Aurizon eyes awakening of Sleeping Giant

The planned processing of lower grade ore at the Sleeping Giant mine in Quebec, has led Aurizon Mines (ARZ-T) to post a loss of $163,000 (or nil per share) for the three months ended September 30, compared with earnings of $502,000 (1 per share) during the corresponding period of 2000.

Operating cash flow during the recent quarter was $267,000, well of the year-ago $1.5 million. Revenue between the two periods was almost halved to $3.5 million from $6 million the previous year.

For the first nine months of the year, Aurizon tallied a loss of $2.8 million (7 per share) one revenue of $10.3 million, a significant turnaround from year-ago net earnings of $1.9 million (5 per share) on revenue of $20.7 million. The decreased is attributed to decreased gold production and lower gold prices. Cash flow dipped into negative territory to the tune of $876,000 owing to non-recurring care and maintenance costs of $449,000 at the Beaufor mine and restructuring costs of $786,000. A year earlier, the company had positive cash flow of $4.8 million.

Third-quarter gold production was nearly halved to 7,941 oz., compared with the 14,398 oz. produced during the same period of 2000. The shortfall results from the suspension of operations at the Beaufor mine. Aurizon sold its half-interest in the mine to Richmont Mines (RIC-T) dcauring the second quarter. Total cash costs rang in on target at US$236 per oz., but up from US$190 per oz. a year earlier.

So far this year, gold production stands at 24,324 oz., in line with forecast. Total cash cost was US$227 per oz. During the first nine months of 2000, production was 46,973 oz. at US$202 per oz. The average gold price realized in the third quarter was unchanged from a year ago at US$279 per oz., a premium of US$5 per oz. over the average spot price. For the nine-month period, the company averaged US$271 for each oz. produced, US$20 per oz. lower than the previous year.

In late September, Aurizon and equal partner Cambior (CBJ-T) announced the discovery of three high-grade gold lenses near Sleeping Giant’s production shaft. Definition drilling on lens 8, about 100 metres west of the shaft, outlined proven and probable reserves of 218,000 tonnes averaging 12.1 grams gold per tonne, plus inferred resources of 140,000 tonnes of 13.4 grams gold. The figures were calculated using a gold price of US$300 per oz. This zone remains open to the south and at depth.

Lens 6 about 400 metres to southwest has an inferred resource of about 22,000 tonnes grading 8.4 grams gold. The lens remains open to the south and at depth. The third new structure is lens 7, which lies 310 metres south of the shaft. The lens was cut by 18 holes , eight returned gold grades ranging from 7.6 to 24.4 grams gold over true thicknesses of about 2 metres.

The new reserves and resources are expected to extend the mine life by at least two years.

Aurizon CEO David Hall said, “We are encouraged by the prospect of higher grade production from Sleeping Giant in 2002 combined with gold prices, which could increase significantly in the current economic environment.”

Lower grades at Sleeping Giant during the recent quarter sent cash costs up to US$236 per oz. from US$190 per oz. a year earlier. The mine churned out 15,882 oz., down from 19,612 oz. in the same period of 2000.

Aurizon expects to produce 32,000 oz. of gold at US$240 per oz. during 2001.

At September 30, Aurizon had working capital of $700,000, and outstanding spot deferred contracts for the sale of 8,700 oz. at an average price of US$289 per oz.