A Golden Year for B.C.’s Aurizon Mines

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Aurizon Mines’s CEO, David Hall, attributesthe company’s 645 percent jump in earnings to”hieroglyphics” legible only to accountants.

David Hall, president and CEO of Aurizon Mines, saw a nearly sevenfold jump in company earnings in 2009. Was it luck or skill?

Aurizon Mines Ltd.’s place near the top of the income growth list is more a fluke of accounting than a measure of performance, says David Hall, but the company nevertheless offers a textbook example of how to capitalize on good times in the gold patch.


The company’s president and CEO attributes Aurizon’s 645 per cent jump in earnings to “hieroglyphics” legible only to accountants, including such provisions as non-refundable tax credits and non-cash derivative losses. However, the inescapable fact is that the price of gold, Aurizon’s sole product, spiked in 2009, and the company cashed in, using its bucketloads of cash to retire $75 million in debt a year early and to finish the year debt-free with $100 million in the bank.


The company’s success at squeezing every last penny out of the precious metal is due at least in part to Hall’s background as an accountant. After graduating with his CA qualifications in his native Scotland, he spent a couple of years working in offshore investments and reinsurance in Bermuda before landing in Vancouver in 1975. His work here with PricewaterhouseCoopers introduced him to several of the local mining companies, and he left the accounting firm in 1981 to work with a couple of juniors that would merge to become Aurizon in 1988.


Since that time, Hall has deftly steered Aurizon through good times and bad. There were plenty of the latter, including the collapse of equity markets following the Bre-X scandal of 1997, which happened to be right around the time when Aurizon negotiated a deal to buy the Casa Berardi mine in Quebec.


After riding out an 11-month drought in equity financing, Aurizon finally raised $7.5 million in 1998 to close the acquisition. Then just as the company was preparing to bring the mine to production, the bottom dropped out of the gold market, with prices hitting a low of $256 an ounce in 1999 and remaining south of $350 until 2003. “Again, everything came to a grinding halt,” Hall recalls. “We had to retreat into a sort of survival cocoon and batten down the hatches and frankly just try and survive for a couple of years.”


Then at last the stars aligned: a 2005 feasibility study confirming the economic viability of Casa Berardi was completed in 2005 with the price of gold on a meteoric trajectory. Seeking $100 million to bring the mine to production, this time Hall had his choice of financing options. He opted to raise the bulk of the money, $75 million, through debt.


As the mine began churning out gold – approximately 159,000 ounces a year starting in 2007 – the price of the commodity continued to soar, and profit margins continued to widen. Aurizon’s production costs in 2009 averaged US$401 an ounce, and the company realized an average of US$915 on each of the nearly 160,000 ounces it sold.


“Yeah, the timing worked for us,” Hall acknowledges in his typically understated manner, with just a hint of a Scottish burr remaining in his voice. 


Hall plans to strike while the iron is hot, forging ahead with a feasibility study this year that he hopes will confirm that a second property in Quebec could be producing another 100,000 ounces of gold a year by late 2012. Assuming, of course, that the fickle forces of the market co-operate.