Persistence Gold Group Ltd - Capital/Financing Update 2006

The Stock Exchange of Hong Kong Limited takes no responsibility for the contents of this announcement, 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 announcement.

This announcement appears for information purposes only and does not constitute an invitation or offer to acquire, purchase or subscribe for the securities mentioned herein.

SHANGHAI MERCHANTS HOLDINGS LIMITED

(Incorporated in Bermuda with limited liability)

(Stock code: 1104)

(1) VERY SUBSTANTIAL ACQUISITION RELATING TO THE CONDITIONAL ACQUISITION OF 48,373,197 ORDINARY SHARES IN MOUNT GIBSON (2) PROPOSED RIGHTS ISSUE IN THE PROPORTION OF ONE RIGHTS SHARE FOR EVERY EXISTING SHARE HELD ON THE RECORD DATE

(3) PROPOSED ISSUE OF ONE BONUS WARRANT FOR EVERY FIVE RIGHTS SHARES

(4) PLACING OF NEW SHARES

(5) PROPOSED CHANGE OF NAME FOR SHANGHAI MERCHANTS HOLDINGS LIMITED

(6) INCREASE OF AUTHORISED SHARE CAPITAL

(7) REFRESHMENT OF GENERAL MANDATES TO ISSUE SHARES AND REPURCHASE SHARES

AND

(8) RESUMPTION OF TRADING IN THE SHARES

Underwriter to the Rights Issue

==> picture [222 x 32] intentionally omitted <==

— 1 —

CONDITIONAL ACQUISITION

On 27 October 2006, the Group entered into the Acquisition Agreement with the Vendors pursuant to which, among other things, the Purchaser, a wholly owned subsidiary of the Company, has conditionally agreed to acquire 48,373,197 ordinary shares in Mount Gibson, representing approximately 8.79% interest in Mount Gibson as at 7 November 2006 (Australian time). Upon completion of the Acquisition Agreement, Mount Gibson will be owned as to approximately 8.79% as at 7 November 2006 (Australian time) (subject to dilution effect, if any, from time to time contemplated by Mount Gibson issuing shares as a result of the unconditional takeover offer in respect of Aztec Resources Limited) by the Group.

Consideration payable by the Group for the Conditional Acquisition of the Sale Shares is HK$244,474,752. Completion of the Acquisition Agreement is conditional upon the fulfilment of certain conditions precedent which include, among other things, the approval by the Independent Shareholders on a vote taken by way of poll at the SGM and at which the controlling shareholder (i.e. Profit Harbour) and its associates shall abstain from voting, in respect of the Acquisition Agreement and the completion of the Rights Issue. Details of the Acquisition Agreement are set out in this announcement.

Further, the completion of the Acquisition Agreement is subject to the approval by the Independent Shareholders on a vote taken by way of poll at the SGM and at which the controlling shareholder (i.e. Profit Harbour) and its associates shall abstain from voting on the basis that (i) the transaction contemplated under the Acquisition Agreement constitutes a very substantial acquisition for the Company under the Listing Rules, on the basis that the calculation of the assets ratio is over 100% and that the Purchaser is a direct wholly-owned subsidiary of the Company and (ii) the completion of the Acquisition Agreement is conditional on the completion of the Rights Issue which is also subject to the approval by the Independent Shareholders on a vote taken by way of poll at the SGM and at which the controlling shareholder (i.e. Profit Harbour) and its associates shall abstain from voting.

RIGHTS ISSUE AND THE BONUS WARRANTS ISSUE

The Company proposes to raise HK$377,700,000 before expenses by way of the Rights Issue of 1,259,000,000 Right Shares at a price of HK$0.30 each payable in full on acceptance. The Company also proposes a bonus issue of one Bonus Warrant for every five Rights Shares successfully subscribed by the Qualifying Shareholders. Based on 1,259,000,000 Rights Shares to be issued pursuant to the Rights Issue, the total number of Bonus Warrants to be issued will be 251,800,000 warrants, entitling the holders thereof to subscribe for the same number of Shares. The Bonus Warrants will entitle their holders to subscribe for new Shares at an initial subscription price of HK$0.30 per Share (subject to adjustment) upon exercise of one Bonus Warrant.

— 2 —

Part of the proceeds raised from the Rights Issue in the sum of HK$224,474,752 will be applied towards payment of the balance of the Consideration. In respect of the balance in the sum of HK$153,225,248, (i) HK$20,000,000 will be deducted by the Company, being the deposit paid in respect of the Conditional Acquisition, to recover the same amount of money which has been previously reserved for base metal trading in the previous rights issue of the Company; (ii) approximately HK$3,700,000 will be used for the payment of professional fees and expenses in relation to the transactions contemplated under the Rights Issue and the Bonus Warrants Issue and (iii) the balance thereof, i.e. approximately HK$129,525,248 will be used by the Company to acquire further investment interests in the resources industry, where opportunities arise to make additional investments where returns are maximised for Shareholders, and as general working capital and for future investment purposes.

The Rights Issue is conditional and is fully underwritten. The Bonus Warrants Issue is conditional on the completion of the Rights Issue.

The Rights Issue and the Bonus Warrants Issue are subject to the approval by the Independent Shareholders on a vote taken by way of poll at the SGM and at which the controlling shareholder (i.e. Profit Harbour) and its associates shall abstain from voting, the increase of authorised share capital of the Company having taken effect and the Underwriter not terminating the Underwriting Agreement in accordance with its terms (see “Termination of the Underwriting Agreement” below).

The Company will provisionally allot one nil-paid Rights Share for every existing Share held by the Qualifying Shareholders whose names appear on the register of members of the Company on the Record Date. If the conditions of the Rights Issue and the Bonus Warrants Issue cannot be fulfilled, the Rights Issue will not proceed.

Warning of the risks of dealing in the Shares and the Rights Shares

Existing Shares will be dealt with on an ex-right basis from Friday, 8 December 2006. To qualify for the Rights Issue, all transfers of Shares must be lodged for registration with the branch registrar of the Company by 4:00 p.m. on Monday, 11 December 2006. The register of members of the Company will be closed from Tuesday, 12 December 2006 to Friday, 22 December 2006 (both dates inclusive). No transfer of the Shares will be registered during this period.

Dealings in the Rights Shares in their nil-paid form will take place from Thursday, 28 December 2006 to Friday, 5 January 2007 (both days inclusive). The Shareholders should note that dealings in such Shares will take place while the conditions to which the Underwriting Agreement is subject remain unfulfilled. If the Underwriter terminates the Underwriting Agreement, or the conditions of the Rights Issue and the Bonus Warrants Issue are not fulfilled, the Rights Issue will not proceed and the Rights Issue will lapse.

— 3 —

Any Shareholder or other person contemplating selling or purchasing the Shares and/or the Rights Shares in their nil-paid forms during the aforesaid period who is in any doubt about his/her/its position is recommended to consult his/her/its professional adviser.

Any Shareholders or other persons contemplating selling or purchasing the Shares and/or Rights Shares in their nil-paid forms up to the date when the conditions of the Rights Issue and the Bonus Warrants Issue are fulfilled (which is expected to be Monday, 15 January 2007) will accordingly bear the risk that the Rights Issue may not become unconditional and may not proceed.

PLACING OF NEW SHARES

The Board also proposes to raise additional equity of HK$240,000,000 through the Placing which is fully underwritten at the Placing Price by the Placing Agent. The additional funding will be used by the Group to acquire further investment interests in resources industry, where an opportunity comes to make additional investments on such acceptable terms and conditions, as the Company deems fit.

On 9 November 2006, the Placing Agreement was executed, pursuant to which the Company has agreed to place, through SHKIS as the Placing Agent, an amount of 800,000,000 new Shares to independent investors at the Placing Price per Placing Share. The Placing Shares are fully underwritten by SHKIS. The Company will seek the Independent Shareholders’ approval, on a vote taken by way of poll at the SGM and at which the controlling shareholder (i.e. Profit Harbour) and its associates shall abstain from voting, to grant a specific mandate for the allotment, issue and dealing with the Placing Shares under the Placing Agreement in accordance with all applicable requirements under the Listing Rules.

LISTING RULES IMPLICATIONS

The completion of the Acquisition Agreement is subject to the approval by the Independent Shareholders on a vote taken by way of poll at the SGM and at which the controlling shareholder (i.e. Profit Harbour) and its associates shall abstain from voting on the basis that (i) the transaction contemplated under the Acquisition Agreement constitutes a very substantial acquisition for the Company under the Listing Rules, on the basis that the calculation of the assets ratio is over 100% and that the Purchaser is a direct wholly-owned subsidiary of the Company and (ii) the completion of the Acquisition Agreement is conditional on the completion of the Rights Issue which is also subject to the approval of the Independent Shareholders on a vote taken by way of poll at the SGM and at which the controlling shareholder (i.e. Profit Harbour) and its associates shall abstain from voting.

The Company announced a rights issue on 11 May 2006 the results of which have been announced on 11 July 2006. The Rights Issue and the Bonus Warrants Issue aggregating with the previous rights issue increased the issued share capital of the Company by more than 50%. With reference to Rule 7.19(6)(a) of the Listing Rules, the Rights Issue and the Bonus Warrants Issue are conditional on the approval by the Independent Shareholders on a vote taken by way of poll at the SGM and at which the controlling shareholder (i.e. Profit Harbour) and its associates shall abstain from voting.

— 4 —

Subject to the approval of the Rights Issue and the Bonus Warrants Issue by the Independent Shareholders at the SGM as aforesaid, application will be made to the Stock Exchange for the listing of, and permission to deal in, the Rights Shares, in both nil-paid and fully-paid forms, the Bonus Warrants and the Shares which may fall to be issued upon the exercise of the Bonus Warrants.

An independent board committee of the Company has been constituted to consider the terms of the Acquisition Agreement, the Rights Issue and the Bonus Warrants Issue, the grant of the New Issue Mandate and the Placing Agreement and to advise and make recommendation to the Independent Shareholders as to how to vote at the SGM on the ordinary resolution regarding the aforesaid. Mr. Wong Wing Kuen, Albert, Mr. Tsui Robert Che Kwong, Mr. Yang Weiming and Mr. Michael J. Bogue have been appointed by the Board to serve as members of the independent board committee.

Independent financial adviser(s) will be appointed to advise the independent board committee of the Company and the Independent Shareholders on the fairness and reasonableness of the transactions contemplated in the Acquisition Agreement, the Rights Issue and the Bonus Warrants Issue, the grant of the New Issue Mandate and the Placing Agreement.

The Company is also required to obtain specific approval from the Independent Shareholders on a vote taken by way of poll at the SGM and at which the controlling shareholder (i.e. Profit Harbour) and its associates shall abstain from voting on the specific mandate for the allotment, issue and dealing with the Placing Shares under the Placing Agreement under Rule 13.36(1) of the Listing Rules.

Subject to the approval of the allotment, issue and dealing with the Placing Shares under the Placing Agreement by the Independent Shareholders at the SGM as aforesaid application will be made to the Stock Exchange for the listing of, and permission to deal in, the Placing Shares.

In view of the resumption proposal as set out in the Company’s announcement dated 13 July 2006 and the recent developments as set out in this announcement, the Stock Exchange has asked the Company to provide further information on the intended development of the Company’s business and may consider requiring the Company to fulfill additional conditions for approval of listing of the new Shares to be issued. The investors should exercise caution in the trading of the Company’s Shares.

CHANGE OF NAME

The Board proposes that the Company will change its name from “Shanghai Merchants Holdings Limited” to “APAC Resources Limited” and its Chinese name, for identification purposes, to “ ”. A further announcement will be made on the change of name becoming effective. The Company will seek the Shareholders’ approval at the SGM to approve the requisite resolution to change its existing name.

— 5 —

INCREASE OF AUTHORISED SHARE CAPITAL

As the current authorised share capital of the Company is HK$200,000,000.00 divided into 2,000,000,000 Shares of nominal value HK$0.10 each, there is insufficient amount of authorised capital for the Company to complete the Rights Issue, the Bonus Warrants Issue and the Placing of new Shares.

In this regard, the Company will seek the Shareholders’ approval at the SGM to approve the requisite resolution to increase the Company’s authorised capital from HK$200,000,000.00 to HK$800,000,000.00 divided into 8,000,000,000 Shares of nominal value of HK$0.10 each.

REFRESHMENT OF GENERAL MANDATES TO ISSUE SHARES AND REPURCHASE SHARES

In view of the enlarged issued share capital of the Company as a result of the Rights Issue and the Bonus Warrants Issue, the Directors will seek the approval of the Shareholders at the SGM and at which no Shareholder shall abstain from voting, as permitted by Rule 13.36(4)(e) of the Listing Rules, to top-up the general mandate from 62,600,000 to 381,662,953 Shares (i.e. approximately 15.16% of the Company’s issued share capital as enlarged by the completion of the Rights Issue which is 2,518,000,000).

The Directors will further seek the approval of the Independent Shareholders at the SGM, as permitted by Rule 13.36(4) of the Listing Rules for an additional mandate, to allot, issue and deal with 121,937,047 Shares (i.e. approximately 4.84% of the Company’s issued share capital as enlarged by the completion of the Rights Issue which is 2,518,000,000). The New Issue Mandate is subject to the approval by the Independent Shareholders on a vote taken by way of poll at the SGM and at which the controlling shareholder (i.e. Profit Harbour) and its associates shall abstain from voting.

In summary, the grant of the refreshment of the Previous Issue Mandate together with the New Issue Mandate by the Shareholders and the Independent Shareholders respectively shall not exceed aggregate of 20% of the nominal amount of the Company’s issued share capital as enlarged by the completion of the Rights Issue.

The Directors will further seek the approval of the Shareholders at the SGM, as permitted by Rule 10.06(1), to repurchase Shares not exceeding 10% of the Company’s issued share capital as at the date of the SGM.

GENERAL

— 6 —

the grant of the New Issue Mandate and the Placing Agreement; (vi) Placing of new Shares; (vii) changeof name of the Company; (viii) grant of refreshment of general mandates to issue Shares and repurchase Shares; and (ix) a summary of the terms of the Bonus Warrants and (x) a notice to convene the SGM will be despatched to the Shareholders as soon as practicable. Subject to the approval of the Rights Issue and the Bonus Warrants Issue by the Independent Shareholders on a vote taken by way of poll at the SGM and at which the controlling shareholder (i.e. Profit Harbour) and its associates shall abstain from voting, the Rights Issue Documents containing details of the Rights Issue and the Bonus Warrants Issue will be despatched as soon as practicable after the approval of the Rights Issue and the Bonus Warrants Issue by the Shareholders at the SGM.

SUSPENSION AND RESUMPTION OF TRADING

At the request of the Company, trading in the Shares was suspended with effect from 9:30 a.m. on 27 October 2006 pending the release of this announcement. An application has been made by the Company to the Stock Exchange for resumption of trading in the Shares with effect from 9:30 a.m. on 10 November 2006.

CONDITIONAL ACQUISITION

Introduction

On 27 October 2006, the Company entered into the Acquisition Agreement to acquire the 48,373,197 Sale Shares, representing approximately 8.79% interest in Mount Gibson as at 7 November 2006 (Australian time). Upon completion of the Acquisition Agreement, Mount Gibson will be owned as to approximately 8.79% as at 7 November 2006 (Australian time) (subject to dilution effect, if any, from time to time contemplated by Mount Gibson issuing shares as a result of the unconditional takeover offer in respect of Aztec Resources Limited) by the Group.

Mount Gibson is a specialist iron ore exploration company which owns iron ore deposits and holds mining rights, with its shares listed on the Australian Stock Exchange. Its principal business is mining of hematite iron ore deposits at Tallering Peak and exploration and development of hematite iron ore deposits in the Midwest region of Western Australia. The Sale Shares will be held for strategic investment purpose. The Company will account for such investment as “available for sale financial assets” as defined under HKAS39 issued by the HKICPA.

The Acquisition Agreement

Date

27 October 2006

Parties

The Vendors: Honest Opportunity Limited and New Fortress Investments Limited The Purchaser: Fortune Desire Investments Limited

— 7 —

Assets to be acquired

Pursuant to the Acquisition Agreement, it is agreed (i) that the Purchaser shall acquire, and the Vendors shall sell, the Sale Shares.

Conditions precedent

Completion of the Acquisition Agreement is conditional upon fulfilment of the following conditions:

(i) the approval by the Independent Shareholders in respect of the Acquisition Agreement on a vote taken by way of poll at the SGM and at which the controlling shareholder (i.e. Profit Harbour) and its associates shall abstain from voting in accordance with all applicable requirements under the Listing Rules;
(ii) completion of the Rights Issue; and
(iii) all necessary authorisations being obtained and maintained by the Purchaser as a result of the transactions contemplated in the Acquisition Agreement.

Completion

Subject to the fulfilment of the conditions precedent as aforesaid, the completion of the Acquisition Agreement shall take place at the earlier of the expiry of five Business Days after all the transactions contemplated in the Acquisition Agreement have been completed or 7 February 2007 (or such earlier or later date as may be agreed by the Vendors and the Purchaser in writing).

If any of the Conditions is not fulfilled (or waived by the Purchaser other than condition (i) above which cannot be waived) on or before 7 February 2007 (or such earlier or later date as may be agreed by the Vendors and the Purchaser in writing), the Acquisition Agreement shall cease and determine and the Company shall have no obligations and liabilities under the Acquisition Agreement save for any antecedent breaches under the terms of the Acquisition Agreement.

Consideration

The Consideration payable by the Purchaser for the Conditional Acquisition is HK$244,474,752 being A$0.85 per Sale Share (at an exchange rate of A$1.00 to HK$5.9458). The Consideration is arrived at after arm’s length negotiation between the Purchaser and the Vendors and with reference to the market price of the Sale Shares traded on the Australian Stock Exchange. The Consideration of the Sale Shares represents a premium of 14.6% over the average closing price of the Sale Shares quoted on the Australian Stock Exchange on the last 5 full trading days up to and including 26 October 2006. Given the potential iron ore production growth of Mount Gibson in the emerging Midwest region of Western Australia combined with being an unique opportunity to secure a strategic foothold in the Australian natural resources sector, the Directors consider that it is reasonable and in the interests of the Company as a whole, to purchase a substantial strategic shareholding of listed shares in Mount Gibson at a price over the then prevailing market price of its shares.

— 8 —

The Consideration payable by the Purchaser pursuant to the Acquisition Agreement has been paid as to HK$20,000,000 upon execution of the Acquisition Agreement as deposit and the balance in the sum of HK$224,474,752 at the earlier of the expiry of five Business Days after all the transactions contemplated under the Acquisition Agreement have been completed or 7 February 2007, provided that the parties thereto may agree to an extension for a further period at such term(s) as agreed by the parties thereto. If the conditions precedent as aforesaid are not fulfilled pursuant to the terms of the Acquisition Agreement, the deposit in the sum of HK$20,000,000 shall be refunded to the Purchaser forthwith.

Source of funding

The Group would fund the Conditional Acquisition as to HK$224,474,752 by way of the Rights Issue and the balance of the Consideration by internal resources of the Group. Details of the Rights Issue are set out under the paragraph headed “Rights Issue” below.

Information on the Company

The Company is incorporated as an exempted company with limited liability in Bermuda under the Companies Act 1981 of Bermuda (as amended) and its shares are listed on the Stock Exchange. The Group is principally engaged in trading of base metals and fabric products and other merchandises.

Information on the Vendors

Honest Opportunity Limited is a company incorporated with limited liability in the British Virgin Islands. Its principal business is securities trading and investments.

New Fortress Investments Limited is a company incorporated with limited liability in the British Virgin Islands. Its nature of business is investment holding.

Information on the Purchaser

Fortune Desire Investments Limited is a company incorporated with limited liability in the British Virgin Islands and a direct wholly-owned subsidiary of the Company. It is a special vehicle set up for investment holding purpose.

Information on Mount Gibson

Mount Gibson is a company incorporated in Australia with limited liability in 1996, and its shares are listed on the Australian Stock Exchange. Its principal business is mining of hematite iron ore deposits at Tallering Peak and exploration and development of hematite iron ore deposits in the Midwest region of Western Australia. Mount Gibson is a specialist iron ore exploration company which owns iron ore deposits and holds mining rights. Mount Gibson currently exports all its current iron ore materials from its operations located at Tallering Peak Hematite to China. It also has plans to export its future iron ore materials directly to customers in China and throughout Asia.

— 9 —

The audited financial information of Mount Gibson for the two years ended 30 June 2006 and 2005 are as follows:

	Year ended 30	Year ended 30
	June 2006	June 2005
	Audited	Audited
	A$	A$
Net assets value	$97,420,000	$67,629,000
Profit before taxation and extraordinary items	$16,151,000	$22,032,000
Profit after taxation and extraordinary items	$23,073,000	$13,502,000

REASONS FOR AND BENEFITS OF THE CONDITIONAL ACQUISITION

Over the past few years the Company has continued to review and evaluate numerous business and investment opportunities consistent with its operations of trading particularly in the lucrative commodities industry. Until now the Company has not identified suitable investment or significant commodity trading opportunities in line with its corporate objectives and principal business activities. The Board believes that the Conditional Acquisition represents a unique strategic investment holding in the Australian resources sector upon which to build a significant investment and commodities trading company primarily focused on the natural resources and related sectors.

The Company has identified a number of geographic regions and commodity markets which it believes present attractive opportunities to pursue the Company’s principal activities of commodities trading and strategic investment and where rationalization and consolidation is likely to occur.

The Midwest iron ore region of Western Australia has been identified by the Company as one such region. This region is likely to be a significant producer of iron ore, one individual commodity identified by the Company as currently having attractive market characteristics, supply and demand fundamentals and a favourable outlook for the foreseeable future.

The Conditional Acquisition relates to Mount Gibson who is currently the leading iron ore producer in the Midwest region of Western Australia with its production from the Tallering Peak Hematite Operations and its proposed development of the Extension Hill Hematite Project, details of which are set out below.

Tallering Peak Operations

Mount Gibson’s first iron ore mine was developed at Tallering Peak, which is located 170 kilometres by road and rail from the port of Geraldton in the Mid West region of Western Australia. Mining of overburden commenced in November 2003 and the first shipment of ore occurred in February 2004.

— 10 —

Mining operations at Tallering Peak are being undertaken by Mount Gibson utilising its own workforce and equipment. Mining of the first pit (T4) is now complete. Mining of the second pit (T5) and the third pit (T3) is underway. Resources at Tallering Peak are expected to permit mining to increase to 3.0 million tons per year of iron ore for five years commencing June 2006.

After mining, the ore is crushed and screened at the mine-site into lump and fines stockpiles. The mine is currently producing lump and fines at a 65:35 ratio. Lump ore is sold at a higher rate than fines which must be sintered before feeding to a blast furnace.

The crushed ore is transported 65 kilometres by road-train to Mullewa where it is stockpiled at Mount Gibson’s rail loading facility.

At Mullewa, the ore is loaded onto rail wagons by employees using front end loaders. The ore is then railed 107 kilometres to Geraldton, where it is stockpiled in a purpose built 150,000 tons capacity storage shed which was constructed by Mount Gibson. From there the ore is loaded onto ships by the Geraldton Port Authority, for transport to China.

The road haulage, rail transport, and ship loading, is being carried out by experienced contractors.

Mount Gibson has contracted to sell all of its production for the life of the Tallering Peak mine. Prices are fixed to the prevailing published freight on board prices for iron ore sold by Hamersley Iron from its Pilbara ports. These prices are reviewed annually, for adjustment on 1 April of each year.

Extension Hill Project

Mount Gibson holds the rights to mine hematite ore occurring at the Extension Hill and other deposits within the Mount Gibson range. Mount Gibson has completed a desk top study of the Extension Hill hematite deposit. The strongly positive result has prompted a detailed feasibility study to evaluate costs and risks of various development strategies and designs, with a completion target of December 2006.

It is anticipated that subject to approvals and the development of port facilities in Geraldton, ore shipments will commence in January 2008. The Extension Hill mine is expected to produce 3.0 million tons per year of direct shipping iron ore for a minimum of five years at a similar operating profit to Tallering Peak as extra haulage costs will be largely offset by reduced mining costs resulting from a much lower waste to ore ratio. Mount Gibson has completed a desktop study on stand-alone development of the hematite at Extension Hill.

More detailed work on the Extension Hill Project is now underway to evaluate costs and risks of various development strategies and designs, with an interim completion target of December 2006. Once that work is complete a project proposal will be formulated and submitted to the board of directors of Mount Gibson for approval, then to government and the community for consideration.

— 11 —

It is expected that completion of the approvals process and development of the Extension Hill Project will result in ore production by December 2007.

Mount Gibson’s intention is to move ahead with the Extension Hill Project, subject to approvals, as rapidly as possible, to take advantage of current iron ore market conditions.

Source: Mount Gibson website materials and Extension Hill Project Developments Update September 2006 at www.mtgibsoniron.com.au.

Mount Gibson also currently has an unconditional takeover offer underway in respect of fellow Western Australian iron ore company, Aztec Resources Limited, a company listed on the Australian Stock Exchange, which if successful would create one of the largest Australian independent iron ore producers. The Company currently also holds an interest of approximately 7.27% in Aztec Resources Limited as at the date of 7 November 2006 (Hong Kong time) in its trading portfolio.

The Midwest region of Western Australia refers to the geographical area which extends inland (or east) from Geraldton across to Cue. Mount Gibson is one of the first of a number of resources companies which have iron ore projects currently in production in the Midwest region or have aspirations to become iron ore producers.

The Conditional Acquisition is consistent with the Company’s strategy of seeking to undertake commodity trading and make investments to participate in industry rationalization and consolidation where returns are maximized for Shareholders.

The Board considers that it is in the interest of the Company to enter into the Acquisition Agreement. The Board is of the opinion that the terms of the Acquisition Agreement are fair and reasonable and in the interests of the Shareholders taken as a whole.

To the best knowledge, information and belief of the Directors having made all reasonable enquiries, the Vendors and its ultimate beneficial owners are independent third parties not connected with the Company or its subsidiaries or any of their respective associates, or any of the connected persons of the Company or its subsidiaries or any of their respective associates.

THE RIGHTS ISSUE AND THE BONUS WARRANTS ISSUE

The Company proposes to raise HK$377,700,000 before expenses by way of the Rights Issue of 1,259,000,000 right shares at a price of HK$0.30 each payable in full on acceptance. The Company also proposes a bonus issue of one Bonus Warrant for every five Rights Shares successfully subscribed by the Qualifying Shareholders. Based on 1,259,000,000 Rights Shares to be issued pursuant to the Rights Issue, the total number of Bonus Warrants to be issued will be 251,800,000 warrants, entitling the holders thereof to subscribe for the same number of Shares. The Bonus Warrants will entitle their holders to subscribe for new Shares at an initial subscription price of HK$0.30 per Share (subject to adjustment) upon exercise of one Bonus Warrant.

— 12 —

Part of the proceeds raised from the Rights Issue in the sum of HK$224,474,752 will be applied towards payment of the balance of the Consideration. In respect of the balance in the sum of HK$153,225,248, (i) HK$20,000,000 will be deducted by the Company, being the deposit paid in respect of the Conditional Acquisition, to recover the same amount of money which has been previously reserved for base metal trading in the previous rights issue of the Company; (ii) approximately HK$3,700,000 will be used for the payment of professional fees and expenses in relation to the transactions contemplated under the Rights Issue and the Bonus Warrants Issue; and (iii) the balance thereof, i.e. approximately HK$129,525,248 will be used by the Company to acquire further investment interests in the resources industry, where opportunities arise to make additional investments where returns are maximised for Shareholders, and as general working capital and for future investment purposes.

The Rights Issue is conditional and is fully underwritten. The Bonus Warrants Issue is conditional on the completion of the Rights Issue.

In particular, the Rights Issue and the Bonus Warrants Issue are subject to the approval by the Independent Shareholders on a vote taken by way of poll at the SGM and at which the controlling shareholder (i.e. Profit Harbour) and its associates shall abstain from voting, the increase of authorised share capital of the Company having taken effect and the Underwriter not terminating the Underwriting Agreement in accordance with its terms (see “Termination of the Underwriting Agreement” below).

Issue statistics of Rights Issue

Basis of Rights Issue — One Rights Share for every existing Share held on the Record Date Existing issued share capital — 1,259,000,000 Shares (comprising 413,000,000 issued Shares before the resumption of trading in Shares of the Company on the Stock Exchange as of the 2006 AGM) and 826,000,000 Shares allotted and issued pursuant to the previous rights issue upon resumption and 20,000,000 Shares allotted and issued upon conversion of the convertible bonds of the Company) Number of Rights Shares — 1,259,000,000 Rights Shares Subscription price — HK$0.30 for each Rights Share

— 13 —

As at the date of this announcement, the Company has no outstanding convertible securities, options or warrants in issue which confer any right to subscribe for or convert or exchange into the Shares.

The total amount of Rights Shares represent 100% of the existing issued share capital of the Company and 50% of the issued share capital of the Company as enlarged by the completion of the Rights Issue. Based on the Subscription Price of HK$0.30 per Rights Share, the net proceeds to be raised by the Company from the Rights Issue is approximately HK$374,000,000 after deduction of expenses including, among others, underwriting commission and professional fees.

Subscription Price for Rights Shares

HK$0.30 per Rights Share, payable in full when a Qualifying Shareholder accepts the provisional allotment of the Rights Shares or applies for excess Rights Shares or when a transferee of nil-paid Rights Shares applies for the relevant Rights Shares.

The Subscription Price represents:

(i) a discount of approximately 26.8% to the closing price of HK$0.41 per Share as quoted on the Stock Exchange on 26 October 2006, being the last full trading day immediately before trading in the Shares was suspended pending the release of this announcement;
(ii) a discount of approximately 24.1% to the average closing price of approximately HK$0.395 per Share as quoted on the Stock Exchange for the last 5 full trading days up to and including 26 October 2006;
(iii) a discount of approximately 18.8% to the average closing price of approximately $0.3695 per Share as quoted on the Stock Exchange for the last 10 full trading days up to and including 26 October 2006; and
(iv) a discount of approximately 15.5% to the theoretical ex-right price of approximately HK$0.355 per Share, calculated on the basis of the closing price of HK$0.41 per Share on 26 October 2006.

The Group had unaudited net assets of approximately HK$15,787,000 as at 30 June 2006. The Subscription Price was agreed based on arm’s length negotiations between the Company and the Underwriter.

Basis of provisional allotment of Rights Shares

One Rights Share in nil-paid form will be issued for every existing Share held by a Qualifying Shareholder on the Record Date. The board lot of the Right Shares in nil-paid form will be 20,000, which is the same as the board lot of the Shares.

Number of Bonus Warrants

Based on 1,259,000,000 Rights Shares to be issued pursuant to the Rights Issue, the total number of Bonus Warrants to be issued will be 251,800,000 warrants, entitling the holders

— 14 —

thereof to subscribe for the same number of Shares, representing approximately 20% of the existing share capital of the Company, approximately 10% of the issued share capital as enlarged by the completion of the Rights Issue and approximately 9.09% of the issued share capital as enlarged by the completion of the Rights Issue and full exercise of the Bonus Warrants.

Subject to the approval of the Rights Issue and the Bonus Warrants Issue by the Independent Shareholders on a vote taken by way of poll at the SGM and at which the controlling shareholder (i.e. Profit Harbour) and its associates shall abstain from voting, application will be made to the Stock Exchange for the listing of, and permission to deal in, the Rights Shares, in both nil-paid and fully-paid forms, the Bonus Warrants and the Shares which may fall to be issued upon the exercise of the Bonus Warrants.

The Bonus Warrants will be traded in board lot of 40,000.

Subscription Period of the Bonus Warrants

The Bonus Warrants will be exercisable at any time from the date on which the Bonus Warrants are listed on the Stock Exchange (the “Commencement Date”) up to and including the day before the 3rd anniversary of the Commencement Date of the Bonus Warrants.

Bonus Warrants Subscription Price

The Bonus Warrants will entitle their holders to subscribe for new Shares at an initial subscription price of HK$0.30 per Share (subject to adjustment) upon exercise of one Bonus Warrant.

The Bonus Warrants Subscription Price represents:

(i) a discount of approximately 26.8% to the closing price of HK$0.41 per Share as quoted on the Stock Exchange on 26 October 2006, being the last full trading day immediately before trading in the Shares was suspended pending the release of this announcement;
(ii) a discount of approximately 24.1% to the average closing price of approximately HK$0.395 per Share as quoted on the Stock Exchange for the last 5 full trading days up to and including 26 October 2006;
(iii) a discount of approximately 18.8% to the average closing price of approximately $0.3695 per Share as quoted on the Stock Exchange for the last 10 full trading days up to and including 26 October 2006; and
(iv) a discount of approximately 15.5% to the theoretical ex-right price of approximately HK$0.355 per Share, calculated on the basis of the closing price of HK$0.41 per Share on 26 October 2006.

Qualifying Shareholders

— 15 —

To qualify for the Rights Issue, Shareholders must at the close of business on the Record Date be registered as a member of the Company. Shareholders having an address in Hong Kong on the register of members of the Company at the close of business on the Record Date are qualified for the Rights Issue. Shareholders having addresses outside Hong Kong on the register of members of the Company at the close of business on the Record Date are qualified for the Rights Issue, only if the Board, after making relevant enquiry with lawyers in the relevant jurisdictions, considers that the offer to these Shareholders would not contravene any legal restriction under the laws of the relevant place or any requirement of the relevant regulatory body or stock exchange in that place and such offer will not require any relevant registration.

The last day of dealings in the Shares on a cum-right basis is Thursday, 7 December 2006. The Shares will be dealt with on an ex-right basis on Friday, 8 December 2006. In order to be registered as a member of the Company on the Record Date, the Shareholders must lodge the relevant transfers of the Shares (with the relevant share certificates) with the Company’s branch registrar in Hong Kong, Secretaries Limited, at 26th Floor, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong by 4:00 p.m. on Monday, 11 December 2006.

The register of members of the Company will be closed from Tuesday, 12 December 2006 to Friday, 22 December 2006, both dates inclusive. No transfer of the Shares will be registered during this period.

Rights of the Overseas Shareholders

If at the close of business on the Record Date, a Shareholder’s address on the Company’s register of members is in a place outside Hong Kong, that Shareholder may not be eligible to take part in the Rights Issue. The Rights Issue Documents will not be registered under the applicable securities legislation of any jurisdiction other than Hong Kong and Bermuda. The Company will comply with all necessary requirements specified in Rule 13.36(2) of the Listing Rules. The Board will make enquiries with lawyers in the relevant jurisdictions as to whether the issue of Rights Shares to the Overseas Shareholders may contravene the applicable securities legislation of the relevant overseas places or the requirements of the relevant regulatory body or stock exchange. If, after making such enquiry, the Board is of the opinion that it would be necessary or expedient, on account either of the legal restrictions under the laws of the relevant place or any requirement of the relevant regulatory body or stock exchange in that place, not to offer the Rights Shares to such Overseas Shareholders, no provisional allotment of nil-paid Rights Shares or allotment of fully-paid Rights Shares will be made to such Overseas Shareholders. In such circumstances, the Rights Issue will not be extended to the Excluded Shareholders. The Company will send the Rights Issue Documents (except the PALs or EAFs) to the Excluded Shareholders for their information only. As at the date of this announcement, all Shareholders on the Company’s register of members have Hong Kong registered addresses.

The basis for excluding the Excluded Shareholders, if any, from the Rights Issue and the Bonus Warrants Issue will be contained in the circular and the Prospectus.

— 16 —

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

Status of the Rights Shares and the Shares to be issued upon exercise of the Bonus Warrants

The Rights Shares when allotted and fully-paid and the Shares to be issued upon exercise of the Bonus Warrants will rank pari passu in all respects with the existing Shares in issue on the date of allotment of such Shares in fully-paid form. Holders of such Shares will be entitled to receive all future dividends and distributions which are declared, made or paid on or after the close of business on any Business Day falling during the subscription period on which any of the subscription rights represented by such Warrants are duly exercised. Subject to the approval of the Rights Issue and the Bonus Warrants Issue by the Independent Shareholders on a vote taken by way of poll at the SGM and at which the controlling shareholder (i.e. Profit Harbour) and its associates shall abstain from voting, application will be made to the Stock Exchange for the listing of, and permission to deal in, the Rights Shares, in both nil-paid and fully-paid forms, the Bonus Warrants and the Shares which may fall to be issued upon the exercise of the Bonus Warrants.

Share certificates for the Rights Shares and the Bonus Warrants

Subject to the fulfilment of the conditions of the Rights Issue, the respective share certificates for all fully-paid Rights Shares and the Bonus Warrants are expected to be posted to the Qualifying Shareholders who have accepted and applied for (where appropriate) and paid for the Rights Shares on or before Monday, 22 January 2007 at their own risk.

Fractional entitlements

No fraction of a Share will be allotted and any amount of remittance in excess of the aggregate amount required to subscribe for fully-paid Shares under the Bonus Warrants will be refunded to the holders of the Bonus Warrants.

Application for excess Rights Shares

Qualifying Shareholders may apply for any unsold entitlements of the Excluded Shareholders and any Rights Shares provisionally allotted but not accepted by the Qualifying Shareholders or otherwise subscribed for by transferees of nil-paid Rights Shares. Application can be made by completing the EAF and lodging the same with remittance for the excess Rights Shares. The Directors will allocate the excess Rights Shares at their discretion and on a fair and equitable basis, but preference will be given to topping-up odd lots to whole board lots.

— 17 —

Shareholders with their Shares held by a nominee company should note that the Board will regard the nominee as a single Shareholder according to the register of members of the Company. Accordingly, the Shareholders should note that the aforesaid arrangement in relation to the top-up odd lots for allocation of excess Rights Shares will not be extended to beneficial owners individually. Shareholders with their Shares held by a nominee company are advised to consider whether they would like to arrange for the registration of the relevant Shares in the name of the beneficial owner(s) prior to the Record Date.

For Shareholders whose Shares are held by their nominee(s) and would like to have their names registered on the register of members of the Company, they must lodge all necessary documents with the Company’s branch registrar in Hong Kong, Hong Kong Branch Share Registrar and Transfer Office, Secretaries Limited, 26th Floor, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong, for completion of the relevant registration by 4:00 p.m. on Monday, 11 December 2006.

The Majority Shareholders have not decided on whether to apply for any excess Rights Shares.

Conditions of the Rights Issue and the Bonus Warrants Issue

Completion of the Rights Issue and the Bonus Warrants Issue is conditional upon, among others, fulfilment of the following conditions:

(i) the circular of the Company (duly approved by the Stock Exchange) being posted to the Shareholders on or before the Circular Posting Date and with the respective resolutions duly passed by the Independent Shareholders on a vote taken by way of poll at the SGM and at which the controlling shareholder (i.e. Profit Harbour) and its associates shall abstain from voting in respect of the Rights Issue and the Bonus Warrants Issue, together with a resolution duly passed approving the increase in authorised share capital of the Company to facilitate the issue of Rights Shares and the Shares that may fall to be issued upon the exercise of the Bonus Warrants, in compliance with the Listing Rules on or before the Prospectus Posting Date;
(ii) the Stock Exchange granting or agreeing to grant (subject to allotment and despatch of certificates in respect of Rights Shares, as appropriate, the posting of the Rights Issue Documents and any other condition which may be agreed in their reasonable opinion by the Company and the Underwriter) the listing of, and permission to deal in, the Rights Shares (in their fully paid form), the Bonus Warrants and the Shares that may fall to be issued upon the exercise of the Bonus Warrants on the Stock Exchange on or before 5:00 p.m. on the second Business Day after the Final Acceptance Date;
(iii) the filing with and registration of the Rights Issue Documents by the Registrar of Companies in Hong Kong in compliance with the Ordinance and the Registrar of Companies in Bermuda in compliance with the Act on or before the Prospectus Posting Date;
(iv) the posting to Qualifying Shareholders of the Prospectus Documents on the Prospectus Posting Date; and

— 18 —

(v) the delivery to the Underwriter on the Prospectus Posting Date a copy of each of the Rights Issue Documents, duly signed for and on behalf of the Company by a duly authorized officer thereof.

In the event that the above conditions precedent have not been fulfilled or otherwise waived, released or modified (in whole or in part) in writing by the Underwriter (other than conditions (i) and (ii) above which cannot be waived) with the agreement of the Company, or shall become incapable of being fulfilled on or before such date, currently expected to be on or around 7 February 2007, without being so waived, released or modified, the Underwriting Agreement may be terminated by the Underwriter by written notice to the Company, in which case, all liabilities of the parties to the Underwriting Agreement shall cease and determine and none of the parties shall have any claim against the other except, among other things, claims arising out of any antecedent breach of any of the provisions of the Underwriting Agreement.

Application for listing of the Rights Shares, the Bonus Warrants and the Shares that may fall to be issued upon the exercise of the Bonus Warrants on the Stock Exchange

The Company will apply to the Listing Committee of the Stock Exchange for the listing of, and permission to deal in, the Rights Shares in both nil-paid and fully-paid forms, the Bonus Warrants and the Shares that may fall to be issued upon the exercise of the Bonus Warrants.

Dealings in the Rights Shares in their nil-paid and fully-paid forms will be subject to the payment of stamp duty in Hong Kong.

Underwriting agreement

Date:	8 November 2006
Underwriter:	SHK International
Number of Rights Shares	A total of 362,300,199 Rights		shares		representing
underwritten:	approximately 28.78% of the issued		share	capital of the
	Company are underwritten by the	Underwriter.
Commission:	2% of the aggregate Subscription	Price	for the		Underwritten
	Shares, which is expected	to	be	approximately
	HK$2,173,801.19.

To the best knowledge, information and belief of the Directors having made all reasonable enquiries, the Underwriter and its ultimate beneficial owners are independent third parties not connected with the Company or its subsidiaries or any of their respective associates, or any of the connected persons of the Company or its subsidiaries or any of their respective associates.

Irrevocable Undertakings from Profit Harbour and Shougang

As at the date of the Underwriting Agreement, Profit Harbour is interested in 596,699,801 Shares, representing approximately 47.39% of the existing issued share capital of the

— 19 —

Company, and Shougang is interested in 300,000,000 Shares, representing approximately 23.83% of the existing issued share capital of the Company. Each of Profit Harbour and Shougang has irrevocably undertaken to take up 596,699,801 Rights Shares and 300,000,000 Rights Shares respectively which will be provisionally allotted to them under the Rights Issue.

Termination of the Underwriting Agreement

The Underwriter may terminate the arrangements set out in the Underwriting Agreement by notice in writing issued to the Company at any time between the date of the Underwriting Agreement and 5:00 p.m. on the second Business Day after the Final Acceptance Date if there occurs any one or more than one of the following events:-

(i) the Underwriter shall become aware of the fact that, any of the warranties contained in the Underwriting Agreement was, then or at the material time, untrue, inaccurate or misleading, or that the Company or the Majority Shareholders or either of them is/are in breach of any provision of the Underwriting Agreement or the Irrevocable Undertaking;
(ii) the enactment of any new law or regulation, any change in existing laws or regulations or any change in the interpretation or application thereof by any court or other competent authority, whether in Hong Kong or otherwise in a jurisdiction relevant in the context of the Rights Issue;
(iii) any change in local, international, financial, political, economic or stock market conditions, whether in Hong Kong or otherwise in a jurisdiction relevant in the context of the Rights Issue; or
(iv) any change or development involving a prospective change in taxation or exchange controls in Hong Kong,

and such event or events is or are in the bona fide and reasonable opinion of the Underwriter:

(a) likely to have a material adverse effect on the business or financial or trading position or prospect of the Company or the Group; or
(b) likely to have a material adverse effect on the success of the Rights Issue or the level of Shares underwritten by the Underwriters; or
(c) so material and prejudicial as to make it inappropriate, inadvisable or inexpedient to proceed further with the Rights Issue,

then the Underwriter may, in addition to and without prejudice to any other remedies to which the Underwriter may be entitled, after consultation with the Company and its professional advisers, by notice in writing to the Company on or before 5:00 p.m. on the third Business Day after the Final Acceptance Date to terminate the Underwriting Agreement forthwith.

— 20 —

If the Underwriter terminates or rescinds the Underwriting Agreement, the Rights Issue will not proceed.

Warning of the risks of dealing in the Shares and the Rights Shares

The Rights Shares in their nil-paid form is expected to be dealt in from Thursday, 28 December 2006 to Friday, 5 January 2007 (both days inclusive). The Shareholders should note that dealings in such Shares will take place while the conditions to which the Underwriting Agreement is subject remain unfulfilled. If the Underwriter terminates the Underwriting Agreement, or the conditions of the Rights Issue and the Bonus Warrants Issue are not fulfilled, the Rights Issue will not proceed and the Rights Issue will lapse.

Any Shareholder or other person contemplating selling or purchasing the Shares and/or the Rights Shares in their nil-paid forms up to the date when the conditions of the Rights Issue and the Bonus Warrants Issue are fulfilled (which is expected to be Monday, 15 January 2007) will accordingly bear the risk that the Rights Issue may not become unconditional and may not proceed.

— 21 —

Events Year 2006
Despatch of circular together with notice of SGM . . . . . . . . . . . . .Thursday, 30 November
Last day of dealings in Shares on a cum-right basis . . . . . . . . . . . . .Thursday, 7 December
First day of dealings in Shares on an ex-right basis . . . . . . . . . . . . . . .Friday, 8 December
Latest time for lodging transfers of Shares
in order to be qualified for the Rights Issue . . . . . .4:00 p.m. on Monday, 11 December
Register of members for the Shares closes . . . . . . . . . . . . . . . . . . .Tuesday, 12 December to
Friday, 22 December
(both dates inclusive)
Latest time for lodging forms of proxy
for the purpose of the SGM . . . . . . . . . . . . . . . .10:00 a.m. on Wednesday, 20 December
Time and date of the SGM . . . . . . . . . . . . . . . . . . . . . . .10:00 a.m. on Friday, 22 December
Despatch of the Rights Issue Documents . . . . . . . . . . . . . . . . . . . . . . . .Friday, 22 December
Record Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Friday, 22 December
Publication of results of SGM in newspapers and
on the Stock Exchange’s website . . . . . . . . . . . . . . . . . . . . . . . . .Wednesday, 27 December
Register of members for the Shares reopens . . . . . . . . . . . . . . . . .Wednesday, 27 December
First day of trading in nil-paid Rights Shares . . . . . . . . . . . . . . . . .Thursday, 28 December

— 22 —

Year 2007

Events

Latest time for splitting nil-paid Rights Shares . . . . . . . .4:00 p.m. on Tuesday, 2 January Last day of trading in nil-paid Rights Shares . . . . . . . . . . .4:00 p.m. on Friday, 5 January

Latest time for acceptance of and payment for Rights Shares (Note) . . . . . . . . . . . . . . . . . . . . . .4:00 p.m. on Wednesday, 10 January Latest time for the Rights Issue to become unconditional . . . . . . . . . . . . . . . . . . . . . . . . .5:00 p.m. on Monday, 15 January

Announcement of the results of the Rights Issue . . . . . . . . . . . . . . . . . .Monday, 22 January

Despatch of refund cheques in respect of wholly or partly unsuccessful excess applications . . . . . . . . . . . . . . .Monday, 22 January

Share certificates for fully-paid Rights Shares and certificates for Bonus Warrants to be posted . . . . . . . . . . . . . . . . . . . .Monday, 22 January

Dealings in fully-paid Rights Shares and the Bonus Warrants commence . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Wednesday, 24 January

Note: If there is a “black” rainstorm warning or a tropical cyclone warning signal number 8 or above in force in Hong Kong on the latest date for acceptance of and payment for Rights Shares (i) at any local time before 12:00 noon and no longer in force after 12:00 noon on 10 January 2007, the latest time of acceptance of and payment for Rights Shares will be extended to 5:00 p.m. and (ii) at any local time between 12:00 noon and 4:00 p.m. on 10 January 2007, the latest time of acceptance time of and payment for Rights Shares will be rescheduled to 4:00 p.m. on the following Business Day which does not have either of those warnings in force at any time between 9:00 a.m. and 4:00 p.m.

Dates stated in this announcement for events in the timetable are indicative only and may be extended or varied. Any changes to the anticipated timetable for the Rights Issue will be announced as appropriate.

Subject to the Rights Issue being approved at the SGM, the Rights Issue Documents containing information on the Rights Issue and the Bonus Warrants Issue will be despatched to the Qualifying Shareholders and the Prospectus (except the PALs or EAFs) only to the Excluded Shareholders for their information, as soon as practicable after the SGM.

REASONS FOR AND BENEFITS OF THE RIGHTS ISSUE AND THE BONUS WARRANTS ISSUE

The amount of HK$224,474,752 from the aggregate amount of Rights Issue (after expenses including underwriting commission, professional fees, printing charges and sundry expenses) will be applied towards payment of the balance of the Consideration for the Conditional Acquisition. As mentioned above, the Directors are of the view that the Conditional Acquisition is in the interests of the Company and the Shareholders as a whole as it will help strengthening the asset base of the Group. Accordingly, the Directors consider that it is fair

— 23 —

and reasonable for the Company to raise the required financing for the Conditional Acquisition by way of the Rights Issue as the exercise provides opportunities for the Shareholders to maintain their stakes in the Company and to enjoy the anticipated benefits from the Conditional Acquisition.

In the event that the Conditional Acquisition is not completed, the Board intends to apply the proceeds from the Rights Issue to acquire further investment interests in the resources industry, where opportunities arise to make additional investments where returns are maximised for Shareholders, and as general working capital and for future investment purposes.

SHAREHOLDING STRUCTURE BEFORE AND AFTER THE RIGHTS ISSUE AND THE BONUS WARRANTS ARE EXERCISED IN FULL

Set out below is a table showing the shareholding structure of the Company as at the date of this announcement, after completion of the Rights Issue assuming different levels of acceptance of the Rights Shares by the Qualifying Shareholders:

Shareholders Profit Harbour Shougang Existing public Shareholders Underwriter Total	As at the date this announce Number of Shares 596,699,801 300,000,000 362,300,199 — 1,259,000,000	of ment Immediately following completion of the Rights Issue assuming all Qualifying Shareholders have taken up their respective entitlements Immediately following completion of the Rights Issue assuming the Majority Shareholders have fully taken up their entitlements and fully underwritten by the Underwriter Immediately following completion of the Rights Issue assuming all Qualifying Shareholders have taken up their respective entitlements and the Bonus Warrants are exercised in full Immediately following completion of the Rights Issue assuming the Majority Shareholders having fully taken up their entitlements and fully underwritten by the Underwriter and the Bonus Warrants are exercised in full Share- holding (%) Number of Shares Share- holding (%) Number of Shares Share- holding (%) Number of Shares Share- holding (%) Number of Shares Share- holding (%) 47.39% 1,193,399,602 47.39% 1,193,399,602 47.39% 1,312,739,562 47.39% 1,312,739,562 47.39% 23.83% 600,000,000 23.83% 600,000,000 23.83% 660,000,000 23.83% 660,000,000 23.83% 28.78% 724,600,398 28.78% 362,300,199 14.39% 797,060,438 28.78% 362,300,199 13.08% — — — 362,300,199 14.39% — — 434,760,239 15.70% 100% 2,518,000,000 100% 2,518,000,000 100% 2,769,800,000 100% 2,769,800,000 100%	of ment Immediately following completion of the Rights Issue assuming all Qualifying Shareholders have taken up their respective entitlements Immediately following completion of the Rights Issue assuming the Majority Shareholders have fully taken up their entitlements and fully underwritten by the Underwriter Immediately following completion of the Rights Issue assuming all Qualifying Shareholders have taken up their respective entitlements and the Bonus Warrants are exercised in full Immediately following completion of the Rights Issue assuming the Majority Shareholders having fully taken up their entitlements and fully underwritten by the Underwriter and the Bonus Warrants are exercised in full Share- holding (%) Number of Shares Share- holding (%) Number of Shares Share- holding (%) Number of Shares Share- holding (%) Number of Shares Share- holding (%) 47.39% 1,193,399,602 47.39% 1,193,399,602 47.39% 1,312,739,562 47.39% 1,312,739,562 47.39% 23.83% 600,000,000 23.83% 600,000,000 23.83% 660,000,000 23.83% 660,000,000 23.83% 28.78% 724,600,398 28.78% 362,300,199 14.39% 797,060,438 28.78% 362,300,199 13.08% — — — 362,300,199 14.39% — — 434,760,239 15.70% 100% 2,518,000,000 100% 2,518,000,000 100% 2,769,800,000 100% 2,769,800,000 100%
			100%

Maintenance of the listing of the Shares after Rights Issue and the Bonus Warrants Issue

Following completion of the Rights Issue and/or the Bonus Warrants Issue are exercised in full, the Underwriter will become a substantial shareholder of the Company if no Qualifying Shareholders (except the Majority Shareholders) is willing to take up his/her/its entitlements of such number of Rights Shares. The Underwriter will own approximately as to 14.39% of the issued share capital of the Company as enlarged by the completion of the Rights Issue (as set out in the fourth column of the table above) and 15.70% of the issued share capital of the Company as enlarged by the completion of the Rights Issue and full exercise of the Bonus Warrants (as set out in the sixth column of the table above).

It is the intention of the Underwriter to place out at least 10.61% of the issued share capital of the Company as enlarged by the completion of the Rights Issue and 11.92% of the issued

— 24 —

share capital of the Company as enlarged by the completion of the Rights Issue and full exercise of the Bonus Warrants respectively, to other independent investors in the capital market for the purpose of maintaining the public float requirement of 25% under the Listing Rules.

It is also the intention of the Company to maintain the listing of the Shares on the Stock Exchange after the completion of the Proposed Acquisition, the Rights Issue and the Bonus Warrants Issue. Accordingly, the Company undertakes that it will take such appropriate steps as may be necessary or required to maintain and/or restore the minimum public float for Shares at all times upon completion of the Rights Issue and the Bonus Warrants Issue.

The Stock Exchange has stated that if, at the date of completion of the Rights Issue, less than 25% of the Shares are held by the public or if the Stock Exchange believes that:

a false market exists or may exist in the trading in the Shares; or
there are too few shares of the Shares in public hands to maintain an orderly market,

then it will consider exercising its discretion to suspend trading in the Shares until a sufficient public float is attained. In this connection, it should be noted that upon completion of the Rights Issue, there may be insufficient public float for the Shares and therefore trading in the Shares may be suspended until a sufficient level of public float is attained.

PLACING OF 800,000,000 NEW SHARES

The Board also proposes to raise additional equity of HK$240,000,000 through the Placing which is fully underwritten by SHKIS at the Placing Price by the Placing Agent. The additional funding will be used by the Group to acquire further investment interests in resources industry, where an opportunity comes to make additional investments on such acceptable terms and conditions, as the Company deems fit.

On 9 November 2006, the Placing Agreement was executed, pursuant to which the Company has agreed to place, through SHKIS as the Placing Agent, an amount of 800,000,000 new Shares to independent investors at the Placing Price per Placing Share. The Company will seek the Independent Shareholders’ approval, on a vote taken by way of poll at the SGM and at which the controlling shareholder (i.e. Profit Harbour) and its associates shall abstain from voting, to grant a specific mandate for the allotment, issue and dealing with the Placing Shares under the Placing Agreement in accordance with all applicable requirements under the Listing Rules.

Placing Agreement made between the Company and the Placing Agent

The Company As the vendor. Number of Placing 800,000,000 new Shares to be placed, representing Shares: approximately 31.77% of the existing issued share capital of the Company enlarged by the completion of the Rights Issue.

— 25 —

Underwriting:

Placing price:

The Placing is fully underwritten by SHKIS.

HK$0.30 per Placing Share which represents:

(i) a discount of approximately 26.8% to the closing price of HK$0.41 per Share as quoted on the Stock Exchange on 26 October 2006, being the last full trading day immediately before trading in the Shares was suspended pending the release of this announcement;
(ii) a discount of approximately 24.1% to the average closing price of approximately HK$0.395 per Share as quoted on the Stock Exchange for the last 5 full trading days up to and including 26 October 2006;
(iii) a discount of approximately 18.8% to the average closing price of approximately $0.3695 per Share as quoted on the Stock Exchange for the last 10 full trading days up to and including 26 October 2006; and
(iv) a discount of approximately 15.5% to the theoretical ex-right price of approximately HK$0.355 per Share, calculated on the basis of the closing price of HK$0.41 per Share on 26 October 2006.

Placing Agent:

Placing commission:

Placees:

SHKIS.

SHKIS will receive a placing commission of 4% on the gross proceeds of the Placing.

The Placing Shares will be placed to not less than six placees (which will be individual, corporate or institutional investors or a combination of them).

Such placees and their respective ultimate owners are all:-

(i) independent of, and not acting in concert with, the Company and parties acting in concert with it; and
(ii) independent third parties not connected with the Company or its subsidiaries or any of their respective associates, or any of the connected persons of the Company or its subsidiaries or any of their respective associates.

— 26 —

Conditions:

The Placing is conditional upon:-

(i) Independent Shareholders of the Company approving the Placing Agreement on a vote taken by way of poll at the SGM and at which the controlling shareholder (i.e. Profit Harbour) and its associates shall abstain from voting, in accordance with all applicable requirements under the Listing Rules;
(ii) Independent Shareholders of the Company approving the grant of the specific mandate to allot, issue and deal with the Placing Shares under the Placing Agreement on a vote taken by way of poll at the SGM and at which the controlling shareholder (i.e. Profit Harbour) and its associates shall abstain from voting, in accordance with all applicable requirements under the Listing Rules; and
(iii) the Stock Exchange granting or agrees to grant the listing of, and the permission to deal in, the Placing Shares,

Neither of the above conditions can be waived.

The Placing is conditional and may or may not proceed. Accordingly, shareholders and prospective investors are reminded to exercise extreme caution when trading in the Shares of the Company.

Completion:

The Placing must be completed on a day which is two (2) months from the date of the SGM (currently scheduled to be on or around 22 December 2006) where the specific mandate in relation to the Placing is approved and granted by the Independent Shareholders on a vote taken by way of poll at the SGM and at which the controlling shareholder (i.e. Profit Harbour) and its associates shall abstain from voting, if such day not being a Business Day, the preceding Business Day of such day, failing which the Placing will cease and terminate.

— 27 —

The Company will further announce the results of each Placing being made at the Placing Price during the Placing Period, amongst other details, the identity of the placees and the number of Placing Shares being placed out to such placees.

The completion of the Placing will not be affected in the event that the Rights Issue does not proceed for whatever cause.

The Placing of 800,000,000 Placing Shares represents approximately 63.54% of the existing issued share capital of the Company, approximately 31.77% of the issued share capital as enlarged by the completion of the Rights Issue, approximately 28.88% of the issued share capital as enlarged by the completion of the Rights Issue and full exercise of the Bonus Warrants, approximately 24.11% of the issued share capital as enlarged by the completion of the Rights Issue and the Placing but before full exercise of the Bonus Warrants and approximately 22.41% of the issued share capital as enlarged by the completion of the Rights Issue, full exercise of the Bonus Warrants and the Placing.

Termination of the Placing Agreement

SHKIS may terminate the arrangements set out in the Placing Agreement, if, at any time prior to 12:00 noon on the Placing Completion Date, in the absolute opinion of SHKIS, the success of the Placing or the business or financial prospects of the Group would or might be adversely affected by any of the following events:-

(a) the introduction of any new Law or any change in existing Laws or change in the interpretation or application of existing Laws; or
(b) the occurrence of any event, development or change (whether or not local, national or international or forming part of a series of events or changes occurring or continuing before, as at or after the date of the Placing Agreement and including an event or change in relation to or a development of an existing state of affairs) of a political, military, industrial, financial, economic or other nature, whether or not sui generis with any of the foregoing, resulting in a material adverse change in, or which might be expected to result in a material adverse change in, political, economic or stock market conditions; or
(c) the imposition of any moratorium, suspension or material restriction on trading in securities generally on the Stock Exchange occurring due to exceptional financial circumstances or otherwise; or
(d) a change or development involving a prospective change in taxation in Hong Kong or any relevant jurisdiction or the implementation of exchange controls which shall or might materially and adversely affect the Company or its present or prospective shareholders in their capacity as such; or
(e) any change or deterioration in the conditions of local, national or international securities markets occurs,

— 28 —

then and in any such case, SHKIS may terminate the Placing Agreement without liability to the Company by giving notice in writing to the Company, provided that such notice is received prior to 12:00 noon on the Placing Completion Date.

In the event that SHKIS terminates the Placing Agreement pursuant to any of the above, all obligations of the Company and SHKIS under the Placing Agreement, shall cease and determine, upon which neither party thereto shall have any claim against the other in respect of any matter arising out of or in connection with the Placing Agreement, except for any breach arising prior to such termination.

If SHKIS terminates or rescinds the Placing Agreement, the Placing will not proceed.

SHAREHOLDING STRUCTURE BEFORE AND AFTER THE COMPLETION OF THE RIGHTS ISSUE, THE BONUS WARRANTS ISSUE AND THE PLACING

Set out below is a table showing the shareholding structure of the Company as at the date of this announcement, after completion of the Rights Issue, the Bonus Warrants Issue and the Placing assuming all the Placing Shares have been successfully purchased or procured to be purchased:

Shareholders Profit Harbour Shougang Existing Public Shareholders SHKIS/Placees Total	As at the date of this announcement Immediately following completion of the Rights Issue assuming all the Qualifying Shareholders have taken up their respective entitlements Immediately following completion of the Rights Issue assuming all the Qualifying Shareholders have taken up their respective entitlements and the Bonus Warrants are exercised in full Immediately following completion of the Rights Issue assuming all the Qualifying Shareholders have taken up their respective entitlements, the Bonus Warrants are exercised in full and the Placing Shares are fully placed out or underwritten Number of Shares Share- holding (%) Number of Shares Share- holding (%) Number of Shares Share- holding (%) Number of Shares Share- holding (%) 596,699,801 47.39% 1,193,399,602 47.39% 1,312,739,562 47.39% 1,312,739,562 36.77% 300,000,000 23.83% 600,000,000 23.83% 660,000,000 23.83% 660,000,000 18.49% 362,300,199 28.78% 724,600,398 28.78% 797,060,438 28.78% 797,060,438 22.33% — — — — — — 800,000,000 22.41% 1,259,000,000 100% 2,518,000,000 100% 2,769,800,000 100% 3,569,800,000 100%	As at the date of this announcement Immediately following completion of the Rights Issue assuming all the Qualifying Shareholders have taken up their respective entitlements Immediately following completion of the Rights Issue assuming all the Qualifying Shareholders have taken up their respective entitlements and the Bonus Warrants are exercised in full Immediately following completion of the Rights Issue assuming all the Qualifying Shareholders have taken up their respective entitlements, the Bonus Warrants are exercised in full and the Placing Shares are fully placed out or underwritten Number of Shares Share- holding (%) Number of Shares Share- holding (%) Number of Shares Share- holding (%) Number of Shares Share- holding (%) 596,699,801 47.39% 1,193,399,602 47.39% 1,312,739,562 47.39% 1,312,739,562 36.77% 300,000,000 23.83% 600,000,000 23.83% 660,000,000 23.83% 660,000,000 18.49% 362,300,199 28.78% 724,600,398 28.78% 797,060,438 28.78% 797,060,438 22.33% — — — — — — 800,000,000 22.41% 1,259,000,000 100% 2,518,000,000 100% 2,769,800,000 100% 3,569,800,000 100%
		100%

Maintenance of the listing of the Shares after the Placing

Following completion of the Placing, SHKIS may become a substantial shareholder of the Company if the Placing Shares are not fully placed out and as a result SHKIS has to underwrite the remaining Placing Shares. If no Placing Shares are able to be placed out by the Placing Period, SHKIS will own approximately as to 22.41% of the issued share capital of the Company as enlarged by the completion of the Rights Issue, full exercise of the Bonus Warrants and the Placing (as set out in the last column of the table above).

It is the intention of SHKIS to place out at least 2.67% of the issued share capital of the Company as enlarged by the completion of the Rights Issue, full exercise of the Bonus Warrants and the Placing, to other independent investors in the capital market for the purpose of maintaining the public float requirement of 25% under the Listing Rules.

— 29 —

It is also the intention of the Company to maintain the listing of the Shares on the Stock Exchange after the completion of the Proposed Acquisition, the Rights Issue, the Bonus Warrants Issue and the Placing. Accordingly, the Company undertakes that it will take such appropriate steps as may be necessary or required to maintain and/or restore the minimum public float for Shares at all times upon completion of the Rights Issue, the Bonus Warrants Issue and the Placing.

The Stock Exchange has stated that if, at the date of completion of the Placing, less than 25% of the Shares are held by the public or if the Stock Exchange believes that:

a false market exists or may exist in the trading in the Shares; or
there are too few shares of the Shares in public hands to maintain an orderly market,

then it will consider exercising its discretion to suspend trading in the Shares until a sufficient public float is attained. In this connection, it should be noted that upon completion of the Placing, there may be insufficient public float for the Shares and therefore trading in the Shares may be suspended until a sufficient level of public float is attained.

REASONS FOR AND BENEFITS OF THE PLACING

The proceeds from the Placing will be used by the Group to acquire further investment interests in the resources industry, where opportunities arise to make additional investments where returns are maximised for Shareholders.

The Director propose to seek the Independent Shareholders’ approval on a vote taken by way of poll at the SGM and at which the controlling shareholder (i.e. Profit Harbour) and its associates shall abstain from voting at the SGM to grant a specific mandate for the allotment, issue and dealing with the Placing Shares in accordance with all applicable requirements under the Listing Rules.

An explanatory statement containing the particulars required by the Listing Rules to enable the Shareholders to make an informed view on whether to vote for or against the resolution for the grant of the specific mandate to be proposed at the SGM will be set out in the circular of the Company.

In view of the current market conditions, the Directors consider that the Placing represents a good opportunity to raise further working capital for the Company while at the same time broadening the Shareholder and capital base and that raising capital at favourable market conditions is a sensible and beneficial move for the Group when future need for capital is anticipated.

Net proceeds from the Placing of approximately HK$229,500,000 (after deduction of expenses including, among others, underwriting commission and professional fees) will be applied by the Group to fund new investments and acquisitions in the future as and when opportunities arise and for general working capital purposes.

— 30 —

Hence, the Directors are of the view that the proposed Rights Issue, the Bonus Warrants Issue and Placing are in the interests of the Shareholders as a whole.

FUND RAISING ACTIVITIES OF THE COMPANY FOR THE 12 MONTHS ENDING ON THE DATE OF THIS ANNOUNCEMENT

The following table summaries the fund raising activities of the Company for the 12 months ending on the date of this announcement:

Date of

announcement/ Proposed use Actual use circular/prospectus Fund raising event Net proceeds raised of proceeds of proceeds 11 May 2006 previous rights issue Approximately Approximately Approximately 30 May 2006 HK$81,000,000 HK$25,000,000 to HK$16,000,000 has 1 June 2006 invest in fabric and been used in the 20 June 2006 other merchandises fabric and other 11 July 2006 trading business merchandises trading (including HK$8,000,000 increase in pledge bank deposit for obtaining bank facilities) Approximately HK$9,000,000 has been reserved in the bank to be used for fabric and other merchandises trading Approximately HK$20,000,000 has HK$20,000,000 to been used as deposit invest in base metal for the Conditional trading business Acquisition of the Sales Shares Approximately Approximately HK$36,000,000 HK$26,000,000 has reserves as general been used for the working capital acquisition of Aztec (Note) Resources Limited’s shares as a stock in its trading portfolio Approximately HK$3,000,000 has been used for the acquisitions of stocks listed on the Stock Exchange as stocks in its trading portfolio

— 31 —

Date of

Date of
announcement/			Proposed use	Actual use
circular/prospectus	Fund raising event	Net proceeds raised	of proceeds	of proceeds
				Approximately
				HK$2,500,000 has
				been used to settle
				outstanding payables
				before the previous
				rights issue and
				expenses incurred in
				the second half of
				2006
				Approximately
				HK$4,500,000 has
				been reserved as
				general working
				capital deposited in
				the bank
15 June 2006	Conversion of	Approximately	Approximately	The entire sum of
	Convertible Bonds	HK$2,000,000	HK$2,000,000 used	approximately
			to pay for the	HK$2,000,000 was
			consideration of	used to pay for the
			acquiring	consideration of
			approximately 60%	acquiring
			interest in	approximately 60%
			Chinaright	interest in
			Electronics Limited	Chinaright
				Electronics Limited

Note: In order to maximize return for the Shareholders, the Board had decided that the general working capital of the Company should not be left idle and should be fully utilized in acquiring interests in sound investments of potential growth and return on a short term basis in September 2006. The Directors of the Company had considered the use of the general working capital to build up short term trading portfolio in shares in listed companies. The intended usage as general working capital can be achieved on the basis that the stocks of Aztec Resources Limited and other listed shares on the Stock Exchange held by the Company can be sold at any time through the Australian Stock Exchange and the Stock Exchange respectively, hence, the proceeds of selling such stocks/shares can easily be applied for use as general working capital from time to time.

Application for listing of the Placing Shares on the Stock Exchange

The Company will apply to the Listing Committee of the Stock Exchange for the listing of, and permission to deal in, the Placing Shares.

Dealings in the Placing Shares will be subject to the payment of stamp duty in Hong Kong.

— 32 —

LISTING RULES IMPLICATIONS

The completion of the Acquisition Agreement is subject to the approval by the Independent Shareholders on a vote taken by way of poll at the SGM and at which the controlling shareholder (i.e. Profit Harbour) and its associates shall abstain from voting on the basis that (i) the transaction contemplated under the Acquisition Agreement constitutes a very substantial acquisition for the Company under the Listing Rules, on the basis that the calculation of the assets ratio is over 100% and that the Purchaser is a direct wholly-owned subsidiary of the Company and (ii) the completion of the Acquisition Agreement is conditional on the completion of the Rights Issue which is also subject to the Independent Shareholders on a vote taken by way of poll at the SGM and at which the controlling shareholder (i.e. Profit Harbour) and its associates shall abstain from voting.

The Company has announced a rights issue on 11 May 2006 and results of which have been announced on 11 July 2006. The Rights Issue and the Bonus Warrants Issue aggregating with the previous rights issue have increased the issued share capital of the Company by more than 50%. With reference to Rule 7.19(6)(a) of the Listing Rules, the Rights Issue and the Bonus Warrants Issue are conditional on the approval by the Independent Shareholders on a vote taken by way of poll at the SGM and at which the controlling shareholder (i.e. Profit Harbour) and its associates shall abstain from voting.

An independent board committee of the Company has been constituted to consider the terms of the Acquisition Agreement, the Rights Issue and the Bonus Warrants Issue, grant of the New Issue Mandate and the Placing Agreement and to advise and make recommendation to the Independent Shareholders as to how to vote at the SGM on the ordinary resolution regarding the aforesaid. Mr. Wong Wing Kuen, Albert, Mr. Tsui Robert Che Kwong, Mr. Yang Weiming and Mr. Michael J. Bogue have been appointed by the Board to serve as members of the independent board committee.

The independent financial adviser(s) will be appointed to advise the independent board committee of the Company and the Independent Shareholders on the fairness and reasonableness of the transactions contemplated in the Acquisition Agreement, the Rights Issue and the Bonus Warrants Issue, grant of the New Issue Mandate and the Placing Agreement in accordance with the Listing Rules..

— 33 —

Subject to the approval of the allotment, issue and dealing with the Placing Shares under the Placing Agreement by the Independent Shareholders at the SGM as aforesaid, application will be made to the Stock Exchange for the listing of, and permission to deal in, the Placing Shares

CHANGE OF NAME

The Directors propose to change the name of the Company from “Shanghai Merchants Holdings Limited” to “APAC Resources Limited” and its Chinese name, for identification purposes, to “ ” to reflect the previous changes in the shareholding structure of the Company and to enable the investors to have an easy recognition on the Company’s future principal business activities. The Directors propose to seek the Shareholders’ approval at the SGM to approve the requisite resolution to change the Company’s existing name.

The proposed change of name will be subject to the passing of the special resolution by the Shareholders at the SGM and will become effective subject to the approvals of the Registrar of Companies in Hong Kong and Bermuda.

The change of name will not affect any rights of the Shareholders. All existing share certificates issue bearing the existing name of the Company will, after the change of name becoming effective, continue to be good evidence of title to the Shares and will be valid for trading, settlement and delivery for the same number of shares in the new name of the Company on the Stock Exchange.

Holders of existing share certificates may exchange them for new share certificates at the expense of the Company within one month after the change of name becomes effective. Holders of existing share certificates who wish to exchange the existing share certificates for new share certificates bearing the new name should deliver the existing share certificates to the Company’s share registrar being the Hong Kong Branch Share Registrar and Transfer Office, Secretaries Limited, 26/F, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong during normal business hours. Any exchange of new share certificates after one month from the effective date of the change of name will be accepted for exchange only on payment of a fee of HK$2.50 (or such higher amount as may from time to time be allowed by the Stock Exchange) for each new share certificate issued.

A further announcement will be made on the change of name becoming effective.

INCREASE OF AUTHORISED SHARE CAPITAL

— 34 —

The Directors propose to seek the Shareholders’ approval at the SGM to approve the requisite resolution to increase the Company’s authorised capital from HK$200,000,000.00 to HK$800,000,000.00 divided into 8,000,000,000 Shares of nominal value of HK$0.10 each.

The proposed increase of the authorised share capital will be subject to the passing of the ordinary resolution by the Shareholders at the SGM and the approval of/filing with the Registrar of Companies in Bermuda. The increase of the authorised share capital will become effective upon filing the respective special resolution with the Registrar of Companies in Bermuda.

REFRESHMENT OF GENERAL MANDATES TO ISSUE SHARES AND REPURCHASE SHARES

At the 2006 AGM, ordinary resolutions were passed whereby general mandates authorizing the Directors, amongst other things, to (i) allot, issue and deal with the Shares of the issued share capital of the Company and to make or grant offers, agreements and options which would or might require the exercise of such powers during or after end of the relevant period which shall not exceed aggregate of 20% of the nominal amount of the share capital of the Company in issue as at the date of the 2006 AGM (“Previous Issue Mandate”) and (ii) repurchase shares of the Company on the Stock Exchange or on any other stock exchange recognised which shall not exceed aggregate of 10% of the nominal amount of the share capital of the Company in issue as at the date of the 2006 AGM (“Previous Repurchase Mandate”).

Since the date of the 2006 AGM, the Company has used up approximately 4.84% of the Previous Issue Mandate applying towards issuance of 20,000,000 Shares for the conversion of the convertible bonds of the Company in August 2006 (the calculation of 4.84% is based on the said 20,000,000 Shares divided by the 413,000,000 issued Shares as at the date of the 2006 AGM) leaving an unused portion of approximately 15.16% under the Previous Issue Mandate. Details of the calculation are set out below:

No. of issued shares as at 413,000,000 Shares the date of 2006 AGM Increase in the no. of 826,000,000 Shares Shares issued after completion of the previous rights issue of the Company in July 2006

No. of Shares issued 20,000,000 Shares pursuant to the conversion of the convertible bonds of the Company in August 2006

— 35 —

Total no. of issued Shares 1,259,000,000 Shares as at the date of this announcement
Increase in the no. of 1,259,000,000 Rights Shares Shares issued after completion of the Rights Issue
Total no. of issued Shares 2,518,000,000 Shares as enlarged by the completion of the Rights Issue
No. of Shares permitted 82,600,000 Shares, i.e. 20% x 413,000,000 Shares to be issued under the Previous Issue Mandate
No. of Shares and % used 20,000,000 Shares used for convertible bonds under the Previous Issue Mandate 4.84%, i.e. 20,000,000 Shares x 100% 413,000,000 Shares
No. of Shares and % not 62,600,000 Shares used under the Previous Issue Mandate 15.16%, i.e. 62,600,000 Shares x 100% 413,000,000 Shares
No. of Shares permitted 381,662,953 Shares, i.e. 15.16% x 2,518,000,000 Shares to be issued after the grant of refreshment of the Previous Issue Mandate based on the issued share capital as enlarged by the completion of the Rights Issue
No. of Shares permitted to be issued after grant of the New Issue Mandate based on the issued share capital as enlarged by the completion of the Rights Issue

121,937,047 Shares, i.e. 4.84% x 2,518,000,000 Shares

— 36 —

No. of Shares permitted 503,600,000 Shares, i.e. 20% x 2,518,000,000 Shares to be issued after the grant of the refreshment of the Previous Issue Mandate and the New Issue Mandate based on the issued share capital as enlarged by the completion of the Rights Issue

Refreshment of Previous Issue Mandate

In view of the enlarged issued share capital of the Company as a result of the Rights Issue and the Bonus Warrants Issue, the Directors will seek the approval of the Shareholders at the SGM and at which no Shareholder shall abstain from voting, as permitted by Rule 13.36(4)(e) of the Listing Rules, to top-up the general mandate from 62,600,000 to 381,662,953 Shares (approximately 15.16% of the Company’s issued share capital as enlarged by the completion of the Rights Issue which is 251,800,000 Shares).

Grant of New Issue Mandate

As a result of the Rights Issue and the Bonus Warrants Issue, the refreshment of the Previous Issue Mandate as to approximately 15.16% of the Company’s issued share capital as enlarged by the completion of the Rights Issue pursuant to Rule 13.36(4)(e) of the Listing Rules will not be sufficient to provide the Company with flexibility to issue securities for cash or as consideration for acquisition of assets as when the Directors think fit and appropriate. Even though the Directors currently have no intention of any acquisition by the Company nor any plan for raising capital by issuing new securities after the Conditional Acquisition, Rights Issue, the Bonus Warrants Issue and the Placing, the Directors will further seek the approval of the Independent Shareholders at the SGM, as permitted by Rule 13.36(4) of the Listing Rules for an additional mandate to allot, issue and deal with 121,937,047 Shares (i.e. approximately 4.84% of the Company’s issued share capital as enlarged by the completion of the Rights Issue which is 251,800,000 Shares (“New Issue Mandate”).

The New Issue Mandate is subject to the approval by the Independent Shareholders on a vote taken by way of poll at the SGM and at which the controlling shareholder (i.e. Profit Harbour) and its associates shall abstain from voting. In summary, the grant of the refreshment of the Previous Issue Mandate together with the New Issue Mandate by the Shareholders and the Independent Shareholders respectively shall not exceed aggregate of 20% of the nominal amount of the share capital of the Company in issue as enlarged by the completion of the Rights Issue.

Grant of New Repurchase Mandate

Further, the Directors will further seek the approval of the Shareholders at the SGM, as permitted by Rule 10.06(1), to repurchase Shares not exceeding 10% of the Company’s issued share capital as at the date of the SGM, being 125,900,000 Shares (“New Repurchase Mandate”).

— 37 —

An explanatory statement containing the particulars required by the Listing Rules to enable the Shareholders to make an informed view on whether to vote for or against the resolution for the grant of the proposed general mandate in relation to the New Repurchase Mandate to be proposed at the SGM will be set out in the circular of the Company.

GENERAL

A circular of the Company containing details of, among other things, (i) the Acquisition Agreement; (ii) the Rights Issue and the Bonus Warrants Issue ; (iii) the increase of authorised capital; (iv) the recommendation of the independent board committee of the Company to the Shareholders in respect of the Acquisition Agreement, the Rights Issue and the Bonus Warrants Issue, grant of the New Issue Mandate and the Placing Agreement; (v) the letter(s) of advice from the independent financial adviser(s) in respect of the terms of the Acquisition Agreement and the Rights Issue and the Bonus Warrants Issue, grant of the New Issue Mandate and the Placing Agreement; (vi) Placing of new Shares; (vii) change of name of the Company; (viii) grant of refreshment of general mandates to issue Shares and repurchase Shares; and (ix) a summary of the terms of the Bonus Warrants and (x) a notice to convene the SGM will be despatched to the Shareholders as soon as practicable. Subject to the approval of the Rights Issue and the Bonus Warrants Issue by the Independent Shareholders on a vote taken by way of poll at the SGM and at which the controlling shareholder (i.e. Profit Harbour) and its associates shall abstain from voting, the Prospectus Documents containing details of the Rights Issue and the Bonus Warrants Issue will be despatched as soon as practicable after the approval of the Rights Issue and the Bonus Warrants Issue by the Independent Shareholders at the SGM.

SUSPENSION AND RESUMPTION OF TRADING

DEFINITIONS

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

“Acquisition Agreement” the conditional sale and purchase agreement dated 27 October 2006 entered into between the Purchaser and the Vendors relating to the sale and purchase of the Sales Shares; “associates” has the meaning ascribed to it under the Listing Rules; “Australian Stock The Australian Stock Exchange Limited; Exchange” “Board” board of the Directors; “Bonus Warrant(s)” 251,800,000 warrants of the Company;

— 38 —

“Bonus Warrants Issue”
the issue of one Bonus Warrant for every five Rights Shares successfully subscribed by the Qualifying Shareholders which will entitle the Bonus Warrant holder to subscribe for new Shares at the Bonus Warrants Subscription Price;
“Bonus Warrants Subscription Price”
an initial subscription price of HK$0.30 per Share (subject to adjustment) upon exercise of one Bonus Warrant;
“Business Day”
a day (excluding Saturday, Sunday or any day on which a tropical cyclone warning signal no. 8 or above or a black rainstorm warning signal is hoisted in Hong Kong at any time between 9:00 a.m. and 5:00 p.m.) on which banks are generally open for business in Hong Kong;
“Circular Posting Date”
30 November 2006 or such other date as the Company and the Underwriter may agree in writing;
“Company” Shanghai Merchants Holdings limited, a company incorporated in Bermuda with limited liability and the issued shares of which are listed on the Main Board of the Stock Exchange;
“Completion Date”
the date on which the completion of the Acquisition Agreement will take place, being the fifth Business Day after the fulfilment of the last of the conditions set out in the sub-paragraph headed “Conditions precedent” in the paragraph headed “The Acquisition Agreement” in this announcement;
“Conditional Acquisition” the conditional acquisition of the Sale Shares, representing approximately 8.79% interest in Mount Gibson as at 7 November 2006 (Australian time) (subject to dilution effect, if any, from time to time contemplated by Mount Gibson issuing shares as a result of the unconditional takeover offer in respect of Aztec Resources Limited) by Fortune Desire Investments Limited pursuant to the terms and conditions of the Acquisition Agreement;
“connected person”

has the meaning ascribed to it under the Listing Rules;

“Consideration”
the consideration of HK$244,474,752 payable by the Group to the Vendors for the acquisition of the Sales Shares, representing approximately 8.79% interest in Mount Gibson as at 7 November 2006 (Australian time) (subject to dilution effect, if any, from time to time contemplated by Mount Gibson issuing shares as a result of the unconditional takeover offer in respect of Aztec Resources Limited) pursuant to the Acquisition Agreement;

— 39 —

“Directors”

the directors of the Company;

“EAF(s)”
form(s) of application for excess Rights Shares in the agreed form proposed to be issued to the Qualifying Shareholders;
“Excluded Shareholders”

Existing Shareholders whose registered address, as shown in the register of member of the Company at the close of business on the Record Date, are located in a jurisdiction outside Hong Kong, which the Directors have (having made such enquiry concerning the applicable legal and regulatory requirements thereof) concluded it expedient to exclude such Existing Shareholders from the Rights Issue and the Bonus Warrants Issue in accordance with the Bye-Laws;

“Final Acceptance Date”
8 January 2007 or such other date as the Company and the Underwriter may agree in writing;
“Group”

the Company and its subsidiaries;

“HKAS”
“HKICPA”

Hong Kong Accounting Standards issued by the HKICPA Hong Kong Institute of Public Certified Accountants;

“Independent Shareholders”
Shareholders other than the controlling shareholder of the Company, i.e. Profit Harbour and its associates;
“Majority Shareholders”

Profit Harbour and Shougang;

“Mount Gibson” Mount Gibson Iron Limited, a corporation incorporated under the laws of Australia, the shares of which are listed on the Australian Stock Exchange;
“Mr. Yue” Mr. Yue Jialin, the chairman and executive director of the Company. Mr. Yue is the sole shareholder of Profit Harbour and therefore deemed to be interested in 596,699,801 Shares held by it, representing approximately 47.39% of the existing issued share capital of the Company as at the date of this announcement pursuant to the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong);
“PAL(s)” the renounceable provisional allotment letter(s) to be issued to the Qualifying Shareholders in respect of the Rights Shares in the agreed form;
“Placing”

the placing of the Placing Shares at the Placing Price;

“Placing Agent” SHKIS “Placing Agreement” the placing agreement dated 9 November 2006 entered into between the Company and the Placing Agent in relation to the Placing;

— 40 —

“Placing Completion Date”
a day which is two (2) months from the date of the SGM (currently scheduled to be on or around 22 December 2006) where the specific mandate in relation to the Placing is approved and granted by the Independent Shareholders on a vote taken by way of poll at the SGM and at which the controlling shareholder (i.e. Profit Harbour) and its associates shall abstain from voting, if such day not being a Business Day, the preceding Business Day of such day;
“Placing Period” the period of two (2) months from the date of the SGM (currently scheduled to be on or around 22 December 2006) where the specific mandate in relation to the Placing is approved and granted by the Independent Shareholders on a vote taken by way of poll at the SGM and at which the controlling shareholder (i.e. Profit Harbour) and its associates shall abstain from voting and ending at 5:00 p.m. on the Business Day preceding the Placing Completion Date;
“Placing Price” HK$0.30 per Placing Share.
“Placing Shares” 800,000,000 new Shares issued by the Company, representing 31.77% of the existing issued share capital of the Company enlarged by the completion of the Rights Issue pursuant to the Placing Agreement;
“Profit Harbour”
Profit Harbour Investments Limited, a company incorporated in the British Virgin Islands with limited liability whose registered office is at P.O. Box 957, Offshore Incorporations Centre, Road Town, Tortola, British Virgin Islands, and is wholly and beneficially owned by Mr. Yue. As at the date of this announcement, Profit Harbour was interested in 596,699,801 Shares, representing approximately 47.39% of the existing issued share capital of the Company;
“Prospectus”
the prospectus to be issued by the Company relating to the Rights Issue and the Bonus Warrants Issue;
“Prospectus Posting Date”
22 December 2006 or such other date as the Company and the Underwriter may agree in writing;
“Purchaser”
Fortune Desire Investments Limited, a company incorporated with limited liability in the British Virgin Islands, with its registered office at P.O. Box 957, Offshore Incorporations Centre, Road Town, Tortola, British Virgin Islands and a direct wholly-owned subsidiary of the Company;
“Qualifying Shareholders”
Shareholders on the register of members of the Company on the Record Date other than the Excluded Shareholders;

— 41 —

“Record Date”

Friday, 22 December 2006 or such other date as the Company and the Underwriter may agree in writing, being the date by reference to which entitlements under the Rights Issue will be determined;
“Rights Issue” the proposed issue of the 1,259,000,000 Rights Shares at the Subscription Price on the basis of one Rights Share for every existing Share held on the Record Date;
“Rights Issue Documents” the Prospectus, PAL and EAF;
“Rights Share” the 1,259,000,000 Shares proposed to be issued pursuant to the Rights Issue;
“Sale Shares” 48,373,197 ordinary shares representing approximately 8.79% of interest in Mount Gibson as at 7 November 2006 (Australian time) (subject to dilution effect, if any, from time to time contemplated by Mount Gibson issuing shares as a result of the unconditional takeover offer in respect of Aztec Resources Limited) by the Group, to be sold as contemplated under the Acquisition Agreement;
“Settlement Date” the date falling three Business Days after the later of (a) Final Acceptance Date, and (b) the date on which the Company notifies the Underwriter of the final number of the Shares being underwritten or such other date as the Underwriter and the Company may agree in writing;
“SGM”
the special general meeting of the Shareholders of the Company to be convened at 10:00 a.m. on Friday, 22 December 2006 for the purposes of considering and, if thought fit, approving, among other things, the Acquisition Agreement, the Rights Issue and the Bonus Warrants Issue, the Placing of new Shares, the grant of general mandate, the change of the Company’s name, the increase of the authorised share capital of the Company and the grant of general mandate;
“Share(s)” ordinary share(s) of HK$0.10 each in the issued share capital of the Company;
“Shareholder(s)” holder(s) of the Share(s);
“SHK International”
Sun Hung Kai International Limited, a licensed corporation to carry out type 1 (dealing in securities) and type 6 (advising on corporate finance) regulated activities under the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong), which is not a connected person (as defined in the Listing Rules) of the Company;

— 42 —

“SHKIS” Sun Hung Kai Investment Services Limited, a licensed corporation under the SFO permitted to carry out Type 1 (dealing in securities) and Type 4 (advising on securities) regulated activities;
“Shougang” Shougang Holding (Hong Kong) Limited, a private company incorporated with limited liability in Hong Kong whose registered office is at 7th Floor, Bank of East Asia Harbour View Centre, 56 Gloucester Road, Wanchai, Hong Kong. As at the date of this announcement, Shougang was interested in 300,000,000 Shares, representing approximately 23.83% of the existing issued share capital of the Company;
“Stock Exchange” The Stock Exchange of Hong Kong Limited;
“Subscription Price” the subscription price of HK$0.30 per Rights Share pursuant to the Rights Issue;
“Underwriter” SHK International;
“Underwriting the underwriting agreement dated 8 November 2006 entered Agreement” into between the Company and the Underwriter in relation to the Rights Issue;
“Underwritten Shares” 362,300,199 Rights Shares, being the total number of Rights Shares to be issued pursuant to the Rights Issue less those Rights Shares agreed and undertaken to be taken up by Profit Harbour and Shougang;
“Vendors” Honest Opportunity Limited and New Fortress Investments Limited, both being companies incorporated with limited liability in the British Virgin Islands; and each of them being individually referred to as “Vendor”;
“2006 AGM” the annual general meeting of the Company held on 23 May 2006;
“A$” Australian dollar(s), the lawful currency of Australia;

— 43 —

“HK$” Hong Kong dollar(s), the lawful currency of Hong Kong; and “%” per cent.

On behalf of the Board of Shanghai Merchants Holdings Limited Yue Jialin Chairman

Hong Kong, 9 November 2006

As at the date of this announcement, the directors of the Company are as follows:

Executive Directors:

Mr. Yue Jialin (Chairman) Mr. Lau Yau Cheung (Chief Executive Officer)

Independent non-executive directors

Mr. Wong Wing Kuen, Albert Mr. Tsui Robert Che Kwong Mr. Yang Weiming Mr. Michael J. Bogue

* For identification purpose only

Please also refer to the published version of this announcement in The Standard.

— 44 —

AI assistant

Persistence Gold Group Ltd — Capital/Financing Update 2006

50623_rns_2006-11-10_a4edd895-4d12-45ad-8e32-c18c7a4d286c.pdf

SHANGHAI MERCHANTS HOLDINGS LIMITED

CONDITIONAL ACQUISITION

RIGHTS ISSUE AND THE BONUS WARRANTS ISSUE

The Rights Issue is conditional and is fully underwritten. The Bonus Warrants Issue is conditional on the completion of the Rights Issue.

Warning of the risks of dealing in the Shares and the Rights Shares

PLACING OF NEW SHARES

LISTING RULES IMPLICATIONS

CHANGE OF NAME

INCREASE OF AUTHORISED SHARE CAPITAL

REFRESHMENT OF GENERAL MANDATES TO ISSUE SHARES AND REPURCHASE SHARES

GENERAL

SUSPENSION AND RESUMPTION OF TRADING

CONDITIONAL ACQUISITION

Introduction

The Acquisition Agreement

Date

Parties

Assets to be acquired

Conditions precedent

Completion

Consideration

Source of funding

Information on the Company

Information on the Vendors

Information on the Purchaser

Information on Mount Gibson

REASONS FOR AND BENEFITS OF THE CONDITIONAL ACQUISITION

Tallering Peak Operations

Extension Hill Project

THE RIGHTS ISSUE AND THE BONUS WARRANTS ISSUE

The Rights Issue is conditional and is fully underwritten. The Bonus Warrants Issue is conditional on the completion of the Rights Issue.

Issue statistics of Rights Issue

Subscription Price for Rights Shares

Basis of provisional allotment of Rights Shares

Number of Bonus Warrants

Subscription Period of the Bonus Warrants

Bonus Warrants Subscription Price

Qualifying Shareholders

Rights of the Overseas Shareholders

Status of the Rights Shares and the Shares to be issued upon exercise of the Bonus Warrants

Share certificates for the Rights Shares and the Bonus Warrants

Fractional entitlements

Application for excess Rights Shares

Conditions of the Rights Issue and the Bonus Warrants Issue

Application for listing of the Rights Shares, the Bonus Warrants and the Shares that may fall to be issued upon the exercise of the Bonus Warrants on the Stock Exchange

Underwriting agreement

Irrevocable Undertakings from Profit Harbour and Shougang

Termination of the Underwriting Agreement

Warning of the risks of dealing in the Shares and the Rights Shares

REASONS FOR AND BENEFITS OF THE RIGHTS ISSUE AND THE BONUS WARRANTS ISSUE

SHAREHOLDING STRUCTURE BEFORE AND AFTER THE RIGHTS ISSUE AND THE BONUS WARRANTS ARE EXERCISED IN FULL

Maintenance of the listing of the Shares after Rights Issue and the Bonus Warrants Issue

The Stock Exchange has stated that if, at the date of completion of the Rights Issue, less than 25% of the Shares are held by the public or if the Stock Exchange believes that:

PLACING OF 800,000,000 NEW SHARES

Placing Agreement made between the Company and the Placing Agent

The Placing is conditional and may or may not proceed. Accordingly, shareholders and prospective investors are reminded to exercise extreme caution when trading in the Shares of the Company.

Termination of the Placing Agreement

If SHKIS terminates or rescinds the Placing Agreement, the Placing will not proceed.

SHAREHOLDING STRUCTURE BEFORE AND AFTER THE COMPLETION OF THE RIGHTS ISSUE, THE BONUS WARRANTS ISSUE AND THE PLACING

Maintenance of the listing of the Shares after the Placing

REASONS FOR AND BENEFITS OF THE PLACING

FUND RAISING ACTIVITIES OF THE COMPANY FOR THE 12 MONTHS ENDING ON THE DATE OF THIS ANNOUNCEMENT

Application for listing of the Placing Shares on the Stock Exchange

LISTING RULES IMPLICATIONS

CHANGE OF NAME

INCREASE OF AUTHORISED SHARE CAPITAL

REFRESHMENT OF GENERAL MANDATES TO ISSUE SHARES AND REPURCHASE SHARES

Refreshment of Previous Issue Mandate

Grant of New Issue Mandate

Grant of New Repurchase Mandate

GENERAL

SUSPENSION AND RESUMPTION OF TRADING

DEFINITIONS

On behalf of the Board of Shanghai Merchants Holdings Limited Yue Jialin Chairman

More from Persistence Gold Group Ltd

Persistence Gold Group Ltd Capital/Financing Update 2006