Aurizon Mines Ltd.

Aurizon Mines Ltd.

March 04, 2005 19:08 ET

Aurizon Reports 2004 Financial Results


NEWS RELEASE TRANSMITTED BY CCNMatthews

FOR: AURIZON MINES LTD.

TSX SYMBOL: ARZ
AMEX SYMBOL: AZK

MARCH 4, 2005 - 19:08 ET

Aurizon Reports 2004 Financial Results

VANCOUVER, BRITISH COLUMBIA--(CCNMatthews - March 4, 2005) - Aurizon
Mines Ltd. (TSX:ARZ)(AMEX:AZK)

Aurizon announces the financial results of the Company for the year
ended December 31, 2004.

SUMMARY

- Gold production of 33,500 ounces

- Revenues of $18.3 million, matching prior year's results

- Write-down of Sleeping Giant totalling $4.7 million

- Net loss of $5.7 million or $0.06 per share

- Year end cash balance of $11.9 million

- Working capital of $12.2 million

- Company remains debt free

FINANCIAL RESULTS

A $9 per ounce increase in the Canadian dollar realized gold prices,
offset by the adoption of a new accounting policy for revenue
recognition, resulted in revenue from mining operations in 2004 of 17.5
million matching revenues achieved in the prior year. The average gold
price realized in 2004 was US$410 per ounce, US$1 per ounce higher than
the average London afternoon fixing, and higher than the US$375 per
ounce achieved in 2003. A stronger Canadian dollar resulted in an
average exchange rate of 1.30 to the U.S. dollar in 2004 and Aurizon
realizing a Canadian dollar gold price of $534 per ounce, compared to
$525 in 2003.

A non-cash impairment write-down of Sleeping Giant totaling $4.7
million, together with higher mine operating costs, were the main
factors resulting in the loss for 2004 of $5.7 million, or $0.06 per
share, compared with a net loss of $0.3 million or $0.00 per share in
2003. Expenditures associated with Casa Berardi have been capitalized
for the past two years.

Cash flow from operating activities was $3.4 million in 2004, compared
to cash flow of $3.8 million in 2003. A $1.2 million increase in
non-cash working capital in 2004 partially mitigated the decrease in
cash flow from operations of $2.2 million compared to $3.1 million in
2003. Cash flow from operations in 2004 was negatively impacted by a
strong Canadian dollar and the mining of lower grade ore compared to
2003.

CHANGES IN ACCOUNTING POLICIES

Effective January 1, 2004, Aurizon adopted a new accounting policy for
revenue recognition, whereby revenue is recognized when the metals have
been delivered and title has passed to a purchaser. Previously revenue
was recognized when the metals had been extracted and processed at the
mill facilities. The adoption of this new policy has resulted in the
deferment of revenue associated with 700 ounces of gold that had been
produced in 2004, but not sold. The effect on operations in 2004, was an
increase in the net loss of $14,900.

An accounting guideline with respect to hedging transactions became
effective January 1, 2004. This guideline addresses the identification,
designation, documentation, and effectiveness of hedging transactions
for the purpose of applying hedge accounting. Aurizon has elected not to
apply hedge accounting to its derivative instruments and accordingly
gains or losses arising from the use of derivative instruments, both
realized and unrealized, will be charged to operations. This has
resulted in unrealized foreign exchange gains for 2004 of $62,950 being
credited to operations.

FOURTH QUARTER RESULTS

A review of Sleeping Giant's year-end updated mineral reserves together
with a life-of-mine plan resulted in the recognition of an impairment in
the carrying value of this asset. Despite an increase in mineral
reserves at the end of 2004 compared to those determined at the end of
2003, a valuation impairment has occurred for the following reasons:

- Capital costs incurred in 2004 together with future expected capital
costs have risen due to lower productivities and delays in lateral
development of the lower portion of the mine.

- Future expected profit margins have narrowed as a strong Canadian
dollar together with lower productivities resulting from mining
variable-dipping ore structures and a corresponding drop in the mining
rate, impact mining costs.

Since Sleeping Giant's book value at the end of 2004 exceeded the
projected future undiscounted net cash flows, the book value was reduced
to the estimated present value of the discounted future cash flows. This
has resulted in a fourth quarter charge to operations of $4.7 million.

Aurizon's share of gold production from the Sleeping Giant mine in the
fourth quarter of 2004 was 7,520 ounces at a cash operating cost of
US$351 per ounce compared to 10,022 ounces at a cash cost of US$243 per
ounce for the same period of 2003. Lower ore grades and lower tonnages
milled caused by manpower shortages have resulted in a low broken ore
inventory and higher mining costs.

Including the $4.7 million write-down of Sleeping Giant, Aurizon
realized a net loss of $4.9 million, or $0.05 per share in the fourth
quarter of 2004, compared to earnings of $49,000, or $0.00 per share for
the same period of 2003.

OPERATIONS

Aurizon's share of gold production in 2004 of 33,500 ounces was similar
to the 33,000 ounces achieved in 2003. The tonnes of ore processed in
2004, was 9% higher than the prior year, although an 8% decline in ore
grades resulted in gold production matching 2003.

Mine operating costs in 2004 increased 8% to $13.4 million compared to
$12.4 million, due primarily to higher tonnage ore production. Unit
operating costs were $145 per tonne in 2004, matching the previous
year's costs. Total cash costs per ounce of US$314 in 2004 were 18%
higher than the US$266 achieved in 2003, due to the strength of the
Canadian dollar together with lower ore grades in 2004.

A major surface and underground development program at Casa Berardi and
continued development of three new lower levels accessible from the
recent shaft deepening at Sleeping Giant have resulted in aggregate
investing activities totaling $31.4 million compared to $21.7 million in
2003.

In 2004, mineral property, plant and equipment expenditures totaled
$31.5 million, of which $27.5 million was invested at Casa Berardi and
$4.0 million was invested at Sleeping Giant. The major underground
exploration program that was initiated in early 2003 at Casa Berardi
continued during 2004, along with the substantial completion of the
updated feasibility study and construction of certain surface
infrastructure. The following work was completed in 2004 at Casa Berardi:

- Surface foundations for the headframe, backlegs, hoist buildings and
ore bins

- 42 metre concrete shaft collar

- Shaft pilot raise from the 550 metre level to surface

- 878 metres of exploration track drift on the 550 metre level

- 32,400 metres of definition drilling of 224 holes

- 20,700 metres of surface exploration drilling of 34 holes

- Detailed engineering for the shaft and surface infrastructure

- 102 metres of ventilation raising

- 1,590 metres of ramps down to the 550 metre level and access drifts to
the shaft raises

During 2004, at Sleeping Giant, $4.0 million was invested in 1,300
metres of drift development, 51,000 metres of exploration and reserve
development drilling, and the purchase of mining equipment.

Financing activities in 2004 totaled $12.8 million, of which $10 million
was provided by an equity financing together with the exercise of
warrants and stock options, and $2.8 million from Quebec refundable tax
and mining credits. These financing activities, together with $27
million cash at the beginning of 2004, allowed the Company to undertake
major development activities at Casa Berardi. At December 31, 2004,
Aurizon had cash of $11.9 million and working capital of $12 million.

OUTLOOK

At Casa Berardi, a positive feasibility study was completed in January
2005 by Met-Chem Canada Inc. for the mineral reserves located above the
700 metre level in the West Mine area. The feasibility study outlines
the first 5.5 years of production from 868,000 reserve ounces of gold. A
scoping study has also been completed which evaluates the economic
impact of including the high grade resources below 700 metres, currently
estimated at 368,000 ounces of gold, into the mining plan.

The pre-production time required to bring Casa Berardi to commercial
production is anticipated to be 18 months. Pre-production capital costs
are estimated at $84.1 million (US$67 million), the majority of which
will be for underground mine development. Tenders have been received for
most of the significant costs related to the project, thereby reducing
capital cost risks.

Discussions with financial institutions are underway with respect to
securing the necessary funding to advance Casa Berardi to commercial
production. The 2005 Casa Berardi budget has been prepared on the basis
that the pre-production work commences in the second quarter of 2005.

During the first quarter of 2005, work will consist of driving the 550
metre track drift south and east of the 113 Zone to permit further
exploration and infill drilling of the lower portion of the 113 Zone and
the 118-122 Zones. Assuming pre-production work commences at the
beginning of the second quarter of 2005, nearly $50 million is expected
to be invested at Casa Berardi during 2005. Surface infrastructure work
will include the installation of the hoist and electrical sub-station on
foundations constructed in 2004; the construction of the headframe and
hoist buildings; and the commencement of the mill refurbishing in the
third quarter of 2005. Underground development in 2005 will include an
expected 640 metres of shaft sinking; 1,400 metres of ramping; 1,500
metres of drifting; 250 metres of raising; and 3,100 metres of
development in ore mineralization.

Included in the budget for Casa Berardi is approximately 66,000 metres
of exploration and definition drilling. Two underground drill rigs will
remain active throughout 2005 in the West Mine area, drilling from the
550 metre level. These rigs will test the dip extension of Zone 113 from
the 900 metre level down to 1,100 metres below surface. Definition
drilling will also be initiated up to 500 metres east of Zone 113 in
order to upgrade the quality of the known inferred mineral resources and
increase the mine life. Surface drilling will continue in the East mine
area and west of the West mine.

Aurizon's share of gold production from Sleeping Giant in 2005 is
expected to decline by 17% from 2004 levels to 27,800 ounces as a result
of a lack of developed areas to extract ore for mine production. Total
cash costs per ounce are expected to increase to US$358 in 2005 compared
to US$314 achieved in 2004 due to higher mining costs associated with
extracting variable dipping ore from the flatter dipping Zone 8, 16%
fewer tonnes and a stronger Canadian dollar.

Sleeping Giant will require $2.3 million of exploration, development,
and capital expenditures in 2005, of which $1.0 million is required to
complete the additional development work associated with the recent
shaft sinking. Also included in the Sleeping Giant budget is nearly
1,600 metres of drifting and 52,000 metres of diamond drilling.

In order to initiate the pre-production work at Casa Berardi and also
fund Sleeping Giant's capital requirements and cover general corporate
costs, it is estimated that Aurizon will require a minimum $50 million
financing in 2005. In 2005, Sleeping Giant will require $800,000 to
support its capital requirements, net of operating cash flow.



---------------------------------------------------------------------
OPERATING RESULTS
Year Ended
Fourth Quarter December 31
2004 2003 2004 2003
--------------------- ---------------------
Sleeping Giant Production
Tonnes milled 45,058 49,848 192,950 176,500
Ore grade (grams/tonne) 10.7 12.8 11.1 12.1
Gold production -
100% (ounces) 15,040 20,043 67,018 66,600
- Aurizon's share of
gold production 7,520 10,022 33,509 33,300
Gold Sold - ounces 9,000 10,022 32,829 33,300
Total cash costs/ounce
- U.S.$ $ 351 $ 243 $ 314 $ 266
Depreciation and
amortization/ounce
- U.S.$ $ 78 $ 63 $ 84 $ 59
--------------------- ---------------------
Total production
costs/ounce - U.S.$ $ 429 $ 306 $ 398 $ 325
--------------------- ---------------------

Realized gold
selling price
- U.S.$ $ 428 $ 405 $ 410 $ 375
- Cdn.$ $ 522 $ 533 $ 534 $ 525

FINANCIAL HIGHLIGHTS
Year Ended
Fourth Quarter December 31
----------------------- ---------------------
2004 2003 2004 2003
$ $ $ $

Revenue 4,924,366 5,541,408 18,355,021 18,260,362
Net Earnings (Loss) (4,898,827) 49,456 (5,695,885) (301,154)
Operating Cash Flow 77,171 1,894,560 3,429,996 3,826,218
Loss per Share -
Basic and Diluted (0.05) (0.00) (0.06) (0.00)
---------------------------------------------------------------------


ANNUAL GENERAL MEETING

The Annual General Meeting of Shareholders of Aurizon Mines Ltd. has
been scheduled for May 17, 2005 at 2:00 o'clock Pacific Daylight Time,
3rd Floor Boardroom of Computershare Trust Company of Canada, 510
Burrard Street, Vancouver, B.C. V6C 3B9.

This News Release contains "forward-looking statements", including, but
not limited to, statements regarding the Company's expectations as to
the market price of gold, strategic plans, future commercial production,
production targets and timetables, mine operating costs, capital
expenditures, work programs, exploration budgets and mineral reserve and
resource estimates. Forward-looking statements express, as at the date
of this report, the Company's plans, estimates, forecasts, projections,
expectations, or beliefs as to future events or results. Forward-looking
statements involve a number of risks and uncertainties, and there can be
no assurance that such statements will prove to be accurate. Therefore,
actual results and future events could differ materially from those
anticipated in such statements. Factors that could cause results or
events to differ materially from current expectations expressed or
implied by the forward-looking statements, include, but are not limited
to, factors associated with fluctuations in the market price of precious
metals, mining industry risks and hazards, environmental risks and
hazards, uncertainty as to calculation of mineral reserves and
resources, requirement of additional financing, risks of delays in
construction and other risks more fully described in Aurizon's Annual
Report on Form 20-F filed as an alternative form of AIF with the
Securities Commissions of the provinces of British Columbia, Ontario and
Quebec, with the United States Securities and Exchange Commission, and
with the Toronto Stock Exchange.

U.S. Registration: (File #0-22672) Form 20-F

-30-

Contact Information

  • FOR FURTHER INFORMATION PLEASE CONTACT:
    Aurizon Mines Ltd.
    Ian S. Walton
    Chief Financial Officer
    (604) 687-6600 or Toll Free: 1-888-411-GOLD
    (604) 687-3932 (FAX)
    or
    Aurizon Mines Ltd.
    Patrick Soares
    Manager, Investor Relations
    (604) 687-6600 or Toll Free: 1-888-411-GOLD
    (604) 687-3932 (FAX)
    info@aurizon.com
    www.aurizon.com