VANCOUVER – Lydian International (LYD-T) is on the move in Armenia as it advances its Amulsar gold project towards production.
In the last six months the company completed a feasibility study for the project, negotiated a new mining license, finalized a new geologic model, changed the mine development plan to incorporate new information derived from that model, planned a 40,000-metre drill campaign for 2013, and calculated a new resource estimate.
That resource estimate is now out, and while it increases the contained gold at the project only slightly it boosts the average resource grade notably.
The near-surface, heap-leachable deposits at Amulsar now contain 81.1 million measured and indicated tonnes grading 0.95 gram gold per tonne for 2.48 million oz. gold, plus 70.1 million inferred tonnes averaging 0.82 gram gold for an additional 1.85 million oz. gold. Those numbers use a cut-off grade of 0.3 gram gold. Increasing the cut-off to 0.4 gram gold changes the measured and indicated count to 61.6 million tonnes grading 1.14 grams gold and puts the inferred resource at 49.9 million tonnes averaging 1.02 grams gold.
The new estimate adds only a few hundred thousand ounces to the total contained gold count at Amulsar. However, it boosts the average gold grade by 16% in the measured and indicated categories and by 11% in the inferred category, using 0.4-gram-gold cutoff numbers.
Those grade improvements were made possible in part by that new 3-D geologic model, which helped Lydian better understand Amulsar's local lithology, alteration, and structural controls.
There are four deposits at the project: Tigranes, Artavasdes, and Arshak form a continuous northwest-striking zone of mineralization while Erato sits roughly 1 km to the north. Mineralization remains open to the north, east, and to depth at Erato, Tigranes, and Artavasdes, while Arshak remains open along strike to the southeast.
Lydian plans to test the potential to grow the Amulsar's deposits laterally, but the more exciting direction for growth is at depth. The new geologic model suggests that barren rock previously thought to define the lower limit of mineralization might in many places actually be just a slice of the older, barren volcanic unit that is interwoven with the younger, gold-bearing volcanic unit at Amulsar. Recent drill holes extending through some of these slices of barren rock have indeed encountered mineralization below, which portends well for the potential to expand mineralization at depth.
To test that theory, while also testing for lateral expansion and probing new induced polarization targets, Lydian plans to complete 40,000 metres of drilling at Amulsar in 2013. In 2012 the project saw only 20,000 metres of drilling, which brought total drilling at the site since Lydian discovered gold there in 2006 to almost 110,000 metres.
Drilling was somewhat limited last year because Lydian was focused on advancing Amulsar toward production, a push that produced a flurry of news.
In September Lydian announced the results of a feasibility study for Amulsar, which outlined a heap leach operation producing an average of 360,000 oz. gold annually for 12 years. The study estimated initial capital costs at just US$270 million and gave the project a pretax net present value of US$646 million and a 27.7% internal rate of return, using a 5% discount rate and a gold price of US$1,200 per oz.
Then Lydian inked a new mining licence deal with the Armenian government, which eased what had been a tight timeline to get into production by allowing for a four-year construction period. Under the old license agreement, Lydian had to start producing gold by March 2015.
With its timing pressure eased, Lydian developed the new geologic model and took a fresh look at its drilling and mapping data…and soon realized that it needed to make some changes to its mine plan.
The first problem was that the plan put the heap leach pads on ground that now appears pretty prospective for additional mineralization. Lydian plans to drill test the area this year, but even if it is barren the pads still need to be revamped because they are too small. With limited expansion capacity, the pads as designed would limit Lydian's ability to extend the mine life it found extra ore. As such Lydian is now seeking out a new location for a larger leach pad.
In addition, the Amulsar feasibility study planned a mine built in two stages, with a single jaw crusher operating alone for the first three years before a second crusher is installed to double throughput capacity. With more time to plan and secure financing for mine construction and with new drilling highlighting strong potential to grow Amulsar's gold count, Lydian completed a crusher trade-off study that contemplated using a single primary gyratory cone crusher instead of the twin jaw crusher previously planned.
The trade-off study supported the new plan. Switching to a single gyratory crusher will allow Amulsar to churn through its maximum throughput starting on day one, rather than waiting for an expansion in year three. That maximum throughout was also boosted from 1,565 tonnes per day to 1,800 tonnes per day.
Changes to the mine plan notwithstanding, Lydian plans to break ground and start building a mine at Amulsar this year.
Lydian's share price has not fared well of late, having fallen off more than 20% in February. News of the updated resource estimate helped: Lydian's share price climbed 8¢ following the announcement to hit $1.64. A year ago LYD shares were trading above $2.70. Lydian has 127 million shares outstanding.
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