Offer for Subscription - Real Gold by pengxiuhui

VIEWS: 16 PAGES: 489

									                                                                               IMPORTANT


  If you are in any doubt about the contents of this prospectus, you should consult your stockbroker, bank manager, solicitor, professional accountant or other professional adviser.




                                       REAL GOLD MINING LIMITED
                                                                 瑞金礦業有限公司
                                                     (Incorporated in the Cayman Islands with limited liability)

                                                                      GLOBAL OFFERING
       Number of Offer Shares under the Global Offering                                        :     165,000,000 Offer Shares (subject to
                                                                                                     Over-allotment Option)
                              Number of Hong Kong Offer Shares                                 :     16,500,000 Offer Shares (subject to adjustment)
                             Number of International Offer Shares                              :     148,500,000 Offer Shares (subject to adjustment and
                                                                                                     Over-allotment Option), comprising 87,700,000 new
                                                                                                     Shares to be offered by the Company and 60,800,000
                                                                                                     Sale Shares to be offered by the Selling Shareholder
                                                       Maximum Offer Price                     :     HK$6.25 per Offer Share payable in full on
                                                                                                     application in Hong Kong dollars, subject to refund,
                                                                                                     plus brokerage of 1%, SFC transaction levy of 0.004%
                                                                                                     and Stock Exchange trading fee of 0.005%
                                                                  Nominal Value                :     HK$1.00 per Share
                                                                    Stock Code                 :     246

                                                      Sole Global Coordinator and Sole Sponsor




                                                    Joint Bookrunners and Joint Lead Managers




Hong Kong Exchanges and Clearing Limited, The Stock Exchange of Hong Kong Limited and Hong Kong Securities Clearing Company Limited take no responsibility for the contents of this
prospectus, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or
any part of the contents of this prospectus.
A copy of this prospectus, having attached thereto the documents specified in the paragraphs headed ‘‘Documents Delivered to the Registrar of Companies and Available for Inspection’’ in
Appendix VIII to this prospectus, has been registered with the Registrar of Companies in Hong Kong as required by section 342C of the Companies Ordinance (Chapter 32 of the Laws of
Hong Kong). The Securities and Futures Commission and the Registrar of Companies in Hong Kong take no responsibility for the contents of this prospectus or any other document referred
to above.
The Offer Price is expected to be fixed by agreement between the Joint Bookrunners (on behalf of the Underwriters), the Selling Shareholder and us on the Price Determination Date. The
Price Determination Date is expected to be on or around Friday, 13 February 2009 and, in any event, not later than Thursday, 19 February 2009. The Offer Price will not be more than
HK$6.25 and is currently expected to be not less than HK$4.35. Investors applying for Hong Kong Offer Shares must pay, on application, the maximum Offer Price of HK$6.25 for each
Offer Share together with a brokerage of 1%, a SFC transaction levy of 0.004% and a Stock Exchange trading fee of 0.005%.
The Joint Bookrunners, on behalf of the Underwriters, may, with our consent, reduce the number of Offer Shares and/or the indicative Offer Price range below that stated in this prospectus
(which is HK$4.35 to HK$6.25 per Offer Share) at any time on or prior to the morning of the last day for lodging applications under the Hong Kong Public Offering. In such case, notice of
the reduction in the number of Offer Shares and/or the indicative Offer Price range will be published in the South China Morning Post (in English) and the Hong Kong Economic Times (in
Chinese) not later than the morning of the last day for lodging applications under the Hong Kong Public Offering. If applications for Hong Kong Offer Shares have been submitted prior
to the last day for lodging applications under the Hong Kong Public Offering, then even if the number of Offer Shares and/or the indicative Offer Price range is so reduced, such
applications cannot be subsequently withdrawn. Further details are set out in the sections headed ‘‘Structure of the Global Offering’’ and ‘‘How to Apply for Hong Kong Offer
Shares’’ in this prospectus.
All of our businesses, and certain of our subsidiaries, are located in the PRC. Potential investors should be aware of the differences in the legal, economic and financial systems between the
mainland of the PRC and Hong Kong, and that there are different risk factors relating to investments in PRC-incorporated companies. Potential investors should also be aware that the
regulatory framework in the PRC is different from the regulatory framework in Hong Kong, and should take into consideration the different market nature of our Shares. Some of these
differences and risk factors are set out in the sections headed ‘‘Risk Factors’’ and ‘‘The PRC Laws and Regulations Relating to the Industry’’ in this prospectus.
If, for any reason, the Joint Bookrunners (on behalf of the Underwriters), the Selling Shareholder and us are unable to reach an agreement on the Offer Price by Thursday, 19
February 2009, the Global Offering will not become unconditional and will lapse immediately.
Prior to making an investment decision, prospective investors should consider carefully all of the information set out in this prospectus and the related Application Forms, including the risk
factors set out in the section headed ‘‘Risk Factors’’ in this prospectus.
Prospective investors of the Hong Kong Offer Shares should note that the obligations of the Hong Kong Underwriters under the Hong Kong Underwriting Agreement to subscribe, and to
procure subscribers for, the Hong Kong Offer Shares, are subject to termination by the Joint Bookrunners (on behalf of the Underwriters) if certain events shall occur prior to 8:00 a.m. on the
day on which trading in the Shares commences on the Stock Exchange. Such grounds are set out in the section headed ‘‘Underwriting’’ in this prospectus. It is important that you refer to that
section for further details.
The Offer Shares have not been and will not be registered under the U.S. Securities Act or any state securities law in the United States and may not be offered, sold, pledged or transferred
within the United States or to, or for the account or benefit of U.S. persons, except pursuant to an exemption from, or in a transaction not subject to, the registration requirement under the
U.S. Securities Act.




                                                                                                                                                               10 February 2009
                                        EXPECTED TIMETABLE


                                                                                                                Date(1)

Application lists open(2) . . . . . . . . . . . . . . . . . . . . . . . . . . 11:45 a.m. on Friday, 13 February 2009

Latest time to complete electronic applications
  under White Form eIPO service through the
  designated website www.eipo.com.hk(3) . . . . . . . . . . . . . . 11:30 a.m. on Friday, 13 February 2009

Latest time to complete payment of White Form eIPO
  applications by effecting internet banking
  transfer(s) or PPS payment transfer(s) . . . . . . . . . . . . . . 12:00 noon on Friday, 13 February 2009

Latest time to lodge WHITE and YELLOW
  Application Forms . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12:00 noon on Friday, 13 February 2009

Latest time to give electronic application
  instructions to HKSCC (4) . . . . . . . . . . . . . . . . . . . . . . 12:00 noon on Friday, 13 February 2009

Application lists close . . . . . . . . . . . . . . . . . . . . . . . . . . . 12:00 noon on Friday, 13 February 2009

Expected Price Determination Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Friday, 13 February 2009

Announcement of:
  .    the Offer Price;
  .    the indication of level of interest in the International Offering;
  .    the level of applications under the Hong Kong Public Offering; and
  .    the basis of allotment of the Hong Kong Offer Shares,
 to be published in the South China Morning Post (in English)
 and Hong Kong Economic Times (in Chinese) on or before . . . . . . . . . . Friday, 20 February 2009

Announcement of results of allotment in the Hong Kong Public Offering
 (with successful applicants’ identification document numbers,
 where applicable) available through a variety of channels, including
 the websites of the Stock Exchange and our Company, as described
 in the section headed ‘‘How to Apply for Hong Kong
 Offer Shares — IX. Publication of Results; Despatch/
 Collection of Share Certificates and Refunds of Application
 Monies’’ in this prospectus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . from Friday, 20 February 2009

Results of allocations in the Hong Kong Public Offering will
 be available at www.iporesults.com.hk
 with a ‘‘search by ID’’ function . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Friday, 20 February 2009

Despatch of Share certificates and refund checks
 (if applicable) on or before (5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Friday, 20 February 2009

Dealings in Shares on the Stock Exchange expected to commence on . . . . Monday, 23 February 2009




                                                         –i–
                                              EXPECTED TIMETABLE


Notes:

(1)      All times and dates refer to Hong Kong local times and dates, except as otherwise stated. Details of the structure of the
         Global Offering, including its conditions, are set out in the section headed ‘‘Structure of the Global Offering’’ in this
         prospectus. If there is any change in the above expected timetable, we will issue a separate announcement.

(2)      If there is a tropical cyclone warning signal number 8 or above, or a ‘‘black’’ rainstorm warning in Hong Kong at any time
         between 9:00 a.m. and 12:00 noon on Friday, 13 February 2009, the application lists will not open on that day. Please refer
         to the section headed ‘‘How to Apply for Hong Kong Offer Shares — V. When May Applications Be Made — Effect of bad
         weather on the opening of the application lists’’ in this prospectus.

(3)      You will not be permitted to submit your application through the designated website at www.eipo.com.hk after 11:30 a.m.
         on the last day for submitting applications. If you have already submitted your application and obtained an application
         reference number from the designated website prior to 11:30 a.m., you will be permitted to continue the application process
         (by completing payment of application monies) until 12:00 noon on the last day for submitting application, when the
         application lists close.

(4)      Applicants who apply by giving electronic application instructions to HKSCC should refer to the section headed ‘‘How to
         Apply for Hong Kong Offer Shares — III. Applying by Giving Electronic Application Instructions to HKSCC’’ in this
         prospectus.

(5)      Share certificates are expected to be issued on Friday, 20 February 2009.


      Share certificates will only become valid certificates of title if the Hong Kong Public Offering
has become unconditional in all respects and neither the Hong Kong Underwriting Agreement nor
the International Underwriting Agreement has been terminated in accordance with its terms,
which is expected to be at around 8:00 a.m., on Monday, 23 February 2009. Investors who trade
the Shares on the basis of publicly available allocation details prior to the receipt of Share
certificates or prior to the Share certificates becoming valid certificates of title do so entirely at
their own risk.

      You should read carefully the sections headed ‘‘Underwriting’’, ‘‘How to Apply for Hong Kong
Offer Shares’’, and ‘‘Structure of the Global Offering’’ in this prospectus, for details relating to the
structure of the Global Offering, how to apply for Hong Kong Offer Shares and the expected timetable
including, inter alia, applicable conditions, the effect of bad weather, and the despatch of refund checks
and Share certificates.




                                                                – ii –
                                                                        CONTENTS


         You should rely on the information contained in this prospectus and the Application Forms to
  make your investment decision. We have not authorized anyone to provide you with information that
  is different from what is contained in this prospectus and/or the Application Forms. Any information
  or representation not made in this prospectus and the Application Forms must not be relied on by
  you as having been authorized by our Company, the Sole Global Coordinator, the Underwriters, any
  of their respective directors or any other person or party involved in the Global Offering.


                                                                                                                                                             Page


Expected Timetable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                i

Contents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    iii

Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      1

Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     22

The JORC Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .             32

Glossary of Technical Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                     34

Forward-looking Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                      38

Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      39

Waivers from Strict Compliance with the Listing Rules and the Companies Ordinance . .                                                                         58

Information about this Prospectus and the Global Offering . . . . . . . . . . . . . . . . . . . . . . . . . . .                                               61

Directors and Parties Involved in the Global Offering . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                                         64

Corporate Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                 69

Industry Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .             72

The PRC Laws and Regulations Relating to the Industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                                               87

Corporate Structure and History . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                        101

Business
        Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     109
        Competitive advantages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .               112
        Controlling Shareholder — Mr Wu . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                          115
        Business strategies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .          116
        Business developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .              118
        Our management team . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                121



                                                                                – iii –
                                                                       CONTENTS


                                                                                                                                                             Page


        Our mineral resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .              124
        Mining areas in other provinces . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                    133
        Exploration and mining rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                    134
        Our key activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         135
        Exploration           ..................................................................                                                             136
        Mining . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   140
        Ore processing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       141
        Sale of products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         145
        Third-party contractors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .            157
        Supply of utility, raw materials, auxiliary materials, and machinery and equipment . . . . .                                                         160
        Competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      162
        Quality control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        164
        Occupational health and safety . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                   165
        Environmental protection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .               168
        Research and development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                   171
        Intellectual property rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .               171
        Custody of assets and access control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                       172
        Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    172
        Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      172
        Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   173
        Litigation and regulatory matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                    173
        Non-competition undertaking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                    178

Directors, Senior Management and Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                                     182

Substantial Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                 207

Share Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      208

Financial Information
        Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     211
        Factors affecting results of operations and financial condition . . . . . . . . . . . . . . . . . . . . . . .                                        212
        Description of selected income statement line items . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                                  217
        Basis of presentation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .            218
        Critical accounting policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .               219
        Results of operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .            222



                                                                               – iv –
                                                                       CONTENTS


                                                                                                                                                             Page

        Ten months ended 31 October 2007 and 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                                  224
        Years ended 31 December 2005, 2006 and 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                                    226
        Liquidity and capital resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                  227
        Capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .           233
        Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       234
        Contractual obligations and capital commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                                  234
        Contingent liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .           234
        Disclaimer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     234
        Off-balance sheet transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                   235
        Market risks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     235
        Profit estimate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      236
        Dividend and dividend policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                   236
        Distributable reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .           236
        Unaudited pro forma adjusted net tangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                                 237
        Property valuation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         238
        No material adverse change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                   238
        Disclosure required under the Listing Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                            238

Future Plans and Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                         239

Exchangeable Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .               242

Underwriting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       251

Structure of the Global Offering . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                       259

How to Apply for Hong Kong Offer Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                                  268

Terms and Conditions of the Hong Kong Public Offering . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                                              297

Appendix I                 — Accountants’ Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                        I-1

Appendix II                — Unaudited Pro Forma Financial Information . . . . . . . . . . . . . . . . . . . . .                                             II-1

Appendix III               — Profit Estimate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                III-1

Appendix IV                — Property Valuation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                     IV-1

Appendix V                 — Independent Technical Expert’s Report . . . . . . . . . . . . . . . . . . . . . . . . . .                                       V-1

Appendix VI                — Summary of the Constitution of the Company and
                               Cayman Companies Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                               VI-1

Appendix VII               — Statutory and General Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                                 VII-1

Appendix VIII — Documents Delivered to the Registrar of Companies
                  and Available for Inspection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                                         VIII-1



                                                                               –v–
                                             SUMMARY


       This summary aims to give you an overview of the information contained in this prospectus. As
 this is a summary, it does not contain all the information that may be important to you. You should
 read the entire document before you decide to invest in the Offer Shares. There are risks associated
 with an investment in the Offer Shares. Some of the particular risks of investing in the Offer Shares
 are set out in the section headed ‘‘Risk Factors’’ in this prospectus. You should read that section
 carefully before you decide to invest in the Offer Shares.



OVERVIEW

      We specialize in the mining of gold and the processing of ore into concentrates containing gold
and other minerals for subsequent sale. Gold is our core commodity because the value of gold contained
in the concentrates we produce and sell exceeds the combined value of all the other metals contained in
our concentrates, and contributed 89.0% and 68.3% of our total revenue for the year ended 31 December
2007 and the ten months ended 31 October 2008, respectively. Despite the recent financial turmoil, our
Directors believe that the outlook for the gold sector remains positive.

      We own a 97.14% shareholding in three operating Gold Mines in the Chifeng Municipality, Inner
Mongolia, namely the Shirengou Gold Mine, the Nantaizi Gold Mine and the Luotuochang Gold Mine.
Chifeng Municipality is an area rich in mineral resources with a long history of production of precious
and nonferrous metals. The ore extracted from our Gold Mines is poly-metallic and has a higher
weighted average gold grade than that of comparable PRC gold producers listed on the Stock Exchange,
which we believe will enable us to generate greater revenue per tonne of ore. For further details, please
refer to the table on page 112 of this prospectus.

     We are in a period of significant production growth. We have undertaken extensive exploration
and drilling activities at our Gold Mines. According to the Independent Technical Expert’s Report, as at
30 November 2008, our Gold Mines had gold resources of 3,869,000 ounces (approximately 120.3
tonnes) and gold reserves of 2,900,000 ounces (approximately 90.2 tonnes). As at 30 November 2008,
the estimated gold grades of the reserves were 8.92 g/t at the Shirengou Gold Mine, 10.10 g/t at the
Nantaizi Gold Mine and 3.44 g/t at the Luotuochang Gold Mine. Furthermore, the Independent
Technical Expert’s Report indicates that there is potential to identify additional mineral resources at our
Gold Mines.

      We do not engage to a material extent in exploration and mining activities. We outsource
substantially all our exploration and mining works. We select third-party contractors to undertake our
exploration and mining works through a selective tendering process. Prior to engaging third-party
contractors, we assess their skills, expertise and experience. All of the third-party contractors must
possess the requisite qualifications for undertaking the mining, exploration or construction works for
which they are commissioned. The third-party contractors work under the supervision of our
management and technical teams. While works are being carried out by third-party contractors, each of
our relevant departments is responsible for supervising such works ranging from reviewing engineering
quality, quantifying losses and depletion of minerals to supervising and managing the progress and
completion of the commissioned works. We require third-party contractors to carry out their works
according to the design and plan of the relevant commission and in accordance with the requirements of
our Production and Environmental Safety Department and Quality Control Department. Our Production
and Environmental Safety Department supervises and inspects safety management. Our Quality Control
Department supervises mineral quality to ensure that third-party contractors meet our quality standards.



                                                  –1–
                                            SUMMARY


We continue to maintain responsibility for technology support, land acquisition and overall coordination
and planning. These measures are adopted by us to ensure that we are in full compliance with the
relevant government rules and regulations and to detect any events of non-compliance. For further
information in relation to our third-party contractors, please refer to the section headed ‘‘Business —
Third-Party Contractors’’ in this prospectus.

      As at the Latest Practicable Date, we had 34 employees in our in-house exploration team. We have
a Geographic Exploration Experts Committee which is responsible for the overall planning, design and
distribution of the geographic exploration of our Gold Mines. It is also responsible for surveying,
demonstrating and technically assessing new mine projects of any company within our Group. Our Land
Exploration Department and Production and Environmental Safety Department are under the direct
supervision of the Geographic Exploration Experts Committee. Each of our Gold Mines also has its own
professional technical groups. Under the overall planning, design and supervision of our Geographic
Exploration Experts Committee, each of the professional technical groups of our Gold Mines is
responsible for the specific design, production organization, production direction, supervision and
inspection of their respective Gold Mines and for inspecting and ensuring our products meet our quality
standards. For further information in relation to our in-house exploration team, please refer to the
section headed ‘‘Business — Exploration — Our in-house exploration team’’ in this prospectus.

      Although we intend to apply substantially all of the net proceeds from the Global Offering for
capital expenditure in relation to our expansion of exploration activities, commercialization of newly
discovered mineral resources as a result of exploration, mine development and acquisitions, our current
operations and profit estimate do not depend on the discovery and commercialization of new resources
or acquisition of new mines. Our Directors believe that the recent financial turmoil will not have any
substantial impact on our results and capital expenditure plans. We have two ore processing facilities
located at the Nantaizi Gold Mine and the Luotuochang Gold Mine, which currently have ore processing
capacities of approximately 990 tpd and 800 tpd, respectively. The Nantaizi Gold Mine and the
Shirengou Gold Mine are adjacent to each other, and the two mines are referred to together in this
prospectus as the Shirengou-Nantaizi Mining Complex. The ore processing facility located at the
Nantaizi Gold Mine processes ore from both the Nantaizi Gold Mine and the Shirengou Gold Mine. At
present, the ore processing facility located at the Nantaizi Gold Mine is under expansion and, when
completed, is expected to have an ore processing capacity of approximately 1,480 tpd. The ore
processing facility located at the Luotuochang Gold Mine is also presently under expansion and, when
completed, is expected to have an ore processing capacity of approximately 1,100 tpd. The combined
ore processing capacity of both ore processing facilities is expected to reach approximately 2,580 tpd by
the fourth quarter of 2009.

     We had a 50 tpd ore processing facility located at the Shirengou Gold Mine, which was
constructed prior to our acquisition of Shirengou Mining. The production technology used at this ore
processing facility was outdated and was unable to effectively extract the various types of minerals
contained in our ore. We ceased the operation of the 50 tpd ore processing facility after we completed
the construction and began the operation of the 500 tpd ore processing facility located at the Nantaizi
Gold Mine in May 2008. The daily production capacity of this ore processing facility was subsequently
augmented by 490 tonnes on completion of the construction of phase II in September 2008. All ore
processing previously undertaken at the 50 tpd ore processing facility located at the Shirengou Gold
Mine is now undertaken at the larger, more efficient 990 tpd ore processing facility located at the
Nantaizi Gold Mine.




                                                 –2–
                                                         SUMMARY


      According to the Independent Technical Expert’s Report, as at 30 November 2008, the reserves at
the Shirengou-Nantaizi Mining Complex were estimated to be sufficient for production at our anticipated
2011 production level of 450 ktpa for approximately 14.2 years, and the reserves at the Luotuochang
Gold Mine were estimated to be sufficient for production at our anticipated 2011 production level of
330 ktpa for approximately 24.9 years. It is estimated that our annual production of gold, silver, copper,
lead and zinc contained in the concentrates we produce will reach 151,900 ounces (approximately 4.7
tonnes), 1,290,000 ounces (approximately 40.1 tonnes), 7,660 tonnes, 4,540 tonnes and 4,530 tonnes,
respectively, by the fourth quarter of 2011. The gold contained in the concentrates we produce and sell
contributed to 89.0% and 68.3% of our total revenue for the year ended 31 December 2007 and the ten
months ended 31 October 2008, respectively. We plan to focus on gold as our core commodity by
expanding production at our Gold Mines, acquiring new mines and expanding into gold smelting and
refining.

      For the year ended 31 December 2007, we generated revenue of RMB8.0 million, gross profit of
RMB3.9 million and loss attributable to equity holders of our Company of RMB2.2 million. For the
year ended 31 December 2007, the concentrates we sold contained gold, silver and copper which
accounted for 89.0%, 6.3% and 4.7% of our revenue, respectively. For the ten months ended 31 October
2008, we generated revenue of RMB173.6 million, gross profit of RMB140.3 million and profit
attributable to equity holders of our Company of RMB62.3 million. For the ten months ended 31
October 2008, gold, silver, copper, lead and zinc contained in the concentrates we sold accounted for
68.3%, 8.6%, 14.2%, 6.0% and 2.9% of our revenue, respectively.

      Our capital expenditure for the year ended 31 December 2008 and the planned capital expenditures
for the two years ending 31 December 2010 are as follows:
                                                                                        Capital Cost
     Name of the Mines                                                   Year 2008       Year 2009        Year 2010
                                                                                      (RMB in millions)
     Shirengou-Nantaizi Mining Complex . . . . . . . .                        168.4              55.2           63.7
     Luotuochang Gold Mine . . . . . . . . . . . . . . . . .                  131.6              31.1           25.0
     Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        300.0              86.3           88.7




                                                                –3–
                                                                 SUMMARY


      The following table, which appears as Table 6.2 in the Independent Technical Expert’s Report,
provides information on the gold resources at our Gold Mines as at 30 November 2008 under the JORC
Code. For definitions of the technical terms used in the tables, please refer to the section headed
‘‘Glossary of Technical Terms’’ in this prospectus.

                   Gold Mines Ore Resources Summary — as at 30 November 2008
    (The figures below are not pro rated for our 97.14% proportionate ownership in each Gold Mine.)

JORC Mineral               Tonnage                          Grades                                         Contained Metals
Resource Category            (kt)     Au (g/t)   Ag (g/t)   Cu (%)    Pb (%)    Zn (%)    Au (koz*)   Ag (koz)   Cu (t)       Pb (t)    Zn (t)
Shirengou
   Measured . . . . .           523       9.54       86.9      0.35      1.67      1.38         161      1,462     1,818        8,730     7,201
   Indicated . . . . .        1,573      10.03       95.6      0.32      1.96      1.49         507      4,835     5,085       30,840    23,435
   Subtotal . . . . .         2,096       9.91       93.4      0.33      1.89      1.46         668      6,296     6,903       39,570    30,636
   Inferred . . . . . .         525       9.71       83.2      0.42      1.94      1.40         164      1,404     2,217       10,198     7,367
   Total . . . . . . . .      2,621       9.87       91.4      0.35      1.90      1.45         832      7,700     9,120       49,768    38,003
Nantaizi
   Measured . . . . .         1,037      11.03       89.6      0.44      1.45      1.38         368      2,986     4,526       14,992    14,298
   Indicated . . . . .        3,241      11.28       90.0      0.50      1.67      1.50       1,175      9,382    16,367       54,082    48,617
   Subtotal . . . . .         4,278      11.22       89.9      0.49      1.61      1.47       1,543     12,368    20,893       69,074    62,915
   Inferred . . . . . .       1,026      11.29       90.1      0.50      1.71      1.51         372      2,972     5,166       17,564    15,510
   Total . . . . . . . .      5,303      11.23       90.0      0.49      1.63      1.48       1,916     15,339    26,059       86,638    78,425
Luotuochang
   Measured . . . . .           935       4.31       49.1      2.67       —         —           129      1,475    24,976           —         —
   Indicated . . . . .        7,007       4.02       48.4      2.60       —         —           905     10,907   181,906           —         —
   Subtotal . . . . .         7,942       4.05       48.5      2.60       —         —         1,035     12,383   206,883           —         —
   Inferred . . . . . .         679       4.02       49.3      2.69       —         —            88      1,077    18,273           —         —
   Total . . . . . . . .      8,622       4.05       48.6      2.61       —         —         1,122     13,459   225,156           —         —
Total
   Measured . . . . .         2,495       8.20       73.8      1.26       —         —           657      5,923    31,321       23,722    21,499
   Indicated . . . . .      11,822        6.81       66.1      1.72       —         —         2,588     25,124   203,358       84,922    72,052
   Subtotal . . . . .       14,316        7.05       67.5      1.64       —         —         3,245     31,047   234,679      108,644    93,551
   Inferred . . . . . .       2,230       8.70       76.1      1.15       —         —           624      5,452    25,656       27,762    22,877
   Total . . . . . . . .    16,546        7.27       68.6      1.57       —         —         3,869     36,499   260,335      136,406   116,428


* koz – kilo troy ounce = 31,103.48 grams.



Source: Independent Technical Expert’s Report




                                                                       –4–
                                                                            SUMMARY


     The following table, which appears as Table 6.4 in the Independent Technical Expert’s Report,
provides information on the gold reserves of our Gold Mines as at 30 November 2008 under the JORC
Code. According to the Independent Technical Expert’s Report, the aggregate proved ore reserves and
probable ore reserves, under the JORC Code, of our Gold Mines are 14,597,000 tonnes.

                   Gold Mines Ore Reserves Summary — as at 30 November 2008
    (The figures below are not pro rated for our 97.14% proportionate ownership in each Gold Mine.)

JORC Ore                   Tonnage                                      Grades                                                Contained Metals
Reserve Category              (kt)       Au (g/t)       Ag (g/t)        Cu (%)     Pb (%)     Zn (%)       Au (koz)       Ag (koz)   Cu (t)       Pb (t)       Zn (t)
Shirengou Gold-Polymetallic Deposit
   Proved . . . . . . .           523          8.59          78.2          0.31        1.50        1.24            144       1,315     1,636           7,857     6,481
   Probable. . . . . .         1,573           9.03          86.0          0.29        1.76        1.34            457       4,351     4,577          27,756    21,092
   Subtotal . . . . .          2,096           8.92          84.1          0.30        1.70        1.32            601       5,667     6,213          35,613    27,573
Nantaizi Gold-Polymetallic Deposit
   Proved . . . . . . .        1,037           9.93          80.6          0.39        1.30        1.24            331       2,687     4,073          13,493    12,868
   Probable. . . . . .         3,241          10.15          81.0          0.45        1.50        1.35          1,058       8,444    14,730          48,674    43,755
   Subtotal . . . . .          4,278          10.10          80.9          0.44        1.45        1.32          1,389      11,131    18,804          62,167    56,624
Luotuochang Gold-Silver-Copper Deposit
   Proved . . . . . . .          968           3.66          41.7          2.27          —          —              114       1,298    21,979             —            —
   Probable. . . . . .         7,255           3.42          41.2          2.21          —          —              797       9,599   160,078             —            —
   Subtotal . . . . .          8,222           3.44          41.2          2.21          —          —              910      10,897   182,057             —            —
Total
   Proved . . . . . . .        2,528           7.25          65.2          1.10          —          —              589       5,301    27,689          21,350    19,349
   Probable. . . . . .        12,069           5.96          57.7          1.49          —          —            2,311      22,394   179,384          76,430    64,847
   Total . . . . . . . .      14,597           6.18          59.0          1.42          —          —            2,900      27,695   207,073          97,780    84,196




Source: Independent Technical Expert’s Report

     The following table shows our production capacity during the Track Record Period and our
expected production capacity for the dates indicated.
                                                                                  Our production level and forecast (ore processing capability tpd)
                                                                                                          Actual                                           Forecast
                                                                           2007         January
                                                                           and          to April          June           October     December            4th Quarter
        Name of the Mines                                                 before          2008            2008            2008         2008                  2009
        Shirengou Gold Mine (1) . . . . . . . . . . . . . . .                     50           50              0                0                0                  0
        Nantaizi Gold Mine . . . . . . . . . . . . . . . . . .                     0            0            500              990              990              1,480
        Luotuochang Gold Mine . . . . . . . . . . . . . . .                        0            0              0              500              800              1,100
        Total . . . . . . . . . . . . . . . . . . . . . . . . . . . .             50           50            500            1,490             1,790             2,580




        Note:

        (1)       The 50 tpd ore processing facility located at the Shirengou Gold Mine was constructed prior to our
                  acquisition of Shirengou Mining. The production technologies used at the 50 tpd ore processing facility
                  were relatively outdated and were unable to effectively extract the various types of minerals contained
                  in the ore. The 50 tpd ore processing facility ceased production in May 2008 after the ore processing
                  facility located at the Nantaizi Gold Mine commenced production.




                                                                                    –5–
                                                        SUMMARY


     The following table shows the revenue and production volume for the year ended 31 December
2007, the six months ended 30 June 2008 and for each month ended 31 July 2008, 31 August 2008, 30
September 2008 and 31 October 2008:
                                       Jan–Dec          Jan–Jun                           August        September      October
                                         2007             2008          July 2008          2008            2008         2008
       Revenue (RMB in
         thousands)
       Shirengou Gold Mine.                  8,007        12,369           12,972           20,848          16,528        14,381
       Nantaizi Gold Mine . .                   —         21,794           19,265            5,484           9,886        14,678
       Luotuochang Gold
         Mine . . . . . . . . . .              —                  —               —              —          11,282        14,099
       Total: . . . . . . . . . . .          8,007        34,163           32,237           26,332          37,696        43,158
       Production volume
         (in t)
       Shirengou Gold Mine.                  5,820         6,530            5,980           12,170           9,951         9,985
       Nantaizi Gold Mine . .                   —         13,190            9,190            3,690           5,799        15,745
       Luotuochang Gold
         Mine . . . . . . . . . .              —                  —               —              —          11,680        14,360
       Total: . . . . . . . . . . .          5,820        19,720           15,170           15,860          27,430        40,090

      Under the Mineral Resources Law of the PRC, all mineral resources in the PRC are owned by the
State. Mining enterprises, including us, must obtain mining or exploration permits prior to undertaking
any mining or exploration activities, and such mining and exploration permits are limited to a specific
geographic area and time period.

      The following table shows the details of the mining and/or exploration permits we currently hold
in respect of our Gold Mines.

Shirengou Mining
                                                                                                         Portion of     Portion
                                                                                                          mineral        of ore
                                                                                                         resources      reserves
                                                     Production                                         covered by    covered by
Type                         Serial number            capacity        Mine area       Validity period   this permit   this permit
Mining permit . . . . . .        1500000820448 60,000 tonnes/         10.9035 km 2 September 2008–            100%          100%
                                                         year                       September 2011




                                                             –6–
                                                     SUMMARY


Nantaizi Mining
                                                                                                      Portion of      Portion
                                                                                                       mineral         of ore
                                                                                                      resources       reserves
                                                 Production                                          covered by     covered by
Type                          Serial number       capacity       Mine area        Validity period    this permit   this permit(1)
                                                                             2
Mining permit . . . . . .        1500000720684 10,000 tonnes/    1.5869 km         December 2007–           15%             16%
                                                         year                       December 2010
Mining permit . . . . . .        1500000810520 60,000 tonnes/    1.4168 km 2      27 October 2008–          59%             58%
                                                         year                      27 October 2011
Exploration permit . . .    T15120080702012284           N/A       3.19 km 2         21 July 2008–          26%             26%
                                                                                      21 July 2009



Luotuochang Mining
                                                                                                     Portion of       Portion
                                                                                                      mineral          of ore
                                                                                                     resources       reserves
                                                  Production                                         covered by     covered by
Type                          Serial number        capacity        Area            Validity period   this permit    this permit
                                                                              2
Mining permit . . . . . .        1500000810063 60,000 tonnes/       6.48 km         February 2008–         100%            100%
                                                          year                       February 2011




Note: The portion of ore reserves covered by the current exploration permit arises from completed exploration
      work and no further exploration work is needed. Although we intend to apply substantially all of the net
      proceeds from the Global Offering for capital expenditure in relation to our expansion of exploration
      activities, and commercialization of newly discovered mineral resources as a result of exploration, mine
      development and acquisitions, our current operations and profit estimate do not depend on the discovery and
      commercialization of new resources or acquisitions of new mines.

     All mineral resources and ore reserves of the Shirengou Gold Mine and Luotuochang Gold Mine
are within the scope of their respective mining rights.

      Approximately 74% of the mineral resources and 74% of the ore reserves for the Nantaizi Gold
Mine are within the scope of Nantaizi Mining’s mining rights. The remaining mineral resources and ore
reserves for the Nantaizi Gold Mine are within the scope of Nantaizi Mining’s exploration rights.

OUR KEY ACTIVITIES

     We are engaged in the business of owning mining assets and processing ore. We outsource
substantially all our exploration and mining works. We select third-party contractors to undertake our
exploration and mining works through a selective tendering process. Prior to engaging third-party
contractors, we assess their skills, expertise and experience. All of the third-party contractors we engage
must possess the requisite qualifications for undertaking the mining, exploration or construction works
for which they are commissioned. The third-party contractors work under the supervision of our
management and technical teams.




                                                          –7–
                                             SUMMARY


     We are engaged in the following key activities with respect to our mineral resources:

     .    overall management — despite outsourcing substantially all of our exploration and mining
          works to third-party contractors, our staff manage and supervise the overall development of
          each Gold Mine’s mineral resources and the mineral quality in order to ensure that third-party
          contractors meet our quality standards. Although our third-party contractors receive payments
          for performing specific tasks that they undertake, they do not have any economic interest in
          our mineral resources. Please refer to the section headed ‘‘Business — Third-Party
          Contractors’’ in this prospectus;

     .    exploration — our geological team constantly analyzes data to identify potential exploration
          targets and to assess the prospectivity, scale, nature and timing of exploration activities for
          each specific location or target. Once an exploration target is identified and acquired, we then
          manage and execute the continued exploration at the site. Please refer to the section headed
          ‘‘Business — Exploration’’ in this prospectus;

     .    mining — we engage third-party contractors on medium-term contracts to extract materials
          from the ore body and to transport them to our ore processing facilities. Please refer to the
          section headed ‘‘Business — Mining’’ in this prospectus;

     .    processing — we process the extracted ore at our ore processing facilities to produce
          saleable mineral concentrates. Please refer to the section headed ‘‘Business — Ore
          Processing’’ in this prospectus; and

     .    concentrates sales — we mainly sell our products to smelters or trading entities in the
          Chifeng Municipality and other surrounding areas in the PRC. Please refer to the section
          headed ‘‘Business — Sale of Products’’ in this prospectus.

COMPETITIVE ADVANTAGES

     We believe our success to date and potential for future growth can be attributed to a combination
of our competitive strengths, including the following:

     .    strong exposure to gold;

     .    unique high-grade poly-metallic mineral reserves;

     .    significant reserves position with strong organic growth potential;

     .    leading in efficiencies and cost position;

     .    effective management structure with a strong senior management team; and

     .    well positioned to capitalize on opportunities in Inner Mongolia and Xinjiang.

      For further information, please refer to the section headed ‘‘Business — Competitive Advantages’’
in this prospectus.




                                                  –8–
                                             SUMMARY


CONTROLLING SHAREHOLDER — MR WU

      Historically, the role of Mr Wu, our ultimate controlling shareholder, has been to assist in
identifying and acquiring our initial strategic assets (i.e. our Gold Mines). However, since acquisition of
our Gold Mines, Mr Wu has hired a team of professional management for our Group and hence has
neither been involved in the daily development of our Gold Mines nor in the operations of our Group.
Therefore, we have been operating independently from our controlling shareholder.

      Although future acquisitions are part of our growth strategy, it should be noted that we do not
need to make additional acquisitions to ensure the ongoing viability of our business. This is because we
are at the stage of developing and commencing commercial operation of our Gold Mines. According to
the Independent Technical Expert’s Report, once all our ore processing facilities operate at their full
capacity of 2,580 tpd by the end of 2009, our ore reserves will be sufficient to support production at our
anticipated full production level for 14.2 years for the Shirengou-Nantaizi Mining Complex and 24.9
years, in the case of the Luotuochang Gold Mine, before the reserves are fully depleted. In addition, our
current operations and profit estimate do not depend on the acquisition of new mines or on the discovery
and commercialization of new resources.

      We have a management team who is responsible for identifying acquisition opportunities and
making investment decisions. Accordingly, we are able to operate independently without the day-to-day
influence of Mr Wu. Any future acquisitions will be identified and assessed by our Acquisitions
Committee which comprises Mr Wang Zhentian, Mr Qiu Haicheng (our Chief Executive Officer), Mr
Ma Wenxue, Mr Lu Tianjun and Mr Cui Jie (our Chief Financial Officer), who are experienced in
mining and exploration management, processing and production, mining and ore extraction, and minerals
exploration and financial matters, respectively.

     Mr Wu’s role in the future is expected to be limited to exerting influence on our Company at the
shareholder level as he is, and will continue to be after Listing, the ultimate controlling shareholder of
our Company.

BUSINESS STRATEGIES

      Our goal is to become a leading integrated gold producer in the PRC. We plan to accomplish our
goal through the following strategies:

     .     growing production at our existing Gold Mines and outsourcing our mining and exploration
           works;

     .     horizontal expansion through future acquisitions of high-quality gold mines;

     .     vertical integration of our gold production process; and

     .     pursuing technological innovation,       effective   energy   savings,   industrial   safety   and
           environmental protection.

      For further information, please refer to the section headed ‘‘Business — Business Strategies’’ in
this prospectus.




                                                  –9–
                                              SUMMARY


BUSINESS DEVELOPMENTS

      We have completed trial production and commenced commercial production at phase I of our ore
processing facility located at the Nantaizi Gold Mine, which has a daily ore processing capacity of
approximately 500 tonnes. Pursuant to the letter of approval issued by Inner Mongolia Autonomous
Region Environmental Protection Bureau (內蒙古自治區環境保護局) on 9 May 2008, phase I of our ore
processing facility and tailings dam located at the Nantaizi Gold Mine were granted permission to
commence trial production for a period of three months commencing on 15 May 2008. Under the terms
of the letter of approval, Nantaizi Mining was required to obtain a valid environmental protection permit
during the trial production period in relation to phase I of our ore processing facility located at the
Nantaizi Gold Mine. Nantaizi Mining obtained such permit on 8 June 2008. The trial production period
for phase I of our ore processing facility located at the Nantaizi Gold Mine ended on 21 July 2008,
when we obtained all necessary permits and approvals required for operations and commenced
commercial production.

     Following the commencement of trial production at phase I of our ore processing facility located at
the Nantaizi Gold Mine, Nantaizi Mining obtained the following approvals:

     .     the environmental protection permit on 8 June 2008, which has a validity period of three
           years;

     .     the production safety permit for its underground mining activity on 21 July 2008, which has
           a validity period of three years; and

     .     the production safety permit for its tailings dam on 21 July 2008, which has a validity period
           of three years.

       We have also commenced commercial production at phase II of our ore processing facility located
at the Nantaizi Gold Mine, which has a daily ore processing capacity of approximately 490 tonnes.
Pursuant to the letter of approval issued by Inner Mongolia Autonomous Region Environmental
Protection Bureau (內蒙古自治區環境保護局) on 28 September 2008, phase II of our ore processing
facility located at the Nantaizi Gold Mine was granted permission to commence trial production for a
period of three months commencing from 29 September 2008. The trial production period for phase II of
our ore processing facility at the Nantaizi Gold Mine ended on 20 October 2008, when we obtained all
necessary permits and approvals required for operations, including an approval letter in respect of
environmental protection inspection and acceptance in respect of phase II, and commenced commercial
production.

      Moreover, we have commenced commercial production at phase I of our ore processing facility
located at the Luotuochang Gold Mine, which has a daily ore processing capacity of approximately 500
tonnes, having received all necessary permits and approvals required for operations in September 2008.

       We have recently completed trial production at phase II of our ore processing facility located at the
Luotuochang Gold Mine, which has an additional daily ore processing capacity of approximately 300
tonnes. Pursuant to the letter of approval issued by Inner Mongolia Autonomous Region Environmental
Protection Bureau (內蒙古自治區環境保護局) on 5 December 2008, the phase II of our ore processing
facility located at the Luotuochang Gold Mine was granted permission to commence trial production for
a period of three months commencing from 27 November 2008. We commenced sales of the products
produced at phase II of our ore processing facility located at the Luotuochang Gold Mine and have
begun to generate revenue therefrom since December 2008. The trial production period for phase II of




                                                  – 10 –
                                            SUMMARY


our ore processing facility located at the Luotuochang Gold Mine ended on 26 December 2008, when we
received an approval letter in respect of environmental protection inspection and acceptance in respect
of phase II, and commenced commercial production.

      As part of our business strategy to identify key growth prospects, we entered into two option
agreements on 26 March 2008 and 25 April 2008, respectively, with two independent third parties in
respect of two gold mines in Qitai County, Xinjiang, the PRC. These options allow us, at our sole
discretion, to purchase the mining rights and related assets of one or both of the mines within ten years
from the respective dates of the option agreements.

      For further information, please refer to the section headed ‘‘Business — Business Developments’’
in this prospectus.

OUR SHAREHOLDING STRUCTURE

      The following chart sets forth our corporate structure immediately upon completion of the Global
Offering and Capitalization Issue, assuming the Over-allotment Option is not exercised and without
taking into account any Shares that may be granted under the Share Option Scheme.




                                                 – 11 –
                                                 SUMMARY



Notes:

1.   The Global Offering consists of (subject to adjustment and the Over-allotment Option) the Hong Kong Public
     Offering of 16,500,000 new Shares and the International Offering of 148,500,000 Shares (comprising
     87,700,000 new Shares to be offered by our Company and 60,800,000 Sale Shares to be offered by the Selling
     Shareholder).

2.   The entire issued share capital of Lead Honest is held by a company incorporated in the Bahamas, Tercel
     Holdings Limited, whose entire issued share capital is in turn held by the Trustee as the trustee of the Wu
     Family Trust. The Wu Family Trust is a discretionary trust established by Mr Wu as settlor and the Trustee as
     trustee on 22 May 2008. The beneficiaries of the Wu Family Trust include family members of Mr Wu. Mr Wu
     is deemed to be interested in the 495,000,000 Shares held by Lead Honest immediately upon completion of
     the Global Offering and Capitalization Issue pursuant to Part XV of the SFO.

3.   Since the Bondholders are not entitled to any Shares until the exchange of the Exchangeable Bonds which
     will not occur until after expiration of the lock-up period of six months after the Listing Date, and there have
     not been any other Share transfers, the shareholding immediately following the Global Offering should be
     Lead Honest holding 75% of Shares and the public holding 25% of Shares (assuming a 25% offering).

4.   The Bondholders are not entitled to any Shares at the Listing Date, as the Exchangeable Bonds will only be
     exchanged after the expiration of the lock-up period of six months after the Listing Date. At least 50% of the
     Exchangeable Bonds will be settled at Listing, the remaining amount of principal outstanding in respect of the
     Exchangeable Bonds (plus interest) will be eligible for exchange into Shares held by Lead Honest. Assuming
     that the Bondholders exchange the Exchangeable Bonds (excluding applicable interest) at the first instance
     after the six-month lock-up period, they will be entitled to approximately 6.19% and 1.60% of the total Shares
     outstanding at the lower-end of the Offer Price range of HK$4.35 per Offer Share and at the higher-end of the
     Offer Price range of HK$6.25 per Offer Share, respectively. For more information on the Exchangeable
     Bonds, please refer to the section headed ‘‘Exchangeable Bonds’’ in this prospectus.




                                                      – 12 –
                                                       SUMMARY


SUMMARY OF HISTORICAL FINANCIAL INFORMATION

     The following table sets forth, for the periods indicated, the selected financial data from our
consolidated financial information. For more information, please refer to ‘‘Appendix I — Accountants’
Report’’ to this prospectus.

Consolidated Income Statements
                                                                                             Ten months
                                                Year ended 31 December                    ended 31 October
                                         2005              2006           2007           2007           2008
                                                       (RMB in thousands, except number of shares)
Revenue . . . . . . . . . . . . . .             —                 —          8,007              —       173,586
Cost of sales . . . . . . . . . . .             —                 —         (4,068)             —       (33,327)
Gross profit . . . . . . . . .   .   .           —               —           3,939             —        140,259
Other income . . . . . . . .     .   .           —                4            953             10         9,267
Administrative expenses .        .   .          (15)           (122)        (5,953)        (3,492)      (40,624)
Other expenses . . . . . . .     .   .           —               —            (638)          (350)           —
(Loss) profit before taxation                   (15)           (118)        (1,699)        (3,832)      108,902
Taxation. . . . . . . . . . . . . .              —               —            (606)            —        (42,765)
(Loss) profit for the year/
  period. . . . . . . . . . . . . .             (15)           (118)        (2,305)        (3,832)       66,137
Attributable to:
  Equity holders of the
     Company . . . . . . . . .                  (15)           (118)        (2,245)        (3,668)       62,332
  Minority interests . . . . .                   —               —             (60)          (164)        3,805
                                                (15)           (118)        (2,305)        (3,832)       66,137
Dividends. . . . . . . . . . . . .              —                 —              —              —              —
Basic (loss) earnings per
  share . . . . . . . . . . . . . .             (15)           (118)        (2,245)        (3,668)             0
Number of shares for the
 calculation of basic (loss)
 earnings per share . . . . .                     1               1              1              1    152,909,336




                                                         – 13 –
                                                                      SUMMARY


Consolidated Balance Sheets
                                                                                                                            At
                                                                                        At 31 December                  31 October
                                                                         2005                2006          2007           2008
                                                                                             (RMB in thousands)
NON-CURRENT ASSETS
Property, plant and equipment . . . . . . . . .                                  —             1,667        21,963         267,095
Mining rights . . . . . . . . . . . . . . . . . . . .                            —            44,500       195,343         192,644
Prepaid lease payments . . . . . . . . . . . . .                                 —                —            147           6,104
                                                                                 —            46,167       217,453         465,843
CURRENT ASSETS
Prepaid lease payments . . . . . . .          .   .   .   .   .   .              —                  —            3             125
Inventories . . . . . . . . . . . . . . . .   .   .   .   .   .   .              —                  —           —            6,313
Trade and other receivables . . . .           .   .   .   .   .   .              —                  —       21,664          14,547
Amounts due from related parties              .   .   .   .   .   .              —                  —        9,479              —
Bank balances and cash . . . . . . .          .   .   .   .   .   .              20                 15         760          67,908
                                                                                 20                 15      31,906          88,893
CURRENT LIABILITIES
Trade and other payables . . . . . . . . . . . .                                 —                30         2,406          64,299
Amounts due to related parties . . . . . . . .                                   35           46,285       247,712              —
Amount due to immediate holding company                                          —                —             —            7,798
Financial guarantee liability . . . . . . . . . .                                —                —             —            3,077
Tax payable . . . . . . . . . . . . . . . . . . . . .                            —                —            754           8,266
                                                                                 35           46,315       250,872          83,440
NET CURRENT (LIABILITIES)
 ASSETS . . . . . . . . . . . . . . . . . . . . . .                              (15)        (46,300)     (218,966)          5,453
                                                                                 (15)           (133)        (1,513)       471,296
CAPITAL AND RESERVES
Share capital . . . . . . . . . . . . . . . . . . . . .                           —               —              —         387,522
Reserves . . . . . . . . . . . . . . . . . . . . . . .                           (15)           (133)        (2,378)        59,954
Equity attributable to equity holders of the
  Company . . . . . . . . . . . . . . . . . . . . .                              (15)           (133)        (2,378)       447,476
Minority interests . . . . . . . . . . . . . . . . .                              —               —             190         13,683
                                                                                 (15)           (133)        (2,188)       461,159
NON-CURRENT LIABILITIES
Provision for restoration cost . . . . . . . . .                                 —                  —             675          675
Deferred tax liabilities . . . . . . . . . . . . . .                             —                  —              —         9,462
                                                                                 —                  —             675       10,137
                                                                                 (15)           (133)        (1,513)       471,296




                                                                        – 14 –
                                                     SUMMARY


PROFIT ESTIMATE FOR THE YEAR ENDED 31 DECEMBER 2008
     The following profit estimate is based on the assumptions set out in ‘‘Appendix III — Profit
Estimate’’ to this prospectus, including:
      (i)    there will be no material changes in the existing political, legal, fiscal or economic conditions
             in Cayman Islands, the PRC or any other countries or territories in which our Group
             operates;

      (ii)   there will be no material changes in legislation, regulations or rules in Cayman Islands, the
             PRC or any other countries or territories in which our Group operates or with which our
             Group has arrangements or agreements, which materially adversely affect our Group’s
             business;

      (iii) there will be no material changes in the bases or rates of taxation, both direct or indirect, in
            the PRC or any other countries or territories where our Group operates, except as otherwise
            disclosed in this prospectus;

      (iv) there will be no material changes in inflation rates, interest rates or foreign currency
           exchange rates from those currently prevailing; and

      (v)    our Group’s operations and business will not be materially affected or interrupted by any
             force majeure events or unforeseeable factors or any unforeseeable reasons that are beyond
             the control of our Directors, including but not limited to the occurrence of natural disasters,
             epidemics or serious accidents.

      Our Directors understand that the financial performance of our Company is highly dependent upon
the market prices of metals contained in the concentrates we produce (in particular the market price of
gold). In preparing the profit estimate, our Directors estimated the market prices of metals after
evaluating a number of sources, including recent historical prices, spot prices, the forward curve and
analyst’s forecasts. The lowest market prices for metals, after evaluating the sources, have been used and
represent our Directors’ best estimate for the purpose of preparing the profit estimate.
      Our Directors’ forecast market price of gold, which constitutes the majority of our revenue and
significantly impacts our financial performance, used for the profit estimate is US$819/oz.
     The consolidated profit attributable to equity holders of our Company for 2008 will be different
from the following profit estimate if the estimated market prices of metals differ from the actual prices.
For a sensitivity analysis of the consolidated profit attributable to equity holders of our Company for
2008 with respect to market prices of metals, please refer to ‘‘Appendix III — Profit Estimate’’ to this
prospectus.

Estimated consolidated net profit attributable
  to equity holders of our Company(1) . . . . . . . . . . . . . . . . . . HK$114.0 million (RMB100.5 million)

Pro forma estimated earnings per Share
  — weighted average (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . HK$0.351 (RMB0.310)
  — fully diluted(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . HK$0.172 (RMB0.152)


Notes:

(1)   The bases and assumptions on which the estimated consolidated profit attributable to equity holders of our
      Company for the year ended 31 December 2008 has been prepared are set out in Appendix III to this
      prospectus. Our Directors are not aware of any extraordinary items which have arisen in the year ended 31
      December 2008.




                                                          – 15 –
                                                    SUMMARY


(2)   The calculation of the pro forma estimated earnings per Share on a weighted average basis is based on the
      estimated consolidated profit attributable to equity holders of our Company for the year ended 31 December
      2008 and 324,442,000 Shares which represent the weighted average number of 220,242,000 Shares in issue
      adjusted as if the Global Offering had been completed on 1 January 2008 in accordance with Listing Rule
      4.29(8). It does not take into account any Shares which may be issued upon exercise of the Over-allotment
      Option or any options which may be granted under the Share Option Scheme.

(3)   The calculation of the pro forma estimated earnings per Share on a fully diluted basis is based on the
      estimated consolidated profit attributable to equity holders of our Company for the year ended 31 December
      2008 of HK$114.0 million, assuming the Global Offering was completed on 1 January 2008 and a total of
      660,000,000 Shares were in issue and outstanding during the entire year. It does not take into account any
      Shares which may be issued upon exercise of the Over-allotment Option or any options which may be granted
      under the Share Option Scheme.


GLOBAL OFFERING STATISTICS (1)
                                                             Based on an Offer Price      Based on an Offer Price
                                                                   of HK$4.35                   of HK$6.25
                                                                 per Offer Share              per Offer Share
Market capitalization of the Shares (2) . . . . . . . .           HK$2,871.0 million           HK$4,125.0 million
Prospective price/earnings multiple
  — weighted average(3) . . . . . . . . . . . . . . . . .                12.39 times                  17.81 times
  — pro forma fully diluted(4) . . . . . . . . . . . . .                 25.29 times                  36.34 times
Unaudited pro forma adjusted net tangible
  asset value per Share(5) . . . . . . . . . . . . . . . .                  HK$1.01                      HK$1.30



Notes:

(1)   All statistics are based on the assumption that the Over-allotment Option is not exercised.

(2)   The calculation of the market capitalization is based on 660,000,000 Shares expected to be in issue
      immediately following the completion of the Global Offering and Capitalization Issue. It does not take into
      account any Shares which may be issued upon exercise of the Over-allotment Option or any options which
      may be granted under the Share Option Scheme.

(3)   The calculation of the prospective price/earnings multiple on a weighted average basis is based on the pro
      forma estimated earnings per Share on a weighted average basis of HK$0.351 at the respective Offer Price of
      HK$4.35 and HK$6.25.

(4)   The calculation of the prospective price/earnings multiple on a fully diluted basis is based on the pro forma
      estimated earnings per Share on a fully diluted basis of HK$0.172 at the respective Offer Price of HK$4.35
      and HK$6.25.

(5)   The unaudited pro forma adjusted net tangible asset value per Share has been arrived at after the adjustments
      referred to in ‘‘Appendix II — Unaudited Pro Forma Adjusted Net Tangible Assets’’ to this prospectus and on
      the basis of 660,000,000 Shares in issue at the respective Offer Price of HK$4.35 and HK$6.25 immediately
      following completion of the Global Offering and Capitalization Issue, without taking into account any Shares
      which may be issued upon exercise of the Over-allotment Option or any options which may be granted under
      the Share Option Scheme.




                                                         – 16 –
                                            SUMMARY


      If the Over-allotment Option is exercised in full, assuming an Offer Price of HK$5.30 (being the
mid-point of the estimated Offer Price range of HK$4.35 and HK$6.25), the unaudited proforma
adjusted net tangible asset value per Share will be approximately HK$1.16 per Share.

DIVIDEND AND DIVIDEND POLICY

      After completion of the Global Offering, our shareholders will be entitled to receive dividends we
declare. The payment and the amount of any dividends will be at the discretion of our Directors and will
depend upon our future operations and earnings, acquisitions, capital requirements and surplus, general
financial conditions, contractual restrictions and other factors which our Directors deem relevant. In
addition, our controlling shareholders will be able to influence our dividend policy. We currently intend
to retain most, if not all, of our available funds and any future earnings to operate and expand our
business, primarily through acquisitions. However, we will consider paying dividends if no attractive
mine acquisition and investment opportunities arise. Cash dividends on our Shares, if any, will be paid
in Hong Kong dollars. Other distributions, if any, will be paid to our shareholders in compliance with
relevant laws and regulations.

      Any declaration and payment as well as the amount of dividends will be subject to our
constitutional documents and the Cayman Companies Law. Please refer to ‘‘Appendix VI — Summary
of the Constitution of the Company and Cayman Companies Law’’ to this prospectus.

     We have not entered into any agreement under which future dividends are waived or agreed to be
waived.

FUTURE PLANS

      Our goal is to be the leading integrated gold producer in the PRC. We intend to be an industry
leader in terms of growth, expanding our gold mining and processing operations through further
development of our existing Gold Mines and increasing our gold reserves by continued exploration in
the Inner Mongolia region. In addition, we intend to acquire and integrate additional gold mines in Inner
Mongolia, Xinjiang and other regions.

     Our Directors have formulated the following business development strategies:

     .     expansion of the ore processing facility located at the Nantaizi Gold Mine;

     .     expansion of the ore processing facility located at the Luotuochang Gold Mine;

     .     expansion of mining and exploration activities in Inner Mongolia;

     .     expansion of mining and exploration activities in Xinjiang and other regions; and

     .     development of gold smelting and refining operations.

     For further information, please refer to the section headed ‘‘Future Plans and Use of Proceeds —
Future Plans’’ in this prospectus.




                                                 – 17 –
                                            SUMMARY


USE OF PROCEEDS

      Based on an Offer Price of HK$5.30 (being the mid-point of the estimated Offer Price range of
HK$4.35 to HK$6.25), the net proceeds of the Global Offering (after deduction of underwriting fees and
estimated expenses payable by us in connection with the Global Offering) are estimated to be
approximately HK$782.0 million. Of these net proceeds, we will receive approximately HK$469.2
million and the Selling Shareholder will receive approximately HK$312.8 million.

     Our Group currently intends to apply the net proceeds as follows:

     .    approximately 38.3% (approximately HK$179.7 million) will be used to fund future
          acquisitions of gold resources in Inner Mongolia, Xinjiang and other regions. Of this total
          amount, approximately RMB18.4 million (equivalent to approximately HK$20.9 million) will
          be used for future acquisitions of gold mines located in Inner Mongolia (including in the
          Chifeng Municipality) and RMB140.0 million (equivalent to approximately HK$158.8
          million) will be used for future acquisitions of gold mines located in Xinjiang and other
          regions;

     .    approximately 23.0% (approximately HK$107.9 million) will be used to expand our
          exploration activities and to commercialize any mineral resources discovered as a result of
          our exploration activities. Of the approximately HK$107.9 million, only 67% (approximately
          HK$72.3 million) will be used for exploration activities, the remaining portion will be used
          in facilitating actual production;

     .    approximately 36.3% (approximately HK$170.3 million) will be used to fund capital
          expenditures at our existing Gold Mines including mine development and the completion of
          the new processing plants at the Nantaizi Gold Mine and Luotuochang Gold Mine; and

     .    the remainder (approximately HK$11.3 million) and interest accrued thereon will be used for
          general corporate purposes.

     In the event that the Offer Price is set at HK$4.35, HK$6.25 or at any price in between, our
Directors will apply the net proceeds in the manner and proportion as shown above.

      In the event that the Over-allotment Option is exercised in full, we estimate that we will receive
net proceeds of approximately HK$477.6 million at the lower-end of the Offer Price range of HK$4.35
per Offer Share and HK$715.2 million at the higher-end of the Offer Price range of HK$6.25 per Offer
Share, after deducting the estimated underwriting fees and expenses payable by us. The additional net
proceeds received from the exercise of the Over-allotment Option will be applied pro rata to the
abovementioned purposes.

     If we have raised sufficient funds or generated enough cash from operations, we intend to fund the
construction of a gold smelting and refining facility intended to be built at the Nantaizi Gold Mine.

      We will not receive any of the proceeds from the sale of Sale Shares in the Global Offering by the
Selling Shareholder.




                                                – 18 –
                                                SUMMARY


RISK FACTORS

     We believe that there are certain risks involved in our operations. These risks can be broadly
categorized into: (i) risks relating to our industry; (ii) risks relating to our business; (iii) risks relating to
conducting operations in the PRC; and (iv) risks relating to the Global Offering. Set out below is a
summary of the risks referred to above. For further information, please refer to the section headed ‘‘Risk
Factors’’ in this prospectus.

Risks Relating to Our Industry

.     Exploration of mineral properties is speculative in nature, requires capital expenditure and may be
      unsuccessful.

.     Changes to the PRC regulatory regime for the gold mining industry may have an adverse impact
      on our results of operations.

.     Changes in PRC tax laws and regulations applicable to the mining industry may adversely affect
      our results of operations.

Risks Relating to Our Business

.     We are a developing mining business. Our limited operating history may not serve as an adequate
      basis to judge our future operating results and prospects.

.     The accuracy of the gold resources and reserves estimates of our Gold Mines is based on a number
      of assumptions, and we may produce less gold than our current estimates.

.     The process of estimating quantities of reserves and the method we use to amortize our mining
      rights have a material effect on our results of operations.

.     We rely on third-party contractors to provide exploration and mining services in respect of our
      Gold Mines.

.     We rely on major customers.

.     Fluctuations in the U.S. dollar market price of gold, the U.S. dollar market price of the other
      metals contained in the concentrates we produce or the RMB/U.S. dollar exchange rate could
      materially and adversely affect our profitability and cash flows.

.     Our business is exposed to uncertainties in relation to our expansion plans, further exploration
      opportunities and future acquisitions.

.     There is no assurance that we can obtain or renew permits necessary for exploration, mining or
      production at our Gold Mines or in respect of any mines we acquire in the future.

.     Our operations are exposed to risks in relation to production safety and the occurrence of
      accidents, such as the mishandling of dangerous articles, and natural disasters.

.     Our operations are exposed to risks in relation to environmental protection and rehabilitation.

.     We may not be adequately insured against losses and liabilities arising from our operations.

.     We may not be able to maintain the provision of adequate and uninterrupted supplies of electricity,
      water, necessary raw materials, auxiliary materials, equipment and spare parts at favorable prices
      or at all.



                                                     – 19 –
                                            SUMMARY


.   Severe weather conditions could materially and adversely affect our business and results of
    operations.

.   Our mining operations have a finite life and eventual closure of these operations will entail costs
    and risks regarding ongoing monitoring, rehabilitation and compliance with environmental
    standards.

.   We may not be able to retain or secure key qualified personnel, key senior management or other
    personnel for our operations.

.   If we fail to manage our liquidity situation carefully, our ability to expand and, in turn, our results
    of operations may be materially and adversely affected.

.   We rely principally on dividends and other distributions on equity paid by our PRC subsidiaries to
    fund cash and financing requirements, and limitations on the ability of our PRC subsidiaries to pay
    dividends to us could have a material adverse effect on our ability to conduct our business.

.   Our risk management and internal control systems improvements may not be adequate or effective.

Risks Relating to Conducting Operations in the PRC

.   Our business, financial condition, results of operations and prospects could be negatively affected
    by PRC political, economic and legal developments and changes to government policies.

.   Our business could be negatively affected by changes and uncertainties in the PRC legal system.

.   Government control of currency conversion and changes in the exchange rate between the RMB
    and other currencies could negatively affect our financial condition, operations and our ability to
    pay dividends.

.   The dividends we receive from our PRC subsidiaries and our global income may be subject to PRC
    tax under the newly enacted PRC Enterprise Income Tax Law, which would have a material
    adverse effect on our business.

.   Dividends payable by us to our foreign investors and gain on the sale of our Shares may become
    subject to taxes under PRC tax laws.

.   PRC regulations relating to loans to and direct investment by offshore holding companies in PRC
    entities may delay or prevent us from using the proceeds of this offering to contribute additional
    capital or make loans to our PRC subsidiaries.

.   PRC regulations relating to the establishment of offshore special purpose companies by PRC
    residents may subject our PRC resident shareholders or our PRC subsidiaries to liabilities or
    penalties, limit our ability to inject capital into our PRC subsidiaries or limit the ability of our
    PRC subsidiaries to distribute profits to us.

.   Restrictions on foreign investment in the PRC mining industry could materially and adversely
    affect our business and results of operations.

.   Failure to comply with PRC regulations in respect of the registration of our PRC citizen
    employees’ share options may subject such employees or us to fines and legal or administrative
    sanctions.




                                                 – 20 –
                                            SUMMARY


.    Outbreak of the Severe Acute Respiratory Syndrome (‘‘SARS’’), the H5N1 strain of bird flu
     (‘‘Avian Flu’’) or other epidemics could severely disrupt our business and operations.

Risks Relating to the Global Offering

.    There has been no prior public market for our Shares.

.    Investors should not place undue reliance on industry and market information and statistics derived
     from official government publications contained in this prospectus.

.    Future issuances or sales, or perceived issuances or sales, of substantial amounts of our Shares in
     the public market could materially and adversely affect the prevailing market price of our Shares
     and our ability to raise capital in the future.

.    The market price of our Shares could be lower than the Offer Price.

.    You should read the entire prospectus carefully and we strongly caution you not to place any
     reliance on any information contained in press articles or disseminated through other media
     relating to us and/or the Global Offering, certain of which may not be consistent with the
     information contained in this prospectus.




                                                – 21 –
                                          DEFINITIONS


      In this prospectus, unless the context otherwise requires, the following terms shall have the
 meanings set out below. Certain other terms are explained in the section headed ‘‘Glossary of
 Technical Terms’’ in this prospectus.


‘‘AME’’                               AME Mineral Economics Pty Ltd, an independent minerals
                                      consultancy that publishes regular market surveys

‘‘Ankson Limited’’                    Ankson Limited (安臣有限公司), a company incorporated in the
                                      BVI on 10 April 2002 with limited liability, in which Mr Wu
                                      holds the entire issued share capital. Ankson Limited is a
                                      connected person of our Company

‘‘Application Form(s)’’               WHITE Application Form(s), YELLOW Application Form(s)
                                      and GREEN Application Form(s), or where the context so
                                      requires, any of them, relating to the Global Offering

‘‘Articles of Association’’           the articles of association of our Company approved at the
                                      extraordinary general meeting of our Company on 30 January
                                      2009, as amended from time to time

‘‘associates’’                        has the meaning ascribed to it under the Listing Rules

‘‘Bloomberg’’                         Bloomberg L.P., an independent financial information service
                                      based in New York, the United States

‘‘Board’’ or ‘‘Board of Directors’’   the board of directors of our Company

‘‘Bondholders’’                       holders of the Exchangeable Bonds, namely Credit Suisse,
                                      Singapore Branch and Dynamic Spot Holdings Limited (a
                                      wholly-owned subsidiary of LAPP Strategic Master Fund I)

‘‘Business Day’’                      a day on which banks in Hong Kong are generally open for
                                      business to the public and which is not a Saturday, Sunday or
                                      public holiday in Hong Kong

‘‘BVI’’                               the British Virgin Islands

‘‘Capitalization Issue’’              the allotment and issue of Shares to Lead Honest to be made
                                      upon capitalization of certain sums standing to the credit of the
                                      share premium account of our Company referred to in the
                                      paragraph headed ‘‘Written resolutions of our sole shareholder
                                      passed on 30 January 2009’’ in Appendix VII to this prospectus

‘‘Cayman Companies Law’’              the Companies Law, Cap. 22 (Law 3 of 1961, as consolidated and
                                      revised) of the Cayman Islands

‘‘CBGA’’                              Central Bank Gold Agreement between 15 central banks




                                                – 22 –
                                      DEFINITIONS


‘‘CCASS’’                         the Central Clearing and Settlement System established and
                                  operated by HKSCC

‘‘CCASS Clearing Participant’’    a person admitted to participate in CCASS as a direct clearing
                                  participant or general clearing participant

‘‘CCASS Custodian Participant’’   a person admitted to participate in CCASS as a custodian
                                  participant

‘‘CCASS Investor Participant’’    a person admitted to participate in CCASS as an investor
                                  participant who may be an individual or joint individuals or a
                                  corporation

‘‘CCASS Participant’’             a CCASS Clearing Participant, CCASS Custodian Participant or a
                                  CCASS Investor Participant

‘‘CEIC’’                          CEIC Data Company Limited, an independent financial
                                  information service firm based in New York, the United States,
                                  specializing in Asian and emerging markets

‘‘Chifeng Fubon Copper’’          Chifeng Fubon Copper Company Limited (赤峰富邦銅業有限責
                                  任公司), a limited liability company established in the PRC on 18
                                  May 2007 under the Company Law. Chifeng Fubon Copper is
                                  controlled by Mr Wu

‘‘Chifeng Fuqiao’’                Chifeng Fuqiao Mining Co., Ltd (赤峰富僑礦業有限公司), a
                                  limited liability company established in the PRC on 21 August
                                  2007 under the Company Law. Chifeng Fuqiao is a wholly-owned
                                  subsidiary of Fubon Industrial

‘‘COMEX’’                         COMEX Division of the New York Mercantile Exchange

‘‘Companies Ordinance’’           Companies Ordinance, Chapter 32 of the Laws of Hong Kong, as
                                  amended and supplemented from time to time

‘‘Company’’ or ‘‘our Company’’    Real Gold Mining Limited (瑞金礦業有限公司), a company
                                  incorporated in the Cayman Islands on 13 March 2008 with
                                  limited liability

‘‘Company Law’’                   the Company Law of the PRC (中華人民共和國公司法), which
                                  was enacted by the Standing Committee of the NPC on 29
                                  December 1993 and became effective on 1 July 1994, as the same
                                  may be amended, supplemented or otherwise modified from time
                                  to time

‘‘connected persons’’             has the meaning ascribed to it under the Listing Rules




                                            – 23 –
                                     DEFINITIONS


‘‘controlling shareholder(s)’’   Lead Honest, the Wu Family Trust, the Trustee, Tercel Holdings
                                 Limited and Mr Wu (as the settlor of the Wu Family Trust)

‘‘CSRC’’                         China Securities Regulatory Commission (中國證劵監督管理委
                                 員會), a regulatory body responsible for the supervision and
                                 regulation of the Chinese national securities markets

‘‘Director(s)’’                  director(s) of our Company

‘‘Exchangeable Bonds’’           the exchangeable bonds in the aggregate principal sum of
                                 US$50.0 million issued by Lead Honest on 30 July 2008, the
                                 particulars of which are set out in the section headed
                                 ‘‘Exchangeable Bonds’’ in this prospectus

‘‘Fubon Industrial’’             Fubon Industrial (Huizhou) Co., Ltd. (富邦工業(惠州)有限公司),
                                 a Sino-foreign joint venture established in the PRC on 23 June
                                 2006 in which Lita holds a 97.14% equity interest, together with
                                 Huizhou Liyin which holds the remaining 2.86%. Fubon
                                 Industrial is a non wholly-owned subsidiary of Lita

‘‘GFMS’’                         GFMS Limited, an independent precious metal consultancy based
                                 in London, the United Kingdom, specialized in research on global
                                 gold, silver, platinum, and palladium markets

‘‘Global Offering’’              the Hong Kong Public Offering and the International Offering

‘‘Gold Mines’’                   collectively the Nantaizi Gold Mine, the Shirengou Gold Mine
                                 and the Luotuochang Gold Mine

‘‘Green Application Form(s)’’    the application form(s) to be completed by White Form eIPO
                                 Service Provider designated by our Company

‘‘Group’’ or ‘‘our Group’’       our Company and our subsidiaries or, where the context so
                                 requires, in respect of any period before the incorporation of our
                                 Company or its Reorganization, our Company’s current
                                 subsidiaries or the business operated by such subsidiaries or their
                                 predecessors

‘‘HK$’’                          the lawful currency of Hong Kong

‘‘HKSCC’’                        Hong Kong Securities Clearing Company Limited, a wholly-
                                 owned subsidiary of Hong Kong Exchanges and Clearing Limited

‘‘HKSCC Nominees’’               HKSCC Nominees Limited, a wholly-owned subsidiary of
                                 HKSCC

‘‘Hong Kong’’                    the Hong Kong Special Administrative Region of the PRC




                                           – 24 –
                                       DEFINITIONS


‘‘Hong Kong Offer Shares’’         the 16,500,000 new Shares being initially offered by us for
                                   subscription at the Offer Price pursuant to the Hong Kong Public
                                   Offering (subject to reallocation as described in the section
                                   headed ‘‘Structure of the Global Offering’’ in this prospectus)

‘‘Hong Kong Public Offering’’      the offer for subscription of the Hong Kong Offer Shares to the
                                   public in Hong Kong at the Offer Price, subject to and in
                                   accordance with the terms and conditions set out in this
                                   prospectus and the Application Forms

‘‘Hong Kong Underwriters’’         the underwriters of the Hong Kong Public Offering whose names
                                   are set out in the section headed ‘‘Underwriting — Hong Kong
                                   Underwriters’’ in this prospectus

‘‘Hong Kong Underwriting           the Hong Kong public offering underwriting agreement dated 9
   Agreement’’                     February 2009 relating to the Hong Kong Public Offering entered
                                   into amongst our Company, the Selling Shareholder, our
                                   controlling shareholders (excluding the Wu Family Trust and the
                                   Trustee) and the Hong Kong Underwriters

‘‘Huizhou Liyin’’                  Huizhou Liyin Electronics Co., Ltd. (惠州利音電子有限公司), a
                                   limited liability company established in the PRC on 11 May 2001
                                   under the Company Law. Huizhou Liyin is an independent third-
                                   party which owns 2.86% of Fubon Industrial

‘‘Independent Technical Expert’’   Behre Dolbear Asia, Inc.

‘‘Independent Technical Expert’s   the independent technical report prepared by the Independent
   Report’’                        Technical Expert in Appendix V to this prospectus

‘‘IFRS’’                           International Financial Reporting Standards

‘‘Inner Mongolia’’                 Inner Mongolia Autonomous Region (內蒙古自治區) of the PRC

‘‘International Offer Shares’’     the 87,700,000 new Shares being offered by our Company for
                                   subscription and the 60,800,000 Sale Shares being offered by the
                                   Selling Shareholder for purchase under the International Offering,
                                   together, where relevant, with any additional Shares issued
                                   pursuant to the exercise of the Over-allotment Option, the
                                   number of which is further subject to reallocation as described in
                                   the section headed ‘‘Structure of the Global Offering’’ in this
                                   prospectus

‘‘International Offering’’         the offer and sale of the International Offer Shares to QIBs in the
                                   United States in reliance on Rule 144A and outside the United
                                   States in reliance on Regulation S, as further described in the
                                   section headed ‘‘Structure of the Global Offering’’ in this
                                   prospectus



                                             – 25 –
                                       DEFINITIONS


‘‘International Underwriters’’     the underwriters of the International Offering whose names are
                                   set out in the section headed ‘‘Underwriting — International
                                   Underwriters’’ in this prospectus

‘‘International Underwriting       the International Underwriting Agreement relating to the
   Agreement’’                     International Offering to be entered into by our Company, the
                                   Selling Shareholder, our controlling shareholders (excluding the
                                   Wu Family Trust and the Trustee), the International Underwriters
                                   and the Sole Global Coordinator on or about 13 February 2009

‘‘Joint Bookrunners’’ or ‘‘Joint   Citigroup Global Markets Asia Limited and Macquarie Capital
   Lead Managers’’                 Securities Limited, being the joint bookrunners and joint lead
                                   managers of the Global Offering

‘‘Latest Practicable Date’’        26 January 2009, being the latest practicable date for the purpose
                                   of ascertaining certain information contained in this prospectus
                                   prior to its publication

‘‘Lead Honest’’                    Lead Honest Management Limited, a company incorporated in the
                                   BVI on 30 March 2005 with limited liability. Lead Honest is the
                                   controlling shareholder of our Company. The entire issued share
                                   capital of Lead Honest is owned by Tercel Holdings Limited, a
                                   company incorporated in Bahamas with limited liability, and the
                                   entire issued share capital of Tercel Holdings Limited is
                                   ultimately owned by the Trustee as the trustee of the Wu Family
                                   Trust

‘‘Listing’’                        the listing of the Shares on the Main Board of the Stock
                                   Exchange

‘‘Listing Committee’’              the listing sub-committee of the board of the directors of the
                                   Stock Exchange

‘‘Listing Date’’                   the date on which dealings in the Shares first commence on the
                                   Stock Exchange

‘‘Listing Rules’’                  the Rules Governing the Listing of Securities on The Stock
                                   Exchange of Hong Kong Limited

‘‘Lita’’                           Lita Investment Limited (利達投資有限公司), a company
                                   incorporated in the BVI on 16 February 2004 with limited
                                   liability. Lita is a wholly-owned subsidiary of our Company

‘‘Luotuochang Gold Mine’’          國濤駱駝場金礦, a gold mine located in Wuxiang Yingzi Village,
                                   Biliutai Town, Balinzuo Banner, Chifeng District, Inner Mongolia




                                             – 26 –
                                       DEFINITIONS


‘‘Luotuochang Mining’’             Balinzuo Banner Materials Products Trading Co., Ltd. (巴林左旗
                                   國濤礦產品貿易有限公司),                a    limited  liability  company
                                   established in the PRC on 1 July 2005 under the Company Law.
                                   Luotuochang Mining owns the Luotuochang Gold Mine and has
                                   been a wholly-owned subsidiary of Chifeng Fuqiao since 23
                                   August 2007

‘‘Main Board’’                     the stock exchange (excluding the option market) operated by the
                                   Stock Exchange which is independent from and operated in
                                   parallel with the Growth Enterprise Market of the Stock
                                   Exchange. For the avoidance of doubt, the Main Board excludes
                                   the Growth Enterprise Market

‘‘Memorandum of Association’’ or   the memorandum of association of our Company adopted by our
  ‘‘Memorandum’’                   Company on 18 July 2008, as amended from time to time

‘‘Mining Companies’’               collectively Shirengou Mining, Nantaizi Mining and Luotuochang
                                   Mining

‘‘Ministry of Commerce’’           The Ministry of Commerce of the PRC (中華人民共和國商務部)

‘‘Ministry of Finance’’            The Ministry of Finance of the PRC (中華人民共和國財政部)

‘‘MOLAR’’                          The Ministry of Land and Resources of the PRC (中華人民共和
                                   國國土資源部)

‘‘Mr Wu’’                          Mr Wu, Ruilin (吳瑞林), one of our controlling shareholders

‘‘Nantaizi Gold Mine’’             南台子金多金屬礦, a gold mine located in Xiaoniuqun Town,
                                   Kalaqin Banner, Chifeng District, Inner Mongolia

‘‘Nantaizi Mining’’                Chifeng Nantaizi Gold Mines Co., Ltd. (赤峰南台子金礦有限公
                                   司), a limited liability company established in the PRC on 11 July
                                   2007 under the Company Law. Nantaizi Mining owns the
                                   Nantaizi Gold Mine and has been a wholly-owned subsidiary of
                                   Chifeng Fuqiao since 23 August 2007

‘‘NASDAQ’’                         Nasdaq Stock Market LLC, a stock exchange in the United States

‘‘NPC’’                            the National People’s Congress of the PRC (中華人民共和國全國
                                   人民代表大會), the national legislative body of the PRC

‘‘Offer Price’’                    the final offer price per Offer Share (exclusive of brokerage fee
                                   of l%, SFC transaction levy of 0.004% and Stock Exchange
                                   trading fee of 0.005%) of not more than HK$6.25 and expected to
                                   be not less than HK$4.35, such price to be agreed upon by us, the
                                   Selling Shareholder and the Joint Bookrunners (on behalf of the
                                   Underwriters) on or before the Price Determination Date



                                             – 27 –
                                   DEFINITIONS


‘‘Offer Shares’’               the Hong Kong Offer Shares and the International Offer Shares,
                               where relevant, with any Shares being sold pursuant to the
                               exercise of the Over-allotment Option

‘‘Over-allotment Option’’      the option to be granted by us to the International Underwriters
                               exercisable by the Sole Global Coordinator on behalf of the
                               International Underwriters, pursuant to which we may be required
                               to allot and issue up to an aggregate of 24,750,000 additional
                               Shares (in the aggregate representing 15% of the Shares initially
                               being offered under the Global Offering) to cover over-allocations
                               in the International Offering, details of which are described in the
                               section headed ‘‘Structure of the Global Offering’’ in this
                               prospectus

‘‘PBOC’’                       the People’s Bank of China, the central bank of the PRC

‘‘PRC’’ or ‘‘China’’           the People’s Republic of China. References in this prospectus to
                               the PRC or China exclude Hong Kong, the Macau Special
                               Administrative Region of the PRC and Taiwan

‘‘PRC government’’             the government of the PRC, including all governmental
                               subdivisions (including provincial, municipal and other regional
                               or local government entities)

‘‘Pre-IPO Investment’’         the issue of the Exchangeable Bonds by Lead Honest to the
                               Bondholders the particulars of which are set out in the section
                               headed ‘‘Exchangeable Bonds’’ in this prospectus

‘‘Price Determination Date’’   the date, expected to be on or about 13 February 2009, on which
                               the Offer Price is to be fixed by agreement between us, the
                               Selling Shareholder and the Joint Bookrunners (on behalf of the
                               Underwriters)

‘‘QIBs’’                       qualified institutional buyers within the meaning of Rule 144A

‘‘Regulation S’’               Regulation S under the U.S. Securities Act

‘‘Renminbi’’ or ‘‘RMB’’        the lawful currency of the PRC

‘‘Reorganization’’             the reorganization of the group of companies now comprising us,
                               completed on 21 August 2008 as described in the section headed
                               ‘‘Corporate Reorganization’’ in ‘‘Appendix VII — Statutory and
                               General Information’’ to this prospectus

‘‘Rich Vision’’                Rich Vision Holdings Limited, a company incorporated in Hong
                               Kong on 9 April 2008 with limited liability. Rich Vision is a
                               wholly-owned subsidiary of Lita




                                         – 28 –
                                     DEFINITIONS


‘‘Rule 144A’’                    Rule 144A under the U.S. Securities Act

‘‘S$’’                           Singapore dollars, the lawful currency of Singapore

‘‘SAFE’’                         State Administration of Foreign Exchange of the PRC (中華人民
                                 共和國國家外匯管理局)

‘‘Sale Shares’’                  a total of 60,800,000 Shares held by the Selling Shareholder,
                                 initially offered for sale by the Selling Shareholder as part of the
                                 International Offer Shares at the Offer Price under the
                                 International Offering

‘‘Selling Shareholder’’          Lead Honest

‘‘SFC’’                          the Securities and Futures Commission of Hong Kong

‘‘SFO’’                          the Securities and Futures Ordinance, Chapter 571 of the Laws of
                                 Hong Kong, as the same may be amended, supplemented or
                                 otherwise modified from time to time

‘‘SGE’’                          the Shanghai Gold Exchange

‘‘Share Option Scheme’’          the share option scheme conditionally adopted by our Company
                                 pursuant to a resolution of the Board on 30 January 2009, further
                                 details of which are described in ‘‘Appendix VII — Statutory and
                                 General Information’’ to this prospectus

‘‘Shares’’                       ordinary shares of nominal value of HK$1.00 each in the capital
                                 of our Company

‘‘Shirengou Gold Mine’’          石人溝金多金屬礦, a gold mine located in Chengzi Village,
                                 Songshan District, Chifeng District, Inner Mongolia

‘‘Shirengou Mining’’             Chifeng Shirengou Gold Mines Co., Ltd (赤峰石人溝金礦有限責
                                 任公司), a limited liability company established in the PRC on 10
                                 November 2004 under the Company Law. Shirengou Mining
                                 owns the Shirengou Gold Mine and has been a wholly-owned
                                 subsidiary of Chifeng Fuqiao since 23 August 2007

‘‘Shirengou-Nantaizi Mining      the combined operations of the Shirengou Gold Mine and the
   Complex’’                     Nantaizi Gold Mine (these two mines are adjacent to each other
                                 and the ore extracted from both mines is processed at the ore
                                 processing facility located at the Nantaizi Gold Mine)

‘‘Sole Global Coordinator’’ or   Citigroup Global Markets Asia Limited
   ‘‘Sole Sponsor’’




                                           – 29 –
                                    DEFINITIONS


‘‘Special Regulations’’         the Special Regulations of the State Council on the Overseas
                                Offering and Listing of Shares by Joint Stock Limited Companies
                                (國務院關於股份有限公司境外募集股份及上市的特別規定)
                                promulgated by the State Council on 4 August 1994, as the same
                                may be amended, supplemented or otherwise modified from time
                                to time

‘‘Stabilization Manager’’       Citigroup Global Markets Asia Limited

‘‘State’’                       the government authorities authorized to perform specified duties
                                in the name of the PRC according to the PRC laws, including
                                without limitation the NPC and the State Council

‘‘State Council’’               the State Council of the PRC (中華人民共和國國務院)

‘‘Stock Exchange’’              The Stock Exchange of Hong Kong Limited, a wholly-owned
                                subsidiary of Hong Kong Exchanges and Clearing Limited

‘‘Subscription Agreement’’      the subscription agreement dated 25 July 2008 entered into
                                among Lead Honest, our Company, Lita, Rich Vision, Mr Wu and
                                the Bondholders, pursuant to which the Bondholders agreed to
                                purchase, and Lead Honest agreed to issue, exchangeable bonds
                                in the amount of US$50.0 million, a summary of which is set out
                                in the section headed ‘‘Exchangeable Bonds’’ in this prospectus

‘‘substantial shareholder’’     has the meaning ascribed to it in the Listing Rules

‘‘Takeovers Code’’              the Hong Kong Code on Takeovers and Mergers

‘‘TOCOM’’                       Tokyo Commodity Exchange

‘‘Track Record Period’’         the three years ended 31 December 2007 and the ten months
                                ended 31 October 2008

‘‘Trustee’’                     Credit Suisse Trust Limited, who is acting as the trustee of the
                                Wu Family Trust

‘‘Underwriters’’                the Hong Kong Underwriters and the International Underwriters

‘‘Underwriting Agreements’’     the Hong Kong Underwriting Agreement and the International
                                Underwriting Agreement

‘‘U.S.’’ or ‘‘United States’’   the United States of America, its territories, its possessions and
                                all areas subject to its jurisdiction

‘‘U.S. dollars’’ or ‘‘US$’’     United States dollars, the lawful currency of the United States

‘‘U.S. persons’’                U.S. persons as defined in Regulation S




                                          – 30 –
                                  DEFINITIONS


‘‘U.S. Securities Act’’       the United States Securities Act of 1933, as amended

‘‘VAT’’                       value added tax

‘‘Wanhua’’                    Balinzuo Banner Wanhua Mining Company Limited (巴林左旗萬
                              華礦業有限公司), a limited liability company established in the
                              PRC on 26 June 2006 under the Company Law. Wanhua is
                              controlled by Mr Wu

‘‘we’’ or ‘‘us’’ or ‘‘our’’   our Company and our subsidiaries or, where the context so
                              requires, our Company only

‘‘White Form eIPO’’           the application for Hong Kong Offer Shares to be issued in the
                              applicant’s own name by submitting applications online through
                              the designated website of White Form eIPO (www.eipo.com.hk)

‘‘White Form eIPO Service     the White Form eIPO service provider designated by our Company,
  Provider’’                  as specified on the designated website (www.eipo.com.hk)

‘‘WTO’’                       World Trade Organization

‘‘Wu Family Trust’’           a discretionary trust established by Mr Wu on 22 May 2008, the
                              discretionary objects of which include family members of Mr Wu

‘‘Xinjiang’’                  Xinjiang Uyghur Autonomous Region (新疆維吾爾自治區) of the
                              PRC

‘‘€’’                         Euro, the lawful currency of 15 European Union countries




                                        – 31 –
                                        THE JORC CODE


     In this prospectus, we have used a number of terms defined in the Australasian Code for Reporting
of Exploration Results, Mineral Resources and Ore Reserves (the ‘‘JORC Code’’). The JORC Code is
an internationally accepted mineral resource or ore reserve classification system which was first
published in September 1999 and further revised in December 2004. The JORC Code has previously
been used in independent technical reports for mineral resource and ore reserve statements for other
PRC based public companies reporting to the Stock Exchange. The JORC Code is used by the
Independent Technical Expert to report the mineral resources and ore reserves of our Gold Mines in this
prospectus.

      The JORC Code definition of ‘‘mineral resource’’ or ‘‘resource’’ is provided in the section
headed ‘‘Glossary of Technical Terms’’ in this prospectus. Mineral resources are sub-divided in order of
the increasing geological confidence of the estimate into the following categories:

     —    inferred mineral resource — is that part of a mineral resource for which tonnage, grade and
          mineral content can be estimated with a low level of confidence. It is inferred from
          geological evidence and assumed but not verified geological and/or grade continuity. It is
          based on information gathered through appropriate techniques from locations such as
          outcrops, trenches, pits, workings and drill holes which may be limited or of uncertain
          quality and reliability;

     —    indicated mineral resource — is that part of a mineral resource for which tonnage, densities,
          shape, physical characteristics, grade and mineral content can be estimated with a reasonable
          level of confidence. It is based on exploration, sampling and testing information gathered
          through appropriate techniques from locations such as outcrops, trenches, pits, workings and
          drill holes. The locations are too widely or inappropriately spaced to confirm geological and/
          or grade continuity but are spaced closely enough for continuity to be assumed; and

     —    measured mineral resource — is that part of a mineral resource for which tonnage, densities,
          shape, physical characteristics, grade and mineral content can be estimated with a high level
          of confidence. It is based on detailed and reliable exploration, sampling and testing
          information gathered through appropriate techniques from locations such as outcrops,
          trenches, pits, workings and drill holes. The locations are spaced closely enough to confirm
          geological and grade continuity.

      The JORC Code definition of ‘‘ore reserve’’ or ‘‘reserve’’ is provided in the section headed
‘‘Glossary of Technical Terms’’ in this prospectus. Ore reserves are selected from measured and
indicated mineral resources after a consideration of the relevant modifying factors — which include
mining, metallurgical, economic, marketing, legal, environmental, social and governmental
considerations. These assessments demonstrate at the time of reporting that extraction could reasonably
be justified. The JORC Code, deems inferred mineral resources to be too poorly delineated to be
transferred into an ore reserve category. Ore reserve figures incorporate mining dilution, mining losses
and are based on an appropriate level of mine planning, design and scheduling. Ore reserves are sub-
divided into the following categories:

     .    probable ore reserve or probable reserve — is the economically mineable part of an
          indicated mineral resource, and in some circumstances, a measured mineral resource which
          has a lower level of confidence than ‘‘proved ore reserves’’, but is of sufficient quality to
          serve as the basis for a decision on the development of the deposit; and




                                                – 32 –
                                        THE JORC CODE


     .     proved ore reserve or proved reserve — is the economically mineable part of a measured
           mineral resource which has the highest confidence category of reserve estimates. The style of
           mineralization or other factors could mean proved ore reserves are not achievable in some
           deposits.

     The following diagram summarizes the general relationships between exploration results, mineral
resources and ore reserves under the JORC Code:




      Ore reserves are generally quoted as comprising a portion of the total mineral resource rather than
the mineral resources being additional to the ore reserves quoted. Under the JORC Code either
procedure is acceptable, provided the method adopted is clearly identified. The Independent Technical
Expert’s Report in this prospectus reports all of the ore reserves as part of the mineral resource
statements.




                                                 – 33 –
                          GLOSSARY OF TECHNICAL TERMS


    This glossary contains definitions of certain terms used in this prospectus in connection with our
Group and our business. Some of these may not correspond to standard industry definitions.

‘‘Ag’’                               is the symbol for the chemical element of silver

‘‘Au’’                               is the symbol for the chemical element of gold

‘‘Au9999, Au9995’’                   the common international standard for denoting gold purity
                                     adopted by the SGE to conform with international practice, in
                                     which Au9999 gold and Au9995 gold denote gold contents of
                                     99.99% and 99.95% or above respectively

‘‘concentrate’’                      a powdery product containing an upgraded mineral content
                                     resulting from initial processing of mined ore to remove some
                                     waste materials. A concentrate is an intermediary product, which
                                     would still be subject to further processing, such as smelting, to
                                     effect recovery of metal

‘‘crusher’’                          a machine for crushing rocks to a smaller grain size

‘‘Cu’’                               is the symbol for the chemical element of copper

‘‘deposit’’                          a body of mineralization containing a sufficient average grade of
                                     metal or metals to warrant further exploration and/or development
                                     expenditure. A deposit may not have a realistic expectation of
                                     being mined, therefore it may not be classified as a resource or a
                                     reserve

‘‘dilution’’                         the reduction of grade for mined ore due to the inclusion of waste
                                     material in the mined ore

‘‘drilling’’                         a technique or process of making a circular hole in the ground
                                     with a drilling machine, which is typically used to obtain a
                                     cylindrical sample of ore. Alternatively, blasthole drilling is
                                     where the drilling technique is used to create a hole to house an
                                     explosive charge in preparation for blasting a zone of rock

‘‘exploration’’                      activity to prove the location, volume and quality of an ore body

‘‘flotation’’                        a process by which some mineral particles are induced to become
                                     attached to bubbles of froth and float, and others to sink, so that
                                     the valuable minerals are concentrated and separated from the
                                     remaining rock or mineral material

‘‘g/t’’                              grams per tonne

‘‘gold bullion’’                     refined gold in the form of bars




                                               – 34 –
                             GLOSSARY OF TECHNICAL TERMS


‘‘gold concentrate’’               a concentrate which contains, among other valuable minerals,
                                   gold

‘‘grade’’ or ‘‘ore grade’’         the relative amount of valuable elements or minerals contained in
                                   a parcel of ore material. For gold, grade is commonly expressed
                                   in grams per tonne terms

‘‘km’’                             kilometer(s), a metric unit measure of distance

‘‘kt’’                             thousand tonnes, a metric unit of weight

‘‘ktpa’’                           kt per annum

‘‘koz’’                            thousand ounces, a unit of weight

‘‘mineral deposits’’               a natural occurrence of a useful mineral on sufficient degree of
                                   concentration and size to suggest it may be economically
                                   extracted

‘‘mineral resource(s)’’ or         a concentration or occurrence of material of intrinsic economic
  ‘‘resource(s)’’                  interest in or on the earth’s crust in such form, quality and
                                   quantity that there are reasonable prospects for eventual economic
                                   extraction, as defined in the JORC Code. The location, quantity,
                                   grade, geological characteristics and continuity of a mineral
                                   resource are known, estimated or interpreted from specific
                                   geological evidence and knowledge

‘‘mineralization’’                 an area with discontinuous distribution belts of mineralization,
                                   including the occurrence of deposits, mine sites and alteration of
                                   waste rock, as exploration indicators and under control of same
                                   geology conditions. It is a key zone for estimation and further
                                   planning of exploration of minerals

‘‘mining dilution’’                the waste material that is taken in the process of ore extraction

‘‘mining loss’’                    that part of an ore reserve which is not recovered during the
                                   mining process

‘‘open pit mining’’                mining of a deposit from a pit open to surface and usually carried
                                   out by stripping of overburden materials

‘‘ore’’                            mineral bearing rock which can be mined and treated profitably
                                   under current or immediately foreseeable economic conditions

‘‘ore body’’                       natural mineral accumulations which can be extracted for use
                                   under existing economic conditions and using existing extraction
                                   techniques




                                             – 35 –
                              GLOSSARY OF TECHNICAL TERMS


‘‘ore processing’’ or ‘‘processing’’   the process which in general refers to the extraction of usable
                                       portions of ores by using physical and chemical methods

‘‘ore reserve(s)’’ or ‘‘reserve(s)’’   the economically mineable part of a measured and/or indicated
                                       mineral resource, as defined by the JORC Code. It includes
                                       diluting materials and allowances for losses which may occur
                                       when the material is mined. Appropriate assessments and studies
                                       have been carried out, and include consideration of and
                                       modification by realistically assumed mining, metallurgical,
                                       economic, marketing, legal, environmental, social and
                                       governmental factors. These assessments demonstrate at the time
                                       of reporting that extraction could reasonably be justified. Ore
                                       resources are subdivided into probable and proved, as described
                                       in the section headed ‘‘The JORC Code’’ in this prospectus

‘‘ounce(s)’’, ‘‘troy ounce(s)’’ or     troy ounce(s), a unit of weight. One troy ounce equals 31.10348
   ‘‘oz’’                              grams

‘‘Pb’’                                 is the symbol for the chemical element of lead

‘‘PPE’’                                personal protection equipment

‘‘recovery rate’’                      the percentage of metal produced compared to the amount of
                                       metal contained in the feed ore in the context of a processing
                                       plant, or the percentage of metal produced compared to the
                                       amount of metal contained in the feed concentrates in the context
                                       of a smelting plant

‘‘refining’’                           the final stage of the metallurgical process of refining crude metal
                                       products to a pure or very pure end-product

‘‘smelting’’                           a pyro-metallurgical process of separating metal by fusion from
                                       those impurities with which it is chemically combined or
                                       physically mixed

‘‘standard gold’’ and ‘‘non-standard   standard gold refers to gold bullion which satisfies both standard
   gold’’                              content requirements (Au9999 and Au9995) and standard weight
                                       requirements (50 g, 100 g, 1 kg, 3 kg and 12.5 kg) set by the
                                       SGE, while other gold bullion is non-standard gold

‘‘t’’                                  tonne(s), a metric unit of weight

‘‘tailings’’                           the waste materials (residue) produced by the processing plant
                                       after extraction of valuable minerals

‘‘tailings dam’’ or ‘‘TSF’’            tailings storage facilities

‘‘tpa’’                                tonnes per annum



                                                  – 36 –
                       GLOSSARY OF TECHNICAL TERMS


‘‘tpd’’                      tonnes per day

‘‘underground mine’’         openings in the earth accessed via shafts and adits below the land
                             surface to extract minerals

‘‘vein’’                     a tabular mass of minerals formed by fracture filling or
                             replacement of host rock

‘‘Zn’’                       is the symbol for the chemical element of zinc




                                       – 37 –
                            FORWARD-LOOKING STATEMENTS


     This prospectus contains forward-looking statements with respect to our business strategies,
operating efficiencies, competitive positions, growth opportunities for existing operations, plans and
objectives of management, certain proforma information and other matters.

      The words ‘‘anticipate’’, ‘‘believe’’, ‘‘could’’, ‘‘predict’’, ‘‘potential’’, ‘‘continue’’, ‘‘expect’’,
‘‘intend’’, ‘‘may’’, ‘‘plan’’, ‘‘seek’’, ‘‘will’’, ‘‘would’’, ‘‘should’’ and the negative of these terms and
other similar expressions identify a number of these forward-looking statements. These forward-looking
statements, including, among others, those relating to our future business prospects, capital expenditures,
cash flows and working capital, are necessarily estimates reflecting the best judgment of our Directors
and management and involve a number of risks and uncertainties that could cause actual results to differ
materially from those suggested by the forward-looking statements. As a consequence, these forward-
looking statements should be considered in light of various important factors, including those set forth
in the section headed ‘‘Risk Factors’’ in this prospectus. Accordingly, such statements are not a
guarantee of future performance and you should not place undue reliance on any forward-looking
information.




                                                   – 38 –
                                            RISK FACTORS


      You should carefully consider all of the information in this prospectus, including the risks and
 uncertainties described in the following risk factors when considering making an investment in the
 Shares being offered in the Global Offering. You should pay particular attention to the fact that our
 business and operations are conducted almost exclusively in the PRC and are governed by a legal
 and regulatory environment which in certain aspects differs from that prevailing in other countries.
 Our business could be materially and adversely affected by any of the risks and uncertainties
 described below. The trading price of the Shares may decline due to any of the risks and
 uncertainties and you may lose all or part of your investment. For details regarding the PRC and
 other relevant matters, please refer to the sections headed ‘‘Corporate Information’’ and ‘‘The PRC
 Laws and Regulations Relating to the Industry’’ in this prospectus.


      We believe that an investment in our Shares involves certain risks, some of which are beyond our
control. These risks can be broadly categorized into (i) risks relating to our industry; (ii) risks relating to
our business; (iii) risks relating to conducting operations in the PRC; and (iv) risks relating to the
Global Offering. Prospective investors in our Shares should consider carefully all the information set
forth in this prospectus and, in particular, this section in connection with any investment in our Shares.

RISKS RELATING TO OUR INDUSTRY

  Exploration of mineral properties is speculative in nature, requires capital expenditure and may be
  unsuccessful.

       There is no assurance that our exploration activities will result in the discovery of mineable
reserves. If a viable deposit is discovered, it can take several years and capital expenditure from the
initial phases of exploration until production commences during which time the capital cost and
economic feasibility may change. Furthermore, actual results upon production may differ from those
anticipated at the time of discovery. In order to maintain gold production beyond the life of our current
proved and probable gold reserves, other than through acquisitions, additional gold reserves must be
identified, either to extend the life of existing mines or justify the development of new projects. Our
exploration programs may not result in the replacement of such gold reserves or result in new
commercial mining operations.

  Changes to the PRC regulatory regime for the gold mining industry may have an adverse impact
  on our results of operations.

      The PRC local, provincial and central authorities exercise a substantial degree of control over the
gold industry in the PRC. Our operations are subject to a range of PRC laws, regulations, policies,
standards and requirements in relation to, among other things, mine exploration, development,
production, taxation, labor standards, occupational health and safety, waste treatment and environmental
protection and operation management. Any changes to these laws, regulations, policies, standards and
requirements or to the interpretation or enforcement thereof may increase our operating costs and thus
adversely affect our results of operations.

      There is no assurance that we will be able to comply with any new PRC laws, regulations,
policies, standards and requirements applicable to the gold mining industry or any changes in existing
laws, regulations, policies, standards and requirements economically or at all. Further, any such new




                                                    – 39 –
                                          RISK FACTORS


PRC laws, regulations, policies, standards and requirements or any such change in existing laws,
regulations, policies, standards and requirements may also constrain our future expansion plans and
adversely affect our profitability.

  Changes in PRC tax laws and regulations applicable to the mining industry may adversely affect
  our results of operations.

      We are subject to, among other things, corporate income tax, resources tax, VAT, city maintenance
and construction tax, education surcharge and property tax under PRC laws and regulations. Although
gold is exempted from VAT, silver and other by-products produced and sold by us, as well as
processing fees we receive for treating ores and concentrates for third parties, are subject to VAT at the
rate of 6%. The PRC government increased the resources tax rates effective 1 August 2007, and the
rates applicable to our Gold Mines are RMB2 to RMB4 per tonne of gold ore mined. There is no
assurance that the PRC government will not further raise the rates of resources tax or other taxes. Any
increase in the rates of resources tax or other taxes will have an adverse impact on our results of
operations. Please refer to the section headed ‘‘The PRC Laws and Regulations Relating to the Industry’’
in this prospectus.

      The PRC Enterprise Income Tax Law and its regulations were recently enacted and became
effective as of 1 January 2008. Under this law and its implementation rules, if we are deemed to be a
non-PRC tax resident enterprise without an office or premises in the PRC, a withholding tax at the rate
of 10% will be applicable to any dividends paid to us by our PRC incorporated subsidiaries, unless we
are entitled to reduction or elimination of such tax, including by tax treaties. Please refer to the section
headed ‘‘Risk Factors — Risks Relating to Conducting Operations in the PRC — The dividends we
receive from our PRC subsidiaries and our global income may be subject to PRC tax under the newly
enacted PRC Enterprise Income Tax Law, which would have a material adverse effect on our business’’
in this prospectus.

RISKS RELATING TO OUR BUSINESS

  We are a developing mining business. Our limited operating history may not serve as an adequate
  basis to judge our future operating results and prospects.

      Our business is still in an early stage of development, and there is limited historical information
available upon which you can base your evaluation of our business and prospects. We began gold
exploration and mining activities after acquiring control of Luotuochang Mining through Wanhua in
October 2006, Shirengou Mining through Chifeng Fubon Copper in May 2007 and Nantaizi Mining
through Chifeng Fubon Copper in July 2007. Wanhua transferred its entire equity interest in
Luotuochang Mining to Chifeng Fubon Copper on 13 July 2007. Chifeng Fuqiao acquired the entire
equity interest in each of Shirengou Mining, Nantaizi Mining and Luotuochang Mining from Chifeng
Fubon Copper on 23 August 2007. We commenced sales after we acquired Shirengou Mining in May
2007. We began trial ore processing operations at the Nantaizi Gold Mine in May 2008 and began sales
from this mine in June 2008. Therefore, our operating results in 2007 and for the first ten months of
2008 are not indicative of future operating results and prospects. You should consider our business and
prospects in light of the risks and uncertainties that we will face as a company developing and operating
new gold mines.




                                                  – 40 –
                                          RISK FACTORS


     We have encountered and may continue to encounter risks and uncertainties frequently experienced
by early-stage companies, including those relating to:

     —     our ability to maintain effective control of our operating costs and expenses;

     —     our ability to develop and maintain internal personnel, systems and procedures to ensure
           compliance with the extensive regulatory requirements applicable to the gold mining industry
           in the PRC;

     —     our ability to respond to changes in our regulatory environment; and

     —     our ability to implement, monitor and enhance our internal controls system.

     If we are unable to address these risks, our financial condition and operating results may be
materially and adversely affected.

  The accuracy of the gold resources and reserves estimates of our Gold Mines is based on a number
  of assumptions, and we may produce less gold than our current estimates.

      The gold resources and reserves estimates of our Gold Mines are based on a number of
assumptions that have been made by the Independent Technical Expert in accordance with the JORC
Code. However, we cannot assure you that the resources and reserves estimates as presented in this
prospectus will be recovered in the quantities, quality or yields presented in this prospectus. Resources
and reserves estimates involve expressions of judgment based on various factors such as knowledge,
experience and industry practice, and the accuracy of these estimates may be affected by many factors,
including quality of the results of exploration drilling and sampling of the ore body and analysis of the
ore samples, as well as the procedures adopted by and experience of the person making the estimates.

      Estimates of the resources and reserves at our Gold Mines may change significantly when new
information becomes available or new factors arise, and interpretations and deductions on which
resources and reserves estimates are based may prove to be inaccurate. Resources estimates indicate in-
situ mineral occurrences from which valuable or useful minerals may be recovered, but do not take into
account whether such resources could be mined or whether valuable or useful minerals could be
recovered economically from them, nor do resources estimates incorporate mining dilution or allow for
mining losses. The reserves estimates contained in this prospectus represent the amount of gold that we
believe can be profitably mined and processed and are calculated based on estimates of future
production costs and gold prices. In the future, we may need to revise the reserves estimates of our Gold
Mines, if, for instance, our production costs increase or gold prices decrease and as a result the
extraction of a portion (or all) of the gold reserves at our Gold Mines becomes uneconomical.

      The inclusion of resources and reserves estimates should not be regarded as a representation that
all these amounts can be economically exploited, and nothing contained in this prospectus (including,
without limitation, the estimates of mine lives) should be interpreted as assurances of the economic
viability of our Gold Mines or the profitability of our future operations.

  The process of estimating quantities of reserves and the method we use to amortize our mining
  rights have a material effect on our results of operations.

      Based on our accounting policy, our mining rights are amortized using the unit of production
method based on the actual production volume over the estimated total proven and probable reserves of
the ore mines, rather than on a straight line basis over the estimated mine life. As described above, the



                                                 – 41 –
                                          RISK FACTORS


process of estimating quantities of reserves is inherently uncertain and complex, and requires significant
judgments and decisions based on available geological, engineering and economic data. In 2007 and for
the ten months ended 31 October 2008, we had amortization expenses for mining rights of RMB157,000
and RMB2.7 million, respectively. If we were to use the straight-line method, then the estimated mining
rights amortization for the year ended 31 December 2008 and each of the years ending 31 December
2009 and 2010 would be RMB12.3 million. This compares to our mining rights amortization of RMB4.6
million for the year ended 31 December 2008 and our estimated mining rights amortization of RMB10.0
million and RMB12.3 million for each of the years ending 31 December 2009 and 2010, respectively,
using the unit of production method. Because amortization is a non-cash expense to the business, the
process of estimating quantities of reserves and the method we use to amortize our mining rights will
have a material effect on our results of operations.

  We rely on third-party contractors to provide exploration and mining services in respect of our
  Gold Mines.

      We outsource substantially all our exploration and mining activities pursuant to service contracts
with third-party contractors. As a result, our operations will be affected by the performance of our third-
party contractors. Although we monitor the work of these third-party contractors to ensure that it is
carried out on time, on budget and to specification, we may not be able to control the quality, safety and
environmental standards of the work done by third-party contractors to the same extent as when the
work is performed by our own employees. Any failure by these third-party contractors to meet our
quality, safety and environmental standards may result in our liabilities to third parties and have a
material adverse effect on our business, reputation, financial condition and results of operations. Any
failure by these third-party contractors could also affect our compliance with government rules and
regulations relating to exploration, mining and workers’ safety. Moreover, since we have no more than
two years of relationship with each of our third-party contractors, any failure by us to retain our third-
party contractors or obtain replacements on favorable terms or at all may have a material adverse effect
on our business and results of operations.

      In selecting third-party contractors, we require the third-party contractors to have the production
safety permit issued by Production Safety Supervisory Department, and, in cases where we hire third-
party contractors for mining activities, we also require them to have the Class C Construction
Qualifications issued by Construction Department. In addition, we require them to provide information
on their past engagement to confirm their ability in terms of capital investment, technical expertise and
managerial skills to perform the work requested. Each of the relevant departments of our Group is
responsible for supervising the works carried out by third-party contractors ranging from reviewing
engineering quality, quantifying losses and depletion of minerals, and supervising and managing of the
progress and completion of the assignment. We require third-party contractors to carry out their works
according to the design and plan of the relevant assignment and in accordance with the requirements of
our Production and Environmental Safety Department and Quality Control Department. Our Production
and Environmental Safety Department supervises and inspects safety management. Our Quality Control
Department supervises mineral quality to ensure that third-party contractors meet our quality standards.
In addition, we have specialized technical management personnel who supervise and direct the progress,
quality and safety of the works performed by third-party contractors. Usually when a contract is signed,
the requirements regarding the progress, quality and safety of the works will be clearly defined and we
will only need to perform our supervisory functions during the project works.




                                                  – 42 –
                                          RISK FACTORS


      The total subcontracting fees paid for mining for the year ended 31 December 2007 and for the ten
months ended 31 October 2008 were approximately RMB0.5 million and RMB14.5 million,
respectively. The total subcontracting fees paid for construction of infrastructure on mines for the year
ended 31 December 2007 and for the ten months ended 31 October 2008 were approximately RMB12.3
million and RMB158.9 million, respectively. For further information in relation to our third-party
contractors, please refer to the section headed ‘‘Business — Third-Party Contractors’’ in this prospectus.

  We rely on major customers.

      We rely on our major customers to purchase all of our products. For the year ended 31 December
2007, sales to our five largest customers accounted for all of our revenue, and for the ten months ended
31 October 2008, sales to our five largest customers accounted for 95.4% of our revenue. Sales to our
single largest customer for the year ended 31 December 2007 and for the ten months ended 31 October
2008 represented 51.4% and 48.9%, respectively, of our revenue.

      We entered into three memoranda of long-term cooperation with three of our largest customers in
March 2008 which accounted for 35.2% of our total revenue for the ten months ended 31 October 2008.
Although under the terms of the memoranda and the corresponding supplemental agreements, we are
entitled to sell and these three customers are obliged to purchase whatever amounts of concentrates that
we, at our sole discretion, agree to sell them, given that most of our revenue is derived from the sale of
concentrates to our five largest customers, any adverse effect on their ability to purchase our
concentrates will have a material adverse effect on our results of operations.

  Fluctuations in the U.S. dollar market price of gold, the U.S. dollar market price of the other
  metals contained in the concentrates we produce or the RMB/U.S. dollar exchange rate could
  materially and adversely affect our profitability and cash flows.

      Our revenue is generated from the sale of concentrates we produce. The price we obtain for our
concentrates is determined by the amount of gold, silver, copper, lead and zinc contained in the
concentrates and the market prices for these metals. Historically, the market price of these metals has
fluctuated widely and each has experienced periods of significant decline. Similar to our competitors we
have limited ability to anticipate and manage commodity price fluctuations. There can be no assurance
that the market price of any or all of these metals will not decline in the future or that such prices will
otherwise remain at sufficiently high levels to support our profitability. A significant decline in the
market price of any of these metals, and in particular gold, could materially adversely affect our
business and result of operations.

      Gold is our core commodity. Approximately 89.0% and 68.3% of our total revenue for the year
ended 31 December 2007 and for the ten months ended 31 October 2008, respectively, were attributable
to the gold contained in the concentrates we sold. We have no control over the factors that have affected
the gold market price. Although the U.S. dollar market price of gold has increased significantly in the
past few years, since the beginning of 2008 there have been substantial fluctuations in the market price
of gold. Daily New York composite spot gold price declined from US$857.55 per ounce on 2 January
2008 to US$724.55 per ounce on 31 October 2008 and increased to US$882.05 on 31 December 2008.
There can be no assurance that the market price of gold will not continue to fluctuate in the future. If




                                                  – 43 –
                                          RISK FACTORS


gold prices should fall or remain below our cost of production for a sustained period, our Share price
and our results of operations could be materially and adversely affected. Please refer to the section
headed ‘‘Industry Overview’’ in this prospectus for a more detailed description of the factors affecting
the international gold price.

      In addition, all of our revenue and most of our operating costs are denominated in RMB. Since the
prices in RMB of the metals contained in the concentrates we sell effectively move in line with the
market prices of these metals in U.S. dollars, our earnings are materially affected by the RMB/U.S.
dollar exchange rate. We currently do not, nor do we intend in the future to, hedge our U.S. dollar
currency exposure. Therefore, any appreciation of the RMB against the U.S. dollar could materially and
adversely affect our financial results.

  Our business is exposed to uncertainties in relation to our expansion plans, further exploration
  opportunities and future acquisitions.

      We are currently investing in the expansion of our ore processing facilities located at the Nantaizi
Gold Mine and Luotuochang Gold Mine. Our expansion plans require significant development of each
mine to bring them to the planned levels of production. It may take longer than we currently anticipate
to implement our expansion plans and there may be unforeseen delays before our expanded ore
processing facilities are able to operate at our planned capacity. As a result of any delay in completing
our expansion, cost overruns, failure to obtain the intended economic benefits from our expansion or
other reasons, our business, financial condition and operations may be adversely affected.

     We expect that, after completion of the Global Offering, we will have sufficient capital from the
proceeds of the Global Offering as well as internally generated cash flows to fund our mining operations
and planned expansion of the ore processing facilities at our existing Gold Mines.

      Further, after the completion of the planned expansion of our ore processing facilities located at
the Nantaizi Gold Mine and Luotuochang Gold Mine, we intend to construct a smelting and refining
plant so that we can become a fully vertically integrated gold producer. This project may be delayed or
adversely affected by various factors, such as failure to obtain regulatory approvals or sufficient
funding, technical difficulties or constraints on resources.

  There is no assurance that we can obtain or renew permits necessary for exploration, mining or
  production at our Gold Mines or in respect of any mines we acquire in the future.

      Under the Mineral Resources Law of the PRC, all mineral resources in the PRC are owned by the
State. Mining enterprises, including us, must obtain exploration or mining permits prior to undertaking
any exploration or mining activities, and the exploration and mining permits are limited to a specific
geographic area and time period. As a result, whether we can carry out exploration and/or mining
activities depends on our ability to obtain exploration and mining permits from the relevant PRC
authorities and to obtain necessary renewals of such permits when they expire. Under PRC laws and
regulations, before a gold production company can commence production, it must obtain, among other
things:

     —     an approval of the relevant project evaluation application from the local development and
           reform bureau;

     —     a production safety permit from the local administration of work safety;

     —     an environmental protection permit from the local environmental protection department;



                                                 – 44 –
                                          RISK FACTORS


     —     a state-owned land use certificate from the local land and resources department; and

     —     a certificate of approval for storage of explosives and a certificate of approval for use of
           explosives. In addition, employees responsible for handling explosives must obtain a
           certificate of safekeeping of explosive equipment from the local public security bureau.

      At present, in respect of our Gold Mines, we have one exploration permit covering a prospecting
area of 3.19 km 2 and four mining permits covering a mining area of approximately 20.4 km 2. The
mining permits for the Shirengou Gold Mine and Luotuochang Gold Mine will expire in September
2011 and February 2011, respectively, while the two mining permits for the Nantaizi Gold Mine will
expire in December 2010 and October 2011, respectively. The exploration permit for the Nantaizi Gold
Mine is valid until July 2009. We also hold all necessary approvals and permits for production at our
Gold Mines. These production-related approvals and permits will expire from time-to-time. We intend to
apply to the appropriate authorities for an extension upon the expiry of each of our exploration permits,
mining permits and production-related approvals and permits. However, there can be no assurance that
we will be able to fully and economically utilize the entire mineral resources of any of our Gold Mines
during the currently effective permit and approval periods or to obtain any extension of such permits
and approvals. We have successfully renewed each of our exploration and mining permits in the past.
However, there can be no assurance that we will be able to obtain exploration or mining or production-
related permits and approvals in respect of resources we identify in the future either at our existing Gold
Mines or at any mines we acquire in the future. If we are unable to obtain any of such permits or to
renew any of such permits upon their expiration, our business and results of operations will be
materially and adversely affected.

      It should be noted that the mineral industry of Inner Mongolia is in the process of resources
integration. Renewal of a mining permit or an exploration permit will be approved based on the specific
circumstances in a banner or city. In the case of Chifeng Municipality, a mining permit will usually be
renewed for 3 years and an exploration permit will usually be renewed for 1 to 2 years, during this
process of resources integration. Our existing mining permits and exploration permit are valid for these
periods respectively. Our Directors do not believe the terms of the permits granted to us are short in
duration and/or out of the ordinary. King & Wood, our PRC legal adviser, has also confirmed that the
term of each of the permits granted to us is within the normal and valid period of approval and is in
compliance with all relevant PRC laws and regulations. In addition, King & Wood, our PRC legal
adviser, has confirmed that we have all of the licenses and permits we require to operate our Gold
Mines.

  Our operations are exposed to risks in relation to production safety and the occurrence of
  accidents, such as the mishandling of dangerous articles, and natural disasters.

      As a gold mining company, we are subject to extensive laws, rules and regulations imposed by the
PRC government regarding production safety. In particular, our exploration and mining operations
involve the handling and storage of explosives and other dangerous articles. Since taking over
ownership of our Gold Mines, we have implemented a set of guidelines and rules regarding the handling
of such dangerous articles which comply with existing PRC laws, regulations and policies. We may
experience in the future increased costs of production arising from compliance with production safety
laws and regulations. The PRC government continues to strengthen the enforcement of safety regulations
in relation to the mining industry. There can be no assurance that more stringent laws, regulations or
policies regarding production safety will not be implemented or that the existing laws, regulations and
policies will not be more stringently enforced. We may not be able to comply with all existing or future



                                                  – 45 –
                                          RISK FACTORS


laws, regulations and policies in relation to production safety economically or at all. Should we fail to
comply with any production safety laws or regulations, we would be required to rectify the production
safety problems within a limited period. Failure to rectify any problem could lead to suspension of our
operations. In addition, there can be no assurance that accidents arising from the mishandling of
dangerous articles will not occur in the future. Should we fail to comply with any relevant laws,
regulations or policies or should any accident occur as a result of the mishandling of dangerous articles,
our business, reputation, financial condition and results of operations may be adversely affected, and we
may be subject to penalties, civil liabilities or criminal liabilities.

     Prior to our acquisition of Shirengou Mining (which owns the Shirengou Gold Mine) from an
independent third party which has no relationship with any of our connected persons, an accident
occurred in the Shirengou Gold Mine on 25 March 2007. The accident was caused by the emission of
excess carbon monoxide by one of the air compressors which resulted in the death of two mine workers.
On 2 April 2008, the Production Safety Inspection and Supervision Bureau of Songshan District,
Chifeng Municipality issued a confirmation confirming that all the legal matters in relation to the
accident have been completed in accordance with the PRC laws. Our PRC legal adviser, King & Wood,
has confirmed that we do not and will not have any liability in relation to the accident because the
accident occurred prior to our acquisition of the Shirengou Gold Mine.

       In order to ensure safety of our employees and the employees of third-party contractors and to
avoid any accidents, our safety policy requires that each mine organizes at least two emergency and
rescue drills per year, ensuring that each worker has a good understanding of rescue procedures and
escape routes. In October 2007, we adopted an internal manual for health and work safety, which
incorporated national safety standards, and the manual has been implemented throughout our Group and
applies to both our employees and the employees of third-party contractors. Despite our endeavors to
enhance workplace safety, there can be no assurance that similar or other accidents will not occur in the
future. Our Group does not maintain any insurance policy to cover possible losses or costs resulting
from accidents in relation to the employees of third-party contractors. Our Directors are of the view that
this is a common practice in the mining industry in the PRC.

       We or our third-party contractors may encounter accidents, technical difficulties, mechanical
failure or breakdown in the exploration, mining and production processes, as well as possible localized
mud-slides, instability of the stopes, and subsidence of the working areas and the like due to natural
disasters. There can be no assurance that accidents will not occur in the future. The occurrence of
accidents may disrupt or result in a suspension of our operations, increase production costs, result in
liability to us and harm our reputation. Such incidents may also result in a breach of the conditions of
our mining permits and exploration permit, or any other consents, approvals or authorizations, which
may result in fines and penalties or even possible revocation of our mining permits.

  Our operations are exposed to risks in relation to environmental protection and rehabilitation.

     Operations of gold mines are subject to environmental risks and hazards. Our production and
operations are subject to laws, rules and regulations imposed by the PRC government regarding
environmental matters, such as the treatment and discharge of hazardous wastes and materials and
environmental rehabilitation. PRC laws and regulations set a series of standards for waste substances
(such as waste water) that may be discharged into the environment, and impose fees for the discharge of
such waste substances. In addition, we are required under current PRC laws and regulations to conduct
our mining operations in a manner that minimizes the impact on the environment, such as through
rehabilitation and revegetation of mined land. Our current mining operations at our three Gold Mines



                                                 – 46 –
                                          RISK FACTORS


employ underground mining and, as a result, our rehabilitation and revegetation obligations in relation
to our three Gold Mines will be more limited than if we conducted open pit mining operations. In the
future, we may have rehabilitation obligations in respect of areas we have cleared for mining and
production purposes and in respect of our tailings dams.

      Environmental hazards may occur in connection with our operations as a result of human
negligence, force majeure or otherwise. The occurrence of any environmental hazards may delay
production, increase production costs, cause personal injuries or property damage, result in liability to us
and/or damage our reputation. Such incidents may also result in a breach of the conditions of our mining
permits and exploration permit, or other consents, approvals or authorizations, which may result in fines
or penalties or even possible revocation of our mining permits and/or exploration permit.

      In the future, we may experience increased costs of production arising from compliance with
environmental laws and regulations. Moreover, the development of the Chinese economy and the
improvements in the living standards of the population may lead to a heightened awareness of
environmental protection. As a result, it is possible that more stringent environmental laws, regulations
and policies may be implemented in the future, or the existing environmental laws, regulations and
policies may be more strictly enforced. We may not always be able to comply with existing or future
laws, regulations or policies in relation to environmental protection and rehabilitation economically or at
all. Should we fail to comply with any such existing or future laws, regulations or policies, we may be
subject to penalties and liabilities under PRC laws and regulations, including but not limited to
warnings, fines, suspension of production and closure of the facility that fails to comply with the
relevant environmental standards.

  We may not be adequately insured against losses and liabilities arising from our operations.

      We maintain work-related injury insurance for our employees to cover possible losses or costs
resulting from accidents which occur to our employees, in accordance with the requirements of the
relevant PRC laws and regulations relating to the work-related injury insurance.

      According to the relevant PRC laws and regulations, we will be liable for losses and costs arising
from accidents resulting from fault or omission on the part of us or our own employees. The relevant
PRC laws and regulations do not require mining enterprises to obtain insurance for such liability, except
in respect of work-related injuries which we have obtained for our employees.

     According to the relevant PRC laws and regulations, we will be liable for losses and costs arising
from fraud committed by, or omission of, our employees. We do not maintain insurance in respect of
such losses or costs and, as a result, our financial condition could be materially or adversely affected if
we become liable for losses and costs arising from fraud or omission on the part of an employee.

     We have also maintained insurance coverage on mandatory social security insurance for our
employees in accordance with the requirements of the relevant PRC laws and regulations.

      We also currently maintain insurance coverage on certain of our assets (including certain new
buildings, equipment and motor vehicles). Save as disclosed above, we have not maintained other
insurance coverage in respect of our operations. In line with the industry practice of the PRC mining
companies, we do not maintain any business interruption insurance with respect to our operations, nor
do we maintain any third-party liability insurance for property damage, personal injury or environmental
damage arising from accidents in relation to our operations other than those caused by our transportation
vehicles.



                                                  – 47 –
                                           RISK FACTORS


      Due to the nature of our business, we handle highly flammable and explosive materials and operate
under perilous conditions. We may experience accidents in the course of our operations which may
cause significant property damage, personal injuries or other liabilities. Losses and liabilities incurred or
payments we may be required to make, if not adequately insured against, could have a material adverse
effect on our results of operations or otherwise materially disrupt our operations.

      We do not maintain any insurance policy to cover possible loss, damage or costs resulting from
fault or omission of third-party contractors. Our Directors are of the view that this is a common practice
in the mining industry in the PRC. As confirmed by King & Wood, our PRC legal adviser, we will not
be liable for the costs or penalties arising from any loss, damage or costs incurred as a result of fault or
omission of third-party contractors. To mitigate the risk of any fault or omission arising from third-party
contracts, we will ensure that no mining or exploration work will be undertaken by third-party
contractors outside the contracting period.

  We may not be able to maintain the provision of adequate and uninterrupted supplies of electricity,
  water, necessary raw materials, auxiliary materials, equipment and spare parts at favorable prices
  or at all.

      Major auxiliary materials used in our production include forged steel grinding balls, chemical
products, explosives, lubricating oil, electric wires and cables, rubber products and fuel. All our
auxiliary materials are sourced from suppliers in the local Chifeng Municipality and our equipment is
sourced from suppliers within the PRC. Electricity and water are the main utilities used in our
exploration and mining. We obtain our electricity from the local power grid and our water supply from
underground water. There can be no assurance that supplies of electricity, water, auxiliary materials,
equipment or spare parts will not be interrupted or that their prices will not increase in the future. In the
event that our existing suppliers cease to supply us with electricity, water, auxiliary materials, equipment
or spare parts at existing or lower prices or at all, our financial condition and results of operations will
be adversely affected. In addition, an interruption in electricity supply will materially and adversely
affect our underground production and our safety by disrupting operations such as water pumping and
ventilation.

  Severe weather conditions could materially and adversely affect our business and results of
  operations.

      Severe weather conditions, such as heavy rainfall, may require us to evacuate personnel or curtail
operations and may result in damage to our mines, our equipment or our facilities, which could result in
the temporary suspension of operations or a reduction in our productivity. During periods of curtailed
activity due to adverse weather conditions, we may continue to incur operating expenses while
production has slowed down or ceased altogether. Any damages to our projects or delays in our
operations caused by severe weather could materially and adversely affect our business and results of
operations.

  Our mining operations have a finite life and eventual closure of these operations will entail costs
  and risks regarding ongoing monitoring, rehabilitation and compliance with environmental
  standards.

      Despite our efforts in identifying and acquiring additional resources in the areas surrounding our
existing mines and other regions in the PRC, our existing mining operations have a finite life and will
eventually close. The key costs and risks for mine closures are (i) long-term management of permanent



                                                   – 48 –
                                          RISK FACTORS


engineered structures and acid rock drainage; (ii) achievement of environmental closure standards; (iii)
orderly retrenchment of employees and third-party contractors; and (iv) relinquishment of the site with
associated permanent structures and community development infrastructure and programs to new owners.
The successful completion of these tasks is dependent on our ability to successfully implement
negotiated agreements with the relevant government, community and employees. The consequences of a
difficult closure range from increased closure costs and handover delays to ongoing environmental
rehabilitation costs and damage to our reputation if desired outcomes cannot be achieved, which could
materially and adversely affect our business and results of operations.

  We may not be able to retain or secure key qualified personnel, key senior management or other
  personnel for our operations.

      We depend on certain key qualified personnel, key senior management and other employees in our
business, particularly those set out in the section headed ‘‘Directors, Senior Management and
Employees’’ in this prospectus. There can be no assurance that such parties will continue to provide
services to us or will honor the agreed terms and conditions of their employment or contracts. Any loss
of key personnel or failure to recruit and retain personnel for our future operations and development
may have a material adverse effect on our business.

  If we fail to manage our liquidity situation carefully, our ability to expand and, in turn, our results
  of operations may be materially and adversely affected.

     As at 31 December 2007, we had net current liabilities of RMB219.0 million, primarily due to
amounts due to related parties of RMB247.7 million. The amounts due to related parties arose from the
acquisition of our three Gold Mines and capital expenditures incurred at these Gold Mines after their
acquisitions. In August 2008, the Group repaid the amounts due to related parties using primarily the
proceeds from the Pre-IPO Investment and an additional investment by Huizhou Liyin. See the section
headed ‘‘Exchangeable Bonds’’ in this prospectus. A net current liability position may impair our ability
to make necessary capital expenditures, develop business opportunities or make strategic acquisitions.
As at 31 October 2008, we had net current assets of RMB5.5 million.

     Further, we had a net operating cash outflow in 2007 because our operating costs exceeded the
revenue we generated from the 50 tpd ore processing facility at the Shirengou Gold Mine (which is no
longer in use). We do not expect this negative cash flow situation to continue as we have commenced
operation of the ore processing facilities located at the Nantaizi Gold Mine and the Luotuochang Gold
Mine.

       There can be no assurance that our business will generate sufficient cash flow from operations in
the future to service any future debts and make necessary capital expenditures, in which case we may
seek additional financing, dispose of certain assets or seek to refinance some of or all our future debts.
We have an existing RMB200 million short-term borrowing facility with Guangdong Development Bank
Co., Ltd. (Huizhou Branch) which remains unutilized and has not been affected by the recent financial
turmoil. However, Guangdong Development Bank Co., Ltd. (Huizhou Branch) may terminate its
commitment under this borrowing facility if certain events were to occur, such as: (i) Fubon Industrial’s
business suffers serious deterioration or loses its current business reputation, (ii) Fubon Industrial
transfers properties or funds to third parties in an attempt to avoid its obligation to repay the loan, or
(iii) any other condition occurs that would result in Fubon Industrial not being able to repay the loan.
We do not expect to utilize such RMB200 million short-term borrowing facility in the next 24-month
period. Although we currently have no intention to obtain any new borrowing facilities, we may in the



                                                 – 49 –
                                            RISK FACTORS


future seek to enter into such facilities and, if the current credit liquidity issues persist, we may have
difficulty in obtaining such facilities or renewing our existing facility with Guangdong Development
Bank Co., Ltd. (Huizhou Branch). If we draw down on our existing short-term borrowing facility or on
a new short-term facility, we may need to allocate a portion of our cash flow to service these
obligations. In the event that we are unable to meet our liabilities when they are due or if our creditors
take legal action against us for payment, we may have to liquidate our long-term assets to repay our
creditors. We may have difficulty converting our long-term assets into current assets in a negative
current liability situation and may suffer losses upon the sale of our long-term assets. This would
materially and adversely affect our operations and prevent us from successfully implementing our
business strategy.

  We rely principally on dividends and other distributions on equity paid by our PRC subsidiaries to
  fund cash and financing requirements, and limitations on the ability of our PRC subsidiaries to
  pay dividends to us could have a material adverse effect on our ability to conduct our business.

      We are a holding company and rely to a significant extent on dividends and other distributions on
equity paid by our PRC subsidiaries, Fubon Industrial, Chifeng Fuqiao, Shirengou Mining, Nantaizi
Mining and Luotuochang Mining, for our cash and financing requirements, including the funds
necessary to pay dividends and other cash distributions to our shareholders, service any debt we may
incur and pay our expenses. If any of our PRC subsidiaries incurs debt in the future, the instruments
governing the debt may restrict its ability to pay dividends or make other distributions to us.

      Furthermore, relevant PRC laws, rules and regulations permit payments of dividends by each of
our PRC subsidiaries only out of its retained earnings, if any, determined in accordance with PRC
accounting standards and regulations. Under PRC laws, rules and regulations, each of the entities
incorporated in the PRC is required to set aside a portion of its net income each year to fund certain
statutory reserves. These reserves, together with the registered equity, are not distributable as cash
dividends. As a result of these PRC laws, rules and regulations, our PRC subsidiaries are restricted in
their ability to transfer a portion of their respective net assets to their shareholders as dividends.

       In addition, certain recent PRC regulations may also limit the ability of our PRC subsidiaries to
pay dividends to us. Please refer to the section headed ‘‘Risk Factors — Risks Relating to Conducting
Operations in the PRC — PRC regulations relating to the establishment of offshore special purpose
companies by PRC residents may subject our PRC resident shareholders or our PRC subsidiaries to
liabilities or penalties, limit our ability to inject capital into our PRC subsidiaries or limit the ability of
our PRC subsidiaries to distribute profits to us’’ in this prospectus. Limitations on the ability of our
PRC subsidiaries to pay dividends to us could limit our ability to grow, make investments or
acquisitions that could be beneficial to our businesses, pay dividends to our shareholders, or otherwise
fund and conduct our business.

  Our risk management and internal control systems improvements may not be adequate or effective.

     We have established risk management and internal control systems consisting of relevant
organizational framework policies, procedures and risk management methods that we believe are
appropriate for our business operations. We seek to continue to improve our risk management system
from time to time. However, due to the inherent limitations in the design and implementation of risk
management and internal control systems, we cannot assure you that our risk management and internal
control systems will be sufficiently effective in identifying and preventing all such risks.




                                                    – 50 –
                                          RISK FACTORS


      In addition, as some of our risk management and internal control policies and procedures are
relatively new, we may need to establish and implement additional risk management and internal control
policies and procedures to further improve our systems from time to time. Since our risk management
and internal control depend on their implementation by our employees, we cannot assure you that such
implementation will not involve any human errors or mistakes. If we fail to timely adapt and implement
our risk management policies and procedures, our business, results of operations and financial condition
could be materially and adversely affected.

RISKS RELATING TO CONDUCTING OPERATIONS IN THE PRC

  Our business, financial condition, results of operations and prospects could be negatively affected
  by PRC political, economic and legal developments and changes to government policies.

     All of our operating assets are located in the PRC and all of our revenues are derived from our
operations in the PRC. Our results of operations and prospects are subject, to a significant degree, to
economic, political and legal developments in the PRC. The economy of the PRC differs from the
economies of most developed countries in many respects, including the extent of government
involvement, the level of development, the growth rate, and government control of foreign exchange.

     The PRC economy has traditionally been centrally planned. Since 1978, the PRC government has
been promoting reforms of its economic and political systems. These reforms have brought about
marked economic growth and social progress in the PRC, and the economy of the PRC has shifted
gradually from a planned economy towards a market-oriented economy. We believe that we have
benefited from the economic reforms implemented by the PRC government and its economic policies
and measures. However, there is no assurance that the PRC government will continue to pursue
economic reforms. In addition, while the PRC’s economy has experienced significant growth in the last
two decades, growth has been uneven across both geographic regions and the various sectors of the
economy. Our business, results of operations, financial condition and prospect may be adversely affected
by the PRC government’s political, economic and social policies, tax regulations or policies, and
regulations affecting the gold mining industry.

      In addition, we have an option to acquire the mining rights and related assets of two gold mines in
Xinjiang. Xinjiang has been affected by periodical trans-national terrorist acts and uprisings of political
or religious groups since early 1990s. The unstable political conditions in Xinjiang resulting from the
actions of such political or religious groups in Xinjiang or neighboring areas in Central Asia may disrupt
our future operations in Xinjiang and, in turn, adversely affect our business and results of operations.

  Our business could be negatively affected by changes and uncertainties in the PRC legal system.

      The PRC legal system is based on the civil law system. Unlike the common law system, prior legal
decisions and judgments have limited significance for guidance. The PRC is still in the process of
developing a comprehensive statutory framework. Since 1979, the PRC government has established a
commercial law system, and has made significant progress in promulgating laws and regulations relating
to economic affairs and matters such as corporate organization and governance, foreign investment,
commerce, taxation and trade. However, many of these laws and regulations are relatively new, and the
implementation and interpretation of these laws and regulations remain uncertain in many areas. In
addition, the PRC legal system is based in part on government policies and administrative rules that may
have a retroactive effect. As a result, we may not be aware of our violation of these policies and rules




                                                  – 51 –
                                         RISK FACTORS


until some time after the violation. Furthermore, the legal protections available to us under these laws,
rules and regulations may be limited. Any litigation or regulatory enforcement action in China may be
protracted and could result in substantial costs and diversion of resources and management attention.

  Government control of currency conversion and changes in the exchange rate between the RMB
  and other currencies could negatively affect our financial condition, operations and our ability to
  pay dividends.

      RMB currently is not a freely convertible currency. We receive all of our revenues in RMB and
will need to convert RMB to foreign currency for payment of dividends, if any, to holders of our Shares.
Under the current foreign exchange regulations in the PRC, our PRC subsidiaries will be permitted,
upon completion of the Global Offering, to effect foreign exchange for current-account transactions
(including the distribution of dividends) through accounts permitted by the PRC government. Under
existing PRC foreign exchange regulations, payments of current account items, including profit
distributions, interest payments and expenditures from trade related transactions, can be made in foreign
currencies without prior approval from SAFE by complying with certain procedural requirements.
However, approval from SAFE or its local branch is required where RMB is to be converted into foreign
currency and remitted out of China to pay capital expenses such as the repayment of loans denominated
in foreign currencies. There can be no assurance that the PRC government will not in the future impose
restrictions on foreign exchange transactions for current-account items, including the payment of
dividends.

      All our revenue and operating costs are denominated in RMB. As the domestic gold price (which
is expressed in RMB) moves in line with global gold price (which is typically expressed in U.S.
dollars), the price in RMB we can receive for our concentrates depends on the RMB exchange rate
against U.S. dollar. The exchange rate of the RMB against the U.S. dollar and other foreign currencies
fluctuates and is affected by, among other things, the policies of the PRC government and changes in
the PRC’s and international political and economic conditions. Since 1994, the conversion of RMB into
foreign currencies, including U.S. dollars, has been based on rates set by the PBOC, which are set daily
based on the previous business day’s interbank foreign exchange market rates and current exchange rates
on the world financial markets. From 1994 to 20 July 2005, the official exchange rate for the conversion
of RMB to U.S. dollars was generally stable. On 21 July 2005, the PRC government introduced a
managed floating exchange rate system to allow the value of the RMB to fluctuate within a regulated
band based on market supply and demand and by reference to a basket of currencies. On the same day,
the value of the RMB appreciated by approximately 2% against the U.S. dollar. The PRC government
has since made, and in the future may make, further adjustments to the exchange rate system. From 21
July 2005 to 23 January 2009, the value of the RMB has appreciated by approximately 21.1% against
the U.S. dollar.

      There remains significant international pressure on the PRC government to adopt a more flexible
currency policy, which, together with domestic policy considerations, could result in a further and more
significant appreciation of the RMB against the U.S. dollar, the Hong Kong dollar or other foreign
currency. If the appreciation of RMB continues, it may reduce the RMB gold price as well as our profits
in RMB terms. Moreover, to the extent that we need to convert the proceeds from the Global Offering
and future financing into the RMB for our operations, appreciation of the RMB against the relevant
foreign currencies would have an adverse effect on the RMB amount we would receive from the




                                                 – 52 –
                                          RISK FACTORS


conversion. On the other hand, because the dividends on our Shares, if any, will be paid in Hong Kong
dollars, any devaluation of the RMB against the Hong Kong dollar could adversely affect the amount of
any cash dividends on our Shares in Hong Kong dollar terms.

  The dividends we receive from our PRC subsidiaries and our global income may be subject to PRC
  tax under the newly enacted PRC Enterprise Income Tax Law, which would have a material
  adverse effect on our business.

      We are incorporated under the laws of the Cayman Islands and hold interests in our PRC
subsidiaries. As foreign legal persons, dividends derived from our business operations in the PRC are
currently not subject to income tax under PRC law. However, we cannot assure you that such dividends
will continue to be exempt from PRC income tax. A new law, the PRC Enterprise Income Tax Law and
its implementation rules were recently enacted and became effective on 1 January 2008. Under this law
and its implementation rules, if we are deemed to be a non-PRC tax resident enterprise without an office
or premises in the PRC, a withholding tax at the rate of 10% will be applicable to any dividends paid to
us by our PRC incorporated subsidiaries, unless we are entitled to reduction or elimination of such tax,
including by tax treaties.

      In addition, the new laws provide that, if an enterprise incorporated outside the PRC has its ‘‘de
facto management organization’’ located within the PRC, such enterprise may be recognized as a PRC
tax resident enterprise and thus may be subject to enterprise income tax at the rate of 25% on its
worldwide income. Substantially all members of our management are located in the PRC. We may
therefore be deemed a PRC tax resident enterprise and therefore subject to an enterprise income tax rate
of 25% on our worldwide income (including dividend income received from our subsidiaries) which
excluded the dividends received directly from another PRC tax resident. As a result of these changes
described above, our historical operating results will not be indicative of our operating results for future
periods and the value of our Shares could be adversely affected.

  Dividends payable by us to our foreign investors and gain on the sale of our Shares may become
  subject to taxes under PRC tax laws.

      Under the PRC Enterprise Income Tax Law and its implementation rules issued by the State
Council, PRC income tax at the rate of 10% is applicable to dividends payable to investors that are
‘‘non-resident enterprises’’, which do not have an establishment or place of business in the PRC, or
which have such establishment or place of business but the relevant income is not effectively connected
with the establishment or place of business, to the extent such dividends have their sources within the
PRC. Similarly, any gain realized on the transfer of Shares by such investors is also subject to 10% PRC
income tax if such gain is regarded as income derived from sources within the PRC. If we are
considered a PRC ‘‘resident enterprise’’, it is unclear whether dividends we pay with respect to our
Shares, or the gain our shareholders may realize from the transfer of our Shares, would be treated as
income derived from sources within the PRC and be subject to PRC tax. If we are required under the
PRC Enterprise Income Tax Law to withhold PRC income tax on dividends payable to our non-PRC
investors that are ‘‘non-resident enterprises’’, or if our shareholders are required to pay PRC income tax
on the transfer of our Shares, the value of our shareholders’ investment in our Shares may be materially
and adversely affected.




                                                  – 53 –
                                          RISK FACTORS


  PRC regulations relating to loans to and direct investment by offshore holding companies in PRC
  entities may delay or prevent us from using the proceeds of this offering to contribute additional
  capital or make loans to our PRC subsidiaries.

      We are an offshore holding company conducting our operations in China through our PRC
subsidiaries. In utilizing the proceeds we expect to receive from the Global Offering for the purposes
described in the section headed ‘‘Future Plans and Use of Proceeds’’ in this prospectus, we may make
loans or additional capital contributions to our PRC subsidiaries.

      Any loans to Fubon Industrial, which is treated as a foreign invested enterprise under PRC law, are
subject to PRC regulations and foreign exchange loan registrations. For example, loans by us to Fubon
Industrial to finance its activities cannot exceed statutory limits and must be registered with SAFE or its
local counterpart. We may also determine to finance Fubon Industrial by means of capital contributions.
These capital contributions must be approved by the Ministry of Commerce or its local counterpart.

      We cannot assure you that we will be able to complete the necessary government registrations or
obtain the necessary government approvals on a timely basis, if at all, with respect to future loans or
capital contributions by us to our PRC subsidiaries. If we fail to complete such registrations or obtain
such approvals, our ability to use the proceeds from the Global Offering to capitalize or otherwise fund
our PRC operations may be negatively affected, which could materially and adversely affect our
liquidity and our ability to fund and expand our business.

  PRC regulations relating to the establishment of offshore special purpose companies by PRC
  residents may subject our PRC resident shareholders or our PRC subsidiaries to liabilities or
  penalties, limit our ability to inject capital into our PRC subsidiaries or limit the ability of our PRC
  subsidiaries to distribute profits to us.

      SAFE issued a public notice in October 2005, namely SAFE Circular No. 75, requiring PRC
residents to register with the local SAFE branch before establishing or controlling any company outside
of China for the purpose of capital financing with assets or equities of PRC companies, referred to in the
notice as an ‘‘offshore special purpose company’’. PRC residents that are shareholders of offshore
special purpose companies established before 1 November 2005 were required to register with the local
SAFE branch before 31 March 2006. In addition, any PRC resident that is a shareholder of an offshore
special purpose company is required to amend its SAFE registration with respect to that offshore special
purpose company in connection with any increase or decrease of capital, transfer of shares, merger,
division, equity investment, creation of any security interest over any assets located in China or any
other material change in share capital. In May 2007, SAFE issued relevant guidance to its local branches
with respect to the operational process for SAFE registration, which standardized more specific and
stringent supervision on the registration relating to SAFE Circular No. 75 and imposed obligations on
onshore subsidiaries of offshore special purpose companies to coordinate with and supervise the
shareholders of the offshore entity who are PRC residents to complete the SAFE registration process. As
advised by our legal adviser as to PRC laws, King & Wood, since Mr Wu has completed his SAFE
registration for his foreign investment at the relevant department of foreign exchange, our Company and
our controlling shareholders are considered to be in compliance with all relevant rules, regulations and
registration requirements imposed by the SAFE. However, we may not be fully informed of the
identities of all our future shareholders who are PRC residents. Moreover, we do not have control over
our shareholders and cannot assure you that all of our PRC resident beneficial owners will comply with
SAFE Circular No. 75. The failure of our shareholders who are PRC residents to register or amend their
SAFE registrations in a timely manner pursuant to SAFE Circular No. 75 or the failure of future



                                                  – 54 –
                                          RISK FACTORS


shareholders who are PRC residents to comply with the registration procedures set forth in SAFE
Circular No. 75 may subject such beneficial owners and/or our PRC subsidiaries to fines and legal
sanctions and may also limit our ability to contribute additional capital to our PRC subsidiaries, limit
the ability of our PRC subsidiaries to distribute dividends to our Company or otherwise materially and
adversely affect our business.

  Restrictions on foreign investment in the PRC mining industry could materially and adversely
  affect our business and results of operations.

     In the PRC, foreign companies have in the past been, and are currently, required to operate within
a framework that is different from that imposed on domestic PRC companies. However, the PRC
government has been opening up opportunities for foreign investment in mining projects and this
process is expected to continue, especially following the PRC’s accession into the WTO. However, if the
PRC government should reverse this trend, or impose greater restrictions on foreign companies, or seek
to nationalize our PRC operations, our business and results of operations could be materially and
adversely affected. For a description of the laws and regulations applicable to foreign mining companies,
please refer to the section headed ‘‘The PRC Laws and Regulations Relating to the Industry’’ in this
prospectus.

  Failure to comply with PRC regulations in respect of the registration of our PRC citizen
  employees’ share options may subject such employees or us to fines and legal or administrative
  sanctions.

      Pursuant to the Implementation Rules of the Administration Measure for Individual Foreign
Exchange (個人外匯管理辦法實施細則), or the Individual Foreign Exchange Rules, issued on 5 January
2007 by SAFE and relevant guidance issued by SAFE in March 2007, PRC citizens who are granted
shares or share options by an overseas listed company according to its employee share option or share
incentive plan are required, through the PRC subsidiary of such overseas listed company or other
qualified PRC agents, to register with SAFE and complete certain other procedures related to the share
option or other share incentive plan. In order to comply with the requirements of the Implementation
Rules of the Administration Measure for Individual Foreign Exchange (個人外匯管理辦法實施細則),
we will require our employees to register with and obtain approval from SAFE prior to joining the Share
Option Scheme. Foreign exchange income from the sale of shares or dividends distributed by the
overseas listed company must be remitted into China. In addition, the overseas listed company or its
PRC subsidiary or other qualified PRC agent is required to appoint an asset manager or administrator
and a custodian bank, as well as open foreign currency accounts to handle transactions relating to the
share option or other share incentive plan. We and our PRC citizen employees who have been granted
share options, or PRC option holders, will be subject to these rules upon the listing of our Shares on the
Stock Exchange. If we or our PRC option holders fail to comply with these rules, we or our PRC option
holders may be subject to fines and legal or administrative sanctions.

  Outbreak of the Severe Acute Respiratory Syndrome (‘‘SARS’’), the H5N1 strain of bird flu
  (‘‘Avian Flu’’) or other epidemics could severely disrupt our business and operations.

     From December 2002 to June 2003, China and other countries experienced an outbreak of a highly
contagious form of atypical pneumonia now known as SARS. At the height of the SARS epidemic,
many businesses in China were closed by the PRC government to prevent transmission of SARS. Also,




                                                 – 55 –
                                          RISK FACTORS


certain Asian countries, including the PRC, have recently encountered incidents of Avian Flu. This
disease, which is spread through poultry populations, is capable in certain circumstances of being
transmitted to humans and could be fatal.

      If any of our employees or our third-party contractors’ employees are identified as a possible
source of spreading SARS, Avian Flu or any other similar epidemic, we may be required to quarantine
the employees who have been suspected of becoming infected, as well as others who have come into
contact with those employees. We may also be required to disinfect the affected operating facilities,
which could adversely affect our operations. Even if we are not directly affected by the epidemic, an
outbreak of SARS, Avian Flu or other similar epidemics, whether inside or outside the PRC, could slow
down or disrupt economic activities generally, which could in turn adversely affect our operations and
the price of our Shares.

RISKS RELATING TO THE GLOBAL OFFERING

  There has been no prior public market for our Shares.

      Prior to the Global Offering, there has been no public market for our Shares. The Offer Price for
our Shares will be determined by the Joint Bookrunners (on behalf of the Underwriters), the Selling
Shareholder and us on the Price Determination Date. The Offer Price may not be indicative of the price
at which our Shares will trade following the completion of the Global Offering. Moreover, there can be
no assurance that there will be an active trading market for our Shares, or if it exists, that it can be
sustained following the completion of the Global Offering, or that the price at which our Shares will
trade will not decline below the Offer Price. In addition, the price and trading volume of our Shares may
be highly volatile. Factors such as variations in our revenue, earnings and cash flow, announcements of
new technologies, strategic alliances or acquisitions, safety or environmental accidents suffered by us or
other similar mining companies or fluctuations in the market prices of gold and the other metals
contained in our concentrates could cause large and sudden changes in the volume and price at which
our Shares will trade.

  Investors should not place undue reliance on industry and market information and statistics
  derived from official government publications contained in this prospectus.

       This prospectus contains information and statistics relating to the PRC and international gold
industry and markets. With respect to information and statistics derived from various official
government publications, while we have exercised reasonable care in compiling and reproducing such
information and statistics, it has not been independently verified by us or any of our affiliates or
advisers, nor by the Underwriters or any other parties involved in the Global Offering or their respective
affiliates or advisers. In particular, due to possibly flawed or ineffective collection methods or
discrepancies between published information and market practice relating to the PRC, such information
and statistics may be inaccurate or may not be comparable to information and statistics produced with
respect to other countries. Further, there can be no assurance that such information and statistics are
stated or compiled on the same basis or with the same degree of accuracy as the case may be in other
countries. We cannot ensure the accuracy of such information and statistics, and such information and
statistics may not be consistent with other information prepared within or outside the PRC. Prospective
investors should not place undue reliance on any of such information and statistics contained in this
prospectus.




                                                 – 56 –
                                           RISK FACTORS


  Future issuances or sales, or perceived issuances or sales, of substantial amounts of our Shares in
  the public market could materially and adversely affect the prevailing market price of our Shares
  and our ability to raise capital in the future.

      The market price of our Shares could decline as a result of future sales of substantial amounts of
our Shares or other securities relating to our Shares in the public market, including by our substantial
shareholders, or the issuance of new Shares by us, or the perception that such sales or issuances may
occur. Future sales, or perceived sales, of substantial amounts of our Shares could also materially and
adversely affect our ability to raise capital in the future at a time and at a price favorable to us, and our
shareholders would experience dilution in their holdings upon issuance or sale of additional securities in
the future.

  The market price of our Shares could be lower than the Offer Price.

      The initial price to the public of our Shares sold in the Global Offering will be determined on the
Price Determination Date. However, our Shares will not commence trading on the Stock Exchange until
the Share certificates are delivered, which is expected to be the fifth Business Day after the Price
Determination Date. As a result, investors may not be able to sell or otherwise deal in our Shares during
that period. Accordingly, holders of our Shares are subject to the risk that the market price of our Shares
could be lower than the Offer Price.

  You should    read the entire prospectus carefully and we strongly caution you not to place any
  reliance on    any information contained in press articles or disseminated through other media
  relating to   us and/or the Global Offering, certain of which may not be consistent with the
  information   contained in this prospectus.

      Prior to the publication of this prospectus, there has been press and media coverage regarding us
and the Global Offering such as in the Apple Daily, Headline Daily and The Standard published on 13
January 2009, the South China Morning Post published on 20 January 2009, and the Hong Kong
Economic Journal published on 21 January 2009, the disclosure of which has not been authorized by us
but included certain financial information, projections, valuations and other information about us (the
‘‘Unauthorized Information’’). We wish to emphasize to potential investors that we do not accept any
responsibility for any such Unauthorized Information. The Unauthorized Information was not sourced
from or approved by us. We make no representation as to the appropriateness, accuracy, completeness or
reliability of any of the Unauthorized Information. To the extent that any of the Unauthorized
Information is inconsistent with, or conflicts with, the information contained in this prospectus, we
disclaim it. Accordingly, prospective investors are cautioned to make their investment decisions based
solely on the information contained in this prospectus and should not rely on any of the Unauthorized
Information.




                                                   – 57 –
WAIVERS FROM STRICT COMPLIANCE WITH THE LISTING RULES AND THE COMPANIES ORDINANCE


     The following material waivers from the basic conditions in relation to qualifications for Listing
have been applied for and granted from the Stock Exchange and SFC.

WAIVER FROM RULE 4.04(1) OF THE LISTING RULES AND PARAGRAPH 27 OF PART I
AND PARAGRAPH 31 OF PART II OF THE THIRD SCHEDULE TO THE COMPANIES
ORDINANCE

      Rule 4.04(1) of the Listing Rules stipulates that our Company is required to include in this
prospectus an accountants’ report covering the consolidated results of our Group in respect of each of
the three financial years immediately preceding the issue of this prospectus.

      Paragraph 27 of Part I of the Third Schedule to the Companies Ordinance requires our Company to
set out in this prospectus a statement as to, inter alia, the gross trading income or sales turnover during
the three years preceding the date of this prospectus, including an explanation of the method used for
the computation of such income or turnover and a reasonable break-down between the more important
trading activities.

      Paragraph 31 of Part II of the Third Schedule to the Companies Ordinance requires our Company
to include in this prospectus a report by the auditors with respect to, inter alia, the profits and losses
and assets and liabilities of our Group in respect of each of the three financial years immediately
preceding the issue of this prospectus.

       The accountants’ report of our Group for each of the three financial years ended 31 December
2007 and the ten months ended 31 October 2008 has been prepared and is set forth in Appendix I to this
prospectus. However, strict compliance with Rule 4.04 of the Listing Rules and paragraphs 27 and 31 of
the Third Schedule to the Companies Ordinance would create undue burden on us, as there would not be
sufficient time for us and the reporting accountants to finalize the audited financial statements for the
full financial year ended 31 December 2008 for inclusion in this prospectus.

       In such circumstances, an application has been made to the Stock Exchange for a waiver from
strict compliance with Rule 4.04(1) of the Listing Rules, and such waiver has been granted by the Stock
Exchange subject to the condition that the Listing Date is on or before 31 March 2009.

     An application has also been made to the SFC for a certificate of exemption from strict compliance
with paragraph 27 of Part I and paragraph 31 of Part II of the Third Schedule to the Companies
Ordinance in relation to the inclusion of the accountants’ report for the full year ended 31 December
2008 in this prospectus on the ground that it would be unduly burdensome for the Company to do so
and a certificate of exemption has been granted by the SFC under section 342(A) of the Companies
Ordinance.

     Our Directors have confirmed that they have performed sufficient due diligence on our Group to
ensure that, save as disclosed in this prospectus, up to the date of this prospectus, there has been no
material adverse change in the financial position or prospects of our Group since 31 October 2008 and
that there is no event since 31 October 2008 which would adversely and materially affect the
information shown in the accountants’ report of our Group as set forth in Appendix I to this prospectus.
In coming to the abovementioned conclusions, our Directors had, among other things, reviewed and
conducted financial due diligence on the unaudited management accounts of our Group for the one
month ended 30 November 2008, and made enquiries in respect of our Group’s production volume,
average sales price for our products and our five largest customers.




                                                  – 58 –
WAIVERS FROM STRICT COMPLIANCE WITH THE LISTING RULES AND THE COMPANIES ORDINANCE


WAIVER PURSUANT TO RULES 8.05 AND 18.03 OF THE LISTING RULES

       Pursuant to Rule 8.05 of the Listing Rules, an issuer must satisfy one of the three tests in relation
to: (i) profit; (ii) market capitalization, revenue and cash flow; or (iii) market capitalization and revenue
requirements. Chapter 18 of the Listing Rules applies to mineral companies. Under Rules 18.03 and 8.05
of the Listing Rules, the requirements of Rule 8.05 of the Listing Rules may not apply if the Stock
Exchange is satisfied that the directors and management of the issuer have sufficient and satisfactory
experience of at least three years in mining and/or exploration activities. We have applied for, and the
Stock Exchange has granted, a waiver from strict compliance with Rule 8.05 of the Listing Rules in
accordance with the reasoning under Rules 18.03 and 8.05 of the Listing Rules.

WAIVER FROM RULE 8.12 OF THE LISTING RULES

      Pursuant to Rule 8.12 of the Listing Rules, an issuer must have a sufficient management presence
in Hong Kong, which normally means that at least two of its executive directors must be ordinarily
resident in Hong Kong. We do not and, for the foreseeable future, will not have a sufficient management
presence in Hong Kong for the purposes of satisfying the requirements under Rule 8.12 of the Listing
Rules. We have applied for a waiver from strict compliance with Rule 8.12 of the Listing Rules on the
basis that, as our core business operations are based, managed and conducted in the PRC, our
management is best able to attend to its functions by being based in the PRC. We have received from
the Stock Exchange a waiver from compliance with Rule 8.12 of the Listing Rules subject to the
following conditions:

     (a)   we have appointed two authorized representatives pursuant to Rule 3.05 of the Listing Rules
           who will act as our principal communication channel with the Stock Exchange and will
           ensure that they comply with the Listing Rules at all times. The two authorized
           representatives are Mr Xiao Zuhe, an independent non-executive Director, and Ms Lam Yuen
           Hung, our joint company secretary and qualified accountant. Each of the authorized
           representatives is an ordinary resident in Hong Kong and the authorized representatives will
           be available to meet with the Stock Exchange in Hong Kong within a reasonable time frame
           upon the request of the Stock Exchange and will be readily contactable by telephone,
           facsimile or e-mail;

     (b)   in compliance with Rule 3A.19 of the Listing Rules, we shall retain a qualified institution to
           act as compliance advisor for a period commencing on the Listing Date and ending on the
           date on which we distribute the annual report for the first full financial year commencing
           after the Listing Date in accordance with Rule 13.46 of the Listing Rules to provide us with
           advices on the obligation in compliance with the Listing Rules, all other applicable laws,
           rules, codes and guidelines. The compliance advisor will advise on on-going compliance
           requirements and other issues arising under the Listing Rules and other applicable laws and
           regulations in Hong Kong after listing and, where our authorized representatives are
           unavailable, act as an additional channel of communication between the Stock Exchange and
           us at least for the period commencing from the Listing Date and ending on the date that we
           publish our first full financial year results pursuant to Rule 3A.19 of the Listing Rules;

     (c)   both the authorized representatives have means to contact all members of the Board
           (including the independent non-executive Directors) promptly at all times as and when the
           Stock Exchange wishes to contact the members of the Board for any matters. We will
           implement a policy whereby (a) each Director will provide his or her mobile phone number,



                                                   – 59 –
WAIVERS FROM STRICT COMPLIANCE WITH THE LISTING RULES AND THE COMPANIES ORDINANCE


           residential phone number, fax number and e-mail address to the authorized representatives;
           (b) each executive Director will provide valid phone numbers or means of communication to
           the authorized representatives when he or she is traveling; and (c) each executive Director
           will provide his or her mobile phone number, residential phone number, office phone
           number, fax number and e-mail address to the Stock Exchange; and

     (d)   all Directors who are not ordinary residents in Hong Kong have confirmed that they possess
           valid travel documents to visit Hong Kong and will be able to meet with the relevant
           members of the Stock Exchange within a reasonable period of time, when required.

WAIVER FROM RULE 8.17 OF THE LISTING RULES

      Pursuant to Rule 8.17 of the Listing Rules, the secretary of our Company must be a person who is
ordinarily resident in Hong Kong, and who has the requisite knowledge and experience to discharge the
functions of a company secretary and is either (i) a member of the Hong Kong Institute of Chartered
Secretaries, a solicitor or barrister or a professional accountant, or (ii) an individual who, by virtue of
his academic or professional qualifications or relevant experience, is in the opinion of the Stock
Exchange capable of discharging those functions.

       We have appointed Ms Yu Lulu as one of the joint company secretaries. Ms Yu does not possess
full qualification as required under Rule 8.17 of the Listing Rules. Accordingly we have also appointed
Ms Lam Yuen Hung as another joint company secretary. Ms Lam is a qualified accountant and is also
an Associate Member of Hong Kong Institute of Certified Public Accountants and a Fellow Member of
the Association of Chartered Certified Accountants. Accordingly, Ms Lam fully complies with the
requirements set out under Rule 8.17 of the Listing Rules. Ms Yu is experienced in business
management and has a thorough understanding in the operations of our Group; however Ms Yu does not
possess a qualification as stipulated in Rule 8.17 of the Listing Rules and may not be able to solely
fulfill the requirements as stipulated under Rule 8.17 of the Listing Rules. As such, our Company has
appointed Ms Lam to act as a joint company secretary and to provide assistance to Ms Yu so as to
enable her to acquire the relevant experience (as required under Rule 8.17(3) of the Listing Rules) and
to duly discharge the functions of a company secretary.

     We propose to engage Ms Lam as joint company secretary for a minimum period of three years
commencing from the Listing Date. During her engagement period, Ms Lam will ensure that at all times
she will be available to provide the assistance as described above. Ms Lam will also provide training to
Ms Yu by introducing her the relevant provisions and requirements of the Listing Rules to enhance and
improve Ms Yu’s knowledge and familiarity with the requirements of the Listing Rules.

      The waiver is valid for an initial period of three years from the Listing Date. Upon expiry of the
three-year period, our Company will re-evaluate the qualifications of Ms Yu to determine whether the
requirements as stipulated in Rule 8.17 of the Listing Rules can be satisfied.




                                                  – 60 –
INFORMATION ABOUT THIS PROSPECTUS AND THE GLOBAL OFFERING


DIRECTORS’ RESPONSIBILITY FOR THE CONTENTS OF THIS PROSPECTUS

      This prospectus contains particulars given in compliance with the Companies Ordinance, the
Securities and Futures (Stock Exchange Listing) Rules and the Listing Rules for the purpose of giving
information to the public with regard to us. Our Directors collectively and individually accept full
responsibility for the accuracy of the information contained in this prospectus. Having made all
reasonable enquiries, our Directors confirm, that to the best of their knowledge and belief there are no
other facts the omission of which would make any statement in this prospectus misleading.

INFORMATION ON THE GLOBAL OFFERING

      The Offer Shares are offered solely on the basis of the information contained and representations
made in this prospectus and the Application Forms and on the terms and subject to the conditions set
out herein and therein. No person is authorized to give any information in connection with the Global
Offering or to make any representation not contained in this prospectus, and any information or
representation not contained herein must not be relied upon as having been authorized by us, the Selling
Shareholder, the Sole Global Coordinator, the Underwriters, any of their respective directors, agents,
employees or advisors or any other party involved in the Global Offering.

      Details of the structure of the Global Offering, including its conditions, are set out in the section
headed ‘‘Structure of the Global Offering’’ in this prospectus, and the procedures for applying for Hong
Kong Offer Shares are set out in the section headed ‘‘How to Apply for Hong Kong Offer Shares’’ in
this prospectus and in the relevant Application Forms.

UNDERWRITING

     This prospectus is published solely in connection with the Hong Kong Public Offering, which
forms part of the Global Offering. For applicants under the Hong Kong Public Offering, this prospectus
and the Application Forms set out the terms and conditions of the Hong Kong Public Offering. Details
of the terms of the Global Offering are described in the section headed ‘‘Structure of the Global
Offering’’ in this prospectus.

      The Listing is sponsored by the Sole Global Coordinator. The Hong Kong Public Offering is fully
underwritten by the Hong Kong Underwriters under the terms of the Hong Kong Underwriting
Agreement, subject to the agreement on the Offer Price between the Joint Bookrunners (on behalf of the
Underwriters), the Selling Shareholder and us on the Price Determination Date. For details of the
Underwriters and the underwriting arrangements, please refer to the section headed ‘‘Underwriting’’ in
this prospectus.

RESTRICTIONS ON OFFER AND SALE OF THE OFFER SHARES

     Each person acquiring the Hong Kong Offer Shares will be required to, or be deemed by his/her
acquisition of Hong Kong Offer Shares to, confirm that he/she is aware of the restrictions on offers of
the Hong Kong Offer Shares described in this prospectus.




                                                  – 61 –
INFORMATION ABOUT THIS PROSPECTUS AND THE GLOBAL OFFERING


      No action has been taken in any jurisdiction other than Hong Kong to permit an offering of the
Hong Kong Offer Shares or the distribution of this prospectus in any jurisdiction other than Hong Kong.
Accordingly, this prospectus may not be used for the purpose of, and does not constitute an offer or
invitation in any jurisdiction or in any circumstances in which such an offer or invitation is not
authorized or to any person to whom it is unlawful to make such an offer or invitation. The distribution
of this prospectus and the offering and sales of the Hong Kong Offer Shares in other jurisdictions are
subject to restrictions and may not be made except as permitted under the applicable securities laws of
such jurisdictions pursuant to registration with or authorization by the relevant securities regulatory
authorities or an exemption therefrom.

APPLICATION FOR LISTING ON THE STOCK EXCHANGE

      We have applied to the Listing Committee of the Stock Exchange for the listing of, and permission
to deal in the Shares in issue, the Offer Shares (including any additional Shares which may be issued
pursuant to the exercise of the Over-allotment Option) and any Shares which may be issued upon the
exercise of any options to be granted under the Share Option Scheme. Dealings in our Shares on the
Stock Exchange are expected to commence on 23 February 2009. None of our Shares or loan capital are
listed on or dealt in on any other exchange and no such listing or permission to list is being or proposed
to be sought in the near future.

      Under section 44B(l) of the Companies Ordinance, any allotment made in respect of any
application will be invalid if the listing of, and permission to deal in, our Shares on the Stock Exchange
is refused before the expiration of three weeks from the date of the closing of the application lists, or
such longer period (not exceeding six weeks) as may, within the said three weeks, be notified to our
Company by the Stock Exchange.

SHARES WILL BE ELIGIBLE FOR CCASS

      Subject to the granting of listing of, and permission to deal in, our Shares on the Stock Exchange
and the compliance with the stock admission requirements of HKSCC, our Shares will be accepted as
eligible securities by HKSCC for deposit, clearance and settlement in CCASS with effect from the date
of commencement of dealings in our Shares on the Stock Exchange or any other date HKSCC chooses.
Settlement of transactions between participants of the Stock Exchange is required to take place in
CCASS on the second Business Day after any trading day.

     All activities under CCASS are subject to the General Rules of CCASS and CCASS Operational
Procedures in effect from time to time.

      All necessary arrangements have been made for our Shares to be admitted into CCASS. If you are
unsure about the details of CCASS settlement arrangements and how such arrangements will affect your
rights and interests, you should seek the advice of your stockbrokers or other professional advisers.




                                                 – 62 –
INFORMATION ABOUT THIS PROSPECTUS AND THE GLOBAL OFFERING


PROFESSIONAL TAX ADVICE RECOMMENDED

       Potential investors in the Global Offering are recommended to consult their professional advisors if
they are in any doubt as to the taxation implications of subscribing for, purchasing, holding or disposal
of, and dealing in our Shares (or exercising rights attached to them). None of us, the Selling
Shareholder, the Sole Global Coordinator, the Underwriters, any of their respective directors or any
other person or party involved in the Global Offering accepts responsibility for any tax effects on, or
liabilities of, any person resulting from the subscription, purchase, holding or disposal of, dealing in, or
the exercise of any rights in relation to, our Shares.

REGISTER OF MEMBERS AND STAMP DUTY

    Our Company’s share register of members will be maintained by our Hong Kong Share Registrar,
Computershare Hong Kong Investor Services Limited in Hong Kong.

     Dealings in the Shares will be subject to Hong Kong stamp duty.

CURRENCY TRANSLATIONS

      Unless otherwise specified, amounts denominated in Hong Kong dollars and US$ have been
translated, for the purpose of illustration only, into Renminbi, and vice versa, in this prospectus at the
following rates:

     HK$1.00        :   RMB0.8814
     HK$7.7545      :   US$1.00

      No representation is made that any amounts in RMB, US$ or HK$ can be or could have been at
the relevant dates converted at the above rates or any other rates or at all.

LANGUAGE

     If there is any inconsistency between the Chinese names of the Chinese entities mentioned in this
prospectus and their English translations, the Chinese names shall prevail.

PROCEDURE FOR APPLICATION FOR HONG KONG OFFER SHARES

     The procedure for applying for Hong Kong Offer Shares is set out in the section headed ‘‘How to
Apply for Hong Kong Offer Shares’’ in this prospectus and on the relevant Application Forms.

STRUCTURE OF THE GLOBAL OFFERING

     Details of the structure of the Global Offering, including its conditions, are set out in the section
headed ‘‘Structure of the Global Offering’’ in this prospectus.

ROUNDING

     Any discrepancies in any table between totals and sums of amounts listed therein are due to
rounding.




                                                  – 63 –
    DIRECTORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING


DIRECTORS
Name                                      Address         Nationality
Executive Directors

Wang Zhentian (王振田)      Room 2, 4th Floor, Unit 1       Chinese
 (Chairman)              Building B5
                         Yulong Jia Yuan
                         New City District
                         Chifeng
                         Inner Mongolia
                         PRC

Qiu Haicheng (邱海成)       No. 753                         Chinese
                         Building 44
                         Jinkuang Jiashu Yuan
                         Tienan Neighborhood Committee
                         Wangfu Town
                         Songshan District
                         Chifeng
                         Inner Mongolia
                         PRC

Ma Wenxue (馬文學)          Room 2, 3rd Floor, Unit 3       Chinese
                         Building 3
                         Honghuagou Gold Mine
                         Gongjiao Alley
                         Qiaoxi Street Central
                         Songshan District
                         Chifeng
                         Inner Mongolia
                         PRC

Cui Jie (崔杰)             Room 1, 6th Floor, Unit 3       Chinese
                         Building 20
                         Songzhouyuan Area
                         Steel West Street
                         Hongshan District
                         Chifeng
                         Inner Mongolia
                         PRC




                             – 64 –
    DIRECTORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING


Name                                                     Address            Nationality
Lu Tianjun (陸田俊)                      Room 352, Block 5                    Chinese
                                      Songshan Dangxiao Jia Shu Building
                                      Hongshan District
                                      Chifeng
                                      Inner Mongolia
                                      PRC

Independent non-executive Directors

Mak Kin Kwong (麥建光)                   M6, Floral Villas                    Chinese
                                      18 Tso Wo Road
                                      Sai Kung
                                      The New Territories
                                      Hong Kong

Zhao Enguang (趙恩光)                    No. 17 Building                      Chinese
                                      Room 2–501
                                      Honglianzhongli
                                      Xuan Wu District
                                      Beijing
                                      PRC

Xiao Zuhe (肖祖核)                       Room 1404                            Chinese
                                      Block B
                                      Kam Pong House
                                      Kam Tai Court
                                      Ma On Shan
                                      The New Territories
                                      Hong Kong




                                          – 65 –
    DIRECTORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING


Sole Global Coordinator and          Citigroup Global Markets Asia Limited
  Sole Sponsor                       50th Floor
                                     Citibank Tower
                                     3 Garden Road
                                     Central
                                     Hong Kong

Joint Bookrunners and Joint Lead     Citigroup Global Markets Asia Limited
  Managers                           50th Floor
                                     Citibank Tower
                                     3 Garden Road
                                     Central
                                     Hong Kong

                                     Macquarie Capital Securities Limited
                                     Level 18, One International Finance Centre
                                     1 Harbour View Street
                                     Central
                                     Hong Kong

Auditors and reporting accountants   Deloitte Touche Tohmatsu
                                     Certified Public Accountants
                                     35th Floor
                                     One Pacific Place
                                     88 Queensway
                                     Hong Kong

Legal advisers to our Company        As to Hong Kong law:
                                     Mallesons Stephen Jaques
                                     37th Floor
                                     Two International Finance Centre
                                     8 Finance Street
                                     Central
                                     Hong Kong

                                     As to United States law:
                                     Latham & Watkins
                                     41st Floor, One Exchange Square
                                     8 Connaught Place
                                     Central
                                     Hong Kong




                                         – 66 –
    DIRECTORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING


                                     As to PRC law:
                                     King & Wood
                                     40th Floor
                                     Office Tower A
                                     Beijing Fortune Plaza
                                     7 Dongsanhuan Zhonglu
                                     Chaoyang District
                                     Beijing 100020
                                     PRC

                                     As to Cayman Islands law:
                                     Conyers Dill & Pearman
                                     2901, One Exchange Square
                                     8 Connaught Place
                                     Central
                                     Hong Kong

Legal advisers to the Underwriters   As to Hong Kong law:
                                     Gordon Ng & Co.
                                     in association with Hogan & Hartson LLP
                                     Suite 2101
                                     Two Pacific Place
                                     88 Queensway
                                     Hong Kong

                                     As to United States law:
                                     Hogan & Hartson LLP
                                     Suite 2101
                                     Two Pacific Place
                                     88 Queensway
                                     Hong Kong

                                     As to PRC law:
                                     Jun He Law Offices
                                     20th Floor
                                     China Resources Building
                                     8 Jianguomenbei Avenue
                                     Beijing 100005
                                     PRC

Independent Technical Expert         Behre Dolbear Asia, Inc.
                                     999 Eighteenth Street
                                     Suite 1500
                                     Denver CO 80202
                                     United States




                                         – 67 –
    DIRECTORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING


Property valuer             Savills Valuation and Professional Services Limited
                            23rd Floor, Two Exchange Square
                            Central
                            Hong Kong

Receiving bankers           Bank of China (Hong Kong) Limited
                            1 Garden Road
                            Hong Kong

                            Industrial and Commercial Bank of China (Asia) Limited
                            33rd Floor, ICBC Tower,
                            3 Garden Road,
                            Central, Hong Kong

Principal share registrar   Butterfield Fulcrum Group (Cayman) Limited
  and transfer office       Butterfield House
                            68 Fort Street
                            P.O. Box 609
                            Grand Cayman
                            KY1-1107
                            Cayman Islands

Hong Kong share registrar   Computershare Hong Kong Investor Services Limited
                            Shops 1712–1716
                            17th Floor, Hopewell Centre
                            183 Queen’s Road East
                            Wanchai, Hong Kong




                                – 68 –
                                      CORPORATE INFORMATION


Registered office                                    Cricket Square
                                                     Hutchins Drive
                                                     P.O. Box 2681
                                                     Grand Cayman KY1-1111
                                                     Cayman Islands

Principal place of business                          Room 1201B
  in Hong Kong                                       12/F, Java Commercial Centre
                                                     128 Java Road
                                                     North Point
                                                     Hong Kong

Headquarters of our Company                          3rd Floor, Block B
                                                     Caifu Building
                                                     Daming Street
                                                     Xincheng District
                                                     Chifeng City
                                                     Inner Mongolia
                                                     PRC

Website of the Company                               www.realgoldmining.com (1)

Joint company secretaries                            Ms Yu Lulu
                                                     Ms Lam Yuen Hung FCCA, HKICPA

Qualified accountant                                 Ms Lam Yuen Hung FCCA, HKICPA

Authorized representatives                           Mr Xiao Zuhe
                                                     Room 1404
                                                     Block B
                                                     Kam Pong House
                                                     Kam Tai Court
                                                     Ma On Shan
                                                     The New Territories
                                                     Hong Kong

                                                     Ms Lam Yuen Hung
                                                     Flat F, 10th Floor
                                                     Block 2, Greenview Court
                                                     Tsuen Wan
                                                     The New Territories
                                                     Hong Kong



Note:


1. The information contained on the website of our Company does not form part of this prospectus.



                                                           – 69 –
                            CORPORATE INFORMATION


Audit and Risk Management         Mr Mak Kin Kwong (Chairman)
 Committee                        Mr Xiao Zuhe
                                  Mr Zhao Enguang

Nomination and Remuneration       Mr Xiao Zuhe (Chairman)
 Committee                        Mr Zhao Enguang
                                  Mr Wang Zhentian

Compliance advisor                Taifook Capital Limited
                                  25th Floor
                                  New World Tower
                                  16–18 Queen’s Road Central
                                  Hong Kong

Principal bankers                 The Hongkong and Shanghai Banking Corporation Limited
                                  1 Queen’s Road Central
                                  Hong Kong

                                  Agricultural Bank of China
                                  Chifeng Songshan District Branch
                                  Mulan Street
                                  Songshan District
                                  Chifeng City
                                  Inner Mongolia
                                  PRC

                                  Agricultural Bank of China
                                  Balinzuo Banner Branch
                                  Xincheng Zhongjieqiao Road North
                                  Wudao Street
                                  Lindong Town
                                  Balinzuo Banner
                                  Chifeng City
                                  Inner Mongolia
                                  PRC

                                  Guangdong Development Bank
                                  Huizhou Maidi Road South Branch
                                  1st Floor, 9 Maidi Road South
                                  Huizhou City
                                  Guangdong Province
                                  PRC




                                      – 70 –
CORPORATE INFORMATION


      Industrial and Commercial Bank of China Limited
      Chifeng Songshan District Branch
      Middle Section
      Yingjin Road
      Songshan District
      Chifeng City
      Inner Mongolia
      PRC

      Industrial and Commercial Bank of China Limited
      Chifeng Zhaowuda Branch
      Opposite the hospital affiliated to Chifeng Institute
      Yuanlin Road
      Chifeng City
      Inner Mongolia
      PRC




           – 71 –
                                    INDUSTRY OVERVIEW


       Certain information and statistics contained in this section are related to the gold industry that
 we operate in. No independent verification has been carried out in respect of information and
 statistics which are derived from various official government publications. While we, the Sole Global
 Coordinator, the Underwriters and other parties involved in the Global Offering or their respective
 directors and advisers have exercised reasonable care in compiling and reproducing such
 information and statistics, we cannot ensure the accuracy of such information and statistics and
 such information and statistics may not be consistent with other information prepared inside or
 outside China. In addition, we cannot ensure that more updated information or statistics have not
 been prepared or released by the relevant authorities. You should not place undue reliance on any of
 such information and statistics contained in this section.



RESEARCH SOURCES

      This prospectus has cited materials prepared by GFMS, AME, CEIC and other research sources.
None of our Company, our Directors, or the Sole Global Coordinator have commissioned any of the
materials prepared by these research sources for use as citations in this prospectus. The materials we
have used are widely available periodic publications and/or data compilations by the respective research
sources. We have paid for the reports at their published prices. The parameters and assumptions used by
researchers in compiling the reports are based on their own in-house standards.

INTRODUCTION

     Our existing mining assets are high-grade poly-metallic mineral reserves containing gold, silver,
copper, zinc and lead. Gold is our core commodity because the value of gold contained in the
concentrates we produce and sell exceeds the combined value of all the other metals contained in our
concentrates. Our strategy is to continue to focus on gold assets.

GOLD — OUR CORE COMMODITY

      Throughout history, gold has served as both a commodity and a monetary asset and is often
regarded as the world’s oldest currency. Gold’s most significant purpose as a commodity is its use in the
fabrication of jewelry, which accounted for 60.8% of total global demand for gold in 2007. Due to its
high malleability and ductility, gold has further applications, including uses in the production of
electronics, dental products, and other industrial and decorative uses.




                                                 – 72 –
                                      INDUSTRY OVERVIEW


     According to GFMS, at the end of 2007, the global above-ground stock of gold was approximately
161,000 tonnes. The majority of annual gold demand is met by mine production and the recycling of
above-ground gold mined from previous years.

                                         Global Flow of Gold
                         Above-ground stock (161,000 tonnes) at the end of 2007




Note:   The amount for investment and other holdings is the balance of total global demand for gold less new
        fabrication and industrial uses. Figures have been rounded to nearest tonne.

Source: GFMS

     Market forces, based on over-the-counter transactions and global trading on a number of
exchanges, determine the price of gold. Major exchanges include COMEX (USA), the London Bullion
Market (UK), TOCOM (Japan) and the SGE (PRC). Gold prices are typically quoted in U.S. dollars per
ounce.

GLOBAL GOLD INDUSTRY

  Overview

      Gold is primarily used in the fabrication of jewelry, coinage and as a means for monetary
exchange. Due to its superior electrical conductivity, resistance to corrosion, malleability and ductility, it
is also an essential raw material in the production of electronics, such as computers and communications
equipment. Additionally, gold has important uses in the production of dental products, as well as many
other industrial and decorative applications.

     Historically, monetary systems known as ‘‘gold standards’’ prevailed in many developing
economies. Under a gold standards system, paper currencies were guaranteed by the issuer. The issuer
agreed to redeem the paper notes for a fixed amount of gold and held physical gold to support this. This
provided a system by which the issuers could stabilize the value of their own currencies and using such
currencies to trade for other currencies. From the 1870s, several industrialized countries implemented
gold standards systems, the most recent one being the Bretton Woods system, which was in place



                                                   – 73 –
                                                         INDUSTRY OVERVIEW


between 1946 and 1971. In contrast to fiat currencies, the value of gold is not based on the liability of
the currency issuer and, therefore, is not exposed to the associated risk of the issuers’ default. Today,
though gold is no longer used to back national currencies, it is perceived to maintain its value as an
international currency. Gold has been particularly desirable to investors during periods of weak
economic confidence and high inflation.

                                                     Global Gold Supply and Demand

                                                                                                    % change
                                                              2005         2006        2007       2007 vs. 2006
                                                                          (tonnes)
Supply
  Supply mine production . .         .   .   .   .   .   .       2,548         2,486      2,480            (0.2)
  Official sector sales . . . . .    .   .   .   .   .   .         663           370        501            35.4
  Old gold scrap . . . . . . . .     .   .   .   .   .   .         897         1,126        967           (14.1)
  Net producer hedging. . . .        .   .   .   .   .   .          —             —          —               —
  Implied net disinvestment .        .   .   .   .   .   .          —             —          —               —
Total Supply . . . . . . . . . . . . . . . . .                   4,108         3,982      3,948            (0.9)
Demand
  Fabrication
    Jewelry . . . . . . . . . . . . . . . . . .                  2,708         2,284      2,401             5.1
    Other (1) . . . . . . . . . . . . . . . . . .                  579           648        671             3.5
  Total fabrication . . . . . . . . . . . . .                    3,287         2,932      3,072             4.8
  Bar hoarding. . . . . . . . . . . . . . . .                      264           235        236             0.4
  Net producer de-hedging . . . . . . .                             92           410        447             9.0
  Implied net investment(2) . . . . . . .                          465           404        193           (52.2)
Total Demand . . . . . . . . . . . . . . . .                     4,108         3,982      3,948            (0.9)



Notes:

(1)    Includes coinage.

(2)    Implied net investment is the residual from combining all other GFMS data on gold supply/demand.

Source: GFMS




                                                                – 74 –
                                      INDUSTRY OVERVIEW


   Global demand for gold

        Gold demand can be divided into two categories — fabrication and investment:

        Fabrication demand

     Fabrication demand comprises demand from jewelry, production of electronics, dental products,
and gold used for other industrial and decorative applications. Approximately 77.8% of the global
demand for gold in 2007 was fabrication demand, according to GFMS. Most of this demand was for
jewelry, which contributed 78.2% of the total fabrication demand. The primary driver for jewelry
demand is growth in real income, in particular, disposable income.

      Gold’s unique properties, such as its ductility and conductivity, drive its use in the production of
components for electronics, dental products, and other industrial and decorative applications. Demand
for such products drives industrial demand for gold.

        Investment demand

      Investment demand comprises demand for coins and bullion. Demand for physical gold has largely
been driven by net incremental gold stocks held in support of derivative transactions and exchange-
traded funds (‘‘ETFs’’). Investment demand is a function of the current and anticipated value of gold
relative to other investments, such as cash, fixed interest securities, equities and properties, resulting
largely from monetary policy considerations and expectations regarding future gold prices.

        According to GFMS:

        .    Demand for gold in 2007 (totalling 3,948 tonnes) was 0.9% lower in tonnage terms than in
             2006.

        .    Total fabrication demand (1) in 2007 (totalling 2,862 tonnes) was 4.3% higher in tonnage
             terms than in 2006. The increase in fabrication demand was supported by increases in
             demand from both jewelry and other fabrication (including dental products and gold used for
             other industrial and decorative purposes).

             .     Jewelry demand for gold in 2007 (totalling 2,401 tonnes) was 5.1% higher in tonnage
                   terms than in 2006.

             .     Other fabrication demand (1) for gold in 2007 (totalling 461 tonnes) was 0.4% higher in
                   tonnage terms than in 2006. Increased demand from electronic products and other
                   industrial applications of gold was largely offset by a decline in demand for gold from
                   dental products. Demand for gold from electronic products and other industrial
                   applications in 2007 (totalling 403 tonnes) was 1.0% higher in tonnage terms than in
                   2006. Demand from dental products in 2007 (totalling 58 tonnes) was 4.9% lower in
                   tonnage terms than in 2006.




Note:


(1) Excludes coinage.



                                                   – 75 –
                                                                               INDUSTRY OVERVIEW


      .     Identifiable investment demand for gold in 2007 (totalling 654 tonnes) was 1.2% lower in
            tonnage terms than in 2006. Total physical holdings in gold for ETFs and similar products
            grew by 251 tonnes in 2007 (net addition in holdings in 2007 declined by 3.5% in tonnage
            terms compared to net addition in holdings in 2006).

   Global gold supply

     The annual supply of gold comes from mine production, recycled gold scraps and net sales of gold
by central banks. Approximately 62.8% of annual supply in 2007 (2,480 tonnes) came from mine
production, according to GFMS. Recycled gold and net sales of gold bullion by central banks made up
the balance and represented 24.5% and 12.7% of annual supply in 2007, respectively.

      Mine production

      Total global mine production of gold declined by 0.2%, from 2,486 tonnes in 2006 to 2,480 tonnes
in 2007. According to GFMS, Asia was the only region that reported higher mine production, with a
year-on-year gain of 67 tonnes. All other regions reported declines. The decrease in overall mine
production of gold can be primarily attributed to the lack of industry investment in exploration for the
replacement of reserves during the extended period of low gold prices earlier this decade and increasing
difficulty in identifying large-scale economic gold deposits.

      The ten largest gold producing countries in 2006 and 2007 are described in the following table:

                                                                           Largest Gold Producing Countries

                                                                                                                                    Rank               Mine production (tonnes)
                                                                                                                            2007           2006          2007          2006
PRC . . . . . .    .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .                    1              3          280          247
South Africa .     .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .                    2              1          270          296
Australia . . .    .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .                    3              4          245          247
United States      .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .                    4              2          244          252
Peru . . . . . .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .                    5              5          170          202
Russia . . . . .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .                    6              6          169          173
Indonesia . . .    .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .                    7              7          147          116
Canada . . . .     .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .                    8              8          101          104
Uzbekistan . .     .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .                    9              9           75           74
Ghana . . . . .    .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .                   10             10           75           70



Source: GFMS




                                                                                                                   – 76 –
                                    INDUSTRY OVERVIEW


     Global mine production costs have been on the rise in recent years. Every major gold producing
region has experienced increasing costs in U.S. dollar terms since 2002. According to GFMS, global
average cash costs of gold mining increased significantly in 2007, by US$78 per ounce, or a 25% year-
on-year increase over 2006 levels, to US$395 per ounce. The global average total production cost in
2007 was US$496 per ounce, representing a US$99 year-on-year increase over 2006 levels.

      According to GFMS, cash cost includes direct mining expenses, stripping costs, refining charges,
royalties and production taxes, and is net of by-product credits.

     Gold scrap recycling

      Gold scrap recycling in 2007 declined by 159 tonnes to 967 tonnes from 1,126 tonnes in 2006,
representing a 14.1% year-on-year decrease. Gold scrap recycling in most parts of the world was largely
stable. The top five countries with the biggest decline were Saudi Arabia, Egypt, South Korea, Turkey
and India; these countries contributed to a combined 134.3 tonnes in net decline in gold scrap recycling
in 2007. The reasons for the unintuitive decline in gold scrap recycling, on the back of a rising gold
price, were: (i) a rising gold price in U.S. dollar terms may not represent the same magnitude in increase
in some currencies; (ii) consumers becoming accustomed to the elevated gold price and cutting back on
recycling compared to 2006 levels (gold scrap recycling in 2006 increased by 229 tonnes from 897
tonnes in 2005); and (iii) higher future price expectations for gold.

     Central bank sales of gold

      According to GFMS, central banks held an estimated amount of 28,500 tonnes in gold stock at the
end of 2007, representing 17.7% of the world’s total above-ground stock. With their substantial holdings
in gold, central banks’ actual and potential sales have the effect of keeping gold prices low. In order to
stabilize the gold market, 15 central banks entered into the CBGA on 26 September 1999, to limit their
collective gold sales and lending and the use of derivatives for the next five years. The announcement
prompted an immediate spike in gold prices, as the uncertainty of central banks sales was removed.

      A second CBGA was signed on 8 March 2004, covering the next five-year period. The substantive
change in the second agreement is that signatories agreed not to sell more than 2,500 tonnes over the
next five years (maximum 500 tonnes per year), compared to 2,000 tonnes agreed in the first CBGA.

      In April 2008, the board of the International Monetary Fund (‘‘IMF’’) approved the sale of 403.3
tonnes of gold from its reserves. According to GFMS, the IMF held 3,217 tonnes of gold at the end of
2007.

     Producer de-hedging

      Hedging, where the future price of gold is contractually locked in, has in the past been a common
practice among gold producers to reduce their price risk. Since 2000, gold producers have started to
unwind their collective hedge book. Gold producers’ net de-hedging reached record levels in 2007 by
contributing 447 tonnes in physical demand, according to GFMS. Producer de-hedging is important as it
creates effective demand when physical gold is allocated to close out hedged positions.




                                                 – 77 –
                                       INDUSTRY OVERVIEW


  Gold price trends
      The closing gold price in U.S. dollars between 1 January 1980 and 30 January 2009 is shown in
the graph below:
                         Spot Gold Price — 1 January 1980 to 30 January 2009

            1,200


            1,000


              800


              600


              400


              200


                   0




Note:     Daily New York composite spot gold price quoted in U.S. dollar per ounce at 17:00 New York time.

Source: Bloomberg

        The spot price of gold between 1 January 2005 and 30 January 2009 is shown in the graph below:

                         Spot Gold Price — 1 January 2005 to 30 January 2009

    (Low US$412.7 per ounce on 8 February 2005; high US$1,003.0 per ounce on 14 March 2008)

           1,200


           1,000


             800


             600


             400


             200


               0




Note:     Daily New York composite spot gold price quoted in U.S. dollar per ounce at 17:00 New York time.

Source: Bloomberg




                                                    – 78 –
                                    INDUSTRY OVERVIEW


      The price of gold reached a 25-year high of US$1,003.0 per ounce on 14 March 2008 following
continued strength in 2007. The average gold price for 2007 was a record US$697.7 per ounce,
representing a 15.3% increase over 2006. The average gold price for 2008 was US$872.2 per ounce,
representing a 25.0% increase over 2007.

PRC GOLD INDUSTRY

  Overview

      Prior to 2002, the PRC gold market was closely managed by the PRC government’s centralized
purchase and allocation system. All gold reserves, as well as the sale, purchase and price of gold, was
controlled by the PBOC. Jewelry manufacturing and sales were restricted to State-owned enterprises and
foreign companies were prevented from participating in the local gold market. These restrictive practices
resulted in limited production and consumption of gold within the PRC.

      The PRC gold market has undergone significant reform over the last few years. Following its
accession into the WTO in December 2001, the PRC government began deregulating the PRC gold
market. Key features of deregulation included: (i) the establishment of the SGE to replace the PBOC’s
restrictive purchase and allocation system; and (ii) the grant of permission to private domestic and
foreign companies to enter the gold jewelry business.

      Prior to the establishment of the SGE, trading in gold was regulated by the PBOC. In October
2002, the SGE officially commenced trading. It has the principal responsibility of supervising and
coordinating the trade of all gold and other precious metals within the PRC. Prior to the commencement
of trade on the SGE, the gold price in the PRC was above historical international levels. However, with
the introduction of the SGE and deregulation, supply and demand factors have become increasingly
aligned with international markets and the PRC gold price now converges with the global price of gold.

      From February 2003, domestic and foreign companies were permitted to participate in the gold
jewelry business. Gold jewelry manufacturers, wholesalers and retailers no longer require approvals to
enter into the gold jewelry business, as long as the gold they use is not imported. Furthermore, gold can
now be in jewelry form or held as an investment by retail investors, being available in passbook
accounts (via authorized banks) as bullion and coins. In February 2004, the Commercial Banking Law of
China was amended to allow all banks to participate in gold trading.

  Gold trading on the SGE

      The SGE is a platform for trading gold bullion and gold coins. The price of gold traded on the
SGE largely converges to the price of gold in international markets. The SGE is the only legal source of
VAT-free gold. Gold trading on the SGE is at the standard purities of Au9999 and Au9995. The
standard weights for gold bullion bars (and coins where relevant) are 50 grams, 100 grams, 1 kilogram,
3 kilograms and 12.5 kilograms, and the unit of quotation is RMB per gram.

      Gold trading on the SGE is settled through designated settlement banks in the PRC. The current
162 members of the SGE include qualified financial institutions and corporations that produce, smelt,
process, wholesale, import and export precious metals and associated products. Some of these entities
are certified as standard gold bullion production enterprises.




                                                 – 79 –
                                      INDUSTRY OVERVIEW


     According to GFMS, the total volume for spot gold on the SGE in 2007 (totalling 919 tonnes) was
37% higher in tonnage terms than in 2006. The spot gold price on the SGE between 1 January 2005 and
30 January 2009 is shown in the graph below:

                        SGE Gold Price — 1 January 2005 to 30 January 2009

          1,200


          1,000


           800


           600


           400


           200


             0




Notes:

(1)   SGE Au9999 Gold Price quoted in RMB per gram at 17:30 Beijing time. The SGE gold price has been
      converted to U.S. dollars per ounce using:

      —    the RMB/US$ spot rate; and

      —    a conversion factor of 31.1034768 grams per ounce.

(2)   Daily New York composite spot gold price quoted in U.S. dollar per ounce at 17:00 New York time.

Source: Bloomberg

     In 2005, 2006, 2007 and 2008, the average SGE gold price was RMB117.4 per gram, RMB155.1
per gram, RMB170.4 per gram and RMB195.7 per gram, respectively.




                                                   – 80 –
                                                    INDUSTRY OVERVIEW


     Demand for Gold in the PRC

      According to GFMS, while global consumer demand in 2007 was 5.2% higher in tonnage terms
than in 2006, the PRC’s consumer demand for gold experienced growth of 25.6% in 2007. The
consumer demand for gold in the PRC in 2007 consisted of jewelry and retail investments demand. The
significant gain in the PRC’s consumer demand for gold allowed the PRC to overtake the United States
to become the world’s second largest gold consumer. Annual gold consumer demand in the PRC in 2007
was 326.1 tonnes, accounting for 11.6% of total global consumer demand for gold.
                                                                                                       (1)
                                    Consumer Demand in Different Countries (tonnes)
                                       2006                                   2007                           % change 2007 vs. 2006

                        Jewelry     Investments     Total      Jewelry     Investments     Total      Jewelry         Investments    Total

India . . . . . . . .       514.2         194.0        708.2       555.1         215.4        770.5            8.0           11.0            8.8
PRC . . . . . . . .         244.7          14.9        259.6       302.2          23.9        326.1          23.5            60.4        25.6
United States . .           306.1          35.0        341.1       260.9          15.2        276.1          (14.8)         (56.6)      (19.1)
Turkey . . . . . . .        165.3          59.9        225.2       188.1          61.2        249.3          13.8             2.2        10.7
Saudi Arabia. . .           104.3             8.0      112.3       117.9             9.2      127.1          13.0            15.0        13.2
Others . . . . . . .        949.4          72.2      1,021.6       976.8          80.4      1,057.2            2.9           11.4            3.5

Total . . . . . . . .     2,284.0         384.0      2,668.0     2,401.0         405.3      2,806.3            5.1            5.5            5.2




Note:

(1) Consumer demand comprises gold purchased by individuals (jewelry and retail investments).

Source: GFMS

      Jewelry demand represented approximately 92.7% of the total consumer demand for gold in the
PRC in 2007. The increase in disposable income, resulting from rapid growth of the PRC economy, and
the success of the World Gold Council’s promotion campaigns, have driven up jewelry demand for gold
in the domestic market, which increased 23.5% in tonnage terms from 2006 to 2007.

     Retail investment demand for gold in the PRC increased 60.4% in tonnage terms from 2006 to
2007 (totalling 23.9 tonnes, which represented 7.3% of total consumer demand for gold in the PRC).
Investment demand was mainly driven by ongoing government liberalization to allow gold bullion and
coins to be widely held.

      According to GFMS, the PBOC has maintained a gold holding of 600 tonnes since 2002,
representing 1% of its foreign reserves of US$1,546.4 billion by the end of 2007. This suggests the
potential for the PBOC to alter reserve holdings. Any small shift of its gold reserve strategy could affect
the demand for gold in the PRC and consequently the global demand.




                                                                  – 81 –
                                                                              INDUSTRY OVERVIEW


  Supply of Gold in the PRC

      PRC Gold Output

     The PRC overtook South Africa to become the world’s largest producer of gold in 2007, according
to GFMS. The PRC’s gold production in 2007 increased by 33 tonnes to 280 tonnes, representing a
13.4% year-on-year growth from 247 tonnes in 2006 and 11.3% of global gold output. The PRC’s gold
output has been increasing significantly in both absolute and relative terms compared to the global gold
output.

                                                      PRC Gold Mine Production 1949-2007 (tonnes)




Sources: GFMS and CEIC

     According to CEIC, the top five gold producing provinces in the PRC in the first ten months of
2008 were Shandong, Henan, Anhui, Shaanxi, and Jiangxi, which together accounted for 83.3% of the
PRC’s gold production in the same year.
Output Province                                                                                                                                                                                                               %
1.    Shandong        .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .        37.3
2.    Henan . .       .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .        27.5
3.    Anhui . .       .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .         6.9
4.    Shaanxi .       .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .         6.6
5.    Jiangxi . .     .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .         5.0
6.    Hubei. . .      .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .         4.6
7.    Jilin . . . .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .         3.8
8.    Liaoning .      .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .         2.5
9.    Hebei . . .     .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .         0.6
10.   Xinjiang .      .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .         0.4
      Others . .      .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .         4.8
                                                                                                                                                                                                                                  100.0



Source: CEIC




                                                                                                                  – 82 –
                                             INDUSTRY OVERVIEW


      PRC Gold Reserve

     The PBOC holds 600 tonnes of gold reserves and ranked eighth among central banks globally,
according to GFMS.

COMPETITION

      Our operations have significant levels of remaining gold reserves. As described in the following
table and in terms of the resources and reserves at our Gold Mines as at 30 November 2008, we believe
we rank fifth among comparable PRC gold producers which operate substantially in the PRC and are
listed on the Stock Exchange. The following table has been compiled using publicly available data
released by the gold producers, which has not been independently verified by us or any of our advisers.
The following resources and reserves figures reflect estimates at different dates, which may have
materially changed thereafter. Furthermore, some of the gold producers described in the following table
have used a technical standard or classification system that is different from the JORC Code in
calculating their resources and reserves. Therefore, their reported resources and reserves may not be
directly comparable with the resources and reserves at our Gold Mines, which are reported under the
JORC Code. The available sources do not always describe whether and how resources and reserves
estimates of non-wholly-owned subsidiaries are included in the total resources and reserves of the
relevant companies. Moreover, there are also many gold producers in the PRC that are unlisted and are
not reflected in the following table. As a result, caution should be applied when referring to the figures
in the table below.

                 Latest Reported Resources and Reserves Estimates of our Company and
                           PRC Gold Producers Listed on the Stock Exchange
                                                                                                        Reported resources
                                                                                                            or reserves
Gold producer                                                                                            (containing gold)
                                                                                                             (tonnes)
Zijin Mining Group Co., Ltd. (紫金礦業集團股份有限公司)(1) (‘‘Zijin’’),
  as at 30 June 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   ......                   663.3(2)
Zhaojin Mining Industry Company Limited (招金礦業股份有限公司)(3)
  (‘‘Zhaojin’’), as at the end of 2007 . . . . . . . . . . . . . . . . . . . . . . . . .       ......                   150.0(4)
Sino Gold Mining Limited (澳華黃金有限公司) (5) (‘‘Sino Gold’’),
  as of 30 June 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   ......                   149.3(6)
Lingbao Gold Company Ltd. (靈寶黃金股份有限公司) (7) (‘‘Lingbao’’),
  as at 30 June 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   ......                   124.0(8)
Our Company, as at 30 November 2008 . . . . . . . . . . . . . . . . . . . . . . .              ......                    90.2(9)



Notes:

(1)   Zijin has been listed on the Stock Exchange since 23 December 2003 and on the Shanghai Stock Exchange
      since 25 April 2008.

(2)   Estimated gold resource/reserves as at 30 June 2008 as stated in the interim report of Zijin for the six months
      ended 30 June 2008. It is not specified whether the resources or reserves of non-wholly-owned subsidiaries
      are included entirely or only on a proportionate basis, or under what resource and reserve classification
      system this estimate is made.




                                                             – 83 –
                                          INDUSTRY OVERVIEW


(3)     Zhaojin has been listed on the Stock Exchange since 8 December 2006.

(4)     Estimated gold reserves in accordance with the JORC Code as at the end of 2007 as stated in the annual
        report of Zhaojin for the year ended 31 December 2007. It is not specified whether the resources or reserves
        of non-wholly-owned subsidiaries are included entirely or only on a proportionate basis.

(5)     Sino Gold has been listed on the Australian Securities Exchange since 3 December 2003 and on the Stock
        Exchange since 16 March 2007.

(6)     Estimated gold reserves of 4,800 kozs as at 30 June 2008 estimated in accordance with the JORC Code as
        disclosed in the interim report of Sino Gold for the six months ended 30 June 2008 and converted at a
        conversion factor of 31.10348 grams per ounce. It is not specified whether the resources or reserves of non-
        wholly-owned subsidiaries are included entirely or only on a proportionate basis.

(7)     Lingbao has been listed on the Stock Exchange since 12 January 2006.

(8)     Estimated gold reserves and resources as at 30 June 2008 as stated in the interim report of Lingbao for the six
        months ended 30 June 2008. It is not specified under what resource and reserve classification system this
        estimate is made, or whether the resources or reserves of non-wholly-owned subsidiaries are included entirely
        or only on a proportionate basis.

(9)     Estimated gold reserves as at 30 November 2008 estimated in accordance with the JORC Code as disclosed in
        the Independent Technical Expert’s Report. Our Company’s share of the mineral reserves in the table is
        97.14%.

      With WTO accession and the continued liberalization of the PRC gold sector, investment interest
from foreign gold producers has increased. Foreign gold producers are actively seeking entry into the
PRC market. As a result, the local market is likely to experience increased competition. Sophisticated
international producers commonly have an advantage over PRC gold producers in terms of capital,
equipment, expertise, operating efficiencies and corporate management. However, many PRC gold
producers have the advantage of being able to sustain lower costs of labor and establish greater control
of local gold reserves within the PRC, when compared to their foreign competitors. The increased
capitalization from foreign investment and the implementation of the latest gold mining and processing
technologies is expected to make PRC gold producers increasingly competitive.

PRINCIPAL PRODUCT — GOLD CONCENTRATE

     Our principal product is gold concentrate. Gold concentrate is the principal raw material used in
gold smelting operations to produce standard and non-standard gold. The mined ore is processed in
processing facilities to produce gold concentrates. Our concentrates contain gold and other valuable
minerals such as silver, copper, lead and zinc.

      Gold concentrate pricing

     The principal purchasers of gold concentrate in the PRC are gold smelting operators. The price of
gold concentrate is affected by the following factors:

        .     market price of gold: there is a strong positive correlation between the market price of gold
              and gold concentrate prices. As gold market prices increase, gold concentrate prices increase;

        .     supply and demand dynamics: the availability of production capacity of gold smelting
              operators in the PRC;




                                                        – 84 –
                                     INDUSTRY OVERVIEW


     .     content and grade of gold: gold smelting operators pay the gold concentrate producer
           according to the content and grade of gold contained in the concentrate. The higher the
           content and grade of the gold, the higher the price; and

     .     the level of impurities contained in the gold concentrate: if the impurities contained in a
           gold concentrate comprise valuable minerals which can be profitably extracted by the gold
           smelting operator (for example, silver, copper, lead and zinc), the gold concentrate producer
           may be able to obtain a higher price for the concentrate. However, if the impurities contained
           in the gold concentrate hold little or no value, or make extraction of gold from the
           concentrate more expensive, the gold concentrate producer may receive a lower price for the
           concentrate.

OUR BY-PRODUCT COMMODITIES

  Silver

       Silver is a by-product metal in the concentrates that we produce. Throughout history, silver, as a
precious metal, has served as both a commodity and a monetary asset. Due to unique properties such as
its strength, malleability, ductility, and electrical and thermal conductivity (the highest of all metals),
silver today is used in three main areas: industrial uses, photography, and jewelry and silverware —
together these three categories are estimated to account for over 90% of total global demand for silver in
2007. According to GFMS, global demand in 2006 for silver was 913.7 million ounces. 2007 global
demand for silver was almost the same as in 2006 at 894.5 million ounces, as a significant increase in
industrial uses is offset by a large drop in photography and smaller drops in jewelry and silverware.
Global silver supply in 2007 was driven by strong growth in mine production, offset by a decrease in
supplies in scrap silver and net government sales. The average price of silver in 2007 was US$13.4 per
ounce, representing a 15.5% increase over an average price of US$11.6 per ounce in 2006. The average
price of silver in 2008 was US$15.0 per ounce, representing an 11.8% increase over an average price of
US$13.4 per ounce in 2007.

  Copper

      Copper is a by-product metal in the concentrates that we produce. Copper is a non-precious metal
mainly used in construction, electrical and electronics products, transportation equipment, industrial
machineries and consumer and general products. According to AME, 2007 global demand for copper
was 17.978 million tonnes. The PRC’s demand for copper in 2007 grew 18.0% from 2006 to reach 4.627
million tonnes, representing 25.7% of the global demand. Global supply of copper is mainly sourced
from mine production and recycled scrap. Chile was the largest producer of mined copper, representing
35.3% (5.579 million tonnes) of global mine production in 2007. The average price of copper in 2007
was US$7,143.7 per tonne, representing a 6.1% increase over an average price of US$6,730.7 per tonne
in 2006. The average price of copper in 2008 was US$6,951.9 per tonne, representing a 2.7% decrease
over an average price of US$7,143.7 per tonne in 2007.

  Zinc

     Zinc is a by-product metal in the concentrates that we produce. Zinc is a non-precious metal and
has many applications, such as for galvanizing steel to prevent corrosion, production of batteries and
production of alloys such as brass. According to AME, 2007 global demand for zinc was 11.441 million
tonnes. The PRC’s demand for zinc in 2007 grew 14.5% from 2006 to reach 3.660 million tonnes,



                                                  – 85 –
                                  INDUSTRY OVERVIEW


representing 32.0% of the global demand. Global supply of zinc is mainly sourced from mine
production. Global mine production of zinc in 2007 was 11.568 million tonnes. The PRC and Peru were
the two largest producers of mined zinc, representing 30.3% and 12.5% of global mine production in
2007, respectively. The average price of zinc in 2007 was US$3,255.5 per tonne, representing a 0.3%
decrease over an average price of US$3,266.9 per tonne in 2006. The average price of zinc in 2008 was
US$1,881.6 per tonne, representing a 42.2% decrease over an average price of US$3,255.5 per tonne in
2007.

  Lead

      Lead is a by-product metal in the concentrates that we produce. Lead is a non-precious metal
mainly used in production of batteries and non-battery products. According to AME, 2007 global
demand for lead was 8.326 million tonnes. The PRC’s demand for lead in 2007 grew 17.6% from 2006
to reach 2.627 million tonnes, representing 31.6% of the global demand. Global supply of lead is
sourced from mine production and recycled scrap, with each representing about half of total supply.
Global mine production of lead in 2007 was 3.658 million tonnes. The PRC and the United States were
the two largest producers of mined lead, representing 39.4% and 11.8% of global mine production in
2007, respectively. The average price of lead in 2007 was US$2,591.1 per tonne, representing a 101.4%
increase over an average price of US$1,286.3 per tonne in 2006. The average price of lead in 2008 was
US$2,084.2 per tonne, representing a 19.6% decrease over an average price of US$2,591.1 per tonne in
2007.




                                               – 86 –
   THE PRC LAWS AND REGULATIONS RELATING TO THE INDUSTRY


       The information and statistics set out in this section have been extracted from various official
 government publications. No independent verification has been carried out on such information and
 statistics. Our Company, the Sole Global Coordinator, the Underwriters, their respective directors
 and advisers or any other party involved in the Global Offering make no representation as to the
 accuracy of such information and statistics, which may not be consistent with each other or with
 other information compiled within or outside the PRC.



LAWS AND REGULATIONS RELATING TO MINERAL RESOURCES

     The ‘‘Mineral Resources Law of the PRC’’ (‘‘Mineral Resources Law’’) (中華人民共和國礦產資源
法) was promulgated by the Standing Committee of the NPC on 19 March 1986 and became effective on
1 October 1986. On 29 August 1996, the Standing Committee of the NPC amended the ‘‘Mineral
Resources Law’’. The amended ‘‘Mineral Resources Law’’ became effective on 1 January 1997.

     The ‘‘Mineral Resources Law’’ and its implementation rules are as follows:

     .    All mineral resources of the PRC, including such resources on the earth’s surface or
          underground, are owned by the State. The State ownership of mineral resources shall remain
          unchanged notwithstanding that the ownership or the right to use the land to which such
          mineral resources are attached has been granted to a different entity or individual.

     .    MOLAR is responsible for the supervision and administration of the mining and exploration
          of mineral resources nationwide. The geology and mineral resources departments of the PRC
          government of the respective provinces, autonomous regions and municipalities are
          responsible for the supervision and administration of the exploration, development and
          mining of mineral resources within their respective jurisdictions.

     .    Enterprises engaged in the mining or exploration of mineral resources must obtain mining
          and exploration permits, as the case may be, which are transferable for consideration only in
          certain circumstances as provided under PRC laws, subject to approval by relevant
          administrative authorities. Furthermore, if the mining activities involve gold resources, in
          accordance with the ‘‘Provisions on the Administration of Obtaining the Letter of Approval
          for Mining of Gold Minerals’’ (辦理開採黃金礦產批准書管理規定), promulgated by the
          National Development and Reform Commission on 17 December 2003 and became effective
          on 1 January 2004, the Gold Operating Permit (開採黃金礦產批准書) must also be obtained.
          The maximum validity period of the initial term of a Gold Operating Permit for a gold mine
          having an ore processing capacity of more than 500 tpd, an ore processing capacity ranging
          from 100 tpd to 500 tpd and an ore processing capacity of less than 100 tpd shall be 15
          years, 10 years and 5 years, respectively.

     .    MOLAR and the Geological and Mineral Resources Department of the PRC government of
          the provinces, autonomous regions and municipalities authorized by MOLAR are responsible
          for the granting of exploration and mining permits. Generally, holders of exploration permits
          and mining permits have those rights and obligations as prescribed by laws.




                                                – 87 –
    THE PRC LAWS AND REGULATIONS RELATING TO THE INDUSTRY


     .     Anyone who exploits mineral resources must pay a resources tax and resources compensation
           levy in accordance with relevant regulations of the State. In accordance with ‘‘Provisional
           Regulations on Resources Tax of the PRC’’ (中華人民共和國資源稅暫行條例), the amount
           of the resources tax is computed on the basis of the taxable amount. In accordance with
           ‘‘Administrative Rules on the Levy of Mineral Resources Compensation’’ (礦產資源補償費
           徵收管理規定), the resources compensation levy shall be calculated in accordance with the
           following formula:

                                                                                           Coefficient of
            Amount of the resources        Sales revenue of         Compensation
                                         =                  x                         x   mining recovery
           compensation levy payable       mineral products           levy rate
                                                                                                rate


  Rights and Obligations of Holders of Exploration Permits

      The rights exercisable by a holder of an exploration permit include, among other things, the
following: (1) to carry out exploration in the designated area and within the prescribed time; (2) to have
access to the exploration area and its adjacent areas; (3) to temporarily use the land in accordance with
the needs of the exploration project; (4) to have priority in obtaining the mining right of the mineral
resources as specified in the exploration permit and the exploration right of other newly discovered
minerals within the designated exploration area; (5) upon fulfillment of the prescribed minimum
expenditure requirements, to transfer the exploration right to any third party upon government approval;
and (6) to sell the mineral products extracted from the surface of the land in the exploration area, except
for those mineral products which are required by the State Council to be sold to designated units.

      The obligations of a holder of an exploration permit include, among other things, the following:
(1) to commence and complete the exploration work within the term of the exploration permit; (2) to
carry out the exploration work in accordance with the exploration plan and to ensure no occurrence of
unauthorized mining activities; (3) to carry out integrated exploration and assessment on the paragenetic
and associated mineral resources; and (4) to submit an exploration report regarding the mineral resources
to the relevant government authority for approval.

  Rights and Obligations of Holders of Mining Permits

      The rights exercisable by a holder of a mining permit include, among other things, the following:
(1) to engage in mining activities in the designated area and within the term prescribed under the mining
permit; (2) to set up ore processing facilities and amenities within the designated area; (3) to engage in
exploration and production within the vicinity of the mine as set out in the mining permit; (4) to sell the
mineral products, except for those minerals which are required by the State Council to be sold to
designated units; and (5) to acquire the land use rights attaching to the mine.

      The obligations of a holder of a mining permit include, among other things, the following: (1) to
carry out mining activities in the prescribed designated area and within the term of the mining permit;
(2) to effectively protect and reasonably extract the mineral resources and to integrate the use of the
mineral resources; (3) to pay resources tax and resources compensation levy; (4) to submit to the
supervision and management by the relevant government authorities; and (5) to submit a report on the
utilization of mineral resources to the relevant government authority.




                                                  – 88 –
    THE PRC LAWS AND REGULATIONS RELATING TO THE INDUSTRY


  Renewal of Exploration and Mining Permits

      In accordance with the ‘‘Administrative Measures on Registration of Mineral Resources
Exploitation’’ (礦產資源開採登記管理辦法), the validity period of a mining permit shall be determined
according to the scale of the mine. The maximum validity period of the initial term of a mining permit
for a big-scale mine, medium-scale mine and small-scale mine shall be 30 years, 20 years and 10 years,
respectively.

      In accordance with the ‘‘Administrative Measures on Registration of Tenement of Mineral
Resources Exploration and Survey’’ (礦產資源勘查區塊登記管理辦法), the maximum validity period of
the initial term of exploration permits shall be three years.

      However, the State Council issued the《國務院關於加强地質工作的決定》                             (國發(2006年)4號)
(State Council Regarding the Reinforcement of the Geological Work (No. 4 document issued by State
Council (2006)) which stipulates that the State Council will enforce the monitoring and management of
the exploration activities of mineral resources and will prohibit activities of marking without exploration
and mining without exploration (圈而不探或以採代探的行為). In light of the above, when approving
the validity period of exploration permits and mining permits, the Department of Land and Resources
(國土資源部門) of all the provinces in the PRC will act in accordance with their internal guidelines and
principles and will normally grant mining permits and explorations permits with a validity period of
approximately 3 years and a validity period of approximately 1–2 years respectively. As confirmed by
the Inner Mongolia Autonomous Region Department of Land and Resources (內蒙古自治區國土資源
廳), the department will normally grant gold mining enterprises a mining permit with a validity period
of less than 3 years in practice.

      Also, according to the list of exploration permits and mining permits issued in 2006 and 2007 by
the Inner Mongolia Autonomous Region Department of Land and Resources (內蒙古自治區國土資源
廳), the validity periods of the mining permits and exploration permits are similar to that of ours.

      Both King & Wood, our PRC legal adviser, and our Directors consider that so long as we have not
violated any relevant laws, regulations or policies as a holder of an exploration permit or a mining
permit, there should be no impediments for us to renew our mining permits and exploration permits. We
have not violated any relevant laws, regulations or policies applicable to our exploration or mining
permits.

      In accordance with the relevant provisions stipulated in the ‘‘Administrative Measures on
Registration of Tenement of Mineral Resources Exploration and Survey’’ (礦產資源勘查區塊登記管理
辦法) and the ‘‘Administrative Measures on Registration of Mineral Resources Exploitation’’ (礦產資源
開採登記管理辦法), exploration permits and mining permits can be renewed within a prescribed period
prior to their expiration, upon compliance with the prescribed extension procedure. Each renewal of
exploration permit shall not exceed two years. Where a holder of an exploration permit or a mining
permit fails to renew its permit, such exploration or mining permit shall be automatically annulled upon
expiration.




                                                  – 89 –
    THE PRC LAWS AND REGULATIONS RELATING TO THE INDUSTRY


     As advised by King & Wood, our PRC legal adviser, our current exploration and mining
operations have complied with the relevant laws and administrative regulations pertaining to the Mineral
Resources Law and its implementation regulations. During the Track Record Period, we have not been
penalized as a result of breaching any laws and regulations in relation to our mining and exploration
operations.

     In accordance with our business licenses and the relevant permits and approvals, we engage in
gold exploration, mining and processing. Pursuant to the Mineral Resources Law and its implementation
regulations, we have obtained the relevant permits and certificates, including letter of approval for the
mining of gold minerals, one exploration permit, four mining permits and eight production safety
permits, all of which are required for us to conduct our operations within our approved business scope.

  Qualifications for initial admission and renewal of exploration and mining permits

      The relevant PRC laws and regulations contain certain specific qualifications for the initial issue of
exploration and mining permits. In accordance with the ‘‘Notice on Regulations regarding the
Registration of Exploration and Exploitation of Mineral Resources’’ (關於礦產資源勘查登記、開採登記
有關規定的通知) issued by the Department of Land and Resources, the registration authority (that is the
Department of Land and Resources) shall focus on the following aspects in the examination of an
application for an exploration permit:

     .     whether the exploration areas applied for have already been applied for by other parties;

     .     whether the application form is properly filed, the exhibits are complete and the required
           materials are correctly supplied;

     .     whether the exploration areas applied for are out of the permitted registered areas and are
           classified as continuous areas;

     .     whether exploration or mining rights have already been granted in respect of the exploration
           areas applied for;

     .     in relation to exploration areas where exploration activities were funded by the State, whether
           the value of the relevant exploration right is properly assessed, whether the assessment result
           has been confirmed by relevant government authorities and the payment method of
           consideration for such exploration rights has been ratified by the relevant government
           authorities;

     .     within the 90 days prior to the making of the application, whether the exploration right of the
           exploration areas applied for has been revoked; and

     .     within the 6 months prior to the making of the application, whether an exploration license
           held by the applicant was revoked.




                                                  – 90 –
    THE PRC LAWS AND REGULATIONS RELATING TO THE INDUSTRY


      In accordance with the ‘‘Notice on Regulations regarding the Registration of Exploration and
Exploitation of Mineral Resources’’ (關於礦產資源勘查登記、開採登記有關規定的通知) issued by the
Department of Land and Resources, the registration authority (that is the Department of Land and
Resources) shall, after receiving the application materials for a mining permit and the investigation
results of the low-level registration authority, will examine the following aspects in the examination of
an application for a mining permit:

     .     whether the range and acreage of the mining area applied for is the same as those of the
           approved areas by the registered authority;

     .     whether the production quantity of mines will change and whether it complies with the
           devised mineral reserves;

     .     whether the designed mine life of the mines is reasonable;

     .     whether the integrated exploration, use and recycle of mining resources are reasonable;

     .     whether the applicant of mining rights meets the prescribed qualifications; and

     .     other aspects required for inspection.

      The relevant PRC laws and regulations have not set forth any specific standards and qualifications
for the renewal of exploration and mining permits. As confirmed by the Department of Land and
Resources, it does have a system of standards and qualifications in deciding whether to renew
exploration and mining permits, but will not disclose such standards and qualifications to the public.

  Documents to be submitted for the application/renewal of mining permits

     Pursuant to relevant PRC laws and regulations, the documents to be submitted to the relevant
government authorities for the application of mining permit include the following:

     .     application document and the mining area diagram;

     .     qualification document of the applicant;

     .     exploitation plan of mineral resources;

     .     approval documents for establishment of mining enterprise;

     .     environmental impact assessment report for the mining of mineral resources; and

     .     other documents required by the department in charge of geology and mineral resources
           under the State Council.

      Relevant PRC laws and regulations do not provide which documents shall be submitted to the
relevant government authorities for the renewal of mining permit. However, the Department of Land and
Resources (國土資源部) publicizes on its official website (http://www.mlr.gov.cn) the application
documents which must be submitted to the Department of Land and Resources for renewal of mining
permit, as follows:

     .     an application for the renewal of a mining permit;

     .     the reserved copy and the counterpart copy of the original mining permit;




                                                    – 91 –
    THE PRC LAWS AND REGULATIONS RELATING TO THE INDUSTRY


     .     the opinion of the Department of Land and Resources at the provincial level regarding the
           mining right holder’s fulfillment of its obligations and documents proving that the mining
           right holder has fulfilled its obligations under the license;

     .     the documents providing the residual reserves;

     .     an explanation of the exploitation of the mine;

     .     in relation to a mining right that was transferred for consideration the relevant materials
           regarding the evaluation, confirmation and amount paid for such mining right;

     .     a copy of the business license;

     .     in the case of a foreign-invested enterprise, a copy of the certificate of approval for a foreign-
           invested enterprise; and

     .     pre-renewal compliance record in relation to mineral resource registration and mineral
           resource register.

  Fees

      Holders of exploration permits and holders of mining permits are subject to exploration right usage
fees and mining right usage fees, respectively. In accordance with the ‘‘Administrative Measures on
Registration of Mineral Resources Exploitation’’ (礦產資源開採登記管理辦法), mining right usage fees
shall be payable on an annual basis. The rate of mining right usage fees shall be RMB1,000 per km 2 of
mining area per year. On the other hand, in accordance with the ‘‘Administrative Measures on
Registration of Tenement of Mineral Resources Exploration and Survey’’ (礦產資源磡查區塊登記管理
辦法), exploration right usage fees shall be calculated according to the terms of the exploration permit
and shall be payable on an annual basis. The rate of exploration right usage fee for the first year through
the third year of exploration shall be RMB100 per km 2 of exploration area per year. From the fourth
year of exploration onwards, the rate will be increased by RMB100 per km 2 of exploration area per
year. However, the annual maximum rate shall not exceed RMB500 per km 2 of exploration area.

     The exploration right usage fee and mining right usage fees paid by us for each of the two years
ended 31 December 2006 and 31 December 2007 and for the ten months ended 31 October 2008 were
RMB630, RMB11,390 and RMB33,322, respectively.

  Laws and Regulations relating to the Administration of Gold

      Pursuant to the ‘‘Administrative Regulations on Gold and Silver of the PRC’’ (中華人民共和國金
銀管理條例) promulgated and implemented on 15 June 1983, purchases of gold and silver were made
centrally by the PBOC. No entity or individual was permitted to purchase gold and silver without the
consent of the PBOC. All gold and silver produced by mining enterprises, rural communes, brigades,
armed forces or individuals engaged in the production of gold and silver (including those with ore
exploration, production and smelting as their supplementary business) were required to be sold to the
PBOC, and could not be retained individually for sale, exchange or use. Entities requiring gold and
silver for use were required to submit a proposal to the PBOC on the proposed use of gold and silver for
examination and approval.

     On 30 October 2002, the SGE commenced operation under the supervision of the State Council.
Thereafter, the PBOC ceased its operation in gold allocation and gold purchase. All PRC gold producers
are now required to sell their standard gold bullion through the SGE, and prices of gold on the SGE are



                                                  – 92 –
    THE PRC LAWS AND REGULATIONS RELATING TO THE INDUSTRY


determined by market demand and supply, which essentially converge with the price of gold in the
international market. On 27 February 2003, the State Council promulgated the ‘‘Decision of the State
Council in relation to Termination of the Second Batch of Administrative Approval Projects and
Amendment of the Management Method of Certain Administrative Approval Projects’’ (國務院關於取消
第二批行政審批項目和改變一批行政審批項目管理方式的決定)                                           and    canceled    the    approval
requirements for the production and sale of gold. As a result, the policy of ‘‘centralized purchase and
allocation of gold’’ as stipulated under the ‘‘Administrative Regulations on Gold and Silver of the PRC’’
has been terminated in practice.

      Since the promulgation of the ‘‘Administrative Permission Law of the PRC’’ (中華人民共和國行政
許可法) on 27 August 2003, the State Council reformed the administrative approval system and clarified
that the outstanding projects would be subject to administrative approval by its departments. The State
Council promulgated the ‘‘Decision of the State Council on the Enactment of Administrative Permission
for Certain Administrative Approval Projects which Shall be Retained’’ (國務院對確需保留的行政審批
項目設定行政許可的決定) on 29 June 2004. According to the decision, the import and export of gold
and gold products remain subject to administrative examination and approval. The authority responsible
for such examination and approval is the PBOC. Such decision became effective as of 1 July 2004.

  Laws and Regulations Relating to Environmental Protection

     The PRC government has formulated a comprehensive set of environmental protection laws and
regulations that cover areas such as land rehabilitation, sewage discharge and waste disposal. The State
Environmental Protection Administration Bureau (國家環境保護總局) regulates matters relating to
environmental protection in the PRC and formulates the national standards on environmental quality and
discharge of pollutants. The environmental protection departments at the county level or above are
responsible for matters relating to environmental protection within their own jurisdictions.

       The ‘‘Environmental Protection Law of the PRC’’ (‘‘Environmental Protection Law’’) (中華人民共
和國環境保護法) and the ‘‘Administrative Regulations on Environmental Protection for Construction
Projects’’ (建設項目環境保護管理條例) stipulate that prior to the construction of new production
facilities or expansion or transformation of existing facilities that may cause a significant impact on the
environment, a report on the environmental impact of the construction project shall be submitted to the
relevant environmental protection authority. Newly constructed production facilities cannot operate until
the relevant department is satisfied that such facilities are in compliance with all relevant environmental
protection standards. Pursuant to the requirements of the ‘‘Environmental Protection Law’’, any
production facilities that could possibly cause pollution or other public hazards shall adopt measures on
environmental protection and shall establish a system on environmental protection and administration.
Effective measures shall be adopted to prevent and control the pollution and harm caused to the
environment by the emission of exhaust air, sewage, waste residues, dust, malodorous gas, radioactive
substances, noise, vibration and electromagnetic radiation. Enterprises that discharge pollutants shall
register with the relevant environmental protection authority. The State Environmental Protection
Administration Bureau formulates national standards on emission of pollutants in accordance with the
national standards on environmental quality and the national economic and technological conditions.
Governments at the provincial level and of the autonomous regions and municipalities may formulate
their respective local standards on the discharge of pollutants for items not specified in the national
standards. The local governments may formulate local standards which are more stringent than the
national ones. Pursuant to the requirements under the ‘‘Law on Prevention of Water Pollution of the
PRC’’ (中華人民共和國水污染防治法)’’, ‘‘Law on Prevention of Air Pollution of the PRC’’ (中華人民



                                                  – 93 –
    THE PRC LAWS AND REGULATIONS RELATING TO THE INDUSTRY


共和國大氣污染防治法) and ‘‘Administrative Regulations on Levy and Utilization of Sewage Charge’’
(排污費徵收使用管理條例), enterprises which discharge water or air pollutants shall pay discharge fees
pursuant to the types and volume of pollutants discharged. The discharge fees are calculated by the local
environmental protection authority which shall review and verify the types and volume of pollutants
discharged. Once the discharge fees have been calculated, a notice on payment of discharge fees shall be
issued to the relevant enterprises. In addition, enterprises which discharge sulfur dioxide at a level
exceeding the prescribed standards are required to install ‘‘de-sulfurizing devices’’ or adopt other ‘‘de-
sulfurizing’’ measures to control the emission of sulfur dioxide.

      Pursuant to the ‘‘Mineral Resources Law’’, ‘‘Land Administration Law of the PRC’’ (中華人民共
和國土地管理法) and ‘‘Rules on Land Rehabilitation’’ (土地復墾規定), exploitation of mineral
resources shall be conducted in compliance with the legal requirements on environmental protection so
as to prevent environmental pollution. With respect to any damage caused to cultivated land, grassland
or forest as a result of exploration or mining activities, mining enterprises shall restore the land to a
state appropriate for use by reclamation, re-planting trees or grasses or such other measures as are
appropriate to the local conditions. In the event that the mining enterprise is unable to rehabilitate or the
rehabilitation does not comply with the relevant requirements, the mining enterprise shall pay a fee for
land rehabilitation. Upon the closure of a mine, a report in relation to land rehabilitation and
environmental protection shall be submitted for approval. Enterprises that fail to perform or satisfy the
requirements on land rehabilitation will be penalized by the relevant land administration authority.

      In accordance with the ‘‘Law on Prevention of Environmental Pollution Caused by Solid Waste of
the PRC’’ (中華人民共和國固體廢物污染環境防治法), entities and individuals collecting, storing,
transporting, utilizing or disposing of solid waste shall take precautions against the spread, loss and
leakage of such solid waste or adopt such other measures for preventing such solid waste from polluting
the environment.

       The penalties for breaches of the environmental protection laws vary from warnings, fines to
administrative sanctions, depending on the degree of damage. Any entity whose construction projects
fail to satisfy the requirements on pollution prevention may be ordered to suspend its production or
operation and be subject to a fine. The person responsible for the entity may be subject to criminal
liability for serious breaches resulting in significant damage to private or public property or personal
death or injury. Our current production and operating activities have been in compliance with the
relevant requirements on environmental protection. During the Track Record Period, our Group has not
been penalized as a result of breaching any environment protection laws and regulations.

  Laws and Regulations relating to Production Safety

      The PRC government has formulated a relatively comprehensive set of laws and regulations on
production safety, including the ‘‘Law on Production Safety of the PRC’’ (中華人民共和國安全生產法),
the ‘‘Law on Mine Safety of the PRC’’ (中華人民共和國礦山安全法) as well as ‘‘Regulations on Mine
Safety’’ (礦山安全條例) and ‘‘Regulations on the Monitoring of Mine Safety’’ (礦山安全監察條例)
promulgated by the State Council, which pertain to the mining, processing and smelting operation of the
mining industry. The State Administration of Work Safety (國家安全生產監督管理總局) is responsible
for the overall supervision and management of the production safety nationwide, while the departments
in charge of production safety at the county level or above are responsible for the overall supervision
and management of production safety within their own jurisdictions.




                                                   – 94 –
    THE PRC LAWS AND REGULATIONS RELATING TO THE INDUSTRY


      The PRC government implements a licensing system for production safety of mining enterprises
under the ‘‘Regulations on Production Safety License’’ (安全生產許可證條例). No mining enterprise
may engage in production activities without holding a valid production safety license. Enterprises which
fail to fulfill the production safety conditions may not carry out any production activity. Mining
enterprises which have obtained the production safety licenses shall not lower their production safety
standards, and shall be subject to the supervision and inspection of the licensing authorities from time to
time. If the licensing authorities are of the opinion that the mining enterprises do not fulfill the
production safety requirements, may order it to rectify within a specified period. In the event that the
production safety requirements are not fulfilled after the relevant specified period, the production safety
licenses may be withheld or revoked.

      The PRC government has also formulated a set of national standards on production safety for the
mining industry. In general, the mine design shall comply with production safety requirements and
industry practice. Each underground mine shaft is required to have at least two safety exits and the mine
shall be equipped with transportation and communication facilities, which connect the mine to the
outside. The mine design must be approved in accordance with the requisite procedures.

      A mining enterprise shall have its own management body or designated safety management team
handling production safety matters. Education and training on production safety shall be provided to
workers to ensure that they fully understand the regulations on and the procedures required for
production safety and are able to master the necessary skills for operation safety for their respective
positions. Those not having received such said education and training may not be allowed to work at the
mine.

      Pursuant to the ‘‘Regulations on Mine Safety’’ (礦山安全條例), the PRC government also
implemented a safety supervision system in mines and established the mine safety supervisory
authorities. The major responsibilities of such supervisory authorities include, among other things, the
following: (1) to supervise the provision of safety education and training by mining enterprises; (2) to
approve mine design and carry out examinations upon completion of mine construction; (3) to monitor
the status of the construction of safety facilities carried out by the mining enterprises; (4) to inspect the
safety of mines and require the mining enterprises to rectify any facilities or equipment that fall below
the requisite safety standards within a particular time limit; (5) to investigate mining accidents and to
supervise the handling of mining accidents; (6) to impose fines or administrative sanctions or submit the
case to the judicial authorities for legal actions against the mining enterprises, the management or any
related staff thereof who have severely violated the ‘‘Regulations on Mine Safety’’ (礦山安全條例); and
(7) to suggest the relevant authorities suspending or closing the operation of mining enterprises which
cannot meet the basic safety requirements.

     Upon occurrence of accidents, mining enterprises shall immediately take measures to rescue their
workers and report any deaths or injuries to the relevant authority. In the event of a minor accident, the
mining enterprise shall be responsible for investigating and handling the case. In the event of a serious
accident, the government, the relevant authority, the labor union and the mining enterprise shall conduct
an investigation and handle the case together. In addition, the mining enterprise shall pay compensation
to any employee who was injured or died in the accident in accordance with the national requirements.
Such mining enterprise may only resume production after the relevant danger at the scene has been
eliminated.




                                                   – 95 –
    THE PRC LAWS AND REGULATIONS RELATING TO THE INDUSTRY


      In addition, pursuant to the ‘‘Law on Production Safety of the PRC’’ (中華人民共和國安全生產
法), the PRC government implemented an accountability system for incidents relating to production
safety. The responsible person for a production safety incident may be subject to demotion or
termination of employment, and may be subject to criminal liabilities.

     During the Track Record Period we have not been penalized as a result of breaching any
production safety laws and regulations.

  Laws and Regulations relating to Taxation

      Enterprises engaged in the mining of mineral resources must pay resources tax in accordance with
relevant regulations of the State. In accordance with the ‘‘Provisional Regulations on Resources Tax of
the PRC’’ (中華人民共和國資源稅暫行條例), which became effective as of 1 January 1994, the rate of
the resources tax ranges from RMB0.40 to RMB30 per tonne of mineral products. The amount of
resources compensation levy payable is computed on the basis of the sales revenue of mineral products.
According to the ‘‘Implementing Rules for the Provisional Regulations on Resources Tax of the PRC’’
(中華人民共和國資源稅暫行條例實施細則) issued by the Ministry of Finance which became effective
as of 30 December 1993, resources tax is levied according to the grade of mines and the applicable
amount of tax per tonne of ore produced as provided in the schedules attached to these implementing
rules. The resources tax rates applicable to gold ore ranges from RMB1.3 per tonne to RMB2.5 per
tonne; the resources tax rates applicable to silver ore ranges from RMB0.4 per tonne to RMB3.0 per
tonne; the resources tax rates applicable to lead and zinc ore ranges from RMB2.0 per tonne to RMB4.0
per tonne; and the resources tax rates applicable to copper ore ranges from RMB1.2 per tonne to
RMB1.6 per tonne. For companies which are not listed in such schedules, the rates of resource tax will
be decided by provincial government within a range of 30% and the decision will be reported to the
Ministry of Finance and the State Administration of Taxation for records.

      On 19 May 2006, the Ministry of Finance (財政部) and the State Administration of Taxation (國家
稅務總局) issued ‘‘Notices on Adjusting Policies with respect to Resource Tax of Rock Gold Ore’’ (關
於調整岩金礦資源稅有關政策的通知), which became effective on 1 May 2006. The notice is about the
adjustment of tax, which, among other things, adjusted upwards the rates of resource tax for various
grades of rock and gold mines. The resources tax rates applicable to gold ore ranges from RMB1.5 per
tonne to RMB7.0 per tonne.

      On 5 July 2007, the Ministry of Finance (財政部) and the State Administration of Taxation (國家
稅務總局) issued ‘‘Notices on Adjusting the Tax Rate Standard of Resource Tax of Lead, Zinc and
Other Tax Items’’ (關於調整鉛鋅礦石等稅目資源稅適用稅額標準的通知), which, effective on 1
August 2007, sets forth that the resources tax rates applicable to lead and zinc ore ranges from
RMB10.0 per tonne to RMB20.0 per tonne, and the resources rates applicable to copper ore ranges from
RMB5.0 per tonne to RMB7.0 per tonne. We have paid resources tax according to the provisions of the
relevant PRC laws and regulations. For companies that are not listed in this notice, the adjustment of
resources tax will be decided by provincial government within a range of 30% with reference to the
rates applicable to the neighboring mines listed in this notice and the decision will be reported to the
Ministry of Finance and the State Administration of Taxation for filing.

      The PRC government encourages the development of the gold industry by implementing a policy
of preferential treatment on taxation. In accordance with the ‘‘Notice from Ministry of Finance and State
Tax Bureau in Relation to Exemption of Value Added Tax on Gold Production’’ (財政部、國家稅務總
局關於黃金生產環節免徵增值稅問題的通知) promulgated in 1994 and other relevant laws and



                                                 – 96 –
    THE PRC LAWS AND REGULATIONS RELATING TO THE INDUSTRY


regulations, gold produced and sold by gold mining and smelting enterprises are exempted from VAT.
‘‘Notice regarding issues on Tax Policy on Gold Transactions’’ issued by the Ministry of Finance and
the State Tax Bureau (財政部、國家稅務總局關於黃金稅收政策問題的通知) on 12 September 2002
provides that gold production enterprises engaged in the sales of standard gold and gold sand
(containing gold content) are exempt from VAT. For transactions with physical settlement, the tax
authority will issue VAT invoices based on the actual transaction price and immediately refund any
VAT levied and paid. Pursuant to the ‘‘Provisional Regulations on Value-Added Tax of the PRC’’ (中華
人民共和國增值稅暫行條例), silver and concentrates of sulfur and other metals such as copper, lead
and zinc produced and sold by us, as well as processing fees we receive for treating ores and
concentrates for third parties, are subject to VAT at the rate of 6%.

      During the Track Record Period, the enterprise income tax rate applicable to Chifeng Fuqiao,
Shirengou Mining, Nantaizi Mining and Luotuochang Mining was 33%, and the enterprise income tax
rate applicable to Fubon Industrial was 27%. On 16 March 2007, the NPC enacted a new enterprise
income tax law, or the New Enterprise Income Tax Law (中華人民共和國企業所得稅法), which has
taken into effect from 1 January 2008. The implementing rules of the New Enterprise Income Tax Law
(中華人民共和國企業所得稅法實施條例) (the ‘‘Implementing Rules’’), were adopted on 6 December
2007 and have taken into effect from 1 January 2008. Under the New Enterprise Income Tax Law, the
Implementing Rules, foreign invested enterprises, such as Fubon Industrial, and domestic companies,
such as Chifeng Fuqiao, Shirengou Mining, Nantaizi Mining and Luotuochang Mining would be subject
to Enterprise Income Tax at a uniform rate of 25%.

     The category and tax rate of other major taxes to which we are subject are as follows:
                                      Reference for tax
     Tax categories                      calculation                Tax rate                 Legislation
     Corporate income tax . .       Production income,                           25% Enterprise Income Tax
                                      Operation income                                 Law of the PRC
                                      and other income,
                                      net of the related
                                      costs, expenses and
                                      losses incurred

     Value-added tax . . . . .      Increased value                               6% Provisional Regulations
                                                                                       on Value-Added Tax
                                                                                       of the PRC

     Business tax . . . . . . . .   Service income                             3%/5% Provisional Regulations
                                                                                       on Business Tax of
                                                                                       the PRC

     City maintenance and           Business tax and                   5% (county, Provisional Regulations
       construction tax . . . .       VAT                       municipality, town), on City Maintenance
                                                                   7% (urban area)   and Construction

     Resources tax . . . . . . .    Taxable amount                  RMB2–4/tonne Provisional Regulations
                                                                (nonferrous metals) on Resources Tax of
                                                                                    the PRC




                                                       – 97 –
    THE PRC LAWS AND REGULATIONS RELATING TO THE INDUSTRY


                                      Reference for tax
     Tax categories                      calculation              Tax rate                   Legislation
     Education surcharge. . .       Business tax and                            3% Education Law of the
                                      VAT                                    (Note)  PRC, Provisional
                                                                                     Rules on the Levy of
                                                                                     Education Surcharges
                                                                                     of the PRC

     Property tax . . . . . . . .   The residue value                         1.2% Provisional Regulations
                                      after deducting                                on Property Tax of
                                      10%–30% of the                                 the PRC
                                      original value of
                                      the property



     Note: In addition to the statutory levy at the rate of 3% of our business tax and VAT, we are subject to an
           additional levy of local education surcharge at the rate of 1% of our revenue from sales of gold in
           accordance with local government policy.

     During the Track Record Period, we had not been subject to any penalty for breach of laws and
regulations on taxation.

  Laws and Regulations relating to the Control of Currency Conversion

      RMB currently is not a freely convertible currency. Under the current foreign exchange regulations
in the PRC, PRC incorporated entities can effect foreign exchange for current-account transactions
(including the distribution of dividends) only through accounts permitted by the PRC government.
Under existing PRC foreign exchange regulations, payments of current account items, including profit
distributions, interest payments and expenditures from trade related transactions, can be made in foreign
currencies without prior approval from SAFE by complying with certain procedural requirements.
However, approval from SAFE or its local branch is required where Renminbi is to be converted into
foreign currency and remitted out of China to pay capital expenses such as the repayment of loans
denominated in foreign currencies.

      Since 1994, the conversion of RMB into foreign currencies, including U.S. dollars, has been based
on rates set by the PBOC, which are set daily based on the previous business day’s interbank foreign
exchange market rates and current exchange rates on the world financial markets. From 1994 to 20 July
2005, the official exchange rate for the conversion of RMB to U.S. dollars was generally stable. On 21
July 2005, the PRC government introduced a managed floating exchange rate system to allow the value
of the RMB to fluctuate within a regulated band based on market supply and demand and by reference
to a basket of currencies. On the same day, the value of the RMB appreciated by approximately 2%
against the U.S. dollar. The PRC government has since made, and in the future may make, further
adjustments to the exchange rate system. From 21 July 2005 to 23 January 2009, the value of RMB has
further appreciated by approximately 21.1% against the U.S. dollar.




                                                       – 98 –
    THE PRC LAWS AND REGULATIONS RELATING TO THE INDUSTRY


OTHER RELEVANT LAWS AND REGULATIONS

  Reforms of Investment Systems by the State Council

      Pursuant to the ‘‘Decision of the State Council on the Reform of Investment System’’ (國務院關於
投資體制改革的決定), which came into effect on 16 July 2004, significant changes have been made to
the government approval regime for major investment projects in the PRC. The State Council abolished
the requirements of government examination and approval for investment projects not utilizing
government funds, and replaced such requirements with a verification and filing system. With respect to
non-government funded projects, verification would only be required for major or restricted projects
while other projects, irrespective of size, are only subject to a filing requirement. According to the
Catalogue of Investment Projects Requiring Government Verification and Approval (2004 Version) (政
府核准的投資項目目錄(2004)年本), mining development projects with a production capacity of 500
tonnes per day or above are subject to verification by the Department of Investment under the State
Council (國務院投資主管部門) while other mine development projects are subject to verification by the
Department of Investment at the provincial level. We are not subject to verification by the Department
of Investment under the State Council (國務院投資主管部門). As none of Shirengou Mining, Nantaizi
Mining and Luotuochang Mining has established a new mining development project with a production
capacity of 500 tonnes per day or above, Shirengou Mining, Nantaizi Mining and Luotuochang Mining
shall only be subject to verification by the Department of Investment at the provincial level, rather than
the Department of Investment under the State Council (國務院投資主管部門). Shirengou Mining,
Nantaizi Mining and Luotuochang Mining have respectively passed verification by the Department of
Investment at the provincial level.

     In relation to Nantaizi Mining:

     (i)    the original production capacity of the ore processing facility located at the Nantaizi Gold
            Mine was 300 tpd, however the production capacity has since been expanded to 500 tpd due
            to an expansion of production capacity of 200 tpd, and then subsequently expanded to 990
            tpd due to a further expansion of production capacity of 490 tpd; and

     (ii)   in accordance with the interpretation of the Decision of the State Council on Reform of the
            Investment System (國務院關於投資體制改革的決定), the gold mining and extracting
            project invested and established by Nantaizi Mining is subject to approval at the Inner
            Mongolia level, and has been examined and approved by Inner Mongolia Autonomous
            Region Development and Reform Commission (內蒙古自治區發展和改革委員會).

       King & Wood, our PRC legal adviser, has confirmed that Nantaizi Mining is not required to apply
further to State Development and Reform Commission for project approval for its gold mining and
extracting project at the Nantaizi Gold Mine. The above opinion is also confirmed by the confirmation
letter issued by Inner Mongolia Autonomous Region Development and Reform Commission (內蒙古自
治區發展和改革委員會) to Nantaizi Mining on 30 July 2008.

     Similarly, in relation to Luotuochang Mining:

     (i)    the original production capacity of the ore processing facility located at the Luotuochang
            Gold Mine was 350 tpd, however the production capacity has since been expanded to 500 tpd
            due to a expansion of production capacity of 150 tpd, and then subsequently expanded to 800
            tpd due to a further expansion of production capacity of 300 tpd; and




                                                 – 99 –
    THE PRC LAWS AND REGULATIONS RELATING TO THE INDUSTRY


     (ii)   in accordance with the interpretation of the Decision of the State Council on Reform of the
            Investment System (國務院關於投資體制改革的決定), the gold mining and extracting
            project invested and established by Luotuochang Mining is subject to approval at the Inner
            Mongolia level, and has been examined and approved by Inner Mongolia Autonomous
            Region Development and Reform Commission (內蒙古自治區發展和改革委員會).

      King & Wood, our PRC legal adviser, confirm that Luotuochang Mining is not required to apply
further to State Development and Reform Commission for project approval for its gold mining and
extracting project at the Luotuochang Gold Mine. The above opinion is also confirmed by the
confirmation letter issued by Inner Mongolia Autonomous Region Development and Reform
Commission (內蒙古自治區發展和改革委員會) to Luotuochang Mining on 30 July 2008.

  Laws and Regulations relating to Foreign Investment in Gold

      The exploration and mining of precious metals (gold, silver and platinum) is subject to the
‘‘Catalogue of Industries for Guiding Foreign Investment (Revised 2007)’’ (外商投資產業指導目
錄(2007修訂)). The ‘‘Verification and Approval of Foreign-Invested Projects Tentative Administrative
Procedures’’ (外商投資項目核准暫行管理辦法) further provides that projects being subject to the
aforementioned catalog, which have a total investment of:

     —      less than US$50 million, must be submitted to and approved by provincial-level development
            and reform departments;

     —      US$50 million or more, must be submitted to and approved by the National Development and
            Reform Commission; and

     —      US$100 million or more, must be examined by the National Development and Reform
            Commission and following such examination must be submitted to and approved by the State
            Council.




                                                – 100 –
                       CORPORATE STRUCTURE AND HISTORY


HISTORY AND DEVELOPMENT

      Prior to the establishment of our Company on 13 March 2008, our business was operated by Lita.
Lita was incorporated in the BVI on 16 February 2004 with Mossack Fonseca & Co. (B.V.I.) Ltd, a trust
company in the BVI, as the initial subscriber. Mossack Fonseca & Co. (B.V.I.) Ltd is a related company
of Mossack Fonseca & Co. Mossack Fonseca & Co. is a Panamanian law firm established since 1977
which is active, inter alia, in the field of company formation and administration in the Bahamas, British
Anguilla, the BVI, the Republic of Panama, Seychelles (Indian Ocean) and Samoa (South Pacific). In
the Bahamas, the BVI, Seychelles and Samoa they act solely as company formation agents and provide
related services. Mossack Fonseca & Co. (B.V.I.) Ltd was the initial subscriber for shares in Lita when
Lita was incorporated on 16 February 2004. On 10 March 2004, Ms Hong Lijun became the sole
shareholder of Lita and held one share in total. Ms Hong is the wife of one of Mr Wu’s sons. On 28
October 2005, Ms Hong transferred her one share in Lita to Mr Wu for nominal consideration of
US$1.00. On 11 April 2008, Mr Wu transferred his one share in Lita to our Company. Our Company is
currently the sole shareholder of Lita.

      Ms Hong was appointed as the first director of Lita on 10 March 2004. She resigned on 28
October 2005 and Mr Wu was appointed as director of Lita on the same day. Mr Wu is currently the
sole director of Lita.

      Fubon Industrial was established on 23 June 2006 and was owned as to 10% and 90% by Huizhou
Liyin and Ankson Limited, respectively. Huizhou Liyin is a company controlled by an independent third
party. Mr Wu acquired the entire interest in Ankson Limited on 23 April 2007 and consequently became
the controlling shareholder of Fubon Industrial. On 2 August 2007 and as part of the Reorganization,
Ankson Limited transferred its entire 90% equity interest in Fubon Industrial to Lita. On 27 August
2007, Lita acquired from Huizhou Liyin an additional 5% equity interest in Fubon Industrial. Fubon
Industrial then became a 95% directly owned subsidiary of Lita. On 21 August 2008, as a result of the
capitalization of Fubon Industrial in connection with the issue of Exchangeable Bonds by Lead Honest,
Lita’s and Huizhou Liyin’s equity interests in Fubon Industrial became 97.14% and 2.86%, respectively.
For more information on the Exchangeable Bonds, please refer to the section headed ‘‘Exchangeable
Bonds’’ in this prospectus.

     On 21 October 2007 and as part of the Reorganization, Fubon Industrial acquired from Huizhou
Ankson Communication Technology Co. Ltd. (惠州安臣通訊科技有限公司), a company controlled by
Mr Wu, the entire equity interest in Chifeng Fuqiao. Chifeng Fuqiao then became a wholly-owned
subsidiary of Fubon Industrial.

      On 25 May 2007, Chifeng Fubon Copper, a company controlled by Mr Wu, acquired from
independent third parties an aggregate of 90% equity interest in Shirengou Mining at a consideration of
RMB65.34 million. On 9 July 2007, Chifeng Fubon Copper further acquired the remaining 10% equity
interest in Shirengou Mining from one of such independent third parties at a consideration of RMB7.26
million. The aggregate consideration of RMB72.6 million (including RMB68.0 million for the
acquisition of the mining rights) was determined with reference to a valuation report dated 3 May 2007
prepared by an independent valuer (jointly appointed by the transferor and the transferee) on the value
of the tangible assets and intangible assets of Shirengou Mining. The aggregate consideration for the
acquisition of the entire interest in Shirengou Mining, and in turn Shirengou Gold Mine, was made at a
discount of 0.17% (approximately RMB123,800) to the valuation amount.




                                                – 101 –
                       CORPORATE STRUCTURE AND HISTORY


      On 23 August 2007 and as part of the Reorganization, Chifeng Fuqiao acquired the entire equity
interest in Shirengou Mining from Chifeng Fubon Copper. Shirengou Mining then became a wholly-
owned subsidiary of Chifeng Fuqiao.

      On 20 May 2007, Chifeng Fubon Copper acquired from an independent third party the assets in
Nantaizi Gold Mine at a consideration of RMB93.5 million. The consideration of RMB93.5 million
(including RMB83.0 million for the acquisition of the mining rights) was determined with reference to a
valuation report dated 3 May 2007 prepared by an independent valuer (jointly appointed by the
transferor and the transferee) on the value of the tangible assets and intangible assets of Nantaizi Gold
Mine. The aggregate consideration for the acquisition of the entire interest in Nantaizi Gold Mine was
made at a discount of 0.34% (approximately RMB321,100) to the valuation amount.

      Nantaizi Mining was established by Chifeng Fubon Copper on 11 July 2007, and on the same day,
Chifeng Fubon Copper transferred all the assets in Nantaizi Gold Mine to Nantaizi Mining. On 23
August 2007 and as part of the Reorganization, Chifeng Fubon Copper transferred its entire equity
interest in Nantaizi Mining to Chifeng Fuqiao. Nantaizi Mining then became a wholly-owned subsidiary
of Chifeng Fuqiao.

      On 30 October 2006, Wanhua, a company controlled by Mr Wu, acquired from independent third
parties the entire equity interest in Luotuochang Mining at a consideration of RMB46 million. The
aggregate consideration of RMB46 million (including RMB44.5 million for the acquisition of the
exploration rights) was determined with reference to a valuation report dated 3 October 2006 prepared
by an independent valuer (jointly appointed by the transferor and the transferee) on the value of the
tangible assets and intangible assets of Luotuochang Mining. The aggregate consideration for the
acquisition of the entire interest in Luotuochang Mining, and in turn Luotuochang Gold Mine, was made
at a discount of 0.39% (approximately RMB178,000) to the valuation amount.

      As part of the Reorganization, Wanhua transferred its entire equity interest in Luotuochang Mining
to Chifeng Fubon Copper on 13 July 2007. Subsequently, Chifeng Fubon Copper transferred its entire
equity interest in Luotuochang Mining to Chifeng Fuqiao on 23 August 2007. Luotuochang Mining then
became a wholly-owned subsidiary of Chifeng Fuqiao.

      On 13 March 2008, our Company was incorporated in the Cayman Islands as an exempted
company with limited liability under the Cayman Companies Law. Our Company holds the entire issued
share capital in Lita.

    All of the existing mining projects are and any future mining projects will be held by the Mining
Companies. Our Company holds a 97.14% equity interest in each of the Mining Companies.

      On 9 April 2008, Rich Vision was incorporated in Hong Kong. Lita holds the entire issued share
capital in Rich Vision. Since incorporation, Rich Vision has not carried on any business, other than the
transactions related to the Reorganization and Pre-IPO Investment.

      King & Wood, our PRC legal adviser, has confirmed that all the necessary approvals were
obtained with respect to the capital increase of Fubon Industrial.

     On 8 August 2006, the Provisions on Mergers and Acquisitions of Domestic Enterprises by
Foreign Investors (關於外國投資者併購境內企業的規定) (the ‘‘M&A Regulations’’) was promulgated
and became effective on 8 September 2006. The M&A Regulations clearly require that an offshore
special purpose vehicle formed for listing purposes and controlled directly or indirectly by PRC
companies or individuals (“SPV”) using its shares to acquire an equity interest in a PRC company (i.e.,



                                                – 102 –
                       CORPORATE STRUCTURE AND HISTORY


through a share swap) shall obtain the approval of the CSRC prior to the listing and trading of such
SPV’s securities on an overseas stock exchange. However, given the facts that: (i) Ankson Limited was
established in 2002, Lita was established in 2004, and the capital with respect to the establishment of
Ankson Limited and Lita was acquired duly abroad by the actual controller; (ii) Fubon Industrial, a
foreign invested enterprise, was established on 23 June 2006; (iii) we acquired the equity interest in the
domestic operating companies, including Shirengou Mining, Nantaizi Mining and Luotuochang Mining,
from independent third parties; (iv) we acquired the equity interest in the domestic operating companies,
including Shirengou Mining, Nantaizi Mining and Luotuochang Mining, using cash; (v) the M&A
Regulations do not clearly provide whether an SPV using cash to acquire an equity interest in a PRC
company needs to obtain approval from the CSRC prior to the listing and trading of such SPV’s
securities on an overseas stock exchange; and (vi) the M&A Regulations do not clearly provide whether
a SPV, established before 8 September 2006 and having domestic equity and interests, needs to obtain
approval from the CSRC prior to the listing and trading of such SPV’s securities on an overseas stock
exchange. As advised by our and the Underwriters’ legal advisers as to PRC laws, King & Wood and
Jun He Law Offices, respectively, the M&A Regulations do not apply to the transactions undertaken by
us as disclosed above since such transactions are not expressly included in the M&A Regulations and it
is not necessary for us to obtain approval from the CSRC prior to the listing and trading our securities
on the Stock Exchange.

  History of our Gold Mines

      Gold mining activities first occurred in the Chifeng Municipality during the late Qing Dynasty
with relatively larger scale gold mining activities concentrated in areas near Honghuagou Town in
Songshan District (松山區紅花溝) and Jinchanggouliang in Aohan Banner (敖漢旗金廠溝梁). There
were only sporadic signs of mining activities in the regions where the Shirengou-Nantaizi Mining
Complex and Luotuochang Gold Mine now locate. In the 1980s, as a result of the opening up of the
gold mining industry in the PRC, there was a surge in exploration and mining activities. During that
period of time, the PRC gold market was still closely managed by the PRC government’s centralized
purchase and allocation system, and as a result the PRC gold price was relatively low. Low PRC gold
price, together with outdated mining technologies, meant that local people were only able to mine the
higher grade ore located just under the oxidative surface while the underground ore remained largely
untouched. Both the Shirengou Gold Mine and Nantaizi Gold Mine (including their predecessors) were
established in 2001. Production was limited to approximately 3,000 to 5,000 tpa as the Shirengou Gold
Mine only had a 50 tpd ore processing facility. According to the Independent Technical Expert’s Report,
as at 30 November 2008, the reserves at the Shirengou-Nantaizi Mining Complex were estimated to be
sufficient for production at our anticipated 2011 production level of 450 ktpa for approximately 14.2
years.

      Regarding the Luotuochang Gold Mine, as the mineral grading of ore in the area is relatively low
and contains impurities such as copper, local people were unable to exploit the mineral resources in the
area until the establishment of the Luotuochang Gold Mine. According to the Independent Technical
Expert’s Report, as at 30 November 2008, the reserves at the Luotuochang Gold Mine were estimated to
be sufficient for production at our anticipated 2011 production level of 330 ktpa for approximately 24.9
years.




                                                 – 103 –
                        CORPORATE STRUCTURE AND HISTORY


CORPORATE STRUCTURE

     The diagram below sets out our corporate structure immediately before the Global Offering:




Notes:

1.   The entire share capital of Lead Honest is held by a company incorporated in the Bahamas, Tercel Holdings
     Limited, whose entire share capital is in turn held by the Trustee as the trustee of the Wu Family Trust. The
     Wu Family Trust is a discretionary trust established by Mr Wu as settlor and the Trustee as trustee on 22 May
     2008. The beneficiaries of the Wu Family Trust include family members of Mr Wu. Mr Wu is deemed to be
     interested in the 495,000,000 Shares held by Lead Honest immediately upon completion of the Global
     Offering and Capitalization Issue pursuant to Part XV of the SFO.

2.   Huizhou Liyin was established on 11 May 2001 with a registered capital of RMB500,000 with four
     shareholders, namely Mr Wu Zhizhong, Mr Wu Qiaoyuan, Mr Wu Siliu and Mr Zhang Lin, who owned 60%,
     22.2%, 16.7% and 1.1% of the equity interests in Huizhou Liyin respectively. Mr Wu Zhizhong was appointed
     as chairman of Huizhou Liyin.

     On 17 August 2002, Mr Wu Zhizhong and Mr Wu Siliu sold their respective equity interests in Huizhou Liyin
     to Mr Wu Qiaoyuan and Mr Zhang Lin and Ms Wang Yihong. The registered capital of Huizhou Liyin was
     also increased to RMB1,250,000. Mr Wu Qiaoyuan, Mr Zhang Lin and Ms Wang Yihong owned 79%, 13%
     and 8% of the equity interests in Huizhou Liyin, respectively, and there has been no change to its
     shareholdings since then. Mr Wu Zhizhong resigned as director of Huizhou Liyin after ceasing to be a
     shareholder of Huizhou Liyin. Mr Wu Qiaoyuan was appointed to replace Mr Wu Zhizhong as director of
     Huizhou Liyin.




                                                    – 104 –
                        CORPORATE STRUCTURE AND HISTORY


     On 29 September 2004, Mr Wu Qiaoyuan resigned and Ms Li Qing was appointed as director of Huizhou
     Liyin. Subsequently, on 10 March 2008, Ms Li Qing resigned and Ms Luo Lihong was appointed as director
     of Huizhou Liyin. There has been no change to its directorship since then.

     Save and except for Mr Wu Zhizhong (Mr Wu’s son) who ceased to be director and shareholder of Huizhou
     Liyin on 17 August 2002, and Ms Li Qing (Mr Wu’s wife) who ceased to be director of Huizhou Liyin on 10
     March 2008, none of the past and existing shareholders and directors of Huizhou Liyin is related to our
     Directors, members of senior management or shareholders of our Group.

     Huizhou Liyin engages primarily in the business of manufacture of communication materials and products and
     sales of such materials and products. On 23 June 2006, Huizhou Liyin established Fubon Industrial, with Lita.
     Huizhou Liyin currently holds 2.86% of the equity interests in Fubon Industrial.

     As at the date of this prospectus, the shareholders of (and their percentage interest in) Huizhou Liyin, are as
     follows:

     (a)   Mr Wu Qiaoyuan (79%): Mr Wu Qiaoyuan is currently engaged in the business of manufacture of
           communication materials and products and sales of such materials and products.

     (b)   Ms Wang Yihong (13%): Ms Wang is the wife of Mr Wu Qiaoyuan and is currently engaged in the
           business of manufacture of communication materials and products and sales of such materials and
           products.

     (c)   Mr Zhang Lin (8%): Mr Zhang is currently engaged in the business of manufacture of communication
           materials and products and sales of such materials and products.

     Each of Mr Wu Qiaoyuan, Ms Wang Yihong and Mr Zhang Lin is not related to our Directors, members of
     senior management or shareholders of our Company and our subsidiaries.

      At the time of acquiring 95% of the equity interests in Fubon Industrial in August 2007 and the
capitalization of Fubon Industrial in August 2008, we did not consider approaching Huizhou Liyin to
acquire the remaining equity interests in Fubon Industrial. On 21 August 2008, pursuant to a capital
contribution to Fubon Industrial, Lita increased its percentage of equity interests in Fubon Industrial to
97.14%. Our Directors do not consider the remaining 2.86% to be material as we have already acquired
majority control over Fubon Industrial. We have no intention of approaching Huizhou Liyin to acquire
the remaining 2.86%. With regard to any future acquisitions, our strategy is focused on acquiring
additional high-quality gold mines, not on acquiring the remaining 2.86% of equity interests in Fubon
Industrial.




                                                     – 105 –
                        CORPORATE STRUCTURE AND HISTORY


     The following chart sets out our corporate structure immediately following the completion of the
Global Offering and Capitalization Issue (but not taking into account any Shares which may be allotted
and issued pursuant to the exercise of the Over-allotment Option and any Shares that may be granted
under the Share Option Scheme):




Notes:

1.   The Global Offering consists of (subject to adjustment and the Over-allotment Option) the Hong Kong Public
     Offering of 16,500,000 new Shares and the International Offering of 148,500,000 Shares (comprising
     87,700,000 new Shares to be offered by our Company and 60,800,000 Sale Shares to be offered by the Selling
     Shareholder).

2.   The entire issued share capital of Lead Honest is held by a company incorporated in the Bahamas, Tercel
     Holdings Limited, whose entire issued share capital is in turn held by the Trustee as the trustee of the Wu
     Family Trust. The Wu Family Trust is a discretionary trust established by Mr Wu as settlor and the Trustee as
     trustee on 22 May 2008. The beneficiaries of the Wu Family Trust include family members of Mr Wu. Mr Wu
     is deemed to be interested in the 495,000,000 Shares held by Lead Honest immediately upon completion of
     the Global Offering and Capitalization Issue pursuant to Part XV of the SFO.

3.   Since the Bondholders are not entitled to any Shares until the exchange of the Exchangeable Bonds which
     will not occur until after expiration of the lock-up period of six months after the Listing Date, and there have
     not been any other Share transfers, the shareholding immediately following the Global Offering should be
     Lead Honest holding 75% of Shares and the public holding 25% of Shares (assuming a 25% offering).

4.   The Bondholders are not entitled to any Shares at the Listing Date, as the Exchangeable Bonds will only be
     exchanged after expiration of the lock-up period of six months after the Listing Date. At least 50% of the
     Exchangeable Bonds will be settled at Listing, the remaining amount of principal outstanding in respect of the
     Exchangeable Bonds (plus interest) will be eligible for exchange into Shares held by Lead Honest. Assuming



                                                     – 106 –
                                CORPORATE STRUCTURE AND HISTORY


         that the Bondholders exchange the Exchangeable Bonds (excluding applicable interest) at the first instance
         after the six-month lock-up period, they will be entitled to approximately 6.19% and 1.60% of the total Shares
         outstanding at the lower-end of the Offer Price range of HK$4.35 per Offer Share and at the higher-end of the
         Offer Price range of HK$6.25 per Offer Share, respectively. For more information on the Exchangeable
         Bonds, please refer to the section headed ‘‘Exchangeable Bonds’’ in this prospectus.


      Shareholdings in our subsidiaries and associated companies

     Set out below is a table providing further information on shareholdings in all our subsidiaries and
associated companies.
                                                  Date of incorporation
         Name                                    (place of incorporation)       Principal business   Equity interests
         Company . . . . . . . . . . . .        13 March 2008               Ultimate holding         Lita (100%)
                                                  (Cayman Islands)            company

         Lita . . . . . . . . . . . . . . . .   16 February 2004 (BVI)      Holding company          Fubon Industrial
                                                                                                       (97.14%)

         Rich Vision(1) . . . . . . . . .       9 April 2008                —                        —
                                                  (Hong Kong)

         Huizhou Liyin (2) . . . . . . .        11 May 2001 (PRC)           Research and             Fubon Industrial
                                                                             development,              (2.86%)
                                                                             manufacturing and
                                                                             sale of electrical
                                                                             appliances

         Fubon Industrial . . . . . . .         23 June 2006 (PRC)          Sino-foreign             Chifeng Fuqiao
                                                                              joint-venture            (100%)
                                                                              investment holding
                                                                              company

         Chifeng Fuqiao . . . . . . . .         21 August 2007 (PRC)        Main operating           Shirengou
                                                                             company for our           Mining
                                                                             Gold Mines                (100%)
                                                                                                     Nantaizi Mining
                                                                                                       (100%)
                                                                                                     Luotuochang
                                                                                                       Mining
                                                                                                       (100%)




Notes:

(1)
      Rich Vision is non-operating.
(2)
      An independent third party.



                                                             – 107 –
                        CORPORATE STRUCTURE AND HISTORY


                                       Date of incorporation
     Name                             (place of incorporation)     Principal business     Equity interests
     Shirengou Mining . . . . . .    10 November 2004            Exploration, mining      —
                                       (PRC)                       and processing of
                                                                   precious metals and
                                                                   sale of concentrates
                                                                   at the Shirengou
                                                                   Gold Mine

     Nantaizi Mining . . . . . . .   11 July 2007 (PRC)          Exploration, mining      —
                                                                   and processing of
                                                                   precious metals at
                                                                   the Nantaizi Gold
                                                                   Mine

     Luotuochang Mining . . . .      1 July 2005 (PRC)           Exploration, mining      —
                                                                   and processing of
                                                                   precious metals at
                                                                   the Luotuochang
                                                                   Gold Mine


  Exchangeable Bonds

      On 25 July 2008, Lead Honest, our Company, Lita, Rich Vision, Mr Wu and the Bondholders
entered into the Subscription Agreement pursuant to which the Bondholders agreed to purchase, and
Lead Honest agreed to issue, secured exchangeable bonds in the amount of US$50.0 million. The
Exchangeable Bonds were issued by Lead Honest on 30 July 2008. For further information, please refer
to the section headed ‘‘Exchangeable Bonds’’ in this prospectus.




                                                  – 108 –
                                             BUSINESS


OVERVIEW

      We specialize in the mining of gold and the processing of ore into concentrates containing gold
and other minerals for subsequent sale. Gold is our core commodity because the value of gold contained
in the concentrates we produce and sell exceeds the combined value of all the other metals contained in
our concentrates, and contributed 89.0% and 68.3% of our total revenue for the year ended 31 December
2007 and the ten months ended 31 October 2008, respectively. Despite the recent financial turmoil, our
Directors believe that the outlook for the gold sector remains positive.

     We own a 97.14% shareholding in three operating Gold Mines in the Chifeng Municipality, Inner
Mongolia, namely the Shirengou Gold Mine, the Nantaizi Gold Mine and the Luotuochang Gold Mine.
Chifeng Municipality is an area rich in mineral resources with a long history of production of precious
and nonferrous metals. The ore extracted from our Gold Mines is poly-metallic and has a higher
weighted average gold grade than that of comparable PRC gold producers listed on the Stock Exchange,
which we believe will enable us to generate greater revenue per tonne of ore.

      Our Gold Mines are covered by four mining permits covering an aggregate area of approximately
20.4 km 2 and one exploration permit covering an aggregate area of approximately 3.19 km 2 in the
Chifeng Municipality. In addition, we have also entered into option agreements with two independent
third parties to purchase the mining rights and assets in two gold mines in Qitai County, Xinjiang, the
PRC.

      We are in a period of significant production growth. We have undertaken extensive exploration
and drilling activities at our Gold Mines. We have engaged Behre Dolbear Asia, Inc., an internationally
reputable mining consultant and independent third party, to evaluate the gold resources and reserves at
our Gold Mines in accordance with the JORC Code and prepare the Independent Technical Expert’s
Report. According to the Independent Technical Expert’s Report, as at 30 November 2008, our Gold
Mines had gold resources of 3,869,000 ounces (approximately 120.3 tonnes) and gold reserves of
2,900,000 ounces (approximately 90.2 tonnes). As at 30 November 2008, the estimated gold grades of
the reserves were 8.92 g/t at the Shirengou Gold Mine, 10.10 g/t at the Nantaizi Gold Mine and 3.44 g/t
at the Luotuochang Gold Mine. Furthermore, the Independent Technical Expert’s Report indicates that
there is potential to identify additional mineral resources at our Gold Mines.

      We do not engage to a material extent in exploration and mining activities. We outsource
substantially all our exploration and mining works. We select third-party contractors to undertake our
exploration and mining works through a selective tendering process. Prior to engaging third-party
contractors, we assess their skills, expertise and experience. All of the third-party contractors must
possess the requisite qualifications for undertaking the mining, exploration or construction works for
which they are commissioned. The third-party contractors work under the supervision of our
management and technical teams. While works are being carried out by third-party contractors, each of
our relevant departments is responsible for supervising such works ranging from reviewing engineering
quality, quantifying losses and depletion of minerals to supervising and managing the progress and
completion of the commissioned works. We require third-party contractors to carry out their works
according to the design and plan of the relevant commission and in accordance with the requirements of
our Production and Environmental Safety Department and Quality Control Department. Our Production
and Environmental Safety Department supervises and inspects safety management. Our Quality Control
Department supervises mineral quality to ensure that third-party contractors meet our quality standards.




                                                – 109 –
                                             BUSINESS


     We have two ore processing facilities located at the Nantaizi Gold Mine and the Luotuochang Gold
Mine, which currently have ore processing capacities of approximately 990 tpd and 800 tpd,
respectively. The Nantaizi Gold Mine and the Shirengou Gold Mine are adjacent to each other, and the
two mines are referred to together in this prospectus as the Shirengou–Nantaizi Mining Complex. The
ore processing facility located at the Nantaizi Gold Mine processes ore from both the Nantaizi Gold
Mine and the Shirengou Gold Mine. At present, the ore processing facility located at the Nantaizi Gold
Mine is under expansion and, when completed, is expected to have an ore processing capacity of
approximately 1,480 tpd. The ore processing facility located at the Luotuochang Gold Mine is also
presently under expansion and, when completed, is expected to have an ore processing capacity of
approximately 1,100 tpd. The combined ore processing capacity of both ore processing facilities is
expected to reach approximately 2,580 tpd by the fourth quarter of 2009.

     We had a 50 tpd ore processing facility located at the Shirengou Gold Mine, which was
constructed prior to our acquisition of Shirengou Mining. The production technology used at this ore
processing facility was outdated and was unable to effectively extract the various types of minerals
contained in our ore. We ceased the operation of the 50 tpd ore processing facility after we completed
the construction and began the operation of the 500 tpd ore processing facility located at the Nantaizi
Gold Mine in May 2008. The daily production capacity of this ore processing facility was subsequently
augmented by 490 tonnes on completion of the construction of phase II in September 2008. All ore
processing previously undertaken at the 50 tpd ore processing facility located at the Shirengou Gold
Mine is now undertaken at the larger, more efficient 990 tpd ore processing facility located at the
Nantaizi Gold Mine.

      According to the Independent Technical Expert’s Report, as at 30 November 2008, the reserves at
the Shirengou-Nantaizi Mining Complex were estimated to be sufficient for production at our anticipated
2011 production level of 450 ktpa for approximately 14.2 years, and the reserves at the Luotuochang
Gold Mine were estimated to be sufficient for production at our anticipated 2011 production level of
330 ktpa for approximately 24.9 years. It is estimated that our annual production of gold, silver, copper,
lead and zinc contained in the concentrates we produce will reach 151,900 ounces (approximately 4.7
tonnes), 1,290,000 ounces (approximately 40.1 tonnes), 7,660 tonnes, 4,540 tonnes and 4,530 tonnes,
respectively, by the fourth quarter of 2011. The gold contained in the concentrates we produce and sell
contributed to 89.0% and 68.3% of our total revenue for the year ended 31 December 2007 and the ten
months ended 31 October 2008, respectively. We plan to focus on gold as our core commodity by
expanding production at our Gold Mines, acquiring new mines and expanding into gold smelting and
refining.

       We have completed trial production and commenced commercial production at phase I of our ore
processing facility located at the Nantaizi Gold Mine, which has a daily ore processing capacity of
approximately 500 tonnes. Pursuant to the letter of approval issued by Inner Mongolia Autonomous
Region Environmental Protection Bureau (內蒙古自治區環境保護局) on 9 May 2008, phase I of our ore
processing facility and tailings dam located at the Nantaizi Gold Mine were granted permission to
commence trial production for a period of three months commencing on 15 May 2008. Under the terms
of the letter of approval, Nantaizi Mining was required to obtain a valid environmental protection permit
during the trial production period in relation to phase I of our ore processing facility located at the
Nantaizi Gold Mine. Following commencement of trial production at phase I of our ore processing
facility located at the Nantaizi Gold Mine, Nantaizi Mining obtained the following approvals:

     .     the environmental protection permit on 8 June 2008. It has a validity period of three years;




                                                 – 110 –
                                              BUSINESS


     .     the production safety permits for its underground mining activity on 21 July 2008. Both of
           the permits have a validity period of three years; and

     .     the production safety permit for its tailings dam on 21 July 2008. It has a validity period of
           three years.

     The trial production period for phase I of our ore processing facility at the Nantaizi Gold Mine
ended on 21 July 2008, when we obtained all necessary permits and approvals required for operations
and commenced commercial production. As Nantaizi Mining obtained the permits noted above prior to
the expiry of the trial production period, Nantaizi Mining is permitted to continue commercial
production after the expiry of the trial production period.

       We have also commenced commercial production at phase II of our ore processing facility located
at the Nantaizi Gold Mine, which has a daily ore processing capacity of approximately 490 tonnes.
Pursuant to the letter of approval issued by Inner Mongolia Autonomous Region Environmental
Protection Bureau (內蒙古自治區環境保護局) on 28 September 2008, phase II of our ore processing
facility located at the Nantaizi Gold Mine was granted permission to commence trial production for a
period of three months commencing on 29 September 2008. The trial production period for phase II of
our ore processing facility at the Nantaizi Gold Mine ended on 20 October 2008, when we obtained all
necessary permits and approvals required for operations, including an approval letter in respect of
environmental protection inspection and acceptance in respect of phase II, and commenced commercial
production.

      Moreover, we have commenced commercial production at phase I of our ore processing facility
located at the Luotuochang Gold Mine, which has a daily ore processing capacity of approximately 500
tonnes, having received all necessary permits and approvals required for operations in September 2008.

      We have recently completed trial production at phase II of our ore processing facility located at the
Luotuochang Gold Mine, which has a daily ore processing capacity of approximately 300 tonnes.
Pursuant to the letter of approval issued by Inner Mongolia Autonomous Region Environmental
Protection Bureau (內蒙古自治區環境保護局) on 5 December 2008, the phase II ore processing facility
located at the Luotuochang Gold Mine was granted permission to commence trial production for a
period of three months commencing from 27 November 2008. We commenced sales of the products
produced at phase II of our ore processing facility located at the Luotuochang Gold Mine and have
begun to generate revenue therefrom since December 2008. The trial production period for phase II of
our ore processing facility located at the Luotuochang Gold Mine ended on 26 December 2008, when we
received an approval letter in respect of environmental protection inspection and acceptance in respect
of phase II, and commenced commercial production.

     Our revenue, gross profit and profit attributable to equity holders of our Company were
approximately RMB173.6 million, RMB140.3 million and RMB62.3 million, respectively, for the ten
months ended 31 October 2008.

     Although we intend to apply a portion of the net proceeds from the Global Offering for capital
expenditure in relation to our expansion of exploration activities, commercialization of newly discovered
mineral resources as a result of exploration, mine development and acquisitions, our current operations
and profit estimate do not depend on the discovery and commercialization of new resources or
acquisitions of new mines.




                                                 – 111 –
                                                        BUSINESS


      Our Directors believe that the recent financial turmoil will not have any substantial impact on our
results and capital expenditure plans. No additional financing is required to enable our Group to exploit
our proven reserves and commence recoveries on a commercial scale since our Group has already started
to exploit its proven reserves and commenced recoveries on a commercial scale.

COMPETITIVE ADVANTAGES

     We believe that we possess the following competitive advantages.

  Strong exposure to gold

      We consider gold as our core commodity because the value of gold contained in the concentrates
we produce exceeds the combined value of all other metals contained in our concentrates. We believe
that the production of gold concentrates from ore yields the highest margin in the gold value chain. We
differ from comparable PRC gold producers listed on the Stock Exchange in that we source 100% of the
ore for gold concentrate production from our own Gold Mines and do not engage in toll processing of
third-party gold ores or concentrates. Accordingly, we believe that we are well positioned to capitalize
on any increase in the market price of gold because we have a more strongly aligned exposure to gold
than most of the comparable PRC gold producers listed on the Stock Exchange.

  Unique high-grade poly-metallic mineral reserves

     Our gold ore reserves are high-grade based on a review of comparable PRC gold producers listed
on the Stock Exchange. The table below shows that our Gold Mines have a higher weighted average
gold grade than comparable PRC gold producers listed on the Stock Exchange.
                                                                                                          Weighted average
     PRC gold producer listed on the Stock Exchange                                                       gold grade (g/t) (1)
     Company, as at 30 November 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . .                              6.18
     Lingbao Gold Company Ltd. (靈寶黃金股份有限公司), as at 30 June 2005.                                                          5.60
     Sino Gold Mining Limited (澳華黃金有限公司), as at 30 April 2005 . . . . .                                                   5.00
     Zhaojin Mining Industry Company Limited (招金礦業股份有限公司),
       as at 30 June 2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                     3.50
     Zijin Mining Group Co., Ltd. (紫金礦業集團股份有限公司), as at
       30 June 2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                   2.51



     Source: Initial public offer prospectus for each listed company.

     Note:

     (1)     Based on the weighted average of the measured, indicated and inferred resources disclosed in the
             independent technical expert’s report contained in each listed company’s initial public offer prospectus.

     According to the Independent Technical Expert’s Report, as at 30 November 2008, the estimated
gold grades of our reserves were 8.92 g/t at the Shirengou Gold Mine, 10.10 g/t at the Nantaizi Gold
Mine and 3.44 g/t at the Luotuochang Gold Mine.

     Our Gold Mines also contain significant amounts of other valuable minerals. As at 30 November
2008, our recoverable ore reserves for the major types of minerals, including gold, silver, copper, lead
and zinc, were estimated to be approximately 14,597,000 tonnes. According to the Independent



                                                            – 112 –
                                               BUSINESS


Technical Expert’s Report, our Gold Mines contain total gold, silver, copper, lead and zinc reserves of
approximately 2,900,000 ounces (approximately 90.2 tonnes), 27,695,000 ounces (approximately 861.4
tonnes), 207,073 tonnes, 97,780 tonnes and 84,196 tonnes, respectively. These additional metal by-
products are assessed and paid for by our customers when they purchase our concentrates. Please refer
to ‘‘Appendix V — Independent Technical Expert’s Report’’ to this prospectus.

      As costs in the mining industry are broadly linked to the cost of extracting ore, we believe the
reserves at our Gold Mines with high gold grade and significant amounts of other valuable minerals will
enable us to generate greater revenue per tonne of ore relative to our mining costs.

  Significant reserves position with strong organic growth potential

       According to the Independent Technical Expert’s Report, our Gold Mines have gold resources of
3,869,000 ounces (approximately 120.3 tonnes) and gold reserves of 2,900,000 ounces (approximately
90.2 tonnes). Ore mined from our Gold Mines is processed into gold concentrates at our ore processing
facilities located at the Nantaizi Gold Mine and the Luotuochang Gold Mine, which have a combined
ore processing capacity of 1,790 tpd. Both ore processing facilities are currently under expansion and
are expected to have a combined ore processing capacity of 2,580 tpd by the fourth quarter of 2009.

      Based on the mine life analysis conducted by the Independent Technical Expert, as at 30
November 2008, we had ore reserves at the Shirengou-Nantaizi Mining Complex (the Shirengou Gold
Mine and the Nantaizi Gold Mine are adjacent to one another and the ore extracted from both mines is
processed at the ore processing facility located at the Nantaizi Gold Mine, accordingly their mine lives
were estimated together) that were estimated to be sufficient for production at our anticipated 2011
production level of 450 ktpa for 14.2 years, and ore reserves at the Luotuochang Gold Mine were
estimated to be sufficient for production at our anticipated 2011 production level of 330 ktpa for 24.9
years.

     (i)    Clear medium-term growth profile

      As mining and production at our Gold Mines will be escalated over the next few years, we expect
our medium-term growth profile to be strong. As confirmed by the Independent Technical Expert, the
combined production capacity of our ore processing facilities will reach 2,580 tpd in 2010. The amount
of ore to be processed at our ore processing facilities in 2010 is forecasted to be 780 kt. This results in
an implied compound annual growth rate of 91.6%. Details of the forecast production capacity of our
Gold Mines are set out in section 10 of the Independent Technical Expert’s Report. Please refer to
‘‘Appendix V — Independent Technical Expert’s Report’’ to this prospectus.

     (ii)   Additional future potential

      Our Gold Mines are still in an early stage of development. So far, we have only explored a small
portion of the area covered under our exploration permit at our Gold Mines. We are committed to
optimizing the potential of these mines and to increase our current reserves through focused exploration
efforts. We have committed an annual budget of approximately RMB4.0 million to undertake further
exploratory drilling and testing at our Gold Mines. The Independent Technical Expert believes that there
is potential to find additional mineral resources at our Gold Mines because:

     —      many of the gold containing poly-metallic veins at our Gold Mines are open laterally and
            sometimes also in the dip extension direction. Further exploration may define additional
            mineral resources for these veins; and



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     —    our Gold Mines are still at an early stage of development and there is a potential to find new
          mineralized veins in addition to the already known mineralized veins at our Gold Mines.

     Accordingly, we believe we have the potential to discover gold and other mineral resources in
excess of our present reserves.

  Leading in efficiencies and cost position

     We believe that we are one of the lowest cost producers (per ounce of gold) in the gold industry in
the PRC. Our forecast cash cost estimate for 2009 is US$197 per ounce of gold for the Shirengou-
Nantaizi Mining Complex and US$329 per ounce of gold for the Luotuochang Gold Mine. Our cash cost
estimate compares favorably with gold producers globally whose average cash cost for 2007 was
estimated by GFMS to be US$395 per ounce of gold.

     Our Directors believe that the main reasons why we are able to produce gold concentrates at a
lower cost compared to gold producers globally are as follows:

     —    Our unique high-grade poly-metallic reserves enable us to enjoy lower costs associated with
          mining and processing ores relative to the quality of finished metal available in those ores.

     —    We have prepared detailed plans for our mining operations and have placed a strong
          emphasis on using advanced, reliable technology and equipment to ensure greater efficiencies
          and economic benefits for our operations.

     —    In choosing mining methods, we draw on successful mining practices used both within the
          PRC and internationally. For example, we use the latest mining technologies and modern
          management methods to maintain effective cost control and to achieve high ore recovery
          rates.

     —    By sub-contracting mining operations, construction and production to experienced third
          parties, we only have to assign a small number of management staff and technical personnel
          to provide guidance, supervision and management with regard to mining operations,
          construction and production. The consideration paid to our third-party contractors is fixed to
          measurable deliverables, for example by reference to meters of development or tonnes of ore
          drilled. In addition, our third-party contractors are penalized if developments are completed
          below pre-agreed quality standards or if ore mining results in significant losses.

  Effective management structure with a strong senior management team

      We seek to differentiate ourselves from other mining operators in the PRC by implementing a
management structure we regard as modern and internal control systems which we believe have
contributed, and will continue to contribute, to the growth of our business. We have also designed and
implemented an employee incentive scheme which ensures that our staff are recognized and rewarded
for their work and efforts.

      The majority of our executive Directors and senior management, including Mr Qiu Haicheng (who
has approximately 16 years of experience in mining and exploration), Mr Ma Wenxue (who has
approximately 20 years of experience in ore processing), Mr Lu Tianjun (who has approximately 22
years of experience in mining and exploration) and Mr Zhao Guoming (who has approximately 20 years
of experience in ore processing), has at least 16 years of experience in the gold industry. Our current
senior management team was formed by the selective recruitment of prominent members of the mining



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industry and the business and academic communities in Inner Mongolia. We believe that our
experienced and dedicated senior management team has contributed to the significant growth of our
business and consolidation of our position as a growing producer of gold and precious metals.

      In recent years, we have been able to draw on the experience and expertise of our senior
management and their in-depth understanding of the mineralogy and geology of our resource base at our
Gold Mines to modify or customize our equipment to develop greater efficiencies and economic benefits
for our operations.

  Well positioned to capitalize on opportunities in Inner Mongolia and Xinjiang

      Inner Mongolia and Xinjiang are increasingly being recognized as resource rich regions of the
PRC. While Inner Mongolia and Xinjiang are abundant in various kinds of mineral resources (for
instance, over 120 and 138 kinds of mineral resources have been discovered in Inner Mongolia and
Xinjiang, respectively), the level of gold reserves of each of the top five gold producing provinces in the
PRC (for 2007 according to CEIC) may be higher than that of Inner Mongolia or Xinjiang. Also,
although certain areas of Inner Mongolia (e.g. the Chifeng Municipality) and Xinjiang have a long gold
mining history, large-scale gold mining operations only commenced very recently. As a result, gold
production levels in Inner Mongolia and Xinjiang still lag behind those of the more traditional gold
mining provinces such as Shandong, Henan, Anhui, Liaoning and Hubei. However, given the relatively
short history of large-scale mining development in Inner Mongolia and Xinjiang, neither region is yet to
be exploited to its full potential. Significant opportunities in gold mining exist in Inner Mongolia and
Xinjiang and we believe that we are one of the most well positioned companies to be able to take
advantage of these opportunities.

     Our presence in Inner Mongolia provides us with strong leverage to take advantage of numerous
growth opportunities such as obtaining the rights to exploit new areas and to consolidate with existing
gold mines in the region. Although our business started in August 2007 when we acquired our Gold
Mines, we have been able to commence operation of each of our Gold Mines within approximately one
year of acquisition.

CONTROLLING SHAREHOLDER — MR WU

      Historically, the role of Mr Wu, our ultimate controlling shareholder, has been to assist in
identifying and acquiring our initial strategic assets (i.e. our Gold Mines). However, since acquisition of
our Gold Mines, Mr Wu has hired a team of professional management for our Group and hence has
neither been involved in the daily development of our Gold Mines nor in the operations of our Group.
Therefore, we have been operating independently from our controlling shareholder.

      Although future acquisitions are part of our growth strategy, it should be noted that we do not
need to make additional acquisitions to ensure the ongoing viability of our business. This is because we
are at the stage of developing and commencing commercial operation of our Gold Mines. According to
the Independent Technical Expert’s Report, once all our ore processing facilities operate at their full
capacity of 2,580 tpd by the end of 2009, our ore reserves will be sufficient to support production at our
anticipated full production level for 14.2 years for the Shirengou-Nantaizi Mining Complex and 24.9
years, in the case of the Luotuochang Gold Mine, before the reserves are fully depleted. In addition, our
current operations and profit estimate do not depend on the acquisition of new mines or on the discovery
and commercialization of new resources.




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      We have a management team who is responsible for identifying acquisition opportunities and
making investment decisions. Accordingly, we are able to operate independently without the day-to-day
influence of Mr Wu. Any future acquisitions will be identified and assessed by our Acquisitions
Committee which comprises Mr Wang Zhentian, Mr Qiu Haicheng (our Chief Executive Officer), Mr
Ma Wenxue, Mr Lu Tianjun and Mr Cui Jie (our Chief Financial Officer), who are experienced in
mining and exploration management, processing and production, mining and ore extraction, and minerals
exploration and financial matters, respectively.

     Mr Wu’s role in the future is expected to be limited to exerting influence on our Company at the
shareholder level as he is, and will continue to be after Listing, the controlling shareholder of our
Company.

BUSINESS STRATEGIES

     Our goal is to become a leading integrated gold producer in the PRC, which we plan to accomplish
through the following strategies.

  Growing production at our existing Gold Mines and outsourcing our mining and exploration works

      We commenced commercial production at phases I and II of our ore processing facility located at
the Nantaizi Gold Mine in July and October 2008, respectively, and phases I and II of our ore
processing facility located at the Luotuochang Gold Mine in September and December 2008,
respectively having received all necessary permits and approvals required for operations. We expect to
significantly grow the operations at our Gold Mines by progressively ramping up our mining and
production operations while maintaining their low cost.

     The scale of our production operations will increase in the near future when our phase III ore
processing facility is completed at the Nantaizi Gold Mine and our phase III ore processing facility is
completed at the Luotuochang Gold Mine. We expect that phase III construction at both the Nantaizi
Gold Mine and Luotuochang Gold Mine will be completed in late 2009. On completion of this
expansion our installed daily production capacity will increase from 1,790 tonnes to 2,580 tonnes.

     To minimize costs and risks, our business operating model includes outsourcing mining and
exploration works and ore haulage activities to third-party contractors.

  Horizontal expansion through future acquisitions of high-quality gold mines

      Our growth model includes expansion through the acquisition of high-quality gold mines. In
addition, and as noted above, our growth model includes expansion of the ore extraction and processing
capabilities at each of the gold mines we acquire. We acquired the three Gold Mines during the Track
Record Period.

     We are dedicated to focusing on gold as our core commodity and intend to complement growth at
our Gold Mines through continuing to acquire additional high-quality gold mines. We will carefully
consider and balance some or all of the following criteria in order to pursue acquisitions prudently with
a view to further growing our business and maximizing returns to our shareholders:

     —     the resources, reserves or mining operations of gold;

     —     the amount, grade, mineability and sustainability of the target resources or reserves;

     —     whether the cost and benefit of the acquisition meet our stringent internal financial criteria;



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     —     the synergies between us and potential targets in terms of technology and know-how,
           management expertise and business compatibility and complementability; and

     —     whether the acquisition can enhance the overall sustainability of our existing and future
           businesses.

      We have a specialized team of technical experts to identify high-quality mineral resources for
potential acquisition in Inner Mongolia, Xinjiang and other regions. This team is led by Mr Ma Xiwen,
one of our senior management, who has been engaged in geological field work for more than 30 years
and is very experienced in geological survey and mining exploration. Our strategy is to apply the
significant knowledge base we have developed to identify key gold resources and exploration prospects,
and to collaborate with local partners to acquire, further develop and explore these resources. We have
recently entered into option agreements with two independent third parties to purchase the mining rights
and assets in two gold mines in Qitai County, Xinjiang, the PRC. For further details, please refer to the
subsection headed ‘‘Business — Business Developments — Option agreements in respect of two gold
mines in Xinjiang’’ in this prospectus.

  Vertical integration of our gold production process

      We are committed to gold as our core commodity with a focus on gold exploration, mining and
processing, as well as gold smelting and refining in the future. Expanding our operations into gold
smelting and refining will make us capable of producing standard gold (Au9999 and Au9995) — the key
end product in the gold industry. By reaching this capability, we will achieve our goal of becoming a
vertically integrated gold producer and will strengthen our position as a leading gold company in the
PRC. We believe that becoming a vertically integrated gold producer will also increase our standing and
credibility in the PRC gold mining industry and, accordingly, will assist our horizontal expansion
strategy of acquiring additional high-quality gold mines.

  Pursuing technological innovation, effective energy savings, industrial safety and environmental
  protection

      We are not currently undertaking any research and development projects. However, we intend to
commence research and development of innovative mining and processing technologies in order to
increase our recovery rate of gold, on the one hand, and to reduce our dilution and loss rate, on the
other. We also plan to make use of information technology to ensure continuous monitoring and
optimization of the production process.

     We plan to implement the following measures:

     —     conduct research on and development of more effective technologies for deep-level
           exploration;

     —     advance our deep-level mining expertise to enable us to engage in the development of deep-
           level resources in our existing Gold Mines;

     —     develop smelting and refining capabilities to process gold concentrates; and

     —     improve our mining methods and technologies to minimize mining loss and dilution.

     We have implemented, and will continue to maintain, effective measures for mining safety and
environmental protection. In the course of production, we operate in compliance with production safety
laws, environmental laws and other relevant PRC legislation and regulations. Supervisory staff at each



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level of operations is accountable for and must observe our accountability system. We are committed to
working with our employees to uphold high standards of mining safety and to ensure compliance with
environmental laws and regulations.

     For further details in relation to our research and development plan, please refer to the section
headed ‘‘Business — Research and Development’’ in this prospectus.

BUSINESS DEVELOPMENTS

  Completion of trial production and commencement of commercial production at phase I of our ore
  processing facility located at the Nantaizi Gold Mine

      We have completed trial production and commenced commercial production at phase I of our ore
processing facility located at the Nantaizi Gold Mine, which has a daily ore processing capacity of
approximately 500 tonnes. Pursuant to the letter of approval issued by Inner Mongolia Autonomous
Region Environmental Protection Bureau (內蒙古自治區環境保護局) on 9 May 2008, phase I of our ore
processing facility and tailings dam located at the Nantaizi Gold Mine were granted permission to
commence trial production for a period of three months commencing on 15 May 2008. Under the terms
of the letter of approval, Nantaizi Mining was required to obtain a valid environmental protection permit
during the trial production period in relation to phase I of our ore processing facility located at the
Nantaizi Gold Mine. Nantaizi Mining obtained such permit on 8 June 2008. The trial production period
for phase I of our ore processing facility located at the Nantaizi Gold Mine ended on 21 July 2008,
when we obtained all necessary permits and approvals required for operations and commenced
commercial production. The ores mined from both the Nantaizi Gold Mine and Shirengou Gold Mine are
processed at this ore processing facility.

  Completion of trial production and commencement of commercial production at phase II of our ore
  processing facility located at the Nantaizi Gold Mine

       In September 2008, we completed the construction of phase II of our ore processing facility
located at the Nantaizi Gold Mine, which has a daily ore processing capacity of approximately 490
tonnes. Pursuant to the letter of approval issued by Inner Mongolia Autonomous Region Environmental
Protection Bureau (內蒙古自治區環境保護局) on 28 September 2008, phase II of our ore processing
facility located at the Nantaizi Gold Mine was granted permission to commence trial production for a
period of three months commencing on 29 September 2008. The trial production period for phase II of
our ore processing facility at the Nantaizi Gold Mine ended on 20 October 2008, when we obtained all
necessary permits and approvals required for operations, including an approval letter in respect of
environmental protection inspection and acceptance in respect of phase II, and commenced commercial
production. The ores mined from both the Nantaizi Gold Mine and Shirengou Gold Mine are processed
at this ore processing facility. Further expansion of this ore processing facility is planned in one
additional phase. For further details, please refer to the section headed ‘‘Future Plans and Use of
Proceeds — Future Plans — Expansion of ore processing facility located at the Nantaizi Gold Mine’’ in
this prospectus.




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  Completion of construction and commencement of commercial production at phase I of our ore
  processing facility located at the Luotuochang Gold Mine

       In June 2008, we completed the construction of phase I of our ore processing facility located at the
Luotuochang Gold Mine, which has a daily ore processing capacity of approximately 500 tonnes.
Having received all necessary permits and approvals required for operations, phase I of our ore
processing facility located at the Luotuochang Gold Mine commenced commercial production in
September 2008. The ores mined from the Luotuochang Gold Mine are processed at this ore processing
facility. For further details, please refer to the section headed ‘‘Future Plans and Use of Proceeds —
Future Plans — Expansion of ore processing facility located at the Luotuochang Gold Mine’’ in this
prospectus.

  Completion of trial production and commencement of commercial production at phase II of our ore
  processing facility located at the Luotuochang Gold Mine

      In December 2008, we completed the construction of phase II of our ore processing facility located
at the Luotuochang Gold Mine, which has an additional daily ore processing capacity of approximately
300 tonnes. Pursuant to the letter of approval issued by Inner Mongolia Autonomous Region
Environmental Protection Bureau (內蒙古自治區環境保護局) on 5 December 2008, phase II of our ore
processing facility located at the Luotuochang Gold Mine was granted permission to commence trial
production for a period of three months commencing from 27 November 2008. We commenced sales of
the products produced at phase II of our ore processing facility located at the Luotuochang Gold Mine
and have begun to generate revenue therefrom since December 2008. The trial production period for
phase II of our ore processing facility located at the Luotuochang Gold Mine ended on 26 December
2008, when we received an approval letter in respect of environmental protection inspection and
acceptance in respect of phase II, and commenced commercial production. The ores mined from the
Luotuochang Gold Mine are processed at this ore processing facility. Further expansion of this ore
processing facility is planned in one additional phase. For further details, please refer to the section
headed ‘‘Future Plans and Use of Proceeds — Future Plans — Expansion of ore processing facility
located at the Luotuochang Gold Mine’’ in this prospectus.

  Option agreements in respect of two gold mines in Xinjiang

      We entered into two option agreements on 26 March 2008 and 25 April 2008, respectively, with
two independent third parties in respect of two gold mines in Qitai County, Xinjiang, the PRC. One of
the two independent third parties is a limited liability company established in the PRC on 12 May 2005
under the Company Law, which engages in the business of gold mining and production and is 100%
owned by an individual. The other independent third party is a limited liability company established in
the PRC on 24 September 2007 under the Company Law, which also engages in the business of gold
mining and production and is 100% owned by the same individual. We have not paid, nor are we
obliged to pay, any form of consideration to the option grantors.

      Under the terms of the option agreement dated 26 March 2008, Nantaizi Mining agreed to obtain,
and the grantor agreed to grant an option over all rights and assets in connection with the mining permit
of a gold mine in Qitai County, Xinjiang, the PRC. The option allows Nantaizi Mining, at its sole
discretion, to purchase all rights and assets in connection with the mining permit within ten years from
the date of agreement at a consideration of RMB60 million.




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      Under the terms of the option agreement dated 25 April 2008, Nantaizi Mining agreed to obtain,
and the grantor agreed to grant an option over all rights and assets in connection with the mining permit
of a gold mine in Qitai County, Xinjiang, the PRC. The option allows Nantaizi Mining, at its sole
discretion, to purchase all rights and assets in connection with the mining permit within ten years from
the date of agreement at a consideration of RMB80 million.

      King & Wood, our PRC legal adviser, has advised that the terms of each of the option agreements
are legal and enforceable according to the relevant PRC laws and regulations.

      The parties to the option agreements jointly engaged an independent third party to undertake
valuations of the two gold mines in Qitai and, on the basis of such valuations, the consideration payable
in respect of each gold mine was negotiated between the parties. The validity periods of the mining
permits for the two gold mines in Qitai are from May 2008 to April 2011 and from August 2007 to
August 2009.

      We did not make any payment to obtain the above two options. These options allow us, at our sole
discretion, to purchase the mining rights and related assets of one or both of the mines within ten years
from the respective dates of the option agreements. However, we have been advised by our PRC legal
adviser that we will not be able to exercise either option until April 2009 and May 2009, respectively,
because under the relevant PRC law the mining permit issued to each mine owner in respect of the
relevant mine cannot be transferred until one year after the commencement of exploitation within the
geological areas covered by such mining permit. We have not provided any financial assistance to the
parties to the two option agreements or to their beneficial owners, and any exploration and mining costs
in relation to each mine have been and shall be borne by the grantor in the respective option agreement
or its beneficial owners (i.e. the owners of each mine). Prior to exercising either option, we have the
right to carry out comprehensive legal, financial and business due diligence on the relevant gold mine.
However, under the terms of the two option agreements, we cannot adjust the proposed purchase price
of the mining rights and related assets of the gold mines based on our subsequent due diligence. Each of
the mine owners has provided certain representations and warranties including, but not limited to: (i) the
mining permit held in respect of the relevant gold mine is currently valid and effective and is not subject
to any encumbrances; (ii) the mine owner will conduct its business in accordance with all applicable
laws and regulations prior to the exercise of the relevant option; and (iii) unless prior written approval
has been given by us, the mine owner will not sell, transfer, mortgage or dispose of any of the assets or
the business of the relevant gold mine.

      We have not verified the existence of any of the mineral resources represented by the mine
owners. If we decide to exercise the options, the purchase price of the mining rights and related assets
of the two gold mines will be RMB60 million and RMB80 million, respectively.

      We have not determined whether to purchase one or both of the gold mines referred to in the
option agreements. If we decide to purchase one or both of the gold mines, the purchase(s) will be
carried out in accordance with the terms and conditions set out in the relevant option agreement. We
will also comply with the requirements of the Listing Rules applicable to such purchase(s).

     We believe that other significant opportunities exist to grow our business in Xinjiang through
acquiring additional exploration and mining rights with significant development potential. For more
information, please refer to the section headed ‘‘Business — Business Strategies — Horizontal
expansion through future acquisitions of high-quality gold mines’’ in this prospectus.




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OUR MANAGEMENT TEAM

      We have sought to differentiate ourselves from other PRC mining operators by implementing a
modern management structure and a series of internal controls procedures to ensure that we are able to
operate efficiently. Our Chief Executive Officer (‘‘CEO’’), Mr Qiu Haicheng, has approximately 16
years of experience in the gold mining industry. Mr Qiu is assisted by a team of executive Directors and
senior management who are highly experienced with respect to technical matters concerning mining,
exploration, ore processing, production and environmental safety.

      In order to ensure our efficient and effective operation, our business is organized into six business
units. The senior manager in charge of each business unit reports directly to Mr Qiu on a regular basis.
Each of the senior managers has extensive experience in the line of business of their respective business
unit. In addition to reporting directly to the CEO, each senior manager is required to report to the
Independent Supervisory Committee, which is described in more detail below.

      The details of our six business units, the senior manager responsible for each business unit and the
relevant senior manager’s relevant experience are as follows:

     .     Exploration: this business unit is responsible for selecting and managing our exploration
           projects and is headed by Mr Ma Xiwen. Pursuant to the certificate issued by the Ministry of
           Geology and Mineral Resources of the PRC (中華人民共和國地質礦產部) in May 1991, Mr
           Ma is qualified as a senior geological engineer (礦產地質高級工程師). Mr Ma has been
           engaged in geological field work for more than 30 years and is very experienced in
           geological survey and mining exploration;

     .     Mining: this business unit is responsible for all of our ore extraction activities and is
           headed by Mr Lu Tianjun. Mr Lu graduated in geology and mineral exploration, is qualified
           as an engineer and has over 20 years’ experience in gold mining and production. Prior to
           joining our Group, Mr Lu was employed by Chifeng Honghuagou mines, one of the largest
           state-owned gold mines in the PRC, in a number of different roles with responsibilities
           relating to mining, production and production safety;

     .     Production and Environmental Safety: this business unit is responsible for production
           safety at our Gold Mines, ensuring compliance with applicable environmental regulations and
           implementation of environmental protection measures. This business unit is also headed by
           Mr Lu Tianjun;

     .     Ore Processing: this business unit is responsible for all of our ore processing and
           concentrate production activities and is headed by Mr Ma Wenxue. Mr Ma graduated with a
           major in ore processing engineering, is qualified as a mine engineer at the intermediate level
           and has over 20 years’ experience in gold production and processing. Prior to joining our
           Group, Mr Ma was employed by Chifeng Honghuagou mines, one of the largest state-owned
           gold mines in the PRC, in a number of different roles including responsibilities relating to
           production, processing and production safety;

     .     Supply and Sales: this business unit is responsible for our trading operations, customer
           sales and marketing activities and is headed by Mr Guo Xiumin. Mr Guo holds a degree in
           economics and management and has over 10 years’ experience in trading, operations
           management and marketing. With respect to his experience in the gold mining industry, Mr
           Guo has been employed by our Group for almost four years and during this time has become
           experienced in mineral concentrate sales and marketing; and



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     .    Business Development: this business unit is responsible for developing and implementing
          strategies to expand and grow our operations. This business unit is focused on two growth
          strategies:

          (1)   increase production at our existing Gold Mines: we are committed to growing
                operations at our existing Gold Mines through:

                (i)    increasing our mining and ore extraction activities which will be achieved through
                       enlarging the existing mining areas and excavating additional shafts and tunnels.
                       Mr Lu, as head of the mining business unit, is in charge of this strategy and
                       related capital expenditure; and

                (ii)   increasing our current production capacity at our ore processing facilities which
                       will be achieved by constructing larger processing facilities with higher
                       production capacities. Mr Ma Wenxue, as head of the ore processing business
                       unit, is in charge of this strategy and related capital expenditure; and

          (2)   expansion through future acquisitions: we intend to compliment growth at our Gold
                Mines through acquiring additional high-quality gold mines. We have established an
                Acquisitions Committee which comprises Mr Wang, Mr Qiu (our Chief Executive
                Officer), Mr Ma Wenxue, Mr Lu and Mr Cui (our Chief Financial Officer) who are
                experienced in mining and exploration management, processing and production, mining
                and ore extraction, and minerals exploration and financial matters, respectively.
                Accordingly, the Acquisitions Committee comprises individuals who collectively have
                significant experience in all aspects of operating a mining and exploration business. The
                Acquisitions Committee is responsible for undertaking due diligence investigations in
                respect of potential gold mine acquisitions.

      We have established an Independent Supervisory Committee to oversee the operations of each
business unit. Each of the senior managers in charge of a business unit is required to report to the
Independent Supervisory Committee on a regular basis. The Independent Supervisory Committee is
headed by Mr Ma Xiwen, Head of our Land Exploration Department. Mr Ma Xiwen is a qualified senior
geological engineer with approximately 40 years’ experience in the gold mining industry. Prior to
joining our Group, Mr Ma Xiwen held various positions with No. 10 Institute of Chifeng Geological
Exploration (赤峰地勘十院) and was responsible for redeployment and exploration for the Chifeng
region. Mr Ma Xiwen has been appointed to head the Independent Supervisory Committee because of
his extensive experience in the gold mining industry. As the head of the Independent Supervisory
Committee, Mr Ma Xiwen is responsible for independently assessing the operations of each business
unit and the proposals and business decisions made by the senior manager in charge of that business
unit. Mr Ma Xiwen independently reports his findings to Mr Qiu, the Group’s CEO, on a regular basis.




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     The role of the head of the Independent Supervisory Committee includes:

     (1)   supervising the daily operation of our Group, including supervision of the progress of ore
           exploitation, selection of mines and other related infrastructure, supervision of completion of
           the processing targets, supervision of the establishment of our overall marketing strategy and
           policy;

     (2)   supervising our major contracts and agreements, including supervision of implementation of
           the major contracts and agreements in order to protect the interests of our Group to the extent
           possible;

     (3)   managing our production safety systems and ensuring that various production indicators
           comply with the relevant requirements of the PRC laws; and

     (4)   supervising our compliance with PRC environmental protection laws in respect of our
           production processes.

      For further information on the experience of each of our executive Directors and senior
management team, please refer to the section headed ‘‘Directors, Senior Management and Employees’’ in
this prospectus.




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OUR MINERAL RESOURCES

     We currently own three operating mines in the Chifeng Municipality, Inner Mongolia. We have an
ore processing facility located at each of the Nantaizi Gold Mine (which processes ore from both the
Nantaizi Gold Mine and the Shirengou Gold Mine) and the Luotuochang Gold Mine. We have secured
one exploration permit covering an aggregate area of approximately 3.19 km 2 and four mining permits
covering an aggregate area of approximately 20.4 km 2 at our Gold Mines.

     The map below illustrates the geographical locations of our Gold Mines in Inner Mongolia and the
geographical location of the Chifeng Municipality:




Source: Independent Technical Expert’s Report




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     For details of our mining and exploration areas, please refer to ‘‘Appendix V — Independent
Technical Expert’s Report’’ to this prospectus.

      The following table, which appears as Table 6.2 in the Independent Technical Expert’s Report,
provides information on the gold resources at our Gold Mines as at 30 November 2008 under the JORC
Code. For definitions of the technical terms used in the tables, please refer to the section headed
‘‘Glossary of Technical Terms’’ in this prospectus.

                  Gold Mines Ore Resources Summary — as at 30 November 2008
  (The figures below do not take into account our 97.14% proportionate ownership in each Gold Mine)

JORC Mineral               Tonnage                          Grades                                         Contained Metals
Resource Category            (kt)     Au (g/t)   Ag (g/t)   Cu (%)    Pb (%)    Zn (%)    Au (koz*)   Ag (koz)   Cu (t)       Pb (t)    Zn (t)
Shirengou
   Measured . . . . .           523       9.54       86.9      0.35      1.67      1.38         161      1,462     1,818        8,730     7,201
   Indicated . . . . .        1,573      10.03       95.6      0.32      1.96      1.49         507      4,835     5,085       30,840    23,435
   Subtotal . . . . .         2,096       9.91       93.4      0.33      1.89      1.46         668      6,296     6,903       39,570    30,636
   Inferred . . . . . .         525       9.71       83.2      0.42      1.94      1.40         164      1,404     2,217       10,198     7,367
   Total . . . . . . . .      2,621       9.87       91.4      0.35      1.90      1.45         832      7,700     9,120       49,768    38,003
Nantaizi
   Measured . . . . .         1,037      11.03       89.6      0.44      1.45      1.38         368      2,986     4,526       14,992    14,298
   Indicated . . . . .        3,241      11.28       90.0      0.50      1.67      1.50       1,175      9,382    16,367       54,082    48,617
   Subtotal . . . . .         4,278      11.22       89.9      0.49      1.61      1.47       1,543     12,368    20,893       69,074    62,915
   Inferred . . . . . .       1,026      11.29       90.1      0.50      1.71      1.51         372      2,972     5,166       17,564    15,510
   Total . . . . . . . .      5,303      11.23       90.0      0.49      1.63      1.48       1,916     15,339    26,059       86,638    78,425
Luotuochang
   Measured . . . . .           935       4.31       49.1      2.67       —         —           129      1,475    24,976           —         —
   Indicated . . . . .        7,007       4.02       48.4      2.60       —         —           905     10,907   181,906           —         —
   Subtotal . . . . .         7,942       4.05       48.5      2.60       —         —         1,035     12,383   206,883           —         —
   Inferred . . . . . .         679       4.02       49.3      2.69       —         —            88      1,077    18,273           —         —
   Total . . . . . . . .      8,622       4.05       48.6      2.61       —         —         1,122     13,459   225,156           —         —
Total
   Measured . . . . .         2,495       8.20       73.8      1.26       —         —           657      5,923    31,321       23,722    21,499
   Indicated . . . . .      11,822        6.81       66.1      1.72       —         —         2,588     25,124   203,358       84,922    72,052
   Subtotal . . . . .       14,316        7.05       67.5      1.64       —         —         3,245     31,047   234,679      108,644    93,551
   Inferred . . . . . .       2,230       8.70       76.1      1.15       —         —           624      5,452    25,656       27,762    22,877
   Total . . . . . . . .    16,546        7.27       68.6      1.57       —         —         3,869     36,499   260,335      136,406   116,428


* koz – kilo troy ounce = 31,103.48 grams.



Source: Independent Technical Expert’s Report




                                                                      – 125 –
                                                                 BUSINESS


     The following table, which appears as Table 6.4 in the Independent Technical Expert’s Report,
provides information on the gold reserves of our Gold Mines as at 30 November 2008 under the JORC
Code. Pursuant to the Independent Technical Expert’s Report, the aggregate proved ore reserves and
probable ore reserves, under the JORC Code, of the Gold Mines are 14,597,000 tonnes.

                   Gold Mines Ore Reserves Summary — as at 30 November 2008
  (The figures below do not take into account our 97.14% proportionate ownership in each Gold Mine)

JORC Ore                   Tonnage                          Grades                                              Contained Metals
Reserve Category             (kt)     Au (g/t)   Ag (g/t)   Cu (%)     Pb (%)     Zn (%)     Au (koz)      Ag (koz)    Cu (t)      Pb (t)      Zn (t)
Shirengou Gold-Polymetallic Deposit
   Proved . . . . . . .         523       8.59       78.2      0.31       1.50       1.24           144        1,315      1,636      7,857       6,481
   Probable. . . . . .        1,573       9.03       86.0      0.29       1.76       1.34           457        4,351      4,577     27,756      21,092
   Subtotal . . . . .         2,096       8.92       84.1      0.30       1.70       1.32           601        5,667      6,213     35,613      27,573
Nantaizi Gold-Polymetallic Deposit
   Proved . . . . . . .       1,037       9.93       80.6      0.39       1.30       1.24           331        2,687      4,073     13,493      12,868
   Probable. . . . . .        3,241      10.15       81.0      0.45       1.50       1.35          1,058       8,444    14,730      48,674      43,755
   Subtotal . . . . .         4,278      10.10       80.9      0.44       1.45       1.32          1,389     11,131     18,804      62,167      56,624
Luotuochang Gold-Silver-Copper Deposit
   Proved . . . . . . .         968       3.66       41.7      2.27           —       —             114        1,298    21,979          —           —
   Probable. . . . . .        7,255       3.42       41.2      2.21           —       —             797        9,599   160,078          —           —
   Subtotal . . . . .         8,222       3.44       41.2      2.21           —       —             910      10,897    182,057          —           —
Total
   Proved . . . . . . .       2,528       7.25       65.2      1.10           —       —             589        5,301    27,689      21,350      19,349
   Probable. . . . . .      12,069        5.96       57.7      1.49           —       —            2,311     22,394    179,384      76,430      64,847
   Total . . . . . . . .    14,597        6.18       59.0      1.42           —       —            2,900     27,695    207,073      97,780      84,196




Source: Independent Technical Expert’s Report

     The following tables, which appear as Tables 10.1 and 10.2 in the Independent Technical Expert’s
Report, provide information on the actual milled ore and concentrate production from May to November
2008 and forecast production of ore and concentrate from December 2008 to 2011 for the Shirengou-
Nantaizi Mining Complex.


         Actual and Forecast Production for the Shirengou-Nantaizi Mining Complex, 2008–2011
                      (Our Company’s share of the production in the table is 97.14%)
                                                                     Actual                                    Forecast
                                                                May–Nov              Dec
Item                                                             2008                2008               2009              2010               2011
Milled Gold-Polymetallic Ore
 Tonnage (kt) . . . . . . . . . . . . . . . . . . . . . .                 121                 30              365              450               450
     Au Grade (g/t) . . . . . . . . . . . . . . . . . .                  9.26               9.64             9.64             9.67              9.72
     Ag Grade (g/t) . . . . . . . . . . . . . . . . . .                  79.7               82.1             82.1             82.0              77.9
     Cu Grade (%) . . . . . . . . . . . . . . . . . . .                  0.41               0.38             0.38             0.39              0.36
     Pb Grade (%) . . . . . . . . . . . . . . . . . . .                  1.43               1.54             1.54             1.54              1.35
     Zn Grade (%) . . . . . . . . . . . . . . . . . . .                  1.28               1.32             1.32             1.32              1.30
     Au Metal (koz) . . . . . . . . . . . . . . . . . .                  36.0                  9              113              140               141
     Ag Metal (koz) . . . . . . . . . . . . . . . . . .                   310                 80              960            1,190             1,130
     Cu Metal (t) . . . . . . . . . . . . . . . . . . . .                 498                120            1,410            1,750             1,620
     Pb Metal (t) . . . . . . . . . . . . . . . . . . . .               1,731                460            5,620            6,910             6,080
     Zn Metal (t) . . . . . . . . . . . . . . . . . . . .               1,547                400            4,800            5,920             5,850




                                                                       – 126 –
                                                               BUSINESS


                                                                  Actual                                  Forecast
                                                               May–Nov             Dec
Item                                                            2008               2008            2009              2010         2011
Mill Recovery
  Au (%) . . . . . . . . . . . . . . . . . . . . . . . . .            86.9            85.2            85.2              85.2         85.2
  Ag (%) . . . . . . . . . . . . . . . . . . . . . . . . .            79.9            80.0            80.0              80.0         80.0
  Cu (%). . . . . . . . . . . . . . . . . . . . . . . . . .           71.0            67.0            67.0              67.0         67.0
  Pb (%) . . . . . . . . . . . . . . . . . . . . . . . . . .          73.7            74.8            74.8              74.8         74.8
  Zn (%) . . . . . . . . . . . . . . . . . . . . . . . . . .          76.5            77.4            77.4              77.4         77.4
Final Products
  No. 1 Gold Concentrate (t) . . . . . . . . . . . .                 2,024             450           5,540             6,880        6,380
     Cu Grade (%) . . . . . . . . . . . . . . . . . . .               17.5            17.0            17.0              17.0         17.0
     Au Grade (g/t) . . . . . . . . . . . . . . . . . .                256             287             286               285          308
     Ag Grade (g/t) . . . . . . . . . . . . . . . . . .              2,310           2,610           2,610             2,590        2,650
     Cu Metal (t) . . . . . . . . . . . . . . . . . . . .              353              80             940             1,170        1,090
     Au Metal (koz) . . . . . . . . . . . . . . . . . .               16.7               4              51                63           63
     Ag Metal (koz) . . . . . . . . . . . . . . . . . .                150              40             460               570          540
  No. 2 Gold Concentrate (t) . . . . . . . . . . . .                 2,932             690           8,150             9,940        9,090
     Pb Grade (%) . . . . . . . . . . . . . . . . . . .               43.5            49.8            51.6              52.0         50.0
     Au Grade (g/t) . . . . . . . . . . . . . . . . . .                155             167             174               176          193
     Ag Grade (g/t) . . . . . . . . . . . . . . . . . .              1,029           1,130           1,170             1,180        1,230
     Pb Metal (t) . . . . . . . . . . . . . . . . . . . .            1,276             350           4,210             5,170        4,540
     Au Metal (koz) . . . . . . . . . . . . . . . . . .               14.6               4              46                56           57
     Ag Metal (koz) . . . . . . . . . . . . . . . . . .                 97              25             306               377          358
  Zinc Concentrate (t). . . . . . . . . . . . . . . . .              2,426             610           7,450             9,210        9,060
     Zn Grade (%) . . . . . . . . . . . . . . . . . . .               48.8            50.0            49.9              49.8         50.0
     Zn Metal (t) . . . . . . . . . . . . . . . . . . . .            1,183             310           3,720             4,580        4,530

   Actual Monthly Production Data for the Shirengou-Nantaizi Mining Complex, May–Nov 2008
                  (Our Company’s share of the production in the table is 97.14%)
                                      May             June           July          August         September      October        November
Period                                2008            2008           2008           2008             2008         2008            2008
Milled Gold-
 Polymetallic Ore
 Tonnage (kt) . . . . . . .                4.20           13.94            15.17          15.86        15.75            25.73       30.16
     Au Grade (g/t) . . .                  5.27            9.46            10.10           8.96         8.69             9.61        9.47
     Ag Grade (g/t) . . .                 49.66           78.56            79.96          81.83        82.31            81.00       80.67
     Cu Grade (%) . . . .                  0.37            0.40             0.39           0.35         0.43             0.43        0.44
     Pb Grade (%) . . . .                  0.90            1.39             1.39           1.69         1.41             1.43        1.43
     Zn Grade (%) . . . .                  0.79            1.28             1.29           1.32         1.31             1.30        1.29
     Au Metal (koz) . . .                   0.7             4.2              4.9            4.6          4.4              8.0         9.2
     Ag Metal (koz) . . .                     7              35               39             42           42               67          78
     Cu Metal (t) . . . . .                  15              56               60             55           68              111         132
     Pb Metal (t) . . . . .                  38             194              210            267          222              369         431
     Zn Metal (t) . . . . .                  33             178              195            210          206              335         390
Mill Recovery
 Au (%) . . . . . . . . . .               85.33           88.89            88.62          86.23        85.94            86.05       86.62
 Ag (%) . . . . . . . . . .               74.37           77.35            82.95          79.67        79.86            80.02       79.97
 Cu (%). . . . . . . . . . .              68.18           65.39            73.68          71.71        71.37            71.67       71.42
 Pb (%) . . . . . . . . . . .             73.52           73.56            74.31          73.60        73.54            73.73       73.56
 Zn (%) . . . . . . . . . . .             75.26           73.91            77.42          75.50        75.54            77.39       77.44




                                                                    – 127 –
                                                BUSINESS


                              May       June       July      August     September    October     November
Period                        2008      2008       2008       2008         2008       2008         2008
Final Products
  No. 1 Gold
     Concentrate (t) . . .        111       216        255        232          263         439         509
     Cu Grade (%) . . . .        9.40     16.83      17.30      17.18        18.58       18.04       18.58
     Au Grade (g/t) . . .         139       275        287        279          237         257         257
     Ag Grade (g/t) . . .       1,136     2,256      2,437      2,692        2,390       2,301       2,317
     Cu Metal (t) . . . . .      10.5      36.3       44.1       39.8         48.8        79.3        94.5
     Au Metal (koz) . . .        0.50      1.91       2.35       2.08         2.00        3.62        4.21
     Ag Metal (koz) . . .         4.1      15.7       20.0       20.0         20.2        32.5        37.9
  No. 2 Gold
     Concentrate (t) . . .         68       338        362        439          374         621         731
     Pb Grade (%) . . . .        41.1      42.2       43.2       44.9         43.7        43.8        43.4
     Au Grade (g/t) . . .          51       171        173        132          148         161         160
     Ag Grade (g/t) . . .         424     1,068      1,064        935        1,091       1,057       1,049
     Pb Metal (t) . . . . .        28       143        156        197          163         272         317
     Au Metal (koz) . . .         0.1       1.9        2.0        1.9          1.8         3.2         3.8
     Ag Metal (koz) . . .           1        12         12         13           13          21          25
  Zinc Concentrate (t). .          53       273        309        323          318         530         618
     Zn Grade (%) . . . .        46.6      48.1       48.8       48.9         48.9        49.0        48.9
     Zn Metal (t) . . . . .        25       131        151        158          156         259         302



Source: Independent Technical Expert’s Report




                                                  – 128 –
                                                             BUSINESS


    The following tables, which appear as Tables 10.3 and 10.4 in the Independent Technical Expert’s
Report, provide information on the actual milled ore and concentrate production from September to
November 2008 and forecast production from December 2008 to 2011 for the Luotuochang Gold Mine.

              Actual and Forecast Production for the Luotuochang Gold Mine, 2008–2011
                      (Our Company’s share of the production in the table is 97.14%)
                                                               Actual                                 Forecast
                                                             Sep–Nov            Dec
     Item                                                      2008             2008           2009              2010         2011
     Milled Gold-Polymetallic Ore
        Tonnage (kt) . . . . . . . . . . . . . . . . . .             41.7            20            273               330          330
          Au Grade (g/t) . . . . . . . . . . . . . .                 3.40          3.44           3.44              3.44         3.49
          Ag Grade (g/t) . . . . . . . . . . . . . .                 41.2          41.2           41.2              41.2         44.7
          Cu Grade (%) . . . . . . . . . . . . . . .                 2.16          2.21           2.21              2.21         2.51
          Au Metal (koz) . . . . . . . . . . . . . .                  4.6             2             30                37           37
          Ag Metal (koz) . . . . . . . . . . . . . .                   55            26            360               440          470
          Cu Metal (t) . . . . . . . . . . . . . . . .                899           440          6,030             7,290        8,280
     Mill Recovery
        Au (%) . . . . . . . . . . . . . . . . . . . . .             85.8          86.8           86.8              86.8         86.8
        Ag (%) . . . . . . . . . . . . . . . . . . . . .             82.0          82.1           82.1              82.1         82.1
        Cu (%). . . . . . . . . . . . . . . . . . . . . .            80.0          79.3           79.3              79.3         79.3
     Final Products
        Copper Concentrate (t) . . . . . . . . . . .                2,880         1,300         17,700            21,400       24,300
          Au Grade (g/t) . . . . . . . . . . . . . .                 42.3          46.0           46.0              46.0         41.1
          Ag Grade (g/t) . . . . . . . . . . . . . .                  489           521            521               521          498
          Cu Grade (%) . . . . . . . . . . . . . . .                 25.0          27.0           27.0              27.0         27.0
          Au Metal (koz) . . . . . . . . . . . . . .                  3.9             2             26                32           32
          Ag Metal (koz) . . . . . . . . . . . . . .                   45            22            297               359          389
          Cu Metal (t) . . . . . . . . . . . . . . . .                720           350          4,780             5,780        6,570


          Actual Monthly Production Data for the Luotuochang Gold Mine, Sep–Nov 2008
                   (Our Company’s share of the production in the table is 97.14%)
                                                                            September 2008      October 2008            November 2008
     Milled Gold-Polymetallic Ore
       Tonnage (kt) . . . . . . . . . . . . . . . . . . . . . . . . .                   11.7                14.4                 15.7
          Au Grade (g/t) . . . . . . . . . . . . . . . . . . . . .                      3.50                3.48                 3.26
          Ag Grade (g/t) . . . . . . . . . . . . . . . . . . . . .                      41.4                41.5                 40.9
          Cu Grade (%) . . . . . . . . . . . . . . . . . . . . . .                      2.22                2.25                 2.02
          Au Metal (koz) . . . . . . . . . . . . . . . . . . . . .                       1.3                 1.6                  1.6
          Ag Metal (koz) . . . . . . . . . . . . . . . . . . . . .                        16                  19                   21
          Cu Metal (t) . . . . . . . . . . . . . . . . . . . . . . .                     259                 323                  317
     Mill Recovery
       Au (%) . . . . . . . . . . . . . . . . . . . . . . . . . . . .                  85.09               86.44                85.73
       Ag (%) . . . . . . . . . . . . . . . . . . . . . . . . . . . .                  82.12               82.45                81.35
       Cu (%). . . . . . . . . . . . . . . . . . . . . . . . . . . . .                 80.17               80.30                79.66
     Final Products
       Copper Concentrate (t) . . . . . . . . . . . . . . . . . .                        829               1,029                1,021
          Au Grade (g/t) . . . . . . . . . . . . . . . . . . . . .                      41.9                42.0                 42.9
          Ag Grade (g/t) . . . . . . . . . . . . . . . . . . . . .                       479                 477                  510
          Cu Grade (%) . . . . . . . . . . . . . . . . . . . . . .                     25.02               25.23                24.71
          Au Metal (koz) . . . . . . . . . . . . . . . . . . . . .                       1.1                 1.4                  1.4
          Ag Metal (koz) . . . . . . . . . . . . . . . . . . . . .                        13                  16                   17
          Cu Metal (t) . . . . . . . . . . . . . . . . . . . . . . .                     397                 491                  521



     Source: Independent Technical Expert’s Report



                                                                 – 129 –
                                             BUSINESS


  Chifeng Municipality

      We have three operating mines in the Chifeng Municipality, namely the Shirengou Gold Mine, the
Nantaizi Gold Mine and the Luotuochang Gold Mine. The Chifeng Municipality is situated in eastern
Inner Mongolia, at the junction of Inner Mongolia, Hebei Province (河北省) and Liaoning Province (遼
寧省), adjacent to Chengde, Hebei Province (河北承德) and Chaoyang, Liaoning Province (遼寧朝陽)
and approximately 500 km from Beijing. The Chifeng Municipality is well connected to other major
cities of the country through air routes, railways and highways. A number of new highways have
recently been completed and have commenced operations in the Chifeng Municipality, including the
Chifeng to Chaoyang (赤峰—朝陽), Chifeng to Tongliao (赤峰—通遼) and Chifeng to Daban (赤峰—
大板) highways. In addition, a number of other infrastructure projects are under construction in the
Chifeng Municipality, including the Chifeng to Chengde (赤峰—承德) highway and a large-scale
military and civil airport.

      The Chifeng Municipality is comprised of three districts, two counties and seven banners, spanning
a total area of 90,021 km 2 and is the second largest prefecture-level city in the PRC, in terms of area,
with a population of approximately 4.8 million.

      The Chifeng Municipality is situated directly between the two major economic zones of north-
eastern and northern China and at the junction of the Bohai Rim economic zone (環渤海經濟區),
spanning across the Daxinganling poly-metallic mineralization belt (大興安嶺多金屬成礦帶) and the
gold mineralization belt at the northern rim of Northern China Di Tai (華北地台緣金成礦帶).

      According to the Independent Technical Expert’s Report, the Chifeng Municipality is rich in
mineral resources, and the area has a long history of production of precious metals and nonferrous
metals. In recent years, increases in metal prices, as well as implementation of the government’s favored
policies, including the ‘‘Western China Development Plan’’, ‘‘Redevelopment of Old Industrial
Headquarters of North-eastern China’’ (振興東北老工業基地) and ‘‘Assistance to the Eastern Region of
the Inner Mongolia Autonomous Region’’ (自治區扶持東部地區) have created a mining boom in the
Chifeng Municipality, with numerous new discoveries of mineral deposits and new development of
mining properties. In 2003, the municipality commission and government of Chifeng invited over 80
experts and academics to a seminar on the development prospects of mineral resources of the
Daxinganling area. Participants submitted a joint long-term recommendation, in particular, the
recommendation to the State Council entitled ‘‘Joint Recommendation Regarding an Important
Nonferrous Metal Resource Headquarters in Central Southern Daxinganling’’ (大興安嶺中南段一個重
要的有色金屬資源基地的聯合建議)for the development of the nonferrous metal industry in the
Chifeng Municipality. This recommendation was supported by State Council Premier Wen Jiabao and
relevant ministries and commissions. Our Gold Mines are among these newly-developed mining
projects. Since then, the Chifeng Municipality has become an important base for strategic mineral
resources in China.

     For further details of our mining and exploration areas, please refer to ‘‘Appendix V —
Independent Technical Expert’s Report’’ in this prospectus.

     Shirengou Gold Mine

      The Shirengou Gold Mine is located approximately 60 km southwest of the Chifeng Municipality
in the southern Songshan District (松山區), bordering on Kalaqin Banner (喀喇沁旗). Gold
mineralization at Shirengou is controlled by a set of north-northwest-trending fractures, and currently
three auriferous complex veins have been identified in the deposit area.



                                                – 130 –
                                                                   BUSINESS


     The following table, which appears as part of Table 5.1 in the Independent Technical Expert’s
Report, summarizes the characteristics of the three complex veins that have been identified in the
Shirengou deposit area.

                    Characteristics of Auriferous Complex Veins of the Shirengou Deposit Area

                                           Strike    Vertical
                      Dip         Dip      Length    Extension            Thickness (m)                            Average Grades
Vein                Direction     Angle     (m)        (m)         Mean       Min         Max     Au (g/t)   Ag (g/t)   Cu (%)    Pb (%)    Zn (%)
No. I . . . . . .           78°      60°     1,006           575     1.32       0.82       1.79       9.86       95.1      0.39      1.85      1.36
No. II . . . . .            70°      56°       802           375     1.26       0.95       1.59      10.11       88.6      0.32      1.93      1.55
No. III . . . . .           70°      70°       548           353     1.38       1.15       1.58       9.71       84.5      0.30      1.92      1.57




Source: Independent Technical Expert’s Report

      The mining area designated in the mining permit covers an area of approximately 10.9 km 2 . As at
30 November 2008, the remaining gold reserves (proved and probable) and resources (measured and
indicated) of the Shirengou Gold Mine amounted to approximately 601 koz and 668 koz, respectively,
and the average estimated gold grade of the reserves for the Shirengou Gold Mine was 8.92 g/t.

      The Shirengou Gold Mine is an underground mine which accesses the No. I vein from the north
via two levels at approximately 1,400 m and 1,360 m elevation. Ore mined at the Shirengou Gold Mine
is transported to the ore processing facility located at the Nantaizi Gold Mine for processing.

      We are currently implementing several development projects at the Shirengou Gold Mine to
expand present production capacity and to enhance efficiency. The planned development is to establish
sublevels every 40 m to extract ore from the No. I vein and to expand further the mine resources and
reserves at the Shirengou Gold Mine. A blind shaft is being developed from the 1,360 m elevation level
and will provide access to, and ore and waste hoisting from, the lower levels of the Shirengou Gold
Mine. The development on the 1,360 m elevation level will be connected from the north to south with
the Nantaizi Gold Mine, allowing all ore from the Shirengou Gold Mine to be hauled to the adit at the
Nantaizi Gold Mine for processing.

         Nantaizi Gold Mine

      The Nantaizi Gold Mine is located south of the Shirengou Gold Mine and covers a poly-metallic
mineralization belt spanning 6 km from west to east and 15 km from north to south. It is situated around
Dabeiliang (大北梁) and Lishugou (梨樹溝) of Nantaizi, Kalaqin Banner. For zoning purposes, however,
it belongs to Nantaizi Town of Kalaqin Banner (喀喇沁旗南台子鄉). The Shirengou Gold Mine and the
Nantaizi Gold Mine mining areas share the same geological features and ore characteristics. To date, a
total of four auriferous complex veins have been identified in the Nantaizi deposit area.




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     The following table, which appears as part of Table 5.1 in the Independent Technical Expert’s
Report, summarizes the characteristics of the four complex veins that have been identified in the
Nantaizi deposit area.

                        Characteristics of Auriferous Complex Veins of the Nantaizi Deposit

                                          Strike    Vertical
                     Dip         Dip      Length    Extension            Thickness (m)                            Average Grades
Vein               Direction     Angle     (m)        (m)         Mean       Min         Max     Au (g/t)   Ag (g/t)   Cu (%)    Pb (%)    Zn (%)
No. IV . . . . .           68°      70°     1,649           534     2.07       0.71       2.91      11.75       90.1      0.48      1.58      1.44
No. V . . . . .            72°      68°       653           320     1.88       0.90       2.10      11.95       90.7      0.51      1.70      1.50
No. VI . . . . .           65°      58°       952           375     1.28       0.63       2.02       8.79       88.1      0.45      1.59      1.47
No. VII . . . .      65°–72°        68°     1,025           274     2.03       1.00       2.20      11.44       90.5      0.52      1.72      1.53




Source: Independent Technical Expert’s Report

      Nantaizi Gold Mine’s exploration permit covers an area of 3.19 km 2 and the two mining permits
cover an aggregate area of approximately 3.0 km 2 . As at 30 November 2008, the remaining gold
reserves (proved and probable) and resources (measured and indicated) of Nantaizi Gold Mine amounted
to approximately 1,389 koz and 1,543 koz, respectively, and the estimated average gold grade of the
reserves for the Nantaizi Gold Mine was 10.10 g/t.

      The Nantaizi Gold Mine is an underground mine which accesses the No. IV vein from the south
via one level at approximately 1,350 m. Ore processing at the ore processing facility located at the
Nantaizi Gold Mine comprises crushing, grinding, gravity recovery, flotation and concentrate
dewatering. The ore processing facility located at the Nantaizi Gold Mine processes ore produced from
both the Nantaizi Gold Mine and the Shirengou Gold Mine and has a capacity of approximately 990 tpd.
Concentrates produced by the ore processing facility located at the Nantaizi Gold Mine are sold directly
to our customers.

     We are currently implementing several development projects at the Nantaizi Gold Mine to expand
present production capacity and to enhance efficiency. The planned development at the Nantaizi Gold
Mine includes constructing sublevels every 40 m to extract ore from the No. IV and No. VI veins. A
main shaft will be developed from the surface to hoist ore and waste from the lower levels. The
development of the main shaft has commenced at the beginning of 2009 and is expected to be completed
within the year to an approximate depth of 200 m. In addition, we are in the process of expanding the
ore processing capacity of the ore processing facility located at the Nantaizi Gold Mine from 990 tpd to
approximately 1,480 tpd. Please refer to the section headed ‘‘Future Plans and Use of Proceeds —
Future Plans — Expansion of ore processing facility located at the Nantaizi Gold Mine’’ in this
prospectus.

         Luotuochang Gold Mine

      The Luotuochang Gold Mine is located approximately 240 km north-northeast of the Chifeng
Municipality and approximately 50 km north-northwest of the town of Lindong (林東鎮). Gold
mineralization at Luotuochang is controlled by a set of west-northwest-trending fractures. To date, a
total of four auriferous complex veins have been identified in the Luotuochang deposit area.




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     The following table, which appears as part of Table 5.2 in the Independent Technical Expert’s
Report, summarizes the characteristics of the four complex veins that have been identified in the
Luotuochang deposit area.

                            Characteristics of Auriferous Complex Veins of the Luotuochang Deposit

                                                        Strike          Vertical
                                Dip                     Length         Extension               Thickness (m)                   Average Grades
Vein                          Direction     Dip Angle    (m)              (m)         Mean        Min          Max      Au (g/t)   Ag (g/t)   Cu (%)
No. I . . . . . . . . . .             30°         60°       1,028               445     1.72        1.17         2.43       3.99       51.5      2.03
No. II . . . . . . . . .              25°         65°            846            536     1.89        1.50         2.60       4.20       57.6      3.05
No. III . . . . . . . . .             30°         70°            998            550     1.95        1.69         2.23       4.04       34.8      2.57
No. IV . . . . . . . . .              30°         70°            856            430     1.59        0.90         2.12       3.95       57.0      2.90




Source: Independent Technical Expert’s Report

      The Luotuochang Gold Mine’s mining permit covers an area of approximately 6.5 km 2. As at 30
November 2008, the remaining gold reserves (proved and probable) and resources (measured and
indicated) of the Luotuochang Gold Mine amounted to approximately 910 koz and 1,035 koz,
respectively, and the estimated average gold grade of the reserves for the Luotuochang Gold Mine was
3.44 g/t.

      The Luotuochang Gold Mine is an underground mine which accesses the No. I and III veins from
the south via an inclined shaft, which provide access to the first and second levels. Ore processing at the
ore processing facility located at the Luotuochang Gold Mine comprises crushing, grinding, gravity
recovery, flotation and concentrate dewatering. The ore processing facility located at the Luotuochang
Gold Mine has an ore processing capacity of approximately 800 tpd. Concentrates produced by the ore
processing facility located at the Luotuochang Gold Mine are sold directly to our customers.

       We are currently implementing several development projects at the Luotuochang Gold Mine to
expand present production capacity and to enhance efficiency. The planned development includes
constructing sublevels every 40 m to extract ore from the No. II and No. IV veins. A main shaft will be
developed in the north from the surface to hoist ore and waste from the lower levels. In addition, we are
in the process of expanding the ore processing capacity of the ore processing facility located at the
Luotuochang Gold Mine from approximately 800 tpd to approximately 1,100 tpd. Please refer to the
section headed ‘‘Future Plans and Use of Proceeds — Future Plans — Expansion of ore processing
facility located at the Luotuochang Gold Mine’’ in this prospectus.

MINING AREAS IN OTHER PROVINCES

      We are dedicated to expanding our resource base through exploration. For further details see the
section headed ‘‘Business — Business Strategies’’ in this prospectus.

      We have entered into option agreements with two independent third parties to purchase the mining
rights and assets of two gold mines in Qitai County, Xinjiang, the PRC. For further details, please refer
to the sections headed ‘‘Business — Business Developments — Option agreements in respect of two
gold mines in Xinjiang’’ and ‘‘Future Plans and Use of Proceeds — Future Plans — Expansion of
mining and exploration activities in Xinjiang and other regions’’ in this prospectus.




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EXPLORATION AND MINING RIGHTS

      We hold a number of mining and exploration permits in respect of our Gold Mines. Our
exploration permit covers an aggregate area of approximately 3.19 km 2 and our four mining permits
cover an aggregate mining area of approximately 20.4 km 2. We have renewed certain exploration and
mining permits, including the exploration permit for the Nantaizi Gold Mine, which will expire in July
2009, the two mining permits for the Nantaizi Gold Mine, which will expire in December 2010 and
October 2011, respectively, and the mining permit for the Shirengou Gold Mine, which will expire in
September 2011. Both the Shirengou Gold Mine and the Luotuochang Gold Mine had previously held
exploration permits, and such permits have already been converted into mining permits. For the purposes
of our current operations, the exploration work for the Shirengou Gold Mine and Luotuochang Gold
Mine has been completed, as such, no exploration permit is needed for either the Shirengou Gold Mine
or Luotuochang Gold Mine. For further details on the risks relating to obtaining new permits or
renewing existing permits, please see the section headed ‘‘Risk Factors — Risks Relating to Our
Business — There is no assurance that we can obtain or renew permits necessary for exploration, mining
or production at our Gold Mines or in respect of any mines we acquire in the future’’ in this prospectus.

     The holders of mining permits have legal ownership over the minerals mined. Such ownership is
derived from the mining permits and not from the ownership of the mined land, although the holders of
the mining permits often acquire the land-use rights over the land. Pursuant to PRC laws and
regulations, the holder of an exploration permit can renew that exploration permit as described below
and the holder of that exploration permit has a priority in obtaining the related mining permit after
successful discovery of gold resources.

      In accordance with the ‘‘Administrative Measures on Registration of Tenement of Mineral
Resources Exploration and Survey’’ (礦產資源勘查區塊登記管理辦法) and the ‘‘Administrative
Measures on Registration of Mineral Resources Exploitation’’ (礦產資源開採登記管理辦法), a renewal
application for an exploration permit must be submitted to the authority which approved the original
application at least 30 days prior to the expiration date of the permit. Each renewal period for an
exploration permit must not exceed two years.

      According to the ‘‘Notice to holders of exploration permit’’ (探礦權人須知) issued by the Bureau
of Land Resources of Chifeng (赤峰市國土資源局), a conversion of an exploration permit into a mining
permit can be applied for by the holder of an exploration permit provided that the following conditions
are fulfilled:

     .     a valuation of all the mineral resources discovered in the exploration areas set forth in the
           exploration permit has been carried out;

     .     the geological exploration carried out on the exploration areas is of an advanced level; and

     .     the level of the mineral reserves and the scale of development meet the minimum
           requirements set by the governmental authority in such autonomous area and the PRC
           government.




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                                              BUSINESS


     Please refer to the section headed ‘‘The PRC Laws and Regulations Relating to the Industry —
Renewal of Exploration and Mining Permits’’ in this prospectus. Further details of our mining and
exploration permits are set out in ‘‘Appendix V — Independent Technical Expert’s Report’’ to this
prospectus.

     Shirengou Mining, Nantaizi Mining and Luotuochang Mining, as enterprises engaging in the
exploration and mining of gold, have also obtained Gold Operating Permits (開採黃金礦產批准書).

OUR KEY ACTIVITIES

     We are engaged in the business of owning mining assets and processing ore. We outsource
substantially all our exploration and mining works. We select third-party contractors to undertake our
exploration and mining works through a selective tendering process. Prior to engaging third-party
contractors, we assess their skills, expertise and experience. All of the third-party contractors we engage
must possess the requisite qualifications for undertaking the mining, exploration or construction works
for which they are commissioned. The third-party contractors work under the supervision of our
management and technical teams.

     We are engaged in the following key activities with respect to our mineral resources:

     .     overall management — despite outsourcing substantially all of our exploration and mining
           works to third-party contractors, our staff manage and supervise the overall development of
           each Gold Mine’s mineral resources and the mineral quality in order to ensure that third-party
           contractors meet our quality standards. Although our third-party contractors receive payments
           for performing specific tasks that they undertake, they do not have any economic interest in
           our mineral resources. Please refer to the subsection headed ‘‘Third-Party Contractors’’
           below;

     .     exploration — our geological team constantly analyzes data to identify potential exploration
           targets and to assess the prospectivity, scale, nature and timing of exploration activities for
           each specific location or target. Once an exploration target is identified and acquired, we then
           manage and execute the continued exploration at the site. Please refer to the subsection
           headed ‘‘Exploration’’ below;

     .     mining — we engage third-party contractors on medium-term contracts to extract materials
           from the ore body and to transport them to our ore processing facilities. Please refer to the
           subsection headed ‘‘Mining’’ below;

     .     processing — we process the extracted ore at our ore processing facilities to produce
           saleable mineral concentrates. Please refer to the subsection headed ‘‘Ore Processing’’ below;
           and

     .     concentrates sales — we mainly sell our products to smelters or trading entities in the
           Chifeng Municipality and other surrounding areas in the PRC. Please refer to the subsection
           headed ‘‘Sale of Products’’ below.




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EXPLORATION

     Our exploration activities are focused on the extension of existing ore bodies in the areas
surrounding our existing mines. Moreover, we actively seek exploration opportunities in other regions
that we consider may have potential. We have a specialized team of technical personnel, comprising
employees from our exploration, production and project teams, to identify new mineral resources and
deposits in Xinjiang, Inner Mongolia and other regions. Our specialized team identifies such resources
and deposits through analysis and studies based on information gathered from preliminary geological
work by mining and geological experts.

      After potential resources and/or deposits have been identified by our specialized team, we
outsource the actual exploration works (for example, drilling and sampling of ore bodies) to third-party
contractors, as described below. This outsourcing strategy is similar to the approach used by some of the
other PRC mineral companies listed on the Stock Exchange. Our management team supervises and
monitors these third-party contractors to ensure that the exploration and mining works are carried out on
time, on budget and to specification.

     Upon acquisition of an exploration permit in respect of potential resources, we will organize an
analysis and study based on all information gathered from preliminary geological work by mining and
geological experts. A professional geological exploration team with the requisite State qualifications will
be engaged to conduct exploration. Upon taking up the engagement, the exploration team will, building
on their own analysis and utilization of the preliminary geological work, design and carry out
exploration work in accordance with the national standard of ‘‘General Regulations on Geological
Exploration in Respect of Solid Ores’’ (固體礦產地質勘查規範總則) (GB/T13908-2002) issued on 28
August 2002 and ‘‘Regulations on Geological Exploration of Gold Mines’’ (巖金礦地質勘查規範) (DZ/
T0205-2002) issued on 17 December 2002.

       The scope of exploration mainly covers the identification and determination of the position and
occurrence of important minerals, including mineralization belts, control structure and fault structure
through terrain survey, geological exploration survey and geological mapping, which provides a basis
for the deployment of the geological exploration project. Exploration also includes an integrated analysis
and study of the geological structure, primary ore status, occurrence, size and grade of ore through
drilling, trenching and pitting; as well as comparison of mining conditions of the deposit and processing
performance of ores for the estimation of reserves of gold, silver and poly-metallic resources. In
designing and implementing the pitting work, the existing shafts and tunnels will be fully utilized by
combining exploration and mining, so as to maximize the use of exploration work in the mining stage
with the aim of accelerating infrastructure construction, lowering mining costs and enhancing profit
margin.

     Upon exploration of the mineral resources, we enter the infrastructure construction phase, during
which mine shaft excavation and pre-mining preparation work will be carried out. In fact, by combining
exploration and mining, all vertical shafts, horizontal tunnels and skylights which have been constructed
during the exploration stage will meet the needs for production readily or after slight modification.

      Pursuant to the relevant requirements of the State, mine construction design must be carried out by
a professional mine design company with the requisite qualification prescribed by the State on the basis
of the exploration report submitted to the State.




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  Third-party Contractors

     To minimize costs and risk, our business operating model is to outsource substantially all of our
exploration works to third-party contractors.

      In selecting third-party contractors, we require them to provide information on their past
engagements to confirm their ability in terms of capital investment, technical expertise and managerial
skills to perform the work requested. While works are being carried out by third-party contractors, each
of the relevant departments of our Group is responsible for supervising the works carried out by third-
party contractors which ranges from reviewing engineering quality, quantifying losses and depletion of
minerals to supervising and managing the progress and completion of the assignment. We require third-
party contractors to carry out their works according to the design and plan of the relevant assignment
and in accordance with the requirements of our Production and Environmental Safety Department and
Quality Control Department. Our Production and Environmental Safety Department supervises and
inspects safety management. Our Quality Control Department supervises mineral quality to ensure that
third-party contractors meet our quality standards. In addition, we have specialized technical
management personnel who supervise and direct the progress, quality and safety of the works
performed by third-party contractors. Usually when a contract is signed, the requirements regarding the
progress, quality and safety of the works will be clearly defined and we will only need to perform our
supervisory functions during the project works.

     Subcontracting our exploration works has reduced our costs mainly in the following ways:

     .    management costs — outsourcing substantially all of our exploration and mining activities
          has significantly reduced our management costs. Such management costs include
          administrative costs which are associated with overseeing a larger number of employees. The
          dual-management in production and safety has also ensured smoother operations of each
          Gold Mine.

     .    increase in efficiency — engagement of third-party contractors that possess the requisite
          experience and expertise ensures that the exploration or mining works are carried out
          efficiently, which has resulted in an increase in our working efficiency and a reduction in our
          unit production costs.




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  Our In-house Exploration Team

     As at the Latest Practicable Date, we had 34 employees engaging in exploration activities. We
have a Geographic Exploration Experts Committee which comprises professional technicians with
experience in exploration ranging from 17 to 48 years. Each member of the Geographic Exploration
Experts Committee has rich theoretical knowledge of and extensive practical experience in solid mineral
exploration field, and are collectively responsible for overall planning, design and distribution of the
geographic exploration of our Gold Mines. The Geographic Exploration Experts Committee is also
responsible for surveying, demonstrating and technically assessing new mine projects of any company
within our Group. Details of members of the Geographic Exploration Experts Committee are as follows:
                                                                Years of
                                                               Experience
                                                               in Mining
     Name                                    Title              Industry     Professional Skills/Expertise
     Li Ruishan . . . . . . .      Senior Engineer in                   48   District Geographic
                                     Geography                                 Minerals Investigation
     Ma Xiwen . . . . . . .        Head of Land Exploration             40   District Geographic
                                     Department and Head of                    Minerals Investigation
                                     Independent Supervisory
                                     Committee
     Tao Deyi . . . . . . . .      Senior Engineer in                   27   General Geographic Survey
                                     Geography and Minerals                    and Mineral Exploration
     Li Jie. . . . . . . . . . .   Senior Engineer in                   25   Mine Geography
                                     Geography                                 Exploration
     Chen Yunzhi . . . . .         Senior Engineer in                   17   Mine Geography
                                     Geographic Engineering                    Exploration
     Li Qing . . . . . . . . .     Deputy Head of the                   17   Mine Surveying
                                     Production and
                                     Environmental Safety
                                     Department




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                                               BUSINESS


      Our Land Exploration Department and Production and Environmental Safety Department are under
the direct supervision of the Geographic Exploration Experts Committee. Our Land Exploration
Department is comprised of technicians in fields including geographic exploration, physical exploration
and chemical exploration, while the Production and Environmental Safety Department is comprised of
technicians in five professional fields including geography, mining, surveying, production planning and
production statistics. Each of our Gold Mines also has their own professional technical groups which
comprise 10 professional technicians in the fields of geography, surveying and mining and are
responsible for geographic exploration, surveying and mining of our Gold Mines. Under the overall
planning, design and supervision of the Geographic Exploration Experts Committee, each of the
professional technical groups of our Gold Mines is responsible for the specific design, production
organization, production direction, supervision and inspection of their respective Gold Mine, and for
inspecting and ensuring our products meet our quality standards. Details of the existing ten members of
the professional technical groups are as follows:

     Shirengou — Nantaizi Mining Complex
                                                               Years of
                                                             Experience in
                                                                Mining
     Name                                  Title               Industry      Professional Skills/Expertise
     Pang Guohai . . . . . .    Engineer in Mining                      22   Mine Geography
                                                                              Exploration
     Liu Yongqiang . . . .      Engineer in Mining                      13   Mine Geography
                                  Engineering                                 Exploration
     Li Haifeng . . . . . . .   Engineer in Mine                        13   Mine Exploitation
                                  Exploitation
     Jia Maosheng . . . . .     Assistant Engineer in                   16   Mine Surveying
                                  Engineering Technology
     Hu Zhiyuan . . . . . .     Technician                              14   Mine Surveying


     Luotuochang Gold Mine
                                                               Years of
                                                             Experience in
                                                                Mining
     Name                                  Title               Industry      Professional Skills/Expertise
     Yang Guangwu . . . .       Engineer in Mining                      20   Mine Geography
                                  Engineering                                 Exploration
     Xiangli Tieshan. . . .     Engineer in Geography                   29   Mine Geography
                                                                              Exploration
     Wang Guihai . . . . .      Engineer in Mining                      22   Mine Exploitation
     Gao Jinfeng . . . . . .    Technician                              14   Mine Exploitation
     Ou Wenbo . . . . . . .     Assistant Engineer in                   22   Mine Surveying
                                  Engineering




                                                   – 139 –
                                                 BUSINESS


      The costs of our in-house exploration team as compared to fees paid to third-party contractors are
as follows:
                                      Jan–Dec 2005 Jan–Dec 2006 Jan–Dec 2007 Jan–Oct 2007 Jan–Oct 2008
                                      (in RMB’000) (in RMB’000) (in RMB’000) (in RMB’000) (in RMB’000)
     Cost of our in-house
       exploration team
       (including salary and
       cost incurred on
       exploration) . . . . . . . .            —              —           190              —             289
     Fees paid to third-party
       contractors regarding
       exploration activities. .               —              —         3,330          2,000           4,092


MINING

      All of our Gold Mines are underground operations. Our mining process consists of creating access
to an ore body and then mining the ore body.

      Mine access and ore and waste transportation are conducted through adits and shafts. A number of
internal blind shafts have been constructed to link adits to the surface. Vertical shafts are appropriated to
the dip of the ore bodies, typically between 55º and 70º. Drum winders are generally used on all shafts.
Access to stopes is via haulage levels mined at regular 40 m vertical intervals. The main drive size is
approximately 2 m × 2 m reflecting the scale of machinery used at our Gold Mines.

      The Shirengou Gold Mine and the Nantaizi Gold Mine employ a variety of mining methods which
include: shrinkage stoping, cut-and-fill stoping and resuing. Shrinkage stoping involves mining from the
base upwards, using the blasted ore as a working platform and only drawing sufficient ore to provide
working space. Cut-and-fill stoping also involves mining from the base up, but waste is used to fill the
stopes after completion of the extraction of each cut or lift. The waste fill forms the working platform
for the next cut. The resuing method is suitable for mining of narrow ore veins.

      The Luotuochang Gold Mine employs a combination of the shrinkage stoping and cut-and-fill
stoping mining methods. Waste rock is used as fill for both methods. Haulage and submajor levels are at
40 m vertical intervals.

      Both major and minor developments at our Gold Mines are typically carried out with hand-held
equipment. Rail-mounted shovels are used in haulage development. For main transportation adits, ore
and waste rock are hauled by 0.7 m 3 mine cars pulled by 3 tonne electric trolley locomotives. For
auxiliary transportation, 1.5 tonne electric trolley locomotives are used. The mine cars are currently
hauled out of the surface adits, but as mining progresses deeper, the mine cars will be hoisted in cages
via shafts. We use third-party contractors to carry out all development and mining operations under the
supervision of our management and technical teams at each mine.

      To minimize costs and risk, our business operating model is to outsource our mining works to
third-party contractors. All of our mining operations and most of our mine design construction works are
outsourced to third parties. We have entered into subcontracting mining agreements with two third-party
contractors. Please refer to the section headed ‘‘Business —Third-Party Contractors’’ in this prospectus.




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      We have planned the substantial development of all our Gold Mines over the next three years. The
table below summarizes the planned mine development and production rates for 2008 to 2011:

                        Forecast Mine Development and Production, 2008–2011
Item                                                    2008        2009         2010          2011
Shaft Development (m)
  Shirengou-Nantaizi Mining Complex         .......         1,600         0          200              0
  Luotuochang Gold Mine . . . . . . . . .   .......           200       650          800              0
Adit and Haulage Development (m)
  Shirengou-Nantaizi Mining Complex         .......         7,600     7,500       15,000         3,500
  Luotuochang Gold Mine . . . . . . . . .   .......         3,200     6,600        6,200         1,600
Production (kt)
  Shirengou-Nantaizi Mining Complex         .......          155        365          450           450
  Luotuochang Gold Mine . . . . . . . . .   .......           65        273          330           330



Source: Independent Technical Expert’s Report


ORE PROCESSING

     We have two ore processing facilities located at the Nantaizi Gold Mine and the Luotuochang Gold
Mine, which currently have ore processing capacities of approximately 990 tpd and 800 tpd,
respectively. The Nantaizi Gold Mine and the Shirengou Gold Mine are adjacent to each other, and the
two mines are referred to together in this prospectus as the Shirengou–Nantaizi Mining Complex. The
ore processing facility located at the Nantaizi Gold Mine processes ore from both the Nantaizi Gold
Mine and the Shirengou Gold Mine. At present, the ore processing facility located at the Nantaizi Gold
Mine is under expansion and, when completed, is expected to have an ore processing capacity of
approximately 1,480 tpd. The ore processing facility located at the Luotuochang Gold Mine is also
presently under expansion and, when completed, is expected to have an ore processing capacity of
approximately 1,100 tpd. The combined ore processing capacity of both ore processing facilities is
expected to reach approximately 2,580 tpd by the fourth quarter of 2009.

     We had a 50 tpd ore processing facility located at the Shirengou Gold Mine, which was
constructed prior to our acquisition of Shirengou Mining. The production technology used at this ore
processing facility was outdated and was unable to effectively extract the various types of minerals
contained in the ore. We ceased the operation of the 50 tpd ore processing facility after we completed
the construction and began the operation of the 500 tpd ore processing facility located at the Nantaizi
Gold Mine in May 2008. The daily production capacity of this ore processing facility was subsequently
augmented by 490 tonnes on completion of the construction of phase II in September 2008. All ore
processing previously undertaken at the 50 tpd ore processing facility located at the Shirengou Gold
Mine is now undertaken at the larger, more efficient 990 tpd ore processing facility located at the
Nantaizi Gold Mine.

      We generally use the flotation method for ore processing. From time to time, we also use the
gravity method in the ore processing facility located at the Luotuochang Gold Mine if coarse-grained
gold is present in the ore.




                                                  – 141 –
                                             BUSINESS


     The average gold recovery rate at the ore processing facility located at each of the Nantaizi Gold
Mine and the Luotuochang Gold Mine is approximately 85.2% and 86.8%, respectively.

Ore processing facility located at the Nantaizi Gold Mine

     The processing of ore into concentrates at the ore processing facility located at the Nantaizi Gold
Mine is briefly described below.

     .    The raw ore, sized on a grizzly to less than 350 mm, is first crushed in a 500 mm x 750 mm
          jaw crusher;

     .    the crushed product is screened on a vibrating screen with 14 mm apertures. The oversized
          product from the screening process is sent to a Nordberg cone crusher. The Nordberg cone
          crusher works in a closed circuit with the vibrating screen. The undersized product from the
          screening process is sent for primary grinding;

     .    primary grinding takes place in a 2,400 mm x 3,600 mm ball mill. The ground product from
          the primary grinding process is first put through a jigger to recover the coarse gold particles
          then classified in a screw classifier. Classifier underflow goes back to the ball mill. Classifier
          overflow is classified in a battery of 300 mm cyclones. The cyclone underflow goes to a
          secondary 1,880 mm x 3,700 mm ball mill which works in a closed circuit with the cyclones.
          The cyclone overflow, sized at about 85% less than 0.074 mm, is sent to flotation;

     .    after conditioning with conventional reagents, the cyclone overflow is subjected to rougher
          bulk copper-lead flotation and then rougher zinc flotation. The rougher bulk copper-led
          concentrate is cleaned three times and then subjected to copper and lead separation; galena is
          depressed and chalcopyrite floated. This separation yields the final No. 1 Gold Concentrate
          (as defined in the Independent Technical Expert’s Report) and No. 2 Gold Concentrate (as
          defined in the Independent Technical Expert’s Report). The zinc rougher concentrate is
          cleaned in three stages to produce the final zinc concentrate;

     .    all final concentrates are dewatered by thickening, and the thickener underflow is then
          filtered; and

     .    a 700 mm x 1,250 mm shaking table is used to monitor the gold in the tailings. Additional
          shaking tables will be installed if necessary to collect the gold in the tailings.




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     The flowchart below illustrates the major steps of the ore processing procedures employed at the
processing facility located at the Nantaizi Gold Mine which processes ore from both the Nantaizi Gold
Mine and the Shirengou Gold Mine.




Source: Independent Technical Expert’s Report




                                                 – 143 –
                                             BUSINESS


Ore processing facility located at the Luotuochang Gold Mine

     The processing of ore into concentrates at the ore processing facility located at the Luotuochang
Gold Mine is briefly described below.

     .    The raw ore, sized on a grizzly to less than 350 mm, is first crushed in a 500 mm x 750 mm
          jaw crusher;

     .    the crushed product is screened on a vibrating screen with 14 mm apertures. The oversized
          product from the screening process is sent to a Nordberg cone crusher. The Nordberg cone
          crusher works in a closed circuit with the vibrating screen. The undersized product from the
          screening process is sent for primary grinding;

     .    primary grinding takes place in a 2,400 mm x 3,600 mm ball mill. The ground product from
          the primary grinding process is first put through a jigger to recover the coarse gold particles
          then classified in a screw classifier. Classifier underflow goes back to the ball mill. Classifier
          overflow is classified in a battery of 300 mm cyclones. The cyclone underflow goes to a
          secondary 1,880 mm x 3,700 mm ball mill which works in a closed circuit with the cyclones.
          The cyclone overflow, sized at about 85% less than 0.074 mm, is sent to flotation;

     .    flotation comprises a rougher stage and four cleaner stages on the rougher concentrate as well
          as three scavenger flotation stages to yield the final concentrates;

     .    the final concentrates are dewatered by thickening, and the thickener underflow is then
          filtered; and

     .    a 700 mm x 1,250 mm shaking table is used to monitor the gold minerals in the tailings.
          Additional shaking tables will be installed if necessary to collect the gold minerals in
          tailings.




                                                 – 144 –
                                                BUSINESS


     The flowchart below illustrates the major steps of the ore processing procedures employed at the
processing facility located at the Luotuochang Gold Mine.




Source: Independent Technical Expert’s Report


SALE OF PRODUCTS

     Concentrates produced by our ore processing facilities are sold at the prevailing market prices to
smelters or trading entities in the Chifeng Municipality and other surrounding areas in the PRC. The
concentrates are generally transported by truck to the smelters at their own expense.

  Our customers

      For the year ended 31 December 2007, sales to our five largest customers, which were all
independent third parties, represented 100% of our total sales. Our single largest customer in 2007,
Liaoning Xindu Gold Company Limited (遼寧新都黃金有限責任公司) (‘‘Liaoning Xindu’’), was a
company incorporated in the PRC on 11 November 1999 and was principally engaged in the business of
gold and silver smelting and production and sales of copper cathodes and sulfuric acid. Our other top
four customers in 2007 were private individuals, who operated minerals trading and brokering
enterprises. It is common, in the PRC mining industry, for minerals trading and brokering enterprises to
be operated by individuals. We have maintained sales relationships with these five customers since the
commencement of production at the ore processing facility at the Shirengou Gold Mine. In 2007, our
sales to Liaoning Xindu represented 51.4% of our total sales. Except for Liaoning Xindu, none of our
customers were end-users of our concentrates.




                                                 – 145 –
                                              BUSINESS


     All of our current customers are smelting enterprises. Smelting enterprises process gold
concentrates into, among other products, standard gold for subsequent sale. In processing gold
concentrates into standard gold, smelting enterprises are able to achieve a relatively constant margin
independent of the market price of gold. As a result, the recent financial turmoil and gold price volatility
should not have any negative impact on our customers’ business and/or lower their demand for our gold
concentrates.

      For the ten months ended 31 October 2008, sales to our five largest customers, in aggregate
represented 95.4% of our total sales. For the ten months ended 31 October 2008, sales to our five largest
customers represented 48.9%, 29.2%, 7.7%, 6.5% and 3.1%, respectively, of our total sales. For the ten
months ended 31 October 2008, our single largest customer was a company incorporated in the PRC
which is principally engaged in the business of copper smelting. The other four customers who
comprised our five largest customers for the ten months ended 31 October 2008 are also companies
incorporated in the PRC.

      For the ten months ended 31 October 2008, one of our top five customers was Chifeng Fubon
Copper, a PRC incorporated copper smelting enterprise controlled by Mr Wu which is not within our
Group. Chifeng Fubon Copper’s copper smelting facility is currently under expansion, and construction
in relation to such expansion is expected to be completed in early 2009 with trial production to
commence at or around the same time. Our sale to Chifeng Fubon Copper in September 2008 was for
the sole purpose of providing concentrates to facilitate testing of Chifeng Fubon Copper’s copper
smelting facility as Chifeng Fubon Copper was unable to locate a suitable supplier at the relevant time.
The sale to Chifeng Fubon Copper amounted to RMB11,281,182 which represented 3.6% of our revenue
for the year ended 31 December 2008. The concentrates sold to Chifeng Fubon Copper had been mined
from and produced by the ore processing facility located at our Luotuochang Gold Mine because the
concentrates produced by Luotuochang Mining contain a higher percentage of copper than the
concentrates produced by our Nantaizi Gold Mine. Our Directors confirm that the sale agreement in
respect of these concentrates was negotiated between us and Chifeng Fubon Copper on an arms’ length
basis, in the ordinary course of our business and on normal commercial terms that are fair and
reasonable, and are in our interests and shareholders’ interests as a whole. The Sole Sponsor concurs
with our Directors’ view. Going forward, Chifeng Fubon Copper will have its own concentrate suppliers.
Our Directors confirm that if we enter into a connected transaction with Chifeng Fubon Copper in the
future, we will comply with the requirements of Chapter 14A of the Listing Rules.

      We specialize in the mining of gold, the processing of ore into concentrates containing gold and
the selling of gold concentrates. Chifeng Fubon Copper is an enterprise which engages in the business
of copper smelting, a business which operates downstream from our operations. Chifeng Fubon Copper
does not produce concentrates and does not in any respect compete with our activities. Accordingly, our
Directors believe that there will not be any competition issue between our controlling shareholders and
us.

      In 2007, only our 50 tpd ore processing facility located at the Shirengou Gold Mine was in
operation, while the ore processing facilities located at the Nantaizi Gold Mine and the Luotuochang
Gold Mine were under construction. It was on such basis that we established cooperative relationships
with customers in the Chifeng Municipality and the nearby provinces. As we only produce concentrates
containing gold and other minerals and do not produce standard gold, our customers can historically be
divided into two categories: (i) smelters; and (ii) trading entities (including both enterprises and private
individuals). Medium- to large-scale smelters, aside from setting up branches in resources-rich regions
for direct purchase of raw materials (such as concentrates) from mining enterprises, commonly cooperate



                                                  – 146 –
                                              BUSINESS


with local trading enterprises who undertake the role of acquiring raw materials (such as concentrates)
from various mining enterprises in the region before on-selling to the smelters. Due to the higher
volume of each sale, smelters are typically willing to offer a relatively higher price when purchasing
from trading entities. This pricing arrangement also usually translates to better pricing for mining
enterprises, especially those that are of a smaller scale. Although some of our customers in 2007 were
trading entities, all of our current customers are smelting enterprises.

      In 2007, we established a strong relationship with a smelting enterprise who was our single largest
customer in that year (Liaoning Xindu). Liaoning Xindu uses the latest technology in its operations. Its
key products include gold, silver, copper and sulfate. The level of technology adopted is one of the
major factors that we consider when assessing prospective customers in accordance with our customer
selection procedures. The adoption of the latest smelting technology by Liaoning Xindu enables it to
more effectively extract minerals from the concentrates that we produce, i.e. to obtain a higher recovery
rate, which also translates to higher price for our concentrates. Due, in part, to its use of more advanced
production technology, we believe that Liaoning Xindu has a greater potential for profitability and
further growth than the other smelting enterprises in north-eastern China, which may translate to higher
demand for our concentrates. Accordingly, we believe that it is to our advantage to have established a
long-term and stable relationship with this customer.

     In the PRC, currently there are three commonly used smelting technologies, namely, cyanidation,
bio-oxidation and fluidization roasting:

     .     cyanidation is capable of processing concentrates containing gold and silver, while recovery
           rates of other marketable metals are low. It is a conventional technology most often used by
           small smelting enterprises. This method has an average recovery rate for gold of
           approximately 95%;

     .     bio-oxidation is capable of processing concentrates containing gold and other impurities such
           as arsenic and carbon. Not many enterprises in the PRC use this technology as it is not well
           developed. This method has an average recovery rate for gold of approximately 70 to 80%;
           and

     .     fluidization roasting is used by large smelting enterprises due to its reliability, recovery
           diversity, material adaptability, processing capacity and cost advantage. It is a relatively
           advanced technology and is widely used in the PRC.

      Liaoning Xindu uses this fluidization roasting method. Moreover, their two-stage roasting system
is a proprietary technology imported from abroad and is capable of processing complex gold
concentrates. They are able to achieve a high composite recovery rate in line with the PRC market
standard. With the two-stage roasting process and oxygen-enriched bottom blowing matte smelting, they
can process complex gold concentrates with multiple substances waste-free and increase the recovery
rates of gold, silver and copper. In 2007, only our 50 tpd ore processing facility located at the Shirengou
Gold Mine was in operation, and it was on such basis that we established cooperative relationships with
customers in the Chifeng Municipality and the adjacent north-eastern provinces. We believe that most
smelting enterprises in the PRC use this technology in processing gold concentrates. In addition, there
are smelting enterprises located near our Group’s production facilities which have spare capacity to
process our gold concentrates. As such, we have a broad customer base and marketplace.




                                                 – 147 –
                                             BUSINESS


      The fluidization roasting method is able to recover other marketable metals as well as gold and
silver from concentrates. This smelting method creates more value for our customer, enhancing its
market competitiveness and in turn the pricing factor of its major raw material, i.e. concentrates. If we
were to sell our gold concentrates to smelting enterprises using conventional technology such as the
cyanidation method, which focuses on the recovery of gold and silver at the expense of other marketable
metals, the purchase prices that such smelting enterprises would be willing to offer for the concentrates
produced by us would be significantly lower than those offered by smelting enterprises using the
fluidization roasting method.

      As stated above, many of the smelting enterprises in the PRC adopt the fluidization roasting
method, which is able to better recover metals from concentrates containing multiple types of metals. As
such, our potential market is not limited by the level of mineral content in our metal concentrates or any
specified technology adopted by our customers.

      During 2007, we also established strong relationships with four trading entities who are private
individuals and who undertake activities similar to minerals trading and broking enterprises. In the past,
we considered it more advantageous and convenient to sell a significant portion of our concentrates to
those individuals instead of selling directly to smelters. However, we currently only sell our
concentrates to smelters.

  Memoranda of long-term cooperation

      We have entered into a memorandum of long-term cooperation to sell our concentrates to Liaoning
Xindu, our largest customer in 2007. This memorandum has a term of three years and is due to expire in
March 2011. Pursuant to this memorandum, we may from time to time enter into sales agreements to
sell concentrates. For the period to 31 December 2007 and the ten months ended 31 October 2008, our
sale of concentrates to this customer contributed RMB4.1 million and RMB5.4 million, respectively, of
our revenue. Under the terms of the memorandum, the price for our concentrates depends on the amount
of gold, silver, copper and lead contained in those concentrates and is calculated as follows:

     .     gold: contained gold per tonne multiplied by the gold spot price on the SGE on the day of
           the sale applying a discount agreed with the customer;

     .     silver: contained silver per tonne multiplied by the market price of silver published on the
           Shanghai Huatong Net (上海華通網) applying a discount agreed with the customer;

     .     copper: contained copper per tonne multiplied by the market price of copper published on
           the Shanghai Nonferrous Metals Market Net (上海有色金屬網) applying a discount agreed
           with the customer; and

     .     lead: contained lead per tonne multiplied by the market price of lead published on the
           Shanghai Nonferrous Metals Market Net (上海有色金屬網) applying a discount agreed with
           the customer.

     We have a similar memorandum of long-term cooperation with Henan Yuguang Gold and Lead
Group Company Limited (河南豫光金鉛集團有限責任公司) which is one of our significant customers.
This memorandum has a term of three years and is due to expire in March 2011. Pursuant to this
memorandum, we may enter into sales agreements from time to time to sell concentrates. Under the
terms of the memorandum, the price for our concentrates depends on the amount of gold, silver, copper
and lead contained in those concentrates and is calculated on similar basis as described above.




                                                 – 148 –
                                                        BUSINESS


      We also have entered into a memorandum of long-term cooperation with, a customer, Chifeng
Zhongsekubohongye Zinc Company Limited (赤峰中色庫博紅燁鋅業有限公司) to sell our zinc
concentrates. This memorandum has a term of three years and is due to expire in March 2011. Pursuant
to this memorandum, we may from time to time enter into sales agreements to sell zinc concentrates.
Under the terms of this memorandum, the price for our concentrates depends on the amount of contained
zinc per tonne multiplied by the monthly average market price of zinc published on the Shanghai
Nonferrous Metals Market Net (上海有色金屬網) applying a discount agreed with the customer.

      For ten months ended 31 October 2008, 35.2% of our revenue was attributable to sales to these
three customers:
                                                                                                     RMB’000    %
     Customers who have entered into a Memorandum
       Liaoning Xindu Gold Company Limited (遼寧新都黃金有限公司) . .                                             5,353    3.1%
       Henan Yuguang Gold and Lead Group Company Limited
         (河南豫光金鉛股份有限公司) . . . . . . . . . . . . . . . . . . . . . . . . .                              50,722   29.2%
       Chifeng Zhongsekubohongye Zinc Company Limited
         (赤峰中色庫博紅燁鋅業有限公司) . . . . . . . . . . . . . . . . . . . . . .                                   5,072    2.9%
     Customers who have not entered into a Memorandum . . . . . . . . . . . .                         112,439   64.8%
     Total revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    173,586   100.0%

      The respective parties to the three memoranda of long-term cooperation (the ‘‘Memoranda’’)
entered into supplemental agreements dated 10 June 2008, 12 June 2008 and 16 June 2008, respectively
(the ‘‘Supplemental Agreements’’). The purpose of the Supplemental Agreements is to expressly state
the intention of the parties to the Supplemental Agreements that the Memoranda constitute binding
agreements among the parties thereto and that the purchasers are obliged to make purchase of gold
concentrates or zinc concentrates from us.

      We produce two types of gold concentrates (No. 1 Gold Concentrates and No. 2 Gold
Concentrates, each as defined in the Independent Technical Expert’s Report) and a zinc concentrate.
The gold concentrates include minerals in addition to gold. The additional minerals included in gold
concentrates are silver, copper and lead. Accordingly, these memoranda (as amended by supplemental
agreements) provide us with the right to sell all of our gold, silver, zinc, copper and lead because all of
these minerals are contained either in the gold concentrates or zinc concentrates that we produce.

     The Memoranda cover all the products we will produce for the period from March 2008 to March
2011. According to our production plan, the production capacity will increase to 2,580 tpd by the end of
year 2009, however, based on the terms of the Supplemental Agreements to the Memoranda, the
customers are required to purchase whatever amounts of products that we produce and decide to sell
them at our sole discretion during the term of the Memoranda.

      The respective customers are obliged to purchase whatever amount of gold concentrates or zinc
concentrates which we decide (at our absolute discretion) to sell them, as opposed to all of the gold
concentrates or zinc concentrates produced by us. In other words, we have the right to decide, in our
sole discretion, the amount of gold concentrates or zinc concentrates to be purchased by the customers.

      In light of the above, we will determine which of these customers to sell our concentrates with the
objective of maximizing our profits. Our determination will be based on a number of factors including
the type of concentrate being sold, the pricing terms (under the relevant Memorandum or Supplemental
Agreement) and other sales terms submitted by other potential customers.


                                                            – 149 –
                                              BUSINESS


     The maximum quantity and dollar value of concentrates covered under the Supplemental
Agreements depend on production conditions and there is no cap or floor for either quantity or dollar
value. There is no floor imposed on us with respect to quantity or dollar amount. However, the
purchasers are obliged to purchase all of the concentrates that we actually provide.

      As confirmed by our PRC legal counsel, King & Wood, we will not be in breach of the
Memoranda or the Supplemental Agreements for selling to one party but not the other and the
Supplemental Agreements are legal, valid and enforceable against each relevant customer under the laws
of the PRC.

     We price our concentrates based on prices of minerals with reference to the prevailing prices on
the SGE, in the case of gold, the Shanghai Huatong Net, in the case of silver, and the Shanghai
Nonferrous Metals Market Net, in the case of the other minerals contained in our concentrates (other
than gold).

     Gold is the predominant source of payment value for our concentrates. The price of gold traded on
the SGE largely converges to the price of gold in international markets. For the spot gold price on the
SGE and the daily New York composite spot gold price between 1 January 2005 and 30 January 2009,
please refer to the section headed ‘‘Industry Overview’’ in this Prospectus.

      Shanghai Huatong Net is a professional website for the domestic nonferrous metal prices. The
prices of nonferrous metals on Shanghai Huatong Net generally have a close correlation to international
market prices. Shanghai Huatong Net is registered with the PRC Ministry of Industry and Information
Technology. Shanghai Huatong Net is a relatively large, professional nonferrous metal information
platform for the nonferrous metal industry in China. It has become a pricing system generally used in
the industry.

      Shanghai Nonferrous Metals Market Net is the official website of the Shanghai Nonferrous Metals
Trade Association. The Shanghai Nonferrous Metals Trade Association, founded in January 2002, is a
professional group voluntarily organized by nonferrous metals enterprises, institutions and other
economic organizations in Shanghai and the surrounding area. Its membership is comprised of state-
owned, collectively-owned, private enterprises, joint ventures and enterprises invested in by persons
outside the PRC (including Taiwan) who produce, trade and consume nonferrous metals. The Shanghai
Nonferrous Metals Market Net is a professional website for the nonferrous metals industry. It covers
over 100 prices for different nonferrous metal products. It has become one of the main information
platforms for participants in the PRC nonferrous metal industry to release and acquire trading messages
and seek business opportunities. The prices of nonferrous metals on the Shanghai Nonferrous Metals
Market Net generally have a close correlation to international prices.

     The PRC market prices for the other key metals concerned (silver, copper, lead and zinc) largely
converge to international trading prices (subject to small differences to account for items such as duties).

     Based on the above, it can be established that while specific concentrate pricing for the
concentrates we produce is based on observable PRC sources, such a methodology will deliver an
outcome broadly linked to international commodities pricing and movements.

      Also, under the terms of the respective Memorandum, prior to each sale, both the customer and us
will take a sample of the metal concentrates and conduct their own tests and verification to determine
the quality of the metal concentrates.




                                                  – 150 –
                                             BUSINESS


     In terms of quantity of the metal concentrates, since the customer will inspect the volume of metal
concentrates to be purchased on site, difference in quantity is not expected to occur.

      In terms of quality standard, samples will be extracted and prepared for inspection in accordance
with the terms stipulated in the Memoranda. Four samples will be randomly extracted on site, namely, a
supplier sample, a laboratory sample, a customer sample and an arbitration sample. The relevant Mining
Company will inspect the supplier sample and a laboratory owned by Chifeng Fuqiao will inspect the
laboratory sample. If the difference in grading of the two samples is within the permissible range (i.e.
the discrepancy is less than 2g/t), we could, at our sole discretion, choose either examination result as
our test result.

     Our test result will then be compared with the customer’s test result, and if the difference in
grading is within the permissible range (i.e. the discrepancy is less than 2g/t), the customer and we will
then negotiate and agree on the mineral content in the metal concentrates, and determine the amount
payable by the customer based on the formulae set out above.

      If the difference exceeds the permissible range (i.e. the discrepancy is more than 2g/t), the
arbitration sample would be submitted to the National Center of Quality Supervision and Inspection On
Gold and Silver Products (Changchun) (國家金銀及製品質量監督檢驗中心(長春)) for arbitration and
its determination would be final. The customer would then be obliged to complete the purchase of metal
concentrates at a price calculated based on the final determination of this center.

      Despite the abovementioned quality verification procedures, it is still possible for the quality of
metal concentrates bought by a customer to be different from that of its customer sample, and according
to the terms of each of the Memoranda, no recourse would be available to such customer. Since our
establishment, we have not received any complaints due to quantity or quality problems of our products.

   The pricing terms between the trading entities and us are substantially similar to those under the
Memoranda. The metal concentrates are sold by us to those trading entities without recourse.

      In respect of each sale of concentrates, the customer must prepay an amount equal to
approximately 10% to 20% of the total value of the concentrates to be sold at the time of signing of the
individual sales contract relating to such sale and such amount shall be transferred by the customer to an
account designated by us. The 10% to 20% is a prepayment of the purchase price and is refundable on
failure of delivery. In relation to each sale, depending on which of the three Mining Companies made
the sale, the account designated by us would be an account belonging to the relevant Mining Company,
namely, either Nantaizi Mining, Shirengou Mining or Luotuochang Mining. Approximately 80% of the
total value of the concentrates sold (including the amount of the prepayment) is required to be settled by
the customer in cash. The remaining 20% is treated as accounts receivable and must be paid within 30
days after the sale of the concentrates has taken place.

      The delivery of our concentrates will take place at our ore processing facilities, and the customers
will be responsible for all transportation and other relevant costs.

     For the year ended 31 December 2007 and for the ten months ended 31 October 2008, none of our
Directors or their associates or our shareholders who, to the knowledge of our Directors, owns more
than 5% of our issued capital, had any interest in our five largest customers (except Chifeng Fubon
Copper), and all our current customers are repeat customers.




                                                 – 151 –
                                                      BUSINESS


   Summary of major customers

     The table below contains a summary of the identity of each of our major customers, each
customer’s relationship with our Group and/or the controlling shareholder, each customer’s business
nature, the product the customer purchases from us and the basis on which the price of the product
purchased by each customer is determined.
                       Relationship
                         with our
                          Group/                         Products        Basis for Determining the
                        Controlling      Business     Purchased by   Price of the Products Purchased
Major Customers        Shareholder        Nature      the Customer           by the Customer*                         Remarks
Liaoning Xindu Gold   Independent     Gold smelting   Gold           The historical selling prices for the   Under the memorandum of
  Company Limited     third party     and refining    concentrates   year ended 31 December 2007 and         long-term cooperation
  (遼寧新都黃金有限責                                                         the ten months ended 31 October         dated 8 March 2008 and
  任公司)                                                               2008 depended on the amount of          the corresponding
                                                                     gold, silver, copper and lead           supplemental agreement
                                                                     contained in the concentrates and       dated 10 June 2008, the
                                                                     were calculated as follows:             customer is obliged to
                                                                                                             purchase whatever amount
                                                                     gold: contained gold per tonne          of gold concentrates which
                                                                     multiplied by the gold spot price       we decide (in our absolute
                                                                     on the SGE on the day of the sale       discretion) to sell them, as
                                                                     applying a discount agreed with the     opposed to all of the gold
                                                                     customer;                               concentrates produced by
                                                                                                             us. In other words, we have
                                                                     silver: contained silver per tonne      the right to decide, in our
                                                                     multiplied by the market price of       sole discretion, the amount
                                                                     silver published on the Shanghai        of concentrates sold to this
                                                                     Huatong Net (上海華通網)                     customer. At the same
                                                                     applying a discount agreed with the     time, the customer is
                                                                     customer;                               obliged to purchase from
                                                                                                             us whatever amount of
                                                                     copper: contained copper per            gold concentrates we
                                                                     tonne multiplied by the market          decide to sell to the
                                                                     price of copper published on the        customer.
                                                                     Shanghai Nonferrous Metals
                                                                     Market Net (上海有色金屬網)
                                                                     applying a discount agreed with the
                                                                     customer; and


                                                                     lead: contained lead per tonne
                                                                     multiplied by the market price of
                                                                     lead published on the Shanghai
                                                                     Nonferrous Metals Market Net (上
                                                                     海有色金屬網) applying a discount
                                                                     agreed with the customer.




                                                         – 152 –
                                                         BUSINESS


                          Relationship
                            with our
                             Group/                         Products        Basis for Determining the
                           Controlling      Business     Purchased by   Price of the Products Purchased
Major Customers           Shareholder        Nature      the Customer           by the Customer*                         Remarks
Henan Yuguang Gold and   Independent     Gold and lead   Gold           The historical selling prices for the   Under the memorandum of
  Lead Group Company     third party     smelting and    concentrates   ten months ended 31 October 2008        long-term cooperation
  Limited (河南豫光金                         refining                       depended on the amount of gold,         dated 12 March 2008 and
  鉛集團有限責任公司)                                                            silver, copper and lead contained in    the corresponding
                                                                        the concentrates and were               supplemental agreement
                                                                        calculated as follows:                  dated 16 June 2008, the
                                                                                                                customer is obliged to
                                                                        gold: contained gold per tonne          purchase whatever amount
                                                                        multiplied by the average of the        of gold concentrates which
                                                                        market prices of gold on the SGE        we decide (in our absolute
                                                                        for the 5 consecutive trading days      discretion) to sell them, as
                                                                        from the day of the sale applying a     opposed to all of the gold
                                                                        discount agreed with the customer;      concentrates produced by
                                                                                                                us. In other words, we have
                                                                        silver: contained silver per tonne      the right to decide, in our
                                                                        multiplied by the average of the        sole discretion, the amount
                                                                        market prices of silver published       of concentrates to be sold
                                                                        on the Shanghai Huatong Net (上          to this customer. At the
                                                                        海華通網) for the 5 consecutive             same time, the customer is
                                                                        trading days from the day of the        obliged to purchase from
                                                                        sale applying a discount agreed         us whatever amount of
                                                                        with the customer;                      gold concentrates we
                                                                                                                decide to sell to the
                                                                        copper: contained copper per            customer.
                                                                        tonne multiplied by the average of
                                                                        the market prices of copper
                                                                        published on the Shanghai
                                                                        Nonferrous Metals Market Net (上
                                                                        海有色金屬網) for the 5
                                                                        consecutive trading days from the
                                                                        day of the sale applying a discount
                                                                        agreed with the customer; and


                                                                        lead: contained lead per tonne
                                                                        multiplied by the average of the
                                                                        market prices of lead published on
                                                                        the Shanghai Nonferrous Metals
                                                                        Market Net (上海有色金屬網) for
                                                                        the 5 consecutive trading days
                                                                        from the day of the sale applying a
                                                                        discount agreed with the customer.




                                                            – 153 –
                                                         BUSINESS


                          Relationship
                            with our
                             Group/                         Products        Basis for Determining the
                           Controlling      Business     Purchased by   Price of the Products Purchased
Major Customers           Shareholder        Nature      the Customer           by the Customer*                         Remarks
Chifeng                  Independent     Zinc smelting   Zinc           The historical selling prices for the   Under the memorandum of
   Zhongsekubohongye     third party     and refining    concentrates   ten months ended 31 October 2008        long-term cooperation
   Zinc Company                                                         depended on the amount of               dated 10 March 2008 and
   Limited (赤峰中色庫                                                       contained zinc per tonne multiplied     the corresponding
   博紅燁鋅業有限公司)                                                           by the market price of zinc             supplemental agreement
                                                                        published on the Shanghai               dated 12 June 2008, the
                                                                        Nonferrous Metals Market Net (上         customer is obliged to
                                                                        海有色金屬網) on the day of the               purchase whatever amount
                                                                        sale applying a discount agreed         of zinc concentrates which
                                                                        with the customer.                      we decide (in our absolute
                                                                                                                discretion) to sell them, as
                                                                                                                opposed to all of the zinc
                                                                                                                concentrates produced by
                                                                                                                us. In other words, we have
                                                                                                                the right to decide, in our
                                                                                                                sole discretion, the amount
                                                                                                                of concentrates to be sold
                                                                                                                to this customer. At the
                                                                                                                same time, the customer is
                                                                                                                obliged to purchase from
                                                                                                                us whatever amount of
                                                                                                                gold concentrates we
                                                                                                                decide to sell to the
                                                                                                                customer.


Chifeng Fubon Copper     Connected       Copper          Gold           The historical selling prices for the   No memorandum of long-
   (Note)                party           smelting and    concentrates   ten months ended 31 October 2008        term cooperation has been
                                         refining                       were determined by reference to         entered into.
                                                                        the average of the market prices
                                                                        quoted from the relevant website
                                                                        for the 5 consecutive trading days
                                                                        from the day of the sale of the
                                                                        concentrates applying a discount
                                                                        agreed with the customer.


Chifeng Jinjian Copper   Independent     Copper          Gold           The historical selling prices for the   No memorandum of long-
   Company Limited       third party     smelting and    concentrates   ten months ended 31 October 2008        term cooperation has been
   (赤峰金劍銅業有限                             refining                       were determined by reference to         entered into.
   責任公司)                                                                the average of the market prices
                                                                        quoted from the respective
                                                                        websites for the 5 consecutive
                                                                        trading days from the day of the
                                                                        sale of the concentrates applying a
                                                                        discount agreed with the customer.




                                                            – 154 –
                                                         BUSINESS


                         Relationship
                           with our
                            Group/                          Products        Basis for Determining the
                          Controlling      Business      Purchased by   Price of the Products Purchased
Major Customers          Shareholder        Nature       the Customer              by the Customer*                      Remarks
Chifeng Baiyin Nuoer    Independent     Gold, lead and   Gold           The historical selling prices for the   No memorandum of long-
   Lead and Zinc Mine   third party     zinc smelting    concentrates   ten months ended 31 October 2008        term cooperation has been
   (赤峰市白音諾爾鉛鋅                           and refining                    depended on the amount of gold,         entered into.
  礦)                                                                    silver and lead contained in the
                                                                        concentrates and were calculated as
                                                                        follows:


                                                                        gold: contained gold per tonne
                                                                        multiplied by the average of the
                                                                        market prices of gold on the SGE
                                                                        for the 5 consecutive trading days
                                                                        from the day of the sale applying a
                                                                        discount agreed with the customer;


                                                                        silver: contained silver per tonne
                                                                        multiplied by the average of the
                                                                        market prices of silver published
                                                                        on the Shanghai Huatong Net (上
                                                                        海華通網) for the 5 consecutive
                                                                        trading days from the day of the
                                                                        sale applying a discount agreed
                                                                        with the customer; and


                                                                        lead: contained lead per tonne
                                                                        multiplied by the average of the
                                                                        market prices of lead published on
                                                                        the Shanghai Nonferrous Metals
                                                                        Market Net (上海有色金屬網) for
                                                                        the 5 consecutive trading days
                                                                        from the day of the sale applying a
                                                                        discount agreed with the customer.




Note: For the ten months ended 31 October 2008, one of our top five customers was Chifeng Fubon Copper, a
      PRC incorporated copper smelting enterprise controlled by Mr Wu which is not within our Group. Chifeng
      Fubon Copper’s copper smelting facility is currently under expansion, and construction in relation to such
      expansion is expected to be completed in early 2009 with trial production to commence at or around the
      same time. Our sale to Chifeng Fubon Copper in September 2008 was for the sole purpose of providing
      concentrates to facilitate testing of Chifeng Fubon Copper’s copper smelting facility as Chifeng Fubon
      Copper was unable to locate a suitable supplier at the relevant time. The sale to Chifeng Fubon Copper
      amounted to RMB11,281,182 which represented 3.6% of our revenue for the year ended 31 December 2008.
      The concentrates sold to Chifeng Fubon Copper had been mined from and produced by the ore processing
      facility located at our Luotuochang Gold Mine because the concentrates produced by Luotuochang Mining
      contain a higher percentage of copper than the concentrates produced by our Nantaizi Gold Mine. Our
      Directors confirm that the sale agreement in respect of these concentrates was negotiated between us and
      Chifeng Fubon Copper on an arms’ length basis, in the ordinary course of our business and on normal
      commercial terms that are fair and reasonable, and are in our interests and shareholders’ interests as a whole.
      The Sole Sponsor concurs with our Directors’ view. Going forward, Chifeng Fubon Copper will have its own
      concentrate suppliers. Our Directors confirm that if we enter into a connected transaction with Chifeng
      Fubon Copper in the future, we will comply with the requirements of Chapter 14A of the Listing Rules.




                                                            – 155 –
                                                 BUSINESS


*     In determining the amount of discount given to the relevant customer, our Group usually takes into account of
      the length of relationship with the customer, future business opportunities with the customer, importance of
      the customer to our Group’s overall development and business strategies, and the general market conditions at
      the time of the sale.

     Our detailed future sales strategies and marketing plans for the three years ending 31 December
2010 are as follows:

    Sales strategies

      .     to increase sales to existing customers — under the terms of the Memoranda and
            Supplemental Agreements, three of our customers are obliged to purchase whatever amounts
            of concentrates that are produced by us. Accordingly, although we expect that our production
            levels will significantly increase over the next few years, we will be able to sell all of the
            concentrates we produce to these customers;

      .     to widen our customer base by commencing sales to new customers — although we are
            entitled to sell all of the products we produce to three of our existing customers, as noted
            above, in order to avoid being too reliant on just three customers, our Group will pursue a
            strategy of attracting new customers;

      .     to widen our range of products by commencing production of standard gold — if we have
            raised sufficient funds from the Global Offering or generated enough cash from operations,
            we intend to fund the construction of a gold smelting and refining facility so that we can
            further process some or all of the concentrates we produce into standard gold. The production
            of standard gold will further diversify our customer base;

      .     to establish reliable and high-quality sales channels through establishing strategic
            partnerships with smelters — No. 1 Gold Concentrates (as defined in the Independent
            Technical Expert’s Report), No. 2 Gold Concentrates (as defined in the Independent
            Technical Expert’s Report) and zinc concentrates will be our major products in the next three
            years. All of our products will be sold to smelters and/or mineral trading and brokering
            enterprises. The establishment of reliable and high-quality sales channels is critical to the
            stability of our production and operations as well as sustainable development. We have
            identified and begun discussions with various smelters to sell our expected increased volume
            of concentrates; and

      .     to adopt flexible marketing strategies to respond actively to changing conditions in the
            market, for example by selling larger quantities of our products when market prices for
            concentrates are high.

    Marketing plans

      .     to establish a major raw materials supply base for gold producers and smelters in northern
            China and to establish our brand recognition and reputation — we identify and assess new
            customers based on quarterly market research materials prepared by our Sales Department
            and in accordance with our stringent customer selection procedures;




                                                     – 156 –
                                             BUSINESS


     .     to maximize our profit by actively responding to changing market conditions and by
           researching on our competitors — we monitor market changes closely and formulate/adjust
           our marketing strategies based on analyzes and forecasts of price trends and customers’
           needs;

     .     to strengthen customer management efforts, establish stable sales channels and retain quality
           customers — (i) in respect of existing customers, we regularly communicate with our
           customers so that we can better understand and address their needs; and (ii) in respect of
           prospective customers who indicate an interest in entering into a long-term sales arrangement
           with us, we will undertake detailed due diligence in respect of that prospective customer.
           This will typically involve requesting the prospective customer to provide detailed relevant
           background information. According to our customer selection procedures, our Sales
           Department will review the prospective customer’s business operations and our Finance
           Department will review the prospective customer’s credit history and financial condition.
           After completion of such due diligence and considering any relevant risks, we will determine
           whether to enter into a long-term sales agreement with a prospective customer;

     .     to enhance our efficiency by focusing on management of our production, marketing and
           financial control procedures and to ensure that our products are of a consistently high quality
           — we have put into place a number of quality control procedures including a system of
           accurately weighing of our concentrates (to determine tonnage), and sampling the mineral
           grade of our concentrates to determine the quantity of metals contained and measuring water
           content; and

     .     to promote sales and establish relationships with customers by using our website as a
           marketing and informational tool and by participating in activities such as specialized
           academic conferences, industry forums and exhibitions organized by various institutions in
           the metallurgy industry.

THIRD-PARTY CONTRACTORS

      We outsource substantially all our exploration and mining works. We have entered into
subcontracting agreements with third-party contractors for exploration, mining and other operational
activities. We select third-party contractors through a selective tendering process. Prior to engaging
third-party contractors, we assess their skills, expertise and experience. In addition, we require them to
provide information on their past engagement to confirm their ability in terms of capital investment,
technical expertise and managerial skills to perform the work requested. During the Track Record
Period, each of the third-party contractors engaged by us for mining activities held a Class C
Construction Qualification for mining (丙級或以上資質證書) issued by the Ministry of Construction of
the PRC. The undertaking of mining work by a contracted construction team relieves us from the need
to establish our own mining construction workforce and accelerates the construction process. The third-
party construction contractor must hold a safety qualification which is recognized by the State
Administration of Work Safety, and independently accepts production safety liability throughout the
entire construction process.

      In respect of subcontracted mining works, we pay the third-party contractor a fixed fee. Usually,
the fees payable to third-party contractors are settled after completion of the relevant projects and are
subject to the type of engineering projects and volume of subcontracting.




                                                 – 157 –
                                              BUSINESS


      All of the third-party contractors must possess the requisite qualifications for undertaking the
mining, exploration or construction works for which they are commissioned. The third-party contractors
work under the supervision of our management and technical teams. While works are being carried out
by third-party contractors, each of our relevant departments is responsible for supervising the works
carried out by third-party contractors which ranges from reviewing engineering quality and quantifying
losses and depletion of minerals to supervising and managing the progress and completion of the
assignment. We require third-party contractors to carry out their works according to the design and plan
of the relevant assignment and in accordance with the requirements of our Production and
Environmental Safety Department and Quality Control Department. Our Production and Environmental
Safety Department supervises and inspects safety management. Our Quality Control Department
supervises mineral quality to ensure that third-party contractors meet our quality standards. We continue
to maintain responsibility for technology support, land acquisition and overall co-ordination and
planning. These measures are adopted by us to ensure they are in full compliance with the relevant
government rules and regulations and detect any non-compliance with the relevant rules and regulations.

      We have specialized technical management personnel who supervise and direct the progress,
quality and safety of the works performed by third-party contractors. Usually when a contract is signed,
the requirements regarding the progress, quality and safety of the works will be clearly defined and we
will only need to perform our supervisory functions during the project works.

      As at 31 October 2008 we had entered into contracts with 21 third-party contractors. We have no
more than two years of relationship with each of these third-party contractors. The principal terms of
these contracts are outlined below:

  Production safety

     We require our third-party contractors to comply with the policies and regulations promulgated by
the State and possess all necessary permits and licenses which are issued by relevant regulatory
departments. Prior to engaging them we will ensure that the third-party contractors:

     —     possess the special operating permit and safety management staff qualification permit and,
           where there is a specialist requirement, possess any special permits, as required under the
           relevant PRC regulation;

     —     enter employment contracts in accordance with the requirements of any applicable labor laws;

     —     implement the ‘‘Law of Mine Safety’’ and operate in accordance with the ‘‘Safety
           Regulations for Metal and Non-Metal Mines’’;

     —     possess the permit required by the ‘‘Administration Measures on Explosives for Civilians in
           the PRC’’, and follow the related stock-in and stock-out procedures, as well as the
           requirements of the ‘‘Regulation for Metal and Non-Metal Mines’’, when using explosive
           devices;

     —     arrange for medical examinations prior to recruiting staff;

     —     enhance industrial hygiene administration including measures to prevent pneumoconiosis;

     —     establish an effective emergency rescue system for safe handling of incidents as well as
           ensuring regular drills to practice the system; and

     —     participate in safety and training education of their employees.



                                                 – 158 –
                                              BUSINESS


     The third-party contractors shall be responsible for all expenses in relation to meeting these
compliance requirements and will be responsible for any consequences of not complying with the
respective rules and regulations.

  Other principal terms

     In contracting with a third-party, we will be responsible for:

     —     developing a production plan in relation to the needs of the mines;

     —     providing draft plans and technical advice prior to the commencement of work; and

     —     ensuring an adequate supply of electricity for the project.

     During the project, the third-party contractor will be responsible for:

     —     organizing technical and other staff as required for the project;

     —     organizing production materials and safety equipment;

     —     accepting instructions from, and accounting to, the responsible members of our management
           and technical team;

     —     ensuring projects are completed in a timely manner and with a high degree of engineering
           quality;

     —     complying with our policies and systems;

     —     insuring all staff with appropriate industrial accident insurance; and

     —     ensuring an adequate supply of water for mine production and employee living needs.

  Subcontracting fees

      The total subcontracting fees paid for mining for the year ended 31 December 2007 and for the ten
months ended 31 October 2008 were approximately RMB527,000 and RMB14.5 million, respectively.
The total subcontracting fees paid for construction of infrastructure at our Gold Mines for the year
ended 31 December 2007 and for the ten months ended 31 October 2008 were approximately RMB12.3
million and RMB158.9 million, respectively.

  Liability of the third-party contractor

      During the contracting period, any claims that arise in respect of safety incidents as a result of
failure to comply with PRC laws and regulations will be the responsibility of the third-party contractor,
who shall bear the cost. In the event of an injury or loss of life during a project, the incident shall be
reported to the relevant PRC administrative department according to the applicable regulations. In the
event of a serious incident causing loss of life, the third-party contractor shall be wholly responsible for
the incident and the third-party contractor will be dismissed within one month after such an incident is
confirmed. As at the Latest Practicable Date, there have not been any incidents that have required us to
terminate any of our third-party contractors.

     Under the current subcontracting agreements between the third-party contractors and us, the third-
party contractors will be wholly responsible for all the consequences that arise in the event of non-
compliance with the policies and regulations promulgated by the State. Similar to comparable gold



                                                  – 159 –
                                              BUSINESS


mining companies currently listed on the Stock Exchange, we do not maintain any insurance policy to
cover possible loss or costs resulting from accidents in relation to employees of third-party contractors.
Our Directors are of the view that this is a common practice in the mining industry in the PRC. In the
event of an injury or loss of life during a project, the incident shall be reported to the relevant PRC
administrative department according to applicable regulations. In the event of a serious incident causing
loss of life, the third-party contractor shall be wholly responsible for the incident and the third-party
contractor will be dismissed within one month after such an incident is confirmed.

      If an accident occurs outside a contracting period, we will be liable. However, since we outsource
substantially all of our mining and exploration operations to third-party contractors and there will be no
operations outside a contracting period, the risk of any accident occurring outside a contracting period is
minimal. To minimize our risk, we will ensure that no mining or exploration work will be undertaken
outside a contracting period.

      We will ensure that no mining or exploration work will be taken by third-party contractors outside
the contracting period to ensure that no accidents occur outside the period of our contractual relationship
with such third-party contractors. That is, the ‘‘contracting period’’ only applies to third-party
contractors and does not apply to our employees. Although mining or exploration work could be
undertaken by our own employees at any time, it is our policy to outsource all actual mining and
exploration work to third-party contractors. Accordingly, it is unlikely that our own employees will
undertake mining or exploration work.

      As advised by our legal adviser as to PRC laws, King & Wood, the measures adopted by us to
ensure third-party contractors are in full compliance with the relevant government rules and regulations
are satisfactory and in compliance with the relevant PRC laws and regulations. As at the Latest
Practicable Date, there have been no incidents of non-compliance by third-party contractors and we have
not been liable for any non-compliance committed by third-party contractors.

     While we use third-party contractors extensively, development and mining operations at our sites
are carried out under the supervision of our management and technical teams. As a result of
subcontracting our excavation work, we have achieved better cost controls and reduced our management
expenses, while maintaining direct participation in the management of mine safety and ensuring
maximum safety protection. Our Directors believe that such outsourcing arrangements, if managed
appropriately, will lower our operational costs and reduce our capital expenditures.

SUPPLY OF UTILITY, RAW MATERIALS, AUXILIARY MATERIALS, AND MACHINERY
AND EQUIPMENT

  Utility

     We have never, during the Track Record Period, experienced material interruptions to our
operations due to a shortage or suspension of our power supply. Electricity for our mining operations is
supplied by the local power grid and we have entered into electricity supply contracts with the relevant
governmental authorities for the supply of electricity at market rates to our operating Gold Mines and
processing plants. All of our operating Gold Mines are equipped with backup power generators. For the
year ended 31 December 2007 and the ten months ended 31 October 2008, our electricity consumption
expenditure relating to production amounted to approximately RMB285,000 and RMB8.1 million,
respectively.

     Since October 2007, power lines have been connected to all three Gold Mines.



                                                 – 160 –
                                             BUSINESS


      All our mine sites have identifiable water sources. Water supply for production will be derived
from underground water sources. Water from the tailings ponds will also be recycled for production.
During the Track Record Period, we did not experience any material water supply interruptions or
shortages.

     We have also adopted a two-pronged approach to water conservation, by combining advanced
engineering measures with sustainable vegetation practices. Please see the section headed ‘‘Business —
Environmental Protection’’ in this prospectus.

     Our Directors believe that we should not have any difficulties in securing the supply of electricity
and water to meet our expansion plans.

  Raw materials and auxiliary materials

     For the year ended 31 December 2007 and the ten months ended 31 October 2008, our purchases
of raw materials and auxiliary materials from our five largest suppliers of accounted for 52.9% and
85.8%, respectively, of our total purchases. For the year ended 31 December 2007 and the ten months
ended 31 October 2008, our purchases of raw materials and auxiliary materials from our single largest
supplier accounted for 28.4% and 29.5%, respectively, of our total purchases. For the year ended 31
December 2007 and for the ten months ended 31 October 2008, none of our Directors or their associates
or our shareholders who, to the knowledge of our Directors, owns more than 5% of our issued capital,
had any interest in our five largest suppliers of raw materials and auxiliary materials.

     The ore extracted from our Gold Mines is our principal raw material (as it is with others in the
gold mining industry). We do not purchase ores from third parties.

      The production process at our mines consumes many types of auxiliary materials including forged
steel grinding balls, chemical products, explosives, lubricating oil, electric wires and cables, rubber
products and fuel. These consumables are typically readily available from multiple suppliers and can be
sourced at competitive market prices. All our auxiliary materials are sourced from local suppliers in the
Chifeng Municipality.

      As at 31 October 2008, we have engaged 57 suppliers for the provision of raw materials and
auxiliary materials. We have had relationships with these suppliers for about two years.

  Machinery and equipment

     During the Track Record Period, we entered into contracts with independent third parties for the
supply of machinery and equipment at market rates to our Gold Mines and ore processing facilities. For
the year ended 31 December 2007 and the ten months ended 31 October 2008, our total purchases of
machinery and equipment, amounted to approximately RMB2.3 million and RMB17.3 million,
respectively. The percentage of machinery and equipment sourced from our top five suppliers for the
year ended 31 December 2007 and for the ten months ended 31 October 2008 was approximately 62.4%
and 95.9%, respectively. Purchases from our largest supplier accounted for approximately 23.5% and
61.5% of our total purchases of machinery and equipment for the year ended 31 December 2007 and the
ten months end 31 October 2008, respectively. Purchases of machinery and equipment as a percentage
of sales for the year ended 31 December 2007 and for the ten months ended 31 October 2008 was
28.2% and 10.0%, respectively. We did not purchase any machinery or equipment during the two years
ended 31 December 2006 or during the ten months ended 31 October 2007.




                                                – 161 –
                                             BUSINESS


      The exploration, mining and production processes at our Gold Mines require the purchase of many
types of machinery and equipment including but not limited to drilling machines, air compressors and
ore crushers. All our machinery and equipment for exploration, mining and production are sourced from
local suppliers in the PRC.

    As at 31 October 2008, we had engaged 12 suppliers for the provision of equipment and
machineries. We have had relationships with these suppliers for about two years.

COMPETITION

  Competition with gold concentrate producers

     There has been increased international investment by foreign gold producers as a result of China’s
accession to the WTO and deregulation of the Chinese gold industry. However, we are currently not an
end producer of standard gold. Instead we sell our concentrates which contain gold at the prevailing
market prices to smelters in the Chifeng Municipality and other surrounding areas in the PRC. Our
Directors believe that based on historical trends there is an oversupply of smelting capacity in the PRC
and, accordingly, there is an excess of demand from existing and potential customers for our gold
concentrates. Accordingly, our Directors are of the view that competition from other gold concentrate
producers is currently not a material risk. However, if the current demand for gold concentrates in the
PRC decreases, due to smelting capacity in the PRC becoming a constraint or the demand for gold
decreasing, increased competition from other gold concentrate producers may adversely affect our
business, financial condition and results of operations may be adversely affected.

  Competition for future acquisitions

      We believe that opportunities exist to grow our current mining activities through selectively
acquiring gold mines in Inner Mongolia and Xinjiang. In addition, we believe that opportunities exist to
acquire additional exploration rights with significant developmental potential in Inner Mongolia and
Xinjiang. We may face competition in acquiring existing mines and exploration rights in these regions
from other foreign or domestic gold mining companies. We compete on the basis of our ability to
identify valuable gold resources and effectively negotiate with the targets. Increased competition may
result in us having to pay more to acquire such gold resources. There is no assurance that competition
for acquisitions in the PRC gold industry will not adversely affect our profitability or sustained
development.

  Industry competition

     The unique market feature of determining gold price via commodities exchanges has resulted in
fewer price wars when fighting for market share, as compared to other industries. As a resource based
industry, the development of the gold industry will depend on various factors such as the reserve of
resources owned and its quality, geological exploration technology and capability, resources
development and utilization standard.

      Gold is mined all over the world. Once it is processed, smelted and refined, the finished product is
a standard, close to pure, commoditized product (usually 99.99% or 99.95% pure). The tradable,
commoditized product is sold in identical form through market-making banks and commodities
exchanges worldwide. Having a completely open market means that demand and supply is brought into
equilibrium via movements in the price. This is also known as a ‘‘terminal’’ market, which refers to the



                                                 – 162 –
                                             BUSINESS


fact that price-setting is not up to individual suppliers competing to sell to specific buyers but is the
result of almost infinite buyers and sellers meeting their requirements to buy or sell via the exchange
mechanism.

     The gold trade is truly worldwide and the standardized nature of the commodity means if there is
excess supply in one region, it can be easily exported. The market price is generally aligned globally
and continuously fluctuates worldwide.

      Individual miners of gold typically simply receive the market price for the gold contained in their
concentrates less the processing cost and margin. What this means is that competition in the traditional
sense where companies compete on factors such as quality, branding and marketing of their products is
less relevant and hence their position in the industry (i.e. market share) is less relevant.

      One key point of competition for gold miners is cost structure and ore body quality in terms of
whether revenues can be enhanced with the sale of by-product metals. Those with lower costs will be in
a better position to weather decline in global prices.

  Market size and market share

     According to the 2007 Annual Report of the World Gold Council, total global gold supply in 2007
was 3,473 tonnes (gold mine production was 2,476 tonnes) and total demand was 3,516 tonnes.

      According to the China Gold Association, PRC gold production in 2007 was 270.49 tonnes, an
increase of 30.41 tonnes when compared with 2006. The demand for gold jewelry in the PRC in 2007
was 302.2 tonnes, with an annual growth rate of 20% and ranked second in the world after India.
According to the relevant forecast by Chinese Gold Industry Eleventh Five-Year Plan and Sustainable
Development Research ‘‘《我國黃金工業‘‘十一五’’規劃及可持續發展研究》’’, by 2010, market
demand in the PRC for gold will be 400 tonnes and by 2020, the forecast demand will reach 600
tonnes. As the gold production in the PRC in 2007 was only 270.49 tonnes, there is substantial disparity
between market demand in the PRC and supply. As the resources invested in geological exploration of
the PRC have been severely limited in recent years, the identified gold reserves are unable to effectively
increase production and its production can only achieve a basic growth rate of 5–6% per annum. The
efforts to protect the resources are severely inadequate and steps should be taken to maintain a stable
growth in gold production volume.

  Our market position in the industry

      We specialize in the mining of gold and the processing of ore into concentrates containing gold
and other minerals for subsequent sale. We believe that we are one of the lowest cost producers (per
ounce of gold) in the gold industry in the PRC. Our forecast cash cost estimate for 2009 is US$197 per
ounce of gold for the Shirengou-Nantaizi Mining Complex and US$329 per ounce of gold for the
Luotuochang Gold Mine. Our cash cost estimate compares favorably with gold producers globally whose
average cash cost estimate for 2007 was estimated by GFMS to be US$395 per ounce of gold. Also, our
Gold Mines are still in an early stage of development. So far, we have only explored a small portion of
the area covered under our exploration permit at the Nantaizi Gold Mine, and the Independent Technical
Expert believes that there is potential to find additional mineral resources at the Nantaizi Gold Mine.

      We believe that, by leveraging on our unique high-grade poly-metallic mineral reserves, production
efficiency, organic growth potential, and stable and effective management structure, we have a robust
market position.



                                                 – 163 –
                                              BUSINESS


  Industry entry barriers

     Pursuant to the ‘‘Mineral Resources Law of The People’s Republic of China’’, ‘‘Administration
Measures For Registering Mineral Exploration Through Blocking System’’, ‘‘Administration Measures
For Registering Mineral Resources Mining’’, an enterprise entering this industry is required to obtain the
exploration permit and mining permit issued by the Department of Land and Resources and the approval
document for mining gold mines issued by the National Development and Reform Commission.

     With the current intense market competition, financial capability, mining resources, technology and
equipment, and seasoned production management experience are major barriers in entering this industry.

     We have already obtained the exploration permit and mining permit issued by the Department of
Land and Resources of Inner Mongolia Autonomous Region and the approval document for mining gold
mines issued by National Development and Reform Commission. With regards to technology and
management, we have a highly qualified management team comprising Mr Lu Tianjun, an experienced
mining specialist, and Mr Ma Wenxue, a senior mining exploration specialist.

  Our weaknesses

       Our operations are still in an early stage of development. For instance, for the year ended 31
December 2007, only our 50 tpd ore processing facility located at the Shirengou Gold Mine was in
operation, while the ore processing facilities located at the Nantaizi Gold Mine and the Luotuochang
Gold Mine were under construction. However, we have commenced commercial production of
concentrates at phases I and II of both our ore processing facilities located at the Nantaizi Gold Mine
and the Luotuochang Gold Mine. In addition, phase III construction at both the Nantaizi Gold Mine and
Luotuochang Gold Mine is expected to be completed in late 2009. The scale of our ore processing
capacity will be further increased in the near future when the phase III expansion of these processing
facilities is completed. On completion of this expansion our total installed daily production capacity will
increase to 2,580 tonnes.

      According to our production and development plan, the cash flow expected to be generated from
the normal production of our Group in the next two years will sufficiently meet the requirements for
increase in our production capacity. We have also planned increases to our ore extraction and processing
capabilities in order to substantially increase our scale of operations.

QUALITY CONTROL

     We have a quality control policy in place to ensure that the quality of our concentrates meets the
standard for acceptance by our customers. As at the Latest Practicable Date, our Quality Control
Department comprised ten quality control personnel. We closely monitor our various production
processes. In addition, as part of our quality control policy, we require that all our third-party
contractors possess the requisite qualifications for undertaking their respective works in mining,
exploration or construction.

      Each of our operating Gold Mines has obtained the ISO 9001:2000 ‘‘Quality Management System
Certification’’ issued by CICC Conformity Assessment Services Co., Ltd (中國檢驗認證集團質量認證
有限公司). Since our establishment, we have not received any material complaints due to quality
problems with our products.




                                                 – 164 –
                                             BUSINESS


OCCUPATIONAL HEALTH AND SAFETY

      We operate in a responsible manner to ensure the health and safety of our employees, third-party
contractors and the communities in which we operate. We are subject to various PRC laws and
regulations with respect to the prevention and treatment of occupational diseases, the prevention of
worksite accidents and the handling of industrial injuries. Our customers currently do not impose any
other requirements on us. Please refer to the section headed ‘‘The PRC Laws and Regulations Relating
to the Industry — Laws and Regulations relating to Production Safety’’ in this prospectus.

      Our safety policy requires that each mine organizes at least two emergency and rescue drills per
year, ensuring that each worker has a good understanding of rescue procedures and escape routes. We
have also adopted an internal manual on health and work safety in October 2007, which incorporated
national safety standards and is implemented throughout our Group (including both our employees and
third-party contractors). Our Directors believe that the adoption of the above measures will help us to
minimize the risk of occurrence of accidents.

      Our Gold Mines conduct their operations in accordance with specific national laws and regulations
covering occupational health and safety in mining, production, underground mining, blasting and
explosives handling, mineral processing, TSF design, environmental noise, construction, fire protection
and fire extinguishment, sanitary provision, power provision, labor and supervision.

     Production safety permits have been obtained for each of the Shirengou Gold Mine, Nantaizi Gold
Mine and Luotuochang Gold Mine. Furthermore, our PRC legal adviser, King & Wood, confirms that
each of the Shirengou Gold Mine, Nantaizi Gold Mine and Luotuochang Gold Mine has been and is
currently in compliance with all applicable PRC safety laws and regulations.

      We implement a mandatory safety training program for all our employees and third-party
contractors in strict accordance with requirements under the ‘‘Law on Production Safety of the PRC’’
and ‘‘Law on Mine Safety’’, please see the section headed ‘‘PRC Laws and Regulation Relating to the
Industry’’ in this prospectus. Before being able to apply to work in an underground shaft, all staff are
tested at an occupational disease hospital and must complete our mandatory safety training program and
any other safety training programs required by the local Administration of Work Safety (安全生產監督
管理局).

     Our mine directors and safety inspectors are required to pass a series of training courses organized
by the municipal safety supervision authority and hold a relevant permit before starting to work.

      We have a medical clinic at the Shirengou-Nantaizi Mining Complex. For the Luotuochang Gold
Mine, the Guotao Luotuochang hospital is used, as it is reasonably close to the mine. All employees and
third-party contractors have annual medical checks, including for silicosis, and are insured for injury as
required by local laws. There have been no reportable injuries at any of the mines since we acquired the
mines in August 2007.

     Each of our supervising staff members is accountable for their respective areas of responsibility.
Each level of operations has to adhere to the accountability system. Our Production and Environmental
Safety Department undertakes periodic inspections to identify and address safety hazards. Our safety
management systems and practices are being continually reviewed and improved. Our Production and
Environmental Safety Department makes final reviews to ensure that infrastructure design and
construction cover critical safety issues.




                                                 – 165 –
                                                BUSINESS


     Since our acquisitions of the mines in August 2007, we have not been subject to any investigation
with regard to work safety practices by any government authority and no non-compliance incident has
been recorded. However, like other companies that operate in our industry, we are subject to random
inspections by government authorities.

      Each of the Mining Companies have reserved a safety measure fee per annum in accordance with
Clause 42 of ‘‘Implementation Regulations For Mine Safety’’ 《礦山安全法實施條例》 of ‘‘Mine Safety
                                                              (                      )
Law Of The People’s Republic Of China’’ 《中華人民共和國礦山安全法》 The fee will be used for (1)
                                          (                               ).
safety technical measures to prevent mining incidents; (2) labor hygienic technical measures to prevent
occupational hazards; (3) staff safety training; (4) improving other technical measures of mine
production safety conditions and ensuring accident insurance coverage for staff under the ‘‘Labour Law
of The People’s Republic of China’’.

      We plan to provide not less than 72 hours of safety education to all our employees every year.
Employees with specialized technical duties will be required to receive training directly from the
relevant government authorities. All employees working in our Gold Mines will be subject to weekly
safety training to enhance their awareness of safety issues, and improve their knowledge in working
safety techniques in order to reduce and eliminate the occurrence of accidents.

      During the contracting period, any claims that arise in respect of safety incidents will be the
responsibility of the third-party contractor, who shall bear the cost. We do not carry any insurance
against this risk. In the event of an injury or loss of life during a project, the incident will be reported to
the relevant PRC administrative department according to the applicable regulations. In the event of a
serious incident causing loss of life, the third-party contractor will be wholly responsible for the incident
and will be dismissed within one month after such an incident is confirmed.

      In order to ensure that a third-party contractor has the necessary financial capability to meet the
claims/penalties when there is any serious injury or accident, we examine the registered capital of such
third-party contractor, the kind of projects that it has been or is able to contract into and its financial
capacity to bear the risks. Our PRC legal adviser, King & Wood, believes that under a third-party
contractor arrangement, there is no express regulatory requirement that would hold us responsible under
the PRC laws if the third-party contractor defaults on their payments. Accordingly, we do not believe we
will be held responsible under the PRC laws if the third-party contractors default on their payments.

  Measures to counteract various common mining industry-related accidents

     Roof collapse

     We plan to:

     —     change the traditional wooden log passive support to an anchor rod used in our Gold Mines
           and spray concrete active support;

     —     post a safety officer on every shift to patrol and oversee the condition of our Gold Mines;

     —     increase the general quality of equipment and tools used by engineering technicians; and

     —     design the mining operations in a scientific manner in order to avoid carrying out
           constructions in dangerous geological locations and to minimize the risk of roof collapse.




                                                   – 166 –
                                             BUSINESS


     Intoxication/suffocation

     We plan to:

     —    purchase and install automatic hazardous gas detection equipment and alarm systems at all of
          our Gold Mines;

     —    purchase and equip each of our Gold Mines with respirators; and

     —    further improve the ventilation system to ensure good ventilation at each of our Gold Mines.

     Mechanical accidents

     We plan to:

     —    formulate stringent operating procedures to ensure all mechanical equipment is properly
          operated;

     —    provide training to staff who engage in specialized technical duties, and ensure that such staff
          are qualified to undertake such specialized technical works and are in possession of all
          relevant permits/licenses as required by law; and

     —    formulate a comprehensive maintenance plan for different types of repair works in order to
          ensure all mechanical equipment is in good working condition.

     Falling from high ground

     We plan to:

     —    lower the height of our work platforms from 8 m to 6 m; and

     —    install an anti-collision beam and video surveillance devices in each vertical shaft.

     Explosion

     We plan to:

     —    change the current use of close range fuse ignition to long range electronic pulse ignition in
          connection with the use of explosives;

     —    ensure that all staff who operate explosives have obtained proper training and all relevant
          permits/licenses before the commencement of work; and

     —    change the current periodic reporting system of use of explosives to a computerized daily
          reporting system in order to avoid any misuse or unauthorized handling of explosives.

       Pursuant to the Provisional Rule on Finance Management of Safety Production Fees of Enterprises
in High Risk Industries (高危行業企業安全生產費用財務管理暫行辦法) of the PRC, mining enterprises
are required to contribute to a production safety fund RMB8 for each tonne of ore mined in a year.
Accordingly, the amount of annual production safety fund requires to be paid by us is proportional to
our level of production. For the year ended 31 December 2007, since only our 50 tpd ore processing
facility located at the Shirengou Gold Mine was in operation, the amount of annual production safety
fund required to be paid was relatively low. For the year ended 31 December 2007 and the ten months
ended 31 October 2008, the annual production safety fund was RMB48,000 and RMB1.0 million,
respectively. For the year ended 31 December 2008, the annual production safety fund was



                                                – 167 –
                                              BUSINESS


RMB1,906,000 and for the two years ending 31 December 2009 and 2010, it is expected that the annual
production safety fund will be RMB5,104,000 and RMB6,240,000, respectively. However, as the
production capacities of our ore processing facilities continue to expand (and with our level of
production reaching these facilities’ designed capacities), we anticipate that the amounts of annual
production safety fund payable will substantially increase in the near future.

ENVIRONMENTAL PROTECTION

      Our operations are subject to various PRC laws and regulations with respect to environmental
protection and environmental rehabilitation, please see the section headed ‘‘The PRC Laws and
Regulations Relating to the Industry — Laws and Regulations Relating to Environmental Protection’’ in
this prospectus. We have adopted various measures within our operations with regard to environmental
protection.

      We currently have a number of environmental protection staff responsible for formulating and
implementing environmental protection measures at our three Gold Mines. Our environmental protection
staff has, on average, 15 to 20 years of mine environmental protection experience.

      Each of the Shirengou Gold Mine, Nantaizi Gold Mine and Luotuochang Gold Mine has a valid
environmental protection permit from the relevant local environmental protection department to
undertake mining and processing activities at their respective mining site. Two of the major
environmental issues in the gold mining industry are management of wastewater and management of
tailings. Wastewater and tailings can contain substances that are potentially harmful to human beings
and the environment, especially in large quantities. For further details, please refer to the section headed
‘‘Risk Factors — Risks Relating to Our Business’’ in this prospectus. Some of the environmental
measures that are being implemented, or are planned to be implemented, at our Gold Mines are:

     —     Dust mitigation: including the use of dust collectors, exhaust fans fitted with filters, water
           sprays and enclosure of dust generating activity. PPE, such as face masks, to provide
           additional personal protection from dust are provided, and their use is strongly encouraged.
           Upgrading of roads, which will reduce dust generation, is also progressing.

     —     Wastewater treatment: all sites are to be zero water discharge sites, with waste water
           (including tailings effluent) recycled to the processing plant for use in mineral processing or
           used for dust suppression. With annual evaporation rates approximately four times the annual
           rainfall, water in this semi-arid zone is a valued resource. Top-up water is drawn from bores
           and any mine pump-out water is used for dust suppression in the mine. Monitoring of water
           quality is undertaken at regular intervals to ensure pH and other parameters are at an
           acceptable level. Calcium carbonate will be added to wastewater to control pH value to
           within a range of 7 to 8 and will not have any adverse effect on the environment so long as
           such wastewater is not discharged.

     —     Solid waste: waste rock from underground development is and will continue to be used for
           stop backfills and construction purposes, in particular for the embankment walls of the TSFs.
           All tailings from processing will be stored in the constructed TSFs. The ore processing
           facilities located at the Shirengou-Nantaizi Mining Complex and Luotuochang Gold Mine
           will produce approximately 423,000 tonnes and 206,000 tonnes, respectively, of solid waste
           per annum after they have reached design capacities. The solid waste will be stored at our




                                                  – 168 –
                                             BUSINESS


           tailings dams. As the solid waste does not contain any radioactive substance, storage of the
           waste will not have any adverse effect on the environment. After closure of the tailings dams,
           the land could easily be restored by reforestation and converted into industrial land.

     —     Waste gas: waste gas produced as a result of the use of explosives and any other poisonous
           elements (such as silicon dioxide) will be diluted using the machinery ventilation/dust
           removal method to a level lower than the level permitted by ‘‘Safety Operating Regulations
           for Metal and Non-Metal Mines’’ before discharging into the environment.

     —     Noise control:     methods of noise control include use of silencers, noise and vibration
           dampening and absorbing materials, and isolation and enclosure of noisy equipment. Our
           policy requires use of PPE, such as ear plugs, for noise-affected workers.

     —     Leakage prevention: leakage prevention measures are integrated in the design of the mines
           with the purpose of preventing the tailings inside the tailings dam contaminating the
           underground water. Recycling of the tailings inside the tailings dam will reduce the use of
           underground water. The tailings dam also serves to prevent flood, control flood level and
           protect downstream farm land.

     —     Repair and maintenance: in order to prevent tailings dam slope from sand blowing causing
           pollution to the atmosphere, landscape measures such as reforestation and vegetation are
           adopted on tailings dam slope. Water-prevention resin and floor membrane technology will
           be adopted where necessary so as to ensure normal growth of vegetation on tailings dam
           slopes.

     —     Environmental monitoring: monitoring of water and air quality, noise and waste
           management is conducted by the relevant local environmental protection department on a
           quarterly basis. We also undertake our own schedule of regular water and air quality
           monitoring. As at the Latest Practicable Date, the mines have complied with regulatory
           requirements.

     —     Rehabilitation: planting programs have commenced concurrently with mining activities.
           Rehabilitation will include measures such as covering tailings dams with clay and rock, back
           filling slopes and planting vegetation to stabilize the area and to prevent erosion.

      In accordance with the requirements of the approved water conservation plan, we have also
adopted a two-pronged approach to ensure efficient water management. We combine vegetation practices
with engineering measures in a systematic approach to conservation. Vegetation measures include
forestation of the stable yard, road bank and tailings pond by combining grasses, shrubs, arbors and
vines. Engineering measures include the construction of water interception and flood control facilities to
prevent rainwater erosion in the form of channel flow and the construction of the residues blocking dam,
the water and mud blocking dam, the tailings dam and breast walls. After a mine is built, its relative
ecological balance is also maintained by planting a variety of saplings, vines, trees and grasses, thereby
preventing the environment from being undermined by mine construction.

      We are currently developing TSFs at our mine sites. The new TSFs will be built at the Shirengou-
Nantaizi Mining Complex and be of a sufficient size to meet the phased requirements of the new mills.
They will be designed to accommodate the mine’s lifetime requirements and are designed to
accommodate local seismic and flooding risk history. Both surface and underground disposal options
are still under consideration and flooding and seismic risk will be taken into account in any future
design.



                                                 – 169 –
                                             BUSINESS


       Through the use of our environmental initiatives, we aim to mitigate the environmental risk of
operating in our industry. The relevant PRC environmental authorities conduct regular inspections of our
facilities, and we have not received any negative comments from such PRC environmental authorities
during the Track Record Period.

      As far as our Directors and PRC legal advisors are aware, our current production and operating
activities have been in compliance with the relevant requirements on environmental protection and there
were no incident causing environmental hazards or delayed production during the Track Record Period.

     Our plans to address potential future risks are as follows:

     Stringent control of immersion level to prevent damage to tailings dams by an earthquake

           The earthquake intensity scale of the region is VI grade and tailings are highly liquefied
     sand. In order to prevent tailings from generating liquefied vibration during an earthquake of a
     greater scale, it is required that the immersion level of a tailings dam be submerged at around 10m.

     Monitoring system of tailings dams

           We closely monitor the operational status of the tailings dams. The monitoring system of the
     tailings dams includes water-level movement detection system, dam surface sinking detection
     system and internal water level detection system.

     Flooding prevention standard

           Pursuant to the ‘‘Safety Technical Regulations For Tailings Dam’’ (AQ2006-2005), our
     tailings dams are class-4 dams and the corresponding flooding standard is: initial period 50–100
     years and medium to latter period 200–500 years. Our planned flood prevention standard is once
     every 100 years, and later once every 500 years.

      We have assigned staff specifically for managing, releasing, maintaining and patrolling the tailings
dam. Their duties are to prevent any incidents that may cause damages to the tailings dam or any other
safety issues, monitor abnormal situations during the operation of the tailings dams, and timely report to
management any emergency situation. According to management requirements, the schedule is designed
in three shifts, two staff for each shift with a total of six staff.

       Save and except for the drainage fee of RMB15,000 paid in 2007, no compliance cost or other
environmental-related costs have been incurred by us during the Track Record Period. Pursuant to the
letters issued by the Bureau of Environmental Protection of the Songshan District of the Chifeng
Municipality (赤峰市環境保護局松山區分局), the Bureau of Environmental Protection of the Kalaqin
Banner (喀喇沁旗環境保護局), and the Bureau of Environmental Protection of the Balinzuo Banner (巴
林左旗環境保護局) on 31 December 2008, it is confirmed that Nantaizi Mining, Shirengou Mining and
Luotuochang Mining have been in compliance with all relevant PRC environmental laws and
regulations. As a result, our PRC legal adviser, King & Wood, is of the view that each of Nantaizi
Mining, Shirengou Mining and Luotuochang Mining has paid all environmental-related fees as required
under all relevant environmental laws and regulations.




                                                 – 170 –
                                              BUSINESS


     Our relatively low compliance costs are a result of the following two factors:

     (1)   our compliance costs mainly consist of the fees paid to the competent department in charge
           of State-owned land and resources in accordance with the relevant laws which are generally
           small in amount; and

     (2)   in our historical records, our compliance costs are debited into the accounts as cost fees
           based on the compliance costs actually incurred. As the compliance costs actually incurred by
           us to date have been relatively low, the compliance costs shown in the historical records are
           low.

     We do not have a non-compliance record on safety matters. For the year ended 31 December 2008,
the annual environmental protection fee was RMB1,743,000 and for the two years ending 31 December
2009 and 2010, it is expected that the annual environmental protection fee will be RMB8,995,800 and
RMB10,998,000, respectively.

      The substantial increase in the environmental protection fee is a result of our increased production
capacity. Pursuant to relevant PRC environmental laws and regulations, the environmental protection fee
is calculated and paid based on the annual production volume of the company. In 2007, we operated a
single small processing facility with a daily capacity of 50 tonnes. Accordingly, due to its small size the
environmental protection fee for this processing facility was only RMB15,000.

       In the second half of 2008, we completed constructing and began operating two production
facilities which have a combined daily capacity of 1,790 tonnes. Accordingly, as a result of the
significant increase in the output of our production facilities, the environmental protection fee for 2008
has increased to approximately RMB1.7 million.

     In addition, the daily capacity of our two production facilities will be increased over 2009 by 790
tonnes which partially accounts for our estimated increase in the environmental protection fee to
approximately RMB9.0 million and approximately RMB11.0 million in 2009 and 2010, respectively.

RESEARCH AND DEVELOPMENT

      We are not currently engaging in any research and development projects. However, we plan to
develop research and development capabilities, focusing initially on ore selection, processing and
smelting technologies. The purpose of our research and development will be to increase the recovery
rate of gold and reduce the dilution rate. We are in the process of applying for a piece of land in Xishan
Village, Niujiayingzi Town, Kalaqinqi, Chifeng, the PRC for the construction of a research and
development center. We have neither paid any land premium to the relevant PRC authorities nor
obtained any governmental approval in respect of this application.

INTELLECTUAL PROPERTY RIGHTS

      In August 2008, we filed an application with the Trademark Office of State Administration for
Industry and Commerce of the PRC for registration of the trademark   . We have also applied for the
registration of the trademark   in Hong Kong in August 2008.




                                                 – 171 –
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CUSTODY OF ASSETS AND ACCESS CONTROL

     Gold concentrates are kept in secure storage at our Gold Mines with access restricted to authorized
personnel. Each storage facility is equipped with electric security and alarm systems.

INSURANCE

      We have taken out insurance on certain of our assets (including certain new buildings, equipment,
and motor vehicles) which are subject to certain operating risks. We have also maintained mandatory
social security insurance for our employees. Save as disclosed above, we have not maintained any other
insurance coverage with respect to our operations. For the year ended 31 December 2007 and the ten
months ended 31 October 2008, the amount of insurance premiums paid by us was approximately
RMB26,000 and RMB66,000, respectively. Our Directors are of the view that the insurance coverage on
our assets is consistent with the industry practice in the PRC.

     Pursuant to the agreements we entered into with the third-party contractors for our construction,
exploration and mining works, all legal liabilities arising from any accidents caused by such third-party
contractors in the course of operations at our mines are borne by our third-party contractors.

      According to the ‘‘Work-Related Injury Insurance Regulations’’ (工傷保險條例), employers of all
types of enterprises and sole traders shall participate in work-related injury insurance and pay work-
related injury insurance premiums for all employees in their work unit in accordance with the
regulations. Our Group and our third-party contractors have personal injury insurance and we are in
compliance with the relevant PRC laws and regulations relating to work-related injury insurance.

EMPLOYEES

     As at the Latest Practicable Date, we had a total of 89 full-time employees. They can be
categorized as follows according to their roles. The following table shows a breakdown of our
employees by function.
     Function                                                                                                                                                                                                             Number
     Management . .       .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .         7
     Operations . . .     .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .        47
     Marketing. . . .     .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .         2
     Quality control      .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .        10
     Safety . . . . . .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .         1
     Others . . . . . .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .        22
                                                                                                                                                                                                                               89

      We make contributions to mandatory social security funds for our employees to provide for
retirement, medical, work-related injury, maternity and unemployment benefits. For the year ended 31
December 2007 and the ten months ended 31 October 2008, our contributions to the state-managed
defined contribution retirement scheme were approximately RMB443,000 and RMB573,000,
respectively. The percentage of salary being contributed by our employees and us respectively to the
state-managed defined contribution retirement scheme is listed in the table below.




                                                                                                      – 172 –
                                                                   BUSINESS


                                                          Unemployment                               Occupational                     Housing
                                 Endowment Insurance         Insurance         Medical Insurance        Injury      Maternity     Provident Funds
                                 Enterprise Individual Enterprise Individual Enterprise Individual    Insurance     Insurance   Enterprise Individual
Fubon Industrial . . . . . . .        20%         8%          2%         1%         6%         2%            4.8%       0.70%        10%         10%
Chifeng Fuqiao . . . . . . . .        20%         8%          2%         1%         6%         2%            4.8%       0.70%        10%         10%
Shirengou Mining . . . . . .          20%         8%          2%         1%         6%         2%            4.8%       0.70%        10%         10%
Nantaizi Mining . . . . . . .         20%         8%          2%         1%         6%         2%            4.8%       0.70%        10%         10%
Luotuochang Mining . . . .            20%         8%          2%         1%         6%         2%            4.8%       0.70%        10%         10%


      As confirmed by relevant government authorities and our Directors, we have complied with
relevant national and local labor and social welfare laws and regulations in the PRC.

      Considering that we have already established a high standard for protecting the interests and rights
of our employees, the new PRC Labor Contract Law (‘‘New Labor Law’’) did not have any material
impact on our business and operations, except that the law superseded the terms of the original
employment contracts between our employees and us. In response to the New Labor Law, we have
entered into a new employment contract with each of our employees. As advised by our PRC legal
adviser, King & Wood, our new employment contracts comply with the New Labor Law in every
respect.

PROPERTIES

    Land

      As at 31 December 2008, we owned the land use rights of three parcels of land with a total site
area of approximately 90,044.00 sq.m. The total gross floor area of the completed buildings or structures
is approximately 4,166.75 sq.m.

     As confirmed by our PRC legal adviser, King & Wood, Shirengou Mining, Nantaizi Mining and
Luotuochang Mining have respectively obtained the land use right for each parcel of land. As confirmed
by our Directors, all gold mines and related area which Shirengou Mining, Nantaizi Mining and
Luotuochang Mining have operations are covered under the relevant land use rights.

    Owned buildings

       As at 31 December 2008, we had obtained two certificates of building ownership. We obtained one
certificate of building ownership for Nantaizi Mining on 8 July 2008, and another certificate of building
ownership for Luotuochang Mining on 4 August 2008.

    Leased Properties

     As at 31 December 2008, we leased 3 offices units that support our business activities and
operations in the PRC and Hong Kong, with a total gross floor area of approximately 2,587.83 sq.m.

     Details of the property valuation together with the summary of valuation and valuation certificates
from our property valuer are set out in Appendix IV to this prospectus.

LITIGATION AND REGULATORY MATTERS

      As at the Latest Practicable Date, we were not a party to any legal or administrative proceedings,
and none of our Directors are aware of any proceedings contemplated by government authorities or third
parties, which, if adversely determined, would materially and adversely affect us.



                                                                         – 173 –
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      We are required by the laws and regulations of the PRC to obtain a number of licenses, permits
and approvals from the relevant authorities in the PRC to conduct mining activities in the PRC. The
following table shows the licenses, permits and approvals we have already obtained and their respective
validity periods or the status of our application.
                                                                                                                                                               Certificate  Certificate            Social
                                      Gold                                                     Project                     Environmental                      of approval of approval            insurance
                      Business      operating                            Exploration         assessment       Production     protection        Land use        for storage  for use of          registration
Permit                 license       permit         Mining permit          Permit             approval       safety permit    permit           certificate    of explosives explosives           certificate
Mine
Nantaizi Gold Mine 11/07/2007 to   18/07/2008 to   12/2007 to          21/7/2008 to          Mining          21/07/2008 to   08/06/2008 to    12/05/2008 to   18/12/2008 to    18/12/2008 to    March 2008 to
  (Date of            30/12/2010      17/07/2018      12/2010(1)          21/7/2009 (5)(6)~{ 300 tpd            20/07/2011      07/06/2011~      03/03/2058      18/12/2009       18/12/2009      February
  commencement of                                  27/10/2008 to                             17/04/2008 to                                                                                        2012
  commercial                                          27/10/2011 (2)                         16/04/2010
  production: 22
  July 2008)                                                                                Mining
                                                                                            200 tpd
                                                                                            24/04/2008 to
                                                                                            23/04/2010

                                                                                            Mining
                                                                                            490 tpd
                                                                                            17/09/2008 to
                                                                                            16/09/2010

Luotuochang Gold  01/07/2005 to    02/07/2008 to   02/2008 to          N/A(7)               Mining           29/07/2008 to   18/07/2008 to    09/05/2008 to   Effective from   Effective from   May 2008 to
  Mine (Date of      30/06/2025       02/07/2018      02/2011(3)                            150 tpd             28/07/2011      17/07/2011       29/03/2058      01/12/2008       01/12/2008      April 2012
  commencement of                                                                           11/03/2008 to
  commercial                                                                                10/03/2010
  production:
  September 2008)                                                                           Mining
                                                                                            350 tpd
                                                                                            22/04/2008 to
                                                                                            21/04/2010

                                                                                            Mining
                                                                                            300 tpd
                                                                                            17/09/2008 to
                                                                                            16/09/2010

Shirengou Gold     10/11/2004 to   19/09/2005 to   09/2008 to          N/A(7)               No new           01/12/2008 to   10/08/2007 to    05/05/2008 to   15/07/2008 to    15/07/2008 to    June 2008 to
   Mine (Date of      09/11/2024      19/09/2010      09/2011(4)                            construction        31/12/2011      09/08/2010       29/02/2058      15/07/2009       15/07/2009      May 2012*
   commencement of                                                                          project(8)
   ore mining:
   18 August 2007)




          Notes:

          (1)        This permit (with a reference number of 1500000720684) was granted on 14 December 2007, and was
                     renewed from the mining permit with a reference number of 1500000730498 and a validity period from
                     August 2007 to August 2008.

          (2)        This mining permit (with a reference number of 1500000810520) was granted on 27 October 2008, and
                     was converted from the exploration permit with a reference number of T15120080502007825 and a
                     validity period from 16 May 2008 to 16 September 2009.

          (3)        This mining permit (with a reference number of 1500000810063) was granted on 27 February 2008, and
                     was converted from the exploration permit with a reference number of 1504000630693 and a validity
                     period from 30 December 2006 to 30 December 2007.

          (4)        This mining permit (with a reference number of 1500000820448) was granted on 19 September 2008,
                     and was renewed from the mining permit with a reference number of 1500000830312 and a validity
                     period from June 2008 to December 2008.

          (5)        This exploration permit (with a reference number of T15120080702012284) was granted on 21 July
                     2008, and was renewed from the exploration permit with a reference number of 1500000722002 and a
                     validity period from 16 September 2007 to 20 July 2008.




                                                                                                – 174 –
                                                BUSINESS


     (6)   We have applied for conversion of this exploration permit to mining permit and expect the mining
           permit to be granted in June 2009.

     (7)   As each of Shirengou Mining and Luotuochang Mining has completed its planned program of
           exploration and neither intends to carry out further exploration at the present time, neither Shirengou
           Mining nor Luotuochang Mining holds any exploration permits.

     (8)   Shirengou Mining conducts ore mining activities at the Shirengou Gold Mine but does not conduct ore
           extraction. This is because all the ore mined by Shirengou Mining at the Shirengou Gold Mine will be
           directly transported to the Nantaizi Gold Mine through an underground shaft which connects the two
           Gold Mines. Accordingly, the ore mined at Shirengou Gold Mine will be extracted at the Nantaizi Gold
           Mine and hence Shirengou Mining does not require any project assessment approvals.
     ~
           The permit was obtained after commencement of the trial production of Nantaizi Gold Mine.
     {
           The permit was obtained after commencement of the exploration operations of Nantaizi Gold Mine.

     *     The permit/certificate was obtained after commencement of the mining operations of Shirengou Gold
           Mine.

     We confirm that, as of the Latest Practicable Date, we are not aware of any claims in relation to
exploration rights made or notified either by third parties against us or vice versa.

      Shirengou Mining has obtained all the necessary permits and approvals required for its operations.
Although Shirengou Mining did not hold a social insurance registration certificate when it commenced
ore mining, on 4 August 2008, the Chifeng City Songshan District Work and Social Insurance Bureau
(赤峰市松山區勞動社會保障局) issued to Shirengou Mining a confirmation letter stating that, as
Shirengou Mining has applied for and completed social insurance registration before Shirengou Mining
obtained the social insurance registration certificate, Shirengou Mining did not breach any relevant laws
and regulations.

      Nantaizi Mining has obtained all of the necessary permits and approvals required for its operations
including:

     .     all necessary production safety permits issued by Inner Mongolia Autonomous Region
           Administration of Work Safety on 21 July 2008. The production safety permits will expire on
           20 July 2011; and

     .     the approval letter in respect of environmental protection inspection and acceptance (竣工環
           境保護驗收) for its 300 tpd and 200 tpd ore exploitation and extraction projects which was
           obtained on 7 July 2008.

     In relation to Nantaizi Mining’s exploration activities, Nantaizi Mining held all necessary permits
when it commenced its exploration activities, and thus Nantaizi Mining’s exploration did not and will
not breach relevant laws and regulations.

      From the date of commencement of exploration in Nantaizi Gold Mine to 17 May 2008, the date
Nantaizi Mining commenced its trial production, Nantaizi Mining held an exploration permit, but did not
hold a trial production permit. As a trial production permit is issued by the authorities to allow the
mining enterprises to conduct trial production of mining and ore extraction, not exploration, a mining
enterprise can legally conduct exploration after it has obtained an exploration permit. There is no
requirement for a mining enterprise to hold a trial production permit if it is only undertaking
exploration. Accordingly, Nantaizi Mining did not breach relevant PRC laws and regulations in this
regard during this period.




                                                    – 175 –
                                               BUSINESS


       Since 17 May 2008, the date Nantaizi Mining commenced its trial production in relation to its
phase I ore processing facility, Nantaizi Mining has held two mining permits, one exploration permit
and a trial production permit. As such, from this date, Nantaizi Mining was authorized to legally
conduct its exploration activities (pursuant to its exploration permit) and to also legally conduct its trial
production of mining and ore extraction (pursuant to its trial production permit and mining permits). In
relation to Nantaizi Mining’s trial production at its phase I ore processing facility, although Nantaizi
Mining did not hold an environmental protection permit when it commenced trial production, Inner
Mongolia Autonomous Region Environmental Protection Bureau (內蒙古自治區環境保護局) and the
Bureau of Administration of Work Safety Supervision of Inner Mongolia (內蒙古安全生產監督管理局),
which are the competent authorities that respectively issued the approval letter in respect of
environmental production inspection and acceptance (竣工環境保護驗收) on 7 July 2008 and the
production safety permit (安全生產許可證) to Nantaizi Mining on 21 July 2008 and are in charge of
supervising Nantaizi Mining’s environmental protection and work safety, have each issued confirmation
letters to Nantaizi Mining to conduct trial production. Accordingly, the trial production commenced at
the Nantaizi Gold Mine in relation to its phase I ore processing facility did not and will not breach
relevant laws and regulations. Our PRC legal adviser, King & Wood, confirmed that we are in
compliance with, and there was no breach of, PRC laws and regulations when Nantaizi Gold Mine
commenced trial production as all the permits and approvals required to commence such production had
been received, and, in addition, there was no historical breach of PRC laws and regulations
notwithstanding our pending permits and approvals.

      Nantaizi Gold Mine began commercial production at the phase I ore processing facility, and the
relevant trial production period ended, on 21 July 2008, when we obtained all necessary permits and
approvals required for operations of the Nantaizi Gold Mine.

       We have also commenced commercial production at phase II of the mining and ore processing
facility located at the Nantaizi Gold Mine, which has a daily ore processing capacity of approximately
490 tonnes. Pursuant to the letter of approval issued by Inner Mongolia Autonomous Region
Environmental Protection Bureau (內蒙古自治區環境保護局) on 28 September 2008, the phase II ore
processing facility located at the Nantaizi Gold Mine was granted permission to commence trial
production for a period of three months commencing from 29 September 2008. The trial production
period for phase II of our ore processing facility at the Nantaizi Gold Mine ended on 20 October 2008,
when we obtained all necessary permits and approvals required for operations, including an approval
letter in respect of environmental protection inspection and acceptance in respect of phase II, and
commenced commercial production.

     Luotuochang Mining has obtained all of the necessary permits and approvals required for its
operations including:

     .     the gold operating permit on 2 July 2008. It has a validity period from 2 July 2008 to 2 July
           2018;

     .     all necessary production safety permits issued by Bureau of Administration of Work Safety
           Supervision on 29 July 2008. The production safety permits will expire on 28 July 2011;

     .     the environmental protection permit issued by Balinzuo Banner Environmental Protection
           Bureau on 18 July 2008. It has a validity period of three years; and




                                                  – 176 –
                                              BUSINESS


     .     the approval letter in respect of environmental protection inspection and acceptance (竣工環
           境保護驗收) for its 350 tpd and 150 tpd ore exploitation and extraction projects on 11
           August 2008, and another approval letter for its 300 tpd ore exploration and extraction
           projects on 26 December 2008.

      We have commenced commercial production at phase I of the mining and ore processing facility
located at the Luotuochang Gold Mine, which has a daily ore processing capacity of approximately 500
tonnes after having obtained all necessary permits and approvals required for operations in September
2008.

       We have also recently finished trial production at phase II of our ore processing facility located at
the Luotuochang Gold Mine, which has an additional daily ore processing capacity of approximately 300
tonnes. Pursuant to the letter of approval issued by Inner Mongolia Autonomous Region Environmental
Protection Bureau (內蒙古自治區環境保護局) on 5 December 2008, the phase II ore processing facility
located at the Luotuochang Gold Mine was granted permission to commence trial production for a
period three months commencing from 27 November 2008. We commenced sales of the products
produced at phase II of this ore processing facility and have begun to generate revenue therefrom since
December 2008. We have also commenced commercial production at phase II of this ore processing
facility on 26 December 2008 when we obtained the approval letter in respect of environmental
protection inspection and acceptance for phase II of this ore processing facility.

      To avoid any non-compliance with PRC laws and regulations from occurring in the future, we will
enter into a retainer with an external PRC legal adviser who will be consulted by us on any general legal
and regulatory matters. Any significant matters will be reported to the CEO for further handling. In
addition, a comprehensive compliance manual has been prepared for listing and compliance purposes.
Once approved by our Directors, all major operating departments of our Group will be given training on
all laws and regulations applicable to our Group. In order to ensure compliance with all legal and
regulatory requirements, we will also consider conducting regular reviews through an independent third
party such as a compliance adviser or through our audit department. Our Directors will approve the
scope of responsibilities for any such review prior to the review being conducted and the results of the
review will be reported to our Directors immediately after completion.

      Save as disclosed above, our Directors confirm that we have complied with all relevant laws,
regulations and obtained all the necessary licenses, approvals and permits for conducting our business
activities. We undertake that our Group will obtain all relevant permits, licenses and approvals before
Listing.




                                                  – 177 –
                                             BUSINESS


NON-COMPETITION UNDERTAKING

      Mr Wu (the ‘‘Covenantor’’), one of our controlling shareholders, has confirmed that other than his
interest in our Group, he is not engaged in, or interested in any business which, directly or indirectly,
competes with our business.

     Mr Wu is interested in certain other mining assets relating to molybdenum, lead and zinc. Our
Group has a strong focus on gold as our core commodity and does not focus on molybdenum, lead or
zinc as our core commodity. Although lead and zinc are contained in the concentrates produced by us,
lead and zinc are by-products contained in the ore mined by us. For the ten months ended 31 October
2008, the lead and zinc contained in the concentrates produced and sold by us contributed to 6.0% and
2.9%, respectively, of our revenues. Accordingly, the lead and zinc contained as by-products in the
concentrates produced and sold by us are not significant contributors to our Group’s revenues. For this
reason, Mr Wu’s other mining assets are excluded from our Group’s business. Our Directors believe and
Mr Wu confirms that these companies currently do not compete with our Group’s existing business and
business expansion plans as described in this prospectus. Mr Wu does not intend to inject these
companies into our Group.

     For information about Mr Wu’s other mining assets, please refer to the table set out below.
     Name of mining company                                            Status
     Chifeng Balinzuo Banner Wanhua         Chifeng Balinzuo Banner Wanhua Mining Company Limited
       Mining Company Limited               (巴林左旗萬華礦業有限公司) has not commenced any
       (巴林左旗萬華礦業有限公司) . .                   production or trading activities. The only assets owned by
                                            Chifeng Balinzuo Banner Wanhua Mining Company Limited
                                            (巴林左旗萬華礦業有限公司) are two lead and zinc mines,
                                            namely Inner Mongolia Balinzuo Banner Majiashan
                                            Polymetallic Mine (內蒙古自治區巴林左旗馬架山多金屬
                                            礦) and Inner Mongolia Balinzuo Banner Henghezixi Lead
                                            & Zinc Polymetallic Mine (內蒙古自治區巴林左旗橫河子
                                            西鉛鋅多金屬礦). Mr Wu plans to dispose of his interests
                                            in Chifeng Balinzuo Banner Wanhua Mining Company
                                            Limited (巴林左旗萬華礦業有限公司) in the near future,
                                            and in any event, prior to the commencement of operations.
                                            Therefore, Chifeng Balinzuo Banner Wanhua Mining
                                            Company Limited (巴林左旗萬華礦業有限公司) is not and
                                            will not be a competitor of our Group.

     Balinzuo Banner Xinyuan Mining         Balinzuo Banner Xinyuan Mining Company Limited (巴林
       Company Limited                      左旗鑫源礦業有限公司) has not commenced any production
       (巴林左旗鑫源礦業有限公司) . .                   or trading activities. Even if Balinzuo Banner Xinyuan
                                            Mining Company Limited (巴林左旗鑫源礦業有限公司)
                                            commences its operations, we do not consider that it will
                                            compete with the business of our Group since it intends to
                                            engage in the business of lead and zinc mining and
                                            processing whereas our Group’s business is the production
                                            of concentrates containing gold.




                                                – 178 –
                                               BUSINESS


     Name of mining company                                              Status
     Chifeng Zhongtai Mining                  Chifeng Zhongtai Mining Company Limited (赤峰中泰礦業
       Company Limited                        有限公司) is a non-operating, holding company. Its sole
       (赤峰中泰礦業有限公司) . . . . .                 subsidiary is Chifeng Balinzuo Banner Wanhua Mining
                                              Company Limited (巴林左旗萬華礦業有限公司), which has
                                              not commenced any production or trading activities.

     Chifeng Fubon Copper . . . . . . . . .   Chifeng Fubon Copper is an enterprise which engages in the
                                              business of copper smelting, a business which operates
                                              downstream from our operations. Chifeng Fubon Copper
                                              does not produce concentrates and does not in any respect
                                              compete with our activities.

     Chifeng Haozhou Mining                   Chifeng Haozhou Mining Company Limited (赤峰浩州礦業
       Company Limited                        有限公司) has not commenced any production or trading
       (赤峰浩州礦業有限公司) . . . . .                 activities. It intends to engage in the business of mining and
                                              processing of molybdenum only. Given that the concentrates
                                              produced by our Group only contain minerals such as gold,
                                              silver, copper, lead and zinc, but not molybdenum, Chifeng
                                              Haozhou Mining Company Limited (赤峰浩州礦業有限公
                                              司) is not and will not be a competitor of our Group.

      One of our executive Directors, Mr Wang Zhentian, is a director of each of Balinzuo Banner
Xinyuan Mining Company Limited (巴林左旗鑫源礦業有限公司) and Chifeng Zhongtai Mining
Company Limited (赤峰中泰礦業有限公司). For the reasons set out above, we do not consider that
these companies will compete with the business of our Group.

      We are satisfied that our Company is capable of carrying on its business independently of Mr Wu.
In accordance with the non-competition undertakings set out in the deed of non-competition dated 5
February 2009 (the ‘‘Deed of Non-Competition’’), the Covenantor has irrevocably agreed, undertaken
and covenanted with our Company (for itself and on behalf of its subsidiaries) that during the period
commencing from the Listing Date and ending on the occurrence of the earliest of (i) the day on which
our Shares cease to be listed on the Stock Exchange or another recognized stock exchange; (ii) the day
on which the Covenantor ceases to be interested in 30% or more of the entire issued share capital of our
Company; and (iii) the day on which the Covenantor beneficially owns or is interested in the entire
issued share capital of our Company:

     .    he will not and he will procure that none of his spouse and children under the age of 18 and
          persons to whom the Covenantor provides financial assistance to set up and operate any
          business (the ‘‘Controlled Persons’’) or any companies controlled, whether directly or
          indirectly, by him (the ‘‘Controlled Companies’’) will, and he will use his best endeavors to
          procure that none of his associates or associated companies not controlled by him, will,
          except through his/her/its/their interests in our Company, whether as principal or agent and
          whether undertaken directly or indirectly through any body corporate, partnership, joint
          venture or other contractual arrangement and whether for profit or otherwise, participate,
          acquire or hold any right or interest or otherwise be interested, involved or engaged in or
          concerned with, directly or indirectly, any business which is in any respect in competition



                                                  – 179 –
                                             BUSINESS


          with or similar to or is likely to be in competition with the business of our Group as
          described in this prospectus (the ‘‘Restricted Business’’) within any of the territories within
          the PRC where any member of our Group carries on business from time to time (the
          ‘‘Restricted Territories’’);

     .    if he and/or any of the Controlled Persons and/or any of the Controlled Companies is offered
          or becomes aware of any business opportunity directly or indirectly to engage or become
          interested in a Restricted Business in any of the Restricted Territories, he/she/it/they:

          —     will promptly notify our Company in writing and refer such business opportunity to our
                Company for consideration and provide such information as reasonably required by our
                Company in order to come to an informed assessment of such business opportunity; and

          —     will not and procure his/her/its/their Controlled Persons and/or Controlled Companies
                will not invest or participate in any project or business opportunity unless such project
                or business opportunity will have been rejected by our Company and the principal terms
                on which the Covenantor or his/her/its/their Controlled Persons and/or Controlled
                Companies invest or participate are no more favourable than those made available to
                our Company.

     The Covenantor has irrevocably agreed, undertaken and covenanted with our Company (for itself
and on behalf of its subsidiaries) that they will not and they will procure that none of the Controlled
Persons and/or the Controlled Companies will:

     .    at any time induce or attempt to induce any director, manager or employee or consultant of
          any member of our Group to terminate his or her employment or consultancy (as applicable)
          with our Group, whether or not such act of that person would constitute a breach of that
          person’s contract of employment or consultancy (as applicable); or

     .    at any time employ any person who has been a director, manager, employee of or consultant
          to any member of our Group who is or may be likely to be in possession of any confidential
          information or trade secrets relating to the Restricted Business; or

     .    alone or jointly with any other person through or as manager, adviser, consultant, employee
          or agent for or shareholder in any person, firm or company, in competition with any member
          of our Group, canvass, or solicit or accept orders from or do business with any person with
          whom any member of our Group has done business or solicit or persuade any person who has
          dealt with our Group or is in the process of negotiating with our Group in relation to the
          Restricted Business to cease to deal with our Group or reduce the amount of business which
          the person would normally do with our Group or seek to improve their terms of trade with
          any member of our Group.

       The Covenantor has further irrevocably agreed, undertaken to and covenanted with our Company
(for itself and on behalf of its subsidiaries) that, with effect from the Listing Date:

     .    the Covenantor will procure that none of the Controlled Persons or the Controlled Companies
          will sell any concentrates containing gold or other minerals to our Company’s existing
          customers; and




                                                – 180 –
                                             BUSINESS


     .    the Covenantor, the Controlled Persons and the Controlled Companies may only enter into an
          agreement to sell concentrates containing gold or other minerals to a person if our Company
          has first decided that it will not enter into an agreement to sell such concentrates to that
          person.

      If our Company has made a decision pursuant to the above paragraphs not to enter into an
agreement to sell concentrates containing gold or other minerals to a person but later decides that it
intends to sell such concentrates to that person, the Covenantor has irrevocably agreed, undertaken to
and covenanted with our Company (for itself and on behalf of its subsidiaries) to use all commercially
reasonable endeavors to procure that the person enters into an agreement to purchase such concentrates
from our Company.

     If a potential customer approaches the Covenantor, a Controlled Person or a Controlled Company
proposing a new business opportunity which falls within the scope of the Restricted Business, the
Covenantor has irrevocably agreed, undertaken to and covenanted with the Company (for itself and on
behalf of its subsidiaries) to use all commercially reasonable endeavors to procure that the person
approaches our Company regarding the proposed new business opportunity to offer our Company the
opportunity to undertake the proposed new business opportunity.

      In the event that our Company has made a decision referred to in the paragraphs above not to enter
into an agreement to sell concentrates containing gold or other minerals to a person or not to undertake
a proposed new business opportunity and the Covenantor or his/her/its/their Controlled Persons and/or
Controlled Companies decide to proceed to enter into an agreement to sell concentrates containing gold
or other minerals to the person or to undertake the proposed new business opportunity, our Company
will announce such decision by way of an announcement setting out therein the basis for the Company
not entering into the agreement to sell concentrates containing gold or other minerals to the person or
not undertaking the proposed new business opportunity.

     The decision-making process in relation to the Deed of Non-Competition will be governed and
monitored as follows:

     .    our independent non-executive Directors will be responsible for deciding, without attendance
          by any executive Director (except as invited by our independent non-executive Directors to
          assist them), whether or not to take up a new business opportunity referred to us under the
          terms of the Deed of Non-Competition;

     .    the Covenantor will undertake to keep us informed of new business opportunities and to
          provide all information reasonably required by the independent non-executive Directors to
          assist them in their consideration of any new business opportunity; and

     .    our independent non-executive Directors will also review, on an annual basis, any decisions
          in relation to new business opportunities referred to us and state their views with basis and
          reasons in our annual report.




                                                – 181 –
              DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES


GENERAL

     The Board consists of 8 Directors, comprising 5 executive Directors and 3 independent non-
executive Directors.

     The principal functions and duties conferred on our Board include:

     .      convening general meetings and reporting our Board’s work at general meetings;

     .      implementing the resolutions passed by our shareholders in general meetings;

     .      deciding our business plans and investment plans;

     .      preparing our annual financial budgets and final reports;

     .      formulating the proposals for profit distributions, recovery of losses and for the increase or
            reduction of our registered capital; and

     .      exercising other powers, functions and duties conferred by our shareholders in general
            meetings.

    The following table provides information about our Directors and other senior management of our
Company.
                                                                       Date of
                                                                     commencing
                                                                   employment with
     Name                        Age       Residential address        our Group             Position
     Wang Zhentian (王振田) .        44   Room 2, 4th Floor, Unit 1   August 2007       Chairman and Executive
                                       Building B5                                     Director
                                       Yulong Jia Yuan
                                       New City District
                                       Chifeng
                                       Inner Mongolia
                                       PRC

     Qiu Haicheng (邱海成) . .       39   No. 753                     August 2007       Executive Director and
                                       Building 44                                     Chief Executive
                                       Jinkuang Jiashu Yuan                            Officer
                                       Tienan Neighborhood
                                       Committee
                                       Wangfu Town
                                       Songshan District
                                       Chifeng
                                       Inner Mongolia
                                       PRC

     Ma Wenxue (馬文學) . . . .      41   Room 2, 3rd Floor, Unit 3   August 2007       Executive Director and
                                       Building 3                                      Vice President, Head
                                       Honghuagou Gold Mine                            of the Ore Processing
                                       Gongjiao Alley                                  Department
                                       Qiaoxi Street Central
                                       Songshan District
                                       Chifeng
                                       Inner Mongolia
                                       PRC




                                                  – 182 –
         DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES


                                                                       Date of
                                                                     commencing
                                                                   employment with
Name                             Age      Residential address         our Group             Position
Cui Jie (崔杰) . . . . . . . . .   37    Room 1, 6th Floor, Unit 3   August 2007       Executive Director and
                                       Building 20                                     Chief Financial
                                       Songzhouyuan Area                               Officer
                                       Steel West Street
                                       Hongshan District
                                       Chifeng
                                       Inner Mongolia
                                       PRC

Lu Tianjun (陸田俊) . . . .         43    Room 352, Block 5           August 2007       Executive Director and
                                       Songshan Dangxiao Jia                           Vice President, Head
                                       Shu Building                                    of the Mining
                                       Hongshan District                               Department, and
                                       Chifeng                                         Production and
                                       Inner Mongolia                                  Environmental Safety
                                       PRC                                             Department

Mak Kin Kwong (麥建光)              47    M6, Floral Villas           September 2008    Independent non-
                                       18 Tso Wo Road                                  executive Director
                                       Sai Kung
                                       The New Territories
                                       Hong Kong

Zhao Enguang (趙恩光) . .           65    No. 17 Building             April 2008        Independent non-
                                       2–501 Room                                      executive Director
                                       Honglianzhongli
                                       Xuan Wu District
                                       Beijing
                                       PRC

Xiao Zuhe (肖祖核) . . . . .        42    Room 1404                   April 2008        Independent non-
                                       Block B                                         executive Director
                                       Kam Pong House
                                       Kam Tai Court
                                       Ma On Shan
                                       The New Territories
                                       Hong Kong

Li Qing (李慶) . . . . . . . .     39    No. 222                     August 2007       Deputy Head of the
                                       No. 3 Building                                  Production and
                                       Yizutuan                                        Environmental Safety
                                       Linhe Road                                      Department
                                       Songshan District
                                       Chifeng
                                       Inner Mongolia
                                       PRC




                                                 – 183 –
            DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES


                                                                      Date of
                                                                    commencing
                                                                  employment with
     Name                        Age      Residential address        our Group             Position
     Zhao Guoming (趙國銘) . .      43    No. 262                    August 2007       Deputy Head of the Ore
                                       Baofeng No. 4 Building                         Processing
                                       Sixi Street North                              Department
                                       Hongshan District
                                       Chifeng
                                       Inner Mongolia
                                       PRC

     Ma Xiwen (馬希文) . . . . .    67    Room 502, Unit 2           August 2007       Head of the Land
                                       No. 14 Building                                Exploration
                                       Dikanshiyuan Xiaoqu                            Department and Head
                                       Yingjin Road West                              of the Independent
                                       Songshan District                              Supervisory
                                       Chifeng                                        Committee
                                       Inner Mongolia
                                       PRC

     Yu Lulu (于璐璐) . . . . . .   30    Room 401, Unit 2           October 2005      Secretary to the Board
                                       No. 16 Building                                and Joint Company
                                       274 Ningxia Road                               Secretary
                                       Shinan District
                                       Qingdao
                                       Shandong Province
                                       PRC

     Lam Yuen Hung (林婉紅)         33    Flat F, 10/F               April 2008        Qualified Accountant
                                       Block 2, Greenview Court                       and Joint Company
                                       Tsuen Wan                                      Secretary
                                       The New Territories
                                       Hong Kong


AUTHORIZED REPRESENTATIVE

      Mr Xiao Zuhe and Ms Lam Yuen Hung have been appointed as the authorized representatives of
our Company under Rules 3.05 and 19.36(6) of the Listing Rules. The authorized representatives will
act as the principal communication channel with the Stock Exchange and will easily make themselves
available in Hong Kong whenever necessary to deal with inquiries from the Stock Exchange. When the
Stock Exchange contacts the authorized representatives, they will be able to contact all members of the
Board immediately, ensuring an effective communication channel with the Stock Exchange.

      In addition to appointing the authorized representatives, our Company has also retained the
services of a compliance advisor which, in addition to the authorized representatives of our Company,
will act as the principal channel of communication with the Stock Exchange from the date of listing
until the date on which our Company complies with Rule 13.46 of the Listing Rules in respect of its
financial results for the first full financial year following listing on the Stock Exchange.




                                                 – 184 –
             DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES


EXECUTIVE DIRECTORS

  Mr Wang Zhentian ( 王振田 ), Chairman and Executive Director

      Mr Wang, aged 44, joined us in August 2007. He graduated from the University of Inner Mongolia
(內蒙古大學) with a Bachelor’s degree in Economics and is qualified as an accountant. Between 1984
and 2000, Mr Wang held various positions in the local government of the Chifeng Municipality. In such
positions, he was mainly responsible for collecting and analyzing information for the government’s
policy making, monitoring the implementation of government policies, and conducting policy research.
Mr Wang began his career in mining in May 2000. Between May 2000 and June 2005, Mr Wang was
the deputy general manager of Chifeng Jinyuan Mining Development Co. Ltd. (赤峰金源礦業開發有限
責任公司) (an enterprise with geological exploration qualifications). During this period, he participated
in and completed various exploration projects in areas close to the Luotuochang Gold Mine, including
the acquisition or transfer of mining right projects of Chifeng Xilinguolemengshabu Large and Medium
Scale Lead Mine (赤峰錫林郭勒蒙沙布高中型鉛礦), Chifeng Xilinguoledaolundaba Large Scale Copper
Mine (赤峰錫林郭勒道倫達壩大型銅礦), Chifeng Aohan Banner Baoguotu Medium Scale Lead and
Zinc Mine (赤峰敖漢旗寶國吐中型鉛鋅礦) and the joint exploration of Chifeng Balinzuo Banner
Erdaoyingzi Molybdenum Mine (赤峰巴林左旗二道營子鉬礦), and was mainly responsible in each case
for exploration and mining rights, commercial negotiations and government liaison.

      Between December 2000 and June 2005, Mr Wang was also the general manager of Chifeng
Shuangyuan Mining Co., Ltd. (赤峰雙源礦業有限責任公司) (‘‘Chifeng Shuangyuan’’). He was fully
responsible for the overall management and operation of Chifeng Shuangyuan including geological
exploration, mining and processing, regulatory compliance, safety and environmental protection, product
sales and daily operation and management of Chifeng Shuangyuan. Chifeng Shuangyuan is a mining
enterprise engaged in the mining, processing and sale of gold. Mr. Wang’s significant contributions and
achievements, during his tenure at Chifeng Shuangyuan, included the reestablishment of its prospects
(through the discovery of additional ore reserves) through exploration, obtaining all the relevant
government permits and approvals, and the expansion of its production capacity. Prior to Mr Wang’s
appointment as general manager of Chifeng Shuangyuan in December 2000, the mine’s ore reserves had
been depleted to only 38,460 tonnes (containing less than 400 kg of gold); and the processing facility,
which had a production capacity of 100 tpd, was idle most of the time. Mr Wang, on being appointed as
general manager in December 2000, led a team of experts to carry out a thorough analysis in respect of
the existing mine and identified that the mine suffered from a shortage of resources. Mr Wang also
subsequently led a team of experts to analyze the geological conditions of the entire mining area. After
months of exploration, additional resources were discovered in a second mineralized vein below the
known mineralized vein. Such discovery led to the increase of Chifeng Shuangyuan’s ore reserves by
462,000 tonnes (containing 3,928 kg of recoverable metals) in 2001, and a further increase by 150,000
tonnes (containing 1,356 kg of recoverable metals) in 2002. After the discovery of the new reserves, Mr
Wang led the process to successfully convert Chifeng Shuangyuan’s exploration permit to a mining
permit and obtained all the relevant government permits and approvals for the mining of the newly
discovered reserve, and oversaw the design and construction of a new 200 tpd gold processing plant and
other infrastructure.

      Mr Wang also participated in the development of the Luotuochang Gold Mine which began in
November 2004 and was the deputy general manager of Luotuochang Mining between November 2004
and August 2007. Prior to the appointment of Mr Wang as deputy general manager, in the period
between 2001 and 2004, exploration activities at the Luotuochang Gold Mine were at a standstill due to
insufficient funds for exploration and a lack of knowledge of the mineralization conditions and patterns



                                                – 185 –
             DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES


of the area. Mr Wang was appointed as deputy general manager of Luotuochang Mining in November
2004 and was responsible for organizing exploration activities at the Luotuochang Gold Mine. During
the period from November 2004 to June 2005, Mr Wang led a team of experts to carry out a preliminary
analysis in respect of the geological conditions of the mining area. Based on the results of this
preliminary analysis, Mr Wang, together with the experts, concluded that the area had a very high
potential and should be further explored. Between July 2005 and August 2007, Mr Wang actively raised
funds for mine exploration at the Luotuochang Gold Mine and led a team of geological technicians to
carry out ground surface mapping and to extract samples for laboratory testing, which resulted in the
discovery and better understanding of various geological characteristics of the area, such as the number
of mineralized veins, the shape of the ore body and mineralization patterns etc. In order to ascertain
further the amount of ore reserves in the area, Mr Wang also organized for professional exploration
teams to carry out exploration which resulted in the successful identification of the No. I, II, III and IV
mineralized veins. The identification of these resources at the Luotuochang Gold Mine has laid the
foundation for the setting up and continual development of Chifeng Fuqiao. As at 30 November 2008,
the remaining gold reserves (proved and probable) and resources (measured and indicated) of the
Luotuochang Gold Mine amounted to approximately 910 koz and 1,035 koz, respectively, and the
estimated average gold grade of the reserves for the Luotuochang Gold Mine was 3.44 g/t.

     In view of Mr Wang’s extensive experience in mining enterprise management and his good
working relationship with the government, Mr Wang was appointed the chief executive officer of
Chifeng Fuqiao in August 2007. Since his appointment, Mr Wang has established a high-quality
management team, integrated and discovered abundant gold mineral resources, formulated the long-term
plan for mine development, and improved the management system of Chifeng Fuqiao. Mr Wang
currently serves as a director for each of Balinzuo Banner Xinyuan Mining Company Limited (巴林左旗
鑫源礦業有限公司) and Chifeng Zhongtai Mining Company Limited (赤峰中泰礦業有限公司). Mr
Wang has served as a Director since March 2008.
     Term of office              Positions                    Past Experience and Responsibilities
     1984–2000           Various positions,          Mr Wang was mainly responsible for collecting and
                           the local government       analyzing information for the government’s policy
                           of the Chifeng             making, monitoring the implementation of
                           Municipality               government policies, and conducting policy
                                                      research.

     May 2000–           Deputy general manager,     Mr Wang participated in and completed various
      June 2005            Chifeng Jinyuan            exploration projects in areas close to the
                           Mining Development         Luotuochang Gold Mine, including the
                           Co. Ltd.                   acquisition or transfer of mining right projects of
                                                      Chifeng Xilinguolemengshabu Large and Medium
                                                      Scale Lead Mine, Chifeng Xilinguoledaolundaba
                                                      Large Scale Copper Mine, Chifeng Aohan Banner
                                                      Baoguotu Medium Scale Lead and Zinc Mine and
                                                      the joint exploration of Chifeng Balinzuo Banner
                                                      Erdaoyingzi Molybdenum Mine, and was mainly
                                                      responsible in each case for exploration and
                                                      mining rights, commercial negotiations and
                                                      government liaison.




                                                  – 186 –
            DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES


     Term of office             Positions                  Past Experience and Responsibilities
     December 2000      General manager,           Mr Wang was fully responsible for the overall
       –June 2005         Chifeng Shuangyuan        management and operation of Chifeng
                                                    Shuangyuan including geological exploration,
                                                    mining and processing, regulatory compliance,
                                                    safety and environmental protection, product
                                                    sales and daily operation and management of
                                                    Chifeng Shuangyuan

     November 2004      Deputy general manager,    Mr Wang was responsible for organizing
      –August 2007        Luotuochang Mining        exploration activities at the Luotuochang Gold
                                                    Mine. During the period from November 2004 to
                                                    June 2005, he led a team of experts to carry out a
                                                    preliminary analysis in respect of the geological
                                                    conditions of the mining area. Between July 2005
                                                    and August 2007, he actively raised funds for
                                                    mine exploration at the Luotuochang Gold Mine
                                                    and led a team of geological technicians to carry
                                                    out ground surface mapping and to extract
                                                    samples for laboratory testing.

     August 2007        Chief Executive Officer,   Since his appointment, Mr Wang has established a
      –now                Chifeng Fuqiao             high-quality management team, integrated and
                                                     discovered abundant gold mineral resources,
                                                     formulated the long-term plan for mine
                                                     development, and improved the management
                                                     system of Chifeng Fuqiao

  Mr Qiu Haicheng (邱海成), Executive Director and Chief Executive Officer

      Mr Qiu, aged 39, joined us in August 2007. He graduated from Baotou Institute of Steel (包頭鋼
鐵學院) in 2000, majoring in mine engineering. Pursuant to the certificate issued by the Chifeng Jianan
Professional Technology Training Centre (赤峰建安職業技術培訓中心) on 12 September 2007, Mr Qiu
Haicheng is qualified as an engineer (工程師). Between September 1993 and November 2004, Mr Qiu
held various positions at the Chifeng Honghuagou mines (赤峰紅花溝金礦), one of the largest state-
owned gold mines in the PRC, including as mining technician, assistant mine engineer, mine engineer,
senior mine engineer and mine production and safety manager. During his employment with the Chifeng
Honghuagou mines (赤峰紅花溝金礦), Mr Qiu was responsible for the design of various pit
development systems, ventilation systems and mining projects, including the development design and
construction of the blind inclined shaft of the Longtoushan mining area (龍頭山礦區), the initial design
of No. 83 vein of the Longtoushan mining area (龍頭山礦區), the re-engineering of the waste disposal
shaft and ventilation system, the installation of vertical shaft hoister, the design of various mining
methods such as dry-filling method (幹式充填法) and cliff-cutting filling method (削壁充填法) and the
coordination of all relevant preparation, construction and production works of such mining area.
Between November 2004 and August 2007, Mr Qiu was employed by Luotuochang Mining (including
its predecessors) as its deputy manager. During the same period, Mr Qiu oversaw the successful
completion of shaft development at the Luotuochang Gold Mine providing access to the No. I and No. II
mineralized veins and assisted in the preparation for exploration of the Luotuochang Gold Mine. Mr Qiu



                                               – 187 –
            DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES


was the special assistant to Chifeng Fuqiao’s chief executive officer, Mr Wang Zhentian, from August
2007 to January 2009 and had successfully established a mining safety and environmental protection
system for each of our three Gold Mines. As a result of such mining safety and environmental protection
system, each of our three Gold Mines has obtained ISO 9001:2000 ‘‘Quality Management System
Certification’’.

      He has approximately 16 years of experience in exploration, mining, production, production safety
and mining management. In view of Mr Qiu’s extensive experience, he was appointed the Chief
Executive Officer of our Company in February 2009. Mr Qiu has served as a Director since February
2009.
     Term of office             Positions                     Past Experience and Responsibilities
     September 1993     Various positions             Mr Qiu was responsible for the design of various
       –November          (including mining            pit development systems, ventilation systems and
       2004               technician, assistant        mining projects, including the development
                          mine engineer, mine          design and construction of the blind inclined
                          engineer, senior mine        shaft of the Longtoushan mining area, the initial
                          engineer and mine            design of No. 83 vein of the Longtoushan mining
                          production and safety        area, the re-engineering of the waste disposal
                          manager), the Chifeng        shaft and ventilation system, the installation of
                          Honghuagou mines             vertical shaft hoister, the design of various
                                                       mining methods such as dry-filling method and
                                                       cliff-cutting filling method and the coordination
                                                       of all relevant preparation, construction and
                                                       production works of such mining area.

     November 2004      Deputy manager,               Mr Qiu oversaw the successful completion of shaft
      –August 2007        Luotuochang Mining           development at the Luotuochang Gold Mine
                          (including its               providing access to the No. I and No. II
                          predecessors)                mineralized veins and assisted in the preparation
                                                       for exploration of the Luotuochang Gold Mine.

     August 2007        Special Assistant to the      Mr Qiu successfully established a mining safety and
      –January            Chief Executive              environmental protection system for each of the
      2009                Officer of Chifeng           Nantaizi Gold Mine, the Shirengou Gold Mine
                          Fuqiao, Mr Wang              and the Luotuochang Gold Mine.
                          Zhentian
                                                      As a result of such mining safety and environmental
                                                        protection system, each of our three Gold Mines
                                                        has obtained ISO 9001:2000 ‘‘Quality
                                                        Management System Certification’’.




                                                   – 188 –
             DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES


  Mr Ma Wenxue ( 馬文學) Executive Director, Vice President, Head of the Ore Processing
  Department

       Mr Ma, aged 41, joined us in August 2007. He graduated from Shenyang Institute of Gold (瀋陽黃
金學院) in July 1988, majoring in ore processing engineering and the University of Liaoning (遼寧大學)
with a Bachelor’s degree in Economics Law in June 1999 and is qualified as a mine engineer at the
intermediate level. Between July 1988 and October 2004, Mr Ma held various positions at the Chifeng
Honghuagou mines (赤峰紅花溝金礦), one of the largest state-owned gold mines in the PRC, including
ore processing technician and production scheduling safety officer between July 1988 and July 1990,
mainly responsible for ore processing and production. Between July 1990 and August 1993, Mr Ma was
employed as a deputy production manager of Chifeng Honghuagou mines (赤峰紅花溝金礦), mainly
responsible for production technology and safety, and management of equipment. He was employed as
the processing manager of Chifeng Honghuagou mines (赤峰紅花溝金礦) between August 1993 and
October 2004, mainly responsible for overseeing all aspects of the operation of the ore processing
facility.

      Between November 2004 and July 2007, Mr Ma worked at Kalaqinqi Nantaizixiang Gold Mine (喀
喇沁旗南台子鄉金礦) as its chief engineer, mainly responsible for ore processing and management of
equipment, scientific planning for the Nantaizi Gold Mine as well as developing the mineral resources.
During the same period, Mr Ma also conducted numerous experiments and studies relating to ore
processing. Mr Ma was employed as Nantaizi Mining’s chief engineer until he was appointed a vice
president of Chifeng Fuqiao in August 2007 where he is mainly responsible for ore processing, electrical
and mechanical engineering, and quality control. After his appointment, Mr Ma participated in the
design of the infrastructure relating to the phase I expansion of the ore processing facilities at the
Nantaizi Gold Mine and the Luotuochang Gold Mine and also led a team of experts to design the
production workflow for these two ore processing facilities. The ore processing facility located at the
Nantaizi Gold Mine has commenced commercial production recently and has realized its installed
capacity since mid-June 2008. Mr Ma has served as a Director since March 2008.

      Mr Ma has received numerous awards for his achievement in technological advancement. For
instance, Mr Ma was awarded the Third Award in Scientific and Technological Advancement of
Metallurgical Industry Department (冶金工業部科學技術進步三等獎) in December 1996, the First
Award in Scientific and Technological Advancement of Chifeng City (赤峰市科學技術進步一等獎) and
the Third Award in Scientific and Technological Advancement of Chifeng City (赤峰市科學技術進步三
等獎) in February 1997 for his research and invention of an innovative gold recovery technique from
wasted coal (從炭漿廠廢炭中回收金的新工藝). In November 2001, he was awarded the Inner Mongolia
Autonomous Region Innovation and Achievement Award in Staff and Worker Economic Technology
Project Activity (內蒙古自治區職工經濟技術創新工程活動重大創新成果獎) for his research project
conducted in relation to the improvement of gold refining techniques.
     Term of office             Positions                   Past Experience and Responsibilities
     July 1988–         Ore processing              Mr Ma was mainly responsible for ore processing
       July 1990          technician and             and production.
                          production scheduling
                          safety officer, the
                          Chifeng Honghuagou
                          mines




                                                – 189 –
            DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES


     Term of office            Positions                   Past Experience and Responsibilities
     July 1990–        Deputy production           Mr Ma was mainly responsible for production
       August 1993       manager, the Chifeng       technology and safety, and management of
                         Honghuagou mines           equipment.

     August 1993–      Processing manager, the     Mr Ma was mainly responsible for overseeing all
      October 2004       Chifeng Honghuagou         aspects of the operation of the ore processing
                         mines                      facility.

     November 2004     Chief engineer,             Mr Ma was mainly responsible for ore processing
      –July 2007         Kalaqinqi                  and management of equipment, scientific
                         Nantaizixiang Gold         planning for the Nantaizi Gold Mine as well as
                         Mine                       developing the mineral resources.

     August 2007       Vice President, Head of     Mr Ma has been mainly responsible for ore
      –now               Ore Processing             processing, electrical and mechanical engineering,
                         Department,                and quality control.
                         Chifeng Fuqiao
                                                     After Mr Ma’s appointment as a vice president of
                                                     Chifeng Fuqiao, he participated in the design of
                                                     the infrastructure relating to the phase I
                                                     expansion of the ore processing facilities at the
                                                     Nantaizi Gold Mine and the Luotuochang Gold
                                                     Mine and also led a team of experts to design the
                                                     production workflow for these two ore processing
                                                     facilities.

  Mr Cui Jie (崔杰) Executive Director and Chief Financial Officer

      Mr Cui, aged 37, joined us in August 2007. He graduated from Inner Mongolia Finance College
(內蒙古財經學院) with a Bachelor’s degree in industrial accounting. Between July 1992 and September
1997, he held various financial management positions at Inner Mongolia Linxi Beer Factory (內蒙古林
西啤酒廠), mainly responsible for auditing. Between September 1997 and October 2004, Mr Cui held
various financial management positions in Finance Bureau of Linxi County (林西縣財務局) and certain
financial consultancy companies, mainly responsible for auditing, tax planning, corporate management
and providing training to more than a hundred of trainees who graduated from accounting and financial
institutions. Between October 2004 and July 2005, Mr Cui worked as the chief financial officer of
Beijing LongTech Huanyu Technology Co., Ltd (北京龍騰環宇科技發展有限公司). During this period,
Mr Cui improved the financial planning and internal control systems for Beijing LongTech Huanyu
Technology Co., Ltd. He also further enhanced the mechanisms and procedures for budget management,
financial accounting and auditing. Further, in light of the business development of Beijing LongTech
Huanyu Technology Co., Ltd, Mr Cui provided advice on the company’s financial management in
connection with its business of software development. He also worked as the general manager of the
Beijing branch of Beijing Shuang Bai Financial Accounting Society (雙百(北京)財務軟件開發有限公
司) from July 2005 to October 2006, mainly responsible for auditing, tax planning and trademark
registration.




                                                – 190 –
            DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES


      Mr Cui assisted Mr Wu in founding and establishing Chifeng Fuqiao, and he worked as Shirengou
Mining’s chief financial officer from December 2006 to August 2007, mainly responsible for accounting
management and tax planning. During this period, Mr Cui also provided financial advice on the future
development of Shirengou Mining. Mr Cui was appointed the chief financial officer of Chifeng Fuqiao
in August 2007, responsible for establishing our financial management policies and internal control
policies, improving the wages system in relation to our technical personnel, implementing the vertical
financial management model and providing training to staff of our Financial Department. He has also
established an incentive system for the staff of our Financial Department and introduced an electronic
accounting and auditing system to our Group. Mr Cui has served as a Director since March 2008.
     Term of office             Positions                     Past Experience and Responsibilities
     July 1992–         Various financial             Mr Cui was mainly responsible for auditing.
       September          management
       1997               positions, Inner
                          Mongolia Linxi Beer
                          Factory

     September 1997     Various financial             Mr Cui was mainly responsible for auditing, tax
       –October           management                   planning, corporate management and providing
       2004               positions, Finance           training to more than a hundred trainees who
                          Bureau of Linxi              graduated from accounting and financial
                          County and certain           institutions.
                          financial consultancy
                          companies

     October 2004–      Chief financial officer,      Mr Cui improved the systems of financial planning
       July 2005          Beijing LongTech             and internal control for Beijing LongTech
                          Huanyu Technology            Huanyu Technology Co., Ltd. He also further
                          Co., Ltd                     enhanced the mechanisms and procedures for
                                                       budget management, financial accounting and
                                                       auditing.

                                                      Further, in light of the business development of
                                                        Beijing LongTech Huanyu Technology Co., Ltd,
                                                        he provided advice on the company’s financial
                                                        management and flow in connection with its
                                                        business of software development.

     July 2005–         General manager, the          Mr Cui was mainly responsible for auditing, tax
       October 2006       Beijing branch of            planning and trademark registration.
                          Beijing Shuang Bai
                          Financial Accounting
                          Society




                                                   – 191 –
             DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES


     Term of office             Positions                     Past Experience and Responsibilities
     December 2006      Chief financial officer,      Mr Cui was mainly responsible for accounting
       –August 2007       Shirengou Mining             management and tax planning. He also provided
                                                       financial advice on the future development of
                                                       Shirengou Mining.

     August 2007        Chief Financial Officer,      Mr Cui has been responsible for establishing the
      –now                Chifeng Fuqiao               financial management policies and internal
                                                       control policies, improving the wages system in
                                                       relation to our technical personnel, implementing
                                                       the vertical financial management model and
                                                       providing training to staff of our Financial
                                                       Department.

                                                      He has also established an incentive system for the
                                                        staff of our Financial Department and introduced
                                                        an electronic accounting and auditing system to
                                                        our Group.

  Mr Lu Tianjun ( 陸田俊) Executive Director, Vice President, Head of the Mining Department, and
  Production and Environmental Safety Department

      Mr Lu, aged 43, joined us in August 2007. He graduated from Shenyang Gold Professional School
(瀋陽黃金專科學校) in geology and mineral exploration. Pursuant to the certificate issued by the
Leading Group for Professional Title Reform of the Inner Mongolia Autonomous Region (內蒙古自治區
職稱改革領導小組) in June 1994, Mr Lu is qualified as a project engineer (工程工程師). Between July
1986 and May 2001, he held various positions at the Chifeng Honghuagou mines (赤峰紅花溝金礦),
one of the largest state-owned gold mines in the PRC including as leader of technical team, deputy field
director (礦區副主任) and field director (礦區主任). During his employment with the Chifeng
Honghuagou mines (赤峰紅花溝金礦), Mr Lu conducted analysis on the mineralization patterns of the
No. 2 and No. 81 veins of the Chifeng Honghuagou mines (赤峰紅花溝金礦), the findings of which
eventually led to the successful and effective exploration of the mining areas. In 1991, Mr Lu published
an article entitled Discovery of Mineralization Pattern of No.81 Vein of the Chifeng Honghuagou Mines
and its Effects on Exploration (紅花溝金礦81號脈左型—側伏規律的發現及其找礦效果) in a national
periodical, and the article was subsequently awarded the Second Award for Outstanding Article in
respect of Natural Science in the Chifeng Municipality (赤峰市自然科學優秀論文二等獎). Also, Mr
Lu’s analysis on the mineralization patterns of the No. 3 and No. 15 veins of the Chifeng Honghuagou
mines (赤峰紅花溝金礦) and eventual discovery of additional resources at those two veins were
considered to be a major breakthrough. Mr Lu also held various positions at Shirengou Mining and its
predecessors between May 2001 and August 2007, including as technical consultant and engineer. In his
position as technical consultant, Mr Lu conducted and completed analysis on the mineralization pattern
of No. 1 vein of the Shirengou Gold Mine. In his position as engineer, Mr Lu, substantially reduced the
costs and shortened the period required for mine construction. His work on mining techniques also
helped the project pass the government’s check and obtain the relevant licenses. Since September 2007,
Mr Lu has been a vice president of Chifeng Fuqiao, responsible for production. Mr Lu participated in




                                                   – 192 –
            DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES


the design of the Nantaizi Gold Mine and Luotuochang Gold Mine as well as the renovation of the
Shirengou Gold Mine and formulation of production and construction plans. Mr Lu has served as a
Director since August 2008.

     Over the past two decades, he spent most of his time in the production, exploration safety and
management areas in the mining sector, which earned him a wealth of solid experience in the areas of
mining, exploration and safety.
     Term of office            Positions                    Past Experience and Responsibilities
     July 1986–        Various positions            Mr Lu conducted analysis on the mineralization
       May 2001          (including leader of        patterns of the No. 2 and No. 81 veins of the
                         technical team, deputy      Chifeng Honghuagou mines, the findings of
                         field director and field    which eventually led to the successful and
                         director), the Chifeng      effective exploration of the mining areas.
                         Honghuagou mines

     May 2001–         Various positions            Mr Lu conducted and completed analysis on the
      August 2007        (including technical        mineralization pattern of No. 1 vein of the
                         consultant and              Shirengou Gold Mine.
                         engineer), Shirengou
                         Mining and its             With his professional judgment, he substantially
                         predecessors                reduced the costs and shortened the period
                                                     required for mine construction. His work on
                                                     mining techniques also helped the project pass
                                                     the government’s check and obtain the relevant
                                                     licenses.

     September 2007    Vice President,              Mr Lu has been responsible for production.
       –now              Head of the Mining
                         Department, and            He participated in the design of the Nantaizi Gold
                         Production and               Mine and Luotuochang Gold Mine as well as the
                         Environmental                renovation of the Shirengou Gold Mine and
                         Safety Department,           formulation of production and construction plans.
                         Chifeng Fuqiao


INDEPENDENT NON-EXECUTIVE DIRECTORS

  Mr Mak Kin Kwong ( 麥建光 ) Independent non-executive Director

      Mr Mak, aged 47, joined us as a Director in September 2008. He graduated from the Hong Kong
Polytechnic University (formerly known as the Hong Kong Polytechnic) in 1985 and is a fellow member
of the Association of Chartered Certified Accountants in the United Kingdom and the Hong Kong
Institute of Certified Public Accountants, and a member of the Institute of Chartered Accountants in
England and Wales. Mr Mak is the founder and managing director of Venfund Investment Management
Ltd. in Shenzhen. Prior to that, Mr Mak was the managing partner of Arthur Andersen Southern China.
He serves as an independent director and audit committee chairman of Dragon Pharmaceutical Inc. (凱龍
藥業股份有限公司), Network CN Inc. (安博(美國)有限公司), Trina Solar Limited (天合光能有限公司),
China GreenTech Corp. Ltd. (國人通信股份有限公司) and China Security & Surveillance Technology,



                                                – 193 –
            DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES


Inc. (中國安防技術有限公司), all listed in the United States; and as an independent director of Gemdale
Industries Inc. (金地集團股份有限公司), which is listed in the PRC. Mr Mak also serves as an
independent non-executive director and audit committee chairman of Huabao International Holdings Ltd.
(華寶國際控股有限公司), China Dongxiang (Group) Co., Ltd. (中國動向(集團)有限公司) and Pou
Sheng International (Holdings) Limited (寶勝國際(控股)有限公司), all listed in Hong Kong. In addition,
Mr Mak is a non-executive director and audit committee member of Bright World Precision Machinery
Ltd. (沃得精機股份有限公司), a company listed in Singapore and Vinda International Holdings Ltd. (維
達國際控股有限公司), a company listed on the Main Board.

     Our Directors have evaluated Mr Mak’s education and qualification and are satisfied that he has
the necessary training and qualifications for the purpose of Rule 3.10(2) of the Listing Rules.

  Mr Zhao Enguang (趙恩光 ) Independent non-executive Director

       Mr Zhao, aged 65, joined us as a Director in April 2008. He graduated from Lanzhou University
(蘭州大學) with a Bachelor’s degree in Operational Research (數力系運籌專業) in 1966. Pursuant to a
letter issued by the Leading Group for Professional Title Reform of the Ministry of Metallurgy of the
PRC (中華人民共和國冶金工業部職稱改革工作領導小組) on 31 August 1994, Mr Zhao Enguang is a
professor grade engineer.

      Mr Zhao was an assistant to the chief executive and a vice project engineer of the Automation
Research and Development Institute of Metallurgical Industry (冶金自動化研究院). He was also a
director and the board secretary of Beijing Jinzitian Zhengzhihui Kongzhi Company Limited (北京金自
天正智慧控制股份有限公司) from December 1999 to January 2003.

   Mr Zhao has been a deputy secretary general of the Listed Companies Association of Beijing (北京
上市公司協會). He has also been a member of the Professional Technology Engineering Appraisal
Committee of the China Iron and Steel Association (中國鋼鐵工業協會工程技術專業職務評審委員會).

  Mr Xiao Zuhe ( 肖祖核) Independent non-executive Director

      Mr Xiao, aged 42, joined us as a Director in April 2008. He graduated from the Jiang Xi
University of Finance and Economics (江西財經大學) (formerly known as 江西財經學院) with a
Bachelor’s degree in Economics in 1988 and is qualified as an accountant in the PRC and in Hong
Kong. From 1989 to 2001, Mr Xiao has also undertaken the following postgraduate courses:
International Financial Management and Accounting with the Ministry of Finance of PRC (中華人民共
和國財政部) in 1989; Training Scheme of Accountants of PRC with the Hong Kong Society of
Accountants (香港會計師公會) in 1991; and the Postgraduate Certificate in Professional Accounting
with City University of Hong Kong (香港城市大學) in 2001. Mr Xiao is a member of Hong Kong
Institute of Certified Public Accountants.

      Mr Xiao was an auditor at Jiang Xi Certified Public Accountants (PRC) between 1988 and 1991.
In 1991, he worked for Ho and Ho & Company (a firm of accountants based in Hong Kong) as a trainee
auditor. In 1993, he returned to Jiang Xi Certified Public Accountants (PRC) as the audit department
manager. In 1995, Mr Xiao joined Shenzhen Fortune (Group) Ltd as assistant chief financial officer. In
1996, Mr Xiao returned to Ho and Ho & Company as a semi-senior audit clerk. In 1999, Mr Xiao joined
Qiao Xing Universal Telephone, Inc (僑興環球) in Hong Kong as the finance manager. Between 2001
and 2002, Mr Xiao served as the chief financial officer of Qiao Xing Universal Telephone, Inc (僑興環
球). Since 2005 to the present, Mr Xiao has been the chief executive officer of Benefit Capital Limited.
Incorporated in BVI in 2002, Benefit Capital Limited carries on an investment banking business and
provides professional consultancy services in areas such as new venture investment, private placement



                                               – 194 –
             DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES


financing, financial advice for listed companies and mergers and acquisitions. Utilizing Hong Kong’s
status as an international financial center, Benefit Capital Limited aims at serving the outstanding
corporations in the Greater China region, particularly those in the PRC.

OTHER SENIOR MANAGEMENT

  Mr Li Qing (李慶), Deputy Head of the Production and Environmental Safety Department

       Mr Li, aged 39, joined us in August 2007. He graduated from Shenyang Institute of Gold (瀋陽黃
金學院) in July 1991 majoring in geological surveying, and graduated from Changchun University of
Technology (長春工業大學) in September 2007 majoring in mining engineering. Pursuant to the
certificate issued by the Inner Mongolia Department of Personnel (內蒙古自治區人事廳) in August
1999, Mr Li Qing is qualified as a geodetic engineer (測繪工程工程師).

      Between July 1991 and June 1998, Mr Li held the position of surveyor with the Chifeng
Honghuagou mines (赤峰紅花溝金礦), one of the largest state-owned gold mines in the PRC. During his
employment with Chifeng Honghuagou mines, Mr Li was responsible for the ground surface control
surveying, topographic map surveying of the mining area and underground surveying of the whole
mining area. As part of these responsibilities, Mr Li led elevation marking of certain gold veins,
undertook the drum winder connection surveys and prepared underground surveying maps, surface
ground contrast maps and horizontal cross-section maps of the whole mining area. Mr Li also
participated in Chifeng Honghuagou mines’ annual mine planning preparation works.

      Between June 1998 and June 2004, Mr Li held the position of surveyor with Inner Mongolia Hong
Feng Industrial Co., Ltd. (內蒙宏峰實業股份有限公司) (formerly a listed company specializing in non-
ferrous metals and precious metals). Mr Li was mainly responsible for the surveying of five major gold
and lead mines, monitoring and inspecting data measurement, and surveying and map administration for
all the mines. In addition, Mr Li worked on the planning, statistics gathering and allocation of resources.
Further, he was responsible for the surveying and construction of the principal hauling shaft.

      Between June 2004 and August 2007, Mr Li held the position of technical mining director with
Shirengou Mining and was responsible for the production technology of the Shirengou Gold Mine.
During this period, Mr Li completed the design and construction of the pre-development phase of blind
shaft no. 1. Mr Li endorsed the adoption of adits for exploitation by Shirengou Mining which has
reduced Shirengou Mining’s mining costs significantly. Mr Li also designed the steel beams to replace
the generic timber used at the Shirengou Gold Mine for support which has resulted in increasing the
effective pit area available.




                                                 – 195 –
            DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES


     Since August 2007, Mr Li has held the position of Deputy Head of the Production and
Environmental Safety Department with Chifeng Fuqiao. During this period, Mr Li has been responsible
for our Group’s surveying and mapping works including the use of advanced surveying and mapping
equipment. Mr Li has undertaken various surveying and mapping works of our Gold Mines, including
examination of the drum winders at the Shirengou Gold Mine, ground surface control surveying,
underground surveying and topographic mapping of the mining area.
     Term of office            Positions                   Past Experience and Responsibilities
     July 1991–        Surveyor, the Chifeng       Mr Li was responsible for the ground surface
       June 1998         Honghuagou mines           control surveying, topographic map surveying of
                                                    the mining area and underground surveying of the
                                                    whole mining area.

                                                   As part of these responsibilities, he led elevation
                                                     marking of certain gold veins, undertook the
                                                     drum winder connection surveys and prepared
                                                     underground surveying maps, surface ground
                                                     contrast maps and horizontal cross-section maps
                                                     of the whole mining area.

                                                   He also participated in the Chifeng Honghuagou
                                                     mines’ annual mine planning preparation works.

     June 1998–        Surveyor, Inner             Mr Li was mainly responsible for the surveying of
       June 2004         Mongolia Hong Feng         five major gold and lead mines, monitoring and
                         Industrial Co., Ltd.       inspecting data measurement, and surveying and
                                                    map administration for all the mines.

                                                   In addition, he worked on the planning, statistics
                                                     gathering and allocation of resources.

                                                   Further, he was responsible for the surveying and
                                                     construction of the principal hauling shaft.

     June 2004–        Technical mining            Mr Li was responsible for the production
       August 2007       director, Shirengou        technology of the Shirengou Gold Mine.
                         Mining
                                                   During this period, he completed the design and
                                                    construction of the pre-development phase of
                                                    blind shaft no. 1.

                                                   He endorsed the adoption of adits for exploitation
                                                     by Shirengou Mining which has significantly
                                                     reduced the mining costs of Shirengou Mining.

                                                   He also designed the steel beams to replace the
                                                     generic timber used at the Shirengou Gold Mine
                                                     for support which has resulted in increasing the
                                                     effective pit area available.




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             DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES


     Term of office             Positions                   Past Experience and Responsibilities
     August 2007        Deputy Head of the          Mr Li has been responsible for our Group’s
      –now                Production and             surveying and mapping works including the use
                          Environmental Safety       of advanced surveying and mapping equipment.
                          Department, Chifeng
                          Fuqiao                    He has undertaken various surveying and mapping
                                                      works of the Nantaizi Gold Mine, the Shirengou
                                                      Gold Mine and the Luotuochang Gold Mine,
                                                      including examination of the drum winders at the
                                                      Shirengou Gold Mine, ground surface control
                                                      surveying, underground surveying and
                                                      topographic mapping of the mining area.

  Zhao Guoming (趙國銘), Deputy Head of the Ore Processing Department

      Mr Zhao, aged 43, joined us in August 2007. Mr Zhao graduated from Shanxi Mining Institute (山
西礦業學院) in July 1988 with a major in mining mechanical engineering. Pursuant to the certificate
issued by the Leading Group for Professional Title Reform of the Inner Mongolia Autonomous Region
(內蒙古自治區職稱改革領導小組) in November 1995, Mr Zhao Guoming is qualified as a project
engineer (工程工程師). Pursuant to the certificate issued by Inner Mongolia Department of Personnel
(內蒙古自治區人事廳) in July 2005, Mr. Zhao Guoming is qualified as a mechanical engineer (機械工
程師).

      Between July 1988 and October 1998, Mr Zhao held various positions with Inner Mongolia Jintao
Co., Ltd. (內蒙古金陶股份有限公司) (one of the largest gold mining companies in Inner Mongolia)
including technician, head of the mechanical and electrical department, and manager of machinery and
production. Mr Zhao’s duties included managing the mining of 500 tpd, re-engineering of the processing
capacity of 500 tonnes, and scientific and technological research projects. In respect of technical
expertise, Mr Zhao is familiar with the selection, maintenance and administration of mining and
processing equipment of gold mines. He is also experienced in system design, configuration and
management of upgrading, transportation, ventilation, drainage and air pressure of mines. He has been
involved in the design of drum winders upgrading system, transportation system, ventilation system,
drainage system and air pressure system. Mr Zhao is experienced in the installation, tuning and testing
of automation control systems and is skilled in handling technical problems of mechanical and electrical
integration. In respect of management, Mr Zhao is conversant with the management of modern metallic
mines and has strong experience in on-site management and with high management standard.

      Between November 1998 and March 2003, Mr Zhao held the position of production manager of
Changchun Gold Design Institute (長春黃金設計院) and was responsible for its sub-contracting projects.
In this role, Mr Zhao was responsible for the construction and installation, testing and tuning and
production operation of Hainan Baolun Ore Processing Plant (海南抱倫選礦廠); the construction and
installation, testing and tuning of Gansu Maqu Ore Processing Plant (甘肅瑪曲選礦廠); and the
construction, installation, tuning and testing of Shanxi Datong Jinyin Ore Processing Plant (山西大同晋
銀礦業選礦廠).

     Between January 2004 and September 2007, Mr Zhao held the position of Deputy Head of the ore
processing department of Shirengou Mining and was responsible for system design, configuration and
management in mine upgrading, transportation, ventilation, drainage and air pressure.



                                                – 197 –
            DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES


     Since October 2007, Mr Zhao has held the position of Deputy Head of the ore processing
department of Chifeng Fuqiao and has been responsible for the overall management of the mechanical
and electrical equipment of the mines of our Group. Since working in this position, Mr Zhao has further
improved the management of our Group’s mechanical and electrical equipment, and has streamlined the
operations of the Ore Processing Department, clarified its standards and improved its work efficiency.

     Mr Zhao has been awarded numerous technical achievement awards, including Third Prize in
National Gold System Equipment Management Knowledge Contest (全國黃金系統設備管理知識競賽三
等獎) in 1990.
     Term of office             Positions                   Past Experience and Responsibilities
     July 1988–         Various positions          Mr Zhao’s duties included managing the mining of
       October 1998       (including technician,    500 tpd, re-engineering of the processing capacity
                          head of the               of 500 tonnes, and scientific and technological
                          mechanical and            research projects.
                          electrical department,
                          and manager of           In respect of technical expertise, he is familiar with
                          machinery and              the selection, maintenance and administration of
                          production), Inner         mining and processing equipment of gold mines.
                          Mongolia Jintao Co.,
                          Ltd.                     He is also experienced in system design,
                                                     configuration and management of upgrading,
                                                     transportation, ventilation, drainage and air
                                                     pressure of mines.

                                                   He has been involved in the design of drum winders
                                                     upgrading system, transportation system,
                                                     ventilation system, drainage system and air
                                                     pressure system.

                                                   He is experienced in the installation, tuning and
                                                     testing of automation control systems and is
                                                     skilled in handling technical problems of
                                                     mechanical and electrical integration.

                                                   In respect of management, he is conversant with the
                                                     management of modern metallic mines and has
                                                     strong experience in on-site management and
                                                     with high management standard.




                                               – 198 –
             DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES


     Term of office             Positions                   Past Experience and Responsibilities

     November 1998      Production manager,         Mr Zhao was responsible for the sub-contracting
      –March 2003         Changchun Gold             projects of Changchun Gold Design Institute.
                          Design Institute
                                                    In this role, he was also responsible for the
                                                      construction and installation, testing and tuning
                                                      and production operation of Hainan Baolun Ore
                                                      Processing Plant; the construction and
                                                      installation, testing and tuning of Gansu Maqu
                                                      Ore Processing Plant; and the construction,
                                                      installation, tuning and testing of Shanxi Datong
                                                      Jinyin Ore Processing Plant.

     January 2004–      Deputy Head of the Ore      Mr Zhao was responsible for system design,
       September          Processing                 configuration and management in mine
       2007               Department,                upgrading, transportation, ventilation, drainage
                          Shirengou Mining           and air pressure.

     October 2007       Deputy Head of the Ore      Mr Zhao has been responsible for the overall
       –now               Processing                 management of the mechanical and electrical
                          Department, Chifeng        equipment of the mines of our Group.
                          Fuqiao
                                                    Since working in this position, he has further
                                                      improved the management of our Group’s
                                                      mechanical and electrical equipment, and has
                                                      streamlined the operations of the Ore Processing
                                                      Department, clarified its standards and improved
                                                      its work efficiency.

  Ma Xiwen (馬希文), Head of the Land Exploration Department and Head of the Independent
  Supervisory Committee

      Mr Ma, aged 67, joined our Group in August 2007. Mr Ma graduated from the China University of
Geosciences (中國地質大學) (formerly known as Beijing Geological Institute (北京地質學院)) in July
1968 as a geological engineer with a major in mineral resources and geology. Pursuant to the certificate
issued by the Ministry of Geology and Mineral Resources of the PRC (中華人民共和國地質礦產部) in
May 1991, Mr Ma Xiwen is qualified as a senior geological engineer (礦產地質高級工程師). Mr Ma
has been engaged in geological field work for more than 30 years and is very experienced in geological
survey and mining exploration.

      Between July 1968 and December 2004, Mr Ma held various positions with No. 10 Institute of
Chifeng Geological Exploration (赤峰地勘十院) and was responsible for redeployment and exploration
for the region. Mr Ma’s various positions have included technical supervisor, outdoor operation team
supervisor, land exploration team supervisor, sub-group technician and chief editor. Mr Ma was the
technical head-in-charge of the State’s 1:50000 regional survey project and was responsible for the
preparation of the 1:50000 regional survey report. Between June 1971 and September 1972, he
participated in the 1:20 regional research works of K-51-1 amplitude and L-51-XXXI amplitude.



                                                – 199 –
             DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES


Between July 1976 and September 1980, Mr Ma participated in the 1:5 regional surveys of
Huanggangliang District (黃崗梁地區) and prepared respective sections of the report and maps for that
project. Mr Ma was awarded the Technology Third Class Award of Inner Mongolia (內蒙古科技三等獎)
for this work. Between October 1980 and April 1983, Mr Ma worked at the Geological Department (地
質科) and was responsible for the interpretation work of aerial and satellite photographs.

      Between May 1983 and July 1987, Mr Ma participated in the 1:50000 regional surveying project
of Wulanba District (烏蘭壩地區) and was the sub-group technician. As part of this work, Mr Ma
discovered a large metallic zone in the Wulanba area, a tin deposit in Aonadaba and a lead-zinc
polymetallic deposit in Haobugao. Between August 1987 and April 1988, Mr Ma was responsible for the
quality inspection work of Geological Department (地質科). Between May 1988 and May 1991, he
participated in the 1:50000 regional surveying and mapping of Baiyinnuoer District (白音諾爾地區).
Between June 1991 and April 1992, he participated in preparing maps of the Sino-Mongolia border
region. Between April 1992 and December 1995, Mr Ma was responsible for quality control and
between January 1996 and December 2004, Mr Ma was the chief editor of mineral exploration reports
and the respective map preparation at No. 10 Institute of Chifeng Geological Exploration (赤峰地勘十
院).

      Between December 2004 and September 2007, Mr Ma held the position of geological engineer of
Nantaizi Mining and was responsible for the design and organization of the 1:5000 geographical
plotting of Nantaizi mining area, ground surface trough exploration, ground surface drilling exploration
and pit exploration.

     Between September 2007 and December 2008, Mr Ma held the position of chief engineer of Land
Exploration Department of Chifeng Fuqiao and has been responsible for geological exploration of the
Nantaizi Gold Mine and Shirengou Gold Mine.

     In January 2009, Mr Ma was appointed the head of the Land Exploration Department of Chifeng
Fuqiao and is responsible for the overall management of our exploration projects.

     Term of office             Positions                 Past Experience and Responsibilities
     July 1968–         Various positions           Mr Ma was responsible for redeployment and
       December           (including technical       exploration for the region.
       2004               supervisor, outdoor
                          operation team            Between June 1971 and September 1972, he
                          supervisor, land            participated in the 1:20 regional research works
                          exploration team            of K-51-1 amplitude and L-51-XXXI amplitude.
                          supervisor, sub-group
                          technician, chief         Between July 1976 and September 1980, he
                          editor), No. 10             participated in the 1:5 regional surveys of
                          Institute of Chifeng        Huanggangliang District and prepared respective
                          Geological                  sections of the report and maps for that project.
                          Exploration
                                                    Between October 1980 and April 1983, he worked
                                                      at the Geological Department and was responsible
                                                      for the interpretation work of aerial and satellite
                                                      photographs.




                                                – 200 –
       DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES


Term of office          Positions                   Past Experience and Responsibilities
                                             Between May 1983 and July 1987, he participated
                                               in the 1:50000 regional surveying project of
                                               Wulanba District and was the sub-group
                                               technician. As part of this work, Mr Ma
                                               discovered a large metallic zone in the Wulanba
                                               area, a tin deposit in Aonadaba and a lead-zinc
                                               polymetallic deposit in Haobugao.

                                             Between August 1987 and April 1988, he was
                                               responsible for the quality inspection work of
                                               Geological Department.



                                             Between May 1988 and May 1991, he participated
                                               in the 1:50000 regional surveying and mapping
                                               of Baiyinnuoer District.

                                             Between June 1991 and April 1992, he participated
                                               in preparing maps of the Sino-Mongolia border
                                               region.

                                             Between April 1992 and December 1995, he was
                                               responsible for quality control.

                                             Between January 1996 and December 2004, he was
                                               the chief editor of mineral exploration reports and
                                               the respective map preparation at No. 10 Institute
                                               of Chifeng Geological Exploration.

December 2004    Geological engineer,        Mr Ma was responsible for the design and
  –September       Nantaizi Mining            organization of the 1:5000 geographical plotting
  2007                                        of Nantaizi mining area, ground surface trough
                                              exploration, ground surface drilling exploration
                                              and pit exploration.

September 2007   Chief Engineer of Land      Mr Ma was responsible for geological exploration
  –December        Exploration                of the Nantaizi Gold Mine and the Shirengou
  2008             Department, Chifeng        Gold Mine.
                   Fuqiao

January 2009     Head of Land                Mr Ma is responsible for the overall management of
  –now             Exploration                our exploration projects.
                   Department,
                   Chifeng Fuqiao




                                          – 201 –
            DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES


      Ms Yu Lulu (于璐璐) is the secretary to the Board and our joint company secretary, responsible
for establishing business development strategies together with our Directors and other senior
management, liaising with potential investors of our Group and participating in major and strategic
decision-making processes. She now works for our Company on a full-time basis.

      Ms Yu, aged 30, joined us in October 2005. She assisted Mr Wu in founding and establishing
Chifeng Fuqiao. Ms Yu received a Master of Science degree in Investment Analysis from the University
of Stirling, Scotland on 27 January 2006. She also graduated from the Qing Dao University in the PRC
and the University of Massey, New Zealand with a Bachelor of Arts and a Graduate Diploma in July
2001 and November 2003, respectively.

      From November 2005 to August 2006, Ms Yu was the managing director of the investment
department of Qiao Xing Group Limited, a company controlled by Mr Wu. From September 2006 to
March 2007, she was the board secretary to Qiao Xing Mobile Communications Co., Ltd., a company
listed on the New York Stock Exchange, and she was the coordinator of the initial public offering
process for that company. Since April 2007 and until our listing on the Stock Exchange, she has also
been a personal assistant to Mr Wu in Qiao Xing Group Limited.

      Ms Lam Yuen Hung (林婉紅) is our qualified accountant and joint company secretary. She works
for our Company on a full-time basis.

     Ms Lam, aged 33, joined us in April 2008. She graduated from the Hong Kong University of
Science and Technology with a Bachelor degree in Business Administration in Accounting. She is an
Associate Member of Hong Kong Institute of Certified Public Accountants and a Fellow Member of the
Association of Chartered Certified Accountants. Ms Lam has over 8 years of experience in auditing and
accounting. Prior to joining our Company, she was a manager at an international accounting firm.

SECRETARY TO THE BOARD AND JOINT COMPANY SECRETARY

     Ms Yu Lulu (于璐璐) is the secretary to the Board and our joint company secretary. She works for
our Company on a full-time basis. Her biographical details are set out under the paragraph headed
‘‘Other senior management’’ above.

QUALIFIED ACCOUNTANT AND JOINT COMPANY SECRETARY

     Ms Lam Yuen Hung (林婉紅) is our qualified accountant and joint company secretary. She works
for our Company on a full-time basis. Her biographical details are set out under the paragraph headed
‘‘Other senior management’’ above.

WAIVERS FROM THE STOCK EXCHANGE

  Waiver from Rule 8.12 of the Listing Rules

     We have applied to the Stock Exchange for, and the Stock Exchange has agreed to grant, a waiver
under Rule 8.12 in relation to the requirement of management presence in Hong Kong. For details of the
waiver, please see the section headed ‘‘Waivers From Strict Compliance With The Listing Rules and the
Companies Ordinance — Waiver From Rule 8.12 of The Listing Rules’’ in this prospectus.




                                               – 202 –
            DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES


  Waiver from Rule 8.17 of the Listing Rules

      We have applied to the Stock Exchange for, and    the Stock Exchange has agreed to grant, a waiver
under Rule 8.17 in relation to the requirement on the   qualifications of company secretary in respect of
Ms Yu Lulu. For details of the waiver, please see the   section headed ‘‘Waivers From Strict Compliance
With The Listing Rules and the Companies Ordinance      — Waiver From Rule 8.17 of The Listing Rules’’
in this prospectus.

COMPLIANCE ADVISOR

      Our Company has appointed Taifook Capital Limited as our compliance advisor pursuant to Rule
3A.19 of the Listing Rules to provide advisory services to our Company pursuant to the requirements
thereunder. Taifook Capital Limited will, inter alia, provide advice to our Company with due care and
skill on a timely basis when consulted by our Company in the following circumstances:

     .    before the publication by our Company of any regulatory announcement (whether required by
          the Listing Rules or requested by the Stock Exchange or otherwise), circular or financial
          report;

     .    where a transaction, which might be a notifiable or connected transaction under Chapters 14
          or 14A of the Listing Rules, is contemplated by our Company including share issues and
          share repurchases;

     .    where our Company proposes to use the proceeds of the Global Offering in a manner
          different from that detailed in this prospectus or where the business activities, developments
          or results of our Company deviate from any forecast, estimate, or other information in this
          prospectus;

     .    where the Stock Exchange makes an inquiry of our Company under Rule 13.10 of the Listing
          Rules;

     .    if required by the Stock Exchange, deal with the Stock Exchange in respect of any or all
          matters listed in the foregoing paragraph above;

     .    in relation to an application by our Company for a waiver from any of the requirements in
          Chapter 14A of the Listing Rules, advise our Company on its obligations and in particular
          the requirement to appoint an independent financial advisor; and

     .    assess the understanding of all new appointees to the Board regarding the nature of their
          responsibilities and fiduciary duties as a director of a listed issuer, and, to the extent the
          compliance advisor forms an opinion that the new appointees’ understanding is inadequate,
          discuss the inadequacies with the Board and make recommendations to the Board regarding
          appropriate remedial steps such as training.

       The term of the appointment will commence on the Listing Date and end on the date on which our
Company complies with Rule 13.46 of the Listing Rules in respect of its financial results for the first
full financial year commencing after the Listing Date and such appointment may be subject to extension
by mutual agreement.




                                               – 203 –
             DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES


BOARD PRACTICES

      In the absence of extraordinary events, it is the practice of the Board to meet at least 4 times a
year. At such meeting, the Directors conduct, among other things, an operational review of our business.

BOARD COMMITTEES

  Audit and Risk Management Committee

      The Board has established an Audit and Risk Management Committee, which operates under a
charter approved by the Board. It is the Board’s responsibility to ensure that an effective internal control
framework exists within the entity. This includes internal controls to deal with both the effectiveness
and efficiency of significant business processes, the safeguarding of assets, the maintenance of proper
accounting records, and the reliability of financial information as well as non-financial considerations
such as the benchmarking of operational key performance indicators. The Board has delegated the
responsibility for the initial establishment and the maintenance of a framework of internal controls and
ethical standards for our management to the Audit and Risk Management Committee.

      Our Audit and Risk Management Committee currently comprises three independent non-executive
Directors, namely Mr Mak Kin Kwong, Mr Xiao Zuhe and Mr Zhao Enguang. Mr Mak Kin Kwong is
the chairman of our Audit and Risk Management Committee.

  Nomination and Remuneration Committee

     Our Nomination and Remuneration Committee of the Board is responsible for determining and
reviewing compensation arrangements for our Directors, the chief executive officer and the senior
management and for making recommendations to the Board regarding candidates to fill vacancies on the
Board. Our Nomination and Remuneration Committee assesses the appropriateness of the nature and
amount of emoluments of such officers on a periodic basis by reference to relevant employment market
conditions with the overall objective of ensuring maximum shareholder benefit from the retention of a
high quality board and executive team.

      To assist in achieving these objectives, our Nomination and Remuneration Committee considers
the nature and amount of executive Directors’ and senior executives’ emoluments to our Company’s
financial and operational performance. All senior executives have the opportunity to qualify for
participation in the Share Option Scheme, which currently provides incentives where specified criteria
are met. Details of the principal terms of our Share Option Scheme are summarized in the subsection
headed ‘‘Statutory and General Information — Share Option Scheme’’ set out in Appendix VII to this
prospectus.

    Our Nomination and Remuneration Committee currently comprises one executive Director, namely,
Mr Wang Zhentian, and two independent non-executive Directors, namely, Mr Xiao Zuhe and Mr Zhao
Enguang. Mr Xiao Zuhe is the chairman of our Nomination and Remuneration Committee.

DIRECTORS’ REMUNERATION

      Our Company was incorporated on 13 March 2008. Prior to that, our operations were conducted by
Lita. The compensation information set out below for our Directors and other employees, insofar as it
relates to periods prior to our incorporation, is stated at historical amounts as if our current structure had
been in existence throughout the relevant periods.




                                                  – 204 –
                   DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES


      Our Directors receive remuneration in the form of fees, salaries, allowances and other benefits-in-
kind, including our contribution to the pension plan on their behalf.

     The aggregate remuneration paid to our Directors for each of the two years ended 31 December
2006 and 31 December 2007 and the ten months ended 31 October 2007 and 31 October 2008 was
approximately RMB10,000 and RMB106,000, RMB84,000 and RMB240,000, respectively.

     The following table provides details of the various components of total remuneration paid to our
Directors:
                                                                                                                Ten months ended
                                                   Year ended 31 December                                          31 October
                                           2005                 2006                 2007                     2007                    2008
                                                                                  RMB’000s
Base Fees . . . . . . . . . . . . .                 —                    —                        —                    —                      —
Other compensation . . . . . .                      —                     8                       90                   70                    205
Allowances and benefits-in-
  kind . . . . . . . . . . . . . . .                —                    —                        —                    —                      —
Performance-related bonuses
Retirement benefits . . . . . .                     —                      2                      16                   14                     35
Employee share option
  benefits. . . . . . . . . . . . .                 —                    —                        —                    —                      —
Pension scheme
  contributions . . . . . . . . .                   —                    —                        —                    —                      —
                                                    —                   10                    106                      84                    240

      The aggregate amount of remuneration paid by our Company to the five highest paid individuals
for the two years ended 31 December 2006 and 31 December 2007 and for the ten months ended 31
October 2007 and 31 October 2008 was approximately RMB21,000 and RMB152,000, RMB122,000 and
RMB639,000, respectively.

      The following table provides details of the various components of total remuneration paid to the
five highest paid individuals:
Year ended         Base       Other      Allowances and     Performance-       Retirement         Employee share     Pension scheme
31 December        Fees   Compensation   benefits-in-kind   related bonuses       benefits         option benefits    contributions     Total

                                                                       RMB’000s
2005 . . . . .       —              —                 —                  —                   —                 —                 —            —
2006 . . . . .       —              17                —                  —                    4                —                 —            21
2007 . . . . .       —             131                —                  —                   21                —                 —           152

Ten months         Base       Other      Allowances and     Performance-       Retirement         Employee share     Pension scheme
ended 31 October   Fees   Compensation   benefits-in-kind   related bonuses       benefits         option benefits    contributions     Total

                                                                       RMB’000s

2007 . . . . .       —             105                —                  —                   17                —                 —           122
2008 . . . . .       —             611                —                  —                   28                —                 —           639

      Save as otherwise disclosed in this prospectus, none of the executive Directors in office during the
past three financial years received any salaries, housing allowances, pension scheme contributions, other
allowances and benefits in kind from our Company.




                                                             – 205 –
             DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES


     The annual Directors’ fee and other emoluments paid by our Group for the year ended 31
December 2008 were approximately RMB0.3 million. The expected annual Directors’ fee and other
emoluments to be paid by our Group for the year ending 31 December 2009 will be approximately
RMB0.9 million.

     None of our controlling shareholders, Directors and their respective associates are interested in any
business which competes or is likely to compete with that of ours.




                                                 – 206 –
                                          SUBSTANTIAL SHAREHOLDERS


     So far as we are aware, immediately following completion of the Global Offering and
Capitalization Issue (assuming the Over-allotment Option is not exercised and without taking into
account any Shares to be allotted and issued upon the exercise of any options which may be granted
under the Share Option Scheme), the following persons will have an interest or short position in our
Shares or underlying shares of our Company which would fall to be disclosed to us pursuant to the
provisions of Divisions 2 and 3 of Part XV of SFO, or, who is, directly or indirectly, interested in 10%
or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at
general meetings of any other member of our Company:
                                                                Number of                                  Percentage of
                                                             Shares held after                              shareholding
                                                                the Global                                after the Global
                                                             Offering/Amount                                  Offering/
                                                               of registered                               Percentage of
Name                                                           capital held         Nature of interest     equity holding
Lead Honest (Note) . . . . . . . . . . . . . . . . . .            495,000,000    Registered owner                     75%
Tercel Holdings Limited (Note) . . . . . . . . . .                495,000,000    Interest of controlled               75%
                                                                                    corporation
Wu Family Trust (Note) . . . . . . . . . . . . . . .              495,000,000    Interest of controlled               75%
                                                                                    corporation
Trustee (Note) . . . . . . . . . . . . . . . . . . . . . .        495,000,000    Trustee                              75%
Mr Wu (Note) . . . . . . . . . . . . . . . . . . . . . .          495,000,000    Founder of a                         75%
                                                                                    discretionary trust



Note: The entire issued share capital of Lead Honest is held by a company in Bahamas, Tercel Holdings Limited,
      which is in turn, held by the Trustee as the trustee of the Wu Family Trust. The Wu Family Trust is a
      discretionary trust established by Mr Wu as settlor and the Trustee as trustee on 22 May 2008. The
      beneficiaries of the Wu Family Trust include family members of Mr Wu. Mr Wu is deemed to be interested
      in the 495,000,000 Shares held by Lead Honest immediately upon completion of the Global Offering and
      Capitalization Issue pursuant to Part XV of the SFO.

      Except as disclosed in this prospectus, we are not aware of any other person who will, immediately
following completion of the Global Offering and Capitalization Issue (assuming the Over-allotment
Option is not exercised and without taking into account any Shares to be allotted and issued upon the
exercise of any options which may be granted under the Share Option Scheme), have an interest or short
position in our Shares or underlying shares of our Company which would fall to be disclosed to us
pursuant to the provisions of Divisions 2 and 3 of Part XV of the SFO, or, who is, directly or indirectly,
interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all
circumstances at general meetings of any other member of our Company. We are not aware of any
arrangement which may at a subsequent date result in a change of control of our Company.




                                                                 – 207 –
                                            SHARE CAPITAL


    The authorized share capital of our Company immediately before the Global Offering is
HK$1,000,000,000, divided into 1,000,000,000 Shares with a nominal value of HK$1.00 per Share.

    Assuming the Over-allotment Option is not exercised, the share capital of our Company
immediately after the Global Offering will be as follows:
                                                                                                    Approximate
                                                                                Aggregate            percentage
                                                                              nominal value           of issued
     Number of Shares                   Description of Shares                   of Shares           share capital
                                                                                  (HK$)
             441,943,715  Shares in issue at the date of this                    441,943,715                 67.0%
                            prospectus
             113,856,285* Shares to be issued pursuant to the                    113,856,285                 17.3%
                            Capitalization Issue
              87,700,000 Shares to be issued under the                            87,700,000                 13.2%
                            International Offering
              16,500,000 Shares to be issued under the Hong                       16,500,000                   2.5%
                            Kong Public Offering
             660,000,000     Total                                               660,000,000                  100%



     * 60,800,000 Shares of which will be the Sale Shares to be issued to the Selling Shareholder pursuant to the
       Capitalization Issue, all of which will be offered for sale by the Selling Shareholder under the International
       Offering.

      According to Rule 8.08 of the Listing Rules, at the time of the listing and at all times thereafter,
our Company must maintain the ‘‘minimum prescribed percentage’’ of 25% of our Company’s issued
share capital in the hands of the public.

ASSUMPTIONS

      The above tables assume that the Global Offering and the Capitalization Issue becomes
unconditional and will be completed in accordance with the relevant terms and conditions. It, however,
takes no account of any Shares which may be issued upon the exercise of the Over-allotment Option and
any options which may be granted under the Share Option Scheme, and any Shares which may be
allotted and issued, or repurchased by our Company pursuant to the general mandate to issue new
Shares and general mandate to repurchase Shares as described below.

RANKING

      The Offer Shares will rank pari passu in all respects with all Shares now in issue or to be issued
as mentioned herein, and will rank in full for all dividends or other distributions declared, made or paid
on the Shares after the date of this prospectus save with respect to entitlement to the Capitalization
Issue.

     Save as disclosed in this prospectus, no share or loan capital of our Company or any of our
subsidiaries is under any option or is agreed conditionally or unconditionally to be put under any option.




                                                     – 208 –
                                        SHARE CAPITAL


GENERAL MANDATE TO ISSUE NEW SHARES

     A general unconditional mandate has been granted to our Directors authorizing them to exercise
our powers to allot, issue and deal with Shares or securities convertible into Shares and to make an offer
or agreement or grant an option which would or might require such Shares to be allotted and issued,
provided that the aggregate nominal value of the Shares allotted or agreed conditionally or
unconditionally to be allotted shall not exceed 20% of the aggregate nominal value of the share capital
of our Company in issue immediately following completion of the Global Offering and the
Capitalization Issue (but excluding any Shares which may be allotted and issued pursuant to the
exercise of the Over-allotment Option and under the Share Option Scheme).

      This mandate does not apply to situations where our Directors allot, issue or deal with the Shares
under any rights issue, scrip dividend scheme or similar arrangements providing for the allotment and
issue of Shares in lieu of whole or part of a dividend on Shares in accordance with the Articles of
Association or pursuant to the exercise of any subscription or conversion rights attaching to any
warrants or any securities which are convertible into Shares or in issue prior to the date the mandate was
granted, or pursuant to the exercise of any options to be granted under the Share Option Scheme or
pursuant to the Global Offering or the Capitalization Issue or pursuant to a specific authority granted by
our shareholders in general meeting, on behalf of our Company.

     This mandate will expire:

     .     at the conclusion of our next annual general meeting; or

     .     at the expiration of the period within which our next annual general meeting is required by
           any applicable law or the Articles of Association to be held; or

     .     the passing of an ordinary resolution by our shareholders in a general meeting revoking,
           varying or renewing such mandate,

whichever is the earliest.

     Particulars of this general mandate are set forth under ‘‘Written resolutions of our sole shareholder
passed on 30 January 2009’’ in Appendix VII to this prospectus.

GENERAL MANDATE TO REPURCHASE SHARES

      A general unconditional mandate has been granted to our Directors authorizing them to exercise all
the powers for and on behalf of our Company to repurchase Shares with an aggregate nominal value not
exceeding 10% of the aggregate nominal value of the share capital of our Company in issue immediately
following completion of the Global Offering and the Capitalization Issue (but excluding any Shares
which may be allotted and issued pursuant to the exercise of the Over-allotment Option and under the
Share Option Scheme).

     This mandate only relates to repurchases made on the Stock Exchange, or on any other approved
stock exchange(s) on which the securities of our Company may be listed and which is recognized by the
SFC and the Stock Exchange for this purpose, and which are made in accordance with the Listing Rules.
A summary of the relevant Listing Rules is set forth under ‘‘Repurchase by our Company of our Shares’’
in Appendix VII to this prospectus.

     This mandate will expire:

     .     at the conclusion of our next annual general meeting; or



                                                 – 209 –
                                        SHARE CAPITAL


     .     at the expiration of the period within which our next annual general meeting is required by
           any applicable law or the Articles of Association to be held; or

     .     the passing of an ordinary resolution by our shareholders in a general meeting revoking,
           varying or renewing such mandate,

whichever is the earliest.

     Particulars of this general mandate are set forth under ‘‘Written resolutions of our sole shareholder
passed on 30 January 2009’’ in Appendix VII to this prospectus.




                                                 – 210 –
                                FINANCIAL INFORMATION


       You should read this section in conjunction with our audited consolidated financial statements,
 including the notes thereto, as set out in the Accountants’ Report included in ‘‘Appendix I —
 Accountants’ Report’’ to this prospectus. Our financial statements have been prepared in accordance
 with IFRS. Information included in this section that has not been extracted or derived from the
 Accountants’ Report has been extracted or derived from unaudited management accounts or other
 records. You should read the entire Accountants’ Report and not merely rely on the information
 contained in this section.

       The following discussion and analysis contains certain forward-looking statements that reflect
 our current views with respect to future events and financial performance. These statements are
 based on assumptions and analyses made by us in light of our experience and perception of
 historical trends, current conditions and expected future developments, as well as other factors we
 believe are appropriate under the circumstances. However, whether actual outcomes and
 developments will meet our expectations and projections depends on a number of risks and
 uncertainties over which we do not have control. For further information, see the section headed
 ‘‘Risk Factors’’ in this prospectus.



OVERVIEW

      We specialize in the mining of gold and the processing of ore into concentrates containing gold
and other minerals for subsequent sale. Gold is our core commodity because the value of gold contained
in the concentrates we produce and sell exceeds the combined value of all the other metals contained in
our concentrates, and contributed 89.0% and 68.3% of our total revenue for the year ended 31 December
2007 and the ten months ended 31 October 2008, respectively. Despite the recent financial turmoil, our
Directors believe that the outlook for the gold sector remains positive. We own a 97.14% shareholding
in three Gold Mines in the Chifeng Municipality, Inner Mongolia, namely the Shirengou Gold Mine, the
Nantaizi Gold Mine and the Luotuochang Gold Mine.

      Prior to our incorporation on 13 March 2008, our business was operated by Lita. We began gold
exploration and mining activities after acquiring control of Luotuochang Mining in October 2006,
Shirengou Mining in May 2007 and Nantaizi Mining in July 2007. See the section headed ‘‘Corporate
Structure and History’’ in this prospectus. Accordingly, we have a limited financial history, and
comparisons between our financial results for 2005, 2006 and 2007 should be reviewed with the
understanding that we only had sales starting in November 2007, after we acquired Shirengou Mining in
May 2007.

      We have two ore processing facilities, one located at the Nantaizi Gold Mine and the other at
Luotuochang Gold Mine, which currently have ore processing capacities of 990 tpd and 800 tpd,
respectively. Our two ore processing facilities enable us to effectively transform ore into saleable
concentrates containing gold and other valuable minerals. The ore processing facility located at the
Nantaizi Gold Mine processes ore from both the Nantaizi Gold Mine and the Shirengou Gold Mine. We
began sales of concentrates from the facility at the Nantaizi Gold Mine in May 2008. This facility is
under expansion and, when completed in 2009, is expected to have an ore processing capacity of
approximately 1,480 tpd. The ore processing facility located at the Luotuochang Gold Mine began
commercial production and sales of concentrates in September 2008 and is also under expansion. When
completed in 2009, this facility is expected to have an ore processing capacity of approximately 1,100
tpd. See the section headed ‘‘Future Plans and Use of Proceeds — Future Plans’’ in this prospectus.



                                               – 211 –
                                 FINANCIAL INFORMATION


     According to the Independent Technical Expert’s Report, as at 30 November 2008, the estimated
gold grades of our reserves were 8.92 g/t at the Shirengou Gold Mine, 10.10 g/t at the Nantaizi Gold
Mine and 3.44 g/t at the Luotuochang Gold Mine. See the section headed ‘‘Business — Competitive
Advantages’’ in this prospectus. Based on a review of comparable PRC gold producers listed on the
Stock Exchange, our reserves have a higher weighted average gold grade than these gold producers.

      According to the Independent Technical Expert’s Report, from 1 May to 31 October 2008, the
period during which our processing facility at the Nantaizi Gold Mine was in operation, our total
production cost per ounce of gold contained in our concentrates at the Shirengou-Nantaizi Mining
Complex was RMB1,606 per ounce. From 1 September 2008 to 31 October 2008, the period during
which our processing facility at the Luotuochang Gold Mine was in operation, our total production cost
per ounce of gold contained in our concentrates at the Luotuochang Gold Mine was RMB1,670 per
ounce. Production cost per ounce of gold at the Luotuochang Gold Mine will continue to be higher than
that of the Shirengou-Nantaizi Mining Complex due to the higher grade of the reserves at the Shirengou
Gold Mine and the Nantaizi Gold Mine as compared to the Luotuochang Gold Mine, resulting in lower
extraction cost per ounce of gold for the Shirengou-Nantaizi Mining Complex. In other words, the
higher production cost at the Luotuochang Gold Mine is the result of the lower grade of reserves at the
mine, as compared to the Shirengou-Nantaizi Mining Complex, and not other factors such as the
location of deposits, drilling methods and capital expenditures. Due to that our ore processing facility at
the Nantaizi Gold Mine commenced trial production in May 2008 and commercial production in July
2008, whereas our ore processing facility at the Luotuochang Gold Mine only commenced commercial
production in September 2008, we expect the Luotuochang Gold Mine to contribute to a higher
proportion of our overall production costs, as well as revenues, in the foreseeable future. Furthermore,
we believe that we are a low cost producer (per ounce of gold). According to the Independent Technical
Expert’s Report, our forecast cash cost estimate for 2009 is US$197 per ounce of gold for the
Shirengou-Nantaizi Mining Complex and US$329 per ounce of gold for the Luotuochang Gold Mine.

      We currently derive all of our revenue from sales of concentrates to customers located in the PRC.
Because we did not commence sales of concentrates until November 2007, after our acquisition of
Shirengou Mining in May 2007, we did not recognize any revenue in 2005 and 2006. In 2007 and for
the ten months ended 31 October 2008, we recognized revenue of RMB8.0 million and RMB173.6
million, respectively.

FACTORS AFFECTING RESULTS OF OPERATIONS AND FINANCIAL CONDITION

    Our results of operations and financial condition have been, and will continue to be, affected by a
number of important factors:

  Prices of Products

      The sales price of our concentrates is determined by factors such as    the prevailing prices of gold
and other minerals in the market, the composition of our concentrates         in terms of gold and other
minerals, and the discount that we apply to each of our minerals in order     for our customers to enjoy a
certain level of profitability. We sell our concentrates mainly to smelters   in the Chifeng Municipality,
Inner Mongolia.

     We price our concentrates based on the prices of minerals with reference to their prevailing prices
on the SGE in the case of gold, the Shanghai Huatong Net (上海華通網) in the case of silver, and the
Shanghai Nonferrous Metals Market Net (上海有色金屬網) in the case of other minerals in our



                                                 – 212 –
                                   FINANCIAL INFORMATION


concentrates, at or about the time of sale. Please see the section headed ‘‘Business’’ in this prospectus
for more details. We consider gold as our core commodity because the value of gold contained in the
concentrates we produce exceeds the combined value of all other minerals contained in our concentrates.
In 2007, the gold, silver and copper contained in our concentrates accounted for 89.0%, 6.3% and 4.7%
of our total revenue, respectively. For the ten months ended 31 October 2008, the gold, silver, copper,
lead and zinc contained in our concentrates accounted for 68.3%, 8.6%, 14.2%, 6.0% and 2.9% of our
revenue, respectively.
                                                                                                                                                   Ten months
                                                                                                                                      Year ended     ended
                                                                                                                                     31 December   31 October
                                                                                                                                         2007         2008
     Amount of gold sold (g) . . . . . . .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .        43,751       730,224
     Average price of gold (RMB/g) . .       .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .           163           162
     Amount of silver sold (g) . . . . . .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .       307,997     6,036,217
     Average price of silver (RMB/g) .       .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .          1.62          2.47
     Amount of copper sold (t) . . . . .     .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .         13.42        621.31
     Average price of copper (RMB/t).        .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .        28,285        39,707
     Amount of lead sold (t) . . . . . . .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .            —         875.49
     Average price of lead (RMB/t) . .       .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .            —         11,927
     Amount of zinc sold (t) . . . . . . .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .            —         802.03
     Average price of zinc (RMB/t) . .       .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .            —          6,324

      There was a material change in our revenue mix in the second half of 2008 as we developed the
ability to extract lead and zinc, which are other minerals contained in our ores, in addition to gold,
silver and copper, as a result of the commencement of operations of our two new processing facilities
located at the Nantaizi Gold Mine and the Luotuochang Gold Mine. As a result of our ability to extract
lead and zinc from our ores and subsequent sales of these minerals, our revenue from gold as a
percentage of our total revenue for the ten months ended 31 October 2008 decreased to 68.3%, although
there was no material change in the quantity of gold extracted per unit of ore we mined and processed.
Therefore, we believe gold will continue to be our core commodity going forward, and we do not expect
material changes in the product quantity mix of our various minerals from our existing Gold Mines in
the foreseeable future.

      With respect to the price of gold, in 2005, 2006 and 2007 and the ten months ended 31 October
2008, the average SGE gold price was RMB117 per gram, RMB155 per gram, RMB170 per gram and
RMB200 per gram, respectively. The average sales price of our gold was RMB163 per gram in 2007
and RMB162 per gram for the ten months ended 31 October 2008. The closing SGE gold price was
RMB164 per gram on 31 October 2008. Our final product is concentrates. Our customers, who are
smelters, must further process and refine the concentrates they purchase from us into gold, which then
can be sold based on the market price of gold. Following the common industry practice, we sell our
concentrates to smelters at a discount to the market price of gold. The discount, which is negotiated
between ourselves and the smelters, is essentially the smelters’ cost and profit for processing and
refining the gold concentrate into gold metal. Therefore, the average selling price of the gold contained
in the concentrates sold by us in 2007 and for the ten months ended 31 October 2008 was lower than
the average SGE gold price over the corresponding periods.




                                                                     – 213 –
                                 FINANCIAL INFORMATION


      The price of gold on the SGE increased in the first half of 2008, declined from August to
November 2008, and again increased in December 2008. The prevailing gold price on the SGE is one of
the factors we consider for setting the sale price of our concentrates. We cannot assure you that the
market price of gold will not decline further in the future. The gold price on the SGE has historically
been strongly correlated to the international price of gold, which in turn is affected by a number of
factors beyond our control. These factors include global fabrication and industrial demand, buying and
selling of gold by central banks, macroeconomic factors such as inflation, interest rates and currency
exchange rates and production cost levels in major gold-producing regions. Gold has traditionally been
considered as a safe investment against stock market volatility with its inverse correlation to stock
market performances. The U.S. dollar market price of gold has increased significantly in the past few
years; however, since the beginning of 2008, there has been substantial fluctuations in the market price
of gold. Daily New York composite spot gold price declined from US$857.55 per ounce on 2 January
2008 to US$724.55 per ounce on 31 October 2008 but increased to US$882.05 on 31 December 2008.
Despite the decline of gold price during certain months of 2008, the market price of gold did not decline
as significantly as worldwide stock market indices. See the sections headed ‘‘Industry Overview —
Global Gold Industry’’ and ‘‘Industry Overview — PRC Gold Industry’’ in this prospectus for more
discussion.

      Because our Gold Mines contain significant amounts of valuable minerals other than gold and we
are able to extract minerals such as lead and zinc going forward, the market price of these other
minerals has had and will continue to have an impact on the price of our concentrates. The average price
of silver increased in 2008, as compared to its average price in 2007. The average price of copper, zinc
and lead in their respective markets decreased in 2008, as compared to the average price of such
minerals in 2007. Please see the section headed ‘‘Industry Overview — Our By-Product Commodities’’
for more details. Similar to our competitors, we have limited ability to anticipate and manage
commodity price fluctuations. Therefore, we can provide no assurance that the metal prices will not
decline in the future or that such prices will otherwise remain at sufficiently high levels to support our
profitability.

      We do not currently employ any financial instruments to hedge fluctuations in the SGE gold or
other metal prices or currency exchange rates. The published mineral prices on the SGE, the Shanghai
Huatong Net (上海華通網) and the Shanghai Nonferrous Metals Market Net (上海有色金屬網) have
historically converged with the international prices of such minerals, which is denominated in U.S.
dollars. All of our revenues are from the domestic sale of concentrates and are denominated in RMB in
relation to published metal prices on the SGE, the Shanghai Huatong Net (上海華通網) and the
Shanghai Nonferrous Metals Market Net (上海有色金屬網) for the minerals contained in our
concentrates. Accordingly, the price achieved for our concentrates has traditionally tracked the global
market prices for these minerals, however there is no certainty this will continue. As a result, exchange
rate fluctuations may impact our earnings.

  Production Volume

     Our sales volume is largely dependent upon the demand for our concentrates and our ability to
meet such demand. Our ability to meet market demand is limited by the reserves at our Gold Mines and
our production capacity.

     According to the Independent Technical Expert’s Report, as at 30 November 2008, the reserves at
the Shirengou-Nantaizi Mining Complex are estimated to be sufficient for production at our anticipated
2011 production level of 450 ktpa, or 1,480 tpd of ore based on 300 working days per year, for



                                                 – 214 –
                                 FINANCIAL INFORMATION


approximately 14.2 years, and the reserves at the Luotuochang Gold Mine are estimated to be sufficient
for production at our anticipated 2011 production level of 330 ktpa, or 1,100 tpd of ore based on 300
working days per year, for approximately 24.9 years. It is estimated that our annual production of gold,
silver, copper, lead and zinc contained in the concentrates we produce will reach 151,900 ounces
(approximately 4.7 tonnes), 1,290,000 ounces (approximately 40.1 tonnes), 7,660 tonnes, 4,540 tonnes
and 4,530 tonnes, respectively, by the fourth quarter of 2011. According to the Independent Technical
Expert’s Report, the total production cost at the Shirengou-Nantaizi Mining Complex and the
Luotuochang Gold Mine is forecasted to be RMB1,550 per ounce of gold contained in our concentrates
and RMB2,510 per ounce of gold contained in our concentrates, respectively, in 2009. The difference in
cost is due to the higher concentration of gold in the ore from the Shirengou Gold Mine and the
Nantaizi Gold Mine as compared to the ore from the Luotuochang Gold Mine, resulting in lower
extraction cost per ounce of gold for the Shirengou-Nantaizi Mining Complex.

      Our production capacity is affected by the scale and speed by which we exploit our Gold Mines,
the availability of equipment and machinery necessary for extraction, and the capacity and efficiency of
labor and third-party contractors we hire for extraction. Our ability to obtain governmental approvals
and to meet production, timing and cost estimates are important factors that will impact the exploitation
process of our Gold Mines. Unexpected maintenance or technical problems of our existing equipment or
failures in delivery of key equipment to our Gold Mines may constrain our production capacity.
Additionally, our production may be materially and adversely affected by factors beyond our control,
including adverse weather conditions, natural disasters such as earthquakes and unexpected geological
formations.

       We have constructed two ore processing facilities, one located at the Nantaizi Gold Mine and the
other at the Luotuochang Gold Mine, for the processing of ore into concentrates. The ore processing
facility located at the Nantaizi Gold Mine currently has an ore processing capacity of 990 tpd, and the
ore processing facility located at the Luotuochang Gold Mine currently has an ore processing capacity of
800 tpd. The ore processing facility located at the Nantaizi Gold Mine processes ore from both the
Nantaizi Gold Mine and the Shirengou Gold Mine. We have ceased operations at our ore processing
facility located at the Shirengou Gold Mine, which had an ore processing capacity of approximately 50
tpd and was in operation until May 2008. At present, the ore processing facilities located at the Nantaizi
Gold Mine and the Luotuochang Gold Mine are under expansion and, when completed, the combined
ore processing capacity of both ore processing facilities is expected to reach approximately 2,580 tpd by
the end of 2009.

  Costs of Production

     Most of the major components of our costs of production are directly related to production volume.
The key factors impacting our costs of production include: variations in production volume, the costs of
mining of ore and the costs of processing ore into concentrates.

      We outsource all of our exploration and mining works. We select third-party contractors for our
mining and construction through a selective tendering process. See the section headed ‘‘Business —
Third-Party Contractors’’ in this prospectus for more information regarding the subcontracting process.
In respect of subcontracted mining works, we pay the contractor a fixed fee covering design,
construction and mining services, which include construction of adits and shafts, extraction and hauling
of ore. The fee is usually settled after completion of the relevant projects. In 2007 and for the ten
months ended 31 October 2008, fees paid to third-party contractors were RMB0.5 million and RMB14.5
million, respectively, which accounted for 13.0% and 43.5% of our cost of sales, respectively. The



                                                 – 215 –
                                  FINANCIAL INFORMATION


substantial increase in subcontracting expenses is due to the increase in our mining activities at all of
our Gold Mines as our ore processing facilities at the Nantaizi Gold Mine and the Luotuochang Gold
Mine reached a combined ore processing capacity of 1,790 tpd. Although we use third-party contractors,
development and mining operations at our Gold Mines are carried out under the supervision of our
management and technical teams.

      In addition, we believe our unique high-grade poly-metallic mineral reserves will lead to high
margins in the future. As at 30 November 2008, our recoverable ore reserves for the major types of
minerals, including gold, silver, copper, lead and zinc, were estimated to be approximately 14,597,000
tonnes. According to the Independent Technical Expert’s Report, our Gold Mines contain total gold,
silver, copper, lead and zinc reserves of approximately 2,900,000 ounces (approximately 90.2 tonnes),
27,695,000 ounces (approximately 861.4 tonnes), 207,073 tonnes, 97,780 tonnes and 84,196 tonnes,
respectively. We expect the high grade in gold and significant amounts of other valuable minerals in our
reserves will enable us to generate greater revenue per tonne of ore than comparable PRC gold
producers listed on the Stock Exchange.

  Development, Construction and Mining Operations

       Our future expansion and growth will be affected by our ability to meet production, timing and
cost estimates for mine development projects currently under construction. Technical considerations,
ability to obtain governmental approvals and financing are also important factors that will impact the
outcome of any current and future projects. In 2008, we spent approximately RMB4.3 million on further
exploration activities at our Gold Mines. In 2007, we had total capital expenditures of RMB14.9 million
(excluding capital expenditures due to the acquisition of subsidiaries and mining assets), primarily for
the purchase of mining equipment and other capital costs and the construction of our ore processing
facilities located at the Shirengou-Nantaizi Mining Complex and the Luotuochang Gold Mine. In 2008,
we incurred RMB168.4 million and RMB131.6 million for capital expenditures relating to the mining
operations and expansion of ore processing facilities at the Shirengou-Nantaizi Mining Complex and the
Luotuochang Gold Mine, respectively, or approximately RMB300.0 million in aggregate. For the ten
months ended 31 October 2008, our capital expenditures relating to the mining operations and expansion
of ore processing facilities at the Shirengou-Nantaizi Mining Complex and the Luotuochang Gold Mine
were RMB136.8 million and RMB111.6 million, respectively.

  Economic Growth in the PRC and Globally

      Gold is most often used in jewelry, coinage and as a standard for monetary exchange. It also
serves as an important industrial metal due to its superior electrical conductivity, resistance to corrosion,
malleability and ductility. Gold is also held in investment portfolios. In addition to direct holdings,
physical investment demand is substantially driven by net incremental gold stocks held in support of
derivative transactions (such as hedging) and exchange-traded funds. Investment demand is a factor of
the current and expected value of gold relative to other assets, such as cash, fixed interest securities,
equities and property, resulting largely from monetary considerations and expectations regarding future
gold prices.

      In recent years, the PRC has become an important market, and its influence on the global metals
industry, including gold, has been increasing. In 2007, China was the world’s second largest gold
consumer, with an annual gold consumer demand of 326.1 tonnes, accounting for approximately 11.6%
of total global consumer demand for gold. The economic growth of the PRC has been accompanied by




                                                  – 216 –
                                  FINANCIAL INFORMATION


growth in gold production with gold output in 2007 totalling 280 tonnes, or 11.3% of global output. See
the section headed ‘‘Industry Overview’’ in this prospectus for further details of factors that could affect
the demand for our products in the PRC and thus, our revenue and profits.

  PRC Government Control and Policies

     The PRC local, provincial and central authorities exercise a substantial degree of control over the
gold industry in the PRC. Our operations are subject to a range of PRC laws, regulations, policies,
standards and requirements in relation to, among other things, mine exploration, development,
production, taxation, labor standards, occupational health and safety, waste treatment and environmental
protection and operation management. The PRC government has full authority to grant, renew and
terminate exploration, mining and gold production permits. While we expect to be able to renew our
mining and production permits and convert our exploration permit into a mining permit at our Gold
Mines, if for any reason we are unable to do so, our results of operations would be materially and
adversely affected.

       In the PRC, foreign companies are required to operate within a framework that is different from
that imposed on domestic PRC companies. However, the PRC government has been opening up
opportunities for foreign investment in mining projects and this process is expected to continue,
especially following the PRC’s accession into the WTO. However, if the PRC government should cease
this liberalization, or impose greater restrictions on participation in the mining sector by foreign-owned
or foreign-invested companies, our business and results of operations could be materially and adversely
affected.

DESCRIPTION OF SELECTED INCOME STATEMENT LINE ITEMS

  Revenue

      Revenue represents income generated from the sale of our concentrates to customers, and is net of
VAT. Although the revenue attributable to gold in our concentrates is exempted from VAT, the revenue
attributable to other minerals, such as silver, copper, lead and zinc, in our concentrates are subject to
VAT. Our revenue is affected by our total sales volume, which is subject to our production capacity,
and the average sales price of our concentrates.

  Cost of Sales

      Cost of sales includes subcontracting costs, auxiliary materials used in the production process
(including forged steel grinding balls, chemical products and explosives), staff costs and retirement
benefit scheme contributions, depreciation, electricity costs, environmental protection fees, production
safety fees and other production costs. Subcontracting expenses comprise fees paid to third-party
contractors for exploration, mining and hauling of ore.

  Other Income and Gains

     Other income represents interest income received from our bank deposits, government subsidies
which represent the benefit granted by the PRC government to encourage the development of the gold
industry, release of financial guarantee liability over the duration of the financial guarantee issued by us
in connection with the Pre-IPO Investment and discount on acquisition of additional interest in
subsidiaries.




                                                  – 217 –
                                                               FINANCIAL INFORMATION


   Administrative Expenses
      Administrative expenses primarily consist of professional fees associated with survey of our Gold
Mines and the Global Offering, mineral and woodland compensation fees, amortization of intangible
assets, salaries and retirement expenses of our administrative and management staff, exploration
expenses, net loss from disposal of fixed assets, financial guarantee expenses relating to the provision of
the guarantee issued by us in connection with the Pre-IPO Investment and other administrative expenses.

   Other Expenses
     Other expenses include a one-time charitable donation and the loss on the sale of ore outside the
ordinary course of business.

   Tax Expense

      We are subject to income tax on an entity basis on profits derived from the sale of concentrates in
the PRC. The applicable tax rate for each of the years ended 31 December 2005, 2006 and 2007 was
33%. On 16 March 2007, the PRC government promulgated the Law of the People’s Republic of China
on Enterprise Income Tax (the ‘‘New Enterprise Income Tax Law’’) and, on 6 December 2007, the State
Council of the PRC issued Implementation Regulations of the New Enterprise Income Tax Law. Under
the New Enterprise Income Tax Law and the Implementation Regulations, effective 1 January 2008, a
unified enterprise income tax rate is set at 25% for both domestic enterprises and foreign invested
enterprises. As a result, our PRC subsidiaries are subject to PRC income tax at a tax rate of 25%. Our
tax expense represents income tax expense currently payable and is based on taxable profit for the year.
Included in tax expense is also deferred tax liability mainly arising from withholding tax applied on the
profit of our PRC subsidiaries.

BASIS OF PRESENTATION

       Our consolidated income statements, consolidated statements of changes in equity and consolidated
cash flow statements for the Track Record Period and for the ten months ended 31 October 2007 and
2008 include the results, changes in equity and cash flows of the entities now comprising our group of
companies as if the current group structure had been in existence throughout the Track Record Period
and for the ten months ended 31 October 2007 and 2008 and from the date of which they were
effectively controlled by Mr Wu, taking into account the effective controlling interest in these
companies held by Mr Wu prior to the Reorganization. Our consolidated balance sheets as at 31
December 2005, 2006 and 2007 and 31 October 2008 have been prepared to present the assets and
liabilities of the entities now comprising our group of companies as if the current group structure had
been in existence, taking into account the effective controlling interest held in these entities by Mr Wu
as at those dates. The table below sets out our subsidiaries and the starting dates when our subsidiaries’
financial information were consolidated.
                                                                                                                                                 Date When Subsidiary’s Financial
Name of Subsidiary                                                                                                                                Information Were Consolidated
Lita . . . . . . . . . . . .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   28   October 2005
Rich Vision . . . . . .        .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   10   April 2008
Fubon Industrial . . .         .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   23   April 2007
Chifeng Fuqiao . . . .         .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   21   August 2007 (date of registration)
Shirengou Mining . .           .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   25   May 2007
Nantaizi Mining . . .          .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   11   July 2007 (date of registration)
Luotuochang Mining             .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   30   October 2006



                                                                                                           – 218 –
                                      FINANCIAL INFORMATION


     For further details regarding the Reorganization, please refer to the subsection headed ‘‘Corporate
Reorganization’’ in ‘‘Appendix VII — Statutory and General Information’’ to this prospectus.

CRITICAL ACCOUNTING POLICIES

     Critical accounting policies are those that require management to exercise judgment and make
estimates which yield materially different results if management has to apply different assumptions or
make different estimates.

      Our financial statements have been prepared in accordance with IFRS. Our significant accounting
policies are set forth in note 3 to the Accountants’ Report, attached as Appendix I to this prospectus.
IFRS requires that we adopt accounting policies and make estimates that our Directors believe are most
appropriate in the circumstances for the purposes of giving a true and fair view of our results and
financial position. We believe the most complex and sensitive judgment, because of their significance to
our financial statements, result primarily from the need to make estimates about the effects of markets
that are inherently uncertain. Actual results in these areas could differ from our estimates. We have
identified below the accounting policies that we believe are the most critical to our consolidated
financial statements and that involve the most significant estimates and judgments.

   Revenue Recognition

     Revenue is measured at the fair value of the consideration received or receivable and represents
amounts receivable for goods sold in the normal course of business, net of sales related tax. Sales of
goods are recognized when goods are delivered and title has passed.

   Property, Plant and Equipment

      Property, plant and equipment, other than construction in progress, are stated at cost less
accumulated depreciation and any identified impairment loss. Depreciation is provided to write off the
cost of items of property, plant and equipment, other than construction in progress and mining
structures, over their estimated useful lives and after taking into account their estimated residual value,
using the straight-line method.
                                                                                                                                                                              Estimated Useful
Assets                                                                                                                                                                             Lives
Buildings . . . . . . . . .   ........    .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .         8–20   years
Plant and machinery .         ........    .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .           10   years
Furniture, fixtures and       equipment   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .            5   years
Motor vehicles . . . . .      ........    .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .            5   years

     Depreciation on mining structures is provided to write off the cost of the mining structures using
the unit of production method based on the actual production volume over the estimated total proven
and probable reserves of our Gold Mines.

      Construction in progress represents buildings, mining structures, and plant and equipment in the
course of construction for production or for its own use purposes. Construction in progress is stated at
cost less any identified impairment loss. Cost comprises construction expenditure and other direct costs,
such as staff costs, attributable to such projects, if the amount of capital expenditures and the time
involved to complete the construction are significant. Construction in progress is classified to the




                                                                                  – 219 –
                                  FINANCIAL INFORMATION


appropriate category of property, plant and equipment when completed and ready for intended use.
Depreciation of these assets, on the same basis as other property assets, commences when the assets are
ready for their intended use.

      An item of property, plant and equipment is derecognized upon disposal or when no future
economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising
from derecognition of the asset (calculated as the difference between the net disposal proceeds and the
carrying amount of the item) is included in the consolidated income statement in the year in which the
item is derecognized.

  Taxation

     Taxation represents the sum of income tax expense currently payable and deferred tax.

      The income tax expense currently payable is based on taxable profit for the period or year. Taxable
profit differs from profit as reported in the consolidated income statement because it excludes items of
income and expense that are taxable or deductible in other years or periods and it further excludes items
that are never taxable nor deductible. Our liability for current tax is calculated using tax rates that have
been enacted or substantively enacted by the balance sheet date.

      Deferred tax is recognized on the differences between the carrying amounts of assets and liabilities
in the consolidated financial statements and the corresponding tax bases used in the computation of
taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are
generally recognized for all taxable temporary differences and deferred tax assets are recognized to the
extent that it is probable that taxable profits will be available against which deductible temporary
differences can be utilized. Such assets and liabilities are not recognized if the temporary differences
arise from goodwill or from the initial recognition (other than in a business combination) of other assets
and liabilities in a transaction that affects neither the taxable profit nor the accounting profit. Deferred
tax liabilities are recognized for taxable temporary differences arising on investments in subsidiaries,
except where we are able to control the reversal of the temporary difference and it is probable that the
temporary difference will not reverse in the foreseeable future. The carrying amount of deferred tax
assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that
sufficient taxable profit will be available to allow all or part of the asset to be recovered.

      Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability
is settled or the asset realized. Deferred tax is charged or credited to the profit or loss, except when it
relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in
equity.

  Provisions for Restoration Cost

     We are required to make payments for restoration and rehabilitation of the land after the
underground sites have been mined. Provision for restoration cost is required when we have a present
obligation as a result of a past event, and it is probable that we will be required to settle that obligation.
Provision is measured in accordance with the relevant rules and regulations applicable in the PRC at the
balance sheet date and calculated on the basis of the amount and timing of future cash expenditure to
perform the required work. The amount is discounted to present value where the effect is material. We
have made provisions for the restoration costs for the mines held by Shirengou Mining, Nantaizi Mining




                                                  – 220 –
                                  FINANCIAL INFORMATION


and Luotuochang Mining. We currently accrue for restoration costs at a rate of RMB75,000 per hectare
for exploration and mining we undertake at our Gold Mines. This is the maximum per hectare rate
specified in the guidelines published by the local government.

      Restoration cost is provided in the period in which the obligation is identified and are capitalized
to the costs of mining structures. The cost is charged to profit or loss through amortization of the assets,
which are amortized using the unit of production method based on the actual production volume over
the total estimated proven and probable reserves of our Gold Mines.

     While we believe that the provisions we have made for restoration costs are adequate, the actual
amounts incurred to rehabilitate the land after the underground sites have been mined may differ
materially from the amounts that we estimated for future liabilities. Changes to our estimates might
occur as a result of changes in environmental laws and regulations, our mining plans or the timing of
our performance of mining and processing activities.

  Impairment of Tangible and Intangible Assets

     At each balance sheet date, we review the carrying amounts of our tangible and intangible assets to
determine whether there is any indication that those assets have suffered an impairment loss. If the
recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of
the asset is reduced to its recoverable amount. An impairment loss is recognized as an expense
immediately.

      Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to
the revised estimate of its recoverable amount, so that the increased carrying amount does not exceed
the carrying amount that would have been determined had no impairment loss been recognized for the
asset in prior years. A reversal of an impairment loss is recognized as income immediately.

  Mining Rights

      Mining rights with definite useful lives are carried at cost less accumulated amortization and any
accumulated impairment loss. Amortization is provided using the unit of production method based on
the actual production volume over the estimated total proven and probable reserves of our Gold Mines.
The process of estimating quantities of reserves is inherently uncertain and complex and requires
significant judgments and decisions based on available geological, engineering and economic data. We
amortize mining rights using the unit of production method, rather than on a straight-line basis over the
estimated mine life. In 2007 and for the ten months ended 31 October 2008, we had amortization
expenses for mining rights of RMB157,000 and RMB2.7 million, respectively. If we were to use the
straight-line method, then the estimated mining rights amortization for the year ended 31 December
2008 and each of the years ending 31 December 2009 and 2010 would be RMB12.3 million. This
compares to our mining rights amortization of RMB4.6 million for the year ended 31 December 2008
and our estimated mining rights amortization of RMB10.0 million and RMB12.3 million for each of the
two years ending 31 December 2009 and 2010, respectively, using the unit of production method.




                                                  – 221 –
                                          FINANCIAL INFORMATION


RESULTS OF OPERATIONS

      We have a limited financial history and comparisons between our financial results for 2005, 2006
and 2007 and for the ten months ended 31 October 2007 and 2008 should be reviewed with the
understanding that we only began sales of our concentrates in 2007 at the Shirengou Gold Mine. The
financial information set forth in the Accountants’ Report presents our consolidated financial position,
operational results and cash flow as of and for the years ended 31 December 2005, 2006 and 2007 and
for the ten months ended 31 October 2007 and 2008. For further details, please refer to the Accountants’
Report attached as Appendix I to this prospectus.
                                                                                             Ten months ended
                                                 Year ended 31 December                         31 October
                                              2005               2006         2007          2007          2008
                                                            (RMB in thousands, except number of shares)
     Revenue . . . . . . . . . . . . . .             —                  —        8,007             —      173,586
     Cost of sales . . . . . . . . . . .             —                  —       (4,068)            —      (33,327)
     Gross profit . . . . . . . . .   .   .           —                —         3,939           —        140,259
     Other income . . . . . . . .     .   .           —                 4          953           10         9,267
     Administrative expenses .        .   .          (15)            (122)      (5,953)      (3,492)      (40,624)
     Other expenses . . . . . . .     .   .           —                —          (638)        (350)           —
     (Loss) profit before taxation                   (15)            (118)      (1,699)      (3,832)      108,902
     Taxation. . . . . . . . . . . . . .              —                —          (606)          —        (42,765)
     (Loss) profit for the year/
       period . . . . . . . . . . . . . .            (15)            (118)      (2,305)      (3,832)       66,137
     Attributable to:
       Equity holders of the
          Company . . . . . . . . .                  (15)            (118)      (2,245)      (3,668)       62,332
       Minority interests . . . . .                   —                —           (60)        (164)        3,805
                                                     (15)            (118)      (2,305)      (3,832)       66,137
     Dividends. . . . . . . . . . . . .              —                  —            —             —             —
     Basic (loss) earnings per
       share . . . . . . . . . . . . . .             (15)            (118)      (2,245)      (3,668)             0
     Number of shares for the
      calculation of basic (loss)
      earnings per share . . . . .                     1                1            1             1   152,909,336




                                                           – 222 –
                                     FINANCIAL INFORMATION


Cost of Sales
                                                                                          Ten months
                                              Year ended 31 December                   ended 31 October
                                           2005          2006          2007           2007          2008
                                                                (RMB in thousands)
  Subcontracting expenses . . . .                 —             —           527              —       14,490
  Auxiliary materials . . . . . . .               —             —         2,289              —        9,586
  Electricity costs. . . . . . . . . .            —             —           285              —        8,093
  Depreciation . . . . . . . . . . . .            —             —           157              —        2,287
  Staff costs and retirement
    benefit scheme
    contributions . . . . . . . . . .             —             —           757              —         1,353
  Environmental protection fees                   —             —            —               —         1,518
  Production safety fees . . . . .                —             —            —               —         1,015
  Other production expenses . .                   —             —            53              —         1,298
  Period-end inventory . . . . . .                —             —            —               —        (6,313)
  Total cost of sales . . . . . . . .             —             —         4,068              —       33,327


Administrative Expenses
                                                                                      Ten months ended
                                              Year ended 31 December                     31 October
                                           2005          2006          2007           2007          2008
                                                                (RMB in thousands)
  Professional fees associated
    with survey of Gold Mines
    and the Global Offering . .                   —             —           996           451        17,829
  Mineral and woodland
    compensation fees . . . . . .                 —             —           642              —         6,611
  Amortization of intangible
    assets . . . . . . . . . . . . . . .          —             —           157              1         2,699
  Salary and retirement
    expenses . . . . . . . . . . . . .            —             —         1,102           459          1,647
  Exploration expenses . . . . . .                —              5        1,014           225            266
  Net loss from disposal of
    property, plant and
    equipment . . . . . . . . . . . .             —             —             12             —            994
  Financial guarantee
    expenses (1) . . . . . . . . . . .            —           —              —             —           4,103
  Other administrative expenses                   15         117          2,030         2,356          6,475
  Total administrative expenses                   15         122          5,953         3,492        40,624



  Note:

  (1)     In July 2008, Lead Honest, our Company, Lita, Rich Vision, Mr Wu and certain investors entered into
          the Subscription Agreement pursuant to which Lead Honest issued secured exchangeable bonds due
          2009 to the Bondholders at a consideration of US$50 million. The Pre-IPO Investment is secured by,
          among other things, guarantee given by certain members of our Group, which will be released upon



                                                   – 223 –
                                   FINANCIAL INFORMATION


           Listing. See the section headed ‘‘Exchangeable Bonds’’ in this prospectus. The guarantee has been
           charged to the consolidated income statement as a provision for financial guarantee contract on the date
           of inception at approximately RMB4.1 million. The financial guarantee liability of approximately
           RMB4.1 million is released to other income in the consolidated income statement beginning in August
           2008 on a straight-line basis over the one year period of the financial guarantee.


TEN MONTHS ENDED 31 OCTOBER 2007 AND 2008

  Revenue

      For the ten months ended 31 October 2007, we did not recognize any revenue, as we only had
sales starting in November 2007. For the ten months ended 31 October 2008, we recognized RMB173.6
million in revenue, reflecting sales of concentrates primarily from the Shirengou Gold Mine and the
Nantaizi Gold Mine, and, to a lesser extent, from the Luotuochang Gold Mine. In May 2008, we
commenced trial ore processing operations at our ore processing facility located at the Nantaizi Gold
Mine, and after we commenced full ore processing operations at this location, our sales increased
significantly as compared to 2007. We commenced commercial production and sales of concentrates at
our ore processing facility located at the Luotuochang Gold Mine in September 2008, and we expect that
sales of concentrates from this mine will further contribute to our revenue in future periods.

     The price of gold on the SGE increased in the first half of 2008 but declined from August to
November 2008, which impacted the price of our concentrates. There can be no assurance that the
market price of gold will not decline in the future and impact our revenue.

  Cost of Sales

      For the ten months ended 31 October 2007, we did not incur any cost of sales as our mining
operations had not yet commenced. Cost of sales was RMB33.3 million for the ten months ended 31
October 2008 and primarily included subcontracting fees, auxiliary material costs, electricity costs,
depreciation, environmental protection fees and production safety fees. We incurred high subcontracting
fees because we increased our mining activities as our new ore processing facilities at the Nantaizi Gold
Mine and the Luotuochang Gold Mine began production. For the ten months ended 31 October 2008,
our cost of sales accounted for 19.2% of our revenue.

     After the ore processing facility located at the Nantaizi Gold Mine began trial production and sales
of concentrates in May 2008, the Shirengou-Nantaizi Mining Complex had cost of sales of
approximately RMB26.3 million for the six months ended 31 October 2008, which included
depreciation of approximately RMB1.7 million. After the ore processing facility located at the
Luotuochang Gold Mine commenced commercial production and sales of concentrates in September
2008, Luotuochang Mining had cost of sales of approximately RMB6.6 million for the two months
ended 31 October 2008, which included depreciation of approximately RMB0.3 million.

  Gross Profit and Gross Margin

      As a result of the foregoing, gross profit was RMB140.3 million and gross margin was 80.8% for
the ten months ended 31 October 2008. We may experience a decrease in gross margin if the sales price
of our concentrates decreases due to a decline in the prevailing prices of the minerals contained in our
concentrates, particularly gold.




                                                    – 224 –
                                 FINANCIAL INFORMATION


  Other Income

      Other income increased from approximately RMB10,000 for the ten months ended 31 October
2007 to RMB9.3 million for the ten months ended 31 October 2008. The primary source of other
income for the ten months ended 31 October 2007 was bank interest income. The primary source of
other income for the ten months ended 31 October 2008 was government subsidies in the form of a tax
benefit granted to us by the PRC government to encourage the development of the gold industry. We
also had a release of financial guarantee liability of RMB1.0 million related to the guarantee issued by
us in connection with the Pre-IPO Investment and a discount on the acquisition of additional interest in
subsidiaries of RMB1.0 million for the ten months ended 31 October 2008 due to the difference between
the consideration paid for the additional cash injection by Lita and the carrying amount of the net assets
of our Group attributable to the additional interest acquired. As the carrying amount of the net assets
exceeded the consideration paid, the excess was recognized as other income.

  Administrative Expenses

      Administrative expenses increased from RMB3.5 million for the ten months ended 31 October
2007 to RMB40.6 million for the ten months ended 31 October 2008. The administrative expenses for
the ten months ended 31 October 2007 primarily consisted of purchases of low-value consumables. The
administrative expenses for the ten months ended 31 October 2008 primarily represented professional
fees associated with the survey of our Gold Mines and the Global Offering, mineral and woodland
compensation fees, amortization of intangible assets, salaries paid and payable to, and benefits for, our
administrative and management staff, financial guarantee expenses related to our provision of the
guarantee issued by us in connection with the Pre-IPO Investment and other administrative expenses,
such as travel and entertainment expenses.

      After the ore processing facility located at the Nantaizi Gold Mine began trial production and the
sales of concentrates in May 2008, the Shirengou-Nantaizi Mining Complex had administrative expenses
of approximately RMB10.6 million for the six months ended 31 October 2008, which included
amortization of approximately RMB2.5 million. Our companies other than the Gold Mines had
administrative expenses of approximately RMB22.1 million for the same period, which included
depreciation of approximately RMB10,000. For calculating operating cash costs of the Shirengou-
Nantaizi Mining Complex in the Independent Technical Expert’s Report, two-thirds of the RMB22.1
million of administrative expenses were allocated to the Shirengou-Nantaizi Mining Complex.

     After our ore processing facility located at the Luotuochang Gold Mine commenced commercial
production and the sale of concentrates in September 2008, Luotuochang Mining had administrative
expenses of approximately RMB1.4 million for the two months ended 31 October 2008, which included
amortization of approximately RMB0.2 million. Our companies other than the Gold Mines had
administrative expenses of approximately RMB6.2 million for the same period, which included
depreciation of approximately RMB5,000. For calculating operating cash costs of Luotuochang Mining
in the Independent Technical Expert’s Report, one-third of the RMB6.2 million of administrative
expenses was allocated to Luotuochang Mining.

  Other Expenses

      We incurred RMB350,000 of other expenses for the ten months ended 31 October 2007 due to a
one-time charitable donation. We did not incur other expenses for the ten months ended 31 October
2008.



                                                 – 225 –
                                 FINANCIAL INFORMATION


  Tax Expense

     Tax expense was nil for the ten months ended 31 October 2007 as we had no revenue during that
period. Tax expense was RMB42.8 million for the ten months ended 31 October 2008, comprising
RMB33.3 million of income tax on our profit from the Gold Mines, which was taxed at the PRC’s new
Enterprise Income Tax rate of 25% and a deferred tax liability of RMB9.5 million mainly arising from
withholding tax applied on the profit of our Gold Mines. In addition, in the ten months ended 31
October 2008 we utilized the tax losses of Nantaizi Mining and Luotuochang Mining in the amount of
RMB1,777,000, which were carried forward from the prior year.

  (Loss) Profit Attributable to our Equity Holders

      Since we did not have any sales during the ten months ended 31 October 2007 and purchased low-
value consumables for use by the Shirengou Gold Mine, we had a loss attributable to our equity holders
of RMB3.7 million for the ten months ended 31 October 2007. For the ten months ended 31 October
2008, we had a profit attributable to our equity holders of RMB62.3 million, which was the result of the
sales of concentrates primarily from Shirengou Mining and Nantaizi Mining, and, to a lesser extent,
from Luotuochang Mining.

  Dividends

        No dividends were declared for the ten months ended 31 October 2007 and 2008.

YEARS ENDED 31 DECEMBER 2005, 2006 AND 2007

  Revenue

     In 2005 and 2006, we did not recognize any revenue, as our mining operations had not yet
commenced. In 2007, we recognized RMB8.0 million in revenue, reflecting sales of concentrates since
November 2007 at the Shirengou Gold Mine. The revenue recognized in 2007 was primarily due to sales
of 255.8 tonnes of concentrates with an average sales price of RMB31,306 per tonne.

  Cost of Sales

     In 2005 and 2006, we did not incur any cost of sales as our mining operations had not yet
commenced. Cost of sales was RMB4.1 million in 2007 and primarily included auxiliary material costs,
subcontracting costs, electricity costs and depreciation and amortization. In 2007, our cost of sales
accounted for 50.8% of our total revenue.

  Gross Profit and Gross Margin

        As a result of the foregoing, gross profit was RMB3.9 million and gross margin was 49.2% in
2007.

  Other Income

      Other income increased from RMB4,000 in 2006 to RMB953,000 in 2007. In 2007, we recognized
other income of RMB936,000 primarily due to government subsidies, which represented the tax benefit
granted by the PRC government to encourage development of the gold industry. In 2006, our only
source of other income was from bank interest income of RMB4,000.



                                                – 226 –
                                 FINANCIAL INFORMATION


  Administrative Expenses

      Administrative expenses increased from RMB15,000 in 2005 to RMB122,000 in 2006 and to
RMB6.0 million in 2007. The administrative expenses in 2007 primarily represented professional fees
associated with the survey of our Gold Mines, exploration expenses, salaries paid and payable to, and
benefits for, our administrative and management staff and other expenses, including travel and
entertainment expenses. In 2006, we incurred administrative expenses that primarily consisted of
purchases of low-value consumables at Luotuochang Mining. In 2005, we had miscellaneous
administrative expenses.

  Other Expenses

      Other expenses were RMB638,000 in 2007. The other expenses incurred in 2007 were primarily
due to a one-time charitable donation of RMB350,000 and a loss on the sale of ore outside of the
ordinary course of business of RMB288,000. In connection with the acquisition of assets of Nantaizi
Mining, we acquired a deposit of gold, silver, copper, lead and zinc ores. In December 2007, we sold
the ore to a smelter in China due to our limited ore processing capability at that time. We sold the ore at
a slight mark-up to the cost of the ore, but we incurred a loss of RMB288,000 due to VAT that we paid
during the sale.

  Tax Expense

     Tax expense was nil in 2005 and 2006 as we had no revenue in either year. Tax expense was
RMB606,000 in 2007, primarily due to profit at Shirengou Mining, which was taxed at the PRC’s
Enterprise Income Tax rate of 33%, partially offset by unused tax losses carried over from a prior
period.

  Loss Attributable to our Equity Holders

      Loss attributable to our equity holders increased from RMB15,000 in 2005 to RMB118,000 in
2006 and to RMB2.2 million in 2007. This was primarily the result of increased administrative expenses
incurred at our Gold Mines from 2005 to 2007, a period of time when we had either no or limited sales.

  Dividends

     No dividends were declared for the years ended 31 December 2005, 2006 and 2007.

LIQUIDITY AND CAPITAL RESOURCES

      Our liquidity requirements relate to funding working capital, capital expenditures, acquisition of
mining rights and maintaining cash reserves. We engage third-party contractors to carry out a significant
part of our mining operations. Our capital requirements include construction of mine shafts and the
expansion of processing facilities. For the ten months ended 31 October 2007 we had net increase of
cash and cash equivalents of approximately RMB2.2 million, compared to net increase of cash and cash
equivalents of approximately RMB67.1 million for the ten months ended 31 October 2008. We
generated net increase of cash and cash equivalents of RMB20,000 and RMB745,000 in 2005 and 2007,
respectively, and net decrease of cash and cash equivalents of RMB5,000 in 2006. In the past, we relied
on advances from related parties as a significant source of liquidity. As at 31 December 2007, we had
net current liabilities of RMB219.0 million primarily due to amounts due to related parties of RMB247.7
million. The amounts due to related parties arose from the acquisition of our three Gold Mines and



                                                 – 227 –
                                    FINANCIAL INFORMATION


capital expenditures incurred at these Gold Mines after our acquisitions. In August 2008, our Group
repaid the amounts due to related parties using primarily the proceeds from the Pre-IPO Investment and
an additional investment by Huizhou Liyin. See the section headed ‘‘Exchangeable Bonds’’ in this
prospectus. As at 31 October 2008, we had net current assets of RMB5.5 million.

       From time to time, we may enter into short-term borrowings, and as a result, we may need to
allocate a portion of our cash flow to service these obligations. As at 31 December 2008, our total
unutilized banking facility was RMB200 million. On 21 July 2008, Fubon Industrial entered into a
short-term borrowing facility with Guangdong Development Bank Co., Ltd. (Huizhou Branch) to be
used for working capital purposes. Mr Wu, our ultimate controlling shareholder, provided us with the
initial banking contact at Guangdong Development Bank Co., Ltd. (Huizhou Branch); however, he was
not involved in the negotiation or the finalization of the terms of the facility. Under the terms of the
loan agreement, Fubon Industrial may draw down up to RMB200 million at any time from July 2008
until September 2010. The applicable interest rate will be the relevant base rate, which is the benchmark
lending rate published by the PBOC from time to time in accordance with its interest rate policy, on the
date that any sum is borrowed. Under the terms of the loan agreement, Fubon Industrial will be limited
in its ability to pay dividends if: (i) the after tax profits for a particular year are zero or negative, (ii) the
after tax profit is not sufficient to cover the accumulated deficit of past accounting years, (iii) the profit
before tax has not been used to repay the interest, loan principal and fees incurred in the accounting
year, or (iv) the profit before tax is not sufficient to repay the interest, loan principal and fees for the
next accounting period. Guangdong Development Bank Co., Ltd. (Huizhou Branch) may terminate its
loan commitment if: (i) Fubon Industrial’s business suffers serious deterioration or loses its current
business reputation, (ii) Fubon Industrial transfers property or funds to third parties in an attempt to
avoid its obligation to repay the loan, or (iii) any other condition occurs that would result in Fubon
Industrial not being able to repay the loan. Fubon Industrial does not have any present intention to draw
down on Guangdong Development Bank Co., Ltd. (Huizhou Branch)’s loan facility.

      We plan to fund the capital expenditures described in this prospectus and working capital with
cash from operating activities, existing bank and cash balances and net proceeds from the Global
Offering. We may also finance our working capital, if needed, using a mix of short-term and long-term
bank borrowings. We do not plan to use loans repayable on demand from related parties going forward.
Based on our current mine production plan, and assuming metal prices and exchange rates do not differ
significantly from estimates prevailing on the Latest Practicable Date, our Directors confirm that our
cash flows from operating activities, existing bank and cash balances, bank borrowings available to us
and the estimated proceeds from the Global Offering will be sufficient to finance our capital
expenditures and working capital for our present requirements and for the period ending 24 months from
the date of this prospectus.




                                                    – 228 –
                                         FINANCIAL INFORMATION


  Cash Flows

      We have a limited financial history and comparisons between our financial results for 2005, 2006
and 2007 and for the ten months ended 31 October 2007 and 2008 should be reviewed with the
understanding that we only had sales starting in November 2007. Accordingly, our cash flows
information for 2005 and 2006 and the ten months ended 31 October 2007 are not meaningful. The
following table sets out certain information regarding our consolidated cash flows for the years ended 31
December 2005, 2006 and 2007 and for the ten months ended 31 October 2007 and 2008 and estimated
consolidated cash flows for the year ended 31 December 2008 and the years ending 31 December 2009
and 2010:
                                                                                   Estimated
                                                                                    for the
                                                                                     year      Estimated for the
                                                                     Ten months    ended 31       year ending
                                  Year ended 31 December          ended 31 October December(1) 31 December (1)
                                  2005      2006         2007       2007     2008      2008       2009       2010
                                                                  (RMB in thousands)
     Net cash (used in)
       from operating
       activities . . . . . . .      (15)     273        (4,267) (11,882) 117,906      166,121   375,930     445,907
     Net cash used in
       investing activities           —       (528) (24,281) (15,438) (218,582)        (293,309) (110,614)   (90,050)
     Net cash from
       financing activities           35      250        29,293     29,521   167,824   167,824   306,000            —
     Increase (decrease) in
       cash and cash
       equivalents . . . . .          20           (5)     745       2,201    67,148    40,636   571,316     355,857
     Cash and cash
       equivalents at
       beginning of the
       year/period . . . . .          —        20           15         15       760        760     41,396    612,712
     Cash and cash
       equivalents at end
       of the year/period             20       15          760       2,216    67,908    41,396   612,712     968,569



     Note:

     (1)     The estimated figures are prepared by our Directors and are unaudited. The estimated figures assume the
             application of estimated net proceeds from the Global Offering. Our actual results may differ from the
             current estimates.


  Net Cash (used in) from Operating Activities

      Net cash used in operating activities for the ten months ended 31 October 2007 was RMB11.9
million, compared to net cash from operating activities of RMB117.9 million for the ten months ended
31 October 2008. Our net cash from operating activities for the ten months ended 31 October 2008 was
the result of (i) RMB117.0 million of operating cash inflow before movements in working capital, (ii) an
increase in trade and other payables of RMB25.9 million primarily due to payables for construction of
mining infrastructure and ore processing facilities, and (iii) a decrease in trade and other receivables of
RMB7.1 million primarily due to payments of receivables from third parties, net of prepayments by us
for purchases of plant and equipment, a deposit for a proposed purchase of a new mine and an increase


                                                          – 229 –
                                 FINANCIAL INFORMATION


in trade receivables during the period, offset by an increase in inventories of RMB6.3 million. Our net
cash used in operating activities for the ten months ended 31 October 2007 was the result of (i) an
increase in inventories of RMB10.9 million primarily due to acquired mineral ore as a result of our
acquisition of Nantaizi Mining in July 2007 and (ii) a decrease in trade and other payables of RMB1.7
million due to payments of other payables to third parties, net of receipt of trade deposits, offset by a
decrease in trade and other receivables of RMB3.7 million primarily due to payments of other
receivables by third parties.

      Net cash from operating activities was RMB273,000 in 2006, and net cash used in operating
activities was RMB4.3 million in 2007. Our net cash used in operating activities in 2007 was primarily
attributable to an increase in trade and other receivables of RMB15.7 million primarily as a result of
(i) advances to third parties and a receivable from a third party related to a sale of ores at Nantaizi
Mining and (ii) an outflow of RMB1.1 million in our operating cash flow before movements in working
capital, offset by an increase in trade and other payables of RMB2.4 million primarily due to deposits
from customers for purchase of concentrates. Furthermore, as we have a limited operating history and
had limited sales to offset our administrative expenses in 2007, we incurred a loss before taxation,
which also contributed to our net cash outflow. Our net cash from operating activities in 2006 was
primarily attributable to a decrease in consumables and spare parts. Net cash used in operating activities
in 2005 was RMB15,000, which was directly correlated with our loss before taxation of RMB15,000 for
that year as we did not have any mining operations in 2005.

  Net Cash used in Investing Activities

      Net cash used in investing activities for the ten months ended 31 October 2007 was RMB15.4
million, compared to net cash used in investing activities for the ten months ended 31 October 2008 of
RMB218.6 million. Our net cash used in investing activities for the ten months ended 31 October 2008
was primarily attributable to RMB212.4 million used in the purchases of property, plant and equipment
for mining and construction of infrastructure at our Gold Mines. Our net cash used in investing activities
for the ten months ended 31 October 2007 was the result of the purchases of plant and equipment for
mining and construction of infrastructure at our Gold Mines.

      Net cash used in investing activities was RMB528,000 and RMB24.3 million in 2006 and 2007,
respectively. Our net cash used in investing activities in 2007 was primarily attributable to RMB14.9
million used in the purchases of plant and equipment for mining and construction of infrastructure at our
Gold Mines and RMB9.5 million of advances to related parties. In 2006, our net cash used in investing
activities was primarily attributable to the purchases of plant and equipment for mining and construction
of infrastructure at the Luotuochang Gold Mine.

  Net Cash from Financing Activities

      Net cash from financing activities was RMB29.5 million for the ten months ended 31 October
2007, compared to RMB167.8 million for the ten months ended 31 October 2008. Our net cash from
financing activities for the ten months ended 31 October 2008 was primarily due to capital injections of
an aggregate of RMB387.5 million from Lead Honest (including a cash contribution by our controlling
shareholder) to subscribe for shares in our Company in July and August 2008 and an additional
investment by Huizhou Liyin of RMB10.7 million in July 2008, which were offset by repayments of
RMB238.2 million to our controlling shareholder and its related parties. Our net cash from financing
activities for the ten months ended 31 October 2007 was the result of advances from certain related
parties for the purchase of mining rights for the Shirengou Gold Mine.



                                                 – 230 –
                                 FINANCIAL INFORMATION


      Net cash from financing activities was RMB250,000 and RMB29.3 million in 2006 and 2007,
respectively, and was attributable to advances from certain related parties for the purchase of mining
rights and advances to other related parties.

  Analysis of Inventories

      Our inventories included ore and concentrates. Our average inventory turnover days is not yet
meaningful because we did not have any outstanding inventory as at 31 December 2005, 2006 or 2007,
as we only began our mining operations and sales of concentrates in November 2007. As at 31 October
2008, we had RMB6.3 million of inventories, which comprised primarily concentrates and mineral ores
that have not been processed into concentrates at period end. The inventory turnover for concentrates for
the ten months ended 31 October 2008 was 33 days. Inventory turnover for concentrates is calculated
based on the inventory of concentrates at the end of the period divided by the cost of sales times the
number of days during the period.

  Analysis of Trade Receivables and Trade and Other Payables

      We did not have any trade receivables in 2007 because we had minimal sales and our customers
were required to pay us in full before delivery of our concentrates. As our sales increased, we began to
have trade receivables as we allowed some of our customers to make a portion of their payment after
delivery based on the length of our relationships with the customers and the customers’ credit profile.
For sales of concentrates, our customers generally prepay an amount equal to approximately 10% to
20% of the total value of the concentrates to be sold at the time of signing the sales contracts.
Approximately 80% of the total value of the concentrates sold (including the prepayment) is required to
be settled by the customers in cash. The remaining 20% is treated as trade receivables, and must be paid
within 30 days after the sales have taken place. As at 31 October 2008, we had trade receivables of
RMB5.3 million.

       Our trade and other payables represent payables from the purchases of consumable auxiliary
materials from different suppliers, payables relating to the construction of mine infrastructure, various
tax payables and accruals such as production safety fees and mineral and woodland compensation fees.
The credit period granted by our suppliers ranges from 30 to 60 days. Our trade payables decreased
from RMB41,000 as at 31 December 2007 to nil as at 31 October 2008 as we generally pay for the
purchases of consumable auxiliary materials in cash. Our other payables increased from RMB2.4 million
as at 31 December 2007 to RMB64.3 million as at 31 October 2008 primarily due to payables of
RMB36.0 million due to contractors engaged to construct our mining infrastructure and ore processing
facilities, as well as various tax payables and accruals such as production safety fees and mineral and
woodland compensation fees.

  Analysis of Other Receivables

      We did not have any other receivables as at 31 December 2005 and 2006, as we only began our
mining operations and sales of concentrates in 2007. As at 31 December 2007, we had RMB20.6 million
of other receivables, of which RMB9.0 million was the result of sale of ores from the Nantaizi Gold
Mine to a third-party smelter and RMB10.0 million due from an unrelated third party. The amount due
from the sale of ores was settled in January 2008. The amount due from the unrelated third party was
transferred to a related third party, which subsequently transferred the liability to Mr Wu in February
2008. The RMB10.0 million receivable was subsequently offset against amounts owed by us to Mr Wu.




                                                – 231 –
                                                  FINANCIAL INFORMATION


As at 31 October 2008, we had RMB5.5 million of other receivables, primarily due to a deposit for a
purchase of a new mine, which was later refunded to us in November 2008 because the purchase was
not consummated, and prepayments for purchases of plant and equipment.

   Analysis of Net Current Liabilities

      As at 31 December 2005, 2006 and 2007 we had net current liability positions of RMB15,000,
RMB46.3 million and RMB219.0 million, respectively. The net current liability position as at 31
December 2005 was primarily the result of RMB35,000 due to Mr Wu. The net current liability position
as at 31 December 2006 was the result of RMB46.3 million collectively due to Mr Wu and companies in
which he has a beneficial interest. The net current liability position as at 31 December 2007 was
primarily the result of RMB247.7 million due to Mr Wu and companies in which he and Mr Wang
Zhentian have a beneficial interest, partially offset by RMB21.7 million in deposits, prepayments and
other receivables and RMB9.5 million due from companies in which Mr Wu and Mr Wang Zhentian
have a beneficial interest. All the amounts that we borrowed were primarily used to acquire mining
rights and plant, property and equipment. The amounts due to Mr Wu and companies in which he and
Mr Wang Zhentian have a beneficial interest were repayable on demand and were repaid in full in
August 2008.

       As at 31 October 2008, we had net current assets of RMB5.5 million.

   Working Capital

      Based on the unaudited management accounts of our Group as at 31 December 2008, being the
latest practicable date for the purpose of this net current assets statement, we had net current assets as
set out in the following table:
                                                                                                                                                                                      At 31 December 2008
                                                                                                                                                                                           (unaudited)
                                                                                                                                                                                      (RMB in thousands)
Current assets
Prepaid lease payments . . .          .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .                  125
Inventories . . . . . . . . . . . .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .                5,290
Trade and other receivables           .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .               21,336
Bank balances and cash . . .          .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .   .               42,493
                                                                                                                                                                                                  69,244
Current liabilities
Trade and other payables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                                                                                              22,928
Financial guarantee liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                                                                                              2,393
Tax payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                                                                                          8,587
                                                                                                                                                                                                  33,908
Net current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                                                                                          35,336

      As a gold mining company, approximately 80% of our sales are settled in cash within a month,
while we are able to obtain extended credit terms ranging from 30 to 60 days from our suppliers. As a
result, we believe we have a highly liquid operating position with strong cash from operating activities.




                                                                                              – 232 –
                                            FINANCIAL INFORMATION


Taking into account our cash from operating activities, net proceeds from the Global Offering and the
available bank facility, our Directors are of the opinion that we have sufficient working capital for our
present requirements and for at least the next 24 months from the date of this prospectus.

CAPITAL EXPENDITURES

      Capital expenditures consist of capital costs at our Gold Mines, which include purchase of mining
equipment, expansion of ore processing facilities, costs for constructing mining structures, costs for
obtaining and renewing mining and exploration licenses and certain other costs. In 2007 and the ten
months ended 31 October 2008, our principal capital requirements were in relation to the mining
operations at the Shirengou-Nantaizi Mining Complex and the construction of ore processing facilities at
the Nantaizi Gold Mine and the Luotuochang Gold Mine. The following table sets forth the historical
capital costs of our Gold Mines in 2007 and for the ten months ended 31 October 2008, excluding
capital expenditures due to the acquisition of subsidiaries and mining assets:
                                                                                                                     Ten months
                                                                                                Year ended             ended
                                                                                               31 December           31 October
                                                                                                   2007                 2008
                                                                                                    (RMB in thousands)
Shirengou-Nantaizi Mining Complex . . . . . . . . . . . . . . . . . . . .                              8,453              136,813
Luotuochang Gold Mine . . . . . . . . . . . . . . . . . . . . . . . . . . . . .                        6,428              111,645
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .            14,881               248,458

      Our planned future capital expenditures mainly comprise the capital requirements for our mining
operations and construction of additional production capacities at the Shirengou-Nantaizi Mining
Complex and the Luotuochang Gold Mine. We expended approximately RMB300.0 million in 2008 and
plan to expend approximately RMB86.3 million and RMB88.7 million in 2009 and 2010, respectively.
The following table sets forth the capital expenditure for the year ended 31 December 2008 and the
planned capital expenditures for the years ending 31 December 2009 and 2010:
                                                                                     For the
                                                                                   year ended          For the year ending
                                                                                  31 December             31 December
                                                                                        2008           2009              2010
                                                                                                 (RMB in millions)
Shirengou-Nantaizi Mining Complex . . . . . . . . . . . . . . .                             168.4             55.2              63.7
Luotuochang Gold Mine . . . . . . . . . . . . . . . . . . . . . . . .                       131.6             31.1              25.0
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .             300.0             86.3              88.7

      We may also incur capital expenditures after acquiring additional mining companies as well as
mining or exploration assets (including by exercising an option over the mining rights and assets in the
two gold mines in Qitai County, Xinjiang, the PRC) when the appropriate opportunities arise. Please
refer to the subsection headed ‘‘Business — Business Strategies’’ in this prospectus for a further
description of our growth strategy.




                                                                 – 233 –
                                  FINANCIAL INFORMATION


INDEBTEDNESS

      As at 31 October 2008, we did not have any short-term or long-term bank loans. We had a total of
RMB7.8 million due to our immediate holding company, Lead Honest, which was remitted to us for
general working capital purposes in accordance with the Subscription Agreement. The amount due to
Lead Honest was unsecured and non-interest bearing, and, in December 2008, Lead Honest waived the
right to repayment of such amount. Under the terms of the term-loan facility granted by Guangdong
Development Bank Co., Ltd. (Huizhou Branch), Fubon Industrial may draw down up to RMB200
million at any time from July 2008 until September 2010. Guangdong Development Bank Co., Ltd.
(Huizhou Branch) may terminate its loan commitment if: (i) Fubon Industrial’s business suffers serious
deterioration or loses its current business reputation, (ii) Fubon Industrial transfers property or funds to
third parties in an attempt to avoid its obligation to repay the loan, or (iii) any other condition occurs
that would result in Fubon Industrial not being able to repay the loan. Fubon Industrial does not have
any present intention to draw down on Guangdong Development Bank Co., Ltd. (Huizhou Branch)’s
loan facility.

      As at 31 December 2008, being the latest practicable date for the purpose of this indebtedness
statement, we did not have any indebtedness. As at 31 December 2008, we had banking facilities in the
total amount of RMB200 million, of which none were utilized.

CONTRACTUAL OBLIGATIONS AND CAPITAL COMMITMENTS

      As at 31 October 2008, we had contractual obligations consisting of operating leases which totaled
RMB286,000 with RMB270,000 due within one year and RMB16,000 due between two to five years.
Operating leases are rentals for certain of our office premises. As at 31 October 2008, we had RMB1.5
million in capital commitments in respect of purchases of equipment for the ore processing facilities at
the Luotuochang Gold Mine and the Nantaizi Gold Mine, which were not provided for in the
consolidated balance sheet.

CONTINGENT LIABILITIES

      As at 31 October 2008 and 31 December 2008, we had a contingent liability relating to a
guarantee given by certain members of our Group to secure the US$50 million Exchangeable Bonds
issued by Lead Honest. The guarantee will be released upon Listing. See the section headed
‘‘Exchangeable Bonds’’ in this prospectus.

DISCLAIMER

     Save as otherwise disclosed herein and apart from intra-group liabilities, we did not have any
mortgages, charges, debentures or other loan capital or bank overdrafts, finance leases or hire purchase
commitments, or liabilities under acceptances or acceptance credits outstanding at the close of business
on 31 October 2008.

      Our Directors, save as otherwise disclosed herein, have confirmed that there have been no material
changes in our commitments since 31 October 2008, and there has been no material change in our
contingent liabilities and indebtedness since 31 December 2008.




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                                 FINANCIAL INFORMATION


OFF-BALANCE SHEET TRANSACTIONS

      During the Track Record Period, we did not enter into any material off-balance sheet transactions
or arrangements.

MARKET RISKS

      Our market risks relate principally to fluctuations in commodity prices and, to a lesser extent,
fluctuations in exchange rates and interest rates and inflation.

  Commodity Price Risk

      The market price for gold and other metals contained in our concentrates have a significant effect
on our results of operation. The market price for these metals are influenced by numerous factors and
events that are beyond our control such as global fabrication and industrial demand, buying and selling
of gold by central banks, macroeconomic factors including inflation, interest rates and foreign exchange
rates and production cost levels in major metal-producing regions. See the section headed ‘‘Risk Factors
— Risks Relating to Our Business’’ in this prospectus for more details. We have not entered into
commodity derivative instruments or futures to hedge against any potential fluctuations in the SGE and
other commodity market prices for metals, in particular for gold contained in our concentrates.
Therefore, fluctuations in the metal prices will have a direct effect on our sales and profit.

  Foreign Exchange Risk

      We conduct our operations in the PRC and RMB is our reporting and functional currency. All of
our revenue and operating costs are denominated in RMB. As domestic metal prices (which are
expressed in RMB) move in line with global metal prices (which are typically expressed in U.S.
dollars), the price in RMB we can receive for our concentrates depends on the RMB : US dollar
exchange rate. The exchange rate of the RMB against the U.S. dollar and other foreign currencies
fluctuates and is affected by, among other things, the policies of the PRC government and changes in
the PRC’s and international political and economic conditions. We have not entered into foreign
exchange derivative instruments or futures to hedge against any potential fluctuations in the exchange
rate of the RMB against the U.S. dollar. For further information, see the section headed ‘‘Risk Factors
— Risks Relating to Conducting Operations in the PRC’’ in this prospectus.

  Interest Rate Risk

      Our income and operating cash flows are not substantially affected by changes in market interest
rates. We have no significant interest-bearing assets, except for cash and cash equivalents, nor any
interest-bearing liabilities. A reasonably possible change of 50 basis points in interest rates would have
no material impact on our profit or loss during the Track Record Period, nor would it materially impact
our equity. We have not used any interest rate swaps to hedge against interest rate risk.

  Inflation

     In recent years, the PRC has not experienced significant inflation, and therefore, inflation has not
had a significant effect on our business during the Track Record Period. According to the National
Bureau of Statistics of China, the change in the PRC’s Consumer Price Index was 1.8%, 1.5%, 4.8% and
6.7% in 2005, 2006 and 2007 and for the first ten months of 2008, respectively. We have not been
materially and adversely affected by the recent inflationary and deflationary pressures in the PRC.



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                                       FINANCIAL INFORMATION


PROFIT ESTIMATE

Estimated consolidated profit attributable