JMHO, but if the government can get these new laws in place by mid 2008 the area will become a hot spot again as everyone will know what the 'rules' are.
CHICAGO (ResourceInvestor.com) -- With the release of further solid drill results from its Fruta Del Norte (FDN) deposit in Ecuador, Aurelian Resources [TSX:ARU] has re-confirmed the emerging potential of its 100%-owned epithermal gold deposit.
The intersection of 216.6 metres grading 12.85 g/t gold reconfirms the potential detailed in early October's initial mineral resource estimate, which detailed an inferred resource of 13.7 million ounces Au and 22.4 million ounces Ag, putting it well within world-class territory. The grading was quite impressive, 58.9 million tonnes grading 7.23 g/t Au and 11.8 g/t Ag.
Although a formal development and cost plan hasn't yet emerged, it's expected by analysts that the deposit can be producing from a starter zone within 3-5 years at a rate of 700,000 ounces per annum - a nice sum for a company with a market cap just north of C$1B - giving the firm an in situ gold valuation of around $75/ounce, well below sector exploration-stage averages, especially considering the large scope of FDN.
But even with the recent strong drill results, the shares remain largely flat since the resource announcement.
Beyond the currently weakening precious metals stock prices, a main reason for the discount appears to be the current political uncertainty in Ecuador. The recent election of left-leaning Ecuadorian President Rafael Correa hasn't helped matters, with the President recently threatening to revoke the concessions of the non-producing miners in Ecuador.
While the political situation is always a concern in Latin America, many analysts have suggested that the fears currently baked into Aurelian's stock price are overblown - and that the new Ecuadorian mining law due out in early 2008 will confirm this. Recent comments by mining ministers have shown support for socially-responsible mining with reasonable royalty rates - a fact that Aurelian doesn't hesitate to highlight in its investor presentation.
In a recent note, Casey Research added that comments from contacts in the Ecuadorean ministry regarding concessions largely referred to speculative mining companies signing up for concessions without doing any reasonable amount of work on the deposits. With that in mind, it would seem that this wouldn't include Aurelian, which has spent tens of millions of dollars already advancing FDN. These comments seem to suggest that foreign investment is still welcomed in Ecuador, and that the left-leaning country won't be heading the way of Venezuela anytime soon.
Investors can look toward the current situation facing Corriente Resources [TSX:CTQ], which has temporarily halted work on the development of its further-along MIrador deposit. While the government is in the process of re-negotiating some aspects of the development - specifically requesting a redone Environmental Impact Assessment. While these changes are certainly frustrating to Corriente's shareholders, they aren't any different from the difficulties facing any miner in a developing economy with an evolving mineral legal code.
The hope is that with the revised laws due to be finalized by mid-2008, the problems that are causing delays with Corriente will be resolved before any serious development work has been undertaken at FDN. In a recent interview President Correa stated that provided mining is conducted under adequate controls, with adequate consultation of the community, and while respecting the community, the environment, and State, it would be supported in Ecuador.
For those willing to bear the political uncertainty, Aurelian's current share price of C$7.91 provides a relatively inexpensive entry point into a developing, large-scale deposit.