Aurizon Mines Ltd.

Aurizon Mines Ltd.

March 19, 2008 09:02 ET

Aurizon Reports 2007 Financial Results

VANCOUVER, BRITISH COLUMBIA--(Marketwire - March 19, 2008) - Aurizon Mines Ltd. (TSX:ARZ)(AMEX:AZK) is pleased to announce its unaudited financial results for the year ended December 31, 2007.


Fourth Quarter highlights:

- Cash flow from operations of $12.0 million.

- Increase of $18.2 million in cash balances.

- Gold production of 37,007 ounces.

- Net loss of $5.9 million, or ($0.04) per share, which was net of a non-cash derivative loss of $10.3 million.

- Total cash costs of US$402 per ounce.

2007 Full Year highlights:

- Achieved commercial production at Casa Berardi, producing 159,500 ounces of gold in 2007.

- Discovered high grade zone (123-S) at Casa Berardi.

- Established mineral resources of 600,000 indicated ounces and 1.4 million inferred ounces at Joanna.

- Cash flow from operations of $32 million.

- Total cash costs of US$327 per ounce.

- Net earnings of $5.5 million, or $0.04 per share, which was net of a non-cash derivative loss of $6.0 million.

"2007 was another milestone year for Aurizon. Commercial production was achieved at Casa Berardi and a significant mineral resource was outlined at Joanna," said David Hall, Aurizon's President and Chief Executive Officer. "Looking to the future, our growing operating cash flow will enable us to enhance the value of our prospective land holdings. Aurizon is well positioned to capitalize on rising gold prices."


Financial Review

In the fourth quarter of 2007, Aurizon incurred a net loss of $5.9 million, or ($0.04) per share, compared to a net loss of $2.2 million, or ($0.01) per share, in the fourth quarter of 2006. Fourth quarter results were impacted by non-cash derivative losses of $10.3 million, stock based compensation charges of $1.0 million, increased exploration activity of $1.7 million at Joanna, and higher depreciation and depletion charges of $9.2 million. In the fourth quarter of 2006, non-cash charges associated with derivative instruments totaled $3.1 million, partially offset by a non-cash future income tax recovery of $2.1 million. There were no revenues from operations in 2006, as Casa Berardi was not in commercial production until May 1, 2007.

Cash flow from operating activities was $12.0 million in the fourth quarter, compared to cash outflows of $10.0 million for the same period of 2006. Aurizon's aggregate operating, investing and financing activities during the fourth quarter of 2007 resulted in a net $18.2 million increase in its cash balances compared to a decrease of $0.6 million in the same period of 2006. On December 31, 2007, $19.2 million was released from restricted cash, resulting in free cash of $24.8 million at year end. Restricted cash totaled $31.8 million at December 31, 2007.

Gold production for the fourth quarter of 2007 was 37,007 ounces from the processing of 154,001 tonnes at an average grade of 8.1 grams of gold per tonne. The anticipated lower ore grades in the fourth quarter, compared to the average grade of 10.4 grams/tonne for the first nine months of 2007, together with a strong Canadian dollar, resulted in cash operating costs per ounce of US$402 in the quarter, compared to US$287 for the first nine months and US$327 for the year.

Net earnings in 2007 totalled $5.5 million, or $0.04 per share, compared to a net loss of $15.0 million, or ($0.10) per share in 2006. Earnings in 2007 include eight months of commercial operations at Casa Berardi from May 1, 2007. In 2006, Casa Berardi was in the pre-production construction period, with initial start-up in the fourth quarter.

Earnings in 2007 include non-cash charges associated with a $6.0 million mark-to-market adjustment of non-hedge derivative instruments and a $3.5 million charge for stock based compensation, offset by a future income tax recovery of $2.2 million.

The net loss in 2006 included a number of non-cash items, including an $8.7 million mark-to-market charge for non-hedge derivative instruments, a $1.7 million charge for stock based compensation, and a $4.5 million future income tax recovery. The 2006 loss also included non-recurring expenses totalling $5.3 million related to an unsolicited takeover bid.

In 2007, Casa Berardi gold production totalled 159,469 ounces and gold sales during the year totalled 160,600 ounces. The average realized gold price in 2007 was US$696 per ounce and, at an average Cdn/US exchange rate of 1.06, sales proceeds totalled $118.8 million. As Casa Berardi was not in commercial production until May 1, 2007, gold and silver sales, totalling $31.1 million, and associated operating costs have been deferred and included in capitalized mineral property costs.

Eight months of commercial operations in 2007 resulted in cash flow of $32.2 million, compared to cash outflows of $13.0 million in 2006. In 2006, corporate and administrative cash costs, takeover bid costs, together with a build-up of gold and supplies inventories resulted in the cash outflows.

Balance Sheet

As at December 31, 2007, cash and cash equivalents stood at $24.8 million, compared to $9.5 million in 2006. In addition, restricted cash balances in respect of the Casa Berardi debt facility totalled $31.8 million at December 31, 2007 compared to $19.4 million in 2006.

At the end of 2007, Aurizon had working capital of $31.9 million, compared to $29.4 million at the end of 2006. Included in current liabilities are two principal debt payments due in March and September 2008, totalling $25.7 million, together with a capital lease obligation of $0.1 million, compared to one principal payment of $4.4 million included in current liabilities at the end of 2006.

In February 2008, an amendment to the project debt facility allowed the modification of certain operating performance benchmarks that must be achieved at Casa Berardi; extended the date of achieving these parameters from January 31, 2008 to September 30, 2008; and provided that an additional principal payment totaling $15.0 million be made on March 31, 2008. All principal repayments may be paid from the restricted cash accounts.

Long term debt at December 31, 2007 totalled $44.9 million of which $43.1 million is project debt, $1.7 million is refundable government assistance and $0.1 million are equipment capital leases.


Summary of Key Operational Statistics

Q1 Q2 Q3 Q4 2007 2006
Operating results

Tonnes milled 104,663 134,569 152,025 154,001 545,258 68,481

Grade - grams/tonne 10.14 10.38 10.65 8.14 9.78 8.58

Mill recoveries - % 93.8% 93.8% 92.8% 91.8% 93.0% 93.9%

Gold Production - ozs 32,013 42,144 48,305 37,007 159,469 17,731

Gold sold - ounces

Pre-commercial production 30,100 10,500 - - 40,600 6,882

Commercial production(1) - 26,000 50,000 44,000 120,000 -
Gold sold - total 30,100 36,500 50,000 44,000 160,600 6,882

Per ounce data - US$

Average realized gold price $651 $666 $679 $770 $696 $625

Total cash costs(2,3) - $298 $282 $402 $327 -

Amortization(4) - $152 $162 $214 $169 -
Total production costs(5) - $450 $444 $616 $496 -

Table footnotes:
(1) Commercial production achieved May 1, 2007.
(2) Year to date data from date of commercial production on May 1, 2007.
(3) Cost figures calculated in accordance with Gold Institute Standard from
the date of achieving commercial production.
(4) Depreciation, amortization and reclamation expenses.
(5) Total cash costs plus depreciation, amortization and reclamation

In 2007, gold production totalled 159,469 ounces from the processing of 545,258 tonnes at an average grade of 9.8 grams of gold per tonne. Mill recoveries for the year averaged 93.0%, compared to 91% anticipated in the feasibility study.

Ore production scaled up during the first half of 2007 from 1,130 tonnes per day to over 1,650 tonnes per day as additional stopes were developed. Initial mining experience gained in early 2007, necessitated more elaborate ground support systems, which have had a direct impact on the development and production cycles. In addition to the ground support changes, modifications were made to the mining sequence, which resulted in the mining of stopes in the center of the orebody and working outwards to the abutments in a pyramidal shape. Production rates stabilized in the second half of 2007 above 1,650 tonnes per day and are expected to increase to 1,800 tonnes per day in 2008.


Aurizon has included a non-GAAP performance measure of total cash costs per ounce of gold in this report. Aurizon reports total cash costs on a sales basis. In the gold mining industry, this is a common performance measure but does not have any standardized meaning, and is a non-GAAP measure. The Company follows the recommendations of the Gold Institute standard. 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. The following table provides a reconciliation of total cash costs per ounce to the financial statements:

Total Cash Costs per Ounce Q2 Q3 Q4 2007(1)
(in $ thousands)

Operating costs $8,444 $14,859 $17,470 $40,773

By-product silver sales ($84) ($121) ($86) ($291)
Total cash costs - Cdn$ $8,360 $14,738 $17,384 $40,482

Divided by average Bank of Canada
Cdn$/US$ exchange rate 1.08 1.045 0.98 1.075

Divided by ounces of gold sold 26,000 50,000 44,000 120,000

Total cash costs per ounce of gold - US$ $298 $282 $403 $327
1. Year to date data from date of commercial production on May 1, 2007.

Higher than average mine reserve ore grades and a weaker Canadian dollar in the second and third quarters of 2007 resulted in total cash costs of less than US$300 per ounce. These two strong performing quarters, together with the anticipated lower ore grades in the fourth quarter and a stronger Canadian dollar, resulted in total cash costs of US$327 per ounce for 2007.


Having achieved a successful commissioning and ramp-up of operations at Casa Berardi in 2007, 2008 will mark the first full year of commercial operations since Aurizon acquired the mine in 1998.

The outlook for gold appears very positive. Investment demand for gold is strong as a result of turmoil in the financial markets resulting from the U.S. sub-prime mortgage meltdown, a weak U.S. dollar, expectations of lower interest rates to avert a U.S. recession, and inflationary pressures in the world economies. The rapid rise in the price of gold has recently resulted in a dramatic decrease in jewellery demand and increase in scrap gold sales; however, this may stabilize as consumers become accustomed to the higher price. On the supply side, a lack of new gold discoveries to replace closures, continued depletion of existing ore bodies, power shortages and work force issues in South Africa, and significant capital cost escalations for new projects are likely to dampen future global gold production.

Based upon the 2008 mine plan, it is estimated that Casa Berardi will produce approximately 160,000 - 170,000 ounces of gold at an estimated total cash cost of US$394 per ounce, using a Cdn$/US$ exchange rate at parity. This compares to gold production of 159,469 ounces and a total cash cost of US$327 in 2007 at an average Cdn$/US$ exchange rate of 1.07.

The average daily mine production is estimated to increase to 1,800 tonnes per day in 2008, an increase of 20% over 2007. Ore grades are expected to average 8.6 grams per tonne in 2008, compared to the 9.8 grams per tonne achieved in 2007. Ore production in 2008 will be primarily from the 113 Zone with some ore provided by the lower grade NW Zone and, later in 2008, with development ore from the Lower Inter Zone.

Based upon 165,000 ounces of gold production for 2008 and using the gold price and exchange rates as at December 31st, 2007, the sensitivity of the Company's cash flow to a 10% movement in either component is as follows:

Dec 31, 2007 Impact on
price & exchange 10% Cash Flow
rates Variance ($ thousands)
Gold price increases US$834 $83 (1)$8,360

Gold price declines US$834 ($83) ($13,790)

Cdn/US dollar exchange rates:

- Canadian dollar weakens 0.988 0.0988 (2)$11,755

- Canadian dollar strengthens 0.988 (0.0988) (2)($11,755)

(1) Call options, related to the Company's project debt facility, were sold
on 77,306 ounces of gold, exercisable at an average price of US$848 per
ounce in 2008, representing approximately 47% of 2008 planned gold
production, thereby limiting full participation of gold prices above
US$848 per ounce.

(2) Excluding Cdn$21 million of foreign exchange contracts at 1.13.

As of early March 2008, gold prices are above US$960 per ounce while the Canadian dollar is very close to the level as at December 31, 2007.

Containment of mine site operating costs will continue to be a challenge in 2008 as significant cost pressures are affecting the mining industry. The cost of labour and materials continue to rise at a rapid rate. Additional ground support costs and lower productivities would negatively impact operating costs.

In accordance with the terms of the project debt facility, the Casa Berardi mine is required to meet certain operating performance benchmarks by September 30, 2008, as stipulated by the lenders.

Sustaining capital costs at Casa Berardi in 2008 are estimated at $15.4 million, primarily for the development of the upper and lower portions of the 113 Zone and of the Lower Inter Zone. An additional $2.6 million is planned on infrastructure and equipment improvements and $0.4 million for tailings pond improvements. Underground development in 2008 will total 5,100 metres, including 1,700 metres of ramping; 2,400 metres of drifting; and 1,000 metres of raising.

Aurizon intends to initially invest over $13 million, from working capital, in exploration and development activities at its properties in 2008, of which approximately $3 million will be expensed. In total, over 70,000 metres of drilling is planned.

The Company's financial position at December 31, 2007, and the operating cash flows that are expected from Casa Berardi over the next twelve months should allow it to meet its financial obligations as they become due and also fund its planned exploration and capital programs.

Casa Berardi

At Casa Berardi, surface drilling will focus on the extension of the South fault, east of Zone 123-S, and in the area of the East Mine crown pillar.

In addition, Lake Shore Gold has commenced surface drilling on the adjacent Casa Berardi exploration property in order to fulfill its commitment to incur expenditures of $600,000.

A three year underground exploration program, initiated in 2007, will continue as follows:

a) Drilling will occur, from the rehabilitated track drift on the 280 metre level in the area of the Principal Zone and between the two mines where limited surface exploration has been performed to date. At the East Mine, rehabilitation of the underground workings and definition drilling is planned with the objective of transferring the inferred mineral resources to the indicated category and, ultimately, to mineral reserves.

b) An exploration drift will be developed at the 810 metre level, east of Zone 113 and south of the Casa Berardi fault, to provide drill access to test the depth extension of Zone 113 and to test the continuity and extension of Zones 118 to 122 and 123-South.

A total of $10.2 million will be invested at Casa Berardi, including $6.1 million on underground development and infrastructure, and $4.1 million on approximately 45,000 metres of surface and underground drilling.


At Joanna, approximately $3 million will be initially invested to perform approximately 26,000 metres of drilling focused on the following:

a) Surface drilling to a depth of 300 metres, outside of the area of the existing mineral resources.

b) Testing for potential of higher gold grade mineralization below 300 metres.

c) Exploration targets north of the existing mineral resources.

In addition, Breton, Banville & Associates are currently working on a preliminary assessment report to address the technical parameters of the project, which should be completed early in the second quarter, 2008. Further work programs will be budgeted following receipt of this report.

At Joanna, mineral resources are currently estimated at 11.3 million tonnes averaging 1.7 grams of gold per tonne, for 630,000 ounces in the indicated mineral resource category and 28.6 million tonnes averaging 1.6 grams of gold per tonne, for 1.42 million ounces in the inferred mineral resource category.


At Kipawa, 2008 programs and budgets are being finalized in conjunction with analysis and interpretation of the results from the extensive exploration programs performed in 2007. It is anticipated that 2008 exploration activity will include trenching and drilling to follow up on the discoveries of gold, uranium and rare earth elements made in 2007. Work will commence upon receipt of the necessary approval from the First Nations communities and government agencies.

Mineral Reserves and Resources

Aurizon's independent consultants are currently finalizing an updated mineral reserve and resource estimate as at December 31, 2007, details of which will be released shortly.

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 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 American Stock Exchange under the symbol "AZK". Additional information on Aurizon and its properties is available on Aurizon's website at

This report contains "forward-looking statements", including, but not limited to, statements regarding the Company's expectations as to the market price of gold, strategic plans, production targets and timetables, mine operating costs, capital expenditures, work programs, and exploration budgets. 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 Information Form filed with the Securities Commission of the Provinces of British Columbia, Alberta, Manitoba, Ontario and Quebec, and in Aurizon's Annual Report on Form 40-F filed with the United States Securities and Exchange Commission. These documents are available on Sedar at and on Edgar at

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

Consolidated Balance Sheets
As at December 31,

(in Canadian Dollars - Unaudited) 2007 2006
$ $
Cash and cash equivalents 24,836,323 9,465,215
Restricted cash 31,754,068 19,357,224
Accounts receivable and prepaid expenses 3,100,475 3,027,999
Refundable tax credits and mining duties 3,865,481 5,392,289
Derivative instrument assets 2,446,048 -
Inventories 8,152,417 5,841,020
74,154,812 43,023,747
Derivative instrument assets 3,416,877 -
Other assets 4,393,232 8,689,147
Property, plant & equipment 39,043,105 39,909,934
Mineral Properties 124,602,981 134,606,035
TOTAL ASSETS 245,611,007 226,228,863
Accounts payable and accrued liabilities 11,574,926 8,742,565
Derivative instrument liabilities 4,851,528 531,135
Current portion of long-term debt 25,795,846 4,435,524
42,222,300 13,709,224
Derivative instrument liabilities 15,795,242 8,214,098
Long-term debt 44,923,883 68,840,439
Asset retirement obligations 2,598,339 2,246,931
Future income tax liabilities 11,201,391 8,566,572
TOTAL LIABILITIES 116,741,155 101,577,264
Share Capital
Common shares issued - 146,730,948
(2006 - 146,313,048) 190,975,945 193,330,698
Contributed Surplus 837,284 742,943
Stock based compensation 6,062,359 2,822,050
Deficit (69,005,736) (72,244,092)
TOTAL SHAREHOLDERS' EQUITY 128,869,852 124,651,599

Consolidated Statements of Earnings (Loss)
For the periods ended December 31,

Three months ended Year ended
(in Canadian Dollars December 31, December 31,
- Unaudited) 2007 2006 2007 2006
Revenue $ $ $ $
Mining operations 33,333,433 - 87,998,729 -
Operating costs 17,470,401 - 40,773,588 -
depletion and
accretion 9,177,158 101,384 22,032,648 101,384
Administrative and
general costs 2,176,159 975,130 8,487,181 5,178,190
Exploration costs 1,685,160 160,214 5,242,346 623,656
Unrealized derivative
losses 10,312,418 3,058,604 6,038,612 8,745,233
Interest on
long-term debt 1,238,123 - 3,344,999 -
Corporate takeover
bid costs - - - 5,247,426
Loss on sale of
property, plant
and equipment 5,431 52,200 40,704 49,887
Foreign exchange loss 20,505 (1,567) 122,730 44,559
Capital taxes 212,359 305,167 849,432 796,725
Other income (702,970) (318,777) (2,252,909) (1,238,849)
41,594,744 4,332,355 84,679,331 19,548,211
Earnings (loss) for
the period before
income taxes (8,261,311) (4,332,355) 3,319,398 (19,548,211)

Current income
tax recovery - 24,629 - 24,629

Future income
tax recovery 2,359,775 2,137,632 2,209,947 4,487,226
Net earnings (loss)
for the period (5,901,536) (2,170,094) 5,529,345 (15,036,356)
Earnings (loss)
per share
Basic and diluted (0.04) (0.01) 0.04 (0.10)
Weighted average
number of common
shares outstanding 146,501,956 144,399,006 146,501,956 144,399,006

Consolidated Statements of Cash Flow
For the years ended December 31,

Three months ended Year ended
(in Canadian Dollars December 31, December 31,
- Unaudited) 2007 2006 2007 2006
$ $ $ $
Net earnings (loss) for
the year from
continuing operations (5,901,536) (2,170,094) 5,529,345 (15,036,356)
Adjustment for
non-cash items:
depletion and
accretion 9,177,158 29,832 22,032,648 101,384
Refundable tax credits (623,261) (1,315,475) (1,938,931) -
Loss (gain) on sale of
property, plant &
equipment 5,431 52,200 40,704 49,887
Stock based compensation 995,953 - 3,529,074 1,725,920
Unrealized non-hedge
(gains) losses 10,312,418 3,058,604 6,038,612 8,745,233
Future income
tax recovery (2,359,775) (2,137,632) (2,209,947) (4,487,226)
11,606,388 (2,482,565) 33,021,505 (8,901,158)
Decrease (increase)
in non-cash working
capital items 436,340 (7,514,202) (784,005) (4,120,919)
12,042,728 (9,996,767) 32,237,500 (13,022,077)
Reclamation deposits (94,730) (31,577) (94,730) (31,577)
Property, plant &
equipment (2,093,249) (6,740,099) (6,960,279) (18,555,496)
Mineral properties (1,223,269) (8,198,784) (27,461,735) (55,912,287)
Gold sales prior to
commercial production - 5,011,415 31,161,709 5,011,415
Refundable tax credits 1,447,061 1,315,475 1,447,061 1,315,475
Refundable mining
duties - - 2,462,930 -
Deferred interest costs - (1,087,276) (1,613,319) (2,399,553)
Restricted cash funding 7,697,783 (5,894,083) (12,396,844) (19,357,224)
5,733,596 (15,624,929) (13,455,207) (89,929,247)
Issuance of shares 379,142 1,958,110 814,357 16,502,486
Long-term debt 11,874 23,030,086 (4,225,542) 73,275,963
Deferred finance costs - - - (2,372,123)
391,016 24,988,196 (3,411,185) 87,406,326
EQUIVALENTS 18,167,340 (633,500) 15,371,108 (15,544,998)
BEGINNING OF PERIOD 6,668,983 10,098,715 9,465,215 25,010,213
END OF YEAR 24,836,323 9,465,215 24,836,323 9,465,215

Contact Information

  • Aurizon Mines Ltd.
    David P. Hall
    President and C.E.O.
    (604) 687-6600 or Toll Free: 1-888-411-GOLD
    Aurizon Mines Ltd.
    Ian S. Walton
    Executive Vice President & C.F.O.
    (604) 687-6600 or Toll Free: 1-888-411-GOLD
    (604) 687-3932 (FAX)
    Renmark Financial Communications Inc.
    Barry Mire
    (514) 939-3989
    Renmark Financial Communications Inc.
    Jen Power
    (514) 939-3989
    Renmark Financial Communications Inc.
    Vanessa Napoli
    (514) 939-3989
    (514) 939-3717 (FAX)