RAISING MONEY FOR MINING (ENGLISH AND SPANISH)

• Jurisdiction: Derecho Internacional

Mining and Oil and Gas Law, Development, and Investment - Book 2
(Apr 2007)
CHAPTER 14A
RAISING MONEY FOR MINING (ENGLISH AND SPANISH)
Andrés Verdugo
Attorney
Vice-President, Corporate Affairs, South America
Aur Resources Inc.
Santiago, Chile

ANDRÉS VERDUGO

Andrés Verdugo is a graduate of the Universidad de Chile, holds a law degree and a MBA degree from Loyola College in Maryland, USA.

Mr. Verdugo is the Vice-President, Corporate Affairs, South America, of Aur Resources Inc., a public company based in Toronto, Canada, which, among others, controls and operates two copper mines in Chile, the Quebrada Blanca and the Andacollo mines. He is the President of Aur Argentina S.A., doing exploration in Argentina and the General Manager of Aur Resources Chile Limitada, providing services and doing exploration in Chile.

Mr. Verdugo between 1998 and mid 2003 was the former General Counsel of Empresa Nacional de Minería, Enami, a Chilean Government owned company; between 1994 and January 1998 was the Director of Legal Affairs-Andes, for Cambior Inc., and its subsidiaries in Peru, Ecuador, Argentina and Chile. He was also the former Chief Legal Counsel for the Foreign Investment Committee - Chile and a senior partner of the law firm "Manterola & Asociados".

Mr. Verdugo was a speaker at RMMLF at the Special Institute on Mineral Development in Latin America, which took place in Santiago, Chile, on November 3-4, 1997, and presented a paper titled "Trans-boundary mining projects", specifically the Pachon project, and speaker at RMMLF Special Institute "International Mining Law & Investment in Latin America and the Caribbean", April 11-12, 2005 in Lima, Peru, with a paper titled Tax stability under Chilean rules and the bills of law initiatives.

INTRODUCTION

• The copper, gold, and other base metal mining activities are experiencing the best moment of past ages.

• Advanced technology for exploring, exporting and processing.

• Mining requires large amounts of capital.

• Professionals that participate providing information of mineral reserves and resources have to be certified, reliable and responsible.

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1. Review status of legal iniciatives:

o Competent persons and creation of comission to qualify competencies in mineral resources and reserves.

o Capital market MK2.

2. Case of Aur Resources Inc. and Canadian Mining Corporation trading its shares also in the Santiago Stock Exchange.

3. Reasons of lack of presence and liquidity of foreign stocks.

STATUS OF CHILEAN LEGAL INITIATIVES

• Previous papers in International Institutes of the RMMLF 2003 and 2005.

• "Stock Markets and Venture Capital Funds to Finance Mining Projects: The Case of Chile", by the attorney, partner of Carey & Cia., of Chile, Mr. Rafael Vergara;

• "Risk Capital Segment of the Lima Stock Exchange", of the attorney partner of "Rodrigo, Elías & Medrano", of Perú, Mr. Luis Carlos Rodrigo P.;

• "Use of Stock Markets and Venture Funds to Finance Mining Projects", of attorneys Gregory Ho Yuen and Benjamin Lee, of Fasken Martineau DuMoulin LLP, of Toronto, Canadá;

• "Mineral Industry Financing: A Global Perspective", of the attorney partner of McMillan Binch LLP, of Toronto, Canadá, Mr. W.S. "Steve" Vaughan.

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BILL OF LAW: COMPETENT PERSONS AND CREATION OF A COMMISSION TO QUALIFY COMPETENCIES IN MINERAL RESOURCES AND RESERVES

• Bill: December 2005 and reception at the House of Representatives in January 17, 2006.

• Currently at the Senate.

• Comments and changes were received from the President of the Republic in March 12, 2007.

• A new period for comments and indications was offered, which ended on April 9, 2007.

• The bill is expected to become law soon.

• Code of Certification of Exploration Prospects, Mineral Resources and Reserves, jointly performed and delivered by Institute of Mining Engineers and Ministry of Mining, Chile, plus other professionals.

• The purpose of the Bill for Component Person is to authorize some public and private institutions to create a Commission to Qualify the Competencies in Mineral Resources and Reserves as a legal non profit entity, for the administration of such public register, in which competent persons will be registered to issue reports regarding public offer of securities that are related to mining investments.

• Inspired in the Australian Law; also Canada, UK, USA and South Africa; based on "codes".

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CODES PROVIDE:

• Organization in charge of verifying the correct application of the provisions of the Code; regulating and controlling the acts of persons in charge of valuing deposits, called "Competent Persons" or "Qualified Persons"

CODES REGULATE

1. The classification of ore deposits: mining resources and reserves.

2. Standardization of public reports

• Transparency

• Materiality

• Competence

3. Regulation of "Competent Person"

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The compared systems in different countries have three main basic principles:

1.-Setting norms to report on the estimation and valuation of mining deposits

2.- Rules the persons that have the power to issue such reports (Competent Persons)

3.- The existence of an organization in charge of controlling the application of valuation norms and the actions of Competent Persons

1.2 MK2 Bill of Law

• Related to modifications and improvements in the rating of Chilean stock markets.

• Has been approved by the Congress, under revision of the Constitutional Court since April 3, 2007.

• Introduces adjustments of tax and institutional nature, to promote venture capital industry and to modernize capital market.

• Tax exemptions on capital gains.

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1.3. MK2 Bill of Law

• Government announcement of economic reactivation "Chile invests".

• Third reform to the capital market.

• Standardization to 4% tax rate on interest of credits granted by foreign financing institutions.

• Regulation of retro-purchase agreements for securities.

• Extension of the regime of guarantees of stock market law.

Probably help in development of mining stock market and venture capital market; but not enough.

REGISTRATION OF FOREIGN CORPORATIONS AND THEIR STOCKS IN THE SANTIAGO STOCK EXCHANGE

• Case of Aur Resources Inc., a Canadian Mining Company incorporated in Toronto, Province of Ontario, Canada, which shares are traded in the Toronto Stock Exchange ("TSX")

• 76.5% of share interest in Cia. Minera Quebrada Blanca S. A. (Production of 82,400 tonnes of copper cathode per year) and 90% of Cía. Minera Carmen de Andacollo (production of 19,000 tonnes of Copper Cathode per year until 2009, and increased to 81,000 tonnes of copper and 66,000 ounces of gold per year between 2009-2020; falling to 71,000 tonnes of copper and 59,000 ounces of gold thereafter.)

• Chilean Government owns 10% share interest in both mining companies.

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AUR SHARES IN TSX

• 98,474,706 ordinary shares issued as of March 15, 2007.

• As of December 2006 of the total number of shares issued and outstanding of 98,159,000 has a monthly average volume of transactions in the TSX of 15,205,000

PURPOSE OF REGISTRATION AND TRADING AUR SHARES IN THE SANTIAGO STOCK EXCHANGE (BCS)

• Aur registration in Superintendence of Securities and Insurance, Chile (SVS) regulatory and controlling agency.

• To quote and trade Aur shares in the offshore stock exchange of the BCS and possibility of financing projects with new issuances.

• Delivering and issuing in a sufficient and timely manner essential or relevant information of the Company.

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• Conditions: File to SVS and BCS

• All legal documentation (by laws, articles of incorporation, powers, certificates) in Spanish.

• Information of its business activity; map of ownership and affiliate relationship.

• Describe legal and tax norms that regulate its activity.

• Administration, Board of Directors, Board Committees.

• List of main shareholders, etc.

• Annual report; audited financial statements information to shareholders.

• Ongoing and material information and facts in Spanish, at the same time English information is filed in Canada.

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• Only one other foreign company is registered in the Santiago Offshore Stock Exchange (ENDESA - ESPAÑA). It does not trade shares.

• Aur was the first foreign mining company (today still to be unique) to be registered and trade its shares in the BCS.

• Closeness to local community of investors.

• Trust in Chile; transparency.

• Possibility of new source of financing.

• Between April 26th, 2006 and December 31, 2006 only a 1.17% of Aur shares are traded in the BCS, compared to the 15,205,000 that are traded in the TSX.

• Very profitable, liquid and volatile, depending of copper price.

• Not very liquid in Chile.

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REASONS FOR LACK OF PRESENCE AND LIQUIDITY

a. Lack of depth of the market in the metallic mining industry.

b. High profitability. Not always the world had the same metal prices. Historically there has been cycles.

c. Ignorance of the mining sector by the investor community.

d. Absence of tax incentives for mining companies.

e. Not use of credits of Chilean shareholders of taxes withheld and paid abroad.

f. Regulations and burocracy for doing an investment abroad or in foreign securities.

• Cost of transaction

• Limitations for the Pension Funds (AFP) for the investment in foreign securities. Not more than 30% of funds. Bill of law will smoothly eliminate the restrictions. But won't impact

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THE END

RAISING MONEY FOR MINING

Prepared for presentation at the Rocky Mountain Mineral Law Foundation "International Mining and Oil & Gas Law, Development, and Investment"

by

Andrés Verdugo,

Attorney-at-law, MBA

Vice President, Corporate Affairs, South America

Aur Resources Inc.

April 16-18, 2007

Buenos Aires, Argentina

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Raising Money for Mining by Andrés Verdugo, Attorney-at-law, MBA

Prepared for presentation at the Rocky Mountain Mineral...