Lydian International Announces Robust Feasibility Study for Its Low-Cost Amulsar Gold Project in Armenia
NPV of $646.0m at 5% discount rate, IRR of 27.7% (at $1,200/oz gold)TORONTO, ONTARIO -- (Marketwire) -- 09/05/12 -- Lydian International Ltd. (TSX: LYD) ("Lydian" or "the Company"), a gold-focused mineral exploration and development company, is pleased to report the results from its resource update and feasibility study at its Amulsar gold project in Armenia. All figures are in US Dollars unless otherwise stated.
Highlights of the Feasibility Study (base case using $1,200/oz gold)
-- Proven and probable open pit mineral reserves of 2.26 million ounces
gold and 9.63 million ounces silver
-- Average life-of-mine (LOM) waste to ore ratio of 2.23:1 (1.80:1 years 1
to 3)
-- 12 year LOM with expansion in year four from a nominal-ore feed rate of
5 million tonnes per year to 10 million tonnes per year
-- Steady state annual gold production for years 1 to 3 of 118,341 ounces
per year and for years 4 to 12 of 186,047 ounces per year via heap-leach
processing
-- Average LOM cash operating cost of $468.5/oz
-- Pre-tax net present value (NPV) of $646 million at a 5% discount rate
generating an internal rate of return (IRR) of 27.7%
-- Estimated start-up capital cost of $269.6 million
At a gold price of $1,500, pre-tax NPV at a 5% discount rate is in excess of $1.05 billion and the IRR is 38.1%. Further opportunities exist to improve project economics through additional exploration drilling, resource conversion and engineering options.
Dr. Tim Coughlin, President and CEO of Lydian International states "The completion of this feasibility study is a major accomplishment for the Company. With 2.3 million reserve ounces of gold, the Amulsar deposit is Armenia's largest as yet undeveloped grassroots gold deposit and will be one of the country's top tax generators. The total workforce required during operation is estimated at around 550 direct employees, with about 600 employees and contractors needed during the construction period. Exploration drilling continues with the aim being to add new reserve ounces and we are currently working on the remaining key deliverables, which include the Environmental and Social Impact Assessment and further permits and licenses. We are implementing international best practise in the area of environmental management, health and safety, and community development as well as building partnerships and developing local businesses. Current ongoing consultations with local communities and engagement with all national stakeholders is an important aspect of the social license to operate at Amulsar. Our team is focused on building an exemplary mine of which Armenia, our local communities and the Company can be proud."
Project Assumptions and Parameters
Assumptions
Gold Price ($/oz) 1,200
Foreign Exchange Rate (ARM/US$) 389
Electricity ($/kWh) 0.06
Tax Deductible Royalty "Top Line" Charge (%) 4.0
Tax Deductible Royalty "Bottom Line" Charge (%) 12.5
Corporation Tax (%) 20.0
(thus in broad terms the bottom line charge is a combined 30%)
Mine Parameters (LOM)
Mine Life (years) 12
Average Strip Ratio (waste: ore) 2.23
Average Gold Grade (g/t) 0.75
Average Silver Grade (g/t) 3.27
Total Contained Gold (M oz) 2.26
Total Contained Silver (M oz) 9.63
Estimated Gold Recovery (%) 88.6
Estimated Silver Recovery (%) 36.9
Total Recovered Gold (M oz) 2.03
Total Recovered Silver (M oz) 3.68
Average Annual Silver Production (oz) 306,706
Steady State Average Annual Gold Production Yrs 1 to 3 (oz) 118,341
Steady State Average Annual Gold Production Yrs 4 to 12 (oz) 186,047
Costs
Initial Capital ($M) 269.6
Sustaining and Mine Closure Capital ($M) 146.5
Average Operating Cost LOM ($/oz) 468.5
Financial Analysis
NPV 5% Discount Pre-Tax ($M) 646.0
IRR Pre-Tax (%) 27.7
Pre-Tax Payback Period (years) 4
Amulsar Mineral Reserves
The mineral reserve estimate was established by tabulating the undiluted tonnes and grades of proven and probable material within the designed final pit that is scheduled as ore to the crusher over the mine life. A floating cone algorithm (independently verified by Whittle optimizations) was used to determine the final pit design and internal phase designs. The floating cone optimization algorithm is a commonly used and accepted industry tool for providing guidance to mine design. The estimated proven and probable reserves total 2.26 million ounces.
Amulsar Mineral Reserves at $1,200/oz and a variable cut-off grade by year
Reserve Tonnes Gold Grade Silver
category ('000s) (g/t) Grade (g/t) Gold oz Silver oz
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Proven 51,143 0.801 3.37 1,317,000 5,541,000
Probable 37,106 0.789 3.43 941,000 4,092,000
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Total (P&P) 88,249 0.796 3.40 2,258,000 9,633,000
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The table below shows the mineral resources at various cut-off grades:
Amulsar Mineral Resource Estimate
Gold Silver
Resource Cut-off Tonnes Grade Ounces Grade Ounces
Category Grade (millions) (g/t Au) ('000) (g/t Ag) ('000)
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Measured (M) 0.75 15.4 1.64 812 4.97 2,459
0.5 27.7 1.18 1,053 4.18 3,720
0.4 36.5 1.00 1,180 3.82 4,489
0.3 50.2 0.83 1,332 3.45 5,574
0.2 70.7 0.66 1,496 3.11 7,065
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Indicated (I) 0.75 13.0 1.57 655 4.78 1,995
0.5 23.9 1.13 866 4.14 3,178
0.4 32.2 0.95 986 3.84 3,977
0.3 46.4 0.77 1,143 3.48 5,189
0.2 71.1 0.59 1,339 3.13 7,155
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Total (M&I) 0.75 28.4 1.61 1,467 4.88 4,454
0.5 51.6 1.16 1,919 4.16 6,898
0.4 68.8 0.98 2,166 3.83 8,466
0.3 96.6 0.8 2,475 3.47 10,763
0.2 141.9 0.62 2,835 3.12 14,220
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Inferred 0.75 15.0 1.45 696 4.56 2,196
0.5 26.8 1.08 927 4.39 3,779
0.4 35.5 0.92 1,052 4.01 4,580
0.3 48.1 0.77 1,192 3.65 5,645
0.2 73.9 0.59 1,395 3.12 7,410
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The Mineral Reserves and Mineral Resources have been prepared in accordance
with Canadian Securities Administrators National Instrument 43-101 Standards
of Disclosure for Mineral Projects ("NI 43-101") and the Canadian Institute
of Mining ("CIM") definitions for Mineral Resources.
The Mineral Resource estimate for the Amulsar Project was calculated under
the supervision of Gary Anthony Patrick, BSc (Chemistry/Extractive
Metallurgy), MAusIMM CP, the Company's Development Manager, a Qualified
Person as defined by NI 43-101, and who supervised the preparation of and
verified and approved the technical disclosure in this news release.
Mineral resources that are not mineral reserves do not have demonstrated economic viability. Mineral resource estimates do not account for mineability, selectivity, mining loss and dilution. These mineral resource estimates include inferred mineral resources that are normally considered too speculative geologically to have economic considerations applied to them that would enable them to be categorized as mineral reserves. There is also no certainty that these inferred mineral resources will be converted to measured and indicated categories through further drilling, or into mineral reserves, once economic considerations are applied.
The feasibility study database includes drilling data from the 2007 to 2011 drilling programs. The mineral resource is based on drilling completed through the 2011 drill season and includes a total of 665 core and reserve circulation holes.
The Company also continues to carry out its planned drilling program for 2012 and also plans to carry out additional drilling with the goal of increasing mineral reserves.
Mining and Production
Mining of the Amulsar deposit is planned to be accomplished with conventional open pit mining methods. Over 12 years, seven phases covering the Artavasdes, Tigranes and Erato ore bodies are sequenced to arrive at an ultimate pit-geometry containing the project's Reserve. Mineralization extends to the surface in the Tigranes ore body where initial mining begins; as a result, minimal pre-stripping of 729,000 tonnes is required to have adequate ore feed to the crusher. Artavasdes and Tigranes areas are mined ahead of the Erato area which requires more waste stripping to expose the ore.
During the initial three years of mining, ore is scheduled from the pit as direct feed to the crusher at a nominal rate of five million tonnes of ore per year. In year three, crusher capacity is doubled with a crusher expansion and 10 million tonnes of ore per year will be sent to the crusher starting in year four. The average stripping ratio in the first three years of mining is 1.8:1 waste:ore. Beginning in year four, the stripping ratio increases to 2.35:1 and continues at that ratio to year 10.
The pit-design has resulted in a mine plan containing 94.9 million tonnes at a LOM average grade of 0.75 g/t gold. The mine plan has more tonnage at a lower grade than the mineral reserve because a nominal 7% dilution has been added to the plan. Total production over a 12-year mine life is estimated to be 2.04 million ounces, averaging 169,100 ounces per year (plus an average of 306,700 silver). The LOM waste:ore average ratio is estimated at 2.23:1.
A summary of the annual mine production plan is outlined in the table below:
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Gold Silver
Ore Mined Grade Grade Production Production Waste Strip
Year (tonnes) (g/t) (g/t) Gold (oz) Silver (oz) (tonnes) Ratio
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Yr1 3,750,000 0.915 2.12 82,634 66,008 6,314,000 1.68
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Yr2 5,655,120 0.966 3.16 135,333 142,832 9,471,880 1.67
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Yr3 5,000,000 0.957 5.02 137,056 234,784 10,193,000 2.04
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Yr4 10,000,000 0.730 4.85 186,717 442,877 23,466,000 2.35
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Yr5 10,000,000 0.812 3.76 217,152 400,081 23,500,000 2.35
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Yr6 10,000,000 0.870 3.94 240,416 400,242 23,500,000 2.35
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Yr7 10,000,000 0.639 3.43 196,132 393,682 23,500,000 2.35
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Yr8 10,000,000 0.658 3.00 175,571 321,747 23,500,000 2.35
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Yr9 10,000,000 0.549 2.27 165,254 322,288 23,500,000 2.35
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Yr10 9,541,000 0.562 2.14 164,266 365,338 23,959,000 2.51
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Yr11 10,000,000 0.815 2.35 224,540 422,309 20,433,000 2.04
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Yr12 948,000 1.508 3.20 104,375 168,287 375,000 0.40
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Total 94,894,120 0.75 3.27 2,029,446 3,680,475 211,711,880 2.23
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Note: In year two of mining, a small low grade stockpile is generated when
the crusher cut-off grade is 0.35 g/t recoverable gold. This is to keep a
consistent mining rate as well as maximise the grade of material fed to the
crusher in early years. The cut-off grade for the low grade stockpile in
this period is 0.30 g/t recoverable gold. This material goes to the crusher
in years 10 to 12. In total, 385,000 tonnes of ore is stockpiled in pre-
production and re-handled to the crusher.
The drop in ounce production in Years 7 to 10 is a result of the
commencement of mining in the early stages at Erato. As the drill density at
Erato is less, a larger proportion of the material inside the ultimate pit
shell is in the inferred category and hence cannot be included in this
study. It is expected that as exploration activities continue, more material
will be upgraded from inferred and this drop in produced ounces can be
reduced.
The Company has selected mine mobile equipment to meet the production requirements of the Amulsar mine development schedule. Blast holes will be drilled with Sandvik DP1500i drills. Loading and hauling of material from the pit will be accomplished with a mixed fleet of Caterpillar 6018's (RH90) and 6030's (RH120) excavators and Caterpillar 777 haul trucks. An auxiliary fleet of dozers, graders, water trucks and loaders has also been sourced from Caterpillar to assist in construction and ongoing maintenance works in the mine.
Metallurgy and Recovery
Column tests were conducted at a 100% minus 12.5mm crush size without agglomeration, at varying column heights from two to four meters, and for leach cycles up to 75 days. Gold extraction in the columns averaged 91% with average sodium cyanide and lime consumptions of 0.2 and 2 kg/t respectively. Solution to ore ratio was used to scale these results, as well as one column test from previous testing, to predict the rate and ultimate levels of gold extraction for each of the Amulsar deposits. Interpretation of the metallurgical testing also drove the project design towards tertiary crushing, permanent leach pad, and precious metal recovery by carbon adsorption.
Run-of-mine ore will be hauled from the pit to the three stage crushing plant located in proximity to the mine. Haulage from pit to crushing is 1km or less. The circuit will reduce ROM ore from minus 700mm top size to a product of 80% passing 12mm and is designed to process ore at a rate of 5 Mtpa. In the first year of operation 3.75 Mtpa will be processed and 5 Mtpa in year two. Installation of a duplicate circuit ramps up production to 10 Mtpa for year four and through the life of the project.
Crushed ore will be transported approximately 3.5km on an overland conveyor to be distributed along the north side of the leach pad. The heap leach facility will consist of a leach pad and collection ponds. The leach pad will be constructed in three phases with the ultimate ore heap amount of 95 Mt stacked in three stages.
The primary leach cycle will be 30 days and the secondary 80 days. Leaching of precious metal from the ore will continue as the leached ore is buried by consecutive lifts. After 30 days of buried lift leaching, 140 total leach days, the predicted overall recovery will be attained with an overall leach solution to ore ratio exceeding 3 m3/t.
Infrastructure
Surface facilities include a camp, maintenance shop and other supporting infrastructure.
There is good infrastructure surrounding the Amulsar project. This includes the main sealed highway between Yerevan and Iran, high tension power lines and substations, a gas pipeline from Iran, year round water from the Vorotan River and a fibre optic internet cable.
Operating Costs
Operating cash costs over the life of the project are expected to average $468.48/oz (this includes a post-production payment to Newmont which is payable in one of three ways: a single payment of US$15.6 million on commercial production, on-going 3% NSR or make 20 quarterly payments of US$1 million each. The model assumes the last option as preferred).
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LOM Average First 3yrs
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Item $/Tonne Ore Leached US$/oz US$/oz
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Mining 5.50 257.11 241.18
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Mine Cost Lease 0.79 37.04 91.18
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Processing 2.92 136.55 140.59
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Waste Water Treatment Plant 0.13 6.05 9.43
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G & A 0.47 21.88 31.37
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Cash Operating Costs 9.81 458.63 513.75
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Newmont Payment 0.21 9.85 33.80
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Total Operating Costs 10.02 468.48 547.55
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Capital Cost Estimates
The feasibility study is based on capital pricing as of the first half of 2012. The level of accuracy of the capital costs estimates is within +/-15% for feasibility studies.
The initial capital costs are estimated at $269.6 million. Sustaining capital expenditures over the operation's mine life are estimated at $146.5 million which includes $37.2 million for mine closure. The total capital cost is estimated at $416.1 million.
The mining cost estimate for the truck fleet and mobile equipment is based on pricing received from the tendering process.
The cost breakdown for pre-production capital expenditures, assuming an owner operator scenario, is shown below:
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Initial Sustaining
Item cost $ cost $ Total $
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Mining Cost 8,791,700 17,189,800 25,981,500
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Process Plant Direct Cost 228,568,063 26,872,254 255,440,318
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Waste Water Treatment Plant 19,078,412 19,078,412
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Leach Pads 15,687,450 31,814,488 47,501,938
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Waste Dump 16,575,893 14,302,181 30,878,074
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Closure and Reclamation 37,221,477 37,221,477
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Total Initial and Future Sustaining
Project Cost 269,623,106 146,478,612 416,101,718
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Note: Sustaining costs include the majority of the capital costs associated
with the Phase II expansion
Financial Analysis
The financial analysis for the base case (at a gold price of $1,200/oz), which assumes an owner's operation, indicates a pre-tax NPV at a 5% discount rate of $646.0 million with an IRR of 27.7% and a payback of four years. The project is expected to generate $1.12 billion in pre-tax operating cash flow (after the first 12-years) at $1,200/oz gold price. At a gold price of $1,500, pre-tax operating cash flow is expected to be around $1.73 billion.
The table below outlines key sensitivities for the pre-tax NPV and IRR of the Amulsar project.
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Base Case
Discount Rate Undiscounted 5% 10%
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NPV pre-tax (US$M) 1,121.6 646.0 366.8
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Gold Price, $/oz US$1,100 US$1,200 US$1,300 US$1,400 US$1,500
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NPV @5%, ($ M) 513 646 779 913 1,046
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IRR % 23.8 27.7 31.3 34.8 38.1
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Payback (yrs) 4.5 4.0 3.7 3.4 3.1
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Capex change +10% -10%
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NPV @ 5% ($M) 611 646 681
IRR (%) 25.2 27.7 30.5
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Operating Cost change +10% -10%
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NPV @ 5% ($M) 582 646 710
IRR (%) 25.7 27.7 29.7
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Gold Recovery change +10% -10%
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NPV @ 5% ($M) 806 646 486
IRR (%) 32.0 27.7 23.0
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Moving Forward - Opportunities
The Company intends to carry out additional studies with a view to further optimizing project economics, including:
-- Potentially upgrading existing inferred mineral resources to mineral
reserves
-- Expanding the current mineral resources through exploration drilling
-- Eliminating the Phase II ramp up and commencing initial production at 10
Mtpa
-- Comparing the installation of a single gyratory versus two jaw crushers
-- Reviewing key infrastructure layout and configuration
The international Environmental and Social Impact Assessment is expected to be publicly disclosed in November 2012. Stakeholder engagement will continue throughout the project development at every key stage.
In Conclusion
Lydian International Ltd.'s Board of Directors has accepted the Amulsar gold project's Feasibility Study and has instructed management to implement the Study's recommendations, further develop and bring the Amulsar gold project to commercial production.
Qualified Persons for Feasibility Study
The resource update and feasibility study was prepared by the following independent engineering firms:
-- KD Engineering, under the direction of Mr. Joseph M. Keane, P.E;
responsible for overall report contents and preparation and all matters
relating to the design and costs of the processing facility.
-- Golder Associates, under the direction of Mr. Richard Kiel, P.E;
responsible for all matters relating to the HLF and WDF, the
introduction, the geotechnical and the update extracted from the NI-43-
101 Preliminary Economic Assessment entitled "Development of Amulsar
Heap Leach Facility" and Mr. Pete Lemke, P.E; responsible for all
matters relating to the Wastewater Treatment Plant design.
-- Independent Mining Consultants, under the direction of Mr. Herb
Welhener, MMSA-QPM; responsible for all matters relating to geology,
drilling, open pit and mine design.
-- Wardell Armstrong International, under the guidance of Mr. John Eyre,
FRICS MIMMM MIQ CEnv; responsible for all matters relating to the
Environmental and Social Impact Assessment.
An NI 43-101 compliant Technical Report will be filed on the Company's website and on SEDAR within 45 days.
This release has been reviewed and approved by Mr. Joseph M. Keane, P.E, and Pete Lemke, P.E of KD Engineering, Mr. Richard Kiel, P.E of Golder Associates, Herb Welhener, MMSA-QPM of Independent Mining Consultants and John Eyre, FRICS MIMMM MIQ CEnv of Wardell Armstrong International, in each case, a "qualified person" as that term is defined in NI 43-101. This release has also been reviewed and approved for the Company by Gary Anthony Patrick, BSc (Chemistry/Extractive Metallurgy), MAusIMM CP, the Company's Development Manager and a "qualified person" as that term is defined in NI 43-101.
About Lydian International
Lydian is a gold-focused mineral exploration and development company with expertise employing "first mover" strategies in emerging exploration environments. Currently Lydian is focused on Eastern Europe and, in particular, developing its flagship Amulsar gold project in Armenia. Lydian also has a pipeline of promising early-stage gold and base metal exploration projects in the Caucasus regions.
Lydian's management team has a track record of success in grassroots discovery, in acquiring and developing undervalued assets, and in building companies. Lydian has a strong social agenda and a unique understanding of the complex social and political issues that characterise emerging environments. The Company's significant shareholders include the International Finance Corporation which is a member of the World Bank Group and the European Bank for Reconstruction and Development. More information can be found on Lydian's web site at www.lydianinternational.co.uk.
Caution regarding forward-looking information:
This news release may contain certain information that constitutes forward-looking statements. Forward-looking statements are frequently characterised by words such as "plan," "expect," "project," "intend," "believe," "anticipate" and other similar words, or statements that certain events or conditions "may" or "will" occur and include statements regarding the Company's intended planned exploration. Forward-looking statements are based on the opinions and estimates of management at the date the statements are made, and are subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ materially from those projected in the forward-looking statements. These factors include the inherent risks involved in the exploration and development of mineral properties, the uncertainties involved in interpreting drilling results and other geological data, fluctuating metal prices and other factors described above and in the Company's most recent annual information form under the heading "Risk Factors" which has been filed electronically by means of the Canadian Securities Administrators' website located at www.sedar.com. The Company disclaims any obligation to update or revise any forward-looking statements if circumstances or management's estimates or opinions should change. The reader is cautioned not to place undue reliance on forward-looking statements.
Contacts:
Lydian International Ltd.
Lucy Fowler
Investor Relations Manager
+44 (0)1534 715472 or +44 (0)7797 738777
info@lydianinternational.co.uk
www.lydianinternational.co.uk
