Greentech Technology International Limited — Proxy Solicitation & Information Statement 2010

Dec 31, 2010

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

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

If you have sold or transferred all your shares in Vitar International Holdings Limited (the “ Company ”), you should at once hand this circular to the purchaser or transferee or to the bank or licensed securities dealer or registered institution in securities or other agent through whom the sale or transfer was effected for transmission to the purchaser or transferee.

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited (the “ Stock Exchange ”) take no responsibility for the contents of this circular, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this circular.

This document appears for information purposes only and does not constitute an invitation or offer to acquire, purchase or subscribe for securities of Vitar International Holdings Limited.

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VITAR INTERNATIONAL HOLDINgS LIMITED 威達國際控股有限公司

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 195)

(I) VERY SUBSTANTIAL ACQUISITION IN RELATION TO THE ACQUISITION OF THE ENTIRE ISSUED SHARE CAPITAL OF PARKSONg MININg AND RESOURCE RECYCLINg LIMITED AND

(II) NOTICE OF EXTRAORDINARY gENERAL MEETINg

Financial Adviser

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A letter from the board of directors of Vitar International Holdings Limited is set out on pages 15 to 72 of this circular.

A notice convening an extraordinary general meeting of the Company to be held at Room 2607, Greenfield Tower Concordia Plaza, 1 Science Museum Road, Tsimshatsui, Kowloon, Hong Kong at 11:00 a.m. on 19 January 2011 is set out on pages EGM-1 to EGM-2 of this circular.

Whether or not you intend to attend the extraordinary general meeting, you are requested to complete and return the accompanying proxy form in accordance with the instructions printed thereon to the branch share registrar and transfer office of the Company in Hong Kong, Tricor Investors Services Limited, at 26th Floor, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong as soon as practicable and in any event not later than 48 hours before the time appointed for holding of the meeting or any adjournment thereof. Completion and return of the proxy form will not preclude you from attending and voting in person at the meeting or any adjournment thereof should you so wish.

31 December 2010

CONTENTS

		Page
Definitions. . . .	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
glossary. . . . .	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	12
Letter from the	Board. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	15
Risk factor. . .	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	73
Legal and regulatory regime in which the Target group operates. . . . . . . . .		79
Appendix I	— Financial Information of the group. . . . . . . . . . . . . . . . .	I-1
Appendix II	— Accountants’ Report of the Target group. . . . . . . . . . . .	II-1
Appendix III	— Unaudited Pro Forma Financial Information
	on the Enlarged group. . . . . . . . . . . . . . . . . . . . . . . . .	III-1
Appendix IV	— Management discussion and analysis. . . . . . . . . . . . . . . .	IV-1
Appendix V	— Technical Report and valuation report on the Assets. . .	V-1
Appendix VI	— Letters on projection underlying
	the valuation of the Assets. . . . . . . . . . . . . . . . . . . . . . .	VI-1
Appendix VII	— general Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . .	VII-1
Notice of EgM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		EGM-1

— i —

DEFINITIONS

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

“Acquisition” the proposed acquisition of the entire issued share capital of the Target Company pursuant to the Sale and Purchase Agreement

“Approvals”

the approvals by or the registration with the relevant authorities in Australia in respect of YT Parksong Australia as may be required as a result of the sale and purchase of the Sale Shares contemplated under the Sale and Purchase Agreement

• “Assets”

all rights, title, interest, claims, benefits, and all other property of whatever kind, real or personal, from time to time obtained, acquired, developed or produced by the BMT on 18 March 2010 and includes the Tenements, all of the BMT’s fixtures and fittings situated on the Tenements, all of the BMT’s plant and equipment, all consumables and stock including ore stocks but excluding cash and debtors and Tin Metal Stocks/all tin in concentrate at a smelter or in transit to a smelter including on site in bins and tin in circuit stock as measure and valued and the teaming mixing machine on site and includes all data, reports, records and information held by the BMT in relation to the Assets

“associates”

has the meaning ascribed to it in the Listing Rules

“A$” or “AUD”

Australian dollars, the lawful currency of Australia

“BDA” or “Valuer”

Behre Dolbear Australia Pty Limited, an independent valuer

“BLA” Bluestone Australia PTY Ltd, being a contractor for providing services to the Management Company pursuant to the Services Agreement

— 1 —

DEFINITIONS

“BMT”	Bluestone Mines Tasmania Pty Ltd (I 108 492 627),
	a company incorporated under the laws of Australia,
	which is beneficially owned by Metals X Limited
“Board”	the Board of Directors
“Bondholder(s)”	the holder(s) of the Convertible Bonds
“Business Day”	a day (other than a Saturday, a Sunday and any day on
	which a tropical cyclone warning No. 8 or above or a
	“black rainstorm warning signal” is hoisted in Hong
	Kong at any time between 9:00 a.m. and 5:00 p.m.) on
	which licensed banks are generally open for banking
	business in Hong Kong
“CB” or “Convertible Bonds”	the convertible bonds in the principal amount of
	HK$806,500,000 to be issued by the Company to the
	Vendor as part payment of the Consideration
“Companies Ordinance”	the Companies Ordinance (Chapter 32 of the Laws of
	Hong Kong)
“Company” or “Guarantor” or	Vitar International Holdings Limited, a company
“Vitar”	incorporated in the Cayman Island whose shares are
	listed and traded on the Main Board of the Stock
	Exchange
“Completion”	Completion of the Acquisition
“Code”	Hong Kong Code on Takeovers and mergers
“Completion Accounts”	the unaudited profit and loss account and balance
	sheet of each of the companies in the Review Group
	prepared from 30 June 2010 up to the Completion Date
	in accordance with the applicable laws and the Hong
	Kong Financial Reporting Standards and certified by
	the sole director of the Target Company to represent
	a true and fair view of the assets and liabilities and
	profit and loss of each of the companies in the Review
	Group as at the Completion Date

— 2 —

DEFINITIONS

• “Completion Date” the date on which Completion occurs, which date shall not be more than 14th day after all the conditions having been satisfied in full or waived, or such other date as the Vendor and the Purchaser may agree in writing

• “Concentrate Services Agreement” a service agreement dated 3 August 2010 made between BLA and the YT Parksong Australia for engaging BLA to negotiate and conclude agreement for sale of tin concentrate on behalf of YT Parksong Australia

• “connected person” the meaning ascribed to it in the Listing Rules “Consideration” the consideration payable by the Purchaser to the Vendor for the purchase of all of the Sale Shares pursuant to Sale and Purchase Agreement

• “Conversion Price” the issue price of HK$1.47 per Share as agreed between the Vendor and the Company per Consideration Share

• “Conversion Shares” the Shares to be issued upon the exercise of the conversion rights attached to the Convertible Bonds

• “Deposit” the refundable sum of HK$280,000,000 paid by the Purchaser to the Vendor as deposit and part payment of the Consideration pursuant to the Sale and Purchase Agreement

• “Encumbrance” any mortgage, charge, claim, equitable interest, lien, option, pledge, security interest, right of first refusal, right to acquire, hypothecation, title retention, right of set-off, counterclaim, trust arrangement or similar restriction of any kind (including any restriction on use, voting, transfer, receipt of income, or exercise of any other ownership interest)

• “Enlarged Group” the Group immediately after the Completion “Exploration Licenses” the Tasmanian Mineral Exploration License EL72/2007, including any renewals, extensions, consolidations, amendments, substitutions, variations or successors thereof granted pursuant to the Mineral Resources Act

— 3 —

DEFINITIONS

“EGM”	an extraordinary general meeting to be convened
	by the Company for the purpose of considering and
	passing the relevant resolution to approve the Sale and
	Purchase Agreement and the transactions contemplated
	thereby
“Group”	the Company and its subsidiaries
“HK$” or “Hong Kong Dollars”	Hong Kong dollars, the lawful currency of Hong Kong
or “HKD”
“Hong Kong”	the Hong Kong Special Administrative Region of the
	PRC
“Independent Third Parties”	third parties and their ultimate beneficial owner(s)
	which are independent of the Company and its
	connected persons
“ITRI”	ITRI Ltd (formerly the International Tin Research
	Institute), a not for profit membership tin based
	organization that (i) provide researches statistics and
	market studies; and (ii) respond to environmental and
	regulatory issues affecting the industry
“Joint Venture”	an unincorporated joint venture established in
	Tasmania by BMT and YT Parksong Australia as
	to 50% and 50% respectively pursuant to the JV
	Agreement
“Joint Venture Activities”	all exploration, development, mining, treatment,
	rehabilitation and mine closure activities involved
	in the acquisition, use, development, operation
	and maintenance of the Joint Venture Property and
	all other activities, undertakings, and operations
	undertaken by BMT and YT Parksong Australia
“Joint Venture Property”	all rights, titles, interest, claim, benefit and all other
	property of whatever kind, real or personal, from time
	to time owned by BMT and YT Parksong Australia for
	the purposes of the Joint Venture

— 4 —

DEFINITIONS

• “JV Agreement” the joint venture agreement dated 28 January 2010 entered into among YT Parksong Australia, Yunnan Tin PRC, BMT, and the Target Company for the establishment of a joint venture, namely, the Joint Venture which owns the Joint Venture Property and conduct the Joint Venture Activities

• “Last Trading Date” 13 July 2010, being the last trading date for the Shares before the date of this announcement

• “Latest Practicable Date” 29 December 2010 “Lender” collectively Sun Hung Kai Finance and Yunnan Tin PRC

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

• “LME” the London Metal Exchange

“Loan (Parksong) Agreement” a loan agreement dated 11 February 2010 made between Yunnan Tin PRC and the Target Company for advance of a loan of US$19,485,000 by Yunnan Tin PRC to the Target Company on the terms contained therein

• “Loan (Sun Hung Kai) a loan agreement dated 15 March 2010 made among Agreement” Sun Hung Kai Finance, Yunnan Tin HK, the Vendor, the Target Company and YT Parksong Australia for advance of a loan of HK$250,000,000 to Yunnan Tin HK by Sun Hung Kai Finance on the terms contained therein

• “Loan Agreements” collectively the Loan (Sun Hung Kai) Agreement and the Loan (Parksong) Agreement

• “Long Stop Day” 28 February 2011 or such other date as agreed between the Purchaser and the Vendor

“Management Agreement” the management agreement dated 28 January 2008 entered into between YT Parksong Australia and BMT

— 5 —

DEFINITIONS

“Management Committee”

• “Management Company” or

• “BMTJV”

• “Mining Leases”

• “Mining Right Certificate”

“MLX”

“Mr. Chan” or “Vendor”

“Outstanding Indebtedness”

a management committee formed pursuant to the JV Agreement by YT Parksong Australia and BMT of which each party appointing three representatives to it

Bluestone Mines Tasmania Joint Venture Pty Ltd, being a management company incorporated in Australia and owned by YT Parksong Australia and BMT as to 50% each therein to conduct Joint Venture Activities

Mining Leases 12M/95, 12M/2006, 2M/2008 jointly held by BMT and YT Parksong Australia pursuant to the Tasmanian Mineral Resources Act

the certificate issued or to be issued by the relevant government authority(ies) in Australia to YT Parksong Australia certifying YT Parksong Australia as the owner of 50% interest of the Tenement as defined under the JV Agreement

Metals X Limited, an emerging diversified resources group listed on the Australian Securities Exchange which has a portfolio of metal assets and engaged in the exploration and production of tin, nickel, gold, copper, zinc, phosphate, uranium, lead and tungsten

Mr. Chan Kon Fung（陳幹峰）, who is the sole beneficial owner of the Target Company

t h e a g g r e g a t e o f ( i ) a l o a n i n t h e s u m o f HK$250,000,000 advanced by Sun Hung Kai Finance to Yunnan Tin HK pursuant to the Loan (Sun Hung Kai) Agreement together with all outstanding interest and other sums owing by Yunnan Tin HK to Sun Hung Kai Finance thereunder (“Sun Hung Kai Indebtedness”); and (ii) a loan in the sum of US$19,485,000 advanced by Yunnan Tin PRC to the Target Company pursuant to the Loan (Parksong) Agreement together with all outstanding interest and other sums owing by the Target Company to Yunnan Tin PRC thereunder

— 6 —

DEFINITIONS

“Participating Interest”

“Payables”

“PRC”

“Purchaser”

the rights, liabilities and obligations of YT Parksong Australia and BMT determined under the JV Agreement and expressed as a percentage and includes (i) the obligation, subject to the terms of the JV Agreement, to contribute that percentage of the approved budget; (ii) the ownership of the right to receive in kind and to dispose of for its own account that percentage of product; (iii) the beneficial ownership as a tenant in common of an undivided share in that percentage of the joint venture property; and (iv) subject to terms of the JV Agreement, all other rights (including the right to vote on all voting matters), liabilities and obligation accruing to or incurred by YT Parksong Australia and BMT in or arising out of the JV Agreement in that percentage

the total amount of liabilities incurred up to and including the Completion Date by the Review Group, including, but not limited to, all long term and current liabilities, all long term and current capital commitment, if any and all account payables, but excluding (i) all the outstanding shareholder’s loans owing by the Target Company to the Vendor on the condition that those shareholder’s loans shall be assigned to the Purchaser on the Completion Date; (ii) all the outstanding loans owing by the Company to the Purchaser or its associate, if any or (iii) derivative financial instruments (for avoidance of doubt, all the payables (including the operating expenses and/or cash call) payable by the Review Group to the Management Company shall be apportioned)

the People’s Republic of China (for the purpose of the Sale and Purchase Agreement, excluding Hong Kong, the Macau Special Administrative Region of the PRC and Taiwan)

Gallop Pioneer Limited, a wholly owned subsidiary of the Company, incorporated under the law of British Virgin Islands

— 7 —

DEFINITIONS

“Purchaser’s Warranties” all of the warranties, representations, and undertakings given or made by the Purchaser and the Company in the Sale and Purchase Agreement “Receivables” the bank balances and cash, the account receivables and other receivables owing to the Review Group (including, for the avoidance of doubt, any receivables arising from the sale of the tin concentrates produced on or before the Completion Date, no matter whether the sale is conducted thereafter) but excluding derivative financial instruments, deferred tax assets and deposits paid to all the Australian government authorities, if any, up to and including the Completion Date “Review Group” the Target Company, Yunnan Tin HK, YT Parksong Australia and YT Parksong Australia Management Pty Ltd (for avoidance of doubt, excluding the Management Company and the Joint Venture) “Sale and Purchase Agreement” the agreement dated 13 July 2010 entered into among the Vendor, Mr. Chan and the Company in relation to the Acquisition “Sale Shares” the entire issued share capital of the Target Company, representing 10,000 fully paid shares of HK$1 each of the Company “Second Supplemental Deed” the second supplemental deed to the Sale and Purchase Agreement dated 30 December 2010 entered into among the Vendor, the Purchaser and the Company in relation to the Acquisition “Services Agreement” a service agreement dated 15 July 2010 made between BLA and the Management Company for engaging BLA to provide services including but not limited to accounts payable and payroll, general accounting, company secretarial, administrative support, IT support, geological services, mining engineering services and general services

— 8 —

DEFINITIONS

“SFC”	the Securities and Futures Commission
“Shares”	the ordinary shares of HK$0.005 each in the issued
	share capital of the Company
“Shareholder(s)”	holder(s) of the Shares
“Stock Exchange”	The Stock Exchange of Hong Kong Limited
“Sun Hung Kai Finance”	Sun Hung Kai Structured Finance Limited, being the
	lending party to the Loan (Sun Hung Kai) Agreement
“Supplemental Deed”	the supplemental deed to the Sale and Purchase
	Agreement dated 30 December 2010 entered into
	among the Vendor, the Purchaser and the Company in
	relation to the Acquisition
“Target Company”	Parksong Mining And Resource Recycling Limited, a
	limited liability company incorporated under the laws
	of Hong Kong
“Target Group”	Target Company, Yunnan Tin HK, YT Parksong
	Australia, the Management Company and the Joint
	Venture
“Tasmania”	the State of Tasmania, Australia
“Tasmanian Mineral Resources	the Tasmanian Mineral Resources Development Act
Act”	1995 (TAS) (as amended from time to time), and
	includes any regulations promulgated under that Act
“Tenements”	all tenements relating to the Assets, including but
	not limited to the Mining Leases and the Exploration
	Licenses
“Third Supplemental Deed”	the third supplemental deed to the Sale and Purchase
	Agreement dated 30 December 2010 entered into
	among the Vendor, the Purchaser and the Company in
	relation to the Acquisition

— 9 —

DEFINITIONS

• “Three Supplemental Deeds”

• “Tin Purchase Contract”

• “US$” or “United States Dollars”

• “USGS”

• “Vendor’s Warranties”

• “YTC Resources”

• “YT Parksong Australia”

the Supplemental Deed, the Second Supplemental Deed and the Third Supplemental Deed

the exclusive purchase contract to be entered into between YT Parksong Australia or the Joint Venture and Yunnan Tin PRC for the exclusive purchase from YT Parksong Australia or the Joint Venture of tin metal produced from the Assets at a market price

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

• United States Geological Survey, a science organization that collects, monitors, analyzes and provides scientific understanding on natural resources conditions, issues and problems

all of the warranties, representations, indemnities and undertakings given or made by the Vendor in the Sale and Purchase Agreement

YTC Resources Limited, a tin, gold and copper exploration company and a major producer of nonferrous metals in mining town of Orange, New South Wales. It is 15% owned by Yunnan Tin Australia TDK Resources Pty Ltd (wholly-owned Australian subsidiary of a Chinese state-owned enterprise, Yunnan Tin Group Limited)

YT Parksong Australia Holding PTY Ltd., a limited liability company incorporated under the laws of Australia which engages in the business of exploration, development, mining and process of tin bearing ore from the Assets in the Tasmania and owns 50% interests in the Assets and Tenements free from all the Encumbrances

— 10 —

DEFINITIONS

• “Yunnan Tin HK”

Yunnan Tin Hong Kong (Holdings) Group Co., Limited, a limited liability company incorporated under the laws of Hong Kong, which is beneficially owned by Yunnan Tin PRC as to 45% and the Target Company as to 55%

• “Yunnan Tin PRC”

Yunnan Tin Group (Holding) Co., Ltd.**（雲南錫業集 團（控股）有限責任公司）, a limited liability company incorporated in the PRC, which is beneficially owned by the Government of the Yunnan Province and the parent company of Yunnan Tin Co., Ltd

• “Yunnan Tin PRC Debt”

account payable and owing by Yunnan Tin PRC to the Target Company which remains outstanding and unpaid as at the Completion Date

• “Yunnan Tin PRC Management Agreement”

the management agreement to be entered into between Yunnan Tin PRC and/or its subsidiaries and YT Parksong Australia for the appointment by YT Parksong Australia of Yunnan Tin PRC and/or its subsidiaries or its subsidiary as its manager for the management of the Assets in the form to be agreed between the Vendor and the Purchaser

• “Yunnan Tin Share Transfer”

the proposed transfer by Yunnan Tin PRC of its 27% shareholding in Yunnan Tin HK to the Target Company as mentioned in the Sale and Purchase Agreement

* Should there be any discrepancy between English and Chinese versions, the English version shall prevail.

** For identification purpose only.

— 11 —

gLOSSARY

This glossary of technical terms contains terms used in this circular in connection with the Enlarged Group. As such, these terms and their meanings may not correspond to standard industry meaning or usage of these terms:

“μm”	micrometer(s)
“C”	cent(s)
“Cu”	copper
“ha”	hectare(s)
“km”	kilometer(s)
“kt”	kilotonne(s)
“kWhr”	kilowatt per hour
“LOM”	life of mine
“L/s”	litres per second
“m”	metre(s)
“m 3/sec”	cubic metres per second
“M”	million
“Mbcm”	million bank cubic metre(s)
“Mt”	million tonnes
“ML”	million litres
“ML/d”	million litres per day
“MW”	megawatt
“Sn”	tin

— 12 —

gLOSSARY

• “t” tonne(s)

• “tpa” tonne(s) per annum

• “tph” tonne(s) per hour

“CIF” cost, insurance and freight, a term of sales whereby the seller quotes a price that includes the price of the goods, insurance and freight charges to the buyer’s destination

“Incoterms® 2000” The International Chamber of Commerce (ICC) rules for the use of domestic and international trade terms. Incoterms® rules describe mainly the tasks, costs and risks involved in the delivery of goods from sellers to buyers

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

“Inferred Resources” as defined under the JORC Code, that part of a Mineral Resource for which tonnage, grade and mineral content can be estimated with a low level of confidence. It is inferred from geological evidence and assumed but not verified geological and/or grade continuity

— 13 —

gLOSSARY

“Measured Resources”

“Mineral Resources”

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

as defined under the JORC Code, a concentration or occurrence of material of intrinsic economic interest in or on the Earth’s crust in such form, quality and quantity that there are reasonable prospects for eventual economic extraction. The location, quantity, grade, geological characteristics and continuity of a Mineral Resource are known, estimated or interpreted from specific geological evidence and knowledge. Mineral Resources are sub-divided, in order of increasing geological confidence, into inferred, indicated and measured categories

— 14 —

LETTER FROM THE BOARD

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VITAR INTERNATIONAL HOLDINgS LIMITED 威達國際控股有限公司

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 195)

Executive Directors:

Mr. Leung Chau Hiu (Chairman) Mr. Leung Kai Wing (Chief Executive Officer)

Mr. Cheung Wai Kuen

Mr. Cheng Hau Yan Mr. Cheng Pak Lung

Register Office: Cricket Square Hutchins Drive PO Box 2681 Grand Cayman KY1-1111 Cayman Islands

Mr. Chen Liang

Mr. Li Xianghong

Independent Non-Executive Directors:

Mr. Wong Hing Tat

Mr. Liu Feng

Mr. Zhong Wei Guang

Principal place of business in Hong Kong: Room 304-306, 3/F. Block B, New Trade Plaza 6 On Ping Street Siu Lek Yuen Shatin, N.T. Hong Kong

31 December 2010

To the shareholders

Dear Sir or Madam,

(I) VERY SUBSTANTIAL ACQUISITION IN RELATION TO THE ACQUISITION OF THE ENTIRE ISSUED SHARE CAPITAL OF PARKSONg MININg AND RESOURCE RECYCLINg LIMITED AND (II) NOTICE OF EXTRAORDINARY gENERAL MEETINg

INTRODUCTION

On 13 July 2010, the Company as the Purchaser’s guarantor, the Purchaser and the Vendor entered into the Sale and Purchase Agreement pursuant to which the Vendor has conditionally agreed to sell the Sale Shares, representing the entire issued share capital of the Target Company to the Purchaser at a total consideration of HK$1,086,500,000 (subject to adjustment). On 30 December 2010, the Company, the Purchaser and the Vendor entered into the Three Supplemental Deeds to amend the Sale and Purchase Agreement to the effect that certain terms of the Sale and Purchase Agreement are amended.

— 15 —

LETTER FROM THE BOARD

THE ACQUISITION

Date

• 13 July 2010 (Sale and Purchase Agreement)

30 December 2010 (Supplemental Deed, the Second Supplemental Deed and the Third Supplemental Deed)

Parties

• (A) the Company (as Guarantor);

• (B) Gallop Pioneer Limited (as Purchaser, a wholly owned subsidiary of the Company); and

• (C) Mr. Chan Kon Fung (as Vendor)

Each of the Vendor, the Purchaser and the Guarantor has provided certain representations and warranties and undertakings pursuant to the Sale and Purchase Agreement.

Pursuant to the Sale and Purchase Agreement and the Three Supplemental Deeds, the Vendor warranted to and undertook with the Purchaser that:

• (a) the Target Group would declare and distribute dividends to their shareholders on a proportional basis, (including the Vendor ultimately) out of its distributable profit accumulated before the Completion Date;

• (b) the contained tin in concentrate produced by the Target Group from the Assets for each of (i) the first anniversary of 12 months from the Completion Date, (ii) the second anniversary of 12 months commencing from the day immediately following after expiry of the aforesaid first anniversary and (iii) the third anniversary of 12 months from the day immediately following after expiry of the aforesaid second anniversary shall be not less than 6,500 tonnes, and the Purchaser shall be entitled to claim against the Vendor for damages in respect of breach of the aforesaid guarantee and warranty for any or all of the aforesaid anniversaries; and

— 16 —

LETTER FROM THE BOARD

• (c) the Vendor would bear the Payables made by the Review Group (other than the Joint Venture and the Management Company) to all creditors and other persons as at the Completion Date.

Pursuant to the Sale and Purchase Agreement and the Three Supplemental Deeds, the Purchaser agreed that all the Receivables owing to the Review Group up to and including the Completion Date shall belong to the Vendor absolutely and the Vendor shall be entitled to receive all income and payments to be received by the Review Group in respect of the Receivables from time to time.

Pursuant to the Sale and Purchase Agreement, the Purchaser and the Guarantor warranted to the Vendor that the net assets of the Company as at the Completion Date shall not be less than HK$140,000,000. Immediately before the Completion, the major assets of the Target Group shall comprise the Assets while there will be no liabilities held by the Target Group given that the receivables and payables of the Target Group up to and including the Completion Date will be taken up by the Vendor together with the assignment to the Company of the shareholder loans, due to Mr. Chan including the exercise by BMT of put option granted by YT Parksong Australia to BMT according to the terms and conditions under the acquisition agreement dated 28 January 2010 made between BMT, YT Parksong Australia and Yunnan Tin PRC.

To the best of the knowledge, information and belief of the Directors, having made all reasonable enquiries, the Vendor is an Independent Third Party as at the date of the Sale and Purchase Agreement.

Assets to be acquired

Pursuant to the Sale and Purchase Agreement, the Purchaser has conditionally agreed to acquire and the Vendor has conditionally agreed to dispose of the Sale Shares, being the entire issued share capital of the Target Company. The Sale Shares are to be acquired free from all Encumbrances and the Purchaser will be assigned with the shareholder loans due to Mr. Chan upon Completion as part of the Consideration. As at 30 November 2010, the amount of outstanding shareholder loans was approximately HK$596,546,000.

— 17 —

LETTER FROM THE BOARD

The shareholding structure of the Target group

The following diagram illustrates the current shareholding structure of the Target Group:

==> picture [378 x 318] intentionally omitted <==

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

Mr. Chan Kon Fung
100%
Yunnan Tin PRC Target Company
18% 82%
Yunnan Tin HK MLX
100% 100% 100%
YT Parksong Australia
YT Parksong Australia BMT
Management PTY Ltd.
50% 50%
Joint Venture
(Unincorporated)
Management
Agreement
Management Company Assets
----- End of picture text -----

*Note:

Before the Yunnan Tin Share Transfer, Yunnan Tin HK was owned by Yunnan Tin PRC and the Target Company as to 45% and 55%, respectively. The Yunnan Tin Share Transfer was an arrangement between the Target Company and Yunnan Tin PRC and the completion of which is one of the conditions for the Completion. As a result of the Yunnan Tin Share Transfer, the Target Company currently holds 82% interest in Yunnan Tin HK.

The Management Agreement was entered into in respect of the appointment of the Management Company as the manager of the Joint Venture to manage the Assets. The Management Company will be responsible for the management of the Assets. Pursuant to the Management Agreement, the Management Company shall be appointed severally by YT Parksong Australia and BMT and the Management Company shall (including but not limited to):

• (a) be responsible for maintaining, operating and protecting the Joint Venture Property;

• (b) be responsible for all negotiations and execution of agreements for obtaining exploration, development, mining and other rights from the relevant government authorities in Australia;

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LETTER FROM THE BOARD

• (c) dedicate itself full time to the efficient and economic conduct of the Joint Venture Activities;

• (d) implement the decisions of the Management Committee;

• (e) apply for and procure the grant of, any and all the Tenements, relevant consents and approvals; and

• (f) conduct the Joint Venture Activities in a good, workmanlike and commercially reasonable manner.

All the costs reasonably and properly incurred by the Management Company in connection with the Joint Venture Activities shall be paid or reimbursed by YT Parksong Australia and BMT in proportion to their interests in the Joint Venture. The Management Company may charge YT Parksong Australia and BMT with all costs, expenses and liabilities of the Management Company. Further, the Management Company shall neither make a profit nor a loss from the conduct of the Joint Venture Activities. The appointment of the Management Company commenced on 18 March 2010 and will continue until the termination of the JV Agreement.

Besides the appointment of the Management Company, the Target Group will engage Yunnan Tin PRC to provide management services (the scope of which would be determined under the Yunnan Tin PRC Management Agreement) and assist in the management and operation of the Assets given the metal tin mining expertise of Yunnan Tin PRC. The Company is currently negotiating with Yunnan Tin PRC in relation to the Yunnan Tin PRC Management Agreement.

Consideration

The Vendor shall sell and the Company shall purchase the Sale Shares at the Consideration of HK$1,086,500,000 (subject to adjustment) which shall be settled in the following manner (i) on the date of the Sale and Purchase Agreement, an aggregate amount of HK$280,000,000 was paid by the Purchaser to the Vendor as the refundable Deposit and (if the transaction is completed) part of the Consideration; and (ii) HK$806,500,000 shall be satisfied by the Purchaser procuring the Company to issue the Convertible Bonds to the Vendor on Completion. The Deposit received by the Vendor is for the use of full repayment of the Sun Hung Kai Indebtedness not later than 7 days after receipt of the Deposit.

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LETTER FROM THE BOARD

According to the Second Supplemental Deed, the Consideration shall be adjusted in the following manner by way of cash:

• (a) in the event that there are the Receivables, as shown in the Completion Accounts, the Purchaser shall pay the Vendor the actual amount of such part of the Receivables as have been settled and paid in cash, within 7 days from the receipt by the Company of cash payment; and

• (b) in the event that there are the Payables, as shown in the Completion Accounts, the Vendor shall pay the Purchaser in cash the actual amount of the Payables within 3 Business Days upon receipt of the payment direction(s) in respect thereof (which shall only be issued by the Company to the Vendor within 7 Business Days prior to the due date) and in the event that the Purchaser has settled and paid in cash the relevant part of the Payables on behalf of the Vendor, the Vendor shall reimburse the Purchaser in cash the full amount of such Payables as have been settled and paid by the Purchaser on behalf of the Vendor as aforesaid within 7 days from the payment by the Purchaser in respect thereof.

The Directors are of the view that issuing the Convertible Bonds to satisfy the Consideration can relieve the Company from resorting to its own cash resources and from the immediate need to raise cash for the Acquisition. Issuing the Convertible Bonds will not have an immediate dilution effect on the existing Shareholders. The Directors consider that the arrangement is in the interest of the Company and the Shareholders as a whole. The potential dilution effect of the Conversion Shares is set out under “Effect on the shareholding structure of the Company” below.

Basis of Consideration

The Consideration was arrived at after arm’s length negotiations between the Purchaser and the Vendor with then reference to, among other things, (i) a preliminary valuation of the Assets provided by the Vendor; (ii) the valuation report of the Assets prepared by an independent Valuer appointed by the Purchaser which confirms the value of the Assets as of 30 September 2010 was approximately AUD442.1 million (approximately HK$3.45 billion) under the most likely scenario; (iii) the latest market statistics and future prospects of the metal tin mining industry; (iv) the movement in tin price and its forecast movement; (v) the value of the tin in stocks in transit between the mine and buyer which was approximately AUD18.0 million (approximately HK$140.4 million); and (vi) the management accounts of the Target Group as at 30 June 2010.

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LETTER FROM THE BOARD

In determining the Consideration of the Acquisition, the Directors have taken into account the following factors:

• (i) one of the conditions precedent is that the Company being satisfied with the results of valuation set forth in a valuation report to be prepared by an independent valuer to be appointed by the Purchaser on the Assets including but not limited to the Tenements, whose report shall have confirmed that the fair value of the Assets shall not be less than HK$2.65 billion;

• (ii) the value of the tin in stocks in transit between the mine and buyer which was approximately AUD18.0 million (approximately HK$140.4 million);

• (iii) the changes in market price of the metal tin in past two years. Tin price at LME was trading at an average price of approximately US$18,500 per tonne and approximately US$13,600 per tonne in 2008 and 2009, respectively and at an average price of approximately US$20,300 per tonne for the period from 1 January 2010 up to now. As at the Latest Practicable Date, the market price of tin at the LME has increased to US$26,577;

• (iv) the general global economic condition;

• (v) the prevailing trend of the tin price; and

• (vi) the management accounts of the Target Group as at 30 June 2010.

Behre Dolbear Australia Pty Limited, an independent mineral industry consulting firm which has appropriate qualification and relevant experience in mineral exploration, exploitation and processing activities, has been engaged as the technical adviser to the Company to prepare a technical report and a valuation in accordance with the requirements under Chapter 18 of the Listing Rules. According to the valuation report of the Assets, as of 30 September 2010, the Assets was valued at approximately AUD442.1 million (approximately HK$3.45 billion) under the most likely scenario. The valuation report prepared by BDA values the Assets taken into account, inter alia, the increase in the monthly average tin price from approximately US$17,500 per tonne to US$22,500 per tonne from March 2010 to September 2010, as well as the forecast future tin prices. According to ITRI, tin prices will likely have support on the consumption side in the near future, forecasted tin prices could rise to approximately US$35,000 to US$40,000 per tonne from 2010 through 2015. When preparing the valuation of the 50% interest in the Joint Venture in March 2010, the directors of the Target Company considered the value of the Rentails project insignificant as compared to the other two mining projects, Renison and Mount Bischoff. The directors of the Target Company considered that the development of the Rentails project cannot generate future economic value to the Target Group because the investment cost to the project is higher than the revenue generated from the project based on the tin price at March 2010. Please refer to Appendix V to this circular for details.

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LETTER FROM THE BOARD

The Convertible Bonds

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

Issuer : The Company Principal amount : HK$806,500,000 Conversion Price : HK$1.47 per Share

The Conversion Shares will be issued at an initial Conversion Price of HK$1.47 per Conversion Share, subject to adjustments

Interest : No interest Transferability : the Convertible Bonds may be transferred or assigned in whole by the Bondholder(s) to any person Maturity Date : 5 years from issue date Conversion rights : The Bondholder may convert the whole (in multiples of HK$1,000,000) of the principal amount of the Convertible Bonds into the Conversion Shares at the Conversion Price for the period commencing from the date of issue of the Convertible Bonds up to the maturity date provided that:

• (i) any conversion of the Convertible Bonds will not trigger a mandatory offer obligation under Rule 26 of the Code on the part of the Vendor and parties (if any) acting in concert with it (as defined under the Code); and

• (ii) the exercise of the Convertible Bonds will not cause the Company to be unable to meet the public float requirement under the Listing Rules

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LETTER FROM THE BOARD

• Redemption : The Company shall redeem each Convertible Bond which remains outstanding on the Maturity Date at 100% of the outstanding principal amount

• Early redemption : There is no early redemption of the Convertible Bonds other than upon occurrence of the events of default as mentioned below, in which event, the Convertible Bonds would immediately become due and repayable at their principal amount

• Conversion Price : The Conversion Price is subject to adjustment upon the Adjustment occurrence of a capitalization issue, capitalization of profits and reserves, rights issue, subdivision, consolidation, reclassification or re-construction of Shares or reduction of share capital, which adjustments shall be certified by the auditor of the Company for the time being or by the auditors

• Ranking of the : The Conversion Shares, when allotted and issued, shall rank Conversion Shares pari passu in all respects with the Shares in issue on the date of allotment and issue of the Conversion Shares (except for any right excluded by mandatory provisions of applicable law)

• Ranking of the : The Convertible Bonds constitute direct, general, Convertible Bonds unconditional and unsecured obligations of the Company and rank pari passu and ratably without preference among themselves, and with other direct, unconditional, unsubordinated and unsecured obligations of the Company

• Voting : The Convertible Bonds do not confer any voting rights at any meetings of the Company

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LETTER FROM THE BOARD

Events of default

• : Upon occurrence of an event of default set out in the conditions of the Convertible Bonds, including among others, (i) default is made in the payment of the principal in respect of any of the Convertible Bonds when and as the same ought to be paid in accordance with conditions, (ii) a breach of the provisions of the Convertible Bonds and such default continues for the period of 14 days following written notice of such default, (iii) dissolution or winding up of the Company, Bondholder(s) may give written notice to the Company that the Convertible Bonds are immediately due and repayable. Upon any such notice being given to the Company, the Convertible Bonds will immediately become due and repayable at their principal amount

Basis of Conversion Price

The Conversion Price of HK$1.47 per Share represents:

• (i) a nil discount over the price per Share as quoted on the Stock Exchange on the Last Trading Date;

• (ii) a premium of approximately 21.09% over the average of the closing prices of HK$1.214 per Share as quoted on the Stock Exchange for the last 5 consecutive trading days up to and including the Last Trading Date;

• (iii) a premium of approximately 43.84% over the average of the closing prices of HK$1.022 per Share as quoted on the Stock Exchange for the last 10 consecutive trading days up to and including the Last Trading Date;

• (iv) a premium of approximately 73.62% over the average of the closing prices of HK$0.847 per Share as quoted on the Stock Exchange for the last 90 consecutive trading days up to and including the Last Trading Date;

• (v) a premium of approximately 96.99% over the average of the closing prices of HK$0.746 per Share as quoted on the Stock Exchange for the last 6 months up to and including the Last Trading Date;

• (vi) a premium of approximately 242.10% over the average of the closing prices of HK$0.430 per Share as quoted on the Stock Exchange for the last 12 months up to and including the Last Trading Date; and

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LETTER FROM THE BOARD

• (vii) a premium of approximately 96.43% over the unaudited net asset value per share of the Group as at 31 December 2009.

The Conversion Price was determined by the Company and the Vendor after negotiation on an arm’s length basis with reference to the current market price of the Shares and the terms of the Convertible Bonds.

No application will be made by the Company for the listing of the Convertible Bonds. Application will be made by the Company to the Listing Committee of the Stock Exchange for the listing of, and permission to deal in, the Conversion Shares. The issue of the Conversion Shares will be made pursuant to the specific mandate to be sought at the EGM.

Effect on shareholding structure of the Company

The shareholding structure of the Company as (i) at the date of this circular; and (ii) immediately after the full exercise of the Convertible Bonds are illustrated as follows:

Shareholder Vitar Development Holdings Limited (Note 1) Wright Source Limited_(Note 2) The Vendor(Note 3)_ Public Total	As at the date of this No. of Shares 880,000,000 560,000,000 — 1,440,000,000 2,880,000,000	circular Immediately after the full exercise of the Convertible Bonds % No. of Shares % 30.6% 880,000,000 25.67% 19.4% 560,000,000 16.33% — 548,639,456 16.00% 50.0% 1,440,000,000 42.00% 100.0% 3,428,639,456 100.00%	circular Immediately after the full exercise of the Convertible Bonds % No. of Shares % 30.6% 880,000,000 25.67% 19.4% 560,000,000 16.33% — 548,639,456 16.00% 50.0% 1,440,000,000 42.00% 100.0% 3,428,639,456 100.00%
			100.00%

Note:

1. Vitar Development Holdings Limited is owned by Mr. Leung Chau Hiu (35%), Mr. Leung Kai Wing (32.5%), Mr. Yip Sai Keung (7.5%), Ms. Leung Chun Yin (10%), Ms. Tsang Chi Yung (10%), and Ms. Wong Lai Mui (5%).

2. Wright Source Limited is owned by Mr. Cheung Wai Kuen.

3. 548,639,456 Shares to be issued upon the exercise of the conversion rights attach to the Convertible Bonds to be issued pursuant to the terms and conditions of the Sale and Purchase Agreement. The Company is confirmed by the Vendor that the Vendor is not acting in concert with Vitar Development Holdings Limited and/or Wright Source Limited and Vitar Development Holdings Limited and/or Wright Source Limited consider that they will not be treated as party acting in concert with the Vendor.

The Acquisition will not result in change of control of the Company.

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LETTER FROM THE BOARD

Conditions Precedent

Completion is subject to the following conditions having been fulfilled or waived (as the case may be):

• (i) the warranties of the Vendor and the Purchaser contained in the Sale and Purchase Agreement remaining true and accurate in all material respects and not misleading in any material respect at all times from the date of the Sale and Purchase Agreement up to and including the Completion Date;

• (ii) the passing at a general meeting of the Company by (a) shareholders of the Company of ordinary resolutions, where appropriate, approving the transaction documents and the transactions contemplated therein including, but not limited to, issuance of the Convertible Bonds and the resolutions of the board of directors approving the aforesaid matters; and (b) the independent shareholders of the Company of ordinary resolutions approving the Tin Purchase Contract and Yunnan Tin PRC Management Contract having been duly obtained;

• (iii) the Listing Committee of the Hong Kong Stock Exchange granting listing of and permission to deal in the Conversion Shares;

• (iv) in relation to the transactions contemplated in the Sale and Purchase Agreement, all relevant regulatory requirements (including but not limited to those under the Listing Rules and all relevant regulatory requirements in Hong Kong, the PRC and Australia) having been complied with and satisfied on the part of the Company;

• (v) all the necessary consents and approvals, if any, being granted and not withdrawn or revoked by third parties (including without limitation, government bodies, stock exchange and other relevant authorities having jurisdiction over the transactions contemplated under the Sale and Purchase Agreement, whether in Hong Kong, the PRC or Australia) on the part of the Vendor and the Purchaser in respect of the Sale and Purchase Agreement and the transaction contemplated thereby (including but not limited to the Yunnan Tin Share Transfer) and if such consents are granted subject to any conditions and where such conditions affect any of the parties, such conditions being acceptable to the party concerned and if, such conditions are required to be fulfilled before Completion, such conditions being fulfilled before Completion;

• (vi) the execution of the deeds of termination and discharge in respect of all of the Loan Agreements and the relevant securities documents by the parties thereto no later than 30 days after the receipt of the Deposit or such later date as agreed between the

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LETTER FROM THE BOARD

Purchaser and the Vendor to the effect that the Loan Agreements and the relevant securities documents having been terminated and discharged by the parties thereto in full and unconditionally;

• (vii) completion of the Yunnan Tin Share Transfer;

• (viii) full repayment of the Outstanding Indebtedness together with evidence of receipt of such full repayment issued by the Lenders having been delivered by the Vendor to the Purchaser no later than 7 days after the receipt of the Deposit;

• (ix) the Purchaser having completed the due diligence review and having notified the Vendor that the Purchaser is fully or substantially satisfied with the result of the due diligence review;

• (x) the Purchaser having been satisfied with the results of valuation set forth in a valuation report to be prepared by an independent valuer to be appointed by the Purchaser on the Assets including but not limited to the Tenements, whose report shall have confirmed that the fair value of the Assets shall not be less than HK$2.65 billion;

• (xi) the Target Group having obtained all licences, approvals, authorization, permission, consent, waiver and exemption (if required) from the relevant government or regulatory bodies or authorities in Australia or any other third parties to engage and carry on their respective businesses and own 50% interest in the Assets, the Tenements, the Mining Right Certificate, the Mining Leases and the Exploration Licenses as stated in the Sale and Purchase Agreement;

• (xii) the Approval being obtained;

• (xiii) no material adverse change in the Target Group and its business, assets, liabilities, tax, accounting, operations, financial conditions or prospects (including but not limited to the Assets, the Tenements, the Mining Leases and the Exploration License) has occurred since the date of signing of the Sale and Purchase Agreement;

• (xiv) no material adverse change in the Company and its business, assets, liabilities, tax, accounting, operations, financial conditions or prospects has occurred since the date of signing of the Sale and Purchase Agreement;

• (xv) the Vendor having delivered the legal opinion issued by qualified PRC lawyers in relation to the legality of the Yunnan Tin Share Transfer on part of Yunnan Tin PRC and any other matters reasonably required by the Purchaser, to the satisfaction of the Purchaser;

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LETTER FROM THE BOARD

• (xvi) the Purchaser having delivered the legal opinion issued by qualified Cayman Islands, BVI and Hong Kong lawyers in relation to the Company, the Purchaser and any other matters reasonably required by the Vendor, to the satisfaction of the Vendor;

• (xvii) the shares of the Company remaining listed and traded on the main board of the Stock Exchange at all times from the date of the Sale and Purchase Agreement to and including the Completion Date, save for:

• i. suspension of less than 30 consecutive Business Days preceding the Completion Date; or

• ii. suspension (other than on the Completion Date) on account of clearance of any announcements, circulars or any other documents in respect of any of the transactions contemplated by each Transaction Document;

and no indication being received on or before the Completion Date from the SFC or the Stock Exchange to effect that the listing of the shares of the Company on the main board of the Stock Exchange will or may be withdrawn or objected to as a result of the Completion or in connection with the terms of or any transactions contemplated by the Sale and Purchase Agreement;

• (xviii) the obtaining of a technical report from technical advisers appointed by the Purchaser providing an independent technical assessment of the Assets;

• (xix) the Stock Exchange not having indicated that it will treat (i) the transactions contemplated under the Sale and Purchase Agreement as a “reverse takeover” under Rule 14.06(6) of the Listing Rules and/or (ii) the Target Group as a new listing applicant under Rule 14.54 of the Listing Rules;

• (xx) the Vendor having delivered the legal opinion issued by qualified Hong Kong lawyers in relation to the Target Company and Yunnan Tin HK and any other matters reasonably required by the Purchaser, to the satisfaction of the Purchaser;

• (xxi) the Vendor having delivered the legal opinion issued by the qualified Australian lawyers in relation to YT Parksong Australia, the Joint Venture, the Management Company, the Assets, the Mining Leases, the Exploration Licenses, the Tenements, the renewability issue for the Mining Leases and the Exploration Licenses, the matters mentioned in Conditions (v) and (xi) and any other matters reasonably required by the Purchaser, to the satisfaction of the Purchaser;

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LETTER FROM THE BOARD

• (xxii) the completion of novation of the Yunnan Tin PRC Debt to the Vendor in place of the Target Company with the result that the Target Company will not have any rights or obligations under the Yunnan Tin PRC Debt;

• (xxiii) the execution of the Tin Purchase Contract and the Yunnan Tin PRC Management Agreement by the parties thereto; and

• (xxiv) receipt by the Purchaser from the Vendor of the consolidated audited balance sheet of the Target Company from the date of its incorporation to 30 June 2010 no later than 8 weeks from the date of the Sale and Purchase Agreement.

One of the conditions precedent to Completion is that the Purchaser needs to be satisfied with the results of a valuation report to be prepared by an independent valuer appointed by the Purchaser on the Assets including but not limited to the Tenements which shall confirm the fair value of the Assets shall not be less than HK$2.65 billion. The Company has been informed by the Valuer the valuation has been based on long term metal prices and exchange rates and the Valuer has determined an appropriate set of base case parameters to determine the net present value of the Renison project, and has then reviewed the outcome in terms of the sensitivity to adjustments in the base case parameters, thereby deriving a range of upside and downside valuations. For the Rentails project, the Valuer has reviewed a number of valuation approaches, including discounted cash flow, past expenditure and yardstick methods. Mount Bischoff is currently on care and maintenance but has been a significant tin producer in the past and still retains a significant exploration potential. The Valuer has considered the value of the Mount Bischoff project in terms of its potential as a future source of ore supply to the Renison plant. In terms of Chapter 18 requirements of the Listing Rules, the Valuer has limited the valuation to reserves and Measured and Indicated resources, excluding any potential contribution from Inferred resources. As of 30 September 2010, the Assets were valued at approximately AUD442.1 million (approximately HK$3.45 billion) under the most likely scenario. As such, the Directors consider that such condition of the Sale and Purchase Agreement has been fulfilled. A copy of the valuation report of the Assets prepared in accordance with the requirements of Chapter 18 of the Listing Rules is set out in Appendix V of this circular. Key assumptions of the valuation are set out therein.

No separate Australian legal representative has been engaged by the Company, and the Board has relied on the legal opinion issued by a qualified Australian legal adviser that has been provided by the Vendor with a view to fulfilling the condition numbered (xxi) to the Sale and Purchase Agreement and such reliance has expressly been permitted in the said legal opinion. As part of its due diligence, the Company has reviewed the licences and approvals obtained by the Joint Venture.

As at the Latest Practicable Date, the condition numbered (vi), (vii), (viii) and (x) have been fulfilled. According to the Supplemental Deed, conditions numbered (ii)(b) and (xxiii) has been waived and condition number (xxiv) has been amended in which event the date for receipt by the Purchaser from the Vendor of the consolidated audited balance sheet of the Target Company should be extended to the Completion Date. Other conditions remain outstanding for fulfilment. In the event that any of the conditions precedent above has not been fulfilled or waived on or before the long stop date which is extended to

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LETTER FROM THE BOARD

28 February 2011 from the original long stop date of 30 December 2010 pursuant to the Third Supplemental Deed, the parties shall not be bound to proceed with Completion; the Sale and Purchase Agreement shall terminate forthwith except for any antecedent breaches of the terms of the Sale and Purchase Agreement.

The Company is currently in discussion with Yunnan Tin PRC and YT Parksong Australia on the terms of both the Tin Purchase Contract and the Yunnan Tin PRC Management Agreement. The Director consider that additional time will be required for the discussions to come to a conclusion. Therefore, the Directors have decided to waive conditions numbered (ii)(b) and (xxiii) so that the Sale and Purchase Agreement can complete once all other conditions are fulfilled. While the majority of Target Group’s tin concentrate has been sold to Yunnan Tin PRC, the Target Group does sell its tin concentrate to other customers such as a major tin smelting corporation located in Malaysia which, as far as made known to the Directors, is the major customer of the tin concentrate of BMT. Further, tin is a commodity product and demand is expected to remain strong. Taking into account of the above factors, the Directors believe that YT Parksong Australia would be able to sell its tin concentrate from the Assets to other customers in the readily available market without difficulties in the event that Yunnan Tin PRC does not purchase from the Target Group. In terms of the management of the Assets, considering the Joint Venture is already in operation with majority of the members of the management team stay behind and the Target Group entered into the Services Agreement with BLA on 15 July 2010 pursuant to which management support is readily available upon the Completion.

In this regard, the Directors do not envisage any major obstacle in finalising the Tin Purchase Contract and the Yunnan Tin PRC Management Agreement. It is only that the Directors consider that both parties could be better prepared to discuss and with a view to finalise those contracts once the Acquisition is completed and the Company becoming the major shareholder of the Target Group. The Directors would work towards signing of the Tin Purchase Contract and the Yunnan Tin PRC Management Agreement as soon as practicable thereafter.

As referred to below, majority of the tin output is sold to Yunnan Tin PRC. The current sales contract between YT Parksong Australia and Yunnan Tin PRC will expire in March 2011. Any sale to Yunnan Tin PRC will constitute connected transaction under the Listing Rules upon Completion and the Company will comply with relevant requirements under the Listing Rules as required.

Completion

Subject to the fulfillment or waiver (as the case may be) of the conditions precedent above, the Completion shall take place at 4:00 p.m. on the Completion Date. Upon Completion and as a result of the Acquisition, there will be no change in control of the Company and the Target Company will become a subsidiary of the Company. The financial statements of the Target Company will be consolidated in the accounts of the Group after Completion.

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LETTER FROM THE BOARD

INDUSTRY OVERVIEw

Introduction to tin

Tin is a non-toxic silvery-white metal and is recognised as one of the oldest metal known in history. Unlike other metals, tin does not occur naturally by itself and must be extracted from base compounds, usually cassiterite (SnO2). The distinctive properties of tin are its low melting point and its resistance to corrosion. Due to these unique properties, tin is almost always used in combination with other metals as an alloying element or as a coating to resist corrosion.

Major economic uses of tin include electrical solders, plating other metals, metal containers, chemical use and glass plating. Electrical solder alone accounts for approximately half of the tin consumption, of which, 75% of tin solders are used in the electronic industry. Solder is a fusible metal alloy with a melting point or melting range of 90 to 450 degree Celsius, used in a process called soldering where it is melted to join metallic surfaces. In recent years, high growth in the electronic industry has supported the gradual increase in the use of tin solder.

Tin plating accounts for 18% of the global output; it is mainly used for paints, chemicals and beverage packages. The tin-plating process is used extensively to protect both ferrous and nonferrous surfaces. Tin is a useful metal for the food processing industry due to its non-toxic and ductile properties. The excellent ductility of tin allows a tin coated base metal sheet to be formed into a variety of shapes without damage to the surface tin layer. It provides sacrificial protection for copper, nickel and other non-ferrous metals.

Breakdown on tin global consumption in 2009

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Others
Glass 9%
2%
Tin alloys
5%
Solder
Tin
52%
chemicals
15%
Tinplate
18%
----- End of picture text -----

Sources: ITRI

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LETTER FROM THE BOARD

Tin ore reserves

Tin metal is the 49th most abundant element comprises only approximately 0.002% of the Earth’s curst, with an estimated global detected reserves of 6.1 million tonnes according to the U.S. Geological Survey. No major tin reserves were discovered during the past 20 years. It is projected at current consumption rate and technologies, the reserve will run out within the next 40 years.

China, Indonesia and Peru currently represented approximately 30%, 14% and 13% of the reserves respectively.

Breakdown of tin reserve by countries in 2008

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

Others
24%
China
30%
Malaysia
9%
Brazil Indonesia
10% 14%
Peru
13%
----- End of picture text -----

Sources: USGS

global Tin Production

In 2009, total worldwide tin production was approximately 323,400 tonnes, less than the peak production of 355,000 tonnes in 2006. The output figure did not change substantially due to supply constraint globally. Authorities in Indonesia have been cracking down heavily on the small scale mining and smelting sector due to environmental concerns and this would likely drag down the tin production in Indonesia.

global Tin Supply and Demand

(tonnes)	2006	2007	2008	2009	2010	2011	2012
Refined Production	355,000	345,000	326,000	323,400	324,400	336,500	350,000
Refined Consumption	362,000	356,000	342,000	300,400	348,800	355,200	364,000
Supply/Demand Gap	(7,000)	(11,000)	(16,000)	23,000	(24,400)	(18,700)	(14,000)

Sources: ITRI

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LETTER FROM THE BOARD

China and Indonesia, both supply approximately one-third of the total Tin mining production. According to ITRI, the industry is heavily concentrated with the ten largest players accounted for approximately 75% of the global production. In China, the two largest producers Yunnan Tin and Yunnan Chengfeng alone represented approximately 17% and 5% of global output respectively.

Top 10 Tin Producers in 2009

(tonnes)

Ranking	Company	2005	2006	2007	2008	2009
1	Yunnan Tin (China)	42,720	52,399	61,129	58,371	55,898
2	PT Timah (Indonesia)	41,799	44,689	58,325	49,029	45,800
3	Minsur (Peru)	38,180	40,977	35,940	37,960	33,920
4	Malaysia Smelting Corp (Malaysia)	37,782	22,850	25,471	31,630	36,407
5	Thaisarco (Thailand)	31,539	27,828	19,826	21,731	19,300
6	Yunnan Chengfeng (China)	12,616	21,765	17,064	13,500	14,947
7	EM Vinto (Bolivia)	11,826	11,804	9,448	8,800	11,805
8	Liuzhou China Tin ( China)	15,562	13,499	13,193	12,000	10,500
9	Metallo Chimique (Belgium)	7,727	8,049	8,372	9,228	8,690
10	PT Koba Tin (Indonesia)	21,380	20,930	7,724	7,109	7,455

Sources: ITRI

Tin Demand

Tin demand had been well supported by two main factors including the gradual recovery in the world economy and regulation in favour of tin-related products. For emerging economies, electronic production had been back to pre-financial crisis levels with improved sales in global electronic sales and world consumption of tin are expected to increase by approximately 12% to 348,800 tonnes in 2010. According to PRC Custom, the growing demand of tin and the appreciation of Renminbi over the past years had turned China into a net importer of tin starting in 2008. Other countries like Malaysia, the tin output simply cannot meet its local demand. As a complementary metal, Tin demand had also been supported by a series of movement in banning of leaded products. In 2006, the EU and China both placed a ban on the use of lead made solder. In addition, US prohibited all usage of leaded products in 2008.

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Tin Consumption by Region in 2009

==> picture [184 x 151] intentionally omitted <==

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

Others
1%
America
15%
Asia
67%
Europe
17%
----- End of picture text -----

Sources: ITRI

Tin Industry in Australia

According to the Australian Government, Australia was ranked eighth in the world with approximately 2% of the world’s tin reserve. In 2009, Australia produced approximately 5,900 tonnes of tin and exported approximately 2,784 tonnes of tin concentrates in 2008.

MLX is the main tin mining and exploration company in Australia with production of approximately 2.5% of the global supply of tin from its Mount Bischoff and Rension mines. Rension area contains more than 85% of Australia’s economic tin resources. Other major tin mine is located in Greenbushes in Western Australia, where tin is recovered along with tantalite (a tantalum mineral) from a weathered primary deposit.

While the Assets are located in Australia, an overview of the tin industry in the PRC has been set out in the following paragraphs because of the fact that China accounts for approximately one-third of the world’s total consumption of tin output and the Target Group has been selling and expects to continue to sell majority of its tin output to Yunnan Tin PRC, the largest tin producer in the world.

Tin Industry in PRC

According to the USGS report in 2008, China is a major supplier of tin resources, with basic reserves of tin ores of 1.7 million tonnes, accounting for 27% of basic tin reserves of the world. With respect to production volume, China’s tin concentrates represents about one-third of total volume of the world. The production volume of China’s refined tin was 134,500 tonnes in 2009, rising by 10% over the output in 2008. Since February 2010, Chinese production showed strong surge in output. It is expected that production volume of tin in China will likely stay on the current level due to supply constraint in tin reserves.

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Tin consumption in PRC

Expansion of tin use in China is the key driver behind significant growth of tin consumption. For example, there are many float glass being constructed on buildings in China, leading to significant growth of tin use; in addition, the electronic industry are using tin solders as a replacement for lead solders.

China consumes about one-third of the world’s output, equivalent to the aggregate consumption amount of the US, EU and Japan. In the first half of 2010, China’s IC production (which relies on the use of tin) totalled to 30.2 billion units, represented an increase of 49% from 2009.

Competition within PRC

There are a number of factors that have discouraged new entrants from entering the market. The utmost factor is the large investments required to perform tin mining process consisting of tin extraction, refining and processing procedures. Investments are also required to have the appropriate equipment in order to comply with environmental regulation in emission standards.

Another factor is the supply constraint of tin, no major tin reserves were discovered over the past decade.

As a result, China’s tin manufacturers are highly concentrated. Among the main players across China, production volume of top 3 accounts for 52% of China’s tin production. Equipment, technology, quality management and development capabilities of key players such as Yunnan Tin Co., Ltd. and Guangxi China Tin Group Co., Ltd. have all reached advanced level of the world. Tin ingots from key producers are also registered in London Metals Exchange and enjoy strong competitiveness in the international market.

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Tin Price

Similar to other metal industries, tin price has responded cyclically to the general economy conditions. In 2010, tin price has continued to show strength due to a gradual recovery of the global economy. As at the Latest Practicable Date, Tin price is at US$26,577 per tonne. The high price is contributed by: (i) ongoing supply constraint in tin fundamentals; and (ii) recovery of the economy and demand of tin. With a limited tin reserve left in existing mines, accessible of tin ore has become scarce. In countries particularly like China, which approximately accounts for one-third of the consumption, greater demand of tin will be supported from expansion in IC production and other tin related products. According to ITRI, tin prices will likely have support on the consumption side in the near future, forecasted tin prices could rise to approximately US$35,000 to US$40,000 per tonne from 2010 through 2015.

LME Tin Price in 2007-2010

==> picture [375 x 139] intentionally omitted <==

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

(US$/tonne) Closing Price at the
30,000 Latest Practicable Date:
US$26,577/tonne
25,000
20,000
15,000
10,000
5,000
0
4/1/2007 4/1/2008 4/1/2009 4/1/2010
----- End of picture text -----

Source: Londom Metal Exchange

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Production process of tin

The production process is highly energy and capital intensive. The diagram below illustrates the main production methods that are commonly used in tin mining:

==> picture [315 x 274] intentionally omitted <==

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

Ore Extraction
Dredging Hydraulic Open Cast Underground
Mining Mining Mining
Ore Treatment
Jigging
Tabling
Smelting/Refining
Electrolytic Reverberatory
Fire Refining
Refining Furances
----- End of picture text -----

Ore Extraction

Dredging

An excavation activity used commonly in South East Asia, dredging is used for recovering Tin ore from river beds and from beneath artificial lakes, paddocks and sea beds. The dredges can move across water and dig out tin sediments and elevating to the mineral processing plant on board.

Hydraulic Mining

Alluvial deposits of tin materials on hilly landscape are usually worked hydraulically by method known as gravel pump mining. This method mainly utilizes high pressure water jets to remove alluvial deposits containing tin minerals.

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Open cast Mining

Open cast mining is a less common method of tin mining. The main process is to remove the ore using mechanical shovels, excavators or manual labour instead of hydraulic means.

Underground Mining

Vein deposits are recovered by underground mining, normally accessed by sinking vertical or inclined shafts with horizontal tunnels driven from these main shafts so as to intersect the veins at a right angle. Holes are drilled into the rocks so that explosive charges can be detonated and can be loaded toward the processing plant

Ore Treatment

Since tin content is very small in typical ore, extensive pre-treatment is needed in order to produce high grade tin concentrate for smelting and obtain the metal. Jigging and tabling are the most commonly used methods in ore treatment.

Jigs

Typically, the first stage involves a rectangular tank filled with water and a metal screen on top. The ore enters on one side of the screen and ore particles are separated by pulsing water. Through this process, the lighter minerals are carried over by the flow of water with the tin concentrated leaving behind in the tank.

Shaking Table

Once the ore are in finer size, the use of shaking table will be appropriate. The shaking table with longitudinal ridges or ripples is often used, which causes the particles to become stratified with the cassiterite remaining.

Smelting/Refining

To obtain tin metal from concentrates, common methods used includes: (i) electrolytic refining, (ii) reverberatory furnaces; and (iii) fire refining.

Electrolytic Refining

This type of refining is frequently used for recovering tin from tin-bearing scrap. By passing through electricity, many impurities originally traced in the tin are removed and transforming into high pure grade tin.

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Reverberatory Furnaces

Normally used in tin smelting, the tin concentrate along with carbon in the form of either fuel oil or coal are processed and controlled at high temperature furnace of approximately 1300 to 1400° Celsius. Many agents including anthracite and coal are reduced within the furnace to form carbon monoxide and tin.

Fire Mining

The fire mining method consists of one or both processes of liquating and boiling. Since tin has a melting point less than most metals, liquating can be used by raising the temperature of the furnace. Through this process, only tin is melted. This process can effectively removed iron, copper and arsenic. To achieve higher purity, boiling will be appropriate through rapid stirring of the molten tin. Most of the impurities will rise to the surface to form a scum and the refined tin purity can reach up between 99.75% to 99.85%.

INFORMATION ON THE TARgET gROUP

Shareholding Structure of the Target group

As at the date of the Sale and Purchase Agreement, Yunnan Tin HK was owned as to 55% interest by the Target Company while the remaining 45% interest was held by Yunnan Tin PRC. Under the Sale and Purchase Agreement, the Target Company would acquire from Yunnan Tin PRC its 27% shareholding in Yunnan Tin HK and holds 82% of the issued share capital of Yunnan Tin HK following signing of the Sale and Purchase Agreement but before Completion. This acquisition has been completed.

At present (as depicted in the shareholding structure diagram on page 18), the Vendor is the registered and beneficial owner of the entire issued share capital of the Target Company, which in turn holds 82% issued share capital of Yunnan Tin HK, which through YT Parksong Australia holds 50% interest in the Assets. Upon completion, the Company through the Purchaser will indirectly own 50% interest in the Assets and the Tenements free from all the Encumbrances and will be assigned with the shareholder loans due to Mr. Chan upon Completion as part of the Consideration. As at 30 November 2010, the outstanding amount of shareholder loans was approximately HK$596,546,000. The remaining 50% interest in the Assets is held by BMT, a wholly owned subsidiary of MLX. BMT has granted a call option to YT Parksong Australia to purchase from BMT a further 10% of Assets exercisable by written notice to BMT and expiring 24 months from 18 March 2010 on the terms that (i) YT Parksong Australia shall make a payment of AUD10,000,000 to BMT within 12 months from 18 March 2010; (ii) if YT Parksong

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Australia shall exercise the call option after 12 months from 18 March 2010, YT Parksong Australia shall pay BMT AUD10,000,000 provided that (a) greater than 6,000 tonnes of contained tin in concentrate is produced; and (b) the costs attributable to the production of tin in concentrate excluding costs incurred on the purchase of land, buildings, plant and equipment, mine development and exploration, depreciation, the cost of financing and income taxes costs incurred beyond the mine gate and royalties paid to the Government of Tasmania for the same period are no greater than AUD14,403.46 per tonne of tin in concentrate produced; and (iii) if (a) and (b) above are not achieved, the exercise price of the call option shall be reduced by 50% to AUD5,000,000. It is the Company’s intention to exercise the call option granted by BMT to further acquire 10% of the Assets.

Similarly, YT Parksong Australia has granted a put option to BMT exercisable at any time in the period between 12 months after 18 March 2010 and 24 months after 18 March 2010 to require YT Parksong Australia to further purchase 10% of the Assets for AUD10,000,000 provided that (a) and (b) above have both been achieved within 12 month period after 18 March 2010. Otherwise, the put option will lapse immediately at the end of the period.

The Company will seek shareholders’ approval for the exercise of the call option at the EGM pursuant to Rule 14.76(2) of the Listing Rules. Given the shareholders’ approval for the exercise of the call option would have been obtained, the Company would make an announcement in accordance with the Listing Rules in the event that the call option is exercised. Also, the Company will make an announcement in accordance with the Listing Rules in the event that the put option is exercised. Further, the Company will comply with Chapter 14A of the Listing Rules if BMT becomes a connected person of the Company when the call option is exercised and, in such situation, the Company will seek approval for the exercise of call option in the general meeting of the Company.

Joint Venture

According to the JV Agreement entered into among YT Parksong Australia, Yunnan Tin PRC, BMT on 28 January 2010, the Joint Venture in the form of an unincorporated joint venture which is a common form of joint venture in Australia was established in Tasmania by YT Parksong Australia and BMT as to 50% and 50% respectively and engaged in the business of management of future Mining Operations. The consideration paid by the YT Parksong Australia in respect of the JV Agreement was AUD51,225,000.

According to the Australian legal opinion, unincorporated, contractual joint ventures are a well established and accepted legal method of carrying out joint venture activities in Australia. YT Parksong Australia and BMT each has a 50% Participating Interest in the Assets and has a legally enforceable contractual right to receive in kind and to dispose

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of for its own account the percentage of product equivalent to its Participating Interest. As such, there is no profit sharing arrangement between YT Parksong Australia and BMT pursuant to which the profits of the Assets should be shared between the two parties according to their interests in the Joint Venture. There is no sharing of profits and losses between YT Parksong Australia and BMT but a pro rata entitlement to the ore that is mined and a pro rata obligation to contribute to the costs of the Joint Venture.

Annual budget is prepared by the Joint Venture for approval by the Management Committee with members of both the Target Company and BMT.

There is no fixed period of the Joint Venture. However, pursuant to the JV Agreement, the term of the Joint Venture shall continue until the occurrence of any of the following events:

• (a) YT Parksong Australia and BMT agree in writing to terminate the Joint Venture;

• (b) the Management Committee determines by unanimous consent that all economically recoverable reserves of all mineral or metallic ores, concentrates, metals and other mineralised products in the mining area have been recovered;

• (c) the Management Committee determines by unanimous consent that the Joint Venture Activities should cease due to a failure to obtain approval under the laws and regulations in Australia; or

• (d) YT Parksong Australia and BMT cease to hold any interest in any Tenement.

Management Committee

Pursuant to the JV Agreement, the Management Committee would be responsible to decide all matters relating to the conduct of the Joint Venture Activities, including but not limited to (i) establishing policies from time to time covering the Joint Venture Activities; (ii) approving cost overruns by the Management Company under a programme and budget relating to the Joint Venture Activities for a particular period which has been approved or deemed to have been approved by the Management Committee; and (iii) appointing the auditor of the Joint Venture. Save as the following matters which shall be decided with the unanimous consent of the members of the Management Committee, all other matters shall be decided by the Management Committee by the majority vote:

• (a) authorizing the manager of the Joint Venture to relinquish or dispose of any of the Tenements or any interest therein, other than for the purpose of obtaining a substituted or alternative form of the Tenement in accordance with the Mining Act;

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LETTER FROM THE BOARD

• (b) making a substantial change in the nature or scope of the Joint Venture Activities;

• (c) incurring capital expenditure in excess of AUD 20 million in any year;

• (d) disposing of assets comprising part of the Joint Venture Property with a fair market value in excess of AUD1 million per asset, or AUD2 million for more than one asset if those assets are usually acquired or disposed of in combination or in multiples;

• (e) ceasing or suspending all operations associated with the extraction of ore, or resuming the said operations previously suspended by the decision of the Management Committee;

• (f) encumbering the Joint Venture Property to secure borrowings;

• (g) developing the proposed project involving the retreatment of historical tailings without feasibility study being carried out; and

• (h) any other matters which, under the JV Agreement, requires to be reached with the unanimous consent of the members of the Management Committee.

The Management Committee consists of six members, three from YT Parksong Australia and three from BMT. The Management Committee will meet bi-monthly to review the mine operation (e.g. problems and measures) and also set out new working plan for future operation such as methods to increase production output, etc.

Currently, the six members of the Management Committee are Dr. Gao Wenxiang, Mr. Chan Kon Fung and Mr. Robin Chambers who are the representatives of YT Parksong Australia and Mr. Scott James Huffadine, Mr. Warren Shaye Hallam and Mr. Paul Cmrlec who are the representative of BMT. Dr. Gao is the vice-chairman of the world’s biggest tin producer Yunnan Tin Group. He has more than 20 years of mining engineering and geology experience. Mr. Chambers is an Australian lawyer who has more than 30 years of experience in resources. Mr. Chan has more than five years of experience in tailing retreatment project and financial investments. Mr. Huffadine is a geologist who has more than eight years of experience in geology, Mr. Hallam is a metallurgist who has more than 25 years of experience in metallurgy work and mineral economics, both of them are directors of MLX and Mr. Cmrlec is the chief mining engineer in MLX who has more than eight years of experience in geology and oversees all the underground mining plans for the mines of MLX.

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Upon Completion, the Company would be entitled to appoint three representatives to the Management Committee to involve in the decision making of matters related to the Joint Venture as well as to monitor the performance of the Joint Venture through regular meetings and reviewing periodic reports including daily, weekly and monthly reports prepared by the Management Company. Information in the daily report includes (i) the daily performance of the mine, (ii) whether there is any accident happened, (iii) the amount of ore extracted from underground, (iv) the tonnes of tin process in the processing plant and (v) certain financial information on the mine. Weekly and monthly reports focus on the underground mining, ore processing and geology information. The weekly and monthly reports also contain summary of the daily reports as well as details of performance of each department of the Joint Venture. The Management Committee members will meet every two months to discuss about the issues/problems faced by the Joint Venture and formulate measures to resolve problems encountered by the Joint Venture. Budget for the next two months will also be discussed by the Management Committee during their meetings. With the established measures and mechanism mentioned above, the Company considered that through the involvement in the Management Committee, the Company’s interest in the Joint Venture could be safeguarded.

According to the JV Agreement, whenever there is equal vote in the Management Committee, the decision in dispute will be considered at two further meetings of the Management Committee in order for YT Parksong Australia and BMT to seek to reach an agreement on the issue.

If an agreement has not been reached after the meetings of the Management Committee then no less than fourteen days after the conclusion of the third meeting either YT Parksong Australia or BMT may elect to have a deadlock expert, a qualified expert who is independent of both YT Parksong Australia and BMT or appointed by the president of the Australasian Institute of Mining and Metallurgy at the request of either YT Parksong Australia or BMT, to determine whether the proposed decision should be made.

If the deadlock expert determines that the proposed decision should be made the proposed decision will be deemed to have been made and adopted by the Management Committee. The deadlock expert will accept submission from YT Parksong Australia and BMT and will make a decision according to what the deadlock expert reasonably considers to be in the best interests of YT Parksong Australia and BMT having regard to the objects of the Joint Venture.

YT Parksong Australia and BMT will bear the costs of the deadlock expert in accordance with their respective interest in the Joint Venture.

According to the JV Agreement, the meeting of the Management Committee shall be held at least once a year for approving a work programme and budget for the forthcoming year or period in relation to the conduct of the Joint Venture Activities and meetings of the Management Committee are also held bi-monthly or as otherwise agreed.

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The Joint Venture prepares budget annually and this annual budget is approved by the Management Committee with members of both the YT Parskong Australia and BMT. Source of funding for any capital commitment in the approved budget of the Joint Venture will be financed through internal resources of the Target Group.

The Company is currently in discussion with Yunnan Tin PRC in relation to the Yunnan Tin PRC Management Agreement and the Directors do not envisage any major obstacle in finalising the agreement and consider that the parties involved could be better prepared to discuss and finalise the agreement once the Acquisition is completed and the Company become the major shareholder of the Target Group. The Company will either directly participate in the Management Committee or will engage Yunnan Tin PRC to assist in running the business. Upon Completion, the Yunnan Tin PRC Management Agreement to be entered into will constitute connected transaction of the Company and the Company shall comply with relevant requirements under Chapter 14A of the Listing Rules for obtaining shareholders approval where necessary.

For daily operation of the Joint Venture, the Management Company has entered into Services Agreement with BLA to engage personnel for providing supporting services. BLA is the holding company of BMT and its key management includes Mr. Scott James Huffadine and Mr. Warren Shaye Hallam. Both individuals are also representatives in the Management Committee. In consideration of the services provided by BLA under the Services Agreement, the Management Company shall pay to BLA a service fee, which is charged on an hourly or weekly basis, within 14 days after issue of an invoice for such fee from BLA. The following services are provided by BLA pursuant to the Services Agreement which endure indefinitely unless terminated by either party within one month written notice to the other party:

Handling of purchase orders

BLA is responsible for matching invoices to purchase orders sent from the site and if there are any variations, the invoice will require authorising otherwise it can be processed.

Processing of invoices

BLA will process the invoices and draw payments once a month. No cheque or cash will be handled by BLA staff. They will be responsible for preparation only and check for compliance with the Management Company’s prudential control systems. All cheques will be presented for signing and approval by two authorised signatories from the Management Company.

Payroll

BLA is responsible for payroll function including signing on new staff, establishing payroll links, collection and management of staff record, superannuation, group tax, payroll tax and leave reconciliation.

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General accounting

BLA will assist with general accounting functions including GST/BAS, diesel rebates, capital management, production of management and financial accounts.

Company Secretarial

BLA’s Company Secretary can be appointed as the Company Secretary of the BMTJV to provide corporate services based on an hourly charge.

IT Support

BLA will provide IT support and consulting services in relation to the Management Company’s software and system.

Geological Services

BLA will assist in the provision of geological services of the Joint Venture operations upon request. These include resource modeling, data review, program design and reserve reconciliations.

Mining Engineering Services

BLA will assist in providing mining engineering services including peer review of engineering projects, support in the areas of ore reserve calculation, mine planning and any other related request for the Joint Venture operations.

General Services

BLA will provide general mine management support upon request by the General Manager of the Management Company.

Since the Joint Venture has already been in operation before the Acquisition, BLA will remain responsible to the daily operation and staff management of the Joint Venture. To ensure the daily operation is in performance, the Management Company supervises the Joint Venture through ongoing monitoring of the Joint Venture’s daily operation operated by BLA. The role of the Management Committee is to oversee all major matters faced by the Management Company when it manages the Joint Venture. The Company considers the direct participation of its management in the Management Committee upon Completion would enable the Company to effective control and protect its interest in the Joint Venture.

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YT Parksong Australia has also entered into a Concentrate Services Agreement with BLA which endure indefinitely unless terminated by either party with 1 month written notice to other party. Pursuant to the Concentrate Services Agreement, YT Parksong Australia shall pay to BLA the services fee based on the hourly rates worked by BLA’s employees, officers or contractors on a monthly basis. BLA will negotiate and conclude an agreement for sale of tin concentrate on behalf of YT Parksong Australia. If BLA executes or otherwise enters into a sale agreement in relation to YT Parksong Australia’s tin concentrate, then BLA will enter into such sale agreement as agent for YT Parksong Australia and YT Parksong Australia will be bound by the sale agreement as principal.

As of today, on behalf of YT Parksong Australia, BLA has negotiated the indicative terms and conditions of the sales contract selling tin concentrates to a Malaysian customer for a term from April 2010 to December 2010.

The Directors consider that there is no reliance issue with respect to the engagement of BLA as the daily operation of the Joint Venture is carried out and managed by the staff of the Joint Venture and who are in turn managed by the Management Company. Services are only provided by BLA when need arises such as when the Joint Venture requires specific task to be performed by BLA and BLA is able to offer a lower than market rate because of the expertise and the support it receives from MLX. YT Parksong Australia does not rely on BLA to negotiate its sales contracts and BLA does not negotiate the sales contract for YT Parksong Australia except for the contract with the Malaysian customers. The entering of the Concentrate Services Agreement with BLA was for the purpose of formalizing its sale and purchase relationship with the Malaysian customers.

In addition to the sales contract with the Malaysia customer, YT Parksong entered into a sales contract with Yunnan Tin Co., Ltd for a term from April 2010 to March 2011. The term of the sales contract with Yunnan Tin Co., Ltd will not be extended upon expiration since the Company is currently in discussion with Yunnan Tin PRC and YT Parksong Australia on the terms of the Yunnan Tin Purchase Contract and the Company considers that the parties involved could be better prepared to discuss and finalise the contract once the Acquisition is completed and the Company become the major shareholder of the Target Group. The Director would work towards signing of the Yunnan Tin Purchase Contract as soon as practical thereafter. Upon Completion, the sales of tin concentrate to Yunnan Tin Co., Ltd under the current sales contract or under the Yunnan Tin Purchase Contract to be entered into will constitute connected transaction of the Company. The Company shall comply with relevant requirements under Chapter 14A of the Listing Rules for obtaining shareholders approval where necessary.

Competitive Advantage of the Target Company

The Acquisition constitutes an investment into the Assets which is operated by a joint venture with MLX, the largest tin producer in Australia and a major resource group with a portfolio of metal assets and engaged in the exploration and production of tin, nickel, gold, copper, zinc, phosphate, uranium, lead and tungsten. The Target Company and MLX jointly engage in the management of the mining operations. The Target Company is expected to benefit significantly from the operational experience of MLX.

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Being a scarce and valuable metal, tin has very high commercial value and relatively stable demand despite the recent global economic fluctuation. Supply shortage of tin is estimated to continue in the near future. While no major tin reserves were discovered in the past 20 years, the Assets represent approximately 2.5% of the global supply of tin and 85% of Australia’s economic tin resources and the Rentails project of the Target Company would be able to carry out retreatment of tin tailings to produce tin concentrate.

The Assets held by the Target Company are currently in operational condition. This enables the Group to generate income while at the same time save additional start-up investments. The tin mines at Tasmania are well-known and well-studied which provide additional comfort to the customers in terms of reliable and quality supply. The existing management team of the Joint Venture also comprises members with industry expertise and extensive management experience.

Permits and licenses of the Target group

The mining industry and minerals are regulated in Australia at the state and territory level. Each state has a mining act and regulations that regulate the ownership of minerals and operation of mining activities in that state. Mining rights in Australia are protected by legislation that prohibits prospecting for or mining minerals otherwise than in accordance with the terms of a valid mining tenement. The Tenements are situated in Tasmania and the relevant legislation in connection with them is the Mineral Resources Development Act 1995. The Department of Infrastructure, Energy and Resources administers mining law in Tasmania.

The Target Company and BMT are validly registered on the Register of the Tasmanian Department of Infrastructure, Energy and Resources as the holders of Mining Leases 12M/95, 12M/2006 and 2M/2008 and the holder of Exploration Licence EL 72/2007. The Management Company is validly registered as operator of Mining Leases 12M/95, 12M/2006 and 2M/2008 and the holder of Exploration Licence EL 72/2007.

According to the legal opinion of the Australian legal adviser of the Vendor, YT Parksong Australia has obtained all relevant licences and approvals required for the conduct of its business required under the laws of Victoria and Tasmania. The Australian legal adviser is not aware of any licences/permits/certificates required for the operation of the Assets that are pending for approval. Neither YT Parksong Australia nor BMTJV holds a prospecting, retention or miscellaneous purpose licence. There is no native title licence in Tasmania.

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Renison Mining Tenements

The Renison mine is located within the 4,662ha Consolidated Mining Lease 12M/95, which was granted for a period of 21 years from 1 August 1995 to 1 August 2016, and is for all minerals. Bluestone purchased the property in March 2004 and ML 12M/95 was transferred from Renison Bell Limited to BMT on 17 April 2004. ML 12M/95 is currently jointly held by BMT and YT Parksong Australia Holding Pty Limited.

The tenement conditions preclude mining within 15m of the surface beneath the Murchison Highway and privately owned land, or within 30m of surface beneath TasRail’s Emu Bay Railway.

Mount Bischoff Mining Tenements

The Mount Bischoff tenement holdings comprise a granted Mining Leases 12M/2006 and 2M/2008.

Description of the Tenements

Renison Mine	Area (Hectares)	granted Date	Expiry Date
Consolidated Mining Lease 12M/95	4,662	1 August 1995	1 August 2016
Mount Bischoff
Mining Lease 12M/2006	382	28 August 2007	28 August 2014
Mining Lease 2M/2008	3	29 April 2008	29 August 2014
Other related license(s)
Exploration License EL72/2007	2,400	4 April 2008	04 April 2013

Business of the Target group

The Target Company is an investment holding company and it was incorporated on 16 July 2008 and commenced the metal tin mining in Tasmania, Australia through the Joint Venture with MLX in March 2010 in respect of the Assets. MLX is an emerging diversified resources group listed on the Australian Securities Exchange which has a portfolio of metal assets and engaged in the exploration and production of tin, nickel, gold, copper, zinc, phosphate, uranium, lead and tungsten. MLX is Australia’s largest tin producer producing

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approximately 2.5% of the global supply of tin. MLX recorded a strong financial position in financial year ended 2010 with cash and cash equivalents of AUD29.5 million and no corporate debt. It returned to profitability during the year posting an after tax profit from its continuing operations for the year of AUD$12.6 million.

The Target Group holds 50% interest in the Assets located in Tasmania which comprises of (i) the Renison mine, concentrator and infrastructure, (ii) the Mount Bischoff open cut tin project and (iii) the Rentails tailings retreatment project.

As additional time is required to discuss the terms of the Tin Purchase Contract and the Yunnan Tin PRC Management Agreement, the Supplemental Deed, pursuant to which condition precedent on the execution of the Tin Purchase Contract and the Yunnan Tin PRC Management Agreement has been waived, was entered into. The Company will continue to negotiate with Yunnan Tin PRC on the Tin Purchase Contract and the Yunnan Tin PRC Management Agreement. Since sale of products to Yunnan Tin PRC by the Target Company will constitute continuing connected transaction under the Listing Rules upon Completion of the Acquisition, the Company will take all necessary steps to comply with the relevant requirements under the Listing Rules.

Financial information of the Target group

Set out below is a summary of the unaudited financial information of the Target Group for the period from 16 July 2008 to 30 June 2009 and for the year ended 30 June 2010 prepared in accordance with the Hong Kong Financial Reporting Standards:

	Period from
	16 July 2008
	(date of	For the
	incorporation)	year ended
	to 30 June 2009	30 June 2010
	HK$’000	HK$’000
Income statements
Turnover	—	90,070
Net loss before income tax	(18)	(134,464)
Net loss after income tax	(18)	(134,470)

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Balance Sheets Total assets Total liabilities Net liabilities	As at 30 June 2009 HK$’000 — (8) (8)	As at 30 June 2010 HK$’000 560,577 (690,370) (129,793)

The changes in the net liabilities attributable to the Target Group, for the period from 16 July 2008 to 30 June 2009 and for the year ended 30 June 2010 are set out below:

Net liabilities at the beginning of the period/year Issue of share capital Loss for the period/year Dividend paid and payable Change in reserve Net liabilities at the end of the period/year	Period from 16 July 2008 (date of incorporation) to 30 June 2009 HK$’000 — 10 (18) — — (8)	For the year ended 30 June 2010 HK$’000 (8) — (134,470) — 4,685 (129,793)

As at 30 June 2010, the Target Group had net current liabilities of approximately HK$475,154,000 and net liabilities of approximately HK$129,793,000. In July 2010, the then shareholder of the Target Company advanced HK$410,000,000 to the Target Group to settle the borrowings with carrying amount of HK$401,983,000 as at 30 June 2010. Furthermore, the then shareholder of Target Company has agreed not to demand repayment of the amount due to him until the Target Group is in the financial ability to repay such amount. All shareholder loans will be assigned to the Company upon the Completion. In light of the measures above, the Board believes that the Target Group will be able to meet its financial obligations by the expected cashflow from operations as they fall due for a period of twelve months from the date of this report.

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LETTER FROM THE BOARD

Information on the Assets

The Assets is jointly held by YT Parksong Australia and BMT. YT Parksong Australia is 100% owned by Yunnan Tin HK, and the entire issued share capital of Yunnan Tin HK was owned by Yunnan Tin PRC and the Target Company as at 18% and 82% respectively on the Latest Practicable Date. BMT is a wholly owned subsidiary of MLX. The Assets are jointly owned by the YT Parksong Australia and BMT through an unincorporated joint venture and managed by the Management Company.

Management Discussion and Analysis on the Target group

For the period from 16 July 2008 to 30 June 2009 and the year ended 30 June 2010, the revenues generated by the Target Group were nil and approximately HK$90,070,000 respectively. The net losses after tax of the Target Group for the period from 16 July 2008 to 30 June 2009 and the year ended 30 June 2010 were approximately HK$18,000 and HK$134,470,000 respectively. The loss for the year ended 30 June 2010 was derived mainly from loan interests, commissions to set up the loans and the likes. However, all those relevant loans were fully repaid in July 2010. The expenses of similar natures will not be incurred in the next financial year. The Directors expect that the Target group will generate profit in the next financial year.

The Target Company is an investment holding company and it was incorporated on 16 July 2008 and commenced metal tin mining in Tasmania, Australia through the Joint Venture with MLX in March 2010 in respect of the Assets. The Target Group holds 50% interest in the Assets located in Tasmania which comprises of (i) the Renison mine, concentrator and infrastructure, (ii) the Mount Bischoff open cut tin project and (iii) the Rentails tailings retreatment project. The Target Group sold a majority of its tin output to Yunnan Tin PRC for the period from 16 July 2008 to 30 June 2009 and the year ended 30 June 2010. A minority portion of its tin output was sold to a customer in Malaysia.

The Target Group’s funding and treasury policies are established to ensure the availability of funds at reasonable costs to meet all contractual financial commitments to fund business growth and to generate reasonable returns from available funds. The Target Group relied principally on external borrowings to fund its business during the periods under review.

As at 30 June 2009, the Target Group did not have any borrowings. As at 30 June 2010, the total borrowings of the Target Group amounted to approximately HK$420,516,000 while the cash and bank balances of the Target Group amounted to approximately HK$79,730,000. Borrowings of the Target Group comprises:

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Effective interest rate % Fixed-rate borrowings repayable within one year: Secured loan of HK$250,000,000 24.00% Unsecured loan of HK$151,983,000 4.86% Obligation under financial lease of HK$18,533,000 11.6% Total borrowings	As at 30 2009 HK$’000 — — — —	June 2010 HK$’000 250,000 151,983 18,533
		420,516

At 30 June 2010, borrowings of HK$250,000,000 were secured by (i) a personal guarantee from the shareholder of the Target Company; and (ii) the shares of the Target Company, Yunnan Tin HK, YT Parksong Australia and shares of the Management Company owned by the Target Group; and (iii) the undertakings, properties and assets of the Target Company, Yunnan Tin HK and YT Parksong Australia.

All the above fixed-rate borrowing secured loan and unsecured loan were fully repaid in July 2010. The Target Group’s gearing ratio, as express as the ratio to total liabilities divided by total assets was approximately 1.23 as at 30 June 2010.

Save for the Assets, the Target Group had no significant investments held and there were no material acquisition and disposals of subsidiaries and associate companies during the period under review.

As at 30 June 2010, the Target Group had capital commitment of approximately HK$1,485,000 in relation to acquisition of property, plant and equipment. Save as disclosed above, neither the Target Group had any material capital expenditure commitment nor did it have any further plan for material investments or capital assets.

The Target Group was solely engaged in the tin mining businesses in Tasmania, Australia during the period under review. The total number of employees of the Target Group was 161 as at 30 June 2010 and the total staff cost for the year ended 30 June 2010 was approximately HK$13,635,000. Salaries of employees were maintained at a competitive level and the Target Group continued to review remuneration packages of employees with reference to the general market condition and individual performance. Remuneration packages comprised salaries and discretionary bonuses.

Inventory

For the period from 16 July 2008 to 30 June 2009 and the year ended 30 June 2010, the inventory of the Target Group were nil and approximately HK$35,117,000 respectively. The turnover days for inventory were 170 days for the year ended 30 June 2010 and was calculated by dividing the inventories as of the end of the year by cost of sales for the year, multiplied by 365 days.

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Receivable

For the period from 16 July 2008 to 30 June 2009 and the year ended 30 June 2010, the trade receivable of the Target Group were nil and approximately HK$32,050,000 respectively. The other receivable, deposits and prepayment of the Target Group were nil and approximately HK$16,140,000 respectively.

The trade receivable turnover is 130 days for the year ended 2010, the trade receivable turnover is calculated by dividing the trade receivables as of the end of the year by revenue for the year, multiplied by 365 days.

The Target Group has a policy of allowing its trade customers a credit period of 60 days and has a policy of allowance for bad and doubtful debts which is based on the evaluation of collectibility and ageing analysis of trade receivables and on management’s judgment including credit worthiness and past collection history of each customer. Before accepting any new customer, the Target Group will assess the potential customer’s credit quality and defines credit limits by customer. Limits attributed to customers are reviewed annually.

In determining the recoverability of the trade receivables, the Target Group considers any change in the credit quality of the trade receivables from the date credit was initially granted up to the reporting date.

As at 30 June 2010, all trade receivables due from Yunnan Tin PRC were denominated in US$, and were neither past due nor impaired. The management of the Target Group considers these amounts are of good credit quality and they have been settled in full subsequently.

Provision for rehabilitation

The provision for rehabilitation of the Target Group were nil in the period ended 2009 and HK$14,601,000 for the year ended 2010. The provisions for rehabilitation represents the estimated cost of decommission and rehabilitation of mines and processing sites of the joint venture’s projects to be carried out at the end of their producing lives. The discount rate used in determination the provision for rehabilitation is changed from 4.67% at 19 March 2010 (date of the Target Group acquiring the Assets) to 4.44% as at 30 June 2010.

Other Expenses

For the year ended 30 June 2010, the consultancy fee (HK$33,800,000), commission fee (HK$32,093,000) and stamp duty (HK$17,019,000) were incurred for the acquisition of jointly controlled assets. The above expenses of similar nature will not be incurred in the next financial year.

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LETTER FROM THE BOARD

Net Exchange Loss

For the period from 16 July 2008 to 30 June 2009 and the year ended 30 June 2010, the net exchange loss of the Target Group were nil and approximately HK$32,738,000 respectively. The exchange loss mainly is resulted by borrowings denominated other than AUD (the functional currency of the Target Group). The decrease in exchange rate of AUD against HKD and USD from the date of grant on the borrowings to 30 June 2010 resulted an exchange loss of the Target Group.

Segmental Information

For the operating segment, the Target Group only has a single operating segment. Segment revenue, results, assets and liabilities are therefore the same as the amounts presented in the consolidated statements of comprehensive income and consolidated statements of financial position. For geographical segment, almost all revenue of the Target Group was derived from a customer in PRC. A insignificant amount of revenue was derived from a customer in Malaysia.

Exposure to exchange rate fluctuations

The trade receivables, amount due to a shareholder, certain other payables and accruals and borrowings of the Target Group as at 30 June 2009 and 2010 are denominated in the currencies other than the functional currency of the respective group entities. The Target Group currently does not have a foreign currency hedging policy. However, the management monitors foreign exchange exposure and will consider hedging significant foreign currency exposure should the need arise.

Contingent Liabilities

As at 30 June 2009 and 30 June 2010, the Target Group did not have any significant contingent liabilities.

Accountants’ report on the Target Group is included in Appendix II of this circular.

Background information on Yunnan Tin PRC

Yunnan Tin PRC is a Chinese resident Company and is the ultimate parent company of Yunnan Tin Co., Ltd.. Yunnan Tin Co., Ltd is an integrated company which operates in mineral exploration, mining, processing, smelting and refining, chemical production and precious metals and down-stream products of tin and other non-ferrous metals. Yunnan Tin Group has the largest production and manufacturing base in the world for metal tin and the largest production centre for tin profiles, tin chemicals and arsenic chemicals in PRC. It also owns the state-level enterprise technology centre and the biggest tin research and precious metals research and development organisation in PRC.

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LETTER FROM THE BOARD

Background information on MLX

MLX is a diversify resource group with a considerable portfolio of mining assets at all stages of development from exploration to production with exposure to tin, nickel, gold, copper, zinc, phosphate, uranium, lead and tungsten. MLX is currently Australia’s largest tin producer, supplying approximately 2.5% of the global tin production from its Mount Bischoff, Renison mines and processing plant in Tasmania.

The Assets locate in Tasmania and comprise of (i) the Renison mine, concentrator and infrastructure, (ii) the Mount Bischoff open cut tin project and (iii) the Rentails tailings retreatment project.

The latest resource and reserve estimates for Renison, Mount Bischoff and Rentails are summarized in the table below:

Resources Renison Mount Bischoff Rentails Total Reserves Renison Mount Bischoff Rentails Total	Tonnage (tonne) 1,023,000 41,000 18,957,000 20,021,000	Measured Grade % of tin Contained tin (tonne) Tonnage (tonne) 2.12 21,600 3,183,000 1.17 480 999,000 0.44 83,700 — 105,780 4,182,000 Proved Tonnage (tonne) Grade % of tin 444,000 1.71 41,000 1.17 — — 485,000	Tonnage (tonne) 3,183,000 999,000 —		Indicated Grade % of tin 1.68 0.59 — Contained tin (tonne) 7,600 480 —		Inferred Contained tin (tonne) Tonnage (tonne) Grade % of tin Contained tin (tonne) 50,200 3,047,000 1.75 53,400 5,910 699,000 0.47 3,300 — — — — 56,110 3,746,000 56,700 Probable Tonnage (tonne) Grade % of tin Contained tin (tonne) 1,220,000 1.85 22,600 52,000 0.88 460 18,116,000 0.44 79,700 19,388,000 102,760	Inferred Contained tin (tonne) Tonnage (tonne) Grade % of tin Contained tin (tonne) 50,200 3,047,000 1.75 53,400 5,910 699,000 0.47 3,300 — — — — 56,110 3,746,000 56,700 Probable Tonnage (tonne) Grade % of tin Contained tin (tonne) 1,220,000 1.85 22,600 52,000 0.88 460 18,116,000 0.44 79,700 19,388,000 102,760	Contained tin (tonne) 53,400 3,300 —
			4,182,000						56,700
					8,080			102,760

Note:

• The data was retrieved from the Appendix V-Technical Report and Valuation Report on the Assets.

• BDA considers that the Renison, Mount Bischoff and Rentails resources and reserves have been appropriately estimated and reported in accordance with JORC standards and requirements.

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LETTER FROM THE BOARD

Mining and production capacity

Rension Mine

The Renison mine is located within the 4,662 hectare Consolidated Mining Lease 12M/95, which was granted for a period of 21 years from 1 August 1995, and is for all minerals. This mining licence was transferred from Renison Bell Limited to BMT on 17 April 2004.

According to the Australian Government and BDA, Renison was one of the first large scale trackless decline mines to be developed and at its peak was one of the largest underground tin mines in the world. Tin mining has been carried out at or near Renison since alluvial tin was discovered in 1890. Most of the shallower orebodies have been mined out; however the structure of Renison is complex with over 40 orebodies defined as at May 2009.

Over the operational history, Renison Mine was owned by several operators. In May 2003, the operation was suspended and BMT purchased the mine in 2004 and commenced redevelopment of the mine. With mining performance and tin prices below expectation, BMT suspended the operation in October 2005. After the acquisition of BMT by MLX, the mine was restarted in 2008.

The Renison processing plant comprises of two stage crushing circuit, ore storage in a 900 tonnes capacity tin, grinding in a two stage rod mill/ball mill circuit in which the ball mill is close circuited by two banana screens, flotation of sulphides, gravity recovery of coarse cassiterite from the sulphide floatation tailings desliming of material too fine for gravity processing, floatation of cassiterite from the deslimed fines, and sulphuric acid leaching of the combined gravity and tin floatation concentrates. It was originally commissioned in 1966 and has been modified extensively since that time. Plant feed rate averaged 77 tonne per hour in 2010 compared with a budgeted level of 86 tonne per hour. Plant utilisation in 2010 was 85.8% compared with a budget of 91.5%. About 45% of the plant downtime was due to shortages of ore. In its current configuration the plant capacity is estimated to be around 720,000 tonne per year. Tin recovery is dependent on the mineralogy of the ore and on the condition of the plant. Since recommissioning of the plant in 2008, recovery has improved from 59% in 2009 to 68% in 2010. Historically, tin recovery has peaked at around 72-74% in the 1980s when the plant was running at peak performance and the mineralogy was more favorable.

Ore at Renison Mine is currently mined by a third party contractor independent to MLX, the Vendor and Yunan Tin PRC. The contractor is one of the leading Australian construction and contract mining company with major projects throughout Australia, in New Zealand, South East Asia and Africa. It has over 45 years of experiences and has developed diverse and comprehensive capabilities in a full range of resource infrastructure

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services. Currently, the contractor provides underground and surface mining services for some of the world’s largest mining companies including Rio Tinto, BHP Billiton and Peabody Energy. Save for the Renison operation, the contractor provide mining services to two large scale underground mines and five surface mines in Australia. Over the years, the contractor has received multiple awards on both the international and national stage including “Contractor of the Year” for four consecutive years in its operation in Malaysia and “Safety and Health Innovation Award” awarded by the Chamber of Minerals and Energy of Western Australia. To promote and ensure the appropriate performance is achieved, the contractor is compensated according to performance and operational targets. The compensation is calculated in accordance with a formula which takes into account the approved fixed cost, the approved variable cost, the approved variations, the approved dayworks and the monthly performance payment that includes a factor of health safety environment and quality score. The contractor’s involvement in the daily operation of the mine includes the following:

• Development of decline access, ore accessways, ore drives, sill stripping, ventilation drives and associated miscellaneous excavations using conventional drill and blast methods);

• Production of ore using jumbo or hand held cut and fill methods, benching methods or other methods as appropriate for the orebody being mined;

• Excavation of travelling ways, ventilation rises and stope slots using longhole rising or alternative methods approved by the company;

• Production drilling of orebodies using conventional electric — hydraulic production drilling rigs and/or in the hole hammer pneumatic production rigs;

• Production drilling of orebodies using hand held machines where required;

• Production long hole charging and firing using best practice longhole charging equipment and explosives;

• Loading and haulage of blasted Ore and Waste from development headings and stopes to various dumps and stockpiles underground and on surface. Also placement of backfill underground;

• Supply, proper installation, extension and maintenance of mine services and ventilation as necessary for safe and efficient progression of the works, including the drilling of service holes;

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• Supply and proper installation of ground support as required and as directed;

• Drilling of sludge sample holes;

• Maintenance of the emergency egresses including the ventilation shafts;

• Supervision and control of the works as directed.

Performance of the contractor is monitored by the Management Company as well as the Management Committee. If the performance of the contractor is not up to the satisfaction of the Joint Venture, the Joint Venture is always free to change to other mining service providers available. Performance of the contractor is measured by various schemes such as the task observation schedule and the procedure review schedule. In addition, the mining engineers of the Joint Venture also work closely with the mining contractor on the daily operation in underground mine and perform daily check to ensure that the mining schedules have been strictly followed.

Mount Bischoff

The discovery of Mount Bischoff in 1871 triggered a prospecting rush in Tasmania that resulted in the discovery of the state’s rich West Coast mining belt. BMT acquired the old open pit mining area and tenements in early 2005 with the intention of re-establishing the open pit and trucking the residual reserves to Renison for blending with the underground ore. The Mount Bischoff project has provided incremental feed to supplement the Renison ore. BMT is considering a further stage of drilling and exploration, including geophysical assessment, within the Mount Bischoff lease. According to BDA, there are numerous areas of historical workings that warrant systematic investigation which it is likely that additional tin resources will be defined.

The open pit of Mount Bischoff was redeveloped in 2008, with the ore mined being stockpiled and then trucked to the Renison plant for processing. In the last two years approximately 15,000tpm to 20,000tpm of Mount Bischoff ore has been blended with the Renison ore and processed through the Renison tin concentrator.

Mining at Mount Bishchoff open pit mine ceased in August 2010 as planned and the site is now on care and maintenance. Further exploration has been recently completed and the Management Company is currently considering different feasible plans for adopting the most cost effective plan of mining. It is expected that a decision on the mining plan can be made by March 2011 after the management committee approve the final decision. The Company will consider re-opening the mine in the future if exploration proves successful.

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The Company does not foresee any impact on the cease of mining at the Mount Bischoff open pit mine because trucking stockpiled ore at Mount Mischoff mine is continuing and the blending of open pit ore with the Renison underground ore has provided incremental feed to the Renison process plant.

Rentails

The Rentails project is based on the retreatment of process tailings which have accumulated since the commencement of mining at Renison Mine. It involves the retreatment of approximately 18 million tonne of tailings with an average grade of 0.44% tin and 0.21% Copper at Renison in a dedicated tailings concentrator, with concentrate processed in a tin fumer. The tin tailings are stored in tailings dams at Rension. The contained tin within these dams is approximately 84,000 tonnes, one of the largest tin resources in Australia.

Considerable testwork has been carried out on the re-processing of the tailings since the early 1980s. A definitive feasibility study into the project was completed by MLX in 2008. Various options have been considered and preferred process involves concentrating the tailing and upgrading the concentrate by fuming, a simple smelting process that involves addition of sulphur and coal to the low grade concentrate in a smelting vessel to produce a tin oxide fume product containing more than 65% of tin. Significant laboratory and pilot scale testwork was completed in 2007 to 2009 as part of the definitive feasibility study. The testwork was conducted on typical feed samples and on variability samples with differing characteristics in sulphide and tin grades. Results demonstrated that recovery of tin to a low grade concentrate was generally repeatable.

The current Rentails flowsheet incorporates tailings mining and feed preparation, fine grinding, sulphide floatation incorporating copper floatation, classification and gravity separation, cassiterite floatation and fuming.

In addition to the recovery of tin from the tailings dams, some streams from the existing concentrator may also be redirected to the fumer, improving recoveries from the future processing of ores from Renison mine or other potential sources. The tailings will be reclaimed from the three existing dams using a combination of dredging and sluicing methods at a production rate of 2Mtpa. It is projected that the Rentails operation could produce in addition 5,000tpa of tin over ten year mine life. It is planned to extract approximately 18 million tonnes at 0.44% tin and 0.21% copper from the 19 million tonne resource. Additional construction capital is currently estimated to be approximately AUD213 million which would be borne by the Joint Venture. Expected source of funding would be from cash generating from the operation of the mines. The Company will continue to assess the feasibility of the Rentails project from time to time and work closely with BMT on the future plan of Rentails project.

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Accessibility of the mines

The site of the mines is approximately two hours by road from the established port of Burnie. Access to the site of the mines is good and products from the mines are transported by road from Burnie and then by sea freight in containers.

Major delivery terms

Delivery terms include CIF as per Incroterms®2000; products to be delivered in 23-27 wet metric tonnes of concentrates per container as loose material and no-wood packing. Any import taxes and duties inside China shall be borne by buyer whereas any export taxes or duties in Australia shall be borne by the Target Company.

Labour force and productivity

The Target Group has a workforce of 161 employees as at 30 June 2010. Per disclosure in MLX annual report, the performance of the Assets is summarized below:

	For the period from
	1 July 2009
	to 30 June 2010
Renison
Ore hoisted	333,441 tonnes
Grade	1.70%
Mount Bischoff	186,639 tonnes
Ore mined	1.31%
Grade	535,239 tonnes
Tin concentration
Processed	1.56%
Recovery	67%
Concentrate grade	55%
Tin metal produced	5,340 tonnes
Tin metal sales	5,129 tonnes

Source: MLX annual report 2010

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LETTER FROM THE BOARD

Technical report

A technical report prepared by BDA is included as Appendix V in this circular. For further details of the Assets can be found in the report.

BDA has included a risk summary in its report and the risks have been classified from low through high. The Company concurs with BDA that some of the risk components are low risk and does not believe them to have material impact to the Target Company. The Company sets out below its responses to the medium/high risks identified by BDA:

Risk components identified by BDA

Responses from the Company

Resources/Reserves

Low/Medium risk

The drill density at depth at Renison is variable and significant uncertainty remains in terms of the mineable tonnage and grade that can be recovered from the deeper systems.

The Company considers that the geology of both Renison and Mount Bischoff deposits is reasonably well defined and understood and there is significant upside exploration potential. With the continuous progressive drilling at deeper level at Renison in the future, the risk will diminish.

Underground Mining Medium risk

There may be risk of production shortfall in the underground mine which may lead to high level of dilution if ground conditions prove poorer then expected.

The Company is of the view that with the introduction of an underground contractor and its attaining levels of key parameter would indicate production should be able to increase to forecast level. The Company plans to carry out regular assessment work at the processing plant to maintain the level of tin recoveries.

Processing

Low/Medium risk

H i s t o r i c a l l y p l a n t t h r o u g h p u t h a s been restricted by underground mine production.

The Company believes that with the introduction of the underground contractor and the improvement in the recoveries, the throughput targets are achievable.

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Risk components identified by BDA

Environmental Issues

Low/medium risk

Renison: Managing on-site water flows and excess water discharge quality are critical to maintaining downstream water quality.

Mount Bischoff: Main environmental risk relates to waste rock management, the potential for acid mine drainage and the need to mitigate potential impact.

Production Schedule Medium risk

Overall risk of mine production schedule shortfalls is considered as medium.

Operating Cost

Low/medium risk

A focus on cost control and continuous improvement is important. The production shortfalls may occur relative to the targeted throughput and output, and that therefore projected unit costs may be harder to achieve.

Responses from the Company

There is a long history of mining at Renison, with the introduction of the contractor and the experienced management team of both BMT that are familiar with the mines and landscape, the Company will continue to monitor that mining activities at the mines are as planned.

Although mitigation measures and waste rock dump designs are already in place at Mount Bischoff, the Company will also continue to work closely with BMT and the Management Company to ensure the operation of the Assets will not lead to significant environmental issues.

The Company will participate through the Management Committee to carry out regular assessment on the production and recovery rate of the mines as well as the processing plant. The Company agrees with the view of BDA that the risk should be progressively mitigated as the two declines are progressed and more production faces become available.

The Company will continue to work with the BMT on cost control and improvement on efficiency of the mines to minimise the production shortfalls.

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LETTER FROM THE BOARD

Risk components identified by BDA

Responses from the Company

Rentails

Medium/high risk

The technical risk is considered medium. The economic risk is considered medium/ high.

The Company will continue to monitor the processing cost of the processing plant and re-assess the project viability from time to time. The Company concurs with the view of BDA that Rentails remains a significant resource for the future.

Management

Low/medium risk

There have been some changes in some of the key management positions particularly within the mine production and technical area.

The Company will work with the Target Group and BMT to ensure that sufficient production and technical personnel are available at the mine.

No material change

No material changes have occurred from the effective date (30 September 2010) of the technical report up to the Latest Practicable Date.

Management team

The Assets has been managed by the Joint Venture through the Management Company, and overseen by the Management Committee. The Target Group would become a subsidiary of the Company upon Completion and the experience and background of the management team of the Joint Venture and the Company are summarised as follows:

Mr. Warren Shaye Hallam — Managing Director of MLX

Mr. Hallam is a Metallurgist (B. App Sco (metallurgy)) and a Mineral Economist (MSc (Min. Econ)) and holds a Graduate Diploma in finance. He has considerable technical and commercial experience within the resources industry. In recent times he was the Managing Director of Metals Exploration and previously worked for WMC Resources Ltd (“WMC”). In his last position with WMC, he was Group Manager — Corporate Planning and Strategy. During the past three years he has served as a director of the following public listed company: Metals Exploration Limited (appointed on 14 June 2004).

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Mr. Scott James Huffadine — Executive Director of MLX

Mr. Huffadine is a Geologist (BSc (Hons)) with board experience in the resources industry, specifically in geology and mining project management. For the past 2 years Mr Huffadine has been the Chief Operating Officer of the Metals X Limited. Prior to joining the Metals X Limited Mr. Huffadine was employed by Harmony Gold Australia Pty Limited as the General Manager of the Hill 50 Gold Project for 4 years. His previous roles include Chief Geologist for both Harmony and Hill 50 Gold (Mt Magnet Project). He has also held Underground, Open Pit and Exploration Geology positions with WMC Resources at Mt Magnet WA, Dominion Mining at Mt Morgan’s WA and Werrie Gold NSW. Mr. Huffadine has held no other public company directorships in the past three years.

The Company also proposes to appoint Mr. Chen Liang, the Executive Director of the Company to be one of the representatives of the Company in the Management Committee. Since the Company is currently in negotiation with Yunnan Tin PRC in terms of the Yunnan Tin PRC Management Agreement, other representatives of the Company as the members of the Management Committee have not been determined yet. However, the Company will continue to discuss with Yunnan Tin PRC to try to finalise the details of the Yunnan Tin PRC Management Agreement as soon as practicable. Apart from Mr. Chen Liang who shall be directly participating in the Management Committee, Mr. Cheng Hau Yan, the Executive Director of the Company who has extensive experience in mining exploration and construction management will also be overseeing the newly acquired business of the Company.

Mr. Paul Cmrlec — General Manager of MLX

Mr. Cmrlec holds a Bachelor of Mining Engineering degree from the University of South Australia. He has specialised in underground mining engineering and has held a number of operational and planning roles, including the position of Underground Manager at several Western Australian gold mines. Before joining MLX, he was the Group Mining Engineer for Harmony Gold Australia.

In addition, the Company is of the view that the collective management experience and the diversified background of the Group’s existing board of directors would be capable of managing the new business. Experience and background of some of the members of the Group are highlighted below:

Mr. Cheung Wai Kuen — Executive Director of the Company

Mr. Cheung, aged 36, has established a number of enterprises in various industries in the PRC since 1997, including property investment, hospital and trading business. Mr. Cheung has over 10 years’ extensive experience in capital management and corporate management.

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LETTER FROM THE BOARD

Mr. Cheng Pak Lung — Executive Director of the Company

Mr. Cheng, aged 45, holds a bachelor degree in Mathematics & Operational Research in University of Lancaster, United Kingdom. Mr. Cheng has more than 20 years’ of experience in the finance and investment banking industry.

Mr. Chen Liang — Executive Director of the Company

Mr. Chen Liang, aged 40, holds a Doctoral Degree in Coal, Oil and Gas Geology and Exploration from Petroleum University of China, and became Postdoctoral Fellow in Research Institute of Petroleum Exploration & Development, Beijing and Department of Geology & Geochemistry, Institute Francais du Petrole, France in 1999 and 2001 respectively. He had published a number of research papers and articles on petroleum. Mr. Chen was a vice president of Technology and Planning of CITIC Seram Energy Limited during the period from December 2006 to February 2010, and held the posts of vice president of CITIC Resources Holdings Limited, a company listed on main board of The Stock Exchange of Hong Kong Limited (Stock Code: 1205), from September 2005 to November 2006, primarily responsible for technical evaluation, planning and investments of oil and gas projects in Indonesia and other countries. Mr. Chen was also the senior geologist at Teknica Petroleum Services Limited, Calgary, Canada from August 2002 to August 2005. Prior to that, he worked for various petroleum companies and research institutes in China, France, United Kingdom and Canada. Mr. Chen has over 10 years’ experience in petroleum exploration and development.

Mr. Cheng Hau Yan — Executive Director of the Company

Mr. Cheng Hau Yan, aged 63, studied in the Department of Geophysical Exploration in Chengdu Geology Institute and obtained a Master of Business Administration degree from Shanghai Jiao Tong University in 1970 and 1983 respectively. He has extensive experience in both banking and mining exploration. Mr. Cheng was involved in mineral exploration and construction management for the Yunnan Geology Bureau during 1970s. After his master degree, he returned to Yunnan Geology Bureau as the deputy division chief of the Finance and Planning Division for the period from 1983 to 1986. He then held the post of deputy director of the Economic Commission of Kunming for the period from 1986 to 1988. During the period from May 1988 to 1996, he was president of the Yunnan Branch of Bank of Communications. In the period from 1998 to 2006, Mr. Cheng served the board as the Executive Director for Yunnan Enterprise Holdings Limited, a company listed on the Main Board of the Stock Exchange.

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LETTER FROM THE BOARD

Mr. Li Xianghong – Executive Director

Mr. Li Xianghong, aged 43, holds a bachelor degree in history from Anhui Normal University and a master degree in law from Party School of the Central Committee of C.P.C Mr. Li was appointed as executive director of China Chengtong Development Group Limited in 2000-2003 to assist in the organisational and business restructuring of the company. From 1993 to 1999, he was working under the State Economic and Trade Commission. Mr. Li has extensive resources in the investment and finance sectors in the PRC and possesses experience in restructuring of listed companies in Hong Kong.

Dr. Zhang Guoqing — to be appointed as Non-executive director of the Company

Dr. Zhang Guoqing, aged 50, is currently a non-executive director of YTC Resources and was previously Deputy General Manager of the Sino-Platinum Metal Company Limited, which is a Shanghai listed subsidiary company of the Yunnan Tin Group. Dr. Zhang is based in Australia and is a director of Australian companies controlled by the Yunnan Tin Group. Dr. Zhang has extensive experience in research and development of metal alloys and has received a number of Chinese national awards. Dr. Zhang has a B.Sc (Hon) degree and Ph.D. in Material Science. Dr. Zhang has held no other listed company directorships in the past three years.

It is also the intention of the Company to recruit additional experts that have relevant qualified technical background to join the Company and strengthen the existing management team. Although recruiting process often requires time, the Company will actively seek and procure that suitable candidates are brought to the team after Completion.

Risk factors

Shareholders may wish to bear in mind the following summarised risk factors when considering the Acquisition:

• Risks relating to the acquisition

• The risks relating to investments in a new business and country risk

• Risks relating to business of the Target Group

• Fluctuation in the price of metal tin and tin-related end products

• Foreign jurisdiction, government relating and approval associated in the mining industry

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LETTER FROM THE BOARD

• Requirement for significant and continuous capital investment

• Finite life and potential technical uncertainties

• Actual ore reserves and mineral resources may be lower than current estimates

• Inclement weather and natural disaster

• Validity of the Mining Right Certificates, Mining Leases and the Exploration Licenses

• Reliance on joint venture partner

• Potential accidents in the mining process

• Risks associated with litigation

• Environmental risks and issues arising form compliance with environmental regulations and permitting requirements

• Market competition

• Foreign currency exchange rate fluctuations

• Risks relating to mining contractors

Details of the risk factors in relation to the Acquisition are set out in the section headed “Risk factors” in this circular.

REASONS FOR AND BENEFITS OF THE ACQUISITION

The Group is principally engaged in the manufacturing and the sales of insulation and heat resistance material; and trading of copper and silicone rubber.

The Group recorded a net loss of HK$12.58 million for the year ended 31 December 2009. The Board considers that the Group’s existing business might not demonstrate a promising growth trend in future and, as such, the Group has been actively seeking new investment opportunities, irrespective of whether these opportunities fall within the Group’s principal business activities. The Board believes that new opportunities could enhance the value of the Company and improve the Shareholders’ return.

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LETTER FROM THE BOARD

The Directors are of the view that metal tin, being a scarce and valuable metal, has very high commercial value and relatively stable demand despite the recent global economic fluctuation. Taking into account (i) the preliminary resources and reserves information on the Assets as advised by the Vendor, (ii) the then prevailing market price of metal tin; (iii) the guarantee provided by the Vendor on the contained tin in the tin concentrates produced from the Assets; and (iv) the strategic partnership with Yunnan Tin Group (the world largest producer of metal tin), the Directors consider that the Acquisition represents a good opportunity to venture into the natural resources business. The Directors also consider that the Acquisition represents a good opportunity for the Group to diversify its existing business and broaden its income base.

FEASIBILITY STUDIES ON THE TARgET gROUP PERFORMED BY THE COMPANY

As one of the conditions precedent stated above, Completion is subject to the Company having completed due diligence review and is fully and substantially satisfied with the result of the due diligence review.

The Directors have had discussions with the Vendor to understand the business model, competitive position, development strategies and associated risks of the Target Group. The Directors had also consulted the legal advisers in relation to YT Parksong Australia, the Joint Venture, the Management Company, the Assets, the Mining Leases, the Exploration Licenses, the Tenements, the renewability issue of for the Mining Lease and the Exploration Licenses. In addition, the Directors had reviewed (i) the audited report of the Target Group for the period from its date of incorporation to 30 June 2010; (ii) the technical report and the valuation report of the Assets; (iii) the Australian legal opinion provided by the Vendor; and (iv) the Mining Leases and Exploration Licenses.

Up to the Latest Practicable Date, from the above due diligence work and the due diligence work conducted by the legal advisers, nothing has come to the attention of the Directors that the Company shall cease to continue with the Acquisition.

EFFECTS OF THE ACQUISITION

Upon Completion of the Acquisition, the Target Group will become a subsidiary of the Company and its results will be consolidated into the Group’s accounts.

Set out below is a summary of the unaudited pro forma financial information of the Enlarged Group before and after Completion, which is extracted from the pro forma consolidated statement of financial position that has been prepared with the assumption that the Acquisition has been completed on 30 June 2010 and the pro forma consolidated statement of comprehensive income that has been prepared by assuming that the Acquisition has been completed on 19 March 2010, the date the Target Group came into existence and commenced operation.

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LETTER FROM THE BOARD

	Before	After
	Completion	Completion
	(HK$’000)	(HK$’000)
Total assets	572,171	1,794,919
Total liabilities	(62,898)	(1,086,826)
Net assets	509,273	708,903
Net current assets	452,700	231,489
Gearing ratio
(total liabilities/total assets)	0.11	0.61
Turnover from continuing operation	134,586	224,656
Net loss attributable to Shareholders from continuing
operation	(12,738)	(152,837)

As set out in the above table, upon Completion,

• (a) The total assets of the Enlarged Group will increase by approximately 213.7%, mainly attribution to the additional recognition on mining rights arising from the acquisition of Target Group;

• (b) The total liabilities of the Enlarged Group will increase by 1,627.9% as a result of the issue of the Convertible Bonds and recognition of deferred tax liabilities;

• (c) The net assets of the Enlarged Group will increase by 36.1%;

• (d) The net current assets of the Enlarged Group will decrease by approximately 48.9% after the Acquisition;

• (e) The gearing ratio of the Enlarged Group will increase from 0.11 before Completion to 0.61 after Completion because of the issue of the Convertible Bonds and recognition of deferred tax liabilities;

• (f) The turnover of the Enlarged Group will increase by approximately 66.9%; and

• (g) The Enlarged Group shall have net loss attributable to Shareholders of approximately HK$152.8 million after the Acquisition as a result of the consolidation of the net loss of Target Group.

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LETTER FROM THE BOARD

Based on the pro forma consolidated statement of financial position, the excess of the Consideration over the assumed fair values of the assets and liabilities (other than mining rights) of the Target Group amounting to HK$942,174,000 is adjusted to the fair value of mining rights. For the purpose of pro forma consolidated statement of financial position, the fair value of the identifiable assets and liabilities (except for mining rights) of the Target Group is assumed to be the same as their carrying amounts.

Based on the current circumstances, the directors of the Company considered that no intangible assets, other than mining rights, or goodwill will be recognised in the Company’s next annual report after Completion. The recognition of mining rights and other assets and liabilities are subject to be determined upon the completion of (1) the valuation of all identifiable assets and liabilities acquired; and (2) the valuation of fair value of Convertible Bonds as part of the consideration of the Acquisition at the Completion Date.

The directors of the Company have assessed whether there is indication that mining rights may be impaired as at 30 June 2010 on a pro forma basis, in accordance with Hong Kong Accounting Standard 36 “Impairment of Assets”, the directors of the Company have assessed and concluded that there is no impairment indication in respect of the mining rights with an assumed fair value of approximately HK$1,084 million as shown in the pro forma consolidated statement of financial position of the Group as at 30 June 2010, on the basis that the value provided in the Valuation is much higher than such assumed fair value. The directors of the Company have consulted the auditor of the Group on the accounting policies and principal procedures to be applied to ensure that the mining rights are carried at no more than their recoverable amount in accordance with Hong Kong Accounting Standard 36. In the absence of unforeseen circumstances, the directors of the Company will adopt consistent accounting policies and principal assumptions as used in this Unaudited Pro Forma Financial Information to assess any impairment indication on the mining rights subsequent to the Completion.

FINANCIAL AND TRADINg PROSPECTS OF THE ENLARgED gROUP

The difficult business environment for insulation and heat-resistance solution industry has prevailed since the financial crisis in 2008. The Group is facing a number of unfavorable conditions including: (i) the high unemployment rates in the US and Europe; (ii) shortage of labor together with rising labor costs in the PRC; (iii) rising copper and other materials costs; (iv) RMB appreciation; (v) falling and shrinking profit margins and difficulty to pass the rising costs of productions to customers. In view of the increasingly difficult business environment, the Group has responded in a prudent and positive manner by consolidating its own strengths to reduce adverse impacts from external factors. Notwithstanding the difficult business environment, insulation and heat-resistance solution provider business has remained as part of the Group’s core businesses.

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LETTER FROM THE BOARD

In order to diversify the business, the Group, on 13 July 2010, entered into a Sales and Purchase Agreement to acquire the entire issued share capital of the Target Company. The Target Group engages in the metal tin mining operation in Tasmania, Australia. The Directors consider that this Acquisition represents a good opportunity for stepping into the mining industry. The Directors consider that it is beneficial for the Group to seek suitable investment opportunities from time to time to broaden its source of income.

In light of the increase in tin prices from second half of 2009 onwards (for example, the tin price quoted on the London Metal Exchange was USD17,500 per tonne on the day of signing of the Sale and Purchase Agreement and USD24,500 per tonne on 26 November 2010) , the Directors are optimistic about the future prospects of the Target Group.

It is the intention of the Group to implement stringent cost control measures and cost effective management procedures on the Target Group. The Directors consider that the Acquisition would enhance the financial and trading prospects of the Group.

THE gROUP’S INTENTION CONCERNINg ITS EXISTINg BUSINESS

The Board currently has no agreement, arrangement, understanding, intention or negotiation on any disposal, termination or scaling down of the Group’s existing business in the production, manufacture and sale of insulation, heat resistance solutions and trading of copper and silicon.

LISTINg RULES IMPLICATIONS

As applicable percentage ratios calculated pursuant to Rule 14.07 of the Listing Rules in respect of the Acquisition exceed 100%, the Acquisition constitutes a very substantial acquisition for the Company under Rule 14.06(5) of the Listing Rules. Accordingly, the Sale and Purchase Agreement and the transactions contemplated thereunder will be conditional upon, amongst other things, the approval by the Shareholders at the EGM. Further, pursuant to Rule 14.76(2) of the Listing Rules, the Company will seek shareholders’ approval for the exercise of the Call Option at the EGM.

Application will be made to the Listing Committee of the Stock Exchange for the listing of, and permission to deal in, the Conversion Shares.

To the best of the Directors’ knowledge, information and belief, no Shareholders have any material interest in the Transaction, and hence no Shareholders are required to abstain from voting at the EGM to approve the Acquisition.

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LETTER FROM THE BOARD

EgM

The EGM will be convened on 19 January 2011 for the purpose of obtaining approval from the Shareholders for the Sale & Purchase Agreement and the transactions contemplated thereunder including the exercise of the Call Option, the issue of the Convertible Bonds and the allotment of the Conversion’ Shares. The notice of the EGM is set out on pages EGM-1 to EGM-2 of this circular.

Pursuant to Rule 13.39 of the Listing Rules, all votes of the Shareholders at the general meetings must be taken by poll. The chairman of the EGM will therefore demand a poll for every resolution put to the vote of the EGM pursuant to the articles of association of the Company.

Proxy forms for use at the EGM enclosed with this circular. Whether or not you intend to attend the EGM, you are requested to complete and return the enclosed proxy forms in accordance with the instructions printed thereon as soon as possible to the Company’s Hong Kong share registrar, Tricor Investor Services Limited at 26th Floor Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong in accordance with the instructions printed thereon as soon as possible and in any event not less than 48 hours before the time appointed for holding the EGM or any adjournment thereof. Completion and return of the form of proxy will not preclude you from attending and voting in person at the EGM or any adjournment thereof should you so wish.

RECOMMENDATION

The Board considers that terms of the Acquisition are fair and reasonable and are in the interests of the Company and the Shareholders as a whole. Accordingly, the Board recommends the Shareholders to vote in favour of the ordinary resolution approving the Acquisition including the exercise of the Call Option, the issue of the Convertible Bonds and the allotment of the Conversion Shares at EGM.

FURTHER INFORMATION

Your attention is also drawn to the financial information of the Group, of the Target Group and the Enlarged Group, the technical and valuation report on the Assets and the other information set out in the appendices in this circular.

By order of the Board Cheung wai Kuen Executive Director

Hong Kong, 31 December 2010

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RISK FACTOR

Shareholders should carefully consider all of the information set out in this circular, including the risks and uncertainties described below before making a decision on how to vote at the EGM relating to the Acquisition. The business, financial condition and results of operations of the Group and the Target Group could be materially and adversely affected by any of these risks. To the best of the Directors’ knowledge, the Directors consider the following risks to be the most significant in respect of the Target Group for the Shareholders and potential investors of the Company. However, the risks listed do not purport to comprise all those risks associated with the Target Group and are not set out in any particular order of priority. Additional risks and uncertainties not currently known to the Directors may also have an adverse effect on the Target Group’s business. If any of the following risks actually occurs, the Enlarged Group’s business, financial condition, capital resources, results and/or future operations could be materially and adversely affected.

RISKS RELATINg TO THE ACQUISITION

The risks relating to investments in a new business and country risk

The Acquisition constitutes an investment into a new business sector involving mining and exploration of tin, which the Company has not previously had the exposure and experience. There may be risks that are beyond the Target Group’s control associated with investing in mineral exploration, mining and extraction in a foreign jurisdiction. These risk include, but not limited to, health and safety issues; finite life of the operation; changes to business and regulatory; environment; government policy changes and actions of non-government organisations.

If the Target Group is unable to address the above-mentioned risks and uncertainties, its financial condition and operating results may be materially and adversely affected.

Any change in the political and economic conditions in the jurisdictions in which the Target Group operates may also adversely affect the financial and operational results of the Target Group. Consequently, the Target Group is not in a position to assure the timing and amount of any return or benefits that may be received. If the business in the new mining sectors does not develop or progress as planned, the Target Group may not recover the funds and resources it has spent, and this may adversely affect the Target Group.

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RISK FACTOR

RISKS RELATINg TO THE BUSINESS OF THE TARgET gROUP

Fluctuation in the price of metal tin and tin-related end products

The Directors consider that there are many factors which may influence the price of metal tin, including but not limited to the market price of tin-related end products (e.g. electrical solders, tin alloys), stability of the international and domestic economic situation and the fluctuation of the global political and social condition, which are beyond the Target Group’s control. Any changes in metal tin or tin-related end product prices may adversely affect the Enlarged Group’s business, operational and financial condition, and future prospects.

Foreign jurisdiction, government regulation and approval associated in the mining industry

Mining industry is subject to various Australian government policies and regulations, including but not limited to, exploration, development, production, taxation, labour and environment standards, vocational health and safety, waste treatment, environment monitoring, protection, ongoing approval and control, and operation management. Any changes to relevant policies or approval processes may increase the operating cost of the Target Group and hence, adversely affect the operation results of the Enlarged Group.

The Board has been advised by its Australian legal adviser that since the Acquisition does not hit the financial threshold of AUD$231 million, no compulsory notification to the Foreign Investment Review Board is required under the Foreign Acquisitions and Takeovers Act.

Risk associated to the significant and continuous capital investment requirement

The mining business requires significant and continuous capital investment. Natural resources production projects may not be completed as planned or scheduled, may exceed the original budgets and may not achieve the intended economic results or commercial viability. Moreover, the operation might entail additional costs and risks associated from ongoing monitoring, rehabilitation and compliance to government regulations. Thus, the actual capital investment for operation and development of the Target Group may significantly exceed its budget due to factors beyond the Target Group’s control.

Finite life and potential technical uncertainties

When compared with many industrial and commercial operations, mining is a relatively high risk business. Each orebody is unique and cannot be wholly predicted. Thus, the uncertainties may result in potential delay in construction plan. The amount of metal tin resources in the Assets also may be varied from the estimation by the independent

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RISK FACTOR

technical adviser and there is no assurance that the exploration work to be performed by the Enlarged Group can always lead to discovery of economically feasible resources. Moreover, mining operation has a finite life and closure of the operation might entail both cost and risk associated in rehabilitation to comply with local environmental standards. These factors may negatively affect the Enlarged Group’s business, financial and operational condition, and future prospects.

Actual ore reserves and mineral resources may be lower than current estimates

Mineral resources and ore reserve estimates are subject to independent third party review. The methodology of estimating ore reserve may be updated over time and is reliant to certain assumptions. As new information becomes available, the estimated ore reserve might be revised up or down. Hence, if the Asset’s actual mineral resources and ore reserves are less than current estimates, the Enlarged Group’s business, financial and operation condition may be adversely affected.

Inclement weather and natural disaster

Inclement weather and natural disasters may cause evacuation of personnel, curtailment of operations, damage to mineral properties, transportation routes and loading facilities. This could in turn result in temporary suspension of operations and a general reduction in productivity. From time to time, Rension area can experience heavy rainfall that can result in flooding. There has been flooding issue in the past which was caused by the suspension in operation of the mine in 2006. Proper care and maintenance work have not been carried out by the management team of the Assets back then at the time the operation of the mine was suspended and as a result caused the flooding issue at the mine. In view of the reopening of the mine and the current proper care and maintenance work, the Company does not foresee that the flooding issue will occur again when the mine is in operation. However, there is no assurance that inclement weather and natural disasters will not cause significant losses to the Target Group in the future. Any damage to the Target Group’s projects or delays to its operations by prolonged periods of inclement weather could materially affect its business and results of its operations.

Validity of Mining Right Certificates, the Mining Leases and the Exploration Licences

Despite the fact that the Target Group has obtained the Mining Right Certificates, the Mining Leases and the Exploration Licences for conducting exploitation activities in relation to the Assets during the prescribed period, these documents are subject to renewal in the future. According to Mineral Resources Development Act 1995, the application for licence renewal requires information to be provided to the Minister of the Tasmanian Department of Infrastructure, Energy and Resources in respect of expenditure, exploration completed, proposed exploration program and rehabilitation required. The Minister of the Tasmanian Department of Infrastructure, Energy and Resources has the discretion to

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RISK FACTOR

determine the length of the renewal and other conditions for renewal. The Target Group may not be able to renew or extend the licences. However, as advised by the Australian legal adviser, the Tasmanian Department of Infrastructure, Energy and Resources has confirmed that the Leases and Exploration Licence are held in good standing and has not indicated any adverse issue affecting the Mining Leases and Exploration Licence nor any other matter which may prevent renewal of them.

Reliance on joint venture partner

The Joint Venture is formed with BMT and such joint venture arrangement may necessarily involve special risks such as the possibilities that BMT may (i) have economic or business interests or goals that are inconsistent with or oppose to those of the Enlarged Group; (ii) exercise veto rights so as to block actions that the Enlarged Group believes to be in its or the Joint Venture’s best interests; (iii) as a result of financial or other difficulties, be unable or unwilling to fulfil their obligations under the Joint Venture or other agreements; or (iv) require capital contributions to the Joint Venture beyond the scope of the Enlarged Group.

These issues may have a material adverse effect on the results of operation, financial condition and prospects of the Enlarged Group through disruption to the Joint Venture’s business or the delay or non-completion of the relevant development projects. In addition, the termination of the Joint Venture, if not replaced on similar terms, could have a material adverse effect on the Enlarged Group’s business, results of operations, financial condition and prospects.

Potential accidents in the mining process

Similar to other mining companies, the Company is unable to assure no future occurrence of accident at the tin mine. The occurrence of accident may result in substantial disruptions of the tin mining operations and financial losses, damage to the Company’s reputation, increase in lawsuits and other compensatory claims and payouts, fines, penalties and mandatory suspension of production. Liabilities might arise in the future as a result of accidents, fatalities or other workforce-related misfortunes, some of which may be beyond the Group’s control. As such events could lead to significant expenditure of the Group in respect of compensation claims or payments, and insurance may be unavailable or prohibitively expensive. The occurrence of accidents could delay production, increase production costs and result in liability and adverse publicity for the Group. These factors could have a material adverse effect on the Group’s business, results of operations, financial condition and prospects.

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RISK FACTOR

Risks associated with litigation

As with any company, the Target Group maybe exposed to risk associated with litigation. To the extent such risk may not be covered by insurance. As advised by the Department of Justice, Workplace Standards Tasmania on 7 October 2010, it was investigating a workplace incident against the Joint Venture which involved a worker of the Joint Venture falling into a moving conveyor. The incident has caused injury to the back of the hand of one worker but not death the worker. The injured worker has no time off work and was on restricted duties for approximately two weeks until wounds heal properly. The incident is currently under investigation by the Department of Justice, Workplace Standards Tasmania. Given that (i) operations of the mine continue notwithstanding the incident; (ii) the injury has not caused any casualty; (iii) the injured worker is covered under the compensation insurance of the Joint Venture; (iv) preventative measures have been put in place by the Joint Venture; and (v) the Joint Venture has not received any request for a suspension of operations of the mine, the Directors have been advised by the Target Group that they do not consider the incident will affect the mining license of the Joint Venture and consider that the incident shall not affect the future renewal of the mining licence. The Board concurs with such view. On these bases, the Board considers that the Company shall not cease to continue with the Acquisition for reason of the incident. There might be potential litigation but the impact of the potential litigation is unknown to the Joint Venture which may or may not be material. The potential litigation may have an adverse impact on the results of operation, financial condition and prospects of the Enlarged Group.

Environmental risks and issues arising from compliance with environmental regulations and permitting requirements

The operations of the Assets are subject to the extensive environmental risks inherent in the mining and processing industry, such as risks of accidental spills, leaks or overflow from tailing dams or other facilities, leakages or other unforeseen circumstances, which could subject the Enlarged Group to considerable liability. A violation of health, safety or environmental laws relating to a mine or other operating facilities, or failure to comply with the instructions of the relevant health, safety or environmental authorities, could lead to, amongst other things, a temporary shut down of all or a portion of the mine or relevant facility; a loss of the right to mine or operate the relevant facility; the imposition of costly compliance procedures and fines; or serious reputation damage to the Enlarged Group. All of these factors would have a material adverse effect on the Enlarged Group’s business, results of operations, financial condition and prospects.

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RISK FACTOR

Market competition

The Target Group faces competition from other tin producers in China, Indonesia, Malaysia and other countries. Competition within the tin market is based on many factors, including, among others, price, production, capacity, quality, transportation capabilities and costs, blending capability and brand name. Some of the Target Group’s competitors may have greater production capacity as well as greater financial, marketing, distribution and other resources, and may benefit from more established brand names in the international market. Some of the Target Group’s competitions may also develop new technologies and processing methods that are more effective or less costly than those currently used by the Target Group.

Foreign currency exchange rate fluctuations

The Target Group recognizes most of its revenue in US dollars and operating costs in AUD. Hence, its cost competitiveness, profitability and financial position is affected by appreciation of the Australian dollar against the US dollar without the offsetting improvements in USD-denominated commodity prices. The effect of currency exchange fluctuations is impossible to predict with any degree of certainty and this may materially and adversely affect the Target Group’s operations and financial performance.

Both the Group and Target Group currently do not engage in any currency hedging.

Exchange rates of the Australian dollar against the United States dollar (1 November 2008 to the Latest Practicable Date) (AUD$ per US$ exchange rate)

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Risks relating to mining contractors

Third parties contractors are engaged to provide mining operation services and may affect the efficiency and the operational performance of the Target Group. The Target Group may not have adequate stockpiles of products, the ability to perform the services itself or access to alternative providers. As a result, this may adversely affect the production and financial performance of the Target Group.

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LEgAL AND REgULATORY REgIME IN wHICH THE TARgET gROUP OPERATES

MININg IN AUSTRALIA

In Australia, the powers to legislate in respect of land and mineral resources are vested in the State, not in the Commonwealth. Each state has its own legislation to deal with the area of mineral resources. In Tasmania the relevant legislation is the Mineral Resources Development Act 1995 (“ Mineral Resources Act ”). The Mineral Resources Act is administered by Mineral Resources Tasmania (“ MRT ”), which is a division of the Tasmanian Department of Infrastructure, Energy and Resources (“ DIER ”) that is primarily responsible for the regulation, administration and technical aspects of mineral exploration in Tasmania.

Minerals are state property in Tasmania, access to which is gained through provisions of the Mineral Resources Act.

• When considering the law in respect of any major mining operation, the Minerals Resources Act cannot be consulted in isolation. A major mining operation in Tasmania will be regulated by other Acts including the Native Title (Tasmania) Act 1994 , the Aboriginal Lands Act 1995 , the Nature Conservation Act 2002 , the Aboriginal Relics Act 1975 , the Water Management Act 1999 and the Land Use Planning and Approvals Act 1993 . The Mineral Resources Act provides the statutory framework for the issue of title enabling various activities to be conducted on the land. The Mineral Resources Act provides for the grant of the following tenements: (a) Exploration Licence (EL): is the principal title issued for exploration in Tasmania and it authorizes the licensee, subject to the Mineral Resources Act (and Regulations) and the conditions in the license, to carry out exploration operations of a kind described in the license in respect of the area described, or referred to, in the license. An EL has a maximum area of 500km2 and is generally valid for a period of five years. However, the area covered by a special exploration license may exceed the maxima for normal licenses and may be extended to a maximum of ten years. Exploratory operation of land under an EL excludes precious stone or extractive minerals (sand, grave, stone, shell, shale clay) and excludes current mining tenements (mineral claims, retention leases and mining leases) and any other areas not available for exploration (national parks, Commonwealth land, coastlines, etc);

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LEgAL AND REgULATORY REgIME IN wHICH THE TARgET gROUP OPERATES

• (b) Mining Lease (ML): this is the principal title issued for mining or extracting minerals or other deposits under the specified conditions in Tasmania. An ML authorizes the lessee, subject to the Mineral Resources Act (and Regulations) and the conditions in the lease, to carry out mining operations of a kind described in the lease in respect of the area described, or referred to, in the lease. It also includes the right to sell or dispose of minerals recovered from the relevant land. The area of land is determined by the Minister and the land comprised in a lease may differ in size and shape from the land over which the lease was sought in the application. The term of the lease is also determined by the Minister;

• (c) Prospecting Licences (PL): this allows the holder to prospect for minerals to peg out a mineral claim;

• (d) Retention Licences (RL): this allows the holder to have an exclusive right to prospect for minerals, or to conduct mining operations in respect of land comprised in the lease; and

• (e) Miscellaneous Purposes License (MPL): for purposes associated with mining operations such as establishing operating plant, drainage for a mine, or the disposal of overburden or any waste produced by mining operations.

TRANSFER

Section 35 of the Minerals Development Act deals with approval of the transfer of an exploration licence and section 95 of the Act deals with approval of the transfer of a mining lease. The two sections contain similar wording and provide that the Minister may approve the application for the transfer, with or without conditions, or refuse to approve the application. A transfer is of no effect unless approved by the Minister. If approved the transfer takes effect on the date of the approval.

NATIVE TITLE

Commonwealth legislation

The Tasmanian land and resource activities legislation must be administered in accordance with the Commonwealth Native Title Act 1993 , which came into effect on 1 January 1994.

The Commonwealth Act was to provide for validation of potentially invalid past acts and to establish a mechanism for dealing with Native Title claims and to confirm ownership of natural resources. The primary effect of this Act on exploration and mining approvals is to provide native title parties with rights to negotiate about the grant and some renewals by governments of exploration and mining titles.

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LEgAL AND REgULATORY REgIME IN wHICH THE TARgET gROUP OPERATES

Tasmanian legislation

The Native Title (Tasmania) Act 1994 validates past acts in accordance with the terms and requirements of the Commonwealth Native Title Act 1993 ; and confirms Tasmania’s existing ownership of any natural resources; Tasmania’s existing rights to use, control and regulate the flow of water; existing fishing access rights; and existing public access to waterways and public places.

The Group have been advised by its Tasmanian counsel that Mineral Resources Tasmania has taken the view based on receiving advice from the Solicitor General that it can safely ignore any notification process because no Native Title exists in respect of land which could be the subject of a mining lease. This does not appear to extend outside Tasmania. The position is based on the forced removal of Tasmanian Aborigines from the land in the 19th century which eliminated any possibility of any Tasmanian Aborigine being able to prove a continued connection with the land. The Tasmanian counsel also advised that they are not aware of any contradiction of the factual basis of this position.

ENVIRONMENTAL ISSUES

Commonwealth Legislation

The Environmental Protection and Biodiversity Conservation Act 1999 provides that a person who proposes to take an action that is likely to have a significant effect on a matter of national environmental significance must obtain approval from the Commonwealth Minister for the Environment and Heritage before taking that action.

Under Part 7 of the Environmental Protection and Biodiversity Conservation Act , the Commonwealth Minister for the Environment and Heritage must decide whether the action that is the subject of a proposal referred is a controlled action needing approval because it is otherwise prohibited under the Act. If it decides an action requires approval, an environmental assessment of the action must be carried out. After considering the environmental assessment report, the Australian Government Environment Minister decides whether to approve the action, and what conditions (if any) to impose.

State Legislation

In Tasmania, the environmental conditions applicable to a project will form part of the planning permit issued under the Land Use Planning & Approvals Act 1993 by the local council. To obtain authorisation to undertake an activity such as mining, application is made to the local council and is advertised. The local council proceeds with an environmental impact assessment under the Environment Management Pollution Control Act 1994 . Having considered the material and any representations, the Board of the

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LEgAL AND REgULATORY REgIME IN wHICH THE TARgET gROUP OPERATES

Environment Protection Authority determines if any environmental conditions will be applicable to the operation of the project. The Board then directs the council to include those conditions as part of the conditions of the planning permit issued by that council.

wORKPLACE HEALTH AND SAFETY

Workplace Health and Safety Act 1995 and the Workplace Health and Safety Regulations 1998 are the principle legislation regulating workplaces in Tasmania. Both Act aims to provide for the health and safety of persons employed in, engaged in or affected by industry.

Section 9 of the Workplace Health and Safety Act 1995 stated, an employer must, in respect of each employee employed by the employer, ensure so far as is reasonably practicable that the employee is, while at work, safe from injury and risks to health.

For the purpose of preventing injuries to, and risks to the health of, employees, contractors, persons engaged by a contractor and any other person at a workplace, the Director, by notice in writing served on an employer or responsible officer. Penalties of up to 500 penalty units and a daily fine not exceeding 50 penalty units for each day that the body corporate fails to comply with the notice.

Section 47 of the Workplace Health and Safety Act 1995 requires that if, at a workplace, a person is killed or suffers serious bodily injury or illness then the person having control or management of the workplace must, by the quickest available means, notify an inspector of particulars of the occurrence of the death, injury, illness or incident.

FOREIgN INVESTMENT

The Australian Government’s approach to foreign investment policy is to encourage foreign investment consistent with community interests. One of the objectives of the Government’s foreign investment policy is to balance concerns about foreign investment in Australia against the strong economic benefits to Australia that arise from foreign investment.

The policy provides the framework for Government scrutiny of proposed foreign purchases of Australian businesses and real estate. The Government has the power under the Foreign Acquisitions and Takeovers Act 1975 to block those proposals subject to the Act which would result in a foreign person acquiring control of an Australian corporation or business or an interest in real estate where this is determined to be contrary to the national interest. The Foreign Acquisitions and Takeovers Act and the Foreign Acquisitions and Takeovers Regulations 1989 provide monetary thresholds below which the relevant provisions do not apply, and separate thresholds for acquisitions by US investors.

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LEgAL AND REgULATORY REgIME IN wHICH THE TARgET gROUP OPERATES

In the majority of industry sectors, smaller proposals are exempt from the Foreign Acquisitions and Takeovers Act or notification under the policy and larger proposals are approved unless determined to be contrary to the national interest. The Government determines what is ‘contrary to the national interest’ by having regard to the widely held community concerns of Australians.

T A X A T I O N I M P L I C A T I O N S F O R A U S T R A L I A N C O M P A N I E S A N D SHAREHOLERS IN AUSTRALIAN COMPANIES

The taxes apply to Australian companies include goods and services tax, income tax and other indirect taxes. A summary of the major aspects of the Australian tax system is provided below. This summary is not exhaustive of all Australian tax consideration and it is of a general nature only and is not intended to be, nor should it be construed to be, legal or tax advice to any foreign resident.

goods and Service Tax

A goods and services tax of 10% is imposed on the supply of most goods and services consumed in Australia. Businesses generally can claim back goods and services tax on most business inputs. The tax is essentially an end user tax.

Companies within a corporate group (where ownership interests are 90% or greater within the group) can elect to form a goods and services tax group. Transactions between members of the GST group are ignored and the external goods and services tax liabilities of the group will be managed by a representative member.

Income Tax

Income received by individuals or corporate in Australia is subject to income tax on its non-exempt worldwide taxable income at a flat rate of 30%. Taxable income is calculated by deducting allowable deductions over assessable income. Assessable income includes income as it is traditionally understood, including sales, income, interest, hedging, profits, rent and royalties. All losses or outgoings incurred in producing such assessable income are allowable deductions except where they are capital in nature. Separate capital allowances are available in respect of capital expenditure, including depreciation and amortisation of mine development costs.

With reference to mining operations, the cost of depreciating assets, including plant and equipment, may be deducted over the asset’s economic life. Other expenditure incurred in the mining operations is deductible over the life of the mining project concerned and exploration expenditure is deductible in the year in which it was incurred.

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LEgAL AND REgULATORY REgIME IN wHICH THE TARgET gROUP OPERATES

Proposed Minerals Resource Rent Tax

The Australian Commonwealth Government announced in 2 July 2010 that it intends to introduce a Minerals Resource Rent Tax from 1 July 2012, with a rate of 30% payable on profits made from the exploitation of a limited number of Australia’s non-renewable resources.

At this stage, the current proposed tax will only extend to iron ore and coal mining activities and no further details were announced regarding to other mineral mining businesses. The government has currently formed a Policy Transition Group to analyse and review the technical issues surrounding the proposed tax.

ROYALTIES

The Minerals Resources Act provides that the holder of a mining lease is liable to pay royalty to the Minister on publicly owned minerals recovered under the lease.

Tasmania imposes a two-tiered royalty system on mineral production. There is generally a 1.6% royalty rate levied on net sales revenue (less freight from the mine gate to the point of delivery) which is based on $A equivalent of spot prices prevailing at the time the revenue is received. Secondly, a profit based revenue royalty is also levied using the following formula:

==> picture [141 x 27] intentionally omitted <==

Profit is the mine profit calculated according to Australian Accounting Standards, using spot metal prices and exchange rates, and excluding any financing costs or interest received.

Royalty is calculated over the mine’s financial year and is payable quarterly in arrears on a year to date basis. The maximum royalty payable is fixed at 5% of net sales revenue. Royalty rebates of up to 20% are available for companies which use downstream processing to produce a specific metal product.

Save as disclosed herein, the Joint Venture and the Management Company has complied with applicable Australian laws and regulations since the establishment of the Joint Venture in March 2010. In June 2010, the Management Company received a warning notice from the Department of Environment, Planning and Pollution Control in connection with acid mine dumpage at mount Bischoff. Subsequently, the Management Company is required to comply with the requirements of the warning notice. According to the letter

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LEgAL AND REgULATORY REgIME IN wHICH THE TARgET gROUP OPERATES

from the Department of Environment, Planning and Pollution Control dated 22 November 2010, the Management Company was complying with the requirements of the warning notice. Further, as confirmed by the Department of Justice, Workplace Standards Tasmania on 14 September 2010, the Joint Venture and the Management Company has not breached any requirement and/or regulations under the Workplace Health & Safety Act 1995 or Regulations for the Renison Tin Mine. However, as advised by the Department of Justice, Workplace Standards Tasmania on 7 October 2010, it was investigating a workplace incident against the Joint Venture which involved a worker of the Joint Venture falling into a moving conveyor.

An incident report has been submitted by the Joint Venture to Workplace Standards Tasmania and relevant corrective measures have been proposed. The Joint Venture has conducted meetings to identify and assess the risk at the workplace as well as formulated relevant actions to tackle the potential risks by a determined timeframe. The Joint Venture is currently implementing the proposed corrective measures at the workplace. Details of the corrective measures are summarized below:

• Risk assess all conveyors and implement a maintenance schedule to address issues

• Joint Venture’s safety committee to assess the design of the system and alternative system is being placed into sections of the workplace as a trial to determine its acceptance

• Procedures to be printed with work orders

• Review procedure for the inspection of rollers

• Develop a housekeeping hit list

• Closer supervision ensuring procedures are being followed

• Carry out training and re-inductions at the workplace

• Hard copies of procedures to be placed in maintenance office

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FINANCIAL INFORMATION OF THE gROUP

APPENDIX I

(A) FINANCIAL SUMMARY INCORPORATED BY REFERENCE

The unaudited consolidated financial statements of the Group for the six months ended 30 June 2010 and the audited consolidated financial statements of the Group for each of the two years ended 31 December 2008 and 2009 together with the relevant notes to the accounts, which are incorporated by reference in this circular, could be found in the interim report and the annual reports of the Company published on the website of the Stock Exchange (http://www.hkexnews.hk) with the title Interim Report 2010 dated 9 September 2010 (http://www.hkexnews.hk/ listedco/listconews/sehk/20100909/LTN20100909210.pdf) from pages 12 to 32, “ Annual Report 2009 ” dated 29 April 2010 (http://www.hkexnews.hk/listedco/ listconews/sehk/20100429/LTN20100429873.pdf) from pages 32 to 94 and “ Annual Report 2008 ” dated 28 April 2009 (http://www.hkexnews.hk/listedco/listconews/ sehk/20090428/LTN20090428551.pdf) from pages 30 to 84.

(B) MANAgEMENT DISCUSSION AND ANALYSIS OF THE gROUP FOR THE SIX MONTHS ENDED 30 JUNE 2010 AND EACH OF THE TwO YEARS ENDED 31 DECEMBER 2009

(i) For the six months ended 30 June 2010

The following is the management discussion and analysis extracted from the 2010 interim report of the Company.

Business Overview

During the period of the first half of the year 2010, the Group obtained the certification of ISO/TS16949:2009 auto components supplier quality control system certification from a certification organization. The implementation of this quality management system implies that there is a further enhancement in the quality control standard of the products of the Group, which serves to safeguard and further improve the competitive edge of products of the Group. We are also delighted to see the recovery in the global market and the sales order are up and rising during the period. Insulation and heat-resistance solution provider business are still being managed in a difficult environment. We prime our competitiveness not just in price but rather on quality-price ratios, delivery lead times, as well as flexibility in meeting specific customers order requirements.

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FINANCIAL INFORMATION OF THE gROUP

APPENDIX I

Financial Review

The Group’s unaudited consolidated revenue for the six months ended 30 June 2010 was HKD90.7 million (2009: HKD54.8 million) representing a year on year increase of 65.5% as compared to the same period last year. The overall increase in sales was accounted for by the respective increase of 31.3% in manufacturing segment and 244.7% in trading segment on comparison with that in same period last year. The gross profit margin was shrinked slightly from 12.9% for the six months ended 30 June 2009 to 12.2% for the current period which was caused by a slow recovery of global economy and market demand, a higher portion of revenue generated from trading segment with a comparatively smaller profit margin, minor increase in manufacturing product prices being unable to compensate the effect of increase in copper and other material costs. Other gains and losses increase greatly from a gain of HKD0.8 million for the six months ended 30 June 2009 to HKD12.4 million. The increase was derived mainly from an aggregate of a gain of HKD13.6 million on disposal of property, plant and equipment, investment property and prepaid lease payments, written off of scraped plant and equipment of HKD0.8 million and an allowance of HKD1.1 million for bad and doubtful debts. Administration expenses, which represented 20.5% of the Group’s revenue, increased by approximately 74% from HKD10.7 million for the six months ended 30 June 2009 to HKD18.6 million for the six months ended 30 June 2010. Such increase was mainly attributable to the increase in various professional fee and related expenses, additional professional fee on share placements and related expenses, and increase in directors’ remuneration from a stronger team of board members. As a result of the above factors, the Group’s operation results recorded a profit of HKD3.5 million for the six months ended 30 June 2010 (2009: loss of HKD3.4 million).

Liquidity and Financial Resources

The Group financed its operations through internally generated cash flows and bank borrowings. At 30 June 2010, the Group had bank facilities amounted to HKD54.3 million of which HKD33.5 million were utilized. Bank borrowings were mainly in HK dollars while the borrowings in United States Dollars (“USD”) amounted to HKD14.1 million. Bank borrowings are mostly repayable within one year and on floating interest rates on HIBOR basis during the period. The gearing ratio of the Group, calculated as a ratio of bank borrowings to total assets, was 5.9% as at 30 June 2010 (31 December 2009: 14.2%).

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FINANCIAL INFORMATION OF THE gROUP

APPENDIX I

As at 30 June 2010, the Group had net current assets of approximately HKD452.7 million (31 December 2009: HKD76.8 million). Current ratio as at 30 June 2010 was 9.1 (31 December 2009: 2.4). The net cash position of the Group as at 30 June 2010 was approximately HKD423.5 million (31 December 2009: HKD59.1 million). The improvement of gearing ratio and the current ratio are attributable to high level of net cash position after the recent share placements on 19 January 2010 and 29 April 2010.

The Group has bank balances, bank borrowings, sales and purchases denominated in foreign currencies, which expose the Group to foreign currency risk. The currency risk for those subsidiaries with functional currency in HK dollars is mainly attributable to the bank balances, trade receivables, trade payables and bank borrowings denominated in Renminbi (“RMB”) and USD as at the end of the reporting period. As the exchange rate of HKD is pegged against USD, in the opinion of the directors, the currency risk of USD is insignificant to these subsidiaries. For RMB, we managed to balance the RMB assets and liability in order to minimize the exchange exposure. The Group currently does not maintain a foreign currency hedging policy. However, the management monitors foreign exchange exposure and will consider hedging significant foreign currency exposure should the need arise.

Charges of Assets

As at 30 June 2010, our outstanding bank borrowings of HKD33.5 million and our banking facilities of HKD54.3 million (among which HKD20.8 million had not been utilized) were secured by an insurance policy of the Group together with the corporate guarantee given by the Company.

Contingent Liabilities

As at 30 June 2010, the Group had no material contingent liabilities (six months ended 30 June 2009: nil).

Interim Dividend

The Directors do not recommend the payment of an interim dividend for the six months ended 30 June 2010 (six months ended 30 June 2009: HK5 cents).

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FINANCIAL INFORMATION OF THE gROUP

APPENDIX I

Material Disposal

On 9 February 2010, Vitar Insulation Manufactures Limited (“ Vitar Insulation ”), a wholly-owned Subsidiary of the Company, entered into the agreements with New Ocean (China) Limited (“ New Ocean ”), Grandeur (China) Limited (“ grandeur China ”), Joy Success Corporation Limited (“ Joy Success ”) and Major Business Limited (“ Major Business ”). Pursuant to the agreements, Vitar Insulation has agreed to sell and each of New Ocean, Grandeur China, Joy Success and Major Business have agreed to purchase the properties: (i) the residential property situated at Flat H on 6/F of Block 5 and car parking spaces Nos, 35 and 79 on basement, Villa Concerto, Symphony Bay, No. 530 Sai Sha Road, New Territories (“ First Property ”); (ii) the residential property situated at Unit 3A on 3rd and 4th Floors including roof and car parking spaces Nos. 16 and 22 on Ground Floor of Block A, Ascot Heights, No. 21 Lok Lam Road, Shatin (“ Second Property ”); (iii) the commercial property situated at Workshop 12 on 7th Floor of Block A, New Trade Plaza, No. 6 On Ping Street, Shatin (“ Third Property ”) and (iv) the commercial property situated at Workshop C on 26th Floor, Shield Industrial Centre, Nos. 84-92 Chai Wan Kok Street, Tsuen Wan, New Territories (“ Fourth Property ”) for a total consideration of HK$31.11 million. As part of the agreements, Vitar Insulation shall lease back the Second Property from Grandeur China, the Third Property from Joy Success and the Fourth Property from Major Business at the prevailing market rent, each for a period of three years. The transactions were approved by the independent shareholders of the Company at the extraordinary general meeting held on 18 March 2010. Details of the transactions can be referred to in the announcements of the Company dated 3 February 2010 and the circular of the Company dated 2 March 2010.

Employment and Remuneration Policy

The Group employed approximately 380 (2009: 345) employees in total and the salary and benefit amounted to approximately HK$10,102,708 as at 30 June 2010. The Group implemented its remuneration policy, bonus and share option schemes based on the achievements and performance of employees. The Group also participates in the Mandatory Provident Fund Scheme in Hong Kong and state-owned retirement benefit scheme in the PRC. The Group continues to provide training facilities for our staff to enhance knowledge of industry quality standards.

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FINANCIAL INFORMATION OF THE gROUP

APPENDIX I

Prospect

Sales order for the year 2010 is growing in comparison with 2009 and this have been reflected in the sale performance shown in our 2010 interim report. We have no new line of products and services launched during the period and our traditional products are still our major players.

Significant investments

As at 31 June 2010, the Group did not hold any significant investments during the year but for general PPE maintenance.

Material acquisitions and disposals of subsidiaries

During the period, the group structure are generally maintained and the Group have no material acquisition and disposals of subsidiaries.

Segment Information

For management purposes, the business activity of the Group is organized into two business segments — (1) manufacturing and sales of insulation and heat resistance materials (“Manufacturing”) and (2) trading of copper and silicone rubber (“Trading”). Each business has a different customer base and requires different marketing strategies.

The Group Report approximately HK$90.7 million (of which HK$60.4 million and HK$30.3 million were generated from Manufacturing and Trading segment respectively) for the period, representing a increase of approximately 65.5% as compared to previous financial period. By business segment, the turnover contributed by Manufacturing and Trading increased by 31% and 244% respectively as compared to previous financial period.

Plans for material investments

The Group have no future plans for any material investments or capital assets as at 30 June 2010 as the US market recovery is still on the way but slow and uncertain.

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FINANCIAL INFORMATION OF THE gROUP

APPENDIX I

(ii) For the year ended 31 December 2009

The following is the management discussion and analysis extracted from the 2009 annual report of the Company.

Business Overview

2009 is a difficult and challenging year for the Group under the difficult global economic conditions. Like many of the manufacturing enterprises, the Group was significantly impacted by the rapid global economic downturn caused by the financial tsunami in the second half of the year 2008.

During the year under review, the economic environment was difficult and the decline in global economic activities suppressed consumption and demand for electrical appliance in the US and European markets. Such reduction in demand in return caused a corresponding drop in the sales of our product which is a component of most electrical appliances. It was particularly challenging when revenue from most of our major markets contracted simultaneously that posed considerable pressure to the performance of the Group.

The Group has pursued different strategies to cope with the depressing economic and business environment. In order to sustain our market shares, we had put more effort in marketing activities such as participating in various international insulation materials exhibitions, establishment of sales office, modernization of warehouse and optimization of distribution outlets. To enhance our product features and its competitiveness, we had modification of existing production lines, refinement of labor force, research on materials application, reengineering of manufacturing process and product development. The Group endeavored to maintain the position of being one of the major insulation material manufacturers in Mainland China.

For management purposes, the business activity of the Group is organised into two business segments — (1) manufacturing and sales of insulation and heat resistance materials (“Manufacturing”) and (2) trading of copper and silicone rubber (“Trading”). Each business has a different customer base and requires different marketing strategies.

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FINANCIAL INFORMATION OF THE gROUP

APPENDIX I

Under the above circumstances, the Group reported a turnover of approximately HK$134.6 million (of which HK$105.6 million and HK$29 million were generated from Manufacturing and Trading segment respectively) for 2009, representing a decrease of approximately 30.6% as compared to previous financial year. By business segment, the turnover contributed by Manufacturing and Trading decreased by 26% and 44% respectively as compared to previous financial year. The Group also recorded a loss of approximately HK$12.7 million in the year 2009 due to the drop in revenue and squeeze in profit margin during the year.

Financial Review

Revenue

The Group’s audited consolidated revenue and loss attributable to the Company’s shareholders for the year ended 31 December 2009 were amounted to approximately HK$134.6 million (2008: HK$193.9 million) and HK$12.7 million (2008: Profit of HK$6.2 million) respectively. The Group’s revenue has decreased by 30.6% from that of last year.

We were adversely affected by the global financial crisis throughout 2009. Sales in the first half of 2009 was particularly worse and it recovered a lot in the second half of 2009 with an increase of 45.6% compared with the first half of 2009. The overall decrease in revenue was contributed by the decrease in sales of manufacturing products by 25.9% and trading business of 43.6%.

Cost of sales

Cost of sales includes mainly direct material costs, direct labor costs and manufacturing overhead absorbed during the production process of our products. It was approximately HK$115.3 million for the year ended 31 December 2009 and HK$155.9 million for the year ended 31 December 2008, representing respectively 85.7% and 80.4% of the revenue recorded in the respective years.

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FINANCIAL INFORMATION OF THE gROUP

APPENDIX I

Gross profit and margin

The Group record a gross profit of HK$19.3 million for the year ended 31 December 2009. This represents a decrease of 49.2% comparing with the gross profit of HK$37.9 million in 2008. Gross profit as a percentage of revenue for 2009 drops significantly to 14.3% (2008: 19.6%) due to the increase in material and overhead cost.

Other gains and losses

Other losses increased from HK$0.7 million for the year ended 31 December 2008 to HK$4.0 million in 2009 mainly as a result of the increase in allowance for bad and doubtful debts and impairment loss recognized in respect of intangible asset.

Selling and distribution costs

Selling and distribution costs, representing 1.2% of Group’s revenue, decrease by approximately 27.3% from HK$2.1 million for the year ended 31 December 2008 to HK$1.5 million for the year ended 2009. Such decrease was in line with the drop in sales for the year ended 31 December 2009.

Administrative expenses

Administration expenses, which represented 17.6% of the Group’s revenue, increase by approximately 43.4% from HK$16.5 million for the year ended 31 December 2008 to HK$23.7 million for the year of 2009. Such increase was mainly attributable to the increase in various additional professional fees and expenses after listing in November 2008, higher depreciation charge on additional property, plant and equipment acquired during the year, increase in other administration expenses.

Finance costs

With the general decline in interest rates during the year 2009 together with our decrease in bank borrowing on comparison with those in 2008. The finance cost of the Group deceased from HK$1.9 million in 2008 to HK$0.8 million in 2009.

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FINANCIAL INFORMATION OF THE gROUP

APPENDIX I

Taxation

Income tax increase from HK$1.3 million for the year ended 31 December 2008 to HK$2.7 million for the year ended 31 December 2009 due to underprovision of Hong Kong profits tax in prior years.

Loss for the year

There was an abrupt change in operating result for the year 2009 from a profit of HK$6.2 million for the year ended 31 December 2008 to a loss of HK$12.7 million for the year ended 31 December 2009. The loss was attributed to the increase in other losses and administrative expense, decrease in revenue and gross profit. Profit attributable to shareholders as a percentage of revenue decrease greatly from approximately 3.2% for the year ended 31 December 2008 to a loss of 9.5% for 2009.

Major Financial Ratios

	2009	2008
Trade receivables turnover (days)	130	107
Trade payable turnover (days)	49	42
Inventory turnover (days)	48	77
Gearing ratio	14.2%	17.2%

Trade receivable turnover

The trade receivables turnover is calculated by dividing the trade receivables as of the end of the respective year by revenue for the year, multiplied by 365 days. Due to change in market conditions, the trade receivables turnover day was increased from 107 days as of 31 December 2008 to 130 days as of 31 December 2009.

Trade payables turnover

The trade payable turnover is calculated by dividing the trade payables as of the end of the respective year by cost of sales for the year, multiplied by 365 days. The trade payable turnover days stayed close for both years and stood at 42 days as of 31 December 2008 and 49 days as of 31 December 2009.

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FINANCIAL INFORMATION OF THE gROUP

APPENDIX I

Inventories turnover

The inventory turnover is calculated by dividing the inventories as of the end of the respective year by cost of sales for the year, multiplied by 365 days. The inventories turnover days was more cautiously monitored during the year in order to maintain the minimum level to meet our customers order. It was 77 days as of 31 December 2008 and 48 days as of 31 December 2009.

Gearing ratio

The gearing ratio is calculated by dividing the total bank borrowings by total assets at the end of the respective year. Following our listing on 12 November 2008, the gearing ratio was further improved and it dropped from 17.2% as at 31 December 2008 to 14.2% as at 31 December 2009.

Liquidity and Financial Resources

The Group financed its operations through internally generated cash flows and bank borrowings. At 31 December 2009, the Group had bank facilities amounted to HK$96.3 million of which HK$29.8 million were utilized. Majority of the bank borrowings were in HK dollars while bank borrowings in USD amounted to HK$10.1 million. All bank borrowings were mostly repayable within one year and on floating interest rates basis ranging from HIBOR plus 1.25% to 2.25% during the year. The gearing ratio of the Group, calculated as a ratio of bank borrowings to total assets, was 14.2% as at 31 December 2009 (2008: 17.2%). As at 31 December 2009, the Group had net current assets of approximately HK$76.8 million (2008: HK$101.0 million). Current ratio as at 31 December 2009 was slightly lower than last year and stood at 2.4% (2008: 2.6%). The net cash position of the Group as at 31 December 2009 was approximately HK$59.1 million (2008: HK$68.7 million). The Group has consistently maintained a sound financial position with low gearing ratio, high liquidity and adequate financial resources.

The Group has bank balances, bank borrowings, other payable, sales and purchases denominated in foreign currencies, which expose the Group to foreign currency risk. The currency risk for those subsidiaries with functional currency in HK Dollars is mainly attributable to the bank balances, trade receivables, trade payables and bank borrowings denominated in Renminbi (“RMB”) and United States Dollars (“USD”) as at the end of the reporting

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FINANCIAL INFORMATION OF THE gROUP

APPENDIX I

period. As the exchange rate of HK$ is pegged against USD, in our opinion, the currency risk of USD is insignificant to these subsidiaries. For RMB, we managed to balance the RMB assets and liability in order to minimize the exchange exposure.

During the financial year, the Group did not have a foreign currency hedging policy. However, the management monitored foreign exchange exposure and considered hedging significant foreign currency exposure should the need arises.

Charges of Assets and Contingent Liabilities

As at 31 December 2009, our outstanding bank borrowings of HK$29.8 million and our banking facilities of HK$96.3 million (among which HK$66.5 million had not been utilized) were secured by the properties and deposit placed for a life insurance policy owned by the Group in Hong Kong. Details of the above are disclosed in relevant notes in the audited consolidated financial statements.

As at 31 December 2009, the Group did not have any significant contingent liabilities.

Significant Investments

For the year ended 31 December 2009, capital expenditure of the group for property, plant and equipment and leasehold land in PRC amounted to approximately HK$8.3 million (2008: HK$16.7 million).

Employment and Remuneration Policy

The Group employed approximately 340 employees in total and the salary and benefit amounted to approximately HK$15,843,280 as at 31 December 2009. The Group implemented its remuneration policy, bonus and share option schemes based on the achievements and performance of employees. The Group also participates in the Mandatory Provident Fund Scheme in Hong Kong and state-owned retirement benefit scheme in the PRC. The Group continues to provide training facilities to our staff to enhance knowledge of industry quality standards.

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FINANCIAL INFORMATION OF THE gROUP

APPENDIX I

Share Option Scheme

On 21 October 2008, the Company adopted a share option scheme (the “Scheme”) for the purpose of providing incentives and rewards to eligible participants who contribute to the success of the Group. Eligible participants of Scheme include, without limitation, employees, Directors, shareholder and any other eligible persons of the Group. Up to 31 December 2009, no share option has been granted or agreed to be granted to any person under the Scheme.

Prospect

The Group had no new line of products and services launched during the year and our traditional products are still our major players.

Significant investments

As at 31 December 2009, the Group did not hold any significant investments during the year but for general PPE maintenance.

Material acquisitions and disposals of subsidiaries

During the year, the group structure are generally maintained and the Group have no material acquisition and disposals of subsidiaries.

Segment Information

For management purposes, the business activity of the Group is organized into two business segments — (1) manufacturing and sales of insulation and heat resistance materials (“Manufacturing”) and (2) trading of copper and silicone rubber (“Trading”). Each business has a different customer base and requires different marketing strategies.

T h e G r o u p R e p o r t a p p r o x i m a t e l y H K $ 1 3 4 . 6 m i l l i o n ( o f w h i c h HK$105.6 million and HK$29 million were generated from Manufacturing and Trading segment respectively) for 2009, representing a decrease of approximately 30.6% as compared to previous financial year. By business segment, the turnover contributed by Manufacturing and Trading decreased by 26% and 44% respectively as compared to previous financial year.

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FINANCIAL INFORMATION OF THE gROUP

APPENDIX I

Plans for material investments

The Group have no future plans for any material investments or capital assets as at 31 December 2009 as the US market recovery is still on the way but slow and uncertain.

(iii) For the year ended 31 December 2008

The following is the management discussion and analysis extracted from the 2008 annual report of the Company.

Business Overview

The global economy in 2008 has undergone drastic changes, brought about by the financial crisis beginning in the second half of the year. The US sub-prime mortgage crisis had led to the meltdown of certain financial institutions and the decline of global economy. Consumer confidence in the U.S. and Europe, which are the key markets of our customers, declined substantially due to fears of a deepening recession and rising unemployment rate. The adverse effect began to surface in the fourth quarter of 2008 as the demand for the Company’s products decreased gradually. At the same time, the new labour law in the PRC had caused an increase in labour costs, coupled with appreciation of RMB, and volatile oil prices during the year, resulted in rise in cost of raw materials and manufacturing cost. Like most of the manufacturers in the PRC, the Company was facing an unprecedented adverse business environment during the last quarter of the year. Despite all the negative factors, through the effort of our sale and marketing, the Company was able to maintain a stable revenue level with a slight decline of 5.2%.

Financial Review

Revenue

The Group’s audited consolidated revenue and profit attributable to the Company’s shareholders for the year ended 31 December 2008 amounted to approximately HK$193.9 million (2007: HK$204.5 million) and HK$6.2 million (2007: HK$24.3 million) respectively. The Group’s revenue has decreased slightly by 5.2% from that of last year. The profit attributable to the shareholders of HK$6.2 million was arrived at after deducting expenses

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FINANCIAL INFORMATION OF THE gROUP

APPENDIX I

related to the Listing of approximately HK$9.9 million (2007: nil). Excluding such non-recurring expenses, the profit attributable to the shareholders was HK$16.1 million representing a decrease of 33.7% from that of last year.

We have been adversely affected by the economic tsunami and credit tightening at the end of the year. This caused our sales dropped slightly in the last quarter of the year. However, with our strong customer base and the effort of our sale and marketing, we have managed a slight decline in revenue of 5.2% which was derived from a decrease in sales of trading and manufacturing products by 12.6% and 2.2%, respectively.

Cost of sales

The cost of sales mainly includes direct material costs, direct labour costs and manufacturing overhead absorbed during the production process of our products. It was approximately HK$155.9 million for the year ended 31 December 2008 and HK$161.3 million for the year ended 31 December 2007 and represented 80.4% and 78.9% of revenue in the respective years.

Gross profit and margin

The Group recorded a gross profit of HK$38.0 million for the year ended 31 December 2008. This represents a decrease of 12.1% comparing with the gross profit of HK$43.2 million in 2007. Gross profit as a percentage of revenue for 2008 drop slightly to 19.6% (2007: 21.1%).

Other income

Other income decreased by approximately 61.7% from HK$1.4 million for the year ended 31 December 2007 to HK$0.6 million in 2008 due to the nonoccurrence of gain on fair value change of derivative financial instruments and reversal of the impairment loss on investment property in 2007.

Selling and distribution costs

The selling and distribution costs, which represented 1.1% of Group’s revenue, decrease by approximately 23.7% from HK$2.8 million for the year ended 31 December 2007 to HK$2.1 million for the year of 2008. The high level of selling and distribution costs in 2007 was caused by the transportation requirement for relocation of production facilities from the factory in Shenzhen to the factory in Longchuan.

— I-14 —

FINANCIAL INFORMATION OF THE gROUP

APPENDIX I

Administrative expenses

Administration expenses, which represented 8.9% of the Group’s revenue, increase by approximately 37.9% from HK$12.6 million for the year ended 31 December 2007 to HK$17.3 million for the year of 2008. Such increase was mainly attributable to the increase in various professional fees, higher depreciation charge on additional property, plant and equipment acquired during the year, rental charges for office premises which was free for the year of 2007 and increase in staff cost.

Finance costs

With the general decline in interest rates during the year 2008 together with the decrease in bank borrowings on comparison with those in 2007. The finance costs of the Group deceased from HK$2.6 million in 2007 to HK$1.9 million in 2008.

Taxation

Income tax decreased from HK$3.0 million for the year ended 31 December 2007 to HK$1.3 million for the year ended 31 December 2008 due to the lower of the estimated assessable profit in Hong Kong and the tax rate for the year 2008.

Profit for the year

Excluding non-recurring expenses related to the Listing of HK$9.9 million, profit for the year decreased by approximately 33.7% from HK$24.3 million for the year ended 31 December 2007 to approximately HK$16.1 million for the year of 2008. The decrease in profit was attributed to the increase in administrative expenses and decrease in gross profit and other income.

Excluding non-recurring expenses related to the Listing of HK$9.9 million, profit attributable to shareholders as a percentage of revenue decrease slightly from approximately 11.9% for the year ended 31 December 2007 to 8.3% for 2008. The slight decrease was caused by faster growth rate in cost of sales and administrative expenses.

— I-15 —

FINANCIAL INFORMATION OF THE gROUP

APPENDIX I

Major Financial Ratios

	2008	2007
Trade receivable turnover (days)	107	144
Trade turnover (days)	42	39
Inventory turnover (days)	77	77
Gearing ratio	17.2%	22.1%

Trade receivable turnover

The trade receivable turnover is calculated by dividing the trade receivables as of the end of the respective years by revenue for the year, multiplied by 365 days. With stringent credit control, the trade receivable turnover days improved greatly and were decreased from 144 days as of 31 December 2007 to 107 days as of 31 December 2008.

Trade payable turnover

The trade payable turnover is calculated by dividing the trade payables as of the end of the respective years by cost of sales for the year, multiplied by 365 days. The trade payable turnover days increased slightly from 39 days as of 31 December 2007 to 42 days as of 31 December 2008.

Inventory turnover

The inventory turnover is calculated by dividing the inventories as of the end of the respective years by cost of sales for the year, multiplied by 365 days. The inventory turnover days was managed constantly at 77 days for both of the years 2007 and 2008 in order to keep the minimum inventory level to meet our sale orders.

Gearing ratio

The gearing ratio is calculated by dividing the total borrowings by total assets at the end of the respective years. Following the Listing on 12 November 2008, the gearing ratio was improved and dropped from 22.1% as at 31 December 2007 to 17.2% as at 31 December 2008.

— I-16 —

FINANCIAL INFORMATION OF THE gROUP

APPENDIX I

Liquidity and Financial Resources

The Group financed its operations through internally generated cash flows and bank borrowings. At 31 December 2008, the Group had bank facilities amounted to HK$104.1 million of which HK$41.4 million were utilised. Bank borrowings were major in Hong Kong Dollars (“HK$”) while the borrowings in United States Dollars (“USD”) amounted to HK$5.6 million. The bank borrowings are mostly repayable within one year and on floating interest rates basis ranging from Hong Kong Interbank Offered Rate (“HIBOR”) + 0.8% per annum to HIBOR + 2.3% per annum during the year. The gearing ratio of the Group, calculated as a ratio of bank borrowings to total assets, was 17.2% as at 31 December 2008 (2007: 22.1%). As at 31 December 2008, the Group had net current assets of approximately HK$101.0 million (2007: HK$78.3 million). Current ratio as at 31 December 2008 was 2.6% (2007: 2.0%). The net cash position of the Group as at 31 December 2008 was approximately HK$68.7 million (2007: HK$35.5 million). The improvement of gearing ratio and the current ratio as well as the building up of a net cash position are attributable to the funds raised from the initial public offer of the Company’s shares in November 2008 (the “IPO”).

The Group has pledged bank deposits, bank balances, bank borrowings, other payable, sales and purchases denominated in foreign currencies, which expose the Group to foreign currency risk. The currency risk for those subsidiaries with functional currency in HK$ is mainly attributable to the pledged bank deposits, bank balances, trade receivables, trade payables, bank borrowings and other payable denominated in Renminbi (“RMB”) and USD as at the balance sheet date. As the exchange rate of HK$ is pegged against USD, in our opinion, the currency risk of USD is insignificant to these subsidiaries. For RMB, we managed to balance the RMB assets and liabilities in order to minimise the exchange rate exposure.

During the financial year, the Group did not have a foreign currency hedging policy. However, the management monitored foreign exchange exposure and considered hedging foreign currency exposure should the need arises.

Charges of Assets and Contingent Liabilities

As at 31 December 2008, our outstanding bank borrowings of HK$41.4 million and our banking facilities of HK$104.1 million (among which HK$62.7 million had not been utilised) were secured by the properties owned by the Group in

— I-17 —

FINANCIAL INFORMATION OF THE gROUP

APPENDIX I

Hong Kong, pledged bank deposits, properties owned by Mr. Leung Kai Wing and a related company, and the personal guarantees provided by Mr. Leung Chau Hiu, Mr. Leung Kai Wing and Mr. Yip Sai Keung, a former director of Vitar Insulation Manufacturers Limited (“Vitar Hong Kong”), a subsidiary of the Company. In March 2009, the aforesaid properties and guarantees from the directors, the former director of Vitar Hong Kong and the related company were released. Details of the above are disclosed in relevant notes to the audited financial statements.

As at 31 December 2008, the Group did not have any significant contingent liabilities.

Significant Investments

For the year ended 31 December 2008, capital expenditure of the Group for property, plant and equipment and leasehold land in the PRC amounted to approximately HK$16.6 million (2007: HK$13.5 million)

Employment and Remuneration Policy

The Group employed 380 employees in total and the salary and benefit amounted to approximately HK$17,383,841 as at 31 December 2008. The Group implemented its remuneration policy, bonus and share option schemes based on the achievements and performance of employees. The Group also participates in the Mandatory Provident Fund Scheme in Hong Kong and state-managed retirement benefit scheme in the PRC. The Group continues to provide training facilities for our staff to enhance knowledge of industry quality standards.

Share Option Scheme

On 21 October 2008, the Company adopted a share option scheme (the “Scheme”) for the purpose of providing incentives and rewards to eligible participants who contribute to the growth of the Group. Eligible participants of the Scheme include, without limitation, employees, directors and any other eligible persons of the Group. Up to 31 December 2008, no share option has been granted or agreed to be granted to any person under the Scheme.

— I-18 —

FINANCIAL INFORMATION OF THE gROUP

APPENDIX I

Prospect

The Group had no new line of products and services launched during the year and our traditional products are still our major players.

Significant investments

As at 31 December 2008, the Group did not hold any significant investments during the year but for general PPE maintenance.

Material acquisitions and disposals of subsidiaries

During the year, the group structure are generally maintained and the Group have no material acquisition and disposals of subsidiaries.

Segment Information

For management purposes, the business activity of the Group is organized into two business segments — (1) manufacturing and sales of insulation and heat resistance materials (“Manufacturing”) and (2) trading of copper and silicone rubber (“Trading”). Each business has a different customer base and requires different marketing strategies.

The Group Report approximately HK$193.9 million (of which HK$142.5 million and HK$51.3 million were generated from Manufacturing and Trading segment respectively) for 2008, representing a decrease of approximately 5.2% as compared to previous financial year. By business segment, the turnover contributed by Manufacturing and Trading decreased by 2.2% and 12.6% respectively as compared to previous financial year.

Plans for material investments

The Group have no future plans for any material investments or capital assets as at 31 December 2008 as the financial crisis beginning in the second half of the year.

— I-19 —

FINANCIAL INFORMATION OF THE gROUP

APPENDIX I

(iv) For the year ended 31 December 2007

Financial Review

Revenue

Our revenue increased by HK$28.6 million, or 16.3%, for the year ended 31 December 2007, from HK$175.9 million to HK$204.5 million. Such increase was due to (i) slight increase in sales derived from manufacturing business of HK$0.9 million, or 0.6%, from HK$144.9 million to HK$145.8 million and (ii) increase in copper and silicone rubber trading business of HK$27.8 million, or 89.6%, from HK$31.0 million to HK$58.8 million.

Revenue from sale of high-temperature electric wires increased by HK$6.5 million, or 14.6%, from HK$44.6 million to HK$51.1 million, mainly due to the increase in average selling price of wire products by around 2% as price of copper remained at high level as in 2006 and the increase in demand for our high-temperature wires in general due to the launch of 12 types of new products. Revenue from sale of silicon-based tubes increased by HK$3.4 million, or 22.8%, from HK$15.1 million to HK$18.6 million, mainly due to increase in demand for our silicon-based tubes products in general, which was attributable to the shift of purchase of products from overseas to China by certain of our existing customers and new customers. For the year ended 31 December 2007, sales to new customers for our manufactured products amounted to HK$23.3 million.

There was a slight decrease by HK$1.0 million, or 2.3%, from HK$41.4 million to HK$40.4 million for sales of fibre-glass sleeving for the year ended 31 December 2007 due to the relocation of our production facilities from Vitar Shenzhen to Weida Longchuan whilst the decrease in sales of mica sheets by HK$8.1 million, or 18.5%, from HK$43.8 million to HK$35.7 million for the year ended 31 December 2007 was due to fierce price competition.

— I-20 —

FINANCIAL INFORMATION OF THE gROUP

APPENDIX I

The increased revenue in trading business was mainly due to (i) increase in price of copper due to worldwide increase in metal prices resulted from decline in US$; and (ii) increased demand for silicone rubber from our customers as we started to trade high-end silicone rubber in 2007 with sales from which amounted to HK$16.8 million.

Cost of sales

Our cost of sales increased by HK$24.5 million, or 17.9%, for the year ended 31 December 2007, from HK$136.9 million to HK$161.3 million. Cost of sales for manufacturing business decreased slightly by HK$0.5 million, or 0.5%, from HK$107.0 million to HK$106.5 million, as a result of the lowering of raw materials cost by shifting part of the purchase of silicone rubber from overseas suppliers to local suppliers, and cost of sales for trading business increased by HK$25.0 million, or 83.9%, from HK$29.8 million to HK$54.8 million. The increase in cost of sales for the trading business was in line with the increase in sales in trading business.

Gross profit and gross profit margin

Our gross profit increased by HK$4.1 million, or 10.6%, for the year ended 31 December 2007, from HK$39.0 million to HK$43.2 million, and our gross profit margin decreased slightly from 22.2% to 21.1% in the year ended 31 December 2007. Our overall gross profit margin decreased slightly by 1.1% in 2007 as the gross profit of trading business accounted for a heavier proportion of 9.2% in 2007 compared with 3.1% in 2006. As the trading business was of lower gross profit margin than the manufacturing business, our overall gross profit margin was pulled down.

Gross profit for manufacturing business increased by HK$1.4 million, or 3.7%, from HK$37.8 million to HK$39.2 million, and gross profit margins remained relatively stable at 26.1% and 26.9% for the years ended 31 December 2006 and 2007 respectively. The increase in gross profit was in line with the increase in sales derived from and cost of sales incurred for manufacturing business.

Gross profit for trading business increased by HK$2.8 million, or 233.3%, from HK$1.2 million to HK$4.0 million, while gross profit margin increased from 3.9% to 6.8% in the year ended 31 December 2007. Such increase in margin was mainly due to the higher margin recorded from trading of high-end

— I-21 —

FINANCIAL INFORMATION OF THE gROUP

APPENDIX I

silicone rubber in 2007. Following the demand from our customer, we started to trade high-end silicone rubber in 2007. The gross profit margin from sale of high-end silicone rubber for the year ended 31 December 2007 was 10.0%.

Bank interest income

Our bank interest income increased by approximately HK$100,000, or 24.0%, for the year ended 31 December 2007, from approximately HK$417,000 to approximately HK$517,000. Such increase was mainly due to the increase in interest rate for the year ended 31 December 2007.

Other income

Our other income increased by approximately HK$692,000, or 92.9%, for the year ended 31 December 2007, from approximately HK$745,000 to approximately HK$1,437,000. Such increase was mainly due to the gain from our hedging activities of HK$333,000 and the reversal of impairment loss in respect of our investment property.

In light of the fluctuating metal prices in recent years and the potential volatility in metal prices, we have started to carry out hedging activities on copper price through buying and selling copper futures contract on the Shanghai Futures Exchange since January 2007. For the year ended 31 December 2007, we bought, and subsequently sold, a total of 130 lots of copper futures contracts (representing 650 tonnes of copper) solely for the purpose of hedging the cost of copper in the manufacturing business, and recorded a gain of HK$333,000. For the same year, we purchased 377.5 tonnes of copper for our manufacturing business. We did not enter into derivative financial instruments for speculative purpose.

We review the recoverable amount of the investment property at each balance sheet date with reference to the rental yield and the recent market value of such investment property. In our opinion, based on the recent market transactions of similar properties, the fair value of the investment property was above the cost of acquisition as at 31 December 2007. Therefore we determined to reverse the impairment loss recognised in the year ended 31 December 2004 and the corresponding amount of HK$270,000 was credited to the combined income statement during the year ended 31 December 2007.

— I-22 —

FINANCIAL INFORMATION OF THE gROUP

APPENDIX I

Sundry income, mainly comprised of income from sale of scrap items such as packing materials, metals, wires and silicone tubes, increased by approximately HK$35,000 for the year ended 31 December 2007.

Selling and distribution costs

Our selling and distribution costs increased by HK$1.0 million, or 57.9%, for the year ended 31 December 2007, from HK$1.8 million to HK$2.8 million. Selling and distribution costs represented 1.0% and 1.4% of our total revenue respectively for the years ended 31 December 2006 and 2007. Such increase was mainly due to costs associated with the relocation of our production facilities from Vitar Shenzhen to Weida Longchuan.

Administrative expenses

Our administrative expenses increased by HK$0.9 million, or 8.1%, for the year ended 31 December 2007, from HK$11.6 million to HK$12.6 million. Such increase was mainly due to the general increase in staff salaries and benefits and Directors’ emoluments. The increase in Directors’ emoluments was the additional compensation for completion of relocation of the production facilities from Vitar Shenzhen to Weida Longchuan. Administrative expenses represented 6.6% and 6.1% of our total revenue respectively for the years ended 31 December 2006 and 2007.

Finance costs

Our finance costs increased by HK$0.9 million, or 54.0%, for the year ended 31 December 2007, from HK$1.7 million to HK$2.6 million. Such increase was mainly due to the increase in the amount of trust receipt loan of HK$4.5 million following the increase in sales and the increase in bank loans of HK$4.7 million.

Taxation

Our taxation increased by HK$0.5 million, or 19.9%, for the year ended 31 December 2007, from HK$2.5 million to HK$3.0 million. Such increase was mainly due to the increase in our total revenue and profit before taxation. We were subjected to Hong Kong profits tax at 17.5% of the estimated assessable profit for both years.

— I-23 —

FINANCIAL INFORMATION OF THE gROUP

APPENDIX I

Profit for the year

As a result of the changes in the items discussed above, our profit for the year increased by HK$1.6 million, or 7.0%, for the year ended 31 December 2007, from HK$22.7 million to HK$24.3 million.

Gearing ratio

The gearing ratio is calculated by dividing the total borrowings by total assets at the end of the respective years. The gearing ratio was 22.1% as at 31 December 2007.

Charges of Assets and Contingent Liabilities

As at 31 December 2007, our outstanding bank borrowings of approximately HK$48.4 million and our banking facilities of approximately HK$107.6 million (among which HK$59.2 million had not been utilised) were secured by the leasehold land and buildings, investment property and pledged bank deposits.

As at 31 December 2007, the Group did not have any significant contingent liabilities.

Liquidity and Financial Resources

The Group financed its operations through internally generated cash flows and bank borrowings. At 31 December 2007, the Group had bank facilities amounted to HK$107.6 million of which HK$48.4 million were utilised. Bank borrowings were major in HKD while the borrowings in USD amounted to HK$17.4 million. The bank borrowings are mostly repayable within one year and on floating interest rates basis ranging from Hong Kong Interbank Offered Rate (“HIBOR”) + 0.8% per annum to HIBOR + 1.6% per annum during the year. The gearing ratio of the Group, calculated as a ratio of bank borrowings to total assets, was 22.1% as at 31 December 2007. As at 31 December 2007, the Group had net current assets of approximately HK$78.3 million. Current ratio as at 31 December 2007 was 2.0%. The net cash position of the Group as at 31 December 2007 was approximately HK$35.5 million. The Group has pledged bank deposits, bank balances, bank borrowings, other payable, sales and purchases denominated in foreign currencies, which expose the Group to foreign currency risk. The currency risk for those subsidiaries with functional currency in HKD is mainly attributable to the pledged bank deposits, bank balances, trade receivables, trade payables, bank borrowings and other payable

— I-24 —

FINANCIAL INFORMATION OF THE gROUP

APPENDIX I

denominated in Renminbi and USD as at the balance sheet date. As the exchange rate of HKD is pegged against USD, in our opinion, the currency risk of USD is insignificant to these subsidiaries. For RMB, we managed to balance the RMB assets and liabilities in order to minimise the exchange rate exposure. During the financial year, the Group did not have a foreign currency hedging policy. However, the management monitored foreign exchange exposure and considered hedging foreign currency exposure should the need arise.

Employment and remuneration policy

The Group salary and benefit amounted to approximately HK$15,461,462 as at 31 December 2007. The Group implemented its remuneration policy, bonus and share option schemes based on the achievements and performance of employees. The Group also participates in the Mandatory Provident Fund Scheme in Hong Kong and state-owned retirement benefit scheme in the PRC. The Group continues to provide training facilities for our staff to enhance knowledge of industry quality standards.

Prospect

The Group had no new line of products and services launched during the year and our traditional products are still our major players.

Significant investments

As at 31 December 2007, the Group did not hold any significant investments during the year but for general PPE maintenance.

Material acquisitions and disposals of subsidiaries

During the year, the group structure are generally maintained and the Group have no material acquisition and disposals of subsidiaries.

Segment Information

For management purposes, the business activity of the Group is organized into two business segments — (1) manufacturing and sales of insulation and heat resistance materials (“Manufacturing”) and (2) trading of copper and silicone rubber (“Trading”). Each business has a different customer base and requires different marketing strategies.

— I-25 —

FINANCIAL INFORMATION OF THE gROUP

APPENDIX I

The Group Report approximately HK$204.5 million (of which HK$145.7 million and HK$58.8 million were generated from Manufacturing and Trading segment respectively) for 2007, representing a increase of approximately 16.3% as compared to previous financial year. By business segment, the turnover contributed by Manufacturing and Trading increased by 0.5% and 89.7% respectively as compared to previous financial year.

Plans for material investments

The Group has no future plans for any material investments or capital assets as at 31 December 2007.

(C) INDEBTEDNESS STATEMENT

At the close of business on 30 November 2010, being the latest practicable date prior to the printing of this circular, the Group had outstanding bank borrowings of approximately HK$5,000,000, trust receipt loans of approximately HK$4,832,000. The Target Group had outstanding amount due to the shareholder of the Target Company of approximately HK$596,546,000. In addition, the Target Group had outstanding obligations at the date under hire purchase contracts and finance leases of approximately HK$15,817,000, which were secured by the Target Group’s plant and machinery with carrying amount of HK$30,759,000. A life insurance policy, which is entered into between the Group and an insurance company to insure an executive director of the Group, was pledged to a bank to secure general banking facilities granted to the Group.

Save as disclosed above and apart from intra-group liabilities, the Enlarged Group did not have any outstanding debt securities issued and outstanding or authorized or otherwise created but unissued, term loans, other borrowings or indebtedness in the nature of borrowing including bank overdrafts, liabilities under acceptances (other than normal trade bills), acceptance credits, hire purchase commitments, mortgages and charges, material contingent liabilities and guarantees outstanding at the close of business on 30 November 2010.

The Directors have confirmed that there has not been any material change in the indebtedness and contingent liabilities of the Enlarged Group since 30 November 2010 and up to the Latest Practicable Date.

— I-26 —

FINANCIAL INFORMATION OF THE gROUP

APPENDIX I

(D) wORKINg CAPITAL SUFFICIENCY

Taking into account the expected completion of the Acquisitions and the financial resources available to the Enlarged Group, including the internally generated funds and the available banking facilities, the Directors are of the opinion that the Enlarged Group has sufficient working capital for its present requirements, that is for at least the next 12 months from the date of this circular.

(E) MATERIAL ADVERSE CHANgES

The Directors confirm that there has been no material adverse change in the financial or trading position of the Group since 31 December 2009, the date to which the latest published audited annual financial statements of the Group were made up.

— I-27 —

ACCOUNTANTS’ REPORT OF THE TARgET gROUP

APPENDIX II

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31 December 2010

The Directors

Vitar International Holdings Limited

Dear Sirs,

We set out below our report on the financial information (the “Financial Information”) regarding Parksong Mining And Resource Recycling Limited (“Parksong”) and its subsidiaries (hereinafter collectively referred to as the “Parksong Group”) for the period from 16 July 2008 (date of incorporation) to 30 June 2009 and the year ended 30 June 2010 (the “Relevant Periods”) for inclusion in a circular issued by Vitar International Holdings Limited (the “Company”) dated 31 December 2010 (the “Circular”) in connection with the proposed acquisition of entire equity interest of Parksong by the Company.

Parksong is a limited company incorporated in Hong Kong on 16 July 2008 and acted as an investment holding company during the Relevant Periods.

Parksong has direct and indirect interests in the subsidiaries as follows:

Name of subsidiary Date and place of incorporation Issued and fully paid up share capital Yunnan Tin Hong Kong (Holdings) Group Co., Limited (“YTHKG”) (formerly known as Golden Glory Way Limited) 11 June 2009 Hong Kong HK$10,000	Equity interest attributable to Parksong Principal activities Date of this report As at 30 June 2009 2010 55% 55% 82% Investment holding

— II-1 —

ACCOUNTANTS’ REPORT OF THE TARgET gROUP

APPENDIX II

Name of subsidiary Date and place of incorporation Issued and fully paid up share capital YT Parksong Australia Holding Pty Ltd. (“YT Parksong Australia”) 15 December 2009 Australia AUD1 YT Parksong Australia Management Pty Ltd. 15 December 2009 Australia AUD1	Equity interest attributable to Parksong Principal activities Date of this report As at 30 June 2009 2010 N/A 55% 82% Exploration, development and mining of tin bearing ores in Australia N/A 55% 82% Inactive

Note: YTHKG is directly owned by Parksong. All other subsidiaries are indirectly owned by Parksong.

Parksong has indirect interests in a jointly controlled entity as follows:

Name of entity Form of entity Date and place of incorporation Issue and fully paid up share capital Bluestone Mines Tasmania Joint Venture Pty Ltd. (“BMTJV”) Incorporated 19 March 2010 Australia AUD2	Equity interest and voting power attributable to Parksong Principal activity Date of this report As at 30 June 2009 2010 N/A 50% 50% Provision of management services in mining projects on behalf of the Parksong Group in Australia

No audited financial statements have been prepared for YT Parksong Australia and YT Parksong Australia Management Pty Ltd. for the period from their respective date of incorporation to 30 June 2010 since they have been incorporated for less than one year.

We have acted as the auditor of Parksong and YTHKG for the Relevant Periods, or since the date of incorporation, to 30 June 2010 where there is a shorter period.

— II-2 —

APPENDIX II ACCOUNTANTS’ REPORT OF THE TARgET gROUP

The director of Parksong has prepared the statutory consolidated financial statements of the Parksong Group in accordance with Hong Kong Financial Reporting Standards (“HKFRSs”) issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”) for the Relevant Periods (the “Underlying Financial Statements”).

We have examined the Underlying Financial Statements for the Relevant Periods in accordance with the Auditing Guideline 3.340 “Prospectuses and the Reporting Accountant” as recommended by the HKICPA.

The Financial Information of the Parksong Group for the Relevant Periods set out in this report has been prepared based on the Underlying Financial Statements. No adjustments were considered necessary to adjust the Underlying Financial Statements in preparing our report for inclusion in the Circular.

The Underlying Financial Statements are the responsibility of the director of Parksong who approve their issue. The directors of the Company are responsible for the contents of the Circular in which this report is included. It is our responsibility to compile the Financial Information set out in this report from the Underlying Financial Statements, to form an independent opinion on the Financial Information and to report our opinion to you.

In our opinion, the Financial Information gives, for the purpose of this report, a true and fair view of the state of affairs of the Parksong Group as at 30 June 2009 and 2010 and of its consolidated results and cash flows of the Parksong Group for the Relevant Periods.

— II-3 —

APPENDIX II ACCOUNTANTS’ REPORT OF THE TARgET gROUP

(A) FINANCIAL INFORMATION

Consolidated statements of comprehensive income

From 16 July 2008 (date of incorporation) to 30 June 2009 NOTES HK$’000 Revenue 7 — Cost of sales — Gross profit — Bank interest income — Other gains and losses 10 — Administrative expenses (18) Other expenses 11 — Finance costs 10 — Loss before taxation (18) Tax expense 12 — Loss for the period/year 13 (18) Other comprehensive income: Exchange difference arising on translation to presentation currency — Total comprehensive expense for the period/year (18) Loss for the period/year attributable to: Owner of Parksong (10) Non-controlling interests (8) (18) Total comprehensive expense for the period/year attributable to: Owner of Parksong (10) Non-controlling interests (8) (18)

Year ended 30 June 2010 HK$’000 90,070 (75,141) 14,929 315 (15,968) (6,638) (89,495) (37,607) (134,464) (6) (134,470) 4,685 (129,785) (75,348) (59,122) (134,470) (72,723) (57,062) (129,785)

— II-4 —

APPENDIX II ACCOUNTANTS’ REPORT OF THE TARgET gROUP

Consolidated statements of financial position

NOTES Non-current assets Property, plant and equipment 15 Deposits 16 Mining rights 17 Exploration and evaluation expenditures 18 Deferred tax assets 29 Current assets Inventories 19 Trade receivables 20 Other receivables, deposits and prepayment 20 Derivative financial instruments 22 Bank balances and cash 23 Current liabilities Trade and other payables and accruals 24 Amount due to a shareholder 21 Borrowings 25 Obligations under finance leases 26 Derivative financial instruments 22 Tax payables Net current liabilities Total assets less current liabilities	As 2009 HK$’000 — — — — — — — — — — — — — 8 — — — — 8 (8) (8)	at 30 June 2010 HK$’000 205,214 13,172 141,523 2,281 2,292 364,482 35,117 32,050 16,140 33,058 79,730 196,095 59,893 184,066 401,983 14,013 8,996 2,298 671,249 (475,154) (110,672)

— II-5 —

ACCOUNTANTS’ REPORT OF THE TARgET gROUP

APPENDIX II

NOTES Capital and reserves Share capital 28 Reserves Equity attributable to owner of Parksong Non-controlling interests Total equity Non-current liabilities Obligations under finance leases 26 Provision for rehabilitation 27 Total equity and non-current liabilities	As 2009 HK$’000 10 (10) — (8) (8) — — — (8)	at 30 June 2010 HK$’000 10 (72,733) (72,723) (57,070) (129,793) 4,520 14,601 19,121 (110,672)

— II-6 —

ACCOUNTANTS’ REPORT OF THE TARgET gROUP

APPENDIX II

Consolidated statements of changes in equity

At 16 July 2008 (date of incorporation) Loss and total comprehensive expense for the period At 30 June 2009 Loss for the year Other comprehensive income for the year Total comprehensive income (expense) for the year At 30 June 2010	Attributable to owner of Parksong Non- Share capital Translation reserve Accumulated losses Total controlling interests HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 10 — — 10 — — — (10) (10) (8) 10 — (10) — (8) — — (75,348) (75,348) (59,122) — 2,625 — 2,625 2,060 — 2,625 (75,348) (72,723) (57,062) 10 2,625 (75,358) (72,723) (57,070)	Total HK$’000 10 (18) (8) (134,470) 4,685 (129,785) (129,793)
	Share capital Translation reserve Accumulated losses HK$’000 HK$’000 HK$’000 10 — — — — (10) 10 — (10) — — (75,348) — 2,625 — — 2,625 (75,348) 10 2,625 (75,358)

— II-7 —

APPENDIX II ACCOUNTANTS’ REPORT OF THE TARgET gROUP

Consolidated statements of cash flows

From 16 July 2008 (date of incorporation) to 30 June 2009 HK$’000 Operating activities Loss before taxation (18) Adjustments for: Depreciation of property, plant and equipment — Amortisation of mining rights — Interest expense — Loss on disposal of property, plant and equipment — Write-down of inventories — Fair value change in derivative financial instruments — Operating cash flows before movements in working capital — Increase in deposits — Increase in inventories — Increase in trade receivables — Increase in other receivables, deposits and prepayment — Increase in trade and other payables and accruals — Cash used in operations (18) Interest paid — Net cash used in operating activities (18)

Year ended 30 June 2010 HK$’000 (134,464) 8,294 5,302 21,107 173 153 (16,943) (116,378) (19,817) (12,146) (32,050) (11,374) 57,059 (134,706) (21,059) (155,765)

— II-8 —

APPENDIX II ACCOUNTANTS’ REPORT OF THE TARgET gROUP

From 16 July 2008 (date of incorporation) to 30 June 2009 Note HK$’000 Investing activities Acquisition of jointly controlled assets 30 — Exploration and evaluation expenditures incurred — Purchase of property, plant and equipment — Cash used in investing activities — Financing activities New borrowings raised — Repayments of obligations under finance leases — Proceeds from issue of shares 10 Advance from a shareholder 8 Net cash from financing activities 18 Net increase in cash and cash equivalents — Cash and cash equivalents at the beginning of the period/year — Effect of foreign exchange rate changes — Cash and cash equivalents at the end of the period/year, representing bank balances and cash —

Year ended 30 June 2010 HK$’000 (365,670) (2,281) (17,276) (385,227) 428,338 (3,499) — 196,125 620,964 79,972 — (242) 79,730

— II-9 —

APPENDIX II ACCOUNTANTS’ REPORT OF THE TARgET gROUP

Notes to financial information

1. gENERAL AND BASIS OF PREPARATION

Parksong is a limited liability company incorporated in Hong Kong on 16 July 2008. Parksong is wholly owned by Mr. Chan Kon Fung (“Mr. Chan”). The address of the registered office and principal place of business of Parksong is Flat C, 12/F, On Wing Building, 51-59 Bonham Strand East, Hong Kong.

The functional currency of Parksong is Australian dollar (“AUD”). The Financial Information is presented in Hong Kong dollar, as the directors of the Company consider that it is a more appropriate presentation for the preparation of the Circular and for the convenience of the shareholders of the Company.

Parksong is an investment holding company. The principal activities of its subsidiaries are exploration, development and mining of tin bearing ores in Australia.

As at 30 June 2010, the Parksong Group had net current liabilities of approximately HK$475,154,000 and net liabilities of approximately HK$129,793,000. The Underlying Financial Statements have been prepared on a going concern basis because the management of Parksong believes that the Parksong Group has sufficient funds to finance its current working capital requirement taking into account of future cashflows from operations. In July 2010, the shareholder of Parksong advanced HK$410,000,000 to the Parksong Group to settle the borrowings with carrying amount of HK$401,983,000 as at 30 June 2010. Furthermore, the shareholder of Parksong has agreed not to demand repayment of the amount due to him until the Parksong Group is in the financial ability to repay such amount. In light of the measures above, the management of Parksong believes that the Parksong Group will be able to meet its financial obligations as they fall due for a period of twelve months from the date of this report.

2. APPLICATION OF HONg KONg FINANCIAL REPORTINg STANDARDS

The HKICPA has issued a number of new and revised HKFRSs, Hong Kong Accounting Standards (“HKAS(s)”), amendments and interpretations (“INT”) (herein collectively referred to as “New HKFRSs”) that are effective for the Parksong Group’s annual accounting period beginning on 1 July 2009. For the purpose of preparing and presenting the Financial Information of the Relevant Periods, the Parksong Group has consistently applied all these New HKFRSs throughout the Relevant Periods.

As at the date of this report, the Parksong Group has not early applied the following new or revised standards, amendments or interpretations that have been issued by the HKICPA but are not yet effective.

HKFRSs (Amendments)	Amendments to HKAS 1, HKAS 7, HKAS 17, HKAS 36, HKAS	Amendments to HKAS 1, HKAS 7, HKAS 17, HKAS 36, HKAS
	39, HKFRS 5 and HKFRS 8 as part of improvements to HKFRSs
	2009 2
HKFRSs (Amendments)	Improvements to HKFRSs 2010 2
HKAS 24 (Revised)	Related party disclosures 3
HKAS 32 (Amendment)	Classification of rights issues 4
HKFRS 1 (Amendment)	Additional exemptions for first-time adopters	1
HKFRS 1 (Amendment)	Limited exemption from comparative HKFRS 7 disclosures for
	first-time adopters 5

— II-10 —

APPENDIX II ACCOUNTANTS’ REPORT OF THE TARgET gROUP

HKFRS 2 (Amendment) Group cash-settled share-based payments transactions1 HKFRS 7 (Amendment) Disclosures — Transfer of financial assets6 HKFRS 9 Financial instruments7 HK(IFRIC) — INT 14 Prepayments of a minimum funding requirement3 (Amendment) HK(IFRIC) — INT 19 Extinguishing financial liabilities with equity instruments5

• 1 Effective for accounting periods beginning on or after 1 January 2010.

• 2 Effective for accounting periods beginning on or after 1 July 2010 and 1 January 2011, as appropriate.

• 3 Effective for accounting periods beginning on or after 1 January 2011.

• 4 Effective for accounting periods beginning on or after 1 February 2010. 5 Effective for accounting periods beginning on or after 1 July 2010. 6 Effective for accounting periods beginning on or after 1 July 2011.

• 7 Effective for accounting periods beginning on or after 1 January 2013.

The management of Parksong anticipates that the application of the new and revised standards, amendments and interpretations will have no material impact on the results and the financial position of the Parksong Group.

3. SIgNIFICANT ACCOUNTINg POLICIES

The Financial Information has been prepared on the historical cost basis except for derivative financial instruments which are measured at fair values, as explained in the accounting policies set out below.

The Financial Information has been prepared in accordance with the following policies which conform to HKFRSs issued by the HKICPA. In addition, the Financial Information includes applicable disclosures required by the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited and the Hong Kong Companies Ordinance.

Basis of consolidation

The Financial Information incorporates the financial statements of Parksong and entities controlled by Parksong (its subsidiaries). Control is achieved where Parksong has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities.

All intra-group transactions, balances, income and expenses are eliminated on consolidation.

Non-controlling interests in subsidiaries are presented separately from owner of Parksong.

Allocation of total comprehensive income to non-controlling interests

Total comprehensive income and expense of subsidiaries is attributed to the owner of Parksong and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance.

Joint ventures

Jointly controlled entities

Joint venture arrangements that involve the establishment of a separate entity in which venturers have joint control over the economic activity of the entity are referred to as jointly controlled entities.

— II-11 —

APPENDIX II ACCOUNTANTS’ REPORT OF THE TARgET gROUP

The results and assets and liabilities of jointly controlled entities are incorporated in the consolidated financial statements using the equity method of accounting. Under the equity method, investments in jointly controlled entities are carried in the consolidated statement of financial position at cost as adjusted for post-acquisition changes in the Parksong Group’s share of the net assets of the jointly controlled entities, less any identified impairment loss. When the Parksong Group’s share of losses of a jointly controlled entity equals or exceeds its interest in that jointly controlled entity, the Parksong Group discontinues recognising its share of further losses. Any additional share of losses is provided for and a liability is recognised only to the extent that the Parksong Group has incurred legal or constructive obligations or made payments on behalf of that jointly controlled entity.

Jointly controlled assets

When a group entity undertakes its activities under joint venture arrangements directly constituted as jointly controlled assets, the Parksong Group’s share of the jointly controlled assets and share of any liabilities incurred jointly with other venturers are recognised in its statement of financial position and classified according to their nature. Liabilities and expenses incurred directly in respect of interests in jointly controlled assets are accounted for on an accrual basis.

Income from the sale of the Parksong Group’s share of the output of the jointly controlled assets, together with its share of any expenses incurred, are recognised when it is probable that the economic benefits associated with the transaction will flow to/from the Parksong Group.

Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for goods sold in the normal course of business, net of discounts and sales related taxes.

Revenue from sales of goods is recognised when goods are delivered and title has passed.

Interest income from a financial asset is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts the estimated future cash receipts through the expected life of the financial asset to that asset’s net carrying amount on initial recognition.

Property, plant and equipment

Property, plant and equipment including freehold land and buildings held for use in the production or supply of goods and services, or for administrative purposes other than construction in progress are stated at cost less subsequent accumulated depreciation and accumulated impairment losses.

Depreciation is provided to write off the cost of items of property, plant and equipment (other than freehold land, construction in progress and mining structures) over their estimated useful lives and after taking into account of their estimated residual values, using the straight-line method.

Mining structures (including the main and auxiliary mine shafts, underground tunnels and openpit platforms) are depreciated using the unit of production method based on the actual production volume over the estimated total proven and probable reserves of the ores mine.

Freehold land is carried at cost less recognised impairment loss.

Assets held under finance leases are depreciated over their expected useful lives on the same basis as owned assets or, where shorter, the term of the relevant lease.

— II-12 —

APPENDIX II ACCOUNTANTS’ REPORT OF THE TARgET gROUP

Construction in progress includes property, plant and equipment in the course of construction for production or for its own use purposes. Construction in progress is carried at cost less any recognised impairment loss. Construction in progress is classified to the appropriate category of property, plant and equipment when completed and ready for intended use. Depreciation of these assets, on the same basis as other property assets, commences when the assets are ready for their intended use.

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the item) is included in profit or loss in the period in which the item is derecognised.

Mining rights

Mining rights acquired separately are initially measured at cost. Mining rights are reclassified from exploration and evaluation expenditures at the carrying amount when the technical feasibility and commercial viability of extracting mineral resources are demonstrable. Mining rights with finite useful lives are carried at costs less accumulated amortisation and any identified impairment loss. Amortisation for mining rights with finite useful lives is provided using the unit of production method based on the actual production volume over the estimated total proven and probable reserves of the ores mine.

Exploration and evaluation expenditures

Expenditure on research activities is recognised as an expense in the period in which it is incurred.

Exploration and evaluation expenditures are recognised at cost on initial recognition. Subsequent to initial recognition, exploration and evaluation expenditures are stated at cost less identified impairment loss.

Exploration and evaluation expenditures include the cost of exploration rights and the expenditures incurred in the search for mineral resources as well as the determination of the technical feasibility and commercial validity of extracting those resources. Exploration and evaluation expenditures are assessed for impairment when facts and circumstances suggest that the carrying amount of an exploration and evaluation expenditure may exceed its recoverable amount. An impairment loss is recognised in profit or loss.

When the technical feasibility and commercial viability of extracting a mineral resource become demonstrable and the mining rights is obtained, any previously recognised exploration and evaluation expenditures are reclassified as mining rights. Exploration and evaluation assets are assessed for impairment and any impairment loss recognised, before reclassification.

Inventories

Inventories are stated at the lower of cost and net realisable value. Cost is calculated using the weighted average cost method.

Leasing

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the leases. All other leases are classified as operating leases.

— II-13 —

APPENDIX II ACCOUNTANTS’ REPORT OF THE TARgET gROUP

The Parksong Group as lessee

Assets held under finance leases are recognised as assets of the Parksong Group at their fair value at the inception of the lease or, if lower, at the present value of the minimum lease payments. The corresponding liability to the lessor is included in the consolidated statements of financial position as a finance lease obligation. Lease payments are apportioned between finance charges and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged directly to profit or loss.

Operating leases payments are recognised as an expense on a straight-line basis over the term of the relevant lease. Benefits received and receivable as an incentive to enter into an operating lease are recognised as a reduction of rental expense over the lease term on a straight-line basis.

Foreign currencies

In preparing the financial statements of each individual group entity, transactions in currencies other than the functional currency of that entity (foreign currencies) are recorded in the respective functional currency (i.e. the currency of the primary economic environment in which the entity operates) at the rates of exchanges prevailing on the dates of the transactions. At the end of the reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing on the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.

Exchange differences arising on the settlement of monetary items, and on the retranslation of monetary items, are recognised in profit or loss in the period in which they arise.

For the purposes of presenting the Financial Information, the assets and liabilities of the Parksong Group are translated from its functional currency (i.e. AUD) into the presentation currency (i.e. HK$) at the rate of exchange prevailing at the end of the reporting period, and their income and expenses are translated at the average exchange rates for the Relevant Periods. Exchange differences arising, if any, are recognised in other comprehensive income and accumulated in equity (the translation reserve).

Retirement benefit costs

Payments to state-managed retirement benefit schemes in Australia (Superannuation fund) or Mandatory Provident Fund Scheme in Hong Kong are charged as an expense when employees have rendered service entitling them to the contributions.

Taxation

Income tax expense represents the sum of the tax currently payable and deferred tax.

The tax currently payable is based on taxable profit for the Relevant Periods. Taxable profit differs from profit as reported in the consolidated statements of comprehensive income because it excludes items of income or expense that are taxable or deductible in other periods and it further excludes items that are never taxable or deductible. The Parksong Group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period.

— II-14 —

APPENDIX II ACCOUNTANTS’ REPORT OF THE TARgET gROUP

Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the Financial Information and the corresponding tax base used in the computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are generally recognised for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from the initial recognition of assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

Deferred tax liabilities are recognised for taxable temporary differences arising from investments in subsidiaries, except where the Parksong Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments are only recognised to the extent that it is probable that there will be sufficient taxable profits against which to utilise the benefits of the temporary differences and they are expected to reverse in the foreseeable future.

The carrying amount of deferred tax assets is reviewed at the end of the reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset is realised, based on tax rate (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Parksong Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities. Deferred tax is recognised in profit or loss, except when it relates to items that are recognised in other comprehensive income or directly in equity, in which case the deferred tax is also recognised in other comprehensive income or directly in equity respectively.

Impairment of tangible and intangible assets

At the end of the reporting period, the Parksong Group reviews the carrying amounts of its assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss, if any. If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. An impairment loss is recognised as an expense immediately.

Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, such that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset in prior years. A reversal of an impairment loss is recognised as income immediately.

Provision for rehabilitation cost

A provision for rehabilitation cost is recognised when there is a present obligation as a result of exploration, development and production activities undertaken, it is probable that an outflow of economic benefits will be required to settle the obligation, and the amount of the provision can be measured reliably. The estimated future obligations include the costs of removing facilities, abandoning sites and restoring the affected areas.

— II-15 —

APPENDIX II ACCOUNTANTS’ REPORT OF THE TARgET gROUP

The provision for rehabilitation cost is the best estimate of the present value of the expenditure required to settle the restoration obligation at the end of the reporting period, based on current legal and other requirements and technology. Future rehabilitation costs are reviewed annually and any changes in the estimate are reflected in the present value of the provision at the end of the reporting period.

The initial estimate of the rehabilitation provision relating to exploration, development and production facilities is capitalised into the cost of the related asset and depreciated on the same basis as the related asset.

Changes in the estimation of the rehabilitation provision that result from changes in the estimated timing or amount of cash flows, including the effects of revisions to estimated lives of operation or a change in the discount rate, are added to, or deducted from, the cost of the related asset in the period it occurred. If a decrease in liability exceeds the carrying amount of the asset, the excess is recognised immediately in profit or loss. Unwinding of the effect of discounting on the provision is recognised as finance cost.

Financial instruments

Financial assets and financial liabilities are recognised on the consolidated statements of financial position when the Parksong Group becomes a party to the contractual provisions of the instrument. Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets or financial liabilities at fair value through profit and loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition.

Financial assets

The Parksong Group’s financial assets (including trade receivables, other receivables and deposits and bank balances) are classified as loans and receivables.

Effective interest method

The effective interest method is a method of calculating the amortised cost of a financial asset and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial asset, or, where appropriate, a shorter period to the net carrying amount on initial recognition.

Interest income is recognised on an effective interest basis for debt instruments.

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Subsequent to initial recognition, loans and receivables are carried at amortised cost using the effective interest method, less any identified impairment losses. The accounting policy on impairment loss of financial assets is set out below.

— II-16 —

APPENDIX II ACCOUNTANTS’ REPORT OF THE TARgET gROUP

Impairment of loans and receivables

Loans and receivables are assessed for indicators of impairment at the end of the reporting period. Loans and receivables are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the loans and receivables, the estimated future cash flows of the loans and receivables have been impacted. Objective evidence of impairment could include:

• significant financial difficulty of the issuer or counterparty; or

• default or delinquency in interest or principal payments; or

• it becoming probable that the borrower will enter bankruptcy or financial re-organisation.

For certain categories of loans and receivables, such as trade receivables, assets that are assessed not to be impaired individually are subsequently assessed for impairment on a collective basis. Objective evidence of impairment for a portfolio of receivables could include the Parksong Group’s past experience of collecting payments, an increase in the number of delayed payments in the portfolio past the average credit period, and observable changes in national or local economic conditions that correlate with default on receivables.

For financial assets carried at amortised cost, an impairment loss is recognised in profit or loss when there is objective evidence that the asset is impaired, and is measured as the difference between the asset’s carrying amount and the present value of the estimated future cash flows discounted at the original effective interest rate.

The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables, where the carrying amount is reduced through the use of an allowance account. Changes in the carrying amount of the allowance account are recognised in profit or loss. When a trade receivable is considered uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited to profit or loss.

If, in a subsequent period, the amount of impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment losses was recognised, the previously recognised impairment loss is reversed through profit or loss to the extent that the carrying amount of the asset at the date the impairment is reversed does not exceed what the amortised cost would have been had the impairment not been recognised.

Financial liabilities and equity

Financial liabilities and equity instruments issued by a group entity are classified according to the substance of the contractual arrangements entered into and the definitions of a financial liability and an equity instrument.

An equity instrument is any contract that evidences a residual interest in the assets of Parksong after deducting all of its liabilities.

Effective interest method

The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability, or, where appropriate, a shorter period.

Interest expense is recognised on an effective interest basis.

— II-17 —

APPENDIX II ACCOUNTANTS’ REPORT OF THE TARgET gROUP

Financial liabilities

Financial liabilities including trade and other payables and accruals, amount due to a shareholder and borrowings are subsequently measured at amortised cost, using the effective interest method.

Equity instruments

Equity instruments issued by Parksong are recorded at the proceeds received, net of direct issue costs.

Derivative financial instruments

Derivatives are initially recognised at fair value at the date a derivative contract is entered into and are subsequently remeasured to their fair value at the end of the reporting period. The resulting gain or loss is recognised in profit or loss immediately.

Derecognition

Financial assets are derecognised when the rights to receive cash flows from the assets expire or, the financial assets are transferred and the Parksong Group has transferred substantially all the risks and rewards of ownership of the financial assets. On derecognition of a financial asset, the difference between the asset’s carrying amount and the sum of the consideration received and receivable is recognised in profit or loss.

Financial liabilities are derecognised when the obligation specified in the relevant contract is discharged, cancelled or expired. The difference between the carrying amount of the financial liability derecognised and the consideration paid and payable is recognised in profit or loss.

Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale are added to the cost of those assets until such time as the assets are substantially ready for their intended use or sale. Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation.

All other borrowing costs are recognised in profit or loss in the period in which they are incurred.

4. CAPITAL RISK MANAgEMENT

The Parksong Group manages its capital to ensure that entities in the Parksong Group will be able to continue as a going concern while maximising the return to shareholder through the optimisation of the debt and equity balance. The Parksong Group’s overall strategy remains unchanged throughout the Relevant Periods.

— II-18 —

APPENDIX II ACCOUNTANTS’ REPORT OF THE TARgET gROUP

The capital structure of the Parksong Group consists of debts, which includes the amount due to a shareholder and borrowings disclosed in notes 21 and 25 respectively and equity attributable to its owner, comprising share capital and accumulated losses.

The management of Parksong reviews the capital structure on an annual basis. As part of this review, the management considers the cost of capital and the risks associated with each class of capital. Based on recommendations of the management, the Parksong Group will balance its overall capital structure through the payment of dividends, raising its paid-up capital as well as the issue of new debts or the redemption of existing debts.

5. KEY SOURCES OF ESTIMATION UNCERTAINTY

In the application of the Parksong Group’s accounting policies, which are described in note 3, the management of Parksong is required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or the period of the revision and future periods if the revision effects both current and future periods.

Depreciation/amortisation on mining rights and mining structures

Mining rights and mining structures are amortised or depreciated using the unit of production method based on the actual production volume over the estimated total proven and probable reserves of the ore mines.

The process of estimating quantities of reserves is inherently uncertain and complex. It requires significant judgments and decisions based on available geological, geophysical, engineering and economic data. These estimates may change substantially as additional data available from ongoing development activities. The reserve estimates are updated quarterly taking into account recent production and technical information about each mine. If the quantities of reserves are different from current estimates, it will result in significant changes to amortisation and depreciation expenses of mining rights and mining structures.

Provision for rehabilitation cost

The provision for rehabilitation cost has been estimated by the management based on current regulatory requirements and is discounted to present value. However, significant changes in the regulatory requirements, timing of performance of reclamation activities or discount rate will result in changes to the amount of provision from period to period.

Impairment of property, plant and equipment, mining rights and exploration and evaluation expenditures

The carrying value of property, plant and equipment, mining rights and exploration and evaluation expenditures is reviewed for impairment when events or changes in circumstances indicate that the carrying values of these assets may not recoverable. Determining whether property, plant and equipment, mining rights and exploration and evaluation expenditures are impaired requires an estimation of the value in use of the cash-generating units to which these assets have been allocated. The value in use calculation requires the Parksong Group to estimate the future cash flows expected to arise from the cash-generating unit (i.e. estimation on the total

— II-19 —

APPENDIX II ACCOUNTANTS’ REPORT OF THE TARgET gROUP

proven and probable reserves of the ore mines and future market price of tin concentrate) and a suitable discount rate in order to calculate the present value. Where the actual future cash flows are less than expected, a material impairment loss may arise.

6. FINANCIAL INSTRUMENTS

Categories of financial instruments

		As at 30 June
	2009		2010
	HK$’000	HK$’000
Financial assets
Loans and receivables (including cash and cash
equivalents)	—	131,907
Derivative financial instruments	—		33,058
Financial liabilities
Amortised cost	8	664,475
Derivative financial instruments	—		8,996

Financial risk management objectives and policies

The Parksong Group’s major financial instruments include trade receivables, other receivables and deposits, derivative financial instruments, trade and other payables and accruals, amount due to a shareholder, borrowings, obligations under finance leases and bank balances. Details of these financial instruments are disclosed in respective notes. The risks associated with these financial instruments and the policies on how to mitigate these risks are set out below. The management manages and monitors these exposures to ensure appropriate measures are implemented on a timely and effective manner.

Market risk

Interest rate risk

The Parksong Group is exposed to fair value interest rate risk in relation to fixed-rate borrowings and obligations under finance leases (see notes 25 and 26 for details).

The Parksong Group’s cash flow interest rate risk primarily relates to variable-rate bank balances.

The Parksong Group has not used any interest rate swaps in order to mitigate its exposure associated with fluctuations relating to interest rate risks. However, the management monitors interest rate exposure and will consider necessary actions when significant interest rate exposure is anticipated.

Sensitivity analysis

For the period from 16 July 2008 (date of incorporation) to 30 June 2009, there is no bank balances and thus no sensitivity analysis is presented.

For the year ended 30 June 2010, the management considers that the Parksong Group’s exposure to future cash flow risk on variable-rate bank balances as a result of the change of market interest rate is insignificant and thus no sensitivity analysis is presented.

— II-20 —

APPENDIX II ACCOUNTANTS’ REPORT OF THE TARgET gROUP

Foreign currency risk

Trade receivables, amount due to a shareholder, certain other payables and accruals and borrowings as at 30 June 2009 and 2010 are denominated in the currencies other than the functional currency of the respective group entities as disclosed in notes 20, 21, 24 and 25 respectively. The Parksong Group currently does not have a foreign currency hedging policy. However, the management monitors foreign exchange exposure and will consider hedging significant foreign currency exposure should the need arise.

The carrying amounts of the Parksong Group’s foreign currency denominated monetary assets and liabilities at the end of the reporting period are as follows:

HK$ United States dollars (“US$”)	As at 30 June 2009 Liabilities HK$’000 8 —	As at 30 June 2010
		Assets Liabilities HK$’000 HK$’000 — 444,556 32,050 151,983

Sensitivity analysis

The management considers that the Parksong Group’s exposure to future foreign currency risk as at 30 June 2009 is insignificant and thus no sensitivity analysis is presented.

The sensitivity analyses below have been determined based on the exposure to currency risks as at 30 June 2010.

The following table details sensitivity to a 15% appreciation and depreciation in AUD against relevant foreign currencies and all other variables were held constant. 15% is the sensitivity rate used and represents management’s assessment of the reasonably possible change in foreign exchange rates. The sensitivity analysis includes only outstanding foreign currency denominated monetary items, and adjusts their translation at the year end for a 15% change in foreign currency rates. A positive number below indicates a decrease in post-tax loss for the year where AUD strengthen 15% against the foreign currency. For a 15% weakening of AUD against the foreign currency, there would be an equal and opposite impact on the result for the year.

HK$ US$ Credit risk	Year ended 30 June 2010 HK$’000 66,683 17,990

The Parksong Group’s credit risk is primarily attributable to deposits, trade receivables, other receivables and bank balances.

The Parksong Group’s maximum exposure to credit risk which will cause a financial loss to the Parksong Group in the event of the counterparties’ failure to perform their obligations as at the end of the reporting period in relation to each class of recognised financial assets is the carrying amount of those assets as stated in the consolidated statements of financial position.

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APPENDIX II ACCOUNTANTS’ REPORT OF THE TARgET gROUP

In order to minimise credit risk, management is responsible for the determination of credit limits, credit approvals and other monitoring procedures. In addition, management reviews the recoverable amount of each individual debt regularly to ensure that adequate impairment losses are recognised for irrecoverable debts. In this regard, management considers that the Parksong Group’s credit risk is significant reduced.

The Parksong Group has concentration of credit risk on trade receivables from a customer, Yunnan Tin Company Limited (“YTC”) which is a tin refining and processing company located in the People’s Republic of China, as at 30 June 2010. YTC is a subsidiary of YTHKG’s noncontrolling shareholder. The management reviews the recoverable amount of YTC at the end of the reporting period, including past collection history and subsequent settlement, to ensure that adequate impairment losses are recognised for irrecoverable debts, if any. In this regard, the management of the Parksong Group considers that the credit risk is significantly reduced.

The credit risk on liquid funds is limited because the counter parties are banks with high credit rating assigned by international credit-rating agencies.

Other price risk

During the year ended 30 June 2010, the Parksong Group was required to estimate the fair value of the Call Option and the Put Option in relation to the JV Projects (as defined and set out in notes 22 and 30) at the end of the reporting period with changes in fair value to be recognised in the profit or loss as long as the Call Option and the Put Option are not exercised or expired. The fair value adjustment of the Call Option and the Put Option would be affected positively or negatively, amongst others, by the changes in the market interest rate, tin market price and its volatility.

Sensitivity analysis

The sensitivity analyses below had been determined based on the exposure to tin market price at the reporting date only. If tin market price had been 5% higher/lower and all other variables were held constant, the Parksong Group’s post-tax loss would decrease/increase by approximately HK$12,083,000/HK$12,090,000 as a result of changes in fair value of derivative financial instruments during the year ended 30 June 2010.

The management of the Parksong Group considers that the sensitivity analyses are unrepresentative of the inherent price risk as the pricing model used in the valuation of derivative financial instruments involves multiple variables.

Liquidity risk

Parksong’s policy is to regularly monitor its liquidity requirements to ensure that it maintains sufficient reserves of cash to meet its liquidity requirements in the short and longer term.

As at 30 June 2010, the Parksong Group had net current liabilities of approximately HK$475,154,000 and net liabilities of approximately HK$129,793,000. In the opinion of the management of Parksong, the liquidity of the Parksong Group can be maintained in the coming year, after taking into consideration of the future cash flows from operations and the advance from the shareholder of HK$410,000,000 in July 2010.

In the management of the liquidity risk, the Parksong Group monitors and maintains a level of cash and cash equivalents deemed adequate by the management to finance the Parksong Group’s operations and mitigate the effects of fluctuations in cash flows by obtaining borrowings as well as financing from shareholder in addition to operating cash flows. The management monitors the utilisation of borrowings and ensures compliance with loan covenants.

— II-22 —

ACCOUNTANTS’ REPORT OF THE TARgET gROUP

APPENDIX II

The following table details the Parksong Group’s remaining contractual maturity for its nonderivative financial liabilities based on the agreed repayment terms. It has been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Parksong Group can be required to pay. The table includes both interest and principal cash flows.

weighted Less than average 3 months or interest rate on demand HK$’000 As at 30 June 2009 Non-derivative financial liabilities Amount due to a shareholder N/A 8 As at 30 June 2010 Non-derivative financial liabilities Trade and other payables N/A 59,719 Amount due to a shareholder N/A 184,066 Borrowings 20.42% 410,406 Obligations under finance leases 11.6% 3,951 658,142	Between 3 to 6 months HK$’000 — 174 — — 3,951 4,125	Between 7 to 12 months HK$’000 — — — — 7,904 7,904	Total Between undiscounted 1 to 5 years cash flows HK$’000 HK$’000 — 8 — 59,893 — 184,066 — 410,406 4,627 20,433 4,627 674,798	Total carrying amount HK$’000 8
				59,893 184,066 401,983 18,533
				664,475

Fair values

The fair values of financial assets and financial liabilities (excluding derivative financial instruments) are determined in accordance with generally accepted pricing models based on discounted cash flow analysis using the relevant prevailing market rates.

The fair value of option-based derivative financial instruments is calculated using option pricing model.

The management of the Parksong Group considers that the carrying values of financial assets and financial liabilities recorded at amortised cost in the Financial Information approximate their corresponding fair values.

7. REVENUE

Revenue represents the amounts received and receivable for tin concentrate sold by the Parksong Group during the Relevant Periods.

8. SEgMENT INFORMATION

The chief operating decision-maker has been identified as the sole director of Parksong. Exploration, development and mining of tin bearing ores in Australia through a joint venture arrangement (see note 30) is the Parksong Group’s principal activity. The sole director regards it as a single operating segment. Segment revenue, results, assets and liabilities are therefore the same as the amounts presented in the consolidated statements of comprehensive income and consolidated statements of financial position.

— II-23 —

APPENDIX II ACCOUNTANTS’ REPORT OF THE TARgET gROUP

Information about major customer

Revenue from customer during the Relevant Periods contributing over 10% of the total revenue of the Parksong Group is as follows:

	From
	16 July 2008
	(date of
	incorporation) to	Year ended
	30 June 2009	30 June 2010
	HK$’000	HK$’000
YTC	—	74,414

The majority of the revenue of the Parksong Group are derived from the customers from the People’s Republic of China.

All non-current assets of the Parksong Group are located in Australia.

9. DIRECTOR’S REMUNERATION AND EMPLOYEES’ EMOLUMENTS

Director’s remuneration

The remuneration paid or payable to the sole director was as follows:

Mr. Chan Fee Salaries, allowances and benefits in kind Contributions to retirement benefit scheme Total remuneration	From 16 July 2008 (date of incorporation) to 30 June 2009 HK$’000 — — — —	Year ended 30 June 2010 HK$’000 300 — —
		300

— II-24 —

APPENDIX II ACCOUNTANTS’ REPORT OF THE TARgET gROUP

Employees’ emoluments

The five highest paid individuals of the Parksong Group included the sole director of Parksong for the Relevant Periods. The total emoluments of the remaining four individuals for the Relevant Periods were as follows:

Salaries and other benefits Contributions to retirement benefit scheme	From 16 July 2008 (date of incorporation) to 30 June 2009 HK$’000 — — —	Year ended 30 June 2010 HK$’000 707 63
		770

Their emoluments were all within HK$1,000,000.

During the Relevant Periods, no remuneration was paid by Parksong to the sole director of Parksong or the remaining four highest paid individuals as an inducement to join or upon joining Parksong or as compensation for loss of office. The sole director of Parksong has not waived any remuneration during the Relevant Periods.

10. OTHER gAINS AND LOSSES AND FINANCE COSTS

Other gains and losses Fair value change in derivative financial instruments Loss on disposal of property, plant and equipment Net exchange loss Total other gains and losses Finance costs Interests on: — Borrowings — Finance leases — Unwinding of rehabilitation provision discount Loan arrangement fee Total finance costs	From 16 July 2008 (date of incorporation) to 30 June 2009 HK$’000 — — — — — — — — —	Year ended 30 June 2010 HK$’000 16,943 (173) (32,738)
		(15,968)
		20,523 536 48 16,500
		37,607

Included in interests on borrowings are interests amounted to HK$2,934,000 paid/payable to Yunnan Tin Group Limited (“YTG”), the non-controlling shareholder of YTHKG.

— II-25 —

APPENDIX II ACCOUNTANTS’ REPORT OF THE TARgET gROUP

11. OTHER EXPENSES

The following are expenses incurred for the acquisition of jointly controlled assets (note 30):

Consultancy fee Commission fee paid to YTG Stamp duty expenses Legal expenses Total	From 16 July 2008 (date of incorporation) to 30 June 2009 HK$’000 — — — — —	Year ended 30 June 2010 HK$’000 33,800 32,093 17,019 6,583
		89,495

12. TAX EXPENSE

Tax expense comprises: Current tax expense for the period/year Deferred tax credit for the period/year_(note 29)_	From 16 July 2008 (date of incorporation) to 30 June 2009 HK$’000 — — —	Year ended 30 June 2010 HK$’000 2,381 (2,375)
		6

Hong Kong Profits Tax is calculated at 16.5% of the estimated assessable profits for the Relevant Periods. No provision for Hong Kong Profits Tax has been made in the Financial Information as the Parksong Group had no assessable profit derived in Hong Kong during the Relevant Periods.

Under Australian tax law, the tax rate used for the Relevant Periods is 30% on taxable profits on Australian incorporated entities.

The applicable income tax rate is 16.5% for the period from 16 July 2008 (date of incorporation) to 30 June 2009 as Parksong and YTGHK were incorporated in Hong Kong. The applicable income tax rate is changed to 30% for the year ended 30 June 2010 as the majority of the operating activities of the Parksong Group were in Australia after the acquisition of the jointly controlled assets.

— II-26 —

ACCOUNTANTS’ REPORT OF THE TARgET gROUP

APPENDIX II

The tax expense for the period/year can be reconciled to the loss before taxation per the consolidated statements of comprehensive income as follows:

Loss before taxation Taxation at domestic income tax rate Tax effect of expenses not deductible for tax purpose Tax effect of different tax rate of group entities operating in other jurisdiction Tax expense 13. LOSS FOR THE PERIOD/YEAR Loss for the period/year has been arrived at after charging: Staff costs (including director’s remuneration): Salaries and other benefits Contributions to retirement benefits schemes Depreciation of property, plant and equipment (included in cost of sales) Amortisation of mining rights (included in cost of sales) Auditor’s remuneration Cost of inventories recognised as expense Write-down of inventories Rental payments in respect of premises, equipment and leasehold land under operating leases	From 16 July 2008 (date of incorporation) to 30 June 2009 HK$’000 (18) (3) 3 — — From 16 July 2008 (date of incorporation) to 30 June 2009 HK$’000 — — — — — — — — —	Year ended 30 June 2010 HK$’000 (134,464) (40,339) 22,189 18,156 6 Year ended 30 June 2010 HK$’000 12,954 681 13,635 8,294 5,302 541 55,260 153 7,541

— II-27 —

APPENDIX II ACCOUNTANTS’ REPORT OF THE TARgET gROUP

14. LOSS PER SHARE

No loss per share information is presented as its inclusion, for the purpose of this report, is not considered meaningful.

15. PROPERTY, PLANT AND EQUIPMENT

COST At 16 July 2008 (date of incorporation) and 30 June 2009 Additions Acquisition of jointly controlled assets_(note 30) Disposal Adjustment(note 27)_ Transfer Exchange adjustment At 30 June 2010 DEPRECIATION At 16 July 2008 (date of incorporation) and 30 June 2009 Provided for the year Exchange adjustment At 30 June 2010 CARRYING VALUES At 30 June 2009 At 30 June 2010	Freehold land HK$’000 — — 366 — — — (26) 340 — — — — — 340	Buildings HK$’000 — — 29,792 — — 202 (2,105) 27,889 — 729 (25) 704 — 27,185	Mining structures HK$’000 — 12,347 86,110 — (296) 858 (6,086) 92,933 — 3,192 (111) 3,081 — 89,852	Plant and machinery HK$’000 — — 92,092 (173) — 329 (6,508) 85,740 — 4,327 (151) 4,176 — 81,564	Motor vehicles Construction in progress HK$’000 HK$’000 — — — 4,929 545 2,445 — — — — — (1,389) (39) (173) 506 5,812 — — 46 — (1) — 45 — — — 461 5,812	Total HK$’000 — 17,276 211,350 (173) (296) — (14,937)
						213,220
						— 8,294 (288)
						8,006
						—
						205,214

The property, plant and equipment, other than freehold land, construction in progress and mining structures, are depreciated over their estimated useful lives and after taking into account of their estimated residual values, using the straight-line method, at the following rates per annum:

Buildings	4% — 20%
Plant and machinery	10% — 33%
Motor vehicles	12.5% — 25%

Depreciation on mining structures is provided to write off the cost of the mining structures using the unit of production method based on the actual production volume over the total estimated proven and probable reserves of the ores mine. Effective depreciation rate for the year ended 30 June 2010 is 3.3%.

The net book value of plant and machinery included the amount of approximately HK$30,385,000 in respect of assets held under finance leases as at 30 June 2010.

The freehold land of the Parksong Group is located in Australia.

— II-28 —

ACCOUNTANTS’ REPORT OF THE TARgET gROUP

APPENDIX II

16. DEPOSITS

Deposits with the carrying amount of HK$13,172,000 as at 30 June 2010 represents deposits paid by the Parksong Group to the Mineral and Resource Department of Tasmania as a deposit for operating in the mining industry in Tasmania, Australia. The deposits are refundable upon the cessation of mining activities or closure of mines and the environmental rehabilitation work of relevant mines meets government’s requirements.

17. MININg RIgHTS

COST At 16 July 2008 (date of incorporation) and 30 June 2009 Acquisition of jointly controlled assets_(note 30)_ Exchange adjustment At 30 June 2010 AMORTISATION At 16 July 2008 (date of incorporation) and 30 June 2009 Amortisation for the year Exchange adjustment At 30 June 2010 CARRYING VALUES At 30 June 2009 At 30 June 2010	HK$’000 — 157,791 (11,151)
	146,640
	— 5,302 (185)
	5,117
	—
	141,523

The mining rights, which have definite useful lives, are amortised using the unit of production method based on the actual production volume over the estimated total proven and probable reserves of the ores mine.

18. EXPLORATION AND EVALUATION EXPENDITURES

COST At 16 July 2008 (date of incorporation) and 30 June 2009 Additions At 30 June 2010	HK$’000 — 2,281
	2,281

— II-29 —

APPENDIX II ACCOUNTANTS’ REPORT OF THE TARgET gROUP

19. INVENTORIES

Ore stocks Tin in circuit Tin concentrate Spare parts	As at 30 June 2009 2010 HK$’000 HK$’000 — 10,635 — 2,031 — 9,458 — 12,993 — 35,117	As at 30 June 2009 2010 HK$’000 HK$’000 — 10,635 — 2,031 — 9,458 — 12,993 — 35,117
		35,117

20. TRADE RECEIVABLES, OTHER RECEIVABLES, DEPOSITS AND PREPAYMENT

Trade receivables Prepayment to a contractor Other receivables and deposits Total other receivables, deposits and prepayment	As at 30 June 2009 2010 HK$’000 HK$’000 — 32,050 — 9,185 — 6,955 — 16,140	As at 30 June 2009 2010 HK$’000 HK$’000 — 32,050 — 9,185 — 6,955 — 16,140
		9,185 6,955
		16,140

The Parksong Group has a policy of allowing its trade customers a credit period of 60 days.

The following is an aged analysis of trade receivables based on the invoice date at the end of the reporting period:

0 to 30 days 31 to 60 days	As at 30 June 2009 2010 HK$’000 HK$’000 — 29,113 — 2,937 — 32,050	As at 30 June 2009 2010 HK$’000 HK$’000 — 29,113 — 2,937 — 32,050
		32,050

The Parksong Group has a policy of allowance for bad and doubtful debts which is based on the evaluation of collectibility and ageing analysis of trade receivables and on management’s judgment including credit worthiness and past collection history of each customer.

Before accepting any new customer, the Parksong Group will assess the potential customer’s credit quality and defines credit limits by customer. Limits attributed to customers are reviewed annually.

In determining the recoverability of the trade receivables, the Parksong Group considers any change in the credit quality of the trade receivables from the date credit was initially granted up to the reporting date. Concentration of credit risk on a single customer is disclosed in note 6.

— II-30 —

ACCOUNTANTS’ REPORT OF THE TARgET gROUP

APPENDIX II

As at 30 June 2010, all trade receivables due from YTC were denominated in US$, and were neither past due nor impaired. The management of Parksong considers these amounts are of good credit quality and they have been settled in full subsequently.

21. AMOUNT DUE TO A SHAREHOLDER

Amount due to a shareholder is interest-free and unsecured. The shareholder of Parksong has agreed not to demand repayment of the amount due to him until the Parksong Group has the financial ability to repay such amount.

The amount due to a shareholder of HK$8 and HK$184,066,000 is denominated in HK$ as at 30 June 2009 and 2010 respectively.

22. DERIVATIVE FINANCIAL INSTRUMENTS

Derivative financial instruments consist of the following items: Call Option (disclosed under current assets) Put Option (disclosed under current liabilities)	As at 30 June 2009 2010 HK$’000 HK$’000 — 33,058 — 8,996	As at 30 June 2009 2010 HK$’000 HK$’000 — 33,058 — 8,996
		8,996

On 19 March 2010 (“Date of Completion”), the Parksong Group acquired 50% interests in certain mining projects (the “JV Projects”) located in Tasmania, Australia from Bluestone Mines Tasmania Pty Ltd. (“BMT”) and entered into a joint venture agreement (“JV Agreement”) with BMT.

Pursuant to the JV Agreement, BMT has granted the Call Option to YT Parksong Australia to purchase from BMT a further 10% interests in the JV Projects exercisable 24 months from Date of Completion with the following conditions:

• if Call Option is exercised within 12 months, the consideration will be AUD10 million; or

• if Call Option is exercised after 12 months, the consideration will be AUD10 million if the production on tin concentrate is more than 6,000 tonnes within 12 months from the Date of Completion and average cost of production on tin concentrate is not greater than AUD14,403.46 per tone (“Performance Criteria”). The consideration will be reduced to AUD5 million if the Performance Criteria cannot meet.

At the same time, YT Parksong Australia has granted the Put Option to BMT that BMT can require YT Parksong Australia to purchase a further 10% interest in the JV Projects exercisable between the thirteen month to twenty-fourth month after Date of Completion with the following conditions:

• if Performance Criteria is achieved, the consideration will be AUD10 million; or

• if Performance Criteria is not achieved, the Put Option will lapse immediately.

The fair value of the Call Option and Put Option is approximately HK$23,475,000 and HK$15,179,000 respectively at Date of Completion.

— II-31 —

APPENDIX II ACCOUNTANTS’ REPORT OF THE TARgET gROUP

The movement of the Call Option and the Put Option during the Relevant Periods is set out below:

Granted at the Date of Completion Changes in fair value Exchange adjustment At 30 June 2010	Call Option HK$’000 23,475 11,653 (2,070) 33,058	Put Option HK$’000 (15,179) 5,290 893 (8,996)	Total HK$’000 8,296 16,943 (1,177) 24,062

The fair value of the Call Option and the Put Option are calculated using the Black-ScholesMerton Option Pricing Model at the Date of Completion and 30 June 2010. The inputs into the model were as follows:

		As at Date of	As at
		Completion	30 June 2010
Business	value_(note a)_	AUD10,245,000	AUD12,833,000
Exercise	price	AUD10,000,000	AUD10,000,000
Expected	volatility_(note b)_	50%	50%
Expected	life_(note c)_	2 years	1.72 years
Risk-free	rate_(note d)_	4.81%	4.81%

Notes:

• (a) The business value is determined based on the future discounted cashflow of the JV Projects with reference to the expected tin price.

• (b) Expected volatility for options is based on historical daily tin market price movements over a historical period of 1 year.

• (c) Expected life was the expected remaining life of the Call Option and the Put Option.

• (d) The risk-free rate is determined by reference to the Australian Government bond rate.

During the year ended 30 June 2010, a gain of HK$16,943,000 was recognised in the profit or loss in respect of the changes in fair values of derivative financial instruments.

The Call Option and the Put Option, measured at fair value subsequently to initial recognition, are grouped to Level 3 based on the degree to which the fair value is observable. Level 3 fair value measurements are those derived from valuation techniques that included inputs for the asset or liability that are not based on observable market data (unobservable inputs).

23. BANK BALANCES AND CASH

Bank balances carry interest at market rates of average 1.5% per annum as at 30 June 2010.

— II-32 —

APPENDIX II ACCOUNTANTS’ REPORT OF THE TARgET gROUP

24. TRADE AND OTHER PAYABLES AND ACCRUALS

Trade payables Other payables and accruals Total trade and other payables and accruals	As at 30 June 2009 2010 HK$’000 HK$’000 — 36,524 — 23,369 — 59,893	As at 30 June 2009 2010 HK$’000 HK$’000 — 36,524 — 23,369 — 59,893
		59,893

The following is an aged analysis of trade payables based on the invoice date at the end of the reporting period:

0 to 30 days 31 to 60 days 61 to 90 days 91 to 180 days	As at 30 June 2009 2010 HK$’000 HK$’000 — 22,194 — 13,940 — 216 — 174 — 36,524	As at 30 June 2009 2010 HK$’000 HK$’000 — 22,194 — 13,940 — 216 — 174 — 36,524
		36,524

The average credit period is 30 days. The Parksong Group has financial risk management policies in place to ensure that all payables are within the credit timeframe.

Included in other payables and accruals of approximately HK$3,802,000 were commission payable to YTG as at 30 June 2010.

As at 30 June 2010, other payables and accruals of approximately HK$10,490,000 were denominated in HK$.

25. BORROwINgS

Borrowings comprise:

Effective interest rate Fixed-rate borrowings repayable within one year: Secured loan of HK$250,000,000 24% Unsecured loan of US$19,485,000 5% Total borrowings	As at 30 June 2009 2010 HK$’000 HK$’000 — 250,000 — 151,983 — 401,983	As at 30 June 2009 2010 HK$’000 HK$’000 — 250,000 — 151,983 — 401,983
		401,983

— II-33 —

APPENDIX II ACCOUNTANTS’ REPORT OF THE TARgET gROUP

At 30 June 2010, borrowings of HK$250,000,000 repayable in August 2010 granted from a financial institution were secured by:

• (a) personal guarantee from the shareholder of Parksong;

• (b) the shares of Parksong, YTHKG, YT Parksong Australia and shares of BMTJV owned by the Parksong Group; and

• (c) the undertakings, properties and assets of Parksong, YTHKG and YT Parksong Australia.

Unsecured borrowings of HK$151,983,000 are granted from YTG.

In July 2010, Mr. Chan, the shareholder and sole director of Parksong, advanced HK$410,000,000 to the Parksong Group. All the above borrowings are fully repaid in July 2010.

26. OBLIgATIONS UNDER FINANCE LEASES

Analysed for reporting purpose as: Current liabilities Non-current liabilities	As at 30 June	As at 30 June
	2009 HK$’000 — — —	2010 HK$’000 14,013 4,520
		18,533

Certain plant and equipment of the JV Projects were under finance leases. The average lease term is 3 years for the year ended 30 June 2010. Interest rates underlying all obligations under finance leases are fixed at respective contract dates ranging from 10% to 17%.

Amounts payable under finance leases Within one year In more than one year but not more than two years _Less:_Future finance charges Present value of lease obligations _Less:_Amount due for settlement within 12 months (shown under current liabilities) Amount due for settlement after 12 months	Minimum lease payments As at 30 June 2009 2010 HK$’000 HK$’000 — 15,806 — 4,627 — 20,433 — (1,900) — 18,533	Present value of minimum lease payments	Present value of minimum lease payments
	As at 30 2009 HK$’000 — — — — —	As at 30 2009 HK$’000 — — — — — — —	June 2010 HK$’000 14,013 4,520
			18,533 —
			18,533 (14,013)
			4,520

The Parksong Group’s obligations under finance leases are secured by the lessor’s charge over the leased assets.

— II-34 —

APPENDIX II ACCOUNTANTS’ REPORT OF THE TARgET gROUP

27. PROVISION FOR REHABILITATION

At 16 July 2008 (date of incorporation) and 30 June 2009 Acquisition of jointly controlled assets Adjustment due to change of discount rate Unwinding of discount Exchange adjustment At 30 June 2010	HK$’000 — 15,979 (296) 48 (1,130)
	14,601

The provision for rehabilitation represents the estimated cost of decommission and rehabilitation of mines and processing sites of the JV Projects to be carried out at the end of their production lives. The discount rate used in determining the provision for rehabilitation is changed from 4.67% at the Date of Completion to 4.44% as at 30 June 2010.

28. SHARE CAPITAL

Number of ordinary shares of HK$ 1 each Authorised: At 16 July 2008 (date of incorporation), 30 June 2009 and 30 June 2010 10,000 Issued and fully paid: At 16 July 2008 (date of incorporation), 30 June 2009 and 30 June 2010 10,000	HK$’000 10
	10

Parksong was incorporated with an authorised share capital of HK$10,000. At the time of incorporation, 10,000 shares of HK$1 each were issued at par to the subscriber to provide the initial capital to Parksong.

29. DEFERRED TAXATION

The following are the major deferred tax assets and liabilities recognised and movements thereon during the Relevant Periods:

Acquisition cost of jointly controlled assets HK$’000 At 16 July 2008 (date of incorporation) and 30 June 2009 — (Credit) charge to profit or loss_(note 12)_ (7,914) Exchange adjustment 276 At 30 June 2010 (7,638)	Fair value change in derivative financial instruments Provision for rehabilitation HK$’000 HK$’000 — — 5,081 (173) (177) 6 4,904 (167)	Exploration costs HK$’000 — 709 (25) 684	Others HK$’000 — (78) 3 (75)	Total HK$’000 — (2,375) 83
				(2,292)

— II-35 —

APPENDIX II ACCOUNTANTS’ REPORT OF THE TARgET gROUP

30. JOINT VENTURE

Joint controlled assets

During March 2010, the Parksong Group acquired 50% interests in the JV Projects located in Tasmania, Australia which comprises of (i) the Renison mine, concentrator and infrastructure, (ii) the Mount Bischoff open cut tin project and (iii) the Retails tailing retreatment projects (hereinafter collectively referred to as the “Mining Assets”) from BMT at a consideration of approximately AUD51,225,000 (approximately equal to HK$365,670,000). Pursuant to the acquisition agreement between BMT and YT Parksong Australia, BMT has granted the Call Option to YT Parksong Australia and YT Parksong Australia has granted the Put Option to BMT. Details of the Call Option and Put Option are disclosed in note 22.

On the Date of Completion, YT Parksong Australia and BMT entered into the JV Agreement that an unincorporated joint venture was established by YT Parksong Australia and BMT to jointly manage the Mining Assets. According to the JV Agreement, YT Parksong Australia and BMT severally owned 50% interests of the Mining Assets. Each of YT Parksong Australia and BMT is entitled to 50% of the output from the operation of the Mining Assets and is responsible for 50% of the expenses incurred.

The JV Projects is managed by a management committee (“Management Committee”). Both YT Parksong Australia and BMT is entitled to appoint three representatives to the Management Committee. If YT Parksong Australia increases its interests to 60%, it will be entitled to appoint three representatives to the Management Committee with BMT appointing two representatives. Under the JV Agreement, certain decisions relating to strategic financial and operating policies of those mining projects require the unanimous consent from both YT Parksong Australia and BMT both before and after the exercise of the Call Option or the Put Option. Other operational decisions made by the Management Committee require a simple majority vote. Hence, YT Parksong Australia is able to exercise joint control over the JV Projects and the assets and liabilities of the JV Projects which were acquired by the Parksong Group are accounted for as jointly controlled assets.

The jointly controlled assets and liabilities acquired by the Parksong Group are as follows:

	Date of Completion
	HK$’000
Property, plant and equipment	211,350
Mining rights	157,791
Inventories	25,839
Other receivables, deposits and prepayment	5,128
Obligations under finance leases	(23,707)
Other payables and accruals	(3,048)
Provision for rehabilitation costs	(15,979)
	357,374
Fair value of derivative financial instruments granted at the Date of
Completion
— Call Option	23,475
— Put Option	(15,179)
	365,670
Net cash outflow arising on acquisition:
Cash consideration paid	365,670

— II-36 —

ACCOUNTANTS’ REPORT OF THE TARgET gROUP

APPENDIX II

As at 30 June 2010, the amounts of assets, liabilities, income and expenses recognised in the Financial Information in relation to the Parksong Group’s interests in jointly controlled assets are as follows:

Property, plant and equipment Mining rights Exploration and evaluation expenditures Inventories Other receivables and deposits Bank balances and cash Total assets Trade and other payables and accruals Obligation under finance leases Provision for rehabilitation Total liabilities Sales Cost of sales Bank interest income Other gains and losses Finance costs Net profit	30 June 2010 HK$’000 205,214 141,523 2,281 35,117 14,050 44,709 442,894 44,898 18,533 14,601 78,032 Year ended 30 June 2010 HK$’000 90,070 (75,141) 311 (434) (584) 14,222

Jointly controlled entity

BMTJV is a limited company incorporated in Australia on 19 March 2010 by YT Parksong Australia and BMT. BMTJV was appointed as the management company of the JV Projects and is responsible to manage, supervise and conduct the daily operation of the JV Projects through the Management Committee.

BMTJV has no asset and liability as at 30 June 2010 and no revenue and expenses incurred during the Relevant Periods.

— II-37 —

APPENDIX II ACCOUNTANTS’ REPORT OF THE TARgET gROUP

31. OPERATINg LEASES

The Parksong group as lessee

Minimum lease payments paid under operating leases during the Relevant Periods: Premises Equipment Leasehold land	From 16 July 2008 (date of incorporation) to 30 June 2009 HK$’000 — — — —	Year ended 30 June 2010 HK$’000 150 267 7,124
		7,541

At the end of the reporting period, the Parksong Group had commitments for future minimum lease payments under non-cancellable operating leases which fall due as follows:

Within one year In the second to fifth year inclusive Over five years	As at 30 June	As at 30 June
	2009 HK$’000 — — — —	2010 HK$’000 1,003 3,466 922
		5,391

Operating lease payments represent rentals payable by the Parksong Group for certain of its premises, equipment and leasehold land.

Leases are negotiated for an average term of 4 years and rental are fixed for an average of 4 years.

The leasehold land are located at the mining location of the JV Projects. In order to maintain its right to explore and mine the tenements and to renew the rental contracts of the leasehold land, a specific level of exploration work should be carried out in the JV Projects in order to meet the expenditure requirements specified by the Mineral and Resource Department of Tasmania.

32. CAPITAL COMMITMENTS

At the end of the reporting period, the Parksong Group’s share of capital commitments of the JV Projects is as follows:

Capital expenditure commitments in respect of the acquisition of property, plant and equipment contracted for but not provided in the Financial Information	As at 30 June
	2009 2010 HK$’000 HK$’000 — 1,485

— II-38 —

APPENDIX II ACCOUNTANTS’ REPORT OF THE TARgET gROUP

33. RETIREMENT BENEFITS SCHEMES

The employees are employed by BMTJV on behalf of YT Parksong Australia and BMT. These employees are members of a state-managed retirement benefit scheme in Australia (Superannuation fund). The Parksong Group is required to contribute a certain percentage of their payroll costs to the retirement benefit scheme to fund the benefits. The only obligation of the Parksong Group with respect to the retirement benefit scheme is to make the specified contributions.

During the year ended 30 June 2010, the Parksong Group’s share of total contributions to the retirement benefit schemes is approximately HK$681,000.

34. PLEDgED ASSETS

Certain assets had been pledged to secure the finance leases granted to BMTJV for the JV Projects. The carrying values of the pledged assets are as follows:

	As at 30 June
	2009	2010
	HK$’000	HK$’000
Plant and equipment	—	30,385

Shares of Parksong, YTHKG, YT Parksong Australia and shares of BMTJV owned by the Parksong Group and the undertakings, properties and assets of Parksong, YTHKG and YT Parksong Australia are pledged/provided to a financial institution to secure certain borrowings granted to the Parksong Group. Details are disclosed in note 25. The pledges are released upon the full repayment of borrowings in July 2010.

35. RELATED PARTY TRANSACTIONS

Details of the terms of the amount due to a shareholder are disclosed in note 21. During the Relevant Periods, the Parksong Group had entered into the following related party transactions:

	From
	16 July 2008
	(date of
	incorporation) to	Year ended
	30 June 2009	30 June 2010
	HK$’000	HK$’000
YTg
Interest paid	—	2,934
Commission paid/payable for the purposes of
acquisition of jointly controlled assets	—	32,093
Commission payable	—	3,802
YTC
Sales of tin concentrate	—	74,414
Trade receivables	—	32,050

The management of the Parksong Group considered that the management and the five highest paid individuals are the key management of the Parksong Group, whose emoluments have been disclosed in note 9.

— II-39 —

APPENDIX II ACCOUNTANTS’ REPORT OF THE TARgET gROUP

(B) EVENTS AFTER THE REPORTINg PERIOD

On 13 July 2010, Mr. Chan, the shareholder and sole director of Parksong, entered into an agreement with Gallop Pioneer Limited, a wholly owned subsidiary of the Company, pursuant to which Gallop Pioneer Limited agreed to purchase the entire issued share capital and outstanding shareholder’s loan of Parksong to be satisfied by cash and issuance of convertible bonds of the Company to Mr. Chan. The transaction is conditional upon various conditions and is subject to the approval of the shareholders of the Company.

On 15 July 2010, Parksong acquired an additional 27% equity interest in YTHKG from YTG at a consideration of HK$2,700 satisfied by cash. On the completion of this transaction, an amount of approximately HK$34,245,000 which is the difference between the consideration paid of HK$2,700 and the carrying amount of noncontrolling interests of approximately HK$34,242,000 is recognised as other reserve and attributable to the owner of Parksong.

In July 2010, Mr. Chan advanced HK$410,000,000 to the Parksong Group to settle the borrowings owed by the Parksong Group with carrying amount of HK$401,983,000 as at 30 June 2010.

(C) SUBSEQUENT FINANCIAL STATEMENTS

No audited financial statements have been prepared by the Parksong Group in respect of any period subsequent to 30 June 2010.

Yours faithfully,

Deloitte Touche Tohmatsu

Certified Public Accountants Hong Kong

— II-40 —

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARgED gROUP

APPENDIX III

(A) BASIS OF PREPARATION OF THE UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARgED gROUP

The unaudited pro forma financial information (“Unaudited Pro Forma Financial Information”) of the Enlarged Group has been prepared to illustrate the effect of the Acquisition from the Vendor.

The unaudited pro forma consolidated statement of financial position of the Enlarged Group is prepared based on the unaudited consolidated statement of financial position of the Group as at 30 June 2010 as extracted from the interim report of the Company issued on 30 August 2010 and the audited consolidated statement of financial position of the Target Group as at 30 June 2010 as extracted from the accountants’ report set out in Appendix II to this circular, after making pro forma adjustments relating to the Acquisition, as if the Acquisition had been completed on 30 June 2010.

The unaudited pro forma consolidated statement of comprehensive income and the unaudited pro forma consolidated statement of cash flows of the Enlarged Group are prepared based on the audited consolidated statement of comprehensive income and consolidated statement of cash flows of the Group for the year ended 31 December 2009 as extracted from the annual report of the Company issued on 27 April 2010 and the audited consolidated statement of comprehensive income and consolidated statement of cash flows of the Target Group for the year ended 30 June 2010 as extracted from the accountants’ report as set out in Appendix II to this circular, after making pro forma adjustments relating to the Acquisition, as if the Acquisition had been completed on 19 March 2010, the date the Target Group came into existence and commenced operation. For the purpose of the unaudited pro forma consolidated statement of comprehensive income and the unaudited pro forma consolidated statement of cash flows, the Acquisition is assumed to be completed on 19 March 2010 in order to provide investors with information about the impact of the Acquisition.

The Unaudited Pro Forma Financial Information is based on the aforesaid historical data after giving effect to the pro forma adjustments described in the accompanying notes. A narrative description of the pro forma adjustments of the Acquisition that are (i) directly attributable to the transactions and (ii) factually supportable, is summarised in the accompanying notes.

The Unaudited Pro Forma Financial Information of the Enlarged Group has been prepared by the directors of the Company for illustrative purposes only and is based on a number of assumptions, estimates, uncertainties and currently available information. Accordingly, and because of its nature, the Unaudited Pro Forma Financial Information of the Enlarged Group does not purport to predict what the results and cash flows of the Enlarged Group will be after the Acquisition or the financial position of the Enlarged Group will be on completion of the Acquisition.

— III-1 —

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARgED gROUP

APPENDIX III

(B) PRO FORMA CONSOLIDATED STATEMENT OF FINANCIAL POSITION

Non-current assets Property, plant and equipment Prepaid lease payments Intangible assets Deposits Mining rights Exploration and evaluation expenditures Deferred taxation Deposit placed for a life insurance policy Current assets Inventories Trade receivables Prepaid lease payments Other receivables, deposits and prepayments Amounts due from related companies Derivative financial instruments Bank balances and cash	The group as at 30 June 2010 HK$’000 53,171 6,333 1,061 — — — 755 1,953 63,273 15,169 63,315 58 6,641 199 — 423,516 508,898	The Target group as at 30 June 2010 HK$’000 205,214 — — 13,172 141,523 2,281 2,292 — 364,482 35,117 32,050 — 16,140 — 33,058 79,730 196,095	Pro forma adjustments HK$’000 HK$’000 (note a) (note b) 942,174 (i) 942,174 (3) (280,000) (ii) (3) (280,000)	The Enlarged group HK$’000 258,385 6,333 1,061 13,172 1,083,697 2,281 3,047 1,953
				1,369,929
				50,286 95,365 58 22,781 199 33,058 223,243
				424,990

— III-2 —

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARgED gROUP

APPENDIX III

Current liabilities Trade payables, other payables and accruals Amount due to a related company Amount due to a shareholder Amounts due to directors Borrowings Obligations under finance leases Derivative financial instruments Taxation Net current assets (liabilities) Total assets less current liabilities Capital and reserves Share capital Reserves Equity attributable to owners of the Company Convertible Bonds — equity portion Non-controlling interests Total equity Non-current liabilities Provision for rehabilitation Convertible Bonds — liability portion Deferred tax liabilities Bank borrowings Obligations under finance leases Total equity and non-current liabilities	The group as at 30 June 2010 HK$’000 23,209 1,115 — 1,658 26,815 — — 3,401 56,198 452,700 515,973 14,400 494,873 509,273 — — 509,273 — — — 6,700 — 6,700 515,973	The Target group as at 30 June 2010 HK$’000 59,893 — 184,066 — 401,983 14,013 8,996 2,298 671,249 (475,154) (110,672) 10 (72,733) (72,723) — (57,070) (129,793) 14,601 — — — 4,520 19,121 (110,672)	Pro forma adjustments HK$’000 HK$’000 (note a) (note b) 52,103 (iii) (184,066) (iv) (401,983) (v) (533,946) (3) 253,946 (3) 1,196,120 (10) (vi) (34,245) 106,978 (vi) (34,245) 106,968 221,648 (viii) 34,242 (3) 328,616 541,053 (vii) 326,451 (ix) 867,504 (3) 1,196,120	The Enlarged group HK$’000 135,205 1,115 — 1,658 26,815 14,013 8,996 5,699
				193,501
				231,489
				1,601,418
				14,400 494,873
				509,273 221,648 (22,828)
				708,093
				14,601 541,053 326,451 6,700 4,520
				893,325
				1,601,418

— III-3 —

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARgED gROUP

APPENDIX III

Notes:

• (a) The adjustments in connection with the acquisition of an additional 27% equity interest in Yunnan Tin HK by the Parksong Group, being a condition precedent to the Acquisition, represent:

• (i) cash consideration of HK$2,700;

• (ii) the adjustment of non-controlling interests of the Target Group amounting to HK$34,242,000; and

• (iii) the recognition of other reserve attributable to the owner of the Target Group amounting to HK$34,245,000 being the difference between the consideration paid of HK$2,700 and adjustment of non-controlling interests of the Target Group amounting to HK$34,242,000.

• (b) The adjustments in connection with the Acquisition represent:

• (i) the excess of the Consideration over the assumed fair values of the assets and liabilities (other than mining rights) of the Target Group is adjusted to the fair value of mining rights and corresponding deferred tax liabilities as follows:

The Consideration of Acquisition Adjustment to the Consideration in note (b) (iii) Total consideration Carrying amount of net liabilities of the Target Group as at 30 June 2010 Adjustments as condition precedent to the Acquisition: Amount due to a shareholder of the Target Group in note (b) (iv) Borrowings of the Target Group in note (b) (v) Net fair value adjustment Represented by: Mining rights Deferred tax liabilities in note (b) (ix)

HK$’000 1,086,500 52,103 1,138,603 106,968 (184,066) (401,983) 659,522 942,174 (282,652) 659,522

For the purpose of Unaudited Pro Forma Financial Information, the fair value of the identifiable assets and liabilities (except for mining rights) of the Target Group is assumed to be the same as their carrying amounts. The fair value of mining rights and other assets and liabilities are subject to change upon the completion of (1) the valuation of all identifiable assets and liabilities acquired; and (2) the valuation of fair value of Convertible Bonds as part of the consideration of the Acquisition;

The directors of the Company have assessed whether there is indication that mining rights may be impaired as at 30 June 2010 on a pro forma basis, in accordance with Hong Kong Accounting Standard 36 “Impairment of Assets”, the directors of the Company have assessed and concluded that there is no impairment indication in respect of the mining rights with an assumed fair value of approximately HK$1,084 million as shown in the pro forma consolidated statement of financial position of the Group as at 30 June 2010, on the basis that the value provided in the Valuation is much higher than such assumed fair value. Upon completion of the Acquisition and in subsequent reporting periods, valuation of the mining rights will be performed for the purpose of determining the fair value or recoverable amount of the mining rights. The valuation method to be applied will be consistent with the Valuation set out in Appendix V and key assumptions will be similar to those disclosed in the Valuation set out in Appendix V and adjusted to reflect changes in market conditions.

— III-4 —

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARgED gROUP

APPENDIX III

• (ii) cash consideration of HK$280,000,000 as stated in the Sale and Purchase Agreement;

• (iii) the adjustment to the consideration of HK$52,103,000 being the net amount of the Receivables and Payables of the Review Group on 30 June 2010. According to the Second Supplemental Deed entered into between the Purchaser and Vendor on 30 December 2010, the consideration is to be adjusted for an amount equal to the difference between the Receivables and Payables as shown in the Completion Accounts of the Review Group. The adjustment to Consideration is adjusted to other payables instead of bank balances as the related cash flows are taken place after the settlement of the Receivables and Payables in which case the Receivables or Payables should be paid to or received from the Vendor as long as the Receivables or Payables are settled by relevant debtors or creditors. For the propose of Unaudited Pro Forma Financial Information, the net amount of the Receivables and Payables of the Review Group are calculated based on the financial information of the Review Group as at 30 June 2010, representing:

Bank balances and cash Trade receivables and other receivables Trade payables and other payables Tax payables Net amount of the Receivables and Payables of Review Group	HK$’000 34,989 34,139 (14,727) (2,298) 52,103

• (iv) the elimination of the advance from Mr. Chan of HK$184,066,000 in the books of the Target Group in accordance with the Sale and Purchase Agreement pursuant to which such advance will be assigned to the Company as a result of the Acquisition;

• (v) the full repayment of borrowings of the Target Group as at 30 June 2010 amounting to HK$401,983,000 as a condition precedent to the Acquisition;

• (vi) the elimination of share capital of the Target Company amounting to HK$10,000 and pre-acquisition reserves of the Target Group as at 30 June 2010 amounting to HK$106,978,000;

• (vii) the issuance of Convertible Bonds with principal amount of HK$806,500,000 convertible into 548,639,455 shares of the Company at an initial conversion price of HK$1.47 per conversion share (subject to anti-dilutive adjustments). The fair value of the Convertible Bonds is assumed to be its principal amount for the purpose of preparing the Unaudited Pro Forma Financial Information. In accordance with Hong Kong Accounting Standard 32 “Financial Instruments: Presentation”, Convertible Bonds issued by the Company contains both the liability and conversion option components. The liability component is recognised as financial liabilities and the residual, being the conversion option, as equity. The liability component is recognised at fair value of HK$541,053,000 which is estimated using an effective interest rate of 8.31% per annum. The fair value of the Convertible Bonds will be re-assessed at the Completion Date;

• (viii) the recognition of (i) the equity component of the Convertible Bonds of HK$265,447,000 as the residual of the principal amount of Convertible Bonds and its liability component (as stated in note (b)(vii) above) as if the Convertible Bonds were issued on 30 June 2010.; and (ii) the deferred tax on equity component of the Convertible Bonds of HK$43,799,000; and

• (ix) the recognition of deferred tax on the fair value adjustment of HK$282,652,000 estimating at the Australian tax rate of 30% and deferred tax on equity component of the Convertible Bonds of HK$43,799,000 estimating at the Hong Kong Profits Tax rate of 16.5%.

— III-5 —

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARgED gROUP

APPENDIX III

• (C) PRO FORMA CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

The The Target group group for the for the year ended year ended 31 December 30 June 2009 2010 HK$’000 HK$’000 Revenue 134,586 90,070 Cost of sales (115,318) (75,141) Gross profit 19,268 14,929 Bank interest income 164 315 Other income 592 — Other gains and losses (4,040) (15,968) Selling and distribution costs (1,544) — Administrative expenses (23,723) (6,638) Other expenses — (89,495) Finance costs (774) (37,607) Loss before tax (10,057) (134,464) Income tax (charge) credit (2,681) (6) Loss for the year (12,738) (134,470) Other comprehensive income: Exchange difference arising on translation of foreign operations 153 4,685 Total comprehensive expense for the year (12,585) (129,785) Loss for the year attributable to: Owners of the Company (12,738) (75,348) Non-controlling interests — (59,122) (12,738) (134,470) Total comprehensive expense for the year attributable to: Owners of the Company (12,585) (72,723) Non-controlling interests — (57,062) (12,585) (129,785)	HK$’000 (note a) 2,275 2,275 2,275 2,275 1,270 1,005 2,275 1,270 1,005 2,275	Pro forma adjustments HK$’000 HK$’000 (note b) (note c) (31,092) (31,092) (31,092) 9,328 (21,764) — (21,764) (34,870) (21,764) 34,870 — (21,764) (33,634) (21,764) 33,634 — (21,764)	HK$’000 (note d) (11,242) (11,242) 1,855 (9,387) (9,387) (9,387) (9,387) (9,387) (9,387)	The Enlarged group HK$’000 224,656 (221,551)
				3,105 479 592 (20,008) (1,544) (28,086) (89,495) (49,623)
				(184,580) 8,496
				(176,084) 4,838
				(171,246)
				(152,837) (23,247)
				(176,084)
				(148,823) (22,423)
				(171,246)

— III-6 —

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARgED gROUP

APPENDIX III

Notes:

• (a) The adjustment represent the reversal of expenses incurred by the Target Company and Yunnan Tin HK between the period from 1 July 2009 to 18 March 2010 assuming that the Acquisition is completed on the date the Target Group (together with the Joint Venture) came into existence. Should the results of the Target Company and Yunnan Tin HK between 1 July 2009 to 18 March 2010 be included in the pro forma consolidated statement of comprehensive income, the administrative expenses and loss for the year will increase by HK$2,275,000.

• (b) The adjustments represent the re-allocation of loss for the year and total comprehensive expense for the year attributable to non-controlling interests and the owners of the Company, assuming the acquisition of 27% equity interest in Yunnan Tin HK, is completed on the date the Target Group (together with the Joint Venture) came into existence.

• (c) The amounts represent additional amortisation of mining rights of HK$31,092,000 using the unit of production method based on actual production over the total estimated proven and probable reserves of the ore mines and reversal of related deferred taxation amounting to HK$9,238,000. The fair value of mining rights acquired from the Acquisition is assumed to be HK$1,083,697,000.

• (d) The amounts represent (i) the finance costs of HK$11,242,000 based on the effective interest of Convertible Bonds to be issued as part of the consideration of the Acquisition, assuming the fair value of the liability component of the Convertible Bonds is HK$541,053,000 and effective interest rate is 8.31% per annum; (ii) the reversal of deferred tax liabilities on equity component of the Convertible Bonds of HK$1,855,000, estimating at the Hong Kong Profits Tax rate of 16.5%, assuming the Acquisition is completed on the date the Target Group (together with the Joint Venture) came into existence.

The annual effective interest expenses of the Convertible Bonds is HK$44,962,000 and the related deferred tax is HK$7,419,000.

• (e) The adjustments in notes (c) and (d) will have continuous effect on the consolidated financial statements of the Enlarged Group in the subsequent financial years.

— III-7 —

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARgED gROUP

APPENDIX III

(D) PRO FORMA CONSOLIDATED STATEMENT OF CASH FLOwS

The group for the year ended 31 December 2009 HK$’000 OPERATING ACTIVITIES Loss before tax (10,057) Adjustments for: Depreciation 7,006 Release of prepaid lease payments 421 Impairment loss recognised in respect of intangible assets 846 Amortisation of mining rights — Loss on disposal of property, plant and equipment 85 Fair value change of derivative financial instruments (750) Allowance for doubtful debts 4,068 Allowance for obsolete inventories 2,831 Amortisation of investment property 53 Interest income (164) Interest expense 774 Operating cash flows before movements in working capital 5,113 Decrease (Increase) in inventories 14,901 Decrease (Increase) trade receivables 4,828 Increase in other receivables, deposits and prepayments (3,178) (Decrease) Increase in trade payables, other payables and accruals (2,828) Decrease in amount due to a related company 622 Decrease in amounts due to directors 1,166	The Target group for the year ended 30 June 2010 HK$’000 (134,464) 8,294 — — 5,302 173 (16,943) — 153 — — 21,107 (116,378) (12,146) (32,050) (31,191) 57,059 — —	HK$’000 (note a) 2,275 2,275	Pro forma adjustments HK$’000 HK$’000 (note b) (note c)	HK$’000 (note d) (42,334) 31,092 11,242	The Enlarged group HK$’000 (184,580) 15,300 421 846 36,394 258 (17,693) 4,068 2,984 53 (164) 33,123
					(108,990) 2,755 (27,222) (34,369) 54,231 622 1,166

— III-8 —

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARgED gROUP

APPENDIX III

The group for the year ended 31 December 2009 HK$’000 Cash generated from (used in) operations 20,624 Interest paid — Income tax paid (393) NET CASH FROM (USED IN) OPERATING ACTIVITIES 20,231 INVESTING ACTIVITIES Acquisition of jointly controlled assets — Acquistion of subsidiaries — Exploration and evaluation expenditures incurred — Purchase of property, plant and equipment (8,285) Proceeds on disposal of property, plant and equipment 161 Decrease in pledged bank deposits 8,030 Interest received 90 Payment of deposit placed for a life insurance policy (1,845) NET CASH USED IN INVESTING ACTIVITIES (1,849) FINANCING ACTIVITIES Interest paid (774) Dividend paid (7,642) Repayment of borrowings (67,109) New bank borrowings raised 55,496 Advance from a shareholder — Acquisition of additional interests in subsidiaries —	The Target group for the year ended 30 June 2010 HK$’000 (134,706) (21,059) — (155,765) (365,670) — (2,281) (17,276) — — — — (385,227) — — (3,499) 428,338 196,125 —	HK$’000 (note a) 2,275 2,275 (13,260)	Pro forma adjustments HK$’000 HK$’000 (note b) (note c) (280,000) (280,000) (3)	HK$’000 (note d)	The Enlarged group HK$’000 (111,807) (21,059) (393)
					(133,259)
					(365,670) (280,000) (2,281) (25,561) 161 8,030 90 (1,845)
					(667,076)
					(774) (7,642) (70,608) 483,834 182,865 (3)

— III-9 —

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARgED gROUP

APPENDIX III

The group for the year ended 31 December 2009 HK$’000 NET CASH (USED IN) FROM FINANCING ACTIVITIES (20,029) NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (1,647) CASH AND CASH EQUIVALENTS AT BEGINNING OF THE YEAR 60,672 EFFECT OF FOREIGN EXCHANGE RATE CHANGES 73 CASH AND CASH EQUIVALENTS AT END OF THE YEAR 59,098	The Target group for the year ended 30 June 2010 HK$’000 620,964 79,972 — (242) 79,730	HK$’000 (note a) (13,260) (10,985) 10,985 —	Pro forma adjustments HK$’000 HK$’000 (note b) (note c) (3) (3) (280,000) (10,985) (3) (290,985)	HK$’000 (note d) —	The Enlarged group HK$’000 587,672
					(212,663) 60,672 (169)
					(152,160)

Notes :

• (a) The adjustments represent the (i) reversal of expenses of HK$2,275,000 incurred by the Target Company and Yunnan Tin HK between the period from 1 July 2009 and 18 March 2010; (ii) reversal of advance from Mr. Chan of HK$13,260,000 and (iii) the inclusion of bank and cash balance of HK$10,985,000 of the Target Group as if the Acquisition is completed on the date of the Target Group (together with the Joint Venture) came into existence. Please also refer to note (a) to the unaudited pro forma consolidated statement of comprehensive income.

• (b) Being cash consideration amounting to HK$2,700 in connection with the acquisition of 27% equity interest in Yunnan Tin HK.

• (c) The adjustment represents the (i) total cash consideration for the Acquisition amounting to HK$280,000,000 as stated in the Sale and Purchase Agreement; (ii) adjustment to the consideration of HK$10,985,000 being the net amount of Receivables and Payables of the Review Group as at the date the Target Group (together with Joint Venture) came into existence (see note (b)(iii) to the pro forma consolidated statement of financial position) and (iii) acquisition of bank and cash balance of HK$10,985,000 in note (a).

• (d) The adjustments represent the non-cash expenses of amortisation of mining rights amounting to HK$31,092,000 using the unit of production method based on actual production over the total estimated proven and probable reserves of the ore mines and the effective interest expenses of Convertible Bonds amounting to HK$11,242,000.

• (e) The adjustments in note (d) will have continuous effect on the consolidated financial statements of the Enlarged Group in the subsequent financial years.

— III-10 —

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARgED gROUP

APPENDIX III

(E) ACCOUNTANT’S REPORT ON UNAUDITED PRO FORMA FINANCIAL INFORMATION

==> picture [142 x 68] intentionally omitted <==

ACCOUNTANTS’ REPORT ON UNAUDITED PRO FORMA FINANCIAL INFORMATION To the Directors of Vitar International Holdings Limited

We report on the unaudited pro forma financial information (the “Unaudited Pro Forma Financial Information”) of Vitar International Holdings Limited (the “Company”) and its subsidiaries (hereinafter collectively referred to as the “Group”), Parksong Mining And Resource Recycling Limited (the “Target Company”) and its subsidiaries (together with the Group hereinafter referred to as the “Enlarged Group”) set out in Appendix III to the circular dated 31 December 2010 (the “Circular”), which has been prepared by the directors of the Company for illustrative purposes only, to provide information about how the proposed acquisition of entire equity interest in the Target Company might have affected the financial information presented. The basis of preparation of the Unaudited Pro Forma Financial Information is set out in Section A of Appendix III to the Circular.

Respective responsibilities of directors of the Company and reporting accountants

It is the responsibility solely of the directors of the Company to prepare the unaudited pro forma financial information in accordance with paragraph 29 of Chapter 4 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Listing Rules”) and with reference to Accounting Guideline 7 “Preparation of Pro Forma Financial Information for Inclusion in Investment Circulars” issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”).

— III-11 —

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARgED gROUP

APPENDIX III

It is our responsibility to form an opinion, as required by paragraph 29(7) of Chapter 4 of the Listing Rules, on the unaudited pro forma financial information and to report our opinion to you. We do not accept any responsibility for any reports previously given by us on any financial information used in the compilation of the unaudited pro forma financial information beyond that owed to those to whom those reports were addressed by us at the dates of their issue.

Basis of opinion

We conducted our engagement in accordance with Hong Kong Standard on Investment Circular Reporting Engagements 300 “Accountants’ Reports on Pro Forma Financial Information in Investment Circulars” issued by the HKICPA. Our work consisted primarily of comparing the unadjusted financial information with source documents, considering the evidence supporting the adjustments and discussing the Unaudited Pro Forma Financial Information with the directors of the Company. This engagement did not involve independent examination of any of the underlying financial information.

We planned and performed our work so as to obtain the information and explanations we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the Unaudited Pro Forma Financial Information has been properly compiled by the directors of the Company on the basis stated, that such basis is consistent with the accounting policies of the Group and that the adjustments are appropriate for the purpose of the Unaudited Pro Forma Financial Information as disclosed pursuant to paragraph 29(1) of Chapter 4 of the Listing Rules.

The Unaudited Pro Forma Financial Information is for illustrative purpose only, based on the judgements and assumptions of the directors of the Company, and, because of its hypothetical nature, does not provide any assurance or indication that any event will take place in future and may not be indicative of:

• the financial position of the Group as at 30 June 2010 or any future date; or

• the results and cash flows of the Group for the period ended 31 December 2009 or any future period.

— III-12 —

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARgED gROUP

APPENDIX III

Opinion

In our opinion:

• (a) the Unaudited Pro Forma Financial Information has been properly compiled by the directors of the Company on the basis stated;

• (b) such basis is consistent with the accounting policies of the Group so far as such policies related to the transactions; and

• (c) the adjustments are appropriate for the purposes of the Unaudited Pro Forma Financial Information as disclosed pursuant to paragraph 29(1) of Chapter 4 of the Listing Rules.

Deloitte Touche Tohmatsu

Certified Public Accountants

Hong Kong

• 31 December 2010

— III-13 —

MANAgEMENT DISCUSSION AND ANALYSIS

APPENDIX IV

FOR THE PERIOD FROM 16 JULY 2008 (DATE OF INCORPORATION) TO 30 JUNE 2010

For the period from 16 July 2008 to 30 June 2009 and the year ended 30 June 2010, the revenues generated by the Target Group were approximately HK$Nil and HK$90,070,000 respectively. The net losses after tax of the Target Group for the periods ended 30 June 2010 were approximately HK$18,000 and HK$134,470,000. The loss for the year ended 30 June 2010 was derived mainly from loan interests, commissions to set up the loans and the likes. However, all those relevant loans were fully repaid in July 2010. The expenses of similar natures will not be incurred in the next financial year. The Directors expect that the Target group to generate profit in the next financial year.

BUSINESS REVIEw

The Target Company is an investment holding company and it was incorporated on 16 July 2008 and commenced the metal tin mining in Tasmania, Australia through the Joint Venture with MLX in March 2010 in respect of the Assets. The Target Group holds 50% interest in the Assets located in Tasmania which comprises of (i) the Renison mine, concentrator and infrastructure, (ii) the Mount Bischoff open cut tin project and (iii) the Rentails tailings retreatment project.

When preparing the valuation of the Assets in March 2010, the director of the Target Company considered the value of the Rentails project insignificant as compared to other two mining projects, Renison and Mount Bischoff. The directors of the Target Company considered that the development of Rentails project would not generate future economic value to the Target Group because the investment cost to the project is higher than the revenue generated from the project based on the monthly average tin price of approximately USD17,500 per tonne in March 2010.

CAPITAL STRUCTURE, LIQUIDITY AND FINANCIAL RESOURCES

The Target Group’s funding and treasury policies are established to ensure the availability of funds at reasonable costs to meet all contractual financial commitments to fund business growth and to generate reasonable returns from available funds. The Target Group relied principally on external borrowings to fund its business during the periods under review.

As at 30 June 2010, the total borrowings of the Target Group amounted to approximately HK$420,516,000 while the cash and bank balances of the Target Group amounted to approximately HK$79,730,000. Borrowings of the Target Group comprises:

— IV-1 —

MANAgEMENT DISCUSSION AND ANALYSIS

APPENDIX IV

Effective interest rate As at 30 June 2009 % HK$’000 Fixed-rate borrowings repayable within one year: Secured loan of HK$250,000,000 24.00% — Unsecured loan of HK$151,983,000 4.86% — Obligation under financial lease of HK$18,533,000 11.6% — Total borrowings —	2010 HK$’000 250,000 151,983 18,533
	420,516

At 30 June 2010, borrowings of HK$250,000,000 were secured by (i) a personal guarantee from the shareholder of the Target Company; and (ii) the shares of the Target Company, Yunnan Tin HK, YT Parksong Australia and shares of the Management Company owned by the Target Group; and (iii) the undertakings, properties and assets of the Target Company, Yunnan Tin HK and YT Parksong Australia.

All the above fixed-rate borrowing secured loan and unsecured loan were fully repaid in July 2010. The Target Group’s gearing ratio, as express as the ratio to total liabilities divided by total assets was approximately 1.23 as at 30 June 2010.

MATERIAL INVESTMENTS, ACQUISITION OR DISPOSALS

Save for the Assets, the Target Group had no significant investments held and there were no material acquisition and disposals of subsidiaries and associate companies during the period under reviews.

As at 30 June 2010, the Target Group had capital commitment of approximately HK$1,485,000 regarding to acquisition of property, plant and equipment. Save as disclosed above, neither the Target Group had any material capital expenditure commitment nor did it have any further plan for material investments or capital assets.

SEgMENTAL ANALYSIS

The Target Group was solely engaged in the tin mining businesses in Tasmania, Australia during the period under review.

HUMAN RESOURCES

The total number of employees of the Target Group was 161 as at 30 June 2010 and the total staff cost for the period ended 30 June 2010 was approximately HK$13,635,000.

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MANAgEMENT DISCUSSION AND ANALYSIS

APPENDIX IV

Salaries or employees were maintained at a competitive level and the Target Group continued to review remuneration packages of employees with reference to the general market condition and individual performance. Remuneration packages comprised salaries and discretionary bonuses.

INVENTORY

For the period from 16 July 2008 to 30 June 2009 and the year ended 30 June 2010, the inventory of the Target Group were approximately HK$Nil and HK$35,117,000 respectively and the turnover days for inventory were 170 days for the year ended 30 June 2010 which was calculated by dividing the inventories as of the end of the year by cost of sales for the year, multiplied by 365 days.

RECEIVABLE

For the period from 16 July 2008 to 30 June 2009 and the year ended 30 June 2010, the trade receivable of the Target Group were approximately HK$Nil and HK$32,050,000 respectively. The other receivable, deposits and prepayment of the Target Group were approximately HK$Nil and HK$ 16,140,000 respectively.

The trade receivable turnover is 130 days for the year ended 2010, the trade receivable turnover is calculated by dividing the trade receivables as of the end of the year by revenue for the year, multiplied by 365 days.

The Parksong Group has a policy of allowing its trade customers a credit period of 60 days and has a policy of allowance for bad and doubtful debts which is based on the evaluation of collectibility and ageing analysis of trade receivables and on management’s judgment including credit worthiness and past collection history of each customer. Before accepting any new customer, the Parksong Group will assess the potential customer’s credit quality and defines credit limits by customer. Limits attributed to customers are reviewed annually.

In determining the recoverability of the trade receivables, the Parksong Group considers any change in the credit quality of the trade receivables from the date credit was initially granted up to the reporting date.

As at 30 June 2010, all trade receivables due from YTC were denominated in US$, and were neither past due nor impaired. The management of Parksong considers these amounts are of good credit quality and they have been settled in full subsequently.

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MANAgEMENT DISCUSSION AND ANALYSIS

APPENDIX IV

PROVISION FOR REHABILITATION

The provision for rehabilitation of the Target Group were nil in the period ended 2009 and HK$14,601,000 for the year ended 2010. The provisions for rehabilitation represents the estimated cost of decommission and rehabilitation of mines and processing sites of the JV Projects to be carried out at the end of their producing lives. The discount rate used in determination the provision for rehabilitation is changed from 4.67% at 19 March 2010 (date of the Target Company acquiring the Assets) to 4.44% as at 30 June 2010.

OTHER EXPENSES

For the year ended 30 June 2010, the consultancy fee (HK$33,800,000), commission fee (HK$32,093,000) and stamp duty (HK$17,019,000) were incurred for the acquisition of jointly controlled assets. The above expenses of similar nature will not be incurred in the next financial year.

NET EXCHANgE LOSS

For the period from 16 July 2008 to 30 June 2009 and the year ended 30 June 2010, the net exchange loss of the Target Group were nil and approximately HK$32,738,000 respectively. The exchange loss mainly is resulted by borrowings denominated other than AUD (the functional currency of the Target Group). The decrease in exchange rate of AUD against HKD and USD from the date of grant on the borrowings to 30 June 2010 resulted an exchange loss of the Target Group.

SEgMENTAL INFORMATION

For the operating segment, the Target Group only has a single operating segment. Segment revenue, results, assets and liabilities are therefore the same as the amounts presented in the consolidated statements of comprehensive income and consolidated statements of financial position. For geographical segment, almost all revenue of the Target Group was derived from a customer in PRC. A insignificant amount of revenue was derived from a customer in Malaysia.

EXPOSURE TO EXCHANgE RATE FLUCTUATIONS

The trade receivables, amount due to a shareholder, certain other payables and accruals and borrowings of the Target Group as at 30 June 2009 and 2010 are denominated in the currencies other than the functional currency of the respective group entities. The Parksong Group currently does not have a foreign currency hedging policy. However, the management monitors foreign exchange exposure and will consider hedging significant foreign currency exposure should the need arise.

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APPENDIX IV MANAgEMENT DISCUSSION AND ANALYSIS

CONTINgENT LIABILITIES

As at 30 June 2010, the Target Group did not have any significant contingent liabilities.

As at 30 June 2010, the Target Group had net current liabilities of approximately HK$475,154,000 and net liabilities of approximately HK$129,793,000. The Board believes that the Target Group has sufficient funds to finance its current working capital requirement taking into account of future cashflows from operations. In July 2010, the then shareholder of the Target Company advanced HK$410,000,000 to the Target Group to settle the borrowings with carrying amount of HK$401,983,000 as at 30 June 2010. Furthermore, the then shareholder of Target Company has agreed not to demand repayment of the amount due to him until the Target Group is in the financial ability to repay such amount. In addition, all shareholder loans will be assigned to the Company upon the Completion. In light of the measures above, the Board believes that the Target Group will be able to meet its financial obligations as they fall due for a period of twelve months from the date of this report.

— IV-5 —

APPENDIX V TECHNICAL REPORT AND VALUATION REPORT ON THE ASSETS

The following is the text of a report from Behre Dolbear Australia Pty Ltd., an independent technical specialist prepared for the sole purpose of incorporation in this circular.

TECHNICAL REPORT AND VALUATION REPORT ON THE ASSETS

VITAR INTERNATIONAL HOLDINgS LIMITED

December 2010

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APPENDIX V TECHNICAL REPORT AND VALUATION REPORT ON THE ASSETS

CONTENTS

			Pages
1.0	INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		V-5
Figure 1		Project Location Map-Western Tasmania . . . . . . . . . . . . . . . . . . . . . . . . V-6
2.0	EXECUTIVE SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . .		V-8
	2.1	Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-8
	2.2	Tasmanian Tin Assets . . . . . . . . . . . . . . . . . . . . . . . . . . V-8
Figure 2		Mine Lease and Geology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-9
Figure 3		Mine Site Geology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-11
Figure 4		Renison and Mount Bischoff Sections . . . . . . . . . . . . . . . . . . . . . . . . . . V-12
Figure 5		Generalised Cross Section – 66 500 N . . . . . . . . . . . . . . . . . . . . . . . . . . V-14
Figure 6		Cross Section – Federal Deeps Resource . . . . . . . . . . . . . . . . . . . . . . . . V-15
	2.3	Key Valuation Assumptions . . . . . . . . . . . . . . . . . . . . . . . V-18
	2.4	Valuation Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . V-19
3.0	VALUATION METHODOLOGY . . . . . . . . . . . . . . . . . . . . . . . V-20
	3.1	Effective Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	V-20
	3.2	Standards and Procedures . . . . . . . . . . . . . . . . . . . . . . . . V-20
	3.3	Valuation Principles . . . . . . . . . . . . . . . . . . . . . . . . . .	V-20
	3.4	Valuation Methods . . . . . . . . . . . . . . . . . . . . . . . . . . . V-20
4.0	RISK	SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	V-23
	4.1	Project Risk Summary . . . . . . . . . . . . . . . . . . . . . . . . .	V-23
	4.2	Risk Mitigation Factors . . . . . . . . . . . . . . . . . . . . . . . . .	V-26
	4.3	Sensitivity Analyses . . . . . . . . . . . . . . . . . . . . . . . . . .	V-27
5.0	SOURCES OF INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . V-28
6.0	OVERVIEW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		V-30
7.0	GEOLOGY AND MINERALISATION . . . . . . . . . . . . . . . . . . . . V-33
	7.1	Geology and Structure . . . . . . . . . . . . . . . . . . . . . . . . .	V-33
	7.2	Mineralisation and Exploration . . . . . . . . . . . . . . . . . . . . . V-33

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APPENDIX V TECHNICAL REPORT AND VALUATION REPORT ON THE ASSETS

		Pages
8.0	RESOURCE AND RESERVE ESTIMATION . . . . . . . . . . . . . . . . . V-36
	8.1	Geological Data Collection . . . . . . . . . . . . . . . . . . . . . . . V-36
	8.2	Resource and Reserve Estimates – Renison Mine . . . . . . . . . . . . V-36
	8.3	Resource and Reserve Estimates – Mount Bischoff . . . . . . . . . . . V-37
	8.4	Rentails Resource . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-37
	8.5	Reconciliation Data . . . . . . . . . . . . . . . . . . . . . . . . . . . V-38
9.0	MINING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-39
	9.1	General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-39
	9.2	Renison Underground . . . . . . . . . . . . . . . . . . . . . . . . . . V-39
	9.3	Mine Planning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-39
	9.4	LOM Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-40
	9.5	Mine Infrastructure . . . . . . . . . . . . . . . . . . . . . . . . . . . V-41
10.0	PROCESSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-43
	10.1	Renison Tin Concentrator . . . . . . . . . . . . . . . . . . . . . . . . V-43
Figure 7		Renison Tin Concentrator Flowsheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-44
	10.2	Plant Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . V-45
11.0	INFRASTRUCTURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-46
12.0	TENEMENTS, APPROVALS AND ROYALTIES . . . . . . . . . . . . . . . V-47
	12.1	Renison . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-47
	12.2	Mount Bischoff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-47
	12.3	Royalties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-48
13.0	ENVIRONMENTAL CONSIDERATIONS . . . . . . . . . . . . . . . . . . V-49
	13.1	Renison Mine . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-49
	13.2	Mount Bischoff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-52
14.0	PRODUCTION FORECASTS . . . . . . . . . . . . . . . . . . . . . . . . . V-54
15.0	CAPITAL COSTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-56
16.0	OPERATING COSTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-58

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APPENDIX V TECHNICAL REPORT AND VALUATION REPORT ON THE ASSETS

Pages 17.0 MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-60 18.0 SMELTER TERMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-61 19.0 RENTAILS TIN PROJECT . . . . . . . . . . . . . . . . . . . . . . . . . . V-62 19.1 Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-62 19.2 Resource and Reserve Estimates . . . . . . . . . . . . . . . . . . . . V-62 19.3 Metallurgical Testwork . . . . . . . . . . . . . . . . . . . . . . . . . V-62 20.0 VALUATION DISCUSSION . . . . . . . . . . . . . . . . . . . . . . . . . V-65 20.1 Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-65 20.2 General Assumptions . . . . . . . . . . . . . . . . . . . . . . . . . . V-65 20.3 Renison Operation . . . . . . . . . . . . . . . . . . . . . . . . . . . V-66 20.4 Mount Bischoff Project . . . . . . . . . . . . . . . . . . . . . . . . . V-69 20.5 Rentails Project . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-70 20.6 Valuation Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . V-73 21.0 STATEMENT OF CAPABILITY . . . . . . . . . . . . . . . . . . . . . . . V-75 22.0 STATEMENT OF INDEPENDENCE . . . . . . . . . . . . . . . . . . . . . V-76 23.0 LIMITATIONS AND CONSENT . . . . . . . . . . . . . . . . . . . . . . . V-76

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APPENDIX V TECHNICAL REPORT AND VALUATION REPORT ON THE ASSETS

31 December 2010

Mr. Chen Liang Executive Director Vitar International Holdings Limited Room 304-306, 3/F., Block B, New Trade Plaza, 6 On Ping Street, Siu Lek Yuen, Shatin, N.T., Hong Kong

Dear Sir,

DUE DILIgENCE TECHNICAL REVIEw AND VALUATION TASMANIAN TIN ASSETS – BLUESTONE MINES (TASMANIA) PTY LIMITED BEHRE DOLBEAR AUSTRALIA PTY LIMITED

1.0 INTRODUCTION

Vitar International Holdings Limited (“Vitar” or the “Company”), a public company listed on the Hong Kong Stock Exchange (“Stock Exchange”), has entered into a Sale and Purchase Agreement (the “Sale and Purchase Agreement” or “the Transaction”) with Parksong Mining and Resource Recycling Limited (the “Target Company”) for the purchase of Parksong’s interests in Yunnan Tin Hong Kong (Holdings) Group Company Limited (“Yunnan Tin HK”). Yunnan Tin HK owns 100% interest in YT Parksong Australia Holding Pty Limited (“YT Parksong Australia”) which owns a 50% interest in an unincorporated joint venture (the “Joint Venture”) with Bluestone Mines Tasmania Pty Limited (“BMT”). BMT is a wholly-owned subsidiary of Metals X Limited (“MLX”), a diversified resources group listed on the Australian Stock Exchange.

The Joint Venture holds the Tasmanian tin assets (the “Assets”) including the Renison tin mine, the Renison Concentrator, the Rentails project, the Mount Bischoff mine and associated tenements, plant and equipment (Figure 1). The Tasmanian operations are managed by a joint venture management company, Bluestone Mines Tasmania Joint Venture Pty Limited (“BMTJV” or “the Management Company”) which is owned as to 50% each by YT Parksong Australia and BMT.

Under the original sale agreement with BMT completed in March 2010, Yunnan Tin HK was owned as to 55% by the Target Company and 45% by Yunnan Tin PRC (“Yunnan Tin PRC”). Under the Yunnan Tin Share Transfer Yunnan Tin PRC is to transfer a 27% interest in Yunnan Tin HK to the Target Company such that the Target Company will own an 82% interest in Yunnan Tin HK. Completion of the Yunnan Tin Share Transfer is a condition precedent for completion of the Sales and Purchase Agreement.

Vitar has requested Behre Dolbear Australia Pty Limited (“BDA”) to prepare a Competent Person’s Report (“CPR”), as defined under Chapter 18 of the Listing Rules, involving a technical due diligence review and valuation of the Tasmanian tin assets of the Joint Venture specifically the Renison tin mine and Renison Concentrator, the Rentails project and Mount Bischoff.

BDA is the Australian subsidiary of Behre Dolbear & Company Inc., an international minerals industry consulting group which has operated continuously in North America and worldwide since 1911, with offices in Denver, Guadalajara, London, New York, Santiago, Sydney, Toronto, and Vancouver. Behre Dolbear specialises in mineral evaluations, due diligence studies, independent expert valuation reports, independent engineer certification, strategic planning and technical geological, mining and process consulting. The Sydney office of BDA has undertaken the technical review work for this report.

— V-5 —

APPENDIX V TECHNICAL REPORT AND VALUATION REPORT ON THE ASSETS

==> picture [417 x 586] intentionally omitted <==

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

MT BISCHOFF
RENISON
Tasmania
Hobart
Burnie
Devonport
MT BISCHOFF
Waratah
SAVAGE RIVER
Fe
HELLYER
Zn, Pb, Ag
QUE RIVER
Zn, Pb, Ag
RENISON
ROSEBERY
Zn, Pb, Ag
HERCULES
AVEBURY Zn, Pb, Ag
Ni Zeehan HENTY
Au
MT LYELL
Cu
Queenstown
Strahan
0 25
Kilometres
Metals X Limited Renison Tin Project
Emu
Bay
Railway
----- End of picture text -----

==> picture [416 x 12] intentionally omitted <==

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

Figure 1 PROJECT LOCATION MAP - WESTERN TASMANIA
----- End of picture text -----

BDA - 0114

Behre Dolbear Australia Pty Ltd

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APPENDIX V TECHNICAL REPORT AND VALUATION REPORT ON THE ASSETS

BDA visited the Renison operation and the Mount Bischoff site in September 2010 as part of the current technical review. BMT has provided data on exploration results, resource and reserve estimates, operating and development plans and studies, production schedules and operating and capital costs. BDA has also held on site discussions with technical and managerial staff of BMT and BMTJV. This BDA report is based primarily on information provided by MLX, BMT and BMTJV.

BDA has reviewed the resources and reserves in the context of the Australasian Code for Reporting Identified Mineral Resources and Ore Reserves prepared by the Joint Committee of the Australasian Institute of Mining and Metallurgy, Australian Institute of Geoscientists and Minerals Council of Australia, December 2004 Edition (“the JORC Code”).

BDA has not undertaken an audit of the data or re-estimated the resources or reserves. BDA has not undertaken any legal due diligence on the status of the joint venture tenements. BMT has advised that all material tenements are in good standing. All mine operations, processing, infrastructure, waste dumps and tailings dams are sited within granted mining leases.

The valuation assessment has been conducted in accordance with the Code for the Technical Assessment and Valuation of Mineral and Petroleum Assets and Securities for Independent Expert Reports (“the Valmin Code”) as issued in 1995 and updated in 2005 and in accordance with Chapter 18 of the Listing Rules. In accordance with the latter requirements, BDA has not included any consideration of Inferred resources in determining a value for the technical assets. BDA has adopted a range of valuation methods as detailed in this report. Monetary values included in this report are generally expressed in Australian Dollars (“A$”), with some references to United States Dollars (“US$”).

This report contains forecasts and projections based on data provided by MLX, BMT and BMTJV. BDA’s assessment of the production schedule, the projected capital and operating costs and the estimate of remaining mine life are based on technical reviews of project data and discussions with technical personnel. BDA has reviewed the relevant data to assess the reasonableness of such projections. However, these forecasts and projections cannot be assured and factors both within and beyond the control of the Joint Venture could cause the actual results to be materially different from BDA’s assessments and any projections contained in this report.

The sole purpose of this BDA report is for use by the Directors of Vitar in connection with the proposed Transaction and it should not be used or relied upon for any other purpose. A draft copy of the report has been provided to MLX, BMT, BMTJV, the Target Company and Vitar for correction of any material errors or omissions. Neither the whole nor any part of this report nor any reference thereto may be included in or with or attached to any document or used for any other purpose, without BDA’s our written consent to the form and context in which it appears.

— V-7 —

APPENDIX V TECHNICAL REPORT AND VALUATION REPORT ON THE ASSETS

2.0 EXECUTIVE SUMMARY

2.1 Overview

The assets reviewed and valued comprise the Joint Venture Tasmanian tin properties, namely:

• the Renison Bell mine, concentrator and infrastructure (“Renison”)

• the Mount Bischoff open cut tin project (“Mount Bischoff”)

• the Renison tailings retreatment project (“Rentails”).

The Renison underground tin mine and tin concentrator are located on the west coast of Tasmania, 140 kilometres (“km”) south of the port of Burnie, 10km west of the mining town of Rosebery, and 16km northeast of Zeehan where the Joint Venture has an accommodation village where the bulk of the workforce resides (Figure 1).

The mine is adjacent to the sealed Murchison Highway which connects Renison with Burnie on the north coast. The Emu Bay railway also runs adjacent to the mine and gives access to Burnie’s shipping facilities, although Renison does not use the railway for its products, but rather loads the tin concentrate in 2t metal bins which are trucked to Burnie for containerising and export.

BDA has reviewed the technical and financial data provided for each of the assets and has prepared a summary technical report and valuation in the context of the proposed Transaction. A Risk Summary is provided in Section 3 and a detailed technical review of the projects is provided in Sections 5-18.

2.2 Tasmanian Tin Assets

Background

The Joint Venture’s tin operations in Tasmania comprise the principal historical hard rock tin producers in Australia. The Renison mine has been one of the major hard rock tin mines in the world and is the largest tin producer in Australia. In financial year 2009/10 Renison processed approximately 590,000 tonnes (“t”) of tin ore at an average grade of 1.58% tin (“Sn”) and produced 6,266t of tin metal in concentrate. Ore production through 2009/10 has come from Renison underground and from the Mount Bischoff open cut; the underground ore averaged 1.7% Sn while Mount Bischoff ore averaged 1.3% Sn. It is projected that future production levels will ramp up to around 8,000t per annum (“tpa”) of contained tin, based predominantly on higher grade underground ore from Renison. In the June 2010 quarter the tin price averaged over A$20,000/t while cash operating costs averaged approximately A$12,500/t. In the September 2010 quarter tin prices increased to over US$25,000/t and BDA has signed contracts at over US$26,000/t.

The Rentails project is based on the retreatment of process tailings which have accumulated since the commencement of mining at Renison. The project is structured around the re-processing of approximately 19Mt of tin tailings with an average grade of 0.44% Sn and 0.21% Cu, stored in three tailings dams (A, B and C) at Renison. The contained tin within these dams is approximately 84,000t, one of the largest tin resources in Australia. BMT projects that the Rentails operation could produce a further 5,000tpa of tin over ten year mine life.

The Renison tenement holding comprises a Consolidated Mining Lease 12M/95 granted for 21 years from 1995 which covers the underground mine, all surface plant and infrastructure and tailings dams (Figure 2). The Mount Bischoff tenement holding comprises Retention Lease RL 78/88 and Mining Leases 12M/2006 and 2M/2008. BDA has not reviewed tenement or title status but BMT advises that all tenements are in good standing.

BDA has not undertaken an environmental performance or compliance audit as part of this review. BDA understands that an A$2.5 million (“M”) bond has been lodged with the Tasmanian authorities against rehabilitation obligations for future mine closure at Renison. Similarly, an A$0.7M surety has been lodged in respect of obligations at Mount Bischoff. Provided the projects are competently managed, and taking into account the long history of mining at Renison, BDA sees no reason why the projects as planned should not continue to be operated without significant environmental issues.

History

Tin mining has been carried out at or near Renison since alluvial tin was discovered in 1890. However, it was not until the Mount Lyell Mining and Railway Company acquired control of the leases in 1965 that large scale operations commenced. Renison was one of the first large scale trackless decline mines to be developed and at its peak was one of the largest underground tin mines in the world, processing around 850,000tpa and producing up to 8,500tpa of tin in concentrate.

— V-8 —

APPENDIX V TECHNICAL REPORT AND VALUATION REPORT ON THE ASSETS

==> picture [417 x 586] intentionally omitted <==

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

0 2
Kilometres
Metals X Limited Renison Tin Project
67 000 N
Mine Site Grid Area
44 000 E
Mine Grid North Grid North
----- End of picture text -----

Figure 2

BDA - 0114

MINE LEASE AND GEOLOGY

Behre Dolbear Australia Pty Ltd

— V-9 —

APPENDIX V TECHNICAL REPORT AND VALUATION REPORT ON THE ASSETS

Murchison United NL (“Murchison”) purchased the mine from RGC in 1998. A major resource evaluation programme was undertaken with support from the Tasmanian Government, including underground development and diamond drilling. Work commenced on defining the mineralisation potential at depth along the major mineralised structure, the Federal-Bassett Fault (Figure 3), targeting the north (Rendeeps), central (Area 4), and southern (Federal Deep) areas (Figure 4). In 2000/01 Murchison produced over 8,900t of tin in concentrate, with approximately 7,200t produced in 2001/02.

A rapid decline in the tin price during 2001 and 2002 resulted in operating losses. Capital expenditure was cut back and maintenance work was deferred. Two underground fatalities occurred in June 2001 and a further fatality occurred in April 2003. Operations were suspended in May 2003 and the project was placed in Administration in June 2003.

Bluestone Tin Limited (“Bluestone”) purchased the project in March 2004 and commenced redevelopment of the Renison mine, funded initially by private equity and then as a public company after listing on the Australian Stock Exchange in late August 2004.

The underground workings were flooded at the time of acquisition and the services, plant and infrastructure were either incapacitated or dilapidated. Underground development had been allowed to lag by the previous owner and available ore stocks were limited. Bluestone dewatered and refurbished the workings over a period of six months and commenced development into remnant and new areas. Bluestone also refurbished and modernised the plant and infrastructure to bring it to an operational standard. The plant was re-commissioned in February 2005, albeit at a reduced capacity dictated by the underground production which had to be progressively re-established. Bluestone spent approximately A$40M re-establishing and re-equipping the project.

The commissioning and ramp up period in 2005 proved difficult. Underground contract mining performance was below expectations, and operation of the relatively complex plant in which recirculating loads are high proved difficult at lower processing rates and variable ore feed; recoveries and concentrate production were below budget projections. While some of these issues were progressively resolved, other factors compounded the operating problems, in particular high unit costs. The concentrator has a high fixed-cost component resulting in high unit costs at low productivity rates. Bluestone planned to integrate production from the Mount Bischoff open pit to supplement Renison underground ore, but before this could be achieved significant falls in the tin price occurred, dropping some 30% below the point where decisions had been made to recommence operations. As a result, in early October 2005, Bluestone elected to suspend operations and place the mine on care and maintenance until the tin price recovered to a higher sustainable level.

In 2006 Bluestone merged with Metals Exploration Limited to form Metals X Limited or MLX. In June 2007, at a tin price of around US$14,000/t a decision was made to re-start operations, with production to be based on the mining of ores from both the Renison underground mine and from Mount Bischoff. The Renison plant was restarted in July 2008. In the 2008/09 financial year, production was 3,800t of contained tin from 469,000t of ore averaging 1.4% Sn at a tin recovery of 59%. In the last financial year (2009/10), 587,000t of ore assaying 1.6% Sn were processed, from which 6,266t of tin were produced at a tin recovery of around 68%.

Resource and Reserve Estimates

The latest resource and reserve estimates for Renison, Mount Bischoff and Rentails are summarised in Table 2.1. A more complete breakdown of resources and reserves by category is given in Section 8.

Table 2.1

Resource and Reserve Estimates

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Category Tonnage grade Contained Sn
Mt % Sn Tonnes
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Resources
Renison	7.3	1.77	128,400
Mount Bischoff	1.7	0.56	9,700
Rentails	19.0	0.44	83,700
Total	28.0	0.79	221,800
Reserves
Renison	1.7	1.81	30,200
Mount Bischoff	0.1	1.01	900
Rentails	18.1	0.44	79,700
Total	19.9	0.56	110,800

Note: Mt = million tonnes; the Rentails resource also contains 0.2% Cu; parts of the Renison resource contain 0.2-0.4% Cu

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APPENDIX V TECHNICAL REPORT AND VALUATION REPORT ON THE ASSETS

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Figure 3 MINE SITE GEOLOGY
Mine Grid North
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Figure 3

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Figure 4

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RENISON AND MT BISCHOFF SECTIONS

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APPENDIX V TECHNICAL REPORT AND VALUATION REPORT ON THE ASSETS

BDA considers that the geological data has been appropriately collected in accordance with JORC Code requirements and that the Renison, Mount Bischoff and Rentails resources and reserves have been appropriately estimated and reported in accordance with JORC standards and requirements.

The currently defined Renison reserves are sufficient for only three years of operation at current throughput rates, however with the increase in exploration expenditure at the mine in 2009/10 there was a 32% increase in reserves year-on-year after depletion as at 30 June 2010, illustrating the potential for reserve increases and conversion of resources to reserves provided sufficient development and exploration funds are available. Due to the steeply dipping nature of the ore lodes around the Federal-Bassett fault and the numerous separate, structurally-controlled lodes, reserves at Renison have commonly only been defined for two to three years ahead of mining. The current LOM plan is based on eight years of operation, drawing on Measured, Indicated and Inferred resources which are planned to be infill drilled and upgraded well before mining. In BDA’s opinion such a mine life should be achievable, with significant exploration potential remaining for further extensions to mine life. In particular BDA notes that recent underground drill intersections have indicated higher grade ore at depth, and new lodes have been identified representing downthrown stratiform mineralisation on the hangingwall of the Federal-Bassett fault. For valuation purposes under Chapter 18 Listing Rules of the Stock Exchange BDA has excluded the contribution of any Inferred resources.

Exploration Potential

The Renison mine has a long operational history. Most of the shallower orebodies have been mined out, however the structure at Renison is complex with over 40 orebodies defined to date. The principal potential for ongoing production and additional reserves lies at depth, and there is significant encouragement with some of the deep drill hole intersections showing relatively high grades. The Joint Venture is re-establishing decline access and developing drill positions to access and better define the principal target areas at depth along the Federal Bassett Fault structure. These target areas are shown in long section (Figure 4) and cross section (Figures 5 and 6) and include, from north to south, Rendeep North, Area 4 and Federal Deeps. Drilling in most of these areas is too wide spaced to define reserves; due to the nature of the fault-bound mineralisation, results are variable, but a number of recent intersections indicate significant widths and grades suggesting the presence of significant zones of mineable mineralisation. Although some of these zones will be at depths of 1,000m or more, ground conditions and ventilation conditions to date appear reasonable. While deep drilling has indicated the potential for higher grade mineralisation at depth, recent drilling up dip and on the peripheries of Area 4 has also intersected high grade mineralisation.

Most of the early mining at Renison was within relatively flat-lying near-surface dolomitic zones. Extensive small workings occur over the Renison lease and MLX considers that some of these have potential to be redeveloped as small open pit operations to supplement the underground feed.

The dolomitic horizons present near surface and as dislocated fault blocks within the Federal Bassett fault zone, have recently been intersected at depth on the downthrown hangingwall eastern side of the fault. These units provide a significant additional exploration target at depth.

Mining Operations

Renison

Ore production from underground at Renison re-commenced in July 2008. Current production is from previously developed stopes within the Lower Federal and King orebodies, new development and production from stoping blocks within the Mid and Lower Federal orebody and development of remnant blocks in the King orebody. There has also been production from the Zeehan 1,500 orebody above the areas which are currently being rehabilitated. The North Renison and Waratah declines in the northern section of the mine are being dewatered and rehabilitated to provide access to the Huon, Area 4, Zeehan and North Rendeeps areas. These areas as well as Bassett and other smaller remnants make up the sources of ore for the current LOM plan from the Renison mine.

The bulk of current mining is based on fault bound mineralisation, together with some stratabound mineralisation. Presently BMTJV is completing the mining of the upper levels of the Federal orebody with an Avoca style mining method and more recently a combination of cut and fill and long hole stoping. The future plan is to mine along strike with downhole Avoca mining within a block of two sublevels at 25m intervals and after filling, extract the section above the block with long hole upholes, leaving regular small pillars for ground stability. The floor of each second level is filled with a 2m cemented rock fill (“CRF”) ‘plug’ to form the crown pillar for the block below.

BMTJV has a ground control management programme for the operation and has recently set up continuous monitoring of seismicity to assist in tracking stress levels in respect of stope sequencing.

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Figure 5

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GENERALISED CROSS SECTION - 66 500 N

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CROSS SECTION - FEDERAL DEEPS RESOURCE
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The underground operation is carried out under contract by Macmahon Underground Pty Limited (“Macmahon”) with BMTJV providing the technical oversight and management of the operation. Macmahon replaced BMT operational staff in March 2010 and operates and maintains the BMTJVowned mining fleet including load-haul-dump (“LHD”) units, six wheel trucks (capacity 25t and 40t), jumbo drill rigs and other ancillary units. The underground operation has suffered in the past from low productivity and BMTJV has contracted Macmahon in an effort to improve underground production rates. Production is still below target but several parameters such as production drill hole stock levels are improving and indicate that production rates should increase towards the forecast levels.

The mine has three main exhaust rises and fans with total air flow of approximately 400 cubic metres per second (“m3/sec”). Ore is hauled via the decline from the stoping areas by truck to the ore pass and grizzly above the underground crushing station at 1630mRL, approximately 100-150m above the stoping operations. Ore is crushed and hoisted via the internal 590m shaft. From the skip tipping station ore is conveyed through an adit to the surface stockpiles at the plant. Water is pumped out of the mine in stages with pump stations located close to the mine infrastructure. Total pumping capacity of the mine is in excess of current pumping requirements which are approximately 120 litres per second (“L/s”).

Mount Bischoff

Mount Bischoff is an historic tin mine located 70km north of Renison. Its discovery in 1871 triggered a prospecting rush in Tasmania that resulted in the discovery of the state’s rich West Coast mining belt. Bluestone acquired the old open pit mining area and tenements in early 2005 with the intention of re-establishing the open pit and trucking the residual reserves to Renison for blending with the underground ore.

The Mount Bischoff project has provided incremental feed to supplement the Renison ore. The pit is now complete with some limited ore remaining on stockpiles which is planned to be trucked to Renison over the next one to two months. BMT is considering a further stage of drilling and exploration, including geophysical assessment, within the Mount Bischoff lease. There are numerous areas of historical workings that warrant systematic investigation, and in BDA’s opinion it is likely that additional tin resources will be defined.

Processing Operations

The Renison processing plant comprises a two stage crushing circuit, ore storage in a 900t capacity bin, grinding in a two stage rod mill/ball mill circuit in which the ball mill is close circuited by two banana screens, flotation of sulphides, gravity recovery of coarse cassiterite from the sulphide flotation tailing, desliming of material too fine for gravity processing, flotation of cassiterite from the deslimed fines, and sulphuric acid leaching of the combined gravity and tin flotation concentrates. Regrind stages minimise losses of composite cassiterite grains in the sulphide flotation and gravity circuits. Scavenging flotation stages in the gravity plant and on the tin flotation feed stream control the level of sulphide minerals in the gravity concentrate and the tin flotation feed. Centrifugal gravity separators upgrade the tin flotation concentrate prior to leaching. An Amdel onstream analysis system provides control assays on about fourteen critical streams in the plant.

The plant was originally commissioned in 1966 and has been modified extensively since that time. Plant feed rate averaged 77tph in 2010 compared with a budgeted level of 86tph. Plant utilisation in 2010 was 85.8% compared with a budget of 91.5%. About 45% of the plant downtime was due to shortages of ore. In its current configuration the plant capacity is estimated to be around 720,000tpa.

Tin recovery is dependent on the mineralogy of the ore and on the condition of the plant. Since recommissioning of the plant in 2008, recovery has improved from 59% in 2009 to 68% in 2010. Historically, tin recovery has peaked at around 72-74% in the 1980s when the plant was running at peak performance and the mineralogy was more favourable.

Life of Mine Plan

The Renison actual production for 2009 and 2010 financial years and forecast production for the LOM is summarised in Table 2.2. The forecasts are based on BMT’s current LOM plan. The schedule assumes that underground mining will achieve 660,000tpa this financial year and maintain this level for the LOM. No open pit production is assumed despite there being some potential within the Renison leases for open pittable resources.

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APPENDIX V TECHNICAL REPORT AND VALUATION REPORT ON THE ASSETS

Table 2.2 Renison Production Forecasts – Financial Years

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Category Unit 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Total
Actual Actual Forecast Forecast Forecast Forecast Forecast Forecast Forecast Forecast
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Category Unit 2009 2010 **Actual Actual **	2011 2012 2013 2014 2015 2016 2017 2018 Total Forecast Forecast Forecast Forecast Forecast Forecast Forecast Forecast
Mining Renison kt 283 391 Open Pits kt 218 198 Total kt 501 589 Processing Ore Milled kt 469 587 Grade % Sn 1.4 1.6 Recovery % Sn 59 68 Conc Prodn kt 7.08 11.33 Conc Grade % Sn 54.0 55.3 SaleableTin kt 3.82 6.27	660 660 660 656 660 660 659 241 4857 0 0 0 0 0 0 0 0 0 660 660 660 656 660 660 659 241 4857 693 660 660 656 660 660 659 241 4890 1.7 1.9 1.9 2.0 2.0 1.7 1.5 1.4 1.8 69 70 70 70 70 70 70 70 70 14.87 14.50 14.49 14.93 15.21 12.69 11.09 3.81 101.58 55.0 55.0 55.0 55.0 55.0 55.0 55.0 55.0 55.0 8.18 7.97 7.97 8.21 8.36 6.98 6.10 2.09 55.87

Note: “Conc Prodn” = tin concentrate production; “Conc Grade” = tin concentrate grade; from 2012 onwards BMTJV has discounted the total tin production by 10% to reflect a conservative approach to targeted throughput, grade and recovery for the LOM plan

The LOM plan is based predominantly on defined reserves for the period up to 2013; production thereafter draws on Measured and Indicated resources and, in the later years, Inferred resources, for which no detailed mine planning has been undertaken. BMTJV plans to carry out additional infill drilling and sampling to progressively upgrade this material from Inferred to an Indicated or Measured category, and thence into reserves, well prior to mining. In developing the LOM plan BMT has applied a factor of 0.9 to annual tin production from 2012 to reflect the fact that no detailed mine planning, mine recovery or mine dilution has been applied to these resources. BDA generally considers the approach reasonable for the purposes of LOM planning. Future production will be dependent on the confirmation of ongoing reserves, but in BDA’s opinion there are good prospects for extension and development of reserves in several areas, subject to a systematic drilling programme and ongoing mine development and dewatering. For valuation purposes under Chapter 18 of the Listing Rules, BDA has limited the mine life to 6.5 years, excluding any potential contribution from Inferred resources.

Achievement of the projected underground production rates will be dependent on development of a sufficient number of working faces, and on the productivity of the mining methods. Based on current production levels the targets are challenging, but provided ground conditions at depth remain reasonable BDA considers the longer term targets achievable; however, BDA considers it likely that the ramp up will be slower than forecast in the short term.

BMTJV’s projections for plant throughput from July 2010 onwards of around 660,000tpa require an average grinding circuit feed rate of 81.5tph to be maintained at a plant utilisation of 93%. Utilisation averaged 86% in 2010 compared with a budgeted 91.5%, although around 45% of the downtime was due to ore shortages. In 2010 plant feed rate averaged 77tph compared with a budget level of 86tph. BDA considers that the plant has the capacity to process ore at the projected annual throughput, probably by milling at an average throughput higher than 82tph to compensate for lower than planned plant availability. Some delay could occur in achieving the higher throughputs required while maintaining tin recovery. The productivity of the crushing plant may also be a risk to production because this plant requires a high availability to maintain the ore supply to the grinding circuit. Removal of clayey Mount Bischoff ore from the crusher feed blend will assist in achieving the crushing plant throughput targets but achievement of the 2011 target of 693,000t will be difficult. BDA considers that there is a significant risk of lower than planned mine production which will impact on milled ore tonnage.

Over the LOM, tin recovery of 70% is projected. Recovery improved from 59% in 2009 to 68% in 2010 and has averaged 67% during July and August 2010. BDA considers that a recovery level of 70% is probably close to the upper limit and that a range of between 67% and 70% on an annual basis is likely to be achievable, provided that plant technical supervision can be maintained at a reasonable level.

Rentails Project

The Rentails project involves the retreatment of approximately 18Mt of tailings at Renison in a dedicated tailings concentrator, with concentrate processed in a tin fumer; an additional tailings storage facility would also be required. In addition to the recovery of tin from the tailings dams, some streams from the existing concentrator may also be redirected to the fumer, improving recoveries from the future processing of ores from Renison or other potential sources.

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APPENDIX V TECHNICAL REPORT AND VALUATION REPORT ON THE ASSETS

Considerable testwork has been carried out on the re-processing of the tailings since the early 1980s. A Definitive Feasibility Study (“DFS”) into the project was completed by MLX in 2008. Various options have been considered and the preferred process involves concentrating the tailings and upgrading the concentrate by fuming, a simple smelting process that involves the addition of sulphur and coal to the low grade concentrate in a smelting vessel to produce a tin oxide fume product containing more than 65% Sn. It is also planned to produce a copper-rich sulphide concentrate averaging 19% Cu from the tailings retreatment process which would be directed to the fumer to supply its sulphur requirement, allowing production of a high grade copper matte for sale, generating by-product revenue.

The fuming process is considered to be relatively low risk as it is well established and has proved efficient at other similar style tin operations, in particular in China and Peru. The main process risk is considered to be the ability to consistently achieve acceptable tin recoveries to the low grade tin concentrate pre-fuming.

Significant laboratory and pilot scale testwork was completed in 2007-2009 as part of the DFS. The testwork was conducted on typical feed samples and on variability samples with differing characteristics in sulphide and tin grades; results demonstrated that recovery of tin to a low grade concentrate was generally repeatable.

The current Rentails flowsheet incorporates tailings mining and feed preparation, fine grinding, sulphide flotation incorporating copper flotation, classification and gravity separation, cassiterite flotation, and fuming.

The tailings will be reclaimed from the three existing dams using a combination of dredging and sluicing methods at a production rate of 2Mtpa. It is planned to extract approximately 18Mt at 0.44% Sn and 0.21% Cu from the 19Mt resource.

Reclaimed tails will be slurry pumped to shore facilities to screen debris from the slurry. The tailings will be fine ground to a particle size of 38µm to increase liberation of fine tin. The tailings will then be processed through copper flotation and sulphide flotation circuits. The copper flotation circuit is designed to produce a copper-rich sulphide material suitable for providing the required sulphur units to the tin fuming process. Tin recovery to copper concentrate and sulphide flotation tails is projected to be 92%.

Sulphide flotation tails will be classified and the +10μm stream will be processed through high gravity ultrafine (“UF”) Falcon units with the resultant concentrate being combined with the +10μm classification underflow for treatment in a sulphide scavenger circuit prior to the final cassiterite flotation stage.

Cassiterite flotation concentrate will be dewatered and combined with the copper concentrate as feed stock for the fumer. Local coal and lime rock will be added as fuel and fluxes to produce tin fume, copper matte and an inert slag. The fumer is projected to recover over 94% of the tin in the fumer feed and to produce a tin fume containing over 68% Sn.

Total circuit tin and copper recoveries are projected to be 56% and 49% respectively. The Rentails project will potentially produce approximately 47,000t of tin and 18,000t of copper at annualised rates of approximately 5,000tpa and 2,000tpa respectively over 10 years of production.

The current construction capital is estimated at A$213M ±15%.

2.3 Key Valuation Assumptions

Vitar has requested BDA to undertake a valuation of the BTMJV Tasmanian tin assets, based on long term metal prices and exchange rates. BDA has determined an appropriate set of base case parameters to determine the net present value (“NPV”) of the Renison project, and has then reviewed the outcome in terms of the sensitivity to adjustments in the base case parameters, thereby deriving a range of upside and downside valuations. For the Rentails project BDA has reviewed a number of valuation approaches, including discounted cash flow, past expenditure and yardstick methods. Mount Bischoff is currently on care and maintenance but has been a significant tin producer in the past and still retains a significant exploration potential. BDA has considered the value of the Mount Bischoff project in terms of its potential as a future source of ore supply to the Renison plant. In terms of Chapter 18 requirements of the Listing Rules BDA has limited the valuation to reserves and Measured and Indicated resources, excluding any potential contribution from Inferred resources.

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APPENDIX V TECHNICAL REPORT AND VALUATION REPORT ON THE ASSETS

BMTJV has advised that the average tin price received for the June 2010 quarter was A$20,230 per tonne. As of October 2010 tin is trading above US$26,000/t, three month tin is also above US$26,000/t and tin for 15 month delivery is trading at US$25,600/t. Tin fundamentals remain strong with the LME stock levels having declined by over 40% from April to September 2010. The current LME stock level is equivalent to approximately 14 days at current levels of demand. The replacement of lead solder by tin solder appears to have underwritten a long term strengthening in demand for the metal. The market is forecast to remain in deficit for the next two years with no new mines scheduled for development and continued reductions in production forecasts from the major producers in Indonesia, China and South America.

Given the signs of long-term strength in the tin market, BDA considers that a willing and knowledgeable buyer is likely to take a positive view of the long term tin price. However, BDA is not a commodities expert and for an expert view on future tin prices BDA has relied on an independent report prepared by ITRI Limited (formerly the International Tin Research Institute which was established in 1932 as an intergovernmental research organisation and was privatised in 1995). Mr Peter Kettle, Manager Statistics and Market Studies at ITRI, has over 30 years experience of analysing the tin market and has prepared a report (“The Outlook for Tin Prices, November 2010”) which considers various supply, demand, and cost scenarios. For the purpose of valuation, BDA has adopted ITRI’s central forecast which is based on tin prices rising to a peak of US$35,00040,000/t from 2013 to 2015 before falling to a long term average of approximately US$20,000/t from 2016 through 2020. Based on the current high prices for spot and 15 month delivery, and the forecast increases in demand leading to supply shortfalls, BDA considers the projections reasonable. However, BDA emphasises that there is no guarantee that prices will follow the ITRI projections, and that the valuations are highly sensitive to the metal price assumptions.

Given the strength of the Australian economy, BDA has adopted a long term A$:US$ exchange rate of 1.00. BDA has applied an Australian corporate tax rate of 30%.

For valuation purposes, a 10% discount rate has been used for the Renison and Mount Bischoff projects with a higher 12.5% rate applied to the Rentails project to reflect the higher degree of uncertainty. BDA has considered variations on the basic parameters for the upside and downside cases.

2.4 Valuation Summary

A summary of the asset valuations is shown in Table 2.3. The valuations are based on the metal prices, A$:US$ exchange rate, tax rates and discount rates noted above.

BDA has derived a valuation for the Renison, Mount Bischoff and Rentails tin assets in Tasmania based primarily on the net present value of the potential pre-debt, post-tax, discounted cash flows. The models are expressed in real terms. BDA has undertaken a sensitivity analysis as a basis for determining the high and low ranges. The base case (most likely) value and the high and low range values derived for the assets are shown in Table 2.3.

Table 2.3 Valuation Summary of BTMJV Tasmanian Tin Assets

Property	Low	Valuation (A$M) Most Likely	High	Comments
Renison Project	304.2	345.7	389.0	NPV method and sensitivities
Mount Bischoff Project	5.8	6.2	6.7	Based on potential future supply of ore to Renison
Rentails Project	68.3	90.2	112.8	Average of DCF and Yardstick methods
Total	378.2	442.1	508.5

BDA notes that the valuation results are sensitive to the tin price assumptions.

MLX has advised that at any point in time the value of tin in stocks in transit between the mine and buyer is approximately A$18M. BDA has not considered the value of stocks in its valuation other than in the context of maintaining working capital, as we have been valuing the projects per se and adjustments for stocks and creditors are typically accounted for in the details of the sales agreement.

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APPENDIX V TECHNICAL REPORT AND VALUATION REPORT ON THE ASSETS

3.0 VALUATION METHODOLOgY

3.1 Effective Date

The effective date for the valuation is 30 September 2010.

3.2 Standards and Procedures

This report has been prepared in keeping with the Valmin Code for the Technical Assessment and Valuation of Mineral Assets and Securities for Independent Expert Reports as adopted by the Australasian Institute of Mining and Metallurgy in 1995 and as amended and updated in 2005. Resource and reserve estimation procedures and categorisations have been reviewed in terms of the JORC Code, December 2004.

3.3 Valuation Principles

As a general principle, the fair market value of a property as stated in the Valmin Code (Definition 43) is the amount a willing buyer would pay a willing seller in an arms-length transaction, wherein each party acted knowledgeably, prudently and without compulsion. BDA has adopted the Valmin Code principles in carrying out this valuation. However, based on Chapter 18 of the Listing Rules requirements, BDA has not incorporated any value for the Inferred resources, to which, in other circumstances, BDA considers some value might be ascribed.

3.4 Valuation Methods

There is no single method of valuation which is appropriate for all situations. Rather, there are a variety of valuation methods, all of which have some merit and are more or less applicable depending on the circumstances. The following are appropriate items to be considered:

• discounted cash flow

• amount an alternative acquirer might be willing to offer

• the amount which could be distributed in an orderly realisation of assets

• the most recent quoted price of listed securities

• the current market price of the asset, securities or company.

The discounted cash flow or net present value method is generally regarded as the most appropriate primary valuation tool for operating mines or mining projects close to development. Valuing properties at an earlier stage of exploration where ore reserves, mining and processing methods, and capital and operating costs, are yet to be fully defined, involves the application of alternative methods. The methods generally applied to exploration properties are the related transaction or real estate method, the value indicated by alternative offers or by joint venture terms, and the past expenditure method. Rules of thumb or yardstick values based on certain industry ratios can be used for both mining and exploration properties. Under appropriate circumstances values indicated by stock market valuation should be taken into account as should any previous independent valuations of the property.

The valuation methods considered are briefly described below.

Net Present Value (NPV)

If a project is in operation, under development, or at a final feasibility study stage and reserves, mining and processing recoveries, and capital and operating costs are well defined, it is generally accepted that the net present value of the project cash flows is a primary component of any valuation study. This does not imply that the fair market value of the project necessarily is the NPV, but rather that the value should bear some defined relationship to the NPV.

If a project is at the feasibility study stage, additional weight has to be given to the risks related to uncertainties in costs and operational performance, risks related to the ability to achieve the necessary finance for the project and sometimes a lower degree of confidence in the reserves and recoveries. In an ongoing operation many of these items are relatively well defined.

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APPENDIX V TECHNICAL REPORT AND VALUATION REPORT ON THE ASSETS

The NPV provides a technical value as defined by the Valmin Code (Definition 36). The fair market value could be determined to be at a discount or a premium to the NPV due to other market or risk factors. BDA considers the NPV or discounted cash flow method is the most appropriate method for valuing the BMTJV Tasmanian tin assets as the Renison mine is in production and has a production history and production plan going forward.

The Rentails project is still at a feasibility study stage, and a number of the development parameters are subject to a significant level of uncertainty. However, due to the proximity to the Renison operation, a number of other parameters are reasonably well defined. Overall BDA considers a NPV approach, suitably qualified, is appropriate for valuing the Rentails project.

In certain circumstances, the NPV method can be applied to the valuation of exploration properties, where those properties are adjacent to an existing or planned mining operation, and there is a reasonable likelihood that mineralisation delineated within the exploration properties could provide a future source of feed to the existing plant. In purchasing such a property, a willing and knowledgeable buyer would be mindful of the opportunity of exploiting mineralisation which may otherwise not be viable and would pay a higher price where this potential was considered high. BDA has considered this approach in assessing a value for the future exploration potential of the Renison and Mount Bischoff leases by determining the NPV of the additional potential cash flows.

Alternative Valuation Methods

Related Transactions

Recent comparable transactions can be relevant to the valuation of projects and tenements. While it is acknowledged that it can be difficult to determine to what extent the properties and transactions are indeed comparable, unless the transactions involve the specific parties, projects or tenements under review, this method can provide a useful benchmark for valuation purposes. The timing of such transactions must be considered as there can be substantial change in value with time.

BDA has considered whether any comparable relevant transactions have taken place in recent years which can be used as a basis for estimation of value of the mining assets assessed herein.

Alternative Offers and Joint Venture Terms

If discussions have been held with other parties and offers have been made on the project or tenements under review, then these values are certainly relevant and worthy of consideration. Similarly, joint venture terms where one party pays to acquire an interest in a project, or spends exploration funds in order to earn an interest, provide an indication of value.

Rules of Thumb or Yardsticks

Certain industry ratios are commonly applied to gold mining projects to derive an approximate indication of value. The most commonly used ratios are dollars per ounce of gold in resources, dollars per ounce of gold in reserves, and dollars per ounce of annual production. The ratios used commonly cover a substantial range which is generally attributed to the ‘quality’ of the ounces in question. Low cost ounces are clearly worth more than high cost ounces. Where a project has substantial future potential not yet reflected in the quoted resources or reserves a ratio towards the high end of the range may be justified. Similar ratios in terms of contained tin are less commonly used and quoted but BDA has derived some relevant ratios and allowed the use of the Yardstick method.

Past Expenditure

Past expenditure, or the amount spent on exploration of a tenement is commonly used as a guide in determining the value of exploration tenements, and ‘deemed expenditure’ is frequently the basis of joint venture agreements. The assumption is that well directed exploration has added value to the property. This is not always the case and exploration can also downgrade a property and therefore a ‘prospectivity enhancement multiplier’ (“PEM”), which commonly ranges from 0.5-3.0, is applied to the effective expenditure. The selection of the appropriate multiplier is a matter of experience and

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APPENDIX V TECHNICAL REPORT AND VALUATION REPORT ON THE ASSETS

judgement. To eliminate some of the subjectivity with respect to this method, BDA applies a scale of PEM ranges as follows to the exploration expenditure:

• PEM 0.5-0.9 Previous exploration indicates the area has limited potential.

• PEM 1.0-1.4 The existing (historical and/or current) data consists of pre-drilling exploration and the results are sufficiently encouraging to warrant further exploration.

• PEM 1.5-1.9 The prospect contains one or more defined significant targets warranting additional exploration.

• PEM 2.0-2.4 The prospect has one or more targets with significant drill hole intersections.

• PEM 2.5-2.9 Exploration is well advanced and infill drilling is required to define a resource.

• PEM 3.0 A resource has been defined but a (recent) pre-feasibility study has not yet been completed.

MLX, BMT and BMTJV have provided records of past expenditure and BDA has considered whether past expenditure on the various tenements and projects provides a useful guide to value.

Prospectivity

Over-riding any mechanical or technical valuation method for exploration ground must be recognition of prospectivity and potential, which is the fundamental value in relation to exploration properties.

Market Valuation

On the fundamental definition of value, as being the amount a knowledgeable and willing buyer would pay a knowledgeable and willing seller in an arms-length transaction, it is clear that due consideration has to be given to market capitalisation. In the case of a one project company or a company with one major asset, the market capitalisation gives some guide to the value that the market places on that asset at that point in time, although certain sectors may trade at premiums or discounts to net assets, reflecting a view of future risk or earnings potential. Commonly however a company has several projects at various stages of development, together with a range of assets and liabilities, and in such cases it is difficult to define the value of individual projects in terms of the share price and market capitalisation.

BDA has considered whether the market capitalisation of MLX provides a useful guide to the value of the Tasmanian tin assets.

Other Expert Valuations

Where other independent experts or analysts have made recent valuations of the same or comparable properties these opinions clearly need to be reviewed and to be taken into consideration. We have inquired of BMTJV and MLX whether any other recent valuations of the company or its assets have been undertaken and have been advised that the only other recent assessments have been various brokers’ reports.

Special Circumstances

Special circumstances of relevance to mining projects or properties can have a significant impact on value and modify valuations which might otherwise apply. Examples could be:

• environmental risks – which can result in a project being subject to extensive opposition, delays and possibly refusal of development approvals

• indigenous peoples/land rights issues – projects in areas subject to claims from indigenous peoples can experience prolonged delays, extended negotiations or veto

• country issues – the location of a project can significantly impact on the cost of development and operating costs and has a major impact on perceived risk and sovereign risk

• technical – issues peculiar to an area or orebody such as geotechnical or hydrological conditions, or metallurgical difficulties could affect a project’s economics.

We have considered, and have inquired of BMTJV whether any such factors apply to the projects and prospects under review.

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APPENDIX V TECHNICAL REPORT AND VALUATION REPORT ON THE ASSETS

4.0 RISK SUMMARY

4.1 Project Risk Summary

When compared with many industrial and commercial operations, mining is a relatively high risk business. Each orebody is unique. The nature of the orebody, the occurrence and grade of the ore, and its behaviour during mining and processing can never be wholly predicted. Estimations of the tonnes, grade and overall metal content of a deposit are not precise calculations but are based on interpretation and on samples from drilling which, even at close drill hole spacing, remains a very small sample of the whole orebody. There is always a potential error in the projection of drill hole data when estimating the tonnes and grade of the surrounding rock. Even with close-spaced drilling, significant variations may occur.

Mining and processing throughputs and recoveries are estimates which, while based on past performance and testwork, may still not fully reflect future ores and future issues. Comprehensive metallurgical testwork can reduce the processing risks, but the questions of representivity and scaleup remain. Estimations of project capital and operating costs are rarely more accurate than ±10-15% and at a feasibility study stage several areas of the estimate may be ±30%. Mining project revenues are subject to variations in metal prices and exchange rates.

In reviewing BMT’s Tasmanian assets, BDA has considered areas where there is perceived technical risk to the operation, particularly where the risk component could materially impact the projected cashflows. The assessment is necessarily subjective and qualitative. Risk has been classified from low through to high. In Section 4.2 BDA has considered factors which may ameliorate some of these risks.

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Resources/Reserves	The geology of the Renison and Mount Bischoff deposits is reasonably well
Low/Medium Risk	defined and understood, and the geological data has been professionally
	collected and compiled. Core recoveries are generally good and logging,
	sampling and assaying procedures are in accordance with industry standards.
	Down hole survey data is compromised by the presence of pyrrhotite in the ore,
	however any deviations are likely to impact principally on detailed planning
	rather than overall resource estimation. Drill density is reasonable over the
	defined Measured and Indicated portions of the principal lodes, but the drill
	density at depth at Renison is variable and significant uncertainty remains
	in terms of the mineable tonnage and grade that can be recovered from the
	deeper systems. However, in BDA’s opinion there remains significant upside
	exploration potential.
	Overall, in BDA’s opinion, the geological data base forms an appropriate and
	reasonably reliable basis for resource and reserve estimation.
	The resource estimate has been undertaken with input from specialist
	consultants. AMC Consultants have independently reviewed and audited the
	data and resource estimate. The various deposits have been wire framed. The
	grade interpolation has been undertaken by Ordinary Kriging. The estimation
	methodology appears generally appropriate and the resource estimate is
	considered to provide a reasonable guide to the in situ mineralisation.
	Geotechnical and mine design factors have been incorporated in the estimation
	of mineable reserves. Allowances have been made for fill dilution, and for wall
	dilution and mining losses.
	It is planned to maintain a programme of infill drilling to continue to upgrade
	the degree of confidence in the estimates. Overall, the reserve is considered
	a reasonable guide to the mineable underground tonnes; ongoing extension to
	reserves is anticipated as more detailed infill drilling allows an upgrade of the
	resource categories.
Open Cut Mining	The mining operations at Mount Bischoff are completed. There is some
Low Risk	rehabilitation activity on site and remaining stockpiles are being transported to
	Renison plant ore stockpiles for processing. The Joint Venture has identified
	some areas of near surface mineralisation at Renison which may support shallow
	open pit extraction to supplement the underground ore feed.

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APPENDIX V TECHNICAL REPORT AND VALUATION REPORT ON THE ASSETS

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Underground Mining	Within the principal lodes, the mineralised zones appear relatively continuous;
Medium Risk	the underground stoping designs and schedules are considered appropriate to the
	orebody geometry. The mining fleet is suited to the application.
	Ground conditions within the Lower Federal orebody which lies within a fault
	zone and is intersected by a dyke, are difficult, but are appropriately controlled
	with the present ground support. The Joint Venture has a ground control
	management plan to handle changes in conditions.
	The planned production rate from the Lower Federal orebody is high for a
	relatively low tonnage per vertical metre deposit, and it has proved to be
	difficult to achieve targeted production rates from this orebody. A more
	productive mining method is planned in the lower levels of this orebody. After
	rehabilitation of the northern declines, two mining areas will be available and
	the percentage of production from open stoping with higher productivity will
	increase. Overall it is considered that the risk of production shortfall in the
	underground mine is medium.
	BDA considers there is a possibility that dilution may be more severe if ground
	conditions prove poorer than expected.
	The underground operation suffered in the past from lower than budgeted
	productivity rates and BMT contracted Macmahon largely to improve
	underground productivity. Production is still below target but Macmahon is
	attaining levels of key parameters such as drilled production blasthole stocks
	that would indicate production should increase from the current levels up to the
	forecast rates.
Processing	The plant is old, but reasonable availability was achieved in 2010 after allowing
Low/Medium Risk	for ore shortages; a structural audit was carried out which indicates that little
	expenditure is currently required for refurbishment work.
	The crushing plant is likely to provide the main impediment to throughput
	targets; high availability is required from the crushing plant for production
	targets to be achieved. Historically plant throughput has also been restricted by
	underground mine production.
	Tin recovery in 2010 has been within 3% of the projected LOM recovery of
	70%. Recent ore assessment testwork indicates satisfactory amenability but
	BDA considers, since recent ore discoveries have contained significant copper,
	and sometimes arsenic, that regular assessment work should be carried out.
	BDA considers that tin recoveries in the 67-70% range should continue to be
	achievable.
Services and Utilities	Power supply from the Tasmanian grid is considered low risk; adequate reserve
Low Risk	capacity is available in the event of breakdown or routine maintenance.
	Water supply is considered low risk in this relatively high rainfall area;
	however, long term monitoring of stream flows and rainfall should be
	maintained.
Infrastructure, Roads,	The site is well-situated, approximately two hours by road from the established
Transport	port of Burnie. Access to the site is good. Supplies are transported by road
Low Risk	from Burnie. A number of other mines are operational within the general area.
	Transport of product by road to Burnie and thence by sea freight in containers
	is considered relatively straightforward and low risk.
Tenement and Title	BMT holds appropriate Mining Leases overlying the Renison and Mount
Low Risk	Bischoff tin deposits and the plant and associated infrastructure at Renison.
	BDA has not conducted legal due diligence on the titles but has been advised by
	BMTJV that all material tenements are in good standing.

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APPENDIX V TECHNICAL REPORT AND VALUATION REPORT ON THE ASSETS

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Environmental Issues	Renison– managing on-site water flows and excess water discharge quality are
Low/Medium Risk	critical to maintaining downstream water quality, particularly as surplus process
	water is discharged direct from the TSF dams and plant site sedimentation
	ponds. Under current arrangements the TSF decant water appears to be
	successfully discharged within the statutory criteria under the Environmental
	Protection Notice (“EPN”).
	Based on the mitigation measures in place, BDA concludes that the risks of
	potential off-site water contamination via site run-off, excess TSF decant
	water discharge or tailings seepage are medium to low. Provided the project
	is competently managed, and taking into account the long history of mining at
	Renison, BDA sees no reason why the project as planned should not continue to
	operate without significant environmental issues.

Mount Bischoff – the main environmental risk relates to waste rock management, the potential for acid mine drainage, and the need to mitigate potential impacts. Appropriate encapsulation of potential acid forming (“PAF”) materials in the waste rock dumps and the management of on-site water flows are critical to maintaining downstream water quality. Based on mitigation measures and waste rock dump designs, the risks associated with the potential for off-site water contamination via site run-off or acid mine seepage are considered medium to low. Provided the project is competently managed, and taking into account the pre-existing acid mine drainage liability at Mount Bischoff, BDA sees no reason why the project now placed on ‘care and maintenance’ should not continue to be operated in future and be successfully closed and rehabilitated without significant environmental issues.

Production Schedule Underground production is mainly coming from the Lower Federal orebody Medium Risk and the planned production rates are still to be achieved. While other areas are becoming available there is still some uncertainty in the mine plans in relation to some of the new planned production areas. However, production risk should be progressively mitigated as the two declines are progressed and more production faces become available. While the supply of ore from the underground mine requires a ramp up from current levels, historically the mine has operated at this production rate and BDA considers the LOM plan should be achievable provided sufficient working faces are available. Overall the risk of mine production shortfalls is considered is medium.

BMTJV is generally achieving target production grades and the reconciliations of mine grade to reserves are positive; production grade is not considered a significant risk although the level of detailed planning in later years is limited. Plant throughput will become more dependent on underground mine output following cessation of ore supply from Mount Bischoff. Low crushing plant feed rate on wet ore may affect plant throughput, however, the concentrator has the capacity to mill the planned throughput of 660,000tpa projected from 2012 onwards. The budget of 693,000t planned for 2011 may be difficult to achieve and represents an 18% increase on 2010 throughput.

Tin recovery is dependent on ore amenability and plant efficiency. Historically, good recovery has been achieved from Renison ores; the projected recovery of 70% is achievable, though BDA considers there is some downside risk.

Capital Cost Capital expenditure proposed by BMTJV includes underground development and Low Risk sustaining capital for mining and processing plant and equipment. Allowance is also made for raising the TSF walls and for ongoing underground and surface exploration. Allocations appear reasonable; mine equipment rebuilds and upgrades are included in the contract rates going forward.

Operating Cost Operating costs have been estimated from first principles using established Low/Medium Risk factors and contracted costs and are considered to be reasonably reliable. BMTJV considers operating costs are largely fixed and economies will largely be sought through increased productivity, generating reductions in unit costs. BDA generally concurs but has modelled both fixed and variable components. A focus on cost control and continuous improvement is important. BDA considers that production shortfalls may occur relative to the targeted throughput and output, and that therefore projected unit costs may be harder to achieve.

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Rentails	The tailings resource is well established, based on production records and
Medium/High Risk	drilling. The mining method is relatively low cost and generally low risk.
	Processing will be assisted by production of a uniform feed to the new plant;
	while there may be some variation in grain size and grades, based on the period
	of processing, changes are expected to be relatively gradual, and a degree of
	blending will occur in the mining operation. The preferred processing route
	appears reasonable and appropriate. Although significant testwork has been
	undertaken, there remains some downside risk on recovery. The technical risk
	is considered medium. The latest estimates of capital costs and overall unit
	operating costs indicate that a reasonably high tin price is required for project
	viability. The economic risk is considered Medium/High. Nevertheless, Rentails
	remains a significant resource for the future.
Management	There have been a number of changes in some of the key management positions
Low/Medium Risk	particularly within the mine production and technical areas. The current
	management group, while still establishing credentials, appears experienced,
	capable and motivated. The re-introduction of an underground mining contractor
	has reduced the requirement for underground operations management which had
	been an issue in the past. Significant support is being provided by technical and
	senior management staff from the MLX Perth office, and this has been helpful
	in providing continuity and direction; this input is likely to diminish over time
	as site management takes over more of the technical and planning functions.
	Overall BDA considers that a competent management group has been assembled.

4.2 Risk Mitigation Factors

There are a number of factors which combine to reduce some of the risks. Principal amongst these are:

• The geological controls at both Renison and Mount Bischoff are reasonably well defined and understood. The structures at Renison are complex, and while this complicates resource definition, it also results in significant potential for increases in resources and reserves, provided adequate exploration funds are made available, and systematic drilling programmes are carried out, ideally from well-positioned hangingwall drives which are planned for 2010/11.

• Down dip drill intersections at Renison, while variable, have on balance indicated the potential for higher grade mineralisation at depth.

• There appears to be potential to outline additional shallow open pittable resources at Renison; even if the tonnages defined are not large, additional open pit material will help to maximise the mill throughput and reduce the pressure on underground production.

• Underground ground conditions at Renison in the decline and stoping areas appear generally good.

• BDA considers the stoping methods proposed are suited to the orebody geometry and the ground conditions experienced to date and forecast.

• Although the processing route is complex, the ore is well understood due to the long operating history at the mine.

• The recommissioning of the plant has been relatively successful, with throughput of 587,400t and tin production of 6,266t of tin in concentrate in 2009/10.

• The Mount Bischoff open cut mine redevelopment has been undertaken with minimal land disturbance and off-site impacts; mining activities have recently cessed and the site is being place on ‘care and maintenance’ pending further exploration to identify further resources.

• The Mount Bischoff Development Plan and Environmental Management Plan (“DPEMP”) studies have been carried out by specialist environmental consultants, including John Miedecke and Partners Pty Ltd, an acknowledged expert in the field, particularly with respect to waste rock dumps and acid mine drainage issues.

• Given the Renison mine’s long operating history, and the relatively well proven infrastructure and systems for handling site water quality issues, the site is well positioned to handle ongoing water management issues.

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APPENDIX V TECHNICAL REPORT AND VALUATION REPORT ON THE ASSETS

• Inspections of the Renison TSFs are being carried out by specialist geotechnical engineering consultant GHD Geotechnics, an acknowledged local expert in the field. Recognition of the potential impacts associated with tailings Acid Mine Drainage (“AMD”) and the need for a design strategy to mitigate these potential impacts, including appropriate polishing ponds and TSF closure/capping designs to minimise longer term impacts and stability issues, significantly reduces the risk of pollution resulting from stored tailings in this relatively high rainfall region.

• The current management team appears competent and focused on the key issues to improve mine productivity.

4.3 Sensitivity Analyses

Reserve tonnes and grade, mill throughput, metallurgical recoveries, metal output, capital costs, operating costs and ramp-up are all estimates, and in practice will be subject to variations compared with the budget projections and financial model. BDA has considered the potential impact of such variations in assessing a range of values for the projects by way of sensitivity studies. BDA has commented in the report on sensitivity parameters where appropriate. These suggestions are summarised below.

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Head Grade	BDA considers that the mining recovery and dilution assumptions are
	reasonable, although it is noted that no dilution has been applied to the
	resource grade in the later years of the LOM, rather a 10% reduction
	has been applied to tin output to incorporate a range of mine planning
	features. There are indications of some high grades in some of the areas
	being drilled. Grade estimates are always subject to some variations.
	BDA has applied a ±10% sensitivity to the grade estimate for modelling
	purposes.
Ore Tonnage	As the Renison reserve estimate typically only covers the next 2-3 years
	of production, the LOM plan has commonly been based on resources,
	both Measured, Indicated and Inferred, on which detailed mine planning
	has not been undertaken or where more detailed drilling is required.
	Typically these areas are drilled and detailed planning undertaken
	well before mining, but the inclusion of resource material, particularly
	Inferred resources in the later years of the mine plan does increase the
	risk. Nevertheless, BDA considers that in the long term, provided a
	systematic and ongoing exploration programme is instituted, the current
	projected ore tonnages could be conservative. BDA has applied a ±10%
	sensitivity to the LOM ore tonnage for modelling purposes.
Metallurgical Recovery	Recovery is projected to increase to 70%; testwork results indicate that
	on lower Federal ore this level is achievable but recoveries in 2010
	averaged 68%. BDA has considered the impact of a ±3% variability in
	recovery.
Mine Production	The long term underground production rate is projected at 660,000tpa.
	As of July/August 2010, approximately 75% of this target rate had
	been achieved. BDA has tested the impact of a slower ramp up in mine
	production through 2011 and 2012.
Capital Costs	The re-commissioning capital expenditure programme is largely
	complete, except for the ongoing mine development, which represents
	the major component of remaining capital. Allowances have been made
	for ongoing sustaining capital. BDA has applied a ±10% sensitivity to
	the ongoing capital estimates for modelling purposes.
Operating Costs	BDA considers the operating cost estimates to be generally reasonable.
	BDA has tested the impact of a ±10% variation in operating costs as a
	sensitivity for valuation purposes.

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APPENDIX V TECHNICAL REPORT AND VALUATION REPORT ON THE ASSETS

5.0 SOURCES OF INFORMATION

BDA has undertaken site visits to the Renison Mine and associated projects in Tasmania. Geological, mining, processing and engineering data were reviewed with MLX technical and management staff.

The principal reports and documents reviewed are listed below:

Public Information

• MLX Annual Report 2009

• MLX Quarterly Reports 2009-2010

• MLX Stock Exchange and Press Announcements 2009-2010

Mount Bischoff Project

• Mount Bischoff Mine Waste Management Plan – MLX November 2007

• Mount Bischoff Mine Water Neutralisation Plan – Aquatic Science, John Miedecke & Partners, Dec 2007

• Mount Bischoff Amended Planning Permit DA204/2006-A – Waratah Wynyard Council, March 2009

• Mount Bischoff Mine Development Plan and Environmental Management Plan Supplement (DPEMP) – John Miedecke & Partners, May 2007

• Memo Initial Exploration Programme – MLX, September 2008

• Memo Mount Bischoff Pit Design – MLX, April 2009

• MLX Tin Division Annual Mineral Resource Commentary – MLX, May 2009

Renison Project

• Environment Protection Notice (7092/1) – Department of Tourism Arts and the Environment, July 2007

• Environment Protection Notice (7585/1) – Dept of Environment, Parks, Heritage and Arts, March 2008

• Renison Mine Environmental Management Plan (EMP) 2009 – Bluestone Mines Tasmania

• Renison Seismic System Design – Lower Federal Orebody, Coffey Mining Pty Ltd, July 2009

• Renison Seismic System Design, Lower Federal Orebody – Coffey Mining Pty Ltd, July 2009

• Ore Assessments of BHG, DAL, RZ2 and RZ3 Ore Types for Bluestone Ltd, Burnie Research Laboratory, October 2009

• Environment Protection Notice (7929/1) – Environment Protection Authority, December 2009

• Underground Mining Contract, Renison Tin Mine – BMT/MLX, March 2010

• Bluestone Mines Tasmania JV Budget 2010/11 – BMTJV, June 2010

• Annual Mineral Resources Commentary, MLX Tin Division, June 2010

• Bluestone Mines Tasmania JV Pty Ltd, Business Reports/Monthly Reports – BMT, June 2009, December 2009, January to July 2010

• Mount Bischoff Mine Care and Maintenance Plan – Bluestone Mines Tasmania JV, July 2010

• Renison Mine C Dam Raise to RL2194.5m Certificate of Practical Completion – GHD, July 2010

• Renison Mine Organisation Chart – BMT, September 2010

• Tasmanian Tin Operations – MLX Powerpoint Presentation, September 2010

• Life of Mine Cost and Production Spreadsheets (including Renison Going Concern LOM Plan) – BMT/MLX, September 2010

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APPENDIX V TECHNICAL REPORT AND VALUATION REPORT ON THE ASSETS

Rentails Project

• Renison Tailings Retreatment – RGC Renison, February 1990

• Tailings Re-treatment Scoping Study – Bechtel Mining and Metals, October 2000

• Ausmelt Technology for Fuming Renison Tailings – Ausmelt, December 2004

• Rentails Resource Report – MLX, February 2009

• Rentails DFS Summary Excel Spreadsheet – BMT, June 2009

general Data

• Australasian Code for Reporting of Identified Mineral Resources and Ore Reserves – Report of the Joint Committee of the Australasian Institute of Mining and Metallurgy, Australian Institute of Geoscientists and Minerals Council of Australia – December 2004

• Australasian Code for the Technical Assessment and Valuation of Mineral and Petroleum Assets and Securities for Independent Expert Reports – The Valmin Code – Report of the Joint Committee of the Australasian Institute of Mining and Metallurgy, Australian Institute of Geoscientists and Minerals Council of Australia – 2005

• Hong Kong Stock Exchange – Rules Governing the Listing of Securities on the Stock Exchange of Hong Kong Limited, Chapter 18, Mineral Companies – Disclosure Requirements and Continuing Obligations for Mineral Companies. – June 2010

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APPENDIX V TECHNICAL REPORT AND VALUATION REPORT ON THE ASSETS

6.0 OVERVIEw

BDA personnel conducted a site inspection of the BMTJV Tasmanian tin projects in September 2010. The operations of the Renison underground mine and rehabilitation activities at Mount Bischoff were reviewed, together with the associated processing plant, infrastructure and tailings disposal facilities and environmental practices and procedures.

Location, Access and Infrastructure

The Renison tin project is located adjacent to the sealed Murchison Highway, 140km from Burnie on the north coast, and 18km from Zeehan to the south. Other mining operations in the vicinity are at Rosebery, about 10km to the northeast, and at Queenstown, about 55km to the southeast. The Tasmanian state capital, Hobart, lies about 320km to the southeast. The Renison project is situated approximately 200m above sea level, set in rugged terrain with adjacent mountains rising to above 1,000m.

TasRail’s Emu Bay Railway passes adjacent to the mine, and connects Zeehan with Burnie where export shipping facilities are established. However, Renison does not use the railway for transport of its concentrates. The Renison tin concentrates are transported from the mine by road in dedicated 2t steel bins. In Burnie the concentrate is containerised prior to shipment to southeast Asian smelters in Malaysia and Thailand.

BMT has a 100-person accommodation village in Zeehan where the bulk of the workforce resides during their on-site shifts. Many of the workers and staff live in other centres on the north and west coast and return to these centres at weekends or during their shift breaks.

Ownership, Tenements and Environment

The Renison mine is located within the 4,662 hectare (“ha”) Consolidated Mining Lease 12M/95, which was granted for a period of 21 years from 1 August 1995. Bluestone purchased the property in March 2004 and the lease was transferred to BMT on 17 April 2004. Mining Lease 12M/95 is currently jointly held by BMT and YT Parksong Australia. The tenement conditions preclude mining within 15m of surface beneath the Murchison Highway and privately owned land, or within 30m of surface beneath TasRail’s Emu Bay Railway. The Mount Bischoff tenement holding comprises a granted retention lease RL7/88, and Mining Leases 12M/2006 and 2M/2008.

BDA has not conducted legal due diligence on the tenements or titles but BMT advises that the tenements are in good standing.

BDA has not conducted an environmental audit of the projects, but has reviewed those environmental issues which potentially may pose a risk to the project.

BDA is advised by BMTJV that a bond of A$2.5M has been lodged to guarantee performance against rehabilitation obligations at mine closure at Renison; similarly an A$0.7M surety has been lodged in respect of obligations at Mount Bischoff. The bonds are subject to review from time to time and may be increased or decreased depending upon the extent of disturbance and success of rehabilitation.

BDA has reviewed those environmental aspects which are considered a material part of the project and which may have significant implications for project feasibility, costs and timing. The main environmental risk associated with operating the Renison project relates to water management and the need to mitigate potential impacts arising from water pollution. The management of on-site water flows and excess decant water discharges are critical to maintaining downstream water quality, particularly as surplus process water is discharged from the TSFs and plant site sedimentation ponds. Based on current practices and monitoring data, excess decant water is generally being successfully discharged within the statutory criteria under the EPN.

The main environmental risk associated with operating the Mount Bischoff project relates to waste rock management and the potential for acid mine drainage and the need to mitigate potential impacts arising from acid mine drainage. The appropriate encapsulation of potential acid forming materials in the waste rock dumps and the management of on-site water flows are critical to maintaining downstream water quality.

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APPENDIX V TECHNICAL REPORT AND VALUATION REPORT ON THE ASSETS

Mining recently ceased at Mount Bischoff in August 2010 as planned, as the planned mining of open pit reserves had been completed. Remaining stockpiles are being trucked to Renison and the site is being placed on care and maintenance. The care and maintenance plan has been implemented which is in accordance with EPA Tasmania guidelines.

Background – Renison

Tin mining has been carried out at or near Renison since alluvial tin was discovered in 1890. However, it was not until the Mount Lyell Mining and Railway Company acquired control of the leases in 1965 that large scale operations commenced. Renison was one of the first large scale trackless decline mines to be developed and at its peak was one of the largest underground tin mines in the world, processing around 850,000tpa of ore and producing from 6,000-8,000tpa of tin in concentrate.

Murchison United NL (“Murchison”) purchased the mine from RGC in 1998. A major resource evaluation programme was undertaken with support from the Tasmanian Government, including underground development and diamond drilling. Work commenced on defining the mineralisation potential at depth in the Rendeep orebodies, in Area 4 and the Federal Deeps areas (Figure 4). Scoping studies also commenced on retreatment of the large tailings resource which had accumulated from over 40 years of operations.

A rapid decline in the tin price during 2001 and 2002 resulted in operating losses. Capital expenditure was cut back and maintenance work was deferred. Two underground fatalities occurred in June 2001 with a further fatality in April 2003. Operations were suspended in May 2003 and the project was placed in Administration in June 2003.

Bluestone purchased the project in March 2004 and redevelopment of Renison was commenced. Bluestone dewatered and refurbished the workings over a period of six months and refurbished and modernised the plant and infrastructure. The plant was re-commissioned in February 2005. Bluestone planned to integrate production from the Mount Bischoff open pit to supplement Renison underground ore, but before this could be achieved significant falls in the tin price occurred, dropping some 30% below the point where the decision had been made to recommence operations. As a result, in early October 2005, Bluestone suspended operations and placed the mine on care and maintenance. Bluestone merged with Metals Exploration in late 2006 to form MLX. In June 2007 a decision was made to re-start operations, with production planned to commence in mid-2008 based on the mining of ores from both the Renison underground mine and from Mount Bischoff.

The Renison plant was restarted in July 2008 and by October throughput had ramped up to about 40,000 tonnes per month (“tpm”) and has attained around 50,000tpm over the last year. In the 2009 financial year, production was 3,800t of contained tin from 469,000t of ore averaging 1.4% Sn at a tin recovery of 59%. In the last financial year ending in June 2010, 587,000t of ore assaying 1.6% Sn were processed, from which approximately 6,250t of tin were produced at a tin recovery of around 68%.

In March 2010 MLX announced the completion of the sale of a 50% interest in the Tasmania tin assets for A$50M and the formation of a joint venture between its 100% owned subsidiary BMT and YT Parksong Australia.

The current LOM plan is based on eight years of operation. The current defined Renison reserves are sufficient for only 2-3 years operation at the proposed throughput rate of around 660,000tpa, but the Inferred resources on which the later years of the LOM plan are based are planned to be drilled and upgraded well before mining. In BDA’s opinion, an eight year mine life should be achievable, with significant exploration potential remaining for further extensions.

Background – Mount Bischoff

The historic Mount Bischoff mine is located at Waratah, approximately 70km north of Renison. This mine was the world’s largest tin producer from 1875 to 1905, producing over 2,000tpa of contained metal. The open pit and underground workings closed in 1947. BMTJV owns the retention licence over the property. The open pit was redeveloped in 2008, with the ore mined being stockpiled and then trucked to the Renison plant for processing. In the last two years approximately 15-20,000tpm of Mount Bischoff ore has been blended with the Renison ore and processed through the Renison tin concentrator.

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APPENDIX V TECHNICAL REPORT AND VALUATION REPORT ON THE ASSETS

The predominant mineralisation type at Mount Bischoff, a highly sulphidic skarn, is similar to Renison ore; the higher sulphide content provides some added efficiencies in the flotation and gravity circuits, but the high moisture content and clayey nature of the ore presents some difficulties through the crushing circuit. Blending the open pit ore with the Renison underground ore has provided incremental feed to the plant, mitigating the high fixed costs of the Renison operation and reducing overall unit costs.

While the current open pit is now complete, trucking stockpiled ore is continuing. It is planned to undertake systematic drill evaluation of a number of other areas of old workings on the Mount Bischoff lease, where minimal recent exploration has been carried out, but where from surface mapping and previous mining there is clear evidence of tin mineralisation. Planned exploration work includes geophysical surveys and drilling to determine whether further mineable reserves, either open pit or underground can be established, with a view to re-commencing the operation in the future if exploration proves successful.

Background – Rentails

The Rentails project is structured around the re-processing of approximately 18Mt of tin tailings with an average grade of 0.44% Sn, stored in three tailings dams (A, B and C) at Renison. The contained tin within these dams totals approximately 81,000t, one of the largest tin resources in Australia. Bluestone reviewed the potential re-treatment of the tailings on acquisition of the Renison operation in 2004, but considered that higher tin prices would be required to make the project viable. At current prices and future projected prices the project could be of significance. Retreatment of the tailings material has been contemplated since the first two dams, referred to as A and B, were decommissioned in 1980 and a considerable amount of testwork has been completed since that time. Based on this testwork, the preferred processing option is to produce a low grade concentrate with acceptable recoveries using ultra-fine gravity technology and conventional oxide flotation, and to fume this product in a purpose-built tin fumer to produce a saleable tin oxide (“SnO 2”) product.

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APPENDIX V TECHNICAL REPORT AND VALUATION REPORT ON THE ASSETS

7.0 gEOLOgY AND MINERALISATION

7.1 geology and Structure

The Renison and Mount Bischoff deposits occur within Late Proterozoic/Cambrian sedimentary and volcaniclastic rocks of the Dundas Trough, part of the Tasman Orogenic Zone of Western Tasmania. The Renison ‘Mine Sequence’ comprises three major carbonate horizons (Dolomites 1, 2 and 3) at the contact between the largely sedimentary Late Precambrian Success Creek Formation and the sedimentary-volcanic Early Cambrian Crimson Creek Formation (Figures 2 and 3). This sequence was folded into a southeast plunging anticline during the Devonian Tabberabberan Orogeny.

Forceful emplacement of a granitic ridge associated with the Devonian Pine Hill Granite resulted in complex deformation and faulting of the Mine Sequence. The Federal-Bassett Fault, a northwestsoutheast striking normal fault dipping at 70° to the northeast, formed on the northeast limb of the anticline and, together with a complex fault sequence in the footwall of the fault, provided the major focus for ascending tin/sulphide-bearing hydrothermal fluids (Figure 5 and 6).

The surface elevation at Renison is around 2250RL. The granite intrusion below the Federal Deeps area in the south of the mine is projected at around 1250mRL. The contact appears to plunge to the north with deep drilling around Area 4 and Rendeeps to the north extending to over 1200m depth (Figure 4).

7.2 Mineralisation and Exploration

Renison Mineralisation

Three main styles of mineralisation are recognised at Renison comprising stratabound carbonate replacement, stratafault mineralisation and fault mineralisation. Stratabound mineralisation associated with flat-lying dolomitic horizons within the Mine Sequence at the contact between the Success Creek and Crimson Creek Formations and formed by the replacement of dolomite horizons by massive to semi-massive cassiterite-bearing pyrrhotite was historically the most significant ore source at Renison. This was the principal ore type mined during the boom years of the operation in the 1970s and 1980s. The stratabound beds dip shallowly to the east near surface, but are cut off and substantially down-faulted along the Federal-Bassett Fault (Figure 5).

The bulk of these near-surface stratabound zones are now mined out and current production is focussed on fault and stratafault mineralisation, where the Federal-Bassett Fault itself is mineralised or where blocks of dolomitic and non-dolomitic mine sequence stratabound mineralisation have been preserved, often at steeply dipping angles within sub-parallel faults, splays and areas of complex faulting. This structurally complex mineralisation type is well developed in the ‘Rendeep’ area (Figure 4), the discovery of which in 1990 resulted in the decision to develop a major hoisting shaft.

Fault mineralisation represents a major component of current underground production from the Federal area and comprises areas where the fault zone itself is mineralised and is wide enough to provide an economic target.

Recent drilling at depth has identified downthrown blocks of the stratabound dolomitic horizons on the hangingwall of the Federal-Bassett Fault, providing additional target areas for mineable mineralisation.

The structural complexity of the ore types is an important characteristic of the Renison deposit, as it impacts both on the mining of the deposits and the future potential. Over 40 separate orebodies have been defined at Renison to date. The complexity of the structures controlling the mineralisation results in some significant remaining exploration potential, principally within the Federal Bassett Fault zone at depth (Federal Deeps), within down-faulted stratafault blocks (Rendeep North and Area 4) and also along strike (South Bassett).

The surface elevation at Renison is around 2250RL. The granite intrusion below the Federal Deeps area in the south of the mine is projected at around 1250mRL. The contact appears to plunge to the north with deep drilling around Area 4 and Rendeeps to the north extending to over 1200m depth (Figure 4). Wide spaced drilling at depth has intersected some significant grades, including 5m at 4.8% Sn and 10m at 3.4% Sn. While these are intersected thicknesses and are offset by lower grade intersections, nevertheless there is a suggestion of some potential for relatively high grade mineralisation above the granite contact. Recent drilling of extensions to Area 4 mineralisation has also intersected high grade zones with intersections of 14m at 8.1% Sn and 14.3m at 4.8% Sn reported; such grades, if confirmed over a significant strike and dip, raise the potential for a material increase in the average mined grade in the future.

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APPENDIX V TECHNICAL REPORT AND VALUATION REPORT ON THE ASSETS

The economic mineralisation at Renison is fundamentally cassiterite-bearing pyrrhotite, but the mineralogical characteristics vary from one deposit and ore-type to another, and with depth. These characteristics can impact on metallurgical performance. The sulphide content of stratabound mineralisation (principally pyrrhotite) decreases with depth along the Federal-Bassett Fault. Stratabound mineralisation in the Rendeep area tends to have coarser cassiterite but more talc than similar mineralisation at higher levels. Fault mineralisation generally contains less pyrrhotite than the stratabound mineralisation. It contains significant quartz plus base metal sulphides, arsenopyrite, bismuth, fluorite, tourmaline and minor, though in places metallurgically important, stannite (coppertin sulphide). Traditionally, the Federal mineralisation has been the least metallurgically amenable ore type at Renison due to its hardness, relatively fine cassiterite and more complex mineralogy. However there are indications that the metallurgical amenability improves at depth.

In some areas copper grades appear to increase with depth and BMTJV plans to evaluate the potential to produce a co-product copper concentrate.

Renison Exploration

Principal exploration and infill drilling targets include Federal Deeps below 1400RL, Area 4, Rendeep North, and North and South Bassett (Figure 4). Drilling in the Dundas, King and Mawsons areas is also extending the potential mineable resources. Narrow but high grade areas are being drilled in the Envelope area where the potential for Alimak mining is being considered. The depth and location of most of these targets requires underground drilling, requiring investment in suitably located drill drives followed by systematic fan drilling.

Although the mine has a long operating history, in BDA’s opinion significant exploration potential remains, and the occurrence of high grade intersections within the Federal Fault zone at depth is encouraging.

There is also largely unexplored potential for greisen-style mineralisation along the granite contact (Figure 6). Deep surface drilling has intersected low grade tin mineralisation adjacent to and within the granite at depths of up to 1,200m. A programme of deep drilling is planned to explore the mineralisation potential of the granite contact zone.

The downthrown dolomitic horizons on the east of the Federal Bassett fault provide a further exploration target. These were the major producing horizons near surface and potentially comparable mineralised horizons have been intersected on the hangingwall side of the fault.

The Argent Fault to the west provides a mirror image to the Federal Bassett Fault but there has been little exploration to date of the mineralisation potential of this structure.

The current mine workings occupy a relatively small area of the lease. BMTJV considers there remains potential within the Renison lease for small, but material, near-surface resources that could be mined by open pit. The Dalcoath and Sligo areas represent two such prospects, and while detailed drilling is still to be completed, BMTJV is confident that a small open pit resource could be economically mined and supplement the underground feed to the plant. It is planned to undertake reverse circulation (“RC”) drilling programmes on these and other surface prospects to confirm the mineable potential.

Mount Bischoff Mineralisation and Exploration

Mount Bischoff is an historic tin mine located 70km north of Renison. Its discovery in 1871 triggered a prospecting rush in Tasmania that resulted in the discovery of the state’s rich West Coast mining belt. Bluestone acquired the old open pit mining area and tenements in early 2005 with the intention of re-establishing the open pit and trucking the residual reserves to Renison for blending with the underground ore.

The Mount Bischoff mineralisation is comparable to Renison and occurs within Late Proterozoic and Early Cambrian sedimentary and volcaniclastic rocks of the Dundas Trough. Cassiterite-pyrrhotite mineralisation is hosted in shallow-dipping dolomite horizons and is associated with the intrusion of the Devonian Meredith Granite and porphyry intrusions. Faulting has provided channel ways for hydrothermal mineralising fluids which have resulted in tin-rich sulphide replacement of the dolomites. The principal mineralisation occurs as high-sulphide skarns associated with the main dolomite unit and to a lesser extent, low sulphidation types in the altered porphyry dykes. The dolomitic ore types form the bulk of the material trucked to Renison. The lower grade porphyry mineralisation forms a significant resource if it can be trucked and processed economically.

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APPENDIX V TECHNICAL REPORT AND VALUATION REPORT ON THE ASSETS

The Mount Bischoff project has provided incremental feed to supplement the Renison ore. The pit is now complete and ore remaining on stockpiles is being trucked to Renison. BMTJV is planning a further stage of drilling and exploration, including geophysical assessment, within the Mount Bischoff lease. There are numerous areas of historical workings, most of which have not been subject to recent, systematic exploration. Areas such as Brown Face, Stanhope, Bischoff Extended, Slaughter Yard and Summit Face host significant old workings and warrant detailed mapping and follow-up drilling. BMTJV considers it likely that further economic resources can be defined.

Conclusions

The geology, mineralisation and controls at Renison and Mount Bischoff are reasonably well defined and understood. However, the structure at Renison at depth, is complex, and given the steep dip of the Federal Bassett fault, can only be successfully defined by ongoing systematic drilling from suitable underground sites. BDA considers there are good prospects to define significant additional mineralisation at depth; from intersections to date, there are some indication that the average grade also increases at depth.

The lodes at depth, being associated with the fault zone and with disrupted faulting blocks, may be less continuous and less productive than the historical flat-lying stratiform lodes; it will be important therefore to develop sufficient working areas to provide the target tonnages, particularly as the overall depth and haulage distances increase.

There are also considered to be reasonable prospects of outlining additional near-surface mineralisation at both Renison and Mount Bischoff. While the tonnages and grades may not be high, this material forms a useful supplement to the Renison underground mill feed.

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APPENDIX V TECHNICAL REPORT AND VALUATION REPORT ON THE ASSETS

8.0 RESOURCE AND RESERVE ESTIMATION

8.1 geological Data Collection

Geological data at Renison has been systematically collected and appears to be of a high quality. The resource database at Renison is extensive, comprising over 3,000 underground drill holes and over 1,500 surface drill holes together with geological mapping and sampling of over 80km of underground workings. Core recoveries are good and the core log data has been digitally transferred to the resource database. Sampling has generally been at 1m intervals, but is dictated by geological boundaries. Face chip samples are collected from all accessible in-ore development faces, with the sampling dictated by geological boundaries.

Sample preparation and assaying is conducted at the mine assay laboratory. Samples are analysed for tin, sulphur, arsenic, copper, zinc, tungsten, iron and magnesium oxide by XRF and for silver, bismuth, soluble tin, and lead by AAS. Check assaying relies predominantly on routine internal checks and standards.

Density measurements are undertaken on drill core using the weight-in-air/weight-in-water technique on unsealed core, with results discounted by 3-5% to allow for porosity. Values also take into account results from measurements conducted during metallurgical testwork. Densities can be highly variable from orebody to orebody depending on the pyrrhotite content, and range from 2.9 to 4.2, but typically average 3.2-3.6. A bulk density of 2.8 is used for waste dilution.

8.2 Resource and Reserve Estimates – Renison Mine

A summary of the resource and reserve estimates for Renison as at June 2010 is shown in Table 8.1.

Table 8.1 Renison Resource and Reserve Estimates – June 2010

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Category Tonnage grade Contained Sn
Tonnes % Sn Tonnes
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Resources
Measured	1,023,000	2.12	21,600
Indicated	3,183,000	1.68	50,200
Inferred	3,047,000	1.75	53,400
Total	7,253,000	1.77	128,400
Reserves
Proved	444,000	1.71	7,600
Probable	1,220,000	1.85	22,600
Total	1,664,000	1.81	30,200

Note: resource cut off 0.7% Sn; reserve cut off 0.8% Sn

The detailed geological interpretation of the Renison orebodies for resource estimation purposes is based on geological logging of drill core and detailed mapping of underground workings. Interpretation is conducted on cross sections and cross checked on level plans. Sections and plans are updated as new holes are drilled and new exposures provided underground.

There is a high level of geological control based on mineralisation boundaries comprising faults, lithological units and stratigraphic footwalls and hangingwalls. The interpretations are digitised and then wireframed. Data to be used in the resource estimation process, usually drill holes and, in some cases, face sample information, are identified and tagged according to the orebody and mining block. Samples are composited to 1m intervals (or less where necessary to honour geological boundaries). A minimum mining width of 3m is applied, reducing to 2m at the margins of the orebodies.

The mineralised zone is filled with blocks in two or three dimensions depending on the orebody. Variable block sizes are applied according to the orebody, but a typical size is 10m x 10m x 10m with sub-blocking at mineralisation boundaries. Smaller block sizes (10 x 10 x 2m) have been used for more recent modelling of the Federal lode. Grade interpolation is carried out by Ordinary Kriging, although inverse distance weighting, usually ID2, is retained in some of the areas where there is insufficient data to allow meaningful kriging. The influence of values of >5% Sn is reduced by restricting the search parameters and by applying top cuts on a domain by domain basis. The search ellipse and dimensions vary from orebody to orebody, based on variography and the dip and plunge of the orebody. Grades for tin, sulphur, arsenic, silver and copper are reported. Volumes are estimated from the wireframed shapes. Tonnage factors are applied on an orebody basis in converting volumes to tonnages and typically range from 3.2 to 3.8, based on actual core density measurements from each deposit.

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APPENDIX V TECHNICAL REPORT AND VALUATION REPORT ON THE ASSETS

Measured resources are generally drilled at 20-40m centres. Resources are generally only classified as Measured when in-ore development has been undertaken to confirm geological interpretations. Indicated resources are generally drilled at 40m centres or less but either have insufficient metallurgical testwork or insufficient in-ore development to allow classification as Measured. Inferred resources cover areas that are sparsely drilled but that are adjacent to known Measured or Indicated resources.

Measured and Indicated resources which meet the required economic criteria are converted to Proved and Probable ore reserves respectively. Reserves are based on mine planning and design, and incorporate allowance for mining losses, overbreak and fill dilution.

Level development is planned at a minimum width of 4.5m. Allowance is made for skin dilution in longhole stopes and for bogging of waste fill in both flat-back (cut and fill) and long hole stopes. A 95% mining recovery is assumed in flat back stoping and 90% in long hole stopes. To further allow for misaligned development and dilution, development grades are reduced by 20% and stoping grades by 10-15%.

BDA has not undertaken an audit of the resources or reserves, but from a review of the processes and procedures and discussions with the technical staff, BDA considers the processes reasonable and appropriate and consistent with JORC guidelines and procedures. No Inferred resources have been included in the reserves, but later years of the LOM plan do incorporate mining of Inferred resources, based on the assumption that these resources will have been upgraded to Measured and Indicated status and converted to reserves by that time. BDA considers that there is good potential to increase reserves by upgrade of Inferred resources and by ongoing exploration, particularly at depth.

8.3 Resource and Reserve Estimates – Mount Bischoff

A summary of the resource and reserve estimates for Mount Bischoff as at June 2010 is shown in Table 8.2.

Table 8.2

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Mount Bischoff Resource and Reserve Estimates – June 2010
Category Tonnage grade Contained Sn
Tonnes % Sn Tonnes
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Resources
Measured	41,000	1.17	480
Indicated	999,000	0.59	5,910
Inferred	699,000	0.47	3,300
Total	1,740,000	0.56	9,690
Reserves
Proved	41,000	1.17	480
Probable	52,000	0.88	460
Total	94,000	1.01	940

Note: resource cut off 0.3% Sn; reserve cut off 0.5% Sn

The Mount Bischoff resource outlines were initially defined by interpretation of drill hole sections. The outlines were then converted into three-dimensional solids in Surpac. Assay composites were extracted and block model grades estimated using inverse distance weighting techniques, guided by the geological understanding and a geostatistical review of the data.

A Whittle optimisation study was carried out using mining and processing cost parameters and an assumed A$17,000/t revenue factor to determine a range of pit shells. From these the final pit was designed incorporating geotechnical parameters and ramp design to derive the reserve numbers. Allowance was made for 15% mining dilution and a 95% mining recovery.

Reserves as of June 2010 comprised primarily material remaining on stockpile. BDA considers there is reasonable potential to define additional resources and potentially additional open pittable and underground reserves with systematic ongoing exploration.

8.4 Rentails Resource

The Rentails resource comprises the residual tailings from the processing at Renison Bell mine since 1968. The tailings are stored in three tailings dams on the mine lease, TSF A, B and C. The resource estimate is based on drilling and sampling of the tailings material and metallurgical processing records of tonnages processed and the residual grade of the tailings. Three dimensional tailings volume solids have been created using survey and drilling records. The grade estimate for areas

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APPENDIX V TECHNICAL REPORT AND VALUATION REPORT ON THE ASSETS

which have been drill tested is based on inverse distance squared weightings. Where insufficient drill coverage is available historical milling and deposition records have been used. Figures have been adjusted to allow for survey pickups and recent deposition from the processing of Renison and Mount Bischoff ores. A summary of the resource and reserve estimates for Rentails as at June 2010 is shown in Table 8.3.

Table 8.3 Rentails Resource and Reserve Estimates – June 2010

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Category Tonnage grade Contained Sn
Mt % Sn Tonnes
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Resources
Measured	18.957	0.44	83,700
Total	18.957	0.44	83,700
Reserves
Probable	18.116	0.44	79,700
Total	18.116	0.44	79,700

The reserve is based on detailed mine planning studies including equipment selection and scheduling as part of a Rentails Feasibility Study conducted by GHD Engineering Consultants. It is proposed that the tailings would be recovered by dredging. It has been assumed that dilution would be minimal. While the bulk of the resource is considered Measured, the Reserve has been categorised as Probable, as a reasonable reflection of some of the project uncertainties, mostly in the re-processing area.

8.5 Reconciliation Data

Reconciliation data provides a comparison of reserves depleted and actual tonnes and grade processed through the mill, thereby providing a guide as to the accuracy of the original estimates and the reasonableness of the mining recovery and dilution assumptions. Significant variations are expected on a month by month basis but taken over a longer term the reconciliation data should give a reasonably accurate guide. Historically, the mine has shown good reconciliation between production and mining reserves over many years.

BMTJV has tabulated underground production data for the eight month period January to August 2010. A comparison of the reconciled mill tonnes and grade with the reserves depleted is shown in Table 8.4. The tonnage recovered is reasonably close to the reserve depleted. The recovered grade was nearly 30% higher than reserve projections giving overall a 24% positive reconciliation of contained tin. While eight months is a relatively short period over which to draw long term conclusions, no material areas of concern are highlighted and the results suggest that the reserves provide a reasonable guide to the material likely to be recovered in mining and may be slightly conservative. BDA suggests that reconciliation data should be systematically collected and reported on a Monthly and Year to Date basis in the operations reports.

Table 8.4 Reconciliation Table

Category	Tonnage Mt	grade % Sn	Contained Sn Tonnes
Renison Jan 2010-August 2010
Reserve Depleted	295,380	1.43	4,230
Mill Reconciled Tonnes/Grade	286,670	1.84	5,261
Reconciliation Percentages	97	129	124

Conclusions

BDA has not recalculated or audited the resources or reserves. BDA has reviewed the procedures and discussed the processes with senior BMTJV technical personnel. BDA considers the estimation procedures to be appropriate and the categorisations to be reasonable and in accordance with the JORC Code. Overall the resources are considered a reasonable estimate of the in situ material and the reserves to be a fair guide to the recoverable ore under the stated economic assumptions. The reserves are based on an appropriate level of study and mine planning, and incorporate reasonable allowances for mining recovery and dilution.

The reconciliation data provided by BMTJV, even though covering a relatively short period, indicates no areas of concern. The ore tonnes recovered are close to the reserve tonnes depleted and the recovered grade is higher than expectations giving an overall positive reconciliation of contained metal. The reconciliation data is encouraging and suggests that the reserve grade estimate may be slightly conservative.

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APPENDIX V TECHNICAL REPORT AND VALUATION REPORT ON THE ASSETS

9.0 MININg

9.1 general

Until recently ore feed to the Renison processing plant came from two major sources, the Mount Bischoff open pit ore which was hauled to the Renison plant by truck, and the Renison underground ore. Mining at Mount Bischoff is now complete and remaining stockpiles are being hauled to Renison; all mining is now centred on the Renison operation.

Ore production from underground at Renison re-commenced in July 2008; current production is from previously developed stopes within the Lower Federal and King orebodies, development and production from new stoping blocks within the Lower Federal orebody and development of remnant blocks in the King orebody. The North Renison and Waratah declines in the northern section of the mine are being dewatered and rehabilitated to provide access to the Huon, Area 4, Zeehan and North Rendeeps areas. These areas as well as Bassett and other smaller remnants make up the sources of ore for the current LOM plan from the Renison mine.

The current LOM plan only incorporates production from the Renison underground mine but BMTJV is exploring the lease for potential open pit resources. Several potential open pittable resources have been identified including Dalcoath and Sligo but these areas are not yet included in the LOM plan.

9.2 Renison Underground

Underground operations re-commenced in July 2008. In the financial year to June 2010, approximately 392,000t of ore at 1.72% Sn was mined, predominantly from the Lower Federal orebody, with small quantities of ore recovered from the Radio and King orebodies.

In March 2010 the underground operation changed over from a predominantly owner-operated operation to contract mining under Macmahon Underground Pty Limited. BMTJV continues to directly manage the technical aspects of the mining operation.

The mobile equipment was largely purchased by BMT at the start of the mine development. The fleet includes four load-haul-dump Wagner ST1520 (15t) with two tele-remote units fitted, four Hitachi six wheel trucks (capacity 25-40t), three M2D Atlas Copco jumbo drill rigs and several ancillary units for charging and services. This equipment is now operated and maintained by Macmahon; in addition Macmahon provides production drill rigs. In BDA’s opinion, the current fleet is capable of meeting the planned development targets and production requirements, although it is noted that the Atlas Copco underground loaders are experiencing availability issues that are being addressed by the supplier.

The underground operation suffered in the past from lower than budgeted productivity rates and BMT contracted Macmahon largely in an effort to improve underground production. Production is still below target but several parameters such as production drill hole stock levels are attaining levels that would indicate production rates will increase from the current levels up to the forecast rates.

9.3 Mine Planning

The bulk of current mining is based on fault bound mineralisation, together with some stratabound mineralisation. A dolerite dyke runs sub parallel to the fault in the Federal area and occurs within the fault zone itself for some distance, contributing to mining dilution and in places poor ground conditions. Presently BMTJV is completing the mining of the upper levels of the Federal orebody with a combination of Avoca style mining methods, cut and fill and long hole stoping.

The future plan is to subdivide the orebody into 45m vertical blocks. A 6.5m high drive will be developed at the base of the block over the width of the orebody (up to a maximum of 6m and minimum of 3m), along the full length of the ore zone from the central access from the decline. A 2m cemented rock fill (“CRF”) plug at a cement percentage of approximately 5% is placed on the floor to form the crown pillar for the block below. A 5m high drive is then developed 25m above the lower level of the block, again to the full width of the orebody and along the full length of the ore zone. The block between the two drives will be extracted in an Avoca style retreat. After this section is extracted the upper part of the block will be extracted with upholes to the cemented rock crown pillar above.

Mining reserve calculations for open stoping assume dilution from sidewalls of 375mm totalling 750mm at an assumed zero grade. Dilution estimates also allow for 5% from excavation of the fill floor; it is assumed that there will be no overbreak of the CRF crown. Cut and fill stopes assume a 20% reduction in grade in the initial drive to allow for misalignment of development, reduced to 15% for the first lift and 10% for the second lift. Ore recovery is assumed to be 95%.

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APPENDIX V TECHNICAL REPORT AND VALUATION REPORT ON THE ASSETS

Overall BDA considers the parameters reasonable for the estimation of mineable reserves and for the purpose of mine planning. The proposed mining methods appear appropriate to define the orebody and control the anticipated ground conditions within the Federal orebody.

While development along the orebody allows good geological control, the method requires ongoing management to keep the development on line within the orebody. Detailed diamond drilling of the orebody prior to development is being planned from a hangingwall drill drive that should improve mine design and mine scheduling.

Geotechnical and stress assessment for the Federal orebody has been carried out by several consultants including Coffey Mining Pty Limited and Mining One Pty Limited. The location of the orebody within the Federal Bassett fault and the location of the dolerite dyke cutting through the orebody creates difficult but manageable ground conditions. Currently BMTJV uses split set bolts (with and without grout) and meshing within the orebody with the installation of cablebolts where required. Cablebolts are installed at all access point intersections. Regular pull testing of split sets is carried out to check the integrity of the support system. BMTJV monitors ground noise through shift logs and has recently installed a seismic monitoring system into the Lower Federal zone to provide continuous monitoring of seismicity and to assist in tracking stress levels in respect of stope sequencing.

The extraction sequence in the Federal orebody is planned on the basis of retreating back to the central decline from both north and south. If this strategy creates excessive stress levels the extraction sequence may require refining with either two point access to the orebody or adjustment to the pillar size and location.

BMTJV has a ground control management programme for the operation which ensures there is a coordinated approach to ground control involving all stakeholders from operators to geotechnical engineers. BMTJV also uses external consultants to carry out modelling of extraction sequences. The installation of continuous seismic monitors will add to the understanding of the ground conditions and assist predictions on stress and extraction sequencing. BDA considers the general approach to be logical, balancing operational geotechnical reviews with external consultant studies; some peer review of geotechnical strategies may be warranted.

9.4 LOM Plan

Table 9.1 details the sources of ore from the mine by zone for the duration of the current LOM plan. Production up to the end of financial year 2011 is predominantly from reserves in the Lower Federal orebody but production from other sources in the northern section of the mine will steadily increase in subsequent years. The reserves make up approximately two and a quarter years; the remainder of the LOM schedule is initially on an assumed conversion of Measured and Indicated resources and in the latter part of the schedule a conversion of Inferred resources to which mining parameters have been applied. Historically the project has continued to be successful in discovering new ore zones and extensions to known ore zones and in BDA’s opinion there is a reasonable expectation of increasing the reserves consistent with the LOM plan provided the price of tin remains strong.

Table 9.1 Source of LOM Plan Production by Orebody – Financial Years

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Ore Zone Unit 2011 2012 2013 2014 2015 2016 2017 2018 Total
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Zone
North King	000t	84	–	–	–	–	–	–	–	84
Lower King	000t	27	145	52	–	–	–	–	–	223
Mid Federal	000t	22	–	185	289	136	–	–	–	632
Lower Federal	000t	428	240	240	182	0	–	–	–	1,090
Federal Deeps	000t	–	–	–	–	191	–	–	–	191
Deep Federal North	000t	–	–	–	–	50	110	–	–	160
Zeehan	000t	56	–	90	–	–	–	–	–	146
Huon	000t	7	175	–	–	–	–	–	–	182
Huon North	000t	31	100	18	–	–	–	–	–	149
A4 Area	000t	7	–	75	185	99	–	–	–	367
A4 Area Deeps	000t	–	–	–	–	169	240	65	–	474
South Bassett	000t	–	–	–	–	15	125	–	–	140
Rendeep North	000t	–	–	–	–	–	120	10	–	130
Other Inferred Potential	000t	–	–	–	–	–	65	584	241	890
Total Underground	000t	660	660	660	656	660	660	659	241	4,857

Note: Lower Federal reserve includes a small quantity of ore from the King orebody; BDA has made minor adjustments to the specific orebody production timing after receiving clarification from BMTJV on the LOM plan

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APPENDIX V TECHNICAL REPORT AND VALUATION REPORT ON THE ASSETS

The introduction of a contractor and the change to more productive mining methods (long hole stoping versus flatbacking) is the justification for the increase in mine production to 660,000tpa for the LOM compared to the 2009/10 production level of around 390,000t. While good progress is being made, BDA considers this ramp up may prove challenging.

The one year budget for the underground mine is based on a continuation of the ramp up to the required productivity rates. The remaining years of the LOM plan assume continuing level of activity in maintaining the production rates. BDA considers that the rates for of the various activities are reasonable with development rates scheduled at around 160m per month per machine assuming three jumbos in operation; these levels are not being achieved at present due in part to the development rig being used to rehabilitate previously flooded areas. After the rehabilitation work is complete, development rates should improve to forecast levels.

While the individual activities within the LOM plan are generally reasonable and achievable, BDA has concerns that the overall production rate for the Lower Federal orebody is high. The reserve indicates that the ore tonnage per vertical metre is between 3,500-4,500t giving an implied annual vertical advance rate of around 100m per year. This rate is high and to achieve such a rate of advance all activities of development, stoping and waste filling will have to operate at an optimum rate. The current production rate is below target by approximately 30%. However, recent development has opened up production areas in different parts of the mine, giving several stoping fronts, which should assist in achieving the forecast production.

In the last three months production has ramped up from 67% to 75% and 87% of target production. Further establishment of sufficient mining stocks is required to reach and maintain the target production. While BMTJV expects this to be reached within the next few months, BDA considers it may take a further 1-2 years to ramp up to a consistent target production level.

9.5 Mine Infrastructure

The mine has three main exhaust rises and fans comprising No. 4 (south), No. 6 (central) and No. 7 (north). Total air flow is approximately 400m3/sec. The total air flow through the stoping area within the Federal orebody is 120m3/sec. Ventilation conditions at the base of the Federal decline were satisfactory at the time of the site visit. Establishment of ventilation rises in conjunction with the decline will maintain satisfactory ventilation conditions and minimise the length of ventilation ducting from force fans.

Ore is hauled via the decline from the stoping areas by 40t Hitachi six wheel trucks (an average of 32t per truck) to the ore pass and grizzly above the underground crushing station at 1630mRL, approximately 100-150m above the stoping operations at Federal orebody. Ore is crushed and hoisted via an internal 590m shaft. From the skip tipping station ore is conveyed through an adit to the surface stockpiles at the plant. The 6m diameter shaft has a friction winder that hoists an 11.5t payload skip with counterweight. The capacity of the shaft is approximately 1,500t per shift which is well in excess of required hoisting and allows BMTJV to hoist largely on night shift when power costs are lower. The hoisting system is fully automated. BMTJV advises that the shaft is in good order with no significant ground support issues, and recent equipment audits by ABB Australia Pty Limited confirm the status.

BDA notes that while the risk of major incidents within the shaft is considered unlikely, the consequence on production can be significant. The decline access to surface does provide the ability to haul ore out of the mine by truck reducing the impact of such an event.

Water is being pumped out of the old workings within the Waratah and North Renison declines at the north of the mine. Water is pumped at a rate of approximately 80L/s from rises adjacent to the decline. BMT is rehabilitating the development as the water levels drop. This requires the stripping of old pipe services and removal of corroded ground support mesh. New ground support of bolts and mesh are installed where personnel access is necessary as well as cable bolts in development intersections or large spans. The water level is presently at approximately 1400m RL; the bottom of the decline is 1350mRL. The length of decline required to be rehabilitated is approximately 350m. Drainage and rehabilitation of the decline is essential to BMT opening up the Area 4 and Rendeeps resources. The drainage of the northern area has facilitated access to the upper areas of the reserves within Huon and Zeehan. The reserves within Huon and Zeehan were developed prior to closure of the mine in 2003.

Water is pumped out of the mine in stages with pump stations located close to the mine infrastructure. The mine has the same pumps at the main stations to provide maintenance efficiencies and minimise spare part inventory. Total pumping capacity of the mine is in excess of the current pumping requirement.

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APPENDIX V TECHNICAL REPORT AND VALUATION REPORT ON THE ASSETS

Conclusions

The Renison mine plan is moving away from a combination of flatbacking (cut and fill) and open stoping within the Lower Federal orebody to long hole stoping with Avoca extraction technique that provides high productivity while reducing hanging wall exposure. BDA considers that while this will increase the productivity of the Federal orebody there is some risk of added dilution. Flatbacking had been introduced due to earlier difficulties with a similar mining method as is now planned but the lower productivity of the flatbacking method has created difficulties in BMTJV achieving the planned production and productivity rates.

While the presence of the dyke within the fault zone in the Federal orebody creates difficult ground conditions the mine plan provides sufficient control and flexibility to achieve satisfactory extraction of the resources; the dyke is generally out of the orebody below 1450RL, alleviating this issue.

While BDA considers that the mining schedule is conservatively established on an activity basis, there is a concern that the overall schedule may be difficult to achieve over the next couple of years. In terms of tonnage per vertical metre the mine may struggle to meet the rate of production planned until the quantity of open stoping within the total mix of production is increased, or a number of separate mining areas are available. BDA considers that production rates are towards the higher range of expectations for mining the Lower Federal orebody and that it may take 1-2 years to fully ramp up to the target production rates.

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APPENDIX V TECHNICAL REPORT AND VALUATION REPORT ON THE ASSETS

10.0 PROCESSINg

10.1 Renison Tin Concentrator

The Renison plant was commissioned in the mid 1960s and has had various modifications over time as new technologies, including cassiterite flotation and high gravity-force jig technology, have been added to the circuit. In its current configuration, the plant has a nominal capacity of approximately 720,000tpa, dependent on ore hardness. The most recent addition to the flowsheet has been a flotation circuit for recovery of copper from the sulphide flotation feed. Due to the fall in copper prices in 2009, this circuit was converted for use in the tin flotation area. A description of the flowsheet follows and a basic flowsheet is shown in Figure 7.

Renison ore is crushed to -150mm in a primary jaw crusher located underground. Mount Bischoff ore is crushed in a jaw crusher at the Renison plant site. The two ores are blended in the feed to the Renison crushing plant, which uses a jaw crusher and two cone crushing stages to reduce the ore to -12mm in size. The crushing plant is a low profile semi-mobile plant which has little protection from the weather. Intermittent presence of clays in both ores can interrupt crushing operations and procedures are in place to blend the ores so that the effect of clay is minimised. Crushed ore is stored in two bins with a combined capacity of 900t.

The ore is reduced in size to -0.25mm in a grinding circuit consisting of an open circuit rod mill and a ball mill close circuited with two relatively fine aperture banana screens. The grinding circuit product passes to sulphide flotation which rejects the sulphide minerals (dominantly pyrrhotite) to tailings. The flotation circuit includes a regrind stage on the rougher concentrate. The sulphide flotation tailing, comprised mainly of non-sulphide minerals, is then treated in a coarse gravity circuit consisting mainly of spirals. The centrifugal separators introduced into the circuit in the 1990s have largely been replaced by shaking tables; one Kelsey jig and one Falcon concentrator remain in operation in the gravity circuits. This primary gravity circuit removes the coarser liberated cassiterite; spiral concentrate and middling are further upgraded in a table circuit to produce a high grade gravity concentrate. Residual sulphide minerals are also scavenged from gravity concentrates by flotation.

The coarse (+106µm) fraction is separated from the primary gravity tailing and reground in a ball mill to liberate finer cassiterite and a retreat rougher concentrate is then cleaned on shaking tables, this concentrate being a component of the leach plant feed.

Non-sulphide streams finer than about 40µm are fed via a 30m diameter thickener to a slimes cycloning circuit from which ultrafine material (nominally -4µm) is discarded to a slime tailings product which is a final tailings stream. The slimes cyclone underflow is tin flotation feed and is scavenged of residual sulphides prior to being processed in a circuit comprising roughing and two stages of cleaning. Tin flotation tailing is a final tailings stream and the tin flotation concentrate is directed to a circuit comprising three high force ultra-fine Falcon concentrators for further upgrading. Flotation cells installed prior to the 2008 restart for production of a copper concentrate are currently used as additional tin flotation capacity.

Tin flotation reagents include styrene phosphonic acid (“SPA”) as collector, sodium silicofluoride as a depressant, sulphuric acid for pH control, and a frother. SPA is expensive and BMTJV has been active in locating substitutes.

The use of the flotation cells intended for copper production with the ultra-fine Falcon has enabled better control to be gained of a large circulating load of -15µm fines which previously existed.

Gravity and tin flotation concentrates are combined as feed to the leach plant, in which sulphuric acid is used to dissolve siderite (an iron carbonate also often containing some manganese and magnesium). Concentrate weight loss in the leach plant is about 20% and the concentrate is separated from the acidic liquor prior to filtration, containerised and dispatched to smelters in Malaysia and Thailand. The acidic liquor is neutralised using lime.

The initial plant was not well designed for easy housekeeping, and relatively low manning levels exacerbate this issue. Maintenance deteriorated prior to the shutdown of the plant in 2003 and despite Bluestone’s expenditure of about A$15M in 2005 and MLX’s expenditure of A$5M in 2007 on its restoration to reasonable operating condition, the plant does not present well. A structural audit of the plant was carried out in 2009 which indicated that about A$0.3M of additional expenditure was required. Of this amount, A$0.15M was high priority work, including renewal of the structural supports in the conveyor transfer houses through which ore is conveyed from the crusher to the fine ore bins. This work has been carried out. BMTJV advises that 80% of the work recommended in the audit has been carried out and that there is no expectation that significant additional expenditure beyond that revealed by the audit will be required.

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APPENDIX V TECHNICAL REPORT AND VALUATION REPORT ON THE ASSETS

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ORE FROM CRUSHER Primary SulphideFlotation Sulphide
Grind andRegrind Concentrate
Fines ClassificationCyclone,
Spiral,Tables
Concentrate
Batch
Flotation PrimaryFalconConcentrator,RegrindandRetreat FineGravity
FalconConcentrator Tailing
Retreat
Sulphides Flotation
Tailing
Shaking Shaking
Tables Tables
Tailing
Concentrate
Slimes
Thickener
Tin Tailing
Flotation
Deslime Concentrate
Cyclones
MGS Concentrate
Circuit
Tailing
Concentrate
Sulphide LeachPlant
Scavenger FineTin
Flotation Flotation
Concentrate LEACHED
CONCENTRATE
UFFalcon
Slimes
LEGEND
Grinding and Sulphide Flotation Fine Tin Recovery
Gravity Concentration Concentrate Leaching
TOTAL
Desliming TAILING
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Metals X Limited

Renison Tin Project

Figure 7

BDA - 0114

RENISON TIN CONCENTRATOR FLOWSHEET

Behre Dolbear Australia Pty Ltd

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APPENDIX V TECHNICAL REPORT AND VALUATION REPORT ON THE ASSETS

Plant utilisation in 2009/10 was 86%, ranging from 81-96% on a monthly basis. About 25% of plant downtime was due to unscheduled electrical and mechanical repairs and about 45% was due to ore shortages, with the remainder comprising stoppages due to rod charging and a range of other operational reasons.

Ore shortages are largely due to issues related to crushing wet ore, to the low surge capacity between the crushing plant and the concentrator, and to the relatively low capacity of the crusher compared to the concentrator. BDA considers that, while the plant availability is not good, given the circumstances it is unlikely that consistent availability of greater than 90% will be achieved without expenditure to improve the aspects noted above.

10.2 Plant Performance

The plant was shut-down in mid 2003 and was in a poor condition when Bluestone acquired it the following year. The pyrrhotite content of the ore promotes acid generation, creating a corrosive environment, and the flotation circuits operate at acid pHs. Essential maintenance had not been carried out by the previous operator and this contributed to a general deterioration in the condition of the plant. Bluestone spent in excess of A$20M on refurbishment of the plant and associated infrastructure prior to re-commissioning in early 2005. Falling tin prices in 2005 resulted in a second mine closure and MLX restarted the operation in July 2008.

Historically, recovery has been dependent on ore type. In the early 1970s, low grade (0.9% Sn), hard, fault-bound Federal ore from the upper sections of the mine was treated and recoveries were typically around 60%. In the late 1970s and the 1980s, high grade (1.3% Sn), softer carbonate replacement ores with relatively coarse grained cassiterite were treated and recoveries of around 70% were achieved with recoveries of up to 75% on the deeper higher grade ores.

Table 10.1 shows a summary of ore assessment testwork carried out on samples of Mount Bischoff and Dalcoath ores, a ROM production sample (RZ2), and a high grade Renison mine sample (RZ3) in 2009. BDA notes that neither Mount Bischoff nor Dalcoath material are scheduled to be processed over the ROM. Nevertheless, these results have been included in Table 10.1 as they set the Renison mine data in context. The results indicate that tin losses to sulphide concentrate and to slime tailing from the Renison ore samples total 6% or less. Sulphide tailing is the feed to the tin recovery circuits (gravity plant and tin flotation section) and can be considered to be the remainder of the tin in the ore. Tin liberation in the sulphide tailing stream produced from the two Renison samples, was, after regrinding to simulate the plant process, relatively high compared to the Bischoff and Dalcoath samples and indicates that the Renison samples were relatively amenable to the plant tin recovery process.

The testwork results are quite variable, inferring that variable results can be expected from the plant. BDA considers that systematic assessment of future ore sources should be carried out to provide assurance that planned metallurgical performance can be achieved.

Table 10.1 Summary of Ore Assessment Results

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Parameter Unit BHg DAL RZ2 RZ3
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Head Grade	% Sn	0.88	1.67	1.08	2.52
	% As	0.24	1.16	0.26	0.47
	% S	9.60	13.3	3.10	2.40
	% MgO	11.9	1.60	2.30	1.10
	% Cu	0.07	0.12	0.19	0.18
Relative Hardness		Soft	Soft	Hard	Medium
Loss to Sulphide Concentrate – % of Sn in Ore	%	12	3	5	3
Loss to Slime Tailing – % of Sn in Ore	%	0.9	0.6	1.0	0.6
Reground Sulphide Tailing–% Sn Liberated	%	66	60	73	78

Note: BHG is Bischoff High Grade; DAL is Dalcoath; RZ2 is a Renison ROM ore sample; RZ3 is a Renison high grade ore sample

Conclusions

The processing characteristics of Renison ore are reasonably well understood. Whilst the plant is old and process spillage is evident, the processing equipment is in reasonable condition and plant availability close to 90%, exclusive of ore shortages, can be expected. Tin recoveries within about 3% of the projected long term level of 70% have been reached. Ore assessment testwork suggests that the recovery levels are achievable, but also indicates that the amenability of ore to the process varies. BDA considers that recovery of 70% is an appropriate long term target, but suggests that actual recoveries in the short to medium term could be up to 3% less. The forecast throughput parameters are considered stretch targets, but provided the mine production targets are met, and high plant maintenance standards are sustained BDA considers the long term throughput of 660,000tpa is achievable.

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APPENDIX V TECHNICAL REPORT AND VALUATION REPORT ON THE ASSETS

11.0 INFRASTRUCTURE

Infrastructure at the Renison site is well established.

Road access to the mine is via the sealed two-lane north-south rural Murchison highway. The Emu Bay Railway, owned by Tasrail, runs adjacent to the operation and is used to transport concentrates produced at the base metal mines at Queenstown and Rosebery. Renison product volumes are relatively low and are trucked to Burnie for shipment, rather than using the rail. Daily air services are provided to the Burnie-Wynyard and Devonport airports from Melbourne.

The mine is connected to the Tasmanian power grid, with links to both the north and the south of the state, so that interruptions to supply are rare, and usually brief when they do occur.

A small dam on Argent Creek, approximately 3km southwest of the mine provides the operation with its water supply. High, regular, rainfall in the region assures the reliability of the supply. Site annual rainfall is approximately 2,000mm per annum.

On site infrastructure is in variable condition. Office space exceeds the requirements of the current operation and is in good condition. Stores warehouses are serviceable but sheeting requires replacement in some areas. Workshop buildings are in a similar condition.

BMTJV has a high quality 100-bed camp in Zeehan, for the use of employees who live elsewhere in Tasmania during their shifts on site.

Conclusions

Site infrastructure is generally adequate and appropriate. Access is good and water and power supplies are reliable. Overall, BDA considers that the infrastructure does not present any significant risk issues.

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APPENDIX V TECHNICAL REPORT AND VALUATION REPORT ON THE ASSETS

12.0 TENEMENTS, APPROVALS AND ROYALTIES

BDA has not undertaken legal due diligence on the tenements or titles but BMT advises that the tenements are in good standing. The following notes provide a summary of the tenement details, permits, royalties and project approvals.

12.1 Renison

Mining Tenements

The Renison mine is located within the 4,662ha Consolidated Mining Lease 12M/95, which was granted for a period of 21 years from 1 August 1995, and is for all minerals. Bluestone purchased the property in March 2004 and ML 12M/95 was transferred from Renison Bell Limited to BMT on 17 April 2004. ML 12M/95 is currently jointly held by BMT and YT Parksong Australia.

The tenement conditions preclude mining within 15m of the surface beneath the Murchison Highway and privately owned land, or within 30m of surface beneath TasRail’s Emu Bay Railway. A statutory bond of A$2.5M has been lodged as a performance guarantee for rehabilitation obligations at mine closure. The bond is subject to review from time to time and may be increased or decreased depending upon the extent of disturbance and success of progressive rehabilitation undertaken.

Environmental Approvals

The ‘Licence to Operate Scheduled Premises No. 3315’ was transferred to Bluestone following its acquisition of the project. Although granted prior to the commencement of the Environmental Management and Pollution Control Act 1994 , under the transitional provisions of that Act, the Licence continues to apply and also operates as the permit for the use and development of the land under the West Coast Planning Scheme. Permits and changes to permits are issued by the West Coast Council under the Land Use Planning and Approvals Act , 1993. The Licence to Operate Scheduled Premises No. 3315 was replaced by Environmental Protection Notice 7092/1 on 10 March 2007. Schedule 2 of this EPN limits mineral processing to 1.5Mtpa without the prior approval of the EPA Director. On 21 August 2007, the EPA Director issued a revision of condition E2 of the EPN, varying the water discharge limit for nickel. On 5 March 2008 BMT was issued with EPN No. 7585/1 to cover permit conditions associated with the 2m lift on Tailing Storage Dam C.

In accordance with the land use permit, a three year Environmental Management Plan (“EMP”) was submitted to the Department of Primary Industries, Water and Environment (“DPIWE”) in May 2002. Updated EMPs to cover three year periods were compiled in 2006 and 2009. The current EMP (2009) covers the three year period from July 2009.

A condition of EPN 7092/1 is that any development or activity within ML 12M/95 must be carried out and monitored, in accordance with the environmental management measures set down in the approved Development Plan and Environmental Management Plan (“DPEMP”). BDA has reviewed the currently approved EMP (2009) and is of the opinion that the site is generally being operated in accordance with the strategies and mitigation measures set out therein.

12.2 Mount Bischoff

Mining Tenements

The Mount Bischoff tenement holdings comprise a granted Retention Lease RL7/88, and Mining Leases 12M/2006 and 2M/2008. BMTJV advises that an A$710,000 surety has been lodged against rehabilitation obligations at Mount Bischoff at closure.

Environmental Approvals

Approval for the Mount Bischoff mine re-development project was granted in September 2007 by Waratah-Wynyard Council by way of a planning permit (DA204/2006-A), whilst a subsequent planning permit amendment was granted in March 2009. The Mount Bischoff mine is operated under Environmental Permit No.7436 granted on 29 August 2007.

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APPENDIX V TECHNICAL REPORT AND VALUATION REPORT ON THE ASSETS

A DPEMP was developed for the project by John Miedecke and Partners in August 2006 and a subsequent supplemental DPEMP was completed in May 2007. The project approval requires development to be in accordance with this DPEMP.

Mining ceased at Mount Bischoff in August 2010 as planned, as known reserves are now exhausted. The site has been placed on ‘care and maintenance’ with a view to possible re-opening in the future if ongoing exploration proves successful. A Care and Maintenance Plan (July 2010) has been implemented which is in accordance with EPA-Tasmania guidelines.

12.3 Royalties

Tasmania imposes a two-tiered royalty system on mineral production. An Ad Valorem royalty is levied at the rate of 1.6% on net sales revenue (“NSR”), less freight from the mine gate to the point of delivery. NSR is based on the A$ equivalent of spot prices prevailing at the time the revenue is received. Secondly, a profit-based royalty is also levied, calculated as profit squared, divided by net sales revenue, multiplied by 0.4. Profit is the mine profit calculated according to Australian Accounting Standards, using spot metal prices and exchange rates, and excluding any financing costs or interest received.

Royalty is calculated over the mine’s financial year and is payable quarterly in arrears on a year to date basis. The maximum royalty payable (Ad Valorem plus profit based) is fixed at 5% of net sales revenue. Royalty rebates of up to 20% are available for companies which use downstream processing to produce a specific metal product.

Conclusions

The project approval process is reasonably straightforward and the various EPN conditions stipulating environmental monitoring and reporting are not onerous. Based on the recent experience in gaining approval for mining at Mount Bischoff, BDA is of the opinion that the BMTJV is unlikely to experience significant delays in seeking further approvals for either the proposed Renison open-cut operations, the Rentails project, future mining at Mount Bischoff or approval for the construction and operation of a new Tailings Dam at Renison.

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APPENDIX V TECHNICAL REPORT AND VALUATION REPORT ON THE ASSETS

13.0 ENVIRONMENTAL CONSIDERATIONS

13.1 Renison Mine

BDA has reviewed those environmental aspects which are considered a material part of the project and which may have significant implications for project feasibility, costs and timing. The issues discussed below cover the main environmental risk areas identified from BDA’s review of the project documentation and site visit. The main environmental risk associated with operating the Renison project relates to water management and the need to mitigate potential impacts arising from water pollution.

Locality and Climate

The project area comprises undulating to steeply forested land (eucalypt and tea-tree forest and rainforest). The area is bounded to the north by Lake Pieman and to the south by the Murchison Highway. The Emu Bay Railway is located immediately north of the mine surface facilities. The surface facilities, including Tailing Dams TSF A, B and C are located between the Argent and Ring Rivers which both flow northwards into Lake Pieman.

The climate is characterised by cool temperatures, and high and consistent annual rainfall. Mean monthly minimum temperatures at Zeehan range from 2.9°C in June to 10.3°C in February and maximum temperatures range from 10.9°C in July to 21.8°C in February. The average annual rainfall for Renison ranges from a minimum of 1,660mm to a maximum of 2,940mm with an average of 2,220mm. April to October is the wettest period, although high precipitation (rain and snow) may occur throughout the year. Evaporation at Renison has ranged from 715mm (in 2001-02) to 1,055mm (1999-2000) and the average is 837mm. Between November and March (summer), evaporation often exceeds rainfall. Overall, however, an excess of precipitation over evaporation occurs, which can range from 1,000-2,000mm in any given year. This has significant implications for the environmental management strategies that are applied, particularly in regard to tailings storage and site water management.

water Management

As the Renison project operates in a climatic region where the annual rainfall is in excess of 2,200mm and annual evaporation is about 750mm, it is not possible to operate the project using a zero discharge management model. The objective of water quality management at the Renison project is to ensure that discharges do not compromise the Protected Environmental Values (“PEV”) of receiving waters, as assigned under the State Policy, either during the operational phase or upon mine closure. To achieve this objective, water management practices are adopted which work toward minimising the mass discharge of potential pollutants.

The mine operations discharge about 17 mega-litres (“ML”) per day via six release points, which also serve as monitoring stations. These discharges contain increased concentrations of dissolved salts and acid compared with the receiving waters, due primarily to the oxidation of iron sulphide minerals within the orebody and tailings storage facilities. The waters discharged from the Renison mine do not contain significantly elevated levels of heavy metals such as cadmium, mercury, arsenic and lead. The water chemistry is dominated by a low pH of between 3 and 5 and elevated, relatively benign, contaminants of iron, manganese, sulphate and fluoride.

The excess water is released into the Argent and Ring Rivers which flow into Lake Pieman. These form a natural hydrological boundary around the mining operations.

Water for use in mineral processing and for other purposes is drawn from the underground mine and from the Argent Water Storage Dam. The use and management of the freshwater resources in Tasmania comes under the Water Management Act, 1999 .

Dam Water Storages

There are eight dams on the Renison ML used in water management, namely TSF-A, TSF-B, TSF-C, the Anti-Pollution Dams (two sedimentation dams in series), the Crusher Dam (two sedimentation dams in series), and the Argent Dam.

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APPENDIX V TECHNICAL REPORT AND VALUATION REPORT ON THE ASSETS

Process Water

Water for use in metallurgical processing is pumped from the Argent Dam into an above-ground tank (Mill Head Tank) and piped by gravity to the tin concentrator (and other buildings). The mine head tank also supplied the original crushing plant prior to the Murchison closure of operations in 2003. The crushing plant was not re-commissioned by Bluestone due to concerns about structural soundness. Instead a mobile crushing plant was established adjacent to the stockpile. The old crushing plant has been decommissioned and demolished. Effluent from the crusher house was discharged via two sedimentation ponds in series named the Crusher Dam. The clarified overflow from the Crusher Dam flows into the Ring River via a licensed monitoring station (station CR). The Crusher Dam also receives mine water in excess of processing needs. Hence, despite decommissioning of the old crushing plant, the Crusher Dam remains operational, even though not required by the new mobile crushing facility. The tin concentrator waste water is discharged with the tailings stream to tailings storage facility TSF-C. The discharge from TSF-C flows into the Argent River via licensed monitoring station TC. Discharges from TSF-A flow into TSF-B and then into the Ring River via licensed monitoring station TB. Both the Argent and Ring Rivers flow into Lake Pieman.

Water Supply Sources

Processing operations rely on fresh water pumped from the Argent Dam, which is situated about 2km southwest of the mine complex on the upper reaches of the Argent River. The dam was constructed in the 1920s to supply process and potable water to the Battery Mill. The storage has a full supply level capacity of 318ML. A pump station located at the toe of the dam’s earth and rockfill wall pumps water for processing and mining operations.

Some of the mine water can be used for process water in the tin concentrator, with the remainder being discharged into Lake Pieman via monitoring stations at either the Crusher Dam or the AntiPollution Dam.

About 1.6ML/d of water from the Argent Dam is used in the underground mining operations with about 7.1ML/d used for surface plant, mostly in the tin concentrator. Approximately 8.35ML of water per day are pumped from the mine, of which approximately 6.75ML/d arises from ground water infiltration.

Water Discharges

The operations produce wastewaters from mine dewatering, tin concentrator, sewage and storm waters, tailing storage facility overflow and seepage, and site runoff. All of these waters discharge via one of six monitoring stations. The typical average daily discharge volume is 17.4ML. Since 1974, discharges have been monitored on a regular basis for a broad range of variables including flow, temperature, pH, filterable sulphate, chloride, iron, manganese, fluoride, arsenic and heavy metals. Potential sources of contaminants include underground mine waters, mineral processing waters, TSF decant waters, waste rock and historic workings. The Renison tin field has been worked since the 1890s and a number of open cuts, adits and shafts exist on the lease, all of which are potential sources of acid mine drainage.

Tailings Dams

TSF-A (19.7ha), TSF-B (25.5ha) and TSF-C (31.1ha) are utilised as the project’s tailing storage facilities. The three tailings dams are located at the northern end of the mining lease approximately 1km south of Lake Pieman and 1km north of the main surface operations area.

TSF-A and B are currently at full capacity (holding approximately 4.8Mt) and being considered for rehabilitation and closure. TSF-A decant water gravity feeds into TSF-B which then discharges to the Ring River via monitoring station TB.

TSF-C provides the current storage facility for process tailings. Tailings have been deposited into TSF-C periodically up to a maximum rate of 2,000tpd. Tailings are pumped to the tailing storage facility as a slurry via 25cm and 15cm diameter polyethylene pipes over a distance of up to 2km. Decant water from this facility discharges via monitoring station TC into the Argent River. An additional embankment lift (2.0m) to TSF-C to raise the dam embankment to RL2194.5m was completed in July 2010, which provides an additional 1.7 years tailings storage capacity, based on a production rate of 700,000tpa tailings. However, if the Rentails project proceeds, it is projected that the option to develop TSF-D will need to proceed.

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Tailing dams are regulated by the Water Management (Safety of Dams) Regulations 2003 , promulgated under the Water Management Act, 1999 .

These safety regulations are largely modelled on guidelines established by the Australian National Committee on Large Dams (“ANCOLD”) publication “Guidelines On Tailings Dam Design, Construction and Operation”. All three tailings dams are rated as High Hazard dams according to the ANCOLD guidelines. Design, construction and operation of all three tailings dams is in accordance with this classification.

All tailings dams and impoundment areas are inspected annually by experienced dam engineers and a comprehensive report compiled in accordance with ANCOLD Guidelines. Routine visual dam inspections are carried out by BMTJV staff on a weekly basis.

BMTJV has systems in place to schedule and ensure these statutory inspections are carried out as required.

Tailing Dam Stability

The primary consideration in tailing dam management is stability of dam walls. BMTJV engages suitably qualified and experienced engineers to design, construct and monitor all dams. Tailing dams have instrumentation installed to monitor geotechnical parameters needed for assessing structural integrity. At yearly intervals a report is compiled by a competent engineer regarding the stability of all dams. A copy of the report is forwarded to the Director of Environmental Management and to Mineral Resources Tasmania.

Future Tailings Storage (TSF-D)

TSF-A and TSF-B have reached full storage capacity and were planned to be rehabilitated and closed. However, BMTJV has indicated that it is examining options to further raise TSF-A and TSF-B embankments to provide additional capacity. An additional embankment lift (2.0m) to TSF-C to raise the dam embankment to RL2194.5m was completed in July 2010, which provides an additional 1.7 years tailings storage capacity. The proposed new TSF-D option is premised on the Rentails project proceeding. BDA briefly inspected the proposed site for TSF-D and concludes the site would be appropriate for a future Rentails project.

Environmental Management and Monitoring Programme

The primary environmental issue at Renison is the generation of acidic waters and their potential discharge into the Pieman River catchment. Accordingly, the major focus of the EMP has been on site water and its management. The primary objective of the site environmental effort is to ensure that the tailing dam walls are safe and that Renison emissions do not prejudice the maintenance of protected environmental values designated for the receiving environment.

BMTJV supports the principle of waste minimisation in accordance with a hierarchy of waste management and continues to actively work towards further improvements in reducing mass loadings in effluent emissions. The water quality discharges achieved from the wetlands on tailing storage facilities TSF-A and TSF-B are testimony to the strategies for good environmental outcomes and continual improvement.

Water quality monitoring is carried out at the six licensed discharge points. At each discharge point water samples are collected in accordance with Australian Standards. Flow measurement facilities are also installed at each point; these have continuous digital data recorders measuring flow every 15 minutes.

Water quality monitoring data is reported monthly to DEPHA as per current practice. Overall results are analysed and reported annually, unless analytical results indicate some anomaly or operational changes of importance occur. Ambient water quality monitoring is also carried to ensure the ambient criteria are met at the DEPHA defined mixing zone boundaries.

Compliance issues relating to Total Suspended Solids (“TSS”) movement have occurred intermittently. Consequently, to rectify the movement of TSS through the environmental dams, the upper dam has had material removed to rectify the issue and laboratory procedures have been changed to a method consistent with Australian Standards.

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Noise Emission

Most mining, drilling and blasting at Renison mine is performed underground. The only significant noise generation on the surface emanates from mine ventilation fans, movements of heavy vehicles and from ore processing, mostly crushing. The quarrying of waste rock requires periodic blasting with associated noise generation.

At the perimeter of the normal operations area, noise levels are barely perceptible. At the nearest residential areas in the towns of Rosebery and Zeehan there is no contribution to community noise levels from the mining and processing operations at Renison. Rosebery township is 8km from the mine, whilst Zeehan is 13km.

Dust Emissions

The only significant air emission is dust which may be generated by a number of activities including crushing and grinding, vehicle movements along unsealed internal roads, wind erosion of stockpiled materials, wind losses from conveyors and transfer points and wind erosion from exposed areas including covers on tailing storage facilities. Air sampling for dust concentration in the occupational environment is conducted regularly. As dust concentrations in the immediate environment meet occupational health standards, dust is not regarded as a concern with respect to the external environment. However, notwithstanding this, the roads are watered for dust suppression during long periods of dry weather. As a consequence of the high rainfall in the area, dust emissions from stockpiled materials, belts or conveyors and other exposed areas are relatively minor. Crusher conveyors have recently been enclosed.

Mine Closure and Rehabilitation Plan

A conceptual Mine Closure and Rehabilitation Plan (September 2007) has been developed for the Renison site based on the EPN mine closure conditions and is approved by EPA-Tasmania. The mine site has been divided into a number of domains based on location, use and rehabilitation requirements. BDA has examined the Closure Plan and finds it appropriate with sufficient detail at this stage of project development. The Closure Plan includes details of the A$2.522M provision for mine closure and rehabilitation.

There is a requirement under the EPN that a Decommissioning and Rehabilitation Plan (“DRP) must be submitted to the Director of Environment within 30 days of notifying the Director of any decision that is likely to give rise to the temporary or permanent cessation of mining and/or processing. The Renison site Decommissioning and Rehabilitation Plan was submitted to EPA-Tasmania in September 2007.

13.2 Mount Bischoff

BDA has reviewed those environmental aspects which are considered a material part of the project and which may have significant implications for project operations, costs or timing. The issues discussed below cover the main environmental risk areas identified from BDA’s review of the project documentation and site visit. The main environmental risk associated with operating the Mount Bischoff project relates to mine waste rock storage and acid mine drainage.

BMT developed a mine plan which covered three years of mine life at the Mount Bischoff lease. The open cut has generated approximately 5Mt of waste rock. Mining ceased at Mount Bischoff in August 2010 as planned, and known proven reserves are now exhausted, other than transfer of remaining ore stockpiles to Renison. The site is now on care and maintenance with a view undertaking further exploration and possibly re-opening in the future if exploration proves successful. The Care and Maintenance Plan (July 2010) has been implemented and is in accordance with EPA-Tasmania guidelines.

The original old pit and workings at Mount Bischoff were visible from the township of Waratah and were part of the local area’s tourist attractions. Acid mine drainage was evident from the old workings and BMTJV has implemented a mine waste management plan which incorporates a waste rock disposal strategy to manage sulphidic mine waste and acid mine drainage. BDA has reviewed the Mine Waste Management Plan (November 2007); the waste dump plans incorporate the encapsulation of potentially-acid-generating (“PAG”) rock within non-acid-generating (“NAG”) material.

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Two main waste rock dumps are constructed on site, Happy Valley with a capacity of approximately 2.2Mbcm and Brown Face which is an existing pit near the top of Mount Bischoff with a capacity of 1.4Mbcm.

BDA has reviewed the Mine Waste Management Plan, in particular the strategy for handling and encapsulating the PAG materials, and is of the opinion that the plan is appropriate for this site and has adequately addressed the issue of acid mine drainage associated with this site.

Mine Closure and Rehabilitation

The Mine Waste Management Plan provides sufficient detail for final mine closure at this stage of project development. The current financial provision for mine closure and rehabilitation is A$0.7M.

There is a requirement under the EPN that a Decommissioning and Rehabilitation Plan must be submitted to the Director of Environment within 30 days of notifying the Director of any decision that is likely to give rise to the temporary or permanent cessation of mining/processing. BMTJV has compiled and is implementing a Care and Maintenance Plan (July 2010) which covers the site during the suspension of mining operations.

Conclusions

BDA has reviewed those environmental aspects which are considered a material part of the project and which may have significant implications for project feasibility, costs and timing. The main environmental risk associated with operating the Renison project relates to water management and the need to mitigate potential impacts arising from water pollution. The management of on-site water flows and excess decant water discharges are critical to maintaining downstream water quality, particularly as surplus process water is discharged from the TSFs and plant site sedimentation ponds. Based on current practices and monitoring data, excess decant water is generally being successfully discharged within the statutory criteria under the EPN. In BDA’s opinion, the current TSF impoundment system and polishing pond arrangements appear appropriate.

Based on the current mitigation measures to reduce the potential off-site detrimental impacts, BDA concludes that the risks associated with the potential for off-site water contamination via site run-off, excess TSF decant water or tailings seepage are medium to low. Provided the project is competently managed, and taking into account the long history of mining at Renison, BDA sees no reason why the project as planned should not continue to operate without significant environmental issues.

The main environmental risk associated with operating the Mount Bischoff project relates to waste rock management and the potential for acid mine drainage and the need to mitigate potential impacts arising from acid mine drainage. The appropriate encapsulation of PAF materials in the waste rock dumps and the management of on-site water flows are critical to maintaining downstream water quality. Based on current mitigation measures and waste rock dump designs, BDA concludes that the risks associated with the potential for off-site water contamination via site run-off or acid mine drainage are medium to low. Provided the project is competently managed, and taking into account the pre-existing acid mine drainage liability at Mount Bischoff, BDA considers the project care and maintenance activities should operate successfully and closure and rehabilitation should be achieved without significant environmental issues.

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APPENDIX V TECHNICAL REPORT AND VALUATION REPORT ON THE ASSETS

14.0 PRODUCTION FORECASTS

The Renison production forecasts are summarised in Table 14.1. The forecasts are based on the current BMTJV LOM plan. The schedule assumes that underground mining will achieve 660,000tpa this financial year and maintain this level for the LOM. No open pit production is assumed despite there being some potential within the Renison ML for open pittable resources. In developing the LOM plan BMT has applied a factor of 0.9 to annual concentrate and tin production from 2012 to reflect the fact that no detailed mine planning, mine recovery or mine dilution have been applied to these resources, so that the values of these parameters in Table 14.1 are 90% of the level that would be expected based on tonnage milled, ore grade and metal recovery. BDA generally considers the approach reasonable for the purposes of LOM planning.

Table 14.1

Renison Production Forecasts – Financial Years

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Category Unit 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Total
Actual Actual Forecast Forecast Forecast Forecast Forecast Forecast Forecast Forecast
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Category Unit 2009 2010 Actual Actual	2011 2012 2013 2014 2015 2016 2017 2018 Total Forecast Forecast Forecast Forecast Forecast Forecast Forecast Forecast
Mining Renison kt 283 391 Open Pits kt 218 198 Total kt 501 589 Processing Ore Milled kt 469 587 Grade % Sn 1.4 1.6 Recovery % Sn 59 68 Conc Prodn kt 7.08 11.33 Conc Grade % Sn 54.0 55.3 Saleable Tin kt 3.82 6.27	660 660 660 656 660 660 659 241 4857 0 0 0 0 0 0 0 0 0 660 660 660 656 660 660 659 241 4857 693 660 660 656 660 660 659 241 4890 1.7 1.9 1.9 2.0 2.0 1.7 1.5 1.4 1.8 69 70 70 70 70 70 70 70 70 14.87 14.50 14.49 14.93 15.21 12.69 11.09 3.81 101.58 55.0 55.0 55.0 55.0 55.0 55.0 55.0 55.0 55.0 8.18 7.97 7.97 8.21 8.36 6.98 6.10 2.09 55.87

Note: “Conc Prodn” = tin concentrate production; “Conc Grade” = tin concentrate grade; from 2012 onwards BMTJV has discounted the total tin production by 10% to reflect a conservative approach to targeted throughput, grade and recovery for the LOM plan

The LOM plan is based predominantly on defined reserves for the period up to 2013; production thereafter draws on Measured and Indicated resources and, in the later years, Inferred resources, for which no detailed mine planning has been undertaken. BMTJV plans to carry out additional infill drilling and sampling to progressively upgrade this material from Inferred resources to an Indicated or Measured category, and thence into reserves, well prior to mining. Future production will be dependent on the confirmation of ongoing reserves; in BDA’s opinion there are good prospects for extension and development of reserves in several areas, subject to a systematic drilling programme and ongoing mine development and dewatering. In this regard BMTJV has had some encouraging results from the Area 4 infill drilling with some significant ore grades and ore widths equal and at times greater than expected.

The main source of production for the period up to 2011 is the Lower Federal orebody. Achievement of the projected underground production rates will be dependent on development of a sufficient number of working faces, and on the productivity of the mining methods. Based on current production levels the targets are challenging, but provided ground conditions at depth remain reasonable BDA considers the longer term targets achievable, while there may be a slower ramp up than forecast in the short term.

The development of the reserves within the northern section of the mine require the rehabilitation and dewatering of around 300m of the Waratah and North Renison declines and the re-establishment of access to old stoping areas; there may be some months slippage on this activity but other sources of ore are being identified which are likely to offset possible shortfalls.

BMTJV’s projections for plant throughput of around 660,000tpa require an average grinding circuit feed rate of 81.5tph to be maintained at a plant utilisation of 93%. Utilisation averaged 86% in 2010 compared with a budgeted 91.5%. Around 45% of the downtime was due to ore shortages. In 2010 plant feed rate averaged 77tph compared with a budget level of 86tph. BDA considers that the plant has the capacity to process ore at the projected annual throughput, probably by milling at an average throughput higher than 82tph to compensate for lower than planned plant availability, but BDA considers there is some risk to the achievement of the 2011 target of 693,000t following cessation of Mount Bischoff operations. Achieving the higher throughputs required while maintaining tin recovery could present some challenges. The productivity of the crushing plant may be a risk to throughput levels as this plant requires a high availability to maintain the ore supply to the

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APPENDIX V TECHNICAL REPORT AND VALUATION REPORT ON THE ASSETS

grinding circuit. Removal of clayey Mount Bischoff ore from the crusher feed blend will assist in achievement of crushing plant throughput targets. Overall however, BDA considers that the limit to milled ore tonnage is likely to be lower than planned mine production rather than plant underperformance.

Over the LOM, tin recovery of 70% is projected. Recovery improved from 59% in 2009 to 68% in 2010 and has averaged 67% during July and August 2010. BDA considers that a recovery level of 70% probably represents close to the upper limit, and that a range of between 67% and 70% on an annual basis is likely to be achievable, provided that plant technical supervision can be maintained at a reasonable level.

Concentrate grade is projected to average around 55% Sn over the LOM. Given past plant performance, this is considered a reasonable target.

In developing the LOM plan BMTJV has applied a factor of 0.9 to tin production per annum from 2012, over and above the mining and processing recovery to reflect a general conservatism and the inclusion of Inferred resources within the mine inventory and the risk of conversion of these resources through to mineable reserves. While this is not conventional in preparing a LOM plan BDA considers the approach is reasonable and appropriately conservative.

Conclusions

BDA considers that the present LOM plan is an appropriate target case. While the throughput and recoveries may prove difficult to achieve on a consistent basis, the ore grade is generally in line with the reserves and resources planned to be mined. While cognisant of the discount that has been applied to the LOM tin production by BMTJV, BDA suggests that it may be prudent to consider the potential for a slower ramp up to full production levels over the next two years reflecting the uncertainties of production in the Lower Federal orebody, the constraints on the crushing plant and the lack of detailed reserves from 2013 and beyond. Nevertheless, provided sufficient working faces are established underground, and a high level of plant maintenance is sustained, BDA considers the long term targets should be achievable.

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APPENDIX V TECHNICAL REPORT AND VALUATION REPORT ON THE ASSETS

15.0 CAPITAL COSTS

Bluestone spent in excess of A$40M in plant and infrastructure refurbishment and mine redevelopment in 2005 in the previous phase of operation. MLX spent a further A$8M on the tin concentrator plant, A$14M on mine development and mobile equipment and A$8M on camp accommodation, prior to the re-start in July 2008. Historical capital expenditures incurred by Bluestone, MLX and BMTJV, based on information provided by BMTJV, are shown in Table 15.1.

Table 15.1

Bluestone, MLX and BMTJV Renison Capital Expenditures (A$M) – Financial Years

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Category Unit 03/04 04/05 05/06 06/07 07/08 08/09 09/10 Total
Original Project Acquisition A$M 3.5 3.5
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Category Original Project Acquisition	Unit A$M	03/04 3.5	04/05	05/06	06/07	07/08	08/09	09/10	Total 3.5
Operating Losses Unrecovered	A$M		7.2	6.6			11.2		25.1
Care and Maintenance	A$M			2.4	3.1	1.9			7.4
Property, Plant and Equipment	A$M	1.0	5.8	1.6	0.3	21.6	14.6	2.4	47.4
Mine Properties and Development – Pre Prodn Costs	A$M	5.1	20.5	0.1		8.9	5.2	0.8	40.7
Rentails Project	A$M		0.2		0.4	2.4	1.4		4.3
Capital Development– Renison	A$M		10.0	3.6	0.3	3.5	3.3	8.7	29.6
Capital Development – Mount Bischoff	A$M		2.4	0.3		4.0			6.7
Exploration	A$M		0.5	0.3	0.2	0.4	1.7	3.1	6.2
Total	A$M	9.7	46.7	14.9	4.2	42.8	37.6	14.9	170.9

Note: financial years ending 30 June

The capital cost forecast for the Renison project from financial year 2010/11 is summarised in Table 15.2. The costs are derived from the most recent LOM schedule.

Table 15.2 Renison Capital Cost Forecast (A$M) – Financial Years

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Category Unit 2011 2012 2013 2014 2015 2016 2017 2018 Total
Plant & Equipment A$M 7.46 7.46 7.46 7.46 7.46 7.46 7.46 2.80 55.06
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Category Plant & Equipment	Unit A$M	2011 7.46	2012 7.46	2013 7.46	2014 7.46	2015 7.46	2016 7.46	2017 7.46	2018 2.80	Total 55.06
Mine Properties & Development
(incl. TSF)	A$M		1.50		4.00	1.00	1.50			9.00
Capital Mine Development	A$M	21.31	21.32	21.32	21.32	21.32	21.32	21.32	8.00	157.24
Reserve Development/Extension
Exploration	A$M	7.81	7.81	7.81	7.81	7.81	7.81	7.81	2.93	57.62
Total	A$M	36.60	38.10	36.60	40.60	37.60	36.60	36.60	13.72	276.41

Note: financial years ending 30 June

Mine capital development costs incorporate the required development of declines and other major mine infrastructure, rises and ladderways. The projected unit rates of development are based on the Macmahon contact schedule of rates for development and associated activities. No detailed development metres have been prepared but it is assumed that the current development in the 2011 budget will continue for the LOM. In the budget it is estimated that there will be 5,610m of capital development of which approximately 4,200m is lateral development and 1,410m is vertical development. While the assumption of constant development requirements is a reasonable assumption the lack of detailed requirements does lower the accuracy of the forecast.

Mine, process plant and infrastructure sustaining capital is provided for under Plant and Equipment in the above table. The mine is extensive with a number of major fixed assets including winder, pump stations, fans and electrical infrastructure plus a mobile mining fleet. The mobile fleet is relatively new but there are some issues with the current fleet which are being addressed by the supplier. BDA considers that sustaining capital of around A$7.5Mpa is appropriate.

Approximately A$7.8M is allowed for resource development and exploration for extension drilling on an annual basis. BDA considers this allowance is appropriate and is important activity if the LOM plan is to be achieved. No specific allowance has been made for further exploration work at Mount Bischoff or to confirm the potential of near-surface open pittable mineralisation on the Renison lease.

Allowance has been made for expenditure on tailings lifts to provide additional tailings storage capacity. A site has also been defined for a new TSF D if required.

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MLX advises that a bond of A$2.5M has been lodged to guarantee performance against rehabilitation obligations at mine closure at Renison; similarly a A$0.7M surety has been lodged in respect of obligations at Mount Bischoff. The bonds are subject to review from time to time and may be increased or decreased depending upon the extent of disturbance and success of rehabilitation.

Conclusions

Projected capital expenditure over the proposed life of the project is considered generally appropriate, covering ongoing mine development, resource development, tailings dam extensions and sustaining capital for process, mine and infrastructure requirements. Underground and surface exploration are critical components of a successful ongoing project; A$7.8Mpa has been allocated to resource development and exploration for resource extensions and upgrading the current Inferred resources to a mineable reserve status.

Bonds of A$2.5M and A$0.7M respectively have been lodged in relation to rehabilitation obligations at Renison and Mount Bischoff respectively; in BDA’s opinion these would be minimum requirements.

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16.0 OPERATINg COSTS

The operating cost forecasts for the Renison project are summarised in Table 16.1. The costs are expressed in real terms before the application of cost and price inflation factors.

Table 16.1 Renison Operating and Offsite Cost Forecasts – Financial Years

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Category Unit 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Total
Actual Actual F’cast F’cast F’cast F’cast F’cast F’cast F’cast F’cast
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Category Unit 2009 2010 Actual Actual	2011 2012 2013 2014 2015 2016 2017 2018 Total F’cast F’cast F’cast F’cast F’cast F’cast F’cast F’cast
Site Costs Mining – Renison A$M 24.0 32.1 Mining – Open Pits A$M 16.7 10.2 Processing A$M 18.9 21.9 Maintenance A$M 5.6 4.7 Site Admin A$M 6.5 5.9 Total Site Costs A$M 71.7 74.8 Offsite Costs Royalties A$M 1.1 1.7 Realisation Costs A$M 7.8 10.7 Interest Charges A$M 0.3 0 Total Costs A$M 80.9 87.2	33.5 33.5 33.5 33.5 33.5 33.5 33.5 12.6 247.0 0.9 0.2 0.2 0.2 0.2 0.2 0.2 0.1 2.5 22.8 22.7 22.7 22.7 22.7 22.7 22.7 8.5 167.8 4.7 4.7 4.7 4.7 4.7 4.7 4.7 1.8 35.0 6.4 6.4 6.4 6.4 6.4 6.4 6.4 2.4 47.2 68.3 67.6 67.6 67.6 67.6 67.6 67.6 25.4 499.4 2.4 2.1 2.3 2.4 2.3 2.1 1.8 0.6 16.1 13.8 13.7 13.0 10.4 13.8 12.2 11.5 4.8 93.2 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 84.5 83.4 82.9 80.5 83.7 81.9 81.0 30.8 608.7
Unit Costs Site Cost/t ore A$/t ore 153 127 Total Cost/t tin A$k/t Sn 21.1 13.9	99 102 102 103 102 102 103 105 102 10.3 10.5 10.4 9.8 10.0 11.7 13.2 14.7 10.9

Note: future royalties are based on BMTJV tin price forecast of A$23,000/t

The residual costs at the Mount Bischoff open pit comprise completion of haulage of stockpiles and ongoing environmental monitoring of the site.

The Renison LOM mining costs are estimated at approximately A$51/t based on the detailed budget for the current financial year and assumed ongoing mining costs at the same cost. The budget costs reflect the recent contract schedule of rates and the planned physical schedule of items such as tonnes drilled and blasted within the stopes and metres of development. Recent mine operating costs (last financial year was A$82/t and A$75/t for the two months July and August 2010) show a significant variance when compared with the A$51/t forecast. Actual costs are around 10% above those projected, but lower productivity levels have impacted on the unit costs. BMTJV notes that with the introduction of contract mining, improvements in productivity have been identified as a major focus. However, BDA considers the rate of improvement may not be as rapid as forecast, which would result in more gradational improvement in unit costs.

In the medium term the mine is anticipating an increase in temperature with increased depth of the operation and BDA would anticipate that costs will increase over the LOM to reflect the increased haulage costs from deeper areas of the mine and the increased cost of ventilation.

BMTJV buys electricity on the spot market; recent average prices have been around 3.5-4¢/kWhr plus around 2.5c/kWhr for distribution charges giving a total of approximately 6-8c/kWhr. Prices vary from season to season. BMTJV maximises hoisting and crushing at night to optimise the use of the lower cost of power during off-peak periods, although crushing is also required during day shift to achieve targeted throughput.

BMTJV has budgeted for process operating costs of A$167.8M over the LOM, equivalent to A$34.3/t for treatment of the planned tonnage 4.89Mt of ore. Process operating costs in 2009 were A$21.9M, equivalent to A$37.4/t. Processing costs are considered by BMTJV to be largely fixed. Labour, power and maintenance costs are likely to fall into this category but reagent and consumable costs should be variable to some extent. Process costs in 2010 were above target, and some reduction in spending is required to meet the levels targeted for 2011 onwards. Maintenance charges were 20% above budget in 2010 at A$4.70M. Administration costs achieved the level required for the long term plan.

Total site costs for 2010, at A$74.8M, are high relative to the targets for the LOM given that volumes mined and processed were below target. Some improvements in productivity are required in most areas of the operation to achieve the unit cost projections.

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Conclusions

The underground cost estimates for 2011 have been professionally developed from first principles. Projected future unit costs are low when compared with recent actual costs; to achieve these levels will require significant improvements in productivity levels, as well as an ongoing focus on cost control.

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17.0 MANAgEMENT

Several of the key personnel within the mine management team have joined the operations relatively recently. Over the period that BMT and BMTJV have been operating the mine there has been considerable turnover within the mine technical and management staff. It is relatively early to judge the impact of the current appointments, but in BDA’s view the management and senior staff appear well motivated and reasonably experienced and qualified, and the priorities in both the mining and processing areas appear appropriate. Several senior professionals have been seconded by MLX’s Perth Office to provide further direction particularly within the geology, mine planning and scheduling areas.

Appropriate processes and procedures are in place and the mine data collection and reporting are considered to be of a high standard. In respect of the mine operations, BMTJV confirms that the introduction of the contractor has improved the operating procedures within the mine production area.

Conclusions

The management team, including a number of recent appointments, appear experienced and capable. Additional technical support is being provided by personnel from the MLX Perth office.

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18.0 SMELTER TERMS

The Renison tin concentrates are containerised and shipped from Burnie to South East Asia, to smelters in Malaysia and Thailand. The smelter terms comprise smelter charges, unit deductions and penalties. The smelter charges include a base treatment charge plus a fuel adjustment factor. The unit deduction is a base grade deduction which may be adjusted up or down according to the concentrate grade relative to the specified benchmark to reflect metal losses in smelting. Further penalty deductions apply based on the content of certain deleterious elements above the specified threshold values, with the concentrate assayed for arsenic, copper, iron and sulphur. Penalties applicable to the Renison concentrates have historically averaged around US$40/t, with iron being the main deleterious mineral.

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APPENDIX V TECHNICAL REPORT AND VALUATION REPORT ON THE ASSETS

19.0 RENTAILS TIN PROJECT

19.1 Background

The Rentails project is based on re-processing of approximately 18Mt of plant tailings with an average grade of 0.44% Sn, and 0.21% Cu stored in three tailings dams (A, B and C) at Renison. The contained tin within these dams is approximately 80,000t, one of the largest tin resources in Australia.

Retreatment of this material has been contemplated since the first two dams, A and B, were decommissioned in 1980. Recovery of the tailings is likely to be by dredge and slurry pumps, with the slurry pumped to the process plant. The preferred processing option is to produce a low grade concentrate with acceptable recoveries using ultra-fine gravity technology and conventional flotation, and to fume this product in a purpose-built tin fumer to produce a saleable tin oxide (“SnO 2”) product.

A significant amount of laboratory and pilot scale testwork has been carried out by Bluestone and MLX including fuming using the Ausmelt pilot plant. A DFS was completed in June 2009; it estimated that approximately 47,000t of tin and 18,000t of copper could be recovered over a ten year project life with estimated capital costs of approximately A$213M.

19.2 Resource and Reserve Estimates

A summary of the resource and reserve estimates for Rentails, as at June 2010 is shown in Table 19.1.

Table 19.1

Table 19.1	Table 19.1	Table 19.1	Table 19.1
Rentails Resource and Reserve Estimates – June 2010
Category	Tonnage Mt	grade % Sn	Contained Sn Tonnes
Resources
Measured	18.957	0.44	83,700
Total	18.957	0.44	83,700
Reserves
Probable	18.116	0.44	79,700
Total	18.116	0.44	79,700

Note: cut off 0% Sn; average copper grade of 0.21% Cu

The estimate is based on surveys, test drilling and sampling, and on metallurgical records of total tonnage milled at Renison, less tin concentrate produced. The tailings in Dams A and B have a slightly higher tin grade than Dam C as recoveries have improved with progressive plant upgrades. Bench scale testwork has indicated retreatment to be technically feasible.

19.3 Metallurgical Testwork

A number of studies have been carried out on the recovery of tin from the Rentails resource. In 1983, sampling of tailings dams A and B returned weighted average assay results of 0.42% Sn. Metallurgical testing resulted in 50% of the tin being recovered into a 10% concentrate. A more comprehensive study was conducted in 1989/90 with controlled bulk sampling of dams A and B returning an average weighted assay of 0.45% Sn. Metallurgical testwork resulted in 61% of the tin being recovered into a 15% concentrate.

In December 2004, Bluestone commenced an auger drilling programme on Dam C with the dual purpose of validating historical grades and obtaining a bulk sample for further metallurgical test works. The average grade of the bulk sample was 0.44% Sn, 36% Fe, 23.8% S, 1.02% As, 0.25% Cu and 5.6% MgO. This result was comparable to the calculated average based on historical tailings assays. In February 2005, Bluestone initiated a testwork programme. Bulk samples derived from a drilling program on Dam C confirmed the grades and generated samples which were considered to be representative of the dam.

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APPENDIX V TECHNICAL REPORT AND VALUATION REPORT ON THE ASSETS

Initial testwork focused on the conventional reclaim-grind, sulphide flotation, tin flotation route with up to three stages of cleaning to produce a 15% Sn concentrate with a targeted overall recovery of 55%. The majority of work conducted on the project since inception followed this approach and this was the main focus until early 2006.

Bluestone also determined that gravity devices could play a more important role in the pre-fuming concentration process, in particular the use of gravity separation to upgrade a low grade concentrate with high recoveries by separating out the competing gangue material and improving the tin flotation kinetics. Testwork at operations in Canada has produced good results in recovering fine heavy minerals using high G-force machines. Bluestone took delivery of a laboratory-scale Falcon UF concentrator in March 2006.

Significant laboratory and pilot scale testwork was completed in 2007 to 2009 as part of the DFS which demonstrated that recovery of tin to low grade concentrate was repeatable. This testwork was conducted on “typical” feed samples and on variability samples with differing characteristics in sulphide and tin grades.

The current Rentails flowsheet incorporates the following key processing stages: tailings mining and feed preparation, fine grinding, sulphide and copper flotation, classification and gravity separation, cassiterite flotation, and fuming.

The DFS proposes reclamation of the tailings from the three dams using a combination of dredging and sluicing methods at a production rate of 2Mtpa. Dredging will be the primary method of reclamation with sluicing being utilised on tailings adjacent to upstream constructed dam walls. It is planned to extract approximately 18Mt at 0.44% Sn and 0.21% Cu from the tailings resource. Reclaimed tails will be slurry pumped to shore facilities to screen debris from the slurry, preparing the tailings for fine grinding.

Tailings will be ground in a 3MW IsaMill to reduce the sizing of the material from an 80% passing size (“p80”) of 70µm to a p80 of 38µm. This stage is designed to increase liberation of fine tin from sulphide and quartz minerals. The tailings will then be processed through copper and sulphide flotation circuits. The copper flotation circuit is designed to produce a copper-rich sulphide material suitable for providing all sulphur units required to the tin fuming process. Testwork results indicate that approximately 92% of the tin in the plant feed will report to flotation tailings.

Sulphide flotation tailings will be classified into +10µm and -10µm streams. The fine stream will be processed through high gravity UF Falcon units with the resultant concentrate being combined with the coarser classification underflow for treatment in a sulphide scavenger circuit prior to the final cassiterite flotation stage.

Cassiterite flotation concentrate will be dewatered and combined with the dewatered copper concentrate as low grade tin concentrate feed stock for the fumer. Local coal and limestone will be added as fuel and fluxes respectively with the tin concentrates to produce tin fume, copper matte and an inert slag. The fumer is projected to recover over 94% of tin in the fumer feed to a tin fume containing greater than 68% Sn. The fume will be washed and packaged for sale.

Total circuit recoveries are projected to be 56% of the tin and 49% of the copper in the reclaimed tailings. The Rentails project is projected to produce approximately 47,000t of tin and 18,000t of copper at annualised rates of approximately 5,000tpa and 2,000tpa respectively over 10 years of production.

Sale of the two concentrates is an alternative to on-site smelting. The low grade tin concentrate could be sold to Chinese fuming operations.

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APPENDIX V TECHNICAL REPORT AND VALUATION REPORT ON THE ASSETS

Production Forecasts

The Rentails production forecasts are summarised in Table 19.2. The forecasts are based on the LOM plan for the project, incorporating any changes resulting from ongoing testwork. There is no defined timeline for the project, but subject to a satisfactory tin price, the project could commence in 2013 and continue for 10 years at 2Mtpa after an initial production ramp-up.

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Table 19.2
Rentails Production Forecasts
Item Unit Yr 1 Yr 2 Yr 3 Yr 4 Yr 5 Yr 6 Yr 7 Yr 8 Yr 9 Yr 10 Total
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Processing
Ore Milled	Mt	0.54	2.00	2.00	2.00	2.00	2.00	2.00	2.00	2.00	1.18	17.25
Average Grade	% Sn	0.50	0.47	0.45	0.44	0.40	0.39	0.40	0.46	0.45	0.44	0.44
Average Recovery	% Sn	63	63	61	62	61	62	62	61	59	60	62
Tin Fume Produced	t	2,344	8,130	7,635	7,556	6,792	6,651	6,866	7,798	7,376	4,302	65,450
Product Grade	% Sn	72	72	72	72	72	72	72	72	72	72	72
Recovered Tin	t Sn	1,694	5,874	5,516	5,459	4,907	4,805	4,960	5,633	5,329	3,108	47,286
Copper Matte prod	t	1,092	3,460	3,245	3,611	2,780	2,553	3,222	2,433	2,150	1,334	25,880
Copper matte grade	% Cu	70	70	70	70	70	70	70	70	70	70	70
Recovered Copper	t Cu	765	2,422	2,271	2,527	1,946	1,787	2,256	1,703	1,505	934	18,116

The fumer would produce a high quality oxide product assaying 72% Sn. Overall recovery is forecast at 56% Sn. If the Renison mine is operating in parallel with the Rentails project, as assumed for this assessment, then scope exists for re-direction of selected streams from the concentrator to the fumer, potentially improving overall tin recovery.

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APPENDIX V TECHNICAL REPORT AND VALUATION REPORT ON THE ASSETS

20.0 VALUATION DISCUSSION

20.1 Overview

The valuation principles outlined in Section 3 have been applied to the BMTJV Tasmanian tin assets. Valuations have been considered as of the Valuation Date of 30 September 2010.

For the Renison operation, BDA has relied upon the discounted cash flow or net present value method as the basis for valuation. As noted in Section 3, this is considered the most appropriate method of valuation for an operating project, for which a LOM plan has been developed and the operating parameters are well established. BDA has also adopted a discounted cashflow approach to assess a value for Mount Bischoff based on potential future ore supplies to Renison.

For Mount Bischoff, BDA has considered the incremental net present value of processing additional ore through the Renison plant. BDA has also applied the Yardstick approach as a check on the incremental NPV.

For the Rentails project, BDA has reviewed the studies undertaken and considers that a discounted cash flow valuation method is appropriate, as the LOM of plan and operating parameters have been developed in detail. As a secondary valuation technique, BDA has also considered the Yardstick and the Past Expenditure methods.

20.2 general Assumptions

BDA’s valuation assumes that:

• All licences, permits, certificates and consents issued by the Federal, State or local government or other authorised entities or organizations that will affect the continuity of the operations have been obtained or will be obtained as required in the future with no material cost

• The financial and operational information provided by BMTJV has been prepared on a reasonable basis, reflecting estimates that have been arrived at after due and careful consideration

• There will be no material change in the existing political, legal, fiscal, technological, market and economic conditions which will affect the revenues and incomes being generated

• There will be no material change in the taxation laws and regulations and the rates of tax payable will remain unchanged and all applicable laws and regulations will be complied with

• The market return, market risk, interest rates and exchange rates will not differ materially from those presently prevailing and market and economic conditions will not differ materially from those forecasted

• Tin supply and demand, both domestically and internationally, will not differ materially from those forecasted

• Management will implement financial and operational strategies that will maximize the efficiency of the operation of the business

• Management has sufficient knowledge and experience in respect of the operation of the business, and turnover of any director, management or key person will not significantly affect the operation of the business

• Adequate financial capital for the projected capital expenditure and working capital will be available and any scheduled interest or repayments of loans will be paid on time

• Management has adopted reasonable and appropriate contingency measures against any human disruption such as fraud, corruption and strike, and the occurrence of any such disruption will not significantly affect the operation of the business

• Management has adopted reasonable and appropriate contingency measures against any natural disaster such as fire or flood and the occurrence of any natural disaster will not significantly affect the operation of the business.

Given the signs of long-term strength in the tin market, BDA considers that a willing and knowledgeable buyer is likely to take a positive view of the long term tin price. However, BDA is not a commodities expert and for an expert view on future tin prices BDA has relied on an independent report prepared by ITRI Limited (formerly the International Tin Research Institute which was established in 1932 as an intergovernmental research organisation and was privatised in

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APPENDIX V TECHNICAL REPORT AND VALUATION REPORT ON THE ASSETS

1995). Mr. Peter Kettle, Manager Statistics and Market Studies at ITRI, has over 30 years experience of analysing the tin market and has prepared a report (“ The Outlook for Tin Prices, November 2010 ”) which considers various supply, demand, and cost scenarios. For the purpose of valuation, BDA has adopted ITRI’s central forecast which is based on tin prices rising to a peak of US$35,00040,000/t from 2013 to 2015 before falling to a long term average of approximately US$20,000/t from 2016 through 2020. Based on the current high prices for spot and 15 month delivery, and the forecast increases in demand leading to supply shortfalls, BDA considers the projections reasonable. However, BDA emphasises that there is no guarantee that prices will follow the ITRI projections, and that the valuations are highly sensitive to the metal price assumptions.

20.3 Renison Operation

DCF Valuation

BDA has derived a DCF valuation of the Renison operation based on the NPV of the pre-debt, post-tax discounted cash flows. BDA has prepared a financial model of the project with production projected for approximately 6.5 years to 2017 based on estimated reserves and assumed conversion of Measured and Indicated resources only. The model is expressed in real terms and is based on financial years ending 30 June.

The BDA financial model has been prepared with due regard to the BTMJV LOM plan for the Renison operation. Mining and processing of the Mount Bischoff ore was completed during the September 2010 quarter and therefore is not included in the production forecasts. BDA has adopted a long term tin price of US$20,000/t, with a maximum of US$37,500/t in 2013/14 and 2014/15, a long term US$/A$ exchange rate of 1.00 and an Australian corporate tax rate of 30%.

The principal parameters and assumptions adopted in the BDA financial model are summarised Table 20.1.

Table 20.1 Renison Parameters and Assumptions

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Item Unit Value Comment
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Mine Life	Years	6.5	Assumes progressive conversion of resources to reserves
Underground Ore Mined	Mt	4.2	Current Renison reserves total 1.7Mt; resources total 7.3Mt
Open Pit Ore mined	Mt	–	Mining and processing of Mount Bischoff ore completed Sep 2010
Total Ore Mined	Mt	4.2	Based on reserves and Measured and Indicated resources only
Ore Processed	Mt	4.2	Stockpiles as at datum are minimal
Average Grade	% Sn	1.8	Consistent with production records and reserve grades
Average Recovery	% Sn	70	Based on BTMJV projections
Concentrate Grade	% Sn	55.0	Consistent with current and historical production
Concentrate Produced	kdmt	89.7	Average 13.8ktpa
Metal in Concentrate	kt Sn	49.3	Avg 7.6ktpa; note 10% reduction in contained Sn from 2012
Cash Site Operating Costs	A$/t milled	100	Expressed in real terms
Total Cash Costs	A$/t milled	137	Includes transport and smelter charges and royalties
Cost per Tonne Metal	US$/t Sn	12,043	Includes transport and smelter charges and royalties
Capital Cost	A$Mpa	37.6	Average over remaining LOM
Long Term Real Tin Price	US$/t	20,000	Maximum price of US$37,500/t 2013/14-2014/15
Tax Rate	%	30	Australian corporate tax rate
Tax Written-down Value	A$M	85	As advised by MLX
Long Term Exchange Rate	A$:US$	1.00	Average over LOM
Real Discount Rate	%	10%	Considered appropriate for operating projects

Resource/Reserve Data

This assessment is based on the estimates in BMTJV’s LOM plan. The LOM plan assumes that in addition to mining the currently defined reserve of 1.7Mt, the Measured, Indicated and Inferred resources will be progressively upgraded and converted to mineable reserves with further development and drilling, although only limited Inferred resources have been included in the LOM plan. For the purposes of Chapter 18 of the Listing Rules guidelines, BDA has limited the LOM ore milled to conversion of Measured and Indicated resources only. Given the ongoing exploration programme and results and the longevity of the Renison operation, BDA considers this a conservative projection; in BDA’s opinion it is likely, provided the tin price remains strong, that economic reserves will be defined to extend the life well beyond the projected 6.5 years adopted in the valuation model.

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APPENDIX V TECHNICAL REPORT AND VALUATION REPORT ON THE ASSETS

The forecast average LOM grade of 1.8% Sn is the same as the resource grade, and approximately 10% higher than was achieved in 2010. Allowing for mining dilution it would be expected that the mined grade would be somewhat lower than the in situ resource grade; however, BDA notes that BMTJV has applied a 10% discount to the recoverable tin from 2012 to reflect the fact that detailed mine planning has not been undertaken in the later years. In BDA’s view this is a reasonable reflection of a likely 10% grade dilution, even though the factor has been applied to the final product rather than the mined grade. Recent drill results and a number of former deeper intersections suggest the presence of areas of significantly higher grade which could impact positively on the LOM grade.

Mining

Mine production is based largely on the BTMJV LOM plan, foreshortened to exclude any contribution from Inferred resources. Underground production continues at a steady state rate of 660,000tpa. There is no open pit production in the LOM plan, although BTMJV has identified two potential open pittable areas within the Renison mine lease. The LOM plan also assumes no further production from Mount Bischoff. BDA considers the targets generally achievable, but the ramp up to a consistent 660,000tpa may take up to a further 18-20 months to achieve.

Processing

The LOM production forecasts are based on the current and historical performance of the Renison concentrator. The forecast throughput peaks at 693,000tpa in 2011 and then continues at a steady state rate of 660,000tpa for the remaining LOM. BDA considers that the 693,000t target for 2011 may prove challenging, but that the longer term 660,000tpa plant throughput is achievable, provided there is no shortfall in mine production. Forecast recovery at 70% is slightly higher than recent performance; BDA anticipates that long term recovery may range between 67-70%.

Capital Costs

The forecast capital expenditure of approximately A$37-40Mpa is substantial and reflects the ongoing delineation drilling and mine development required to achieve the LOM production forecasts. It also reflects the high level of sustaining capital required to maintain the process plant and equipment at Renison.

Operating Costs

Site operating cost forecasts are largely based on the BTMJV LOM plan. BDA has derived fixed and variable cost components for the main components so that the costs in the model are calculated rather than hard-coded. The average forecast site cash cost over the remaining mine life from 1 October 2010 is A$103/t milled, which is close to BTMJV’s LOM estimate.

Offsite costs include transport costs, smelter charges and royalties. The transport and smelter charges have been provided by BTMJV and have been incorporated into the BDA financial model. The average forecast offsite cash cost over the remaining mine life is A$32/t. Total cost per tonne of metal is equivalent to approximately A$10,450/t of tin produced.

Metal Prices/Exchange Rates

The tin price has rallied strongly, like most other metal prices, since the beginning of 2009 and is currently trading at over US$26,000/t. There has been a strong rebound in tin demand over the past 18 months, largely based on strong demand for tin solder, replacing former lead solder, which now accounts for about 55% of total demand; the demand for tin for tinplate is also firm.

Tin stocks are declining and supplies of high quality and low lead tin remain tight worldwide. Indonesia, the second largest producer after China and the leading supplier to international markets, has introduced new mining laws which have effectively limited the scope to increase production. Outside of Indonesia and China, there are few greenfield or brownfield expansions forecast to come on stream in the next two to three years.

BMTJV has advised that the average tin price received for the June 2010 quarter was A$20,230 per tonne. As of October 2010 tin is trading above US$26,000/t, three month tin is also above US$26,000/t and tin for 15 month delivery is trading at US$25,600/t..

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APPENDIX V TECHNICAL REPORT AND VALUATION REPORT ON THE ASSETS

BDA has considered various expert projections, historic data, and current sentiment, in order to derive a consensus of the long term tin price and exchange rate. The general consensus is that the tin market will remain tight in 2010 and the foreseeable future, with forecast tin prices projected to range from US$15,000-25,000/t over the long term. Given the signs of long-term strength in the tin market, BDA considers that a willing and knowledgeable buyer is likely to take a positive view of the long term tin price. BDA is not a commodities expert and for an expert view on future tin prices BDA has relied on an independent report prepared by ITRI (“ The Outlook for Tin Prices, November 2010 ”) which considers various supply, demand, and cost scenarios. For the purpose of valuation, BDA has adopted ITRI’s central forecast which is based on tin prices rising to a peak of US$35,00040,000/t from calendar 2013 to 2015 before falling to a long term average of approximately US$20,000/t from 2016 through 2020. Based on the current high prices for spot and 15 month delivery, and the forecast increases in demand leading to supply shortfalls, BDA considers the projections reasonable. However, BDA emphasises that there is no guarantee that prices will follow the ITRI projections, and that the valuations are highly sensitive to the metal price assumptions.

The value of the project is also sensitive to the long term US$/A$ exchange rate assumption. The A$ has rallied strongly against the US$ in 2010, from a low of 0.82 to over 1.00. This rally is being driven by a number of factors, including a weakness in the US$ and expectations that interest rates will rise in Australia. There is also a historical relationship between the A$ and metal prices, with a high A$ often associated with strong metal prices. For the purposes of valuation BDA has adopted a long term US$/A$ exchange rate of 1.00.

Discount Rate

A real discount rate of 10% within a range of 8-12% has been applied as generally representative of the average discount rate that a willing and knowledgeable buyer might apply to a mining project such as Renison.

Tax Rate

BDA has adopted the Australian corporate tax rate of 30%. It has been assumed that none of the recent proposed modifications to the taxing of the Australian minerals resource industry will impact on future Renison operations as the current proposals relate only to the bulk commodities of coal and iron ore.

Results and Sensitivities

Based on the above assumptions and parameters, BDA has derived a discounted cash flow valuation for the Renison project. The derived range is based on a sensitivity analysis of the key variables and an assessment of the probability of changes in these parameters. The sensitivity analysis shows the impact of a change in one variable at a time.

The valuation range and sensitivity results are summarised in Table 20.2 and Figure 8. The sensitivity factor in the table represents the change in value per 1% change in the project parameter.

Table 20.2 Renison Valuation Results and Sensitivities

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Item Base Range Valuation A$M Sensitivity
Low Most Likely High %
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Real Discount Rate	10%	8-12%	326.7	345.7	366.3	0.3
Metal Grade	1.8% Sn	±10%	272.9	345.7	416.8	2.1
Metal Recovery	70%	±3%	324.5	345.7	366.5	2.0
Site and Transport Costs	A$102/t ore	±10%	322.0	345.7	369.2	0.7
Average Capital Cost	A$32.7Mpa	±10%	331.6	345.7	359.2	0.4
Real Metal Price	US$28,900/t Sn	±10%	270.2	345.7	420.5	2.2
Exchange Rate	1.00	±10%	281.4	345.7	423.7	2.0
Summary/Range			304.2	345.7	389.0

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APPENDIX V TECHNICAL REPORT AND VALUATION REPORT ON THE ASSETS

Figure 8 Renison Project Sensitivity

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425
Xrate
400
Opcosts
375
Capex
350 Discount Rate
325
300
Grade/ Recovery/ Price
275
-10% ML +10%
Project NPV (A$M)
----- End of picture text -----

Based on this analysis, the Renison valuation is:

• most sensitive to grade, recovery, metal price and exchange rate

• moderately sensitive to operating costs, less sensitive to capital costs, and relatively insensitive to discount rate.

20.4 Mount Bischoff Project

Yardstick Approach based on Comparable Transactions

The yardstick or ‘rule of thumb’ method can be used to derive value by applying relevant ratios to resource, reserve and production estimates, or to an expected or potential resource estimate in the case of an advanced exploration project. The relevant ratios that are typically applied are dollars per tonne of contained metal in the resource or reserve, with the ratios calculated on the basis of market value or other transactions. The derived ratios can vary considerably from project to project and reflect the ‘quality’ of the resource estimate and the likelihood of development.

The NPV valuation range derived for the Renison operation in Section 20.3 was A$304.2-389.06M, equivalent to a yardstick range of A$3,926-5,021/t of contained tin, with a most likely yardstick value of A$4,462/t.

In determining the appropriate yardstick range applicable to the Mount Bischoff project, certain aspects of the two projects must be considered. Renison is an operating mine whereas the Mount Bischoff open pit operation was recently suspended with only minimal reserves and low grade resources remaining. Nevertheless, BDA considers that with further exploration work there are reasonable prospects of defining additional mineable material that would warrant trucking to Renison for processing.

On this basis, BDA considers that a willing and knowledgeable buyer might value the remaining resources and future potential about 15-20% of the value that might be ascribed to an operating hard rock resource under development or production. Applying 15-20% to the most likely value of A$4,462/t gives a range of A$669-892/t. Applying this range to the contained tin in the Mount Bischoff Measured/Indicated resource provides a valuation range of A$4.3-5.7M with a most likely value of A$5.0M.

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APPENDIX V TECHNICAL REPORT AND VALUATION REPORT ON THE ASSETS

DCF Valuation

BDA has derived a DCF valuation of the Mount Bischoff project by determining the incremental value of the Renison operation, on a pre-debt, post-tax basis, attributed to processing the Mount Bischoff ore at the end of the Renison mine life. For valuation purposes, BDA has assumed that 250,000t of ore grading 1.3% Sn will be processed at the end of the project. Mining and haulage costs are based on recent forecasts.

Based on the above assumptions and parameters, BDA has derived an incremental discounted cashflow valuation of A$7.3-7.7M, with a most likely value of A$7.5M, for the Mount Bischoff project.

Summary

A summary of BDA’s valuation ranges for the Mount Bischoff project is shown in Table 20.3.

Table 20.3 Mount Bischoff Valuation Results

Property	Valuation (A$M) Low Most Likely High	Valuation (A$M) Low Most Likely High	Valuation (A$M) Low Most Likely High	Comments
Yardstick Method	4.3	5.0	5.7	Based on Renison valuation
Incremental DCF	7.3	7.5	7.7	Incremental value, processing at Renison
Method
Average	5.8	6.2	6.7

20.5 Rentails Project

DCF Valuation

BDA has derived a DCF valuation of the Rentails project based on the NPV of the pre-debt, post-tax discounted cash flows. BDA has prepared a financial model of the project with production projected for 10 years to 2022, commencing in 2013. The model is expressed in real terms and is based on financial years ending 30 June.

The BDA financial model has been prepared with due regard to BMTJV’s LOM plan for the Rentails project. BDA has adopted a long term tin price of US$20,000/t and a long term US$/A$ exchange rate of 0.90.

The BDA financial model has been prepared with due regard to BMTJV’s LOM plan for the Rentails project. BDA has adopted a long term tin price of US$20,000/t with a peak of US$37,500/t from 2013/14 to 2014/15 based on ITRI’s projections, a long term US$/A$ exchange rate of 1.00 and an Australian corporate tax rate of 30%.

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Table 20.4
Rentails Parameters and Assumptions
Item Unit Value Comment
Mine Life Years 10 Includes initial construction years
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Item Mine Life	Unit Years	Value 10	Comment Includes initial construction years
Tailings Retreated	Mt	18	Processing rate of 1.9Mtpa
Average Grade	% Sn	0.44	Consistent with reserve grade
Average Recovery	% Sn	60	Consistent with testwork
Concentrate Grade	% Sn	72	Final product from fuming process
Concentrate Produced	kdmt	65.3.	Average 7.4ktpa concentrate shipped
Metal in Concentrate	kt Sn	47.0	Average 5.3ktpa tin
Total Cash Costs	A$/t treated	36	Includes transport and smelter charges and royalties
Cost per Tonne Metal	US$/t Sn	13,678	Includes transport and smelter charges and royalties
Initial Capital Cost	A$M	213	Includes tin fumer
Ongoing Capital Cost	A$Mpa	1.3	Includes tailings facilities and sustaining capital
Long term Tin Price	US$/t	20,000	Maximum price of US$37,500/t 2013/14-2014/15
Tax Rate	%	30	Australian corporate tax rate
Average Exchange Rate	A$:US$	1.00	Average over LOM
Real Discount Rate	%	12%	Considered appropriate for a developing project

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APPENDIX V TECHNICAL REPORT AND VALUATION REPORT ON THE ASSETS

Resource/Reserve Data

The estimates are based on survey and drill data supported by metallurgical records. The latest estimate has increased the average grade from 0.42% Sn to 0.44% Sn and 0.2% Cu.

Mining Data

The tailings will be dredged and the slurry pumped to the tailings retreatment plant for processing. The tailings from the retreatment process will be stored in a new tailings facility until sufficient working area has been cleared in the existing dams.

Processing

Further testwork is required to confirm the results of testwork carried out to date and to optimise the plant flowsheet. The process is relatively complex, however the technology being considered is well established at other operations around the world. The overall tin recovery of 60% is considered achievable and could potentially be improved with further refinements to the process.

Capital Costs

BDA has adopted the revised initial capital cost estimate of A$213M in the DCF analysis. This assumes that the Rentails project is developed on a stand-alone basis and that the Renison plant is operating independently on underground ore; however, the Rentails operation still benefits from established infrastructure, where relevant.

Operating and Offsite Costs

BDA has adopted the latest operating cost estimates. The indicative unit cash operating cost including site and offsite costs is estimated to be approximately A$13,000-14,000/t after the copper credits.

Metal Prices/Exchange Rates

As discussed, BDA considers that a willing and knowledgeable buyer would take a reasonably positive view of the long term tin price, based on the current strength in the market and future projections. BDA has adopted the price assumptions described in Section 20.3 with a long term tin price of US$20,000/t in real terms and a peak of US$37,500/t from 2013/14 to 2014/15, and a US$/ A$ exchange rate of 1.00.

Discount Rate

A real discount rate of 12% within a range of 9.6-14.4% has been applied as generally representative of the average discount rate applied to development projects over the past 20 years and representative in BDA’s opinion of the discount rate a willing and knowledgeable buyer would apply to such a project.

Tax Rate

BDA has adopted the Australian corporate tax rate of 30%. It has been assumed that none of the recent proposed modifications to the taxing of the Australian minerals resource industry will impact on future Rentails operations as the current proposals relate only to the bulk commodities of coal and iron ore.

Results and Sensitivities

Based on the above assumptions and parameters, BDA has derived a discounted cash flow valuation for the Rentails project. The derived range is based on a sensitivity analysis of the key variables and our assessment of the probability of changes in these parameters. The sensitivity analysis shows the impact of a change in one variable at a time.

— V-71 —

APPENDIX V TECHNICAL REPORT AND VALUATION REPORT ON THE ASSETS

The valuation range and sensitivity results are summarised in Table 20.5 and Figure 9. The sensitivity factor in the table represents the change in value per 1% change in the project parameter.

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

Table 20.5
Rentails Valuation Results and Sensitivities
Item Base Range Valuation A$M Sensitivity
Low Most Likely High %
Real Discount Rate 12% 9.6-14.4% 70.8 93.4 120.3 1.3
Metal Grade 0.44 % Sn ±10% 54.2 93.4 131.6 4.2
Metal Recovery 61% ±3% 80.9 93.4 105.8 4.4
Site and Transport Costs $31/t ore ±10% 75.8 93.4 110.5 1.9
Initial Capital Cost $213Mpa ±10% 78.2 93.4 108.5 1.6
Real Metal Price US$27,800/t Sn ±10% 53.5 93.4 132.3 4.2
Exchange Rate 0.90 ±10% 54.8 93.4 139.2 4.3
Summary/Range 66.9 93.4 121.2
Figure 9
Rentails Project Sensitivity
Xrate
125
Site Costs
Capex
Discount Rate
100
75
Grade/ Recovery/ Price
50
-10% ML +10%
Project NPV (A$M)
----- End of picture text -----

Based on this analysis, the Rentails valuation is:

• most sensitive to grade, recovery, metal price and exchange rate

• moderately sensitive to operating costs and capital costs, and

• less sensitive to the discount rate.

Past Exploration Expenditure

Past exploration expenditure is commonly used as a guide to determining the value of exploration properties, the assumption being that well-directed exploration has added value to the property. This is not always the case and exploration can also down-grade a property, consequently a prospectivity enhancement multiplier (PEM) factor is applied as described in Section 3.

According to MLX data, past Bluestone and MLX expenditure on the Rentails project is of the order of A$4.3M. Much of this expenditure has been on drilling, sampling and metallurgical studies to establish the viability of processing the tailings material. The testwork has been generally successful in developing a process flowsheet that produces a tin fume product and copper matte.

On the basis that the resource is well defined, that the testwork has produced encouraging results and that the work is at a detailed feasibility study stage, BDA has applied a PEM range of 2.0-3.0 for valuation purposes. The derived valuation range is A$8.6-12.9M, with a most likely value of A$10.8M.

— V-72 —

APPENDIX V TECHNICAL REPORT AND VALUATION REPORT ON THE ASSETS

Yardstick Approach based on Comparable Transactions

The yardstick or ‘rule of thumb’ method can be used to derive value by applying relevant ratios to resource, reserve and production estimates, or to an expected or potential resource estimate in the case of an advanced exploration project. The relevant ratios that are typically applied are dollars per tonne of contained metal in the resource or reserve, with the ratios calculated on the basis of market value or other transactions. The derived ratios can vary considerably from project to project and reflect the ‘quality’ of the resource estimate and the likelihood of development.

The NPV valuation range derived for the Renison operation in Section 20.3 was A$304.2-389.0M, equivalent to a yardstick range of A$3,926-5,021/t of contained tin, with a most likely yardstick value of A$4,462/t.

In determining the appropriate yardstick range applicable to the Rentails project, certain aspects of the two projects must be considered. Renison is an operating mine whereas Rentails is at the pre-development stage, and as demonstrated in the DCF analysis, requires a tin price of around A$20,000/t to break even. Tailings are inherently more difficult to process than the primary ore based on the fact that the easily extracted metal has already been recovered, and the grade is significantly lower, increasing the operating risk. Also the capital cost of the potential project development is comparatively high which also adds to the project risk.

On this basis, BDA considers that a willing and knowledgeable buyer might value a tailings resource at about 20-30% of the value that might be ascribed to an operating hard rock resource under development or production. Applying 20-30% to the most likely value of A$4,462/t gives a range of A$892-1,339/t. Applying this range to the contained tin in the Rentails resource provides a valuation range of A$69.6-104.4M with a most likely value of A$87.0M.

Summary

A summary of BDA’s valuation ranges for the Rentails project is shown in Table 20.6. Given the well defined nature of the tailings resource, with effectively a known location, tonnage and grade based on historical production data, BDA considers the past expenditure method a less realistic guide to value, and has based the Rentails valuation on the DCF and Yardstick methods. While Rentails represents a significant tin resource, the grade is relatively low and a reasonably high tin price is required to warrant development of the project. BDA considers that the valuation tabulation below provides a realistic estimate of the value range that a willing and knowledgeable buyer might ascribe.

Table 20.6 Rentails Valuation Results

Property	Low	Valuation (A$M) Most Likely	High	Comments
DCF Method	69.6	87.0	104.4	Reviewed at long term tin price and exchange rate
Yardstick Method	66.9	93.4	121.2	Based on Renison valuation
Average	68.3	90.2	112.8

20.6 Valuation Summary

A summary of BDA’s valuation ranges for the BTMJV Tasmanian tin assets is shown in Table 20.7.

Table 20.7 Summary Valuation of the BMTJV Tasmanian Tin Assets

Property	Valuation (A$M) Low Most Likely	High	Comments
Renison Project	304.2 345.7	389.0	NPV method and sensitivities
Mount Bischoff	5.8 6.2	6.7	Based on potential future supply of ore to Renison
Project
Rentails Project	68.3 90.2	112.8	Average of DCF and Yardstick methods
Total	378.2 442.1	508.5

BDA emphasises that the valuation results are sensitive to the tin price assumptions.

— V-73 —

APPENDIX V TECHNICAL REPORT AND VALUATION REPORT ON THE ASSETS

MLX has advised that at any point in time the value of tin in stocks in transit between the mine and buyer is approximately A$18M. BDA has not considered the value of stocks in its valuation other than in the context of maintaining working capital as we have been valuing the projects per se and adjustments for stocks and creditors are typically accounted for in the details of the sales agreement.

— V-74 —

APPENDIX V TECHNICAL REPORT AND VALUATION REPORT ON THE ASSETS

21.0 STATEMENT OF CAPABILITY

This report has been prepared by Mr Malcolm Hancock and Mr John McIntyre, both of whom are Directors of BDA, Mr Peter Ingham, General Manager Mining and Mr Ian White and Mr Adrian Brett, Senior Associates of BDA. A summary of the professional qualifications and experience of the consultants involved is included below.

BDA is a full service engineering and financial consulting firm, specialising in due diligence and Independent Expert reviews and valuations, Independent Engineer assignments and technical audits of resources, reserves, mining and processing operations and project feasibility studies. The parent company, Behre Dolbear & Company Inc., was founded in 1911 and is the oldest continuously operating mineral industry consulting firm in North America. Behre Dolbear has offices in Denver, New York, Toronto, London, Vancouver, Guadalajara, Santiago and Sydney.

Mr Malcolm Hancock (BA, MA, FAusIMM, FGS, MIMM, MGSA, MMICA) is Executive Director of BDA. He is a qualified geologist, with over 30 years experience of exploration and mining projects principally in Australia, Africa and South East Asia. He has extensive experience in the areas of resource/reserve estimation, reconciliation, project feasibility and development, mine geology and mining operations. Mr Hancock has been involved in the feasibility and assessment of many mining operations and has worked on both open pit and underground mines. He has been closely involved with the development of the BDA Independent Engineer capability and has managed and directed many of the assignments completed to date.

Mr John McIntyre (BE (Min) Hon., FAusIMM, CP (Min), MMICA) is Managing Director of BDA. He is a qualified mining engineer who has been involved in the mining industry for more than 30 years, with operational and management experience in base metals, gold and coal in open pit and underground operations. He has been involved in numerous mining projects and operations, feasibility studies and technical and operational reviews in Australia, West Africa, New Zealand, North and South America, PNG and South East Asia. He has been a consultant for 17 years, primarily involved in the management of BDA since 1994, and in the development of the independent engineering and technical audit role.

Mr Peter Ingham (B.Sc. (Min), M.Sc., DIC, GDipAppFin (Sec Inst), CEng, FAusIMM, MIMMM)) is General Manager Mining of BDA and is a graduate mining engineer with more than 25 years in the mining industry in Europe, Africa, Australia and Asia. His experience includes operations management, mining contract management, strategic planning, project assessment and acquisition, cost estimation and operational audits and trouble-shooting. He is experienced in a range of commodities in both surface and underground mining.

Mr Ian white (BSc. (Hon) Metall., MSC, DIC, MAusIMM) is a Senior Associate of BDA with more than 22 years experience in the Australian mining industry. He has held senior management positions in operating mines, including Chief Metallurgist for Savage River Mines and Cyprus Gold Australia. He has been involved in plant design and optimisation, process design testwork, feasibility studies and plant commissioning and project valuation. His technical expertise includes CIP/CIL technology, flotation, heap leaching, SX/EW, comminution, magnetic separation and pelletising and he has worked with a range of commodities including gold, copper, iron ore and base metals.

Mr Adrian Brett (B.Sc. (Hon) Geol., M.Sc., M.Envir.Law, MAusIMM) is a Senior Associate of BDA with more than 25 years experience in environmental and geo-science, including the fields of environmental planning and impact assessment, site contamination assessments, environmental audit, environmental law and policy analysis and the development of environmental guidelines and training manuals. He has worked in an advisory capacity with several United Nations and Australian government agencies. He has completed assignments in Australia, Indonesia, Thailand, the Philippines, Africa and South America.

— V-75 —

APPENDIX V TECHNICAL REPORT AND VALUATION REPORT ON THE ASSETS

22.0 STATEMENT OF INDEPENDENCE

Neither the Principals nor Associates of BDA have any material interest or entitlement in the securities or assets of Vitar, the Target Company, MLX or any associated companies. BDA will be paid a fee for this report comprising its normal professional rates and reimbursable expenses. The fee is not contingent on the conclusions of this report.

23.0 LIMITATIONS AND CONSENT

This assessment has been based on data, reports and other information made available to BDA by MLX, BMT and BMTJV. BDA has been advised that the information is complete as to material details and is not misleading. A draft copy of this report has been provided to Vitar, the Target Company, BMTJV and MLX for comment as to any errors of fact, omissions or incorrect assumptions.

The opinions stated herein are given in good faith. We believe that the basic assumptions are factual and correct and the interpretations reasonable.

With respect to the BDA report and use thereof by Vitar, this company agrees to indemnify and hold harmless BDA and its shareholders, directors, officers, and associates against any and all losses, claims, damages, liabilities or actions to which they or any of them may become subject under any securities act, statute or common law and will reimburse them on a current basis for any legal or other expenses incurred by them in connection with investigating any claims or defending any actions.

This report is provided to the Directors of Vitar to assist them in their assessment of the Tasmanian Tin Assets of the BMTJV and in consideration of the proposed transaction and should not be used or relied upon for any other purpose. This report does not constitute a technical or legal audit. Neither the whole nor any part of this report nor any reference thereto may be included in or with or attached to any document or used for any purpose without our written consent to the form and context in which it appears.

Yours faithfully

BEHRE DOLBEAR AUSTRALIA PTY LTD

==> picture [162 x 43] intentionally omitted <==

Malcolm C Hancock Executive Director – BDA

==> picture [132 x 44] intentionally omitted <==

John McIntyre Managing Director – BDA

Prepared by Behre Dolbear Australia Pty Limited Level 9, 80 Mount Street North Sydney NSW 2060 Australia Tel 612 9954 4988; Fax 612 9929 2549

— V-76 —

APPENDIX VI LETTERS ON PROJECTION UNDERLYINg THE VALUATION OF THE ASSETS

Set out below are the texts of the letters from Deloitte Touche Tohmatsu and BNP Paribas Capital (Asia Pacific) Limited in connection with the cash flow forecasts underlying the valuation report of the Assets dated 31 December 2010 prepared by Behre Dolbear Australia Pty Limited for the purpose of inclusion in this circular.

==> picture [107 x 51] intentionally omitted <==

ACCOUNTANTS’ REPORT ON CALCULATIONS OF DISCOUNTED FUTURE ESTIMATED CASH FLOwS IN CONNECTION wITH THE VALUATION OF THE ASSETS

TO THE DIRECTORS OF VITAR INTERNATIONAL HOLDINgS LIMITED

We have examined the calculations of the discounted future estimated cash flows on which the valuation, prepared by Behre Dolbear Australia Pty Limited dated 31 December 2010, of the Tasmanian tin assets (the “Assets”) including the Renison tin mine, the Renison concentrator, the Rentails project, the Mount Bischoff mine and associated tenements, plant and equipment as at 30 September 2010 (the “Valuation”) is based. The Assets were held under an unincorporated joint venture which is owned as to 50% each by Bluestone Mines Tasmania Pty Limited and YT Parksong Australia Holding Pty Limited, an indirectly owned subsidiary of Parksong Mining And Resource Recycling Limited (the “Target Company”).

The Valuation based on the discounted future estimated cash flows is regarded as a profit forecast under Rule 14.61 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Listing Rules”) and will be included in a circular dated 31 December 2010 to be issued by Vitar International Holdings Limited (the “Company”) in connection with the acquisition of the entire issued share capital of the Target Company (the “Circular”).

Directors’ responsibility for the discounted future estimated cash flows

The directors of the Company are responsible for the preparation of the discounted future estimated cash flows in accordance with the bases and assumptions determined by the directors and set out in Appendix V to the Circular (the “Assumptions”). This responsibility includes carrying out appropriate procedures relevant to the preparation of the discounted future estimated cash flows for the Valuation and applying an appropriate basis of preparation; and making estimates that are reasonable in the circumstances.

— VI-1 —

LETTERS ON PROJECTION UNDERLYINg THE VALUATION OF THE ASSETS

APPENDIX VI

Reporting accountants’ responsibility

It is our responsibility to form an opinion on the arithmetical accuracy of the calculations of the discounted future estimated cash flows on which the Valuation is based and to report solely to you, as a body, as required by Rule 14.62(2) of the Listing Rules, and for no other purpose. We do not assume responsibility towards or accept liability to any other person for the contents of this report.

Our engagement was conducted in accordance with Hong Kong Standard on Assurance Engagements 3000 “Assurance Engagements Other Than Audits or Reviews of Historical Financial Information” issued by the Hong Kong Institute of Certified Public Accountants. This standard requires that we comply with ethical requirements and plan and perform the assurance engagement to obtain reasonable assurance on whether the discounted future estimated cash flows, so far as the calculations are concerned, have been properly compiled in accordance with the Assumptions. Our work does not constitute any valuation of the Assets.

Because the Valuation relates to discounted future estimated cash flows, no accounting policies of the Company have been adopted in its preparation. The Assumptions include hypothetical assumptions about future events and management actions which cannot be confirmed and verified in the same way as past results and these may or may not occur. Even if the events and actions anticipated do occur, actual results are still likely to be different from the Valuation and the variation may be material. Accordingly, we have not reviewed, considered or conducted any work on the reasonableness and the validity of the Assumptions and do not express any opinion whatsoever thereon.

Opinion

Based on the foregoing, in our opinion, the discounted future estimated cash flows, so far as the calculations are concerned, have been properly compiled, in all material respects, in accordance with the Assumptions.

Deloitte Touche Tohmatsu

Certified Public Accountants

Hong Kong 31 December 2010

— VI-2 —

LETTERS ON PROJECTION UNDERLYINg THE VALUATION OF THE ASSETS

APPENDIX VI

==> picture [30 x 30] intentionally omitted <==

The Board of Directors

Vitar International Holdings Limited

Room 304-306, 3/F., Block B, New Trade Plaza, 6 On Ping Street, Siu Lek Yuen, Shatin, N.T., Hong Kong

31 December 2010

Dear Sirs,

We refer to the valuation dated 31 December 2010 prepared by the Behre Dolbear Australia Pty Limited (the “Valuer” or “BDA”) in relation to the appraisal of the value of the Tasmanian tin assets (the “Assets”) including the Renison tin mine, the Renison concentrator, the Rentails project, the Mount Bischoff mine and associated tenements (the “Valuation”). As stated in the valuation report from the Valuer, the Valuation for the Assets has been arrived at and based on the income approach, which takes into account the future cashflow projection (the “Projection”). As such, the Projection is regarded as profit forecast under paragraph 29(2) of Appendix IB of the Listing Rules. Terms used in this letter have the same meanings as defined elsewhere in the circular dated 31 December 2010 (the “Circular”), of which this letter forms part, unless the context requires otherwise.

We have discussed with you and the Valuer the bases and assumptions as set out in section 2 and 20 of Appendix V to the Circular, upon which the Projection has been made. We have also considered, and relied upon, the report addressed to the Board from Deloitte Touche Tohmatsu as set out in Appendix VI to the Circular regarding the calculations upon which the Projection also have been made. We have noted that no accounting policies of the Company have been adopted in its preparation as the Valuation only relates to cashflow.

— VI-3 —

APPENDIX VI LETTERS ON PROJECTION UNDERLYINg THE VALUATION OF THE ASSETS

On the bases of the foregoing, we are satisfied that the Projection for which you as the directors of the Company are solely responsible, have been made after due and careful enquiry.

Yours faithfully,

For and on behalf of

BNP Paribas Capital (Asia Pacific) Limited

Isadora Li

Head of Investment Banking — North Asia

— VI-4 —

gENERAL INFORMATION

APPENDIX VII

1. RESPONSIBILITY STATEMENT

This circular, for which the Directors collectively and individually accept full responsibility, includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the Enlarged Group. The Directors, having made all reasonable enquiries, confirm that to the best of their knowledge and belief the information contained in this circular is accurate and complete in all material respects and not misleading or deceptive, and there are no other matters the omission of which would make any statement in this circular misleading.

2. SHARE CAPITAL

The authorized and issued share capital of the Company as at the Latest Practicable Date and immediately after Completion are set out as follows:

As at the Latest Practicable Date

Authorised: 20,000,000,000 Shares as at the Latest Practicable Date Issued and fully paid, or credited as fully paid: 2,880,000,000 Shares as at the Latest Practicable Date Upon Completion Issued and fully paid, or credited as fully paid: 2,880,000,000 Shares as at the Latest Practicable Date 548,639,456 Conversion Shares to be issued upon exercise of the Convertible Bonds in full 3,428,639,456 Shares in issue immediately following the issue of the Conversion Shares to be made upon exercise of the Convertible Bonds in full

HK$ 100,000,000.00 14,400,000.00 HK$ 14,400,000.00 2,743,197.28

17,143,197.28

The Conversion Shares shall rank pari passu in all aspects, including all rights as to dividend, voting and interest in capital, among themselves and with all other Shares in issue on the date of issue of the Conversion Shares.

— VII-1 —

gENERAL INFORMATION

APPENDIX VII

3. INTERESTS OF DIRECTORS

As at the Latest Practicable Date, the interests or short position of each Director, chief executive, supervisor 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), as recorded in the register maintained by the Company under section 352 of the SFO or otherwise notified to the Company and the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers (the “Model Code”) contained in the Appendix 10 of the Listing Rules, were as follows:

				Approximate
		Long/short	Number of	percentage of
Name of Director	Nature of interest	position	shares	shareholding
Mr. Leung Chau	Interest of a controlled	Long position	880,000,000	30.56%
Hiu	corporation_(note 1)_
Mr. Leung Kai	Interest of a controlled	Long position	880,000,000	30.56%
Wing	corporation_(note 1)_
Mr. Cheung Wai	Interest of controlled	Long position	560,000,000	19.44%
Kuen	corporation_(note 2)_
Mr. Li Xianghong	Beneficial interest	Long position	21,890,000	0.76%

Notes:

1. Mr. Leung Chau Hiu and Mr. Leung Kai Wing’s interests in the Company are held through Vitar Development Holdings Limited incorporated in British Virgin Islands, which is owned as to 35% by Mr. Leung Chau Hiu and as to 32.5% by Mr. Leung Kai Wing.

2. Mr. Cheung Wai Kuen’s interest in the Company is held through Wright Source Limited.

Save as disclosed above, as at the Latest Practicable Date, none of the directors or chief executives of the Company had any interests or short positions in the shares, underlying shares and debentures of the Company and its associated corporations (within the meaning of Part XV of the SFO) as recorded in the register required to be kept under section 352 of the SFO or as otherwise notified to the Company and the Stock Exchange pursuant to the Model Code.

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gENERAL INFORMATION

APPENDIX VII

4. INTERESTS OF SUBSTANTIAL SHAREHOLDERS

Save as disclosed below, as at the Latest Practicable Date, according to the register of interest kept by the Company under Section 336 of the SFO and so far as was known to the Directors and the chief executive of the Company, the following person had an interest or short positions in the shares or underlying shares which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO, or 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 general meetings of any other member of the Group or had any option in respect of such capital:

Long position in the Shares

			Approximate
		Number of	percentage of
Name of shareholder	Nature of interest	shares	shareholding
Vitar Development Holdings	Beneficial owner	880,000,000	30.56%
Limited
(note 1)
Wright Source Limited_(note_	Beneficial owner	560,000,000	19.44%
2)
Chan Kon Fung_(note 3)_	Beneficial interest	548,639,456	19.05%

Notes:

1. Vitar Development Holdings Limited is owned by Mr. Leung Chau Hiu, Mr. Leung Kai Wing, Mr. Yip Sai Keung, Ms. Tsang Chi Yung, Ms. Leung Chun Yin and Ms. Wong Lai Mui as to 35%, 32.5%, 7.5%, 10% and 5% respectively.

2. Wright Source Limited is wholly owned by Mr. Cheung Wai Kuen.

3. 548,639,456 Shares to be issued upon the exercise of the conversion rights attach to the Convertible Bonds to be issued pursuant to the terms and conditions of the Sale and Purchase Agreement.

— VII-3 —

gENERAL INFORMATION

APPENDIX VII

5. DIRECTORS’ SERVICE CONTRACTS

As at the Latest Practicable Date, Mr. Leung Chau Hiu and Mr. Leung Kai Wing have entered into service contracts with the Company for an initial term of three years commencing from 21 October 2008 and will continue thereafter until terminated by three months’ notice in writing served by either party of the other, which notice shall not expire until after expiry of the initial fixed term of three years.

Mr. Chang Yong Tian and Mr. Chen Liang have entered into service contracts with the Company for a term of one year commencing from 22 January 2010 and 13 April 2010 respectively and renewable by mutual agreement on annual basis.

Each of the existing independent non-executive directors has entered into a service contract with the Company for a term of one year commencing from 23 December 2009 and renewable by mutual agreement on annual basis.

Other than as disclosed above, no director has a service contract with the Company or any of its subsidiaries which is not determinable within one year without payment of compensation, other than statutory compensation.

6. COMPETINg INTERESTS

As at the Latest Practicable Date, none of the Directors or any of their respective associates has any interests in any business which compete or may compete with the business of the Enlarged Group.

7. LITIgATION

Save as disclosed in the paragraph headed “Risks associated with litigation” set out in the section headed “Risk Factor” in page 76 of this circular. As at the Latest Practicable Date, no member of the Enlarged Group was engaged in any litigation of material importance and there was no litigation or claim of material importance known by the Directors to be pending or threatened against any member of the Enlarged Group and there is no legal claims or proceedings that may influence the Target Group’s rights to explore or mine.

8. MATERIAL CONTRACTS

The following contracts were entered into by the Enlarged Group (not being contracts entered into in the ordinary course of business) during the period of two years immediately preceding the date of this circular and are or may be material:

— VII-4 —

gENERAL INFORMATION

APPENDIX VII

• (a) the Sale and Purchase Agreement;

• (b) a framework agreement dated 9 February 2010 entered into between Vitar Insulation Manufacturers Limited (“Vitar Insulation”) and New Ocean (China) Limited in relation to the disposal of properties by Vitar Insulation for a consideration of HK$7.9 million, details of which are set out in the announcement and circular of the Company dated 9 February 2010 and 2 March 2010 respectively;

• (c) a framework agreement dated 9 February 2010 entered into between Vitar Insulation and Grandeur (China) Limited in relation to the disposal of properties by Vitar Insulation for a consideration of HK$17 million, details of which are set out in the announcement and circular of the Company dated 9 February 2010 and 2 March 2010 respectively;

• (d) a framework agreement dated 9 February 2010 entered into between Vitar Insulation and Joy Success Corporation Limited in relation to the disposal of properties by Vitar Insulation for a consideration of HK$3,150,000, details of which are set out in the announcement and circular of the Company dated 9 February 2010 and 2 March 2010 respectively;

• (e) a framework agreement dated 9 February 2010 entered into between Vitar Insulation and Major Business Limited in relation to the disposal of properties, by Vitar Insulation for a consideration of HK$3,060,000 details of which are set out in the announcement and circular of the Company dated 9 February 2010 and 2 March 2010 respectively;

• (f) the JV Agreement;

• (g) the Management Agreement;

• (h) the shareholders agreement dated 28 January 2010 entered into between the Management Company, BMT and YT Parksong Australia in relation to the management of the Joint Venture;

• (i) the acquisition agreement dated 28 January 2010 entered into between BMT, YT Parksong Australia, Yunnan Tin PRC and the Target Company in relation to the acquisition of 50% interest in the Assets by BMT to YT Parksong Australia of which YT Parksong shall pay BMT the sum of AUD50,000,000 as consideration for the acquisition of 50% of the Assets and YT Parksong shall pay BMT AUD10,000,000 if it further acquires 10% of the Assets From BMT;

— VII-5 —

gENERAL INFORMATION

APPENDIX VII

• (j) the Tasmania Tin Joint Venture Deed of Cross Charge dated 28 January 2010 entered into between BMT, YT Parksong Australia and the Manager for the grant of charge as security for the obligations of the parties under the JV Agreement;

• (k) the memorandum (the “July Memorandum”) dated 25 July 2009 made between the Target Company and Yunnan Tin PRC in relation to the co-operation of the Target Company and Yunnan Tin PRC on the proposed acquisition of 60% of the Assets of which the Target Company is responsible for the cost of AUD7,600,000 accrued from the early stage of the said acquisition;

• (l) the first undertaking (the “1st Undertaking”) dated 25 July 2009 made between the Target Company and Yunnan Tin PRC in relation to the rights and obligations of the Target Company and Yunnan Tin PRC under the July Memorandum;

• (m) the second undertaking (the “2nd Undertaking”) dated 25 July 2009 made between the Target Company and Yunnan Tin PRC in relation to the due diligence exercise arrangement under the July Memorandum;

• (n) the co-operation agreement (the “Co-operation Agreement”) dated 9 September 2009 made between the Target Company and Yunnan Tin PRC in respect of the co-operation of the Target Company and Yunnan Tin PRC on the proposed acquisition of 60% of the Assets and in particular the Target Company and Yunnan Tin PRC agreed to provide funds to Yunnan Tin HK for the proposed acquisition in proportion to their respective shareholdings of 45% and 55% in Yunnan Tin HK;

• (o) the supplemental co-operation agreement (the “Supplemental Co-operation Agreement”) dated 9 September 2009 made between the Target Company and Yunnan Tin PRC in relation to the co-operation of the Target Company and Yunnan Tin PRC on the proposed acquisition of 60% of the Assets and a proposed formation of a trust of which Yunnan Tin PRC shall be the trustee of the Target Company to hold the shares of Yunnan Tin HK in favour of the Target Company;

• (p) the memorandum (the “December Memorandum”) dated 22 December 2009 made between the Target Company and Yunnan Tin PRC in relation to a proposed trust arrangement between the Target Company and Yunnan Tin PRC;

— VII-6 —

gENERAL INFORMATION

APPENDIX VII

• (q) the Loan (Parksong) Agreement made between Yunnan Tin PRC and the Target Company for advance of a loan of US$19,485,000 by Yunnan Tin PRC to the Target Company;

• (r) the agreement dated 7 May 2010 made between the Target Company and Yunnan Tin PRC in relation to the provision of funds of an aggregate amount of US$17,952,500 of which US$8,080,000 shall be provided by Yunnan Tin PRC to Yunnan Tin HK and US$9,872,500 shall be provided by the Target Company to Yunnan Tin HK;

• (s) the agreement dated 18 July 2010 made between the Target Company and Yunnan Tin PRC to terminate the December Memorandum and other arrangements as agreed by the Target Company and Yunnan Tin PRC under the July Memorandum, the 1st Undertaking, the 2nd Undertaking, the Cooperation Agreement, the Supplemental Co-operation Agreement;

• (t) the deed on assignment dated 19 July 2010 and the supplemental deed dated 6 December 2010 made between the Target Company to the Vendor on the assignment by the Target Company to the Vendor of the rights and benefits under the advance of a loan of AUD16,300,000 by the Target Company to Yunnan Tin PRC at a consideration of AUD16,300,000;

• (u) the Loan (Sun Hung Kai) Agreement made between Sun Hung Kai Finance Yunnan Tin HK, the Vendor, the Target Company and YT Parksong Australia for advance of a loan of HK$250,000,000 to Yunnan Tin HK by Sun Hung Kai Finance;

• (v) the deed of security (the “Deed of Security”) on the property of YT Parksong Australia dated 15 March 2010 made by YT Parksong Australia in favour of Sun Hung Kai Finance as one of the condition precedents to the Loan (Sun Hung Kai) Agreement for the purpose of securing the advance of a loan of HK$250,000,000 to Yunnan Tin HK by Sun Hung Kai Finance;

• (w) the share mortgage (the “Share Mortgage”) in respect of 5,500 issued share of HK$1.00 each of Yunnan Tin HK dated 15 March 2010 made by the Target Company to Sun Hung Kai Finance as one of the condition precedents to the Loan (Sun Hung Kai) Agreement for the purpose of securing the advance of a loan of HK$250,000,000 to Yunnan Tin HK by Sun Hung Kai Finance;

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APPENDIX VII

• (x) the debenture (the “Debenture”) incorporating first fixed and floating charge over all the undertakings, properties and assets of the Target Company dated 15 March 2010 made by the Target Company to Sun Hung Kai Finance as one of the condition precedents to the Loan (Sun Hung Kai) Agreement for the purpose of securing the advance of a loan of HK$250,000,000 to Yunnan Tin HK by Sun Hung Kai Finance;

• (y) the equitable mortgage of shares (the “Equitable Mortgage of Shares”) of YT Parksong Australia dated 15 March 2010 made by Yunnan Tin HK in favour of Sun Hung Kai Finance as one of the condition precedents to the Loan (Sun Hung Kai) Agreement for the purpose of securing the advance of a loan of HK$250,000,000 to Yunnan Tin HK by Sun Hung Kai Finance; and

• (z) the deed of release dated 13 July 2010 made by Sun Hung Kai Finance in favour of Yunnan Tin HK, the Vendor, the Target Company, YT Parksong Australia and Yunnan Tin PRC to release and discharge the Deed of Security, the Share Mortgage, the Debenture and the Equitable Mortgage of Shares subsequent to the repayment of the loan under the Loan (Sun Hung Kai) Agreement.

9. DIRECTORS’ INTEREST IN ASSETS/CONTRACTS AND OTHER INTERESTS

None of the Directors was materially interested in any contract or arrangement entered into by any member of the Enlarged Group subsisting at the Latest Practicable Date which was significant in relation to the businesses of the Group.

None of the Directors has any direct or indirect interests in any assets which have been acquired or disposed of by or leased to any member of the Group or are proposed to be acquired or disposed of by or leased to any member of the Group since 31 December 2009, being the date to which the latest published audited consolidated accounts of the Group were made.

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APPENDIX VII

10. EXPERTS AND CONSENTS

The following are the qualifications of the experts who have given their opinions and advice which are included in this circular:

Name Qualification BNP Paribas Capital (Asia a corporation licensed to carry out type 1 (dealing Pacific) Limited in securities) and type 6 (advising on corporate finance) regulated activities under the SFO Deloitte Touche Tohmatsu Chartered Accountants Certified Public Accountants Behre Dolbear Australia Pty Independent professional valuer and independent Limited technical adviser

Name

As at the Latest Practicable Date, each of the above experts:

1. did not have any shareholding in any member of the Group or any right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member of the Group;

2. did not have any direct or indirect interest in any assets which had been acquired or disposed of by or leased to any member of the Group or were proposed to be acquired or disposed of by or leased to any member of the Group since 31 December 2009, being the date up to which the latest published financial statements of the Group were made; and

3. has given and has not withdrawn its written consent to the issue of this circular with the inclusion of and references to its name, letter and/or report in the form and context in which they respectively appear.

11. MISCELLANEOUS

• (a) The secretary of the Company is Mr. Leung Ka Wai, who is a certified public accountant of the Hong Kong Institute of Certified Public Accountants and has accumulated over six years of professional experience in accounting and auditing.

• (b) The registered office of the Company is located at Cricket Square, Hutchins Drive, P.O. Box 2681, Grand Cayman KY1-1111, Cayman Islands and the head office and principal place of business of the Company is situated at Flat 4-6, 3rd Floor, New Trade Plaza Tower B, 6 On Ping Street, Siu Lek Yuen, Shatin, Hong Kong.

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APPENDIX VII

The branch share registrar of the Company in Hong Kong is Tricor Investor Services Limited at 26/F., Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong.

12. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be available for inspection at the principal place of business of the Company at Flat 4-6, 3rd Floor, New Trade Plaza Tower B, 6 On Ping Street, Siu Lek Yuen, Shatin, Hong Kong during normal business hours from the date of this circular up to the date of the EGM:

• (a) the memorandum and articles of association of the Company;

• (b) the letters on projection underlying the valuation of the assets from BNP Paribas Capital (Asia Pacific) Limited and Deloitte Touche Tohmatsu are referred in Appendix VI to this circular;

• (c) details of the Directors’ service contracts referred to under the paragraph headed “General information — Directors’ service contracts” in this appendix;

• (d) the annual reports of the Company for the two years ended 31 December 2009;

• (e) the accountants’ report of the Target Group as set out in Appendix II to this circular;

• (f) the accountants’ report issued by Deloitte Touche Tohmatsu in connection with the unaudited pro forma financial information on the Enlarged Group, the text of which is set out in Appendix III to this circular;

• (g) the valuation report, the text of which is set out in Appendix VI to this circular;

• (h) the material contracts referred to in the paragraph headed “Material contracts” in this appendix; and

• (i) the written consents referred to in the paragraph headed “Experts and Consents” in this appendix.

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NOTICE OF EgM

==> picture [62 x 62] intentionally omitted <==

VITAR INTERNATIONAL HOLDINgS LIMITED 威達國際控股有限公司

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 195)

NOTICE IS HEREBY gIVEN that an Extraordinary General Meeting (“Meeting”) of Vitar International Holdings Limited (the “Company”) will be held at Room 2607, Greenfield Tower Concordia Plaza, 1 Science Museum Road, Tsimshatsui, Kowloon, Hong Kong at 11:00 a.m. on 19 January, 2011 for the purpose of considering, and, if thought fit, passing the following resolution as ordinary resolution:

ORDINARY RESOLUTION

“ THAT :

• (a) the agreement (the “Agreement”) (a copy of which has been produced to the Meeting marked “A” and signed by the Chairman of the Meeting for the purpose of identification) dated 13 July 2010 and entered into between Gallop Pioneer Limited as purchaser, Mr. Chan Kon Fung (the “Vendor”) as vendor and the Company as purchaser’s guarantor in relation to the sale and purchase of the entire issued share capital of Parksong Mining And Resource Recycling Limited at a consideration of HK$1,086,500,000 (subject to adjustment) together with all supplemental deeds and the transactions contemplated thereunder including the exercise by BMT (as defined below) of put option granted by YT Parksong Australia (as defined below) to BMT according to the terms and conditions of the Acquisition Agreement (as defined below), be and are hereby approved, confirmed and ratified;

• (b) the exercise of YT Parksong Australia Holding Pty Ltd (“YT Parksong Australia”) of call option granted by Bluestone Mines Tasmania Pty Ltd (“BMT”) to YT Parksong Australia according to the terms and conditions of the acquisition agreement (the “Acquisition Agreement”) dated 28th January 2010 made between BMT, YT *

• Parksong Australia and Yunnan Tin Group (Holding) Co., Ltd （雲南錫業集團（控. 股）有限責任公司）be and is hereby approved and any one or more of the director(s) (“Director(s)”) of the Company be authorized to approve the exercise of the said call option according to the terms and conditions of the Acquisition Agreement, and take all steps he/they consider necessary, desirable or expedient for the purpose of, or in connections with, the implementation of and giving effect to, such exercise of the said call option;

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NOTICE OF EgM

• (c) the issue of convertible bonds (the “Convertible Bonds”) in the principal amount of HK$806,500,000 of the Company to the Vendor in accordance with the terms and conditions of the Agreement be and is hereby approved;

• (d) the allotment and the issue of the ordinary shares of HK$0.005 each in the issued share capital of the Company (the “Conversion Shares”) from time to time upon the exercise of the conversion rights attached to the Convertible Bonds; and

• (e) any one or more of the Directors of the Company be and is/are hereby authorized to, on behalf of the Company, take all steps he/they consider necessary, desirable or expedient and to execute and deliver any instrument, document or agreement (including where necessary the affixation of the common seal of the Company in accordance with the articles of association of the Company) for the purpose of, or in connection with, the implementation of and giving effect to the Agreement and the transactions contemplated thereunder, including but not limited to the issue of the Convertible Bonds, and issue and allotment of the Conversion Shares from time to time upon exercise of the conversion rights attached to the Convertible Bonds.”

By order of the Board Cheung wai Kuen Executive Director

Hong Kong, 31 December 2010

Notes:

1. A member entitled to attend and vote at the Meeting is entitled to appoint one or more proxies to attend and, on a poll, vote on his/her behalf. A proxy need not be a member of the Company.

2. To be valid, a form of proxy and the power of attorney or other authority (if any) under which it is signed or a materially certified copy of such power of attorney or authority, must be deposited with the Company’s branch share registrar and transfer office in Hong Kong, Tricor Investor Services Limited, at 26th Floor Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong not less than 48 hours before the time appointed for holding the Meeting or any adjourned Meeting.

3. For identification purpose only

As of the date of this notice, the Board comprises Mr. LEUNG Chau Hiu, Mr. LEUNG Kai Wing, Mr. CHEUNG Wai Kuen, Mr. Cheng Hau Yan, Mr. CHENG Pak Lung, Mr. CHEN Liang and Mr. LI Xianghong as executive Directors, and Mr. WONG Hing Tat, Mr. LIU Feng and Mr. ZHONG Wei Guang as independent non-executive Directors.

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