LEYSHON RESOURCES LIMITED

ABN 75 010 482 274

FINANCIAL REPORT FOR THE YEAR ENDED

31 DECEMBER 2014

CORPORATE DIRECTORY

Directors

Paul Atherley- Non-Executive Chairman Corey Nolan - Managing Director Richard Seville - Non-Executive Director

Company Secretary

Murray Wylie

Principal and Registered Offices

Australia

Suite 3, Level 3
1292 Hay Street
West Perth WA 6005
Telephone: +618 9321 0077
Facsimile: +618 9322 4073

Auditor

Deloitte Touche Tohmatsu

Bankers

Bank of China - Beijing
National Australia Bank

Share Register

UK

Computershare Investor Services plc
2nd Floor, Vintners Place
68 Upper Thames Street
London EC4V 3BJ United Kingdom

Australia

Computershare Investor Services Pty Ltd
Level 2, Reserve Bank Building
45 St Georges Terrace
Perth WA 6000
Australia
Telephone: 1300 557 010
International: +618 9323 2000
Facsimile: +618 9323 2033

Solicitors

Jun He Law Offices - Beijing
Hardy Bowen Solicitors - Perth

Stock Exchange Listings Alternative Investment Market London Stock Exchange

10 Paternoster Square
London EC4M 7LS
Australian Securities Exchange
Home Branch - Perth
2 The Esplanade
Perth WA 6000

AIM and ASX Code

LRL

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Index

Directors' Report 3

Auditor's Independence Declaration 18

Directors' Declaration 19

Consolidated Statement of Profit or Loss and Other Comprehensive Income 20

Consolidated Statement of Financial Position 21

Consolidated Statement of Changes in Equity 22

Consolidated Statement of Cash Flows 23

Notes to the Financial Statements 24

Independent Audit Report 55

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DIRECTORS' REPORT

The Directors of Leyshon Resources Limited present their report on the Group consisting of Leyshon Resources Limited ("the Company" or "Leyshon Resources") and the entities it controlled at the end of, or during, the year ended 31 December 2014 ("Group"). All amounts presented in the annual report including the Directors' Report are presented in United States Dollars (US$) unless otherwise indicated.

DIRECTORS

The following persons were Directors of the Company during the year ended 31 December 2014 and up to the date of this report:
Paul C Atherley
Corey Nolan - Appointed 14 February 2014
Richard P Seville
Andrew Berry III - Retired 31 March 2014

INFORMATION ON DIRECTORS Paul C Atherley

Non-Executive Chairman from 1 February 2015

Non-Executive Director from 14 February 2014 until 1 February 2015

Managing Director from date of appointment 4 May 2004 until 14 February 2014

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 30 years industry experience. 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. During this period he completed a number of acquisitions and financings of resource projects in Australia, South- East Asia, Africa and Western Europe.
Mr Atherley is an experienced Managing Director with well established relationships in the London and Australian capital markets. He has been based in Beijing since 2005 and has pioneered the company's former activities in China. During this period he has built the Leyshon Management team and established extensive government and industry relationships. He currently serves as the Vice Chairman of the China Britain Business Council and is Chairman of the Energy Committee. He also serves on the EU-China Chamber Energy Working Group.
During the three year period to the end of the financial year, Mr Atherley has held a directorship with
Leyshon Energy Limited (January 2014 - present).

Corey Nolan

Managing Director from date of appointment 14 February 2014

Qualifications - B Com, MMEE, GAICD

Nr Nolan has twenty years of diverse experience in the resources sector. This has included experience in mining operations, global resource evaluation, and the financing and development of new opportunities in Australia, South Africa, Asia and South America.
Mr Nolan is a qualified mineral economist. He has held specialist roles as an equities analyst in the mining and natural resources sector of stock broking firms Morgan Stanley and Wilson HTM. During this period he undertook detailed coverage of the Australian and global resources sector including the commodities market.
Mr Nolan has been a Director at PWC in the corporate finance and valuations practice, specialising in resources industry valuations for Australian and global resources firms.
During the three year period to the end of the financial year, Mr Nolan has held a directorship with
Elementos Limited (July 2009 - present).

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INFORMATION ON DIRECTORS (Cont'd)

Richard Seville

Non-Executive Director from date of appointment 1 February 2007 to 25 November 2013 and from 1

February 2015 onwards

Non-Executive Chairman from 25 November 2013 to 1 February 2015

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

Mr Seville is a mining geologist and geotechnical engineer with more than 30 years experience covering exploration, mine development and mine operations in gold, base metals and coal projects in Australia, South America, Africa and Asia. Mr Seville also has significant corporate experience and has held the roles of operations director and/or managing director for ASX/AIM listed companies since 1994. He is currently Managing Director of ASX/TSX listed industrial minerals company Orocobre Ltd.
During the three year period to the end of the financial year, Mr Seville has held directorships in
Orocobre Limited (November 2007 - present) and Elementos Limited (October 2013 - present).

Andrew Berry III

Non-Executive Director from date of appointment 10 October 2008 until retirement on 31 March 2014

Qualifications - BS Geological Engineering and MBA

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.
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 and the unlisted CorporActive Fund 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 held a directorship in
CorporActive Fund Limited (September 2007 - August 2013).

Company Secretary

Murray Wylie

Company Secretary from date of appointment 20 January 2012

Qualifications - B Com (Hon), GradDipAppCorpGov, ACIS

Mr Wylie has more than 30 years experience in administrative and accounting roles in both the public and private sectors. He also holds Company Secretary positions with two other listed companies.

PRINCIPAL ACTIVITIES

The principal activity of the Group during the year consisted of the identification and evaluation of suitable investment opportunities and undertaking a strategic review of its existing Mt Leyshon gold project in Queensland, Australia. During the year, shareholders voted to change the Group's investing policy on 13 January 2014 to remove references to energy projects and focus on mineral exploration opportunities following the demerger of its energy assets.

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CONSOLIDATED RESULTS

Year ended

31 December

2014

$

Year ended

31 December

2013

$

Loss of the Group before income tax from continuing operations (1,936,139) (1,183,279) Income tax expense - excludes discontinued tax (1,079) (10,095) Loss of the Group for the year from continuing operations (1,937,218) (1,192,374) Profit/(loss) of the Group from discontinued operations 903,792 (7,531,601) Net loss attributable to members of Leyshon Resources Limited (1,033,426) (8,723,975)
Net cash flows used in operating activities (1,367,972) (7,394,400)

31 December

2014

$

31 December

2013

$

Net assets 1,262,752 32,352,084

REVIEW OF OPERATIONS Operations

On 13 January 2014, shareholders approved the demerger of the Company's energy assets via the pro-rata in-specie distribution of 100% of the ordinary shares of Leyshon Energy Limited to eligible shareholders of the Company. The demerger was completed and Leyshon Energy Limited commenced trading on the AIM market of the London Stock Exchange on 23 January 2014.
On 14 February 2014, Mr Corey Nolan was appointed Managing Director of Leyshon Resources. Mr Paul Atherley resigned from his position as Managing Director of Leyshon Resources on the same day to concentrate on his role as Managing Director of Leyshon Energy. Mr Atherley remains on the Board of Leyshon Resources as a non-executive director and is currently the Chairman.
Following the demerger, the primary activities of the Company have been the identification and evaluation of suitable investment opportunities and undertaking a strategic review of its existing Mt Leyshon gold project in Queensland, Australia.

New Project Opportunities

During the reporting period, the Company has been actively pursuing and studying potential investment opportunities in the resources sector which are in line with the Company's stated investing policy.
The Company's strategic objective is to identify mineral resource projects that have a clear pathway to production or monetisation and can generate high returns to shareholders. This will be achieved by leveraging the in-house expertise and track-record in identifying, acquiring, financing, developing and operating resource projects, and un-locking value. The Company's plan is to identify advanced or brown-field assets which have a stronger chance of being re-rated in the listed market.
The investment climate in the resources sector continues to be difficult. Resource equity and asset valuations are currently substantially discounted which we believe will provide an attractive entry opportunity for the Company at the bottom of the investment cycle.
Since the completion of the demerger, the Company has commenced preliminary discussions with prospective debt and equity financiers with regard to a number of investment opportunities and has been encouraged by the response in relation to the level and types of funding that could be available.

International Tungsten Services Transaction

On 20 November 2014, the Company signed a Heads of Agreement for a proposed transaction to acquire a 50.1% interest in International Tungsten Services Limited ("ITS"), a private Korean company.

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In return for its 50.1% interest in ITS, Leyshon Resources would provide management and corporate expertise, arrange funding of US$13.5 million for the on-going development of the project, and provide an initial unsecured loan of US$500,000 to ITS. The loan was to provide working capital and on an interest free basis. This facility was subsequently increased by US$120,000 and the aggregate loan of US$620,000 is due for repayment in accordance with its terms by 26 December 2015.
Subsequent to the year end, the Company announced that it was no longer pursuing the transaction with ITS due to a number of factors including declining tungsten prices and the expanding project timetable, which resulted in the proposed transaction ceasing to meet the Company's financial return objectives. As at 31 December 2014 the loan is fully provided for.

Mt Leyshon Strategic Review

The Company completed a high-level strategic review of the Mt Leyshon project and a number of potential opportunities during the period, including:
1) Utilising the existing pit and other infrastructure for small-scale hydro power generation;
2) Reassessing the exploration potential of the ground in the vicinity of the old mine; and
3) The potential to recover the gold from the ball mill scat stockpiles. A previous economic study demonstrated only modest returns at a gold price of US$780 per ounce, compared to the current price of US$1300 per ounce.

1) Hydro Power Generation

During the reporting period, the Company completed the concept study into developing a pumped storage hydro ("PSH") power project at Mt Leyshon.
The concept involves generating near-instantaneous electrical power and supplying it into the grid at times of peak power demand by releasing water from the existing upper reservoir through a hydro generation plant. The upper reservoir is refilled from the existing open pit during periods of off-peak prices.
The optimal project sizing based on the physical reservoir characteristics is estimated to be around 40 megawatts ("MW"). The existing power line infrastructure connected to the site supports a project of up to 20MW and with modest upgrades may support up to 40MW.
The unit cost of production for a 20-40MW PSH plant at the Mt Leyshon site compares favourably to the cost of a larger-scale open-cycle gas turbine project, the assumed next best alternative for providing fast-start peak to intermediate generation capacity.
Whilst the study demonstrated positive project economics, further work will be required in areas including water chemistry, capital and operating cost estimates, networks, engineering, and regulatory.
The report recommended identifying a strategic partner to assist with managing market risk and underpinning the commercial viability of the project by securing either a medium to long-term off-take with an electricity retailer or major energy user, or a medium to long-term network support contract with the local network service provider. The Company has spoken to a number of new players and will continue to seek potential partners during 2015.

2) Further Exploration

The historical focus of the Leyshon mining operations was the Mt Leyshon Breccia, the main ore host, comprising a large pipe-like breccia, approximately 400 x 300 metres in plan, with a minimum vertical extent of 650 metres. A number of areas of brecciation and porphyry intrusion extend outside the main pit area. Historical surface sampling has identified areas of anomalous grades of gold, silver, lead and zinc. The Company completed a review of all the historical data and decided not to proceed with any further exploration activities.

3) Recovery of Gold from Mill Scats

In June 2012, the Company completed a drilling program and economic study on the potential recovery of gold from a large stock pile of between 12 and 15 million tonnes of ball mill scats from the historical operations. The study considered a number of different process routes to recover between
100,000 and 175,000 ounces of gold through the retreatment of the highly mineralised material. The

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material was stockpiled at a time when gold prices averaged around US$300 per ounce, and the 2012 study was based on a gold price of US$780 per ounce. Despite more recent higher prices for gold, the Company believes the high capital required to develop the project outweighs the potential risk adjusted returns.

BUSINESS STRATEGIES AND PROSPECTS

After approving the demerger of Leyshon Energy on 13 January 2014, shareholders approved amendments to the Company's investing policy to reflect the Company's focus on gold and other minerals exploration and investment opportunities by removing references to energy projects. The investing policy aims to capitalise on the Company's extensive experience in China. The policy focuses on acquiring and developing mineral projects in those commodities and located in those countries which it believes will be of interest to Chinese mining and other groups for either offtake, partnership or sale.
The Company continues to review, and in some cases carry out due diligence, on a number of possible projects both internationally and within China.

DIVIDENDS

No interim or final dividend has been declared in respect to the year ended 31 December 2014 (year ended 31 December 2013: nil).

SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS

On 13 January 2014, shareholders approved the demerger of the Company's energy assets via the in- specie distribution of 100% of the ordinary shares of Leyshon Energy Limited to eligible shareholders of the Company. The demerger was completed and Leyshon Energy Limited commenced trading on the AIM market of the London Stock Exchange on 23 January 2014.
Mr Corey Nolan was appointed as Managing Director of Leyshon Resources on 14 February 2014.
The shares of Leyshon Resources have been suspended from trading on the Australian Securities Exchange ("ASX") since 14 July 2014 and will remain suspended. ASX policy, in accordance with Chapter 12 of the Listing Rules, is to allow companies that have disposed of their main undertakings a six-month period within which to satisfy ASX that the company has a sufficient level of operations to justify continued quotation of the Company's securities on the ASX. The Company was not able to satisfy the ASX that it was in compliance with Chapter 12 and was suspended from trading on 14 July
2014.
On 20 November 2014, the shares of Leyshon Resources were also suspended from trading on the AIM Market on the announcement of the proposed transaction with ITS (which constituted a possible reverse takeover). As the Company is an investing company subject to AIM Rule 15, and it has not implemented its investing policy or completed an acquisition which constitutes a reverse takeover under the AIM Rules for Companies within 12 months of becoming an investing company, trading of the Company's shares on the AIM Market will remain suspended pending implementation of its investing policy or completion of an acquisition which constitutes a reverse takeover.
The Company envisages the shares will remain suspended on the ASX and the AIM Market until such time as the Company completes a transaction and seeks re-compliance for listing on the ASX and re- admission to the AIM Market.

SUBSEQUENT EVENTS

Other than as disclosed below, as at the date of this report there are no matters or circumstances which have arisen since 31 December 2014 that have significantly affected or may significantly affect:
a) the operations, in financial years subsequent to 31 December 2014, of the Group constituted by Leyshon Resources Limited and the entities it controls from time to time;
b) the results of those operations; or
c) the state of affairs, in financial years subsequent to 31 December 2014, of the Group.
On 23 January 2015, the Company announced that it had terminated the Heads of Agreement with ITS due to a number of factors including declining tungsten prices and the expanding project timetable.

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LIKELY DEVELOPMENTS

The Company continues to receive investment proposals from many locations around the world and it actively considers each one in light of its competitive advantage of being able to access the Chinese end user market.
The Company remains diligent in its assessment of assets at all times and is therefore prepared to commit significant expenditure on due diligence and other studies before committing to a transaction. The Company can give no assurance that these due diligence investigations and/or discussions will successfully conclude in an acquisition.
In the opinion of the Directors, any further disclosure of information regarding likely developments in the operations of the Group and the expected results of these operations in subsequent financial years may prejudice the interests of the Group and accordingly, has not been disclosed.

ENVIRONMENTAL REGULATIONS

The Group'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.

SHARES

During the year, no shares were issued by the Company.

OPTIONS

During the year ended 31 December 2014 there were 9,000,000 options granted. There were no unissued ordinary shares of Leyshon Resources under option at the date of this report.
During 2013, the Company agreed to issue 5,000,000 performance rights to Key Management Personnel. These were deemed granted and an expense recognised. The intended recipients subsequently agreed to forego their entitlement should the demerger of the Company's energy assets proceed. The demerger was completed on 23 January 2014 and accordingly the performance rights, lapsed, will not be issued.
During the year no shares were issued as a result of the exercise of options. Since 31 December
2014 and up to the date of this report, 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.

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MEETINGS OF DIRECTORS

The following table sets out the number of meetings of the Company's directors held during the year ended 31 December 2014, and the number of meetings attended by each director.

(1) Mr Berry retired on 31 March 2014.

INFORMATION ON DIRECTORS' INTERESTS IN SECURITIES OF LEYSHON RESOURCES Interest in Securities

at the date of this Report

Ordinary

Shares

Options

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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 year ended
31 December 2014. 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:
Paul C Atherley (Chairman from 1 February 2015 until present, Non Executive Director from

14 February 2014 until 1 February 2015, Managing Director until 14 February 2014)

Corey Nolan (Managing Director appointed 14 February 2014)
Richard P Seville (Non Executive Director from 1 February 2015 until present, Chairman from

25 November 2013 until 1 February 2015)

Andrew J Berry III ( Non Executive Director, retired 31 March 2014)
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:
Peter Niu - Chief Financial Officer (resigned 23 January 2014)
Frank Fu - Chief Operating Officer (resigned 23 January 2014)
There were no other group executives or Company executives during the period.

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 Board 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 Board 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 Board'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.

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