Andy Schopick - Nutmeg Securities

Good morning. My name is Sarah, and I will be your conference operator today. At this time I’d like to welcome everyone to the Aurizon Mines Limited, first quarter results conference call. All lines have been placed on mute to prevent any background noise. After the speakers remarks there will be a question-and-answer session. (Operator Instructions) Mr. David Hall, you may begin.

Thank you Sara, and good morning everyone. Welcome to Aurizon’s first quarter 2010 conference call. With me in Vancouver today I have Ian Walton, our Chief Financial Officer; Martin Bergeron, our VP operations; Rodger Walsh, our VP of Corporate Development; Chris McClain our Controller; and Julie Camper, Corporate Secretary. Before we get into the presentation, I’ll ask Julie to read the forward-looking statement disclosure.

Some of the information that will be discussed on this call maybe forward looking in nature, including information regarding the company’s strategic plans, anticipated production and other estimates and forecasts related to the company’s future operations. All such information expressed as of the date of this presentation, the company’s plans, expectations and belief is based on assumptions that the company believes that are reasonable. However by its very nature, forward-looking information is subject to risks and uncertainties, and on that basis there can be no assurance that such information will prove to be accurate, or that expectations will be achieved, except as required under applicable securities legislation, and the company does not intend and does not assume any obligation to update these forward-looking statements. For a description of the assumptions of which forward-looking information discussed on this call is based and on the applicable risks and uncertainties related to that information. We direct you to our most recent annual information form and our management’s discussion and analysis for the period under discussion, both of which are available on SEDAR and on the company’s website.

Thank you, Julie. Now there is a slide presentation that is on our website that I will be going through briefly, and the full MD&A is also on our website at the present time. In terms of the quarter, moving to the slide presentation, we have gold production of a little over 35,000 ounces, cash flow from operations at $9.2 million, earnings of $2.2 million. We ended the quarter and a strong financial position with cash of $114 million, and working capital of $112 million. At Casa Berardi, during the quarter we were successful in extending the mineralization on the 123 South Zone, and at Joanna our drilling was successful in extending the Hosco Zone, both laterally and to-depth in the area of the Hosco pit. Moving on to the details of the gold production itself, as we have indicated at the end of last year and the start of this year, this year Casa Berardi is a transition year where we are going through a lower grade sequence of the mine. We anticipate that the grade on average this year will be roughly one gram per ton less than it was previously. By the end of this year we will be through this lower grade sequence. We will be back into grades more typical of our underground reserve grades, but as we have indicated, for the first part of this year we are in a lower grade sequence. So the grades for the first quarter was 6.79 grams per ton; that’s very close to our plan of 6.86 grams per ton. In terms of our gold production, 35,000 ounces was actually a little ahead of our plan of 34,000 ounces. So basically the mine is performing as anticipate; it’s right on plan, right on target. Moving to the next…

(Operator Instructions) Your first question comes from Bryan Christen – Desjardins Securities.

Just a quick one David on M&A; I just get a sense, kind of reading between the lines in your release, that you maybe more focused here on development projects as supposed to actually looking to merge with another producer. You want to comment on that?

Yes, a couple of comments. I mean I think it’s still sort of a two-thronged approach, where we have been having discussions with various people in terms of existing producers, advanced stage developers, and we still will continue to do that. What had worked against us last year, especially in the case of the advanced stage developers is probably some of the evaluations that were out there, but we haven’t given up on that, we are still working on that. But we also feel that there are some opportunities particularly in Quebec that are open to us, where we can utilize our exploration skill set and ultimately our mine development skill set, plus our financial resources to go in and add value with the drill bits as I said like we have done in the past with Casa Berardi and at Joanna. We are certainly, I wouldn’t discount the first element, but I think at this point we are actively pursuing a second element, because we think there is opportunities to add value by getting in at an early stage and creating value, adding ounces as we go forward.

Would you look potentially at doing a private placement into some of these companies David or…?

Well it’s all driven by the fundamentals of the underlying assets and property in various ways that you can get involved. Obvious they are directly in the property or perhaps participating in the shares of the owners of that property. So we are looking at various situations that may involve that.

Your next question comes from Cosmos Chiu - CIBC.

A few questions here; can you remind us of your cash flow and EPS sensitivities to Canadian dollar?

I will let Ian answer that.

I don’t know if I got it, I think it’s [Inaudible] 10% is like $10 million or something.

It’s okay, you can get back to me afterwards.

Yes, I’m sorry 10% is the variant. It roughly $10 million on gold price and on the FX it’s actually $15 million, so that’s what it is.

Okay. In terms of the 42,500 ounces remaining on the core options, you expect to deliver into that evenly in the next two quarters?

Yes, is it going to be like half in Q2 and half in Q3?

Yes, I mean. It’s the same amount each month, yes basically yes.

Okay, and also if I take a calculation, your Q1 production was above 24% of your full year guidance on the lower end of 145,000 ounces. What is the plan to increase production in the coming quarters? Is it higher through put, higher grades or both?

It is both. This is Martin speaking. Yes, we had planned at the beginning of the year that the first half of 2010 would be more difficult with a ramp up in production from 1800 tons per day in January, going up to 2000 sometime during the second quarter. In addition to that grade, for the first six months it’s going to be lower than what we expect for the remainder of a year. So we are still confidence based on the results that we’ve achieved for the first quarter that we are going to be in the middle of our bracket for production of gold for the year.

Your next question comes from Charles Gibson - Edison.

I think my question must have been largely answered by your answers to both Brian and cosmos there. Could I just ask however; I wonder if I could ask you just to clarify on the hedging on the derivatives contracts. You have some derivatives contracts relating to Canadian dollar, U.S. dollar, now do those also relate of the same time to the gold contracts, or are they set. I mean are they internally related with gold contracts is what I’m asking, or when you delivering to them or do they expire at a different time?

It’s the latter, we’ve got contracts already dependent on the gold contracts.

Right, so do they expire at a very different time. I mean you were talking about the gold contracts being fairly evenly spaced over the next two quarters. How does the Canadian and US contracts?

Well, at the end of Q1 we just have one sort of long contract that comes due at the very end of September, and that’s the $8.1 million US rather roundly point to $1.11 million FX. Last week with the volatility of the current markets, it did put on some additional hedges at that point. So it probably got about roughly 18% of the remaining nine months production, both sales hedged, so roughly 106, 107.

Your next question comes from Randall Hsu - Fundamental Research.

Just another quick question related to earlier contracts. I believe the non-hedging option are expanding this year. I’m just wondering, going forward does the company plan to implement a similar strategy?

No, I think on the gold hedges if you want to call them, that was truly related to the pressure depth facility that we put in place, in order to finance the construction at Casa Berardi, and obviously the lender wanted some protection on the downside. So we did a zero cost collar with puts of 500 calls at the prices we’re talking about, and once we deliver the final trench of those calls over the next six months, that will be it and we won’t be hedging our gold production.

(Operator Instructions) Your next question comes from Andy Schopick - Nutmeg Securities.

I also just wanted to ask a follow-up on the hedging and derivatives. Can you give us any sense of what this quarter or even last year’s performance would have looked like, had you not had some option strategies in place and were selling your production at market prices?

I suppose you can probably derive that from and issue the derivative gain-loss numbers through the period. If you look in the first quarter Andy, 68% of the gold sales were delivered against the gold cost at a price of 903 okay. So you could take whatever price you want, the prevailing market price and workout the difference based on that. Likewise if you look last year, we’ve got tables showing our average realized price, which we would see the impact of deliveries or call options.

So could I ask that you just repeat your response to the prior question about the strategy going forward?

Absolutely. Our strategy as a company is not the hedge or gold production okay, because we believe that our shareholders and certainly we as managers, want to benefit in upside in gold. However turning the clock back five years, when we were building Casa Berardi we were looking at a CapEx of $100 million Canadian approximately. At that time our market cap was roughly $150 million Canadian. So clearly if we try to do that, raise that capital through our equity markets, it would have been a severe dilution for the shareholders. Consequently what we determined to do was to finance up to $100 million, 25 equity which we did at the $1.35, and $75 million project debt facility. Having said that, obviously the lenders -- and we are going back to when gold was trading at around $500 to $550 an ounce. At that point, obviously the lenders were worried about since gold had just come from $300 an ounce protection on the downside, in case gold went back $300 an ounce. Consequently they asked for some protection on a certain percentage of the production at $500 an ounce. To go and buy the puts that they required at $500 an ounce, would have caused us to raise another $10 million Canadian at $1.35 when equity markets were fairly tough as it was. So we decided not to do that; we decided to finance the cost of those puts by writing an equivalent amount of calls on a one-to-one basis, of a spot price of about $550 US. We got calls that ranged from probably 800, up over to 950 an ounce or something like that, and for the first 18 months of the term of the loan, those calls were above the market price. Its only in the last 18 months that those calls have come into play at being below the prevailing spot pricing and we’ve had to deliver into them. As Ian has said, we are now in the last six months of that call situation, and by the end of September we will have deliver the last balance into that call position, and we won’t be hedging our gold production from that point forward. If we were to do a project debt facility in the future, we now have a revenue stream, we now have the financial capacity to buy puts going forward to protect our lender. So you won’t see anymore hedging, after we deliver into the last ounce in September.

In September?

Right.

There are no further questions at this time.

Okay. Thank you operator, and thank you everyone. We do appreciate your time and attention, and have a great day. We look forward to speaking to you shortly on the second quarter conference call. Thank you very much, and have a good day.

This concludes today’s conference call. You may now disconnect.