Aurizon Mines Ltd. - Value
January 10 2012 - 7:00PM
Zacks
The gold miners are cheap after investors fled the sector thinking
the gold bull was over.
Aurizon Mines Ltd. (AZK) is expected
to grow earnings by 87% in 2012 after posting triple digit earnings
growth in 2011. Yet this Zacks #1 Rank (Strong Buy) has a forward
P/E of just 9.5.
Aurizon is a Vancouver-based gold producer with 11
properties in the Abitibi region of northwestern Quebec including
Casa Berardi, which is operational, and the Joanna property which
is in the feasibility stage. It has a market cap of $865
million.
Record Revenue in the Third Quarter
On Nov 10, Aurizon reported its third quarter
results and had a record quarter due to high gold prices. Revenue
was a record $68 million (all dollar amounts are in the Canadian
dollar, except for the price of gold, where indicated).
The quarter was boosted by Casa Berardi which saw
revenue jump 71% to $68.1 million from $39.9 million a year
ago.
It sold 40,257 ounces of gold compared to just
30,755 ounces of gold in the third quarter of 2010.
Higher Gold Prices = Operating Margins up
233%
Aurizon is completely unhedged so it was able to
cash in on record high gold prices. The average realized gold price
was US$1,695 per ounce compared to US$1,119 per ounce a year
ago.
The company also was able to make 100% of gold
sales at current market prices. In the year ago quarter, 60% of
gold sales were delivered against gold call options at an average
price of US$915 per ounce.
Earnings per share missed on the Zacks Consensus,
however, by 4 cents as analysts got too bullish. Earnings per share
were 8 cents compared to the consensus of 12 cents.
This was still 467% higher than the third quarter
of 2010 when the company made just 1 cent.
Exploration costs jumped 29% in the third quarter
to $7 million from $5.5 million in 2010 due to further exploration
and feasibility work at the Joanna property.
Cash is King
Aurizon has plenty of cash, which is a good problem
to have for a smaller miner. As of Sep 30, 2011, cash and cash
equivalents rose to $178 million from $139.3 million at the end of
December 2010.
The company also has an untapped US$50 million
revolving credit facility, which was established on Jan 31,
2011.
Zacks Consensus Estimates Rise
In November, the company confirmed its production
guidance for its premier property, Casa Berardi, at 165,000
ounces.
The analysts liked what they heard and are still
bullish on 2011 and 2012.
2 estimates have moved higher for 2011 in the last
30 days. The 2011 Zacks Consensus Estimate has moved to 30 cents
from 29 cents in that time.
That is earnings growth of 397% as the company made
just 6 cents in all of 2010.
But the analysts also see more hot times in
2012.
2 estimates also moved higher for 2012 in the last
month, pushing the 2012 Zacks Consensus up to 56 cents from 51
cents.
That is another 87% earnings growth.
There's Still Value
Shares sold off for much of 2011 after peaking in
late 2010.
But with earnings expected to grow, that means
there is a lot of value.
With a forward P/E of just 9.5, that puts Aurizon
well under its peers at 10.3x. It also has a price-to-book of 2.8.
A P/B under 3.0 usually indicates value.
Additionally, Aurizon has a 1-year return on equity
(ROE) of 10.9%. That is better than its peers who average just
8.4%.
The gold miners aren't dead yet. Gold is still
18.8% above year ago levels. We'll find out on Feb 10, when Aurizon
is scheduled to report fourth quarter results, whether the 2012
growth story is here to stay.
Tracey Ryniec is the Value Stock Strategist for
Zacks.com. She is also the Editor of the Turnaround Trader and
Insider Trader services. You can follow her on twitter at
traceyryniec.
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