Mineral exploration and development company Lydian International is focusing all its resources on its Amulsar gold project in Southern Armenia. CEO Dr Tim Coughlin explains why to Jayne Flannery.
Like its flagship gold project at Amulsar in Armenia, where gold was first discovered in 2006, Lydian International is a relatively new entrant into the international mining scene. The company was formed in 2005, but while Lydian may be a youthful player in corporate terms, the management team brings together many years of combined expertise in the exploration industry. Dr Tim Coughlin, CEO, is an international expert in frontier mineral exploration and the development of mining investment opportunities in emerging and transitional environments.
By international mining standards Lydian is small and autonomous, with just 40 employees and a geographical presence centered on Eastern Europe. Coughlin sees the agility this gives as a tremendous advantage in pursuing the company’s first mover strategy in emerging markets. “As an exploration company, we need to be able to move very quickly and that means rapid decisions without the need to convene endless committee meetings,” he states.
Up until a year ago, the Amulsar project in Armenia was a 50/50 joint venture with a subsidiary of Newmont Mining Corporation, the world’s second largest gold producer. The venture was focused principally on developing the Amulsar project.
Diversification was the original name of the game. But last year’s boom in commodities has come to an abrupt end. A new economic downturn means retrenchment as a wave of investors turn to gold as a long term safe haven. “Over the last six months many of our shares have changed hands and there is a renewed interest in gold generally. Now we want to put most of our resources into Amulsar and we are looking for partners to help us with our other exploration projects.”
In March 2010, Lydian became the sole owner of Amulsar when it bought out the Newmont interest as part of Newmont’s strategic decision to refocus on other areas. Meanwhile, estimates on the size of the deposit are getting bigger all the time. “We are now optimistic that Amulsar holds at least two million ounces, but we still have no accurate feeling for its eventual size, although we know it is currently 1.4 million inferred ounces. So far, drilling has shown that the deposit is open in all directions, which means there is gold beneath our feet wherever we tread.”
Moreover, Amulsar does not pose any particular technical challenges and the site benefits from a great existing infrastructure in the sense that it is adjacent to the main highway and with all necessary utilities on hand. “There are three factors that can complicate gold mining. Problems can arise from deep, technically demanding deposits, a lack of infrastructure such as roads and utilities and poor extraction levels from the ore. None of these issues apply at Amulsar—it is economically robust and overall, by comparison to other global projects, a very simple one. The ore is close to the surface and tests show that 94 per cent to 97 per cent of the gold can be extracted easily,” he comments.
Coughlin explains that Armenia is also highly attractive for other reasons. The mining sector in Armenia was liberalised in 2005 as part of a far reaching programme of economic reform to encourage Western investment, and despite its emerging status, the country is very stable. “Armenia also has a huge and very successful diaspora. People who have done well in Western style democracies return as investors and are naturally inclined towards Western business practices. It all goes towards making Armenia a modernizing and excellent country to do business in.
“There are many emerging or emergent environments that are possibilities from a geological perspective, but we would not wish to operate there,” he continues. “Of course, geological prospectivity is very important, but I believe our political judgment is something that gives us an edge in the exploration industry. It is vital that any deposit we explore is in an environment in which we can safely and reliably operate. Is there suitable infrastructure, political stability and a positive attitude towards working with foreign enterprises? We tend to look for a significant strategic or economic international interest that is likely to guarantee a level of political stability that goes beyond the immediate governance capability of any elected government,” he says.
Lydian is also helped by its excellent shareholder credentials. “Our shareholder demographics are very important to us,” he continues. “Our largest shareholder is the International Finance Corporation, which is the equity investment arm of the World Bank and a very active multi-lateral investor. We are part of their broader investment portfolio in the region and that gives us a strong position.” A further five per cent of Lydian is owned by the European Bank for Reconstruction and Development, which is also a powerful economic supporter in this region.
Locally, the company has impressed the remote rural community where the project is based by its commitment to supporting sustainable community development in the area. “Social responsibility is now thankfully part of the corporate strategy of most mining companies,” he says. “At Amulsar, we do a lot of work around education and healthcare provision but we are also involved in several very innovative community programmes. One of our best projects is centered on an integrated environmental and social programme to modify cattle farming practices, allowing people to make maximum use of all available resources, including cow dung which is recycled as fertilizer and used to generate methane and high calorific value briquettes for heating homes.”
Coughlin envisages a long and prosperous future for the project, but wants Lydian to do all it can to create a sustainable local economy that is not ultimately dependent on mining. “In this industry we move in cycles of expansion and contraction and right now we want to focus all our energies on releasing the enormous potential of Amulsar. Of course, we still have other projects in our sights, but they are definitely not our priority at the moment,” he concludes.
