Richmont buys Aurizon’s half of Beaufor

For a bit of cash and a royalty, junior miner Richmont Mines (RIC-T) is buying Aurizon Mines‘ (ARZ-T) half-interest in the suspended Beaufor gold mine in northwestern Quebec.

Richmont already holds a stake in the underground mine through its 69.3% ownership of Louvem Mines (LOV-M), which owns the remaining half of Beaufor.

Richmont will pay Aurizon $1.65 million in cash upon closing, and thereafter pay a sliding-scale royalty on any future production.

On half of the first 220,000 oz. of gold produced at Beaufor, Aurizon will receive a C$5-per-oz. royalty if the prevailing gold price is between US$280 and US$300 per oz. If the price is US$300 per oz. or higher, this royalty will increase to C$12.50 per oz.

When production from Beaufor exceeds 220,000 oz., Richmont will pay a royalty ranging from C$17 to C$30 per oz., depending on the gold price.

This latter royalty will also be payable on 100% of any future production from the adjoining Perron property, which is included in the deal.

Acting as operator, Aurizon suspended mining at Beaufor in August 2000, owing to concerns over pillar stability.

The partners then commissioned an independent firm to assess the pillars, and now say that an ensuing report concludes that mining can safely resume once hydrostatic barricades are installed and certain near-surface stopes are backfilled. The cost of this remedy work is estimated at $4.5 million.

As part of the assessment, Beaufor’s proven and probable reserves were re-calculated at 1.1 million tons grading 0.22 oz. gold per ton, or 237,000 contained ounces gold.

The deal helps Richmont consolidate its assets in Quebec. The company already owns the aging Francoeur gold mine, as well as the Camflo mill. For its part, Aurizon says it is focusing on developing its major asset, the advanced-stage Casa Berardi gold project, also in northwestern Quebec. The company still owns half of the Sleeping Giant gold mine in Quebec, the remainder of which is held by Cambior (CBJ-T), the operator.

Aurizon has also reported its financial results for 2000, racking up a hefty loss of $8.4 million (22 per share) on revenue of $24.4 million, compared with a 1999 profit of $3.1 million (8 per share) on revenue of $27.9 million.

The loss was due to a nasty mix of asset writedowns, declining gold prices and lower gold production.

During the fourth quarter, with only $3.7 million in revenue, Aurizon tabled writedowns of $1.5 million on Beaufor, $1.7 million on Sleeping Giant and $5.4 million on the Douay gold exploration project in Quebec.

The company’s average realized gold price in 2000 was US$287 per oz. (US$8 above spot), compared with US$302 per oz. in 1999.

Attributable production in 2000 fell to 56,100 oz. from 60,162 oz. in the previous year.

Beaufor produced 34,239 oz. gold in 2000 at a total production cost of US$254 per oz., compared with 44,842 oz. at US$243 per oz. in 1999.

Sleeping Giant yielded 77,961 oz. gold in 2000 at a cost of US$252 per oz., compared with 75,482 oz. at US$261 per oz. in 1999.

In 2001, Aurizon expects its total attributable production to slide to 31,500 oz. at a total cash cost of US$230 per oz., reflecting a 19% reduction in production from Sleeping Giant caused by lower grades and throughput.

Aurizon ended 2000 with $3.2 million in cash and $1.1 million in bullion settlements. However, $3.8 million in long-term debt related to the acquisition of Casa Berardi was re-classified as a current liability, as it comes due on Aug. 27, 2001, to Casa Berardi’s vendor, TVX Gold (TVX-T).