Lydian International Audio Interview Transcript with Tim Coughlin, President and CEO

Harry Norman: Hello this is Harry Norman for Proactive Investors and welcome to another Proactive audio interview.  Today is the 8th March 2011 and I am talking with Tim Coughlin, President and CEO of Lydian International. Listed on the Toronto Stock Exchange Basic Materials, Metals and Mining Sector.  Stock ticker LYD. Share Price $2.2 Canadian.  Market cap $181.6m Canadian.  Lydian International shares also trade on the over the counter bulletin board in the United States.  Web address:  lydianinternational.co.uk.  Tim. Thank you very much for joining us for this interview.

Tim Coughlin: Oh thank you, Harry.

Please give investors a brief introduction to Lydian International and its business model.

Well Lydian is a gold focussed, principally mineral exploration and development company.  We like to think we have a particular expertise in what I guess you would call non traditional emerging and transitioning environments. We prioritise discovery over expensive and often time consuming, usually complicated acquisitions.  

We have an opportunistic approach which means various things, but basically that we aim to responsibly extract maximum shareholder value. Obviously at the same time with due consideration for all of our stakeholders, for the environment and of course for our affected communities.  

What we like to think makes us different is that we keep a light hand on the tiller and we pay very close attention to geo-political and socio-political aspects of our business, no matter where we are.  We are very happy in Armenia just now.  But of course we are keeping a close eye on other prospects in our immediate region.  Our key project is the Amulsar gold discovery, which was found as we were driving along the main road, and therefore has in Armenia of course, pretty much has everything a mine needs to be highly profitable, including an excellent infrastructure, outstanding metallurgy, a very low stripping ratio and an obvious potential for two million ounces or more.  We are currently at feasibility stage on that project and we are full steam ahead preparing for production in 2014.

Lydian International has a resource of 1.4m ounces of gold at the Amulsar project.  When we spoke last year you were planning to upgrade this resource.  What is the state of the resource at Amulsar today?

The 1.4m ounces was released about this time last year, since then we have drilled 24,000 metres of drilling, and our guys are currently completing the final geologic wire-frames which we expect to deliver to our resource consultants some time this week.

The model has developed significantly.  We have built these current wire-frames with significant attention to detail, and now it is quite robust.  So hopefully as well as growing the overall resource we will be assigning a significant amount of our gold ounces to at least the indicated category of resource.  

On the back of this resource we are going to run a small scale scoping study and that is principally so the market gets a good idea of how robust the economics of this project are.  And as I said two of the key contributing factors, are the outstanding metallurgy and the excellent infrastructure.  So we expect to get that scoping study out sometime early April.

What potential is there to grow the gold resource at Amulsar and what are your plans for growing it Tim?

Well even the resource we are about to release will remain open in all directions.  But particularly now for this year's modelling, as I said, we have a very robust 3D model.  There are very obvious contiguous extensions to the current resource to the immediate north-east, for at least another kilometre, about 500 metres wide.  We simply haven't drilled there previously because we didn't have a bulldozer big enough to clear the boulders.  So this year we are getting a big machine and making room for our drill rig to get into that area of the project.

And then also to the immediate south-east, again that is adjacent to the current resource,  and also to the south-west where we have got un tested  surface geo-chemistry there are high grade veins, such as the one we drilled 87 metres at 4.9grams from last year, that we have yet to drill at depth, because clearly they have underground potential.  It is worth mentioning that 25% of our drill holes still remain open at depth.

And then of course there is Erato which is 900 metres to the north-east where we drilled ,a couple of years ago now, 229 metres at a gram gold and last year 186 metres at 1.1grams gold amongst some other pretty good intersections and that Erato remains open in all directions as well of course.

So I think we can easily see 2 million ounces at Amulsar with very obvious potential for more and our plans in terms of growing that resource is to drill another 30,000 metres this year.

What is the purpose of the column leach metallurgical test you recently completed for Amulsar and what did they reveal?

A column leach test, they synthesise the heap leach process and they showed that with a two-stage crush, that is down to about 19mm we achieved up to 93% recoveries and leached what can only be described as remarkable 80% of our gold in just seven days.  So they really are terrific results and along with other factors, obviously such as the infrastructure, they mean that we can mine at much lower grades and produce gold at a much higher margin than many other gold mines around the world.

What was the purpose of appointing a Development Advisory Board in January of this year?

Well we simply recognised that as we head down this road to production we have to beef up our team with expert assistance of people we have got on the board, which include our local banker, and very well-known local identity Mr Nerses Karamanukyan, a highly experienced mining engineer Patrick Gorman and Liz Wall who is a very well known environmental and social specialist.  

We have also employed a metallurgalist and his job is to help manage the project through the bankable feasibility stage, hopefully construction and production.

What is the situation with Lydian International's joint venture with IMM Marketing for the Drazhnje Lead/Zinc/Silver project in Kosovo Tim?

Well this has been on hold whilst we focus on the main project of interest.  But also while Kosovo institutions try to resolve themselves and make a decision on our application for a Retention Licence.  The economics of Drazhnje as such, that it best benefits from a toll treatment scenario and so options for that are limited to the Trepca facility which is currently just about to undergo privatisation and also to IMM who have their treatment assets in Macedonia. 

I think it is fair to say that Kosovo is still reeling after a snap election which followed the removal of the President, and the removal of other corrupt officials and various scandals involving the current Prime Minister.  The situation in that country has worsened significantly over the last two years.  However there is a glimmer of hope, it seems that has now been recognised and there is some renewed pressure to reform.  And as I alluded to previously one significant positive is that, it appears that the privatisation of the Trepca Base Metals complex is now finally imminent.

In October/November last year Lydian International raised $23m Canadian for a private placement. Where does this leave Lydian International's financial situation going forward?

Well we currently have about CAD$25m in the bank from that financing and cash we already had, which is plenty to see us through this year's drilling and feasibility work and that will take us well into next year.  It will also see us through constructing a test heap leach facility, which we are planning up on Amulsar this year.  So, not a problem at the moment.

What can investors expect from Lydian International over the next 12-18 months Tim?

Well they can expect our imminent resource update of course and the scoping study I have mentioned on the back of that, which will be quite informative, I think for the market.  This will be the first time we will using indicated category resources as well as inferred and the first time they will get some true indications of input parameters.  And then there are the results, as the drilling programme proceeds through the year, hopefully commencing drilling in May, and there will be a feasibility study sometime before the first half of 2012.  

Also perhaps some new projects advancing on the pipeline such as  our Nor-Arevik porphyry copper target in the south and other licence applications and initiatives we have underway.