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Canaccord Adams is the global capital markets group of Canaccord Capital Inc. (CCI : TSX|AIM)

The recommendations and opinions expressed in this Investment Research accurately reflect the Investment Analyst’s personal,

independent and objective views about any and all the Designated Investments and Relevant Issuers discussed herein. For important

information, please see the Important Disclosures section in the appendix of this document or visit

http://www.canaccordadams.com/resear... .

Aurelian Resources Inc.

ARU : TSX : C$8.05 SPECULATIVE BUY

Target: C$13.00 ­

Wendell Zerb 1.604.643.7485

wendell.zerb@canaccordadams.com

Metals and Mining -- Exploration and Development

13.7 MILLION OUNCES AT FDN

Event

The company has released an initial mineral resource estimate on its 100%-owned Fruta

del Norte (FDN) Au epithermal gold project in southeast Ecuador. According to

independent consultants, Micon International, FDN is host to an Inferred Resource of 58.9

million tonnes grading 7.23 g/t Au, 11.8 g/t Ag which equates to about 13.7 million ounces

of Au, and 22.4 million ounces of Ag, making it one of the world’s largest epithermal gold

deposits .Initial metallurgical work conducted at FDN suggests recoveries of 85-95% using

a combination gravity, and carbon in-leach processing of a pre-oxidized flotation

concentrate.

Impact – Positive

FDN is clearly a world-class asset with the potential to be a high-margin gold operation.

The core of the FDN deposit centered at 3400N opens the potential for a phase 1 starter

zone that could produce what we believe is in excess of 700,000 oz of Au per year starting

in three to five years. Metallurgically, initial tests show high recoveries. The requirement to

pre-oxidize a flotation concentrate by using bio-oxidation or an Autoclave is a

complication, but surmountable with current technology. The political risks in Ecuador

remain high. New mining laws are scheduled to be drafted within the next eight months.

Valuation

At this time, we continue to apply an in-situ approach to our valuation of Aurelian. Based

on the new 13.7 million ounce Inferred Resource and applying a new in-situ value of

US$115/oz (was US$100/oz) derives a valuation of $1,730 million (using a 1.1x growth

multiple) or C$13.00/share (rounded), up from $1,466 million or C$11.00/share (using 1.2

growth multiple). We continue to rate the shares a SPECULATIVE BUY.

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FDN PROJECT

Mineral resource and project overview

Aurelian Resources Inc. is a Toronto-based junior under the stewardship of Patrick

Anderson and is focused on developing the Condor Project in southeastern Ecuador which

100% is held, subject to a 1-2% NSR. The massive property holdings cover a region over 70

kilometres in length. In Q2/06, the company announced the discovery of Fruta del Norte

(FDN), a new high-grade, buried epithermal gold zone.

Today, the company released the initial NI43-101 mineral resource for FDN. According to

independent consultants, Micon International, FDN is host to an Inferred Resource of 58.9

million tonnes grading 7.23 g/t Au, 11.8 g/t Ag which equates to about 13.7 million ounces

of Au, and 22.4 million ounces of Ag. The estimate was based on 45,051 metres of drilling

(85 holes) over 1,300-metre strike length. Drilling concentrated on roughly east- west

fences on 100-metre spacings. Plans moving forward include additional infill to 50 metres,

and in specific locations down to 25 metres. Over the 1,300-metre strike (2600N to 3900N)

of the mineralization, the deposit is roughly tabular in nature, structurally bounded on its

east and west, and its upper vertical contact is limited to the stratigraphic top to the host

Misahualli Andesites. North of Section 3900N, the deposit appears to be structurally offset.

To the south, the deposit remains open but is clearly less developed at section 2600N.

Initial metallurgical work conducted at FDN suggests recoveries of 85-95% using a

combination gravity, and carbon in leach processing of a pre-oxidized flotation

concentrate. The requirement to pre-oxidize a flotation concentrate by using bio-oxidation

or an Autoclave is a complication, but surmountable with current technology. Higher

capital requirements and the importance of substantial power comes with these

metallurgical characteristics.

The company has divided the deposit into four separate blocks based on a combination of

location, grade, and metallurgical character. Initial mine planning using the current

information is leading towards a two-phase development plan. Phase 1 would incorporate

a production plan targeting the high-grade core of the deposit at 3,000-5,000 t/d starting

three to five years out. Grades of this phase 1 zone could average about 9.3 g/t Au but

initial years would exploit a significantly high-grade zone near section 3400N. Initial mine

planning for phase 1 assumes using long hole stope mining; further studies will review

lower-cost bulk mining of this zone. Assuming a 5,000 t/d throughput using 20 g/t Au

would produce about 750k oz Au per year. Phase 2 would involve exploitation of bulk

mineable but modestly lower-grade zones. We assume throughput would increase to at

least 10,000 t/d in total with phase 2 coming on-line; however, grades will also trail off and

overall production is not likely to significantly increase despite the higher mining rate.

Initial environmental studies and permitting application have been initiated. The first focus

is to drive an underground decline parallel to the mineralized body. Detailed underground

work would include, but not be limited to extracting bulk samples, diamond drilling

(exploration and delineation), and geotechnical studies.

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4 October 2007

Ecuador political situation

Earlier this week delegates associated with Ecuadorian President Rafael Correa won 79 of

130 seats (60%) for the national assembly, whose mandate will be to assist in drafting a

new constitution. This result should give Mr. Correa solid political control.

We believe the basis of Correa’s initiative is to dissolve the current congressional power

which he claims is the cause for instability and corruption in the country. Others suggest

Correa is aiming to amass more power along similar lines to Chavez in Venezuela.

It could take up to eight months to rewrite the constitution which would then need to be

ratified in a national referendum. In the short term, the completion of the election could

free up politicians’ time, and business decisions could move forward. Most important for

Aurelian, is the government plans to rewrite the mining law, schedule for completion in

H2/08. Past comments coming from several sources have been mixed; however, recent

comments from government representatives stated the goal is a balanced mining policy

that will ensure similar revenues from mining that are received by other countries.

Aurelian believes royalties in the new mining law will be in line with other South American

countries.

Valuation

At this time we continue to apply an in-situ approach to our valuation of Aurelian. Based

on the new 13.7 million ounce inferred resource and applying a new in-situ value of

US$115/oz (was US$100/oz) derives a valuation of $1,730 million (using a 1.1 growth

multiple) or C$13.00/share (rounded), up from $1,466 million or C$11.00/share. Our

preliminary DCF model, based on initial mine parameters outlined by Aurelian, validates

our in-situ methodology at this time. We expect to apply more detailed economic

parameters to a theoretical mine plan over the next three to six months as we eventually

transition into a DCF valuation methodology.

Canaccord Adams has developed an in-situ gold spreadsheet that covers 41 junior

companies and is employed weekly to calculate an average value, based on the market

capitalization of the companies included, per ounce of gold in a recognized NI 43-101

resource. The current average value is US$90.21/oz (up approximately US$14/oz from our

last update). We continue to maintain the view that despite the relatively early stage of

development on FDN, it does not represent an average prospect within the junior mining

sector. We believe the FDN prospect has the potential to develop into a large high-margin

mining operation and, as such, we feel justified in applying a premium in-situ valuation to

the FDN resources of US$115/oz.

To account for what we view is excellent exploration potential, which we believe remains

both at the FDN zone and on additional targets within the Condor Project, we have chosen

to apply a 1.1 growth multiple to our in-situ valuation. We also recognize there is

additional risk associated with investments in Ecuador especially during this period of

constitutional and mining law changes (due out by H2/08). At this time, however, we have

not applied an additional risk discount.

Transfer of coverage

This research note constitutes the transferring of research coverage of Aurelian Resources

from Graeme Currie to Wendell Zerb. The catalyst for this change in coverage is Graeme

Currie’s transition out of Research and his previous role as Mining Analyst.

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Investment risks

The typical risks associated with any mineral investment include commodity and exchange

rate fluctuation risks, geopolitical risk, permitting and technical (development/operating)

risks. The commercialization risks associated with mineral exploration and development

are high, thus, investment in the shares of Aurelian Resources are for risk accounts.

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APPENDIX: IMPORTANT DISCLOSURES

Analyst Certification: Each authoring analyst of Canaccord Adams whose name appears on the front page of this investment

research hereby certifies that (i) the recommendations and opinions expressed in this investment research

accurately reflect the authoring analyst’s personal, independent and objective views about any and all of the

designated investments or relevant issuers discussed herein that are within such authoring analyst’s coverage

universe and (ii) no part of the authoring analyst’s compensation was, is, or will be, directly or indirectly,

related to the specific recommendations or views expressed by the authoring analyst in the investment

research.

Site Visit: An analyst has visited the principle property. Partial payment or reimbursement was received from the issuer

for the related travel costs.

Price Chart:*

* Price charts assume event 1 indicates initiation of coverage or the beginning of the measurement period.

Distribution of Ratings:

Global Stock Ratings

(as of 31 August 2007)

Coverage Universe IB Clients

Rating # % %

Buy 313 56.6% 43.1%

Speculative Buy 72 13.0% 72.2%

Hold 146 26.4% 32.9%

Sell 22 4.0% 9.1%

553 100.0%

Canaccord Ratings

System:

BUY: The stock is expected to generate risk-adjusted returns of over 10% during the next 12 months.

HOLD: The stock is expected to generate risk-adjusted returns of 0-10% during the next 12 months.

SELL: The stock is expected to generate negative risk-adjusted returns during the next 12 months.

NOT RATED: Canaccord Adams does not provide research coverage of the relevant issuer.

“Risk-adjusted return” refers to the expected return in relation to the amount of risk associated with the

designated investment or the relevant issuer.

Risk Qualifier: SPECULATIVE: Stocks bear significantly higher risk that typically cannot be valued by normal fundamental

criteria. Investments in the stock may result in material loss.

Canaccord Adams Research Disclosures as of 4 October 2007

Company Disclosure

Aurelian Resources Inc. 1A, 2, 5, 7

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