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, a bank manager, solicitor, professional accountant or other professional adviser.

If you have sold or transferred all your shares in Pan Asia Mining Limited, you should at once hand this circular with the enclosed form of proxy to the purchaser or transferee or to the bank, 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, The Stock Exchange of Hong Kong Limited and Hong Kong Securities Clearing Company Limited take no responsibility for the contents of this circular, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this circular.

This circular is not and does not constitute an invitation or offer to acquire, purchase or subscribe for the shares or other securities of the Company.

This circular is addressed to the Shareholders in connection with an extraordinary general meeting of the Company to be held on 9 February 2011.

This document, for which the directors of the Company collectively and individually accept full responsibility, includes particulars given in compliance with the Rules Governing the Listing of Securities on the Growth Enterprise Market of The Stock Exchange of Hong Kong Limited for the purpose of giving information with regard to the Company. 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.

PAN ASIA MINING LIMITED
寰亞礦業有限公司

(Incorporated in the Cayman Islands with limited liability)

(Stock code: 8173)

PROPOSED CAPITAL REORGANISATION AND
PROPOSED RIGHTS ISSUE OF NOT LESS THAN
760,153,400 RIGHTS SHARES
AND NOT MORE THAN 760,653,400 RIGHTS SHARES
ON THE BASIS OF FIVE (5) RIGHTS SHARES FOR EVERY ONE (1)
CONSOLIDATED SHARE HELD ON THE RECORD DATE

DEBT RESTRICTURING AGREEMENT

Underwriter of the Rights Issue

國際君安國際
GUOTAI JUNAN INTERNATIONAL

Guotai Junan Securities (Hong Kong) Limited

Independent Financial Adviser to
the Independent Board Committee and the Independent Shareholders

A letter from the Board is set out on pages 1 to 19 of this circular. A letter of recommendation from the Independent Board Committee to the Independent Shareholders is set out on page 20 of this circular. A letter of advice from Donvex Capital Limited to the Independent Board Committee and the Independent Shareholders is set out on pages 21 to 33 of this circular.

A notice convening the EGM to be held at Suite 3008, Tower One, Times Square, 1 Matheson Street, Causeway Bay, Hong Kong on Wednesday, 9 February 2011 at 11 a.m. is set out on pages 55 and 57 of this circular. A form of proxy is also enclosed. Whether or not you are able to attend and vote at the EGM in person, you are requested to complete and return the accompanying form of proxy in accordance with the instructions printed thereon to the branch registrar of the Company in Hong Kong, Tricor Tengis Limited, at 26th Floor, Tesbury Centre, 28 Queen's Road East, Hong Kong as soon as possible and in any event not later 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 subsequently attending and voting at the EGM or any adjournment thereof, should you so wish. This circular will remain on the GEM website at www.hkgem.com on the "Latest Company Announcements" page for at least seven days from the date of its posting.

The Shareholders and potential investors of the Company should note that the Rights Issue is conditional upon the Underwriting Agreement having become unconditional and the Underwriter not having terminated the Underwriting Agreement in accordance with the terms thereof (a summary of which is set out in the sub-paragraph headed "Termination of Underwriting Agreement" below). Accordingly, the Rights Issue may or may not proceed.

Trading of Consolidated Shares on ex-rights basis is expected to commence on Friday, 11 February 2011, and dealing in the Rights Shares in their nil-paid form is expected to take place from Wednesday, 23 February 2011 to Wednesday, 2 March 2011 (both dates inclusive). Any person contemplating buying or selling of the Shares or the Consolidated Shares (as the case may be) from now up to the date on which all conditions of the Rights Issue are fulfilled and dealing in the Rights Shares in their nil-paid form between Wednesday, 23 February 2011 to Wednesday, 2 March 2011 (both dates inclusive) will bear the risk that the Rights Issue may not become unconditional and may not proceed. Investors should seek professional advice regarding dealings in Shares or the Consolidated Shares (as the case may be) and nil-paid Rights Shares if they are in any doubt.

19 January 2011

CHARACTERISTICS OF GEM

GEM has been positioned as a market designed to accommodate companies to which a high investment risk may be attached than other companies listed on the Stock Exchange. Prospective investors should be aware of the potential risks of investing in such companies and should make the decision to invest only after due and careful consideration. The greater risk profile and other characteristics of GEM mean that it is a market more suited to professional and other sophisticated investors.

Given the emerging nature of companies listed on GEM, there is a risk that securities traded on GEM may be more susceptible to high market volatility than securities traded on the Main Board of the Stock Exchange and no assurance is given that there will be a liquid market in the securities traded on GEM.

— i —

CONTENTS

Page

EXPECTED TIMETABLE ... iii
DEFINITIONS ... vi
TERMINATION OF THE UNDERWRITING AGREEMENT ... xi
LETTER FROM THE BOARD ... 1
LETTER FROM THE INDEPENDENT BOARD COMMITTEE ... 20
LETTER FROM THE INDEPENDENT FINANCIAL ADVISER ... 21
APPENDIX I — FINANCIAL INFORMATION OF THE GROUP ... 34
APPENDIX II — UNAUDITED PRO FORMA FINANCIAL INFORMATION OF
THE GROUP ... 36
APPENDIX III — GENERAL INFORMATION ... 44
NOTICE OF EGM ... 55

— ii —

EXPECTED TIMETABLE

The expected timetable for the Capital Reorganisation and the Rights Issue is set out below:

2011

Latest time for lodging proxy forms for the EGM. 11:00 a.m. on Monday, 7 February
EGM 11:00 a.m. on Wednesday, 9 February
Announcement of results of EGM Wednesday, 9 February
Effective date of the Capital Reorganisation Thursday, 10 February
Dealings in Consolidated Shares commence. Thursday, 10 February
Original counter for trading in existing Shares in board lots of 10,000 Shares temporarily closes 9:30 a.m. on Thursday, 10 February
Temporary counter for trading in the Consolidated Shares in board lots of 200 Consolidated Shares (in the form of existing share certificates) opens 9:30 a.m. on Thursday, 10 February
First day for free exchange of existing share certificates for new share certificates. Thursday, 10 February
Last day of dealings in the Consolidated Shares on a cum-rights basis. Thursday, 10 February
First day of dealings in the Consolidated Shares on an ex-rights basis. Friday, 11 February
Latest time for lodging transfer of the Consolidated Shares for entitlement to the Rights Issue 4:30 p.m. on Monday, 14 February
Book closure period (both dates inclusive) Tuesday, 15 February to Friday, 18 February
Record Date Friday, 18 February
Register of members re-opens Monday, 21 February
Despatch of Prospectus Documents Monday, 21 February
First day of dealings in nil-paid Rights Shares Wednesday, 23 February
Original counter for trading in the Consolidated Shares in board lots of 5,000 Consolidated Shares (in the form of new share certificates) reopens 9:30 a.m. on Thursday, 24 February

— iii —

EXPECTED TIMETABLE

Parallel trading in the Consolidated Shares
(in the form of new share certificates and existing share certificates) commences .9:30 a.m. on Thursday, 24 February

Designated agent to stand in the market to provide matching service to facilitate the odd lots trading commences .9:30 a.m. on Thursday, 24 February

Latest time for splitting nil-paid Rights Shares .4:30 p.m. on Friday, 25 February

Last day of dealings in nil-paid Rights Shares .Wednesday, 2 March

Latest time for payment for and acceptance of the Rights Shares and application for excess Rights Shares .4:00 p.m. on Monday, 7 March

Rights Issue becomes unconditional .4:00 p.m. on Thursday, 10 March

Announcement on results of the Rights Issue .Monday, 14 March

Refund cheques in respect of wholly or partially unsuccessful applications for excess Rights Shares expected to be posted on or before .Tuesday, 15 March

Certificates for the Rights Shares expected to be despatched on or before .Tuesday, 15 March

Temporary counter for trading in the Consolidated Shares in board lots of 200 Consolidated Shares (in the form of existing share certificates) closes .4:00 p.m. on Wednesday, 16 March

Designated agent to stand in the market to provide matching services ends .4:00 p.m. on Wednesday, 16 March

Parallel trading in the Consolidated Shares (in the form of new share certificates and existing share certificates) ends .4:00 p.m. on Wednesday, 16 March

Dealings in fully-paid Rights Shares expected to commence .Thursday, 17 March

Last day for free exchange of existing share certificates for new share certificates .Monday, 21 March

Note: All times in this circular refer to Hong Kong times.

Dates or deadlines specified in this circular are indicative only and may be varied by agreement between the Company and the Underwriter. Any consequential changes to the expected timetable will be published or notified to Shareholders appropriately.

— iv —

EXPECTED TIMETABLE

Note: The latest time for acceptance of and payment for the Rights Shares and for application and payment for excess Rights Shares will be changed if there is a tropical cyclone warning signal number 8 or above, or a "black" rainstorm warning:

(1) in force in Hong Kong at any local time before 12:00 noon but no longer in force after 12:00 noon on the Last Acceptance Date. Instead the latest time for acceptance of and payment for the Rights Shares and for application and payment for excess Rights Shares will be extended to 5:00 p.m. on the same Business Day; or

(2) in force in Hong Kong at any local time between 12:00 noon and 4:00 p.m. on the Last Acceptance Date. Instead the latest time for acceptance of and payment for the Rights Shares and for application and payment for excess Rights Shares will be rescheduled to 4:00 p.m. on the following Business Day which does not have either of those warnings in force at any time between 9:00 a.m. and 4:00 p.m.

If the latest time for acceptance of and payment for the Rights Shares and for application and payment for excess Rights Shares is changed, the dates mentioned above may be affected. The Company will notify Shareholders by way of announcement(s) on any change to the expected timetable as soon as practicable.

— v —

DEFINITIONS

In this circular, unless the context requires otherwise, the expressions as stated below will have the following meanings:

"Announcement"
the announcement of the Company dated 23 December 2010 in relation to the Capital Reorganisation and the Rights Issue;

"associate(s)"
has the meaning ascribed thereto in the Listing Rules;

"Black Sand"
Black Sand Enterprises Limited, a company incorporated in Hong Kong and a wholly-owned subsidiary of the Company;

"Board"
the board of Directors;

"Business Day"
a day (other than a Saturday, Sunday and public holiday) on which banks are open for business in Hong Kong;

"Capital Reorganisation"
the proposed capital reorganisation of the Company involving the Share Consolidation and the Increase in Authorised Share Capital;

"CCASS"
The Central Clearing and Settlement System established and operated by HKSCC;

"Companies Ordinance"
the Companies Ordinance, Chapter 32 of the Laws of Hong Kong;

"Company"
Pan Asia Mining Limited, a company incorporated in the Cayman Islands with limited liability with the Shares listed on GEM;

"connected person(s)"
has the meaning ascribed thereto in the Listing Rules;

"Consolidated Share(s)"
ordinary share(s) of HK$0.50 each in the share capital of the Company after the Share Consolidation becoming effective;

"controlling shareholder"
has the meaning ascribed thereto in the Listing Rules;

"Convertible Bonds"
the zero coupon convertible bonds in the aggregate principal amount of US$201,474,359 issued by the Company on 18 December 2008 to Kesterion and which are in issue and outstanding as at the date of this Agreement;

"Debt Restructuring Agreement"
the debt restructuring agreement entered into between the Company, Black Sand and Kesterion on 22 December 2010 in relation to the restructuring of the Relevant Indebtedness, as the same may be amended, modified or supplemented from time to time;

"Director(s)"
the director(s) of the Company;

— vi —

DEFINITIONS

"EGM"
the extraordinary general meeting to be convened and held for approving, amongst other things, the Capital Reorganisation and the Rights Issue;

"Excess Application Form(s)" or "EAF(s)"
the form of application for excess Rights Shares;

"Excluded Shareholder(s)" or "Non-Qualifying Shareholder(s)"
the Shareholder(s) whose names appear on the register of members of the Company as at the close of business on the Record Date and whose address(es) as shown on such register are outside Hong Kong where the Directors, after making enquiries, consider it necessary or expedient on account either of legal restrictions under the laws of the relevant place or the requirements of the relevant regulatory body or stock exchange in that place not to offer the Rights Shares to such Shareholder(s);

"Final Acceptance Date"
the final date for acceptance of, and payment of, Rights Shares (or such other date as the Underwriter and the Company may agree);

"GEM"
the Growth Enterprise Market of the Stock Exchange of Hong Kong Ltd;

"Group"
the Company and its subsidiaries;

"HK$"
Hong Kong dollar, the lawful currency of Hong Kong;

"HKSCC"
Hong Kong Securities Clearing Company Limited;

"Hong Kong"
the Hong Kong Special Administrative Region of the PRC;

"Increase in Authorised Share Capital"
the proposed increase in the authorised share capital of the Company from HK$300,000,000 divided into 600,000,000 Consolidated Shares to HK$1,000,000,000 divided into 2,000,000,000 Consolidated Shares by the creation of 1,400,000,000 Consolidated Shares, upon completion of the Share Consolidation;

"Independent Board Committee"
an independent committee of the Board, comprising all the independent non-executive Directors to be formed to make recommendations to the Independent Shareholders in relation to the Rights Issue;

— vii —

DEFINITIONS

"Independent Financial Adviser"
Donvex Capital Limited, a licensed corporation under the SFO to carry on type 6 (advising on corporate finance) regulated activity, and the independent financial adviser to make recommendations to the Independent Board Committee and the Independent Shareholders in relation to the Rights Issue;

"Independent Shareholders"
the independent shareholders of the Company, other than a shareholder who is a controlling shareholder of the Company or a Director and their respective associates;

"Kesterion"
Kesterion Investments Limited, a company incorporated in the British Virgin Islands and is beneficially owned by Ms. WONG Eva, a sister of Mr. WONG Chung Yu, Denny, the chairman of the Board, and a sister-in-law of Mr. YIN Mark Teh-min, a non-executive Director, and a connected person and a substantial shareholder of the Company;

"Last Trading Day"
Wednesday, 22 December 2010, the last day on which the Shares were traded on the Stock Exchange immediately preceding the publication of the Announcement;

"Latest Practicable Date"
14 January 2011, being the latest practicable date prior to the printing of this circular for the purpose of ascertaining certain information for inclusion therein;

"Latest Time for Termination"
4:00 p.m. on the third Business Day following the Final Acceptance Date;

"Listing Rules"
the Rules Governing the Listing of Securities on the GEM;

"Overseas Shareholder(s)"
the Shareholder(s) whose address(es) on the register of member of the Company are outside Hong Kong on the Record Date;

"Posting Date"
Monday, 21 February 2011 or such other date as the Underwriter may agree in writing with the Company, being the date of despatch of the Rights Issue Documents to the Qualifying Shareholders or the Prospectus to the Overseas Shareholders (as the case may be);

"PRC"
the People's Republic of China, excluding Hong Kong, Macao Special Administrative Region of the PRC and the Republic of China for the purpose of this circular;

"Prospectus"
the prospectus to be despatched to the Shareholders on the Posting Date in connection with the Rights Issue in such form as may be agreed between the Company and the Underwriter;

— viii —

DEFINITIONS

“Prospectus Documents”	the Prospectus, the PALs and the EAFs;
“Provisional Allotment Letter(s)” or “PAL(s)”	the provisional allotment letter(s) for the Rights Shares;
“Qualifying Shareholder(s)”	the Shareholder(s), whose name(s) appear on the register of members of the Company as at the close of business on the Record Date, other than the Excluded Shareholder(s);
“Record Date”	Friday, 18 February 2011, being the date for determining the entitlement of the Qualifying Shareholders to the Rights Issue;
“Registrar”	Tricor Tengis Limited of 26th Floor, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong, the Company’s share registrar;
“Relevant Indebtedness”	the outstanding indebtedness of the Company and/or Black Sand to Kesterion in respect of (i) certain unsecured and interest-free short term loans due from the Company to Kesterion in the aggregate principal amount of HK$10,000,000 and (ii) the promissory notes issued by Black Sand to Kesterion dated 18 December 2008 in the total sum of HK$190,000,000 due from Black Sand to Kesterion and due for repayment initially on 18 December 2009 and extended to 18 June 2010;
“Rights Issue”	the proposed offer by way of rights of not less than 760,153,400 and not more than 760,653,400 Consolidated Shares at the Subscription Price on the terms and subject to the conditions set out in this circular (and as such conditions may be revised by the Company by way of a further announcement thereafter from time to time with the consent of the Underwriter) and to be set out in the Prospectus Documents;
“Rights Share(s)”	not less than 760,153,400 and not more than 760,653,400 Consolidated Shares proposed to be offered for subscription under the Rights Issue;
“RMB”	Renminbi, the lawful currency of the PRC;
“Shares”	ordinary shares of HK$0.01 each in the capital of the Company;
“Share Consolidation”	the proposed consolidation of every fifty (50) issued and unissued Shares of HK$0.01 each into one (1) Consolidated Share of HK$0.50 each;

— ix —

DEFINITIONS

“Shareholder(s)”	shareholder(s) of the Company;
“Share Options”	the share options granted under the Share Option Scheme;
“Share Option Scheme”	the share option scheme adopted by the Company on 25 April 2002;
“Stock Exchange”	The Stock Exchange of Hong Kong Limited;
“Subscription Price”	a price of HK$0.50 per Rights Share;
“substantial shareholder”	has the meaning ascribed thereto in the Listing Rules;
“Takeovers Code”	the Code on Takeovers and Mergers;
“Undertaking”	the irrevocable undertaking dated 22 December 2010 given by Kesterion to the Company and the Underwriter to subscribe or procure, the subscription of its full allotment of the Rights Shares;
“Underwriter”	Guotai Junan Securities (Hong Kong) Limited;
“Underwriting Agreement”	the underwriting agreement dated 22 December 2010 entered into between the Company and the Underwriter in relation to the Rights Issue;
“Underwritten Shares”	all the Rights Shares other than (a) the Rights Shares to be provisionally allotted to Kesterion and/or its nominee as referred to in the Undertaking, being 102,025,000 Rights Shares; and (b) the excess Rights Shares provisionally allotted but not accepted by other Qualifying Shareholders (and/or the transferee of the nil-paid Rights Shares) to be subscribed by Kesterion and/or its nominee as referred to in the Undertaking in respect of a maximum of 150,128,400 excess Rights Shares;
“US$”	United States dollars, the lawful currency of the United States; and
“%”	per cent.

— x —

TERMINATION OF THE UNDERWRITING AGREEMENT

The Underwriter may terminate the Underwriting Agreement by giving notice in writing to the Company at any time prior to the Latest Time for Termination (or such later date as the Company and the Underwriter may agree) if in the reasonable opinion of the Underwriter there shall develop, occur, exist or come into effect:

(i) any of the conditions precedent (as mentioned above) is not fulfilled (or waived); or
(ii) any material adverse change in the business or the financial or trading position of the Company or the Group since the date of the Underwriting Agreement; or
(iii) any matter or event showing any of the warranties, undertakings or provisions contained in the Underwriting Agreement to be untrue, inaccurate or misleading in any respect when given or repeated or there has been a material breach of any of the warranties, undertakings or any other provisions of this Agreement by the Company; or
(iv) any statement contained in the Announcement or any Prospectus Documents is, becomes or is discovered to be untrue, incorrect or misleading in any material respect; or

If on or prior to the Latest Time for Termination:

(i) any of the representations or warranties of the Company in the Underwriting Agreement being untrue in a material respect at any time down to and including the Final Acceptance Date or if, prior to the despatch of the Prospectus Documents any matter or event comes to the attention of the Company as a result of which any representation or warranty, if repeated immediately after the occurrence thereof, would be materially untrue or inaccurate or which would or might render materially untrue, inaccurate or misleading any statement, whether of fact or opinion, contained in the Prospectus Documents if the same were issued immediately after such occurrence comes to the attention of the Underwriter; or
(ii) the Company or Kesterion commit any breach of or omit to observe any of the obligations or undertakings expressed to be assumed by the Company under this Agreement or by Kesterion under the Undertaking,

the Underwriter shall be entitled (but not bound) by notice in writing to the Company to elect to treat such matter or event as releasing and the Underwriter from its obligations, under this Agreement.

Upon the giving of such notice, all obligations of the Underwriter under the Underwriting Agreement will cease and determine and no party will have any claim against any other party in respect of any matter or thing arising out of or in connection with the Underwriting Agreement provided however that the Company will remain liable to pay to the Underwriter certain costs, fees and other out-of-pocket expenses provided for in the Underwriting Agreement.

If the Underwriter terminates the Underwriting Agreement, the Rights Issue will not proceed. Further announcement will be made if the Underwriting Agreement is terminated by the Underwriter.

— xi —

LETTER FROM THE BOARD

PAN ASIA MINING LIMITED 寰亞礦業有限公司

(Incorporated in the Cayman Islands with limited liability)

(Stock code: 8173)

Executive Directors:

Mr. Wong Chung Yu Denny

Mr. Liu Junqing

Non-executive Director:

Mr. Yin Mark Teh-min

Independent non-executive Directors:

Mr. Lai Kai Jin, Michael

Mr. Chu Hung Lin, Victor

Mr. Tong Wan Sze

Registered Office:

P.O. Box 309

Ugland House

South Church Street

George Town

Grand Cayman

Cayman Islands

British West Indies

Principal place of business in Hong Kong:

Suite 3008, Tower One, Times Square

One Matheson Street

Causeway Bay, Hong Kong

19 January 2011

To the Shareholders

Dear Sir/Madam,

PROPOSED CAPITAL REORGANISATION AND PROPOSED RIGHTS ISSUE OF NOT LESS THAN 760,153,400 RIGHTS SHARES AND NOT MORE THAN 760,653,400 RIGHTS SHARES ON THE BASIS OF FIVE (5) RIGHTS SHARES FOR EVERY ONE (1) CONSOLIDATED SHARE HELD ON THE RECORD DATE

DEBT RESTRUCTURING AGREEMENT

INTRODUCTION

On 23 December 2010, the Company announced, among others, that it has entered into the Underwriting Agreement with the Underwriter in respect of the Rights Issue and that it will implement the Capital Reorganisation.

LETTER FROM THE BOARD

The implementation of the Rights Issue and the Capital Reorganisation are subject to the fulfillment of a number of conditions precedent. There is no certainty that the transaction, either in whole or in part, can be executed. Shareholders are therefore urged to exercise extreme caution in dealing in the Shares.

The purpose of this circular is to provide you with details of, amongst other things, the Capital Reorganisation, the Rights Issue, the advice from the Independent Board Committee, the recommendation from the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders on the Rights Issue and to give you the notice convening the EGM for the purpose of considering and, if thought fit, approving the Capital Reorganisation and the Rights Issue.

CAPITAL REORGANISATION

The Capital Reorganisation involves the Share Consolidation and the Increase in Authorised Share Capital.

PROPOSED SHARE CONSOLIDATION

The Board proposes to implement the Share Consolidation on the basis that every fifty (50) issued and unissued Shares of HK$0.01 each will be consolidated into one (1) Consolidated Share of HK$0.50 each. Fractional Consolidated Shares will be disregarded and not issued to the Shareholders but all such fractional Consolidated Shares will be aggregated and, if possible, sold for the benefits of the Company.

CHANGE OF BOARD LOT SIZE

Currently, the Shares are traded on the Stock Exchange in board lot size of 10,000 Shares. The Board proposes that subject to and upon the Share Consolidation becoming effective, the Consolidated Shares will be traded in board lot size of 5,000 Consolidated Shares. Based on the closing price of the Shares of HK$0.039 as at the Last Trading Day, the theoretical ex-right price would be approximately HK$0.742 and the value of the board lot size of 5,000 Consolidated Shares would be approximately HK$3,710. The Board considers that the change in the board lot size would result in the Consolidated Shares being traded in a more reasonable board lot size and value and is in the interests of the Company and its Shareholders as a whole.

PROPOSED INCREASE IN AUTHORISED SHARE CAPITAL

As at the Latest Practicable Date, the authorised share capital of the Company is HK$300,000,000 divided into 30,000,000,000 Shares of a nominal value of HK$0.01 each. Upon the proposed Share Consolidation becoming effective and based on the current issued share capital, the authorised share capital of the Company will be HK$300,000,000 divided into 600,000,000 Consolidated Shares.

— 2 —

LETTER FROM THE BOARD

In order to accommodate the number of Rights Shares to be issued upon the Rights Issue becoming effective, the Company proposes to increase its authorised share capital from HK$300,000,000 divided into 600,000,000 Consolidated Shares of a nominal value of HK$0.50 each to HK$1,000,000,000 divided into 2,000,000,000 Consolidated Shares of a nominal value of HK$0.50 each by the creation of 1,400,000,000 Consolidated Shares, upon completion of the Share Consolidation. The Increase in Authorised Share Capital will help the Company to accommodate further expansion and growth of the Group and to facilitate the proposed Rights Issue.

Effects of the Capital Reorganisation

As at the Latest Practicable Date, the authorised share capital of the Company amounted to HK$300,000,000 divided into 30,000,000,000 Shares of a nominal value of HK$0.01 each, of which 7,601,534,023 Shares have been allotted and issued as fully paid or credited as fully paid. Upon the Capital Reorganisation becoming effective and on the basis that no further Shares will be allotted and issued or repurchased prior thereto, the authorised share capital of the Company will become HK$1,000,000,000 divided into 2,000,000,000 Consolidated Shares, of which 152,030,680 Consolidated Shares will be in issue.

Upon the Capital Reorganisation becoming effective, the Consolidated Shares will rank pari passu in all respects with each other.

Other than the expenses to be incurred in relation to the Capital Reorganisation, the implementation thereof will not alter the underlying assets, business operations, management or financial position of the Company or the interests or rights of the Shareholders, save for any fractional Consolidated Shares to which Shareholders may be entitled.

An application will be made by the Company to the GEM Listing Committee of the Stock Exchange for the listing of, and the permission to deal in, the Consolidated Shares to be in issue upon the Share Consolidation becoming effective.

Subject to the granting of the listing of, and permission to deal in, the Consolidated Shares on the Stock Exchange, the Consolidated Shares will be accepted as eligible securities by HKSCC for deposit, clearance and settlement in CCASS with effect from the commencement date of dealings in the Consolidated Shares on the Stock Exchange or such other dates as determined by HKSCC. Settlement of transactions between participants of the Stock Exchange on any trading day is required to take place in CCASS on the second settlement day thereafter. All activities under CCASS are subject to the General Rules of CCASS and CCASS Operational Procedures in effect from time to time.

Dealings in the Consolidated Shares and the Rights Shares in their nil-paid and fully-paid forms may be settled through CCASS and you should consult your licensed securities dealer, bank manager, solicitor, professional accountant or other professional adviser for details of those settlement arrangements and how such arrangements may affect your rights and interests.

— 3 —

LETTER FROM THE BOARD

Conditions of the Capital Reorganisation

The Capital Reorganisation is conditional upon:

(a) the passing of resolution(s) by the Shareholders at the EGM for approving the Capital Reorganisation; and
(b) the GEM Listing Committee of the Stock Exchange granting the listing of, and the permission to deal in, the Consolidated Shares.

Reasons for the Capital Reorganisation

Pursuant to Rule 17.76 of the Listing Rules, where the market price of the securities of the issuer approaches the extremities of HK$0.01 or HK$9,995.00, the Stock Exchange reserves the right to require the issuer either to change the trading method or to proceed with a consolidation or splitting of its securities. In view of the recent trading price of the Shares and at the request of the Stock Exchange, the Board has proposed to implement the Share Consolidation. The Share Consolidation will increase the nominal value of the Shares. It is expected that the Share Consolidation would bring about a corresponding upward adjustment in the trading price of the Consolidated Shares. In addition, the Capital Reorganisation will facilitate equity fund raising of the Company in the future including the proposed Rights Issue. The Board therefore believes that the Capital Reorganisation is in the interests of the Company and its Shareholders as a whole.

Arrangement on odd lot trading

In order to facilitate the trading of odd lots (if any) of the Consolidated Shares arising from the Share Consolidation, the Company has appointed Ever-Long Securities Company Limited to provide matching services for the odd lots of the Consolidated Shares on a best effort basis during the period from Thursday, 24 February to Wednesday, 16 March 2011 (both dates inclusive).

Shareholders who wish to take advantage of this matching services either to dispose of their odd lots of Consolidated Shares or to top up to board lots of 5,000 Consolidated Shares may contact Mr. Keith Loong of Ever-Long Securities Company Limited at 18 Floor, Dah Sing Life Building, 99-105 Des Voeux Road, Central, Hong Kong at telephone number (852) 2815 3522.

Holders of Consolidated Shares in odd lots should note that successful matching of the sale and purchase of odd lots of Consolidated Shares is not guaranteed. Shareholders are advised to consult their professional advisers if they are in doubt about the above procedures.

Exchange of Share Certificates

Subject to the Share Consolidation becoming effective, which is expected to be at 9:30 a.m. on Thursday, 10 February 2011, Shareholders may, on or after Thursday, 10 February 2011 until Monday, 21 March 2011 (both dates inclusive) submit share certificates for existing Shares to the Registrar, Tricor Tengis Limited of 26th Floor, Tesbury Centre, 28 Queen's Road East, Wanchai, Hong Kong, to exchange, at the expense of the Company, for certificates of the Consolidated Shares (on the

LETTER FROM THE BOARD

basis of fifty (50) existing Shares for one (1) Consolidated Share). Thereafter, certificates of Shares will remain effective as documents of title but will be accepted for exchange only on payment of a fee of HK$2.50 (or such higher amount as may from time to time be specified by the Stock Exchange) per existing share certificate cancelled or new share certificate issued (whichever is the higher) by Shareholders. Share certificates for existing Shares will only be valid for dealing and settlement purposes for the period up to Wednesday, 16 March 2010.

It is expected that new certificates for Consolidated Shares will be available for collection on or after the 10th Business Day after the submission of the existing certificates for the Shares to the Registrar. The color of the share certificates for existing Shares is pink whilst the color of the new share certificates for Consolidated Shares will be purple.

Outstanding Share Options and Convertible Bonds

As at the Latest Practicable Date, (i) there are outstanding Share Options entitling the holder to subscribe for 5,000,000 Shares; and (ii) the Company has outstanding Convertible Bonds in the aggregate principal amount of US$201,474,359 entitling the holders to convert into 2,245,000,000 Shares at a conversion price of HK$0.70.

The Capital Reorganisation and Rights Issue may cause adjustments to the conversion or exercise price and the number of the Consolidated Shares to be issued pursuant to the terms and conditions of the Convertible Bonds and Share Options respectively. Further details of such adjustments, if required, will be disclosed in further announcement(s).

Save as disclosed above, the Company has no other outstanding options, warrants or other securities convertible into or giving rights to subscribe for Shares, as the case may be.

3. PROPOSED RIGHTS ISSUE

Issue statistics

Basis of the Rights Issue	: Five (5) Rights Shares for every one (1) Consolidated Share held on the Record Date
Subscription Price	: HK$0.50 per Rights Share
Number of Shares in issue as at the Latest Practicable Date	: 7,601,534,023 Shares
Number of the Consolidated Shares expected to be in issue upon completion of the Capital Reorganisation (assuming no exercise of the subscription rights under the Share Options and no conversion of the outstanding Convertible Bonds)	: 152,030,680 Consolidated Shares

LETTER FROM THE BOARD

Number of Rights Shares
: Not less than 760,153,400 Rights Shares and not more than 760,653,400 Rights Shares

Total number of Rights Shares being underwritten by the Underwriter
: The Underwriter has conditionally agreed pursuant to the Underwriting Agreement to underwrite the Underwritten Shares subject to the terms and conditions of the Underwriting Agreement

Minimum enlarged issued share capital upon completion of the Rights Issue: (assuming no Shares or Consolidated Shares (other than the Rights Shares) are allotted and issued before completion of the Rights Issue)
: 912,184,080 Consolidated Shares

Maximum enlarged issued share capital upon completion of the Rights Issue: (assuming all Shares or Consolidated Shares have been allotted and issued on or before the Record Date pursuant to the full exercise of the subscription rights of the Share Options but no other Shares or Consolidated Shares (other than the Rights Shares) are allotted and issued before completion of the Rights Issue)
: 912,784,080 Consolidated Shares

Aggregate nominal value of total Rights Shares
: Not less than HK$380,076,700 and not more than HK$380,326,700

As at the Latest Practicable Date:

(1) there were outstanding Share Options entitling the holder to subscribe for 5,000,000 Shares. Assuming full exercise of the subscription rights attaching to the Share Options and Shares are allotted and issued pursuant to such exercise on or before the Record Date, a total of 100,000 Consolidated Shares would fall to be issued, which would result in the issue of 500,000 additional Rights Shares; and

(2) there were outstanding Convertible Bonds convertible into 2,245,000,000 Shares. Pursuant to the Undertaking, Kesterion has undertaken not to exercise any conversion right conferred by the Convertible Bonds on or before the Posting Date.

Save for the outstanding Share Options and Convertible Bonds as mentioned above, the Company has no other outstanding convertible securities or options in issue or other similar rights which confer any right to convert into or subscribe for Shares as at the Latest Practicable Date.

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LETTER FROM THE BOARD

Assuming no exercise of any Share Options and no conversion of Convertible Bonds, the Rights Shares proposed to be provisionally allotted pursuant to the terms of the Rights Issue represents approximately 500% of the number of the Consolidated Shares immediately upon completion of the Capital Reorganisation (based on the Company's existing issued share capital as at the Latest Practicable Date) and approximately 83.33% of the Company's issued share capital as enlarged by the issue of the Rights Shares. In accordance with the Listing Rules, the Rights Issue must be made conditional on approval by shareholders in general meeting by a resolution on which any controlling shareholders and their associates or, where there are no controlling shareholders, the Directors (excluding independent non-executive Directors) and the chief executive of the Company and their respective associates shall abstain from voting in favour. As at the Latest Practicable Date, the Company does not have any controlling shareholder.

Qualifying Shareholders

The Rights Issue is only available to the Qualifying Shareholders. To qualify for the Rights Issue, a Shareholder must be registered as a member of the Company at the close of business on the Record Date and not be an Excluded Shareholder. In order to be registered as members of the Company on the Record Date, all transfers of the Shares or Consolidated Shares (as the case may be) must be lodged (together with the relevant share certificate(s)) with the Company's share registrar in Hong Kong, Tricor Tengis Limited, at 26th Floor, Tesbury Centre, 28 Queen's Road East, Hong Kong by 4:30 p.m. (Hong Kong time) on Monday, 14 February 2011.

The Company will send the Prospectus Documents to the Qualifying Shareholders and will send the Prospectus (without the Provisional Allotment Letters and Excess Application Forms), for information only, to the Excluded Shareholders on Monday, 21 February 2011.

Excluded Shareholders

To the extent that the Company has Shareholders whose addresses as shown on the register of members of the Company are located outside Hong Kong, the Company will make enquiry regarding the legal restrictions (if any) under the laws of the relevant places and the requirements of the relevant regulatory bodies or stock exchanges in relation to the Company's offering of the Rights Issue to such Shareholders and determine if there will be Excluded Shareholders in compliance with Rule 17.41(1) of the Listing Rules. The Prospectus will not be registered or filed under the securities legislation of any jurisdiction other than Hong Kong.

Arrangements will be made for the Rights Shares which would otherwise have been provisionally allotted to the Excluded Shareholders to be sold in the market in their nil-paid form as soon as practicable after dealings in the nil-paid Rights Shares commence on the Stock Exchange and in any event before the last day for dealings in nil-paid Rights Shares if a premium (net of expenses) can be obtained. Net proceeds of each sale (after deducting the expenses of sale (if any), above HK$100 will be paid to the relevant Excluded Shareholders in Hong Kong dollars. The Company will retain individual amount of HK$100 or less for the benefit of the Company.

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LETTER FROM THE BOARD

Closure of register of members

The register of members of the Company will be closed from Tuesday, 15 February 2011 to Friday, 18 February 2011, both dates inclusive. No transfer of Shares or Consolidated Shares (as the case may be) will be registered during this period.

Subscription Price

The Subscription Price is HK$0.50 per Rights Share, payable in full by (a) a Qualifying Shareholder upon acceptance of the provisional allotment of the Rights Shares under the Rights Issue or application for excess Rights Shares; or (b) when a renouncee of any provisional allotment of the Rights Shares or a transferee of nil-paid Rights Shares applies for the Rights Shares.

The Subscription Price of HK$0.50 represents:

(i) a discount of approximately 74.36% to the closing price of HK$1.950 per Consolidated Share, based on the closing price of HK$0.039 per Share as quoted on the Stock Exchange on the Last Trading Day and adjusted for the effect of the Capital Reorganisation;

(ii) a discount of approximately 74.75% to the average closing price of approximately HK$1.980 per Consolidated Share, based on the average closing price of HK$0.0396 per Share as quoted on the Stock Exchange for the 5 consecutive trading days up to and including the Last Trading Day and adjusted for the effect of the Capital Reorganisation; and

(iii) a discount of approximately 32.58% to the theoretical ex-rights price of approximately HK$0.742 per Consolidated Share, based on the closing price of HK$0.039 per Share as quoted on the Stock Exchange on the Last Trading Day and adjusted for the effect of the Capital Reorganisation.

The Subscription Price was arrived at after arm's length negotiation between the Company and the Underwriter with reference to the market price of the Shares under the prevailing market conditions. The Directors consider that the discount of the Subscription Price would encourage Shareholders to participate in the Rights Issue and accordingly maintain their shareholdings in the Company and participate in the future growth of the Group. The Directors (including the independent non-executive Directors whose opinion is set forth in page 20 of this circular) considers the terms of the Rights Issue (including the rate of commission) to be fair and reasonable and in the best interests of the Group and the Shareholders as a whole.

Basis of Provisional Allotments

Five (5) Rights Shares (in nil-paid form) for every one (1) Consolidated Share held by the Qualifying Shareholders as at the close of business on the Record Date.

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LETTER FROM THE BOARD

Status of the Rights Shares

The Rights Shares (when allotted, issued and fully paid) will rank pari passu with the Consolidated Shares then in issue in all respects. Holders of fully-paid Rights Shares will be entitled to receive all future dividends and distributions which may be declared, made or paid after the date of allotment and issue of the fully-paid Rights Shares.

Fractions of the Rights Shares

No fractional entitlements or allotments are expected to arise as a result of the Rights Issue.

Application for excess Rights Shares

In relation to the application for excess Rights Shares, the 150,128,400 excess Rights Shares undertaken by Kesterion pursuant to the Undertaking are not guaranteed to be fully allocated and issued to Kesterion. Qualifying Shareholders shall be entitled to apply for any Rights Shares provisionally allotted but not accepted by other Qualifying Shareholders. Application may be made by completing the Excess Application Form and lodging the same with a separate remittance for the excess Rights Shares being applied for. The Directors will allocate the excess Rights Shares at their discretion on a fair and equitable basis and on a pro-rata basis to the excess Rights Shares applied for by the Qualifying Shareholders. However, no preference will be given to topping-up odd lots to whole board lots.

Shareholders or potential investors should note that the number of excess Rights Shares which may be allocated to them may be different where they make applications for excess Rights Shares by different means, such as making applications on their own names as against through nominees who also hold Shares for other Shareholders/investors. The Qualifying Shareholders whose Shares are held by a nominee company should note that for the purpose of the principles above, the Board will regard the nominee company as a single Shareholder according to the register of members of the Company. Accordingly, the Qualifying Shareholders whose Shares are registered in the name of the nominee companies should note that the aforesaid arrangement in relation to the allocation of the excess Rights Shares will not be extended to beneficial owners individually. Shareholders and investors should consult their professional advisers if they are in any doubt as to whether they should register their shareholding in their own names and apply for the excess Rights Shares themselves.

Investors whose Shares are held by their nominee(s) and who would like to have their names registered on the register of members of the Company must lodge all necessary documents with the Company's branch share registrar in Hong Kong, Tricor Tengis Limited, at 26th Floor, Tesbury Centre, 28 Queen's Road East, Hong Kong for completion of the relevant registration by 4:30 p.m. (Hong Kong time) on Monday, 14 February 2011.

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LETTER FROM THE BOARD

Certificates for the Rights Shares

Subject to the fulfillment or the waiver in whole or in part by the Underwriter of the conditions of the Rights Issue, certificates for all fully-paid Rights Shares are expected to be posted on or before Tuesday, 15 March 2011 to those Qualifying Shareholders who have paid for and have accepted the Rights Shares, by ordinary post and at their own risk. Refund cheques in respect of wholly or partially unsuccessful applications for excess Rights Shares are also expected to be posted on or before Tuesday, 15 March 2011 by ordinary post at such Shareholders' own risk.

Application for listing

The Company will apply to the GEM Listing Committee of the Stock Exchange for the listing of, and permission to deal in, the Rights Shares in both nil-paid and fully-paid forms. No part of the securities of the Company is listed or dealt in or on which listing or permission to deal is being or is proposed to be sought on any other stock exchange. Nil-paid Rights Shares are expected to be traded in board lots of 5,000 as indicated in the paragraph headed "Change in Board Lot Size" in this circular. Dealings in the Rights Shares (in both nil-paid and fully-paid forms) will be subject to the payment of stamp duty, Stock Exchange trading fee, transaction levy, investor compensation levy or any other applicable fees and charges in Hong Kong.

Subject to the granting of listing of, and permission to deal in, the Rights Shares in both nil-paid and fully-paid forms on the Stock Exchange, the Rights Shares (in both nil-paid and fully-paid forms) will be accepted as eligible securities by HKSCC for deposit, clearance and settlement in CCASS with effect from the commencement date of dealings in the Rights Shares (in both nil-paid and fully-paid forms) on the Stock Exchange or such other date as determined by HKSCC. Settlement of transactions between participants of the Stock Exchange on any trading day is required to take place in CCASS on the second settlement day thereafter. All activities under CCASS are subject to the General Rules of CCASS and CCASS Operational Procedures in effect from time to time.

Conditions of the Rights Issue

The Rights Issue is conditional upon the following:

(i) the approval of the Rights Issue by the Shareholders of the Company in the EGM in accordance with the requirements of the Listing Rules;

(ii) (a) the completion of the Share Consolidation and (b) the approval of the Shareholders of the Company in the EGM for the Increase in Authorized Share Capital;

(iii) the delivery to the Stock Exchange and the registration with the Registrar of Companies in Hong Kong on or before the Posting Date of the Prospectus Documents (and all other documents required to be attached thereto) in compliance with the requirements of the Companies Ordinance and the Listing Rules;

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LETTER FROM THE BOARD

(iv) if required by the relevant Companies Law, Cap. 22 (Laws 3 of 1961, as consolidated and revised) of the Cayman Islands, the delivery and filing with the Registrar of Companies in Cayman Islands on or before the Posting Date of a copy of the Prospectus duly signed as required by the Companies Law (and all other documents to be attached thereto);

(v) the posting on the Posting Date of copies of the Prospectus Documents to the Qualifying Shareholders and if permitted under applicable laws, a letter from the Company (in a form approved by the Stock Exchange) explaining the treatment of Excluded Shareholders to the Excluded Shareholders accompanied by a copy of the Prospectus stamped “For Information Only”;

(vi) the provisional allotment of the Rights Shares to the Qualifying Shareholders by posting of the Prospectus Documents to the Qualifying Shareholders on the Posting Date, as well as the provisional allotment of the Rights Shares, which would have been provisionally allotted to the Overseas Shareholders had they been Qualifying Shareholders and those Rights Shares created by the aggregation of fractions of Rights Shares, to a person nominated by the Company, in each case in nil-paid form no later than the Posting Date;

(vii) compliance by the Company with all its obligations under the Underwriting Agreement;

(viii) the GEM Listing Committee of the Stock Exchange agreeing to grant (subject to allotment) the listing of, and permission to deal in, the Rights Shares in their nil-paid form and fully-paid form by no later than the Posting Date and such listing and permission not having been withdrawn or revoked on or before 4:00 p.m. on the third Business Day following the Final Acceptance Date;

(ix) (a) the delivery to the Underwriter of one (1) copy of the Undertaking duly executed by Kesterion, and (b) Kesterion taking up its entitlements to the Rights Issue, and satisfying the total applicable Subscription Price, pursuant to the Undertaking no later than 4:00 p.m. on the Final Acceptance Date; and

(x) the Debt Restructuring Agreement being duly executed and not having been terminated in accordance with its terms or otherwise.

In the event that the conditions above have not been satisfied and/or waived in whole or in part by the Underwriter by the relative times and dates provided for above or if no such time and date is so provided, by the Posting Date (or such later date as the Underwriter may agree), all liabilities of the parties hereto shall cease and determine and no party shall have any claim against the other parties save that all such costs, fees and other out-of-pocket expenses as may have been properly incurred by the Underwriter in connection with the proposed Rights Issue.

The Company’s Cayman counsel has confirmed that with respect to condition (iv) above, there are no requirements under Cayman Islands law for any prospectus to be filed or registered with any government or other authority in the Cayman Islands, and no fees are payable in respect of any such prospectus.

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LETTER FROM THE BOARD

KESTERION UNDERTAKING

Pursuant to the Undertaking, Kesterion has undertaken to the Company and the Underwriter to (a) subscribe or procure the subscription of 102,025,000 Rights Shares in an aggregate subscription amount of HK$51,012,500 being Kesterion’s provisional allotment of Rights Shares; and (b) to make application for 150,128,400 excess Rights Shares provisionally allotted but not accepted by other Qualifying Shareholders (and/or the transferee of the nil-paid Rights Shares) for an aggregate subscription amount of HK$75,064,200. The payment in full in respect of such Rights Shares by Kesterion shall be set-off and cancelled against the equivalent amount of the indebtedness owed by the Company and Black Sand, a wholly owned subsidiary of the Company, to Kesterion out of a total HK$200,000,000 of the Relevant Indebtedness. Kesterion has also undertaken that it shall not exercise any conversion right conferred by the Convertible Bonds on or before the Posting Date. The Undertaking is given by Kesterion in connection with the Debt Restructuring Agreement.

UNDERWRITING ARRANGEMENT

The Underwriting Agreement

Date : 22 December 2010

Underwriter : Guotai Junan Securities (Hong Kong) Limited

To the best of the Directors’ knowledge and information, the Underwriter, its respective associates and ultimate beneficial owner(s) are third parties independent of and not connected with the Company and its connected persons

Total number of Rights Shares being underwritten by the Underwriter : The Underwriter has conditionally agreed pursuant to the Underwriting Agreement to underwrite the Underwritten Shares subject to the terms and conditions of the Underwriting Agreement

Commission : 2.5% of the aggregate Subscription Price in respect of the Underwritten Shares or HK$6,350,000 (assuming no Share Options are exercised and no Convertible Bonds have been converted for Shares or Consolidated Shares (as the case may be))

The Directors (including the independent non-executive Directors) are of the opinion that the terms of the Underwriting Agreement and the amount of commission given to the Underwriter are fair as compared to the market practice and commercially reasonable as agreed between the Company and the Underwriter.

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LETTER FROM THE BOARD

Termination of the Underwriting Agreement

If on or prior to the Latest Time for Termination:

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LETTER FROM THE BOARD

The Underwriter will not take up any Underwritten Shares upon completion of the Rights Issue as the Underwriter has secured commitment from various subscribers and a sub-underwriter in respect of 100% of the Underwritten Shares. Based on the information provided by the Underwriter, the Company is able to comply with the minimum public float of 25% at all times.

If the Underwriter terminates the Underwriting Agreement, the Rights Issue will not proceed. Further announcement will be made if the Underwriting Agreement is terminated by the Underwriter.

CHANGES IN THE SHAREHOLDING STRUCTURE OF THE COMPANY ARISING FROM THE RIGHTS ISSUE

The existing shareholding structure of the Company as at the Latest Practicable Date and the shareholding structure of the Company immediately upon completion of the Capital Reorganisation and the Rights Issue are set out below for illustration purpose only:

(i) assuming no exercise of the outstanding Share Options and no conversion of the Convertible Bonds on or before the Record Date

Shareholders	As at the Latest Practicable Date		Immediately after the Capital Reorganisation but before completion of the Rights Issue		Immediately after the completion of the Rights Issue (assuming no Qualifying Shareholders shall take up his/her/its entitlements under the Rights Issue)		Immediately after the completion of the Rights Issue (assuming all Qualifying Shareholders shall take up his/her/its entitlements under the Rights Issue)
	No. of Approximate Shares	%	No. of Approximate Consolidated Shares	%	No. of Approximate Consolidated Shares	%	No. of Approximate Consolidated Shares	%
Kesterion	1,020,250,000	13.42	20,405,000	13.42	272,558,400	29.88	122,430,000	13.42
Ms. WONG Eva	2,260,000	0.03	45,200	0.03	45,200	0.00	271,200	0.03
Mr. YIN Mark Teh-min	2,880,000	0.04	57,600	0.04	57,600	0.01	345,600	0.04
Singson Ryan Luis V. (Note 1)	1,662,990,000	21.88	33,259,800	21.88	33,259,800	3.65	199,558,800	21.88
Underwriter (Note 2)	—	0.00	—	0.00	178,000,000	19.51	—	0.00
Public Underwriter (Note 2)	—	0.00	—	0.00	330,000,000	36.18	—	0.00
Public Shareholders	4,913,154,023	64.63	98,263,080	64.63	98,263,080	10.77	589,578,480	64.63
Total	7,601,534,023	100.00	152,030,680	100.00	912,184,080	100.00	912,184,080	100.00

LETTER FROM THE BOARD

(ii) assuming the exercise of the outstanding Share Options in full and no conversion of the Convertible Bonds on or before the Capital Reorganisation and the Record Date

Shareholders	As at the Latest Practicable Date		Immediately after the Capital Reorganisation but before completion of the Rights Issue		Immediately after the completion of the Rights Issue (assuming no Qualifying Shareholders shall take up his/her/its entitlements under the Rights Issue)		Immediately after the completion of the Rights Issue (assuming all Qualifying Shareholders shall take up his/her/its entitlements under the Rights Issue)
	No. of Approximate Shares	%	No. of Approximate Consolidated Shares	%	No. of Approximate Consolidated Shares	%	No. of Approximate Consolidated Shares	%
Kesterion	1,020,250,000	13.41	20,405,000	13.41	272,558,400	29.86	122,430,000	13.41
Ms. WONG Eva	2,260,000	0.03	45,200	0.03	45,200	0.00	271,200	0.03
Mr. YIN Mark Teh-min	2,880,000	0.04	57,600	0.04	57,600	0.01	345,600	0.04
Singson Ryan Luis V. (Note 1)	1,662,990,000	21.86	33,259,800	21.86	33,259,800	3.64	199,558,800	21.86
Underwriter (Note 2)	—	0.00	—	0.00	178,500,000	19.56	—	0.00
Public
Underwriter (Note 2)	—	0.00	—	0.00	330,000,000	36.15	—	0.00
Public Shareholders	4,918,154,023	64.66	98,363,080	64.66	98,363,080	10.78	590,178,480	64.66
Total	7,606,534,023	100.00	152,130,680	100.00	912,784,080	100.00	912,784,080	100.00

Notes:
(1) Mr. Singson Ryan Luis V. is also a director of Mt. Mogan Resources And Development Corporation, which is accounted for as a subsidiary of the Company.
(2) This scenario is for illustration purpose only. The Underwriter will not take up any Underwritten Shares upon completion of the Rights Issue as the Underwriter has secured commitment from various subscribers and a sub-underwriter in respect of $100\%$ of the Underwritten Shares. Based on the information available to the Underwriter, assuming no exercise of the outstanding Share Options and no conversion of the Convertible Bonds on or before the Record Date, a particular placee, who is independent of the Company and its connected persons has committed to subscribe for 178,000,000 Underwritten Shares, amounting to $19.51\%$ of the Company's issued share capital following completion of the Rights Issue. This will result in such placee becoming a substantial shareholder. The remaining 330,000,000 Underwritten Shares will be placed

LETTER FROM THE BOARD

to places who are independent of the Company and its connected persons and none of which will as a result of such subscription become a substantial shareholder of the Company. Based on the information available to the Underwriter, assuming the exercise of the outstanding Share Options in full and no conversion of the Convertible Bonds on or before the Record Date, a particular placee, who is independent of the Company and its connected persons has committed to subscribe for 178,500,000 Underwritten Shares, amounting to 19.56% of the Company's issued share capital following completion of the Rights Issue. This will result in such placee becoming a substantial shareholder. The remaining 330,000,000 Underwritten Shares will be placed to places who are independent of the Company and its connected persons and none of which will as a result of such subscription become a substantial shareholder of the Company.

REASONS FOR THE RIGHTS ISSUE AND USE OF PROCEEDS

The principal business activities of the Group are the exploration and exploitation of mineral resources.

The Board is of the view that the Rights Issue will allow the Qualifying Shareholders to maintain their shareholding in the Company and considers that the fund raising through the Rights Issue is in the interests of the Company and the Shareholders as a whole.

The gross proceeds from the Rights Issue at the Subscription Price of HK$0.50 per Rights Share will be not less than approximately HK$380.08 million and not more than approximately HK$380.33 million. After deducting (i) the estimated incidental expenses of approximately HK$10.35 million including underwriting commission, legal and financial fees and printing expenses, and (ii) the HK$130.0 million set-off against the Relevant Indebtedness, the estimated net proceeds from the Rights Issue will be not less than approximately HK$239.73 million and not more than approximately HK$239.98 million.

The Company intends to utilize HK$130 million of the net proceeds from the Rights Issue for the partial repayment of promissory notes, approximately HK$90 million as initial project expenses of the Philippines mining project and approximately HK$160 million as the general working capital of the Group. The Rights Issue will significantly enhance the financial position and enlarge the capital base of the Group, thereby facilitating the mining business and long-term development of the Company.

PREVIOUS FUND RAISING EXERCISE IN THE PRIOR 12-MONTH PERIOD

The Company has not carried out other fund raising activities during the 12 months immediately preceding the Latest Practicable Date.

DEBT RESTRUCTURING AGREEMENT

The Company and Black Sand have also entered into the Debt Restructuring Agreement with Kesterion. Under the Debt Restructuring Agreement, Kesterion has undertaken to support the Rights Issue by entering into the Undertaking and agreed to the cancellation of the Relevant Indebtedness as follows: (a) as to HK$130.0 million of the Relevant Indebtedness, it is agreed that it shall be cancelled by an equivalent amount of the Subscription Price payable by Kesterion in respect of the Rights Shares

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LETTER FROM THE BOARD

and the Excess Application up to a maximum of HK$126,076,700 on completion of the Rights Issue and to the extent that there is any balance in respect thereof, the Company shall repay the balance in cash as soon as practicable after completion of the Rights Issue and (b) as to HK$70.0 million of the Relevant Indebtedness, it shall be restructured into an unsecured two(2) year term loan bearing interest at 6.0% p.a. interest payable semi-annually. Under the term loan arrangement, the Company will have the right to prepay early the entire HK$70.0 million term loan at any time in whole (with accrued interests to-date) or in part in minimum multiples of HK$1.0 million prior to the maturity date. Kesterion does not have any right to demand early repayment of the loan and/or interest thereon unless the Company fails to pay interest when due and/or winding up proceedings are commenced against the Company. The Debt Restructuring Agreement is conditional upon the Rights Issue becoming unconditional on or before 30 June 2011, or such other date as the parties to the Debt Restructuring Agreement may agree in writing. The terms of the Debt Restructuring Agreement have been arrived at after arms length negotiations between the parties and the Directors are of the view that the terms of the Debt Restructuring Agreement are reasonable and on normal commercial terms.

WARNING OF THE RISKS OF DEALING IN THE SHARES AND THE NIL-PAID RIGHTS SHARES

The Shareholders and potential investors of the Company should note that the Rights Issue is conditional upon the Underwriting Agreement having become unconditional and the Underwriters not having terminated the Underwriting Agreement in accordance with the terms thereof (a summary of which is set out under the sub-paragraph headed "Termination of the Underwriting Agreement" above). Accordingly, the Rights Issue may or may not proceed.

Trading of the Consolidated Shares on ex-rights basis is expected to commence on Friday, 11 February 2011, and dealing in the Rights Shares in their nil-paid form is expected to take place from Wednesday, 23 February to Wednesday, 2 March 2011 (both dates inclusive). Any person contemplating buying or selling of the Shares or the Consolidated Shares (as the case may be) from now up to the date on which all conditions of the Rights Issue are fulfilled and dealing in the Rights Shares in their nil-paid form between Wednesday, 23 February to Wednesday, 2 March 2011 (both dates inclusive) will bear the risk that the Rights Issue may not become unconditional and may not proceed. Investors should seek professional advice regarding dealings in the Shares or the Consolidated Shares (as the case may be) and nil-paid Rights Shares if they are in any doubt.

EGM

Set out on pages 55 to 57 of this circular is a notice convening the EGM, which will be held at the Suite 3008, Tower One, Times Square, 1 Matheson Street, Causeway Bay, Hong Kong, Hong Kong on Wednesday, 9 February 2011 at 11 a.m., at which resolutions will be proposed to approve the Capital Reorganisation and the Rights Issue.

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LETTER FROM THE BOARD

The form of proxy for use at the EGM is enclosed with this circular. Whether or not you are able to attend the EGM, you are requested to complete and return the enclosed form of proxy in accordance with the instructions printed thereon and return it to the Company's branch share registrar in Hong Kong, Tricor Tengis Limited, at 26th Floor, Tesbury Centre, 28 Queen's Road East, Wanchai, Hong Kong, as soon as possible and in any event not later than 48 hours before the time appointed for the holding of 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 of it, if you so wish.

GENERAL

The Capital Reorganisation is subject to the Shareholders' approval at the EGM and no Shareholders are required to abstain from voting on the resolution(s) in relation to the Capital Reorganisation.

The Rights Issue will increase the issued share capital of the Company by more than 50%. In accordance with the Listing Rules, the Rights Issue must be made conditional on approval by shareholders in general meeting by a resolution on which any controlling shareholders and their associates or, where there are no controlling shareholders, the Directors (excluding independent non-executive Directors) and the chief executive of the Company and their respective associates shall abstain from voting in favour. As at the Latest Practicable Date, the Company does not have any controlling shareholder. Accordingly, Mr. Wong Chung Yu, Denny, Mr. Liu Junqing and Mr. Yin Mark Teh-min, being the Directors (excluding the independent non-executive Directors), to the extent they hold Shares, shall abstain from voting in favour of the resolutions in relation to the Rights Issue. Based on the information available to the Company, among the Directors, only Mr. Yin Mark Teh-min and his associates hold 2,880,000 Shares amounting to 0.04% of the Company's issued share capital. Kesterion and Ms. Wong Eva, being associates of Mr. Wong Chung Yu, Denny, shall also abstain from voting in favour of the resolutions in relation to the Rights Issue. Kesterion holds 1,020,250,000 Shares amounting to 13.42% of the Company's issued share capital. Ms. Wong Eva beneficially owns Kesterion and also holds 2,260,000 Shares amounting to 0.03% of the Company's issued share capital. To the best knowledge of the Directors having made reasonable enquiries, none of the abstaining Shareholders intends to vote against the resolution.

In accordance with the GEM Listing Rules, the vote to be taken at the EGM shall be conducted by poll.

RECOMMENDATION

Your attention is drawn to the letter from the Independent Board Committee set out on page 20 of this circular which contains its advice to the Independent Shareholders as to voting at the EGM regarding the Rights Issue and to the letter received from the Independent Financial Adviser which contains its recommendation to the Independent Board Committee and the Independent Shareholders as regards the Rights Issue and the principal factors and reasons considered by it in arriving thereat. The text of the letter from the Independent Financial Adviser is set out on pages 21 to 33 of this circular.

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LETTER FROM THE BOARD

The Independent Board Committee, having taken into account the advice of the Independent Financial Adviser, considers that the terms of the Rights Issue are fair and reasonable and that the Rights Issue is in the interests of the Company and the Shareholders as a whole. Accordingly, the Independent Board Committee recommends the Independent Shareholders to vote in favour of the resolutions to approve the Rights Issue at the EGM. The Directors (including members of the Independent Board Committee) believes that the terms of the Rights Issue are fair and reasonable and that the Rights Issue in the interests of the Company and the Shareholders as a whole.

Accordingly, the Directors recommend the Shareholders to vote in favour of the resolution to approve the Rights Issue at the EGM.

Your attention is also drawn to the general information set out in the appendix of this circular.

Yours faithfully,

For and on behalf of

Pan Asia Mining Limited

Mr. Wong Chung Yu, Denny

Chairman

— 19 —

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

PAN ASIA MINING LIMITED 寰亞礦業有限公司

(Incorporated in the Cayman Islands with limited liability)

(Stock code: 8173)

19 January 2011

To the Independent Shareholders

Dear Sir/Madam,

PROPOSED CAPITAL REORGANISATION AND PROPOSED RIGHTS ISSUE OF NOT LESS THAN 760,153,400 RIGHTS SHARES AND NOT MORE THAN 760,653,400 RIGHTS SHARES ON THE BASIS OF FIVE (5) RIGHTS SHARES FOR EVERY ONE (1) CONSOLIDATED SHARE HELD ON THE RECORD DATE

DEBT RESTRUCTURING AGREEMENT

We refer to the circular of the Company dated 19 January 2011 (the "Circular") of which this letter forms part. Terms defined in the Circular shall have the same meanings when used herein unless the context otherwise requires.

We have been appointed to advise the Independent Shareholders in connection with the terms of the Rights Issue. Donvex Capital Limited has been appointed as the independent financial adviser to make recommendation to you and us in this respect.

Having considered the terms of the Rights Issue and the recommendation of Donvex Capital Limited in relation thereto as set out on pages 21 to 33 of the Circular, we are of the opinion that the terms of the Rights Issue, on balance, are fair and reasonable so far as the Independent Shareholders are concerned and the Rights Issue is in the interests of the Company and the Shareholders as a whole. We therefore recommended that you vote for the ordinary resolution in relation to the Rights Issue to be proposed at the EGM.

Yours faithfully,

For and on behalf of the

Independent Board Committee of

Pan Asia Mining Limited

Mr. Lai Kai Jin, Michael
Independent non-executive Director

Mr. Chu Hung Lin, Victor
Independent non-executive Director

Mr. Tong Wan Sze, Wilson
Independent non-executive Director

— 20 —

LETTER FROM INDEPENDENT FINANCIAL ADVISER

The following is the full text of the letter from Donvex Capital Limited setting out their advice to the Independent Board Committee and the Independent Shareholders, which has been prepared for the purpose of inclusion in this circular.

Donvex Capital Limited
富城資本有限公司

Unit1305, 13th Floor,
Carpo Commercial Building
18-20 Lyndhurst Terrace
Central
Hong Kong

19 January 2011

To the Independent Board Committee and the Independent Shareholders
Pan Asia Mining Limited

Dear Sirs,

PROPOSED RIGHTS ISSUE

ON THE BASIS OF FIVE RIGHTS SHARES
FOR EVERY ONE CONSOLIDATED SHARE HELD

INTRODUCTION

We refer to our appointment as the independent financial adviser to advise the Independent Board Committee and the Independent Shareholders whether the Rights Issue is in the interests of the Company and the Shareholders as a whole and the terms of which are fair and reasonable insofar as the Company and the Shareholders are concerned, details of which are set out in the letter from the Board contained in the circular of the Company dated 19 January 2011 (the "Circular") of which this letter forms part. Terms defined in the Circular shall have the same meanings in this letter unless the context of this letter otherwise requires.

Subject to the Capital Reorganization becoming effective, the Company proposes to raise not less than approximately HK$380.08 million and not more than approximately HK$380.33 million before expenses by way of Rights Issue by issuing not less than 760,153,400 Rights Shares and not more than 760,653,400 Rights Shares at the Subscription Price of HK$0.5 per Rights Share on the basis of five Rights Shares for every one Consolidated Share held on the Record Date. Pursuant to the Rights Issue, the Qualifying Shareholders will be provisionally allotted five Rights Shares in nil-paid form for every one Consolidated Share held on the Record Date. After deducting (i) the estimated incidental expenses of approximately HK$10.35 million including underwriting commission, legal and financial fees and printing expenses, and (ii) the HK$130.0 million set-off against the Relevant Indebtedness, the estimated net proceeds raised from the Rights Issue will not be less than approximately HK$239.73 million but not more than approximately HK$239.98 million. The Company intends to utilize the net proceeds from the Rights Issue for initial project expenses of the Philippines mining project and general working capital of the Group.

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LETTER FROM INDEPENDENT FINANCIAL ADVISER

As the Rights Issue will increase the issued share capital of the Company by more than 50%, pursuant to the Listing Rules, the Rights Issue must be made conditional on the approval by Independent Shareholders at the EGM and any Controlling Shareholders and their associates or where there is no Controlling Shareholder, the Directors (excluding independent non-executive Directors) and the chief executive of the Company and their respective associates shall abstain from voting in favour of the relevant resolution relating to the Rights Issue. As at the Latest Practicable Date, the Company does not have any controlling shareholder.

The Independent Board Committee, comprising all the independent non-executive Directors, Mr. Lai Kai Jin, Michael, Mr. Chu Hung Lin, Victor and Mr. Tong Wan Sze, has been established to make recommendations to the Shareholders as to whether the terms of the Rights Issue are fair and reasonable and in the interests of the Company and the Shareholders as a whole and to advise the Shareholders on how to vote at the EGM.

BASIS OF OUR OPINION

In formulating our opinion, we have relied on the statement, information, opinions and representations contained in the Circular and the information and representations provided to us by the Directors and management of the Company. We have assumed that all information, representations and opinions contained or referred to in the Circular and all information, representations contained or referred to in the Circular and all information, representations and opinions which have been provided by the Directors or management of the Company for which they are solely responsible, are true and accurate at the time they were made and will continue to be accurate at the date of the dispatch of the Circular.

We consider that we have been provided with sufficient information on which to form a reasonable basis for our opinion. We have no reason to suspect that any relevant information has been withheld, nor are we aware of any fact or circumstance which would render the information provided and representations and opinions made to us untrue, inaccurate or misleading. Having made all reasonable enquiries, the Directors have further confirmed that, to the best of their knowledge, they believe that there are no other facts or representations the omission of which would make any statement in the Circular, including this letter. We have not, however, carried out any independent verification of the information provided by the Directors and management of the Company, nor have we conducted an independent investigation into the business and affairs of the Company.

In formulating our opinion, we have not considered the taxation implications on Shareholders in relation to the subscription for, holding or disposal of the Rights Shares or otherwise, since these are particular to their individual circumstances. It is emphasized that we will not accept responsibility for any tax effects on, or liabilities or any person resulting from the subscription for, holding or disposal of the Rights Shares or otherwise. In particular, Shareholders subject to overseas taxation or Hong Kong taxation on securities dealings should consider their own tax position and, if in any doubt, should consult their own professional advisers.

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LETTER FROM INDEPENDENT FINANCIAL ADVISER

PRINCIPAL FACTORS TAKEN INTO ACCOUNT

In arriving at our advice to the Independent Board Committee and the Independent Shareholders in respect of the terms of the Rights Issue, we have taken the following principal factors and reasons into consideration:

(I) Background

The principal activity of the Company is investment holding. The principal business activities of the Group are the exploration and exploitation of mineral resources. The Directors consider that it is in the interests of the Company and the Shareholders to raise capital (i) to set-off against the Relevant Indebtedness; (ii) to develop the initial project expenses of the Philippines mining project; and (iii) for the general working capital of the Group.

The table below summarized the financial results of the Group for the two years ended 31 March 2010 and the interim period ended 30 September 2010 as extracted from the annual report and interim report of the Company:

| | 31 March
2010
HK$’000 | 31 March
2009
HK$’000 | 30 September
2010
HK$’000 |
| --- | --- | --- | --- |
| Turnover | 14,730 | 4,287 | 5,079 |
| Loss for the year attributable to the equity holders of the Company | 263,794 | 162,860 | 75,676 |
| Cash | 4,267 | 21,150 | 3,033 |

As shown in the table above, the Group has a significant loss for the two years ended 31 March 2010 due to the impact of the imputed finance cost of Convertible Bond and promissory note and loss has been reduced for the period ended 30 September 2010, which is mainly due to non-cash imputed interest cost for the Convertible Bonds.

The future prospect of the Group is the successful exploration and exploitation of mineral resources should it have sufficient working capital to commence the operation of the Philippines mining project.

(II) Reason for the Rights Issue

The gross proceeds of the Rights Issue at the Subscription Price of HK$0.5 per Rights Share will be not less than approximately HK$380.08 million and not more than approximately HK$380.33 million. After deducting (i) the estimated incidental expenses of approximately HK$10.35 million including underwriting commission, legal and financial fees and printing expenses, and (ii) the HK$130.0 million set-off against the Relevant Indebtedness, the estimated net proceeds raised from

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LETTER FROM INDEPENDENT FINANCIAL ADVISER

the Rights Issue will not be less than approximately HK$239.73 million but not more than approximately HK$239.98 million. The Company intends to utilize HK$90 million from the net proceeds from the Rights Issue for initial start-up funding of the Philippines mining project and HK$160 million for the general working capital of the Group.

Pursuant to the Undertaking, Kesterion has undertaken to the Company and the Underwriter to (a) subscribe or procure the subscription of 102,025,000 Rights Shares in an aggregate subscription amount of HK$51,012,500 being Kesterion's provisional allotment of Rights Shares; and (b) to make application for 150,128,400 excess Rights Shares provisionally allotted but not accepted by other Qualifying Shareholders for an aggregate subscription amount of HK$75,064,200. The payment in full in respect of such Rights Shares by Kesterion shall be set-off and cancelled against equivalent amount of the indebtedness owed by the Company and Black Sand, a wholly owned subsidiary of the Company, to Kesterion out of a total HK$200 million of the Relevant Indebtedness. As such, by reducing Relevant Indebtedness and increasing general working capital, the Rights Issue would (i) strengthen the capital base; (ii) financial flexibility and (iii) enhance the Group's financial position.

We understand from the management of the Company that apart from Rights Issue, the Board will also consider other financing alternatives such as debt financing as possible fund raising method for the Group. However, debt financing shall inevitably create interest payment obligations on the Group and it may be subject to lengthy due diligence and negotiations between the Group and the financiers. In addition, the ability of the Group to obtain bank borrowings usually depends on the profitability and financial standing of the Group as well as the then prevailing market condition. In light of the above and zero operating profit of the Group for the year ended 31 March 2009 and small operating profit of the Group for the year ended 31 March 2010, the management of the Company considers debt financing to be relatively uncertain and time-consuming as compared to equity financing as the financial institution has more concern as to the overall profitability of the Company instead of its operating profit. Given that the Company has zero operating profit of the Group for the year ended 31 March 2009 and small operating profit of the Group for the year ended 31 March 2010, the management of the Company is of the view that the Rights Issue is the only available option for the Company to raise fund to continue its operation as at the Latest Practicable Date.

In view of the above reasons, we concur with the above view that the Rights Issue is an appropriate means to settle the existing debts and provide working capital for the Group by considering that (i) as compared to debt financing, interest cost can be saved; (ii) all the Qualifying Shareholders have an equal opportunity to participate in the enlargement of the Company's capital base and the Company's further development; and (iii) the Rights Issue enables all the Qualifying Shareholders to maintain their proportionate interests in the Company. The Rights Issue is effected on a pro-rata basis and we are of the view that the Rights Issue offers all the Qualifying Shareholders an equal opportunity to participate in the enlargement of the capital base of the Company and enables the Qualifying Shareholders to maintain their proportionate interest in the Company and to continue to participate in the future development of the Group. The nil-paid Rights Shares will be traded on the Stock Exchange. Shareholders who do not take up their entitlements in full will have the opportunity to realize their nil-paid Rights Shares on the market, subject to market conditions.

In view of the above reasons, we consider the Rights Issue is fair and reasonable to the Qualifying Shareholders.

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LETTER FROM INDEPENDENT FINANCIAL ADVISER

(III) Principal terms of the Rights Issue

Basis of the Rights Issue

The Rights Shares, when issued and fully paid, shall rank pari passu in all respects with the Consolidated Shares then in issue on the date of allotment and issue of the Rights Shares. Holders of the Rights Shares will be entitled to receive all future dividends and distributions, which may be declared, made or paid on or after the date of allotment and issue of the Rights Shares.

The Rights Issue is fully underwritten and is subject to the Underwriting Agreement becoming unconditional and not being terminated in accordance with its terms.

Subscription Price

The Subscription Price of HK$0.5 represents:

(i) a discount of approximately 74.36% to the closing price of HK$1.95 per Consolidated Share based on the closing price of HK$0.039 per Share as quoted on the Stock Exchange on the Last Trading Day and adjusted for the effect of the Capital Reorganization;

(ii) a discount of approximately 74.75% to the average closing price of approximately HK$1.98 per Consolidated Share, based on the average closing price of HK$0.0396 per Share as quoted on the Stock Exchange for the 5 consecutive trading days up to and including the Last Trading Day and adjusted for the effect of the Capital Reorganization; and

The Subscription Price was arrived at after arm's length negotiation between the Company and the Underwriter with reference to the market price of the Shares under the prevailing market conditions. The Directors consider that the discount of the Subscription Price would encourage Shareholders to participate in the Rights Issue and accordingly maintain their shareholdings in the Company and participate in the future growth of the Group. The Directors and the independent non-executive Directors considers the terms of the Rights Issue (including the rate of commission) to be fair and reasonable and in the best interests of the Group and Shareholders as a whole.

— 25 —

LETTER FROM INDEPENDENT FINANCIAL ADVISER

In order to assess the fairness and reasonableness of the Subscription Price, we have review the closing price of the Consolidated Shares for the period from 2 July 2010, being the 6 months period prior to the date of the Underwriting Agreement, up to and including the Latest Practicable Date (the "Review Period"). The table below illustrates the monthly average closing price of the Consolidated Shares versus the Subscription Price during the Review Period:

Share Price Movement

Source: http://www.hkex.com.hk/eng/invest/company/chart_page_e.asp

During the Review Period, the highest and lowest closing price of the Consolidated Shares were HK$4.45 in 12 August 2010 and HK$1.3 in 31 December 2010 respectively, based on the closing price of 0.089 of the Share as quoted on the Stock Exchange on 12 August 2010 and the closing price of 0.026 of the Share as quoted on the Stock Exchange on 31 December 2010. The Subscription Price is lower than the lowest closing price of the Consolidated Shares, and represents a discount of

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LETTER FROM INDEPENDENT FINANCIAL ADVISER

approximately 88.76% and 61.54% to the aforesaid highest and lowest closing prices of the Consolidated Share respectively. The Company is of the view that the Subscription Price which represents discounts to the market prices as illustrated above may be likely to attract the Qualifying Shareholders to participate in the Rights Issue.

Company name/ stock code	Date of announcement	Offer ratio	(Discount) of subscription price over/to the closing price per Share on the last trading day	(Discount) of subscription price over/to the theoretical ex-right price per Share	Underwriting commission
Great World Company Holdings Limited (Code No.8003)	6 July 2010	1 for 1	(61.54%)	(44.44%)	3%
China Star Entertainment Limited (Code No. 326)	8 July 2010	1 for 2	(12.28%)	(8.26%)	1%
China Mandarin Holdings Limited (Code No.00009)	9 July 2010	7 for 1	(94.55%)	(68.41%)	2.5%
Unity Investments Holdings Limited (Code No. 913)	27 July 2010	1 for 8	(73.13%)	(23.22%)	2.5%
Dragonite International Limited (Code No. 329)	21 July 2010	20 for 1	(90.83%)	(32.06%)	3%
Wai Yuen Tong Medicine Holdings Limited (Code No. 897)	9 August 2010	5 for 1	(83.1%)	(35.91%)	2.5%
Polyard Petroleum International Group Limited (Code No.8011)	13 August 2010	1 for 2	(28.10%)	(20.60%)	1.5%
Yue Xiu Property Company Limited (Code No.123)	14 September 2010	3 for 10	(15.26%)	(12.02%)	N/A
New Smart Energy Group Limited (Code No.91)	20 September 2010	2 for 1	(26.32%)	(10.40%)	2.5%
21 Holdings Limited (Code No.1003)	22 September 2010	10 for 1	(87.66%)	(39.30%)	2.25% and & 2%
Oriental City Group Holdings Limited (Code No.8325)	27 September 2010	1 for 2	(84.44%)	(71.13%)	2.5%

— 27 —

LETTER FROM INDEPENDENT FINANCIAL ADVISER

Company name/stock code	Date of announcement	Offer ratio	(Discount) of subscription price over/to the closing price per Share on the last trading day	(Discount) of subscription price over/to the theoretical ex-right price per Share	Underwriting commission
China Primary Resources Holdings Limited
(Code No.8117)	27 September 2010	1 for 2	(36.50%)	(27.70%)	1.5%
Hua Xia Healthcare Holdings Limited
(Code No.8143)	27 September 2010	1 for 3	(36.10%)	(29.50%)	6%
Hengli Properties Development (Group) Limited
(Code No.169)	4 October 2010	1 for 1	(71.43%)	(55.56%)	2.5%
Century City International Holdings Limited
(Code No.355)	7 October 2010	1 for 10	(25%)	(28.50%)	2.5%
China Green Assets Investment Limited
(Code No.397)	12 October 2010	9 for 1	(23.08%)	(17.31%)	2.5%
Standard Chartered PLC
(Code No.2888)	15 October 2010	1 for 8	(32.93%)	(30.38%)	2.15%
M Dream InWorld Limited
(Code No.8100)	15 October 2010	4 for 1	(83.74%)	(21.26%)	N/A
Bao Yuan Holdings Limited
(Code No.692)	20 October 2010	8 for 1	(81.82%)	(33.33%)	2.5%
Hong Kong Life Group Holdings Limited
(Code No.8212)	27 October 2010	3 for 1	(69.70%)	(37.5%)	2.5%
Bank of China Limited
(Code No.3988)	28 October 2010	1 for 10	(41.20%)	(38.98%)	N/A
Inno-Tech Holdings Limited
(Code No.8202)	29 October 2010	10 for 1	(72.31%)	(19.28%)	3%
China Construction Bank Corporation
(Code No. 939)	2 November 2010	0.7 for 10	(42.70%)	(41%)	N/A

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LETTER FROM INDEPENDENT FINANCIAL ADVISER

Company name/stock code	Date of announcement	Offer ratio	(Discount) of subscription price over/to the closing price per Share on the last trading day	(Discount) of subscription price over/to the theoretical ex-right price per Share	Underwriting commission
Industrial and Commercial Bank of China Limited (Code No.1398)	10 November 2010	0.45 for 10	(47.40%)	(46.20%)	N/A
Dah Sang Banking Group Limited (Code No.2356) & Dah Sang Financial Holdings Limited (Code No.440)	16 November 2010	1 for 10	(40.94%)	(38.65%)	2.25%
		1 for 8	(39.97%)	(37.18%)	2.25%
Morning Star Resources Limited (Code No.542)	19 November 2010	5 for 1	(89.53%)	(45.05%)	2.5%
ForeFront Group Limited (Code No.885)	25 November 2010	8 for 1	(86.56%)	(41.59%)	3%
China Yunnan Tin Minerals Group Company Limited (Code No.263)	29 November 2010	8 for 1	(87.80%)	(44.40%)	3%
Champion Technology Holdings Limited (Code No.92)	1 December 2010	4 for 9	(21.1%)	(29.6%)	2.5%
Shangri-La Asia Limited (Code No.69)	9 December 2010	1 for 12	(5.8%)	(5.4%)	1%
Wang On Group Limited (Code No.1222)	13 December 2010	8 for 1	(87.65%)	(37.89%)	3%
Zhongtian International Limited (Code No.2379)	17 December 2010	10 for 1	(96.7%)	(72.5%)	N/A
CultureCom Holdings Limited (Code No.343)	17 December 2010	1 for 2	(41.7%)	(32.70%)	N/A
V.S. International Group Limited (Code No.1002)	22 December 2010	1 for 3	(18.37%)	(14.44%)	N/A
Highest premium / (Lowest Discount) (Highest Discount)			(5.8%)	(5.4%)
			(96.7%)	(72.5%)

— 29 —

LETTER FROM INDEPENDENT FINANCIAL ADVISER

Company name/stock code	Date of announcement	Offer ratio	(Discount) of subscription price over/to the closing price per Share on the last trading day	(Discount) of subscription price over/to the theoretical ex-right price per Share	Underwriting commission
Median			(55.,35%)	(33.10%)	2.0%
The Company	23 December 2010	5 for 1	(74.36%)	(32.58%)	2.5%

Source: http://www.hkex.com

Based on the transactions of rights issue from 6 July 2010 up to and including 22 December 2010 borne by 35 companies that are listed on the Main Board and GEM Board of the Stock Exchange which we consider such comparables used are fair and representative samples, the highest and lowest discount of subscription price to the closing on the last trading day are 96.7% and 5.8% respectively. As such, the discount of approximately 74.36% to the closing price of HK$1.95 per Consolidated Share based on the closing price of HK$0.039 per Share as quoted on the Stock Exchange on the Last Trading Day and adjusted for the effect of the Capital Reorganization falls within the above range.

The highest and lowest discount of subscription price to the theoretical ex-right price per share of those transactions of rights issue from 6 July 2010 up to and including 22 December 2010 borne by 35 companies that are listed on the Main Board and GEM Board of the Stock Exchange are 72.5% and 5.4%. As such, the discount of approximately 32.58% to the theoretical ex-rights price of approximately HK$0.742 per Consolidated Share, based on the closing price of HK$0.039 per Share as quoted on the Stock Exchange falls within the above range. Having considered that (i) the Group could reduce its Relevant Indebtedness; (ii) the Group has increased its working capital for the development of for initial project expenses of the Philippines mining project; (iii) the advantages of raising funds by way of rights issue as compared to other financing methods mentioned above; (iv) the Subscription Price which represents discounts to the market prices as illustrated above may be likely to attract the Qualifying Shareholders to participate in the Rights Issue and accordingly maintain their respective shareholding interests in the Company; (v) the discount of the Subscription Price is in line with the discount of subscription price of the rights issue performed from 6 July 2010 up to and including 22 December 2010; and (vi) all Qualifying Shareholders are offered an equal opportunity to subscribe for the Rights Shares, we concur with the Directors that the Subscription Price is fair and reasonable and in the interest of the Company and the Shareholders as a whole.

The Company has not conducted any fund raising exercise in the past 12 months from the Latest Practicable Date.

Underwriting Commission

The underwriting commission, after arm's length negotiation between the Company and the Underwriter, is 2.5% of the aggregate Subscription Price of the Right Shares underwritten by the Underwriter.

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LETTER FROM INDEPENDENT FINANCIAL ADVISER

As the underwriting commission rates of the right issue transaction with underwriting agreements dated from 6 July 2010 up to and including 22 December 2010 borne by 35 companies that are listed on the Main Board and GEM Board of the Stock Exchange ranged from 1% to 6%, with the median of approximately 2.0% respectively, the underwriting commission of the Right Issue, being 2.5%, is the same as the median and falls within the above range. Based on the statistics, we consider that the subscription price and the underwriting commission of the Rights Issue are generally in line with the above and are fair and reasonable so far as the Shareholders are concerned.

(IV) Other terms of the Rights Issue and the underwriting arrangements

The other terms of the Rights Issue, being set out in the Letter from the Board, include the detailed terms related to:

(a) the Qualifying Shareholders
(b) the Basis of provisional allotment
(c) the Fractions of Rights Shares
(d) the Status of the Rights Shares
(e) the Application for excess Rights Shares
(f) the Terms of the Underwriting Agreement
(g) the Conditions of the Rights Issue.

Other than the subscription price and the underwriting commission of the Rights Issue, we have also reviewed the other terms of the Rights Issue together with the terms of the Underwriting Agreement as listed above, we are of the view that the terms of the Rights Issue together with the terms of the Underwriting Agreement are on normal commercial basis, no extraordinary terms being noted.

(V) Effect on shareholding interests of the Shareholders

Being set out in the section headed Changes in the shareholding structure of the Company arising from the Rights Issue in the Letter from the Board, immediately after completion of the Rights Issue, (i) the shareholding of the Qualifying Shareholders who subscribe for in full their assured entitlements under the Rights Issue will retain their current shareholding interests in the Company and (ii) the shareholding of the Qualifying Shareholders who do not subscribe for in full their assured entitlements under the Rights Issue will be diluted from approximately 86.51% to 14.42% assuming no exercise of the outstanding Share Option and no conversion of Convertible Bonds on or before record date or from approximately 86.51% to 14.42% assuming the exercise of the outstanding Share Option in full and no conversion of Convertible Bonds on or before record date. We are of the view that the possible

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LETTER FROM INDEPENDENT FINANCIAL ADVISER

dilution effect on the Qualifying Shareholders is fair and reasonable as they have been provided an opportunity to maintain their shareholding interest in the Company and the benefit arising from the net proceeds from the Rights Issue outweighs the possible dilution effects on the shareholding interests of the Qualifying Shareholders.

(VI) Financial effects of the Rights Issue

(a) Net Asset

The effect on the unaudited pro forma consolidated net liabilities of the Group immediately after completion of the Rights Issue are set out in Appendix II in this Circular.

According to the unaudited pro forma financial information as set out in Appendix II to the Circular, the unaudited consolidated net liabilities of the Group attributable to the owners of the Company was approximately HK$734,120,000 as at 30 September 2010 and the unaudited pro forma adjusted consolidated net liabilities attributable to the owners of the Company would be approximately HK$364,393,000 upon completion of the Rights Issue as a result of the inflow of the estimated net proceeds of approximately HK$369,727,000 million (before setting off against the Relevant Indebtedness) from the Rights Issue. As such, we are of the view that the Rights Issue can improve the net assets value of the Group.

(b) Gearing ratio and working capital

Based on the unaudited consolidated accounts of the Company as at 30 September 2010, the gearing ratio of the Group was 8.43% (the aggregate of convertible bonds and promissory note divided by total equity). The Rights Issue can raise a net proceeds amount of HK$239.73 million to HK$239.98 million. Accordingly, the gearing ratio of the Group immediately after the Rights Issue will be further improved.

The cash position and working capital of the Group immediately after the Rights Issue will be increased by the same amount of the actual net proceeds of the Rights Issue. We are also of the view that the cash position and working capital of the Group to be immediately after the Rights Issue is in the interest of the Company and Shareholders, including both the Qualifying Shareholders and the Non-Qualifying Shareholders.

RECOMMENDATION

We have considered the above principal factors and reasons and, in particular, have taken into account the following in arriving at our opinion:

(i) the net proceeds from the Rights Issue will (a) improve the working capital position of the Group; (b) provide working capital for the Company to develop the initial project expenses of the Philippines mining project; and (c) reduce the Relevant Indebtedness;

(ii) the Rights Issue would enlarge the capital base of the Company;

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LETTER FROM INDEPENDENT FINANCIAL ADVISER

(iii) the Rights Issue will allow all the Qualifying Shareholders to participate in the future growth and development of the Group; and

(iv) the Rights Issue on normal commercial terms.

Having considered the above, we are of the view that the Rights Issue is in the interests of the Company and the Shareholders as a whole and the terms of the Rights Issue are fair and reasonable so far as the Company and the Shareholders, including both the Qualifying Shareholder and the Non-Qualifying Shareholders, are concerned. Accordingly, we recommend the Independent Board Committee to advise the Independent Shareholders to vote in favour of the ordinary resolution to be proposed at the EGM to approve the Rights Issue.

Yours faithfully,

For and on behalf of

Donvex Capital Limited

Doris Sy

Director

— 33 —

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

1. THREE-YEAR FINANCIAL INFORMATION

Financial information of the Group for each of the three years ended 31 March 2008, 2009 and 2010 are disclosed in the annual reports of the Company for the years ended 31 March 2008 (pages 37 to 130), 2009 (pages 26 to 111) and 2010 (pages 29 to 128) respectively. These annual reports are published on the website of the Stock Exchange (www.hkex.com.hk) and the website of the Company (http://www.pamining.com). Unaudited consolidated results of the Company and its subsidiaries for the six months ended 30 September 2010 is also disclosed in the interim report of the Company published on the website of the Stock Exchange and the website of the Company.

2. INDEBTEDNESS STATEMENT

At the close of business on 31 December 2010, being the latest practicable date for ascertaining the indebtedness of the Group prior to the printing of this circular, the Group had debt instruments of approximately HK$1,761,500,000 comprising (i) unsecured zero coupon convertible bonds in the principal amount of HK$1,571,500,000 and (ii) unsecured promissory notes in principal amount of HK$190,000,000, a shareholder's loan of HK$10,000,000 and loans from a director of a subsidiary in aggregate amount of HK$12,100,000, all of these loans are unsecured, interest free and repayable on demand. The Group also has non-cancellable operating lease commitment of HK$1,458,000. As at 31 December 2010, none of the indebtedness of the Group was guaranteed.

Save as aforesaid and apart from intra-group liabilities and normal trade payables, as at the close of business on 31 December 2010, the Group did not have any other debt securities issued and outstanding or authorised or otherwise created but unissued, any other term loans, any other borrowings or indebtedness in the nature of borrowings including bank overdrafts and liabilities under acceptance (other than normal trade bills) or acceptance credits or hire purchase commitments, any other mortgages and charges or any guarantees or material contingent liabilities. There are no contracts for the hire or hire purchase of plant to or by any member of the Group for a period of over one (1) year which are substantial in relation to the Group's business.

3. WORKING CAPITAL

The Directors are of the opinion that, after taking into account the present available financial resources, available banking facilities and the estimated net proceeds from the Rights Issue, the Group has sufficient working capital for its present requirements and for at least the next 12 months from the date of publication of this circular, in the absence of unforeseen circumstances.

4. FOREIGN EXCHANGE

The Company's existing foreign exchange liabilities are denominated in US$ which is pegged with the HK$ at a designated range. Accordingly the Company's expects its exposure to fluctuation of foreign exchange to be limited and minimal.

5. BUSINESS TREND AND PROSPECTS

During the period since the date of publishing the annual report for the year ended 31 March 2010, the Group has been in the process of applying the partial conversion of the exploration permits

— 34 —

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

into mining agreement over an area of approximately 5,000 hectares. After the conversion the Group will be granted exclusive rights to conduct mining operations within, but not title over, the designated area and shares in the production whether in kind or in value as owner of the minerals of the designated area.

The Group also engages in trading of metals. Sales revenue of approximately HK$14.7 million (audited) and HK$5.1 million (unaudited) were recorded for the financial year ended 31 March 2010 and the 6 months ended 30 September 2010. Given the general upward trend of commodity metals, the Group is actively exploring the expansion of the trading of metal business.

6. MATERIAL ADVERSE CHANGE

The Directors confirm that there has been no material adverse change in the financial or trading position or outlook of the Group since 31 March 2010, (being the date to which the latest published audited consolidated financial statements of the Group were made up) up to and including the Latest Practicable Date.

— 35 —

APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE GROUP

For illustrative purposes only, set out below is the unaudited pro forma statement of adjusted consolidated net tangible liabilities of the Group after completion of the Rights Issue.

(A) UNAUDITED PRO FORMA STATEMENT OF ADJUSTED CONSOLIDATED NET TANGIBLE ASSETS OF THE GROUP

The unaudited pro forma statement of adjusted consolidated net tangible assets (the "Unaudited Pro Forma Financial Information") of the Group has been prepared by the directors of the Company in accordance with Rule 7.31 of Chapter 7 of the Rules Governing the Listing of Securities on Growth Enterprises Market of The Stock Exchange of Hong Kong Limited (the "GEM Listing Rules") to illustrate the effect of the proposed rights issue of not less than 760,153,400 Rights Shares and not more than 760,653,400 Rights Shares at a subscription price of HK$0.50 per Rights Share on the basis of five Rights Shares for every one consolidated share held on the record date (the "Rights Issue") on the unaudited consolidated net tangible assets of the Group as if the Rights Issue had taken place on 30 September 2010.

The Unaudited Pro Forma Financial Information of the Group has been prepared based on relevant financial information as extracted from the published interim report of the Company for the period ended 30 September 2010 as set out in Appendix I to the Circular, after incorporating the unaudited pro forma adjustments described in the accompanying notes.

The unaudited Pro Forma Financial Information of the Group has been prepared for illustrative purposes only, and because of its hypothetical nature, it may not give a true picture of the consolidated net tangible liabilities of the Group following the Rights Issue:

	Consolidated net assets of the Group attributable to owners of the Company as at 30 September 2010 (Note 1) HK$'000	Less: Intangible assets (Note 2) HK$'000	Unaudited pro forma adjusted consolidated net tangible liabilities of the Group attributable to owners of the Company as at 30 September 2010 HK$'000	Add: Estimated net proceeds from the Rights Issue (Note 3) HK$'000	Unaudited pro forma adjusted consolidated net tangible liabilities of the Group attributable to owners of the Company immediately after completion of the Rights Issue HK$'000
Minimum number of 760,153,400 Rights Shares to be issued	7,695,759	8,429,879	(734,120)	369,727	(364,393)

APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE GROUP

	Consolidated net assets of the Group attributable to owners of the Company as at 30 September 2010 (Note 1) HK$'000	Less: Intangible assets (Note 2) HK$'000	Unaudited pro forma adjusted consolidated net tangible liabilities of the Group attributable to owners of the Company as at 30 September 2010 HK$'000	Add: Estimated net proceeds from the Rights Issue (Note 3) HK$'000	Unaudited pro forma adjusted consolidated net tangible liabilities of the Group attributable to owners of the Company immediately after completion of the Rights Issue HK$'000
Maximum number of 760,653,400 Rights Shares to be issued	7,695,759	8,429,879	(734,120)	369,977	(364,143)
Unaudited pro forma adjusted consolidated net tangible liabilities attributable to owners of the Company per Consolidated Share as at 30 September 2010 prior to the Rights issue (Note 4)					HK$4.829

APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE GROUP

	Consolidated net assets of the Group attributable to owners of the Company as at 30 September 2010 (Note 1) HK$'000	Less: Intangible assets (Note 2) HK$'000	Unaudited pro forma adjusted consolidated net tangible liabilities of the Group attributable to owners of the Company as at 30 September 2010 HK$'000	Add: Estimated net proceeds from the Rights Issue (Note 3) HK$'000	Unaudited pro forma adjusted consolidated net tangible liabilities of the Group attributable to owners of the Company immediately after completion of the Rights Issue HK$'000
Unaudited pro forma adjusted consolidated net tangible liabilities attributable to owners of the Company per Consolidated Share as at 30 September 2010 immediately after completion of the Rights Issue (based on minimum number of 760,153,400 Rights Shares to be issued) (Note 5)

HK$0.399

APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE GROUP

	Consolidated net assets of the Group attributable to owners of the Company as at 30 September 2010 (Note 1) HK$'000	Less: Intangible assets (Note 2) HK$'000	Unaudited pro forma adjusted consolidated net tangible liabilities of the Group attributable to owners of the Company as at 30 September 2010 HK$'000	Add: Estimated net proceeds from the Rights Issue (Note 3) HK$'000	Unaudited pro forma adjusted consolidated net tangible liabilities of the Group attributable to owners of the Company immediately after completion of the Rights Issue HK$'000
Unaudited pro forma adjusted consolidated net tangible liabilities attributable to owners of the Company per Consolidated Share as at 30 September 2010 immediately after completion of the Rights Issue (based on maximum number of 760,653,400 Rights Shares to be issued) (Note 6)

Notes:

The unaudited consolidated net assets of the Group as at 30 September 2010 as extracted from the published interim report of the Company for the period ended 30 September 2010.
Intangible assets represented exploration rights of approximately HK$8,429,879,000 as extracted from the published interim report of the Company for the period ended 30 September 2010 as set out in Appendix I to the Circular.

APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE GROUP

The estimated net proceeds from the Rights Issue of approximately HK$369,726,700 and HK$369,976,700 are calculated based on the minimum number of 760,153,400 Rights Shares and maximum number of 760,653,400 Rights Shares, respectively, to be issued at the subscription price of HK$0.50 per Rights Share and after deduction of estimated related expenses of approximately HK$10,350,000, including underwriting commission, legal and profession fees and other related expenses.
The number of shares used for the calculation of unaudited pro forma adjusted consolidated net tangible liabilities attributable to owners of the Company per Consolidated Share prior to the Rights Issue is based on 152,030,680 Consolidated Shares of Company in issue as at 30 September 2010 (as adjusted by the Share Consolidation).
The number of shares used for the calculation of unaudited pro forma adjusted consolidated net tangible liabilities per Consolidated Share immediately after completion of the Rights Issue to be issued (based on the minimum number of Rights Shares) is calculated based on 912,184,080 Consolidated Shares, comprising the existing 152,030,680 Consolidated Shares of the Company in issue as at 30 September 2010 and the minimum number of 760,153,400 Rights Shares to be issued pursuant to the Rights Issue. The calculation takes no account of any shares to be issued upon exercise of share options.
The number of shares used for the calculation of unaudited pro forma adjusted consolidated net tangible liabilities per Consolidated Share immediately after completion of the Rights Issue to be issued (based on the maximum number of Rights Shares and including the exercise of share options) is calculated based on 912,784,080 Consolidated Shares, comprising the existing 152,030,680 Consolidated Shares of the Company in issue as at 30 September 2010 and the maximum number of 760,653,400 Rights Shares to be issued pursuant to the Rights Issue and 100,000 Consolidated Shares upon the exercise of share options. The calculation takes no account of any proceeds from the exercise of share options.
No adjustment has been made to reflect any trading results or other transactions of the Group entered into subsequent to 30 September 2010.

— 40 —

APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE GROUP

(B) REPORT ON THE UNAUDITED PRO FORMA STATEMENT OF ADJUSTED CONSOLIDATED NET TANGIBLE LIABILITIES OF THE GROUP

The following is the text of a report received from CCIF CPA Limited, Certified Public Accountants, in respect of the unaudited pro forma financial information of the Group for the sole purpose of incorporation in this Circular.

19 January 2011

The Board of Directors

Pan Asia Mining Limited

Room 3008, Tower One

1 Matheson Street, Causeway Bay

Hong Kong

Dear Sirs,

We report on the unaudited pro forma statement of adjusted consolidated net tangible liabilities (the "Unaudited Pro Forma Financial Information") of Pan Asia Mining Limited (the "Company") and its subsidiaries (collectively referred to as the "Group"), as set out in the circular of the Company dated 19 January 2011 (the "Circular"), in connection with the proposed capital reorganization and proposed rights issue of five rights shares for every one consolidated share held on the Record Date (the "Capital Reorganisation and Rights Issue") of the Company. The Unaudited Pro Forma Financial Information has been prepared by the directors of the Company, for illustrative purposes only, to provide information about how the Capital Reorganisation and Rights Issue might have affected the relevant financial information of the Group. The basis of preparation of the Unaudited Pro Forma Financial Information is set out in Appendix II 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 7.31 of Chapter 7 of the Rules Governing the Listing of Securities on Growth Enterprises market of The Stock Exchange of Hong Kong Limited (the "GEM Listing Rules") and Accountant Guideline 7 "Preparation of Pro Forma Financial Information for Inclusion in Investment Circulars") issued by the Hong Kong Institute of Certified Public Accountants (the "HKICPA").

APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE GROUP

It is our responsibility to form an opinion, as requires by paragraph 7.31(7) of Chapter 7 of the GEM Listing Rules, on the Unaudited Pro Forma Financial Information and to report our opinion solely to you. We do not accept any responsibility for any reports previously given to us on any financial information used in the compilation for 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.

Our work did not constitute an audit or review made in accordance with Hong Kong Standards on Auditing, Hong Kong Standards on Review Engagements or Hong Kong Standards on Assurance Engagements issued by the HKICPA, and accordingly, we do not express any such audit or review assurance on the Unaudited Pro Forma 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 purposes of the Unaudited Pro Forma Financial Information as disclosed pursuant to paragraph 7.31 (1) of Chapter 7 of the GEM Listing Rules.

The Unaudited Pro Forma Financial Information is for illustrative purpose only, based on the judgments 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 the future and may not be indicative of the financial position of the Group as at 30 September 2010 or any future date.

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;

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APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE GROUP

(b) such basis is consistent with the accounting policies of the Group; and

(c) the adjustments are appropriate for the purposes of the Unaudited Pro Forma Financial Information as disclosed pursuant to paragraph 7.31 (1) of Chapter 7 of the GEM Listing Rules.

Yours faithfully,

CCIF CPA Limited

Certified Public Accountants

Hong Kong

Leung Chun Wa

Practising Certificate Number P04963

— 43 —

APPENDIX III
GENERAL INFORMATION

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 Company. 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 herein or this circular misleading.

The Directors jointly and severally accept full responsibility for the accuracy of information contained in this circular and confirm, having made all reasonable inquiries, that to the best of their knowledge, opinions expressed in this circular have been arrived at after due and careful consideration and there are no other facts not contained in this circular, the omission of which would make any statement in this circular misleading.

2. SHARE CAPITAL

(a) Share Capital of the Company

There has been no alteration in the number of Shares issued since 31 March 2010, the date on which the latest audited financial statements of the Group were made up, and up to the Latest Practicable Date. The authorised and issued share capital of the Company as at the Latest Practicable Date and immediately upon the completion of the Capital Reorganisation and the Rights Issue (assuming no exercise of the outstanding Share Options and no conversion of the Convertible Bonds on or before the Record Date) will be as follows:

As at the Latest Practicable Date

Authorised: HK$
30,000,000,000 Shares 300,000,000

Issued and fully paid:
7,601,534,023 Shares 76,015,340.23

Immediately upon the completion of the Capital Reorganisation and the Rights Issue (assuming no exercise of the outstanding Share Options and no conversion of the Convertible Bonds on or before the Record Date)

Authorised: HK$
2,000,000,000 Consolidated Shares 1,000,000,000

APPENDIX III

GENERAL INFORMATION

Issued and fully paid:

152,030,680	Consolidated Shares in issue immediately after the Capital Reorganisation but before completion of the Rights Issue	76,015,340
760,153,400	Rights Shares to be issued pursuant to the Rights Issue	380,076,700
912,184,080	Consolidated Shares in issue immediately after completion of the Rights Issue	456,092,040

All the Rights Shares to be issued would rank pari passu with each other in all respects including the rights as to voting, dividends and return of capital, and with all the Consolidated Shares in issue as at the date of allotment and issue of the Rights Shares. No part of the share capital or any other securities of the Company is listed or dealt in on any stock exchange other than the Stock Exchange and no application is being made or is currently proposed or sought for the Shares or the Consolidated Shares (as the case may be) or Rights Shares or any other securities of the Company to be listed or dealt in on any other stock exchange. As at the Latest Practicable Date, there were no arrangements under which future dividends are waived or agreed to be waived.

(b) Options, derivatives, warrants and conversion rights

Set out below are the details of the outstanding share options granted under the Share Option Scheme as at the Latest Practicable Date:

Name	As at Latest Practicable Date	Grant Date	Exercisable Period	Exercise Price (HK$)
Well Spread Consultants Limited	5,000,000	6 March 2007	10years	0.188
Total	5,000,000

As at the Latest Practicable Date, save for the share options granted pursuant to the Share Option Scheme and the Convertible Bonds, no share nor loan capital of the Company has been issued or is proposed to be issued for cash or otherwise, or has been put under option or agreed conditionally or unconditionally to be put under option, and no commissions, discounts, brokerages or other special terms have been granted in connection with the issue or sale of any such capital and no options, warrants, derivatives, convertible securities or conversion rights affecting the Shares have been issued or granted or agreed conditionally or unconditionally to be issued or granted.

APPENDIX III

GENERAL INFORMATION

3. DISCLOSURE OF INTERESTS BY DIRECTORS

As at the Latest Practicable Date, the interests of the Directors (including proposed Directors) and the chief executive of the Company in the Shares of the Company, underlying Shares or debentures of the Company and its associated corporations (within the meaning of Part XV of the SFO) as notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests or short positions which they were taken or deemed to have under such provisions of the SFO); or as recorded in the register required to be kept pursuant to section 352 of the SFO; or as otherwise notified to the Company and the Stock Exchange pursuant to Rules 5.46 to 5.67 of the GEM Listing Rules relating to securities transactions by the Directors, were as follows:

(a) Long positions in Shares of the Company

Name of Directors	Capacity	Number of Shares	Approximate percentage of the Company’s issued share capital
Yin Mark Teh-min	Interest of spouse	2,500,000	0.03%
	Beneficial owner	380,000	0.01%
Total:		2,880,000	0.04% (Note 1)

Note:
1. Ms. Wong Shu Wah, Ceci, being the wife of Mr. Yin Mark Teh-min (“Mr. Yin”), is interested in 2,500,000 Shares. Accordingly, Mr. Yin is deemed to be interested in such 2,500,000 Shares. Mr. Yin also holds 380,000 Shares as beneficial owner. Therefore, Mr. Yin is interested and deemed to be interested in 2,880,000 Shares in total.

(b) Directors’ Short Positions In Shares, Underlying Shares And Debentures

As at the Latest Practicable Date, there are no short positions of the Directors (including proposed Directors) and the chief executive of the Company in the Shares, underlying Shares and debentures of the Company and its associated corporations that (i) were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which they were taken or deemed to have under such provisions of the SFO); or (ii) were required, pursuant to Section 352 of the SFO, to be entered in the register referred to therein; or (iii) were required, pursuant to Rule 5.46 of the GEM Listing Rules, to be notified to the Company and the Stock Exchange.

APPENDIX III

GENERAL INFORMATION

4. DISCLOSURE OF INTERESTS BY SUBSTANTIAL SHAREHOLDERS

As at the Latest Practicable Date, so far as is known to any Director or chief executive of the Company, the following persons (other than Directors or chief executive of the Company) had interests or short positions in the Shares, underlying Shares or debentures of the Company which would fall to be disclosed to the Company under the provisions Divisions 2 and 3 of Part XV of the SFO, or, who was, 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.

(a) Long positions of substantial shareholders in the Shares and underlying Shares of the Company:

Name of substantial shareholder	Nature of interest	No. of Shares and/or underlying Shares held	Approximate percentage of the shareholding
Kesterion Investments Limited	Beneficial owner (Note 1) (Note 2)	3,265,250,000	42.95
Wong Eva	Interest of controlled Corporation (Note 1) (Note 2)	3,265,250,000	42.95
	Beneficial owner	2,260,000	0.03
Sub-total:		3,267,510,000	42.98
Koh Tat Lee, Michael	Interest of spouse (Note 1) (Note 2)	3,267,510,000	42.98
Singson Ryan Luis V.	Beneficial owner	1,662,990,000	21.88

Notes:

Mr. Koh Tat Lee, Michael, being the husband of Ms. Wong Eva ("Ms. Wong"), is deemed to be interested in such 1,022,510,000 issued shares held by Kesterion and Ms. Wong.
2,245,000,000 underlying shares represents the principal amount of approximately US$201,474,359 of Convertible Bonds, which upon conversion in full will result in the allotment and issue of 2,245,000,000 Shares, which have been issued to Kesterion Investments Limited on 18 December 2008 as part of the consideration for the acquisition of First Pine Enterprises Limited. The entire issued share capital of Kesterion Investments Limited is beneficially owned by Ms. Wong. Ms. Wong, is the sister of the chairman of the Company, Mr. Wong Chung Yu, Denny and the sister-in-law of a non-executive Director of the Company Mr. Yin Mark Teh-min. Mr. Koh Tat Lee, Michael, being the husband of Ms. Wong, is deemed to be interested in such 2,245,000,000 underlying shares.

APPENDIX III

GENERAL INFORMATION

Save as disclosed in this paragraph, the Directors of the Company are not aware, as at the Latest Practicable Date, of any person (not being a Director or chief executive of the Company) who had interest or short position in the Shares or underlying Shares which would fall to be disclosed under Divisions 2 and 3 of Part XV of the SFO, or were expected, directly or indirectly to be 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 the Company or any other member of the Group.

5. DIRECTORS' SERVICE CONTRACTS

As at the Latest Practicable Date, none of the Directors had any service contract with the Company or any of its subsidiaries which is not expiring or determinable by the Group within one year without payment of compensation, other than statutory compensation. As at the Latest Practicable Date, none of the Directors is a director or employee of Kesterion.

6. LITIGATION

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

7. COMPETING INTEREST

As at the Latest Practicable Date, in so far as the Directors are aware, none of the Directors or their respective associates had any interest in a business which competes or likely to compete with the business of the Group.

8. EXPERT AND CONSENT

The following are the qualifications of the expert whose opinions or advice are contained in this circular:

Name	Qualification
Donvex Capital Limited	a licensed corporation authorised to conduct type 6 (advising on corporate finance) regulated activity under the SFO
CCIF CPA Limited	Certified Public Accountants

As at the Latest Practicable Date, each of Donvex Capital Limited and CCIF CPA Limited had given and has not withdrawn its written consent to the issue of this circular with the inclusion of its letter dated the date hereof and reference to its name in the form and context in which they appear.

— 48 —

APPENDIX III

GENERAL INFORMATION

As at the Latest Practicable Date, neither Donvex Capital Limited nor CCIF CPA Limited was interested in any shareholding in any member of the Group or the right or option (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member of the Group, and neither Donvex Capital Limited nor CCIF CPA Limited had direct or indirect interest in any assets which have been or proposed to be acquired or disposed of by or leased to any member of the Group since 31 March 2010, being the date to which the latest published audited accounts of the Company were made up.

9. INTERESTS IN ASSETS

As at the Latest Practicable Date, none of the Directors had any direct or indirect interest in any asset which had been, since 31 March 2010, being the date to which the latest published audited financial statements of the Company were made up, 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.

10. DIRECTORS' INTERESTS IN CONTRACTS

Save as disclosed herein and in the Announcement, there was no contract or arrangement of significance in relation to the Group's business to which the Company, its subsidiaries, its fellow subsidiaries or its holding company was a party and in which a Director had a material interest, whether directly or indirectly, subsisting as at the Latest Practicable Date.

11. MATERIAL CONTRACTS

Save as disclosed below, there are no material contracts (other than contracts entered into in the ordinary course of business) which have been entered into by the Group in the two years immediately preceding the date of the Announcement and up to the Latest Practicable Date and are or may be material:

(a) the sale and purchase agreement dated 23 June 2009 entered into between Mr. Chen Wei Dong and the Company in respect of the disposal of 100 ordinary shares of US$1.00 each in the issued share capital of Datewell Limited and 1 ordinary share of US$1.00 each in the issued share capital of CPE Program Distribution Limited at the consideration of HK$100 (the "Datewell/CPE Program Sale and Purchase Agreement");

(b) the supplemental agreement dated 26 June 2009 entered into between Mr. Chen Wei Dong and the Company in relation to the Datewell/CPE Program Sale and Purchase Agreement;

(c) the sale and purchase agreement dated 21 July 2009 entered into between the Company and Well Charm International Development Limited in relation to the disposal of 200 ordinary shares of US$1.00 each in the share capital of Panorama Entertainment Group Limited ("Panorama") and the assignment of the rights to and the interests in the aggregate amount outstanding form Panorama to the Company as at the date of completion of the disposal at a consideration of HK$100;

— 49 —

APPENDIX III
GENERAL INFORMATION

(d) the conditional investment agreement dated 9 April 2010 entered into between the Company and China Raybo International Corp., Ltd. for the purpose of subscribing for the Subscription Shares and the 2010 Convertible Bonds (the "Investment Agreement");
(e) the supplemental agreement dated 14 May 2010 entered into between the Company and China Raybo International Corp., Ltd. in relation to the Investment Agreement;
(f) the conditional debt restructuring agreement dated 14 May 2010 entered into between the Company, Black Sand and Kesterion in respect of the restructuring of the debts owed to Kesterion (the "Conditional Debt Restructuring Agreement");
(g) the supplemental deed dated 13 October 2010 entered into between the Company, Black Sand and Kesterion in relation to the Conditional Debt Restructuring Agreement;
(h) the supplemental agreement dated 13 October 2010 entered into between the Company and China Raybo International Corp., Ltd. in relation to the Investment Agreement;
(i) the Debt Restructuring Agreement;
(j) the Undertaking; and
(k) the Underwriting Agreement.

12. CORPORATE INFORMATION

Company Secretary
Mr. Chan Ming Cho, Joe, Fellow Certified Public Accountant

Registered Office
P.O. Box 309, Ugland House,
South Church Street, George Town,
Grand Cayman, Cayman Islands,
British West Indies

Head office and principal place of business in Hong Kong
Suite 3008, Tower One, Times Square,
1 Matheson Street, Causeway Bay,
Hong Kong

Share registrar and transfer office in Hong Kong
Tricor Tengis Limited
26th Floor, Tesbury Centre,
28 Queen's Road East, Wanchai,
Hong Kong

— 50 —

APPENDIX III
GENERAL INFORMATION

Auditors

CCIF CPA Limited, Certified Public Accountants
34/F The Lee Gardens,
33 Hysan Avenue, Causeway Bay
Hong Kong.

Authorised Representatives

Mr. Wong Chung Yu, Denny
Mr. Chan Ming Cho, Joe

Solicitors

Sidley Austin
Level 39, Two International Finance Centre
8 Finance Street, Central
Hong Kong

Compliance officer

Mr. Wong Chung Yu Denny

Principal Banker

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

13. DETAILS OF DIRECTORS AND THE AUDIT COMMITTEE

Executive Directors

Mr. Wong Chung Yu Denny (“Mr. Wong”), aged 40, is an executive Director of the Company since 20 May 2008 and re-designated as the chairman of the Company on 6 May 2009. Mr. Wong is the director of Black Sand Enterprises Limited, Black Sand Resources Trading Limited, Black Sand Securities Trading Limited, First Pine Enterprises Limited, Mt. Mogan Holdings, Inc., Mt. Mogan Resources and Development Corporation, Service Form Limited and 寰亞宏華商貿(北京)有限責任公司, all are subsidiaries of the Company. Mr. Wong earned a Bachelor of Science in Electrical Engineering at Rutgers University and a Master of Business Administration from New York University in the United States. Mr. Wong possesses more than 12 years of experience in the banking and financial industry and has a strong background in market investment development. He was previously a senior research analyst for China Construction Bank International Securities Company Limited covering the H-share market strategy and small/mid-cap sectors. Prior to that, Mr. Wong worked for the investment banking division of China Merchant Securities (HK) Limited and had participated in numerous transactions involving mergers and acquisitions, corporate restructuring, and business valuation. Before that, he was vice president and chief financial officer of Mandra Capital Company Limited, a private investment company specializing in PRC industrial and resources investments, and

— 51 —

APPENDIX III

GENERAL INFORMATION

had participated in various transactions including privatization of a state owned enterprise, debt to equity conversion, as well as assessed numerous investment opportunities covering, among others, the healthcare, paper mills, mining, forestry and property industries. Prior to that, Mr. Wong had worked at Salomon Smith Barney and Citigroup in the United States and Hong Kong as vice president equity research analyst and was a member of the Institutional Investor second ranked equity quantitative research team. Mr. Wong is the brother-in-law of Mr. Yin Mark Teh-min.

Mr. Liu Junqing ("Mr. Liu"), aged 41, is an executive Director of the Company since 9 December 2009. Mr Liu is the Business Development director of Black Sand Enterprises Limited and the director of 寰亞宏華商貿(北京)有限責任公司, all are subsidiaries of the Company. Mr. Liu is a graduate of the Institute of Steel and Iron Beijing (Beijing Division) (北京鋼鐵學院(北京分院)) specializing in the field of pressure processing on metals. Mr. Liu has over 10 years of experience in corporate consolidation, crisis management and resources integration. He is also highly experienced in the fields of communications and education. He has taken up the post of General Manager of Sinoforeign Construction Chao Fan Assets Management Company Limited (中外建超凡資產管理有限公司), General Manager of China Agricultural Silicon Valley Production Head Company (中國農業矽谷產業總公司) and General Manager of China Litong Property Company Limited (中國利通置業有限公司). In addition, Mr. Liu has been involved in consolidating more than 10 enterprises of trading and industrial nature and he has established the first asset management company in China. Amid the SARS outbreak, he has organized numerous large-scale interactive live video conferencing sessions for education purpose for organizations including Beijing Normal University and China United Network Communications Group Co., Limited. After 2005, Mr. Liu has concentrated on the reorganization of enterprises in the resource exploitation business and has established more than 5 joint venture companies of medium to large scale in the mining business in Yunan, China. He has helped the enterprises to overcome the challenges of the financial crises through reorganizing various enterprises in the production chain.

Non-executive Director

Mr. Yin Mark Teh-min ("Mr. Yin"), aged 40, is a non-executive Director and a member of each of the audit and remuneration committee of the Company since 20 May 2008. Mr. Yin is an independent consultant with over 17 years of experience as an operational sales and marketing executive. He has held executive management and operational roles in the United States and Asia including business planning and management of large scale projects spanning multiple organizations. Prior to his consultancy, he most recently served as a vice president at Infinera Corporation, a manufacturer of telecommunications equipment, where he led the marketing efforts and, later, Asia Pacific sales and market development. Previously, Mr. Yin served as an executive in sales and marketing roles at Lightera Networks, Ciena Corporation and Cisco Systems/Stratacom. Mr. Yin earned a Bachelor of Science in Electrical Engineering at Rutgers University and a Master of Science in Operations Research at Stanford University. Mr. Yin is the brother-in-law of Mr. Wong Chung Yu, Denny.

APPENDIX III

GENERAL INFORMATION

Independent non-executive Directors

Mr. Lai Kai Jin Michael ("Mr. Lai"), aged 40, is an independent non-executive Director, a member of the audit committee and the chairman of the remuneration committee of the Company since 18 February 2008. Mr. Lai graduated from the National University of Singapore with a LL.B (Hons) Degree in 1994 and was called to the Singapore Bar the following year. He was formerly a partner of Messrs. KhattarWong, one of the largest law firms in Singapore with over 100 professional staff and offices in Singapore, Shanghai, Hanoi and Ho Chih Minh, where he headed the firm's International Trade and Shipping department. Mr. Lai's practice focused on marine insurance, shipping and admiralty law and involved handling legal disputes arising out of international trade and transport. Mr. Lai has acted as lead counsel in numerous cases before the High Court and Court of Appeal of Singapore and in arbitrations. Mr. Lai was formerly the Chairman of the Advisory Body Legal Matters, FIATA and the Legal Counsel for the Singapore Logistics Association. Mr. Lai is currently the Chairman of PVKeez Pte Limited, a joint venture between EOC Limited ("EOC"), Ezra Holdings Limited, Keppel Corporation Limited and PetroVietnam Transportation Corporation set up for the conversion, management and operation of a Floating Production Storage and Offloading ("FPSO") facility in Vietnam's Chim Sao oilfield; a contract worth US$1 billion, with all options exercised. He sits on the Board of Directors of EOC, a company whose shares is listed on the Oslo Stock Exchange. EOC is the leading owner and operator of FPSOs and offshore construction assets based in Asia. Mr. Lai also sits on the Board of Directors of Select Group Limited, a company whose shares is listed on the Singapore Stock Exchange and Interlink Petroleum Limited, a company whose shares is listed on the Mumbai Stock Exchange. Furthermore, Mr. Lai holds the position as a non-executive Director of NagaCorp Limited, a company whose shares is listed on the Stock Exchange.

Mr. Chu Hung Lin, Victor ("Mr. Chu"), aged 42, is an independent non-executive Director and a member of each of the audit committee and remuneration committee of the Company since 1 June 2009. Mr. Chu has a diversified experience in the industries of film production, land development, private pre-IPO investment and food and catering. During the period from January 2001 to June 2003, he was the deputy chairman and executive director of Climax International Company Limited, shares of which are listed on the Stock Exchange. Since 2003, he has been actively involved in food and beverage business and has been a shareholder and director of certain private companies. Mr. Chu is responsible for the business development and product development of such companies.

Mr. Tong Wan Sze ("Mr. Tong"), age 42, is an independent non-executive Director and a chairman of the audit committee of the Company since 29 December 2010. has over 18 years experience in overseeing financial management, merger and acquisition, investor relations and company secretarial matters. Before joining the Company, Mr. Tong has taken up the position as the Chief Financial Officer and Company Secretary of Solargiga Energy Holdings Limited, a company listed on the Stock Exchange. Previously Mr. Tong was the Financial Controller of China Paradise Electronics Retail Limited, which was delisted, and Pearl Oriental Innovation Limited, a company listed on the Main Board of the Stock Exchange. He is a Fellow of the Association of Chartered Certified Accountants, an Associate of the Hong Kong Institute of Certified Public Accountants and a Certified Tax Advisor in Hong Kong. In addition he has obtained a Master degree in Business Administration from the University of Strathclyde in the United Kingdom.

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APPENDIX III

GENERAL INFORMATION

Audit Committee

The audit committee of the Company (the "Audit Committee") currently comprises four members: a non-executive Director, Mr. Yin Mark Teh-min and three independent non-executive Directors, Mr. Lai Kai Jin, Michael, Mr. Chu Hung Lin, Victor and Mr. Tong Wan Sze. The chairman of the Audit Committee is Mr. Tong Wan Sze. The written terms of reference of the Audit Committee set out the duties of the Audit Committee which includes reviewing and supervising the financial reporting and internal control procedures of the Group and reviewing and approving to the Board the Company's annual reports and accounts, interim report and quarterly reports.

14. MISCELLANEOUS

The English text of this circular shall prevail over the Chinese text in case of any inconsistency.

15. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents are available for inspection during normal business hours at the principal place of business of the Company in Hong Kong at Suite 3008, Tower One, Times Square, 1 Matheson Street, Causeway Bay, Hong Kong, up to and including 9 February 2011:

(a) the memorandum and articles of association of the Company;

(b) the "Letter from the Independent Board Committee" as set out in this circular;

(d) the written consent from the Independent Financial Adviser as referred to in the section headed "Expert and Consent" above;

(e) the written consent from CCIF CPA Limited as referred to in the section headed "Expert and Consent" above;

(f) the annual report of the Company for the three financial years ended 31 March 2010;

(g) the unaudited consolidated interim report of the Company for the six months ended 30 September 2010;

(h) all the agreements as referred to in the paragraph headed "material contracts" of this appendix;

(i) the report from CCIF CPA Limited, the text of which is set out on pages 41 to 43 of this circular; and

(j) this circular.

NOTICE OF EGM

PAN ASIA MINING LIMITED 寰亞礦業有限公司

(Incorporated in the Cayman Islands with limited liability)

(Stock code: 8173)

NOTICE IS HEREBY GIVEN THAT an extraordinary general meeting (the “EGM”) of Pan Asia Mining Limited (the “Company”) will be held at Suite 3008, Tower One, Times Square, 1 Matheson Street, Causeway Bay, Hong Kong on Wednesday, 9 February 2011 at 11 a.m. to consider and, if thought fit, to pass with or without amendments, the following resolution:

ORDINARY RESOLUTIONS

THAT subject to the fulfillment of all the conditions set out in the section headed "Conditions of the Capital Reorganisation" in the circular of the Company dated 17 January 2011 (the "Circular", a copy of which has been tabled at the meeting marked "A" and initialed by the chairman of the meeting for the purpose of identification), with effect from the date immediately after the date of passing this resolution:

(a) every fifty (50) issued and unissued shares of HK$0.01 each in the share capital of the Company be consolidated into one (1) share of HK$0.50 each (the "Consolidated Share") in the share capital of the Company (the "Share Consolidation"), and any fractional Consolidated Shares resulting from the Share Consolidation shall be disregarded and not be issued to the shareholder(s) concerned, but all such fractional Consolidated Shares shall be aggregated and, if possible, sold for the benefit of the Company in such manner and on such terms as the directors of the Company (the "Directors") may think fit;

(b) subject to and forthwith upon the Share Consolidation taking effect, the Company's authorised share capital be increased from HK$300,000,000 divided into 600,000,000 Consolidated Shares of a nominal value of HK$0.50 each to HK$1,000,000,000 divided into 2,000,000,000 Consolidated Shares of a nominal value of HK$0.50 each by the creation of 1,400,000,000 Consolidated Shares (the "Increase in Authorised Share Capital"); and

(c) any of the Directors be and is hereby authorised to do all things and acts and sign all documents which he considers necessary, desirable, or expedient in connection with the implementation of the Share Consolidation and the Increase in Authorised Share Capital (collectively, the "Capital Reorganisation").

NOTICE OF EGM

THAT subject to (i) the Capital Reorganisation becoming effective; and (ii) the fulfillment of the conditions in the underwriting agreement dated 22 December 2010 entered into between Guotai Junan Securities (Hong Kong) Limited (the "Underwriter") and the Company (the "Underwriting Agreement", a copy of which has been tabled at the meeting marked "B" and initialed by the chairman of the meeting for the purpose of identification):

(a) the allotment and issue by way of rights issue (the "Rights Issue") of not less than 760,153,400 Consolidated Shares and not more than 760,653,400 Consolidated Shares (the "Rights Shares") to the shareholders of the Company (the "Shareholders") at a subscription price of HK$0.50 per Rights Share on the basis of five (5) Rights Shares for every one (1) Consolidated Share then held by the Shareholders whose names appear on the register of members of the Company at the close of business on a date to be fixed by the Directors (the "Record Date"), other than those Shareholders whose addresses as shown on the register of members of the Company are outside Hong Kong on the Record Date and whom the Directors, after making enquiry as required under the Rules Governing the Listing of Securities on the Stock Exchange of Hong Kong Limited, consider it necessary or expedient on account either of the legal restrictions under the laws of the relevant place or the requirements of the relevant regulatory body or stock exchange in that place not to offer the Rights Shares to such Shareholders, and on the terms and conditions as set out in the Circular, and such other terms and conditions as may be determined by the Directors, be and is hereby approved;

(b) the Underwriting Agreement be and is hereby approved, confirmed and ratified and any Director be and is hereby authorised to do such acts or execute such documents which may be necessary, desirable or expedient in his opinion to carry into effect or to give effect to the terms of the Underwriting Agreement; and

(c) the Directors be and are hereby authorised to allot and issue the Rights Shares pursuant to and in connection with the Rights Issue and any Director be and is hereby authorized to do all such acts and things and execute all such documents which in his opinion may be necessary, desirable or expedient to carry out or give effect to or in connection with the Rights Issue or any transactions contemplated thereby."

By Order of the Board

Mr. Wong Chung Yu Denny

Chairman

Hong Kong, 19 January 2011

NOTICE OF EGM

Notes:

(1) Any member entitled to attend and vote at the meeting convened by the above notice is entitled to appoint one, or if such member is a holder of more than one Share, more proxies to attend and vote in his/her stead. Where a member appoints more than one proxy, the instrument of proxy shall state which proxy is entitled to vote on a poll. A proxy need not be a member of the Company. In addition, a proxy or proxies representing either a member of the Company who is an individual or a member of the Company which is a corporation shall be entitled to exercise the same powers on behalf of the member of the Company which he or they represent as such member of the Company could exercise. If more than one proxy is appointed, the appointment shall specify the number of Shares in respect of which each such proxy is appointed.

(2) In order to be valid, the form of proxy must be deposited at the Company's branch share registrar in Hong Kong, Tricor Tengis Limited at 26th Floor, Tesbury Centre, 28 Queen's Road East, Wan Chai, Hong Kong together with a power of attorney or other authority, if any, under which it is signed or a notarially certified copy of that power of attorney as soon as possible and in any event not less than 48 hours before the time appointed for the holding of such meeting or any adjournment thereof.

(3) The form of proxy shall be in writing under the hand of the appointor or his attorney duly authorised in writing or, if the appointor is a corporation, either under its seal or under the hand of an officer, attorney or other person authorised to sign the same. In the case of a form of proxy purporting to be signed on behalf of a corporation by an officer thereof it shall be assumed, unless the contrary appears, that such officer was duly authorised to sign such form of proxy on behalf of the corporation without further evidence of the fact.

(4) Completion and return of a form of proxy will not preclude a member from attending in person and voting at the above meeting or any adjournment thereof, should he so wish, and in such event, the form of proxy shall be deemed to be revoked.

(5) A form of proxy for use at the meeting is enclosed.

(6) In case of joint holders of a share of the Company, any one of such holders may vote at the meeting either personally or by proxy in respect of such share as if he was solely entitled thereto. However, if more than one such joint holders are present at the meeting personally or by proxy, then one of such holders whose name stands first in the register of member of the Company shall alone be entitled to vote in respect of that share.

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AI assistant

Hephaestus Holdings Limited — Proxy Solicitation & Information Statement 2011

51310_rns_2011-01-18_71b62fd6-6dee-422b-a6d9-bf2b6545fcee.pdf

PAN ASIA MINING LIMITED 寰亞礦業有限公司

Executive Directors:

Non-executive Director:

Independent non-executive Directors:

Registered Office:

Principal place of business in Hong Kong:

PROPOSED CAPITAL REORGANISATION AND PROPOSED RIGHTS ISSUE OF NOT LESS THAN 760,153,400 RIGHTS SHARES AND NOT MORE THAN 760,653,400 RIGHTS SHARES ON THE BASIS OF FIVE (5) RIGHTS SHARES FOR EVERY ONE (1) CONSOLIDATED SHARE HELD ON THE RECORD DATE

DEBT RESTRUCTURING AGREEMENT

INTRODUCTION

Effects of the Capital Reorganisation

Conditions of the Capital Reorganisation

Reasons for the Capital Reorganisation

Arrangement on odd lot trading

Exchange of Share Certificates

Outstanding Share Options and Convertible Bonds

3. PROPOSED RIGHTS ISSUE

Issue statistics

Qualifying Shareholders

Excluded Shareholders

Closure of register of members

Subscription Price

Basis of Provisional Allotments

Status of the Rights Shares

Fractions of the Rights Shares

Application for excess Rights Shares

Certificates for the Rights Shares

Application for listing

Conditions of the Rights Issue

KESTERION UNDERTAKING

UNDERWRITING ARRANGEMENT

The Underwriting Agreement

Termination of the Underwriting Agreement

CHANGES IN THE SHAREHOLDING STRUCTURE OF THE COMPANY ARISING FROM THE RIGHTS ISSUE

REASONS FOR THE RIGHTS ISSUE AND USE OF PROCEEDS

PREVIOUS FUND RAISING EXERCISE IN THE PRIOR 12-MONTH PERIOD

DEBT RESTRUCTURING AGREEMENT

WARNING OF THE RISKS OF DEALING IN THE SHARES AND THE NIL-PAID RIGHTS SHARES

EGM

GENERAL

RECOMMENDATION

PAN ASIA MINING LIMITED 寰亞礦業有限公司

PROPOSED CAPITAL REORGANISATION AND PROPOSED RIGHTS ISSUE OF NOT LESS THAN 760,153,400 RIGHTS SHARES AND NOT MORE THAN 760,653,400 RIGHTS SHARES ON THE BASIS OF FIVE (5) RIGHTS SHARES FOR EVERY ONE (1) CONSOLIDATED SHARE HELD ON THE RECORD DATE

DEBT RESTRUCTURING AGREEMENT

PROPOSED RIGHTS ISSUE

INTRODUCTION

BASIS OF OUR OPINION

PRINCIPAL FACTORS TAKEN INTO ACCOUNT

(I) Background

(II) Reason for the Rights Issue

(III) Principal terms of the Rights Issue

Basis of the Rights Issue

Subscription Price

Underwriting Commission

(VI) Financial effects of the Rights Issue

(a) Net Asset

(b) Gearing ratio and working capital

RECOMMENDATION

1. THREE-YEAR FINANCIAL INFORMATION

2. INDEBTEDNESS STATEMENT

3. WORKING CAPITAL

4. FOREIGN EXCHANGE

5. BUSINESS TREND AND PROSPECTS

6. MATERIAL ADVERSE CHANGE

(A) UNAUDITED PRO FORMA STATEMENT OF ADJUSTED CONSOLIDATED NET TANGIBLE ASSETS OF THE GROUP

(B) REPORT ON THE UNAUDITED PRO FORMA STATEMENT OF ADJUSTED CONSOLIDATED NET TANGIBLE LIABILITIES OF THE GROUP

Respective responsibilities of directors of the Company and reporting accountants

Basis of Opinion

Opinion

1. RESPONSIBILITY STATEMENT

2. SHARE CAPITAL

(a) Share Capital of the Company

As at the Latest Practicable Date

3. DISCLOSURE OF INTERESTS BY DIRECTORS

(a) Long positions in Shares of the Company

(b) Directors’ Short Positions In Shares, Underlying Shares And Debentures

4. DISCLOSURE OF INTERESTS BY SUBSTANTIAL SHAREHOLDERS

5. DIRECTORS' SERVICE CONTRACTS

Hephaestus Holdings Limited Proxy Solicitation & Information Statement 2011