Hidili Industry International Development Limited - Proxy Solicitation & Information Statement 2013

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

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

If you have sold or transferred all your shares in Hidili Industry International Development Limited, you should at once hand this circular and the accompanying form of proxy to the purchaser or the transferee or to the bank, licensed securities dealer or registered institutions in securities or other agent through whom the sale or the transfer was effected for transmission to the purchaser or the transferee.

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

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VERY SUBSTANTIAL DISPOSAL AND NOTICE OF EXTRAORDINARY GENERAL MEETING

Capitalised terms used on this cover page shall have the same meanings as those defined in this circular.

A letter from the Board is set out on pages 7 to 25 of this circular.

A notice convening the EGM to be held at United Conference Centre, 10/F, United Centre, 95 Queensway, Admiralty, Hong Kong on Tuesday, 31 December 2013 at 11:00 a.m. is set out on pages 204 to 205 of this circular. A form of proxy for the EGM is enclosed herein. Whether or not you intend to attend and vote at the EGM or any adjourned meeting (as the case may be) in person, you are requested to complete the accompanying form of proxy in accordance with the instructions printed thereon and return it to the branch share registrar and transfer office of the Company in Hong Kong, Computershare Hong Kong Investor Services Limited, at Shops 1712–16, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong as soon as practicable, but in any event, not less than 48 hours before the time appointed for holding the EGM or any adjourned meeting (as the case may be). Such form of proxy for the EGM is also published on the HKExnews website of the Stock Exchange (www.hkexnews.hk) and the website of the Company (www.hidili.com.cn). Completion and return of the form of proxy will not preclude you from attending and voting at the EGM or at any adjourned meeting (as the case may be) in person should you so wish.

12 December 2013

CONTENTS

		Page
Definitions	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from	the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	7
Appendix I	— Financial information of the Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	26
Appendix II	— Financial information of the Target Group . . . . . . . . . . . . . . . . . . . . . .	36
Appendix III — Unaudited pro forma financial information
	of the Remaining Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	48
Appendix IV — Competent Person’s Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		61
Appendix V	— General information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	197
Notice of EGM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		204

– i –

DEFINITIONS

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

‘‘Agreement’’
the conditional agreement dated 17 May 2013 entered into among Hidili China, Panzhihua Hidili and Yunnan Dongyuan in relation to the Disposal
‘‘associate(s)’’ has the meaning given to it under the Listing Rules
‘‘AUD’’ Australian dollars, the lawful currency of Australia
‘‘Board’’ the board of Directors
‘‘Business Day’’
a day on which licensed banks in Hong Kong and the PRC are generally open for business (other than Saturdays, Sundays and public holidays)
‘‘Buy Back Consideration’’
collectively, the consideration payable by Hidili China to buy back the Target Equity Interest pursuant to the terms of Share Transfer Agreements
‘‘Capital Injection Agreements’’
collectively, eight capital injection agreements dated 28 August 2012 entered into among the Target Subsidiaries, Panzhihua Yanjiang, the Immediate Shareholders and Huaneng Trust in respect of the increase in the share capital of the Target Subsidiaries and Panzhihua Yanjiang by Huaneng Trust
‘‘Capital Injections’’
the injections of capital by Huaneng Trust into the Target Subsidiaries and Panzhihua Yanjiang pursuant to the Capital Injection Agreements
‘‘Company’’
Hidili Industry International Development Limited 恒鼎實業國際發展有限公司, a company incorporated in the Cayman Islands with limited liability, the shares of which are listed on the Stock Exchange
‘‘Competent Evaluator’’
a Competent Person undertaking valuations and satisfying Rule 18.23 of the Listing Rules
‘‘Competent Person’’
a person satisfying the requirements of Rule 18.21 and Rule 18.22 of the Listing Rules
‘‘Competent Person’s Report’’
the public report prepared by the Competent Person on 12 December 2013 in compliance with the requirements under Chapter 18 of the Listing Rules
‘‘Completion’’
completion of the Disposal pursuant to the Agreement

– 1 –

DEFINITIONS

‘‘Completion Date’’
the date on which Completion takes place
‘‘connected person(s)’’
has the meaning given to it under the Listing Rules
‘‘control’’
a person shall be deemed to ‘‘control’’ another person if such first person possesses, directly or indirectly, the power to direct, or cause the direction of, the management and policies of such other person, whether through the ownership of voting securities, by contract or otherwise, and ‘‘controlled’’ shall be interpreted accordingly
‘‘controlling shareholder’’
has the meaning given to it under the Listing Rules
‘‘Director(s)’’ director(s) of the Company
‘‘Disposal’’
the proposed disposal of 50% equity interest in the Target Company by Panzhihua Hidili to Yunnan Dongyuan
‘‘EGM’’
an extraordinary general meeting of the Company to be convened and held on 31 December 2013 for the purpose of considering, and if thought fit, approving and ratifying the Agreement and the transactions contemplated thereunder
‘‘Equity Pledge’’
the pledge of 99.31% equity interest in Sichuan Hidili created by Hidili China in favour of Yunnan Dongyuan on 17 May 2013
‘‘Equity Transfer Agreements’’
collectively, 14 equity transfer agreements dated 22 and 23 May 2013 respectively entered into among the Immediate Shareholders and Huaneng Trust in respect of the buy back of the Target Equity Interest
‘‘Fuyuan Dahe’’ 富源縣大河青坪煤業有限公司 (Fuyuan County Dahe Qingping Coal Industry Co., Ltd.*), a company established in the PRC with limited liability and an indirect whollyowned subsidiary of the Company
‘‘Fuyuan Fude’’
富源縣富德選煤有限公司 (Fuyuan County Fude Coal Washing Co., Ltd*), a company established in the PRC with limited liability and an indirect wholly-owned subsidiary of the Company
‘‘Fuyuan Jintai’’
富源縣錦泰煤業有限公司 (Fuyuan County Jintai Coal Industry Co., Ltd.*), a company established in the PRC with limited liability and an indirect wholly-owned subsidiary of the Company

– 2 –

DEFINITIONS

‘‘Fuyuan Jintong’’
富源金通煤焦有限公司 (Fuyuan Jintong Coking Company Limited*), a company established in the PRC with limited liability and an associate company of the Company
‘‘Fuyuan Kuntie’’
富源昆鐵選煤有限責任公司 (Fuyuan Kuntie Coal Washing Company Limited*), a company established in the PRC with limited liability and an associate company of the Company
‘‘Fuyuan Kunyuan’’
富源縣坤源煤業有限公司 (Fuyuan County Kunyuan Coal Industry Co., Ltd.*), a company established in the PRC with limited liability and an indirect wholly-owned subsidiary of the Company
‘‘Fuyuan Maosheng’’ 富源縣茂盛選煤有限責任公司 (Fuyuan County Maosheng Coal Preparation Co., Ltd*), a company established in the PRC with limited liability and an indirect wholly-owned subsidiary of the Company
‘‘Fuyuan Tonghe’’ 富源縣通和煤業有限公司 (Fuyuan County Tonghe Coal Industry Co., Ltd.*), a company established in the PRC with limited liability and an indirect wholly-owned subsidiary of the Company
‘‘Fuyuan Xiangda’’
富源縣祥達煤礦有限公司 (Fuyuan County Xiangda Coal Mine Co., Ltd.*), a company established in the PRC with limited liability and an indirect wholly-owned subsidiary of the Company
‘‘Fuyuan Yuyuan’’
富源縣鈺源煤業有限責任公司 (Fuyuan County Yuyuan Coal Washing Co., Ltd*), a company established in the PRC with limited liability and an indirect wholly-owned subsidiary of the Company
‘‘Group’’ the Company and its subsidiaries
‘‘Group Reorganisation’’
the proposed reorganisation of the Group involving the Target Group, details of which are set out in the section headed ‘‘Group Reorganisation’’ in the Letter from the Board in this circular
‘‘Guarantees’’
collectively, 13 guarantees dated 17 May 2013 given by each of Hidili China, Sichuan Hidili and the Target Group (other than Fuyuan Kuntie, Fuyuan Jintong and Guizhou Weiqing) to Yunnan Dongyuan, details of which are set out in the section headed ‘‘Guarantees’’ in the Letter from the Board in this circular

– 3 –

DEFINITIONS

‘‘Guizhou Weiqing’’
貴州威箐煤焦物流有限公司 (Guizhou Weiqing Coking Logistic Company Limited), a company established in the PRC with limited liability and an investee company of the Company
‘‘Hidili China’’
恒鼎實業(中國)集團有限公司 (Hidili Industry (China) Group Co., Ltd.*), a company established in the PRC with limited liability and an indirect wholly-owned subsidiary of the Company
‘‘HK$’’ Hong Kong dollars, the lawful currency of Hong Kong
‘‘Hong Kong’’
the Hong Kong Special Administrative Region of the PRC
‘‘Huaneng Trust’’
華能貴誠信托有限公司 (Huaneng Guicheng Trust Co., Ltd.*), a company established in the PRC with limited liability
‘‘Immediate Shareholders’’
collectively, the immediate shareholders of the Target Subsidiaries and Panzhihua Yanjiang before the Capital Injections
‘‘JORC Code’’
has the meaning given to it in the Listing Rules
‘‘Latest Practicable Date’’
9 December 2013, being the latest practicable date prior to the printing of this circular for the purpose of ascertaining information contained herein
‘‘Listing Rules’’ the Rules Governing the Listing of Securities on the Stock Exchange
‘‘Liupanshui Hidili’’
六盤水恒鼎實業有限公司 (Liupanshui Hidili Industry Co., Limited*), a company established in the PRC with limited liability and an indirect wholly-owned subsidiary of the Company
‘‘Panzhihua Hidili’’ 攀枝花市恒鼎煤焦化有限公司 (Panzhihua Hidili Coal Industry Co., Ltd.*), a company incorporated in the PRC with limited liability and an indirect wholly-owned subsidiary of the Company
‘‘Panzhihua Yanjiang’’ 攀枝花市沿江實業有限責任公司 (Panzhihua Yanjiang Industrial Co., Ltd.*), a company incorporated in the PRC with limited liability and an indirect wholly-owned subsidiary of the Company

– 4 –

DEFINITIONS

‘‘PRC’’

the People’s Republic of China which, for the purpose of this circular, excludes Hong Kong, the Macau Special Administrative Region of the PRC and Taiwan

‘‘Purchase Consideration’’
RMB2.4 billion (equivalent to approximately HK$3.0 billion) which shall be paid by Yunnan Dongyuan to Panzhihua Hidili in respect of the Disposal
‘‘Remaining Group’’

the Group immediately after the Completion

‘‘RMB’’ Renminbi, the lawful currency of the PRC
‘‘Share(s)’’
share(s) of HK$0.10 each in the capital of the Company
‘‘Share Transfer Agreements’’
collectively, the eight share transfer agreements dated 28 August 2012 entered into among the Target Subsidiaries, Panzhihua Yanjiang, Hidili China and Huaneng Trust for the buy back of the Target Equity Interest
‘‘Shareholder(s)’’
holder(s) of the Share(s)
‘‘Shenzhen Hidili’’ 深圳市恒信鼎立商貿有限公司 (Shenzhen City Hidili Commercial and Trading Co., Ltd*), a company incorporated in the PRC with limited liability and an indirect wholly-owned subsidiary of the Company
‘‘Sichuan Hidili’’
四川恒鼎實業有限公司 (Sichuan Hidili Industry Co., Ltd*), a company incorporated in the PRC with limited liability and an indirect wholly-owned subsidiary of the Company
‘‘Stock Exchange’’

The Stock Exchange of Hong Kong Limited

‘‘Target Company’’ or ‘‘Yunnan Hidili’’
雲南恒鼎煤業有限公司 (Yunnan Hidili Coal Industry Co., Ltd*), a company incorporated in the PRC with limited liability and an indirect wholly-owned subsidiary of the Company
‘‘Target Companies’’
collectively, Fuyuan Dahe, Fuyuan Fude, Fuyuan Jintai, Fuyuan Jintong, Fuyuan Maosheng, Fuyuan Kuntie, Fuyuan Kunyuan, Fuyuan Tonghe, Fuyuan Xiangda, Fuyuan Yuyuan, Guizhou Weiqing, Yunnan Henglong and Yunnan Hidili Industry
‘‘Target Equity Interest’’ in relation to each of the Target Subsidiaries and Panzhihua Yanjiang, the equity interest to which Huaneng Trust is entitled upon the completion of the Capital Injections
‘‘Target Group’’

collectively, the Target Company and the Target Companies

– 5 –

DEFINITIONS

‘‘Target Subsidiaries’’
‘‘US$’’
‘‘Yunnan Dongyuan’’
‘‘Yunnan Henglong’’
‘‘Yunnan Hidili Industry’’
‘‘%’’

collectively, Yunnan Hidili, Fuyuan Kunyuan, Fuyuan Xiangda, Yunnan Henglong, Fuyuan Dahe, Fuyuan Tonghe and Fuyuan Jintai

United States dollars, the lawful currency of the United States of America
雲南東源煤業集團有限公司 (Yunnan Dongyuan Coal Group Company Limited*), a company incorporated in the PRC with limited liability
雲南恒隆煤業有限公司 (Yunnan Henglong Coal Industry Co., Ltd*), a company incorporated in the PRC with limited liability and an indirect wholly-owned subsidiary of the Company
雲南恒鼎實業有限公司 (Yunnan Hidili Industry Co., Ltd*), a company incorporated in the PRC with limited liability and an indirect wholly-owned subsidiary of the Company

per cent.

For identification purpose only

– 6 –

LETTER FROM THE BOARD

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Executive Directors: Mr. Xian Yang (Chairman) Mr. Sun Jiankun

Independent non-executive Directors: Mr. Chan Chi Hing Mr. Chen Limin Mr. Huang Rongsheng

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

Head office: 16th Floor, Dingli Mansion No. 81 Renmin Road Panzhihua Sichuan 617000 The PRC

12 December 2013

To the Shareholders

Dear Sir/Madam,

VERY SUBSTANTIAL DISPOSAL AND

NOTICE OF EXTRAORDINARY GENERAL MEETING

INTRODUCTION

Reference is made to the announcements of the Company dated 24 May 2013, 27 May 2013 and 3 June 2013 in relation to, inter alia, the Agreement and the Disposal.

The purpose of this circular is to provide you with, among other things, further details of the Agreement and the Disposal.

– 7 –

LETTER FROM THE BOARD

THE AGREEMENT

On 17 May 2013, Hidili China, Panzhihua Hidili and Yunnan Dongyuan entered into the Agreement pursuant to which the parties conditionally agreed to the Disposal at a consideration of RMB2.4 billion (equivalent to approximately HK$3.0 billion) which is payable by Yunnan Dongyuan to Panzhihua Hidili.

The principal terms of the Agreement are as follows:

Date

17 May 2013

Parties

(1) Hidili China
(2) Panzhihua Hidili
(3) Yunnan Dongyuan

Target Company and Target Group

Pursuant to the Agreement, Yunnan Dongyuan will acquire 50% of the equity interest in the Target Company, which, upon completion of the Group Reorganisation, will hold 100% of the equity interests in the Target Companies comprising:

. Fuyuan Dahe
. Fuyuan Fude
. Fuyuan Jintai
. Fuyuan Jintong
. Fuyuan Maosheng
. Fuyuan Kuntie
. Fuyuan Kunyuan
. Fuyuan Tonghe
. Fuyuan Xiangda
. Fuyuan Yuyuan
. Guizhou Weiqing
. Yunnan Henglong

– 8 –

LETTER FROM THE BOARD

. Yunnan Hidili Industry

Purchase Consideration

The consideration for the Disposal shall be RMB2.4 billion (equivalent to approximately HK$3.0 billion) which was determined after arm’s length negotiation among the parties to the Agreement with reference to, among other things, the valuation of the net assets value of the Target Companies as at 31 December 2012 as appraised by China Alliance Appraisal Co., Ltd. (‘‘China Alliance’’), an independent valuer jointly appointed by the Company and Yunnan Dongyuan which possesses relevant professional qualification and is not a Competent Evaluator under Rule 18.23 of the Listing Rules.

Yunnan Dongyuan shall pay the Purchase Consideration to Panzhihua Hidili in cash in the following manner:

(a) a sum of RMB1.2 billion (equivalent to approximately HK$1.5 billion) (the ‘‘Escrow Amount’’), representing 50% of the Purchase Consideration, will be paid by Yunnan Dongyuan to an escrow account (the ‘‘Escrow Account’’) jointly opened and maintained by Yunnan Dongyuan and Panzhihua Hidili within seven days from the date of the Agreement and upon the execution of the Equity Pledge and the Guarantees. Written approval from both parties are required on any movement of the Escrow Amount.

The Escrow Amount should be used as partial payment of the Buy Back Consideration to buy back the Target Equity Interest from Huaneng Trust. Upon the execution of the Equity Transfer Agreements in relation to the buy back of the Target Equity Interest (other than the equity interest of Panzhihua Yanjiang), Panzhihua Hidili and Yunnan Dongyuan will immediately release the Escrow Amount from the Escrow Account to Hidili China and/or Panzhihua Hidili or their associated companies. Within three days from the receipt of the Escrow Amount, Hidili China and/or Panzhihua Hidili or their associated companies must use the same to partially pay the Buy Back Consideration to Huaneng Trust and provide Yunnan Dongyuan with a copy of documentary evidence showing such payment to Huaneng Trust.

The consideration under the Equity Transfer Agreements is the same as the Buy Back Consideration as set out in the Share Transfer Agreements (excluding such part of the Buy Back Consideration relating to the buy back of the equity interest of Panzhihua Yanjiang) in respect of which a written shareholder’s approval of the Company had been obtained on 13 September 2012 from Sanlian Investment Holding Limited, which held 1,100,674,000 Shares (representing approximately 53.28% of the issued share capital of the Company as at 13 September 2012) for the entry of the Share Transfer Agreements.

– 9 –

LETTER FROM THE BOARD

The principal terms of the Equity Transfer Agreements are set out below:

Target Subsidiaries Equity interest held by Huaneng Trust before signing of the Equity Transfer Agreements Equity interest to be bought back by the Group from Huaneng Trust pursuant to the Equity Transfer Agreements % % Yunnan Hidili 34 34 Fuyuan Kunyuan 38 38 Fuyuan Xiangda 41 41 Yunnan Henglong 41 41 Fuyuan Dahe 38 38 Fuyuan Tonghe 40 40 Fuyuan Jintai 39 39	Buy Back Consideration payable by the Group to Huaneng Trust RMB’000 270,619 248,918 64,935 97,402 289,639 151,515 97,402
	1,220,430

As announced by the Company in the announcement dated 3 June 2013, Panzhihua Hidili had received the Escrow Amount of RMB1.2 billion (equivalent to approximately HK$1.5 billion) from Yunnan Dongyuan. The Immediate Shareholders and Huaneng Trust had entered into the Equity Transfer Agreements in respect of the buy back of the Target Equity Interest (other than the equity interest of Panzhihua Yanjiang) on 22 and 23 May 2013, respectively. Accordingly, Panzhihua Hidili had on 3 June 2013 used the entire Escrow Amount to partially pay the Buy Back Consideration to Huaneng Trust.

The Immediate Shareholders and Huaneng Trust entered into an equity transfer agreement on 25 August 2013 in relation to the buy back of 36% equity interest in Panzhihua Yanjiang (‘‘Yanjiang Equity Transfer’’) for a consideration of RMB376.4 million (‘‘Yanjiang Buy Back Consideration’’). The Yanjiang Equity Transfer has been completed and the Yanjiang Buy Back Consideration was fully settled. As at the Latest Practicable Date, all the Target Equity Interest (including Panzhihua Yanjiang) pursuant to the Capital Injection Agreements was transferred back to the Immediate Shareholders from Huaneng Trust and the entire Buy Back Consideration under the Equity Transfer Agreements and Yanjiang Equity Transfer was fully settled.

(b) the balance of RMB1.2 billion (equivalent to approximately HK$1.5 billion) shall be paid by Yunnan Dongyuan to Panzhihua Hidili within 10 days after the Completion Date, being the registration date of the transfer contemplated under the Disposal in the name of Yunnan Dongyuan.

– 10 –

LETTER FROM THE BOARD

Conditions for Completion

Under the Agreement, Yunnan Dongyuan has agreed to purchase 50% of the equity interest in the Target Company subject to the fulfilment of, among others, the following conditions:

(a) the Equity Pledge having been registered within five Business Days from the date of the Agreement;
(b) the completion of the assessment of the assets of the Disposal by Hidili China, Panzhihua Hidili and Yunnan Dongyuan within one month from the date of the Agreement, which assessment shall commence within seven days from the date of the Agreement;
(c) the consolidated net assets value of the Target Companies together with the capitalisation of amounts due to the Group maintained by the Target Companies as at 31 December 2012 are not less than RMB4.0 billion;
(d) the Group Reorganisation having been completed within two months from the date of the Agreement; and
(e) the approval of the Shareholders having been obtained by the Company in compliance with the applicable Listing Rules in respect of the transactions contemplated under the Agreement.

As at the Latest Practicable Date, all the above conditions, other than (e), have been fulfilled.

In order to speed up and facilitate Completion, the management team of Yunnan Dongyuan has fully participated into coal mining operation, coal washing operation and accounting of the Target Companies. In return, Yunnan Dongyuan agrees to pay up the balance of RMB1.2 billion (equivalent to approximately HK$1.5 billion) of the Purchase Consideration (‘‘Early Settlement’’). As at the Latest Practicable Date, the Escrow Amount and the Early Settlement have been received by the Company.

Effect of Completion

The parties to the Agreement agree, among other things, that upon Completion, (i) the board of directors of the Target Company shall comprise five directors, of which Yunnan Dongyuan is entitled to nominate three directors and Sichuan Hidili is entitled to nominate two directors, which appointment shall be approved at the shareholders’ meeting of the Target Company; (ii) a director nominated by Sichuan Hidili shall be the chairman of the board of directors of the Target Company whose appointment shall be decided by the board of directors of the Target Company; and (iii) all matters at board meetings of the Target Company shall be determined by the vote of a three-fourth majority of the board of directors of the Target Company.

– 11 –

LETTER FROM THE BOARD

The Target Company will cease to be a subsidiary of the Company upon Completion and will not be consolidated into the Company accordingly. Sichuan Hidili will hold 50% of the equity interest in the Target Company after the Disposal. As at the Latest Practicable Date, the Group did not have any intention to further dispose of the remaining equity interest it holds in the Target Company.

Undertakings, Representations and Warranties

Each of Hidili China and Panzhihua Hidili undertakes to Yunnan Dongyuan, among others, that:

(a) the Group Reorganisation will be completed within two months from the date of the Agreement;
(b) the delivery of all legal documentation evidencing that (i) the completion of the Group Reorganisation to Yunnan Dongyuan within three days after the completion of the Group Reorganisation, including the register of members of the Target Group; and (ii) the consolidated net assets value of the Target Companies together with the capitalisation of amounts due to the Group maintained by the Target Companies are not less than RMB4.0 billion as at 31 December 2012; and
(c) if the Group Reorganisation is not completed within 90 days from the date of the Agreement, Hidili China and Panzhihua Hidili must pay a lump sum of RMB5 million to Yunnan Dongyuan.

As at the Latest Practicable Date, the Group Reorganisation has been completed and all legal documentations have been delivered to Yunnan Dongyuan.

Hidili China and Panzhihua Hidili represented and warranted to Yunnan Dongyuan in respect of the affairs of the Target Company, including the ownership to the Target Group and the assets, financial matters, tax, material contracts and litigation of the Target Company.

Termination

The Agreement will terminate upon the occurrence of, among others, any of the following events:

(a) the mutual termination of the Agreement by the parties to the Agreement;
(b) a unilateral termination of the Agreement by a party that is not in default by giving a written notice to a party that is in default, which termination will take effect automatically upon the delivery of the above written notice; or
(c) a force majeure event rendering the non-fulfilment of the objective of the Agreement.

– 12 –

LETTER FROM THE BOARD

Yunnan Dongyuan can unilaterally terminate the Agreement if, among other things:

(a) the Group Reorganisation is not completed within 60 days from the date of the Agreement; or
(b) Hidili China, Panzhihua Hidili and/or their associated companies fail to pay the Buy Back Consideration to Huaneng Trust or the buy back of the Target Equity Interest from Huaneng Trust is delayed for more than 30 days from the date of the Agreement.

Upon the unilateral termination of the Agreement by Yunnan Dongyuan in accordance with the terms of the Agreement, Hidili China and Panzhihua Hidili must refund all payments received from Yunnan Dongyuan under the Agreement to Yunnan Dongyuan and compensate Yunnan Dongyuan for all losses it suffers, including any financing interest.

As at the Latest Practicable Date, none of the above terminating events had occurred or was brought to the attention of the Board.

THE EQUITY PLEDGE

On 17 May 2013, Hidili China created the Equity Pledge in favour of Yunnan Dongyuan to secure the obligations of Hidili China and Panzhihua Hidili under the Agreement. The parties to the Equity Pledge must register the Equity Pledge with the Administration for Industry and Commerce of the PRC within five days from the date of the execution of the Equity Pledge.

The Equity Pledge became effective on the execution date of the Equity Pledge and ceases to have any effect upon Completion. The parties to the Equity Pledge must proceed to discharge the Equity Pledge within 10 Business Days after the Completion.

As at the Latest Practicable Date, the Equity Pledge was still valid and had not been released.

THE GUARANTEES

On 17 May 2013, each of Hidili China, Sichuan Hidili and the Target Companies (other than Fuyuan Kuntie, Fuyuan Jintong and Guizhou Weiqing) had, respectively, executed the Guarantees in favour of Yunnan Dongyuan to guarantee, among others, the performance of the obligations of Hidili China and Panzhihua Hidili under the Agreement, including the obligation of Panzhihua Hidili to effect the transfer contemplated under the Disposal and the obligations of Panzhihua Hidili upon the termination of the Agreement.

The Guarantees became effective from the date of the Agreement and cease to have any effect upon Completion or upon the expiry of nine months from the date of the Guarantees, whichever is shorter.

– 13 –

LETTER FROM THE BOARD

GROUP REORGANISATION

Group structure before and after the Group Reorganisation

A summary of the structure of the Group comprising the Target Group immediately before the implementation of the Group Reorganisation (assuming no other changes in the shareholding structure of the Group since 24 May 2013, being the date of the Company’s announcement on the Disposal) is set out below:

==> picture [447 x 308] intentionally omitted <==

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

The Company
100%
Hidili Investment
Holding Limited
100%
Hidili China
0.69%
100% 99.31%
Huaneng
Yunnan Sichuan Trust
Hidili Industry Hidili
36% 34% 38% 41% 41% 40% 39% 38%
64% 100% 20% 6.6% 100% 6.2% 17.7% 11.8% 6% 12.2% 10%
Panzhihua Shenzhen Fuyuan Yunnan Liupanshui Fuyuan Fuyuan Yunnan Fuyuan Fuyuan Fuyuan Fuyuan
Yanjiang Hidili Yuyuan Hidili Hidili Kunyuan Xiangda Henglong Tonghe Jintai Maosheng Dahe
59.4% 90% 55.8%
80% 55.8% 41.3% 47.2% 54% 48.8%
20%
80%
Fuyuan
Fude
18% 20% 47.38%
Guizhou Fuyuan Fuyuan
Weiqing Kuntie Jintong
----- End of picture text -----

– 14 –

LETTER FROM THE BOARD

A summary of the structure of the Group comprising the Target Group immediately after the implementation of the Group Reorganisation (assuming no other changes in the shareholding structure of the Group since the Latest Practicable Date) is set out below:

==> picture [437 x 254] intentionally omitted <==

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

The Company
100%
Hidili Investment
Holding Limited
100%
Hidili China 0.69%
99.31%
Panzhihua Sichuan Huaneng
Hidili Hidili Trust
36%
50% 50% 100% 64%
Yunnan Shenzhen Panzhihua
Hidili Hidili Yanjiang
100% 100% 100% 100% 100% 100% 100% 100% 100% 18% 20% 47.38% 100%
Yunnan
Hidili Fuyuan Fuyuan Yunnan Fuyuan Fuyuan Fuyuan Fuyuan Fuyuan Guizhou Fuyuan Fuyuan Fuyuan
Kunyuan Xiangda Henglon Tonghe Jintai Maosheng Yuyuan Fude Weiqing Kuntie Jintong Dahe
Industry
----- End of picture text -----

To the best of the knowledge of the Directors, the Group Reorganisation will not have any financial impact on the Group as a whole.

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LETTER FROM THE BOARD

Save as disclosed above, the other shareholders of each of Guizhou Weiqing, Fuyuan Kuntie, Fuyuan Jintong and Fuyuan Dahe are set out below:

		Equity
		interest held
		in the Target
Target Companies	Name of other shareholder(s)	Companies
		%
Guizhou Weiqing	雲南凱捷實業有限公司(Yunnan Kaijie Industry	51
	Company Limited*) (‘‘Yunnan Kaijie’’)
	六盤水威箐焦化有限公司(Liupuishui Weiqing	23
	Coking Company Limited*)
	盤縣宏財投資有限責任公司(Panxian Hongcai	8
	Investment Company Limited*)
Fuyuan Kuntie	Yunnan Kaijie	80
Fuyuan Jintong	Yunnan Kaijie	33.18
	富源縣華泰經貿有限公司(Fuyuan County Huatai	19.44
	Trading Company Limited*)
Fuyuan Dahe	Peng Zhongqiang	3.52
	Chen Laoling	2.36
	Tian Jinyi	0.25
	Guo Minli	0.07

Yunnan Kaijie is a substantial shareholder of two subsidiaries of the Company, namely 盤縣盤鑫焦化有限公司 (Panxian Panxin Coking Company Limited) and 盤縣盤翼選煤有限公司 (Panxian Panyi Coal Washing Company Limited). Yunnan Kaijie, being shareholders of Guizhou Weiqing, Fuyuan Kuntie and Fuyuan Jintong, is a connected person of the Company under Rule 14A.11 of the Listing Rules.

ACCOUNTING IMPACT AFTER THE DISPOSAL

Upon Completion, Yunnan Dongyuan will hold 50% equity interest in the Target Group and will consolidate the results of the Target Group from 1 January 2013. The Group will hold the remaining 50% equity interest in the Target Group and expects to retain the equity interest in the Target Group in the future.

The Group expects that it would realise a gain on the Disposal of approximately RMB0.4 billion, which was calculated based on the net Purchase Consideration of RMB2.4 billion and after deducting the combined net assets value of the Target Group as at 31 December 2012 of approximately RMB2.0 billion, representing 50% of the combined net assets value of the Target Group as at 31 December 2012 of approximately RMB2.6 billion and the capitalisation of current accounts of approximately RMB0.7 billion.

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LETTER FROM THE BOARD

The actual financial effect from the Disposal to be accounted for in the consolidated financial statements of the Company for the financial year ending 31 December 2013 will be computed based on the financial information of the Target Company upon Completion and is subject to audit.

INFORMATION OF THE GROUP, THE TARGET GROUP, THE MINES BEING DISPOSED, HIDILI CHINA, PANZHIHUA HIDILI, SICHUAN HIDILI, THE REMAINING GROUP AND YUNNAN DONGYUAN

The Group

The Company was incorporated in the Cayman Islands and registered as an exempted company with limited liability on 1 September 2006 and has been listed on the Stock Exchange since 21 September 2007.

The Group is one of the largest integrated coal enterprises in South West China and is principally engaged in coal mining and processing and sales of clean coal, coke, alloy pig iron and related by-products.

The Target Group

The principal activities of the Target Group are coal mining coal washing and provision of railway logistics service in Yunnan and Guizhou provinces in the PRC, respectively. The principal activities of each of the companies of the Target Group are as follows:

		Location of the
		principal place
Target Group	Principal activities	of business
Yunnan Hidili	Yanhe Coal Mine	Yunnan, PRC
Fuyuan Dahe	Qingping Coal Mine	Yunnan, PRC
Fuyuan Fude	Fude Coal Washing Plant	Yunnan, PRC
Fuyuan Jintai	Xingji Coal Mine	Yunnan, PRC
Fuyuan Jintong	Yangweishao Railway Logistic Station	Yunnan, PRC
Fuyuan Maosheng	Maosheng Coal Washing Plant	Yunnan, PRC
Fuyuan Kuntie	Kuntie Coal Washing Plant	Yunnan, PRC
Fuyuan Kunyuan	Jianglang Coal Mine	Yunnan, PRC
Fuyuan Tonghe	Xingjian Coal Mine	Yunnan, PRC
Fuyuan Xiangda	Xiangda No.1 Coal Mine	Yunnan, PRC
Fuyuan Yuyuan	Hexing Coal Mine	Yunnan, PRC
Guizhou Weiqing	Weiqing Railway Logistic Station	Guizhou, PRC
Yunnan Henglong	Zude Coal Mine	Yunnan, PRC
Yunnan Hidili Industry	Mohong Coal Washing Plant	Yunnan, PRC

– 17 –

LETTER FROM THE BOARD

The audited results and net assets value of the Target Group for the two years ended 31 December 2012 prepared in accordance with accounting principles generally accepted in the PRC are as follows:

		Year ended 31 December	Year ended 31 December	2012
		Profit (Loss)	Profit (Loss)
		before	after	Net assets
Target	Group	taxation	taxation	(liabilities)
		RMB’000	RMB’000	RMB’000
Yunnan	Hidili	(16,055)	(12,066)	453,397
Fuyuan	Dahe	52,183	39,337	726,214
Fuyuan	Fude	45,606	34,116	7,146
Fuyuan	Jintai	11,978	8,943	210,346
Fuyuan	Maosheng	(3,568)	(2,692)	12,084
Fuyuan	Kunyuan	(1,330)	(1,095)	557,915
Fuyuan	Tonghe	14,487	10,250	328,428
Fuyuan	Xiangda	18,808	13,809	127,816
Fuyuan	Yuyuan	81	(354)	4,157
Yunnan	Henglong	11,506	8,625	150,147
Yunnan	Hidili Industry	4,220	3,165	48,786
		Year ended 31 December		2011
		Profit (Loss)	Profit (Loss)
		before	after	Net assets
Target	Group	taxation	taxation	(liabilities)
		RMB’000	RMB’000	RMB’000
Yunnan	Hidili	64,001	50,822	215,461
Fuyuan	Dahe	105,129	85,655	416,846
Fuyuan	Fude	(4,276)	(4,276)	1,530
Fuyuan	Jintai	110,235	110,235	111,423
Fuyuan	Maosheng	5,741	5,741	14,776
Fuyuan	Kunyuan	45,467	45,434	328,997
Fuyuan	Tonghe	74,470	74,386	178,174
Fuyuan	Xiangda	40,259	39,541	53,999
Fuyuan	Yuyuan	55	(332)	288,322
Yunnan	Henglong	19,341	14,659	51,507
Yunnan	Hidili Industry	(231)	(173)	45,621

Notes:

(1) Fuyuan Jintong and Fuyuan Kuntie were held by Yunnan Hidili as associated companies and accordingly the results and the net assets value of Fuyuan Jintong and Fuyuan Kuntie have been incorporated in Yunnan Hidili.

(2) Guizhou Weiqing was held by Yunnan Hidili as an investee company and stated as a long term investment and recorded at cost in the financial statements of Yunnan Hidili.

– 18 –

LETTER FROM THE BOARD

The mines being disposed

As at 30 September 2013, the nine mines being disposed of comprised five integrated coal mines, two newly constructed coal mines and two expanded coal mines, of which two integrated coal mines and one newly constructed coal mine have completed the trial run stage and have commenced production.

The production volume of raw coal and clean coal from the mines being disposed of for the nine months ended 30 September 2013 amounted to approximately 96,000 tonnes and 125,000 tonnes respectively.

With reference to the Competent Person’s Report, the coal resources and reserves estimation of the mines in Yunnan province being disposed of as at 30 June 2013 are as follows:

JORC Coal Resource (Mt) Measured Indicated Inferred 39.5 8.5 2.5 — — — 34.5 5.0 — — 39.0 2.5 — — — 22.5 20.5 2.0 — — — — — — — — — 97.5 73.5 7.0	Total 50.5 — 39.5 41.5 — 45.0 — — — 177.5	JORC Coal Reserve Proved Probable — 10.9 — — 0.1 9.1 — 14.7 — — — — — — — — — — 0.1 34.7	(Mt) Total 10.9 — 9.2 14.7 — — — — —

Notes:

i. The coal resources and reserves estimation for the four mines, namely, Yunxiang, Xiangda, Hexing and Jianglang mines have been prepared in accordance with the recommended guidelines of the JORC Code and the Australian Coal Guidelines.
ii. No estimate can be made in respect of coal resources or reserves in the six mines, namely, Xingji, Xingjian, Jianglang, Yanhe, Zude and Qingping mines in accordance with the recommended guideline of the JORC Code.

For the mines being disposed of, a single approved mining license is stated for each of the nine mines. The current mining licenses have varied surface areas, vertical limitations and production capacities. In addition to obtaining a current mining license, as at 30 September 2013, Yunxiang Coal Mine, Xingji Coal Mine, Jianglang Coal Mine, Xingjian Coal Mine and Zude Coal Mine (collectively ‘‘Expansion Mines’’) were under consolidation within the adjacent licenses due to government regulations. These proposed consolidation resulted in the extension of the current licensed areas in both horizontal and vertical direction (‘‘Expansion Areas’’). Accordingly, a mining tenement covering the area of the proposed expanded licensed areas was granted by the government authorities to the respective mines (‘‘Mining Tenements’’). Upon the completion of the consolidation, a new mining license will be granted to the respective mines of the same coordinates, vertical limitation and production capacity as outlined in the Mining Tenements. In order to obtain a new mining license, the Expansion

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LETTER FROM THE BOARD

Mines should submit to the government authorities a coal mine consolidation plan. The assessment and approval of the consolidation plan should be obtained from the Department of Environmental Protection of Yunnan Province, Department of Land Resources of Yunnan Province, Department of Water Resources of Yunnan Province, Yunnan Provincial Industry & Information Technology Commission, Yunnan Coal Mine Safety Supervision Bureau and County Government accordingly. After obtaining the approval from all the relevant government authorities has been received, the Department of Land Resources of Yunnan Province will assess the mining right consideration payable regarding the Expansion Areas and agree with the Company the settlement method. Finally, a new mining license incorporated the Expansion Areas will be granted. As at the Latest Practicable Date, the Expansion Mines were undergoing consolidation and, the Expansion Mines had submitted the consolidation plans to the relevant government authorities for the application of the new mining licenses. Considering the current development progress, the consolidation and the granting of new mining license to the Expansion Mines are expected to complete by the end of 2015.

The Company considers that the integration over the Expansion Areas is a common practice during the consolidation of coal mines and is properly approved by the government authorities. Since the Company and Yunnan Dongyuan will continue and jointly integrate the coal mines in Yunnan region upon Completion, the Company believes that the Target Group has the right and interest over the Expansion Areas. A legal opinion issued by 貴州公達律師事務所 (Guizhou Gongda & Co., Solicitors*) has been obtained by the Company that as the Expansion Areas have been approved by the Department of Land Resources of Yunnan Province, there will not be any legal obstacles regarding the grant of the new mining license to the respective mines. Accordingly, the Board considers to include the Expansion Areas for the purpose of the Competent Person’s Report to have a comprehensive and complete estimation of reserves and resources over the mines under the Target Group.

Hidili China

Hidili China is a limited liability company established in the PRC and is a wholly-owned subsidiary of the Company. Its principal activity is investment holding.

Panzhihua Hidili

Panzhihua Hidili is a limited liability company established in the PRC and is a whollyowned subsidiary of the Company. Its principal activities are coal mining and investment holding.

Sichuan Hidili

Sichuan Hidili is a limited liability company established in the PRC and is a whollyowned subsidiary of the Company. Its principal activities are coal mining and investment holding.

– 20 –

LETTER FROM THE BOARD

Yunnan Hidili or Target Company

Yunnan Hidili is a limited liability company established in the PRC and is a whollyowned subsidiary of the Company. Its principal activities are coal mining and investment holding.

The Remaining Group

Upon Completion, the Company will hold the remaining 50% interest in the Target Group and a number of mines in Panzhihua and Guizhou.

Since the occurrence of the ‘‘8.29’’ Xiaojiawan Coal Mine (肖家灣煤礦) Incident in Panzhihua City, all coal mines throughout Panzhihua City have been suspended for inspection. Five mining areas in Panzhihua City, namely Dahegou mining area, Banshan mining area, Huijiasuo mining area, Bainipo mining area and Tianbao mining area, owned by the Group have been suspended. Currently, the Tianbao mining area and Dahegou mining area have passed inspection and received the notice on production resumption, and the rest are awaiting for the inspection on production resumption by the government or the consolidation solution of the government.

As at 30 September 2013, the Group owned 18 coal mines in Guizhou province. After the acquisition of these coal mines, the Company arranged for the development of a new production system in order to enlarge coal mine production capacity and to upgrade safety standards. As at 30 September 2013, the construction progress of the Group’s coal mines in Guizhou province was as follows:

Construction progress

Type of mines Integrated (9) Newly constructed (7) Expanded (2)	Production 3 5 1 9	Trial run — — — —	Under construction 6 2 1
			9

The following table illustrates the production volume of the principal products in Panzhihua and Guizhou for the nine months ended 30 September 2013.

Panzhihua Guizhou	Raw coal (’000 tonnes) 2 1,031	Clean coal (’000 tonnes) 1 253	Coke (’000 tonnes) 33 —

The Panzhihua region is under the stage of consolidation. As the consolidating entity in Panzhihua, the Company will actively participate in integration with coal mines in the region to increase its production volume in the Panzhihua region. Besides, with the start of the merger

– 21 –

LETTER FROM THE BOARD

and restructuring of coal mines in the Guizhou region, the safety conditions of the coal mines in the region will be substantially improved, which will provide assurance for coal production in the Guizhou region. The Company believes that the consolidation in both Panzhihua and Guizhou region will be completed on schedule in 2014 and the production volume will be steadily rump up accordingly.

For the remaining 50% equity interest in the Target Group, the Company intends to hold as a long term investment and jointly operate with Yunnan Dongyuan.

Yunnan Dongyuan

Yunnan Dongyuan is a limited liability company established in the PRC. Yunnan Dongyuan is a state-owned enterprise and its principal activities are coal mining, coal washing and coking in Yunnan province. Yunnan Dongyuan is a subsidiary of 雲南煤化工集團有限公司 (Yunnan Coal Chemical Industry Group Co., Ltd.*).

To the best of the Directors’ knowledge, information and belief having made all reasonable enquiry, Yunnan Dongyuan and its ultimate beneficial owners are third parties independent of the Company and its connected persons.

REASONS FOR AND BENEFITS OF THE DISPOSAL AND USE OF PROCEEDS

The Directors believe that the Disposal can strengthen the Group’s cashflow and secure for the repayment of the short-term borrowings. The net proceeds to be received by the Group from the Disposal are intended to be partly used and have been used to buy back the Capital Injections of Huaneng Trust and partly used to repay short-term borrowings.

Besides, coal mines in Yunnan province operated jointly with Yunnan Dongyuan can help stabilise the raw coal production volume and shorten or avoid time spent on suspension of production for safety checks arising from accidents occured in other coal mines within the region. Under the joint operation, the Group can share the capital expenditure originally scheduled to spend in the development of the coal mines in Yunnan province with Yunnan Dongyuan. Accordingly, the Group can release and reallocate more funding to support daily operation and coal mines development in both Sichuan and Guizhou provinces.

Taking into account the valuation of the net assets value of the Target Companies as at 31 December 2012 as appraised by China Alliance, an independent appraisal firm approved by the Ministry of Finance and China Securities Regulatory Commission, together with the capitalisation of amount due to the Group maintained by the Target Companies as at 31 December 2012, the consolidated net assets value of the Target Companies amounted to approximately RMB4.0 billion. The mining rights and structures as at 31 December 2012 were revalued based on a market comparable approach with reference to the estimated recoverable reserves of the coal mines. Other tangible assets were revalued based on fair market value.

The basis and assumptions made for the valuation of mining rights under the market comparable approach consider the sales of similar or substitute mineral assets or properties and related market data, and establish a value estimate by process involving comparison. For the mining and metals sector, the methodologies applied involve an indirect means which seeks to

– 22 –

LETTER FROM THE BOARD

compare the subject mineral asset or property to similar mineral assets or properties which have been sold/transacted in an open market. Accordingly, the value in this instance is established by the principle of substitution which means that if one thing is similar to another and could be used for the other, then they must be equal. Furthermore, the price of two alike and similar items should approximate one another. Examples of valuation of methods employed for the market comparable approach include the guideline company methods, the guideline transaction method, the analysis of prior transactions in the ownership of the subject company, and the rules of thumb. The mineral asset or property used for comparison must serve as a reasonable basis for comparison and factors to be considered in judging whether a reasonable basis for comparison exists include:

. a sufficient similarity of qualitative and quantitative investment characteristics;
. the amount and verifiability of data known about the similar investment; and/or
. whether or not the price of the similar investment was obtained in an arm’s length transaction, or a forced or distressed sale.

The basis and assumptions made for the valuation of other mining assets under the fair market value considers the amount of money (or the cash equivalent of some other consideration) determined by the relevant expert for which the mineral asset should change hands on the relevant date in an open and unrestricted market between a willing buyer and a willing seller in an ‘‘arm’s length’’ transaction, with each party acting, knowledgeably, prudently and without compulsion. The fair market value is usually comprised of two components, namely the underlying technical value of the mineral asset (defined herein), and a premium or discount related to market, strategic or other considerations.

The Board is of the view that it is reasonable to use the market comparable basis for mining rights and fair market value basis for other mining assets as (i) the mines being disposed of are under the development stage and have not entered into full capacity production. Therefore, it is difficult to have a reliable forecast of expected future cashflows generated therefrom; and (ii) Sichuan, Guizhou and Yunnan province have undergone coal mine consolidation in the recent years and provided lots of related market information for mineral assets and properties.

Accordingly, 50% of the equity interest in the Target Company entitled to Yunnan Dongyuan pursuant to the Disposal amounted to approximately RMB2.0 billion. The consideration of the Disposal agreed to be RMB2.4 billion, representing a premium of RMB0.40 billion or 20%. China Alliance has extensive experience in valuation of mineral companies and performed several valuation for listed companies and stated own enterprises in the PRC.

The Directors consider that the terms of the Disposal, which were determined after arm’s length negotiation among the parties to the Agreement, are on normal commercial terms and are fair and reasonable and in the interests of the Company and its shareholders as a whole.

– 23 –

LETTER FROM THE BOARD

The Board therefore believes that the Disposal is in the interests of the Company and the Subsidiaries as a whole and most Shareholders should vote in favour of the Disposal accordingly.

Notwithstanding the above, if the Disposal were to be voted down by the Shareholders, the Company shall refund the Escrow Amount and the Early Settlement to Yunnan Dongyuan in accordance with the terms of the Agreement. The Company will make further announcement as and when it is appropriate.

IMPLICATIONS UNDER THE LISTING RULES

As the applicable percentage ratios for the Disposal will exceed 75%, the Disposal constitutes a very substantial disposal of the Company under Chapter 14 of the Listing Rules and is therefore subject to Shareholders’ approval at the EGM.

The EGM will be convened and held for the Shareholders to consider and, if thought fit, approve and ratify the Agreement and the transactions contemplated thereunder. To the best of the Directors’ knowledge, information and belief after having made all reasonable enquiries, no Shareholder has a material interest in the Disposal and hence no Shareholder is required to abstain from voting on the ordinary resolution to approve the Agreement and the transactions contemplated thereunder at the EGM.

As Completion is subject to the fulfilment of certain conditions precedent and may or may not proceed, Shareholders and potential investors should exercise caution when dealing in the securities of the Company.

EGM

A form of proxy for use at the EGM is enclosed herewith. Whether or not you are able to attend the EGM, you are requested to complete the accompany form of proxy in accordance with the instructions printed thereon and return it to the branch share registrar and transfer office of the Company in Hong Kong, Computershare Hong Kong Investor Services Limited, at Shops 1712–16, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong as soon as possible and in any event not less than 48 hours before the time appointed for holding the EGM or any adjourned meeting thereof (as the case may be). Completion and return of the form of proxy will not preclude any Shareholders from attending and voting in person at the EGM or any adjourned meeting thereof (as the case may be) should they so wish, and in such event, the form of proxy shall be deemed to be revoked.

The vote of the Shareholders at the EGM will be taken by poll in accordance with Rule 13.39(4) of the Listing Rules and the Company will announce the result of the poll in the manner prescribed under Rules 13.39(5) of the Listing Rules.

– 24 –

LETTER FROM THE BOARD

RECOMMENDATION

The Board considers that the Agreement and the transactions contemplated under the Agreement are on normal commercial terms, fair and reasonable and in the interests of the Company and the Shareholders as a whole. Accordingly, the Board recommends the Shareholders to vote in favour of the ordinary resolution to approve the Agreement and the transactions contemplated thereunder to be proposed at the EGM.

ADDITIONAL INFORMATION

Your attention is drawn to the additional information set out in the appendices to this circular.

Yours faithfully,

By order of the Board

HIDILI INDUSTRY INTERNATIONAL DEVELOPMENT LIMITED Xian Yang Chairman

– 25 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

1. FINANCIAL INFORMATION OF THE GROUP

The financial information of the Group (i) for the six months ended 30 June 2013 is disclosed in the unaudited interim results announcement of the Company dated 27 August 2013; (ii) for the year ended 31 December 2012 is disclosed on page 40 to 115 of the 2012 annual report of the Company dated 24 May 2013; (iii) for the year ended 31 December 2011 is disclosed on pages 42 to 127 of the 2011 annual report of the Company dated 20 March 2012; and (iv) for the year ended 31 December 2010 is disclosed on pages 40 to 111 of the 2010 annual report of the company dated 29 March 2011.

All these financial statements have been published on the website of the Stock Exchange (http://www.hkexnews.hk) and the website of the Company (http://www.hidili.com.cn).

2. INDEBTEDNESS

As at the close of business on 31 October 2013 (being the latest practicable date for ascertaining information regarding this indebtedness statement), the Group had total outstanding borrowings of approximately RMB8,174 million. The borrowings comprised secured bank and other loans of approximately RMB4,698 million, unsecured bank and other loans of approximately RMB1,030 million, discounted bill with recourse of approximately RMB40 million, convertible loan notes of approximately RMB7 million and senior notes of approximately RMB2,399 million. The Group’s borrowings were secured by (i) certain assets held by the Group with aggregate net book values of approximately RMB3,000 million as at 31 October 2013; (ii) pledge of certain fixed deposits of the Group of approximately RMB878 million as at 31 October 2013; (iii) bills receivables discounted with recourse of approximately RMB40 million; and (iv) equity interest in certain subsidiaries of the Company. Save as aforesaid, and apart from intragroup liabilities, the Group did not have any bank loans, bank overdrafts and liabilities under acceptances (other than normal trade bills) or other similar indebtedness, debentures or other loan capital, mortgages, charges, finance leases or hire purchase commitments, guarantees or other material contingent liabilities outstanding at the close of business on 31 October 2013. For the purpose of the above indebtedness statement, foreign currency amounts have been translated into RMB at the rates of the exchange prevailing at the close of business on 31 October 2013.

3. WORKING CAPITAL

Provided that (i) the Group is able to obtain new medium to long term facilities from banks and independent third parties in the PRC of not less than RMB3 billion; and (ii) the Group is successful in renewing short term bank facilities to long term bank facilities of not less than RMB800 million, the Directors confirm that, after taking into account the effect of the Disposal and the present internal financial resources available to the Group, including internally generated cash flows and the existing banking and credit facilities available, the Group has sufficient working capital for its present requirements in next 12 months from the date of this circular in the absence of unforeseen material circumstances.

– 26 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

4. MATERIAL ADVERSE CHANGE

The Group is engaged in mining and sale of coke, raw coal and clean coal. At the Latest Practicable Date, the Group owned 31 coal mines (including 12 mining rights in Sichuan province, 18 mining rights in Guizhou province and exploration right in Yunnan province). With the coal mining development in Guizhou and Yunnan provinces, turnover and gross profit of the Group for the year ended 31 December 2012 amounted to approximately RMB1,923.6 million and RMB1,074.8 million respectively, recorded a decrease of approximately 32.8% and 39.2% respectively as compared to corresponding period in 2011. The production volume of raw coal amounted to approximately 3.5 million tonnes, representing a decrease of 14.2% as compared to approximately 4.1 million tonnes in the corresponding period in 2011. In this regard, the Group achieved EBITDA of approximately RMB579.1 million, representing a margin of 30.1% during the year ended 31 December 2012. As a result of the coal mines accident happened in (i) Panzhihua, Sichuan province in August 2012; (ii) Fuyuan county, Yunnan province in December 2012; and (iii) Liupanshui, Guizhou province in January 2013, the production at all coal mines in Panzhihua, Fuyuan and Liupanshui were halted for inspection after the accidents. As a result, the production at all the Group’s coal mines in Sichuan, Yunnan and Guizhou provinces were suspended. Some coal mines of the Group in Sichuan province have to undergo integration. The Group is currently preparing an integration plan subject to the approval of the PRC government. The Group’s remaining coal mines in Sichuan province have to carry out renovation. As at the Latest Practicable Date, the production of two out of five mining regions in Sichuan province and all coal mines in Yunnan and Guizhou provinces was resumed. In this regard, the Group will continue the construction of the coal mines in Guizhou and Yunnan province. The resumption of production can help generate operating cash flow for the Group’s operations. In addition, the Group plans to shrink its debt size and dispose certain assets to further improve its liquidity position.

5. MANAGEMENT DISCUSSION AND ANALYSIS OF THE REMAINING GROUP

Set out below is the management discussion and analysis on the Remaining Group for the three years ended 31 December 2010, 2011 and 2012 together with the six months ended 30 June 2013.

For the six months ended 30 June 2013

Financial Review

For the six months ended 30 June 2013, the revenue of the Remaining Group recorded approximately RMB536.4 million, representing a decrease of approximately 55.5%, as compared with approximately RMB1,204.4 million in the corresponding period in 2012. The decrease was primarily attributable to the decrease in sales volume and average selling price of both clean coal and coke. The decrease was mainly attributable to the suspension of production in the first quarter and the slowdown in the demand from steel manufacturers.

– 27 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

During the six months ended 30 June 2013, sales volume of clean coal and coke amounted to approximately 297,400 tonnes and 27,100 tonnes, respectively, representing decrease of approximately 61.3% and 74.8% respectively, as compared to approximately 767,700 tonnes and 107,400 tonnes respectively in the corresponding period in 2012.

The average selling price (net of value added tax) of both clean coal and coke decreased from approximately RMB1,175.3 per tonne and RMB1,620.3 per tonne respectively in the corresponding period in 2012 to approximately RMB1,068.5 per tonne and RMB1,478.4 per tonne during the period, representing decrease of approximately 9.1% and 8.8% respectively.

Cost of sales of the Remaining Group for the period was approximately RMB333.5 million, representing a decrease of approximately RMB85.0 million, or approximately 20.3%, as compared with approximately RMB418.5 million in the corresponding period in 2012. During the period, production volume of raw coal reduced significantly from approximately 1,546,000 tonnes in the corresponding period in 2012 to approximately 757,000 tonnes during the period, representing a decrease of approximately 51.0%, in relation to the suspension of production consecutively experienced in Sichuan, Guizhou province during the first quarter.

As a result of the foregoing, the gross profit of the Remaining Group for the period was approximately RMB202.9 million, representing a significant decrease of approximately RMB583.0 million or approximately 74.2%, as compared with approximately RMB785.9 million in the corresponding period in 2012. The gross profit margin during the period was approximately 37.8% as compared with approximately 65.3% in corresponding period in 2012.

Liquidity, Financial Resources and Capital Structure

As at 30 June 2013, the Remaining Group incurred net current liabilities of approximately RMB3,817.6 million as compared to approximately RMB3,084.6 million at 31 December 2012.

As at 30 June 2013, the bank balances and cash of the Remaining Group amounted to approximately RMB1,993.0 million.

As at 30 June 2013, the total bank and other borrowings of the Remaining Group were approximately RMB5,870.8 million, of which approximately RMB4,635.7 million was repayable within one year. As at 30 June 2013, loans amounting to RMB2,103 million carry interest at a fixed rate of ranging from 5.4% to 12.11% per annum. The remaining loans carry interest at variable market rates ranging from 2.27% to 7.59% per annum.

The gearing ratio (calculate as the aggregate of total bank and other borrowings, convertible loan notes and senior notes divided by total assets) of the Remaining Group as at 30 June 2013 was 47.7%.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Pledger of Assets

As at 30 June 2013, the Remaining Group pledged assets in an aggregate amount of approximately RMB2,925.8 million to banks for credit facilities.

As at 30 June 2013, a Director, Mr. Xian Yang, guaranteed the bank borrowings of approximately RMB1,252.5 million.

Employees

As at 30 June 2013, the Remaining Group maintained an aggregate of 7,960 employees as compared with 10,252 employees at 31 December 2012.

During the period, the staff costs (including directors’ remuneration in the form of salaries and other allowances) were approximately RMB112.7 million. The decrease was mainly attributable to the reduction in the direct labour cost incurred in mining activities and cost saving in administrative staff during the period.

The salary and bonus policy of the Remaining Group is principally determined by the performance and working experience of the individual employee and with reference to prevailing market conditions.

Risk in Foreign Exchange

Since all of the Remaining Group’s business activities are transacted in RMB, the Directors consider that the Remaining Group’s risk in foreign exchange is insignificant. However, during the period, the Remaining Group was exposed to an exchange rate risk mainly arose out of the foreign currency bank balances of approximately US$10.3 million, HK$4.0 million and AUD0.1 million respectively.

Significant Investment Held

The Remaining Group had invested in unlisted equity investments of RMB173.6 million, representing 15%, 5% and 4.41% equity interest in three entities, respectively. The principal activities of the investees are manufacturing of mining machinery, manufacturing of potassic fertiliser and manufacturing of herbicides and mining of potassium chloride, respectively.

Material Acquisition and Disposal

There was no other material acquisition or disposal of subsidiaries and associated companies by the Remaining Group during the period.

Contingent Liabilities

On 28 January 2013, Blackrock Japan Co., Limited (‘‘First Plaintiff’’) and Blackrock (Singapore) Limited (‘‘Second Plaintiff’’) (collectively known as ‘‘Plaintiffs’’) commenced legal proceedings against the Company in the High Court of Hong Kong Special Administrative Region Court of First Instance (‘‘Action’’).

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The First Plaintiff is the investment manager of two high yield bond funds (‘‘Funds’’). It delegated the investment management of the Funds to the Second Plaintiff. The Funds were the holders of certain bonds issued by the Company in January 2010 (‘‘Bonds’’). Under the terms of the Bonds, the Funds were entitled to require the Company to redeem some or all of the Bonds on 19 January 2013. Instead of issuing redemption notices on 18 and 19 December 2012, it is alleged that the Plaintiffs had issued by mistake notices (‘‘Notices’’) electing to convert the Bonds into Shares. The Plaintiffs assert that the Company knew or ought to have known that the Notices were issued by mistake and therefore are void, or alternatively are voidable in equity, and are of no legal effect. A statement of claim was served on the Company on 25 February 2013. The Company filed the defence on 29 April 2013. On 24 June 2013, the Plaintiffs indicated that they would seek to amend the statement of claim.

Saved as disclosed above, as at 30 June 2013, the Remaining Group did not have any other material contingent liabilities.

For the year ended 31 December 2012

Financial Review

During the year, turnover of the Remaining Group amounted to approximately RMB1,871.9 million, representing a decrease of approximately 31.3%, as compared with approximately RMB2,725.0 million in 2011. The decrease was primarily attributable to the decrease in sales volumes of clean coal and by-products and average selling prices (net of value added tax) of the principal products and coal tar and after setting off against the increase in sales volume of coke and average selling price of thermal coal. The sales volume recorded for clean coal and coke for the year amounted to approximately 1,191,400 tonnes and 189,000 tonnes, respectively as compared to approximately 1,635,900 tonnes and 175,000 tonnes, respectively in 2011, representing a decrease in volume of clean coal of approximately 27.2% and an increase of 8.5%, respectively. The average selling price for the year for both clean coal and coke decreased from RMB1,317.7 per tonne and RMB1,622.3 per tonne, respectively in 2011 to RMB1,135.5 per tonne and RMB1,469.4 per tonne for the year, representing a decrease of approximately 13.8% and 9.4%, respectively.

Cost of sales of the Remaining Group for the year was approximately RMB1,003.4 million, representing an increase of approximately RMB53.5 million, or approximately 5.6%, as compared with approximately RMB949.9 million in 2011. During the year, the Remaining Group recorded a reduction in production volume of raw coal and clean coal resulting from the suspension of production for comprehensive safety check on all coal mines imposed by the Panzhihua provincial governments since August and December 2012, respectively. Accordingly, the raw coal and clean coal production volume decreased from approximately 2,905,000 tonnes, and 1,280,000 tonnes, respectively in 2011 to approximately 2,682,000 tonnes and 1,074,000 tonnes, respectively in the year.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

As a result of the foregoing, the gross profit of the Remaining Group for the year was approximately RMB858.5 million, representing a decrease of approximately RMB916.6 million or approximately 51.6% as compared with approximately RMB1,775.1 million in 2011. The gross profit margin was approximately 46.4% as compared with approximately 65.1% in 2011.

Liquidity, Financial Resources and Capital Structure

As at 31 December 2012, the Remaining Group incurred a net current liabilities of approximately RMB3,084.6 million.

As at 31 December 2012, the bank balances and cash of the Remaining Group amounted to approximately RMB1,471.9 million.

As at 31 December 2012, the total bank and other borrowings of the Remaining Group were approximately RMB4,383.9 million, of which RMB2,571 million is repayable within one year with effective interest rate on fixed rate borrowings and variable rate borrowings ranging from 6.04% to 12.11% per annum and 7.02% to 7.59% per annum, respectively.

The gearing ratio (calculated as the aggregate of total bank and other borrowings, convertible loan notes and senior notes divided by total assets) of the Remaining Group as at 31 December 2012 was 59.9%.

Pledge of Assets

As at 31 December 2012, the Remaining Group pledged assets in an aggregate amount of approximately RMB2,003.3 million to banks for credit facilities.

In connection with the Capital Injection, certain immediate holding companies of the Target Subsidiaries had pledged certain of their equity interests in the Target Subsidiaries to Huaneng Trust to secure the payment of the buy back consideration.

As at 31 December 2012, a Director, Mr. Xian Yang, guaranteed the bank borrowings of approximately RMB2,380 million.

Employees

As at 31 December 2012, the number of employees of the Remaining Group reached 10,252, representing a slight decrease as compared with 2011. During the year, the staff costs (including directors’ remuneration in the form of salaries and other allowances) amounted to approximately RMB353.0 million.

The salary and bonus policy of the Remaining Group is principally determined by the performance and working experience of the individual employee and with reference to prevailing market conditions.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Risk in Foreign Exchange

Since all of the Remaining Group’s business activities are transacted in RMB, the Directors consider that the Remaining Group’s risk in foreign exchange is insignificant. Accordingly, the Remaining Group was only exposed to exchange rate risk arising from the foreign currency bank balance of approximately US$5.6 million, HK$4.6 million and AUD0.1 million respectively.

Significant Investment Held

The Remaining Group had invested in (i) shares of RMB52.8 million in a mining company listed on the Australian Stock Exchange, and; (ii) unlisted equity investments of RMB228.3 million, representing 18%, 15%, 5% and 4.41% equity interest in four entities, respectively. The principal activities of the investees are the provision of transportation services, the manufacturing of mining machinery, manufacturing of potassic fertiliser and manufacturing of herbicides and mining of potassium chloride, respectively.

Material Acquisition and Disposal

During the year, the Remaining Group disposed of its 51% equity interest in 四川恒鼎金自天正信息工程有限公司, which engaged in provision of technology consultancy services and development of automated system.

Save as disclosed above, there was no material acquisition or disposal of subsidiaries and associated companies by the Remaining Group during the period.

Contingent Liabilities

On 28 January 2013, Blackrock Japan Co., Limited (the ‘‘First Plaintiff’’) and Blackrock (Singapore) Limited (the ‘‘Second Plaintiff’’) (collectively known as the ‘‘Plaintiffs’’), commenced legal proceedings against the Company in the High Court of Hong Kong Special Administrative Region Court of First Instance (the ‘‘Action’’).

The First Plaintiff is the investment manager of two high yield bond funds (the ‘‘Funds’’). It delegated the investment management of the Funds to the Second Plaintiff. The Funds were the holders of certain bonds issued by the Company in January 2010 (the ‘‘Bonds’’). Under the terms of the Bonds, the Funds were entitled to require the Company to redeem some or all of the Bonds on 19 January 2013. Instead of issuing redemption notices on 18 and 19 December 2012, it is alleged that the Plaintiffs had issued by mistake notices (the ‘‘Notices’’) electing to convert the Bonds into Shares. The Plaintiffs assert that the Company knew or ought to have known that the Notices were issued by mistake and therefore are void, or alternatively are voidable in equity, and are of no legal effect. A statement of claim was served on the Company on 25 February 2013 and the Company filed the defence on 29 April 2013.

Save as disclosed above, as at 31 December 2012, the Remaining Group did not have any material contingent liabilities.

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FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

For the year ended 31 December 2011

Financial Review

During the year, turnover of the Remaining Group reached approximately RMB2,725.0 million, representing an increase of approximately 10.6%, as compared with approximately RMB2,464.5 million in 2010. The increase was primarily attributable to the increase in sales volumes of clean coal and average selling prices (net of value added tax) of the principal products and by-products and after setting off against the decrease in sales volume of coke. The sales volume recorded for clean coal and coke during the year amounted to approximately 1,635,900 tonnes and 175,000 tonnes, respectively, as compared to approximately 1,272,000 tonnes and 470,000 tonnes, respectively, in 2010, representing an increase in volume of clean coal of approximately 28.6% and a decrease of 62.8%, respectively. The average selling price for both clean coal and coke increased from RMB1,135.6 per tonne and RMB1,419.4 per tonne, respectively in 2010, to RMB1,317.7 per tonne and RMB1,622.3 per tonne, respectively, in 2011 representing an increase of approximately 16.0% and 14.3% respectively.

Cost of sales of the Remaining Group for the year was approximately RMB949.9 million, representing an increase of approximately RMB196.2 million, or approximately 26.0%, as compared with approximately RMB753.7 million in 2010. During the year, the Remaining Group recorded a reduction in production volume of raw coal and clean coal resulting from the suspension of production for comprehensive safety check on all coal mines imposed by the Guizhou provincial government from March to May 2011. Accordingly, the raw coal and clean coal production volume decreased from 3,292,000 tonnes and 1,456,000 tonnes, respectively, in 2010 to 2,905,000 tonnes and 1,280,000 tonnes, respectively, in 2011.

As a result of the foregoing, the gross profit of the Remaining Group for the year was approximately RMB1,775.1 million, representing an increase of approximately RMB64.4 million or approximately 3.8%, as compared with approximately RMB1,710.7 million in 2010. The gross profit margin of the Remaining Group was approximately 65.1% as compared with approximately 69.4% in 2010.

Liquidity, Financial Resources and Capital Structure

As at 31 December 2011, the Remaining Group recorded net current assets of approximately RMB2,005.9 million.

As at 31 December 2011, the bank balances and cash of the Remaining Group amounted to approximately RMB531.6 million. As at 31 December 2011, the total bank borrowings of the Remaining Group were RMB1,997 million, in which approximately RMB1,617 million are repayable within one year, with effective interest rate on fixed rate borrowings and variable rate borrowings ranging from 5.04% to 8.50% per annum and 6.34% to 7.87% per annum respectively.

The gearing ratio (calculate as total bank and other borrowings divided by total assets) of the Remaining Group as at 31 December 2011 was 43.9%.

– 33 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Pledge of Assets

As at 31 December 2011, the Remaining Group pledged assets in an aggregate amount of approximately RMB1,449.8 million (2010: RMB1,759.3 million) to banks for credit facilities in the amount of RMB1,397 million (2009: RMB1,770 million) granted to the Remaining Group.

Employees

As at 31 December 2011, the number of employees of the Remaining Group reached 10,916, maintained as similar level in 2010. During the year, the staff costs (including directors’ remuneration in the form of salaries and other allowances) was amounted to approximately RMB351.1 million.

The salary and bonus policy of the Remaining Group is principally determined by the performance and working experience of the individual employee and with reference to prevailing market conditions.

Risk in Foreign Exchange

Since all of the Remaining Group’s business activities are transacted in RMB, the Directors consider that the Remaining Group’s risk in foreign exchange is insignificant. Accordingly, the Remaining Group was only exposed to exchange rate risk arising from the foreign currency bank balance of approximately US$3.5 million, AUD0.3 million and HK$13.3 million respectively.

Significant Investment Held

The Remaining Group had invested in (i) certain A shares in the PRC which amounted to approximately RMB2.5 million as at 31 December 2011; and (ii) shares of RMB62.0 million in a mining company listed on Australian Stock Exchange.

Material Acquisition and Disposal

There was no material acquisition or disposal of subsidiaries and associated companies by the Remaining Group during the period.

Contingent Liabilities

As at 31 December 2011, the Remaining Group did not have any material contingent liabilities.

6. FINANCIAL AND TRADING PROSPECTS

Upon the completion of the Disposal, the Remaining Group will focus on the mining operation in Sichuan and Guizhou provinces.

– 34 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

All the Company’s coal mines located in Panzhihua, Sichuan province are suspended for production and undergoing consolidation since September 2012. As the consolidating entity in Panzhihua, the Company will actively participate in integration with coal mines in the region to increase its production volume in Panzhihua. Currently, two out of five mining areas are under operation.

There are, in total, 18 operation and construction coal mines in Guizhou province, nine of which are coal producing mines. Construction work continued on schedule to steadily release production volume in the coming two to three years.

For the nine coal mines in Yunnan province, the Company will jointly operate and construct with Yunnan Dongyuan.

The proceed from the Disposal will help to improve the Group’s working capital position.

– 35 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

SUMMARY OF FINANCIAL INFORMATION

Set out below are the unaudited financial information of Yunnan Hidili Coal Industry Co., Ltd. (‘‘Yunnan Hidili’’) and its subsidiaries (collectively referred as the ‘‘Disposal Group’’) for the three years ended 31 December 2012 and the six months ended 30 June 2012 and 2013 (the ‘‘Unaudited Financial Information’’), which have been prepared in accordance with paragraph 68(2)(a)(i)(A) of Chapter 14 of the Listing Rules and the basis set out in note 2 to the Unaudited Financial Information.

The auditor of the Company, Deloitte Touche Tohmatsu, has reviewed the Unaudited Financial Information in accordance with Hong Kong Standard on Review Engagements 2400 ‘‘Engagements to Review Financial Statements’’ issued by the Hong Kong Institute of Certified Public Accountants (the ‘‘HKICPA’’).

The following is an extract of review report on the Unaudited Consolidated Financial Information.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the Financial Information of the Disposal Group for the Relevant Periods is not prepared, in all material respects, in accordance with the basis set out in note 2 to the Financial Information.

Emphasis of Matter

Without modifying our review conclusion, we draw attention to note 3 to the Financial Information which indicates that, as at 30 June 2013, the Disposal Group’s current liabilities exceeded its current assets by RMB229,897,000. As described in note 3 to the Financial Information, the Company and Yunnan Dongyuan Coal Group Company Limited have agreed to provide financial support to the Disposal Group to meet in full its financial obligations as and when they fall due in the foreseeable future. However, the Company’s going concern is dependent on the successful implementation of a number of measures as disclosed in note 3 to the Financial Information to improve its financial position. The eventual success of these measures cannot presently be determined and accordingly this indicates the existence of a material uncertainty which may cast significant doubt about the Disposal Group’s ability to continue as a going concern. The Financial Information does not include any adjustments that would result from a failure of the Company to implement such measures as disclosed in note 3 to the Financial Information.

For the purpose of preparation of the Unaudited Financial Information of the Disposal Group to be included in this circular, the Directors have prepared such Unaudited Financial Information in accordance with paragraph 68(2)(a)(i) of Chapter 14 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited which requires that the Unaudited Financial Information must contain at least a statement of financial position, a

– 36 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

statement of comprehensive income, a statement of changes in equity and a statement of cash flows for each of the three financial years of the company immediately preceding the issue of the circular and where applicable, a stub period.

However, the Unaudited Financial Information does not contain sufficient explanatory notes to constitute a complete set of financial statements as defined in International Accounting Standard 1 ‘‘Presentation of Financial Statements’’ nor a set of condensed financial statements as defined in International Accounting Standard 34 ‘‘Interim Financial Report’’ issued by the HKICPA.

– 37 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

UNAUDITED CONSOLIDATED STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

For each of the three years ended 31 December 2012 and the six months ended 30 June 2013

Revenue Cost of sales Gross profit Other income Administrative expenses Share of results of associates Finance costs Profit (loss) before tax Income tax expense Profit (loss) and total comprehensive income (expense) for the year/period Profit (loss) and total comprehensive income (expense) for the period attributable to: Owners of the Disposal Company Non-controlling interests	Year ended 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 563,162 647,509 557,722 (305,924) (258,515) (348,193) 257,238 388,994 209,529 2,189 12,042 20,502 (50,317) (56,676) (91,035) — — (802) (51,923) (35,283) (63,118) 157,187 309,077 75,076 (51,256) (76,812) (26,790) 105,931 232,265 48,286 98,483 220,777 45,507 7,448 11,488 2,779 105,931 232,265 48,286	Six months ended 30 June 2012 2013 RMB’000 RMB’000 329,429 160,284 (130,266) (155,592) 199,163 4,692 6,499 9,142 (27,314) (40,896) — — (33,183) (34,424) 145,165 (61,486) (31,857) (1,127) 113,308 (62,613) 110,304 (62,613) 3,004 — 113,308 (62,613)

– 38 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

UNAUDITED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

As at 31 December 2010, 2011 and 2012 and 30 June 2013

Non-current Assets Property, plant and equipment Interests in associates Available-for-sale investments Long term deposits and other receivables Amount due from a shareholder Amounts due from fellow subsidiaries Amount due from an intermediate holding company Current Assets Inventories Bills and trade receivables Other receivables, deposits and prepayments Amount due from an intermediate holding company Amounts due from shareholders Amounts due from fellow subsidiaries Amount due from a related party Amount due from an associate Bank balances and cash	At 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 2,796,570 3,746,231 4,151,753 — 103,571 102,769 — 54,700 54,700 314,204 86,970 27,360 — 74,416 77,576 146,960 — 141,558 — — 28,117 3,257,734 4,065,888 4,583,833 61,837 51,437 48,314 37,691 73,057 218,666 69,983 138,732 110,793 — 6,206 — — 31,878 163,977 101,706 189,171 116,888 104,468 — 15,922 — — 16,381 26,210 65,397 82,501 401,895 555,878 773,442	At 30 June 2013 RMB’000 4,185,712 102,769 54,700 27,360 — — —
		4,370,541
		24,218 108,600 107,193 — — 70,555 — 630 5,203
		316,399

– 39 –

APPENDIX II

FINANCIAL INFORMATION OF THE TARGET GROUP

Current Liabilities Trade payables Other payables and accrued expenses Amount due to an intermediate holding company Amounts due to shareholders Amounts due to fellow subsidiaries Amounts due to associates Tax payables Bank borrowing Net Current Liabilities Total Assets less Current Liabilities Capital and Reserves Paid in capital Reserves Equity attributable to owners of the Company Non-controlling interests Total equity Non-current Liabilities Provision for restoration and environmental costs Other long term payables Deferred tax liabilities	At 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 11,280 33,508 79,727 94,816 184,714 191,013 175,000 827,040 817,252 1,100,028 923,373 901,014 649,953 706,334 270,978 — 27,870 42,970 52,515 108,326 112,143 15,000 — — 2,098,592 2,811,165 2,415,097 (1,696,697) (2,255,287) (1,641,655) 1,561,037 1,810,601 2,942,178 20,000 20,000 30,303 1,253,185 1,476,579 1,784,343 1,273,185 1,496,579 1,814,646 96,198 107,686 924,801 1,369,383 1,604,265 2,739,447 624 1,306 1,838 — 14,000 10,500 191,030 191,030 190,393 191,654 206,336 202,731 1,561,037 1,810,601 2,942,178	At 30 June 2013 RMB’000 68,570 158,949 81,854 193,260 25,576 18,087 — — 546,296 (229,897) 4,140,644 50,000 3,887,899 3,937,899 — 3,937,899 1,852 10,500 190,393 202,745 4,140,644

– 40 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

UNAUDITED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

For each of the three years ended 31 December 2012 and the six months ended 30 June 2013

		Attributable	to owners of the Company	to owners of the Company			Non- controlling interests RMB’000 97,407 7,448 — — 800 — (9,457)	Total RMB’000 874,773 105,931 — 298,793 118,330 (18,987 (9,457
Paid in capital RMB’000 20,000 — — — — — —	Capital reserve RMB’000 127,000 — — — — — —	Statutory surplus reserve RMB’000 — — 18,260 — — — —	Future development fund RMB’000 — — 5,459 — — — —	Merger reserve RMB’000 629,984 — — 298,793 117,530 — —	Retained profits (accumulated losses) RMB’000 382 98,483 (23,719) — — (18,987) —	Total RMB’000 777,366 98,483 — 298,793 117,530 (18,987) —
20,000 — — — —	127,000 — — — —	18,260 — 25,930 — —	5,459 — 6,799 — —	1,046,307 — — 12,661 —	56,159 220,777 (32,729) — (10,044)	1,273,185 220,777 — 12,661 (10,044)	96,198 11,488 — — —	1,369,383 232,265 — 12,661 (10,044
20,000 — — 10,303 — — — —	127,000 — — 239,697 — — — —	44,190 — 58,877 — — — — —	12,258 — 109 — — — — —	1,058,968 — — — — — — 65,664	234,163 45,507 (58,986) — (5,652) (9,584) (27,868) —	1,496,579 45,507 — 250,000 (5,652) (9,584) (27,868) 65,664	107,686 2,779 — 880,000 — — — (65,664)	1,604,265 48,286 — 1,130,000 (5,652 (9,584 (27,868 —
30,303	366,697	103,067	12,367	1,124,632	177,580	1,814,646	924,801	2,739,447

– 41 –

APPENDIX II

FINANCIAL INFORMATION OF THE TARGET GROUP

Attributable to owners of the Company

Paid in capital RMB’000 30,303 — — — 19,697 — — — — —	Capital reserve RMB’000 366,697 — — — 3,600,223 — — — — —	Statutory surplus reserve RMB’000 103,067 — — — — 6,234 — — — —	Future development fund RMB’000 12,367 — — — — (3,640) — — — —	Merger reserve RMB’000 1,124,632 — 924,801 (2,095,819) — — — — — —	Retained profits (accumulated losses) RMB’000 177,580 (62,613) — — — (2,594) (298,900) 4,780 10,512 20,572	Total RMB’000 1,814,646 (62,613) 924,801 (2,095,819) 3,619,920 — (298,900) 4,780 10,512 20,572	Non- controlling interests RMB’000 924,801 — (924,801) — — — — — — —	Total RMB’000 2,739,447 (62,613 — (2,095,819 3,619,920 — (298,900 4,780 10,512 20,572
50,000	3,966,920	109,301	8,727	(46,386)	(150,663)	3,937,899	—	3,937,899
20,000 — —	127,000 — —	44,190 — 23,076	12,258 — —	1,058,968 — —	234,163 110,304 (23,076)	1,496,579 110,304 —	107,686 3,004 —	1,604,265 113,308 —
20,000	127,000	67,266	12,258	1,058,968	321,391	1,606,883	110,690	1,717,573

Notes:

(i) On 20 May 2013, the shareholders of Yunnan Hidili Coal Industry Co., Ltd 雲南恒鼎煤業有限公司 (‘‘Yunnan Hidili’’) acquired non-controlling interests of Target Subsidiaries as defined in note 1 to the unaudited consolidated financial information.
(ii) Pursuant to the Group Reorganisation as set out in note 1 to the unaudited consolidated financial information, on 31 May 2013, Yunnan Hidili acquired entire equity interests in Fuyuan Dahe, Fuyuan Jintai, Fuyuan Kunyuan, Fuyuan Tonghe, Fuyuan Xiangda, Yunnan Henglong, Yunnan Hidili Industry and Fuyuan Maosheng; and remaining 20% equity interests in Fuyuan Fude and Fuyuan Yuyuan for aggregated consideration of RMB2,095,819,000 and the amounts were settled through current accounts with group companies.
(iii) On 8 June 2013, the total registered capital of Yunnan Hidili increased from RMB30,303,000 to RMB50,000,000 and the shareholders waive the amounts due to shareholders of RMB3,619,920,000 of which RMB19,697,000 as paid in capital and RMB3,600,223,000 as capital reserve.
(iv) During the six months ended 30 June 2013, dividend declared of RMB298,900,000 was settled through current accounts with group companies.

– 42 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

For each of the three years ended 31 December 2012 and the six months ended 30 June 2013

Profit (loss) before tax Adjustments for: Depreciation of property, plant and equipment Provision for restoration and environmental Loss on disposal of property, plant and equipment Share of results of associates Interest income Interest expense Operating cash flows before movements in working capital changes (Increase) decrease in inventories (Increase) decrease in bills and trade receivables (Increase) decrease in other receivables, deposits and prepayment Increase (decrease) in trade payables (Decrease) increase in other payables and accrued expense Cash (used in) generated from operations Income taxes refund (paid) Net cash (used in) from operating activities	Year ended 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 157,187 309,077 75,076 17,939 24,410 30,773 624 682 532 5,518 — — — — 802 (1,743) (11,432) (17,674) 51,923 35,283 63,118 231,448 358,020 152,627 (54,397) 10,400 3,123 (50,205) (35,366) (145,609) (46,768) (52,076) 2,766 5,140 22,228 46,219 (88,995) 145,705 48,343 (3,777) 448,911 107,469 265 (21,001) (23,610) (3,512) 427,910 83,859	Six months ended 30 June 2012 2013 RMB’000 RMB’000 145,165 (61,486) 14,059 10,401 301 14 — — — — (6,333) (7,765) 33,183 34,424 186,375 (24,412) (31,044) 24,096 (83,205) 110,066 (22,433) 3,600 40,135 (11,157) (73,599) (47,179) 16,229 55,014 (11,767) (113,270) 4,462 (58,256)

– 43 –

FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

Investing activities Additions to property, plant and equipment Deposits paid for acquisition of associates Deposits paid for acquisition of assets Advance to a loan receivables Advance to shareholders Advance to fellow subsidiaries Advance to an intermediate holding company Advance to related parties Advance to an associate Acquisition of a subsidiary Proceeds from disposal of property, plant and equipment Deposit refunds Repayment of loan receivables Repayment from shareholders Repayment from fellow subsidiaries Repayment from an intermediate holding company Repayment from related parties Repayment from an associate Interest income Net cash (used in) from investing activities	Year ended 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 (1,532,841) (999,572) (390,011) (103,571) — — (43,260) — (900) (25,173) — — — (476,465) (384,940) (2,363,654) (3,353,320) (4,258,111) — (13,866) (37,399) (131,169) — (264,174) — — (210,558) 1 — — 382,863 31 — — 50,000 — — — 25,173 — 370,171 249,681 2,320,909 3,422,113 4,172,795 — 7,660 15,488 26,701 104,468 248,252 — — 194,177 248 1,755 263 (1,468,946) (887,025) (640,264)	Six months ended 30 June 2012 2013 RMB’000 RMB’000 (156,527) (31,894) — — — — — — (440) — (115,147) (182,516) (1,840) — (141,900) — — (16,730) — — — 16,261 — — — — — 167,813 28,231 134,563 7,924 28,117 34,966 15,922 — 32,481 10 77 (344,723) 164,094

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FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

Financing activities Advance from an intermediate holding company Advance from shareholders Advance from fellow subsidiaries Advance from associates Capital injection Contribution from non-controlling interest Repayment to an intermediate holding company Repayment to shareholders Repayment to fellow subsidiaries Repayment to associates Repayment of bank borrowings Interest paid Acquisition of additional interest in non-wholly owned subsidiaries Net cash from (used in) financing activities Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of the year/period Cash and cash equivalents at end of the year/period represented by bank balances and cash	Year ended 31 December 2010 2011 2012 RMB’000 RMB’000 RMB’000 223,493 676,185 200,234 1,287,912 728,748 1,225,029 2,222,619 3,191,012 2,470,554 — 250,025 36,162 — 12,661 250,000 — — 880,000 (15,000) (24,145) (225,115) (341,174) (915,070) (1,241,946) (1,826,081) (3,134,629) (2,905,911) — (222,155) (21,062) — (15,000) — (51,923) (49,330) (94,436) (9,457) — — 1,490,389 498,302 573,509 17,931 39,187 17,104 8,279 26,210 65,397 26,210 65,397 82,501	Six months ended 30 June 2012 2013 RMB’000 RMB’000 65,854 19,640 642,798 3,329,686 207,673 125,138 691 5,368 — — — — (9,402) (735,722) (238,836) (2,478,419) (316,188) (370,540) (14,000) (30,251) — — (47,284) (48,036) — — 291,306 (183,136) (48,955) (77,298) 65,397 82,501 16,442 5,203

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FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL INFORMATION For the three years ended 31 December 2012 and the six months ended 30 June 2013

1. GENERAL

On 17 May 2013, Hidili Industry (China) Group Co., Ltd. 恒鼎實業(中國)集團有限公司 (‘‘Hidili China’’), an intermediate holding company of the Yunnan Hidili and Panzhihua Hidili Coal Industry Co., Ltd. 攀枝花市恒鼎煤焦化有限公司 (‘‘Panzhihua Hidili’’), a shareholder of the Yunnan Hidili, entered into a conditional agreement (the ‘‘Agreement’’) with Yunnan Dongyuan Coal Group Company Limited 雲南東源煤業集團有限公司 (‘‘Dongyuan’’), an independent third party, pursuant to which Panzhihua Hidili has conditionally agreed to dispose of 50% equity interests of:

(i) Yunnan Hidili;
(ii) Fuyuan County Dahe Qingping Coal Industry Co., Ltd. 富源縣大河青坪煤業有限公司 (‘‘Fuyuan Dahe’’);
(iii) Fuyuan County Jintai Coal Industry Co., Ltd. 富源縣錦泰煤業有限公司 (‘‘Fuyuan Jintai’’);
(iv) Fuyuan County Kunyuan Coal Industry Co., Ltd. 富源縣坤源煤業有限公司 (‘‘Fuyuan Kunyuan’’);
(v) Fuyuan County Tonghe Coal Industry Co., Ltd. 富源縣通和煤業有限公司 (‘‘Fuyuan Tonghe’’);
(vi) Fuyuan County Xiangda Coal Mine Co., Ltd. 富源縣祥達煤礦有限公司 (‘‘Fuyuan Xiangda’’);
(vii) Yunnan Henglong Coal Industry Co., Ltd. 雲南恒隆煤業有限公司 (‘‘Yunnan Henglong’’);
(viii) Yunnan Hidili Industry Co., Ltd. 雲南恒鼎實業有限公司 (‘‘Yunnan Hidili Industry’’);
(ix) Fuyuan County Maosheng Coal Preparing Co., Ltd 富源縣茂盛選煤有限責任公司 (‘‘Fuyuan Maosheng’’);
(x) Fuyuan County Fude Coal Washing Co., Ltd. 富源縣富德選煤有限公司 (‘‘Fuyuan Fude’’); and
(xi) Fuyuan Country Yuyuan Coal Washing Co., Ltd. 富源縣鈺源煤業有限責任公司 (‘‘Fuyuan Yuyuan’’)

(collectively ‘‘Target Companies’’) to Dongyuan (the ‘‘Disposals’’). Pursuant to the Agreement, the Target Companies underwent a group reorganisation (the ‘‘Group Reorganisation’’) which principally involved the transfer of the entire equity interests in Fuyuan Dahe, Fuyuan Jintai, Fuyuan Kunyuan, Fuyuan Tonghe, Fuyuan Xiangda, Yunnan Henglong, Yunnan Hidili Industry and Fuyuan Maosheng; and remaining 20% equity interest in Fuyuan Fude and Fuyuan Yuyuan (collectively ‘‘Target Subsidiaries’’) to Yunnan Hidili. Yunnan Hidili owned 80% equity interests in Fuyuan Fude and Fuyuan Yuyuan before Group Reorganisation. In addition, certain equity interests in Fuyuan Dahe, Fuyuan Jintai, Fuyuan Kunyuan, Fuyuan Tonghe, Fuyuan Xiangda, Yunnan Henglong were held by independent third parties before Group Reorganisation, the shareholders of Yunnan Hidili had acquired these noncontrolling interests on 20 May 2013 to facilitate the Group Reorganisation. The Group Reorganisation was completed on 31 May 2013, and entire equity interests in Fuyuan Dahe, Fuyuan Jintai, Fuyuan Kunyuan, Fuyuan Tonghe, Fuyuan Xiangda, Yunnan Henglong, Yunnan Hidili Industry, Fuyuan Maosheng; and remaining 20% equity interests in Fuyuan Fude and Fuyuan Yuyuan were transferred to Yunnan Hidili for aggregated consideration of RMB2,095,819,000. The Target Subsidiaries became wholly owned subsidiaries of Yunnan Hidili on 31 May 2013.

Hidili China, Panzhihua Hidili and Yunnan Hidili and its subsidiaries (the ‘‘Yunnan Hidili Group’’) are wholly owned subsidiaries of Hidili Industry International Development Limited (the ‘‘Company’’) and upon completion of the Disposals, the Yunnan Hidili Group will cease to be the subsidiaries of the Company.

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FINANCIAL INFORMATION OF THE TARGET GROUP

APPENDIX II

2. BASIS OF PRESENTATION OF THE UNAUDITED FINANCIAL INFORMATION

The unaudited financial information has been prepared in accordance with paragraph 68(2)(a)(i) of Chapter 14 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited, and solely for the purpose of inclusion in the circular to be issued by the Company in connection with the Disposals.

The amounts included in the unaudited financial information have been recognised and measured in accordance with the relevant accounting policies of the Company and its subsidiaries adopted in the preparation of its condensed consolidated financial statements for the period from 1 January 2013 to 30 June 2013, which conform with International Financial Reporting Standards.

Since the Yunnan Hidili Group is ultimately controlled by the Company before and after the completion of the Group Reorganisation, the Group Reorganisation is considered as a business combination under common control and is accounted for using the principle of merger accounting. The merger method of accounting involves incorporating the financial statements items of the Yunnan Hidili Group from the date when they first came under the control of the Company. The non-controlling interests represent equity in subsidiaries not attributable, directly or indirectly, to the Company. The net assets of the Yunnan Hidili Group are consolidated using the existing book values from the Company’s perspective. No amount is recognised in respect of goodwill or excess of the Yunnan Hidili’s interest in the net fair value of subsidiaries’ identifiable assets, liabilities and contingent liabilities over cost at the time of common control combination, to the extent of continuation of the Company’s interest. The consolidated statements of profit or loss and other comprehensive income include the results of each of the subsidiaries of Yunnan Hidili from the earliest date presented or since the date when the subsidiaries first came under the common control, where it is a shorter period, regardless of the date of common control combination.

The unaudited financial information does not contain sufficient information to constitute a complete set of financial statements as defined in International Accounting Standard 1 ‘‘Presentation of Financial Statements’’ or an interim financial report as defined in International Accounting Standard 34 ‘‘Interim Financial Reporting’’. In addition, for the purpose of the preparation of the unaudited financial information, the comparative financial information in respect of the year ended 31 December 2009 has not been presented.

3. BASIS OF PREPARATION OF THE UNAUDITED FINANCIAL INFORMATION

In preparing the unaudited consolidated financial information, the directors of the Yunnan Hidili have taken into consideration that the Yunnan Hidili Group’s current liabilities exceeded its current assets by RMB1,696,697,000, RMB2,255,287,000, RMB1,641,655,000 and RMB229,897,000 as at 31 December 2010, 2011, 2012, 2013 and 30 June 2013, respectively. Upon completion of the Disposals to Dongyuan, Dongyuan and the Company will provide financial support to the Yunnan Hidili Group to meet in full its financial obligations as and when they fall due in the foreseeable future.

However, if the Disposals is not completed, the Company will continue to provide financial support to the Yunnan Hidili Group to enable it to meet its liabilities as and when they fall due and to continue its business for the foreseeable future.

The Company has been implementing a number of measures, including but not limited to: (1) approaching banks and independent third parties in the People’s Republic of China to obtain new medium to long-term facilities of not less than RMB3 billion; and (2) negotiating with a bank to review and renew banking facilities repayable within 12 months from draw down to repayable after 12 months from draw down of not less than RMB800 million. The directors of Yunnan Hidili believe that the above measures can be successfully implemented and therefore Yunnan Hidili Group will have sufficient working capital to finance its operations and to meet its financial obligations as and when they fall due for the foreseeable future. Accordingly, the unaudited consolidated financial information has been prepared on a going concern basis.

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APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

(A) UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

Basis of preparation of the unaudited pro forma financial information of the Remaining Group

The unaudited pro forma financial information presented below is prepared by the directors of the Company to illustrate (a) the financial position of the Remaining Group as if the Disposal had been completed on 30 June 2013; and (b) the results and cash flows of the Remaining Group as if the Disposal had been completed on 1 January 2012. This unaudited pro forma financial information has been prepared for illustrative purposes only and because of its hypothetical nature, it may not purport to represent the true picture of the financial position of the Group as at 30 June 2013 or at any future date had the Disposal been completed on 30 June 2013 or the results and cash flows of the Group for the year ended 31 December 2012 or for any future period had the Disposal been completed on 1 January 2012.

The unaudited pro forma financial information is prepared based on the unaudited condensed consolidated statement of financial position of the Group as at 30 June 2013 extracted from the Company’s interim report for the six months ended 30 June 2013 dated 27 August 2013, the audited consolidated statement of comprehensive income and audited consolidated statement of cash flows of the Group for the year ended 31 December 2012 extracted from the audited consolidated financial statements of the Group for the year ended 31 December 2012 and the financial information of the Target Group set out in Appendix II to this circular after giving effect to the pro forma adjustments relating to the Disposal as described in the accompanying notes and was prepared in accordance with Rules 4.29 and 14.68(2)(a)(ii) of the Listing Rules.

The unaudited pro forma financial information is based on the aforesaid historical data after giving effect to the pro forma adjustments described in the accompanying notes. Narrative description of the pro forma adjustments that are (i) directly attributable to the transactions and (ii) factually supportable, is summarised in the accompanying notes.

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APPENDIX III

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF FINANCIAL POSITION OF THE GROUP

At 30 June 2013

NON-CURRENT ASSETS Property, plant and equipment Prepaid lease payments Intangible assets Interests in associates Available-for-sale investments Long term deposits and other receivables Investments in joint ventures Pledged and restricted bank deposits CURRENT ASSETS Inventories Bills and trade receivables Bills receivables discounted with recourse Other receivables and prepayments Amounts due from joint ventures Amounts due from associates Amounts due from related parties Pledged bank deposits Bank balances and cash Assets classified as held for sale	The Group as at 30 June 2013 Proforma adjustments for the Disposal RMB’000 RMB’000 RMB’000 Note 1 Note 2(a) Note 2(b) 9,786,004 28,728 106,382 40,510 173,630 169,652 — 2,400,000 351,633 10,656,539 117,032 593,742 36,477 559,249 — 300,690 24,220 27,768 783,181 793,093 1,200,000 2,934,762 4,616,385 (4,616,385) 7,551,147	The Remaining Group RMB’000 9,786,004 28,728 106,382 40,510 173,630 169,652 2,400,000 351,633
		13,056,539
		117,032 593,742 36,477 559,249 300,690 24,220 27,768 783,181 1,993,093
		4,435,452 —
		4,435,452

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UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

APPENDIX III

CURRENT LIABILITIES Bills and trade payables Advances drawn on bills receivables discounted with recourse Other payables and accrued expenses Amount due to an associate Amounts due to related parties Amount due to a non-controlling shareholder Amounts due to joint ventures Tax payables Senior notes Bank and other borrowings — due within one year Liabilities associated with assets classified as held for sales NET CURRENT LIABILITIES TOTAL ASSETS LESS CURRENT LIABILITIES CAPITAL AND RESERVES Share capital Reserves Equity attributable to owners of the Company Non-controlling interests TOTAL EQUITY	The Group as at 30 June 2013 Proforma adjustments for the Disposal RMB’000 RMB’000 RMB’000 Note 1 Note 2(a) Note 2(b) 357,426 36,477 1,609,987 (1,200,000) 201 14,525 14,765 — 70,555 23,809 215,525 2,474,133 4,635,664 9,166,987 448,351 (448,351) 9,615,338 (2,064,191) 8,592,348 199,842 6,910,605 646,576 7,110,447 37,292 7,147,739	The Remaining Group RMB’000 357,426 36,477 409,987 201 14,525 14,765 70,555 239,334 2,474,133 4,635,664 8,253,067 — 8,253,067 (3,817,615) 9,238,924 199,842 7,557,181 7,757,023 37,292 7,794,315

– 50 –

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

APPENDIX III

NON-CURRENT LIABILITIES Provision for restoration and environmental costs Other long term payables Deferred tax liabilities Bank and other borrowings — due after one year Convertible loan notes	The Group as at 30 June 2013 Proforma adjustments for the Disposal RMB’000 RMB’000 RMB’000 Note 1 Note 2(a) Note 2(b) 15,910 59,960 126,797 1,235,121 6,821 1,444,609 8,592,348	The Remaining Group RMB’000 15,910 59,960 126,797 1,235,121 6,821
		1,444,609
		9,238,924

Notes:

(1) Extracted from the unaudited condensed consolidated statement of financial position of the Group as at 30 June 2013 as set out in the Company’s interim report for the six months ended 30 June 2013 dated 27 August 2013.
(2) The adjustments reflects:
(a) the exclusion of the assets and liabilities of the Target Group as at 30 June 2013 assuming the Disposal had been taken place on 30 June 2013. The assets and liabilities, other than current accounts with group companies, of the Target Group are presented as ‘‘assets classified as held for sale’’ and ‘‘liabilities associated with assets classified as held for sale’’, respectively, in the unaudited condensed consolidated statement of financial position of the Group as at 30 June 2013. The current account with group companies of the Target Group are presented as ‘‘amounts due from and to joint ventures’’ in the unaudited pro forma financial information. Details of assets and liabilities of the Target Group are included in Appendix II of this circular; and
(b) gain on disposal of Target Group of RMB862,101,000 and corresponding income tax payable of RMB215,525,000. Gain on disposal of Target Group represents the difference between aggregated fair values of the Disposal consideration and retained remaining interest in the Target Group amounting to RMB4,800 million and the carrying amounts of net assets and liabilities of the Target Group of RMB3,937,899,000. Pursuant to the conditional agreement on 17 May 2013, the Group conditionally agreed to dispose of 50% equity interests of the Target Group at a consideration of RMB2,400 million, of which deposit received by the Group at 30 June 2013 amounting to RMB1,200 million was included in ‘‘other payables and accrued expenses’’ in the unaudited condensed consolidated statement of financial position of the Group as at 30 June 2013. In addition, the directors of the Company consider the fair value of retained remaining interest in the Target Group, representing 50% equity interests of the Target Group, which is accounted for joint ventures of the Company is amounting to RMB2,400 million with reference to the Disposal consideration.

– 51 –

APPENDIX III

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the year ended 31 December 2012

Revenue Cost of sales Gross profit Other income Other gains and losses Distribution expenses Administration expenses Share of losses of associates Share of losses of a jointly controlled entity Gain on disposal of subsidiaries Finance costs (Loss) profit before tax Income tax expense (Loss) profit and total comprehensive (expense) income for the year	The Group for the year ended 31 December 2012 RMB’000 Note 1 1,923,599 (848,785) 1,074,814 23,698 (47,204) (235,291) (415,145) (2,827) — — (452,902) (54,857) (89,435) (144,292)	Proforma adjustments for the Disposal RMB’000 RMB’000 RMB’000 RMB’000 Note 2 Note 3 Note 4 Note 5 (557,722) 506,005 348,193 (502,798) (209,529) — 3,207 — (20,502) 80,529 — — — — 91,035 802 — — 22,540 — 541,634 — 63,118 (80,529) (75,076) 541,634 3,207 22,540 26,790 (135,409) (48,286) 406,225 3,207 22,540	Proforma adjustments for the Disposal RMB’000 RMB’000 RMB’000 RMB’000 Note 2 Note 3 Note 4 Note 5 (557,722) 506,005 348,193 (502,798) (209,529) — 3,207 — (20,502) 80,529 — — — — 91,035 802 — — 22,540 — 541,634 — 63,118 (80,529) (75,076) 541,634 3,207 22,540 26,790 (135,409) (48,286) 406,225 3,207 22,540	The Remaining Group for the year ended 31 December 2012 RMB’000 1,871,882 (1,003,390) 868,492 83,725 (47,204) (235,291) (324,110) (2,025) 22,540 541,634 (470,313) 437,448 (198,054) 239,394
			— 22,540
			22,540
			22,540

Notes:

(1) Extracted from the consolidated financial statements of the Group for the year ended 31 December 2012 as set out in the Company’s 2012 annual report dated 26 March 2013.
(2) The adjustment reflects the exclusion of results of the Target Group for the year ended 31 December 2012, assuming the Disposal had been taken place on 1 January 2012. Figures extracted from the unaudited consolidated statements of profit or loss and other comprehensive income as set out in Appendix II of this circular.

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APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

(3) The adjustment reflects the gain on disposal of the Target Group amounting to RMB541,634,000, and corresponding income tax expense of RMB135,409,000, assuming the Disposal had been taken place on 1 January 2012. Gain on disposal of Target Group of RMB541,634,000, which represents the difference between aggregated fair values of the Disposal consideration and retained remaining interest in the Target Group amounting to RMB4,800 million and the aggregated of (i) carrying amounts of net assets and liabilities of the Target Group as of 1 January 2012 of RMB1,604,265,000; (ii) capital contribution of RMB1,130 million from Huaneng Guicheng Trust Co., Ltd. in August 2012 assuming it had been taken place on 1 January 2012; and (iii) net capital contribution from group reorganisation of RMB1,524,101,000, comprising of capital injection of RMB3,619,920,000 deducted for consideration for acquired target companies of RMB2,095,819,000 in 2013 assuming these group reorganisation had been taken place on 1 January 2012. The capital contributions of (ii) and (iii) which significant affected the net assets of the Target Group are considered to be the interlocking events and directly attributable to the Disposal. The calculation of the gain on disposal on a pro forma basis taking into account of these capital contributions completed during 2012 and May 2013 is considered to be less misleading.
(4) Included in the revenue of the Target Group was sale to Remaining Group. Such intercompany transactions had been eliminated in full in the Group’s consolidated statement of comprehensive income. The adjustment reflects the elimination of the intercompany transactions in the Target Group for the year ended 31 December 2012 and the reversal of elimination of unrealised profit on the transaction in the Target Group.
(5) The adjustment reflects share of results of the Target Group assuming the Disposal had been taken place on 1 January 2012 and Target Group became joint ventures of the Company. The share of results of joint ventures is calculated based on the profit of the Target Group for the year ended 31 December 2012 after taken out the unrealised profit on sales to Target Group.

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UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

APPENDIX III

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF CASH FLOWS

For the year ended 31 December 2012

OPERATING ACTIVITIES (Loss) profit before tax Adjustments for: Amortisation of prepaid lease payments Amortisation of intangible assets Interest income Gain on disposal of a subsidiary Dividend income Depreciation and amortisation of property, plant and equipment Share-based payment expenses Finance costs Loss on disposal of property, plant and equipment Impairment loss recognised on financial assets Impairment loss recognised in respect of property, plant and equipment Share of profit of joint ventures Share of losses of associates Operating cash flows before movements in working capital Decrease in bills and trade receivables Decrease in other receivables and prepayments Repayment of loan receivable Increase in bills and trade payables Decrease in held-for-trading investments Provision for restoration and environmental costs Decrease in amounts due from related parties Decrease in amount due from an associate Increase in amount due from joint ventures Increase in inventories Decrease in amounts due to related parties Decrease in other payables and accrued expenses Net cash generated from operations Income taxes paid NET CASH FROM OPERATING ACTIVITIES	The Group for the year ended 31 December, 2012 Proforma adjustments for the Disposal RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 Note 1 Note 2 Note 3 Note 4 Note 5 Note 6 Note 7 (54,857) (75,076) 541,634 3,207 22,540 1,305 3,800 (6,167) 17,674 (80,529) (1,360) (541,634) (4,019) 175,952 (30,773) 42,177 452,902 (63,118) 80,529 6,822 16,636 22,000 — (22,540) 2,827 (802) 658,018 314,637 145,609 120,711 (2,766) (25,173) 62,692 (46,219) 11,705 2,627 (532) 833 15,922 1,535 16,381 — (3,207) (25,205) (3,123) (26,754) (322,873) (48,343) 797,926 (140,198) 23,610 657,728	The Remaining Group RMB’000 437,448 1,305 3,800 (69,022 (542,994 (4,019 145,179 42,177 470,313 6,822 16,636 22,000 (22,540 2,025
		509,130 460,246 92,772 16,473 11,705 2,095 16,755 17,916 (3,207 (28,328 (26,754 (371,216
		697,587 (116,588
		580,999

– 54 –

APPENDIX III

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

INVESTING ACTIVITIES Purchase of property, plant and equipment Placement of pledged and restricted bank deposits Deposits paid for acquisition of land use right Advance of loan receivables to a third party Advance of loan to minority shareholder of subsidiary Advance to associates Advance to related parties Advance to a jointly controlled entity Advance to shareholders Advance to fellow subsidiaries Advance to an intermediate holding company Deposit paid for acquisition of mine Refund of deposit paid for acquisition of mines Repayment from an associate Repayment from related parties Repayment from a jointly controlled entity Repayment from shareholders Repayment from fellow subsidiaries Repayment from an intermediate holding company Proceeds (net cash outflow) from disposal of a subsidiary Interest received Proceeds from disposal of property, plant and equipment Withdrawal of pledged and restricted bank deposits Dividend received NET CASH (USED IN) FROM INVESTING ACTIVITIES	The Group for the year ended 31 December, 2012 Proforma adjustments for the Disposal RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 Note 1 Note 2 Note 3 Note 4 Note 5 Note 6 Note 7 (1,342,016) 390,011 (210,838) (18,396) (15,000) (11,033) (9,935) 210,558 (210,558) — 264,174 (264,174) — — (3,910,917) — 384,940 (384,940) — 4,258,111 (4,258,111) — 37,399 (37,399) (900) 900 1,500 — (194,177) 194,177 — (248,252) 248,252 — — 4,372,972 — (249,681) 249,681 — (4,172,795) 4,172,795 — (15,488) 15,488 4,155 (319,498) 6,167 (263) 94,436 18,539 — 144,417 4,019 (1,429,321)	The Remaining Group RMB’000 (952,005 (210,838 (18,396 (15,000 (11,033 (9,935 — (3,910,917 — — — — 1,500 — — 4,372,972 — — — (315,343 100,340 18,539 144,417 4,019
		(801,680

– 55 –

APPENDIX III

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

FINANCING ACTIVITIES New bank and other borrowings raised Advance drawn on bills receivables discounted with recourse Capital contribution from non controlling interest Capital injection Advance from a jointly controlled entity Advance from an intermediate holding company Advance from shareholders Advance from fellow subsidiaries Advance from an associate Repayment to jointly controlled entities Repayment to an intermediate holding company Repayment to shareholders Repayment to fellow subsidiaries Repayment to an associate Decrease in amount due to non-controlling interest of a subsidiary Acquisition of additional interest in non-wholly owned subsidiaries Repayment of other long term payables Dividend paid Interest paid Repayment of bank borrowings NET CASH FROM FINANCING ACTIVITIES NET INCREASE IN CASH AND CASH EQUIVALENTS Cash and cash equivalent at beginning Cash and cash equivalent at end	The Group for the year ended 31 December, 2012 Proforma adjustments for the Disposal RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 Note 1 Note 2 Note 3 Note 4 Note 5 Note 6 Note 7 4,403,935 (1,130,000) 9,800 980 (880,000) 880,000 — (250,000) 250,000 — — 4,680,450 — (200,234) 200,234 — (1,225,029) 1,225,029 — (2,470,554) 2,470,554 444 (36,162) 36,162 — (4,437,964) — 225,115 (225,115) — 1,241,946 (1,241,946) — 2,905,911 (2,905,911) — 21,062 (21,062) (377) (24,000) (41,544) (142,530) (460,713) 94,436 (94,436) (2,017,000) 1,728,995 957,402 596,966 1,554,368	The Remaining Group RMB’000 3,273,935 9,800 980 — 4,680,450 — — — 444 (4,437,964 — — — — (377 (24,000 (41,544 (142,530 (460,713 (2,017,000
		841,481
		620,800 596,966
		1,217,766

Notes:

(1) Extracted from the consolidated financial statements of the Group for the year ended 31 December 2012 as set out in the Company’s 2012 annual report dated 26 March 2013.
(2) The adjustment reflects the exclusion of cash flows of the Target Group for the year ended 31 December 2012, assuming the Disposal had been taken place on 1 January 2012. Figures extracted from the unaudited consolidated statements of cash flow as set out in Appendix II of this circular.
(3) The adjustment reflects the gain on disposal of Target Group and net cash outflow arising on the Disposal of RMB319,498,000, comprising consideration of RMB2,400,000,000 less cash and cash equivalent maintained by the Target Group of RMB2,719,498,000. The cash and cash equivalent maintained by the Target Group represents aggregated of (i) bank and cash balance of the Target Group as of 1 January 2012 of

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UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE REMAINING GROUP

RMB65,397,000; (ii) capital contribution of RMB1,130 million from Huaneng Guicheng Trust Co., Ltd. in August 2012 assuming it had been taken place on 1 January 2012; and (iii) net capital contribution from group reorganisation of RMB1,524,101,000, comprising of capital injection of RMB3,619,920,000 deducted for consideration for acquired target companies of RMB2,095,819,000 in 2013 assuming these group reorganisation had been taken place on 1 January 2012. The capital contributions of (ii) and (iii) which significant affected the net assets of the Target Group are considered to be the interlocking events and directly attributable to the Disposal.

(4) The adjustment reflects intercompany transactions between the Target Group and Remaining Group for the year ended 31 December 2012.
(5) The adjustment reflects share of results of the Target Group assuming the Disposal had been taken place on 1 January 2012 and Target Group became joint ventures of the Company.
(6) The adjustment refers to reclassification of capital injection from Huaneng Guicheng Trust Co., Ltd. to Target Group which accounted for as other borrowing of the Company.
(7) The adjustment refers to the reclassification of current account balances between the Target Group and Remaining Group.

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(B) INDEPENDENT REPORTING ACCOUNTANT’S ASSURANCE REPORT ON THE COMPILATION OF PRO FORMA FINANCIAL INFORMATION

==> picture [72 x 54] intentionally omitted <==

TO THE DIRECTORS OF HIDILI INDUSTRY INTERNATIONAL DEVELOPMENT LIMITED

We have completed our assurance engagement to report on the compilation of pro forma financial information of Hidili Industry International Development Limited (the ‘‘Company’’) and its subsidiaries (hereinafter collectively referred to as the ‘‘Group’’) by the directors of the Company (the ‘‘Directors’’) for illustrative purposes only. The pro forma financial information consisted of the pro forma statement of financial position as at 30 June 2013, the pro forma consolidated statement of comprehensive income for the year ended 31 December 2012, the pro forma statement of cash flows for the year ended 31 December 2012 and related notes as set out on pages 49 to 57 of the circular issued by the Company dated 12 December 2013 (the ‘‘Circular’’). The applicable criteria on the basis of which the Directors have compiled the pro forma financial information are set out in Appendix III(A) of the Circular.

The pro forma financial information has been compiled by the Directors to illustrate the impact of the proposed very substantial disposal of 50% equity interest in Yunnan Hidili Industry Co., Ltd and its subsidiaries on the Group’s financial position as at 30 June 2013 and the Group’s financial performance and cash flows for the year ended 31 December 2012 as if the transaction had taken place at 30 June 2013 and 1 January 2012 respectively. As part of this process, information about the Group’s financial position, financial performance and cash flows has been extracted by the Directors from the Group’s unaudited condensed consolidated financial statements for the six months ended 30 June 2013, on which a review report has been published and the Group’s consolidated financial statements for the year ended 31 December 2012, on which an audit report has been published.

Directors’ Responsibilities for the Pro Forma Financial Information

The Directors are responsible for compiling the pro forma financial information in accordance with paragraph 4.29 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the ‘‘Listing Rules’’) and with reference to Accounting Guideline 7 Preparation of Pro Forma Financial Information for Inclusion in Investment Circulars (‘‘AG 7’’) issued by the Hong Kong Institute of Certified Public Accountants (‘‘HKICPA’’).

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Reporting Accountant’s Responsibilities

Our responsibility is to express an opinion, as required by paragraph 4.29(7) of the Listing Rules, on the pro forma financial information and to report our opinion to you. We do not accept any responsibility for any reports previously given by us on any financial information used in the compilation of the pro forma financial information beyond that owed to those to whom those reports were addressed by us at the dates of their issue.

We conducted our engagement in accordance with Hong Kong Standard on Assurance Engagements (‘‘HKSAE’’) 3420 Assurance Engagements to Report on the Compilation of Pro Forma Financial Information Included in a Prospectus issued by the HKICPA. This standard requires that the reporting accountant comply with ethical requirements and plan and perform procedures to obtain reasonable assurance about whether the Directors have compiled the pro forma financial information in accordance with paragraph 4.29 of the Listing Rules and with reference to AG 7 issued by the HKICPA.

For purposes of this engagement, we are not responsible for updating or reissuing any reports or opinions on any historical financial information used in compiling the pro forma financial information, nor have we, in the course of this engagement, performed an audit or review of the financial information used in compiling the pro forma financial information.

The purpose of pro forma financial information included in an investment circular is solely to illustrate the impact of a significant event or transaction on unadjusted financial information of the Group as if the event had occurred or the transaction had been undertaken at an earlier date selected for purposes of the illustration. Accordingly, we do not provide any assurance that the actual outcome of the event or transaction at 30 June 2013 or 1 January 2012 would have been as presented.

A reasonable assurance engagement to report on whether the pro forma financial information has been properly compiled on the basis of the applicable criteria involves performing procedures to assess whether the applicable criteria used by the Directors in the compilation of the pro forma financial information provide a reasonable basis for presenting the significant effects directly attributable to the event or transaction, and to obtain sufficient appropriate evidence about whether:

. The related pro forma adjustments give appropriate effect to those criteria; and
. The pro forma financial information reflects the proper application of those adjustments to the unadjusted financial information.

The procedures selected depend on the reporting accountant’s judgment, having regard to the reporting accountant’s understanding of the nature of the Group, the event or transaction in respect of which the pro forma financial information has been compiled, and other relevant engagement circumstances.

The engagement also involves evaluating the overall presentation of the pro forma financial information.

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We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Opinion

In our opinion:

(a) the pro forma financial information has been properly compiled on the basis stated;
(b) such basis is consistent with the accounting policies of the Group; and
(c) the adjustments are appropriate for the purposes of the pro forma financial information as disclosed pursuant to paragraph 4.29(1) of the Listing Rules.

Deloitte Touche Tohmatsu Certified Public Accountants Hong Kong

12 December 2013

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EXECUTIVE SUMMARY

Sichuan Hidili Industry Limited

Unit 1605, 16/F, Block B, Century Center of Air China, 1 Hangkong Road, Wuhou District, Chengdu, China

12 December, 2013

RE: Competent Persons Report.

Dear Sirs,

Core Global Mining Solutions (Beijing) Co, trading as RungePincockMinarco (‘‘RPM’’), has been commercially engaged by Sichuan Hidili Industry Limited (the ‘‘Client’’ or the ‘‘Company’’) to carry out an Independent Technical Review (‘‘ITR’’) and compile a Competent Persons Report (‘‘CPR’’) of Multiple Coal Mine Projects (the ‘‘Projects’’) on behalf of Hidili International Development Limited (‘‘Hidili’’). The Projects consist of nine (9) mines (the ‘‘9 Mines’’) and 5 wash plants which are located in the Yunnan Province, Peoples Republic of China. The Projects are supported by two Railway Logistics Stations, one located in Yunnan Province and the other in Guizhou Province. Eleven subsidiary companies of the Client own and operate the Projects.

Sichuan Hidili Industry Limited is a wholly owned subsidiary of Hidili International Development Limited which is a Hong Kong Stock Exchange (‘‘HKEx’’) listed company. The process and conclusions of the ITR are presented in a CPR (as defined in Annexure B), which will be included in the HKEx Circular prepared as part of a transaction.

The statements of Coal Resources and Coal Reserves (as defined in Annexure B) for the Yunxiang, Xiangda, and Hexing mines and Coal Resources only for the Jianglang mine, have been prepared to be in accordance with the recommended guidelines of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves JORC Code (2004 Edition) and the Australian Guidelines for Estimating and Reporting of Inventory Coal, Coal Resources and Coal Reserves (March, 2003) (‘‘Australian Coal Guidelines’’).

For clarity throughout this CPR, Coal Resources and Coal Reserves which are compliant with the recommended guidelines of the JORC Code are termed JORC Coal Resources and JORC Coal Reserves, respectively.

RPM’s technical team (‘‘the Team’’) consisted of international Competent Persons, international principal and senior consultants, Chinese national senior mining engineers and senior geologists. The Team undertook several site visits to the Projects to familiarise themselves with site conditions. RPM’s Competent Persons were responsible for compiling or supervising the compilation of the CPR and the JORC Statements of Coal Resources and Coal Reserves, stated within.

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During the site visits, the Team had open discussions with the Company’s personnel on technical aspects relating to the relevant issues. The Company’s personnel were cooperative in facilitating RPM’s work.

In addition to work undertaken to generate independent JORC Coal Resources and Coal Reserves estimates, this report relies largely on information provided by the Client, either directly from the sites and other offices, or from reports by other organisations whose work is the property of the Client or its subsidiaries. The data relied upon for the JORC Coal Resources and Coal Reserves estimates independently completed by RPM have been compiled primarily by the Client or third parties engaged by the Client or Company and subsequently reviewed and verified were possible by RPM. The report is based on information made available to RPM as at August, 2013 however several reports or data were provided after this date upon request by RPM. The Client has not advised RPM of any material change, or event likely to cause material change, to the underlying data, designs or forecasts since the date of asset inspections.

Project Summary

. The 9 Mines and five (5) supporting wash plants are located in the Yunnan Province, in south western Peoples Republic of China (‘‘PRC’’ or ‘‘China’’).
. The Projects consist of eight (8) operating underground mines and one (1) undergoing a construction phase (Yunxiang) to expand current production capacity. All mines are under consolidation with adjacent mines or under production expansion from current rates. ROM Coal (as defined in Appendix B) production from the 8 Mines ranged from 50 kt up to 120 kt in 2012 which resulted in a combined total ROM Coal production of 850 kt in 2012.
. All of the 9 Mines have been in operation for a number of years, with the main underground mining methods employed being either mechanised and or manual longwall operations. Each mine utilises longwall operation of some type with various conveyor systems used to transport coal to the surface. From the surface the Run of Mine (‘‘ROM’’ as defined in Appendix B) Coal production is transported various distances via Chinese trucks to be processed in one of the five wash plants or taken directly to market for sale. ROM Coal production from the 9 Mines ranged from 50 kt up to 120 kt in 2012 resulting in a combined total ROM Coal production of 850 kt in 2012.
. A single approved mining licence is stated for each of the 9 Mines. The current mining licences have varying surface areas, vertical limitations and production capacities. In addition to containing a current mining licence, five (5) of the 9 Mines are under consolidation within the adjacent licences due to government regulations, these mines in Yunxiang, Jianglang, Xingji, Xingjian and Zude. These proposed consolidations will likely result in the expansion of current licence areas in both the horizontal and vertical direction. These expanded mining licences are yet to be finalised and approved and are subject to regulatory review. Yunxiang, Xingjian and Jianglang have a granted Mining Tenement which covers the area of the proposed expanded mining licence, while the Company are yet to be granted a mining tenement over the expanded licence area for Xingji and Zude. RPM however has been supplied with the coordinates of the proposed

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mining licence in the relevant official files of the consolidation plan for Xingji and Zude and considers them suitable for inclusion in JORC estimates where appropriate. RPM has not been provided with relevant official files for the expansion area of the Qingping mine.

. Upon completion of the consolidation process RPM understands the Company will be granted a Mining Licence of the same coordinates, vertical limitation and production capacity as outlined in the Mining Tenement documentation. As such RPM considers that it is reasonable assumption the Company will receive the Mining Licences which covers the expansion areas.
. The Mining Licences, Mining Tenements and proposed Mining Tenements held by the Company have varying vertical limits below which no mining activities can occur. Mineable Coal seams (as defined in Appendix B) occur below the current licence and tenement limits for the majority of the 9 Mines. RPM notes that the JORC Coal Resources estimated are restricted by the vertical limitations of the licence and tenements, and excludes the Mineable Coal Seams above and below the current or proposed expanded licence areas. The five mines under consolidation or expansion have been reported within both the current mining licence and the expanded area based on the currently proposed coordinates where applicable.
. RPM conducted site visits in November, 2012 and March 2013 to the 9 Mines, while a site visit to the Yunxiang, Hexing and Xiangda mines was completed in July 2013. The site visit ‘‘Team’’ consisted of combinations of International Competent Person (Mr Graeme Rigg), Executive Consultants (Mr Hong Zhao, and Mr Kevin Qu), Senior Mining Engineers (Mr Hongbo Liu) and Consultant Geologist (Mr Song Huang). During the series of site visits, the Team visited the 9 Mines, the underground and surface operations and had discussion with the geologists, mining engineers and experts of the geological and design institutes.

Coal Resource and Coal Reserves estimates

. RPM considers that typical Chinese exploration techniques have been employed and that these techniques are generally suitable for reporting to international standards, however variable amounts of data was supplied for the 9 Mines. A review of the data by RPM indicates that four (4) (Yunxiang, Hexing, Xiangda and Jianglang) of the 9 Mines have sufficient data, however insufficient data was supplied for the remaining to verify all the underlying datasets to sufficient levels to enable reporting to the JORC Code. As such for presentation RPM separates the mines into two groups.

Yunxiang, Xiangda, Hexing and Jianglang (‘‘4 Mines’’)

. RPM has been supplied with a complete set of original documentation for the post 2000 drilling, including coal qualities laboratory certificates, original logging documents, geophysical logs, and several photographs of the core during drilling for the 4 Mines. In addition, RPM verified the location of 40% of the recent drill holes and several of the historical holes for these mines. RPM compared all available datasets, including the digital coal quality data to the certificate and geophysical logs and determined limited variability, although some variation in core recoveries was observed. RPM notes that no

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original documentation was supplied for the historical drilling data or the coal quality determinations and the majority of the historical bore holes collars cannot be located due to surface disturbances. During the site visit, RPM noted that the coal thicknesses and coal classification (as noted in Section 5) within the underground operations are generally consistent with the historical data supplied. In addition, RPM was able to compare the geophysical data for several historical holes with the digital geology data with excellent correlation.

. The Coal Resources for the 4 Mines have been independently estimated and reported as at 30 June 2013 by RPM in accordance with the JORC Code and the Australian Coal Guidelines. Minimum thickness cut offs of 0.2 m were applied to the mineable coal seams in the JORC Resources estimate, however only coal with less than 3% Total Sulphur was reported. The Coal Resources quantities are shown in Table A below and graphically in Figure A. RPM notes that Table A contains the JORC Coal Resources within both the current mining licences and the expansion and consolidation areas.

Table A Statement of JORC Coal Resources as at 30 June 2013 within the Current Mining Licence (Xiangda and Hexing) and Proposed Expanded Licences within the Mining Tenement (Yunxiang and Jianglang) for the 4 Mines

Mine Yunxiang Xingji Xiangda Hexing Xingjian Jianglang Yanhe Zude Qingping* Total	Measured 39.5 — 34.5 — — 22.5 — — — 97.5	Quantity (Mt) Indicated Inferred 8.5 2.5 — — 5.0 — 39.0 2.5 — — 20.5 2.0 — — — — — — 73.5 7.0	Ash Moisture Total Sulphur Volatile Matter Specific Energy RD Total % % % % (MJ/kg) (GAR) cu.m/t 50.5 22.6 0.8 0.5 21.5 26.9 1.5 — — — — — — — 39.5 31.0 0.8 0.2 16.2 24.2 1.4 41.5 14.9 0.9 — 17.1 36.2 1.4 — — — — — — — 45.0 22.9 0.7 0.9 24.1 27.1 1.5 — — — — — — — — — — — — — — — — — — — — — 177.5

Note: Figures reported are rounded which may result in small tabulation errors. Unless otherwise stated qualities are quoted on air dried (ad) basis

RPM notes that limited S data was supplied for Hexing, as a result S has not been estimated.

All tonnes are reported out on in situ moisture basis of 2% using Preston Sanders

JORC Coal Resources cannot be estimated due to data validation issues (Section 6).

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Figure A Graphical Representation of JORC Coal Resources as at 30 June 2013

==> picture [453 x 180] intentionally omitted <==

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

JORC Coal Resources Quantity by Mine JORC Coal Resources Quantity by Classification
4%
25%
29%
Yunxiang Measured
Xiangda
41% Indicated
55%
Hexing
Jianglang Inferred
24%
22%
----- End of picture text -----

. RPM notes that only the Yunxiang, Xiangda, Hexing and Jianglang Mines currently have JORC Coal Resources. Furthermore, upon review of the Feasibility Study and mine design reports for the 4 Mines, RPM notes that no mining studies have been completed for the Jianglang mine, and as such no JORC Coal Reserves have been estimated.
. The JORC Coal Reserves for three of the 9 Mines (Yunxiang, Xiangda and Hexing (‘‘3 Mines’’)), have been independently estimated as at 30 June 2013 by RPM in accordance with the JORC Code and the Australian Coal Guidelines. RPM has determined suitable technical parameters or Modifying Factors to apply in the JORC Coal Reserves estimation process following discussions with site personnel, review of the Feasibility and Design Studies and the proposed life of mine plans, mining method, and historical and forecast recoveries. These parameters were applied to Mineable Coal Seams where Indicated and Measured JORC Coal Resources have been estimated. RPM notes that only Mineable Coal Seams located within the current mining licences and proposed expanded mining licences are included and that the Measured and Indicated JORC Coal Resources reported in Table A are inclusive of, and not additional to, the JORC Coal Resources modified to produce the JORC Coal Reserves presented in Table B below and shown graphically in Figure B. The Coal Quantities and Qualities provided for the JORC Coal Reserves are not JORC Marketable Coal Reserves and do not include washability test work, see Section 7.4.1 for further details.

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Table B Statement JORC Coal Reserves quantities as at 30 June 2013 within the Current Mining Licence (Xiangda and Hexing) and Proposed Expanded Licences within Mining Tenement (Yunxiang)

Mine Yunxiang Xiangda Hexing* Total	JORC Coal Reserve (Mt) Specific Energy Ash Moisture Sulphur VM ARD Proved Probable Total MJ/kg (GAR) % ad % % % cu.m/t — 10.9 10.9 22.7 33.5 5 0.45 18.2 1.62 0.1 9.1 9.2 24.2 29.8 5 0.19 16.2 1.53 — 14.7 14.7 31.3 25.0 5 14.9 1.52 0.1 34.7 34.8

Note: Figures reported are rounded which may result in small tabulation errors.

Tonnes are quoted at an assumed 5% Moisture Content.

No sulphur test results were provided to RPM for Hexing, however based on the sulphur results for the same group of seams at Xiangda and Yunxiang, RPM are of the opinion that high sulphur is not likely to be an issue at Hexing
Some panels in C20 Seam at Hexing lie just below the approved mining elevation range (1,700 — 2,100m). The associated tonnes (approximately 0.3 Mt) have been excluded from the Coal Reserve estimates.

Figure B Graphical Representation of JORC Coal Reserves quantities as at 30 June 2013

==> picture [453 x 180] intentionally omitted <==

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

JORC Coal Reserves Quantity by Mine JORC Coal Reserves Quantity by Classification
0%
31%
42% Yunxiang Proved
Xiangda
Hexing Probable
27% 100%
----- End of picture text -----

. The geotechnical information supplied to RPM is as per the Chinese Standards, however generally under the requirement of the JORC Code geotechnical information and parameters utilised must support a reasonable assumption for the life of mine detailed design and schedule. As demonstrated in the recent production at Xiangda, the geotechnical conditions at most mines are challenging. Due to the limited geotechnical information supplied, RPM has made reductions to the longwall panel estimates to account for the difficult mining conditions with depth and the subsequent uncertainty that is associated with development of the gateroads and extraction of the longwall panels. The reductions have been applied as derate factors increasing with depth and decreasing

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interburden thickness. These factors are to ensure the life of mine designs by RPM and recoverable reserves estimates are reasonably achievable and consistent with the requirements of the JORC Code.

Xingji, Xingjian, Yanhe, Zude and Qingping

. JORC Coal Resources and JORC Coal Reserves for the Xingji, Xingjian, Yanhe, Zude and Qingping mines (‘‘5 Mines’’) have not been estimated at this time, as insufficient data was supplied to verify all the underlying datasets to sufficient levels to enable reporting to the JORC Code.
. A review of the data supplied for the Xingji, Xingjian, Yanhe, Zude and Qingping mines (‘‘5 Mines’’) indicates that typical Chinese exploration techniques have been employed. RPM considers these techniques to be generally suitable for reporting to international standards; however for these projects RPM has not been supplied with the original documentation; including a complete dataset of the core recoveries for the historical bore holes or the coal quality determinations for all holes. Given the incomplete core datasets per seam and the inability to verify the datasets provided (via original documentation and limited recent drilling), RPM concluded that the supplied datasets cannot be used to underpin the estimation of JORC Coal Resources and JORC Coal Reserves.

Mine and Production

. The mining plans in the 9 Mines categorise the seams to be mined into thin (0.7 to 1.3m) or moderate (1.3m to 3.5m) coal seam thickness. The majority of Mineable Coal Seams have dips which range between 20º and 60º. Given the geometry of the mineable coal seams, the Chinese Standards and regulations indicate that various version of longwall mining should be employed to extract the coal. The Longwall methods currently employed within the 9 Mines include Mechanised Mining, Modified Mechanised, Drill and Blast and Apparent Dip Flexible Shields Mining (‘‘AFDS’’) mining. These methods are particularly prevalent in the Yunnan province, where the coal seams are generally thin and dipping. RPM considers the methods appropriate for the coal seam geometry and orientations observed. RPM understands that as part of the development of the Projects, Mechanised methods will become more prevalent within the mines, replacing the labour intensive Drill and Blast methods, which form the basis of the proposed licence and product capacity.
. Review of the recent production performance of the 9 Mines indicates that all but one mine has failed to achieve its forecast production over the previous three years. During discussion with site personnel and Company technical staff, RPM was informed these missed production targets are the result of delays on mechanised Longwall operations coming on line as well as delays in construction associated with region wide coal mine shut downs imposed by the Yunnan government after coal accidents in mines other than those reviewed in this CPR.
. In conjunction with the expansion of the licence areas for five of the 9 Mines, the Company plans to expand production in the majority of the 9 Mines within the next four years. These expansions are phased to coincide with the likely timing of receipt of

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relevant permits, licences and approvals to enable provincial approval of the expanded operations. RPM notes that it has not reviewed the application process of the Projects and is not aware if the approval process timing coincides with the planned expansions. RPM further notes that a number of planned final capacities are higher than the feasibility studies (or design reports) capacity. As such it is likely that further technical studies will be required to meet the approval requirements for the local regulations.

Due to the consolidation process the 9 Mines are at vary stages of development. Table E outlines the current mining licence capacity, the currently constructed development capacity as well as the proposed mining licence capacity. As can be seen a number of the mines can technical achieve the proposed expanded production based on the currently constructed development (shaft and gateroads), however 3 require further construction. Technical reform and reconfiguration of the plant infrastructure will be require to achieve these production based on the Feasibility Study mine designs. RPM considers the project development schedules, while technically achievable, to be optimistic and recommends that a full review of the Life of Mine forecast schedules for each mine to be carried out to better reflect likely production profiles and achievable coal recovery.

Table E Production Ramp Up Status for the 9 Mines as at 30 June 2013

		Current		Proposed ML
	Current	Development		and Production
	Capacity of ML	Capacity		Capacity
Mine	(ktpa)	(ktpa)*	Development Status	(ktpa)	Construction Date
Yunxiang	150	450	Mining tenement granted	600	July 2016–Jan 2017
			Production Expansion Planned
Xingji	90	300	Mining tenement granted	300
Xiangda	150	—	Upgrade Completed	450	Pending Completion
Hexing	300	—	Upgrade 65% completed	600	Jan 2013–June 2014
Xingjian	90	300	Mining tenement was granted	300
			planned expansion
Jianglang	150	450	Mining tenement was granted	450
			planned expansion
Yanhe	150	—	Upgrade completed	450	Oct 2013–April 2014
Zude	150	600	Mining tenement granted	600
Qingping	150	450	Awaiting for grant of mining	450
			tenement

Estimated based of full mechanical mining method.
. Based on the JORC Coal Reserves quantities (as applicable) and the feasibility study development schedules, RPM has estimated that the Mine Lifes’ for the 4 Mines range from 4.2 years to approximately 59 years as at 1 January 2013. RPM notes that the Project development schedule of several of the mines proposed by the Company varies from the feasibility studies with increased production rates being forecast. For the purposes of the Mine Life analysis RPM has assumed that feasibility study production rates.
. Forecast total production operating costs for the 4 Mines range from 261.5 to 273.3 RMB/ ROM Coal tonnes which varies depending on the mining method and the production rate. A review of the mine operating costs indicates that the forecast costs are significantly

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higher than the recent operating costs. RPM notes that the Company is in the process of upgrading the mining methods to more mechanised methods. Whilst start-up capital costs of the methods are higher, they generally produce at higher production rates, with less downtime and are safer to operate hence when in full operation the average unit operating costs are expected to reduce.

. RPM considers the estimated capital costs to be reasonable and understands the estimate is based on the latest available construction, contract rates and the Companies development plans for the 3 Mines which have JORC Coal Reserves estimated. Capital costs over the next three years vary depending on the development stage of the mine; however are forecast to range from 139.65 MRMB up to 211.31 MRMB per annum over the next five years with a total forecast expenditure for all 3 Mines with JORC Coal Reserves of 520.19 MRMB as at the 1 January 2013.
. A high level review of the environmental, health and safety indicates that the 9 Mines have typical risks which are associated with mine of these styles within the regions. During the site visit RPM noted that appropriate procedures are in place to manage the associated risks and that the Company is following the required regulations of the provinces.

The key opportunities identified to the Project during the ITR are outlined below:

. The mine plans in this report are within the vertical limits of the current or proposed mining licences only. RPM is aware that the Mineable Coal Seams extend below the current elevation restrictions of the mining licences. RPM considers these areas to have excellent potential to increase the mine life if licences can successfully be extended into these areas and geotechnical and mining conditions allow economic extraction.
. Additional geotechnical information and assessment for the remainder of the mine life would assist in reducing planning and operating risk associated with the mine plan designed by RPM for the 3 Mines. This would significantly impact the derate factors applied by RPM for the Reserve estimate for the 3 Mines and the achievability of the life of mine production schedule. This would result in increased JORC Reserve estimates and subsequent classification confidence.
. Completion of a Chinese Feasibility Study along with LOM design, schedules and positive economic analysis for the Jianglang mine is likely to result in an increase in total JORC Coal Reserves.
. The majority of the 9 Mines currently are undergoing expansion of production capacity and are introduction mechanised mining methods to increase production rates. When effectively operating, these mechanised methods, although having higher unit costs, could lower Total Mining costs due to increased production rates and less development required. RPM notes that the forecasts costs are higher due to this introduction, however with detailed short and long term planning these costs could potentially be lowered.

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The key risks identified to the Project during the ITR are outlined below:

. Achievability of the Ramp Up Schedule — Based on the historical performance of the 9 Mines, RPM considers the ramp up schedules presented within the Chinese Feasibility studies to be optimistic although technically achievable based on the planned equipment selection. Historical underperformance against the planned schedule have on the whole being associated with delays in bringing online mechanised longwall operations, difficult mining conditions and recent government regulatory constraints associated with safety concerns at surrounding but not associated mine sites which impacted the entire province.
. Marketable Reserves — RPM has not estimated Marketable Reserves for the JORC Reserves of the 3 Mines, due to the limited amount of washability data supplied. Refer to Section 7.4.1 for further information.
. Economic JORC Reserve Model — RPM has based its economic model on a price regression equation to estimate the price of coal per year using the ash content on an annual basis. This was completed to factor in the limited washability data and lack of detailed production reconciliation data at the wash plants due to multiple source blending. Further details are provided in Section 7.4.2.
. Approvals — The ramp up and mine life is contingent on relevant approvals being granted for the consolidation and expansion areas, as well as the planned increased production capacities. Delays to these approvals may postpone production which potential could have an adverse effect on the operations and associated mine plans and cost profiles.
. High Gas Content/Coal Dust — Outburst, high and low gas has been identified as a characteristic of the mines. High concentrations of gas in a mine’s atmosphere may result in an explosion. A gas explosion may stir up coal dust and lead to further coal dust explosions. Close management is required to ensure safe operations.
. Water In-rush — An uncontrolled water in-rush event could be caused by water accumulated in the ‘‘Goaf’’ areas of historical mining. The hydro geological conditions are generally of a complex nature.

RPM notes that several additional risks have been identified; these are presented in Section 14 of this report.

RPM operates as an independent technical consultant providing resource evaluation, mining engineering and mine valuation services to the resources and financial services industries. This report was prepared on behalf of RPM by technical specialists, details of whose qualifications and experience are set out in Annexure A.

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RPM has been paid, and has agreed to be paid, professional fees for its preparation of this report. However, none of RPM or its directors, staff or sub-consultants who contributed to this report has any interest or entitlement, direct or indirect in:

. the Company, securities of the Company or companies associated with the Company; or
. the Client, securities of the Client or companies associated with the Client; or
. the right or options in the relevant Projects.
. The work undertaken is a CPR of the information provided by or on behalf of the Company, as well as information collected during site inspections completed by RPM as part of the CPR process. It specifically excludes all aspects of legal issues, marketing, commercial and financing matters, insurance, land titles and usage agreements, and any other agreements/contracts that Company may have entered into.

RPM does not warrant the completeness or accuracy of information provided by the Company which has been used in the preparation of this report.

The title of this report does not pass to the Client until all consideration has been paid in full.

Drafts of this report were provided to the Client, but only for the purpose of confirming the accuracy of factual material and the reasonableness of assumptions relied upon in the report.

Generally, the data available was sufficient for RPM to complete the scope of work. The quality and quantity of data available, and the cooperative assistance, in RPM’s view, clearly demonstrated the Company’s assistance in the ITR process. All opinions, findings and conclusions expressed in the report are those of RPM and its specialist advisors.

Yours faithfully,

Graeme Rigg Hong Kong Exchange Competent Person Core Global Mining Solutions (Beijing) Co, (trading as RungePincockMinarco)

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APPENDIX IV

1	INTRODUCTION . . . . . . . . . . . . . . .	INTRODUCTION . . . . . . . . . . . . . . .	.	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	80
	1.1	SCOPE OF WORK . . . . . . . . . .	.	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	80
	1.2	RELEVANT ASSETS . . . . . . .	.	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	81
	1.3	REVIEW METHODOLOGY .	.	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	81
	1.4	SITE VISITS AND INSPECTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .			82
	1.5	INFORMATION SOURCES .	.	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	82
	1.6	COMPETENT PERSON AND	RESPONSIBILITIES . . . . . . . . . . . . . . . . . . . . . . . . .		83
		1.6.1 JORC Coal Resource	.	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	83
		1.6.2 JORC Coal Reserves .	.	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	83
		1.6.3 HKEx Competent Person . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .			83
		1.6.4 Project Team . . . . . . . .	.	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	84
	1.7	LIMITATIONS AND EXCLUSIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .			85
		1.7.1 Limited Liability . . . . .	.	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	85
		1.7.2 Responsibility and Context of this Report . . . . . . . . . . . . . . . . . . . . . . . . . . .			85
		1.7.3 Indemnification . . . . . .	.	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	86
		1.7.4 Intellectual Property .	.	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	86
		1.7.5 Mining Unknown Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .			86
		1.7.6 Capability and Independence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .			86
2	PROJECT OVERVIEW . . . . . . . . .		.	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	87
	2.1	PROJECT LOCATION AND ACCESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .			90
	2.2	REGIONAL ENVIRONMENT		. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	91
3	LICENCE AND PERMITS . . . . . .		.	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	91
	3.1	MINING LICENCE . . . . . . . . . .	.	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	92
	3.2	PRODUCTION PERMIT . . . . .	.	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	94
	3.3	SAFETY PRODUCTION PERMITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .			94
	3.4	BUSINESS LICENCE . . . . . . .	.	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	97
	3.5	ENVIRONMENTAL PERMITS		. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	98
4	PROJECT HISTORY . . . . . . . . . . .		.	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	98
	4.1	HISTORY OF EXPLORATION		. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	98
	4.2	HISTORY OF MINING . . . . . .	.	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	99

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APPENDIX IV

5	GEOLOGY AND COAL BEARING STRATA . .	GEOLOGY AND COAL BEARING STRATA . .	GEOLOGY AND COAL BEARING STRATA . .	. . . . . .	. . . . . . . . . . . . . . . . . . . . . . . . .	100
	5.1	GEOLOGICAL CHARACTERISTICS AND COAL SEAM
		AND COAL QUALITY DESCRIPTIONS . .		. . . . . .	. . . . . . . . . . . . . . . . . . . . . . . . .	101
		5.1.1	Yunxiang Coal Mine . . . . . . . . . . . . . . . .	. . . . . .	. . . . . . . . . . . . . . . . . . . . . . . . .	101
		5.1.2	Xingji Coal Mine . . . . . . . . . . . . . . . . . . .	. . . . . .	. . . . . . . . . . . . . . . . . . . . . . . . .	106
		5.1.3	Xiangda . . . . . . . . . . . . . . . . . . . . . . . . . . . .	. . . . . .	. . . . . . . . . . . . . . . . . . . . . . . . .	106
		5.1.4	Hexing Coal Mine . . . . . . . . . . . . . . . . . .	. . . . . .	. . . . . . . . . . . . . . . . . . . . . . . . .	110
		5.1.5	Xingjian Coal Mine . . . . . . . . . . . . . . . . .	. . . . . .	. . . . . . . . . . . . . . . . . . . . . . . . .	110
		5.1.6	Jianglang . . . . . . . . . . . . . . . . . . . . . . . . . .	. . . . . .	. . . . . . . . . . . . . . . . . . . . . . . . .	114
		5.1.7	Yanhe Coal Mine . . . . . . . . . . . . . . . . . . .	. . . . . .	. . . . . . . . . . . . . . . . . . . . . . . . .	114
		5.1.8	Zude Coal Mine . . . . . . . . . . . . . . . . . . . .	. . . . . .	. . . . . . . . . . . . . . . . . . . . . . . . .	118
		5.1.9	Qingping Coal Mine . . . . . . . . . . . . . . . .	. . . . . .	. . . . . . . . . . . . . . . . . . . . . . . . .	118
	5.2	CHINESE COAL QUALITY COMPARISON		. . . . . .	. . . . . . . . . . . . . . . . . . . . . . . . .	119
6	DATA VERIFICATION . . . . . . . . . . . . . . . . . . . . . . . .			. . . . . .	. . . . . . . . . . . . . . . . . . . . . . . . .	120
	6.1	DESKTOP AND SITE VISIT DATA REVIEW		. . . .	. . . . . . . . . . . . . . . . . . . . . . . . .	120
	6.2	DATA	QUALITY REVIEW . . . . . . . . . . . . . . . . .	. . . . . .	. . . . . . . . . . . . . . . . . . . . . . . . .	121
		6.2.1	Yunxiang, Hexing, Xiangda and Jianglang .		. . . . . . . . . . . . . . . . . . . . . . . . .	121
		6.2.2	Xingji, Xingjian, Yanhe, Zude and Qingping		Mines . . . . . . . . . . . . . . . . . .	124
7	JORC COAL RESOURCES AND JORC COAL RESERVES . . . . . . . . . . . . . . . . . .					124
	7.1	COAL	RESOURCES/COAL RESERVE DEFINITIONS
		UNDER THE JORC CODE . . . . . . . . . . . . . . .		. . . . . .	. . . . . . . . . . . . . . . . . . . . . . . . .	125
	7.2	JORC COAL RESOURCES ESTIMATION . .		. . . . . .	. . . . . . . . . . . . . . . . . . . . . . . . .	125
		7.2.1	Procedure and Parameters for JORC Coal Resources Estimation . . . . .			125
		7.2.2	Validation . . . . . . . . . . . . . . . . . . . . . . . . . .	. . . . . .	. . . . . . . . . . . . . . . . . . . . . . . . .	127
		7.2.3	Statement of JORC Coal Resources . .	. . . . . .	. . . . . . . . . . . . . . . . . . . . . . . . .	128
	7.3	ESTIMATION OF JORC COAL RESERVES		. . . . . .	. . . . . . . . . . . . . . . . . . . . . . . . .	135
		7.3.1	JORC Coal Reserves Estimation Parameters		. . . . . . . . . . . . . . . . . . . . . . . .	136
		7.3.2	JORC Coal Reserves Estimation Procedure		. . . . . . . . . . . . . . . . . . . . . . . . .	136
		7.3.3	JORC Statement of Coal Reserves . . .	. . . . . .	. . . . . . . . . . . . . . . . . . . . . . . . .	137

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	7.4	COMMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	139
		7.4.1 Coal Reserves Vs Marketable Coal Reserves . . . . . . . . . . . . . . . . . . . . . . . .	139
		7.4.2 Economic Model . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	139
		7.4.3 Licences and Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	140
		7.4.4 Extraction Sequence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	140
		7.4.5 Geotechnical . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	141
		7.4.6 Mining Depletion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	142
		7.4.7 Government Mining Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	142
8	MINING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		143
	8.1	MINING OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	143
		8.1.1 Mine Underground Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	145
		8.1.2 Coal Extraction Methods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	148
		8.1.3 Mining Method Summary by Project . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	150
		8.1.4 Surface Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	150
	8.2	MINING EQUIPMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	152
9	FORECAST PRODUCTION SCHEDULE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		153
10	OPERATING AND CAPITAL COSTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		154
	10.1	HISTORICAL AND FORECAST OPERATING COSTS . . . . . . . . . . . . . . . . . . . . .	154
	10.2	CAPITAL COSTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	157
11	MINE LIFE ANALYSIS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		158
12	BENEFICIATION AND TRANSPORTATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		158
	12.1	PROCESS DESCRIPTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	159
	12.2	TRANSPORT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	160

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13	OVERVIEW OF EHSS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	OVERVIEW OF EHSS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	160
	13.1 KEY MINING RELATED SAFETY RISKS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		161
	13.1.1	Gas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	161
	13.1.2	Water . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	162
	13.1.3	Geotechnical . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	162
	13.1.4	Dust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	163
	13.1.5	Fire . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	163
	13.1.6	GOAF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	163
	13.1.7	Subsidence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	163
	13.2 RESCUE SYSTEMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		164
14	MINE RISKS AND OPPORTUNITY ASSESSMENT . . . . . . . . . . . . . . . . . . . . . . . . . .		164

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APPENDIX IV

List of Tables

TABLE A. STATEMENT OF JORC COAL RESOURCES AS AT 30 JUNE 2013	TABLE A. STATEMENT OF JORC COAL RESOURCES AS AT 30 JUNE 2013
WITHIN THE CURRENT MINING LICENCE (XIANGDA AND
HEXING) AND PROPOSED EXPANDED LICENCES WITHIN THE MINING
TENEMENT (YUNXIANG AND JIANGLANG) FOR THE 4 MINES.	. . . . . . . . . . . . . . .	64
TABLE B. STATEMENT JORC COAL RESERVES QUANTITIES
AS AT 30 JUNE 2013 WITHIN THE CURRENT MINING LICENCE
(XIANGDA AND HEXING) AND PROPOSED EXPANDED LICENCES
WITHIN MINING TENEMENT (YUNXIANG). . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . .	66
TABLE E. PRODUCTION RAMP UP STATUS FOR THE 9 MINES
AS AT 30 JUNE 2013. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . .	68
TABLE 1–1. COORDINATES OF THE 9 MINES (XI’AN, 1980 COORDINATE
SYSTEM) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . .	81
TABLE 1–2. COORDINATES OF THE FIVE WASH PLANTS . . . . . . . .	. . . . . . . . . . . . . . .	81
TABLE 2–1. PROJECT OVERVIEW, PRODUCTION, ASSOCIATED
WASH PLANT AND STOCKPILES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . .	88
TABLE 2–2. CURRENT DEVELOPMENT STATUS OF THE 9 MINES	. . . . . . . . . . . . . . .	89
TABLE 2–3. YUNNAN GROUP MINE LOCATION AND ACCESS . . . .	. . . . . . . . . . . . . . .	90
TABLE 3–1. MINING LICENCE AND HOLDINGS DETAILS
AS AT 30 JUNE 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . .	92
TABLE 3–2. MINING LICENCE AND UPDATED HOLDINGS DETAILS . . . . . . . . . . . .		92
TABLE 3–3. PRODUCTION PERMITS FOR THE 9 MINES . . . . . . . . . . .	. . . . . . . . . . . . . . .	94
TABLE 3–3a. SAFETY PRODUCTION PERMITS FOR THE 9 MINES	. . . . . . . . . . . . . . .	94
TABLE 3–4. BUSINESS LICENCE FOR EACH MINE . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . .	97
TABLE 3–5. ENVIRONMENTAL REPLY LETTER FOR THE 9 MINES	. . . . . . . . . . . . . .	98
TABLE 4–1. EXPLORATION HISTORY OF THE 9 MINES . . . . . . . . . . .	. . . . . . . . . . . . . . .	99
TABLE 4–2. 2009 TO 2012 ACTUAL ROM COAL PRODUCTION (KTPA) . . . . . . . . . . .		100
TABLE 5–1. MINEABLE COAL SEAMS CHARACTERISTICS OF THE
9 MINES FOR YUNNAN GROUPS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . .	102
TABLE 5–2. MINEABLE COAL SEAM CHARACTERISTICS OF THE
9 MINES FOR THE YUNNAN GROUP . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . .	103
TABLE 6–1. BORES HOLES MISSING COAL QUALITY DATA . . . . . .	. . . . . . . . . . . . . . .	123
TABLE 6–2. BORES HOLES MISSING COAL QUALITY DATA . . . . . .	. . . . . . . . . . . . . . .	124
TABLE 7–1. JORC COAL RESOURCES QUANTITIES ESTIMATION
PARAMETERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . .	126

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TABLE 7–2. STATEMENT OF JORC COAL RESOURCES
AS AT 30 JUNE 2013 WITH THE CURRENT MINING LICENCE,
EXPANSION AND CONSOLIDATED AREAS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	129
TABLE 7–3. STATEMENT OF JORC COAL RESOURCES QUANTITIES
AS AT 30 JUNE 2013 WITHIN THE EXPANDED LICENCE AREAS . . . . . . . . . . . . . . .	130
TABLE 7–4. STATEMENT OF JORC COAL RESOURCES QUANTITIES
AS AT 30 JUNE 2013 WITHIN THE CURRENT MINING LICENCE AREAS . . . . . . .	131
TABLE 7–5. HISTORICAL RESOURCE RECOVERY AND
MINING DILUTION PERFORMANCE OF THE 3 MINES . . . . . . . . . . . . . . . . . . . . . . . . . .	136
TABLE 7–6. JORC STATEMENT OF COAL RESERVES ESTIMATE
AS AT 30 JUNE 2013 WITHIN THE CURRENT MINING LICENCE,
EXPANSION AND CONSOLIDATED AREAS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	138
TABLE 7–7. STATEMENT OF JORC COAL RESERVES ESTIMATE
AS AT 30 JUNE 2013 WITHIN THE EXPANDED LICENCES AREAS
FOR YUNXIANG . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	139
TABLE 7–8. STATEMENT OF JORC COAL RESERVES ESTIMATE
AS AT 30 JUNE 2013 WITHIN THE CURRENT MINING LICENCE
FOR THE YUNXIANG . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	139
TABLE 8–1. SUMMARY OF THE MINE DESIGN PARAMETERS . . . . . . . . . . . . . . . . . . .	144
TABLE 8–2. SUMMARY OF MINING METHOD FOR THE 9 MINES . . . . . . . . . . . . . . . .	150
TABLE 9–1. PRODUCTION RAMP UP STATUS FOR THE 9 MINES
AS AT 1 JANUARY 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	153
TABLE 10–1. FORECAST TOTAL MINING OPERATING COSTS
PER ROM COAL TONNE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	155
TABLE 10–2. HISTORICAL OPERATING COSTS FOR THE 9 MINES . . . . . . . . . . . . . . .	156
TABLE 10–3. HISTORICAL AND FORECAST CAPITAL EXPENDITURE
BY YEAR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	157
TABLE 11–1. MINE LIFE ANALYSIS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	158
TABLE 12–1. WASH PLANT CAPACITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	159
TABLE 12–2. DISTANCE FROM MINE TO WASH PLANT AND
TO STOCKPILES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	160
TABLE 13–1. RECENT GAS GRADE TEST WORK COMPLETED
FOR THE 9 MINES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	161
TABLE 14–1. HIDILI PROJECT — RISK ASSESSMENT TABLE . . . . . . . . . . . . . . . . . . . .	165
TABLE A1 — MINING RELATED IPO AND CAPITAL RAISING
DUE DILIGENCE EXPERIENCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	174

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List of Figures

FIGURE A. GRAPHICAL REPRESENTATION OF JORC COAL RESOURCES
AS AT 30 JUNE 2013. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	65
FIGURE B. GRAPHICAL REPRESENTATION OF JORC COAL RESERVES
QUANTITIES AS AT 30 JUNE 2013. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	66
FIGURE 2–1. GENERAL LOCATION PLAN. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	90
FIGURE 2–2. DETAILED LOCATION PLAN. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	91
FIGURE 3–1. YUNXIANG MINE GEOLOGICAL MAP AND SURFACE
TOPOGRAPHY PLAN. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	95
FIGURE 3–2. XIANGDA MINE GEOLOGICAL MAP AND SURFACE
TOPOGRAPHY PLAN. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	95
FIGURE 3–3. HEXING MINE GEOLOGICAL MAP AND SURFACE
TOPOGRAPHY PLAN. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	96
FIGURE 3–4. JIANGLANG MINE GEOLOGICAL MAP AND SURFACE
TOPOGRAPHY PLAN. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	96
FIGURE 5–1. YUNXIANG CROSS SECTION (A-A’). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	104
FIGURE 5–2. YUNXIANG MINE COAL SEAM CORRELATION
INTERPRETATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	105
FIGURE 5–3. CROSS SECTION FOR XIANGDA MINE (A-A’). . . . . . . . . . . . . . . . . . . . . . .	108
FIGURE 5–4. XIANGDA MINE COAL SEAM CORRELATION
INTERPRETATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	109
FIGURE 5–5. HEXING MINE CROSS SECTION (A-A’). . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	112
FIGURE 5–6. HEXING MINE COAL SEAM CORRELATION
INTERPRETATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	113
FIGURE 5–7. JIANGLANG MINE CROSS SECTION (A-A’). . . . . . . . . . . . . . . . . . . . . . . . . .	116
FIGURE 5–8. JIANGLANG COAL SEAM CORRELATION INTERPRETATION. . . . . . .	117
FIGURE 5–9. CHINESE COAL QUALITY CLASSIFICATION MATRIX. . . . . . . . . . . . . .	119
FIGURE 7–1. GRAPHICAL REPRESENTATION OF JORC COAL
RESOURCES QUANTITIES AS AT 30 JUNE 2013. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	130
FIGURE 7–2. YUNXIANG RESOURCE CLASSIFICATION PLANS FOR
SEAMS C9 AND C17. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	131
FIGURE 7–3. XIANGDA RESOURCE CLASSIFICATION PLANS FOR
SEAMS C9 AND C12. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	132
FIGURE 7–4. HEXING RESOURCE CLASSIFICATION PLANS FOR
SEAMS C9 AND C11. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	132

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FIGURE 7–5. JIANGLANG RESOURCE CLASSIFICATION PLANS FOR
SEAMS C11 AND C21. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	133
FIGURE 7–6. YUNXIANG MINE COAL QUALITY CONTOUR MAPS
WITH DRILL HOLES FOR SEAM C9. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	133
FIGURE 7–7. XIANGDA MINE COAL QUALITY CONTOUR MAPS
WITH DRILL HOLES FOR SEAM C13. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	134
FIGURE 7–8. HEXING MINE COAL QUALITY CONTOUR MAPS
WITH DRILL HOLES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	134
FIGURE 7–9. JIANGLANG MINE COAL QUALITY CONTOUR MAPS
WITH DRILL HOLES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	135
FIGURE 7–10. GRAPHICAL REPRESENTATION JORC COAL RESERVES
QUANTITIES AS AT 30 JUNE 2013. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	138
FIGURE 8–1. YUNXIANG MINE C3 SEAM MINE DESIGN AND
LONG PANEL LAYOUT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	146
FIGURE 8–2. XIANGDA MINE C19 SEAM MINE DESIGN AND
LONG PANEL LAYOUT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	147
FIGURE 8–3. HEXING MINE C9 SEAM MINE DESIGN AND
LONG PANEL LAYOUT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	147
FIGURE 8–4. AFDS COAL MINING METHOD. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	149

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1 INTRODUCTION

Core Global Mining Solutions (Beijing) Co, trading as RungePincockMinarco (‘‘RPM’’), has been commercially engaged by Sichuan Hidili Industry Limited (the ‘‘Client’’ or the ‘‘Company’’) to carry out an Independent Technical Review (‘‘ITR’’) and Competent Persons Report (‘‘CPR’’) of the Multiple Mine Project (the ‘‘Projects’’) on behalf of Hidili International Development Limited (‘‘Hidili’’). The Projects consist of nine (9) Mines (the ‘‘9 Mines’’) and five (5) wash plants located in the Yunnan Province, Peoples Republic of China. Eleven (11) subsidiaries companies of the Client own and operate the Projects. The process and conclusions of the ITR are presented in the CPR (as defined in Annexure B), which will be included in the HKEx Circular prepared as part of the transaction.

The Projects consist of nine underground mines, all of which are under consolidation (expansion of the mining licence area and capacity) or under expansion of current production (including licence capacity increase). ROM Coal (as defined in Appendix B) production from the operating mines ranged from 50 kt up to 120 kt in 2012, which resulted in a combined total ROM coal production of 850 kt (Table 2–1).

All of the 9 Mines have been in production for a number of years, with the main underground mining methods employed being either mechanised and or manual longwall operations. Each mine utilise variable types of longwall operations, with various conveyor system used to transport coal to the surface. At surface, the Coal production is transported via Chinese trucks to the five wash plants or directly to market for sale. Due to the varying locations of the mines around the centralised wash plants, ROM Coal (as defined in Appendix B) is transported varying distances; however this is generally between 5 km and 30 km.

1.1 Scope of Work

RPM carried out the following scope of work for the Independent Technical Review:

. Gathered relevant information on the Projects including Chinese resources and reserves estimates, life of mine production schedules, and operating and capital cost information;
. Reviewed Chinese resources and reserves, including quantity and quality of drilling, reliability of historic data, and adequacy of resource and reserve estimation methods;
. Completed JORC Code compliant Coal Resource and Coal Reserve estimations (where appropriate) in compliance with the recommendations guidelines of the JORC Code (as defined in Appendix B);
. Reviewed and commented on the appropriateness of planned mining methods and mine design in the relevant technical studies;
. Reviewed and commented on forecast operating and capital expenditure in the relevant technical studies;
. Reviewed the company’s short and long term development plans;

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. Reviewed potential production profiles, and
. High Level review the environmental, health and safety risks and management plans of the Projects.

For clarity throughout this CPR, JORC Code compliant Coal Resources and Coal Reserves are termed JORC Coal Resources and JORC Coal Reserves, respectively.

1.2 Relevant Assets

The Project general coordinates for the 9 Mines and 5 wash plants are shown in Table 1–

1:

Table 1–1 Coordinates of the 9 Mines (Xi’an, 1980 Coordinate System)

Mine	Northing	Easting
Yunxiang	2,823,349	35,437,062
Xingji	2,823,597	35,450,672
Xiangda	2,832,789	35,431,150
Hexing	2,805,063	35,418,394
Xingjian	2,822,792	35,423,774
Jianglang	2,821,000	35,422,852
Yanhe	2,817,924	35,421,652
Zude	2,824,004	35,450,926
Qingping	2,830,746	35,433,702

Table 1–2 Coordinates of the Five Wash Plants

Wash plant	Longitude	Latitude
Yanhe	104°13´21@	25°27´56@
Mohong	104°14´17@	25°30´16@
Xiangda	104°18´47@	25°36´2@
Maosheng	104°20´24@	25°35´4@
Fude	104°30´26@	25°30´58@

1.3 Review Methodology

RPM’s ITR methodology was as follows:

Preparation for the study by translating and reviewing existing reports. The lists of reports reviewed are provided in Information Sources (Section 1.5).
RPM conducted a two site visits during November 2012 and March 2013, which consisted of Chinese Geologists and Mining Engineers, followed by a Competent Person site visit in July 2013.

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Project information was reviewed and Chinese Resource and Reserve estimate validated.
RPM estimated JORC Coal Resources and Coal Reserves quantities where applicable;
RPM prepared a Competent Persons Report (the ‘‘Report’’) and provided drafts to the Company and its specialist advisers.

The comments and forecasts in this Report are based on information compiled by enquiry and verbal comment from the Client. Where possible, this information has been cross checked with hard copy data or by comment from more than one source. Where there was conflicting information on issues, RPM used its professional judgment to assess the issues.

1.4 Site Visits and Inspections

Site visits were conducted by RPM’s technical team (‘‘the Team’’) to all 9 Mines and two of the wash plants. Several site visits were conducted between November 2012 to July 2013 with the following technical Teams.

Site visits to the 9 Mines were undertaken between November 26 and 30, 2012 by Mr. Andrew Shepherd, Mr. Kevin Qu and Mr. Hong Zhao, while a second visit was undertaken between March 22 and 30, 2013 by Mr Hongbo Liu, Mr. Song Huang and Mr. Hong Zhao. A further site visit was undertaken between July 1 to 5, 2013 to the Yunxiang, Xiangda and Hexing Mines by Mr Hong Zhao, Mr Graeme Rigg and Mr Kevin Qu.

During the site visits, the Team inspected the surface and the underground operations, access roads, and conducted general inspections of the surrounding area of the 9 Mines. The visits were also used to gain a better understanding of the Project.

RPM has conducted site visits to two of the five wash plants (Xiangda and Yanhe), however has not conducted a detailed review plants owned by the company and has based its comments in regards to the wash plants on discussions held with the Company.

Open discussions were held with Company experts on aspects relating to the technical issues of the Project. Technical personnel were co-operative and open in facilitating RPM’s work.

1.5 Information Sources

Several geology, feasibility study and design reports have been provided for each mine. A full list of the relevant report can be found in Annexure D.

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1.6 Competent Person and Responsibilities

The statements of JORC Coal Resources and JORC Coal Reserves (as defined in Annexure B) have been prepared to be in accordance with the recommended guidelines of the 2004 Edition of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves prepared by the Joint Ore Reserves Committee (‘‘JORC’’) (the ‘‘JORC Code’’) and the Australian Guidelines for Estimating and Reporting of Inventory Coal, Coal Resources and Coal Reserves (March, 2003) (‘‘Australian Coal Guidelines’’).

1.6.1 JORC Coal Resource

The information in this report that relates to JORC Coal Resources is based on information compiled by or under the supervision of Mr Michael Johnson who is a full time employee of RPM and a Member of the Australian Institute of Mining and Metallurgy. Mr Johnson has sufficient experience that is relevant to the style of mineralisation and type of deposit under consideration and to the activity that he has undertaken to qualify as a Competent Person as defined in the 2004 Edition of the Australasian Code for the Reporting of Exploration Results, Mineral Resources and Ore Reserves (‘‘The JORC Code’’).

The JORC Coal Resource estimate complies with the guidelines of the JORC Code. Therefore it is suitable for public reporting.

1.6.2 JORC Coal Reserves

The information in this report that relates to JORC Coal Reserves is based on information compiled by the client and reviewed by Mr Graeme Rigg, who is a full time employee of RPM a Member of the Australasian Institute of Mining and Metallurgy. Mr Graeme Rigg has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he has undertaken to qualify as a Competent Person as defined in the JORC Code.

1.6.3 HKEx Competent Person

Mr Graeme Rigg meets the requirements of a Competent Person, as defined by Chapter 18 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited. These requirements include:

. Greater than five years’ experience relevant to the type of deposit;
. Member of the Australian Institute of Mining and Metallurgy (‘‘AUSIMM’’);
. Does not have economic or beneficial interest (present or contingent) in any of the reported assets;
. Has not received a fee dependent on the findings outlined in the Competent Person’s Report;
. Is not an officer, employee of proposed officer for the issuer or any group, holding or associated Company of the issuer, and

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. Assumes overall responsibility for the Competent Person’s Report.

Graeme Rigg is a Mining Engineer who has extensive experience in the mining industry, working for over 30 years with major mining companies and consulting firms. During this time he has either managed or contributed significantly to numerous mining studies related to the estimation, assessment, evaluation and economic extraction of coal in Australia, New Zealand, Indonesia, and China. He has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity he is undertaking to qualify him as a Competent Person as defined in the 2004 Edition of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves and the Hong Kong Exchange Listing Rules.

Graeme has over 7 years’ experience with Chinese coal assets which have similar styles of mining to the Relevant Asses and has extensive experience with Chinese styles of mining, feasibility studies and design report which are similar to those utilised within the Ore Reserve estimates of this Report. These projects include coal mines in Yunnan, Sichuan, Gansu, Inner Mongolia, Shanxi, Liaoning and Heilongjiang Provinces within China.

1.6.4 Project Team

In addition to the JORC and Hong Kong Competent Persons, RPM unitised a larger technical team to undertaken the work. A summary of the people and work undertaken by each person is provided below:

. Hong Zhao: In addition to undertaking several site visit to the Relevant Assets, under the supervision of Mr Michael Johnson, Mr Zhao was responsible for reviewing and verifying the geological bore hole information and procedures, undertaking the review of the geological and coal seam correlations and Chinese estimation methods. Mr Zhao has 18 years’ experience in reviewing similar project and 10 years’ geoscience research in China.
. Kevin Qu: In addition to undertaking site visits to the Relevant Assets, under supervision of the Mr Graeme Rigg undertook a review of all feasibility studies, recent mining data, mining performance and undertook a review of all Chinese reserve estimates completed. Mr Qu has over 30 years’ experience as a mining engineer with the Chinese Coal industry and has work on a extensive number of project in China which have similar mining methods to those of the Assets.
. Hongbo Lui and Peilin Guo: Assisted Mr Qu in revision and estimates of Chinese Coal reserves and assisted Mr Michael Johnson and Mr Graeme Rigg in the estimation of the JORC Coal Resources and Coal Reserves.
. Huang Song: Assisted Mr Zhao in the review of the bore hole information and review of the geology and coal seam observation points and Chinese Coal resources.
. Benjamin Quashie: Was responsible for compiling the preliminary economic model for the 3 Mines for which JORC Coal Reserves have been reported.

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. Jeremy Clark and Philippe Baudry: Were responsible for review and auditing the Report and its content.

1.7 Limitations and Exclusions

The review was based on various reports, plans and tabulations provided by the Client either directly from the mine site and other offices, or from reports by other organisations whose work is the property of the Client. The Client has not advised RPM of any material change, or event likely to cause material change, to the operations or forecasts since the date of asset inspections.

The work undertaken for this report is that required for a technical review of the information, coupled with such inspections as the Team considered appropriate to prepare this report. It specifically excludes all aspects of legal issues, commercial and financing matters, land titles and agreements, except such aspects as may directly influence technical, operational or cost issues.

RPM has specifically excluded making any comments on the competitive position of the Relevant Asset compared with other similar and competing iron ore producers around the world. RPM strongly advises that any potential investors make their own comprehensive assessment of both the competitive position of the Relevant Asset in the market, and the fundamentals of the iron ore market at large.

1.7.1 Limited Liability

RPM will not be liable for any loss or damage suffered by a third party relying on this report (regardless of the cause of action, whether breach of contract, tort (including negligence) or otherwise) unless and to the extent that that third party has signed a reliance letter in the form required by RPM (in its sole discretion). RPM’s liability in respect of this report (if any) will be specified in that reliance letter.

1.7.2 Responsibility and Context of this Report

The contents of this report have been created using data and information provided by or on behalf of the Client. RPM accepts no liability for the accuracy or completeness of data and information provided to it by, or obtained by it from, the Client or any third parties, even if that data and information has been incorporated into or relied upon in creating this report. The report has been produced by RPM using information that is available to RPM as at the date stated on the cover page. This report cannot be relied upon in any way if the information provided to RPM changes. RPM is under no obligation to update the information contained in the report at any time.

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1.7.3 Indemnification

The Client has indemnified and held harmless RPM and its subcontractors, consultants, agents, officers, directors, and employees from and against any and all claims, liabilities, damages, losses, and expenses (including lawyers’ fees and other costs of litigation, arbitration or mediation) arising out of or in any way related to:

. RPM’s reliance on any information provided by the Client; or
. RPM’s services or materials; or
. Any use of or reliance on these services.

In all cases, save and except in cases of wilful misconduct (including fraud) or gross negligence on the part of RPM and regardless of any breach of contract or strict liability by RPM.

1.7.4 Intellectual Property

All copyright and other intellectual property rights in this report are owned by and are the property of RPM.

RPM grants the Client a non-transferable, perpetual and royalty-free Licence to use this report for its internal business purposes and to make as many copies of this report as it requires for those purposes.

1.7.5 Mining Unknown Factors

The findings and opinions presented herein are not warranted in any manner, expressed or implied. The ability of the operator, or any other related business unit, to achieve forwardlooking production and economic targets is dependent on numerous factors that are beyond the control of RPM and cannot be fully anticipated by RPM. These factors included site-specific mining and geological conditions, the capabilities of management and employees, availability of funding to properly operate and capitalise the operation, variations in cost elements and market conditions, developing and operating the mine in an efficient manner, etc. Unforeseen changes in legislation and new industry developments could substantially alter the performance of any mining operation.

1.7.6 Capability and Independence

RPM provides advisory services to the mining and finance sectors. Within its core expertise it provides independent technical reviews, resource evaluation, mining engineering and mine valuation services to the resources and financial services industries.

RPM has independently assessed the Relevant Assets of the Client by reviewing pertinent data, including resources, reserves, manpower requirements and the life of mine plans relating to productivity, production, operating costs and capital expenditures. All opinions, findings and conclusions expressed in this Report are those of RPM and its specialist advisors.

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Drafts of this report were provided to the Client, but only for the purpose of confirming the accuracy of factual material and the reasonableness of assumptions relied upon in this Report.

RPM has been paid, and has agreed to be paid, professional fees based on a fixed fee estimate for its preparation of this Report. None of RPM or its directors, staff or specialists who contributed to this report has any interest or entitlement, direct or indirect, in:

. the Company, securities of the Company or companies associated with the Client; or
. the right or options in the Relevant Assets; or
. the outcome of the proposed transaction.

This CPR was compiled on behalf of RPM by the signatories to this letter, details of whose qualifications and experience are set out in Annexure A to this CPR. The specialists who contributed to the findings within this CPR have each consented to the matters based on their information in the form and context in which it appears.

2 Project Overview

The 9 Mines which form the Projects are located in the Yunnan province within the People’s Republic of China (‘‘PRC’’ or ‘‘China’’) (Figure 2–1). The Projects consist of nine underground mines with ROM coal production ranging from 50 Kt up to 120 Kt in 2012 which resulted in a combined total ROM coal production of 850 kt (Table 2–1).

All of the 9 Mines have been in production for a number of years; however production has been suspended at Yunxiang while construction is ongoing. Several variations of longwall mining operations are utilised within the underground mines and includes both mechanised and manual longwall operations. RPM notes that the Company plans to increasingly use mechanised mining methods which will potentially result in increased production and increase safety performance.

Each mine longwall operation is combined with various conveyor systems to transport coal to surface stockpiles. From the surface stockpiles ROM coal is transported via Chinese trucks to the 5 centralised wash plants or directly to market for sale. Due to the varying locations of the mines around the centralised wash plants, ROM coal is transported varying distances; however this generally ranges between 5 km and 30 km.

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Table 2–1 Project Overview, Production, Associated Wash Plant and Stockpiles

Capacity (Mtpa)

	2012
	Production		Current
Mine	(Mtpa)	Mining	Licence	Final	Planned	Wash Plant	Stockpile
Yunxiang	0.08		0.15		0.60	Maosheng	Yangweishao
Xingji	0.12		0.09		0.30	Fude	Weijing
Xiangda	0.14		0.15		0.45	Xiangda
Hexing	0.02		0.30		0.60	Yanhe
Xingjian Jianglang	0.12 0.05		0.09 0.15		0.30 0.45	Mohong	Yangweishao
Yanhe	0.10		0.15		0.45	Yanhe
Zude	0.09		0.15		0.60	Fude	Weijing
Qingping	0.13		0.15		0.45	Maosheng	Yangweishao

The Company is currently expanding production in a number of the mines. This expansion is planned to be achieved through the use of mechanised mining methods and the consolidation and expansion of the current mining licences (Table 2–2). A single approved mining licence is stated for each of the 9 Mines however five (5) of the 9 Mines are under consolidation within the adjacent licences due to government regulations. These proposed consolidations will likely result in the expansion of current licence areas in both the horizontal and vertical direction.

Due to the consolidation process the 9 Mines are at vary stages of development. Table 2– 2 outlines the current mining licence capacity, the currently constructed development capacity as well as the proposed mining licence capacity. As can be seen a number of the mines can technical achieve the proposed expanded production based on the currently constructed development (shaft and gateroads), however 3 require further construction. Technical reform and reconfiguration of the plant infrastructure will be require to achieve these production based on the Feasibility Study mine designs. RPM considers the project development schedules, while technically achievable, to be optimistic and recommends that a full review of the Life of Mine forecast schedules for each mine to be carried out to better reflect likely production profiles and achievable coal recovery.

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APPENDIX IV

Table 2–2. Current Development Status of the 9 Mines

		Current
	Current	Development		Proposed ML
	Capacity of	Capacity		and Production
Mine	ML (ktpa)	(ktpa)*	Development Status	Capacity (ktpa)	Construction Date
Yunxiang	150	450	Mining tenement granted	600	July 2016–Jan 2017
			Production Expansion
			Planned
Xingji	90	300	Waiting for grant of	300
			mining tenement
Xiangda	150	—	Upgrade Completed	450	Pending Completion
Hexing	300	—	Upgrade 65% completed	600	Jan 2014–June 2014
Xingjian	90	300	Mining tenement was	300
			granted planned
			expansion
Jianglang	150	450	Mining tenement was	450
			granted planned
			expansion
Yanhe	150	—	Upgrade completed	450	Oct 2013–April 2014
Zude	150	600	Awaiting for grant of	600
			mining tenement
Qingping	150	450	Awaiting for grant of	450
			mining tenement

To be carried out by the Company after completion of current development and mine construction.

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APPENDIX IV

Below is a description the Project Location, access and environment for the 9 Mines.

Figure 2–1 General Location Plan

==> picture [427 x 290] intentionally omitted <==

2.1 Project Location and Access

The 9 Mines are located in close proximity to Fuyuan County, Qujing Prefecture, in eastern Yunnan. Fuyuan County is accessible via the national highway network to Kunming (197.5km) (the Capital of the Yunnan Province) which has daily flight to Beijing and several International Cities in South East Asia. Table 2–2 details the relative position of each mine in relation to Fuyuan County, which is further shown graphically in Figure 2–2.

Table 2–3 Yunnan Group Mine Location and Access

Mine	Yunxiang	Xingji	Xiangda	Hexing	Xingjian	Jianglang	Yanhe	Zude	Qingping
Distance	23km	98km (by	19km (by	33.6km (linear)	35km (by	22km (linear)	45km (by	33km	15 (linear)
Fuyuan	(linear)	road)	road)		road)		road)	(linear)
Closest Railway				7km	35km	30km
station				(Mohongzhen)	(Fuyuan)	(Huangnihe)

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APPENDIX IV

2.2 Regional Environment

The climate is considered to be ‘‘subtropical monsoon high mountain’’ with large seasonal temperature variations ranging from -5˚C to 34.9˚C, with a yearly average of 13.8˚C. The region has high yearly precipitation levels with an average of 1,332 mm per annum being recorded. Precipitation mainly occurs between the monsoon months of May to September, however precipitation commonly occurs outside of these months. Outside of the mining industry, farming is the main regional industry, with the crops consisting of rice, corn, wheat, potato and tobacco. The population is predominately of Han nationality with some minorities such as Hui, Miao and Yi. Mining supplies and experienced labour are readily available in Fuyuan county and Kunming City.

Figure 2–2 Detailed Location Plan

==> picture [427 x 291] intentionally omitted <==

3 LICENCE AND PERMITS

The Company holds Mining Licence, Production, Business, Safety Permits and Environmental Report Reply letters for each of the 9 Mines the details of which are outlined below.

RPM provides this information for reference only and recommends that land titles and ownership rights be reviewed by legal experts.

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APPENDIX IV

3.1 Mining Licence

Each of the 9 Mines are contained within a single mining licence which are currently held by the Company or its subsidiaries. In addition five of the 9 Mines have applications for expansions of the licence area, and consolidation of the surrounding tenements. These include the Yunxiang and Jianglang mines which has JORC estimates completed and the Xingji, Xingjian, and Zude mines which have no estimates completed as a result of data verification issues as outlined in Section 6. The mining licences and mining tenement details are summarised in Table 3–1, while the mining licence are shown graphically in Figure 3–1 to Figure 3–4.

Table 3–1 Mining Licence and Holdings Details as at 30 June 2013

				Mining Elevation	Capacity
Mine Name	Licence No.	Valid	Area (Sq.m)	(m)	(Mtpa)
Yunxiang	C5300002009071120030720	2011.3.29–2019.6.29	1.425	1,730–1,400	0.15
	Mining Tenement Yunnan [2011]No184	2013.9.16–2014.10.9	2.05	1,730–1,150	0.15
Xingji	C5300002011031140109532	2011.7.14–2015.2.14	0.556	1,850–1,208	0.09
	MLR[2012]-308*	2012.4.9–	1.4013
Xiangda	5300000720425	2007.12–2017.12	1.6081	1,995–1,200	0.15
Hexing	C5300002009071120030552	2012.5.16–2019.7.17	2.7399	2,100–1,700	0.30
Xingjian	C5300002009071120030674 Mining Tenement Yunnan [2011]-218	2011.6.24–2017.6.24 2012.11.16–2013.12.29	1.069 2.38	1,900–1,730 2,000–1,200	0.09 0.45
Jianglang	C5300002009091120036214	2011.7.21–2014.7.21	0.4231	2,000–1,560	0.15
	Mining Tenement Yunnan [2012]-39	2012.6.5–2013.6.5	1.42	2,000–1,200	0.45
Yanhe	C5300002011041120110576	2011.4.14–2014.2.14	1.4961	1,800–1,300	0.15
Zude	C5300002010061120068951	2011.6.24–2014.6.24	0.9124	1,658–1,300	0.15
	MLR [2012]-308*	2012.4.9–	1.9046
Qingping	C5300002009081120032059	2012.1.6–2019.8.6	0.9596	1,820–1,300	0.15
	In application by the Company		2.2294	1,760–1,380

Source: Supplied by the Client

Note: RPM provides this information for reference only and recommends that land titles and ownership rights be reviewed by legal experts.

Table 3–2 Mining Licence and Updated Holdings Details

					Mining Elevation	Capacity
Mine	Name	Licence No.	Valid	Area (Sq.m)	(m)	(Mtpa)
Xingji		C5300002011031140109532	2011.7.14 –2015.2.14	0.556	1,850–1,208	0.09
		Mining Tenement Yunnan [2013] 30	2013.6.17–2014.6.17	0.934	1,850–1,150
Zude		C5300002010061120068951	2011.6.24–2014.6.24	0.9124	1,658–1,300	0.15
		Mining Tenement Yunnan [2013] 31	2013.6.17–2014.6.17	1.9046	1,700–1,150

Source: Supplied by the Client

Note: RPM provides this information for reference only and recommends that land titles and ownership rights be reviewed by legal experts.

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APPENDIX IV

RPM is aware that Mining Tenements for Zude and Xingji have been granted both in midJune 2013. Whilst these outline the legality of the Company holdings over these areas, further technical studies under standard Chinese technical development process are required to be completed for the changed areas to enable there inclusion in JORC Coal Resources and Reserves estimates. RPM has utilised the coordinates and vertical limitation of the holdings as at the 30 June 2013 outlined in Table 3–1 for the 4 Mines, while the updated Mining Tenements are shown in Table 3–2. RPM notes that’s no JORC Resource and Reserves have been estimated for the Zude and Xingji mines.

The current mining licences have variety production capacities; however several licences have current capacities lower than the planned expansions. These expanded mining licences are yet to be finalised and approved and are subject to regulatory review. Yunxiang, Xingjian and Jianglang have a granted Mining Tenement which covers the area of the proposed expanded mining licence. RPM however has been supplied with the coordinates of the proposed mining licence in the relevant official files of the consolidation plan.

RPM understands that the proposed expanded mining licences will replace that current licence, as a result RPM has reported both the JORC Coal Resource and Reserves within the proposed expanded licence areas. After review of the current mine design, plans and forecast schedules RPM believes there is sufficient material within the current licences which can be mined prior to the granting of expanded licence.

RPM is aware that renewal of licences within China is dependent on the completion of fee payment, such as royalties of mineral right, usage fee of mineral right area, resource compensation levies as well as the necessary document provision compliant with the regulations of land management, maps of historic mining activities, safety and environment management for the area designated under the permit. The renewal application should be submitted to the relevant state or provincial authorities at least 30 days before the expiration of a permit. Based on RPM’s experience, the renewal of a mining licence is a formality, if the company has a history of paying permitting fees when required. Furthermore, in RPM’s experience expansion of the vertical limits is generally permitted if the company has completed all relevant technical studies to ensure economic mining can occur in these areas.

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APPENDIX IV

3.2 Production Permit

The Company or its subsidiaries hold a production permit for each of the 9 Mines. These permits detail the validity date and the Mineable seams per mine, as shown in Table 3–3.

Table 3–3 Production Permits for the 9 Mines

			Production Permit
Mine Name	No.	Valid To	Capacity (Mtpa)
Yunxiang	205303254047	2027.7	0.08
Xingji	205303254143	2027.7	0.09
Xiangda	205303254178	2029.3	0.15
Hexing	205303254061	2027.7	0.05
Xingjian	205303254059	2027.7	0.06
Jianglang	205303254068	2020.7	0.06
Yanhe	205303254069	2027.7	0.06
Zude	205303254142	2027.7	0.15
Qingping	205303254088	2027.7	0.04

Source: Supplied by the Client

Note: RPM provides this information for reference only and recommends that land titles and ownership rights be reviewed by legal experts.

3.3 Safety Production Permits

The Company or its subsidiaries hold a Safety permit for each of the 9 Mines. These permits detail the validity date, as shown in Table 3–3a.

Table 3–3a Safety Production Permits for the 9 Mines

Mine	Permit No.	Validity Dates
Yunxiang	MK[2005]0430	2011.6.15–2014.6.15
Xingji	MK[2005]0801	2011.9.23–2014.9.23
Xiangda	MK[2009]0004	2012.2.1–2015.2.1
Hexing	MK[2005]0405	2011.6.15–2014.6.15
Xingjian	MK[2005]0806	2011.9.23–2014.9.23
Jianglang	MK[2006]0071	2012.2.7–2014.7.21
Yanhe	MK[2005]0406	2011.6.15–2014.2.28
Zude	MK[2005]0045	2011.1.27–2014.1.27
Qingping	MK[2005]0431	2011.6.15–2014.6.15

Source: Supplied by the Client

Note: RPM provides this information for reference only and recommends that land titles and ownership rights be reviewed by legal experts.

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APPENDIX IV

Figure 3–1. Yunxiang Mine Geological Map and Surface Topography Plan.

==> picture [427 x 290] intentionally omitted <==

Figure 3–2. Xiangda Mine Geological Map and Surface Topography Plan.

==> picture [427 x 290] intentionally omitted <==

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APPENDIX IV

Figure 3–3. Hexing Mine Geological Map and Surface Topography Plan.

==> picture [427 x 290] intentionally omitted <==

Figure 3–4. Jianglang Mine Geological Map and Surface Topography Plan.

==> picture [427 x 290] intentionally omitted <==

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APPENDIX IV

3.4 Business Licence

The Company or its subsidiaries hold a Business Licence for each of the 9 Mines. These licences detail the validity date and permit the company to operate under a business entity, as shown in Table 3–4.

Table 3–4 Business Licence for Each Mine

Mine	License No.	Register Name	Valid
Yunxiang	530325100009716	Fuyuan County Dahe	2009.4.29–2019.4.29
		Qingping Coal Industrial
		Co. Ltd.
Xingji	530325100011140	Fuyuan County Jintai Coal	2010.1.19–2020.1.19
		Industrial Co. Ltd.
Xiangda	530325100007101	Fuyuan County Xiangda Coal	2008.7.3–2018.7.3
		Mine Co. Ltd.
Hexing	530325100003893	Hexing Coal Mine of Fuyuan	2004.7.16
		County Yuyuan Coal
		Industrial Co. Ltd.
Xingjian	530325100011721	Fuyuan County Tonghe Coal	2010.6.20–2040.6.20
		Industrial Co. Ltd.
Jianglang	530325100011158	Fuyuan County Kunyuan	2010.1.19–2030.1.19
		Coal Industrial Co. Ltd.
Yanhe	530325100010288	Yunnan Hidili Coal Industrial	2009.7.10–2039.7.10
		Co. Ltd.
Zude	530325100011199	Yunnan Henglong Coal	2010.2.3–2040.2.3
		Industrial Co. Ltd.
Qingping	530325100009716	Fuyuan County Dahe	2009.4.29–2019.4.29
		Qingping Coal Industrial
		Co. Ltd.

Source: Supplied by the Client

Note: RPM provides this information for reference only and recommends that land titles and ownership rights be reviewed by legal experts.

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APPENDIX IV

3.5 Environmental Permits

The Company or its subsidiaries hold an Environmental Permit or reply letter for each of the 9 Mines. These Reply letters detail the validity date and permit the company to operate under for the environmental restriction or compliance for the mines, a summary of the letter details are shown in Table 3–6.

Table 3–5 Environmental Reply Letter for the 9 Mines

Mine Name	No.	Reply Date
Yunxiang	Qu Environment Permit No. [2006]209	2006.11.28
Xingji	Qu Environment Permit No. (table) [2007]158	2007.8.23
Xiangda	Fu Environment Permit No. [2005]10	2005.6.28
Hexing	Yunnan Environment Approval No. [2007]225	2007.9.27
Xingjian	Qu Environment Permit No. (table) [2007]203	2007.12.12
Jianglang	Qu Environment Permit No. (table) [2008]68	2008.6.15
Yanhe	Qu Environment Permit No. (table) [2005]21	2005.8.5
Zude	Qu Environment Permit No. [2006]134	2006.10.16
Qingping	Qu Environment Permit No. (table) [2007]67	2007.5.30

Source: Supplied by the Client

Note: RPM provides this information for reference only and recommends that land titles and ownership rights be reviewed by legal experts.

4 PROJECT HISTORY

4.1 History of Exploration

A number of generations of exploration have been carried out on the 9 Mines to date. The majority of the systematic exploration commenced in the 1960’s with several phases of additional drilling being undertaken since 2000. The exploration works completed includes drilling programmes, Coal Quality determinations, underground channel sampling and geophysical surveys, a summary of which is outlined below in Table 4–1. The bore hole location for the Yunxiang, Xiangda, Hexing and Jianglang are shown graphically within the Projects in Figure 3–1 to Figure 3–4 and in Figure 7–2 to Figure 7–5.

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APPENDIX IV

Table 4–1 Exploration History of the 9 Mines

			UG
			Logging	No. Coal Quality		Drilling/Controlling Spacing (m)
Mine	Exp Period	No. holes	(m)	Determinations	ARD	331*	332*		333*
Yunxiang	2012	6		33		500	1,000		2,000
	2008–2009;	6		116
	1987–1991
Xingji	2010–2011	6		56		500	500–1,000
	Not Supplied	1
Xiangda	2011	8	1,500	126	2	500	1,000		2,000
	1989–1991	8
Hexing	2010	3		53		500	1,000
	1981–1984	11
Xingjian	2011–2012	17		134		500	1,000
		none
Jianglang	2012–2013	17				500
		none
Yanhe	2010	6	200	173		500	1,000
	1992	5
Zude	2010–2011	11		160		250–500	500–1,000
	Not available	1
Qingping	2010	6		71
	2007	2				250–500	500–1,000	1,000–2,000

Source: Supplied by the Company

Chinese Res Coal and Peat Exploration Code.

4.2 History of Mining

Significant mining has been undertaken within the Projects to date. During the review of the data supplied, RPM noted that not all of the Projects have production records which details all mining completed to date, however since the Company purchased the 9 Mines, detailed production records have been recorded, these are summarised in Table 4–2. RPM notes that the Company is undertaking capacity expansions of a number of the Projects, and presents the actual production for the previous 4 years in Table 4–2.

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APPENDIX IV

Table 4–2 2009 to 2012 Actual ROM Coal Production (ktpa)

Mine Yunxiang Xingji Xiangda Hexing Xingjian Jianglang Yanhe Zude Qingping Total	2009 20 Na Na Na 6 10 13 Na 19 68	2010 65 86 195 40 142 74 128 109 94 933	2011 166 210 151 14 147 74 195 75 169 1,201	2012 80 115 137 22 117 51 101 92 132
				847

Source: Supplied by the Company.

RPM notes that the company has failed to reach its forecast annual production targets for a number of years on most of its projects. RPM has provided further commentary on the shortfall in Section 10 of this report.

RPM is aware that a mining accident in a nearby mine (not owned or operated by the Company or any of its subsidiaries) occurred in December 2012. RPM understands that this accident bears no relation to the Company’s mines or its operations; however it is not aware of the particulars of the accident. As a result of this accident, the local government authorities ceased operation of all mining activities within the nearby mines, which includes the Companies 9 Mines. RPM has been informed that normal operation within the Companies 9 Mines recommenced in August 2013, however recommissioning for the Xiangda and Hexing commenced in June 2013 and no production is occurring. As such no production has occurred in 2013 for any of the 9 Mines.

5 GEOLOGY AND COAL BEARING STRATA

Although similar geological settings are observed within the 9 Mines, significant differences are noted in the structural complexity, Mineable Coal Seams geometry and the Coal Class which occurs. Table 5–1 and Table 5–2 outline the general geological characteristics of the 9 Mines, as well the number of Mineable Coal seams identified. A brief description of each mine is presented below for reference.

RPM notes that all Coal Classification described below are a ratio of the Caking Index and the Volatile Matter of the coal as defined by the Chinese Standards. Further detail on Chinese coal quality standards are provided in Chapter 5.6 for reference.

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APPENDIX IV

5.1 Geological Characteristics and Coal Seam and Coal Quality Descriptions

5.1.1 Yunxiang Coal Mine

Local Geological Setting

The Yunxiang Mine is located within the southern portion of the Pingguan — Daping syncline (‘‘Daping Syncline’’) (Figure 3–1). The Daping Syncline has a northsouth axis which is consistent with the interpreted regional structural features. The east wing of the syncline has subsequently been truncated by fault structures and contains several hanging wall faults. These fault system have resulted in a complex stratigraphic setting within the hanging wall on the coal strata, however the footwall strata is relatively simple with no fault development (Figure 5–1).

In addition to the Daping Syncline and associated faulting, within the region seven faults have been interpreted which offset strata by greater than 20m, as can be seen in the cross sections in Figure 5–1 and in Annexure G. These faults are predominately located within the hanging wall coal strata and have resulted in mine structural complexity of medium level.

Coal Bearing and Mineable Seams

The coal bearing strata within the Yunxiang Mine is dominated by the continental facies coal bearing clastic Upper Permian Xuanwei Formation which has an average thickness of 293.4m (Figure 5–1). The Formation consists of predominately grey, dark grey mudstone, silty mudstone, siltstone and coal.

Within the mine, twenty two coal seams have been defined (C1 to C22), of which thirteen are considered Mineable Coal Seams. These seams range in average thickness from 0.7 to 2.9m (Table 5–2) as shown graphically in Figure 5–2 in the coal seam correlation interpretation. The Formation has been subdivided into three Sections, of which the Xuanwei Group Section No.2 is the main coal-bearing strata. This Section contains the highest quality coal within nine Mineable Coal Seams, numbered C7 to C13, C16 to C18. The Xuanwei Group Section No.3 contains with four Mineable coal seams, numbered C2+1, C3, C4, C6.

Coal Quality

Each seam in the region has good quality ROM Coal with medium ash content, ultralow to low sulfur and phosphorus content. The coal is classified as 1/3 Coking Coal (Figure 5–9), with all coal having good caking and coking properties.

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APPENDIX IV

Table 5–1 Mineable Coal Seams Characteristics of the 9 Mines for Yunnan Groups

	Ave Depth		Interburden	No. Mineable
Mine	Coal (m)	Dip (°)	Thickness (m)	Seams
Yunxiang	353	<25°	3.0 to 62.8	13
Xingji	39.6	10～36°	0.3 to 40.8	13
Xiangda	404.7	15°～30°	0.9 to 20	13
Hexing	260	5°～15°	5.3 to 59.1	9
Xingjian		40°～79°	2.8 to 83.2	9
Jianglang	575	23°～60°	1.61 to 24.01	12
Yanhe	394	21°～42°	23.3 to 41.9	10
Zude	116	10°～30°	4.1 to 50.5	7
Qingping	191	15°～35°	0.8 to 31.7	15

Source: Reports supplied by the Company.

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APPENDIX IV

																																M9	2.2		0
																																M7	1.3		1
C10	1.0		1	M10	4.2		1	C20	0.6		0																					M5	1.0		1
C12	1.2		1	M12	1.4		2	C19	1.3		2									C9	3.0		1									M4+1	1.2		1
C13	1.5		1	M2	1.2		0	C16	1.0		3					C20				C23	2.8		2									M4	1.1		1
C16	1.3		0	M20	1.1		0	C15	2.1		2					C21				C21	2.2		2	M9	3.4		1					M3	1.0		2
C17	1.7		0	M21	1.2		2	C13	1.5		1	C9	5.2		3	M9	2.0		1	C7	1.7		1	M7	1.7		1					M21	1.2		1
C18	1.2		5	M23	1.1		1	C12	3.2		1	C8	1.5		1	M7	1.5		1	C16	1.6		1	M24	2.2		1					M20	1.0		2
C2+1	0.7		0-1	M3	0.9		2	C9	4.0		1	C7	0.9		0	M21	1.3		0	C20	1.5		1	M23	1.1		2	C16	2.1		1-3	M2+1	0.7		0
Yunxiang Seam No. C9 C8 C7 C6 C4 C3	Avg. Thickness 2.9 1.0 0.9 0.9 0.7 1.2	(m)	No. Partings 3 1 2 1 1 0	Xingji Seam No. M1 M9 M8 M7 M6 M5	Avg. Thickness 1.2 4.6 2.4 1.1 1.6 1.1	(m)	No. Partings 0 1 0 3 0 0	Xiangda Seam No. C2 C3 C4 C4+1 C7 C8	Avg. Thickness 0.9 1.1 1.2 1.0 1.3 0.9	(m)	No. Partings 0 0 1 0 0 0	Hexing Seam No. C11 C15 C16 C19 C20 C3a	Avg. Thickness 1.8 1.3 1.4 1.0 1.1 0.8	(m)	No. Partings 2 0 2 3 2 0	Xingjian Seam No. M11 M13 M14 M16 M19 M20	Avg. Thickness 1.7 1.3 0.9 1.8 1.3 1.1	(m)	No. Partings 1 0 0 0 0 0	Jianglang Seam No. C13 C12 C19 C22 C21+1 C11	Avg. Thickness 0.7 1.0 1.0 1.1 1.1 1.2	(m)	No. Partings 0 1 1 1-Feb 1 0	Yanhe Seam No. M11 M16 M2+1 M20 M21 M22	Avg. Thickness 1.6 1.4 0.9 0.9 1.7 1.3	(m)	No. Partings 2 1.4 1 2 1 2	Zude Seam No. C3 C7 C6 C5 C8 C10	Avg. Thickness 1.1 0.4 0.9 1.0 2.4 4.9	(m)	No. Partings 1 1 0 1 0 3	Qingping Seam No. M12 M13 M15 M16 M19 M2	Avg. Thickness 1.7 1.6 1.6 1.4 2.2 0.7	(m)	No. Partings 0 3 0 2 2 1

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APPENDIX IV

Figure 5–1 Yunxiang Cross Section (A-A’)

==> picture [427 x 626] intentionally omitted <==

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APPENDIX IV

Figure 5–2 Yunxiang Mine Coal Seam Correlation Interpretation

==> picture [427 x 626] intentionally omitted <==

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APPENDIX IV

5.1.2 Xingji Coal Mine

Local Geological Setting

The structural features within the Xingji Mine are dominated by the Lemin Syncline. Located in the eastern wing and south western edge of the syncline hinge, seven faults have been identified within the mine. These faults are generally orientated towards the north east and north-north east and have variably offset the coal bearing strata. The overall strata dip of the minefield is relatively low to the west.

Coal Bearing and Mineable Seams

The coal bearing strata of the mine consists of the marine and terrestrial deposited Upper Permian Changxing and Longtan Formation. With a combined thickness of up to 198.7m, these Formations contain twenty three coal seams (named M1 to M23), of which thirteen (13) are classified as Mineable or Partially Mineable Coal Seams with Mineable Coal Seam thicknesses ranging between 0.72 m and 2.91 m.

Coal Quality

All coal within the mine is categorized as Coking Coal with good coal qualities and may potentially be used for coking. RPM notes that the lower elevation coal seams (M12, M20, M21, M23) contain higher sulfur contents (medium to high levels) mainly due to the presence of pyrite, however a review of test work and production indicates that upon flotation washing at a cut point density of 1.4, the sulfur content reduces significantly to potentially marketable levels.

5.1.3 Xiangda

Local Geological Setting

Dominated by a single gently dipping syncline, the structural features within the mine are relatively simple compared to other mines in the region (Figure 5–3). Location in the northern portion of the outcropping syncline all strata dips to the south along parallel to the north south axis orientation (Figure 3–2). Although no major faults are noted within the mine, regional faults sets offset the strike extent of the coal bearing strata and limit the horizontal continuity as can be seen in the cross section in Figure 5–3, and the series of sections in Annexure G.

Coal Bearing and Mineable Seams

The coal-bearing strata within the mine consist of the Upper Permian Changxing and Longtan Formations which have an average combined thickness of 270m. Thirteen Mineable or Partially Mineable Coal Seams have been defined to date of which four are located within the Changxing Formation (P3C) (C2, C3, C4, C4+1), while the Longtan Section 2 (P3l2) contains six seams (C7, C8, C9, C12, C13, C15). The seams have an

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average thickness ranging from 0.6 to 4.9m (Table 5–2) as shown graphically in Figure 5–4 in the coal seam correlation interpretation. The three remaining seams (C16, C19, and C20) located within the Longtan Formation Section 1 are all Partially Mineable.

Coal Quality

With the exception of seam C7, all the seams are categorized as 1/3 Coking Coal, and Coking Coal with a small amount of Fat Coal. Although variable, the coal seams generally contain medium ash content and ultra-low to low sulfur content. The Longtan Section 1 seams all have medium to high sulfur content. Seam C7 is categorized as 1/3 Coking Coal with low ash, ultra-low sulfur, ultra-low to low-phosphorous contents. All coal show good caking and coking properties.

Seams C4, C7, C12, C13, C16 coal after washing could potentially be used for metallurgical and coking, with the remaining seams, after washing to potentially be used as a coal blend for coking. RPM notes that the medium-high to high sulfur content within the ‘‘Longtan Formation Section 1’’ seams reduces significantly after washing, and could potentially be used for power generation and civil purposes.

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Figure 5–3 Cross Section for Xiangda Mine (A-A’)

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Figure 5–4 Xiangda Mine Coal Seam Correlation Interpretation

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5.1.4 Hexing Coal Mine

Local Geological Setting

The structure and strata orientation within the mine is dominated by a near north south gentle dipping syncline as can be seen in the cross section in Figure 5–5 and the geological map in Figure 4–1. The strata generally strikes parallel to this syncline, with the western strata dipping to the east, and the eastern strata dipping to the west at angles ranging between 5° and 15°. Although dominated by the syncline structure, the strata id offset by several fault structures in the peripheral areas and the west side of the synclinal axis. As shown in Figure 5–2 (as well as the series of cross section in Annexure G these faults dip steeply to the east and west, and offset strata by 10’s m.

Coal Bearing and Mineable Seams

The coal bearing strata within the mine consists of the Longtan Formation (Xuanwei Group) (Figure 5–5) which has and average thickness of 260.8m. A total of 9 Mineable Coal Seams (C3a, C7, C8, C9, C11, C15, C16, C19, and C20) have been defined to date which generally have a medium thickness (averages range from 0.83–5.13m) as shown graphically in Figure 5–6 in the coal seam correlation interpretation. Although generally medium in thickness the seams also have a variable sizes ranging from thin to ultra-thick (which occurs only occurs on a local scale). In addition, RPM notes that two seams are located below the current licence (C23a and C23b) and are considered Mineable, however due to this reason and their inherent sulfur contents (up to 6%), they are excluded from the estimations presented in Section 7.

The depth of coal ranges from outcropping at surface on the eastern and western edge of the licence areas to below the mining licence (1,700m) as can be seen in Figure 5–5.

Coal Quality

Coking Coal is categorised in seven seams (C3a, C7, C8, C9, C11, C15, and C16), of which seam C9 contains low ash and ultra-low sulfur contents and, as such, is categorised as high-quality Coking Coal. Although seams C19 and C20 are also categorized as Coking Coal, the sulfur content is above 1%, and is not ideally suited for use as Coking Coal, and as a result is categorised for use as ‘‘Power Coal’’.

5.1.5 Xingjian Coal Mine

Local Geological Setting

The strata within the mine is orientated roughly parallel with dominate nor-northeast oriented southeast dipping monoclinic fold structure. With dips averaging 65° the strata is classified as Steeply Inclined; RPM notes that dips range between 40° and 79°. Three large faults sets have been identified within the mine; these include the normal faults (F1 and F3) and a reverse fault (F2). Numerous surrounding small faults are developed all of which have only local impact on the coal continuity.

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Coal Bearing and Mineable Seams

The continental swamp-lake facies Longtan Formation is the main coal bearing strata. With an average thickness of 203.8 m, the Formation contains nine (9) Mineable or mostly Mineable Coal Seams (M7, M9, M11, M13, M14, M16, M19, M20, M21), which have an average thickness of 18.1 m ranging between 13.3 m and 31.5 m. RPM notes that seams M9, M11, M13, M16, M19, M20 are more ‘‘stable’’ (thickness continuity) than seams M7, M14 and M21.

Coal Quality

Seams M7, M9, M11, M13, M14 and M16 are classified as 1/3 Coking Coal, while M19, M20 and M21 are classified as Fat Coal. RPM understands that all coal is potentially suitable for coking blending or civil coal, and after washing can be used for industrial purposes.

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Figure 5–5 Hexing Mine Cross Section (A-A’)

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Figure 5–6 Hexing Mine Coal Seam Correlation Interpretation

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5.1.6 Jianglang

Local Geological Setting

Strata within the mine generally strikes between N25E and W35S (Figure 3–4) and dips to the south east between 20°and 60° (Figure 5–7). The coal bearing strata appears to be structural influence by the regional fault sets which cross the licence area. The dip of the strata increases with proximity to the fault zone, which indicates that fault induced folding has occurred. 20 fault zones have been identified within the mine, all of which offset the dipping strata within the Langsanjia anticline with displacements ranging from a few meters to up to 500 m, as can be seen within the cross section in Figure 5–7 and Annexure G.

Coal Bearing and Mineable Seams

The coal-bearing strata consists of the Longtan Formation which ranges in thickness from 152.3 m to 176.0 m. Twelve Mineable Coal Seams and 3 Partially Mineable Seam have been identified. These seams have an average thickness ranging from 0.68 to 2.99 m as can be seen in Table 5–2 and graphically in Figure 5–8 in the coal seam correlation interpretation.

Coal Quality

Coal seam sample analysis results from within the 12 Mineable seams indicates that the specific energy of ROM coal is predominately comprised of medium to high level, with medium level of ash and extremely low to low sulphur levels observed. The coal within these seams has been categorised as 1/3 Coking Coal and Fat Coal. RPM notes that no washability tests have been undertaken within the mine.

5.1.7 Yanhe Coal Mine

Local Geological Setting

Structural features within the mine are dominated by a monoclinic fold, which has an axis orientated nor-northeast, and a plunge at dips ranging between 22° and 32°. Although faulting is observed within the mine, the fault throws appear minor and are generally reverse/strike slip faults.

Coal Bearing and Mineable Seams

Ten (10) Mineable Coal Seams have been identified which are mainly located within Section 1 and Section 2 of the Longtan Formation. Coal seams are generally stable with little variation in thickness and throws occurring.

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Coal Quality

Seams M2+1, M7, M9, M11, and M16 all containing 1/3 Coking Coal, while M20, M21, M22, M23 are categorised as 1/3 Coking Coal, with occasional Coking Coal. RPM notes that only Seam M24 contains mainly Coking Coal; with occasional occurrence of 1/3 Coking Coal.

A review of the data indicates that M9 could potentially be categorised as a highquality metallurgical Coking Coal, while M7, M11, M16 could potentially be used as a coking blending coal; however this cannot be confirmed with the data supplied. Other coal seams: M2+1, M20, M21, M22, M23, M24, due to high content of floating ash or ultra-high sulfur, are only suitable for use as a power coal.

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Figure 5–7 Jianglang Mine Cross Section (A-A’)

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Figure 5–8 Jianglang Coal Seam Correlation Interpretation

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5.1.8 Zude Coal Mine

Local Geological Setting

Strata within the mine generally dip between 8° and 35°, with an average of 15°. RPM notes that the dipping strata are partially influenced by faulting with dips being observed between 45° and 85°. Although faulting is not common in the mine, occasionally it is observed and throws have been identified in the coal strata. RPM notes that seven (7) faults have been identified, however minimal throws have been observed within several of these faults.

Coal Bearing and Mineable Seams

The coal bearing strata includes the marine and continental sedimentary Upper Permian Changxing and Longtan Formations. Three (3) Mineable and four (4) Partially Mineable Coal Seams have been identified with a Mineable total thickness ranging from 3.5 m to 18.8 m.

Coal Quality

All coal is categorised as Coking Coal, consisting mainly of medium-ash coal, with small amount of low-ash and ultra-low to high sulfur coal. Coal is likely to be suitable for coking blending and civil use, however after washing the coal could be used for industrial purposes.

5.1.9 Qingping Coal Mine

Local Geological Setting

The mine is located a structural complex in the region northern portion of the regional Er’le anticline and the west portion of the Shudan Syncline. Coal is observed within strata which strikes northeast, and is observed in length greater than 1,200 m with dips ranging between 15° to 36°. RPM notes that small faults, below 2 m in frequency are observed within production roadways. These faults sets are predominately in the nornortheast direction and influence mine production and the geotechnical designs of the mine.

Coal Bearing and Mineable Seams

The coal bearing strata in the mine consists of the Upper Permian System Xuanwei Formation (P2X) which has an average thickness of 286.4 m. Containing fifteen (15) Mineable or Partially Mineable Coal Seams the average total thickness is 20.0 m. RPM notes that the coal seams are considered stable and the majority of coal is Mineable.

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Coal Quality

The coal within the mine is generally contain medium to medium-high ash, mediumlow to medium volatile, ultra-low ~ medium sulphur contents and medium-high to ultrahigh calorific value. Coal is classified as mainly 1/3 Coking Coal and with small amount of Coking Coal and Gas Coal. However, due to the impact of ash indicators, the ash content of coal in portions of the deposits are occasionally less than 12%, and could be directly used for coking. RPM further notes that with the floating ash content of parts of some seams could be reduced below 12%, and could potentially become good Coking Coal after washing. RPM notes that if the ash content of washed coal is above the 12%, the coal could potentially be used as a coking blend, power coal or for industrial purposes.

5.2 Chinese Coal Quality Comparison

A summary of the Chinese Coal Quality matrix is provided in Figure 5–9 below for reference.

Figure 5–9 Chinese Coal Quality Classification Matrix

==> picture [426 x 254] intentionally omitted <==

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

FAT (FM) GAS-FAT (QF)
(Y<25MM) (Y>25MM)
85 (B>220)
A
COKING (JM)
N
T 1/3 CAKING (1/3JM)
65 H (Y<25MM) (Y<25MM)
60 R (WY) (B<150) (B<220) GAS (QM)
A
C (Y<25MM)
50 I (B<150)
T
E
LEAN (SM) 1/2 CAKING (1/2ZN)
35
30
20
WEAKLY CAKING (RN) LONG FLAME (CY)
MEAGER LEAN (PS)
5
0 MEAGER (PM) NON-CAKING (BN)
0 10 20 28 37
Volatile %
Classified as Lignite (HM) if energy less than 24 MJ/kg
Y and B are Chinese coking indices
RI
CAKING INDEX G
----- End of picture text -----**

Chinese coals are classified on in-situ qualities and hence there is no real equivalent classification for Australian coals, other than coking coal.

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6 DATA VERIFICATION

6.1 Desktop and Site Visit Data Review

The review undertaken by RPM of the 9 Mines included a desktop analysis of the data supplied along with site visits to all mines. During the site visits, which were predominantly completed during the months of March and July 2013 by Senior Chinese geologists and Engineers along with Competent Persons, RPM inspected surface outcrop, underground mining operations, surface transport and stockpile operation, reviewed the general geological setting and controls of coal seam geology and structure, and sighted original and hard copy data. RPM also visited 2 of the 5 washery plants during the site visits and desktop analysis RPM noted the following:

. Limited original coal quality and bore hole documentation was provided for the historical drilling, however documentation was supplied for the recent drilling;
. Update Geological reports with corresponding coal seam correlation interpretation, bore hole loggings and governmental approval have been supplied for Yunxiang, Hexing, Xiangda, Jianglang, Qingping and Yanhe only;
. RPM was able to verify a portion of the recent bore hole locations and confirmed consistency with the plans and sections supplied from the Design (Geology) Institutes, however only limited historical bore holes could be located due to surface disturbances such as farming. RPM confirmed the location of bore holes relative to the mining licences through independent hand held GPS checks;
. Details of the drilling and sampling procedures were not provided however discussions with site personnel and information supplied indicates that Chinese Standards were utilised for all generations of exploration for the historical holes. RPM notes that some coal quality sampling from the recent bore holes was carried out on larger lengths than acceptable by the Chinese standards (See Section 6.2.1);
. RPM was able to verify the location of the shafts, underground working for the 9 Mines and confirmed consistency with the Design Reports and relative position compared to the mining licences and bore hole collars;
. During underground inspection, RPM compared the depleted mining areas against the latest version of the Design Institute plans and long sections. No material issues were noted;
. Inspection of the recent mine workings and discussions with site personnel indicates that appropriate surveys controls are utilised to accurately delineate recent mining depletion areas. RPM notes that historically accurate methods were not used, which results in portions of the mines requiring to be sterilized and excluded from the remnant resource estimated by RPM;

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. Remaining drill core and the digital data provided indicates that limited historical core recovery information was supplied and that portions of the recent drilling have recoveries less than 80%;
. Although detailed in historical Reconciliation Geology Reports, no coal seam correlation data was provided for several of the 2012 reports, nor was the origin of the Coal Quality Determinations provided for verification; and
. Although detailed in the Institutes Geology Reports and utilised to estimate the Chinese Resource and Reserves within the provided Feasibility Studies, the majority of the bore hole hardcopy documents were not supplied. Original hard copy documents are used to verify the borehole data, geophysical logging, Coal Quality determinations, coal beneficiation test work, underground tunnel logging and channel sampling which underpins the resource and reserve estimates.

6.2 Data Quality Review

RPM was supplied with variable amounts of original data for the 9 Mines. A review of the data indicates that RPM considers that four (Yunxiang, Hexing, Xiangda and Jianglang) of the 9 Mines have sufficient data to comply with the JORC Code, however insufficient data was supplied for the remaining to verify all the underlying datasets to sufficient levels to allow reporting to the JORC Code.

Below is a description of the data supplied for the 9 Mines separated Yunxiang, Hexing, Xiangda and Jianglang (the ‘‘4 Mines’’) and the Xingji, Xingjian, Yanhe, Zude and Qingping mines (the ‘‘5 Mines’’).

6.2.1 Yunxiang, Hexing, Xiangda and Jianglang

A review of the data supplied for the 4 Mines indicates that typical Chinese exploration drilling techniques have been employed for all generations of exploration. RPM considers these techniques to be generally suitable for reporting to international standards. RPM has been supplied with a complete set of original documentation for the recent drilling, including coal qualities laboratory certificates, original logging documents, geophysical logs, and several photographs of the core during drilling. In addition, RPM was able to verify the location of up to 40% of the recent holes and several of the historical holes for these mines. RPM compared all available datasets, including the digital coal quality data to the certificate and geophysical logs and determined limited variability, although some variation in core recovers were observed

RPM notes that no original documentation was supplied for the historical drilling data or the coal quality determinations and the majority of the historical bore holes collars cannot be located due to surface disturbances. During the site visit, RPM noted that the coal thicknesses and coal classification (as noted in Section 5) within the underground operations are generally consistent with the historical data supplied. In addition, RPM was able to compare the geophysical data for several historical holes with the digital geology data with excellent

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consistency and that comparisons to the recent bore hole intersections are consistent and coal seam correlation are suitable. RPM further notes that all previous exploration and geology reports supplied by the Client have all been approved by the relevant authorities.

RPM considers that sufficient information is available to confirm the veracity of both the recent and historical datasets which have been supplied for the Yunxiang, Hexing, Xiangda and Jianglang mines and as such it is suitable to underpin a Statement of Coal Resource as defined by the JORC Code. RPM however notes that three issues were noted which effects the confidence of the resulting coal quality data utilised.

Core Recovery

The review of the data supplied to RPM indicated that a number of holes recorded below 80% core recovery. RPM notes that core recovery has a direct relationship with the reliability of the coal quality data which underpins the resource estimates. As the Coal Quality determinations are based on the sample recovered, if significant sample is not recovered then the resultant Coal Quality data may not be representative of the total sample length. Generally a core recovery of >80% is acceptable to industry standards however this is varies based on the variability observed in the coal seams and the amount of stone partings.

RPM notes that the coal quality data supplied for the recent holes indicates that minimal variation is observed between holes, and although some layering occurs within the coal seams, the overall coal quality continuity is high. As a result, during the estimation of the Coal Resource RPM utilised the following parameters to ensure the coal quality data was off sufficient reliability:

. Compared the coal intersections and coal quality data with geophysical logs for consistency. If any anomalous determinations where observed the data was excluded.
. If core recovery was >85%, RPM compared the coal quality data to the surrounding holes. If no anomalous determinations and consistent with the geophysical logs where observed the structure and quality data was accepted. Where no bias in data was identified, boreholes with recoveries greater than 85% were used as base points and used for comparisons of other holes of lessor recoveries.
. If core recovery was between 65 and 85%, RPM compared the coal quality data to the surrounding holes. If no anomalous determinations and consistent with the geophysical logs where observed the structure and quality data was accepted.
. If core recovery was between 50% and 65%. RPM compared the coal quality data to the surrounding holes. If no anomalous readings were observed and the determinations where consistent with the geophysical logs the structure and quality data was accepted, however if no quality data was supplied for the surrounding holes then quality data was rejected and

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. If the core recovery was less than 50%, RPM compared the coal quality data to the surrounding holes. For data continuity however all qualities were rejected. If good correlations could be made from geophysical logs from neighbouring holes, than these holes were treated as a ‘‘structure only’’ borehole, otherwise they were also rejected.

Using the above criteria RPM excluded the coal quality data from several historical holes.RPM notes that the holes excluded were include in structure model and the coal quantities estimates, however were not used in the coal qualities estimates and as such the classification of the Coal Resources.

Sampling Length

RPM notes that sampling of the majority of the recent holes have been has been undertaken on intervals which are larger than acceptable by the Chinese regulation and guidelines. The samples have limited by the coal seam thickness however excludes the internal stone partings (as per the Chinese Standard procedures). RPM notes that although this will limit the ability to determine the internal variable within each seam, RPM notes that the coal seams will be mined in full and as such the Coal Resources have been estimated on weighted averaged coal seam intersections, which include the stone partings. As such, RPM considers that no material change to the coal quality estimates will result from the smaller sample lengths were utilised.

Missing Data

For the three boreholes listed in Table 6–2, coal intersections were recorded in the datasets supplied; however, no coal quality data was recorded. RPM has not been able to determine whether the missing coal quality data was due to poor core recovery or another reason. Although the coal intersection were utilised to determine the coal structure, the lack of coal quality data impacted the JORC Coal Resource classification categories applied to areas surrounding these bore holes.

Table 6–1 Bores Holes Missing Coal Quality Data

Mine	Boreholes	Geological Institute	Period
Yunxiang	ZK603	Yunnan No.143 Coalfield Geological Exploration	1987–1991
		Brigade
Xiangda	1001, 1002	Brigade 1 of Yunnan Provincial Geology Mineral	1989–1991
		Bureau

Additionally, the data for holes CK120 and CK277 from the Hexing Mine were excluded from the dataset due to lack of collar coordinates and original documentation which would have enabled to validate the data.

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6.2.2 Xingji, Xingjian, Yanhe, Zude and Qingping Mines

A review of the data supplied for the 5 Mines indicates that typical Chinese exploration techniques have been employed. RPM considers these techniques to be generally suitable for reporting to international standards; however has not been supplied with the original documentation; including a complete set of core recoveries for the historical bore holes or the coal quality determinations for the holes shown in Table 6–3 to verify these works.

Given the incomplete core recoveries datasets per seam and the inability to verify the datasets provided (via original documentation and limited recent drilling), RPM concluded that the supplied datasets cannot be used to estimate Coal Resources for reporting to the JORC Code.

RPM notes that in order to verify the underlying datasets to be suitable for JORC Coal Resources and JORC Coal Reserves estimates, it is likely that a verification drilling programme will be required for the 5 Mines. Any drilling programme should test the accuracy of the historical drilling and confirm the Coal Quality of each Mineable Seam. Upon completion of this programme the results should be compared to the historical results for verification.

Table 6–2 Bores Holes Missing Coal Quality Data.

Mine	Boreholes	Geological Institute	Period
Xingji	201, 401, 402, 501, 502	Sichuan Coalfield Geological	2010–2011
		Exploration Design Institute
	1408	Guangxi Brigade No.150
Xingjian	ZKJ1–1, ZKJ1–2, ZK1–2, ZK1–3,	Beijing Santaitong Geological	2012–2013
	ZKJ2–1, ZKJ2–2, ZK2–2, ZK2–3,	Development Co., Ltd.
	ZK3–1, ZK3–2, ZK4–2, ZK4–3,
	ZK5–1, ZK5–2
Yanhe	2101, 3201, 3202, 4301	NA	NA
Qingping	ZK2001	NA	NA

7 JORC COAL RESOURCES AND JORC COAL RESERVES

As described in Section 6, a review of the underlying bore hole datasets, geological and mining studies indicates that as at the effective date of the CPR, RPM has been able to verify the data for four of the 9 Mines to sufficient confidence to confirm the veracity of the geological data sets. These mines include the Yunxiang, Xiangda, Hexing and Jianglang (the ‘‘4 Mines’’). RPM notes that the datasets for the remaining mines do not have sufficient data to confirm the data quality and veracity and further verification works are required.

The statements of Coal Resources and Coal Reserves for the 4 Mines have been prepared to be in accordance with the recommended guidelines of the JORC Code and the Australian Coal Guidelines. Below is a summary of the procedures and parameters utilised for the estimations.

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7.1 Coal Resources/Coal Reserve Definitions under the JORC Code

A ‘Mineral Resource’ is a concentration or occurrence of material of intrinsic economic interest in or on the Earth’s crust in such form, quality and quantity that there are reasonable prospects for eventual economic extraction. The location, quantity, grade, geological characteristics and continuity of a Mineral Resource are known, estimated or interpreted from specific geological evidence and knowledge. Mineral Resources are sub-divided, in order of increasing geological confidence, into Inferred, Indicated and Measured categories. (JORC Code — Clause 19).

An ‘Ore Reserve’ is the economically mineable part of a Measured and/or Indicated Mineral Resource. It includes diluting materials and allowances for losses, which may occur when the material is mined. Appropriate assessments and studies have been carried out, and include consideration of and modification by realistically assumed mining, metallurgical, economic, marketing, legal, environmental, social and governmental factors. These assessments demonstrate at the time of reporting that extraction could reasonably be justified. Ore Reserves are sub-divided in order of increasing confidence into Probable Ore Reserves and Proved Ore Reserves. (JORC Code — Clause 28)

The terms ‘Mineral Resource(s)’ and ‘Ore Reserve(s)’, and the subdivisions of these as defined above, apply also to coal reporting, but if preferred by the reporting company, the terms ‘Coal Resource(s)’ and ‘Coal Reserve(s)’ and the appropriate subdivisions may be substituted. (JORC Code — Clause 38)

7.2 JORC Coal Resources Estimation

JORC Coal Resources for 4 of the 9 Mines have been independently estimated in line with the recommended guidelines of the JORC Code and the Australian Coal Guidelines. Below is a description of the procedure and parameters utilised to undertake the estimates.

7.2.1 Procedure and Parameters for JORC Coal Resources Estimation

The geological model was constructed using the Vulcan software. The geological model consists of grid models of the structural features (e.g. geological contacts, roof and floor of Coal unit etc.), and the quality estimates (e.g. ash, specific energy etc.).

Topographic data (contours) were provided by the mine site in MAPGIS software. This was saved as a 3 dimensional contour layer, and converted to a drawing exchange file format to be loaded into the geological model.

The creation of the structure model and the verification of the database were completed in Vulcan Software. The following process was completed:

. The topography was imported and extended over the relevant resource area.
. All boreholes were loaded into Vulcans ISIS Database and validated against elevation with topography, downhole survey, coal seam correlations.

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. Seam roof and floor structure grids, along with quality grids were created.
. A stratigraphic model was created using the structure grids and topographic layer,
. Coal seam thickness cut offs were applied at 0.2 m, and
. Qualities were estimated for each seam. Quality and quantity values were then reported by each seam and corresponding resource polygons for the individual seams. RPM notes that the coal quality and quantity estimates include all the stone partings within the coal seams, and do not include the washed properties of potential saleable products.

All quality composite data was reported on an air dried basis. Relative density values were available for all seams, these were modelled and weight averaged over seam volume. Coal quality models were created for Specific Energy (MJ/kg), Ash (%), Air Dried Moisture (%), Volatile Matter (%), Total Sulphur (%). All models are reported on an air dried basis. Inverse distance weighting was used as the interpolation method. All models were masked using the same limit polygons defined for the structural models. All JORC Coal Resource tonnes have been adjusted for moisture using Preston Sanders equations and are reported on an in situ moisture basis of 2%.

All coal seams have been modelled with the inclusion of the stone partings. The assumed stone qualities (ad) are as listed below:

. Moisture — 1%
. Insitu relative density of 2.1
. Volatile matter — 1%
. Specific energy — 1 MJ/kg
. Total Sulphur 0.1 — 0.2% (range in relation to the host coal seams)
. Raw Ash — 100%

The parameter assumptions applied to the JORC Coal Resource estimates are outlined in Table 7–1.

Table 7–1 JORC Coal Resources quantities Estimation Parameters

Parameter Coal Seam Thickness (m) Dip Angle <25° ≥0.7 26°~45° ≥0.6 >45° ≥0.5 Maximum Ash (Ad %) 40 Maximum Total Sulfur (%) 3

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In addition to the above estimation parameters applied, RPM noted the following to ensure an accurate representation of the underlying geology, structural complexity and likely mine method:

. The JORC Coal Resources estimates were based on latest mining licences or expansion areas supplied by the Company and reviewed by RPM during the site visits;
. Only Mineable Coal Seams (as defined in Annexure B) were included as part of the JORC Coal Resource estimates using the parameters shown in Table 7–1;
. The area used to estimate the JORC Coal Resources quantities covered all currently identified seams within the current mining and the expansion areas. Non-recoverable areas due to mining and geotechnical conditions, and licence barrier pillars have been excluded;
. Other than the licence barrier pillar, no areas have been excluded due to surface restrictions. The surface restrictions are minimal and are unlikely to have a material impact on the JORC Coal Resources quantities for any mining area; and
. RPM notes that the JORC Coal Resources estimated are restricted by the vertical limitations, and excludes the Mineable Coal Seams above and below. The two mines under consolidation or expansion of the licence area (Yunxiang and Jianglang) have been reported within the combined total mining licence and mining tenement areas (current mining tenement extension, inclusive of the original mining licence). The remaining two mines are reported within the current mining. In addition, the current mining pillar and the current mining areas of depletion are excluded from the JORC Coal Resource estimates.
. Estimates for individual seams by categories have been rounded down to the nearest 100 kt for Measured, Indicated and Inferred total JORC Coal Resources by category are rounded up to the nearest 500 kt to reflect the overall accuracy of estimates.

7.2.2 Validation

Validation of the geological model against the borehole database was completed in order to confirm the estimation methodology. The steps undertaken during this process include:

. A series of approximately cross sections was created to compare the bore holes to the estimates. An iterative process of reviewing and correcting any observed anomalies was continued until a satisfactory result was achieved.
. Contour plots of modelled coal quality parameters were generated for each seam and reviewed.
. Comparison of histograms and basic statistics of the input composite data and the estimated values from the grid models.

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. Vulcan ‘‘Grid Calc’’ validation tools, validate database and fix downhole database were run.
. A Vulcan HARP model was created and checked against the stratigraphic model for errors and completeness.

7.2.3 Statement of JORC Coal Resources

The results of the independent Coal Resources estimate for the 9 Mines are tabulated in the Statement of JOC Coal Resources in Table 7–2 below, and are assigned the appropriate confidence categorisations of Measured, Indicated and Inferred, as noted in Section 7–1. RPM notes that JORC Coal Resources have been able to be estimated for only four of the 9 Mines, due to the inability of RPM to verify the underlying geological and bore hole datasets for the remaining 5 Mines.

RPM has reported the JORC Coal Resource estimates in accordance with the JORC Code and therefore these estimates are suitable for public reporting and meet the reporting standards of Chapter 18 of the HKEx listing rules.

Determination of ‘‘level of confidence’’ by RPM was based on the categorising the seam characteristics as ‘‘simple’’, ‘‘moderate’’ or ‘‘complex’’. The seam characteristics included:

. variability of seam thickness (including seam splitting),
. variability in coal quality parameters, and
. structural complexity

Based on the level of complexity within the Projects, RPM classified the resource estimates into categories based on the following drill spacing:

. Measured — 0–500 m (radius of influence 250 m).
. Indicated — 500–1,000 m (radius of influence 500 m).
. Inferred — 1,000–2,000 m (radius of influence 1,000 m).

The above level of confidence categories were further modified seam-by-seam as can be seen graphically in the series of plots in Figure 7–2 to Figure 7–5. Other parameters were taken into account including the number of drill holes, extent of drilling down dip and amount of representative coal quality data. RPM has estimated a total JORC Coal Resource quantity of 95.5 Mt of Measured, 74.5 Mt of Indicated and 7.5 Mt Inferred. A further breakdown by mine is provided in Table 7–2, and is graphically show in Figure 7–1. Minimum thickness cut off of 0.2 m was applied to all seams. Only coal less than 3% Sulphur was reported.

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Table 7–2 Statement of JORC Coal Resources as at 30 June 2013 with the Current Mining Licence, Expansion and Consolidated Areas

Mine Yunxiang Xingji Xiangda Hexing Xingjian Jianglang Yanhe Zude Qingping* Total	Measured 39.5 — 34.5 — — 22.5 — — — 97.5	Quantity (Mt) Indicated Inferred 8.5 2.5 — — 5.0 — 39.0 2.5 — — 20.5 2.0 — — — — — — 73.5 7.0	Ash Moisture Total Sulphur Volatile Matter Specific Energy RD Total % % % % (MJ/kg) (GAR) cu.m/t 50.5 22.6 0.8 0.5 21.5 26.9 1.5 — — — — — — — 39.5 31.0 0.8 0.2 16.2 24.2 1.4 41.5 14.9 0.9 — 17.1 36.2 1.4 — — — — — — — 45.0 22.9 0.7 0.9 24.1 27.1 1.5 — — — — — — — — — — — — — — — — — — — — — 177.5

Note: Figures reported are rounded which may result in small tabulation errors.

RPM notes that limited S data was supplied for Hexing; as a result S has not been estimated.

All tonnes are reported out on in situ moisture basis of 2% using Preston Sanders.

Unless otherwise stated qualities are quoted on air dried (ad) basis.

JORC Coal Resources cannot be estimated due to data validation issues (Section 6).

RPM notes that Coal Quantities and Coal Quality data estimates in the stone partings and are not coal only estimates. The estimates of Sulphur, Volatile Matter and Ash Content for the main seam within the 4 Mines are shown graphically in the contour maps in Figure 7–6 to Figure 7–9, with the remainder shown in Annexure H.

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Figure 7–1 Graphical Representation of JORC Coal Resources quantities as at 30 June 2013

==> picture [453 x 180] intentionally omitted <==

RPM notes that the licences of two of the four mines which have JORC Coal Resource estimated are under consolidation and expansion surrounding the current mining licences, namely the Yunxiang and Jianglang Mines. Information supplied to RPM indicates these areas are designated by the local provincial government and regulatory authority, however are still subject to the approval process. Although the licences are yet to be approved, RPM considers it likely that these will be received and as such there are reasonable prospects for economic extraction.

For transparency RPM has estimated the JORC Coal Resources within these areas, as outlined in Table 7–3. In addition, RPM presents the JORC Coal Resources quantities within the current mining licences in Table 7–4. Table 7–3 Statement of JORC Coal Resources quantities as at 30 June 2013 within the Expanded Licence areas

Mine Yunxiang Jianglang Total	Measured 9.5 20.0 29.5	Quantity (Mt) Indicated Inferred 2.0 — 15.0 2.0 17.0 2.0	Total 11.5 37.0
			48.5

Note: Figures reported are rounded which may result in small tabulation errors.

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Table 7–4 Statement of JORC Coal Resources quantities as at 30 June 2013 within the Current Mining Licence areas

Mine Yunxiang Jianglang Total	Measured 30.0 2.5 32.5	Quantity (Mt) Indicated Inferred 6.5 2.5 5.5 — 12.0 2.5	Total 39 8
			47

Note: Figures reported are rounded which may result in small tabulation errors.

Figure 7–2 Yunxiang Resource Classification Plans for Seams C9 and C17.

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Figure 7–3 Xiangda Resource Classification Plans for Seams C9 and C12.

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Figure 7–4 Hexing Resource Classification Plans for Seams C9 and C11.

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Figure 7–5 Jianglang Resource Classification Plans for Seams C11 and C21.

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Figure 7–6 Yunxiang Mine Coal Quality Contour Maps with Drill Holes for Seam C9.

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Figure 7–7 Xiangda Mine Coal Quality Contour Maps with Drill Holes for Seam C13.

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Figure 7–8 Hexing Mine Coal Quality Contour Maps with Drill Holes.

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Figure 7–9 Jianglang Mine Coal Quality Contour Maps with Drill Holes.

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7.3 Estimation of JORC Coal Reserves

The process used by RPM for the estimation of JORC Coal Reserve quantities is summarised as:

. Reviewed the Coal Resources estimates and characterised coal within the mines;
. Reviewed the Chinese Feasibility and Design Studies including the operating and capital costs;
. Reviewed the current and proposed mining methods and current life of mine designs;
. Verified the mining losses and dilutions applied in the Feasibility and Design Reports as reasonable for use in a JORC Coal Reserves quantities estimates and compared with historical recoveries and mine plans to ensure consistency (where possible) and appropriateness.
. Completed economic modelling to determine the economic viability of extraction of the coal based on the assumptions as outlined below, and
. The JORC Coal Reserves estimates are restricted by the vertical limitations, and exclude the Mineable Coal Seams above and below. The Yunxiang mine which has estimated Coal Resources under consolidation or expansion of the licence area have

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been reported within both the current mining licence and the expanded area based on the currently proposed coordinates. All other mine are reported within the current mining licence only.

RPM notes that only the Yunxiang, Xiangda, Hexing and Jianglang Mines have JORC Coal Resources. Furthermore, upon review of the Feasibility Study and mine design reports for the 4 Mines, RPM notes that no mining studies have been completed for the Jianglang mine, as such no Coal Reserves have been estimated. RPM is unable to estimate JORC Coal Reserves for the remaining 5 Mines, as these do not have JORC Coal Resources.

7.3.1 JORC Coal Reserves Estimation Parameters

RPM has determined suitable technical parameters to apply in the JORC Coal Reserves estimation process following discussions with site personnel, review of the Feasibility and Design Study Reports and the proposed life of mine plans, mining method, and historical and forecast recoveries to the areas of the three mines, where Indicated and Measured JORC Coal Resources have been estimated.

JORC Coal Resources classified as Inferred cannot be used for Coal Reserves estimation, and were not considered as per the JORC Code guidelines.

The historical Resource Recovery and Mining Dilution factors from production are shown in Table 7–5.

Table 7–5 Historical Resource Recovery and Mining Dilution Performance of the 3 Mines

	2009		2010		2011		2012
	Recovery	Dilution	Recovery	Dilution	Recovery	Dilution	Recovery	Dilution
	(%)	(%)	(%)	(%)	(%)	(%)	(%)	(%)
Yunxiang	Not	Supplied	95	14	95	12	95	11
Xiangda	95		95	12	95	11	95	10
Hexing	Na	Na	92	14	92	13	92	11

7.3.2 JORC Coal Reserves Estimation Procedure

The following steps were completed to accurately estimate JORC Coal Reserves quantities:

. Vertical sections were created around seam correlations to determine the average tonnage for each planned mining panel.
. RPM determined a minimum apparent mining thickness for each mine (0.8 m for Yunxiang and 0.9 m Xiangda and Hexing), based on the proposed equipment, estimated operating costs, coal transport and washing costs, and coal prices. RPM then generated target areas within each of the mineable coal seams and created panel layouts. Relevant tonnes were then estimated using RPM’s Underground Coal

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software package XPAC Underground Coal Solutions. RPM notes that only Mineable seams on Measured and Indicated JORC Coal Resources quantities were included, while the high sulphur coal was excluded.

. The appropriate mining dilution was applied to determined ROM coal tonnages for each coal seam. The mining dilution estimates were validated against historical production for the relevant seams, and the technical reports supplied for the employed mining method.
. The ROM coal tonnes and coal qualities were estimated for each coal seam on each planned longwall panel mining level. RPM notes that safety pillars were based on the Design Reports, and modified based on the historical production where appropriate. Recovery factors include but are not limited to safety pillars, mine pillars, boundary pillars and longwall loses.
. Modifying factors were applied to incorporate the effects of depth of cover of individual seams and also interburden thickness between seams, and the likely reduction in coal recovery from these two issues.
. The longwall tonnages and coal qualities per coal seam and the gateroad development tonnages and coal qualities per coal seam were combined to form the JORC Coal Reserves quantities for the 3 Mines. Main headings development was excluded from the Reserve estimates.
. Review the mining area and licence details to ensure JORC Coal Reserves quantities lie within licence or expansion areas and exclude the mining depleted area and mineable seams above and below the current mining licence areas, and
. An economic model was generated for each of the three Mines incorporating operating and capital costs and revenue. RPM reviewed the operating and capital cost estimates prior to applying them in the economic model. Additional capital costs were included in the economic model to allow for sustaining capital over the life of mine for the installed equipment and infrastructure.

7.3.3 JORC Statement of Coal Reserves

The Proved and Probable JORC Coal Reserves estimates for the 3 Mines are summarised in Table 7–6 while a detailed breakdown by seam and classification is provided in Annexure F. The Measured and Indicated JORC Coal Resources quantities reported in Section 7–2 are inclusive of, and not additional to, the JORC Coal Resources quantities modified to produce the JORC Coal Reserves estimates reported below. RPM has estimated a total JORC Coal Reserves quantities of 0.1 Mt of Proved and 34.7 Mt of Probable reserves.

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Table 7–6 JORC Statement of Coal Reserves Estimate as at 30 June 2013 within the Current Mining Licence, Expansion and Consolidated Areas

Mine Yunxiang Xiangda Hexing* Total	Proved — 0.1 — 0.1	JORC Coal Reserve (Mt) Specific Energy ROM Ash Moisture Sulphur VM ARD Probable Total MJ/kg (Qgr, d) % ad % % % cu.m/t 10.9 10.9 22.7 33.5 5 0.45 18.2 1.62 9.1 9.2 24.2 29.8 5 0.19 16.2 1.53 14.7 14.7 31.3 25.0 5 14.9 1.52 34.7 34.8

Note: Figures reported are rounded which may result in small tabulation errors.

Figures assume 5% Moisture Content.

No sulphur test results were provided to RPM for Hexing, however based on the sulphur results for the same group of seams at Xiangda and Yunxiang, RPM are of the opinion that high sulphur is not likely to be an issue at Hexing.
Some panels in C20 Seam at Hexing lie just outside the approved mining elevation range (1,700–2,100 m). The associated tonnes (approximately 0.3 Mt) have been excluded from the JORC Coal Reserve estimates.

The Coal Quantities and Qualities provided for the Coal Reserves are not Marketable Coal Reserves and do not include washability test work, see Section 7.4.1 for further details.

Figure 7–10 Graphical Representation JORC Coal Reserves quantities as at 30 June 2013

==> picture [453 x 180] intentionally omitted <==

RPM notes that the licences for the Yunxiang Mine are under consolidation and expansion surrounding the current mining licence. Information supplied to RPM indicates this area is designated by the local provincial government and regulatory authority to the Company, however is still subject to the approval process. Although the licence are yet to be approved, RPM is aware the approval process is underway and sufficient Reserves are contained within the current licence to ensure the forecast schedule is meet prior to the likely timing of the

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approval process. As a result RPM considers it likely that these will be received and as such there is reasonable assumption for mining to be able to be undertaken within the timeframe to receive the required regulatory approval, as outlined in Section 3.1. For transparency RPM has estimated the JORC Coal Reserves within these areas, as outlined in Table 7–8. In addition RPM presents the JORC Coal Resources quantities within the current mining licences in Table 7–9.

Table 7–7 Statement of JORC Coal Reserves Estimate as at 30 June 2013 within the Expanded Licences Areas for Yunxiang

Mine	Mineable Proved	Reserve (Mt) Probable	Total
Yunxiang	—	5.7	5.7

Note: Figures reported are rounded which may result in small tabulation errors.

Table 7–8 Statement of JORC Coal Reserves Estimate as at 30 June 2013 within the Current Mining Licence for the Yunxiang

Mine	Mineable Proved	Reserve (Mt) Probable	Total
Yunxiang	—	5.2	5.2

Note: Figures reported are rounded which may result in small tabulation errors.

7.4 Comments

7.4.1 Coal Reserves Vs Marketable Coal Reserves

RPM has not estimated Marketable Reserves, due to the limited amount of washability data supplied. Information provided indicates that total yields are typically high, with coking or blending coal splits being able to be produced from many of the seams. A secondary thermal split is available from these seams, comprised of middlings and tailings. Historically production records indicate that typically only a small portion of the ROM coal reports to washery rejects. RPM have inspected 2 of the relevant 5 washeries for the mines for which JORC Coal Reserves have been reported and considers that the coal haulage and processing plans for the future of the operations are viable.

7.4.2 Economic Model

In order to validate there is reasonable probability that the reported reserves of the 3 Mines are economically viable as per the requirements of the JORC Code, RPM undertook an economic analysis to provide an order of magnitude estimate of the potential of the mining quantities as it is now understood. This analysis was based on production schedule developed by RPM employing defined mining plans, geotechnical parameters and coal quality information of the various coal seams. RPM also referenced available Feasibility Studies and projected

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annual production levels as provided by the company (Hidili). RPM further analyzed direct operating costs, indirect costs, capital spending, and price projections for the principal mine product. These inputs were compiled with the projected operating schedule and a forwardlooking economic model was created for the completion of cash-flow analysis, yielding positive Net Present Value for all the three mines.

RPM further derived a price regression equation to estimate the price of coal for each operating year, using ash content of annual coal tonnes as specified in the production schedule and forecast price provided by the Company.

It should be noted that production costs are dependent on a number of factors; such as deposit in-situ characteristics, depth of excavation, geotechnical considerations, ventilation requirements, groundwater dewatering and inflation. Therefore, comparison with similar projects within the region was adopted to assess the reasonableness of cost assumptions used in the Chinese Feasibility Study. Generally, the project operating costs and capital costs appear to have been developed using a reasonable methodology.

7.4.3 Licences and Approvals

RPM is aware that the Yunxiang mining is under a consolidation with the surrounding area, which will likely result in the horizontal expansion of the current mining licence area. Furthermore the current Feasibility Studies indicate that the production capacities all three mines are above the current mining licence capacities. RPM notes that the approval process for the consolidation and updated (increased capacity mining licences) are underway and have been informed that the licences will be gained prior to the achievement on the planned expansion.

The JORC Coal Reserve estimates for the 3 mines is contingent on relevant approvals being granted for the consolidation and expansion areas, as well as the planned increased production capacities. Delays to these approvals may postpone production which potential could have an adverse effect of the JORC Coal Reserve estimate and associated mine plans and cost profiles.

7.4.4 Extraction Sequence

The life of mine production schedules which underpin the JORC Coal Reserves have been estimated by RPM based on extraction of the upper seam being mined first, followed sequentially by each underlying seam (‘‘top down mining’’). RPM considers this to be the Base Case scenario; however there is scope to optimise the mine economics by mining some areas of the lower seams out of sequence. RPM notes that there are limitations for the optimal sequence of seam extraction due to the seam thickness and/or coal quality issues.

The Base Case scenario of mining the upper seams, followed sequentially by the lower seams is known as ‘‘Undermining’’ and is the standard method employed in a multi-seam environment, such as that existing in the 9 Mines. ‘‘Overmining’’ occurs when the upper seam is extracted after mining has been carried out in one or more of the lower seams. Several reasons exist to mine the lower seam first; however, the majority of situations are due to more attractive seam thickness or coal quality parameters occurring in the lower seams. Mining of

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the lower seam first generally results in a zone of fractured rock above the mined out area. This potentially impacts the geotechnical conditions of the seams above and as a result difficult mining conditions if the distance to the upper seam is too small.

The general consensus in China is that 30m is a reasonable minimum distance between seams prior to the Overmining method being employed. RPM notes that there remains a risk that conditions at a specific location will not conform to the 30m assumption or that the mine operators will attempt to undertake Overmining with a smaller thickness of material between the two seams concerned. This will invariably result in a reduction in recoverable coal. RPM has not reduced JORC Coal Reserves in consideration of this issue, however highlights that it remains a significant risk to the estimated Coal Reserves not being recovered.

In areas where adjacent seams are close together, there is an elevated risk associated with extraction of the second seam. The Chinese coal mining industry has developed ways to facilitate the extraction of ‘‘Ultra Close’’ seams, including the use of steel mesh when extracting the first of the two seams. This creates a false roof when extracting the second seam and assists with controlling mining conditions, however there are numerous hazards that provide elevated risk levels when the distance between two seams is small.

RPM notes that a significant portion of the coal seams within the three mines which have Coal Reserves estimated are less than 20m. As a result, to account for the likely coal loss due to geotechnical issues, RPM have applied a ‘‘Multi Seam Loss’’ factor to each of the seams, with the loss factor increasing as the distance between any two seams decreases. These factors has been calculated based on a linear regression equation and is based on site visit observations.

7.4.5 Geotechnical

The three mines operate in a relatively weak geotechnical environment, characterised by low strength rock material above and below the coal seams. A poor geotechnical environment can create difficulties in the development of underground roadways and their stability during the life of mine requirements. During the site visits RPM noted that the support methods for the roadways are generally low technology, when compared with industry practice in western countries such as Australia and the USA.

Discussions with site personnel indicated that when challenging ground conditions were encountered which impacted production, normal operations were generally stopped. Development of the longwall gateroads were ceased and the longwall equipment was installed earlier than planned. This resulted in longwall panels shorter than initially planned, with a corresponding reduction in recoverable coal. RPM notes it may be possible to upgrade the ground support methods and employ more advanced support technology, however this would likely result in the longwall unit having to work in more challenging conditions than it currently does. With the steep seam grades and low capacity (typically 450t) longwall roof supports, RPM are of the opinion that it would not be prudent to subject the longwall production equipment to higher ground stresses. In addition it may be possible to purchase higher capacity longwall roof supports, however the higher capacity LW supports would be

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considerably heavier and significantly more difficult to transport around the mine. RPM believe that the current arrangement with ground support and longwall equipment capacity provides a good balance, complementing each other reasonably well.

RPM highlights that there will be random occurrences of areas not being mined due to difficult ground conditions in driving development roadways through the area. Each of these areas will result in a loss of recoverable coal for that seam. There is not sufficient geotechnical data available for RPM to be able to predict where these areas will be or apply an accurate estimate of tonnages. As a result RPM have applied a ‘‘Geotechnical Loss’’ factor to each of the seams, with the loss factor increasing as the depth of cover increases.

7.4.6 Mining Depletion

RPM is aware that some areas of the historical workings have not been accurately surveyed, as such have not been included in the depletion areas supplied to RPM. RPM notes that the majority of these un-surveyed areas are within areas of the mine which do not form part of the forecast production as RPM has excluded them for geotechnical reasons. As a result RPM considers that any remanent coal which is not surveyed accurately will not have a material impact on the JORC Coal Resources or JORC Coal Reserves Statements.

7.4.7 Government Mining Restrictions

RPM is aware that a mining accident in a nearby mine (not owned or operated by the Company or any of its subsidiaries) occurred in December 2012. RPM understands that this accident bears no relation to the Company’s mines or its operations; however is not aware of the particulars of the accident. As a result of this accident, the local government authorities have ceased operation of all mining activities within the nearby mines, including the Company’s 9 Mines. RPM is aware that several operations have recommenced operation, and has been informed that normal operation within the Company’s 9 Mines recommenced in August 2013.

The JORC Coal Reserve estimates and the ramp up schedules which form the basis for the revenue cost analysis to confirm economic viability of the mines has assumed that no production cessations occur due to government restrictions or accidents. Any cessation in mine production which is not forecast will likely have a material impact of the cost profile of the operation effected, and as such the estimation of Coal Reserves.

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8 MINING

The Company has previously engaged various Design Institutes to complete Chinese Feasibility Studies for each of the 9 Mines. RPM has completed a review of these Chinese Feasibility Studies and their associated Design Reports. These Feasibility Studies outline the Project’s proposed production profile, operations and costs. Below is a summary of the mining methods currently employed and planned to be employed at the 9 Mines. This summary also includes observations made by RPM during the site visits.

8.1 Mining Operations

All mining extraction activities are undertaken using underground mining methods, however these are supported by surface operations. Various underground mining methods, rates and scales are utilised for the 9 Mines as summarised in Table 8–2. Generally the mining process can be separated in three major components, Underground Mine Development, Coal Extraction and Surface Operations, these are detailed below.

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	Capacity	per annum	(kt)	326	242	295	465	583	342	167	290	424	380	401	230
		Capacity	per day (t)	1,161	862	1,116	1,762	2,208	692	673	1,170	1,426	1,355	1,431	873
		RAD	(cu.m)	1.48	1.44	1.35	1.4	1.32	1.64	1.35	1.36	1.46	1.38	1.39	1.4
	Mining	recovery	(%)	97	97	93	95	97	93	95	95	95	97	97	95
Annual	Advance	Rate (m)	(longwall)	1,200	1,400	634	1,267	713	495	792	792	1,497	1,515	1,515	995
	Scheduled	Reach Rate	(%)	85	85	80	80	80	75	75	75	90	85	85	80
	Retreat Rate	Per day (m/d)	(development)	4.28	4.99	2.40	4.80	2.70	2.00	3.20	3.20	5.04	5.40	5.40	3.77
	Mining	Height	(m)	1.26	1.03	4.63	2.3	4.12	3.78	1.64	2.83	1.7	1.25	1.31	1.34
	Panel	Width	(m)	150	120	80	120	155	60	100	100	120	150	150	130
Operating	Hours Days	Dip Angle Shifts Per Shift Per Year	Mine (°) Per Day (hours) (Days)	Yunxiang 25 3 8 330 25 3 8 330		Xingji 18 3 8 330	Xiangda 3 8 330	Hexing 4–15 3 8 330	Xingjian 25–35* 3 8 330	30* 3 8 330	Jianglang 30* 3 8 330	Yanhe 27 3 8 330	Zude 8–28 3 8 330	8–29 3 8 330	Qingping 15/25 3 8 330	Note: * Approximate Dip angle, varies slightly but not recorded.

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8.1.1 Mine Underground Development

Mine Development includes the driving of inclines, main headings and gateroads. These developments are known as primary extraction, as they represent the first stage of mining and are utilised to transport coal, waste material and mining equipment to and from surface. Development also includes the mined material which is required to ‘set up’ the longwall blocks. Various types of mine development occur, the types utilised within the 9 Mines are described below. RPM notes that the majority of future Mine Development will be in coal, with minimal waste material mined and requiring storage on surface.

The mine designs for the major seams for each of the Yunxiang, Xiangda and Hexing Mines are shown in Figure 8–1 to Figure 8–3.

8.1.1.1 Inclines

Inclines provide access to and from the surface and the different levels of the mine for transport, conveyors, and mine services. They may be developed in stone (rock) or coal. An Incline is designed to last for the life of the mine, or the life of the district of the mine they are required to service.

8.1.1.2 Main Headings

Main Headings are a network of roads that support all the mines services. They connect coal conveyors from the mining areas to the main conveyor for transport to the surface. The various roadways are used for storage of consumables. The main mine services such as underground power, and water pumping are all managed from the Main Headings. They may be driven in stone (rock) or coal. The life of the Main Headings is for the life of the mine, or as long as it is required to supply services to the working faces they are connected to.

Both Inclines and Main Headings also provide supplies and services (such as fresh air, water, and compressed air) for mining activities as well as return air roadways, waste water management (pumping lines and systems).

8.1.1.3 Gateroads

Gateroads are developed on either side of a planned longwall panel. The gateroads are connected to each other by a ‘‘face’’ road. The gateroads supply services to the longwall, such as conveyors, fresh air, water, consumables, power, compressed air and transport, and also provide an escape way for the for the ‘return’ air (fresh air that has been contaminated by dust and gas as part of the mining process) to pass.

Gateroads may be driven in stone (rock) or coal. The life of the gateroad is for as long as it is required by the longwall panel it is servicing.

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Inclines, main headings and gateroads may be developed either in stone or coal. Development in stones is performed by drill and blast techniques which are very common and used throughout China and internationally. Development in coal will be performed with the aid of machines known as ‘road headers’. The use of road headers is an effective method of extracting the coal.

8.1.1.4 longwall Processes

A longwall mining system is a high production rate mining method which utilises a shearer to cut coal across a mining coal face. Mining faces can vary from 30 to 400 m in width and approximately 1 to 5 m in height. Coal extracted from a longwall face is conveyed along the face and transported to the surface via a system of belt conveyors. The methods employed within the 9 Mines are detailed in Section 8.2.2.

8.1.1.5 Underground Coal Handling

Coal is transported underground via a network of conveyors, eventually being loaded into an underground storage bin. Conveyors are then be used to transport coal to the surface, where it is loaded into storage bins for transport to wash and preparation plants for Beneficiation or directly to market for sale.

Figure 8–1 Yunxiang Mine C3 Seam Mine Design and Long Panel Layout

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Figure 8–2. Xiangda Mine C19 Seam Mine Design and Long Panel Layout

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Figure 8–3. Hexing Mine C9 Seam Mine Design and Long Panel Layout

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8.1.2 Coal Extraction Methods

The mining plans in the 9 Mines categorise the seams to be mined into thin (0.7 to 1.3 m) or moderate (1.3 to 3.5 m) coal seam thickness. The majority of the coal seams dip with averages ranging 20º and 60º.

The mine designs is based on the Chinese design code. It is common within China that the thin and dipping coal seams be extracted using the longwall methods. This method is particularly prevalent in the Yunnan province, where the coal seams are generally thin and dip. In applying this code, the methods are employed to extract the coal in mines summarized as following:

Mechanised

Upon development of the longwall blocks, the longwall machinery will be installed. This machinery includes the use of a shearer to mine the coal along the face, roof support hydraulic shields, and a coal clearance system which is generally a chain conveyor (armoured face conveyor ‘‘AFC’’) over which the shearer travels up and down the longwall face. As the shearer cuts out the coal, the shields behind the shearers’ direction of travel are lowered and stepped towards the new face, and raised to provide positive pressure to the newly exposed roof, and maintain the roof support. Once a full pass is completed, a small notch is cut out at the end of the face the AFC is pushed forward and flush against the face by hydraulic rams connected to the shields. The process then starts again with the shearer cutting out the new section of the face. The mine design and longwall panel layout for the main seams within the Yunxiang, Xiangda and Hexing Mine are shown graphically in Figure 8–1 to Figure 8–3.

Modified Mechanised

Modified-Mechanised longwall mining systems processes include the use of a shearer to mine the coal along the face with roof support will be provided by hydraulic props or modified simple shields with articulated metal roof beams. The coal clearance system is similar to the Mechanised method utilising a chain conveyor, such as AFC. As the coal is cut out by the shearer, the rear props behind shearers’ direction of travel are manually lowered and moved towards the new face, and raised to provide positive pressure to the newly articulated metal roof beams to support exposed roof, and maintain the roof support. Once a full pass is concluded, a small notch is cut out at the end of the face the AFC is pushed forward and flush against the face by individual hydraulic rams connected to the forced props. The process then starts again with the cutting out the new section of the face.

Drill and Blast

Drill and Blast, as a manual longwall mining system, range from labour intensive drill and blast faces with manual use of hydraulic props for roof support to semiautomatic mechanised longwall systems. The longwall processes include the use of drill and blast to mine the coal along the face, roof support will be provided by hydraulic props with articulated metal roof beams, and the coal clearance system along the face is a

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chain conveyor. As the coal is cut out by drill and blasting, the rear props behind the blasting direction of travel are manually lowered and moved towards the new face, and raised to provide positive pressure to the newly articulated metal roof beams to support exposed roof, and maintain the roof support. Once a full pass is concluded, a small notch is cut out at the end of the face the AFC is pushed forward and flush against the face by individual hydraulic rams connected to the forced props. The process then starts again with the cutting out the new section of the face.

AFDS

Apparent Dip Flexible Shields Mining (‘‘ADFS’’) system is a modified form of longwall mining utilised in steeply dipping to vertical coal seams. Although an ADFS mining system produces a significantly lower production rate compared to a conventional longwall system, the ADFS mining system can be used where the apparent dip reaches 35° or more. The face can vary from 30 m to 130 m in width and approximately 1 m to 5 m in height and is supported by metal flexible shield units. Coal extracted from a downside face is generally transported to the lower gateroad via a system of automatically slipping chutes.

A typical section is graphically shown in Figure 8–4.

Figure 8–4 AFDS Coal Mining Method

==> picture [427 x 290] intentionally omitted <==

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8.1.3 Mining Method Summary by Project

During the review of the 9 Mines RPM noted that due to the varying dip angle, coal seam thickness and parting sizes, several different mining methods are employed within the mine. Table 8–2 summaries the methods used in each of the 9 Mines.

Table 8–2 Summary of Mining Method for the 9 Mines

		Modified-	Drill &
Mine	Mechanised	Mechanised	Blasting	AFDS
Yunxiang	√	√
Xingji	√
Xiangda	√
Hexing	√
Xingjian				√
Jianglang				√
Yanhe	√
Zude	√		√
Qingping	√

8.1.4 Surface Operations

Surface operations consists of predominately support infrastructure and services for the underground operations. Operations generally focus on the movement of coal from underground to markets or wash plant, maintenance of equipment’s or office administration. The infrastructure generally on each site is described below.

Industrial Yard

The Industrial Yard services all surface facilities and generally includes the following:

. Main and auxiliary shaft processing system, combined building (production dispatching office and change room);
. ROM stockpile, coal surface processing system, and coal load-out facility; and
. Machinery repairing shop, timber prop process room, underground wastewater treatment plant, power transmission station and gas drainage station.

The narrow-gauge railway and auxiliary road is the main transport inside the industrial yard. Gravel roads then connect to the highway locally.

RPM notes that industrial yards in the majority of the 9 Mines layout are restricted by the local topography. The Design reports have resolved the issues fully utilising the terrain and facilities being established at different elevation levels. As such these designs

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will also be compatible with the natural terrain, minimise earthworks by balancing excavation and project requirements. A suitable drainage system has been arranged for each mine site that allows rainwater to be drained quickly and smoothly.

Coal Handling

Coal is generally transported underground via conveyor system to underground bins. Another enforced conveyor system will then be used to haul coal up the main access to the surface.

Once on the surface, Coal is conveyed from the mine via enforced conveyor systems into a storage bins or stockpiles that has been designed in Preliminary Design or Mining Plan Reports. From the bins or stockpiles, coal is handled primarily by manual screen processing systems. Through processing, the stone will be picked out, then the coal will transported to wash plants for beneficiation or directly to market for sale.

Water Supply

There are several sources of water for the mines:

. Water from the mine underground aquifers; and
. Rivers and streams.

Mine water is predominately utilised for dust management and fire fighting systems, and is sourced from the mine waste water treatment plants. Additionally water suitable for domestic applications is generally sourced from the above mentioned possible resources.

RPM are of the opinion that the proposed system should be sufficient to satisfy the needs of the 9 Mines.

Power supply

35kV substations have been built at the within industrial yards of each mine. The mine will reduce the voltage, as necessary, for supply to the mine. With the Chinese regulatory mandatory, dual circuit of power lines are cited, RPM are of the opinion that the proposed power supply system should be sufficient to satisfy the needs of 9 Mines.

Ventilation

In order to ensure a high rate of productivity, the longwall and ADFS need face velocities of approximately 1.4 m/sec to effectively control the face methane emissions and minimize dust exposure to the personnel operating at the coal face. The Preliminary Designs details different methods for each mine but mainly comprising either a centralised exhaust ventilation system or a districted exhaust ventilation system. In general the main and auxiliary inclined shafts act as air intakes while the ventilation inclined shaft act as air return. Chinese regulations require the installation of a standby or backup ventilation fan, so preliminary design further recommends the use of two axial flow fans each sufficient capacity.

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RPM are of the opinion that each proposed ventilation system should be sufficient to satisfy the needs of 9 Mines.

Methane Degasification and Drainage Station

Three underground degasification technologies are utilised within the 9 Mines, these include parallel-seam degasification of the coal in advance of mining, parallel-seam degasification of development in coal seams, and Goaf degasification.

The Preliminary Design and Mining Plan Reports have designed the Drainage Stations for the mines that are required. RPM consider that the proposed degasification system is consistent with Chinese standards and is appropriate for mines. RPM notes that degasification will play a crucial role in decreasing the methane emission and require careful management to ensure safe operations are maintained.

Moisture system

Environmental monitoring sensors are strategically located throughout the mines to ensure safe climate conditions. All monitored data transmitted to the surface for monitoring by site personnel. All mine monitoring systems are required to incorporate the capability of transmitting data to the city or autonomous region safety bureau.

The mine monitoring system for the 9 Mines are designed for monitoring airflows, carbon monoxide (‘‘CO’’), carbon dioxide (‘‘CO2’’) and methane (‘‘CH4’’) in the mine atmosphere at multiple (and often remote) locations throughout the underground mine. Pre-set alarms are programmed into the system to warn designated personnel for immediate response and to automatically de-energize power when gas concentrations exceed the statutory limits. In addition, the mine monitoring systems monitor the performance of numerous pieces of equipment and assemblies of components of the mine via a fibre optic interface. RPM considers that the monitoring systems are consistent with Chinese standards and is appropriate for mines.

Waste Material Management

During the suite visits RPM noted that waste material form the underground development is delivered to the delineated waste dump areas. A high level review of these areas indicates that suitable land use permits and environmental permits are in place, and that the areas are likely to be suitable for the life of mine production. RPM notes however that if the mine plans change from the feasibility study design, further review is recommended ensuring adequate land is available.

8.2 Mining Equipment

The mining equipment’s currently utilised in the 9 Mines is presented in Annexure C. RPM considers the equipment list to be suitable for the proposed mining operations and forecast production rates, however RPM recommends that detailed mine planning be undertaken to ensure the production rates can be achieved.

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9 FORECAST PRODUCTION SCHEDULE

The forecast production schedule for the Projects is presented in Table 9–1. In conjunction with the expansion of the licence areas for five of the 9 Mines, the Company plans to expand production in the majority of the 9 Mines within the next four years. These expansions are phased to coincide with the likely timing of receipt of relevant permits, licences and approvals to enable provincial approval of the expanded operations. RPM notes that it has not reviewed the application process of the Projects and is not aware if the approval process timing coincides with the planned expansions. RPM further notes that a number of planned final capacities are higher than the feasibility studies (or design reports) capacity. As such it is likely that further technical studies will be required to meet the approval requirements for the local regulations.

Due to the consolidation process the 9 Mines are at vary stages of development. Table 9– 1 outlines the current mining licence capacity, the currently constructed development capacity as well as the proposed mining licence capacity. As can be seen a number of the mines can technical achieve the proposed expanded production based on the currently constructed development (shaft and gateroads), however 3 require further construction. Technical reform and reconfiguration of the plant infrastructure will be require to achieve these production based on the Feasibility Study mine designs. RPM considers the project development schedules, while technically achievable, to be optimistic and recommends that a full review of the Life of Mine forecast schedules for each mine to be carried out to better reflect likely production profiles and achievable coal recovery.

Table 9–1 Production Ramp Up Status for the 9 Mines as at 1 January 2013

				Proposed
	Current	Current		ML and
	Capacity of	Development		Production
Mine	ML	Capacity	Development Status	Capacity Construction Date
	(ktpa)	(ktpa)*		(ktpa)
Yunxiang	150	450	Mining tenement granted	600 July 2016–Jan 2017
			Production Expansion
			Planned
Xingji	90	300	Waiting for grant of mining	300
			tenement
Xiangda	150	—	Upgrade Completed	450 Pending Completion
Hexing	300	—	Upgrade 65% completed	600 Jan 2014–June 2014
Xingjian	90	300	Mining tenement was	300
			granted planned expansion
Jianglang	150	450	Mining tenement was	450
			granted planned expansion
Yanhe	150	—	Upgrade completed	450 Oct 2013–April 2014
Zude	150	600	Awaiting for grant of mining	600
			tenement
Qingping	150	450	Awaiting for grant of mining	450
			tenement

Estimated based of full mechanical mining method.

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RPM notes that it has not reviewed the application process of the Projects and is not aware if the approval process timing coincides with the planned expansions. RPM further notes that a number of final capacities are higher than the feasibility studies (or design reports) capacity (Table 9–1). As such it is likely that further technical studies will be required to meet the approval requirements for the local regulations.

Review of the recent production performance of the 9 Mines indicates that all but one mine has failed to reach its forecast production. During discussion with site personnel and Company technical staff RPM was informed these missed production targets are the result of delays on mechanised longwall operations coming on line and difficulties within the mining conditions. In addition recently government regulations have restricted mining activities due to the safety concerns within un-related mines in the region.

Given the recent performance of the Project, RPM considers the project development schedule presented in Table 9–1 to be optimistic and recommends that a full review of the Life of Mine forecast schedules for each mine to be carried out better reflect likely production profiles. This review should include a detailed analysis of the likely impact of the introduction of mechanised operations and a further optimisation of short and medium term mine plans. In addition detailed mine scheduling should be undertaken to enable accurate forecast to be established. RPM is aware that the Company has formulated a new management structure to facilitate the issues and planning of each individual mine.

Failure to reach the planned production rates will likely have a detrimental impact on the OPEX and the economic profile of the mines.

10 OPERATING AND CAPITAL COSTS

10.1 Historical and Forecast Operating Costs

RPM have reviewed the historical Total Mining Operating costs (Table 10–2) and compared them to the forecast ROM Total Mining Operating costs, which are outlined in Table 10–1. A review of these costs indicates that the forecast costs are significantly higher than the historical costs. During the review of the 9 Mines and their associated Design Reports, RPM noted that the Company is in the process of upgrading the mining methods to more mechanised methods. These methods whilst higher in establishment costs generally produce higher production rates and are safer in operation. RPM notes that only the 4 Mines with JORC estimates have forecast production costs been estimated.

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Table 10–1 Forecast Total Mining Operating Costs per ROM Coal Tonne

Cost Item Unit Materials RMB/ROM t Power RMB/ROM t Salary and Welfare RMB/ROM t Maintenance RMB/ROM t Subsidence Compensation RMB/ROM t Others RMB/ROM t Total Operating Cash Costs RMB/ROM t Roadway Development Fund RMB/ROM t Re-simple Production Fee RMB/ROM t Safety Fee RMB/ROM t Gas Control Special Fund RMB/ROM t Total Cash Costs RMB/ROM t Depreciation RMB/ROM t Amortisation RMB/ROM t Financing RMB/ROM t Total Production Costs RMB/ROM t	Yunxiang 35.8 14.5 50.4 13.1 1.5 37.5 152.8 2.5 8.0 30.0 30.0 223.3 36.3 1.4 1.1 262.1	Hexing 50.0 17.3 28.8 10.9 1.5 65.0 173.5 2.5 8.0 30.0 30.0 244.0 27.0 0.0 2.3 273.3	Xiangda 48.4 20.0 56.2 1.1 1.5 49.8 176.9 2.5 8.0 30.0 30.0 247.4 13.7 0.3 261.5	Xingji 50.0 15.8 31.3 16.4 1.5 65.0 179.9 2.5 6.0 30.0 30.0 248.4 20.6 2.5 271.5	Xingjian 25.4 15.3 67.0 5.5 1.0 23.2 137.5 2.5 3.0 6.0 20.0 169.0 20.8 4.2 3.9 197.8	Jianglang 50.0 15.8 32.5 12.1 1.5 65.0 176.9 2.5 6.0 30.0 30.0 245.4 19.1 2.5 266.9	Yanhe 50.0 15.8 32.5 12.5 1.5 65.0 177.3 2.5 6.0 30.0 30.0 245.8 22.1 2.3 270.2	Zude 50.0 15.8 25.5 13.6 1.5 65.0 171.3 2.5 6.0 30.0 30.0 239.8 16.4 2.4 258.6	Qingping 50.0 17.3 42.1 16.5 1.5 65.0
									192.4
									2.5 6.0 30.0 30.0
									260.9
									20.9 2.5
									284.3

Source

Xiangda from the client forecast and reviewed by RPM referring to the mining design reports of adjacent coal mines;
Yunxiang and Hexing from the design reports and reviewed by RPM referring to the mining design reports and local regulations;
Other 6 mines from the design reports.

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Xingji Xingjian Jianglang Yanhe Zude Qingping	2011 2012 2010 2011 2012 2010 2011 2012 2010 2011 2012 2010 2011 2012 2010 2011 2012	25.2 30.7 41.2 41.9 48.9 36.5 45.1 39 42.4 27.2 48.4 40.8 44 41 38.3 37.6 41.4	50.5 16.4 14.3 9.4 11.1 17.8 11 10.3 15.5 11.7 17.6 11.8 12 18 16.9 14 14.6	9.9 56.8 65 52.3 53.6 38.9 44.6 56.8 38.7 38.8 43.7 87.6 47.1 54.1 39.2 39.5 50.8	0.8 1.1 1.6 2.1 1 1.6 1 0.8 4.7 1.9 1.1 3.8 5.6 2.7 2.5 1.9 0.7		0 0.3 1.3 0.3 0 1.9 2 0.1	35.6 5 17.7 48.6 50.2 60.1 31.6 18.8 43.1	0.2 0.3 22.8 1.4 0.8 38.9 37 85.7 98.6 72.4 260.6 17.2 1.5 114.1 9.2 8.4 4.7		86.6 105.4 144.9 107 115.3 169.4 145 210.3 248.6 202.2 431.6 192.8 129 274.9 108.1 101.5 112.3	2 6.8 2.5 11.6 12.2 3.5 6.5 9.1 6.1 4.9 24.8 3.7 10.1 12.2 2.7 5.8 12.5	8.4 8.4 8.3 10.3 8.9 10.5 10.9 10.9 23.6 17.7 8.5 8 9.5 9.5 5.4 6.2 9	1 5.6 -0.1 -0.2 2.4 300.4 3.8 -0.7 5.6 0.3 -0.1		97 121.7 161.2 128.8 136.2 183.5 162.4 232.7 578.7 228.5 464.2 210 148.9 296.5 116.2 113.5 133.8
Yunxiang Hexing Xiangda	2010 2011 2012 2010 2011 2012 2010 2011 2012 2010	40.6 26.5 40.3 50 34.9 34.1 68.9 53.8 47.7 54.6	12 7.5 11.5 23.8 15 7.4 19.3 11.5 23.2 19.2	40.1 31.6 49.8 88.4 175.8 51.9 85.1 59.7 66.1 51	3.2 1.2 0.7 4.3 10.8 2.5 1.6 1.3 1.1 0.9		1.4 0 4.2 0 0 0 3.4 0.2 1.4	10.5 51.2 19.8 15.9 2.9 29.1	5.4 1.2 0.6 26.4 83.7 68.4 25.6 30.7 40 3.1		102.8 68.1 107 203.4 371.4 184 219.8 160.2 208.6 128.8	3.3 3.1 6.5 28.4 27.5 2.29 16.9 18 42.7 1.9	17 4.8 5.3 2.7 9.5 5.4 0 0.2 0.5 8	0 0 0 109 27.7 7.8 30.5 -0.1 0		123.1 76 118.8 343.5 436.1 220.2 267.3 178.4 251.7 138.6
	Unit	RMB/ROM t	RMB/ROM t	RMB/ROM t	RMB/ROM t		RMB/ROM t	RBM/ROM t	RMB/ROM t		RMB/ROM t	RMB/ROM t	RMB/ROM t	RMB/ROM t		RMB/ROM t
	Cost Item	Materials	Power	Salary and Welfare	Maintenance	Subsidence	Compensation	Sale Fee	Other	Total Operating	Cash Costs	Depreciation	Amortisation	Financing	Total Production	Costs

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10.2 Capital Costs

RPM considers the estimated capital costs for the 9 Mines to be reasonable and understands the estimate is based on the latest available construction, contract rates and the Companies development plans. Furthermore, the expenditure includes construction, installation of equipment, which when compared to similar mines in China, appears reasonable.

The historical and forecast Capital Expenditure costs are detailed in Table 10–2, which included mining, working capital provisions. RPM have reviewed these mining capital estimate and they appear reasonable and are consistent with the planned expansions of production within the 4 Mines which JORC Coal Reserves have been estimated.

Table 10–3 — Historical and Forecast Capital Expenditure by Year

Pre-2010 71.69 43.52 29.86 70.29 64.78 32.26 79.47 87.02 118.38 597.27	2011 15.22 62.21 104.17 59.08 65.11 47.37 178.23 43.21 49.73 624.33	2012 6.1 7.93 13.89 49.55 18.41 24.81 35.17 17.84 49.72 223.42	Million RMB 2013 2014 2015 6.09 10.68 13.18 11.01 10.97 16.34 15.8 22.54 9.5 81.45 61.75 NA 22.16 20.91 NA 14.64 9.75 NA 46.88 59.85 NA 20.17 23.14 NA 19.62 12.57 NA 237.82 232.16 39.02	2016 12.18 12.74 9.5 NA NA NA NA NA NA 34.42	2017 4.51 4.51 6.05 NA NA NA NA NA NA 15.07	Total 139.65 169.23 211.31 NA NA NA NA NA NA

Source: Provided by the Company

RPM notes that no ongoing Capital Costs have been provided for beyond 2017 or has not been supplied to RPM for the 5 wash plants.

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11 MINE LIFE ANALYSIS

Two mine life’s for the 3 Mines for which JORC Coal Reserves have been estimated are presented in Table 11–1, the Feasibility Study mine life, and the RPM estimated mine life based on the JORC Coal Reserves estimate. The mine life estimates are as at January 2013.

Table 11–1 Mine Life Analysis

	Mine Life	(years)
	Feasibility
Mine	Study	JORC
Yunxiang	34	24
Xingji	4
Xiangda	40.7	20

Significant differences are observed between the Feasibility Studies, JORC mine life’s. These differences are predominately the result of varying methodology utilised to estimate the mineable reserve and the mine life’s. The main methodology variations include:

. The Chinese mineable reserve includes 333 classified material, however the JORC mineable reserve does not include the Inferred material;
. The Chinese mine life estimate uses a reserve factor (varies between 1.3 and 1.6) to ensure adequate supply of coal over the mine life, where the JORC mine life does not apply a reserve factor: and
. The JORC mine life accounts for the ramp up to full production, whereas the Feasibility Study mine life does not.

12 BENEFICIATION AND TRANSPORTATION

RPM has not completed a detailed review the beneficiation plants which service the 9 Mines during its review of the Projects, however presents a summary of the information supplied for reference. This information is based on the reports supplied, and observations made during visits to the wash plants.

The 9 Mines are served by five wash plants which are located in Yunnan. These plants have varying capacities, are generally centralised around the mines. The capacity of the mines is presented in Table 12–1, while the distance to each mine is shown in Table 12–2 and shown graphically in Figure 2–2.

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RPM notes that information supplied indicates that the wash plants have a nominal capacity, which the Company operates at, however this is not the full capacity of the plants.

Table 12–1 Wash Plant Capacity

	Designed
	Treatment	Product Class and Yield Rate				Mines of ROM Coal
Wash Plant	Capacity	Cleaned	Middling	Slime	Reject	Washed in 2012
	(Mtpa)	(%)	(%)	(%)	(%)
Xiangda	1.5	50	20	10–15	5–20	Xiangda
Yanhe	0.3	70–80	10–15		5–20	Yanhe
Mohong	0.6	55	10	23	12	Xingjian, Jianglang
Fude	0.3	70	10	5	15	Xingji, Zude
Maosheng	0.3					Yunxiang, Qingping

Source. Supplied by the Company.

12.1 Process description

The wash plants all follow similar designs, with coal cleaning followed by separation utilizing whirlpool separators. Cleaning is generally undertaken via three-product dense medium cyclones (for coarser coal fractions) and conventional froth flotation (for fine and ultra-fine size fractions). RPM notes these are typical and well know methods in China and minimal risk associated.

Clean coal, middlings, and reject from the separators subsequently are passed over drain and rinse sieves and vibrating screens to remove magnetite medium and coal fines from the products. Fine coal and reject are separated from the medium using sieve bends and screens. Ultrafine coal, from the secondary sizing devices, is further cleaned in the froth flotation circuits.

Coking coal and middlings products are mechanically dried using vibrating screens, centrifuges, and for the ultra-fines, plate and frame pressure filters.

During the site visits RPM observed that the 5 washeries are consistent with the above mentioned techniques. However during the previous two years there was not enough ROM coal supply due to mining production influence, the actual production was interrupted. According to local staff and RPM’s site observations. Although the coal washeries are under management of their respective coal mines, the technology management, product requirements and quality management controlled by a specialized department within the Company for supervision and implementation.

Each washery is equipped with specialized coal quality laboratory and responsible for ROM feed coal and quality analysis and final product coal quality identification. The main products of the washeries include: clean coal, middle coal, coal slime and tailing stone. Middle coal and coal slime in general, are mixed with each other and being used for power coal selling, clean coal will be produced according to customer requirement. The technical indexes for the coal washeries are shown in Table 12–1.

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12.2 Transport

After extraction from underground and conveying to surface, coal is transported varying distances to the wash plants for beneficiation. These distances vary from between 5 km and 30km, as summarised in Table 12–2. Transportation is generally undertaken by a number of 45 t Chinese manufactured trucks which travel via a series of well-maintained gravel and tarred roads. Following beneficiation the coal is transported to two stockpiles, namely Weijing and Yangweishao. These two stockpiles are located between 5 km and 50 km., as outlined in Table 12–2.

Table 12–2 Distance from Mine to Wash Plant and to Stockpiles

			Distance to
			Stockpile
	Distance to		from Wash	Coal
Mine	Wash Plant	Wash Plant	Plant	Stockpile
	(km)		(km)
Yunxiang	15.5	Maosheng	52	Yangweishao
Xingji	0.4	Fude	7.5	Weijing
Xiangda	0.0	Xiangda	31.5	Yangweishao
Hexing	28	Yanhe	51.0
Xingjian	1.8	Mohong	45.0
Jianglang	3.0
Yanhe	0.0	Yanhe	51.0
Zude	5.2	Fude	7.5	Weijing
Qingping	2.8	Maosheng	52.0	Yangweishao

Source. Supplied by the Company.

13 OVERVIEW OF EHSS

RPM has been provided with Feasibility Studies and Design reports for each mine which detail the environmental and safety procedures which are required for each mine. In addition RPM conducts a preliminary review during the site visit to highlight any associated risk and mitigation. Below is a summary of the key findings and observations made during the report review and site visits.

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13.1 Key Mining Related Safety Risks

13.1.1 Gas

Due to the geological setting and categories of coal seams within China, methane gas generally represents the highest risk for Chinese coal mining operations. In coal and gas outburst, high and low gas content mines (particularly as methane explosions often propagate more serious coal dust explosions) effective management of the gas risk is imperative for the mine safety.

Preliminary Design and Mining Plan reports have mostly has been categorised as high gas (potentially coal and gas outbursts), which RPM agrees with. The Company, or its subsidiaries, carry out gas grade testing yearly and subsequently issued testing results to the provincial government. The management and control of gas of the mines are regulated by the standard of the test grade. Table 13–1 shows the recent test work conducted for each mine.

Table 13–1 Recent Gas Grade Test Work Completed for the 9 Mines

			Relative Emission	Relative Emission	Absolute Emission	Absolute Emission
			(cu.m/t)		(cu.m/min)
Mine	No.	Gas Grade	CH4	CO2	CH4	CO2	Test Date
Yunxiang	11-0219	Outburst	80.1	7.12	9.01	0.8	2012.3.9
Xingji	11-0272	High	48.83	11.88	6.8	1.98	2012.3.9
Xiangda	11-0303	High	62.12	9.29	19.18	2.87	2012.3.9
Hexing	11-0208	High			3.1	0.62	2012.3.9
Xingjian	11-0206	Low	7.49	6.81	0.99	0.9	2012.3.9
Jianglang	10-0306	Low	5.86	3.84	0.79	0.52	2011.5.12
Yanhe	11-0214	High	46.76	11.61	5.92	1.47	2012.3.9
Zude	11-0271	High	24.23	9.79	4.56	1.84	2012.3.9
Qingping	11-0230	High	90.95	16.56	8.4	1.53	201.3.9

Source. Supplied by the Company.

Note: The Yunxiang mine recently with a mine gas outburst appraisal, and is to be managed in accordance to the conclusions of this appraisal. The mine is currently managed as coal and gas outburst until appraisal conclusion officially provided. RPM has not reviewed this appraisal and cannot comment on its reasonableness.

The Chinese government has very strict regulations in relation to the management of methane gas in coal mines. The main approaches for the management of methane gas for the Hidili Coal mines include:

. Improve the ventilation management of mine shafts, working faces and developments;
. Effectively remove methane gas before mining commences;
. Use personnel and self-monitoring systems during production to monitor methane levels.

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RPM believes that the designs and actual application of the methane management systems and controls of the 9 Mines are in accordance with reasonable safety requirements.

13.1.2 Water

The hydro geological conditions of the 9 Mines are generally of a simple and or moderate nature. The main underground flooding risk facing the mine is the presence of accumulated water in the coal seams in the previous mined area.

For the purpose of mitigating the risks of ‘‘mined area’’ water in addition of other underground water, the careful management will accordingly be needed to ensure that the associated risks are controlled. During the site visit RPM noted that mitigating measures such as a dedicated pumping system should be implemented to ensure that all the hydrogeological risks are managed appropriately.

During the site visits RPM observed that the 9 Mines have suitable underground water pump stations, water pumps and water drainage lines and roadways. The water pump equipment designs are in accordance with normal operations with backup units. Development operations utilise some drilling of working faces to investigate for water prior to development commences. This is consistent with the relevant rules and requirements.

13.1.3 Geotechnical

The immediate roof of the seams (rock above the coal seams) are typically sandy mudstone, fine sandstone and mudstone, which are generally geotechnically weak. The thickness of the seams commonly observed indicates that development roadways cannot be driven with a coal roof (as they are too thin), especially large section roadways for mechanised longwall equipment delivery, and therefore the weak roof above the coal seam may be a significant issue on development. In addition, the weak material within the roofs may create intermittent problems on the longwall face itself. Recovering any roof falls, which do occasionally occur, on the face will be challenging, given the face coal dilution and associated safety issues.

The immediate floors of the seams generally include a 0.3 to 0.5m thick generally weak or soft mudstone. Geotechnical testing indicates that the floor material will degrade in the presence of water. If weak floor or considerable groundwater is encountered on the longwall face at any time, suitable measures will be required to mitigate against floor lift in the thin seams. Additional support in development roadways is recommended regardless.

It is designed in the Preliminary Design and Mining Plan reports that development roadways are proposed to be driven by Road header and drill/blasting units. The Design reports recommend that roof bolts and mesh should be the primary roof support together with cable bolts as appropriate. It is essential that suitable support design, material specifications and installation standards are developed and maintained, in order to achieve the necessary roof support performance. No design details have been provided with respect to proposed roof and rib support densities. During the site visit RPM noted that the roof support at the 9 Mines was a modern system of fully meshed roof bolts with 8m cable bolts. The strata conditions

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observed were generally good with no signs of falls of ground or faulting in the workings. Some support in the mines was more primitive and will likely need upgrading by forced melt ‘‘U’’ or ‘‘Π’’ supports.

13.1.4 Dust

The majority of the Mineable coal seams have explosive risk due to the generation of coal dust. Mitigation measures should be adopted to reduce the risk of coal dust explosions.

This is a common risk for many underground coal mines and will require careful management to ensure that the associated risks are controlled. The high gas content of the seam increases the likelihood of methane explosions, which in turn will increase the likelihood of coal dust explosions.

RPM recommends that standard mitigating measures such as water-slot or stone-dusting will need to be adopted to reduce the risk of coal dust explosions.

13.1.5 Fire

The majority of seams are generally characterised as prone to spontaneous combustion with a various ‘Level’ spontaneous combustion rating. This will necessitate good ventilation, sealing and monitoring practices. The issue appears to be recognised in the Mining Plan and Preliminary Design reports with references to standard ‘‘U’’ ventilation, goaf sealing with nitrogen injection and continuous monitoring systems. The risk of Spontaneous combustion control could increase in the lower seams or levels as a result of the interconnection of goaves and as such RPM recommends review of the procedure prior to mining in these areas.

13.1.6 GOAF

The surface and shallow parts of main mineable coal seams have effectively been depleted. It should be a high risk as a result of spontaneous combustion. This part of the deposit has been referred to as the ‘‘goaf area’’.

RPM notes that the abandoned underground mining areas potentially contain a significant amount of remnant coal in the goaf. Inadequate sealing of the goaf would result in a high risk of spontaneous combustion due to the potential exposure of the coal to air. RPM advices that good management will be needed to prevent any accidents as a result of spontaneous combustion, CO poisoning from if any ‘Burnt Zone’’ and flooding as a result of water accumulating in the original burnt zone area.

13.1.7 Subsidence

Mining activities in the 9 Mines impact surface with the removal of overburden strata affecting the geotechnical stability of the overlying rock. This instability, if not properly managed could result in substantial subsidence at surface. A review of operations indicates that safety pillars to protect the main surface and underground facilities over the mining areas are in place or designed. RPM understands some small villages over the mining area will be moved, however no significant subsidence was observed during the site visit.

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RPM recommends that well maintain monitoring of surface movement s be undertaken to ensure protection of the surface facilities such as roads, rivers and power lines from the damage by subsidence.

13.2 Rescue Systems

The Company does not plan to establish a rescue team at the Yunnan operations, however will provide the necessary equipment onsite. In addition, the Fuyuan County Rescue Team and Fire-Fighting Team are available for emergency call out. RPM understands that the Company has an ongoing arrangement the local rescue team, however has not sighted any of the relevant documents.

During discussion with site personnel and the Company, RPM understands that an underground rescue system containing a rescue and first aid station will be constructed within the major mining areas of each mine. RPM has not reviewed the plan or the progress of the construction.

14 MINE RISKS AND OPPORTUNITY ASSESSMENT

Mining is a relatively high risk business when compared to other industrial and commercial operations. Each mine has unique characteristics and responses during mining and processing, which can never be wholly predicted. RPM’s review of the Mines indicates mine risk profiles typical of mines at similar levels of resource, mine planning and development in China. Until further studies provide greater certainty, RPM notes that it has identified risks and opportunities with the Mines as outlined in Table 14–1.

RPM has attempted to classify risks associated with the Mine based on Guidance Note 7 issued by The Stock Exchange of Hong Kong Limited. Risks are ranked as High, Medium or Low, and are determined by assessing the perceived consequence of a risk and its likelihood of occurring using the following definitions:

Consequence of risk:

Major: the factor poses an immediate danger of a failure, which if uncorrected, will have a material effect (>15% to 20%) on the Mine cash flow and performance and could potentially lead to Mine failure;

Moderate: the factor, if uncorrected, could have a significant effect (10% to 15% or 20%) on the Mine cash flow and performance unless mitigated by some corrective action, and

Minor: the factor, if uncorrected, will have little or no effect (<10%) on Mine cash flow and performance.

Likelihood of risk occurring within a 7 year timeframe:

Likely: will probably occur;

Possible: may occur, and

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Unlikely: unlikely to occur.

The consequence of a risk and its likelihood of occurring are then combined into an overall risk assessment as shown in Table 14–1 to determine the overall risk rank.

Table 14–1 Hidili Project — Risk Assessment Table

	Consequence
Likelihood	Minor	Moderate	Major
Likely	Medium	High	High
Possible	Low	Medium	High
Unlikely	Low	Low	Medium

RPM notes that in most instances it is likely that through enacting controls identified through detailed review of the Mine’s operation, existing documentation and additional technical studies, many of the normally encountered Mine risks may be mitigated.

Risk	Risk Description and
Ranking	Suggested Further Review	Potential Mitigant	Area of Impact
H	Achievability of the Ramp Up Schedule	Detailed Planning	Project Economics
	Based on the historical performance of the 9
	Mines, RPM considers the ramp up schedules
	presented within the Chinese Feasibility
	studies to be optimistic although technically
	achievable based on the planned equipment
	selection. Historical underperformance
	against the planned schedule have on the
	whole being associated with delays in
	bringing online mechanised longwall
	operations, difficult mining conditions and
	recent government regulatory constraints
	associated with safety concerns at
	surrounding but not associated mine sites
	which impacted the entire province.
H	Economic Analysis	Detailed Economic	Reserve estimates
	RPM conducted a preliminary review of the	analysis
	Economics of the 5 Mines and utilised the
	Chinese approach to justify the economics of
	the projects as outlined in the Chinese
	feasibility studies. RPM notes that if a JORC
	Reserve was to be undertaken further
	economic analysis of individual longwall
	panel and coal seams would be required
	which may result in a reduction in the total
	amount of Reserves.

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Risk	Risk Description and
Ranking	Suggested Further Review	Potential Mitigant	Area of Impact
H	High Gas Content/Coal Dust	Adequate ventilation,	Mine Safety
	Outburst, high and low gas has been	gas drainage, ongoing
	identified as a characteristic of the mines.	management, limiting
	High concentrations of gas in a mine’s	coal dust build-up,
	atmosphere may result in an explosion. A gas	hanging water bags,
	explosion may stir up coal dust and lead to	stone dusting
	further coal dust explosions.
H	Water In-rush	Ongoing management	Mine Safety and
	The uncontrolled in-rush event could be	will be required to	Production
	caused by water accumulated in the ‘‘Goaf’’	ensure that the
	areas of historical mining. The hydro	current mine does not
	geological conditions are generally of a	breach the old mine
	complex nature.	workings. It is
		necessary for
		detective drilling for
		the roadway
		development
H	Core Recovery	Complete verification	Resource and
	No Core recovery data was supplied for the	drilling to confirm	Reserve Estimates
	historical bore holes and recent drilling	coal quality data
	suggest recoveries of less than 90%, which
	RPM consider low. Low core recovery may
	result in poor coal quality determination
	which are not representative.
M	Marketable Reserves	Washability Test work	Economics and
	RPM has not estimated Marketable Reserves		Revenue
	for the JORC Reserves of the 3 Mines, due to
	the limited amount of washability data
	supplied.
M	Approvals		Project Development
	The ramp up and mine life is contingent on		Schedule
	relevant approvals being granted for the
	consolidation and expansion areas, as well as
	the planned increased production capacities.
	Delays to these approvals may postpone
	production which potential could have an
	adverse effect on the operations and
	associated mine plans and cost profiles.
M	Roof Hang-ups	Better understanding of	Mine production
	As the longwall units progress in the coal	lithological condition	rates
	seam, the coal roof should regularly cave	of the Floor, carefully
	behind the advancing unit. If the coal roof	management for LW
	does not regularly cave, it may slow the	shields
	longwall advance due to the stresses applied
	to the longwall supports.

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Risk	Risk Description and
Ranking	Suggested Further Review	Potential Mitigant	Area of Impact
M	Spontaneous Combustion	Careful monitoring and	Mine Safety
	There is a known potential for spontaneous	management
	combustion of the coal with the mines, which
	has previously resulted in the sterilisation of
	coal.
M	Bore Holes Data	Supply all original	Resource Reserve
	The Historical bore hole data could not be	documentation, and	tonnage estimates
	fully validated as no hardcopy original	drill verification
	documentation was supplied.	holes
M	Production Forecasts	Review Recent	Operating costs,
	Recent Production targets have not been	operating	Production
	achieved for all but one mine.	performance and	schedule, LOM
		introduction of
		mechanised
		machinery
M	Coal Quality	Complete additional test	Resource and
	RPM has been unable to verify the Coal	work and verification	Reserve estimates,
	Quality datasets, although RPM notes the	drilling	Product revenue
	mines have been in production and producing
	saleable product after washing.
M	OPEX/CAPEX	Complete a review of	Operating Costs
	No detailed OPEX/CAPEX have been	detailed OPEX
	provided, or breakdowns of the individual
	cost units or consumable etc. No OPEX was
	provided for the wash plants.
M	Geotechnical	Complete geotechnical	Mine Design and
	No Geotechnical data has been supplied for	studies to confirm the	Reserve estimates
	review, however RPM understand no major	design parameters
	incidents have occurred. RPM notes that with
	increased time, the mine will be sourcing
	deeper coal which may further geotechnical
	instability.
L	Economic JORC Reserve Model
	RPM has based its economic model on a
	price regression equation to estimate the price
	of coal per year using the ash content on an
	annual basis. This was completed to factor in
	the limited washability data and lack of
	detailed production reconciliation data at the
	wash plants due to multiple source blending.
L	Internal Variability	Completed detailed 3D	Resource and
	Limited information is available as to the	modelling of coal	Reserve estimates
	pinching and swelling (thickness) of the coal	seams
	seams, as well as the coal qualities. Areas
	may exist which may be below the cut off for
	minimum mining thickness. These areas are
	likely to be included in the design and
	reserves presented.

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Risk Risk Description and Ranking Suggested Further Review

L Wash Plant Review RPM has not conducted a review of the wash plants performance and cannot comment of the suitability of the design or method employed.

L Coal Seam Correlation

Several recent reconciliation geology report do don contain coal seam correlation information to confirm continuity of the seams.

L Mining Licence Mining Licence capacity increases are required to ensure the expanded capacity can be achieved.

L Incendive Sparking A number of stone splits have been identified within the coal seams. If these splits have high concentrations of silica, there is a potential for sparking to occur as they are mined. This can potentially ignite pockets of gas and escalate.

Potential Mitigant

Area of Impact

Complete review Economic viability

Provide original bore Resource and hole data Reserve Estimate

Application for new Production, JORC mining licence to be Resource and submitted Reserves, project profitability

Complete testing related Mine Production to determine the level of this risk, and then carefully monitoring and management is needed

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A1. APPENDIX A — QUALIFICATIONS AND EXPERIENCE

Graeme Rigg — Senior Engineer, RungePincockMinarco, Bachelor of Engineering (Mining Hons), Second Class Certificate of Competency, Member of Australasian Institute of Mining and Metallurgy, Member of Mine Subsidence Technological Society

Graeme has over 25 years experience as a mining engineer, principally in underground coal mining operations, planning and management in New South Wales and Queensland. He has extensive experience in mine design, mine scheduling, feasibility studies, and optimisation for new mine development and mine expansion programmes.

Graeme has experience in reserve estimation, conducting technical audits and due diligence investigations for mine valuation purposes. He has worked on numerous technical review projects in Australia, New Zealand, China and Indonesia.

Michael Johnson — Operations Manager/Technical Director — Moscow, CJSC Runge (RungePincockMinarco), BAppSci (Geology), Grad Dip (Mining Engineering), Member of the Australian Institute of Mining and Metallurgy

Michael has over 12 years experience working in the mining industry particularly in underground coal operations. He has held positions of Mine Geologist, Strata Control Engineer, Mine Planning Engineer and Senior Mining Consultant. Michael has experience in longwall/ longwall Top Coal Caving (LTCC) production optimisation, strata control, coal quality, JORC Reserve/Resource reports; mine planning, mine design, mine scheduling, and feasibility studies due diligence, resource evaluation and optimisation for mine expansions programmes. He has worked on numerous underground and opencut coal projects in Australia, Canada (potash), China, Mongolia, New Zealand, Indonesia, Philippines, Russia, and Norwegian Territories.

With relevant experience in coal geology and underground engineering, Michael meets the requirements for Competent Person (‘‘CP’’) for JORC reporting for Coal Resources and underground Coal Reserves. Michael is a member of the Australian Institute of Mining and Metallurgy. In addition Michael has extensive experience in China having been actively invoiced in project for over 5 years. Having worked of numerous coal deposits and undertaking review of Chinese resource and reserves, Michael has active a Competent Persons for several major Hong Kong listing in the last 3 years which included undertaking JORC Compliant Resources and Reserves.

Benjamin Quashie — RungePincockMinarco, Senior Technical Manager (Beijing) — BEng(Mining), Master of Mining — CP for JORC/QP for NI43-101 — Member of the Society for Mining, Metallurgy and Exploration (SME)

Benjamin has 19 years of mining industry expertise with ample understanding of ore reserve estimation, mine planning, haulage cycle time and cost analysis. He is a registered member of Society for Mining, Metallurgy and Exploration (SME) and is a Competent Person for JORC and Qualified Person for NI43-101. Much of his work has been higher level strategic report, including feasibility studies, technical due diligence, fatal flaw review of operating mines and JORC compliant competent person’s reports (CPR) for listing and private equity purposes for commodities such as copper, gold, zinc, lead, manganese, nickel, magnesium,

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tungsten, iron, coal and etc. Further experience has been in mine reclamation and compliance with environmental regulations. He is Knowledgeable of open-pit and underground mineral operations with actual design expertise in shrinkage stoping, sub-level stoping, sub-level caving, mine scheduling, primary open-pit equipment selection.

He has provided technical support services involving metal mines in China and internationally spanning Australia, USA, Canada, Pakistan, Papua New Guinea, Peru, Democratic Republic of Congo, Mongolia and the Philippines. Mining softwares used have included Datamine Studio, NPV Scheduler, Whittle 4X, CS-Mine, Ventsim, and Mapcad.

Also, Benjamin had his tertiary education (bachelor’s and master’s) in China and is proficient in Chinese and in English.

Hong Zhao, MEng, Executive Geologist Consultant — Beijing, RungePincockMinarco, Member of Australasian Institute of Mining and Metallurgy

Hong Zhao is a registered qualified valuator of mineral rights in China. He graduated with a bachelor degree in coal geology and exploration from Huainan University of Mining and Technology in 1985 and was granted a Masters from the Beijing Graduate School, China University of Mining and Technology, with a specialty in coal geology in 1990. Mr Zhao has worked in coal mining geology at the Fengfeng Coal Mining Bureau and Beijing Coal Mining Bureau. He has also conducted scientific study on coal strata and environment in the Chinese Academy of Sciences, where he co-operated with foreign scholars for many years. From 2003, he has been working as a geologist and mining industry consultant, performing more than 80 projects, including coal (UG and OC), coal bed methane, iron (UG and OC), gold, copper, silver, zinc and lead, tin, manganese, molybdenum, aluminium, rare earth, sulphur, salt, calcite, geothermy, mineral spring water, etc, in China as well as international mining consulting companies.

With relevant experience in coal geology, Hong Zhao meets the requirements as a Qualified Person for 43-101 reporting, and as a Competent Person (‘‘CP’’) for JORC reporting for Coal Resources. Hong Zhao is a member of the Australian Institute of Mining and Metallurgy.

Kevin Qu — Executive Mining Engineer — RungePincockMinarco, B.E. Hebei Mining College, Handan City, China

Kevin has over 25 years’ experience in the mining industry, including broad operational and technical roles in the management of scoping, prefeasibility, feasibility and optimization studies, review and benchmarking of mine operations, management and planning systems, and the development and analysis of cost and financial models. He has had significant experience working on feasibility studies and is in particular very knowledgeable on the regulations and policies in the mining industry of China.

Kevin graduated with a BEng in Mining Engineering from Hebei Mining Institute, Handan City, Hebei Province, P.R. of China in 1983, and spent over twenty years at both state-run and private operations in many roles, ranging from underground mining, mine planning, ventilation and operations.

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Kevin participated in a number of feasibility studies for large underground mines, as well as scoping studies and due diligence assessments for purchasers and investors, with assignments in Europe, Thailand, Canada, Indonesia, and America.

In recent years, Kevin has become a full time technical consultant for both metal and coal mines, planning projects, conducting feasibility studies and operational reviews on a wide variety of mining methods — in particular, with respect to dipping mining, stoping, open benching, cut and fill, sub level caving and block caving both in China and overseas.

Hongbo Liu — Mining Engineer — RungePincockMinarco, National Register of Safety Engineers, China University of Mining & Technology (Beijing)

Hongbo Liu graduated with a bachelor degree in mining engineering from Hebei University of Engineering in 2003, was granted a master’s degree from China University of Mining and Technology in 2006 and qualified for the National Register of Safety Engineers in 2009.

From 2006 to late 2011, Hongbo was employed at Gemcom Software International Inc. China. He performed in a project management and technology support engineer capacity on projects using Surpac and MineSched software training.

During his work with Runge from 2011 to the present, he has been actively involved in many technical review projects including iron, gold copper; and lead mine projects in China and Africa. His work includes data reviewing, open pit optimization, open pit and underground mine designing and scheduling. All of his work is in accordance with the JORC Code (Australia, Africa, Europe and Asia) or the NI-43-101 code (Canada and South America) and the Hong Kong Exchange listing rules.

Peilin Guo — Mining Engineer — RungePincockMinarco, BM. (Mining Engineering), China University of Mining & Technology (Beijing)

Peilin has 8 years of experience working in the domestic and international mining industry, including in underground coal operations, open pit nickel laterite operations, and as a consultant in a mining software company. As a consultant, he performed geological modelling, resource estimation, mining design and software training for coal, iron, gold, copper, limestone and nickel-cobalt projects. Peilin is an expert user of AUTOCAD and SURPAC.

Since joining Runge in 2011, Peilin has worked on more than 10 iron ore, gold, copper, lead, zinc, rare earth and coal projects in China, Mongolia and Africa. He has been actively involved in many technical review projects, with his work including reviewing and designing. All of his work is in accordance with the JORC Code (Australia, Africa, Europe and Asia) or the NI-43–101 code (Canada and South America) and the HKEx (Hong Kong Exchange) Listing Rules.

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Song Huang — Project officer/Geologist — RungePincockMinarco, Master of Geology, University of Peking Technology, China

Song graduated from the University of Peking Technology with a master’s degree in Geology in 2009. From 2009 to 2011, he worked in Jinchuan China as a geology engineer. During this period, he mainly focused on the management of mine geology. Since joining Runge in 2011, Song has been involved with several project reviews and resources estimation from exploration to operating assets focusing mainly on metals. Recent commodities covered by Song in China have included gold, iron, nickel, copper, molybdenum, etc. (Including 1 Ni project in Indonesia, 2 iron projects in Mongolia and Madagascar, and 1 gold project in Ghana.) Through his technical work Song has gained knowledge and skills in utilizing resource analysis software and understanding of exploration data management.

Jeremy Clark — Manager, Hong Kong — RungePincockMinarco, Bsc. with Honours in Applied Geology, Grad Cert Geostatistics, MAIG, MAusimm

Jeremy has over 12 years of experience working in the mining industry. During this time he has been responsible for the planning, implementation and supervision of various exploration programs, open pit and underground production duties, detailed structural and geological mapping and logging and has a wide range of experience in resource estimation techniques. Jeremy’s wide range of experience within various mining operations in Australia and recent experience working in South and North America gives him an excellent practical and theoretical basis for resource estimation of various metalliferous deposits including Iron Ore and extensive experience in reporting resource under the recommendations of the JORC and NI-43-101 reporting codes.

With relevant experience in a wide range of commodity and deposit types, Jeremy meets the requirements for Qualified Person for 43-101 reporting, and Competent Person (‘‘CP’’) for JORC reporting for most metalliferous Mineral Resources. Jeremy is a member of the Australian Institute of Geoscientists.

Philippe Baudry — Regional General Manager — Australasia, Russia & CIS — RungePincockMinarco, Bsc. Mineral Exploration and Mining Geology, Assoc Dip Geo science, Grad Cert Geostatistics, MAIG

Philippe is a geologist with over 14 years of experience. He has worked as a consultant geologist for over 6 years first with Resource Evaluations and subsequently with Runge after they acquired the ResEval group in 2008. During this time Philippe has worked extensively in Russia assisting with the development of two large scale copper porphyry Mines from exploration to feasibility level, as well as carrying out due diligence studies on metalliferous Mines throughout Russia. His work in Australia has included resource estimates for BHPB, St Barbara Mines and many other clients both in Australia and overseas on most styles of mineralisation and metals. Philippe furthered his modelling and geostatistic skills in 2008 by completing a Post Graduate Certificate in Geostatistics at Edith Cowan University. Philippe relocated to China in 2008 and has since Mine managed numerous Due Diligences and Independent Technical Reviews for private acquisitions and IPO listings purpose mostly in China and Mongolia.

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Prior to working as a consultant Philippe spent 7 years working in the Western Australian Goldfields in various positions from mine geologist in a large scale open cut gold mine through to Senior Underground Geologist. Before this time Philippe worked as a contractor on early stage gold and metal exploration mines in central and northern Australia.

With relevant experience in a wide range of commodity and deposit types, Philippe meets the requirements for Qualified Person for 43-101 reporting, and Competent Person (‘‘CP’’) for JORC reporting for most metalliferous Mineral Resources. Philippe is a member of the Australian Institute of Geoscientists.

Company’s Relevant Experience

RungePincockMinarco is a premier international consulting, engineering and technology firm. It provides a full range of services from pure technical consulting through to strategic corporate advice, undertaking assignments on developing and operating mines covering a range of commodities across the globe, serving clients on a global basis through its network of 21 offices including China and Hong Kong where RPM has been operating for over 7 years.

RungePincockMinarco maintains a full time staff of qualified specialists in the fields of mining engineering, geology, process and metallurgical engineering, environmental and geotechnical engineering, and environmental economics.

RungePincockMinarco typically completes over 200 assignments per year and has over 300 professionals available in disciplines including:

. Mining Engineering;
. Minerals Processing;
. Coal Handling and Preparation;
. Power Generation;
. Environmental Management;
. Geology;
. Contracts Management;
. Mine Management;
. Finance;
. Technology Consulting;
. Life of mine scheduling and financial modelling;
. Commercial Negotiations.

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The roots of RungePincockMinarco were established in the Australian mining industry. RungePincockMinarco is committed to compliance with the codes which regulate Australian corporations and consultants and has established an International business which has continued to give its clients and those that rely on its work the confidence that can be associated by the use of the relevant Australian codes.

These codes include:

. The Australian Corporation Law;
. The Australian Institute of Company Directors Code of Conduct;
. The Securities Institute of Australia Code of Ethics;
. The Australasian Institute of Mining and Metallurgy Code of Ethics;
. The Australasian Code for Reporting of Exploration Results, Mined Resources and Ore Reserves (The JORC Code).

RungePincockMinarco has conducted numerous mining technical due diligence programs and reporting for IPO’s and capital raisings over the past six years, with involvement in Mines raising a total of over Billion USD 40 of capital. This and other work is summarised in Table A1.

Table A1 — Mining Related IPO and Capital Raising Due Diligence Experience

2012 China Gold Resources International, Ltd; Tibet Jiama Copper-Polymetallic Phase II NI 43–101 HKEx Pre-Feasibility Study. China

2012 China Precious Metal Resources Holdings Co., Ltd Competent Persons Report of Mineral Resources and Ore Reserves under JORC and Independent Technical Review for inclusion in a HKSE Circular to support the acquisition of an Gold Operation Yunnan Province, China.

2012 Kinetic Mines and Energy, Ltd; Competent Persons Report of Coal Resources and Coal Reserves under JORC and Independent Technical Review for inclusion in a HKSE Circular to support the IPO of an underground coal asset in Inner Mongolia Province, China.

2012 China Daye Non-Ferrous Metals Mining, Ltd; Competent Persons Report of Mineral Resources and Ore Reserves under JORC and Independent Technical Review for inclusion in a HKSE Circular to support the acquisition of 4 operating underground copper, lead, zinc assets in Hubei Province, China.

2012 Huili Resources Group, Ltd; Competent Persons Report of Mineral Resources and Ore Reserves under JORC and Independent Technical Review for inclusion in a HKSE Circular to support the IPO of multiple underground nickel, lead, zinc, copper and gold mining assets in Xinjiang and Hami Province, China.

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2011 China Polymetallic Limited Mining, Ltd; Competent Persons Report of Mineral Resources and Ore Reserves under JORC and Independent Technical Review for inclusion in a HKSE Circular to support the IPO of a lead zinc silver polymetallic underground mining assets in Yunnan Province, China.

2011 China Precious Metal Resources Holdings Co., Ltd; Competent Persons Report of Mineral Resources and Ore Reserves under JORC and Independent Technical Review for inclusion in a HKSE Circular to support the acquisition of multiple underground gold mining assets in Henan Province, China.

2011 HaoTian Resources Group Limited; Competent Persons Report of Coal Resources and Reserves under JORC and Independent Technical Review for inclusion in a HKEx Circular to support acquisition of and underground coal mines in Xinjiang Autonomous Region, China.

2011 King Stone Energy Group, Ltd; Competent Persons Report of Coal Resources and Reserves under JORC and Independent Technical Review for inclusion in a HKEx Circular to support acquisition of 2 underground coal mines in Shanxi Province, China.

2010 China Precious Metals Holdings Co., Ltd; Competent Persons Report of Mineral Resources and Ore Reserves under JORC and Independent Technical Review for inclusion in a HKEx Circular to support the acquisition of multiple underground gold mining assets in Henan Province, China.

2010 Century Sunshine Group Holdings Limited; Competent Persons Report of Mineral Resources and Ore Reserves under JORC and Independent Technical Review for inclusion in a HKEx Circular to support the acquisition of a serpentinite mining asset in Jiangsu Province, China.

2010 Doxen Energy Group Limited; Independent Technical Review and estimation of Coal Resources under JORC for inclusion in a HKEx Circular to support the acquisition of a coal mining asset in Xinjiang Autonomous Region, China.

2010 KwongHing International Holdings (Bermuda) Limited; Independent Technical Review for inclusion in a HKEx Circular to support a Very Substantial Acquisition.

2009 Metallurgical Corporation Of China Ltd (‘‘MCC’’); Independent Technical Review for inclusion in a Prospectus to support a stock exchange listing on the Hong Kong Stock Exchange.

2009 Nubrands Group Holdings Limited, Guyi Coal Mine; Independent Technical Review for inclusion in a Stock Exchange Circular to support a mining asset purchase by a listed Hong Kong Company.

2008 China Blue Chemical Limited, Wangji and Dayukou Phosphate Mines: Independent Technical Review for inclusion in a Stock Exchange Circular to support a mining asset purchase by a listed Hong Kong Company.

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2008 Kenfair International (Holdings) Limited, Shengping Coal Mine: Independent Technical Review for inclusion in a Stock Exchange Circular to support a mining asset purchase by a listed Hong Kong Company.

2007 China Railway Company Limited, African Copper/Cobalt Assets: Capital raising for mining assets on the Hong Kong Stock Exchange. Preparation of Competent Persons Report for planned IPO on the HKEx.

2007 KoYo Ecological Agrotech (Group) Limited Sichuan Phosphate: Independent Technical Review for inclusion in a Stock Exchange Circular to support a mining asset purchase by a listed Hong Kong Company.

2007 Prosperity International Holdings Limited, Guilin Granite Mine: Independent Technical Review for inclusion in a Stock Exchange Circular to support a mining asset purchase by a listed Hong Kong Company.

2007 China Primary Resources — Independent Technical Review for inclusion in a Stock Exchange Circular to support a mining asset purchase by China Primary Resources.

2007 Gloucester Coal Limited — Independent Technical Review for Australian Stock Exchange Scheme of Arrangement.

A2. APPENDIX B — GLOSSARY OF TERMS

The key terms used in this report include:

. AIG Australian Institute of Geoscientist
. Asset means the 9 Mines and 5 wash Plants
. CV stands for Caloric Value
. AUSIMM stands for Australasian Institute of Mining and Metallurgy
. Company means Sichuan Hidili Industry Limited
. CPR stands for Competent Persons Report as defined by the Hong Kong Stock Exchange
. HKEx stands for Hong Kong Stock Exchange
. ITR stands for Independent Technical Review
. JORC stands for Joint Ore Reserves Committee

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. JORC Code refers to the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves 2004 edition, which is used to determine resources and reserves, and is published by JORC of the Australasian Institute of Mining and Metallurgy, the Australian Institute of Geoscientists and the Minerals Council of Australia
. km stands for kilometre
. kt stands for 000’s of tonnes
. ktpa stands for 000’s tonne per annum
. LOM plan stands for Life of Mine Plan
. m stands for metres
. mine production is the total ROM production from any particular mine
. Mineable Coal Seams refers to a coal seam which has a thickness greater than the minimum mining width, as described by the Chinese Code
. mining rights means the rights to mine mineral resources and obtain mineral products in areas where mining activities are licensed
. Ml stands for mega litre which is equal to one million litres
. RPM refers to RungePincockMinarco
. Mt stands for mega tonnes which is equal to one million tonnes
. RMB stands for Chinese Renminbi Currency Unit; 10[3] RMB means 1,000 RMB
. ROM stands for run-of-mine, being material as mined prior to beneficiation or washing
. Coal Reserves are not Marketable Reserves
. t stands for metric tonne
. tonne refers to metric tonne
. tpd stands for tonnes per day
. tph stands for tonnes per hour
. $ refers to United States dollar currency
. ¥ is the symbol for the Chinese Renminbi Currency Unit

Note: Where the terms Competent Person, Inferred Resources and Measured and Indicated Resources are used in this report, they have the same meaning as in the JORC Code.

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A3. APPENDIX C — MINING EQUIPMENT

Longwall Shearer

				Operating	Drum	Cutting	Haulage	Installed
Group	Mine	LW	Shearer Model	Range	Diameter	Web	Speed	Power	Voltage
				(m)	(mm)	(mm)	(m/min)	(kW)	(V)
Yunnan No.1	Yunxiang	110304/C3	MG110/250-BW	0.95–1.60	800	630
(Newly		110601/C6	MG200/456-WD	1.1–2.4	800	600	0–6.1	456	1,140
Listed)	Xingji	M9	MG2x200/456-WD	1.1–2.4	800	600	0–6.1	456	660/1,140
	Xiangda	M7	MG250/600-QWD	2–3.8	1,600	630	7.85–13.7	598.5	1,140
	Hexing		MG200/456-WD	1.1–2.4	800	600	0–6.1	456	1,140
Yunnan No.2	Xingjian	M7
	Jianglang	C7,C9
	Yanhe		MG200/456-WD	1.1–2.4	800	600	0–6.1	456	1,140
	Zude	C5	MG2×200/456-WD	1.1–2.4	800	600	0–6.1	456	660/1,140
	Qingping	M4+1	MG2×200/457-WD	1.1–2.5	800	600	0–6.2	457	660/1,141

Hydraulic Roof Supports

					Operating	Working	Set	Yield	Support
Group	Mine		Support Form	Support Model	Range	Resistance	Pressure	Pressure	Weight
					(m)	(kN)	(Mpa)	(Mpa)	(t)
Yunnan	Yunxiang	110304/C3	Shields	ZY2400/08/16	0.8–1.60	2,400		0.30–0.36
No.1		110601/C6	Prop	DW12–300/100X	0.70–1.20	300	41.5
(Newly	Xingji	M9	Modified Shields	ZH240/200/26B	1.5–2.6	1,200		0.56
Listed)	Xiangda	M7	Shields	ZZ3200/15/33	1.5–3.3	3,200	31.5	0.5
	Hexing	9		ZY3400–09/22	0.9–2.2	3,400	27–38.6	0.55	10.6
Yunnan	Xingjian	M7	Props and FS*	NDZ22–30/90
No.2	Jianglang	C7,C9	Props and FS*	DWX18;DWX12
	Yanhe	M9	Shields	ZY3400–09/22	0.9–2.2	3,400	31.5	0.55	10.6
	Zude	C3	Shields	ZY3400/09/22	0.9–2.2	3,400	31.5	0.55	10.6
	Qingping	M4+1	Shields	ZY3400/09/23	0.9–2.3	3,400	31.5	0.55	10.6

NB.: * FS-Flexiable Shield in ADFS mining face.

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APPENDIX IV

AFC

				Face	Transport	Chain	Installed
Group	Mine		AFC Model	Length	Capacity	speed	Power	Voltage
				(m)	(t/hr)	(m/s)	(kW)	(V)
Yunnan No.1	Yunxiang	110304/C3	SGB630/180	120	400		2x90
(Newly Listed)		110601/C6	SGB630/180	120	400		2x90
	Xingji	M9	SGB730/2x160	100	300		2x160	1,140
	Xiangda	M7	SGZ730-2x200	200	700	1.03	2x200	660/1,140
	Hexing	9	SGB730/2x160	160	300		2x160	1,140
Yunnan No.2	Xingjian	M7
	Jianglang	C7,C9
	Yanhe	M9	SGZ-730	120	400		2x160
	Zude		SGZ-730	120	401		2x161
	Qingping	M4+1	SGZ730-2x200	200	700	1.03	2x200	660/1,140

Coal Clearance

					Transport		Installed
Group	Mine		Conveyor Model	Belt Width	Capacity	Belt Speed	Power	Voltage
				(mm)	(t/hr)	(m/s)	(kW)	(V)
Yunnan No.1	Yunxiang	110304/C3	SSJ800/2×40	800	400		2x40
(Newly Listed)		110601/C6	SSJ800/2×41	800	400		2x40
	Xingji	M9	DTL80/40/2x55	800	400	2.5	2x55
	Xiangda	M7	SPJ-800	800	400	2	37	660/1,140
	Hexing	9	DTL80/40/2x55	800	400	2.5	2x55
Yunnan No.2	Xingjian	M7
	Jianglang	C7,C9
	Yanhe	M9	DTL80/40/2x55	800	400	2	55
	Zude	C7	DTL80/40/2x56	800	400	2	55
	Qingping	M4+1	DTL80/40/2x57	800	400	2	55

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APPENDIX IV

A4. APPENDIX D — LIST OF INFORMATION SOURCES

		Mining reports	Mining reports			Geology reports
Group	Mine	Report Name	Design institute	Date	Name	Design institute	Date
Yunnan No.1	Yunxiang	Fuyuan County Dahe	Chongqing Design and	2012.06	Yunnan Province Fuyuan	Sichuan Coalfield	2012.1
(Newly Listed)		Qingping Coal	Research Institute of		County Yunxiang	Geological
		Industrial Co. Ltd.	China Coal Science		Coal Mine	Engineering
		Yunxiang Coal Mine	and Engineering		Production &	Exploration Design
		Mining Plan Design	Group		Exploration Report	& Research Institute
	Xingji	Yunnan Province Fuyuan		2012.12	Yunnan Province Fuyuan		2012.3
		County Jintai Coal			County Xingji Coal
		Industrial Co. Ltd.			Mine Coal
		Xingji Coal Mine			Resources
		Mining Plan Design			Exploration Report
	Xiangda	Fuyuan County Dahe Town	Yunnan Province local	2013.01	Yunnan Province Fuyuan		2012.4
		Xiangda Coal Mine	coal mine design		County Xiangda
		Shaft#1 Mechanization	institute		Coal Mine Shaft#1
		Reform Plan Design			Coal Resources
					Exploration Report
	Hexing	Fuyuan County Mohong	Chongqing Design and	2012.06	Yunnan Province Fuyuan		2011.1
		Town Hexing Coal	Research Institute of		County Mohong
		Mine Mining Plan	China Coal Science		Town Hexing Coal
		Design Description	and Engineering		Mine Supplementary
			Group		Exploration Report
Yunnan No.2	Xingjian	Fuyuan County Tonghe	Kunming Coal Design	2012.07	Yunnan Province Fuyuan	Beijing Santaitong	2013.4
		Coal Industrial Co.	and Research		County Tonghe Coal	Geological
		Ltd. Xingjian Coal	Institute		Industrial Co. Ltd.	Exploration
		Mine Mineral Resource			Xingjian Coal Mine	Technological
		Development &			Resource Reserve	Development Co.
		Utilization Scheme			Verification &	Ltd.
					Exploration Report
	Jianglang	Fuyuan County Kunyuan	Chongqing Design and	2012.12	Yunnan Province Fuyuan	Sichuan Coalfield	2013.7
		Coal Industrial Co.	Research Institute of		County Jianglang	Geological
		Ltd. Jianglang Coal	China Coal Science		Coal Mine	Engineering Design
		Mine Mining Plan	and Engineering		Production	and Research
		Design	Group		Exploration Report	Institute
	Yanhe	Yunnan Hidili Coal		2012.06	Yunnan Province Fuyuan	Kunming University of	2010.1
		Industrial Co. Ltd.			County Yanhe Coal	Science and
		Yanhe Coal Mine			Mine Production &	Technology
		Mining Plan Design			Exploration Report	Technological
	Zude	Yunnan Henglong Coal		2012.12	Yunnan Province Fuyuan	Industrial	2011.1
		Industrial Co. Ltd.			County Fucun Town	Management Co.
		Zude Coal Mine			Zude Coal Mine	Ltd.
		Mining Plan Design			Resource/Reserve
					Verification &
					Exploration Report
	Qingping	Fuyuan County Dahe		2012.06	Yunnan Province Fuyuan	Yunnan Province	2010.7
		Qingping Coal			County Qingping	Geological
		Industrial Co. Ltd.			Coal Mine	Engineering
		Qingping Coal Mine			Exploration Report	Exploration Head
		Mining Plan Design				Office

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A5. APPENDIX E — DETAILED JORC COAL RESOURCE BY SEAM AND CLASSIFICATION

Yunxiang

Seam C2 C3 C4 C6 C7 C8 C9 C10 C12 C13 C16 C17 C18 Total	Quantity By Category(Mt) Measured Indicated 0.6 1.3 3.0 0.6 1.1 0.9 2.2 0.4 2.0 0.3 2.2 0.3 7.5 0.2 2.4 0.7 3.4 0.6 3.9 0.6 3.2 0.6 4.1 1.1 3.8 0.5 39.5 8.5	includes Coal Inferred — 0.2 — — 0.3 0.2 0.6 0.2 0.2 0.3 — — 0.5 2.5	and Stone Total 1.9 3.8 2 2.6 2.6 2.7 8.3 3.3 4.2 4.8 3.8 5.2 4.8
			50.5

Average Coal Seam Qualities Including Stone Partings

Category Measured Indicated Inferred Average	ASH (%) 22.3 23.7 23.4 — 22.6	Moisture (%) 0.8 0.8 0.8 — 0.8	Total Sulphur (%) 0.5 0.5 0.5 — 0.5	Volatile Matter (%) 21.5 21.8 21.6 — 21.5	Specific Energy (MJ/KG) (GAR) 27.0 26.6 26.7 — 26.9	RD (g/cu.cm) 1.5 1.5 1.5 —
						1.5

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Xiangda

Seam C2 C3 C4 C7 C8 C9 C12 C13 C15 C16 C19 C20 C4_1 Total	Quantity by Measured 1.7 1.5 2.4 1.7 — 6.1 5.5 3.2 4.8 2.3 1.5 1.6 1.9 34.5	Category(Mt) Indicated 0.1 0.1 0.2 0.6 0.8 0.6 0.7 0.3 0.5 0.3 0.1 0.1 0.2 5.0	Includes Coal Inferred —	and Stone Total 1.8 1.6 2.6 2.3 0.8 6.7 6.2 3.5 5.3 2.6 1.6 1.7 2.1
				39.5

Average Coal Seam Qualities Including Stone Partings

Category Measured Indicated Inferred Average	ASH (%) 31.2 29.5 26.2 31.0	Moisture (%) 0.8 0.8 0.8 0.8	Total Sulphur (%) 0.2 0.2 0.1 0.2	Volatile Matter (%) 16.2 16.7 16.8 16.2	Specific Energy (MJ/KG) (GAR) 24.2 24.5 26.2 24.2	RD (g/cu.cm) 1.4 1.4 1.4
						1.4

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Hexing

Quantity by Category(Mt) Includes Coal and Stone Seam Measured Indicated Inferred Total C7 — 2.5 0 2.5 C8 — 4.0 0.1 4.1 C9 — 11.4 0 11.4 C11 — 6.0 0 6.9 C15 — 4.0 0.1 4.1 C16 — 5.1 0.5 5.6 C19 — 2.2 0.2 2.4 C20 — 1.6 0.8 2.4 C3a — 1.2 0.5 1.7 Total — 39.0 2.5 41.5 Average Coal Seam Qualities Including Stone Partings Category ASH Moisture Total Sulphur Volatile Matter Specific Energy RD (%) (%) (%) (%) (MJ/KG) (GAR) (g/cu.cm) Measured — — — — — — Indicated 14.9 0.9 0.2 17.2 36.2 1.4 Inferred 15.0 0.9 0.2 17.2 36.2 1.4 Average 14.9 0.9 0.2 17.2 36.2 1.4	and Stone Total 2.5 4.1 11.4 6.9 4.1 5.6 2.4 2.4 1.7	and Stone Total 2.5 4.1 11.4 6.9 4.1 5.6 2.4 2.4 1.7
		41.5
		RD (g/cu.cm) — 1.4 1.4
		1.4

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APPENDIX IV

Jianglang

Seam c4 c6 c7 c9 c11 c12 c13 c15 c16 c19 c20 c21 c22 c23 c24 c4_1 c21_1 Total	Measured 0.2 0.4 2.8 4.4 1.5 1.2 1.2 1.2 0.5 0.3 2.3 3.6 0.4 1.1 0.2 0.8 22.5	Category(Mt) Indicated Inferred 0.1 0.1 1 1.4 0.7 0.7 0.6 0.5 1.8 0.1 1.2 1.3 0.2 2.9 0.5 1.8 0.1 5.3 0.7 0.2 0.2 0.1 0.7 20.5 2.0	Total 0.3 0.5 3.8 5.8 2.2 1.9 1.8 1.7 2.4 1.5 3.8 7 2.3 7.1 0.4 0.3 1.5
			45

Average Coal Seam Qualities Including Stone Partings

Category Measured Indicated Inferred Average	ASH (%) 22.5 23.1 23.9 22.8	Moisture (%) 0.8 0.7 0.7 0.7	Total Sulphur (%) 0.6 1.2 1.5 0.9	Volatile Matter (%) 24.6 24.0 23.7 24.3	Specific Energy (MJ/KG) (GAR) 27.3 27.0 26.7 27.1	RD (g/cu.cm) 1.4 1.5 1.5
						1.5

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A6. APPENDIX F — DETAILED JORC COAL RESERVES BY SEAM AND CLASSIFICATION

Yunxiang

Seam C3 C4 C6 C7 C8 C9 C10 C12 C13 C16 C17 C18 Total	Quantity (Mt) Probable Specific Energy ROM Ash Sulfur ROM VM (MJ/kgar) (%) (%) (%) 1.6 21.7 0.3 0.1 18.8 0.2 20.3 0.4 0.3 18.0 1.0 20.5 0.4 0.1 17.5 0.4 17.8 0.4 0.1 15.0 0.5 20.0 0.4 0.1 16.3 1.6 26.2 0.2 0.1 19.6 0.6 19.9 0.4 0.1 16.3 0.9 25.1 0.3 0.1 19.6 0.9 23.8 0.3 0.2 18.4 0.9 23.6 0.3 0.5 18.7 1.0 23.8 0.3 1.1 18.4 1.1 21.1 0.4 2.0 17.5 10.9

Xiangda

Quantity (Mt)

Seam C2 C3 C4 C4+1 C7 C9 C12 C13 C15 C16 C19 C20 Total	Proven 0.1 0.0 0.1	Probable 0.2 0.7 1.2 0.8 1.0 1.3 1.5 0.9 1.1 0.2 0.2 0.3 9.4	Total Specific Energy ROM Ash Sulfur ROM VM (MJ/kgar) (%) (%) (%) 0.2 21.3 0.3 0.1% 15.2% 0.7 21.3 0.4 0.1% 15.3% 1.2 22.7 0.3 0.2% 15.7% 0.8 20.2 0.4 0.2% 13.7% 1.0 23.9 0.3 0.1% 17.2% 1.4 26.2 0.2 0.1% 17.7% 1.5 27.8 0.2 0.1% 19.8% 0.9 25.5 0.3 0.2% 16.9% 1.1 22.0 0.3 0.3% 12.8% 0.2 28.0 0.3 0.3% 15.6% 0.2 22.3 0.4 0.3% 13.7% 0.3 23.6 0.4 0.2% 13.2% 9.5

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Hexing

Seam C3a C7 C8 C9 C11 C15 C16 C19 C20 Total	Quantity (Mt) Probable Specific Energy ROM Ash ROM VM (MJ/kgar) (%) (%) 0 0.9 24.5 40.2 11.3 2.2 29.4 29.9 14.6 3.5 35.5 14.6 16.6 2.5 33.1 20.8 16.9 2 29.9 29.2 13.9 1.5 31.9 24.4 14 1.2 28 32.3 13.3 0.9 28.7 31.4 13.6 14.7

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A7. APPENDIX G — CROSS SECTIONS FOR THE 4 MINES

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A8. APPENDIX H — COAL QUALITY ESTIMATES BY SEAM FOR THE 4 MINES

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GENERAL INFORMATION

APPENDIX V

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 Group. The Directors, having made all reasonable enquiries, confirm that to the best of their knowledge and belief the information contained in this circular is accurate and complete in all material respects and not misleading or deceptive, and there are no other matters the omission of which would make any statement herein or this circular misleading.

2. DIRECTORS’ AND CHIEF EXECUTIVE’S INTERESTS AND SHORT POSITIONS IN THE SHARES

As at the Latest Practicable Date, the Directors and the chief executive of the Company had the following interests and/or short positions in the shares, underlying shares and debentures of the Company and its associated corporations (within the meaning of Part XV of the Securities and Futures Ordinance (Cap 571 of the Laws of Hong Kong) (the ‘‘SFO’’)) which 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/or short positions which they were taken or deemed to have under such provisions of the SFO) or which were required, pursuant to Section 352 of the SFO, to be entered in the register of the Company referred to therein or which were required, pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers as set out in Appendix 10 to the Listing Rules (the ‘‘Model Code’’), to be notified to the Company and the Stock Exchange:

				Approximate
			Number of	percentage of
			shares and	the relevant
			underlying	issued share
Name of Directors	Name of corporations	Nature of interests	shares held	capital	Notes
Mr. Xian Yang	The Company	Founder and	1,100,674,000	53.81%	1
(‘‘Mr. Xian’’)		beneficiary of trust
Mr. Xian	Sanlian Investment Holding	Beneficial owner	1,000	100%
	Limited (‘‘Sanlian
	Investment’’)
Mr. Sun Jiankun	The Company	Interest of controlled	19,380,000	0.95%	2
(‘‘Mr. Sun’’)		corporation
Mr. Sun	Able Accord Enterprises	Beneficial owner	1,000	100%
	Limited (‘‘Able
	Accord’’)
Mr. Chan Chi Hing	The Company	Beneficial owner	80,000	0.004%

Notes:

The 1,100,674,000 shares of the Company are held by Sanlian Investment, the issued share capital of which is jointly held by Xian Yang No.1A Ltd. (‘‘Xian Yang No.1A’’) and Sanlian No.1 Ltd. (‘‘Sanlian No.1’’). Mr. Xian is the only controlling shareholder of Xian Yang No.1A and Sanlian No.1. In 2011, Mr. Xian formed a discretionary trust, The Xian Yang Foundation 1, of which Sarasin Trust Company Guernsey Limited (‘‘Sarasin Trust’’) was the trustee. Accordingly, Mr. Xian is deemed to be interested in the 1,100,674,000 shares held by Sanlian Investment by virtue of the SFO. Mr. Xian is also the sole director of Sanlian Investment.

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GENERAL INFORMATION

APPENDIX V

The 19,380,000 shares of the Company are held by Able Accord, the entire issued share capital of which is held by Mr. Sun. Accordingly, Mr. Sun is deemed to be interested in 19,380,000 shares held by Able Accord by virtue of the SFO. Mr. Sun is also a director of Able Accord.

Save as disclosed above, to the best knowledge of the Directors, as at the Latest Practicable Date, none of the Directors or chief executive of the Company had or was deemed to have any interests or short positions in the shares, underlying shares or debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) which are required, pursuant to section 352 of the SFO, to be recorded in the register referred to therein or which are required, pursuant to the Model Code, to be notified to the Company and the Stock Exchange.

Saved as disclosed, at no time during the year was the Company, its holding company, or any of its subsidiaries or fellow subsidiaries, a party to any arrangements to enable the Directors to acquire benefits by means of the acquisition of shares in, or debentures of, the Company or any other body corporate.

3. SUBSTANTIAL SHAREHOLDERS

As at the Latest Practicable Date, the following persons, other than the Directors and chief executive of the Company, had an interest or short position in the shares or underlying shares of the Company as recorded in the register required to be kept under section 336 of the SFO:

			Approximate
			percentage of
	Number of		issued share
	issued ordinary		capital of the
Name	shares held*	Nature of interests	Company*	Notes
Sarasin Trust	561,343,740 (L)	Trustee	27.44% (L)	1
Sanlian Investment	1,100,674,000 (L)	Beneficial owner	53.81% (L)	1
Mr. Xian	1,100,674,000 (L)	Interest of controlled	53.81% (L)	1
		corporation
Ms. Qiao Qian	1,100,674,000 (L)	Interest of spouse	53.81% (L)	2
Baring Private Equity	400,000,000	Interest of controlled	19.55% (L)	3
Asia GP V, L.P.		corporation
Jean Eric Salata	400,000,000	Interest of controlled	19.55% (L)	3
		corporation

(L)-Long position

Notes:

The entire issued share capital of Sanlian Investment is jointly owned by Xian Yang No.1A and Sanlian No.1. Mr. Xian is the only controlling shareholder of Xian Yang No.1A and Sanlian No.1. In 2011, Mr. Xian formed a discretionary trust, The Xian Yang Foundation 1, of which Sarasin Trust was the trustee. Accordingly, Mr. Xian is deemed to be interested in 1,100,674,000 shares of the Company held by Sanlian Investment by virtue of the SFO. Mr. Xian is the sole director of Sanlian Investment.

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GENERAL INFORMATION

APPENDIX V

Ms. Qiao Qian is the spouse of Mr. Xian. By virtue of the SFO, Ms. Qiao Qian is also deemed, as the spouse of Mr. Xian, to be interested in all the Shares in which Mr. Xian is deemed to be interested.
Baring Private Equity Asia GP V, L.P. was wholly controlled by Baring Private Equity Asia GP V Limited (as general partner), a company which wholly controlled The Baring Asia Private Equity Fund V, L.P. Baring Private Equity Asia GP V. Limited was wholly controlled by Mr. Jean Eric Salata. Baring Private Equity Asia V Holding (8) Limited was 99.35% controlled by The Baring Asia Private Equity Fund V, L.P. Accordingly, Baring Private Equity Asia GP V, L.P. and Jean Eric Salata by virtue of the SFO are deemed to be interested in 400,000,000 Shares.

Save as disclosed above, the Company has not been notified by any person (other than the Directors or the chief executive of the Company) who had/would have interests or short positions in the shares or underlying shares of the Company or its associated corporations of 5% or more which were required to be disclosed to the Company under Part XV of the SFO or which were recorded in the register kept by the Company under section 336 of the SFO.

4. DIRECTORS’ SERVICE CONTRACTS

Each of the executive Directors has entered into a service agreement with the Company for a fixed term of three years. The service agreements of the executive Directors have been renewed on 1 September 2013. Each of the independent non-executive Directors has entered into a service agreement with the Company for a fixed term of two years. The service agreements of the independent non-executive Directors have been renewed on 1 September 2013.

As at the Latest Practicable Date, none of the Directors had entered into any service agreement with the Company which is not determinable within one year without payment of compensation (other than the statutory compensation).

5. COMPETING INTERESTS

None of the Directors and their respective associates have any interest in a business, which competes or is likely to compete with the businesses of the Group.

6. INTEREST IN ASSETS

As at the Latest Practicable Date, none of the Directors had any interest, direct or indirect, in any asset which has been since 31 December 2012, being the date to which the latest published audited financial statements of the Group were made up, acquired or disposed of by or leased to any member of the Group or are proposed to be acquired or disposed of by or leased to any member of the Group.

As at the Latest Practicable Date, none of the Directors was materially interested in any contract or arrangement entered into by any member of the Group subsisting at the date of this circular which is significant in relation to the business of the Group.

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GENERAL INFORMATION

APPENDIX V

7. MATERIAL ADVERSE CHANGE

Other than the information as disclosed in the Company’s interim results announcement for the six months ended 30 June 2013 dated 27 August 2013, the Directors are not aware of any material adverse changes in the financial or trading position of the Group since 31 December 2012, being the date to which the latest published audited financial statements of the Group were made up.

8. LITIGATION

The First Plaintiff is the investment manager of two high yield bond funds (the ‘‘Funds’’) in January 2010. lt delegated the investment management of the Funds to the Second Plaintiff. The Funds were the holders of certain bonds issued by the Company (the ‘‘Bonds’’). Under the terms of the Bonds, the Funds were entitled to require the Company to redeem some or all of the Bonds on 19 January 2013. Instead of issuing redemption notices on 18 and 19 December 2012, it is alleged that the Plaintiffs had issued by mistake notices (the ‘‘Notices’’) electing to convert the Bonds into Shares. The Plaintiffs assert that the Company knew or ought to have known that the Notices were issued by mistake and therefore are void, or alternatively are voidable in equity, and are of no legal effect. A statement of claim was served on the Company on 25 February 2013 and the Company served the defence on 29 April 2013. On 24 June 2013, the Plaintiffs indicated they would seek to amend the statement of claim and the amended statement of claim was served on the Company on 9 December 2013.

Save as disclosed herein, as at the Latest Practicable Date, neither the Company nor any of its subsidiaries is engaged in any litigation or claim of material importance and no litigation or claim of material importance is known to the Directors to be pending or threatened by or against the Company or any of its subsidiaries.

9. MATERIAL CONTRACTS

The following contracts (not being contracts entered into in the ordinary course of business of the Group) have been entered into by the Group within the two years immediately preceding the date of this circular and up to and including the Latest Practicable Date which are, or may be, material:

(i) three equity purchase agreements dated 13 December 2011 entered into between (Yunnan Hidili as purchaser and 曲靖明珠集團投資開發有限公司 (Qujing Mingzhu Group Investment Development Company Limited) as vendor for the acquisition of the 20% equity interest in 盤縣富源昆鐵選煤有限責任公司 (Panxian Fuyuan Kuntie Coal Washing Company Limited), 18% equity interest in Guizhou Weiqing and 41.78% in Fuyuan Jintong at a cash consideration of RMB150 million in aggregate;
(ii) the Capital Injection Agreements;

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GENERAL INFORMATION

APPENDIX V

(iii) the Share Transfer Agreements;
(iv) the Agreement;
(v) the Equity Transfer Agreements and the agreement in relation to Yanjiang Equity Transfer;
(vi) the Equity Pledge;
(vii) the Guarantees;
(viii) the conditional agreement dated 2 September 2013 entered into among 盤縣恒吉工貿有限公司 (Panxian Hengji Industry and Trade Co., Ltd), 貴州豐鑫源礦業有限公司 (Guizhou Fengjinyuan Mining Co., Ltd) (‘‘Guizhou Fengjinyuan’’) and 盤縣慶源煤業有限公司 (Panxian Qingyuan Coal Mine Co., Ltd.*) in relation to the sale of Dongguaao coal mine located at Baiguozhen, Panxian, Liupanshui, Guizhou province;
(ix) the conditional agreement dated 2 September 2013 entered into among Liupanshui Hidili, Guizhou Fengjinyuan and 廣西物資集團有限責任公司 (Guangxi Logistics Group Co., Ltd.*) in relation to the sale of Jinhe coal mine located at Baiguozhen, Panxian, Liupanshui, Guizhou province; and
(x) the conditional agreement dated 28 November 2013 entered into among Sichuan Hidili and 四川國理鋰材料有限公司(Sichuan Guoli Lithium Materials Co., Ltd) in relation to the sale of 100% equity interest in 四川恒鼎鋰業科技有限公司(Sichuan Hidili Lithium Technology Co., Ltd), a company engaged in lithium mining in Aba, Sichuan province.

10. EXPERT AND CONSENT

The following is the qualification of the experts who have given opinion or advice which is contained in this circular:

Name Qualification

Deloitte Touche Tohmatsu Certified Public Accountants

Runge Pincock Minarco Competent Person and Competent Evaluator

(collectively, the ‘‘Experts’’)

Each of the Experts is not beneficially interested in the share capital of any member of the Group nor has any right, whether legally enforceable or not, to subscribe for or to nominate persons to subscribe for securities in any member of the Group.

Each of the Experts has given and has not withdrawn its written consent to the issue of this circular with the inclusion of its letter and references to its name in the form and context in which it appears.

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GENERAL INFORMATION

APPENDIX V

As at the Latest Practicable Date, each of the Experts was not interested, directly or indirectly, in any assets which have been acquired or disposed of by or leased to any member of the Group or are proposed to be acquired or disposed of by or leased to any member of the Group since 31 December 2012, being the date to which the latest published audited accounts of the Company were made up.

11. MISCELLANEOUS

(a) The company secretary of the Company is Ms. Chu Lai Kuen. She is an associate member of the Hong Kong Institute of Certified Public Accountants and a fellow member of the Association of Chartered Certified Accountants. Prior to joining the Company in October 2008, she had over 16 years of working experience in auditing and financial management.
(b) The registered office of the Company is located at Cricket Square, Hutchins Drive, P.O. Box 2681, Grand Cayman, KY1-1111, Cayman Islands. The principal place of business of the Company in Hong Kong is located at Unit 3702, 37th Floor, West Tower, Shun Tak Centre, 168-200 Connaught Road Central, Hong Kong.
(c) The share registrar and transfer office of the Company is Computershare Hong Kong Investor Services Limited at Shops 1712–1716, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong.
(d) In the event of inconsistency, the English language of this circular shall prevail over the Chinese language.

12. DOCUMENT AVAILABLE FOR INSPECTION

Copies of the following documents will be available for inspection during normal business hours on any week day (except public holidays) at Unit 3702, 37th Floor, West Tower, Shun Tak Centre, 168–200 Connaught Road Central, Hong Kong for the period of 14 days from the date of this circular:

(a) this circular;
(b) the memorandum and articles of association of the Company;
(c) copies of the material contracts referred to in the section headed ‘‘Material Contracts’’ in this appendix;
(d) the annual reports of the Company for the two financial years ended 31 December 2012;
(e) the interim report of the Company for the six months ended 30 June 2013;
(f) the financial information of the Target Group, the text of which is set out in Appendix II to this circular;

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GENERAL INFORMATION

APPENDIX V

(g) the accountants’ report on unaudited pro forma financial information of the Remaining Group from Deloitte Touche Tohmatsu, the text of which is set out in Appendix III to this circular;
(h) the Competent Person’s Report from Runge Pincock Minarco, the text of which is set out in Appendix IV to this circular; and
(i) the written consents from the Experts referred to under the section headed ‘‘Expert and Consent’’ in this appendix.

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NOTICE OF EGM

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NOTICE OF EXTRAORDINARY GENERAL MEETING

NOTICE IS HEREBY GIVEN that an extraordinary general meeting (the ‘‘Meeting’’) of Hidili Industry International Development Limited (the ‘‘Company’’) will be held at United Conference Centre, 10/F, United Centre, 95 Queensway, Admiralty, Hong Kong on Tuesday, 31 December 2013 at 11:00 a.m. for the purposes of considering and, if thought fit, passing (with or without modifications), the following resolution (the ‘‘Resolution’’) as an ordinary resolution of the Company:

ORDINARY RESOLUTION

‘‘(a) THAT the agreement dated 17 May 2013 (the ‘‘Agreement’’) entered into among 恒鼎實業(中國)集團有限公司 (Hidili Industry (China) Group Co., Ltd.) (‘‘Hidili China’’), 攀枝花市恒鼎煤焦化有限公司 (Panzhihua Hidili Coal Industry Co., Ltd.) (‘‘Panzhihua Hidili’’) and 雲南東源煤業集團有限公司 (Yunnan Dongyuan Coal Group Company Limited) (‘‘Yunnan Dongyuan’’) (a copy of which has been produced to this meeting marked ‘‘A’’ and initialled by the chairman of this meeting for the purpose of identification) pursuant to which the parties conditionally agreed to the proposed disposal of 50% equity interest in 雲南恒鼎煤業有限公司 (Yunnan Hidili Coal Industry Co., Ltd) by Panzhihua Hidili to Yunnan Dongyuan pursuant to the terms and subject to the conditions of the Agreement, and the documents entered or to be entered into pursuant to the Agreement (including the Equity Pledge and the Guarantees referred to in the circular of the Company dated 12 December 2013), and the terms and conditions therein and the transactions contemplated thereunder, be and are hereby approved, confirmed and ratified; and

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NOTICE OF EGM

(b) THAT the board of directors of the Company (the ‘‘Board’’) be and is hereby generally and unconditionally authorised to do all such acts and things and execute all such documents as it considers necessary or expedient or desirable in connection with or to give effect to the Agreement and to implement the transactions contemplated thereunder and to agree to such variation, amendments or waivers of matters relating thereto as are, in the opinion of the Board, in the interest of the Company.’’

Yours faithfully, By order of the Board Hidili Industry International Development Limited Xian Yang Chairman

Hong Kong, 12 December 2013

For identification purpose only

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

Head office: 16th Floor, Dingli Mansion No. 81 Renmin Road Panzhihua Sichuan 617000 The PRC

Notes:

Any member (who is a holder of two or more shares) of the Company entitled to attend and vote at the Meeting convened by the above notice is entitled to appoint one or more proxy(ies) to attend and, subject to the articles of association of the Company, vote in his stead. A proxy need not be a member of the Company.
In order to be valid, the instrument appointing a proxy, together with the power of attorney or other authority, if any, under which it is signed or a certified copy thereof, must be deposited with the Company’s branch share registrar and transfer office in Hong Kong, Computershare Hong Kong Investor Services Limited, at Shops 1712–16, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong not less than 48 hours before the time appointed for holding the Meeting or any adjourned meeting thereof.
A form of proxy for use at the Meeting is enclosed with the circular of the Company dated 12 December 2013. Completion and return of the form of proxy shall not preclude any member from attending and voting in person at the Meeting or any adjourned meeting thereof.
Where there are joint registered holders of any share, any one of such persons may vote at the Meeting, either personally or by proxy, in respect of such share as if he were solely entitled thereto, but if more than one of such joint registered holders are present at the Meeting personally or by proxy, then one of the registered holders so present whose name stands first on the register of members of the Company in respect of such share, or his proxy, shall alone be entitled to vote and will be accepted to the exclusion of other joint registered holders in respect thereof.
The votes at the Meeting will be taken by poll.
As at the date of this notice, the executive directors of the Company are Mr. Xian Yang (Chairman) and Mr. Sun Jiankun; and the independent non-executive directors of the Company are Mr. Chan Chi Hing, Mr. Chen Lemin and Mr. Huang Rongsheng.

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AI assistant

Hidili Industry International Development Limited — Proxy Solicitation & Information Statement 2013

49894_rns_2013-12-12_78d74095-7a15-493e-bb6a-ae0265ecbf66.pdf

VERY SUBSTANTIAL DISPOSAL AND NOTICE OF EXTRAORDINARY GENERAL MEETING

DEFINITIONS

DEFINITIONS

DEFINITIONS

VERY SUBSTANTIAL DISPOSAL AND

NOTICE OF EXTRAORDINARY GENERAL MEETING

INTRODUCTION

THE AGREEMENT

Target Company and Target Group

. Yunnan Hidili Industry

Purchase Consideration

Conditions for Completion

Effect of Completion

Undertakings, Representations and Warranties

Termination

THE EQUITY PLEDGE

THE GUARANTEES

GROUP REORGANISATION

Group structure before and after the Group Reorganisation

ACCOUNTING IMPACT AFTER THE DISPOSAL

LETTER FROM THE BOARD

INFORMATION OF THE GROUP, THE TARGET GROUP, THE MINES BEING DISPOSED, HIDILI CHINA, PANZHIHUA HIDILI, SICHUAN HIDILI, THE REMAINING GROUP AND YUNNAN DONGYUAN

The Group

The Target Group

LETTER FROM THE BOARD

The mines being disposed

LETTER FROM THE BOARD

Hidili China

Panzhihua Hidili

Sichuan Hidili

Yunnan Hidili or Target Company

The Remaining Group

Construction progress

Yunnan Dongyuan

REASONS FOR AND BENEFITS OF THE DISPOSAL AND USE OF PROCEEDS

LETTER FROM THE BOARD

IMPLICATIONS UNDER THE LISTING RULES

EGM

RECOMMENDATION

ADDITIONAL INFORMATION

1. FINANCIAL INFORMATION OF THE GROUP

2. INDEBTEDNESS

3. WORKING CAPITAL

4. MATERIAL ADVERSE CHANGE

5. MANAGEMENT DISCUSSION AND ANALYSIS OF THE REMAINING GROUP

For the six months ended 30 June 2013

Financial Review

Liquidity, Financial Resources and Capital Structure

Pledger of Assets

Employees

Risk in Foreign Exchange

Significant Investment Held

Material Acquisition and Disposal

Contingent Liabilities

For the year ended 31 December 2012

Financial Review

Liquidity, Financial Resources and Capital Structure

Pledge of Assets

Employees

Risk in Foreign Exchange

Significant Investment Held

Material Acquisition and Disposal

Contingent Liabilities

For the year ended 31 December 2011

Financial Review

Liquidity, Financial Resources and Capital Structure

Pledge of Assets

Employees

Risk in Foreign Exchange

Significant Investment Held

Material Acquisition and Disposal

Contingent Liabilities

6. FINANCIAL AND TRADING PROSPECTS

SUMMARY OF FINANCIAL INFORMATION

Conclusion

Emphasis of Matter

UNAUDITED CONSOLIDATED STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

Hidili Industry International Development Limited Proxy Solicitation & Information Statement 2013