Aurizon’s Q4, year-end profits drop

Aurizon Mines (ARZ-T, ARK-X) reported lower fourth-quarter and annual profits for 2010 as it wrapped up a tough year at its flagship Casa Berardi gold mine in northwestern Quebec.

“We worked our way through a low-grade area of the Casa Berardi mine with a short-term, adverse impact on operating and financial performance,” said president and chief executive David Hall in a press release.

Fourth quarter earnings came in at $6.2 million, or 4¢ a share, down from $9.9 million, or 6¢ per share, in the same period of 2009, when the company cashed in $4.5 million in tax credits.

Other factors contributing to the earnings slide were higher exploration costs of $5.4 million compared to $1.1 million in the prior-year
quarter, and non-cash stock based compensation charges of $3.2 million, up from $800,000 in the fourth quarter of 2009.

However, the company saw growth in revenue from mining operations of $48.6 million, up from $42 million in the year-ago quarter. Operating profit margins rose to US$845 per oz. gold, from US$487 per oz., driven by higher realized gold prices and the axing of gold delivery into call options at below market prices. Production came in at 37,496 oz., up from 36,459 oz. in the year-ago quarter.

For 2010, the company reported revenue of $179 million, up from 2009’s $176 million. However, profits came in at $16 million, or 10¢ per share, down from $36.7 million or 23¢ per share a year earlier. Aurizon says the earnings were partly affected by exploration work at its six, newly optioned properties, and exploration and feasibility work at its Joanna gold property near Rouyn-Noranda, Que. 

The company produced 141,116 oz. gold in 2010 compared to 159, 261 oz. in 2009, mainly because of the lower-grade ore processed at Casa Berardi. 

It also reported that lower ore grades, reduced mill recoveries and a stronger Canadian dollar for the year increased total cash costs to US$541 per oz. gold, 35% higher than 2009.

Its average realized gold price was US$1,376 per oz., compared with US$946 per oz. in 2009.

At year-end, the debt-free company had $139 million in cash, which it plans to use to upgrade resources and reserves at both Casa Berardi and Joanna, and to further explore its new properties, all in Quebec. The company currently has 10 properties. 

This year Casa Berardi is expected to produce between 165,000 and 170,000 oz. gold, at a 1,965- tonne-per-day rate. 

An updated estimate released in March pegged Casa Berardi’s reserves at 7.85 million tonnes grading 5.8 grams gold per tonne for 1.45 million oz. gold (a 44% increase compared to a 2009 estimate), and extended the mine’s life from six years to 10 years. 

The company describes the Casa Berardi deposits (East and West mines, and the Principal zone) as an Archean sedimentary-hosted lode gold deposit, with mineralization superimposed on a continuous graphitic mudrock unit corresponding to the Casa Berardi fault plane. 

Also in 2011, Aurizon will continue feasibility work on the Hosco open-pit deposit at Joanna. Based on an updated March resource estimate by SGS Canada, Hosco has 40.5 million measured and indicated tonnes of 1.33 grams gold for 1.73 million oz. gold, at a 0.5 gram gold cutoff grade. 

At presstime in Toronto, Aurizon shares were trading at $7.22 apiece, within a 52-week range of $4.63-$8.41.