Analysts note Lydian International's recent progress at Amulsar gold project

In a report released last month, Canaccord Genuity noted that investors have been actively pulling out of the small caps mining sector, leading to an 18% decline in the TSX Venture index Since April. The broker said that while investors have been reasonably reluctant to put their money at risk, they have overlooked a few companies that could give investors legitimate reasons to “feel bullish".

Among them was Armenia focused gold miner Lydian International Corp (TSX:LYD), focused on advancing its 95% owned Amulsar gold project in Armenia and the Drazhnje zinc-lead-silver-gold project in Kosovo. Canaccord has recently visited the Amulsar property, where the company is currently conducting 16,000 metre combination RC and diamond drill program designed to infill and expand resources at Amulsar. The project currently hosts an inferred resource of 49.6 million tonnes grading 0.90 g/t gold for 1.43 Moz (million ounces) contained in the Tigranes and Artavasdes zones.

In 2006, the company entered into a 50/50 exploration joint venture agreement with Newmont Mining (NYSE:NEM), which had the option to earn an additional 20% interest in the project by completing a feasibility study with an option to earn a further 10% interest by funding the project through to commercial production. Newmont then elected not to add to its project interest and Lydian entered into an agreement to purchase its 50%.

The broker said that the infrastructure was considered very good with a gas pipeline transecting the project area to the east and high tension power paralleling the western margin of the property. The company is currently scoping potential areas for future leach pads and processing facilities.

The bulk of the exploration work over the last two years has focused on Tigranes/Artavasdes, which together host to the current 1.4 million oz gold resource. The company is targeting to have an updated mineral resource completed for year end. In addition, Lydian is driving to have a feasibility study completed by the end of 2011.

The current 2010 drill program will continue to concentrate on the Tigranes and Artavasdes area with a total of 91 holes planned. The company hopes to provide drill centres of 40 metres to push resources into the measured and indicated categories.

“We believe there is resource expansion potential throughout the project area...we believe believe there is moderate room for expansion to depth and on the boundaries around Tigranes and Artavasdes,” said Canaccord.

There are currently eight drill holes planned for 2010 at the Erato and four planned at the Erato North, which is considered one of the primary areas for expansion potential at Amulsar following initial positive drilling results. The last hole completed at Erato in 2009 returned 229 metres grading 1 g/t gold. The first hole of the current program is testing mineralization west of last years drilling.

The Drazhnje project hosts a NI 43-101 inferred mineral resource of 3.3 Mt (million tonnes) grading 5.1% zinc and 2.5% lead. Drilling at the project has largely confirmed historical work and the company have identified a new gold system on the project.

Broker Cormark Securities already in June gave a bullish assessment, stating that the company was a “low risk” and that it could produce up to 90,000 oz per annum at operating costs of about US$390/oz over a mine life of more than 12 years. It called Lydian an "undervalued growing gold developer".

"It is clear, in our view, that Amulsar has all the hallmarks of an economically robust, , low-cost open-pit mine, even on the base case scenarioo, which completely discounts exploration success," Cormark said.

Another broker, Dundee Capital Markets, at the end of last month added Lydian to its Mineral Exploration Watch List.