The Northern Miner, 7/18/2008

Aurelian does what it can in Ecuador

While the winds of uncertainty around foreign mining investment continue to blow in Ecuador, the former darling of the junior gold mining circuit, Aurelian Resources (ARU-T), is pushing ahead despite a government ordered suspension of all mining activities.

The suspension is in place until a new mining law gets done, and while a draft the law was finished at the end of June miners must now wait as it sits before President Rafael Correa and his advisors for review.

No update has been provided by the government as to when the final version of the draft law will be made public but estimates put the completion date in and around September of this year.

Patrick Anderson, Aurelian's president and chief executive, says the earlier version of the draft law that he has seen was "reasonable" and that the company is "confident that President Correa wants to see a responsible mining industry in Ecuador."

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 with a referendum on it likely be held on October 5 with final results to be published on October 21.

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

As for the new mining law, top officials in the country have sought to ease investor fears after the suspension on mining hammered the shares of foreign miners operating in the country back 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 while the new mining law will call for community consultation those communities will not be given veto powers to shut any projects down.

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 – the number was said to be just three back in April – doubt now exist as to whether that will come to fruition.

Reuters reported that an un-named mining official told it that the new law will not limit the number of concessions and neither would it force them to form joint ventures with the government as had 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.

While much of those elements have been finished, it 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 the development of the project when and if it gets underway.

It says the first phase of the project would target the high grade portion of the ore body which begins just 150 metres below surface. The area has 300 metres strike length and holds roughly half of the resource of 13.7 million oz. of gold.

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 test program due to larger samples being taken, while greater flexibility in plant design comes from the fact that more than 50% of projected mill feed will not need to be pre-oxidized before leaching. Initial studies assumed that all feed would require oxidation.

Both factors mean less capital investment and lower production costs.

In Toronto on July 18 the company's shares were trading for $4.30 on a volume of roughly 206,000 shares. The company's shares have fluctuated wildly in the last 52 week period thanks to the political uncertainty, as they have touched as high as $10.23 and fallen as low as $3.05. Aurelian has roughly 137 millions shares outstanding.