Aurelian puts Fruta del Norte resource at 13.7M oz gold

Aurelian Resources (ARU-T, AUREF-O) is sitting on one heck of a lot of gold.

The Canadian company released a National Instrument 43-101-compliant inferred resource estimate for its wholly owned Fruta del Norte (FDN) gold project, in southeastern Ecuador, of 58.9 million tonnes grading 7.23 grams gold per tonne and 11.8 grams silver.

At a cutoff grade of 2.3 grams per tonne gold equivalent, that makes for a remarkable 13.7 million contained ounces gold and 22.4 million contained ounces silver.

“It’s hard to believe that it was only seventeen months ago that we first discovered FDN and we now have 13.7 million ounces of gold,” Patrick Anderson, Aurelian’s president and chief executive, exclaimed on a recent conference call to analysts and investors. “This is a spectacular deposit.”

Metallurgical testing has also confirmed that gold recoveries of 85-95% gold can be reached using a process that combines gravity separation of coarse free gold followed by flotation and carbon-in-leach processing.

The 2.3-grams-per-tonne gold-equivalent cutoff grade used to report the resource was derived from an overall site cost of US$37 per tonne.

Gold-equivalent ounces were calculated on the basis of US$550-per-oz. gold and US$10-per-oz. silver.

The inferred resource was calculated on a database of 85 drill holes, 45,050 metres of drilling and 22,940 gold assays.

The mineralized envelope is 1,300 metres long (north-south), 80 to 200 metres wide (east-west), and up to 400 metres deep.

“There aren’t too many precedents for this resource,” noted George Bee, Aurelian’s chief operating officer. “We have a super resource to work with here — a unique situation where we have a very well-defined package of high-grade rocks.”

Aurelian describes FDN as an intermediate sulphidation epithermal gold-silver system, hosted in andesitic volcanics and buried inside a Jurassic pull-apart basin that essentially preserves the bulk of the epithermal system.

Bee, speaking from the Ecuadorian capital of Quito, said the first phase of the project will take between three and five years and includes the building of a 3.5-km decline from surface, which should take about 18 months to complete. He expects to get the permit to begin construction of the decline next year.

Development will be funded by cash flow from the project. Bee sees significant early production — and significant cash flow — from the deposit’s high-grade ore zones.

“I think the idea is to start off getting into the higher-grade zones and support an underground mining operation with a 3,000- to 5,000-tonne-per-day range and focus on the higher grades,” he said. “As the highest grades wane a bit, we could be into the lower-grade material looking to increase our throughput to maintain a fairly consistent ounce-throughput in the long term.”

Nevertheless, Bee pointed out, it’s still “early days” and Aurelian has “a lot of planning to do.”

He added: “The bulk sample is going to be contingent on us getting underground and doing a lot of definition drilling.”

Of course, the project doesn’t come without its risks. Ecuador has seen much political turmoil in recent years, with eight presidents in the last decade.

The country’s current president, Rafael Correa, is among a group of emerging left-leaning leaders to have won democratic elections in Latin America over the past few years.

Correa, a trained economist educated in the U.S., blames poverty and social inequality in Ecuador on failed economic policies imposed by the U.S. and international institutions like the World Bank. He also accuses the country’s political elite of pillaging the country’s natural resources.

At the start of his successful 2006 presidential campaign, Correa founded the PAIS Alliance, a new party that espouses political sovereignty, regional integration and economic relief for Ecuador’s poor.

Correa’s PAIS Alliance won a landslide victory in Constituent Assembly elections held on Sept. 30.

“His majority will present stability to the country . . . including changes to the mining laws which the government tells us to expect by next summer,” Anderson reassured participants on the conference call.

“Later this year, the government will be able to provide us with much more clarity on the proposed mining laws. The mining minister has said that the government supports large-scale mining. The government also says royalties will be in line with international standards.”

Anderson added that Aurelian has had many “constructive meetings” with government members and these will continue as the Toronto-based company continues to explain the benefits of its gold project to them.

“We flat-out asked the government whether they planned to do any nationalization of mining programs — specifically ours — and they said no,” Anderson explained. “They said they need responsible foreign investment.”

Added Anderson: “I think there were some sensational statements made about shutting down foreign mining operations. Take what you read in the press with a grain of salt.”

On the Toronto Stock Exchange, news of the positive resource estimate sent Aurelian’s shares up sharply by $1.02 to close at $8.02 apiece, on a trading volume of 6.1 million.