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Leyshon Resources Limited (the 'Company')

Annual Report and Managing Director's Report

The Company's Annual Report for the financial year ending 30 June 2008, including the Managing Director's Report which is set out below, has been posted to shareholders and is available electronically on the Company's website: www.leyshonresources.com.

Managing Director's Report

The Company made considerable progress during the year advancing the 70% owned Zheng Guang gold zinc project located in Heilongjiang Province northeastern China to development status culminating in a ground breaking ceremony on 2nd August 2008 which saw commencement of civil engineering works at the mine site.

Work completed included an 8.6 kilometre access road that connects the project with the residential town of Heibaoshan and the majority of site clearing and bulk earthworks. Land acquisition agreements have been finalised with two forestry departments and three villages affected by the 16 kilometre 35 kv power line which will connect the project to the state grid.

A number of the approvals for Zheng Guang have now been received with Environmental Approval being awarded in late June. Project Registration and issue of the Mining Licence are all expected in 2009 ahead of the main construction.

The detailed engineering design being undertaken by the Changchun Design Institute is currently around 90% complete and final engineering design is scheduled for completion in February 2009.

Over 50% of the mechanical equipment has been sourced, the crushing circuit fabrication is complete and first ball mill fabrication well advanced. It is anticipated that there will not be any delay arising from long lead time items not being delivered on time.

This preparatory work which was undertaken prior to the onset of winter has put the project in a position subject to funding and approvals to commence main construction in April 2009 with commissioning scheduled for the end of 2009. 

Capital costs for the project have been updated from those provided by the Changchun Design Institute in January 2008 following the recent review of individual supply contracts by the project development team and now stand at RMB 369 million (~US$54 million). 

Operating costs benefit from zinc and silver credits and are expected to range between US$250 and US$350 per ounce of gold produced depending on zinc and silver prices received. 

The project is expected to commission first ore in late 2009 with the first full year of production in 2010. Ore will be mined from a low strip ratio starter pit and then treated in a flotation circuit which will recover 75,000 ounces gold, 225,000 of silver metal and 5,250 tonnes of zinc in concentrate. 

At current metal prices the project is expected to generate positive cash flows from the starter pit over the first seven years of the project's life. Current studies indicate there are up to 15 years mine life from the Main Ore Zone. 

Independent consultancy Hellman and Schofield Pty Ltd of Australia reported a revised 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. A copy of the estimate is contained within the Review of Operations in the Directors' Report. 

Preliminary studies at current metal prices suggest that a 0.5g/t gold equivalent is a likely approximate lower operating cut-off grade. 

The 2008 exploration program targetted strike extensions to the Main Ore Zone and sought to identify drill targets on two large copper gold anomalies. The results to date indicate that there are no obvious strike extensions to the Main Ore Zone, but that it remains open at depth. The results from the regional programme are still being analysed, but at this stage there have been no obvious copper or gold drill targets identified. 

The Company has approximately A$7.4 million in cash (at 30 September) and has substantially reduced its monthly outgoings to around $200,000 per month in response to uncertainties created by the unfolding corrections to the equity, debt and metal markets. 

A detailed review is currently underway which is exploring ways to get the project to cash flow with a reduced capital requirement. 

The original plan to raise equity to fund the predevelopment ahead of a planned secondary listing on the Hong Kong stock exchange has been put on hold until some confidence has been restored in the capital markets. 

The Company has instead focussed its efforts on securing the required capital through project finance and is in discussion with three international banks which have been unaffected by the recent financial upheavals, have strong balance sheets and are actively lending to resource project developers in emerging markets. 

The Company has strengthened the Board in this area with the appointment of Andrew J. Berry on 10 October. Mr Berry has over 35 years experience in financing projects mainly with Chase Manhattan Bank in the far east and Australia. During this period Mr Berry played an integral role in the completion of over US$25 billion in transactions for power generation, mining and petroleum companies in Australia and throughout the international arena. 

Stacey Apostolou resigned as Director for personal reasons. She will continue as Company Secretary and will provide ongoing corporate advisory assistance. The Board is very appreciative of her immensely valuable contribution to the Company as a Director and looks forward to her ongoing contribution.

The Company remains fully engaged in China with its Managing Director and Chief Operating Officer based in the main operating office in Beijing. 

Paul Atherley

Managing Director

22 October 2008 

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 297903

James MacFarlane

Tel: +44 (0)207 743 6672

Mob: +44 (0)7841 672831

Seymour Pierce 

Jonathan Wright 

Tel: +44 (0)207 107 8000 

http://www.leyshonresources.com

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