The Drazhnje Zn-Pb-Ag and Au project in Kosovo is one of Lydian's flagship projects. The Company's exploration target is to define a +10Mt combined underground and open-pit operation. Full feasibility is planned for end 2009.

Lydian operates the Drazhnje exploration project through its wholly owned subsidiary Kosovo Resource Company LLC. The licence is 12 Sq km in area and is located some 36km from the capital of Prishtina.

Historic exploration activities identified a number of variably exposed northwest trending massive sulphide bodies. This was not a producing mine, it is an abandoned exploration project. Previous exploration work comprised some 80 drill holes, collared both from surface and from two levels of exploratory drives. Drilling and underground sampling led to the estimation of a Yugoslav resource (not JORC compliant) of 4.7Mt at 4.9%Zn, 2.4%Pb and 45ppm Ag in categories A + B + C1 and a further 2Mt at 5.8%Zn, 3.2%Pb and 45ppm Ag in category C2.

Work in Progress

A first pass drill programme at Drazhnje has been completed (Table of results. Orange colour indicates confirmatory drilling, blue colour refers to along-strike upside drilling on targets not included in the Yugoslav resource) and second pass drilling and ground geophysics is currently underway.

The first pass programme was designed to locate and confirm the main mineralised body and to test exploration potential along the northern strike extension of the system (see Figure 1). A total of 20 diamond drill holes and some 2500m of core were drilled out. The results to date are very encouraging having confirmed the presence of sulphide mineralisation with significant sections of higher Zn-grades in the main mineralised body and defined exploration upside along strike to the north.

The most extensive intersection to date (not true width) has been 62m at greater than 6% Zn, just less than 2% Pb and 29ppm Ag (using 2% Zn cut-off) Drilling along strike in the areas of St George and St Barbara has identified new sulphide mineralisation (not included in the former Yugoslav resource) with sulphide intersections of up to 13m at greater than 9% Zn and 4% Pb (using 2% Zn cut-off).

Trpeza

A new zone of gold mineralisation (with lower grade zinc) has been identified at the Trpeza prospect some 2km along-strike of the former Yugoslav Resource. Trenching from this area has returned significant results including 51m @ 1.25g/t Au, 38m @ 1.08g/t Au and 31m @ 1.22g/t Au. This area is presently being drill tested with a view to outlining an open-pittable resource.

Geology

The Drazhnje Zn-Pb-Ag project is located along the Vardar Zone which is a major basin-controlling fault structure that was active during the Cretaceous and then inverted during the Tertiary. The main body of massive sulphide mineralisation at Drazhnje appears to be hosted along the main Vardar fault zone itself whereas other significant occurrences (known as St. George, St Barbara and Trpeza) appear to be located along associated faults in the footwall to the Vardar fault and in second generation fold hinges. Zn-Pb-Ag mineralisation is hosted in the deeper parts of the fault and fold system whereas more significant gold mineralisation (such as that at Trpeza) occurs in the upper reaches of the system.