Aurelian stands firm in Ecuador

While uncertainty continues to swirl around foreign mining investment in Ecuador, the former darling of the junior gold mining circuit, Aurelian Resources (ARU-T, AUREF-O), is pushing ahead with plans for its Fruta del Norte gold-silver project, despite a government- ordered suspension of all mining activities.

The suspension is in place until a new mining law is completed, and while a draft of the law was finished at the end of June, miners must now wait for it to be reviewed by President Rafael Correa and his advisers.

No update has been provided by the government as to when the final version ofthe draftlawwill be made public but estimates put the completion date around September.

Patrick Anderson, Aurelian’s president and chief executive, says he saw the earlier version of the draft law and it was “reasonable.” The company is “confident that President Correa wants to see a responsible mining industry in Ecuador,” Anderson says.

But the new mining law is only part of the sweeping structural changes coming to Ecuador in the coming months.

A new constitution is set to go before the Supreme Electoral Council by the end of the month. A referen- dum on the constitution will likely be held on Oct. 5, with final results to be published on Oct. 21.

Following that, general elections are slated for February 2009 with the new president taking office in May.

As for the new mining law, top officials have sought to ease investor fears after news of a suspension of mining activities in the country hammered the shares of foreign mining companies operating there in April.

At the end of June, Ecuador’s Mining Minister, Galo Chiriboga, addressed at least one concern for investors — how much power nearby communities would have.

Chiriboga said the new mining law would call for community consultation, but those communities would not be given veto powers to shut down projects.

Unlike in the past, however, the new law will see the state, rather than companies, conduct such consultations.

As for the much publicized limitation on the number of concessions a company can hold — said to be just three back in April — doubts now exist as to whether that will be included in the law.

Reuters reported that an unnamed mining official said the new law would not limit the number of concessions or force companies to form joint ventures with the government, as has also been rumoured.

In the midst of such uncertainties, Aurelian has decided to not sit on its hands.

The company is forging ahead with a conceptual development plan that tackles mine planning, process design and assessment, and capital cost estimation.

Though much of that work is complete, Aurelian says it can only release it once the new mining law is finished and certain inputs for economic calculations are known.

Still, Aurelian says it is pushing the plan beyond the standard conceptual development level to fast-track Fruta del Norte when and if it gets under way.

It says the first phase of the project would target the high-grade portion of the orebody, which begins just 150 metres below surface. The area, along 300 metres of the deposit’s strike length, holds roughly half of the project’s 13.7- million-oz. gold resource.

Aurelian also announced updated results from new metallurgical testing.

The results improve upon earlier tests that were part of the company’s resource estimate from October of last year. Higher gravity recoveries and greater flexibility in plant design are the immediate consequences of the new study.

Weighted average gravity recovery improved by 25% to 34% from the earlier program due to the testing of larger samples. And while initial studies assumed that all feed would require oxidation, Aurelian has discovered that more than 50% of projected mill feed will not need to be pre-oxidized before leaching, allowing greater flexibility in plant design. Both factors mean less capital investment and lower production costs.

At presstime, the company’s shares were trading at $4.23; the stock has fluctuated wildly over the last 52 weeks to as high as $10.23 and as low as $3.05. Aurelian has roughly 137 millions shares outstanding.