Vancouver — Calculated risk has been Aurizon Mines’ (ARZ-T, AZK-x) secret to success. For president and CEO David Hall, the gamble was putting together an experienced team in 2003 — before the price of gold had more than doubled — to assess the potential of what is now its chief asset, the Casa Berardi gold mine, about 95 km north of La Sarre, Que.
Inco Gold first brought Casa Berardi to production in 1988. For the next 10 years it produced 688,000 oz. gold from two underground mines, the East and West mines. But with gold prices in the dumps, TVX Gold (created out of a merger of Inco Gold and Consolidated TVX Mining) shut down operations.
A year later, Aurizon optioned the property and, drilling close to 80,000 metres, discovered the 113 and 118 zones off the West mine that held an additional 1.3 million oz. of indicated resources. However, with gold prices still anemic, Aurizon waited until 2002 and 2003 to set the gears in motion.
“From the very beginning,” Hall says, “we wanted to control the project and not have to rely on independent consultants, from defining the resource to achieving feasibility, from permitting to going into production.”
Having its own team from the get-go allowed Aurizon to act quickly on moving the property back into production so it could take advantage of soaring gold prices. Hall says Aurizon took steps to curtail the mine development timeline, such as putting in an Alamak Raise to the 550-level while it was building surface infrastructure and collaring the shaft at the West mine. Then all they had to do was slash out from the raise.
“That was possible because of the experienced guys we had on board,” Hall says.
Clearly, the gamble has paid off. Two years after updating its feasibility study in 2005, it achieved commercial production and, in the year and a half since, it has produced 334,300 oz. gold and managed to pay its debt down to $42 million from $73 million. Although the debt is scheduled to be repayed by March 2010, with one prepayment under its belt and another under consideration, Aurizon might become debt-free sooner than expected.
In the last quarter, Aurizon’s total cash costs per oz. gold were US$429. It sold 41,000 oz. at US$869 a piece.
Nor could its timing on getting positive cash flow have been better. Hall says he doubts whether these days Aurizon could raise the necessary capital on the markets to fund its expansion programs at the mine and its other exploration projects in Quebec, such as the Joanna property, 20 km from Rouyn-Noranda.
With about 900,000 oz. in reserves, Casa Berardi officially has about six years left of mine life. But with 1.8 million oz. in the measured and indicated categories so far defined, Hall says, “It’s very early days.”
Currently, Aurizon is expanding the 113 zone downdip, assessing the Principal zone, an area with open-pit and underground potential between the East and West mines, and completing a drift from the 113 zone through zones 118 and 123 to the east. The drift will facilitate a planned drilling program into those resources.
The latest five drill results from the 113 zone, at a depth of about 830 metres and 50 metres east of existing reserves, returned intersections ranging between 1.6 and 16.6 metres long and grading between 7.9 and 23.3 grams gold per tonne. The longest hole, 38, cut 16.6 metres grading 10.7 grams gold.
As for the 810 drift destined for zones 118 and 123, Aurizon has completed about 200 metres going south from zone 113. “Now we turn east and head out about one kilometre,” he says.
In the 118-120 zones, Aurizon has so far outlined 854,000 inferred tonnes grading 6.6 grams gold and in the 123, it has 714,000 inferred tonnes grading 9.4 grams gold.
In 2007, Aurizon pegged the Principal zone, Casa Berardi’s largest, single untapped resource, at 903,000 indicated tonnes grading 6.5 grams gold and 3 million inferred tonnes grading 6.5 grams gold. There, Aurizon continues to drill and, more importantly, Hall says, the company is updating its 3-D geological models to generate mining ideas and designs that may include an open pit. Otherwise, it has access to the Principal zone through what was the 280-level track drift that connects East and West.
As Hall credits progress at Casa Berardi to the experience of his team, so too does he recognize it for progress at Aurizon’s most promising exploration target, the Joanna property.
When the company originally acquired it two years ago and put together old data, geologists at Aurizon intended to explore the potential of what they realized was an uptick at depth. But then as they compiled the numbers, they made another realization.
“‘Oh wait a minute,'” Hall remembers his team saying. “‘There’s potential for an open pit.'”
To date, Aurizon has outlined an indicated resource of 11.3 million tonnes grading 1.7 grams gold with an additional 28.6 million inferred tonnes grading 1.6 grams gold. With a prefeasibility study on the way, Aurizon’s latest move is an option on the Alexandria claim block adjacent to Joanna. Hall says Aurizon will start drilling this winter.
“Our intention is to add production,” Hall says. With about 148 million shares issued, Aurizon’s 52- week trading range is between $2.02 and $5.43. The stock closed at $2.54 at presstime.
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The Quebec advantage
Why were miners with assets in Quebec raving about the province at the recent Denver Gold Forum?
La belle province — which finished first in the Fraser Institute’s 2007-08 ranking of mining jurisdictions, scoring 97 points out of 100 — offers:
• A pro-mining government and culture
• Some of the lowest energy costs
in the industry at 4.3-4.7
• A hedge against resource nationalism and currency risk elsewhere
• A highly skilled workforce
• A low mining taxation rate (34%)
• A mining incentive scheme offering a 42% refund on all non-flow-through exploration expenditures
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