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Lydian Announces Positive Results From Updated Feasibility Study for the Amulsar Gold Project

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Lydian Announces Positive Results From Updated Feasibility Study for the Amulsar Gold Project






Lydian International Limited (TSX:LYD) today announced the results of an updated feasibility study for its 100%-owned Amulsar Gold Project in Southern Armenia. The results of the study demonstrate Amulsar as a compelling opportunity for the development of a large scale, low cost operation utilizing open pit mining and conventional heap leach processing. All dollar amounts are listed in U.S. dollars unless otherwise noted.



--  Total recoverable gold of 2.1 million ounces over a 10.4 year mine life;
--  Gold production averaging over 200,000 ounces per year; 
--  Initial capital costs of $426 million; 
--  Low all-in sustaining costs of $701 per ounce of gold; 
--  84% gold recoveries and 2.8:1 strip ratio; 
--  Accelerated after tax-cash flows in first five years to support early
    payback and project financing; 
--  After-tax unleveraged IRR of 20.2% and NPV(1) of $306 million based on a
    discount rate of 5% and a gold price of $1,250 per ounce.
  1. NPV stated as at January 1, 2015

Results of the study may be enhanced by additional drilling which could potentially convert inferred mineral resources into proven and probable mineral reserves and define additional potential resources and reserves.

The study incorporates a new site layout to accommodate the relocation of the heap leach facility to the site endorsed by the joint Working Group with the Government of Armenia. Nominal throughput of 10 million tonnes of ore per year is planned from the outset, with processing of higher grade ore during the initial five years. New estimates of mineral resources and reserves accompany the updated feasibility study.

Howard Stevenson, President and CEO stated, “This study produced an excellent outcome from both technical and economic perspectives. Moving the previously planned location for the heap leach facility has allowed us to optimize the entire site layout. We have also focused on pulling operating cash flows forward with our planned construction of a full scale, 10 million tonnes per year processing facility at the outset and using a higher cut-off grade for five years with lower grade material stockpiled for processing in later years. Our plan to generate over $570 million of after-tax cash flow during the first five years of operations provides an attractive rate of return and enhances our ability to add leverage to the planned financing arrangements.”

The study has been prepared by SGS in accordance with the CIM Definition Standards on Mineral Resources and Mineral Reserves referred to in the National Instrument 43-101 – Standards of Disclosure for Mineral Projects (“NI 43-101”).

Mineral Resource Estimate

The independent mineral resource estimate was prepared by AMC Consultants (UK) Limited using all available exploration results. Mineral resources for the Amulsar Gold Project were estimated in conformity with generally accepted “CIM Estimation of Mineral Resource and Mineral Reserves Best Practices” guidelines and are classified according to the “CIM Standards on Mineral Resources and Reserves: Definition and Guidelines” (November 2010).


                          Mineral Resource Estimate                         
                AMC Consultants (UK) Limited, August 29, 2014               
                                       Gold   Silver   Contained   Contained
                           Quantity   Grade    Grade        Gold      Silver
Classification             (tonnes)   (g/t)    (g/t)        (oz)        (oz)
Measured                 77,200,000    0.78      3.6   1,940,000   8,810,000
Indicated                45,100,000    0.76      3.5   1,100,000   5,120,000
Total Measured and                                                          
 Indicated              122,400,000    0.77      3.5   3,030,000  13,930,000
Total Inferred          106,200,000    0.59      2.6   2,010,000   8,980,000
--  The effective date of the mineral resource estimate was August 29, 2014.
--  A cut-off grade of 0.20 g/t gold was used for this project based on gold
    price of US$1,500 per troy ounce of gold and assuming a Whittle
    optimized open-pit mining scenario. 
--  Figures have been rounded to the appropriate level of precision for the
    reporting of Indicated and Inferred Resources in the upper and lower
    volcanic units. 
--  Due to rounding, some columns or rows may not compute exactly as shown. 
--  Mineral resources in this resource estimate are not mineral reserves and
    do not have demonstrated economic viability. The estimate of mineral
    resources may be materially affected by environmental, permitting,
    legal, title, taxation, socio-political, marketing, or other relevant



Mineral Reserve Estimate

The independent mineral reserve estimate was prepared by AMC Consultants (UK) Limited using the mineral resource estimate from August 29, 2014. Mineral reserves were estimated with reference to CIM Definition Standards – For Mineral Resources and Mineral Reserves (November 2010).

The study contemplates a mining production schedule which was developed through pit optimizations using the mineral resource model and pit slope designs, these formed the basis for the design of open pits which were scheduled to deliver ore to a conventional heap leach process. Mine production is based on the following mineral reserves, these are a portion of measured and indicated mineral resources and are included in the production schedule.


                          Mineral Reserve Estimate                          
                             Gold   Silver     Gold   Silver           Strip
                     Ore    Grade    Grade    Metal    Metal   Waste   Ratio
Category            (Mt)    (g/t)    (g/t)    (koz)    (koz)    (Mt)   (W:O)
Proven              72.9     0.77      3.6    1,816    8,436                
Probable            28.9     0.77      3.7      712    3,481                
Total Proven and                                                            
 Probable          101.8     0.77      3.6    2,529   11,917   284.8    2.80
--  The mineral reserve was estimated using a gold price of US$1,200/oz and
    a silver price of US$20/oz for economic evaluations. 
--  The pit design was based on an optimization shell generated at a gold
    price of US$900/oz and a silver price of US$15/oz. 
--  A diluted gold cut-off grade of 0.20 g/t was used for processing. 
--  The material mined in the first five years of the project above 0.20 g/t
    and below 0.30 g/t will be stockpiled as low grade for processing later
    in the life-of-mine. 
--  The effective date of the mineral reserve estimate was August 29, 2014.



Amulsar Gold Project Description

The Amulsar Gold Project is located in Southern Armenia approximately 115 km south-west of the capital city of Yerevan and covers an area of approximately 56 km2. The Amulsar property reaches a maximum elevation of 2,988 m, with the heap leach facility located in a valley at lower elevations providing a nominal top surface elevation of 1,856 m.

All major infrastructural needs are readily accessible. The town of Jermuk is located 15 km to the north of the site and Gorayk is 6 km to the south. The town of Gndevaz is located 1 km north of the heap leach facility. Current vehicular access to the heap leach facility is mainly via an unpaved road extending east from the highway to Gndevaz and Jermuk. There is also a sealed highway linking the Amulsar project site to Yerevan. Other adjacent infrastructure includes high tension power lines and substations, a gas pipeline, a fiber optic internet cable and on-site sources of water.

The Company’s planned operations contemplate an owner-operated mining fleet delivering run-of-mine ore at a nominal rate of 10 Mtpy from the three open pits to the primary crusher. The ore will be reduced in size through a three-stage crushing facility from 700 mm to 100% passing 12.5 mm. The crushed ore will be transported approximately 6.2 km via overland conveyors to a crushed ore stockpile. From there, it will be reclaimed by belt feeders underneath the stockpile and transferred to a load out bin by a conveyor. Lime will be added to the ore on the conveyor and trucks will haul the ore approximately half a kilometer to the heap leach pad for stacking.

The planned heap leach facility consists of the leach pad and collection ponds. The leach pad will be constructed in three phases with a total ore heap stacking capacity of 104 Mt over the 10.4 year project life. The collection ponds will include the process pond and two storm event ponds. Process solution and storm/snowmelt water will flow from the leach pad and will gravity drain through a spillway from the pad to the process pond. Spillways will connect the ponds for potential runoff overflows.

Stacked ore on the heap leach pad will be treated by applying barren leach solution at a rate of 10 l/hr/m2. The overall leach cycle is 110 days total, consisting of 55 days of primary leaching and 55 days of secondary leaching. Over 70% of the gold is expected to be recovered in the primary leach. Pregnant leach solution will be collected in the process pond and then pumped into a standard adsorption, desorption and recovery plant for processing. The strip solution from the carbon columns will report to the electrowinning circuit where the precious metals will be deposited onto steel mesh cathodes, dried in a retort and smelted into dore bars. Dore will be shipped offsite to be refined and sold. Overall gold recovery is expected to be 84.2%.

The updated feasibility study includes a number of design revisions from the 2012 feasibility study:


--  The heap leach facility was relocated to a location endorsed by a
    Government Working Group outside the defined "immediate impact zone" of
    Lake Sevan. The location of the heap leach now allows for a valley fill
    design and a change from an impounding configuration to a free-flowing
    design. This design allows for intermediate leach solution
    recirculation, use of more efficient open ponds, and improves
    remediation management. The lower elevation of the heap should also
    improve operating conditions. 
--  Nominal throughput was increased to 10 Mtpy from the outset of the
    project and a +0.3 g/t cut-off grade was used during the initial five
    years of operations. This substantially improves operating cash flow
    during the anticipated project financing period. 
--  Haul distances to the primary crusher and barren rock storage facility
    were optimized. 
--  Ore stacking was revised to utilize haul trucks to reduce overall
    capital costs. 
--  Additional hydrology studies evaluated water sourcing, storage,
    treatment, and usage with a demonstrated zero discharge of process



The following table summarizes the outcome of the financial evaluation of the results of the updated feasibility study:


                     Updated Feasibility Study Results                      
                                                 Years 1 - 5   Life of Mine 
Gold price - base case                          $      1,250   $      1,250 
Mine life - years                                        5.0           10.4 
Strip Ratio (W:O)                                        3.0            2.8 
Average annual tonnes processed - Mtpy                   9.6            9.8 
Average grade - Au g/t                                  0.97           0.77 
Average gold recovery (%)                               82.4           84.2 
Average annual gold production (oz)                  247,000        205,000 
Total recovered gold (oz)                          1,234,000      2,130,000 
Pre-production capital ($ millions)             $        426   $        426 
Sustaining capital ($ millions)                 $         34   $         75 
Total cash cost ($/oz)                          $        647   $        642 
All-in sustaining cost ($/oz)                   $        694   $        701 
After tax operating cash flows ($ millions)     $        574   $        961 
Project NPV5 - after tax ($ millions)                          $        306 
Project IRR - after tax unleveraged                                    20.2%



Initial Capital Costs


             Details of Amulsar Feasibility Study Capital Costs             
Direct Costs                                                              $M
Mining equipment                                                       101.6
Processing facilities                                                  177.6
Other                                                                   39.5
Total direct costs                                                     318.7
Indirect costs                                                          24.4
Owners Costs                                                            38.6
Sub-total                                                              377.4
Contingency                                                             44.4
Total Initial Capital Costs                                            426.1
Total Sustaining Capital Costs                                          74.8



Capital costs for the project were estimated by AMC for mining, SGS for the processing plant/infrastructure, and GRE for the leach pad, collection ponds, barren rock storage facility, water treatment plant and Golder Associates Inc. for the mine landfill and planning for closure and rehabilitation. For the purposes of this press release, the accuracy of the Feasibility Study estimates is between minus 10 percent and plus 15 percent of the SGS capital cost estimate.

Operating Costs

Operating costs for the project were estimated with input from SGS, AMC and GRE. Life-of-Mine total cash costs and estimated all-in sustaining costs are:


            Details of Amulsar Feasibility Study Operating Costs            
Description                                       $/ore tonne        $/oz Au
Mining                                          $        7.58    $       362
Processing                                      $        3.72    $       178
General and administrative                      $        1.38    $        66
Production royalties                            $        1.27    $        61
Offsite transportation and refining             $        0.11    $         5
By-product credit                               $       -0.62    $       -30
Total Cash Costs                                $       13.42    $       642
Corporate general and administrative            $        0.51    $        24
Sustaining capital                              $        0.74    $        35
All-in Sustaining Costs                         $       14.68    $       701



Royalties and Taxes

The royalties applied in determining the economic results of the study included the Armenian mining royalty tax and a royalty payable to Newmont. The Armenian mining royalty tax includes a 4% royalty on gross revenues from gold and silver sales and a 12.5% royalty, after allowable deductions from income for operating expenses, the 4% production royalty and depreciation. The Newmont royalty is a perpetual 3% net smelter return royalty; however, the Company may, at its option, elect to terminate the 3% Newmont royalty and instead pay to Newmont the aggregate sum of $20 million, in 20 equal quarterly installments of $1 million commencing on the first day of the third calendar month following the start of commercial production and, following such election, the Company may further elect to prepay all unpaid installments by making a one-time payment in an amount equal to the present value of the unpaid installments, calculated using a discount rate of 10 percent per annum (initially, approximately $15.6 million). The economic model assumes the quarterly installment payment method.

Income tax is imposed at a 20% rate, after allowable deductions from income for operating expenses, the Armenian royalties, depreciation, financing charges, and any available net loss carryforwards.

Sensitivity to Gold Price

The economic model is most sensitive to changes in the gold price. The table below demonstrates the base case gold price of $1,250 and the effects of applying various gold prices on net present value and IRR. As shown, the project remains viable at a gold price of $1,100. The after-tax sensitivity to changes in the gold price is:


 After-Tax Summary of Key Financial Parameters (Sensitivity to Gold Price)  
Gold Price             $  1,100   $  1,175   $  1,250   $  1,325   $  1,400 
NPV5 ($ millions)      $    151   $    228   $    306   $    383   $    459 
IRR (after tax,                                                             
 unleveraged)              13.1%      16.8%      20.2%      23.4%      26.5%




The most recent phase of metallurgical testing was performed by Kappes, Cassiday & Associates of Reno, Nevada in 2013 on metallurgical composites from the Erato deposit. The program confirmed previous findings from four phases of metallurgical test work performed by SGS and Wardell Armstrong International that indicate that the Amulsar mineral reserves are amenable to precious metal recovery by heap leach processing.

Gold extraction in column tests averaged 91% though this has been de-rated to 84% in the study to allow for field conditions. Average sodium cyanide and lime consumptions of 0.2 kg/t and 2.0 kg/t, respectively, were used in the feasibility study for operating cost estimation. Solution to ore ratio was used to scale these results, to predict the leach rate and ultimate levels of gold and silver extraction for each of the Amulsar deposits.


The updated feasibility study results will be used to support the Company’s efforts to source financing for construction of the Amulsar Gold Project. The acceleration of early cash flows is expected to improve the attractiveness to lenders and support greater project leverage. Management is in early discussions with a number of potential lenders, including commercial banks, International Finance Corporation, and the European Bank for Reconstruction and Development. Various alternative sources of project financing are also being evaluated by management.

Environmental, Social and Permitting

Lydian submitted its mining rights application at the end of July 2014. The application was subsequently accepted for review by the Ministry of Energy and Natural Resources in August 2014. The process of public hearings and regulatory reviews are underway. The initial public hearing required by the EIA Law was held in the village of Gndevaz on August 25, 2014. The second public hearing will likely take place in October 2014, after completion of the reviews by independent experts and receipt of public comments.

Concurrently, the Company is preparing an ESIA to meet the requirements of the Equator Principles so the Company can pursue international financing for construction of the Amulsar project.

A comprehensive plan for affected stakeholders is being implemented with on-going consultation events. The company has engaged with the local communities through public disclosure regarding information on the development of the Amulsar Project. Regular engagement will continue throughout the project development at every key stage.

Next Steps

The Company’s current short term objectives include the following:


--  Continue the advancement of the mining rights approval process; 
--  Complete and publicly disclose the ESIA; 
--  Determine the financing structure, complete lender due diligence, and
    advance to a bank mandate; 
--  Value engineering and project optimization; 
--  Develop a project execution plan for the pre-construction period; 
--  Front end engineering and design to identify long lead items and prepare
    for first phase of construction.



Technical Information

The scientific and technical information in this news release has been reviewed and approved by, Marc Leduc, P.Eng, Chief Operating Officer of the Corporation, who is a “qualified person” for the purposes of NI 43-101. A Technical Report to be prepared in accordance with NI 43-101 will be filed on SEDAR within 45 days of this news release. For further information with respect to the key assumptions, parameters and risks associated with the results of the feasibility study, the mineral reserve estimate and other technical information with respect to the Amulsar Gold Project, please refer to the Technical Report to be made available at The following qualified persons, as that term is defined in NI 43-101, have prepared or supervised the preparation of their relevant portions of the technical information in this news release and the related Technical Report to be filed:


--  Mr. Joseph M. Keane, P.E. 
--  Mr. Richard Kiel, P.E. 
--  Mr. Larry Breckenridge, P.E. 
--  Mr. G. David Keller, P. Geo. 
--  Mr. Martin Staples, FAusIMM, FIMMM 
--  Mr. Gary Patrick, MAusIMM CP (Met) 
--  Mr. Charlie Khoury, P.E. 
--  Mr. David Brignal, PhD, BSc, CBiol, CSci, MIEnvSci



About Lydian International Limited

Lydian is an emerging gold developer, focused on its 100% owned Amulsar Gold Project, located in Southern Armenia. The Company’s current mine development and construction plan for Amulsar is aimed at achieving average production of 200,000 ounces of gold per year and establishing the Company as a high cash-flow, mid-tier producer. The Company is committed to best practices in all aspects of its operations including production, sustainability, and good corporate citi

Posted September 11, 2014

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