Aurelian Resources Inc. October 4, 2007 12:40 PM(ARU-T: C$7.00) P. Mark Smith / (416) 365-5456
pmsmith@dundeesecurities.com
Robert Thaemlitz / (647) 428-8392
rthaemlitz@dundeesecurities.com
MArket Outperform, High Risk*
12-month target price: C$14.00
Initial FDN Resource Exceeds Expectations

Aurelian Releases Initial Inferred Resource of 13.7MM oz Au for FDN
Aurelian Resources submitted the first National Instrument 43-101-compliant inferred mineral resource estimate for the Fruta Del Norte (FDN) deposit on its Condor property today. The resource estimate was prepared by Micon International Limited and P&E Mining Consultants Inc. It was estimated using the Canadian Institute of Mining, Metallurgy and Petroleum (CIM) standards on mineral resources and reserves, definitions, and guidelines.
Table 1: Micon Inferred Resource estimate. Based on a low-end cut-off of 2.3g/t gold. *Cut-off grade calculated using US$37/tonne overall site costs ($24/t mining, $11.5 processing, $1.5/t G&A)
Micon's estimate (Table 1) was calculated using 22,942 assays taken from 85 drill holes (45,041 m of drilling), defining a deposit with a moderately westward dip, a strike length of 1,300 m (north-south), 80 to 200 m width (east-west). Micon determined an inferred resource of 13.7 million ounces gold and 22.4 million ounces silver was determined using a low-end cut-off grade of 2.3 g/t. The deposit was broken up into four sub-zones for which top-end cuts ranged from 42 g/t to 234 g/t.
Resource Exceeded our Expectations by a third
When we determined our internal mineral inventory estimate of 32.6MM tonne grading 9.8 g/t gold (10.3MM ounces) this April we were basing the assessment on 41 drill holes over a strike length of 1,100m (Table 2). We assumed a low-end cut-off grade of 3.0 g/t and top-end cuts of 125 g/t for much of the deposit and 548 g/t for a high-grade subset. Using a 1 g/t low-end cut and 3 g/t low-end cut, but no top-end cut we determined 59.9MM ounces grading 7.1 g/t gold (13.6MM ounces) and 32.6MM tonnes grading 11.6 g/t (12.1MM ounces).
Micon resource of 13.7MM ounces exceeds our April 2007 10.3MM ounce estimate by 33%. The inferred resource is based on more than double the number of drill holes in the earlier Dundee estimate, and covers a strike length 200m longer than that encompassed by the Dundee estimate. Those 200m contained lower-grade mineralization. Furthermore, Micon's selection of a 2.3 g/t lower grade cut-off vs. Dundee's 3.0 g/t would also bring in additional lower-grade mineralization. We would still expect that any mine plan determined by the company would optimize the grade mined in the early years, such that the grade mined for the first few years would average closer to 12 g/t.
We also note that assuming 90% metallurgical recovery and a $550/oz gold price, a tonne of 2.3 g/t rock has a value of $37, the breakeven operating cost assumption, without considering some $10/tonne in sustaining and initial capital. We believe that low-end cut-off grade could be a little low for mine planning, and that our earlier assumption of 3 g/t may be more reasonable.
Table 2: Dundee's April 2007 mineral inventory estimates. * Using ARU's 61.9g Ag to 1g Au ratio. ¹ 548 g/t top-cut used on 3400N blocks

Micon's estimate (Table 1) was calculated using 22,942 assays taken from 85 drill holes (45,041 m of drilling), defining a deposit with a moderately westward dip, a strike length of 1,300 m (north-south), 80 to 200 m width (east-west). Micon determined an inferred resource of 13.7 million ounces gold and 22.4 million ounces silver was determined using a low-end cut-off grade of 2.3 g/t. The deposit was broken up into four sub-zones for which top-end cuts ranged from 42 g/t to 234 g/t.
Resource Exceeded our Expectations by a third
When we determined our internal mineral inventory estimate of 32.6MM tonne grading 9.8 g/t gold (10.3MM ounces) this April we were basing the assessment on 41 drill holes over a strike length of 1,100m (Table 2). We assumed a low-end cut-off grade of 3.0 g/t and top-end cuts of 125 g/t for much of the deposit and 548 g/t for a high-grade subset. Using a 1 g/t low-end cut and 3 g/t low-end cut, but no top-end cut we determined 59.9MM ounces grading 7.1 g/t gold (13.6MM ounces) and 32.6MM tonnes grading 11.6 g/t (12.1MM ounces).
Micon resource of 13.7MM ounces exceeds our April 2007 10.3MM ounce estimate by 33%. The inferred resource is based on more than double the number of drill holes in the earlier Dundee estimate, and covers a strike length 200m longer than that encompassed by the Dundee estimate. Those 200m contained lower-grade mineralization. Furthermore, Micon's selection of a 2.3 g/t lower grade cut-off vs. Dundee's 3.0 g/t would also bring in additional lower-grade mineralization. We would still expect that any mine plan determined by the company would optimize the grade mined in the early years, such that the grade mined for the first few years would average closer to 12 g/t.
We also note that assuming 90% metallurgical recovery and a $550/oz gold price, a tonne of 2.3 g/t rock has a value of $37, the breakeven operating cost assumption, without considering some $10/tonne in sustaining and initial capital. We believe that low-end cut-off grade could be a little low for mine planning, and that our earlier assumption of 3 g/t may be more reasonable.
Table 2: Dundee's April 2007 mineral inventory estimates. * Using ARU's 61.9g Ag to 1g Au ratio. ¹ 548 g/t top-cut used on 3400N blocks

Initial Metallurgical work yields solid results
Metallurgical work indicated that gold recoveries will be in the order of 85-95%. This would be achieved using a combination of gravity separation of coarse free gold, flotation, and gold recovery by Carbon in Leach on the tails and an oxidized flotation product to liberate the gold from the pyrite. These conventional mineral processing techniques are expected to be effective. We would anticipate average recoveries to ultimately be in the upper end of that range.
Results to be discussed with Ecuador
Today's results along with early-stage development plans will be discussed with the Ecuadorian government in the coming months. Aurelian intends to bring FDN into production using the highest social and environmental standards. The company wants to set the standard for large-scale mining in Ecuador.
Ongoing work and Events 2007/08
Infill drilling and expansion drilling on FDN.
Follow up on more than 30 other gold targets on the Condor property aided by a new airborne geophysical survey.
Mine planning will continue to be refined. Preliminary and conceptual mine planning has been underway since August. Metallurgy and flow sheet development will also continue to advance.
Baseline studies will continue. This will include environmental, geotechnical drilling, hydrology. Golder Asscociates Ltd. is continuing to study various tailings disposal option.
Permitting will begin to move forward. The company is already preparing a permit application for an access decline to allow for definition drilling and bulk sampling.
Decline construction.
Government likely to announce generalities of new mining act and royalties later in 2007, with new act and tax/royalty structure in place by mid-2008.
IMPACT
While the headline resource number appears strong at 13.7MM Au ounces and is 33% higher than our previous number of 10.3MM ounces, the grade of 7.2 g/t is 26% lower than our previous calculation of 9.8 g/t. Furthermore, Micon's cost assumption of $37/tonne is 23% higher than our initial estimate of $30/tonne, although we do not know the milling rate assumed in that determination. We had previously assumed a milling rate of 10,000 tpd giving a less than 10-year mine life. Based on the same assumption, but taking 90% mining recovery and 5% dilution to the Micon resource, the mine life would extend to 15 years. As we noted earlier, we expect the resource grade for mine planning will likely increase.
After a preliminary assessment of the impact of this release on our ARU model, we are maintaining our current 12-month target price of C$14.00, and our current rating of Market Outperform.
Unfortunately, while the size of the deposit has been largely confirmed, the Ecuadorian political scene remains uncertain. We would expect the stock to continue to trade at a discount to our target until that issue sees progress. We would not expect a senior gold producer to spend $2B to acquire Aurelian, or FDN before politically-related tenure and development uncertainty largely evaporates. We anticipate that with a majority in the new assembly, over the next few months Correa will push ahead with reforms to the royalty structure introducing a royalty in the range of 5%, while letting industry know Ecuador is open for business. The new minister of mines has recently stated that he is a proponent of socially and environmentally sound large-scale mining. Once this process is advanced, we believe majors will line up for an opportunity to own a new flagship operation.

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