'Effin' Anderson

Those initials represent Fergus and Neill, the sort of middle names that Irish immigrants from Belfast bestow upon their only son. But it was probably lost on Anderson's parents how appropriate those initials would become, especially for disgruntled Aurelian shareholders bitter about what they perceived to be an insufficient price paid by Kinross Gold (K-T) for mining's biggest Cinderella story in a decade.

When Kinross executives approached Aurelian's board about a takeover in June 2008, no one knew, least of all Anderson, the kind of vitriol that would be unleashed by Aurelian shareholders when the dust had settled.

In late July, Kinross offered Aurelian shareholders about $1.2 billion (the deal was worth a little less than $1 billion when it closed in late September) in shares and warrants, or about US$85 for each ounce in the 13.7-million-oz. company-maker Fruta del Norte deposit, in Ecuador (see sidebar on Page 28).

Shortly after the news became public in late July of last year, a select group of Aurelian shareholders started to beat the drum about how they had been "taken to the cleaners." Phone calls were made. Form-letter campaigns launched. Word of the "injustice" reached editors at the Globe and Mail, National Post, and here, to Mining Markets' parent publication, The Northern Miner.

One letter sent to this office reads: "Patrick Anderson and the Aurelian board of directors gave the company away to Kinross Gold Corporation for a small fraction of its value. To be sure, the officers of Aurelian were well compensated. They received millions of stock options while the rest of the shareholders were taken to the cleaners."

The Globe called Anderson but never printed a story. The Post called, too, and printed a story but it was more about shareholder angst than the supposed rotten deal.

"It's really a minority. It's a small, very vocal group of vitriolic shareholders who feel they got screwed on the deal. As time goes on I think they are beginning to realize -and most are - that people didn't get screwed on this deal. The reasons we did the deal are unfolding...and it's turned out to be a very good deal for Aurelian shareholders," Anderson explains. "It is the best deal we could have done."

He adds: "I think expectations were very high... That group of shareholders was envisioning a share price for Aurelian in the hundreds of dollars. There was this 200 Club group of shareholders who were all going to hold on until the stock reached two-hundred dollars. They had sold themselves on this dream of another rocketing share price like we saw from the forty cents to the forty-dollar level, which, barring another discovery on the property, I don't see how that could have happened."

Anderson, though, was playing against the odds from the beginning and despite the obvious success of delineating the biggest gold discovery in a generation, he did not hold the right cards. The Ecuadorian government, meanwhile, led with a pair of aces.

In January 2008, the government levied a new 70% commodity price-based windfall tax on miners and almost simultaneously revoked hundreds of mining licences.

By April, Ecuador's government, led by Rafael Correa, had suspended all mining and exploration in the country until a new mining law was in place. Anderson could read the tea leaves and Kinross had a decent offer on the table -- a soft landing, even if it didn't come with a boardroom view.

"I don't know if I would have added much to the Kinross board," Anderson admits. "As we were moving the discovery toward production, I came to a realization about myself: that I really enjoy and know about exploration. I really don't know much about production but I know enough to know that I prefer exploration."

Newsletter writer John Kaiser followed the Aurelian story from the beginning but never invested in the junior. Kaiser watched the remarkable story unfold and contends that Anderson and the Aurelian board were the victims of circumstance.

"The Aurelian discovery was a grassroots discovery of a world-class deposit. Unfortunately, geopolitical problems prevented (Aurelian) from getting acquired at full value," Kaiser told Mining Markets.

But for every mining industry man in his corner, Anderson probably counts two on the other side, some of them big-time players.

One executive with Torontobased Dundee Securities, a firm that fronted some Aurelian financings, once deemed Anderson "unfit to run a public company."

"I think they're wrong," Anderson says, returning fire. "We were conscientious. We were as transparent as possible. We stood up under investigation and passed with flying colours. I think we ran a public company well. I think I ran a public company well."

Maybe, but other money men went as far as to launch a lawsuit after they watched their warrants expire while, from their perspective, Aurelian sat idle.

In July 2006, Robert Cudney's Northfield Capital, Jonpol Investments, Morrie Tobin, Mark Monaghan and Kevin Everingham filed a $3-million claim against Aurelian in the Ontario Superior Court. The suit purported that Aurelian did not do what it could to get listed on the top tier of Vancouver's TSX Venture Exchange. Such a listing would have allowed Aurelian to petition the TSX for a two-year extension of warrants that were owned by the plaintiffs. The listing did not happen in time, however, and the warrants expired. The suit is ongoing but is now Kinross's property.

"If we were still Aurelian, and there had been no transaction, we would never settle on that lawsuit. I don't know what Kinross's intentions are," Anderson says.

Anderson ruffled more feathers among mining's "old boys" network as part of a group that toppled the board of high-profile junior Noront Resources (NOT-V).

Popular former Noront CEO Richard Nemis stepped down in late October after a proxy war for control was launched by Rosseau Asset Management, a hedge fund that owns just less than 10% of Noront. Backed by Rosseau, Anderson is now a Noront director.

After living in Vancouver at the time of Anderson's birth, his parents traded life on the Left Coast for another on the Gulf Coast, settling in Pascagoula, Miss., a port city east of New Orleans. That's where Anderson grew up.

His family remains in Mississippi but Anderson returned to Canada in 1986 to earn a bachelor's degree in geology from the University of Toronto. He would eventually graduate, but not before a detour found him trying his hand at the culinary arts in 1988.

In 1994, after his last exam but before graduation, he headed to Venezuela for a field-based job and remained there for years. It was where he would work with Keith Barron, who helped Anderson found Aurelian.

The junior's story is the stuff of legend; part folklore, part reality.

Anderson and Barron applied for their first concession in Ecuador's Cordillera del Condor in February 2001, following six weeks of prospecting in some remote regions of the country.

Two months later, in a turn of good fortune, the Ecuadorian government announced new mining rules that gave individuals and companies one month to convert their outstanding concession applications - some more than 10 years old - into titles and begin paying patents. In May 2001, about 80% of the country's concessions were declared void, giving Aurelian the rare chance to acquire a large, contiguous land package.

Seeing the opportunity, Aurelian personnel took turns waiting in line at the patent office for weeks to be near the front when concessions became available.

Aurelian augmented its land position by purchasing the La Zarza concession from private interests in July 2002 and the concession became the core of the Condor project - 950 sq. km of mining concessions and home to Fruta del Norte, the epic gold-silver deposit. Aurelian Resources went public in 2003, raising $3 million at $0.50 a share.

Going back a little further, exploration on La Zarza by Australia's Climax Mining from late 1996 through mid-1998 turned up the Ubewdy, Bonza and Las Peñas prospects. But after minor drilling on other prospects returned only modest grades, Climax let its concessions lapse.

In 2004, Aurelian sunk 28 holes totalling 6,900 metres into Bonza and Las Peñas and outlined 500,000 oz. gold at a grade of slightly more than 1 gram gold per tonne, certainly far less than bonanza grade.

By the end of 2005, Aurelian was wrapping up almost two years of regional sampling that had outlined another 33 gold targets at Condor. Those targets were ranked and slated to be systematically drilled in 2006 but Aurelian had little cash left. Anderson says this was the low point of his career.

"We were nearly out of money...We had no audience. The phone calls weren't being returned. That was very frustrating," Anderson recalls. "The defining moment, of course, is when we made the discovery."

Earlier in 2005, Steve Leary had joined the company as exploration manager, bringing along experience in epithermal systems. He reinterpreted a pull-apart basin identified by Climax, and decided that the basin infill conglomerate was mostly post-mineralization and, therefore, epithermal deposits could lie buried below the basin sediments.

Leary and Anderson took the revised interpretation and exploration model to the board and pitched the members on spending Aurelian's remaining treasury to drill one of Condor's most favourable targets, Fruta del Norte.

The deposit is an intermediate sulphidation epithermal gold-silver system, hosted in andesitic volcanics and buried inside a Jurassic pull-apart basin that basically preserved most of the epithermal system. The third hole into Fruta Del Norte hit the buried, gold-rich system. One intersection returned 8.4 grams gold per tonne uncut across 205 metres. Another hit 189 metres averaging 24 grams gold per tonne uncut.

"I checked (the assay results). Re-checked them. Called up the lab to make sure there weren't any errors," Anderson recollects. "I was terrified, terrified that we screwed up somehow."

When everything checked out, he ran into the street to share the news with anyone he could find until he had a sudden revelation.

"I had two different shoes on," he recalls.

Since that moment Anderson has been on something of a roll.

He recently turned 40 and lives in English Bay in Vancouver with his new wife, a former mining analyst with Genuity Capital Markets.

They have travelled to Spain, surfed in Costa Rica, and Anderson now owns a sea kayak. Anderson, in many ways a child at heart, has another hobby -sharing a growing collection of remote-control helicopters with Aurelian's former vice-president of corporate development, Tim Warman. The helicopters are something Anderson describes as "just fun."

When he's not toying, Anderson serves as director of several juniors: U3O8 Corp. (UWE-V), Colossus Minerals (CSI-T) and Noront.

"I'm generating a few other projects in the back-room, exploration projects in other parts of the world," Anderson says. "I usually invest in an industry I know, our industry. I look at the projects and I look at the people. I look at the philosophy behind the exploration and the discovery."

Chances are he will never find another discovery like Fruta del Norte, but investors, disgruntled or otherwise, might be wise to follow Anderson on his next adventure.

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Looking Back

On July 24, 2008, Kinross Gold (K-T) offered for each Aurelian common share, 0.317 of a Kinross common share, plus 0.1429 of a warrant, with each warrant entitling the holder to acquire one Kinross common share.

The Kinross warrants have an exercise price of $32.00 per Kinross common share and will expire five years after the date on which Kinross first pays for Aurelian common shares tendered to the offer. Kinross issued about 47 million common shares related to the transaction or about 8% of Kinross's outstanding common shares at the time (Kinross issued another 24 million shares as part of an equity financing in January 2009).

Based on the preceding 20-day volume-weighted average price (prior to the date of the bid) of Kinross's common shares on the Toronto Stock Exchange (TSX), and assuming a value of C$0.92 per fractional warrant, the value of the offer is C$8.20 per Aurelian common share, which at the time represented a premium of roughly 63% over the preceding 20-day volume-weighted average price of Aurelian common shares.

About 94% of Aurelian shareholders tendered to Kinross's offer.