Aurelian Resources (ARU)

[Lone Clone]

Geography, politics chill Aurelian takeover allure

ANDY HOFFMAN

00:00 EDT Thursday, July 19, 2007

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It is the proud owner of what is widely acknowledged as the greatest gold discovery of the decade. It is part of an industry undergoing rapid consolidation due to buoyant metal prices and a willingness by major producers to pay up for large deposits. Its shares rocketed up almost 13 per cent yesterday after it unveiled more positive drilling results.

So why is Aurelian Resources Inc. still here and not yet swallowed up in the takeover boom?

The answer, it seems, is geography and politics. Aurelian's Fruta del Norte gold and silver discovery, which analysts estimate could contain between 10 million and 16 million ounces of gold, is in Ecuador. The South American country has yet to unveil a new mining policy, and uncertainty about the intentions of its recently elected leftist President Rafael Correa are a millstone around Aurelian's potential fortunes.

"It is all about politics," Patrick Anderson, chief executive officer of the Toronto-based company, conceded in an interview yesterday.

All of the world's major gold producers are understood to have sized up Aurelian and mulled a potential takeover bid for the miner, which has a market value of $1.1-billion. Its stock has risen 80 per cent over the past year, and more than 2,300 per cent over three years. Aurelian has signed so-called confidentiality agreements with more than a dozen parties, Mr. Anderson said. But the company, which first began drilling the Fruta Del Norte deposit in April, 2006, has no firm offers so far and is not currently in discussions with any potential suitors.

An executive at one major gold producer said Aurelian's Ecuador holdings, the "Condor project," are some of the best undeveloped gold mining assets in the world. "We've been on site. We've had a look, and it is a bona fide discovery. It's real. This is not a Bre-X."

Despite a severe shortage of new gold discoveries and a desperate desire to add to gold reserves, the source said his company's board is unwilling to bid for assets it may not have full control over.

The gold majors want to avoid the political waiting game bedevilling Toronto's Crystallex International Corp., which is trying to develop its Las Cristinas mine in Venezuela but has waited roughly three years for a final government permit to allow mining to begin.

Mr. Anderson said Ecuador is nothing like Venezuela, and that Aurelian has had positive and constructive discussions with government officials.

"They've stated over and over again that they will respect contracts under the law as they stand. We've asked the minister of mines point blank, 'do you intend nationalization?' [and he has said] 'no.' ... They need to create a thriving industry to diversify their economy," Mr. Anderson said.

A number of foreign mining companies, including Iamgold Corp. of Toronto and Dynasty Metals and Mining Inc. of Vancouver, are also developing projects in the country.

Mr. Anderson expects Ecuador to complete a new mining policy in 2008 that will include a government royalty on mining profits. He anticipates royalties will be similar to those levied in Peru and Chile.

AURELIAN RESOURCES

Close: $8.40, up 96¢