Aurizon Mines

20-20 vision┬áAurizon Mines is celebrating its 20th birthday in style. President and CEO David Hall describes to Gay Sutton how the company is progressing toward its aim of becoming an intermediate mining company. GoldÔÇöa precious metal that does not tarnish or corrupt. You only have to see the stunning 3,300-year-old face masks unearthed from the Egyptian desert to understand the power of its integrity and longevity. More than that, in times of financial difficulty gold has traditionally been the commodity in which people can ÔÇ£safelyÔÇØ invest their money, as they shun the volatility of banks and the financial markets. And true to form, in todayÔÇÖs financially precarious times gold prices have been holding up very well, while investment capital has more or less dried up.Aurizon Mines has been in the gold mining business since 1988. In its early days it was extracting ore at two small mines in Quebec and was producing a combined total of 60,000 ounces of gold annually by the 1990s. Although financially successful, this level of productivity was simply not enough to attract the interest of the institutional investors. So the company went in search of properties that could deliver a much more profitable output.┬á ÔÇ£After looking at a lot of projects, we purchased Casa Berardi in northwestern Quebec in 1998,ÔÇØ explains chairman, president and CEO David Hall. ÔÇ£It had been a former producing mine that was shut down in 1997. We felt that there was excellent potential to increase existing zones as well as the potential to find new zones on the land.ÔÇØSet in the Abitibi mining camp region, which has excellent infrastructure, a pool of highly skilled engineers, geologists and miners, and a government favorable to the mining industry, the site has amply rewarded the companyÔÇÖs faith and financial commitment. Exploration, funded by equity issues, identified the presence of new unexplored gold zones. The company then raised the $100 million required to fully develop the mine through a combination of $75 million in debt and a further $25 million equity issue. Underground infrastructure and services were constructed along with a production shaft down to a level of 700 meters together with improvements to the mill to extract the gold from the ore. Meanwhile, the original small mines were sold off.By December 2006 the first gold from Casa Berardi was being poured. Now, after two full years of productionÔÇöand ten years since the property was first purchasedÔÇöthe mine is producing 150,000 to 160,000 ounces of gold a year. The financial rewards of almost tripling the companyÔÇÖs output of gold have been significant. Aurizon has reduced its $75 million debt to just $30 million, and it still has a cash balance of $50 million. ÔÇ£We actually have more cash than debt today,ÔÇØ Hall says. ÔÇ£And in todayÔÇÖs financial meltdown, deleveraging, restructuring, call it what you willÔÇöhaving a mine in production that is generating cash flow puts us in a good position and means we can fund all our requirements for the foreseeable future without recourse to the equity markets.ÔÇØ This financial stability has ensured the company can pursue its expansion strategy. ÔÇ£Our aim,ÔÇØ says Hall, ÔÇ£is to grow the company from a junior to an intermediate mining company, which means we want to take our present 150,000 to 160,000 ounces of annual production and increase that to approximately a half million ounces of annual production.ÔÇØThe long-term prospects for Casa Berardi look promising. Although the entire project area is 37 kilometers in length, the company has only explored two kilometersÔÇödown to a depth of 1,000 metersÔÇöwhere it has a confirmed reserve of five years. ÔÇ£Our feeling is that Casa Berardi has the potential to be like other mines in the Abitibi camp; it could go on for 20 to 40 years. We may, in fact, be able to extend the mine life throughout the land position,ÔÇØ Hall states.To ascertain the full extent of the potential gold resources will require further exploration, and a junior company is currently working on the early-stage high-risk exploration at the outer reaches of the property. Aurizon and the junior entered into an option agreement where the junior will invest $5 million in exploration over five years. If they find gold, they will have earned a 50 percent interest in the Casa Berardi exploration property, but Aurizon would be the operator. The process is already bearing fruit. ÔÇ£They have just discovered a new gold zone 7.5 kilometers to the east of our surface processing facilities.ÔÇØMeanwhile, the company has acquired two further properties, and these are at varying stages of exploration and development. The more advanced of the two is the Joanna Project, 100 km south of Casa Berardi, and right in the heart of the historic Cadillac Break gold belt. Initial exploration has revealed extensive gold resources of about 2 million ounces lying close to the surface, which Hall believes could probably be extracted by open pit mining. A pre-feasibility study, which should be completed by the middle of 2009, should define the economic viability of the shallow mining project. However, the property was originally acquired because of the possibility of finding gold zones at a deeper level, so plans are being made to begin drilling exploratory holes.Finally, Aurizon has acquired the Kipawa project a further 100 km south, and this is at a much earlier stage in its evolution. ÔÇ£ItÔÇÖs the sort of property where you work away slowly, doing annual programs, building your database and level of knowledge. WeÔÇÖll see how it goes from there,ÔÇØ says Hall. Early-stage surveys indicate that there are not only gold targets on the site but also rare earth and uranium deposits. ÔÇ£But I think if we ever found a significant rare earth or uranium deposit, weÔÇÖd probably farm it out into a separate corporate entity,ÔÇØ Hall says. ÔÇ£ItÔÇÖs a very different business from gold mining, and we wouldnÔÇÖt want it to distract from our prime focus, which is producing gold.ÔÇØHall does not intend to sell out in the short term. ÔÇ£WeÔÇÖre building for the long term,ÔÇØ he explains. ÔÇ£WeÔÇÖre building an experienced management team with good assets, and weÔÇÖll continue to build the company. However, if someone puts an attractive offer on the table, then we would have to consider it.ÔÇØ┬á