Aurizon (TSX:ARZ)(NYSE Amex:AZK) reports unaudited financial
results for the third quarter of 2011, which have been prepared on
the basis of available information up to November 8, 2011.
Management's Discussion and Analysis should be read in conjunction
with the most recent annual financial statements of the Company and
the first and second quarter interim financial statements issued
for March 31 and June 30, 2011. All dollar amounts are in Canadian
dollars unless otherwise stated. Our results are prepared in
accordance with International Financial Reporting Standards
("IFRS"). All prior period information has been restated or
reclassified for comparative purposes in accordance with IFRS.
Third Quarter 2011 Highlights and Significant Items
-- Net profit of $13.1 million ($0.08 per share), up 467% from third
quarter 2010.
-- Record revenue of $68 million in the quarter.
-- Record cash flow from operations of $34.7 million, up 388% compared to
third quarter 2010.
-- Gold production of 44,457 ounces, up 49% from third quarter of 2010.
-- Total cash costs(1) of US$497 per ounce and operating margins(1) of
US$1,198 per ounce.
-- EBITDA(1) of $33.3 million, up 159% from third quarter 2010.
-- Working capital of $178.8 million, including cash of $178.0 million.
-- Joanna feasibility study optimization to be completed second quarter
2012.
-- New CEO, Mr. George Paspalas appointed.
From the President and Chief Executive Officer, George
Paspalas:
"We are very pleased with the results our team have delivered
this quarter, and I thank them for their support and commitment.
The operating performance at Casa Berardi continues to improve, and
we are seeing greater margins as lower operating costs on a per
ounce basis complement higher gold prices to realize an operating
margin of US$1,198 per ounce for the quarter, an improvement of
233% over the corresponding period last year. This increased
operating margin is improving all financial metrics significantly
compared to corresponding periods. Our investment in the future of
Casa Berardi is progressing well, with the shaft deepening in full
swing and very encouraging exploration results from the 123 zone
within the West Mine. We have also realized exploration success
elsewhere at Fayolle and Marban, and are excited about the future
potential for these projects. The optimization of the Joanna
feasibility is progressing well, and a final study should be
completed in second quarter 2012."
FINANCIAL RESULTS
Financial review of the third quarter 2011
Net profit in the third quarter of 2011 increased to $13.1
million, or $0.08 per share, exceeding net profit of $2.3 million,
or $0.01 per share, in the same period of 2010. Results were
positively impacted by higher realized gold prices, and expected
higher ore grades and ore throughput during the quarter, and
negatively impacted by foreign exchange mark-to-market adjustments,
increased exploration activities and a significant increase in
income taxes. As a result of the enactment of new Quebec resource
tax legislation in 2011 and higher taxable profits in the third
quarter of 2011, income and resource taxes totalled $10.6 million,
up significantly from $2.7 million for the same period of 2010.
Revenue from Casa Berardi operations increased 71% to $68.1
million in the third quarter of 2011 from the sale of 40,257 ounces
of gold, compared to $39.9 million from the sale of 30,755 ounces
of gold in the same quarter of 2010. The average realized gold
price was US$1,695 per ounce and the average US/Cad exchange rate
was 0.99, compared to realized prices of US$1,119 per ounce at an
average exchange rate of 1.04 in the same quarter of 2010.
During the third quarter of 2011, 100% of gold sales were made
at current market prices. In the same quarter of 2010, 60% of the
gold sales were delivered against gold call options at an average
price of US$915 per ounce. The average London p.m. gold fix for the
third quarter of 2011 was US$1,700 per ounce, compared to US$1,227
per ounce for the same period of 2010.
Cost of sales for the third quarter of 2011, comprising
operating costs and depreciation and amortization of $19.8 million
and $9.9 million, respectively, totalled $29.7 million. On a unit
cost basis(2), total cash costs per ounce of gold sold were US$497
and depreciation and amortization was US$250 per ounce, for a total
production cost of US$747 per ounce.
Gross profit of $38.4 million in the third quarter of 2011
increased significantly from $12.7 million for the same period of
2010. Rising gold prices, lower cash costs per ounce, higher ore
throughput, and the elimination of gold deliveries into call
options at below market spot prices in the third quarter of 2010
allowed operating profit margins(2) to increase to US$1,198 per
ounce, compared to US$515 per ounce in the same quarter of
2010.
Exploration expenditures in the third quarter of 2011 rose 29%
to $7.0 million from $5.5 million in the same period of 2010. This
is attributable to the new exploration properties optioned in 2010,
together with continued exploration and feasibility work at
Joanna.
General and administrative costs in the third quarter of 2011
totalled $5.0 million compared to $2.9 million for the same period
of 2010. Included in these costs are non-cash stock based
compensation charges totalling $1.8 million, compared to $0.8
million in the same period of 2010. Increased costs are related to
performance related compensation, higher staffing levels to support
the increased activities of the Company, together with general
inflationary pressures.
Derivative losses of $3.4 million were charged to operations
primarily from mark-to-market revaluations of foreign exchange
contracts outstanding at September 30, 2011, as a result of a rapid
decline in the Canadian dollar at the end of September against the
US dollar.
EBITDA(2) rose 159% to $33.3 million in the third quarter of
2011, compared to $12.9 million in the same period of 2010, driven
by higher gold prices, increased gold production, and lower cash
costs per ounce, partially offset by foreign exchange
mark-to-market adjustments, higher exploration and general
administrative costs.
Income and resource taxes for the third quarter of 2011 totalled
$10.6 million, up significantly from $2.7 million for the same
period of 2010, as a result of significantly higher taxable profits
and increased Quebec resource taxes.
Resource taxes for the third quarter totalled $3.7 million, or
13% of pre-tax profits, compared to $1.1 million in the same period
of 2010. Federal and Quebec income taxes totalled $6.9 million, or
24% of pre-tax profits, which are lower than the combined statutory
income tax rate of 28% as a result of the effect of the higher
resource taxes which are deductible for Federal and provincial
income tax purposes.
Cash flow from operating activities increased 388% in the third
quarter of 2011 to $34.7 million, compared to cash flow of $7.1
million in the same period of 2010. The increase in cash flow from
a year ago is principally due to higher realized gold prices,
increased gold production, and lower cash costs per ounce,
partially mitigated by higher current resource taxes and increased
exploration activities.
Investing activities totalled $11.2 million in the third quarter
of 2011, compared to $6.7 million for the same period of 2010.
Capital expenditures at Casa Berardi totalled $10.7 million in the
third quarter of 2011, of which $8.1 million was on sustaining
capital and development, and $2.6 million was on exploration
activity. A further $0.5 million was incurred for property
acquisition costs.
Year to date 2011
Net profit for the nine months ended September 30, 2011 was
$22.1 million, or $0.14 per share, compared to $10.2 million or
$0.06 per share in the same period of 2010. Year to date operating
results were positively impacted by higher realized gold prices and
increased gold production, and negatively impacted by a significant
increase in income taxes, and increased exploration activities, as
compared to the same period of 2010.
Higher ore grades and similar ore throughput in the first nine
months of 2011, compared to the same period of 2010, resulted in
gold production totalling 117,851 ounces. Gold production in the
first nine months of 2010 was 103,620 ounces. The average realized
gold price was US$1,544 per ounce and the average US/Cad exchange
rate was 0.98, compared to realized prices of US$1,069 per ounce at
an average exchange rate of 1.04 for the same nine month period of
2010.
Cash flow from operating activities totalled $72.3 million,
compared to $32.8 million for the same period of 2010. Cash flow
adjustments in the first nine months of 2010 include the unwinding
of gold derivatives, which reduced operating cash flow by $8.7
million. Operating profit margins increased to US$993(3) per ounce,
compared to US$525 per ounce in the same period of 2010.
Investing activities in the first nine months of 2011 totalled
$35.2 million, of which $33.3 million was incurred on sustaining
capital and exploration expenditures at Casa Berardi and $1.9
million was incurred for property acquisition costs, marketable
securities, and other capital assets. In the same period of 2010,
investing activities totalled $22.6 million, of which $21.8 million
was incurred on capital and exploration expenditures at Casa
Berardi and $0.8 million was incurred for property acquisition
costs and related marketable securities.
Financing activities resulted in a cash inflow of $1.6 million
in the first nine months of 2011 as a result of incentive stock
option exercises, compared to cash inflows of $7.7 million for the
same period of 2010 in which $8.3 million was from stock option
exercises, less a repayment of government assistance totalling $0.7
million.
CASH RESOURCES AND LIQUIDITY
As at September 30, 2011, cash and cash equivalents increased to
$178.0 million, compared to $139.3 million as at December 31, 2010.
Working capital increased to $178.8 million at September 30, 2011
from $152.5 million at December 31, 2010. The US$50 million
revolving credit facility established on January 31, 2011 remains
un-utilized as at November 8, 2011.
CASA BERARDI
Operations
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(Unaudited) 2011 2010
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YTD Q3 Q2 Q1 Q4 Q3 Q2 Q1
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Operating
results
Tonnes
milled 527,840 188,571 178,233 161,036 191,697 169,913 182,487 178,648
Grade -
grams/tonne 7.63 7.95 8.00 6.85 6.86 6.15 7.20 6.79
Mill
recoveries
- % 91.0% 92.2% 90.4% 90.2% 88.6% 89.1% 91.2% 90.2%
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Gold
production
- ounces 117,851 44,457 41,418 31,976 37,496 29,905 38,527 35,188
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Gold sold -
ounces 114,463 40,257 39,900 34,306 34,808 30,755 39,964 34,423
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Per ounce
data -
US$(4)
Average
realized
gold price
(i) $1,544 $1,695 $1,521 $1,392 $1,376 $1,119 $1,082 $1,010
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Total cash
costs (ii) $551 $497 $544 $621 $531 $604 $504 $538
Amortization
(iii) 242 250 225 238 263 254 240 228
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Total
production
costs (iv) $793 $747 $769 $859 $794 $858 $744 $766
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Table footnotes(4)
(i) Realized gold prices net of realized gold derivative gains or losses
divided by ounces sold.
(ii) Operating costs net of by-product credits, divided by ounces sold, and
divided by the average Bank of Canada Cad$/US$ rate.
(iii) Depreciation and amortization expenses divided by ounces sold.
(iv) Total cash costs plus depreciation, amortization and accretion
expenses.
Gold production from the Casa Berardi mine in the third quarter
of 2011 totalled 44,457 ounces, 49% higher than the same period of
2010. Higher ore throughput, higher ore grades, and improved mill
recoveries account for the improvement over the corresponding 2010
period. These results are in line with plan. Additional mining
equipment and improved ore handling had a positive impact on
productivity and ore throughput.
Daily ore throughput of 2,050 tonnes per day was achieved in the
third quarter 2011, compared to 1,847 tonnes per day in the same
quarter of 2010. Unit operating costs(4) on a Canadian dollar per
tonne basis in the third quarter of 2011 were 2% higher than plan
at $117 per tonne, as a result of additional stope development
costs and general inflationary cost pressures in the mining
industry. Unit operating costs(4) in the same quarter of 2010 were
$112 per tonne.
The anticipated higher ore grades in the third quarter of 2011
more than offset a strong Canadian dollar and higher operating
costs per tonne, resulting in total cash costs of US$497 per ounce
in the third quarter of 2011, compared to US$604 in the same
quarter of 2010. The 18% drop in total cash costs per ounce,
compared to the same quarter of 2010, is the result of a 29%
increase in ore grades, partially mitigated by a combination of 4%
higher unit operating costs per tonne and a 6% strengthening of the
Canadian dollar.
Lower cash operating costs and rising gold prices has allowed
operating profit margins(5) to increase significantly to US$1,198
per ounce in the third quarter 2011 compared to US$515 per ounce in
the same quarter of 2010.
Fourth quarter total cash costs are expected to be comparable to
those realized in the third quarter of 2011.
Casa Berardi Shaft Deepening
In the first quarter of 2011, a contract was awarded for the
deepening of the West Mine production shaft from the 760 metre
level down to the 1,080 metre level. Deepening the shaft is a
component of the overall strategy to have greater mining
flexibility in the West Mine.
Shaft deepening commenced in the second quarter and to the end
of the third quarter, ramp access from the 880 metre level has
resulted in 104 metres of excavation by means of an Alimak raise up
to the current shaft bottom, which will allow for accelerated shaft
deepening. In addition, 477 metres of horizontal development has
been completed. The shaft is expected to be completed towards the
end of 2012 and will provide access to the lower portion of Zones
113, 118, and 123 once a drift at the 1,010 metre level is
completed in 2013. The estimated cost of the shaft deepening, drift
access to Zones 118 and 123, and related infrastructure is
approximately $33.5 million. Expenditures during the third quarter
totalled $2.8 million and year to date total $6.6 million.
Casa Berardi Exploration
Three surface rigs and seven underground drill rigs were active
at Casa Berardi during the third quarter of 2011. A shortage of
drill crews forced the suspension of two underground rigs. The
surface drill rigs were primarily active exploring the extensions
of the 123 and 148 Zones at depth and the open pit resource
potential of Zone 160 near the East mine mill facilities. The
underground drill rigs were primarily focused on infill and step
out drilling of the upper extensions of Zones 118 and 123 from the
550 level drift as well as depth extensions of Zones 118 and 120
from the 810 level drift.
OTHER PROPERTIES
Joanna Gold Development Property
Aurizon is currently working on a feasibility study on the Hosco
deposit of the Joanna property, which will incorporate a reserve
update based on the increased mineral resource estimate announced
on June 13, 2011, together with results of metallurgical pilot
tests, a geotechnical study, updated capital and operating cost
estimates, and other relevant studies.
As reported on August 11, 2011, an initial review of the studies
has indicated that the projected capital and operating costs appear
to be significantly higher than previously anticipated. The
increased scope of the project, as a result of the expanded mineral
resource base, has increased capital costs, including those
associated with an autoclave process. Ore and waste stockpiles,
tailings costs, and costs of materials and equipment have also all
been trending higher, along with the gold price. Consequently,
several optimization studies are underway and include a revision of
the mine plan to optimize the mining fleet and productivities;
additional environmental characterisations (soil/streams/residues
& waste material) to ensure minimal environmental impact of the
mine; and revision of the metallurgical process and surface
infrastructures. This additional work will delay the estimated
completion of the feasibility study until the second quarter of
2012.
In the context of the current strong gold price environment,
management is confident in the future development of the Joanna
property given its measured and indicated in-pit resources of 54.1
million tonnes at an average grade of 1.29 grams of gold per tonne,
or 2,245,000 ounces of contained gold in the Hosco deposit, its
excellent exploration potential, its location in the heart of the
Cadillac Break gold camp, and its close proximity to existing
infrastructure.
Additional drill results from the drill campaign are being used
to revise the block model for the western extension of the Hosco
orebody. The resource update is currently being completed and the
results will be included in the feasibility study.
Although the original objective of the 2011 drill campaign was
to perform step-out drilling on 50 metre spacing along the 2.5
kilometre strike length of the Heva deposit and potential satellite
zones, some drill rigs were diverted to the Hosco sector in order
to increase and improve resources. Drilling is scheduled to restart
on Heva in late November, 2011. Feasibility and exploration
expenditures during the third quarter totalled $1.1 million and
year to date totalled $8.8 million. Continued feasibility
optimization studies and exploration activity in the fourth quarter
of 2011 are expected to total approximately $2.0 million.
Fayolle Property
Two drill rigs were active in the third quarter of 2011
completing 5,740 metres of drilling that was divided between
continued exploration of the Fayolle deposit by stepping out from
the mineralized core with 50 to 100 meter spacing and follow up on
the Vang structure located 500 metres south of the deposit.
Expenditures during the third quarter, 2011, totalled $1.1
million and year to date totalled $4.4 million. A new resource
estimation on the Fayolle deposit is underway and exploration
activity will continue during the fourth quarter at the same pace,
with 4,500 metres of drilling planned. Expenditures in the fourth
quarter are expected to total approximately $1.0 million.
Aurizon may earn up to a 65% interest in the Fayolle property,
subject to an underlying 2% net smelter royalty. The Fayolle
Property comprises 39 mining claims covering 1,373 hectares across
the Porcupine-Destor Break and is situated 10 kilometres north of
Aurizon's Joanna Project in north-western Quebec.
Marban Property
Two drill rigs were active in the third quarter of 2011
completing 5,449 metres of drilling focused on close spaced
drilling within the first 250 vertical metres of the Marban deposit
and testing the down dip eastern extension between depths of 400 to
600 metres. The drilling to date has established lateral and
vertical continuity of mineralized lenses inside the shear zone
system; and demonstrated the potential for both bulk tonnage open
pit mining and narrower higher-grade ore shoots at depth. The
drilling coverage has also assessed the transition from a more
gently dipping style of mineralization close to surface, where past
mining operation occurred, to a moderately dipping structure at
depth. Other targets have been tested, including the surface
footprint of the Norlartic deposit and fence drilling between the
Marban and Norlartic deposits in an attempt to evaluate the
connection between the two areas.
Expenditures during the third quarter 2011 total $788,000 and
year to date total $4.4 million. The end of the third quarter marks
the fulfillment of the first year firm exploration commitment of $5
million under the terms of the joint venture agreement. A second
phase budget of $5 million representing a work commitment of 34,000
metres has been approved. The program, planned to commence in
November, 2011, should allow the completion of 5,450 metres of
drilling by the end of the year, representing expenditures of
approximately $0.6 million.
Aurizon may earn up to a 65% interest in the Marban property,
which comprises 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.
Rex South Property
A field exploration program, built around a drill program on the
Augossan Zones and the extension of the large scale exploration
program started in 2010, was completed during the third quarter. To
the end of September 2011, 53 drill holes on 400 metre widely
spaced sections have been completed by percussion drilling,
representing 4,934 metres. The drill pattern was developed to test
polarization anomalies along a 6 kilometre area linked at surface
with copper-gold-tungsten mineralization. In addition, 145 metres
of channel sampling was completed to better understand the
mineralization controls. Approximately 15% of the assay results had
been received as at the end of September, 2011.
The prospecting part of the program was concluded with the
collection of 2,530 grab samples. The area covered totalled
approximately 400 square kilometres, and prospecting was guided by
lake-bottom sediment anomalies. Approximately 40% of the assay
results had been received as at the end of September, 2011.
Considering the large coverage distance between each point of
interest, construction of a second camp has been budgeted for 2012
with some expenses incurred during the third quarter of 2011,
including materials and transportation costs totalling $200
thousand. Year to date, total expenditures for the project are $4.7
million. Data compilation and geological interpretation activities
are planned for the fourth quarter, 2011.
Aurizon may earn a 65% interest on the South Rex property which
is located 145 kilometres east of Puvirnituk in the Nunavik region,
of northern Quebec. The staked area comprises 2,061 claims covering
approximately 89,800 hectares.
Opinaca-Wildcat Property
Exploration activity performed during the quarter comprised
drilling 5,900 metres in 31 holes to test the main targets
previously defined on the property by the optionor. In addition,
2,880 chip samples and 714 till samples have been collected to
better evaluate the potential of the property. Results from
approximately 50% of samples reveal arsenic enrichment trends,
where kilometric wide gold bearing anomalies have been
identified.
No further work is planned for the balance of the year other
than data verification, geological interpretation and reporting
activities. Year to date, total expenditures for the project are
$3.4 million.
Aurizon may earn 60% of the Opinaca property and 65% of the
Wildcat property comprising groups of claims blocks controlled by
Azimut Exploration and Everton Resources. The property, which
covers 56,791 hectares, is located in the James Bay area, Northern
Quebec, bordering the Eleonore project owned by Goldcorp.
Duverny
A first phase of exploration activity during the third quarter,
2011, focused on drill target generation with the collection of
1,300 soil samples on a 200 metre-wide line spacing. The Duverny
property has had very little exploration activity other than
limited prospecting and drilling. A land package extending for 10
kilometres has been staked in the extension of a main showing area
where historical drilling has confirmed grade and structural
continuity. Work planned for the fourth quarter, 2011, include
ground geophysical work on anomalies identified, followed by drill
testing, representing expenditures of approximately $0.5
million.
The Duverny property is located approximately 100 kilometres
north of Val d'Or and is 100% owned by Aurizon comprising 144
claims, and representing an area of 6,202 hectares. Of the total
claims, 16 claims have been purchased from a prospector and are
subject to a 1.5% NSR.
Duvay
In September 2011, the Company entered into an agreement with
Tres-Or Resources Ltd. ("Tres-Or"), under which the Company may
earn an initial 50% interest in Tres-Or's Duvay property situated
in the Abitibi region of Quebec. The Duvay property is situated
adjacent to the Duverny property and comprises different claims
blocks totalling 132 mineral claims and covering 4,999
hectares.
The 50% interest in the Duvay property may be earned by making
cash payments of $1.5 million and incurring work expenditures
totalling $6.5 million, over the next four years, of which firm
commitments totalling $2.5 million must be incurred in the first 18
months of the agreement. An additional 15% interest, bringing the
total interest to 65% in the property, may be earned by either
delivering a pre-feasibility study on the property or by incurring
$13 million of additional exploration expenditures within a three
year period of achieving the 50% participation.
During the third quarter of 2011, the Company made an initial
cash payment of $0.5 million and advanced $0.5 million in respect
of exploration expenditures to Tres-Or in accordance with the
provisions of the agreement. Work planned for the fourth quarter,
2011, representing expenditures of approximately $0.7 million,
include soil and till sampling together with bulk sampling of
several surface pits to assess mineral continuity in a context
where strong nugget effects are suspected and to define optimal
sampling parameters for future drilling activity.
Patris Property
A second phase of field work was initiated in September, 2011.
The southern part of the claim block was previously tested with a
program of 2,100 metres in twelve holes during the second quarter.
The exploration focus is now two kilometres north-west of the
previous drilling, along the same geological structure and in the
same area as an historical showing. Geological interpretation,
prospecting and 1,000 metres of diamond drilling are expected to be
completed in the fourth quarter 2011, at an estimated cost of $0.3
million.
Expenditures during the third quarter, 2011, total $33 thousand
and year to date total $0.3 million. The total program corresponds
to the first commitment of $0.6 million under a joint venture
agreement signed with Midland Exploration on a 63 mineral claim
block covering 2,672 hectares located approximately 10 kilometres
north of the Joanna project. Aurizon can earn up to 60% in this
property.
ADDITIONAL INFORMATION
Additional information about the Company's Casa Berardi Mine and
Joanna Gold Development project 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,
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 in this document
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.
OUTLOOK
Based upon results to date and a review of the fourth quarter
mine plan, Casa Berardi production guidance for the full year
remains at approximately 165,000 ounces of gold. Forecast total
cash costs in U.S. dollars are also expected to remain the same as
previously provided, at US$535 per ounce for the full year,
assuming a Canadian dollar exchange rate at parity against the U.S.
dollar for the balance of the year.
Onsite mining, milling and administration costs for 2011 are
expected to be similar to those experienced in the first nine
months of 2011 and average $122 per tonne for the full year, 2%
higher than previous guidance, and up 13% from 2010 unit operating
costs as a result of reduced development ore, smaller stopes, and
longer haulage distances.
Capital expenditures at Casa Berardi are estimated to total
$39.3 million in 2011, lower than the previous guidance of $46.4
million as a result of delays in initiating the shaft deepening
project and reduced development activity. In the first nine months
of 2011, $35.3 million of capital expenditures were incurred.
Approximately 30% of the 2011 capital expenditures comprise shaft
sinking, infrastructure costs and lateral development that will
allow access to the lower portion of Zone 113 as well as the
recently discovered gold mineralization at depth in Zones 118 and
123, east of the West mine production shaft.
An additional $2.4 million will be invested on exploration at
Casa Berardi in the fourth quarter of 2011 ($8.9 million incurred
in the first nine months of 2011) which will result in
approximately 100,000 metres of surface and underground diamond
drilling. Up to 4 surface and 9 underground drill rigs will be
active during the remainder of 2011. The Company expects to
capitalize these costs as the primary objective of the drilling
will be to improve the quality of the known reserves and resources
as well as exploring for extensions of these structures.
Aggressive exploration programs are also underway at the
Company's other Quebec properties which will result in expenditures
of approximately $28 million in 2011 (before tax credits), of which
$23.4 has been spent in the first nine months of 2011. In addition,
Joanna feasibility and optimization studies are estimated to total
$4.7 million in 2011, of which $3.8 million was incurred in the
first nine months of 2011.
NON-GAAP MEASURES
Realized gold price per ounce of gold
Realized gold price per ounce of gold is a non-GAAP measure and
is calculated by adjusting revenue for all realized gains and
losses on gold derivative instruments and then dividing by the gold
ounces sold.
Total cash costs per ounce of gold
Aurizon has included a non-GAAP performance measure of total
cash costs per ounce of gold in this report. Aurizon reports total
cash costs on a sales basis. In the gold mining industry, this is a
common performance measure but it does not have any standardized
meaning, and is a non-GAAP measure. The Company believes that, in
addition to conventional measures prepared in accordance with GAAP,
certain investors use this information to evaluate the Company's
performance and ability to generate cash flow. Accordingly, it is
intended to provide additional information and should not be
considered in isolation or as a substitute for measures of
performance prepared in accordance with GAAP. Total cash costs per
gold ounce are derived from amounts included in the Statements of
Comprehensive Income and include mine site operating costs such as
mining, processing and administration, but exclude amortization,
reclamation costs, financing costs and capital development costs.
The costs included in the calculation of total cash costs per ounce
of gold are reduced by silver by-product sales and then divided by
gold ounces sold and the average Bank of Canada Cad$/US$ exchange
rate.
In calculating the total cash costs per ounce of gold for the
third quarter of 2011, cost of sales were reduced by depreciation
and depletion charges of $9.8 million and silver revenues of $0.3
million, compared to $7.8 million and $0.2 million, respectively
for the same period in 2010. For the first nine months of 2011,
cost of sales were reduced by depreciation and depletion charges of
$26.4 million and silver revenues of $0.8 million, compared to
$25.2 million and $0.4 million, respectively, for the same period
in 2010.
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 included in cost of sales,
as shown in the Statements of Comprehensive Income, for inventory
adjustments and then dividing by the tonnes processed through the
mill.
For the third quarter of 2011, operating costs were decreased by
inventory adjustments of $2.1 million, compared to inventory
adjustments that increased operating costs by $0.4 million for the
same period in 2010. For the first nine months of 2011, operating
costs were decreased by inventory adjustments of $1.6 million,
compared to inventory adjustments that increased operating costs by
$1.8 million for the same period in 2010.
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 2011, the
average realized gold price was US$1,695 less total cash costs of
US$497 for an operating profit margin of US$1,198, compared to an
average realized gold price of US$1,119 less total cash costs of
US$604 for an operating profit margin of US$515 in the same quarter
of 2010.
For the first nine months of 2011, the average realized gold
price was US$1,544 less total cash costs of US$551 for an operating
profit margin of US$993, compared to an average realized gold price
of US$1,069 less total cash costs of US$544 for an operating profit
margin of US$525 in the same period of 2010.
NON-GAAP MEASURES (continued)
Earnings before interest, taxes, depreciation and amortization
("EBITDA")
EBITDA is a non-GAAP measure and is calculated by adjusting the
net profit or loss to exclude depreciation and depletion charges,
finance expense, finance income, and income tax expense. The
following table provides a reconciliation of net profit to EBITDA
for the three and nine months ended September 30:
Three months ended Nine months ended
------------------------------------------------------------
September 30, September 30, September 30, September 30,
2011 2010 2011 2010
----------------------------------------------------------------------------
Net profit for
the period $13,071 $2,307 $22,121 $10,236
Depreciation &
amortization 9,844 7,989 26,565 25,784
Finance income (365) (279) (1,035) (491)
Finance costs 250 177 691 574
Income tax
expense 10,574 2,684 25,685 11,155
----------------------------------------------------------------------------
EBITDA $33,374 $12,878 $74,027 $47,258
----------------------------------------------------------------------------
OUTSTANDING SHARE DATA
As of November 8, 2011, Aurizon had 163,021,202 common shares
issued and outstanding. In addition, 9,255,350 incentive stock
options representing 5.7% of outstanding share capital are
outstanding and exercisable into common shares at an average price
of $5.31 per share.
Common Shares
(TSX - ARZ & NYSE Amex - AZK)
------------------------------------------------
September 30, December 31,
2011 2010
------------------------------------------------
Issued 163,021,202 162,145,702
Fully-diluted 172,276,552 171,815,302
Weighted average 162,483,035 160,249,688
------------------------------------------------
CONFERENCE CALL AND WEBCAST
Aurizon management will host a conference call and live webcast
for analysts and investors on Thursday, November 10, 2011 at 8:00
a.m. Pacific Standard Time (11:00 a.m. Eastern Standard Time) to
review the results.
Conference Call Numbers:
Canada & USA Toll Free Dial In: 1-800-319-4610 or Outside
Canada & USA Call: 1-604-638-5340.
The call is being webcast and can be accessed at Aurizon's
website at www.aurizon.com or enter the following URL into your web
browser:
http://services.choruscall.com/links/aurizon111110.html.
Those who wish to listen to a recording of the conference call
at a later time may do so by calling: Canada & USA Toll Free:
1-800-319-6413 or outside Canada & USA: 1-604-638-9010, (Code:
1001#). A replay of the call will be available until Thursday,
November 17, 2011.
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,
estimated mineral resources and timing of feasibility study on the
Joanna Gold Development Project, 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 2011, 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, and with respect to mineral resource estimates,
the key assumptions and parameters on which such estimates are
based as mentioned in this report, 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,
labor 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 favourable mining
jurisdictions and 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.
(1) See "Non-GAAP" measures.
(2) See "Non-GAAP" measures.
(3) See "Non-GAAP measures.
(4) See "Non-GAAP" measures.
(5) See "Non-GAAP" measures.
U.S. Registration (File 001-31893)
Interim Balance Sheets as at,
(Unaudited, expressed in thousands
of Canadian dollars) September 30, 2011 December 31, 2010
----------------------------------------------------------------------------
----------------------------------------------------------------------------
ASSETS
Current assets
Cash and cash equivalents $ 178,017 $ 139,341
Marketable securities 919 1,129
Inventories 15,197 12,085
Accounts receivable and other
receivables 8,874 7,258
Tax credits receivable 10,922 12,398
----------------------------------------------------------------------------
Total current assets 214,246 172,211
----------------------------------------------------------------------------
Non-current assets
Property, plant and equipment 162,233 152,012
Mineral properties 4,880 4,220
Deferred finance costs 383 -
Other assets 6,149 8,100
----------------------------------------------------------------------------
Total non-current assets 173,645 164,332
----------------------------------------------------------------------------
TOTAL ASSETS $ 387,891 $ 336,543
----------------------------------------------------------------------------
----------------------------------------------------------------------------
LIABILITIES
Current liabilities
Accounts payable and accrued
liabilities $ 26,468 $ 18,905
Derivative instrument liabilities 2,886 -
Current portion of long-term
obligations 130 756
Current resource tax liabilities 5,602 -
----------------------------------------------------------------------------
Total current liabilities 35,086 19,661
----------------------------------------------------------------------------
Non-current liabilities
Provisions 16,401 13,114
Deferred tax liabilities 39,198 35,378
----------------------------------------------------------------------------
Total non-current liabilities 52,927 48,492
----------------------------------------------------------------------------
Total liabilities 88,013 68,153
----------------------------------------------------------------------------
EQUITY
Shareholders' equity
Issued capital 273,873 269,677
Contributed surplus 1,118 1,022
Share-based compensation 16,515 13,719
Retained earnings (Deficit) 5,714 (16,407)
Accumulated other comprehensive
(loss) income (331) 379
----------------------------------------------------------------------------
Total shareholders' equity 299,878 268,390
----------------------------------------------------------------------------
TOTAL LIABILITIES AND EQUITY $ 387,891 $ 336,543
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Interim Statements of Comprehensive Income
Three months ended Nine months ended
------------------------------------------------------------
(Unaudited,
expressed in
thousands of
Canadian
dollars except
per share September 30, September 30, September 30, September 30,
amounts) 2011 2010 2011 2010
---------------------------------------------------------------------------
Revenue $ 68,144 $ 39,882 $ 174,316 $ 130,184
Cost of sales (29,736) (27,223) (88,811) (84,880)
---------------------------------------------------------------------------
Gross profit 38,408 12,659 85,505 45,304
---------------------------------------------------------------------------
Other operating
expenses
Exploration
costs (7,037) (5,471) (20,239) (10,271)
General and
administr-
ation costs (5,025) (2,918) (15,278) (11,291)
Other net
gains 585 461 552 2,049
---------------------------------------------------------------------------
Operating
profit 26,931 4,731 50,540 25,791
---------------------------------------------------------------------------
Finance income 365 279 1,035 491
Finance costs (250) (177) (691) (574)
Other
derivative
gains (losses) (3,401) 158 (3,078) (4,317)
---------------------------------------------------------------------------
Profit before
income taxes 23,645 4,991 47,806 21,391
---------------------------------------------------------------------------
Income tax
expense (10,574) (2,684) (25,685) (11,155)
---------------------------------------------------------------------------
NET PROFIT FOR
THE PERIOD 16,060 2,307 25,110 10,236
---------------------------------------------------------------------------
Other
comprehensive
income (loss)
Non-cash gain
(loss) on
marketable
securities (407) 578 (710) 433
---------------------------------------------------------------------------
TOTAL
COMPREHENSIVE
INCOME FOR THE
PERIOD $ 15,653 $ 2,885 $ 24,401 $ 10,669
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Weighted
average number
of common
shares
outstanding -
Basic 162,813 160,518 162,483 159,724
Earnings per
share - Basic $0.08 $0.01 $0.14 $0.06
Weighted
average number
of common
shares
outstanding -
Diluted 164,622 163,131 164,344 161,514
Earnings per
share -
Diluted $0.08 $0.01 $0.14 $0.06
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Interim Statements of Cash Flows
Three months ended Nine months ended
------------------------------------------------------------
(Unaudited,
expressed in
thousands of
Canadian September 30, September 30, September 30, September 30,
Dollars) 2011 2010 2011 2010
----------------------------------------------------------------------------
Operating
activities
Net profit for
the period $ 13,071 $ 2,307 $ 22,121 $ 10,236
Adjustments for
non-cash
items:
Depreciation
and
amortization 9,844 7,989 26,565 25,784
Share based
compensation 1,790 758 4,187 4,486
Derivative
losses (gains) 3,209 (4,185) 2,886 (8,715)
Future income
taxes (724) 524 3,820 5,761
Other 33 168 2,183 274
----------------------------------------------------------------------------
27,223 7,561 61,762 37,826
Decrease
(increase) in
non-cash
working
capital items 7,456 (460) 10,511 (5,047)
----------------------------------------------------------------------------
Net cash
provided by
operating
activities 34,679 7,101 72,273 32,779
----------------------------------------------------------------------------
Investing
activities
Property, plant
and equipment (10,748) (6,659) (33,655) (20,436)
Mineral
properties (500) - (660) (1,665)
Purchase of
marketable
securities - - (500) (500)
Reclamation
deposits - - (418) -
----------------------------------------------------------------------------
Net cash used in
investing
activities (11,248) (6,659) (35,233) (22,601)
----------------------------------------------------------------------------
Financing
activities
Issuance of
shares 2,075 6,186 2,901 8,318
Long-term
obligations - (21) (773) (661)
Deferred
finance costs - - (492) -
----------------------------------------------------------------------------
Net cash
provided by
financing
activities 2,075 6,165 1,636 7,657
----------------------------------------------------------------------------
NET INCREASE IN
CASH AND CASH
EQUIVALENTS 25,506 6,607 38,676 17,835
CASH AND CASH
EQUIVALENTS -
BEGINNING OF
PERIOD 152,511 124,326 139,341 113,098
----------------------------------------------------------------------------
CASH AND CASH
EQUIVALENTS -
END OF PERIOD $ 178,017 $ 130,933 $ 178,017 $ 130,933
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Contacts: Aurizon Mines Ltd. George Paspalas President & CEO
604-687-6600 or Toll Free: 1-800-411-GOLD (4653) Aurizon Mines Ltd.
Ian S. Walton Executive Vice President & CFO 604-687-6600 or
Toll Free: 1-800-411-GOLD (4653) 604-687-3932
(FAX)info@aurizon.comwww.aurizon.com Aurizon Mines Ltd. Investor
Relationsjennifer.north@aurizon.com
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