LRL Leyshon Res

RNS Number:7484I
Leyshon Resources Limited
29 November 2007

29 November 2007

        Managing Director, Paul Atherley's Annual Report to Shareholders

It gives me great pleasure to be able to report on a year of considerable
progress that has brought us to point where we can embark on the important
transition from explorer to producer.

There could hardly be a better time for the Company to be developing a gold
project in China. The gold price shows no sign of relenting in its 7 year long
rise, China continues to open up its resources sector to Foreign Investment and
the province of Heilongjiang continues to invest heavily in its infrastructure
to attract development. Capital and operating costs in China remain amongst the
lowest in the world.

China is now a major player in the gold market and is predicted to become not
only the world's largest producer in the next few years but also the world's
largest consumer. This year it seemingly came from nowh ere to overtake
Australia to become the world's third largest gold producer. In 2006 it produced
240 tonnes and this year production is up 15% in the first 7 months. This
represents it's biggest growth in a decade and China is now well on the way to
becoming the world's number one.

In addition to becoming the world's number one gold producer the country is
headed for top spot in gold consumption in the next few years. Last year it
consumed more than 259 tonnes to become the world's number three consumer behind
the United States and India. Gold Fields Mineral Services has predicted that
consumer demand for gold in China will continue to grow this year following
consecutive increases over the past four years.

China's increased status as a gold producer and consumer is reflected on the
Shanghai Gold Exchange, which did not exist 5 years ago, but last year turned
over a record US$25 billion, an increase of more than 60% on the previous year.
The exchange is getting increasingly sophisticated. The China Securities
Regulatory Commission has given permission to the Shanghai Futures Exchange to
start gold futures trading which will allow gold hedging for producers and
consumers.

Leyshon is participating in this once-in-a-generation transformation of China's
gold industry from state to private ownership through its development of the
Zheng Guang gold zinc project as the first foreign owned gold project in the
mineral rich province of Heilongjiang in north east China.

The Company remains fully engaged in China with its Managing Director and Chief
Operating Officer both residents of China and operating out of an office in
Beijing with the majority of its employees either Mandarin speaking or native
Chinese.

In March of this year independent resource experts Hellman and Schofield Pty Ltd
of Australia reported a JORC compliant recoverable resource estimate o f 1.21
million ounces of gold, 3.72 million ounces of silver and 94,000 tonnes of zinc
based on the highly successful 2006 drill programme. Overall gold equivalent
content was increased by 43% with more than 50% of the previous Inferred
resource estimated upgraded to the Indicated category.

The gold equivalent of this resource estimate is more than 1.7 million ounces
and the discovery cost to date has been less than US$5 per ounce reflecting the
lack of modern exploration in a major gold belt which has produced over 20
million ounces from mainly surface and alluvial methods.

This year's drill programme has progressed well ahead of schedule with the both
diamond and reverse circulation programmes extended to increase the infill
drilling density in important areas of the Main Ore Zone and to test additional
targets on the licence area.

The diamond drilling programme has been extended from the planned 17,000 metres
to more than 20,000 m etres of closely spaced infill drilling. Results at the
time of writing are very encouraging with broad widths of good grade
mineralisation being intersected as predicted between important sections of the
Main Ore Zone. This gives us confidence that the bulk of the resource will be
upgraded to Measured and Indicated status ahead of development in 2008.
Reverse circulation drilling totalled over 22,300 metres, ahead of the planned
22,000 metre programme, testing a number of previously identified geochemical
anomalies across the licence area and completing a major sterilization programme
over the proposed areas for the process plant, tailings dam and other surface
facilities.

Mineralisation has been discovered on all seven of the geochemical anomalies and
the highlight of the results are the excellent widths and grade of the near
surface mineralisation at the Zheng Guang North discovery where the
mineralisation extends in all directions. This deposit lo cated 750 metres to
the north of the Main Ore Zone was discovered in last year's drill programme and
is showing good potential to be an immediate source of near surface oxide
material.

During the year we commenced a regional geochemical programme designed to
generate drill targets on the recently acquired 85 km2 exploration licence
adjacent to the eastern boundary of the Zheng Guang licence. The applications
for three additional exploration licences in the immediate area are well
advanced and are expected to be issued shortly.

The exploration work we have undertaken to date is in its infancy for a project
of this scope. While our main focus now turns to construction and production we
will not be holding back from exploring the full potential of the project which
has been far from tested and has the very real potential to host additional
significant resources beyond those already identified in the Main Ore zone.

The Company is fortunate to have one of China's largest and most respected
organisations, the Qiqiha'er Brigade of the Heilongjiang Bureau of Geology and
Mineral Resources, as a partner on the project. We are extremely grateful to
director Mr Chai De Sai and Mr Wang Xian Guo for their strong personal support
of the project throughout the year. With more than 4,000 technical staff, a
fleet of drill rigs and a range of laboratory and other technical services at
his disposal we are most grateful to Chai for making available a range of
services which have considerably assisted the project's rapid progress to date.

Independent metallurgical consultancy Metallurg Pty Ltd of Australia has been
working on the process route development and has reported that there will be no
requirement for mining and treating separate ore types; meaning that a single
gold/zinc sulphide ore can be supplied to the plant which will have significant
capital and operating cost benefits.

The proposed process route has a separate carbon in leach circuit for the gold
oxide ore which will produce a gold and silver dore bar for and a flotation
circuit for the gold/zinc sulphide ore which will produce further gold and
silver dore bars from a high intensity leach reactor and a saleable zinc
concentrate.

Chanchung Design Institute continues with basic engineering design under the
direction of a highly experienced project construction team lead by the
Company's recently appointed Project Manager, Dr Ye Dong Ping with a view to
having the design complete early in 2008.

Procurement of long delivery items continues by Chanchung and the Company's
procurement team. Orders are expected to be placed shortly for ball mills and
other major long time items.

Labour, fuel, energy and materials costs are amongst the lowest in China and
orders of magnitude lower than for a comparable location in Australia or Canada.

The approval processes are being led by Project Manager Ye Dong Ping working
closely with ex Ministry of Lands and Resources official Professor Zhang who has
been coordinating sino foreign joint venture company Black Dragon Mining
Limited's applications over the past 12 months.

Under an agreement signed during the year with the Municipal Government of Ai
Hui District, Zheng Guang has been designated a top priority project which will
expedite the approvals for access, land use, road construction and the supply of
water and electricity.

Feasibility studies and other reports completed by the joint venture in
accordance with regulatory requirements have been completed and approved by the
relevant authorities. The processes are well advanced with various reports
submitted and meetings attended with a view to having all necessary approvals in
place to enable construction to commence in early 2008.

Leyshon's policy of full engagement with the local community is bearing fruit as
negotiations with local farmers and other affected parties for land acquisition
and access are well advanced and progressing well.

I am most grateful to Chief Operating Officer Vic Mclaglen for establishing his
team in the new Beijing office and working closely with Project Manager Ye Dong
Ping in rapidly progressing the joint venture's activities throughout the year.
Vic is an experienced mining executive who speaks Mandarin and has fully
immersed himself in all aspects of life in China. Together with Ping he
continues to drive the project forward with unbridled enthusiasm.

The Company has A$18.2 million in cash and no debt and has received a number of
expressions of interest from prospective financiers offering equity and debt to
fund the project's development. Once the capital and operating costs have been
finalised early in the new year the funding arrangements will be finalised.
We very much look forward to keeping you informed of our progress as we bring
Heilongjiang's newest and in my view China's most exciting gold project into
production. By bringing Zheng Guang into production, Leyshon will join a small
peer group of internationally listed mining companies that have achieved a
significant re-rating through the development of a project in China. The rewards
to shareholders will be substantial if we can emulate the performance of this
group.

Paul Atherley
Managing Director

Footnote: During the year Managing Director Paul Atherley invested A$3.3 million
in the Company through the conversion of 15 million options and subsequently
sold 1 million shares in October.

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

Candice Sgroi
Tel: +44 (0)207 743 6376
Mob: +44 (0)7894 462 114

Seymour Pierce
Jonathan Wright
Tel: +44 (0)207 107 8050

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 and
with over 80% of employees who 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 first ever Sino Foreign
owned mine in the mineral rich province of Heilongjiang's 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.

In March 2007 Hellman and Schofield Pty Ltd of Australia reported a JORC
compliant recoverable resource estimate of 1.21 million ounces of gold, 3.72
million ounces of silver and 94,000 tonnes of zinc of which 50% was reported in
the Measured and Indicated category.

The gold equivalent of this resource estimate is over 1.7 million ounces and the
discovery cost to date has been less than US$5 per ounce reflecting the lack of
modern exploration in a major gold belt which has produced over 20 million
ounces from mainly surface and alluvial methods.

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 Statement

The information in this report relating to Exploration Results, Mineral
Resources or Ore Reserves is based on information compiled by Richard Seville, a
director of the Company, who is a member of the Australasian Institute of Mining
and Metallurgy.

Mr Seville 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.





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            The company news service from the London Stock Exchange

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