AMC Consultants (UK) Limited Registered in England and Wales Company No 3688365 Level 7, Nicholsons House Nicholsons Walk, Maidenhead Berkshire SL6 1LD UNITED KINGDOM T +44 1628 778 256 F +44 1628 638 956 E [email protected] AMULSAR GOLD PROJECT ARMENIA TECHNICAL REPORT MINERAL RESOURCE UPDATE AND RESERVE ESTIMATE UPDATE for Lydian International Limited TSX: LYD Prepared by G. David Keller, P. Geo.: AMC Consultants (UK) Limited Gary Patrick, MAusIMM CP (Met): Metallurg Pty Ltd. Herb Welhener, MMSA-QPM: Independent Mining Consultants, Inc Richard E. Kiel, P.E.: Golder Associates Inc. Peter R. Lemke, P.E.: Golder Associates Inc John Maxwell Eyre, CEnv: North Coast Consulting Limited Joseph M. Keane, P.E.: SGS-KD Engineering In accordance with the Requirements of National Instrument 43-101, “Standards of Disclosure for Mineral Project” of the Canadian Securities Administrators AMC 412042 Effective Dates of Report: Mineral Resources - 18 April 2013 Mineral Reserves - 28 November 2012 ADELAIDE BRISBANE MELBOURNE PERTH TORONTO VANCOUVER MAIDENHEAD +61 8 8201 1800 +61 7 3230 9000 +61 3 8601 3300 +61 8 6330 1100 +1 416 640 1212 +1 604 669 0044 +44 1628 778 256 www.amcconsultants.com LYDIAN INTERNATIONAL LIMITED Amulsar Gold Project DATE AND SIGNATURE PAGE This report has been prepared and signed for by the following “Qualified Persons” (within the meaning of National Instrument 43-101). The effective dates for this report are 18 April 2013 for the resource estimate and 28 November 2012 for the reserve estimate. Signed the 21 April 2013 G David Keller, P.Geo. Principal Geologist AMC Consultants (UK) Limited Gary Patrick, MAusIMM CP (Met) Metallurg Pty Ltd. Herb Welhener, MMSA-QPM Independent Mining Consultants, Inc Richard E. Kiel, P.E. Golder Associates Inc. Peter R. Lemke, P.E. Golder Associates Inc John Maxwell Eyre, CEnv North Coast Consulting Limited Joseph M. Keane, PE SGS-KD Engineering 12042 Amulsar Project Lydian Resource and Reserves Final - May 2013 ii LYDIAN INTERNATIONAL LIMITED Amulsar Gold Project 1 SUMMARY Introduction This technical report for the Amulsar gold project, in the south-central region of Armenia has been prepared by AMC Consultants (UK) Limited (AMC) of Maidenhead, UK, for Lydian International Limited (Lydian). The report has been prepared in accordance with requirements of National Instrument 43-101 (NI 43-101), “Standards of Disclosure for Mineral Projects”, of the Canadian Securities Administrators (CSA) for lodgement on the CSA’s “System for Electronic Document Analysis and Retrieval” (SEDAR). This report is required to support an update of the estimation of mineral resources for the Amulsar Gold Project, as announced by Lydian in a press release issued 5 March 2013. The effective dates of this report are 18 April 2013 for the mineral resource estimate and 28 November 2012 for the mineral reserve estimate. Revised mineral reserves based on the current mineral resources are being developed. The mineral reserve estimates stated in this report represent those derived from a previous mineral resource estimates, effective date 28 November 2012. From 2008 to December 2012, Lydian drilled 383 reverse circulation and 507 diamond core drillholes, totalling 110,561 metres of drilling, and chip sampled 358 lines for 1,337 metres of sampling, on the Amulsar gold project. This has allowed the delineation of major lithological units and structures that were used to model mineralization and estimate mineral resources for the project. The Amulsar gold project is located in south-central Armenia approximately 115 Km south-west of the capital Yerevan and covers an area of approximately 98 square Km. The property is covered by three Prospecting Permissions. A mining licence covers the Amulsar area. Core shed facilities, sample processing, and offices for the project are located in the nearby town of Gorayk near the southern boundary of the project area. Exploration and mining licences for the Amulsar project comprise the Saravan and Gorayk and Khatchkar Prospecting Permissions. A new mining licence granted for the project, that is valid until 2034 and permits extensions to the licence as new resources, has been approved. All prospecting permits and mining licences are held 100% by Geoteam CJSC, an Armenian registered Closed Joint Stock Company. Geoteam is owned 100% by Lydian Resources Armenia, a wholly-owned subsidiary of Lydian International Limited. The Amulsar region was initially identified by the Armenian Soviet Expedition in 19361937 as an area of “secondary quartzite” which was deemed to host potential as a silica resource. Research work by the Soviet Expedition continued at Amulsar during the period 1979 to 1982. Silica reserves at Amulsar were never entered onto the Republic of Armenia State Balance, and no further exploration or research work has been conducted by the Soviet Expedition in the area since 1982. Geology and Mineralization The Amulsar gold deposit is situated in south-central Armenia and is hosted in Upper Eocene to Lower Oligocene calc-alkaline magmatic-arc system that extends north-west through southern Georgia, into Turkey, and south-east into the Alborz-Arc of Iran. 12042 Amulsar Project Lydian Resource and Reserves Final - May 2013 iii LYDIAN INTERNATIONAL LIMITED Amulsar Gold Project Volcanic and volcano-sedimentary rocks of this system comprise a mixed marine and terrigenous sequence that developed as a near-shore continental arc between the southern margin of the Eurasian Plate, and the northern limit of the Neo-Tethyan Ocean. The Neo-Tethyan Ocean closed and subduction ceased along this margin in the Early Oligocene – when a fragment of continental crust was accreted with the Eurasian plate. The Amulsar deposit is hosted in a sequence of Eocene-Oligocene volcanogenic rocks of basaltic to dacitic composition, containing two distinct volcano-sedimentary cycles. The Lower Volcanic unit (LV) is dominated by massive porphyritic andesite. The unit also contains abundant coarse volcaniclastic members in some project areas. The Upper Volcanic unit (UV) is characterized by coarse volcaniclastic breccia occurring within debris flow channels, incised into a thick package of finer grained volcanogenic rocks, including immature feldspathic sandstone. Andesitic lava flows form a minor component and also appear to occur in erosional channels. The UV unit lies disconformably over the LV unit. Pervasive host fracturing has been produced during an interval of both east- and west- directed thrusting, producing a broad mild antiformal fold across Amulsar project area. The abundance of host fracturing is likely controlled by the differential strength increase produced by the focusing of pre-mineralization silica-alunite alteration into the porous breccia units. Mineralization is focused within a local zone of highly complex deformation near the crest of the antiform. At least two intervals of post-mineralization extensional faulting dissect the antiformal structure, such that the original ore system is now preserved within large discrete north-easttrending grabens that cross the antiform. These larger structures have been disrupted by north-westtrending extensional faults. Gold mineralization at Amulsar is thought to have been a late event in the development of the deposit, occurring dominantly within the silica-alunite altered volcano-sedimentary breccia units of the UV unit. Mineralization is also associated with iron oxide-coated fracture surfaces and heavily oxidized faults that cut the silica-alunite alteration. Gold mineralization is believed to be associated with iron oxide coatings, fillings and hydraulic breccias in late stage brittle fractures, and faults within a thrust and fold complex. Silver mineralization is present at the Amulsar project, but the genesis and distribution of is not well understood. Silver mineralization does not correlate with gold mineralization. Average silver grades range from 2 g/t to 5 g/t and locally can occur in the 100 g/t to 200 g/t range. 12042 Amulsar Project Lydian Resource and Reserves Final - May 2013 iv LYDIAN INTERNATIONAL LIMITED Amulsar Gold Project Exploration and Data Management Exploration on the Amulsar project was initiated with a joint venture between Lydian and Newmont Mining Inc. in the period from 2008 to 2010. Newmont completed approximately 150 line Km of ground magnetic surveys, and 54.6 line Km of induced polarization and resistivity surveys during the joint venture period. After the project was acquired by Lydian in 2010, all exploration activity was managed by Geoteam CJSC—a wholly-owned subsidiary of Lydian. Geoteam has completed an extensive programme of surface geological mapping over the project. In conjunction with the surface mapping programme Geoteam has collected approximately 358 (1,337 m) surface channel samples and 171 (50 m) trench samples. Channels samples are cut from outcrop faces cleared of vegetation, talus and loose rock. The average length of channel samples is about 2 metres, with approximately 99% of samples less than 3 metres in length. In early 2012, Lydian commissioned a structural geological study of the deposit by Dr Rod J. Holcombe and associates to review drill core and reverse circulation chips, surface geological and structural mapping, and to assess drillhole structural data. A three-dimensional conceptual model of the deposit was generated, based on re-logging data and the integration of surface mapping and drillhole data, and has resulted in a major revision of the geological understanding of the deposit. Exploration under the Newmont joint venture comprised diamond core drilling, reverse circulation drilling and geophysical surveys completed from 2008 to early 2010. During this period exploration drilling was carried out in the Erato and Artavasdes-Arshak- Tigranes areas. A total of 31 diamond core (4,363 m) and 175 reverse circulation holes (22,809 m) were completed. All exploration activity on the Amulsar project is managed through Geoteam, Lydian’s subsidiary in Armenia. From 2010 onwards Geoteam has conducted an aggressive programme of core and reverse circulation exploration drilling over the Artavasdes, Arshak, Tigranes and Erato areas, completing a total of 218 core and 317 reverse circulation drillholes for total of drilled lengths of 33,422 m and 45,476 metres respectively. Geoteam exploration personnel follow procedures outlined in a comprehensive manual for diamond drilling. Diamond drilling operations are supervised by Geoteam geologists at the drilling site. Diamond drillholes are drilled with a number of core sizes, including PQ, HQ, and NQ. Core is logged by Geoteam geologists at the drill site. At the end of each shift, core boxes are delivered to secure core shed facilities at Gorayk. Diamond drilling core recovery averages 96% for the project. Similarly, for reverse circulation drilling, Geoteam exploration personnel follow procedures outlined in a comprehensive manual. All reverse circulation drilling is conducted under constant supervision by the rig geologist. Reverse circulation drilling is undertaken using downhole hammers with face-sampling drill bits. All drilling chips are collected from the reverse circulation cyclone. The entire chip sample is delivered to the core shed facilities in Gorayk for splitting and sampling. 12042 Amulsar Project Lydian Resource and Reserves Final - May 2013 v LYDIAN INTERNATIONAL LIMITED Amulsar Gold Project Specific gravity measurements were made by Geoteam at the project core shed, located in the town of Gorayk. Measurements were restricted to diamond core samples only, using a wax-sealed core water-immersion method. Lydian has a sample preparation facility which is adjacent to core shed facilities at Gorayk. The facility includes two jaw crushers, two rotary splitters, two high-capacity pulverizers, and two drying ovens. Sample preparation facilities at Gorayk operated from September 2008 to 2010, and then were restarted in late 2011. Prior to establishing this facility, and during the period between 2010 and late 2011, all samples were sent to ALS Romania SRL laboratories in Rosia Montana for sample preparation. New containerized sample preparation facilities provided by ALS Chemex were installed in late 2011. The Gorayk laboratory is owned and operated by Geoteam. Geoteam performs routine checks on laboratory submissions, upon import to the drillhole management Century Systems, Fusion database. On an ongoing basis QA/QC data is analysed using Fusion plots for standard, scatter, and quantilequantile plots. Failures in quality-control data are identified by Geoteam database managers and discussed with field geological personnel. Critical failures result in the resubmission of assay batches, or ten samples that precede the failed sample. Lydian provided assay quality-control data for gold and silver assays for the Amulsar project, which AMC reviewed using scatter plots; HRD, HARD, ranked HARD, and quantilequantile plots to evaluate field duplicates, pulp duplicates, and umpire samples. Blank and certified reference material data were plotted on time-series plots using two standard deviations as data limits for reference material plots. Based on the data provided, AMC concludes that assay analytical results for the Amulsar project are appropriate for the estimation of mineral resources. AMC also completed a check of database assay values with assay certificates supplied by Lydian, and a separate check with assay certificates sent directly from the assay laboratories to AMC. AMC randomly selected assay values for validation. Approximately 10% of the gold and silver assays were checked with assay certificates supplied by Lydian, and 2% of gold and silver assays were checked with assay certificates from the analytical laboratories. No errors were found. AMC concludes that the Amulsar project assay drillhole data provided by Lydian is appropriate for the estimation of mineral resources. Metallurgical Testing Extensive testwork has been carried out on representative samples from the three main deposits; Tigranes, Artavasdes and Erato. Testwork has been carried out on bulk samples from rock outcrops, as well as half and whole core samples. Tests have included fine and coarse bottle roll leach tests, as well as column leach tests. To date, a total of 46 column leach tests have been completed by various laboratories. The column leach tests show that the leach kinetics are very rapid, and that high gold leach recoveries can be obtained. 12042 Amulsar Project Lydian Resource and Reserves Final - May 2013 vi LYDIAN INTERNATIONAL LIMITED Amulsar Gold Project Mineral Resource Estimate The resource database used to evaluate the mineral resources for the Amulsar project was provided as MSExcel spreadsheet exports from Lydian’s Fusion database system. These spreadsheets contained all information for diamond core and reverse circulation drillholes, and chip samples for the project. The database consists of 1,154 drillholes and channel samples collected in exploration work undertaken between 2007 and 2012. The data comprises 298 diamond drillholes (40,017 m), 498 reverse circulation drillholes (69,380 m), and 358 channel samples (1,337 m). Drilling and chip sampling were carried out in the Tigranes, Artavasdes, Arshak and Erato areas of the Amulsar project. The geological history of the Amulsar deposit has resulted in a complex of structurally positioned blocks of upper and lower volcanic rock units. Mineralization is predominantly confined to rocks of Upper Volcanic unit (UV). Mineralization in the Lower Volcanic unit (LV) are generally not mineralized, except near contacts with mineralized UV rocks or related mineralized structures. The UV unit was subdivided into two, comprising the Erato sub unit to the north, and the Artavasdes-Arshak-Tigranes (AAT) sub unit to the south. The two units are structurally distinct, with the Erato unit having a slightly lower tenor of gold mineralization. Rocks of the LV unit were assumed to occur in all areas outside of the Upper Volcanic and colluvium wireframes. The extent of the lower volcanic unit was modelled by AMC based on the extent of drilling over the Amulsar project. Exploration targets outside of the Erato and AAT areas were excluded. The drillholes and chip sample database used for estimation of resources consists of 91,830 gold and silver assays, and 1,148 specific gravity measurements. AMC determined that the most appropriate method of representing specific gravity is to average the specific gravity values for each main unit modelled. Drillholes for each of the four zones, Erato and AAT, Upper Volcanic, and Lower Volcanic units were composited to 1 metre to provide common support for statistical analysis and estimation for gold and silver data. Approximately 93% of assay samples were sampled at 1 metre intervals or less. Based on statistical analysis of the Erato and AAT composites, it was found that a combined dataset of UV and LV units for each Erato and AAT zones provided more stable datasets for indicator variography, and Gaussian transform of gold composite data. These combined datasets were used for variography and the estimation of grades for the UV model only. The LV unit is estimated using composites from only the LV unit. Conditional statistics were generated for the Erato and AAT zones using combined UV and LV gold composites, and used to determine intra-class mean grades to be used for post-processing of model panel grade estimates. Eleven thresholds were selected for each of the two UV zones, as they were considered sufficient to discretize both the sample and metal values. A suite of experimental gold variograms were generated and modelled for the Erato and AAT subzone declustered composites (using combined UV and LV data). Variograms 12042 Amulsar Project Lydian Resource and Reserves Final - May 2013 vii LYDIAN INTERNATIONAL LIMITED Amulsar Gold Project were generated for both gold and indicator thresholds. Traditional semi-variograms were used as the spatial model for Erato and AAT zones. Gold indicator variograms were used to estimate gold grades, while gold variograms were used to derive change-of- support correction factors. Omni-directional variograms or variograms that model major and semi-major axes are considered the most appropriate for estimating the UV units. Gold grades were estimated using a multiple indicator kriging (MIK) estimator, using 1 m gold composites for each of the Erato and AAT UV zones. As the combined LV and UV composite set of grades for each of the Erato and AAT zones is more statistically stable, these were used to estimate gold into each of the Erato and AAT models. A panel model with the dimensions of 20 m E × 20 m N × 10 m elevation was used for the each UV zone MIK estimates. In preparation for ranking of localized estimates, gold grades were estimated by OK into a target SMU model with the dimensions 10 m N × 10 m E × 5 m elevation. These estimates also utilized the combined (LV and UV) composites for Erato and AAT zones. Gold grades were estimated in three estimation runs using progressively larger search ellipsoid ranges for the Erato and AAT zones. The search ellipsoid for the Erato zone was inclined at 10° to the north to reflect a dip trend observed in mineralization. No similar trends were observed in the AAT zone. A change-of-support adjustment was applied in order to produce resource estimates that reflect the anticipated level of mining selectivity. When estimating local recoverable resources, the objective is to obtain the proportion of mineralization above a particular cut-off grade (pseudo tonnage), within panels that are large enough to achieve a robust estimation. A localized MIK (LMIK) SMU model was generated using the MIK SMU-corrected histogram, and partitioning the estimated tonnage and metal from the MIK panel model evenly into SMU blocks within the panel. In this manner, grades are mapped into each of the SMU-sized blocks, thereby replicating the targeted mining selectivity. Ranking of the SMU-sized blocks within a panel is based on SMU grades estimated by ordinary kriging (OK). Gold grades were estimated by OK for the Lower Volcanic unit using only LV composites. No distinction was made between Erato and AAT areas for these estimates. Three estimation runs were completed using progressively expanded ellipsoid search ranges. Silver grades were estimated for the Upper and Lower Volcanic units using silver composites separately for each zone. Capped composites for the Erato UV zone are used to for estimation of silver grades in the Erato UV model. Uncapped composites are used to for estimation of silver grades in the AAT UV model. Capped composites are used for estimation of silver grades in the LV model – no distinction is made between Erato and AAT areas for these estimates. Three estimation runs were completed using progressively expanded ellipsoid search ranges. Silver grades were estimated using an OK estimator. Specific gravity values were assigned to each estimated model on the basis of the average specific gravity measurements in each of the estimated models. 12042 Amulsar Project Lydian Resource and Reserves Final - May 2013 viii LYDIAN INTERNATIONAL LIMITED Amulsar Gold Project The Mineral Resources have been estimated using the Canadian Institute of Mining, Metallurgy and Petroleum (CIM) Standards on Mineral Resources and Reserves, Definitions and Guidelines prepared by the CIM Standing Committee on Reserve Definitions and adopted by CIM Council, and procedures for classifying the reported resources were undertaken within the context of the Canadian Securities Administrators National Instrument 43-101 (NI 43-101). Estimated resources have been classified with consideration of the following criteria:  Quality and reliability of raw data (sampling, assaying, surveying).  Confidence in the geological interpretation.  Number, spacing, and orientation of intercepts through mineralized zones.  Knowledge of grade continuities gained from observations and geostatistical analyses.  The likelihood of material meeting economic mining constraints over a range of reasonable future scenarios, and expectations of relatively low selectivity of mining. Gold mineralization at the Amulsar deposit is characterized by short-range continuities, particularly if considering grades above potentially economic cut-offs. It is, therefore, important to identify low-confidence areas which have been estimated by one or two drillholes in an isolated area, regions at depth where estimates are highly influenced by a single drillhole, or regions that have been estimated at longer distances from any drillholes. AMC does not consider these areas as resources, and therefore, using the boundary between the UV second and third estimation runs as a guide, AMC developed a wireframe which constrained the extent of reportable estimated resources. The boundary also excluded blocks estimated by isolated drillholes, or blocks estimated by drillholes that are significantly isolated from other drillholes at depth. This wireframe was applied to the final block model containing UV and LV estimates, and all blocks below this boundary were removed from the model as unclassified material. Indicated resources were classified on the basis of a wireframe enclosing drilling that was closely spaced (approximately 45 m), and included holes drilled vertically and at inclined angles, demonstrating vertical and horizontal continuity. The wireframe outline was drawn to enclose a continuous zone of mineralization, and relatively high number of composites used to make each block estimate. Resources classified as Measured were contained within the Indicated wireframe, but where block grades are estimated by 50 or more composites. The Measured classification encompassed only blocks in the Upper Volcanic unit. Resources classified as Inferred comprise all remaining blocks not classified as Measured or Indicated. The likelihood of the resource being potentially economic was tested by generating an optimized pit shell around the classified resources using:  Pit slope angle of 45 degrees  Gold price assumption of $1,200 per troy ounce of gold. 12042 Amulsar Project Lydian Resource and Reserves Final - May 2013 ix LYDIAN INTERNATIONAL LIMITED Amulsar Gold Project Mineral Resources for the Amulsar project have been estimated in conformity with generally accepted CIM “Estimation of Mineral Resource and Mineral Reserves Best Practices” guidelines and are classified according to the “CIM Standards on Mineral Resources and Reserves: Definition and Guidelines” (December, 2005). At a cut-off grade of 0.35 g/t gold, the Mineral Resources are estimated at 52.4 Mt at 1.05 g/t Au (1.77 million ounces) of Measured category, 18.1 Mt at 1.02 g/t Au (0.59 million ounces) of Indicated category, and 58.0 Mt at 0.93 g/t Au (1.73 million ounces) of Inferred category resources. Table 1.1 Mineral Resource Statement for the Amulsar Project, Armenia, AMC Consultants (UK) Limited, 5 March, 2013 Gold Silver Contained Contained Classification Quantity (tonnes) Grade (g/t) Grade (g/t) Gold (toz) Silver (toz) Measured 52,400,000 1.05 4.19 1,769,000 7,059,000 Indicated 18,100,000 1.02 3.25 593,000 1,888,000 Inferred 58,000,000 0.93 2.87 1,734,000 5,351,000 Total Measured and 70,500,000 1.05 3.95 2,379,000 8,949,000 Indicated Total Inferred 58,000,000 0.93 2.87 1,734,000 5,351,000 1. The effective date of the Mineral Resource Statement is 5 March 2013. 2. A cut-off grade of 0.35 g/t gold for this project based on gold price of US$1,200 per troy ounce of gold and assuming an open-pit mining scenario. 3. Figures have been rounded to the appropriate level of precision for the reporting of Indicated and Inferred Resources in the upper and lower volcanic units. 4. Due to rounding, some columns or rows may not compute exactly as shown. 5. Mineral Resources in this resource statement are not Mineral Reserves do not have demonstrated economic viability. The estimate of Mineral Resources may be materially affected by environmental, permitting, legal, title, taxation, socio-political, marketing, or other relevant issues. Mineral Reserves have been previously reported for this project using a prior Mineral Resource statement Mineral Reserves A mineral reserve estimate for the Amulsar project was developed from the results of the 2012 feasibility study for the project using a concurrent mineral resources and mineral reserves estimate authored by Herb Welhener MMSA-QPM of Independent Mining Consultants, Inc. The reported mineral resources and reserves were contained in a by the Amulsar Resource update and Heap Leach Feasibility Study completed by K D Engineering for Lydian. The report for the study was dated 3 September 2012 and amended 28 November 2012. The mineral reserve will be revised for Mineral Resources reported on 5 March 2012 as part of a feasibility study currently underway and due for completion in August 2013. As a basis for the mineral reserve evaluation, a floating cone algorithm (independently verified by Whittle optimizations) was used to determine the final pit design and internal phase designs. The final pit design is based on the shell generated by the US$ 900/oz floating cone run, selected as a result of the evaluation of the discounted net value at US$ 1200/oz gold and US$ 20/oz silver prices for a suite of cone geometries run from $400/oz to $1200/oz gold. The cones above US$ 900/oz. showed no increase in contained value for the additional material mined. This is also a function of the estimation being data limited, as the cone at US$ 900/oz captures ore up to where 12042 Amulsar Project Lydian Resource and Reserves Final - May 2013 x