Aram Gareginyan, ArmInfo
Interview with Tim Coughlin, President and CEO of Lydian International Ltd exploration and development company Please give a background on Lydian International and its activities in Armenia
Lydian International Ltd is a diversified mineral exploration and development company based in the UK and established in 2005. In January 2008, Lydian became a Public Company listed on Toronto Stock Exchange (TXS:LYD). Lydian’s largest shareholders are the International Finance Corporation (part of the World Bank Group), Newmont Mining Corporation (the world’s second largest gold producer) and the European Bank for Reconstruction and Development. The two main projects of the company include gold at Amulsar in Armenia and polymetallic (zinc, lead, silver and gold) at Drazhnje in Kosovo. Lydian obtained an exploration license at Amulsar in March 2006 and identified the gold-bearing potential in mid-2006. In late 2006 – early 2007, Lydian got exploration licenses at Saravan and Gorhayk, neighboring to Amulsar, covering a total of 98 square km in area. The initial drilling started in 2007, and in 2008 Lydian completed a 14,000 m drill program to test the bulk tonnage potential and estimate a gold resource. In May 2009, Lydian was granted a 25-year mining license by the Government of Armenia. The Amulsar license is 95% owned by Lydian's wholly owned Armenian subsidiary, Geoteam CJSC. Amulsar project is currently being explored as part of a 50/50 joint venture with Newmont Overseas Exploration Limited, a wholly owned subsidiary of Newmont Mining Corporation (USA).
Amulsar is a high-sulfidation type epithermal gold project, located on the border of Vayots Dzor marz and Syunik marz of Armenia, 170 km away from Yerevan along a paved highway, with additional 6 km of unpaved road, via the village of Gorhayk.
When do you expect to finish the second drilling program started in June 2009? Perhaps you have an approximate date to start stripping and mining?
We expect to finish this year’s drill program before the snow starts in November. It is still too early to speculate on stripping and mining. We are currently completing our work for the mining concession but we also need to complete a feasibility study so that development funds can be sourced from banks and other institutions. The planned schedule of 2008 of 20,000 m was compromised by a late start to the summer field season and an early start to winter. During the winter, snowfalls at Amulsar can be quite heavy and thus we may not complete the planned 20,000 meters. Last year we spent about USD 6M on exploration at Amulsar and this year we expect to spend something in the order of USD 4.5M. Mineral exploration is an expensive and risky business!
Judging by recent drilling results, what is the approximate area of mineralized zone and mineral resource estimate?
Early rock-chip sampling and geochemical analyses revealed that the mineralized system extended over 3,5 km long and at least 500 m wide. Those were initial estimates based on the area where we have found gold in sampling at the surface. In-fact we have now extended that area to something in the order of 5km2. However, we have not found gold in the subsurface by drilling over this entire area yet. We are stepping away with the drill rig from the current resource to see how far the subsurface gold extends. Currently the project is open in all directions including depth.
The initial mineral resource at Amulsar of 31 mln tons of ore and 1 mln ounces of gold was completed in March 2009 by an independent company, CSA Global Ltd (UK). That estimate will increase now as we have found gold outside the extents of our internationally compliant resource but we will not know how much until the drill rigs stop turning and we calculate a new resource later this year. At this point it may be worth alerting readers to the fact that resource figures for public companies hoping to raise finance to develop mining projects must be estimated and approved by certified independent professionals who have the ability to report to all major international stock exchanges.
Have you already started to explore possibilities to construct the heap leach facility, as indicated in the previous statements of the company?
In April 2009, a heap leach treatment scoping study was conducted by Golder Association Limited (UK) and KD Engineering (US). The study modeled three scenarios one of-which assumed 1 mln ounces gold with 94% extraction, with an estimated stripping ratio (gold-bearing ore to waste) of 0,64. However, it is impossible to make any extrapolations about eventual amount of expenditures until we know just how big the project may be. That requires further drilling and a feasibility study including detailed environmental impact assessments.
Do you have an estimate of annual mining costs and expenditures for mine hauling roads?
No, again; such costs depend on the final size and scale of the project. Although we have seen a preliminary proposal for a quite interesting gravity conveyer system that would convey the ore down the hill under its own weight and generate about 10% of the total power requirement for the plant. We are very keen to explore all environmentally sensible options for development at Amulsar.
Do you meet potential difficulties regarding gold extraction, considering the type of ore?
Sulphide ore is difficult to leach as microscopic gold is trapped in sulphide minerals such as pyrite and often surrounded by hard silica. Sulphide ore needs to be oxidized (like rust on steel) to liberate this gold. Luckily all of our drill intersections at Amulsar to-date have been in oxidized ores.
Do you negotiate with gold recovery companies to supply extracted ore?
No, again it is too early for us to proceed on this without knowing the full extent and proposed mining treatment methodology for the system.
What benefits did you obtain from equity investments of IFC and EBRD? Do you plan to cooperate with other financial institutions in the future?
IFC and EBRD provide Lydian with important advice on managing environmental and social issues. Our company has a full time environmental officer who is Armenian and based in Yerevan. He has dual reporting lines both to management and to the IFC. We also employ a social development consultant who acts as an intermediary reporting to specialists in the banks. The IFC regularly inspects and reviews our progress to ensure that we are meeting World Bank standards. Both institutions are also very helpful at advising the Company in regard to Geopolitics and in representing our interests where required.
Have you already initiated to take actions specified by your mining license in Armenia – Environmental impact assessment and mining safety assessment? When do you expect the concession agreement to be signed?
We are at the “Concession Agreement” stage meaning we are currently conducting a preliminary environmental impact assessment, mine design and safety studies. The Company has employed a local consulting firm for this purpose. However, we expect that we will have to do this at some later stage again as the resource grows and in order to meet strict World Bank and international guidelines required to secure project finance. We will not be developing a full financial outline until we know how large the project is. I expect the concession agreement will be signed sometime this year.
Representatives of Newmont corporation, Geoteam and Armenian office of IFC have met with Prime Minister of Armenia in March. Have you reached any agreements with state authorities, either at the time or subsequently?
No, it was a meeting to introduce the companies to the Prime Minister and to express the future plans of Geoteam and its partners.
October 07, 2009