Aurizon (TSX:ARZ)(NYSE MKT:AZK)(NYSE Amex:AZK) reports unaudited
financial results for the second quarter of 2012, which have been
prepared on the basis of available information up to August 6,
2012. Management's Discussion and Analysis should be read in
conjunction with the most recent annual financial statements of the
Company. All dollar amounts are in Canadian dollars unless
otherwise stated.
Second Quarter 2012 Highlights and Significant Items
-- Net profit of $8.6 million, or $0.05 per share, 29% higher than second
quarter 2011.
-- EBITDA(1) of $25.4 million compared to $27.9 million in the second
quarter 2011.
-- Operating profit margin(2) per ounce of US$921.
-- Gold production of 37,820 ounces.
-- Cash balances of $208 million and no debt.
-- Joanna feasibility study completed.
-- Encouraging exploration results at Casa Berardi and Joanna.
From the President and Chief Executive Officer, George
Paspalas:
"The results of a positive Feasibility study on the Hosco
deposit at Joanna were received during the second quarter and have
established in-pit mineral reserves of 1.66 million ounces of gold.
A capital allocation decision was made to defer development and
permitting of the Hosco deposit. We have seen early stage
exploration potential at Heva and the Hosco West extension, and the
concept of adding non-refractory and higher grade refractory ore to
the development scenario at the property is currently being
explored. Both areas have provided positive drill results during
the second quarter.
"Gold production for second quarter 2012 was 13% higher than the
first quarter 2012. Although production is now on track, we believe
it is prudent to trim our production guidance for the year from
155,000 - 160,000 ounces to approximately 150,000 ounces of gold.
Commensurate with the production guidance, we are also revising the
total cash costs per ounce from US$600 to US$645.
"Our focus remains to grow the Company by pursuing opportunities
that would be accretive to shareholder value. The exploration
success at Casa Berardi which has confirmed continuity and
extension of previously identified lenses, and identified
potentially new lenses adjacent to the 123 zone, and the
encouraging drill results from Heva and the Hosco West extension,
highlight the potential for future growth at these two
properties."
FINANCIAL RESULTS
Financial review of the second quarter 2012
Net Profit of $8.6 million, or $0.05 per share, was achieved in
the second quarter 2012, 29% higher than the net profit of $6.6
million, or $0.04 per share, in the same period of 2011.
Comparative second quarter 2011 results were negatively impacted by
the retroactive enactment of higher Quebec resource taxes. Profit
before income taxes in the second quarter of 2012 was 23% lower
than the same period of 2011 as a result of higher total production
costs.
Revenue from Casa Berardi operations increased to $60.9 million
in the second quarter of 2012 from the sale of 37,345 ounces of
gold, compared to $59 million from the sale of 39,900 ounces of
gold in the same quarter of 2011. The average realized gold price
was US$1,592 per ounce and the average Cad/US exchange rate was
1.02, compared to realized prices of US$1,521 per ounce at an
average exchange rate of 0.97 in the same quarter of 2011. The
average London afternoon gold fix for the second quarter of 2012
was US$1,611 per ounce compared to US$1,504 per ounce for the same
period of 2011.
Cost of sales for the second quarter 2012, comprising operating
costs and depreciation and amortization of $25.5 million and $10.7
million respectively totalled $36.2 million. On a unit cost basis,
total cash costs per ounce of gold sold(3) were US$671 and
depreciation and amortization was US$283 per ounce, for a total
production cost of US$954 per ounce. As reported in the first
quarter, changes to the mining sequence were necessary in the first
half of 2012 as a result of a lack of shotcrete capacity required
for ground rehabilitation which has now been resolved. These
operational issues impacted productivities during the quarter,
resulting in higher unit operating costs(4) than plan of Cad$142
per tonne.
Gross profit of $24.7 million in the second quarter 2012
decreased from $29.1 million for the same period of 2011.
Moderately higher realized gold prices were more than offset by
higher operating costs resulting in operating profit margins to
decline to US$921 per ounce compared to US$977 per ounce in the
same quarter of 2011. Higher depreciation and amortization charges
of US$283 per ounce also impacted second quarter results, compared
to US$225 per ounce in the same quarter of 2011.
EBITDA declined 9% to $25.4 million, compared to $27.9 million
in 2011, as a result of higher unit total cash costs, partially
mitigated by higher gold prices.
Exploration expenditures in the second quarter 2012 totalled
$5.4 million compared to $6.1 million in the same period of 2011.
Exploration activities in 2012 were conducted primarily on the
Marban and Joanna projects, including the completion of the
feasibility study at Joanna.
General and administrative costs in the second quarter 2012
totalled $4.2 million, matching those costs in the same period of
2011.
Income and resource taxes totalled $6.4 million, or 43% of
pre-tax earnings, for the second quarter 2012, significantly lower
than the $12.7 million, or 66% of pre-tax earnings, for the same
period of 2011. The second quarter 2011 taxes reflect the
retroactive enactment of higher Quebec resource taxes to March 31,
2010, which increased the tax rate from 12% to 14% from April 1,
2010 onward and to 15% in 2011. The Quebec resource tax rate in
2012 is 16%.
The combined Canadian statutory income and resource tax rate for
the Company in 2012 is 38.4%. The difference in the statutory rates
from the effective rates in 2012 is primarily due to the
non-deductibility of certain costs, particularly for the
determination of the Quebec resource tax.
Cash flows from operating activities in the second quarter 2012
totalled $21.7 million, compared to $23.1 million in the same
period of 2011. The decrease in cash flow from a year ago is
principally due to lower gold sales volumes and lower operating
profit margins resulting from higher total cash costs, partially
mitigated by higher realized gold prices.
Investing activities totalled $15.6 million in the second
quarter 2012, compared to $13.0 million for the same period of
2011. Capital expenditures at Casa Berardi totalled $19.4 million
in the second quarter 2012, of which $17.3 million was on
sustaining capital and development, and $2.1 million was on
exploration activity.
Financing activities during the second quarter 2012 resulted in
cash inflows totalling $3.0 million from incentive stock option
exercises.
First Half 2012
Net Profit for the six months ended June 30, 2012 was $16.8
million, or $0.10 per share, compared to $9.1 million or $0.05 per
share in the same period of 2011. First half operating results were
positively impacted by higher realized gold prices, partially
reduced by lower gold sales volume and higher total production
costs, compared to the same period of 2011. Profits in the first
half of 2011 were also adversely impacted by a significant increase
in income and resource taxes associated with the new Quebec
resource tax.
Lower ore grades partially mitigated by higher ore throughput in
the first half of 2012 compared to the same period of 2011 resulted
in gold production totalling 71,308 ounces compared to 73,394
ounces in the same period of 2011. A weaker Canadian dollar over
the past year has had a positive effect on US dollar denominated
gold prices.
Cash flow from operating activities totalled $25.1 million in
the first half of 2012, compared to cash flow of $37.6 million for
the same period of 2011. The decrease in cash flow in 2012 is
primarily due to a $10.2 million increase in non-cash working
capital items resulting from the payment in 2012 of income and
resource tax payments totalling $18.4 million in respect of 2011
taxes owing. Operating profit margins increased to US$963 per ounce
in 2012, compared to US$882 per ounce in the same period of
2011.
Investing activities in the first half of 2012 totalled $36.1
million, of which $33.7 million was invested in sustaining capital
and exploration expenditures at Casa Berardi. In the same period of
2011, investing activities totalled $24.0 million, of which $23.9
million was invested in capital and exploration expenditures at
Casa Berardi.
Financing activities resulted in cash inflows of $5.3 million in
the first half of 2012 compared to cash outflows of $0.4 million
for the same period of 2011.
CASH RESOURCES AND LIQUIDITY
As at June 30, 2012, cash and cash equivalents were $207.9
million, compared to $213.5 million as at December 31, 2011. Cash
balances were impacted by income and resource tax payments
totalling $18.4 million in 2012 in respect of taxes owing for 2011.
Working capital increased to $202 million from $198 million as at
December 31, 2011. The US$50 million revolving credit facility
established on January 31, 2011 remains un-utilized as at August 6,
2012.
CASA BERARDI
Operations
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2012 2011
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1st
Half Q2 Q1 Q4 Q3 Q2 Q1
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Operating results
Tonnes milled 341,285 176,557 164,728 170,283 188,571 178,233 161,036
Grade - grams/tonne 7.13 7.27 6.99 9.13 7.95 8.00 6.85
Mill recoveries - % 91.1% 91.7% 90.5% 92.0% 92.2% 90.4% 90.2%
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Gold production -
ounces 71,308 37,820 33,488 45,995 44,457 41,417 31,976
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Gold sold - ounces 70,709 37,345 33,364 50,787 40,257 39,900 34,306
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Per ounce data -
US$(5)
Average realized
gold price (i) $1,639 $1,592 $1,692 $1,655 $1,695 $1,521 $1,392
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Total cash costs
(ii) $676 $671 $681 $498 $497 $544 $621
Amortization (iii) 263 283 234 238 250 225 238
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Total production
costs (iv) $939 $954 $915 $736 $747 $769 $859
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Table footnotes:
(i) Realized gold prices divided by ounces sold.
(ii) Operating costs net of by-product credits, divided by ounces sold, and
divided by the average Bank of Canada Cad$/US$ rate.
(iii) Depreciation and amortization charges.
(iv) Total cash costs plus depreciation and amortization charges.
CASA BERARDI DISCUSSION
Operational results
Ore throughput increased 7% and ore grades improved 4% in the
second quarter compared to the first quarter 2012. As reported in
the first quarter, changes to the mining sequence were necessary in
the first half of 2012 due to a lack of shotcrete capacity required
for ground remediation, which has now been resolved. Gold
production from the Casa Berardi mine in the second quarter of 2012
totalled 37,820 ounces, 13% higher than the first quarter 2012, and
lower than the second quarter 2011 production of 41,417 ounces.
Daily ore throughput of 1,940 tonnes per day at an average grade
of 7.27 grams per tonne was achieved in the second quarter 2012,
compared to 1,959 tonnes per day at an average grade of 8.0 grams
per tonne in the same quarter of 2011. Lower ore grades were the
principal factor for the lower gold production in the second
quarter 2012. Unit operating costs on a Canadian dollar per tonne
basis in the second quarter of 2012 were higher than plan, at $142
per tonne, due to difficult ground conditions and higher
rehabilitation costs. Unit operating costs in the same quarter of
2011 were $119 per tonne.
The anticipated higher unit operating costs on a per tonne basis
in 2012, resulted in total cash costs of US$671 per ounce in the
second quarter 2012, compared to US$544 in the same quarter of
2011. A combination of a 19% increase in unit operating costs
together with 9% lower ore grades resulted in the higher total cash
costs per ounce in the second quarter 2012, compared to the same
quarter of 2011.
Moderately higher realized gold prices were more than offset by
higher operating costs resulting in operating profit margins to
decline to US$921 per ounce compared to US$977 per ounce in the
same quarter of 2011.
Ore throughput and grades are anticipated to be higher in the
second half of 2012, which is expected to result in higher gold
production and lower total cash costs per ounce than those realized
in the first half of 2012.
(1),(2),(3),(4),(5) See "Non-GAAP Measures"
Casa Berardi Shaft Deepening
Shaft deepening of the West Mine production shaft continued with
106 metres of sinking completed in the first half of 2012 from the
760 metre level down to the 866 metre level. Also completed in the
first half of the year were the excavation of the loading pocket at
the 795 level and the installation of a sinking hoist for the
second phase of shaft deepening. Shaft deepening is expected to be
completed in the first quarter 2013 and operational by the third
quarter 2013. The shaft will provide access to the lower portion of
Zones 113, 118, and 123 from a drift at the 1,010 metre level. As
previously reported, with production priorities impacting the
scheduling and productivity of the shaft deepening project, as well
as general inflationary cost pressures, the capital costs for the
shaft deepening and lateral drift development at the 1,010 metre
level to access Zones 113, 118 and 123 is now projected to be $40
million, of which $7.4 million has been incurred in the first half
of the year, and $17.2 million incurred to date. Approximately
$10.5 million will be incurred in the second half of 2012 and the
balance in 2013.
Casa Berardi Exploration
Three surface rigs and eight underground drill rigs were active
at Casa Berardi during the second quarter 2012. 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 123. Drilling in
the vicinity of Zone 123 from the 810 metre drift has confirmed the
identification of new mineralized lenses outside of the known
resource block. Some of the better drill results include 6.7 grams
per tonne over 25 metres; 16.1 grams per tonne over 6.4 metres; and
5.8 grams per tonne over 9.5 metres.
One surface drill rig continues to be active exploring Zone 160
near the East mine mill facilities where there may be an
opportunity to establish an open pit operation. Some of the better
drill results include 16.9 grams per tonne over 2.2 metres and 1.0
gram per tonne over 19.5 metres. A second surface drill rig was
actively exploring the Principal Zone and another exploring the
depth extensions of the West Mine area. Some of the better drill
results from the eastern side of the Principal Zone and outside of
the pit contours are 1.7 grams per tonne over 163.8 metres and 5.1
grams per tonne over 49.4 metres.
FEASIBILITY AND EXPLORATION DISCUSSION
Joanna Gold Development Property
The results of the Joanna Hosco Feasibility Study were received
in the second quarter of 2012. The Feasibility Study established
in-pit mineral reserves of 1.66 million ounces of gold in the Hosco
deposit that forms part of the 100% owned Joanna project. The
Feasibility Study was prepared by BBA Inc. of Montreal, ("BBA")
with contributions from other engineering firms and consultants, in
accordance with the Standards of Disclosure for Mineral Projects as
defined by National Instrument 43-101 ("NI 43-101").
The Feasibility Study was prepared as an open pit mining project
relating solely to the mineral reserves located on the Hosco
deposit. The Hosco deposit forms part of the Joanna Project which
is located in pro-mining, north-western Quebec, 20 kilometres east
of the town of Rouyn-Noranda. The in-pit mineral reserves were
estimated at a cut-off grade of 0.5 g/t for a total diluted proven
and probable reserve estimate of 41.1 million tonnes at 1.26
grams/tonne representing 1.66 million ounces of gold. The mine plan
was designed for a 8,500 tonnes per day operation, with an average
stripping ratio of 4.49 to 1 and a life of mine of 13.4 years.
The milling circuit includes crushing, grinding, gravity,
flotation, pressure oxidation and carbon-in-pulp leaching (CIP).
Metallurgical test work indicates that the use of the pressure
oxidation technology prior to leaching improves the overall gold
recoveries to 87.5%. The study provides for the low sulphide
tailings, without cyanide, to be stored in a flotation thickened
tailings pond and the tailings from the autoclave circuit would be
stored in a specifically designed impoundment.
The pre-production capital costs and sustaining costs for the
Hosco deposit are estimated, respectively, at $422 million and $97
million. The average operating cash cost is estimated at US$716 per
ounce of gold and $25.32 per tonne milled. The financial analysis,
using a price of gold of US$1,350 per ounce using a 5% discount
rate, indicates a pre-tax net present value ("NPV") of $112 million
with a pre-tax internal rate of return ("IRR") of 8.7% and a
payback period of 8.2 years. On an after tax basis, Aurizon
estimates that the IRR is 6.5%.
The Feasibility Study indicates that the Hosco deposit generates
a positive return at three-year trailing average gold prices;
however, in terms of capital allocation, the Company has decided to
defer development and permitting of the Hosco deposit. However, the
Company will continue to pursue exploration of the Heva deposit and
the Hosco West Extension areas, which, if successful, could lead to
a staged and perhaps more financially beneficial development
strategy at Joanna.
Four drills were active during the second quarter of 2012
focusing on the Heva and Hosco West Extension areas.
As announced during the year, assays have been received from
eighty nine drill holes, of which sixty drill holes returned
between one and five mineralized intersections, calculated with a
minimum cut-off of 0.5 grams of gold per tonne over 5 metres above
a vertical depth of 200 metres. Nineteen holes returned one to
three positive intervals down to a maximum depth of 400 metres,
using a cut-off grade of 3 grams of gold per tonne over a minimum
thickness of 3 metres. Based on the encouraging results obtained to
date, deeper holes to follow the continuity of the mineralization
down dip to 600 metres will commence shortly.
The reconnaissance drilling on the Heva deposit is nearing
completion. An in-pit resource update of Heva will be performed
during the year. In addition, the interpretation of the higher
grade trends shows a well-defined plunge, and has the potential to
move the project toward a combination of surface and underground
production targets.
Initial metallurgical test work of the Heva mineralization
indicates that it is non-refractory, and could potentially deliver
high recoveries through direct cyanidation of the ore.
Exploration and feasibility study expenditures at Joanna during
the second quarter totalled $2.8 million and for the first half of
2012 totalled $5.5 million.
Marban Property
The Phase 2 drill program comprising 90 drill holes and nine (9)
extensions of previous holes was completed in May, 2012 with 34,656
metres of drilling completed using four drill rigs. The 2010 to
2012 drill programs have confirmed that mineralization extends
between surface to an approximate depth of 500 metres. The programs
have also led to the discovery of a shallow area called the Western
High Grade Zone and the identification of the Eastern Down Dip
Zone. The Eastern Down Dip Zone is located below a vertical depth
of 250 metres and remains open at depth and laterally.
Also received during the second quarter 2012, were preliminary
metallurgical test results conducted by SGS Mineral Services on two
composite samples which indicated favourable gold recoveries. Ore
cyanidation testing produced results ranging from 95.4% to 97.6%
gold recoveries.
An updated mineral resource estimate based on the Phase One
drill results, as well as basic technical studies, including
metallurgical test work, are nearing completion and undergoing
final review.
Expenditures during the second quarter 2012 totalled $1.6
million and year to date totalled $4.3 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.
Fayolle Property
Early in the second quarter, the Company completed a 7,136 metre
drill program, on drill targets located in the eastern extension of
the main mineralized breccia of the Fayolle deposit. A total of
59,381 metres have been drilled on the project since Aurizon's
involvement in the property.
Expenditures during the second quarter 2012 totalled $0.3
million and year to date totalled $1.6 million. A new resource
estimation on the Fayolle deposit is nearing completion which will
determine the Company's next phase of exploration activities.
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.
Duverny Property
During the second quarter 2012, twenty-one diamond drill holes
totalling 4,441 metres were completed to test a series of
geophysical and soil anomalies located within the Chicobi fault
corridor where narrow, high grade gold vein mineralization was
discovered in the 1930's. Pending assay results will determine the
next phase of exploration activities.
Expenditures during the second quarter 2012 totalled $0.5
million. Aurizon owns a 100% interest in 144 mineral claims
covering 6,200 hectares, 25 kilometres northeast of Amos, Quebec
which include 14 mineral claims which are subject to a royalty.
Rex South Property
The receipt and evaluation of the results of the Rex South 2011
exploration program have resulted in the Company's decision not to
continue the earn-in of this early stage project. This decision was
made in the context of the significant capital required to define
and develop a mineral deposit large enough to provide robust
economics for this remote, far northern project.
Exploration costs incurred in the first half of 2012 together
with costs associated with decommissioning a remote camp totalled
$0.6 million. In addition, $0.3 million of capitalized costs were
charged to earnings.
Other Exploration Activities
Various sampling and geophysical activities were conducted
during the second quarter 2012 on two joint venture projects, the
Duvay and Opinaca-Wildcat projects, where $0.2 million and $0.6
million respectively, was expended in the second quarter 2012.
OUTLOOK
Casa Berardi Operations
Based upon first half results and a review of the mine plan for
the balance of 2012, Casa Berardi production guidance for the full
year has been lowered to approximately 150,000 ounces, compared to
previous guidance of 155,000 - 160,000 ounces of gold. Total cash
costs for the full year are now estimated at approximately US$645
per ounce, assuming a Canadian dollar exchange rate at parity
against the US dollar for the balance of the year, compared to
previous guidance of US$600 per ounce and exchange rates at
parity.
Onsite mining, milling and administration costs for 2012 are
expected to decrease from $147 per tonne experienced in the first
half of 2012 and average $143 per tonne for the year, compared to
the $134 per tonne guidance provided at the beginning of the
year.
Capital expenditures at Casa Berardi, funded from operating cash
flow, are estimated to total $46 million in the second half of
2012, to continue with three major capital projects: shaft sinking
and underground development; construction of a paste backfill plant
to maximize the extraction of high grade ore from Zone 113 and
allow greater mining flexibility; and continued replacement of
mobile equipment.
An additional $4.5 million will be invested on exploration at
Casa Berardi in the second half of 2012 which will include
approximately 36,000 metres of surface and underground diamond
drilling. Up to 3 surface and 5 - 7 underground drill rigs will
continue to be active during the course of 2012. These costs will
be capitalized as the primary objective of the drilling will be to
improve the quality of the known reserves and resources as well as
identifying extensions of these structures.
The manpower transition from contract miners at Casa Berardi to
Aurizon employees that was announced on April 2, 2012, has been
going well. The change to owner mining is expected to assist the
Company in recruiting, attracting, and retaining miners. The
transition is expected to be completed in the third quarter
2012.
Exploration properties
Exploration activities in the second half of 2012 will continue
to focus on the Heva and Hosco West Extension areas of the Joanna
property. The Heva deposit resource inventory includes 270,000
ounces at 1.9 grams of gold per tonne in the measured and indicated
mineral resource category and 421,000 ounces at 1.7 grams of gold
per tonne in the inferred mineral resource category using a cut-off
grade of 0.5 grams of gold per tonne over a minimum width of 5
metres. A resource update at Marban is expected shortly which will
assist the Company in developing the next phase of exploration at
this advanced stage project.
Exploration activities in the second half of 2012 for the
resource expansion at Joanna and Marban together with regional
exploration at the Company's early stage projects are estimated to
total $6.2 million.
Corporate Development
Aurizon continues to focus on its organic growth within the
Abitibi area and evaluate accretive opportunities within the
Americas to enhance its reserve and production profile.
NON-GAAP MEASURES
Realized gold price per ounce
Realized gold price per ounce is a non-GAAP measure and is
calculated by adjusting revenue for silver by-product sales and
then dividing that by the gold ounces sold and the average realized
Bank of Canada Cad$/US$ exchange rate. For the second quarter of
2012, there were silver sales adjustments totalling $0.2 million,
matching silver sales adjustments totalling $0.2 million in the
same period of 2011. For the first half of 2012, there were silver
sales adjustments totalling $0.5 million, compared to silver sales
adjustments totalling $0.4 million in the same period of 2011.
Total cash costs per ounce of gold
Aurizon has included a non-GAAP performance measure, total cash
costs per ounce of gold, in this report. Aurizon reports total cash
costs on a sales basis. In the gold mining industry, this is a
common performance measure but does not have any standardized
meaning, and is a non-GAAP measure. The Company believes that, in
addition to conventional measures prepared in accordance with GAAP,
certain investors use this information to evaluate the Company's
performance and ability to generate cash flow. Accordingly, it is
intended to provide additional information and should not be
considered in isolation or as a substitute for measures of
performance prepared in accordance with GAAP. Total cash costs per
gold ounce are derived from amounts included in the statements of
comprehensive income and include mine site operating costs such as
mining, processing and administration, but exclude amortization,
reclamation costs, financing costs and capital development costs.
The costs included in the calculation of total cash costs per ounce
of gold are reduced by silver by-product sales and then divided by
gold ounces sold and the average Bank of Canada Cad$/US$ exchange
rate.
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
are calculated by adjusting operating costs as shown in the
statements of comprehensive income for inventory adjustments and
then dividing that by the tonnes processed through the mill. For
the second quarter of 2012, operating costs were increased by
inventory adjustments of $0.5 million compared to no operating cost
adjustments required in 2011 for inventory adjustments. For the
first half of 2012, operating costs were decreased by inventory
adjustments of $1.5 million compared to an operating cost increase
of $0.6 million in 2011 from inventory adjustments.
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 second quarter of 2012, the
average realized gold price was US$1,592 less total cash costs of
US$671 for an operating profit margin of US$921, compared to an
average realized gold price of US$1,521 less total cash costs of
US$544 for an operating profit margin of US$977 in 2011.
For the first half of 2012, the average realized gold price was
US$1,639 less total cash costs of US$676 for an operating profit
margin of US$963, compared to an average realized gold price of
US$1,462 less total cash costs of $580 for an operating profit
margin of US$882 in 2011.
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 amortization
charges, finance expense, finance income, and income tax expense.
The following table provides a reconciliation of net profit to
EBITDA for the three and six months ended June 30:
Three months ended Six months ended
----------------------------------------------------- ------------------
2012 2011 2012 2011
----------------------------------------------------- ------------------
Net profit for the period $8,552 $6,604 $16,815 $9,048
Depreciation and amortization 10,741 8,683 18,581 16,721
Finance income (508) (330) (1,082) (669)
Finance costs 229 241 452 442
Income tax expense 6,374 12,659 13,008 15,111
----------------------------------------------------- ------------------
EBITDA $25,388 $27,857 $47,774 $40,653
----------------------------------------------------- ------------------
SUMMARY OF QUARTERLY RESULTS (Unaudited)
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2012 2011
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in thousands of
Canadian dollars, 2nd 1st 4th 3rd 2nd 1st
except per share data Quarter Quarter Quarter Quarter Quarter Quarter
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Revenue $60,852 $56,753 $85,683 $68,144 $58,960 $47,212
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Cost of sales (36,193) (30,822) (38,914) (29,736) (29,847) (29,228)
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Gross profit 24,659 25,931 46,769 38,408 29,113 17,984
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General and
administrative costs 4,211 4,856 4,268 5,025 4,168 6,086
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Exploration costs 5,435 6,686 6,229 7,037 6,098 7,104
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Net profit 8,552 8,263 21,810 13,071 6,604 2,446
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Earnings per share -
basic and diluted 0.05 0.05 0.13 0.08 0.04 0.02
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2010
------------------
in thousands of
Canadian dollars, 4th 3rd
except per share data Quarter Quarter
----------------------------------------
Revenue $48,558 $39,882
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Cost of sales (27,843) (27,223)
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Gross profit 20,715 12,659
----------------------------------------
General and
administrative costs 5,659 2,918
----------------------------------------
Exploration costs 5,372 5,471
----------------------------------------
Net profit 7,004 2,307
----------------------------------------
Earnings per share -
basic and diluted 0.04 0.02
----------------------------------------
Financial results for the last eight quarters reflect higher
realized Canadian dollar gold prices and rising production costs.
The average realized Canadian dollar gold price in the second
quarter of 2012 was $1,592 per ounce and for the calendar year 2011
was $1,567 per ounce, 33% higher than the $1,180 per ounce in the
2010 calendar year.
OUTSTANDING SHARE DATA
As of August 6, 2012, Aurizon had 164,408,202 common shares
issued and outstanding. In addition, 9,089,850 incentive stock
options representing 5.5% of outstanding share capital are
outstanding and exercisable into common shares at an average price
of $5.62 per share.
Common Shares
(TSX - ARZ & NYSE MKT - AZK)
--------------------------------------------------
--------------------------------------------------
June 30, December 31,
2012 2011
--------------------------------------------------
Issued 164,400,702 163,073,027
Fully-diluted 173,528,052 173,983,052
Weighted average 164,320,369 162,623,135
--------------------------------------------------
--------------------------------------------------
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,
2011, 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.
Conference Call and Webcast
Aurizon management will host a conference call and live webcast
for analysts and investors on Thursday, August 9, 2012 at 8:00 a.m.
Pacific Daylight Time (11:00 a.m. Eastern Daylight 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.ca/links/aurizon120809.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,
August 16, 2012.
About Aurizon
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 MKT under the symbol "AZK". Additional information
on Aurizon and its properties is available on Aurizon's website at
http://www.aurizon.com.
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,
onsite mining, milling and administration costs for 2012,
anticipated ore throughput and grades for 2012, timing for the
completion of the shaft deepening project at Casa Berardi,
estimated timing for completion of the manpower transition project
at Casa Berardi, estimated mineral reserves and resources, timing
of updated resource estimates for the Marban and Fayolle projects,
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 2012, 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 reserves and resource
estimates, the key assumptions and parameters on which such
estimates are based, that 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 operating and 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").
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 Mines Ltd.
Interim Balance Sheets (Unaudited)
(Expressed in thousands of Canadian dollars, unless otherwise stated)
June 30, December 31,
As at, 2012 2011
----------------------------------------------------------------------------
----------------------------------------------------------------------------
ASSETS
Current assets
Cash and cash equivalents $ 207,869 $ 213,486
Marketable securities 858 864
Inventories 14,795 12,545
Accounts receivable and other 8,749 9,474
Derivative instrument assets - 357
Tax credits receivable 3,842 5,210
----------------------------------------------------------------------------
Total current assets 236,113 241,936
----------------------------------------------------------------------------
Non-current assets
Property, plant and equipment 180,042 164,783
Mineral properties 4,945 4,995
Deferred finance costs 261 343
Other assets 4,995 6,324
----------------------------------------------------------------------------
Total non-current assets 190,243 176,445
----------------------------------------------------------------------------
TOTAL ASSETS $ 426,356 $ 418,381
----------------------------------------------------------------------------
----------------------------------------------------------------------------
LIABILITIES
Current liabilities
Accounts payable and accrued
liabilities $ 28,558 $ 25,788
Current income and resource tax
liabilities 5,163 18,338
----------------------------------------------------------------------------
Total current liabilities 33,721 44,126
----------------------------------------------------------------------------
Non-current liabilities
Provisions 16,613 16,153
Deferred tax liabilities 30,652 36,918
----------------------------------------------------------------------------
Total non-current liabilities 47,265 53,071
----------------------------------------------------------------------------
Total liabilities 80,986 97,197
----------------------------------------------------------------------------
EQUITY
Shareholders' equity
Issued capital 281,855 274,165
Contributed surplus 2,447 1,170
Stock based compensation 17,621 18,711
Accumulated other comprehensive
losses (892) (386)
Retained earnings 44,339 27,524
----------------------------------------------------------------------------
Total shareholders' equity 345,370 321,184
----------------------------------------------------------------------------
TOTAL LIABILITIES AND EQUITY $ 426,356 $ 418,381
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Aurizon Mines Ltd.
Interim Statements of Comprehensive Income (Unaudited)
(Expressed in thousands of Canadian dollars, except for per share data)
Three months ended Six months ended
--------------------------------------------
--------------------------------------------
June 30, June 30, June 30, June 30,
For the periods, 2012 2011 2012 2011
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Revenue $ 60,852 $ 58,960 $ 117,605 $ 106,171
Less cost of sales (36,193) (29,847) (67,016) (59,074)
----------------------------------------------------------------------------
Gross profit 24,659 29,113 50,589 47,097
Other operating expenses
Exploration costs (5,435) (6,098) (12,120) (13,202)
General and administration costs (4,211) (4,168) (9,069) (10,254)
Other net gains (losses) (366) 4 150 (32)
----------------------------------------------------------------------------
Operating profit 14,647 18,851 29,550 23,609
Finance income 508 330 1,082 669
Finance costs (229) (241) (452) (442)
Other derivative gains (losses) - 323 (357) 323
----------------------------------------------------------------------------
Profit before income tax 14,926 19,263 29,823 24,159
Income tax expense (6,374) (12,659) (13,008) (15,111)
----------------------------------------------------------------------------
NET PROFIT FOR THE PERIOD 8,552 6,604 16,815 9,048
Other comprehensive loss
Non-cash loss on marketable
securities (323) (272) (506) (303)
----------------------------------------------------------------------------
TOTAL COMPREHENSIVE INCOME FOR
THE PERIOD $ 8,229 $ 6,332 $ 16,309 $ 8,745
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Weighted average number of
common shares outstanding -
Basic 164,320 162,409 163,835 162,318
Earnings per share - Basic $ 0.05 $ 0.04 $ 0.10 $ 0.05
Weighted average number of
common shares outstanding -
Diluted 164,822 164,115 164,395 164,463
Earnings per share - Diluted $ 0.05 $ 0.04 $ 0.10 $ 0.05
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Aurizon Mines Ltd.
Interim Statements of Cash Flows (Unaudited)
(Expressed in thousands of Canadian dollars, unless otherwise stated)
Three months ended Six months ended
--------------------------------------------
--------------------------------------------
June 30, June 30, June 30, June 30,
For the periods, 2012 2011 2012 2011
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Operating activities
Net profit for the period $ 8,552 $ 6,604 $ 16,815 $ 9,048
Adjustments for non-cash items:
Depreciation and amortization 10,741 8,683 18,581 16,721
Share-based compensation 1,284 999 2,558 2,396
Deferred income tax (recovery)
expense (770) 4,274 (6,266) 4,544
Refundable and non-refundable
taxes (960) (2,185) 2,355 (4,428)
Derivative losses (gains) - (323) 357 (323)
Other 174 387 974 1,719
----------------------------------------------------------------------------
19,021 18,439 35,374 29,677
Decrease (increase) in non-cash
working capital items 2,697 4,617 (10,232) 7,915
----------------------------------------------------------------------------
Net cash provided by operating
activities 21,718 23,056 25,142 37,592
----------------------------------------------------------------------------
Investing activities
Property, plant and equipment (18,871) (12,359) (34,106) (22,905)
Mineral properties (200) (130) (230) (160)
Other investing activities 3,500 (500) (1,742) (918)
----------------------------------------------------------------------------
Net cash used in investing
activities (15,571) (12,989) (36,078) (23,983)
----------------------------------------------------------------------------
Financing activities
Issuance of shares 3,020 433 5,319 826
Deferred finance costs - (15) - (492)
Long-term obligations - (773) - (773)
----------------------------------------------------------------------------
Net cash provided (used) by
financing activities 3,020 (355) 5,319 (439)
----------------------------------------------------------------------------
NET INCREASE IN CASH AND CASH
EQUIVALENTS 9,167 9,712 (5,617) 13,170
CASH AND CASH EQUIVALENTS -
BEGINNING OF PERIOD 198,702 142,799 213,486 139,341
----------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS - END
OF PERIOD $ 207,869 $ 152,511 $ 207,869 $ 152,511
----------------------------------------------------------------------------
----------------------------------------------------------------------------
U.S. Registration
(File 001-31893)
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) Aurizon Mines
Ltd. Investor Relationsjennifer.north@aurizon.com Aurizon Mines
Ltd.info@aurizon.com www.aurizon.com
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