VANCOUVER, Nov. 3 /CNW/ -- Shares Listed: Toronto Stock Exchange -
Ticker Symbol - ARZ NYSE Amex: - Ticker Symbol - AZK U.S.
Registration: (File 001-31893) News Release Issue No. 32 - 2010
VANCOUVER, Nov. 3 /CNW/ - Aurizon reports financial results for the
third quarter of 2010, which have been prepared on the basis of
available information up to November 1, 2010. Management's
Discussion and Analysis should be read in conjunction with the most
recent audited annual financial statements of the Company. The
third quarter of 2010 was highlighted by the following:
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- Cash flow from operations of $7.1 million. - Gold production of
29,905 ounces. - Net earnings of $2.4 million, or $0.02 per share.
- Total cash costs of US$604 per ounce(1) and operating margins of
US$515 per ounce. - $131 million in cash; working capital of $131.5
million, and no debt. - Final delivery of remaining gold call
options. - Additional metallurgical tests initiated at Joanna -
feasibility study targeted for mid-2011. - High grade
mineralization discovered in 123 Zone at Casa Berardi. - Initial
drill results at Fayolle confirm geological model.
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From the President and Chief Executive Officer, David Hall
"Although the third quarter operational results at Casa Berardi
were below expectations, we are confident that the operational
issues experienced will be resolved." said David Hall, President
and Chief Executive Officer. "Furthermore, as we move from a lower
grade mining sequence to one that is more reflective of overall
average underground reserve grades, we expect improved operational
performance going forward", he added. "The Company is now totally
un-hedged and poised to participate fully in the prevailing bull
market for gold. In addition, Aurizon's strategic assembly of
properties, at various stages of development, has further
complemented Aurizon's asset base and should provide a strong
pipeline of projects for future growth." FINANCIAL RESULTS Third
Quarter 2010 Net earnings of $2.4 million, or $0.02 per share, were
achieved in the third quarter of 2010 compared to net earnings of
$8.2 million, or $0.05 per share, for the same quarter of 2009.
Third quarter results were impacted by operational challenges at
Casa Berardi together with the anticipated sequencing of lower than
average ore grades. Operating profit margins decreased to US$515(2)
per ounce compared to US$537 per ounce in the same quarter of 2009,
primarily due to lower ore grades and a stronger Canadian dollar,
partially offset by higher realized gold prices. In addition, a
significant increase in exploration activities at Aurizon's newly
optioned properties, together with continued exploration and
feasibility work at Joanna, resulted in $5.5 million of exploration
expenditures being charged to earnings in the third quarter of
2010, compared to $0.7 million in the same quarter of 2009. After
removing the positive impact of non-cash unrealized derivative
gains of $2.9 million, on an after tax basis, the adjusted net loss
was $0.5 million, or ($ nil) per share, compared to adjusted net
earnings of $7.7 million, or $0.05 per share, in the same quarter
of 2009. In the third quarter of 2009, earnings were positively
impacted by non-cash unrealized derivative gains of $0.5 million,
on an after tax basis. Revenue for the quarter from Casa Berardi
operations declined to $39.9 million from the sale of 30,755 ounces
of gold, compared to $45.5 million from the sale of 43,650 ounces
of gold in the same quarter of 2009. Net of realized derivative
losses, revenues were $35.9 million compared to $44.2 million in
the same quarter of 2009. After adjusting for the impact of net
derivative losses, the average realized gold price was US$1,119 per
ounce, and the average Cad/US exchange rate was 1.04, compared to
realized prices of US$929 per ounce and an average exchange rate of
1.10 in the same quarter of 2009. As at September 30, 2010, the
Company has no gold hedges. Effective October 1, 2010, 100% of the
Company's gold production will be sold at prevailing spot prices,
allowing the Company to benefit fully from prevailing strong gold
prices. During the third quarter of 2010, 60% of the gold sales
were delivered against gold call options at an average price of
US$915 per ounce, 25% lower than the average London fixing of
US$1,227 per ounce. In the same quarter of 2009, 46% of the gold
sales were delivered against gold call options at an average price
of US$886 per ounce. Partially offsetting this opportunity cost,
the Company exercised 5,358 ounces of gold call options at US$863
per ounce that were purchased in 2009 and then sold the gold at an
average price of US$1,229 per ounce during the third quarter 2010.
The Company did not have any purchased call options maturing in
2009. Operating costs in the third quarter of 2010 totalled $19.5
million, 2.5% higher than the same period last year, primarily as a
result of increased repairs and maintenance and higher material
handling costs, which combined with the anticipated lower ore
grades, resulted in total cash costs per ounce of gold sold of
US$604(2) compared to US$392 per ounce in the same period of 2009.
Depletion, depreciation and accretion charges ("DD&A")
decreased to $8.1 million in the third quarter of 2010 compared to
$10.1 million in the same period of 2009 as a result of lower gold
sales in the current reporting period. On a unit basis, DD&A
amortization was US$254 per ounce, up from US$212 per ounce in the
same period of 2009 due to the impact of prior and current year
capital expenditures. Administrative and general costs in the third
quarter of 2010 rose to $2.9 million from $2.3 million in the same
period of 2009, as a result of increased staffing in both the
corporate office in Vancouver and the operations office in Val
d'Or. Included in these costs are stock based compensation charges
totalling $0.8 million in the third quarter of 2010 compared to
$0.5 million in the same period last year. A significant increase
in exploration activities resulted in $5.5 million of exploration
expenditures (net of $1.7 million of tax credits) being charged to
earnings in the third quarter of 2010 compared to $0.7 million in
the same quarter of 2009. The main focus in the third quarter of
2010 was the ongoing feasibility study and continued exploration at
Joanna where $3.6 million was incurred. Other active exploration
programs included Rex South ($1.6 million); Kipawa ($0.6 million);
Fayolle ($0.4 million); and Marban ($0.4 million). Income and
resource taxes totalled $2.4 million in the third quarter of 2010;
of which $1.4 million are current federal income taxes; $0.7
million are Quebec resource taxes; and $0.3 million are future
income taxes. No cash outlay is required for the current federal
tax expense as the Company has $7.8 million of non-refundable tax
credits to shelter any taxes owing. The future income taxes are a
result of temporary differences between the tax and accounting
bases of the Company's assets and liabilities. Cash flow from
operating activities in the third quarter of 2010 was $7.1 million
compared to cash flow of $17.6 million in the same period of 2009.
The decrease in cash flow is primarily related to lower gold
production and sales, as well as increased exploration and
feasibility related activities. Investing activities totalled $6.7
million in the third quarter of 2010, of which $4.2 million was on
sustaining capital and development at Casa Berardi, and $2.3
million was on exploration activity at Casa Berardi. Included in
financing activities are proceeds from the exercise of incentive
stock options and repayment of government assistance during the
third quarter of 2010 which resulted in a net cash inflow of $6.2
million. In the same period of 2009, the repayment of project debt
totalling $21.0 million, less cash inflows of $0.4 million from the
exercise of incentive stock options, resulted in a net cash outflow
of $20.6 million. Nine Months 2010 Net earnings for the nine months
ended September 30, 2010, were $9.9 million, or $0.06 per share,
compared to $26.8 million or $0.17 per share in the same period of
2009. Operating results were adversely impacted by the planned
sequencing of lower than average ore grades, operational challenges
in the third quarter, and a strong Canadian dollar. In addition,
the significant increase in exploration and feasibility related
activities, together with higher non-cash stock based compensation
charges negatively impacted results. After removing the positive
impact of non-cash unrealized derivative gains, on an after tax
basis, of $6.1 million and $10.1 million in the first nine months
of 2010 and 2009 respectively, earnings were $3.8 million, or $0.02
per share, compared to adjusted earnings in the same period of 2009
of $16.8 million or $0.11 per share. Cash flows from operating
activities in the first nine months of 2010 totalled $32.8 million,
compared to cash flows of $59.8 million for the same period of
2009. Cash flow was adversely impacted by lower earnings and
movements in non-cash working capital items compared to the same
period of 2009. The operating profit margin for the nine month
period increased to US$525(3) per ounce, compared to US$521 per
ounce in the same period of 2009 due to higher gold prices
partially offset by higher operating costs. Investing activities in
the first nine months of 2010 totalled $22.6 million, of which
$21.8 million was incurred on sustaining capital and exploration
expenditures at Casa Berardi and $0.8 million was incurred for
property acquisition costs and related marketable securities. In
the same period of 2009, investing activities totalled $7.1
million, which comprise $29.0 million incurred on capital and
exploration expenditures; $2.6 for the purchase of the gold call
options that expire in 2010; offset by cash inflows generated from
the release of the restricted cash balances totalling $21.2
million; and $3.3 million from refundable tax credits. Financing
activities during the first nine months of 2010 resulted in a net
cash inflow of $7.7 million as a result of incentive stock option
exercises, reduced by the repayment of government assistance of
$0.6 million. In the same period of 2009, financing activities
resulted in a net cash inflow of $20.9 million as a result of a
$47.3 million equity financing and $3.4 million from the exercise
of incentive stock options, reduced by principal debt repayments of
$29.2 million and a $0.6 million repayment of government
assistance. CASH RESOURCES AND LIQUIDITY As at September 30, 2010,
cash and cash equivalents increased to $130.9 million, compared to
$113.1 million as at December 31, 2009. Working capital at the end
of the current reporting period increased to $131.5 million,
compared to $101.7 million at the end of 2009. The increase in cash
and cash equivalents was primarily attributable to cash flows
generated from Casa Berardi's mining operations. Aurizon continued
to have no debt as at September 30, 2010. CASA BERARDI Operations
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YTD 2010 Q3 2010 Q2 2010
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Operating results Tonnes milled 531,048 169,913 182,487 Grade -
grams/tonne 6.73 6.15 7.20 Mill recoveries - % 90.2% 89.07% 91.2%
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Gold production - ounces 103,620 29,905 38,527
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Gold sold - ounces 105,142 30,755 39,964
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Per ounce data - US$(4) Average realized gold price(i) $1,069
$1,119 $1,082
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Total cash costs(ii) $544 $604 $504 Amortization(iii) 240 254 240
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Total production costs(iv) $784 $858 $744
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Bank of Canada exchange rate - Cad/US dollar 1.036 1.039 1.028
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Q1 2010 Q4 2009 Q3 2009
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Operating results Tonnes milled 178,648 172,343 178,420 Grade -
grams/tonne 6.79 7.16 8.14 Mill recoveries - % 90.2% 91.9% 94.2%
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Gold production - ounces 35,188 36,459 43,962
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Gold sold - ounces 34,423 36,183 43,650
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Per ounce data - US$(4) Average realized gold price(i) $1,010 $946
$929
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Total cash costs(ii) $538 $459 $392 Amortization(iii) 228 224 212
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Total production costs(iv) $766 $683 $604
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Bank of Canada exchange rate - Cad/US dollar 1.041 1.056 1.097
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Table footnotes(4): (i) Realized gold prices net of realized
derivative gains or losses divided by ounces sold. (ii) Operating
costs net of by-product credits, divided by ounces sold, and
divided by the average Bank of Canada Cad$/US$ rate. (iii)
Depreciation, amortization and accretion expenses. (iv) Total cash
costs plus depreciation, amortization and accretion expenses. Gold
production for the third quarter of 2010 totalled 29,905 ounces
from the processing of 169,913 tonnes at an average grade of 6.15
grams of gold per tonne. Mill recoveries declined by 2% over the
second quarter of 2010 to 89% as a result of lower ore grades. This
compares to ore grades of 8.1 grams of gold per tonne and
recoveries of 94.2% in the same quarter of 2009. Challenging ground
conditions in a localized area of Zone 113 resulted in changes to
the mining sequencing, which adversely impacted expected ore
grades. Additionally, as a result of the reduced availability of
underground mining equipment due to mechanical issues, daily ore
throughput decreased to 1,847 tonnes per day in the third quarter
of 2010, compared to 2,005 tonnes per day in the second quarter of
2010 and 1,939 tonnes per day in the third quarter of 2009. An
independent study of maintenance practices and an evaluation of
equipment replacement has been initiated to address this issue.
Additional mining equipment was acquired in October 2010 to improve
productivity. The anticipated sequencing of lower grade ore in
2010, together with lower mill recoveries and a strong Canadian
dollar, resulted in total cash costs of US$604 per ounce in the
third quarter of 2010, compared to US$392 in the same quarter of
2009. The higher total cash costs per ounce were primarily due to
lower ore grades, as well as higher unit mining costs, and a
strengthening Canadian dollar. Unit operating costs(5) on a
Canadian dollar per tonne basis were $112 per tonne during the
third quarter of 2010, compared to costs of $103 per tonne in the
same quarter of 2009. The operating profit margin(4) in the third
quarter of 2010 decreased to US$515 per ounce compared to US$537
per ounce in the same quarter of 2009, primarily due to lower ore
grades, partially offset by higher realized gold prices.
Modifications to the stope design of the Lower Inter Zone in late
2009 have resulted in mining a larger mineralized envelope
containing lower grade ore. Approximately 43% of 2010 production
will come from this Zone. Higher ore grades are anticipated in 2011
as more areas containing underground reserve grade material that
average approximately 8 grams per tonne are included in the mine
plan, which is expected to result in higher gold production and
lower total cash costs per ounce. Casa Berardi Exploration In the
third quarter of 2010, two surface drill rigs and seven underground
drill rigs were active at Casa Berardi. The exploration focus
during the third quarter was on the upper and depth extensions of
the 123 Zone, located approximately 1.0 kilometre east of the West
Mine shaft, with the objective of extending the known
mineralization. As at December 31, 2009, the 123 Zone contained
inferred mineral resources of 714,000 tonnes at a grade of 9.4
grams of gold per tonne, or 216,000 ounces. Gold mineralization in
the 123 Zone occurs in quartz veins, cherty units and massive
sulphide structures located between the South 123 Zone Break to the
east and the South Break to the west in a volcanic bearing
environment. This corridor extends for more than 1.0 kilometre
vertically, containing distinct stacked lenses. The thickness of
the individual lenses within the corridor is in the range of 3 to
35 metres. Recent drilling from the exploration drift on the 810
metre level indicate that there is a high grade core within the 123
Zone, extending over a strike distance in the order of 200 metres
vertically by 50 metres horizontally and having an approximate
thickness of 25 metres. The best results were 42.1 grams of gold
per tonne over 21.5 metres; 10.0 grams of gold per tonne over 35.1
metres; and 9.1 grams of gold per tonne over 27.3 metres. The
deepest hole to date in the 123 Zone is at 1,100 metres which
intersected two structures: 5.5 grams of gold per tonne over 10
metres (true thickness) and 20.7 grams of gold per tonne over 0.7
metres (true thickness). OTHER PROPERTIES Joanna Gold Development
Property During the third quarter of 2010, feasibility study work
continued with larger scale metallurgical test work on the Albion
process, which we expected to be used to treat the Hosco ore at
Joanna. The test work completed to date indicates that the
estimated overall gold recoveries, utilizing the Albion process,
would be 85.1%, compared to 86.8% estimated in the pre-feasibility
study, with increased consumption of cyanide, oxygen and acid.
These factors would have an adverse impact on operating costs. For
these reasons, while the Albion process is an acceptable choice for
the Joanna project, the Company has decided to evaluate three
alternative recovery processes, including the use of an autoclave,
whilst continuing to review potential improvements to the Albion
process. As a result of the additional metallurgical test work,
completion of the Feasibility Study has been delayed until mid
2011. Other aspects of the Feasibility Study are proceeding
according to plan. Pit optimization modelling is progressing well
and feasibility level engineering of the grinding, gravity, and
floatation circuits is essentially complete. Geotechnical and
hydrological studies have been received. The environmental impact
study is well underway without any major issues being identified.
Drilling continues to test the potential of the Joanna project,
particularly the area between the Hosco and satellite pits
identified in the Pre-Feasibility Study. Kipawa Gold Property A
6,550 metre drill program, comprising 25 drill holes, has recently
been completed to test gold targets identified from prior field
activities. Drill results from this program are presently being
compiled and results are expected shortly. Fayolle Property During
the third quarter of 2010, 4,648 metres of drilling was completed
as part of a 15,000 metre program aimed to test a new geological
model on the Fayolle gold deposit and to explore the entire
deformation corridor transecting the property along a strike length
of more than 2 kilometres, for which costs totalling $0.4 million
were incurred during the third quarter. As at the end of the third
quarter 2010, fourteen drill holes have been completed on a 50
metre drill spacing to test the continuity and grade of the
mineralized zones. Drill results and associated geological
interpretations were received for the first four holes, the best
result returning 112.50 grams per tonne of gold over 6.0 metres.
These initial holes appear to confirm the new model with improved
continuity between mineralized zones. The current exploration
program includes two drill rigs concentrating on two targets: down
dip extensions of the known Fayolle deposit resource outline, and
generating and testing other targets using already defined
geological controls. Aurizon may earn up to a 65% interest in the
Fayolle Property, comprising 39 mining claims covering 1,373
hectares across the Porcupine-Destor Break, one of the most
productive gold bearing structures of the Abitibi Belt. The Fayolle
Property is situated 10 kilometres north of Aurizon's Joanna
Project in north-western Quebec. Rex South Property At Rex South,
$1.6 million was incurred in the third quarter 2010 on an
exploration program comprising: 5,410 line-kilometres of airborne
magnetic and spectrometric geophysical surveys, a lake bottom
sediment geochemical survey comprising 765 samples, and surface
prospecting which included the collection of 1,160 rock grab
samples. Aurizon may earn up to a 65% interest in the Rex South
Property comprising 1,274 claims covering a surface area of 555
square kilometres, about 145 kilometres southeast of the community
of Puvirnituq in northern Quebec. The Rex South property hosts
strong exploration potential based on extensive geochemical
anomalies, geophysical signatures, and the presence of several
mineralized prospects including high-grade gold and copper values
obtained by grab samples. Marban Block Property During the third
quarter of 2010, Aurizon initiated a $5.8 million exploration
program comprising 50,000 metres of drilling to test the lateral
and depth extensions of the existing mineral resources, of which
$0.4 million was spent in the third quarter. Two drill rigs are
active on the property and a third rig may be added later in the
program. Aurizon may earn up to a 65% interest in forty-two mining
claims and three mining concessions covering 976 hectares in the
heart of the Malartic gold mining camp in the Abitibi region of
Quebec, subject to underlying royalties. The Marban block covers 3
kilometres of a 500 metre wide favourable gold bearing shear zone
punctuated by historic production, current mineral resources and
exploration potential. Underground potential can be projected by
following down dip extensions, similar to other deposits in the
Abitibi area. The first phase of Aurizon's involvement on the
project will focus on additional drilling to extend resources
potentially mineable by open pit. Duverny Property At Duverny, an
initial $0.5 million exploration program comprising an airborne
magnetic survey and surface prospecting commenced, of which $0.15
million was incurred during the third quarter. Aurizon may earn a
100% interest in 14 mineral claims covering 2,700 hectares, 25
kilometres northeast of Amos, Quebec, subject to underlying
royalties. An additional 87 claims surrounding the property have
been staked, subject to acceptance by Provincial authorities. The
Duverny Property covers part of a mafic volcanic belt associated
with the Chicobi fault corridor. Gold mineralization indicators in
this area have similarities to the Timmins context, such as
carbonate saturation and the presence of extensive quartz vein
systems associated with folded structures. Opinaca-Wildcat
Properties Consistent with Aurizon's strategy of assembling a
portfolio of exploration properties at various stages of
development to provide a strong pipeline for future growth,
agreements have been entered into that allow Aurizon to earn up to
a 60% interest in the Opinaca Property, comprising 649 mineral
claims covering 338 square kilometres, and up to a 65% interest in
the Wildcat Property, comprising 411 mineral claims covering 214
square kilometres. Both properties are situated in the James Bay
area, 350 kilometres north of Matagami, Quebec and in close
proximity to Goldcorp's Eleonore project.
-------------------------- (1) See "Non-GAAP measures on page 9.
(2) See "Non-GAAP measures on page 9. (3) See "Non-GAAP measures on
page 8. (4) See "Non-GAAP measures on page 8. (5) See "Non-GAAP
measures on page 8. OUTLOOK With cash balances of $131 million and
no debt as at September 30, 2010, Aurizon intends to utilize its
strong operating cash flows and balance sheet to continue upgrading
its mineral resources to mineral reserves at both Casa Berardi and
Joanna and to aggressively explore its new portfolio of exploration
properties in Quebec. The fundamentals for gold remain very strong
as the US adopts further quantitative easing measures to combat
uncertainties regarding the sustainability of their economic
recovery. These measures will likely allow US real interest rates
to remain low, which is supportive of gold prices. Continued
sovereign debt issues in Europe remain and against this backdrop of
uncertainty, central bank and investment buying of gold bullion
appears to be strong. Looking at the currency risks, the Canadian
dollar is strengthening closer to parity against the US dollar as
strong commodity prices and Canada's sound fiscal and economic
fundamentals attract foreign capital flows. However, further
strengthening of the Canadian dollar should be more than
compensated by higher gold prices that reflect a weaker US dollar.
As previously announced, based upon results for the first nine
months and the revised mine plan for the balance of 2010, Casa
Berardi production guidance has been lowered to 140,000 - 145,000
ounces, compared to previous guidance of 145,000 - 155,000 ounces
of gold. Total cash costs for the full year are now estimated at
approximately US$535 per ounce, assuming a Canadian dollar exchange
rate of 1.01 against the US dollar for the balance of the year,
compared to previous guidance of US$500 per ounce at an exchange
rate of 1.03. Beginning in 2011 through 2013, annual gold
production of 160,000 to 170,000 ounces is anticipated at total
cash costs approximating US$450 per ounce, as the mine plan
includes more areas containing material with the average
underground reserve grade of approximately 8 grams of gold per
tonne. It is anticipated that future mine plans will incorporate
the results of the extensive drill programs currently in progress.
On-site mining, milling and administrative costs are expected to
average $110 per tonne in the fourth quarter of 2010. Fourth
quarter average daily mine production is estimated at 2,050 tonnes
per day at an average grade of 7.0 grams per tonne. Sustaining
capital expenditures at Casa Berardi for the fourth quarter of 2010
are estimated to be $10.5 million and will include development of
the upper and lower portions of Zone 113, as well as development to
access Zones 115 and 118. Also included in this amount are
underground infrastructure additions, equipment replacement, and
tailings pond construction. As previously reported, $2.3 million of
the $10.5 million will be invested in the fourth quarter 2010
commencing a ramp from the 810 metre level down to approximately
the 1,000 metre level which will provide drill bases to test the
depth extensions of both the 123 and 118 Zones as well as commence
mine development of these zones. A further $2.8 million will be
invested on exploration in the fourth quarter of 2010. In addition,
the Board of Directors approved the deepening of the West Mine
production shaft a further 320 metres to provide access to the
lower portion of the 118 and 123 Zones. The shaft, currently at a
depth of 760 metres, will be extended to approximately 1,080 metres
below surface. This will provide a drift access at the 1,010 metre
level from these zones to the shaft. The estimated cost of the
shaft deepening, drift access to the 118 and 123 zones, and related
infrastructure is approximately $32 million and is expected to
start in early 2011 and be completed at the end of the third
quarter of 2012. At Casa Berardi, an updated resource estimate for
the Principal Area was completed in October that resulted in a 94%
increase of the in-pit measured and indicated gold resources to
5,435,000 tonnes at an average grade of 4.02 grams per tonne, or
690,000 ounces of gold. Outside of the open pit contour, there are
further measured and indicated resources totalling 719,000 tonnes
at an average grade of 6.99 grams per tonne, or 162,000 ounces of
gold. The updated resource block model for the Principal Area is
being used in the prefeasibility study of an open pit mining
operation, by BBA inc., Montreal, Quebec, which is expected by the
end of the year. Additional surface drilling will be conducted
during the winter to verify the extensions of the mineralized
lenses in the Principal Area, which are open in all directions.
Elsewhere at Casa Berardi, underground drilling will continue with
two rigs from the 810 metre exploration drift to define the down
dip extensions of both the 118 and 123 Zones. The 123 Zone remains
open to depth and along strike to the east; however, step out
drilling is limited due to the orientation of the mineralization
relative to the drill bases at the 810 metre exploration drift. The
two drill rigs will primarily perform infill drilling of the 123
Zone in order to upgrade the resources identified in the campaign.
An updated mineral resource estimate is expected to be completed by
year-end. The 600 metre extension of the 550 metre level
exploration track drift was completed in October 2010 and now
provides a drilling platform to verify the continuity between the
Principal Area and the 118, 120 and 123 Zones. Another drill will
continue to be active on the 810 metre level exploration drift
delineating the 113(deep) and 113(S4) Zones. Surface exploration
drilling programs at both the East and West Mine are continuing to
evaluate the extension of existing zones and to test new
interpolated targets. At Joanna, an additional $5.1 million
exploration program comprising 44,000 metres of drilling utilising
two to four drill rigs, was initiated in July 2010, of which
approximately $4.0 million will be incurred in the fourth quarter
2010. These rigs will perform exploration and infill drilling on
surface targets covering various extensions of the Hosco deposit,
the Alexandria property and the Heva deposit. Approximately $2.0
million will be incurred in the fourth quarter to conduct
additional metallurgical test work and various other studies
currently in progress related to the feasibility study, which is
anticipated to be completed in mid 2011. At Marban, approximately
$1.4 million will be incurred in the fourth quarter as part of the
50,000 metre drill program to test the lateral and depth extensions
of the existing mineral resources. Two drill rigs are active on the
property and a third rig may be added later in the program. At
Fayolle, approximately $1.2 million will be incurred in the fourth
quarter as part of the 14,000 metre drill program to test two
targets: the down dip extensions of the known Fayolle deposit
resource outline, and other targets using already defined
geological controls. At Rex South, minimal costs will be incurred
in the fourth quarter as the field work was substantially completed
at the end of September 2010. Results from the summer program are
expected in the fourth quarter. At Duverny, approximately $0.1
million is expected to be incurred in the fourth quarter as part of
a $0.5 million exploration program comprising an airborne magnetic
survey and surface prospecting. Aurizon continues to evaluate
various opportunities, particularly in Quebec, where it can utilize
its technical expertise and financial resources to create value, as
it has done previously at both Casa Berardi and Joanna. The
objective is to continue to assemble a portfolio of properties at
various stages of development to complement Aurizon's current
production and development base and to provide a strong pipeline of
projects for future growth. ADDITIONAL INFORMATION Additional
information about the Company's Casa Berardi Mine and Joanna Gold
Development projects as required by NI 43-101, sections 3.2 and 3.3
and paragraphs 3.4 (a), (c) and (d) can be found in the Company's
Annual Information Form for the year ended December 31, 2009, its
news releases dated March 1, 2010 and July 5, 2010 and the latest
Technical Reports on each project, copies of which can be found
under Aurizon's profile on SEDAR at www.sedar.com and are also
available on the Company's website at www.aurizon.com. QUALIFIED
PERSON AND QUALITY CONTROL Information of a scientific or technical
nature was prepared under the supervision of Martin Bergeron, P.
Eng., Vice-President of Operations of Aurizon and a qualified
person under National Instrument 43-101. NON-GAAP MEASURES Realized
gold price per ounce of gold Realized gold price per ounce of gold
is a non-GAAP measure and is calculated by adjusting revenue for
all realized gains and losses on gold derivative instruments and
then dividing that by the gold ounces sold. Unit mining costs per
tonne Unit mining costs per tonne is a non-GAAP measure and may not
be comparable to data prepared by other gold producers. The Company
believes that this generally accepted industry measure is a
realistic indication of operating performance and is useful in
allowing year over year comparisons. Unit mining costs per tonne is
calculated by adjusting operating costs as shown in the Statement
of Earnings for inventory adjustments and then dividing that by the
tonnes processed through the mill. Calculation of Adjusted Earnings
Adjusted net earnings are calculated by removing the gains and
losses, net of income tax, from the mark-to-market revaluation of
the Company's gold and foreign currency price protection contracts,
as detailed in the table below. Adjusted net earnings do not
constitute a measure recognized by generally accepted accounting
principles (GAAP) in Canada or the United States, and do not have a
standardized meaning defined by GAAP. The Company discloses this
measure, which is based on its financial statements, to assist in
the understanding of the Company's operating results and financial
position.
-------------------------------------------------------------------------
3rd 3rd Nine Nine Quarter Quarter Months Months 2010 2009 2010 2009
-------------------------------------------------------------------------
(in thousands of Canadian dollars, except per share amounts) Net
earnings as reported $2,431 $8,211 $9,927 $26,844 Deduct the
after-tax effect of: Unrealized derivative gains (2,933) (560)
(6,109) (10,065)
-------------------------------------------------------------------------
Adjusted net (loss) earnings ($502) $7,651 $3,818 $16,779
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Adjusted net (loss) earnings per share ($0.00) $0.05 $0.02 $0.11
-------------------------------------------------------------------------
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Total cash costs per ounce of gold Aurizon has included a non-GAAP
performance measure of total cash costs per ounce of gold in this
report. Aurizon reports total cash costs on a sales basis. In the
gold mining industry, this is a common performance measure but does
not have any standardized meaning, and is a non-GAAP measure. The
Company believes that, in addition to conventional measures
prepared in accordance with GAAP, certain investors use this
information to evaluate the Company's performance and ability to
generate cash flow. Accordingly, it is intended to provide
additional information and should not be considered in isolation or
as a substitute for measures of performance prepared in accordance
with GAAP. Total cash costs per gold ounce are derived from amounts
included in the statements of earnings and include mine site
operating costs such as mining, processing and administration, but
exclude amortization, reclamation costs, financing costs and
capital development costs. The costs included in the calculation of
total cash costs per ounce of gold are reduced by silver by-product
sales and then divided by gold ounces sold and the average Bank of
Canada Cad$/US$ exchange rate. Operating profit margin per ounce
Operating profit margin per ounce is a non-GAAP measure, and is
calculated by subtracting the total cash costs per ounce from the
average realized gold price. For the third quarter of 2010, the
average realized gold price was US$1,119 less total cash costs of
US$604, net of derivative losses, for an operating profit margin of
US$515, compared to an average realized gold price of US$929 less
total cash costs of US$392 for an operating profit margin of US$537
in the same quarter of 2009. For the first nine months of 2010, the
average realized gold price was US$1,069 less total cash costs of
US$544 for an operating profit margin of US$525, compared to an
average realized gold price of US$906 less total cash costs of
US$385 for an operating profit margin of US$521 in the same half of
2009. OUTSTANDING SHARE DATA As of November 1, 2010, Aurizon had
161,505,982 common shares issued and outstanding. In addition,
7,810,475 incentive stock options, representing 4.84% of
outstanding share capital, are outstanding and exercisable into
common shares at an average price of $4.19 per share. Common Shares
(TSX - ARZ & NYSE Amex - AZK)
---------------------------------------------------------------
September 30, December 31, 2010 2009
---------------------------------------------------------------
Issued 161,363,482 159,008,607 Diluted 169,316,457 166,957,707
Weighted average 160,518,482 156,265,947
---------------------------------------------------------------
---------------------------------------------------------------
CONFERENCE CALL AND WEBCAST Aurizon management will host a
conference call and live webcast on Thursday, November 4, 2010 at
8:00 a.m. Pacific Standard Time (11:00 a.m. Eastern Standard Time)
to allow analysts and shareholders the opportunity to hear
management discuss the Company's quarterly results. You may access
the call by dialling into the Toll Free No. at 1-877-407-8031 or
the International No. at 1-201-689-8031. The call is being webcast
by Vcall and can be accessed on Aurizon's website at
www.aurizon.com or enter the following URL into your browser:
www.investorcalendar.com/IC/CEPage.asp?ID=162119. Investors can
also access the webcast at www.InvestorCalendar.com. Those who wish
to listen to a recording of the conference call at a later time may
do so by calling the Toll Free No. at 1-877-660-6853 or
International No. at 1-201-612-7415 (Replay Passcodes: Account No.
286 and Conference ID No. 358998). A replay of the call will be
available until Thursday, November 11, 2010. FORWARD LOOKING
STATEMENTS AND INFORMATION This report contains "forward-looking
statements" and "forward-looking information" within the meaning of
applicable securities regulations in Canada and the United States
(collectively, "forward-looking information"). The forward-looking
information contained in this report is made as of the date of this
report. Except as required under applicable securities legislation,
the Company does not intend, and does not assume any obligation, to
update this forward-looking information. Forward-looking
information includes, but is not limited to, statements regarding
the Company's expectations and estimates as to future gold
production, anticipated rates of recovery, anticipated total cash
cost per ounce of gold to be produced at the Casa Berardi Mine,
currency exchange rates, the future price of gold and the effects
thereof, the estimation of mineral reserves and mineral resources,
the realization of mineral reserve and mineral resource estimates
and the economic viability thereof, the timing and amount of
estimated capital expenditures, costs and timing of the development
of new deposits, plans and budgets for and expected timing and
results of exploration activities and feasibility and
pre-feasibility studies, permitting time-lines, evaluation of
opportunities, requirements for additional capital, government
regulation of mining operations, environmental risks, reclamation
obligations and expenses, title disputes or claims, adequacy of
insurance coverage, the availability of qualified labour,
acquisition plans and strategies. Often, but not always,
forward-looking information can be identified by the use of words
such as "plans", "expects, "is expected", "budget", "scheduled",
"estimates", forecasts", "intends", "anticipates", or "believes",
or the negatives thereof or variations of such words and phrases or
statements that certain actions, events or results "may", "could",
"would", "might", or "will" be taken, occur or be achieved. The
forward-looking information contained in this report is based on
certain assumptions that the Company believes are reasonable,
including the exchange rates of the U.S. and Canadian currency in
2010, that the current price of and demand for gold will be
sustained or will improve, the supply of gold will remain stable,
that the current mill recovery rates at the Company's Casa Berardi
Mine will continue, that the Company's current mine plan can be
achieved, that the general business and economic conditions will
not change in a material adverse manner, that financing will be
available if and when needed on reasonable terms and that the
Company will not experience any material accident, labour dispute,
or failure of plant or equipment. However, forward-looking
information involves known and unknown risks, uncertainties and
other factors which may cause the actual results, performance or
achievements of the Company to be materially different from any
future results, performance or achievements expressed or implied by
the forward-looking information. Such factors include, among
others, the risk that actual results of exploration activities will
be different than anticipated, that cost of labour, equipment or
materials will increase more than expected, that the future price
of gold will decline, that the Canadian dollar will strengthen
against the U.S. dollar, that mineral reserves or mineral resources
are not as estimated, that actual costs or actual results of
reclamation activities are greater than expected; that changes in
project parameters as plans continue to be refined may result in
increased costs, of lower rates of production than expected, of
unexpected variations in ore reserves, grade or recover rates, of
failure of plant, equipment or processes to operate as anticipated,
of accidents, labour disputes and other risks generally associated
with mining, unanticipated delays in obtaining governmental
approvals or financing or in the completion of development or
construction activities, as well as those factors and other risks
more fully described in Aurizon's Annual Information Form filed
with the securities commission of all of the provinces and
territories of Canada and in Aurizon's Annual Report on Form 40-F
filed with the United States Securities and Exchange Commission,
which are available on Sedar at www.sedar.com and on Edgar at
www.sec.gov. Although the Company has attempted to identify
important factors that could cause actual actions, events or
results to differ materially from those described in
forward-looking information, there may be other factors that cause
actions, events or results to not be as anticipated, estimated or
intended. There can be no assurance that forward-looking
information will prove to be accurate, as actual results and future
events could differ materially from those anticipated in such
statements. Readers are cautioned not to place undue reliance on
forward-looking information due to the inherent uncertainty
thereof. CAUTIONARY NOTE TO US READERS AND INVESTORS As a British
Columbia corporation, the Company is subject to certain rules and
regulations issued by the British Columbia Securities Commission
("BC Securities Commission"). The Company is required to provide
detailed information regarding its properties including
mineralization, drilling, sampling and analysis, security of
samples and mineral resource and mineral reserve estimates.
Further, the Company describes mineral resources associated with
its properties utilizing terminology such as "indicated" or
"inferred" which terms are recognized by Canadian regulations but
are not recognized by the United States Securities and Exchange
Commission ("SEC"). Cautionary Note to U.S. Readers and Investors
Regarding Mineral Resources The SEC allows mining companies, in
their filings with the SEC, to disclose only those mineral deposits
they can economically and legally extract or produce. The Company
may use certain terms in this document, such as "mineral
resources", "indicated mineral resources" and "inferred mineral
resources" that are recognized and mandated by Canadian securities
regulators but are not recognized by the SEC. This document may use
the term "indicated" mineral resources. U.S. readers are cautioned
that while that term is recognized and required by Canadian
regulations, the SEC does not recognize it. U.S. readers and
investors are cautioned not to assume that any part or all of
mineral deposits in this category will ever be converted into
mineral reserves. This document may also use the term "inferred"
mineral resources. U.S. readers are cautioned that while this term
is recognized and required by Canadian regulations, the SEC does
not recognize it. "Inferred resources" have a great amount of
uncertainty as to their existence, and great uncertainty as to
their economic and legal feasibility. It cannot be assumed that all
or any part of an inferred mineral resource will ever be upgraded
to a higher category. Under Canadian rules, estimates of inferred
mineral resources may not form the basis of feasibility or
pre-feasibility studies, except in rare cases. U.S. readers and
investors are cautioned not to assume that part or all of an
inferred resource exists, or is economically or legally mineable.
Aurizon is a gold producer with a growth strategy focused on
developing its existing projects in the Abitibi region of
north-western Quebec, one of the world's most prolific gold and
base metal regions, and by increasing its asset base through
accretive transactions. Aurizon shares trade on the Toronto Stock
Exchange under the symbol "ARZ" and on the NYSE Amex under the
symbol "AZK". Additional information on Aurizon and its properties
is available on Aurizon's website at www.aurizon.com. Aurizon Mines
Ltd. Balance Sheets (Unaudited) As at September 30 December 31
(expressed in thousands of Canadian Dollars) 2010 2009
-------------------------------------------------------------------------
ASSETS Current assets Cash and cash equivalents $ 130,933 $ 113,098
Marketable securities 933 - Accounts receivable and prepaid
expenses 5,072 4,825 Tax credits receivable 1,790 2,587 Advances
1,376 - Derivative instrument assets 104 5,274 Inventories 9,970
11,897
-------------------------------------------------------------------------
150,178 137,681 Non-current assets Other assets 17,218 14,551
Property, plant and equipment 49,531 53,691 Mineral properties
118,854 117,370
-------------------------------------------------------------------------
TOTAL ASSETS $ 335,781 $ 323,293
-------------------------------------------------------------------------
-------------------------------------------------------------------------
LIABILITIES Current liabilities Accounts payable and accrued
liabilities $ 17,501 $ 16,451 Derivative instrument liabilities -
13,885 Current portion of long-term obligations 753 652 Current
provincial resource taxes payable - 3,752 Current portion of future
income tax liabilities 411 1,275
-------------------------------------------------------------------------
18,665 36,015 Non-current liabilities Long-term obligations - 705
Asset retirement obligations 22,592 21,816 Future income and
resource tax liabilities 35,439 29,120
-------------------------------------------------------------------------
TOTAL LIABILITIES 76,696 87,656
-------------------------------------------------------------------------
SHAREHOLDERS' EQUITY Share capital Common shares issued -
161,363,482 (2009 - 159,008,607) 259,302 247,365 Contributed
surplus 1,022 979 Stock based compensation 11,286 10,178 Deficit
(12,958) (22,885) Accumulated other comprehensive income 433 -
-------------------------------------------------------------------------
TOTAL SHAREHOLDERS' EQUITY 259,085 235,637
-------------------------------------------------------------------------
TOTAL EQUITY AND LIABILITIES $ 335,781 $ 323,293
-------------------------------------------------------------------------
-------------------------------------------------------------------------
The attached notes form an integral part of these financial
statements. Signed on behalf of the Board, (signed) (signed) Andre
Falzon, Richard Faucher, Director, Chairman of Director, Audit
Committee Member the Audit Committee Aurizon Mines Ltd. Statements
of Earnings (Unaudited) (expressed in thousands of Three months
ended Nine months ended Canadian Dollars, except September 30
September 30 per share data) 2010 2009 2010 2009
-------------------------------------------------------------------------
Revenue Mining operations $ 39,882 $ 45,549 $ 130,184 $ 133,585
-------------------------------------------------------------------------
Expenses Operating 19,470 18,989 59,727 55,739 Depreciation,
depletion and accretion 8,104 10,147 26,115 27,940 Administrative
and general 2,905 2,250 11,518 7,665 Exploration 5,471 729 10,271
2,699 Derivative losses (gains) (158) 667 4,317 (10,030) Interest
on long-term debt - 159 - 542 Foreign exchange (gain) loss (539)
(427) (1,557) 2,388 Capital taxes 69 270 (418) 668 Other income
(271) (151) (565) (605)
-------------------------------------------------------------------------
35,051 32,633 109,408 87,006
-------------------------------------------------------------------------
Earnings for the period before income tax 4,831 12,916 20,776
46,579 Current income and resource taxes (2,160) (2,101) (5,394)
(6,518) Future income and resource taxes (240) (2,604) (5,455)
(13,217)
-------------------------------------------------------------------------
NET EARNINGS FOR THE PERIOD $ 2,431 $ 8,211 $ 9,927 $ 26,844
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Weighted average number of common shares outstanding (thousands)
160,518 158,863 159,724 155,358 Earnings per share - Basic and
diluted $ 0.02 $ 0.05 $ 0.06 $ 0.17
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Aurizon Mines Ltd. Statements of Comprehensive Income (Unaudited)
(expressed in thousands of Three months ended Nine months ended
Canadian Dollars, except September 30 September 30 per share data)
2010 2009 2010 2009
-------------------------------------------------------------------------
Net earnings for the period $ 2,431 $ 8,211 $ 9,927 $ 26,844 Other
comprehensive income Unrealized gains on available-for-sale
marketable securities 578 - 433 -
-------------------------------------------------------------------------
COMPREHENSIVE INCOME FOR THE PERIOD $ 3,009 $ 8,211 $ 10,360 $
26,844
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Aurizon Mines Ltd. Statements of Cash Flow (Unaudited) Three months
ended Nine months ended (expressed in thousands of September 30
September 30 Canadian Dollars) 2010 2009 2010 2009
-------------------------------------------------------------------------
Operating activities Net earnings for the period $ 2,431 $ 8,211 $
9,927 $ 26,844 Adjustment for non-cash items: Depreciation,
depletion and accretion 8,104 10,147 26,115 27,940 Refundable tax
credits (1,043) (127) (1,985) (472) Non refundable tax credits
(653) - (1,237) - Stock based compensation 804 516 4,770 2,081
Unrealized derivative gains (4,185) (715) (8,715) (13,658) Future
income taxes 240 2,604 5,455 13,217 Capital taxes 69 270 179 811
Other 168 - 273 34
-------------------------------------------------------------------------
5,935 20,906 34,782 56,797 Decrease (increase) in non-cash working
capital items (264) (3,339) (3,434) 3,043 Non refundable taxes
1,430 - 1,430 -
-------------------------------------------------------------------------
Net cash provided by operating activities 7,101 17,567 32,778
59,840
-------------------------------------------------------------------------
Investing activities Property, plant and equipment (1,773) (1,751)
(4,838) (9,473) Mineral properties (4,886) (6,571) (17,262)
(19,489) Restricted cash proceeds - 30,208 - 21,225 Derivative
instruments - (2,620) - (2,620) Refundable tax credits - 3,298 -
3,298 Purchase of marketable securities - - (500) -
-------------------------------------------------------------------------
Net cash provided by (used in) investing activities (6,659) 22,564
(22,600) (7,059)
-------------------------------------------------------------------------
Financing activities Issuance of shares 6,186 358 8,318 50,705
Long-term obligations (21) (20,951) (661) (29,818)
-------------------------------------------------------------------------
Net cash provided by (used in) financing activities 6,165 (20,593)
7,657 20,887
-------------------------------------------------------------------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 6,607 19,538 17,835
73,668 CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD 124,326
88,467 113,098 34,337
-------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS - END OF PERIOD $ 130,933 $ 108,005 $
130,933 $ 108,005
-------------------------------------------------------------------------
-------------------------------------------------------------------------
AURIZON MINES LTD., Suite 3120, 666 Burrard Street, Park Place,
Vancouver, British Columbia, V6C 2X8; For further information,
contact David P. Hall, President & Chief Executive Officer or
Ian S. Walton, Executive Vice-President & Chief Financial
Officer, at Telephone: (604) 687-6600, Toll Free: 1-888-411-GOLD,
Fax: (604) 687-3932, Web Site: www.aurizon.com, Email:
info@aurizon.com; Or Renmark Financial Communications Inc., 1550
Metcalfe, Suite 502, Montreal, QC, H3A 1X6; Barry Mire:
bmire@renmarkfinancial.com; Maurice Dagenais:
mdagenais@renmarkfinancial.com; Media: Lynn Butler:
lbutler@renmarkfinancial.com; Tel: (514) 939-3989, Fax: (514)
939-3717
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