Amulsar drilling propels Lydian to new heights (September 20, 2010)

VANCOUVER — A string of strong drill results from the Amulsar gold project in Armenia has carried Lydian International’s (LYD-T) share price to a new high.

Lydian is working through a 16,000-metre drill program at Amulsar aimed at upgrading and expanding the current 1.4-million-oz. gold deposit, exploring the potential of known gold zones to the north and south, and probing outlier targets on the property defined by rock and soil sampling. So far, the first two efforts are paying dividends.

Recent results include highlight hole 212, which hit 86 metres grading 2.7 grams gold per tonne in the Artavasdes area, starting 86 metres downhole. The hit is a follow up from hole 195, which returned 84 metres of 4.9 grams gold from 80 metres to the southeast. The Artavasdes area constitutes the southern half of the current resource; the northern half is known as Tigranes.

Lydian is especially excited about the results from holes 212 and 195 because they confirm the presence of an interpreted feeder zone carrying better grades: the hit in hole 212 included 16 metres averaging 12.5 grams gold.

Other good results from Artavasdes include hole 208, which was collared 100 metres west of hole 212 and returned 95 metres grading 1.3 grams gold from 102 metres depth, and hole 204, which was drilled from 100 metres farther west, cut 109 metres of 0.9 gram gold from 62 metres downhole.

Moving some 500 metres north, Lydian is working to prove up mineralization in the small gap between Artavasdes and Tigranes. Several new results will help with that effort: hole 205 intersected 94 metres of 1 gram gold from 67 metres depth, hole 191 cut 35 metres of 2.5 grams gold from surface, and hole 220 hit 37 metres of 1.2 grams gold from 84 metres downhole.

And in the centre of Tigranes, hole 193 returned 74 metres of 1.4 grams gold from surface, including 17 metres of 4 grams gold.

The known gold zone to the north that Lydian is testing, called Erato, is also starting to show its strength. The latest hole into Erato, hole 233, returned 95 metres of 1.7 grams gold from 36 metres depth, including 28 metres of 3.9 grams gold. It was collared 40 metres south of hole 30, which was drilled at the end of 2009 and returned 229 metres carrying 1 gram gold.

This year’s work at Erato is defining a north-south fault and fracture control on the zone’s gold mineralization. Drill cores also indicate the presence of a previously unknown northwest-trending corridor carrying better gold grades. Erato is 900 metres north of the resources at Tigranes-Artavasdes.

That resource, which Lydian updated in March, stands at 49.6 million inferred tonnes grading 0.9 gram gold for 1.4 million oz. The update came just as Lydian inked a deal to regain full ownership of the property, which had been a 50-50 joint venture with Newmont Mining (NMC-T, NEM-N) since shortly after its discovery four years prior.

The deal returns the project to Lydian in exchange for 3 million shares, US$15 million in staged cash payments, and a 3% net smelter return royalty that Lydian can repurchase for US$20 million over the first five years of production or for a lump sum payment of US$16 million.

In order to focus on Amulsar, Lydian recently signed a heads of agreement with British company IMM Marketing for the development of its Drazhnje lead-zinc-sil- ver project in Kosovo. Drazhnje is home to 3.2 million inferred tonnes averaging 2.51% lead and 5.11% zinc. Silver and gold are also present but historic holes used in the estimate were not assayed for precious metals so the resource could not carry silver or gold grades.

The agreement, which has not been finalized, will see IMM fully finance all further exploration work at Drazhnje. If a joint management committee decides, before the end of 2011, to take the project to production then Lydian will have two options: to jointly develop the project with IMM on a 50-50 basis or to let IMM carry the development costs alone and instead be paid 50% of all profits up to US$5 million, and then retain just a 1.5% net smelter return royalty.

IMM is an affiliate company of the Binani Group of companies, whose interests include lead-zinc mining and processing facilities in neighbouring Macedonia. The partners say they would consider treating Drazhnje ore at those facilities.

Investors got behind Lydian when the company regained full ownership of Amulsar in March and lifted its share price from 70¢ to the $1.20 level in mid-summer. Now drill results from Amulsar are sparking another gain — during August, the company’s share price added 78¢ to reach $1.98. Lydian has 79million shares outstanding.