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Company profile Lydian International: the Armenian story Lydian International is a TSX main board-listed mineral exploration and development company with expertise in discovering and developing new gold projects in unfamiliar and frontier settings. Lydian’s key asset is Amulsar, a gold project in southern Armenia straddling the provinces (Marz) of Vayots Dzor and Sunnik. Amulsar project The Amulsar project covers a region of highsulphidation, epithermal-type gold mineralisation. It was discovered by Lydian in 2006 and currently hosts a global resource of 3.2Moz gold – 2.1Moz at 1.0g/t in the indicated and 1.1Moz at 0.9g/t in the inferred category. It is still open in all directions, including depth and is being advanced towards Bankable Feasibility Study, due to be completed by the end of Q2 2012, with full production planned in 2014. It is then envisaged that the project will be fully permitted (Q2 2012), ready for the completed detailed engineering studies, due out by year-end 2012, enabling construction of the infrastructure to begin. Amulsar will be an open-pit heap-leach mine – the first such operation in Armenia. Gold production is predicted for Q3 2014, with an initial 123,000oz/y of gold in the first three years, with a ramp-up in year four, increasing annual production to 256,000oz/y of gold (figures based on PEA, July 2011). The Amulsar gold project is well located in terms of infrastructure. The main tarmac road between the Armenian capital of Yerevan (distance: 176km) and the south of the country passes some 4km to the south of the project, and the main road is flanked by hightension electricity lines (which will be used to supply the project with electrical power). A further tarmac road passes to the west and north of Amulsar serving the small town of Jermuk. Water is available from the Vorotan River – which flows south of the project – and the Spandaryan reservoir (3km east and 8km southeast, respectively). A major gas pipeline between Iran and Yerevan is in the final stages of construction and passes some 4km east of Amulsar. A fibre-optic internet cable was laid during 2010 and a small hydro-electric plant is under construction on the Vorotan River – both of which are 4km north-east of Amulsar. There are several small towns and villages in the vicinity, from where Lydian and its contractors source local labour. The PEA indicates that the project will be highly profitable, with a preliminary IRR assessment based on 1.64m mineable ounces only or 45% and an NPV of 515m. Social responsibility With a strong social agenda and an understanding of the complex political backdrop to this region, Lydian develops its projects responsibly with exceptional emphasis on social and environmental awareness and care. The company minimises environmental impact and engages local communities in order to deliver sustainable social development initiatives. Currently, there are 130 local people employed by Lydian at Amulsar and, once the mine goes into production, this figure is likely to increase to 300-500 full- or part-time workers, fully trained by Lydian International. Two of Lydian’s largest shareholders are the International Finance Corporation, part of the World Bank Group, and The European Bank for Reconstruction and Development. Both these entities provide influential in-country support and valuable advice to manage environmental, social and governance risks. www.lydianinternational.co.uk CONTACT Lydian International Tel: +44 (0)1534 715 472 Fax: + 44 (0)1534 758 708 E-mail: info@lydianinternational.co.uk 2011 Mines and Money Award The team at Lydian International were flattered to receive the Outstanding Achievement award given for notable exploration success (Amulsar) presented at the Mining Journal awards dinner at the Mines and Money conference held in London on December 7, 2011. The Mining Journal Outstanding Achievement Awards have been established to honour those individuals and organisations who have made a significant contribution to the industry and who stand out from the crowd. For more information on Lydian International and the Amulsar project, visit the website below. Below: drilling commences at Amulsar; Above: the Amulsar camp and bag farm; Top: view south to Tigranes and Artavasdes; Top (inset): social responsibility is taken very seriously
THE development of mineral resources is a key driver of global economic growth but the extent to which it has fulfilled that potential is varied. A report from the World Economic Forum (WEF), in collaboration with the Boston Consulting Group, explores the views, priorities and concerns of key stakeholders in mineral development. The report, entitled ‘Responsible Mineral Development Initiative’, provides important guidelines for mineral exploration and mine development. It asks where discontent and frustration most commonly arise, where improvements can occur, and what can be done to foster a more responsible, sustainable mineral development, thus enabling better integration of mining wealth into national economies. The first part of the report focusses on the challenges around responsible mineral development, while the second part summarises stakeholder views on how to address these challenges. The following material includes extracts from the report. Minerals in context WEF launched its Responsible Mineral Development Initiative (RMDI) in 2010. It started by asking a global range of stakeholders to identify the key challenges around responsible mineral development. It asked what works, what does not, where discontent and frustration most commonly arise, and where improvements can occur. WEF notes that some of the world’s poorest countries are rich in mineral resources. Using these resources effectively offers, it says, “an unmatched opportunity for social and economic transformation”. The report reminds us that mineral development can help drive socio-economic development in ways that fit with local and national priorities. In particular, it can contribute to the country’s development by generating foreign direct investment, export earnings, government revenues (through royalties, taxes, licenses and fees), GDP growth and employment. Achieving responsible, sustainable development is tough and complicated. Progress is being made along many fronts in many regions, but there are significant barriers to progress. These barriers are often highest in countries where sustainable development is most needed. WEF’s research and consultation was underpinned by workshops across six continents. Participants were asked how mineral development can occur in a way that best considers the full social and economic contributions and costs across the entire life cycle of a mine, from the onset of exploration through closure and reclamation, while also fairly addressing the distribution of costs, benefits, risks and responsibilities between stakeholders. RMDI seeks to facilitate ways to help mineral-rich countries attain socio-economic progress beyond the February 2012 mining revenues, stimulating broader indirect benefits. The complexity of the industry, and wide variations in political, economic, regulatory, physical and cultural environments, mean that no solution is universally applicable. As a result, the WEF report does not seek a ‘recipe’ or all-encompassing solutions. WEF recognises that while much remains to be done, excellent contributions to responsible development already exist. The organisation’s aim, it says, is to build on this work. Initially focused on the roles and use of Mineral Development Agreements (see below), WEF’s work broadened in scope, while at the same time considering how to improve MDAs. The concept of an RMDI stakeholder is used frequently throughout this work. This encompasses mining companies or their representatives (both national and international), governments (national, regional and local), NGOs, representatives of local communities, indigenous peoples, civil society, international bodies and multilateral development organisations, academic institutions and individuals with interests in mining and its impacts. The challenges WEF asks: What are the main obstacles to responsible mineral development? Mining is an expensive, long-term business that has a profound effect on its host societies. Stability and trust are essential underpinnings of any development. Companies making heavy, long-term capital commitments must be sure that they are in a stable legal, political, social and economic environment. Stakeholders in those societies need to have confidence that the economic and social benefits from mining will be distributed equitably, with respect for their culture, their environment and their future economic stability. WEF held consultations with 250 stakeholders in 13 countries during the RMDI’s first phase. This highlighted a wide range of concerns that undermine EXPLORATION SPECIAL Responsible search for minerals A report published in February by the World Economic Forum provides a framework for responsible mineral development “Achieving responsible, sustainable development is tough and complicated” Six building blocks Consultations by WEF have made it clear that there is no one-size-fits-all solution to the multifarious challenges of responsible development. Given the size, length and complexity of most mining developments, their many effects on their host societies and the immense differences within and between those societies, every development is different as are the measures and devices needed for its sustainable success. Instead, stakeholders suggested that solutions must be developed along parallel dimensions. A framework of six building blocks was identified to address recognised challenges and trust and confidence. An understanding of these concerns was further developed through continued consultation during the second phase of the initiative. The variety of concerns matched the range of country and company situations, meaning that no two problems identified were entirely equivalent. WEF reports, however, that common themes emerged. Mining companies have found that in some countries the risks of investment can outweigh any potential benefits. Investment is vulnerable if there are unexpected changes to the law that undermine the original terms of agreement, since these terms underpin its economic viability and make investment possible in the first place. So, companies feel threatened by rising resource nationalism and its associated possibility of unexpected dramatic change. These possibilities will form part of the comprehensive risk analysis that precedes any investment. This will also take in the stability and length of the approvals process, the potential for resistance in the host country, which in extreme cases may extend to issues of human security, and the adequacy of local, regional and national infrastructure. Governments may suspect they are not receiving an appropriate share of benefits from a project. Sometimes this is because agreements made under previous administrations were marred by corruption or an imbalance in negotiating capacity. Civil society can feel that communities are suffering damage to their health and environment while missing out on social and economic benefits. All this may be compounded by poor communication and a lack of transparency, leading to misunderstanding and distrust. Six building blocks The six building blocks (see box, below) reflect the issues surrounding many developments. They include economic and social aspects, such as issues around taxes and royalties, local suppliers and hiring, give guidance for next steps (the importance of each depends on its context): 1. Progressive capacity building and knowledge sharing among all stakeholders; 2. A shared understanding of the benefits, costs, risks and responsibilities related to mineral development; 3. Collaborative processes for stakeholder engagement throughout the life cycle of mining projects; 4. Transparent processes and arrangements; 5. Thorough compliance, monitoring and enforcement of commitments; and 6. Early and comprehensive dispute management. Mining Journal special publication – PDAC 31
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