August 12, 2010 / 12:07 PM / in 8 years

UPDATE 2-Aurizon operating earnings rise, shares up

* Q2 adj EPS C$0.03 vs C$0.02 a yr-earlier

* Q2 revenue up 12 pct to C$50.5 mln

* Shares up 5.6 pct at C$5.84 on Toronto Stock Exchange (Adds details on results, CEO comments)

TORONTO, Aug 12 (Reuters) - Junior gold miner Aurizon Mines (ARZ.TO) said on Thursday its operating earnings rose as higher gold prices overshadowed lower production and sales from its Casa Berardi mine in Quebec.

Excluding one-time items, earnings in the second quarter rose to C$4.4 million ($4.2 million), or 3 Canadian cents a share, from a year-earlier profit of C$3.9 million, or 2 Canadian cents a share.

Shares of the company were up 5.6 percent at C$5.84 on Thursday afternoon on the Toronto Stock Exchange.

Net income fell to C$5.3 million, or 3 Canadian cents a share, from C$13.6 million, or 8 Canadian cents a share, a year earlier, when results were substantially boosted by unrealized derivative-related gains.

Gold production slipped 3.4 percent to 38,527 ounces, while gold sales volumes in the quarter fell 5 percent to 39,964 ounces.

Quarterly revenue rose 12 percent to C$50.5 million.

About 60 percent of the gold sales in the quarter were into a hedged position at a price of US$907 an ounce, well below the prevalent gold price in the period, which limited revenue gains.

“By the end of the third-quarter those calls will be exhausted and so every ounce that we produce after Oct. 1 this year will benefit from what we believe will be a strong gold price going forward,” Chief Executive David Hall told Reuters.

The debt-free company, with a cash balance of C$124 million as of June 30, intends to use its cash to continue upgrading the mineral resources at both its Casa Berardi and Joanna properties in Quebec.

The company reiterated its 2010 production forecast of 145,000 ounces to 155,000 ounces. In 2011 Aurizon expects to produce between 160,000 ounces and 170,000 ounces, as it begins to mine higher-grade areas of the Casa Berardi mine.

The increased output will help drive unit costs down to about US$425 an ounce from roughly US$500.

The company hopes to complete its feasibility study at Joanna by the end of 2010, with the permitting process and initial construction set to begin in 2011.

Hall said Aurizon hopes to complete its mine construction at the site in 2012 with production beginning in 2013.

“We are in a good position to fund that internally. We also have operating lines (of credit) that we could get, if we require, but I don’t think we’d have to tap the equity markets in order to finance the construction of Joanna,” said Hall, who expects the mine to cost in the region of C$200 million. ($1=$1.05 Canadian) (Reporting by Euan Rocha; Editing by Peter Galloway)

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