For Lydian International (TSE:LYD), which we here at Proactive follow closely, the GDXJ reweighting means around 1.9mln of its shares will come onto the market.
The prospect of the reshuffle has for the past week or so acted as a depressant on the share price.
And it will take some time to clear the overhang, which is the equivalent of eight and a half days’ trading volume.
Yet it does nothing to alter the fundamentals of Lydian – indeed it creates an opportunity for those already convinced of its merits.
Its flagship project Amulsar, in Armenia, is shaping up to be a world class gold property. It has 1.85mln ounces of the precious metal in the measured category and a further 1.8mln indicated and inferred, while the economics reveal just how viable it is. All-in costs are US$750 per ounce against an average of US$1,211 for other producers.
On the more widely used cash cost measure, Lydian also scores better than its rivals at US$469 per ounce compared to a global average of US$738, according to Research by RBC Capital.
Tim Coughlin, Lydian’s chief executive, said recently the comparison showed “how remarkably robust the project is”.
RBC based its calculation on last year’s feasibility study, though. Lydian is working on updating it with the revised plan due in the third quarter.
In the meantime, due diligence work is being carried out by potential project financiers, with commercial banks and major shareholders visiting the proposed mine site recently.
Delegates from Lydian’s two major shareholders, the World Bank’s International Finance Corporation and the European Bank for Reconstruction and Development, visited earlier this month.
The company has now embarked upon its 2013 drill programme, which will comprise 20,000 metres of drilling. It will run until mid-November and it is expected that the first batch of results could come next month. The aim is to unlock the deposit’s deeper secrets.
The company will use a high performance reverse circulation drill rig to drill deep holes in excess of 450 metres.
“We’re completely open at depth,” CEO Coughlin told Proactive earlier this week.
“That’s the exciting thing about it. We don’t really know what’s down there. The deepest hole we’ve drilled was still in good gold grades and still in good oxidised material.
“I think we’re going to see, particularly under the Erato area, some good deep, long intersections of gold.”
Let’s hope the market finally gives Lydian some credit for the progress it has made.