Aurizon Thrives In Midst Of Downturn

VANCOUVER — Aurizon Mines (ARZ-T, AZK-X) is one of those companies happy to be mining gold.

Aurizon restarted the Casa Berardi gold mine north of La Sarre, Que., in late 2006. Two and a half years later, the company is reporting a $4.9-million annual profit in the midst of a global economic downturn, has $24 million in working capital available, and has paid its project debt down to under $30 million.

And a new resource estimate for its Joanna gold property, also in Quebec, just moved that project into prefeasibility studies.

In 2008, Aurizon saw $60.3 million in operational cash flow, a 35% increase from 2007. The company put $40 million down on its Casa Berardi debt, reducing that load by 58% to $29.2 million. A healthy gold price lifted the company’s operating profit margin per oz. produced by 23% to US$448, while cash costs fell to US$399 per oz.

Casa Berardi produced 158,830 oz. gold in 2008 and Aurizon realized an average gold price of US$847 per oz., which meant gold sales totalled $144 million. Aurizon expects to produce between 150,000 and 155,000 oz. in 2009, at a similar cash cost. The mine churns through 1,800 tonnes of ore each day and, in 2009, the ore grade is expected to average 7.9 grams gold per tonne.

At the end of 2008, the company held cash and equivalents of $34.3 million, as well as a $21.2-million restricted cash balance earmarked for Casa Berardi debt facility payments. Aurizon plans to pay down that facility by $21 million in 2009, which will leave just $8.2 million left outstanding. Available working capital stands at $24.1 million.

Aurizon expects to spend $13 million on sustaining capital at Casa Berardi this year, primarily on developing the upper and lower portions of zone 113 and the lower inter zone. In addition, $6.9 million will go toward infrastructure and equipment improvements.

The company will also complete an exploration drift at the 810-metre level of the West mine, and drill roughly 14,000 metres to test the depth extension of zone 113 and the continuity and extensions of zones 118 and 123-south. Another 21,000 metres of drilling will test the northern and upper limits of the lower inter zone, the eastern part of zone 113, and zones 109 and 115.

Casa Berardi’s proven and probable reserves currently stand at 3.84 million tonnes grading 7.8 grams gold. Measured and indicated resources come in at 4.96 million tonnes grading 5.9 grams gold and inferred resources add 4.34 million tonnes averaging 6.6 grams gold.

The Casa Berardi gold deposits are located along a 5-km-long east-west mineralized corridor and include the East and West mines and the Principal zone. Since restarting production in late 2006, the mine has produced 336,000 oz. gold; adding in previous production under TVX Gold (the merged Inco Gold and Consolidated TVX Mining) starting in 1988, the mine has produced more than 1 million oz. gold.

Aurizon acquired the mine a year after TVX Gold shut it down in the face of poor gold prices and soon after discovered the 113 and 118 zones off the West mine, proving up 1.3 million oz.

One downside in the company’s annual financials is an $18-million increase in asset retirement obligations. Soil characterization studies at Casa Berardi indicate arsenic levels in the tailings pond exceed the new maximum acceptable levels. Aurizon intends to spend some $20.9 million working to restore the mine site to a state that complies with or exceeds government standards.

Aurizon also released a new resource estimate for its Joanna project in northwestern Quebec. The new estimate increases Joanna’s measured and indicated resources to 33.8 million tonnes grading 1.4 grams gold, almost 1 million contained ounces more than the 2007 estimate. Inferred resources stand at 28.4 million tonnes grading 1.4 grams gold. With the three categories combined, Joanna contains 2.8 million oz. gold.

Mineralization at Joanna is related to the east-west Cadillac fault and forms a 200-metre-wide corridor composed of different mineralized lenses parallel to the fault. Within the lenses, gold is hosted in small-to-medium quartz veins inside finely disseminated sulphides.

Mineralization is concentrated in two sectors. Hosco, on the eastern side, hosts three mineralized lenses each 15 to 60 metres thick and extending laterally 300 to 700 metres. At Heva, on the western side, the mineralized lenses are smaller.

Aurizon spent $11.4 million at Joanna in 2008. For 2009, Aurizon has initially budgeted just $1.5 million for the project. The money will fund a 10,000-metre drill program targeting a possible eastern extension of the Hosco deposit onto the recently optioned Alexandria property, potential higher-grade mineralization in the downdip extension of Hosco, and exploration zones north of the existing resources. The company already has two rigs active on the property, getting started on those targets.

And Aurizon intends to complete a prefeasibility study on Hosco, as well as a preliminary economic assessment of Heva by the third quarter.

At presstime, Aurizon shares traded at $5.55 apiece. The company has a 52-week trading range of $1.21- 5.60 and has 148.4 million shares outstanding.