AUKING MINING LIMITED - Proxy Solicitation & Information Statement 2011

Chinalco Yunnan Copper Resources Limited

ACN 070 859 522

Notice of Extraordinary General Meeting and Explanatory Memorandum

Date of Meeting: Friday 21 October 2011 Time of Meeting: 10:00am (Brisbane time) Place of Meeting: HopgoodGanim Lawyers Presentation Room Level 7, Waterfront Place, 1 Eagle Street, Brisbane QLD 4000 Australia

This Notice of Extraordinary General Meeting should be read in its entirety. If Shareholders are in doubt as to how they should vote, they should seek advice from their accountant, solicitor or other professional adviser prior to voting.

Notice of Extraordinary General Meeting and Explanatory Memorandum

Notice is given that an Extraordinary General Meeting of shareholders of Chinalco Yunnan Copper Resources Limited ACN 070 859 522 ( Chinalco Yunnan or Company ) will be held at the offices of HopgoodGanim Lawyers on Friday 21 October 2011 (Brisbane time).

Agenda

Ordinary business

Resolution 1 - Approval of Acquisition of 51% Equity Interest in Yunnan Copper San Mu Mining Industry Co Ltd

To consider and, if thought fit, pass the following Ordinary Resolution, without amendment:

“That in accordance with ASX Listing Rule 10.1 and for all other purposes, the Company be authorised to acquire a 51% equity interest in Yunnan Copper San Mu Mining Industry Co Ltd and otherwise on the terms and conditions described in the Explanatory Memorandum.”

Voting exclusion statement

The Company will disregard any votes cast on this Resolution by:

Yunnan Copper San Mu Mining Industry Co Ltd; and
Yunnan Copper Industry (Group) Co Ltd; and
Yunnan Copper Mineral Resources Exploration and Development Co Ltd; and
any associate of the above parties.

However, the Company need not disregard a vote if:

it is cast by a person as proxy for a person who is entitled to vote, in accordance with the directions on the proxy form; or
it is cast by the person chairing the Meeting as proxy for a person who is entitled to vote, in accordance with the direction on the proxy form to vote as the proxy decides.

Resolution 2 - Approval of Disposal of 55% Interest in Cloncurry North and Waterford Projects

To consider and, if thought fit, pass the following Ordinary Resolution, without amendment:

“That in accordance with ASX Listing Rule 10.1 and for all other purposes, the Company be authorised to dispose of a 55% interest in the Cloncurry North and Waterford Projects and otherwise on the terms and conditions described in the Explanatory Memorandum.”

Voting exclusion statement

The Company will disregard any votes cast on this Resolution by:

Yunnan Copper Mineral Resources Exploration and Development Co. Ltd; and
any associate of Yunnan Copper Mineral Resources Exploration and Development Co. Ltd.

However, the Company need not disregard a vote if:

it is cast by a person as proxy for a person who is entitled to vote, in accordance with the directions on the proxy form; or
it is cast by the person chairing the Meeting as proxy for a person who is entitled to vote, in accordance with the direction on the proxy form to vote as the proxy decides.

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Notice of Extraordinary General Meeting and Explanatory Memorandum

General business

To consider any other business as may be lawfully put forward in accordance with the Constitution of the Company.

BY ORDER OF THE BOARD

Paul Marshall Company Secretary 21 September 2011

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Notice of Extraordinary General Meeting and Explanatory Memorandum

1. Introduction

This Explanatory Memorandum is provided to shareholders of Chinalco Yunnan Copper Resources Limited ACN 070 859 522 ( Company ) to explain the resolutions to be put to Shareholders at the Extraordinary General Meeting to be held at the offices of HopgoodGanim Lawyers on Friday 21 October 2011 (Brisbane time).).

The Directors recommend Shareholders read the accompanying Notice of Meeting and this Explanatory Memorandum in full before making any decision in relation to the resolutions.

Terms used in this Explanatory Memorandum are defined in Section 2.

ORDINARY RESOLUTIONS

Resolution 1 - Approval of Acquisition of 51% Equity Interest in Yunnan Copper San Mu Mining Industry Co Ltd

Introduction

Resolution 1 seeks Shareholder approval for the proposed acquisition by the Company of a 51% equity interest in Yunnan Copper San Mu Mining Industry Co Ltd.

As announced to Shareholders and the market on 3 February 2011, the Company has entered into an agreement with Yunnan Copper Industry (Group) Co Ltd ( YCI ) to acquire a 51% equity interest in Yunnan Copper San Mu Mining Industry Co Ltd ( San Mu ), a Chinese registered company holding subsidiaries that own near-development copper silver projects in Northern Laos ( Proposed Acquisition ).

A summary of the terms of the Proposed Acquisition is set out below. Further details of the transaction are set out in the Independent Expert’s Report accompanying this Notice and Explanatory Memorandum.

Background

Yunnan Copper Industry (Group) Co Ltd ( YCI ) and Yunnan Copper Mineral Resources Exploration and Development Co Ltd ( YEX ) hold 85% and 15% in San Mu respectively. YEX is a wholly owned subsidiary of YCI. YCI is the holding company of China Yunnan Copper (Australia) Investment and Development Co. Ltd ( CYC ) and CYC holds approximately 21.25% of shares in the Company.

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The diagram below summarises the corporate structure and relationships between the entities before the
Proposed Acquisition: Figure 1: Corporate structure before the Proposed Acquisition
YCI
Yunnan Copper Industry (Group) Co Ltd
Holds 85% Holds 100% Holds 83.33%
YEX CYC
Yunnan Copper Mineral Resources China Yunnan Copper (Australia)
Exploration & Development Co Investment and Development Co Ltd
Holds 15% Holds 21.25%
San Mu Company
Yunnan Copper San Mu Mining Industry Chinalco Yunnan Copper Resources Ltd
Co Ltd
Holds 100% (Laos) Yunnan Copper
Industry (GROUP)
Oudomxay Mining Sloe
CO.LTD
• Jiuzhai Project
• Nadao Project
• Modeng Project
(Laos) Yunnan Copper
Industry (GROUP)
Phongsaiy Mining Sloe
CO.LTD
• Xinzhai Project
----- End of picture text -----

Note: The above diagram excludes assets that are not directly affected by the Proposed Acquisition.

Summary of Terms of Proposed Acquisition

The Company intends to acquire a 51% equity interest in San Mu in consideration for the payment to San Mu of the AU$ equivalent of RMB17,827,700, payable in cash in three stages over the 12 months following final approvals for the transaction.

The investment in San Mu is by way of a subscription of new shares and the invested funds will be used to complete an approximate AU$2.8 million exploration program. Consequently, YCI and YEX’s shareholdings will be diluted due to the issue of new shares to the Company.

Pursuant to the Proposed Acquisition, San Mu's legal status will be modified to become a Chineseforeign joint venture in accordance with the San Mu Joint Venture Contract.

The Proposed Acquisition is governed by three key documents, being:

the Articles of Association of San Mu ( Articles of Association );
the Agreement on Capital Increase between YCI, YEX, San Mu and the Company dated 28 January 2011 ( Capital Increase Agreement ); and
the San Mu Joint Venture Contract between YCI, YEX and the Company dated 28 January 2011 ( San Mu Joint Venture Contract ).

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Notice of Extraordinary General Meeting and Explanatory Memorandum

Below is a summary of the key terms of the Proposed Acquisition under the documents:

San Mu's legal status will be modified to become a Chinese-foreign joint venture in accordance with the San Mu Joint Venture Contract. San Mu will be issued a new business license ( San Mu Business License );
San Mu will operate for a period of 20 years from the issue of the San Mu Business License;
the registered capital of San Mu shall be increased by RMB17,827,700 (i.e. by Chinalco Yunnan's cash contribution), bringing the total registered capital of San Mu to RMB37,827,700;
the increase in registered capital shall be contributed by Chinalco Yunnan, payable in cash. The cash payment shall be the AU$ equivalent of RMB17,827,700. The exchange rate of RMB for AU$ is to be based on the buying rate of the Bank of China on the actual day of the cash contribution;
Chinalco Yunnan's cash contribution will be made in three instalments as follows:
RMB6,000,000 of increased registered capital shall be paid on the Contribution Date (defined as the first contribution to the increased capital by the Company);
RMB6,000,000 of increased registered capital shall be paid within 180 days after the issue of the San Mu Business Licence;
RMB5,800,000 of increased registered capital shall be paid within 360 days after the issue of the San Mu Business Licence;
The final San Mu shareholding after the third and final payment of increased capital by Chinalco Yunnan is set out as follows:
YCI - registered capital contribution of RMB17,000,000 - 41.65%;
YEX - registered capital contribution of RMB3,000,000 - 7.35%; and
Chinalco Yunnan - registered capital contribution of RMB17,827,700 - 51%.
Once Chinalco Yunnan has paid its registered contribution in full, there is no requirement to provide any further funds to or on behalf of San Mu;
Chinalco Yunnan shall appoint three directors (out of a total of five) to San Mu's board of directors;
After the issue of the San Mu Business License, disputes against San Mu relating to preexisting debts (i.e. debts existing prior to the Company's contribution and becoming a shareholder in San Mu) will be dealt with and costs covered in full by YCI and YEX;
The Articles of Association, Capital Increase Agreement and San Mu Joint Venture Contract are silent on any operational targets that are to be achieved after the implementation of the Proposed Acquisition. However, the San Mu Joint Venture Contract provides that San Mu’s purpose shall be to establish an independent legal entity capable of exploring and developing mineral resources and obtaining mining rights in China and neighbouring countries in order to meet increasing demand for minerals, realise economic benefits and produce a return on investment. San Mu’s scope of business includes mining exploration, the sale of minerals and technical services for the mining industry; and
The Proposed Acquisition is subject to government approvals in Australia and China.

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Notice of Extraordinary General Meeting and Explanatory Memorandum

Rationale for the Proposed Acquisition

The Proposed Acquisition will provide the Company with the opportunity to gain a controlling interest in San Mu and the Laos Projects. An overview of the Laos Projects is set out in the Independent Expert’s Report accompanying this Notice and Explanatory Memorandum. The Directors have stated that of the Laos Projects, the Xinzhai Project represents a good opportunity for the Company (via San Mu) to realise revenues in the near term. While the Xinzhai Project mineral body is not JORC-compliant, the Company's investment in San Mu would allow a drilling program to be completed with a view to bringing the mineral body to a JORC-compliant status.

Chinalco Yunnan has the potential to gain synergies and infrastructure benefits by operating in a lowcost environment within Laos, utilising the Company's technical expertise and being in close proximity to a processing facility owned by YCI, situated 20 kilometres north of the Laos/Chinese border.

Corporate Structure following Proposed Acquisition

The diagram below summarises the resulting effect on the corporate structure and relationships between the entities following the Proposed Acquisition:

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Figure 2: Corporate structure following the Proposed Acquisition
Holds
YEX 100% YCI Company
Yunnan Copper Mineral Yunnan Copper Industry Chinalco Yunnan Copper
Resources Exploration & (Group) Co Ltd Resources Ltd
Development Co
Will hold Will hold 41.65% Will hold
7.35% 51%, via the
subscription
San Mu of new
Yunnan Copper San Mu Mining shares
Industry Co. Ltd
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Note: San Mu will still hold 100% equity interest in its two respective subsidiaries. The above diagram excludes other assets that are not directly affected by the Proposed Acquisition.

Regulatory Requirements

ASX Listing Rule 10.1

ASX Listing Rule 10.1 provides that a company must ensure that neither it, nor any of its subsidiaries, acquires a substantial asset from, or disposes of a substantial asset to, any of the following persons without shareholders' prior approval:

(a) a related party;
(b) a subsidiary;
(c) a substantial shareholder, being a person who, together with the person's associates, holds a relevant interest, or held a relevant interest at any time in the 6 months before the relevant transaction, in at least 10% of the total votes attached to the voting securities in the company;
(d) an associate of a person referred to in paragraphs (a), (b) or (c); or
(e) a person whose relationship to the company or a person referred to in paragraphs (a) to (d) is such that, in ASX's opinion, the transaction should be approved by security holders of the entity.

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Notice of Extraordinary General Meeting and Explanatory Memorandum

An asset is substantial if its value, or the value of the consideration paid or given for it is, or in ASX's opinion is, 5% or more of the equity interests of the entity as set out in the latest accounts given to ASX under the Listing Rules.

China Yunnan Copper (Australia) Investment and Development Co. Ltd ( CYC ) is a substantial shareholder as it holds approximately 21.25% of the total votes attached to the voting securities in the Company. Yunnan Copper Industry (Group) Co Ltd ( YCI ) is the holding company of CYC, making it a substantial shareholder. San Mu is an associate of YCI and thus an associate of a substantial shareholder.

The Company’s current equity interests are $7,358,685 as set out in the latest accounts given to ASX under the Listing Rules (Financial Report for the Half Year ended 31 December 2010). The AU$ equivalent of RMB17,827,700 (approximately AU$2.8 million as announced on 3 February 2011) consideration for the acquisition of the equity interest represents approximately 38% of the Company’s equity interests, making the interest a substantial asset.

Accordingly, the Company is seeking shareholder approval of the Proposed Acquisition of a 51% equity interest in San Mu pursuant to Listing Rule 10.1.

ASX Listing Rule 10.10

ASX Listing Rule 10.10 requires that a report on the transaction be obtained from an independent expert stating whether the transaction is fair and reasonable to the holders of ordinary securities whose votes are not to be disregarded ( Non-Associated Shareholders ).

The Company has engaged PKF Corporate Advisory (East Coast) Pty Limited ( PKFCA ) as an independent expert for the purposes of providing a report as to the fairness and reasonableness of the acquisition of a 51% equity interest in San Mu.

The Independent Expert’s Report prepared by PKFCA is set out in Appendix A. The Directors urge Shareholders to read the Independent Expert’s Report in its entirety. The Independent Expert’s Report was prepared in respect of Listing Rule 10.1 and concluded that the Proposed Acquisition is fair and reasonable to all Non-Associated Shareholders.

Recommendation

The Directors recommend that Shareholders vote in favour of Resolution 1.

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Notice of Extraordinary General Meeting and Explanatory Memorandum

Resolution 2 - Approval of Disposal of 55% Interest in Cloncurry North and Waterford Projects

Introduction

As announced to Shareholders and the market on 3 February 2011, the Company has signed a Letter of Intent with Yunnan Copper Mineral Resources Exploration and Development Co. Ltd. ( YEX ). The Letter of Intent proposed that the Company and YEX will execute a Joint Venture Agreement ( JV Agreement ) granting YEX the exclusive right to farm in and earn up to a 55% interest in the Company’s Cloncurry North and Waterford Projects, by incurring a minimum exploration expenditure of AU$5,000,000 on the projects over a three year period ( Proposed Disposal ). On 21 March 2011, the Company announced to Shareholders and the market that the Company and YEX had executed the JV Agreement.

A summary of the terms of the Proposed Disposal is set out below. Further details of the transaction are set out in the Independent Expert’s Report accompanying this Notice and Explanatory Memorandum.

Background

Yunnan Copper Industry (Group) Co Ltd ( YCI ) holds 100% of YEX. YCI is the holding company of China Yunnan Copper (Australia) Investment and Development Co. Ltd ( CYC ) and CYC holds approximately 21.25% of shares in Chinalco Yunnan.

The diagram below summarises the corporate structure and relationships between the entities before the Proposed Disposal:

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Figure 3: Corporate structure before the Proposed Disposal
YCI
Yunnan Copper Industry (Group) Co Ltd
Holds 100% Holds 83.33%
YEX CYC
Yunnan Copper Mineral Resources China Yunnan Copper (Australia)
Exploration & Development Co Investment and Development Co Ltd
Holds 21.25%
Company
Chinalco Yunnan Copper Resources Ltd
Holds 100%
Properties
EPM12205 – Roseby East
EPM15084 – Quamby
EPM 15095 – Clonagh
EPM16393 – Waterford
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Note: The above diagram excludes assets that are not directly affected by the Proposed Disposal.

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Notice of Extraordinary General Meeting and Explanatory Memorandum

Summary of Terms of Proposed Disposal

Below is a summary of the key terms of the Proposed Disposal under the JV Agreement:

the JV Agreement commences when the Company obtains the necessary shareholder approvals to the transactions contemplated by the JV Agreement ( JV Agreement Commencement Date );
the JV Agreement ends on 15 February 2014, or such later date as agreed by the Company and YEX ( JV Agreement End Date );
YEX shall earn up to a 55% participating interest in Queensland tenements EPM 12205, 15084, 15095 and 16393 ( Properties ), free of all encumbrances ( Farm-in Interest ) by:
spending a total of AU$5,000,000 in exploration expenditure on or before the JV Agreement End Date; and
spending AU$1,200,000 in exploration expenditure on or before the date being one year after the JV Agreement Commencement Date to earn a 10% participating interest in the Properties;
spending an additional AU$1,800,000 in exploration expenditure on or before the date being two years after the JV Agreement Commencement Date to earn an extra 20% participating interest in the Properties;
spending an additional AU$2,000,000 in exploration expenditure on or before the date being three years after the JV Agreement Commencement Date, but on or before the JV Agreement End Date, to earn an extra 25% participating interest in the Properties.
Chinalco Yunnan is currently the 100% legal holder of the Properties and the assignment and registration of the incremental 10%, 20% and 25% participating interests (leading to a total of a 55% participating interest) to YEX will be affected in accordance with the staged exploration expenditure outlined above. That is:
once YEX spends AU$1,200,000 in exploration expenditure on or before the date being one year after the JV Agreement Commencement Date, the Company will assign and register a 10% participating interest in the Properties to YEX;
once YEX spends an additional AU$1,800,000 in exploration expenditure on or before the date being two years after the JV Agreement Commencement Date, the Company will assign and register a further 20% participating interest in the Properties to YEX;
once YEX spends an additional AU$2,000,000 in exploration expenditure on or before the date being three years after the JV Agreement Commencement Date, but on or before the JV Agreement End Date, the Company will assign and register a further 25% participating interest in the Properties to YEX;
in the event of partial expenditure below the staged expenditure obligations, YEX will not be entitled to a proportionate participating interest in the Properties. For example, if YEX spent AU$500,000 in exploration expenditure (and no more), it would not be entitled to any participating interest in the Properties. If YEX spent AU$1,200,000 in exploration expenditure on or before the date being one year after the JV Agreement Commencement Date, and subsequently spent an additional AU$500,000 in exploration expenditure (and no more), it would only be entitled to a 10% participating interest in the Properties;
if YEX does not satisfy the minimum exploration expenditure requirements (to keep the Properties in good standing) prior to the JV Agreement End Date, the JV Agreement shall be terminated and YEX shall have no further obligations;

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during the minimum expenditure farm-in period, YEX shall have sole and exclusive rights to carry out exploration on and have non-exclusive possession of the Properties;
when YEX has performed its farm-in expenditure obligations, a joint venture will be formed between YEX and the Company with the following participating interests:
YEX - 55%; and
Chinalco Yunnan - 45%.
the joint venture shall have an operating committee, which shall have management and control of joint venture operations and all other matters affecting the joint venture. YEX and the Company will each have one member on the operating committee, and each party shall have a block vote on the operating committee, proportionate to its respective participating interest. Decisions of the operating committee shall be made by majority vote representing at least 55% of the participating interests;
YEX will be the operator of the joint venture and, subject to the control and direction of the operating committee, shall have day-to-day management and control of all joint venture operations;
YEX is obliged to carry out the joint venture operations in accordance with work programs and budgets approved by the operating committee;
fees, rents, rates and other monies levied or assessed upon the Properties (exclusive of the exploration expenditure payable by YEX pursuant to the Proposed Disposal) under Queensland's Mineral Resources Act 1989 (Qld) are payable by YEX; and
after the JV Agreement End Date, if a party does not contribute to all costs in connection with the Properties in accordance with each party's interest, that party's interest shall dilute so that its interest from time to time shall be calculated as:
For each AU$1,000,000 or part thereof of expenditure not contributed by the party, that party's interest in the Properties shall be reduced by 5% of such AU$1,000,000 or pro rata for expenditure less than AU$1,000,000.

Rationale for the Proposed Disposal

The Directors have stated that, in view of the other opportunities that the Company is pursuing, the Properties are a low priority, given the minimal resource results found to date. Accordingly, limited capital and staff time are budgeted towards further exploration work on the Properties.

The Proposed Disposal provides the opportunity for Chinalco Yunnan to participate in any positive results at a reduced cost to the Company on projects that are a low priority. The Directors have stated that, although the Proposed Disposal will result in a diluted interest in the Properties for the Company, the transaction is beneficial to the Company as Chinalco Yunnan, with limited resources, was unlikely to have embarked on an extensive exploration program of the Properties.

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Corporate Structure following Proposed Disposal

The expected corporate structure following the Proposed Disposal, assuming YEX fulfils the minimum exploration expenditure requirements, is summarised below:

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Figure 4: Corporate structure following the Proposed Disposal
Company YEX
Chinalco Yunnan Copper Yunnan Copper Mineral
JV Agreement
Resources Ltd Resources Exploration &
Development Co
Will hold 45% Will hold 55%
Properties
• EPM 12205 – Roseby East
• EPM 15084 – Quamby
• EPM 15095 – Clonagh
• EPM 16393 – Waterford
----- End of picture text -----

Notes: Diagram assumes YEX fulfils the AU$5 million minimum exploration expenditure requirement. The above diagram excludes other assets not directly affected by the Proposed Disposal.

Regulatory Requirements

ASX Listing Rule 10.1

As set out above, ASX Listing Rule 10.1 provides that a company must ensure that neither it, nor any of its subsidiaries, disposes a substantial asset to certain categories of persons without shareholders' prior approval.

Because YEX is an associate of YCI and CYC, shareholder approval is sought for the disposal of the Company’s interest in the Cloncurry North and Waterford Projects.

The Company’s current equity interests are $7,358,685 as set out in the latest accounts given to ASX under the Listing Rules (Financial Report for the Half Year ended 31 December 2010). The $5,000,000 total consideration for the disposal of the interest represents approximately 68% of the Company’s equity interests, making the interest a substantial asset.

ASX Listing Rule 10.10

The Company has engaged PKFCA as an independent expert for the purposes of providing a report as to the fairness and reasonableness of the disposal of the interest in the Cloncurry North and Waterford Projects.

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was prepared in respect of Listing Rule 10.1 and concluded that the Proposed Disposal is fair and reasonable to all Non-Associated Shareholders.

Corporate Structure following the Proposed Acquisition and the Proposed Disposal

Set out below is the anticipated corporate structure of the Company following the Proposed Acquisition and the Proposed Disposal:

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Figure 5: Corporate structure following the Proposed Acquisition and the Proposed Disposal
41.65% YCI
Yunnan Copper Industry (Group) Co Ltd
100% 83.33%
YEX CYC
Yunnan Copper Mineral Resources China Yunnan Copper (Australia)
Exploration & Development Co Investment and Development Co Ltd
7.35% 21.25%
San Mu 51% Company
Yunnan Copper San Mu Mining Industry Chinalco Yunnan Copper Resources Ltd
Co Ltd
55%
45%
100%
(Laos) Yunnan Copper Properties
Industry (GROUP) EPM12205 – Roseby East
Oudomxay Mining Sloe EPM15084 – Quamby
CO.LTD EPM 15095 – Clonagh
• Jiuzhai Project EPM16393 – Waterford
• Nadao Project
• Modeng Project
(Laos) Yunnan Copper
Industry (GROUP)
Phongsaiy Mining Sloe
CO.LTD
• Xinzhai Project
----- End of picture text -----

Note: The above diagram assumes the Proposed Acquisition and the Proposed Disposal are approved by the NonAssociated Shareholders and YEX fulfils the minimum exploration expenditure on the Properties (i.e. the full amount of AU$5 million). San Mu will still hold 100% equity interest in its two respective subsidiaries. The diagram excludes other assets that are not directly affected by the Proposed Acquisition and the Proposed Disposal.

Recommendation

The Directors recommend that Shareholders vote in favour of Resolution 2.

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2. Interpretation

Articles of Association means the Articles of Association of San Mu.

ASX means the Australian Securities Exchange.

ASIC means the Australian Securities and Investments Commission.

Capital Increase Agreement means the Agreement on Capital Increase between YCI, YEX, San Mu and the Company dated 28 January 2011.

Chinalco Yunnan or Company means Chinalco Yunnan Copper Resources Limited ACN 070 859 522.

Corporations Act means the Corporations Act 2001 (Cth) as amended from time to time.

CYC means China Yunnan Copper (Australia) Investment and Development Co. Ltd ACN 110 345 750.

Directors means the board of directors of the Company from time to time.

Explanatory Memorandum means this explanatory memorandum accompanying this Notice.

Extraordinary General Meeting or Meeting means the extraordinary general meeting of shareholders of the Company convened by the Directors and detailed in the Notice of Meeting, or any adjournment thereof.

Independent Expert’s Report means the Independent Expert’s Report prepared by PKFCA dated 8 September 2011.

JV Agreement means the joint venture agreement in respect of the Properties between YEX and the Company dated 15 February 2011, as amended by the deed of variation between YEX and the Company dated 2 September 2011.

JV Agreement Commencement Date means the commencement date under the JV Agreement, being when the Company obtains the necessary shareholder approvals to the transactions contemplated by the JV Agreement.

JV Agreement End Date means 15 February 2014, or such later date as agreed by the Company and YEX.

Laos Projects means the four mining projects owned by the two subsidiaries of San Mu, being the Xinzhai Project, Jiuzhai Project, Nadao Project and Modeng Project.

Listing Rules means the listing rules of the ASX.

Non-Associated Shareholders means Shareholders whose votes are not to be disregarded in respect of the Proposed Acquisition and/or Proposed Disposal, as applicable.

Notice of Meeting or Notice means the notice of meeting giving notice to shareholders of the Extraordinary General Meeting, accompanying this Explanatory Memorandum.

Ordinary Resolution means a resolution passed by more than 50% of the votes cast at a general

meeting of shareholders.

PKFCA means PKF Corporate Advisory (East Coast) Pty Limited.

Properties means Queensland tenements EPM 12205, 15084, 15095 and 16393 (which collectively represent the Company’s Cloncurry North and Waterford Projects).

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Proposed Acquisition means the proposed acquisition of a 51% equity interest in San Mu.

Proposed Disposal means the proposed disposal of a 55% interest in the Properties.

RMB means Renminbi, being the official currency of the People’s Republic of China. The primary unit of Renminbi is the Chinese Yuan.

San Mu means Yunnan Copper San Mu Mining Industry Co Ltd.

San Mu Business Licence means the new business licence to be held by San Mu in accordance with the Capital Increase Agreement, San Mu Joint Venture Contract and Articles of Association.

San Mu Joint Venture Contract means the San Mu Joint Venture Contract between YCI, YEX and the Company dated 28 January 2011.

Shareholder means a shareholder of the Company.

Shares means fully paid ordinary shares in the capital of the Company.

Special Resolution means a resolution passed by at least 75% of the votes cast at a general meeting of shareholders.

YCI means Yunnan Copper Industry (Group) Co Ltd.

YEX means Yunnan Copper Mineral Resources Exploration and Development Co Ltd.

Any inquiries in relation to the Resolutions or the Explanatory Memorandum should be directed to Paul Marshall (Company Secretary):

Level 5, 10 Market Street, Brisbane QLD 4000

+61 7 3212 6204

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Proxies and representatives

Shareholders are entitled to appoint a proxy to attend and vote on their behalf. Where a shareholder is entitled to cast two or more votes at the meeting, they may appoint two proxies. Where more than one proxy is appointed, each proxy may be appointed to represent a specific proportion or number of votes the shareholder may exercise. If the appointment does not specify the proportion or number of votes each proxy may exercise, each proxy may exercise half of the votes. The proxy may, but need not, be a shareholder of the Company.

Shareholders who are a body corporate are able to appoint representatives to attend and vote at the meeting under Section 250D of the Corporations Act 2001 (Cth).

The proxy form must be signed by the shareholder or his/her attorney duly authorised in writing or, if the shareholder is a corporation, in a manner permitted by the Corporations Act.

The proxy form (and the power of attorney or other authority, if any, under which the proxy form is signed) or a copy or facsimile which appears on its face to be an authentic copy of the proxy form (and the power of attorney or other authority) must be deposited at, posted to, or sent by facsimile transmission to the address listed below not less than 48 hours before the time for holding the meeting, or adjourned meeting as the case may be, at which the individual named in the proxy form proposes to vote.

Chinalco Yunnan Copper Resources Limited

GPO Box 216, Brisbane QLD 4001

Telephone: +61 7 3212 6204 Facsimile No: +61 7 3212 6250

If a representative of the corporation is to attend the meeting the appropriate “Certificate of Appointment of Corporate Representative” should be produced prior to admission. A form of the certificate may be obtained from the Company’s share registry.

A proxy form is attached to this Notice.

Voting entitlement

For the purposes of determining voting entitlements at the Meeting, shares will be taken to be held by the persons who are registered as holding the shares at 7.00pm (Sydney time) on 19 October 2011. Accordingly, transactions registered after that time will be disregarded in determining entitlements to attend and vote at the Meeting.

Signing instructions

You must sign the proxy form as follows in the spaces provided:

Individual:	Where the holding is in one name, the holder must sign.
Joint Holding:	Where the holding is in more than one name, all of the security holders
	should sign.

Power of Attorney: To sign under Power of Attorney, you must have already lodged this document with the registry. If you have not previously lodged this document for notation, please attach a certified photocopy of the Power of Attorney to this form when you return it.

Companies: Where the company has a Sole Director who is also the Sole Company Secretary, this form must be signed by that person. If the company (pursuant to section 204A of the Corporations Act 2001 ) does not have a Company Secretary, a Sole Director can also sign alone.

Otherwise this form must be signed by a Director jointly with either another Director or a Company Secretary.

Please indicate the office held by signing in the appropriate place.

Page 16

LODGE YOUR VOTE

Chinalco Yunnan Copper Resources Limited

ACN 070 859 522

By mail:  Chinalco Yunnan Copper Resources Limited  [By fax:][ +61 7 3212 6250] GPO Box 216 Brisbane QLD 4001



All enquiries to: Telephone: +61 7 3212 6204

X99999999999

SHAREHOLDER VOTING FORM

I/We being a member(s) of Chinalco Yunnan Copper Resources Limited and entitled to attend and vote hereby appoint:

STEP 1

APPOINT A PROXY

the Chairman OR if you are NOT appointing the Chairman of the of the Meeting Meeting as your proxy, please write the name of the (mark box) person or body corporate (excluding the registered shareholder) you are appointing as your proxy

or failing the person/body corporate named, or if no person/body corporate is named, the Chairman of the Meeting, as my/our proxy and to vote for me/us on my/our behalf at the Extraordinary General Meeting of the Company to be held at 10am (Brisbane Time) on Friday, 21 October 2011, at HopgoodGanim Lawyers, Presentation Room, Level 7, Waterfront Place, 1 Eagle Street, Brisbane, QLD, 4000 and at any adjournment or postponement of the meeting.

Proxies will only be valid and accepted by the Company if they are signed and received no later than 48 hours before the meeting. Please read the voting instructions overleaf before marking any boxes with an X

VOTING DIRECTIONS

STEP 2

Resolution 1

Approval of Acquisition of 51% Equity Interest in Yunnan Copper San Mu Mining Industry Co Ltd

Resolution 2

Approval of Disposal of 55% Interest in Cloncurry North and Waterford Projects

For Against Abstain *

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 * If you mark the Abstain box for a particular Item, you are directing your proxy not to vote on your behalf on a show of hands or on a poll and your votes will not be counted in computing the required majority on a poll.

SIGNATURE OF SHAREHOLDERS – THIS MUST BE COMPLETED

STEP 3

Shareholder 1 (Individual) Sole Director and Sole Company Secretary

Joint Shareholder 2 (Individual) Joint Shareholder 3 (Individual) Director/Company Secretary (Delete one) Director

This form should be signed by the shareholder. If a joint holding, all shareholders must sign. If signed by the shareholder’s attorney, the power of attorney must have been previously noted by the registry or a certified copy attached to this form. If executed by a company, the form must be executed in accordance with the company’s constitution and the Corporations Act 2001 (Cth).

CYU PRX101

HOW TO COMPLETE THIS PROXY FORM

Your Name and Address

This is your name and address as it appears on the company’s share register. If this information is incorrect, please make the correction on the form. Shareholders sponsored by a broker should advise their broker of any changes. Please note: you cannot change ownership of your shares using this form.

Appointment of a Proxy

If you wish to appoint the Chairman of the Meeting as your proxy, mark the box in Step 1. If the person you wish to appoint as your proxy is someone other than the Chairman of the Meeting please write the name of that person in Step 1. If you leave this section blank, or your named proxy does not attend the meeting, the Chairman of the Meeting will be your proxy. A proxy need not be a shareholder of the company. A proxy may be an individual or a body corporate.

Votes on Items of Business – Proxy Appointment

You may direct your proxy how to vote by placing a mark in one of the boxes opposite each item of business. All your shares will be voted in accordance with such a direction unless you indicate only a portion of voting rights are to be voted on any item by inserting the percentage or number of shares you wish to vote in the appropriate box or boxes. If you do not mark any of the boxes on the items of business, your proxy may vote as he or she chooses. If you mark more than one box on an item your vote on that item will be invalid.

Appointment of a Second Proxy

You are entitled to appoint up to two persons as proxies to attend the meeting and vote on a poll. If you wish to appoint a second proxy, an additional Proxy Form may be obtained by telephoning the company’s share registry or you may copy this form and return them both together.

To appoint a second proxy you must:

(a) on each of the first Proxy Form and the second Proxy Form state the percentage of your voting rights or number of shares applicable to that form. If the appointments do not specify the percentage or number of votes that each proxy may exercise, each proxy may exercise half your votes. Fractions of votes will be disregarded.
(b) return both forms together.

Signing Instructions

You must sign this form as follows in the spaces provided:

Individual: where the holding is in one name, the holder must sign.

Joint Holding: where the holding is in more than one name, all shareholders must sign.

Power of Attorney: to sign under Power of Attorney, you must lodge the Power of Attorney with the registry. If you have not previously lodged this document for notation, please attach a certified photocopy of the Power of Attorney to this form when you return it.

Companies: where the company has a Sole Director who is also the Sole Company Secretary, this form must be signed by that person. If the company (pursuant to section 204A of the Corporations Act 2001 ) does not have a Company Secretary, a Sole Director can also sign alone. Otherwise this form must be signed by a Director jointly with either another Director or a Company Secretary. Please indicate the office held by signing in the appropriate place.

Corporate Representatives

If a representative of the corporation is to attend the meeting the appropriate “Certificate of Appointment of Corporate Representative” should be produced prior to admission in accordance with the Notice of Meeting. A form of the certificate may be obtained from the company’s share registry.

Lodgement of a Proxy Form

This Proxy Form (and any Power of Attorney under which it is signed) must be received at an address given below by 10am (Brisbane Time) on Wednesday, 19 October 2011, being not later than 48 hours before the commencement of the meeting. Any Proxy Form received after that time will not be valid for the scheduled meeting.

Proxy Forms may be lodged using the reply paid envelope or:



by mail:

Chinalco Yunnan Copper Resources Limited GPO Box 216 Brisbane QLD 4001



by fax:

+61 7 3212 6250



by hand:

delivering it to Chinalco Yunnan Copper Resources Limited, Level 5, 10 Market St, Brisbane, QLD 4000.

If you would like to attend and vote at the Extraordinary General Meeting, please bring this form with you. This will assist in registering your attendance.

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Chinalco Yunnan Copper Resources Ltd

Independent Expert's Report 8 September 2011

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FINANCIAL SERVICES GUIDE

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8 September 2011

This Financial Services Guide (" FSG ") is issued in relation to an independent expert’s report (" IER ") prepared by PKF Corporate Advisory (East Coast) Pty Limited (ABN 70 050 038 170) (" PKFCA ") at the request of the directors (" Directors ") of Chinalco Yunnan Copper Resources Ltd (" Chinalco Yunnan " or "the Company ") in respect of:

the acquisition of a 51% equity investment in Yunnan Copper San Mu Mining Industry Co. Ltd (" San Mu "), a Chinese registered company, for the Australian Dollar (" AU$ ") equivalent of RMB17,827,700 (translating to approximately AU$2.8 million) as announced to the Australian Securities Exchange (" ASX ") on 3 February 2011 (" Proposed Acquisition "); and
Chinalco Yunnan has entered into a joint venture agreement with YEX (" JV Agreement ") granting YEX the right to farm-in and subsequently earn up to a 55% interest in Chinalco Yunnan's Cloncurry North Project and Waterford Project by incurring exploration expenditure of AU$5 million on the projects over a three year period (" Proposed Disposal ").

The Proposed Acquisition and the Proposed Disposal are collectively referred to as the " Proposed Transactions ".

The Proposed Acquisition and the Proposed Disposal are independent of each other.

Engagement

The IER is to accompany a notice of meeting and explanatory memorandum that are to be provided by the Directors to assist the Company's shareholders not associated with the Proposed Acquisition and the Proposed Disposal (" Non-Associated Shareholders ") in deciding whether to accept the Proposed Acquisition and the Proposed Disposal.

Financial Services Guide

PKFCA holds an Australian Financial Services Licence (Licence No: 247420) (" Licence "). As a result of our Report being provided to you, PKFCA is required to issue to you, as a retail client, a FSG. The FSG includes information on the use of general financial product advice and is issued so as to comply with our obligations as holder of an Australian Financial Services Licence.

Financial services PKFCA is licensed to provide

The Licence authorises PKFCA to carry on a financial services business to (a) provide financial product advice for derivatives limited to old law securities, options contracts and warrants and securities and (b) deal in a financial product by arranging for another person to apply for, acquire, vary or dispose of financial products in respect of securities, to retail and wholesale clients.

PKFCA provides financial product advice by virtue of an engagement to issue the Report in connection

with the issue of securities of another person.

Our Report includes a description of the circumstances of our engagement and identifies the party who has engaged us. You have not engaged us directly but will be provided with a copy of our Report (as a retail client) because of your connection with the matters on which our Report has been issued.

Our Report is provided on our own behalf as an Australian Financial Services Licensee authorised to provide the financial product advice contained in the Report.

General financial product advice

Our Report provides general financial product advice only, and does not provide personal financial product advice, because it has been prepared without taking into account your particular personal circumstances or objectives (either financial or otherwise), your financial situation or your needs.

The PKF East Coast Practice is a member of the PKF International Limited network of legally independent member firms. The PKF East Coast Practice is also a member of the PKF Australia Limited national network of legally independent firms each trading as PKF. PKF East Coast Practice has offices in NSW, Victoria and Brisbane. PKF East Coast Practice does not accept responsibility or liability for the actions or inactions on the part of any other individual member firm or firms.

Some individuals may place a different emphasis on various aspects of potential investments. An individual’s decision in relation to the Proposed Transactions described in the Document may be influenced by their particular circumstances and, therefore, individuals should consider the appropriateness of the Report having regard to your own objectives, financial situation and needs before you act on the advice in a Report and seek independent advice.

Where the advice relates to the acquisition or possible acquisition of a financial product, you should also obtain an offer document relating to the financial product and consider that document before making any decision about whether to acquire the financial product.

Associations and relationships

PKFCA is the licensed corporate advisory arm of PKF (East Coast Practice), Chartered Accountants and Business Advisers. The directors of PKFCA may also be partners in PKF East Coast Practice, Chartered Accountants and Business Advisers.

PKF (East Coast Practice), Chartered Accountants and Business Advisers is comprised of a number of related entities that provide audit, accounting, tax and financial advisory services to a wide range of clients.

Benefits that PKFCA may receive

PKFCA has charged fees for providing our IER. The basis on which our fees will be determined has been agreed with, and our fees will be paid by, the person who engaged us to provide the IER. Our fees have been agreed on either a fixed fee or time cost basis.

PKFCA will receive a fee based on the time spent in the preparation of this IER in the amount of approximately AU$50,000 (plus GST and disbursements). PKFCA will not receive any fee contingent upon the outcome of the Proposed Transactions, and accordingly, does not have any pecuniary or other interests that could reasonably be regarded as being capable of affecting its ability to give an unbiased opinion in relation to the Proposed Transactions. In addition, fees of the independent mining valuation specialists for their reports have been paid by the Company and such fees are also on the same basis as that rendered by PKFCA.

Remuneration or other benefits received by our directors and employees

Our directors and employees providing financial services receive an annual salary, a performance bonus or profit share depending on their level of seniority. Bonuses are based on overall productivity and contribution to the operation of PKFCA or related entities but any bonuses are not directly connected with any assignment and in particular are not directly related to the engagement for which our Report was provided.

Referrals

PKFCA does not pay commissions or provide any other benefits to any parties or person for referring customers to us in connection with the reports that PKFCA is licensed to provide.

Complaints resolution

As the holder of an Australian Financial Services Licence, we are required to have a system for handling complaints from persons to whom we provide financial product advice. All complaints must be in writing, addressed to The Complaints Officer, PKF Corporate Advisory (East Coast) Pty Limited, Level 10, 1 Margaret Street, Sydney NSW 2000.

On receipt of a written complaint we will record the complaint, acknowledge receipt of the complaint and seek to resolve the complaint as soon as practical. If we cannot reach a satisfactory resolution, you can raise your concerns with the Financial Ombudsman Service Limited (" FOS "). FOS is an independent body established to provide advice and assistance in helping resolve complaints relating to the financial services industry. PKFCA is a member of FOS. FOS may be contacted directly via the details set out below.

Financial Ombudsman Service Limited GPO Box 3 Melbourne VIC 3001 Toll free: 1300 78 08 08 Email: [email protected]

Chinalco Yunnan Copper Resources Ltd - Independent Expert's Report

8 September 2011

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The Directors Chinalco Yunnan Copper Resources Ltd Level 5 10 Market Street BRISBANE QLD 4001

Dear Directors

INDEPENDENT EXPERT'S REPORT - IN RELATION TO VARIOUS PROPOSALS BY CHINALCO YUNNAN COPPER RESOURCES LIMITED

Chinalco Yunnan Copper Resources Ltd (" Chinalco Yunnan " or " the Company "), formerly known as China Yunnan Copper Australia Limited, was incorporated in 1995 and is headquartered in Brisbane, Australia. The Company has been listed on the Australian Securities Exchange (" ASX ") since 2007. The market capitalisation of the Company as at 19 August 2011 was AU$35.5 million.

Chinalco Yunnan engages in the exploration and development of minerals, primarily copper, silver, rare earth elements, gold and uranium. The Company has exploration operations throughout Australia and Chile, and its strategy is supported and assisted by the Company's cornerstone investor, Yunnan Copper Industry Group Co. Ltd (" YCI ").

The directors (" Directors ") of Chinalco Yunnan have engaged PKF Corporate Advisory (East Coast) Pty Limited (" PKFCA ") to prepare an independent expert's report (" IER ") setting out our opinion as to whether each of the two proposed transactions (" Proposed Transactions ") that the Company is contemplating is fair and reasonable to the non-associated shareholders of the Company (" Non-Associated Shareholders ").

Proposed Transactions

As announced to the ASX on 3 February 2011, the Proposed Transactions are outlined as follows:

Proposed Acquisition

Chinalco Yunnan to acquire a 51% equity investment, via the subscription of new shares, in Yunnan Copper San Mu Mining Industry Co. Ltd (" San Mu "), a Chinese registered resource company, for the Australian Dollar (" AU$ ") equivalent of RMB17,827,700 (translating to approximately AU$2.8 million) (" Proposed Acquisition "). San Mu, via two subsidiaries, holds four copper and silver projects (Zinzhai Project, Jiuzhui Project, Modeng Project and Nadao Project) in northern Laos, (collectively referred to as the " Laos Projects ").

The investment in San Mu will be by way of a subscription of new shares and the invested funds will be utilised to complete an approximately AU$2.8 million exploration program. Currently, the two shareholders of San Mu are YCI (holding 85% of the total registered capital) and Yunnan Copper Mineral Resources Exploration and Development Co. Ltd (" YEX ") (holding 15% of the total registered capital). The Proposed Acquisition would result in YEX's and YCI's shareholdings being diluted due to the issue of new shares to the Company.

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Proposed Disposal

Chinalco Yunnan has entered into a joint venture agreement with YEX (" JV Agreement "), dated 15 February 2011 and amended by the Deed of Variation between YEX and the Company dated 2 September 2011, granting YEX the right to farm-in and subsequently earn up to a 55% interest in the Company's Cloncurry North Project and Waterford Project by incurring exploration expenditure of AU$5 million on the projects over a three year period (" Proposed Disposal ").

The Cloncurry North Project comprises three Exploration Permits for Minerals (" EPM "), EPM 12205 – Roseby East, EPM 15084 – Quamby and EPM 15095 – Clonagh. The Waterford Project consists of a single EPM, EPM 16393 – Waterford. The four EPMs are collectively referred to as the " Properties ".

We have been advised the Proposed Acquisition and the Proposed Disposal are independent of each other. The IER provides our opinion as to whether or not each of the Proposed Transactions is "Fair" and "Reasonable" to the Non-Associated Shareholders. Each transaction has been assessed separately with separate opinions issued for each transaction.

Our assessment and our opinions of the Proposed Transactions is at 19 August 2011 (" Assessment Date ").

The details of the Proposed Transactions are set out fully in the Explanatory Memorandum accompanying the Notice of Extraordinary General Meeting that is to be provided to the Company's Non-Associated Shareholders by the Directors in relation to the Proposed Transactions. We understand that this IER will accompany the Notice of General Meeting and Explanatory Memorandum.

Summary of Regulatory Requirements

ASX Listing Rules

The Proposed Transactions are each subject to Chapter 10 "Transactions with Persons in a Position of Influence" of the ASX Listing Rules (" ASX Listing Rules ").

ASX Listing Rule 10.1 requires the approval of an entity's shareholders where a company proposes to acquire a substantial asset from, or dispose of a substantial asset to:

a related party or an associate of a related party;
a subsidiary or an associate of a subsidiary;
a substantial shareholder or an associate of a substantial shareholder. A substantial shareholder is defined by the ASX Listing Rules as a shareholder with a relevant interest at any time in the six months prior to a proposed transaction, in at least 10% of the total votes attached to the voting securities; or
a person whose relationship to the entity or a person referred to in the first three bullet points is such that in ASX's opinion, the transaction should be approved by the entity's shareholders.

An asset is substantial if its value, or the value of the consideration for it, is greater than 5% of the total equity interests of an entity as at the date of the last accounts provided to the ASX.

Listing Rule 10.10.2 requires that the Notice of Meeting to approve the Proposed Acquisition and Proposed Disposal be accompanied by a report from an independent expert stating whether each of the Proposed Acquisition and Proposed Disposal is "fair" and "reasonable" to the Non-Associated Shareholders.

Under the Proposed Acquisition, Chinalco Yunnan proposes to acquire a 51% equity interest in San Mu, an associate of a substantial shareholder of the Company (YCI - holding 85% of the total registered capital of San Mu and YEX - holding 15% of the total registered capital of San Mu).

Chinalco Yunnan Copper Resources Ltd - Independent Expert's Report

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Under the Proposed Disposal Chinalco Yunnan proposes to dispose of a 55% farm-in interest in the Properties to YEX, an associate of a substantial shareholder in the Company (being China Yunnan Copper (Australia) Investment and Development Co Ltd (" CYC ")).

Accordingly, ASX Listing Rule 10.1 will apply to each of the Proposed Transactions.

Corporations Act 2001

The Directors have sought legal advice whether the Proposed Transactions constitute the giving and the receipt of a financial benefit to related parties of the Company under Chapter 2E of the Corporations Act 2001 (" Corporations Act "). The Directors have provided a statement to PKFCA that they are of the view the Proposed Transactions are not related party transactions under the Corporations Act. We have relied upon this statement and accordingly prepared the IER on this basis that the Proposed Transactions are not subject to Chapter 2E of the Corporations Act.

ASIC Regulatory Guides

Neither the Corporations Act nor the ASX Listing Rules define the expression "fair" and "reasonable". However, guidance is provided by the Australian Securities and Investments Commission's (" ASIC ") Regulatory Guides (" RG ") that establish certain guidelines in respect of independent expert's reports under the Corporations Act. In particular, RG 111 "Contents of Expert's Reports" and RG 112 "Independence of Experts " have been considered.

PKFCA has not considered RG 76 "Related Party Transactions" as the Directors have stated the Proposed Transactions do not constitute a related party transaction subject to Chapter 2E of the Corporations Act.

PFKCA role

PKFCA has been engaged to prepare an IER setting out our opinion as to whether the Proposed Transactions, individually, are fair and reasonable to the Non-Associated Shareholders.

Summary of Conclusions

Conclusion - Proposed Acquisition

In our opinion, the Proposed Acquisition is " Fair " and " Reasonable " to the Non-Associated Shareholders.

Fair

For the purposes of assessing whether the Proposed Acquisition is "fair" to the Non-Associated Shareholders, PKFCA has compared the assessed fair market value of a 51% equity interest in San Mu to the assessed fair market value of the consideration offered by Chinalco Yunnan.

The value of San Mu, on a control basis, was determined based on an asset-based valuation method on a going concern basis. In applying this method PKFCA used the Net Tangible Asset (" NTA ") approach.

We determined the NTA of San Mu as at the Assessment Date based on its latest available financial statements as at 30 June 2011 and have made certain adjustments to reflect the assessed market value of the net assets of San Mu and arrived at the fair market value of San Mu.

In assessing the fair market value, we have adjusted the net assets to reflect the market value of San Mu's Laos Projects as valued by Roma Appraisals Limited (" Roma Appraisals ") on 21 July 2011 and adjusted for a liability known as Specific Accounts Payable. We understand that this liability represents a grant from the Chinese Government Finance Department of Yunnan Provincial Government to sponsor exploration activities and is expected to be written off in full in the financial year ending 30 June 2012.

Chinalco Yunnan Copper Resources Ltd - Independent Expert's Report

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The Joint Venture Contract for the Establishment of the Joint Venture Yunnan Copper San Mu Mining Industry Co Ltd (" San Mu JV Contract "), as we understand, indemnifies the Company from the impact of any liability of San Mu regarding the Specific Accounts Payable.

We have also adjusted for the investment of the proposed consideration in San Mu, by the Company, as the invested funds will be utilised to complete an approximately AU$2.8 million exploration program.

On the above basis, we have assessed fair market value of a 51% shareholding interest in San Mu as at the Assessment Date to be in the range of AU$3.3 million to AU$3.8 million. We have assessed the fair market value of the consideration offered by Chinalco Yunnan to be AU$2.7 million. Therefore, as the assessed value of the asset being acquired exceeds the consideration offered, we conclude the Proposed Acquisition is " Fair " to the Company's Non-Associated Shareholders.

Set out below is the comparison between the assessed value of the 51% fair market value of San Mu and the Proposed Acquisition Consideration:

Table 1: Conclusion - Fairness of Proposed Acquisition

AU$ Section	AU$ Section	Low High Mid-point	Low High Mid-point	Low High Mid-point
Fair market value of a 51% equity interest in San Mu Cash consideration of the Proposed Acquisition Conclusion	9.2 9.3	3,344,301 2,697,331	3,807,279 2,697,331	3,575,790 2,697,331
		"Fair"	"Fair"	"Fair"

Source: PKFCA analysis

Reasonable

In accordance with the guidelines set out in RG 111, as the Proposed Acquisition is "Fair it is also "Reasonable". Accordingly, we conclude the Proposed Acquisition is " Reasonable ".

Nonetheless, we have also considered various factors that we believe Non-Associated Shareholders should consider when deciding whether to accept or not to accept the Proposed Acquisition. Set out below is a summary of our assessment of the various factors.

The advantages of the Proposed Acquisition are summarised as follows:

acquisition of an interest in new mineral deposits;
obtain control of San Mu;
potential commerciality of the Xinzhai Project, one of the four component projects of the Laos Projects; and
potential infrastructure benefits, as the Laos Projects are within close proximity to an existing YEX processing plant.

The disadvantages of the Proposed Acquisition are summarised as follows:

uncertainty around the future performance of San Mu and the Laos Projects given the early stage of the Laos Projects;
volatility in commodity prices and foreign exchange rates affecting the Laos Projects valuation; and
subject to Australian and Chinese government regulatory approvals.

Having regard to the above, in our opinion, the advantages outweigh the disadvantages.

Chinalco Yunnan Copper Resources Ltd - Independent Expert's Report

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Conclusion - Proposed Disposal

In our opinion, the Proposed Disposal is " Fair " and " Reasonable " to the Non-Associated Shareholders.

Fair

The consideration to be provided by YEX for a 55% interest in the Properties is not being directly invested in, or paid to, Chinalco Yunnan. The consideration, to the extent that it is expended, will be spent on the exploration of the Properties, of which the Company will only own 45%, if the Proposed Disposal is fully implemented.

In our opinion, the assessment of the "fairness" of the Proposed Disposal should take into account that the consideration payable under the Proposed Disposal, to the extent that it is expended, will be spent on the exploration of the Properties. Accordingly, Chinalco Yunnan will share in the benefits of such expenditure to the extent of the Company's 45% ownership of the Properties, if the Proposed Disposal is fully implemented.

In our opinion, for the purposes of assessing whether the Proposed Disposal is "fair" to the NonAssociated Shareholders, it can be assumed that if all the Proposed Disposal consideration is expended, then the value of the Properties may be increased by the same amount and the Company will own 45% of the Properties with the enhanced value.

On the above basis, for the purposes of assessing whether the Proposed Disposal is "fair" to the NonAssociated Shareholders, PKFCA compared the assessed fair market value of a 55% interest in the enhanced value of the Properties (i.e. the fair market value of the Properties, as assessed by Mining Associates, plus the consideration payable under the Proposed Disposal, assuming that it will be fully expended) with the assessed fair market value of the consideration payable by YEX.

Based on the valuation of the Properties conducted by Mining Associates, of between AU$3.6 million and AU$6.9 million, and the assessed fair market value of the consideration offered, as at the Assessment Date, of AU$4.6 million, we have assessed the fair market value of a 55% interest in the Properties to be within the range of AU$4.5 million to AU$6.3 million. The assessed fair market value of the consideration offered falls within the valuation range of the 55% interest in the Properties, albeit at the lower end. Therefore, we conclude that the Proposed Disposal is " Fair " to the Non-Associated Shareholders.

Table 2: Conclusion - Fairness of Proposed Disposal

AU$ Section	AU$ Section	Low High Preferred	Low High Preferred	Low High Preferred
Fair market value of the Properties before expenditure of the Proposed Disposal Consideration Add: Proposed Disposal Consideration Fair market value of the Properties after expenditure of the Proposed Disposal Consideration Fair market value of a 55% interest in the Properties Fair market value of the Proposed Disposal Consideration Premium / (Deficiency) of Proposed Disposal Consideration as compared with Fair market value of a 55% interest in the Properties Conclusion	10.2 10.4 10.4	3,626,000 4,627,667	6,888,000 4,627,667	4,850,000 4,627,667
		8,253,667 4,539,517 4,627,667	11,515,667 6,333,617 4,627,667	9,477,667 5,212,717 4,627,667
		88,150 1.9%	(1,705,950) (26.9%)	(585,050) (11.2%)
		"Fair"	"Not Fair"	"Not Fair"

Source: PKFCA analysis

Reasonable

As the Proposed Disposal is "Fair", it is also "Reasonable" in accordance with the guidelines set out in RG 111. Accordingly, we conclude the Proposed Disposal is " Reasonable ".

Chinalco Yunnan Copper Resources Ltd - Independent Expert's Report

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Nonetheless, we have also considered various factors that we believe Non-Associated Shareholders should consider when deciding whether to accept or not to accept the Proposed Disposal. Set out below is a summary of our assessment of the various factors.

The advantages of the Proposed Disposal are summarised as follows:

future capital committed towards exploration of the Properties (up to an amount of AU$5 million) will be funded by YEX;
provides for continued participation by the Company in any future growth potential in the Properties (without further expenditure by the Company);
the Properties are a low internal priority of the Company and, in the absence of the Proposed Disposal, further exploration on the Properties would not have occurred for some time; and
fees, rents, rates and other monies levied or assessed upon the Properties (exclusive of the exploration expenditure payable by YEX pursuant to the Proposed Disposal) under Queensland's Mineral Resources Act 1989 are payable by YEX.

The disadvantages of the Proposed Disposal are summarised as follows:

reduced ownership participation in the Properties in the event of any significant mineral discoveries;
forgo opportunity to realise cash by sale of the Properties; and
Chinalco Yunnan's interest could be diluted further following the end of the JV Agreement, if the Company does not contribute its share of any costs.

Having regard to the above, in our opinion, the advantages outweigh the disadvantages.

Other matters

Non-Associated Shareholders’ individual circumstances

Our analysis has been undertaken, and our conclusions are expressed, at an aggregate level. PKFCA has not considered the effect of the Proposed Transactions on the particular circumstances of individual Non-Associated Shareholders. Some individual Non-Associated Shareholders may place a different emphasis on various aspects of the Proposed Transactions from that adopted in this IER. Accordingly, individual Non-Associated Shareholders may reach different conclusions as to whether or not the Proposed Transactions are "fair" and "reasonable" based on their individual circumstances. As the decision of an individual Non-Associated Shareholder in relation to the Proposed Transactions may be influenced by their particular circumstances (including their taxation position), Non-Associated Shareholders are advised to seek their own independent advice.

Fair market value

For the purposes of our opinion, the term "fair market value" is defined as the " price that would be negotiated in an open and unrestricted market between a knowledgeable, willing, but not anxious purchaser, and a knowledgeable, willing, but not anxious vendor, acting at arm’s length ".

Special value

We have not considered special value in forming our opinion as to whether the Proposed Transactions are "fair". Special value is the amount that a potential acquirer may be prepared to pay for a business in excess of the fair market value. This premium represents the value to the particular potential acquirer of potential economies of scale, reduction in competition, other synergies and cost savings arising from the acquisition under consideration not available to likely purchasers generally. Special value is not normally considered in the assessment of fair market value as it relates to the individual circumstances of special purchasers.

Chinalco Yunnan Copper Resources Ltd - Independent Expert's Report

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Current market conditions

Our opinions are based on economic, market and other conditions prevailing at the Assessment Date. Such conditions can change significantly over relatively short periods of time. Changes in those conditions may result in any valuation or other opinion becoming quickly outdated and in need of revision. PKFCA reserves the right to revise any valuation or other opinion, in the light of material information existing at the valuation date that subsequently becomes known to PKFCA.

Currencies referred to throughout the IER

A number of currencies have been referred to throughout the IER.

The Proposed Acquisition involves the use of RMB, which is the official currency of mainland China. The Chinese Yuan (" CNY ") is 1 unit of RMB. Calculations have been made in the IER using the spot AU$/CNY exchange rates, as quoted by the Reserve Bank of Australia (" RBA ") as at the Assessment Date. For the avoidance of doubt and to aide the reader, PKFCA has referred to all AU$/CNY exchange rates as AU$/RMB.

The Proposed Disposal involves the use of AU$ and there is no need for foreign currency translations.

Limitations

The IER has been prepared at the request of the Directors for the sole benefit of the Directors and the Non-Associated Shareholders to assist them in their decision whether to accept or reject each of the Proposed Transactions. This IER is to accompany the Explanatory Memorandum to be sent to the NonAssociated Shareholders to consider the Proposed Transactions and was not prepared for any other purpose.

This IER and the information contained herein may not be relied upon by anyone other than the Directors and Non-Associated Shareholders without the written consent of PKFCA. PKFCA accepts no responsibility to any person other than the Directors and Non-Associated Shareholders in relation to this IER.

The IER should not be used for any other purpose and PKFCA does not accept any responsibility for its use outside this purpose. Except in accordance with the state purpose, no extract, quote or copy of our IER, in whole or in part, should be reproduced without our written consent, as to the form and context in which it may appear.

PKFCA has consented to the inclusion of the IER with the Explanatory Memorandum. Apart from this IER, PKFCA is not responsible for the contents of the Explanatory Memorandum or any other document associated with the Proposed Transactions. PKFCA acknowledges that this IER may be lodged with regulatory authorities.

Summary

This summary should be read in conjunction with the attached IER that sets out in full the purpose, scope, basis of evaluation, limitations, information relied upon, analysis and our findings.

Glossary

A glossary of terms used throughout this IER is set out in Appendix 1.

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Sources of Information

Appendix 2 identifies the infor m ation referred to, and relied upon by PKFC A during the course of preparing this IER and forming our opinion.

Financial Services Guide

PKFCA holds an Australian Financial Services Licence that authorises us (inter alia) to provide reports for the purposes of financial produc t advice for derivatives limited to old law securiti e s, options contracts and warrants and securities. A Fina n cial Services Guide is attached at the front of thi s IER.

Yours sincerely

Fiona Hansen Director

Peter Cornell Director

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TABLE OF CONTENTS	TABLE OF CONTENTS	TABLE OF CONTENTS
FINANCIAL SERVICES GUIDE ............................................................................................................................. 2
1	PURPOSE, SCOPE AND LIMITATIONS ...................................................................................................... 14
	1.1	PURPOSE................................................................................................................................. 14
	1.2	SCOPE..................................................................................................................................... 14
	1.3	REGULATORYREQUIREMENTS.................................................................................................... 14
	1.4	BASIS OFASSESSMENT.............................................................................................................. 15
	1.5	LIMITATIONS............................................................................................................................. 17
2	PROPOSED	TRANSACTIONS ..................................................................................................................... 20
	2.1	OVERVIEW................................................................................................................................ 20
	2.2	PROPOSEDACQUISITION............................................................................................................ 20
	2.3	PROPOSEDDISPOSAL................................................................................................................ 22
	2.4	CORPORATE STRUCTURE FOLLOWING THEPROPOSEDTRANSACTIONS........................................... 24
	2.5	RATIONALE FOR THEPROPOSEDTRANSACTIONS.......................................................................... 25
3	PROFILE OF CHINALCO YUNNAN COPPER RESOURCES LTD .............................................................. 27
	3.1	OVERVIEW................................................................................................................................ 27
	3.2	KEY MILESTONES....................................................................................................................... 27
	3.3	COMPANYOPERATIONS............................................................................................................. 28
	3.4	KEYPERSONNEL....................................................................................................................... 29
	3.5	CAPITAL STRUCTURE AND OWNERSHIP......................................................................................... 30
	3.6	SHARE PRICE ANALYSIS.............................................................................................................. 31
	3.7	STATEMENT OFCOMPREHENSIVEINCOME.................................................................................... 34
	3.8	STATEMENT OFFINANCIALPOSITION........................................................................................... 35
	3.9	SWOTANALYSIS...................................................................................................................... 36
4	PROFILE OF YUNNAN COPPER INDUSTRY SAN MU MINING CO. LTD .................................................. 37
	4.1	OVERVIEW................................................................................................................................ 37
	4.2	COMPANY OPERATIONS.............................................................................................................. 37
	4.3	CAPITAL STRUCTURE AND OWNERSHIP......................................................................................... 39
	4.4	STATEMENT OFCOMPREHENSIVEINCOME.................................................................................... 39
	4.5	STATEMENT OFFINANCIALPOSITION........................................................................................... 40
5	ECONOMIC OVERVIEW ............................................................................................................................... 42
	5.1	INTRODUCTION.......................................................................................................................... 42
	5.2	AUSTRALIANECONOMICOVERVIEW............................................................................................ 42
	5.3	LAOTIANECONOMICOVERVIEW.................................................................................................. 43
	5.4	CONCLUSION............................................................................................................................ 43
6	INDUSTRY OVERVIEW ................................................................................................................................ 44
	6.1	OVERVIEWAUSTRALIA............................................................................................................... 44
	6.2	OVERVIEWLAOS....................................................................................................................... 44
	6.3	COMMODITY PRICES.................................................................................................................. 45
7	SUMMARY OF TECHNICAL SPECIALISTS' REPORTS ............................................................................. 47
	7.1	ROMAAPPRAISALSVALUATIONREPORT...................................................................................... 47
	7.2	MININGASSOCIATESVALUATIONREPORT.................................................................................... 48
8	VALUATION	METHODOLOGY ..................................................................................................................... 50
	8.1	OVERVIEW................................................................................................................................ 50
	8.2	PROPOSEDACQUISITION............................................................................................................ 50
	8.3	PROPOSEDDISPOSAL................................................................................................................ 51
9	EVALUATION OF THE PROPOSED ACQUISITION .................................................................................... 52
	9.1	FAIR MARKET VALUE OFSANMU................................................................................................. 52
	9.2	CONCLUSION AS TO FAIR MARKET VALUE OFSANMU.................................................................... 53
	9.3	VALUATION OFPROPOSEDACQUISITIONCONSIDERATION.............................................................. 54
	9.4	FAIRNESSASSESSMENT............................................................................................................. 54

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9.5	REASONABLENESSASSESSMENT................................................................................................ 54
9.6	CONCLUSION............................................................................................................................ 56
10 EVALUATION OF THE PROPOSED DISPOSAL ......................................................................................... 57
10.1	APPROACH............................................................................................................................... 57
10.2	VALUATION OFPROPERTIES....................................................................................................... 57
10.3	VALUATION CROSS CHECK.......................................................................................................... 57
10.4	VALUATION OFPROPOSEDDISPOSALCONSIDERATION.................................................................. 58
10.5	FAIRNESSASSESSMENT............................................................................................................. 59
10.6	REASONABLENESSASSESSMENT................................................................................................ 61
10.7	CONCLUSION............................................................................................................................ 62
11 QUALIFICATIONS AND DECLARATIONS .................................................................................................. 63
11.1	QUALIFICATIONS........................................................................................................................ 63
11.2	INDEPENDENCE......................................................................................................................... 63
11.3	DISCLAIMER.............................................................................................................................. 64
APPENDIX 1	GLOSSARY ................................................................................................................................ 65
APPENDIX 2	SOURCES OF INFORMATION .................................................................................................. 67
APPENDIX 3	VALUATION METHODS ............................................................................................................ 68
APPENDIX 4	TECHNICAL SPECIALIST VALUATION REPORTS ................................................................. 70

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1 PURPOSE, SCOPE AND LIMITATIONS

1.1 Purpose

PKFCA has been appointed by the Directors to prepare an IER to the Non-Associated Shareholders expressing our opinion as to whether or not each of the Proposed Acquisition and Proposed Disposal is "Fair" and "Reasonable" to the Non-Associated Shareholders.

This IER is to accompany an Explanatory Memorandum required to be provided to the NonAssociated Shareholders and has been prepared to assist the Directors in fulfilling their obligation to provide the Non-Associated Shareholders with full and proper disclosure to enable them to assess the merits of the Proposed Transactions and to decide whether to accept the Proposed Transactions.

1.2 Scope

The scope of the procedures we undertook in forming our opinion on whether each of the Proposed Transactions is "Fair" and "Reasonable" were limited to those procedures we believed were required in order to form our opinion. Our procedures involved an analysis of financial information and accounting records. This did not include verification work, nor constitute an audit or assurance engagement in accordance with Australian Auditing and Assurance Standards and consequently does not enable us to become aware of all significant matters that might be identified in an audit or assurance engagement. Accordingly, we do not express an audit or assurance engagement opinion.

The assessment of whether the Proposed Transactions are "Fair" and "Reasonable" necessarily requires determining the “fair market value” of various securities, assets and interests.

For the purposes of our opinion, the term "fair market value" is defined as " the price that would be negotiated in an open and unrestricted market between a knowledgeable, willing, but not anxious purchaser and a knowledgeable, willing, but not anxious vendor, acting at arm’s length ".

1.3 Regulatory Requirements

The Proposed Transactions are each subject to Chapter 10 " Transactions with Persons in a Position of Influence" of the ASX Listing Rules.

ASX Listing Rules

ASX Listing Rule 10.1 requires the approval of an entity's non-associated shareholders where a listed company proposes to acquire a substantial asset from, or dispose of a substantial asset to:

a related party or an associate of a related party;
a subsidiary or an associate of a subsidiary;
a substantial shareholder or an associate of a substantial shareholder. A substantial shareholder is defined by the ASX Listing Rules as a shareholder with a relevant interest at any time in the six months prior to a proposed transaction, in at least 10% of the total votes attached to the voting securities; or
a person whose relationship to the entity or a person referred to in the first three bullet points is such that in ASX's opinion, the transaction should be approved by the entity's shareholders.

An asset is substantial if its value, or the value of the consideration for it, is greater than 5% of the total equity interests of the entity as at the date of the last accounts provided to the ASX.

ASX Listing Rule 10.10.2 requires that the notice of meeting to approve such a proposal be accompanied by a report from an independent expert stating whether the proposal is "fair" and "reasonable" to the Non-Associated Shareholders.

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ASX Listing Rule 10.1 applies to each of the Proposed Transactions as:

Chinalco Yunnan is acquiring a 51% equity interest in Sa Mu, which is ultimately whollyowned by YCI;
YEX is acquiring a 55% farm-in interest in the Properties owned by Chinalco Yunnan and YEX is wholly-owned by YCI;
YCI owns 83.33% of CYC, which owns 21.25% of Chinalco Yunnan; and
the value of the 51% interest in San Mu to be acquired by Chinalco Yunnan under the Proposed Acquisition and the value of the 55% interest in the Properties to be acquired by YEX under the Proposed Disposal, in each case, exceeds 5% of the total equity interest of Chinalco Yunnan as at 31 December 2010.

Corporations Act 2001

The Directors have sought legal advice whether the Proposed Transactions constitute the giving and the receipt of a financial benefit to related parties of the Company under Chapter 2E of the Corporations Act. The Directors have provided a statement to PKFCA that they are of the view the Proposed Transactions are not related party transactions. We have relied upon this statement and accordingly have prepared the IER on the basis that the Proposed Transactions are not subject to Chapter 2E of the Corporations Act.

1.4 Basis of Assessment

RG 111 and RG 112

Neither the Corporations Act nor the ASX Listing Rules define the expression "fair" and "reasonable". However, guidance is provided by ASIC's RG's, which establish certain guidelines in respect of independent expert’s reports required under the Corporations Act. In particular, RG 111 "Content of Expert's Reports" and RG 112 "Independence of Experts" have been considered.

PKFCA notes that pursuant to RG 111, separate assessments as to the fairness and reasonableness of each of the Proposed Transactions are required and these assessments are consistent with the assessment of control transactions.

Fair

While the Proposed Transactions are not considered related party transactions, RG111.52 indicates that transactions under ASX Listing Rule 10 and related party transactions under the Corporations Act should be analysed on the bases as set out in RG111.53-63.

RG 111.57 indicates a proposed transaction is "fair" if the value of the asset or financial benefit to be provided by the entity to the related party is equal to or less than the value of the consideration being provided to the entity. This comparison should be made assuming a knowledgeable and willing, but not anxious, buyer and a knowledgeable and willing, but not anxious, seller acting at arm’s length. In valuing the financial benefit/asset given and the consideration received by the entity, an expert should take into account all material terms of the proposed transaction.

Any special value of the 'target' to a particular 'bidder' (e.g. synergies that are not available to other bidders) should not be taken into account under this comparison, but should be considered under the test of "reasonable".

The assessment should be made assuming 100% ownership of the 'target' and irrespective of whether the consideration is scrip or cash. The expert should not consider the percentage holding of the 'bidder' or its associates in the 'target' when making this comparison.

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Reasonable

RG111.60 indicates a proposed transaction is "reasonable" if it is "fair". It might also be "reasonable" if, despite being "not fair", the expert believes there are sufficient reasons for members to vote for the proposal. When deciding whether a proposed transaction is "reasonable", factors that an expert might consider include:

the financial situation and solvency of the entity, including the factors set out in RG 111.26, if the consideration for the financial benefit is cash;
opportunity costs;
the alternative options available to the entity and the likelihood of those options occurring;
the entity’s bargaining position;
whether there is selective treatment of any security holder, particularly the related party;
any special value of the transaction to the purchaser, such as particular technology or the potential to write off outstanding loans from the target; and
the liquidity of the market in the entity’s securities.

PKFCA has not considered RG 76 as the Directors are of the view the Proposed Transactions do not constitute related party transactions. We have been instructed not to prepare the IER on this basis.

APES 225

APES 225 " Valuations Services " issued by the Accounting Professional & Ethical Standards Board Limited sets out mandatory requirements for the provision of quality and ethical valuation services. PKFCA has complied with this standard in the preparation of this IER.

General requirements in relation to the IER

In preparing the IER, ASIC requires the independent expert, when deciding on the form of analysis for a report, to bear in mind that the main purpose of the report is to adequately deal with the concerns that could reasonably be anticipated for those persons affected by the Proposed Transactions. We, therefore, in preparing the IER have considered the necessary legal requirements and guidance of the Corporations Act, ASIC's RG's and commercial practice, as if the IER was required for legal purposes.

The IER includes the following information and disclosures:

particulars of any relationship, pecuniary or otherwise, whether existing presently or at any time within the last two years, between PKF (East Coast Partnership) or PKFCA and any of the parties to the Proposed Transactions;
the nature of any fee or pecuniary interest or benefit, whether direct or indirect, that we have received or will or may receive for or in connection with the preparation of the IER;
in the IER, that PKFCA has been appointed as independent expert for the purposes of providing an IER for inclusion in the Explanatory Memorandum;
that we have relied on information provided by the Directors and management of Chinalco Yunnan and San Mu. We have not carried out any form of audit or independent verification of the information provided; and
that we have received representations from the Directors in relation to the completeness and accuracy of the information provided to us for the purposes of the IER.

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1.5 Limitations

1.5.1 General

PKFCA has consented to the inclusion of the IER with the Explanatory Memorandum to be issued by Chinalco Yunnan. Apart from the IER, PKFCA is not responsible for the contents of the Explanatory Memorandum, any other document or announcement associated with the Proposed Transactions. PKFCA acknowledges that its IER may be lodged with the regulatory authorities, including the ASX.

The IER should not be used for any other purpose and PKFCA does not accept any responsibility for its use outside this purpose. Except in accordance with the stated purpose, no extract, quote or copy of our IER, in whole or in part, should be reproduced without our written consent, as to the form and context in which it may appear.

1.5.2 Non-Associated Shareholders' individual circumstances

Our analysis has been undertaken, and our conclusions are expressed, at an aggregate level. Accordingly, PKFCA has not considered the effect of the Proposed Transactions on the particular circumstances of individual Non-Associated Shareholders. Some individual Non-Associated Shareholders may place a different emphasis on various aspects of the Proposed Transactions from that adopted in this IER. Accordingly, individual Non-Associated Shareholders may reach different conclusions as to whether or not the Proposed Acquisition and the Proposed Disposal are fair and reasonable in their individual circumstances. As the decision of an individual NonAssociated Shareholder in relation to the Proposed Transactions may be influenced by their particular circumstances (including their taxation position), Non-Associated Shareholders are advised to seek their own independent advice.

1.5.3 Current market conditions

Our opinion is based on economic, market and other conditions prevailing at the Assessment Date. Such conditions can change significantly over relatively short periods of time. Changes in those conditions may result in any valuation or other opinion becoming quickly outdated and in need of revision. PKFCA reserves the right to revise any valuation or other opinion, in the light of material information existing at the valuation date that subsequently becomes known to PKFCA.

1.5.4 Reliance on information

This IER is based upon financial and other information provided by the Directors and management of Chinalco Yunnan and San Mu, a valuation report prepared by Mining Associates on the fair market value of the Properties (" Mining Associates Valuation Report ") and a valuation report prepared by Roma Appraisals on the fair market value of the Laos Projects (" Roma Appraisals Valuation Report "). Mining Associates and Roma Appraisals are collectively referred to as the " Technical Specialists " and their valuation reports are collectively referred to as the " Technical Specialists' Valuation Reports ".

PKFCA has considered and relied upon this information. PKFCA believes the information provided to be reliable, complete and not misleading, and we have no reason to believe that any material facts have been withheld.

It was not PKFCA’s role to undertake, and PKFCA has not undertaken, any commercial, technical, financial, legal, taxation or other due diligence, other similar investigative activities or valuations in respect of the Proposed Transactions. PKFCA understands that the Directors have been advised by legal, accounting and other appropriate advisors in relation to such matters, as necessary. PKFCA does not provide any warranty or guarantee as to the existence, extent, adequacy, effectiveness and/ or completeness of any due diligence or other similar investigative activities by the Directors and/or their advisors.

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PKFCA does not provide any warranty or guarantee that its inquiries have identified or verified all of the matters which an audit, extensive examination or “due diligence” investigation might disclose. An opinion as to whether a corporate transaction is "fair" and "reasonable" is in the nature of an overall opinion, rather than an audit or detailed investigation and it is in this context that PKFCA advises that it is not in a position, nor is it practical for PKFCA, to undertake such an extensive verification exercise.

It is understood that except where noted, the accounting information provided to PKFCA was prepared in accordance with generally accepted accounting principles (including adoption of Australian Equivalents to International Financial Reporting Standards) and prepared in a manner consistent with the method of accounting used by the Company in previous accounting periods.

1.5.5 Assumptions

In forming our opinion, we made certain assumptions, including:

that matters such as retention of key personnel, title to assets, compliance with laws and regulations and contracts in place are in good standing, and will remain so, and that there are no material legal proceedings, other than as publicly disclosed;
information in relation to the Proposed Transactions that is distributed to Non-Associated Shareholders, or any information issued to a statutory body is complete, accurate and fairly presented in all material respects;
publicly available information relied on by us is accurate, complete and not misleading;
if the Proposed Transactions are implemented, that the Proposed Transactions will be implemented in accordance with its stated terms;
the legal mechanisms to implement the Proposed Transactions are correct and effective;
subject to the review undertaken in paragraphs Sections 1.5.6 and 1.5.7, we have relied on the Technical Specialists' Valuation Reports, which set out their respective opinions as to the fair market values of the Laos Projects and the Properties; and
each of the Technical Specialists have provided their consent for PKFCA to rely on their report and for its inclusion in the IER. As at the date of this IER the Technical Specialists have not withdrawn this consent. The Technical Specialists' Valuation Reports are attached in Appendix 4 of this IER.

1.5.6 Review of the Mining Associates Valuation Report

We have undertaken the following limited review of the Mining Associates Valuation Report in order to satisfy our self as to its reasonableness:

the methodology and approach undertaken;
that the report is consistent with our knowledge and understanding of the Properties; and
the qualifications and experience of the provider appear to be appropriate.

Based on our limited review of the Mining Associates Valuation Report, nothing has come to our attention that would lead us to believe that the conclusions reached in that report are not reliable and fit for the purpose of this IER.

1.5.7 Review of the Roma Appraisals Valuation Report

We have undertaken the following limited review of the Roma Appraisals Valuation Report in order to satisfy our self as to its reasonableness:

the methodology and approach undertaken;
that the report is consistent with our knowledge and understanding of San Mu and the Laos Projects; and
the qualifications and experience of the provider appear to be appropriate.

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Based on our limited review of the Roma Appraisals Valuation Report, nothing has come to our attention that would lead us to believe that the conclusions reached in that report are not reliable and fit for the purpose of this IER.

The Roma Appraisals Valuation Report has figures stated in RMB. Where appropriate, PKFCA has translated to AU$ using a foreign exchange rate provided by the RBA as at the Assessment Date.

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2 PROPOSED TRANSACTIONS

2.1 Overview

On 3 February 2011, the Directors announced to the ASX their intention to enter into the Proposed Acquisition and the Proposed Disposal.

The diagram below outlines the corporate structure and relationship between the entities involved in the Proposed Transactions. The diagram excludes other interests each party may hold that are not directly affected by the Proposed Transactions.

Figure 1

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

Corporate structure before the Proposed Transactions
YCI
Yunnan Copper Industry (Group) Co Ltd
Holds 85% Holds 100% Holds 83.33%
YEX CYC
Yunnan Copper Mineral Resources China Yunnan Copper (Australia)
Exploration & Development Co Investment and Development Co Ltd
Holds 15% Holds 21.25%
San Mu Company
Yunnan Copper San Mu Mining Chinalco Yunnan Copper Resources Ltd
Industry Co Ltd
Holds 100%
Holds 100% (Laos) Yunnan Copper
Industry (GROUP) Properties
Oudomxay Mining Sloe EPM12205 – Roseby East
CO.LTD EPM15084 – Quamby
EPM 15095 – Clonagh
• Jiuzhai Project EPM16393 – Waterford
• Nadao Project
• Modeng Project
(Laos) Yunnan Copper
Industry (GROUP) Phongsaiy
Mining Sloe CO.LTD
• Xinzhai Project
----- End of picture text -----

Source: Chinalco Yunnan management

Note: The above diagram excludes assets that are not directly affected by the Proposed Transactions

2.2 Proposed Acquisition

On 3 February 2011 the Directors announced to the ASX that the Company has entered into an agreement with YEX for Chinalco Yunnan to acquire a 51% equity interest in San Mu, via the subscription of new shares in San Mu to Chinalco Yunnan. Consequently, YEX's and YCI's shareholdings in San Mu will be diluted due to the issue of new shares to the Company.

San Mu is a Chinese registered company holding four copper and silver projects in northern Laos, via two wholly-owned subsidiaries.

The consideration for the Proposed Acquisition is the AU$ equivalent of RMB17,827,700, payable in cash, in three stages over a 12 month period (" Proposed Acquisition Consideration ").

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The investment in San Mu will be utilised to complete an approximately AU$2.8 million exploration program.

The resulting effect on the corporate structure of San Mu following the approval of the Proposed Acquisition is summarised below:

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Figure 2
Corporate structure following the Proposed Acquisition
YEX Holds YCI Company
100%
Yunnan Copper Mineral Yunnan Copper Industry Chinalco Yunnan Copper
Resources Exploration & (Group) Co Ltd Resources Ltd
Development Co
Will hold Will hold 41.65% Will hold
7.35% 51%, via the
subscription
San Mu of new
Yunnan Copper San Mu Mining shares
Industry Co. Ltd
----- End of picture text -----

Source: Chinalco Yunnan management

Note: San Mu will still hold 100% equity interest in its two respective subsidiaries. The above diagram excludes other assets that are not directly affected by the Proposed Transactions

2.2.1 Summary of Key Terms

The Proposed Acquisition is governed by three key documents, being:

the Articles of Association of San Mu (" Articles of Association ");
the Agreement on Capital Increase (" Capital Increase Agreement "); and
the San Mu JV Contract.

In general, the keys terms of the documents are outlined below:

San Mu's legal status will be modified to become a Chinese-foreign joint venture in accordance with the San Mu JV Contract. San Mu will be issued a new business license (" San Mu Business License ");
San Mu will operate for a period of 20 years from the issue of the San Mu Business License;
the registered capital of San Mu shall be increased by RMB17,827,700 (i.e. the Company's cash contribution), bringing the total registered capital of San Mu to RMB37,827,700;
the increase in registered capital shall be contributed by Chinalco Yunnan, payable in cash. The cash payment shall be the AU$ equivalent of RMB17,827,700. The exchange rate of RMB for AU$ is to be based on the buying rate of the Bank of China on the actual day of the cash contribution;
The Company's cash contribution will be made in three instalments as set out as follows:
RMB6 million of increased registered capital shall be paid on the Contribution Date (defined as the first contribution to the increased capital by the Company);
RMB6 million of increased registered capital shall be paid within 180 days after the issue of the San Mu Business Licence; and
RMB5.8 million of increased registered capital shall be paid within 360 days after the issue of the San Mu Business Licence.
The final San Mu shareholding after the third and final payment of increased capital by Chinalco Yunnan is set out as follows:

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YCI - registered capital contribution of RMB17 million - 41.65%;

YEX - registered capital contribution of RMB3 million - 7.35%; and

Chinalco Yunnan - registered capital contribution of RMB17.8 million - 51%.

The Capital Increase Agreement states the relative shareholding under the Proposed Acquisition is calculated on a net asset position. The Directors have advised that Zhonghe Appraisals Co Ltd were commissioned in September 2010 to perform a valuation of San Mu as at 30 June 2010. The purpose of this valuation was for the existing shareholders of San Mu to determine the minimum subscription price the Company would pay for new shares based on the value of San Mu.

Zhonghe Appraisals Co Ltd concluded the value of San Mu was RMB17,807,400. Chinalco Yunnan was offered 51% of San Mu for RMB17,827,700, which would be issued as new share capital. The notional value of San Mu after this contribution would be RMB35,635,100 and the Company's stake would be 51%.

Furthermore, the Directors have advised that under the Chinese company incorporation system, a company's total registered capital and shareholding percentage need only to be recorded, not the number of shares issued. The Directors have confirmed that the Company's equity interest in San Mu after the Proposed Acquisition would be 51%.

Once Chinalco Yunnan has paid its registered contribution in full, there is no requirement to provide any further funds to or on behalf of San Mu;
The Company shall appoint three directors (out of a total of five) to San Mu's board of directors;
After the issue of the San Mu Business License, disputes against San Mu relating to preexisting debts (i.e. debts existing prior to Chinalco Yunnan's contribution and becoming a shareholder in San Mu) will be dealt with and costs covered in full by YCI and YEX;
The Articles of Association, Capital Increase Agreement and San Mu JV Contract are silent on any operational targets that are to be achieved after the implementation of the Proposed Acquisition; and
The Proposed Acquisition is subject to government approvals in Australia and China.

2.3 Proposed Disposal

On 3 February 2011 Chinalco Yunnan announced to the ASX that a Letter of Intent (" LOI ") had been signed between the Company and YEX. The LOI proposed that the Company and YEX will enter into a JV Agreement granting YEX the exclusive right to farm-in and earn up to a 55% interest in the Properties, free of all encumbrances (" Farm-in Interest "), by incurring a minimum exploration expenditure of AU$5 million on the Properties over a three year period.

The minimum exploration expenditures noted above is referred to as the " Proposed Disposal Consideration ".

On 21 March 2011 Chinalco Yunnan announced to the ASX that the Company and YEX executed the JV Agreement.

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The expected corporate structure following the Proposed Disposal, assuming YEX fulfils the minimum exploration expenditure requirements, is summarised below:

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Figure 3
Corporate structure following the Proposed Disposal
Company YEX
Chinalco Yunnan Copper JV Agreement Yunnan Copper Mineral
Resources Ltd Resources Exploration &
Development Co
Will hold 45% Will hold 55%
Properties
• EPM 12205 – Roseby East
• EPM 15084 – Quamby
• EPM 15095 – Clonagh
• EPM 16393 – Waterford
Source: JV Agreement and Chinalco Yunnan management
Notes: Diagram assumes YEX fulfils the AU$5 million minimum exploration expenditure requirement. The above
diagram excludes other assets not directly affected by the Proposed Transactions
----- End of picture text -----

2.3.1 Summary of Key Terms of the JV Agreement

Outlined below is a summary of the key terms of the JV Agreement (as amended by the Deed of Variation dated 2 September 2011):

the JV Agreement commences when the Company obtains the necessary shareholder approvals in relation to the transactions contemplated by the JV Agreement (" JV Agreement Commencement Date ");
the JV Agreement ends on 15 February 2014, or such later date as agreed by Chinalco Yunnan and YEX (" JV Agreement End Date ");
YEX shall earn up to a 55% participating interest in the Properties by spending a total of AU$5 million in exploration expenditure on or before the JV Agreement End Date, as follows:

follows:
Tranche 1	spending AU$1.2 million in exploration expenditure on or before the date being one year after the JV Agreement Commencement Date to earn a 10% participating interest in the Properties;
Tranche 2	spending an extra AU$1.8million in exploration expenditure on or before the date being two years after the JV Agreement Commencement Date to earn an extra 20% participating interest in the Properties; and
Tranche 3	spending extra AU$2 million in exploration expenditure on or before the date being three years after the JV Agreement Commencement Date, but on or before the JV Agreement End Date, to earn an extra 25% participating interest in the Properties.

Chinalco Yunnan is currently the 100% legal owner of the Properties and the assignment and registration of the incremental 10%, 20% and 25% participating interests (leading to a total of 55% participating interest) to YEX will be effected in accordance with the staged exploration expenditure outlined above. That is:
once YEX spends AU$1.2 million in exploration expenditure on or before the date being one year after the JV Agreement Commencement Date, the Company will assign and register a 10% participating interest in the Properties to YEX;

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once YEX spends and additional AU$1.8 million in exploration expenditure on or before the date being two years after the JV Agreement Commencement Date, the Company will assign and register a further 20% participating interest in the Properties to YEX; and
once YEX spends an additional AU$2 million in exploration expenditure on or before the date being three years after the JV Agreement Commencement Date, but on or before the JV Agreement End Date, the Company will assign and register a further 25% participating interest in the Properties to YEX.
in the event of partial expenditure below the stage exploration expenditure obligations, YEX will not be entitled to a proportionate participating interest in the Properties. For example, if YEX spent AU$500,000 in exploration expenditure (and no more), YEX would not be entitled to any participating interest in the Properties. If YEX spent AU$1.2 million in exploration expenditure on or before the date being one year after the JV Agreement Commencement Date, and subsequently spent an additional AU$500,000 in exploration expenditure (and no more), YEX would only be entitled to a 10% participating interest in the Properties;
if YEX does not satisfy the minimum exploration expenditure requirement (to keep the Properties in good standing) prior to the JV Agreement End Date, the JV Agreement shall be terminated and YEX shall have no further obligations;
during the minimum expenditure farm-in period, YEX shall have sole and exclusive rights to carry out exploration on and have non-exclusive possession of the Properties;
when YEX has performed its farm-in expenditure obligations, a joint venture will be formed between YEX and the Company with the following participating interests:
YEX - 55%; and
Chinalco Yunnan - 45%.
the joint venture shall have an operating committee, which shall have management and control of joint venture operations and all other matters affecting the joint venture. YEX and Chinalco Yunnan will each have one member on the operating committee, and each party shall have a block vote on the operating committee, proportionate to its respective participating interest. Decisions of the operating committee shall be made by majority vote representing at least 55% of the participating interests;
YEX will be the operator of the joint venture and, subject to the control and direction of the operating committee, shall have day-to-day management and control of all joint venture operations;
YEX is obliged to carry out the joint venture operations in accordance with work programs and budgets approved by the operating committee;
fees, rents, rates and other monies levied or assessed upon the Properties (exclusive of the exploration expenditure payable by YEX pursuant to the Proposed Disposal) under Queensland's Mineral Resources Act 1989 are payable by YEX. We have been advised by the Directors that these monies would be a maximum of AU$20,000 per year; and
after the JV Agreement End Date, if a party does not contribute to all costs in connection with the Properties in accordance with each party's interest, that party's interest shall dilute so that its interest from time to time shall be calculated as:
for each AU$1 million or part thereof of expenditure not contributed by the party, that party's interest in the Properties shall be reduced by 5% of such AU$1 million or pro rata for expenditure less than AU$1 million.

2.4 Corporate structure following the Proposed Transactions

Set out below is the anticipated corporate structure of Chinalco Yunnan following the approval of the Proposed Acquisition and the Proposed Disposal by the Non-Associated Shareholders and other regulatory approvals:

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

Figure 4
Corporate structure following the Proposed Transactions
YCI
41.65%
Yunnan Copper Industry (Group) Co Ltd
100% 83.33%
YEX CYC
Yunnan Copper Mineral Resources China Yunnan Copper (Australia)
Exploration & Development Co Investment and Development Co Ltd
7.35% 21.25%
San Mu Company
Yunnan Copper San Mu Mining 51% Chinalco Yunnan Copper Resources Ltd
Industry Co Ltd
55%
45%
100%
(Laos) Yunnan Copper Properties
Industry (GROUP) EPM12205 – Roseby East
Oudomxay Mining Sloe EPM15084 – Quamby
CO.LTD EPM 15095 – Clonagh
EPM16393 – Waterford
• Jiuzhai Project
• Nadao Project
• Modeng Project
(Laos) Yunnan Copper
Industry (GROUP) Phongsaiy
Mining Sloe CO.LTD
• Xinzhai Project
----- End of picture text -----

Source: Chinalco Yunnan management

Notes: The above diagram assumes the Proposed Transactions are approved by the Non-Associated Shareholders and YEX fulfils the minimum exploration expenditure on the Properties (i.e. the full amount of AU$5 million). San Mu will still hold 100% equity interest in its two respective subsidiaries. The diagram excludes other assets that are not directly affected with the Proposed Transactions

2.5 Rationale for the Proposed Transactions

Chinalco Yunnan's rationale for the Proposed Transactions is as follows:

2.5.1 Proposed Acquisition

The Proposed Acquisition provides the Company the opportunity to gain a controlling interest in San Mu and the Laos Projects. The Directors have stated the Xinzhai Project has shown an early indication of the project's commerciality. While the Xinzhai Project mineral body is not compliant with The Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (2004 edition) (" JORC Code "), the Company's investment in San Mu would allow a drilling program to be completed and potentially bring the mineral body to a JORC Codecompliant status. A feasibility study would be completed to Australian standards.

The Company has the potential to gain synergies and infrastructure benefits by operating in a low-cost environment within Laos, utilising the Company's technical expertise and being in close proximity to a processing facility owned by YCI, situated 20 km north of the Laos/Chinese border.

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2.5.2 Proposed Disposal

The Directors have stated that the Properties are a low priority, given the minimal resource results found to date. Accordingly, limited capital and staff time are budgeted towards further exploration work on the Properties.

The Proposed Disposal provides the opportunity for Chinalco Yunnan to participate in any positive results of further exploration expenditure at a reduced cost to the Company on projects that are a low priority. The Directors have stated that a diluted interest in the Properties is of no concern, as the Company, with limited resources, would not have embarked on an extensive exploration program of the Properties, in the absence of the Proposed Disposal.

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3 PROFILE OF CHINALCO YUNNAN COPPER RESOURCES LTD

3.1 Overview

Chinalco Yunnan, formerly known as China Yunnan Copper Australia Limited, was incorporated in 1995 and is headquartered in Brisbane, Australia. The Company has been listed on the ASX since 2007. The market capitalisation of Chinalco Yunnan as at 19 August 2011 was AU$35.5 million.

The Company engages in the exploration and development of minerals, primarily copper, silver, rare earth elements, gold and uranium. It operates throughout Australia and Chile.

3.2 Key milestones

Outlined below is a summary of the key milestones of the Company since its incorporation:

Table 3: Chinalco Yunnan - ASX announcements

Date Description	Date Description
August 1995 October 2007 August 2009 August 2009 November 2009 December 2009 February 2010 March 2010 April 2011 April 2011 April 2011 May 2011 June 2011 July 2011	Chinalco Yunnan was formed under the name Radhalve Pty Ltd and subsequently changed its name to Mt Stewart Gold Pty Ltd. Listed on the ASX. Entered into a purchase agreement with the owner of Mining Lease 1631 in the Pentland District of northern Queensland. Entered into a farm-in and joint venture agreement with Goldsearch Limited ("Goldsearch") to explore Goldsearch's Mary Kathleen Project. Entered into a farm-in and joint venture agreement with ActivEX Limited ("ActivEX") to explore ActivEX's Pentland Project. Chinalco Yunnan and YCI announced the formation of a major strategic alliance to conduct exploration activities in Yunnan Province, China. Entered into a purchase agreement with Carpentaria Exploration Ltd for Exploration Lease EPM16393 in north west Queensland. Entered into a purchase agreement with Rey Resources Ltd for Humitos Pty Ltd, which owned the Humitos Copper Porphyry property in the Copiapo District of northern Chile. Chinalco Yunnan withdraws from the ActivEX joint venture. Announces AU$14 million capital raising by issue of 64,695,775 ordinary shares. China Yunnan Copper Australia Limitada (a Chilean subsidiary of Chinalco Yunnan) signed two Agreements with Rio Tinto Mining and Exploration Chile ("RTMEC") for options to joint venture covering exploration properties in northern Chile. Changed name to Chinalco Yunnan Copper Resources Ltd from China Yunnan Copper Australia Ltd. 70% interest earned in the Goldsearch joint venture. Significant initial results from a new sulphide zone discovered at the Elaine Dorothy prospect. Goldsearch announced to the ASX they have raised $1 million via a placement to provide additional working capital to finance ongoing exploration contributions of the Mary Kathleen Joint Venture with Chinalco Yunnan.

Date
Description

August 1995
October 2007
August 2009
August 2009
November 2009
December 2009
February 2010
March 2010
April 2011
April 2011
April 2011
May 2011
June 2011
July 2011

Chinalco Yunnan was formed under the name Radhalve Pty Ltd and subsequently
changed its name to Mt Stewart Gold Pty Ltd.
Listed on the ASX.
Entered into a purchase agreement with the owner of Mining Lease 1631 in the
Pentland District of northern Queensland.
Entered into a farm-in and joint venture agreement with Goldsearch Limited
("Goldsearch") to explore Goldsearch's Mary Kathleen Project.
Entered into a farm-in and joint venture agreement with ActivEX Limited ("ActivEX") to
explore ActivEX's Pentland Project.
Chinalco Yunnan and YCI announced the formation of a major strategic alliance to
conduct exploration activities in Yunnan Province, China.
Entered into a purchase agreement with Carpentaria Exploration Ltd for Exploration
Lease EPM16393 in north west Queensland.
Entered into a purchase agreement with Rey Resources Ltd for Humitos Pty Ltd, which
owned the Humitos Copper Porphyry property in the Copiapo District of northern Chile.
Chinalco Yunnan withdraws from the ActivEX joint venture.
Announces AU$14 million capital raising by issue of 64,695,775 ordinary shares.
China Yunnan Copper Australia Limitada (a Chilean subsidiary of Chinalco Yunnan)
signed two Agreements with Rio Tinto Mining and Exploration Chile ("RTMEC") for
options to joint venture covering exploration properties in northern Chile.
Changed name to Chinalco Yunnan Copper Resources Ltd from China Yunnan Copper
Australia Ltd.
70% interest earned in the Goldsearch joint venture.
Significant initial results from a new sulphide zone discovered at the Elaine Dorothy
prospect.
Goldsearch announced to the ASX they have raised $1 million via a placement to
provide additional working capital to finance ongoing exploration contributions of the
Mary Kathleen Joint Venture with Chinalco Yunnan.

Source: ASX announcements

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3.3 Company Operations

The following provides an overview of the Company's operations:

3.3.1 Australia

Copper Gold - Cloncurry North and Waterford Projects (i.e. projects associated with the Proposed Disposal)

The Cloncurry North Project comprises EPM 12205, EPM 15084 and EPM 15095 which are centered approximately 30 kilometers north of Cloncurry, Queensland. The tenements are located near major sealed highways and numerous secondary roads which link the tenements via Cloncurry to the cities of Mt Isa and Townsville.

The Waterford Project comprises EPM 16393 and is located approximately 45 kilometers north of Boulia, Queensland. EPM 16393 is intersected by a formed gravel road that connects to Boulia which then has a sealed road to Mt Isa.

Copper Gold - Mount Isa (Mary Kathleen Joint Venture with Goldsearch)

On 28 August 2009, the Company announced that it had entered into a farm-in/joint venture agreement with Goldsearch over three exploration permits (EPM 14019, EPM 14022 and EPM 15257) comprising the Mary Kathleen Joint Venture. A number of high priority targets with potential for the discovery of deposits of copper, gold, uranium and rare earth elements have been defined in the region. Target areas include uranium potential at the Elaine Dorothy and economic copper/gold deposits at Hardway, Pindora, Prince of Wales, Jubilee, Mount Dorothy and King Solomon. The projects covered in the Goldsearch joint venture are located an average 50 kilometers south-east of Mount Isa.

As at 30 June 2011, the Company had a 70% equity stake in the Goldsearch joint venture. Under the terms of the agreement, Chinalco Yunnan was obligated to carry out exploration programs (to the total amount of AU$1.5 million) to investigate a number of high priority targets identified by Goldsearch, and previous tenement holders, within a three year period. Upon completion of the farm-in period, both parties will contribute to the joint venture in proportion to their participating interests with normal dilution applying thereafter.

On 14 July 2011, the Company announced to the ASX significant initial results from a new sulphide zone discovered at the Elaine Dorothy prospect. A total of four diamond drill holes were drilled to further test the area for copper sulphide, rare earths and other any other elements.

Other projects

The Company had other projects in addition to the above, being the Clermont, Ravenswood and Pentland Projects. The Clermont and Ravenswood Projects were fully impaired by 30 June 2010. The Pentland Project (a joint venture with ActivEX) was fully impaired by 31 December 2010.

3.3.2 Chile

Copper - Rio Tinto Joint Venture

On 27 April 2011, China Yunnan Copper Australia Limitada (a Chilean subsidiary of Chinalco Yunnan) signed two agreements with RTMEC to commence a joint venture covering copper porphyry exploration properties, Palmani and Caramasa, in northern Chile.

The Palmani prospect is located 60 kilometers north-east of Arica and lies within the same belt of rocks that host the Cerro Colorado porphyry copper deposit and the Toquepala porphyry copper deposit in southern Peru.

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The Caramasa prospect is located in the Palaeocene Porphyry Copper Belt of northern Chile, 80 kilometers north of BHP Billiton's Cerro Colorado mine.

The key components of the two joint ventures are:

Palmani: Minimum expenditure commitment for first year of US$250,000. Total expenditures (over five years) of US$10 million and 5,000 meters of drilling to earn a 40% interest. After the exercise of the first option, RTMEC has 90 days to elect to resume management of the project or grant a second option for a further three years, with expenditures of US$15 million needing to be incurred for Chinalco Yunnanto gain a further 20% (60% in total); and
Caramasa: Minimum expenditure commitment for first year of US$250,000. Total expenditures (over five years) of US$8 million and 5,000 meters of drilling to earn a 40% interest. After exercise of the first option, RTMEC has 90 days to elect to resume management of the project or grant a second option for a further three years with expenditures of US$15 million needing to be incurred for Chinalco Yunnanto gain a further 20% (60% in total).

Copper - Humitos

On 22 February 2010, the Company announced that it had entered into a purchase agreement with Rey Resources Ltd for Humitos Pty Ltd. Humitos Pty Ltd owns the Humitos Copper Porphyry property. The Humitos project is located 90km north of Copiapo, Chile.

The Humitos project comprises 17 tenements over 4,500+ hectares and is the first time a Chinalco associated company has entered the Chilean copper industry as a direct participant.

The Humitos project is in the centre of a broad NNE-trending structural corridor bounded by the Atacama Fault to the east and the Domeyko Fault system to the west. This zone hosts a number of deposits including the El Salvador, Damiana and Caballo Muerto deposits, in addition to copper silver epithermal vein mineralisation of the Inca de Oro district. The Humitos project consists of numerous undrilled targets, including an untested supergene horizon in the Chilean Cordillera.

3.4 Key Personnel

The Directors and key management of Chinalco Yunnan and their background are outlined in the following table:

Table 4: Chinalco Yunnan - key personnel

Name Position Description	Name Position Description	Name Position Description
Mr Norman Zillman Mr Zhihua Yao Mr Jason Beckton	Non-Executive Co- Chairman Non-Executive Co- Chairman Managing Director	Mr Zillman is a professional geologist with over 40 years experience in exploration and production in the petroleum, coal and mineral industries in Australia and internationally. Mr Zillman is the Non Executive Chairman on Burleson Energy Limited and a Non Executive Director of Earth Heat Resources Limited. Mr Zillman has filled the positions of Managing Director responsible for the initial public offering and ASX listing of Queensland Gas Company Limited, Chairman of Great Artesian Oil and Gas Limited and a Director of Planet Gas Limited. Mr Zillman holds a Bachelor of Science Degree in Geology and a Bachelor of Science (with Honours) in Botany from the University of Queensland. Mr Yao is the Deputy General Manager of YCI. He has responsibility for the exploration, M&A and project development activities of YCI. Mr Yao has over 28 years experience in mining and exploration in China. Mr Beckton is a professional geologist with over 19 years experience in exploration, project development, production and management in Australia and internationally. Mr Beckton holds a Bachelor of Science (Honours) in Geology from Melbourne University, and a Masters in Economic Geology from the ARC Centre of Excellence in Ore Deposits at the University of Tasmania.

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Name Position Description	Name Position Description	Name Position Description
Mr Zewen Yang Mr Paul Marshall Mr Richard Hatcher	Executive Director Company Secretary and Chief Financial Officer ("CFO") Exploration Manager	Mr Yang is the General Manger of China Yunnan Copper (Australia) Investment and Development Co Ltd and is based in Sydney. Mr Yang has 18 years experience in mineral resources trading and project investment areas in China and Australia. He has been with the Yunnan Copper Industry (Group) Co Ltd since March 2004. Mr Marshall has more than 22 years in the accountancy profession, having worked for Ernst and Young for 10 years, and subsequently over ten years in commercial roles as Company Secretary and CFO for a number of listed and unlisted companies mainly in the resources sector. Mr Marshall is a Chartered Accountant holding a Bachelor of Laws degree from Liverpool University, England, and a post Graduate Diploma in Accounting and Finance from the London School of Economics, England. Mr Hatcher is Senior Geologist of the Company, managing the north west project areas of Mount Isa and Cloncurry. Mr Hatcher has 16 years experience in gold, base metals, diamond, petroleum and lateritic nickel exploration and project development in Australia, the South Pacific, New Zealand and Central America.

Source: Chinalco Yunnan website and 2010 Annual Report

3.5 Capital structure and ownership

Chinalco Yunnan has the following securities on issue as at 12 August 2011:

173,358,349 ordinary shares; and
17,800,000 unlisted options.

3.5.1 Ordinary shares

Chinalco Yunnan's top 10 shareholders and their respective shareholdings as at 12 August 2011 are summarised in the following table:

Table 5: Top 10 Shareholders

Shareholder	Number of Ordinary Shares % of issued Ordinary Shares	Number of Ordinary Shares % of issued Ordinary Shares
China Yunnan Copper (Australia) Investment and Development Co Ltd Mr Norman Joseph Zillman Elliott Nominees Pty Ltd HSBC Custody Nominees (Australia) Limited – GSCO ECA Premar Capital Nominees Pty Limited Flatoak Pty Ltd UBS Wealth Management Australia Nominees Pty Ltd Bannerblock Pty Ltd Yunnan & Hong Kong Metal Co. Ltd HSBC Custody Nominees (Australia) Limited Top 10 Shareholders Other Shareholders Total Shareholders	36,839,852 8,200,000 7,150,000 6,196,686 3,633,333 3,363,263 2,808,514 2,500,000 2,400,000 2,369,435	21.25% 4.73% 4.12% 3.57% 2.10% 1.94% 1.62% 1.44% 1.38% 1.37%
	75,461,083 97,897,266	43.53% 56.47%
	173,358,349	100.00%

Source:Chinalco Yunnan share register as at 12 August 2011

In regard to the above table, we note that CYC is the only shareholder with a holding greater than 5%.

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3.5.2 Unlisted options

A summary of Chinalco Yunnan's unlisted options as at 12 August 2011 is outlined in the table below:

Table 6: Unlisted options

Option expiry date Exercise price	Option expiry date Exercise price	Number of options
20 August 2011 19 December 2011 20 August 2012 20 December 2012 20 December 2012 20 December 2012 20 December 2012 20 December 2012 12 August 2014 Total	$0.40 $0.40 $0.40 $0.40 $0.40 $0.40 $0.40 $0.40 $0.30	2,000,000 300,000 1,000,000 100,000 1,000,000 3,500,000 3,750,000 3,750,000 2,400,000
		17,800,000

Source: Appendix 5B: Mining exploration entity quarterly report - announced to ASX on 28 July 2011; Appendix 3B announced to ASX on 12 August 2011

3.6 Share price analysis

The graph below illustrates the movement in the daily share price, together with the volumes traded, from 20 August 2010 to 19 August 2011.

Figure 5

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

Chinalco Yunnan share price analysis
Share price AU$ Volume
0.45 16,000,000
0.40 H 14,000,000
0.35
12,000,000
I M
0.30
N P 10,000,000
J K
0.25
L
B F G O 8,000,000
0.20 D
A
6,000,000
0.15 C
E
4,000,000
0.10
0.05 2,000,000
- -
Volume CYU AU EQUITY S&P/ASX300 Metals and Mining Index
Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11
----- End of picture text -----

Source: Bloomberg, PKFCA analysis

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Notable events announced to the ASX that may have impacted the Company's share price and volumes traded between 20 August 2010 and 19 August 2011 are set out below:

Table 7: Chinalco Yunnan's ASX announcements

Reference Date Details of Announcement	Reference Date Details of Announcement	Reference Date Details of Announcement
A B C D E F G H I J K L M N O P	19 August 2010 20 September 2010 18 October 2010 11 November 2010 17 November 2010 15 December 2010 6 January 2011 20 January 2011 3 February 2011 21 March 2011 5 April 2011 5 April 2011 27 April 2011 18 May 2011 9 June 2011 14 July 2011	Released results from its drill programme at its Mount Dorothy prospect. Announced update on work underway on its Mount Dorothy and Elaine Dorothy prospects. Announced progress on target definition from the Stanley's Hope Gold Mining Lease in the Pentland District, Queensland. Announced the Company is undertaking a share purchase plan. Announced commencement of drilling on its Mount Dorothy prospect. Announced results of drilling on its Mount Dorothy prospect. Announced a significant heavy rare earth element discovery at its Mount Dorothy prospect. Announce continuation of drilling at its Elaine and Mount Dorothy prospects. Announced Proposed Acquisition and Proposed Disposal. Received Chinese approval for the Proposed Disposal. Announced a capital raising of AU$13.1 million. Chinalco Yunnan withdrew from the Pentland Joint Venture with ActivEX. Announced it had signed two agreements with RTMEC for options to a joint venture covering copper porphyry exploration properties, Palmani and Caramasa, in northern Chile. Announced updates on the Company's current projects. Announced that the Company has now earned a 70 per cent equity interest in the Mary Kathleen Joint Venture with Goldsearch. Significant initial results from a new sulphide zone discovered at the Elaine Dorothy prospect.
Source:ASX announcements

Share Price Analysis as at 19 August 2011

In assessing Chinalco Yunnan's share price performance we have had particular regard to the following:

the 'spread' of shareholders and the total number of shares that shareholders hold in the Company;
the level of trading activity of the Company's ordinary shares (i.e. the volume of trades of the shares in the market as a percentage of the total number of shares, and the frequency of the trades);
the number and frequency of 'unusual' and/or 'abnormal' trading that has taken place in the Company shares; and
the level of knowledge that the 'willing' buyers and sellers may be considered to have in respect of the Company and the market in which it operates.

We have reviewed the following factors relating to the trading activity of Chinalco Yunnan's shares on the ASX:

the daily high and low share price of the Company;
the daily volume of the trades; and
the Volume Weighted Average Share Price (" VWAP ").

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The table below summarises trades over the previous 12 months up to 19 August 2011:

Table 8: Share price analysis as at 10 August 2011

High AU$ Low AU$ VWAP AU$	High AU$ Low AU$ VWAP AU$	High AU$ Low AU$ VWAP AU$	High AU$ Low AU$ VWAP AU$	Total value AU$'000 Actual total volume traded 000's	Total value AU$'000 Actual total volume traded 000's	Turnover %
As at 19 Aug 2011 1 month to 19 Aug 2011 3 months to 19 Aug 2011 6 months to 19 Aug 2011 12 months to 19 Aug 2011	0.22 0.26 0.28 0.39 0.44	0.20 0.16 0.16 0.16 0.11	0.20 0.21 0.21 0.24 0.28	42 1,364 6,022 11,498 27,441	205 6,483 28,364 47,489 96,756	0.16% 4.98% 21.78% 36.47% 74.31%
Source:Bloomberg, PKFCA analysis

We note the following with respect to the liquidity of Chinalco Yunnan's shares during the 12 months up to 19 August 2011:

the shares traded on 19 August 2011 at a price between $0.22 and $0.20;
the shares are very thinly traded;
the shares traded within the price range of $0.11 and $0.44;
the VWAP is observed to be on a downwards trend;
the greatest number of shares traded occurred on 6 January 2011, where approximately 15 million shares were traded. This coincided with the Company's ASX announcement of a significant heavy rare earth element discovery at the Mount Dorothy prospect;
as shown in Figure 5, over the period reviewed the Company outperformed the S&P/ASX 300 Metals and Mining Index; and
the majority of trading occurred during the first half of the period reviewed.

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3.7 Statement of Comprehensive Income

The Company's statement of comprehensive income for the financial year ended 30 June 2009 (" FY2009 "), 30 June 2010 (" FY2010 ") and the six months ended 31 December 2010 are presented in the table below:

Table 9: Chinalco Yunnan - Statement of Comprehensive Income

AU$	FY2009 Audited FY2010 Audited Six months ended 31 December 2010 Reviewed	FY2009 Audited FY2010 Audited Six months ended 31 December 2010 Reviewed	FY2009 Audited FY2010 Audited Six months ended 31 December 2010 Reviewed
Revenue Employment and consultancy expenses Depreciation expenses Finance costs Impairment of exploration expenditure Project generation expenditure Other expenses Total expenses Loss before income tax Income tax expense Loss after income tax Other comprehensive income Total comprehensive income for the period	158,966 (495,649) (37,162) (161) - - (407,327)	102,808 (687,739) (55,049) - (1,986,924) (102,283) (530,397)	139,089 (302,826) (34,624) (1,303) (544,220) (34,277) (230,707)
	(940,299)	(3,362,392)	(1,147,957)
	(781,333) -	(3,259,584) -	(1,008,868) -
	(781,333) -	(3,259,584) (1,794)	(1,008,868) (36,014)
	(781,333)	(3,261,378)	(1,044,882)

Source: Chinalco Yunnan's 2009 and 2010 Annual Reports; Chinalco Yunnan's financial report for the half-year ended 31 December 2010

We note the following in relation to Chinalco Yunnan's statement of comprehensive income:

Revenue – Chinalco Yunnan is an exploration company and does not have any operating mining activities. In FY2009 revenue consisted entirely of interest earned on cash on hand. In FY2010, interest earned accounted for AU$100,883. For the six months ended 31 December 2010, revenue consisted of AU$117,956 in government grants, with the balance made up of interest earned.
Impairment of exploration expenditure – during FY2010, the Company wrote off AU$2 million in exploration expenditure relating to a number of different projects. The projects with an impairment charge of greater than AU$100,000 were Pentland - Mt Stewart (AU$817,000), Cloncurry - Quamby (AU$399,000), Clermont (AU$255,000), Pentland (AU$166,000) and Pentland East (AU$149,000). During the six months ended 31 December 2010, the Company wrote off approximately AU$544,000 in exploration expenditure relating to the Pentland joint venture with ActivEX.

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3.8 Statement of Financial Position

The statement of financial position of the Company as at 30 June 2009, 30 June 2010 and 31 December 2010 are presented in the table below:

Table 10: Chinalco Yunnan - Statement of Financial Position

AU$	As at 30 June 2009 Audited	As at 30 June 2010 Audited	As at 31 December 2010 Reviewed
Current Assets Cash and cash equivalent Other receivables Financial assets Other current assets Total Current Assets Non Current Assets Other receivables Plant and equipment Exploration expenditure Total Non-Current Assets TOTAL ASSETS Current Liabilities Trade and other payables Interest bearing liabilities Short-term provisions Total Current Liabilities Non Current Liabilities Interest bearing liabilities Total Non-Current Liabilities TOTAL LIABILITIES NET ASSETS Equity Share capital Reserves Accumulated losses TOTAL EQUITY	1,617,277 205,845 1,091 8,994	1,585,996 313,970 1,091 11,154	1,613,101 64,985 1,091 38,738
	1,833,208 44,618 178,914 4,189,673	1,912,211 44,195 221,051 5,183,362	1,717,915 36,695 240,487 5,899,598
	4,413,206	5,448,608	6,176,780
	6,246,414 532,582 - 20,553	7,360,819 400,445 - 33,047	7,894,695 455,252 26,390 32,778
	553,135 -	433,492 -	514,420 21,590
	-	-	21,590
	553,135	433,492	536,010
	5,693,279	6,927,327	7,358,685
	6,934,322 27,188 (1,268,231)	11,212,656 242,486 (4,527,815)	12,610,434 284,934 (5,536,683)
	5,693,279	6,927,327	7,358,685

Source: Chinalco Yunnan 2009 and 2010 Annual Reports; Chinalco Yunnan financial report for the half-year ended 31 December 2010

We note the following in relation to the financial position of the Company as at 31 December 2010 as outlined below:

Cash and cash equivalent – cash and cash equivalents remained relatively consistent as at the reporting dates above.

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Exploration expenditure – Chinalco Yunnan incurred AU$2.8 million in exploration expenditure during FY2010. During the six months ended 31 December 2010 the Company incurred AU$1.2 million in exploration expenditure. Exploration expenditure has been primarily funded via the issue of new shares in the Company (see next point). On 30 March 2010, the Company acquired Humitos Pty Ltd from Rey Resources Ltd for AU$200,000. Humitos Pty Ltd held tenements in the Humitos Porphyry property in the Copiapo District of northern Chile.

During FY2010 and the six months ended 31 December 2010 AU$2 million and AU$544,000 of exploration expenditure was impaired, respectively. Refer to Section 3.7 for commentary on exploration expenditure impairment.

Share capital – During FY2010, the Company raised AU$4.7 million by issuing 31,046,460 new shares through a 2-for-5 non-renounceable rights issue. During the six month period to 31 December 2010, the Company raised a further AU$1.5 million by issuing 10 million new shares through a share purchase plan.

The above statements of financial position exclude the effect of the capital raising announced to the ASX on 5 April 2011, where the Company announced and received AU$13.1 million via the issue of 54.7 million ordinary fully paid shares.

3.9 SWOT analysis

Set out below is a SWOT analysis in relation to Chinalco Yunnan:

Table 11: SWOT analysis

Strengths Weaknesses	Strengths Weaknesses
• Key participant in Aluminium Corporation of China's ("Chinalco") (the ultimate holding company of YCI) long term exploration development. • Strong cash position with no immediate need to seek additional funds. • Highly experienced technical team with proven track record responsible for exploration successes worldwide.	• Association with Chinalco reduces the likelihood of a takeover, as the 90% compulsory acquisition threshold may not be reached due to CYC's substantial shareholding in the Company. • Chinalco Yunnan is reliant on a small number of highly skilled staff. • Chinalco Yunnan's value tied to commodity prices and high growth economies. • Chinalco Yunnan's value tied to exploration success.
Opportunities Threats
• As a result of relationship with Chinalco, quality project opportunities of varying sizes will be presented to the Company from third parties and also from within the broader Chinalco group. • Ability to give technical guidance and assessment to Chinalco on projects beyond the resources of China Yunnan to develop in return for a small stake in the projects. • Chinalco Yunnan has exposure to different territories such as Laos and Chile which are geologically and commercially more attractive than Australia.	• Key staff at risk of being poached by other companies in highly competitive industry. • Operating in different territories presents risks such as foreign exchange, safety and political. • Company’s value and ability to raise capital currently is tied to the success of a limited suite of projects.
Source:Chinalco Yunnan management

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4 PROFILE OF YUNNAN COPPER INDUSTRY SAN MU MINING CO. LTD

4.1 Overview

San Mu is a private company established on 18 November 2003 and incorporated in China. On 13 May 2005, San Mu changed its name from Xishuangbanna San Mu Mining Co. Ltd. Originally, the company had a registered capital of RMB3 million, jointly contributed by three people, being Wang Chunhua, Wang Yongjun and Wang Aimin.

In July 2004, YCI invested RMB17 million, increasing San Mu's registered capital from RMB3 million to RMB20 million and thus held 85% of the total shares. The original three investors jointly held the remaining 15%.

In December 2005, the original three investors transferred their 15% holding to YEX. In return, the three original investors obtained San Mu's two mineral rights in Laos, being Man Zha Wan antimony ore of Luang Nam Tha Province and Pu Ya Ka Oudomzay Province.

San Mu was established as an independent legal entity to explore and develop mining resources.

4.2 Company operations

San Mu wholly-owns the Laos Projects, via two wholly-owned subsidiaries. The Laos Projects are located within the Mohan Development Zone in northern Laos. The Laos Projects are close to the Pan South East Asian Highway and an operating copper processing plant owned by YCI.

Descriptions of the Laos Projects are outlined below:

Xinzhai Project

The Xinzhai Project covers an area of 140km[2] and is situated in the Phongsali Province. Preliminary economic studies have revealed a copper sulphide chalcocite deposit hosted in limestone and brecciated by cross cutting faults. The deposit is to the Chinese Mineral Resource/Reserve Classification (" CMRRC ") Standard however not to Australian JORC Code standards. The preliminary studies suggest a Solvent Extraction Electro Winning operation could be constructed for the realisation of revenues in the near term.

Jiuzhai Project

The Jiuzhai Project, located in the Oudumaxai Province, covers an area of 31km[2] . A deposit to CMRRC Standard is based on the surface trenching and underground sampling and mapping. Currently, the confirmed mineralised structure is 2km long, 50m deep and an average 3m wide.

Nadao Project

The Nadao Project is a sediment hosted copper-silver deposit of 1km strike, proven to 50m down, with an average width of 2.6m, based on surface sampling.

Modeng Project

The Modeng Project is a very early stage project with similar surface expression to the other projects, however no drilling has been undertaken.

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The following figure shows the locality of San Mu's Laos Projects:

Figure 6

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

Laos Projects locality
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Source: Company Quarterly Report for the three months ended 31 March 2011

The mineral estimates of the Laos Projects are outlined in the table below:

Table 12: Laos Projects mineral estimates

Project name Tonnes Grade Copper % Grade Silver ppm Classification*	Project name Tonnes Grade Copper % Grade Silver ppm Classification*	Project name Tonnes Grade Copper % Grade Silver ppm Classification*	Project name Tonnes Grade Copper % Grade Silver ppm Classification*	Project name Tonnes Grade Copper % Grade Silver ppm Classification*
Xinzhai Project Jiuzhai Project Nadao Project Modeng Project	503,000 100,260 123,000 116,400	1.04 1.11 0.99 1.33	- - 67 - 138 112 - 156	Inferred / Indicated Inferred Inferred Inferred

Source: Laos - Copper Silver - Development Joint Venture, Joint Press Release 31 January 2011 Note: *Classification is non-JORC Code compliant, but compliant to CMRRC

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4.3 Capital structure and ownership

San Mu has a total registered capital of RMB20 million and paid-in capital of RMB20 million. There are two shareholders of San Mu. YCI holds 85% and YEX holds 15% of the total registered capital.

San Mu has no issued options over its share capital.

4.4 Statement of Comprehensive Income

The consolidated statement of comprehensive income of San Mu, for the year ended 31 December 2010 and the six months ended 30 June 2011 are presented in the table below:

Table 13: San Mu - Statement of Comprehensive Income

AU$	FY2010 Audited Six months ended 30 June 2011 Reviewed	FY2010 Audited Six months ended 30 June 2011 Reviewed
Revenue Less: Management fees Finance costs Total expenditure Loss before income tax Income tax expense Loss after income tax Other comprehensive income Total comprehensive income for the period	- 96,726 215	- 166,009 378
	96,941	166,387
	(96,941) -	(166,387) -
	(96,941) -	(166,387) -
	(96,941)	(166,387)

Source: San Mu statement of comprehensive income for the six months ended 30 June 2011 and year ended 31

The financial accounts have been audited and reviewed by ShineWing Certified Public Accountants in China.

The statement of comprehensive income have been translated using the AU$/RMB spot rate as at the Assessment Date of AU$/RMB of 0.1513 (Source: RBA).

San Mu is an exploration company with no revenues. We have provided the statement of comprehensive income for information purposes only.

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4.5 Statement of Financial Position

The translated consolidated statement of financial position of San Mu as at 31 December 2010 and 30 June 2011 are presented in the table below:

Table 14: San Mu - Statement of Financial Position

AU$	As at 31 December 2010 Audited As at 30 June 2011 Reviewed	As at 31 December 2010 Audited As at 30 June 2011 Reviewed
Current Assets Cash and cash equivalents Other receivables Total Current Assets Non Current Assets Fixed assets Construction project Other non current assets Total Non Current Assets TOTAL ASSETS Current Liabilities Trade payables Staff remuneration payable Taxes and fees payable Other payables Total Current Liabilities Non Current Liabilities Specific account payables Total Non Current Liabilities TOTAL LIABILITIES NET ASSETS Equity Share capital Accumulated losses TOTAL EQUITY	25,728 -	29,012 25,976
	25,728 89,000 866,415 4,273,911	54,988 80,173 866,415 4,273,911
	5,229,326	5,220,499
	5,255,054 219,525 14,145 91 242,157	5,275,487 219,525 25,380 6,788 411,046
	475,918 1,891,250	662,739 1,891,250
	1,891,250	1,891,250
	2,367,168	2,553,989
	2,887,886	2,721,498
	3,026,000 (138,114)	3,026,000 (304,502)
	2,887,886	2,721,498

The statement of financial position have been been translated using the AU$/RMB spot rate as at the Assessment Date of AU$/RMB of 0.1513 (Source: RBA).

We note the following in relation to San Mu's statement of financial position:

Other non current assets and construction project – represents capitalised costs relating to the initial granting of the tenements and subsequent capitalised exploration and management expenditure incurred on the Laos Projects.
Specific account payables – the Directors have advised the Specific Accounts Payables is a grant for exploration activity sponsorship from the Chinese Government Finance Department of Yunnan Provincial Government. The sponsorship funding was received in 2005 and 2006 for RMB 9 million and RMB 3.5 million, respectively.

PKFCA has been advised that pursuant to Chinese accounting standards, the grant monies must be recorded as a liability until such time as the Finance Department of Yunnan Provincial Government completes an audit of the exploration sponsorship funds.

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After completion and acceptance of the audit, the liability will be written off in full. The audit has been in progress since early 2010 and is expected to be finalised late 2011.

The Directors have stated that if there are any issues with the audit, YCI and YEX have committed that the Specific Accounts Payable is their liability to resolve. PKFCA notes that Clause 4.6 of the Capital Increase Agreement states that any debt disputes relating to matters prior the San Mu Business License are the responsibility of YCI and YEX. The Directors are of the view that Clause 4.6 of the Capital Increase Agreement would indemnify Chinalco Yunnan from any liability of San Mu arising from a failure to fully write off the Specific Accounts Payable following the audit of the Laos Projects.

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5 ECONOMIC OVERVIEW

5.1 Introduction

The following observations regarding economic conditions in Australia and Laos are based on our review of generally available economic analysis reports published by major trading banks and economic forecasting bodies at or about the Assessment Date.

5.2 Australian Economic Overview

Following the recent Global Financial Crisis (" GFC "), while several major countries had one of their most serious recessions in the post-World War II period, Australia had one of its mildest, with a relatively sharp but brief downturn in aggregate demand and economic activity late in 2008, with a return to expansion during the first half of 2009.

More recently, global financial markets have once again been characterised by a state of volatility, with concerns being raised that the United States is heading towards a double-dip recession. European sovereign debt issues continue to cause nervousness among investors as little progress seems to have been made toward reducing debt. China's economy continues to expand at a rapid pace with the March quarter 2011 GDP rising 9.5% from a year earlier. However, rising inflation in China has forced policy makers to raise interest rates as they attempt a 'soft landing' for the economy.

At its meeting in August 2011, the RBA left the cash rate unchanged at 4.75% p.a. In a statement made by the RBA, reasons for leaving interest rates unchanged were as follows:

although the global economy is continuing to expand, the pace of expansion slowed in the June quarter. Key reasons for this were the supply-chain disruptions from the Japanese earthquake and the dampening effects of high commodity prices on income and spending in major economies;
Australia's national income is growing strongly, helped by the terms of trade remaining at very high levels. Private investment activity has picked up, particularly in the resources sector, in response to high commodity prices. However, caution in the household sector, coupled with the high level of the exchange rate, is having a noticeable dampening effect in some areas of the service sector;
employment growth has slowed over recent months, with the unemployment rate remaining little changed, near 5%. The RBA expects this slower pace of employment growth to continue in the near term. In addition, it was noted that wages growth had returned to rates seen prior to the GFC; and
while the trend in inflation has remained consistent with the 2-3 per cent target on a yearended basis, the RBA remains concerned about the medium-term outlook for inflation. Despite this, the RBA judged that it was prudent to leave the cash rate at 4.75%, particularly in view of the acute sense of uncertainty in global financial markets.

The Australian economy continues to be characterised by its 'two-speed' nature, referring to the rapid expansion in mining and energy sectors and the marked slowdown in the manufacturing and services sectors. The RBA projects that Australia's 2011 year-ended gross domestic product (" GDP ") growth rate will be 3.25%, revised down from 4.25%. The RBA notes that this downward revision mostly reflects " the slower-than-expected recovery in coal production and, to a lesser extent, a downward revision to consumer spending as domestic and international concerns have weighed on sentiment ". However, the 2012 forecast growth rate remained consistent with the RBA's earlier forecast of 3.75%.

Until recently, economic analysts from Australian financial institutions were forecasting an upward trend in interest rates over the medium term as the global recovery gained traction. The most recent reading of the Consumer Price Index (" CPI "), which indicated a year-on-year inflation rate of 3.6%, would tend to support this view.

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However, in light of the recent flow of negative information regarding US and European debt issues, a slower than expected pickup in the US economy and a policy-induced slowdown in China, expectations are that the Australian cash rate will remain on hold or go down if the prevailing uncertainty in global financial markets further deteriorates.

5.3 Laotian Economic Overview

The Laotian economy remained robust throughout the GFC, recording real GDP growth in excess of 7.5% from 2008 to 2010. This economic growth is predicted to continue with the World Bank forecasting real GDP growth of 8.6% in 2011 and 7.6% in 2012. The main sources of growth until the end of 2012 will be from the natural resources and services sectors.

The Laotian CPI headline inflation reached 7.7% year-on-year in March 2011, driven largely by fuel and other non-food commodity prices. Global movements in food prices typically have a limited impact upon Laos inflation due to the subsistence nature of food production and the relatively low levels of food exports.

In FY2010 the government's budget deficit was running at 4.6% of GDP, decreasing from 6.7% in the previous financial year. The reduction in the budget deficit is expected to continue, falling to 2.8% in FY2011 and 2.5% in FY2012. This trend will largely be due to a slower expansion of expenditure compared to real GDP growth, in conjunction with increased tax revenue, particularly from the resources sector.

The Laotian kip has appreciated marginally against the US dollar in recent months, though it has depreciated against other regional currencies such as the Thai baht.

Laos has sought to implement structural reforms throughout the economy over recent years. Throughout 2009 the Government of Laos completed the centralisation of the Treasury, Customs, and Tax functions to enable greater control over revenue sources and more timely budget execution. The Government has also started to implement the new public investment management mechanism which includes rule-based budget allocation norms aimed at providing more favourable allocations to poorer provinces.

5.4 Conclusion

Based on the above it is noted that both the Australian and Laos economies came through the GFC relatively well compared to other similar nations. However, there remains a high degree of uncertainty with recent volatility in financial markets expected to continue amid concerns on the level of government debt and fragile consumer confidence in developed economies and the increased risk of the global economy slipping into recession.

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6 INDUSTRY OVERVIEW

The following observations regarding industry conditions are based on PKFCA's review of generally available industry reports.

6.1 Overview Australia

The Australian mineral exploration industry consists of firms that explore for minerals (except crude petroleum and natural gas) on their own account. It covers in-house exploration activities of mining companies, but does not include firms that undertake exploration on a fee or contract basis.

The industry is expected to have spent AU$2.5 billion on exploration in FY2011, compared with AU$1.5 billion in FY2006. The main driver of growth in exploration expenditure was the increase in mineral commodity prices over the past five years. From FY2006 to FY2011 exploration spending increased 10.4% annually, despite falls in FY2009 as a result of the GFC. The first half of FY2011 saw considerable growth in spending on the search for copper, silver/lead/zinc, nickel, gold, iron ore, uranium and coal.

The major players that operate in this industry are large firms as a result of the considerable sums of capital required to undertake exploration activities. The four largest mineral explorers in Australia are BHP Billiton Limited (7.0%), Rio Tinto Limited (5.0%), Xstrata Holdings Pty Ltd (1.1%) and Newmont Australia Holdings Pty Ltd (0.9%).

Factors that may determine the level of exploration spending in Australia include:

Commodity prices - it is expected that exploration activity will follow trends in the price of mineral commodities.
Exchange rate - since most mineral commodities are traded in US dollars, the exchange rate plays a vital role in determining the return earned by Australian mineral producers.
Spread of new technologies - improvements in technologies used in exploration will increase the number and size of mineral deposits considered viable.
Labour availability - the Australian mining industry experienced an acute labour shortage in the years leading up to the GFC. Although the labour shortage eased throughout the GFC, it is expected that it will again become an issue as the Australian labour market becomes tighter. Higher wage costs will reduce the likelihood of exploration expenditure being undertaken on marginal projects.

Over the medium term, analysts are expecting an upward trend in commodity prices due to increased demand from China and other developing nations. On the other hand, major developed economies in Europe, as well as the US, continue to experience a relatively slow and protracted recovery from the GFC, providing some counterbalance to the growth in mineral commodity prices.

6.2 Overview Laos

Please refer to the attached Roma Appraisals Valuation Report at Appendix 4 for an overview of key industry specific parameters relevant to the Proposed Acquisition.

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6.3 Commodity prices

6.3.1 Copper

Set out below is the cop p er spot price from 19 August 2009 to 19 August 2011.

Figure 7

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

Copper spot price
11,000
10,000
9,000
8,000
7,000
6,000
5,000
US$ per Metric Ton
----- End of picture text -----

Source: Bloomberg

We note that between A u gust 2009 and August 2011 that there has bee n a general upward trend in the copper spot pric e , increasing from approximately US$6,051/MT on 19 August 2009 to approximately US$9,43 0 /MT on 30 June 2011. However, the copper sp o t price has decreased in recent weeks and was US$8,804/MT on 19 August 2011.

6.3.2 Silver

Set out below is the silv e r spot price from 19 August 2009 to 19 August 2 0 11.

Figure 8

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

Silver spot price
50
40
30
20
10
0
US$ per Troy Ounce
----- End of picture text -----

Source: Bloomberg

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We note that from Au g ust 2009 to September 2010 the silver spot price trended gradually upwards from approxim a tely US$13.00/troy ounce to approximately US $ 19.00/troy ounce. From September 2010 to April 2011 the silver spot price trended strongly up w ard to reach a peak of US$48.44/troy ounce o n 28 April 2011 before falling sharply over the next 12 trading days to US$33.58/troy ounce. S ince then, the price has traded within a band between US$33.58/troy ounce and US$48.44/tro y ounce.

6.3.3 Gold

Set out below is the gold spot price from 19 August 2009 to 19 August 2011.

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

Figure 9
Gold spot price
2,000
1,800
1,600
1,400
1,200
1,000
800
US$ per Troy Ounce
----- End of picture text -----

Source: Bloomberg

We note that from 19 August 2009 to 19 August 2011 there has been an upward trend in the gold spot price, increasing from approximately US$950/troy ounce to record highs of over US$1,800/troy ounce o ver the period. As at 19 August 2011, th e gold spot price was US$1,852/troy ounce.

We note that throughou t this period, volatility in the gold spot price has n ot been as pronounced as other commodities.

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7 SUMMARY OF TECHNICAL SPECIALISTS' REPORTS

7.1 Roma Appraisals Valuation Report

Set out below are extracts from the Roma Appraisals Valuation Report. The report in its entirety is attached in Appendix 4. Roma Appraisals refer to the Laos Projects as the "Mines" throughout their report.

Basis of valuation

[Roma Appraisals'] valuation is conducted on a market value basis. Market value is defined as "the estimated amount for which an asset could be exchanged, or a liability settled, between willing parties in an arm's length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion".

Mine valuation

In the process of valuing the Mines, [Roma Appraisals] has taken into account the uniqueness of their operations and the industries they are participating. The Income-Based Approach was not adopted in this case because there is insufficient historical information of the Mines. The AssetBased Approach was also not adopted because it could not reflect the future potential growth of the Mines. [Roma Appraisals] has therefore considered the adoption of the Market-Based Approach in arriving at the market value of the Mines.

In the process of the valuation, [Roma Appraisals] has selected several transactions of comparable that had similar mineral resources with similar level of confidence in the resource estimation of the Mines and determined their price per tonnage of resources. [Roma Appraisals'] fundamental selection criterion was similarity of the acquired mines of the comparable transactions with that of the Mines. Accordingly, all comparable transactions selected in [Roma Appraisals'] valuation referred to the acquisition of multi-metal mines containing various metal resources such as copper, gold, silver and molybdenum. During the process of selection of comparable transactions, [Roma Appraisals] mainly focused on recent metal mine acquisitions, and [Roma Appraisals] adjusted the considerations of the comparable transaction to reflect the changes in metal prices between transaction dates and the date of valuation. To the best of [Roma Appraisals'] knowledge, [Roma Appraisals] considered the adopted comparable transactions were sufficient and representative.

The comparable transactions used by Roma Appraisals are as follows:

Table 15: Comparable Transactions - Roma Appraisals Valuation Report

Acquirer Location Date Consideration Equity Interest	Acquirer Location Date Consideration Equity Interest	Acquirer Location Date Consideration Equity Interest	Acquirer Location Date Consideration Equity Interest	Acquirer Location Date Consideration Equity Interest
Solartech International Holdings Limited China Properties Investment Holdings Limited	China China	November 2009 August 2010	HK$1,500,000,000 HK$300,000,000	100% 100%
Source:Roma Appraisals Valuation Report

The metal resource multiples used by Roma Appraisals to value the Laos Projects are:

Table 16: Metal resource multiples - Roma Appraisals Valuation Report

Acquirer	Copper resource multiple (RMB/tonne) Silver resource multiple (RMB/tonne)	Copper resource multiple (RMB/tonne) Silver resource multiple (RMB/tonne)
Solartech International Holdings Limited China Properties Investment Holdings Limited Average	1,158 5,472	79,948 -
	3,315	79,948

Source:Roma Appraisals Valuation Report

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[Roma Appraisals] applied the industry average prices to the relevant resources of the Mines and determined [their] concluded value.

Although Inferred Resource was dominantly located in the Mines of [San Mu], both Measured and Indicated Resources of comparables were included in their valuation. Accounting for the higher level of confidence for the estimations of tonnage, densities, grade and mineral content for the Measured and Indicated Resources, the inclusion of the Measured and Indicated Resources in the valuation was treated appropriately by adopting a 50% premium on the Measured Resource and a 20% premium on the Indicated Resource (i.e. using 150% Measured Resource and 120% Indicated Resource for valuation) due to the substantially lower risk or uncertainty of Measured Resource and Indicated Resource compared to Inferred Resource .

In correspondence between PKFCA and Roma Appraisals, Roma Appraisals considered other comparable transactions of mines that contained copper and silver deposits around the greater Asia region. However, Roma Appraisals considered that these comparable transactions do not provide sufficient information for Roma Appraisals to calculate the metal resource multiples. Accordingly, Roma Appraisals has eliminated those transactions during the selection process. Roma Appraisals assessed 15 comparable transactions, from which, two transactions were considered to be the most comparable.

Opinion of value

Based on the investigation and analysis stated above and on the valuation method employed, the market value of the Mines as at the date of valuation, in [Roma Appraisals'] opinion ranged from RMB29,000,000 to RMB35,000,000.

7.2 Mining Associates Valuation Report

Set out below are extracts from the Mining Associates Valuation Report. The report in its entirety is attached in Appendix 4.

Conclusions

The three generally accepted valuation approaches are:

• Income • Market • Cost Approach Approach Approach

The Income Approach is based on the principle of anticipation of benefits and includes all methods that are based on the income or cash flow generation potential of the Mineral Property. None of [the Properties are] sufficiently advanced for the Income Approach to be appropriate.

The primary methods used in this valuation are the Market Approach and the Cost Approach. The Market Approach is based primarily on the principle of substitution and is also called the Sales Comparison Approach. The Mineral Property being valued is compared with the transaction value of similar Mineral Properties, transacted in an open market. Methods include comparable transactions and option or farm-in agreement terms analysis.

The Cost Approach is based on the principle of contribution to value. The appraised value method is one commonly used technique where exploration expenditures are analysed for their contribution to the exploration potential of the Mineral Property.

Cloncurry North EPMs 12205 and 15084

The range, average and even the highest value of comparable transactions for the Cloncurry North EPMs 12205 and 15084 are substantially less than the expenditure incurred on the project by previous and current explorers. This possibly indicates that the potential of the property has been more than adequately tested, and that the law of diminishing returns kicked in some time ago.

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The disappointing results from the RC drilling at the GEM prospect, which cost about AU$1.5 million in 2010 dollars and led to a small and inconsequential copper resource estimate, did not enhance the value of the property. For this reason, [Mining Associates] regard most of the RC drilling expenditure as wasted, and reduce the Cost Approach value from AU$4.5 million to AU$3 million. This still falls short of the average value calculated by the Market Approach (AU$2.4 million). Assuming that the real value falls somewhere between the two figures, AU$2.4 million and AU$3.0 million, suggests a Preferred Value of AU$2.7 million.

Cloncurry North EPM 15095

The range of values of comparable transactions for EPM 15095 is very wide, from a low AU$380,000 to a high of AU$1.2 million. This is probably a reflection of the relative scarcity of transactions involving properties of this type. Also, in the aftermath of the GFC, corporate sentiment towards speculative properties like EPM 15095 has fluctuated wildly between risk averse to risk taking. So the concept underpinning the Market Approach, that in an informed market a pure transaction reflects “fair market value”, is not being reflected in recent real transactions as companies are routinely grossly over-valuing or under-valuing speculative assets compared to the Cost Approach. Nevertheless, the average of the broad spread of market values (AU$710,000) is similar to the sunk cost of exploration expenditure on the property (AU$600,000). Again, assuming that the real value lies somewhere between these two figures suggests a Preferred Value of AU$650,000.

Waterford EPM 16393

The range of values of comparable transactions for EPM 16393 is fairly normal, from a low AU$1,066,000 to a high of AU$2,188,000. As with EPM 15095, there is a relative scarcity of transactions involving uranium exploration properties. Also, in the aftermath of the Fukushima nuclear accident, sentiment towards uranium properties has fluctuated wildly between risk averse to risk taking in a similar fashion to the impact of the GFC, and companies are similarly grossly overvaluing or undervaluing uranium assets compared to the Cost Approach.

Nevertheless, the average of the broad spread of market values (AU$1,630,000) is similar to the sunk cost of exploration expenditure on the property (AU$1,400,000). Again, assuming that the real value lies somewhere between these two figures suggests a Preferred Value of AU$1,500,000.

On the basis of an analysis of 16 comparable transactions, and a review and analysis of 161 open-file reports of previous exploration within the Projects, the following tabulation has been compiled. The “Preferred” column lists the most preferable value placed on each Project by Mining Associates:

Table 17: Properties valuation

Market Approach	Market Approach	Market Approach	Market Approach	Market Approach	Market Approach
EPM Cost Approach AU$ Preferred AU$ Low AU$ High AU$ Average AU$
12205 15084	2,180,000	3,500,000	2,400,000	3,000,0001	2,700,000
15095	380,000	1,200,000	710,000	600,000	650,000
16393	1,066,000	2,188,000	1,600,000	1,400,000	1,500,000
TOTAL	3,626,000	6,888,000	4,710,000	5,000,000	4,850,000

Source: Mining Associates Valuation Report Note: 1The Cost Approach of EPM 12205 and 15084 has been adjusted by PKFCA by AU$1.5 million for expenditure that Mining Associates have considered as 'wasted expenditure'

PKFCA notes that the Properties valuation summary, set out above, is the valuation for 100% of the Properties. Pursuant to the Proposed Disposal, YEX will have the opportunity to obtain up to a 55% interest in the Properties.

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8 VALUATION METHODOLOGY

8.1 Overview

In arriving at our valuation conclusion in relation to the Proposed Acquisition and the Proposed Disposal, we have considered the following broad categories of valuation methods:

capitalisation of future maintainable earnings;
discounted cash flow (" DCF ");
asset-based valuations;
comparable market transactions; and
the most recent quoted market price of listed securities.

Set out at Appendix 3 are further descriptions of valuation methodologies considered.

Set out below is a discussion of the valuation methods we consider appropriate for the purposes of undertaking our valuation assessment of the Proposed Transactions.

8.2 Proposed Acquisition

8.2.1 Primary valuation approach

We have adopted an asset-based valuation approach, whereby the various assets and liabilities of San Mu have been taken into account. The major component is derived from the fair market valuation of the Laos Projects as calculated by Roma Appraisals. The following components have been assessed independently and then aggregated to arrive at the equity value of San Mu:

the fair market value of the Laos Projects as assessed in the Roma Appraisals Valuation Report; and
the value of the other NTA of San Mu (excluding the Laos Projects and including the value of any surplus assets and liabilities).

We note that the liabilities and assets of San Mu (other than the Laos Projects) are largely payables and cash and receivables, with a small value amount of fixed assets. Having regard to this, we have assumed that all San Mu's other assets and liabilities, excluding the value of the Laos Projects, are recorded at their fair market value in the latest available San Mu balance sheet.

The Laos Projects have been valued in RMB. PKFCA has translated the RMB value to the AU$ equivalent at the prevailing AU$/RMB spot rate as at the Assessment Date using exchange rates as quoted by the RBA.

We note that the Laos Properties and other assets of San Mu have been assessed on the basis of 100% (i.e. control) values. We have pro-rated the 100% (control) value of all the equity of San Mu, thus obtaining a 51% equity interest that Chinalco Yunnan proposes to acquire pursuant to the Proposed Acquisition.

8.2.2 Proposed Acquisition valuation cross check

PKFCA do not believe a valuation cross check is available for the valuation of San Mu. The Laos Projects have been valued on a comparable market transaction approach. As the Laos Project valuations comprise the majority of San Mu's assets and underpin the San Mu equity valuation derived by PKFCA, a comparable market transaction approach has been indirectly applied in valuing San Mu.

Chinalco Yunnan Copper Resources Ltd - Independent Expert's Report

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8.2.3 Proposed Acquisition Consideration

The Proposed Acquisition Consideration is cash, payable within 12 months. Accordingly, the nominal value will represent fair market value.

8.3 Proposed Disposal

8.3.1 Primary valuation approach

Mining Associates has been engaged to provide an independent technical assessment of the Properties and their fair market value. A summary of the Mining Associates Valuation Report, including the valuation methodologies considered, is set out in Section 7.2.

Mining Associates has advised the preferred valuation approach is the market approach.

We note that the Properties have been assessed on the basis of 100% (i.e. control) values. We have pro-rated the Mining Associates 100% (control) fair market value for the 55% interest in the Properties that is to be disposed pursuant to the Proposed Disposal.

8.3.2 Proposed Disposal valuation cross check

Mining Associates have used the cost approach to cross check their preferred valuation.

8.3.3 Proposed Disposal Consideration

The Proposed Disposal Consideration is the amount of cash to be expended by the YEX on further exploration of the Properties. The cash is payable over a three year period. Accordingly, the discounted present value of the cash amount represents fair market value.

Chinalco Yunnan Copper Resources Ltd - Independent Expert's Report

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9 EVALUATION OF THE PROPOSED ACQUISITION

9.1 Fair market value of San Mu

To calculate the fair market value of San Mu at the Assessment Date on a net assets basis, it is necessary to adjust the latest available statement of financial position. Adjustments have been made for the valuations of individual assets and liabilities to better reflect the fair market value of San Mu at the Assessment Date. Set out below is San Mu's pro-forma statement of financial position as at 30 June 2011 (" Pro-forma Statement of Financial Position "), using the mid-point valuation of the Laos Projects.

We have assumed all other assets and liabilities, excluding the Laos Projects, are recorded at their fair market value.

Table 18: San Mu Pro-forma Statement of Financial Position

	As at 30-Jun-11 Actual Audited (RMB)	Adjustments As at 30-Jun-11 Pro-forma Mid-point (RMB) As at 30-Jun-11 Pro-forma Mid-point (AU$) A B	Adjustments As at 30-Jun-11 Pro-forma Mid-point (RMB) As at 30-Jun-11 Pro-forma Mid-point (AU$) A B	Adjustments As at 30-Jun-11 Pro-forma Mid-point (RMB) As at 30-Jun-11 Pro-forma Mid-point (AU$) A B	Adjustments As at 30-Jun-11 Pro-forma Mid-point (RMB) As at 30-Jun-11 Pro-forma Mid-point (AU$) A B
		A
Current Assets Cash and cash equivalent Other receivables Total Current Assets Non Current Assets Fixed assets Construction project Other non current assets Total Non Current Assets TOTAL ASSETS Current Liabilities Trade payables Staff remuneration payable Taxes and fees payable Other payables Total Current Liabilities Non Current Liabilities Specific account payables Total Non-Current Liabilities TOTAL LIABILITIES NET ASSETS	191,752 171,684	- -	17,827,7003 -	18,019,452 171,684	2,726,343 25,976
	363,436 529,893 5,726,469 28,247,926	- (5,726,469)1 (28,247,926)1	- 32,000,0004 -	18,191,136 529,893 32,000,000 -	2,752,319 80,173 4,841,600 -
	34,504,288			32,529,893	4,921,773
	34,867,724 1,450,923 167,743 44,862 2,716,764	- - - -	- - - -	50,721,029 1,450,923 167,743 44,862 2,716,764	7,674,092 219,525 25,380 6,788 411,046
	4,380,292 12,500,000	(12,500,000)2	-	4,380,292 -	662,739 -
	12,500,000			-	-
	16,880,292			4,380,292	662,739
	17,987,432			46,340,737	7,011,353

Source: San Mu statement of financial position as at 30 June 2011, Roma Appraisals Valuation Report, PKFCA analysis

Notes: AU$/RMB as at the Assessment Date - 0.1513 as quoted by the RBA

1 Elimination of line items at carrying value that comprise the Laos Projects

2 Elimination of the Specific Accounts Payables - refer paragraph 4.5

3 To account for the investment of the Proposed Acquisition Consideration by Chinalco Yunnan 4 To account for the Laos Projects at the mid-point of the Roma Appraisals' valuation range

Chinalco Yunnan Copper Resources Ltd - Independent Expert's Report

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In relation to the Pro-forma Statement of Financial Position, we have adjusted San Mu's statement of financial position as at 30 June 2011 for the fair market value of the Laos Projects and the elimination of the Specific Accounts Payables at carrying value.

As the Proposed Acquisition Consideration is to be injected into San Mu to fund further exploration, and not used to purchase existing YCI or YEX shareholdings, we have included the Proposed Acquisition Consideration in San Mu's Pro-forma Statement of Financial Position.

Specific Accounts Payables

As noted previously in the IER (refer paragraph 4.5), the Specific Accounts Payable reflects grant monies to sponsor exploration activities from the Chinese Finance Department of Yunnan Provincial Government and we have been advised that the liability will be written off in full after completion and acceptance of the Laos Project audit. The Directors have stated that if there is any issue with the audit, YCI and YEX have committed that the Specific Accounts Payable is their liability to resolve. PKFCA notes that Clause 4.6 of the Capital Increase Agreement states that any debt disputes relating to matters prior to the issue of the San Mu Business License are the responsibility of YCI and YEX. The Directors are of the view that Clause 4.6 of the Capital Increase Agreement would indemnify the Company from any liability of San Mu arising from any issue with the failure to write off all the Specific Accounts Payable following the audit of the Laos Projects.

As such, PKFCA has adjusted San Mu's statement of financial position for the Specific Accounts Payable on the basis that it does not represent a liability of San Mu.

Fair market value of the Laos Projects

This item represents the recognition of the Laos Projects at the mid-point value as assessed by Roma Appraisals. We recommend the Non-Associated Shareholders read the Roma Appraisals Valuation Report in full as attached as Appendix 4 of this IER.

We have adopted the fair market valuations of the Laos Projects as assessed in the annexed Roma Appraisals Valuation Report (represented by the construction project and other non current assets recorded on San Mu's statement of financial position as at 30 June 2011) as follows:

Table 19: Fair market value of the Laos Projects

	Low	High	Mid-Point
Fair market value of the Laos Projects - RMB	29,000,000	35,000,000	32,000,000
Fair market value of the Laos Projects - AU$	4,387,700	5,295,500	4,841,600
Source:Roma Appraisals Valuation Report, PKFCA analysis
Note: Translation has been done at the AU$/RMB spot rate as at the Assessment Date - 0.1513 (Source: RBA)

9.2 Conclusion as to fair market value of San Mu

The table below outlines the fair market value of San Mu as at the Assessment Date.

Table 20: San Mu fair market value

AU$	Low High Mid-point	Low High Mid-point	Low High Mid-point
Fair market value of 100% equity interest in San Mu Fair market value of a 51% equity interest in San Mu	6,557,453	7,465,253	7,011,353
	3,344,301	3,807,279	3,575,790

Source: PKFCA analysis

PKFCA has assessed the fair market value of a 51% equity interest in San Mu between AU$3.3 million and AU$3.8 million , with a mid-point of AU$3.6 million.

Chinalco Yunnan Copper Resources Ltd - Independent Expert's Report

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PKFCA has not applied an additional premium for control to the Pro-forma net assets of San Mu. The Laos Projects have been assessed using a market based approach. Accordingly, a control premium is already allowed for in the valuation of the Laos Projects and the other net assets of San Mu.

9.3 Valuation of Proposed Acquisition Consideration

The Proposed Acquisition Consideration is the AU$ cash equivalent of RMB17.8 million, to be paid by Chinalco Yunnan in three equal stages over a 12 month period following completion of the Proposed Acquisition.

As the Proposed Acquisition Consideration is payable over 12 months, PKFCA has not calculated the present value of the Proposed Consideration as at the Assessment Date.

PKFCA has translated the Proposed Acquisition Consideration to Australian Dollars using the spot AU$/RMB rate prevailing at the Assessment Date of AU$/RMB 0.1513 (Source: RBA). The Proposed Acquisition Consideration is assessed at AU$2.7 million .

9.4 Fairness Assessment

RG 111.57 provides that the Proposed Acquisition will be "fair" if the 51% fair market value of San Mu is greater than or equal to the value of the Proposed Acquisition Consideration being offered by the Company. The comparison should be made assuming a knowledgeable and willing, but not anxious, buyer and a knowledgeable and willing, but not anxious, seller acting at arm's length.

Set out below is the comparison between the assessed value of the 51% fair market value of San Mu and the Proposed Acquisition Consideration:

Table 21: Fairness assessment - Proposed Acquisition

Section	Section	Low AU$ High AU$ Mid-point AU$	Low AU$ High AU$ Mid-point AU$	Low AU$ High AU$ Mid-point AU$
Fair market value of a 51% equity interest in San Mu Cash consideration of the Proposed Acquisition Conclusion	9.2 9.3	3,344,301 2,697,331	3,807,279 2,697,331	3,575,790 2,697,331
		"Fair"	"Fair"	"Fair"

Source: PKFCA analysis

Based on the analysis set out in Table 21, the fair market value of the Proposed Acquisition Consideration is lower than the range of the fair market value of a 51% equity interest in San Mu. Accordingly, in our opinion, the Proposed Acquisition is " Fair ".

It could be argued that as the cash consideration payable under the Proposed Acquisition is payable over 12 months, the present value of the cash consideration should be calculated. However, the present value of the cash consideration would not be materially different and would not change our opinion that the Proposed Acquisition is Fair.

Furthermore, PKFCA has had regard to the forecast 2012 AU$/RMB rate to translate the Proposed Acquisition Consideration as the cash consideration is payable over a 12 month period. However, the cash consideration would not be materially different and would not change our opinion that the Proposed Acquisition is Fair.

9.5 Reasonableness Assessment

RG 111.60 provides that a proposed related party transaction is "reasonable" if it is "fair". Therefore, applying that reasoning to the present circumstances, as we have concluded the Proposed Acquisition is " Fair ", pursuant to RG 111, the Proposed Acquisition is also " Reasonable ".

Chinalco Yunnan Copper Resources Ltd - Independent Expert's Report

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Nonetheless, in our "Reasonableness" assessment we have considered various factors that we believe Non-Associated Shareholders should consider when deciding whether or not to accept the Proposed Acquisition. Set out below is a summary of our assessment of the various factors.

9.5.1 Advantages of the Proposed Acquisition

Acquisition of new mineral deposits

The Proposed Acquisition provides the Company with a new mineral deposits base for further exploration and potential development. Chinalco Yunnan will be able to share in the future growth of the Laos Projects if they progress beyond an exploration stage.

Control of San Mu

The Proposed Acquisition provides the opportunity to acquire control of San Mu. Chinalco Yunnan will have the opportunity to acquire a 51% equity interest and have three seats (out of five) on the Board of Directors.

Potential commerciality of the Xinzhai Project

The Directors have indicated the Xinzhai Project has the potential to reach an operating stage by undertaking a feasibility study. The feasibility study would have the potential to bring the Xinzhai Project mineral estimates to a JORC Code-compliant status.

Infrastructure benefits

The Laos Projects are within transporting distance of YCI's existing processing centre in southern Yunnan Province, China. If the Laos Projects progress to the development stage, the Company would be able to benefit from having a processing plant in close proximity.

9.5.2 Disadvantages of the Proposed Acquisition

Uncertainty around the future performance of San Mu and the Laos Projects

Due to the early stage nature of the Laos Projects, there is a risk that the Laos Projects may not proceed to a development phase. Accordingly, there is uncertainty around future San Mu's profitability and shareholder returns.

Funding of Laos Projects exploration activities

In order to gain any advantage from the Proposed Acquisition it is likely that exploration will have to be undertaken and this will have to be funded. Chinalco Yunnan's equity injection is intended to fund a certain amount of exploration expenditure. Having regard to San Mu's Pro Forma Statement of Financial Position, it appears likely that any additional exploration expenditure subsequent to the expenditure of Chinalco Yunnan's equity injection, will have to come from San Mu's shareholders, including Chinalco Yunnan.

Movements in commodity prices and foreign exchange rates

The fair market value of San Mu is primarily dependent on the prevailing commodity prices for copper and silver, due to the Laos Projects comprising the majority of San Mu's assets. If the commodity prices decrease, value of the Laos Projects and the fair market value of Chinalco Yunnan's 51% equity interest may also decrease.

The purchase consideration is fixed as RMB17,827,700. If the AU$ depreciates against the RMB, the cash consideration payable under the Proposed Acquisition will cost more in AU$ terms.

Chinalco Yunnan Copper Resources Ltd - Independent Expert's Report

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However, the AU$ equivalent of San Mu's net assets may increase. The net effect may be that the fair market value of Chinalco Yunnan's 51% equity interest in San Mu may remain greater than the cash consideration.

Subject to regulatory approvals

The Proposed Acquisition is subject to Chinese regulatory approval. There is a risk that the Proposed Acquisition will not receive Chinese regulatory approval and the Proposed Acquisition may not proceed.

9.5.3 Conclusion on "Reasonableness"

As we have concluded the Proposed Acquisition is "Fair", pursuant to RG 111 it is considered " Reasonable ".

9.6 Conclusion

In our opinion, based on the analysis contained within this section, the Proposed Acquisition is " Fair " and " Reasonable " to the Non-Associated Shareholders.

Obviously, if the Non-Associated Shareholders have a more pessimistic view of the prospects and potential value of the Laos Projects, they can decide to vote against the Proposed Acquisition.

Chinalco Yunnan Copper Resources Ltd - Independent Expert's Report

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10 EVALUATION OF THE PROPOSED DISPOSAL

10.1 Approach

To evaluate the Proposed Disposal it is PKFCA's view that it is appropriate to:

assess the fair market value of the Properties. We have relied on the Mining Associates Valuation Report for the fair market value of the Properties. A summary of the report is set out in Section 7.2, and in its entirety in Appendix 4;
assess the fair market value of the Proposed Disposal Consideration;
aggregate the fair market value of the Properties and the Proposed Disposal Consideration, (assuming that it is fully expended);
pro rata the valuation for the aggregated value of the Properties and the Proposed Disposal Consideration, for the 55% ownership interest in the Properties that YEX is proposing to acquire pursuant to the JV Agreement; and
compare the fair market value of a 55% interest in the aggregated value of the Properties and the Proposed Disposal Consideration with the Proposed Disposal Consideration.

10.2 Valuation of Properties

Set out below is a summary of the PKFCA adjusted valuation of 100% of the Properties. We recommend Non-Associated Shareholders read the Mining Associates Valuation Report in full as attached as Appendix 4 of this IER.

Table 22: Properties valuation summary

EPM	Market Approach Cost Approach AU$ Low AU$ High AU$ Average AU$	Market Approach Cost Approach AU$ Low AU$ High AU$ Average AU$	Market Approach Cost Approach AU$ Low AU$ High AU$ Average AU$	Market Approach Cost Approach AU$ Low AU$ High AU$ Average AU$	Preferred AU$
	Low AU$ High AU$ Average AU$
12205 15084	2,180,000	3,500,000	2,400,000	3,000,0001	2,700,000
15095	380,000	1,200,000	710,000	600,000	650,000
16393	1,066,000	2,188,000	1,600,000	1,400,000	1,500,000
TOTAL	3,626,000	6,888,000	4,710,000	5,000,000	4,850,000

10.3 Valuation cross check

To provide additional evidence of the value of the Properties, Mining Associates performed the valuation of the Properties using two different methods.

Mining Associates noted that disappointing results from RC drilling led to inconsequential copper resource estimates in the Cloncurry North Project. The RC drilling expenditure was approximately AU$1.5 million. Mining Associates considered the expenditure 'wasted expenditure' as it did not enhance the value of the project. Accordingly, Mining Associates believe the Cost Approach should be adjusted by AU$1.5 million.

Chinalco Yunnan Copper Resources Ltd - Independent Expert's Report

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Set out below is the adjusted Cost Approach method for the Projects, adjusting for the "wasted" RC drilling expenditure.

Table 23: Valuation cross check - Proposed Disposal

AU$	Amount
Cost Approach of the Properties - 100% interest RC drilling wasted expenditure Valuation cross check - Properties - 100% interest	6,500,000 (1,500,000)
	5,000,000

Source:Mining Associates Valuation Report

Adjusting the Cost Approach for the AU$1.5 million for the RC drilling expenditure, which is considered as wasted by Mining Associates, the assessed value of the Properties under the Cost Approach falls within the range of the Properties under the market approach.

10.4 Valuation of Proposed Disposal Consideration

The Proposed Disposal Consideration under the JV Agreement is AU$5 million in exploration expenditure on the Properties to be incurred by YEX over a three year period.

The payment profile of the exploration expenditure is as follows:

Tranche 1: AU$1.2 million on or before the date of one year after the commencement of the JV Agreement, earning a 10% interest;
Tranche 2: AU$1.8 million on or before the date of two years after the commencement of the JV Agreement, earning a 20% interest; and
Tranche 3: AU$2 million on or before the date of three years after the commencement of the JV Agreement, earning a 25% interest.

As the Proposed Disposal Consideration is payable over three years, PKFCA believes it is appropriate to calculate the present value of the Proposed Disposal Consideration as at the Assessment Date.

The JV Agreement defines the 'End Date' as 15 February 2014. For the purposes of calculating the present value of the Proposed Disposal Consideration we have assumed that each tranche of exploration expenditure to occur on the following dates:

Exploration expenditure Tranche 1 - 13 November 2011;
Exploration expenditure Tranche 2 - 16 August 2012; and
Exploration expenditure Tranche 3 - 16 August 2013.

The date of the exploration expenditure Tranche 1 is the mid-point between the Assessment Date and the 15 February 2012. Similarly, the date for the exploration expenditure Tranche 2 and 3 is the mid-point between 15 February 2013 and 2014, respectively. We have used 15 February each year as the JV Agreement stated the end date is 15 February 2014. Furthermore, we have used the mid-point to account for the fact that the exploration expenditure would be incurred throughout the period.

To calculate the present value of the Proposed Disposal Consideration, we have applied a discount rate to each tranche of exploration expenditure at 6.55%, comprising of the Australian 3- year Government Bond rate of 3.55% as at the Assessment Date and an assumed cost of debt margin applicable to YEX of 3%. We have benchmarked our adopted discount rate against the 3 year BBB Corporate Bond rate as at the Assessment Date of 5.96% (Source: Bloomberg).

Chinalco Yunnan Copper Resources Ltd - Independent Expert's Report

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We have adopted the assumed cost of debt applicable to YEX as the appropriate discount rate for the following reasons:

on the one hand, we believe that a risk free rate is not applicable as would be appropriate if the expenditures were certain in amount and timing. However, the expenditures are not certain. YEX has discretion as to the amounts and timing of expenditures. In the extreme case, it may not make any expenditure (and conversely, would not acquire any interest in the Projects); and
however, on the other hand, we believe that a cost of equity, or at least a weighted average cost of capital (representing the discount rate applicable to value an asset) is not applicable as the discount rate is being applied to a steam of cash flows, rather than an equity or asset investment.

The following table outlines the present value of the Proposed Disposal Consideration:

Table 24: Present value - Proposed Disposal Consideration

Nominal Exploration Expenditure Assumed Date Payable By Present Value as at Assessment Date AU$	Nominal Exploration Expenditure Assumed Date Payable By Present Value as at Assessment Date AU$	Nominal Exploration Expenditure Assumed Date Payable By Present Value as at Assessment Date AU$
Tranche 1 - AU$1.2 million Tranche 2 - AU$1.8 million Tranche 3 - AU$2 million Nominal Total - AU$5 million	15 February 2012 15 February 2013 15 February 2014	1,180,552 1,687,440 1,759,675 4,627,667
Source:PKFCA analysis

The present value of the Proposed Disposal Consideration is estimated at AU$4.6 million .

10.5 Fairness Assessment

RG 111.57 provides that the Proposed Transaction will be "fair" if the value of the interest in the Properties being acquired is equal to or less than the value of the consideration being provided by YEX. The comparison should be made assuming a knowledgeable and willing, but not anxious, buyer and a knowledgeable and willing, but not anxious, seller acting at arm's length.

We note that the Proposed Disposal Consideration to be provided by YEX, for a 55% interest in the Properties, is not being paid to or invested directly in the Company. The Proposed Disposal Consideration, to the extent that it is expended, will be spent on the exploration of the Properties and Chinalco Yunnan will only own 45% of the Properties after the Proposed Disposal is fully implemented.

In our opinion, the assessment of the "fairness" of the transaction should take into account that the Proposed Disposal Consideration, to the extent that it is expended, will be spent on the exploration of the Properties and the Company will benefit to the extent of its 45% ownership of the Properties from the benefits of such expenditure.

One valuation approach (known as the cost approach) is to assume that exploration expenditure on a project can be assumed to enhance the value of the exploration project by the amount of the expenditure. Of course, exploration expenditure may result in no benefit (such as the RC drilling expenditure of approximately AU$1.5 million referred to in the Mining Associates Valuation Report that produced disappointing results such that Mining Associates considered the expenditure 'wasted expenditure' as it did not enhance the value of the project (refer Section 10.3)).

Chinalco Yunnan Copper Resources Ltd - Independent Expert's Report

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On the other hand, exploration expenditure may enhance the value of the project by significantly more than the amount of the expenditure if additional positive information about mineralisation is generated or an economic deposit found.

In usual circumstances, before the exploration expenditure is spent and results obtained, it is usually the case that it is assumed that the exploration expenditure on a project can be assumed to enhance the value of the exploration project by the amount of the expenditure.

Applying that approach to the present circumstances, it can be assumed that if all the Proposed Disposal Consideration is expended, then the value of the Properties will be increased by the same amount and the Company will own 45% of the Properties with the enhanced value.

Set out below is the comparison between the value of the Properties and the Proposed Disposal Consideration provided by YEX on the above basis:

Table 25: Fairness assessment - Proposed Disposal

AU$ Section	AU$ Section	Low High Preferred	Low High Preferred	Low High Preferred
Fair market value of the Properties before expenditure of the Proposed Disposal Consideration Add: Proposed Disposal Consideration Fair market value of the Properties after expenditure of the Proposed Disposal Consideration Fair market value of a 55% interest in the Properties Fair market value of the Proposed Disposal Consideration Premium / (Deficiency) of the Proposed Disposal Consideration as compared with fair market value of a 55% interest in the Properties Conclusion	10.2 10.4 10.4	3,626,000 4,627,667	6,888,000 4,627,667	4,850,000 4,627,667
		8,253,667 4,539,517 4,627,667	11,515,667 6,333,617 4,627,667	9,477,667 5,212,717 4,627,667
		88,150 1.9%	(1,705,950) (26.9%)	(585,050) (11.2%)
		"Fair"	"Not Fair"	"Not Fair"

Source:PKFCA analysis

An alternative assessment approach is to consider the matter from the viewpoint of the value of Chinalco Yunnan's interests in the Properties, as follows:

Table 26: Fairness assessment - Proposed Disposal

AU$ Ref	AU$ Ref	Low High Preferred	Low High Preferred	Low High Preferred
Chinalco Yunnan's position before the Proposed Transaction 100% of the fair market value of the Properties before Proposed Transaction Chinalco Yunnan's position after the Proposed Transaction 100% of the fair market value of the Properties before expenditure of the Proposed Disposal Consideration Add: Proposed Disposal Consideration Fair market value of the Properties after expenditure of the Proposed Disposal Consideration Fair market value of a 45% interest in the Properties after the Proposed Transaction Premium / (Deficiency) of fair market value of a 45% interest in the Properties after the Proposed Transaction as compared with 100% fair market value of the Properties before Proposed Transaction Conclusion	10.2 10.4	3,626,000 3,626,000 4,627,667	6,888,000 6,888,000 4,627,667	4,850,000 4,850,000 4,627,667
		8,253,667 3,714,150 88,150 2.4%	11,515,667 5,182,050 (1,705,950) (24.8%)	9,477,667 4,264,950 (585,050) (12.1%)
		"Fair"	"Not Fair"	"Not Fair"

Source:PKFCA analysis

Chinalco Yunnan Copper Resources Ltd - Independent Expert's Report

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Based on the analysis set out above, the fair market value of the Proposed Disposal Consideration falls within the range of the assessed fair market value of a 55% interest in the Properties, albeit at the lower range. Accordingly, in our opinion, the Proposed Disposal is " Fair ".

We note that the above analysis ignores that under the JV Agreement, fees, rents, rates and other monies levied or assessed upon the Properties (exclusive of the exploration expenditure payable by YEX pursuant to the Proposed Disposal) under Queensland's Mineral Resources Act 1989 are payable by YEX.

10.6 Reasonableness Assessment

RG 111.60 provides that a proposed related party transaction is "reasonable" if it is "fair". Therefore, applying that reasoning to the present circumstances, as we have concluded the Proposed Disposal is " Fair ", pursuant to RG 111, the Proposed Acquisition is also " Reasonable ".

Nonetheless, we have considered various factors that we believe Non-Associated Shareholders should consider when deciding whether or not to accept the Proposed Disposal. Set out below is a summary of our assessment of the various factors.

10.6.1 Advantages of the Proposed Disposal

Future capital committed to the Properties

Under the JV Agreement it is YEX's responsibility to incur exploration expenditure up to the amount of AU$5 million, although there is no obligation on YEX to make any expenditure at all. But if it does not, then it would not acquire any interest in the Properties. Accordingly, the Company will not have to commit exploration expenditure until after the JV Agreement End Date. Chinalco Yunnan can reallocate capital and focus towards other projects.

Participation in the future growth of the Properties

The Proposed Disposal provides Chinalco Yunnan with the opportunity to retain an interest of 45% in the Properties. This retention will allow the Company to benefit from any future growth in value to be derived from the Properties if there are any major mineral discoveries.

Properties are a low priority for Chinalco Yunnan

The Directors have stated the Properties are a low priority due to the current mineral estimates not reaching an economic stage. The Proposed Disposal presents the opportunity for further exploration to be undertaken on the Properties that would not have occurred for some time, if at all, in the absence of the Proposed Disposal.

Limitation of future expenditure by Chinalco Yunnan

Under the JV Agreement, fees, rents, rates and other monies levied or assessed upon the Properties (exclusive of the exploration expenditure payable by YEX pursuant to the Proposed Disposal) under Queensland's Mineral Resources Act 1989 are payable by YEX.

10.6.2 Disadvantages of the Proposed Disposal

Reduced participation in any future growth of the value of the Properties

The exploration expenditure to be incurred on the Properties may enhance the value of the Properties and may translate to discoveries of an economic mineral base. Should the NonAssociated Shareholders approve the Proposed Disposal and YEX fulfils the minimum exploration expenditure requirements, the shareholders' future participation in the Properties will reduced to 45%.

Chinalco Yunnan Copper Resources Ltd - Independent Expert's Report

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Forgo opportunity to realise cash by sale of Properties

By entering into the Proposed Transaction the Company would forgo the opportunity to sell the Properties and realise cash that would fund other more attractive activities.

The preferred value of the Properties is AU$4,850,000. If this amount could be realised, it would be a significant sum for Chinalco Yunnan and the Company has indicated that the Properties were a low priority due to the current mineral estimates not reaching an economic stage.

Possible further dilution of participation

The JV Agreement states that after the End Date of the JV Agreement the Company's interest could dilute further if Chinalco Yunnan does not contribute its share of the costs towards the Properties in accordance with its participating interest. Accordingly, Chinalco Yunnan's participating interest in the Properties could be diluted further than 45% if Chinalco Yunnan does not contribute its share of the costs.

10.6.3 Conclusion on "Reasonableness"

As we have concluded the Proposed Disposal is "Fair", pursuant to RG 111 it is considered " Reasonable ".

10.7 Conclusion

PKFCA concludes that the Proposed Disposal is " Fair " and " Reasonable " to the Non-Associated Shareholders.

Obviously, if the Non-Associated Shareholders have a more optimistic view of the prospects and potential value of the Properties, they can decide to vote against the Proposed Disposal.

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11 QUALIFICATIONS AND DECLARATIONS

11.1 Qualifications

PKFCA is the licensed corporate advisory arm of PKF East Coast Practice, Chartered Accountants and Business Advisers. PKFCA provides advice in relation to all aspects of valuations and has extensive experience in the valuation of corporate entities and provision of expert reports.

Ms Fiona Hansen, CA, B.Com (Hons), is a Director of PKFCA. Ms Hansen is also a Partner of PKF East Coast Practice. Ms Hansen is the Director responsible for the preparation of this IER. Ms Hansen has in excess of 15 years experience in the chartered accountancy profession and has undertaken numerous corporate finance assignments involving acquisitions, divestments, valuations and financial due diligence.

Mr Wayne Schulz, CA, B.Com, Post-Graduate Diploma in Accounting, is a Principal of PKFCA. Wayne has over 10 years of corporate finance experience. He has had extensive experience in the areas of preparation and review of independent expert’s reports, business valuations, valuation of intangible assets, employee options, purchase price allocations and due diligence reviews.

Mr. Peter Cornell B.Com, LLB, is a Director of PKFCA. Mr. Cornell has been actively involved in the review of this IER. Mr. Cornell has over 25 years experience in law, business valuation and corporate advisory and planning activities. He has had extensive experience in the areas of preparation and review of independent expert’s reports, litigation accounting, business feasibility studies, financial investigations, business valuations and due diligence reviews.

Based on their experience, Messrs Hansen, Schulz and Cornell are considered to have the appropriate expertise and professional qualifications to provide the advice offered.

11.2 Independence

PKFCA is unaware of any matter or circumstance that would preclude it from preparing this IER on the grounds of independence under regulatory or professional requirements. In particular, PKFCA has had regard to the provisions of applicable pronouncements and other guidance statements relating to professional independence issued by Australian professional accounting bodies and ASIC.

PKFCA was not involved in advising on, negotiating, setting, or otherwise acting in any capacity for Chinalco Yunnan in relation to the Proposed Transactions, other than the preparation of this IER. Further, PKFCA has not held and, at the date of this IER, does not hold any shareholding in, or other relationship with, Chinalco Yunnan that could be regarded as capable of affecting its ability to provide an unbiased opinion in relation to the Proposed Transactions.

PKFCA considers itself to be independent in terms of RG 112 Independence of experts , issued by ASIC, dated March 2011.

PKFCA will receive a fee based on the time spent in the preparation of this IER in the amount of approximately AU$50,000, (plus GST and disbursements). PKFCA will not receive any fee contingent upon the outcome of the Proposed Transactions, and accordingly, does not have any pecuniary or other interests that could reasonably be regarded as being capable of affecting its ability to give an unbiased opinion in relation to the Proposed Transactions. In addition, fees for the reports of the independent Technical Specialists have been paid by Chinalco Yunnan and such fees are also on the same basis as that rendered by PKFCA.

Two drafts of this IER were provided to the Directors of Chinalco Yunnan and the Technical Specialists for review of factual accuracy. Certain changes were made to the IER as a result of the circulation of the draft IERs. However, no changes were made to the methodology, conclusions or recommendations made to the Non-Associated Shareholders.

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11.3 Disclaimer

This IER has been prepared at the request of the Directors and was not prepared for any purpose other than that stated in this IER. This IER has been prepared for the sole benefit of the Directors and Non-Associated Shareholders. Accordingly, this IER and the information contained herein may not be relied upon by anyone other than the Directors and the Non-Associated Shareholders without the written consent of PKFCA. PKFCA accepts no responsibility to any person other than the Directors, and Non-Associated Shareholders in relation to this IER. The statements and opinions contained in this IER are given in good faith and are based upon PKFCA’s consideration and assessment of information provided by the Directors, executives and management of Chinalco Yunnan and San Mu.

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APPENDIX 1 GLOSSARY

Term Definition	Term Definition
ActivEX AFSL AU$ Articles of Association ASIC Assessment Date ASX Capital Increase Agreement Chinalco CMRRC CNY Company or Chinalco Yunnan Corporations Act CPI DCF Directors EPM Explanatory Memorandum Farm-in Interest FOS FSG FY GDP GFC Goldsearch IER JORC Code JV Agreement JV Agreement Commencement Date JV Agreement End Date Laos Projects Licence LOI Mining Associates Mining Associates Valuation Report Non-Associated Shareholders NTA PKFCA, us or we Pro-forma Statement of Financial Position Proposed Acquisition Proposed Disposal	ActivEX Limited Australian Financial Services Limited Australian Dollar San Mu's Articles of Association Australian Securities & Investments Commission 19 August 2011 Australian Securities Exchange Agreement on Capital Increase for San Mu The Aluminium Corporation of China Chinese Mineral Resource/Reserve Classification Standard Chinese Yuan Chinalco Yunnan Copper Resources Ltd Corporations Act 2001 Consumer Price Index Discounted Cash Flow Directors of Chinalco Yunnan Exploration Permit for Minerals The Explanatory Memorandum prepared by Chinalco Yunnan in respect of the Proposed Transactions, which this IER accompanies YEX's exclusive right to earn up to a 55% interest in the Properties, free of all encumbrances Financial Ombudsman Service Limited Financial Services Guide Financial Year Gross Domestic Product Global Financial Crisis Goldsearch Limited This Independent Expert's Report The Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (JORC Code, 2004 edition) Joint Venture Agreement in respect of the Properties between YEX and Chinalco Yunnan dated 15 February 2011, as amended by the Deed of Variation between YEX and Chinalco Yunnan dated 2 September 2011 The date that the JV Agreement commences, being when the Company obtains the necessary shareholder approvals to the Proposed Disposal The end date of the JV Agreement, being 15 February 2014 or such later date as agreed by Chinalco Yunnan and YEX The four developments owned by the two subsidiaries of San Mu, being Xinzhai Project, Jiuzhai Project, Nadao Project and Modeng Project Australian Financial Services Licence Letter of Intent Mining Associates Pty Ltd Valuation Report prepared by Mining Associates on the Properties Shareholders of Chinalco Yunnan whose votes are not to be disregarded in respect of the Proposed Acquisition and/or Proposed Disposal, as applicable Net Tangible Assets PKF Corporate Advisory (East Coast) Pty Limited San Mu's statement of financial position as at 30 June 2011, adjusted for valuations of individual assets and liabilities to better reflect fair market value of San Mu as at the Assessment Date Chinalco Yunnan's proposed 51% equity investment in San Mu Chinalco Yunnan's proposed disposal of a 55% interest in the Properties

Term
Definition

ActivEX
AFSL
AU$ Articles of Association
ASIC
Assessment Date
ASX
Capital Increase Agreement
Chinalco
CMRRC
CNY
Company or Chinalco Yunnan
Corporations Act
CPI
DCF
Directors
EPM
Explanatory Memorandum
Farm-in Interest
FOS
FSG
FY
GDP
GFC
Goldsearch
IER
JORC Code
JV Agreement
JV Agreement Commencement
Date
JV Agreement End Date
Laos Projects
Licence
LOI
Mining Associates
Mining Associates Valuation
Report
Non-Associated Shareholders
NTA
PKFCA, us or we
Pro-forma Statement of
Financial Position
Proposed Acquisition
Proposed Disposal

ActivEX Limited
Australian Financial Services Limited
Australian Dollar
San Mu's Articles of Association
Australian Securities & Investments Commission
19 August 2011
Australian Securities Exchange
Agreement on Capital Increase for San Mu
The Aluminium Corporation of China
Chinese Mineral Resource/Reserve Classification Standard
Chinese Yuan
Chinalco Yunnan Copper Resources Ltd
Corporations Act 2001
Consumer Price Index
Discounted Cash Flow
Directors of Chinalco Yunnan
Exploration Permit for Minerals
The Explanatory Memorandum prepared by Chinalco Yunnan in respect of the Proposed
Transactions, which this IER accompanies
YEX's exclusive right to earn up to a 55% interest in the Properties, free of all encumbrances
Financial Ombudsman Service Limited
Financial Services Guide
Financial Year
Gross Domestic Product
Global Financial Crisis
Goldsearch Limited
This Independent Expert's Report
The Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore
Reserves (JORC Code, 2004 edition)
Joint Venture Agreement in respect of the Properties between YEX and Chinalco Yunnan
dated 15 February 2011, as amended by the Deed of Variation between YEX and Chinalco
Yunnan dated 2 September 2011
The date that the JV Agreement commences, being when the Company obtains the
necessary shareholder approvals to the Proposed Disposal
The end date of the JV Agreement, being 15 February 2014 or such later date as agreed by
Chinalco Yunnan and YEX
The four developments owned by the two subsidiaries of San Mu, being Xinzhai Project,
Jiuzhai Project, Nadao Project and Modeng Project
Australian Financial Services Licence
Letter of Intent
Mining Associates Pty Ltd
Valuation Report prepared by Mining Associates on the Properties
Shareholders of Chinalco Yunnan whose votes are not to be disregarded in respect of the
Proposed Acquisition and/or Proposed Disposal, as applicable
Net Tangible Assets
PKF Corporate Advisory (East Coast) Pty Limited
San Mu's statement of financial position as at 30 June 2011, adjusted for valuations of
individual assets and liabilities to better reflect fair market value of San Mu as at the
Assessment Date
Chinalco Yunnan's proposed 51% equity investment in San Mu
Chinalco Yunnan's proposed disposal of a 55% interest in the Properties

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Term Definition	Term Definition
Proposed Transactions Proposed Acquisition Consideration Proposed Disposal Consideration Properties RBA RG RMB Roma Appraisals Roma Appraisals Valuation Report RTMEC San Mu San Mu Business License San Mu JV Contract Technical Specialists Technical Specialists Valuation Report US$ YEX VWAP	Collectively, the Proposed Acquisition and the Proposed Disposal The AU$ equivalent of RMB17,827,700, payable in cash by Chinalco Yunnan, over a 12 month period AU$5 million in exploration expenditure to be incurred by YEX on the Properties Collectively, the Cloncurry North and Waterford Projects comprising of EPM 12285 (Roseby East), EPM 15084 (Quamby), EPM 15095 (Clonagh) and EPM 16393 (Waterford). Reserve Bank of Australia Regulatory Guideline, as issued by ASIC Renminbi, being the official currency of the People's Republic of China. The primary unit of Renminbi is the Chinese Yuan Roma Appraisals Limited Valuation report prepared by Roma Appraisals on the equity value of San Mu Rio Tinto Mining and Exploration Chile Yunnan Copper San Mu Mining Industry Co. Ltd The new business license of San Mu issued after San Mu is modified to a Chinese-foreign joint venture in accordance with the San Mu JV Contract Joint Venture Contract for the Establishment of the Joint Venture Yunnan Copper San Mu Mining Industry Co Ltd Mining Associates and Roma Appraisals Collectively, the Mining Associates Valuation Report and the Roma Appraisals Valuation Report United States Dollar Yunnan Copper Mineral Resources Exploration and Development Co. Ltd Volume Weighted Average Price

Term
Definition

Proposed Transactions
Proposed Acquisition
Consideration
Proposed Disposal
Consideration
Properties
RBA
RG
RMB
Roma Appraisals
Roma Appraisals Valuation
Report
RTMEC
San Mu
San Mu Business License
San Mu JV Contract
Technical Specialists
Technical Specialists Valuation
Report
US$ YEX
VWAP

Collectively, the Proposed Acquisition and the Proposed Disposal
The AU$ equivalent of RMB17,827,700, payable in cash by Chinalco Yunnan, over a 12
month period
AU$5 million in exploration expenditure to be incurred by YEX on the Properties
Collectively, the Cloncurry North and Waterford Projects comprising of EPM 12285 (Roseby
East), EPM 15084 (Quamby), EPM 15095 (Clonagh) and EPM 16393 (Waterford).
Reserve Bank of Australia
Regulatory Guideline, as issued by ASIC
Renminbi, being the official currency of the People's Republic of China. The primary unit of
Renminbi is the Chinese Yuan
Roma Appraisals Limited
Valuation report prepared by Roma Appraisals on the equity value of San Mu
Rio Tinto Mining and Exploration Chile
Yunnan Copper San Mu Mining Industry Co. Ltd
The new business license of San Mu issued after San Mu is modified to a Chinese-foreign
joint venture in accordance with the San Mu JV Contract
Joint Venture Contract for the Establishment of the Joint Venture Yunnan Copper San Mu
Mining Industry Co Ltd
Mining Associates and Roma Appraisals
Collectively, the Mining Associates Valuation Report and the Roma Appraisals Valuation
Report
United States Dollar
Yunnan Copper Mineral Resources Exploration and Development Co. Ltd
Volume Weighted Average Price

Source: PKFCA

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APPENDIX 2 SOURCES OF INFORMATION

In preparing this IER, PKFCA has had access to and relied upon the following principal sources of information:

Explanatory Memorandum prepared by Hopgood Ganim;
Chinalco Yunnan's 2009 and 2010 Annual Report;
Chinalco Yunnan's Financial Report for the Half-Year Ended 31 December 2010;
San Mu balance sheet as at 30 June 2011, with 31 December 2010 comparatives;
San Mu profit and loss statement for the six months ended 30 June 2011 and the year ended 31 December 2010;
Chinalco Yunnan Share Register, dated 12 August 2011;
Chinalco Yunnan website, http://www.cycal.com.au/irm/content/home.html
Mining Associates Valuation Report, dated 3 June 2011;
Roma Appraisals Valuation Report, dated 21 July 2011;
Joint Venture Agreement between Yunnan Copper Mineral Resources Exploration and Development Co. Ltd and China Yunnan Copper Australia Limited (now Chinalco Yunnan Copper Resources Limited);
Deed of Variation between Chinalco Yunnan and YEX, prepared by Hopgood Ganim;
Agreement on Capital Increase - Yunnan Copper San Mu Mining Industry Co. Ltd, dated 28 January 2011;
Joint Venture Contract For the Establishment of the Joint Venture "Yunnan Copper San Mu Mining Industry Co. Ltd", dated 28 January 2011;
Articles of Association of "Yunnan Copper San Mu Mining Industry Co. Ltd";
Joint Press Release dated 31 January 2011, "Laos - Copper Silver - Development Joint Venture";
Various ASX announcements;
Various correspondence and discussions between PKFCA and Chinalco Yunnan;
Information and research sourced from Bloomberg and RBA; and
Information generally available and provided by major Australian economic forecasting bodies.

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APPENDIX 3 VALUATION METHODS

In conducting our assessment of the fair market value of the Proposed Transactions the following commonly used business valuation methods have been considered:

Discounted Cash Flow Method

The DCF method is based on the premise that the value of a business or any asset is represented by the present value of its future cash flows. It requires two essential elements:

the forecast of future cash flows of the business asset for a number of years (usually five (5) to 10 years); and
the discount rate that reflects the riskiness of those cash flows used to discount the forecast cash flows back to net present value.

DCF is appropriate where:

the businesses’ earnings are capable of being forecast for a reasonable period (preferably five (5) to 10 years) with reasonable accuracy;
earnings or cash flows are expected to fluctuate significantly from year to year;
the business or asset has a finite life;
the business is in a 'start up' or in early stages of development;
the business has irregular capital expenditure requirements;
the business involves infrastructure projects with major capital expenditure requirements; or
the business is currently making losses but is expected to recover.

Capitalisation of Future Maintainable Earnings Method

This method involves the capitalisation of estimated future maintainable earnings by an appropriate multiple. Maintainable earnings are the assessed sustainable profits that can be derived by the vendor’s business and excludes any one off profits or losses. An appropriate earnings multiple is assessed by reference to market evidence as to the earnings multiples of comparable companies.

This method is suitable for the valuation of businesses with indefinite trading lives and where earnings are relatively stable or a reliable trend in earnings is evident.

Net Realisable Value of Assets

Asset based valuations involve the determination of the fair market value of a business based on the net realisable value of the assets used in the business.

Valuation of net realisable assets involves:

separating the business or entity into components which can be readily sold, such as individual business units or collection of individual items of plant and equipment and other net assets; and
ascribing a value to each based on the net amount that could be obtained for the asset if sold.

The net realisable value of the assets can be determined on the basis of:

orderly realisation : this method estimates fair market value by determining the net assets of the underlying business including an allowance for the reasonable costs of carrying out the sale of assets, taxation charges and the time value of money assuming the business is wound up in an orderly manner. This is not a valuation on the basis of a forced sale where the assets might be sold at values materially different from their fair market value;
liquidation : this is a valuation on the basis of a forced sale where the assets might be sold at values materially different from their fair market value; or

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going concern : the net assets on a going concern basis estimates the market value of the net assets but does not take into account any realisation costs. This method is often considered appropriate for the valuation of an investment or property holding company. Adjustments may need to be made to the book value of assets and liabilities to reflect their going concern value.

The net realisable value of a trading company’s assets will generally provide the lowest possible value for the business. The difference between the value of the company’s identifiable net assets (including identifiable intangibles) and the value obtained by capitalising earnings is attributable to goodwill.

The net realisable value of assets is relevant where a company is making sustained losses or profits but at a level less than the required rate of return, where it is close to liquidation, where it is a holding company, or where all its assets are liquid. It is also relevant to businesses which are being segmented and divested and to value assets that are surplus to the core operating business. The net realisable assets methodology is also used as a check for the value derived using other methods.

These approaches ignore the possibility that the company’s value could exceed the realisable value of its assets.

Share Market Trading History

The application of the price that a company’s shares trade on the ASX is an appropriate basis for valuation where:

the shares trade in an efficient market place where ‘willing’ buyers and sellers readily trade the company’s shares; and
the market for the company’s shares is active and liquid.

Constant Growth Dividend Discount Model

The dividend discount model works best for:

firms with stable growth rates;
firms which pay out dividends that are high and approximate free cash flow to equity;
firms with stable leverage; and
firms where there are significant or unusual limitations to the rights of shareholders.

Special Value

Special value is the amount which a potential acquirer may be prepared to pay for a business in excess of the fair market value. This premium represents the value to the potential acquirer of potential economies of scale, reduction in competition or other synergies arising from the acquisition of the asset not available to likely purchasers generally. Special value is not normally considered in the assessment of fair market value as it relates to the individual circumstances of special purchases.

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APPENDIX 4 TECHNICAL SPECIALIST VALUATION REPORTS

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AI assistant

AUKING MINING LIMITED — Proxy Solicitation & Information Statement 2011

64355_rns_2011-09-20_dc466651-f5ae-4d3e-a196-040c5a992369.pdf

Chinalco Yunnan Copper Resources Limited

ACN 070 859 522

Notice of Extraordinary General Meeting and Explanatory Memorandum

Agenda

Ordinary business

Resolution 1 - Approval of Acquisition of 51% Equity Interest in Yunnan Copper San Mu Mining Industry Co Ltd

Voting exclusion statement

Resolution 2 - Approval of Disposal of 55% Interest in Cloncurry North and Waterford Projects

Voting exclusion statement

General business

BY ORDER OF THE BOARD

1. Introduction

ORDINARY RESOLUTIONS

Introduction

Background

Summary of Terms of Proposed Acquisition

Rationale for the Proposed Acquisition

Corporate Structure following Proposed Acquisition

Regulatory Requirements

ASX Listing Rule 10.1

Notice of Extraordinary General Meeting and Explanatory Memorandum

ASX Listing Rule 10.10

Recommendation

Resolution 2 - Approval of Disposal of 55% Interest in Cloncurry North and Waterford Projects

Introduction

Background

Summary of Terms of Proposed Disposal

Rationale for the Proposed Disposal

Corporate Structure following Proposed Disposal

Regulatory Requirements

ASX Listing Rule 10.1

ASX Listing Rule 10.10

Notice of Extraordinary General Meeting and Explanatory Memorandum

Corporate Structure following the Proposed Acquisition and the Proposed Disposal

Recommendation

2. Interpretation

Notice of Extraordinary General Meeting and Explanatory Memorandum

Proxies and representatives

Chinalco Yunnan Copper Resources Limited

GPO Box 216, Brisbane QLD 4001

Telephone: +61 7 3212 6204 Facsimile No: +61 7 3212 6250

Voting entitlement

Signing instructions

X99999999999

X99999999999

SHAREHOLDER VOTING FORM

STEP 1

APPOINT A PROXY

VOTING DIRECTIONS

STEP 2

Resolution 1

Resolution 2

SIGNATURE OF SHAREHOLDERS – THIS MUST BE COMPLETED

STEP 3

Your Name and Address

Appointment of a Proxy

Votes on Items of Business – Proxy Appointment

Appointment of a Second Proxy

Signing Instructions

Corporate Representatives

Lodgement of a Proxy Form

by mail:

by fax:



by hand:

Chinalco Yunnan Copper Resources Ltd

FINANCIAL SERVICES GUIDE

8 September 2011

Engagement

Financial Services Guide

Financial services PKFCA is licensed to provide

General financial product advice

Associations and relationships

Benefits that PKFCA may receive

Remuneration or other benefits received by our directors and employees

Referrals

Complaints resolution

AUKING MINING LIMITED Proxy Solicitation & Information Statement 2011