Investment summary

Aurizon’s third quarter results were characterised by record revenues and cash flows from operations supporting record exploration expenditure. Operationally, Aurizon’s Q311 results were very close to our expectations. Of particular note was the decline in unit working costs to C$117/t from C$119/t (vs our expectation of C$118.06/t). In combination with the rise in grade, this resulted in an 8.6% quarter-on-quarter fall in unit costs of production to US$497/oz (vs our expectation of US$505/oz). Revenue was 7.5% lower than our expectations, explained in terms of 9.4% (or 4,200oz) less gold being sold than produced.

Last updated on 09/12/2011

Industry outlook

When ARZ’s forecast cash position of C$191.0m (ie C$1.17 per share) as at 31 December 2011 and C$253.1m as at 31 December 2012 is taken into account, ARZ’s EV/EBITDA multiple of 6.39x is at a 38.2% discount to the equivalent multiple for the Gold BUGS index (HUI) of 9.69x in FY11, narrowing slightly to a 35.1% discount in FY12, when ARZ’s EV/EBITDA is 4.26x vs 6.46x for the HUI.

Last updated on 09/12/2011