(LRL.L) Leyshon Resources Ltd Buy/Sell

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:

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:

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

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.

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 Remuneration Committee Meetings
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

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 - -

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:

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:

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:

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:

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:

Senior Management

Mr McLaglen

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

Mr Niu

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

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 Other 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

(c) the directors have been given the declarations required by s.295A of the Corporations Act 2001.

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

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 (1,400,665) (2,736,200) (1,375,141) (2,386,000)

expenses
Business development expenses (181,181) (503,678) (181,001) (491,296)
Foreign exchange 138,765 (1,656,234) 138,570 (1,654,400)

gains/(losses)
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 (1,933,944) (10,411,177) (1,481,030) (5,683,323)

continuing operations

Discontinued operations
Loss for the year from (1,463,883) - - -
discontinued operations 23
(3,397,827) (10,411,177) (1,481,030) (5,683,323)

Loss attributable to members of Leyshon Resources Limited

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

per share)
Diluted loss per share (cents 18 (1.6) (4.8)

per share)

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

per share)
Diluted loss per share (cents 18 (0.9) (4.8)

per share)

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
$ $ $ $

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 7 24,328,083 - - -

sale
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 8 1 1 1 1

value through profit or loss
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

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 14 5,363,607 - - -

for sale
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

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

$ $ $ $

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 986,685 (327,899) - -

attributable to members of Leyshon Resources Limited

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) -
- 112,841 - 112,841

Balance at end of year

FOR THE FINANCIAL YEAR ENDED 30 JUNE 2009 (CONTINUED)

Consolidated Company

$ $ $ $

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 (3,397,827) (10,411,177) (1,481,030) (5,683,323)

Resources Limited

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

Loss for the year

attributable to members of parent entity

(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
$ $ $ $

Payments to suppliers and (3,699,022) (8,244,467) (1,987,907) (3,262,863)

employees
Interest received 272,207 904,928 272,101 900,385
Net cash flows used in 26(b) (3,426,815) (7,339,539) (1,715,806) (2,362,478)

operating activities

Payments for property, plant (2,580) (27,444) (375) (4,836)

and equipment
Amounts advanced to related - - (3,607,557) (9,655,977)

parties
Loan to joint venture partner (702,176) (1,738,899) - -
Development expenditure (1,486,355) (2,803,214) - -
Net cash flows used in (2,191,111) (4,569,557) (3,607,932) (9,660,813)

investing 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 (1,200) 867,904 (1,200) 867,904

financing activities

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

Cash and cash equivalents at 9,399,324 22,096,750 9,025,187 21,834,974

the beginning of the year
Effects of exchange rate 138,765 (1,656,234) 138,570 (1,654,400)

changes on cash and cash equivalents

CASH AND CASH EQUIVALENTS AT 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 Expected to be
reporting periods initially applied in
beginning on or the financial year
after: ending:
1 January 2009 30 June 2010

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
AASB 2009-2 'Amendments to 30 June 2010

Australian Accounting Standards - Improving Disclosures about Financial Instruments'

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

Standard / Effective for annual Expected to be
Interpretation reporting periods initially applied in
beginning on or the financial year
after: ending:
AASB 123 *Borrowing Costs* (revised), AASB 2007-6 1 January 2009 30 June 2010

*Amendments to Australian Accounting Standards arising from AASB 123*
AASB 3 *Business Combinations* (revised), AASB 127 Business 30 June 2010
*Consolidated and Separate Financial Statements* combinations
(revised) and AASB 2008-3 *Amendments to Australian occurring after the
Accounting Standards arising from AASB 3 and AASB beginning of annual
127* reporting periods
beginning 1 July

AASB 2008-1 *Amendments to Australian Accounting 1 January 2009 30 June 2010

Standard - Share-based Payments: Vesting Conditions and Cancellations*
AASB 2008-2 *Amendments to Australian Accounting 1 January 2009 30 June 2010

Standards - Puttable Financial Instruments and Obligations arising on Liquidation*
AASB 2008-5 *Amendments to Australian Accounting 1 January 2009 30 June 2010

Standards arising from the Annual Improvements Project*
AASB 2008-6 *Further Amendments to Australian 1 July 2009 30 June 2010

Accounting Standards arising from the Annual Improvements Project*
AASB 2008-7 *Amendments to Australian Accounting 1 January 2009 30 June 2010

Standards * Cost of an Investment in a Subsidiary, Jointly Controlled Entity or Associate
AASB 2008-8 *Amendments to Australian Accounting 1 July 2009 1 July 30 June 2010 30
Standards * Eligible Hedged Items* AASB 2009-4 2009 1 January June 2010 30 June
*Amendments to Australian Accounting Standards 2010 1 January 2011 30 June 2010
arising from the Annual Improvements Process* AASB 2009

2009-5 *Further Amendments to Australian Accounting Standards arising from the Annual Improvements Process* AASB 2009-6 *Amendments to Australian Accounting Standards*

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 Expected to be
reporting periods initially applied in
beginning on or the financial year
after: ending:
AASB 2009-7 "Amendments to 1 July 2009 30 June 2010

Australian Accounting Standards"

AASB 1 'First-time Adoption of 1 July 2009 30 June 2010

Australian Accounting Standards'

AASB Interpretation 15 1 January 2009 30 June 2010

'Agreements for the Construction of Real Estate'

AASB Interpretation 16 'Hedges 1 October 2008 30 June 2010

of a Net Investment in a Foreign Operation'

AASB Interpretation 17 1 July 2009 30 June 2010

'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 1 July 2009 30 June 2010

'Transfers of Assets from Customers'

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.

(c) Joint Venture Arrangements

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:

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:

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

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 13,408 17,710 13,408 17,710 3,147 3,720 - - 3,147 3,720

lease payments)
Equity settled share based 46,336 1,558,523 - - 46,336 1,558,523 46,336 1,558,523 - - 46,336 1,558,523

payments
Post-employment benefits 12,798 33,748 - - 12,798 33,748 8,508 21,796 - - 8,508 21,796
Consolidated Company

3. INCOME TAX $ $ $ $

Income tax expense
Current tax - - - -
Deferred tax - - - -

Numerical reconciliation of income tax expense to prima facie tax payable
Loss from continuing (3,397,827) (10,411,177) (1,481,030) (5,683,324)

operations before income tax expense
(1,019,348) (3,123,353) (444,309) (1,704,997)

Tax at the Australian tax rate of 30% (2007: 30%) 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 623,695 2,155,824 103,263 791,756

expenditure
(381,752) (499,972) (327,145) (445,684)
Tax losses not brought to 381,752 499,972 327,145 445,684

account

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

4. REMUNERATION OF AUDITORS $ $ $ $

Auditor of the parent entity
Audit Services 47,215 48,450 47,215 48,450

Fees paid to Deloitte Touche Tohmatsu

5. TRADE AND OTHER RECEIVABLES Current Amounts owing by

(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

$ $ $ $

Transferred from:

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)

entities

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 7 (4,026,976) - - -

assets held for sale
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

$ $ $ $

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 2,771 26,352 2,771 5,543

10(a))

(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 - -

12. TRADE AND OTHER PAYABLES

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

(unsecured)

Non-current
Trade creditors and accruals 1,758,919 - - -

(unsecured)
Transferred to Non-Current (1,758,919) - - -
Liabilities held for sale 14

13. PROVISIONS

Employee benefits 45,452 120,947 43,856 120,135

Note Consolidated Company

$ $ $ $

14. NON-CURRENT LIABILITIES HELD FOR SALE

Transferred from:

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

15. ISSUED CAPITAL

(a) Issued and paid up capital
218,255,692 (2008: 64,552,218 64,507,082 64,552,218 64,507,082

218,110,891) fully paid ordinary shares

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 Ordinary Shares Total
(Number) ($) ($)
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 - 16,210 63,191,138
benefits reserve
22/11/07 Exercise of options (i) 300,000 105,000 63,296,138
Transfer from employee - 48,630 63,344,768
benefits reserve
11/12/07 Exercise of options (i) 1,100,000 385,000 63,729,768
Transfer from employee - 225,310 63,955,078
benefits reserve
18/12/07 Exercise of options (i) 1,000,000 350,000 64,305,078
Transfer from employee - 209,100 64,514,178
benefits reserve
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

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

Consolidated Company

$ $ $ $

16. RESERVES
Employee benefits reserve 1,941,893 1,941,893 1,941,893 1,941,893
Foreign currency translation 488,917 (497,768) - -

reserve
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) $0.40 268,100 268,100 268,100 268,100

options
550,000 (2008: 550,000) $0.55 115,271 115,271 115,271 115,271

options
4,750,000 (2008: 4,750,000) $0.70 1,558,522 1,558,522 1,558,522 1,558,522

options
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

$ $ $ $

Nil (2008: Nil) 18 pence options (i) - 112,841 - 112,841
- 112,841 - 112,841

17. ACCUMULATED LOSSES
(42,319,895) (31,908,718) (20,902,055) (15,218,732)

Balance at the beginning of the financial year
Net loss attributable to (3,397,827) (10,411,177) (1,481,030) (5,683,323)

members of Leyshon Resources
Transfer from Option Premium 112,841 - 112,841 -

Reserve
(45,604,881) (42,319,895) (22,270,244) (20,902,055)

Balance at the end of the financial year

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

basis)

18. EARNINGS PER SHARE
Consolidated Entity

$ $

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

$ $
Net loss used in calculating basic earnings per (3,397,827) (10,411,177)

share
Adjustment to exclude loss from discontinued 1,433,879 -

operations
Earnings used in calculating basic and diluted (1,963,948) (10,411,177)

earnings per share from continuing operations

Number of Number of
Shares shares

Weighted average number of ordinary shares used in 218,216,417 217,015,001

calculating basic earnings per share
Effect of dilutive securities -

Adjusted weighted average number of ordinary shares 218,216,417 217,015,001 and potential ordinary shares used in calculating diluted earnings per share

(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

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

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 - -

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 - 80,596 - -

longer than 5 years
Longer than 5 years - - - -
22,057 201,490 - -

22. SUBSIDIARIES

Name of Entity Country of Class of Shares Equity Holding
Incorporation

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

$ $ $ $ $ $

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 522,895 1,069,626

revenue/income

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 375 4,838 2,205 22,606 2,580 27,444

assets
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

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.

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

$ $ $ $
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

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

24. RELATED PARTY DISCLOSURES (cont'd)

(c) Key management personnel equity holdings

Fully paid ordinary shares of Leyshon Resources

Balance at the start of the year Purchases Received on exercise of options Other changes Disposals Balance at the end of the year
(i)

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

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

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

Balance at the start Granted as Exercised Other changes Balance at the end Vested during the Vested and
of the year remuneration of the year year exercisable at the
end of the year

Mr John Fletcher - 2010
Options 1,000,000 - - - 1,000,000 - 1,000,000

Mr Richard Seville - 2010
Options 1,000,000 - - - 1,000,000 - 1,000,000

Ms Stacey Apostolou - 2010
Options 2,000,000 - - - 2,000,000 - 2,000,000

Dong Ping Ye -
2011 Options 750,000 - - - 750,000 - 750,000
Balance at the start Granted as Exercised Other changes Balance at the end Vested during the Vested and
of the year remuneration of the year year exercisable at the
end of the year

Mr John Fletcher - 2010
Options - 1,000,000 - - 1,000,000 1,000,000 1,000,000

Mr Richard Seville - 2010
Options - 1,000,000 - - 1,000,000 1,000,000 1,000,000

Ms Stacey Apostolou - 2010
Options - 2,000,000 - - 2,000,000 2,000,000 2,000,000

Dong Ping Ye -
2011 Options - 750,000 - - 750,000 750,000 750,000
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 Granted as Exercised Other changes Balance at the end Vested during the Vested and
of the year remuneration of the year year exercisable at the
end of the year

Mr Vic McLaglen - $0.40
Options 550,000 - - - 550,000 - 550,000

Mr Vic McLaglen- $0.55 Options
550,000 - - - 550,000 - 550,000

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

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$12.66 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:

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.

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

$ $ $ $
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 (75,495) 57,019 (76,279) 61,112

employee entitlements
Interest on loan to joint (270,418) (164,698) - -

venture partner
Exchange differences on cash (138,765) 1,656,234 (138,570) 1,654,400

balances
Unrealised foreign exchange 986,685 (327,900) - -

differences
Share based payment expense 46,336 1,558,523 46,336 1,558,523
(Increase)/decrease in other (85,330) (25,575) 32,164 24,480

assets
(Decrease)/increase in (505,409) 300,325 (101,574) 18,610

payables
Net cash provided (used) by (3,426,815) (7,339,539) (1,715,806) (2,362,478)

operating activities

26. notes to the CASH FLOW STATEMENT (cont'd)
(c) Non cash transactions

30 June 2009

During the financial year:

30 June 2008

During the financial year:

27. JOINTLY CONTROLLED ENTITY

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

Interest

Name of venture Principal activity % %
Black Dragon Mining Company Limited Exploration and development 70 70

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

$ $

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 ra