GCL Technology Holdings Limited — Proxy Solicitation & Information Statement 2008

Sep 19, 2008

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

The Stock Exchange of Hong Kong Limited takes no responsibility for the contents of this circular, makes no representation as to its accuracy or completeness and expressly disclaims any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this circular.

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

If you have sold or transferred all your shares in GCL-Poly Energy Holdings Limited, you should at once hand this circular and the accompanying form of proxy to the purchaser or the transferee or to the bank, stockbroker or other agent through whom the sale or transfer was effected for transmission to the purchaser or the transferee.

This circular appears for information purposes only and does not constitute an invitation or offer to acquire, purchase or subscribe for securities of GCL-Poly Energy Holdings Limited.

GCL-Poly Energy Holdings Limited 保利協鑫能源控股有限公司

(incorporated in the Cayman Islands with limited liability)

(Stock code: 3800)

DISCLOSEABLE AND CONNECTED TRANSACTION INVOLVING ISSUE OF CONVERTIBLE NOTES AND ACQUISITION OF A COMPANY

Financial adviser to GCL-Poly Energy Holdings Limited

SOMERLEY LIMITED

Independent financial adviser to the Independent Board Committee and the Independent Shareholders

FIRST SHANGHAI CAPITAL LIMITED

A letter from the independent board committee of the Company is set out on pages 29 to 30 of this circular. A letter from First Shanghai Capital Limited containing its advice to the independent board committee and the independent shareholders of the Company is set out on pages 31 to 56 of this circular.

A notice convening an extraordinary general meeting of the Company to be held at Pacific Place Conference Centre, Level 5, One Pacific Place, 88 Queensway, Hong Kong on Wednesday, 15 October 2008, at 10:30 a.m. is set out on pages EGM-1 to EGM-2 of this circular. If you are not able to attend and/or vote at the meeting, you are strongly urged to complete the accompanying form of proxy in accordance with the instructions printed thereon and return it to the Company’s branch share registrar in Hong Kong, Computershare Hong Kong Investor Services Limited at Rooms 1712-1716, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong as soon as possible and in any event not later than 48 hours before the time appointed for the holding of the meeting or any adjournment thereof. Completion and return of the form of proxy will not preclude you from attending and voting at the meeting or any adjournment thereof should you so wish.

22 September 2008

CONTENTS

	Page
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	8
Letter from the Independent Board Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	29
Letter from First Shanghai. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	31
Appendix I – Technical report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	I-1
Appendix II – Valuation of Opco . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	II-1
Appendix III – General information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	III-1
Notice of the EGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	EGM-1

– i –

DEFINITIONS

In this circular, the following expressions shall have the meanings set out below unless the context requires otherwise:

“Acquisition”	the acquisition by the Purchaser of the Sale Shares pursuant
	and subject to the terms and conditions of the Sale and
	Purchase Agreement
“Acquisition Announcement”	the announcement published on 11 August 2008 by the
	Company in relation to the Acquisition
“Announcements”	the announcements of the Company dated 11 January 2008
	and 1 April 2008 in relation to the pre-listing acquisitions
“associate”	has the meaning ascribed thereto in the Listing Rules
“BMI” or “Valuer”	BMI Appraisals Limited, an independent valuation firm
“Board”	the board of Directors
“Business Day”	a day (except Saturday, Sunday or public holiday) on which
	banks in Hong Kong are generally open for business
“BVI”	the British Virgin Islands
“Code”	The Hong Kong Code on Takeovers and Mergers
“Company”	GCL-Poly Energy Holdings Limited, a company
	incorporated in the Cayman Islands with limited liability
	and the securities of which are listed on the Stock Exchange
“connected person(s)”	has the meaning ascribed thereto in the Listing Rules
“Consideration”	up to RMB127,936,000 (equivalent to approximately
	HK$145,627,000), being the aggregate consideration
	payable by the Purchaser pursuant to the Sale and Purchase
	Agreement
“Conversion Price”	HK$1.230 per Share, subject to adjustment as set out in the
	Convertible Notes

– 1 –

DEFINITIONS

“Conversion Share(s)” the Share(s) to be issued by the Company under the Convertible Notes (whether upon exercise by the Noteholder of the conversion rights, or otherwise pursuant to the conditions under the Convertible Notes) “Convertible Notes” the convertible notes, comprising the Tranche 1 Convertible Note and the Tranche 2 Convertible Note, in an aggregate principal amount of not exceeding RMB127,936,000 (equivalent to approximately HK$145,627,000), to be issued by the Company to satisfy the Consideration, the terms and conditions of which are set out in the section headed “Convertible Notes” in this circular “Directors” the directors of the Company “Duolun Mine” the Duolun coal mine located at Xidacang Mining Right Area, about 4 kilometers north of Duolun County, Inner Mongolia Autonomous Region, the PRC “EGM” an extraordinary general meeting of the Company to be convened to approve, amongst other things, the Sale and Purchase Agreement and the issue of the Convertible Notes “First Completion” the first completion of the Acquisition on the First Completion Date “First Completion Date” the date which is 5 Business Days after the Purchaser determines that the Purchaser’s due diligence is satisfactory and after the relevant documents as set out in the Sale and Purchase Agreement have been delivered to the Purchaser and the conditions precedent for the First Completion as set out in the section headed “Conditions precedent” in this circular are fulfilled

– 2 –

DEFINITIONS

“First Long Stop Date”	the date which is twelve (12) months from the date of the
	Sale and Purchase Agreement or such other date as may be
	agreed between the Purchaser and the Vendor
“First Shanghai” or “Independent	First Shanghai Capital Limited, a licensed corporation under
Financial Adviser”	the SFO to carry out type 6 (advising on corporate finance)
	regulated activity, being the independent financial adviser
	to the Independent Board Committee and the Independent
	Shareholders on the terms of the Sale and Purchase
	Agreement, the issue of the Convertible Notes and the
	transactions contemplated thereunder
“GangHua”	Ganghua (Hong Kong) Company Limited（港華（香港）有
	限公司）, a company incorporated in Hong Kong and own
	as to 25% of the equity capital of Opco as at the Latest
	Practicable Date
“Golden Concord Xilin”	內蒙古協鑫錫林礦業有限公司(Inner Mongolia Golden
	Concord Xilin Energy Investment Company*), a company
	incorporated in the PRC which owns as to 55% of the equity
	capital of Opco as at the Latest Practicable Date
“Group”	the Company and its subsidiaries
“HKCo1”	Hong Kong Rich Base Limited
“HK$” or “HK Dollar”	Hong Kong dollars, the lawful currency of Hong Kong from
	time to time
“Hong Kong”	the Hong Kong Special Administrative Region of the PRC
“Independent Board	the independent board committee of the Company formed
Committee”	by all the independent non-executive Directors to advise
	the Independent Shareholders on the terms of the Sale and
	Purchase Agreement and the transactions contemplated
	thereunder
“Independent Shareholders”	Shareholders (other than the Vendor and Mr. Zhu and their
	respective associates) who are not required to abstain from
	voting at the EGM

– 3 –

	DEFINITIONS
“JV Agreements”	the joint venture agreement of Opco dated 19 May 2005
	and its supplemental agreement dated 17 July 2005
“Last Trading Day”	11 August 2008, being the date of the Acquisition
	Announcement and the date of the Sale and Purchase
	Agreement
“Latest Practicable Date”	17 September 2008, being the latest practicable date prior
	to the printing of this circular for ascertaining certain
	information contained herein
“Listing Rules”	Rules Governing the Listing of Securities on the Stock
	Exchange
“Marketable Reserves”	saleable coal from proven and probable reserves after
	accounting for preparation plant yield, where applicable
“Marketable Resources”	saleable coal from measured, indicated and inferred
	resources after accounting for preparation plant yield, where
	applicable. It is classified as resource because mining right
	has not been obtained from the government
“Maturity Date”	the third anniversary of the date of issue of the Tranche 1
	Convertible Note
“Mr. Zhu”	Mr. Zhu Gongshan, the controlling shareholder of the
	Company
“Noteholder(s)”	the person who is for the time being the registered holder
	of the Convertible Notes
“Opco”	內蒙古多倫協鑫礦業有限責任公司(Inner Mongolia
	Duolun Golden Concord Mining Limited*), a sino foreign
	equity joint venture incorporated in the PRC
“PRC”	the People’s Republic of China which, for the purpose of
	this circular, excludes Hong Kong, Taiwan and the Macau
	Special Administrative Region of the PRC
“Prospectus”	the prospectus of the Company dated 31 October 2007 in
	relation to the global offering

– 4 –

DEFINITIONS

“Purchaser” GCL-Poly Coal Mining Limited, a company incorporated in the BVI and a wholly-owned subsidiary of the Company “Redemption Date(s)” the date(s) on which all or part of the outstanding Tranche 2 Convertible Note will be redeemed in accordance with the terms of the conditions as set out in the Tranche 2 Convertible Note “Redemption Price” the redemption price shall be calculated in accordance with the following formula: Redemption Price = [1 + (6% x D/T)] x outstanding principal amount of the Tranche 2 Convertible Note to be redeemed where:

	D = For the Tranche 2 Convertible Note, total number of
	days between the issue date of the Tranche 2 Convertible
	Note and the Redemption Date
	T = 1,095 days, being total number of days of between the
	issue date of the Tranche 1 Convertible Note and the
	Maturity Date
“RMB”	Renminbi, the lawful currency of the PRC from time to
	time
“Sale and Purchase	the agreement dated 11 August 2008 entered into by and
Agreement”	between the Purchaser and the Vendor in relation to the
	Acquisition
“Sales Shares”	100% of the issued share capital of the Target
“Second Completion”	the second completion of the Acquisition on the Second
	Completion Date

– 5 –

DEFINITIONS

“Second Completion Date”	the date which is 5 Business Days after the Purchaser
	determines that the Purchaser’s further due diligence is
	satisfactory and after the relevant documents as set out in
	the Sale and Purchase Agreement have been delivered to
	the Purchaser and the conditions precedent for the Second
	Completion as set out in the section headed “Conditions
	precedent” in this circular are fulfilled
“Second Long Stop Date”	the date which is thirty (30) months from the date of the
	Sale and Purchase Agreement or such other date as may be
	agreed between the Purchaser and the Vendor
“SFC”	Securities and Futures Commission of Hong Kong
“SFO”	the Securities and Futures Ordinance (Chapter 571 of the
	Laws of Hong Kong), as amended, supplemented or
	otherwise modified from time to time
“Shareholder(s)”	holder(s) of the existing shares of the Company
“Shares”	the shares of HK$0.10 each in the share capital of the
	Company
“Share Transfer Agreement”	the agreement dated 30 July 2008 entered into by HKCo1
	and Golden Concord Xilin pursuant to which HKCo1 agreed
	to acquire the 55% interest in Opco from Golden Concord
	Xilin
“Stock Exchange”	The Stock Exchange of Hong Kong Limited
“Target”	Joint Loyal Holdings Limited, a company incorporated in
	the BVI
“Target Group”	Target and its subsidiaries
“Technical Adviser”	means John T. Boyd Company, a company with the
	appropriate qualification to provide independent technical
	review of the Duolun Mine

– 6 –

DEFINITIONS

“Tranche 1 Convertible RMB85,000,000 (equivalent to approximately Note” HK$96,754,000) convertible note to be issued on the First Completion Date

“Tranche 2 Convertible not exceeding RMB42,936,000 (equivalent to approximately Note” HK$48,873,000) convertible note to be issued on the Second Completion Date “Vendor” Get Famous Investments Limited, a company incorporated in the BVI and beneficially wholly-owned by Mr. Zhu “Xidacang Mining the mining right area located 4 kilometers north of Duolun Right Area” County, Inner Mongolia Autonomous Region, the PRC, covering 7.7325 sq. km. and encompassing the Duolun Mine “Mtpa” million tonnes per year “sq. km.” square kilometer(s) “sq. m.” square metre(s) “%” per cent.

For the purposes of this circular, unless otherwise specified, conversions of RMB into HK$ are based on the approximate exchange rate of RMB0.87852 to HK$1.00, for the purposes of illustration only. No representation is made that any amount in HK$ or RMB could have been or could be converted at the above rate or at any other rates.

• For identification purpose only

– 7 –

LETTER FROM THE BOARD

GCL-Poly Energy Holdings Limited 保利協鑫能源控股有限公司

(incorporated in the Cayman Islands with limited liability)

(Stock code: 3800)

Executive Directors:

Zhu Gong Shan (Chairman) Sha Hong Qiu Ji Jun Shu Hua Yu Bao Dong Sun Wei Tong Yee Ming

Non-executive Director:

Law Ryan Wing Cheung

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

Principal place of business in Hong Kong: Suites 3601-4, Two Exchange Square 8 Connaught Road Central Hong Kong

Independent non-executive Directors:

Heng Kwoo Seng Qian Zhi Xin Raymond Ho Chung Tai Xue Zhong Su

22 September 2008

To the Shareholders

Dear Sir or Madam,

DISCLOSEABLE AND CONNECTED TRANSACTION INVOLVING ISSUE OF CONVERTIBLE NOTES AND ACQUISITION OF A COMPANY

INTRODUCTION

On 11 August 2008 (after trading hours), the Purchaser, a wholly-owned subsidiary of the Company, and the Vendor entered into the Sale and Purchase Agreement pursuant to which the Purchaser has conditionally agreed to acquire and the Vendor has conditionally agreed to sell 100% of the issued share capital of the Target. The principal asset of the Target will be the beneficial ownership of the Duolun Mine project under construction in Inner Mongolia Autonomous Region, the PRC.

– 8 –

LETTER FROM THE BOARD

The purpose of this circular is to give you (i) further details of the Acquisition and the Target Group; (ii) the report from the Technical Adviser; (iii) the valuation report from the Valuer; (iv) the recommendation of the Independent Board Committee to the Independent Shareholders; (v) a letter from the Independent Financial Adviser containing its advice to the Independent Board Committee and the Independent Shareholders; and (vi) the notice of the EGM and the proxy form.

THE SALE AND PURCHASE AGREEMENT

Date

11 August 2008

Parties

The Vendor:

Get Famous Investments Limited, a company incorporated in the BVI, principally engaged in investment holding and beneficially wholly-owned by Mr. Zhu, the controlling Shareholder

The Purchaser: GCL-Poly Coal Mining Limited, a company incorporated in the BVI and a wholly-owned subsidiary of the Company

Asset acquired

100% of the issued share capital of the Target

Total consideration

The aggregate consideration payable by the Purchaser pursuant to the Sale and Purchase Agreement will be not more than RMB127,936,000 (equivalent to approximately HK$145,627,000), comprising (i) as to RMB85,000,000 (equivalent to approximately HK$96,754,000) for the acquisition of the Sale Shares; and (ii) up to approximately RMB42,936,000 (equivalent to approximately HK$48,873,000) for the subsequent increase in the registered capital of Opco to be paid by the Vendor after the First Completion on a dollar-for-dollar basis. The aggregate consideration is to be satisfied by the issue of Convertible Notes by the Company in two tranches, details of which are set out in the section headed “Basis of Consideration” in this circular. The terms of Convertible Notes are set out in the section headed “Convertible Notes” in this circular. The Acquisition will not result in a change of control of the Company.

– 9 –

LETTER FROM THE BOARD

Completion

First Completion

Subject to the fulfillment (or as applicable, waiver) of the conditions precedent for the First Completion as set out in the section headed “Conditions precedent” in this circular, the First Completion will take place on the First Completion Date, which is 5 Business Days after the Purchaser determines that the Purchaser’s due diligence is satisfactory and after relevant documents as set out in the Sale and Purchase Agreement have been delivered to the Purchaser (including but not limited to, the land use rights certificates, instrument of transfer and all books and records of the Target).

On the First Completion Date, the Company shall issue the Tranche 1 Convertible Note to the Vendor or its nominee in the principal amount of RMB85,000,000 (equivalent to approximately HK$96,754,000).

The First Long Stop Date is 10 August 2009, which is twelve (12) months from the date of the Sale and Purchase Agreement or such other date as may be agreed between the Purchaser and the Vendor.

Second Completion

Subject to the fulfillment (or as applicable, waiver) of the conditions precedent for the Second Completion as set out in the section headed “Conditions precedent” in this circular, the Second Completion will take place on the Second Completion Date, which is 5 Business Days after the Purchaser determines that the Purchaser’s further due diligence is satisfactory and after relevant documents as set out in the Sale and Purchase Agreement have been delivered to the Purchaser (including but not limited to, the evidences of approvals on the increased registered capital and total investment capital of Opco).

On the Second Completion Date, the Company shall issue the Tranche 2 Convertible Note to the Vendor or its nominee in the principal amount equivalent to the actual amount then paid by the Vendor for such increase in registered capital of Opco after the First Completion. Under the Sale and Purchase Agreement, the principal amount of the Tranche 2 Convertible Note in any event will not exceed RMB42,936,000 (equivalent to approximately HK$48,873,000).

The Second Long Stop Date is 10 February 2011, which is thirty (30) months from the date of the Sale and Purchase Agreement or such other date as may be agreed between the Purchaser and the Vendor.

– 10 –

LETTER FROM THE BOARD

If the Second Completion does not occur prior to the Second Long Stop Date, the obligations of the parties regarding subsequent increase in the registered capital of Opco under the Sale and Purchase Agreement shall lapse and the Tranche 2 Convertible Note will not be issued to the Vendor by the Company. Any subsequent increase in the registered capital of the Opco shall then be borne by the Purchaser according to the JV Agreements and the relevant interest of the Purchaser in Opco.

Conditions precedent

The First Completion is conditional upon the satisfaction of the following conditions precedent:

• i. obtaining the approval of the Independent Shareholders regarding the Acquisition;

• ii. obtaining the approval of the Independent Shareholders regarding the issuance of the Convertible Notes;

• iii. the Purchaser receiving the land use rights certificate (“土地使用權証書 ”) from the Vendor;

• iv. the Purchaser being reasonably satisfied with the results of the due diligence exercise on the Target Group, the Target Group’s assets and real property, including Opco and the Duolun Mine (whether legal, accounting, financial, business and technical or other aspects that the Purchaser considers relevant);

• v. completion of the Reorganisation;

• vi. grant by the Stock Exchange of the listing of, and permission to deal in the Conversion Shares; and

• vii. the Vendor and the Target Group obtaining such other approvals and fulfilling such other conditions as required by any relevant governments or regulatory authorities or other relevant third parties in connection with the Acquisition.

– 11 –

LETTER FROM THE BOARD

The Purchaser may at any time waive in whole or in part and conditionally or unconditionally the conditions precedent (iv) and (vii) by notice to the Vendor. As at the Latest Practicable Date, the Purchaser has no current intention to exercise such waiver. The Directors confirm that the Purchaser will waive the conditions precedent (iv) and (vii) only when the granting of such waiver is in the interests of the Company and the Independent Shareholders as a whole. As at the Latest Practicable Date, none of the above conditions have been satisfied or waived.

The Second Completion is conditional upon the satisfaction of the following conditions precedent:

• i. the occurrence of the First Completion;

• ii. the Purchaser being reasonably satisfied with the results of any further due diligence exercise on the Target Group, the Target Group’s assets and real property, including Opco and the Duolun Mine (whether legal, accounting, financial, business and technical or other aspects that the Purchaser considers relevant);

• iii. written confirmation that as of the Second Completion Date the Vendor is not aware of any matter or thing which is in breach of or inconsistent with any of the warranties which details are set out in the Sale and Purchase Agreement;

• iv. evidence of the Development and Reform Commission of Inner Mongolia’s confirmation to increase the total investment amount from RMB313,870,000 to the amount stated in the confirmation upon the completion of the construction at Duolun Mine, such amount being the costs incurred in the development of the Duolun Mine;

• v. the approval certification (“批准証書 ”) issued by Department of Commerce of Inner Mongolia Autonomous Region evidencing the increase of Opco’s registered capital from RMB109,850,000 to an appropriate amount, such increase being based on 40% of the approved increase in investment amount as described above;

• vi. evidence of payment on behalf of HKCo1 by the Vendor of the abovementioned increased registered capital not exceeding RMB42,936,000 or approximately HK$48,873,000 upon issuance of Opco’s Business Registration License recording the same or evidence of such payment to HKCo1; and

– 12 –

LETTER FROM THE BOARD

• vii. the Vendor and the Target Group obtaining such other approvals and fulfilling such other conditions as required by any relevant governments or regulatory authorities or other relevant third parties.

The Purchaser may at any time waive in whole or in part and conditionally or unconditionally the conditions precedent (ii) and (vii) by notice to the Vendor. As at the Latest Practicable Date, the Purchaser has no current intention to exercise such waiver. The Directors confirm that the Purchaser will waive the conditions precedent (ii) and (vii) only when the granting of such waiver is in the interests of the Company and the Independent Shareholders as a whole. As at the Latest Practicable Date, none of the above conditions have been satisfied or waived.

INFORMATION OF THE TARGET GROUP

At the Latest Practicable Date, Golden Concord Xilin, Ganghua and 錫林浩特煤礦 (Inner Mongolia Xilinhot Coal Mine) hold 55%, 25% and 20% of the equity interest in Opco respectively. As at the Latest Practicable Date, Mr. Zhu ultimately owns the entire interests of Golden Concord Xilin. The original purchase cost of 55% equity interest in Opco was approximately RMB85,000,000. To the best of the Directors’ knowledge, information and belief and having made all reasonable enquiries, each of Ganghua and 錫林浩特煤礦 (Inner Mongolia Xilinhot Coal Mine), and the ultimate beneficial owners of each of them, is third party independent from the Company and its connected persons.

The Target is an investment holding company incorporated in the BVI with limited liability on 17 January 2008. As at the Latest Practicable Date, the Vendor, which is beneficially whollyowned by Mr. Zhu, is the beneficial owner holding the entire issued share capital of the Target. As part of the conditions precedent of the First Completion under the Sale and Purchase Agreement, HKCo1, an investment holding company incorporated in Hong Kong and a direct wholly-owned subsidiary of the Target, has entered into the Share Transfer Agreement pursuant to which HKCo1 agreed to acquire the 55% interest in Opco from Golden Concord Xilin. Accordingly, the Target will indirectly own 55% of the equity interest of Opco before the First Completion Date (the

– 13 –

LETTER FROM THE BOARD

“Reorganisation”). Since their respective incorporation and up to the Latest Practicable Date, the Target and HKCo1 have no major assets or operating business other than their respective indirect and direct contractual interest in the 55% equity interest in Opco pursuant to the Share Transfer Agreement. The following diagram illustrates the shareholding structure of Opco immediately before the First Completion (assuming the completion of the Reorganisation):

==> picture [389 x 491] intentionally omitted <==

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

Mr. Zhu
100%
The Vendor
100%
The Target
100%
錫林浩特煤礦
HKCol Ganghua (Inner Mongolia
Xilinhot Coal Mine)
55% 25% 20%
Opco
Duolun Mine project
----- End of picture text -----

– 14 –

LETTER FROM THE BOARD

The following diagram illustrates the shareholding structure of Opco immediately after the First Completion:

==> picture [389 x 491] intentionally omitted <==

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

The Company
100%
The Purchaser
100%
The Target
100%
錫林浩特煤礦
HKCol Ganghua (Inner Mongolia
Xilinhot Coal Mine)
55% 25% 20%
Opco
Duolun Mine project
----- End of picture text -----

Opco is a sino foreign equity joint venture incorporated in the PRC having an approved registered capital of RMB109,850,000, among which as to approximately RMB95,522,000 has been paid up and as to approximately RMB14,328,000 was the unpaid capital of Ganghua as at the Latest Practicable Date. Opco is the owner of a coal mine under construction in Inner Mongolia, the PRC, and is incorporated to carry out exploration, mining and exploitation of coal.

– 15 –

LETTER FROM THE BOARD

The principal asset of Opco is the Duolun Mine project, which is an underground coal mine in the Xidacang Mining Right Area, located 4 kilometers north of Duolun County, Inner Mongolia Autonomous Region, the PRC. The Xidacang Mining Right Area covers 7.7325 sq. km., which includes a coal mine with a design output capacity of 1.2 Mtpa. Opco completed its exploration of coal reserves within the authorised mining elevation in June 2005 and subsequently obtained its mining right permit for exploitation of coal in October 2006. The Acquisition, therefore, does not involve exploration for natural resources. Upon the First Completion, the Company will not via Opco be engaged in any exploration for natural resources.

Opco holds the coal mining right permit for the Xidacang Mining Right Area, with certificate number 1500000620637, which was issued in October 2006 and will expire in October 2011. According to the PRC legal opinion issued by Grandall Legal Group (Beijing), a duly approved and licensed law firm in the PRC by the Ministry of Justice of the PRC and are qualified to practice PRC laws and issue legal opinions on PRC laws, pursuant to the relevant PRC laws, the mining right permit should be renewed at the relevant government departments 30 days before the expiry of the permit, and the renewal of Opco’s mining right permit will not involve competition with any third parties but subject to, among other things, the payment of royalty of the mining right by Opco to the relevant government departments. After consultation with the PRC lawyer, the Directors are of the view that there will not be material obstacles in the renewal of the mining right permit upon its expiry.

Pursuant to the technical report issued by the Technical Adviser (which is set out in Appendix I to this circular), as at 30 June 2008, the total in-place resources of all seams amount to approximately 82.44 million tonnes. The additional total Marketable Resources of all seams and the total Marketable Reserves of the mine amount to approximately 13.80 million tonnes and approximately 15.76 million tonnes respectively. The Technical Adviser, John T. Boyd Company, is one of the largest independent consulting firms in the world exclusively serving the mining, financial, utility, power, and related industries. Its consultancy services have been provided on a continuous basis since 1943 in over 50 countries.

Opco has obtained all necessary permits for its construction and it will obtain all necessary permits for its exploitation operation upon the completion of construction. Pursuant to the Sale and Purchase Agreement, the Vendor must obtain and deliver, among other things, the land use rights certificates, on or before the First Completion. The mine is presently under construction in the Xidacang Mining Right Area, and the Directors expect that commercial exploitation operation will be commenced in early 2009.

Each of the Target and HKCo1 has not carried out any business activities since their incorporation dates of 17 January 2008 and 15 May 2008 respectively. Thus there is no turnover, profit or loss before tax and profit or loss after tax of the Target and HKCo1. As at 31 July 2008, the net book values of the Target and HKCo1 were US$1 and HK$1 respectively.

As the mine has not yet commenced commercial operation, there is no turnover, profit or loss before tax and profit or loss attributable to shareholders of Opco for the past 2 years ending 31 December 2007.

– 16 –

LETTER FROM THE BOARD

According to the PRC audited financial statements of Opco for the six-month ended 30 June 2008 prepared in accordance to the generally accepted accounting principles in the PRC, the loss before tax and loss attributable to shareholders of Opco for the six-month ended 30 June 2008 were approximately RMB5,928,000 (equivalent to approximately HK$6,748,000). As at 30 June 2008, the audited net book value of Opco was approximately RMB89,594,000 (equivalent to approximately HK$101,983,000).

The Directors (excluding the independent non-executive Directors whose opinion are set out in the Letter from the Independent Board Committee) consider that the entering into of the Sale and Purchase Agreement is fair and reasonable and in the interests of the Company and the Independent Shareholders as a whole.

BASIS OF CONSIDERATION

The principal amount of the Tranche 1 Convertible Note of RMB85,000,000 (equivalent to approximately HK$96,754,000), has been arrived at after arm’s length negotiations between the Purchaser and the Vendor, with reference to, among other things, the original purchase cost of Opco of approximately RMB85,000,000, the prevailing international market coal price, the total in-place resources of all seams, the additional total Marketable Resources of all seams and the total Marketable Reserves of the mine of approximately 82.44 million tones, approximately 13.80 million tonnes and approximately 15.76 million tonnes respectively. Given the total Marketable Reserves of the Duolun Mine of approximately 15.76 million tones, the Consideration represents approximately RMB8.12 per tonne, which is substantially lower than the price (including valueadded tax) of the coal similar to the average quality of the Duolun Mine within the Inner Mongolian Region in May 2008 of RMB300 per tonne, based on the information provided by the independent Technical Adviser.

The principal amount of the Tranche 1 Convertible Note represents a discount of approximately 45.9% to the appraised value of the 55% equity interest in Opco as at 30 June 2008 by BMI based on market approach method (being the estimated amount for which an asset should exchange on the date of valuation between a willing buyer and a willing seller in an arm’s length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion) of HK$179,000,000.

The valuation report of Opco is set out in Appendix II to this circular.

– 17 –

LETTER FROM THE BOARD

The principal amount of the Tranche 2 Convertible Note of not more than RMB42,936,000 (equivalent to approximately HK$48,873,000), has been arrived at after arm’s length negotiations between the Purchaser and the Vendor having taken into account the estimated increase in registered capital of Opco from approximately RMB110 million to not more than approximately RMB172 million in accordance with the applicable PRC and Inner Mongolia laws and regulations. The actual principal amount of the Tranche 2 Convertible Note will be determined on a dollar-fordollar basis with a ceiling of RMB42,936,000 according to the then actual increase in registered capital of Opco as required and to be paid in cash by the Vendor after the First Completion.

According to the PRC legal opinion issued by Grandall Legal Group (Beijing), a certified PRC lawyer, when the total investment capital of Opco increases and is expected to reach approximately RMB470 million, Opco will have to apply for the confirmation of total investment capital and when approved, will have to accordingly increase its registered capital in an amount equivalent to 40% of the difference between the actual investment capital and the verified total investment capital in accordance with the relevant PRC and Inner Mongolia laws and regulations. The difference between the registered capital and the total investment capital will be financed by bank loan and/or shareholders’ loans.

Pursuant to the JV Agreements, whenever Opco increases its registered capital, 錫林浩特 煤礦 (Inner Mongolia Xilinhot Coal Mine), the 20% owner of Opco, will maintain its 20% interest in Opco without further capital injection. Under the terms of the JV Agreements, Golden Concord Xilin and Ganghua will be responsible for the injection of additional capital on behalf of 錫林浩 特煤礦 (Inner Mongolia Xilinhot Coal Mine) in proportion to their interest in Opco for any subsequent increase in registered capital. Given the estimated increase of the total investment amount of Opco from approximately RMB314 million to not more than RMB470 million and the corresponding estimated increase in registered capital as required under the relevant PRC and Inner Mongolia laws and regulations, and the provisions under the JV Agreements as stated above, the Purchaser and the Vendor have arrived at the principal amount of the Tranche 2 Convertible Note of not more than RMB42,936,000 on a dollar-for-dollar basis with reference to the then actual increase in registered capital of Opco required to be paid in cash by the Vendor. Save for disclosed above, there is no other capital commitment in regard to the Acquisition by the Group.

– 18 –

LETTER FROM THE BOARD

In the event that the Group’s share in the increase in registered capital of Opco as required under the relevant PRC and Inner Mongolia laws and regulations exceeds RMB42,936,000, the balance of such increased registered capital amount will be borne by the Group and is expected to be funded by internal resources of the Group.

Further announcement will be made by the Company as and when appropriate in regard to the then actual principal amount of the Tranche 2 Convertible Note to be issued upon the Second Completion.

The Directors (excluding the independent non-executive Directors whose opinion are set out in the Letter from the Independent Board Committee) consider that the Consideration is fair and reasonable as far as the Independent Shareholders are concerned.

CONVERTIBLE NOTES

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

Issuer:	The Company
Tranche 1 Convertible Note	RMB85,000,000 (equivalent to approximately
principal amount:	HK$96,754,000)
Tranche 2 Convertible Note	Not more than RMB42,936,000 (equivalent to
principal amount:	approximately HK$48,873,000)
Initial Conversion Price:	HK$1.230, being the average closing price of the
	Shares for the last five consecutive trading days
	ending on the date of the Sale and Purchase
	Agreement. All conversion will be converted at a
	fixed exchange rate of HK$1.00 to RMB0.87852.

The Conversion Price will be subject to adjustment for subdivisions or consolidations of Shares.

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LETTER FROM THE BOARD

Coupon:

Nil

Maturity Date for the Convertible Notes:

the third anniversary of the date of issue of the Tranche 1 Convertible Note

Conversion:

The Noteholder shall have the right to convert on any Business Day on or prior to the Maturity Date, the whole or any part of the principal amount of the Convertible Notes into Shares at any such time and from time to time at the Conversion Price (subject to adjustment) provided that such part of the principal amount of the Convertible Notes to be converted shall not be less than RMB100,000 at any one time. No fraction of Conversion Share shall be issued on conversion of the Convertible Notes.

Notwithstanding any other provisions set out in the Convertible Notes, the Noteholder is not entitled to convert the whole or any part of the principal amount of the Convertible Notes unless the public float of the Shares shall not be less than 25% (or any given percentage as required by the Listing Rules) of the issued Shares at any one time in compliance with the Listing Rules.

Redemption at Maturity:

For the Tranche 1 Convertible Note, unless previously converted, the Tranche 1 Convertible Note will be redeemed by the Company at 106% of its principal amount in Hong Kong Dollars on the Maturity Date.

For the Tranche 2 Convertible Note, unless previously redeemed or converted, the Tranche 2 Convertible Note will be redeemed by the Company in full at the Redemption Price of its outstanding principal amount in Hong Kong Dollars on the Maturity Date.

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LETTER FROM THE BOARD

• Early Redemption for the Tranche 1 Convertible Note at the option of the issuer:

No early redemption

• Early Redemption for the Tranche 2 Convertible Note at the option of the issuer:

At any time between the date of issue of the Tranche 2 Convertible Note and the day before the Maturity Date, the Company may elect to redeem in whole or in part of the outstanding principal amounts of the Tranche 2 Convertible Note at the Redemption Price.

Transferability:

The Convertible Notes will be transferable without restrictions at any time following 12 months from the date of issue of the Tranche 1 Convertible Note.

The Convertible Notes or any part thereof shall not be transferred to any company or other person which is a connected person (as defined in the Listing Rules) of the Company (other than any company within the same group company of the Noteholder or its whollyowned beneficial owner).

Listing:

No application will be made for the listing of the Convertible Notes on the Stock Exchange or any other stock exchange. An application will be made to the Stock Exchange by the Company for the listing of, and permission to deal in, the Conversion Shares to be issued as a result of the exercise of the conversion rights attached to the Convertible Notes.

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LETTER FROM THE BOARD

Ranking:

The Convertible Notes will rank pari passu with all other present and future unsecured and unsubordinated obligations of the Company.

The Conversion Shares to be issued as a result of the exercise of the conversion rights attaching to the Convertible Notes will rank pari passu in all respects with all other existing Shares outstanding at the exercise date of the conversion rights and be entitled to all dividends and other distributions the record date of which falls on a date on or after the date of the registered shareholder of the Conversion Shares is registered in the register of member of the Company.

If any of the events of default (as set out in the Convertible Notes) occurs, the Noteholder may give notice to the Company that the Convertible Notes, on the giving of such notice, are immediately due and payable at its principal amount then outstanding together with any default interest (calculated at the prime lending rate per annum on HK Dollar account) as provided in the Convertible Notes from the date of issue of the relevant notice up to and excluding the date of payment.

Conversion Price

The Conversion Price of HK$1.230 per Conversion Share (subject to adjustments) was arrived at after arm’s length negotiation between the Vendor and the Purchaser and represents:

• (i) a premium of approximately 44.7% over the closing price of HK$0.850 per Share as quoted on the Stock Exchange on the Latest Practicable Date;

• (ii) a premium of approximately 5.1% over the closing price of HK$1.170 per Share as quoted on the Stock Exchange on the Last Trading Day;

• (iii) the average closing price per Share of approximately HK$1.230 as quoted on the Stock Exchange for the last five consecutive trading days up to and including the Last Trading Day;

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LETTER FROM THE BOARD

• (iv) a discount of approximately 2.3% to the average closing price per Share of approximately HK$1.259 as quoted on the Stock Exchange for the last ten consecutive trading days up to and including the Last Trading Day; and

• (v) a discount of approximately 50.8% to the audited consolidated net assets value attributable to equity holders of the Company per Share of approximately HK$2.50 as at 31 December 2007 (as calculated by the equity attributable to equity holders of the Company of approximately HK$2,427 million as at 31 December 2007 and the number of outstanding Shares of 972,419,487 as at the Latest Practicable Date).

Assuming exercise in full of the conversion rights attaching to the Convertible Notes at the initial Conversion Price of HK$1.230 per Conversion Share by the Noteholders, the Company will allot and issue an aggregate of 118,395,719 new Shares, representing approximately:

• (i) 12.2% of the existing issued share capital of the Company; and

• (ii) 10.9% of the issued share capital of the Company as enlarged by the issue and allotment of the Conversion Shares as a result of the exercise in full of the conversion rights attaching to the Convertible Notes.

The Conversion Shares will be issued pursuant to a specific mandate to be sought at the EGM.

The Directors (excluding the independent non-executive Directors whose opinion are set out in the Letter from the Independent Board Committee) consider that the terms of the Convertible Notes, including the Conversion Price, are on normal commercial terms, fair and reasonable and in the interests of the Company and the Shareholders as a whole.

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LETTER FROM THE BOARD

SHAREHOLDING STRUCTURE

For illustrative purpose, the following table sets out the shareholding structure of the Company (i) as at the Latest Practicable Date; (ii) immediately upon the First Completion assuming only the Tranche 1 Convertible Note are fully converted; and (iii) immediately upon the Second Completion assuming both the Tranche 1 Convertible Note and the Tranche 2 Convertible Note are fully converted:

Highexcel Investments Limited (Note 1) The Vendor Mr. Zhu and his concert parties MS China 3 Limited_(Note 2) Morgan Stanley(Note 3) Poly (Hong Kong) Investments Limited(Note 4)_ Sub-total Public Shareholders Total number of issued Shares	As at the Latest Practicable Date Shares Approx. % 352,518,443 36.25 – – 352,518,443 36.25 160,080,000 16.46 528,000 0.06 134,791,044 13.86 647,917,487 66.63 324,502,000 33.37 972,419,487 100.00	Immediately upon the First Completion assuming only the Tranche 1 Convertible Note are fully converted into Conversion Shares(Note 6) Shares Approx. % 352,518,443 33.54 78,661,488 7.49 431,179,931 41.03 (Note 5) 160,080,000 15.23 528,000 0.05 134,791,044 12.82 726,578,975 69.13 324,502,000 30.87 1,051,080,975 100.00	Immediately upon the Second Completion assuming both the Tranche 1 Convertible Note and the Tranche 2 Convertible Note are fully converted into Conversion Shares(Note 6) Shares Approx. % 352,518,443 32.32 118,395,719 10.85 470,914,162 43.17 (Note 5) 160,080,000 14.67 528,000 0.05 134,791,044 12.36 766,313,206 70.25 324,502,000 29.75 1,090,815,206 100.00	Immediately upon the Second Completion assuming both the Tranche 1 Convertible Note and the Tranche 2 Convertible Note are fully converted into Conversion Shares(Note 6) Shares Approx. % 352,518,443 32.32 118,395,719 10.85 470,914,162 43.17 (Note 5) 160,080,000 14.67 528,000 0.05 134,791,044 12.36 766,313,206 70.25 324,502,000 29.75 1,090,815,206 100.00
				43.17 (Note 5) 14.67 0.05 12.36
				70.25 29.75
				100.00

Notes:

1. Mr. Zhu, being the executive Director, is the beneficial owner of the entire issued share capital of Highexcel Investments Limited, which owns 352,518,443 Shares.

2. MS China 3 Limited is a wholly-owned subsidiary of Morgan Stanley Emerging Markets Inc. which in turn is wholly-owned by Morgan Stanley. Morgan Stanley Emerging Markets Inc. and Morgan Stanley are therefore deemed to be interested in 160,080,000 Shares held by MS China 3 Limited.

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LETTER FROM THE BOARD

1. The interest of Morgan Stanley in the Company is also held through:

2. a) Morgan Stanley & Co. Inc. which held 25,000 Shares and is a wholly-owned subsidiary of Morgan Stanley. Morgan Stanley is therefore deemed to be interested in 25,000 Shares;

3. b) Morgan Stanley & Co. International plc. which held 503,000 Shares and is wholly-owned by Morgan Stanley UK Group. Morgan Stanley UK Group is wholly-owned by Morgan Stanley Group (Europe) which in turn is held as to 98.3% by Morgan Stanley International Limited. Morgan Stanley International Limited is an indirect wholly-owned subsidiary of Morgan Stanley. Accordingly, Morgan Stanley is deemed to be interested in the 503,000 Shares held by Morgan Stanley & Co. International plc.

4. The interest of Poly (Hong Kong) Investments Limited is held through its indirect wholly-owned subsidiary, Power Jade Holdings Limited.

5. If the Convertible Notes are converted in whole or in part, it is possible that the holding of voting rights of Mr. Zhu and its concert parties in aggregate will increase by more than the 2% creeper threshold from the lowest percentage holding of them in the 12 month period ending on and inclusive of the date of the conversion of the Convertible Notes as specified in Rule 26.1(c) of the Code. In such event, Mr. Zhu and his concert parties confirm that they will comply with the relevant provisions of the Code.

6. Assuming there is no acquisition and/or disposal of Shares from the Latest Practicable Date up to the First Completion Date and the Second Completion Date.

REASONS FOR THE ACQUISITION

The Group is one of the largest foreign-owned independent cogeneration plant operators in the PRC and is principally engaged in the development, management and operation of cogeneration plants in Jiangsu Province and Zhejiang Province in the PRC. It is the Group’s long term development strategy to invest in environmental friendly and renewable energy projects.

Continuous price hike of coal has exerted greater cost pressure on power enterprises, like the Group, which owns a number of plants fueled by coal. The Board considers that the most effective way to deal with the price hike of coal and to ease cost pressure is to extend its industrial chains to the coal industry and to directly invest in mining of coalmines. The Board considers that the Acquisition will provide the Group with a steady and reliable source of coal supply for the Group’s cogeneration plants, and minimize the Group’s risk on the fluctuation of coal price. The Acquisition will realize the Group’s development strategy in the integration of coal mining and electricity generation businesses.

The skilled and experienced exploitation team from Opco will provide synergy effect to the Group in realising the integration of coal mining and electricity generation businesses. Mr. Zhu, the controlling Shareholder, has experience and expertise in managing and running the coal mining business in the PRC and will provide all feasible support to the Group. The Company would also recruit new staff for mine development and management upon the First Completion.

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LETTER FROM THE BOARD

FINANCIAL EFFECT OF THE ACQUISITION

Upon the First Completion, the Target and HKCo1 will become the wholly-owned subsidiaries of the Company and their respective results will be consolidated into the income statement of the Group. Upon the First Completion, the Group will hold 55% equity interest in Opco. Under the articles and association of Opco, the Group is entitled to appoint five out of nine directors of Opco, which is less than two-thirds majority of the board required to pass financial and operation policies of Opco. The Group will have no absolute control over Opco, however, the Directors consider that the Group will exercise significant influence over Opco. In such circumstances and according to the accounting policy of the Group, the Group’s 55% equity interest in Opco will be equity accounted for as an interest in an associate in the Group’s consolidated financial statements.

The Directors expect that the Acquisition will enable the Group to ease cost pressure on the Group upon the commencement of commercial production of the Duolun Mine and accordingly, may enhance the profitability of the Group in the long run.

In addition, the Acquisition can broaden the asset base of the Group. The assets and liabilities of the Group will increase respectively due to the share of net asset value in Opco pursuant to the Acquisition and the issue of the Convertible Notes. The Directors expect that the Acquisition will not have material impact on the net asset value of the Group immediately upon the First Completion given that the investment in Opco, as an associate of the Company, will be initially recognised at cost and the Consideration will be satisfied in full by the issue of the Convertible Notes. If the Consideration exceeds the fair value of the identifiable assets and liabilities of the Target Group as at the First Completion Date, the Acquisition would result in the Group recording a goodwill, which is included in the carrying amount of the investment in associate(s) and subject to assessment for impairment at least annually.

FUND RAISING ACTIVITIES IN THE PAST TWELVE MONTHS

Reference is made to the Prospectus and the Announcements. Unless otherwise specified, terms used in this section shall have the same meanings as those defined in the Prospectus and the Announcements respectively (as the case may be).

The net proceeds from the Company’s IPO, after deducting the underwriting commissions and other expenses, amounted to HK$1,042 million. The proceeds received from the IPO has been scheduled to be applied to further the Company’s strategy of increasing installed capacity through acquisition and expanding and upgrading the Company’s existing power plants. Details of the intended use of the net proceeds had been set out in the Prospectus. There is no significant change of the use of net proceeds as at the Latest Practicable Date.

As at the Latest Practicable Date, an aggregate amount of HK$897 million, representing approximately 86% of the total net proceeds have been progressively utilized as set out below:

• approximately HK$275 million for the redemption of the loan amount of the convertible note;

– 26 –

LETTER FROM THE BOARD

• approximately HK$50 million for the cash portion of the consideration for the acquisitions of certain subsidiaries from Poly Group;

• approximately HK$353 million for the acquisition of the entire equity interest in the Suzhou Fuel Company, the Puyuan Cogeneration Plant, Huitengliang Project Company and the Xinneng Cogeneration Plant, 30.6% of the equity interest in the Funing Cogeneration Plant and 49% interest in China Resources Beijing Cogeneration Plant;

• approximately HK$127 million for the expansion of Puyuan Cogeneration Plant, Xinneng Cogeneration Plant, Jiaxing Cogeneration Plant, Rudong Cogeneration Plant and Huitengliang Wind Farm Project;

• approximately HK$39 million for the repayment of loan; and

• approximately HK$53 million for working capital.

Save for the above, the Company has not completed any other fund raising activities in the past twelve months before the date of the Acquisition Announcement.

LISTING RULES IMPLICATIONS

The Vendor is beneficially wholly-owned by Mr. Zhu who is the controlling Shareholder. As such, the Vendor is a connected person of the Company within the meaning of the Listing Rules and therefore, the entering into of the Sale and Purchase Agreement constitutes a connected transaction of the Company which is, based on the relevant percentage ratio calculations, subject to the reporting, announcement and Independent Shareholders’ approval requirements as set out in Chapter 14A of the Listing Rules. Further, based on the relevant percentage ratio calculations under the Listing Rules, the entering into of the Sale and Purchase Agreement also constitutes a discloseable transaction of the Company under Chapter 14 of the Listing Rules.

The Vendor, Mr. Zhu and their associates, who were in aggregate interested in 352,518,443 shares with voting rights (amounted to approximately 36.25% of the issued share capital of the Company) as at the Latest Practicable Date, will abstain from voting at the EGM. The votes of the Independent Shareholders regarding the resolution for approving the Sale and Purchase Agreement and the transactions contemplated thereunder will be taken by way of a poll at the EGM.

EGM

The EGM will be held at Pacific Place Conference Centre, Level 5, One Pacific Place, 88 Queensway, Hong Kong at 10:30 a.m. on Wednesday, 15 October 2008 to consider and, if thought fit, approve, among other matters, the Sale and Purchase Agreement, the issue of the Convertible Notes and the transactions contemplated thereunder.

– 27 –

LETTER FROM THE BOARD

A notice convening the EGM is set out on pages EGM-1 to EGM-2 of this circular. Whether or not you are able to attend the meeting, you are requested to complete the accompany form of proxy in accordance with the instructions printed thereon and return the same to the Company’s branch share registrar in Hong Kong, Computershare Hong Kong Investor Services Limited at Rooms 1712-1716, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong as soon as possible and in any event not less than 48 hours before the time appointed for the holding of the meeting or any adjournment thereof. Completion and return of the form of proxy shall not preclude you from attending an voting at the EGM if you so wish.

In accordance with Rule 14A.18 of the Listing Rules, the vote of the Independent Shareholders taken at the EGM to approve the Sale and Purchase Agreement, the issue of the Convertible Notes and the transactions contemplated thereunder will be taken by poll, with Mr. Zhu, the Vendor and their respective associates abstaining from voting. The voting results will be announced after the EGM.

RECOMMENDATION AND ADDITIONAL INFORMATION

The Directors have included a technical report as set out in the Appendix I to this circular for the purpose of providing the Shareholders with more detailed information relating to the Duolun Mine to enable them to decide on the Acquisition.

On the basis of the information set out in this circular, the Directors (excluding the independent non-executive Directors whose opinion are set out in the Letter from the Independent Board Committee) consider that the Sale and Purchase Agreement, the issue of the Convertible Notes and the transactions contemplated thereunder are on normal commercial terms, fair and reasonable and in the interests of the Company and the Shareholders as a whole. The relevant Directors therefore recommend the Shareholders to vote in favour of these resolutions as set out in the notice of the EGM.

Your attention is drawn to the letters from the Independent Board Committee and the Independent Financial Adviser as set out in this circular. First Shanghai has been appointed as the independent financial adviser to advise the Independent Board Committee and the Independent Shareholders in respect of the terms of the Sale and Purchase Agreement, the issue of the Convertible Notes and the transactions contemplated thereunder. Your attention is also drawn to the appendices to this circular.

Yours faithfully,

By order of the Board

GCL-Poly Energy Holdings Limited

Zhu Gong Shan

Chairman

– 28 –

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

GCL-Poly Energy Holdings Limited 保利協鑫能源控股有限公司

(incorporated in the Cayman Islands with limited liability)

(Stock code: 3800)

22 September 2008

To the Independent Shareholders

Dear Sir and Madam,

DISCLOSEABLE AND CONNECTED TRANSACTION INVOLVING ISSUE OF CONVERTIBLE NOTES AND ACQUISITION OF A COMPANY

We refer to the circular (“Circular”) issued by the Company to its shareholders dated 22 September 2008 of which this letter forms part. Capitalised terms defined in the Circular shall have the same meanings in this letter unless the context otherwise requires.

We have been appointed as the members of the Independent Board Committee to advise you in respect of the Sale and Purchase Agreement, the issue of the Convertible Notes and the transactions contemplated thereunder, details of which are set out in the Letter from the Board in the Circular. First Shanghai has been appointed as an independent financial adviser to advise us and the Independent Shareholders in this respect.

We wish to draw your attention to the letter from the Board and the letter from First Shanghai set out in the Circular. Having considered the principal factors and reasons considered by, and the advice of, First Shanghai set out in its letter of advice set out in the Circular, we consider that the terms of the Sale and Purchase Agreement, the issue of the Convertible Notes and the transactions contemplated thereunder are on normal commercial terms, and are fair and reasonable so far as the Independent Shareholders are concerned, and the Sale and Purchase Agreement, the issue of the Convertible Notes and the transactions contemplated thereunder are in

– 29 –

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

the interests of the Company and the Shareholders as a whole. Accordingly, we recommend the Independent Shareholders to vote in favour of the ordinary resolutions to be proposed at the EGM to approve the Sale and Purchase Agreement, the issue of the Convertible Notes and the transactions contemplated thereunder.

Yours faithfully,

For and on behalf of the Independent Board Committee

Heng Kwoo Seng Qian Zhi Xin Raymond Ho Chung Tai Xue Zhong Su

Independent non-executive Directors

– 30 –

LETTER FROM FIRST SHANGHAI

The following is the text of a letter received from First Shanghai setting out its advice to the Independent Board Committee and the Independent Shareholders in respect of the terms of the Sale and Purchase Agreement and the issue of the Convertible Notes in relation to the Acquisition for inclusion in this circular.

==> picture [138 x 40] intentionally omitted <==

FIRST SHANGHAI CAPITAL LIMITED

19th Floor, Wing On House 71 Des Voeux Road Central Hong Kong

22 September 2008

To the Independent Board Committee and

the Independent Shareholders

Dear Sir or Madam,

DISCLOSEABLE AND CONNECTED TRANSACTION

INTRODUCTION

We refer to our engagement to advise the Independent Board Committee and the Independent Shareholders in respect of the terms of the Sale and Purchase Agreement and the issue of the Convertible Notes in relation to the Acquisition, details of which are set out in the circular of the Company dated 22 September 2008 (the “Circular”) to the Shareholders of which this letter forms a part. Unless the context otherwise requires, terms used in this letter shall have the same meanings as those defined in the Circular.

The Acquisition constitutes a discloseable transaction of the Company under the Listing Rules. As the Vendor is wholly owned by Mr. Zhu, the controlling Shareholder, the Vendor is therefore a connected person of the Company under the Listing Rules. Accordingly, the Acquisition constitutes a connected transaction of the Company under the Listing Rules and is subject to the approval of the Independent Shareholders by way of poll at the EGM.

– 31 –

LETTER FROM FIRST SHANGHAI

The Independent Board Committee, comprising all the independent non-executive Directors, namely Mr. Heng Kwoo Seng, Mr. Qian Zhi Xin, Ir. Dr. Raymond Ho Chung Tai and Mr. Xue Zhong Su, has been formed to advise the Independent Shareholders on the terms of the Sale and Purchase Agreement and the issue of the Convertible Notes in relation to the Acquisition. We, First Shanghai Capital Limited, have been appointed to advise the Independent Board Committee and the Independent Shareholders in this regard.

In putting forth our opinion and recommendation, we have relied on the accuracy of the information and representations included in the Circular and provided to us by the Directors and the Group, and have assumed that all such information and representations made or referred to in the Circular and provided to us by the Directors and the Group were true at the time they were made and continued to be true up to the time of the holding of the EGM. We have also assumed that all statements of belief, opinion and intention made in the Circular were reasonably made after due enquiry. We have no reason to doubt the truth, accuracy and completeness of the information and representations provided to us by the Directors and the Group and have been advised that no material facts have been withheld or omitted from the information provided and referred to in the Circular. We consider that we have reviewed sufficient information to reach an informed view and to justify reliance on the accuracy of the information contained in the Circular and to provide a reasonable basis for our advice. We have not, however, conducted any independent verification of the information included in the Circular and provided to us by the Directors and the Group nor have we conducted any form of investigation into the business, affairs or future prospects of the Group and the Target Group.

PRINCIPAL FACTORS AND REASONS CONSIDERED

In formulating our opinion, we have considered the following principal factors and reasons:

1. Background to and reasons for the Acquisition

The Group is principally engaged in the development, management and operation of cogeneration and power plants in Jiangsu Province and Zhejiang Province in the PRC. As set out in the annual report of the Company for the year ended 31 December 2007 (the “2007 Annual Report”), in view of the continuous increase in the price of coal which are primarily used by the cogeneration plants of the Group, the Board has considered several possible alternatives, including acquiring coal mining/supply companies for vertical integration as part of the cost control measures. The Acquisition (i) provides an opportunity for the Group to secure a steady and reliable source of coal supply for the Group’s cogeneration plants; (ii) minimizes the Group’s risk on the fluctuation of coal price; and

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LETTER FROM FIRST SHANGHAI

(iii) realizes the Group’s development strategy in the integration of coal mining and electricity generation businesses. Having considered the fluctuation in coal price in recent years and the cogeneration plants of the Group are mainly fuelled by coal, we concur with the Board’s view that the Acquisition is in the interests of the Company and the Shareholders as a whole by securing a stable and reliable supply of coal within the Group, and is in accordance with the Group’s development strategy.

2. Business and financial information of the Group

(i) Business of the Group

The Group is principally engaged in the development, management and operation of cogeneration and power plants in Jiangsu Province and Zhejiang Province in the PRC. A number of power plants of the Group are coal cogeneration plants which are fuelled by coal. To improve the overall efficiency of the Group and to lower the coal cost of the Group through bulk purchases, the Group had acquired a coal procurement company by the end of 2007.

(ii) Financial information of the Group

Consolidated income statement for the two years ended 31 December 2007

The following are summaries of the audited results of the Group for the two years ended 31 December 2007.

Revenue Gross profit Profit/(loss) before tax Income tax (expense)/credit Profit/(loss) for the year	Year ended 31 December 2006 2007 HK$’000 HK$’000 (audited) (audited) 910,022 1,892,622 199,269 371,857 89,200 (221,451) (3,460) 4,132 85,740 (217,319)

– 33 –

LETTER FROM FIRST SHANGHAI

For the year ended 31 December 2007, the Group was organized into three operating divisions which are coal (including coal sludge, sludge and gangue) fuelled cogeneration plants, gas-fuelled cogeneration plant and others. The following table shows the performance of different divisions of the Group for the year ended 31 December 2007.

	Coal fuelled	Gas-fuelled
	cogeneration	cogeneration
	plants	plant	Others	Consolidated
	HK$’000	HK$’000	HK$’000	HK$’000
Revenue	1,175,017	701,537	16,068	1,892,622
Segment result	200,654	107,900	30,505	339,059

For the year ended 31 December 2006, substantial portion of the Group’s consolidated revenue and contribution to operating profit were derived from the coal fuelled cogeneration plants.

For the year ended 31 December 2007, coal fuelled cogeneration plants is the largest contributor to the results of the Group, both in terms of revenue and operating profit.

In 2007, the Group’s revenue increased by 108.0% to approximately HK$1,892.6 million, while its gross profit increased by 86.6% to approximately HK$371.9 million when compared to the year 2006. The growth in revenue for 2007 was mainly due to contributions from (i) the gas-fuelled cogeneration plant which was equity accounted for as an associate in 2006 is now consolidated as a subsidiary of the Group; as well as (ii) the acquisition of other coal fuelled cogeneration plants during the year ended 31 December 2007. However, the Group recorded loss of approximately HK$217.3 million for the year ended 31 December 2007 as compared with profit of approximately HK$85.7 million for the year ended 31 December 2006. The worsen financial performance for the year ended 31 December 2007 was primarily attributable to the increase in loss on increase in fair value of convertible note from approximately HK$86.6 million in 2006 to approximately HK$348.6 million in 2007 as a result of the conversion of the convertible amount and redemption of the convertible note together with accrued interest. As set out in the 2007 Annual Report, if all the non-recurring items, principally the above-mentioned loss on increase in fair value of convertible note, were excluded, the Group would have recorded profit for the year ended 31 December 2007.

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LETTER FROM FIRST SHANGHAI

Consolidated income statement for the six months ended 30 June 2007 and 2008

The following are summaries of the unaudited results of the Group for the six months ended 30 June 2007 and 2008.

Revenue Gross profit (Loss)/profit before tax Income tax credit/(expense) (Loss)/profit for the year	Six months ended 30 June 2007 2008 HK$’000 HK$’000 (unaudited) (unaudited) 699,331 1,974,930 135,076 221,595 (6,262) 47,754 935 (6,186) (5,327) 41,568	Six months ended 30 June 2007 2008 HK$’000 HK$’000 (unaudited) (unaudited) 699,331 1,974,930 135,076 221,595 (6,262) 47,754 935 (6,186) (5,327) 41,568
		41,568

Currently, the Group is organized into five operating divisions which are coal-fuelled & resources comprehensive utilization (“RCU”) plants, gas-fuelled plants, biomass-fuelled plants, coal trading and others. The following table shows the performance of different divisions of the Group for the six months ended 30 June 2008.

	Coal-		Biomass-
	fuelled &	Gas-fuelled	fuelled	Coal
RCU plants		plants	plants	trading	**Others **	Consolidated
	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000
Revenue	917,724	574,585	149,297	322,220	11,104	1,974,930
Segment result	77,533	70,417	24,956	8,663	22,331	203,900

For the six months ended 30 June 2008, coal-fuelled & RCU plants is the largest contributor to the results of the Group, both in terms of revenue and operating profit, followed by gas-fuelled plants.

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LETTER FROM FIRST SHANGHAI

For the six months ended 30 June 2008, the Group’s revenue increased by approximately 182.4% to approximately HK$1,974.9 million, while its gross profit increased by approximately 64.0% to approximately HK$221.6 million when compared to the same period in 2007. The management of the Company advised us that the growth in revenue of the Group for the six months ended 30 June 2008 was mainly due to (i) consolidation of revenue of companies which were accounted for as associates of the Company in 2007; and (ii) acquisition of additional power plants. The decrease in gross profit margin from approximately 19.3% for the six months ended 30 June 2007 to approximately 11.2% for the six months ended 30 June 2008 was mainly attributable to the increase in coal price. However, the Group recorded profit of approximately HK$41.6 million for the six months ended 30 June 2008 as compared with loss of approximately HK$5.3 million for the six months ended 30 June 2007. The improved financial performance for the six months ended 30 June 2008 was primarily attributable to the non-recurrence of loss on increase in fair value of convertible note, which amounted to approximately HK$48.6 million for the six months ended 30 June 2007.

Consolidated balance sheet as at 31 December 2007 and 30 June 2008

The following is a summary of the Group’s assets and liabilities as at 31 December 2007 and 30 June 2008.

31 December 2007 HK$’000 (audited) Non-current assets 5,467,296 Current assets 1,866,490 Total assets 7,333,786 Current liabilities 2,304,000 Non-current liabilities 2,213,598 Total liabilities 4,517,598 Equity attributable to Shareholders 2,427,341 Minority interests 388,847 Total equity 2,816,188	30 June 2008 HK$’000 (unaudited) 6,115,949 1,769,847
	7,885,796
	2,529,510 2,313,626
	4,843,136
	2,615,653 427,007
	3,042,660

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LETTER FROM FIRST SHANGHAI

As at 30 June 2008, the Group had total assets of approximately HK$7,885.8 million, representing an increase of approximately 7.5% when compared with the same as at 31 December 2007 and such increase was mainly due to the increase in property, plant and equipment and interests in associates as a result of the acquisitions of power plants after initial public offering in November 2007. Among the assets of the Group, property, plant and equipment amounted to approximately HK$5,335.1 million (accounting for approximately 67.7% of the total assets), bank balances and cash amounted to approximately HK$669.6 million (accounting for approximately 8.5% of the total assets), and trade and other receivables amounted to approximately HK$655.4 million (accounting for approximately 8.3% of the total assets). As at 30 June 2008, total liabilities of the Group amounted to approximately HK$4,843.1 million, representing an increase of approximately 7.2% when compared with the same as at 31 December 2007 which was mainly due to the increase in bank borrowings of the Group. Bank borrowings of the Group as at 30 June 2008 amounted to approximately HK$3,997.1 million (accounting for approximately 82.5% of total liabilities); while trade and other payables amounted to approximately HK$653.2 million (accounting for approximately 13.5% of total liabilities).

Based on such balances, the current ratio and gearing ratio (being total borrowings divided by equity attributable to Shareholders plus total borrowings) of the Group decreased from 0.81 times and 60.5% as at 31 December 2007 to 0.70 times and 60.4% as at 30 June 2008 respectively.

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LETTER FROM FIRST SHANGHAI

3. Information on the Target Group

(i) The Target

The Target is an investment holding company incorporated in BVI with limited liability on 17 January 2008. Pursuant to the terms of the Share Transfer Agreement entered into between a subsidiary of the Target and the Golden Concord Xilin, the Opco will be owned as to 55% by the Target before the First Completion Date. We are advised that save for the contractual interest in the 55% equity interest in the Opco pursuant to the Share Transfer Agreement, the Target Group did not have any other material assets or liabilities as at the Latest Practicable Date.

(ii) The Opco

The Opco is a sino foreign equity joint venture incorporated in the PRC. The Opco is eligible to engage in exploration, mining and exploitation of coal; and owns the Duolun Mine project which is an underground coal mine under construction in the Xidacang Mining Right Area, located 4 kilometers north of Duolun County, Inner Mongolia, the PRC. The mining right permit of the Duolun Mine is for the period from October 2006 to October 2011. As set out in the letter from the Board to the Circular, after consultation with the PRC lawyer, Grandall Legal Group (Beijing), the Directors are of the view that there will not be any material obstacles in the renewal of the mining right permit upon its expiry. The Duolun Mine is presently under construction and is expected to commence commercial operation in early 2009. The design output capacity of the Duolun Mine is 1.2 Mtpa. Pursuant to Tables 3.1, 3.2 and 3.3 of the technical report prepared by John T. Boyd Company, an independent technical consulting firm, as contained in appendix I to the Circular, the total in-place resources and the additional total Marketable Resources of all seams of the Duolun Mine amount to approximately 82.44 million tonnes and approximately 13.80 million tonnes respectively. The total Marketable Reserves of the Duolun Mine amount to approximately 15.76 million tonnes.

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LETTER FROM FIRST SHANGHAI

(ii) Financial information on the Opco

As Duolun Mine is still under development and has not commenced commercial operation, there are no turnover, profit or loss before tax and profit or loss attributable to shareholder of the Opco for the two years ended 31 December 2007. Based on the audited financial statements of the Opco prepared in accordance with the generally accepted accounting principles in the PRC for the six months ended 30 June 2008, the Opco recorded loss attributable to shareholders of approximately RMB5.9 million (equivalent to approximately HK$6.7 million) for the six months ended 30 June 2008; and had a net asset value of approximately RMB89.6 million (equivalent to approximately HK$102.0 million) as at 30 June 2008, which comprised total assets of approximately RMB383.4 million (equivalent to approximately HK$436.4 million) and total liabilities of approximately RMB293.8 million (equivalent to approximately HK$334.4 million).

As at 30 June 2008, the major assets of the Opco were cash and bank deposit and construction in progress, which amounted to approximately RMB132.1 million (equivalent to approximately HK$150.4 million) and RMB192.3 million (equivalent to approximately HK$218.9 million) respectively, representing approximately 34.5% and 50.2% of the Opco’s total assets. Among the construction in progress, approximately 76.5% of which is prepaid construction fee.

As to the liabilities of the Opco as at 30 June 2008, bank loan amounted to approximately RMB195.0 million (equivalent to approximately HK$222.0 million) and accounted for approximately 66.4% of the total liabilities of the Opco. In addition, the Opco also had amount due to Golden Concord Xilin amounted to approximately RMB76.9 million (equivalent to approximately HK$87.5 million) and amount due to associates of Golden Concord Xilin amounted to approximately RMB9.2 million (equivalent to approximately HK$10.5 million), in aggregate representing approximately 29.3% of the total liabilities of the Opco. As advised by the Directors, the above then related parties’ loan is expected to be repaid by proceeds from new bank borrowings of the Opco.

The Opco recorded loss attributable to shareholders of approximately RMB5.9 million (equivalent to approximately HK$6.7 million) for the six months ended 30 June 2008 and was mainly due to the loss on disposal of assets.

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LETTER FROM FIRST SHANGHAI

4. Evaluation of the Consideration

The Consideration for the Acquisition of not more than RMB127.9 million (equivalent to approximately HK$145.6 million), comprises (i) approximately RMB85.0 million (equivalent to approximately HK$96.8 million) for the acquisition of the Sale Shares (the “Sale Shares Consideration”); and (ii) approximately RMB42.9 million (equivalent to approximately HK$48.9 million) for the subsequent increase in the registered capital of the Opco to be paid by the Vendor after the First Completion Date on a dollar-for-dollar basis (the “Capital Injection Consideration”).

As set out in the letter from the Board to the Circular, the Sale Shares Consideration and the Capital Injection Consideration have been arrived at after arm’s length negotiations between the Company and the Vendor, with reference to, among other things, (i) the original purchase cost of the Opco, the prevailing international market coal price, the total in-place resources of all seams, the additional total Marketable Resources of all seams and the total Marketable Reserves of the Duolun Mine; and (ii) the estimated increase in registered capital of Opco from approximately RMB110 million to not more than approximately RMB172 million in accordance with the applicable PRC and Inner Mongolia laws and regulations on a dollar-for-dollar basis.

Sale Shares Consideration

We are advised that Mr. Zhu acquired 55% equity interest in the Opco in March 2008 at the cost of RMB85.0 million through the acquisition of the offshore holding company of Golden Concord Xilin. Since the Target Group will not have any other material assets or liabilities save for the 55% equity interest in the Opco after the First Completion, the Sale Shares Consideration is in effect the consideration for the 55% equity interest in the Opco. Accordingly, Mr. Zhu sells the 55% equity interest in the Opco to the Group at its original acquisition cost.

The Sale Shares Consideration of approximately RMB85.0 million (equivalent to approximately HK$96.8 million) also represents a discount of approximately 45.9% to the market value of the 55% equity interest in Opco of approximately HK$179.0 million as appraised by the independent Valuer as at 30 June 2008. The report on the valuation of the Sale Shares and its underlying assumptions and calculations prepared by the Valuer is contained in appendix II to the Circular.

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LETTER FROM FIRST SHANGHAI

We have reviewed and discussed with the Valuer regarding, among other things, the assumptions and methodologies adopted for the valuation of the Sale Shares, particular of which are contained in appendix II to the Circular. We noted that the Valuer has adopted the market approach to evaluate the market value of the Sale Shares which, in our opinion, is a reasonable approach. In assessing the market value of the Sale Shares, the Valuer has adopted the enterprise value to reserves multiples implicit in listed companies in Hong Kong with business similar to that of the Opco and made adjustment for cash and liabilities positions of the Opco and the lack of marketability and the presence of control premium of the Sale Shares. During our discussions with the Valuer, we have not identified any major factors which cause us to doubt the fairness and reasonableness of the principal assumptions used in arriving at the valuation of the Sale Shares.

Capital Injection Consideration

Pursuant to the JV Agreements, whenever the Opco increases its registered capital, 錫林浩特煤礦 (Inner Mongolia Xilinhot Coal Mine) (“Xilinhot”), the 20% owner of the Opco, will maintain its 20% interest in the Opco without further capital injection. Under the terms of the JV Agreements, Golden Concord Xilin and Ganghua will be responsible for the injection of additional capital on behalf of Xilinhot in proportion to their respective interest in the Opco for any subsequent increase in registered capital.

As the Opco is expected to increase its total investment amount from approximately RMB314 million to not more than RMB470 million after the First Completion (the “Total Investment Amount Increase”), the Opco is expected to increase its registered capital from approximately RMB110 million to not more than approximately RMB172 million according to the relevant PRC and Inner Mongolia laws and regulations. The Vendor, on behalf of the Group, and Ganghua will be responsible for the injection of additional capital on behalf of Xilinhot in proportion to their then interest in the Opco while Xilinhot will maintain its 20% interest in the Opco without any capital contribution. Accordingly, the Vendor, on behalf of the Group, is expected to contribute not more than approximately RMB42.9 million (equivalent to approximately HK$48.9 million) for the Opco’s registered capital increase in relation to the Total Investment Amount Increase, which will equal to the final amount of the Capital Injection Consideration.

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LETTER FROM FIRST SHANGHAI

The Directors advised us that after the Second Completion, the operation of the Opco is expected to be financed by bank borrowing and/or shareholder’s loan and will not require further commitment for the Opco’s registered capital. In addition, after the First Completion, the Group will appoint five members to the board of directors of the Opco which comprises nine members. Pursuant to the articles of association of the Opco, all material resolutions of the Opco, including increase in total investment amount or registered capital, should be approved by two-third of the directors present in the board meeting. Accordingly, the Group can exercise significant influence over future financing arrangement of the Opco including commitment in registered capital and its interest in the Opco will not be prejudiced by the existing terms of the JV Agreements.

The Consideration

Having considered that (i) the terms of the JV Agreements were agreed among those parties before the Vendor acquired the interest in the Opco; (ii) the Total Investment Amount Increase is part and parcel to the acquisition of the Sale Shares, we consider that it is more appropriate to evaluate the Consideration (Sale Shares Consideration and Capital Injection Consideration) for the acquisition of the Sale Shares and the capital injection as a whole.

Since the Opco is still in the development stage and will not be in commercial operation until 2009, we consider that cash flow or earning basis for valuation of the Opco is not appropriate. In addition, the quality, estimated recovery level, economic viability, feasibility and geological confidence level of different type of coal can vary widely and may not be directly comparable to those of the Duolun Mine, therefore, we have not compared the Acquisition with acquisitions of similar coal mining business by other listed companies on the Stock Exchange. Since the Consideration was arrived at after arm’s length negotiations, with reference to, among other, the prevailing international market coal price, the total inplace resources of all seams, the additional total Marketable Resources of all seams and the total Marketable Reserves of the Duolun Mine, we have made reference to (i) the prevailing market price of coal similar to those of the Duolun Mine within the Inner Mongolian Region; and (ii) the Marketable Reserves of the Duolun Mine which are saleable coal from proven and probable reserves of the mine with mining right being obtained. In addition, since price to book (“P/B”) ratio is suitable for valuation of companies require more infrastructure capital, in assessing the fairness of the Consideration, we also consider the P/B ratios of companies listed on Hong Kong and the PRC which are engaged in business similar to the Opco.

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LETTER FROM FIRST SHANGHAI

(i) Coal price

Based on the information provided by the independent Technical Adviser, chart 1 below shows the price (included value-added tax) of coal similar to the average quality of the Duolun Mine within the Inner Mongolian Region (the “Comparable Coal”) from February 2006 to May 2008:

Chart 1: Historical price of the Comparable Coal

==> picture [342 x 195] intentionally omitted <==

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

320
300
280
260
240
220
200
Feb-06Mar-06Apr-06May-06Jun-06Jul-06Aug-06Sep-06Oct-06Nov-06Dec-06Jan-07Feb-07Mar-07Apr-07May-07Jun-07Jul-07Aug-07Sep-07Oct-07Nov-07Dec-07Jan-08Feb-08Mar-08Apr-08May-08
RMB per tonne
----- End of picture text -----

Source: China Coal Monthly

Based on the total Marketable Reserves of the Duolun Mine of approximately 15.76 million tones, the Consideration represents approximately RMB8.12 per tonne which is substantially lower than the price of the Comparable Coal recorded in May 2008 of RMB300 per tonne.

– 43 –

LETTER FROM FIRST SHANGHAI

(ii) Comparable Companies

We have researched into the market ratings of all companies which (i) are listed on Hong Kong or the PRC stock exchanges; (ii) have mining rights to carry out coal mining operation in the PRC; and (iii) have a substantial portion (over 60%) of their revenue in the last financial year being generated from thermal coal mining and sales. Based on the aforesaid criteria, we have identified, to the best of our knowledge, three companies listed on the Stock Exchange and four companies listed on the Shanghai stock exchange (the “Comparable Companies”). Set out below is a table comparing the P/B ratio of the Opco represented by the Consideration against those of the Comparable Companies:

		Closing price
		as at the Latest
Company (stock code)	Market	Practicable
Listed on the Stock Exchange	capitalization	Date	P/B ratio
	(HK$ million)	(HK$)
China Coal Energy Company Limited
(1898)(Note 1)	125,898.6	8.24	1.71
China Shenhua Energy Company
Limited (1088)(Note 1)	449,183.5	18.04	2.33
Yanzhou Coal Mining Company
Limited (1171)(Note 1)	50,175.3	8.68	1.54
Mean			1.86
Median			1.71
The Opco			1.72 (Note 2)
			1.53 (Note 3)

– 44 –

LETTER FROM FIRST SHANGHAI

		Closing price
		as at the Latest
Company (stock code)	Market	Practicable
Listed on Shanghai stock exchange	capitalization	Date	P/B ratio
	(RMB million)	(RMB)
Datong Coal Industry Company Limited
(601001)	9,908.30	11.84	2.58
Shanxi Lu’an Environmental Energy
Development Company Limited
(601699)	14,957.05	13.00	3.31
SDIC Xinji Energy Company Limited
(601918)	10,676.75	5.77	2.52
Anhui Hengyuan Coal Industry and
Electricity Power Co., Ltd. (600971)	2,228.77	11.83	1.97
Mean			2.60
Median			2.55
The Opco			1.72(Note 2)
			1.53 (Note 3)

Source: Bloomberg Notes:

• (1) These companies have their shares listed on both the Stock Exchange and the Shanghai stock exchange. For the purpose of our analysis, prices of their shares listed on the Stock Exchange are used.

• (2) Based on the Sale Shares Consideration and the net asset value of the Opco before the increase in its registered capital.

• (3) Based on the Consideration and the net asset value of the Opco after the increase in its registered capital.

As shown in the table above, the P/B ratios of those Comparable Companies listed on the Stock Exchange range from 1.54 to 2.33, while the P/B ratios of those Comparable Companies listed on the Shanghai stock exchange range from 1.97 to 3.31. The P/B ratio of the Opco represented by the Consideration is below the range of the corresponding ratio for all the Comparable Companies.

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LETTER FROM FIRST SHANGHAI

Having considered (i) the benefit attributable to the Group as mentioned in the section headed “Background to and reasons for the Acquisition” above; (ii) the Sale Shares Consideration is based on the cost to Mr. Zhu and represents a discount of approximately 45.9% to valuation of the Sale Shares as appraised by the independent Valuer; (iii) the Capital Injection Consideration is based on the subsequent increase in the registered capital of the Opco on a dollar-for-dollar basis; (iv) the substantial low level of the Consideration per Marketable Reserves of the Duolun Mine compared to the market price of the Comparable Coal; and (v) the P/B ratio of the Opco represented by the Consideration is below the range of the Comparable Companies, we are of the opinion that the Consideration is fair and reasonable.

5. Settlement method of the Consideration

Pursuant to the Sale and Purchase Agreement, the Consideration of not more than RMB127.9 million (equivalent to approximately HK$145.6 million) will be satisfied by the issue of the Convertible Notes to the Vendor.

(i) Principal terms of the Convertible Notes

Both the Convertible Notes, with a principal amount of RMB85.0 million and RMB42.9 million each (equivalent to approximately HK$96.8 million and HK$48.9 million respectively), are non-interest bearing and convertible into the Conversion Shares at the initial conversion price of HK$1.230 per Share (subject to adjustments for subdivisions or consolidations of Shares) on any Business Day on or prior to the Maturity Date. The conversion right attaching to the Convertible Notes cannot be exercised if any conversion of the Convertible Notes will result in the public float of the Shares less than 25%. Further details of the terms of the Convertible Notes are set out in the letter from the Board to the Circular.

The entire amount of the Consideration will be satisfied by the issue of the Convertible Notes which are non-interest bearing, redeemable on maturity where the Tranche 2 Convertible Note is also subject to early redemption at the option of the Company, it enables the Company to defer the settlement of the Consideration up to a period of 3 years and reduces the immediate cash outlay required for the Acquisition. Upon conversion of the Convertible Notes by the holder thereof, the equity base of the Company would be enlarged.

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LETTER FROM FIRST SHANGHAI

(ii) Analysis of Conversion Price

Comparison of the Conversion Price with market price

The initial Conversion Price of HK$1.230 represents:

• (i) a premium of approximately 44.7% to the closing price of HK$0.850 per Share as quoted on the Stock Exchange on the Latest Practicable Date;

• (ii) a premium of approximately 5.1% to the closing price of HK$1.170 per Share as quoted on the Stock Exchange on the Last Trading Day;

• (iii) the average of the closing prices as quoted on the Stock Exchange for the last five consecutive trading days up to and including the Last Trading Day of approximately HK$1.230 per Share;

• (iv) a discount of approximately 2.3% to the average of the closing prices as quoted on the Stock Exchange for the last ten consecutive trading days up to and including the Last Trading Day of approximately HK$1.259 per Share; and

• (v) a discount of approximately 50.8% to the audited consolidated net asset value attributable to equity holders of the Company per Share of approximately HK$2.50 as at 31 December 2007 (as calculated by the equity attributable to equity holders of the Company of approximately HK$2,427.3 million as at 31 December 2007 and the number of outstanding Shares of 972,419,487 as at the Latest Practicable Date).

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LETTER FROM FIRST SHANGHAI

Analysis of past performance of the Shares

• (1) Share price performance

Chart 2 below shows the closing price and volume of the Shares traded on the Stock Exchange since 13 November 2007 (the date on which the Shares were first listed on the Stock Exchange) up to and including the Latest Practicable Date (the “Period”):

Chart 2: Historical Share price and trading volume

==> picture [313 x 192] intentionally omitted <==

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

1 Apr
90 11 Jan c) Announcement for 6
a) Announcement for the completion of
80 the completion of 29 Feb acquisitions
acquisitions b) Announcement mentioned in the 5
70 mentioned in the for the signing of a Prospectus
60 Prospectus framework 11 Apr 4
agreement to acquire d) Announcement
50 stake in a for the signing of
hydropower plant non-legally binding 3
40 MOU to acquire 11 Aug
coal mines e) Announcement
30 for the Acquisition 2
20
1
10
0 0
Source: Bloomberg
Nov-07 Dec-07 Jan-08 Feb-08 Mar-08 Apr-08 May-08 Jun-08 Jul-08 Aug-08 Sept-08
Closing price (HK$)
Trading volume (million)
----- End of picture text -----

Note: The trading volume on 13 November 2007, being the listing date of the Company, is not included in the chart above as the trading volume on that day is significantly greater than the other trading days and its inclusion would distort the scale.

As shown in chart 2 above, the Share price had a downward trend since the listing of the Shares on 13 November 2007. The Share price decreased from HK$4.93 on 15 November 2007 to HK$1.43 on 20 March 2008, and then traded within a range between HK$1.78 to HK$0.85 up to the Latest Practicable Date.

During the Period, the Company made three announcements in relation to acquisitions not mentioned in the Prospectus. The Company announced that (i) it has entered into a legally binding conditional framework agreement to acquire 52.5% equity stake in a hydropower plant on 29 February 2008; (ii) it has entered into a non-legally binding memorandum of understanding to negotiate for a possible acquisition of equity stake in certain coal mines in China on 11 April 2008; and (iii) it has entered into the Sale and Purchase Agreement on 11 August 2008. Following the announcements of the above three potential acquisitions, the Share price did not have any positive reaction.

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LETTER FROM FIRST SHANGHAI

(2) Analysis of trading volume of the Shares

Set out below is the monthly and average daily trading volume of the Shares and the respective percentages of the average daily trading volume compared to the total issued Shares and to the Shares held by public on the Stock Exchange during the Period:

			Average trading	% of
			volume of	average daily	% of average
			**the Shares **	trading volume	daily trading
		Monthly	per trading	of the Shares	volume of
		trading volume	day during	to the total	the Shares to
		of Shares	the month	issued Shares	public float
		_(million Shares) _	(million Shares)
		(Note 1)		(Note 2)	(Note 3)
2007
November		599.22	42.80	4.40	7.34
December		102.87	5.41	0.56	0.93
2008
January		50.20	2.28	0.23	0.39
February		27.86	1.47	0.15	0.25
March		38.36	2.02	0.21	0.35
April		38.72	1.84	0.19	0.32
May		86.26	4.31	0.44	0.69
June		84.98	4.25	0.44	0.69
July		36.10	1.64	0.17	0.26
August		15.11	0.80	0.08	0.13
September_(Note_	4)	8.32	0.69	0.07	0.11

Notes:

(1) Source: Bloomberg

• (2) Calculated based on the number of issued Shares as at each month end during the Period.

• (3) Calculated based on the number of public float Share as at each month end during the Period obtained from Bloomberg.

• (4) Up to the Latest Practicable Date.

Trading volumes of the Shares during most of the months of the Period as shown above were in general thin, representing less than 1% of the total issued Shares per month and less than 1% of the Shares in public float for most of the months except for November 2007 when the Shares was first listed on the Stock Exchange.

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LETTER FROM FIRST SHANGHAI

Comparison with other issues of convertible notes

In assessing the reasonableness of the terms of the Convertible Notes, we have identified, to the best of our knowledge, from the website of the Stock Exchange and reviewed for reference purpose the terms of other three-year term convertible bonds/notes with principal amount of less than or equal to HK$200 million (the “CN Comparables”) announced to be issued or already issued by companies listed on the Stock Exchange since 1 January 2008 and up to 11 August 2008, date of the Sale and Purchase Agreement. Details of the CN Comparables are summarized below:

							Premium/
							(Discount)
							of the initial
							conversion price
							over/(to) the
					Redemption		closing price of
Date of	Company	Principal			price		shares on the
announcement	(Stock code)	amount	Maturity	Coupon	at maturity	**YTM **	last trading day
		(HK$ million)	(Years)	(%)	(%)	(%)	(%)
							(Note)
28-Jan-08	Artfield Group Limited	200	3	0	100	0	(86.75)
	(1229)
28-Jan-08	Shang Hua Holdings	200	3	0	100	0	(47.37)
	Limited (371)
5-Feb-08	Sunny Global Holdings	16.2	3	0	100	0	(86.72)
	Limited (1094)
20-Feb-08	Golife Concepts Holdings	40	3	2	100	2	18.64
	Limited (8172)
5-Mar-08	China HealthCare Holdings	20	3	2	100	2	110.90
	Limited (673)
5-Mar-08	Smart Rich Energy Finance	117	3	1	100	1	12.32
	(Holdings) Limited
	(1051)
14-Apr-08	South East Group	68	3	2.5	100	2.5	(8.85)
	Limited (726)
6-May-08	GFT Holdings Limited	130	3	2	100	2	25.00
	(1003)
6-May-08	Shen Nong China (Group)	22	3	1	100	1	38.46
	Limited (8175)

– 50 –

LETTER FROM FIRST SHANGHAI

							Premium/
							(Discount)
							of the initial
							conversion price
							over/(to) the
					Redemption		closing price of
Date of	Company	Principal			price		shares on the
announcement	(Stock code)	amount	Maturity	Coupon	at maturity	**YTM **	last trading day
		(HK$ million)	(Years)	(%)	(%)	(%)	(%)
							(Note)
21-May-08	Willie International	86.59	3	0	100	0	0.00
	Holdings Limited (273)
21-May-08	Emcom International	150	3	0	100	0	(88.64)
	Limited (8220)
23-May-08	Kong Sun Holdings	25	3	8	100	8	300.00
	Limited (295)
30-May-08	China Conservational Power	70	3	0	100	0	(67.21)
	Holdings Limited (290)
3-Jun-08	Shen Nong China (Group)	3	3	1	100	1	38.46
	Limited (8175)
4-Jun-08	Golife Concepts Holdings	7	3	2	100	2	(19.35)
	Limited (8172)
23-Jun-08	United Metals Holdings	106.2	3	2	100	2	(63.51)
	Limited (2302)
2-Jul-08	China Sci-Tech Holdings	100	3	0	100	0	47.06
	Limited (985)
9-Jul-08	Golife Concepts Holdings	35	3	0	100	0	(37.50)
	Limited (8172)
25-Jul-08	Suncorp Technologies	100	3	0.5	100	0.5	(28.06)
	Limited (1063)
	Average					1.26	2.99
	Maximum					8.00	300.00
	Minimum					0	(88.64)
	The Company	145.6	3	0	106	1.96	5.1

Note: Based on the initial conversion prices of the CN Comparables and the closing price of the share of the CN Comparables companies on the last full trading date before the issue of their respective announcement.

– 51 –

LETTER FROM FIRST SHANGHAI

As indicated above, the conversion prices of the CN Comparables range from a discount of approximately 88.64% to a premium of approximately 300% over the closing price of the last trading day immediately prior to the date of their respective announcement. The premium of the Conversion Price of the Convertible Notes to the closing price on the Last Trading Day of approximately 5.1% is within the range of those of the CN Comparables and slightly above the average of 2.99% premium of the CN Comparables.

(iii) Analysis of yield of maturity

The Convertible Notes are non-interest bearing and are redeemable at maturity at 106%, giving a yield to maturity (“YTM”) of approximately 1.96%.

As indicated in the above table, out of the nineteen CN Comparables, eight of them have zero YTM, for the purpose of analyzing the YTM of the Convertible Notes, only those CN Comparables with non-zero YTM (the “YTM Comparables”) are considered.

The YTM of the YTM Comparables range from 0.5% to 8%, with an average of approximately 2.18%. The YTM of the Convertible Notes of 1.96% is within the range and lower than the average of the YTM Comparables. In addition, having considered that most of the YTM Comparables are interest bearing and redeemable at par at maturity, while the Convertible Notes are non-interest bearing and redeemable at a premium at maturity, the Company will have no cash outflow during the term of the Convertible Notes until maturity or redemption which is positive to the Company’s working capital status.

Having considered (i) the low liquidity and decreasing price trend of the Shares; (ii) the Conversion Price is equal to the average of the closing prices as quoted on the Stock Exchange for the last five consecutive trading days up to and including the Last Trading Day per Share; (iii) the YTM of the Convertible Notes is lower than the average of the YTM Comparables; and (iv) the flexibility provided to the working capital of the Group by using Convertible Notes to satisfy the Consideration, we are of the view that the terms of the Convertible Notes, including the Conversion Price, are fair and reasonable and in the interests of the Company and the Shareholders as a whole.

– 52 –

LETTER FROM FIRST SHANGHAI

6. Financial effects of the Acquisition on the Group

(i) Earnings

The Directors advised us that upon the First Completion, (i) the Target and HKCo1 will become the wholly owned subsidiaries of the Company and their respective results will be consolidated into the consolidated income statement of the Group; and (ii) the Opco will become an associated company of the Group and its result will be equity accounted for in the Group’s consolidated income statement.

Since the Duolun Mine is expected to commence commercial production in early 2009, the Acquisition will not have any immediate earnings contribution to the Group upon the First Completion.

Imputed interest expense on the Convertible Notes would be charged to the Group’s consolidated income statement after the First Completion. However, such interest expense is notional and does not incur any cash outlay for the Group.

As mentioned in part (ii) below, if goodwill would be recognized in the consolidated balance sheet of the Group as a result of the Acquisition, it will be subject to the annual impairment review in accordance with the accounting policies of the Group. The goodwill would not have any material impact on the Group’s earnings unless impairment loss is required to be recognized.

(ii) Net asset value

The Group will hold an equity interest of 55% in the Opco through the Target Group upon the First Completion. The Opco will be accounted for as an associate of the Group. Save for the incidental costs associated with the Acquisition, there will not be any significant impact on the net asset value of the Group upon the First Completion as the financing of the Acquisition is entirely by way of the Convertible Notes.

– 53 –

LETTER FROM FIRST SHANGHAI

Shareholders should note that if the Consideration exceeds the fair value of the identifiable assets and liabilities of the Target Group as at the First Completion Date, the Acquisition would result in the Group recording a goodwill. According to the accounting policies of the Group, goodwill is subject to assessment for impairment at least annually. Impairment loss would be recognised as an expense for the amount by which the asset’s carrying amount exceeds its recoverable or revalued amount. The recoverable amount is the higher of fair value, reflecting market conditions less costs to sell, and value in use based on an internal discounted cash flow evaluation. Accordingly, it is possible that impairment loss would be incurred by the Group after the First Completion. On the other hand, if the fair value of the identifiable assets and liabilities of the Target Group as at the First Completion Date exceeds the Consideration, the excess would be recognized in the equity of the Group according to the accounting policies of the Group.

The issue of the Convertible Notes will increase the liabilities of the Group. As mentioned in the paragraph headed “Principal terms of the Convertible Notes” under the section headed “Settlement method of the Consideration” above, the conversion mechanism of the Convertible Notes would facilitate the holders to convert the Convertible Notes and thereby converting the Group’s liabilities into equity capital and enlarging its capital base.

(iii) Cash flow

As the Acquisition is financed entirely by the Convertible Notes, the Acquisition will not result in cash outflow until the Group redeems the Convertible Notes. As mentioned in the section headed “Evaluation of the Consideration” above, the operation of the Opco is expected to be financed by bank borrowing and shareholder’s loan. Accordingly, the Acquisition is not expected to adversely affect the overall cash flow and liquidity position of the Group.

– 54 –

LETTER FROM FIRST SHANGHAI

7. Dilution in shareholding

Set out below is a summary of the shareholding in the Company (i) as at the Latest Practicable Date; (ii) immediately upon the First Completion assuming only Tranche 1 Convertible Note is fully converted; and (iii) immediately upon the Second Completion assuming both the Tranche 1 Convertible Note and Tranche 2 Convertible Note are fully converted, assuming there would be no changes in the issued share capital of the Company after the Latest Practicable Date other than as stated in each scenario.

Mr. Zhu and his concert parties_(Note 1)_ MS China 3 Limited Morgan Stanley Poly (Hong Kong) Investments Limited Sub-total Public Shareholders Total number of issued Shares	As at the Latest Practicable Date Approx. Shares % 352,518,443 36.25 160,080,000 16.46 528,000 0.06 134,791,044 13.86 647,917,487 66.63 324,502,000 33.37 972,419,487 100.00	Immediately upon the First Completion assuming only the Tranche 1 Convertible Note is fully converted into Conversion Shares(Note 2) Approx. Shares % 431,179,931 41.03 160,080,000 15.23 528,000 0.05 134,791,044 12.82 726,578,975 69.13 324,502,000 30.87 1,051,080,975 100.00	Immediately upon the Second Completion assuming both the Tranche 1 Convertible Note and the Tranche 2 Convertible Note are fully converted into Conversion Shares(Note 2) Approx. Shares % 470,914,162 43.17 160,080,000 14.67 528,000 0.05 134,791,044 12.36 766,313,206 70.25 324,502,000 29.75 1,090,815,206 100.00	Immediately upon the Second Completion assuming both the Tranche 1 Convertible Note and the Tranche 2 Convertible Note are fully converted into Conversion Shares(Note 2) Approx. Shares % 470,914,162 43.17 160,080,000 14.67 528,000 0.05 134,791,044 12.36 766,313,206 70.25 324,502,000 29.75 1,090,815,206 100.00
				70.25 29.75
				100.00

Notes:

1. Mr. Zhu, being the executive Director, is the beneficial owner of the entire issued share capital of Highexcel Investments Limited, which owns 352,518,443 Shares.

2. Assuming there is no acquisition and/or disposal of Shares from the Latest Practicable Date up to the First Completion Date and Second Completion Date.

– 55 –

LETTER FROM FIRST SHANGHAI

As shown in the above table, as at the Latest Practicable Date, 324,502,000 Shares were held by public Shareholders, representing approximately 33.37% of the issued share capital of the Company. Upon exercise of the conversion rights attaching to Tranche 1 Convertible Note and Tranche 2 Convertible Note at the Conversion Price, shareholding of the Independent Shareholders will be diluted to approximately 29.75%. As the issue of the Convertible Notes will enable the Group to complete the Acquisition without substantial and immediate cash outlay and will enlarge the capital base of the Group upon conversion of the Convertible Notes, we are of the view that the potential dilution on the shareholding of the Independent Shareholders is acceptable.

RECOMMENDATION

Having considered the abovementioned principal factors and reasons, we consider that the Sale and Purchase Agreement and the Convertible Notes are on normal commercial terms, and the terms of the Sale and Purchase Agreement are fair and reasonable so far as the Independent Shareholders are concerned; and the entering into of the Sale and Purchase Agreement is in the interests of the Group and the Shareholders as a whole.

However, the terms of the JV Agreements provide that whenever the Opco increases its registered capital, Xilinhot will maintain its 20% interest in the Opco without further capital injection which means the Group and Ganghua will be responsible for the injection of additional capital on behalf of Xilinhot in proportion to their respective interest in the Opco for any subsequent increase in the Opco’s registered capital. As mentioned in the section headed “Evaluation of the Consideration” above, given the board composition of the Opco, the interest of the Group in the Opco will not be prejudiced by the existing terms of the JV Agreements. In the event that the Group has to contribute additional capital on behalf of Xilinhot, the Company will comply with the requirements of the relevant Listing Rules.

Based on the above analysis, we therefore recommend the Independent Board Committee to advise the Independent Shareholders to vote in favour of the resolution relating to the Acquisition at the EGM. We also recommend the Independent Shareholders to vote in favour of the resolution in relation to the Acquisition at the EGM.

Yours faithfully, For and on behalf of

First Shanghai Capital Limited

Helen Zee Fanny Lee Managing Director Executive Director

– 56 –

TECHNICAL REPORT

APPENDIX I

The following is the text of the independent technical review prepared for the purpose of incorporation in this circular received from John T. Boyd Company, an independent technical adviser.

==> picture [51 x 52] intentionally omitted <==

John T. Boyd Company

Mining and Geological Consultants

22 September 2008 File: 3382

GCL-Poly Energy Holdings Limited 36/F Two Exchange Square, Central HONG KONG

Attention: The Directors GCL-Poly Energy Holdings Limited

Subject: Independent Technical Review Duolun Coal Mine Inner Mongolia Autonomous Region, People’s Republic of China

Dear Sirs:

This report presents our Independent Technical Review (ITR) of the Duolun Coal Mine presently under construction. Located 4 km north of Duolun County, Inner Mongolia Autonomous Region (Inner Mongolia), People’s Republic of China (PRC), the mine project is under the direction of Inner Mongolia Duolun Golden Concord Mining Limited (Duolun Golden Concord). Our independent due diligence commissioned by GCL-Poly Energy Holdings Limited (GCL-Poly) is intended for inclusion in a Circular of the discloseable and connected transaction in relation to the acquisition of the Duolun Coal Mine filing on The Stock Exchange of Hong Kong (SEHK). Completion of mine construction is projected in March 2009. Authorized raw coal output capacity is 0.9 Mtpa; design capacity is 1.2 Mtpa. Duolun Golden Concord controls the mining rights for the Xidacang area, where the mine is situated.

We have relied on available source data as provided by Duolun Golden Concord and discussions and observations during the John T. Boyd Company’s (BOYD) project team’s three visits to the Duolun Mine. The source data were evaluated according to our broad Chinese and international coal industry experience. Resource and reserve estimates were prepared by BOYD in accordance with the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (JORC Code).

I-1

TECHNICAL REPORT

APPENDIX I

For purposes of validating the economic mineability of the subject coal, as required for coals to be reported as reserves under JORC guidelines, we have also reviewed available feasibility reports and evaluated mining plans and economics.

Respectfully submitted,

JOHN T. BOYD COMPANY

By:

John T. Boyd II President and CEO

I-2

TECHNICAL REPORT

APPENDIX I

TABLE OF CONTENTS

			Page
LETTER OF		TRANSMITTAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	I-1
TABLE OF CONTENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .			I-3
GLOSSARY		AND DEFINITIONS
1.0	INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		I-13
	1.1	Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	I-13
	1.2	Scope of Work . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	I-14
	1.3	Work Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	I-15
	1.4	Source Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	I-16
	1.5	Project Team . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	I-17
	1.6	BOYD Qualifications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	I-19
	1.7	Statement of Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	I-20
	1.8	Forward-Looking Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	I-20
	1.9	Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	I-21
	Figure	1.1 General Location Map Showing Duolun Coal Mine
2.0	SUMMARIZED FINDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		I-24
	2.1	Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	I-24
	2.2	Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	I-24
	2.3	Geology and Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	I-25
		2.3.1 Geology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	I-25
		2.3.2 Resources. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	I-26
		2.3.2.1 Reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	I-26
		2.3.2.2 No. 7 Seam Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	I-27
		2.3.2.3 Lower Seam Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	I-28
	2.4	Mine Operation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	I-29
		2.4.1 Background and Geologic Setting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	I-29
		2.4.2 Construction Status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	I-30
		2.4.3 Mine Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	I-30
		2.4.4 Mining Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	I-31
		2.4.5 Coal Processing and Quality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	I-31
		2.4.6 Mine Output . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	I-32
		2.4.7 Labor Force . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	I-34
	2.5	Environmental Overview. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	I-34

I-3

APPENDIX I

TECHNICAL REPORT

3.0	GEOLOGY AND RESOURCES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	GEOLOGY AND RESOURCES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	I-35
	3.1	Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	I-35
	3.2	Geology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	I-35
		3.2.1 Geologic Setting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	I-35
		3.2.2 Mining Recovery Considerations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	I-37
	3.3	Resource Evaluation Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	I-41
	3.4	Resource Classification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	I-43
	3.5	Resource Estimating Methodology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	I-44
	3.6	Resource Estimates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	I-47
		3.6.1 Proved and Probable Reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	I-47
		3.6.2 Resources. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	I-48
	3.7	Coal Quality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	I-51
	3.8	Mining Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	I-52
		Tables
		3.1: Coal Reserve Estimate, Duolun Mine . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	I-54
		3.2: Coal Resource Estimate, Duolun Mine . . . . . . . . . . . . . . . . . . . . . . . . . . . .	I-55
		3.3: Additional Resources Potentially Recoverable
		by Longwall Slicing and Room and Pillar Mining . . . . . . . . . . . . . . . .	I-56
		Figures
		3.1: Map Showing Drill Hole Locations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	I-57
		3.2: Map Showing Proposed Mine Plan,
		2005 PDR with BOYD Revisions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	I-58
		3.3: Map Showing Proposed Mine Plan, Tiandi 2007 Report . . . . . . . . . . . . .	I-59
4.0	MINE	OPERATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	I-60
	4.1	Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	I-60
	4.2	Background and Geologic Setting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	I-61
	4.3	Construction Status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	I-62
	4.4	Mine Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	I-65
		4.4.1 Mine Openings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	I-65
		4.4.2 Underground Coal Haulage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	I-66
		4.4.3 Underground Material and Personnel Transport . . . . . . . . . . . . . . . . . . . . .	I-67
		4.4.4 Coalbed Methane and Ventilation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	I-67
		4.4.5 Water Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	I-68
		4.4.6 Electrical Power . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	I-69
		4.4.7 Mine Surface Facilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	I-69
	4.5	Mining Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	I-70
		4.5.1 Work Schedule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	I-70
		4.5.2 Mining Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	I-70
		4.5.3 Mining Methods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	I-72
		4.5.4 Mine and LW Development. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	I-72
		4.5.5 LW Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	I-75

I-4

TECHNICAL REPORT

APPENDIX I

	4.6	Coal Processing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	I-75
	4.7	Coal Quality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	I-77
	4.8	Work Safety . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	I-78
	4.9	Mine Output . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	I-78
	4.10	Labor Force. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	I-81
5.0	ENVIRONMENTAL OVERVIEW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		I-84
	5.1	Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	I-84
	5.2	Guidelines of the World Bank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	I-84
	5.3	Environmental Protection Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	I-85
	5.4	Environmental Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	I-85
	5.5	Surface Subsidence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	I-86
	5.6	Soil and Water Conservation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	I-86
	5.7	Solid Waste Disposal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	I-86
	5.8	Water Resources Protection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	I-87
	5.9	Air Pollution Control. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	I-87
	5.10	Noise Abatement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	I-88
	5.11	Capital for Environmental Protection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	I-88

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APPENDIX I

GLOSSARY AND DEFINITIONS

• Ad Air dried, as in coal quality reporting. AFC Armored Face Conveyor. Block A defined area of coal bordered by gateroads, usually rectangular in configuration, in which the LW face operates.

• BOYD John T. Boyd Company. Coal Resource A concentration or occurrence of coal of intrinsic economic interest in or on the Earth’s crust in such form and quantity that there are reasonable prospects for eventual economic extraction. The location, quantity, quality, geological characteristics, and continuity of a coal resource are known, estimated, or interpreted from specific geological evidence and knowledge. Coal resources are subdivided, in order of increasing geological confidence, into Inferred, Indicated, and Measured categories.

• Coal Reserve The economically mineable part of a Measured or Indicated coal resource. It includes diluting materials and allowances for losses, which may occur when the material is mined. Appropriate assessments, which may include feasibility studies, have been carried out and include consideration of the modification by realistically assumed mining, metallurgical, economic, marketing, legal, environmental, social, and governmental factors. These assessments demonstrate at the time of reporting that extraction could reasonably be justified. Coal reserves are subdivided in order of increasing confidence into Probable coal reserves and Proved coal reserves.

• Coal Preparation Plant Facility used to selectively remove an undesirable portion (waste) from the ROM/raw coal using chemical or mechanical methods. Also known as CPP.

• Coal Seam Portion of the strata that contains solid fossil fuel.

Commercial Output Saleable product from a particular mine, which may include varying proportions of raw and cleaned coals.

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Contract Services Personnel	Personnel typically employed full-time by the mining company
	who are assigned to operating mines in order to perform specific
	routine tasks (e.g., LW face transfers).
CV	Calorific value, heat content of the coal seam.
daf	Dry, ash-free basis, as in coal quality reporting.
Dip	Angle that strata makes with the horizontal.
Duolun Golden Concord	Inner Mongolia Duolun Golden Concord Mining Limited
Face	Mine location where active coal extraction is taking place.
Feasibility Study	A Feasibility Study assesses in detail the technical soundness and
	economic viability of an undeveloped mining project, serves as
	the basis for the investment decision, and serves as a bankable
	document for project financing. The study constitutes an audit of
	all geological, engineering, environmental, legal, and economic
	information accumulated on the project. Generally, a separate
	environmental impact study is required.
Fm	Formation.
FM	Fully Mechanized, in reference to longwall face equipment
	complement.
GCL-Poly	GCL-Poly Energy Holdings Limited.
Gate	Bord-and-pillar development around a longwall panel supporting
	its operation.
Gob	Spoil material allowed to subside behind the longwall retreat.
HM52 Category	A designation within the Chinese coal classification system for
	volatile content greater than 37% and transmittance between 30%
	and 50%.

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Indicated Coal Resource

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

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

ITR Independent Technical Review.

JORC Joint Ore Reserves Committee of The Australasian Institute of Mining and Metallurgy, Australian Institute of Geoscientists and Minerals Council of Australia.

JORC Code Australian Code for the Reporting of Exploration Results, Mineral Resources and Ore Reserves.

Kcal/kg Kilocalorie per kilogramme , a measure of coal heat content.

km Kilometre. LW Longwall, an underground mining technique.

m Metre. m[2] Square metre (also sq m). m[3] Cubic metre (also cu m). m[3] /min Cubic metres per minute.

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Marketable Reserves Saleable coal from Recoverable Reserves after accounting for preparation plant yield, where applicable. Marketable Resources Saleable coal from Recoverable tonnage after accounting for preparation plant yield, where applicable. Tonnages are classified as resources because the mining rights have not been obtained.

• Measured Coal Resource That part of a coal resource for which tonnage, densities, shape, physical characteristics, quality, and mineral content can be estimated with a high level of confidence. It is based on detailed and reliable exploration, sampling, and testing information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings, and drill holes.

• Methane A colorless, odorless, explosive gas (CH4) typically associated with coal seams.

• Mine Plan Understood as the current documentation of the state of development and exploitation of a deposit during its economic life, including current mining plans. It is generally made by the operator of the mine. The study takes into consideration the quantity and quality of the minerals extracted during the reporting time, changes in economic viability categories due to changes in prices and costs, development of relevant technology, newly imposed environmental or other regulations, and data on exploration conducted concurrently with mining.

Mining Rights The mining rights granted by the relevant authorities to conduct mining activities specifying area of mining operations, mining method, annual output, and term.

• mm Millimetre.

• Mt Million tonnes.

• Mtpa Million tonnes per annum.

Normal Fault A fault where the hanging wall has dropped along the fault plane (fault angle between 45 and 90 degrees) relative to the footwall. NRC National Railway of China.

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OSD Out-of-seam dilution, i.e., roof and floor rock recovered with the coal seam during the normal mining process. Outcrop The part of the coal formation exposed to the surface. Out-of-Seam Non-coal material above and below the coal seam recovered during mining. Overburden Waste material overlying a coal seam. Panel An area of coal designated for extraction using longwall mining within which a series of blocks (longwall faces) are developed. Partings Rock material within mineable coal seams usually extracted with the coal. PDR Preliminary Design Report, official documented report of the final design study conducted by a recognized Chinese mine design institute. The Preliminary Design study is undertaken after an FSR has been issued for the subject project. The PDR generally expands the FSR with additional mine planning analysis and includes detailed mine opening and construction plans from initial work to full production status. Pillar Column of coal left behind for support. PRC The People’s Republic of China. Prefeasibility Study Provides a preliminary assessment of the economic viability of a deposit and forms the basis for justifying further investigations (detailed exploration and feasibility). It usually follows a successful exploration campaign and summarizes all geological, engineering, environmental, legal, and economic information accumulated to date.

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Probable Coal Reserve	The economically mineable part of an Indicated, and in some
	circumstances Measured, coal resource. It includes diluting
	materials and allowances for losses, which may occur when the
	material is mined. Appropriate assessments, which may include
	feasibility studies, have been carried out and include consideration
	of and modification by realistically assumed mining, metallurgical,
	economic, marketing, legal, environmental, social, and
	governmental factors. These assessments demonstrate at the time
	of reporting that extraction could reasonably be justified. Also
	referred to as Recoverable Probable Coal Reserve.
Productivity	Measurements of worker efficiency usually expressed in terms of
	tonnes per unit of time.
Proved Coal Reserve	The economically mineable part of a Measured coal resource. It
	includes diluting materials and allowances for losses that may
	occur when the material is mined. Appropriate assessments, which
	may include feasibility studies, have been carried out and include
	consideration of and modification by realistically assumed mining,
	metallurgical, economic, marketing, legal, environmental, social,
	and governmental factors. These assessments demonstrate at the
	time of reporting that extraction could reasonably be justified.
	Also referred to as Recoverable Proved Coal Reserve.
Raw Coal	Coal on an as-mined basis, which may be sold directly or processed
	if necessary.
Recoverable Coal	Portion of coal reserve available for mining exclusive of coal
	losses due to mining.
Recoverable Reserves	Tonnage after mining recovery, mining dilution, and moisture gain
	factors have been applied.
Recoverable Resources	Tonnage after mining recovery, mining dilution, and moisture gain
	factors have been applied. Tonnages are classified as resources
	because the mining rights have not been obtained.
Residual Stone	Low heat content material remaining after commercial coal has
	been produced from raw coal using crushing, screening, and
	processing methods. Heat content typically is sufficient for
	utilization in specially designed boilers for power generation.

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RMB	Renminbi, Chinese currency.
ROM	Run-of-mine, the as-mined material as it leaves the mine site.
SEHK	The Stock Exchange of Hong Kong.
Shearer	Mechanized cutting machine utilized to extract coal from a face
	in a longwall mine.
Strike	The course, or bearing, of an inclined coal seam or stratum on a
	level surface; the direction of a horizontal line perpendicular to
	the dip.
Subcrop	Projected limit of mineral deposition where the bed outcrop is
	overlain by surface alluvium and rock strata.
Team 153	No. 153 Team of Coalfield Geology Exploration of the Inner
	Mongolia Autonomous Region.
Temporary Personnel	Workers employed on a temporary basis at a mining operation to
	perform specific construction or maintenance tasks. These workers
	are not reflected in mine employment figures.
Tonne	Metric ton equal to 1,000 kilogrammes.
tph	Tonnes-per-hour.
UG	Underground.
VM	Volatile matter.
Wash Plant	Facility used to selectively remove an undesirable portion (waste)
	from the ROM/Raw coal using chemical or mechanical methods.
	Also known as a CPP.
Yield	Saleable portion of coal cleaned in a preparation plant relative to
	the total tonnes cleaned.

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APPENDIX I

1.0 INTRODUCTION

1.1 Background

BOYD was engaged in July 2008 by GCL-Poly Energy Holdings Limited (GCL-Poly) to complete an Independent Technical Review (ITR) of the Duolun Mine for inclusion in a Circular of the discloseable and connected transaction in relation to the acquisition of the Duolun Coal Mine in accordance with the Rules Governing the Listing of Securities on the SEHK. This report is based on technical review work conducted since June 2007 of the Duolun Mine. Inner Mongolia Duolun Golden Concord Mining Limited (Duolun Golden Concord) is the mine operator and holder of the mining rights. Duolun Mine, currently under construction, is located approximately 4 km north of Duolunnao’er Town, the county seat of Duolun County, Inner Mongolia Autonomous Region, People’s Republic of China.

• A profile of the Duolun Mine project is as follows:

• Duolun Mine operates in the Xidacang Mining Right Area, which covers 7.7325 km[2] .

• Output design capacity is 1.2 Mtpa; current authorized output capacity is 0.9 Mtpa.

• The underground coal mine, currently under construction (which commenced in 2005), has three shafts and associated surface facilities nearly completed. Mine bottom and main roadway construction work and equipment installation is continuing.

• Principal coal seam to be exploited is the No. 7.

• Coal quality is classified as HM52 category according to the Chinese classification system.

• Planned coal processing is screening and dry coal processing with trucking to local markets. There are no plans at present for railroad service.

Duolun Golden Concord has submitted approximately RMB33 million in resource fees to the Inner Mongolian regional government.

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APPENDIX I

The owners of the mining company (Duolun Golden Concord) and holder of the Xidacang mining rights are:

Owner Inner Mongolia Golden Concord Xilin Energy Investment Co. Inner Mongolia Xilinhot Coal Mine Ganghua (Hong Kong) Co. Ltd. Total	Ownership Share (%) 55 20 25
	100

1.2 Scope of Work

By assignment, the scope of work for the ITR included the following items:

• Geology, Reserves

• Review and summary of reported coal resources (reserves) as presented in available documents and prepared using Chinese standards.

• Using the existing resource (reserve) work, re-estimation of resources and reserves to comply with international JORC requirements.

• Review coal quality of reserves.

• Review potential for unassigned reserves.

• Mine Construction Status – Based on site visit and other source data, summarize and review the current status (stage) of mine construction.

• Mine Plans – Assessment of the mine plan for Duolun Mine regarding:

• Mine infrastructure planning.

• Consistency of mining plan and forecast based on reserve analysis.

• Equipment utilization and productivity assumptions.

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• • Proposed employment levels.

• Issues affecting future operations.

• Environmental Overview – Review of planned environmental practices and procedures regarding compliance of proposed operations with World Bank/ Chinese requirements.

• Health and Safety – Review and commentary on health and safety requirements.

• Transportation – Assessment of transportation infrastructure:

• Adequacy of existing transportation infrastructure.

• Ability to transport future coal production.

• Business Plan – Assessment of internal business plans as provided by Duolun Golden Concord:

• Management ability to execute plans.

• Operating cost, capital spending, and output projections. BOYD did not perform coal market analysis.

• Material issues relating to achievement of output and cost forecasts.

1.3 Work Program

A comprehensive list of required source data was forwarded to Duolun Golden Concord upon initiating project work in July 2008. Information was subsequently provided to the BOYD’s Beijing office.

During the course of this study, a two-member team of BOYD’s China technical specialists in coal mining (underground) completed a site visit on 14 July 2008 to complete firsthand observations of mine construction projects, to collect available source data, and to discuss future plans with Duolun Golden Concord. BOYD’s Beijing office provided technical and translation support. Geologic source data were reviewed at the mine site for potential reproduction. Duolun Golden Concord also provided financial and coal output projections. BOYD previously conducted site visits to Duolun Mine in June 2007 and March 2008.

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APPENDIX I

1.4 Source Data

The principal sources of information for this project are:

1. Xidacang Mining Right Area Coal Supplementary Exploration Report, July 2005, as prepared by Exploration Team 153, Inner Mongolia Autonomous Region, Coalfield Geology Bureau.

2. Xidacang Preliminary Design Report, December 2005, as prepared by Tiandi Technology Co., Ltd.

3. Tiandi Technology Co., Ltd (Tiandi) prepared a supplemental September 2007 report on expected Duolun mining conditions, mine design requirements, and coal reserves. Duolun Golden Concord provided the Tiandi Report and the following additional supporting data for the Duolun Mine reserve analysis:

4. a. Statement of Reserve Calculations of Duolun Mine by China Coal Research Institute and Tiandi, 22 September 2007.

5. b. Tiandi’s Response to BOYD’s 1st Reply, 27 September 2007.

6. c. Tiandi’s Response to BOYD’s 2nd Reply.

7. d. Further Explanation of Tiandi’s Response to BOYD’s 2nd Reply by Tiandi, 20 October 2007.

8. e. Technical Opinions on Coal Mining under Tertiary Aquifer in Duolun Mine by Tiandi, 20 October 2007.

9. Updated mine construction information, including:

10. Mine map as of the end of June 2008.

11. Equipment list (purchased, booked, and planned).

12. Revised capital spending plan.

13. Environmental protection design.

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APPENDIX I

While the primary source of information (written and verbal) relied upon by BOYD in preparing this ITR was provided by Duolun Golden Concord (including geologic and preliminary design reports), we independently evaluated the reasonableness of the data provided within the context of our professional, and technical expertise and broad Chinese mining and international experience. To confirm our interpretation of the Duolun data, discussions were conducted after our initial analysis of the available data, and where necessary, additional information was collected.

1.5 Project Team

The BOYD project team has extensive professional experience in coal resource and mine evaluations. Key professionals for this project include:

Mr. Ronald L. Lewis – Managing Director and Chief Operating Officer, BS (Civil Engineering)

Mr. Lewis has 37 years of experience in assessment and evaluation of coal mining companies, with specialized expertise in the areas of coal/mineral reserve estimation, opencut and underground mine analysis, and economic assessment of mining operations. He is a Registered Professional Mining Engineer and a recognized expert in mining property valuation. Mr. Lewis is a Registered Member of the Society for Mining, Metallurgy, and Exploration, Inc., and is qualified as a Competent Person as defined in the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (JORC Code).

Mr. David L. Rohanna – Managing Director EurAsia, BS (Economics/Geology), MS (Mining Engineering)

Mr. Rohanna has over 36 years of experience at the executive/senior manager level in the mining and materials handling industries with a broad and extensive background in engineering and project management with specialized worldwide expertise in coal and mineral preparation, ports, and bulk materials handling and transportation. Mr. Rohanna is a member of the Society for Mining, Metallurgy, and Exploration, Inc., the American Iron and Steel Engineering Society, and the Cranes Manufacture’s Association (CMA) Mechanical and Electrical Sub-Committees.

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Mr. David Zhong – General Manager, BS (Mining Engineering)

Mr. Zhong has over 40 years of experience in the mining industry, primarily in coal mine design at the Beijing Coal Design and Research Institute. His last position was that of Chief Engineer.

Mr. James F. Kvitkovich – Vice President, BS (Mining Engineering)

Mr. Kvitkovich has 25 years of experience in assessment and evaluation of underground coal mining operations throughout the world. He is a Registered Professional Engineer and is highly experienced with regard to reviewing and evaluating LW mining operations. Mr. Kvitkovich is a Registered Member of the Society for Mining, Metallurgy, and Exploration, Inc., and is qualified as a Competent Person as defined in the Australasian Code for Reporting of Exploration Results Mineral Resources and Ore Reserves (JORC Code).

Mr. Paul D. Anderson – Director of Geological Services, BS (Geology)

Mr. Anderson is a Certified Professional Geologist (AIPG) with 31 years of professional experience in exploration, evaluation, and development of coal and mineral deposits. Mr. Anderson is a Registered Member of the Society for Mining, Metallurgy, and Exploration, Inc., and a member of the American Institute of Professional Geologists and is qualified as a Competent Person as defined in the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (JORC Code).

Mr. Zhao Liang – Mining Engineer, BS (Coal Mine Technology)

Mr. Zhao has nine years of mining industry experience with a broad base of knowledge of coal mine design and feasibility gained at the Beijing Huayu Engineering Co. Ltd.

Mr. Jisheng Han – Mining Engineer, MS (Mining Engineering)

Mr. Han has 10 years of mining industry experience in both China and US.

Mr. Zhang Xubin – Mining Engineer, BS (Mining Engineering)

Mr. Zhang has two years of mining industry experience in China gained at the Sino-Coal International Group.

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APPENDIX I

1.6 BOYD Qualifications

BOYD is one of the largest independent consulting firms in the world exclusively serving the mining, financial, utility, power, and related industries. Our consultancy services have been provided on a continuous basis since 1943 in over 50 countries. Our full-time staff includes specialists in the analysis of geology, reserves, mine planning and costs, material handling, markets, business planning, transport, and environmental issues. Our full range of professional services includes:

• Due diligence of mining operations

• Fuel and energy supply planning

• Permitting and environmental analysis

• Contract negotiations

• Market and transport analyses

• Economic feasibility studies and valuations

• Assessment of existing operations

• Strategic business planning

• Transport issues

• Asset appraisals

• Minerals industry restructuring

• Privatization studies

• Geologic, reserve and mine plan modeling

• Exploration design and supervision

• Reserve and geotechnical studies

• Technical assistance in legal matters

• Monitoring of operating companies

• Financial analysis

BOYD also possesses extensive computer and software systems to estimate reserves and complete mine plans. These include Vulcan, MINCOM, SurvCadd, and others.

Our headquarters are located in the Pittsburgh, Pennsylvania, region of the US. Branch offices are established in Denver, Colorado (US); Brisbane, Australia; and Beijing, China. Please visit our website (www.jtboyd.com) for additional details.

We have extensive experience in preparing Competent Persons and Independent Technical Review reports for international financing purposes and for stock exchange filings. We are knowledgeable of listing requirements of The Stock Exchange of Hong Kong (SEHK), London Stock Exchange, and NI43101 (Canadian Requirements), JORC Code, U.S. Securities and Exchange Rules, etc. We are familiar with the level of effort required by international investors and financial institutions.

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APPENDIX I

Among our Chinese projects, we represented Shenhua Group Corporation as their Technical Advisor for the China Shenhua Energy Company Limited (China Shenhua) IPO on SEHK. Our work included an analysis of reserves (JORC, SEC, and UN Reporting Standards), coal quality, mine operations, processing, material handling, rail and ocean transport facilities, and operating economics. Shenhua Group Corp.’s reserve holdings were evaluated according to JORC Code. We subsequently prepared two resource studies commissioned by China Shenhua for material acquisition SEHK filings. We also prepared an ITR for MP Logistics International Holdings Limited for two openpit mines in Xingjiang Uygur Autonomous Region and an ITR for Fushan International Energy Group Limited’s acquisition of Fortune Dragon Group Limited mines in Shanxi Province.

BOYD is a recognized consultancy having worldwide stature. We were retained by Her Majesty’s Government, Department of Trade and Industry, regarding the privatization of British Coal Corporation (British Coal) and were actively involved with N M Rothschild, the lead financial advisor, during the course of this project. Our work assisted in the restructuring of the industry, and the coal mining operations of British Coal were successfully privatized. We have completed over 2,000 resource and reserve audits. BOYD’s reserve statements have been used by client companies, including some of the largest US coal producers, for Securities and Exchange (SEC) filings. We have worked with virtually all of the major international banks. Numerous financial agencies have used our services to opine on property/mine operations.

1.7 Statement of Interests

BOYD is a privately owned consultancy firm with headquarters in the US. Our company was selected for this assignment on the basis of our internationally recognized expertise in exploration, resource/reserve studies, mine development, and valuation. BOYD has no ownership or shareholder interest in the Duolun Mine, Duolun Golden Concord, or GCLPoly. Payment for our services is not contingent upon our opinions regarding the merits of the project or approval of our work by GCL-Poly.

1.8 Forward-Looking Statements

Estimates of coal resources and reserves, as well as projections of coal mine output, are inherently forward-looking statements. Actual performance may differ from projections of future performance due to various reasons beyond the control of BOYD, including, but not limited to: inherent uncertainties in geologic data interpretation, occurrence of unforeseen geological conditions, change or lack of development in key domestic and international markets, material changes in market prices, variances in execution of construction and mine plans, and significant changes in projected materials, supplies, parts and equipment, operating costs, and expenditures.

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Imposition of different central, regional, and/or local government policies could affect future coal production. For example, increased environmental compliance and changes in regulatory oversight for health and safety could result in reduced output and increased costs. Possible variations of future performance from the projections presented in this report are addressed in more detail in specific sections of this report. Comments on the risks inherent in the various operations are discussed in the appropriate sections of this report.

1.9 Closing

In preparing this report, we have relied on reserve, operating, and other data as provided by Duolun Golden Concord. We have exercised reasonable care in reviewing the information provided. We have no reason to believe that any material facts have been withheld or that a more detailed analysis may reveal additional material information. Our ITR has been completed in accordance with generally accepted standards and practices employed in the international mining industry. Although we have compared key information provided by Duolun Golden Concord with expected values, the accuracy of the results and conclusions of this report are reliant on the accuracy of the information provided. We are not responsible for any material errors or omissions in the information provided.

The findings and conclusions presented in this report represent the independent professional opinion of BOYD based on our review of available project information. We have made no attempt to verify the technical and geological information presented in the reference material documents and assume it has been prepared by competent engineers and geologists. Our expertise is in technical and financial mining issues and BOYD is not qualified to offer, nor do we represent any of our findings to include, matters of a legal or accounting nature. We have relied on information provided by Duolun Golden Concord regarding land tenure, legal rights held, and ownership. We have not independently researched land and/or coal certificate rights nor have we reviewed or verified the ownership or structure of the various entities with interests in Duolun Golden Concord. BOYD’s independent analyses of the available data have been developed in a manner consistent with industry standards and engineering practices. We believe our conclusions are reasonable assessments of the information provided.

The ability of Duolun Golden Concord, or any mine operator, to achieve the projections contained in this report is dependent on numerous factors that are beyond the control of, and cannot be anticipated by, BOYD. These factors include mining and geologic conditions, the capabilities of management and employees, the securing of required approvals and permits in a timely manner, etc. Unforeseen changes in regulations could also impact performance; although we believe all findings and conclusions to be reasonable, we do not warrant this report in any manner, express or implied.

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While this report addresses technical (e.g., reserve, mining, etc.) and financial (operating costs, capital costs, revenues, etc.) issues, qualified legal expertise is required to verify existing exploration and mining rights to the various areas. BOYD is not qualified to assess PRC legal matters and does not purport to offer a legal opinion on the status of ownership/control and/or the right to mine.

Following this page is Figure 1.1, General Location Map Showing Duolun Coal Mine.

Respectfully submitted,

JOHN T. BOYD COMPANY

By:

Jason Han

Mining Engineer

Liang Zhao

Manager of Technical Service – China

Paul D. Anderson

Director of Geological Services

David Zhong

Managing Director – Beijing Office

David L. Rohanna

Managing Director EurAsia

James F. Kvitkovich

Vice President

Ronald L. Lewis

Managing Director and COO

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==> picture [394 x 616] intentionally omitted <==

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APPENDIX I

2.0 SUMMARIZED FINDINGS

2.1 Introduction

The Duolun Mine Project is an underground coal mine located near Duolun County, Inner Mongolia, PRC. The mine is presently under construction in the Xidacang mining right area with a design output capacity 1.2 Mtpa. Duolun Golden Concord controls the mining rights for Xidacang. Resource fees totaling RMB32.85 million have been submitted to the Bureau of Land and Resource for Inner Mongolia.

				Mining	Right
				(year/month)
Mining		Mining		Permit
Right Area	Certificate No.	Method	Area	Grant Date	Expiration
			(km2)
Xidacang	1500000620637	UG	7.76	2006/10	2011/10

The principal findings of this study are summarized in this chapter and are supported by the text included in the body of this report. This section presents the major findings regarding coal resources, projected mining operations, and environmental overview. Technical description and discussion of mine facilities, operating practices, future mine plans, etc., concerning the Duolun Mine prospects can be found in their respective sections.

2.2 Conclusion

BOYD has not identified any fatal flaws regarding the Duolun Mine project during our review that would prevent the mine from achieving a projected output level of 1.2 Mtpa of raw coal output. Our analysis assumes that the geotechnical issues experienced in construction are adequately resolved. Expected mine operating life at the 1.2-Mtpa level is projected at 13 years according to our reserve analysis. Mine life may be extended pending application of room-and-pillar mining methods and extension of mining into the seams below the No. 7 Seam horizon. Based on our independent review and our experience, relative to other Chinese coal projects, we see the following positive aspects of Duolun project:

• Favorable Geologic Setting Conditions

• Thick seam occurrence

• Low methane emissions

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• Moderate mining depth

• Moderate seam gradients

• Limited faulting.

• Marketable Coal Quality

• Favorable Mine Location

• Highly accessible in terms of road network

• Markets within reasonable trucking distance

• Good access to adequate power and water supplies

• Absence of villages or protected surface features

2.3 Geology and Resources

2.3.1 Geology

On a global basis, the geological setting or nature of the coal Xidacang coal deposit is judged to be moderate.

The coal-bearing strata occurs in an enclosed synclinal basin overlain by waterbearing Tertiary- and Quaternary-age strata. The presence of these overlying acquifers and related water inflow into the underground mine workings due to subsidence is the major factor that impacts mining in this basin (and resource/reserve estimation). Subsidence from mining forms cracks in the overlying strata, and if this subsidence creates a pathway to the aquifer, the mine can be flooded. In order to avoid this potential problem, BOYD has limited the resources to areas where the thickness of overlying competent strata is sufficient to conduct mining operations.

The major coal seam in the deposit is the thick No. 7 Seam. This seam is well defined by drilling, and a PDR has been prepared. Based on our review of the geology, mining studies, and mine economics, it is our opinion that the No. 7 Seam can be considered as a reserve, and BOYD has prepared reserve estimates within the mine plan.

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Several thinner, lower seams exist below the No. 7 Seam. These seams are more erratic in occurrence and less well defined by drilling and have limited quality data, and Duolun Golden Concord has not prepared mining feasibility studies for these seams. BOYD has identified seam areas below the No. 7 Seam in the Nos. 5, 4, 3, and 2 seams that could be accessed from the No. 7 Seam mine workings and may be mineable upon further exploration and studies. Due to the limitations discussed above, we have classified tonnages in the seams as Resources.

2.3.2 Resources and Reserves

BOYD has prepared independent resource and reserve estimates for the coal seams in the deposit. Estimates of Measured, Indicated, and Inferred Coal Resources and Proved and Probable Coal Reserves presented in this report are JORC compliant.

2.3.2.1 Reserves

Estimated coal reserves for the No. 7 Seam are:

Total Seam Thickness (m) Seam Bench (Coal/Parting) 7-2 10.10 (9.60/0.50) 7-1 6.25 (6.00/0.25) Total	Marketable Reserves – Million Tonnes % of Proved Probable Total Total 3.58 4.75 8.33 53 3.19 4.24 7.43 47 6.77 8.99 15.76 100	Marketable Reserves – Million Tonnes % of Proved Probable Total Total 3.58 4.75 8.33 53 3.19 4.24 7.43 47 6.77 8.99 15.76 100
		100

Approximately 43% of the total reserves are classified as Proved.

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2.3.2.2 No. 7 Seam Resources

In addition to the reported reserves, there are coal resources	In addition to the reported reserves, there are coal resources	In addition to the reported reserves, there are coal resources	In addition to the reported reserves, there are coal resources	In addition to the reported reserves, there are coal resources	In addition to the reported reserves, there are coal resources	In addition to the reported reserves, there are coal resources	in the No. 7	in the No. 7
Seam (subject to successful	application of enhanced LW mining					methods and
acceptable economics for room-and-pillar mining practices) and							in the lower
coal seams. BOYD’s estimate		of additional coal resources in the					No.	7 Seam
on a Marketable basis are summarized as				follows:
		Marketable Resources (Mt)
								% of
Seam		Proved		Probable	Total		Resources
LW Slicing Techniques
7-2		2.61		1.74	4.35			58
7-1		1.88		1.21	3.09			42
Total		4.49		2.95	7.44			100
Room-and-Pillar Mining
7-2		1.07		1.40	2.47			47
7-1		1.26		1.52	2.78			53
Total		2.33		2.92	5.25			100
Total Potential Additional Resources
7-2		3.68		3.14	6.82			54
7-1		3.14		2.73	5.87			46
Total		6.82		5.87	12.69			100

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2.3.2.3 Lower Seam Resources

BOYD has classified tonnage contained in the lower seams as resources because most of the areas are below the minimum authorized mining elevation of 935 m. The percentage of the resource areas that lie within the authorized mining elevations range from approximately 35% in the No. 5 Seam to 5% in the No. 2 Seam. The controlled areas are too small to support mining operations and, therefore, are classified as resources. Our estimates of the Measured, Indicated, and Inferred Resources for the lower seams are summarized as follows:

	Seam Thickness.	Marketable	Marketable	Marketable	Resources (Mt)	Resources (Mt)	Resources (Mt)
Seam	Total (Coal/Parting)	**Measured **	Indicated			Inferred	Total
Within	Authorized Mining Elevation
5	6.65 (5.70/.0.95)	–		0.61		–	0.61
4	4.40 (3.80/0.60)	–		0.20		–	0.20
3	3.90 (3.40/0.50)	–		–		0.19	0.19
2	2.90 (2.400/0.50)	–		0.07		0.04	0.11
Total		–		0.88		0.23	1.11
Below Authorized Mining Elevation
5	6.65 (5.70/.0.95)	–		0.76		0.31	1.07
4	4.40 (3.80/0.60)	–		0.55		0.44	0.99
3	3.90 (3.40/0.50)	–		0.81		2.11	2.92
2	2.90 (2.400/0.50)	–		0.16		1.28	1.44
Total		–		2.28		4.14	6.42
Total
5	6.65 (5.70/.0.95)	–		1.37		0.31	1.68
4	4.40 (3.80/0.60)	–		0.75		0.44	1.19
3	3.90 (3.40/0.50)	–		0.81		2.30	3.11
2	2.90 (2.400/0.50)	–		0.23		1.32	1.55
Total		–		3.16		4.37	7.53

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TECHNICAL REPORT

As shown, the seams are not well defined, especially in the No. 3 Seam, which contains 41% of the total resources and has 74% of its resources in the Inferred class. The seam also contains a much higher weight percentage of parting material than the thicker No. 7 Seam, which results in higher ash content and lower calorific values.

We have classified tonnage contained in the lower seams as resources because most of the areas are below the minimum authorized mining elevation of 935 m. If Duolun Golden Concord were to acquire Mining Rights for the entire lower seam resource areas, it would be appropriate to reclassify the 3.16 Mt of Indicated Resources as Probable Reserves. Additional drilling would be required to potentially upgrade the Inferred Resource tonnage to reserve status. Commonly it is reasonable to expect that the majority of Inferred Resources would upgrade to Indicated Resources with continued exploration. However, due to the uncertainty of Inferred Resources, it should not be assumed that such upgrading will always occur. It should also be understood that in the JORC Code there is no direct link between Inferred Resource and any category of Coal Reserves.

2.4 Mine Operation

2.4.1 Background and Geologic Setting

Mine planning is focused on the No. 7 Seam. Mining elevation within the Xidacang mining right area for the No. 7 Seam typically ranges from 935 m to 1,180 m, with the shallowest cover depth at 88 m and the highest cover depth at 350 m. Average gradient of the coal seam ranges from 0 degrees to 18 degrees, with typical gradient of 12 degrees. Although relatively simple in structural terms (limited faulting is indicated), the No. 7 Seam is a complicated deposit with geologic conditions varying throughout the mining right area, requiring different mining methods.

Generally the hazards for Duolun mining operations are as follows:

• Loose, unconsolidated Tertiary strata that present loading issues for undermining, and potential sand or soil inrushes into the underground workings.

• Surface and subsurface water systems that could drain into the underground workings following voids and fractures caused by undermining.

Guidelines have been developed for mining methods to be employed according to strata composition and depth of mining operation.

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2.4.2 Construction Status

Construction of the air return shaft was initially started in November 2004 but halted in April 2005 when the shaft reached 75-m depth. Construction of the main and service shafts began on 15 November 2005 using ground-freezing methods. Air return shaft construction with a second contractor resumed in May 2006 using freezing methods. According to the January 2006 plan, the mine was projected to go into operation on 12 March 2008. Based on BOYD’s latest visit and as projected by Duolun in July 2008, the initial mine operation is delayed to mid-March 2009 due to additional repair work for broken roadways, slow development rate, and other related issues.

Other activities are further behind in some instances, but there is time available to avoid scheduling issues. There do not appear to be fatal flaws, which would prevent the project from achieving final construction milestones, considering the advanced stage of pit bottom construction. Expected weak coal seam conditions may slow development of the main roadways and delay start-up of mining operations presently anticipated in mid-March 2009. BOYD’s July 2008 underground tour included the three rises, gate roads, water sumps, and other pit bottom facilities. Most of the finished construction areas in the coal seam exhibited good standards. However, the pit bottom is located at the bottom of a syncline, which causes higher than normal ground pressure, and a repeating broken and repair process has been experienced by the pit bottom roadways. The construction was obviously delayed by the repair work.

2.4.3 Mine Services

Duolun has three vertical shafts to a depth of 335 m at the main surface complex for access to the mine providing production hoisting, service hoisting, and return air ventilation. Underground coal haulage consists of a gate belt conveyor system transporting the mined raw coal to the main production shaft. The main production shaft is to be outfitted with a single 8-tonne capacity skip hoisting system. Provisions for handling underground material and equipment transfers follow standard Chinese practices. Planned mine services for methane and water generation are adequate to support the projected mining operation based on available data. Water and power supplies are readily available.

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2.4.4 Mining Operations

According to the limited design, three mining methods are planned for Duolun Mine, i.e., FM LW with sublevel caving (SLC) by slice, FM LW by slice, and roomand-pillar mining (added in the revised mine plan). The initial (No. 1) mining district has simple, relatively constant, geologic conditions extending over a significantly large area, which favor the FM LW sublevel caving approach. The No. 1 mining district located at the east side of the pit bottom development is projected for 700 m on an east-west orientation. This district, which appears to have the most consistent seam thickness conditions and the thickest competent overburden in the mining right area, is the optimum area for initiating Duolun mining operations. The initial mine plan development is prudent in our opinion. The main roadways support a two-wing LW face layout with opposing LW faces. The LW faces are perpendicular to the rises of the initial district with retreat along the strike from south to north or north to south. Depending on mine planning, a second mining district may be required to recover the coal reserves lying south of District No. 1.

The economics associated with the use of room-and-pillar mining to supplement LW mining has not been analyzed, but is critical in the overall mining economics. BOYD’s estimate of reserves assigns room-and-pillar mining areas under the resource category. Successful application of room-and-pillar would contribute additional reserves and extend the mine life.

2.4.5 Coal Processing and Quality

In the initial production stage, only raw coal screening and handpicking (to remove larger rock from the run-of-mine material) are planned for preparing the raw coal for market. We anticipate screening and hand picking will reduce the ROM ash content by 3 to 5 percentage points. Actual results at Duolun will depend on in situ coal quality and seam roof and floor conditions.

Raw coal from Duolun is expected to range in size up to 300 mm, with the following distribution based on 100 mm and 50 mm sizing:

	Approximate
Sizes	Distribution
	(%)
>100 mm	16
50-100 mm	14
<50 mm	70
	100

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Duolun Golden Concord is currently planning to replace the initially planned screening method with a dry preparation technology to improve product quality with relatively low capital investment and operating cost. Coal produced by Duolun Mine is transported by truck to market (local and regional power generators).

Duolun coal quality is categorized according to the Chinese coal classification system as HM52 lignite. Primary users are the power generation markets (both local and regional). Reported average in situ Duolun coal quality for the No. 7 Seam (representing only coal sections without partings) is as follows:

Characteristic	Basis	Unit	Value
Moisture	ad	(%)	15.0
Ash	d	(%)	20.2
Sulfur	d	(%)	0.55
Phosphorus	d	(%)	0.05
Volatile Matter	daf	(%)	45.0
Calorific Value	gr.ad	(Kcal/kg)	4,430
Grindability			42
Ash Fusion (softening)		ºC	1,250

2.4.6 Mine Output

BOYD’s independent review and experience indicate that the planned mining systems (LW face and skip hoisting system) are capable of generating the projected 1.2-Mtpa design output level provided that there are no LW face delays due to unanticipated, adverse conditions. Skip hoisting capacity is estimated at 1.4 to 1.7 Mtpa depending on hoist operating days. LW face output is projected at 1.3 Mtpa.

Duolun Golden Concord is presently scheduling LW face startup for test run in mid- March 2009. The mid-March 2009 start-up date is reasonable according to general coal development experience, assuming there are no delays for adverse mining conditions in the gates and no delays for potential repairs in the pit bottom and main roadways. However, Duolun Golden Concord’s LW face start-up scheduling does not reflect construction issues (service shaft availability, limited hoisting, and haulage capacity), constrained mine development rates, and opening repair work, which may delay LW face start-up until June 2009. According to the information provided by

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Duolun Golden Concord during the BOYD visit, and based on our review of progresstodate construction performance since June 2007 and opening stability issues encountered in 2007 and 2008, the following build-up in coal output is projected as follows:

Year	Output
	(Mt)
2008	0.05
2009	0.40
2010	1.20

For planning purposes, BOYD projects 2008 output at 0.05 Mt from development of gate roads and rises. Standard practice after start-up is to undergo a mine test period that may extend three to six months, during which time mine systems are evaluated and debugged. Regulatory officials also inspect the mine and its infrastructure. Mines in start-up mode typically do not attain their rated or authorized output capacity during this period, and we have reflected this in the 2009 output projection.

According to BOYD’s reserve and mine plan analyses, projected mine operating life at 1.2 Mtpa is 13 years. Mine life may be extended pending application of roomand-pillar mining methods and extension of mining into the seams below the No. 7 Seam horizon. Due to the expected weak seam conditions, we do not anticipate that room-and-pillar mining methods will be economically viable on a stand-alone basis (no LW face operations), but they could be employed to supplement coal output.

Remediation (de-watering through surface pumping) of significant water sources in the Quaternary strata may be required to conduct the proposed mine plan. Additional analysis of hydrologic conditions is warranted prior to mining areas with less than 140 m of competent overlying strata. We have assumed for our review that hydrologic issues, if any, are handled by dewatering programs or mine design revision.

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2.4.7 Labor Force

According to the PDR, projected staffing at full output for Duolun Mine is 548 personnel. Underground labor productivity, based on projected PDR underground staffing, is 3,450 raw tonnes/employee-year at annual raw output of 1.2 Mtpa. According to our experience, the labor force staffing projections appear low (or projected labor productivity appears high) for the anticipated mining conditions and technology. Our projection of total staffing requirements at full production totals 657 personnel, as follows:

Category Production Worker Underground Surface Subtotal Management Service and Other Total	Payroll 445 117
	562
	67 28
	657

Staffing requirements for room-and-pillar mining are not reflected in the manning projections above. We anticipate additional personnel will be added as the mine expands and room-and-pillar mining operations are undertaken later in the mine operation, as indicated. In July 2008 Duolun Golden Concord proposed a new labor staffing plan with 887 personnel; a staffing breakdown was not provided.

2.5 Environmental Overview

Appropriate environmental protection measures in accordance with national environment protection laws are planned. The environmental protection work planned for Duolun is comparable to similar mining enterprises in China. While the particulars of actual environmental practices may need to be upgraded in some areas in the future, there do not appear to be environmental constraints to future coal mining operations. In BOYD’s opinion, environmental protection measures planned for Duolun comply with applicable Chinese requirements for environmental protection related to coal mining activities and follow World Bank policies for responsible environmental management.

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APPENDIX I

3.0 GEOLOGY AND RESOURCES

3.1 Introduction

In June 2007, March 2008, and July 2008, BOYD personnel met with Duolun Golden Concord technical personnel, who made presentations of the geology, coal resources, and mine plans for the area. Duolun Golden Concord provided BOYD with copies of the data presented in these meetings and follow-up data at our request. In addition, BOYD mining engineers visited the mine site and, during the visit, discussed the coal resources and mine plans with Duolun Golden Concord and mine personnel.

3.2 Geology

3.2.1 Geologic Setting

On a global basis, the geological setting or nature of the Xidacang coal deposit controlled by Duolun Golden Concord is judged to be moderate.

Areas of coal occurrence evaluated in this report are located in the Cretaceousage Bayanhua Formation. This formation is uncomformably overlain by semiconsolidated Tertiary sediments, which are overlain by unconsolidated Quaternary alluvium.

The Quaternary alluvium is a major aquifer in the area, with thickness ranging from 30 m to 70 m and averaging 50 m. The underlying Tertiary-age strata contain occasional sand-filled paleochannels and range in thickness from 20 m to 180 m, averaging 80 m. The Cretaceous Bayanhua Formation contains 12 major coal seams numbered from 1 to 12 in stratighaphically ascending order. The major, most persistent, thickest, and only seam considered as a reserve is the No. 7 Seam. Seams above the No. 7 Seam are thin and discontinuous, will be undermined by the planned No. 7 Seam mine, and are not considered as resources in our evaluation. The six coal seams

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APPENDIX I

that lie below the No. 7 Seam are also thin and are erratic in occurrence due to abrupt seam splitting. Our evaluation of these seams has identified coal resource areas in the Nos. 5, 4, 3, and 2 seams that may be accessible from the No. 7 Seam mine workings. Intervals between the seams considered in our resource evaluation are:

	Interval to Underlying
Seam	Coal Seam
	(m)
7	20 – 30
5	40
4	3 – 10
3	1 – 5
2

The deposition of coal seams throughout the entire sequence shows during the deposition process that the coal swamps were frequently flooded, as seen in the existence of multiple seam partings and abrupt thinning and splitting of the seams. While the deposition of the No. 7 Seam was more stable than the other thinner seams, it also contains multiple partings, including one thick parting that divides the seam into two distinct mining horizons. The top layer (No. 7-2) thickness averages 10 m; the bottom layer thickness averages 6 m. The following diagram shows a typical cross section across the syncline in the central part of the resource area.

Typical Section Across Xidacang Area

==> picture [343 x 126] intentionally omitted <==

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

W Quaternary Alluvium E
Tertiary Strata Paleochannel
12
11
10
3
9
8
1
6 2
No. 7 Seam 5
Fault F4 4 Cretaceous Strata
----- End of picture text -----

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TECHNICAL REPORT

The coal-bearing strata occur in an elongated north-south trending synclinal basin that is 6 km in length and approximately 1 km in width. Dip along the axis of the syncline is 5 degrees in the north but is more variable in the south, ranging from 10 degrees to 20 degrees. Dip along the east limb of the syncline ranges from 10 to 20 degrees, averaging about 15 degrees. There is limited drilling data defining the west limb of the syncline that is also truncated by a fault in the central part of the resource area. Steeper dips of up to 25 degrees are projected on the west limb; however, because there is limited data to substantiate these steeper dips, we have assumed the dip will be similar to the east limb (10 to 20 degrees). The coal seams subcrop against the overlying Tertiary strata on the eastern and western limbs (except where truncated by faulting) and along the north and south boundary of this enclosed basin.

The major geologic factor that impacts mining in this basin is the Quaternary alluvium, which forms an aquifer that overlies the deposit. The concern is subsidence from mining will form cracks in the overlying strata. If this subsidence creates a pathway to the aquifer, the mine can be flooded. The original Duolun Mine (now closed) in the south part of the basin experienced severe water inflow problems.

3.2.2 Mining Recovery Considerations

In order to avoid major water inflow, mining must only be conducted where there is a sufficient thickness of competent strata above the seam. In the PDR prepared for Duolun Golden Concord, it was recognized that the paleochannels in the Tertiary strata form pathways for migration of water in the Quaternary aquifer, and this was a factor in the original Duolun Mine flooding incidents. While these paleochannels contain only moderate amounts of water, their connection to the overlying aquifer is a significant factor in mine planning.

The mining right area is logically divided into four sub-areas or zones, each having unique geologic conditions and potential mining hazards requiring different mining methods, as discussed below.

1. “Ancient Riverbed” Zone

This zone features a thick conglomerate layer at the bottom of Tertiary strata, within which underground water flows to the southeast. Due to uncertain hydrological conditions, LW sublevel caving is not suitable for this area and slice LW mining is recommended to reduce overburden movement. The number of slices, and the slice thickness, should be determined after the hydrological conditions of the zone are understood.

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2. Middle South Zone

This zone of thick interburden between the coal seam and Tertiary strata includes the central part of the No. 1 and No. 2 mining districts. The major mining design consideration is to prevent an inrush of sand from overlaying Tertiary and Quaternary strata due to over-breakage of overburden. LW sublevel caving is planned in this area when the interburden (interval between the top of the seam and the Tertiary strata) is larger than 140 m; the LW slicing technique is specified when the interburden is larger than 60 m, but less than 140 m. According to these guidelines, most of the No.1 mining district is suitable for LW sublevel caving methods and the No.2 mining district is suitable for LW slicing.

3. Thin Interburden Zones

These zones include the eastern part of the No. 1 and No. 2 mining districts and the No. 3 mining district, which is impacted by the F4 fault. Typically these zones have complicated geologic conditions and are not suitable for LW mining. In these zones, interburden between the No. 7 Seam and Tertiary strata is generally between 30 m and 60 m, which would likely be fractured if LW mining were conducted, resulting in flushing or sand in-rush into the underground workings. In these zones, room-and-pillar (lower recovery) mining methods are planned to minimize the potential breakage of roof strata.

4. Northern Zone

Seam characteristics in this zone are not well known due to insufficient exploration drilling. The seam has been severely eroded, and the overburden depth is shallow. Since overburden thickness contouring was not available, only FM LW slicing and room-and-pillar methods are projected. Whether FM sublevel caving mining techniques are suitable in this zone depends on future mining experience.

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The PDR recommended the following mining method guidelines.

Thickness
of Competent	Paleochannels
Strata	In Tertiary	Recommended Mining Method*
(m)
>140	Yes	Longwall with SLC
	No	Longwall with SLC
140 – 80	Yes	Longwall
	No	Longwall with SLC
60 – 80	Yes	Longwall
	No	Longwall
30 – 60	Yes	Room-and-Pillar (no secondary extraction)
	No	Room-and-Pillar (no secondary extraction)

* SLC = Sublevel Caving.

The PDR concluded that there should be no hydrologic issues in areas with more than 140 m of competent strata. Between 140 m and 80 m LW mining with SLC was not recommended where the paleochannels exist because the greater subsidence (associated with SLC) could result in severe water inflows. Longwall methods are not applicable in areas with less than 60 m of competent strata. Room-and-pillar mining methods are applicable in these areas, provided there is no secondary extraction of the coal pillars.

A subsequent study completed by Tiandi in September 2007 affirmed these criteria for mining in areas where the risk of water influx is high. Tiandi also reported that the risk of water flooding was lower than originally anticipated in the 2005 PDR. The water-bearing capacity of Quaternary strata and permeability of the Tertiary strata was lower than projected in the PDR. According to Tiandi, the restrictive mining method guidelines employed for mining under water-laden strata did not strictly apply to Duolun and higher resource recovery methods could be used.

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TECHNICAL REPORT

BOYD has reviewed these studies and is in general agreement with their findings in regards to mining method guidelines for mining seams underlying water-laden strata. The current mine plan for the thick No. 7 Seam will employ multiple LW slicing with sublevel caving mining methods. In order to address the greater subsidence created with this method, BOYD used the following criteria to define resource areas, assuming significant potential for water inundation:

Thickness

Thickness
of Competent	Paleochannels
Strata	In Tertiary	BOYD Recommended Mining Method*
(m)
>140	Yes	2 Slice Longwall with SLC
	No	2 Slice Longwall with SLC
140 – 80	Yes	2 Slice Longwall
	No	2 Slice Longwall with SLC
60 – 80	Yes	1 Slice Longwall
	No	1 Slice Longwall

* SLC = Sublevel Caving.

Where paleochannels were present in the 140 m to 80 m thickness interval, sublevel caving was not recommended. Also, where thickness was 60 m to 80 m only a single slice LW was recommended. For the thinner, lower seams the same criteria were applied to single slice LW mining.

We agree that if hydrological conditions are not as severe as originally projected, additional coal resources are recoverable. Alternately, other measures to prevent and/ or to control flooding include implementation of a formal program to monitor both hydrology and subsurface and surface subsidence and an appropriate surface pumping (de-watering) program based on the hydrology and subsidence data.

Application of these mining method criteria divides the deposit into north and south areas. The south area covers one-third of the basin, and is 2 km in length and 1/2 km in width. The original Duolun Mine is located in this area. The thickness of competent strata in this area ranges from 0 m to 60 m, and due to this lack of thickness and limited seam extent, this area was excluded from our evaluation. The north area is 4 km by 1 km and contains the reserves and resources estimated in this report. Thickness of competent strata overlying the mine plan area ranges from 60 m to 220 m. Total depth of cover ranges from 180 m to 330 m.

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APPENDIX I

3.3 Resource Evaluation Data

In order to prepare an evaluation of Xidacang coal resources, BOYD was provided with detailed data for the mining right area. Typical data provided included:

1. Exploration report.

2. Geologic data, including tables detailing available seam thickness and coal quality data.

3. Resource tonnage tables and maps for each seam.

4. Mine plan maps.

5. Other information.

The exploration report contained information for the following items:

1. Location and Geography.

2. Regional Geology, Mine Geology, Coal Seam Geology.

3. Coal Quality.

4. Hydrology.

5. Engineering Geology.

6. Environmental Geology.

7. Exploration Status.

8. Resource Assessment.

9. Resource Calculations

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The reports also contained supporting maps, cross sections, and figures. Resources are defined by exploration drilling. Typical drill hole data includes:

1. Drill Hole Logs.

2. Geophysical Logs

3. Coal Analyses.

There are a total of 96 drill holes that define coal occurrence in the Mining Right Area.

BOYD received resource tables and maps for each seam in the resource areas. The resource maps show hole locations, seam thickness and structure, geologic and hydrologic features, mining rights limits, buffer areas, local mine areas, current mining, and surface features. Resource polygons were shown with polygon identification number, area, seam thickness, density, and in-place tonnage data.

Polygon tables were also provided that corresponded to the maps. These tables showed the polygon identification, area, thickness, in-place tonnes, and holes used to determine seam thickness for the polygon. The table also shows the classification of the resources based on the Chinese classification system.

The mine plan for the No. 7 Seam from the PDR was reviewed by BOYD engineers and was revised based on BOYD’s mapping of the seam and mine layout preferences.

During our review of this data BOYD personnel contacted Duolun Golden Concord to clarify and verify our understanding of the data provided. Additional information, including maps and tables, was provided as needed. This interaction was an important source of information during our evaluation.

In-place resource tonnage estimates were prepared for each seam in each resource area according to standards established by the Chinese Government for this coal grade. Under these standards, all underground mineable seams greater than 0.8 m in thickness are included in the resource estimates. A polygon method was used to define individual area subdivisions used to calculate in-place resources in accordance with the PRC requirements for detailed accounting of all in-place coal tonnage to track exploitation of a strategic national asset.

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BOYD reviewed the in-place resource estimates and found that the estimates were reasonable based on PRC standards and the available source exploration data. However, these estimates did not separate resource areas by thickness of competent strata, or by drill hole spacing requirements to determine the degree of geologic reliability. Therefore, BOYD prepared independent estimates for all of the specified resource areas.

3.4 Resource Classification

In reporting resources for the valuation of mining properties, most international classification systems require two major factors to be considered, namely:

• Geologic assurance of existence, and

• Economic viability.

All systems require that the degree of geological assurance of the subject coal’s occurrence and definition be separated into various categories based on the spacing of points of observation (drill holes, mine measurements, and outcrop measurements).

Economic viability of resources is usually reported in economic and subeconomic categories.

The terms Resource and Reserve are commonly used in the reporting of coal tonnage, but the usage or definition supplied to these terms can vary between parties.

BOYD has prepared resource estimates for Duolun using the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Resources, also known as the JORC Code. The reserve and resource classification terminology of the JORC Code is found in the Glossary and Definitions section of this report.

In this report Measured, Indicated, and Inferred resources are defined as follows.

	Drill	Hole Spacing (m)
Seam	Measured	Indicated	Inferred
7	300	600	1,000
5, 4, 3, 2	150	300	500

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APPENDIX I

The No. 7 Seam is well defined and all resources are within the Measured and Indicated categories. Figure 3.1, following this text, shows the location of the drill holes in the mining right area. The drill hole spacing was reduced for the lower seams due to their erratic occurrence, including abrupt splitting and thinning. The lower seams are less well defined, as many holes were only targeted to thick No. 7 Seam and were not drilled deep enough to intersect these lower seams.

Projections of resources in any category beyond any point of observation do not exceed one-half of the defined spacing. We have assigned these spacing criteria based on our professional, independent evaluation of the geologic conditions. We believe the spacings used in this study are conservative, but appropriate, and provide the required level of geological assurance.

Estimates of Measured, Indicated, and Inferred Coal Resources and Proved and Probable Coal Reserves presented in this report are JORC compliant.

3.5 Resource Estimating Methodology

BOYD defined the resource areas using a minimum seam thickness (coal and parting) of 2 m and a minimum thickness of competent strata (60 m), as discussed in the Geology section of this chapter.

The No. 7 Seam resource area was defined according to the PDR mine plan within the area. The Duolun Mine (currently under construction) consists of a set of eastwest mains (rise) with LW faces developed to the north and south (see Figure 3.2, following this text).

The north face area is small, and the No. 7 Seam has only 60 to 80 m of competent strata. Portions of two planned panels were excluded from our estimates and limited to development only, as the areas were below 60 m of competent strata. The south panels were significantly extended, and one panel was added to the west in order to maximize seam recovery.

Resource areas were then mapped for the lower seams. All of the resource areas underlie the No. 7 Seam plan, and the panel layout was columnized with the No 7 plan. Several panels were added where the seams (4, 3, 2) extended to the east beyond the No. 7 mine plan.

All resource and reserve estimates presented in this report were limited to the mine plan areas, and do not include outlying areas.

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APPENDIX I

Coal resources for the No. 7 Seam were estimated by competent strata increment and identified occurrence of paleochannels using the recommended mining method criteria, as follows, assuming significant risk of water inundation from overlying strata.

Thickness
of Competent	Paleochannels
Strata	In Tertiary	Recommended Mining Method*
(m)
>140	Yes	2 Slice Longwall with SLC
	No	2 Slice Longwall with SLC
140 – 80	Yes	2 Slice Longwall
	No	2 Slice Longwall with SLC
60 – 80	Yes	1 Slice Longwall
	No	1 Slice Longwall

• SLC = Sublevel Caving.

The 2 slice mining method is only projected in the thick No. 7 Seam.

Reserve estimates are confined to the No. 7 Seam resources meeting the recommended mining method criteria, that is, the resources within the PDR mine plan as revised by BOYD. Additional coal resources that may be recoverable with added LW slices, and/or if the water control issue, are addressed, are recognized as additional resources.

BOYD prepared estimates of in-place, recoverable, and Marketable tonnes using the following criteria and factors:

1. Vertical seam recovery (i.e., mining height limits)

2. Mining recovery

3. Mining dilution

4. Mining moisture gain

5. Coal beneficiation

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APPENDIX I

The LW mining equipment to be used has a cutting height from 2 m to 3 m. Seam thickness as of less than 3.5 m are recovered with a 2 m to 3 m LW cut. When seams are greater than 3.5 m thick, a 2.5-m-thick slice is mined by the LW face, and the remaining coal up to 7.5 m thick is recovered by sublevel caving. In the thick No. 7 Seam, where sufficient competent strata are present, two slices with sublevel caving are planned that can recover up to 20 m of coal.

Mining recovery in the slices is estimated at 100%, and recovery for sublevel caving is 60%.

Mining dilution for seams less than 3 m thick is 0.2 m; 0.1 m is used for seams greater than 3 m thick.

Spray water is commonly used throughout the mining process to control dust liberated during mining and coal handling. BOYD applied a 3 percentage point increase in total raw coal output to account for moisture gain.

The coal is projected to be sold on a raw basis. To improve quality, the raw coal is screened and some of the rock partings and mining dilution is removed by hand. We have estimated that approximately 50% of the dilution rock material is removed in this process.

Estimates of in-place resources for all seams, or seam benches, are based on the LW face areas, even if benches could not be recovered due to competent strata limits. Resource estimates were calculated using the LW face area, seam thickness (coal and parting separately), and seam density factors by seam are as follows:

	Density Factor
Seam	(Specific Gravity)
7	1.29
5	1.32
4	1.34
3	1.35
2	1.35

Recoverable or ROM resource estimates include the mining restrictions due to thickness of competent strata, vertical seam and mining recoveries, and moisture gain.

Marketable estimates account for the loss of parting and OSD material during screening.

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APPENDIX I

3.6 Resource Estimates

3.6.1 Proved and Probable Reserves

BOYD has reviewed the mining feasibility studies for the No. 7 Seam provided by Duolun Golden Concord and has conducted an independent evaluation of the mining economics. The results of our evaluation demonstrate the No. 7 Seam is economically mineable and, therefore, can be classified as a reserve.

Our estimates of the Proved and Probable Reserves for the No. 7 Seam according to mining method guidelines are presented in Table 3.1 of this report and are summarized as follows:

Seam Thickness(m) Seam Bench Total (Coal/Parting) 7-2 10.10 (9.60/0.50) 7-1 6.25 (6.00/0.25) Total	Marketable Reserves (million Proved Probable Total 3.58 4.75 8.33 3.19 4.24 7.43 6.77 8.99 15.76	tonnes) % of Total 53 47
		100

Approximately 43% of the total reserves are classified as Proved. Of the total, approximately 89% of the reserves are in the larger south panels (Figure 3.2, following this text), with the remaining 11% in the north panels. The limited reserve tonnage in the north panels is the result of the reduced size (area) and lack of competent strata in the north. In the north panels, only a single LW slice can be recovered due to the lack of appropriately thick competent strata and the occurrence of paleochannels in the Tertiary strata. This slice is taken in the lower 7-1 bench as the upper bench is split with partings of up to 2 m. In the south panels, a 2 slice sublevel caving mining method can be used in a large part of the area. This also explains why the reserves are approximately equal between the thick upper bench (not recovered in the north) and thinner lower bench. There is a small area in the center of the coal basin that is below the authorized mining elevation of 935 m. We have assumed that the minimum authorized elevation will be adjusted to include this area and have included the tonnage in this area in our reserve estimates.

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APPENDIX I

3.6.2 Resources

BOYD has classified tonnage contained in the lower seams as resources because most of the areas are below the minimum authorized mining elevation of 935 m. The percentage of the resource area that lies within the authorized mining elevations ranges from approximately 35% in the No. 5 Seam to 5% in the No. 2 seam. The controlled areas are too small to support mining operations and, therefore, are classified as resources. Our estimates of the Measured, Indicated, and Inferred Resources for the lower seams are presented in Table 3.2, following this text, and are summarized as follows:

	Seam Thickness.	Marketable	Marketable	Marketable	Resources (Mt)	Resources (Mt)	Resources (Mt)
Seam	Total (Coal/Parting)	**Measured **	Indicated			Inferred	Total
Within Authorized	Mining Elevation
5	6.65 (5.70/.0.95)	–		0.61		–	0.61
4	4.40 (3.80/0.60)	–		0.20		–	0.20
3	3.90 (3.40/0.50)	–		–		0.19	0.19
2	2.90 (2.400/0.50)	–		0.07		0.04	0.11
Total		–		0.88		0.23	1.11
Below Authorized Mining Elevation
5	6.65 (5.70/.0.95)	–		0.76		0.31	1.07
4	4.40 (3.80/0.60)	–		0.55		0.44	0.99
3	3.90 (3.40/0.50)	–		0.81		2.11	2.92
2	2.90 (2.400/0.50)	–		0.16		1.28	1.44
Total		–		2.28		4.14	6.42
Total
5	6.65 (5.70/.0.95)	–		1.37		0.31	1.68
4	4.40 (3.80/0.60)	–		0.75		0.44	1.19
3	3.90 (3.40/0.50)	–		0.81		2.30	3.11
2	2.90 (2.400/0.50)	–		0.23		1.32	1.55
Total		–		3.16		4.37	7.53

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APPENDIX I

As shown, the seams are not well defined, especially in the No. 3 Seam, which contains 41% of the total resources and has 74% of its resources in the inferred class. The seam also contains a much higher weight percentage of parting material than the thicker No. 7 Seam, which results in higher ash content and lower calorific values.

As previously mentioned, we have classified tonnage contained in the lower seams as resources because most of the areas are below the minimum authorized mining elevation of 935 m. If Duolun Golden Concord were to acquire Mining Rights for the entire lower seam resource areas, it would be appropriate to reclassify the 3.16 Mt of Indicated Resources as Probable Reserves. Additional drilling would be required to potentially upgrade the Inferred Resource tonnage to reserve status. Commonly it is reasonable to expect that the majority of Inferred Resources would upgrade to Indicated Resources with continued exploration. However, due to the uncertainty of Inferred Resources, it should not be assumed that such upgrading will always occur. It should also be understood that in the JORC Code, there is no direct link between Inferred Resource and any category of Coal Reserves.

Additional coal resources in the No. 7 Seam are recoverable if the potential for inundation from water-saturated Quaternary strata is less than originally anticipated due to lower overall water content and permeability in the Tertiary strata layer. Alternatively, if it is found that Quaternary water content and/or Tertiary permeability present inundation issues, then surface water control methods through pumping can be employed. Assuming that either water from the Quaternary/Tertiary strata is not significant, or that the Quaternary water can be controlled with surface pumping methods, additional slices are projected in the PDR mine plan with BOYD revisions. Depending on thickness, up to three additional slices are projected between the two seam layers (No. 7-2 and No. 7-1 in descending order), generally two in the thick No. 7-2 layer and one in the thinner No. 7-1 layer. We have assumed that slicing methods will be employed in areas with less than 140 m of competent, overlying strata in order to control the subsidence process. Resource estimates for the additional coal resources are based on the criteria and factors established earlier.

Additional coal resources may be recoverable using room-and-pillar mining methods in areas of the seam where the overlying competent strata range from 30 to 60 m. In room-and-pillar areas, only first mining is conducted to minimize, or avoid, subsidence. We have excluded the remaining resources adjacent to the old Duolun Mine. By our estimates, there are 1.5 million tonnes of in-place resources. Recognizing that mining conditions were not favorable in the original Duolun Mine and the limited resource base, this area is not economically viable in our opinion.

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APPENDIX I

Parameters for developing room-and-pillar resource estimates are as follows:

Vertical Recovery Factor	:	Maximum height of 6 m
Areal Recovery	:	50%
Plan Recovery	:	80%

BOYD’s estimate of additional coal resources in the No. 7 Seam on a Marketable basis (subject to successful application of enhanced LW mining recovery methods and acceptable economics for room-and-pillar mining practices) are summarized from Table 3.3, as follows:

Marketable Resources (Mt)	Marketable Resources (Mt)	Marketable Resources (Mt)	Marketable Resources (Mt)
				% of
Seam Proved	Probable	Total	Resources
LW Slicing Techniques
7-2 2.61	1.74	4.35		58
7-1 1.88	1.21	3.09		42
Total 4.49	2.95	7.44		100
Room-and-Pillar Mining
7-2 1.07	1.40	2.47		47
7-1 1.26	1.52	2.78		53
Total 2.33	2.92	5.25		100
Total Potential Additional Resources
7-2 3.68	3.14	6.82		54
7-1 3.14	2.73	5.87		46
Total 6.82	5.87	12.69		100

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APPENDIX I

3.7 Coal Quality

Coal resources are classified as Subbituminous B by international standards and HM52 lignite by PRC standards and are to be utilized in the steam or thermal coal market.

BOYD has reviewed coal quality data provided by Duolun Golden Concord and has prepared estimates of product quality for the seams. Estimates of seam and coal quality for the No. 7 Seam are:

		Estimated	Quality (Air Dried	Basis)
Seam	Basis	Moisture	Ash Sulfur	Kcal/kg
		(%)	(%) (%)
7	Coal only	16	18 0.45	4,550
	Run-of-Mine	16 -18	19 0.45	4,450

According to Chinese standards only the coal and partings less than 0.05 m are sampled and analyzed. In order to prepare estimates of Marketable quality, BOYD used standard default quality values for partings and OSD.

Estimates of seam and coal quality for the lower seams are as follows:

		Estimated	Quality (Air Dried	Quality (Air Dried	Basis)
Seam	Basis	Moisture	Ash	Sulfur	Kcal/kg
		(%)	(%)	(%)
5	Coal only	16	19.5	0.50	4,300
	Run-of-Mine	16	25.0	0.50	3,900
4	Coal only	16	23.5	0.50	4,050
	Run-of-Mine	16	29.0	0.50	3,700
3	Coal only	16	24.0	0.60	3,950
	Run-of-Mine	16	29.5	0.60	3,600
2	Coal only	16	24.5	0.80	3,800
	Run-of-Mine	16	32.0	0.80	3,400

Due to the lack of quality data in the seam areas, these estimates should be regarded as an approximation of seam quality. The impact of the partings and mining dilution on these thinner seams is reflected in the high ash content in the ROM or Marketable coal.

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APPENDIX I

3.8 Mining Rights

Coal in China is owned by the central government, as established in the PRC Mineral Resources Law. The law and related Administrative Measures on the Mineral Resources Production Registration, which governs certain aspects of mineral and coal resources control for exploitation (including the granting of new and the renewal of existing mining right permits), are administered by the Ministry of Land and Resources (MLR). Exploration right permits, mining right permits, and land use rights are granted by the MLR or the relevant local mineral resource bureau before exploration or mining operations can be undertaken in defined mining right areas. Mining right permits are granted for specified periods of time, after which the rights may be extended upon application.

The mining rights for Duolun Mine are controlled by Duolun Golden Concord. Mining Right resource fees total RMB32.85 million and have been submitted to the Bureau of Land and Resources, Inner Mongolia. Mining right permit summary and status for Duolun Mine is as follows:

					Mining	Right
					(year/month)
Mining		Mining		Authorized	Permit
Right Area	Certificate No.	Method	Area	**Mining Elevation **	Grant Date	Expiration
			(km2)	(m)
Xidacang	1500000620637	UG	7.76	1,180 – 935	2006/10	2011/10

As shown, the authorized mining elevation is from 1,180 to 935. This range of elevation covers most of the No.7 Seam resource area, except for a small part in the center of the basin where the elevation is slightly below 935 m. We have assumed that the minimum authorized elevation will be adjusted to include this small area, and we have included tonnage in this area in our reserve estimates. Only from 5% to 40% of the lower seam resource areas lies within the elevation range. These controlled areas are too small to support mining operations, and therefore, we have classified all tonnage in these seams as resources.

BOYD has reviewed the documentation for Duolun Golden Concord’s mining rights. By PRC law, the maximum holding period (term) for a mining right permit is 30 years. The MLR has the legal authority to renew an existing mining right area that is expiring. It is typical practice in other major coal-producing nations for governments to extend the term of the mining rights for the economic life of the reserves. Therefore, we have assumed that the mining rights will be renewable for the life of the resources. (BOYD is not qualified to offer any legal opinions, and our comments are intended to be technical in nature.)

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APPENDIX I

Generally, the surface lands within the Xidacang Mining Right Area belong to the PRC government. For mining right areas where underground mining methods are applied, land use rights are not needed.

PRC laws and regulations governing the mining of coal resources require coal mine operators to attain high resource recovery rates. For operators to fully comply, they could be forced to mine coals that are uneconomic. Failure to achieve applicable recovery rates in a timely manner, as set by the responsible central government ministry, can expose a coal producer to penalties, such as revocation of the coal mine’s production permit. A responsible person, typically the highest ranking geologist/engineer, prepares an annual report to the MLR detailing changes in estimated resources over the year. Based on our discussions with Duolun Golden Concord officials, the coal production units take resource recovery seriously and employ measures to comply with mandated recovery rates, including secondary recovery mining activity in some instances. Duolun Golden Concord’s mine plans demonstrate a concern for maximizing resource recovery.

Following this page are:

Tables:

• 3.1: Coal Reserve Estimate, Duolun Mine

• 3.2: Coal Resource Estimate, Duolun Mine

• 3.3: Additional Resources Potentially Recoverable by Longwall Slicing and Roomand-Pillar Mining

Figures:

• 3.1: Map Showing Drill Hole Locations

• 3.2: Map Showing Proposed Mine Plan, 2005 PDR with BOYD Revisions

• 3.3: Map Showing Proposed Mine Plan, Tiandi 2007 Report

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APPENDIX I

TABLE 3.1

COAL RESERVE ESTIMATE DUOLUN MINE

XIDACANG MINING RIGHT AREA

Inner Mongolia Autonomous Region People’s Republic of China Prepared For GCL-POLY ENERGY HOLDINGS LIMITED By John T. Boyd Company Mining and Geological Consultants September 2008

Seam 7-2 7-1 Total	In-Place Resource Measured Indicated 19.67 24.61 13.30 11.90 32.97 36.51	(Mt) Total 44.28 25.20 69.48	Amount as at 30 June 2008 Recoverable Reserves (Mt) Processing Proved Probable Total Yield % 3.73 5.01 8.74 95 3.33 4.59 7.92 94 7.06 9.60 16.66 95	Marketable Reserves (Mt) Proved Probable Total 3.58 4.75 8.33 3.19 4.24 7.43 6.77 8.99 15.76	% of Resources 53 47
					100

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APPENDIX I

TABLE 3.2

COAL RESOURCE ESTIMATE

DUOLUN MINE

XIDACANG MINING RIGHT AREA

Inner Mongolia Autonomous Region People’s Republic of China

Prepared For GCL-POLY ENERGY HOLDINGS LIMITED

By

John T. Boyd Company Mining and Geological Consultants September 2008

Seam Within Authorize 5 4 3 2 Total Below Authorized 5 4 3 2 Total Total 5 4 3 2 Total	In Measured d Mining E – – – – – Mining El – – – – – – – – – –	-Place Res Indicated levation 2.49 3.28 1.04 0.94 7.75 evation 1.09 0.99 1.68 0.56 4.32 3.58 4.27 2.72 1.50 12.07	ource (Mt) Inferred 1.54 2.98 0.62 0.07 5.21 1.49 0.76 3.17 2.65 8.07 3.03 3.74 3.79 2.72 13.28	Total 4.03 6.26 1.66 1.01 12.96 2.58 1.75 4.85 3.21 12.39 6.61 8.01 6.51 4.22 25.35	Reco Measured – – – – – – – – – – – – – – –	Amount verable Re Indicated 0.70 0.24 – 0.08 1.02 0.84 0.62 0.91 0.20 2.57 1.54 0.86 0.91 0.28 3.59	as at 30 June 2008 sources (Mt) Processing Inferred Total Yield % – 0.70 87 – 0.24 83 0.22 0.22 86 0.04 0.12 92 0.26 1.28 87 0.35 1.19 90 0.50 1.12 88 2.39 3.30 88 1.49 1.69 85 4.73 7.30 88 0.35 1.89 89 0.50 1.36 88 2.61 3.52 88 1.53 1.81 86 4.99 8.58 88	Mar Measured – – – – – – – – – – – – – – –	ketable Re Indicated 0.61 0.20 – 0.07 0.88 0.76 0.55 0.81 0.16 2.28 1.37 0.75 0.81 0.23 3.16	sources (Mt) Inferred Total – 0.61 – 0.20 0.19 0.19 0.04 0.11 0.23 1.11 0.31 1.07 0.44 0.99 2.11 2.92 1.28 1.44 4.14 6.42 0.31 1.68 0.44 1.19 2.30 3.11 1.32 1.55 4.37 7.53	sources (Mt) Inferred Total – 0.61 – 0.20 0.19 0.19 0.04 0.11 0.23 1.11 0.31 1.07 0.44 0.99 2.11 2.92 1.28 1.44 4.14 6.42 0.31 1.68 0.44 1.19 2.30 3.11 1.32 1.55 4.37 7.53
											1.11
											1.07 0.99 2.92 1.44
											6.42
											1.68 1.19 3.11 1.55
											7.53

Note: These resources cannot be recovered until mining rights below the authorized mining elevation (935 m) are acquired.

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APPENDIX I

TABLE 3.3

ADDITIONAL RESOURCES

POTENTIALLY RECOVERABLE BY LONGWALL SLICING AND ROOM-AND-PILLAR MINING DUOLUN MINE XIDACANG MINING RIGHT AREA Inner Mongolia Autonomous Region People’s Republic of China Prepared For GCL-POLY ENERGY HOLDINGS LIMITED By John T. Boyd Company Mining and Geological Consultants September 2008 Amount as at 30 June 2008 In-Place Resource (Mt) Recoverable Resources (Mt) Processing Marketable Resources (Mt) Seam Measured Indicated Total Measured Indicated Total Yield % Measured Indicated Total LW Slicing Techniques 7-2 See Table 3.1 2.75 1.84 4.59 95 2.61 1.74 4.35 7-1 1.98 1.27 3.25 95 1.88 1.21 3.09 Total 4.73 3.11 7.84 95 4.49 2.95 7.44 Room-and-Pillar Mining 7-2 See Table 3.1 1.13 1.47 2.60 95 1.07 1.40 2.47 7-1 1.33 1.60 2.93 95 1.26 1.52 2.78 Total 2.46 3.07 5.53 95 2.33 2.92 5.25 Total Potential Additional Resources 7-2 See Table 3.1 3.88 3.31 7.19 95 3.68 3.14 6.82 7-1 3.31 2.87 6.18 95 3.14 2.73 5.87 Total 7.19 6.18 13.37 95 6.82 5.87 12.69	% of Resources 58 42
	100
	47 53
	100
	54 46
	100

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APPENDIX I

==> picture [392 x 614] intentionally omitted <==

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APPENDIX I

==> picture [391 x 626] intentionally omitted <==

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APPENDIX I

==> picture [392 x 626] intentionally omitted <==

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APPENDIX I

4.0 MINE OPERATION

4.1 Introduction

Duolun Mine, located 4 km north of the county seat of Duolun, Xilinguole League, Inner Mongolia, is currently under construction. Mining is planned in the No. 7 Seam and is scheduled to begin LW operation with one FM LW face, one roadheader face, and one continuous miner face in 2009. The mine design capacity is 1.2 Mtpa. Although ventilation shaft sinking began in November 2004, mine reconstruction was officially initiated in April 2006. Duolun Mine operates in the Xidacang mining right area, which encompasses 7.7325 km[2] , measuring 6 km from north to south and 1.3 km from west to east. BOYD visited the mine site on 14 June 2007 and 21 March and 14 July 2008.

The current Duolun Mine is located adjacent to the now closed original Duolun Mine. The original Duolun Mine began initial operation in 1980 and mined the No. 7 Seam at 0.06-Mtpa capacity with 130 personnel. Approximately 1.1 Mt of coal was extracted by the original Duolun Mine, nearly depleting the coal resources south of the F5-2 fault. Since the existing Duolun Mine inclines have limited cross sectional area and are located some distance from the selected pit bottom site, the new Duolun Mine will not reuse existing mine openings and workings. For governmental reporting purposes, mine construction is referenced under the Duolun mining right certificate. The existing Duolun mining right certificate authorizes an annual output of 900,000 tonnes. According to Duolun Golden Concord, the legal application for approval to use 0.137 km[2] of land for siting the mine surface main complex has been completed. Approval for an additional 0.085 km[2] of land usage is under application.

There are no other major mines within 350 km of Duolun. The mine is about 145 km away from the Sanggendalai Station on the Ji-Tong Railway and 45 km away from the Lanqi Station of Sang-Lan Railway currently under construction. The regional and local road system is modern and well developed. Highways from Duolun to other cities include: 138 km to Weichang County of Hebei Province, 45 km to Zhenglanqi, 75 km to Habiriga, 290 km to Zhangjiakou, and 290 km to Xilinhaote. Since the railways are remote from the mine site, highway access will provide coal transportation from Duolun. The asphalt-paved class II highway from Duolun to Zhenglanqi appears appropriate for operating 30-tonne trucks.

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APPENDIX I

4.2 Background and Geologic Setting

Xidacang (Duolun) mining right area is situated in Inner Mongolia in the southern part of the central plateau in the Duolun fault-depression basin. On the western and northern boundaries of the area, surface topographic features consist of hilly terrain with tectonic erosions. The gentle hill relief is featureless, with ridges extending northeast to southwest and accented by well developed gullies. Ravine depressions distributed among the hills form ground water supply stream areas. In the southern and eastern boundary areas, erosionaccumulated river valley plains are predominate. The general landform trend of the mine area is high in the west and low in the east; surface elevations range between 1,220 m and 1,500 m, with a relative relief of 30 m to 280 m. The most significant surface drainage, the Luan River, flows northwest to southeast through the area. A few small lakes and reservoirs are found in the area.

Duolun’s lower ranked coal seams are prone to spontaneous combustion. According to flame tests, coal dust generated from mining operations is rated as having explosive potential. Methane content is low according to available testing data, and methane emissions are not anticipated to present operational issues. Ground temperature gradient, reported to be 2.5°C/100 m based on drill-hole testing and the experience of mining operations in nearby underground mines, is normal and poses no issues for mining activities at the operating depth. Water generation is expected to be moderate, provided that the guidelines for employing mining methods according to interburden thickness (competent rock strata between the top of the seam and the unconsolidated surface materials) are effective. Hydrological conditions require further analysis.

Mine planning is focused on the No. 7 Seam. Elevation of the No. 7 Seam within the mining right area ranges from 935 m to 1,180 m, with the shallowest cover depth at 88 m and highest cover depth of 350 m. Gradient of the coal seam ranges from 0 to 18 degrees, with an average gradient of 12 degrees. Although relatively simple in structural terms (limited faulting is indicated), the No. 7 Seam is a complicated deposit, with geologic conditions varying throughout the mining right area, requiring different mining methods, as discussed in the Geology and Resources chapter of this report.

Roof composition for the No. 7 Seam consists of carboniferous shale and siltstone strata. The No. 7 Seam floor contains mainly siltstone, carboniferous shale, and shale strata, with coarse sandstone and conglomerate sandstone identified in some areas. Cementation of roof and floor rocks of No. 7 Seam is low, and the strata have low compressive strength.

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APPENDIX I

The Xidacang Mine Preliminary Design Report (December 2005) was the primary source of technical data for this study. According to mine managers, the report remains the general basis for proposed mine design and operations. The general mine plan consists of three shaft openings penetrating the No. 7 Seam, with a one level design and three defined mining districts. Mine operations are projected at the 935-m level, with three main roadways for service railway, belt conveyor system, and return ventilation. The main roadways are fully developed in the No. 7 Seam or partially in the seam to facilitate development operations. The initial three main roadways connecting the service and production shaft bottom area with the return shaft bottom are to be developed using roadheader and continuous miner equipment operating in the coal seam and drill and blast technology when roadways are driven (developed) in rock. In the September 2007 Tiandi Report, the mine plan for Duolun was modified for the No. 2 District LW face layout, although the plans for the initial mining district are essentially unchanged from the 2005 PDR also prepared by Tiandi.

4.3 Construction Status

Construction of the return air ventilation shaft was initiated in November 2004, but halted in April 2005, when the shaft reached 75-m depth. Construction of the main and service shafts began on 15 November 2005 using ground-freezing methods. Construction of the return airshaft, with a second contractor, resumed in May 2006 using ground-freezing methods.

According to the January 2006 plan, the total construction period would extend 24 months and the mine would go into operation on 12 March 2008. The plan was revised on 7 February 2007 for shaft construction and critical path engineering work, with a 15 July 2008 deadline for initial operation. The latest construction plan, revised in June 2008, shows the initial mine operation in mid-March 2009, mainly due to slow development rates and repeated repair of the main roadways near the high-pressure strata area.

Significant construction work completed by the end of June 2008 includes the following:

• The main (production) shaft had been sunk to the design depth of 335 m. Installation of a permanent hoisting system, including the framework for winch rope, was underway and anticipated to be completed by the end of August 2008.

• The service shaft had reached the 365-m design depth, and bottom and main sump excavations were completed. Underground connections linking the main, service, and ventilation shaft bottoms were completed. A permanent hoisting system for the service shaft was installed.

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• The ventilation shaft had reached design depth, and the shaft bottom excavation and support work was finished.

• Pit bottom construction for shafts, skip loading room, pipeline entry, central transformer station and central pumping room, inside water sump, and No. 1703 LW face upper connection were finished.

• Outside water sump had 13 m of excavation remaining and was under development from both ends.

• Main roadway construction:

Roadway	Design Length	Completed
	(m)	(m)
Service (railway)	680	235
Air Return	700	240
Belt Conveyor	600	300

• Tailgate of the initial LW face (1703) had advanced 200 m; the headgate had advanced 150 m finished.

• Completed surface facilities include: dining room, surface 35 kV transformer station and 10 kV distribution room, boiler and chimney, winch rooms for main and service shafts, mine-site buildings for service shaft, maintenance workshop, warehouse for FM LW equipment, and materials warehouse.

• The following installations have been completed: surface conveyor covers, steel belt conveyor framework, concrete cable trench and brackets, 15% of the heat supply pipelines, 35-kV power line, pumps for potable water well, main ventilation fans, winch electric equipment at main shaft, approximately 1,200 m of fence wall, and water drainage pipeline to the nearest river.

Purchased equipment includes: underground central transformer station, mobile underground transformer station, main fan system, hoisting system for main and service shafts, belt conveyors for No.1703 headgate and main roadway, belt conveyor for surface transportation system, main drainage pumping equipment, boiler room equipment, hoist system, roadheaders, FM LW equipment, and truck scale.

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Purchasing contracts to be signed in July 2008 include: additional surface belt conveyors, air compressor, maintenance equipments, end-less rope, battery locomotive, mine water processing equipment, and monitoring equipment.

Equipment to be purchased in the latter half of 2008 includes: backup DC motors for winch, skips, 10 kV switchboard, coal feeding system, motors for boiler room, motors for surface production facilities, equipment for maintenance workshop, pumps and motors for underground central pumping room, motors for belt in main roadway, motors for FM LW face, motors for belts in gates under development, motor for K4 coal feeder, LED screen, and platform balance.

The construction status at Duolun indicates the project’s construction progress approximates the latest schedule for critical path activity. Other activities are further behind in some instances, and there is limited time available to avoid scheduling issues. However, there do not appear to be fatal flaws that would prevent the project from achieving final construction milestones, considering the advanced stage of underground construction. Expected weak coal seam conditions and other issues may slow development of the main roadways and delay start-up of mining operations presently anticipated in mid-March 2009.

Based on our visit and analysis, the test-run operation could be delayed to June 2009 due to the following factors:

• Permanent hoisting system installation at the Main Production Shaft will extend two months to the end of September, leaving only the Service Shaft available for mine hoisting needs. Limited hoisting capacity from mine opening and complex underground transportation conditions constrains development.

• Management of the underground construction effort needs to be improved in areas such as organization, safety control, etc.

• Pit bottom and roadways located in mudstone strata near the F4 fault in the bottom of the syncline have experienced over 460 m of workings requiring repair work, which has delayed the construction timetable. Anticipated weak coal seam conditions may continue to slow development of the main roadways and delay startup of mining operations later also.

• Underground wagons, 1-tonne-capacity railcars, are inadequate for efficient material transportation.

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BOYD visited the pit bottom construction areas and development in the three rises, gate roads, and water sumps during the site visit. Except for several sections of roadways with floor heaves and damages due to high ground pressure, the quality of finished construction was judged to be good.

4.4 Mine Services

4.4.1 Mine Openings

Duolun has three vertical shafts for access to the mine:

Shaft				Vent.
Opening	Description	Depth	Diam.	Type	Use
		(m)	(m)
1	Production	335	5.0	Intake	Coal hoisting by a single 8-tonne
					skip.
2	Service	361	5.5	Intake	Hoisting material, equipment, and
					workers.
3	Ventilation	335	3.6	Return	Air return.

All shafts are located at the mine’s main complex. The main and service shafts are constructed of 0.4-m-thick reinforced concrete, while the ventilation shaft has a 0.3-m-thick concrete lining.

Water infiltration through the concrete lining in the main and ventilation shafts has been controlled by cement grouting, and the water inflow rate is significantly reduced. Cement grouting is not necessary in the service shaft due to lower water inflow.

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4.4.2 Underground Coal Haulage

Underground coal haulage consists of a gate belt conveyor system transporting the mined raw coal to the main production shaft. The main production shaft is to be outfitted with a single 8-tonne capacity skip hoisting system.

The planned 777-kW single-rope drum winder-type coal hoisting system has a design hoisting capacity of 1.5 Mtpa (5,230 tonnes/day) based on the following characteristics:

Parameter	Value
Hoisting Depth_(m)_	335
Hoist Speed_(m/min.)_	650
Cycle Time_(sec)_	77
Trips/Hour	47
Hoisting Hours/Day	14
Operating Days Annually	300

Proposed hoisting parameters are comparable to those in other skip hoist systems employed elsewhere in the Chinese coal industry. Expected skip hoist performance is attainable and exceeds the nominal daily output requirements of 4,000 tonnes. Assuming a higher operating rate of 16 hours per day of hoisting, the estimated daily capacity is increased to 5,970 tonnes (49% potential surge factor over nominal daily operating rate of 4,000 tonnes).

Raw coal generated from the LW face in the initial mining district is conveyed to a gate belt conveyor, which in turn carries the raw coal on to the belt conveyor system in the district rise, and then to the underground bunker near production shaft bottom. For mining operations in other districts, a belt conveyor in the main transportation roadway links the coal conveyance system to the district rise and underground bunker. For the initial mining district, the belt conveyor has a 1.0-m width, a 2.5-m/sec operating speed, and nominal capacity of 1,200 tph. Gate belt conveyors have similar characteristics.

A 960-tonne-capacity underground bunker receives and stores the coal from development and LW face mining operations. Waste material from LW gate and roadway development is handled separately and loaded into 1.0-tonne railcars for service hoisting.

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4.4.3 Underground Material and Personnel Transport

Infrastructure arrangements for material handling follow standard PRC practice. The planned underground material transportation system consists primarily of narrow gauge (600 mm, 22 kg) rail. Electric-powered winches are used to move supplies, materials, and equipment into the service gate openings utilizing 1.0-tonne-capacity railcars, larger 3-tonne material cars, and 16-tonne-capacity rail trucks for moving hydraulic LW supports and other large LW equipment pieces. The 5.5-m-diameter service shaft is to be equipped with a single-deck cage capable of handling two mine cars at a time. Materials and personnel are transported from the surface to the underground working level via a multi-rope 777-kw friction-type winch hoist. Mine workers ride the service hoist to and from the underground workings. Initially the workforce walk to their work areas; in time, rail mounted man cars may be provided.

4.4.4 Coalbed Methane and Ventilation

Duolun’s projected methane emissions are classified as low. This is supported by the low gas emission rate in the original Duolun Mine. However, the original Duolun Mine operated in the shallower part of the deposit. Methane content may increase as the mining depth increases. Close monitoring of gas emissions is recommended to prevent possible methane build-ups in active mine areas. It is not anticipated that methane generation will be a significant constraint on mine development and LW face operations.

The planned exhausting type ventilation system uses the service shaft for fresh air intake and the ventilation shaft for the return air exhaust. The production shaft is a neutral opening, with little air flow. The return shaft is equipped with a DBK618-8No. 24 fan (6 kV, 2 x 160 kW), with an identical back-up system. Current air-return volume is 2,179 m[3] /minute, and the maximum capacity of the fans installed is 7,769 m[3] /minute.

Ventilation planning for Duolun follows typical design practices. FM LW face quantities are projected at 900 m[3] /minute; development face quantities are 420 m[3] / minute. Auxiliary fans are used for supplementing local ventilation requirements.

Typical of lower rank coals, Duolun’s coal is rated as having significant potential for spontaneous combustion. Proper sealing of gob areas and ventilation designs may reduce the oxidation process and prevent spontaneous combustion. Alternately, measures (such as nitrogen injection) for rendering sealed areas inert may be required.

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Based on flame-length tests, the coal dust is classified as having explosive potential. Standard measures to control dust include:

• Water injection into the coal seam before mining.

• Reducing float dust as much as possible by using water sprays in the development and LW face areas (equipment-mounted typically), along belt conveyor installations, and at underground transfer points (bunkers, chutes, etc.).

• Limiting ventilation air velocities to minimize “fugitive” dust pick-up.

• Removal of coal debris along belt conveyor lines and in the development faces with washing of roadways, as required.

• Wet drilling techniques for development and LW coal face blasting.

• Periodic cleaning and re-whitening of roadways, as needed.

• Installation of self-dumping, hanging water bags in gates and other roadways.

Although not typically used in Chinese mines, BOYD recommends applying limestone dust in LW gates as a precautionary, and safety, measure to minimize propagation of potential face ignitions.

4.4.5 Water Management

Typical water generation at the Duolun operation is projected to be 325 m[3] /hr (maximum 485 m[3] /hr). However, fracturing of the sandstone and sand layers in the overlying Tertiary strata may result in higher rates of water generation. The water sump, pump room, and pipelines are designed to accommodate higher water pumping requirements than projected in recognition of potentially higher water generation rates. The planned underground pumping facility has three MD450-60*7G pump sets (each rated at 430 m[3] /hr), which provide adequate redundancy for the anticipated water generation. Space for an additional set of pump is available in the pump room for possible water pumping capacity expansion.

The potential for high water generation rates remains a significant concern, and additional analysis of the Tertiary sandstone and sand layers and related hydrology is recommended. Surface dewatering of the water above the LW districts’ advance of mining operations should be evaluated.

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Typical water generation of 13 m[3] /hour increased to approximately 17 to 20 m[3] /hour when the F4 fault was approached. The water inflow rate is fairly low at this construction stage.

4.4.6 Electrical Power

Electrical power to the area is provided by the western Inner Mongolia power grid. Due to its location near the Duolun transformer station and its proximity to nearby generation, the mine has excellent options for its power requirements. Temporary incoming power at 110 kV is provided from the Duolun transformer station (40-MVA capacity), which is located 5 km away from the mine. Two power supply circuits are planned for the mine operation, one from the 110-kV Duolun transformer station and the other from the 220-kV Duolun transformer station. Both stations are in the same section of the western Inner Mongolia power grid and should not be considered separate sources. Since there are no other power sources available in this area, we recommend Duolun install its own standby diesel power generating system to back up its external power supply. Two separate lines at 35 kV are installed between the station and the mine. Power is distributed at 10 kV to the underground distribution system. Utilization voltage is reduced to 1,140 V for the FM LW faces and 660 V for the development faces.

4.4.7 Mine Surface Facilities

Modern mine surface facilities provide accommodations for all aspects of the mining operation, including: administration and mine manager offices, materials and parts storage, machinery shops, electrical and maintenance areas, shower rooms, locker rooms, bathhouse areas, conference rooms, engineering facilities, mine monitoring and communications station, etc.

The mine is to be equipped with a KJ95 model system for safety monitoring of underground operations, ventilation controls, mine environment, etc. Video terminals monitor operational status of specific sensor locations.

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4.5 Mining Operations

4.5.1 Work Schedule

The LW and development faces are scheduled to effectively operate 300 days per year on a seven-day-per-week basis. This schedule is reasonable based on our experience with similar Chinese coal mines. Major festival periods and national holidays normally account for 15 idle operating days annually. Mine and equipment examinations and repair periods account for remaining non-operating days. Labor staffing levels are low during the major festival periods, and the mine is idled for maintenance activities during these periods. Once in operation, the LW face(s) are expected to work on a continuous basis over three 8-hour shifts per day, including three 2-hour periods for equipment maintenance and face preparation. Continuous operation and the availability of the coal bunker maximize utilization of the skip hoist system. Development sections are scheduled to work three 8-hour shifts per day. The average worker typically works 245 days per year.

4.5.2 Mining Conditions

The recognized primary hazards for Duolun mining operations are as follows:

• Loose, unconsolidated Tertiary strata overlying the mine workings that could result in increased vertical loading (pressures) and create the potential for sand or soil inrushes into the underground workings.

• Surface and subsurface water systems that could drain into the underground workings following natural fractures in the strata and/or through voids and fractures caused by undermining.

• Unfavorable mudstone geology and high ground pressure in the pit bottom area have caused construction delays and increased capital costs for repair of deformed roadways. Over 500 m of roadways have been repaired, some for the third time. Additional repair work is expected in the future.

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Characteristics and behaviors of failed and fractured strata and associated hydrological impacts in the Duolun geologic setting are not well known. The following guidelines from the PDR were developed using standard design criteria:

• If overburden thickness is less than 30 m, no mining is projected, as fracture zones may link directly to surface water systems, causing serious flooding incidents.

• If the overburden thickness is more than 30 m, but less than 60 m, roomand-pillar methods are applied with mining height limited to 3 m or less.

• If the overburden thickness is less than 140 m, but larger than 60 m, mining methods and mining heights are determined based on general, and future, mining experience.

• An interburden thickness of 140 m or more is adequate for sublevel caving methods.

The subsequent Tiandi 2007 Report affirmed these criteria, while maintaining that the water-bearing capacity of the Quaternary strata and the permeability of the Tertiary strata was lower than projected in the PDR, stating that the risks of inundation were less than previous estimations.

The parameters developed in the PDR, and subsequently affirmed by Tiandi, are reasonable in our opinion, and similar criteria were used in developing BOYD’s reserve estimates. Future mining experience will determine if modification to these mining criteria are needed

Other measures to prevent and/or to control flooding include implementation of a formal program to monitor both hydrology, subsurface and surface subsidence, and an appropriate surface pumping (de-watering) program. As indicated in the Geology and Resources section, additional coal resources may be recovered pending results of these proposed programs.

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4.5.3 Mining Methods

Three mining methods are planned for Duolun, namely, FM LW with sublevel caving by slice, FM LW by slice, and room-and-pillar mining (added in the BOYD revised mine plan). The FM LW with sublevel caving method has been proven to have obvious advantages over other methods, including: better adaptation to varying thickness leading to higher resource recovery, potentially high output, simpler management requirements, lower development/mining ratios, fewer face moves, potentially lower operating cost, and higher proportion of lump coal product, etc. In China the maximum annual output from sublevel caving FM faces has been achieved by Yanzhou Coal Mining Company in Shandong Province, where a single face performance has ranged from 4.0 Mt to 6.0 Mt. Generally, sublevel caving is highly successful where the ratio of the sublevel caving height and the shearer cutting height is 3:1 or less and other conditions for sublevel caving application are favorable. Coal recovery from sublevel caving declines where the ratio is higher.

The initial (No. 1) mining district has simple, relatively constant, geologic conditions extending over a large area, which favor the FM LW sublevel caving approach. The proposed shield support for FM LW sublevel caving also accommodates the FM LW slicing method, which is projected to be used along the mine boundary or in zones where sublevel caving is not practical or the interburden thickness does not meet design guidelines.

Room-and-pillar mining is planned in areas where LW methods cannot be used. First mining only would be undertaken with no secondary recovery of pillars or barriers.

4.5.4 Mine and LW Development

The initial (No. 1) mining district is located at the east side of the pit bottom development and is projected for 600 m on an east-west orientation. This district, which appears to have the most consistent seam thickness conditions and thickest interburden in the mining right area, is the optimum area for initiating Xidacang mining operations. The initial mine plan development, with modifications by BOYD (to the PDR layout) where warranted, is shown in Figure 3.2. The September 2007 Tiandi Report, while maintaining the No. 1 District LW face layout essentially as projected in the PDR, adds the No. 2 District LW faces and projected room-and-pillar mining areas.

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In both the BOYD and Tiandi plans, the main roadways in the District No. 1 support a two-wing LW face layout with opposing LW faces. The advantage of the two-wing layout is that less development work is required to get the mine into full production and that coal belt haulage distances are shorter. Three parallel rise openings provide belt conveyor, service road and intake air, and return airway. The belt conveyor (center) rise is developed in the center of the No. 7 Seam mine plan area. The No. 7 Seam consists of two distinct benches, or layers, the No. 7-1 at the bottom of the seam, overlain by the No. 7-2. The service track rise is developed along the floor of the No. 7-1 layer; the air return rise is developed along the roof of the No. 7-2 layer. Each wing has four faces projected in the top No. 7-2 layer and four faces projected in the No. 7-1 layer and located directly under the No. 7-2 faces. In all, 16 LW faces are projected in the No. 1 District, with all but one using sublevel caving slicing methods. The LW faces are perpendicular to the rises of the initial district. LW face retreat is oriented along the strike and advances either from north to south or south to north. Faces are developed with single gate designs, with 20 m maintained between adjacent gate roads. Depending on final mine design, the 20-m pillar between faces may be reduced. Additional slices may be projected based on seam thickness and adequate resolution of potential water control issues.

The 2007 Tiandi plan projects a second (No. 2) district south of the No. 1 District. The principal difference between the 2007 Tiandi plan and the PDR plan with BOYD revisions is the recovery of the coal reserves in the southern portion of the reserve. The PDR plan with BOYD revisions is more efficient because it eliminates significant mains development. However, longer face strike lengths and associated service life requirements of the development gates may dictate shorter strike lengths, and the addition of a second mining district.

The initial LW face, No.1703, located in the south wing, has a strike length of 1,300 m and a face length of 120 m. The remaining faces (all 120 m length) have strike lengths ranging from 550 m to 1,300 m. The No. 1703 face is situated in a high stability/low risk zone that is an area with 140 m or more of competent overlying strata. Consequently, the LW face sequence is beginning in an area with the best anticipated conditions from a stability perspective. This will permit the mine management and technical staff to better assess overall reserve mining conditions.

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When Zhengmei Group took over the management from Tianneng in April 2008, mine management revised Tiandi’s design to a layout approximating BOYD’s layout, as shown in Figure 3.2 The latest Duolun Mine layout map shows that the mine is divided into three mining districts. District No. 1 is the same as BOYD’s layout. District No. 2 is in the south part of the mine field, while District No. 3 is located at the western part, where the coal seams have steeper gradients. Four FM LW faces at the west wing and another four FM LW faces at the east wing are planned for District No. 1. Except for one area with thicker coal planned to be mined in four slices and a second area to be mined in two slices without sublevel caving, the remaining areas are generally mined in two slices using FM LW sublevel caving method. In total, 18 FM LW faces (six slicing faces without sublevel caving) are planned in District No. 1.

Two roadheader faces are projected for LW development, although additional development faces could be deployed if required. Gate roads are developed in the seam horizon for the LW faces. Each slice has its own development gates. Roof support planned for the FM gate roads consists of steel roof bolts and wire mesh, plus steel straps and cable bolts as required. Nominal opening dimensions are 3.2 m high and 4.5 m wide.

Projected development rates by development type are as follows:

• Gate development in the coal seam with roadheader – 500 m/month.

• District rise development in coal seam with conventional methods – 200 m/month.

• Roadway development in rock with conventional methods – 100 m/month.

Historical gate development experience is insufficient to evaluate whether the projected gate development rates are reasonably achievable. Anticipated soft coal seam conditions are likely to constrain development rates.

The roadheader faces can be modified into continuous miner type configuration for room-and-pillar mining operations in designated areas of the Duolun reserve.

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4.5.5 LW Operations

The mine transfers from construction to production status when the No. 1703 face begins operation. Equipment for the No. 1703 FM face is domestically manufactured with electro-hydraulic shield supports with sublevel caving capabilities. The proposed operation height of the shield supports ranges from 1.7 to 3.3 m. The front and rear chain conveyors (AFC) rate at 800 tph and are each driven by 2x200 kW motors; the transfer conveyor (stageloader) is rated at 800-tph capacity with a 132-kWrated motor. A 630-mm shearer cut depth and average cutting height of 2.6 m are projected. According to the shearer purchase contract, the 1.8-m shearer drum diameter is capable of a 1.8-m to 3.5-m cutting height range. The thickness of the No. 7-2 Seam in the No. 1 District is about 10 m (including partings). Sublevel caving height and the shearer cutting height has a ratio of approximately 3:1.

4.6 Coal Processing

In the initial production stage, only raw coal screening is planned for preparing the raw coal for market. Raw coal from the underground workings is hoisted to the surface and transported to an 8.64 m[2] vibrating screen. Raw coal from Duolun is expected to range in size up to 300 mm, with the following distribution based on 100 mm and 50 mm sizing:

	Approximate
	Distribution
Sizes	(% by Weight)
>100 mm	16
50-100 mm	14
<50 mm	70
	100

The plus-100-mm sizes are loaded onto the lump coal belt conveyor for handpicking to improve coal quality. Waste is transported by belt conveyor and discharged to a storage facility where it is loaded into railcars for transport to the surface refuse disposal site. About 33,000 tonnes of waste rock from handpicking are projected annually at the 1.2 Mtpa output level.

Lump coal product (plus-100-mm) is sold primarily to the residential light industrial markets for heating purposes. The minus-100-mm sizes are crushed to minus-50 mm and sold to the power generation market. Capacity of the planned screening plant matches the 1.2-Mtpa mine output capacity with a nominal processing rate of 385 tph.

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During BOYD’s July 2008 mine visit, Duolun Golden Concord informed BOYD that the screening plant facility would be replaced by a dry preparation facility using domestic technology. This technology, combining several material separation principles capable of separating materials with varying densities, has been widely adopted by coal producers in China. Advantages of this technology include dry (waterless) operation, low capital investment, low processing cost (RMB2-3/t), relatively small spatial requirements, short construction period, simple operation, and high reliability. In cold winter climate conditions, dry operations are especially favorable. Processing capacity of the planned dry preparation system is 1.2 Mtpa.

According to the design, raw coal from the underground workings is hoisted to a surface coal feeder and transported to a 12.25 m[2] vibrating screen by a 1.0-m-wide belt conveyor. The vibrating screen has round grids with 80-mm diameter. The coal passing over 80-mm screen is transferred to a crusher; the coal at less than 80-mm sizing is collected and transported by belt conveyor to a separator (air table) circuit. A dust bag in the screening system reduces fugitive dust. The air table separates the raw coal into clean coal, middlings, and refuse, which are transported to stockpiles or silos by belt conveyors, as shown below:

Belt Conveyor Location

Belt Conveyor	Location
From	To	Width	Length
		(mm)	(m)
Coal Feeder	Screen	1,000	36
Screen	Separator	1,000	51
Separator	Refuse Pile	500	20
Separator	Clean Coal Silo	800	40
Separator	Middlings Silo	500	25

An FGX-24A model is selected for the dry preparation system, which requires approximately 600 m[2] for the plant. The dry preparation plant is planned for 330 day/year operation matched to the mine production schedule.

Coal produced by Duolun is transported to market by truck. Although railway transportation is under consideration, there are no plans for construction of a branch railway.

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4.7 Coal Quality

Duolun coal quality is categorized according to the Chinese coal classification system as HM52 lignite. Primary users are the power generation markets (both local and regional). Reported average in situ Duolun coal quality for the No. 7 Seam (representing only coal sections without partings) is as follows:

Characteristic	Basis	Unit	Value
Moisture	ad	(%)	15.0
Ash	d	(%)	20.2
Sulfur	d	(%)	0.55
Phosphorus	d	(%)	0.05
Volatile Matter	daf	(%)	45.0
Calorific Value	gr.ad	(Kcal/kg)	4,430
Grindability			42
Ash Fusion (softening)		ºC	1,250

Estimates of ROM or raw coal quality according to mine plan projections have not been made, although Duolun Golden Concord has provided the following saleable product (as received basis) quality estimates for use in its marketing analysis.

Characteristic	Unit	Value
Ash	(%)	22.8
Sulfur	(%)	0.49
Volatile Matter	(%)	40.2
Calorific Content	(Kcal/kg)	4,800

Duolun Golden Concord is forecasting an increase in ash content over the in-situ ash content to reflect parting and out-of-seam material mined with the coal seam. Actual results at Duolun will depend on in situ coal quality and seam roof and floor conditions.

While screened raw coal quality and dry preparation plant coal quality are difficult to accurately project, we anticipate surface processing will remove a portion of the OSD and parting material and reduce the ROM ash content by 3 to 5 percentage points.

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4.8 Work Safety

Based on the geologic, technical, operation characteristics, and new mine features of this project, health and work safety aspects and accident prevention measures regarding coal seam methane; coal dust; spontaneous combustion; flooding; electrical safety; roof control; and personal health and safety requirements are incorporated into the mine design in accordance with the national mine safety regulations. In addition, a mine-wide monitoring system (KJ-95) is planned. It is BOYD’s opinion that the proposed health and safety measures are prudent and follow the common practice in the PRC. BOYD found during research that a water and sand burst occurred before in a nearby smaller local mine; this flooded the mine and caused fatalities. With the relatively more complicated hydrological conditions presented in this area, special attention should be paid during the mine operation. The mining height criteria reviewed in the Mine Operation section should be strictly followed to minimize, or eliminate, the opportunity of inducing Tertiary ground water into the mine. We recommend additional analysis of the area’s hydrology as the mine development proceeds to determine if other control measures are required.

Deformed roadways and roof falls have been experienced in the pit bottom area which has soft mudstone roof and high ground pressure features. We expect difficulties in maintaining roadway stability in this area and we suggest Duolun Golden Concord arrange routine monitoring at critical locations to ensure work safety during mine construction and operation periods.

4.9 Mine Output

Duolun Mine raw coal output is determined primarily by hoisting capacity and LW face mining capacity. With hoisting capacity mechanically fixed at a maximum of 370 tph, the nominal annual raw output capacity for Duolun ranges from 1.4 Mtpa to 2.0 Mtpa depending on operating days/year, hoisting hours/day, and availability assumptions.

The maximum (2.0-Mtpa output capacity) assumes 330 operating days per year, 18 hours of hoisting per day, and 90% availability. These operating assumptions reflect recently implemented PRC regulations governing mine design and feasibility analyses and are not based on general mine operating benchmarks. While providing reasonable targets for mine capacity and efficiency, the projected operating level is typically not attained in practice. On the other hand, nearly all of the larger Chinese coal mines with which we are familiar exceed the lower end of the operating range in terms of annual hoisting hours (based on 300 operating days, 14 hoisting hours/day, and 90% availability). Actual output will be lowered if the mine is forced to miss days for regulatory safety closures, mine incidents such as fires, and unusual maintenance-related events (belt failures, hoist failures, etc.). For Duolun, the lower end of the operating range equates to 1.40 Mtpa. A reasonable approach, with

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high operating standards, assumes 315 operating days, 16 hoisting hours per day, and 90% availability and yields an expected output capacity of 1.68 Mtpa, compared to the reported design annual production level of 1.2 Mt. We are in general agreement with the LW face output capacities projected for domestic, shearer-equipped, sublevel-caving LW faces in the specified operating height. Projected FM LW sublevel caving face capacity is based on the following general design considerations:

		Seam	Section
		Thick	Moderate
Extraction Height_(m)_		10.0	5.8
Face Length_(m)_		120	120
Annual Operating Days		315	315
Scheduled Cycles/Day		5.0	8.0
Cycle Cut Depth_(m)_		0.8	0.8
Shearer Cutting Height	(m)	2.5	2.5
Efficiency_(%)_		85	85
Meters of Face Retreat:	Day	3.4	5.4
	Year	1,070	1,700
Coal Density_(tonnes/m3)_		1.29	1.29
Annual Face Output (tonnes) @ 60%*		1,160,000	1,180,000
	@ 65%*	1,220,000	1,220,000
	@ 70%*	1,290,000	1,270,000

* Sublevel caving recovery.

Assuming that development tonnage makes up 5% to 8% of total tonnage mined, Duolun Mine could produce up to 1.4 Mtpa, matching the 1.4 Mtpa lower end of the projected range of skip hoisting capacity. The planned mining systems appear capable of generating the projected output levels, provided that there are no LW face delays due to unanticipated adverse conditions.

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APPENDIX I

Duolun Golden Concord is presently scheduling LW face start-up for test run in midMarch 2009. The mid-March 2009 start-up date is reasonable according to general coal development experience, assuming there are no delays for adverse mining conditions in the gates and no delays for potential repairs in the pit bottom and main roadways. However, Duolun Golden Concord’s LW face start-up scheduling does not reflect construction issues (service shaft availability, limited hoisting and haulage capacity), constrained mine development rates, and opening repair work, which may delay LW face start-up until June 2009. According to the information provided by Duolun Golden Concord during the BOYD visit, and based on our review of progressto-date construction performance since June 2007 and opening stability issues encountered in 2007 and 2008, the following build-up in coal output is projected as follows:

Year	Output
	(Mt)
2008	0.05
2009	0.40
2010	1.20

For planning purposes, BOYD projects 2008 output at 0.05 Mt from development of gate roads and rises. Standard practice after start-up is to undergo a mine test period that may extend three to six months, during which time mine systems are evaluated and debugged. Regulatory officials also inspect the mine and its infrastructure. Mines in start-up mode typically do not attain their rated or authorized output capacity during this period, and we have reflected this in the 2009 output projection.

The nature of the Duolun reserve may require development of LW faces well in advance of their scheduled start of mining. This may be needed in order to provide alternative LW setups in the event that adverse conditions, such as unknown faults, or areas with adverse mining conditions are encountered and developed faces must be shortened. Mining operations will transition to the lower lying seams after the No. 7 Seam is depleted. Although the PDR references mining with room-and-pillar methods, we do not believe that these methods are economically viable at Duolun on a standalone basis due to the weak seam conditions and anticipated lower mine output. If necessary, to achieve regulatory coal recovery guidelines and supplement LW face output, room-and-pillar methods could be undertaken in conjunction with ongoing LW face operations, subject to regulatory based output limits. Our review and analysis of future Duolun operations is predicated on LW mining; we have not reviewed room-and-pillar mining applications in depth for this study. Generally room-andpillar mining tends to be less productive from the standpoint of labor efficiency, and has significantly higher consumable material costs. Room-and-pillar mining would not be undertaken until later in the mine’s operating life.

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APPENDIX I

Remediation (de-watering through surface pumping) of significant water sources in the Quaternary strata may be required to facilitate the proposed mine plan. Additional analysis of hydrologic conditions is warranted prior to mining areas with less than 140 m of competent overlying strata. We have assumed for our economic review that hydrologic issues, if any, are handled by de-watering programs or mine design revision.

4.10 Labor Force

According to the PDR, projected staffing at full output for Duolun is 548 personnel, with the following breakdown:

Category Production Worker Underground Surface Subtotal – Production worker Management Service and Other Total	Shift 1 79 22 101 7 8 116	Shift 2 100 40 140 53 12 205	Payroll Shift 3 Subtotal Factor* 79 258 1.35 22 84 1.25 101 342 7 67 1.00 8 28 1.00 116 437	On Payroll 348 105
				453
				67 28
				548

* Payroll factor provides coverage for seven day/week operations and absenteeism due to injuries, sickness, and other time away from the mine.

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APPENDIX I

A breakdown of underground production workers for LW and development faces are as follows:

Classification Shift 1 LW Face Staffing Foreman 1 Shearer Operator 2 Shield Operator 3 Pump Station Attendant 1 Repair Worker 2 Face-end Support Worker 2 AFC Operator 1 Stage Loader Operator 1 Service Worker 4 Total 17 Development Face Staffing (2 faces) Foreman 2 Road Header Operator 2 Service Worker 8 Electrician 1 Conveyor Belt Operator 1 Repair Worker – Road Repair Worker – Total 14	Shift 2 1 2 3 1 2 2 1 1 4 17 2 2 8 1 1 – – 14	Shift 3* 1 2 2 1 4 2 1 1 4 18 2 2 – 1 1 6 5 17	Subtotal 3 3 6 8 3 8 6 3 12
			52
			6 6 16 3 3 6 5
			45

* Maintenance Shift.

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APPENDIX I

Underground labor productivity, based on projected underground staffing, is 3,450 raw tonnes/employee-year for annual raw output of 1.2 Mtpa. According to our experience, the labor force staffing projections appear low (or projected labor productivity appears high) for the anticipated mining conditions and technology. Given the nature of the Duolun Mine reserve, a larger workforce will likely be necessary as compared to an underground mine operating in a simple (non-layered) deposit primarily for face support and underground opening maintenance. Duolun Golden Concord has recognized the need for additional personnel, as indicated below. LW face staffing shown above corresponds to single pass or full seam extraction LW face operations; sublevel caving faces require additional personnel. Additional personnel will be required for main roadway development, face setup and retrieval, water handling, and the higher support requirements resulting from current construction experience and the expected weak coal seam conditions. Staffing requirements for roomand-pillar mining are not reflected in the manning projections above.

Screening plant staffing of 18 personnel, included with the surface production workers, may be understated by 12 to 30 personnel based on staffing at similar facilities. BOYD’s projections for total staffing requirements at full production, including 12 additional screening plant personnel, with a total of 657 personnel are as follows:

Category Production Worker Underground Surface Subtotal Management Service and Other Total	Payroll 445 117
	562
	67 28
	657

We anticipate additional personnel will be needed as the mine expands and room-andpillar mining operations are undertaken later in the mine operation. In July 2008 Duolun Golden Concord proposed a new labor staffing plan with 887 personnel; a staffing breakdown was not provided.

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APPENDIX I

Underground workers will be recruited from the now closed original Duolun Mine workforce, as well as other regional mines. Significant efforts will be needed to recruit and effectively educate and train the requisite workforce because the regional workforce with underground mining experience is limited. The planned mine start-up and operating schedule provides adequate allowance for workforce training as full output performance is scheduled for the second year of mine operation. It is BOYD’s opinion that recruiting and training miners in a timely manner will benefit mine safety and improve early mining performance.

According to Duolun Golden Concord mine site, employment consisted of only 39 surface personnel employees as of 30 June 2008. All of the underground construction workers and most of the surface construction workers are from contractor companies.

5.0 ENVIRONMENTAL OVERVIEW

5.1 Introduction

The physical environment where the Duolun Mine is located consists of relatively dry grasslands; the terrain is characterized as gentle hills with gullies or washes. Except for the surface footprint for the mine’s facilities for offices, change-rooms, shafts, inclines, coal handling and stockpile areas, etc., the mine has little effect on the surface. Adverse impacts are largely related to surface land subsidence resulting from LW mining, generation and disposal of coal refuse materials resulting from coal processing, community by-products (e.g., handling of sewage), power and heating plant emissions, fugitive dust, and noise pollution.

5.2 Guidelines of the World Bank

The World Bank does not set explicit standards regarding environmental protection relating to mining activities. However, the Bank’s guidelines and principles support the view that coal mining activities affect the environment and that environmental protections must be provided. Responsible environmental management on the part of the mining enterprises includes establishing the policies and practices companies must employ to protect the environment and to minimize the impact of mining and related activities. Based on our site visit and document review, BOYD is satisfied that the planning for Duolun Mine recognizes environmental responsibilities.

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APPENDIX I

5.3 Environmental Protection Regulations

The principal environment protection laws, as they relate to mining operations, pertain to the following areas:

• Environmental protection

• Air pollution control

• Water pollution control

• Solid waste control

• Ambient noise control

• Water preservation

• Soil and water conservation

• Responsible production practices (compliance to standards)

• Environmental impact evaluation

Environmental protection issues are addressed in detail in the PDR. Facilities, equipment, and capital for environmental protection are incorporated into the mine design and construction.

5.4 Environmental Management

According to the PDR, an environmental management office will be set up for Duolun, which is responsible for environmental planning, equipment management, environmental monitoring, and coordination among different sections of the mine regarding environmental protection aspects. This office will be overseen by the mine’s operations manager.

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APPENDIX I

5.5 Surface Subsidence

The principal method of coal extraction utilized throughout the PRC coal industry, and in Duolun Mine, is LW mining, including sublevel caving in areas of the mine plan. LW mining will result in disturbance to, or subsidence of, the overlying surface land when the extent of coal seam extraction is sufficient to produce failure of the overlying strata extending to the surface. The strata failure often produces cracks and depressions, on the overlying surface. For Duolun Mine, owing to the large total planned extraction thickness, surface subsidence caused by mining activities is predicted to be as large as 10 m.

Generally, LW mining is prohibited under features such as major surface civil structures (e.g., bridges, villages, main rail corridors, etc.) and major water resources (e.g., rivers, major surface streams, substantive ground water aquifers). Safety pillars are maintained beneath designated protected areas and structures. The mine is responsible for recovering the affected areas according to national regulations. In accordance with these regulations, plans have been developed to prevent surface subsidence in protected surface areas and minimize environmental impacts of underground full extraction mining practices, although the affected areas requiring remediation are expected to be minimal.

Damage caused by underground subsidence is compensated according to local government requirements. Since the surface cultural conditions vary among different mines, the compensation standard also varies. The compensation rate is RMB0.2/t for Duolun, which should be sufficient given the fact that few residents (if any) will be affected.

5.6 Soil and Water Conservation

In accordance with the Soil and Water Conservation law, effective methods are planned to avoid, or to minimize, the loss of soil and water. Examples include constructing cinder dams in refuse disposal sites and retaining walls in steep slope areas; timely repair of surface cracks and depressions and reclamation of disposal sites; etc.

5.7 Solid Waste Disposal

Solid wastes include waste rock, ash residue from boilers, and domestic living waste. Waste rock generated by mine construction is projected to be 88,000 tonnes; waste rock from mining operations is projected at 55,000 tonnes/year at the design production level of 1.2 Mtpa. Ash residue from the boilers is projected at 1,300 tonnes/year; solid waste from the mine surface complex is projected to be 116 tpa.

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APPENDIX I

Waste rock will be temporarily stored in surface disposal areas, with most of the waste rock used to fill the subsided areas. A portion of waste rock with sufficient heat content may be used for power generation. In addition, the region has successfully used waste rock for brickmaking. There are no provisions for permanent waste rock storage at Duolun.

Ash residue is planned to be used for road pavement or construction material. Domestic waste will be collected and disposed at a planned location.

5.8 Water Resources Protection

Coal mines in many areas of the PRC are recognized as sources of water for use in surface activities, both mining and non-mining related. Water management plans are in place to protect water resources during the mining process, and recycle groundwater inflows into the mine workings after such water is collected, pumped to the surface, and processed.

Water generated from mining operations is generally recycled after filtering and treatment and is used to supply the underground emergency fire protection system, to supply dust depression sprays, and/or to provide water for surface agricultural irrigation.

Sewage from existing mines and associated communities is processed through cesspool systems until the effluent reaches the discharge requirements of the local environment authorities. The effluent is often used for nearby farm irrigation.

5.9 Air Pollution Control

Boiler exhaust emissions and fugitive dust from coal processing, coal handling, and transportation activities are the primary sources of air pollution with the following pollutant emission projections:

Source	Type	Amount Generated
Boilers	smoke dust	35.9 tpa (1,793 mg/m3)
Boilers	SO2	15.6 tpa
Coal/Waste Piles	coal/rock dust	160 tpa
Loading/Transportation	coal dust	0.2 kg/km/truck

Coal-burning boilers are planned to be fitted with multi-pipe dust filtering equipment for capturing and processing exhaust emissions. The filtering system reduces smoke discharges to meet the requirements of local environmental regulations.

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TECHNICAL REPORT

APPENDIX I

Automatic water sprays are installed at coal storage sites to reduce fugitive dust. Drivers are required to cover loaded truck beds to control dust and follow posted speed limits. Routine road washing and tree plantings along the access roads are also planned to minimize fugitive dust accumulation and dispersal.

5.10 Noise Abatement

According to the mine design, Duolun has adopted noise insulation and reduction practices for high-noise generation activities. Examples include reducing the vibration of the crusher and vibrating screens, soundproofing the equipment rooms, installing noise reduction equipment on ventilation fans, etc. Mining equipment and facilities that generate high noise levels are sited away from the residential areas to avoid disturbance to inhabitants whenever practicable. Given the remote location of the mining operation, noise generation will not be an issue for the community.

5.11 Capital for Environmental Protection

Planned environmental protection expenditures are RMB2.76 million, accounting for 1.2% of the mine construction budget, and have the following breakdowns:

Item Water spray facilities Water disposal facilities Solid waste treatment Noise control engineering Landscaping Environmental monitoring Total	RMB (Millions) 0.16 1.38 0.18 0.64 0.26 0.13
	2.75

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VALUATION OF OPCO

APPENDIX II

The following is the text of a letter prepared for the purpose of incorporation in this circular received from BMI Appraisals Limited, an independent valuer, in connection with its valuation as at 30 June 2008 of the market value of a 55% equity interest in 內蒙古多倫協鑫礦 業有限責任公司 (Inner Mongolia Duolun Golden Concord Mining Limited).

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22 September 2008

The Directors

GCL-Poly Energy Holdings Limited

36th Floor, Two Exchange Square Central Hong Kong

Dear Sirs,

INSTRUCTIONS

We refer to the instructions from GCL-Poly Energy Holdings Limited (referred to as the “Company”) for us to provide our opinion on the market value of a 55% equity interest in 內蒙古 多倫協鑫礦業有限責任公司 (Inner Mongolia Duolun Golden Concord Mining Limited) (referred to as “Opco”) as at 30 June 2008 (the “date of valuation”).

This report describes the background of the Company, the background of Opco, an industry overview and the basis of valuation and assumptions. It also explains the valuation methodology utilized and presents our conclusion of value.

PURPOSE OF VALUATION

We understand that the purpose of our valuation is to express an independent opinion on the market value of a 55% equity interest in Opco as at 30 June 2008 for your acquisition reference purposes.

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VALUATION OF OPCO

APPENDIX II

BASIS OF VALUATION

Our valuation has been carried out on the basis of market value. Market value is defined as “the estimated amount for which an asset should exchange on the date of valuation between a willing buyer and a willing seller in an arm’s length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion”.

We have adopted “HKIS Valuation Standards on Trade-related Business Assets and Business Enterprises” in preparing this valuation report.

BACKGROUND OF THE COMPANY

The Company is one of the largest foreign-owned independent cogeneration plant operators in the People’s Republic of China (referred to as the “PRC”) and has been listed on the Hong Kong Stock Exchange (stock code: 3800) since 2007. The Company is principally engaged in the development, investment, management and operation of cogeneration plants in the PRC.

The Company’s power plants can be classified as follows: coal-fired cogeneration plants, gas-fired cogeneration plants, resources comprehensive utilization plants, biomass-fired cogeneration plants, municipal solid waste incineration plant and wind power plant.

The Company currently owns 19 power plants and has investment in 1 power plant. The total attributable installed capacity is 732MW, and the total attributable steam extraction capacity is 1,671 tonnes per hour. These plants are located in Jiangsu Province, Zhejiang Province, Beijing and Inner Mongolia Autonomous Region.

BACKGROUND INFORMATION OF OPCO

Opco is a sino foreign equity joint venture incorporated in the PRC having an approved registered capital of RMB109,850,000. Opco is the owner of Duolun coal mine (referred to as the “Duolun Mine”) and is incorporated to carry out exploration, mining and exploitation of coal.

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VALUATION OF OPCO

APPENDIX II

Duolun Mine is an underground coal mine, located near Duolun County, Inner Mongolia Autonomous Region, the PRC. The mine is currently under construction with a designed production capacity of 1.2 million tonnes per annum. Duolun Mine currently has a valid mining license no. 1500000620637 from October 2006 to October 2011, issued by the Bureau of Land and Resource of Inner Mongolia, with authorized mining elevation ranging from 1,180 meters to 935 meters.

According to the Technical Assessment Report of Duolun Mine (referred to as the “Technical Report”), issued by John T. Boyd Company in September 2008, there are a total of twelve seams in the deposit. The major coal seam in the deposit is the thick No. 7 Seam. Several thinner, lower seams exist below the No. 7 Seam are No. 5, 4, 3 and 2 Seams. Since detailed geological, mining studies have been conducted for No. 7 Seam, the tonnages classified in the seam are considered as reserves. As no mining feasibility studies were prepared for No. 5, 4, 3, 2 Seams, the tonnages classified in the seams are considered as resources. The range of the authorized mining elevation covers the most of the No. 7 Seam and partial of No. 5, 4, 3 and 2 Seams.

Based on the Technical Report, the details of the reserve estimates of No. 7 Seam are listed as follows:

Seam 7-2 7-1 Total	In-Place Resource (Mt) Measured Indicated Total 19.67 24.61 44.28 13.30 11.90 25.20 32.97 36.51 69.48	Marketable Reserves (Mt) Proved Probable Total 3.58 4.75 8.33 3.19 4.24 7.43 6.77 8.99 15.76	Marketable Reserves (Mt) Proved Probable Total 3.58 4.75 8.33 3.19 4.24 7.43 6.77 8.99 15.76
			15.76

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VALUATION OF OPCO

APPENDIX II

In addition to the abovementioned reserves of No. 7 Seam, there are coal resources which are subject to successful application of enhanced Longwall mining method and acceptable economics for room and pillar mining practices. Details of additional coal resources in the No. 7 Seam on a marketable basis are summarized as follows:

		Marketable Resources (Mt)	Marketable Resources (Mt)	Marketable Resources (Mt)	Marketable Resources (Mt)
Seam		Proved		Probable	Total
	Longwall Slicing Techniques
7-2		2.61		1.74	4.35
7-1		1.88		1.21	3.09
Total		4.49		2.95	7.44
	Room and	Pillar Mining
7-2		1.07		1.40	2.47
7-1		1.26		1.52	2.78
Total		2.33		2.92	5.25
	Total Potential Additional Resources
7-2		3.68		3.14	6.82
7-1		3.14		2.73	5.87
Total		6.82		5.87	12.69

Besides, the details of the resource estimates of Nos. 5, 4, 3, and 2 Seams which are within the authorized mining elevation are listed as follows:

Seam 5 4 3 2 Total	In-Place Resource (Mt) Indicated Inferred Total 2.49 1.54 4.03 3.28 2.98 6.26 1.04 0.62 1.66 0.94 0.07 1.01 7.75 5.21 12.96	Marketable Resources (Mt) Indicated Inferred Total 0.61 – 0.61 0.20 – 0.20 – 0.19 0.19 0.07 0.04 0.11 0.88 0.23 1.11	Marketable Resources (Mt) Indicated Inferred Total 0.61 – 0.61 0.20 – 0.20 – 0.19 0.19 0.07 0.04 0.11 0.88 0.23 1.11
			1.11

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VALUATION OF OPCO

APPENDIX II

The details of the resource estimates of Nos. 5, 4, 3, and 2 Seams which are below the authorized mining elevation are listed as follows:

Seam 5 4 3 2 Total	In-Place Resource (Mt) Indicated Inferred Total 1.09 1.49 2.58 0.99 0.76 1.75 1.68 3.17 4.85 0.56 2.65 3.21 4.32 8.07 12.39	Marketable Resources (Mt) Indicated Inferred Total 0.76 0.31 1.07 0.55 0.44 0.99 0.81 2.11 2.92 0.16 1.28 1.44 2.28 4.14 6.42	Marketable Resources (Mt) Indicated Inferred Total 0.76 0.31 1.07 0.55 0.44 0.99 0.81 2.11 2.92 0.16 1.28 1.44 2.28 4.14 6.42
			6.42

BRIEF INDUSTRY OVERVIEW

The PRC has emerged as one of the fastest growing economies in the world. With a recordbreaking nominal gross domestic product (GDP) of RMB20.9 trillion in 2006, the PRC has managed to maintain a double-digit GDP growth for the fourth consecutive year. A wealthier population and higher living standards are the results of this booming economy. The annually compounded GDP growth rate of the PRC has been rising since 1999. From 2000 and onwards, the GDP has been growing at over 8% per year, implying a rapid increase in the consumption power of the nation.

GDP Growth Rate of The PRC (1997-2006)

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

RMB (billion)
25,000 20%
18%
20,000 16%
14%
15,000 12%
10%
10,000 8%
6%
5,000 4%
2%
0 0%
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
GDP Growth Rate
GDP
----- End of picture text -----

Source: National Bureau of Statistics of China

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VALUATION OF OPCO

APPENDIX II

Urbanization in the PRC, as measured by dividing the urban population by the total population, has grown rapidly from 31.9% in 1997 to 43.9% in 2006. The per capita annual consumption expenditure by urban household of the PRC was approximately RMB4,998 in 2000. This figure rose to approximately RMB7,943 in 2005, representing a significant increase in consumption expenditure by urban households at a compounded annual growth rate of approximately 19.7%.

The PRC, with rich coal resources, ranks the first in the world in terms of coal reserves. In 2007, the PRC’s coal output and sales grew about 9% to 10%, and the profit growth rate of the PRC’s coal companies hit around 35% against the previous year. The industry prosperity was further enhanced.

In recent years, the PRC’s fixed asset investment in the coal industry has increased rapidly. During the period of 2001 to 2005, the investment grew at a rate of above 40%. In the next few years, the PRC’s investment in the coal industry will be reduced due to the regulation and control of the national policy. With a fast expansion in production capacity stimulated by a great deal of investment, the PRC had an annual increase in coal production capacity by over 400 million tonnes in 2007, and is expected to remain the same in 2008, making its production capacity reaches 2.93 billion tonnes in 2008.

As the PRC has a relatively tight supply of coal, coal prices have made record highs repeatedly. Furnace coal prices rise faster than those of steam coal and anthracite. By the end of May 2008, the price of Qinhuangdao gifted mixed steam coal has jumped more than 60% against the same period last year. The prices of coking coal have even more than doubled in some areas, including Taiyuan, capital of Shanxi Province, and Tangshan, a city in Hebei Province. According to the statistics from January to February, 2008, the main business revenue and profit of the PRC coal industry saw a fast increase, rising 40.8% and 66.8% respectively. The PRC’s coal industry is bound to have big gains in 2008. Good performance of coal industry in the first half year of 2008 shows that demand in downstream industries is still robust and transportation bottleneck continues to restrict the effective expansion of production capacity.

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VALUATION OF OPCO

APPENDIX II

SOURCE OF INFORMATION

For the purpose of our valuation, we were furnished with the financial and operational data related to Opco, which were given by the senior management of the Company.

The valuation of Opco required consideration of all pertinent factors affecting the economic benefits of Opco and its abilities to generate future investment returns. The factors considered in the valuation included, but were not limited to, the following:

• The business nature of Opco;

• The financial and operational information of Opco including, but not limited to, the PRC audited financial statements of Opco for the six-month ended 30 June 2008;

• The specific economic environment and competition for the market in which Opco currently operates or will operate;

• Market-derived investment returns of entities engaged in similar lines of business;

• Market research on the similar coal mine transactions as Opco;

• The Technical Report issued by John T. Boyd Company; and

• The financial and business risks of Opco, including the continuity of income and the projected future results.

SCOPE OF WORKS

In the course of our valuation work for Opco, we have conducted the following steps to evaluate the reasonableness of the adopted bases and assumptions provided by the senior management of the Company:

• Interviewed with the senior management of the Company;

• Reviewed the Technical Report issued by John T. Boyd Company;

• Obtained all relevant financial and operational information of Opco;

• Performed market research and obtained statistical figures from public sources;

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APPENDIX II

• Examined all relevant bases and assumptions of both the financial and operational information related to Opco, which were provided by the senior management of the Company;

• Prepared a business financial model to derive the indicated value of Opco, and

• Presented all relevant information on the background of the Company and Opco, geological information of Opco, a brief industry overview, valuation methodology, source of information, scope of works, major assumptions, comments and our conclusion of value in this report.

VALUATION ASSUMPTIONS

Due to the changing environment in which Opco currently operates or will operate, a number of assumptions had to be established in order to sufficiently support our concluded opinion of the market value of the 55% equity interest in Opco. The major assumptions adopted in our valuation were:

• There will be no major changes in the existing political, legal, and economic conditions in the jurisdiction where Opco is currently exposed to or will be exposed to;

• There will be no major changes in the current taxation law in the jurisdiction where Opco is currently exposed to or will be exposed to, that the rates of tax payable remain unchanged and that all applicable laws and regulations will be complied with;

• The financial information in respect of Opco has been prepared on a reasonable basis, reflecting estimates that have been arrived at after due and careful considerations by the senior management of the Company; and

• Exchange rates and interest rates will not differ materially from those presently prevailing;

VALUATION METHODOLOGY

Three generally accepted valuation methodologies have been considered in valuing Opco. They are the market approach, the cost approach and the income approach.

The market approach provides indications of value by comparing the assets subjected to valuation to similar businesses, business ownership interests and securities that have been sold in the market, with appropriate adjustments for the differences between the assets subjected to valuation and the comparable assets.

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VALUATION OF OPCO

APPENDIX II

The cost approach provides indications of value by studying the amounts required to recreate the asset for which a value conclusion is desired. This approach seeks to measure the economic benefits of ownership by quantifying the amount of fund that would be required to replace the future service capability of the asset.

The income approach is the conversion of expected periodic benefits of ownership into an indication of value. It is based on the principle that an informed buyer would pay no more for the asset than an amount equal to the present worth of anticipated future benefits from the same or a substantially similar asset with a similar risk profile.

Among the three approaches, the cost approach was regarded not appropriate in the valuations, as this approach does not take future growth potential of Opco into consideration The income approach was also considered inadequate in the valuation, as it involves much more assumptions compared to the other two approaches. Therefore, we determined that the market approach was the most appropriate approach for the valuation of Opco.

During the valuation, we have selected three listed comparable companies (referred to as the “Comparable Companies”), of which businesses are similar to that of the Opco, as follows:

Comparable Company 1

Name of Company : China Coal Energy Company Limited (referred to as “China Coal”) Stock code : 1898 Core Businesses : China Coal mines and markets thermal coal and coking coal. It also manufactures coal mining equipment and offers coal mine design services. Comparable Company 2 Name of Company : China Shenhua Energy Company Limited (referred to as “China Shenhua”) Stock code : 1088 Core Businesses : China Shenhua is an integrated coal-based energy company focusing on the coal and power businesses in the PRC. It also owns and operates an integrated coal transportation network consisting of dedicated rail lines and port facilities.

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APPENDIX II

Comparable Company 3

Name of Company : Yanzhou Coal Mining Company Limited (referred to as “Yanzhou Coal”) Stock code : 1171 Core Businesses : Yanzhou Coal operates underground mining and coal preparation and operation businesses. Its products are sold in domestic and international markets. It also provides railway transportation services.

For our valuation, we adopted the enterprise value to reserve (referred to as “EV to Reserve”) multiple in assessing the market value of Opco. The enterprise value was calculated as follows:

Enterprise Value = Market Capitalization + Preferred Equity + Minority Interest + Short-Term and Long-Term Debt – Cash and Cash Equivalents

The EV to Reserve multiples of the Comparable Companies are as follows:

Name of Company Enterprise Value Reserve (in RMB (in Million Million) tonnes) China Coal 135,078.72 3,372.81 China Shenhua 569,918.93 7,231.00 Yanzhou Coal 54,210.32 2,056.69 Average of EV to Reserve Multiples:	EV to Reserve Multiple 40.05 78.82 26.36
	48.41

To determine the enterprise value of Opco, the average of EV to Reserve multiple was multiplied by Opco’s reserve of 15,760,000 tonnes and then subtracted the capital expenditure of RMB275,133,527. The calculated enterprise value of Opco was then adjusted by subtracting total debt, the preferred equity and the minority interest, and adding back the cash and the cash equivalents, if any. The result was then further adjusted by the lack of marketability discount and the presence of control right premium to derive the market value of Opco.

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VALUATION OF OPCO

APPENDIX II

The concept of marketability deals with the liquidity of an equity interest, that is, how quickly and easily it can be converted into cash if the owner chooses to sell. The lack of marketability discount reflects the fact that there is no ready market for shares in a closely held company. Equity interest in closely held companies is typically not readily marketable compared to similar equity interest in publicly listed companies. Therefore, a share of stock in a privately held company is usually worth less than an otherwise comparable share of stock in a publicly listed company. In the valuation, 46% was used as the discount for lack of marketability.

Control is the right to direct the strategies and activities of a firm, including the right to allocate resources and distribute the economic products. There is a tendency to regard the premium offered to pre-bid trading in a takeover as the value of the control right. As our valuation was carried out based on the market prices of publicly traded companies, in which producing a minority level value, and thus a control premium of 25% was adopted to reflect the value of the control right.

REMARKS

For the purpose of this valuation and in arriving at our opinion of value, we have referred to the information provided by the senior management of the Company, the Technical Report and the information of the Comparable Companies. We have also sought and received confirmation from the Company that no material facts have been omitted from the information supplied.

To the best of our knowledge, all data set forth in this report are true and accurate. Although gathered from reliable sources, no guarantee is made nor liability assumed for the accuracy of any data, opinions, or estimates identified as being furnished by others, which have been used in formulating this analysis.

Unless otherwise stated, all money amounts stated are in Hong Kong Dollars (HK$). The exchange rate adopted in our valuation is HK$1 = RMB0.8791, which was approximately the prevailing exchange rate as at the date of valuation (i.e. 30 June 2008).

II-11

VALUATION OF OPCO

APPENDIX II

CONCLUSION OF VALUE

Our conclusion of value is based on accepted valuation procedures and practices that rely substantially on the use of numerous assumptions and the consideration of a lot of uncertainties, not all of which can be easily ascertained or quantified.

Further, whilst the assumptions and consideration of such matters are considered by us to be reasonable, they are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond the control of the Company, Opco, John T. Boyd Company, or us.

Based on our investigation and analysis outlined in this report, it is our opinion that the market value of a 55% equity interest in Opco as at 30 June 2008 was HK$179,000,000 (HONG KONG DOLLARS ONE HUNDRED AND SEVENTY NINE MILLION ONLY).

We hereby certify that we have neither present nor prospective interest in the Company, Opco, John T. Boyd Company or the value reported.

Yours faithfully,

For and on behalf of

BMI APPRAISALS LIMITED

Marco T.C. Sze Dr. Tony C. H. Cheng B.Eng(Hon), MBA(Acct), CFA, AICPA BSc, MUD, MBA(Finance), MSc(Eng), PhD(Econ), Director MHKIS, MCIArb, AFA, SCIFM, FCIM, MASCE, MIET, MIEEE, MASME, MIIE Director

1. Mr. Marco Sze holds a Master’s Degree of Business Administration in Accountancy from the City University of New York – Baruch College and is a holder of Chartered Financial Analyst. He has about 3 years’ experience in valuing similar assets or companies engaged in similar business activities as that of Opco in Hong Kong, the PRC and the Asia-Pacific Region.

2. Dr. Tony C. H. Cheng is a member of the Hong Kong Institute of Surveyors (General Practice), a member of the American Society of Civil Engineers, a member of the American Society of Mechanical Engineers and a member of Institute of Industrial Engineers (U.K.). He has about 5 years’ experience in valuing similar assets or companies engaged in similar business activities as that of Opco worldwide.

II-12

GENERAL INFORMATION

APPENDIX III

1. RESPONSIBILITY STATEMENT

This circular includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the Company. The Directors collectively and individually accept full responsibility for the accuracy of the information contained in this circular and confirm, having made all reasonable enquiries, that to the best of their knowledge and belief there are no other facts the omission of which would make any statement herein misleading.

2. SHARE CAPITAL

HK$

Authorised: 10,000,000,000 Shares Issued and to be issued, fully paid or credited as fully paid: 972,419,487 Shares in issue as at the Latest Practicable Date 78,661,488 Maximum number of Conversion Shares to be allotted and issued pursuant to the exercise of the conversion rights under the Tranche 1 Convertible Note 39,734,231 Maximum number of Conversion Shares to be allotted and issued pursuant to the exercise of the conversion rights under the Tranche 2 Convertible Note 1,090,815,206	HK$ 1,000,000,000.00
	97,241,948.70 7,866,148.80 3,973,423.10
	109,081,520.60

III-1

GENERAL INFORMATION

APPENDIX III

3. DISCLOSURE OF INTERESTS

(a) Directors of the Company

As at the Latest Practicable Date, the interests and short positions of the Directors and chief executives of the Company in the shares, underlying shares and debentures of the Company and its associated corporations (within the meaning of Part XV of the SFO) which were required (a) to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which they were deemed or taken to have under such provisions of the SFO); or (b) to be and were recorded in the register required to be kept pursuant to Section 352 of the SFO; or (c) as otherwise notified to the Company and the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers adopted by the Company (the “Model Code”) were as follows:

(i) Long position in shares/underlying shares of the Company

			Number of
	Number of		underlying
Name of	ordinary Shares		shares held		Percentage
Directors/	Corporate	Personal	under equity		of issued
Chief Executive	interests	interest	derivates	Total	share capital
Zhu Gong Shan	352,518,443	–	118,395,719	470,914,162	48.43%
	(note 1)		(note 1)
Sha Hong Qiu	–	–	1,680,000	1,680,000	0.17%
			(note 2)
Ji Jun	–	–	1,500,000	1,500,000	0.15%
			(note 2)
Shu Hua	–	–	1,500,000	1,500,000	0.15%
			(note 2)
Yu Bao Dong	–	–	1,500,000	1,500,000	0.15%
			(note 2)
Sun Wei	–	–	1,500,000	1,500,000	0.15%
			(note 2)

Notes:

1. Mr. Zhu Gong Shan, who is the Director and the controlling Shareholder, is the director and the legal and beneficial owner of the entire issued share capital of Highexcel Investments Limited (“HIL”) and is deemed to be interested in the shares held by HIL. Mr. Zhu Gong Shan is also the director and the beneficial owner of Get Famous Investments Limited (“Get Famous”), which entered into the Sale and Purchase Agreement dated 11 August 2008 as vendor with a subsidiary of the Company as purchaser. Upon the First Completion and the Second Completion of the said agreement, Get Famous or its nominee will receive the Convertible Notes in a total amount not more than RMB127,936,000 (equivalent to approximately HK$145,627,000). Get Famous or its nominee has the right to convert any part of the principal amount of the Convertible Notes into Shares at the Conversion Price of HK$1.230 (subject to adjustment).

III-2

GENERAL INFORMATION

APPENDIX III

1. The share options granted by the Company to the Directors under the Pre-IPO share option scheme. These options can be exercised by the Directors at various intervals during the period from 13 November 2010 to 12 November 2017 at an exercise price of HK$4.10.

Save as disclosed above, as at the Latest Practicable Date, none of the Directors and chief executives of the Company had or was deemed to have any interest or short position in the shares, underlying shares and debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) which was required (a) to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which he/she was taken or deemed to have under such provisions of the SFO); or (b) which was required, pursuant to Section 352 of the SFO, to be entered in the register referred to therein; or (c) which was required, pursuant to the Model Code contained in the Listing Rules, to be notified to the Company and the Stock Exchange.

(b) Substantial Shareholders

As at the Latest Practicable Date, so far as is known to any Director or chief executive of the Company, the following persons (other than a Director or chief executive of the Company) had an interest or short position in the shares or underlying shares of the Company which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO, or, who were directly or indirectly, interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at the general meeting of any other member of the Group:

(i) Long Position in the shares and underlying shares of the Company

			Number of	Percentage
			shares/	of issued
		Capacity/	underlying	share
Name	Note	nature of interest	shares held	capital
Get Famous Investments	1	Beneficial owner	118,395,719	12.18
Limited
Highexcel Investments	1	Beneficial owner	352,518,443	36.25
Limited
MS China 3 Limited	2	Beneficial owner	160,080,000	16.46

III-3

APPENDIX III

GENERAL INFORMATION

			Number of	Percentage
			shares/	of issued
		Capacity/	underlying	share
Name	Note	nature of interest	shares held	capital
Morgan Stanley	2	Interest of controlled	160,080,000	16.46
Emerging		corporation
Markets Inc.
Morgan Stanley	2,3	Interest of controlled	160,608,000	16.52
		corporation
Poly (Hong Kong)	4	Interest of controlled	134,791,044	13.86
Investments Limited		corporation

Notes:

1. Mr. Zhu Gong Shan, who is the Director and the controlling Shareholder, is the director and the legal and beneficial owner of the entire issued share capital of Highexcel Investments Limited (“HIL”) and is deemed to be interested in the shares held by HIL. Mr. Zhu Gong Shan is also the director and the beneficial owner of Get Famous Investments Limited (“Get Famous”), which entered into the Sale and Purchase Agreement dated 11 August 2008 as vendor with a subsidiary of the Company as purchaser. Upon the First Completion and the Second Completion of the said agreement, Get Famous or its nominee will receive the Convertible Notes in a total amount not more than RMB127,936,000 (equivalent to approximately HK$145,627,000). Get Famous or its nominee has the right to convert any part of the principal amount of the Convertible Notes into Shares at the Conversion Price of HK$1.230 (subject to adjustment).

2. MS China 3 Limited is a wholly-owned subsidiary of Morgan Stanley Emerging Markets Inc. which in turn is wholly-owned by Morgan Stanley. Morgan Stanley Emerging Markets Inc. and Morgan Stanley are therefore deemed to be interested in 160,080,000 Shares held by MS China 3 Limited.

3. The interest of Morgan Stanley in the Company is also held through:

4. (a) Morgan Stanley & Co. Inc. which held 25,000 Shares and is a wholly-owned subsidiary of Morgan Stanley. Morgan Stanley is therefore deemed to be interested in 25,000 Shares;

5. (b) Morgan Stanley & Co. International plc. which held 503,000 Shares and is wholly-owned by Morgan Stanley UK Group. Morgan Stanley UK Group is wholly-owned by Morgan Stanley Group (Europe) which in turn is held as to 98.3% by Morgan Stanley International Limited. Morgan Stanley International Limited is an indirect wholly-owned subsidiary of Morgan Stanley. Accordingly, Morgan Stanley is deemed to be interested in the 503,000 Shares held by Morgan Stanley & Co. International plc.

Mr. Law Ryan Wing Cheung, the non-executive Director, is currently an employee of Morgan Stanley.

1. The interest of Poly (Hong Kong) Investments Limited is held through its indirect wholly-owned subsidiary, Power Jade Holdings Limited.

2. The total number of ordinary shares in issue as at the Latest Practicable Date was 972,419,487.

III-4

GENERAL INFORMATION

APPENDIX III

• (ii) Long Position in shares/registered capital of the members of the Group and the Target Group

		Capacity/	Contributed	Percentage
Name of member		nature of	**registered **	of registered
of the Group	Name of shareholder(s)	interest	capital	capital
			(RMB unless
			otherwise
			stated)
Fengxian Xinyuan	江蘇金馬房地產有限公司	beneficial owner	32,340,000	49%
Biological	(Jiangsu Jinma
Environmental	Property Co. Ltd.*)
Protection
Cogen-Power Co., Ltd.
Haimen Xinyuan	江蘇電力發展股份	beneficial owner	US$2,320,000	29%
Environmental	有限公司
Protection Co-	(Jiangsu Electric
Generation Co., Ltd.	Development Co. Ltd.*)
	江蘇通供集體資產	beneficial owner	US$1,600,000	20%
	有限公司
	(Jiangsu Tong Gong
	Holding Asset Co. Ltd.*)
Kunshan Xinyuan	蘇州鑫圓資產投資	beneficial owner	29,050,000	25%
Environmental	有限公司
Protection Cogen-	(Suzhou Xin Yuan Asset
Power Co., Ltd.	Investments Co. Ltd.*)
	昆山高科技有限公司	beneficial owner	16,280,000	14%
	(Kunshan Technology
	Co. Ltd.*)
Yangzhou Harbour	揚州蘇源集團有限公司	beneficial owner	US$3,094,960	22%
Sludge Cogen-	(Yangzhou Suyuan
Power Co., Ltd.	Holdings Co. Ltd.*)
	江蘇電力發展股份	beneficial owner	US$3,094,960	22%
	有限公司
	(Jiangsu Electric
	Development Co. Ltd.*)

III-5

GENERAL INFORMATION

APPENDIX III

		Capacity/	Contributed	Percentage
Name of member		nature of	**registered **	of registered
of the Group	Name of persons	interest	capital	capital
			(RMB unless
			otherwise
			stated)
Suzhou Industrial	中新蘇州工業園區市政	beneficial owner	90,000,000	30%
Park Blue Sky Gas	公用發展集團有限公司
Cogen-Power	(Zhongxin Suzhou Industrial
Co., Ltd.	Park Municipal Public
	Utility Development
	Holding Co. Ltd.*)
	蘇州蘇鑫資產投資	beneficial owner	57,000,000	19%
	有限公司
	(Suzhou Suxin Asset
	Investments Co. Ltd.*)
Xuzhou Baoxin	華潤天能（徐州）煤電	beneficial owner	23,808,000	24%
Sludge Power	有限公司
Co., Ltd.	China Resources Tianneng
	(Xuzhou) Coal &
	Power Co., Ltd.
Inner Mongolia Duolun	錫林浩特煤礦有限公司	beneficial owner	19,104,400	20%
Golden Concord	(Inner Mongolia Xilinhot
Mining Limited	Coal Mine Co., Ltd.*)
	Ganghua (Hong Kong)	beneficial owner	16,000,000	25%
	Company Limited

* For identification only

Save as aforesaid, so far as is known to any Directors or chief executive of the Company, as at the Latest Practicable Date, no other person (who is not a Director or chief executive of the Company) had an interest or short position in the Shares or underlying Shares which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO or which were recorded in the register kept by the Company under section 336 of the SFO or, who were directly or indirectly, interested in 10% or more of the norminal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any other member of the Group or held any option in respect of such capital.

III-6

GENERAL INFORMATION

APPENDIX III

Save for Mr. Zhu and Mr. Law Ryan Wing Cheung, as at the Latest Practicable Date, none of the Directors was a director or employee of a company which has an interest or a short position in the shares or underlying shares which would fall to be disclosed to the Company under the provisions of Division 2 and 3 of Part XV of the SFO.

4. SERVICE CONTRACTS

As at the Latest Practicable Date, none of the Directors had any existing or proposed service contracts with the Company or any member of the Group and the Target Group which does not determinable within one year without payment of compensation, other than statutory compensation.

5. DIRECTORS’ INTERESTS IN THE COMPANY AND ITS SUBSIDIARIES’ ASSETS OR CONTRACTS

Save as disclosed in the announcements dated 11 January 2008, 3 March 2008, 1 April 2008 and 11 April 2008 issued by the Company in relation to respectively (i) the acquisition of a 30.6% equity interest in the Funing Cogeneration Plant at a consideration of HK$28,031,865, a 100% equity interest in the Puyuan Cogeneration Plant at a total consideration of RMB69,018,150 and HK$22,024,329, a 100% equity interest in the Xinneng Cogeneration Plant at a consideration of HK$48,359,993, a 100% equity interest in the Suzhou Fuel Company at a consideration of HK$14,062,059 by the Group from associates of Mr. Zhu, which have already been completed on or before 31 December 2007, and the acquisition of a 49% equity interest in the Beijing Cogeneration Plant at a consideration of RMB145,788,475 by the Group from an associate of Mr. Zhu, which has been completed on 2 January 2008; (ii) on 29 February 2008, the Company served a written notice to Profit Act Limited (which is wholly and beneficially owned by Mr. Zhu) that it has decided not to exercise the option and the right of first refusal granted to the Company by Highexcel Investments Limited, Mr. Zhu and Mr. Zhu Yu Feng (son of Mr. Zhu) under the deed of noncompetition undertaking dated 27 October 2007 to acquire the 70% equity interest in the Baoxin Project Company; (iii) the acquisition of the entire equity interest in the Huitengliang Project Company by the Group from an associate of Mr. Zhu at a consideration of RMB20,014,398, which has been completed on 28 March 2008; and (iv) the Company entered into a non-legally binding memorandum of understanding with China Coal Chemical Group Limited (“China Coal”), which is wholly and beneficially owned by Mr. Zhu, for a possible acquisition of part or all of the equity interests held by China Coal in the companies which own certain coal mines in the PRC, as at the Latest Practicable Date, none of the Directors had any interest in any assets which have been since 31 December 2007 (being the date to which the latest published audited consolidated accounts of the Group were made up) acquired or disposed of by or leased to the Group and the Target Group, or were proposed to be acquired or disposed of by or leased to the Group and the Target Group.

III-7

GENERAL INFORMATION

APPENDIX III

As at the Latest Practicable Date, save as disclosed above, none of the Directors was materially interested in any contract or arrangement subsisting at the Latest Practicable Date which was significant in relation to the business of the Group and the Target Group.

6. DIRECTORS’ INTERESTS IN COMPETING BUSINESS

As at the Latest Practicable Date, the interests of Directors or their respective associates in businesses which are considered to compete or likely to compete, either directly or indirectly, with the businesses of the Group (“Competing Business”) as required to be disclosed pursuant to the Listing Rules were as follows:

	Name of company
Names of	in which the	Principal
the Company’s	relevant Director	activities of the	% interest in
Directors	has interest	competing company	competing company
Mr. Zhu Gong Shan	Taicang Harbour	Operation of a	Mr. Zhu and his associate
	Power Plant	cogeneration	controls an aggregate
		plant in Taicang,	interest of 37%
		Jiangsu, the PRC
	Nanjing Cogeneration	Operation of a	Mr. Zhu, through
	Plant	cogeneration	companies controlled
		plant in Nanjing,	by him, holds 100%
		the PRC	interest
	Longgu Cogeneration	Operation of a	Mr. Zhu, through
	Plant	power plant in	companies controlled
		Longgu, Peixian,	by him, holds 59%
		the PRC	interest
	Guohua Taicang	operation of a	Mr. Zhu and his
	Power Plant	power plant in	associate controls an
		Taicang, Jiangsu,	interest of 18.5%
	Lanxi Cogeneration	the cogeneration	Mr. Zhu, through
	Plant	power plant is	companies controlled
		being constructed	by him, holds 100%
			interest

III-8

GENERAL INFORMATION

APPENDIX III

	Name of company
Names of	in which the	Principal
the Company’s	relevant Director	activities of the	% interest in
Directors	has interest	competing company	competing company
	Guangzhou Yonghe	the cogeneration	Mr. Zhu, beneficially
	Project	power plant is in	owns 100% interest
		the pre-construction
		stage
	Lianyungang Baoxin	the cogeneration	Mr. Zhu, beneficially
	Biomass	power plant is	owns 100% interest
	Cogeneration Plant	being constructed
	Dongwu Cogeneration	operation of a	Mr. Zhu, controls 10%
	Project	cogeneration	interest
		power plant in
		Suzhou, the PRC
	Xuzhou Incineration	in the planning stage	Mr. Zhu, through
	Power Plant	to construct an	company
		incineration power	controlled by him,
		Plant in Xuzhou,	holds 100%
		the PRC interest
	Lianyungang Wind	in the planning stage	Mr. Zhu, through
	Power Project	to construct	his associates,
		a wind station	controls 100%
		in Lianyungang,
		Jiangsu,
		the PRC

A non-competition deed was given by Mr. Zhu Gong Shan and his associates immediate prior to the initial public offering of the Shares.

Save as disclosed above, as at the Latest Practicable Date, none of the Directors or their respective associates was interested in any business which competes or is likely to compete, either directly or indirectly, with business of the Group.

III-9

GENERAL INFORMATION

APPENDIX III

7. MATERIAL ADVERSE CHANGE

The Directors confirm that there was no material adverse change in the financial or trading position of the Company and its subsidiaries since 31 December 2007, being the date to which the latest published audited consolidated accounts of the Group were made up.

8. LITIGATION

As at the Latest Practicable Date, as far as was known to the Directors, no members of the Group and the Target Group was engaged in any litigation or arbitration of material importance and there was no litigation or claim of material importance known to the Directors to be pending or threatened against any members of the Group and the Target Group.

9. CONSENTS OF EXPERTS

Each of the following experts has given and has not withdrawn its written consent to the issue of this circular with the inclusion of its respective letter and/or report and/or reference to its name in the form and context in which it respectively appears:

Name	Qualification
First Shanghai	A licensed corporation under the SFO to carry
	out type 6 (advising on corporate finance)
	regulated activity
John T. Boyd Company	Independent technical adviser
Grandall Legal Group (Beijing)	PRC legal advisers
BMI Appraisals Limited	Valuer

As at the Latest Practicable Date, each of the above experts was not beneficially interested in the share capital of the Company and its subsidiaries nor did it have any right, whether legally enforceable or not, to subscribe for or to nominate persons to subscribe for securities in the Company and its subsidiaries.

As at the Latest Practicable Date, each of the above experts did not have any direct or indirect interest in any assets which have been since 31 December 2007 (being the date to which the latest published audited consolidated accounts of the Group were made up) acquired or disposed of by or leased to the Company and its subsidiaries, or were proposed to be acquired or disposed of by or leased to the Company and its subsidiaries.

III-10

GENERAL INFORMATION

APPENDIX III

10. PROCEDURE FOR DEMANDING A POLL BY SHAREHOLDERS

Pursuant to Article 66 of the Articles of Association, at any general meeting a resolution put to the vote of the meeting shall be decided on a show of hands unless voting by way of a poll is required by the Listing Rules or (before or on the declaration of the result of the show of hands or on the withdrawal of any other demand for a poll) a poll is demanded:

• (a) by the chairman of such meeting; or

• (b) by at least three Shareholders present in person or in the case of a Shareholder being a corporation by its duly authorised representative or by proxy for the time being entitled to vote at the meeting; or

• (c) by a Shareholder or Shareholders present in person or in the case of a Shareholder being a corporation by its duly authorised representative or by proxy and representing not less than one-tenth of the total voting rights of all the Shareholders having the right to vote at the meeting; or

• (d) by a Shareholder or Shareholders present in person or in the case of a Shareholder being a corporation by its duly authorised representative or by proxy and holding Shares in the Company conferring a right to vote at the meeting being Shares on which an aggregate sum has been paid up equal to not less than one-tenth of the total sum paid up on all Shares conferring that right; or

• (e) if required by the Listing Rules, by any Director or Directors who, individually or collectively, hold proxies in respect of shares representing 5% or more of the total voting rights at such meeting.

A demand by a person as proxy for a Shareholder or in the case of a Shareholder being a corporation by its duly authorised representative shall be deemed to be the same as a demand by a Shareholder.

III-11

GENERAL INFORMATION

APPENDIX III

11. GENERAL

• (a) The registered office of the Company is located at Cricket Square, Hutchins Drive, P.O. Box 2681, Grand Cayman, KY1-1111, Cayman Islands.

• (b) The head office and principal place of business of the Company in Hong Kong is located at Suites 3601-4, Two Exchange Square, 8 Connaught Road Central, Hong Kong.

• (c) The qualified accountant of the Company is Mr. Tong Yee Ming, who is an associate member of the Hong Kong Institute of Certified Public Accountants, the Chartered Institute of Cost and Management Accountants of the United Kingdom and Certified General Accountants of Canada.

• (d) The company secretary of the Company is Ms. Chan Yuk Chun, who is an associate member of The Hong Kong Institute of Company Secretaries and Institute of Chartered Secretaries and Administrators, the United Kingdom.

• (e) The Company’s branch share registrar and transfer office in Hong Kong is Computershare Hong Kong Investor Services Limited at Rooms 1712-1716, 17/F., Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong.

• (f) For the purposes of this circular, unless otherwise specified, conversions of RMB into HK$ are based on the approximate exchange rate of RMB0.87852 to HK$1.00, for the purposes of illustration only. No representation is made that any amount in HK$ or RMB could have been or could be converted at the above rate or at any other rates.

• (g) The English text of this circular prevails over its Chinese translation in case of discrepancy.

III-12

GENERAL INFORMATION

APPENDIX III

12. DOCUMENTS FOR INSPECTION

Copies of the following documents will be available for inspection at Suites 3601-3604, 36th Floor, Two Exchange Square, 8 Connaught Road, Central, Hong Kong during normal business hours on any weekday (except public holidays) from the date of this circular up to and including 15 October 2008:

• 1) the memorandum and articles of association of the Company;

• 2) the Sale and Purchase Agreement;

• 3) the letter from Independent Board Committee, the text of which is set out from pages 29 to 30 of this circular;

• 4) the letter from First Shanghai, the text of which is set out from pages 31 to 56 of this circular;

• 5) the technical report from John T. Boyd Company, the text of which is set out from in Appendix I of this circular;

• 6) the legal opinion from Grandall Legal Group (Beijing);

• 7) the valuation report in relation to Opco prepared by BMI Appraisals Limited, the text of which is set out in Appendix II of this circular; and

• 8) the written consents referred to under the section headed “Consents of experts” in this appendix.

III-13

NOTICE OF THE EGM

GCL-Poly Energy Holdings Limited 保利協鑫能源控股有限公司

(incorporated in the Cayman Islands with limited liability)

(Stock code: 3800)

NOTICE IS HEREBY GIVEN THAT an extraordinary general meeting (the “Meeting”) of GCL-Poly Energy Holdings Limited (the “Company”) will be held at Pacific Place Conference Centre, Level 5, One Pacific Place, 88 Queensway, Hong Kong on Wednesday, 15 October 2008 at 10:30 a.m. for the purpose of considering and, if thought fit, passing with or without modification the following resolution of the Company:

ORDINARY RESOLUTIONS:

1. THAT

• a. the sale and purchase agreement dated 11 August 2008 ( a copy of which is marked “A” and has been produced to the meeting and signed by the Chairman of the meeting for the purpose of identification) (“Sale and Purchase Agreement”) entered into between Get Rich Investments Limited and GCL-Poly Coal Mining Limited (“GCM”), a wholly-owned subsidiary of the Company regarding the Acquisition (as defined in the circular of the Company dated 22 September 2008) be confirmed, approved and ratified;

• b. the creation and issue of the convertible notes (“Convertible Notes”) convertible into shares of the Company at an initial convertible price of HK$1.230 per share subject to adjustments (“Conversion Shares”), the terms of which are set out in the circular of the Company dated 22 September 2008 with an aggregate principal amount of not more than RMB127,936,000 (equivalent to approximately HK$145,627,000) in accordance with the terms of the Sale and Purchase Agreement as the aggregate consideration payable by GCM, comprising (i) as to RMB85,000,000 (equivalent to approximately HK$96,754,000) for the acquisition of Sale Shares (as defined in the circular of the Company dated 22 September 2008); and (ii) up to approximately RMB42,936,000 (equivalent to approximately HK$48,873,000) for the subsequent increase in the registered capital of Inner Monglia Duolun Golden Concord Mining Limited;

EGM-1

NOTICE OF THE EGM

• c. the issue and allotment of the Convertible Shares upon exercise of conversion rights under the Convertible Notes to the holder(s) of the Convertible Notes by the Company be and are hereby approved; and

• d. the directors of the Company be and are hereby authorized to do all such acts and things, to sign and execute all such further documents and to take such steps as they may in their absolute discretion consider necessary, appropriate, desirable or expedient to give effect to or in connection with the Sale and Purchase Agreement, issue of the Conversion Shares and the Convertible Notes or any of the transactions contemplated thereunder.

By Order of the Board GCL-Poly Energy Holdings Limited Chan Yuk Chun Company Secretary

Hong Kong, 22 September 2008

Notes:

1. A member of the Company entitled to attend and vote at the Meeting is entitled to appoint one or, if he is the holder of two or more shares, more proxies to attend and vote instead of him. A proxy need not be a member of the Company.

2. In the case of joint holders of shares in the Company, the vote of the senior who tenders a vote, whether in person or by proxy, shall be accepted to the exclusion of the vote(s) of the other joint holder(s), seniority being determined by the order in which names stand in the register of members.

3. In order to be valid, the form of proxy must be in writing under the hand of the appointor or of his attorney duly authorised in writing, or if the appointor is a corporation, either under seal, or under the hand of an officer or attorney or other person duly authorised, and must be deposited with the Company’s branch share registrar in Hong Kong, Computershare Hong Kong Investor Services Limited at Rooms 1712-1716, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong (together with the power of attorney or other authority, if any, under which it is signed or a certified copy thereof) not less than 48 hours before the time fixed for holding of the Meeting.

EGM-2