torsdag 21 februari 2013

Lydian aktieägarbrev

Dear Shareholder,

These are clearly tumultuous times for the mineral resource sector. However, in spite of the current volatile markets, redemptions and general economic uncertainties, management believes that high-margin, robust gold development projects in supportive jurisdictions, such as Lydian’s Amulsar project, continue to be attractive to investors and financiers. Why? Because we believe that the existing market is principally about margin, and the cash costs at Amulsar at present are estimated to be merely USD$470/ounce (based on the current feasibility study).

Lydian continues to be well-positioned to effectively carry out its current stated business objectives at its Amulsar project, which include, among other things, remaining focussed on the following:

• Continuing to refine its mine-design options to best reflect the underlying resource potential and ultimate crushing and stacking capacity and satisfy any environmental and social requirements;

• Completing a new mineral resource estimate based on the results of Lydian’s 2012 drill program;

• Completing an updated feasibility study for the Amulsar project (currently scheduled to be released in July 2013); obtaining the necessary permits in connection with Lydian’s new proposed site-layout plans (good progress is being made in this regard and, at present, no delays are anticipated); and

• Commencing its 2013 40,000 meter drilling program in May/June 2013 (which means that major exploration and development costs are not expected to be incurred until mid-year).

Lydian continues to have sufficient cash on hand to fund its near-term business objectives and, accordingly, does not have any current plans to seek any equity or debt financing in the capital markets at the present time. However, the company continues to explore a variety of potential sources of funding to fund its continued development of the Amulsar project.

The various future financing strategies that are currently being examined by the company include both traditional debt and equity project finance options and non-traditional alternatives such as a royalty or a silver by-product stream. Management believes that, if Lydian receives its updated feasibility study and the necessary permits by the end of Q2 2013 as anticipated, it will be in a good position to draw down on such available alternative financing at that time, if desirable, to provide Lydian with the capital it requires to further develop Amulsar through 2013 and to Q2 2014. In this scenario, Lydian would then seek to access traditional project financing
in Q2 2014 to complete its mine construction.

Planned project financing in Q2 2014 is expected to consist of a combination of debt and equity, with early indications suggesting a 70% debt and 30% equity division. To date, fourteen potential lenders, including Lydian’s current shareholders, International Finance Corporation and the European Bank for Reconstruction and Development, have expressed interest in providing the debt component of this project financing and have already visited the Amulsar project in Armenia. The company is in regular contact with these potential lenders, to assist them with developing their models and understanding the potential at Amulsar.

BNP Paribas after previously financing into Armenia said on the 20/02/13;
"“we remain very interested in raising the financing for Amulsar and welcome the additional studies that you are carrying to optimise the project. We remain on stand by for Q3 2013.” (Philippe Penet, Head of Metals & Mining, Structured Finance, BNP Paribas Bank, France)
Dutch Bank ING said 20/02/13;
“Lydian’s Amulsar project in Armenia presents itself as a future low-cost producer with anticipated stable revenue-generating capabilities supported by the project’s robust performance characteristics. Subject to our internal approvals we would be keen to assist Lydian International in developing the first modern gold operation in Armenia. A project finance structure, by a club of commercial, and possibly multilateral, debt providers, is perceived by us as the right way forward to make this happen.” (Dr Andor Lips, Vice President Natural Resources Metals and Mining, ING Bank, Netherlands)
The French Commercial bank Natixis said on the 5/7/12;

“On the basis of our preliminary review of available information and on the site visit, and subject to credit and other internal credit approvals, we are pleased to confirm Natixis’ interest to further study the possibility of financing part or portion of the project development”
“…..Based on our preliminary discussions and on Lydian’s strong corporate profile, Natixis would be pleased to support Lydian’s approach to structure the financing as a club deal, in which 4 to 6 institutions could participate”
“…..We look forward to supporting Lydian in this important development”

The company understands that lending banks are interested in pay-back only (not market capital) and, accordingly, Lydian’s production model anticipates commencing production at 10Mtpa or even more annual production from year one, using a single primary gyratory cone crusher. Under this model, the company would achieve about 250,000 ounces gold production in the first year of production and through life of mine, which we believe significantly increases the debt capacity of Amulsar.

Based on the management’s analysis of available public information, at current estimated resources and reserves, cash costs of only $470/ounce and annual production of 250,000 ounces, Amulsar is in the top 15% of gold projects and in the top three heap leach development projects throughout the world.

Click to see larger image

At times like these there is a propensity for markets to be indiscriminate, with all boats floated out on the same tide. The rising tide, however, will be less indiscriminate;only robust, high-margin projects like Amulsar will come bobbing back to bay!

We thank you for your continuing support.
Tim Coughlin, President and CEO

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