Leyshon Resources: Final Results | Company Announcements

Final Results

Leyshon Resources

Wednesday 30 September, 2009

(a) Issued and paid up capital

218,255,692 (2008: 218,110,891) fully paid ordinary shares

RNS Number : 9346Z

Leyshon Resources Limited

30 September 2009

LEYSHON RESOURCES LIMITED

FINANCIAL REPORT FOR THE FINANCIAL YEAR ENDED 30 JUNE 2009

DIRECTORS' REPORT

The Directors of Leyshon Resources Limited present their report on the Consolidated Entity consisting of Leyshon Resources Limited ('the Company' or 'Leyshon Resources') and the entities it controlled at the end of, or during, the financial year ended 30 June 2009 ('Consolidated Entity').

DIRECTORS

The following persons were Directors of the Company during the financial year and up to the date of this report:

John W S Fletcher

Paul C Atherley

Richard P Seville

Andrew Berry (Appointed 10/10/2008)

Stacey Apostolou (Resigned 10/10/2008)

INFORMATION ON DIRECTORS

John WS Fletcher CBE

Non-Executive Chairman from date of appointment 7 April 2006

Member of the Audit Committee and Chairman of the Remuneration Committee

Mr Fletcher is based in Hong Kong and is a director and shareholder of Somerley Group Limited ('Somerley'), a corporate advisory firm which has been operating for more than 25 years. He is also a director of Inteq Limited an Australia based corporate advisory company 40% owned by Somerley Group Limited. Somerley advises both Chinese and international groups from its Hong Kong and Beijing offices on access to capital via the Hong Kong Stock Exchange and via foreign direct investment. Mr Fletcher continues to maintain his well-established industry, government and financial connections in London.

During the three year period to the end of the financial year, Mr Fletcher has held directorships in Pacific Energy Limited (August 1996 - September 2007) and KTL Limited (December 2004 - December 2007).

Paul C Atherley

Managing Director from date of appointment 4 May 2004

Qualifications - BSc (Hons), MAppSc, MBA, MAusIMM, ARSM

Mr Atherley graduated in mining engineering from the Royal School of Mines, Imperial College in 1982 and has over 25 years industry operating experience including periods with British Coal in the UK and Mount Isa Mines Ltd in Australia. He was an Executive Director of the Investment Bank arm of HSBC Australia where he undertook a range of advisory roles in the resources sector. In August 2004 he retired from the position of Managing Director of an ASX and AIM listed mining company, a position he held since the company's flotation in 1994. During this period he completed a number of acquisitions and financings of resource projects in Australia, South-East Asia, Africa and Western Europe.

During the three year period to the end of the financial year, Mr Atherley has not held a directorship in any other listed company.

INFORMATION ON DIRECTORS (Cont'd)

Richard Seville

Non-Executive Director from date of appointment 1 February 2007

Member of the Audit Committee (formerly Chairman) and Member of the Remuneration Committee

Qualifications - BSC (Hon), MEngSc, MAusIMM, ARSM

Mr Seville is a mining geologist and geotechnical engineer with over 25 years experience covering exploration, mine development and mine operations in gold, base metals, lithium/potash and coal projects in Australia, South America, Africa and Asia. Mr Seville also has significant corporate experience and held the roles of operations director and/or managing director for ASX/AIM listed companies since 1994. He is currently Managing Director of ASX listed, Orocobre Ltd.

During the three year period to the end of the financial year, Mr Seville has also held directorships in Renison Consolidated Mines NL and Northern Energy Corporation Ltd (both ceasing in November 2006).

Andrew Berry

Non-Executive Director from date of appointment 10 October 2008

Chairman of the Audit Committee

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.

Mr. Berry is a graduate from the University of Arizona in the United States where he earned a Bachelor of Science degree in Geological Engineering and a Master of Business Administration degree. After graduation in 1963, Mr. Berry worked in Washington D.C. for the Agency for International Development until 1968 when he joined the Chase Manhattan Bank in New York.

He is currently the Chairman of Viridis Investment Management Limited which is the Responsible Entity of the ASX listed Viridis Clean Energy Group and a Non-Executive Director of the unlisted Corporative Fund Limited. Previously Mr. Berry was a Non-Executive Director of several listed and unlisted Australian resource focused companies including the ASX and Port Moresby Stock Exchange listed Highlands Pacific Limited. Mr. Berry is a citizen of the United States and Australia.

During the three year period to the end of the financial year, Mr Berry has held directorships in CorporActive Fund Limited (September 2007 - Present), Viridis Investment Management Limited (July 2005 - Present) and Highlands Pacific Limited (August 1998 - role ceased May 2008).

Stacey Apostolou, Executive Director

Resigned 10 October 2008.

Company Secretary

Stacey Apostolou

Company Secretary from date of appointment 7 April 2006

Qualifications - B Bus, CPA

Ms Apostolou has been employed with the Company since August 2005 initially in the role of Manager - Corporate. She has previously acted as Finance Director to an ASX/AIM listed company, has held company secretarial roles for publicly listed companies within the mining and exploration industry and has over 18 years relevant industry experience. Ms Apostolou has been responsible for the corporate, treasury, finance, accounting and administration functions for these companies.

PRINCIPAL ACTIVITIES

The principal activities of the Consolidated Entity during the year consisted of gold and other minerals exploration. There was no significant change in the nature of those activities during the financial year.

CONSOLIDATED RESULTS

	2009 $	2008 $

Loss of the Consolidated Entity before income tax	(3,397,827)	(10,411,177)
Income tax	-	-
Net loss attributable to members of Leyshon Resources Limited	(3,397,827)	(10,411,177)

REVIEW OF OPERATIONS

During the 2009 financial year, the Consolidated Entity undertook initial site works for the development of its Zheng Guang project in China before electing to defer construction activity due to the prevailing uncertainties in the capital markets. Since then, the Consolidated Entity has been pursuing the twin strategies of progressing the necessary approvals and funding for the project to proceed whilst at the same time advancing the interest of a number of parties seeking to acquire the Consolidated Entity's interest in the project.

As announced on 22 September 2009, the Company has entered into an agreement for the sale of its interest in the project. Further details of the agreement are provided under 'Subsequent Events' on the following page.

DIVIDENDS

No interim or final dividend has been declared in respect to the financial year ended 30 June 2009 (2008: nil).

SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS

There were no significant changes in the state of affairs of the Company during the year.

SUBSEQUENT EVENTS

Other than as disclosed below, as at the date of this report there are no matters or circumstances which have arisen since 30 June 2009 that have significantly affected or may significantly affect:

the operations, in financial years subsequent to 30 June 2009, of the Consolidated Entity constituted by Leyshon Resources Limited and the entities it controls from time to time;
the results of those operations; or
the state of affairs, in financial years subsequent to 30 June 2009, of the Consolidated Entity.

On 22 September, the Company announced that it had entered into agreements with Heilongjiang Heilong Mining Company Limited (Heilong) for the sale of China Metals Pty Ltd's (CMPL) interest in Black Dragon Mining Company Limited (BDM), the entity that holds the rights to the Zheng Guang gold project.

The Company has entered into a Loan Substitution Agreement, whereby Heilong will repay RMB75 million (A$12.7 million based on the exchange rate at the date of signing) of loans advanced from CMPL to BDM.

In addition, an Equity Transfer Agreement was entered into, whereby CMPL will exchange its 70% interest in BDM in exchange for a payment from Heilong of RMB 230 million (A$38.8 million based on the exchange rate prevailing at the date of signing).

The transaction is conditional upon:

receipt of the relevant approvals by Heilong relating to the acquisition of the Company's and Qiqiha'er Brigade's shareholding in BDM;
transfer of the relevant business licences by the provincial authorities; and
foreign exchange approvals.

The overall financial effect on the Consolidated Group, based on the exchange rate prevailing at the date of entering into the agreements, is to increase cash by $51.5 million before tax, reduce Non Current Assets - held for resale by $24.3 million and reduce Current liabilities and Non Current Liabilities - held for resale by $6.3 million, with the net effect being an increase in net assets of $33.5 million. The financial impact of the disposal has not been incorporated into these financial statements.

LIKELY DEVELOPMENTS

As discussed above, the Company has entered into an agreement with Heilong for the divestment of its interest in Zheng Guang. The Company intends to draw on its experience in China and focus on acquiring and developing projects located in those countries and commodities which are of interest to Chinese groups for either offtake, partnership or sale.

In the opinion of the Directors, any further disclosure of information regarding likely developments in the operations of the Consolidated Entity and the expected results of these operations in subsequent financial years may prejudice the interests of the Consolidated Entity and accordingly, has not been disclosed.

ENVIRONMENTAL REGULATIONS

The Consolidated Entity's operations are subject to various environmental laws and regulations under the relevant government's legislation. Full compliance with these laws and regulations is regarded as a minimum standard for all operations to achieve.

Instances of environmental non-compliance by an operation are identified either by external compliance audits or inspections by relevant government authorities.

Pursuant to an agreement between the Company and Newmont Australia Limited ('Newmont'), Newmont is responsible for all environmental obligations in respect of the Mt Leyshon leases in perpetuity regardless of changes to those obligations arising from changes to regulatory requirements and has indemnified the Company to that effect.

SHARE ISSUES

During the year:

144,801 fully paid ordinary shares were issued to employees in return for their accepting a reduction to the level of the cash component of their remuneration.

OPTIONS

During the year no options were issued and no options expired.

Unissued ordinary shares of Leyshon Resources under option at the date of this report are as follows:

Unlisted Options

700,000 options at an exercise price of $0.40 each that expire on 30 November 2009;
550,000 options at an exercise price of $0.55 each that expire on 30 November 2009;
4,000,000 options at an exercise price of $0.70 each that expire on 30 November 2010; and
750,000 options at an exercise price of $0.70 each that expire on 30 June 2011.

No option holder has any right under the options to participate in any other share issue of the Company or any other entity. Each option is for one ordinary share of the Company.

During the financial year no shares were issued as a result of the exercise of options. Since 30 June 2009, no shares have been issued as a result of the exercise of options.

INSURANCE OF OFFICERS AND AUDITORS

During the financial year, the Company paid a premium in respect of a contract insuring the directors of the Company, the company secretary and all executive officers of the Company and of any related body corporate against a liability incurred as such a director, secretary or executive officer to the extent permitted by the Corporations Act 2001. The contract of insurance prohibits disclosure of the nature of the liability and the amount of the premium.

The Company has not otherwise, during the financial year, indemnified or agreed to indemnify an officer or auditor of the Company or of any related body corporate against a liability incurred as such an officer or an auditor.

MEETINGS OF DIRECTORS

The following table sets out the number of meetings of the Company's directors held during the financial year ended 30 June 2009, and the number of meetings attended by each director.

	Board Meetings		Audit Committee Meetings		Remuneration Committee Meetings
	Held	Attended	Held	Attended	Held	Attended

Directors
John WS Fletcher	11	11	2	2	1	1
Paul C Atherley	11	11	N/A	N/A	N/A	N/A
Stacey Apostolou	2	2	N/A	N/A	N/A	N/A
Richard Seville	11	11	2	2	1	1
Andrew Berry (1)	9	9	N/A	N/A	N/A	N/A

Mr Berry was appointed Chairman of the Audit Committee on 19 March 2009. There have been no meetings of the Audit Committee since Mr Berry's appointment.

INFORMATION ON DIRECTORS' INTERESTS IN SECURITIES OF LEYSHON RESOURCES

	Interest in Securities at the date of this Report
	Ordinary Shares	Options

John WS Fletcher	2,202,824	1,000,000
Paul C Atherley	29,000,000	-
Richard Seville	-	1,000,000
Andrew Berry	-	-

REMUNERATION REPORT (AUDITED)

This remuneration report which forms part of the directors' report, sets out information about the remuneration of Leyshon Resources Limited's directors and its senior management for the financial year ended 30 June 2009. The prescribed details for each person covered by this report are detailed below.

Director and Senior Management Details

The following persons acted as directors of Leyshon Resources Limited during or since the end of the financial year:

John WS Fletcher (Chairman)
Paul C Atherley (Managing Director)
Stacey Apostolou (Executive Director and Company Secretary) - ceased as director 10 October 2008
Richard P Seville (Non Executive Director)
Andrew J Berry ( Non Executive Director) - appointed 10 October 2008

The term 'senior management' is used in this remuneration report to refer to the following persons. Except as noted, the named persons held their current position for the whole of the financial year and since the end of the financial year:

Vic McLaglen - Chief Operating Officer, Leyshon Resources Limited (ceased 30 April 2009)
Dong Ping Ye - Project Development Manager, China Metals Pty Ltd (ceased 12 September 2008)
Peter Niu - Financial Controller, Leyshon Resources Limited

There were no other group executives or Company executives during the year.

Remuneration policies

Executive remuneration

The Company's remuneration policy for executive directors and senior management is designed to promote superior performance and long term commitment to the Company. Remuneration packages are set at levels that are intended to attract and retain executives capable of managing the Company's operations. Executives receive a base remuneration which is market related, together with an element of performance based remuneration.

Overall remuneration policies are subject to the discretion of the Board and will be adapted to reflect competitive market and business conditions where it is in the interests of the Company and shareholders to do so. Within this framework, the remuneration committee (established 9 May 2007) considers remuneration policies and practices generally, and determines specific remuneration packages and other terms of employment for executive directors and senior executive management.

Executive remuneration and other terms of employment are reviewed annually by the committee having regard to performance, relevant comparative information and expert advice.

The objective of any short term incentives is to link achievement of the Company's operational targets with the remuneration received by executives charged with meeting those targets. The objective of long term incentives is to reward executives in a manner which aligns this element of their remuneration with the creation of shareholder wealth.

The committee's remuneration policies are designed to align executive's remuneration with shareholders' interests and to retain appropriately qualified executive talent for the benefit of the Company. The main principles of the policies are that:

Reward reflects the competitive market in which the Company operates;
Individual reward should be linked to performance criteria; and
Executives should be rewarded for both financial and non-financial performance.

The structure of remuneration packages for executive directors and other senior executive management consists of the following:

Salary - executive directors and senior executives receive a fixed sum base salary payable monthly in cash;
Short term incentives - through eligibility to participate in performance bonus plans;
Long term incentives - executive directors are eligible to participate in share option schemes with the prior approval of shareholders. Senior management may also participate in employee share option schemes, with any option issues generally being made in accordance with thresholds set in plans approved by shareholders. The Board however, considers it appropriate to retain the flexibility to issue shares or options to senior management outside of approved employee option plans and in the event that no employee option plan exists; and
Other benefits - executive directors and senior management, where applicable, are eligible to participate in superannuation schemes.

Non-executive directors' remuneration

In accordance with current corporate governance practices, the structure for the remuneration of non-executive directors and senior management is separate and distinct. Shareholders approve the maximum aggregate remuneration for non-executive directors. The remuneration committee recommends the actual payments to directors and the Board is responsible for ratifying any recommendations, as appropriate. The maximum aggregate remuneration approved for non-executive directors is currently $250,000 which does not include any share based payments. The Board approves any consultancy arrangements for non-executive directors who provide services outside of and in addition to their duties as non-executive directors.

Non-executive directors are entitled to statutory superannuation benefits if applicable. At the current stage of the Company's development, non-executive directors may also be entitled to participate in equity based remuneration schemes.

All directors are entitled to have their indemnity insurance paid by the Company.

Relationship between the remuneration policy and Company performance

The table below sets out summary information about the Consolidated Entity's earnings and movements in shareholder wealth for the five years to June 2009:

	30 June 2009	30 June 2008	30 June 2007	30 June 2006	30 June 2005
	$	$	$	$	$
Revenue	518,802	1,048,631	628,530	349,677	816,115
Net loss before tax	(3,397,827)	(10,411,177)	(10,081,813)	(7,172,707)	(3,827,936)
Net loss after tax	(3,397,827)	(10,411,177)	(10,081,813)	(7,172,707)	(3,647,936)
Share price at start of year	0.5000	0.6250	0.3150	0.2600	0.2971
Share price at end of year	0.1000	0.5000	0.6250	0.3150	0.2600
Dividend paid	-	-	-	-	-
Diluted loss per share (cents)	(1.6)	(4.8)	(5.8)	(5.4)	(2.8)

There is no relationship between the remuneration for key management personnel and the Company's financial performance.

Service Agreements

Non Executive Directors

Mr Fletcher

The Company has entered into a service agreement with Mr Fletcher whereby he is paid a fee of $66,000 per annum in his capacity as Chairman with effect from 1 January 2009 ($90,000 prior to 1 January 2009). Mr Fletcher is entitled to receive reimbursement for out of pocket expenses incurred whilst on Company business. The agreement is for no fixed term, does not provide for the payment of termination benefits and may be terminated by either party by providing 90 days written notice.

Mr Seville

The Company has entered into a service agreement with Mr Seville whereby he is paid a fee of $45,000 per annum in his capacity as Non-Executive Director with effect from 1 January 2009 ($50,000 prior to 1 January 2009). Mr Seville is entitled to receive reimbursement for out of pocket expenses incurred whilst on Company business. The agreement is for no fixed term, does not provide for the payment of termination benefits and may be terminated by either party by providing 90 days written notice.

In addition, the Company has entered into a consultancy arrangement with Richard Seville & Associates Pty Ltd in relation to the provision of technical services by Mr Seville at the rate of $1,600 per day. The consultancy agreement was for an initial term to 31 December 2007 and thereafter until terminated. The consultancy can be terminated by either party providing three months written notice.

Mr Berry

The Company has entered into a service agreement with Mr Berry whereby he is paid a fee of $45,000 per annum in his capacity as Non-Executive Director with effect from 1 January 2009 ($50,000 prior to 1 January 2009). Mr Berry is entitled to receive reimbursement for out of pocket expenses incurred whilst on Company business. The agreement is for no fixed term, does not provide for the payment of termination benefits and may be terminated by either party by providing 90 days written notice.

Executive Directors

Mr Atherley

The service agreement in place with Mr Atherley during the financial year contains the following key provisions:

Entered into with effect from 1 July 2006 for a rolling twelve month term as Managing Director;
May be terminated by the Company by providing no more than three months notice;
May be terminated by Mr Atherley by providing at least six months notice;
If Mr Atherley is removed as a director of the Company by shareholders, or as the managing director of the Company, then the Company will be deemed to have terminated the contract;
Base salary of $300,000 per annum with effect from 1 September 2008 ($450,000 prior to 1 September 2008);
A discretionary cash bonus of up to $500,000 per annum is payable based on, in the Board's view, the contribution of Mr Atherley towards the Company's achievement of its overall objectives being the development of the Zheng Guang project. No bonus was granted during 2009 (2008: $75,000);
No amount is payable in the event of termination for neglect of duty or gross misconduct; and
If Mr Atherley's contract is terminated, other than for neglect of duty or gross misconduct, then the Company shall pay to Mr Atherley a Termination Payment. The Termination Payment shall be the aggregate of the contract rate that would be payable for the period commencing when the contract terminates and ending at the end of the contract term. In the event that the Termination Payment exceeds the amount calculated in accordance with section 200F of the Corporations Act or Chapter 10.19 of the ASX Listing Rules, then the Termination Payment will be reduced by such amount as is necessary so as to not exceed the amount permitted.

Ms Apostolou

The service agreement in place with Ms Apostolou during the period, until ceasing as an executive on 31 August 2008, contained the following key provisions:

Entered into with effect from 1 July 2006 for no defined period;
May be terminated by the Company or Ms Apostolou by providing three months notice. No payment, other than for notice, is payable upon termination;
Base salary of $250,000 per annum inclusive of superannuation, with effect from 1 January 2008;
A cash bonus is payable based on, in the Board's view, the contribution of Ms Apostolou towards the Company's achievement of its overall objectives being the development of the Zheng Guang project. No bonus was granted during 2009 (2008: $75,000).

Senior Management

Mr McLaglen

The service agreement in place with Mr McLaglen during the financial year contains the following key provisions:

Mr McLaglen ceased as an employee on 30 April 2009;
Mr McLaglen was receiving base salary of $250,000 per annum with effect from 1 September 2008 ($400,000 prior to 1 September 2008);
Mr McLaglen has continued working for the company as a consultant at the rate of $20,833 per month; and
The consultancy agreement can be terminated by either party providing one month's written notice.

Mr Niu

The service agreement in place with Mr Niu during the financial year contains the following key provisions:

Entered into with effect from 17 March 2008 for no defined period;
May be terminated by the Company or Mr Niu by providing three months notice. No payment, other than for notice, is payable upon termination;
Base salary of RMB1,200,000 per annum;
May become entitled to receive incentive options in the Company at a price to be determined by the Board at the time of issue; and
May become entitled to receive a cash bonus at the discretion of the Board.

Details of Remuneration

The emoluments (paid or payable) of each Director and the executive officers for the financial year ended 30 June 2009 are as follows:

	Short-term employee benefits			Post-employment	Termination Benefits	Share Based Payment
	Salary & fees $	Bonus $	Other $	Super-annuation $	$	Shares issued $	Total $

Directors
John WS Fletcher	78,000	-	-	-	-	-	78,000
Paul C Atherley	325,000	-	-	-	-	-	325,000
Richard Seville	48,620	-	-	-	-	-	48,620
Andrew Berry(1)	31,000	-	-	1,861	-	-	32,861
Stacey Apostolou (2)	72,832	-	-	3,440	-	-	76,271

Group executives
Vic McLaglen (3)	282,932	-	-	-	-	37,368 (5)	320,300
Dong Ping Ye (4)	75,000	-	-	-	-	-	75,000
Peter Niu	244,628	-	-	-	-	8,968 (6)	253,596

(1) Commenced as a director 10 October 2008.

(2) Ceased as a director 10 October 2008. Retirement benefits reflect unpaid leave paid entitlement upon termination.

(3) Ceased employment 30 April 2009.

(4) Ceased employment 12 September 2008.

(5) Represents 116,775 shares issued at $0.32 in consideration for Mr McLaglen taking a reduction in his salary. 11% of Mr McLaglen's total remuneration was comprised of the value of shares (2008: nil). Fair value was determined based on the volume weighted average share price on the ASX for the previous 10 trading days before they were issued.

(6) Represents 28,026 shares issued at $0.32 in consideration for Mr Niu taking a reduction in his salary. 4% of Mr Niu's total remuneration was comprised of the value of shares (2008: nil). Fair value was determined based on the volume weighted average share price on the ASX for the previous 10 trading days before they were issued.

The emoluments (paid or payable) of each Director and the executive officers for the financial year ended 30 June 2008 are as follows:

	Short-term employee benefits			Post-employment	Termination Benefits	Share Based Payment
	Salary & fees $	Bonus (2) $	Other (3) $	Super-annuation $	$	Options issued $	Total $

Directors
John WS Fletcher	90,000				-	305,000	395,000
Paul C Atherley	400,000	75,000	7,289		-	-	482,289
Stacey Apostolou	194,679	75,000	3,665	17,521	-	610,000	900,865
Richard Seville	105,940				-	305,000	410,940

Group executives
Vic McLaglen	321,665	100,000	-	-	-	185,350	607,015
Dong Ping Ye	275,000	75,000	-	-	-	153,173	503,173
Peter Niu (1)	62,664	-	-	-	-	-	62,664

(1) Commenced employment 17 March 2008.

(2) Discretionary bonuses were paid as the Company progressed towards achieving its objective of developing the Zheng Guang project. No bonuses were forfeited during the year.

(3) Represents incremental increases in the value of unused annual leave as a result of salary increases.

Share-based Compensation

No options were granted, vested, exercised or lapsed in relation to Directors and Senior Management during the year.

The grant of share options is not directly linked to previously determined performance milestones or hurdles as the current stage of the Group's activities make it difficult to determine effective and appropriate key performance indicators and milestones. No options were forfeited during the year.

There is currently no Board policy in relation to the person granted the option limiting his or her exposure to risk in relation to the securities as the options are issued in addition to their separate remuneration package.

NON-AUDIT SERVICES

The Directors are satisfied that the provision of non-audit services during the year by the auditor (or by another person or firm on the auditor's behalf) is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The Audit Committee assesses the provision of non-audit services by the auditors to ensure that the auditor independence requirements of the Corporations Act 2001 in relation to the audit are met.

Details of amounts paid or payable to the auditor for non-audit services provided during the year by the auditor are outlined in note 4 to the financial statements.

AUDITOR'S INDEPENDENCE DECLARATION

Section 307C of the Corporations Act 2001 requires our auditors, Deloitte Touche Tohmatsu, to provide the directors of Leyshon Resources with an Independence Declaration in relation to the audit of the attached Financial Statements. This Independence Declaration is included in this Financial Report at page 15 and forms part of this Directors' Report.

Signed in accordance with a resolution of the Board of Directors.

On behalf of the Directors

Paul Atherley

Managing Director

Dated: 29 September 2009

Perth, Western Australia

DIRECTORS' DECLARATION

The directors declare that:

(a) in the directors' opinion, there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable;

(b) in the directors' opinion, the attached financial statements and notes thereto are in accordance with the Corporations Act 2001, including compliance with accounting standards and giving a true and fair view of the financial position and performance of the consolidated entity; and

Signed in accordance with a resolution of the directors made pursuant to s.295(5) of the Corporations Act 2001.

On behalf of the Directors

Paul Atherley

Managing Director

Dated: 29 September 2009

Perth, Western Australia

INCOME STATEMENT

FOR THE FINANCIAL YEAR ENDED 30 JUNE 2009

		Consolidated		Company
	Note	2009 $	2008 $	2009 $	2008 $
Continuing operations
Revenue	2(a)	518,802	1,048,631	280,597	880,475

Other income	2(b)	4,093	20,995	4,060	19,910
Exploration expenses		(967,422)	(5,026,168)	(301,779)	(493,489)
Corporate and administration expenses		(1,400,665)	(2,736,200)	(1,375,141)	(2,386,000)
Business development expenses		(181,181)	(503,678)	(181,001)	(491,296)
Foreign exchange gains/(losses)		138,765	(1,656,234)	138,570	(1,654,400)
Share based payments		(46,336)	(1,558,523)	(46,336)	(1,558,523)

Loss before income tax		(1,933,944)	(10,411,177)	(1,481,030)	(5,683,323)

Income tax	3	-	-	-	-
Loss for the year from continuing operations		(1,933,944)	(10,411,177)	(1,481,030)	(5,683,323)
Discontinued operations
Loss for the year from discontinued operations	23	(1,463,883)	-	-	-
Loss attributable to members of Leyshon Resources Limited		(3,397,827)	(10,411,177)	(1,481,030)	(5,683,323)


Earnings Per Share
From continuing and discontinued operations:
Basic loss per share (cents per share)	18	(1.6)	(4.8)
Diluted loss per share (cents per share)	18	(1.6)	(4.8)

From continuing operations:
Basic loss per share (cents per share)	18	(0.9)	(4.8)
Diluted loss per share (cents per share)	18	(0.9)	(4.8)

The above Income Statement should be read in conjunction with the accompanying notes.

BALANCE SHEET

AS AT 30 JUNE 2009

		Consolidated		Company
	Note	2009 $	2008 $	2009 $	2008 $
ASSETS
Current Assets
Cash and cash equivalents	26(a)	3,918,963	9,399,324	3,838,819	9,025,187
Trade and other receivables	5	76,010	116,140	47,877	74,042
Other	6	14,078	65,127	7,499	13,498
		4,009,051	9,580,591	3,894,195	9,112,727
Non-Current Assets held for sale	7	24,328,083	-	-	-
Total Current Assets		28,337,134	9,580,591	3,894,195	9,112,727

Non-Current Assets
Trade and other receivables	5	-	-	31,392,366	27,784,809
Other financial assets at fair value through profit or loss	8	1	1	1	1
Other financial assets	9	14,999	2,613,103	9,149,628	9,149,628
Property, plant and equipment	10	2,771	26,352	2,771	5,543
Development properties	11	-	16,324,326	-	-
Total Non-Current Assets		17,771	18,963,782	40,544,766	36,939,981

TOTAL ASSETS		28,354,905	28,544,373	44,438,961	46,052,708

LIABILITIES
Current Liabilities
Trade and other payables	12	1,567,699	1,074,585	171,238	272,812
Provisions	13	45,452	120,947	43,856	120,135
		1,613,151	1,195,532	215,094	392,947
Non-Current Liabilities held for sale	14	5,363,607	-	-	-
Total Current Liabilities		6,976,758	1,195,532	215,094	392,947

Non-Current Liabilities
Deferred tax liabilities	3	-	3,604,688	-	-
Total Non-Current Liabilities		-	3,604,688	-	-

TOTAL LIABILITIES		6,976,758	4,800,220	215,094	392,947

NET ASSETS		21,378,147	23,744,153	44,223,867	45,659,761

EQUITY
Issued capital	15	64,552,218	64,507,082	64,552,218	64,507,082
Reserves	16	2,430,810	1,556,966	1,941,893	2,054,734
Accumulated losses	17	(45,604,881)	(42,319,895)	(22,270,244)	(20,902,055)

TOTAL EQUITY		21,378,147	23,744,153	44,223,867	45,659,761

The above Balance Sheet should be read in conjunction with the accompanying notes.

STATEMENT OF CHANGES IN EQUITY

FOR THE FINANCIAL YEAR ENDED 30 JUNE 2009

	Consolidated		Company
	2009 $	2008 $	2009 $	2008 $

Issued Capital
Issued and paid up capital - at the beginning of the year	64,507,082	63,139,928	64,507,082	63,139,928
Transactions with equity holders in their capacity as equity holders:
Issue of shares as part of employee benefits	46,336		46,336
Contributions of equity	-	867,904	-	867,904
Transfer from employee benefits reserve	-	499,250	-	499,250
Less share issue costs	(1,200)	-	(1,200)	-
	45,136	1,367,154	45,136	1,367,154

Issued and paid up capital - at the end of the year	64,552,218	64,507,082	64,552,218	64,507,082

Employee Benefit Reserve
Balance at the beginning of the year	1,941,893	882,620	1,941,893	882,620

Employee benefit expense - Share options	-	1,558,523	-	1,558,523
Exercise of options	-	(499,250)	-	(499,250)

Balance at the end of the year	1,941,893	1,941,893	1,941,893	1,941,893

Foreign Currency Translation Reserve
Balance at the beginning of the year	(497,768)	(169,869)	-	-

Exchange differences on translation of foreign operations attributable to members of Leyshon Resources Limited	986,685	(327,899)	-	-

Balance at the end of the year	488,917	(497,768)	-	-

Option Premium Reserve
Balance at beginning of the year	112,841	112,841	112,841	112,841
Expiry of options	(112,841)	-	(112,841)	-
Balance at end of year	-	112,841	-	112,841

STATEMENT OF CHANGES IN EQUITY

FOR THE FINANCIAL YEAR ENDED 30 JUNE 2009 (CONTINUED)

	Consolidated		Company
	2009 $	2008 $	2009 $	2008 $
Accumulated Losses
Accumulated losses at the beginning of the year	(42,319,895)	(31,908,718)	(20,902,055)	(15,218,732)

Transfer from option premium reserve	112,841	-	112,841	-
Loss for the year attributable to members of Leyshon Resources Limited	(3,397,827)	(10,411,177)	(1,481,030)	(5,683,323)

Accumulated losses at the end of the year	(45,604,881)	(42,319,895)	(22,270,244)	(20,902,055)

Net income recognised directly in equity:
Exchange differences on translation of foreign operations
- Members of parent entity	986,685	(327,899)	-	-
	986,685	(327,899)	-	-
Loss for the year
- Members of parent entity	(3,397,827)	(10,411,177)	(1,481,030)	(5,683,323)
Total recognised income and expense for the year attributable to members of parent entity	(2,411,142)	(10,739,076)	(1,481,030)	(5,683,323)

The above Statement of Changes in Equity should be read in conjunction with the accompanying notes. CASH FLOW STATEMENT

FOR THE FINANCIAL YEAR ENDED 30 JUNE 2009

		Consolidated			Company
	Note	2009 $	2008 $	2009 $		2008 $

CASH FLOWS FROM OPERATING ACTIVITIES
Payments to suppliers and employees		(3,699,022)	(8,244,467)	(1,987,907)		(3,262,863)
Interest received		272,207	904,928	272,101		900,385
Net cash flows used in operating activities	26(b)	(3,426,815)	(7,339,539)	(1,715,806)		(2,362,478)


CASH FLOWS FROM INVESTING ACTIVITIES
Payments for property, plant and equipment		(2,580)	(27,444)	(375)		(4,836)
Amounts advanced to related parties		-	-	(3,607,557)		(9,655,977)
Loan to joint venture partner		(702,176)	(1,738,899)	-		-
Development expenditure		(1,486,355)	(2,803,214)	-		-
Net cash flows used in investing activities		(2,191,111)	(4,569,557)	(3,607,932)		(9,660,813)


CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issues of shares		-	875,000	-		875,000
Share issue costs		(1,200)	(7,096)	(1,200)		(7,096)
Net cash flows (used in)/from financing activities		(1,200)	867,904	(1,200)		867,904


NET DECREASE IN CASH AND CASH EQUIVALENTS		(5,619,126)	(11,041,192)	(5,324,938)		(11,155,387)

Cash and cash equivalents at the beginning of the year		9,399,324	22,096,750	9,025,187		21,834,974
Effects of exchange rate changes on cash and cash equivalents		138,765	(1,656,234)	138,570		(1,654,400)


CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR	26(a)	3,918,963	9,399,324	3,838,819		9,025,187

The above Cash Flow Statement should be read in conjunction with the accompanying notes.

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Statement of compliance

The financial report is a general purpose financial report which has been prepared in accordance with the Corporations Act 2001, Accounting Standards and Interpretations, and complies with other requirements of the law. The financial report includes the separate financial statements of the Company and the consolidated financial statements of the Group.

Accounting Standards include Australian equivalents to International Financial Reporting Standards ('A-IFRS'). Compliance with A-IFRS ensures that the financial statements and notes of the Company and the Group comply with International Financial Reporting Standards ('IFRS').

The financial statements were authorised for issue by the directors on 29 September 2009.

Basis of preparation

The financial report has been prepared on the basis of historical cost, except for the revaluation of certain non-current assets and financial instruments. Cost is based on the fair values of the consideration given in exchange for assets. All amounts are presented in Australian dollars, unless otherwise noted.

Adoption of new and revised Accounting Standards

In the current year, the Group has adopted all of the new and revised Standards and Interpretations issued by the Australian Accounting Standards Board (the AASB) that are relevant to its operations and effective for the current annual reporting period. Details of the impact of the adoption of these new accounting standards are set out in the individual accounting policy notes set out below.

At the date of authorisation of the financial report, the Standards and Interpretations listed below were in issue but not yet effective.

Initial application of the following Standards will not effect any of the amounts recognised in the financial report, but will change the disclosures presently made in relation to the Group and the Company's financial report:

Standard / Interpretation	Effective for annual reporting periods beginning on or after:	Expected to be initially applied in the financial year ending:
AASB 101 'Presentation of Financial Statements' (revised September 2007), AASB 2007-8 'Amendments to Australian Accounting Standards arising from AASB 101', AASB 2007-10 'Further Amendments to Australian Accounting Standards arising from AASB 101'	1 January 2009	30 June 2010
AASB 8 'Operating Segments', AASB 2007-3 'Amendments to Australian Accounting Standards arising from AASB 8'	1 January 2009	30 June 2010
AASB 2009-2 'Amendments to Australian Accounting Standards - Improving Disclosures about Financial Instruments'	1 January 2009	30 June 2010

Initial application of the following standards is not expected to have any material impact on the financial report of the Group and Company.

	Standard / Interpretation	Effective for annual reporting periods beginning on or after:	Expected to be initially applied in the financial year ending:
AASB 123 ‘Borrowing Costs’ (revised), AASB 2007-6 ‘Amendments to Australian Accounting Standards arising from AASB 123’		1 January 2009	30 June 2010
AASB 3 ‘Business Combinations’ (revised), AASB 127 ‘Consolidated and Separate Financial Statements’ (revised) and AASB 2008-3 ‘Amendments to Australian Accounting Standards arising from AASB 3 and AASB 127’		Business combinations occurring after the beginning of annual reporting periods beginning 1 July 2009	30 June 2010
AASB 2008-1 ‘Amendments to Australian Accounting Standard - Share-based Payments: Vesting Conditions and Cancellations’		1 January 2009	30 June 2010
AASB 2008-2 ‘Amendments to Australian Accounting Standards - Puttable Financial Instruments and Obligations arising on Liquidation’		1 January 2009	30 June 2010
AASB 2008-5 ‘Amendments to Australian Accounting Standards arising from the Annual Improvements Project’		1 January 2009	30 June 2010
AASB 2008-6 ‘Further Amendments to Australian Accounting Standards arising from the Annual Improvements Project’		1 July 2009	30 June 2010
AASB 2008-7 ‘Amendments to Australian Accounting Standards – Cost of an Investment in a Subsidiary, Jointly Controlled Entity or Associate		1 January 2009	30 June 2010
AASB 2008-8 ‘Amendments to Australian Accounting Standards – Eligible Hedged Items’ AASB 2009-4 ‘Amendments to Australian Accounting Standards arising from the Annual Improvements Process’ AASB 2009-5 ‘Further Amendments to Australian Accounting Standards arising from the Annual Improvements Process’ AASB 2009-6 “Amendments to Australian Accounting Standards”		1 July 2009 1 July 2009 1 January 2010 1 January 2009	30 June 2010 30 June 2010 30 June 2011 30 June 2010

The potential effect of the initial application of the expected issue of an Australian equivalent accounting standard to the following Standard has not yet been determined:

Standard / Interpretation

Effective for annual reporting periods beginning on or after:

Expected to be initially applied in the financial year ending:

AASB 2009-7 'Amendments to Australian Accounting Standards'

AASB 1 'First-time Adoption of Australian Accounting Standards'

1 July 2009

30 June 2010

AASB Interpretation 15 'Agreements for the Construction of Real Estate'

1 January 2009

30 June 2010

AASB Interpretation 16 'Hedges of a Net Investment in a Foreign Operation'

1 October 2008

30 June 2010

AASB Interpretation 17 'Distributions of Non-cash Assets to Owners', AASB 2008-13 'Amendments to Australian Accounting Standards arising from AASB Interpretation 17 - Distributions of Non-cash Assets to Owners'

AASB Interpretation 18 'Transfers of Assets from Customers'

1 July 2009

30 June 2010

The director's note that the impact of the initial application of the other Standards and Interpretations not adopted is not yet known or is not reasonably estimable. These Standards and Interpretations will be first applied in the financial report of the Group that relates to the annual reporting period beginning on or after the effective date of each pronouncement.

Critical accounting judgements and key sources of estimation uncertainty

In the application of the Group's accounting policies, which are described in Note 1, management is required to make judgments, estimates and assumptions about carrying values of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstance, the results of which form the basis of making the judgments. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

Key sources of estimation uncertainty

The following are the key assumptions concerning the future, and other key sources of estimation uncertainty at the balance sheet date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year:

Development Properties

Development properties represent those costs which are either directly incurred or have been transferred from Exploration and Evaluation expenditure following a decision to develop. These costs will then be amortised over the life of the reserves associated with the area of interest once mining operations have commenced. Recoverability of the carrying amount of Development properties is dependent on successful development and commercial exploitation, or alternatively, sale of the areas of interest.

Significant accounting policies

The following significant accounting policies have been adopted in the preparation and presentation of the financial report:

(a) Going Concern Basis

The financial report has been prepared on the going concern basis, which contemplates the continuity of normal business activity and the realisation of assets and the settlement of liabilities in the normal course of business.

The Company and the Consolidated Entity have incurred a net loss after tax for the year ended 30 June 2009 of $1,481,030 and $3,397,827 respectively and experienced net cash outflows from operating activities of $1,715,806 and $3,426,815 respectively. As at 30 June 2009 the Company and the Consolidated Entity had positive net current assets of $3,679,101 and $21,360,376 respectively.

As disclosed in Subsequent Events, the Company has reached agreement for the sale of its 70% interest in the Zheng Guang gold project. In addition, it will be repaid the amounts which have been previously advanced to the joint venture entity.

(b) Basis of Consolidation

The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries) as at 30 June 2009 and the results of all subsidiaries for the year then ended. Leyshon Resources Limited and its subsidiaries together are referred to as the Group or the Consolidated Entity. A list of subsidiaries is provided in Note 22.

Subsidiaries are all those entities (including special purpose entities) over which the Group has the power to govern the financial and operating policies so as to obtain benefits from their activities, generally accompanying a shareholding of more than one-half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity.

Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date that control ceases.

The purchase method of accounting is used to account for the acquisition of subsidiaries by the Group (refer to note 1(i)). Subsequent to initial recognition, investments in subsidiaries are measured at cost in the Company's financial statements.

Intercompany transactions and balances, and unrealised gains on transactions between Group companies, are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.

Minority interests in the results and equity of subsidiaries are shown separately in the consolidated income statement and balance sheet respectively.

The Group accounts for its interests in jointly controlled entities with proportionate consolidation. Proportionate consolidation is a method of accounting whereby the Group's share of each of the assets, liabilities, income and expenses of its jointly controlled entities is reported on a line-by-line basis in the consolidated entity's financial statements. The Group considers that proportionate consolidation provides users of the financial report with reliable and relevant information.

Given that the Group's main asset is its 70% interest in Black Dragon Mining Company Limited, proportionate consolidation enables the Group to present its share of the assets, liabilities, income and expenses on the face of the balance sheet and income statement.

(d) Segment Reporting

A business segment is a group of assets and operations engaged in providing products or services that are subject to risks and returns that are different to those of other business segments. A geographical segment is engaged in providing products or services within a particular economic environment and is subject to risks and returns that are different from those of segments operating in other economic environments.

(e) Foreign Currency Translation

(i) Functional and presentation currency

Items included in the financial statements of each of the Group's entities are measured using the currency of the primary economic environment in which the entity operates ('the functional currency'). The consolidated financial statements are presented in Australian dollars, which is the Company's functional and presentation currency. Refer to note 1(e)(iv) for details of a change in the functional currency of a subsidiary.

(ii) Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at period-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement.

(iii) Group companies

The results and financial position of all the Group entities (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

Assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet;
Income and expenses for each income statement are translated at average exchange rates (unless this is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transactions); and
All resulting exchange differences are recognised as a separate component of equity in the foreign currency translation reserve.

Where a foreign operation is sold or borrowings repaid, a proportionate share of such exchange differences are recognised in the income statement as part of the gain or loss on sale.

Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate.

(iv) Change in functional currency of Black Dragon Mining Company Limited

Following receipt of the necessary approvals during 2006, the operations of Black Dragon have been separated from China Metals and conducted in China, through bank accounts held in United States dollars and Chinese Renminbi, with payments being made primarily in Chinese Renminbi. Accordingly, the functional currency of Black Dragon is Chinese Renminbi and the accounts of Black Dragon are prepared in this currency.

(f) Revenue Recognition

Revenue is measured at the fair value of the consideration received or receivable. The following specific recognition criteria must also be met before revenue is recognised:

Interest

Interest is recognised on a time proportionate basis that takes into account the effective yield on the financial asset.

(g) Income Tax

The income tax expense or income for the period is the tax payable on the current period's taxable income based on the national income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences between the tax bases of assets and liabilities and their carrying amounts in the financial statements, and to unused tax losses.

Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to apply when the assets are recovered or liabilities are settled, based on those tax rates which are enacted or substantively enacted for each jurisdiction. The relevant tax rates are applied to the cumulative amounts of deductible and taxable temporary differences to measure the deferred tax asset or liability. An exception is made for certain temporary differences arising from the initial recognition of an asset or a liability. No deferred tax asset or liability is recognised in relation to these temporary differences if they arose in a transaction, other than a business combination, that at the time of the transaction did not affect either accounting profit or taxable profit or loss.

Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses.

Current and deferred tax balances attributable to amounts recognised directly in equity are also recognised directly in equity.

Leyshon Resources Limited and its wholly owned Australian controlled entities have not implemented the tax consolidation legislation.

(h) Operating Leased Assets

Leases are classified at their inception as either operating or finance leases based on the economic substance of the agreement so as to reflect the risks and benefits incidental to ownership.

Operating leased assets, where the lessor effectively retains substantially all of the risks and benefits of ownership of the leased item, are not capitalised and rental payments are expensed to the income statement over the lease term on a straight line basis except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.

(i) Acquisition of Assets

The purchase method of accounting is used to account for all acquisitions of assets (including business combinations) regardless of whether equity instruments or other assets are acquired. Cost is measured as the fair value of the assets given, shares issued or liabilities incurred or assumed at the date of exchange plus costs directly attributable to the acquisition. Where equity instruments are issued in an acquisition, the value of the instruments is their published market price as at the date of exchange unless, in rare circumstances, it can be demonstrated that the published price at the date of exchange is an unreliable indicator of fair value and that other evidence and valuation methods provide a more reliable measure of fair value. Transaction costs arising on the issue of equity instruments are recognised directly in equity.

Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any minority interest. The excess of the cost of acquisition over the fair value of the Group's share of the identifiable net assets acquired is recorded as goodwill. If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognised directly in the income statement, but only after a reassessment of the identification and measurement of the net assets acquired.

Where settlement of any part of cash consideration is deferred, the amounts payable in the future are discounted to their present value as at the date of exchange. The discount rate used is the entity's incremental borrowing rate, being the rate at which a similar borrowing could be obtained from an independent financier under comparable terms and conditions.

(j) Impairment of Assets

Assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs to sell and value in use. For the purposes of assessing impairment where an asset does not generate cash flows that are independent from other assets, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash generating units).

(k) Cash and Cash Equivalents

'Cash and cash equivalents' includes cash on hand, deposits held at call with financial institutions, other short-term highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities on the balance sheet.

(l) Receivables

Trade and other receivables are recognised initially at fair value and subsequently measured at amortised cost less provision for doubtful debts. Trade receivables are due for settlement no more than 30 days from the date of recognition.

(m) Other Financial Assets

The Group classifies its investments in the following categories: financial assets at fair value through profit or loss, loans and receivables, held-to-maturity investments, and available-for-sale financial assets. The classification depends on the purpose for which the investments were acquired.

(i) Financial assets at fair value through profit or loss

This category has two sub-categories: financial assets held for trading, and those designated at fair value through profit or loss on initial recognition. Derivatives are also categorised as held for trading unless they are designated as hedges. Assets in this category are classified as current assets if they are either held for trading or are expected to be realised within twelve months of the balance sheet date.

(ii) Loans and receivables

Trade receivables, loans and other receivables are recorded at amortised costs less impairment.

(n) Fair value estimation

The fair value of financial assets and financial liabilities must be estimated for recognition and measurement.

The fair value of financial instruments traded in active markets (such as publicly traded derivatives, and trading and available-for-sale securities) is based on quoted market prices at the balance sheet date. The quoted market price used for financial assets held by the Group is the current bid price; the appropriate quoted market price for financial liabilities is the current ask price.

(o) Non-current assets held for sale

Non-current assets and disposal groups are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable and the asset (or disposal group) is available for immediate sale in its present condition. Management must be committed to the sale, which should be expected to qualify for recognition as a completed sale within one year from the date of classification.

Non-current assets (and disposal groups) classified as held for sale are measured at the lower of their previous carrying amount and fair value less costs to sell.

(p) Property, Plant and Equipment

Plant and equipment is stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items.

Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the income statement during the financial period in which they are incurred.

Plant and equipment are depreciated at rates based upon their expected useful lives as follows:

	Life	Method

Plant and Equipment	2 - 15 years	Diminishing value

The assets' residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date.

An asset's carrying amount is written down immediately to its recoverable amount if the asset's carrying amount is greater than its estimated recoverable amount (note 1(j)). Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in the income statement.

(q) Payables

These amounts represent liabilities for goods and services provided to the Group prior to the end of the financial period which are unpaid. The amounts are unsecured and are usually paid within 30 days of recognition.

(r) Employee Benefits

Liabilities for wages and salaries, including non-monetary benefits, annual leave, accumulating sick leave and long service leave expected to be settled within twelve months of the reporting date are recognised in provisions in respect of employees' services up to the reporting date and are measured at the amounts expected to be paid when the liabilities are settled. Liabilities for non-accumulating sick leave are recognised when the leave is taken and measured at the rates paid or payable.

The liability for long service leave not expected to be settled within 12 months is recognised in the provision for employee benefits and measured as the present value of expected future payments to be made in respect of services provided by employees up to the reporting date. Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service. Expected future payments are discounted using market yields at the reporting date on national government bonds with terms to maturity and currency that match, as closely as possible, the estimated future cash outflows.

Contributions to the defined contribution superannuation fund are recognised as an expense as they become payable. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in future payments is available.

(s) Issued Capital

Issued and paid up capital is recognised at the fair value of the consideration received by the Company.

Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.

(t) Dividends

Provision is made for the amount of any dividend declared on or before the end of the year but not distributed at balance date.

(u) Earnings per Share (EPS)

Basic earnings per share is calculated by dividing the consolidated profit/(loss) attributable to equity holders of the company, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the year, adjusted for bonus elements in ordinary shares issued during the year.

Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares.

(v) Exploration and evaluation expenditure

Exploration and evaluation expenditure encompasses expenditures incurred by the Group in connection with the exploration for and evaluation of mineral resources before the technical feasibility and commercial viability of extracting a mineral resource are demonstrable.

Exploration and evaluation expenditure incurred by the Group is accumulated for each area of interest and recorded as an asset if:

(1) the rights to tenure of the area of interest are current; and

(2) at least one of the following conditions is also met:

(i) the exploration and evaluation expenditures are expected to be recouped through successful development and exploitation of the area of interest, or alternatively, by its sale; and/or

(ii) exploration and evaluation activities in the area of interest have not at the reporting date reached a stage which permits a reasonable assessment of the existence or otherwise of economically recoverable reserves, and active and significant operations in, or in relation to, the area of interest are continuing.

For each area of interest, expenditure incurred in the acquisition of rights to explore is capitalised, classified as tangible or intangible, and recognised as an exploration and evaluation asset. Exploration and evaluation assets are measured at cost at recognition. Exploration and evaluation expenditure incurred by the Group subsequent to acquisition of the rights to explore is expensed as incurred.

(w) Development Expenditure

Development expenditure represents the costs incurred in preparing mines for production. The costs are carried forward to the extent that these costs are expected to be recouped through the successful exploitation of the Company's mining properties and then amortised over the life of the reserves associated with the area of interest once mining operations have commenced.

Development expenditure is reviewed at each reporting date to establish whether an indication of impairment exists. If any such indication exists, the recoverable amount of the development expenditure is estimated to determine the extent of the impairment loss (if any). Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, but only to the extent that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset in previous years.

(x) Goods and Services Tax

Revenues, expenses and assets are recognised net of the amount of GST except:

where the GST incurred on a purchase of goods and services is not recoverable from the taxation authority, in which case the GST is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and
receivables and payables are stated with the amount of GST included.

The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the balance sheet.

Cash flows are included in the Cash Flow Statement on a gross basis and the GST components of cash flows arising from investing and financing activities, which are recoverable from, or payable to, the taxation authority are classified as operating cash flows.

Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the taxation authority.

(y) Share Based Payments

Share based payments may be provided to directors, employees, consultants and other advisors.

For shares issued as payment, the fair value of the shares issued is recognised as an expense with a corresponding increase in equity. The fair value of the shares issued is based on the volume weighted average share price on the ASX for the previous 10 trading days before they are issued.

For share options granted after 7 November 2002 and vested after 1 January 2005, the following treatment is adopted:

The fair value of options granted is recognised as an expense with a corresponding increase in equity. The fair value is measured at grant date and recognised over the period during which the holders become unconditionally entitled to the options.

The fair value at grant date is independently determined using a Black-Scholes option pricing model that takes into account the exercise price, the term of the option, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk-free interest rate for the term of the option.

The fair value of the options granted excludes the impact of any non-market vesting conditions. Non-market vesting conditions are included in assumptions about the number of options that are expected to become exercisable. At each balance sheet date, the entity revises its estimate of the number of options that are expected to become exercisable. The expense recognised each period takes into account the most recent estimate.

Upon the exercise of options, the balance of the reserve relating to those options is transferred to share capital.

	Consolidated						Company
	Continuing		Discontinued		Total		Continuing		Discontinued		Total
	2009	2008	2009	2008	2009	2008	2009	2008	2009	2008	2009	2008
2. LOSS FROM OPERATIONS	$	$			$	$	$	$			$	$

(a) Revenue
Revenue consisted of the following items:

Interest received/receivable	518,802	1,048,631	-	-	518,802	1,048,631	280,597	880,475	-	-	280,597	880,475
Total revenue	518,802	1,048,631	-	-	518,802	1,048,631	280,597	880,475	-	-	280,597	880,475

(b) Loss before income tax
Loss before income tax has been arrived at after crediting the following gains:

Sundry income	4,093	20,995	-	-	4,093	20,995	4,060	19,910	-	-	4,060	19,910
Total other income	4,093	20,995	-	-	4,093	20,995	4,060	19,910	-	-	4,060	19,910

Loss before income tax has been arrived at after charging the following losses and expenses:

Depreciation and amortisation - plant and equipment	13,408	17,710	-	-	13,408	17,710	3,147	3,720	-	-	3,147	3,720
Net movement in provisions for - employee entitlements	(75,495)	57,019	-	-	(75,495)	57,019		61,112	-	-	(76,279)	61,112
Exploration expenses	527,682	5,026,168	1,463,883	-	1,991,565	5,026,168	301,779	439,489	-	-	301,779	439,489
Foreign exchange (gain)/loss	(138,765)	1,656,234	-	-	(138,765)	1,656,234	(138,570)	1,654,400	-	-	(138,570)	1,654,400
Rental expense relating to operating leases (minimum lease payments)	126,669	120,796	-	-	126,669	120,796	-	-	-	-	-	-
Equity settled share based payments	46,336	1,558,523	-	-	46,336	1,558,523	46,336	1,558,523	-	-	46,336	1,558,523
Post-employment benefits	12,798	33,748	-	-	12,798	33,748	8,508	21,796	-	-	8,508	21,796

	Consolidated		Company
	2009	2008	2009	2008
3. INCOME TAX	$	$	$	$
Income tax expense
Current tax	-	-	-	-
Deferred tax	-	-	-	-

Numerical reconciliation of income tax expense to prima facie tax payable

Loss from continuing operations before income tax expense	(3,397,827)	(10,411,177)	(1,481,030)	(5,683,324)
Tax at the Australian tax rate of 30% (2007: 30%)	(1,019,348)	(3,123,353)	(444,309)	(1,704,997)
Tax effect of amounts which are not deductible in calculating taxable income:
Share based payments	13,901	467,557	13,901	467,557
Other non-deductible expenditure	623,695	2,155,824	103,263	791,756
	(381,752)	(499,972)	(327,145)	(445,684)
Tax losses not brought to account	381,752	499,972	327,145	445,684

Income tax expense	-	-	-	-

Deferred tax liabilities

The balance comprises temporary differences attributable to:
Fair value adjustments on acquisition of subsidiary (i)	-	3,604,688	-	-
	-	3,604,688	-	-

(i) The deferred tax liability arises upon adoption of the balance sheet method required by AASB 112 Income Taxes. Although this does not represent a cash liability payable by the controlled entity, nonetheless the adoption of AASB 112 requires that it be brought to account. On the basis that the controlled entity receives revenue in the future from its operations in China, it will receive an income tax benefit to its Income Statement representing the amortization of the deferred tax liability in line with the amortization of the Exploration and Evaluation expenditure which has since been transferred to development properties which has been carried forward in respect of this asset. The deferred tax liability has now been transferred to Non-Current Liabilities held for resale following the Company entering into an equity transfer agreement with resepect to the sale of its Zheng Guang gold project in China.

Movements

Opening balance at 1 July		3,604,688	3,604,688	-	-
Charged/(credited) to the income statement		-	-	-	-
Transferred to Non-Current Liabilities held for sale	Note 14	(3,604,688)	-	-	-
Closing balance at 30 June		-	3,604,688	-	-

Unrecognised Deferred Tax Balances

The following deferred tax assets have not been brought to account as assets:

Tax losses - revenue	9,525,541	9,143,789	9,232,384	8,905,239
	9,525,541	9,143,789	9,232,384	8,905,239

3. INCOME TAX (continued)

Tax Consolidations

Legislation to allow groups, comprising a parent entity and its Australian resident wholly-owned entities, to elect to consolidate and be treated as a single entity for income tax purposes was substantively enacted on 21 October 2002. The Company and its wholly owned Australian resident entities are eligible to consolidate for tax purposes under this legislation.

The Board has not yet resolved to consolidate eligible entities within the Consolidated Entity for tax purposes. The Board will review this position annually, before lodging of that year's income tax return.

	Consolidated		Company
	2009	2008	2009	2008
4. REMUNERATION OF AUDITORS	$	$	$	$
Auditor of the parent entity
Audit Services Fees paid to Deloitte Touche Tohmatsu - Audit and review of the financial reports and other audit work	47,215	48,450	47,215	48,450
Other non-audit services - Taxation advice	6,690	7,540	6,690	7,540
Total remuneration	53,905	55,990	53,905	55,990

5. TRADE AND OTHER RECEIVABLES
Current
Amounts owing by
- other persons	76,010	116,140	47,877	74,042


Non-Current
Amounts owing by
- controlled entities (a)	-	-	31,392,366	27,784,809

(a) Recovery of the non-current amount owing by controlled entities is dependent upon the discovery of commercially viable reserves and the successful development or alternatively sale, of the respective tenements which comprise the underlying assets of the controlled entity. The loan is non-interest bearing and repayable in AUD. At the time of this report no terms for repayment have been set. Following completion of the sale of the Group's interests in the Zheng Guang project, it is likely that this loan will be repaid to the parent entity.

6. OTHER ASSETS

Current
Prepayments		14,078	65,127	7,499	13,498

7. NON-CURRENT ASSETS HELD FOR SALE

The Group intends to sell its interest in Black Dragon Mining Company Limited (BDM). A formal agreement for this sale was entered into on 16 September 2009.

Note

Consolidated

Company

2009

2008

2009

2008

Transferred from:
Property, plant and equipment	10	12,752	-	-	-
Other financial assets	9	4,026,976	-	-	-
Development properties	11	20,288,355	-	-	-
		24,328,083	-	-	-

Zheng Guang assets and liabilities recognised as held for sale - see 'Subsequent Events' in Directors' Report.

8. OTHER FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS

Non-current
Shares in other entities	1	1	1	1

9. OTHER FINANCIAL ASSETS
Non-current
Investments - controlled entities (Note 22)
- At cost		-	-	11,939,629	11,947,474
- Recoverable amount write down provision		-	-	(2,805,000)	(2,812,845)
Total Investments - controlled entities		-	-	9,134,629	9,134,629

Security deposits		14,999	20,847	14,999	14,999

Loans to other entities (1)		4,026,976	2,592,256	-	-
Transferred to Non-current assets held for sale	7	(4,026,976)	-	-	-
Total Loans to other entities		-	2,592,256	-	-

		14,999	2,613,103	9,149,628	9,149,628

(1) This represents money paid on behalf of the Consolidated Entity's joint venture partner, Qiqiha'er Brigade ('Qiqiha'er Brigade') of the Heilongjiang Bureau of Geology and Mineral Resources, in accordance with the joint venture agreement entered into in April 2006. The loan to the Qiqiha'er Brigade commenced accruing in September 2006 when the Consolidated Entity had satisfied its expenditure commitment for a 70% interest in Black Dragon Mining Company Limited. The loan is to be interest bearing and repayable from surplus cashflow from the Zheng Guang project once it is in operation. Interest is accrued on the loan at the People's Bank of China rate (5.76% at 30 June 2009).

Each reporting period, the recoverable amount of all non-current assets is assessed. Where the carrying amount of a non-current asset is greater than its recoverable amount, the asset is written down to its recoverable amount. The recoverable amount of the asset has been based on its fair value less costs to sell. The recoverable amount write down represents the excess of the carrying amount over the recoverable amount as determined by the directors.

Note

Consolidated

Company

2009

2008

2009

2008

10. PROPERTY, PLANT AND EQUIPMENT

Plant & equipment
At cost		20,714	71,636	20,714	20,339
Accumulated depreciation		(17,943)	(45,284)	(17,943)	(14,796)
Total plant and equipment (Note 10(a))		2,771	26,352	2,771	5,543

(a) Reconciliation

Plant and Equipment
Carrying amount at beginning of year		26,352	16,618	5,543	4,426
Additions		2,580	27,444	375	4,837
Disposals		-	-	-	-
Depreciation expense		(13,408)	(17,710)	(3,147)	(3,720)
Transferred to Non-Current Assets held for sale	7	(12,752)	-	-	-
Total plant & equipment		2,771	26,352	2,771	5,543

11. DEVELOPMENT PROPERTIES

Balance brought forward		16,324,326	13,031,994	-	-
Development expenditure incurred		3,964,029	3,292,332	-	-
Subtotal (i)		20,288,355	16,324,326	-	-
Transferred to Non-current assets held for sale	7	(20,288,355)	-	-	-
Closing balance		-	16,324,326	-	-

The value of the development properties is dependent upon the successful development or alternatively sale, of the respective tenements.

12. TRADE AND OTHER PAYABLES

Current
Trade creditors and accruals (unsecured)		1,567,699	1,074,585	171,238	272,812

Non-current
Trade creditors and accruals (unsecured)		1,758,919	-	-	-
Transferred to Non-Current Liabilities held for sale	14	(1,758,919)	-	-	-
		-	-	-	-

13. PROVISIONS

Employee benefits

45,452

120,947

43,856

120,135

Note

Consolidated

Company

2009

2008

2009

2008

14. NON-CURRENT LIABILITIES HELD FOR SALE

Transferred from:
Trade and other payables	12	1,758,919	-	-	-
Deferred tax liabilities	3	3,604,688	-	-	-
		5,363,607	-	-	-

Zheng Guang assets and liabilities recognised as held for sale - see 'Subsequent Events' in Directors' Report.

15. ISSUED CAPITAL

Changes to the then Corporations Law abolished the authorised capital and par value concept in relation to share capital from 1 July 1998. Therefore, the Company does not have a limited amount of authorised capital and issued shares do not have a par value.

(b) Movements in share capital during the past two years were as follows (Consolidated Entity and Company):-

Date	Details	Ordinary Shares (Number)	Ordinary Shares ($)	Total ($)
1/07/07	Opening Balance	215,610,891	63,139,928	63,139,928

9/10/07	Exercise of options (i)	100,000	35,000	63,174,928
	Transfer from employee benefits reserve	-	16,210	63,191,138
22/11/07	Exercise of options (i)	300,000	105,000	63,296,138
	Transfer from employee benefits reserve	-	48,630	63,344,768
11/12/07	Exercise of options (i)	1,100,000	385,000	63,729,768
	Transfer from employee benefits reserve	-	225,310	63,955,078
18/12/07	Exercise of options (i)	1,000,000	350,000	64,305,078
	Transfer from employee benefits reserve	-	209,100	64,514,178
	Share issue costs	-	(7,096)	64,507,082
30/06/08	Closing Balance	218,110,891	64,507,082	64,507,082
8/10/08	Issue of shares (ii)	144,801	46,336	64,553,418
	Share issue costs	-	(1,200)	64,552,218
30/06/09	Closing Balance	218,255,692	64,552,218	64,552,218

15. ISSUED CAPITAL (cont'd)

Note

The Company issued shares resulting from the exercise of options as follows:

Date	Number	Exercise Price
9/10/07	100,000	$0.35
22/11/07	300,000	$0.35
11/12/07	1,100,000	$0.35
18/12/07	1,000,000	$0.35

On 8 October 2008, the Company issued 144,801 shares at $0.32 as part of employee benefits, fair value was determined based on the volume weighted average share price on the ASX for the previous 10 trading days before they were issued.

Fully paid ordinary shares carry one vote per share and carry the right to dividends.

	Consolidated		Company
	2009	2008	2009	2008
	$	$	$	$
16. RESERVES

Employee benefits reserve	1,941,893	1,941,893	1,941,893	1,941,893
Foreign currency translation reserve	488,917	(497,768)	-	-
Option premium reserve	-	112,841	-	112,841
	2,430,810	1,556,966	1,941,893	2,054,734

Movement in reserves

The movement in each of the reserves has been set out in the Statement of Changes in Equity.

Nature and purpose of reserves

Employee benefits reserve

The employee benefits reserve is used to recognise the fair value of services provided to the Company by employees who are paid through the issue of options in the Company.

Details of the options that comprise the employee benefits reserve are as follows:

700,000 (2008: 700,000) $0.40 options	268,100	268,100	268,100	268,100
550,000 (2008: 550,000) $0.55 options	115,271	115,271	115,271	115,271
4,750,000 (2008: 4,750,000) $0.70 options	1,558,522	1,558,522	1,558,522	1,558,522
	1,941,893	1,941,893	1,941,893	1,941,893

Foreign currency translation reserve

Exchange differences arising on translation of the foreign controlled entity are taken to the foreign currency translation reserve as described in note 1(e). The accumulated exchange difference is recognised in profit and loss when the net investment is disposed of.

16. RESERVES (cont'd)

Option premium reserve

The option premium reserve is used to recognise the fair value of options issued in connection with acquisitions or services provided to the Company by individuals other than employees.

Details of the options that comprise the option premium reserve are as follows:

Consolidated		Company
2009	2008	2009	2008
$	$	$	$

Nil (2008: Nil) 18 pence options (i)

112,841

600,000 options were issued to Mirabaud Securities with an exercise price of 18 pence as part consideration for undertaking the share placement undertaken by the Company in June 2006. The options expired on 30 June 2008. The balance of the reserve was subsequently transferred to Accumulated Losses.

17. ACCUMULATED LOSSES
Balance at the beginning of the financial year		(42,319,895)	(31,908,718)	(20,902,055)	(15,218,732)
Net loss attributable to members of Leyshon Resources		(3,397,827)	(10,411,177)	(1,481,030)	(5,683,323)
Transfer from Option Premium Reserve		112,841	-	112,841	-
Balance at the end of the financial year		(45,604,881)	(42,319,895)	(22,270,244)	(20,902,055)

Adjusted franking account balance (tax paid basis)	6,913,764		6,913,764	6,913,764	6,913,764

18. EARNINGS PER SHARE

	Consolidated Entity
	2009	2008
	$	$

From continuing and discontinued operations
Basic loss per share (cents per share)	(1.6)	(4.8)
Dilutive loss per share (cents per share)	(1.6)	(4.8)

From continuing operations:
Basic loss per share (cents per share)	(0.9)	(4.8)
Diluted loss per share (cents per share)	(0.9)	(4.8)

The following reflects the earnings and average number of ordinary shares and potential ordinary shares used in the calculations of basic and diluted earnings per share:

	Consolidated Entity
	2009	2008
	$	$

Net loss used in calculating basic earnings per share	(3,397,827)	(10,411,177)
Adjustment to exclude loss from discontinued operations	1,433,879	-
Earnings used in calculating basic and diluted earnings per share from continuing operations	(1,963,948)	(10,411,177)

	Number of	Number of
	Shares	shares
	2009	2008
Weighted average number of ordinary shares used in calculating basic earnings per share	218,216,417	217,015,001
Effect of dilutive securities		-
Adjusted weighted average number of ordinary shares and potential ordinary shares used in calculating diluted earnings per share	218,216,417	217,015,001

(a) Conversions, calls, subscriptions or issues after 30 June 2009

There have been no conversions to, calls of, or subscriptions for ordinary shares or issues of potential ordinary shares since the reporting date and before the completion of this financial report.

(b) Non-dilutive securities

The following potential ordinary shares are not dilutive as they would decrease the loss per share and are therefore excluded from the weighted average number of ordinary shares used in the calculation of diluted earnings per share:

	Number of	Number of
	potential	potential
	shares	shares
	2009	2008

Options - 40 cents exercise price	700,000	700,000
Options - 55 cents exercise price	550,000	550,000
Options - 70 cents exercise price	4,750,000	4,750,000

19. DIVIDENDS PAID OR PROVIDED FOR

No dividends have been paid or provided for during the year.

	Consolidated		Company
	2009	2008	2009	2008
20. COMMITMENTS FOR EXPENDITURE	$	$	$	$

Development Expenditure
Not longer than 1 year (i)	1,888,944	602,031	-	-
Longer than 1 year and not longer than 5 years	-	651,909	-	-
Longer than 5 years	-	-	-	-
Total Development Commitment	1,888,944	1,253,940	-	-

Total Commitments	1,888,944	1,253,940	-	-

Following the sale of the consolidated entity's interest in Black Dragon Mining Company Limited and the Zheng Guang projects, as referred to in note 25, the consolidated entity will no longer have these commitments.

21. LEASE COMMITMENTS

Operating leases
Leasing arrangements
The operating lease relates to the lease of an office in China. The current lease was entered into on 18 March 2009 for a period of twelve months with effect from 28 March 2009. The Consolidated Entity does not have an option to acquire the leased asset at the expiry of the lease period.

Non-cancellable operating leases
Not longer than 1 year	22,057	120,894	-	-
Longer than 1 year and not longer than 5 years	-	80,596	-	-
Longer than 5 years	-	-	-	-
	22,057	201,490	-	-

22. SUBSIDIARIES

Name of Entity	Country of Incorporation	Class of Shares	Equity Holding
			2009	2008
Parent Entity			%	%
Leyshon Resources Limited	Australia

Controlled Entities
China Metals Pty Ltd	Australia	Ordinary	100	100

23. SEGMENT INFORMATION

The Consolidated Entity operates in one business segment, being the exploration of gold and other minerals, in the following geographical segments:

Geographical Segment	Australia		China		Consolidated
	2009	2008	2009	2008	2009	2008
	$	$	$	$	$	$
Revenue
Other revenue/income	4,060	19,910	33	1,085	4,093	20,995
Total segment revenue/income	4,060	19,910	33	1,085	4,093	20,995
Unallocated revenue					518,802	1,048,631
Total consolidated revenue/income					522,895	1,069,626

Results
Segment result	(1,761,626)	(6,563,798)	(2,155,003) (i)	(4,896,010)	(3,916,629)	(11,459,808)
Unallocated expenses					-	-
Unallocated interest revenue					518,802	1,048,631
Unallocated other income					-	-
Loss before income tax					(3,397,827)	(10,411,177)
Income tax (expense)/benefit					-	-
Net loss					(3,397,827)	(10,411,177)

Assets
Segment assets	3,896,966	9,118,270	24,457,939 (ii)	19,426,103	28,354,905	28,544,373
Unallocated assets					-	-
Total assets					28,354,905	28,544,373

Liabilities
Segment liabilities	215,094	392,947	6,761,664 (iii)	4,407,273	6,976,758	4,800,220
Unallocated liabilities					-	-
Total liabilities					6,976,758	4,800,220

Other
Acquisition of non-current assets	375	4,838	2,205	22,606	2,580	27,444
Depreciation of segment assets	3,147	3,720	10,261	13,990	13,408	17,710
Share based payments	46,336	1,558,523	-	-	46,336	1,558,523

Segment result includes ($1,463,883) from discontinued operations.
Segment assets includes $24,328,083 from discontinued operations.
Segment liabilities includes $5,363,607 from discontinued operations.

24. RELATED PARTY DISCLOSURES

(a) Equity interests in related parties

Equity interests in subsidiaries

Details of the percentage of ordinary shares held in subsidiaries are disclosed in Note 22 to the financial statements.

(b) Key management personnel compensation

The directors' and key management personnel of the Consolidated Entity during the year were as follows. Unless otherwise specified each person held their position for the full financial year.

John WS Fletcher (Chairman)
Paul C Atherley (Managing Director)
Stacey Apostolou (Executive Director) - resigned 10 October 2008
Richard Seville (Non Executive Director)
Andrew J Berry (Non Executive Director) - appointed 10 October 2008
Vic McLaglen - Chief Operating Officer, Leyshon Resources Limited - ceased 30 April 2009
Dong Ping Ye - Project Development Manager, China Metals Pty Ltd - ceased 12 September 2008
Peter Niu - Financial Controller, Leyshon Resources Limited - appointed 17 March 2008

The aggregate compensation made to key management personnel of the Company and the Group is set out below:

	Consolidated		Company
	2009	2008	2009	2008
	$	$	$	$

Short-term employee benefits	1,158,012	1,785,902	1,083,012	1,435,902
Post-employment benefits	5,302	17,521	5,302	17,521
Termination benefits	-	-	-	-
Share-based payment	46,336 (i)	1,558,523	46,336 (i)	1,558,523
	1,209,650	3,361,946	1,134,650	3,011,946

Represents 144,801 shares issued at $0.32 in consideration of a reduction in the cash component of the individual's remuneration during the 2009 financial year.

Details of individual key management personnel compensation are disclosed in the Remuneration Report.

24. RELATED PARTY DISCLOSURES (cont'd)

Fully paid ordinary shares of Leyshon Resources

	Balance at the start of the year	Purchases		Received on exercise of options		Other changes (i)	Disposals	Balance at the end of the year
2009
Mr Paul Atherley	29,000,000	-	-		-		-	29,000,000
Mr John Fletcher	2,202,824	-	-		-		-	2,202,824
Mr Richard Seville	-	-	-		-		-	-
Mr Andrew Berry	-	-	-		-		-	-
Ms Stacey Apostolou	100,000	-	-		-		-	100,000
Mr Vic McLaglen	-	-	-		116,775		-	116,775
Mr Peter Niu	-	-	-		28,026		-	28,026

2008
Mr Paul Atherley	30,000,000	-	-	-	(1,000,000)	29,000,000
Mr John Fletcher	2,202,824	-	-	-	-	2,202,824
Mr Richard Seville	-	-	-	-	-	-
Ms Stacey Apostolou	800,000	-	-	-	(700,000)	100,000

2009 - shares issued in return for accepting a reduction in cash remuneration.

Options exercisable @ $0.70 each on or before 30 November 2010 or 30 June 2011 (as appropriate)

Balance at the start of the year

Granted as remuneration

Exercised

Other changes

Balance at the end of the year

Vested during the year

Vested and exercisable at the end of the year

2009

Mr John Fletcher - 2010 Options

1,000,000

Mr Richard Seville - 2010 Options

1,000,000

Ms Stacey Apostolou - 2010 Options

2,000,000

Dong Ping Ye -

2011 Options

750,000

Balance at the start of the year

Granted as remuneration

Exercised

Other changes

Balance at the end of the year

Vested during the year

Vested and exercisable at the end of the year

2008

Mr John Fletcher - 2010 Options

1,000,000

Mr Richard Seville - 2010 Options

1,000,000

Ms Stacey Apostolou - 2010 Options

2,000,000

Dong Ping Ye -

2011 Options

750,000

24. RELATED PARTY DISCLOSURES (cont'd)

Options exercisable @ $0.40 or $0.55 (as appropriate) each on or before 30 November 2009

	Balance at the start of the year	Granted as remuneration	Exercised	Other changes	Balance at the end of the year	Vested during the year	Vested and exercisable at the end of the year
2009
Mr Vic McLaglen - $0.40 Options	550,000	-	-	-	550,000	-	550,000
Mr Vic McLaglen- $0.55 Options	550,000	-	-	-	550,000	-	550,000

2008
Mr Vic McLaglen - $0.40 Options	550,000	-	-	-	550,000	275,000	550,000
Mr Vic McLaglen- $0.55 Options	550,000	-	-	-	550,000	275,000	550,000

(d) Other transactions with key management personnel (and their related parties) of Leyshon Resources

Richard Seville & Associates Pty Ltd, a company of which Mr Richard Seville is a director and beneficial shareholder, was paid $4,752 (2008: $43,440) for the provision of technical services. This amount is included in exploration expenses for the year.

Somerley Limited, a company of which Mr John Fletcher is a director and beneficial shareholder, was paid nil (2008: $53,642) for the provision of services with respect to the Company's proposed secondary listing on the Hong Kong Stock Exchange. This amount was included in business development expenses for that year.

(e) Transactions with other related parties

Transactions between Leyshon and its subsidiaries

Inter-company Account

Leyshon provides working capital to its controlled entities. Transactions between Leyshon and other controlled entities in the wholly owned group during the financial year ended 30 June 2009 consisted of:

(i) Working capital advanced by Leyshon;

(ii) Working capital repaid to Leyshon; and

The above transactions were made interest free with no fixed terms for the repayment of principal on the working capital advanced by Leyshon.

At balance date amounts receivable from controlled entities totalled $31,392,366 (2008: $27,784,809).

(f) Parent entities

The parent entity in the consolidated entity and the ultimate parent entity is Leyshon Resources Limited.

25. SUBSEQUENT EVENTS AFTER BALANCE DATE

The Company has entered into a Loan Substitution Agreement, whereby Heilong will repay RMB75 million (A$12.66 million based on the exchange rate at the date of signing) of loans advanced from CMPL to BDM.

The transaction is conditional upon:

receipt of the relevant approvals by Heilong relating to the acquisition of the Company's and Qiqiha'er Brigade's shareholding in BDM;
transfer of the relevant business licences by the provincial authorities; and
foreign exchange approvals.

26. notes to the CASH FLOW STATEMENT

(a) Reconciliation of cash and cash equivalents

Cash and cash equivalents at the end of the financial year as shown in the cash flow statement is reconciled to the related items in the balance sheet as follows:

	Consolidated		Company
	2009	2008	2009	2008
	$	$	$	$
Cash and cash equivalents	3,918,963	9,399,324	3,838,819	9,025,187

(b) Reconciliation of loss for the year to net cash provided (used) by operating activities

Loss for the year	(3,397,827)	(10,411,177)	(1,481,030)	(5,683,323)

Depreciation and amortisation	13,408	17,710	3,147	3,720
Increase in provision for employee entitlements	(75,495)	57,019	(76,279)	61,112
Interest on loan to joint venture partner	(270,418)	(164,698)	-	-
Exchange differences on cash balances	(138,765)	1,656,234	(138,570)	1,654,400
Unrealised foreign exchange differences	986,685	(327,900)	-	-
Share based payment expense	46,336	1,558,523	46,336	1,558,523
(Increase)/decrease in other assets	(85,330)	(25,575)	32,164	24,480
(Decrease)/increase in payables	(505,409)	300,325	(101,574)	18,610
Net cash provided (used) by operating activities	(3,426,815)	(7,339,539)	(1,715,806)	(2,362,478)

26. notes to the CASH FLOW STATEMENT (cont'd)

30 June 2009

During the financial year:

On 8 October 2008, 144,801 shares valued at $46,336 were issued to employees as consideration for negotiated reductions in cash remuneration;

30 June 2008

During the financial year:

During the year a total of 2,500,000 options with an exercise date of 31 December 2007 were exercised. An amount of $499,250 relating to these 2,500,000 options exercised had previously been credited to the employee benefit reserve. Subsequent to exercise, issued capital has been increased by this amount with a similar reduction to the employee benefit reserve;
On 30 June 2008, 600,000 options with an exercise price of 18 pence expired.
Grant of options - there were no options granted by the Company during the year.

27. JOINTLY CONTROLLED ENTITY

The Group is a venturer in the following jointly controlled entity:

Interest

Name of venture

Principal activity

2009

2008

Black Dragon Mining Company Limited

Exploration and development

The Group's interest in assets employed in the above jointly controlled entity is detailed below. The amounts are included in the consolidated financial statements under their respective assets categories:

Consolidated

	2009 $	2008 $
Current assets
Cash	51,387	263,722
Other	6,579	51,628
Total current assets	57,966	315,350
Non current assets
Other	-	5,848
Development properties	6,475,892	3,157,510
Total non current assets	6,475,892	3,163,358
Total assets	6,533,858	3,478,708

As disclosed in note 25, the Company has reached agreement for the sale of China Metals interest in Black Dragon Mining Company Limited. Therefore at year end, the amount included for Non Current assets has been reclassified as Non Current assets held for sale.

28. FINANCIAL RISK MANAGEMENT

Overview

This note presents information about the Company's and Group's exposure to credit, liquidity and market risks, their objectives, policies and processes for measuring risk, and management of capital.

The Company and the Group does not use any form of derivatives as it is not at a level of exposure that requires the use of derivatives to hedge its exposure. Exposure limits are reviewed by management on a continuous basis. The Group does not enter into or trade financial instruments, including derivative financial instruments, for speculative purposes.

The Board of Directors has overall responsibility for the establishment and oversight of the risk management framework. Management monitors and manages the financial risks relating to the operations of the group through regular reviews of the risks.

Significant Accounting Policies

Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement and the basis on which revenues and expenses are recognised, in respect of each class of financial asset, financial liability and equity instrument are disclosed in Note 1 to the financial statements.

Net Fair Value

The carrying amount of financial assets and financial liabilities recorded in the financial statements represents their respective net fair values, determined in accordance with the accounting policies disclosed in Note 1 to the financial statements.

Credit risk

Credit risk refers to the risk that counter-party will default on its contractual obligations resulting in financial loss to the consolidated entity. The consolidated entity has adopted the policy of only dealing with creditworthy counter-parties and obtaining sufficient collateral or other security where appropriate, as a means of mitigating the risk of financial loss from defaults. The consolidated entity measures credit risk on a fair value basis. The consolidated entity does not have any significant credit risk exposure to any single counter-party.

Cash and cash equivalents

The Group limits its exposure to credit risk by only investing in liquid securities and only with counterparties that have an acceptable credit rating.

Trade and other equivalents

As the Group operates primarily in exploration activities, it does not have trade receivable and therefore is not exposed to credit risk in relation to trade receivables.

The Company and Group have established an allowance for impairment that represents their estimate of incurred losses in respect of other receivables (mainly relates to staff advances and security bonds) and investments. The management does not expect any counterparty to fail to meet its obligations.

28. FINANCIAL RISK MANAGEMENT (cont'd)

Exposure to credit risk

The carrying amount of the Company and Group's financial assets represents the maximum credit exposure. The Company and Group's maximum exposure to credit risk at the reporting date was:

	Consolidated		Company
	2009	2008	2009	2008
	$	$	$	$
Loans and receivables	4,093,650	2,729,243	31,455,242	27,873,850
Cash and cash equivalents	3,918,963	9,399,324	3,838,819	9,025,187
	8,012,613	12,128,567	35,294,061	36,899,037

Impairment losses

None of the Groups' other receivables are past due (2008: Nil)

Liquidity risk

Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group's approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group's reputation.

The Group manages liquidity risk by maintaining adequate cash reserves from funds raised in the market and by continuously monitoring forecast and actual cash flows. The Group does not have any external borrowings.

The Company announced on 22 September 2009 that it had entered an agreement for the sale of the Group's interests in Black Dragon Mining Company Limited which holds the Zheng Guang development project. As part of the sale, an amount of RMB230 million (approximately A$39 million) will be received when the sale is completed, expected to be around March 2010. Also Black Dragon Mining Company Limited has received funds from the purchaser to enable it to repay a loan of RMB75 million (approximately A$13 million) to the Group. Accordingly it is unlikely that the Group will need to raise additional capital in the next 12 months to meet its currently known obligations.

The following are the maturities of financial liabilities, including estimated interest payments and excluding the impact of netting agreements of the Group:

	Consolidated			Company
	2009 $	2008 $		2009 $	2008 $

Less than 6 months	286,745	1,074,585		171,238	272,812
6 months to 1 year	726,150	-		-	-
1 to 5 years	2,313,723 (i)		-	-	-
Over 5 years	-	-		-	-
	3,326,618	1,074,585		171,238	272,812

(i) Consists of $1,758,919 of Non-Current Liabilities Held for Sale, to be settled or assumed by the purchaser and $554,804 of Non-Current liabilities which have been classied as Current given that they will be dealt with as part of the overally sale process.

All financial liabilities of the Group and Company are non-interest bearing.

28. FINANCIAL RISK MANAGEMENT (cont'd)

Market Risk

Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect the Group's income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposure within acceptable parameters, whilst optimising the return. The Group manages market risk by ensuring it only holds short-term, predominantly fixed interest financial instruments with maturities of less than three months.

Currency Risk

The Group is exposed to currency risk on investments, purchases and borrowings that are denominated in a currency other than the respective functional currencies of Group entities, which is primarily the Australian Dollar (AUD). The currencies in which these transactions primarily are denominated are USD and GBP.

The Group has not entered into any derivative financial instruments to hedge such transactions.

The Group's investments in its subsidiaries are not hedged as those currency positions are considered to be long term in nature.

Exposure to Currency Risk

The Group's exposure to foreign currency risk at balance date based on notional amounts was as follows:

	A$
	RMB	USD	GBP	Total
30 June 2009
Financial Assets
Cash and cash equivalents	69,817	1,427	295,794	367,038
Loans and receivables	4,057,739	-	-	4,057,739
Financial Liabilities
Amortised cost	(2,377,709)	(117,383)	(14,621)	(2,509,713)
Gross balance sheet exposure	1,749,847	(115,956)	281,173	1,915,064

30 June 2008
Financial Assets
Cash and cash equivalents	360,196	6,202	9,014,046	9,380,444
Loans and receivables	2,618,059	-	-	2,618,059
Financial Liabilities
Amortised cost	(633,914)	(10,435)	(9,349)	(653,698)
Gross balance sheet exposure	2,344,341	(4,233)	9,004,697	11,344,805

28. FINANCIAL RISK MANAGEMENT (cont'd)

The Company's exposure to foreign currency risk at balance date based on notional amounts was as follows:

	A$
	RMB	USD	GBP	Total
30 June 2009
Financial Assets
Cash and cash equivalents	-	468	295,794	296,262
Loans and receivables	-	-	-	-
Financial Liabilities
Amortised cost	-	-	(14,621)	(14,621)
Gross balance sheet exposure	-	468	281,173	281,641

30 June 2008
Financial Assets
Cash and cash equivalents	-	1,850	9,014,046	9,015,896
Loans and receivables	-	-	-	-
Financial Liabilities
Amortised cost	-	-	(9,349)	(9,349)
Gross balance sheet exposure	-	1,850	9,004,697	9,006,547

Sensitivity analysis

A 20 percent strengthening of the Australian dollar against the following currencies at 30 June would have increased (decreased) equity and profit or loss by the amounts shown below. This analysis assumes that all other variables, in particular interest rates, remain constant. The analysis is performed on the same basis for 2008.

	Consolidated		Company
30 June 2009	Other Equity A$	Profit or loss A$	Other Equity A$	Profit or loss A$

RMB	-	349,970	-	-
USD	-	(23,191)	-	94
GBP	-	56,234	-	56,234
	-	383,013	-	56,328

	Consolidated		Company
30 June 2008	Other Equity A$	Profit or loss A$	Other Equity A$	Profit or loss A$

RMB	-	468,868	-	-
USD	-	(846)	-	370
GBP	-	1,800,940	-	1,800,940
	-	2,268,962	-	1,801,310

28. FINANCIAL RISK MANAGEMENT (cont'd)

A 20 percent weakening of the Australian dollar against the above currencies at 30 June would have had an equal but opposite effect on the above currencies to the amounts shown above, on the basis that all other variables remain constant.

Interest rate risk

The Group is exposed to interest rate risk (primarily on its cash and cash equivalents), which is the risk that a financial instrument's value will fluctuate as a result of changes in the market interest rates on interest-bearing financial instruments. The Group does not use derivatives to mitigate these exposures.

The Group adopts a policy of ensuring that as far as possible it maintains excess cash and cash equivalents in short terms deposit at interest rates maturing over 90 day rolling periods.

	Weighted Average Effective Interest Rate	Variable Interest Rate	Fixed Interest Rate	Total
Consolidated	%	$	$	$
2009
Financial Assets
Cash and cash equivalents	3.4%	3,918,963	-	3,918,963
Other financial assets	5.8%	4,026,976	-	4,026,976
Financial Liabilities
Financial liabilities		-	-	-
		7,945,939	-	7,945,939
2008
Financial Assets
Cash and cash equivalents	7.1%	9,399,324	-	9,399,324
Other financial assets	7.3%	2,592,256	-	2,592,256
Financial Liabilities
Financial liabilities		-	-	-
		11,991,580	-	11,991,580
Company
2009
Financial Assets
Cash and cash equivalents	3.4%	3,838,819	-	3,838,819
Other financial assets		-	-	-
Financial Liabilities
Financial liabilities		-	-
		3,838,819	-	3,838,819
2008
Financial Assets
Cash and cash equivalents	7.1%	9,025,187	-	9,025,187
Other financial assets		-	-	-
Financial Liabilities
Financial liabilities		-	-	-
		9,025,187	-	9,025,187

At the reporting date the interest rate profile of the Group's and the Company's interest-bearing financial instruments was:

28. FINANCIAL RISK MANAGEMENT (cont'd)

Cash flow sensitivity analysis for variable rate instruments

A change of 100 basis points in interest rates at the reporting date would have increased (decreased) equity and profit or loss by the amounts shown below. This analysis assumes that all other variables, in particular foreign currency rates, remain constant. The analysis is performed on the same basis for 2008.

	Consolidated		Company
	Other Equity A$	Profit or loss A$	Other Equity A$	Profit or loss A$

30 June 2009
Variable rate instruments	-	78,611	-	38,341

30 June 2008
Variable rate instruments	-	147,765	-	145,293

Commodity Price Risk

The Group is still operating primarily in the evaluation and development phase and accordingly the Group's financial assets and liabilities are not yet subject to commodity price risk.

Capital Management

The Group's objectives when managing capital are to safeguard the Group's ability to continue as a going concern and to maintain a strong capital base sufficient to maintain future exploration and development of its projects. In order to maintain or adjust the capital structure, the Group may return capital to shareholders, issue new shares or sell assets to reduce debt. The Group's focus has been to raise sufficient funds through equity to fund exploration and evaluation activities.

There were no changes in the Group's approach to capital management during the year. Risk management policies and procedures are established with regular monitoring and reporting.

Neither the Company nor any of its subsidiaries are subject to externally imposed capital requirements.

The capital structure of the Group consists of equity attributable to equity holders of the parent, comprising issued capital, reserves and retained losses as disclosed in Notes 15, 16 and 17 respectively.

29. SHARE BASED PAYMENTS

The Company does not have a formal employee share option plan, however the Board has from time to time granted shares or options to employees and officers on a discretionary basis as it is considered that this provides a cost-effective and efficient means of remunerating and incentivising employees. In addition, shareholders have in General Meeting approved the granting of all incentive options to Directors. The share based payment expenses have been recognised in respect of the fair value of shares or options granted as remuneration.

29. SHARE BASED PAYMENTS (cont'd)

Valuation of Securities

30 June 2009

There were no options granted by the Company during the year. In October 2008 there were 144,801 fully paid ordinary shares issued to employees of the Company in accordance with agreements for negotiated salary reductions. Valuation of the shares was determined from the volume weighted average price on ASX over a 10 day period prior to issue.

30 June 2008

Advice was sought by the Company in relation to the value of options granted during the year. Based on this advice, the value of the securities was calculated as follows:

The fair value of the options was estimated on the date of grant using the Black Scholes Valuation Model with the following assumptions:

	$0.70 - 2010 Options	$0.70 - 2011 Options
Dividend yield	-	-
Volatility	75%	62%
Risk-free interest rate	6.59%	6.25%
Expected life of option	3 years	3.2 years
Underlying security spot price	$0.61	$0.520

The dividend yield reflects the assumption that the current dividend payout will remain unchanged. The expected life of the options is based on historical data and is not necessarily indicative of exercise patterns that may occur. The expected volatility reflects the assumption that the historical volatility is indicative of future trends, which may also not necessarily be the actual outcome.

The resulting fair values per option for the options granted are:

Number of Options	Exercise price	Expiry date	Grant date	Vesting dates	Fair value per option
4,000,000	$0.70	30 Nov 2010	4 Dec 2007	Vest immediately	$0.305
750,000	$0.70	30 Jun 2011	8 Apr 2008	350,000 vest immediately and 400,000 on 7 May 2008	$0.204

30. DISCONTINUED OPERATIONS

The results of the discontinued operation which have been included in the income statement are as follows:

	Consolidated Entity
	2009	2008
	$	$

Loss for the year from discontinued operations
Revenue	-	-

Expenses
Exploration expenses	(1,463,883)	-
Loss before income tax	(1,463,883)	-
Attributable income tax expense	-	-
	(1,463,883)	-
Gain/(loss) on remeasurement to fair value less costs to sell	-	-
	(1,463,883)	-
Attributable income tax expense	-	-
Loss for the year from discontinued operations	(1,463,883)	-


Cash flows from discontinued operations
Net cash flows from operating activities	(809,543)	-
Net cash flows from investing activities	(1,041,203)	-
Net cash flows from financing activities	-	-
Net cash flows	(1,850,746)	-

The major classes of assets and liabilities comprising the operations classified as held for sale at balance date are as follows:

Property, plant and equipment	12,752	-
Other financial assets	4,026,976	-
Development properties	20,288,355
Total assets classified as held for sale	24,328,083	-

Trade and other payables	1,758,919	-
Deferred tax liabilities	3,604,688	-
Total liabilities classified as held for sale	5,363,607	--
Net assets classified as held for sale	18,964,476	-

This information is provided by RNS

The company news service from the London Stock Exchange

END

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