Following several months of review, Leyshon Resources (AIM: LRL) (ASX:LRL)  has announced significantly reduced capital requirements for the Zheng Guang gold project in Heilongjiang in northeast China.

A revised design for the mine development envisages a lower initial throughput based on a single ball mill and crushing circuit which can be ramped up quickly from an initial 175,000 tpa throughput to 750,000 tpa in due course. This has resulted in a reduction in the up-front capex costs of almost 20%, from the original US$59 million to US$48 million.

Leyshon and its consultants - Minarco-MineConsult - are now working on a Bankable Feasibility Study which will incorporate the revised parameters and an optimised pit design, which could be completed in as little as 3 months. Key points to come out of preparatory work for the BFS include:

·    Production and processing of 750,000 tonnes per annum of open pit ore with mine diluted

     grades of 2.66 g/t Au, 10.41 g/t Ag and 1.06% Zn.

·    Annual production of 48,000 ounces of gold, 160,000 ounces of silver and 6,800 tonnes of zinc

     in concentrate.

·    Capital cost of US$43.92 million including government imposts and an estimate of working

     capital of US$ 4.4 million.

·    Total operating cost of US$26.35 per tonne, inclusive of mining, processing and overhead.

·    Annual revenue of US$52.92 million at current metal prices.

The study has not evaluated the mining and treatment of oxide, lower grade ore or extensions to the Main Ore Zone which collectively have the potential to significantly extend the initial mine life beyond the initial 7.2 years. The Study will also cover potential future throughput expansion to 1.5 million tonnes per annum.

Permitting is well advanced, with the Land Acquisition Plan having been approved and the Business Licence renewed for a further 15 years. Leyshon anticipate being able to lodge the documentation for the final mining licence before mid-year. The revised mine plan has the approval of Heilongjiang Bureau of Geology and Mineral Resources and the relevant local municipal and provincial authorities, who are keen to see Zheng Guang and other recent discoveries become a key part of the regionaql development strategy. This support, together with the recent briefings delivered by Austrade, should help expedite the permitting process.

Funding has not yet been sought formally, though the company are in confidential discussions regarding an indicative term sheet. Commercial discussions with potential buyers of Leyshon's interest in Zheng Guang are also continuing.

Cash conservation has remained a priority, with monthly outgoings down to A$150,000 per month, and cash now stands at A$4.6 million.

Leyshon Resources 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 USD90 mln from the project at current metal prices, and EBITDA of 54 mln usd on cash operating costs of some 155 usd per ounce.

Published courtesy of Proactive Investors - www.proactiveinvestors.com