Apollo Future Mobility Group Limited — Proxy Solicitation & Information Statement 2010

Jan 20, 2010

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in any doubt as to any aspect of this circular or as to the action to be taken, you should consult your stockbroker or other licensed securities dealer, bank manager, solicitor, professional accountant or other professional adviser.

If you have sold or transferred all your shares in Ming Fung Jewellery Group Limited , you should at once hand this circular and the enclosed form of proxy to the purchaser or the transferee or to the bank, stockbroker or other licensed securities dealer or other agent through whom the sale or transfer was effected for transmission to the purchaser or the transferee.

This circular appears for information purposes only and does not constitute an invitation or offer to acquire, purchase or subscribe for securities of Ming Fung Jewellery Group Limited.

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this circular, 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 circular.

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MING FUNG JEWELLERY GROUP LIMITED

*

(Incorporated in the Cayman Islands with limited liability)

(Stock code: 860)

(1) DISCLOSEABLE TRANSACTION – ISSUE OF CONSIDERATION SHARES UNDER SPECIFIC MANDATE IN RELATION TO THE ACQUISITION OF 80% INTEREST IN A GOLD MINE IN CHI ZHOU

(2) DISCLOSEABLE TRANSACTION – ISSUE OF CONVERTIBLE NOTES AND ISSUE OF CONVERSION SHARES UNDER SPECIFIC MANDATE IN RELATION TO THE ACQUISITION OF 60% INTEREST IN A GOLD MINE IN INNER MONGOLIA

A notice of the EGM to be held at Room 1825, 18th Floor, Hutchison House, 10 Harcourt Road, Central, Hong Kong on Monday, 8 February 2010 at 2:30 p.m. is set out on pages 175 to 176 of this circular. A form of proxy for use by the Shareholders at the EGM is enclosed. Whether or not you intend to attend and vote at the EGM in person, please complete the form of proxy enclosed in accordance with the instructions printed thereon and return it to the Hong Kong branch share registrar of the Company, Tricor Tengis Limited at 26th Floor, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong as soon as practicable but in any event not later than 48 hours before the time appointed for holding the EGM. Completion and return of the form of proxy will not preclude you from attending and voting in person at the EGM should you so wish.

• for identification purpose only

21 January 2010

CONTENTS

	Page
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	7
Appendix I – Chi Zhou Independent Technical Report . . . . . . . . . . . . . .	44
Appendix II – Chi Feng Independent Technical Report . . . . . . . . . . . . . .	85
Appendix III – General Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	167
Notice of EGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	175

– i –

DEFINITIONS

In this circular, unless the context otherwise requires, the following terms shall have the following meanings:

• “Board”

• the board of Directors

• “Bright Ever”

Bright Ever Holdings Limited, a company incorporated under the laws of the British Virgin Islands, a whollyowned subsidiary of the Company and the purchaser under the Chi Feng Share Purchase Agreement

• “Chi Feng Acquisition”

• the acquisition of 100 ordinary shares of Gold Fortune, representing its entire issued share capital

• “Chi Feng Announcements”

• the Company’s announcements dated 25 August 2009, 19 November 2009 and 25 November 2009 respectively in relation to the Chi Feng Share Purchase Agreement

• “Chi Feng Conversion Shares”

• initially, up to 211,111,111 new ordinary Shares (subject to adjustment) having a par value of HK$0.01 each in the share capital of the Company, which may be issued upon the exercise of the conversion rights attached to the Chi Feng Convertible Notes

• “Chi Feng Convertible Notes”

the convertible notes in registered form comprising a total principal amount of HK$190,000,000, to be issued by the Company as consideration for the Chi Feng Acquisition, which may be convertible into Chi Feng Conversion Shares at the conversion price of HK$0.90

• “Chi Feng Group”

• Gold Fortune, Prime East, Success Gold, Sanxin Mining, Goldluxe and Chi Feng Guo Jin

• “Chi Feng Guo Jin”

(for identification purpose only, in English, Chi Feng Guo Jin Mining Company Limited), a limited liability company incorporated in the PRC, whose entire equity interest is owned by Goldluxe

• “Chi Feng Independent Technical Report”

• “Chi Feng Last Trading Day”

• the independent technical report prepared by the Technical Adviser in relation to the Chi Feng Mine which is set out in Appendix II to this circular 19 August 2009, being the last full trading day of the Shares before the date of the Chi Feng Share Purchase Agreement

– 1 –

DEFINITIONS

• “Chi Feng Mine”

• (for

• identification purpose only, in English, Zhu Jia Gou Gold Mine of Hong Hua Gou Village, Song Shan Area of Chi Feng City, Inner Mongolia of the PRC), with an area of 1.0989 square kilometres at (5 kilometres from

• south of Hong Hua Gou, Song Shan Area of Chi Feng City, Inner Mongolia of the PRC)

• “Chi Feng Mining License”

• the mining license held by Chi Feng Guo Jin granting the right to conduct mining and exploitation work for gold resources over the Chi Feng Mine pursuant to the Mineral Laws which was granted on 2 December 2008 and is valid until 2 December 2011

• “Chi Feng Share Purchase Agreement”

• the share purchase agreement dated 20 August 2009 entered into between Prime Fortune as vendor and Bright Ever as purchaser in respect of the Chi Feng Acquisition

• “Chi Feng Specific Mandate”

• the specific mandate in relation to the allotment and issue of the Chi Feng Conversion Shares

• “Chi Zhou Acquisition”

• the acquisition of 80 ordinary shares of Super Charm, representing 80% of its entire issued share capital

• “Chi Zhou Announcements”

• the Company’s announcements dated 11 June 2009 and 3 November 2009 respectively in relation to the Chi Zhou Share Purchase Agreement

• “Chi Zhou Consideration Shares”

• 100,000,000 new ordinary Shares which will be issued at an issued price of HK$0.80 as consideration for the Chi Zhou Acquisition on completion of the Chi Zhou Acquisition

• “Chi Zhou Donghai”

• (for identification purpose

• only, in English, Chi Zhou Donghai Mining Development Company Limited), a limited liability company incorporated in the PRC, whose entire equity interest is owned by East Ocean

• “Chi Zhou Exploration Licenses” the Houshan Exploration License and the Gaoling Exploration License

– 2 –

DEFINITIONS

• “Chi Zhou Group”

• Super Charm, East Ocean and Chi Zhou Donghai

• “Chi Zhou Guarantor”

• Tang Wai Ha Phoebe ( ), the legal and beneficial owner of Pretty Sweet

• “Chi Zhou Independent Technical the independent technical report prepared by the Report” Technical Adviser in relation to the Chi Zhou Mines which is set out in Appendix I to this circular

• “Chi Zhou Last Trading Date”

• 9 June 2009, being the last full trading day of the Shares before the date of the Chi Zhou Share Purchase Agreement

• “Chi Zhou Mines” the Houshan Mine and the Gaoling Mine

• “Chi Zhou Mining Licenses”

• the mining licenses expected to be issued by the relevant PRC authorities, allowing Chi Zhou Donghai to conduct mining and exploitation of gold resources in the Chi Zhou Mines

• “Chi Zhou Share Purchase the share purchase agreement dated 10 June 2009 entered Agreement” into between Pretty Sweet as vendor, Trismart as purchaser and the Chi Zhou Guarantor as guarantor in respect of the Chi Zhou Acquisition

• “Chi Zhou Specific Mandate”

• the specific mandate in relation to the allotment and issue of the Chi Zhou Consideration Shares

• “Company”

• Ming Fung Jewellery Group Limited, a company incorporated under the laws of the Cayman Islands whose registered office is at Cricket Square, Hutchins Drive, P.O. Box 2681, Grand Cayman, KY1-1111, Cayman Islands, whose Shares are listed on the Stock Exchange

• “Directors”

• directors of the Company

• “East Ocean”

East Ocean Worldwide Limited ( ), a company incorporated under the laws of Hong Kong, the entire issued share capital of which is held by Super Charm

– 3 –

DEFINITIONS

• “EGM”

• the extraordinary general meeting of the Company to be convened and held for the purpose of considering, if thought fit, approving the issue of Chi Feng Convertible Notes, the Chi Zhou Specific Mandate and the Chi Feng Specific Mandate

• “Gaoling Exploration License”

• the exploration license issued by the Department of Land Resources of Anhui Province on 28 November 2007, allowing Chi Zhou Donghai to conduct general exploration of gold-polymetallic ore in the Gaoling Mine within an area of approximately 5.72 square kilometres, valid until 28 November 2009. As confirmed by Pretty Sweet, the Gaoling Exploration License has been renewed for a further two years from 23 December 2009

• “Gaoling Mine” (for identification purpose only, in English, Gao Ling Polymetallic Mining Properties), located in Chi Zhou City of An Hui Province, the PRC

• “Gold Fortune” Gold Fortune Company Limited, a company incorporated under the laws of Anguilla, the entire issued share capital of which is held by Prime Fortune and the target company under the Chi Feng Share Purchase Agreement

• “Goldluxe”

• Goldluxe Limited ( ), a company incorporated under the laws of Hong Kong, the entire issued share capital of which is held by Sanxin Mining

• “Group”

• the Company and its subsidiaries

• “Hong Kong”

• Hong Kong Special Administration Region of the PRC

• “Houshan Exploration License”

• the exploration license issued by the Department of Land Resources of Anhui Province on 3 March 2008, allowing Chi Zhou Donghai to conduct in-depth exploration of gold-polymetallic ore in the Houshan Mine within an area of approximately 4.71 square kilometres, valid until 3 March 2010

• “Houshan Mine” (for identification purpose only, in English, Hou Shan Polymetallic Mining Properties), located in Chi Zhou City of An Hui Province, the PRC

– 4 –

DEFINITIONS

• “Latest Practicable Date”

• 20 January 2010, being the latest practicable date prior to the printing of this circular for the purpose of ascertaining certain information contained therein

• “Listing Rules” the Rules Governing the Listing of Securities on the Stock Exchange

• “Mineral Laws”

• the Mineral Resources Law ( ) of the PRC, as amended, modified or replaced from time to time, and such other rules, regulations, measures and policies formulated and promulgated by the governmental agencies or public bodies of the PRC (including without limitation national, provincial and other local authorities)

• “PRC” People’s Republic of China

• “Pretty Sweet” Pretty Sweet Limited, a company incorporated under the laws of the British Virgin Islands and the vendor under the Chi Zhou Share Purchase Agreement

• “Prime East” Prime East International Company Limited, a company incorporated under the laws of Anguilla, the entire issued share capital of which is held as to 9.1% by Gold Life Company Limited and 90.9% by Gold Fortune

• “Prime Fortune” Prime Fortune Company Limited, a company incorporated under the laws of Anguilla and the vendor under the Chi Feng Share Purchase Agreement

• “Sanxin Mining”

• Sanxin Mining Company Limited ( ), a company incorporated under the laws of Hong Kong, the entire issued share capital of which is held as to 66% by Success Gold and 34% by a party independent of the Company and its connected persons (as defined under the Listing Rules)

• “Shares”

• ordinary shares of HK$0.01 each in the share capital of the Company

• “Shareholders” shareholders of the Company

• “Stock Exchange”

The Stock Exchange of Hong Kong Limited

– 5 –

DEFINITIONS

• “Success Gold”

Success Gold Limited ( ), a company incorporated under the laws of Hong Kong, the entire issued share capital of which is held by Prime East

• “Super Charm”

Super Charm Holdings Limited ( ), a company incorporated under the laws of the British Virgin Islands, the entire issued share capital of which is held by Pretty Sweet and the target company under the Chi Zhou Share Purchase Agreement

• “Technical Adviser”

SRK Consulting China Limited

• “Trismart”

Trismart Group Limited ( ), a company incorporated under the laws of the British Virgin Islands, a wholly-owned subsidiary of the Company and the purchaser under the Chi Zhou Share Purchase Agreement

• “HK$”

Hong Kong dollars, the lawful currency of Hong Kong

• “RMB”

Renminbi, the lawful currency of the PRC

• “US$”

• US dollars, the lawful currency of the United States of America

• “%” per cent.

– 6 –

LETTER FROM THE BOARD

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MING FUNG JEWELLERY GROUP LIMITED

*

(Incorporated in the Cayman Islands with limited liability)

(Stock code: 860)

Executive Directors: Mr. Wong Chi Ming, Jeffry Mr. Chung Yuk Lun Mr. Yu Fei, Philip

Independent non-executive Directors: Mr. Lee Pak Chung Mr. Chan Man Kiu Mr. Tam Ping Kuen, Daniel

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

Head office and principal place of business in Hong Kong Room 1825, 18th Floor Hutchison House 10 Harcourt Road, Central Hong Kong

21 January 2010

• To the Shareholders and, for information only, holders of share options and convertible bonds and warrants of the Company

Dear Sir/Madam,

(1) DISCLOSEABLE TRANSACTION – ISSUE OF CONSIDERATION SHARES UNDER SPECIFIC MANDATE IN RELATION TO THE ACQUISITION OF 80% INTEREST IN A GOLD MINE IN CHI ZHOU

(2) DISCLOSEABLE TRANSACTION – ISSUE OF CONVERTIBLE NOTES AND ISSUE OF CONVERSION SHARES UNDER SPECIFIC MANDATE IN RELATION TO THE ACQUISITION OF 60% INTEREST IN A GOLD MINE IN INNER MONGOLIA

INTRODUCTION

Reference is made to (1) the Chi Zhou Announcements in relation to the acquisition of 80% interest in a gold mine in Chi Zhou City of An Hui Province; and (2) the Chi Feng Announcements in relation to the acquisition of 60% interest of a gold mine in Inner Mongolia.

• for identification purpose only

– 7 –

LETTER FROM THE BOARD

On 10 June 2009, Trismart, a wholly-owned subsidiary of the Company, entered into the Chi Zhou Share Purchase Agreement with Pretty Sweet to acquire 80% of the entire issued share capital of Super Charm at a consideration of HK$80,000,000. Completion of the Chi Zhou Acquisition is conditional upon the obtaining of the Shareholders’ approval to issue and allot the Chi Zhou Consideration Shares under the Chi Zhou Specific Mandate and the fulfillment of other conditions precedent as set out in the paragraph headed “6. Conditions precedent” under the section headed “The Chi Zhou Acquisition – A. The Chi Zhou Share Purchase Agreement” below.

On 20 August 2009, Bright Ever, a wholly-owned subsidiary of the Company, entered into the Chi Feng Share Purchase Agreement with Prime Fortune to acquire the entire issued share capital of Gold Fortune at a consideration of HK$190,000,000. Completion of the Chi Zhou Share Purchase Agreement is conditional upon the obtaining of the Shareholders’ approval to issue the Chi Feng Convertible Notes and the obtaining of the Shareholders’ approval to issue and allot the Chi Feng Conversion Shares under the Chi Feng Specific Mandate and the fulfillment of other conditions precedent as set out in the paragraph headed “6. Conditions precedent” under the section headed “The Chi Feng Acquisition – A. The Chi Feng Share Purchase Agreement” below.

The purpose of this circular is to provide you with, among other things, (i) further information in relation to the Chi Zhou Share Purchase Agreement and the Chi Zhou Mines; (ii) further information in relation to the Chi Feng Share Purchase Agreement and the Chi Feng Mine; and (iii) a notice convening the EGM at which necessary resolutions will be proposed to seek your approval of the issue of the Chi Feng Convertible Notes, the Chi Zhou Specific Mandate and the Chi Feng Specific Mandate.

THE CHI ZHOU ACQUISITION

A. The Chi Zhou Share Purchase Agreement

1. Date

10 June 2009

2. Parties

• (1) Trismart, a wholly-owned subsidiary of the Company.

• (2) Pretty Sweet, an investment holding company established in the British Virgin Islands with limited liability.

• (3) Chi Zhou Guarantor, the legal and beneficial owner of Pretty Sweet.

– 8 –

LETTER FROM THE BOARD

To the best knowledge, information and belief of the Directors and after making all reasonable enquiries, Pretty Sweet and its ultimate beneficial owner (i.e. Ms. Tang Wai Ha Phoebe, the Chi Zhou Guarantor) are third parties independent of the Company and its connected persons (as defined in the Listing Rules) and is not related to the ultimate beneficial owner of Prime Fortune, the vendor under the Chi Feng Share Purchase Agreement. The Company was acquainted with Pretty Sweet and its ultimate beneficial owner through business networks of the Directors.

3. Assets to be acquired

Under the Chi Zhou Share Purchase Agreement, Trismart conditionally agreed to purchase and Pretty Sweet agreed to sell 80 ordinary shares of Super Charm, representing 80% of its entire issued share capital, for a consideration of HK$80,000,000. On completion of the Chi Zhou Acquisition, Super Charm will become a non-wholly owned subsidiary of the Company and held as to 80% indirectly by the Company and 20% by Pretty Sweet.

As at the Latest Practicable Date, Super Charm held the entire issued share capital of East Ocean, which in turn held the entire equity interest in Chi Zhou Donghai. Chi Zhou Donghai was the holder of the Chi Zhou Exploration Licenses in respect of the Chi Zhou Mines.

4. Consideration

The consideration for the Chi Zhou Acquisition is HK$80,000,000 and will be satisfied by Trismart procuring the Company to allot and issue to Pretty Sweet (or its nominee(s)) the Chi Zhou Consideration Shares, credited as fully paid, at the issue price of HK$0.80 per Consideration Share upon completion of the Chi Zhou Acquisition. The Chi Zhou Consideration Shares represented approximately 9.45% of the issued share capital of the Company as at the Latest Practicable Date and approximately 9.45% of the issued share capital of the Company as enlarged by the allotment and issue of the Chi Zhou Consideration Shares.

5. Basis of the Consideration

The consideration for the Chi Zhou Acquisition was arrived at based on normal commercial terms after arm’s length negotiations between the parties to the Chi Zhou Share Purchase Agreement and by reference to (i) the estimated amount of gold and other mineral reserves in the Chi Zhou Mines which were discovered through preliminary exploration conducted by Pretty Sweet; (ii) the prices of gold when the Chi Zhou Share Purchase Agreement was entered into; and (iii) other factors as set out in the paragraph headed “Reasons for entering into the Chi Zhou Acquisition and the Chi Feng Acquisition” below. The consideration was arrived at based on the results of the preliminary exploration work carried out by (for identification purpose only, in English, An Hui Provincial Institute of Exploration and Technology)

– 9 –

LETTER FROM THE BOARD

(“ APIET ”) in 2008 which were provided to the Company by Pretty Sweet. Based on the preliminary exploration report issued by APIET, the long-term gold reserve estimate ( ) in the Houshan Mine was 8.68 tonnes and that in Gaoling Mine was 7.14 tonnes.

Background and experience of APIET (provided by Pretty Sweet)

APIET is a national exploration association in the PRC. The first exploration team of AHETA was formed in 1978. APIET has been under the jurisdiction of the People’s Government of An Hui Province, PRC since July 1999 and it is directly under the Bureau of Geology and Mineral Exploration of An Hui Province ( ). Over the years, APIET has been focusing on the development of the Institute of Integrated Electrolysis Mineral Exploration ( ). APIET is currently a nationally renowned mining consultant association and has a leading role in the geology and mineral exploration field.

APIET is equipped with advanced technology and equipment among all other exploration institutes in the PRC and it is possessed with the most powerful integrated exploration capacity. APIET has skilled engineers who have extensive experience in mineral exploration and are familiar with the codes for reporting of reserves in the PRC.

APIET has extensive experience in mineral exploration in different kinds of mines located in different provinces in the PRC. It has also provided mineral exploration services to several listed companies in Hong Kong and the PRC, including Zijin Mining Group Co., Ltd. (listed in Hong Kong, stock code 2899), Nanjing Iron and Steel Co. Ltd. (listed in Shanghai, stock code 600282) and Inner Mongolia Yili Industrial Group Co., Ltd. (listed in Shanghai, stock code 600887).

The price of gold as at the date when the Chi Zhou Share Purchase Agreement was entered into was US$956 per ounce.

The Company did not perform any valuation on the Chi Zhou Mines as an independent assessment on the Chi Zhou Mines have been conducted by the Technical Adviser and the valuation of the Chi Zhou Mines can be estimated based on the estimated or predicted resource as indicated in the Chi Zhou Independent Technical Report and the market price of gold. Based on the reserve estimate from the findings by APIET and the Technical Adviser and the price of gold as at the date when the Chi Zhou Share Purchase Agreement was entered into, and the expected expenses to exploit the gold reserves, the valuation of the Chi Zhou Mines was approximately US$400 million which is at a premium to the consideration. As such, the consideration for the Chi Zhou Acquisition is considered by the Board as fair and reasonable and in the interests of the Company and the Shareholders as a whole.

– 10 –

LETTER FROM THE BOARD

6. Conditions Precedent

Completion of the Chi Zhou Acquisition is subject to the following conditions precedent:

• (A) Trismart having completed and satisfied in its absolute discretion with the results of the due diligence investigation in respect of, inter alia, the financial, business, operational and legal aspects of the Chi Zhou Group and the Chi Zhou Mines. It is acknowledged by Pretty Sweet and the Chi Zhou Guarantor that whether or not Trismart is satisfied with the results of the due diligence investigation is entirely within the sole discretion of Trismart and is not subject to any matters which may be disclosed of by Pretty Sweet;

• (B) the receipt by Trismart of a legal opinion on PRC laws (in such form and substance to its satisfaction) covering, among others, the following major issues:

• (I) Chi Zhou Donghai having been duly established and validly subsisting;

• (II) Chi Zhou Donghai having obtained all relevant operating permits required at the time of its establishment and such permits remaining valid;

• (III) the legality of the operation and business of Chi Zhou Donghai;

• (IV) Chi Zhou Donghai having obtained the Chi Zhou Exploration Licences in respect of Chi Zhou Mines and such licences are in full force and effect;

• (V) (if required) all necessary approvals, authorisations, consents, registrations and filings required having been obtained and effected by Chi Zhou Donghai in relation to the Chi Zhou Share Purchase Agreement, and the transactions contemplated thereunder; and

• (VI) such other aspects of PRC laws as Trismart may reasonably consider appropriate or relevant to the transactions contemplated under the Chi Zhou Share Purchase Agreement;

– 11 –

LETTER FROM THE BOARD

• (C) the receipt by Trismart of a legal opinion on laws of the British Virgin Islands (in such form and substance to its satisfaction) covering, inter alia, the due incorporation of Super Charm and such other aspects of the laws of the British Virgin Islands as Trismart may reasonably consider appropriate or relevant to the transactions contemplated under the Chi Zhou Share Purchase Agreement;

• (D) Trismart having obtained, and satisfied with, a technical report issued by a technical adviser acceptable to Trismart that indicates the Chi Zhou Mines have indicated gold resources of not less than 15 tonnes and the average grading of the gold resources is not less than 3 grams per tonne;

• (E) Trismart having satisfied in its absolute discretion that Pretty Sweet has extended the Chi Zhou Exploration Licences for a further two years commencing on or about the expiry dates of the respective Chi Zhou Exploration Licences;

• (F) (if required) all requisite waivers, consents and approvals from any relevant governments or regulatory authorities of Hong Kong in connection with the transactions contemplated under the Chi Zhou Share Purchase Agreement having been obtained;

• (G) (if required) the Company, having convened an EGM at which resolutions shall have been duly passed by its Shareholders to approve the Chi Zhou Share Purchase Agreement and the transactions (or any of them) contemplated thereunder (including without limitation to the allotment and issue of the Chi Zhou Consideration Shares);

• (H) the Listing Committee of the Stock Exchange having granted or having agreed to grant the listing of, and permission to deal in, the Chi Zhou Consideration Shares;

• (I) Trismart being satisfied, from the date of the Chi Zhou Share Purchase Agreement and at any time before the completion of the Chi Zhou Acquisition, that the representations, warranties and undertakings given under the Chi Zhou Share Purchase Agreement remain true and accurate in all material respects, not misleading or in breach in any material respect and that no events have suggested that there were any breach in any material respect of any warranties or other provisions of the Chi Zhou Share Purchase Agreement by Pretty Sweet;

• (J) Trismart being satisfied that, from the date of the Chi Zhou Share Purchase Agreement to completion of the Chi Zhou Acquisition, there has not been any change which has a material and adverse effect on the financial position, business or operations of any of the company in Chi Zhou Group; and

– 12 –

LETTER FROM THE BOARD

• (K) Pretty Sweet having provided to Trismart with a written confirmation or other documents, showing that all fees required to be paid by Chi Zhou Donghai to the Department of Land and Resources of the PRC and/or other governmental authorities in respect of exploration of Chi Zhou Mines have been fully paid and there is no outstanding fees.

Pretty Sweet shall use all reasonable endeavours to ensure that the above conditions are fulfilled as soon as practicable and in any event not later than 31 December 2009 or such later date to be agreed in writing between Pretty Sweet and Trismart. By way of a written agreement between Pretty Sweet and Trismart, the long stop date was extended from 31 December 2009 to 31 January 2010.

Trismart shall be entitled by notice given to Pretty Sweet to waive compliance with or fulfilment of any of the above conditions.

At the time of negotiating the terms of the Chi Zhou Acquisition, in particular, the consideration of HK$80,000,000, the parties to the Chi Zhou Share Purchase Agreement have made reference to, among other things, (i) the estimated amount of gold and other mineral reserves in the Chi Zhou Mines which were discovered through preliminary exploration conducted by the Pretty Sweet; and (ii) the prices of gold when the Chi Zhou Share Purchase Agreement was entered into. Pretty Sweet has provided to the Trismart a preliminary exploration report (the “ Preliminary Report ”) issued by APIET in 2008. According to the Preliminary Report, the long-term gold reserves estimate ( ) in the Houshan Mine was 8.68 tonnes and that in the Gaoling Mine was 7.14 tonnes, i.e., a total amount of 15.82 tonnes. Based on such information, the parties to the Chi Zhou Share Purchase Agreement agreed that the technical report to be obtained by Trismart should indicate, inter alia, that the long-term gold reserves estimate ( ) in the Chi Zhou Mines be not less than 15 tonnes. To this end, one of the conditions precedent (the “ Condition (D) ”) under the Chi Zhou Share Purchase Agreement provides that “the Purchaser (Trismart) having obtained, and satisfied with, a technical report issued by a technical adviser acceptable to the Purchaser (Trismart) that indicates the Target Mines (the Chi Zhou Mines) have an aggregate indicated gold resources of not less than 15 tonnes and the average grading of the gold resources is not less than 3 gram per tonne”.

The Company engaged the Technical Adviser to prepare an independent technical assessment report on the Chi Zhou Mines. The Chi Zhou Independent Technical Report was prepared based on a three number system (categories 333 and 334) adopted by the PRC and provided both the estimate of reserves at the current stage of exploration and the long-term gold reserves estimate. The Chi Zhou Independent Technical Report states that, based on the samples obtained by the geologists of the Technical Adviser during the site visits to the Chi Zhou Mines (total 10 mineralised gold bodies have a 333 category gold mineral resources of about 18,600 metric tonnes with an average grade 4.72 grams per tonne and a 334 category gold mineral resources of 37,379 metric tonnes with an average grade 2.34 grams per tonne), the Chi Zhou Mine has a 333 category gold mineral resources of approximately 87.73 kilograms and a 334 category gold mineral resources of

– 13 –

LETTER FROM THE BOARD

approximately 87.78 kilograms. The Chi Zhou Independent Technical Report further states that upon completion of further exploration work at the Chi Zhou Mines, the predicted metal gold resources at the Houshan Mines may reach 8.69 tonnes and the predicted metal gold resources at the Gaoling Mines may reach 7.14 tonnes. In other words, according to the Chi Zhou Independent Technical Report, the Chi Zhou Mines will have a long-term gold reserves estimate of approximately 15.83 tonnes.

Based on the amount of predicted metal gold resources as indicated in the Chi Zhou Independent Technical Report, the Directors are of a view that Condition (D) has been fulfilled. In forming its opinion, the Board put much reliance on both the findings by APIET and the Technical Adviser as APIET is a prominent technical adviser in the PRC with extensive experience in exploration work in the Anhui Province and the Technical Adviser is an internationally recognised mining consultant firm.

The Company has also compared the consideration for the Chi Zhou Acquisition to other recent acquisitions of gold mines by companies listed on the Stock Exchange based on their respective gold reserve estimate and has noted that the Chi Zhou Mines are sold at a discount.

The parties have not considered putting the Chi Zhou Consideration Shares in an escrow agent before certifying the amount of gold resources as it is not common market practice. Pretty Sweet would not have accepted such an arrangement.

7. Completion

Completion of the Chi Zhou Acquisition shall take place on a date which is the third business day after the date on which all the conditions precedent are satisfied or waived or such other date as Pretty Sweet and Trismart may agree in writing.

Upon completion, Trismart will hold 80% of the entire issued share capital of Super Charm.

8. The Guarantee

In consideration of Trismart entering into the Chi Zhou Share Purchase Agreement, the Chi Zhou Guarantor has unconditionally and irrevocably guaranteed to Trismart the due and punctual performance and observance by Pretty Sweet of all its obligations, commitments, undertakings, warranties, indemnities and covenants under or pursuant to the Chi Zhou Share Purchase Agreement and has agreed to indemnify Trismart against all losses, damages, costs and expenses (including legal costs and expenses) which Trismart may suffer through or arising from any breach by Pretty Sweet of such obligations, commitments, warranties, undertakings, indemnities or covenants.

– 14 –

LETTER FROM THE BOARD

B. Information on Super Charm, East Ocean and Chi Zhou Donghai

Corporate Structure of the Chi Zhou Group as at the Latest Practicable Date

==> picture [131 x 273] intentionally omitted <==

----- Start of picture text -----

Pretty Sweet
(British Virgin Islands)
100%
Super Charm
(British Virgin Islands)
100%
East Ocean
(Hong Kong)
100%
Chi Zhou Donghai
(PRC)
Chi Zhou Exploration
Licenses
----- End of picture text -----

Corporate Structure of the Chi Zhou Group immediately upon completion of the Chi Zhou Acquisition

==> picture [297 x 270] intentionally omitted <==

----- Start of picture text -----

Pretty Sweet Trismart
(British Virgin Islands) (British Virgin Islands)
20% 80%
Super Charm
(British Virgin Islands)
100%
East Ocean
(Hong Kong)
100%
Chi Zhou Donghai
(PRC)
Chi Zhou Exploration
Licenses
----- End of picture text -----

– 15 –

LETTER FROM THE BOARD

1. Super Charm

Super Charm was incorporated under the laws of British Virgin Islands on 8 June 2006 and is an investment holding company.

2. East Ocean

East Ocean was incorporated under the laws of Hong Kong on 2 March 2006 and is an investment holding company.

		**For the **	year ended
		31 March	31 March
		2008	2009
		(unaudited)	(unaudited)
Net	profit/(loss) before taxation	HK$(142,140)	HK$(2,650)
Net	profit/(loss) after taxation	HK$(142,140)	HK$(2,650)
			As at
			31 March
			2009
			(unaudited)
Net	asset/(liabilities)		HK$(159,840)

3. Chi Zhou Donghai

Chi Zhou Donghai was established under the laws of the PRC on 21 September 2006 and is engaged in the production and sale of metal and non-metal ores and provision of relevant technical service.

		**For the **	year ended
		31 December	31 December
		2007	2008
		(unaudited)	(unaudited)
Net	profit/(loss) before taxation	RMB0	RMB0
Net	profit/(loss) after taxation	RMB0	RMB0
			As at
			31 December
			2008
			(unaudited)
Net	asset/(liabilities)		RMB5,930,700

– 16 –

LETTER FROM THE BOARD

C. Information on the Chi Zhou Mines

The Chi Zhou Mines are located within the territory of Chi Zhou City, Anhui Province, PRC.

Houshan Mine is located at the southwest of Chi Zhou, about 26 kilometres of the No.318 National Highway, and about 20 kilometres of the local well paved road accessing to the area under the Houshan Exploration License with the geographic coordinates being latitude 30˚20’15” to 30˚21’45”N and longitude 117˚22’00” to 117˚23’15”E.

Gaoling Mine is located at the east of Chi Zhou, about 30 kilometres of the No.318 National Highway, and about 10 kilometres of the local paved road accessing to the area under the Gaoling Exploration License with the geographic coordinates being latitude 30˚39’45” to 30˚41’00”N and longitude 117˚46’15” to 117˚48’00”E.

Both Houshan Mine and Gaoling Mine are equipped with extensive transportation system, rich manpower and have a complete electricity network.

The Company has instructed the PRC lawyers, Jun Ze Jun Law Offices, to carry out legal due diligence investigation to Chi Zhou Donghai. The PRC lawyers in their due diligence report dated 24 August 2009 and their two supplemental due diligence reports dated 17 September 2009 and 11 November 2009 respectively, confirmed that Chi Zhou Donghai has obtained the valid Chi Zhou Exploration Licenses in respect of the Chi Zhou Mines from the Department of Land and Resources of Anhui Province. The Houshan Exploration License is valid from 3 March 2008 to 3 March 2010, granting the right to carry out detail exploration work on an area of about 4.71 square kilometres in the Houshan Mine. The Gaoling Exploration License is valid from 28 November 2007 to 28 November 2009, granting the right to carry out general exploration work on an area of about 5.72 square kilometres in the Gaoling Mine. As confirmed by Pretty Sweet, the Gaoling Exploration License has been renewed for a further 2 years from 23 December 2009. The Company has the right to carry out exploration work on the Chi Zhou Mines and a priority to obtain the mining licenses of the Chi Zhou Mines under the existing PRC laws.

Exploration work has been carried out on the Chi Zhou Mines. It is expected that further exploration work will be carried out upon completion of the Chi Zhou Acquisition. It is expected that completion of the Chi Zhou Acquisition will take place in February 2010 and the further exploration work will be completed in or around July 2010. Upon completion of the further exploration work, necessary facilities such as water supply and electricity supply will be constructed which is expected to complete in or around July 2011. As such, the Group believes that the Chi Zhou Mines will begin to generate revenue from July 2011. The exploration work and future exploitation work will be supervised by Mr. Wong Kwok Ming and Professor Lu De Shun, whose biographies are set out in the paragraph headed “Mining Experts to be Employed by the Company” below.

To the best knowledge, information and belief of the Directors and after making all reasonable enquiries, there is no claim in relation to the rights under the Chi Zhou Exploration Licences made or notified by third parties against the Company.

– 17 –

LETTER FROM THE BOARD

For further details of the Chi Zhou Mines and estimate of proven exploitable resources and the nature and quality of the said resources, please refer to the Chi Zhou Independent Technical Report set out in Appendix I to this circular.

D. Source of funding for the Chi Zhou Acquisition

The consideration of the Chi Zhou Acquisition will be satisfied by the allotment and issue of the Chi Zhou Consideration Shares to Pretty Sweet (or its nominee(s)) under the Chi Zhou Specific Mandate.

E. Exploration technique to be used by the Company

Underground mining will be adopted to explore both Gaoling Mine and Houshan Mine. Shaft wells extending down 400 metres with level courses and air ways will be built.

F. Sufficiency of working capital

The initial investment cost required for the construction and installation of new facilities and infrastructure for the exploration of the Chi Zhou Mines to be incurred in the first 18 months following completion of the Chi Zhou Acquisition is expected to be approximately RMB76 million. The Company currently envisages that such investment will be funded by internal resources of the Group.

It is expected that the construction and installation works will be completed within 18 months from the date of completion of the Chi Zhou Acquisition and the Chi Zhou Mines will start to generate income. The Company estimates a further amount of RMB10 million will be needed to enable the Group to exploit the proven reserves of the Chi Zhou Mines and commence recoveries on a commercial scale. The Company estimates that it will take approximately 6 months, i.e. from the 19th month to the 24th month after completion of the Chi Zhou Acquisition to achieve the aforesaid. The Directors are of the opinion that, the Group will have sufficient working capital, in the absence of unforeseen circumstances, for its present requirements in the next 24 months from the date of completion of the Chi Zhou Acquisition.

G. The issue price of the Chi Zhou Consideration Shares

The issue price of HK$0.80 per Chi Zhou Consideration Share was determined after arm’s length negotiation between Trismart and Pretty Sweet with reference to the average closing price of the Shares for the last 5 trading days up to an including the Chi Zhou Last Trading Day. The issue price represents:

• (i) a premium of approximately 11.11% to the closing price of HK$0.720 per Share as quoted on the Stock Exchange on the Chi Zhou Last Trading Day;

• (ii) a premium of approximately 9.89% to the average closing price of HK$0.728 per Share as quoted on the Stock Exchange for the last 5 trading days up to an including the Chi Zhou Last Trading Day.

– 18 –

LETTER FROM THE BOARD

THE CHI FENG ACQUISITION

A. The Chi Feng Share Purchase Agreement

1. Date

20 August 2009

2. Parties

• (1) Bright Ever, a wholly-owned subsidiary of the Company.

• (2) Prime Fortune, an investment holding company established in Anguilla with limited liability. To the best knowledge, information and belief of the Directors and after making all reasonable enquiries, Prime Fortune and its ultimate beneficial owner, Mr. Eric Wei, are third parties independent of the Company and its connected persons (as defined in the Listing Rules) and are not related to the ultimate beneficial owner of Pretty Sweet, the vendor under the Chi Zhou Share Purchase Agreement. The Company was acquainted with Prime Fortune and its ultimate beneficial owner through business network of the Directors.

3. Assets to be acquired

Under the Chi Feng Share Purchase Agreement, Bright Ever agreed to purchase and Prime Fortune agreed to sell the entire issued share capital of Gold Fortune, at the consideration of HK$190,000,000. On completion of the Chi Feng Acquisition, Gold Fortune and its subsidiaries will become wholly-owned subsidiaries of the Company. Gold Fortune effectively holds 60% of Chi Feng Guo Jin, which in turn is the holder of the Chi Feng Mining License in respect of the Chi Feng Mine.

4. Consideration

The consideration for the Chi Feng Acquisition is HK$190,000,000 and will be satisfied by Bright Ever procuring the Company to issue to Prime Fortune the Chi Feng Convertible Notes upon completion of the Chi Feng Acquisition. The terms of the Chi Feng Convertible Notes are further described in the paragraph headed “B. Principal Terms of the Chi Feng Convertible Notes” below.

5. Basis of the consideration

The consideration for the Chi Feng Acquisition was arrived at based on normal commercial terms after arm’s length negotiations between the parties to the Chi Feng Share Purchase Agreement and by reference to (i) the estimated amount of gold resources in the Chi Feng Mine; (ii) the prices of gold at the time when the Chi Feng Share Purchase Agreement was entered into; and (iii) other factors set out in the paragraph headed “Reasons for entering into the Chi Zhou Acquisition and the Chi Feng Acquisition” below. The consideration was also arrived at based on the results of the preliminary exploration work carried out by two PRC technical advisers in March 2008 and March 2009 respectively which were provided to the Company by Prime Fortune.

– 19 –

LETTER FROM THE BOARD

One of the PRC technical advisers (“ PRC Technical Adviser 1 ”) estimated and reported that four mineralized bodies at the Chi Feng Mine contain 112b category of gold deposit of 276,411 tonnes with 2,525 kilograms contained gold with an average grade of 9.13 grams per tonne and 333 category gold deposit of 66,736 tonnes with 628 kg contained gold with an average grade of 9.41 grams per tonne.

The other PRC technical adviser (“ PRC Technical Adviser 2 ”) estimated and reported that the other nine mineralized bodies at the Chi Feng Mine contain 333 category gold deposit of 87,319 tonnes with an average gold grade of 51.89 grams per tonne and 334 category gold deposit of 140,778 tonne with an average grade of 51.89 grams per tonne. As published in its official website, PRC Technical Adviser 2 is an exploration company established in 1987 and is a subsidiary of the Development and Research Centre of China Geological Survey ( ). It has obtained the necessary professional certificates and licenses to carry out exploration work. In the twenty years since its establishment, it has been awarded with the Land and Resources Scientific Technology Award ( ) five times by the Land and Resources Department of the PRC. It also has extensive experience in mineral exploration in different kind of mines located in different provinces in the PRC.

The Company was unable to obtain information on PRC Technical Adviser 1 as it does not have an official website. Although the two PRC technical advisers are not technical advisers of international repute, the Company understands that these two technical advisers have experience in providing advices to the mining companies in the PRC. The Company had heard of the two PRC technical advisers prior to the entering into the Chi Feng Share Purchase Agreement and therefore has relied on both of their reports, among other matters, in determining the consideration under the Chi Feng Share Purchase Agreement.

Furthermore, at the time of negotiating the terms of the Chi Feng Share Purchase Agreement, the Company was prepared and intended to instruct an independent technical adviser to conduct an independent assessment on the Chi Feng Mine to verify the results of the preliminary exploration work. Based on such arrangement, the Board considered that it was reasonable for Bright Ever to negotiate the consideration for the Chi Feng Acquisition with Prime Fortune based on the findings from the preliminary exploration work conducted by the two PRC technical advisers.

The price of gold as at the date when the Chi Feng Share Purchase Agreement was entered into was US$940 per ounce.

The Company did not perform a valuation on the Chi Feng Mine as an independent assessment on the Chi Feng Mine has been conducted by the Technical Adviser and the valuation of the Chi Feng Mine can be estimated based on the estimated or predicted resource as indicated in the Chi Feng Independent Technical Report and the market price of gold.

Based on the reserve estimate from the findings by the two PRC technical advisers and the price of gold as at the date of the Chi Feng Share Purchase Agreement, and the expected expenses to exploit the gold reserves, the valuation of the Chi Feng Mines was

– 20 –

LETTER FROM THE BOARD

approximately US$454 million which is at a premium to the consideration. As such, the consideration for the Chi Feng Acquisition is considered by the Board as fair and reasonable and in the interests of the Group and of the Shareholders as a whole.

The Company has not considered other fund raising method apart from issuing the Chi Feng Convertible Notes. The consideration was agreed upon between the parties to the Chi Feng Share Purchase Agreement through arm’s length negotiations. Prime Fortune offered to sell the Chi Feng Mine to Bright Ever in consideration for the Chi Feng Convertible Notes. Considering the fact that the conversion price of the Chi Feng Convertible Notes is at a premium to the Share price of the Company around the Chi Feng Last Trading Date, the Board is of the view that the consideration for the Chi Feng Acquisition is fair and reasonable and in the interests of the Group and of the Shareholders as a whole. As such, Bright Ever accepted the offer. The Company did not use debt or its cash to finance the Chi Feng Acquisition in order to maintain the cashflow of the Company.

6. Conditions Precedent

Completion of the Chi Feng Acquisition is conditional upon the following conditions precedents:

• (A) Bright Ever and its advisers having completed and satisfied in their absolute discretion with the results of a legal, financial, business and other due diligence investigation in respect of the assets, liabilities, businesses, prospects and other affairs of the Chi Feng Group as Bright Ever may in its sole and absolute discretion consider necessary or desirable;

• (B) Bright Ever having received and satisfied in its absolute discretion a legal opinion issued by King & Wood covering matters including, among other things, (I) Chi Feng Guo Jin having been duly established and validly subsisting; (II) Chi Feng Guo Jin having obtained all relevant operating permits required at the time of its establishment and such permits remaining valid; (III) Chi Feng Guo Jin having obtained the Chi Feng Mining Licence in respect of the Chi Feng Mine and such licence is in full force and effect; and (IV) such other aspect of the PRC laws as Bright Ever may consider appropriate or relevant to the transactions contemplated under the Chi Feng Share Purchase Agreement;

• (C) Bright Ever and its advisers having obtained and satisfied in their absolute discretion (in each case in form and substance) with the legal opinions given by lawyers practising in the jurisdictions where any member of the Chi Feng Group is incorporated on the issues arising from or in connection with any of the Chi Feng Share Purchase Agreement and the documents referred to therein and the transactions contemplated thereunder as Bright Ever may in its sole and absolute discretion identify;

– 21 –

LETTER FROM THE BOARD

• (D) Bright Ever having obtained a technical report (at Bright Ever’s cost and expense) issued by a qualified technical adviser that indicates the Chi Feng Mine has indicated amount of gold resources of not less than 15 tonnes;

• (E) (if applicable) the Company having convene an extraordinary general meeting at which resolutions shall have been duly passed by the Shareholders to approve the Chi Feng Share Purchase Agreement and the transactions contemplated thereunder (including without limitation the allotment and issue of the Chi Feng Conversion Shares) and all other consents and acts required under the Listing Rules having been obtained and completed;

• (F) the Listing Committee of the Stock Exchange having granted or having agreed to grant the listing of, and permission to deal in, the Chi Feng Conversion Shares;

• (G) if required, all approvals, consents, authorisations and licences (so far as are necessary) in relation to the transactions contemplated under the Chi Feng Share Purchase Agreement having been obtained from the relevant governmental authorities;

• (H) Bright Ever being satisfied in its absolute discretion, from the date of the Chi Feng Share Purchase Agreement to completion, that the warranties in the Chi Feng Share Purchase Agreement remain true and accurate in all material respects, not misleading or in breach in any material respect and that no events have suggested that there were any breach in any material respect of any such warranties or other provisions of the Chi Feng Share Purchase Agreement by Prime Fortune;

• (I) Bright Ever being satisfied in its absolute discretion, from the date of the Chi Feng Share Purchase Agreement to completion, there has not been any material adverse change in respect of the financial position, business or operation any member of the Chi Feng Group; and

• (J) Bright Ever having received from Prime Fortune and satisfied in its absolute discretion (in each case in form and substance) (i) an original deed of confirmation issued by Weibo International Company Limited to Bright Ever confirming and undertaking that it will not enforce the share mortgage dated 29 June 2009 made between Success Gold and Verdens Investments Limited as mortgagors and Prime East and Weibo International Company Limited as mortgagees in relation to the shares of Sanxin Mining; and (ii) an original deed of confirmation issued by Weibo International Company Limited to Bright Ever confirming and undertaking that it will not enforce the share mortgage dated 29 June 2009 made between Sanxin Mining as mortgagor and Prime East and Weibo International Company Limited as mortgagees in relation to the shares of Goldluxe.

– 22 –

LETTER FROM THE BOARD

Prime Fortune and Bright Ever shall use their respective reasonable endeavours to satisfy the above conditions in any event not later than 5 p.m. on 30 November 2009 (provided that if by 30 November 2009, all the conditions above have not been fully satisfied and/or waived, the date shall be automatically extended to 31 December 2009) or such later date to be agreed between Bright Ever and Prime Fortune in writing. By way of a written agreement between Bright Ever and Prime Fortune, the long stop date was extended from 31 December 2009 to 31 January 2010.

7. Completion

Completion of the Chi Feng Share Purchase Agreement will take place on a date which is the third business day after the date on which all the conditions precedent are satisfied or waived or such other date as Prime Fortune and Bright Ever may agree in writing.

Upon completion,

• (a) Bright Ever will hold the entire issued share capital of Gold Fortune. Gold Fortune, in turn, will hold 90.9% of the entire issued share capital of Prime East and the remaining 9.1% will be held by Gold Life Company Limited, a company wholly-owned by the ultimate beneficial owner of Prime Fortune.

• (b) Gold Life Company Limited and Gold Fortune will enter into a shareholders’ agreement to regulate their relationship as shareholders of Prime East and the management and operation of Prime East.

B. Principal terms of the Chi Feng Convertible Notes

The terms of the Chi Feng Convertible Notes have been negotiated on arm’s length basis and the principal terms of which are summarised below:

Issuer The Company Principal amount HK$190,000,000 Interest The Chi Feng Convertible Notes will bear interest on the principal amount from and including the issue date of the Chi Feng Convertible Notes at the rate of 3% per annum.

Maturity The date falling on the 18 calendar months after the date of issue of the Chi Feng Convertible Notes.

– 23 –

LETTER FROM THE BOARD

Conversion price

The initial conversion price is HK$0.90 per Chi Feng Conversion Share and represents:

• (i) a premium of approximately 13.92% to the closing price of HK$0.79 per Share as quoted on the Stock Exchange on the Latest Practicable Date;

• (ii) a premium of approximately 1.12% to the closing price of HK$0.89 per Share as quoted on the Stock Exchange on the Chi Feng Last Trading Day; and

• (iii) a premium of approximately 0.45% to the average closing price of approximately HK$0.896 per Share for the last five trading days up to and including the Chi Feng Last Trading Day.

The initial conversion price of the Chi Feng Convertible Notes is subject to adjustment provisions which are standard terms for convertible securities of similar type. The adjustment events will arise as a result of certain change in the Shares including, inter alia, consolidation or sub-division of Shares, capitalization of profits or reserves, capital distributions in cash or specie or subsequent issue of securities in the Company.

Conversion rights

The conversion rights under the Chi Feng Convertible Notes can be exercised during the conversion period described below. Upon the exercise of any conversion rights under the Chi Feng Convertible Notes, the Company will allot the number of Chi Feng Conversion Shares in respect of which conversion rights are exercised provided that no conversion right may be exercised, to the extent that following such exercise (i) a holder of the Chi Feng Convertible Notes and parties acting in concert with it, taken together, will directly or indirectly, control or be interested in 25% or more of the entire issued Shares or such percentage as may from time to time be specified in the Hong Kong Code on Takeovers and Mergers as being the level for triggering a mandatory general offer, whichever is lower, or (ii) the Company will be in breach of the minimum public float requirement under the Listing Rules.

– 24 –

LETTER FROM THE BOARD

Conversion period

The Chi Feng Convertible Notes are convertible in whole or in part into Chi Feng Conversion Shares at any time from the period commencing from the date of issue and ending on the date falling on the 18 calendar months after the date of issue.

Any Chi Feng Convertible Note which remains outstanding by 4:00 p.m. (Hong Kong time) on the maturity date shall be converted automatically into the Chi Feng Conversion Shares. However, there will not be any automatic conversion of the Chi Feng Convertible Notes at maturity if such conversion will result in (i) a holder of the Chi Feng Convertible Notes and parties acting in concert with it, taken together, will directly or indirectly, control or be interested in 25% or more of the entire issued Shares or such percentage as may from time to time be specified in the Hong Kong Code on Takeovers and Mergers as being the level for triggering a mandatory general offer, whichever is lower, or (ii) the Company will be in breach of the minimum public float requirement under the Listing Rules. In such event, the Company may consider liaising with the holders of the outstanding Chi Feng Convertible Notes to extend the maturity date of the Chi Feng Convertible Notes, or the Company (or its subsidiaries) may consider purchasing the Chi Feng Convertible Notes. Should the maturity date of the Chi Feng Convertible Notes be extended, it will constitute a change in material terms of the Chi Feng Convertible Notes and the Company will seek Shareholders’ approval (or as the case may be, independent Shareholders’ approval) of such alteration at general meeting in accordance with the requirements under the Listing Rules and comply with the applicable requirements of the Listing Rules (including but not limited to Chapters 14 and 14A of the Listing Rules).

Chi Feng Conversion Shares

The Chi Feng Conversion Shares will rank pari passu in all respects with all existing Shares in issue at the date of the notice of conversion.

– 25 –

LETTER FROM THE BOARD

Assuming that the Chi Feng Convertible Notes are fully converted into Chi Feng Conversion Shares at the initial conversion price of HK$0.90, a total of 211,111,111 Chi Feng Conversion Shares will be issued which represent approximately 22.04% of the issued share capital of the Company as at the Latest Practicable Date and approximately 18.06% of the issued share capital of the Company as enlarged by the allotment and issue of the Chi Feng Conversion Shares.

The Chi Feng Conversion Shares will be issued under the Chi Feng Specific Mandate which will be sought at the EGM. Application will be made to the Listing Committee of the Stock Exchange for the listing of and permission to deal in the Chi Feng Conversion Shares.

• Status of the Chi Feng Convertible Notes

The Chi Feng Convertible Notes constitute a direct, general, unconditional and unsecured obligation of the Company and rank pari passu and rateably without preference (with the exception of obligations in respect of taxes and certain other mandatory provisions of applicable law exceptions) equally with all other present and/or future unsecured and unsubordinated obligations of the Company. No application will be made for the listing of the Chi Feng Convertible Notes.

• Transferability

The Chi Feng Convertible Notes will be freely transferable provided that if the transfer is made to a connected person (as defined under the Listing Rules), such transfer shall comply with the requirements under the Listing Rules.

• Voting rights

The Chi Feng Convertible Notes do not confer any voting rights at any meetings of the Company.

• Application for Listing

No application will be made for the listing of the Chi Feng Convertible Notes.

– 26 –

LETTER FROM THE BOARD

C. Information on the Chi Feng Group

Corporate structure of the Chi Feng Group as at the Latest Practicable Date

==> picture [412 x 357] intentionally omitted <==

----- Start of picture text -----

Prime Fortune
(Anguilla)
100%
Gold Life Company Limited Gold Fortune
(Anguilla) (Anguilla)
9.1% 90.9%
Prime East
(Anguilla)
100%
Verdens Investment Limited Success Gold
(British Virgin Islands) (Hong Kong)
34% 66%
Sanxin Mining
(Hong Kong)
100%
Goldluxe
(Hong Kong)
100%
Chi Feng Guo Jin
(PRC)
Chi Feng Mining
License
----- End of picture text -----

– 27 –

LETTER FROM THE BOARD

• Corporate structure of the Chi Feng Group immediately upon completion of the Chi Feng Acquisition

==> picture [412 x 357] intentionally omitted <==

----- Start of picture text -----

Bright Ever
(British Virgin Islands)
100%
Gold Life Company Limited Gold Fortune
(Anguilla) (Anguilla)
9.1% 90.9%
Prime East
(Anguilla)
100%
Verdens Investment Limited Success Gold
(British Virgin Islands) (Hong Kong)
34% 66%
Sanxin Mining
(Hong Kong)
100%
Goldluxe
(Hong Kong)
100%
Chi Feng Guo Jin
(PRC)
Chi Feng Mining
License
----- End of picture text -----

1. Gold Fortune

Gold Fortune was incorporated under the laws of Anguilla on 18 August 2009 and is an investment holding company.

2. Prime East

Prime East Gold Fortune was incorporated under the laws of Anguilla on 12 June 2009 and is an investment holding company.

– 28 –

LETTER FROM THE BOARD

3. Success Gold

Success Gold was incorporated under the laws of Hong Kong on 4 January 2008 and is an investment holding company.

For the period from 4 January 2008 to 30 June 2009 (audited)

Net profit/(loss) before taxation Net profit/(loss) after taxation Net asset/(liabilities)

HK$(18,200) HK$(18,200) As at 30 June 2009 HK$(8,200)

4. Sanxin Mining

Sanxin Mining was incorporated under the laws of Hong Kong on 28 December 2007 and is an investment holding company. Sanxin Mining is owned as to 66% by Success Gold and as to the remaining 34% by a party independent of the Company and its connected persons (as defined in the Listing Rules), namely, Verdens Investment Limited (a company incorporated in the British Virgin Islands).

For the period from 28 December 2007 to 30 April 2009 (audited) Net profit/(loss) before taxation HK$(27,250) Net profit/(loss) after taxation HK$(27,250) As at 30 April 2009 Net asset/(liabilities) HK$972,750

Net asset/(liabilities)

– 29 –

LETTER FROM THE BOARD

5. Goldluxe

Goldluxe was incorporated under the laws of Hong Kong on 4 January 2008 and is an investment holding company.

For the period from 4 January 2008 to 30 April 2009 (audited)

Net profit/(loss) before taxation HK$(36,115) Net profit/(loss) after taxation HK$(36,115) As at 30 April 2009 Net asset/(liabilities) HK$963,885

Net asset/(liabilities)

6. Chi Feng Guo Jin

Chi Feng Guo Jin was incorporated under the laws of PRC on 18 October 2005.

	**For the year **	ended
	31 December 2007	**31 **	December 2008
	(audited)		(audited)
Net profit/(loss) before
taxation	RMB(49,021.08)		RMB(16,172)
Net profit/(loss) after
taxation	RMB(49,021.08)		RMB(16,172)
	As at
	31 December 2007	**31 **	December 2008
Net asset/(liabilities)	RMB880,091.01		RMB859,303

As informed by Prime Fortune, Gold Life, the other shareholder holding 9.1% of Prime East, is an investment holding company which does not have any experience in mining and has not been involved in the exploitation and exploration process. As disclosed in the section headed “Mining Experts to be Employed by the Company”, the existing staff team of Chi Feng Guo Jin will be retained and will be supervised by Mr. Wong Kwok Ming and Professor Lu De Shun.

– 30 –

LETTER FROM THE BOARD

As informed by Prime Fortune, Verdens Investments Limited, the other shareholder holding 34% of Sanxin Mining, is an investment holding company which does not have any experience in mining and has not been involved in the exploitation and exploration process. Upon completion of the Chi Feng Acquisition, Verdens Investments Limited will provide 34% of the initial investment cost to Chi Feng Guo Jin, details are disclosed in paragraph “G. Sufficiency of Working Capital” below. Apart from the aforesaid, Verdens Investments Limited will not have any role in the exploration and exploitation work.

D. Information on the Chi Feng Mine

The Chi Feng Mine is located in Honghuagou of Chi Feng County, Inner Mongolia Autonomous Region, PRC. Its geographic coordinates are latitude 42˚12’23” to 42˚13’20” and longitude 118˚36’00” to 118˚37’09”.

The Chi Feng Mine is located approximately 50 kilometres to the Chi Feng City and is connected to the Chi Feng City by a concrete paved road and a few kilometres of unpaved road. There are daily flights at the Chi Feng Airport, which is located in Chi Feng City, to and from the major cities in the PRC. The Chi Feng Mine is therefore easily accessible.

The area around Chi Feng Mine is equipped with sufficient labour force. Electricity in the area is supplied by a national electricity grid.

The PRC lawyer, King and Wood, in their due diligence report dated 17 June 2009, has confirmed that Chi Feng Guo Jin has obtained the Chi Feng Mining License from the Department of Land and Resource of Chi Feng County which grants to Chi Feng Guo Jin the right to conduct mining and exploitation work for gold resources over an area of about 1.0989 square kilometres in the Chi Feng Mine pursuant to the Mineral Laws. The Chi Feng Mining License was granted on 2 December 2008 and is valid until 2 December 2011. It is expected that substantial revenue will be generated from the exploitation of gold resources from the Chi Feng Mine.

As Chi Feng Guo Jin has already obtained the Chi Feng Mining License, exploitation work will commence immediately upon completion of the Chi Feng Acquisition. As such, it is expected that the Chi Feng Mine will begin to generate revenue within a month after completion of the Chi Feng Acquisition which is expected to take place in February 2010. The exploitation work will be supervised by Mr. Wong Kwok Ming and Professor Lu De Shun, whose biographies are set out in the paragraph headed “Mining Experts to be Employed by the Company” below.

To the best knowledge, information and belief of the Directors and after making all reasonable enquiries, there is no claim in relation to the rights under the Chi Feng Mining Licence made or notified by third parties against the Company.

For further details of the Chi Feng Mine and estimate of proven exploitable resources and the nature and quality of the said resources, please refer to the Chi Feng Independent Technical Report set out in Appendix II to this circular.

– 31 –

LETTER FROM THE BOARD

E. Source of funding of the Company for the Chi Feng Acquisition

The consideration of Chi Feng Acquisition will be satisfied by the issue of the Chi Feng Convertible Notes to Prime Fortune.

F. Exploration technique to be used by the Company

As advised by the Technical Adviser, cut-filling and short-hole shrinkage methods will be adopted in exploration and mining production in the Chi Feng Mine. Cut-filling method will be used for ore body which is thinner than 0.8 metre and short-hole shrinkage method will be used in ore body which is over 0.8 metre thick.

G. Sufficiency of working capital

The Company expects that the initial investment cost (for construction and installation of new facilities and infrastructure for exploitation of resources in the Chi Feng Mine) for the 24 months immediately following completion of the Chi Feng Acquisition will be approximately RMB23 million. 34% of the initial investment cost will be funded by Verdens Investments Limited and the remaining will be funded by the Company. The Company envisages that such investment will be funded by internal resources of the Group. The Company expects that revenue will be generated within one month after completion of the Chi Feng Acquisition and estimates that cash inflow of approximately RMB164 million will be contributed by the sale of mineral resources from the Chi Feng Mines within 24 months following completion of the Chi Feng Acquisition. The Company estimates a further amount of RMB16 million will be needed to enable the Group to exploit the proven reserves of the Chi Feng Mine and commence recoveries on a commercial scale. The Company estimates that it will take approximately 6 months to achieve the aforesaid.

The Directors are of the opinion that, the Group will have sufficient working capital, in the absence of unforeseen circumstances, for its present requirements in the next 24 months from the date of completion of the Acquisition.

– 32 –

LETTER FROM THE BOARD

(ii) Number of	Shares held	directly or	indirectly (iii) Number of Approximate	immediately Shares held (v) Number of percentage of	after allotment directly or (iv) Number of Shares held the total issued	and issue of the Approximate indirectly Shares held Approximate directly or share capital of	Chi Zhou percentage of immediately directly or percentage of indirectly the Company	Consideration the issued share upon completion indirectly on full the issued share immediately enlarged by	Shares upon capital of of the Chi Feng conversion of capital of after allotment the allotment	completion of the Company Share Purchase the Chi Feng the Company of Chi Zhou and issue of	(i) Number of the Chi Zhou enlarged by Agreement Convertible enlarged by Consideration the Chi Zhou	Shares held Approximate Acquisition the allotment (without Approximate Notes (without the allotment Shares and on Consideration	directly or percentage of (without issue of and issue of allotment of percentage of issue of the Chi and issuance of full conversion Shares and	indirectly as at the total issued the Chi Feng the Chi Zhou the Chi Zhou the total issued Zhou the Chi Feng of the Chi Feng the Chi Feng	the Latest share capital of Conversion Consideration Consideration share capital of Consideration Conversion Convertible Conversion	Name of Shareholders Practicable Date the Company Shares) Shares Shares) the Company Shares) Shares Notes Shares	Equity Base Holdings Limited 426,732,714 44.56% 426,732,714 40.34% 426,732,714 44.56% 426,732,714 36.51% 426,732,714 33.63%	Cheng Yu Tung 57,550,000 6.01% 57,550,000 5.44% 57,550,000 6.01% 57,550,000 4.92% 57,550,000 4.54%	Atlantis Investment	Management Limited 58,000,000 6.06% 58,000,000 5.48% 58,000,000 6.06% 58,000,000 4.96% 58,000,000 4.57%	Pretty Sweet Limited (or its nominees) – – 100,000,000 9.45% – – – – 100,000,000 7.88%	Prime Fortune (or its nominees) – – – – – – 211,111,111 18.06% 211,111,111 16.64%	Other public Shareholders 415,467,337 43.37% 415,467,337 39.29% 415,467,337 43.37% 415,467,337 35.55% 415,467,337 32.74%		Total 957,750,051 100.00% 1,057,750,051 100.00% 957,750,051 100.00% 1,168,861,162 100.00% 1,268,861,162 100.00%

– 33 –

LETTER FROM THE BOARD

REASONS FOR THE CHI ZHOU ACQUISITION AND THE CHI FENG ACQUISITION

The Company is an investment holding company and its subsidiaries are principally engaged in the manufacture, sale, trading, distribution, processing and retailing of jewellery products. The above activities are mainly carried out in the PRC and the sale, trading, distribution and retailing of jewellery products generate major profits of the Company.

The Directors consider that the Chi Zhou Acquisition and the Chi Feng Acquisition represent an opportunity for the Group to develop its mineral resources-related business because of the worldwide increasing demand for mineral resources such as gold and silver. The Directors believe that the Group could broaden its source of income by vertically diversifying into the exploration and mining of mineral resources. In addition, minerals extracted can be value added to the Group’s own production lines.

The Directors further believe that upon obtaining the Chi Zhou Mining Licenses, the exploitation and mining of the Chi Zhou Mines could allow the Group to generate additional revenue from the sale of the mineral resources to be extracted from the Chi Zhou Mines. As Chi Feng Guo Jin has already obtained the Chi Feng Mining Licnese, the Directors believe that the Chi Feng Mine will generate revenue from the sale of mineral resources shortly after completion of the Chi Feng Acquisition.

Upon completion of the Chi Zhou Acquisition, Super Charm and Gold Fortune will become subsidiaries of the Company and the Company will be able to benefit from the earnings of the Chi Zhou Group and the Chi Feng Group. Although the existing members of the Board do not have experience in managing mining business, the Board has gathered a professional management team with extensive experience in mining business (as disclosed in the paragraph headed “Mining Experts to be Employed by the Company” below). On the other hand, the existing Board has much experience in operating PRC companies and managing business in the PRC. The Board is of the view that they can assist to oversee and manage the day-to-day business of the two project companies. During the six months ended 31 March 2009, the Group successfully transferred its primary focus to the domestic jewellery markets in the PRC. The Group believes that by vertically diversifying into gold exploitation, the Group could widen its revenue streams in the future and could obtain a constant supply of gold resources for its jewellery business at a stable price.

The Board is planning to recruit an executive Director who possesses extensive experience in mining and smelting business to oversee the operations of Chi Zhou Donghai and Chi Feng Guo Jin. In the meantime, since the Chi Zhou Mines are still under the exploration stage, the Group will recruit a professional team to join the Group in order to expedite the process. The Group will assign Mr. Wong Kwok Ming and Professor Lu De Shun, whose biographies are set out in the paragraph headed “Mining Experts to be Employed by the Company” below, to assist in recruiting staff and also act as the key person to report the progress of the exploration and construction to the Board. The Group expects that the exploitation work can be carried out soon after completion of exploration work and the construction of the facilities.

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LETTER FROM THE BOARD

Since Chi Feng Guo Jin has obtained the Chi Feng Mining License and the Chi Feng Mine is already in operation, the Group will focus more on human resource management in order to increase the productivity and eventually increase the revenue.

The Group has no intention to dispose of its existing business in the near future. On the contrary, the Group intends to utilize minerals extracted from the Chi Zhou Mines and the Chi Feng Mine in the Group’s jewellery production business. The Company estimates that approximately 95% of the products to be extracted from the Chi Zhou Mines and the Chi Feng Mine respectively will be sold to customers, being local refineries, when the remaining 5% will be retained for the Group’s own use.

The Directors (including the independent non-executive Directors) are of the view that the terms of the Chi Zhou Share Purchase Agreement are fair and reasonable and in the interests of the Company and the Shareholders as a whole.

RISK FACTORS RELATING TO THE GROUP’S MINING BUSINESS AND THE MINING INDUSTRY

(a) New business segment of the Group

The Chi Zhou Acquisition and the Chi Feng Acquisition constitute investment in a new business segment, being the mining business, for the Group. The new business, coupled with the regulatory environment, may pose significant challenges to the Company’s administrative, financial and operational resources. Since the Group does not have significant experience in the new business, it is not in a position to ascertain the timing and amount of any return or benefits that may be received from the new business. If the new business does not develop and progress as planned, the Group may not recover the funds and resources it has spent, and this may affect the Group.

(b) Possible fluctuation in the market price of gold

The Group’s operation in the mining business may be exposed to gold price fluctuation. The gold price in the PRC is highly influenced by the international gold price which is denominated in US$. As most of the Group’s revenue from the mining business will be derived from the sale of gold, our expected earnings will be closely related to the international gold price. Gold prices may be influenced by numerous factors and events which are beyond our control. These factors and events include world demand, forward selling activities, gold reserve movements in central banks and other macro-economic factors such as expectations regarding inflation, interest rates, currency exchange rates as well as general global economic conditions. These factors and events may have an adverse effect on the mining business operation the Group.

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LETTER FROM THE BOARD

(c) Capital requirements and funding sources

The exploration and mining of mineral resources require substantial capital investments. The development and expansion plans of the Chi Zhou Mines and the Chi Feng Mine may also result in increases in capital expenditures and commitment. The internal funds of the Group are expected to be sufficient to cover the initial capital injection necessary for constructing facilities in the Chi Zhou Mines and the Chi Feng Mine. The Group has never encountered any difficulty in obtaining additional funding or financing for our operation. In the event that the Group is unable to obtain adequate funding or financing to satisfy the operation and development and expansion plans, our business may be adversely affected.

(d) Reserves and resources estimates

The reserves and resources data set forth in the Chi Zhou Independent Technical Report and the Chi Feng Independent Technical Report represent estimates. Such estimates are judgments based on knowledge, experience and industry practice. Estimates which were valid when originally made may need to be updated when new information or techniques become available. By nature, reserves and resources estimates depend to some extend on interpretations and deductions which may prove to be inaccurate. As further information becomes available, the estimates are likely to change. This may result in alterations to the Group’s operation and development plans which may, in turn, adversely affect the Group’s operation and performance.

(e) Uncertainty related to exploration

Exploration of new and potential resources is crucial to the Group’s mining business. Resources exploration is unpredictable in nature. There is no assurance that initial exploration will result in the discovery of valuable reserves or profitable mining operation as substantial expenses may be incurred for the exploitation of identified reserves.

(f) Laws and regulations relating to the gold industry

The central and local governments exercise a substantial degree of control over the gold industry in the PRC. The Group’s mining business will be subject to various government policies, regulations, standards and requirements. Any changes to this policies, regulations, standards and requirements may increase the operation costs of the Group and may adversely affect the operating results of the Group. Any such changes may also constraint our future expansion plan and our ability to maximise our profitability.

(g) Mining rights and license period of exploration rights

Under the Mineral Laws, all mineral resources of the PRC are owned by the PRC government. Mining enterprises must obtain mining rights prior to undertaking any mining activities in a specific mining area during the license period. Chi Zhou Donghai has only obtained the Chi Zhou Exploration Licenses, although Pretty Sweet and the Group will use

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LETTER FROM THE BOARD

their best endeavours to obtain the necessary mining licenses of the Chi Zhou Mines, there is no assurance that the Group will be able to obtain the said mining licenses. Apart from the aforesaid, upon expiry of the license period of the relevant exploration rights or mining rights under the Chi Zhou Exploration Licenses and Chi Feng Mining License, the Group will have to apply to the relevant authorities for an extension of the license period. There can be no assurance that the Group will be able to explore or exploit the entire mineral resources of the Chi Zhou Mines and the Chi Feng Mine during the current effective license period. If the Group is unable to obtain the exploration rights or mining rights or renew such rights upon their expiries, our operation and performance may be adversely affected.

(h) Supply of electricity

Electricity is one of the main energy sources used for our gold production. Although the Chi Zhou Mines and the Chi Feng Mine are already lined up with extensive electricity supply, there can be no assurance that the Group will always have adequate and uninterrupted supply of electricity in the future. In addition, increase in the price of electricity may result in the increase in our operating costs.

(i) Production safety

The Group’s mining operation may be affected by accidents, technical difficulties, mechanical failure or plant breakdown encountered in the exploration, mining, processing, smelting and refining processes. Such technical difficulties, mechanical failure or plant breakdown may result in disruptions to the Group’s operation, increases in our operating costs or personal injuries. Upon completion of the Chi Zhou Acquisition and the Chi Feng Acquisition, the Group will establish and implement a set of stringent internal safety and preventive measures. However, it still cannot be assured that accidents will not occur in the future.

DUE DILIGENCE

The Company has instructed the Technical Adviser to carry out exploration work on the Chi Zhou Mines and the Chi Feng Mine and has instructed PRC lawyers to carry out legal due diligence investigations on Chi Zhou Donghai and Chi Feng Guo Jin. Both the exploration work and the legal due diligence work have been completed.

The followings are the major findings of the due diligence investigation conducted by the PRC lawyers, Jun Ze Jun Law Offices, regarding Chi Zhou Donghai and the Chi Zhou Mines:

• (a) Chi Zhou Donghai has been duly established and validly subsisting;

• (b) The registered capital of Chi Zhou Donghai is HK$13,500,000, among which HK$10,000,000 has been paid up;

• (c) Chi Zhou Donghai has obtained the Chi Zhou Exploration Licenses in respect of Chi Zhou Mines and such licences are in full force and effect;

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LETTER FROM THE BOARD

• (d) With the Chi Zhou Exploration Licenses, Chi Zhou Donghai is entitled to engage geologists to conduct exploration activities in Chi Zhou Mines;

• (e) Upon fulfillment of certain statutory conditions, Chi Zhou Donghai may apply for gold mining permit in respect of Chi Zhou Mines and expand its scope of business to cover gold mining, in accordance with relevant PRC laws and regulations;

• (f) East Ocean legitimately owns the entire equity interest of Chi Zhou Donghai; and

• (g) No approval from PRC government is required for the Chi Zhou Acquisition.

The followings are the major findings of due diligence by the PRC lawyers, King and Wood, regarding Chi Feng Guo Jin and the Chi Feng Mine:

• (a) Chi Feng Guo Jin has been duly established and validly subsisting;

• (b) Chi Feng Guo Jin has obtained the Chi Feng Mining License in respect of Chi Feng Mine and such licence is in full force and effect;

• (c) In order to engage in the operation as stated in its scope of business, including gold mining, Chi Feng Guo Jin has obtained most of significant permits or approvals from PRC government, except for the Approval of Gold Mining ( ) and the Certificates of Safe Operation ( ) for Chi Feng Mine, while the Certificates of Safe Operation for Chi Feng Guo Jin has expired. Chi Feng Guo Jin is not allowed to start gold-mining operation until the approval or certificates aforementioned are obtained or renewed. (As informed by Prime Fortune, Chi Feng Guo Jin has already obtained the Approval of Gold Mining and the Certificates of Safe Operation subsequent to the issue of the legal opinion by King and Wood);

• (d) Goldluxe legitimately owns the entire equity interest of Chi Feng Guo Jin;

• (e) No approval from PRC government is required for the Chi Feng Acquisition;

• (f) Chi Feng Guo Jin has not provided evidences of the payments of consideration and charges of exploration and mining rights. However, Chi Feng Guo Jin has confirmed that it has duly made such payments (Under the Chi Feng Share Purchase Agreement, Prime Fortune has undertaken to indemnify and keep Bright Ever indemnified from and against all actions, proceedings, losses, damages, liabilities, claims, demands etc. arising out of or in connection with any breach or nonfulfilment of any of the warranties in the Chi Feng Share Purchase Agreement. Prime Fortune warranted, inter alia, that (i) all necessary licences and permits have been obtained by each member of the Chi Feng Group to enable it to carry on its business effectively in the places and in the manner in which such business is now carried on or is contemplated to be carried on and all such licences and permits are

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LETTER FROM THE BOARD

valid and subsisting and none of them should be suspended, cancelled or revoked or should not be renewed or reissued upon or prior to their expiry, and (ii) Chi Feng Guo Jin is the owner of all assets (including the Chi Feng Mining License) represented as belonging to or used by it free of encumbrances, and (iii) Chi Feng Guo Jin has not, since the date of the provided accounts, become liable to repay, any loan or indebtedness in advance of its stated maturity);

• (g) Chi Feng Guo Jin has not obtained approval from Inner Mongolia Development and Reform Committee when it became a wholly foreign-owned enterprise, in which regard, Chi Feng Guo Jin may be required to submit the application for approval;

• (h) As the gold-mining operation of Chi Feng Mine has not started, Chi Feng Guo Jin has not submitted a proposal for environment protection and comprehensive improvement and has not paid the relevant deposit, which is estimated to be approximately RMB1,000,000, to the Land and Resource Bureau of Chi Feng City pursuant to relevant regulations. The Land and Resource Bureau of Chi Feng City may require a rectification of the same within a specified time and impose an administrative penalty. King and Wood further confirmed that the relevant regulations do not provide details of the aforesaid administrative penalty.

MINING EXPERTS TO BE EMPLOYED BY THE COMPANY

The following experts have the expertise in exploration and investment in mineral resources business:

Mr. Ho Chi Kong – An executive director and the chief executive officer of East Ocean. Mr. Ho is experienced in the exploration and investment in mineral resources business and is equipped with extensive business networks. Mr. Ho has been working in the mining and smelting industry since 1995.

Mr. Wong Kwok Ming – A consultant of East Ocean. Mr. Wong is experienced in investment in resources business and has been involved in the oil development project of Northern Oil (China) Development Company Limited. North Oil (China) Development Company Limited is a subsidiary of PetroAsian Energy Holdings Limited, a company listed on the main board of the Stock Exchange (Stock Code 850). PetroAsia Energy Holdings Limited is engaged in the production, sales and distribution of downstream oil products such as paints, blended solvents and plastic colorants in the PRC. Mr. Wong has been working in the mining and smelting industry since 1999.

Mr. Yang Yong Qing – The legal representative and the director of Chi Zhou Donghai. Mr. Yang has extensive experience in the management of mining companies and has served Chi Zhou Donghai since its incorporation. Mr. Yang has been working in the mining and smelting industry since 1999.

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LETTER FROM THE BOARD

Professor Lu De Shun – The chief consultant and chief geologist of Chi Zhou Donghai. Professor Lu is an eminent qualified geologist in China who was graduated from China Geology University ( ) with a degree in exploration of metal and non-metal mines in 1969. He has been working in the geology field since his graduation and therefore is equipped with extensive theoretical and practical experience in geology. Professor Lu has provided Chi Zhou Group with strong technical support to the exploration and investment of natural resources over the years. Professor Lu is a committee member of the Committee of Qualified Mine Geologist ( ) of the China Geologist Society ( ) and the Rock Mechanics and Engineering Society ( ).

Upon completion of the Chi Zhou Acquisition, the above senior management will continue to serve the Chi Zhou Group. The Board has considered the background and experience of the above senior management and is of the view that the current senior management is competent to assist in the development of the business of Chi Zhou Group. According to Pretty Sweet, service contracts have been entered into between Mr. Yang Yong Qing and Professor Lu and the Chi Zhou Group. The service contracts of Mr. Ho Chi Kong and Mr. Wong Kwok Ming have expired. They will be renewed on completion of the Chi Zhou Acquisition.

Despite the fact that Mr. Ho Chi Kong, Mr. Wong Kwok Ming and Mr. Yang Yong Qing do not possess professional qualification in mining, they have over twenty years of experience in the mining and smelting business. Professor Lu De Shun has obtained necessary professional qualifications and a professional team will be recruited and Mr. Ho Chi Kong, Mr. Wong Kwok Ming and Mr. Yang Yong Qing will be in the managerial role to supervise and oversee the professional team. As such, the Company is of the view that professional qualifications are not essential for Mr. Ho Chi Kong, Mr. Wong Kwok Ming and Mr. Yang Yong Qing to carry out their managerial work. Technical work will be overseen by Professor Lu De Shun and executed by the professional team.

The Group will recruit a professional team apart from the above four experts to work for the exploration and exploitation work on the Chi Zhou Mines. Upon completion of the Chi Zhou Acquisition, the Group will recruit two geological engineer, one project engineer and one project specialist for the exploration project. Four staff will be recruited for accounting and general office work. Upon completion of the exploration work, it is expected that it will take approximately four months to obtain the Chi Zhou Mining Licenses. In the meantime, the Group will recruit four mining engineers, two rotation engineers and one safety specialist to be in charge of the exploitation work. Two professional staff for sample taking and analysis, two assistants to the engineers and seven general staff will also be recruited. It is expected that the recruitment will complete at the time when Chi Zhou Donghai obtain the Chi Zhou Mining Licenses.

For the Chi Feng Mines, the Company intends to appoint Mr. Wong and Professor Lu to oversee operation of the Chi Feng Mine. Separate service contracts will be entered into by Chi Feng Guo Jin (or any company in the Chi Feng Group as the Company may think fit) with Mr. Wong and Professor Lu. As informed by Prime Fortune, Chi Feng Guo Jin is already in operation and there is an organised staff team. The Group intends to retain the staff team and Mr. Wong and Professor Lu will supervise the staff team after completion of the Chi Feng Acquisition.

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LETTER FROM THE BOARD

In addition to the above, the Company will appoint new directors to companies in the Chi Zhou Group and the Chi Feng Group to oversee the day-to-day management and operation of Chi Zhou Group and the Chi Feng Group. The Company is also recruiting suitable experts who possess international qualification in geologist or mining related area to act as consultants of Chi Zhou Group and the Chi Feng Group.

ORE PROCESSING

Ores exploited from the Chi Zhou Mines and the Chi Feng Mine will be sent to floatation plants for floatation separation where minerals are preliminarily separated from the ores. The products will be sold to local refineries, who will be the customers of the Group.

MAJOR FINDINGS OF THE TECHNICAL ADVISER

(a) The Chi Zhou Mines

The Technical Adviser has discovered a total of 10 mineralized gold bodies in the Chi Zhou Mines, having 333 category gold mineral resources of approximately 18,600 tonnes with an average grade of 4.72 grams per tonne and 334 category gold mineral resources of 37,379 metric tonnes with an average grade of 2.34 grams per tonne. It is expected that main exploration programs including high-precision magnetic survey and drilling will be carried out and the predicted metal gold resource at Houshan Mine may reach 8.69 tonnes and the predicted metal gold resource at Gaoling Mine may reach 7.14 tonnes when the exploration work is completed. Based on the price of gold when the Chi Zhou Share Purchase Agreement was entered into, being US$956 per ounce, the monetary value of the gold resources in the Houshan Mine is approximately US$293 million and that in the Gaoling Mine is approximately US$240 million (1 tonne is equivalent to 35,273 ounce).

(b) The Chi Feng Mine

The Technical Adviser has reviewed the reports issued by two PRC technical advisers previously engaged by Prime Fortune, one of whom estimated and reported that four mineralized bodies at the Chi Feng Mine contain 112b category of gold deposit of 276,411 tonnes with 2,525 kilograms contained gold with an average grade of 9.13 grams per tonne and 333 category gold deposit of 66,736 tonnes with 628 kg contained gold with an average grade of 9.41 grams per tonne. The other PRC technical adviser estimated and reported that the other nine mineralized bodies at the Chi Feng Mine contain 333 category gold deposit of 87,319 tonnes with an average gold grade of 51.89 grams per tonne and 334 category gold deposit of 140,778 tonne with an average grade of 51.89 grams per tonne. Based on the price of gold when the Chi Feng Share Purchase Agreement was entered into, the monetary value of the gold resources in the Chi Feng Ming is approximately US$500 million (1 tonne is equivalent to 35,273 ounce).

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LETTER FROM THE BOARD

The Technical Adviser has reviewed the detailed information and data regarding the resource estimates in the Chi Feng Mines and believes that the industrial index, parameters and blocking principles are in compliance with related Chinese standards and provisions relating to resource verification in 2007. The Technical Adviser opined that the resource estimate can be deemed to be a global estimate of the mineral resources.

EGM

The EGM (or any adjournment thereof) will be held at Room 1825, 18th Floor, Hutchison House, 10 Harcourt Road, Central, Hong Kong on Monday, 8 February 2010 at 2:30 p.m. for the purpose of considering and, if thought fit, passing the ordinary resolutions to approve the issue of the Chi Feng Convertible Notes, the Chi Zhou Specific Mandate and the Chi Feng Specific Mandate. A notice convening the EGM is set out on pages 175 to 176 of this circular.

To the best knowledge of the Directors, no Shareholders are required to abstain from voting on the ordinary resolution for the approval of the issue of the Chi Feng Convertible Notes, the Chi Zhou Specific Mandate and the Chi Feng Specific Mandate at the EGM and Pretty Sweet was not interested in any Shares as at the Latest Practicable Date. If Pretty Sweet holds any Shares as at the date of the EGM, Pretty Sweet and its associate will abstain from voting on the ordinary resolution for the approval of the Chi Zhou Specific Mandate a the EGM and such approval shall be obtained by way of poll pursuant to Rule 13.39(4) of the Listing Rules. If Prime Fortune holds any Shares as at the date of the EGM, Prime Fortune and its associate will abstain from voting on the ordinary resolution for the approval of the issue of the Chi Feng Convertible Notes and the Chi Feng Specific Mandate at the EGM and such approval shall be obtained by way of poll pursuant to Rule 13.39(4) of the Listing Rules.

A form of proxy for use at the EGM is enclosed with this circular. Whether or not you are able to attend the meeting, you are advised to read the notice and to complete and return the enclosed form of proxy, in accordance with the instructions printed thereon, to the Company’s branch share register in Hong Kong, Tricor Tengis Limited at 26th Floor, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong, as soon as possible but in any event not less than 48 hours before the time appointed for the holding of the EGM or any adjourned meeting. Completion and return of the form of proxy will not preclude you from attending and voting at the EGM or any adjourned meeting in person if you so wish.

RECOMMENDATION

The Directors consider that (i) the terms of the Chi Zhou Share Purchase Agreement are fair and reasonable and were arrived at after arm’s length negotiation, and that the issue of the Chi Zhou Consideration Shares is in the best interests of the Company and the Shareholders as a whole; and (ii) the terms of the Chi Feng Share Purchase Agreement are fair and reasonable and were arrived at after arm’s length negotiation, and that the issue of the Chi Feng Conversion Notes and the Chi Feng Conversion Shares is in the best interests of the Company and the Shareholders as a whole. Accordingly, the Board recommends the Shareholders to vote in favour of the ordinary resolution with respect to the approval of the Chi Zhou Specific Mandate and the Chi Feng Specific Mandate to be proposed at the EGM.

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LETTER FROM THE BOARD

ADDITIONAL INFORMATION

Your attention is also drawn to (i) the Chi Zhou Independent Technical Report, (ii) the Chi Feng Independent Technical Report; and (iii) the notice of the EGM.

Yours faithfully,

For and on behalf of the Board

Ming Fung Jewellery Group Limited Wong Chi Ming, Jeffry

Executive Director and Chairman

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APPENDIX I CHI ZHOU INDEPENDENT TECHNICAL REPORT

Technical Review of Houshan and Gaoling Gold-Polymetallic Projects in Chizhou, Anhui Province, People’s Republic of

China

for

Trismart Group Limited

SRK Project Number SHK059

SRK Consulting China Ltd B1205, COFCO Plaza, 8 Jianguomennei Dajie Dongcheng District, Beijing 100005

Contact: Dr Yiefei Jia Telephone No.: +86 10 8512 0365 Email: yjia@srk.cn URL: www.srk.cn

October 2009

Compiled by: Peer reviewed by: Yiefei Jia, MAusIMM Dr Anson Xu, MAusIMM Principal Consultant Principal Consultant (Geology) (Geology)

Authors:

Mr Yuan Chen, Dr Yiefei Jia, Mr Pengfei Xiao

Peer reviewed by: Dr Anson Xu

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CHI ZHOU INDEPENDENT TECHNICAL REPORT

APPENDIX I

Executive Summary

Summary of Principal Objectives

Trismart Group Limited (“Trismart” or “the Company”) commissioned to SRK Consulting China Limited (“SRK”) to undertake an independent technical assessment report on geology and mineral resources and potential of the Houshan and Gaoling gold and polymetallic exploration tenements in Chizhou City of Anhui Province, People’s Republic of China (“PRC”). The two gold and polymetallic projects are whole owned by Chizhou Donghai Mining & Development Company Limited (“Chizhou Donghai”). The principal projective of the Report is to provide existing Trismart shareholders and the Stock of Hong Kong Limited (“HKEx”) with an Independent Expert Report suitable for inclusion in documents that the Company plans to submit to HKEx in relation to a proposed acquisition.

Outline of Work Program

The work program involved three phases:

• Phase 1, conduct a desktop review of available information provided by Trismart and Chizhou Donghai;

• Phase 2, travel to Bengbu and Chizhou, in Anhui Province, discussions with staff of the Company and collection and review of documents provided to SRK and then take a site visit and collect samples in property area located in Chizhou, Anhui Province, and,

• Phase 2, analysis of the provided data and writing up a draft report, considering client’s feedbacks and finalisation of this report.

Results

Overall

Two exploration tenements currently owned by Chizhou Donghai include the Houshan gold and polymetallic exploration permit covering an area of 4.71 square kilometres (km[2] ), and the Gaoling gold and polymetallic exploration permit holding an area of 5.72km[2] . The Chizhou Donghai’s Project is located at approximately 150km southeast of Hefei, the capital of Anhui Province, PRC. The property areas can be easily accessed.

SRK was informed that the Anhui Provincial Institute of Exploration and Technology (“APIET”) had conducted exploration program on the two exploration properties and compiled exploration reports with Houshan gold resource estimates in 2008. Further exploration work for both gold and polymetallic projects are needed and especially for the Gaoling gold and polymetallic project because it is still in its early stage of exploration.

Geology

Regional Geology: Geotectonically, the Chizhou Donghai’s gold projects area is located in the northeast edge of Yangtze Platform, which is composed of the Proterozoic metamorphic basement and the paleozoic sedimentary cover. The first-order anticlinorium structure is composed of widespread Cambrian and Silurian sedimentary rocks. The Houshan exploration property area is located at the SE limb of the second-order synclinorium structure trending NE, which consists of

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CHI ZHOU INDEPENDENT TECHNICAL REPORT

APPENDIX I

Silurian, Devonian, Carboniferous, Permian and Triassic sedimentary rocks, whereas the Gaoling exploration property area is located at the plunging crown of the second-order anticlinorium structure trending NE, which is composed of Ordovician and Silurian sedimentary rocks. It is inferred that the fold structures were formed during Indosinian orogeny (Triassic to early Jurassic period), and the most faults are parallel to the fold axis or had broken the fold structures. The first-order fold structure was intruded by the widespread Yanshanian (Jurassic to Cretaceous period) diorite and granite rock bodies.

The Cambrian sedimentary is characterized by grey to heavy grey silicon shale and mud-banded limestone. The Ordovician is mainly composed of heavy grey marl, chert-banded limestone intercalated by some yellow-green shale. The Silurian is characterized by fine grain sandstone, greywacke, and silt stone. The Devonian is characterized by shale and clay rocks and the Carboniferous by the bioclastic limestone, while the Permian by siliceous rock and siliceous shale. The Triassic is characterized by calcareous shale and limestone.

Regionally, it presents a well known important iron-copper-gold mineralization zone in China trending NE located at the middle to lower reach Yangtze River, where the Chizhou gold projects are located at the middle part of the regional iron-copper-gold mineralization zone. In project area, the Meishancun gold deposit is located about 8km to the east sharing the exact same geological setting as Houshan gold deposit, whereas the Simenkou gold deposit is located about 6km to the east sharing the exact same geological setting as Gaoling gold deposit.

Houshan Deposit Geology

The Houshan exploration property area is located at the SE limb of the second-order synclinorium structure trending NE, where it appears a monocline structure composed mainly of Silurian, and a small part of Devonian, Carboniferous and Permian rocks are located at the NW corner. The Silurian includes the Lower Gaojiabian, Middle Fentou and Upper Maoshan Formations.

Two groups of faults are developed within the exploration property area: one group fault such as F9 and F10 trends near EW, dipping to south with high angle which controls the mineralization. Another group fault is characterized by sinistral offset trending near SN. Grano-diorite porphyry dykes are outcropped sporadically trending NE or near EW. It is said that the porphyry has a genetic relationship to the mineralization.

Mineralised Body Geology

Ten mineralized bodies had been defined within Houshan exploration property by the APIET and all the mineralization is confined by the fault structure. The main characteristics are summarized as following:

Body I-1: The mineralized body had been controlled for 364m long, and 1.45-3.05m wide with elevations ranging 135-217m ASL grading Au 2.27g/t. Three trenches of TC38, 42 and 44 were applied for controlling, but the diamond drill hole ZK4401 had not intercepted the mineralization. The mineralized body trends near EW, dipping to 175° at the angle of 58°.

Body I-2: The mineralized body had been controlled for 80m long, and 1.06m wide with elevations ranging 137-177m ASL grading Au 1.06g/t. One trench of TC50 was applied for controlling. The mineralized body trends near EW, dipping to 175° at the angle of 70°.

Body I-3: The mineralized body had been controlled for 80m long, and 1.05m wide with elevations ranging 132-172m ASL grading Au 1.05g/t. One trench of TC42 was applied for controlling. The mineralized body trends near EW, dipping to 175° at the angle of 58°.

Body II-1: The mineralized body II-1 is the main body within the property area, which had been controlled for 242m long, and 0.95-1.56m wide with elevations ranging 145-234m ASL grading Au

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CHI ZHOU INDEPENDENT TECHNICAL REPORT

3.66g/t. Three trenches of TC6-3, 8-1 and 12-3, and two diamond drill holes of ZK001 and Zk201 were applied for controlling. The mineralized body trends near EW, dipping to 170° at the angle of 56°.

Body II-2: The mineralized body II-2 is the blind body, which had been controlled for 80m long, and 1.12m wide with elevations ranging 100-140m ASL grading Au 1.02g/t. The diamond drill hole ZK001 had intercepted the mineralization. The mineralized body trends near EW, dipping to 170° at the angle of 56° (figure 5-3).

Body III: The mineralized body had been controlled for 117m long, and 0.98-1.47m wide with elevation ranging 158-229m ASL grading Au 9.35g/t. Two trenches of TC6-5 and 8-1 were applied for controlling, but unfortunately, both diamond drill holes of ZK003 and ZK203 had not intercepted the mineralization. The mineralized body trends near EW, dipping to 175° at the angle of 60° (figure 5-3).

Body IV-1: The mineralized body had been controlled for 80m long, and 0.85m wide with elevations ranging 276-316m ASL grading Au 1.40g/t. One trench of TC18 was applied for controlling. The mineralized body trends near EW, dipping to 180° at the angle of 65°.

Body IV-2: The mineralized body had been controlled for 80m long, and 1.86m wide with elevation ranging 272-312m ASL grading Au 1.41g/t. One trench of TC18 was applied for controlling. The mineralized body trends near EW, dipping to 180° at the angle of 65°.

Body IV-3: The mineralized body had been controlled for 80m long, and 1.33m wide with elevation ranging 247-287m ASL grading Au 1.82g/t. One trench of TC22 and one drill hole of ZK1601 were applied for controlling. The mineralized body trends near EW, dipping to 167° at the angle of 56°.

Body IV-4: The mineralized body had been controlled for 80m long, and 0.77m wide with elevation ranging 200-240m ASL grading Au 1.59g/t. One trench of TC26 was applied for controlling. The mineralized body trends near EW, dipping to 172° at the angle of 62°.

Mineralogy

The ore can be classified into two types: primary ore and oxidized ore. The oxidized ore is about 0-10m deep below the surface. The mineral resource in property area is dominated by the primary ore, which can be further divided into two sub-types: cataclasite sedimentary type and catalasite porphyry type. The mineralized body IV-3 is the porphyry hosted type only, and all other mineralized bodies are the sedimentary rock hosted mineralization.

Ore mineral is dominated by pyrite, with a small amount of hematite (limonite) which is associated with the oxidized ore, minor galena and sphalerite. The gangue minerals are dominated by quartz, plagioclase plus sericite, and minor carbonate and epidote etc. The ore textures are: breccias, stockwork, disseminate and the granular etc. The pyrite usually fills or replaces along the cement of the breccias, or appears as disseminated texture.

Mineral Resource/Reserve Estimates

The engineering used for defining mineralized body were deployed based on the exploration grid of 100m by 80m for 333 resource category, and the resources controlled by two engineering at the interval 100-210m, or single engineering was classified into 334 resource category.

Before 1999 China used a letter system to categorise resource and reserve estimate. China has since adopted a three number system. However, both the systems are different from the criteria used in defining a resource under the Australian Joint Ore Reserves Committee (JORC) Code. In generally, the 333 resource may refer to JORC Inferred resource, and the 334 does not have a JORC equivalent.

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APPENDIX I

Cut-off’s: Based on the following technical parameters, the APIET completed the mineral resource estimation of Houshan exploration property using parallel cross-section block method in May 2008:

• Overall cut-off: Au≥1.0g/t;

• Minimum average ore block grade: Au≥1.0g/t;

• Minimum mineable thickness: 1.0m;

• Maximum band allowed: 2.0m;

Resource/Reserve Estimation: Total 10 mineralized gold bodies have a 333 category gold mineral resources of about 18,600 metric tonnes with an average grade 4.72g/t and a 334 category gold mineral resources of 37,379 metric tonnes with an average grade 2.34g/t as details showed in the following:

Mineralized Body I-1 I-2 I-3 II-1 II-2 III IV-1 IV-2 IV-3 IV-4 Total	Tonnage t 333 334 18,514.34 4,064.48 844.10 15,593.91 1,965.74 1,191.68 3,006.62 2,258.34 1,361.92 2,411.73 2,794.77 1,971.94 18,600.53 37,379.05	Grade g/t 333 334 2.27 1.06 1.05 3.76 2.84 1.02 9.68 8.90 1.40 1.41 1.82 1.59 4.72 2.34	Metal Resource Kg 333 334 42.12 4.31 0.89 58.63 5.59 1.22 29.10 20.11 1.91 3.40 5.09 3.14 87.73 87.78

Gaoling Deposit Geology

Gaoling exploration property area is located at the plunging crown of the second-order anticlinorium structure trending NE, which is composed of the Lower Ordovician Lunshan Formation and the Lower Silurian Gaojiabian Formation and the Middle Silurian Fentou Formation.

There are two different strike faults, NE and NW, but dominated by NE faults. NE fault is actually the bedding fault which developed along the contact between Fentou Formation and Gaojiabian Formation, or Fentou Formation and Lunshan Formation. It dips to SE at the angle of 60°. NW fault had offset both the bedding and NE fault which is believed to be conjugated fault with NE fault.

Yanshanian (Jurassic to Cretaceous period) granite stock is wide outcropped at about 200-500m to the north, where a granite porphyry dyke is developed mixed with the mineralization.

Mineralised Body Geology

Six mineralized bodies were defined within the property area. Body I hosted within the porphyry dyke was controlled by TC3, and one sample indicates Au 2.19g/t over 2.2m wide which was inferred for 100m long. Body II hosted within the porphyry dyke was controlled by TC3, and three samples bring back Au 0.25g/t over 4.7m wide and Cu 0.29% over 2.7m wide, which was inferred for 100m long. Body III hosted within the porphyry dyke was controlled by TC5-1, 5-2, 3, 701 and 702 for about 390m long, with the grade Cu of 0.21-0.78%. Body IV hosted within the porphyry

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CHI ZHOU INDEPENDENT TECHNICAL REPORT

APPENDIX I

dyke was controlled by TC701 only, and the three samples bring back Au 1.01g/t over 5.0m wide, which was inferred for 100m long. Body V hosted within the porphyry dyke was controlled by TC701, and five samples bring back Au 1.74g/t over 6.9m wide, which was inferred for 100m long. Body VI hosted in Gaojiabian Formation was controlled by TC703, and three samples bring back Au 0.22g/t over 6.0m wide, which was inferred for 100m long.

There are two types mineralization: porphyry hosted mineralization and sedimentary hosted mineralization. It’s a poly metallic mineralization of Cu, Au and possible Mo, and reported to have observed chalcopyrite, chalcocite, covelline, malachite, molybdenite and galena etc.

Resource/Reserve Estimates

The Gaoling property is still in an exploration stage and there are no mineral resource estimates so far. SRK was informed that the mineral resource/reserve estimation, following the Chinese Resource Category System, will be carried out after completion of further exploration programs.

Potentials for Further Exploration

The project area is located at the middle part of the well known regional iron-copper-gold mineralization zone in China. It is believed that the iron-copper-gold mineralization has a genetic relationship to Yanshanian (Jurassic to Cretaceous period) magma event which demonstrates as diorite and granite stock, or dyke, and the mineralization is confined by the fault structure.

In Houshan exploration property area, it is reported there exists a high value geochemical composite anomaly composed of Au, Cu and Ag for 0.75 square kilometres, where there are some outcropped grano-diorite porphyry dykes. So far, some soil sampling survey and high resolution magmatic survey had been done within the property area, but the data had not been summarized. The geological mapping had not even covered the whole exploration property area, which could be why only 3 holes of the total 7 conducted diamond drill holes had intercepted the mineralization. SRK believes that the geological work so far is sort of geological follow-up inspection of geochemical anomaly, and current discovered mineralization is the prospect clue only for further exploration, that is, more exploration is needed.

SRK was informed that Chizhou Donghai will invest RMB10.55M to do further exploration work at the Houshan exploration tenement. The main exploration programs include the high-precision magnetic survey (area of 4.27km[2] ) and drilling (total footage of 5000m). After completion of these programs, the predicted metal gold resource at Houshan may reach to 8.69t.

The Gaoling exploration property area is located at the south outer contact of Yanshanian granite stock, and the mineralization hosted both in a granite porphyry dyke and the sedimentary rocks dominated by Au, Cu and Mo. Previous soil sampling survey had outlined the anomalies of AP-1 and AP-2, both of which are characterized by the composition of Au, Ag, Cu, Pb, Zn, Hg and Mo. Unfortunately, no detail geological mapping had conducted so far, and only some trenches had been applied. SRK recommend carrying on more geological work.

SRK was informed that Chizhou Donghai will invest RMB6.57M to do further exploration work at the Gaoling exploration tenement. The main exploration programs include the high-precision magnetic survey (area of 5.72km[2] ) and drilling (total footage of 3000m). After completion of these programs, the predicted metal gold resource at Gaoling may reach to 7.14t.

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APPENDIX I

Table of Contents

	Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
	List of Tables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
	List of Figures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
	Disclaimer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
1	Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
2	Background and Brief. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 2.1 Background of the Project . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
	2.2 Scope of Work . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
3	Program Objectives and Work Program. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 3.1 Program Objectives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
	3.2 Reporting Standard . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
	3.3 Limitations Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
	3.4 Work Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
	3.5 Project Team . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
	3.6 Statement of SRK Independence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
	3.7 Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
	3.8 Consent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
	3.9 SRK Experience . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
	3.10 Forward Looking Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
4	Location and Property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57 4.1 Accessibility, Climate, Physiography, Local Economy and Infrastructure . . . . . . . . . . 57
	4.1.1 Location and Access . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
	4.1.2 Climate and Physiography . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
	4.1.3 Economy and Infrastructure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
	4.2 Exploration Permit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
5	Geological and Mineral Inventory Assessment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 5.1 Regional Geology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
	5.2 Houshan Gold Deposit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
	5.2.1 Property Geology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
	5.2.2 Mineralized Body . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
	5.2.3 Mineralogy and Ore Texture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
	5.3 Gaoling Gold Project . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
	5.3.1 Property Geology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
	5.3.2 Mineralization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65

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	5.4 Sampling, Analytical Procedures and Quality Control . . . . . . . . . . . . . . . . . . . . . . . . 67
	5.4.1 Geological Work . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
	5.4.2 Sampling Methods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
	5.4.3 Sample Preparation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
	5.4.4 Assaying . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
	5.4.5 Quality Assurance/Quality Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
	5.5 Resource Estimation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
	5.5.1 Resource Classification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
	5.5.2 Cut-off’s and Specific Gravity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
	5.5.3 Estimate of Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
	5.6 Potential for Further Exploration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
6	References. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
Glossary of Terms and Abbreviations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
Appendices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79 Appendix I: Exploration Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
	Appendix II: Chinese Resource and Reserve Standards . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
	Appendix III: Exploration Qualification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
	Appendix IV: Laboratory Qualification License . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84

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List of Tables

Table 3-1: SRK Project Team . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 Table 3-2: Recent Reports by SRK for Chinese Companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57 Table 4-1: Summary of Exploration Permit Details . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 Table 5-1: Summarized Work Conduced in Houshan Property during 2007-2008 . . . . . . . . . . . . . 68 Table 5-2: Summarized Work Conduced in Gaoling Property during 2007-2008 . . . . . . . . . . . . . 68 Table 5-3: Diamond Drill Core Recovery in Houshan Property . . . . . . . . . . . . . . . . . . . . . . . . . . 69 Table 5-4: SRK Sample Assays by Intertek Testing Services Ltd. Beijing Branch . . . . . . . . . . . . 73 Table 5-5: Summary of Gold Estimate of Resources of Houshan Property by APIET . . . . . . . . . 75 Table 5-6: Brief Block Resource Estimate of Houshan Property by APIET . . . . . . . . . . . . . . . . . 76

List of Figures

Figure 4-1: General Location Map . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 Figure 5-1: Regional Geology of Chizhou Gold Projects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 Figure 5-2: Property Geology of Houshan Exploration Property Area . . . . . . . . . . . . . . . . . . . . . 61 Figure 5-3: Cross Section of Houshan Exploration Property Area . . . . . . . . . . . . . . . . . . . . . . . . 62 Figure 5-4: Core Ore of Houshan Exploration Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64 Figure 5-5: Property Geology of Gaoling Exploration Property Area . . . . . . . . . . . . . . . . . . . . . . 65 Figure 5-6: Porphyry Type Mineralization at TC3 of Gaoling Property . . . . . . . . . . . . . . . . . . . . 66 Figure 5-7: Sedimentary Type Mineralization at TC703 of Gaoling Property . . . . . . . . . . . . . . . . 66 Figure 5-8: Trench TC3 in Gaoling Exploration Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69 Figure 5-9: Mark of Drill Hole ZK001 in Houshan Exploration Property . . . . . . . . . . . . . . . . . . 70 Figure 5-10: AAS Lab of No.312 Brigade Laboratory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71 Figure 5-11: Pulp Weighting before AAS Assay of No.312 Brigade Laboratory . . . . . . . . . . . . . 71 Figure 5-12: Internal Re-assaying by No.312 Brigade Laboratory . . . . . . . . . . . . . . . . . . . . . . . . 72 Figure 5-13: SRK’s Sample Site in Houshan Exploration Property . . . . . . . . . . . . . . . . . . . . . . . 72 Figure 5-14: SRK’s Sample Site in Gaoling Exploration Property . . . . . . . . . . . . . . . . . . . . . . . . 73

Disclaimer

The opinions expressed in this report have been based on the information supplied to SRK Consulting China Ltd (“SRK”) by Trismart Group Limited (“the Trismart” or “the Company”). The opinions in this report are provided in response to a specific request from the Company. SRK has exercised all due cares in reviewing the supplied information. Whilst SRK has compared key supplied data with expected values, the accuracy of the results and conclusions from the review are entirely reliant on the accuracy and completeness of the supplied data. SRK does not accept responsibility for any errors or omissions in the supplied information and does not accept any consequential liability arising from commercial decisions or actions resulting from them.

Opinions presented in this report apply to the site conditions and features as they existed at the time of SRK’s investigations, and those reasonably foreseeable. These opinions do not necessarily apply to conditions and features that may arise after the date of this report, about which SRK have had no prior knowledge nor had the opportunity to evaluate.

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APPENDIX I

1 Introduction

Trismart Group Limited (“Trismart” or “the Company”) is a wholly-owned subsidiary company of Ming Fung Jewellery Group Limited which is a public company listed on the Stock Exchange of Hong Kong Limited (“HKEx”). Trismart is planning to acquire the Chizhou project including Houshan gold and polymetallic exploration property and Gaoling gold and polymetallic exploration property, and the both properties are located in Chizhou city of Anhui Province, People’s Republic of China (“PRC”). The Houshan gold and polymetallic exploration tenement (No. T34520080302005736) covers an area of 4.71 square kilometres (km[2] ), and the Gaoling gold and polymetallic exploration tenement (No. 3400000730501) covers an area of 5.72 square kilometres (km[2] ). Both tenements are now owned by the Chizhou Donghai Mining & Development Company Limited (“Chizhou Donghai”). Copies of the two exploration tenements are attached in Appendix I. SRK was informed that the Anhui Provincial Institute of Exploration and Technology (“APIET”) had conducted exploration program on the two exploration properties and compiled exploration reports with Houshan gold resource estimates in 2008. APIET’s exploration qualification has been approved by the Ministry of Land and Resources (“MLR”), and the copy of the original qualification license is attached in appendix III. SRK was informed that the ownership of the Chizhou gold and polymetallic exploration tenements will be changed to Trismart, however SRK has not reviewed any transaction documents.

The Trismart commissioned SRK to review and report on the Chizhou gold projects. SRK was required to provide an Independent Expert Report (“the Report”) to the HKEx and the shareholders of Trismart.

2 Background and Brief

2.1 Background of the Project

Trismart commissioned SRK to review and report the Houshan and Gaoling gold and polymetallic exploration tenements in Chizhou City, Anhui Province, PRC. The two properties are wholly owned by Chizhou Donghai. Copies of the original exploration tenements are shown in Appendix I.

2.2 Scope of Work

The scope of work included SRK travelling to the property site and visiting the two gold and polymetallic properties in south of Chizhou City of Anhui Province, PRC, and preparing a report suitable for Trismart’s acquisition of the gold-polymetallic projects. This report focuses on geology and resources and resource potential of the three gold-polymetallic deposits.

3 Program Objectives and Work Program

3.1 Program Objectives

The principal objective of this report is to provide existing Trismart existing shareholders and the HKEx with an Independent Technical Assessment Report suitable for inclusion in documents that Trismart plans to submit to the HKEx in relation to the proposed acquisition. The SRK report is proposed to provide the HKEx and existing and potential shareholders of Trismart with an Independent Expert Report which provides an unbiased technical assessment of risk and opportunities associated with the project.

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3.2 Reporting Standard

This Report has been prepared to the standard of and is considered by SRK to be a Technical Assessment Report under the guidelines of the Valmin Code. The Valmin Code is the code adopted by the Australasian Institute of Mining and Metallurgy and incorporates the Joint Ore Reserves Committee (“JORC”) Code for the reporting of Mineral Resources and Ore Reserves. The standard is binding upon all and is binding upon all Australasian Institute of Mining and Metallurgy (“AusIMM”) members.

This Report is not a valuation report and does not express an opinion as to the value of mineral asset. Resources reported in this document are not classified according to the JORC code and have been reported against the relevant Chinese classification system. SRK does not express an opinion regarding the specific value of asset and tenement involved.

3.3 Limitations Statement

SRK is not professionally qualified to opine upon and/or confirm that Chizhou Donghai have 100% control of the underlying tenements and/or have any unresolved legal matters relating to any transfer of ownership or associated fees and royalties. SRK has therefore assumed that no legal impediments regarding the relevant tenements exist and that the company named above has legal rights to all underlying tenements as purported. Assessing the legal tenure and right to prospects of the above company is the responsibility of legal due diligence conducted by entities other than SRK.

3.4 Work Program

The work program consisted of a review of data provided by Chizhou Donghai and Trismart, travel to the project site in Chizhou City in Anhui Province, PRC; inspection of the Chizhou Donghai’s properties, including field observations, interviews with the representatives of the Company and exploration staff, analysis of the data provided, and preparation of this Report, which was provided to the Company as a draft for review of factual content. SRK will finalise the report after feedback and comments have been considered.

3.5 Project Team

The SRK project team, title and responsibility within this Report are shown in Table 3-1.

Table 3-1: SRK Project Team

Consultant	Title and Responsibility
Dr Yiefei Jia	Principal Consultant, geology, exploration and resource estimates,
	report compilation
Yuan Chen	Senior Geologist, assisting geological data collection and compilation
Pengfei Xiao	Geologist, assisting geological data collection and compilation
Liqin Yu	GIS Engineer, geology, drawing and charting
Dr Anson Xu	Principal Consultant, peer review and quality control

Dr Yiefei Jia, PhD, MAusIMM, is a principal consultant (geology) with a specialty of exploration of mineral deposits. He has more than 18 years experience in the field of exploration, development, and resources estimate of precious (gold, silver, and PGE) and base

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CHI ZHOU INDEPENDENT TECHNICAL REPORT

metal (lead, zinc, copper, vanadium, titanium, and iron as well as other metal ore deposits in different geological settings in China, Australia, and North America. He also has essential skills including exploration project management and design; petrological and geochemical analysis; lithological and geotechnical logging; and scientific research. He has recently completed several technical review projects including Stock Exchange of Hong Kong (HKEx) technical reports. Dr Jia is the project manager.

Yuan Chen, MSc, graduated from China University of Geosciences, is a senior geologist with a specialty of exploration knowledge and experience of mineral deposits. He used to be the senior geologist to review and generate project for Barrick Gold, AngloGold Ashanti, Silvercorp and Standard Bank etc. He has more than 20 years experience in exploration and development of various types of mineral deposits including gold, silver, copper, lead, zinc, iron, nickel and tungsten etc. He played as a chief geologist to be responsible for the detail exploration of Paracale Gold Mine located in SE Luzon Island, Philippines, which was financed by Chinese Government. He used to be one of the key persons to be responsible for prospecting for Liba Gold Deposit located in Gansu, China. Recently, he was responsible for the resource estimations of TLP and LM Silver-Lead projects for Silvercorp. After joining SRK recently, he is in charge of several exploration management projects in China, Indonesia and Mongolia.

Pengfei Xiao, MSc, (Geophysics) of Chinese Academy of Sciences, is a Geologist of SRK Consulting China. In the past years, Pengfei has joined a number of training on Petrology, Tectonics, and Geophysical exploration; also he has taken part in geological mapping. As a main participant, he has worked on Geophysical exploration and Geological survey in some metal minerals and coal projects, including a key project sponsored by National Nature Science Foundation of China.

Liqin Yu, GIS engineer, graduated from Chang’an University. He is engaged in drawing all kinds of maps of geology by computer. He is skilled in applications of MapInfo, MapGIS, CorelDRAW, ArcGIS, AutoCAD, Photoshop softwares. He took part in several exploration projects and assisted the Senior Geologist or Principal on some due diligence studies, such as Mongolian Mo project and Inner Mongolian Fluorite Project etc.

Dr Anson Xu, PhD, MAusIMM, is a principal consultant with a specialty in exploration of mineral deposits. He has more than 20 years experience in exploration and development of various types of mineral deposits including copper-nickel sulphide deposits related to ultrabasic rocks, tungsten and tin deposits, diamond deposits, and in particular, various types of gold deposits, vein-type, fracture-breccia zone type, alteration type, carlyn type. He was responsible for resource estimations of several diamond deposits, and review of resource estimations of several gold deposits. He has recently completed several due diligence jobs for clients in China, including gold, silver, lead-zinc, iron, bauxite, and copper projects, and several technical review projects, as well as HKSE technical reports.

3.6 Statement of SRK Independence

Neither SRK nor any of the Report authors have any material present or contingent interest in the outcome of this Report, nor do they have any pecuniary or other interest that could be reasonably regarded as being capable of affecting their independence or that of SRK.

SRK has no prior association with Trismart or Chizhou Donghai in regard to the mineral assets that are the subject of this Report. SRK’s fee for completing this Report is based on its normal professional daily rates plus reimbursement of incidental expenses. Payment of that professional fee is not contingent upon the outcome of this report.

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APPENDIX I

3.7 Warranties

Trismart Chizou Donghai have warranted to SRK that full disclosure has been made of all material information and that, to the best of its knowledge and understanding, such information is complete, accurate and true. SRK has no reason to doubt this representation.

3.8 Consent

SRK consents to this Report being included in full in the Company’s privately or publicly, assist the possible fundraising and decision-making of the Company, in the form and context in which the technical assessment is provided, and not for any other purpose.

SRK provides this consent on the basis that the technical reviews expressed in the summary and in the individual sections of this Report are considered with, and not independently of, the information set out in the complete Report.

3.9 SRK Experience

SRK Consulting is an independent, international consulting group with extensive experience in preparing independent technical reports for various stock exchanges around the world (see www.srk.com for a review). SRK is a one-stop consultancy offering specialist services to mining and exploration companies for the entire life cycle of a mining project, from exploration through to mine closure. Among SRK’s more than 1,500 clients are most of the world’s major and medium-sized metal and industrial mineral mining houses, exploration companies, banks, petroleum exploration companies, agribusiness companies, construction firms and government departments.

Formed in Johannesburg, South Africa, in 1974 SRK now employs more than 900 professionals internationally in 35 permanent offices on six continents. A broad range of internationally recognized associate consultants complements the core staff.

SRK Consulting employs leading specialists in each field of science and engineering. Its seamless integration of services, and global base, has made the company a world’s leading practice in due diligence, feasibility studies and confidential internal reviews.

The SRK Group’s independence is ensured by the fact that it holds no equity in any project and that its ownership rests solely with its staff. This permits the SRK Group to provide its clients with conflict-free and objective recommendations on crucial judgement issues.

SRK China was established in early 2005, and is mainly working on Chinese mining projects independently or together with SRK’s other offices, mainly SRK Australasia (see www.srk.cn and www.srk.com.au for a review). We have prepared dozens of independent technical reports on mining projects for various companies who acquired Chinese projects or went public listings on overseas stock exchanges with a summary list as showing in Table 3-2.

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APPENDIX I

Table 3-2: Recent Reports by SRK for Chinese Companies

Company

Yanzhou Coal Limited (company listed on the Stock Exchange of Hong Kong Limited) Chalco (Aluminium Corporation of China)

Fujian Zijin Gold Mining Company

Lingbao Gold Limited

Yue Da Holdings Limited (company listed on the Stock Exchange of Hong Kong Limited) China Coal Energy Company Limited (China Coal) Sino Gold Mining Limited

Xinjiang Xinxin Mining Industry Company Limited Espco Technology Holdings Limited

Hong Kong Nation Resources Limited

Kiu Hung International Holdings Limited

China Shenzhou Mining and Resources Inc

Year Nature of Transaction

• 2000 Sale of Jining III coal mine by parent company to the listed operating company

• 2001 Listing on the Stock Exchange of Hong Kong Limited and New York Stock Exchange

• 2004 Listing on the Stock Exchange of Hong Kong Limited

• 2005 Listing on the Stock Exchange of Hong Kong Limited

• 2006 Proposed acquisition of shareholding in mining projects in PRC

• 2006 Listing on the Stock Exchange of Hong Kong Limited

• 2007 Dual listing on the Stock Exchange of Hong Kong Limited

• 2007 Listing on the Stock Exchange of Hong Kong Limited

• 2008 A acquisition of shareholding in Tongguan Taizhou Gold-Lead projects in PRC

• 2008 Proposed acquisition of shareholding in iron projects Chengde, PRC

• 2008 A acquisition of shareholding in coal projects in Inner Mongolia, PRC

• 2008 Listing (SHZ) on the American Stock Exchange

3.10 Forward Looking Statements

Estimates of mineral resources are inherently forward looking statements. Being projections of future performance, they will differ from actual performance. The errors in such projections result from inherent uncertainties in interpretation of geologic data, variations in the execution of mining and processing plans, the ability to meet construction and production schedules, availability of necessary equipment and supplies, fluctuating prices and changes in regulations.

Possible sources of error in the forward looking statements are addressed in more details in the appropriate sections of this Report.

4 Location and Property

4.1 Accessibility, Climate, Physiography, Local Economy and Infrastructure

4.1.1 Location and Access

The Chizhou gold projects are located at approximately 150km southeast of Hefei, the capital of Anhui Province (Figure 4-1). Hefei is one of the major cities in China, with available railways and air fights accessing to Beijing, Shanghai and Guangzhou etc.

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APPENDIX I

The Chizhou gold projects include Houshan Gold and Polymetallic Metals Exploration (Houshan) and Gaoling Gold and Polymetallic Metals Exploration (Gaoling). Both Houshan and Gaoling are located within the territory of Chizhou City, Anhui Province. There are railways and highways connecting Chizhou and Hefei via Anqing bridge and Tongling bridge to the west and the east respectively, both bridges are across over the Yangtze River.

The Houshan exploration property is located at the southwest of Chizhou, about 26km of the No.318 National Highway, and then about 20km of the local well paved road accessing to Houshan exploration permit area with the geographic coordinates are latitude 30°20’15” to 30°21’45”N and longitude 117°22’00” to 117°23’15”E.

The Gaoling exploration property is located at the east of Chizhou, about 30km of the No.318 National Highway, and then about 10km of the local paved road accessing to Gaoling exploration permit area with the geographic coordinates are latitude 30°39’45” to 30°41’00”N and longitude 117°46’15” to 117°48’00”E.

==> picture [400 x 259] intentionally omitted <==

Figure 4-1: General Location Map

4.1.2 Climate and Physiography

Topography of the project area is characterized by hills of elevations ranging 70m to 442m above the sea level (ASL) with the relief ranging 190-372m for the most parts of the area. The climate is typical continental with four distinct seasons. It is hot and rainy in summer and cold and dry in winter. Seasons have temperatures averaging 16.1°C. The annual precipitation is 1400-1600 millimetres (mm), and non-frost season is about 240 days.

4.1.3 Economy and Infrastructure

Local economy is heavily based on agriculture and mining industries. Main crops are rice, tea and timber, and the most residents are consisted of the Han people. The national-grid power line extends to the property areas. The mobile-phone signal is available all over the area.

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There are some operation mines of copper, gold, molybdenum, lead and zinc etc. which are the important industries in the area.

There is a creek at Houshan exploration property area with running water year round accessing to the Qiupuhe River to the east, which flows then from south to north, and join the Yangtze River finally near Chizhou.

4.2 Exploration Permit

Two exploration permits are currently held by the Chizhou Donghai Mining & Development Co. Ltd (Donghai). Table 4-1 summarises the exploration permit details, which are issued by the Anhui Provincial Administration of Land and Mineral Resources. The copies of the original permit are given in Appendix 2.

Table 4-1: Summary of Exploration Permit Details

Permit No.	Property Name	Expiry Date	Area (km2)
T34520080302005736	Guizhi Houshan Gold and Polymetallic Metal Detail Exploration	March 2010	4.71
3400000730501	Guizhi Gaoling Gold and Polymetallic Metal Detail Exploration	November 2009	5.72

5 Geological and Mineral Inventory Assessment

5.1 Regional Geology

As shown on Figure 5-1, the Chizhou gold projects area is located in the northeast edge of Yangtze Platform, which is composed of the Proterozoic metamorphic basement and the paleozoic sedimentary cover.

In the region, it outcrops a first-order anticlinorium structure composed of widespread Cambrian and Silurian sedimentary rocks (Figure 5-1). The Houshan exploration property area is located at the SE limb of the second-order synclinorium structure trending NE, which is composed of Silurian, Devonian, Carboniferous, Permian and Triassic sedimentary rocks, whereas the Gaoling exploration property area is located at the plunging crown of the second-order anticlinorium structure trending NE, which is composed of Ordovician and Silurian sedimentary rocks. It is inferred that the fold structures were formed during Indosinian orogeny (Triassic to early Jurassic period), and the most faults are parallel to the fold axis or had broken the fold structures. The first-order fold structure was intruded by the widespread Yanshanian (Jurassic to Cretaceous period) diorite and granite intrusions.

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APPENDIX I

==> picture [471 x 283] intentionally omitted <==

Figure 5-1: Regional Geology of Chizhou Gold Projects

The Cambrian sedimentary is characterized by grey to heavy grey silicon shale and mud-banded limestone. The Ordovician is mainly composed of heavy grey marl, chert-banded limestone intercalated by some yellow-green shale. The Silurian is characterized by fine grain sandstone, greywacke, and silt stone. The Devonian is characterized by shale and clay rocks and the Carboniferous by the bioclastic limestone, while the Permian by siliceous rock and siliceous shale. The Triassic is characterized by calcareous shale and limestone.

Regionally, it presents a well known important iron-copper-gold mineralization zone in China trending NE located at the middle to lower reach Yangtze River, where the Chizhou gold projects are located at the middle part of the regional iron-copper-gold mineralization zone. In project area, the Meishancun gold deposit is located about 8km to the east sharing the exact same geological setting as Houshan gold deposit, whereas the Simenkou gold deposit is located about 6km to the east sharing the exact same geological setting as Gaoling gold deposit (Figure 5-1).

5.2 Houshan Gold Deposit

5.2.1 Property Geology

The Houshan exploration property area is located at the SE limb of the second-order synclinorium structure trending NE (Figure 5-1), where it appears a monocline structure composed mainly of Silurian, and a small part of Devonian, Carboniferous and Permian rocks are located at the NW corner (Figure 5-2).

The Silurian is recognized into three formations: Lower Gaojiabian (S1g), Middle Fentou (S2f) and Upper Maoshan (S3m). The Lower Gaojiabian Formation (S1g) is characterized by silty shale with a small amount of intercalated siltstone. The strata dip to NW340° at the angle of 22°-42°. The Middle Fentou Formation (S2f) is characterized by quartz sandstone, fine grain sandstone, pelitic sandstone with a small amount of intercalated silty shale, which

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is further divided into the Upper Member (S2f[3] ), Middle Member (S2f[2] ) and Lower Member (S2f[1] ) based on the percentage composition of sandstone and the shale (Figure 5-2). The strata dip to NW340° in general at the angle of 30°-48°. The Upper Maoshan Formation (S3m) is characterized by fine grain sandstone intercalated by silt sandstone. The mineralization is mainly hosted in the Lower Gaojiabian Formation (S1g) and the Middle Fentou Formation (S2f).

Two groups of faults are developed within the exploration property area: one group fault such as F9 and F10 trends near EW, dipping to south with high angle cutting the bed which has a close relationship with the mineralization. Another group fault is characterized by sinistral offset trending near SN cutting the latest bed of Permian, indicating the fault was formed after Hercynian orogeny.

Some grano-diorite porphyry dykes are outcropped sporadically trending NE or near EW. Local geologists believe that the porphyry has a genetic relationship to the mineralization.

==> picture [349 x 443] intentionally omitted <==

Figure 5-2: Property Geology of Houshan Exploration Property Area

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APPENDIX I

5.2.2 Mineralized Body

Ten (10) mineralized bodies had been defined within Houshan exploration property, and the main characteristics are summarized as following.

Body I-1

The mineralized body had been controlled for 364m long, and 1.45-3.05m wide with elevations ranging 135-217m ASL grading Au 2.27g/t. Three trenches of TC38, 42 and 44 were applied for controlling, but the diamond drill hole ZK4401 had not intercepted the mineralization. The mineralized body trends near EW, dipping to 175° at the angle of 58°.

Body I-2

The mineralized body had been controlled for 80m long, and 1.06m wide with elevations ranging 137-177m ASL grading Au 1.06g/t. One trench of TC50 was applied for controlling. The mineralized body trends near EW, dipping to 175° at the angle of 70°.

Body I-3

The mineralized body had been controlled for 80m long, and 1.05m wide with elevations ranging 132-172m ASL grading Au 1.05g/t. One trench of TC42 was applied for controlling. The mineralized body trends near EW, dipping to 175° at the angle of 58°.

Body II-1

The mineralized body II-1 is the main body within the property area, which had been controlled for 242m long, and 0.95-1.56m wide with elevations ranging 145-234m ASL grading Au 3.66g/t. Three trenches of TC6-3, 8-1 and 12-3, and two diamond drill holes of ZK001 and Zk201 were applied for controlling. The mineralized body trends near EW, dipping to 170° at the angle of 56° (Figure 5-3).

==> picture [408 x 241] intentionally omitted <==

Figure 5-3: Cross Section of Houshan Exploration Property Area

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APPENDIX I

Body II-2

The mineralized body II-2 is the blind body, which had been controlled for 80m long, and 1.12m wide with elevations ranging 100-140m ASL grading Au 1.02g/t. The diamond drill hole ZK001 had intercepted the mineralization. The mineralized body trends near EW, dipping to 170° at the angle of 56° (Figure 5-3).

Body III

The mineralized body had been controlled for 117m long, and 0.98-1.47m wide with elevation ranging 158-229m ASL grading Au 9.35g/t. Two trenches of TC6-5 and 8-1 were applied for controlling, but unfortunately, both diamond drill holes of ZK003 and ZK203 had not intercepted the mineralization. The mineralized body trends near EW, dipping to 175° at the angle of 60° (Figure 5-3).

Body IV-1

The mineralized body had been controlled for 80m long, and 0.85m wide with elevations ranging 276-316m ASL grading Au 1.40g/t. One trench of TC18 was applied for controlling. The mineralized body trends near EW, dipping to 180° at the angle of 65°.

Body IV-2

The mineralized body had been controlled for 80m long, and 1.86m wide with elevation ranging 272-312m ASL grading Au 1.41g/t. One trench of TC18 was applied for controlling. The mineralized body trends near EW, dipping to 180° at the angle of 65°.

Body IV-3

The mineralized body had been controlled for 80m long, and 1.33m wide with elevation ranging 247-287m ASL grading Au 1.82g/t. One trench of TC22 and one drill hole of ZK1601 were applied for controlling. The mineralized body trends near EW, dipping to 167° at the angle of 56°.

Body IV-4

The mineralized body had been controlled for 80m long, and 0.77m wide with elevation ranging 200-240m ASL grading Au 1.59g/t. One trench of TC26 was applied for controlling. The mineralized body trends near EW, dipping to 172° at the angle of 62°.

5.2.3 Mineralogy and Ore Texture

The ore can be classified into two types: primary ore and oxidized ore, and the oxidized ore were told to be about 0-10m deep under the surface. The mineral resource in property area is dominated by the primary ore, which can be further divided into two sub-types: cataclasite sedimentary type and catalasite porphyry type. The mineralized body IV-3 is the porphyry hosted type only, and all other mineralized bodies are the sedimentary rock hosted mineralization.

All the mineralization is confined by the fault structure.

Based on the microscope study, the ore mineral is dominated by pyrite (Figure 5-4), with a small amount of hematite (limonite) which is associated with the oxidized ore, minor galena and sphalerite. The gangue minerals are dominated by quartz, plagioclase plus sericite, and minor carbonate and epidote etc.

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APPENDIX I

The ore textures are: breccias, stockwork, disseminate and the granular etc. The pyrite usually fills or replaces along the cement of the breccias, or appears as disseminated texture (Figure 5-4).

The ore chemical composition has not studied yet.

==> picture [343 x 258] intentionally omitted <==

Figure 5-4: Core Ore of Houshan Exploration Property

5.3 Gaoling Gold Project

5.3.1 Property Geology

Gaoling exploration property area is located at the plunging crown of the second-order anticlinorium structure trending NE (Figure 5-1), which is composed of the Lower Ordovician Lunshan Formation (O1l) and the Lower Silurian Gaojiabian Formation (S1g) and the Middle Silurian Fentou Formation (S2f) (Figure 5-5).

Lunshan Formation (O1l) is characterized by limestone, dolomite, dipping to 152° at the angle of 61°. Gaojiabian Formation (S1g) is characterized by quartz sandstone, fine grain sandstone, siltstone and shale, dipping to 100°-155° at the angle of 30°-46°.

Fentou Formation (S2f) is characterized by fine grain sandstone, siltstone and shale, dipping to 110°-155° at the angle of 30°-45°.

There are two different strike faults, NE and NW, but dominated by NE faults. NE fault is actually the bedding fault which developed along the contact between Fentou Formation (S2f) and Gaojiabian Formation (S1g), or Fentou Formation (S2f) and Lunshan Formation (O1l), dipping to SE at the angle of 60° cutting the bedding. NW fault had offset both the bedding and NE fault which is believed to be conjugated fault with NE fault.

Yanshanian (Jurassic to Cretaceous period) granite stock is wide outcropped at about 200-500m to the north (Figure 5-5), where a granite porphyry dyke is developed mixed with the mineralization.

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APPENDIX I

==> picture [315 x 375] intentionally omitted <==

Figure 5-5: Property Geology of Gaoling Exploration Property Area

5.3.2 Mineralization

Six (6) mineralized bodies were defined within the property area. Body I hosted within the porphyry dyke was controlled by TC3, and one sample indicates Au 2.19g/t over 2.2m wide which was inferred for 100m long. Body II hosted within the porphyry dyke was controlled by TC3, and three samples bring back Au 0.25g/t over 4.7m wide and Cu 0.29% over 2.7m wide, which was inferred for 100m long. Body III hosted within the porphyry dyke was controlled by TC5-1, 5-2, 3, 701 and 702 for about 390m long, with the grade Cu of 0.21-0.78%. Body IV hosted within the porphyry dyke was controlled by TC701 only, and the three samples bring back Au 1.01g/t over 5.0m wide, which was inferred for 100m long. Body V hosted within the porphyry dyke was controlled by TC701, and five samples bring back Au 1.74g/t over 6.9m wide, which was inferred for 100m long. Body VI hosted in Gaojiabian Formation (S1g) was controlled by TC703, and three samples bring back Au 0.22g/t over 6.0m wide, which was inferred for 100m long.

There are two types mineralization: porphyry hosted mineralization (Figure 5-6) and sedimentary hosted mineralization (Figure 5-7). It is a poly metallic mineralization of Cu, Au and possible Mo, and reported to have observed chalcopyrite, chalcocite, covelline, malachite, molybdenite and galena etc.

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APPENDIX I

==> picture [346 x 259] intentionally omitted <==

Figure 5-6: Porphyry Type Mineralization at TC3 of Gaoling Property

==> picture [343 x 258] intentionally omitted <==

Figure 5-7: Sedimentary Type Mineralization at TC703 of Gaoling Property

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APPENDIX I CHI ZHOU INDEPENDENT TECHNICAL REPORT

5.4 Sampling, Analytical Procedures and Quality Control

5.4.1 Geological Work

• Previous Geological Work

1959-1965: the Regional Geological Survey Team of Anhui Bureau of Geology and Mineral Resources carried out the regional geology and mineral resources mapping at the scale of 1/200k for Anqing Sheet covering the project area.

1988-1990: the First Geophysical Team of previous Ministry of Land and Resources (MLR, former name: Ministry of Geology and Mineral Resources) conducted Chizhou area geophysical and geochemical surveys, and made the follow-up field inspection in year 2001, 2002 and 2005 respectively.

2002: the First Geophysical Team of previous MLR had applied soil sampling survey at the scale of 1/10k in Houshan exploration property area, and outlined 5 composite anomalies, among which the trench TC8 had uncovered gold mineralization grading Au 1-40.9g/t. It is also discovered another mineralization zone nearby, 20-45m wide, about 200m long grading Au 0.5-6.98g/t with part copper mineralization at the highest grade Cu of 0.35%.

1999-2003: the First Geophysical Team of previous MLR had applied soil sampling survey at the scale of 1/10k in Gaoling exploration property area, and outlined some anomalies. It is inferred that there would a blind polymetallic mineralization in Gaoling exploration property.

2005: the First Geophysical Team of previous MLR had conducted soil sampling survey outside Houshan exploration property, and outlined two composite anomalies composed of Au, Ag, Cu, Pb, Zn, As, Sb and Bi. One anomaly is located at the southwest part of Houshan property, about 1100m long trending near EW, and 550m wide with the highest Ag value of 19.418g/t. Another anomaly is located at the northwest part of Houshan property appearing 150m wide by 200m long, and the highest Au value of 0.47g/t.

• Current Geological Work

Current geological work in Houshan and Gaoling exploration properties conducted by APIET during 2007-2008 see Table 5-1 and 5-2 respectively.

In Houshan property area, the diamond drilling program was the main method for the exploration. The total 7 holes were conducted with core recovery see table 5-3. It is reported that the down-hole survey and the depth verification had been conducted every 50m and 100m respectively, and the quality was accepted.

SRK noticed that APIET had applied the high resolution GPS for measuring the engineering, but the work has not well performed, and not surveyed the topography in system. The high resolution magmatic survey data had not summarized.

No diamond drilling program had applied to Gaoling exploration property.

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APPENDIX I

Table 5-1: Summarized Work Conducted in Houshan Property during 2007-2008

		Conducted
Program	Unit	Work	Comments
Geological mapping at 1/2000	km2	1.13
Trenching	m3	3,272.6	24 exploration line
Drilling	m	695.46	7 hole
High resolution magnet survey	m	5,322
Topo measure of engineering point	point	51
Trench sampling	sample	336
Core sampling	sample	84
Specific gravity measure	sample	41
Sample for magnet measure	sample	54
Microscope petrology	sample	20

Table 5-2: Summarized Work Conducted in Gaoling Property during 2007-2008

		Conducted
Program	Unit	Work	Comments
Trench	m3	586	2 trenches
Shallow pit	m	7.2
Basic assaying	sample	29
Microscope petrology	sample	7
Sample for magnet measure	sample	12
High resolution magnet survey	m	195

5.4.2 Sampling Methods

• Trenching

Trenching was used to reveal the mineralized bodies on the surface, and distributed perpendicular in general to the mineralized body’s strike. Channel sampling method was used to take samples from trenches with a channel section size of 10cm long by 3cm wide along a wall of the trench. In general, each sample is 1.0-2.0m long (Figure 5-8).

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APPENDIX I

==> picture [341 x 258] intentionally omitted <==

Figure 5-8: Trench TC3 in Gaoling Exploration Property

• Drilling

A total of 695.46m of diamond drillings were drilled in Houshan exploration property area by the APIET during the period 2007-2008. Diamond drill rigs were used for the exploration operation with hole diameter of 75mm. All holes were designed as declined holes, with the recovery of diamond drilling ore core recovery averaging 81% (Table 5-3). The down-hole surveys, depth verification and the logging were conducted by the APIET’s site geologist. After end of a hole, cement has been used to seal it, and a mark is left (Figure 5-9). The core was split along the core by the half for sampling. Besides, the simple hydrological observation is reported to have been made for each hole.

Table 5-3: Diamond Drill Core Recovery in Houshan Property

						Ore core
	Depth to	Total	Recovery	Ore depth	Ore core	recovery
Hole No	m	core m	%	range m	m	%	Comments
ZK001	87.76	66.54	75.8	3.0	2.42	81
ZK003	92.86	77.75	83.7				No intercepted
							mineralization
ZK201	114.99	92.95	80.8	2.9	2.38	82
ZK203	92.86	80.18	80.6				No intercepted
							mineralization
ZK401	106.00	85.12	80.3				Intercepted Au
							0.88g/t over
							1.53m
ZK1601	100.79	79.36	78.7	1.6	2.00	80
ZK4401	100.20	43.58	82.8				No intercepted
							mineralization

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APPENDIX I

==> picture [343 x 259] intentionally omitted <==

Figure 5-9: Mark of Drill Hole ZK001 in Houshan Exploration Property

The high resolution GPS receiver are claimed for setting up the topographic control point, measuring the trench ends, and drill collar in Houshan property area. No high resolution topo-measuring equipment has been applied to Gaoling property.

SRK noticed that the topographic map of both the Houshan and Gaoling properties should be measured before conducting further geological work in the future exploration program.

5.4.3 Sample Preparation

All site samples were packed in clothe bags and shipped to the No. 312 Brigade of Anhui Bureau of Geology and Mineral Resource Exploration for sample preparation. The sample was dried first, and then crushed to -40 mesh before the first splitting. The K takes the value 0.2 for Au. The split sample was pulverized to -200 mesh with the gravity more than 200g before taking for assaying.

No. 312 Brigade of Anhui Bureau of Geology and Mineral Resource Exploration possess Chinese Government approved qualification and certification issued by Anhui Provincial Administration of Quality and Technology (see appendix 4).

5.4.4 Assaying

AAS was used for Au assaying by the No. 312 Brigade of Anhui Bureau of Geology and Mineral Resource Exploration (Figure 5-10, 5-11).

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APPENDIX I

==> picture [308 x 232] intentionally omitted <==

Figure 5-10: AAS Lab of No.312 Brigade Laboratory

==> picture [306 x 230] intentionally omitted <==

Figure 5-11: Pulp Weighting before AAS Assay of No. 312 Brigade Laboratory

5.4.5 Quality Assurance/Quality Control

A total of 30 samples of the internal re-assaying were made by the No. 312 Brigade Laboratory accounting for 7% of total 420 basic assaying samples. The internal re-assaying means that -200 mesh pulps were brought back from the laboratory and then re-numbered by the APIET’s geologist, and to re-send to No. 312 Brigade Laboratory again for re-assaying. The internal re-assaying result see Figure 5-12 indicating that the most of the total 30 re-assaying samples are plotted within 10% limits of original assays, that is, the re-assaying quality was accepted.

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APPENDIX I

SRK noticed that the external re-assaying had not been made in both Houshan and Gaoling exploration program.

==> picture [327 x 193] intentionally omitted <==

----- Start of picture text -----

- 10%
Re-assaying
+10%
Linear (Re-
assaying)
Internal Re-assaying g/t
Original assay g/t
----- End of picture text -----

Figure 5-12: Internal Re-assaying by No. 312 Brigade Laboratory

SRK geologists have taken back five samples during the site visit as showed in Figure 5-13, 5-14 and Table 5-4 which indicate that SRK’s sample assays have low value of Au, but some Mo mineralization in Gaoling property. SRK cautions that the field re-sampling assays are not compliant with APIET’s assays, and any reliance on APIET’s assays should be cautious.

==> picture [343 x 253] intentionally omitted <==

Figure 5-13: SRK’s Sample Site in Houshan Exploration Property

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APPENDIX I

==> picture [343 x 261] intentionally omitted <==

Figure 5-14: SRK’s Sample Site in Gaoling Exploration Property

Table 5-4: SRK Sample Assays by Intertek Testing Services Ltd. Beijing Branch

		Sampling	Location	Sampling	Assay	Assay
Sample	Mineralized Body	X	Y	Length m	Au g/t	Mo %	Comments
HS09001	Houshan No II-1	39536008	3358889	2.0	0.032		TC8-1
	mineralized body
HS09002	Houshan No II-2	39536008	3358889	1.2	0.024		TC8-2
	mineralized body
HS09003	Houshan No II-3	39536008	3358889	0.4	0.023		TC8-3
	mineralized body
GL09001		39574632	3395150	Grab	0.144	0.0049	TC3
GL09002	Gaoling No II	39574662	3395113	1.5	0.109	0.0003	TC4
	mineralized body

Note: Au assayed by AAS, and Mo by ICP

5.5 Resource Estimation

5.5.1 Resource Classification

Before 1999 China used a letter system to categorise resource and reserve estimate. China has since adopted a three number system. However, both the systems are different from the criteria used in defining a resource under the Australian Joint Ore Reserves Committee (JORC) Code. The comparison between different systems is provided in Appendix II.

In generally, the 333 resource may refer to JORC Inferred resource, and the 334 does not have a JORC equivalent.

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CHI ZHOU INDEPENDENT TECHNICAL REPORT

APPENDIX I

5.5.2 Cut-off’s and Specific Gravity

• Technical Parameters

Based on the following technical parameters, the APIET completed the mineral resource estimation of Houshan exploration property using parallel cross-section block method in May 2008, and had not done any mineral resource estimation of Gaoling exploration property:

• Overall cut-off: Au≥1.0g/t;

• Minimum average ore block grade: Au≥1.0g/t;

• Minimum mineable thickness: 1.0m;

• Maximum band allowed: 2.0m

Total 10 mineralized bodies have been estimated for the mineral resources.

• General Method of the Resource Estimate

The engineering used for defining mineralized body were deployed based on the exploration grid of 100m by 80m for 333 resource category, and the resources controlled by two engineering at the interval 100-210m, or single engineering was classified into 334 resource category.

On cross section, 40m has been extrapolated along the dip extension from the engineering, and on the profile projection map, 40m extrapolated along both the strikes of the mineralized body from the engineering.

The block volume confined between two cross-sections was calculated based on the following formulas:

• (S1 + S 2) × L

• • V = , when the defined area difference of mineralized bodies on two 2

• cross section is less than 40%;

• (S1 + S 2 + S1× S 2) × L

• • V = , when the defined area difference of mineralized 3

• bodies on two cross section is more than 40%;

• S × L

• • V = , when mineralized body pinches out outside of the cross section. 3

The defined area of mineralized body on cross section was performed by AutoCAD software, and all relevant calculation was performed by Microsoft Excel software.

The weighted grade by sample grade and sample length was applied for the block average grade. The concept of the top-cut grade by 8 times average grade was applied, however, all assays for resource estimation were less than the top-cut grade.

The tonnage is the block volume times specific gravity, and the metal resource is the tonnage times average block grade.

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APPENDIX I

• Specific Gravity

The APIET had measured the total 41 samples for the specific gravity averaging 2.56 t/m[3] , among which 2 samples for gold ore averaging 2.66t/m[3] . The specific gravity data of 2.66t/m[3] was applied for the resource estimation.

SRK noticed that more samples are needed for the specific gravity data in the future exploration program, and the resource estimate based on 2.66t/m[3] was not reliable.

5.5.3 Estimate of Resources

Total 10 mineralized gold bodies have a 333 category gold mineral resources of about 18,600 metric tonnes with an average grade 4.72g/t and a 334 category gold mineral resources of 37,379 metric tonnes with an average grade 2.34g/t as details showed in Table 5-5.

The block resource calculation process is briefly demonstrated in Table 5-6.

SRK noticed that the resource estimations of the Houshan exploration property area made by the APIET are not fully compliant with the JORC Code, and more work need to be done to provide reliable resource estimates.

Table 5-5: Summary of Gold Estimate of Resources of Houshan Property by APIET

Mineralized Body I-1 I-2 I-3 II-1 II-2 III IV-1 IV-2 IV-3 IV-4 Total	Tonnage t 333 334 18,514.34 4,064.48 844.10 15,593.91 1,965.74 1,191.68 3,006.62 2,258.34 1,361.92 2,411.73 2,794.77 1,971.94 18,600.53 37,379.05	Grade g/t 333 334 2.27 1.06 1.05 3.76 2.84 1.02 9.68 8.90 1.40 1.41 1.82 1.59 4.72 2.34	Metal Resource Kg 333 334 42.12 4.31 0.89 58.63 5.59 1.22 29.10 20.11 1.91 3.40 5.09 3.14 87.73 87.78

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APPENDIX I CHI ZHOU INDEPENDENT TECHNICAL REPORT

Table 5-6: Brief Block Resource Estimate of Houshan Property by APIET

				Defined			Interval
Mineralized	Resource	Block		Mineralized	True	Average	Between		Block	Specific		Gold
Body	Category	No	Engineering	Area	Thickness	Grade	Cross-Section	Block Volume Formula	Volume	Gravity	Tonnage	Resources
				m2	m	g/t	m		m3	t/m3	t	kg
	334	K1	TC38	S=31.2	2.42	3.05	40	V=S×L/3	416.00	2.66	1,106.56	3.38
	334		TC38	S=31.2						2.66
	334	K2	TC42	S1=13.5	1.70	2.55	210	V=(S1+S2+(S1*S2)1/2)×L/3	4,565.62	2.66	12,144.55	30.97
I-1
	334		TC42	S1=13.5						2.66
	334	K3	TC44	S=30.2	1.43	1.45	74	V=(S1+S2+(S1*S2)1/2)×L/3	1,575.99	2.66	4,192.13	6.08
	334	K4	TC44	S=30.2	1.88	1.58	40	V=S×L/3	402.67	2.66	1,071.10	1.69
I-2	334	K5	TC50	S=57.3	2.86	1.06	80	V=S×L/3	1,528.00	2.66	4,064.48	4.31
I-3	334	K6	TC42	S2=11.9	0.98	1.05	80	V=S×L/3	317.33	2.66	844.10	0.89
			TC6-3							2.66
	334	K7	ZK001	S1=75.2	1.41	3.24	40	V=S×L/3	442.67	2.66	1,177.50	3.82
			TC6-3							2.66
				S1=75.2
			ZK001							2.66
	333	K8	TC8-1		1.56	3.76	69	V=(S1+S2+(S1*S2)1/2)×L/3	3,374.62	2.66	8,976.49	33.75
II-1				S=33.3
			ZK201							2.66
			TC8-1							2.66
				S=33.3
	333	K9	ZK201		1.46	3.76	93	V=(S1+S2)×L/2	2,487.75	2.66	6,617.42	24.88
			TC12-3	S=20.2						2.66
	334	K10	TC12-3	S=20.2	0.95	2.24	40	V=S×L/3	296.33	2.66	788.24	1.77
II-2	334	K11	ZK001	S2=16.8	1.12	1.02	80	V=S×L/3	448.00	2.66	1,191.68	1.22
	334	K12	TC6-5	S3=44.6	1.47	6.34	40	V=S×L/3	594.67	2.66	1,581.82	10.03
			TC6-5	S3=44.6						2.66
III	333	K13	TC8	S=18.4	1.23	9.68	37	V=(S1+S2+(S1*S2)1/2)×L/3	1,130.31	2.66	3,006.62	29.10
	334	K14	TC8	S=18.4	0.98	14.90	40	V=S×L/3	254.33	2.66	676.52	10.08
IV-1	334	K15	TC18	S1=19.2	0.85	1.40	80	V=S×L/3	512.00	2.66	1,361.92	1.91
IV-2	334	K16	TC18	S2=34	1.86	1.41	80	V=S×L/3	906.67	2.66	2,411.73	3.40
			TC22							2.66
IV-3	334	K17	ZK1601	S1=39.4	1.33	1.82	80	V=S×L/3	1,050.67	2.66	2,794.77	5.09
IV-4	334	K18	TC26	S=27.8	0.77	1.59	80	V=S×L/3	741.33	2.66	1,971.94	3.14

5.6 Potential for Further Exploration

The project area is located at the middle part of the well known regional iron-copper-gold mineralization zone in China. It is believed that the iron-copper-gold mineralization has a genetic relationship to Yanshanian (Jurassic to Cretaceous period) magma event which demonstrates as diorite and granite stock, or dyke, and the mineralization is confined by the fault structure.

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APPENDIX I

CHI ZHOU INDEPENDENT TECHNICAL REPORT

In Houshan exploration property area, it is reported there exists a high value geochemical composite anomaly composed of Au, Cu and Ag for 0.75 square kilometres, where there are some outcropped grano-diorite porphyry dykes. So far, some soil sampling survey and high resolution magmatic survey had been done within the property area, but the data had not been summarized. The geological mapping had not even covered the whole exploration property area, which could be why only 3 holes of the total 7 conducted diamond drill holes had intercepted the mineralization. SRK believes that the geological work so far is sort of geological follow-up inspection of geochemical anomaly, and current discovered mineralization is the prospect clue only for further exploration, that is, more exploration is needed.

SRK was informed that Chizhou Donghai will invest RMB10.55M to do further exploration work at the Houshan exploration tenement. The main exploration programs include the high-precision magnetic survey (area of 4.27km[2] ) and drilling (total footage of 5000m). After completion of these programs, the predicted metal gold resource at Houshan may reach to 8.69t.

The Gaoling exploration property area is located at the south outer contact of Yanshanian granite stock, and the mineralization hosted both in a granite porphyry dyke and the sedimentary rocks dominated by Au, Cu and Mo. Previous soil sampling survey had outlined the anomalies of AP-1 and AP-2, both of which are characterized by the composition of Au, Ag, Cu, Pb, Zn, Hg and Mo.

Unfortunately, no detail geological mapping had conducted so far, and only some trenches had been applied. SRK recommend carrying on more geological work.

SRK was informed that Chizhou Donghai will invest RMB6.57M to do further exploration work at the Gaoling exploration tenement. The main exploration programs include the high-precision magnetic survey (area of 5.72km[2] ) and drilling (total footage of 3000m). After completion of these programs, the predicted metal gold resource at Gaoling may reach to 7.14t.

The Company has already adopted the recommendation made by SRK above to conduct further exploration programs in the two gold prospects. After the completion of the exploration work, ore resources/reserves of three gold prospects, including measured, indicated and inferred resources, will be estimated by relevant, geological brigade. The feasibility study and the environmental impact assessment report will be compiled as well. The Company will conduct one to five year mining plan based on the mining design of the mine. With reference to the mining schedules of the Company, Chouzhou Donghai’s proposed production policy is to use its own mine resources to engage in mining, concentrating, and sales of gold, Chouzhou Donghai also has a policy to mine and process economically exploitable ore according to the rights to be provided by the mining licence.

and (g)

6 References

Chizhou Donghai Mining & Development Company Limited, Prospect Report on Houshan Gold and Polymetallic Deposit, Chizhou, Anhui Province, May 2008.

Anhui Provincial Institute of Exploration and Technology, Prospect Report on Gaoling Gold and Polymetallic Deposit, Chizhou, Anhui Province, March 2008.

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APPENDIX I CHI ZHOU INDEPENDENT TECHNICAL REPORT

Glossary of Terms and Abbreviations

%	percent
°	degree
°C	degrees Centigrade
ASL	above sea Level
Au	The chemical symbol for gold
AusIMM	Australasian Institute of Mining and Metallurgy
cm	centimetre
Cu	The chemical symbol for copper
deposit	Earth material of any type; either consolidated or unconsolidated, that has
	accumulated by some natural process or agent.
E	east
FS	Feasibility study
HKEx	the Stock Exchange of Hong Kong Limited
IER	Independent Expert Report
IPO	Initial Public Offering
ITR	Independent Technical Review
JORC Code	Joint Ore Reserves Committee Code
kg	kilogram, equivalent to 1,000 grams
km	kilometres, equivalent to 1,000 metres
km2	square kilometres
m	metres
M	million
mm	millimetres
Mt	million tonnes
N	north
NE	Northeast
NEE	Northeast-east
NNE	Northnorth-east
NNW	Northnorth-west
NS	Northsouth
NW	Northwest
pa	per annum
PRC	People’s Republic of China
QA/QC	quality assurance/quality control
S	south, also the chemical symbol for sulphur
SE	southeast
SRK	SRK Consulting Ltd
SW	southwest
t	tonne, equal to 1,000kg
the “Report”	Independent Expert Report
Valmin Code	Code for the Technical Assessment and Valuation of Mineral and Assets and
Petroleum	Securities for Independent Expert Reports
W	west
WE	westeast

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CHI ZHOU INDEPENDENT TECHNICAL REPORT

APPENDIX I

Appendices

Appendix I: Exploration Permits

Exploration Permit of Houshan Gold and Polymetallic Metals

==> picture [391 x 553] intentionally omitted <==

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CHI ZHOU INDEPENDENT TECHNICAL REPORT

APPENDIX I

Exploration Permit of Gaoling Gold and Polymetallic Metals

==> picture [421 x 585] intentionally omitted <==

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APPENDIX I

Appendix II: Chinese Resource and Reserve Standards

Categorisation of Mineral Resources and Ore Reserves

The system for the categorisation of mineral resources and ore reserves in China is in a period of transition which commenced in 1999. The traditional system, which is derived from the former Soviet system, uses five categories based on decreasing levels of geological confidence – Categories A, B, C, D and E. The new system (Rule 66) promulgated by the Ministry of Land and Resources (MLR) in 1999 uses three-dimensional matrices, based on economic, feasibility/mine design and geological degrees of confidence. These are categorised by a three number code of the form “123”. This new system is derived from the UN Framework Classification proposed for international use. All new projects in China must comply with the new system, however, estimates and feasibility studies carried out before 1999 will have used the old system.

Wherever possible, the Chinese Resource and Reserve estimates have been reassigned by SRK to categories similar to those used by the JORC Code to standardise categorisation. Although similar terms have been used, SRK does not mean to imply that in their present format they are necessarily classified as ‘Mineral Resources’ as defined by the Australasian Code for the Reporting of Exploration Results, Mineral Resources and Ore Reserves (the “JORC Code”).

A broad comparison guide between the Chinese classification scheme and the JORC Code is presented in the following table.

	Chinese	“Reserve” Category
JORC Code Resource Category	Previous system	Current system
Measured	A, B	111, 111b, 121, 121b, 2M11, 2M21,
		2S11, 2S21,331
Indicated	C	122, 122b, 2M22, 2S22, 332
Inferred	D	333
Non-equivalent	E	334

Relationship between JORC Code and the Chinese Reserves System

In China, the methods used to estimate the resources and reserves are generally prescribed by the relevant Government authority, and are based on the level of knowledge for that particular geological style of deposit. The parameters and computational methods prescribed by the relevant authority include cut-off grades, minimum thickness of mineralisation, maximum thickness of internal waste, and average minimum ‘industrial’ or ‘economic’ grades required. The resource classification categories are assigned largely on the basis of the spacing of sampling, trenching, underground tunnels and drill holes.

In the pre-1999 system, Category A generally included the highest level of detail possible, such as grade control information. However, the content of each category B, C and D may vary from deposit to deposit in China, and therefore must be carefully reviewed before assigning to an equivalent “JORC Code type” category. The traditional Categories B, C and D are broadly equivalent to the ‘Measured’, ‘Indicated’, and ‘Inferred’ categories that are provided by the JORC Code and USBM/ USGS systems used widely elsewhere in the world. In the JORC Code system the ‘Measured Resource’ category has the most confidence and the ‘Inferred’ category has the least confidence, based on the increasing levels of geological knowledge and continuity of mineralisation.

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APPENDIX I CHI ZHOU INDEPENDENT TECHNICAL REPORT

Definition of the new Chinese Resource and Reserve Category Scheme

Category Denoted Comments

• Economic 1 Full feasibility study considering economic factors has been conducted

• 2 Pre feasibility to scoping study which generally considers economic factors has been conducted

• 3 No pre feasibility or scoping study conducted to consider economic analysis

• Feasibility 1 Further analysis of data collected in “2” by an external technical department

• 2 More detailed feasibility work including more trenches, tunnels, drilling, detailed mapping

• 3 Preliminary evaluation of feasibility with some mapping and trenches

• Geologically 1 Strong geological control controlled 2 Moderate geological control via closely-spaced data points (e.g. small scale mapping)

• 3 Minor work which is projected throughout the area 4 Review stage

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APPENDIX I

Appendix III: Exploration Qualification

Anhui Provincial Institute of Exploration and Technology

==> picture [415 x 583] intentionally omitted <==

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APPENDIX I

Appendix IV: Laboratory Qualification License

The Qualification Copy of the Laboratory Attached No. 312 Brigade of Anhui Bureau of Geology and Mineral Resource Exploration

==> picture [419 x 576] intentionally omitted <==

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APPENDIX II CHI FENG INDEPENDENT TECHNICAL REPORT

INDEPENDENT TECHNICAL REPORT

Technical Assessment on Chifeng Zhujiagou Gold Project Inner Mongolia Autonomous Region, People’s Republic of China

Ming Fung Jewellery Group Ltd.

Rm. 1825, 18/F, Hutchison House 10 Harcourt Road, Central Hong Kong

SRK Project Number SHK063

SRK Consulting

B1205 COFCO Plaza, No.8 Jianguomennei Daijie Dongcheng District, Beijing, China

Contact: Yiefei Jia yjia@srk.cn www.srk.cn

November 2009

Compiled by: Dr Yiefei Jia

Endorsed by: Dr Anson Xu

Authors: Andrew Lewis Qiuji Huang Lanliang Niu Jinhui Liu Dr Yiefei Jia

Peer reviewer: Dr Anson Xu

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CHI FENG INDEPENDENT TECHNICAL REPORT

APPENDIX II

EXECUTIVE SUMMARY

Summary of principal objectives

Ming Fung Jewellery Group Limited (“MFJ Group” or “the Company”) commissioned SRK Consulting China Limited (“SRK”) to undertake an independent technical assessment on all relevant technical aspects of Zhujiagou gold mine in Chifeng of Inner Mongolia Autonomous Region, People’s Republic of China (“PRC”). The Zhujiagou gold property with a mining licence is wholly owned by the Chifeng Guojin Mining Co. Limited (“Chifeng Guojin”). The principal objective of this Report is to provide MFJ Group shareholders and The Stock Exchange of Hong Kong Limited (“HKEx”) with an Independent Technical Assessment Report suitable for inclusion in documents that the Company plans to publish in relation to a proposed acquisition.

Outline of work program

The work program involved three phases:

• Phase 1 – conduct a desktop review of available information provided by MFJ Group and Chifeng Guojin;

• Phase 2 – travel to Chifeng Guojin’s property site, inspection of mining licence area, interview with related staff of the Chifeng Guojin, and collection and review of documents provided to SRK; and

• Phase 3 – analysis of the provided data, completion of a draft report, copy to MFJ Group for review, finalise the report.

RESULTS

Overall

Chifeng Guojin’s project, which consists of gold deposit with mining licence, locates in Chifeng of Inner Mongolia Autonous Region, PRC, is wholly owned by Chifeng Guojin. The mining licence covers an area of 1.0989 square kilometres (km[2] ), lineated by ten geographical coordinates. The mine development, concentrator construction, and management are putting in practice to meet Chifeng Guojin’s plans to invest 23 million Renminbi (RMB) to complete the Company’s twoyear target, which the mining and processing will reach 100 tonnes per day (t/d) to produce 1,426 tonnes per annum (tpa) gold concentrate at grades of 192 gram per tonne (g/t).

Chifeng Xingyuan Mining Consulting Ltd. estimated and reported the resources of four mineralized bodies (Nos. 1, 2, 3 and 4) at Zhujiagou gold deposit at 276,411t of Categories 122b with 2,525kg gold with average grade of 9.13g/t and 66,736t of Category 333 with 628kg gold with average grade of 9.41g/t. Beijing Exploration Technology & Engineering Co. Ltd. estimated and reported other nine mineralized bodies (Nos. 5 to 13) at Zhujiagou gold deposit at Category 333 resources of 87,319t with an average gold grade of 51.89g/t and Category 334 resources of 140,778t with an average gold grade of 51.89g/t, more exploration work is needed to upgrade the levels of resource confidence.

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APPENDIX II

CHI FENG INDEPENDENT TECHNICAL REPORT

Zhujiagou gold mine is an underground mine. Two declines have been built to access No. 1 and No. 2 veins. SRK believes that the current mining capacity of the mine is about 15t/d. Two mining methods, short-hole shrinkage mining method and cut-filling mining method, are proposed based on ore body geometry. Both mining methods are conventional and practicable. The major valuable and target minerals of Zhujiagou Gold Mine are gold (Au) and silver (Ag) and can be easily handled. Adopting of gravity and flotation process generates the recovery rates of 96% Au and 76% Ag. SRK believes this is the appropriate method to use and recommends the Company provides technical personnel to oversee the entire construction project. The expansion project to 100t/d has been proposed, but a feasibility study of the expansion has not been done yet.

SRK is informed that the Company will be committed to safety training, provision of safety equipment and safety monitoring in the mining and metallurgical processing departments and other supporting workshops.

Number of workforce is estimated to be 261. This includes mining and metallurgical processing personnel, other relevant service workers and administration staff. Staff turnover is estimated at 5% to 10% of the workforce. There have been no problems with sourcing of skilled workers.

The Company plans to commit to a substantial greening programme at the mine with improvements in dust control, wastewater treatment and sewage treatment. These practices will demonstrate the Company’s responsible approach towards environmental protection.

Geology and Mineralogy

The mine field lies in the middle segment of the northern margin of the North China Plate, adjacent to the Inner Mongolia Fold Belt in the north. It has a complex geological structure with many stages of magmatic activities and is abundant in mineral resources.

A total of thirteen gold-bearing quartz veins/bodies (Nos. 1 to 13) were discovered in the mining licensed area; they are typically magmatic hydrothermal deposit, shown as gold mineralized quartz veins in the Archaean hornblende plagioclase gneiss and migmatite. The occurrence of the veins is commonly known as “pinch-and-swell” in veins and is caused probably by flexures of the faulted plane enabling portions of the fault to widen (“swell”) or narrow (“pinch”) with movement along the faults.

Of the 13 mineralized quartz veins/bodies, the Nos. 1, 2, 3 and 4 mineralized bodies were delineated by Chifeng Xingyuan Mining Consulting Ltd. in 2007. The other nine mineralized veins were discovered by Beijing Exploration Technology & Engineering Co. Ltd. in 2009. Details of these mineralized veins in Zhujiagou gold deposit mining licence area are summarized below.

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APPENDIX II

CHI FENG INDEPENDENT TECHNICAL REPORT

Nos. 1 and 2 Mineralized Veins: The mineralized vein No. 1 strikes nearly W-E, and dips to the S at diping angle of 78°. The mineralized body is delineated by four underground tunnels. The mineralized vein No. 2 strikes NNW and dips to the NNE at dipping an angle of 80°. The mineralized body is defined four underground tunnels as well. The following table shows the characteristics of the two mineralized bodies at different levels.

Ore Body	Length (m)	Thickness (m)	Gold grade (g/t)	Elevation (m ASL)
1	205	1.48	6.55	780
	225	1.36	7.48	740
	206	1.43	7.72	700
	213	1.44	6.52	660
2	340	1.45	9.72	770
	335	1.46	9.8	730
	345	1.44	10.08	690
	349	1.52	5.28	650

No. 3 Mineralized Vein: It trends NW, and dips to the NNE at an angle of 70°. It is about 37m long and 0.90~1.06m wide with 0.98m wide on average. The gold grades range from 9.87g/t to 15.28g/t at an average grade of 12.40g/t.

No. 4 Mineralized Vein: It trends nearly W-E, and dips to the S at an angle of 65°. It is about 80m long and 0.98~1.17m wide with 1.06m wide on average. The gold grades range from 7.22g/t to 20.30g/t at an average grade of 16.01g/t.

No. 8 Mineralized Vein: It strikes NW, and dips to the NE at an angle of 70°. It is about 290m long and 0.5m wide on average. The gold grades of four samples range from 14.56g/t to 102.00g/t.

No. 11 Mineralized Vein: It strikes NW, and dips to the NE at an angle of 60°. It is about 110m long and 0.42m wide on average. The gold grades of two samples are 60.70g/t and 65.60g/t, respectively.

No. 12 Mineralized Vein: It strikes NNW, and dips to the NNE at an angle of 63°. It is about 270m long and 1.15m wide on average. The gold grades of four samples range from 11.26g/t to 88.55g/t.

Other 6 mineralized veins of Nos. 5, 6, 7, 9, 10 and 13 were discovered by surface trenches. Details of these veins are described in the following table. SRK notes that there are neither planimetric maps showing trenches with samples nor sample assay results of these veins.

Ore Body	Dimension(m)	Dimension(m)	Occurrence	Occurrence
	Length	Width	Dip (°)	Dip Angle (°)
5	40	0.9	113	64
6	100	0.97	115	75
7	60	0.49	81	78
9	80	0.92	110	68
10	80	0.84	70	47
13	250	0.93	262	69

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APPENDIX II

Ore minerals are mainly pyrite, followed by chalcopyrite, native gold, argentite, and chlorargyrite. Gangue minerals include mainly quartz, followed by chlorite, sericite, feldspar and calcite.

The gold is the main economic useful metal. The grades of associated metals of silver (14.25g/t17.78g/t), copper (<0.06%), lead (<0.18%) and zinc (<0.31%) are all low. The arsenic content is very low as well.

Resource and Reserve Estimates

Based on the resource verification program, the Chifeng Xingyuan Mining Consulting Ltd. estimated and reported the resources of four mineralized bodies (Nos. 1, 2, 3 and 4) at Zhujiagou gold deposit at 276,411t of Categories 122b with 2,525kg contained gold with an average grade of 9.13g/t and 66,736t of Category 333 with 628kg contained gold with an average grade of 9.41g/t. Also based on the resource verification program conducted in 2009, the Beijing Exploration Technology & Engineering Co. Ltd. estimated and reported the other nine mineralized bodies (Nos. 5 to 13) at Zhujiagou gold deposit at Category 333 resources of 87,319t with an average gold grade of 51.89g/ t and Category 334 resources of 140,778t with an average gold grade of 51.89g/t. The following table below lists the detailed distribution of the resources of gold at Zhujiagou gold deposit.

Mineralized Body	Resource Category	Resource (t)	Grade (g/t)	Contained Gold (kg)
1	122b	101,024	7.67	774
	333	22,059	6.84	151
2	122b	175,386	9.98	1,750
	333	38,117	10.10	385
3	333	3,280	12.53	41
4	333	3,279	15.65	51
8	333	14,792	53.71	794
11	333	2,742	63.15	173
12	333	69,784	51.06	3,563
5	334	3,326	51.89	173
6	334	24,074	51.89	1,249
7	334	3,450	51.89	179
9	334	14,103	51.89	732
10	334	12,411	51.89	644
13	334	83,414	51.89	4,328
Total	122b	276,411	9.13	2,525
	333	154,054	33.49	5,159
	334	140,778	51.89	7,305

SRK carefully reviewed the detailed information/data regarding the resource estimates and believes the industrial index, parameters and blocking principles are in compliance with related Chinese standards and provisions relating to resource verification in 2007. The longitudinal projection geological blocking method produces a reliable resource estimation result. Due to the fact that the mineralized veins are usually narrow, tunnelling combination with drilling to define 122b and 333 category resource is reasonable. In SRK’s opinion, the resource estimate can be deemed to be a global estimate of the mineral resources.

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APPENDIX II

CHI FENG INDEPENDENT TECHNICAL REPORT

For the resource verification made by Beijing Exploration Technology & Engineering Co. Ltd. in 2009, SRK believes the resource estimate is in low confidential level, and more exploration programs, such as drilling and trenching with detailed sampling, should be conducted to accurately define the spatial distribution, quantity and quality of gold resources following the Chinese Standard Exploration Rules. The resource estimates therefore should be used with cautions.

Prior to 1999, China used a letter system to categorise reserves/resources. This has been replaced by a three number system. Both of these Chinese systems use different criteria from those used in defining resources under the Australian Joint Ore Reserves Committee (JORC) code. A comparison of the Chinese and JORC systems is provided in Appendix II. In general, Category 122b Resource is equivalent to Indicated Resource and Category 333 Resource is equivalent to Inferred Resource. There is no equivalent category in JORC for the Category 334 Resource. SRK deems the 334 category as the potential of the project.

The term “ore reserve” is defined differently in the Chinese code and the JORC code. In China, the 122b category can be deemed as a basic reserve. In JORC, only Indicated and Measured categories resources can be converted into ore reserves after consideration of some technical, economic and other factors. Although SRK believes that 122b category resources may be economically mined out, no JORC compliant ore reserves can be converted due to that there are no JORC compliant resources. SRK should emphasize that the resources reported here may comply with Chinese regulations, but consistency with JORC classifications is equivocal due to the absence of information about quality assurance and quality control in sampling and assaying, and the resource statement should be used with caution.

Exploration Potential

The project area is located on the junction of northern margin of the North China plate and the Inner Mongolia thrust-fold belt. This is an area of strong tectonic movement and possesses very favourable geological conditions to host gold mineralization. Currently thirteen mineralized veins are discovered in the mining licence area, but nine of them were carried out a very little exploration work. SRK believes that the reported 334 category resource of these mineralized vein systems is the potential of the veins. More exploration programs, such as drilling with surface trenching, are needed to upgrade the gold resources and explore more gold resources following the standard exploration rules.

Mining

Current mining system was built based on previous exploration tunnels without a proper mine design. Two declines were developed to access No. 1 and No. 2 veins. Four levels were also developed along the veins and mining acticities happened in all of the levels. There is no detailed information about the previous production. The mining condition in the Zhujiagou gold mine is favorable, and short-hole shrinkage mining method is adopted for this project by considering the deposit occurrence (cut-filling will be used in local sections with high grade and thick ore body). SRK believes that current system may support a production of 15t/d.

An expansion of the mine from 15t/d to 100t/d has been proposed. A new access system of shafts and declines has been considered to access Nos. 1, 2, 3, and 4. At present, the No. 3 and No. 4 mineralized bodies are still not incorporated within the mining schedule due to the low exploration degree, and should be further explored. SRK recommends that after the resource delineation, a feasibility study about the expansion should be conducted to optimize the utilization of the resources, followed by a mine design.

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CHI FENG INDEPENDENT TECHNICAL REPORT

APPENDIX II

Ore Processing

Currently, there is no ore processing plant. Based on the fact that the major valuable and target minerals of Zhujiagou Gold Mine are gold and silver with simple ore properties, SRK believes that the ore can be easily handled. The gold and silver recovery rates are expected to be 96% and 76%, respectively. Referring to the practice on same ore type, the process combining gravity and cyanide leaching is also feasible to produce gold and silver ingots. The Au and Ag recovery rates are pretty much same as flotation method, but still need to conduct cyanide leaching test for parameter identification.

SRK recommends conducting cyanide leaching test before the feasibility study to identify the leaching ratio. The proposed two schemes need to be eco-technical compared in order to select the reasonable process flowsheet. And the plant scale needs to be determined depending on mining capacity.

Operation and Capital Costs

Based on information provided, major cost inputs to the mining and processing project are salaries, water and power, raw materials and manufacturing costs. Operating costs for mining are 140 RMB/t and metallurgical processing costs are 55 RMB/t, with total operating costs of 195 RMB/t (the resource tax is not included) of ore mined and treated. The gold recovery rate is 96%. The operating cost presents as an average underground mine in terms of operational management.

Chifeng Guojin plans to invest a total of approximately RMB23 million from January 2010 to December 2011 to develop and expand mining operations, construct the metallurgical processing plant and other supporting facilities. In SRK’s opinion, the proposed capital investments may be sufficient and likely to achieve the Company’s stated targets.

Environmental

An Environmental Impact Assessment (EIA) Report entitled “30,000tpa Gold Ore Mining Construction Project for Zhujiagou Gold Mine” was completed on 24 December 2007 in relation to Guojin Mine was provided for review. Although the EIA states that it was compiled by the State Environmental Protection Agency (SEPA), which in 2007 was the national body for environmental assessments, the SEPA was not an accredited institute (Class A or B) for conducting EIA work. Also, no approval of the EIA (completed in 2007) by an Environmental Protection Agency (EPA) was provided for review, which SRK believes raises concerns as to the veracity of the EIA itself.

The Zhujiagou Project’s Soil and Water Conservation Plan (SWCP) was completed by the Chifeng Luzhou Soil and Water Technologies Co Ltd (Class B) in November 2008 for Guojin Mining. However no approval for the SWCP was provided to SRK for review.

No Land Use Permits (LUP) for the Zhujiagou Project facilities sites were provided for review. The Zhujiagou Project will not be in compliance with Chinese law until LUP’s have been obtained from the Land and Resources Bureau.

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CHI FENG INDEPENDENT TECHNICAL REPORT

APPENDIX II

In summary, the most significant environmental risks for the development of the Zhujiagou Project currently identified as part of the project assessment are:

• Surface water management and discharges (i.e. stormwater runoff).

• Groundwater management and discharges (i.e. mine dewatering and seepage from the Waste Rock Dump – WRD).

• Rehabilitation of the waste rock stockpiles and other disturbed areas.

• Storage and handling of hazardous materials.

• Waste generation and management (industrial and domestic wastes).

• No geochemical characterisation of industrial waste materials (waste rock).

• Potential contaminated sites.

• Adequate structured closure planning process.

• Adequate erosion control measures.

The environmental risks associated with water management, waste rock disposal and land rehabilitation can be generally managed if Chinese National environmental standards and regulatory requirements are met.

The environmental risks associated with the potential for generating contaminated sites and other site closure liabilities can be effectively managed through the adoption of relevant recognised international industry practices.

Social

The Zhujiagou Project is located in Songsan District of Chifeng Township, Inner Mongolia. The land use for the general surrounding area is practising predominately agricultural and animal husbandry. Guojin Mining has stated that the population of the surrounding area is mainly Han Chinese and Mongolian that there are no significant local cultural minority groups and that there no significant cultural heritage sites, within or surrounding the Zhujiagou Project site.

No public/community consultation program on the development of the Zhujiagou Project has yet been completed. SRK recommends conducting such a consultation to determine community concerns and how Guojin Mining can address those concerns to the benefit of the community and the project’s smooth development.

The Zhujiagou Project is under the jurisdiction of relevant authority of the Songsan District of the Chifeng City. No non-compliance notices and or other notices of breach of environmental conditions for the Zhujiagou Project have been sighted as part of this review.

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CHI FENG INDEPENDENT TECHNICAL REPORT

APPENDIX II

TABLE OF CONTENTS

	Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Table of Contents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . List of Figures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . List of Tables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Disclaimer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	86 93 96 97 97
1	Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	98
2	Background and Brief. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1 Background of the Project . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2 Scope of Work . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	98 98 98
3	Objectives and Work Program. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1 Program Objectives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2 Purpose of the Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.3 Reporting Standard. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.4 Limitations Statement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.5 Work Program. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.6 Project Team. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.7 Statement of SRK Independence. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.8 Warranties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.9 Consent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.10 SRK Exerience . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.11 Forward-Looking Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	98 98 98 99 99 99 99 101 101 101 102 103
4	Accessibility, Climate, Physiography, Local Economy and Infrastructure. . . . . . . . 4.1 Location and Access . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.2 Climate and Physiography . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3 Local Economy and Infrastructure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.4 Mining License. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	104 104 105 105 105
5	Geological and Mineral Inventory Assessment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.1 Data Collection and Methods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.2 Resource and Reserves Classifications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.3 Regional Geology of the Zhujiagou Gold Project . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.3.1 Strata . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.3.2 Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.3.3 Magmatic Rocks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.3.4 Regional Mineralization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.4 Deposit Geology. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.4.1 Strata . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.4.2 Structures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.4.3 Magmatic Rocks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.4.4 Wallrock Alteration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.5 Mineralised Body Geology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.6 Ore Characteristics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.6.1 Mineralogy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.6.2 Wall Rock Alteration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.6.3 Ore Characteristics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	106 106 106 106 107 108 108 108 109 109 109 109 109 109 115 115 116 116

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APPENDIX II CHI FENG INDEPENDENT TECHNICAL REPORT

	5.7 Sampling, Analytical Procedures and Quality Control . . . . . . . . . . . . . . . . . . . . . . . 5.7.1 Previous Exploration Completed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.7.2 Sampling . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.7.3 Assaying . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.7.4 SRK Checking Samples. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.8 Estimates of Resources/Reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.8.1 Related Technical Parameters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.8.2 Methods of Resource Estimate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.8.3 Definition of Mineralized Body and Resource Category . . . . . . . . . . . . . . . . . 5.8.4 Results of Resource/reserve estimates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.9 Potential of Further Exploration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	116 116 117 118 118 119 119 119 120 120 126
6	Mining Assessment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.2 Technical Condition on Mining . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.2.1 Geography and Climate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.2.2 Mineral Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.2.3 Geotechnical Engineering . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.2.4 Hydrogeology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.3 Mining Design . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.3.1 Mining Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.3.2 Mining Method . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.4 Production Facilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.4.1 Ventilation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.4.2 Underground Drainage. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.4.3 Haulage and Hoisting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.4.4 Power and Water Supply . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.5 Problems and Suggestions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.5.1 Problems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.5.2 Suggestions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	126 126 127 127 127 128 129 130 131 132 132 132 132 133 133 133 133 134
7	Ore Processing Assessment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.1 Ore Characteristics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.2 Ore Processing Test . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.3 Optional Processing Methods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.4 Conclusions and Suggestions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	134 134 135 136 139
8	Occupational Health and Safety. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	139
9	Workforce. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.1 Workforce Numbers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.2 Assessment of Workforce . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	140 140 141
10	Operating and Capital Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.1 Forecast on Operating Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.1.1 Mining Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.1.2 Ore Processing Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.2 Forecast on Capital Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	141 141 141 142 142

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APPENDIX II

11	Environmental Assessment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.1 Environmental Review Objective . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.2 Environmental Review Process, Scope and Standards. . . . . . . . . . . . . . . . . . . . . . . 11.3 Status of Environmental Approvals and Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.4 Environmental Compliance and Conformance . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.5 Land Disturbance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.6 Flora and Fauna . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.7 Waste Rock and Tailings Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.8 Water Aspects and Impacts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.9 Air Emissions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.10 Noise Emissions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.11 Hazardous Materials Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.12 Waste Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.12.1 Waste Oil . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.12.2 Solid Wastes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.12.3 Sewage and Oily Waste Water . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.13 Contaminated Sites Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.14 Environmental Management Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.15 Emergency Response Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.16 Site Closure Planning and Rehabilitation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.17 Evaluation of Environmental Risks. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	143 143 143 143 144 145 145 146 146 147 148 148 148 148 149 149 149 150 150 151 152
12	Social Assessment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	153
	12.1 Social and Community Interaction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.2 Relationship with Local Government . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	153 153
References. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		154
Abbreviations and Glossary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Appendices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Appendix I: Mining Licence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Appendix II: Resource and Reserve Standards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Appendix III: Chinese Environmental Legislative Background. . . . . . . . . . . . . . . . . . . .		155 156 156 157 158
	Appendix IV: World Bank/International Finance Corporation (IFC) Environmental Standards and Guidelines . . . . . . . . . . . . . . . . . . . . . . .	163

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APPENDIX II

LIST OF FIGURES

Figure Figure Figure Figure Figure Figure Figure Figure Figure	4-1: General Local Map . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104 4-2: Zhujiagou Mining License Area showing in Goolge Earth . . . . . . . . . . . . . . . . . . 105 5-1: Geotectonic Map of Inner Mongolia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107 5-2: Regional Geological Map of Zhujiagou Gold Deposit . . . . . . . . . . . . . . . . . . . . . 108 5-3: Planimetric Map Showing mineralized quartz veins . . . . . . . . . . . . . . . . . . . . . . . 110 5-4: Cross Section of Mineralized Body No. 1 on Exploration Line 0# . . . . . . . . . . . . 111 5-5: Layout of Mineralized Body No. 1 on Level 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . 111 5-6: Cross Section of Mineralized Body No. 2 on Exploration Line 0# . . . . . . . . . . . . 112 5-7: Cross Section Map of Mineralized Bodies Nos. 3 and 4 on Exploration Line 0# . 113	4-1: General Local Map . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104 4-2: Zhujiagou Mining License Area showing in Goolge Earth . . . . . . . . . . . . . . . . . . 105 5-1: Geotectonic Map of Inner Mongolia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107 5-2: Regional Geological Map of Zhujiagou Gold Deposit . . . . . . . . . . . . . . . . . . . . . 108 5-3: Planimetric Map Showing mineralized quartz veins . . . . . . . . . . . . . . . . . . . . . . . 110 5-4: Cross Section of Mineralized Body No. 1 on Exploration Line 0# . . . . . . . . . . . . 111 5-5: Layout of Mineralized Body No. 1 on Level 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . 111 5-6: Cross Section of Mineralized Body No. 2 on Exploration Line 0# . . . . . . . . . . . . 112 5-7: Cross Section Map of Mineralized Bodies Nos. 3 and 4 on Exploration Line 0# . 113
Figure Figure Figure Figure Figure Figure Figure Figure Figure Figure	5-8: Cross Section Map of Mineralized Bodies Nos. 8, 11 and 12 on Exploration Line 0# . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-9: Drill Core Stored in Wooden Boxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-10: Longitudinal Projection Map of No. 1 Mineralized Vein. . . . . . . . . . . . . . . . . . . 5-11: Longitudinal Projection Map of No. 2 Mineralized Vein. . . . . . . . . . . . . . . . . . . 5-12: Longitudinal Projection Map of No. 3 Mineralized Vein. . . . . . . . . . . . . . . . . . . 5-13: Longitudinal Projection Map of No. 4 Mineralized Vein. . . . . . . . . . . . . . . . . . . 5-14: Longitudinal Projection Map of No. 8 Mineralized Vein. . . . . . . . . . . . . . . . . . . 5-15: Longitudinal Projection Map of No. 11 Mineralized Vein. . . . . . . . . . . . . . . . . . 5-16: Longitudinal Projection Map of No. 12 Mineralized Vein. . . . . . . . . . . . . . . . . . 5-17: Longitudinal Projection Map of No. 13 Mineralized Vein. . . . . . . . . . . . . . . . . .	114 118 121 121 122 122 123 124 124 125
Figure Figure Figure Figure Figure	6-1: Decline 1 at Zhujiagou Gold Mine . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6-2: Short-hole Shrinkage without Bottom Pillar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7-1: Preferred Flowation Flowsheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7-2: CIP Process Flowsheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7-3: CIP Au Extraction Flowsheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	131 133 136 137 138

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APPENDIX II

LIST OF TABLES

LIST	OF TABLES
Table Table Table Table	3-1: SRK Project Team . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-2: Recent Reports by SRK for Chinese Companies . . . . . . . . . . . . . . . . . . . . . . . . . . 4-1: Mining Licence of Zhujiagou Gold Deposit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-1: Characteristics of Other mineralized Veins. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	99 103 105 115
Table	5-2: Exploration Work Completed in Resource Verification Program of Zhujiagou Project by Chifeng Xingyuan Mining Consulting Ltd. . . . . . . . . . . . . . . . . . . . .	116
Table Table Table Table Table Table Table Table Table Table Table Table Table Table Table Table Table	5-3: Exploration Work Completed in Resource Verification Program of Zhujiagou Project by Beijing Exploration Technology & Engineering Co. Ltd . . . . . . . . . . 117 5-4: Summary of SRK Checking Samples . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119 5-5: Mineral Resources Estimated of Mineralized Bodies Nos. 1, 2, 3 and 4. . . . . . . . . 121 5-6: Resource Estimates of Mineralized Bodies Nos. 8, 11 and 12 . . . . . . . . . . . . . . . . 123 5-7: Samples Used for Resource Estimation of Veins Nos. 8, 11 and 12 . . . . . . . . . . . . 123 5-8: Resource Estimates of Mineralized Veins Nos. 5, 6, 7, 9, 10 and 13 . . . . . . . . . . . 125 6-1: Main Characters of Mineralized Bodies at Zhujiagou Gold Mine. . . . . . . . . . . . . . 128 6-2: Estimated Resources at Zhujiagou Project . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 128 6-3: Rock Mechanic Test Result . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 129 6-4: Gushing Water in Shaft 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 130 6-5: Designed Coordinates at Head Vertical Shats . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 131 7-1: Processing Test Result . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 136 7-2: Mutiple Analyse Result . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 136 9-1: Workforce Numbers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 140 10-1: Forecast on Mining Costs_(RMB/t) 141 10-2: Forecast on Metallurgical Processing Costs(RMB/t) _ 142 10-3: Production Capacity and Production Forecasts, 2010 to 2012 . . . . . . . . . . . . . . . 142

DISCLAIMER

The opinions expressed in this report have been based on information supplied to SRK by Ming Fung Jewellery Group Ltd. and Chifeng Guojin Mining Co. Ltd. SRK has exercised all due care in reviewing the supplied information. While SRK has compared key supplied data with expected values, the accuracy of the results and conclusions from the review are entirely reliant on the accuracy and completeness of the supplied data. SRK does not accept responsibility for any errors or omissions in the supplied information and does not accept any consequential liability arising from commercial decisions or actions resulting from them.

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APPENDIX II

1 INTRODUCTION

Ming Fung Jewellery Group Limited. (“MFJ Group” or “the Company”) is a public company listed on the Stock Exchange of Hong Kong Limited (“HKEx”). The Company is considering the acquisition of part or whole ownership of the Zhujiagou gold project from Chifeng Guojin Mining Co. Limited. (“Chifeng Guojin”). The project includes one gold deposit with a mining licence located in Chifeng, Inner Mongolia Autonomous Region, People’s Republic of China (“PRC”). MFJ Group commissioned SRK to undertake a due diligence review report on all relevant aspects of the project in geology, mineral resources, mining, ore processing, environmental and other issues. This Report is to provide MFJ Group shareholders and the HKEx with an Independent Technical Assessment Report suitable for inclusion in documents that the Company plans to publish in relation to a proposed acquisition.

2 BACKGROUND AND BRIEF

2.1 Background of the Project

MFJ Group commissioned SRK Consulting China (“SRK”) to review and report the Zhujiagou gold deposit with a mining licence in Chifeng, Inner Mongolia Automous Region, PRC. The mining permit (No. 1500000820608), covering an area of 1.0989km[2] , is currently owned by Chifeng Guojin. Copy of the mining permit is shown in Appendix I.

2.2 Scope of Work

The scope of work included SRK travelling to Chifeng, and visiting the Zhujiagou gold property; reviewing the resource verification reports and the proposed mining development and mineral resource exploitation plan and other relevant documents of the project; and preparing an independent technical review report (the “Report”) suitable for MFJ Group’s acquisition of the gold project and transaction in the HKEx.

3 OBJECTIVES AND WORK PROGRAM

3.1 Program Objectives

The objective of the program was to address the scope of work by reviewing available data, participate in a site visit, and provide the Company with both verbal feedback and the Report.

3.2 Purpose of the Report

The purpose of the Report is to provide potential equity investors, potential shareholders and the HKEx with an independent expert report which:

• provides potential investors with an unbiased views on the risks and opportunities associated with the project, and

• is suitable to be included with documents that the Company plans to submit to HKEx in relation to a proposed acquisition of Zhujiagou gold property.

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3.3 Reporting Standard

This report has been prepared to the standard of, and is considered by SRK to be, an Independant Technical Assessment Report under the guidelines of the Valmin Code. The Valmin Code incorporates the JORC Code for the reporting of Mineral Resources and Ore Reserves and is binding upon all Australasian Institute of Mining and Metallurgy (AusIMM) and Australian Institute of Geoscientists (AIG) members.

This report is not a Valuation Report and does not express an opinion as to the value of mineral assets. Aspects reviewed in this report do include product prices, socio-political issues and environmental considerations; however SRK does not express an opinion regarding the specific value of the assets and tenements involved.

3.4 Limitations Statement

SRK is not professionally qualified to opine upon and/or confirm that Chifeng Guojin has 100% control of the underlying tenement and/or has any unresolved legal matters relating to any transfer of ownership or associated fees and royalties. SRK has therefore assumed that no legal impediments regarding the relevant tenements exist and that Chifeng Guojin has legal rights to all underlying tenements as purported. Assessing the legal tenure and right to prospects of Chifeng Guojin is the responsibility of legal due diligence conducted by entities other than SRK.

3.5 Work Program

The work program included:

• Review data provided by the Company prior to departure from Beijing

• Travel to Chifeng to inspect assets from September 14 to 16, 2009

• Discuss with Chifeng Guojin’s management staff

• Collect data and relevant documents and checking samples

• Return travel to Beijing and review data and documents

• Prepare draft Report

• Provide draft Report to MFJ Group for review of factual content.

• Complete and finalise the Report after consideration of feedbacks and comments

3.6 Project Team

The SRK project team, title and responsibility within this Report are shown in Table 3-1 below.

Table 3-1: SRK Project Team

	Table 3-1: SRK Project Team
Consultant	Title and Responsibility
Dr Yiefei Jia	Principal Consultant/geology and resource review, project manager, report compilation
Jinhui Liu	Senior Geologist/assisting geological data collection
Qiuji Huang	Senior MiningEngineer/miningreview
LanliangNiu	Senior Ore ProcessingEngineer/oreprocessingreview
Andrew Lewis	Senior Environmental Engineer/environmental review
Dr Anson Xu	Principal Consultant/peer review andqualitycontrol

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CHI FENG INDEPENDENT TECHNICAL REPORT

Dr Yiefei Jia, PhD, MAusIMM, is a principal consultant (geology) with a specialty of exploration of mineral deposits. He has more than 18 years experience in the field of exploration, development, and resources estimate of precious (gold, sliver, and PGE) and base metal (lead, zinc, copper, vanadium, titanium, and iron as well as other metal ore deposits in different geological settings in China, Australia, and North America. He also has essential skills including exploration project management and design; petrological and geochemical analysis; lithological and geotechnical logging; and scientific research. He has recently completed several technical review projects including HKEx technical reports. Dr Jia is the project manager.

Jinhui Liu, M .Sc . (Geology), MAusIMM , is a senior geologist with SRK Consulting China. He has over 3 years experience and specialises in GIS applications and resources and reserves estimates. Jinhui has conducted resource estimates for some gold deposits, silver-lead-zinc deposits, and iron projects. Mr Liu also took part in the technical assessment projects for HKEx listings. Mr Liu assists Dr. Jia reviewing the geology and resource section.

Huang Qiuji, B .Eng ., Senior Mining Engineer with SRK Consulting China, graduated from Central South University of Mining and Metallurgy in 1982. He used be mining directors for a few gold mines in the southwest region of China. After that he joined the Gold Administration Bureau of Guangxi province in charge of the supervision and direction of mine construction mine planing and mining technology developing. Mr Huang is an expert on mine construction, mining technology, mine production and mine planning. He will be responsible for mining review.

Lanliang Niu, BEng , Senior Mineral Processing Engineer at SRK Consulting China office, graduated from Beijing University of Science and Technology in 1987. After graduation, he had been working in Henan Rock and Ore Testing Centre and the Zhengzhou Mineral Exploitation Researching Institute of China Academy of Geological Sciences. He has more than 20 years’ experience in metallurgical testing and other mine technical service – 10 years in metallurgical testing research and another 10 years in the mine operational practice. He will review the ore processing aspects of the project for this report.

Andrew Lewis, BSc (Environmental Science), MAusIMM is a Senior Environmental Engineer with SRK Consulting China. He has worked extensively in China and Asia for a decade as well as projects in Australia and Africa. He has worked on a wide variety of projects ranging from technology transfer to environmental health and safety and community consultation programmes. His current focus is on environmental compliance, permitting, auditing and impact assessments on mining, mineral processing, refining, smelting and infrastructure projects in China and Mongolia. He also works on environmental management systems, pollution prevention/mitigation, remediation of contaminated sites and site closure planning. Mr. Lewis is responsible for the review and assessment of environmental, social and other issues of the projects.

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Dr Anson Xu, PhD, MAusIMM , is a principal consultant with a specialty in exploration of mineral deposits. He has more than 20 years experience in exploration and development of various types of mineral deposits including copper-nickel sulfide deposits related to ultrabasic rocks, tungsten and tin deposits, diamond deposits, and in particular, various types of gold deposits, vein-type, fracture-breccia zone type, alteration type, carlin type. He was responsible for resource estimations of several diamond deposits, and review of resource estimations of several gold deposits. He has recently completed several due diligence projects for clients in China, including gold, silver, lead-zinc, iron, bauxite, and copper projects, and several technical review projects, as well as Canadian NI43-101 and HKEx IPO technical reports. Dr Xu is the project manager and the Qualified Person (QP) of the project.

3.7 Statement of SRK Independence

Neither SRK nor any of the authors of this report have any material present or contingent interest in the outcome of this report, nor do they have any pecuniary or other interest that could be reasonably regarded as being capable of affecting their independence or that of SRK.

SRK has no prior association with MFJ Group and/or Chifeng Guojin in regard to the mineral properties that are the subject of this Report. SRK has no beneficial interest in the outcome of the technical assessment being capable of affecting its independence.

SRK’s fee for completing this report is based on its normal professional daily rates plus reimbursement of incidental expenses. The payment of that professional fee is not contingent upon the outcome of the report.

3.8 Warranties

Chifeng Guojin has represented to SRK that full disclosure has been made of all material information and that, to the best of its knowledge and understanding, such information is complete, accurate and true. SRK has no reason to doubt this representation.

3.9 Consent

SRK consents to this Report being included in full in MFJ Group’s application for the acquisition of Zhujiagou gold deposit on the HKEx, in the form and context in which the technical assessment is provided, and not for any other purpose.

SRK provides this consent on the basis that the technical reviews expressed in the summary and in the individual sections of this Report are considered with, and not independently of, the information set out in the complete Report and the cover letter.

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APPENDIX II

3.10 SRK Experience

SRK Consulting is an independent, international consulting group with extensive experience in preparing independent technical reports for various stock exchanges around the world (see www.srk.com for a review). SRK is a one-stop consultancy offering specialist services to mining and exploration companies for the entire life cycle of a mining project, from exploration through to mine closure. Among SRK’s more than 1,500 clients are most of the world’s major and medium-sized metal and industrial mineral mining houses, exploration companies, banks, petroleum exploration companies, agribusiness companies, construction firms and government departments.

Formed in Johannesburg, South Africa, in 1974 SRK now employs more than 900 professionals internationally in 35 permanent offices on six continents. A broad range of internationally recognized associate consultants complements the core staff.

SRK Consulting employs leading specialists in each field of science and engineering. Its seamless integration of services, and global base, has made the company a world’s leading practice in due diligence, feasibility studies and confidential internal reviews.

The SRK Group’s independence is ensured by the fact that it holds no equity in any project and that its ownership rests solely with its staff. This permits the SRK Group to provide its clients with conflict-free and objective recommendations on crucial judgment issues.

SRK China was established in early 2005, and is mainly working on Chinese mining projects independently or together with SRK’s other offices, mainly SRK Australasia (see www.srk.cn and www.srk.com.au for a review). We have prepared dozens of independent technical reports on mining projects for various companies who acquired Chinese projects or went public listings on overseas stock exchanges with a summary list as showing in Table 3-2.

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Table 3-2: Recent Reports by SRK for Chinese Companies

Company	Year	Nature of Transaction
Yanzhou Coal Limited (company listed on The Stock Exchange of Hong Kong Limited)	2000	Sale of Jining III coal mine by parent company to the listed operating company
Chalco (Aluminium Corporation of China)	2001	Listing on The Stock Exchange of Hong Kong Limited and New York Stock Exchange
Fujian Zijin Gold Mining Company	2004	Listing on The Stock Exchange of Hong Kong Limited
Lingbao Gold Limited	2005	Listing on The Stock Exchange of Hong Kong Limited
Yue Da Holdings Limited (company listed on the Stock Exchange of Hong Kong Limited)	2006	Proposed acquisition of shareholding in mining projects in PRC
China Coal Energy Company Limited (China Coal)	2006	Listing on The Stock Exchange of Hong Kong Limited
Sino Gold Mining Limited	2007	Dual listing on The Stock Exchange of Hong Kong Limited
Xinjiang Xinxin Mining Industry Company Limited	2007	Listing on The Stock Exchange of Hong Kong Limited
Espco Technology Holdings Limited	2008	An acquisition of shareholding in Tongguan Taizhou Gold-Lead projects in PRC
Hong Kong Nation Resources Limited	2008	Proposed acquisition of shareholding in iron projects Chengde, PRC
Kiu Hung International Holdings Limited	2008	An acquisition of shareholding in coal projects in inner Mongolia, PRC
China Shenzhou Mining and Resources Inc	2008	Listing (SHZ) on the American Stock Exchange

3.11 Forward-Looking Statements

Technical assessments of mineral properties are inherently forward-looking statements. Being projections of future outcomes, they may differ from actual outcomes. Errors in such projections may result from inherent uncertainties in the interpretation of geologic data, and potential market variations which are out of SRK’s control.

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APPENDIX II

4 ACCESSIBILITY, CLIMATE, PHYSIOGRAPHY, LOCAL ECONOMY AND INFRASTRUCTURE

4.1 Location and Access

The Zhujiagou Gold Mine is located in the Honghuagou Township of Chifeng County, Inner Mongolia Autonomous Region, PRC. It is approximately 50km to the Chifeng City, as shown in Figure 4-1. The geographic coordinates are of Longtitude at 118°36’00”~118°37’09” and Latitude at 42°12’23”~42°13’20”.

There is a straightforward general access to the region. Chifeng airport is a regional airport in Inner Mongolia with daily flights available between Chifeng and Beijing and other major cities in China. Accessibility to the property site is excellent. The property can be accessed via a concrete paved road and a few kilometres of dirty road to the mine site. The location of the project is shown in Figure 4-1.

==> picture [262 x 335] intentionally omitted <==

Figure 4-1: General Local Map

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4.2 Climate and Physiography

Zhujiagou property is located in the low to medium mountains and hills region. The elevations range from 700 to 910 metres (m) above sea level (ASL) with a relief of 210m. The region has a continental climate with less rainfall, and is hot in summer and cold in winter. The annual temperatures range varies from -27 to 38 degrees Celsius (°C) with an average temperature of 7.1°C. Seasonal winds occur from March to May with a highest wind speed of 17.90 metres per second (m/sec). The annual precipitation is 345 millimetres (mm), mainly concentrated in the period from June to August. The annual evaporation is 1830mm. Since the annual evaporation is greater than the annual precipitation, local streams have water only during the rainy season.

4.3 Local Economy and Infrastructure

The local economy is based on agriculture and mining industries. Labor worker resource is sufficient for mine operation in the region. There is a national electricity grid and a transform station at Honghuagou Town, with 10 kilovolt (kV) power near the Zhujiagou deposit.

4.4 Mining License

Chifeng Guojin holds the Zhujiagou Gold Mine mining license for the underground gold mine with a total area of 1.0989 km[2] (see Figure 4-2). Detailed information about the mining license is given in Table 4-1. Copy of the original license is supplied in Appendix I.

==> picture [278 x 212] intentionally omitted <==

Figure 4-2: Zhujiagou Mining License Area showing in Goolge Earth

Table 4-1: Mining Licence of Zhujiagou Gold Deposit

Mine	License#	Production Capacity (t/a)	Area (km2)	Expiry Date	Elevation Limit (m ASL)
Zhujiagou	1500000820608	30,000	1.0989	Dec. 2011	505-833

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APPENDIX II

5 GEOLOGICAL AND MINERAL INVENTORY ASSESSMENT

5.1 Data Collection and Methods

SRK assessed Zhujiagou gold project by reviewing sampling, analytical procedures and quality control methods, showing the amount of sampling of drill holes, trenches, and tunnels. In SRK’s opinion, general exploration techniques which have been used for sampling of the mineralisation are acceptable being of industry standard.

Chifeng Xingyuan Mining Consulting Co. Ltd. (2007) and Beijing Exploration Technology and Engineering Co. Ltd. (2009) conducted the resource verification programs at the Zhujiagou gold deposit and submitted the resource verification reports. Descriptions of this section were mainly based on the two geological reports and SRK’s site inspections.

5.2 Resource and Reserves Classifications

The mineral resources of the Chifeng Guojin gold deposit reported in the section were estimated by Chifeng Xingyuan Mining Consulting Co. Ltd and Beijing Exploration Technology and Engineering Co. Ltd. using Chinese resource classification according to the Chinese National Standard for Solid Mineral Resources/Reserves Classification (GB/ T17766-1999). This is a three-digit system, where the last digit indicates the geological certainty, 1 stands for measured mineral resource, 2 for indicated mineral resource, 3 for inferred resource and 4 for predicated resource. However, this system is different from the criteria used in defining a resource under the JORC code. Comparison between different systems is provided in Appendix II.

5.3 Regional Geology of the Zhujiagou Gold Project

The mine field lies in the zone where the Inner Mongolia Thrust Fold Belt (“orogenic belt”) joints the southern margin of North China Plate. This plate and orogenic belt is a nearly west-east trending zone (Figure 5-1). The zone has a complex geological structure, and is abundant in mineral resources which relate to many stages of magmatic activities. Chifeng region is a main gold producing area in China.

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Figure 5-1: Geotectonic Map of Inner Mongolia

5.3.1 Strata

The strata are mainly of Mesozoic age, with a general strike of NWW. This includes Jurassic (upper) through to Cretaceous formations, and subsequent Cenozoic cover. Rare Archaean rocks are also found in the area, and their distribution is shown in Figure 5-2. Below is a brief description of the strata from the oldest to the youngest:

• Archaean Jianping Group Xiaotazigou Formation (Arjnx): composed of amphibolites gneiss, mixed granite.

• Mesozoic Jurassic Jiangchang Formation (J3jc): made up of sedimentary gravel and sandstone.

• Mesozoic Cretaceous Yixian Formation (K1y): consists of andesitic basalt, andesite, tuffaceous grit sandstone.

• Cenozoic Tertiary Pilocene Series Hannuoba Formation (N2h): composed of basalt, a small amount of sandstone, and semi-cemented conglomerate with coal line.

• Quaternary (Q4): composed of gravels and loose red sandy soil.

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Figure 5-2: Regional Geological Map of Zhujiagou Gold Deposit

5.3.2 Structure

One major regional structure, the Sheluhe fault, trends approximately E-W through the mine area, with secondary structures occurring as two dominant groups of N-E trending group and N-W trending group.

5.3.3 Magmatic Rocks

The regional magmatic rocks are very common. The batholith outcrop is the 1.8-2.6 billion year (Ga) Qianxi-Lvliang granite body distributed in the northern section of Lianhuashan area, while the south side of Wangyefu-Liufendi region, the Mesozoic granite bodies are of irregular banding distribution.

There are two type magmatic rocks including granite and granite-porphyry, and diorite and granite-porphyry veins.

5.3.4 Regional Mineralization

The regional mineralization includes Au, Cu, Fe, Pb, Zn poly-metallic minerals relating to magmatic activities, and coal and non-metallic minerals, etc. Currently all of the mineralization is in the process of exploitation in different extent.

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5.4 Deposit Geology

5.4.1 Strata

From oldest to youngest, the main strata in the desposit area are Archaean Jianping Group Dayingzi Formation (Arjn[2] ), the Late Jurassic Jiangchang Formation (J3) and Quaternary (Q4).

The lithologies of Achaean Jianping Group Dayingzi Formation are amphibolites, gneiss, migmatite granite, and trondhjemite. The rocks generally display a gneissosity with a NNE-NE strike, and that dip SE between 55°-75°. The Late Jurassic Jiangchang Formation includes tuff, tuffaceous sandstone/shale and conglomerate-bearing sandstone and graphite-bearing shale. This Formation trends NE, dips to the NW with a dipping angle of 17°. The Quaternary sediments are mainly sillstone and mudstone.

5.4.2 Structures

The faults are mainly structure in the property area, composed of premineralization faults and post-mineralizatoin faults. The pre-mkineralization faults consist of two groups of faults: one group trending NNW and dipping to the NE with angles of 78° to 81° and the other group trending NNE and dipping the SE with angles of 78° to 82°. The post-mineralization faults trend NE and dip to the NW with angles of 70° to 80°.

5.4.3 Magmatic Rocks

There are mainly diorite dykes and granite-porphyry dykes in local areas.

5.4.4 Wallrock Alteration

There are two types of wallrock alteration. One is the mineralization-related alteration, which consists of pyritization and chalcopyritization. The other is mineralization unrelated alteration, which is composed of chloritization and epidotixation.

5.5 Mineralised Body Geology

A total of thireen gold-bearing quartz veins/bodies (No. 1 to No. 13) were discovered in the mining license area; they are typically magmatic hydrothermal deposit, shown as Au mineralized quartz veins in the Archaean hornblende plagioclase gneiss and migmatite. The occurrence is commonly known as “pinch-and-swell” in veins and is caused probably by flexures of the fault plane enabling portions of the fault to widen (“swell”) or narrow (“pinch”) with movement along the fault (Figure 5-3).

Of the thirteen mineralized quartz veins/bodies, the Nos. 1, 2, 3 and 4 mineralized bodies were delineated by Chifeng Xingyuan Mining Consulting Ltd. in 2007. Followings are the descriptions of these mineralised bodies.

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Figure 5-3: Planimetric Map Showing mineralized quartz veins

No. 1 mineralized Body

No. 1 mineralized vein is situated in the middle of the property area. It strikes nearly W-E, and dips to the S at diping angle of 78°. On the surface, the mineralized body, controlled by three trenches, is about 75m long and 0.70~1.10m wide with 0.87m wide on average. The gold grades range from 0.14g/t to 0.96g/t at average grade of 0.69g/t. Underground, there are four mining levels (tunnels) to define the shape of the mineralized body. Figure 5-4 gives the cross-section of the mineralized body No. 1.

Level 1 on elevation 780m ASL: it is 205m long and 0.43~2.00m wide with 1.48m wide an average. The gold grades range from 1.37g/t to 23.21g/t with an average grade of 6.55g/t (Figure 5-5).

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Figure 5-4: Cross Section of Mineralized Body No. 1 on Exploration Line 0#

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Figure 5-5: Layout of Mineralized Body No. 1 on Level 1

Level 2 on elevation 740m ASL: it is 225m long and 0.78~1.81m wide with 1.36m wide an average. The gold grades range from 1.31g/t to 17.84g/t with an average grade of 7.48g/t.

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Level 3 on elevation 700m ASL: it is 206m long and 0.78~1.66m wide with 1.43m wide an average. The gold grades range from 1.58g/t to 20.57g/t with an average grade of 7.72g/t.

Level 4 on elevation 660m ASL: it is 213m long and 0.75~1.95m wide with 1.44m wide an average. The gold grades range from 1.48g/t to 16.79g/t with an average grade of 6.52g/t.

No. 2 Mineralized Body

No. 2 mineralized body is situated in the middle of the property area as well. It strikes NNW and dips to the NNE at dipping an angle of 80°. On the surface, the mineralized body, controlled by five trenches, is about 160m long and 0.73~1.16m wide with 0.70m wide on average. The gold grades are between 0.15g/t and 0.87g/t with an average grade of 0.77g/t. Underground, it is controlled by four levels/tunnels. Figure 5-6 gives the cross-section map of the mineralized body No. 2.

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Figure 5-6: Cross Section of Mineralized Body No. 2 on Exploration Line 0#

Level 1 on elevation 770m ASL: It is 340m long and 0.69~2.04m wide with 1.45m wide on average. The gold grades range from 1.72g/t to 19.71g/t at average grade of 9.72g/t.

Level 2 on elevation 730m ASL: It is 335m long and 0.79~1.83m wide with 1.46m wide on average. The gold grades range from 1.74g/t to 25.33g/t at average grade of 9.80g/t.

Level 3 on elevation 690m ASL: It is 345m long and 0.79~1.60m wide with 1.44m wide on average. The gold grades range from 1.22g/t to 25.94g/t at average grade of 10.08g/t.

Level 4 on elevation 650m ASL: It is 349m long and 0.72~2.22m wide with 1.52m wide on average. The gold grades range from 1.51g/t to 29.71g/t at average grade of 10.46g/t.

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One drill hole also intersected the mineralized body No. 2 on 523m ASL. The controlled thickness is 0.94m. The gold grades are between 1.27g/t and 10.01g/t with an average grade of 5.28g/t.

No. 3 Mineralized Body

No. 3 mineralized vein is situated in the north of the property area. It strikes NW, and dips to the NNE at an angle of 70°. It, controlled by one trench and three shallow wells, is about 37m long and 0.90~1.06m wide with 0.98m wide on average. The gold grades range from 9.87g/t to 15.28g/t at average grade of 12.40g/t. Figure 5-7 gives the crosssection of the mineralized body No. 3.

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Figure 5-7: Cross Section Map of Mineralized Bodies Nos. 3 and 4 on Exploration Line 0#

No. 4 Mineralized Body

No. 4 mineralized vein is situated in the south of the property area. It strikes nearly W-E, and dips to the S at an angle of 65°. It, controlled by four trenches at the surface, is about 80m long and 0.98~1.17m wide with 1.06m wide on average. The gold grades range from 7.22g/t to 20.30g/t at average grade of 16.01g/t. Figure 5-7 gives the crosssection of the mineralized body No. 3.

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In 2009, Beijing Exploration (Technology and Engineering) Ltd. carried out exploration work and conducted resource verification report at the Zhujiagou gold deposit. Besides the mineralized bodies Nos 1 to 4, another nine mineralized bodies of Nos. 5 to 13 were discovered. Of the nine mineralized veins/bodies, the Nos. 8, 11 and 12 were respectively controlled by drill holes ZK002, ZK003 and ZK001, and trenches at surface outcroups (see Figure 5-8).

No. 8 Mineralized Body

No. 8 mineralized vein is situated in the central part of the property area. It strikes NW, and dips to the NE at an angle of 70°. It, controlled by trenches and one drillhole ZK002, is about 290m long and 0.5m wide on average. The gold grades of four samples range from 14.56g/t to 102.00g/t.

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Figure 5-8: Cross Section Map of Mineralized Bodies Nos. 8, 11 and 12 on Exploration Line 0#

No. 11 Mineralized Body

No. 11 mineralized vein is situated in the west part of the property area. It strikes NW, and dips to the NE at an angle of 60°. It, controlled by trenches and one drillhole ZK003, is about 110m long and 0.42m wide on average. The gold grades of two samples are 60.70g/t and 65.60g/t, respectively.

No. 12 Mineralized Body

No. 12 mineralized vein is situated in the southeat part of the property area. It strikes NNW, and dips to the NNE at an angle of 63°. It, controlled by trenches and one drillhole ZK001, is about 270m long and 1.15m wide on average. The gold grades of four samples range from 11.26g/t to 88.55g/t.

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Other Mineralized Bodies

It is reported that other six mineralized veins/bodies were controlled only by trenches. The characteristics of these mineralized bodies are summarized in Table 5-1. However, SRK notes that there are neither planimetric maps showing trenches with samples and nor sample assay results of these veins.

Table 5-1: Characteristics of Other mineralized Veins

Ore Body	Dimension(m)	Dimension(m)	Occurrence	Occurrence
	Length	Width	Dip (°)	Dip Angle(°)
5	40	0.9	113	64
6	100	0.97	115	75
7	60	0.49	81	78
9	80	0.92	110	68
10	80	0.84	70	47
13	250	0.93	262	69

5.6 Ore Characteristics

5.6.1 Mineralogy

According to reports compiled by Chifeng Xingyuan Consulting Co. Ltd. and Beijing Exploration Technology and Engineering Ltd., there are two ore types of gold-bearing pyrite quartz vein and gold-bearing pyrite-chalcopyrite quartz vein. Metallic minerals are mainly pyrite, followed by chalcopyrite, native gold, argentite, and chlorargyrite. Gangue minerals include mainly quartz, followed by chlorite, sericite, feldspar and calcite. Descriptions of the main ore minerals, which have been sighted during the SRK’s visit, are below.

Native gold: The colour of the native gold, as irregular granular (grain sizes <1mm), is golden yellow within pyrite and quartz and/or in the gaps of pyrite and quartz.

Pyrite: The pyrite can be divided into two types. The coarse cube particles are light yellow with sizes between 5 and 10mm. There are distinct stripes detected on the surface. There is little or no gold component in this type of pyrite.

The grey pyrite concentration area has a single particle size of usually less than 1mm. It is the main gold-bearing mineral in the deposit.

Sample assay results from the mineralized bodies Nos. 1 and 2 show that the gold is the main economic useful metal. The grades of associated metals of silver (14.25g/t-17.78g/t), copper (<0.06%), lead (<0.18%) and zinc (<0.31%) are all low. There are no data of the harmful element such as arsenic. SRK was informed that the arenic conent is very low as well.

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5.6.2 Wall Rock Alteration

The wall rock are comprised of biotite plagioclase gneiss, hornblende plagioclase gneiss and plagioclase amphibolite. The boundary of wall rock and veins is clear. The pyritization and chalcopyritization are the main prospecting criteria.

5.6.3 Ore Characteristics

Main ore textures include euhedral-hypidiomorphic granular texture, plate texture, granular texture, cataclastic texture, metasomatic texture, etc. Ore structures are dissemination and narrow vein type structures, followed crumb structure, point structure and net-veiny structure.

Based on the characteristics above, the genesis of the Zhujiagou gold deposit is a mesothermal vein-type gold deposit.

5.7 Sampling, Analytical Procedures and Quality Control

5.7.1 Previous Exploration Completed

The Honghuagou township enterprise of Hongshan District of Chifeng County conducted the geological exploration in Zhujiagou area, and submitted a resource report of Zhujiagou gold deposit. The report was approved by the Gold Bureau of Inner Mongolia in December 24, 1996, and the resource summary is ore tonnage 2,562t at gold metal 73kg of Category C, and ore tonnage 8,293t at gold metal 130kg of Category D.

The Chifeng Xingyuan Mining Consulting Ltd. carried out the resource verification working in August 2007, and submitted the report of “Resource Verification Report of Zhujiagou gold deposit Honghuagou ore field, Songshan District, Chifeng County” in December 2007. The exploration work completed in the Resource verification programs is summarised in Table 5-2. Xingyuan holds the Exploration Class C Certification in China.

Table 5-2: Exploration Work Completed in Resource Verification Program of Zhujiagou Project by Chifeng Xingyuan Mining Consulting Ltd.

Item	Unit	Workload
The Geological Amendment mapping at 1:2000	km2	7.6
Tunnels logging	m	3543
Assaying for basic sampling	pc	402
Specific gravity	pc	30
Internal-check samples	m	65
External-check samples	m	33
Rock mechanics analysis	pc	4

• pc – piece

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The Beijing Exploration Technology & Engineering Co. Ltd. (Appendix III) conducted the resource verification working, and submitted the “Resource Verification Report of Zhujiagou gold deposit Honghuagou ore field, Songshan District, Chifeng County” in May 25, 2007. The exploration work completed in this resource verification program of Zhujiagou project is shown as Table 5-3.

Table 5-3: Exploration Work Completed in Resource Verification Program of Zhujiagou Project by Beijing Exploration Technology & Engineering Co. Ltd.

Item	Unit	Workload
The Geological mappingat 1:2000	km2	3.04
Cross-sections surveyin exploration line at 1:1000	m	1,140
Total length of investigation of mineralized veins	m	1,300
Drilling	pc	4
Gold Assaying	pc	83
Photos	pc	39

5.7.2 Sampling

There is no description of sampling in the resource verification program of May 2009. The following is the sampling method used in the verification program of August 2007 carried out by Chifeng Xinyuan Mining Consulting Ltd.

Channel Sampling: Channel sampling is adopted in the exploration tunnels. Underground channel samples are cut 10 centimeters (cm) wide and 5cm deep, producing a 2 to 5kg sample for each no more than 0.8m interval, depending upon the length of the sample. These channel samples are taken across the vein at 8 to 10m interval along the vein where there is evidence of mineralization or significant alteration.

Drill Core Sampling: SRK was informed that there were four boreholes carried out in the project area including one surface borehole and three underground boreholes. In the 2007 resource verification report, only one borehole was meantioned that the core recovery rate is 91%, where the recovery of mineralized part core is 92%, which comply with relevant Chinese requirements. There are no descriptions on drill core sampling. SRK did not obtain any original borehole logs. SRK visited the core storage, but only three boxes core left (see Figure 5-9).

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Figure 5-9: Drill Core Stored in Wooden Boxes

5.7.3 Assaying

There is no description of assaying progress in the resource verification program of May 2009. The following are the procedure of sample preparation and the assaying method used in the verification program of August 2007 carried out by Chifeng Xinyuan Mining Consulting Ltd.

Sample Preparation and Analysis: The analytical laboratory of No. 10 Geological Brigade of Inner Mongolia Exploration and Development Bureau of Geology and Mineral Resources conducted sample preparation and analysis. The sample preparation consists of drying, crushing and splitting of the sample with a riffle splitter to 150 grams (g), pulverizing (4-5 hours) the samples to 160 mesh, and then picking up about 200g for assaying. There are no descriptions on the assaying methods in the resource verification report.

A total of 402 samples were analysed. For quality control, sixty-five samples were selected for internal checking and returned 96.29% qualified rate. Thirty samples were also selected and sent to the Analytical Laboratory of Chifeng Exploration and Development Institute of Geology and Mineral Resources for external checking. The external checking samples returned 96.97% qualified rate.

SRK understands that the above analytical laboratories hold the appropriate Chinese national level qualifications.

5.7.4 SRK Checking Samples

For a limited check of the gold mineralization of the Zhujiagou project, SRK took three checking samples from the mining tunnels. These were sent to Hebei Regional Geological Exploration Institute Lab of Ministry of Land and Resources, which holds a national level qualification for assaying. The assaying results are listed in Table 5-4.

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Table 5-4: Summary of SRK Checking Samples

Sample No.	Vein No.	Assaying Results	Assaying Results	Assaying Results	Assaying Results	Assaying Results	Assaying Results
		Au (g/t)	Ag (g/t)	Cu (%)	Co (%)	S (%)	As (%)
CF01	2	104.20	105.6
CF02	2	0.15	32.4
CF03	1	39.82	34.3

The two checking samples collected from the mineralized vein No. 2 returned gold grades of 104.20g/t and 0.15g/t. One sample from the mineralized vein No. 1 returned gold grade of 34.30g/t.

5.8 Estimates of Resources/Reserves

Based on the Chinese standard of DZ/T0205-2002 and the process report submitted by Metallurgical Institute of Jilin Province of January 2003 and feasibility study conducted by Yantai Design Institute of Shandong Gold Group in October 2007, the following parameters for the resource estimation was adopted as following. SRK notes that the same estimate method and related technical parameters were adopted by the both resource verification reports.

5.8.1 Related Technical Parameters

Cut-off grade: Au≥lg/t Minimum industrial grade: Au≥3g/t; associated Ag≥2g/t Minimum Average grade of mineralized body: Au≥5g/t Minimum minable thickness: ≥0.8m Maximum band thickness allowed: ≤2m

If the mineralized body does not reach the minimum minable thickness but has a comparatively high grade, the minimum rate of 2.4 million g/t is used for the mineralized body delineation.

5.8.2 Methods of Resource Estimate

Based on the characters of mineralized bodies, such as the shape and scale, the occurrence, the variation coefficient of thickness and grades, and the Type III exploration grid at the Zhujiagou gold depsoits, the geological block method on the vertical project map was adopted to estimate the resource as following.

V=S × M Q=V × D P=Q × C

Here, V is volume (m[3] ), Q is ore tonnage, P is the gold metal (kg), S is the vertical longitudinal area, M is the average horizontal thickness (m), C is average grade (g/t), and D is the average gravity (t/m[3] ).

Average grade of single engineering (linear sample) was calculated by the length weighted method, namely the length multiplied by the grade and then divided by the length summation of all the samples.

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Average block grade: As trenching was used for surface engineering and tunnel and drillings were used for deep engineering during the exploration, the average grade of every ore block will be calculated first by the length weighing method and then by the arithmetical average method to calculate the block average grade.

Average grade of mineralized body: the metal quantity divided by the ore quantity.

Block Area Delineation is by MAPGIS software on vertical longitudinal projection maps. Each block will be calculated 3 times to guarantee accuracy.

Average horizontal thickness: is by the sample length cross the vein.

Ore Specific Gravity: there are 38 bulk density samples taken in total from the mineralized bodies involved in the resources/reserves estimation. They are all typical sulphide ore (primary ore) samples from tunnels and distributed in the levels. The maximum density is 3.30t/m[3] , while the minimum density is 2.80t/m[3 ] with average of 3.08t/m[3] .

5.8.3 Definition of Mineralized Body and Resource Category

Mineralized Body Delineation Principles

Based on the “Geological Exploration Standard for Primary Gold” DZ/ T0205-2002, the principles for mineralized body delineation and extrapolation are shown as following.

Indicated Economic Reserve (122b)

This resource category is based on surface exploration grid lines spacing 40m, deep drilling or tunnel spacing 40m (strike) × 40m (dip).

Inferred Potential Economic Resource (333)

This resource category is the horizontal expansion of deep expansion of category 122b, and the reliability degree of geology and resource estimation is low.

Reconnaissance Resource (334)

This resource category is the lowest degree of resource, which represents that the potential resource of that deposit.

5.8.4 Results of Resource/reserve estimates

Based on the resource verification program carried out in 2007, the Chifeng Xingyuan Mining Consulting Ltd. conducted the resource estimates of Nos 1, 2, 3 and 4 mineralized veins at Zhujiagou project in December 2007. Table 5-5 lists the detailed resource estimates of the four mineralized veins on vertical projection maps (see Figure 5-10, Figure 5-11, Figure 5-12 and Figure 5-13). The resource estimate was approved by the Bureau of Land and Resource, Inner Mongolia in March 2008.

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Table 5-5: Mineral Resources Estimated of Mineralized Bodies Nos. 1, 2, 3 and 4

Mineralized Body	Resource Category	Resource (t)	Grade (g/t)	Contained Gold(kg)
1	122b	101,024	7.67	774
	333	22,059	6.84	151
2	122b	175,386	9.98	1,750
	333	38,117	10.10	385
3	333	3,280	12.53	41
4	333	3,279	15.65	51
Total	122b	276,411	9.13	2,525
	333	66,736	9.41	628

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Figure 5-10: Longitudinal Projection Map of No. 1 Mineralized Vein

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Figure 5-11: Longitudinal Projection Map of No. 2 Mineralized Vein

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Figure 5-12: Longitudinal Projection Map of No. 3 Mineralized Vein

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Figure 5-13: Longitudinal Projection Map of No. 4 Mineralized Vein

Beijing Exploration Technology & Engineering Co. Ltd. conducted the resource verification program from February to May of 2009 and estimated the resource of new discovered mineralized veins of Nos 5, 6, 7, 8, 9, 10, 11, 12 and 13 at Zhujiagou project in May 2009.

Of the nine mineralized veins, the mineral resources of mineralized veins of Nos. 8, 11 and 12 were estimated using the geological block method on the vertical project map (see Figure 5-14, Figure 5-15 and Figure 5-16). Table 5-6 lists the resource estimates of the three mineralized veins were based on only a few surface chip samples and a few samples from three drill cores.

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Table 5-6: Resource Estimates of Mineralized Bodies Nos. 8, 11 and 12

Mineralized Body	Resource Category	Mineralized Block	Resource (t)	Grade (g/t)	Contained Gold(kg)
8	333	8-333-1	1,300	20.78	27
		8-333-2	6,072	31.66	192
		8-333-3	6,109	72.27	442
		8-333-4	1,311	102.00	134
11	333	11-333-1	1,339	63.15	85
		11-333-2	1,404	63.15	89
12	333	12-333-1	3,206	53.9	173
		12-333-2	31,658	49.30	1,561
		12-333-3	31,750	51.77	1,644
		12-333-4	3,170	58.84	187
Total	333		87,319	51.89	4,531

Table 5-7: Samples Used for Resource Estimation of Veins Nos 8, 11 and 12

Veins	Sample No.	Sample Length	Au(g/t)	Remark
8	ZJG3-H1		20.78	Surface chipsample
	ZJG2-H1		14.56	Surface chipsample
	ZK002-1	0.5	70.50	Drill Core
	zjgj-1		102.00	Surface chipsample
11	MAO2		60.70	Surface chipsample
	ZK003-1	0.4	65.60	Drill Core
	ZJGJ-2		53.90	Surface chipsample
	ZJG1-H1		11.26	Surface chipsample
12	ZK001-H1	0.8	88.55	Drill Core
	ZK001-14	0.35	54.30	Drill Core
	ZJG1-H3		58.84	Surface chipsample

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Figure 5-14: Longitudinal Projection Map of No. 8 Mineralized Vein

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Figure 5-15: Longitudinal Projection Map of No. 11 Mineralized Vein

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Figure 5-16: Longitudinal Projection Map of No. 12 Mineralized Vein

The mineral resources of mineralized veins of Nos. 5, 6, 7, 9, 10 and 13 at category 334 were estimated as well using the geological block method on the vertical project map (see Table 5-8 and Figure 5-17). SRK notes that the resource of these mineralized veins were estimated using a 150m downdepth expansion block area from surface and the same gold grade of 51.89g/t, which is the average gold grade of the three mineralized veins of Nos. 8, 11 and 12. There is no sample assay result to support this category in the resource verification report.

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Table 5-8: Resource Estimates of Mineralized Veins Nos. 5, 6, 7, 9, 10 and 13

Mineralized Body	Resource Category	Mineralized Block	Resource (t)	Grade (g/t)	Contained Gold (kg)
5	334	5-334-1	1,170	51.89	61
		5-334-2	2,157	51.89	112
6	334	6-334-1	13,113	51.89	680
		6-334-2	10,962	51.89	569
7	334	7-334-1	1,346	51.89	70
		7-334-2	2,104	51.89	109
9	334	9-334-1	4,284	51.89	222
		9-334-2	9,818	51.89	509
10	334	10-334-1	10,424	51.89	541
		10-334-2	1,987	51.89	103
13	334	13-334-1	20,180	51.89	1,047
		13-334-2	37,547	51.89	1,948
		13-334-3	25,688	51.89	1,333
Total	334		140,778	51.89	7,305

==> picture [218 x 239] intentionally omitted <==

Figure 5-17: Longitudinal Projection Map of No. 13 Mineralized Vein

SRK carefully reviewed the detailed information/data regarding the resource estimate and believes the industrial index, parameters and blocking principles are in compliance with related Chinese standards and provisions for the resource verification of 2007. The longitudinal projection geological blocking method produces a reliable resource estimation result. Due to the fact that the mineralized veins are usually narrow, tunnelling combination with drilling to define 122b and 333 category resource is reasonable. In SRK’s opinion, the resource estimate can be deemed to be a global estimate of the mineral resources.

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For the resource verification made by Beijing Exploration Technology & Engineering Co. Ltd. in 2009, SRK believes the resource estimate is in low confidential level, and more exploration programs, such as drilling and trenching with detailed sampling, should be conducted to accurately define the spatial distribution, quantity and quality of gold resources following the Chinese Standard Exploration Rules. The resource estimates therefore should be used with cautions.

The term “ore reserve” is defined differently in the Chinese code and the JORC code. In China, the 122b category can be deemed as a basic reserve. In JORC, only Indicated and Measured categories resources can be converted into ore reserves after consideration of some technical, economic and other factors. Although SRK believes that 122b resources and mostly 333 resources, may be economically mined out, no JORC compliant ore reserves can be converted due to that there are no JORC compliant resources. SRK should emphasize that the resources reported here may comply with Chinese regulations, but consistency with JORC classifications is equivocal due to the absence of information about quality assurance and quality control in sampling and assaying, and the resource statement should be used with caution.

5.9 Potential of Further Exploration

The project area is located on the junction of northern margin of the North China Plate and the Inner Mongolia Thrust-Fold Belt. This is an area of strong tectonic movement and possesses very favourable geological conditions to host gold mineralization. Currently thirteen mineralized veins are discovered in the mining licence area, but nine of them were carried out a very little exploration work. SRK believes that the reported 334 catgory resource of these mineralized vein systems is the potential of the veins. More exploration programs, such as drilling with surface trenching, are needed to explore more gold resources following the standard exploration rules.

6 MINING ASSESSMENT

6.1 Introduction

The Zhujiagou Gold Mine owned by Chifeng Guojin Mining Co, Ltd. is located in Honghuagou project area, Chifeng City. In 1996, the Chifeng Guojin obtained the mining property with mining throughput of 15 t/d, and the ore is sold to the processing plant at Honghuagou Gold Mine, which is also commissioned for processing. Based on the resource consolidation plan in 2008, the project area expanded from 0.0383km[2] to 1.0989km[2] , which is beneficial for further geological exploration and production expansion. The Guojin company is planning to invest RMB18.23 million on the production expansion to reach to 30,000 tonnes per year (t/a) from current 4,500t/a.

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Chifeng Guojin is currently focusing on the geological resource verification and further exploration. SRK observed at site that there are two inclines implemented for the mining of No. 1 and No. 2 ore bodies, and the gold-bearing ore is the final product. The Guojin personnel stated that all the mining production has been halted for the further mine improvement and upgrade. In October, 2008, Inner Mongolia Yuanbo Engineering and Design Consulting Co, Ltd. completed a 30,000tpa mineral resource utilization plan, in which the development and mining methods, environment protection, technical and economic assessment are generally evaluated without specific data and description. Therefore, a more completed and systematic design is required for actualization of 30,000tpa production output.

6.2 Technical Condition on Mining

6.2.1 Geography and Climate

The Zhujiagou Gold Mine is located in the south of Honghuagou town, Songshan District, Chifeng City. The project area is 5km away from G111 national freeway and Honghuagou railway station, and Chifeng urban area is 40km northeast to the mine, which is with favorable accessibility. The mine is located at the southwest end of Daxing’anling Mountains, where is the low and medium mountain region with altitude between 700-910m and relative relief of 210m.

As the mine is located in north semiarid continental climate region, it is cold in the winter while hot in the summer. The annual precipitation is 280-440mm, with the average of 345mm, which is centralized in July and August. The annual evaporation is 1600-2430mm, with average of 1830mm. The regional water system is undeveloped without surface streams. The highest and lowest temperatures are respectively 38°C and -27°C. The frozen period is from each November to next March with maximum frozen earth of 1.6m. The northwest wind predominant in winter, spring, and autumn, and the maximum wind speed is 17.90m/s.

6.2.2 Mineral Resources

As a quartz vein gold-bearing deposit filled by medium temperature hydrothermal structure, four auriferous ore bodies (No. 1, No. 2, No. 3 and No. 4) have already been detected in the project area, in which the No. 1 and No. 2 ore bodies are located in the middle of project area with extensive scale. The strike and dip for No. 1 ore body are respectively 80° and 170°, and the strike and dip for No. 2 ore body are 345° and 75°. The spacing between the No. 1 and No. 2 ore bodies is small and the distributions are featuring as a right angle. The No. 3 and No. 4 ore bodies are respectively located in the northwest and south of the project area.

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The main characteristics of the ore bodies are shown in table below:

Table 6-1: Main Characters of Mineralized Bodies at Zhujiagou Gold Mine

Ore Body No.	Strike Length (m)	Average Thickness (m)	Ore Body Dip (°)	Average Grade (g/t)	Controlled Depth (m)	No. of Levels
1	205-225	1.43	78	7.55	161	4
2	340-349	1.47	80	10.02	164	5
3	37	0.98	70	12.4	Surface Short holes
4	80	1.06	65	16.01	Surface Trenches

According to the “Resource Verification Report for Zhujiagou Gold Mine, Songshan District, Chifeng City, Inner Mongolia” completed by Beijing Prospecting and Engineering Co, Ltd. on May 25, 2009, the estimated resource quantity in Zhujiagou project area is listed in Table 6-2.

Table 6-2: Estimated Resources at Zhujiagou Project

Resource Category	Resource (t)	Grade (g/t)	Contained Gold(kg)	Proportion (%)
122b	276,411	9.13	2,525	16.84
333	154,054	33.49	5,159	34.42
334	140,778	51.89	7,305	48.74
122b+333+334	571,243	26.24	14,989	100.00

In SRK’s view, the mine design should only be relied on the measured and indicated geological resource, which is described as 122b in the table above. In China, the 333 resource category has also been used for mine design in some mines with lower reliability.

6.2.3 Geotechnical Engineering

The ore body occurrence in Zhujiagou mine is distributed in the fault structure of hornblende plagioclase gneiss. The wall rock of roof and floor is hornblende plagioclase gneiss with high hardness. The result of rock mechanic test conducted by MCC Shenyang Prospecting and Research Institute is shown in Table 6-3.

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Table 6-3: Rock Mechanic Test Result

Lithology	Sample No.	Sampling Location	Compressive Strength (Mpa)	Pulling Strength (Mpa)	Shear Parameter	Shear Parameter	Deformation Parameter	Deformation Parameter
					Cohesion (Mpa)	Internal Friction Angle (°)	Elastic Modulus (104MPa)	Poisson Ratio
Gneiss	L1	Upper Section of No. 2 Level in Shaft 1	148.50	22.85	6.10	39.8	6.8	0.25
Gneiss	L2	Lower Section of No. 3 Level in Shaft 1	148.50	21.45	6.46	38.9	6.5	0.27
Gneiss	LS1	Upper Section of No. 3 Level in Shaft 1	158.85	20.00	6.60	39.2	6.9	0.28
Gneiss	LS2	Lower Section of No. 4 Level in Shaft 1	147.50	23.40	6.20	39.1	6.7	0.27

The rock hardness is high based on the table above. SRK was informed by mine personnel that the rock below surface layer (5-10m) is slightly weathered, and the rock downward is comparatively stable and completed with undeveloped fissures. SRK noticed that essential support should be implemented in the soft and unstable regions that have been eroded and destructed. Generally the geotechnical engineering condition in Zhujiagou project area is medium-simple.

6.2.4 Hydrogeology

The lowest elevation of erosion base level in Zhujiagou mine is 700m. The gravitation level for mine water is 730m and the lowest mining elevation approved in the mining license is 505m.

Since the gold deposit in Zhujiagou mine is located above the erosion base level, it is favorable for mine dewatering. The fissure water is the main source for mine water with limited quantity. The hydro-geology in project area is simple.

The gushing water correspondingly increases with the downward extension of mining depth. Based on the measurement by Beijing Prospecting and Engineering Co, Ltd, the gushing water of all the levels in shaft 1 is summarized in Table 6-4.

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Table 6-4: Gushing Water in Shaft 1

Level Elevation	Gushing Water Quantity (m/d)
Level 1 (780m)	30.0
Level 2 (740m)	36.5
Level 3 (700m)	42.3
Level 4 (660m)	48.0
Max Gushing Water Quantity (estimated)	60.0

The domestic water source is from Zhujiagou village, where the water yield for a single well is 180m[3] /d. Except for severe drought season, the domestic water supply in the mine is sufficient.

6.3 Mining Design

Though the mining production in Zhujiagou mine commenced in 1996, the mining throughput was small with annual ore yield of 4500tpa, which will be promoted to 30,000tpa on the basis of prospecting achievement obtained by Chifeng Guojin Mining Co, Ltd. In Oct, 2008, Inner Mongolia Yuanbo Engineering and Design Consulting Co, Ltd (“Yuanbo Company”) was commissioned by Chifeng Guojin to complete a 30,000tpa mineral resource utilization plan. In SRK’s view, neither the content nor the expertise of this plan can comply with the actual requirement during mine construction. Therefore, a new completed and systematic mine design should be accomplished instead of the current one. The investment is reduced as the final product is ore and therefore no processing plant is required, whereas the final profit will correspondingly decrease. At current stage, SRK can only simply assess this plan as no other mining data is available.

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6.3.1 Mining Development

The incline-blind incline development is adopted in Zhujiagou gold mine, where the No. 1 and No. 2 ore bodies are respectively mined though Incline 1 (Figure 6-1) and Incline 2.

==> picture [278 x 208] intentionally omitted <==

Figure 6-1: Decline 1 at Zhujiagou Gold Mine

The deposit development method recommended by Yuanbo company is flanking vertical shaft, and the No. 1 and No. 2 ore bodies are respectively mined though Shaft 1 and Shaft 2, which will be connected with current levels. Four development levels will be implemented in No. 1 ore body with level height of 40m, and the elevations are respectively 780m, 740m, 700m, and 660m. The level quantity and height in No. 2 ore body are the same as that in No. 1, and the elevations are respectively 770m, 730m, 690m and 650m. The designed locations of vertical shaft heads are shown in Table 6-5.

Table 6-5: Designed Coordinates at Head Vertical Shats

Vertical Shaft	Head Coordinate	Depth	Level Elevation
No. 1	X=4,676,657.79	173m	780m, 740m, 700m, 660m
	Y=40,385,678.64
	Z=823
No. 2	X=4,676,469.99	130m	770m, 730m, 690m, 650m
	Y=46,385,600.80
	Z=816

The management personnel in Guojin company introduced that the mining production halted in 2007 for the preparation of further exploration and mining tenement expansion. A new mine design is required due to the mine improvement and upgrade construction, and the investment and commencement date can only be confirmed once the new design is completed. Through the site visit, SRK believes that the current development system is not in accordance with the requirement for 30,000tpa mining capacity. Considering the locations of No. 1 and No. 2 ore bodies, a comprehensive development system can be introduced to reduce the construction investment.

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6.3.2 Mining Method

The cut-filling and short-hole shrinkage are adopted in the mining production in Zhujiagou gold mine. When the ore body thickness is less than 0.8m, the cutfilling is used, and short-hole shrinkage will be introduced for the mining of ore body that is over 0.8m thick. In SRK’s view, the two mining methods mentioned above are appropriate by taking into consideration of the ore body occurrence and thickness. Nevertheless the productivity of cut-filling is low with high work intensity. In consequence, the Yuanbo Company recommended the short-hole shrinkage to be used as the only mining method. SRK suggests that the short-hole shrinkage should be used as predominant mining method to reduce the dilution loss, while the cut-filling will be introduced for the ore body with higher grade and lower thickness.

The stoping sequence is top-down in different levels, and upward stoping is adopted with layer spacing of 2m.

Preparation and Cutting: Along the ore body strike, the ore-drawing cross-cuts will be developed in the transportation workings with spacing of 5m and length of 5-7m, and then the access and ventilation shaft will be advanced along the chamber. The prospecting roadway along the vein is used as undercutting working for upward stoping.

Stoping: The YSP-45 rock drill is used for drilling of upward blast hole in one line with dip angle of 70°-80°, and the spacing of blast holes is between 0.8-1.2m. The stoping height is 2m. Manual charging and micro-delay detonation are adopted with non-electric initiation. The secondary crushing is completed in the stope. The ore-drawing is conducted in all the cross-cuts and the quantity for each ore-drawing takes up about 1/3 of the total extracted ore. Once the stoping is completed, massive ore-drawing should be commenced.

Pillar Recovery: After the final level stoping is concluded, the crown pillar will be recovered through a disposable drilling-blasting, which is also adopted for the rib pillar recovery when the massive ore-drawing is finished.

The short-hole shrinkage without bottom pillar is shown in Figure 6-2.

6.4 Production Facilities

6.4.1 Ventilation

The natural ventilation supplemented by local mechanical ventilation is introduced underground. Once the improvement and upgrade construction is concluded, the central mechanical exhausting ventilation will be deployed. The fresh air flows through the No. 1 and No. 2 vertical shafts, while the waste air exhausts to the surface through level roadway, stope and air-return roadway.

6.4.2 Underground Drainage

The ground gushing water gravitates into the sump located in 650m level through the drainages, and then the water will be pumped to surface reservoir. After settling down, the water can be used for ground de-dusting and surface greening.

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6.4.3 Haulage and Hoisting

The total underground haulage quantity designed by Yuanbo company is 110t/d, in which the ore and waste rock quantities are respectively100t/d and 10t/d. The max haulage distances in No. 1 and No. 2 mining sections are respectively 240m and 300m. The ore and waste rock from different level are transferred by manual mine car to bottom station and hoisted to the surface through cages.

==> picture [320 x 245] intentionally omitted <==

Figure 6-2: Short-hole Shrinkage without Bottom Pillar

6.4.4 Power and Water Supply

The power for mine production is supplied by Northeastern Grid, and the Honghuagou substation is 5km from Zhujiagou project area with connection by a 10kv transmission line. The water source is 5km away from the mine with yield of 300m[3] /d, and the mine gushing water reaches 46m[3] /d, which is generally sufficient for mine production.

6.5 Problems and Suggestions

6.5.1 Problems

Through site visit, data review and communication with management staffs and technicians from Chifeng Guojin, SRK concluded that Chifeng Guojin has possessed considerable gold resource, which will bring great economic profit if the resource can be fully and appropriately utilized. In SRK’s view, the current main problems are as follows:

• There is no adapted resource utilization plan and general layout, and the further investment plan is not specified.

• The infrastructure facilities do not comply with further expansion plan, and the production throughput is restricted by the limited industrial yard.

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• The water supply is a problem if the concentrator is put into construction.

• There are no enough technicians for current and further management and production.

• The long period production suspension is unfavourable for mine maintenance and safety management, and the general expense also increases.

• The exploration degree for No. 3 and No. 4 ore bodies are comparatively low. The development and utilization plan does not comprise the development and stoping for these two ore bodies, which will be an obstacle for further future engineering and management.

6.5.2 Suggestions

• Based on the current exploration achievement, the mine should commission a qualified company to complete an operational feasibility study or preliminary design.

• The general layout should be redesigned to be in accordance with 30,000tpa expansion plan. In addition, the layouts and locations for concentrator and TSF should also be taken into consideration if possible.

• More hydro-geological work should be conducted to guarantee the production and domestic water supply.

• The company should commission more engineering technicians, who are expertise at geology, mining, measuring, processing and assaying, for the site technical management and data collection.

• The mining production should be carried out appropriately during the exploration to save the maintenance cost and verify the achievement.

• Supplementary exploration work should be conducted for No. 3 and No. 4 ore bodies to promote the resource category.

7 ORE PROCESSING ASSESSMENT

7.1 Ore Characteristics

Zhujiagou gold deposit is auriferous quartz vein type; the valuable minerals as native gold, argentite, and chlorargyrite.

The native gold shaped mainly as fissure type and secondarily as grainy type. The general disseminated grain size is ranged from 0.0004mm to 0.6mm, and the grainy gold is disseminated in pyrite and quartz. Gold is mainly enriched in pyrite, which appears as veining, massive and disseminated occurrence. Ore is mainly structured as dissemination, veinlet and massive.

Zhujiagou gold mine is lacked of systematic and specific ore characteristic research information, but the Zhujiagou deposit’s origin and industrial type are similar with one adjacent mine, the ore characteristic is referred as follow.

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The auriferous quartz vein consists of a total 10% ore content comprised of mainly pyrite, magnetite, and secondly chalcopyrite, galena, limonite, pyrrhotite, cobaltite, and sphalerite. Approximate 90% of its content is non-metal gangue minerals, which are comprised of mainly quartz, chlorite, sericite, and secondly feldspar and calcite. Ore minerals appear as massive, compact impregnated, banding, lumpy and veins which structured in the rock fractures and inter-granule of gangue minerals. The main composition of ore is quartz, calcite, ankerite and pyrite. The major economic-valuable minerals are electrum, native gold and argentite. Due to the low grade of other metals or minerals, gold and silver are considered the only recovery-oriented elements.

The electrum contains a gold content of 55.76-86.33%, and a silver content of 12.58-42.98%. Gold is mainly shaped as granular, quadrilateral, rectangle and rhombus; long granular and round-ellipse are the secondary shape types. Round-ellipse shape inclusions are in accessory minerals and are generally inter-grained and fissure-filled.

Visible gold constitutes the majority and accounts for approximately 96.84%; invisible gold is of very low amounts, and accounts for approximatlye 3.16%. Fine grains, medium grains and coarse grains hold 57.49%, 32.79% and 6.56% percentages, respectively, in visible gold. Inter-grained, inclusion and fissure-filled gold are the three major gold occurrence types and occur at rates of 36.22%, 34.32% and 29.46%, respectively. Comparing with inter-grained and fissure-filled, mineral liberation is more difficult for inclusion gold, but the relatively coarse grains of inclusion type are also easy for liberation.

7.2 Ore Processing Test

Metallurgical Institute of Jilin Province submitted Ore Gravity and Flotation Processing Test Report of Zhujiagou Gold Mine, Honghuagou Mining Area, Songshan District, Chifeng City, Inner Mongolia. The test is based on gravity (table concentrator) and flotation method, the test result, multiple analyze result are shown in Table 7-1 and Table 7-2, respectively. The preferred flotation flowsheet is shown in Figure 7-1.

The test result indentified that Zhujiagou deposit is composed of auriferous quartz vein type ore with low sulphide content, which can be easily processed, and the recovery of gold and silver severally reach 96.97% and 76.89%. Gravity and flotation methods are suitable for recovering coarse grained and fine grained gold respectively. The gold concentrate is of good quality which contains high grades of Au and Ag and low grade impurities.

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Table 7-1: Processing Test Result

Products	Yield (%)	Grade(g/t)	Grade(g/t)	Recovery(%)	Recovery(%)
		Au	Ag	Au	Ag
Shake-Table Concentrate	1.23	267.49	253.78	39.64	18.77
Flotation Concentrate	2.47	192.65	391.31	57.33	58.12
Total Above	3.7	217.53	345.59	96.97	76.89
Tailings	96.3	0.26	3.99	3.03	23.11
Feed	100	8.3	16.63	100	100

Table 7-2: Mutiple Analyse Result

Products	Au (g/t)	Ag (g/t)	Cu (%)	Fe (%)	S (%)	Pb (%)	Zn (%)	Sn (%)	SiO2 (%)	As
Geological Samples	9.96	15.79	0.05		0.75	0.12	0.27	0.001
GravityConcentrate	267.50	253.78	0.11	5.84	1.02	0.12	0.23	0.001	1.06	0.001
Flotation Concentrate	192.60	391.31	0.23	4.96	1.14	0.75	0.88	0.01	2.08	0.001
Tailings	0.26	3.99	0.01	1.02	0.74	0.53	0.89	0.001	1.13	0.001

==> picture [264 x 241] intentionally omitted <==

Figure 7-1: Preferred Flowation Flowsheet

7.3 Optional Processing Methods

Zhujiagou gold mine is of simple ore property, cyanide-leaching method is expected to be feasible due to the gold and silver are identified as the only economic valuable minerals, and the impurities and waste contents are of low grade. Referring to the adjacent gold mine, by using CIL (carbon in leach) method, Au leaching yield reaches 96-98%, the recovery of active carbon absorption, gold-loaded carbon desorption and electrolysis reaches 98%, and the comprehensive recovery is above 96%. Thus flotation and cyanide leaching are two optional processing methods.

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Conventionally, CIP method is advanced than flotation method on economical aspect. Regarding to the relative small mine scale of Zhujiagou project, SRK recommends a tech-economic comparison between such two optional methods. The proposed gravity and CIP process flowsheet is illustrated on Figure 7-2. The equipment connection of cyanide-leaching process is shown on Figure 7-3.

==> picture [226 x 338] intentionally omitted <==

Figure 7-2: CIP Process Flowsheet

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==> picture [296 x 162] intentionally omitted <==

Figure 7-3: CIP Au Extraction Flowsheet

Flotation method consists of 4 main procedures outputting Au/Ag collective concentrate.

• Crushing. Twin stages close-circuit crushing will reduce the ore grain size to less than 10mm.

• Milling. Single or twin stages close circuit milling reduces the particle fineness to 75%-74m (75% passing 75m).

• Gravity concentration. Gravity equipment (e.g. Knelson concentrator and shake table) is used in milling circuit to recover coarse gold.

• Flotation concentration. In the series of flotation cells, milled ore is conducted by 1×roughing, 2×cleaning and 2×scavenging and output collective gold and silver concentrate.

Cyanide leaching method consists of 6 main procedures outputting Au/Ag collective concentrate.

• Crushing. Twin stages close-circuit crushing will reduce the ore grain size to less than 10mm.

• Milling. Single or twin stages close circuit milling reduces the particle fineness to 75%-74m (75% passing 75m).

• Gravity concentration. Gravity equipment (e.g. Knelson concentrator and shake table) is used in milling circuit to recover coarse gold.

• Cyanide leaching. Milling product will be concentrated to 40%-45%, and then the reagents including lime, sodium cyanide, active carbon are added into agitator. Gold and silver will be leached in the solution and adsorbed in active carbon. The gold loaded carbon will be screened out from the pulp.

• Desorption and electrolysis. Gold loaded carbon are desorbed to Au complexes and Ag complexes in desorption and electrolysis process then reduced to elemental gold and silver.

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• Ag/Au separation and smelting. Elimination of base metals been generated from electrolysis and separation of gold and silver are conducted, and then the smelting and ingot casting will be conducted respectively.

7.4 Conclusions and Suggestions

• Zhujiagou gold mine is of simple ore property, flotation and cyanide-leaching methods are expected to be able to achieve reasonable production parameters. Gold particles are of high content, supplementary gravity concentration is necessary.

• Though mining operation was historically existed, regarding to relative low reserve category, a good member of geological exploration works are needed in future to extend the reserve and reserve category. The issue of resource risk will be faced if the mining and processing projects are developed based on current condition.

• Essential cyanide leaching test is recommended.

• In connection with flotation and cyanide leaching methods, the final product is planed as below: Au/Ag collective concentrate; or Au ingot and Ag ingot. The plans need to be compared based on technical and economical aspects to identify the more feasible one.

• Future processing plants’ scale need to be accordance with actual ore reserve and mining capacity.

8 OCCUPATIONAL HEALTH AND SAFETY

SRK was provided with a copy a Safety and Health report (completed in August 2008) for the Zhujiagou Mining area. The report though was produced for Chifeng City Gold Mining Co Ltd, not for Guojin Mining (SRK has no information to confirm what company and mine this report is assessing).

The Safety and Health Report states, “design is based on strictly implementing the guideline “Safety First, Precaution Crucial, Comprehensive Control”, and insists on the “Safe Development” scientific concept guiding ideology; establish the people-oriented concept, and take permanent solution measures in the overall production process . Actively adopt advanced technology and equipment, enhance the mechanization extent in production process; and greatly reduce and eliminate the unsafe and harmful factors” .

The report continues to say, based on the “Three Same Time” requirements, aims to the adverse factors to safe production, we adopted active prevention measures in design; we paid particular attention to underground water burst, hoaf area collapse, tunnel landslide, fire safety, lightning protection, earthquake prevention, electric appliance and mechanical safety protection; the designs of down-hole ventilation, dust prevention, and noise prevention etc can effectively prevent occurrence of accident, and guarantee the mine safety. The design of all buildings and structures in this project can fully meet the demands of production use, which can conform to present state standard and specifications; and prefect measures are taken on earthquake prevention, fire prevention, and noise prevention etc. It’s can be foreseen, the mine safety requirements can be met after the project is put into production, and guarantee the safety and health of the workers during production.

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The mine must strictly implement the relevant state law and regulations on production safety, carries out all the measures raised in this design, strengthen safety management; and integrate the safety work into the production works such as planning, arrangement, examination, summarization, and rating etc.

The report suggests to make feasibility study, primary design, and construction design of the project prior to the mine exploitation; optimizing the design scheme on the basis of deepened investigation. In strict compliance with requirements of related regulation, make compilation of related safety evaluation documents according to actual conditions of mine; guide the mine design, construction, and guarantee production safety.

9 WORKFORCE

9.1 Workforce Numbers

Required workforce numbers for Zhujiagou mining department, ore processing plant and other departments were forecast in Table 9-1.

Table 9-1: Workforce Numbers

Department	Forecast numbers
Company headquarters	50
General manager	2
Chief engineer	6
Chief accountant	12
Others	30
Mining department	111
Management	6
Technology	15
Miningand transport workers	90
Metallurgicalprocessing plant	43
Management	3
Technology	10
General workers	30
Quality Control Department	10
Management	2
Technology	8
Workshop	32
Management	2
General workers	30
Environment & Safety	7
Management	2
General workers	5
Sale Department	8
Management	2
General workers	6
Total	261

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9.2 Assessment of Workforce

Based on Chinese National Ministry laws and the work contract regulations of Inner Mongolia Bureau of Work and Social Security, Company staff and employees will sign work contracts. To ensure a relatively stable workforce, the Company will transact endowment, medical, work injury, unemployment and bearing insurance plus housing accumulation funds for employees.

10 OPERATING AND CAPITAL COSTS

10.1 Forecast on Operating Costs

According to information provided by the Company, the operating costs include mining operation and ore processing. The cost of consumption of reagents and other materials are based on prices obtained by suppliers in China. Information regarding salary scales was used to calculate labour costs. Power consumption and costs were based on local standards.

10.1.1 Mining Costs

The mining operation is conducted by underground mining techniques utilising the services of mining contractors and the Company’s own employees. For mining and tunnelling development, contractors are responsible for partly providing necessary production and support equipment as well as all direct labour and front line supervision. The Company provides explosives to contractors at their own expense. The Company also provides power and water supplies for mining operations carried out by contractors. Mining contracts are signed based on the amount of ore mined and its quality control. Safety and environmental issues are also detailed in the contract to define liabilities and responsibilities for both parties. According to the feasibility study report, major cost inputs to the mining project are salaries, water and power, raw materials and manufacturing costs. The operating costs for mining are 140 RMB/t (Table 10-1).

Table 10-1: Forecast on Mining Costs (RMB/t)

Item	(RMB/t)
Raw material	25
Water and power	5
Manufacture and others	20
Labor	60
Welfare	30
Total	140

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10.1.2 Ore Processing Costs

Processing costs are calculated based on mine and plant operating data. Major costs for processing include accessory material, power and water and manufacture costs. The metallurgical processing costs are 55RMB/t (Table 10-2). The Company will use its own employees in the metallurgical and processing plant.

Table 10-2: Forecast on Metallurgical Processing Costs (RMB/t)

Item	(RMB/t)
Accessorymaterial	24
Water andpower	8
Manufacture and others	8
Labor	10
Welfare	5
Total	55

10.2 Forecast on Capital Costs

Between 2010 and 2012, MFJ Group plans to invest approximately 23 million RMB in mining development such as mining stope preparation, processing plant (see Table 10-3). In SRK’s opinion, the proposed capital investments may be sufficient and likely to achieve targets. Details of production capacity and production volume forecasts are shown in Table 10-3.

Table 10-3: Production Capacity and Production Forecasts, 2010 to 2012

Mine, Plant and Other Facilities	Construction Period	Construction Period	Construction Period	Construction Period	Construction Period	Construction Period
	Total	1st H 2010	2nd H 2010	1st H 2010	2nd H 2010	2012
MiningDevelopment	1000	300	400	300
Metallurgical ProcessingPlant	600	300	300
Tailings Storage Facility	500	300	200
Support Facility	100	20	20	20	20	20
Others	100	20	20	20	20	20
Total_(Unit: 10,000RMB)_	2300	940	940	340	40	40

Mine/Plant	Production Period	Production Period	Production Period	Production Period	Production Period	Production Period
Operating Mine	Unit	2nd H 2011	2012	2013	2014	2015
Capacity	1000t	15	30
Ore Mined	1000t	15	30
Au Grade	g/t	9.13
Metallurgical Processing Plant
Capacity	t	15,000	30,000
Concentrate Production	t	713	1,426
Concentrate Grade	g/t	192
RecoveryRate	%	96

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11 ENVIRONMENTAL ASSESSMENT

11.1 Environmental Review Objective

The objective of this environmental due diligence review is to identify and or verify the existing and potential environmental liabilities and risks, and assess any associated proposed remediation measures for the Zhujiagou Gold Mine Development Project (Zhujiagou Project) in Songsan District of Chifeng Township, Inner Mongolia. The project is owned by Chifeng Guojin Mining Co Ltd (Guojin Mining).

Presently at site are historic underground workings and surface facilities consisting of a small office/residential building, winch house, Waste Rock Dump (WRD) and access road. No construction or development has yet been commenced for the new Zhujiagou Project.

11.2 Environmental Review Process, Scope and Standards

The process for the verification of the environmental compliance and conformance for the Zhujiagou Project comprised a review and inspection of the project’s environmental management performance against:

Chinese National environmental regulatory requirements (Appendix III).

World Bank/International Finance Corporation (IFC) environmental standards and guidelines (Appendix IV).

Internationally recognised environmental management practices.

The methodology that was applied for this environmental review of Zhujiagou Project comprised a combination of document review, site visit and interviews with Company technical representatives. The site visit was undertaken from the 14 to 16 of September, 2009.

11.3 Status of Environmental Approvals and Permits

The Mining Licence for the Zhujiagou Project Gold Mine (Licence No. 1500000820608) was granted to Guojin Mining on 2 December 2008 by the Chifeng City Bureau of Land and Resource (expiry 2 December 2011), and covers an area of 1.0989 km[2] . The approved mining method is for underground, with an approved production rate of 30,000 tonnes of ore mined per year.

An Environmental Impact Assessment (EIA) entitled “30,000tpa Gold Ore Mining Construction Project for Zhujiagou Gold Mine” was completed on 24 December 2007 for Guojin Mining was provided for review. This EIA though states it was compiled by the State Environmental Protection Agency (SEPA), which in 2007 was the national approving body for environmental assessments, not an accredited institute (Class A or B) for conducting EIA work. Also, no approval of the EIA (completed in 2007) by an Environmental Protection Agency (EPA) was provided for review, which SRK believes raises concerns as to the veracity of the EIA itself.

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The Jiujiagou Project’s Soil and Water Conservation Plan (SWCP) was completed by the Chifeng, Luzhou Soil and Water Technologies Co Ltd (Class B) in November 2008 for Guojin Mining. No approval for the SWCP was provided to SRK for review though.

No Land Use Permits (LUP) for the Zhujiagou Project facilities sites were provided for review. The Zhujiagou Project will not be compliant with Chinese law until LUP’s have been obtained from the Land and Resources Bureau.

As Guojin Mining is yet to begin construction/development work on the Zhujiagou Project, Water Use Permits, Pollution Discharge Permits and Final Check Acceptances (on environmental protection facilities) are not yet required, but will be required as the project moves into operation.

11.4 Environmental Compliance and Conformance

The significant environmental aspects for the Zhujiagou Project that are subject to this technical review are associated with the proposed mining activities at the Zhujiagou Project sites. The environmental technical review identified the following as the most significant potential environmental management liabilities that relate to operation and development of the Jiujiagou Project:

• Surface water management and discharges (i.e. stormwater runoff).

• Groundwater management and discharges (i.e. mine dewatering and seepage from the Waste Rock Dump – WRD).

• Rehabilitation of the waste rock stockpiles and other disturbed areas.

• Storage and handling of hazardous materials.

• Waste generation and management (industrial and domestic wastes).

• No geochemical characterisation of industrial waste materials (waste rock).

• Potential contaminated sites.

• Adequate structured closure planning process.

• Adequate erosion control measures.

Of the above items, the most significant environmental risks for the Zhujiagou Project are associated with potential surface and groundwater impacts. In addition, storage and handling of hazardous materials/wastes, including fuels and process slags and the potential for generating contaminated sites and operational closure liabilities through management of waste rock, hydrocarbons and general waste also presents high environmental risks. In particular, the Jiujiagou Project has no structured process in place for undertaking contaminated sites assessment and for broader closure planning. The lack of characterisation of process wastes and the potential for acid rock drainage and metal leaching may also be of concern.

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The environmental risks associated with surface and ground water management, waste rock disposal, hazardous materials management and land rehabilitation can be generally managed if Chinese National environmental standards and regulatory requirements are met.

The environmental risks associated with the potential for generating contaminated sites and other site closure liabilities can be effectively managed through the adoption of relevant recognised international industry practices.

11.5 Land Disturbance

The main impact on the surrounding ecological environment is due to disturbance and contamination caused by surface stripping, waste rock and tailings storage, processing plant drainage, processing waste water, explosions, transportation and associated buildings that are erected. If effective measures are not taken to manage and rehabilitate the disturbed areas, the surrounding land can become polluted and the land utilization function will be changed, causing an increase in land desertification, water loss and soil erosion.

The project EIA reports, the surface facilities will mainly be composed of office and living area, mining industrial area, WRD, and access road. The total land occupied is expected to be about 109.89ha. The office/residential area of disturbance is estimated at 0.39ha, mine surface infrastructure area of disturbance is estimated at 1.32ha, the WRD area of disturbance is estimated at 1.54ha and access road area of disturbance is estimated at 0.68ha.

At the time of SRK’s site visit the only land disturbance in relation to the project was from historic operations and was limited in area, although no estimate of actual area though provided by Guojin Mining. No registry documenting areas of current land disturbance for the Jiujiagou Project site have been sighted as part of this review. The extent of this historic disturbance though while small should be surveyed and recorded along with future disturbances from the development of the Jiujiagou Project.

11.6 Flora and Fauna

One of the most important problems to be resolved in the projects of exploitation of natural resources is the management of the impacts that could be caused to the forests and the vegetation in general. One of these impacts is caused in the process of clearing which reduces the extension of the plants and degenerates into the loss and/or fragmentation of habitats and the loss of biodiversity. In the construction and operation phase of mining; removal of the vegetation cover, trees, shrubs, epiphytes and herbaceous plants are cut and removed, and on occasion also the organic soil layer is removed.

The project EIA states, “most vegetation is this district has been destroyed; and most of the natural vegetation distributed in the western part; and the majority of them are artificial vegetation, the farmland and artificial forest take a large proportion . Because of artificial introduction the natural vegetation distribution, there are diverse biological species; but no endemic species and rare species” .

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The EIA also states, “the wild animal within the project area is mainly some rodent mammals; according to the primary investigation, the birds in this area mainly include: house swallow, golden-rumped swallow, sparrow, great tit, pheasant, and chukar etc . The rodent small mammals include vole, weasel, and tolai hare etc . Now there is no large natural forest land in the project area, the artificial forest is also very sparse; so there is no the habitat environment for endangered and protected animals, and there is no protected animal species in this area” .

11.7 Waste Rock and Tailings Management

Waste rock that has been generated so far at the Zhujiagou Project site is from historical mine workings. The amount while small has simply been dumped down the hillside. No acid rock drainage (“ARD”) or associated leaching of heavy metals was observed during SRK’s site visit.

The project EIA states, “the industrial solid waste to be produced via mining will mainly include stripping waste soil, and waste rock . Guojin Mining should build a WRD, and build an enclosing dam around the site to prevent loss and stripped top-soil should be stockpiled for later reuse in rehabilitation . In middle and later stages of operation the waste rock will be directly used to backfill stopes . After treatment by these measures, the project waste rock will cause slight impact to the surrounding environment” .

No geochemical assessment of the potential for ARD though has been performed; hence no empirical statement regarding the potential impacts from the WRDs can be made at this stage. No estimates of the amount of waste rock that will be produced, stockpiled or backfilled have been reported in the EIA.

No historic process tailings have been generated at the Zhujiagou Project site as previous mining operations included no processing of ore; rather ore was sold to another company for processing and concentrating. Guojin Mining have stated that in future operations ore will also be sold on for processing and no processing facilities will be built at site, therefore a Tailings Storage Facility (“TSF”) will not be required at site.

SRK recommends that a geochemical assessment of the proposed waste rock be undertaken to confirm that the contaminant levels are low and the potential for leaching impacts are low. SRK also recommends topsoil should be stockpiled in piles no more than 2 metres high to ensure the fertility of the soil.

11.8 Water Aspects and Impacts

Groundwater is the water source for all users in the area and the project is within a regional soil and water conservancy zone. There are no perennial surface water bodies in the region surrounding the project sites, so groundwater (recharged via surface infiltration) will be the main water protection target for the project. Groundwater quality in the area is reported to be poor.

No information was available for review regarding water consumption, mine dewatering rates, waste water production or water monitoring for the Zhujiagou project. No designs for the proposed industrial site stormwater drainage system or runoff diversions have yet been sighted for the Zhujiagou Project.

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The project EIA reports, Guojin Mining shall construct a water storage tank and related water treatment facilities; after treatment, the drainage water will be used for mining area landscaping and farm irrigation.

SRK recommends the mine dewater, industrial waste water, plant drainage and sewage production rates are estimated in project designs and assessment and are monitored (under a monitoring programme – as part of an Environmental Management Plan (EMP)) to determine its acceptability for discharge with the Chinese National standard “Comprehensive Emission Standard of Wastewater (GB8978-1996)”. SRK also recommends, water recycling and reuse options are assessed for feasibility in project designs and incorporated were possible to reduce new water consumption and waste water discharges for the project.

11.9 Air Emissions

Dust emissions for the Zhujiagou Project will be from stockpiles, open areas, ore handling and the general movement of vehicles and mobile plant. Proposed dust management measures for these anticipated dust emissions sources have yet to be completed. The project EIA reports that dust control and suppression plans and management measures will be developed. Water sprays at the dust generation source is the main method mentioned.

The EIA states, “through the use of management measures, and also because of the mining area environment is open; the air has strong dispersing ability . The nearest village is far from the mining area, so the flying dust has no impact to the village” .

Gas emissions generated by the Zhujiagou Project are predominately from the operation of fixed and mobile plant and emissions include non-organizational waste gas, explosive waste gas and boiler’s flue gas in office district mainly produced by drilling, exploding, loading and transporting in the mining and stockpiling areas. The main pollutants include CO, NO, NO2, smoke and SO2. No detailed assessment of these potential gas emissions has yet been completed.

SRK recommends comprehensive dust suppression and management plans are developed to meet National Standards for in the mine as well as in and around the mine site and associated facilities. SRK recommends a comprehensive analysis of the whole projects estimated emissions be carried out during detailed project feasibility studies.

There is no Chinese National legislative requirement for the project to estimate its Greenhouse Gas emissions or to implement any emissions reductions. As such none of the project environmental assessment documentation reviewed address the issue of Greenhouse Gas emissions. However, energy efficiency and the reduction of Greenhouse Gas emissions are now considered as Chinese National policy directives. In addition, these are also components of IFC environmental requirements and are considered as internationally recognised environmental management practices. Therefore, SRK recommends that consideration be given to developing initiatives to quantify Greenhouse Gas emissions and assess possible emission reduction strategies for the Zhujiagou Project.

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11.10 Noise Emissions

The main noise sources for the Zhujiagou Project will be from the operation of fixed equipment (crushers, compressors, pumps etc) and mobile equipment (mainly ore haulage). The EIA states, “the transporting noise source strength is 85dB(A), and after distance decay it has less impact to the Daba village . The blasting noise source strength is 130dB(A), because it’s underground mining, and the noise is reduce after distance decay, ground effect, and air sound absorption; then the noise can reach the standard in daytime, but at night the noise may be over standard . So the project unit is prohibited to carry out blasting at night” .

SRK found conditions for noise emissions to be well controlled during site visits and considering the remoteness of the project site from any residences, no significant impacts are expected from noise sources other than ore trucking from site.

11.11 Hazardous Materials Management

At the time of SRK’s site visit, no plans for the processing of ore within the Zhujiagou Project have been developed; rather ore will be sold to another company for processing. Therefore the determination of the hazardous materials that will be used, stored, handled, etc at site is not available for review at this time. Explosives and hydrocarbons currently are the only hazardous materials that will be used at site as described by project designs and documents.

The Zhujiagou Project will need to develop procedures for hazardous materials management (hydrocarbons and explosives) and use along with appropriate storage facilities and conditions to comply with National regulations. SRK recommends constructing fuel diesel storage (with adequate bunding – secondary containment) and transfer facilities to contain spillages from entering the environment.

11.12 Waste Management

11.12.1 Waste Oil

The Zhujiagou Project will produce waste oil from the servicing and maintenance of equipment. No annual generation rates and detailed assessment of the storage and handling requirements for this waste oil have yet been completed. The Zhujiagou Project documents make no mention of waste oil or management measures. Guojin Mining have not stated what they will do with the waste oil, but should be able to sell it for recycling in line with Chinese directives for recycling and reuse of waste products.

SRK recommends maintenance work to be carried out over concrete hardstand areas to minimize the spillage of waste oil to the soil/water environment. Waste oil collected should be stored in containers within secondary containment facilities, before they are sold for recycling or disposed of in line with Chinese National Standards for the disposal of waste hydrocarbons.

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11.12.2 Solid Wastes

No annual generation rates and detailed assessment of the disposal of the inert industrial and domestic solid wastes for the Zhujiagou Project has yet been completed. No uncontrolled rubbish dumping was observed within the current project site area during SRK’s site visit.

SRK recommends placing sufficient refuse collection points about site for the collection of refuse prior to disposal. Guojin Mining will either be able to have rubbish collected by the local county (dependent upon whether the county has such services) or will need to construct their own landfill (which needs permitting) for disposal of refuse generated on site. Scrap iron can be collected and stockpiled in a designated place prior to being sold for recycling in line with Chinese National directives on the reuse/recycling of waste products.

11.12.3 Sewage and Oily Waste Water

No annual generation rates and detailed assessment of the disposal of the sewage and oily waste water for the Zhujiagou Project has yet been completed. Sewage management is not addressed within the project’s EIA although Guojin Mining stated domestic waste water (sewage and gray water) will be treated and this waste water will then be discharged to a nearby gully, but provided no details as to what type of treatment system this would be.

No information on oily waste water was available at the time of SRK’s site visit and the project EIA make no reference to oily waste water impacts or management procedures. SRK recommends the management of oily waste water and sewage be addressed as part of the projects EMP. Guojin Mining should construct plant washdown collection drains and concreted hardstand areas for vehicle and equipment maintenance that are bunded to collect hydrocarbons for appropriate disposal and separation from water; thereby reducing the source of oily waste water.

11.13 Contaminated Sites Management

The assessment, recording and management of contaminated sites within mining or mineral processing operations, is a recognised international industry practice (i.e. forms part of the IFC Guidelines) and in some cases a National regulatory requirement (e.g. an Australian environmental regulatory requirement). The purpose of this process is to minimise the level of site contamination that may be generated throughout a project’s operation while also minimising the level and extent of site contamination that will need to be addressed at site closure.

A contaminated site or area can be defined as:

“An area that has substances present at above background concentrations that presents or has the potential to present a risk of harm to human health, the environment or any environmental value”.

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The process to assess and record the level of contamination basically involves a combination of visual (i.e. suspected contamination observed from spillages/releases) and soil/water/air sampling and testing (i.e. to confirm contaminant levels). Once the level of contamination is defined, the area’s location and contamination details are then recorded within a site register.

Remediation/clean up of contamination areas involves the collection and removal of the contaminated materials for treatment and appropriate disposal, or in some cases the in-situ treatment of the contaminated (e.g. use of bioremediation absorbents on hydrocarbon spillage). The other key component to the management of contaminated areas is to also remove or remedy the source of the contamination (e.g. place hydrocarbon storage and handling within secondary containment).

No contaminated sites assessment program has at this stage been developed for the Zhujiagou Project that covers the above mentioned components. SRK recommends that a contaminated sites assessment and management process be developed for the Zhujiagou Project.

11.14 Environmental Management Plan

The purpose of an operational Environmental Management Plan (EMP) is to direct and coordinate the management of the project’s environmental risks. The EMP documents the establishment, resourcing and implementation of the project’s environmental management programs. The site environmental performance is monitored and feedback from this monitoring is then utilised to revise and streamline the implementation of the EMP.

No plan has at this stage been developed for the Zhujiagou Project that covers the above mentioned components. SRK recommends that Guojin Mining develop and implement an operational EMP for the Zhujiagou Project in line with Chinese National requirements and recognised international practices as the project moves toward operation.

11.15 Emergency Response Plan

The IFC describes an emergency as “an unplanned event when a project operation loses control, or could lose control, of a situation that may result in risks to human health, property, or the environment, either within the facility or in the local community”. Emergencies are of a scale that have operational wide impacts, and do not include small scale localised incidents that are covered under operational area specific management measures. Examples of an emergency for a mining/mineral processing project are events such as pit wall collapse, underground mine explosion, the failure of a TSF or a large scale spillage/discharge of hydrocarbons or chemicals.

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The recognised international industry practice for managing emergencies is for a project to develop and implement an Emergency Response Plan (ERP). The general elements of an ERP are:

Administration – policy, purpose, distribution, definitions of potential site emergencies and organisational resources (including setting of roles and responsibilities).

Emergency response areas – command centres, medical stations, muster and evacuation points.

Communication systems – both internal and external communications.

Emergency response procedures – work area specific procedures (including area specific training).

Checking and updating – prepare checklists (role and action list and equipment checklist) and undertake regular reviews of the plan.

Business continuity and contingency – options and processes for business recovery from

an emergency.

No plan has at this stage been developed for the Zhujiagou Project that covers the above mentioned components. SRK recommends that Guojin Mining develop and implement an operational ERP for the Zhujiagou Project, in line with Chinese requirements and recognised international industry practices.

11.16 Site Closure Planning and Rehabilitation

The Chinese National requirements for mine closure are covered under Article 21 of the Mineral Resources Law (1996), the Rules for Implementation of the Mineral Resources Law of the People’s Republic of China (2006), the Land Use Regulations of the People’s Republic of China (1986.6.25) and the Land Rehabilitation Regulation issued by the State Council on October 21, 1988. In summary these legislative requirements cover the need to conduct land rehabilitation, to prepare a site closure report and submit a site closure application for assessment and approval.

The recognised international industry practice for managing site closure is to develop and implement an operational site closure planning process and document this through an operational Closure Plan. This operational closure planning process should include the following components:

Identify all site closure stakeholders (e.g. government, employees, community etc.).

Undertake stakeholder consultation to develop agreed site closure criteria and post operational land use.

Maintain records of stakeholder consultation.

Establish a site rehabilitation objective in line with the agreed post operational land use.

Describe/define the site closure liabilities (i.e. determined against agreed closure criteria).

Establish site closure management strategies and cost estimates (i.e. to address/reduce site closure liabilities).

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Establish a cost estimate and financial accrual process for site closure.

Describe the post site closure monitoring activities/program (i.e. to demonstrate compliance with the rehabilitation objective/closure criteria).

While the above site closure planning process is not specified within the Chinese National requirements for mine closure, the implementation of this process for a Chinese mining project will:

Facilitate achieving compliance with these Chinese National legislative requirements; and

Demonstrates conformance to a recognised international industry management practice.

There is currently no operational closure planning process in place for the Zhujiagou Project that covers the above components. SRK recommends that an operational closure planning process is developed and implemented for the Zhujiagou Project in line with Chinese National legislative requirements and incorporates recognised international industry practices.

11.17 Evaluation of Environmental Risks

The sources of inherent environmental risk are project activities that may result in potential environmental impacts. These project activities have been previously described within this report. In summary the most significant environmental risks for the development of the Zhujiagou Project, currently identified as part of the project assessment, are:

• Surface water management and discharges (i.e. stormwater runoff).

• Groundwater management and discharges (i.e. mine dewatering and seepage from the Waste Rock Dump – WRD).

• Rehabilitation of the waste rock stockpiles and other disturbed areas.

• Storage and handling of hazardous materials.

• Waste generation and management (industrial and domestic wastes).

• No geochemical characterisation of industrial waste materials (waste rock).

• Potential contaminated sites.

• Adequate structured closure planning process.

• Adequate erosion control measures.

The environmental risks associated with water management, waste rock disposal and land rehabilitation can be generally managed if Chinese National environmental standards and regulatory requirements are met.

The environmental risks associated with the potential for generating contaminated sites and other site closure liabilities can be effectively managed through the adoption of relevant recognised international industry practices.

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12 SOCIAL ASSESSMENT

12.1 Social and Community Interaction

The Zhujiagou Project is located in Songsan District of Chifeng Township, Inner Mongolia. The land use for the general surrounding area is practising predominately agricultural and animal husbandry. Guojin Mining has stated that the population of the surrounding area is mainly Han Chinese and Mongolian that there are no significant local cultural minority groups and that there no significant cultural heritage sites, within or surrounding the Zhujiagou Project site.

No public/community consultation program on the development of the Zhujiagou Project has yet been completed. SRK recommends conducting such a consultation to determine community concerns and how Guojin Mining can address those concerns to the benefit of the community and the project’s smooth development.

Guojin Mining reported, with little previous industry developed in the area, locals felt that the project would be advantageous to the area’s development. Positive effects to the surrounding local communities will be mainly direct employment of local contractors and use of local suppliers/service providers where practical. No records of public complaints in relation to the activities associated with the Zhujiagou Project were sighted as part of this review.

12.2 Relationship with Local Government

The main administrative body for the Zhujiagou Project is the Songsan District of the Chifeng City Township jurisdiction. No non-compliance notices and or other notices of breach of environmental conditions for the Zhujiagou Project have been sighted as part of this review.

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REFERENCES

1. Beijing Exploration Technical Engineering Co, Ltd, Resource Verification Report for Zhujiagou Gold Mine, Honghuagou Project Area, Songshan District, Inner Mongolia Autonomous Region , May, 25, 2009.

2. Safety Production Administration Bureau of Inner Mongolia Autonomous Region, Safety Production Permit , June 16, 2006.

3. Chifeng City Land and Resource Bureau, Mining License of Zhujiagou Gold Mine, Songshan District, Chifeng City , Dec, 2008.

4. Inner Mongolia Autonomous Region Industrial and Commercial Administration Bureau, Business License of Chifeng Guojin Mining Co, Ltd , Feb 9, 2009.

5. Public Security Bureau of Songshan District, Explosive Material Storage Permit , Feb 24, 2009.

6. Public Security Bureau of Songshan District, Explosive Material Use Permit , Feb 24, 2009.

7. Chifeng Lvzhou Soil and Water Conservation Technological Co, Ltd, Soil and Water Conservation Plan for Zhujiagou Gold Mine , Nov, 2008.

8. No. 2 Hydro-geological Engineering and Geological Exploration Bureau of Inner Mongolia Autonomous Region, Geological Hazards and Risks Assessment for Zhujiagou Gold Mine, Honghuagou Project Area, Songshan District, Inner Mongolia Autonomous Region , Oct, 2008.

9. EIA for 30,000tpa Zhujiagou Gold Mine, Honghuagou Project Area, Songshan District, Inner Mongolia Autonomous Region , Dec 24, 2007.

10. Inner Mongolia Yuanbo Engineering and Design Consulting Co, Ltd, Mineral Resource Utilization Plan for Zhujiagou Gold Mine, Honghuagou Project Area, Songshan District, Inner Mongolia Autonomous Region , Oct, 2008.

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ABBREVIATIONS AND GLOSSARY

° degrees % percent Ag The chemical symbol for silver ASL above sea level Au The chemical symbol for gold AusIMM Australasian Institute of Mining and Metallurgy Beijing Corporation Beijing Geology Development Corporation c centimetres C Celsius CIM Canadian Institute of Mining, Metallurgy and Petroleum cm centimetres Cu The chemical symbol for copper E east EW eastwest Fe The chemical symbol for iron China Precious Metal or China Precious Metal Resources Inc the Company g/t grams per tonne HKEx The Stock Exchange of Hong Kong IPO Initial Public Offering JORC Code Australian Joint Ore Reserves Committee code kg/m kilo grams per metre km kilometres km[2] square kilometres Yongfeng Chifeng Kinpeng Mining Limited kV kilovolt kVa kilovolt m metres m[3] /min cubic metres per minute MLR Ministry of Land and Resources mm millimetres Mo The chemical symbol for molybdenum MPa Megapascals m/sec metres per second N north NNE northnorth-east NW northwest Pb The chemical symbol for lead PRC People’s Republic of China RMB Renminbi S south SN southnorth SRK SRK Consulting China t tonnes t/d tonnes per day t/m[3] tonnes per cubic metre tpa tonnes per annum TSX Toronto Stock Exchange V volt W west

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APPENDICES

Appendix I – Mining Licence

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Appendix II – Resource and Reserve Standards

Categorisation of Mineral Resources and Ore Reserves

The system for categorisation of mineral resources and ore reserves in China is in a period of transition which commenced in 1999. The traditional system, which is derived from the former Soviet system, uses five categories based on decreasing levels of geological confidence – Categories A, B, C, D and E. The new system (Rule 66) promulgated by the Ministry of Land and Resources (MLR) in 1999 uses three-dimensional matrices, based on economic, feasibility/mine design and geological degrees of confidence. These are categorised by a three number code of the form “123”. This new system is derived from the UN Framework Classification proposed for international use. All new projects in China must comply with the new system, however, estimates and feasibility studies carried out before 1999 will have used the old system.

Both the new and old systems are quoted in this report, because it is common for Chinese mining assets to be classified based on both systems. Wherever possible, the Chinese Resource and Reserve estimates have been reassigned by SRK to categories similar to those used by the JORC Code to standardize categorisation. Although similar terms have been used, SRK does not mean to imply that in their present format they are necessarily classified as “Mineral Resources” as defined by the Australasian Code for the Reporting of Exploration Results, Mineral Resources and Ore Reserves (the “JORC Code”).

A broad comparison guide between the Chinese classification scheme and the JORC Code is presented in the following table.

	Chinese “Reserve” Category	Chinese “Reserve” Category
JORC Code Resource Category	Previous system	Current system
Measured	A	111, 111b, 121, 121b, 2M11, 2S11, 2M21, 2S21, 331
	B
Indicated	C	122, 122b, 2M22, 2S22, 332
Inferred	D	333
Non-equivalent	E	334

Relationship between JORC Code and the Chinese Reserves System

In China, the methods used to estimate resources and reserves are generally prescribed by the relevant Government authority, and are based on the level of knowledge for that particular geological style of deposit. Parameters and computational methods prescribed by the relevant authority include cut-off grades, minimum thickness of mineralisation, maximum thickness of internal waste, and average minimum “industrial” or “economic” grades required. Resource classification categories are assigned largely on the basis of the spacing of sampling, trenching, underground tunnels and drill holes.

In the pre-1999 system, Category A generally included the highest level of detail possible, such as grade control information. However, the content of each category B, C and D may vary from deposit to deposit in China, and therefore must be carefully reviewed before assigning to an equivalent “JORC Code type” category. The traditional Categories B, C and D are broadly equivalent to the “Measured”, “Indicated”, and “Inferred” categories that are provided by the

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CHI FENG INDEPENDENT TECHNICAL REPORT

APPENDIX II

JORC Code and USBM/USGS systems used widely elsewhere in the world. In the JORC Code system the “Measured Resource” category has the most confidence and the “Inferred” category has the least confidence, based on the increasing levels of geological knowledge and continuity of mineralisation.

In the new Chinese Category Scheme, as shown in the following table, the three numbers refer to economic, feasibility/mine design and geological degrees of confidence.

Definition of the New Chinese Resource Category Scheme

	Definition	of the New Chinese Resource Category Scheme
Category	Denoted	Comments
Economic	1	Full feasibility study considering economic factors has been conducted
	2	Pre-feasibility to scoping study which generally considers economic factors has been conducted
	3	No pre-feasibility or scoping study conducted to consider economic analysis
Feasibility	1	Further analysis of data collected in “2” by an external technical department
	2	More detailed feasibility work including more trenches, tunnels, drilling, detailed mapping, etc.
	3	Preliminary evaluation of feasibility with some mapping and trenches
Geologically controlled	1	Strong geological control
	2	Moderate geological control via closely-spaced data points (e.g. small-scale mapping)
	3	Minor workprojected throughout the area
	4	Review stage

Appendix III: Chinese Environmental Legislative Background

The Chinese National Mineral Resources Law (1996), Rules for Implementation of the Mineral Resources Law of the People’s Republic of China (2006) and Environmental Protection Law (1989) provide the main legislative framework for the regulation and administration of mining projects within China. The Environmental Protection Law (1989) provides the main legislative framework for the regulation and administration of mining projects environmental impacts.

The following articles of the Mineral Resources Law (1996) summarise the specific provisions in relation to environmental protection:

• Article 15 Qualification & Approval

Anyone who wishes to establish a mining enterprise must meet the qualifications prescribed by the State, and the department in charge of examination and approval shall, in accordance with law and relevant State regulations examine the enterprise’s mining area, its mining design or mining plan, production and technological conditions and safety and environmental protection measures . Only those that pass the examination shall be granted approval .

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CHI FENG INDEPENDENT TECHNICAL REPORT

APPENDIX II

• Article 21 Closure Requirements

If a mine is to be closed down, a report must be prepared with information about the mining operations, hidden dangers, land reclamation and utilisation, and environmental protection, and an application for examination and approval must be filed in accordance with relevant State regulations .

•

Article 32 Environmental Protection Obligations of Mining License Holders

In mining mineral resources, a mining enterprise or individual must observe the legal provisions on environmental protection to prevent pollution of the environment . In mining mineral resources, a mining enterprise or individual must economise on the use of land . In case cultivated land, grassland or forest land is damaged due to mining, the mining enterprise concerned shall take measures to utilize the land affected, such as by reclamation, tree and grass planting, as appropriate to the local conditions . Anyone who, in mining mineral resources, causes losses to the production and well-being of other persons shall be liable for compensation and shall adopt necessary remedial measures .

The following articles of the Environmental Protection Law (1989) summarise the specific provisions for environmental protection in relation to mining:

• Article 13 Environmental Protection

Units constructing projects that cause pollution to the environment must observe the state provisions concerning environmental protection for such construction projects . The environmental impact statement on a construction project must assess the pollution the project is likely to produce and its impact on the environment and stipulate the preventive and curative measures; the statement shall, after initial examination by the authorities in charge of the construction project, be submitted by specified procedure to the competent department of environmental protection administration for approval . The department of planning shall not ratify the design plan descriptions of the construction project until after the environmental impact statement on the construction project is approved .

• Article 19 Statement of requirement for Environmental Protection

Measures must be taken to protect the ecological environment while natural resources are

being developed or utilised .

• Article 24 Responsibility for Environmental Protection

Units that cause environmental pollution and other public hazards shall incorporate the work of environmental protection into their plans and establish a responsibility system for environmental protection, and must adopt effective measures to prevent and control the pollution and harms caused to the environment by waste gas, waste water, waste residues, dust, malodorous gases, radioactive substances, noise, vibration and electromagnetic radiation generated in the course of production, construction or other activities .

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APPENDIX II

• Article 26 Pollution Prevention & Control

Installations for the prevention and control of pollution at a construction project must be designed, built and commissioned together with the principal part of the project . No permission shall be given for a construction project to be commissioned or used, until its installations for the prevention and control of pollution are examined and considered up to the standard by the competent department of environmental protection administration that examined and approved the environmental impact statement .

•

Article 27 Report on Pollution Discharge

Enterprises and institutions discharging pollutants must report to and register with the relevant authorities in accordance with the provisions of the competent department of environmental protection administration under the State Council .

•

Article 38 Violation Consequences

An enterprise or institution which violates this Law, thereby causing an environmental pollution accident, shall be fined by the competent department of environmental protection administration or another department invested by law with power to conduct environmental supervision and management in accordance with the consequent damage; in a serious case, the persons responsible shall be subject to administrative sanction by the unit to which they belong or by the competent department of the government .

The following articles of the Construction Project Environmental Protection Law (1998) and Regulations on the Administration of Construction Project Environmental Protection (November 1998) summarise the specific provisions for undertaking a project’s Final Checking and Acceptance process:

• Article 20 – The construction unit should, upon completion of a construction project, file an application with the competent department of environmental protection administration that examined and approved the said construction project environmental impact report, environmental impact statement or environmental impact registration form for acceptance checks on completion of matching construction of environmental protection facilities required for the said construction project .

Acceptance checks for completion of construction of environmental protection facilities should be conducted simultaneously with the acceptance checks for completion of construction of the main body project . Where trial production is required for the construction project, the construction unit should, within 3 months starting from the date of the said construction project going into trial production, file an application with the competent department of environmental protection administration that examined and approved the said construction project environmental impact report, environmental impact statement or environmental impact registration form for acceptance checks on completion of matching construction of environmental protection facilities required for the said construction project .

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APPENDIX II

CHI FENG INDEPENDENT TECHNICAL REPORT

• Article 21 – For construction projects that are built in phases, go into production or are delivered for use in phases, acceptance checks for their corresponding environmental protection facilities should be conducted in phases .

• Article 22 – Competent departments of environmental protection administration should, within 30 days starting from the date of receipt of the application for acceptance checks on completion of construction of the environmental protection facilities, complete the acceptance checks .

• Article 23 – The said construction project may only formally go into production or be delivered for use when the matching construction of the environmental protection facilities required for the construction project has passed acceptance checks .

The following article of the Water & Soil Conservancy Law (1991) summarises the provisions for the preparation and approval of Water and Soil Conservation Plans:

• Article 19 – When the construction of a railway, highway or a water project is carried out, a mining or electrical power enterprise or any other large or medium-sized industria1; enterprise is established in a mountainous, hilly or sandstorm area, the environmental impact statement for the project must include a water and soil conservation programme approved by the department of water administration . The water and soil conservation programme shall be drawn up in accordance with the provisions of Article 18 of this Law .

Where a township col1ective mining enterprise is to be set up or an individua1 is to apply for mining, in accordance with the provisions of the Law on Mineral Resources, in a mountainous, hilly or sandstorm area, a water and soil conservation programme approved by the department of water administration under the people’s government at or above the county level must be submitted before the app1ication for going through the approving procedures for mining operation is made .

Water and soil conservation facilities in a construction project must be designed, constructed and put into operation simultaneously with the principal part of the project . When a construction project is completed and checked for acceptance, the water and soi1 conservation facilities shal1 be checked for acceptance at the same time, with personnel from the department of water administration participating .

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APPENDIX II CHI FENG INDEPENDENT TECHNICAL REPORT

The following are other Chinese laws that provide environmental legislative support to the Minerals Resources Law (1996) and the Environmental Protection Law (1989) :

Environmental Impact Assessment (EIA) Law (2002) .

Law on Prevention & Control of Atmospheric Pollution (2000) .

Law on Prevention & Control of Noise Pollution (1996) .

Law on Prevention & Control of Water Pollution (1996) .

Law on Prevention & Control Environmental Pollution by Solid Waste (2002) .

Forestry Law (1998) .

Water Law (1988) .

Water Conservancy Industrial Policy (1997) .

Land Administration Law (1999) .

Protection of Wildlife Law (1989) .

Energy Conservation Law (1998) .

Electric Power Law (1995) .

Management Regulations of Prevention & Cure of Tailings Pollution (1992) .

Management Regulations of Dangerous Chemical Materials (1987) .

The relevant environmental protection related Chinese legislation that are required to be utilised for project’s design are a combination of the following National design regulations and emissions standards:

Environment Protection Design Regulations of Construction Project (No . 002) by Environment Protection Committee of State Council of PRC (1987) .

Regulations on the Administration of Construction Project Environmental Protection (1998) .

Regulations for Quality Control of Construction Projects (2000) .

Regulations for Environmental Monitoring (1983) .

Regulations on Nature Reserves (1994) .

Regulations on Administration of Chemicals Subject to Supervision & Control (1995) .

Regulations on Management of Chemicals Subject to Supervision & Control (1995) .

Environment Protection Design Regulations of Metallurgical Industry (YB9066-55) .

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CHI FENG INDEPENDENT TECHNICAL REPORT

APPENDIX II

Comprehensive Emission Standard of Wastewater (GB8978-1996) .

Environmental Quality Standard for Surface Water (GB3838-1988) .

Environmental Quality Standard for Groundwater (GB/T14848-1993) .

Ambient Air Quality Standard (GB3095-1996) .

Comprehensive Emission Standard of Atmospheric Pollutants (GB16297-1996) .

Emission Standard of Atmospheric Pollutants from Industrial Kiln (GB9078-1996) .

Emission Standard of Atmospheric Pollutants from Boiler (GB13271-2001) – II – stage coalfired boiler .

Environmental Quality Standard for Soils (GB15618-1995) .

Standard of Boundary Noise of Industrial Enterprise (GB12348-90) .

Emissions Standard for Pollution from Heavy Industry; Non-Ferrous Metals (GB4913-1985) .

Control Standard on PCB’s for Wastes (GB13015-1991) .

Control Standard on Cyanide for Waste Slugs (GB12502-1990) .

Standard for Pollution Control on Hazardous Waste Storage (GB18597-2001) .

Identification Standard for Hazardous Wastes-Identification for Extraction Procedure Toxicity (GB5085 .3-1996) .

Standard of Landfill and Pollution Control of Hazardous Waste (GB 18598-2001) .

Appendix IV: World Bank/International Finance Corporation (IFC) Environmental Standards and Guidelines

In seeking to obtain project financing or to list on a stock exchange, these institutions themselves require the proponent to comply with such documents as the Equator Principles and the IFC Performance Standards and Guidelines. This is exemplified by the following preamble from the Equator Principles (July 2006):

Project financing, a method of Funging in which the lender looks primarily to the revenues generated by a single project both as the source of repayment and as security for the exposure, plays an important role in financing development throughout the world . Project financiers may encounter social and environmental issues that are both complex and challenging, particularly with respect to projects in the emerging markets .

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CHI FENG INDEPENDENT TECHNICAL REPORT

APPENDIX II

The Equator Principles Financial Institutions (EPFIs) have consequently adopted these Principles in order to ensure that the projects we finance are developed in a manner that is socially responsible and reflect sound environmental management practices . By doing so, negative impacts on project- affected ecosystems and communities should be avoided where possible, and if these impacts are unavoidable, they should be reduced, mitigated and/or compensated for appropriately . We believe that adoption of and adherence to these Principles offers significant benefits to ourselves, our borrowers and local stakeholders through our borrowers’ engagement with locally affected communities . We therefore recognise that our role as financiers affords us opportunities to promote responsible environmental stewardship and socially responsible development . As such, EPFIs will consider reviewing these Principles from time-to-time based on implementation experience, and in order to reflect ongoing learning and emerging good practice .

These Principles are intended to serve as a common baseline and framework for the implementation by each EPFI of its own internal social and environmental policies, procedures and standards related to its project financing activities . We will not provide loans to projects where the borrower will not or is unable to comply with our respective social and environmental policies and procedures that implement the Equator Principles .

The following appendix Table 1 and appendix Table 2 provide a brief summary of the Equator Principles and IFC performance standards respectively. These documents are used by the EPFI’s and stock exchanges in their review of social and environmental performance of proponent companies.

Appendix Table 1: Equator Principles

Equator Principles	Title	Key Aspects (Summary)
1	Review and Categorisation	Categorise such projects based on the magnitude of its potential impacts and risks.
2	Social and Environmental Assessment	Conduct a Social and Environmental Assessment (“Assessment”). The Assessment should also propose mitigation and management measures appropriate to the nature and scale of theproposedproject.
3	Applicable Social and Environmental Standards	The Assessment will refer to the applicable IFC Performance Standards, and applicable Industry Specific EHS Guidelines (“EHS Guidelines”) and overall compliance with same.
4	Action Plan and Management System	Prepare an Action Plan (AP) which addresses relevant findings of the Assessment. The AP will describe and prioritise actions, mitigation measures, corrective actions and monitoring to manage impacts and risks identified in the Assessment. Maintain a Social and Environmental Management System that addresses management of these impacts, risks, and corrective actions required to comply with host country laws and regulations, and requirements of the applicable Standards and Guidelines, as defined in the AP.
5	Consultation and Disclosure	Consult with project affected communities. Adequately incorporate affected communities’ concerns.

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CHI FENG INDEPENDENT TECHNICAL REPORT

APPENDIX II

Equator Principles	Title	Key Aspects (Summary)	Key Aspects (Summary)
6	Grievance Mechanism	Establish a grievance mechanism as part of the management system to receive and resolve concerns about the project by individuals or groups from among project-affected communities. Inform affected communities about the grievance mechanism in the course of the community engagement process and ensure that the mechanism addresses concerns promptly and transparently, and is readily accessible to all segments of the affected communities.
7	Independent Review	Independent social or environmental expert will review the Assessment, AP and consultation process to assess Equator Principles compliance.
8	Covenants	Covenant in financingdocumentation:
		(a)	to comply with all relevant host country social and environmental laws, regulations andpermits;
		(b)	to comply with the AP during the construction and operation of theproject;
		(c)	to provide periodic reports not less than annually, prepared by in-house staff or third party experts, that (i) document compliance with the AP, and (ii) provide compliance with relevant local, state and host country social and environmental laws, regulations andpermits; and
		(d)	decommission facilities, where applicable and appropriate, in accordance with an agreed decommissioning plan.
9	Independent Monitoring and Reporting	Appoint an independent environmental and/or social expert, or require that the borrower retain qualified and experienced external experts to verifyits monitoringinformation.
10	EPFI Reporting	Each EPFI adopting the Equator Principles commits to report publicly at least annually about its Equator Principles implementation processes and experience, taking into account appropriate confidentiality considerations.

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APPENDIX II

Appendix Table 2: IFC Performance Standards

IFC Performance Standard	Title	Objective (Summary)	Key Aspects (Summary)
1	Social and Environmental Assessment and Management Systems	Social and EIA and improved performance through use of management systems.	Social & Environmental Management System (S&EMS). Social & Environmental Impact Assessment (S&EIA). Risks and impacts. Management Plans. Monitoring. Reporting. Training. Community Consultation.
2	Labour and Working Conditions	EEO. Safety and health.	Implement through the S&EMS. HR policy. Working conditions. EEO. Forced and child labour. OH&S.
3	Pollution Prevention and Abatement	Avoid pollution. Reduce emissions.	Prevent pollution. Conserve resources. Energy efficiency. Reduce waste. Hazardous materials. EPR. Greenhouse.
4	Community Health, Safety and Security	Avoid or minimise risks to community.	Implement through the S&EMS. Do risk assessment. Hazardous materials safety. Community exposure. ERP.
5	Land Acquisition and Involuntary Resettlement	Avoid or minimise resettlement. Mitigate adverse social impacts.	Implement through the S&EMS. Consultation. Compensation. Resettlement planning. Economic displacement.
6	Biodiversity Conservation and Sustainable Natural Resource Management	Protect and conserve biodiversity.	Implement through the S&EMS. Assessment. Habitat. Protected areas. Invasive species.
7	Indigenous Peoples	Respect. Avoid and minimise impacts. Foster good faith.	Avoid adverse impacts. Consultation. Development benefits. Impacts to traditional land use. Relocation.
8	Cultural Heritage	Protect cultural heritage.	Heritage survey. Site avoidances. Consultation.

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GENERAL INFORMATION

APPENDIX III

1. RESPONSIBILITY STATEMENT

This circular includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the Company. The Directors collectively and individually accept full responsibility for the accuracy of the information contained in this circular and confirm, having made all reasonable enquiries, that to the best of their knowledge and belief there are no other facts the omission of which would make any statement herein misleading.

2. SHARE CAPITAL

As at the Latest Practicable Date, the authorised and issued share capital of the Company were as follows:

Authorised: HK$ 2,000,000,000 ordinary share(s) of HK$0.01 each 20,000,000.00

Issued and fully paid or credited as fully paid: 957,750,051 ordinary share(s) of HK$0.01 each 9,577,500.51

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APPENDIX III

3. INTERESTS OF DIRECTORS AND CHIEF EXECUTIVES OF THE COMPANY

As at the Latest Practicable Date, the interests and short positions of the Directors and the chief executives of the Company in the Shares, underlying Shares and debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) which (a) were required to be notified to the Company and the Stock Exchange pursuant to the provisions of Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which they were taken or deemed to have under such provisions of the SFO), or (b) were required, pursuant to section 352 of the SFO, to be entered in the register required to be kept by the Company, or (c) were required, pursuant to the Model Code as set out in Appendix 10 to the Listing Rules adopted by the Company, to be notified to the Company and the Stock Exchange, were as follows:

	Company/
	Associated	Number of	Percentage
Name of Director	corporation	Shares held	of interest
Mr. Wong Chi Ming, Jeffry	Equity Base	416,000,000	44.56%
	Holdings Limited

Save as disclosed above, as at the Latest Practicable Date, none of the Directors or the chief executives of the Company had any interests or short positions in the Shares, underlying Shares or debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) which (a) were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO, or (b) were required, pursuant to section 352 of the SFO, to be entered in the register required to be kept by the Company, or (c) were required, pursuant to the Model Code adopted by the Company, to be notified to the Company and the Stock Exchange.

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GENERAL INFORMATION

APPENDIX III

4. INTERESTS OF THE SUBSTANTIAL SHAREHOLDERS

As at the Latest Practicable Date, so far as it is known to the Directors, the persons (other than the Directors or chief executive of the Company) with interests or short positions in the Shares or underlying Shares which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO or which would be recorded in the register of the Company required to be kept under section 336 of the SFO or who are 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 member of the Group were as follows:

Long position in Shares:

Percentage Name Number of Shares held of interest Equity Base Holdings 426,732,714 44.56% Limited

5. CLAIMS AND LITIGATIONS

As at the Latest Practicable Date, no member of the Group was engaged in any litigation or arbitration of material importance and no litigation or claim of material importance was known to the Directors to be pending or threatened against any member of the Group.

6. SERVICE CONTRACTS

As at the Latest Practicable Date, other than service contracts which will expire or may be terminated within one year without payment of compensation (other than statutory compensation), none of the Directors had any service contract with any member of the Group.

7. COMPETING INTERESTS

None of the Directors or their respective associates had any interest in a business which competes or may compete with the business of the Group as at the Latest Practicable Date.

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GENERAL INFORMATION

APPENDIX III

8. QUALIFICATION OF EXPERTS AND CONSENTS

(a) The Technical Adviser

The Company has engaged the Technical Adviser to carry out exploration work on Chi Zhou Mines and the Chi Feng Mine and prepare the Chi Zhou Independent Technical Report and the Chi Feng Independent Technical Report which are set out in Appendix I and Appendix II, respectively, to this circular. Information of the Technical Adviser is as follows:

Full name

SRK Consulting China Limited

Address

B1205, COFCO Plaza, 8 Jianguomennei Dajie, Dongcheng District, Beijing 100005, the PRC

Professional qualification and relevant experience

The following information in relation to the experience and expertise of the Technical Adviser is extracted from the Chi Zhou Independent Technical Report and the Chi Feng Independent Technical Report:

“ SRK Experience

SRK Consulting is an independent, international consulting group with extensive experience in preparing independent technical reports for various stock exchanges around the world (see www.srk.com for a review). SRK is a one-stop consultancy offering specialist services to mining and exploration companies for the entire life cycle of a mining project, from exploration through to mine closure. Among SRK’s more than 1,500 clients are most of the world’s major and medium-sized metal and industrial mineral mining houses, exploration companies, banks, petroleum exploration companies, agribusiness companies, construction firms and government departments.

Formed in Johannesburg, South Africa, in 1974 SRK now employs more than 900 professionals internationally in 35 permanent offices on six continents. A broad range of internationally recognized associate consultants complements the core staff.

SRK Consulting employs leading specialists in each field of science and engineering. Its seamless integration of services, and global base, has made the company a world’s leading practice in due diligence, feasibility studies and confidential internal reviews.

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GENERAL INFORMATION

APPENDIX III

The SRK Group’s independence is ensured by the fact that it holds no equity in any project and that its ownership rests solely with its staff. This permits the SRK Group to provide its clients with conflict-free and objective recommendations on crucial judgement issues. SRK China was established in early 2005, and is mainly working on Chinese mining projects independently or together with SRK’s other offices, mainly SRK Australasia (see www.srk.cn and www.srk.com.au for a review). We have prepared dozens of independent technical reports on mining projects for various companies who acquired Chinese projects or went public listings on overseas stock exchanges with a summary list.

Company	Year	Nature of Transaction
Yanzhou Coal Limited	2000	Sale of Jining III coal mine by parent
(company listed on the		company to the listed operating
Stock Exchange of Hong		company
Kong Limited)
Chalco (Aluminium	2001	Listing on the Stock Exchange of
Corporation of China)		Hong Kong Limited and New York
		Stock Exchange
Fujian Zijin Gold Mining	2004	Listing on the Stock Exchange of
Company		Hong Kong Limited
Lingbao Gold Limited	2005	Listing on the Stock Exchange of
		Hong Kong Limited
Yue Da Holdings Limited	2006	Proposed acquisition of shareholding
(company listed on the		in mining projects in PRC
Stock Exchange of Hong
Kong Limited)
China Coal Energy Company	2006	Listing on the Stock Exchange of
Limited (China Coal)		Hong Kong Limited
Sino Gold Mining Limited	2007	Dual listing on the Stock Exchange of
		Hong Kong Limited
Xinjiang Xinxin Mining	2007	Listing on the Stock Exchange of
Industry Company Limited		Hong Kong Limited
Espco Technology Holdings	2008	A acquisition of shareholding in
Limited		Tongguan Taizhou Gold-Lead
		projects in PRC

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GENERAL INFORMATION

APPENDIX III

Company	Year	Nature of Transaction
Hong Kong Nation Resources	2008	Proposed acquisition of shareholding
Limited		in iron projects Chengde, PRC
Kiu Hung International	2008	A acquisition of shareholding in coal
Holdings Limited		projects in Inner Mongolia, PRC
China Shenzhou Mining and	2008	Listing (SHZ) on the American Stock
Resources Inc		Exchange”

The Technical Adviser has given and has not withdrawn its written consent to the issue of this circular with inclusion of its statement, letter and references to its name included herein in the form and context in which it appears.

The Technical Adviser is independent to the Company and is not legally or beneficially interested in any Shares in the share capital of the Company.

The Technical Adviser is not interested in any assets which have been within the two years immediately preceding the publication of this circular acquired or disposed of by or leased to the Company or any of its subsidiaries.

(b) Other experts

The following are the qualification of other experts who have given opinion or advice which are contained in this circular:

Jun Ze Jun Law Offices Legal adviser to the Company as to PRC law King and Wood Legal adviser to the Company as to PRC law (for Technical adviser identification purpose only, in English, An Hui Provincial Institute of Exploration and Technology)

Each of the above experts has given and has not withdrawn its written consent to the issue of this circular with the inclusion of its report and/or letter and/or the references to its name included herein in the form and context in which they are respectively include.

9. INTERESTS OF THE DIRECTORS IN ASSET AND CONTRACT

None of the Directors is materially interested in any contract or arrangement entered into by any member of the Group subsisting at the Latest Practicable Date which is significant in relation to the business of the Group.

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GENERAL INFORMATION

APPENDIX III

As at the Latest Practicable Date, each of the Directors had no direct or indirect interest in any asset which had been acquired or disposed of by or leased to any member of the Group, or was proposed to be acquired or disposed of by or leased to any member of the Group since 30 September 2009, being the date to which the latest published audited financial statements of the Group were made up.

10. MATERIAL ADVERSE CHANGE

The Directors are not aware of any material adverse change in the financial or trading position of the Group since 30 September 2009, being the date of which the latest published audited financial statements of the Group were made up.

11. MISCELLANEOUS

• (a) The Company’s company secretary is Mr. Lau Chun Pong. Mr. Lau is also the financial controller of the Group. Mr. Lau joined the Group in June 2008 and is responsible for the financial and accounting matters of the Group. He is an associate member of the Hong Kong Institute of Certified Public Accountants and American Institute of Certified Public Accountants. He has over 10 years of experience in the field of finance, accounting and auditing.

• (b) The Hong Kong branch share registrar and transfer office of the Company is Tricor Tengis Limited at 26th Floor, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong.

• (c) This circular has been prepared in both English and Chinese. In the case of any discrepancy, the English text shall prevail.

12. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be available for inspection at the head office of the Company at Room 1825, 18th Floor, Hutchison House, 10 Harcourt Road, Central, Hong Kong during normal business hours up to and including the date which is 14 days from the date of this circular:

• (a) the Chi Zhou Share Purchase Agreement;

• (b) the Chi Feng Share Purchase Agreement;

• (c) the Chi Zhou Independent Technical Report;

• (d) the Chi Feng Independent Technical Report;

• (e) the technical report issued by An Hui Provincial Institute of Exploration and Technology in respect of the Chi Zhou Mines;

• (f) the technical reports issued by two PRC technical advisers engaged by Prime Fortune in respect of the Chi Feng Mine;

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GENERAL INFORMATION

APPENDIX III

• (g) the due diligence report issued by Jun Ze Jun Law Offices; and

• (h) the due diligence report issued by King and Wood.

– 174 –

NOTICE OF EGM

==> picture [70 x 39] intentionally omitted <==

MING FUNG JEWELLERY GROUP LIMITED

*

(Incorporated in the Cayman Islands with limited liability)

(Stock code: 860)

NOTICE IS HEREBY GIVEN THAT an extraordinary general meeting (the “ Meeting ”) of Ming Fung Jewellery Group Limited (the “ Company ”) will be held at Room 1825, 18th Floor, Hutchison House, 10 Harcourt Road, Central, Hong Kong on Monday, 8 February 2010 at 2:30 p.m. for the purposes of consideration and, if thought fit, passing, with or without modification, the following resolution as ordinary resolution of the Company:

ORDINARY RESOLUTION

“ THAT :

• (a) the allotment and issue of 100,000,000 shares (the “ Chi Zhou Consideration Shares ”) at the issue price of HK$0.80 each to Pretty Sweet Limited (or its nominee(s)) pursuant to the share purchase agreement (the “ Chi Zhou Share Purchase Agreement ”) dated 10 June 2009 entered into between Trismart Group Limited, a wholly-owned subsidiary of the Company, as purchaser, Pretty Sweet Limited as vendor and Ms. Tang Wai Ha Phoebe as guarantor (a copy of which has been produced to the Meeting, signed by the chairman of the Meeting for the purposes of identification), be and the same is hereby approved;

• (b) any one director of the Company (each a “ Director ”) be and is hereby generally and unconditionally authorised in the best interests of the Company to do such act, including without limitation, the issue and allotment of the Chi Zhou Consideration Shares, and execute all such documents for and on behalf of the Company by hand, or in case of execution of documents under seal, to do so jointly with any of a second Director, a duly authorized representative of the Directors or the secretary of the Company as he/they shall consider necessary, appropriate, desirable or expedient in relation to the issue and allotment of the Chi Zhou Consideration Shares;

• (c) the issue of convertible notes in the total principal amount of HK$190,000,000 (the “ Chi Feng Convertible Notes ”) as the consideration under the share purchase agreement (the “ Chi Feng Share Purchase Agreement ”) dated 20 August 2009 entered into between Bright Ever Holdings Limited, a wholly-owned subsidiary of the Company, as purchaser and Prime Fortune Company Limited as vendor (a copy of which has been produced to the Meeting, signed by the chairman of the Meeting for the purposes of identification) be and the same is hereby approved;

• for identification purpose only

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NOTICE OF EGM

• (d) the allotment and issue of 211,111,111 shares (the “ Chi Feng Conversion Shares ”) at the issue price of HK$0.90 each to Prime Fortune Company Limited (or its nominee(s)) upon exercise of the conversion right of the Chi Feng Convertible Notes pursuant to the Chi Feng Share Purchase Agreement be and the same is hereby approved; and

• (e) any one Director be and is hereby generally and unconditionally authorised in the best interests of the Company to do such act, including without limitation, the issue of the Chi Feng Convertible Notes and the issue and allotment of the Chi Feng Conversion Shares, and execute all such documents for and on behalf of the Company by hand, or in case of execution of documents under seal, to do so jointly with any of a second Director, a duly authorized representative of the Directors or the secretary of the Company as he/they shall consider necessary, appropriate, desirable or expedient in relation to the issue of the Chi Feng Convertible Notes and issue and allotment of the Chi Feng Conversion Shares.”

By order of the Board Ming Fung Jewellery Group Limited Wong Chi Ming, Jeffry Executive Director and Chairman

Hong Kong, 21 January 2010

Registered Office: Head office and principal place of Cricket Square business in Hong Kong: Hutchins Drive, P.O. Box 2681 Room 1825, 18th Floor Grand Cayman, KY1-1111 Hutchison House Cayman Islands 10 Harcourt Road, Central Hong Kong

Notes:

1. A member of the Company entitled to attend and vote a the Meeting is entitled to appoint one or more proxies, if holding two or more shares, to attend and to vote in his stead. A proxy need not be a member of the Company.

2. Where there are joint registered holders of any share, any one such persons may vote at the Meeting, either personally or by proxy, in respect of such share as if he were solely entitled thereto; but if more than one of such joint holders be present at the Meeting personally or by proxy, that one of the said persons so present whose name stands first on the register of members of the Company in respect of such shares shall alone be entitled to vote in respect thereof.

3. In order to be valid, the form of proxy duly completed and signed in accordance with the instructions printed thereon must be deposited with the Company’s branch share registrar in Hong Kong, Tricor Tengis Limited at 26th Floor, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong together with the power of attorney or other authority, if any, under which it is signed, or a certified copy of that power of authority, not less than 48 hours before the time appointed for holding the Meeting or any adjournment thereof.

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