RNS Number : 2906A
Leyshon Resources Limited
31 July 2008
31 July 2008
JUNE 2008 QUARTERLY REPORT
Moving Heilongjiang's First Ever Sino Foreign Gold Mine into Production
Leyshon Resources Limited (AIM/ASX: LRL) is pleased to report that during the quarter it
continued to make substantial and wide ranging
progress as it rapidly develops the Zheng Guang gold zinc project in Heilongjiang, northeast
China.
Highlights
* Environmental approval awarded
* Upgraded resource estimate
* 30,000 metre step out drill programme to increase gold resources and test two large
porphyry copper targets is well underway
* Capital cost estimate for project set at RMB 369 million (US$52.7 million)
* Forecast net operating costs at less than US$250 per ounce
* Construction of 8.6km main access road commenced
* Proposed secondary listing on the Main Board of the Stock Exchange of Hong Kong Limited
under consideration
Updated Capital and Operating Costs
Capital costs for the project have been updated from those provided by the Changchun
Design Institute in January 2008 following the
recent review of individual supply contracts by the project development team.
The operating costs have also been reviewed and are now estimated at US$238 per ounce of
gold produced after silver and zinc credits
over the first five years of operations. This equates to a unit operating cost of $21.60 per
tonne of ore mined and milled which is
achieved by the combination of a low strip ratio open cut mine, low power and labour inputs
and a large scale highly productive processing
plant. Final engineering studies are being undertaken this year and final operating cost
estimates will be available after these have been
completed.
The Board has introduced a comprehensive inflation cost management policy under which
suppliers are being required to disaggregate and
mitigate any proposed cost increases. Fixed price contracts are being entered into wherever
possible, and where price increases cannot be
avoided, quantity reductions, deferrals and/or productivity improvements are being sought to
offset the increase in cost.
A summary of the updated project operating parameters over the first five years of the
operation is provided below:
100% 2009 2010 2011 2012 2014
2015
tonnes mined and
processed Commissioning 1,500,000 1,750,000 2,250,000 2,250,000
2,250,000
76,000 88,000 114,000 114,000
114,000
gold ounces produced
silver ounces produced 214,000 280,000 360,000 360,000
360,000
zinc tonnes metal in
concentrate produced n/a 5,800 7,500 7,500
7,500
68 92 118 118
118
revenue (US$ millions)
operating cost (US$ millions) 29 39 48.5 48.5
48.5
cost per ounce gold equivalent 330 255 238 238
238
US$/oz
operating cashflow (EBITDA) 39.5 52.7 69.7 69.7
69.7
(US$ millions)
59.1 15.3 6.0 5.9 4.4
4.1
capex (US$ millions)
exploration (US$ millions) 3.0 5.0 5.0 5.0 5.0
5.0
Revenue is based on metal prices of US$850/ounce gold, US$18/ounce silver and
US$2,000/tonne zinc. Cost per ounce of gold is the total
cost of production net of silver and zinc revenues divided by the ounces of gold produced.
The project benefits from the excellent metallurgical response of the ore which permits
whole of ore to be treated through a single
circuit allowing an additional 20% of revenue to be generated from silver metal and zinc
concentrate.
At current metal prices the project is expected to generate very strong cash flows from
the starter pit over the first five years of the
project's life. Current studies indicate there are up to 15 years mine life from the Main Ore
Zone alone.
The Board is of the view that these early cash flows should be applied to sustaining
project capital, US$3-5 million per year in
exploration and the balance distributed to shareholders by way of a high dividend payout
policy as soon as positive cashflow and
profitability has been established.
During the first five years, over US$25 million will be spent on exploration to delineate
additional resources on the 130 km2 of highly
prospective tenement holdings. These will be mined separately and blended with ore from the
Main Ore Zone and are expected to result in a
long mine life project with sustainable low operating costs.
Upgraded Resource Estimate.
Independent resource specialist Hellman and Schofield Pty Ltd (H&S) of Australia has
reported a revised resource estimate incorporating
the 43,500 metre 2007 drill programme. Resources were estimated by Multiple Indicator Kriging
including block support correction to give
tonnage and grade estimates at open pit mining selectivity, and are reported above gold
equivalent cut-off grades.
The March 2007 resource estimate was reported at gold cut-off grades. Taking into account
the different basis of cut-off grades used to
report the 2007 estimates, the current estimate at a 0.5 g/t gold equivalent cut-off grade
has:
* increased the overall resource by approximately 25% from 24 to 30 million tonnes,
* increased the Measured and Indicated resources by approximately 60% from 10 to 16
million tonnes,
* slightly decreased contained gold by approximately 4% from 1.2 to 1.16 million
ounces,
* increased contained silver by approximately 20% from 3.7 to 4.5 million ounces, and
* increased zinc content by approximately 30% from 94,000 to 120,000 tonnes.
The following table presents the 2008 resource estimates at a range of cut-off grades. The
figures in this table have been rounded and
may exhibit rounding errors. Preliminary studies suggest that a 0.5 g/t gold equivalent is a
likely approximate lower operating cut-off
grade.
Zheng Guang April 2008 Resource Estimates
Cut-off Au Equiv. g/t Resource Tonnes Au Zn Ag
Category ( (g/ (%) (g/
Millio t) t)
n)
0.3 Measured 9.25 1.28 0.39 4.84
Indicated 12.2 1.04 0.33 3.96
Measured + Indicated 21.5 1.14 0.36 4.34
Inferred 23 0.7 0.2 3.2
Total 44 0.9 0.3 3.7
0.5 Measured 7.16 1.57 0.47 5.70
Indicated 8.91 1.32 0.41 4.78
Measured + Indicated 16.1 1.43 0.44 5.19
Inferred 14 1.0 0.3 4.2
Total 30 1.2 0.4 4.7
0.7 Measured 5.73 1.86 0.54 6.49
Indicated 6.81 1.59 0.48 5.52
Measured + Indicated 12.5 1.71 0.51 5.96
Inferred 9.7 1.2 0.4 5.1
Total 22 1.5 0.5 5.6
0.9 Measured 4.70 2.15 0.60 7.23
Indicated 5.36 1.87 0.55 6.22
Measured + Indicated 10.1 2.00 0.57 6.69
Inferred 6.9 1.5 0.4 5.9
Total 17 1.8 0.5 6.4
Gold equivalent cut-offs were used to allow the value of zinc and silver to be taken into
account as part of the estimation process.This was based on 1% Zn and 1g/t Ag being equivalent to 0.67 g/t Au and 0.018g/t Au
respectively. These ratios were calculated at a gold
price of $930/oz and metallurgical recovery of 87.3%, and silver price of $US17/oz and
metallurgical recovery of 84%, and zinc price of
US$2250/tonne and recovery of 84% with payments at 47.5% of recovered zinc metal to allow for
smelting, refining and transport charges.
Site Activities
Project development has commenced with the 8.6km access road nearing completion, crushing
circuit fabrication complete and first ball
mill fabrication well advanced. It is anticipated that there will not be any delay arising
from long lead time items not being delivered on
time.
Exploration
The 2008 exploration programme targeting strike extensions to the Main Ore Zone and
identifying drill targets on two large copper gold
anomalies is well under way with over 4,100 metres of diamond drilling and 5,400 metres of
reverse circulation drilling completed. First
drilling results are expected in August.
The joint venture has been successful in limiting drilling costs to 9% increase in 4 years by
offsetting rising input costs with
productivity improvements. The joint venture has the advantage of available diamond drill rigs
at rates that are substantially below
equivalent rates in Australia and elsewhere.
Corporate
The Company is considering a proposed secondary listing on the Main Board of the Stock
Exchange of Hong Kong Limited (the "SEHK").
Hong Kong, being part of Mainland China, is a natural choice for companies with
substantial businesses and operations in China seeking a
listing on an internationally recognised market. The Directors are of the view that the
proposed listing of Leyshon on the SEHK, an
internationally recognized stock exchange with a strong legal system, sound regulatory
framework and high liquidity, will enable it to
expand its shareholder base and fund raising opportunities, in particular in the rapidly
growing Asian market.
The Company has 218,110,891 ordinary fully paid shares on issue and 5.95 million options.
Cash on hand at the end of the quarter was
$9.4 million.
For further information contact:
Leyshon Resources Limited
Paul Atherley - Managing Director
Tel: +86 137 1800 1914
Mob: +61 417 475 038
Pelham Public Relations
Charles Vivian
Tel: +44 (0)207 743 6672
Mob: +44 (0)7977 297 903
John McLeod
Tel: +44 (0)207 743 5508
Mob: +44(0)788 692 0436
Seymour Pierce
Jonathan Wright
Tel: +44 (0)207 107 8000
http://www.leyshonresources.com
Background Information
Leyshon is fully engaged in China with its main operating office in Beijing its Chairman,
Managing Director and Chief Operating Officer
all based in China. Over 80% of employees are either native Chinese or Mandarin speaking.
The Company is rapidly progressing the Zheng Guang gold zinc project to production status
and is aiming to jointly develop it as the
first ever Sino Foreign owned mine in the mineral rich province of Heilongjiang in 2008.
The project benefits from exceptional infrastructure as it is located within a well
established coal and copper mining community with
rail, power, water and mining contractor services immediately available.
The recently reviewed capital cost estimate for the 2.25 million tonne per annum combined
carbon in leach and flotation circuit process
plant is RMB369 million (US$52.6 million).Orders have been placed for two 4.6 metre diameter
ball mills at a cost of RMB15.2 million (USD
2.1 million) and a RMB12.1 million (USD 1.7 million) order has also been placed for the supply
of a 700 tonne per hour Nordberg crushing
circuit.
Leyshon's partner, the Qiqiha'er Brigade of the Heilongjiang Bureau of Geology and Mineral
Resources, one of the largest organizations
of its kind in China, is providing a range of services to the joint venture from its
complement of 4,000 technical staff, drill rigs,
laboratory and other technical facilities. This valuable support is enabling the project to
rapidly move ahead on an extremely
cost-effective basis.
Competent Persons Statements
The information in this report that relates mineral resource estimation is based on work
completed by Mr Jonathon Abbott who is a full
time employee of Hellman and Schofield Pty Ltd and a member of the Australasian Institute of
Mining and Metallurgy. Mr Abbott has sufficient
experience which is relevant to the style of mineralisation and type of deposit under
consideration and to the activity which he is
undertaking to qualify as a Competent Person as defined in the 2004 Edition of the
'Australasian Code for Reporting of Exploration Results,
Mineral Resources and Ore Reserves' and as a Qualified Person as defined in the AIM Rules. Mr
Abbott consents to the inclusion in the report
of the matters based on his information in the form and context in which it appears.
The exploration data on which the Mineral Resource estimate is based has been compiled by
Mr Irvine Hay who is a member of the
Australian Institute of Mining and Metallurgy. Mr Hay is a fulltime employee of CSA Australia
Pty Ltd a consultancy which provides
geological services to Leyshon and has sufficient experience which is relevant to the style of
mineralisation and type of deposit under
consideration and to the activity which he is undertaking to qualify as a Competent Person as
defined in the 2004 Edition of the
'Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves.'
Mr Hay consents to the inclusion in the report
of the matters based on his information in the form and context in which it appears.
Calculation of metal equivalents have been compiled by Mr Richard Seville who is a member
of the Australian Institute of Mining and
Metallurgy. Mr Seville is a Director of Leyshon Resources Limited and has sufficient
experience which is relevant to the style of
mineralisation and type of deposit under consideration and to the activity which he is
undertaking to qualify as a Competent Person as
defined in the 2004 Edition of the 'Australasian Code for Reporting of Exploration Results,
Mineral Resources and Ore Reserves.' Mr Seville
consents to the inclusion in the report of the matters based on his information in the form
and context in which it appears.
This information is provided by RNS
The company news service from the London Stock Exchange
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