Lydian International's (TSE:LYD) chief executive Tim Coughlin quashed fears about its Amulsar project in Armenia on Thursday by insisting that building a heap leach facility would not affect a tunnel leading to a nearby lake.
Coughlin's comments come after Lydian revealed that a resolution had been put forward by the government to modify the boundaries of the catchment basin to Lake Sevan, Armenia's largest freshwater resource.
The modified area, where mineral processing would not be allowed, includes the proposed site for its heap leach facility - news that sent the share price down 31% on Wednesday.
In a conference call, Coughlin said previous studies carried out by independent consultants Golder Associates show no stress impact on the tunnel.
If there was ever a catastrophic breach of the heap leach facility, he added, any leakage that penetrates the lining and is not captured and diverted by drains, will flow downhill and away from the tunnel.
"So the proposed heap leach facility will have no impact on the tunnel," he stressed.
Coughlin pointed out that the resolution does not prohibit mining activities in the 'immediate impact zone'.
"In other words, we understand the only potential significant impact of the resolution relates to the company's currently planned location for the heap leach processing facility," said the chief executive.
The company has been invited to participate in a joint working group with the government, which will begin work towards a resolution within a week.
The changes to the catchment area will almost certainly result in a delay in the delivery and publication of the firm's revised feasibility study, a document aimed at facilitating financing of Amulsar, it warned the market.
It had hoped to publish the results of the feasibility study - which Lydian claims is 95% complete - in the third quarter of 2013.
Coughlin said that the Armenian government, as well as local authorities, remain supportive of the project.
"We have some work to do in the short-term to settle matters related to our mine site design and continue to finalise our new feasibility study," he continued.
"We've faced challenges before, we've overcome them and we've succeeded."
The shares regained 10% to $1.08 a share today.
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