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Msg  63676 of 65647  at  12/18/2010 9:05:13 AM  by

liverless


Lydian International

 I've been buying into a new company this week - they are a small gold explorer with a deposit.  Their name is Lydian International.  Symbol is LYD.
 
I got the idea from Rick Rule on bnn: http://watch.bnn.ca/#clip362226
 
They have a deposit in Armenia.  The deposit right now has 1.4Moz of gold inferred and indicated, they’ve had some good drilling results since the release of the resource so that should increase – maybe to 1.7-2Moz of gold. 
 
The really great thing about the deposit is how easy and cheap it should be to mine.  It is all oxide so Lydian can use a heap leach to produce the gold – this is way cheaper than having to build a big milling circuit to produce it.  In Lydian’s scoping study they said they will have to spend between $25-$60M capex depending on the size of the heap leach.  So it’s almost an order of magnitude cheaper than your typical mill circuit to get started.  Also, the deposit is right on top of a hill, which makes it really easy to mine without having to haul away a bunch of overburden first.
 
So that's my real reason for buying the stock.  As Rule says in the interview, with an easy to mine deposit requiring very little capex it should be just a matter of time before some company takes them over.
 
The stock isn't super cheap based on a per ounce found basis, but if you look at the economics of a future mine its really cheap.  I looked at both a high and low case, with the high assuming 2Moz and the low assuming the current ~1.4Moz.  Keep in mind that rule says in the interview that he thinks they have 2.5Moz discovered. 
 
I took cost numbers from their scoping study ($4/t mining and $2.5/t milling) and checked these against some other heap leach ops to make sure they were reasonable. The capex includes $15M that they have to pay to Newmont and another $15M contingency I added on.  Taxes of 20% base plus 12.5% excess profit are included.  The after tax NPV10 that I came up with is much higher than the stock price.
 
 
 
 


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Msg # Subject Author Recs Date Posted
63680 Re: Lydian International tigersea 1 12/20/2010 12:59:08 AM


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