Early bird Lydian snags far-flung gems

Lydian International (LYD-T) likes to arrive early.

Sniffing out geological potential in transitional markets is the hallmark of the British company and the scent has drawn it to Eastern Europe and the southern Caucasus.

“We pile in, boots and all,” Lydian chief executive Tim Coughlin says of the company’s approach. “It’s the classic example of the first mover strategy.”

First mover indeed, but with the backing of some experienced players.

The company counts Newmont Mining (NMC-T, NEM-N) and the International Finance Corp. (the private equity branch of the World Bank) as its two largest shareholders.

And while the World Bank clearly has a geopolitical interest in seeing capital, and the development that follows it, move into places like Armenia and Kosovo — the two countries Lydian is active in–Newmont’s interest falls more on the geological side of things.

Being one of the few Western companies in Armenia gave Lydian the chance to make a big new discovery, and it may just have done that at its Amulsar gold project.

While it is still early — a National Instrument (NI) 43-101-compliant resource estimate is due out by the end of the year — drill results are indicating a project that Coughlin says is conservatively shaping into a 1-million-oz. plus project.

Gold at the site was discovered by Lydian geologists, Coughlin among them, during a drive along what was once the legendary Silk Road. Recognizing severe alteration on the exposed face of the mountain, the team pulled their vehicle over and took some samples.

What they had discovered was an oxidized high-sulphidation gold system that stretches at least 3 km.

The most recent drill results from Amulsar came at the end of July and were highlighted by one hole that hit 2.3 grams gold per tonne over 77 metres. Previous holes had returned 20 metres at 9.9 grams gold and 23 metres at 9.3 grams gold.

The results are part of the first drill program the site has seen, with about 20,000 metres planned. Coughlin says the program is about 30% complete.

Of the 19 holes that have been assayed thus far, all but two hit mineralization.

Also boding well for the long-term success of the project is the fact that heap-leach simulation tests indicated 94-97% gold recovery.

Amulsar is a 50-50 joint venture with Newmont, which has two options to increase its interest. It can earn a further 20% by funding the project through to feasibility; it can then earn another 10% by funding through to commercial production.

Newmont’s movement on the project was also helped along by Armenia’s development as a country. It is now a member of the World Trade Organization (WTO) and a signatory to the international convention on investment disputes.

Coughlin says its mining laws are good and protect Lydian against any future changes to regulations as the company can opt to abide by the prevailing law at the time it began operations.

Other miners have taken notice. The country’s blossoming into

an investor-friendly nation has lured the likes of Freeport-Mc-MoRan Copper & Gold (FCX-N) and Dundee Precious Metals (DPM-T, DPMLF-O) to name but two.

As for its other area of interest, Kosovo, it has acquired zinc projects along a trend that was once among Europe’s largest zinc-producing areas.

Recognition of Kosovo’s declaration of independence at the beginning of the year remains uneven — with Western powers like the U. S., France and Britain recognizing its sovereignty but Russia and former Soviet block countries not doing so. The European Union, while not coming down on one side or the other, has sent in a mission to maintain the rule of law.

And importantly for Lydian, the mining law was written under the counsel of the World Bank, and Coughlin says the company’s recent renewal of a two-year exploration licence is evidence of its stability.

So even while Kosovo is known more for the war of the 1990s and its citizens’ quest for independence now, its government is striving to return the land to its position as one of the Balkans’ key mining regions.

Lydian is doing its part by working on three projects there.

But the company’s key asset is the Drazhnje zinc project. The site was proved up by Yugoslav geologists through the 1980s but was abandoned with the rising ethnic unrest in 1988.

It was left with a historical resource of 4.7 million tonnes grading 4.9% zinc and 2.4% lead.

Lydian has confirmed the higher grades of the Yugoslav resource with drilling returning highlights of 21 metres grading 15.54% zinc, 3.56% lead, 0.19 gram gold and 50.12 grams silver per tonne and 36.6 metres grading 6.68% zinc, 3.16% lead, 0.11 grams gold and 38.16 grams silver.

Coughlin says the company has also identified a possible down-faulted extension on the northern and southern sides of the deposit.

The company is currently cleaning out and dewatering adits left by the Yugoslavs with underground drilling expected to begin imminently.

At presstime, Lydian shares were trading at 34 apiece. Its shares have moved between 25 and $1.35 over the last 52 weeks and the company has roughly 40 million shares outstanding.