Though Aurelian Resources, merged into Kinross Gold, is now a story of the past there are important lessons for investors and speculators to be learned from the history of this company.

The success story of Aurelian Resources is probably the best known among junior gold investors in this cycle. In 2006, Aurelian discovered the giant Fruta del Norte epithermal gold deposit in the Cordillera del Condor part of the eastern foothills of the Ecuadorian Andes. The stock went on a meteoric rise which took it from $0.60 to $40 within a few months as continued drilling confirmed the initial grades and thicknesses of more than 200 meters grading double-digit grams per ton.

Speculative investors reap most of their profits when getting in early on an emerging play. So this discovery raises an interesting question: Is the discovery of a company maker like Fruta del Norte just a lucky shot or are there possibly any prior indications to that a company is about to find something big?

In Aurelian’s case there is in fact an important lesson to learn since there were a lot of signals that the market simply overlooked. While several factors contributed to Aurelian’s success probably the most important single factor was a methodical exploration program tailored to the natural conditions of a difficult to access tropical rainforest and a mountaineous terrain with a great number of streams and rivers.

The very first step in exploration is a thorough historical research to narrow down on preliminary target areas. Field surveys are then conducted to visually examine the prospective areas. In the case in point these preliminary studies showed that a lot of the creeks and rivers in southeast Ecuador were gold-bearing. However, the source of the mineralization remained unknown.

In this case the source deposit can only be upstream, so that a delineation of the watersheds defines the limits of the area where the deposit has to be located. The mineralization cannot be on the opposite site of the watershed.

Once the perimeter of the gold bearing hydrological basin was defined, Aurelian carried out a textbook stream sediment sample program that lead their geologists upstream to the source of the mineralization. Aurelian consequently integrated these data in a Geographic Information System. A GIS is a software technology designed to analyze and recognize spatial data patterns and to visualize spatial relationships in attractive maps and 3D models. Aurelian made these maps available to the public all the time via their website. These maps are a very good example of a typical stream exploration program. In combination with classic geological mapping, soil sample analysis, geophysical methods, and exploration drill holes, Aurelian defined 30 targets for gold and 12 targets of the porphyry copper type. Assays of samples of the weathered and decayed material of gold bearing rocks showed the presence of pathfinder elements like arsenic and mercury. Additionally, historic mining and gold handcrafts by local residents gave important clues to the potential of the Cordillera del Condor.

An important step in the discovery process was made early on when Aurelian’s geologists recognized an approximately 45 mile long, north-south striking fault zone. Known as the Las Peñas fault this structural element controls the occurrence of gold mineralizations that are literally lined up along this fault.

A tectonic element of these dimensions usually is easy to spot by remote sensing technologies. Examples of NASA satellite imagery could be found in Aurelian’s company brochure on their website as early as 2004, two years before the discovery of Fruta del Norte. To the trained eye, the imagery clearly revealed the structural control of what could possibly define a new unknown gold trend.

In April 2004 Aurelian announced results from 8 boreholes drilled in the Bonza Las Peñas prospect, just south of Fruta del Norte. The most successful bore hole showed 114 meters of 1.58 g/t. Mineralization could be traced over 500 meters and was open to the north, to the south, and to depth. Aurelian’s methodical exploration program was beginning to show early and promising results.

It was in this context that important clues for a similar or even larger deposit in the Fruta del Norte prospect became obvious. Fruta del Norte was interpreted as the northern prolongation of the Bonza las Peñas trend.

Interestingly, Aurelian’s geologists found proof of another fault zone in boreholes in a nearby copper prospect. This fault zone was found to offset the Fruta del Norte zone for about 250 meters to depth against the Bonza Las Peñas deposit. This meant that a possible new deposit in this zone was protected against erosion by the overlying sediments. So chances were that a new discovery within the Fruta del Norte zone could be even larger by volume than the Bonza Las Peñas discovery.

All this information was made available by Aurelian via their website. However, the market did not recognize the importance of these geological clues. Aurelian stock declined after the Bonza Las Peñas announcement and consolidated at low levels throughout 2005.

Summing it all up, astute investors had a chance to recognize Aurelian Resources as a speculative play with significant chances of a major discovery early on. The necessary information was hidden in plain sight on their website. Aurelian kept updating the reports, maps and cross sections on the website with great detail. As a matter of fact, Aurelian had one of the most informative and best structured websites of all junior gold companies. The quality of geological information they provided was outstanding.

Last year’s revision of the Ecuadorian mining law and the turmoil it raised among foreign mining companies, however, raise another important point: when is the time to get out of a stock like this? While the exact date of new government regulations cannot be predicted, a healthy degree of caution is warranted for companies in similar situations. Certainly, Aurelian appeared as a big dot on the radar of the Ecuadorian government after the initial discovery. The dot surely grew larger after the 43-101 compliant initial inferred resource calculation for the Fruta del Norte deposit came in at 13.7 million ounces. To many observers of the resource markets, Aurelian must have seemed like a sitting duck, waiting to be taken aim at. In a situation like this, at least partial profits should always be taken off the table, while new positions should be entered with great caution.