Lydian International (TSX: AYD) has entered into an agreement with a syndicate of underwriters, who have agreed to purchase 13.7m shares at a price of $0.73 per share raising gross proceeds of $10m. Lydian is raising the capital to finance the buy-out of the Amulsar Gold Project in Armenia from its joint venture partner, Newmont Mining (NYSE:NEM).
The fundraising is expected to close on April 14 2010.
Lydian also granted the underwriters an option, in relation to over-allotments, for a period of 30 days from the closing date, to purchase up to 2m additional shares at $0.73 per share. The underwriters are co-led by Cormark Securities and Dundee Securities, and also include Canaccord Capital and Dahlman Rose & Company.
Lydian also noted that it expects to complete its previously announced private placement with the International Finance Corporation (IFC) concurrently with the closing of the underwritten offering. Through the IFC placing Lydian is raising approximately $1.7 million through the issue of 2.4 million shares.
As part of the agreement, announced March 1 2010, Lydian has 60 days to pay Newmont $5 million. The remaining $5 million will be used to complete 16,000 meters of drilling in 2010 and pre-feasibility work at Amulsar, which is due to enter production in 2013.
A further $10 million is due in two additional instalments before December 31, 2011 and December 31, 2012. Lydian will also pay Newmont a 3% new smelter royalty, or USD$20 million over the first five years of commercial production. The transaction effectively values Newmont’s interest in the project at USD$25 million using a 10% discount rate.
Amulsar sits within the Tethyan fold belt, one of the principal geological features in the northern hemisphere. Extending from Central Europe and northern Africa across Turkey and the Middle East to the Himalayas and then on to the Far East and Indonesia. Stretching as it does across so many countries and cultures, many of which have been centres of political and geological upheaval over the centuries, the Tethyan belt is perhaps the least explored of all the earth’s major geological systems.
Amulsar already contains a 1.4 million ounce inferred resource and certainly has the potential to host a considerably larger resource with numerous untested drill targets still on the company’s ‘to do’ list, and plenty of infill drilling required on the main targets already indentified - Tigranes, Erato and Artavasdes.
Disclosure: The author holds no positions in the company