Quarterly Activities Report
April 30 2008 - 5:54AM
UK Regulatory
RNS Number:4247T
Leyshon Resources Limited
30 April 2008
30 April 2008
MARCH 2008 QUARTERLY REPORT
Rapidly Bringing 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
* Construction and Mining approvals well advanced
* Upgraded resource estimate allows for detailed mine design
* 2008 exploration programme targeting further increase in resources
* Capital cost estimate for project set at RMB 323.2 million (US$45.5
million)
* Orders placed for long lead time items and power supply
* Financing well advanced
Approvals
Project Registration
The approvals required for Project Registration are being processed by the
Heilongjiang Development and Reform Commission and are expected to be completed
in June. This will allow the main plant construction to commence. Infrastructure
and other works outside the Mining Area, such as the power line and access road,
are unaffected and development is expected to commence shortly.
Details of the individual components of the Project Registration approval
process are itemised below.
1. Feasibility Report - Completed and Approved
2. Clarification of Mining Area - Completed and Approved
3. Project Registration Report - Completed - under review
4. Development Utilisation Plan - Completed and Approved
5. Safety Report - Completed and Approved
6. Soil & Water Conservation Plan - Completed and Approved
7. Geo hazard report - Completed and Approved
8. Pre Land Acquisition Plan - In Progress
9. Cultural relic investigation report - In Progress
10. Environmental Report - Completed, Expert panel review successfully
completed, Approval pending
Mining Licence
A Mining License will be required before mining operations can commence. The
Mining Licence application is expected to be submitted around the same time as
Project Registration. The approving authority is Heilongjiang Department of
Lands and Resources and approval is expected to take several months. Details of
the individual components of the Mining Licence approval process are itemised
below.
Report Status
1. Project Registration( Incl.Reports as per the above) - See above
2. Geology Report - Completed and Approved
3. EL Registered Capital Repayment - In Progress
The project contiues to receive strong support from the Heilongjiang provincial
government, the Heihe municipal and Aihui district governments.
Upgraded Resource Estimate.
Independent resource specialists 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 (Million) (g/t) (%) (g/t)
0.3 Measured 9.25 1.28 0.39 4.84
Indicated 12.2 1.04 0.33 3.96
Measured + 21.5 1.14 0.36 4.34
Indicated
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 + 16.1 1.43 0.44 5.19
Indicated
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 + 12.5 1.71 0.51 5.96
Indicated
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 + 10.1 2.00 0.57 6.69
Indicated
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.
The principal objective of the 2007 diamond drilling campaign was to increase
confidence in resource estimates for the Main Mineralised Zone to allow detailed
mine design studies to undertaken before mine development. This was achieved
with estimates for portions of the Main Mineralised Zone upgraded to Measured
and Indicated status.
The 2007 drilling programme also reinforced the project's exploration potential.
Mineralisation in the main zone was traced for an additional 50 metres to the
north and the mineralised trend continues at depth. Encouraging early results
were encountered at Zheng Guang North, South, East and West.
Figure 1 presents an example cross section showing drill hole traces and the
current resource estimates coloured by estimated gold grade. Figure 2 presents
drilling and mineralisation trends relative to a preliminary pit design and
infrastructure layout derived from the 2007 model.
Refer company website: www.leyshonresources.com full PDF version of
announcement with Figures.
Following structural interpretation of the core from the 2007 drilling
programme, a new model for the mineralisation has been developed by the
Company's geological consultants. This has highlighted the potential for en
echelon pods of mineralization to occur within dilation zones within a
north-west trending regional shear. The Main Zone at Zheng Guang has been
interpreted as one of these dilation zones.
The 2008 programme is scheduled to commence shortly and will be targeting the
strike extensions to the north and south of the Main Mineralised Zone. The
programme will be testing dilationary targets within the interpreted north-west
trending regional shear zone which hosts the Main Mineralised Zone, Zheng Guang
North and Zheng Guang East.
Full details on this programme as well as details of the regional exploration
programme on the recently acquired 130 km2 exploration licence areas, will be
provided shortly.
Capital Cost Estimate
The Capital cost estimate, as prepared by the Changchun Design Institute for the
Zheng Guang gold zinc project, is RMB 323.2 million (US$45.5 million).
The cost estimate is based on a combined carbon in leach and flotation plant
which will be capable of processing both oxide and sulphide ore types. The
circuit has been designed to allow for the maximum flexibility in terms of ore
type and has the capacity for significant additional throughput.
Details of the estimate are as follows:
RMB
Mechanical equipment 89,071,000
Electrical and instrumentation 39,786,000
Other equipment 27,594,000
Civil engineering
(including earthworks and tails dam) 120,644,000
Management 46,074,000
Total 323,169,000 (US$45.5 million)
The estimate does not include any allowance for inflation or unbudgeted costs.
The Company has assumed a contingency of up to RMB 33 million (US$ 4.6 million)
representing 10% of the capital estimate to allow for these items.
Project Design
Changchun Gold Design Institute has completed Preliminary Engineering of the
process route that was designed by independent metallurgical consultant Gary
Patrick of Metallurg Pty Ltd, based on metallurgical test work completed by
AMMTEC Australia.
Detailed Engineering, also being completed by Changchun Gold Design Institute,
is well advanced. Civil design is almost complete and mechanical design is
expected to be completed by the end of June.
Gary Patrick of Metallurg and Tim Hetherington of EPCM continue to work closely
with the Changchun design team to incorporate the latest metallurgical and
operating concepts into the Chinese design.
Long Lead Time Orders
Crushers
* The Company placed orders for the manufacture and delivery of crushers
at a total cost of US$1.68 million. The order for a Nordberg C125 Primary
jaw crusher and two Nordberg HP4f Cone crushers, has been placed with the
Chinese subsidiary of Metso Minerals, the world's leading rock and mineral
processing group.
* The crushers are scheduled to be delivered and installed by September
2008. The total cost of RMB12.13 million will be paid 30% up front and 70%
upon delivery with a 24 month guarantee subject to a 10% performance bond.
Power Line
* The Company has entered into a contract for the installation of a 16
kilometre 35KV power line, at a total cost of RMB 2.80 million (US$390,000).
The dedicated high voltage overhead transmission power line will provide
13MW of electrical power from State Grid, the provincial power authority,
and has the capacity to be increased to over 20 MW.
* The lump sum contract has been placed with the Nenjiang Power Bureau for
the engineering design, material purchase, construction, installation and
commissioning of the line and associated facilities.
Ball Mills
* The Company has also placed orders for the manufacture and delivery of
two ball mills at a cost of US$2 million. The order was placed with Shenyang
Heavy Machinery Group, one of China's largest engineering groups based in
the neighbouring province of Jilin.
* The 4.6 metre diameter, 750,000 tonnes per annum capacity mills are
amongst the largest of their type to be manufactured in China and the first
is scheduled to be delivered in August 2008 for the oxide circuit and the
second in September 2009 for the sulphide circuit.
* The total cost of RMB15 million (US$2.03 million) spread over 2 years is
in line with budget estimates and compares very favourably with that for
overseas manufactured and supplied mills. The delivery time of 8 months, is
less than a third of that being quoted for some international projects.
Site Work and Utilities
The main site access road route has been finalised and a road design has been
completed by the Qiqiha'er Institute Road and Bridge construction unit. The
approximately 8 km long road will intersect with the Nenjiang to Heihe road
which runs to the south of the site. Construction of the road is scheduled to
commence in late May 2008. The road construction will include a sub terrain
fibre optic cable for site communications and internet access.
The 35kv power line route has been finalised and construction is also scheduled
for May 2008.
At full production, the site is calculated to consume 3,000 to 3,500 m3 of water
per day. The Hydrology division of the Qiqiha'er Institute has identified
underground water supplies approximately 8 kms south east of the site which will
be sufficient for the project's requirements. Approval has been given to
establish a borefield that is capable of supplying over 8,000 m3 per day.
The borefield will be made up of several bores, of which 2 deep bores
(approximately 150m deep) have a sustainable production totaling 2400 m3 per
day. The balance of water will come from a series of shallower bores
(approximately 20 - 30 metres deep) capable of supplying a sustained total of
5,600 m3 per day.
The process design incorporates dry tailings disposal which minimises water
consumption by filtering the tailings to less than 20% moisture and returning
the water for immediate re use. Although the sulphide circuit plans to utilise
wet tailings disposal, the entire plant is operated in closed circuit, returning
all water from the tailings for reuse.
The site water supply/consumption does not include catchment from site run off
or pit dewatering, which when included will further reduce borefield water
requirements.
Negotiations with contractors for the preparation of site civil works, including
site preparation and foundation works, are well advanced and letters of intent
will be put in place early May, ahead of commencement of site works scheduled
for late May.
The project benefits from being located in a well established coal and copper
mining community with excellent infrastructure including a rail connection to
the national network, grid power, water and a range of mining contractor
services.
The project is expected to benefit further from the recently announced US$8
billion planned infrastructure investment by the provincial government in the
surrounding area. This will coincide with low energy costs resulting from the
expansion of Heilongjiang's electricity generating capacity.
Heilongjiang is an energy rich province with abundant coal and gas supplies.
State Grid, the provincial power authority, is expanding its installed
electrical generating capacity by 80% to 2.2 terawatts (million megawatts) by
2010. The province enjoys an average price of electricity half of that in
China's southern provinces and as a result, the Company expects to be able to
negotiate a very attractive power tariff compared with international standards.
The Company remains fully engaged in China with its Managing Director, Chief
Operating Officer and Financial Controller based in the main operating office in
Beijing. Its 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.
Financing
The Company has received numerous approaches from investment bankers and brokers
from London, Australia and Hong Kong to provide funding for the project. The
Company is well advanced in these discussions and expects to finalise funding
arrangements in the near future.
Corporate
The Company has 218,110,891 ordinary fully paid shares on issue and 5.85 million
options. Cash on hand at the end of the quarter was $12,901,000.
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.
Changchun Design Institute has recently reported that the capital cost estimate
for the 1.5 million tonne per annum combined carbon in leach and flotation
circuit process plant is RMB323 million RMB (US$46 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.
Comments relating to exploration potential and 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
END
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