Aurizon Reports 2008 Financial Results

Share Name	Share Symbol	Market	Type
Aurizon Mines, Ltd. Ordinary Shares (Canada)	AMEX:AZK	AMEX	Ordinary Share

Aurizon Mines (AMEX:AZK)
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Shares Listed: Toronto Stock Exchange - Ticker Symbol - ARZ NYSE Alternext - Ticker Symbol - AZK U.S. Registration: (File #0-22672) VANCOUVER, March 11 /PRNewswire-FirstCall/ -- Aurizon Mines Ltd. (TSX: ARZ; NYSE Alternext:AZK) is pleased to announce its unaudited financial results for the year ended December 31, 2008. HIGHLIGHTS Fourth Quarter highlights: - Cash flow from operations of $11.6 million. - Increase of $18.8 million in unrestricted cash balances. - Gold production of 38,363 ounces. - Net loss of $4.1 million, or ($0.03) per share, which was net of a non-cash derivative loss of $5.8 million. - Total cash costs of US$356 per ounce. 2008 Highlights: - Record cash flow from operations of $60.3 million, a 35% increase from 2007. - Record revenues of $144 million, a 21% increase from 2007. - Net earnings of $4.9 million, or $0.03 per share, and adjusted net earnings of $9.4 million, or $0.06 per share. - Project debt reduced by 58% to $29.2 million. - Operating profit margin per ounce increased 23% to US$448. - Total cash costs of US$399 per ounce. "Aurizon delivered a strong financial performance in 2008, enabling us to significantly reduce our debt and exit the year in a healthy financial position," said David P. Hall, President and Chief Executive Officer, "In 2009, we expect to generate significant operating cash flow which will enable us to further strengthen our balance sheet, unlock the potential of our properties, and pursue other opportunities to improve our long-term production profile." FINANCIAL RESULTS Financial Review Fourth Quarter -------------- In the fourth quarter of 2008, Aurizon incurred a net loss of $4.1 million, or ($0.03) per share, compared to a net loss of $6.5 million, or ($0.04) per share, in the fourth quarter of 2007. Fourth quarter results in 2008 were impacted by non-cash derivative losses of $5.8 million, non-cash income and resources taxes of $1.5 million, stock based compensation charges of $1.7 million, and increased exploration activity of $3.0 million at Joanna. In the fourth quarter of 2007, non-cash charges associated with derivative instruments totalled $10.3 million, partially offset by a non-cash future income tax recovery of $2.4 million. Cash flow from operating activities was $11.6 million in the fourth quarter of 2008, compared to $12.3 million for the same period of 2007. Aurizon's aggregate operating, investing and financing activities during the fourth quarter of 2008 resulted in net cash inflows of $18.8 million. Gold production for the fourth quarter of 2008 was 38,363 ounces from the processing of 169,291 tonnes at an average grade of 7.7 grams of gold per tonne. The anticipated lower ore grades in the fourth quarter, compared to the average grade of 8.3 grams/tonne for the first nine months of 2008, were more than offset by a strong Canadian dollar, resulting in cash operating costs per ounce of US$356 in the quarter, compared to US$418 for the first nine months and US$399 for the year. Year ended December 31, 2008 ---------------------------- Net earnings in 2008 totalled $4.9 million, or $0.03 per share, compared to net earnings of $9.4 million, or $0.06 per share in 2007. Factors impacting operating results in 2008 were $11.4 million of exploration expenses related to the in-fill drilling activity at the Joanna project, and non-cash future income and resource taxes of $5.3 million compared to exploration expenses of $5.2 million and a non-cash a future income tax recovery of $1.3 million in 2007. Operating results in 2008 were also impacted by non-cash derivative losses of $8.5 million, a $3.2 million recovery of corporate takeover costs and foreign exchange gains of $0.9 million, all on an after tax basis. After adjusting for these items, adjusted net earnings were $9.4 million, or $0.06 cents per share, compared to adjusted net earnings of $14.2 million, or $0.10 cents per share in 2007. In 2007, operating results were impacted by non-cash derivative losses of $4.7 million and foreign exchange losses of $0.1 million, on an after tax basis. In 2008, Casa Berardi gold production totalled 158,830 ounces and gold sales totalled 159,404 ounces, similar to 2007. The average realized gold price in 2008 was US$847 per ounce and at an average Cad/US exchange rate of 1.07, gold sales totalled $144 million, 21% higher than 2007. During 2008, 53,217 ounces were delivered against gold call options at an average price of US$835 per ounce, 5% lower than the average London fixing of US$876 per ounce. Whilst the Canadian dollar fluctuated considerably during 2008 against the US dollar, the average Cad/US dollar exchange rate for the year of 1.07 was similar to the 2007 rate of 1.06. Silver sales in 2008 totalled $0.5 million. In 2007, Casa Berardi gold production totalled 159,469 ounces and gold sales totalled 160,600 ounces. The average realized gold price in 2007 was US$696 per ounce and, at an average Cad/US exchange rate of 1.06, gold sales proceeds totalled $118.8 million. The Company's comparative results for 2007 have been re-stated to reflect the adoption of CICA Handbook Section 3064, "Goodwill and Intangible Assets". This new standard provides guidance for the treatment of preproduction and start-up costs and requires that these costs and related revenues be reflected in earnings. The Company was in preproduction at its Casa Berardi mine in the fourth quarter of 2006 and accordingly, 2006 and 2007 results have been retrospectively restated. Calculation of Adjusted Net Earnings Adjusted net earnings are calculated by removing the gains and losses, net of income tax, resulting from the mark-to-market revaluation of the Company's gold and foreign currency price protection contracts, the recovery of corporate takeover costs, as well as currency exchange fluctuations, as detailed on the table below. Adjusted net earnings do not constitute a measure recognized by generally accepted accounting principles (GAAP) in Canada or the United States, and do not have a standardized meaning defined by GAAP. The Company discloses this measure, which is based on its financial statements, because it will assist in the understanding of the Company's operating results and financial position. ------------------------------------------------------------------------- 2008 2007 ------------------------------------------------------------------------- (in thousands of Canadian dollars, except per share amounts) Net earnings as reported $4,921 $9,351 Add (deduct) the after-tax effect of: Unrealized loss on derivative instruments 8,522 4,703 Foreign exchange loss (gain) (852) 96 Recovery of takeover defense costs (3,220) - ------------------------------------------------------------------------- Adjusted net earnings $9,371 $14,150 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Adjusted net earnings per share $0.06 $0.10 ------------------------------------------------------------------------- Balance Sheet As at December 31, 2008, cash and cash equivalents stood at $34.3 million, compared to $24.8 million in 2007. In addition, restricted cash balances in respect of the Casa Berardi debt facility totalled $21.2 million at December 31, 2008 compared to $31.8 million in 2007. At the end of 2008, Aurizon had working capital of $24.1 million compared to $32.2 million at the end of 2007. Included in current liabilities are two principal debt payments due in March and September 2009, totaling $21.0 million, compared to principal payments of $25.8 million included in current liabilities at the end of 2007. Also included in current liabilities at December 31, 2008 are non-cash derivative liabilities totaling $13.7 million compared to $4.8 million at the end of 2007. Long term debt at December 31, 2008, totalled $9.4 million of which $8.2 million is project debt and $1.2 million is refundable government assistance. Asset retirement obligations at December 31, 2008 increased to $20.9 million compared to $2.6 million as a result of soil characterization studies conducted in 2008 and new environmental guidelines set out by the provincial and federal authorities. The new soil characterization studies at Casa Berardi indicate arsenic levels in the tailings pond exceed the new maximum acceptable levels set by government authorities. The new restoration cost estimate reflects the Company's commitment to restore the mine site to a state that complies with or exceeds all government standards. As at the date of this report, Aurizon had 148,417,482 common shares issued and outstanding. In addition, 8.2 million incentive stock options are outstanding that are exercisable into common shares at an average price of $3.54 per share. Operations ------------------------------------------------------------------------- Summary of Key Operational Statistics - Casa Berardi ------------------------------------------------------------------------- Q1 Q2 Q3 Q4 2008 2007 ------------------------------------------------------------------------- Operating results Tonnes milled 163,694 160,054 161,358 169,291 654,397 545,258 Grade - grams/tonne 8.63 7.73 8.58 7.70 8.16 9.78 Mill recoveries - % 92.6% 92.7% 93.3% 91.5% 92.5% 93.0% ------------------------------------------------------------------------- Gold Production - ozs 42,074 36,871 41,522 38,363 158,830 159,469 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Gold sold - ozs 39,611 41,217 40,228 38,348 159,404 160,600 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Per ounce data - US$ Average realized gold price $877 $869 $845 $793 $847 $696 ---------------------------------------------------- Total cash costs(1) $422 $436 $405 $356 $399 $331 Amortization(2) 191 210 211 226 209 172 ---------------------------------------------------- Total production costs(3) $613 $646 $616 $582 $608 $503 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Table footnotes: (1) Operating costs net of by-product credits, divided by ounces sold. (2) Depreciation, amortization and accretion expenses. (3) Total cash costs plus depreciation, amortization and accretion expenses. Total cash costs in 2008 were US$399 per ounce, higher than the US$331 per ounce costs in 2007, primarily the result of mining of more tonnes of ore and lower ore grades. Higher ore throughput in 2008 allowed unit operating costs to drop to $105 per tonne from $107 per tonne in 2007, partially mitigating the higher unit costs on a per ounce basis. The operating profit margin in 2008 increased 23% to US$448 per ounce compared to US$365 per ounce in 2007, due primarily to higher realized gold prices. Operating profit margin per ounce is a non-GAAP measure, and is calculated by subtracting the total cash costs per ounce from the average realized gold price. NON-GAAP MEASURE - TOTAL CASH COST PER GOLD OUNCE CALCULATION Aurizon has included a non-GAAP performance measure, total cash cost per gold ounce, in this report. Aurizon reports total cash costs on a sales basis. In the gold mining industry, this is a common performance measure but does not have any standardized meaning, and is a non-GAAP measure. However, the standard is the accepted standard for reporting cash costs of production in North America. The Company believes that, in addition to conventional measures, prepared in accordance with GAAP, certain investors use this information to evaluate the Company's performance and ability to generate cash flow. Accordingly, it is intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP. The following table provides a reconciliation of total cash costs per ounce to the financial statements: ------------------------------------------------------------------------- Total Cash Costs per Ounce Q1 Q2 Q3 Q4 2008 2007 ------------------------------------------------------------------------- (in $ thousands) Operating costs $16,869 $18,121 $17,025 $16,590 $68,605 $57,839 By-product silver sales ($147) ($158) ($88) ($92) ($485) ($392) ------------------------------------------------------------------------- Total cash costs - Cdn $ $16,722 $17,963 $16,937 $16,498 $68,120 $57,447 Divided by average Bank of Canada Cdn$/US$ exchange rate 1.00 1.00 1.04 1.21 1.07 1.08 Divided by ounces of gold sold 39,611 41,217 40,228 38,348 159,404 160,600 ------------------------------------------------------------------------- Total cash costs per ounce of gold - US$ $422 $436 $405 $356 $399 $331 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Outlook Casa Berardi enters its third year of commercial operations in 2009 following the re-commencement of operations in November 2006. Based upon the 2009 mine plan, it is estimated that Casa Berardi will produce approximately 150,000 - 155,000 ounces of gold at an estimated total cash cost of US$390 per ounce, using a Cad$/US$ exchange rate of 1.20. This compares to the gold production of 158,830 ounces and a total cash cost of US$399 in 2008 at an average Cad$/US$ exchange rate of 1.07. On-site mining, milling and administrative costs are expected to average $108 per tonne. The average daily mine production is estimated at 1,800 tonnes per day in 2009, in line with 2008. Ore grades are expected to average 7.9 grams per tonne compared to the 8.2 grams per tonne achieved in 2008. Approximately 60% of the ore production will come from Zone 113, 30% from the recently developed Lower Inter Zone and the balance from smaller zones and development material. In accordance with the terms of the project debt facility, the Casa Berardi mine is required to meet certain financial covenants, as stipulated by the lenders. The Company expects to meet or exceed these covenants in 2009. Principal debt repayments totaling $21.0 million will be made from the Company's restricted cash accounts in 2009, resulting in residual project debt of $8.2 million by the end of 2009. Sustaining capital expenditures at Casa Berardi are estimated to be $13.0 million in 2009, primarily for the development of the upper and lower portions of Zone 113 and of the Lower Inter Zone. An additional $6.9 million is planned for infrastructure and equipment improvements. Casa Berardi At Casa Berardi, exploration will focus on the completion of the exploration drift at the 810 metre level of the West mine, and approximately 14,000 metres of drilling to test the depth extension of Zone 113 and the continuity and extension of Zones 118 and 123-South. In addition, approximately 21,000 metres of infill drilling will be performed on the north and upper limits of the Lower Inter Zone, the eastern part of Zone 113, and Zones 109 and 115. A total of $8.5 million will be initially invested at Casa Berardi in 2009, including $3.5 million on underground development and infrastructure, and $5.0 million on approximately 35,000 metres of underground drilling. In addition, Aurizon intends to complete a feasibility study on mining the crown pillar of the East Mine and a preliminary technical assessment study on mining the upper portion of the Principal zones, both by open pit mining. Joanna At Joanna, infill drilling of the Hosco deposit has been completed and independent consultants are currently working on a pre-feasibility study which is anticipated to be completed in the third quarter, 2009. In 2009, approximately $1.5 million will be initially invested to perform approximately 10,000 metres of drilling focused on the following: a) Possible eastern extension of the Hosco deposit on the recently optioned Alexandria property. b) Testing for potential higher grade gold mineralization in the down dip extension of the Hosco deposit below 500 metres. c) Exploration targets north of the existing mineral resources. Kipawa At Kipawa, future work programs will be developed following detailed analysis and interpretation of the results of the 2008 field program. About Aurizon Aurizon is a gold producer with a growth strategy focused on developing its existing projects in the Abitibi region of north-western Quebec, one of the world's most favourable mining jurisdictions and prolific gold and base metal regions, and by increasing its asset base through accretive transactions. Aurizon shares trade on the Toronto Stock Exchange under the symbol "ARZ" and on the NYSE Alternext (formerly AMEX) under the symbol "AZK". Additional information on Aurizon and its properties is available on Aurizon's website at http://www.aurizon.com/. FORWARD-LOOKING STATEMENTS This News Release contains "forward-looking statements" within the meaning of securities legislation. These forward-looking statements include, but are not limited to, statements regarding the 2009 Casa Berardi mine plan and estimates of gold production, grade and long-term average gold prices, mineral reserve and mineral resource estimates, planned work programs, strategic plans and expected outcomes. Forward-looking statements express, as at the date of this News Release, the Company's plans, estimates, forecasts, projections, expectations, or beliefs as to future events or results and, except as required under applicable securities legislation, the Company does not intend, and does not assume any obligation to update these forward-looking statements. Forward-looking statements are based on certain assumptions including those referred to in this news release and involve risks and uncertainties, and there can be no assurance that such statements will prove to be accurate. Therefore, actual results and future events could differ materially from those anticipated in such statements. Factors that could cause results or events to differ materially from current expectations expressed or implied by the forward-looking statements, include, but are not limited to conclusions of economic evaluations; changes in project parameters as plans continue to be refined; future prices of gold; accidents, and other risks of the mining industry; and other risks more fully described in Aurizon's Annual Information Form filed with the Securities Commissions of the provinces of British Columbia, Alberta, Manitoba, Ontario and Quebec, and in Aurizon's Annual Report on Form 40-F filed with the United States Securities and Exchange Commission. These documents are available on Sedar at http://www.sedar.com/ and on Edgar at http://www.sec.gov/. Balance Sheets As at December 31, 2008 2007 (expressed in thousands of (restated) Canadian Dollars - unaudited) (Note 1) ------------------------------------------------------------------------- $ $ ASSETS Cash and cash equivalents 34,337 24,837 Restricted cash 21,225 31,753 Accounts receivable and prepaid expenses 4,419 3,101 Refundable tax credits and mining duties 5,301 3,865 Derivative instrument assets 412 2,446 Inventories 9,938 8,241 ------------------------------------------------------------------------- 75,632 74,243 Derivative instrument assets 1,420 3,417 Other assets 1,553 4,393 Property, plant & equipment 54,968 38,418 Mineral properties 124,378 130,573 ------------------------------------------------------------------------- TOTAL ASSETS 257,951 251,044 ------------------------------------------------------------------------- ------------------------------------------------------------------------- LIABILITIES CURRENT Accounts payable and accrued liabilities 15,067 11,575 Derivative instrument liabilities 13,727 4,852 Current portion of long-term debt 21,663 25,796 Current provincial mining taxes payable 1,302 - ------------------------------------------------------------------------- 51,759 42,223 Derivative instrument liabilities 13,474 15,795 Long-term debt 9,430 44,924 Asset retirement obligations 20,905 2,598 Future income tax liabilities 17,442 12,141 ------------------------------------------------------------------------- TOTAL LIABILITIES 113,010 117,681 ------------------------------------------------------------------------- SHAREHOLDERS' EQUITY Share Capital Common shares issued - 148,068,248 (2007 - 146,730,948) 194,647 190,976 Contributed Surplus 872 837 Stock based compensation 9,013 6,062 Deficit (59,591) (64,512) ------------------------------------------------------------------------- TOTAL SHAREHOLDERS' EQUITY 144,941 133,363 ------------------------------------------------------------------------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 257,951 251,044 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Note 1: The comparative results have been re-stated to reflect the adoption of CICA Handbook Section 3064, "Goodwill and intangible Assets". The adoption of this new standard results in a change in the treatment of preproduction and start-up costs and requires that these costs and related revenues be reflected in earnings. The Company was in preproduction at its Casa Berardi mine in the fourth quarter of 2006 and accordingly, 2006 and 2007 results have been retrospectively restated. Statements of Earnings (Loss) and Comprehensive Income (Loss) For the periods ended December 31, Three months ended Year ended December 31, December 31, (expressed in thousands of Canadian Dollars, except for 2008 2007 2008 2007 share and per share amounts - (restated) (restated) unaudited (Note 1) (Note 1) ------------------------------------------------------------------------- Revenue $ $ $ $ Mining operations 37,517 33,333 144,452 119,160 ------------------------------------------------------------------------- Expenses Operating costs 16,590 17,470 68,605 57,839 Depreciation, depletion and accretion 10,535 9,726 35,582 29,754 Administrative and general costs 3,182 2,176 10,929 8,487 Exploration costs 3,116 1,684 11,426 5,242 Unrealized derivative losses 5,794 10,312 10,586 6,039 Interest on long-term debt 360 1,238 2,692 4,958 Foreign exchange (gain) loss 828 21 (1,059) 123 Capital taxes 136 212 397 849 Other income (426) (696) (6,229) (2,212) ------------------------------------------------------------------------- 40,115 42,143 132,929 111,079 ------------------------------------------------------------------------- Earnings (loss) for the period before income taxes (2,598) (8,810) 11,523 8,081 Current provincial mining taxes (465) - (1,302) - Future income tax expense relating to mining duties (1,395) - (3,162) - Future income tax recovery (expense) 404 2,360 (2,138) 1,270 ------------------------------------------------------------------------- Net earnings (loss) and comprehensive income (loss) for the period (4,054) (6,450) 4,921 9,351 ------------------------------------------------------------------------- Earnings (loss) per share Basic and diluted (0.03) (0.04) 0.03 0.06 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Weighted average number of common shares outstanding 147,708 146,502 147,708 146,502 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Note 1: The comparative results have been re-stated to reflect the adoption of CICA Handbook Section 3064, "Goodwill and intangible Assets". The adoption of this new standard results in a change in the treatment of preproduction and start-up costs and requires that these costs and related revenues be reflected in earnings. The Company was in preproduction at its Casa Berardi mine in the fourth quarter of 2006 and accordingly, 2006 and 2007 results have been retrospectively restated. Statements of Cash Flow For the periods ended December 31, Three months ended Year ended December 31, December 31, 2008 2007 2008 2007 (expressed in thousands of (restated) (restated) Canadian Dollars - unaudited) (Note 1) (Note 1) ------------------------------------------------------------------------- $ $ $ $ OPERATING ACTIVITIES Net earnings (loss) for the period from continuing operations (4,054) (5,901) 4,921 9,351 Adjustment for non-cash items: Depreciation, depletion and accretion 10,535 9,178 35,582 29,754 Refundable tax credits and mining duties (534) (624) (2,003) (1,938) Inventory obsolescence reserve 93 93 - Loss (gain) on sale of property, plant & equipment 3 5 (8) 41 Stock based compensation 1,708 996 4,003 3,529 Unrealized non-hedge derivative losses 5,794 10,312 10,586 6,039 Future income tax expense (recovery) 991 (2,125) 5,301 (1,270) ------------------------------------------------------------------------- 14,536 11,841 58,475 45,506 Decrease (increase) in non-cash working capital items (2,977) 437 1,790 (784) ------------------------------------------------------------------------- 11,559 12,278 60,265 44,722 ------------------------------------------------------------------------- INVESTING ACTIVITIES Reclamation deposits (158) (95) (158) (95) Property, plant & equipment (2,363) (2,093) (7,500) (6,960) Mineral properties (6,546) (1,223) (20,498) (10,397) Refundable tax credits 1,783 1,447 1,783 1,447 Refundable mining duties - - 2,174 2,463 Restricted cash proceeds (funding) 14,220 7,698 10,528 (12,397) ------------------------------------------------------------------------- 6,936 5,734 (13,671) (25,939) ------------------------------------------------------------------------- FINANCING ACTIVITIES Issuance of shares 173 379 2,653 814 Long-term debt 119 12 (39,747) (4,226) ------------------------------------------------------------------------- 292 391 (37,094) (3,412) ------------------------------------------------------------------------- INCREASE IN CASH AND CASH EQUIVALENTS 18,787 18,403 9,500 15,371 CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD 15,550 6,434 24,837 9,466 ------------------------------------------------------------------------- ------------------------------------------------------------------------- CASH AND CASH EQUIVALENTS - END OF PERIOD 34,337 24,837 34,337 24,837 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Note 1: The comparative results have been re-stated to reflect the adoption of CICA Handbook Section 3064, "Goodwill and intangible Assets". The adoption of this new standard results in a change in the treatment of preproduction and start-up costs and requires that these costs and related revenues be reflected in earnings. The Company was in preproduction at its Casa Berardi mine in the fourth quarter of 2006 and accordingly, 2006 and 2007 results have been retrospectively restated. DATASOURCE: Aurizon Mines Ltd. CONTACT: AURIZON MINES LTD., David Hall, President and C.E.O., Telephone: (604) 687-6600, Toll Free: 1-888-411-GOLD, Fax: (604) 687-3932; Ian S. Walton, Executive Vice President and C.F.O, Telephone: (604) 687-6600, Toll Free: 1-888-411-GOLD, Fax: (604) 687-3932, Web Site: http://www.aurizon.com/; Email: ; or Renmark Financial Communications Inc., 2080 Rene-Levesque Blvd. West, Montreal, QC, H3H 1R6, Barry Mire: , Henri Perron: , Media: Vanessa Napoli: , Tel: (514) 939-3989, Fax: (514) 939-3717

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AZK Aurizon Mines, Ltd. Ordinary Shares (Canada)