Leyshon Resources (ASX: LRL) has a proud history as one of Australia’s most financially successful gold mining companies having produced over 2.7 million ounces from its Mt Leyshon Gold Mine in Queensland and distributed over A$300 million dollars to its shareholders over its 15 year life.
Today Leyshon has divested its Australian mining and exploration interests and is focused on the Zheng Guang project in Heilongjiang, northeast China. Zheng Guang has estimated the resource of 1.21 million ounces of gold, 94,000 tonnes of zinc and 3.72 million ounces of silver. The company forecasts annual revenues of 90 mln usd from the project at current metal prices, and EBITDA of 54 mln usd on cash operating costs of some 155 usd per ounce.
Leyshon makes US$20 mln gain on Zheng Guang project exit, reviewing potential new projects
China focused junior miner Leyshon Resources (AIM, ASX: LRL) has completed the sale of its interests in the Zheng Guang project. The deal realised a gain of US$20.2 million, based on a US$22.5 million investment since the project’s inception. The company is actively pursuing its new investment strategy: it has entered an iron ore joint venture and is currently reviewing over 50 potential new projects.
As a result of the divestment Leyshon now has approximately A$48 million in cash and and RMB1.98 million deposited in Beijing, approximately equating to a combined 12 pence (A$0.22) per share. Leyshon are currently pursuing a number of potential new projects and plans a share buy-back.
Leyshon said it is actively reviewing potential projects under its new investment criteria; it has received over 50 projects for review. The investment criteria is focused on the acquisition and development of mineral and energy projects which may be of interest to Chinese groups.
"Following the strong shareholder support for the (new) investing policy, the company will continue to be located in Beijing and will draw on its six years' experience in China”, Leyshon MD Paul Atherley commented. The current focus is broadly on the region encompassing Northern China and Southern Mongolia, specifically targeting primarily coking coal and also iron ore.
According to the mining company, China currently has a strong focus on expanding the domestic production of both coking coal and iron ore, consequently the regional infrastructure’s rate of development is astonishing, Leyshon said. The company has quickly established excellent deal flow in these targeted areas and has entered into an exploration and production joint venture on the QHD Iron Mountain project in East China. It is actively working on a number of other joint venture opportunities.
The QHD Iron Mountain project is being developed through a 51:49% joint venture with the Qiqiha'r Tai Fu trading company. The project is located in one of the main iron mining districts in the East China Iron Belt, the Tang Shan district of Hebei, East China. The local iron mining industry is characterized by a large number of smaller operations mining magnetite from near surface deposits, which are processed through simple magnetic separation plants and produce smelter grade concentrate for sale at the mine gate.
Qiqiha'r Tai Fu is headquartered in Heilongjiang. Leyshon said it has known the company, which was one of the bidders for the Zheng Guang project, for some time. The JV is currently undertaking a 1,500 metre drill programme at QHD. Following up coincident ground magnetics and surface rock chip and geological mapping were carried out in December 2009. Leyshon expects the programme to confirm the size of the potential resource, and that the mineralogy is magnetite not hematite. Samples taken from the drilling programme will be used for metallurgical testwork. The programme and test work are expected to be completed in mid-April.
Earlier this month, Leyshon told investors it will conduct an on-market share buyback of up to 21.8 million shares, approximately 10% of the company’s share capital. In London, Seymour Pierce is conducting the buyback on the company's behalf, whilst Blackswan Equities are handling the buyback in Australia.
