And itÔÇÖs gold
Lydian International is moving quickly to define the extent of its gold discovery in Armenia. CEO Tim Coughlin and technical director Andor Lips tell Gay Sutton how the discovery was made and why the company is focusing its efforts on exploration in emerging and transitional environments.
A curious thing is happening in the world of mineral exploration. Since 2002 the amount of money ploughed into exploration has risen by a staggering 600 per cent, according to the Special Report on World Exploration Trends by the Metals Economics Group. Yet over that same period, the number of large new mineral discoveries has been falling.
Dr Tim Coughlin, CEO of junior exploration company Lydian International, believes that this peculiar state of affairs is partly due to the cautious nature of the investment markets. ÔÇ£Exploration companies are capital-intensive and the markets that fund them are inherently nervous about putting their money into emerging and transitional environments. Therefore, most of the exploration capital goes to companies working in geopolitically stable countries: Canada, Australia, parts of South America and of course, the US. But these are mature exploration countries where the chance of finding large, completely new deposits is very low.ÔÇØ
Lydian, which is listed on the Toronto Stock Exchange and has the backing of the International Finance Corporation (the equity investment arm of the World Bank) and the European Bank for Reconstruction and Development, hopes to lead the way in reversing this trend by focusing exclusively on the mineral potential in what it defines as emerging and truly transitional countries. ÔÇ£Our aim is to identify highly prospective emerging environments that we know are truly willing to evolve into free market economies, and to make completely new discoveries in those environments,ÔÇØ Coughlin says.
When the choice of investment environment is intelligently made, then the risks in exploration are not necessarily any greater than in the established countries, but the prospectivity is much higher.
Lydian has an interesting history. Its founders ran a consultancy firm analysing the risks and mineral prospects in emerging and transitional countries for mining industry clients. When a client they were working for decided to focus elsewhere, they were left with an excellent analytical report and their own positive recommendations on the prospects in Armenia, and consequently, they decided to explore the area themselves. ÔÇ£So we shut the door on the consultancy,ÔÇØ Coughlin says, ÔÇ£and morphed ourselves into Lydian.ÔÇØ
That decision looks likely to pay off. ÔÇ£We found our Amulsar site in Armenia simply by driving along the main road. ItÔÇÖs not often you can do that in a mature exploration environment.ÔÇØ
The company obtained the initial exploration licence by the end of 2005. ÔÇ£Six months later we had found the first rock sample containing gold, and that was a marvellous moment,ÔÇØ explains technical director Dr Andor Lips. Exploration continued at a fast rate. ÔÇ£In 2007 we drilled five holes. All of them were gold-bearing, four out of the five being very good holes. Last year we drilled a total of about 100 holes, or 13,000 metres, over a fairly small area and this allowed us to calculate the first resource, which has been registered as one million ounces of gold in the inferred category.ÔÇØ
Based on these findings, the company obtained a 25-year mining licence for the project, and also took out a further five-year exploration licence for 113sq km of land circling the site.
ÔÇ£Ten days ago we began drilling holes in a wider pattern radiating out from last yearÔÇÖs drilling area, so that we can explore the extent of the find in all directions,ÔÇØ says Lips. The drilling will eventually cover an area about six times larger than last yearÔÇÖs, and is likely to continue until the end of October.
Once the full extent of the discovery has been ascertained, decisions can be made regarding how to exploit the find. ÔÇ£First and foremost weÔÇÖre an exploration company,ÔÇØ Coughlin says. ÔÇ£In this instance, if the gold turns out to be significant enough to interest Newmont, our current joint venture partner, then Newmont will take it through the feasibility study to the commercial stage and Lydian will be free-carried. If itÔÇÖs less than the size criteria Newmont requires but still economically viable, then weÔÇÖll begin looking for another partner or consider developing the project ourselves. Either way, for Lydian itÔÇÖs a discovery and a win-win situation.ÔÇØ
A number of economic factors make the Amulsar project highly viable. Although the gold concentration is lowÔÇöbetween one and two grams per tonÔÇöit is located on the surface which makes it easy and cheap to mine. Metallurgically, the ore is easy to handle too. It is highly oxidised, and tests show that 94 per cent to 97 per cent of the gold in the rock can be extracted relatively easily. In addition to that, the exploration site is situated alongside a major road beside which all the major utilities such as power, gas and water are routed.
In 2002 significant changes were made to ArmeniaÔÇÖs mining law which made it a much more stable and attractive place to operate from. ÔÇ£Trade and commerce seem to be inherent in the Armenian national character,ÔÇØ says Coughlin. This has both an historic and present-day elementÔÇöArmenians have been trading for millennia and the old Silk Road goes straight through the country. ÔÇ£In fact it goes right past our site at Amulsar. But more recently, with the migration of Armenians around the world there are now three million Armenians living in the country and six million diaspora, the title given to Armenians living outside Armenia in countries such as Russia, the US, Greece and France. The US Armenians have been very active in promoting a free market and investment in their home country.ÔÇØ
Lydian has not focused purely on its gold discoveries in Armenia, however. Early in 2006, when the old Yugoslav mining prospects came onto the market through the newly created licensing body, the Independent Commission for Mines and Minerals, the company moved very quickly to stake the Drazhnje project, the very best available asset in Kosovo. An advanced lead-zinc and silver exploration project, it had been about to go into production when ethnic unrest led to its abandonment. It had lain dormant ever since, harbouring a known resource of 6.7 million tons of Pb, Zn and Ag ore.
ÔÇ£WeÔÇÖve conducted confirmatory and exploratory drilling over the last three years and reopened and re-secured the collapsed tunnels,ÔÇØ says Coughlin of the project today. ÔÇ£It benefits significantly from access to existing infrastructure with three zinc concentrators and a zinc refinery virtually down the road. We are currently converting former Yugoslav resources to international compliance and conducting an internal scoping study to ascertain the projectÔÇÖs profitability at todayÔÇÖs depressed zinc prices.ÔÇØ
The company has another much earlier stage zinc project in Kosovo at Crepulje, which it plans to explore, and also has a regional grass roots exploration project in Armenia looking for more gold. ÔÇ£ItÔÇÖs vital for the survival of the company that we keep moving forward like a rolling front,ÔÇØ Coughlin says. ÔÇ£We want to make new discoveries; not only to add shareholder value but also to really make a difference to the environments where weÔÇÖve been operating. In the long term, our aim is to joint venture with local mining companies for the development of our discoveries, or if a local mining company does not exist, then with an international one.ÔÇØ Training the local workforce plays a major part in this.
The company already has some future destinations under the microscope, although, not surprisingly, it prefers to keep them a closely guarded secret.  
