Broker FoxDavies said it was "very encouraged" by Lydian International's (TSE:LYD) recent scout drilling results, which revealed a ‘very good early indication’ that the 2.5 million ounce Amulsar gold project in Armenia extends to the south-west, outside the current resource area.
The broker maintains its "buy" recommendation for the stock with an unchanged 12 month target price of C$3.84 per share (current price: C$2.450).
On July 6, the firm announced results from seven holes on the lower western slopes of the Amulsar ridge - away from the current resource shell. Some holes were drilled up to two kilometres away.
Amulsar is made up of three separate areas – Tigranes, Artavasdes and Erato.
Results confirmed the source of several gold soil geochemical anomalies. Importantly it has also extended the known limits of Amulsar’s mineralised system.
Lydian chief executive Tim Coughlin had said: “These initial scout drilling results are very good early indications that the gold mineralized system at Amulsar extends south-westwards for at-least a further kilometre from the current resource shell and that it may extend to a depth of 500 meters beneath the current resource."
The programme’s stand-out results come from drill hole DDA-087, drilled around one kilometre southwest of the resource shell and 500 metres below the resource limit, which cut 72 metres grading 0.8 grams per tonne (g/t) gold and included including two higher grade sections – 12 metres at 1 g/t and 35 metres at 1 g/t.
Nearby drill hole DDA-085 returned anomalous gold (0.3g/t) over the first 42 meters, whilst drill hole DDA-081, two km away from the resource shell, intersected a thin segment of a mineralised fault zone carrying 3m at 1.3g/t gold.
Lydian told investors that these scout drill holes were drilled early in the field season, when the team was unable to access the main resource area because of snow.
The company has now upped the workload for the current drill programme. Six rigs are currently working on site and a sixth is due to join the campaign later this month.
The plan is to drill more than 40,000 metres through the current programme, which comprises resource upgrade, resource extension and exploration drilling.
"Exploration work at Amulsar is being conducted in parallel with resource infill and extension drilling at Tigranes, Artavasdes and Erato,” Coughlin added.
"Further drilling will be completed later in the year along the soil geochemical anomaly to fill in the gap between DDA-087 and the limits of the resource shell at Artavasdes.
“Further exploration targets will also be tested to the immediate northeast of Tigranes, at Erato and at Arshak".
In a note FoxDavies said: "The fact that the two holes have struck significant mineralisation over 250m away is a testament to Lydian’s current thinking on the controls on mineralisation at the project.
"We are particularly impressed by the length of the mineralised intercepts (72 m and 42 m) and the shallow nature of the mineralisation which is in line with the majority of previous results and indicates a trend towards lower stripping ratios, something which our economic model is quite sensitive to.
"Hole DD-087 significantly, also contains sulphide mineralisation below 87 m indicating the possible discovery of a sulphide feeder zone for the oxide deposit. This will have to be incorporated into Lydian’s geological model before making any definitive statements but could raise the potential of the project considerably.
"Results from DDA-080 (3 m at 1.3 g/t Au), although not particularly exciting to us, does indicate that there is more gold to be found in the region which will require further work and could add to the resource potential of the area."