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Lydian International has reached the final stage of the permitting process for its Amulsar gold project.
Lydian was halted during early morning trading hours pending the announcement, and shares of the company initially jumped as high as $0.67 once trading resumed — up roughly 28 percent from Wednesday’s close. Lydian was still up 22 percent, trading at $0.61, as of 2:14 p.m. EST.
Why is it important?
Lydian has received various permits for Amulsar in the past. However, this is the first time the company has gained a mining right that allows it to develop the project according to the parameters of its updated feasibility study, which was released back in September.
The study made substantial changes to the project’s infrastructure, such as moving the planned location of the heap leach facility. It projects that the mine will recover over 2 million ounces of gold over its 10.4-year lifetime, and will have a life-of-mine, all-in sustaining cost of $701 per ounce of gold.
Overall, Amulsar has a net present value of $306 million at a 5-percent discount, an initial capital cost of $426 million and an internal rate of return of 20.2 percent. “I think when you look at the quality of work that was done in the second round [feasibility study], it’s certainly a robust project,” said Andrew Kaip of BMO Capital Markets.
Extensive interaction
Investors who remember why Lydian had to relocate its heap leach facility — a government resolution back in the summer of 2013 forced the change — may be a little hesitant about Amulsar. However, Lydian has worked hard since then to communicate with all project stakeholders, and that diligence looks to have paid off — the company has already secured approval for an environmental impact assessment (EIA) and a technical safety program (TSP), and Trevor Turnbull of Scotiabank noted that the Armenian government came to a decision about Amulsar well ahead of schedule, indicating good support for the project.
Similarly, Howard Stevenson, Lydian’s president and CEO, said in a statement, “[t]he previous EIA and TSP approvals, and now this most recent approval of the Mining Right, were the subjects of intensive and thorough interaction with the Armenian authorities, local communities, members of civil society, and others … We look forward to a long working relationship within Armenia as this project progresses into construction and production.”
Watch this space
Turnbull said that Scotiabank has given Lydian International a “sector outperform” rating and a target price of $0.70. However, the analyst said that the firm is currently reviewing that target price in light of today’s news.
According to its website, Lydian is hoping to reach full production at Amulsar in 2016, and today’s mining right approval will definitely help it move towards that goal. Certainly, gold investors will be heartened to see a company developing a project in the current market, and will be watching Lydian for further developments.
Securities Disclosure: I, Teresa Matich, hold no direct investment interest in any company mentioned in this article.
Related reading:
New Feasibility Study for Lydian’s Amulsar Shows Project is a ‘Compelling Opportunity’