Lydian ups Amulsar gold count and cuts deal for Newmont’s stake

Vancouver – Full ownership of the growing Amulsar gold deposit in Armenia will soon be back in hands of the junior that discovered it – Lydian International (LYD-T).

Lydian discovered gold at Amulsar in 2005. By 2006 Newmont Mining (NMC-T, NEM-N) had signed on as a 50% joint venture partner. The partners have been splitting the costs of exploration since then and in 2008 their efforts defined a 1-million oz. gold deposit.

Now the partners have been rewarded for their drilling work in 2009 with an increased estimate: Amulsar is now home to 49.6 million inferred tonnes grading 0.9 grams gold, for 1.4 million oz. The deposit primarily extended to the south.

Now Newmont has decided to take its focus elsewhere. The partners inked a deal that will see Lydian regain ownership of Newmont’s 50% stake in Amulsar for 3 million shares, US$15 million in staged cash payments, and certain payments related to production.

The US$15-million payment will be due in three equal chunks; the first is due at deal close, the second by the end of 2011, and the third by the end of 2012 or soon after publication of a feasibility study. If Lydian brings Amulsar into production, the company will have to elect whether to grant Newmont a 3% net smelter royalty, pay 20 quarterly instalments of US$1 million each over the first five years of production, or buy out Newmont’s production payments for roughly US$16 million.

“The purchase of Newmont’s interest in Amulsar marks the most significant juncture in the company’s history since its discovery of the project in 2005,” said Tim Coughlin, Lydian’s president and CEO. “This deal reflects Lydian’s ambition to put the Amulsar gold project into production by 2013.” The fact that part of the payment is due after the start of production and can stake on of several forms is also a benefit, Coughlin indicated, as that means the funds can come from mine revenue and Lydian and choose the option – staged payments, an upfront payment, or a royalty – that is most economic at the time.

Coughlin expects the Amulsar resource to grow in 2010. Lydian is planning to kick off a 16,000-metre drill program utilizing three rigs in June. The program will have three foci: extending the deposit, upgrading the resource confidence, and exploring new targets on the property.

The high sulphidation, epithermal gold mineralization at Amulsar remains open in all directions. The resource is currently constrained within just two of the five zones identified at Amulsar, a result stemming from Armenian mining regulations that required Lydian to define a resource and convert part of its project to a mining licence.

But results from some of the other zones certainly show promise. The last hole of the 2009 program, for example, probed the Erato target and returned 229 metres grading 1 gram gold. Another hole, this one into a target called Arshak, cut 100 metres of 1.4 grams gold.

Lydian’s share price lost 4¢ on news of the Newmont deal to close at 69¢. The company has a 52-week share price range of 33¢ to 88¢ and has 53 million shares outstanding.