untested potential at other newly identified prospect areas such as Erato where we drilled 229m at 1.0g/t gold in the last drill hole of the 2009 season (see Figure 1).

This is a highly positive move for Lydian, simplifying the story significantly and providing clarity on the Company’s pathway to production. The terms of the deal have been outlined in the press release of March 1st but in essence Lydian is paying Newmont USD$15m over three years and a capped net smelter royalty. All payments are purchasable at a present value using a 10% discount rate meaning that the exploration ounces today cost USD$13.7m equating to approximately twenty dollars a resource ounce on a growing resource with significant untested potential.

The question we have been most often asked is why are Newmont exiting a project which is permitted for production and hosts such obvious potential? This is something only Newmont can answer in whole. Our belief is that the main issue for them lies in permitting and the time-line to production which is governed by the Armenian authorities. We currently have a 25-year mining license on the project and have recently concluded our concession agreement which provides the Company with 600 thousand ounces of gold, approved and ready to mine. The project must be in production by 2013 and of course, while we can and will be adding to the approved mineable resource and still exploring, it means we need to commence our feasibility work this year and expect to be producing in 2013 from an approved resource in an expanding starter pit scenario. This starter-pit operation would not really suit the appetite of a major miner, as they generally prefer to spend more years on systematic exploration and developing a larger resource inventory before committing to feasibility and mining. The fact that as part of the exit deal Newmont are subscribing to a further 3 million shares should be comfort enough to the market that they still see a financial upside.

Excitingly this will be the first year that Lydian can explore the project without the pressures of defining a small resource to convert to a mining license (2008), or to step away from the resource and focus on drilling out new areas (2009). This year the Company has contracted three drill rigs for a total of 16000m drilling. One of these rigs will be focussed on infill drilling within the resource area and with the principal aim being to upgrade the resource category and better define the zones of high grade, another rig will be dedicated to expanding the resource envelope and closing it off, whilst the third machine will be focussed on testing and expanding newly discovered areas such as Erato in the north and Arshak in the south.

In Kosovo the Company is in advanced negotiations with a potential joint venture partner. We remain confident of our projects potential there but we are mindful that our exciting commitments at Amulsar require dedicated focus for the coming year.

Tim Coughlin, President/CEO



PDAC
Lydian will be attending the PDAC in Toronto March 7th to 10th. Please come along and see us at booth number 2328