Aurizon makes headway in Quebec

Aurizon Mines (ARZ-T, AZK-X) began September with a bang. On the same day it released higher-grade intercepts from its Hosco West and Heva deposits — part of the company’s feasibility-stage Joanna gold project, 20 km east of Rouyn-Noranda — it also updated the resource estimate for its Fayolle project, a joint-venture it holds with Typhoon Exploration (TYP-V), 35 km northeast of Rouyn-Noranda. Those news flashes were followed a day later by a resource update for its joint-venture Marban project, also in Quebec.

Drilling highlights at the Joanna project, which is situated along Quebec’s Cadillac Break in Joannes Township, include an intercept of 7.5 grams gold per tonne over a true width of 15 metres in the Heva deposit, and 6.4 grams gold over a true width of 5.2 metres in the Hosco West extension. Other notable results included 12.4 grams gold over a true width of 3 metres in Heva West, and 6.3 grams gold over 3 metres in Heva East.

“The objective of the drill program was to build resources close to surface in the vicinity of the Hosco pit, and evaluate underground resources,” Andrew Kaip, a mining analyst at BMO Capital Markets in Toronto, writes in a research note. “The weighted average grade of 2.5 grams gold per tonne over 8.2 metres true width from the drill holes released is significantly higher than the Heva zone’s measured and indicated resource grade of 1.9 grams gold per tonne . . . higher-grade intercepts at Heva demonstrate the potential for resource growth, contingent on further exploration.”

At the end of 2011, the Heva zone’s resource stood at 4.4 million measured and indicated tonnes grading 1.90 grams gold for 270,000 oz. gold, plus 7.7 million inferred tonnes at 1.7 grams gold for 421,000 oz. gold, using a cut-off grade of 0.5 gram gold.

The Joanna project extends east–west for more than 8 km, and measures 3 km wide in places.

Meanwhile, at Fayolle results of preliminary metallurgical test work indicates recoveries of 94% to 97%, and a new resource estimate confirms Aurizon’s initial assumptions that the property contains previously undefined, high-grade mineralization.

Aurizon can earn a 51% interest in Fayolle subject to an underlying 2% net smelter return royalty by spending $10 million, and subscribing for $2 million of Typhoon’s shares over four years.

The new resource estimate defines an indicated resource of 1.82 million tonnes grading 2.7 grams gold per tonne for 156,000 contained oz. gold, at a cut-off grade of 0.8 gram gold.

The previous resource estimate from 2007, by contrast, outlined indicated resources at a 0.5 gram gold cut-off grade measuring 464,700 tonnes at 2.4 grams gold for 36,081 oz. gold, and inferred resources of 2.19 million tonnes grading 1.6 grams gold for 113,021 contained oz. gold.

The updated estimate was based on drill results after February 2007 — a total of 253 surface holes and 68,826 metres, of which 92 holes over 30,927 metres were drilled after May 2010, when Aurizon and Typhoon kicked off their joint venture.

Aurizon says it also identified different parallel gold-bearing structures a few hundred metres south of the Fayolle zone, where it has uncovered mineralized intersections in the range of 1 gram to 8 grams gold per tonne, over thicknesses between 3 metres and 10 metres.

The Fayolle property consists of 39 mining claims that are 100% owned by Typhoon covering 13.7 sq. km across the Destor-Porcupine break, one of the most productive gold-bearing structures of the Abitibi belt.

Under the terms of Aurizon’s option agreement, it has already spent $8.8 million on exploration and subscribed for $1.5 million in Typhoon’s common shares.

Aurizon is also earning into the Marban project in a joint venture with NioGold Mining (NOX-V), and released an updated resource estimate for the project on Sept. 7.

Drilling at Marban, in the Malartic gold mining camp halfway between Rouyn-Noranda and Val-d’Or, has resulted in an updated in-pit resource of 20.7 million tonnes of 1.58 grams gold for 1.05 million contained oz. gold in the measured and indicated category, and 3.78 million tonnes grading 1.60 grams gold for 194,000 oz. gold in the inferred category. The resource is based on a cut-off grade of 0.35 gram gold. The simulated pit is 1.4 km long, 850 metres wide and 350 metres deep.

The Marban resource outside of the pit shell, using a cut-off grade of 2 grams gold per tonne, is estimated at 980,000 tonnes grading 2.82 grams gold for 89,000 oz. gold in the measured and indicated category, and 800,000 tonnes at 2.68 grams gold for 69,000 contained oz. gold in the inferred category. The resources outside the optimized pit shell were evaluated using an underground mining scenario.

At press time Aurizon shares were trading in Toronto at $4.31 per share within a 52-week range of $3.80 to $7.25. The Vancouver-based company has 164.4 million shares outstanding.

Kaip of BMO Capital Markets has a $6 price target on the stock, and forecasts Aurizon’s gold production this year will reach 148,000 oz., at co-product cash costs of US$650 per oz. (Last year the company’s 100%-owned Casa Berardi mine in northwestern Quebec produced 163,845 oz. gold from processing 698,123 tonnes, at an average grade of 8 grams gold per tonne.)

The Casa Berardi mine entered its sixth year of commercial operation this year since restarting in November 2006. In the second quarter the mine produced 37,820 oz., up 13% over the first quarter of the year, but lower than the 41,417 oz. it produced in the second quarter of 2011. Higher unit operating costs per tonne this year raised total cash costs in the second quarter to US$671 per oz., up from US$544 per oz. in the second quarter of 2011.

Casa Berardi’s gold deposits are located along a 5 km east–west mineralized corridor. They include the East and West mines, and the Principal zones. Gold occurs mainly south of the Casa Berardi fault, and occasionally on both sides.