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06/09/2014 22:41

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RNS Number : 8339N
Leyshon Resources Limited
31 July 2014 
 
LEYSHON RESOURCES LIMITED 
 
31 JULY 2014 
 
Quarterly Report June 2014 
 
Leyshon Resources Limited (AIM/ASX: LRL) ("Leyshon" or the "Company") primary
activities during the quarter included identifying new project opportunities
and continuing the strategic review of the Mt Leyshon gold project in
Queensland, Australia. 
 
New Project Opportunities 
 
During the quarter, the Company has been actively pursuing and studying
potential investment opportunities in the resources sector which are in line
with the Company's stated investing policy. 
 
The Company's strategic objective is to identify mineral resource projects
that have a clear pathway to production or monetisation and can generate high
returns to shareholders. This will be achieved by leveraging the in-house
expertise and track-record in identifying, acquiring, financing, developing
and operating resource projects, and un-locking value. The Company's plan is
to identify advanced or brown-field assets which have a stronger chance of
being re-rated in the listed market. 
 
The investment climate in the resources sector continues to be difficult.
Resource equity and asset valuations are currently substantially discounted
which we believe will provide an attractive entry opportunity for the Company
at the bottom of the investment cycle. 
 
The Company has a strong cash position with working capital of AUD$2.9
million. Major shareholders are supportive of the Company's acquisition
strategy. 
 
Since the completion of the demerger, the Company has commenced preliminary
discussions with prospective debt and equity financiers in regard to a number
of investment opportunities and has been encouraged by the response regarding
the level and types of funding that could be available. 
 
Mt Leyshon Strategic Review 
 
The Company is continuing its strategic review of the Mt Leyshon project and a
number of potential opportunities to create value from the project have been
identified, including: 
 
1)    Utilising the existing pit and other infrastructure for small-scale
hydro power generation; 
 
2)    Reassessing the exploration potential of the ground in the vicinity of
the old mine; and 
 
3)    The potential to recover the gold from the ball mill scat stockpiles. A
previous economic study demonstrated only modest returns at a gold price of
US$780 per ounce, compared to the current price of US$1300 per ounce. 
 
1.            Hydro Power Generation 
 
During the quarter, the Company completed the concept study into developing a
pumped storage hydro ("PSH") power project at Mt Leyshon. 
 
The concept involves generating near-instantaneous electrical power and
supplying it into the grid at times of peak power demand by releasing water
from the existing upper reservoir through a hydro generation plant. The upper
reservoir is refilled from the existing open pit during periods of off-peak
prices. 
 
The Australian Energy Market Operator forecasts that new generation capacity
will be required in Queensland by 2020 in order to maintain supply reliability
within the National Electricity Market Reliability Standard. Under a high
growth scenario, this requirement for new capacity may be as early as 2017. 
 
The optimal project sizing based on the physical reservoir characteristics is
estimated to be around 40 megawatts ("MW"). The existing power line
infrastructure connected to the site supports a project of up to 20MW and with
modest upgrades may support up to 40MW. 
 
The unit cost of production for a 20-40MW PSH plant at the Mt Leyshon site
compares favourably to the cost of a larger-scale open-cycle gas turbine
project, the assumed next best alternative for providing fast-start peak to
intermediate generation capacity (i.e. a capacity factor of up to 30-40%.). 
 
Whilst the study demonstrated positive project economics, further work will be
required in areas including water chemistry, capital and operating cost
estimates, networks, engineering, and regulatory. 
 
The report recommended identifying a strategic partner to assist with managing
market risk and underpinning the commercial viability of the project by
securing either a medium to long-term off-take with an electricity retailer or
major energy user, or a medium to long-term network support contract with the
local network service provider. The Company is currently discussing proposals
with a number of industry players. 
 
2.            Further Exploration 
 
The historical focus of the Leyshon mining operations was the Mt Leyshon
Breccia, the main ore host, comprising a large pipe-like breccia,
approximately 400 x 300 metres in plan, with a minimum vertical extent of 650
metres. A number of areas of brecciation and porphyry intrusion extend outside
the main pit area. Historical surface sampling has identified areas of
anomalous grades of gold, silver, lead and zinc. The Company will study the
historical data to assess whether a new re-interpretation should be undertaken
using modern day exploration methodologies including sampling and geophysics. 
 
3.            Recovery of Gold from Mill Scats 
 
In June 2012, the Company completed a drilling program and economic study on
the potential recovery of gold from a large stock pile of between 12 and 15
million tonnes of ball mill scats from the historical operations. The study
considered a number of different process routes to recover between 100,000 and
175,000 ounces of gold through the retreatment of the highly mineralised
material. The material was stockpiled at a time when gold prices averaged
around US$300 per ounce, and the 2012 study was based on a gold price of
US$780 per ounce. 
 
The results of the program indicated that the project was viable but required
significant capital expenditure for a relatively modest return, and the
project was put on hold. Given the recent increase in the gold price to
US$1300 per ounce, the Directors have decided to revisit the economics of the
project. 
 
ASX Suspension 
 
Australian Securities Exchange ("ASX") policy, in accordance with Chapter 12
of the Listing Rules, is to allow companies that have disposed of their main
undertakings a six-month period within which to satisfy ASX that the company
has a sufficient level of operations to justify continued quotation of the
Company's securities on the ASX. With funds available for investment and the
volume of opportunities being presented to Leyshon for consideration, the
Board had expected to be in a position to implement a programme to create
value from its existing Mt Leyshon assets or a suitable project acquisition in
time to satisfy the ASX's continued operations policy. 
 
Since the demerger and subsequent appointment of a new Managing Director in
February 2014, the Company has been actively reviewing a number of project
opportunities, including appropriate due diligence enquiries, and entered into
negotiations with several parties. Whilst the Company is currently evaluating
a number of opportunities, there can be no certainty that a transaction will
be concluded. 
 
However, the Company was not able to satisfy the ASX that it was in compliance
with Chapter 12 and was suspended from trading on 14 July 2014. Leyshon
remains an ASX listed entity and provided it is able to recommence operations
of a level that, in the opinion of the ASX, is sufficient to justify quotation
of Leyshon securities in the future, the suspension of trading in the
Company's shares will be lifted. 
 
With our available cash reserves, Leyshon is well positioned to pursue quality
projects in accordance with our investment strategy. Every effort will be made
to ensure we secure assets that are most likely to achieve the corporate
objectives and strategic aims of the Company. 
 
In the interim, the Company will continue to evaluate suitable investment
opportunities and will keep the market informed of any material developments
as they occur. 
 
The Company confirms that its securities continue to trade on the AIM Market
and the Company remains subject to Rule 15 of the AIM Rules for Companies
("AIM Rules") whereby the Company will have to make an acquisition(s) which
constitute a reverse takeover under AIM Rule 14 or otherwise implement its
investing policy to the satisfaction of the London Stock Exchange within
twelve months of the demerger of Leyshon Energy. 
 
For further information please contact: 
 
Leyshon Resources Limited 
 
Corey Nolan - Managing Director 
 
Tel: +61 7 3221 7770 
 
admin@leyshonresources.com 
 
RFC Ambrian Limited 
 
Samantha Harrison (Nominated Adviser) 
 
Kim Eckhof (Corporate broking) 
 
Tel: +44 (0)203 440 6800 
 
http://www.leyshonresources.com 
 
Leyshon Resources Limited held the following interests in exploration
tenements at the end of the quarter: 
 
 PROJECT        BENEFICIAL INTEREST  TENEMENT  NAME                 
                                                                    
 AUSTRALIA                                                          
 MOUNT LEYSHON  100%                 ML 1546   Golden Star          
                100%                 ML 10144  Mt Leyshon           
                100%                 ML 10148  Puddler Creek        
                100%                 ML 10149  Water Dam Gap Creek  
                100%                 ML 10172  Eastern Star         
                100%                 ML 10173  Southern Star        
                                                                    
 
 
There were no tenements acquired or disposed of during the quarter and no
changes in the beneficial interests held by the Company. 
 
Leyshon Resources Limited ABN 75 010 482 274 
 
Level 3 / Suite 3, 1292 Hay Street, West Perth 6005, Western Australia 
 
Tel: + 61 8 9321 0077 Fax: + 61 8 9322 4073 
 
This information is provided by RNS
The company news service from the London Stock Exchange