Aurizon Mines (ARZ.TO) reported FY12 results with few surprises, given financial results for three quarters and production for Q4 and FY12 were already known. Diluted reported EPS of 19.4cps compared to Edison’s expectation of 19.9cps (20.4cps vs 20.5cps on a normalised basis). Main variations were lower gold sold cf produced, costing an estimated C$4.1m in revenue, counteracted by lower unit costs of C$124/t in Q4 (vs C$133.6/t expected). Exploration and general & administrative costs were lower in FY12 cf FY11 and capex was also below our (admittedly conservative) estimate. ARZ is currently subject to two takeover offers.
Alamos offer: value C$4.28/ARZ share in cash & shares
Under the terms of the first offer (unanimously rejected by the ARZ board), from Alamos Gold, each ARZ shareholder can elect to receive consideration of either C$4.65 in cash or 0.2801 of an Alamos share (0.2801 x C$14.25 = C$3.99) per ARZ share, subject to pro-ration (blended value C$4.28 per ARZ share). As of noon on 5 March, c 22.9 million shares of ARZ had been validly tendered to, and not withdrawn from, the Alamos offer, representing c 13% of ARZ’s issued and outstanding share capital. Alamos then owns an additional 16% interest in ARZ directly. Any ARZ shares tendered to the Alamos offer to date remain subject to withdrawal rights.
Hecla offer: value C$4.55/ARZ share in cash & shares
Under the terms of the second offer, from Hecla Mining, ARZ shareholders may elect to receive C$4.75 per share in cash or 0.9953 of a Hecla share (0.9953 x US$4.17 x C$1.0218/US$ = C$4.24 currently) or a combination of both, subject in each case to pro-ration (blended value C$4.55 per ARZ share). The transaction will be implemented by way of a plan of arrangement and will require the approval of 66⅔% of the votes cast by the affected securityholders at a special meeting which is expected to take place in May. The ARZ board of directors unanimously recommends the Hecla plan of arrangement and rejects the Alamos offer on the grounds that the latter is 'financially inadequate' and 'opportunistic' at a time of transition at Casa Berardi.
Outlook and guidance
FY13 production guidance is 125-130koz Au at a total cash cost of US$810/oz. Once the transition from west to east is complete at Casa Berardi in c 18mths, ARZ should benefit from a combination of recovering grades, reduced losses from high-grade stopes and increased mining flexibility at the same time as ore from the East Mine Crown Pillar open pit becomes available to bring the mill up to capacity. Reserves at Casa Beradi increased for the fourth year in a row in 2012 and tonnages are now sufficient to support mining for 11 years at current rates (and resources for another 22 years thereafter). Recent drilling at Heva West identified a new trend and extended the limits of the Hosco deposit ahead of an updated mineral resource estimate in H113.
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