  A new Chandra observation and archival observations by ASCA are used to
investigate spectral variations in the Sy1 galaxy NGC 3516 over a period of 7
years. A large change in flux (factor ~50 at 1keV) is observed between an ASCA
observation in '94 and the Chandra observation in 2000, with the source close
to the all-time maximum and minimum X-ray flux states, respectively. We find
the variations in the observed flux and spectra at these epochs to be
consistent with a constant column density of line-of-sight material reacting to
changes in the ionizing continuum. The data from the two epochs are consistent
with a simple decrease (by a factor 8-10) in the luminosity of a constant
0.5-50 keV slope source and a line-of-sight absorber with an equivalent
hydrogen column density of 10^21.9 cm^-2. Intermediate luminosities, sampled
during other ASCA observations, are all fitted by the same model with a very
small change in spectral index (well below \Delta\Gamma=0.2). In addition,
analysis of the long (360 ks) ASCA observation in 1998 shows clear "color"
variations that are entirely consistent with this model and are interpreted as
due to changes in the opacity of the absorbing gas. The data allow us to put a
conservative upper limit of 60 ks on the recombination time which translates to
a lower limit of about 2.4 times 10^6 cm^-3 on the density of the recombining
gas and an upper limit of about 6 times 10^17 h_{75}^-2 cm on its distance from
the central source. These are the best limits obtained so far on the density
and location of the X-ray absorbing gas in a type-1 AGN. They indicate that the
absorbing gas is different, in terms of its density and location, from the
ionized gas commonly observed in type-II AGN. [Abridged]
