Company Profile
Aurizon Mines is a new junior gold producer with the underground Casa Berardi mine in NW Quebec. At year-end 2006, 1.2 million oz were in the mine plan with extensions to the mine life anticipated. Exploration is also underway in and around the mine with junior partner Lakeshore Gold (LSG-T), plus at Aurizon’s two million ounce Joanna project, also in Quebec.
Click here to watch a BNN interview with David Hall, CEO of Aurizon on March 6, 2008
Event
In a note entitled “Reserve and Resource Update; Planned 2008 Exploration Programs to Target Expansions” Gignac explains the reasons behind her Buy rating and target price of $6.00.
Takeaways From The Event
In outlining her investment thesis for Aurizon Mines, Gignac writes that Aurizon is a “New Quebec gold producer with active exploration programs. Developing underground targets at the new 165,000 oz/year Casa Beradi mine plus potential feed from the junior explorer’s activities on the surrounding property should ensure a long mine life. An active surface drilling program is also in progress at the Joanna deposit, in the Rouyn-Noranda mining camp, where two million ounces have been outlined to-date.”
Responding to an April 1st/08 news release where Aurizon announced mineral reserves and resources estimates as at December 31, 2007 for its Casa Berardi and Joanna projects, Gignac writes “Proven and Probable reserves at the Casa Berardi mine were estimated at 3.1 million tonnes averaging 9.2 g/t for 918,000 oz. gold, a gain of 21% in grade and 251,000 oz. depletion over 2006. For all of Aurizon’s properties, Measured and indicated resources decreased to 1.3 million oz. (15 million tonnes grading 2.7 g/t gold), and Inferred resources increased to 2.6 million oz. (34 million tons grading 2.3 g/t gold), including the addition of Zone 123-S. The reported reserves and resources update only the Casa Beradi portion of our model, as the Joanna project resources were reported in September 2007. The resource update for the Lower Inter Zone at Casa Beradi in August excluded the reserve increase just announced, raising the average grade 56% to 9.5 g/t from 6.1 g/t gold. The increase in reserves due to resource conversion (99,000 oz. gold), was offset by mining production (191,000 oz. gold), changes in the projected recoveries (58,000 oz. gold) and mining costs due to an adjustment to the cut-off grade (100,000 oz. gold). The net asset value estimate decreases by 4% or $0.22 per share to $5.24 per share (from $5.46 per share).”
Valuation and Price Target
Gignac recommends Aurizon as a buy because “Based on a 3% discount rate, the
Casa Beradi mine model was adjusted to a steadier annual production rate, returning a net present value of $362 million or $2.47 per share. Resources beyond our ten-year model are valued at $125/oz or $1.12 per share. A similar multiple is applied to the 2.0 million ounces in gold mineralization identified at the Joanna project, valued at $1.74/share. Adjusting for net working capital, the net asset value is $5.24 per share – approximately 68% of the value from Casa Beradi and 33% from Joanna. Applying market multiples of 1.1x-1.25x, similar to peers, results in a target trading range of $5.75-$6.55 per share.”
Investment Risks
Without limitations, some of the risks include reserves and resource risk, development risks, permitting risks, off-take agreements, commodity price risks, geo-political risks, exchange rates, weather related impacts etc.
If you like this post, please take a moment to suscribe to my feed or Stumble/Digg it using the appropriate links at the bottom of this post! You can also post a link to it on relevant forums/bullboards. Also, feel free to debate, discuss or comment on the any of the stocks you see on this page in the comments section.
|