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In mid-2006, I had already been fully invested in the PM mining sector for four years.  Junior mining was RED HOT; and thus, many small stocks were rising dramatically.  Following a 20-year bear market, gold supply had been stagnant for a decade.  However, hopes were high due to significantly increased exploration spending – care of a VERY strong mining capital market.

Moreover, such excitement “stair-stepped” further in June 2006, when a small Canadian junior miner called Aurelian Resources made an ENORMOUS discovery.  Per the below, fateful press release, the Fruta del Norte deposit in Ecuador was hands down, the largest discovery in years

Aurelian Intersects 204.80 Metres Averaging 8.40 g/t of Gold at the FDN Epithermal Gold-Silver Discovery – June 2006

…launching Aurelian’s stock from $1/share to $40/share…

Graph Gray Chart

…and subsequently, catalyzing the TSX Venture’s surge to its ALL-TIME HIGH of 3,300 in April 2007; from which – tragically – it plunged 80%, en route to today’s valuation 70% below the 2007 highs…

S P TSX Venture Composite Graph

Aurelian’s initial resource estimates were published in 2007, helping to boost the below global discoveries table; in terms of both ounces and – more importantly – grade; as the higher the grade, the lower the extraction cost (as a general “rule of thumb.”)  By the way, the “initial ounces” table must be taken with a grain of salt; as it includes both highly developed “proven and probable” RESERVES and extremely speculative “measured, indicated, and inferred” RESOURCES.  For “my money,” I’d bet 90% of such “initial ounces were in the most speculative resource category of all – “inferred”…

Intial Ounces Grade Graph

Irrespective, you can see that both the initial ounces and grades of new discoveries have since plunged – as discussed in my recent RANT, “PRECIOUS METALS SUPPLY CRUNCH”.  Moreover, based on the below article – from last week – such data should collapse further in the coming years; perhaps, for a decade

Mining Capex plunges to 11-year low: NAB – June 10, 2013

Back to Aurelian, it was eventually bought for the equivalent of $25/share, or C$1.2 billion, in July 2008 – just two months before Global Meltdown I – by major gold producer Kinross Gold…

Kinross Gold Agrees to Buy Aurelian for C$1.2 Billion – July 2008

After exhaustive research, I have not been able to find an estimate for the incremental capital Kinross has since put into Fruta del Norte.  However, as Kinross has not changed the project’s resource estimate since a December 2010 technical report…

Fruta del Norte Project Ecuador NI 43-101 Technical Report – December 2010

…of the following…

Fruta Del Norte Reserve

…I’d guess such spending has been minimal; as clearly, it’s spent most of the past two years negotiating with Ecuador’s government regarding a taxation agreement…

Ecuador: Talk of mining tax reform is fool’s gold – July 2012

Recently, talks became cantankerous; and thus, it shouldn’t have surprised anyone when this HORRIFIC announcement emerged last week…

Kinross Gold walks away from Fruta del Norte Project in Ecuador – June 2013

…as Kinross simply WALKED AWAY from the project, taking a $720 million write-off, or 72% of the 2008 purchase cost; and further validating that Kinross has spent very little developing the project since acquiring it five years ago…
The Fruta del Norte project, which Kinross Gold bought five years ago for about $1 billion – and is seen as the world’s largest untapped gold resource; is being abandoned because Kinross isn’t willing to pay a 70 percent windfall profits tax demanded by Quito.
…causing its stock price to plummet to an ALL-TIME LOW…

Kinross Gold Corporation Common

…and in turn, yielding heightened pessimism of the long-term gold supply outlook…

Gold faces ‘global supply crunch’ – Telegraph

validating what I have been SCREAMING all along

MINING SHARES REDUX

…and emboldening my advice, to…

SELL MINERS, AND DESTROY THE CARTEL

…as the longer the PM bull continues – and the higher prices go – the MORE DIFFICULT it will become for PM miners to earn profits

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