March 21, 2008
BY FAX AND EDGAR
Securities and Exchange Commission
100 F Street NE
Washington, DC 20549-7010
USA
Attention: Mark A. Wojciechowski
Dear
Sirs
:Re: Aurelio Resource Corporation (filed April 4, 2007) SEC File No. 0-50931 |
In response to the comments in your letter to Aurelio Resource Corporation (the "Company") dated January 24, 2008, we respond to your comments, as set out in your letter.
Form 10-KSB for the Fiscal Period Ended December 31, 2006
Notes to Consolidated Financial Statements, Page 35
Note 7 Business Acquisitions, page 38
As discussed in our response to comment five in our letter dated July 30, 2007, the Company certainly placed value on the unpatented claims in Arizona, and our subsequent exploration work on that project is gradually beginning to give credibility to that assessment of value. In time, we anticipate the possibility of being able to substantiate a value that could be said to be a "mining asset" at the Hill Copper-Zinc Project (which is what we now call the expanded property position surrounding the original unpatented claims we acquired with the purchase of ARI) and we are moving towards being able to estimate that economic value by estimating cash flows. As an exploration company working in base metals, we think that we also understand the value beyond proven and probable reserves, and understand some of the issues and the discussion and the consensus of the Task Force as referred to as Issue 1(a) in EIFT 04-03. However, we clearly did not have what could be termed a "minin g asset" at the time we purchased ARI, although we are approaching that stage at this time. What we could not do at the time we purchased ARI is have an idea of the value of the property, which we now see with the benefit of hindsight.
As we described in our response to comment four in our letter dated November 19, 2007, we propose to expand our accounting policy in the Notes to the Consolidated Financial Statements to make clearer the Company's policy with regard to the costs of acquiring mineral properties which have patented claims or surface rights. We propose to add words to make clearer that we will write off the capitalized acquisition costs if it is determined that a property is not economically viable. However, our policy is that we do not capitalize the costs for acquisition costs for unpatented claims and, of course, the costs for carrying and retaining and exploring mineral properties are expensed as incurred. We do not propose to change this aspect of our accounting policy as, under United States Generally Accepted Accounting Principles we would not be able to capitalize exploration expenditures, and the acquisition and maintenance costs on unpatented claims are an essential part of our business, which is the ongoing exploration process for base metals.
Our conclusion was that, although we clearly believed in thevalue of the unpatented claims in Arizona, the establishment of an arbitrary monetary value as part of the purchase price would be an artefact and would not have been consistent with our accounting policies. As discussed above, we have no methodology or policy for establishing or retaining such a value in our financial statements.
We propose to expand our accounting policy in the Notes to the Consolidated Financial Statements, in a further amendment to the Note as described in our Response letter dated November 19, 2007, as follows (with the added language underlined):
Mineral properties and exploration expenditures
The costs of acquiring mineral properties which have patented claims or surface rights are capitalized and will be amortized over their estimated useful lives following the commencement of commercial production or written-off if the properties are sold or abandoned. If it is determined that a property is not economically viablebased on scoping or feasibility studies, the capitalized costsof patented claims and surface rights are written off.If the studies show the carrying value to be in excess of their economic value, then the properties will be considered impaired and will be written down to their current economic value. Exploration expenses ^ and the costs for carrying and retaining mineral properties are expensed as incurred.
The costs of acquiring mineral properties that have unpatented claims, leases or exploration permits are not capitalized. Ongoing costs for exploration and the costs for carrying and retaining these mineral properties are also expensed as incurred.
When it is determined that a mineral deposit can be economically and legally extracted or produced based on established proven and probable reserves based on an independent feasibility study that shows the economic viability of the deposit as confirmed by a Competent Person, further exploration costs and the costs of development incurred after such determination will be capitalized. Upon the commencement of commercial production, capitalized costs will be amortized on the units of production basis using the estimated proven and probable reserves as the depletion basis.
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On behalf of Aurelio Resource Corporation, we acknowledge that:
We look forward to any further comments you may have with regard to the Company's Form 10-KSB or with regard to the above response. Should you have any questions, please do not hesitate to contact the writer directly at 303.875.2090.
Yours truly,
AURELIO RESOURCE CORPORATION
_/s/ Allan J. Marter____________________
Allan J. Marter
Chief Financial Officer
