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Press release from Marketwire

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)

Wednesday, September 05, 2012

Lydian International Announces Robust Feasibility Study for Its Low-Cost Amulsar Gold Project in Armenia16:00 EDT Wednesday, September 05, 2012TORONTO, ONTARIO--(Marketwire - Sept. 5, 2012) - 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 millionAt a gold price of $1,500, pre-tax NPV at a 5% discount rate is in excess of $1.05 billion and the IRR is 38.1%. Further opportunities exist to improve project economics through additional exploration drilling, resource conversion and engineering options.Dr. Tim Coughlin, President and CEO of Lydian International states "The completion of this feasibility study is a major accomplishment for the Company. With 2.3 million reserve ounces of gold, the Amulsar deposit is Armenia's largest as yet undeveloped grassroots gold deposit and will be one of the country's top tax generators. The total workforce required during operation is estimated at around 550 direct employees, with about 600 employees and contractors needed during the construction period. Exploration drilling continues with the aim being to add new reserve ounces and we are currently working on the remaining key deliverables, which include the Environmental and Social Impact Assessment and further permits and licenses. We are implementing international best practise in the area of environmental management, health and safety, and community development as well as building partnerships and developing local businesses. Current ongoing consultations with local communities and engagement with all national stakeholders is an important aspect of the social license to operate at Amulsar. Our team is focused on building an exemplary mine of which Armenia, our local communities and the Company can be proud." Project Assumptions and ParametersAssumptionsGold Price ($/oz)1,200Foreign Exchange Rate (ARM/US$)389Electricity ($/kWh)0.06Tax Deductible Royalty "Top Line" Charge (%)4.0Tax Deductible Royalty "Bottom Line" Charge (%)12.5Corporation Tax (%)20.0(thus in broad terms the bottom line charge is a combined 30%)Mine Parameters (LOM)Mine Life (years)12Average Strip Ratio (waste:ore)2.23Average Gold Grade (g/t)0.75Average Silver Grade (g/t)3.27Total Contained Gold (M oz)2.26Total Contained Silver (M oz)9.63Estimated Gold Recovery (%)88.6Estimated Silver Recovery (%)36.9Total Recovered Gold (M oz)2.03Total Recovered Silver (M oz)3.68Average Annual Silver Production (oz)306,706Steady State Average Annual Gold Production Yrs 1 to 3 (oz)118,341Steady State Average Annual Gold Production Yrs 4 to 12 (oz)186,047CostsInitial Capital ($M)269.6Sustaining and Mine Closure Capital ($M)146.5Average Operating Cost LOM ($/oz)468.5Financial AnalysisNPV 5% Discount Pre-Tax ($M)646.0IRR Pre-Tax (%)27.7Pre-Tax Payback Period (years)4Amulsar 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 yearReserve categoryTonnes('000s)Gold Grade (g/t)Silver Grade (g/t)Gold ozSilver ozProven51,1430.8013.371,317,0005,541,000Probable37,1060.7893.43941,0004,092,000Total (P&P)88,2490.7963.402,258,0009,633,000The table below shows the mineral resources at various cut-off grades:Amulsar Mineral Resource EstimateResource CategoryCut-off GradeTonnes (millions)Grade (g/t Au)Gold Ounces ('000)Grade (g/t Ag)Silver Ounces ('000)Measured (M)0.7515.41.648124.972,4590.527.71.181,0534.183,7200.436.51.001,1803.824,4890.350.20.831,3323.455,5740.270.70.661,4963.117,065Indicated (I)0.7513.01.576554.781,9950.523.91.138664.143,1780.432.20.959863.843,9770.346.40.771,1433.485,1890.271.10.591,3393.137,155Total (M&I)0.7528.41.611,4674.884,4540.551.61.161,9194.166,8980.468.80.982,1663.838,4660.396.60.82,4753.4710,7630.2141.90.622,8353.1214,220Inferred0.7515.01.456964.562,1960.526.81.089274.393,7790.435.50.921,0524.014,5800.348.10.771,1923.655,6450.273.90.591,3953.127,410The 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 ProductionMining 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:YearOre Mined (tonnes)Gold Grade (g/t)Silver Grade (g/t)Production Gold (oz)Production Silver (oz)Waste (tonnes)Strip RatioYr13,750,0000.9152.1282,63466,0086,314,0001.68Yr25,655,1200.9663.16135,333142,8329,471,8801.67Yr35,000,0000.9575.02137,056234,78410,193,0002.04Yr410,000,0000.7304.85186,717442,87723,466,0002.35Yr510,000,0000.8123.76217,152400,08123,500,0002.35Yr610,000,0000.8703.94240,416400,24223,500,0002.35Yr710,000,0000.6393.43196,132393,68223,500,0002.35Yr810,000,0000.6583.00175,571321,74723,500,0002.35Yr910,000,0000.5492.27165,254322,28823,500,0002.35Yr109,541,0000.5622.14164,266365,33823,959,0002.51Yr1110,000,0000.8152.35224,540422,30920,433,0002.04Yr12948,0001.5083.20104,375168,287375,0000.40Total94,894,1200.753.272,029,4463,680,475211,711,8802.23Note: 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.InfrastructureSurface 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 CostsOperating 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$1 million each. The model assumes the last option as preferred).LOM AverageFirst 3yrsItem$/Tonne Ore LeachedUS$/ozUS$/ozMining5.50257.11241.18Mine Cost Lease0.7937.0491.18Processing2.92136.55140.59Waste Water Treatment Plant0.136.059.43G & A0.4721.8831.37Cash Operating Costs9.81458.63513.75Newmont Payment0.219.8533.80Total Operating Costs10.02468.48547.55Capital Cost EstimatesThe 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:ItemInitial cost $Sustaining cost $Total $Mining Cost8,791,70017,189,80025,981,500Process Plant Direct Cost228,568,06326,872,254255,440,318Waste Water Treatment Plant19,078,41219,078,412Leach Pads15,687,45031,814,48847,501,938Waste Dump16,575,89314,302,18130,878,074Closure and Reclamation37,221,47737,221,477Total Initial and Future Sustaining Project Cost269,623,106146,478,612416,101,718Note: Sustaining costs include the majority of the capital costs associated with the Phase II expansionFinancial AnalysisThe 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 $1.73 billion.The table below outlines key sensitivities for the pre-tax NPV and IRR of the Amulsar project.Discount RateUndiscountedBase Case 5%10%NPV pre-tax (US$M)1,121.6646.0366.8Gold Price, $/ozUS$1,100US$1,200US$1,300US$1,400US$1,500NPV @5%, ($ M)5136467799131,046IRR %23.827.731.334.838.1Payback (yrs)4.54.03.73.43.1Capex change+10%-10%NPV @ 5% ($M)611646681IRR (%)25.227.730.5Operating Cost change+10%-10%NPV @ 5% ($M)582646710IRR (%)25.727.729.7Gold Recovery change+10%-10%NPV @ 5% ($M)806646486IRR (%)32.027.723.0Moving Forward - OpportunitiesThe 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 configurationThe 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 ConclusionLydian 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 StudyThe 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 InternationalLydian 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.FOR FURTHER INFORMATION PLEASE CONTACT: Lucy FowlerLydian International Ltd.Investor Relations Manager+44 (0)1534 715472 or +44 (0)7797 738777info@lydianinternational.co.ukwww.lydianinternational.co.uk