Jinchuan Group International Resources Co. Ltd - Proxy Solicitation & Information Statement 2017

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

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

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

If you have sold all your shares in Jinchuan Group International Resources Co. Ltd, you should at once hand this circular accompanying proxy form to the purchaser or to the bank, stockbroker or other agent through whom the sale was effected for transmission to the purchaser.

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JINCHUAN GROUP INTERNATIONAL RESOURCES CO. LTD 金川集團國際資源有限公司

(Incorporated in the Cayman Islands with limited liability) (Stock Code: 2362)

RENEWAL OF CONTINUING CONNECTED TRANSACTIONS

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

A letter from the Board is set out on pages 5 to 15 of this circular. A letter from the Independent Board Committee is set out on page 16 of this circular. A letter from Altus containing its advice to the Independent Board Committee and the Independent Shareholders is set out on pages 17 to 40 of this circular.

A notice convening the EGM to be held at Unit 3101, 31/F, United Centre, 95 Queensway, Admiralty, Hong Kong at 10:00 a.m on Friday, 27 January 2017 is set out on pages 49 and 50 of this circular.

Whether or not you are able to attend the EGM in person, you are requested to complete the accompanying proxy form in accordance with the instructions printed thereon and return it to the branch share registrar of the Company in Hong Kong, Boardroom Share Registrars (HK) Limited at 31/F, 148 Electric Road, North Point, Hong Kong, as soon as possible but in any event not less than 48 hours before the time fixed for the holding of the EGM or any adjournment thereof. Completion and return of the proxy form will not preclude you from attending and voting in person at the EGM if you so wish.

12 January 2017

	Page
DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
LETTER FROM THE BOARD. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	5
LETTER FROM THE INDEPENDENT BOARD COMMITTEE. . . . . . . . . . . . . . . . . . . . . . . .	16
LETTER FROM ALTUS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	17
APPENDIX I – GENERAL INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	41
APPENDIX II – SUMMARY OF KEY TERMS OF THE 2015
COBALT AGREEMENT (AS SUPPLEMENTED BY THE
2016 COBALT SUPPLEMENTAL AGREEMENT). . . . . . . . . . . . . . . . . .	47
NOTICE OF EGM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	49

DEFINITIONS

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

“2013 CCT Agreement”

the framework agreement dated 2 December 2013 entered into between the Company and Jinchuan for trading of Mineral and Metal Products between the Group and the Jinchuan Group for the three years from 1 January 2014 up to 31 December 2016

“2013 CCT Circular”
the circular of the Company in relation to the 2013 CCT Agreement dated 11 December 2013
“2013 Continuing Connected Transactions”
collectively, the continuing connected transactions between the Group and the Jinchuan Group for the period from 1 January 2014 to 31 December 2016 under the 2013 CCT Agreement
“2015 Circular”
the circular issued by the Company dated 21 December 2015 in relation to the 2015 Cobalt Agreement
“2015 Cobalt Agreement”
the agreement dated 2 December 2015 entered into between Golden Harbour and Lanzhou Jinchuan for the sale and purchase of cobalt hydroxide produced by Ruashi Mining, as supplemented by the 2016 Cobalt Supplemental Agreement
“2016 CCT Agreement”
the framework agreement dated 29 November 2016 entered into between the Company and Jinchuan for trading of Mineral and Metal Products between the Group and the Jinchuan Group for the three years from 1 January 2017 up to 31 December 2019
“2016 Circular”
the circular issued by the Company dated 15 July 2016 in relation to the 2016 Cobalt Supplemental Agreement
“2016 Continuing Connected Transactions”
collectively, the continuing connected transactions between the Group and the Jinchuan Group contemplated under the 2016 CCT Agreement
“2016 Cobalt Supplemental Agreement”
the supplemental agreement dated 15 June 2016 entered into between Golden Harbour and Lanzhou Jinchuan for the sale and purchase of the cobalt hydroxide produced by Ruashi Mining, the terms of which are supplementing the 2015 Cobalt Agreement
“associates”

has the meaning ascribed to it under the Listing Rules

“Board”

the board of Directors

“Business Day”
any day (other than a Saturday or Sunday or public holiday) on which banks in Hong Kong are generally open for the transaction of normal business

“close associate”

has the meaning ascribed to it under the Listing Rules

DEFINITIONS

“Company”	Jinchuan Group International Resources Co. Ltd, a company
	incorporated in the Cayman Islands with limited liability, the
	Shares of which are listed on the Main Board of the Stock
	Exchange
“connected person”	has the meaning ascribed to it under the Listing Rules
“Director(s)”	the director(s) of the Company
“EGM”	the extraordinary general meeting to be convened on Friday, 27
	January 2017 for, among other matters, approving the 2016 CCT
	Agreement and the 2016 Continuing Connected Transactions
	(including the Proposed Annual Caps)
“Golden Harbour”	Golden Harbour International Trading Limited, a company
	incorporated in Hong Kong and indirectly wholly-owned by the
	Company
“Group”	collectively, the Company and its subsidiaries and associates
	controlled by the Company from time to time
“HK$”	Hong Kong dollars, the lawful currency of Hong Kong
“Hong Kong”	the Hong Kong Special Administrative Region of the PRC
“Independent Board Committee”	the independent committee of the Board, consisting of the three
	independent non-executive Directors, established to advise the
	Independent Shareholders in connection with the 2016 CCT
	Agreement and the 2016 Continuing Connected Transactions
	(including the Proposed Annual Caps)
“Independent Financial Adviser”	Altus Capital Limited, a corporation licensed to carry on Type 4
or “Altus”	(advising on securities), Type 6 (advising on corporate finance)
	and Type 9 (asset management) regulated activities under the
	Securities and Futures Ordinance (Chapter 571 of the Laws of
	Hong Kong), is the independent financial adviser appointed to
	advise the Independent Board Committee and the Independent
	Shareholders in connection with the 2016 CCT Agreement and
	the 2016 Continuing Connected Transactions (including the
	Proposed Annual Caps)

“Independent Shareholders” the Shareholders but excluding Jinchuan and its close associates “Jinchuan” 金川集團股份有限公司(Jinchuan Group Co., Ltd.*), a stated-owned enterprise established in the PRC and the controlling shareholder of the Company

“Jinchuan Group” collectively, Jinchuan and its subsidiaries and associates controlled by it from time to time, for the purpose of this circular, excluding the Group

DEFINITIONS

“Jinchuan HK” Jinchuan Group (Hongkong) Resources Holdings Limited (金川集團（香港）資源控股有限公司), an investment holding company incorporated in Hong Kong and a wholly-owned subsidiary of Jinchuan. It indirectly owns 3,263,022,857 Shares, representing approximately 75% of the issued share capital of the Company as at the Latest Practicable Date
“Kinsenda Project” a brownfield copper project owned by Kinsenda SA and situated in the Katanga Province, the Democratic Republic of Congo
“Kinsenda SA” Kinsenda Copper Company SA (formerly named Kinsenda Copper Company Sarl), a company incorporated in the Democratic Republic of Congo and a subsidiary of Company
“Lanzhou Jinchuan” 蘭州金川新材料科技股份有限公司(Lanzhou Jinchuan Advanced Materials Technology Co., Ltd.*), a company incorporated in the PRC, approximately 99% interest of which is indirectly held by Jinchuan
“Latest Practicable Date” 11 January 2017, being the latest practicable date prior to the printing of this circular for the purpose of ascertaining certain information for inclusion in this circular
“LBMA” London Bullion Market Association, the London-based trade association and a recognised publisher of reference prices for a number of precious metals which are timely published on its designated website (http://www.lbma.org.uk/pricing-andstatistics) on a daily basis for subscribed members and publications
“Listing Rules” the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited
“LME” London Metal Exchange, a recognised investment exchange regulated by the Financial Conduct Authority of the United Kingdom and a recognised publisher of reference prices for various metals which are timely published on its designated website (https://www.lme.com/) on a daily basis for metal and investment communities
“Metal Bulletin” a premium intelligence service for metal and steel professionals, being part of the Euromoney Institutional Investor Plc Group of companies and a recognised publisher of reference prices for long-term cobalt trading contracts which are timely published on its designated website (www.metalbulletin.com) on a twice-a-week basis for subscribed members and publications

DEFINITIONS

“Mineral and Metal Products”	mineral products, metal products and other raw materials the
	Jinchuan Group needs for its own production and for its sale to
	third parties, the scope of which is detailed in the 2013 CCT
	Agreement and 2016 CCT Agreement respectively, including but
	not limited to copper or nickel ores and concentrates, copper or
	nickel cathodes and other forms of copper, nickel or other metals
	bearing raw materials, and the 2016 CCT Agreement also
	specifically covers cobalt and its related products
“PRC”	the People’s Republic of China, for the purposes of this circular,
	excluding Hong Kong, the Macau Special Administrative Region
	of the PRC and Taiwan
“Proposed Annual Caps”	the proposed annual caps in respect of the 2016 Continuing
	Connected Transactions for the years ending 31 December 2017,
	2018 and 2019 respectively as set out in this circular
“RMB”	Renminbi, the lawful currency of the PRC
“Ruashi Mine”	an opencast oxide copper and cobalt mine owned by Ruashi
	Mining and situated in the Democratic Republic of Congo on the
	outskirts of Lubumbashi, the capital of Katanga province and
	processing operations within exploitation permit number 578
“Ruashi Mining”	Ruashi Mining SAS, a company incorporated in the Democratic
	Republic of Congo and a subsidiary of Ruashi Holdings
	(Proprietary) Limited, a company incorporated in South Africa
	and held as to 75% by Metorex (Proprietary) Limited (an indirect
	wholly-owned subsidiary of the Company)
“SFO”	Securities and Futures Ordinance (Chapter 571 of the Laws of
	Hong Kong) for the time being in force
“Share(s)”	ordinary shares of HK$0.01 each in the issued share capital of the
	Company
“Shareholder(s)”	holder(s) of the Share(s)
“Stock Exchange”	The Stock Exchange of Hong Kong Limited
“subsidiaries”	has the meaning ascribed to it under the Companies Ordinance
	(Chapter 622 of the Laws of Hong Kong)
“USD”	US dollars, the lawful currency of the United States
“%”	per cent.

Certain English translation of Chinese names or words in this circular are included for information only, and are not official English translations of such Chinese names or words.

For identification purpose only

LETTER FROM THE BOARD

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JINCHUAN GROUP INTERNATIONAL RESOURCES CO. LTD 金川集團國際資源有限公司

(Incorporated in the Cayman Islands with limited liability) (Stock Code: 2362)

Executive Directors: Mr. Yang Zhiqiang (Chairman of the Board) Mr. Zhang Sanlin (Deputy Chairman of the Board) Mr. Chen Dexin (Chief Executive Officer) Mr. Zhang Zhong

Registered office: P.O. Box 309 Ugland House Grand Cayman KY1-1104 Cayman Islands

Independent non-executive Directors:

Mr. Wu Chi Keung Mr. Yen Yuen Ho, Tony Mr. Neil Thacker Maclachlan

Head office and principal place of business in Hong Kong: Unit 3101, 31/F United Centre 95 Queensway Admiralty Hong Kong

12 January 2017

To the Shareholders

Dear Sir or Madam,

RENEWAL OF CONTINUING CONNECTED TRANSACTIONS

INTRODUCTION

Reference is made to the announcement of the Company dated 29 November 2016 in relation to the 2016 CCT Agreement and the 2016 Continuing Connected Transactions and the announcement of the Company dated 11 January 2017 in relation to the revision of the Proposed Annual Caps under the 2016 Continuing Connected Transactions. Reference is also made to the 2013 CCT Circular in relation to the 2013 CCT Agreement entered into between the Company and Jinchuan, the 2015 Circular in relation to the 2015 Cobalt Agreement entered into between Golden Harbour and Lanzhou Jinchuan, and the 2016 Circular in relation to the 2016 Cobalt Supplemental Agreement which is supplemental to the 2015 Cobalt Agreement entered into between Golden Harbour and Lanzhou Jinchuan.

LETTER FROM THE BOARD

The 2016 CCT Agreement has been entered into between the Company and Jinchuan for the trading of Mineral and Metal Products between the Group and the Jinchuan Group for the three years from 1 January 2017 up to 31 December 2019. As at the Latest Practicable Date, Jinchuan is the controlling shareholder of the Company. Through its wholly-owned subsidiaries, Jinchuan indirectly owns 3,263,022,857 Shares, representing approximately 75.0% of the issued share capital of the Company. Accordingly, Jinchuan is a connected person of the Company under Chapter 14A of the Listing Rules and the transactions contemplated under the 2016 CCT Agreement will constitute continuing connected transactions for the Company. Based on the Proposed Annual Caps, the 2016 CCT Agreement and the 2016 Continuing Connected Transactions are subject to the reporting, annual review, announcement and independent shareholders’ approval requirements under Chapter 14A of the Listing Rules.

The Independent Board Committee, consisting of Mr. Wu Chi Keung, Mr. Yen Yuen Ho, Tony and Mr. Neil Thacker Maclachlan, being all the independent non-executive Directors, has been established to advise the Independent Shareholders on (i) whether the terms and conditions of the 2016 CCT Agreement were negotiated between the parties on an arm’s length basis and are on normal commercial terms that are fair and reasonable; (ii) whether the Proposed Annual Caps are fair and reasonable; and (iii) whether the 2016 CCT Agreement and the 2016 Continuing Connected Transactions will be conducted in the ordinary and usual course of business of the Company and its subsidiaries and are in the interests of the Company and the Shareholders as a whole, and to advise the Independent Shareholders on how to vote at the EGM, taking into account the recommendations of Altus.

Altus has been appointed to advise the Independent Board Committee and the Independent Shareholders on (i) whether the terms and conditions of the 2016 CCT Agreement were negotiated between the parties on an arm’s length basis and are on normal commercial terms that are fair and reasonable; (ii) whether the Proposed Annual Caps are fair and reasonable; and (iii) whether the 2016 CCT Agreement and the 2016 Continuing Connected Transactions will be conducted in the ordinary and usual course of business of the Company and its subsidiaries and are in the interests of the Company and the Shareholders as a whole, and to advise the Independent Shareholders on how to vote at the EGM.

The purposes of this circular are, among other things:

(i) to provide the Shareholders with the details of the 2016 CCT Agreement and the 2016 Continuing Connected Transactions (including the Proposed Annual Caps);
(ii) to set out the letter of the Independent Board Committee to the Independent Shareholders;
(iii) to set out the letter from Altus to the Independent Board Committee and the Independent Shareholders; and
(iv) to give notice to convene the EGM to consider and, if thought fit, to approve, among other things, the 2016 CCT Agreement and the 2016 Continuing Connected Transactions (including the Proposed Annual Caps).

LETTER FROM THE BOARD

THE 2016 CCT AGREEMENT

The principal terms of the 2016 CCT Agreement are summarised as follows:

Date: 29 November 2016 Parties: (a) The Company (as vendor) (b) Jinchuan (as purchaser)

Term:

The effective period of the 2016 CCT Agreement should commence on 1 January 2017 and up to, and inclusive of, 31 December 2019.

Subject matter:

Pursuant to the 2016 CCT Agreement:

(i) The Company has agreed to sell to Jinchuan, and Jinchuan has agreed to purchase from the Company, the Mineral and Metal Products that the Group sourced from third parties or produced by the mines of the Group; and
(ii) The Company has agreed to cause the Group to sell to the Jinchuan Group, and Jinchuan has agreed to cause the Jinchuan Group (for the purpose of this circular, excluding the Group) to purchase from the Group, the Mineral and Metal Products.

Condition precedent:

The undertaking of the 2016 Continuing Connected Transactions under the 2016 CCT Agreement is conditional upon the Company obtaining the Independent Shareholders’ approval at the EGM for the 2016 CCT Agreement, the 2016 Continuing Connected Transactions and the Proposed Annual Caps in respect of the 2016 Continuing Connected Transactions.

Basis of the trading prices of the Mineral and Metal Products:

The trading prices of the Mineral and Metal Products will be determined by reference to the prices of copper, nickel, cobalt and other relevant metals as announced by the LME, the LBMA and/or the Metal Bulletin, subject to certain adjustments to be made in accordance with the relevant market practices.

LETTER FROM THE BOARD

General transaction principles:

The 2016 Continuing Connected Transactions should be conducted in accordance with the following general principles:

(i) the Mineral and Metal Products provided by the Group should be of good quality and at fair and reasonable prices;
(ii) the Group and the Jinchuan Group should enter into separate contracts for trading of the Mineral and Metal Products contemplated under the 2016 CCT Agreement. Such trading contracts should comply with the relevant regulatory requirements in Hong Kong (including but not limited to the Listing Rules) and should set out, among other things, the parties of the transaction(s), the terms and conditions of the transaction(s), the relevant product(s) and the trading price (which shall be determined on the basis as described above), the delivery time and the payment terms. The terms of such trading contracts should be on normal commercial terms and should be no less favourable than those available to independent third parties; and
(iii) the terms offered by the Group should be competitive in terms of the quality and trading price of the Mineral and Metal Products. Priority should only be given to the Group by the Jinchuan Group if the quality and trading price of the Mineral and Metal Products provided by the Group to the Jinchuan Group are no less favourable than those available from independent third parties.

As the terms of the 2016 CCT Agreement also specifically cover cobalt and its related products, in determining the Proposed Annual Caps under the 2016 CCT Agreement and the 2016 Continuing Connected Transactions, the calculation of such Proposed Annual Caps have also included the supply of cobalt hydroxide produced by Ruashi Mining to Lanzhou Jinchuan under the 2015 Cobalt Agreement (as supplemented by the 2016 Cobalt Supplemental Agreement) and the relevant annual caps will be consolidated for transactions to be conducted under the 2016 CCT Agreement if the 2016 Continuing Connected Transactions are approved by the Independent Shareholders at the EGM. For the avoidance of doubt, the 2015 Cobalt Agreement (as supplemented by the 2016 Cobalt Supplemental Agreement) will not be superseded or substituted by the 2016 CCT Agreement and will continue to be valid and in full force. With respect to the summary of terms of the 2015 Cobalt Agreement and its amendments thereof pursuant to the 2016 Cobalt Supplemental Agreement (including the pricing mechanism and the basis of the selling prices of the cobalt contained in the cobalt hydroxide as agreed between Golden Harbour and Lanzhou Jinchuan), please refer to Appendix II of this circular, the 2015 Circular and 2016 Circular for further details.

LETTER FROM THE BOARD

HISTORICAL ANNUAL CAPS AND TRADING AMOUNTS UNDER THE 2013 CCT AGREEMENT AND THE 2015 COBALT AGREEMENT

The following table sets out the historical annual caps for transactions conducted under the 2013 CCT Agreement (as disclosed in the 2013 CCT Circular) and the historical trading amounts of Mineral and Metal Products between the Group and the Jinchuan Group under the 2013 CCT Agreement, respectively, for the periods indicated below:

	Year ended	Year ended	Year ended
	31 December	31 December	31 December
	2014	2015	2016
	(USD)	(USD)	(USD)
Historical annual caps	1,000 million	1,200 million	1,500 million
	Year ended	Year ended	Six months
	31 December	31 December	ended 30 June
	2014	2015	2016
	(USD)	(USD)	(USD)
Historical trading amounts	113.7 million	60.6 million	16.6 million

The following table sets out the historical annual caps and historical trading amounts of cobalt hydroxide between Golden Harbour and Lanzhou Jinchuan for transactions conducted under the 2015 Cobalt Agreement, respectively, for the periods indicated below:

	Year ended	Year ending	Year ending
	31 December	31 December	31 December
	2016	2017	2018
	(USD)	(USD)	(USD)
Historical annual caps	106 million	106 million	106 million
	Six months
	ended 30 June
	2016
	(USD)
Historical trading amounts	16.2 million

LETTER FROM THE BOARD

PROPOSED ANNUAL CAPS UNDER THE 2016 CCT AGREEMENT

The following table sets out the Proposed Annual Caps in respect of the 2016 Continuing Connected Transactions:

Proposed Annual Caps	Year ending 31 December
	2017 2018 2019 (USD) (USD) (USD) 165 million 190 million 200 million

The Proposed Annual Caps have been determined by reference to: (i) the respective financial resources of the parties to the 2016 CCT Agreement; (ii) the respective needs of the business development of the Group and the Jinchuan Group; (iii) the expanded scope of Mineral and Metal Products that the Group sourced from third parties or produced by the mines of the Group to be covered under the 2016 CCT Agreement, in particular the inclusion of the supply of cobalt and its related product, including but not limited to the transactions contemplated under the remaining term of the 2015 Cobalt Agreement (having taken into account the potential output fluctuations); (iv) historical and prevailing prices of the Mineral and Metal Products; (v) historical trading amounts, including those under the 2013 CCT Agreement and the 2015 Cobalt Agreement; (vi) possible fluctuations in prices of the Mineral and Metal Products in the future; and (vii) a buffer to cater for potential business growth. Particularly, in respect of the Proposed Annual Cap for the year ending 31 December 2017, it has been determined with reference to (i) the annual cap for the year ending 31 December 2017 under the 2015 Cobalt Agreement as approved by a resolution passed at the extraordinary general meeting of the Company held on 7 January 2016; (ii) the historical trading amounts for the year ended 31 December 2016 under the 2013 Continuing Connected Transactions; (iii) the increasing trend of copper and cobalt prices in the fourth quarter of 2016; and (iv) the business development and expansion plans of the Group which are expected to increase the production capacity of the Group and thereby increasing the revenue base of the Group, such as the Kinsenda Project (including a high grade copper deposit) which is expected to begin trial production of copper in the first quarter of 2017. The Board has also taken into account (i) the annual cap for the year ending 31 December 2018 under the 2015 Cobalt Agreement as approved by a resolution passed at the extraordinary general meeting of the Company held on 7 January 2016; (ii) the volatile nature of the commodity market and prices; and (iii) the business development and expansion plans of the Company (including the increasing production capacity of copper under the Kinsenda Project as described above) which are expected to increase the production capacity of the Group and thereby increasing the revenue base of the Group, in determining the Proposed Annual Cap for the years ending 31 December 2018 and 2019.

Reference is also made to the announcement of the Company dated 11 January 2017 in relation to the revision of the Proposed Annual Caps under the 2016 Continuing Connected Transactions, which sets out the reason for revising the Proposed Annual Caps to USD165 million, USD190 million and USD200 million for the three years ending 31 December 2017, 2018 and 2019 respectively. The Company will seek approval from the Independent Shareholders for such reduced Proposed Annual Caps, together with the 2016 CCT Agreement and the 2016 Continuing Connected Transactions, at the EGM.

LETTER FROM THE BOARD

Given the undertaking of the 2016 Continuing Connected Transactions is conditional upon the Company obtaining the Independent Shareholders’ approval at the EGM, the Company expects that the 2016 Continuing Connected Transactions to be conducted under the 2016 CCT Agreement will commence in January 2017 should the Independent Shareholders’ approval is obtained. On an annualised basis, the Proposed Annual Caps represent approximately 89.7% decrease from the last year of the term of the 2013 Continuing Connected Transactions (i.e. 2016) to the first year (i.e. 2017) of the term of the 2016 Continuing Connected Transactions, approximately 15.2% growth from the first year (i.e. 2017) to the second year (i.e. 2018) of the term of the 2016 Continuing Connected Transactions and approximately 5.3% growth from the second year (i.e. 2018) to the third year (i.e. 2019) of the term of the 2016 Continuing Connected Transactions.

Shareholders should note that the Proposed Annual Caps represent an estimate based on information currently available and that the actual utilisation and sufficiency of the Proposed Annual Caps would depend on a number of factors, including but not limited to, the price of the Mineral and Metal Products and the demand of Jinchuan Group. The Proposed Annual Caps have no direct relationship to, nor should be taken to have any bearing on, the Group’s financial or potential financial performance or percentage of contributions of sales revenue to Jinchuan Group to the overall revenue of the Group over the term of the 2016 CCT Agreement. This is especially so when the Group’s revenue in 2015 was greatly impacted by low commodity prices in that year. In view of the increasing trend of copper and cobalt prices in the fourth quarter of 2016, and the Group’s expansion plans and business development efforts directed towards increasing the customer base and revenue source for the Group, it may affect the percentage of contributions of sales revenue to Jinchuan Group to the overall revenue of the Group in the coming years.

The Board (including the independent non-executive Directors) considers that the Proposed Annual Caps are fair and reasonable. The Company will re-comply with the reporting, annual review, announcement and independent shareholders’ approval requirements pursuant to Chapter 14A of the Listing Rules in the event that any of the Proposed Annual Caps is exceeded.

PRICING MECHANISM UNDER THE 2016 CONTINUING CONNECTED TRANSACTIONS

The trading prices of the Mineral and Metal Products to be provided by the Group to the Jinchuan Group will be primarily based on the purchase costs or prevailing market prices of the Mineral and Metal Products (namely, the consideration paid to the overseas suppliers by the Group for purchases of such products, or consideration paid to the Group for such products produced by the mines of the Group) determined by reference to the prices of copper, nickel, cobalt and other relevant metals as announced by the LME, the LBMA and/or the Metal Bulletin after making certain adjustments (if appropriate) mainly by reference to the following items, to achieve a reasonable profit margin:

(i) the difference between the treatment charges and refining charges (if appropriate) that are charged by the overseas suppliers to the Group, and the treatment charges and refining charges (if appropriate) that the Group charges the Jinchuan Group, which will be determined through the negotiations between the Group and the Jinchuan Group (predominantly on an annual basis) with reference to an annual benchmark in the market set by the major mining companies and the major mineral and metal products consumers near the end of each year; and

LETTER FROM THE BOARD

(ii) a reasonable premium to be charged by the Group to the Jinchuan Group over the actual or notional finance costs (if appropriate) that would be incurred by the Group for the particular transactions, and such mark-up will be determined through the negotiations between the Group and the Jinchuan Group by reference to the prevailing lending interest rates offered/ charged by banks in Hong Kong and the prevailing lending interest rates of the People’s Bank of China in China.

In order to assess whether a profit margin has been achieved after performing the above adjustments to the trading prices offered to the Jinchuan Group for the Group to derive reasonable returns, the Group would also take into account the following costs and expenses that may be incurred by the Group for the particular transactions:

(a) exposure to possible costs arising from foreign exchange differences for entering into the particular transactions (if appropriate), depending on the currency which the Group would borrow or utilise to fund the payments under the transactions, which will be affected by fluctuations of foreign exchange rate between RMB and USD, as well as possible costs that may be incurred by the Group for entering into currency hedging contracts to hedge the risk against such fluctuations in foreign exchange rate; and
(b) exposure to other possible unforeseen costs such as extra logistic costs that may be incurred by the Group in the event of shipment delays, for example.

As the terms of the 2016 CCT Agreement also specifically cover cobalt and its related products, reference is also made to the 2015 Circular and the 2016 Circular with respect to the pricing mechanism and basis as agreed between Golden Harbour and Lanzhou Jinchuan in determining the trading prices of cobalt contained in cobalt hydroxide, which is provided in the 2015 Cobalt Agreement (as supplemented by the 2016 Cobalt Supplemental Agreement). It is a market practice for metal traders to adopt pricing mechanisms that use, in line with market practice with respect to the relevant metal, a certain percentage of the prices quoted by a recognised publisher or on a recognised exchange, subject to certain adjustments according to the metal content and quality. The setting of a benchmark by reference to the Metal Bulletin is considered to be appropriate as it is the premium intelligence service for metal and steel professionals and is a recognised publisher of reference prices for long-term cobalt trading contracts. With respect to the summary of terms of the 2015 Cobalt Agreement and its amendments thereof pursuant to the 2016 Cobalt Supplemental Agreement (including the aforesaid pricing mechanism and the basis of the selling prices of cobalt contained in the cobalt hydroxide), please refer to Appendix II of this circular, the 2015 Circular and the 2016 Circular for further details.

In general, the Group will only consider entering into particular transactions if the profit margin to be derived from the trading prices offered to the Jinchuan Group would allow the Group to derive a reasonable return on the transactions, which is comparable to the return attainable for transactions with independent third parties. The Company considers that the profit margins charged by the Company to the Jinchuan Group and independent third parties are comparable.

The above pricing mechanism (including the adjustments where appropriate and the cost and expenses taken into account as mentioned above) is intended to ensure that the trading prices for the Mineral and Metal Products provided by the Group to the Jinchuan Group will be determined on normal commercial terms and generally on a cost-plus basis. The Company has established internal control measures to standardize and stipulate the pricing policies and mechanism, the assignment of responsibility and decision making authority to ensure the 2016 Continuing Connected Transactions will be conducted in accordance with the terms of the 2016 CCT Agreement, and that the pricing policies will be strictly complied with. As part of the Company’s internal control measures, the implementation of the

LETTER FROM THE BOARD

2016 CCT Agreement and the relevant pricing terms in accordance with the general transaction principles therein, including the relevant adjustments to metal product prices, the determination of reasonable profit margin, the relevant costs and expenses as well as the actual quantity and amount of the Mineral and Metal Products, will be monitored and reviewed by the Board and the senior management on a regular basis, with reference to terms of similar transactions which apply the relevant pricing principles. The pricing terms will be reviewed by the senior management prior to the execution of any transaction under the 2016 CCT Agreement to ensure the relevant general transaction principles are being complied with on arm’s length basis and the trading terms are no less favourable than those with independent third parties. The Company will evaluate the 2016 Continuing Connected Transactions on a yearly basis.

The independent non-executive Directors of the Company shall conduct an annual review on whether the terms on which the 2016 Continuing Connected Transactions undertaken during the relevant year have been conducted on normal commercial terms by assessing whether the trading prices for the Mineral and Metal Products and the profit margin have been determined by following the above pricing mechanism, whether the profit margin is comparable to the margin derived from similar transactions, selected on a random basis, with independent third parties (by understanding how the margin was determined by the Company, the factors that were taken into account in determining the margin, and by comparing the terms with those conducted with independent third parties) and after taking into accounts the factors that have been identified above (as and if appropriate).

REASONS FOR AND BENEFITS OF THE 2016 CONTINUING CONNECTED TRANSACTIONS

The principal business of the Company and its subsidiaries is in the mining operation and the trading of mineral and metal products. The Company has a significant portfolio of mineral assets and has successfully repositioned itself as an international upstream non-ferrous metals company.

Jinchuan is a large scale non-ferrous metals mining conglomerate, specialising in mining, concentrating, metallurgy, chemical engineering and further downstream processing. Its principal business includes the production of nickel, copper, cobalt, platinum group metals, non-ferrous metal plates, chemical products and chemicals of non-ferrous metals.

The Board believes that the proposed 2016 CCT Agreement and the 2016 Continuing Connected Transactions, by consolidating the existing arrangements in respect of the trading of Mineral and Metal Products under one coherent framework agreement (including preserving the existing arrangement in respect of the trading of cobalt hydroxide between Golden Harbour and Lanzhou Jinchuan pursuant to the 2015 Cobalt Agreement (which is supplemented by the 2016 Cobalt Supplemental Agreement), the further details of which are disclosed in Appendix II of this circular, the 2015 Circular and the 2016 Circular), will broaden the revenue bases of the Company and its subsidiaries in fulfilling the long-term demand by Jinchuan Group for such Mineral and Metal Products. Such proposed arrangements will continue to help develop the expertise and experience of the Company and its subsidiaries in mineral products trading, which will enhance the competitiveness of the Company in the future.

Furthermore, the arrangement between the Group and the Jinchuan Group under the 2016 CCT Agreement is non-exclusive and there should be no bias or preference for the Group to deal with Jinchuan Group.

LETTER FROM THE BOARD

The Directors (including the independent non-executive Directors) consider that:

(a) the terms and conditions of the 2016 CCT Agreement were negotiated between the parties on an arm’s length basis and are on normal commercial terms that are fair and reasonable;
(b) the Proposed Annual Caps are fair and reasonable; and
(c) the 2016 CCT Agreement and the 2016 Continuing Connected Transactions will be conducted in the ordinary and usual course of business of the Company and its subsidiaries and are in the interest of the Company and the Shareholders as a whole.

In particular, the Directors (including the independent non-executive Directors) believe that the pricing mechanism as provided in the 2016 CCT Agreement is fair and reasonable and is on normal commercial terms. The trading prices of the Mineral and Metal Products are determined by reference to the prices of copper, nickel, cobalt and other relevant metals as announced by the LME, the LBMA and/or the Metal Bulletin, subject to certain adjustments taking into account various factors including, among other things, the treatment charges and refining charges, bank financing and related charges, foreign exchange differences and the Company’s reasonable profit margin (on top of the aforementioned costs).

With respect to the pricing mechanism in determining the trading prices of cobalt contained in cobalt hydroxide, it is a market practice for metal traders to adopt pricing mechanisms that use, in line with market practice with respect to the relevant metal, a certain percentage of the prices quoted by a recognised publisher or on a recognised exchange, subject to certain adjustments according to the metal content and quality. The setting of a benchmark by reference to the Metal Bulletin is considered to be appropriate as it is the premium intelligence service for metal and steel professionals and is a recognised publisher of reference prices for long-term cobalt trading contracts.

LISTING RULES IMPLICATION

As at the Latest Practicable Date, Jinchuan is the controlling shareholder of the Company. Through its wholly-owned subsidiaries, Jinchuan indirectly owns 3,263,022,857 Shares, representing approximately 75.0% of the issued share capital of the Company. Accordingly, Jinchuan is a connected person of the Company under Chapter 14A of the Listing Rules and the transactions contemplated under the 2016 CCT Agreement will constitute continuing connected transactions for the Company.

Based on the Proposed Annual Caps, the 2016 CCT Agreement and the 2016 Continuing Connected Transactions are subject to the reporting, annual review, announcement and independent shareholders’ approval requirements under Chapter 14A of the Listing Rules. The Company will seek approval from the Independent Shareholders for the 2016 CCT Agreement and the 2016 Continuing Connected Transactions (including the Proposed Annual Caps) at the EGM. As Jinchuan is the controlling shareholder of the Company, Jinchuan and its close associates will abstain from voting on the resolution approving the 2016 CCT Agreement and the 2016 Continuing Connected Transactions (including the Proposed Annual Caps) at the EGM.

LETTER FROM THE BOARD

Annual Caps pursuant to the articles of association of the Company. However, for good corporate governance, Mr. Yang Zhiqiang, Mr. Zhang Sanlin, Mr. Chen Dexin and Mr. Zhang Zhong voluntarily abstained from voting on the relevant board resolutions to which the 2016 CCT Agreement, the 2016 Continuing Connected Transactions and the Proposed Annual Caps were approved, as they also serve as directors and/or senior management of Jinchuan and/or Jinchuan HK.

Set out on pages 49 to 50 is a notice to convene the EGM to be held at Unit 3101, 31/F United Centre, 95 Queensway, Admiralty, Hong Kong at 10:00 a.m. on Friday, 27 January 2017 at which an ordinary resolution will be proposed to the Shareholders to consider, and if thought fit, approve the 2016 CCT Agreement and the 2016 Continuing Connected Transactions (including the Proposed Annual Caps).

A proxy form for the EGM is enclosed with this circular. Whether or not you are able to attend the EGM in person, you are requested to complete the proxy form and return it to the Company’s branch share registrar at 31/F, 148 Electric Road, North Point, Hong Kong, in accordance with the instructions printed thereon not less than 48 hours before the time fixed for the EGM or any adjournment thereof. The completion and delivery of a proxy form will not preclude you from attending and voting at the EGM in person.

VOTING BY WAY OF POLL

Pursuant to Rule 13.39(4) of the Listing Rules, all votes at the EGM will be taken by poll and the Company will announce the results of the poll in the manner prescribed under Rule 13.39(5) of the Listing Rules.

RECOMMENDATION

Your attention is drawn to the letter from the Independent Board Committee set out on page 16 of this circular which contains its recommendation to the Independent Shareholders in relation to the 2016 CCT Agreement and the 2016 Continuing Connected Transactions (including the Proposed Annual Caps). Your attention is also drawn to the letter from Altus set out on pages 17 to 40 of this circular which contains its recommendations to the Independent Board Committee and the Independent Shareholders in relation to the 2016 CCT Agreement and the 2016 Continuing Connected Transactions (including the Proposed Annual Caps), and the principal factors and reasons taken into account in arriving at its recommendations.

ADDITIONAL INFORMATION

Your attention is also drawn to the general information set out in the Appendix I and II to this circular.

Yours faithfully, For and on behalf of the Board Jinchuan Group International Resources Co. Ltd Mr. Yang Zhiqiang Chairman

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

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JINCHUAN GROUP INTERNATIONAL RESOURCES CO. LTD 金川集團國際資源有限公司 (Incorporated in the Cayman Islands with limited liability) (Stock Code: 2362)

12 January 2017

To the Independent Shareholders

Dear Sir or Madam,

RENEWAL OF CONTINUING CONNECTED TRANSACTIONS

We refer to the circular dated 12 January 2017 issued by the Company to its shareholders (the “ Circular ”) of which this letter forms a part. The capitalised terms defined in the Circular shall have the same meanings when used in this letter unless the context otherwise requires.

We were appointed as members of the Independent Board Committee to advise you on (i) whether the terms and conditions of the 2016 CCT Agreement were negotiated between the parties on an arm’s length basis and are on normal commercial terms that are fair and reasonable; (ii) whether the Proposed Annual Caps are fair and reasonable; and (iii) whether the 2016 CCT Agreement and the 2016 Continuing Connected Transactions will be conducted in the ordinary and usual course of business of the Company and its subsidiaries and are in the interests of the Company and the Shareholders as a whole, and to advise you on how to vote at the EGM, taking into account the recommendations of Altus.

Altus was appointed to advise the Independent Board Committee and the Independent Shareholders on (i) whether the terms and conditions of the 2016 CCT Agreement were negotiated between the parties on an arm’s length basis and are on normal commercial terms that are fair and reasonable; (ii) whether the Proposed Annual Caps are fair and reasonable; and (iii) whether the 2016 CCT Agreement and the 2016 Continuing Connected Transactions will be conducted in the ordinary and usual course of business of the Company and its subsidiaries and are in the interests of the Company and the Shareholders as a whole, and to advise the Independent Shareholders on how to vote at the EGM.

Having taken into account the principal factors and reasons considered by, and the recommendations of Altus contained in its letter set out on pages 17 to 40 of the Circular, we consider that the terms of the 2016 CCT Agreement and the Proposed Annual Caps are fair and reasonable, and the 2016 Continuing Connected Transactions are on normal commercial terms, in the ordinary course of business of the Company and its subsidiaries and in the interests of the Company and the Shareholders as a whole.

Accordingly, we recommend the Independent Shareholders to vote in favour of the ordinary resolution to be proposed at the EGM to approve the 2016 CCT Agreement, the 2016 Continuing Connected Transactions and the Proposed Annual Caps.

Yours faithfully, For and on behalf of

the Independent Board Committee

Jinchuan Group International Resources Co. Ltd Mr. Wu Chi Keung, Mr. Yen Yuen Ho, Tony and Mr. Neil Thacker Maclachlan Independent Non-executive Directors

LETTER FROM ALTUS

The following is the text of a letter of advice from Altus Capital Limited to the Independent Board Committee and the Independent Shareholders in respect of the 2016 CCT Agreement and the 2016 Continuing Connected Transactions (including the Proposed Annual Caps), which has been prepared for the purpose of incorporation in this circular.

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Altus Capital Limited 21 Wing Wo Street Central Hong Kong

12 January 2017

To the Independent Board Committee and the Independent Shareholders Jinchuan Group International Resources Co. Ltd Unit 3101, 31/F United Centre 95 Queensway Admiralty Hong Kong

Dear Sir/Madam,

RENEWAL OF CONTINUING CONNECTED TRANSACTIONS

INTRODUCTION

We refer to our appointment as the Independent Financial Adviser to advise the Independent Board Committee and the Independent Shareholders in respect of the 2016 CCT Agreement and the 2016 Continuing Connected Transactions (including the Proposed Annual Caps). Details of which are set out in the “Letter from the Board” contained in the circular dated 12 January 2017 (the “ Circular ”) to the Shareholders, of which this letter forms part. Terms used in this letter shall have the same meanings as those defined in the Circular unless otherwise defined herein or required by the context.

The 2016 CCT Agreement

Reference is made to the 2013 CCT Circular in relation to the 2013 CCT Agreement entered into between the Company and Jinchuan, the 2015 Circular in relation to the 2015 Cobalt Agreement entered into between Golden Harbour and Lanzhou Jinchuan, and the 2016 Circular in relation to the 2016 Cobalt Supplemental Agreement which is supplemental to the 2015 Cobalt Agreement entered into between Golden Harbour and Lanzhou Jinchuan. As the 2013 CCT Agreement in respect of the 2013 Continuing Connected Transactions has expired on 31 December 2016 and the Company intends to continue the trading of Mineral and Metal Products with the Jinchuan Group, the Company and Jinchuan have entered into the 2016 CCT Agreement on 29 November 2016.

LETTER FROM ALTUS

LISTING RULES IMPLICATION

As at the Latest Practicable Date, Jinchuan is the ultimate controlling shareholder of the Company. It indirectly owns through its subsidiaries 3,263,022,857 Shares, representing approximately 75.0% of the issued share capital of the Company. Accordingly, Jinchuan is a connected person of the Company under Chapter 14A of the Listing Rules and the transactions contemplated under the 2016 CCT Agreement will constitute continuing connected transactions for the Company.

Furthermore, based on the Proposed Annual Caps, the 2016 CCT Agreement and the 2016 Continuing Connected Transactions are subject to the reporting, annual review, announcement and independent shareholders’ approval requirements under Chapter 14A of the Listing Rules. Accordingly, the Company is seeking approval from the Independent Shareholders for the 2016 CCT Agreement and the 2016 Continuing Connected Transactions (including the Proposed Annual Caps) at the EGM. As Jinchuan is the controlling shareholder of the Company, Jinchuan and its associates will abstain from voting on the resolution concerning the 2016 CCT Agreement and the 2016 Continuing Connected Transactions (including the Proposed Annual Caps) at the EGM.

None of the Directors have any material interest in the 2016 Continuing Connected Transactions for which they would be required to abstain from voting on the relevant board resolutions approving the terms of the 2016 CCT Agreement, the 2016 Continuing Connected Transactions and the Proposed Annual Caps pursuant to the articles of association of the Company. However, for good corporate governance, Mr. Yang Zhiqiang, Mr. Zhang Sanlin, Mr. Chen Dexin and Mr. Zhang Zhong voluntarily abstained from voting on the relevant board resolutions to which the 2016 CCT Agreement, the 2016 Continuing Connected Transactions and the Proposed Annual Caps were approved, as they also serve as directors and/or senior management of Jinchuan and/or Jinchuan HK.

THE INDEPENDENT BOARD COMMITTEE

The Independent Board Committee consisting of Mr. Wu Chi Keung, Mr. Yen Yuen Ho, Tony and Mr. Neil Thacker Maclachlan, being all the independent non-executive Directors, has been established to advise the Independent Shareholders on (i) whether the terms and conditions of the 2016 CCT Agreement are on normal commercial terms that are fair and reasonable; (ii) whether the Proposed Annual Caps are fair and reasonable; and (iii) whether the 2016 CCT Agreement and the 2016 Continuing Connected Transactions will be conducted in the ordinary and usual course of business of the Company and its subsidiaries and are in the interests of the Company and the Shareholders as a whole, and to advise the Independent Shareholders on how to vote at the EGM, taking into account the recommendations of the Independent Financial Adviser.

THE INDEPENDENT FINANCIAL ADVISER

As the Independent Financial Adviser to the Independent Board Committee, our role is to give an independent opinion to the Independent Board Committee and the Independent Shareholders as to (i) whether the terms and conditions of the 2016 CCT Agreement are on normal commercial terms and are fair and reasonable; (ii) whether the Proposed Annual Caps are fair and reasonable; (iii) whether the 2016 CCT Agreement and the 2016 Continuing Connected Transactions will be conducted in the ordinary and usual course of business of the Company and its subsidiaries and are in the interests of the Company and the Shareholders as a whole; and (iv) how the Independent Shareholders should vote in respect of the resolution relating thereto to be proposed at the EGM.

LETTER FROM ALTUS

We had acted as the independent financial adviser to the Company with regards to the proposed continuing connected transactions under the 2015 Cobalt Agreement and the proposed continuing connected transactions under the 2016 Cobalt Supplemental Agreement, details of which are set out in the letters from Altus contained in the 2015 Circular and 2016 Circular respectively. Save for the aforesaid engagements, we have not acted as the independent financial adviser in relation to any transactions of the Company in the last two years prior to the date of the Circular. Pursuant to Rule 13.84 of the Listing Rules, and given that remuneration for our engagement to opine on the 2016 Continuing Connected Transactions is at market level and not conditional upon successful passing of the resolution, and that our engagement is on normal commercial terms, we are independent of the Company.

BASIS OF OUR ADVICE

In formulating our opinion, we have relied on the statements, information, opinions and representations contained or referred to in the 2015 Circular, the 2016 Circular and the Circular provided to us by the Company, the Directors and the management of the Company (the “ Management ”). We have assumed that all statements, information, opinions and representations contained or referred to in the 2015 Circular, the 2016 Circular and the Circular provided to us by the Management were true, accurate and complete at the time they were made and continued to be so as at the date of the Circular.

We have no reason to believe that any statements, information, opinions or representations relied on by us in forming our opinion is untrue, inaccurate or misleading, nor are we aware of any material facts the omission of which would render the statements, information, opinions or representations provided to us untrue, inaccurate or misleading.

We have assumed that all the statements, information, opinions and representations for matters relating to the Company or Jinchuan contained or referred to in the 2015 Circular, the 2016 Circular and the Circular provided to us by the Company, the Directors and the Management have been reasonably made after due and careful enquiry. We have relied on such statements, information, opinions and representations and have not conducted any independent investigation into the business, financial conditions and affairs or the future prospects of the Company or Jinchuan.

PRINCIPAL FACTORS AND REASONS CONSIDERED

1. Background information of the Company and its subsidiaries and their relationship with the Jinchuan Group

1.1 Principal activities of the Group and the Jinchuan Group

The Company is an investment holding company. The principal business of the Group is in the trading of Mineral and Metal Products and the mining operations, primarily copper and cobalt production. The Company has a significant portfolio of mineral assets and has successfully repositioned itself as an international upstream non-ferrous metals company.

LETTER FROM ALTUS

Jinchuan is a state-owned enterprise with its majority interest held by the People’s Government of Gansu Province. Jinchuan Group is a large scale non-ferrous mining conglomerate, specialising in mining, concentrating, metallurgy, chemical engineering and further downstream processing. Its principal business includes the production of nickel, copper, cobalt, platinum group metals, nonferrous metal plates, chemical products and chemicals of nonferrous metals.

1.2 Operating results of the Group

Set out below is a summary of the operating results of the Group for each of the year ended 31 December 2014 and 2015 and the six months ended 30 June 2015 and 2016, as extracted from the annual report of the Company for the year ended 31 December 2015 (the “ 2015 Annual Report ”) and the interim report of the Company for the six months ended 30 June 2016 (the “ 2016 Interim Report ”) respectively.

Revenue – Copper sales Trading of mineral and metal products Mining operations – Cobalt sales Cost of sales Gross profit/(loss) Impairment loss Loss for the year/period attributable to owners of the Company	For the year ended 31 December 2014 2015 USD’000 USD’000 (audited) (audited) 208,032 137,182 366,138 257,684 574,170 394,866 78,305 75,825 652,475 470,691 (632,201) (462,637) 20,274 8,054 (370,053) (312,264) (230,512) (291,767)	For the six months ended 30 June 2015 2016 USD’000 USD’000 (unaudited) (unaudited) 79,798 54,566 135,065 90,948 214,863 145,514 40,908 26,456 255,771 171,970 (249,171) (180,978) 6,600 (9,008) (259,759) – (168,392) (15,736)

Source: 2015 Annual Report and 2016 Interim Report

LETTER FROM ALTUS

1.2.1 For the six months ended 30 June 2016

Revenue for the six months ended 30 June 2016 was approximately USD172.0 million, representing a decrease of approximately 32.8% compared to the revenue for the six months ended 30 June 2015 of approximately USD255.8 million. The decrease in revenue from the mining operations was mainly affected by the decrease in copper and cobalt prices in the global market due to volatility in the commodities market. The average copper cash price received over the six months ended 30 June 2016 fell by approximately 23.7% to USD4,468 per tonne as compared to approximately USD5,857 per tonne for the six months ended 30 June 2015. The average cobalt price (after adjusting for the contracted basis coefficient) has decreased by approximately 17.2% for the six months ended 30 June 2016 to USD15,805 per tonne, as compared to approximately USD19,080 per tonne for the corresponding period in 2015. The decrease in revenue was also attributable to the decrease in the sales volume for the six months ended 30 June 2016, with copper sales decreasing by approximately 11.7% and cobalt sales decreasing by approximately 21.9%, compared to sales volumes for the six months ended 30 June 2015.

The trading segment, which is copper-related, recorded a decrease in revenue of approximately 31.6% from approximately USD79.8 million for the six months ended 30 June 2015 to approximately USD54.6 million for the six months ended 30 June 2016. The decrease in revenue from the trading segment was mainly due to the significant decrease of approximately 19,400 tonnes of copper concentrate sales, representing an approximately 75.9% decrease, coupled with the decline in the copper price due to the volatility in the copper market, which was net off with a mild increase of copper blister sales of approximately 1,200 tonnes, representing an increase of approximately 12.5%.

Cost of sales for the six months ended 30 June 2016 decreased by approximately 27.4% to approximately USD181.0 million from approximately USD249.2 million for the six months ended 30 June 2015. Such decrease was primarily due to the decrease in sales volume of copper concentrate (under the trading segment) and in the average copper prices, as well as the cost savings initiatives carried out by the Group in its mining operations.

The Group recorded a gross loss of approximately USD9.0 million for the six months ended 30 June 2016 as compared to a gross profit of approximately USD6.6 million for the corresponding period in 2015, which was mainly due to the decrease in copper price and the increase in unit mining operating costs.

During the six months ended 30 June 2015, the Group recorded material non-cash impairment losses of approximately USD190.7 million and USD69.1 million on mineral rights, exploration and evaluation assets respectively. The impairment loss was attributable to the downward revision of the long term copper price and the adjustment to the regional risk profiles for Ruashi Mine, Chibuluma South Mine and Kinsenda Project. The Management concluded that no further impairment was considered necessary for the six months ended 30 June 2016 based on impairment assessments on the mineral rights and related operating assets.

As a result of the above, the Group incurred a loss attributable to owners of the Company for the six months ended 30 June 2016 of approximately USD15.7 million, as compared with a loss attributable to owners of the Company of approximately USD168.4 million for the corresponding period last year.

LETTER FROM ALTUS

1.2.2 For the year ended 31 December 2015

Revenue for the year ended 31 December 2015 was approximately USD470.7 million, representing a decrease of approximately 27.9% from approximately USD652.5 million for the year ended 31 December 2014. The decrease in revenue was mainly attributable to a worldwide downturn in commodity prices including copper, which was the main driving factor for the decrease in the Group’s overall sales revenue. The copper mining revenue dropped by approximately 25.0% from the year ended 31 December 2014 to the year ended 31 December 2015 due to the lower copper prices and lower output of copper. On the other hand, despite the increase in output of cobalt for the year ended 31 December 2015, the cobalt mining revenue decreased by approximately 4.1% from the year ended 31 December 2014 to the year ended 31 December 2015, mainly due to the decrease in the selling price of cobalt.

The trading segment of the Group recorded a significant decrease in revenue on sales of copper related raw materials by approximately 34.0% from approximately USD208.0 million for the year ended 31 December 2014 to approximately USD137.2 million for the year ended 31 December 2015. The decrease was mainly attributable to the then less favourable market conditions, new product development impacted by the changing conditions in the inventory financing trade, as well as the delay or suspension of production start-ups due to depressed copper and nickel prices.

Cost of sales for the year ended 31 December 2015 was at a lower level compared to the cost of sales for the year ended 31 December 2014. The decrease was mainly attributable to the lower production and the implementation of cost savings measures during the year ended 31 December 2015.

Gross profit of the Group decreased by approximately 60.1% from approximately USD20.3 million for the year ended 31 December 2014 to approximately USD8.1 million for the year ended 31 December 2015, which was mainly due to the decrease in copper price and the increase in unit mining operating costs.

During the year ended 31 December 2015, the Group recorded a substantial non-cash impairment loss of approximately USD129.4 million and USD182.9 million on the mineral rights, and exploration and evaluation assets respectively. Coupled with the further decline in copper price during the year ended 31 December 2015 compared to the corresponding year in 2014, the Group reassessed the valuation of its mines on the basis of each cash generating unit. Revisions to some principal parameters such as copper price and discount rates resulted in a substantial impairment loss on the mineral rights, and exploration and evaluation assets of the operating units.

As a result of the above, the Group’s loss for the year attributable to owners of the Company amounted to approximately USD291.8 million for the year ended 31 December 2015 as compared to a loss of approximately USD230.5 million recorded for the year ended 31 December 2014. Although the Group’s performance was impacted by the significant non-cash impairment on the mineral rights and its related operating assets, the impairment assessment was a periodic exercise where the consequential loss recorded during the year ended 31 December 2015 was an accounting related adjustment, and its non-cash nature had no impact on the cash flow of the Group.

LETTER FROM ALTUS

1.3 Relationship between the Group and Jinchuan Group

We refer to the circular of the Company dated 29 October 2010 in relation to, amongst other things, the subscription through which Jinchuan became the controlling shareholder of the Company. Pursuant to the business strategy of the Group disclosed therein, and the business prospects as set out in the 2015 Annual Report and the 2016 Interim Report respectively, the Company serves as the flagship of Jinchuan Group for undertaking overseas operations in the exploration and exploitation of mining assets and related trading of raw materials and products of nickel, copper, cobalt and precious metals, while it continues to leverage on the background and expertise of Jinchuan Group to pursue mining investment opportunities.

Taking into account the principal activities of the Group and the Jinchuan Group and the relationship between them mentioned above, we consider that the 2016 CCT Agreement and the 2016 Continuing Connected Transactions adhere to the business strategy of the Company, represent a continuation of the long-term relationship between the Group and Jinchuan Group and will be conducted in the ordinary and usual course of business of the Group.

1.4 Prospects of the Group

As the depressed copper and cobalt prices had negative impact on the Group’s result for the six months ended 30 June 2016, the Group had continuously strengthening its cost control measures as shown in the decrease in its cost of sales by approximately 27.4% for the six months ended 30 June 2016, compared to the corresponding period in 2015. Such cost saving initiatives include restructuring at one of the Group’s operating mines and head office in South Africa, which caused the mining expenditure in the operating mine to decrease by approximately 17.0% for the six months ended 30 June 2016.

Apart from implementing more stringent cost control measures, the Group continued to develop its mining operation. It is noted that there are two mines in the pipeline, with one of them approaching production in the first quarter of 2017.

While the world economy will remain challenging, it is the Group’s intention to strengthen its trading operations with Jinchuan Group and other customers. The Group also intends to enhance and strengthen the Group’s mining operations as well, and to leverage on Jinchuan Group’s experience and skills in areas such as mining, concentrating and metallurgy of non-ferrous metal, and other mining operational expertise to expand its businesses and services in such areas, and eventually an international mining company that integrates mining, concentrating and metallurgy process with a developed trading segment.

LETTER FROM ALTUS

Referring to the announcement made by the Company on 5 December 2016, the Company has entered into a strategic non-binding framework agreement with Junhe Holdings Limited (“ Junhe Holdings ”) in relation to a strategic cooperation proposed to be implemented through (i) proposed equity investment in the Company by Junhe Holdings; (ii) proposed management of Golden Harbour by Junhe Holdings; and (iii) proposed joint ventures to be established by the Company and Junhe Holdings. Junhe Holdings is a subsidiary of the Shanghai Junhe Group Co., Ltd (“ Junhe Group ”), which is an integrated conglomerate engaged in various segments of business including, but not limited to, (i) the global trading of non-ferrous metals, precious metals and energy products (such as petrochemicals, wood pulp, coal, mineral resources and other international and domestic trades); (ii) industry investment (such as manufacturing and sales of aviation equipment and heavy machinery); and (iii) financial services (such as financial leasing, factoring, fund management, internet finance and supply chain finance). Junhe Group has received the title of “Enterprise of Contractual Performance and Creditworthiness” from the State Administration for Industry and Commerce on numerous occasions and ranks second amongst the top 100 private enterprise in Shanghai in 2016. It is also ranked 39th amongst the top 500 Chinese private enterprises and 23rd amongst the top 100 Shanghai enterprises in 2016.

The Management believes that the possible strategic partnership between the Company and Junhe Holdings will introduce the Company to Junhe Holdings’ management and trading expertise, and the formation of commodity trading joint ventures with Junhe Holdings will enable the Company to take comparative advantages of the brands, channels, capital and resources of the Junhe Group through organic integration, which is in line with the Company’s strategies in further developing its trading business of Mineral and Metal Products.

2. Reasons and benefits for the 2016 Continuing Connected Transactions as contemplated under the 2016 CCT Agreement

The 2016 CCT Agreement represents a continuation of the existing arrangements in respect of the trading of Mineral and Metal Products between the Group and Jinchuan Group. The intragroup purchase and sale of Mineral and Metal Products under the purchase and sales contract for cobalt hydroxide entered into between Golden Harbour and Ruashi Mining dated 2 December 2015 and onward sale of the same under the 2016 CCT Agreement to Jinchuan Group effectively consolidate the Mineral and Metal Products trading activities of the Group.

The Directors consider the proposed 2016 Continuing Connected Transactions would consolidate existing arrangements in respect of the trading of Mineral and Metal Products under one coherent framework agreement (including preserving the existing arrangement is respect of the trading of cobalt hydroxide between Golden Harbour and Lanzhou Jinchuan pursuant to the 2015 Cobalt Agreement (which is supplemented by the 2016 Cobalt Supplemental Agreement), the further details of which are disclosed in the 2015 Circular and the 2016 Circular) and broaden the revenue bases of the Company and its subsidiaries in fulfilling the long-term demand by Jinchuan Group for such Mineral and Metal Products. Such proposed arrangements will continue to help developing the expertise and experience of the Company and its subsidiaries in mineral products trading, which will enhance the competitiveness of the Company in the future.

LETTER FROM ALTUS

Having considered the above and the factors set out in the sections headed “1.3 Relationship between the Group and Jinchuan Group” and “1.4 Prospects of the Group” above, we concur with the Directors that the 2016 CCT Agreement and the 2016 Continuing Connected Transactions will be conducted in the ordinary and usual course of business of the Company and its subsidiaries and are in the interests of the Company and the Shareholders as a whole.

3. Principal terms of the 2016 CCT Agreement

Below are the key terms of the trading of Mineral and Metal Products under the 2016 CCT Agreement that we have considered. Details of the 2016 CCT Agreement are set out in the “Letter from the Board” of the Circular.

Pursuant to the 2016 CCT Agreement, (i) the Company has agreed to sell to Jinchuan, and Jinchuan has agreed to purchase from the Company, the Mineral and Metal Products that the Group sourced from third parties or produced by the mines of the Group; and (ii) the Company has agreed to cause the Group to sell to the Jinchuan Group, and Jinchuan has agreed to cause the Jinchuan Group (for the purpose of this Circular, excluding the Group) to purchase from the Group, the Mineral and Metal Products.

3.1 Pricing mechanism

As set out in the “Letter from the Board” of the Circular, the trading prices of the Mineral and Metal Products to be provided by the Group to the Jinchuan Group will be primarily based on the purchase costs or prevailing market prices of the Mineral and Metal Products (namely, the consideration paid to the overseas suppliers by the Group for purchases of such products, or consideration paid to the Group for such products produced by the mines of the Group) determined by reference to the prices of copper, nickel, cobalt and other relevant metals as announced by the London Metal Exchange (“ LME ”), London Bullion Market Association (“ LBMA ”) and/or the Metal Bulletin, after making certain adjustments (if appropriate) mainly by reference to the following items, to achieve a reasonable profit margin, which is comparable to the profit margin derived from similar transactions with independent third parties:

(i) the difference between the treatment charges and refining charges (if appropriate) that are charged by the overseas suppliers to the Group, and the treatment charges and refining charges (if appropriate) that the Group charges the Jinchuan Group, which will be determined through the negotiations between the Group and the Jinchuan Group (predominately on an annual basis) with reference to an annual benchmark in the market set by the major mining companies and the major mineral and metal projects consumers near the end of each year; and
(ii) a reasonable premium to be charged by the Group to the Jinchuan Group over the actual or notional finance costs (if appropriate) that would be incurred by the Group for the particular transactions, and such mark-up will be determined through negotiations between the Group and the Jinchuan Group by reference to the prevailing lending interest rates offered/charged by banks in Hong Kong and the prevailing lending interest rates of the People’s Bank of China in the PRC.

LETTER FROM ALTUS

(a) exposure to possible costs arising from foreign exchange differences for entering into the particular transactions (if appropriate), depending on the currency which the Group would borrow or utilise to fund the payments under the transactions, which will be affected by fluctuations of foreign exchange rate between RMB and USD, as well as possible costs that may be incurred by the Group for entering into currency hedging contracts to hedge the risk against such fluctuations in foreign exchange rate; and
(b) exposure to other possible unforeseen costs such as extra logistic costs that may be incurred by the Group in the event of shipment delays, for example.

We have also reviewed and compared (i) three sample contracts and trading transactions entered into between the Group and the Jinchuan Group during the three years ended 31 December 2016; and (ii) seven sample contracts and trading transactions entered into between the Group and independent third parties during the three years ended 31 December 2016 in respect of trading of Mineral and Metal Products (apart from cobalt and its related products). It is noted that all of the sample contracts reviewed by us are mineral framework agreements which, by its nature, can be few for each year. In addition, the sampled customers are major mineral trading companies. Based on the abovementioned criteria and selection, which according to the Management is an exhaustive list of relevant sample contracts and trading transactions entered into during the three years ended 31 December 2016, we noted that thereunder:

(i) it is a market practice for metal traders to adopt pricing mechanism that make reference to the prices of the relevant metal as announced by the LME and/or the LBMA after making certain adjustments including treatment charges and refining charges. Further discussion on the market practice is set out in the section headed “3.2 Market practice in relation to the pricing mechanism” below;
(ii) the terms and pricing mechanisms of the reviewed samples between the Group and the Jinchuan Group were in line with the terms and pricing mechanisms of the transactions between the Group and independent third parties; and
(iii) the term “profit margin” referred to above was basically a cost plus policy adopted by the Group and applied to the Jinchuan Group and other independent third party customers; such cost plus policy takes into account, namely (i) the potential exposure to foreign differences for entering into the particular transactions (if appropriate); or (ii) the possible unforeseen extra logistic cost that may be incurred by the Group in the event of shipment delays.

LETTER FROM ALTUS

As disclosed in the “Letter from the Board” of the Circular, the terms of the 2016 CCT Agreement also specifically cover cobalt and its related products, reference is also made to the 2015 Circular and the 2016 Circular with respect to the pricing mechanism and basis as agreed between Golden Harbour and Lanzhou Jinchuan in determining the trading prices of cobalt contained in cobalt hydroxide, which is provided in the 2015 Cobalt Agreement (as supplemented by the 2016 Cobalt Supplemental Agreement). As set out in the “Letter from the Board” of the Circular, it is a market practice for metal traders to adopt pricing mechanisms that use, in line with market practice with respect to the relevant metal, a certain percentage of the prices quoted by a recognised publisher or on a recognised exchange (i.e. Metal Bulletin for 2015 Cobalt Agreement), subject to certain adjustments according to the metal content and quality. With respect to the summary of terms of the 2015 Cobalt Agreement and its amendments thereof pursuant to the 2016 Cobalt Supplemental Agreement (including the aforesaid pricing mechanism and the basis of the selling prices of cobalt contained in the cobalt hydroxide), please refer to the 2015 Circular and the 2016 Circular for further details. The 2015 Cobalt Agreement and the subsequent 2016 Cobalt Supplemental Agreement were approved by the then independent shareholders of the Company on the extraordinary general meetings of the Company held on 7 January 2016 and 1 August 2016 respectively.

We have reviewed and compared (i) three sample contracts entered into between the Group and Jinchuan Group; and (ii) one sample contract entered into between the Group and another seller (which is an independent third party), in respect of trading of cobalt contained in cobalt hydroxide between the year ended 31 December 2007 to the year ended 31 December 2016. It is noted that all of the sample contracts reviewed by us are mineral framework agreements which, by its nature, can be few for each year. In addition, the sampled customer is a major mineral trading company. Based on the abovementioned criteria and selection, which according to the Management is an exhaustive list of relevant sample contracts entered into between the year ended 31 December 2007 to the year ended 31 December 2016, we noted that thereunder:

(i) it is a market practice for metal traders to adopt pricing mechanism that use, in line with market practice with respect to the relevant metal, a certain percentage of the prices quoted by a recognised publisher or on a recognised exchange and certain adjustments according to the metal content and quality. Further discussion on the market practice is set out in the section headed “3.2 Market practice in relation to the pricing mechanism” below;
(ii) the terms and pricing mechanisms of the reviewed samples between the Group and the Jinchuan Group were in line with the terms and pricing mechanisms of the transactions between the Group and independent third parties; and
(iii) the Metal Bulletin is the premium intelligence service for metal and steel professionals. It was first introduced in 1913 with the first mission to provide must-have timely information price indications, for the global non-ferrous metals and steel markets. Metal Bulletin is part of the Euromoney Institutional Investor Plc group of companies, and is a recognised publisher of reference prices for long-term cobalt trading contracts.

In general, the Group will only consider entering into particular transactions if the profit margin to be derived from the trading prices offered to the Jinchuan Group would allow the Group to derive a reasonable return on the transactions which is comparable to the return attainable for transactions with independent third parties.

LETTER FROM ALTUS

The above pricing mechanism (including the adjustments where appropriate and cost and expenses taken into account as informed above) is intended to ensure that the trading prices for the Mineral and Metal Products provided by the Group to the Jinchuan Group will be determined on normal commercial terms and generally on a cost-plus basis. It is noted that the Company has established internal control measures to standardize and stipulate the pricing policies and mechanism, the assignment of responsibility and decision making authority to ensure the 2016 Continuing Connected Transactions will be conducted in accordance with the terms of the 2016 CCT Agreement, and that the pricing policies will be strictly complied with. According to the Management, the implementation of the 2016 CCT Agreement and the relevant pricing terms in accordance with the general transaction principles therein, including the relevant adjustments to metal product prices, the determination of reasonable profit margin, the relevant costs and expenses as well as the actual quantity and amount of the Mineral and Metal Products, will be monitored and reviewed by the Board and the senior management on a regular basis, with reference to terms of similar transactions which apply the relevant pricing principles. The pricing terms will also be reviewed by the senior management prior to the execution of any transaction under the 2016 CCT Agreement to ensure the relevant general transaction principles are being complied with on arm’s length basis and the trading terms are no less favourable than those with independent third parties. Furthermore, according to the Management, the Company will evaluate the 2016 Continuing Connected Transactions on a yearly basis. We have reviewed a schedule which sets out the profit margin derived from transactions between the Group and (i) Jinchuan Group; and (ii) independent third parties between 2014 and 2016, and noted that under the internal control measures implemented by the Company the profit margins are comparable. Taking into account that above profit margins are comparable, we are of the view that the adjustments made and cost and expenses taken into account as part of the pricing mechanism are fair and reasonable, and the internal control measures implemented by the Company are effective.

In addition, the independent non-executive Directors shall conduct an annual review on whether the terms on which the 2016 Continuing Connected Transactions undertaken during the relevant year have been conducted on normal commercial terms by assessing whether the trading prices for the Mineral and Metal Products and the profit margin have been determined by following the above pricing mechanism, whether the profit margin is comparable to the margin derived from similar transactions, selected on a random basis, with independent third parties (by understanding how the margin was determined by the Company, the factors that were taken into account in determining the margin, and by comparing the terms with those conducted with independent third parties) and after taking into account the factors that have been identified above (as and if appropriate). As far as the Management is aware, there has been no recorded breach in connection with the pricing mechanism under the 2013 CCT Agreement, 2015 Cobalt Agreement and 2016 Cobalt Supplemental Agreement during the period from the commencement of the respective agreements up to and including the Latest Practicable Date.

Taking into account the above, we are of the view that the basis to determine the selling price under the 2016 CCT Agreement is fair and reasonable.

LETTER FROM ALTUS

3.2 Market practice in relation to the pricing mechanism

In order to consider whether the pricing mechanism adopted by the Company under the 2016 CCT Agreement is in line with market practices, we have identified transactions conducted by and/or pricing policies adopted by other companies (“ Comparable Companies ”) which are (i) listed on the Stock Exchange; and (ii) principally engaged in mining operations between 2011 and 2016. We, based on our best endeavor and as far as we are aware, have identified an exhaustive and complete list of six Comparable Companies and reviewed seven transactions, as set out below.

(i) KAZ Minerals Plc (“ KAZ ”, stock code: 847, formerly known as Kazakhmys Plc), as set out in the listing document of Kazakmys dated 21 June 2011, contracts for mineral products of the KAZ group do not have a fixed sale price, goods are priced by reference to the relevant metal markets quoted price for the relevant monthly delivery period and depending on types of mineral products, pricing is also adjusted with respect to the content and respective treatment charges;
(ii) China Silver Group Limited (“ China Silver ”, stock code: 815), as set out in the listing document of China Silver dated 14 December 2012, pricing of minerals are determined with reference to the relevant metal markets and adjusted for, among others, the content of the underlying minerals and locations of supplies;
(iii) MMG Limited (“ MMG ”, stock code: 1208), as set out in the circular of MMG dated 30 June 2014, MMG entered into an offtake agreement in respect of the supply of copper concentrates, the pricing of which shall be determined by reference to the content of copper, silver and gold in the copper concentrates and the relevant metal prices quoted on the LME or other relevant London markets reflecting the grade and quality of the product, subject to treatment and refining charges being consistent with those prevailing in the international market for comparable products at the time of entering into the relevant sale agreement;
(iv) Jiangxi Copper Company Limited (“ Jiangxi Copper ”, stock code: 358), as set out in the circular of Jiangxi Copper dated 21 October 2014, Jiangxi Copper entered into an agreement in respect of the supply of copper related products, lead materials, zinc materials and other materials, the pricing of which shall be determined by referring to the monthly average closing price quoted on relevant metal markets adjusted for content and costs;
(v) China Nonferrous Mining Corporation Limited (“ China Nonferrous ”, stock code: 1258), as set out in the circular of China Nonferrous dated 8 December 2014, pricing of copper products will be determined with reference to (i) the monthly moving average price or monthly average settlement price of copper quoted on the LME; or (ii) the monthly moving average price or the monthly average settlement price of copper quoted on the Shanghai Futures Exchange; or (iii) when the market price of copper products could not be adequately reflected through (i) and (ii) at the place of sale or the receiving market, the price reasonably determined by both parties after making reference to the monthly average selling price of copper at the place of sale or the receiving market. Such price will be determined by making reference to a recognized copper stock index that is comparable to the LME or the Shanghai Futures Exchange;

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(vi) as set out in an announcement of MMG dated 1 March 2016, MMG entered into the Copper Concentrate Sales Framework Agreement in relation to the sale of copper concentrates produced by MMG group excluding copper concentrates produced at the Las Bambas Project, the pricing of which shall be determined on an arms’ length basis and comparable to the prevailing market rates or at rates similar to those offered by the group to any other independent third parties. Such prices shall be calculated based on the relevant metal prices, including copper, gold and silver as quoted on the LME or other relevant London markets averaged over an agreed quotation period; and less agreed treatment and refining charges which are consistent with those prevailing in the PRC metal market for comparable imported copper concentrates at the time of the relevant sale agreement; and
(vii) China Daye Non-Ferrous Metals Mining Limited (“ China Daye ”, stock code: 661), as set out in the circular of China Daye dated 24 November 2016, pricing of copper concentrate will be determined with reference to (as applicable): (i) the market price of gold as quoted on the Chicago Mercantile Exchange (adjusted with reference to the premium or discount quoted by Reuters) or by the LBMA; (ii) the market price of silver as quoted on the Chicago Mercantile Exchange (adjusted with reference to the premium or discount quoted by Reuters) or by the LBMA; and (iii) the market price of copper as quoted on the LME (adjusted with reference to the premium or discount quoted by Reuters as applicable).

After review of the Comparable Companies, we noted that there are five comparable transactions that adopted a similar pricing mechanism as that of the Company, namely (i), (ii), (iii), (iv), and (vi) of the Comparable Companies, which makes reference to the prices of the relevant metal as announced by the LME and/or the LBMA after making certain adjustments including but not limited to treatment charges and refining charges.

Although these five comparable transactions did not use basis coefficient or make reference to Metal Bulletin in their pricing mechanism, as in the case of the Company in determining the price of cobalt and its related products, their pricing mechanism were determined with reference to a market quoted price (such as LME) and adjusted by its contents, grade/quality, and/or location of supplies which is similar to the Group using Metal Bulletin for cobalt (when LME does not provide timely quotation of cobalt price, it is possible due to lack of trading volume to justify the quotation of such metals) and adjusted by its contents, grade/quality and/or location of supplies. It is also noted that none of the Comparable Companies entered into transaction in relation to cobalt and its related products.

We noted that the pricing mechanism of two of the transactions above, namely (v) and (vii) of the Comparable Companies, also made reference to the metal market price on a reputable metal market, being LME, LBMA or the Shanghai Futures Exchange, which is similar to the pricing mechanism of the Company. However, these two transactions did not have any description with regards to the adjustments were to be made in relation to the content of the metal, treatment charges and other relevant costs in the respective circulars. Nevertheless, we believe the salient terms of the transactions should have been disclosed in the circulars of these two transactions in accordance with the disclosure requirements of the Listing Rules.

Given that out of the seven comparable transactions, there are five that have a similar pricing mechanism as that of the Company, and for the other two, the salient terms of the pricing mechanism included in their respective circulars are similar to that of the Company, we therefore conclude that the pricing mechanism adopted by the Company under the 2016 CCT Agreement is in line with market practices.

LETTER FROM ALTUS

3.3 General transaction principles

As described in the “Letter from the Board” of the Circular, the 2016 Continuing Connected Transactions should be conducted in accordance with the following general principles:

(i) the Mineral and Metal Products provided by the Group shall be of good quality and at fair and reasonable prices;
(ii) the Group and the Jinchuan Group shall enter into separate contracts for trading of the Mineral and Metal Products contemplated under the 2016 CCT Agreement. Such trading contracts should comply with the relevant regulatory requirements in Hong Kong (including but not limited to the Listing Rules) and should set out, among other things, the parties of the transaction(s), the terms and conditions of the transaction(s), the relevant product(s) and the trading price (which shall be determined on the basis as described above), the delivery time and the payment terms. The terms of such trading contracts should be on normal commercial terms and should be no less favourable than those available to independent third parties; and
(iii) the terms offered by the Group should be competitive in terms of the quality and trading price of the Mineral and Metal Products. Priority should only be given to the Group by the Jinchuan Group if the quality and trading price of the Mineral and Metal Products provided by the Group to the Jinchuan Group are no less favourable than those available from independent third parties.

Having reviewed and compared (i) three sample contracts and trading transactions entered into between the Group and the Jinchuan Group during the three years ended 31 December 2016; and (ii) seven sample contracts and trading transactions entered into between the Group and independent third parties during the three years ended 31 December 2016 in respect of trading of Mineral and Metal Products (apart from cobalt and its related products), which according to the Management is an exhaustive list of relevant sample contracts and trading transactions entered into during the three years ended 31 December 2016, we note that all of them are conducted in accordance with the above general principles.

Having reviewed and compared (i) three sample contracts entered into between the Group and Jinchuan Group; and (ii) one sample contract entered into between the Group and another seller (which is an independent third party), in respect of trading of cobalt contained in cobalt hydroxide between the year ended 31 December 2007 to the year ended 31 December 2016, which according to the Management is an exhaustive list of relevant sample contracts entered into during the same period, we note that all of them are conducted in accordance with the above general principles.

3.4 Section summary

Taking into account the above and the arrangement between the Group and the Jinchuan Group under the 2016 CCT Agreement is non-exclusive and there should be no bias or preference for the Group to deal with Jinchuan Group, we are of the view that the terms of the 2016 CCT Agreement are fair and reasonable.

LETTER FROM ALTUS

4. Proposed annual caps

4.1 Historical annual caps and trading amounts under the 2013 CCT Agreement and the 2015 Cobalt Agreement

Historical annual caps Historical trading amounts	Year ended 31 December 2014 USD 1,000 million Year ended 31 December 2014 USD 113.7 million	Year ended Year ended 31 December 31 December 2015 2016 USD USD 1,200 million 1,500 million Year ended Six months ended 31 December 30 June 2015 2016 USD USD 60.6 million 16.6 million	Year ended 31 December 2016 USD 1,500 million

The utilisation rate under the 2013 CCT Agreement in terms of dollar amount for the years ended 31 December 2014, 2015 and 2016 on an annualised basis was approximately 11.4%, 5.1% and 2.2% respectively. We understand from the Management that due to the low demand from Jinchuan Group, the historical annual caps had not been fully utilised.

LETTER FROM ALTUS

The following table sets out the historical annual caps and trading amounts of cobalt hydroxide between Golden Harbour and Lanzhou Jinchuan for transactions conducted under the 2015 Cobalt Agreement, respectively, for the periods indicated below:

Year ended 31 December 2016 USD Historical annual caps 106 million Six months ended 30 June 2016 USD Historical trading amounts 16.2 million	Year ending 31 December 2017 USD 106 million	Year ending 31 December 2018 USD 106 million

Since the Group has little or no control over the actual demand of Mineral and Metal Products of Jinchuan Group, we wish to highlight that the Management has used its best endeavours as well as to take into account the flexibility the Group needs to meet Jinchuan Group’s demand when determining the annual caps for the year ended 31 December 2016.

4.2 Proposed Annual Caps under the 2016 Continuing Connected Transactions

As set out in the “Letter from the Board” of the Circular, the Proposed Annual Caps are determined by reference to: (i) the respective financial resources of the parties to the 2016 CCT Agreement; (ii) the respective needs of the business development of the Group and the Jinchuan Group; (iii) the expanded scope of Mineral and Metal Products that the Group sourced from third parties or produced by the mines of the Group to be covered under the 2016 CCT Agreement, in particular the inclusion of the supply of cobalt and its related product, including but not limited to the transactions contemplated under the remaining terms of the 2015 Cobalt Agreement (having taken into account the potential output fluctuations); (iv) the historical and prevailing prices of the Mineral and Metal Products; (v) the historical trading amounts, including those under the 2013 CCT Agreement and the 2015 Cobalt Agreement; (vi) the possible fluctuations in prices of the Mineral and Metal Products in the future; and (vii) a buffer to cater for potential business growth. Particularly, in respect of the Proposed Annual Cap for the year ending 31 December 2017, it has been determined with reference to (i) the annual cap for the year ending 31 December 2017 under the 2015 Cobalt Agreement as approved by a resolution passed at the extraordinary general meeting of the Company held on 7 January 2016; (ii) the historical trading amounts for the year ended 31 December 2016 under the 2013 Continuing Connected Transactions; (iii) the increasing trend of copper and cobalt prices in the fourth quarter of 2016; and (iv) the business development and expansion plans of the Group which are expected to increase the production capacity of the Group thereby increasing the revenue base of the Group, such as the Kinsenda Project (including a high grade copper deposit) which is expected to begin trial production of copper in the first quarter of

LETTER FROM ALTUS

In addition, it is our understanding that the Board has also taken into account (i) the annual caps for the year ending 31 December 2018 under the 2015 Cobalt Agreement as approved by the extraordinary general meeting of the Company held on 7 January 2016; (ii) the volatile nature of the commodity market and prices; and (iii) the business development and expansion plans of the Company (including the increasing production capacity of copper under the Kinsenda Project as described above) which are expected to increase the production capacity of the Group thereby increasing the revenue base of the Group, in determining the Proposed Annual Cap for the years ending 31 December 2018 and 2019.

The following table sets out the Proposed Annual Caps in respect of the 2016 Continuing Connected Transactions:

			Year ending 31 December
		2017	2018	2019
		USD	USD	USD
Proposed Annual Caps	165	million	190 million	200 million

For illustration purpose, the annualised utilised amount of 2013 CCT Agreement and 2015 Cobalt Agreement together for the year ended 31 December 2016 would be approximately USD65.6 million. Through our discussions with the Management, we note that the under utilisation of the historical annual caps, as set out under the paragraph headed “Historical annual caps and trading amounts under the 2013 CCT Agreement and the 2015 Cobalt Agreement” above, is mainly affected by Jinchuan Group’s timing of the order or the quantity required or the price offered or a combination of all on Mineral and Metal Products, which the Group has little or no control over. It was also noted that the historical annual caps were determined with a buffer to offer the Group a flexibility to cope with Jinchuan Group’s potential demand of Mineral and Metal Products.

As the historical annual caps and trading amounts under the 2013 CCT Agreement and the 2015 Cobalt Agreement were mainly affected by the demand of Jinchuan Group on Mineral and Metal Products (which the Group has little or no control over), and taking into account of the low utilisation rate of the historical annual caps under the 2013 CCT Agreement, and the underutilisation of the historical annual caps under the 2015 Cobalt Agreement, and the above factors, the Company considered that it would be more conservative to reduce the Proposed Annual Caps for the three years ending 31 December 2017, 2018 and 2019 to USD165 million, USD190 million and USD200 million respectively. We note the Proposed Annual Caps represent approximately 89.7% decrease from the last year of the term of the 2013 Continuing Connected Transactions (i.e. 2016) to the first year (i.e. 2017) of the term of the 2016 Continuing Connected Transactions.

To consider whether the Proposed Annual Caps for the 2016 CCT Agreement are fair and reasonable, we have to take into account the historical utilisation rate of the annual caps under the 2013 CCT Agreement and 2015 Cobalt Agreement, in particular, the annualised historical transaction amount under the 2013 CCT Agreement and 2015 Cobalt Agreement for the year ended 31 December 2016.

LETTER FROM ALTUS

4.2.1 The proposed annual cap for the year ending 31 December 2017

We noted that the Management estimated the proposed annual cap for the year ending 31 December 2017 taking into account of, in particular, (i) the proposed annual caps for the 2015 Cobalt Agreement approved at the extraordinary general meeting of the Company held on 7 January 2016; (ii) the annualised amount of historical actual copper sales recorded for the six months ended 30 June 2016 of the Group; (iii) the Management’s estimation of the annual copper production amount of Kinsenda Project for the year ending 31 December 2017 once it is being commissioned based on feasibility studies; (iv) the historical average percentage of copper sales under the 2013 CCT Agreement out of the Group’s total copper sales; and (v) the volatility of copper and cobalt prices.

As described in the 2015 Circular, we were of the view that the proposed annual caps for the 2015 Cobalt Agreement of USD106 million have been fairly and reasonably determined with reference to the maximum volume of sales under the 2015 Cobalt Agreement, the estimated average selling price per tonne of cobalt hydroxide and the basis coefficient due to the cobalt content and impurities contained in the cobalt hydroxide and was approved by the then independent shareholders at the extraordinary general meeting of the Company held on 7 January 2016. As part of the consolidation of the 2015 Cobalt Agreement (which was supplemented by the 2016 Cobalt Supplemental Agreement) into the 2016 CCT Agreement, we have taken into account that the change of basis coefficient from 73% to 69.5% under the 2016 Cobalt Supplemental Agreement, which was further approved by the then independent shareholders at the extraordinary general meeting of the Company held on 1 August 2016. We also note that under the Cobalt Off-take Agreement (renewed and replaced by 2015 Cobalt Agreement), sales of cobalt hydroxide by the Group to Jinchuan Group had been steadily increasing along with the gradual increase in production capacity of Ruashi Mine after the new management team has implemented changes. Hence, with reference to the cobalt price performance as shown in the chart below, the maximum volume of sales under the 2015 Cobalt Agreement and the revised basis coefficient of 69.5%, we are of the view that the basis to determine the proposed annual caps for cobalt sales remain valid and are fair and reasonable.

We have reviewed a schedule setting out the yearly historical metal sales broken down by different commodities, including the historical total amount of copper sold for the year ended 31 December 2016 of approximately 63,300 tonnes, and noted that the average percentage of copper sold under the 2013 CCT Agreement out of the total copper sales of the Group for the three years ended 31 December 2016 was approximately 14.5%.

As mentioned in the Company’s annual report for the year ended 31 December 2015 and its interim report for the six months ended 30 June 2016, it is noted that the business development and expansion plans of the Company such as the Kinsenda Project will begin trial production in the first quarter of 2017. We have reviewed the feasibility study report of Kinsenda Project, and noted that the annual copper production full capacity of Kinsenda Project is approximately 24,000 tonnes, which is in line with the disclosure in the Company’s annual report for the year ended 31 December 2015 and interim report for the six months ended 30 June 2016. As far as the Management is aware, the development of the Kinsenda Project is on schedule as at the Latest

LETTER FROM ALTUS

Practicable Date. We also noted that the Management estimates the production capacity of Kinsenda Project will begin at approximately a third of its maximum annual capacity for the year ending 31 December 2017 (i.e. approximately 8,000 tonnes) and will increase gradually up to 24,000 tonnes for the year ending 31 December 2018. We have reviewed a schedule provided by the Management which sets out the production plan of Kinsenda Project with supporting data, and noted that the Management’s estimation of Kinsenda Project’s production capacity for the year ending 31 December 2017 has been fairly and reasonably arrived at.

Set out below is the chart showing the copper and cobalt prices between 18 November 2011 to the Latest Practicable Date.

==> picture [416 x 266] intentionally omitted <==

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

9,000 35,000
33,000
8,000
31,000
29,000
7,000
27,000
6,000 25,000
Copper
23,000
Cobalt
5,000
21,000
19,000
4,000
17,000
3,000 15,000
2011-11-18 2012-11-18 2013-11-18 2014-11-18 2015-11-18 2017-01-10
Cobalt Price (US$/t)
Copper Price (US$/t)
----- End of picture text -----

Source: Company. It has made reference to LME historical price. https://www.lme.com/metals/non-ferrous/#tab3

LETTER FROM ALTUS

During the period under review, the highest quotations for copper and cobalt prices were approximately USD8,740 per tonne and USD33,225 per tonne recorded on 9 February 2012 and 18 January 2012 respectively and the lowest quotations for copper and cobalt prices were approximately USD4,331 per tonne and USD21,750 per tonne recorded on 15 January 2016 and 1 February 2016 respectively. Given that the volatility can be very acute and occur in a short time frame, the Management has decided to determine the selling price of copper by reference to the five-year average price of the LME historical copper prices during 2012 to 2016 and rounded to USD6,500 per tonne. Taking into account the vast disparity between the highest and lowest price of each year during the period under review, we believe that the longer time span of a five-year period allows the Group to capture more data to estimate the selling price for the next three years. In addition, we also noted that the basis for determining the selling price of copper by reference to the five-year average price of the LME historical copper prices is in line with the basis used to determine the selling price of cobalt contemplated under 2015 Cobalt Agreement, which was approved by the then independent shareholders on an extraordinary general meeting of the Company held on 7 January 2016. Accordingly, we consider using the five-year average is fair and reasonable. In view of the current LME copper prices and the aforesaid factors, we concur with the Management to use the five-year average market price of the LME copper price as the selling price, which has been fairly and reasonably arrived at, to calculate the Proposed Annual Caps.

In considering whether the proposed annual cap of USD165 million for the year ending 31 December 2017 has been arrived at fairly and reasonably, we have taken into account the sum of the proposed annual caps for cobalt sales under the 2015 Cobalt Agreement (taking into account the revised basis coefficient of 69.5%) and the expected copper sales under the 2016 CCT Agreement for the year ending 31 December 2017. We have calculated the expected copper sales under the 2016 CCT Agreement for the year ending 31 December 2017 by multiplying the total expected copper production and trading amount of the Group for the year ending 31 December 2017 (including the total historical copper production and trading amount of the Group for the year ended 31 December 2016 of approximately 63,300 tonnes and expected production amount from Kinsenda Project trial production for the year ending 31 December 2017 of approximately 8,000 tonnes) to the historical average percentage of copper sold under the 2013 CCT Agreement out of the Group’s total copper sales of approximately 14.5%, which was then multiplied by the five-year historical copper price as quoted on the LME of approximately USD6,500 per tonne.

Given that each of the aforesaid items has been supported and fairly and reasonably arrived at, we consider that the proposed annual cap for the year ending 31 December 2017 has also been fairly and reasonably arrived at.

LETTER FROM ALTUS

4.2.2 The proposed annual caps for the year ending 31 December 2018 and 2019

The proposed annual caps for the year ending 2018 and 2019 represent a year-on-year increase of approximately 15.2% and 5.3% from the corresponding prior year’s annual cap respectively.

As mentioned above, as part of the business development and expansion plans of the Company, the Kinsenda Project will begin trial production in the first quarter of 2017. Based on the feasibility study report, the Management, to the best of its understanding and knowledge, estimates that the annual copper production full capacity of Kinsenda Project is approximately 24,000 tonnes, which is in line with the disclosure in the Company’s annual report for the year ended 31 December 2015 and interim report for the six months ended 30 June 2016. As far as the Management is aware, the development of the Kinsenda Project is on schedule as at the Latest Practicable Date. With the commencement of production of Kinsenda Project, the Company’s annual copper production of approximately 40,000 tonnes will be increased by an additional 24,000 tonnes per year. We noted that the increase in the proposed annual cap for the year ending 31 December 2018 of approximately 15.2% was attributable to (i) the Management’s estimation of the increase in annual production of Kinsenda Project reaching 24,000 tonnes per year; and (ii) a buffer for the potential increase in copper price of approximately 10% for the year ending 31 December 2018. We have reviewed the past quoted prices of copper on the LME, we noted that the copper prices has fluctuated by approximately 11.3% from the average price of approximately USD5,493.3 per tonne for the year ended 31 December 2015 to the average price of approximately USD4,869.0 per tonne for the year ended 31 December 2016, coupled with the recent rising trend of the copper price as shown in the chart below showing the copper and cobalt prices between 1 June 2016 and the Latest Practicable Date, and the volatile nature of commodity prices, we concur with the Management that a buffer of 10% on the copper price for the year ending 31 December 2018 is fair and reasonable. Having reviewed the feasibility study report of Kinsenda Project provided by the Management, coupled with the reasoning concerning the potential increase in copper price for the year ending 31 December 2018, we concur that such basis in estimating the proposed annual caps for the years ending 31 December 2018 was fair and reasonable.

LETTER FROM ALTUS

Set out below is the chart showing the copper and cobalt prices between 1 June 2016 to the Latest Practicable Date.

==> picture [416 x 266] intentionally omitted <==

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

9,000 35,000
33,000
8,000
31,000
29,000
7,000
27,000
6,000 25,000
Copper
23,000
Cobalt
5,000
21,000
19,000
4,000
17,000
3,000 1,5000
2016-06-01 2016-07-01 2016-08-01 2016-09-01 2016-10-01 2016-11-01 2016-12-01 2017-01-10
Cobalt Price (US$/t)
Copper Price (US$/t)
----- End of picture text -----

Source: Company. It has made reference to LME historical price. https://www.lme.com/metals/non-ferrous/#tab3

We noted that the increase in the proposed annual cap for the year ending 31 December 2019 of approximately 5.3% was attributable to a buffer for the potential increase in copper price of approximately 10% for the year ending 31 December 2019. Based on the analysis above, taken into account the potential volatility and recent increasing trend of copper prices, we consider such buffer is fair and reasonable. The Management is also of the view, and we concur, that no material factor has been noted that would affect that proposed annual cap for cobalt under the 2015 Cobalt Agreement for the year ending 31 December 2018, which was approved by the then independent shareholders on an extraordinary general meeting of the Company held on 7 January 2016. Therefore, the same proposed annual cap for cobalt has also been added to the proposed annual cap for the year ending 31 December 2019.

Taking into account of (i) the factors to derive the proposed annual caps for the cobalt sales of the Group remain valid, fair and reasonable; (ii) the latest copper and cobalt price trends (as shown in the chart above), the volatile nature of the commodity market and the potential fluctuation of commodity prices; (iii) the planned expansion of the Group’s mining operations including the Kinsenda Project; (iv) the fact that the Group has little or no control over the demand of Mineral and Metal Products of Jinchuan Group, and the flexibility the Group needs to meet Jinchuan Group’s demand; and (v) Jinchuan Group’s strategy to use the Group as the flagship of Jinchuan Group for undertaking overseas operations in the exploration and exploitation of mining assets and related trading (as described in section headed “1.3 Relationship between the Group and Jinchuan Group” above), we are of the view that the percentage increase applied to determine the proposed annual caps for the year ending 31 December 2018 and 2019 adhere to the Company’s growth policy, are fair and reasonable and in the interests of the Company and the Shareholders as a whole.

LETTER FROM ALTUS

RECOMMENDATION

Having considered the above principal factors, we are of the view that (i) the terms and conditions of the 2016 CCT Agreement are on normal commercial terms and are fair and reasonable; (ii) the Proposed Annual Caps are fair and reasonable; and (iii) the 2016 CCT Agreement and the 2016 Continuing Connected Transactions will be conducted in the ordinary and usual course of business of the Company and its subsidiaries and are in the interests of the Company and the Shareholders as a whole.

Accordingly, we recommend the Independent Shareholders, as well as the Independent Board Committee to advise the Independent Shareholders, to vote in favour of the resolution approving the 2016 CCT Agreement and 2016 Continuing Connected Transactions (including the Proposed Annual Caps) at the EGM.

Yours faithfully, For and on behalf of Altus Capital Limited Jeanny Leung Executive Director

Ms. Jeanny Leung (“ Ms. Leung ”) is a Responsible Officer of Altus Capital Limited licensed to carry on Type 6 (advising on corporate finance) regulated activity under the SFO and permitted to undertake work as a sponsor. She is also a Responsible Officer of Altus Investments Limited licensed to carry on Type 1 (dealing in securities) regulated activity under the SFO. Ms. Leung has over 26 years of experience in corporate finance advisory and commercial field in Greater China, in particular, she has participated in sponsorship work for initial public offerings and acted as financial adviser or independent adviser in various corporate finance advisory transactions.

For the purpose of this letter, unless otherwise indicated, the exchange rate of USD1.00 = HK$7.78 has been used for currency translation, where applicable. Such exchange rate is for illustration purpose only and does not constitute a representation that any amount in HK$ or USD have been, could have been or may be converted at such or any other rates or at all.

GENERAL INFORMATION

APPENDIX I

1. RESPONSIBILITY STATEMENT

This circular, for which the Directors collectively and individually accept full responsibility, includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the Company. The Directors, having made all reasonable enquiries, confirm that to the best of their knowledge and belief the information contained in this circular is accurate and complete in all material respects and not misleading or deceptive, and there are no other matters the omission of which would make any statement in this circular misleading.

2. SHARE CAPITAL

Number of Shares Nominal value HK$ Authorised 20,000,000,000 Shares 200,000,000.00

Issued, to be issued and fully paid 4,350,753,051 Shares in issue as at the Latest Practicable Date 8,466,120,000 Shares to be issued as conversion shares upon full conversion of the perpetual subordinated convertible securities_(Note 1)_ 12,816,873,051	43,507,530.51 84,661,200.00
	128,168,730.51

Note 1: The perpetual subordinated convertible securities (“PSCS”) were issued by the Company to Jinchuan (BVI) Limited, the nominee of Jintai Mining Investment Limited, pursuant to the sale and purchase agreement dated 27 August 2013 entered into by, among others, the aforesaid parties for the acquisition of the entire issued share capital of Jin Rui Mining Investment Limited. Upon full conversion of the PSCS and based on the initial conversion price of HK$1.00, the Company shall allot and issue 8,466,120,000 new Shares credited as fully paid, subject to terms of the PSCS, details of which are set out in the circular of the Company dated 30 August 2013.

GENERAL INFORMATION

APPENDIX I

3. DISCLOSURE OF INTERESTS

(a) Directors’ interests and short positions in the securities of the Company and its associated corporations

As at the Latest Practicable Date, none of the Directors and the chief executives of the Company had any interest or short position in the shares, underlying shares and debentures of the Company or its associated corporations (within the meaning of Part XV of the SFO) which are required: (a) to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests or short positions which he is taken or deemed to have under such provisions of the SFO); (b) pursuant to Section 352 of the SFO, to be entered into the register referred to therein; or (c) to be notified to the Company and the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers as set out in Appendix 10 to the Listing Rules.

(b) Persons who have an interest or short position which is discloseable under Divisions 2 and 3 of Part XV of the SFO and substantial shareholders

So far as is known to the Directors and the chief executive of the Company, as at the Latest Practicable Date, the following persons had interests or short positions in the Shares or underlying Shares of the Company which would fall to be disclosed to the Company (being 5% or more of the Company’s issued share capital) under the provisions of Divisions 2 and 3 of Part XV of the SFO, or which were recorded in the register of substantial shareholders maintained under section 336 of the SFO. These interests are in addition to those disclosed above in respect of the Directors and the chief executive of the Company.

				Number of	Percentage of
				Shares	the total
				which may	number of
Name of		Capacity/ nature of	Number of	be converted	Shares in
Shareholder	Note	interest	Shares held	from PSCS	issue (%)
				(Note 3)	(Note 2)
Jinchuan	(1)	Interest of a controlled	3,263,022,857	8,466,120,000	269.59%
		corporation
Jinchuan HK	(1)	Interest of a controlled	3,263,022,857	8,466,120,000	269.59%
		corporation
Jinchuan (BVI) Limited	(1) & (3)	Interest of a controlled	3,263,022,857	8,466,120,000	269.59%
		corporation/Beneficial
		owner
Jinchuan (BVI) 1 Limited		Beneficial owner	1,872,226,377	N/A	43.03%
Jinchuan (BVI) 2 Limited		Beneficial owner	855,874,372	N/A	19.67%
Jinchuan (BVI) 3 Limited		Beneficial owner	534,922,108	N/A	12.29%

GENERAL INFORMATION

APPENDIX I

Notes:

Jinchuan directly owns 100% of the issued share capital of Jinchuan HK which in turn owns 100% of the issued share capital of Jinchuan (BVI) Limited which owns 100% of the issued share capital of Jinchuan (BVI) 1 Limited, Jinchuan (BVI) 2 Limited and Jinchuan (BVI) 3 Limited. Therefore, Jinchuan, Jinchuan HK and Jinchuan (BVI) Limited are deemed to have an interest in 11,729,142,857 Shares under the SFO.
The calculation is based on the number of Shares as a percentage of the total number of issued Shares (i.e. 4,350,753,051) as at the Latest Practicable Date.
Jinchuan (BVI) Limited directly holds PSCS in the amount of US$1,085.4 million (equivalent to approximately HK$8,466.1 million) which may be converted into 8,466,120,000 Shares of the Company at an initial conversion price of HK$1.00. Under the SFO, Jinchuan (BVI) Limited is deemed to be interested in the 8,466,120,000 Shares of the Company underlying the PSCS.
Save as disclosed below, as at the Latest Practicable Date, none of the Directors is a director or employee of a company which had interests or short positions in the Shares or underlying Shares of the Company which would fall to be disclosed to the Company and the Stock Exchange under the provisions of Division 2 and 3 Part XV of the SFO.

Name of Director Posts held in Jinchuan Mr. Yang Zhiqiang Chairman and director Mr. Zhang Sanlin Vice President and director Mr. Chen Dexin Vice President Name of Director Posts held in Jinchuan HK Mr. Yang Zhiqiang Chairman and director Mr. Zhang Sanlin Director Mr. Zhang Zhong General manager and director Name of Director Posts held in each of Jinchuan (BVI) Limited, Jinchuan (BVI) 1 Limited, Jinchuan (BVI) 2 Limited and Jinchuan (BVI) 3 Limited Mr. Yang Zhiqiang Director Mr. Zhang Sanlin Director Mr. Zhang Zhong Director

Save as disclosed above, as at the Latest Practicable Date, the Directors and the chief executive of the Company were not aware of any person who had any interest or short position in the Shares or underlying Shares of the Company which would fall to be disclosed to the Company under Divisions 2 and 3 of Part XV of the SFO, or which were recorded in the register required to be kept by the Company under Section 336 of the SFO.

4. DIRECTORS’ SERVICE CONTRACTS

As at the Latest Practicable Date, none of the Directors has any existing service contract or proposed service contract with any member of the Company and its subsidiaries which will not expire or be determinable by the Company or its subsidiaries (as the case may be) within one year without payment of compensation (other than statutory compensation).

GENERAL INFORMATION

APPENDIX I

5. QUALIFICATION AND CONSENT OF EXPERT

(a) Qualification of expert

The following are the qualifications of the expert who has given opinions or advice which are contained in this circular:

Name

Qualification

Altus Capital Limited a corporation licensed to carry on Type 4 (advising on securities), Type 6 (advising on corporate finance) and Type 9 (asset management) regulated activities under the SFO

(b) Consent of expert

As at the Latest Practicable Date, Altus has given and has not withdrawn consent to the issue of this circular with the inclusion therein of its letter and references to is name in the form and context in which it appears.

(c) Interests of expert

As at the Latest Practicable Date, Altus was not directly or indirectly interested in any securities of any member of the Group or any right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for any securities in any member of the Group nor did it have any direct or indirect interest in any assets which had been, since 31 December 2015 (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.

6. LITIGATION

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

7. MATERIAL ADVERSE CHANGE

The Directors are not aware of any material adverse change in the financial position or trading position of the Company and its subsidiaries since 31 December 2015 (being the date to which the latest published audited financial statements of the Group were made up) and up to the Latest Practicable Date.

8. COMPETING INTERESTS

As at the Latest Practicable Date, the following Directors were considered to have interest in a business which competes or is likely to compete, either directly or indirectly, with the business of the Company and its subsidiaries pursuant to the Listing Rules.

GENERAL INFORMATION

APPENDIX I

Mr. Yang Zhiqiang, Mr. Zhang Sanlin and Mr. Chen Dexin held directorship and/or position as senior management in Jinchuan which principally engages in businesses of production of nickel, copper, cobalt, platinum group metals, nonferrous metal plates, chemical products and chemicals of nonferrous metals.

Mr. Yang Zhiqiang, Mr. Zhang Sanlin and Mr. Zhang Zhong held directorship and/or position as senior management in Jinchuan HK, which indirectly holds 100% issued share capital of the Company, and is principally engaged in investment holding and trading of mineral and metal products.

9. INTEREST IN ASSETS ACQUIRED

As at the Latest Practicable Date, the Directors did not have any interest, direct or indirect, in any assets which have been, since 31 December 2015 (the date to which the latest published audited accounts of the Company 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 date of this circular, there is no contract or arrangement in which a Director is materially interested and which is significant in relation to the business of the Group.

10. DIRECTORS’ INTEREST IN THE 2016 CONTINUING CONNECTED TRANSACTIONS

11. MISCELLANEOUS

(i) The registered office of the Company is located at P.O. Box 309, Ugland House, Grand Cayman KY1-1104, Cayman Islands.
(ii) The head office and principal place of business in Hong Kong of the Company is located at Unit 3101, 31/F, United Centre, 95 Queensway, Admiralty, Hong Kong.
(iii) The branch share registrar of the Company in Hong Kong is Boardroom Share Registrars (HK) Limited at 31/F, 148 Electric Road, North Point, Hong Kong.

GENERAL INFORMATION

APPENDIX I

(iv) The company secretary of the Company is Mr. Wong Tak Chuen. Mr. Wong is a fellow member of both the Hong Kong Institute of Certified Public Accountants and the Association of Chartered Certified Accountants in the United Kingdom, as well as a member of the Institute of Chartered Accountants in England and Wales. Mr. Wong has over 20 years of experience in auditing, financial management, mergers and acquisitions gained from certain senior finance related positions in an international accounting firm in Hong Kong, companies listed in Hong Kong and a company listed in the United States.

12. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be made available for inspection during normal business hours on Business Days at the office of the Company at Unit 3101, 31/F, United Centre, 95 Queensway, Admiralty, Hong Kong from the date of this circular up to and including 27 January 2017, and at the EGM:

(a) the 2016 CCT Agreement;
(b) the 2016 Cobalt Supplemental Agreement;
(c) the 2015 Cobalt Agreement;
(d) the 2013 CCT Agreement;
(e) the letter from the Independent Board Committee, the text of which is set out in this circular;
(f) the letter from Altus, the text of which is set out in this circular;
(g) the written consent of Altus referred to in the paragraph headed “Qualification and Consent of Expert” in this Appendix; and
(h) a copy of this circular.

APPENDIX II SUMMARY OF KEY TERMS OF THE 2015 COBALT AGREEMENT (AS SUPPLEMENTED BY THE 2016 COBALT SUPPLEMENTAL AGREEMENT)

The following sets out a summary of key terms of the 2015 Cobalt Agreement, which is further amended and supplemented by the 2016 Cobalt Supplemental Agreement:

Parties:

Golden Harbour (as seller); and

Lanzhou Jinchuan (as buyer)

Subject Matter:

Golden Harbour has agreed to sell to Lanzhou Jinchuan, and Lanzhou Jinchuan has agreed to purchase from Golden Harbour, the cobalt hydroxide that produced by Ruashi Mine and further sold to Golden Harbour.

Basis of the selling

prices of the cobalt contained in cobalt hydroxide:

The selling price of the cobalt contained in cobalt hydroxide delivered by Golden Harbour is determined by multiplying a basis price with a basis coefficient:

(i) the basis price is tied to the low quotation for low-grade cobalt in the free market as published on the Metal Bulletin during the quotation period (which is a specified pricing period being the month following the month of despatch from the mine site of Ruashi Mine, Democratic Republic of Congo), with reference to “free carrier” trade terms under Incoterms 2010; and
(ii) the basis coefficient is 69.5% subject to an adjustment based on the cobalt content and impurity element content in the metals.

If the cobalt content is below 25% but above 20%, the basis coefficient will be reduced depending on the actual cobalt content. If the cobalt content is below 20%, Lanzhou Jinchuan has the right to reject the delivery. Such right of rejection is in line with the prevailing market practice as the custom authority of the PRC imposes relatively heavier tax on importing cobalt products with cobalt content below 20%.

If the impurity element content in the metals exceeds certain percentages, the basis coefficient will also be reduced depending on the actual impurity element content.

SUMMARY OF KEY TERMS OF THE 2015 COBALT AGREEMENT (AS SUPPLEMENTED BY THE 2016 COBALT SUPPLEMENTAL AGREEMENT)

APPENDIX II

Golden Harbour has also taken into account the purchasing costs of the cobalt hydroxide from Ruashi Mining and the shipping costs to determine the selling price to Lanzhou Jinchuan. Golden Harbour has agreed to deliver the cobalt hydroxide from the mine site of Ruashi Mine, Democratic Republic of Congo to Johannesburg, South Africa (bearing approximately two third of the total transportation costs) and Lanzhou Jinchuan has agreed to bear the transportation costs to be incurred for delivery of the cobalt hydroxide therefrom to the Tianjin Port, PRC (bearing approximately one third of the total transportation costs).

Quantity of cobalt hydroxide:

An annual minimum purchase of 2,000 tonnes to an annual maximum purchase of 5,000 tonnes of cobalt hydroxide produced by the Ruashi Mine for each of the three calendar years from 1 January 2016 to 31 December 2018, the exact amount of which will be subject to the amount of cobalt hydroxide that is produced by Ruashi Mine and further sold to Golden Harbour on a “on demand” basis. Ruashi Mining is not obliged to sell all its cobalt hydroxide produced in Ruashi Mine to Golden Harbour until it reaches the maximum purchase amount of 5,000 tonnes. If Golden Harbour fails to deliver cobalt hydroxide produced by Ruashi Mining in accordance with the annual minimum amount due to reasons other than force majeure, a grace period of 30 calendar days will be allowed to rectify this failure. In the event that Golden Harbour is unable to maintain deliveries, Golden Harbour and Lanzhou Jinchuan will negotiate in good faith to determine how quickly the situation may be resolved and what deliveries may be forthcoming. Should the parties fail to reach a solution within a specified period of time, Lanzhou Jinchuan has the right to claim compensation from Golden Harbour based on the damages caused by the failure in the delivery and the incremental direct costs incurred by Lanzhou Jinchuan in procuring an alternative supply of cobalt hydroxide.

NOTICE OF EGM

==> picture [139 x 76] intentionally omitted <==

JINCHUAN GROUP INTERNATIONAL RESOURCES CO. LTD 金川集團國際資源有限公司

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 2362)

NOTICE IS HEREBY GIVEN that an extraordinary general meeting (the “ EGM ”) of the shareholders of Jinchuan Group International Resources Co. Ltd (the “ Company ”) will be held at Unit 3101, 31/F United Centre, 95 Queensway, Admiralty, Hong Kong at 10:00 a.m. on Friday, 27 January 2017 for the purpose of considering, and if thought fit, passing the following resolution as an ordinary resolution of the Company:

ORDINARY RESOLUTION

“ THAT :

the agreement dated 29 November 2016 (the “ 2016 CCT Agreement ”) entered into between the Company (as vendor) and 金川集團股份有限公司 (Jinchuan Group Co., Ltd.) (“ Jinchuan ”) (as purchaser), a company incorporated in the PRC and the controlling shareholder of the Company, for trading of the Mineral and Metal Products (as defined in the circular of the Company dated 12 January 2017) between the Company and its subsidiaries and associates controlled by the Company from time to time (collectively the “ Group ”) and Jinchuan and its subsidiaries and associates controlled by Jinchuan from time to time (collectively the “ Jinchuan Group* ”, for the purpose of this notice, excluding the Group), pursuant to which:

(i) the Company has agreed to sell to Jinchuan, and Jinchuan has agreed to purchase from the Company, the Mineral and Metal Products (as defined in the circular of the Company dated 12 January 2017) that the Group sourced from third parties or produced by the mines of the Group; and
(ii) the Company has agreed to cause the Group to sell to the Jinchuan Group, and Jinchuan has agreed to cause the Jinchuan Group (for the purpose of this notice, excluding the Group) to purchase from the Group, the Mineral and Metal Products (as defined in the circular of the Company dated 12 January 2017);
For identification purpose only

NOTICE OF EGM

the continuing connected transactions contemplated under the 2016 CCT Agreement be and are hereby confirmed, approved and ratified, and any one director of the Company be and is hereby authorised to take such actions and execute such documents as he may consider necessary or desirable to carry out and complete the transactions contemplated under the 2016 CCT Agreement; and the Proposed Annual Caps (as defined in the circular of the Company dated 12 January 2017) for the continuing connected transactions contemplated under the 2016 CCT Agreement for each of the following financial years: (1) the financial year ending 31 December 2017; (2) the financial year ending 31 December 2018; and (3) the financial year ending 31 December 2019, being approximately USD165 million, USD190 million and USD200 million respectively, be and are hereby approved.”

By order of the Board Jinchuan Group International Resources Co. Ltd Wong Tak Chuen Company Secretary

Hong Kong, 12 January 2017

Notes:

A member entitled to attend and vote at the EGM is entitled to appoint more than one proxy to attend and, on poll, vote on his behalf. A proxy need not be a member of the Company.
A form of proxy for use at the EGM is enclosed. Whether or not you intend to attend the EGM in person, you are urged to complete and return the form of proxy in accordance with the instructions printed thereon as soon as possible. Completion and return of the form of proxy will not preclude you from attending and voting in person at the EGM or any adjourned EGM thereof if you so wish. In the event that you attend the EGM after having returned the completed form of proxy, your form of proxy will be deemed to have been revoked.
To be valid, the form of proxy, together with any power of attorney or other authority (if any) under which it is signed or a notarially certified copy of such power of attorney, must be deposited at Boardroom Share Registrars (HK) Limited at 31/F., 148 Electric Road, North Point, Hong Kong, not less than 48 hours before the time appointed for holding the EGM or any adjournment thereof.
In the case of joint registered holders of any shares of the Company, any one of such joint registered holders may vote at the EGM, either in person or by proxy, in respect of such shares as if he/she/it were solely entitled thereto; but if more than one of such joint registered holders are present at the EGM, either in person or by proxy, the vote of that one of them so present, either in person or by proxy, whose name stands first on the register of members in respect of such shares shall be accepted to the exclusion of the votes of the other joint registered holder(s).

As at the date of this circular, the Board comprises four executive directors, namely Mr. Yang Zhiqiang, Mr. Zhang Sanlin, Mr. Chen Dexin and Mr. Zhang Zhong; and three independent non-executive directors, namely Mr. Wu Chi Keung, Mr. Yen Yuen Ho, Tony and Mr. Neil Thacker Maclachlan.

AI assistant

Jinchuan Group International Resources Co. Ltd — Proxy Solicitation & Information Statement 2017

50551_rns_2017-01-11_69195e01-95f3-4916-bb9a-226144faf19e.pdf

JINCHUAN GROUP INTERNATIONAL RESOURCES CO. LTD 金川集團國際資源有限公司

RENEWAL OF CONTINUING CONNECTED TRANSACTIONS

CONTENTS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

JINCHUAN GROUP INTERNATIONAL RESOURCES CO. LTD 金川集團國際資源有限公司

RENEWAL OF CONTINUING CONNECTED TRANSACTIONS

INTRODUCTION

LETTER FROM THE BOARD

THE 2016 CCT AGREEMENT

Term:

Subject matter:

Condition precedent:

Basis of the trading prices of the Mineral and Metal Products:

General transaction principles:

HISTORICAL ANNUAL CAPS AND TRADING AMOUNTS UNDER THE 2013 CCT AGREEMENT AND THE 2015 COBALT AGREEMENT

PROPOSED ANNUAL CAPS UNDER THE 2016 CCT AGREEMENT

LETTER FROM THE BOARD

PRICING MECHANISM UNDER THE 2016 CONTINUING CONNECTED TRANSACTIONS

REASONS FOR AND BENEFITS OF THE 2016 CONTINUING CONNECTED TRANSACTIONS

LISTING RULES IMPLICATION

VOTING BY WAY OF POLL

RECOMMENDATION

ADDITIONAL INFORMATION

JINCHUAN GROUP INTERNATIONAL RESOURCES CO. LTD 金川集團國際資源有限公司 (Incorporated in the Cayman Islands with limited liability) (Stock Code: 2362)

RENEWAL OF CONTINUING CONNECTED TRANSACTIONS

RENEWAL OF CONTINUING CONNECTED TRANSACTIONS

INTRODUCTION

The 2016 CCT Agreement

LISTING RULES IMPLICATION

THE INDEPENDENT BOARD COMMITTEE

THE INDEPENDENT FINANCIAL ADVISER

LETTER FROM ALTUS

BASIS OF OUR ADVICE

PRINCIPAL FACTORS AND REASONS CONSIDERED

1.2 Operating results of the Group

LETTER FROM ALTUS

1.2.1 For the six months ended 30 June 2016

LETTER FROM ALTUS

1.2.2 For the year ended 31 December 2015

LETTER FROM ALTUS

1.3 Relationship between the Group and Jinchuan Group

1.4 Prospects of the Group

LETTER FROM ALTUS

2. Reasons and benefits for the 2016 Continuing Connected Transactions as contemplated under the 2016 CCT Agreement

3. Principal terms of the 2016 CCT Agreement

3.1 Pricing mechanism

LETTER FROM ALTUS

LETTER FROM ALTUS

LETTER FROM ALTUS

3.2 Market practice in relation to the pricing mechanism

LETTER FROM ALTUS

LETTER FROM ALTUS

3.3 General transaction principles

3.4 Section summary

4. Proposed annual caps

4.2 Proposed Annual Caps under the 2016 Continuing Connected Transactions

LETTER FROM ALTUS

4.2.1 The proposed annual cap for the year ending 31 December 2017

LETTER FROM ALTUS

LETTER FROM ALTUS

4.2.2 The proposed annual caps for the year ending 31 December 2018 and 2019

LETTER FROM ALTUS

LETTER FROM ALTUS

RECOMMENDATION

1. RESPONSIBILITY STATEMENT

2. SHARE CAPITAL

3. DISCLOSURE OF INTERESTS

(a) Directors’ interests and short positions in the securities of the Company and its associated corporations

(b) Persons who have an interest or short position which is discloseable under Divisions 2 and 3 of Part XV of the SFO and substantial shareholders

4. DIRECTORS’ SERVICE CONTRACTS

5. QUALIFICATION AND CONSENT OF EXPERT

(a) Qualification of expert

Name

Qualification

Jinchuan Group International Resources Co. Ltd Proxy Solicitation & Information Statement 2017