New Gold Exploration Project In Armenia

NEW GOLD EXPLORATION PROJECT IN ARMENIA
Aram Gareginyan

ArmInfo
2009-10-05 16:02:00

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
b y 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 th
e 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 inters ections 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 consul ting 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.