Aurizon Mines Ltd. TSXV:ARZ

Casa Berardi
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Outlook

Casa Berardi produced 41,522 ounces of gold in the third quarter of 2008 and 40,228 ounces were sold at an average price US$845 per ounce. Since commissioning the mill in November 2006, Casa Berardi has produced 297,667 ounces of gold, primarily from Zone 113. Development is currently under way within the Lower Inter Zone in order to provide supplemental mill feed for 2009.

Operations

Summary of Key Operational Statistics

 

 

 

 

 

 

2008

2007

2006

 

Q3

Q2

Q1

Q4

Q3

Q2

Q1

Q4

Operating results

 

 

 

 

 

 

 

 

Tonnes milled

161,358

160,054

163,694

154,001

152,025

134,569

104,663

68,481

Grade -- grams/tonne

8.58

7.73

8.63

8.14

10.65

10.38

10.14

8.58

Mill recoveries - %

93.3%

92.7%

92.6%

91.8%

92.8%

93.8%

93.8%

93.9%

Gold Production -- ozs

41,522

36,871

42,074

37,007

48,305

42,144

32,013

17,731

Gold sold -- ounces

 

 

 

 

 

 

 

 

Commercial production 1

40,228

41,217

39,611

44,000

50,000

26,000

-

-

Pre-commercial production

-   

-   

-    

-    

-    

10,500

30,100

6,882

Gold sold -- total

40,228

41,217

39,611

44,000

50,000

36,500

30,100

6,882

Per ounce data -- US$

 

 

 

 

 

 

 

 

Average realized gold price

$845

$869

$877

$770

$679

$666

$651

$625

Total cash costs 2

$405

$436

$422

$402

$282

$298

-

-

Amortization 3

$211

$210

$191

$214

$162

$152

-

-

Total production costs 4

$616

$646

$613

$616

$444

$450

-

-
Table footnotes:
  1. Commercial production achieved May 1, 2007.
  2. Cost figures calculated in accordance with a standard developed by the former Gold Institute from the date of achieving commercial production.
  3. Depreciation, amortization and accretion expenses.
  4. Total cash costs plus depreciation, amortization and accretion expenses.


Ore throughput in the mill during the third quarter of 2008 increased to 161,358 tonnes from 152,025 tonnes in the same period of 2007. An average ore grade of 8.6 grams/tonne was achieved in the third quarter of 2008, matching the ore grades planned for 2008. Mill recoveries averaged 93.3%, in the third quarter of 2008. This compares to higher than average ore grades of 10.6 grams/tonne and mill recoveries of 92.8% in the same quarter of 2007.

Total cash costs, on the basis of gold sold, were US$405 per ounce in the third quarter of 2008, 7% lower than the second quarter and higher than the US$282 per ounce costs in the third quarter of 2007 due to the lower ore grades and higher unit operating costs. Unit mining costs in the third quarter of 2008 were $101 per tonne, compared to $94 per tonne costs in the same quarter of 2007 and lower than the second quarter 2008 costs of $105 per tonne.

The operating profit margin per ounce increased 11% to US$440 per ounce from US$397 per ounce in the second quarter 2007 due primarily to higher realized gold prices.

Based upon anticipated lower ore grades in the fourth quarter, Aurizon has reduced its production forecast for 2008 to 155,000 to 160,000 ounces of gold at a total cash cost of approximately US$420 per ounce assuming a Cdn$/US$ exchange rate of 1.15 in the fourth quarter.

Sustaining development costs at Casa Berardi are estimated to total $4.0 million in the fourth quarter of 2008, primarily for the development of the Lower Inter Zone. An additional $3.0 million is planned for investment in infrastructure and equipment and $2.6 million in exploration and related development activities in the fourth quarter at Casa Berardi.

The Company's financial position at September 30, 2008, and the operating cash flows that are expected from Casa Berardi over the next twelve months should allow Aurizon to meet its financial obligations as they become due and also fund its planned exploration and capital programs, based on current gold prices and exchange rates.

Exploration for 2008

At Casa Berardi, surface drilling will focus on the extension of the South fault, east of Zone 123-S.

In addition, Lake Shore Gold has commenced surface drilling on the adjacent Casa Berardi exploration property in order to fulfill its commitment to incur expenditures of $600,000. Results are pending.

A three year underground exploration program, initiated in 2007, will continue as follows:
  • Drilling has commenced from the rehabilitated track drift on the 280 metre level in the area of the Principal Zones and between the two mines where limited surface exploration has been performed to date. An updated 3D geological model is in progress for the Principal Zones in order to provide an updated mineral resources for the evaluation of open pit and underground mining opportunities.
  • At the East Mine, a rehabilitation of the underground workings and definition drilling is under review with the objective of transferring the inferred mineral resources to the indicated category and ultimately to mineral reserves.
  • An exploration drift is being developed at the 810 metre level, east of Zone 113 and south of the Casa Berardi fault, to provide drill access to test the depth extension of Zone 113 and to test the continuity and extension of Zones 118 to 122 and 123-South.

Exploration related activities totalling $10.2 million will be invested at Casa Berardi in 2008, including $6.1 million on underground development and infrastructure, and $4.1 million on approximately 45,000 metres of surface and underground drilling.

2007 Gold Production

Gold production from Aurizon's 100% owned Casa Berardi mine for the year ended December 31, 2007, totalled 159,469 ounces from the processing of 545,258 tonnes at an average grade of 9.8 grams of gold per tonne, which is 2.0 grams per tonne higher than the present mine reserve grade. Recoveries for the year averaged 93.0% which was higher than anticipated. Gold production was 3% lower than the previous 2007 guidance of 165,000 ounces due primarily to a delay in mining one higher grade stope that will now be mined in 2008.


Casa Berardi Reserves and Resources - December 31, 2007

The Casa Berardi mine is a vein type deposit located close to the contact between a sedimentary basin sequence and the volcanic basement. The deposit extends for a 5 kilometre strike length along the Casa Berardi Fault system. The mine reached commercial production on May 1, 2007.

Scott Wilson Roscoe Postle ("Scott Wilson RPA") and Breton Banville and Associates ("BBA") were commissioned by Aurizon to update the mineral reserve estimates for the different zones of the property. Scott Wilson RPA reviewed the mineral reserve estimate on Zones 109 and 115, and updated the mineral resources of existing West Mine zones. BBA prepared a mineral reserve estimate on the East Mine crown pillar. Golder Associates Ltd. prepared an updated mining plan for the Lower Inter zone, based upon an updated mineral resource estimate prepared by Scott Wilson RPA.



Notes:
    1. CIM definitions were followed for mineral reserves.
    2. Previous mineral reserve estimates were based on a mining recovery of 97% as proposed by the Updated Feasibility Study prepared by Scott Wilson RPA dated October 26, 2005. The experience gained in the first year of production indicates that a mining recovery of 90% on primary stoping and 95% on secondary stoping would be more appropriate.
    3. Mineral reserves are estimated using a long-term average gold price of US$581 per ounce, and a US$/CDN$ exchange rate of 1 : 1.14, resulting in a revised minimum cut off grade of 5.1 grams of gold per tonne. The minimum cut off grade was previously 4.0 grams per tonne.
    4. Totals may not represent the sum of the parts due to rounding.


The following assumptions were used in the estimates of mineral reserves:
  • For the underground operation, the selected mining method is sequential transversal long hole when the vein is larger than 10 metres and sequential transversal or longitudinal long hole retreat when the vein is less than 10 metres. The stoping sequence includes cemented rockfill of the primary stoping sequence, cemented and unconsolidated rockfill for the longitudinal retreat and unconsolidated rockfill for secondary stoping sequence.
  • Stope dilution has been calculated from numerical modeling on the basis of the stability of the stope openings, ore deposit geometry and mining method. The amount of dilution was reduced for stopes of smaller dimensions on the fringes of the zone, and increased for stopes with unfavourable geometry. In addition, each stope was assigned a backfill dilution percentage based on number of walls of fill and type of mucking floor. As a result, dilution averages 18-20%
  • Minimum underground mining widths of two to three metres were used.
  • The East mine crown pillar open pit is designed to a depth of 80 meters with an overall pit slope of 35 degrees.


Reconciliation of Casa Berardi mineral reserves

The following table outlines the primary factors impacting mineral reserves during 2007 following the actual experience gained during the first year of production at Casa Berardi.



Notes to the reconciliation of mineral reserves:
    (1) Resources conversion resulted in the addition of 99,000 ounces to mineral reserves representing a 52% renewal of the in situ 2007 production including milling and mining recoveries.
    (2) Mining depletion represents 2006 mineral reserves mined and processed in 2007 before mining and milling recoveries and therefore does not correspond to actual 2007 gold production of 159,469 ounces.
    (3) Engineering includes changes in mining dilution and recovery assumptions and other mine design considerations.
    (4) Mining cost represents an adjustment to the cut off grade by applying the three year moving average gold price of US$581 per ounce to increased mining costs. As the current gold price is significantly higher, it is anticipated that most of these ounces will be mined and recovered.




    Notes: 1. CIM definitions were used for mineral resources.
    2. Mineral resources are estimated using a long-term average gold price of US$750 per ounce, a US$/CDN$ exchange rate of 1:1.10, and a cut off grade of 4.1 grams of gold per tonne.
    3. Minimum underground mining widths of two to three metres were used.
    4. Totals may not represent the sum of the parts due to rounding.
    5. Mineral resources are exclusive of mineral reserves. Mineral resources do not have demonstrated economic viability.


Casa Berardi History

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CAUTIONARY NOTE TO US READERS

As a British Columbia corporation, the Company is subject to certain rules and regulations issued by the British Columbia Securities Commission ("BC Securities Commission"). The Company is required to provide detailed information regarding its properties including mineralization, drilling, sampling and analysis, security of samples and mineral resource and mineral reserve estimates. Further, the Company describes mineral resources associated with its properties utilizing terminology such as "indicated" or "inferred" which terms are recognized by Canadian regulations but are not recognized by the United States Securities and Exchange Commission ("SEC").

Cautionary Note to U.S. Investors Regarding Mineral Resources

The SEC allows mining companies, in their filings with the SEC, to disclose only those mineral deposits they can economically and legally extract or produce. The Company may use certain terms in this document, such as "mineral resources", "indicated mineral resources" and "inferred resources" that are recognized and mandated by Canadian securities regulators but are not recognized by the SEC.

This web site may use the term "indicated" resources. U.S. readers are cautioned that while that term is recognized and required by Canadian regulations, the SEC does not recognize it. U.S. investors are cautioned not to assume that any part or all of mineral deposits in this category will ever be converted into mineral reserves.

This web site may also use the term "inferred" resources. U.S. readers are cautioned that while this term is recognized and required by Canadian regulations, the SEC does not recognize it. "Inferred resources" have a great amount of uncertainty as to their existence, and great uncertainty as to their economic and legal feasibility. It cannot be assumed that all or any part of an Inferred Mineral Resource will ever be upgraded to a higher category. Under Canadian rules, estimates of Inferred Mineral Resources may not form the basis of feasibility or pre-feasibility studies, except in rare cases. U.S. investors are cautioned not to assume that part or all of an inferred resource exists, or is economically or legally mineable.



CASA BERARDI INITIAL GOLD POUR - DECEMBER 4, 2006
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