TIDMLRL
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
END
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