0.1 wt.% binning - amulsar

Response to Lydian’s report: Further details of Lydian’s approach to adaptive management of ARD

Report prepared by: Blue Minerals Consultancy Buka Environmental Clear Coast Consulting December 2017

Executive Summary Lydian is not acknowledging the high acid and metalliferous drainage potential from their mining and their corresponding management obligations. The acid rock drainage (ARD) testing in their reports is seriously inadequate and highly biased. Only two significant sulfide-containing (>0.5 wt.% sulfide S) samples have been tested for rates of ARD release, and Lydian acknowledge that the test methods were not appropriate. Several of the statements from their consultants, GRE, to support reduced management requirements are incorrect and show misunderstanding of the geochemistry of this deposit. The deposit is not “oxide” as Lydian has consistently claimed but has ARD potential throughout the Lower and some of the Upper Volcanics. There is high risk that the current plan will not cope with the ARD generated and will not be protective after ARD formation. Additional testing is proposed but this may be overtaken by ARD release when mining starts. Further, the plan for management of mineinfluenced water during the first years of mining is to discharge a large portion of it – untreated – to haul roads without a permit. This approach will spread rather than prevent pollution. Finally, the proposed passive treatment system is demonstrably inadequate for drainage generated during mining operations. In support of this statement, we submit the following analysis of Lydian International’s October 2017 report (Lydian, October 2017). 1

1

Amulsar Gold Mine. Further details of Lydian’s approach to adaptive management of ARD, Prepared by Golder Associates, GRE, and Wardell Armstrong. i

Contact Information: Andrea Gerson, PhD Roger Smart, PhD Blue Minerals Consultancy Middleton, South Australia 5213 [email protected] [email protected] www.bluemineralsconsultancy.com.au/ Tel: 0422112516 (Dr Gerson), or Tel: 0400835603 (Dr Smart) Ann Maest, PhD Buka Environmental Boulder, CO, USA [email protected] Tel: 303.324.6948 André Sobolewski, PhD Clear Coast Consulting, Inc. Gibsons, BC, Canada [email protected] www.clear-coast.com Tel: 604-240-8845

ii

Table of Contents Summary .............................................................................................................................................................................. i 1. Geochemistry ................................................................................................................................................................. 1 1.1 Complexity of the deposit geology .................................................................................................................. 1 1.2 Humidity cell tests ........................................................................................................................................... 2 1.3 Acid production from sulfate minerals ............................................................................................................ 5 1.4 Worst case scenario (Lydian, October 2017, Section 2.5.2 ........................................................................... 5 1.5 The risk ........................................................................................................................................................... 6 1.6 Separation of PAG from NAG ......................................................................................................................... 6 1.7 ARD reaction rates ......................................................................................................................................... 7 1.8 Liquid/solid additives ....................................................................................................................................... 8 1.9 Abiotic versus biotic ARD ............................................................................................................................... 9 2. Water Balance and Baseline Water Quality Issues ............................................................................................... 10 2.1 Use of mine water for dust suppression is a de facto disposal technique.................................................... 10 2.2 Dewatering wells and pit water ..................................................................................................................... 11 3. Water Treatment........................................................................................................................................................... 12 4. Recommendations Ignored ....................................................................................................................................... 13 4. Corrections to the Lydian, October 2017 Report ................................................................................................... 15

Figures Figure 1. Geological and structural cross-sections through the proposed Amulsar open pits. ............................. 2 Figure 2: Sulfide wt.% (0.1 wt.% binning) for Lower Volcanic (LV) and Upper Volcanic (UV) TiG/Art samples as compared to wt.% S samples used in the humidity cell tests..................................................... 3 Figure 3. Example plot of kinetic test results. ...................................................................................................... 4 Figure 4. Photograph of example field kinetic test. .............................................................................................. 8

iii

1. Geochemistry 1.1 Complexity of the deposit geology Lydian (October 2017) includes a short section on baseline geology (Section 2.4) but fails to acknowledge the complexity of the site geology and how this will affect planned management strategies. The deposit has consistently been described by Lydian as having two distinct zones: an oxidized Upper Volcanic and a reduced Lower Volcanic zone. The implication is that only oxide minerals will be encountered in the Upper Volcanic, while sulfide minerals will only be encountered in the Lower Volcanic rocks. Lydian International (March 2017, p. 31) 2 justifies the geological basis for this division: “The strong stratiform control on the location of the base of the silicified volcanosedimentary rocks has given rise to the mapping definition of Upper Volcanics and Lower Volcanics representing silicified volcano‐sedimentary and altered andesites rock units respectively. The division into Upper Volcanics and Lower Volcanics is also based on alteration and structural position.”

However, they discuss further how this simplistic division does not properly reflect the deposit geology:

“Within the confines of the Amulsar Ridge the structural complexity increases whereby dips become steep and overturned. At least four different sets of structure (shears, folds, and faults) produce the final geometry, with increasingly brittle response in the younger structures. Thick slabs of Lower Volcanics arch into an antiform, before a transition across faults into the highly complex central folded zone.” and “Although mineralization occurs within the complex zone in the core of this large apparent fold structure, it is the further complexity produced by the refolding of an already folded structure that creates the final host structure.” Thus, instead of a simple stratigraphic oxide/sulfide division, it is probable that sulfide minerals, which carry the potential for long-term ARD generation, will be encountered in the Upper Volcanic and at varying depths throughout the deposit, as shown in Figure 1. We recommend that sulfides and acid-producing sulfate minerals should be initially identified during mining by qualified geologists at the wall face and further confirmed by laboratory analysis, be segregated away from non-acid-generating materials, and be handled in a way that prevents long-term ARD generation.

2

Lydian International Limited, 2017. NI 43-101 Technical Report, Amulsar Updated Resources and Reserves, Armenia. March. Prepared by Samuel Engineering for Lydian International. Available: http://www.lydianinternational.co.uk/images/TechnicalReports-pdfs/2017/Lydian_43-101_March_30,_2017.pdf 1

Figure 1. Geological and structural cross-sections through the proposed Amulsar open pits. Note that the geology is complicated by faults and folds, and Lower Volcanic material is mixed throughout the deposit rather than simply being stratigraphically below Upper Volcanic material. Source: Lydian International, 2017. NI 43-101 Technical Report, Amulsar Updated Resources and Reserves, Armenia. March. Prepared by Samuel Engineering. Figure 7.3.

1.2 Humidity cell tests Lydian (October 2017) exhibits a poor understanding of humidity cell tests. In Section 2.3.3, they state: “By design, these cells provide an environment for generation of ARD, which is generally unlike any of the conditions predicted to be experienced in the field.” The design of humidity cells is not to provide an environment for generation of ARD. It is an environment to accelerate weathering and to reproduce within a period of weeks what can be expected to occur in the field over a period of years. Contrary to what Lydian states, humidity cell tests are not used “for the evaluation of worst-case predictions.” They are accepted as a central tool for prediction of water chemistry for proposed mining projects, if conducted properly. From Lydian, October 2017, Section 2.4: “Furthermore, it is important to recognise that many of the barren rock samples placed in humidity cells with sulfide concentrations, comparable to the average concentration of sulfide in the dataset (based on baseline data), failed to produce severe concentrations of ARD in the humidity cell leachate.” The basis of ARD planning remains the interpretation of the eight HCTs. As we stated previously, the samples for these tests were insufficient and not representative. These samples contain only relatively small concentrations of sulfide S and cannot represent the true acid drainage risk. To illustrate this fact clearly please review Figure 2, which plots the frequency of samples for which sulfide S (wt.%, from Table A-1; GRE, 2014 3) characterisation was carried out and samples for which HCTs were carried out (note: sulfide wt.% S for Lower Volcanic (LV) sample 6V is not available). Where no samples for a given ‘bin’ were present no data point is shown (i.e. there are no zeros).

3

Amulsar Project Geochemical Characterization and Prediction Report – Update. Prepared for Lydian International, 31 August 2014. Included as Annex 4 of Lydian, October 2017. 2

Figure 2: Sulfide wt.% (0.1 wt.% binning) for Lower Volcanic (LV) and Upper Volcanic (UV) TiG/Art samples as compared to wt.% S samples used in the humidity cell tests. The sulfide S wt.% values of HCTs (in orange) are biased low and are not representative of the full range of S values. Data Source: GRE, 2014, Table A-1.2

From Lydian, October 2017, Section 2.5.1: “If a sample has the potential for ARD, and if this potential is not realized over long-duration humidity cell test work, it is a positive indication that ARD formation is unlikely in field conditions. This is the case with all but two of the humidity cell tests, including all the humidity cells that contained UV or high alunite rock.” The durations of the humidity cell tests were not sufficient being less than 60 weeks in all cases – this is not ‘long-duration.’ For example, Chapter 5b of the GARD Guide shows a typical humidity cell test that was conducted for about 175 weeks (Figure 3). The data show that pH remained circumneutral and metal leaching was negligible for the first 120 weeks, but these trends changed dramatically after 130 weeks, after neutralization potential in these samples was exhausted. As noted in the Buka Environmental

3

Geochemical Characterization memo, 4 all HCTs that had neutral pH initially went on to produce acidic leachate if they were run for over 20 weeks. Four of Lydian’s eight tests were run for only 20 weeks.

Figure 3. Example plot of kinetic test results. Source: GARD Guide, Chapter 5b, Figure 5-11. http://www.gardguide.com/index.php?title=Chapter_5b

Several humidity cells were interrupted while they were trending towards increasing acidity, but before they could reach steady state. The results simply indicate that these humidity cells were not run long enough, rather than indicating that ARD generation will not occur in the field. The correct approach should have been to: 1. Identify key geochemical test units, based on the geological characterization program 2. Establish leachate characteristics for each of these units for best case and worst-case scenarios 3. Predict water chemistry on the basis of water contact with these units, flow rates, and leaching characteristics for each geochemical test unit. This was the approach taken at Eskay Creek, a gold-silver mine owned by Barrick Gold in Canada: 5 “Key sources of data available for this prediction were kinetic test results from work undertaken by Higgs & Associates (1993). Higgs performed kinetic tests on composite samples representing “mean” and “worst case” examples of 6 defined rock types. The mean and worst case composites were selected on the basis of net neutralization potential values for populations of each rock type obtained from the initial geochemistry program conducted on drill core samples. Kinetic tests were also conducted on 5 unspecified ore samples. MEMi established several underground wall washing stations in 1997 to support kinetic leach rates obtained by Higgs (MEMi, 1999).” “Using these kinetic rate data, MEMi developed a “base case” and a “conservative best judgement” (CBJ) model for water quality predictions for the flooded and unflooded portions of the Eskay Creek Mine. The CBJ Model is considered to be more representative of wall rock characteristics in the underground workings (Mehling, 2002).” 4

5

Buka Environmental, 2017. Evaluation of Geochemical Characterization Results and Proposed Additional Studies for the Amulsar Project, Armenia. 30 October. MEMi, 2002. Initial Water Quality Predictions for the Eskay Creek Mine Closure. Report prepared by Mehling Environmental Management, Inc. for Barrick Gold Corporation. June 25, 2002. Personal Communication, Andre Sobolewski, December 2017. 4

To date a thorough examination of geochemical test units, other than the simplistic division into Upper and Lower Volcanics, has not been carried out by Lydian.

1.3 Acid production from sulfate minerals Hydrated sulfate minerals like alunite and jarosite are secondary minerals formed in part from the oxidation of sulfide minerals. Acid production from certain sulfate minerals has been studied for decades, 6 and its effect on water quality at Amulsar has been underestimated by Lydian (October 2017) and in Lydian’s ARD Management Plan. From Lydian, October 2017, Section 2.5.1: “Similarly, samples with high alunite and jarosite subject to humidity cell testing did not result in severe concentrations of ARD in the leachate water. As explained in paragraph 2.3.2, humidity cells are designed to maximize ARD formation. Therefore, if these samples failed to make severe ARD in a humidity cell, it can be predicted to behave similarly in field conditions. Geotechnical baseline analysis has, therefore proven that alunite and jarosite are not significant sources of ARD.” As stated by Golder Associates (Annex 1, Lydian, October 2017) alunite dissolution will give rise to leachates in the pH range 4.5−6.5; 7 leachate with pH values below 6 are considered acidic.8 The statement that samples with high alunite and jarosite were subjected to HCT is incorrect. No HCTs were conducted on jarosite containing samples. Importantly jarosite leachate will equilibrate at pH circa 3.5. One key consequence that Lydian does not recognize in its ARD management plan is that alunite and jarosite will gradually dissolve when they contact water and release acidity and associated metals. The acidity produced by alunite and jarosite will add to the acidity produced by sulfide minerals, which will produce even more acidic and metal-rich leachate. More detailed mineralogy of waste, ore, and wall rock samples is needed to fully understand the acidity that will be generated by sulfate minerals. Special management of wastes containing acid-producing sulfate minerals is needed. Two humidity cell test (HCT) samples (75C and 77C, LV) containing 53 wt.% and 21 wt.% alunite, respectively, and no pyrite produced acidic drainage with pH values below 5; a UV sample with 70 wt.% alunite and no pyrite also produced acidic drainage with a pH below 6 (ESIA, 2015, Appendix 4.6.2, Appendix C-1 and Figure 8-1). These results demonstrate that samples containing greater percentages of alunite can adversely affect water quality, contrary to Lydian’s statement in the ARD Management Plan (ESIA, 2016, Appendix 8.19, p. 35).

1.4 Worst case scenario (Lydian, October 2017, Section 2.5.2 From Lydian, October 2017, Section 2.5.2: “In conclusion, under worst-case realized (empirical) conditions, the UV, colluvium and high-alunite samples failed to form ARD. In all but two samples of LV, the humidity test cells failed to produce severe ARD.”

6

7

8

Hammarstrom, JM, Seal II, RR, Meier, AL, and Kornfeld, JM. 2005. Secondary sulfate minerals associated with acid drainage in the eastern US: recycling of metals and acidity in surficial environments. Chemical Geology 215, 407-431. Available: http://digitalcommons.unl.edu/usgsrye/2/ Amulsar Project Geochemical Characterization and Prediction Report – Update. Prepared for Lydian International, 31 August 2014. Included as Annex 4 of Lydian, October 2017, p. 4.8.82. GARD Guide. Available: http://www.gardguide.com/index.php?title=Chapter_2 5

It has been demonstrated these samples are not representative of the sulfide or metal content of the UV or LV and certainly not of the worst case scenario. As noted in the June 2017 Buka Environmental report, 9 the HCTs were conducted on samples that did not reflect the average or upper concentration ranges of mercury, antimony, arsenic (for LV), or copper values in LV or UV rocks. Lydian consistently underestimate the risk and this is reflected in the ARD mitigation plan. No literature references are provided that agree with Lydian’s claim that HCTs represent worst-case conditions. HCTs are designed to accelerate (rather than overestimate) the weathering that will take place under oxidizing field conditions (ASTM, 2013). 10 Further, Lydian continues to distinguish between mild and severe ARD and implies that “mild” ARD, which they define as having pH values as low as 4.5 (Lydian, October 2017, Annex 4), is not a problem. Any mine discharge or leachate with a pH value below 6 is considered ARD by the GARD Guide 11 because of its adverse effects on aquatic biota and human health, and the much-enhanced ability of the leachate to dissolve metals. Using the internationally accepted definition of ARD, six of eight HCTs produced acid drainage, as shown in Annex 4 in Lydian, October 2017, Figure 8-1, and the other two were cut short at 20 weeks, while their leachate pH was trending steadily downward.

1.5 The risk In the revised Chapter 4.8 Groundwater (Lydian, October 2017, Annex 1) it is stated by Golder Associates that: “Geochemical characterisation completed to date for the Amulsar project (Golder Associates, 2013b)13 indicates that the high pyrite/jarosite materials from the Lower Volcanics lithologic group are highly acid generating due to sulphide oxidation and produce acidic leachates with pH as low as 2.5. High alunite materials from all of the lithologic groups generate leachates with a pH ranging from 4.5 to 6.5, but with low metals and sulphate concentrations.” We are in complete agreement with this assessment. Furthermore 13 out of 43 field locations returned field pH values outside of the MAC standards (Lydian, October 2017, Annex 1, Table 4.8.21). This suggests that the risk of ARD on extensive lithologic exposure and weathering caused by mining is high and that the mitigation strategies proposed will likely be insufficient. However, it is stated by Lydian (October 2017, Section 2.6.1) that: “The ESIA recorded that the baseline water quality in the Amulsar Project area is generally good or very good and does not appear to be notably affected by natural acid drainage.”

1.6 Separation of PAG from NAG In Section 1 (Lydian, October 2017) it is stated that: “Potentially Acid Generating (PAG) rock has been managed from the start of the construction process (see: Section 5.6 of the ARD Management Plan, Appendix 8.19 of the ESIA). The methodology for identifying and therefore separating PAG from Non Acid Generating (NAG) rock was developed by GRE and has been overseen by Golder Associates, field engineers (in their Quality Assurance role) to ensure compliance with this mitigation measure.” It is agreed that this is an essential process to ensure adequate ARD mitigation. However, no details as to the nature of this methodology or the frequency of its application are provided. In previous documents, the ARD 9

10

11

Evaluation of Hydrogeochemical Issues Related to Development of the Amulsar Gold Project, Armenia: Key Assumptions and Facts, Table 3. Available: https://goo.gl/n8Qwnw ASTM, 2013. Standard Test Method for Laboratory Weathering of Solid Materials Using a Humidity Cell. D 574413. ASTM International, West Conshohocken, PA. www.gardguide.com/index.php?title=Chapter_2 6

Management Plan stated that visual inspection will be used to distinguish PAG from NAG rock and that it will be “obvious” in the field (ESIA, 2016, Appendix 8.19, p. 58). 12 This statement is based on distinguishing two over-simplified geochemical units: Upper Volcanics and Lower Volcanics. As noted in our previous reports and above, smaller subunits within these large divisions must be identified to effectively manage ARD at the site. Lydian also mentions in Appendix 8.19 the possible use of paste pH, which their independent evaluator, Knight Piésold, states will not be acceptable. Knight Piésold also mentions that ore from the Lower Volcanics is not precluded, implying that some ore could have the high sulfide content associated with the LV rocks. 13 There is high risk that PAG rock is already being under-identified at the Amulsar site and is being used in the construction of mine roads or facilities.

1.7 ARD reaction rates It is stated that ‘reaction rates’ have been observed (Lydian, October 2017, Section 3.2.5). This is not the case: 1) Humidity cell tests conducted are not adequate to assess field reaction rates, the samples chosen for these tests were not representative, and the test durations were too short. 2)

ARD from historic Soviet era waste dumps has not been continuously monitored so evolution of the ARD rate is unknown; the initial compositions of these dumps is also unknown.

3)

The statement that the UV HCT samples “ran out of sulfide” (Lydian, October 2017, p. 11) is not substantiated by an accounting of the amount of sulfide initially present in the sample versus the amount of sulfate released in the HCT leachate from oxidation of the sulfide. The tests were simply not run for long enough.

4)

The on-site “kinetic” tests to be conducted in 20-liter buckets are aimed at “verifying” ferric iron resistance, and water quality test kits will be used to analyse the leachate. 14 Somewhat more information on the tests is provided in the Environmental Monitoring Plan (ESIA, 2016, Appendix 8.12, Section 9.3. 15 Figure 4 shows an example field kinetic test bucket in which fresh cores appear to be added without size reduction. Blasted rock comes in all sizes, from fine dust to boulders. ARD generation is largely controlled by the fine-grained material produced. Clearly the proposed approach will not replicate conditions in the barren rock storage facility (BRSF) and will underestimate field reaction rates. In addition, no information is provided on analytical detection limits for the field sulfate test kit or field or laboratory quality control procedures. Without additional information, it cannot be determined if the proposed field tests can be used to reliably estimate field reaction rates.

12 13

14

15

Available: http://www.lydianarmenia.am/resources/geoteam/pdf/174d63294134a54bbed0bd71f3156d92.pdf Knight Piésold, 2016. Lydian’s Amulsar Project. Independent Review of the Amulsar Project Environmental and Social Impact Assessment v10. May 16. Available: http://www.lydianarmenia.am/resources/geoteam/pdf/18c034698675490a23f2a1ccb71005c8.pdf Lydian International Limited, 2017. NI 43-101 Technical Report, Amulsar Updated Resources and Reserves, Armenia. March. Prepared by Samuel Engineering for Lydian International, p. 397. Available: http://www.lydianinternational.co.uk/images/TechnicalReports-pdfs/2017/Lydian_43-101_March_30,_2017.pdf Available: http://www.lydianarmenia.am/resources/geoteam/pdf/052ee4cdda4b9480af76ad44a8c60ab5.pdf 7

Figure 4. Photograph of example field kinetic test. Will the cores be added to the buckets with no size reduction, as shown? If so, the field sulfide oxidation rates will underestimate those in the BRSF during mining. Source: Environmental Monitoring Plan, ESIA 2016, Appendix 8.12, Figure 2.

1.8 Liquid/solid additives In Sections 2.1.3 (Lydian, October 2017) it is stated that: “The principal components of this pollution prevention strategy are as follows: 1. Encapsulation of PAG in the BRSF to reduce ingress of air and water; 2. Suppression of microorganisms, through encapsulation and liquid/solid additives to prevent severe “biotic” or “ferric iron oxidized” ARD; 3. Reuse or consumption of contact water in mining operations and other mitigation measures such as dust control on haul roads etc.; and 4. Treatment of any excess contact water during mining and post closure using proven and effective the passive treatment methods such as sulphate reducing bioreactors, prior to discharge.”5 We note there is no further information given as to the form of the liquid/solid additives despite this being a principal component of the prevention strategy. Additives to suppress microbial oxidation are not discussed in the current ARD Management Plan (ESIA, 2016, Appendix 8.19) or in any of the annexes to the Lydian, October 2017 report. We suspect that the additives discussed by Lydian refer to the pHOAM™ method for mitigating ARD, 16 which is promoted by associates of Sovereign Consulting Inc. We only know of one long-term study where this approach has been field-validated. This does not qualify as a “proven environmental engineering method” because its success may reflect unique characteristics of that site, rather than attributes making this technique broadly applicable. For instance, the pHOAM™ method may be inappropriate for rock waste containing high proportions of alunite and jarosite. Such an important component of the proposed pollution prevention and control approach must be demonstrated at this site before it is judged to be applicable. Lydian has not proposed any additional testing to examine the effectiveness of ARD suppression using “additives.” If 16

Gusek, J., Masloff, B. and J. Fodor. 2012. Engineered pumpable pHOAM™: An innovative method for mitigating ARD. 2012 Annual Meeting of the West Virginia Surface Mine Drainage Task. Available: https://www.researchgate.net/publication/265275177_Engineered_pumpable_pHOAM_An_innovative_method_for_ mitigating_ARD 8

Lydian’s consultants can demonstrate success using this approach at full scale at more than one site, they should have documented it in this response.

1.9 Abiotic versus biotic ARD From Section 2.2 (Lydian, October 2017): “It is critical to understand the role of the geochemical reactions in the management of ARD. The two primary reactions governing the production of ARD are shown below: FeS2 + 7/2O2 + H2O 

Abiotic ARD 2SO4 + 2H+ + Fe2 (H2SO4 – product is sulphuric acid.) [1]

Biotic ARD – Ferric Iron Oxidation FeS2 + 14Fe + 8H2O 15Fe2+ + 2SO4 + 16H+ (at pH less than 3.0) [2]” 3+

“It should also be noted that the evidence from baseline analysis demonstrates the ability to suppress biotic ARD. In fact, existing ARD impacted seeps are producing only mild ARD without any designed prevention methods in place.” “Only in select humidity cell tests, where the environment is unnaturally maintained to promote the formation of ARD, did biotic ARD conditions form.” We dispute the interpretation of Amulsar ARD observations to date, specifically: 1)

The reactions written above by Lydian’s consultants do not balance. Reaction [1] is the first step in the formation of acid drainage and is not the primary controlling reaction. Reaction [2] is dependent on the oxidation of Fe2+ to Fe3+ and is generally the rate-limiting step in the absence of microbes. 17 It is unrealistic to believe that one can effectively suppress the biotic formation of ARD over the long term and there is no evidence, other than speculation, to suggest that there is slow acting “abiotic” or “ferric resistant” ARD at the mine site.

2)

In the presence of sufficient Fe3+ ferric driven oxidation of pyrite can occur abiotically, and will be dependent on solution iron concentration, redox potential (not considered in any Lydian report) and pH (see for instance Chandra and Gerson (2010)11 for a review of pyrite leach mechanisms with more than 100 references).

3)

There is no actual evidence presented (except hope) that microbially catalysed pyrite leaching is “naturally” suppressed at Amulsar – no analyses of microbial activities (population or diversity) or results of isotopic analysis that could distinguish biotic vs. abiotic reactions have been presented in any Lydian report. This ‘suppression’ is again a principal component and incorrect assumption of the pollution prevention strategy.

4)

The humidity cell tests that provide the foundation for these conclusions were deeply flawed – the samples were not representative, the duration of testing was not sufficient and no microbial or isotopic analyses were carried out.

5)

Spring water pH (Lydian, October 2017, Section 2.3.1) cannot be compared with ARD formation during mining as a justification for the likelihood of low risk of ARD. If acidic springs tapping the Amulsar deposit have formed under undisturbed conditions, mining of the deposit will cause substantially more ARD. However, to our knowledge, no investigation has been done of the rocks and mineralization that the springs are flowing through. We note again that 13 of 43 field locations exceeded MAC pH limit (Lydian, October 2017, Annex 1, Table 4.8.21). The contact time between

17

A.P. Chandra, A.R. Gerson, 2010. The mechanisms of pyrite oxidation and leaching: A fundamental perspective, Surface Science Reports 65, 293–315. Available: https://goo.gl/6t4X8g 9

rocks, water and importantly the atmosphere is shorter in the natural system; moreover the surface area of exposed rock is also considerably smaller than that of waste rock. Importantly, Lydian cites to Appendix 4.8.8 for its field pH measurements of springs (Lydian, October 2017, Annex 1, p. 4.8.82). However, this ESIA appendix is not publicly available on Lydian’s website. The spring pH data in Appendix 4.8.5, which is available online, 18 has data that contradict Lydian’s claims of acidic spring pH values. Lydian should make Appendix 4.8.8 available and explain the discrepancies between results in the two appendices. 6)

Long contact times between waste rock piles and meteoric water are not considered. Particularly in a relatively dry climate, such as at Amulsar, this can lead to an accumulation of acid and aqueous metals, in trapped pore water, promoting ferric-drive pyrite oxidation. On high rainfall the built up oxidation products are flushed from the system leading to high intensity ARD events (Maest and Nordstrom, 2017). 19 This is why even in an exceptionally dry area such as the Pilbara region of Western Australia ARD is taken very seriously. 20

2. Water Balance and Baseline Water Quality Issues 2.1 Use of mine water for dust suppression is a de facto disposal technique As noted in Section 1.8 above, Lydian is proposing to use mine contact water for dust control on haul roads and in undefined “other mitigation measures” (Lydian, October 2017, Section 2.1.3). Mine contact water is water that has come into direct contact with mined materials (e.g. pit walls, blasted rock, waste rock) and contains mine-related contaminants such as sulfate, nitrate, and metals. This approach is not mentioned in Lydian’s ARD Management Plan (ESIA, 2016, Appendix 8.1912). This practice will cause contaminated water runoff to streams, infiltrate to groundwater, and contaminate soils, yet no permit will be required. It is apparently how Lydian plans to avoid needing an active treatment system, or any treatment at all for that matter, during the first four years of mining (Lydian, October 2017; Section 2.2.3): “Abiotic ARD can be managed through evaporation and/or by using it as dust suppression. This permits a zero-discharge water balance for early in mine life.” This management practice certainly does not constitute pollution prevention and is instead a pollution spreading approach. Lydian designates water from the heap leach facility, which is declared to be non-acid generating as ARD (Lydian, October 2017, Annex 5, p. A-5) and contact water. In addition, the Site Wide Water Balance identifies pit dewatering water as “contact water” but runoff from haul roads as non-contact water (Lydian, October 2017, Annex 5, p. A-1, A-5). However, the mine’s plan to apply large volumes of contact water to the haul roads converts runoff from the roads to contact water. No plans exist to manage runoff water from the haul roads as contact water. Good practice requires that contact water be treated before it is applied to the haul roads; such practice is conducted at the Buckhorn Mine in Washington State, USA, by Kinross Gold. At the Buckhorn site, which is currently in closure, active treatment is used (reverse osmosis), and only treated water is applied to the haul roads. 21 18 19

20

21

Available: http://www.lydianarmenia.am/resources/geoteam/pdf/2ea3680d1e2c4c544777489f4b75ba1a.pdf Maest and Nordstrom, 2017. A geochemical examination of humidity-cell tests. Applied Geochemistry 81, 109–131. Available: http://www.sciencedirect.com/science/article/pii/S088329271730197X Standard Acid and Metalliferous Drainage Management Closure Planning Number: 0096370 Version: 4.0 BHPBilliton. Available: https://goo.gl/rbndJV Washington State Department of Ecology, 2014. WA0052344 Buckhorn Final Fact Sheet. p. 18 of 131 (use of treated water for dust suppression) and p. 2 of 131 (description of treatment method). Available: https://fortress.wa.gov/ecy/wqreports/public/f?p=110:302:3255946163458122::NO:RP:P302_PERMIT_NUMBER:W A0052434 (then search for document – currently document #43). 10

The Mine Site Water Balance (Lydian, October 2017, Annex 5) shows that Lydian plans to discharge 88 m3/day to the environment during construction through the use of “dust suppression” (p. 15, Table 5) and 250 m3/day during operations (p. A-7). The release of mine contact water to haul roads would take place an average of 221 days/year (p. 15). One of the proposed methods for decreasing excess contact water at Amulsar is to increase evaporation through spray emitters, sprinklers, or snow makers (Annex 5, p. 35, Lydian, October 2017). Making snow with contact water will also spread pollution because the snow will contain mine contaminants; increasing evaporation through the use of spraying or sprinklers, which is similar to irrigation, will increase precipitation, 22 which will increase contact water. Instead of using contact water for dust suppression, treatment should be initiated on the start of mining, and treated excess contact water could then be discharged to area streams.

2.2 Dewatering wells and pit water Lydian acknowledges the uncertainties associated with estimated operational pit dewatering and inflow rates but concludes that there will be “very little” water inflow in the first few years of mining (Lydian, October 2017, Sections 3.2.1 and 3.2.3). They further state that dewatering wells are not appropriate at Amulsar because it is not in relatively homogeneous lithologies with higher permeability and does not have high permeability structures identified (Lydian, October 2017, Section 3.2.4). The revised Groundwater Resources ESIA chapter (Annex 1 to Lydian, October 2017), however, cites many examples of higher permeability zones in the Amulsar rock units. For example, the Upper Volcanics, which host most of the ore and are present in the pits, are described as having permeability associated with secondary fracturing, being more permeable than the argillically altered Lower Volcanics, and having “intense faulting” (Lydian, October 2017, Annex 1, p. 4.8.18). The unaltered Lower Volcanics are described as having higher horizontal permeability, as evidenced by the presence of springs near the heap leach facility site (Lydian, October 2017, Annex 1, p. 4.8.19). Further, Golder Associates states that the hydraulic conductivity testing to date has under-estimated the hydraulic conductivity of the Upper Volcanics (Lydian, October 2017, Annex 1, p. 4.8.24). Preparing for greater than currently predicted water inflow to the pits is a pollution prevention approach that Lydian is not, but should, be using. Lydian also proposes to use the pits for temporary water storage during operations if inflow volumes exceed the pit pumping rate (Lydian, October 2017, Annex 5, Site Wide Water Balance, p. 17). In addition to making mining dangerous or impossible, storing water in the pits will cause contaminated mine water to move through the extensive fault system to currently unknown downgradient locations and will promote the contamination of groundwater and surface water in the area. Groundwater flow directions from the pit are predicted to move to the Arpa, Vorotan, and Darb rivers (ESIA, 2016, Chapter 6, Groundwater Resources, Figure 6.9.3 23). Movement of mine water along preferential flow paths such as faults will show up as contaminated springs, groundwater, and stream inflows. Lydian states that little regional groundwater is present because of Amulsar’s mountain-top location (Lydian, October 2017, Section 3.2.4). The presence of “perched” groundwater has not been proven, and, as noted in our previous reports, measured groundwater elevations in and near the pits demonstrate that groundwater exists well above the pit bottoms (ESIA, 2016, Chapter 4.8, Groundwater, Figure 4.8.13 24). In fact, Lydian’s

22

23 24

DeAngelis et al., 2010. Evidence of enhanced precipitation due to irrigation over the Great Plains of the United States. Journal of Geophysical Research, Vol., 115. Available: https://pdfs.semanticscholar.org/f2af/9f788e333bce72c997b70be0c0a9d66755ef.pdf Available: http://www.lydianarmenia.am/resources/geoteam/pdf/a70da61db241d7c9c609ffb0ea842f91.pdf Available: http://www.lydianarmenia.am/resources/geoteam/pdf/31d37fb836b3e9f6b39f3354e69b5959.pdf 11

consultant, Golder Associates, notes that bedrock groundwater will be a source of groundwater to the pits during mining: 25 “There are three sources of ground water inflow to the pits during mining:…. 3) Year-round inflow from groundwater where the bases of the pits extend below the water table. This may occur in the base of both the Artavazdes and Tigranes pits which are interpreted to be mined to a depth of about 45 m and 70 m, respectively, below the existing water table.” The presence of your-round groundwater inflow to the pits strongly implies that PAG wastes placed in the bottom of the Tig/Art pit after mining as a pollution prevention measure would be inundated with water.

3. Water Treatment Lydian (October 2017) responded to issues related to the passive treatment system (PTS) in Section 4. Fatal flaws in Lydian’s PTS have been repeatedly identified, but they are not acknowledged or are poorly rebutted. There is high risk that water quality at this site will be more degraded than predicted by Lydian. Pit inflows and other contact water will be significantly more acidic and will contain greater concentrations of aluminium, iron and other metals than predicted. However, the design basis for the passive treatment system assumes less acidic drainage with lower metal loads. As a consequence the proposed PTS design has high failure risk because it is based on an unrealistic feed chemistry and volume. The following issues with the proposed PTS have not been addressed. 1. The system is not designed to treat acidic drainage. The first treatment unit (anaerobic denitrification) needs to operate at pH >6.5, but it will receive water more likely to be pH 5 mg/L), yet the Design Basis Memo (ESIA, 2016, Appendix 8.19, Appendix 1, Table 1) shows input aluminium concentrations as high as 27.2 mg/L. There is an extensive history of failed passive systems treating acidic drainage with elevated aluminium, for example, in systems used in Eastern Appalachia. Aluminium will precipitate when acidic drainage is neutralized in a passive treatment system and plug the system rapidly (within months) unless it is removed periodically from the system. 28 Lydian’s claim that this will not be a problem (Lydian, October 2017, Section 4.2.2) is incorrect.

25

26

27

28

ESIA, 2016. Appendix 6.9.1 Groundwater Modelling Study, Golder Associates, August 2014, p. 39. Available: http://www.lydianarmenia.am/resources/geoteam/pdf/f5b9868eb4388a791c53849c64d51f93.pdf Sovereign Consulting Inc. 2015. Technical Memorandum. Amulsar Passive Treatment System (PTS) Design Basis. December 9. Appendix 1 to Appendix 8.19, ESIA, 2016 (pdf p. 64). Available: http://www.lydianarmenia.am/resources/geoteam/pdf/174d63294134a54bbed0bd71f3156d92.pdf Our most recent case study (Sobolewski, A., Moore, T. Brown, T.B. and Riese, A.C. 2017. Use of Constructed Wetlands to Reduce Metals in Drainage from a High Altitude Mine System, SW Colorado: Horizontal System. 24th Annual British Columbia-MEND ML/ARD Workshop. Vancouver, November 29 and 30, 2017) presented at the 24th BC MEND ML/ARD workshop demonstrated that a comparable anaerobic bioreactor failed when pH decreased below 6.3, but not when it remained above pH 6.5. Available soon at: http://bc-mlard.ca/workshop-proceedings See Skousen, J., Zipper, C.E., Rose, A. Ziemkiewicz, P.F., Nairn, R. McDonald, L.M. and Kleinmann, R.P.L. 2017. Review of Passive Systems for Acid Mine Drainage Treatment. Mine Water Environ 36: 133. Available: 12

3. Lydian (October 2017) claims that arsenic and thiocyanate can be removed with passive treatment technologies (Section 4.2.3), but they have provided no design basis to indicate that the proposed PTS will treat these contaminants to acceptable levels. The proposed PTS operates under anaerobic conditions (using a denitrifying and sulfate-reducing biochemical reactor), but thiocyanate removal occurs under aerobic conditions. 29 In addition, thiocyanate is biodegraded to ammonia and this contaminant will also need to be removed aerobically. There are no treatment units in the proposed PTS that can remove either thiocyanate or ammonia and there is a strong likelihood that these contaminants will be discharged in the PTS effluent. Lydian’s claim that these compounds “can be removed with passive treatment techniques” is not enough: they must demonstrate that their system can remove them to acceptable levels. 4. The proposed PTS is designed to treat water post-closure at 11.1 L/s. However, acidic water generated by pit dewatering is likely to need treatment from Year 0-1. The flow rates and metal loads from this source will likely exceed the capacity of the passive systems due to sludge management system requirements. This problem will be further exacerbated if mine life is expanded, as previously discussed by Lydian International (2017). 30 For these reasons a treatment facility, such as a lime-based treatment plant, should be constructed and operated from Year 0-1 of mining.

4. Recommendations Ignored Lydian has adopted a number of our recommendations regarding the need for further ARD testing (Lydian, October 2017, Table 2). However, other recommendations, central to appropriate risk management, have not been adopted. Lydian’s October 2017 responses in Section 5 do not address the following critical issues: 1)

The response to the need for active mine water treatment to be in place prior to mining was “However, the water balance supports the approach in the ESIA. Treatment is not required based on observed ARD kinetics (i.e. reaction rates), effective pollution prevention and control (refer to barren rock storage design, see also) which means that during the early mine life, all contact water can be safely reused within the site.” (Section 3.2.5) The “safe reuse” of all contact water is addressed in Section 2.1 of this memorandum. The discharge of untreated mine-influenced water to haul roads is not considered safe reuse. In addition, the lack of accounting for groundwater inflow to the pits causes a large underestimate of the amount of contact water that will need to be treated. Lydian (October 2017, Section 3.2.2) states that perched groundwater inflow has been accounted for in the water balance. A model that assumes the presence of perched groundwater rather than inflow of groundwater from the saturated zone can severely

29

30

https://link.springer.com/article/10.1007/s10230-016-0417-1. The only exception is Open Limestone Channels, which are deliberately oversized to account for the anticipated aluminum precipitates that will form in the limestone bed. Given, B. and S. Meyer. 1998. Biological treatment of tailings solution at the Nickel Plate Mine. In: Mine Reclamation and Remediation. Proceedings of the 22nd Annual B.C. Mine Reclamation Symposium. Penticton, B.C. September 14-17, 1998. p. 157-171. Available: http://www.inap.com.au/wp-content/uploads/2017/05/9aNickelPlateMinePaper2008.pdf Lydian International Limited, 2017. NI 43-101 Technical Report, Amulsar Updated Resources and Reserves, Armenia. March. Prepared by Samuel Engineering for Lydian International, p. 397. Available: http://www.lydianinternational.co.uk/images/TechnicalReports-pdfs/2017/Lydian_43-101_March_30,_2017.pdf 13

underestimate the amount of groundwater inflow to the pits. 31 The uncertainties in the amount of perched water are high (Lydian, October 2017, Section 3.2.2 and Annex 1), and the evidence for perched water is speculative and has not been transparently discussed or demonstrated in any Lydian document made available to the public or the Bronozian consultants. As noted in Section 2.2, Lydian’s consultant, Golder Associates, has identified continuous groundwater inflow from below the water tables as an important inflow to the pits during mining. Reaction rates are discussed in Section 1.7 of this memorandum. Also, ARD reaction rates remain undefined and the basis for assumptions made of slow or no rates are unsound. 2)

The application of active water treatment to mitigate any potential site runoff: “In addition, active treatment has social, environmental and economic impacts that are more complex than use of PTS [passive treatment system].” (Table 2, p. 18, Lydian, October 2017). The (assumed negative) “social, environmental and economic impacts” associated with active water treatment are perplexing and are not defined. As noted, it has not been proposed that active treatment be the only mitigation measure used. The economic impact would lie completely with Lydian and should not be considered when evaluating whether and when active treatment is needed. It is nonsensical to claim that active treatment would have negative social and environmental impacts. If active treatment is needed and it is not put into place, negative environmental impacts will certainly occur because mine-influenced water will be released to the environment that could affect aquatic life, human health and livelihoods. Negative economic impacts to society would result if Lydian abandons the site and leaves the clean-up to Armenian institutions and the public. The government of Armenia has not required a bond. The lack of financial assurance puts at risk the environment, and it is surprising that the European Bank for Reconstruction and Development (EBRD)would invest in a large-scale, potentially damaging project without requiring a bond to cover clean-up costs in case of abandonment by Lydian, as is common practice in other jurisdictions.

3)

That pits be backfilled with sulfide containing waste (MEND 2015 32): “At Amulsar, the baseline groundwater conditions provide clear evidence that the open pits will not become inundated with groundwater following closure (see Section 3.2 of this report), therefore the site-specific conditions do not fulfil the circumstances where ARD [acid rock drainage] can be prevented using this technique.” (Section 3.4.2). Separation of higher sulfide/alunite/jarosite waste rock from within the UV and LV units is not described in the ARD Management Plan − UV is defined as NAG (non-acid generating) and LV is defined as PAG (ESIA, 2016, Appendix 8.19, Section 4.3.1) − only separation of runoff is described (ESIA, 2016, Appendix 8.19, p. 37, 38, 47). The “NAG” rock at Amulsar has almost no acid neutralizing capacity (Lydian, October 2017, Annex 4, Table 5-1) and it is this rock that will be used to encapsulate the PAG rock in the BRSF. In addition, the only mineralogic analyses show no clay minerals in the UV rock (Lydian, October 2017, Annex 4, Appendix C), suggesting that it will not form a hydrologic seal around the PAG material. If the “NAG” material has very low neutralization potential and clay content, it is not clear how it acts as a “buffer zone” for the PAG material, as stated in the ARD Management Plan (ESIA, 2016, Appendix 8.19, Section 4.2.2). Furthermore, the ARD Management Plan needs to describe how PAG material will be separated. Further testing of the

31

32

Table 4.8.6 (Lydian, October 2017, Annex 1) shows the monitoring wells with continuous groundwater elevation monitoring. Continuous groundwater elevation monitoring provides an important check against groundwater modeling results. Note that of the 25 wells, data from only 14 were included in the ESIA. Mine Environment Neutral Drainage (MEND). 2015. Report 2.36.1b. In-Pit Disposal of Reactive Mine Wastes: Approaches, Update and Case Study Results. Available: http://mend-nedem.org/wp-content/uploads/2.36.1b-In-PitDisposal.pdf 14

BRSF facility design was to be carried out to evaluate the effectiveness of this approach. 33 A more robust long-term approach would be to backfill the BRSF PAG components into pits upon completion of mining in the Tig/Art pit. The baseline groundwater elevations in and around the pits show the opposite of what Lydian (October 2017) claims and clearly demonstrate that measured (not modelled) groundwater elevations are above the pit bottoms. As noted in Section 2.2 of this memorandum, Golder Associates agrees with this point. Lydian (October 2015, Annex 1, p. 4-8-37) states “the water table is close to surface near the ore bodies,” and Figure 4.8.15 shows that average measured groundwater depths in all but one well in and immediately around the pits, which are planned to be 200 ft deep, ranges from 52 to 140 ft deep; one well farther to the east of the Tig/Art pit had a lower depth of >150 ft. Depths to groundwater were even shallower after spring snow melt. In fact, Table 4.8.7 (Lydian, October 2015, Annex 1) shows that wells in the vicinity of the ore bodies have the highest fluctuation in groundwater elevations, indicating that groundwater elevations will rise markedly from infiltration of snow melt near the pits. As discussed in Section 2.2 of this memorandum and in our previous reports, groundwater will flow into the pits and require collection and treatment during operation. During closure, groundwater will flow into the partially backfilled pits and inundate the lower portions where the most acid-generating materials should be placed.

4. Corrections to the Lydian, October 2017 Report Finally, the Lydian, October 2017 report contains some misstatements that we would like to correct. In Section 2.5.3: “The statement that the humidity cells show every rock will produce acid at Amulsar (Blue Minerals et al., 20171) is incorrect and is a fundamental misunderstanding of the testing performed…” This is a purposeful misquote of our statement “Humidity cell tests show that nearly every rock unit mined at this site will generate ARD.” Our analysis was purposefully focused on rock units not “every rock.” 34 In Section 2.1.2: “Modern effective ARD management emphasizes ARD prevention and suppression combined with the treatment of residual ARD prior to discharge. An alternative approach, described in Blue Minerals et al., 20171, appears to be based on the use of no specific pollution prevention and control techniques but instead appears to rely solely on “end of pipeline” treatment. This approach does not conform to the EHS Guidelines4 and is not therefore GIIP.” This is not our view and no quote is given. We are focusing on active mine water treatment because we are concerned that excess water will be produced early in mining, especially from pit dewatering, that will not be able to be safely used on the mine site. As noted in this memorandum, the use of mine water for dust suppression is a de facto unauthorized disposal of mine water without treatment and is not acceptable. Of course, all possible pollution prevention methods are needed as well.

33

34

Wardell-Armstrong, 2017. Lydian Armenia, Amulsar Gold Mine. Response to Reports Prepared for Mr. H. Bronozian, 18th August 2017, Section 3.6.1. Available: http://www.lydianarmenia.am/resources/geoteam/pdf/349d511d64a6641aed079bee47f1d50f.pdf Response to Lydian review of Bronozian Reports, Blue Minerals Consulting, Buka Environmental, Clear Coast Consulting, October 2017. 15