developing new areas of gold mineralisation in the immediate vicinity and along the Amulsar ridge top such as Erato and Arshak. Four drill rigs are due to commence on June the 1st with each of them being carefully positioned to increase our understanding and grow the resource.


Higher Grade Zones

Drilling on a wide spaced grid (nominally 80m which is just 20m short of a soccer pitch) has meant that it has been very difficult to join up and trace higher grade gold intersections such as those exemplified in the drill holes tabulated below. Isolated intersections of high grade can make resource block modelling difficult and may lead to an effective smoothing of the resource to a lower than representative grade.

Part of the 2010 drill program and an initial focus of our activities this year will be to outline the pattern these higher grade zones make in the subsurface using the information we have and target them with the drill rig. At Amulsar we know that gold occurs in fractures and faults, in layer-like zones that parallel stratigraphy and parallel to the outer surface of dome-shaped igneous intrusions that are emplaced in the rock pile along the ridge top at Amulsar. It is the margins of these intrusions that appear to control the higher grade gold and these will be the initial objective for at-least one of the four drill rigs we will have on-site this year. Lydian’s geologists are currently preparing subsurface models and sections that will help us position the drill rig to follow these higher grade zones just as soon as the rigs are ready to drill.

Erato Area

The Erato area is located just 900m north of the current resource envelope. In the last diamond drill hole of the year last year (DDA-030) we intersected 229m at 1g/t in this area which also included some higher grade material (16m at 3.3g/t gold; see section below). Other drill holes close to DDA-030 along an almost east-west oriented line also intersected gold grade including 50m at 1.0g/t gold and 56m at 1.6g/t gold. Gold in the Erato area appears to correlate well with geophysical data (Induced Polarisation) implying that it relates to a strong contrast in silicified and un-silicified rock. This is illustrated in the figure below where intense white and hot colours have mapped out probable extensions to known gold at Erato and other targets yet to be tested in the immediate vicinity. One of the drill rigs will be focussed at the very outset on stepping gradually away from DDA-030 and following the gold grade parallel to the section line and along strike parallel to the geophysical anomaly.

Resource Extensions

The interim 1.4 million ounce resource at Amulsar remains open in all directions. Diamond drill rigs will commence in the Artavasdes area, extending the resource to the west, to the north and south following initially higher-grade zones including that one intersected by RCA-082 which returned 82m at 2.5g/t gold and trying to close in the 500m gap between the edge of the resource envelope and drill hole RCA-093 which returned 94m at 1.5g/t gold.

DFS

We are contracting consultants to commence a Definitive Feasibility Study on the project. This year the work will include further metallurgical studies, environmental studies, resource assessment and geotechnical work.

Regional Work

As part of the Venture program with Newmont some 600 regional drainage samples have been collected with approximately 20% of these yet to be followed up and three under license application. The Company is also leveraging off its in-country experience and profile and seeking out potential opportunities and local joint-venture projects.

Environment and Social

Lydian is planning to expand its environmental and social programs in the villages surrounding Amulsar this year and will be commencing studies into the quality of soils and grasses and researching the use of cow dung and other waste material for the efficient heating of village houses. The company is also establishing seed nurseries where high and low elevation tree and native plant species will be cultured before being planted in lowlands along waterways and in alpine pastures above the normal grazing elevation of local cows.

All-in-all 2010 is set to be an exciting year for Lydian with four drill rigs positioned initially to outline the higher grade zones, extend the resource envelope and drill out new prospects such as Erato and Arshak.

First results are expected sometime middle to early July.