Timeless Resources Holdings Limited — Proxy Solicitation & Information Statement 2012

Apr 12, 2012

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

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

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

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

This circular appears for information purposes only and does not constitute an invitation or offer to acquire, purchase, or subscribe for securities of the Company.

Timeless Software Limited

(incorporated in Hong Kong with limited liability)

(Stock code: 8028)

VERY SUBSTANTIAL ACQUISITION IN RELATION TO

A 51% EQUITY INTEREST IN GOFFERS MANAGEMENT LIMITED

Financial adviser to Timeless Software Limited

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Shenyin Wanguo Capital (H.K.) Limited

A notice convening the extraordinary general meeting of the Company to be held at Conference Hall 06, 2/F, Lakeside 2, No.10 Science Park West Avenue, Hong Kong Science Park, Shatin, New Territories, Hong Kong on Monday, 30 April 2012 at 3:00 p.m. is set out on pages N-1 to N-2 of this circular. Whether or not you are able to attend the meeting in person, you are requested to complete and return the accompanying form of proxy to the Company’s share registrar, Computershare Hong Kong Investor Services Limited at 17M Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong, as soon as possible and in any event not less than 48 hours before the time appointed for the holding of the extraordinary general meeting of the Company or any adjournment thereof. Completion and return of the form of proxy shall not preclude you from attending and voting at the extraordinary general meeting of the Company or any adjourned meeting thereof should you so wish.

12 April 2012

CHARACTERISTICS OF GEM

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

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

— i —

CONTENTS

			Page
Definitions . . . . . . .		. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
**Letter from the **	Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		5
Appendix I	—	Further information on the Acquisition and the Target Group . .	I-1
Appendix II-A	—	Accountants’ report on the Target Group . . . . . . . . . . . . . . . . . .	IIA-1
Appendix II-B	—	Accountants’ report on Xinjiang Tianmu . . . . . . . . . . . . . . . . . . .	IIB-1
Appendix III	—	Unaudited pro forma financial information of the Enlarged
		Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	III-1
Appendix IV	—	Financial information of the Group and management discussion
		and analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	IV-1
Appendix V	—	Competent Person’s Report on the Target Mines . . . . . . . . . . . .	V-1
Appendix VI	—	Valuation Report on the Target Mines . . . . . . . . . . . . . . . . . . . . .	VI-1
Appendix VII-A —		Valuation report on the properties of the Target Group . . . . . . .	VIIA-1
**Appendix VII-B **	—	Valuation report on the properties of the Group . . . . . . . . . . . . .	VIIB-1
Appendix VIII	—	General information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	VIII-1
Notice of EGM. . . .		. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	N-1

— ii —

DEFINITIONS

Unless the context otherwise requires, the following expressions shall have the following meanings in this circular:

• “Acquisition”

the proposed acquisition of the Sale Shares by the Purchaser pursuant to the Agreement

• “Agreement”

• the sale and purchase agreement entered into among the Purchaser, the Vendor and the Guarantor on 7 September 2011 (supplemented and amended by the Supplemental Agreement) in relation to the Acquisition

• “associates”

• has the same meaning ascribed thereto in the GEM Listing Rules

• “Board”

the board of Directors

• “China” or “PRC”

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

• “Company”

• Timeless Software Limited, a company incorporated in Hong Kong with limited liability, the Shares of which are listed on GEM

• “Competent Person’s Report”

• the technical report on the Target Mines in Appendix V to this circular prepared by Mr. Philip Alan Jones in accordance with the JORC Code and in compliance with the requirements under Chapter 18A of the GEM Listing Rules

• “Completion”

• completion of the sale and purchase of the Sale Shares in accordance with the terms and conditions of the Agreement

• “connected persons”

• has the same meaning ascribed thereto in the GEM Listing Rules

• “Consideration” HK$103,500,000 (subject to adjustment) payable in the manner as set out in the Agreement

• “Consideration Shares” 270,000,000 new Shares to be allotted and issued pursuant to the Agreement

• “Directors” directors of the Company

• “EGM”

the extraordinary general meeting of the Company to be convened and held on Monday, 30 April 2012 for the purpose of considering and, if thought fit, approving the Agreement and the transactions contemplated thereunder (including, but not limited to, the allotment and issue of the Consideration Shares and the issue of the Promissory Note)

— 1 —

DEFINITIONS

“Enlarged Group”	together, the Group and the Target Group
“GEM”	the Growth Enterprise Market of the Stock Exchange
“GEM Listing Rules”	the Rules Governing the Listing of Securities on GEM
“Goffers Resources”	Goffers Resources Limited (高富資源有限公司), a company
	incorporated in Hong Kong with limited liability
“Group”	the Company and its subsidiaries
“Guarantor”	Mr. Tan, who irrevocably and unconditionally guarantees to
	the Purchaser the due and punctual performance of the
	Vendor’s obligations under the Agreement
“HK$”	Hong Kong dollars, the lawful currency of Hong Kong
“HLB”	HLB Hodgson Impey Cheng, being the reporting accountants
	of the Company
“Hong Kong”	the Hong Kong Special Administrative Region of the PRC
“Issue Price”	the issue price of HK$0.15 per Consideration Share
“JORC Code”	the Australasian Code for Reporting of Exploration Results,
	Mineral Resources and Ore Reserves
“Kangshun BVI”	Kangshun Investments Limited, a company incorporated in
	the British Virgin Islands with limited liability
“Kangshun HK”	Kangshun HK Limited (康順香港有限公司), a company
	incorporated in Hong Kong with limited liability
“kg”	kilogram
“Latest Practicable Date”	5 April 2012, being the latest practicable date prior to the
	printing of this circular for ascertaining certain information
	for inclusion in this circular
“LCH”	LCH (Asia-Pacific) Surveyors Limited, being an independent
	professional surveyor in connection with the valuation of the
	property interests held by the Group
“Mr. Tan”	Mr. Felipe Tan (陳奕輝先生), the major shareholder of the
	Vendor and a Shareholder directly interested in approximately
	1.44% of the issued share capital of the Company as at the
	Latest Practicable Date

— 2 —

DEFINITIONS

“Promissory Note” the interest bearing promissory note in the principal amount of HK$63,000,000 secured by a share charge over the Sale Shares in favour of the Vendor of which HK$3,000,000 shall be repayable on the date falling three months from the date of issue and HK$60,000,000 shall be repayable in six equal instalments on each anniversary of the date of issue to be issued by the Purchaser for the purpose of settling part of the Consideration “Purchaser” Time Kingdom Limited, a company incorporated in the British Virgin Islands with limited liability and a wholly-owned subsidiary of the Company “RMB” Renminbi, the lawful currency of the PRC “Roma Appraisals” Roma Appraisals Limited, being an independent valuer in connection with the valuation of the property interests held by the Target Group “Sale Shares” 102 shares of US$1.00 each in the Target Company, representing 51% of the entire issued share capital of the Target Company “SFO” Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong), as amended, supplemented or otherwise modified from time to time “Share(s)” ordinary share(s) of HK$0.05 each in the share capital of the Company “Shareholder(s)” holder(s) of the issued Shares “Stock Exchange” The Stock Exchange of Hong Kong Limited “Supplemental Agreement” the supplemental agreement entered into among the Purchaser, the Vendor and the Guarantor on 10 April 2012 to amend certain terms and conditions of the Agreement “Target Company” Goffers Management Limited, a company incorporated in the British Virgin Islands with limited liability and directly and wholly-owned by the Vendor as at the Latest Practicable Date “Target Group” the Target Company and its subsidiaries “Target Mines” collectively, Heishiliang (黑石梁) gold mine, Hongshannan (紅山南) gold mine, Tuchushan (突出山) iron mine and Baishiquan (白石泉) nickel-copper mine as referred to in the Competent Person’s Report and the Valuation Report

— 3 —

DEFINITIONS

“US$”		United States dollars, the lawful currency of the United States
		of America
“VALMIN	Code”	the Australian Code for the Technical Assessment and
		Valuation of Mineral and Petroleum Assets and Securities for
		Independent Expert Reports
“Valuation	Report”	the valuation report on the Target Mines in Appendix VI to
		this circular prepared by Mr. Philip Alan Jones in accordance
		with the VALMIN Code and in compliance with the
		requirements under Chapter 18A of the GEM Listing Rules
“Vendor”		Starmax Holdings Limited, a company incorporated in the
		British Virgin Islands with limited liability
“Xinjiang	Tianmu”	新疆天目礦業資源開發有限公司(Xinjiang Tianmu Mineral
		Resources Development Co. Ltd.), a company established in
		the PRC with limited liability
“%”		per cent.

— 4 —

LETTER FROM THE BOARD

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Timeless Software Limited

(incorporated in Hong Kong with limited liability)

(Stock code: 8028)

Executive Directors: Mr. CHENG, Kin Kwan (Chairman & Chief Executive Officer) Mr. LAW, Kwai Lam Ms. LEUNG, Mei Sheung Eliza Ms. ZHENG, Ying Yu Mr. FUNG, Chun Pong Louis Mr. LIAO, Yun

Registered office: Units 111-113, 1st Floor Building 9, Phase One Hong Kong Science Park Tai Po, Hong Kong

Independent non-executive Directors:

Ms. TSANG, Wai Chun Marianna Mr. CHAN, Mei Ying Spencer Mr. LAM, Kwai Yan

12 April 2012

To the Shareholders

Dear Sir or Madam,

VERY SUBSTANTIAL ACQUISITION IN RELATION TO

A 51% EQUITY INTEREST IN GOFFERS MANAGEMENT LIMITED

INTRODUCTION

On 7 September 2011, the Board announced that on even date after trading hours, the Purchaser entered into the Agreement with the Vendor and Mr. Tan (as the Guarantor) pursuant to which the Vendor has conditionally agreed to sell and the Purchaser has conditionally agreed to purchase the Sale Shares, representing 51% of the issued share capital of the Target Company, for HK$103,500,000 (subject to adjustment), which shall be satisfied at Completion by the Purchaser procuring the Company to issue the Consideration Shares to the Vendor at the Issue Price of HK$0.15 each to the Vendor and by the Purchaser issuing the Promissory Note to the Vendor.

— 5 —

LETTER FROM THE BOARD

On 29 December 2011, the Vendor, the Purchaser and the Guarantor agreed in writing to extend the latest date for the fulfillment of the conditions for Completion to 30 June 2012. In view of the update on the Valuation Report from the draft valuation report on the Target Mines available to the Company at the time when the Acquisition was announced on 7 September 2011 and the Completion taking longer than originally expected, on 10 April 2012, the Board announced that on even date after trading hours, the Vendor, the Purchaser and the Guarantor entered into the Supplemental Agreement to: (i) amend conditions (v) and (vi) as set out in the section headed “Letter from the Board — The Agreement — Conditions precedent” in this circular; (ii) change the maximum aggregate amount of the dividends which could be declared by the Target Company to the Vendor and by Xinjiang Tianmu to the minority shareholder of Xinjiang Tianmu to RMB60.5 million; (iii) change the settlement arrangement of the consideration as set out in the section headed “Letter from the Board — The Agreement — The Consideration” in this circular; (iv) change the repayment terms of the Promissory Note as set out in the section headed “Letter from the Board — Promissory Note” in this circular; and (v) change the period covered for the gold sales guarantee as set out in the section headed “Letter from the Board — The Agreement — Gold sales guarantee” in this circular. For further details regarding the Supplemental Agreement, please refer to the announcement of the Company dated 10 April 2012.

The Consideration Shares are subject to a lock-up period of six months from the date of Completion.

Xinjiang Tianmu is principally engaged in the exploration and exploitation of gold, iron and nickel-copper mines in Xinjiang, PRC and the processing and sale of the outputs from the mines.

The purpose of this circular is to provide you with, among other things, (i) further details on the Acquisition and the Target Group including the Target Mines; (ii) the financial information of the Group, Xinjiang Tianmu and the Target Group; (iii) the Competent Person’s Report on the Target Mines; (iv) the Valuation Report on the Target Mines; (v) the valuation reports on the properties of the Target Group and the Group; and (vi) a notice of EGM at which an ordinary resolution will be proposed to consider and, if thought fit, approve the Agreement and the transactions contemplated thereunder.

THE AGREEMENT

Date:

7 September 2011 (supplemented and amended by the Supplemental Agreement on 10 April 2012)

Parties:

• (i) Starmax Holdings Limited, as the Vendor

• (ii) Time Kingdom Limited, a wholly-owned subsidiary of the Company, as the Purchaser

• (iii) Mr. Tan, as the Guarantor

The Vendor is an investment holding company and directly owns the entire issued share capital of the Target Company. The Vendor is beneficially owned as to 90% by Mr. Tan and as to 10% by Brilliant Shine Group Limited. Mr. Tan was introduced to the Company via Mr. Louis Fung (an executive Director) in around March 2011 when the unspecific potential co-operation between the Vendor and the Company was contemplated.

— 6 —

LETTER FROM THE BOARD

As at the Latest Practicable Date, Mr. Tan was a Shareholder directly interested in approximately 1.44% of the issued share capital of the Company. Mr. Tan acquired the Shares between 2006 and 2012 on the open market. Since the announcement of the Acquisition by the Company on 7 September 2011, Mr. Tan has acquired 12,068,000 Shares on the open market. Save as disclosed, to the best of the Directors’ knowledge, information and belief having made all reasonable enquiries, the Vendor and its ultimate beneficial owners are third parties independent of the Company and its connected persons.

Assets to be acquired:

The Vendor has conditionally agreed to sell and the Purchaser has conditionally agreed to purchase the Sale Shares, representing 51% of the issued share capital of the Target Company, free from all encumbrances and from all third party rights.

The Consideration:

HK$103,500,000, which shall be satisfied at Completion:

• (i) as to HK$40,500,000 by the Purchaser procuring the Company to allot and issue 270,000,000 Consideration Shares to the Vendor credited as fully paid at the Issue Price of HK$0.15 per Consideration Share to the Vendor; and

• (ii) as to HK$63,000,000 by the Purchaser issuing the Promissory Note in the principal amount of HK$63,000,000 to the Vendor.

The final Consideration has been agreed among the parties to the Agreement after arm’s length negotiations primarily with reference to (i) the attributable interests of 26.01% in the Target Mines being acquired by the Group; (ii) the aggregate value of HK$366,000,000 as quoted in the Valuation Report on the Target Mines as at 1 December 2011 prepared by Mr. Philip Alan Jones in accordance with the VALMIN Code, based on the discounted cash flow approach, which takes into account, among other things, (a) the Competent Person’s Report on the Target Mines as at 1 December 2011 prepared by Mr. Philip Alan Jones in accordance with the JORC Code; (b) the market trends of the relevant mining industries in the PRC and worldwide; (c) the economic outlook in the PRC and worldwide; and (d) the operations, performance and financial information of various listed companies[#] engaged in the development, exploration and exploitation of mineral properties mainly in the PRC, which facilitate Mr. Philip Alan Jones to select comparable companies in the valuation on the Target Mines; (iii) the financial information of Xinjiang Tianmu in Appendix II-B to this circular (in particular, the net asset value of Xinjiang Tianmu (excluding its exploration and evaluation assets, mining rights and its properties) of approximately HK$76.45 million as at 31 December 2011); (iv) the fair market value of RMB6.2 million (i.e. HK$7.57 million) for the properties of the Target Group as stated in Appendix

The various listed companies engaged in the development, exploration and exploitation of mineral properties are namely Zhaojin Mining Industry Company Limited (stock code: 1818.HK), Zijin Mining Group Company Limited (stock code: 2899.HK), Lingbao Gold Company Limited (stock code: 3330.HK), Sinocop Resources (Holdings) Limited (stock code: 476.HK), China Vanadium Titano-Magnetite Mining Company Limited (stock code: 893.HK), Shandong Jinling Mining Company Limited (stock code: 000655.CH), Xinjiang Xinxin Mining Industry Co., Limited (stock code: 3833.HK), Mining and Metallurgical Company Norilsk Nickel (stock code: GMKN.RM) and GobiMin Inc. (stock code: GMN.V).

— 7 —

LETTER FROM THE BOARD

VII-A to this circular; (v) the proposed dividend of approximately RMB44.8 million (i.e. HK$54.7 million) payable to Xinjiang Tianmu’s shareholders on record as at 31 December 2011 and the proposed dividend of approximately RMB13.0 million (i.e. HK$15.9 million) (net of 5% withholding tax) payable by the Target Company to the Vendor for the year ended 31 December 2011; and (vi) the gold sales guarantee as disclosed in the section headed “Letter from the Board — The Agreement — Gold sales guarantee” in this circular.

For the avoidance of doubt, the Valuation Report on the Target Mines prepared by Mr. Philip Alan Jones took into account the Target Mines only, namely Heishiliang (黑石梁) gold mine, Hongshannan (紅山南) gold mine, Tuchushan (突出山) iron mine and Baishiquan (白石泉) nickel-copper mine. As at 1 December 2011, the aggregated value of the Target Mines was HK$366,000,000 as quoted in the Valuation Report in Appendix VI to this circular.

Below illustrates the value of the Target Group taking into account, among other things, the Valuation Report on the Target Mines and the valuation report on the properties of the Target Group:

HK$ million HK$ Net asset value of Xinjiang Tianmu as at 31 December 2011 extracted from the accountants’ report set out in Appendix II-B to this circular (“NAV”) Add: Aggregate value of the Target Mines as quoted in the Valuation Report 366.00 Less: - Exploration and evaluation assets recorded in the NAV (34.57) - Mining rights recorded in the NAV (10.17) Add: Properties of the Target Group at fair market value of RMB6.2 million as quoted in the valuation report set out in Appendix VII-A to this circular 7.57 Less: Land cost of Xinjiang Tianmu recorded in the NAV (0.15) Less: Dividend proposed to be declared for the year ended 31 December 2011 to: - the minority shareholder of Xinjiang Tianmu (i.e. approximately RMB44.8 million x 49%) (26.82) - the Vendor by the Target Company (inclusive of 5% withholding tax) (16.75) Adjusted NAV Attributable interest of 26.01% in the adjusted NAV

million 121.34 321.26 7.42 (43.57) 406.45 105.72

— 8 —

LETTER FROM THE BOARD

The Consideration of HK$103.5 million represents a discount of approximately 2.1% to the Company’s attributable interest in Xinjiang Tianmu of HK$105.72 million as illustrated above, which the Directors are of the view is fair and reasonable and in the interests of the Shareholders and the Company as a whole.

Xinjiang Tianmu declared dividends of approximately HK$8.8 million and HK$29.6 million to its shareholders on record as at 31 December 2009 and 2010 respectively, and proposed to declare a dividend of approximately RMB44.8 million (i.e. HK$54.7 million) to its shareholders on record as at 31 December 2011. On the other hand, the Target Company declared dividends of approximately HK$2.0 million and HK$12.7 million to its shareholder i.e. the Vendor for the years ended 31 December 2009 and 2010 respectively, and proposed to declare a dividend of approximately RMB13.0 million (i.e. HK$15.9 million) (net of 5% withholding tax) to the Vendor for the year ended 31 December 2011. For further details regarding the dividends of Xinjiang Tianmu and the Target Company, please refer to notes 14 and 26 to the accountants’ report on Xinjiang Tianmu as set out in Appendix II-B to this circular and note 13 to the accountants’ report on the Target Group as set out in Appendix II-A respectively.

Pursuant to the terms of the Agreement after arm’s length negotiations among the parties, the aggregate amount of the dividends declared by the Target Company to the Vendor and by Xinjiang Tianmu to the minority shareholder of Xinjiang Tianmu shall not exceed RMB60.5 million after the date of the Agreement and before Completion, which shall cover the dividends declared or to be declared by the Target Company to the Vendor and by Xinjiang Tianmu to the minority shareholder of Xinjiang Tianmu for the years ended 31 December 2010 and 31 December 2011 and other subsequent periods before Completion.

The discounted cash flow approach has been adopted for the purpose of the Valuation Report because it takes into account the expected cash flows specific to the Target Mines reflecting their natures and operations and thus the aggregate value of the Target Mines. Mr. Philip Alan Jones has confirmed that the key underlying assumptions in the valuation include:

• the Target Group has free and uninterrupted rights to operate the Target Mines throughout the period until all reserves of the Target Mines are fully exploited and subject to no land premium or any payment to the government of substantial amount;

• all relevant legal approvals and business certificates or licences to operate the business in the localities in which the Target Mines operate or intend to operate would be officially obtained and renewable upon expiry;

• the Target Mines will be operating as planned;

• there exist reliable and adequate transportation network and capacity for processing the mining products;

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LETTER FROM THE BOARD

• there will be no major changes in the current taxation laws in the localities in which the Target Mines operate or intend to operate and the rates of tax payable shall remain unchanged and all applicable laws and regulations will be complied with;

• based on the recent 12-month gold metal prices as at the date of valuation provided by Shanghai Gold Exchange as extracted from Bloomberg, the average gold price of RMB325 per gram was adopted as the projected gold price in 2011. Steady metal price (no price growth over time) has been adopted in the projection;

• by utilizing the methodologies stated in the feasibility report of Tuchushan (突出山) iron mine and the sales agreements signed by Xinjiang Tianmu, the price paid per tonne of iron ore is RMB282 per tonne inclusive of transportation cost and 17% value added tax. Steady ore price (no price growth over time) has been adopted in the projection;

• the assumptions for the marketability and the profitability of the nickel-copper ore at Baishiquan (白石泉) are reasonable as the Xinjiang Shaquan Nickel and Copper Mine near Baishiquan (白石泉), where similar ore is being mined, has been operating profitably for several years;

• by utilizing the methodologies and assumptions stated in the feasibility report of Baishiquan (白石泉) nickel-copper mine as well as taking the general market practice into consideration, the selling price of the nickel-copper ore with about 0.52% nickel content and 0.34% copper content being estimated as RMB573 per tonne is reasonable. The price paid for concentrates is reckoned by concentrate grade, the relevant metal prices and a price discount factor that reflects smelter’s costs and other charges such as transportation and milling costs. Steady ore price (no price growth over time) has been adopted in the projection;

• steady operating costs (no cost growth over time) have been adopted in the projection;

• as the residual values of the plant and equipment for the Target Mines could not be reliably estimated at the end of the mine lives, their residual values have not been considered in the valuation;

• there will be no major changes in the political, legal, economic or financial conditions in the localities in which the Target Mines operate or intend to operate, which would adversely affect the revenues attributable to and the profitability of the Target Mines; and

• interest rates and exchange rates in the localities for the operations of the Target Mines will not differ materially from those presently prevailed.

Gold sales guarantee:

The Vendor irrevocably warrants and guarantees to the Purchaser that the total actual and completed sales of gold by Xinjiang Tianmu for the 12 months from 1 July 2012 to 30 June 2013 shall not be less than 282 kg (the “ Guaranteed Sales ”).

— 10 —

LETTER FROM THE BOARD

If the total actual and completed sales of gold by Xinjiang Tianmu for the 12 months ending 30 June 2013 (the “ Actual Sales ”) as shown in the guarantee certificate provided by auditors are less than the Guaranteed Sales, then the Vendor shall compensate and pay the Purchaser in cash on a dollar to dollar basis within five business days of the date of such auditors’ guarantee certificate in an amount calculated as follows:

A = (Guaranteed Sales — Actual Sales) x 51% x 51% x HK$124,000 per kg

where A is the amount the Vendor shall pay the Purchaser in cash on a dollar to dollar basis.

The actual sales volume of gold for the year ended 31 December 2011 was about 350 kg. The amount of HK$124,000 per kg has been arrived at after arm’s length negotiations among the parties to the Agreement with reference to the net profit per kg sale of gold of Xinjiang Tianmu for the year ended 31 December 2010 with an adjustment for an increase in the enterprise income tax rate in the PRC for the year ending 31 December 2012. The maximum amount payable by the Vendor under the gold sales guarantee is HK$9,095,176.80.

Conditions precedent:

Completion is conditional upon and subject to:

• (i) the Purchaser being satisfied with the results of the due diligence review to be conducted on the Target Group;

• (ii) all necessary consents, licences (whereby the exploration and exploitation licences which shall be governed by condition (xii) hereunder) and approvals required to be obtained on the part of the Vendor and the Target Group in respect of the Agreement and the transactions contemplated thereunder having been obtained and remain in full force and effect;

• (iii) all necessary consents, licences and approvals required to be obtained on the part of the Purchaser in respect of the Agreement and the transactions contemplated thereunder having been obtained and remain in full force and effect;

• (iv) the obtaining of a legal opinion from a firm of PRC legal advisers appointed by the Purchaser in relation to the Agreement and transactions contemplated thereunder;

• (v) the obtaining of the Valuation Report showing the valuation of the Target Mines to be not less than HK$366,000,000;

• (vi) the obtaining of the Competent Person’s Report indicating that the Target Mines have an estimated resources portfolio of no less than:

• 150,000 tonnes of measured and indicated gold ore resources;

• 329,000 tonnes of measured and indicated iron ore resources; and

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LETTER FROM THE BOARD

• 823,000 tonnes of measured and indicated nickel and copper ore resources;

• (vii) the issue of a circular by the Company in relation to the Acquisition as required under the GEM Listing Rules;

• (viii) the passing by the Shareholders at the EGM to be convened and held of an ordinary resolution to approve the Agreement and the transactions contemplated thereunder, if so required under the GEM Listing Rules (including but not limited to the allotment and issue of the Consideration Shares and the issue of the Promissory Note);

• (ix) the Listing Committee of the Stock Exchange granting listing of and permission to deal in the Consideration Shares;

• (x) the warranties provided by the Vendor under the Agreement remaining true and accurate in all respects;

• (xi) the Purchaser being satisfied that there has not been any material adverse change in respect of any member of the Target Group since the date of the Agreement; and

• (xii) exploration and exploitation licences in relation to the mines held by Xinjiang Tianmu being valid and subsisting and in full force and effect or applications for extension of the validity periods of the same having been duly filed with the relevant governmental authority.

The Purchaser may at its absolute discretion at any time waive in writing any of conditions (i), (iv) and (x) (to the extent it is capable of being waived) and such waiver may be made subject to such terms and conditions as are determined by the Purchaser. Conditions (ii), (v), (vi), (xi) and (xii) are incapable of being waived by the Purchaser. Conditions (iii), (vii), (viii) and (ix) are incapable of being waived by the Vendor. If the conditions set out above have not been satisfied (or as the case may be, waived) on or before 4:00 p.m. on 30 June 2012, or such later date as the Vendor and the Purchaser may agree, the Agreement shall cease and determine and neither party shall have any obligations and liabilities towards each other thereunder save for any antecedent breaches of the terms of the Agreement. As at the date of this circular, conditions (v), (vi) and (vii) have been satisfied.

For the due diligence purposes, the Group has reviewed (i) the draft legal opinion on Xinjiang Tianmu as of the Latest Practicable Date provided by the legal advisers of the Company as to the PRC laws which covers, among other things, the establishment of Xinjiang Tianmu and all the exploration and exploitation licences held by Xinjiang Tianmu; (ii) the financial information of the Target Group and Xinjiang Tianmu for the four years ended 31 December 2008, 2009, 2010 and 2011; (iii) the Valuation Report on the Target Mines prepared by Mr. Philip Alan Jones; (iv) the Competent Person’s Report on the Target Mines prepared by Mr. Philip Alan Jones; and (v) the draft valuation report and the draft competent person’s report on the Target Mines as at 30 June 2011 prepared by Roma Appraisals and Roma Oil and Mining Associates Limited respectively.

As mentioned in the section headed “Target Group and the mines — Licences and permits” in Appendix I to this circular, the production safety permits for Heishiliang (黑石梁) gold mine and Hongshannan (紅山南) gold mine have expired and the applications for the extension of the production

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LETTER FROM THE BOARD

safety permits for these two mines are pending the approval by the relevant government authority in the PRC. Nevertheless, the legal advisers of the Company as to the PRC laws have advised that the risk of being held liable by the government for the continuing production in Heishiliang (黑石梁) gold mine and Hongshannan (紅山南) gold mine when the government is still processing the extension applications for the production safety permits is low and it is unlikely to have any material impact on the business operations of Heishiliang (黑石梁) gold mine and Hongshannan (紅山南) gold mine. The Company therefore considers that the pending applications for the production safety permits for Heishiliang (黑石梁) gold mine and Hongshannan (紅山南) gold mine will not affect the fulfillment of condition (ii) above.

Completion:

Completion shall take place on the date of falling two business days after the fulfillment (or waiver) of the conditions precedent to the Agreement, or such later date as the Vendor and the Purchaser may agree.

CONSIDERATION SHARES

The Consideration Shares represent (i) approximately 20.67% of the existing issued share capital of the Company; and (ii) approximately 17.13% of the issued share capital of the Company as enlarged by the allotment and issue of the Consideration Shares.

The Issue Price of HK$0.15 represents:

• (i) a premium of approximately 13.6% over the closing price of HK$0.132 per Share as quoted on the Stock Exchange on 5 April 2012, being the Latest Practicable Date;

• (ii) a premium of approximately 47.1% over the closing price of HK$0.102 per Share as quoted on the Stock Exchange on 7 September 2011, being the last trading day immediately prior to the entering into of the Agreement;

• (iii) a premium of approximately 54.6% over the average closing price of HK$0.097 per Share for the last five consecutive trading days up to and including 7 September 2011, being the last trading day immediately prior to the entering into of the Agreement;

• (iv) a premium of approximately 61.3% over the average closing price of approximately HK$0.093 per Share for the last ten consecutive trading days up to and including 7 September 2011, being the last trading day immediately prior to the entering into of the Agreement;

• (v) a premium of approximately 92.3% over the average closing price of approximately HK$0.078 per Share for the last three months up to and including 7 September 2011, being the last trading day immediately prior to the entering into of the Agreement;

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LETTER FROM THE BOARD

• (vi) a premium of approximately 70.5% over the average closing price of approximately HK$0.088 per Share for the last six months up to and including 7 September 2011, being the last trading day immediately prior to the entering into of the Agreement;

• (vii) a premium of approximately 61.3% over the average closing price of approximately HK$0.093 per Share for the last 12 months up to and including 7 September 2011, being the last trading day immediately prior to the entering into of the Agreement;

• (viii) a premium of approximately 108.3% over the net asset value attributable to the Shareholders per Share as at 31 March 2011 of approximately HK$0.072 based on the audited consolidated financial statements of the Company for the year ended 31 March 2011 and the total number of Shares in issue as at the Latest Practicable Date; and

• (ix) a premium of approximately 111.3% over the net asset value attributable to the Shareholders per Share as at 30 September 2011 of approximately HK$0.071 based on the unaudited consolidated financial statements of the Company for the six months ended 30 September 2011 and the total number of Shares in issue as at the Latest Practicable Date.

The Consideration Shares will be allotted and issued pursuant to the specific mandate to be sought at the EGM and will be allotted and issued on the date of Completion. The Consideration Shares, when allotted and issued, shall rank pari passu in all respects with the Shares in issue on the date of allotment and issue of the Consideration Shares including the right to all dividends, distributions and other payments made or to be made, on the record date which falls on or after the date of such allotment and issue.

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

Non-disposal undertaking:

The Vendor irrevocably and unconditionally undertakes to the Purchaser, subject to Completion that without the prior written consent of the Purchaser, it will not dispose of any of the Consideration Shares or create or permit to subsist any encumbrance or other security interest whatsoever on or over or in respect of all or any of the Consideration Shares or otherwise purport to deal with the beneficial or economic interest therein (including but not limited to its voting rights) or any right relating thereto or enter into any agreement to dispose of or otherwise create any options, rights, interests or encumbrances in respect of any of the Consideration Shares at any time during the period from and including the date of Completion up to the date falling six months after the date of Completion.

PROMISSORY NOTE

The Promissory Note is in the principal amount of HK$63,000,000 of which HK$3,000,000 is repayable on the date falling three months from the date of issue and HK$60,000,000 is repayable in six equal instalments on each anniversary of the date of issue. The Promissory Note bears interest at 3% per annum payable on each anniversary of the date of issue. In the event the Purchaser defaults on repayment of the principal or the interest under the terms of the Promissory Note, the amount

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LETTER FROM THE BOARD

outstanding shall bear interest at the rate of 7% per annum. Such interest shall be accrued on the actual number of days elapsed and on the basis of a 365-day year. The Purchaser has the right to redeem in whole or in part the Promissory Note prior to its maturity. The Promissory Note may, with prior consent of the Purchaser, be freely transferable and assignable by the Vendor to any party other than a connected person of the Company provided that the Vendor has discharged in full its obligations under the adjustment mechanism relating to the Consideration as set out in the section headed “Letter from the Board — The Agreement — Gold sales guarantee” in this circular.

In order to secure the payment obligations of the Purchaser under the Promissory Note, the Purchaser shall execute and deliver a share charge over the Sale Shares in favour of the Vendor at Completion pursuant to which a first fixed charge over the Sale Shares will be created by the Purchaser in favour of the Vendor. The share charge will be released by the Vendor by executing and delivering a deed of release and the ancillary documents under the share charge to the Purchaser when the payment obligations of the Purchaser under the Promissory Note have been fully discharged.

INFORMATION ON THE TARGET GROUP

Shareholding structure of the Target Group as at the Latest Practicable Date:

==> picture [407 x 361] intentionally omitted <==

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

Vendor
100%
Target Company
100%
Kangshun BVI
100% 100%
Goffers Resources Kangshun HK Independent third
party
46% 5% 49%
Xinjiang Tianmu
----- End of picture text -----*

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LETTER FROM THE BOARD

Shareholding structure of the Target Group upon Completion:

==> picture [407 x 499] intentionally omitted <==

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

Vendor
17.13%
The Company
100%
Purchaser
51% 49%
Target Company
100%
Kangshun BVI
100% 100%
Independent third
Goffers Resources Kangshun HK
party
46% 5% 49%
Xinjiang Tianmu
----- End of picture text -----*

• 哈密六合資源開發有限責任公司 (Hami Liuhe Resources Development Company Limited) is indirectly wholly-owned by 新疆地質礦產勘查開發局第六地質大隊 (Brigade No. 6 of Xinjiang Bureau of Geology and Mineral Resources), which is 新疆維吾爾自治區人民政府直屬正廳級事業單位 (a unit under the Government of the Xinjiang Uygur Autonomous Region of the PRC).

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LETTER FROM THE BOARD

The Target Group

The Target Company is an investment holding company and has (i) three wholly-owned subsidiaries, namely Goffers Resources, Kangshun BVI and Kangshun HK; and (ii) a 51% owned subsidiary, namely Xinjiang Tianmu. Goffers Resources, Kangshun BVI and Kangshun HK are investment holding companies, and together with the Target Company, have no major assets other than their interests in Xinjiang Tianmu.

As at 1 January 2008, Xinjiang Tianmu was owned as to 46% by the Target Company, 49% by 哈密六合資源開發有限責任公司 (Hami Liuhe Resources Development Company Limited) (“ Hami Liuhe ”), a PRC third party, which is independent of and not connected with any member of the Group and the Vendor group and their respective connected persons, and 5% by 新疆康順礦業項目發展有限 公司 (Xinjiang Kangshun Mining Project Development Company Limited) (“ Xinjiang Kangshun ”). Xinjiang Kangshun is owned as to 98% by the Vendor and 2% by a third party independent of the Company and its connected persons. For the purpose of shareholding restructuring, the Target Company entered into an agreement to transfer all of its equity interests in Xinjiang Tianmu to Goffers Resources on 25 February 2011 and Xinjiang Kangshun entered into an agreement to transfer all of its equity interests in Xinjiang Tianmu to Kangshun HK on 10 May 2011. The transfers of the equity interests in Xinjiang Tianmu to Goffers Resources and to Kangshun HK were completed on 27 May 2011 and 14 July 2011 respectively. Since 14 July 2011, Xinjiang Tianmu has become an indirect non-wholly-owned subsidiary of the Target Company. After Completion, Mr. Tan will remain as the director of the Target Company, Goffers Resources, Kangshun BVI and Kangshun HK and will act under the instructions given by the Board from time to time.

Hami Liuhe, with its expertise in the mining sector, is actively involved in the management of Xinjiang Tianmu through six directors and the deputy general manager nominated by it to Xinjiang Tianmu. It is expected that its involvement in Xinjiang Tianmu will remain unchanged after Completion.

Xinjiang Tianmu

Xinjiang Tianmu was established in November 2002 and is principally engaged in the exploration and exploitation of gold, iron and nickel-copper mines in Xinjiang, PRC and the processing and sale of the outputs from the mines. Xinjiang Tianmu currently holds six exploration licences including five gold mines and one nickel-copper mine, namely Baishiquan (白石泉) nickel-copper mine, and six exploitation licences including another five gold mines and one iron mine in Xinjiang, PRC. Among the five gold mines and one iron mine for which Xinjiang Tianmu has exploitation licences, two gold mines, namely Heishiliang (黑石梁) gold mine and Hongshannan (紅山南) gold mine, are operating and generating revenue, and Tuchushan (突出山) iron mine is on trial run, whereas the remaining three gold mines are at the stage of pre-production exploration meaning that they are not in production and are yet to generate revenue.

Xinjiang Tianmu commenced the exploitation of gold mines in 2004. Due to the weather condition in Xinjiang, PRC, Xinjiang Tianmu normally carries out the mining work throughout the year except winter during which the work is temporarily suspended. The total production of gold was about 277 kg and 350 kg for the years 2010 and 2011 respectively. In 2011, Xinjiang Tianmu commenced the trial production of iron ores. Currently, Xinjiang Tianmu has about 121 employees.

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LETTER FROM THE BOARD

Management team of Xinjiang Tianmu

Xinjiang Tianmu has been managed by the representatives of both the Vendor group and Hami Liuhe. Each of the members of the board of Xinjiang Tianmu has been nominated by either party. The board of Xinjiang Tianmu currently comprises 13 directors, seven of whom are nominated by the Vendor group and the other six of the directors are nominated by Hami Liuhe, a company established in the PRC with limited liability and indirectly wholly-owned by 新疆地質礦產勘查開發局第六地質大隊 (Brigade No. 6 of Xinjiang Bureau of Geology and Mineral Resources) (“ Brigade No. 6 ”). The board members of Xinjiang Tianmu have a number of years of experience in the mining industry and corporate management. Mr. Tan, who is currently the vice-chairman of Xinjiang Tianmu, has been the director of Xinjiang Tianmu since 2002. He has over 30 years of metal trading experience including 13 years of management experience in the mining industry in the PRC. Xinjiang Tianmu has been engaged in the exploration and exploitation of mines in Xinjiang, PRC for more than nine years. Most members of the management team of Xinjiang Tianmu have many years of experience in the mining industry in Xinjiang, PRC and a number of them are members of Brigade No. 6. As such, Xinjiang Tianmu has substantial experience in dealing with the laws and practices in respect of mining in Xinjiang and China as well as addressing concerns of local governments and communities regarding the sites of its mines, exploration properties and other relevant management arrangements. For further details of the board composition of the Target Group, please refer to the section headed “Management team” in Appendix I to this circular.

The Target Group shall maintain the existing directors and management who will continue to run the business and operations of the Target Group after Completion and additional staff may be recruited as and when required.

Licences and permits

Based on the legal due diligence report issued by the legal advisers of the Company as to the PRC laws, the Directors are satisfied and confirm that, as at the Latest Practicable Date:

• (i) save for obtaining the approval for the extension applications for the production safety permits for Heishiliang (黑石梁) gold mine and Hongshannan (紅山南) gold mine, Xinjiang Tianmu had obtained all the licences and permits for its business operations;

• (ii) save for obtaining the approval for the extension applications for the production safety permits for Heishiliang (黑石梁) gold mine and Hongshannan (紅山南) gold mine, Xinjiang Tianmu had complied with all applicable laws and regulations relating to environmental protection, production safety and taxation;

• (iii) Xinjiang Tianmu’s continued production in Heishiliang (黑石梁) gold mine and Hongshannan (紅山南) gold mine while the extension applications for the production safety permits for these mines are still being processed by the government is unlikely to have any material impact on the business operations in these mines;

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LETTER FROM THE BOARD

• (iv) it is not crucial to forthwith obtain approval for the extension applications for the production safety permits for Heishiliang (黑石梁) gold mine and Hongshannan (紅山南) gold mine for the continued operations of these two mines;

• (v) there is no legal obstacle to the extension of the validity periods of the exploration licences and exploitation licences held by Xinjiang Tianmu if Xinjiang Tianmu submits the applications and the relevant materials no less than 30 days prior to the expiry date of the relevant licences; and

• (vi) there is no legal obstacle to the production safety permit extension applications for Heishiliang (黑石梁) gold mine and Hongshannan (紅山南) gold mine.

For further details regarding licences and permits relating to the Target Mines and other mines operated by Xinjiang Tianmu, please refer to the section headed “Target Group and the mines — Licences and permits” in Appendix I to this circular.

The Target Mines

Set out below are the reserves and resources estimates as at 30 November 2011 provided by Mr. Philip Alan Jones in accordance with the JORC Code:

Reserves estimates

	Gold mine	Reserve category Tonnage (tonnes * 1,000)	Average grade (gram/tonne) N/A 3.44 3.49 5.14 2.71 2.96 Average grade (Fe %) N/A 32.96 39.65 Average grade (Ni %) (Cu %) N/A N/A 0.52 0.34 N/A N/A
	Heishiliang (黑石梁)	Proved /
		Probable 26
		Stockpiles 18
	Hongshannan (紅山南)	Proved 106
		Probable 8
		Stockpiles 13
	Iron mine	Reserve category Tonnage (tonnes * 1,000)
	Tuchushan (突出山)	Proved /
		Probable 322
		Stockpiles 14
	Nickel-copper mine	Reserve category Tonnage (tonnes * 1,000)
	Baishiquan (白石泉)	Proved /
		Probable 1,208
		Stockpiles /

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LETTER FROM THE BOARD

Resources estimates

	Resources estimates
	Gold mine	Category of resource Tonnage (tonnes * 1,000)	Average grade (gram/tonne) N/A 3.78 3.14 5.65 2.98 3.51 Average grade (Fe %) N/A 37.90 37.90 Average grade (Ni %) (Cu %) N/A N/A 0.60 0.35 0.47 0.15
	Heishiliang (黑石梁)	Measured /
		Indicated 27
		Inferred 98
	Hongshannan (紅山南)	Measured 114
		Indicated 9
		Inferred 11
	Iron mine	Category of resource Tonnage (tonnes * 1,000)
	Tuchushan (突出山)	Measured /
		Indicated 329
		Inferred 681
	Nickel-copper mine	Category of resource Tonnage (tonnes * 1,000)
	Baishiquan (白石泉)	Measured /
		Indicated 1,617
		Inferred 6,796

Heishiliang ( 黑石梁 ) gold mine

Heishiliang (黑石梁) gold mine is an operating mine around 164 kilometres on the east of Hami City (哈密市) of the Xinjiang Uygur Autonomous Region (新疆維吾爾自治區). There is a 220 kilometres asphalt road from Hami City to Jingerquan (鏡兒泉) via National Highway 312 and Xiaohuangshan-Tulaergen Road (小黃山 — 圖拉爾根公路). From Jingerquan to the mine, there is a 20 kilometres gravel road which vehicles can pass through. There are about 160 kilometres (120 kilometres displacement) from the west of the mining area to Shankou Station (山口站) of Lanzhou-Xinjiang Railway (蘭新鐵路).

Hongshannan ( 紅山南 ) gold mine

Hongshannan (紅山南) gold mine is an operating mine located about 80 kilometres southwest of Hami City of the Xinjiang Uygur Autonomous Region. Access to Hongshannan (紅山南) gold mine is partially through paved roads. The terrain is mostly of rocky desert, making off-road driving possible. The mining area is located about 50 kilometres south of Dananhuxiang (大南湖鄉). Dananhuxiang is 30 kilometres away from Hami City and linked by the level 3 highway between Hami and Luojia (哈密 — 羅鉀).

Tuchushan ( 突出山 ) iron mine

Tuchushan (突出山) iron mine is located about 130 kilometres southwest of Hami City. There is no major blockage of traffic for the mining area. There are several ways connecting Tuchushan (突出山)

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LETTER FROM THE BOARD

iron mine and Hami City. There is a connected sideway from the mining area to Hami City at the northwest via the Tuwu Copper Mine (土屋銅礦). To the east of the mining area, there is another sideway connecting to Yamansu Town (雅滿蘇鎮). The distance between Yamansu Town and Hami City, which are connected by National Highway 312 is about 160 kilometres.

Baishiquan ( 白石泉 ) nickel-copper mine

Baishiquan (白石泉) nickel-copper mine is about 170 kilometres southeast of Hami City of the Xinjiang Uygur Autonomous Region. The mining area is reasonably accessible with paved road passing within a few kilometres with additional exploration roads built throughout the area. Baishiquan (白石泉) nickel-copper mine is not yet in production.

Other mines

Other than the Target Mines, Xinjiang Tianmu holds exploration licences for five gold mines and exploitation licences for three gold mines. The latter three are not in production and do not generate revenue. The resources estimates in accordance with the JORC Code regarding these eight mines cannot be ascertained before further exploration works are completed.

SHAREHOLDING STRUCTURE OF THE COMPANY

Set out below is the shareholding structure of the Company (i) as at the Latest Practicable Date; and (ii) upon Completion:

	As at the
	Latest Practicable Date		Upon Completion
	Number of Shares Approx. %		_Number of Shares _	Approx. %
Mr. Cheng Kin Kwan	221,440,000	16.95	221,440,000	14.05
Mr. Law Kwai Lam*	38,325,000	2.93	38,325,000	2.43
Ms. Leung Mei Sheung, Eliza	13,492,000	1.03	13,492,000	0.85
Ms. Zheng Ying Yu	4,900,000	0.38	4,900,000	0.31
Mr. Fung Chun Pong, Louis	588,000	0.05	588,000	0.04
Mr. Liao Yun	4,510,000	0.35	4,510,000	0.29
The Directors	283,255,000	21.69	283,255,000	17.97
Mr. Tan	18,874,000	1.44	18,874,000	1.20
The Vendor	—	—	270,000,000	17.13
Sub-total	18,874,000	1.44	288,874,000	18.33
Public Shareholders	1,004,182,503	76.87	1,004,182,503	63.70
Total	1,306,311,503	100.00	1,576,311,503	100.00

• Of the 38,325,000 Shares, 28,325,000 Shares are held by Super Capital Limited, a private company which is wholly-owned by Mr. Law Kwai Lam.

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LETTER FROM THE BOARD

FINANCIAL EFFECTS OF THE ACQUISITION

Upon Completion, the Target Company will become a 51%-owned subsidiary of the Company, and the financial results and position of the Target Group will be consolidated into the consolidated financial statements of the Group following Completion.

According to the unaudited pro forma financial information of the Enlarged Group as set out in Appendix III to this circular, assuming that Completion had taken place on 30 September 2011, the total assets would increase by approximately HK$532.2 million to HK$634.5 million as at 30 September 2011. The total liabilities would increase by approximately HK$234.7 million to approximately HK$241.7 million as at 30 September 2011. The equity attributable to owners of the Company would increase by approximately HK$31.2 million to approximately HK$123.8 million as at 30 September 2011. The Group had an audited net loss of approximately HK$11.5 million for the year ended 31 March 2011. Based on the unaudited pro forma consolidated statement of comprehensive income of the Enlarged Group set out in Appendix III to this circular assuming the Completion had taken place at the commencement of the period being reported on (i.e. 1 April 2010), the Enlarged Group would have a net profit of approximately HK$11.7 million for the year ended 31 March 2011.

REASONS FOR AND BENEFITS OF THE ACQUISITION

The Group is principally engaged in the provision of computer consultancy and software maintenance services, software development and sales of computer hardware and software.

In order to further create value for the Shareholders, the Group has been seeking other growth opportunities. The Board considers that the Acquisition represents a strategic move providing the Group with an opportunity to enter the mining industry in the PRC. Based on the Valuation Report and the Competent Person’s Report both prepared by Mr. Philip Alan Jones, the mining industry outlook is positive and Xinjiang Tianmu has exploration and exploitation licences as well as proven production history for various gold and iron mines in Xinjiang, PRC. Further, the Target Mines are located in areas accessible by transportation for delivery of outputs. Based on the audited financial information, Xinjiang Tianmu demonstrates that it has delivered satisfactory financial performance in the past. Upon Completion, the Target Company together with its subsidiaries will be consolidated into the Group in respect of their financial statements.

The Consideration shall be satisfied at Completion by a combination of the allotment and issue of the Consideration Shares and the issue of the Promissory Note which is considered appropriate as it is fast and relatively straightforward and does not require immediate cash outlays of the Group. It is expected that the repayment of the Promissory Note will be financed by the internally generated funds of the Group and/or funds raised by the Group through equity and/or debt financing. As at the Latest Practicable Date, the Company had no specific fund raising plans in this connection. The Issue Price has been arrived at after arm’s length negotiations among the parties to the Agreement primarily with reference to the Consideration and the shareholding of the Vendor in the Company on a diluted basis as a result of the allotment and issue of the Consideration Shares.

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As at the Latest Practicable Date, the Board did not have any agreement, arrangement, understanding, intention and negotiation (concluded or otherwise) about any disposal, termination or scaling-down of the Company’s existing business. Further, the Company and the Vendor (and its ultimate beneficial owners) had no intention to change the Board composition and the management team of the Company and the Target Group (including Xinjiang Tianmu) upon Completion.

The Directors (including the independent non-executive Directors) consider that the terms of the Acquisition (including the Issue Price) are fair and reasonable as far as the Shareholders are concerned, and that the Acquisition is in the interests of the Company and the Shareholders as a whole.

FINANCIAL AND TRADING PROSPECTS OF THE ENLARGED GROUP

After Completion, the Enlarged Group will be principally engaged in two business lines, namely (i) the provision of computer consultancy and software maintenance services, software development and sales of computer hardware and software; and (ii) the exploration and exploitation of various mines in Xinjiang, PRC.

The Company’s management holds the belief — “Technology Education to revitalize our country” and “Brain Power to strengthen our country”. Over the years, the Group has been actively developing its core business. The Group’s years of effort spent on cultural market informatization projects are gaining popular recognitions. On web-logistics, the Group has established foundations. The Group is actively crafting a grand plan, striving to maximize the interests of the Shareholders through participation in various aspects of China informatization nationwide e.g. the e-Logistics web with various internet retail platforms in the PRC. The Company’s management considers that these projects would bring long term income to the Group and the Shareholders.

The Group has been seeking other growth opportunities. As set forth in the section headed “Industry overview” in Appendix I to this circular, there is a good prospect of the mining industry given continuous strong global demand for both base and precious metals. Mining companies are expected to experience growth. The Board also believes the outlook of the mining industry in the PRC is positive and views the Acquisition as a growth opportunity for the Group which will be enhancing value for the Shareholders.

The Group will place equal weight of financial resources on its existing business and the new business while both businesses will be operated by their respective current management teams. The current operations and future expansion of the Group’s existing business and the new business will be financed respectively by their own earnings capacity, supplemented with their financing and borrowing ability.

The Company currently has no recruitment plans for additional technical staff or management to monitor the Target Group. As set out in the section headed “Letter from the Board — Information on the Target Group — Management team of Xinjiang Tianmu” in this circular, the Company has proposed to maintain the existing management and technical team of Xinjiang Tianmu to oversee the mining operation due to their comprehensive experience in the mining industry. In order to enhance the management over the new business in future, the Company intends to set up a mining management

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LETTER FROM THE BOARD

committee comprising of three to five management members including mining professionals from Xinjiang Tianmu to be chaired by Mr. Tan. The committee shall be accountable to the Board and be responsible for the review of the exploration and mining development plan, budget and capital expenditure. In addition, the committee shall engage an independent professional consultant to review and advise on the geological progress and development as well as nominate the appropriate personnel to take regular on-site visits, make timely reports and ensure legal compliance.

GEM LISTING RULES IMPLICATIONS

The Acquisition constitutes a very substantial acquisition for the Company under Chapter 19 of the GEM Listing Rules. An EGM will be convened and held to seek approval from the Shareholders for the Agreement and the transactions contemplated thereunder. Given that Mr. Tan is a Shareholder directly interested in approximately 1.44% of the issued share capital of the Company, Mr. Tan and his associates are required to abstain from voting on the ordinary resolution to be proposed at the EGM in respect of the Agreement and the transactions contemplated thereunder.

Upon Completion, the Company will become a mineral company and be subject to annual and interim disclosure requirements under Chapter 18A of the GEM Listing Rules.

EGM

An EGM will be held at Conference Hall 06, 2/F, Lakeside 2, No.10 Science Park West Avenue, Hong Kong Science Park, Shatin, New Territories, Hong Kong on Monday, 30 April 2012 at 3:00 p.m. to consider and, if thought fit, approve the Agreement and the transactions contemplated thereunder.

Notice of the EGM is set out on pages N-1 to N-2 of this circular and the form of proxy for use at the EGM is enclosed with this circular. Whether or not you are able to attend the EGM in person, you are requested to complete and return the form of proxy in accordance with the instructions printed thereon and return it to the Company’s share registrar, Computershare Hong Kong Investor Services Limited at 17M Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong, as soon as possible but in any event not later than 48 hours before the time appointed for holding the EGM or any adjournment thereof.

Completion of the form of proxy will not preclude you from attending and voting at the EGM or any adjourned meeting thereof should you so wish.

RECOMMENDATION

The Directors recommend that the Shareholders vote in favour of the ordinary resolution to be proposed at the EGM to approve the Agreement and the transactions contemplated thereunder.

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LETTER FROM THE BOARD

ADDITIONAL INFORMATION

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

Yours faithfully, for and on behalf of the Board Timeless Software Limited CHENG Kin Kwan Chairman & Chief Executive Officer

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FURTHER INFORMATION ON THE ACQUISITION AND THE TARGET GROUP

APPENDIX I

BUSINESS MODEL

Planned development methods and operational flow

Gold ore processing

The Target Mines lie within the areas characterized with desert climate in the Xinjiang Uygur Autonomous Region. Given the ore bodies of the Target Mines were deposited beneath the ground surface, Xinjiang Tianmu conducts the underground mining at the Target Mines.

The major mining products of the Target Mines are tonnage low-grade ores of gold. Such raw gold ores are exclusively loaded to trucks and hauled to the processing plant for gold extraction. The ore processing method is carbon in leach, which is commonly used for the recovery of gold from large tonnage low-grade raw ores. The ore processing typically involves crushing, grinding, separation, leaching and absorption, electrolysis and smelting.

The chart below illustrates the major steps of the ore processing of gold mining products in the processing plant of Xinjiang Tianmu:

==> picture [280 x 342] intentionally omitted <==

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

Mining
Raw ore
Crushing
Grinding
Carbon in leach Tailing
Elution and electrowinning
Smelting
Gold bars
----- End of picture text -----

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FURTHER INFORMATION ON THE ACQUISITION AND THE TARGET GROUP

(i) Crushing and grinding

The gold ore is put through three stages of crushing followed by grinding in a ball mill to eventually produce a fine grained slurry ready for leaching with cyanide.

(ii) Carbon in leach

The slurry is first passed through a gravity jig to separate out nuggety gold. This nuggety gold is sent directly to the gold smelting section for processing. Cyanide and activated carbon is then added to the slurry before it is passed through a series of eight leaching columns to dissolve the gold. The dissolved gold is absorbed by the activated carbon in the leaching circuit. After the slurry has been leached, it is first screened to separate the activated carbon with the absorbed gold, before the slurry is dewatered in a thickener to recycle most of the water and cyanide. The dewatered slurry is disposed of in a specially constructed dam as tailings.

(iii) Elution and electrowinning

The recovered carbon, loaded with the gold, is then piped to the elution plant where the gold is re-dissolved, or stripped off the carbon, in a pressurised tank using a concentrated caustic soda and cyanide solution leaving the barren carbon to be regenerated before being recycled. This concentrated gold solution is piped to tanks located at the gold processing section where the gold is recovered from the solution by electrowinning. The gold plated cathodes are regularly removed and dried ready for smelting.

(iv) Smelting

The dried cathodes and nuggety gold are mixed with fluxes and smelted to produce gold bullion dores. The slag produced by the smelting is recycled to recover any lost gold.

Iron ore processing

The iron ore produced at Tuchushan iron mine is sold as “mined ore” to a third party for processing with payment based on the percentage of iron content of the truckloads. The minimum acceptable grade of a truckload is 30% iron content with extra payment for the iron content above this minimum grade.

Nickel-copper ore processing

The logistics of treating the nickel-copper ore from Baishiquan has not been finalized. Processing in a company owned plant, toll treating at and selling to a third party processing plant are being considered. The type of plant that is expected to be used is a standard flotation plant similar to others operating in the region by other operators. This plant produces a nickel-copper mineral concentrate at a grade that can then be sold to a refinery for producing nickel and copper metal ingots. Industry standard recoveries of the nickel bearing minerals for this type of concentrator plant is quoted as being 75-80%.

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APPENDIX I

The mining products

Xinjiang Tianmu commenced the exploitation of the gold mines in 2004 and the trial production at the iron mine in 2011. The products of the operating Target Mines include gold ores and iron ores. The gold contained in the gold ores are extracted and smelted into gold dores after processing.

Key capital investment

Key capital investment of the Target Group includes, among other things, investment in site infrastructure and facilities, underground mining infrastructure, conveyor system, workshop and site offices and staff quarters. The major sources of funds are internally generated from time to time, or raised in the capital market or from bank borrowings as and when required.

Costing structure

Key operating cost components of the Target Group include, among other things, fuel, electricity and water, consumables, workforce employment, ore transportation and other services.

Operating costs components of the Target Mines include, among other things, mining costs, treatment of mining wastage, haul costs, workforce employment, consumables, fuel and electricity, administration, rehabilitation, safety and quality assurance and tax charge.

The table below sets forth a summary of estimated operating costs for the Target Mines as indicated in the Valuation Report in Appendix VI to this circular:

Year	2011	2012	2013	2014	2015	2016	2017	2018
Total operating cost (RMB’000)
Heishiliang gold mine	22,438	21,589	—	—	—	—	—	—
Hongshannan gold mine	20,112	18,273	18,273	18,273	18,273	3,107	—	—
Tuchushan iron mine	3,872	12,686	12,686	12,686	4,592	—	—	—
Baishiquan nickel-copper mine	—	—	14,816	31,749	42,333	42,333	42,333	39,599

Sales channels and target customers

At present, nearly all mining products of Xinjiang Tianmu are directly sold to precious metal traders and a precious metal refining company in the PRC. The top one customer in 2009 and the top two customers in 2010 and 2011 in total accounted for approximately 73.3%, 89.0% and 95.1% of the revenue of Xinjiang Tianmu for the three years ended 31 December 2009, 2010 and 2011 respectively. Xinjiang Tianmu has established a long term trading relationship with the metal traders since it started exploitation work in 2004 and precious metal refining company since 2009. The metals traders and the refining company are mainly located in Xinjiang and Gansu.

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APPENDIX I

FURTHER INFORMATION ON THE ACQUISITION AND THE TARGET GROUP

Pricing policies

The gold dores are priced at the time of sales after production with reference to the applicable spot prices of gold in the Shanghai Gold Exchange after having been adjusted for the gold content and refining cost of the gold dores. Accordingly, the pricing of the gold dores sold by Xinjiang Tianmu will not deviate from the market prices significantly. Xinjiang Tianmu does not undertake price hedging for future production.

Quality control

Quality control is fundamental to the success of Xinjiang Tianmu. Xinjiang Tianmu has placed emphasis on quality control when designing and implementing the mine construction plan and the mining process. It established and implemented the following measures regarding mining, production process and product quality:

• (i) measures to screen out the waste rocks from the raw ores according to the respective ore grading standards set by the geological engineers for each of the operating mines;

• (ii) on-site inspections of all mining sites as well as regular sample checking on the quantity and quality of the raw ores;

• (iii) procedures to keep records of the raw ores hauled from the mining sites;

• (iv) regular meetings on mining safety to periodically train qualified professional management and technical personnel and deal with technical problems;

• (v) regular mining safety appraisals every month; and

• (vi) preventive measures to reduce production risks, such as land sliding and mine blast.

In order to ensure the planned quality of the construction and maintain consistent gold content of the mining products, technical department is responsible for monitoring and verifying the mine construction and progress as well as the operational flow for gold processing. The existing technical team of Xinjiang Tianmu comprises eight technical professionals. All of these professionals were graduates from universities or technical institutes and six of them possess at least ten years of experiences in the mining industry. Half of these professionals are responsible for the supervision of the exploration processes and another half of the professionals are responsible for monitoring and verifying the mine construction and safety standards of each mining site.

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APPENDIX I

FURTHER INFORMATION ON THE ACQUISITION AND THE TARGET GROUP

Assessment of the business model of the Target Group

The Company has performed feasibility studies regarding the business model of the Target Group primarily by way of reviewing various documents including the financial statements of the Target Group, the Competent Person’s Report, the draft PRC legal opinion and the Valuation Report on the Target Mines. The feasibility assessment of the existing operating mines was mainly based on the past financial performance of the Target Group by reviewing the financial statements of the Target Group, the historical production capacities of such mines and the prevailing market price of the mining products. The Company has also performed the feasibility assessment of the mines under exploration by reviewing the projection of the production capacities and the estimated selling price of mining products made in the Valuation Report. In order to facilitate the understanding of the processing of ores, the Company conducted site visits at the processing plant of Xinjiang Tianmu. In addition, the Company understood the sales channels and target market of Xinjiang Tianmu as well as the business relationship between Xinjiang Tianmu and its major customers by conducting interviews with the management team of the Target Group.

In accordance with the feasibility studies above, the estimated production capacities of the Target Mines, the past financial performance of the Target Group, capital investment planning and planned production schedule match with the Group’s strategies to create value for the Shareholders and provide a favourable and sustainable development opportunity. The Directors believe that adequate and reasonable steps were made in assessing the business model and the Acquisition.

No material changes

The Target Group confirms that no material changes have occurred since the effective date of the Competent Person’s Report, being 1 December 2011.

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APPENDIX I

FURTHER INFORMATION ON THE ACQUISITION AND THE TARGET GROUP

TARGET GROUP AND THE MINES

Xinjiang Tianmu currently holds six exploitation licences including five gold mines and one iron mine, and six exploration licences including five gold mines and one nickel-copper mine. Among the five gold mines and one iron mine for which Xinjiang Tianmu has exploitation licences, two gold mines are operating and generating revenue, and one iron mine is on trial run.

Strategic plan for new business

Expanding production and development

With the existing available resources, the Target Company plans to strengthen the production of Hongshannan gold mine and Heishiliang gold mine by carrying out shaft extension and construction work in 2012. The estimated capital expenditure for the production development of Hongshannan gold mine and Heishiliang gold mine are approximately RMB12.9 million and RMB1.8 million respectively. Additional expenditure on shaft construction and mine facilities will be incurred to bring the other two Target Mines, Tuchushan iron mine and Baishiquan nickel-copper mine, into full production in 2012 and 2013 respectively. The estimated capital expenditure for the development of Tuchushan iron mine is approximately RMB0.4 million and the estimated capital expenditure for the development of Baishiquan nickel-copper mine are approximately RMB8.2 million and RMB22.2 million for 2012 and 2013 respectively.

Exploration and additional mineral resources

Xinjiang Tianmu currently has no plan to commence exploitation in the remaining mines for which it has exploitation licences. An estimated cost of approximately RMB0.5 million will be incurred in further exploration works so as to provide more information to ascertain the underground mineral resources and to determine and formulate the future development plan. The plan to start exploitation will be ascertained after further exploration works are completed. In addition, most of the currently available financial resources of Xinjiang Tianmu have been already allocated to the Target Mines. Xinjiang Tianmu may consider plans to commence production in the remaining mines subject to its earning ability and additional financial resources available in the future.

Xinjiang Tianmu will monitor the exploration progress of the mines for which it has exploration licences and, as appropriate, apply for exploitation licences after the mining resources can be estimated. The exploration and exploitation plans of the mines are also subject to the earning ability and additional financial resources available to Xinjiang Tianmu in the future.

Any further changes on the development plans of the remaining mines will be disclosed to the Shareholders in accordance with the requirements under the GEM Listing Rules.

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APPENDIX I FURTHER INFORMATION ON THE ACQUISITION AND THE TARGET GROUP

Production capacity and production schedule of the Target Mines

The table below sets forth details of the planned production from 2011 to 2018 as indicated in the Valuation Report in Appendix VI to this circular:

Year	2011	2012	2013	2014	2015	2016	2017	2018
Ore production rate (Tonne/Year)
Heishiliang gold mine	41,209	39,650	—	—	—	—	—	—
Hongshannan gold mine	33,020	30,000	30,000	30,000	30,000	5,102	—	—
Tuchushan iron mine	30,525	100,000	100,000	100,000	36,200	—	—	—
Baishiquan nickel-copper mine	—	—	84,000	180,000	240,000	240,000	240,000	224,500

Currently, Hongshannan and Heishiliang gold mines are under commercial production. Tuchushan iron mine is now under trial production while Baishiquan nickel-copper mine is not yet under exploitation. Xinjiang Tianmu plans to commence commercial production at Tuchushan iron mine and Baishiquan nickel-copper mine in 2012 and in 2013 respectively.

Estimated capital expenditure

Set out below is the estimated capital expenditure of Xinjiang Tianmu in the years of 2012 and 2013:

			Estimated
Year	Mine	Construction works	capital costs
			(RMB’000)
2012	Hongshannan gold mine	Shaft extension work and site building	12,900
		construction
	Tuchushan iron mine	Shaft construction work	400
	Heishiliang gold mine	Shaft construction work	1,830
	Baishiquan nickel-copper mine	Shaft construction work	5,500
		Electricity facility	2,700
	Other mines	General survey and exploration work	470
		Total estimated capital expenditure	23,800
		for 2012
2013	Baishiquan nickel-copper mine	Shaft construction work	6,700
		Underground tunneling work	12,600
		Underground mine facilities	2,918
	Other mines	General survey and exploration work	600
		Total estimated capital expenditure	22,818
		for 2013

The above estimated capital costs, which would mainly be used for the construction of the mining facilities, are proposed to be financed by the internal financial resources and retained earnings of the Target Group. Most of the construction of mining facilities of the Target Mines is expected to be accomplished by the end of 2013.

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APPENDIX I

Supply of labor and raw materials

For the Target Mines, according to the past employment record of Xinjiang Tianmu, it is estimated that there should not be a lack of supply of labor which affects the mining and processing operations. The raw materials used in ore processing are mainly consumables (such as leach solution) of which the cost is not significant and supply is sufficient.

Licences and permits

As advised by the legal advisers of the Company as to the PRC laws, the exploration and exploitation licences held by Xinjiang Tianmu are valid and Xinjiang Tianmu is the sole legal and actual owner of such licences.

The terms of validity of the 12 exploration and exploitation licences held by Xinjiang Tianmu are as follows:

	Mine				**Type of **	**Type of **	**Type of **	**Type of **	licence	licence	licence	Effective date	Effective date	Effective date	Effective date	Effective date		Expiry date	Expiry date
	Target Mines
	Heishiliang (黑石梁) gold mine				Exploitation						29 November 2010						1	March 2013
	Hongshannan (紅山南) gold mine				Exploitation						29 November 2010 27 September 2012
	Tuchushan (突出山) iron	mine			Exploitation							30 December 2010					30 August 2019
	Baishiquan (白石泉) nickel-copper
	mine				Exploration							19 May 2011					19 May 2014
	Other mines
	Hongdong (紅東) gold mine				Exploration							3 November 2011					3 November 2013
	Dananhu (大南湖) gold mine				Exploration							3 November 2011					3 November 2013
	Nangebi (南戈壁) gold mine				Exploration							3 November 2011					3 November 2013
	Honghu (紅湖) gold mine				Exploration							3 November 2011					3 November 2013
	Tianmunan (天木南) gold		mine		Exploration							3 November 2011					3 November 2013
	Hongling (紅嶺) gold mine				Exploitation								March 2003					March 2013
	Tianxing (天星) gold mine				Exploitation								March 2003					March 2013
	Tianmudong (天木東) gold mine				Exploitation						29 November 2010						1	March 2013

According to the relevant PRC regulations, Xinjiang Tianmu may file an application for an extension of the validity periods of the exploration or exploitation licences 30 days prior to the expiry date of the relevant licences. The legal advisers of the Company as to the PRC laws have advised that if Xinjiang Tianmu submits the application and the relevant materials no less than 30 days prior to the expiry date of the relevant licences, there will be no legal obstacles for the extension of the validity periods of the exploration licences and the exploitation licences.

The Company has examined copies of the above 12 exploration and exploitation licences and consulted the legal advisers of the Company as to the PRC laws as to their validity and legality.

Gold mining permit

If the mining activities of an enterprise involve gold resources, in accordance with the “Provisions on the Administration of Obtaining the Letter of Approval for Mining of Gold Minerals” (辦理開採黃金

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APPENDIX I

礦產批准書管理規定), which became effective as of 1 January 2004, a gold mining permit must also be obtained in addition to the relevant exploitation licences. Xinjiang Tianmu holds a gold mining permit issued by the Ministry of Industry and Information Technology with a validity period from 1 March 2012 and 1 March 2015. The gold mining permit held by Xinjiang Tianmu is good for all gold mines of Xinjiang Tianmu.

Production safety permit

The PRC implements a licensing system for production safety of mining enterprises under the “Regulations on Production Safety Permit”, and the “Implementation Measures for Non-coal Mining Enterprises Production Safety Permits”. No mining enterprise may engage in production activities without holding a valid production safety permit.

Xinjiang Tianmu possesses the following production safety permits for its mineral processing plant and tailings pond and its operating mines with exploitation licences:

	Expiry date Mineral processing plant and tailings pond 9 November 2014 Target Mines Heishiliang (黑石梁) gold mine 5 February 2012 Hongshannan (紅山南) gold mine 5 June 2010

Xinjiang Tianmu has filed the relevant documents and materials with the Administration of Work Safety of Xinjiang Uygur Autonomous Region for the applications for extension of the validity periods of the production safety permits for Heishiliang gold mine and Hongshannan gold mine in November 2011 and March 2010 respectively. As at the Latest Practicable Date, there were no matters outstanding or conditions to be fulfilled for the extension application for Heishiliang gold mine and such applications are still being processed by the government. It is expected that the extension application for Heishiliang gold mine would be approved in the first half of 2012. The legal advisers of the Company as to the PRC laws have advised that there is no legal obstacle to the production safety permit extension application for Heishiliang gold mine. The Company and Xinjiang Tianmu will use their best endeavours to ensure the extension application for Heishiliang gold mine to be approved as soon as possible.

The approval for the application for extension of the validity period of the production safety permit for Hongshannan gold mine is subject to the condition that the adaptation and expansion construction which includes shaft extension, electricity supply work, ventilation, safety facilities construction, production exploration and mining facilities contruction in Hongshannan gold mine is completed and accepted by the Administration of Work Safety of Xinjiang Uygur Autonomous Region. It is expected the adaptation and expansion construction will be completed in late 2012 and the extension application for Hongshanan gold mine will be approved in mid 2013. The legal advisers of the Company as to the

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FURTHER INFORMATION ON THE ACQUISITION AND THE TARGET GROUP

PRC laws have advised that there is no legal obstacle to the production safety permit extension application for Hongshannan gold mine. The Company and Xinjiang Tianmu will use their best endeavours to ensure the extension application for Hongshannan gold mine to be approved as soon as possible.

The continuing production at Heishiliang gold mine and Hongshannan gold mine when the extension applications for the production safety permits for these two mines are still being processed by the government may not comply with the “Regulations on Production Safety Permit” and the “Implementation Measures for Non-coal Mining Enterprises Production Safety Permits”. Nevertheless, the legal advisers of the Company as to the PRC laws have advised that since Xinjiang Tianmu has not received any notice from the government requiring it to suspend production or notifying it that the applications for the extension of the validity periods of the production safety permits have been rejected, the risk of being held liable by the government for the continuing production in Heishiliang gold mine and Hongshannan gold mine when the government is still processing its extension applications for the production safety permits is low and therefore it is unlikely to have any material impact on the business operations of Heishiliang gold mine and Hongshannan gold mine.

Although the risk is low according to the advice of the legal advisers of the Company as to the PRC laws, if Xinjiang Tianmu is nevertheless held liable for the continuing production pending the issue of the renewed production safety permits for Heishiliang gold mine and Hongshannan gold mine under the “Regulations on Production Safety Permit” and the “Implementation Measures for Non-coal Mining Enterprises Production Safety Permits”, Xinjiang Tianmu may be penalised. As advised by the legal advisers of the Company as to the PRC laws, there are no specific penalties stipulated by the PRC government for continuing production in Heishiliang gold mine and Hongshannan gold mine when the applications for an extension of the production safety permits for these two mines are still pending the approval by the government. The existing penalties under the “Regulations on Production Safety Permit” and the “Implementation Measures for Non-coal Mining Enterprises Production Safety Permits” (which might not fit into Xinjiang Tianmu’s situation as Xinjiang Tianmu has already filed applications for extension of the production safety permits for Heishiliang gold mine and Hongshannan gold mine) are that if a non-coal mining enterprise fails to obtain the production safety permit, it may be subject to the confiscation of the illicit gains and a fine ranging from RMB100,000 to RMB500,000 and if it continues production without going through the extension procedures for the production safety permit upon its expiration, it may be ordered to suspend production and take the corrective measures within a prescribed time period, and it may be subjected to the confiscation of the illicit gains and a fine ranging from RMB50,000 to RMB100,000.

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FURTHER INFORMATION ON THE ACQUISITION AND THE TARGET GROUP

As the production safety is under the administration and supervision of authorities that are different from the ones issuing the exploration and exploitation licences, the breach of the relevant production safety laws would not entail revocation of the exploration and exploitation licences directly. However, the production safety authorities may seek cooperation from the authorities in charge of the issuance of such licences, which have the authority to revoke the exploration and exploitation licences according to the “Mineral Resources Law of the PRC”. In such case, the exploitation licences for Heishiliang gold mine and Hongshannan gold mine of Xinjiang Tianmu may be revoked.

Since Baishiquan nickel-copper mine, Hongdong gold mine, Dananhu gold mine, Nangebi gold mine, Honghu gold mine, Tianmunan gold mine, Hongling gold mine, Tianxing gold mine, Tianmudong gold mine are not in production, the legal advisers of the Company as to the PRC laws have advised that no production safety permits are necessary for these mines. Commencement of production of these mines will depend on the exploration results. As at the Latest Practicable Date, there was no specific timeframe for commencement of production and obtaining of production safety permits for these mines. After Completion, the Company and Xinjiang Tianmu will ensure compliance with the laws and regulations regarding safety production permits before commencement of production in these mines.

For Tuchushan iron mine, it is under construction in accordance with the requirements of the Administration of Work Safety of Xinjiang Uygur Autonomous Region. After the construction work is completed and accepted by the Administration of Work Safety of Xinjiang Uygur Autonomous Region, Xinjiang Tianmu can file an application for production safety permit for Tuchushan iron mine. It is expected that Xinjiang Tianmu will be able to file such application in mid 2012. The legal advisers of the Company as to the PRC laws have advised that as commercial production at Tuchushan iron mine has yet to commence, no production safety permits are necessary for Tuchushan iron mine before commercial production at Tuchushan iron mine commences.

It is crucial to obtain production safety permits for Baishiquan nickel-copper mine and Tuchushan iron mine before the commencement of commercial production at these two mines. After Completion, the Company and Xinjiang Tianmu will ensure that production safety permits for Baishiquan nickel-copper mine and Tuchushan iron mine will be obtained by Xinjiang Tianmu before the commencement of commercial production at these two mines.

Compliance

Based on the legal due diligence report issued by the legal advisers of the Company as to the PRC laws, the Directors are satisfied and confirm that, as at the Latest Practicable Date:

• (i) save for obtaining the approval for the extension applications for the production safety permits for Heishiliang gold mine and Hongshannan gold mine as disclosed above, Xinjiang Tianmu had obtained all the licences and permits for its business operations;

• (ii) save for obtaining the approval for the extension applications for the production safety permits for Heishiliang gold mine and Hongshannan gold mine as disclosed above, Xinjiang Tianmu had complied with all applicable laws and regulations relating to environmental protection, production safety and taxation;

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• (iii) Xinjiang Tianmu’s continued production in Heishiliang gold mine and Hongshannan gold mine while the extension applications for the production safety permits for these mines are still being processed by the government is unlikely to have any material impact on the business operations in these mines;

• (iv) it is not crucial to forthwith obtain approval for the extension applications for the production safety permits for Heishiliang gold mine and Hongshannan gold mine for the continued operations of these two mines;

• (v) there is no legal obstacle to the extension of the validity periods of the exploration licences and exploitating licences held by Xinjiang Tianmu if Xinjiang Tianmu submits the applications and the relevant materials no less than 30 days prior to the expiry date of the relevant licences; and

• (vi) there is no legal obstacle to the production safety permit extension applications for Heishiliang gold mine and Hongshannan gold mine.

Requirements for the exploration and exploitation operation

There are no extra requirements (e.g. licences, permits or certificates) for the exploration and exploitation operation. To apply for the licence extension, the relevant information and documents have to be submitted to the Ministry of Land and Resources Department of Xinjiang within 30 days before the existing exploration or exploitation licences expired. Relevant documents of exploration licence extension include:

1. application letter of exploration licence extension;

2. copy of the certificate of qualification of the exploration unit;

3. exploration working plan, contract or engagement letter;

4. design report of the exploration project and relevant graphs;

5. evidences of source of funds for the exploration project;

6. boundary map of the exploration area;

7. transportation and location map;

8. map of the working areas;

9. amendment or update of the previously filed exploration report;

10. capital injection report (project expenditure summary);

11. investigation letter issued by the related administrative departments of government; and

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APPENDIX I

1. original exploration licence.

Relevant documents of exploitation licence extension include:

1. application letter of exploitation licence extension;

2. original and duplicate of exploitation licence;

3. assessment letter issued by the related Ministry of Land and Resources Department;

4. evidence of remaining resource;

5. explanatory document of mine development;

6. assessment confirmation of exploitation licence and payment record;

7. copy of business certificate of the licence holder;

8. copy of approval certificate of foreign investment company; and

9. performance progress of registration of mineral resource occupation before change and registration of mineral resource occupation.

As advised by the legal advisers of the Company as to the PRC laws, as at the Latest Practicable Date, there were no legal claims or proceedings that might have (i) material influence on Xinjiang Tianmu’s rights to explore or exploit the Target Mines; and (ii) there were no legal claims or proceedings including ancestral or native claims that existed over the land on which the mines of Xinjiang Tianmu were located.

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APPENDIX I

MANAGEMENT TEAM

Biographical details of all the directors and senior management of Xinjiang Tianmu are set out as follows:

Directors

1. Mr. Felipe Tan ( 陳奕輝先生 )

Mr. Felipe Tan (陳奕輝先生) is currently the vice-chairman of Xinjiang Tianmu. He has been a director of Xinjiang Tianmu since 2002. He is also a director of the Vendor and the Target Company. He has over 30 years of experience in metal trading including 13 years of management experience in mining industry in the PRC. Mr. Tan had been the representative, trader or vice president for various international corporations in the PRC from 1977 to 1982 and in Hong Kong from 1982 to 1988. Since 1988, Mr. Tan had established and operated Simsen Metals (Holdings) Limited (currently known as Simsen International Corporation Limited) (“ Simsen ”), which was subsequently listed on the Main Board of Hong Kong Stock Exchange (stock code: 993) in 1994. During the period from 1994 to 2006, Mr. Tan was the director of Simsen and its subsidiaries, responsible for its metal trading and mining operations. From 1999 to 2008, Mr. Tan was the chairman of the board of Xinjiang Yakesi Resources Company Limited (“ Yakesi Company ”) which mainly developed and operated nickel-copper mines in northwestern China. Since 2003, Mr. Tan has also been the director of Xinjiang Weifu Mining Limited (“ Xinjiang Weifu ”) which operated an iron mine in the PRC from 2003 to 2008. From 2005 onwards, Mr. Tan has been the chairman of the board, president and chief executive officer of GobiMin Inc. (“ GobiMin ”), the shares of which are listed on the TSX Venture Exchange in Canada (stock code: GMN.V). GobiMin is mainly engaged in the development, exploration and exploitation of mineral resources including nickel, copper, gold, lead and zinc in Xinjiang, the PRC. Since 2009, Mr. Tan has been the director of Xinjiang Tongyuan Minerals Limited (“ Xinjiang Tongyuan ”) which is engaged in exploration and development of a gold mine in Xinjiang.

2. Mr. Zhang Yunlong ( 張雲龍先生 )

Mr. Zhang Yunlong (張雲龍先生) is currently the chairman of the board of Xinjiang Tianmu. He has been a director of Xinjiang Tianmu since 2003. He graduated from Beijing University of Technology with a master degree in Management Science and Engineering. He has over 20 years of experience in mining in Xinjiang. He first joined Brigade No. 6 in 1998 and has been assigned various positions including the manager of the Planning and Operation Division and vice prefect. He is currently the head prefect and deputy party secretary of Brigade No. 6.

3. Mr. Zhang Ming ( 張明先生 )

Mr. Zhang Ming (張明先生) has been a director of Xinjiang Tianmu since 2002. He has over 10 years experience in the mining industry. From 1998 to 2000, he was a director of Hami Economy and Trade Committee (哈密市經濟貿易委員會) and also a director of Hami Gold Bureau (哈密黃金局). Mr. Zhang was also a director and the general manager of Yakesi Company from 2000 to 2008, in charge

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FURTHER INFORMATION ON THE ACQUISITION AND THE TARGET GROUP

of the overall development and operations of nickel-copper mines in northwestern China. From 2003 to 2007, Mr. Zhang was a director and the general manager of Xinjiang Weifu and was responsible for its iron ore mining, processing and retailing businesses. Since 2009, Mr. Zhang has been re-appointed as a director and the general manager of Xinjiang Weifu. Xinjiang Weifu owns various joint ventures engaging in exploration projects of gold, copper, nickel, lead and zinc in Xinjiang. Mr. Zhang is also a director of these exploration joint ventures. Since 2005, Mr. Zhang has been a director of GobiMin. Mr. Zhang is responsible for the development of GobiMin’s business in China. Since 2009, Mr. Zhang has been a director of Xinjiang Tongyuan which is engaged in exploration and development of a gold mine in Xinjiang.

4. Mr. Li Yan ( 李焰先生 )

Mr. Li Yan (李焰先生) is currently a director and general manager of Xinjiang Tianmu. He graduated from Changchun Geology Institute (長春地質學院 ) (now known as Changchun University of Science and Technology 長春科技大學) majoring in geological exploration. He has over 29 years of experience in mining and exploration in the PRC. During 1982 to 1992, he was employed by Brigade No. 11 of Xinjiang Bureau of Geology and Mineral Resources (新疆地質礦產勘查開發局第十一地質 大隊) and was promoted as vice prefect in 1992. He then joined Brigade No. 6 in 1992. Mr. Li had been the chairman of the board of Xinjiang Baodi Mining Limited (新疆寶地礦業有限責任公司) from 2004 to 2008. He was promoted as officer-in-charge of Mining & Asset Management Department of Xinjiang Bureau of Geology and Mineral Resources in 2008 and responsible for strategy development and policy and control implementation of mining projects and other assets. He has been assigned various positions including head prefect, general manager, executive director, chairman of the board in entities engaging in exploration, exploitation and production of gold, iron, lead, zinc and nickel-copper mines of Brigade No. 6 or Xinjiang Baodi Mining Limited since 1993 until his retirement from Xinjiang Bureau of Geology and Mineral Resources in 2009. From 2002 to 2004, he was the chairman of the board of Xinjiang Tianmu. Since 2009, he has been a director and the general manager of Xinjiang Tianmu and Xinjiang Tongyuan. Mr. Li is responsible for the daily production, technical aspects and management of Xinjiang Tianmu.

5. Ms. Ko Yuen Kwan ( 高婉君女士 )

Ms. Ko Yuen Kwan (高婉君女士) has been a director of Xinjiang Tianmu since 2008. She obtained a master degree in Professional Accounting from the Hong Kong Polytechnic University. She is a qualified accountant (member of The Hong Kong Institutes of Certified Public Accountants, CPA Australia and The Hong Kong Institute of Chartered Secretaries) and has over 16 years experience in compliance, accounting and finance related matters of listed companies including over six years in mining companies in the PRC. She has been a director of Yakesi Company from 2007 to 2009 and also a director of Xinjiang Weifu since 2009. She has joined GobiMin since 2005 and is currently its vice president, chief financial officer and company secretary.

6. Mr. Han Zhaoju ( 韓照舉先生 )

Mr. Han Zhaoju (韓照舉先生) has been a director of Xinjiang Tianmu since 2009. He graduated from Chang An University (長安大學) majoring in resources exploration. He has over 17 years of

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experience in mining industry in the PRC. During 1994 to 2006, he was employed as geological technician of Brigade No. 6. From 2006 to 2007, he was the geological technician of Hami Baoshan Mining Limited. In 2007, Mr. Han was assigned to Land and Resources Department of Hami as geological technician and Xinjiang Tianmu as a management member by Brigade No. 6. Since 2007, he has been the deputy general manager of Xinjiang Tianmu and is in charge of the technical department.

7. Ms. Gao Jinxia ( 高金霞女士 )

Ms. Gao Jinxia (高金霞女士) has been appointed as a director of Xinjiang Tianmu since 2009. She graduated from Xinjiang Grain College (新疆糧食學校) majoring in Accounting. She has over 20 years of finance and accounting experience in mining industry in the PRC. Since 1991, she has been assigned various positions including treasury, vice department head and department head of the Finance Department of Brigade No. 6.

8. Ms. Hu Caixia ( 胡彩霞女士 )

Ms. Hu Caixia (胡彩霞女士) has been appointed as a director of Xinjiang Tianmu since 2011. She graduated from Wuhan University (武漢大學) majoring in Administration Management. She has about 20 years of personnel, administration and management experience including over 10 years in mining companies in the PRC. During 2000 to 2009, she has been assigned various positions including administration and personnel manager, office officer and compliance manager of Yakesi Company. She joined Xinjiang Weifu in 2009 and is now the vice general manager of Xinjiang Weifu.

9. Mr. Wang Ling ( 王凌先生 )

Mr. Wang Ling (王凌先生) has been appointed as a director of Xinjiang Tianmu since 2011. He graduated from Xinjiang Finance Institute (新疆財經學院) (now known as Xinjiang University of Finance 新疆財經大學) majoring in Economics Management. He has over five years of audit experience in professional firm and six years of accounting and finance experience in mining industry in the PRC. During 2005 to 2010, he has been assigned various positions including accountant, accounting supervisor and vice manager of the Finance Department of Yakesi Company. He is now the finance manager of Xinjiang Weifu.

10. Mr. Lu Linjiang ( 呂林江先生 )

Mr. Lu Linjiang (呂林江先生) has joined Xinjiang Tianmu since 2002 and was a director of Xinjiang Tianmu from April 2008 to August 2009. Thereafter, he remains a member of the management in charge of daily administration of Xinjiang Tianmu till now. He has over nine years experience in administration management in mining industry. Since January 2011, Mr. Lu has been re-appointed as a director of Xinjiang Tianmu.

11. Mr. Peng Fanghong ( 彭方洪先生 )

Mr. Peng Fanghong (彭方洪先生) has been a director of Xinjiang Tianmu since 2011. He graduated from Beijing University of Technology with a master degree majoring in engineering management. He

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has over 28 years of experience in mining industry in the PRC. He joined Brigade No. 6 in 1983 and has been assigned various positions including the technical leader of geological survey, section leader and technical director, chief of Operation and Development Department and research analyst. During April 2004 to January 2005, he was also the officer of Development Department of Hami Baoshan Mining Limited. He is currently a vice team leader of Brigade No. 6.

12. Mr. Ma Deyi ( 馬德義先生 )

Mr. Ma Deyi (馬德義先生) has been a director of Xinjiang Tianmu since 2011. He graduated from Changchun Geology Institute (長春地質學院) (now known as Changchun University of Science and Technology 長春科技大學) majoring in mine exploration and Xi’an Engineering College majoring in industrial enterprise management. He has around 20 years of experience in mining in the PRC. He joined Brigade No. 6 in 1991 and has been assigned various positions including the drilling technician of Exploration Division, director and vice instructor of Engineering Exploration Institute, Head of Exploration Department. He was also a teacher and vice dean of Academic Affairs of the Geological School of Xinjiang Bureau of Geology and Mineral Resources during 1993 to 2002 and the manager of Hami Dadi Engineering Investigation Co., Limited from 2004 to 2006. He is currently a vice team leader of Brigade No. 6.

13. Mr. Deng Gang ( 鄧剛先生 )

Mr. Deng Gang (鄧剛先生) has been a director of Xinjiang Tianmu since 2011. He graduated from Chengdu University of Technology majoring in mining geology. He has over 22 years of experience in mining in the PRC. He joined Brigade No. 6 in 1989 and has been assigned various positions including the technician of Geology and Mineral Resources Department, project leader of geological survey, vice leader of geological project, geological project manager of geological survey, assistant chief engineer, vice director of geological survey, and director of geological survey. During the period from October 2002 to March 2004, he was also the geological project manager of Hami Baoshan Mining Limited. He is currently the chief engineer of Brigade No. 6.

Senior management

Mr. Chen Yanwen ( 陳彥文先生 )

Mr. Chen Yanwen (陳彥文先生) is currently a senior geological engineer of Xinjiang Tianmu and has joined the Company since March 2009. He graduated from Southwest University of Science and Technology majoring in geological and mining surveying. He has over 20 years of experience in mining in the PRC. Since 2005, he has been assigned various positions including chief engineer and project director in the exploration and exploitation of six gold mines, five nickel-copper mines and one iron mine including the Target Mines in Xinjiang and two other iron mines in Gansu and has been responsible for the review of exploration designs, technical directions, designing of mining infrastructure, supervising of ore production, preparation of production reports, etc.

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INDUSTRY OVERVIEW

1. Gold industry

• 1.1 Overview of gold industry

Demand for gold is mainly derived from four sectors, namely jewellery consumption, industrial and dental uses, retail investments, and Exchange Traded Funds (“ ETFs ”) and similar products. Nowadays, the consumption of gold produced throughout the world consists of about 50% in jewellery, 40% in investments, and 10% in industry.

1.2 Gold supply and demand

Throughout 2009, global jewellery demand continued to recover from the depressed levels in the first quarter which was an aftermath of the global economic recessions. Global demand in the third quarter of 2011 amounted to 1,078.2 tonnes, an 8.1% increase from the third quarter of 2010, according to the World Gold Council. The global jewellery demand in the third quarter of 2011 has decreased by 10.3% when compared with the third quarter of 2010. India and China are the two largest markets for gold jewellery, which accounted for more than half of total world demand. Figures below show the global identifiable jewellery consumption from the first quarter of 2009 to the third quarter of 2011.

Global identifiable gold demand for jewellery consumption (in tonnes)

	Identifiable gold	Identifiable gold
	demand for jewellery
Quarter	consumption
2009 Q1		356.1
Q2		444.8
Q3		492.1
Q4		520.5
2010 Q1		520.5
Q2		416.1
Q3		518.2
Q4		562.0
2011 Q1		552.5
Q2		469.1
Q3		464.7

Source: Gold Demand Trends, Full year 2011, World Gold Council, published in February 2012

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Gold demand for industrial and dental applications has been gradually declining in the third quarter of 2011 compared with the third quarter of 2010. On the other hand, demand from electronics in the third quarter of 2011 was 86.7 tonnes, 0.7% over that in the third quarter of 2010. Emerging from the global economic crisis prevailing in late 2008, this particular sector has been improving since the first quarter of 2009. Demand even rose to 86.7 tonnes in the third quarter of 2011.

Demand from the other industrial and decorative segment (classified as “Other industrial” as below) also contributes to the elevated gold price, with demand increasing by 6.4% in the fourth quarter of 2010 from that of 2009. The demand increased from 18.2 tonnes in the first quarter of 2009 to 22.4 tonnes in the third quarter of 2011. The following figures show the global identifiable gold demand for industrial and dental uses.

Global identifiable gold demand for industrial and dental uses (in tonnes)

		Other
Quarter	Electronics	industrial	Dentistry	Total
2009 Q1	56.5	18.2	13.0	87.7
Q2	66.7	22.4	13.2	102.3
Q3	74.3	19.7	13.2	107.2
Q4	77.5	21.8	13.2	112.5
2010 Q1	79.0	22.4	12.8	114.3
Q2	80.4	23.3	12.4	116.1
Q3	86.1	22.0	11.8	120.0
Q4	81.3	23.2	11.6	116.1
2011 Q1	79.9	22.8	11.8	114.5
Q2	82.9	23.1	10.9	116.9
Q3	86.7	22.4	10.7	119.8

Source: Gold Demand Trends, Full year 2011, World Gold Council, published in February 2012

The net retail investment sector is further divided into several categories relating to global bar and coin demands, including bar hoarding, official coins, medals and imitation coins, and some other identified retail investment in gold. The demand for net retail investment in the third quarter of 2011 was 416.1 tonnes, which was 34.3% higher quarter over quarter. Among the various categories, bar hoarding demand accounted for over 77.2% and totaled 321.4 tonnes in the third quarter of 2011. Official coin demand remained resilient to the recovering global economy. The demand in the third quarter of 2011 amounted to 74.6 tonnes, capturing 17.9% of the net retail investment gold demand.

Demand for gold in the ETFs and similar products sector remained healthy in terms of absolute level of investment demand, there was a demand of 77.6 tonnes from ETFs and similar products in the third quarter of 2011. The figure below shows the identifiable gold demand for net retail investment and gold ETFs.

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Identifiable gold demand for net retail investment and gold exchange traded funds (in tonnes)

					Gold exchange
Quarter		Net retail investment			traded funds
	Bar hoarding	Official coin	Other	Total
2009 Q1	72.4	68.9	6.0	147.3	465.1
Q2	140.3	55.6	14.8	210.7	68.1
Q3	142.7	49.5	17.8	210.0	42.2
Q4	132.9	55.7	20.3	208.9	41.7
2010 Q1	182.0	45.3	22.5	249.8	4.7
Q2	216.7	68.8	16.0	301.4	291.6
Q3	228.9	56.6	24.3	309.8	49.1
Q4	271.4	41.9	25.5	338.8	22.3
2011 Q1	312.7	60.5	24.7	397.9	-62.1
Q2	256.1	50.2	25.0	331.3	51.7
Q3	321.4	74.6	20.0	416.1	77.6

Source: Gold Demand Trends, Full year 2011, World Gold Council, published in February 2012

Data releases according to the National Bureau of Statistics of China showed that China’s GDP in the fourth quarter of 2010 was RMB 39,798.3 billion, a 10.3% increase compared with that of the fourth quarter of 2009. Such economic growth was reflected in a 53.5% increase in consumer demand for gold from the fourth quarter of 2009 to that of 2010, reaching 190.3 tonnes. The following figure compares the volume of consumer demand for gold in China.

Consumer demand for gold in China

			Percentage
	2009 Q4	2010 Q4	change
	(tonnes)	(tonnes)
Jewellery	91.7	128.9	+40.6%
Net retail investment	32.3	61.4	+90.1%
Total	124.0	190.3	+53.5%

Source: World Gold Council

The supply of gold worldwide has been on a downward trend from 2005 to 2008. Two major factors were the de-hedging by gold producers and reducing contributions from official sector sales over the past few years. A bounce back had been observed in 2009 and 2010 when supply of gold increased to

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APPENDIX I

4,344 tonnes in 2010. Up to September 2011, the world gold supply was 3,526 tonnes, which increased by 9.9% compared with the first three quarters of 2010. The figure illustrates the world gold supply from 2000 to September 2011 as below.

World supply of gold from 2000 to September 2011

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

Tonnes
5,000
4,500
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Sep
2011
----- End of picture text -----

Source: GFMS Limited and World Gold Council

The world gold mine production followed a similar pattern over the past few years. The volume amounted to 2,693 tonnes in 2010, a 4.0% increase over the previous year. In the third quarter of 2011, the world gold mine production increased by 2.6% over the third quarter of 2010. The following figure shows the world gold mine production from 2000 to September 2011.

World gold mine production from 2000 to September 2011

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

Tonnes
3,000
2,500
2,000
1,500
1,000
500
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Sep
2011
----- End of picture text -----

Source: GFMS Limited and World Gold Council

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1.3 Gold price

The gold price has experienced a substantial increase over the past decade. The closing spot price in 2010 was more than five times higher than that in 2000. The closing spot price per ounce in December 2010 was US$1,421, a 29.5% increase in the twelve-month period from December 2009. The following two figures respectively show the monthly closing spot price from January 2010 to November 2011 and the closing spot price from 2000 to 2010.

Monthly closing spot price of gold from January 2010 to November 2011

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

Closing spot price
(US$/Ounce)
2,000
1,800
1,600
1,400
1,200
1,000
800
600
400
200
0
Jan 2010 Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan 2011 Feb Mar Apr May Jun Jul Aug Sep Oct Nov
----- End of picture text -----

Source: Bloomberg

• 1.4 Gold consumer analysis

Ore mining industry is the primary industry of metals. Primary industry means the first step of the supply chain to create the basic materials for use in other industries. Therefore, mining companies are the primary suppliers of metal manufacturing companies.

With reference to the statistics extracted from World Gold Council, the global gold consumption was 4,050.7 tonnes in 2010, a growth of 12.0% compared to that in 2009 of 3,616.6 tonnes. The 2010 gold demand consists of jewellery sector of 2,016.8 tonnes, technology sector of 466.4 tonnes and investment sector of 1,567.5 tonnes. The following table depicts the distributions of the global gold demand in 2009 and 2010.

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Distributions of the global gold demand in 2009 and 2010 (in tonnes)

Jewellery Technology Investment Total gold demand	2009 1,813.6 409.8 1,393.2 3,616.6	2010 2,016.8 466.4 1,567.5
		4,050.7

Source: World Gold Council

Yearly closing spot price of gold from 2000 to 2010

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

Closing spot price
(US$/Ounce)
1,600
1,400
1,200
1,000
800
600
400
200
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
----- End of picture text -----

Source: Bloomberg

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2. Iron industry

2.1 Overview of iron industry

Iron constitutes about 5% of the crust of the Earth. It is the world’s most commonly used metal. Moreover, it is the key ingredient used to craft steel which accounts for almost 95% to 98% of the iron ore consumption per annum. Steel is primarily used in structural engineering applications, maritime purposes, automobiles, and general industrial machinery.

2.2 Iron supply and demand

Based on the data extracted from the U.S. Geological Survey (“ USGS ”), it is indicated that the world iron production increases each year, reaching a historical high of around 2,400 million tonnes in 2010. The supply of iron from China follows a similar trend to the world iron production, reaching a historical high of 900 million tonnes in 2010. The two figures below illustrate the supplies of iron worldwide and in China from 2000 to 2010 respectively.

World supply of iron from 2000 to 2010

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

Million tonnes
3,000
2,500
2,000
1,500
1,000
500
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
----- End of picture text -----

Source: U.S. Geological Survey

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Supply of iron in China from 2000 to 2010

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

Million tonnes
1,000
900
800
700
600
500
400
300
200
100
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
----- End of picture text -----

Source: U.S. Geological Survey

According to the studies conducted by the AME Group, a global research firm of independent economists specialized in the metal and mineral industries, and OAO Severstal, one of the leading vertically integrated steel and mining companies in the world, the world iron demand attained a historical high of around 1,800 million tonnes in 2010. However, due to the global financial crisis in the late 2008, the demand of iron shrank in 2009. The poor economic environment hurt the construction and automobiles markets, which in turn, decreased the demand of steel. Nevertheless, unlike the other parts of the world, the iron demand in China has maintained a stable increase during the period from 2005 to 2010. The following two figures depict the iron demands worldwide and in China from 2005 to 2010 respectively.

World demand for iron from 2005 to 2010

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

Million tonnes
2,000
1,800
1,600
1,400
1,200
1,000
800
600
400
200
0
2005 2006 2007 2008 2009 2010
----- End of picture text -----

Source: AME Group and OAO Severstal

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Demand for iron in China from 2005 to 2010

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

Million tonnes
1,000
900
800
700
600
500
400
300
200
100
0
2005 2006 2007 2008 2009 2010
----- End of picture text -----

Source: AME Group and OAO Severstal

2.3 Iron ore price

The iron price was volatile in 2010, which increased rapidly in the first quarter, but then dropped and remained low in the second and third quarters respectively, and finally increased again in the fourth quarter. In November 2011, the iron price showed a sharp decrease of 25.4% when compared with that in November 2010. The following two figures further illustrate the monthly and yearly China import iron ore fines closing spot prices respectively.

China import iron ore fines (with 62% iron content) Monthly closing spot price from January 2010 to November 2011

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

Closing spot price
(RMB/Metric tonnes)
1,300
1,200
1,100
1,000
900
800
700
600
500
Jan 2010 Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan 2011 Feb Mar Apr May Jun Jul Aug Sep Oct Nov
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Source: Steel Business Briefing Commodities Research

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China import iron ore fines (with 62% iron content) Yearly closing spot price from 2008 to 2010

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

Closing spot price
(RMB/Metric tonnes)
1,200
1,000
800
600
400
200
0
2008 2009 2010
----- End of picture text -----

Source: Steel Business Briefing Commodities Research

2.4 Iron ore consumer analysis

Mineral Information Institute indicated that approximately 98% of iron ore is used for steel production. Construction materials and mechanical machinery constitute more than half of the production of steel. Other usages of steel include automobiles, electrical equipments and domestic appliances.

According to the Steel Statistical Yearbook 2011 issued by the World Steel Association, the apparent world steel use (crude steel equivalent) in 2010 was 1,385.8 million metric tonnes, a sharp increase of 14.0% from that in 2009 of 1,216.0 million metric tonnes. The table below illustrates the apparent world steel uses from 2006 to 2010.

Apparent world steel uses (crude steel equivalent) from 2006 to 2010

	Apparent world steel use
Year	(million metric tonne)
2006	1,239.3
2007	1,325.1
2008	1,308.8
2009	1,216.0
2010	1,385.8

Source: World Steel Association

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3. Copper industry

3.1 Overview of copper industry

Copper can be utilized for numerous functions. Due to its excellent conduction of electricity, more than half of the copper consumed is used in electrical generators and motors, electrical power and lighting fixtures, electrical wiring, radio and television sets, computers and almost everything electrical. Copper also conducts heat well and is used for thin-walled copper tubing in air conditioning and refrigeration units, motor vehicle radiators, home heating systems and steam condensers.

3.2 Copper supply and demand

Data from the World Bureau of Metal Statistics reveals that the world’s supply of copper has been fairly consistent throughout the past decade. The size of supply ranges from 14,000 to 20,000 thousand tonnes. In contrast, China’s copper supply has increased dramatically in the past decade, from 500 thousand tonnes in 2000 to 1,200 thousand tonnes in 2010. The two figures below illustrate the copper supplies worldwide and in China from 2000 to June 2011 respectively.

World copper production from 2000 to June 2011

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

Thousand tonnes
25,000
20,000
15,000
10,000
5,000
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 June
2011
----- End of picture text -----

Source: World Bureau of Metal Statistics

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China copper production from 2000 to June 2011

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

Thousand tonnes
1,400
1,200
1,000
800
600
400
200
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 June
2011
----- End of picture text -----

Source: World Bureau of Metal Statistics

By comparing the supply and demand of both the world and China, a continual trend can be seen in the past decade. Both the world and China achieved historical highs last year. The following two figures depict the copper demands worldwide and in China from 2000 to June 2011 respectively.

World copper demand from 2000 to June 2011

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

Thousand tonnes
25,000
20,000
15,000
10,000
5,000
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 June
2011
----- End of picture text -----

Source: World Bureau of Metal Statistics

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China copper demand from 2000 to June 2011

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

Thousand tonnes
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 June
2011
----- End of picture text -----

Source: World Bureau of Metal Statistics

3.3 Copper price

The copper price generally showed a rising trend in the past decade, except in 2008 where it dropped significantly to the level in 2004. During 2010, the copper price increased by 43.5% from January to December. However, the copper price dropped from US$9,768 per tonne in January to US$7,860 in November. The following two figures respectively illustrate the monthly and yearly copper spot prices.

LME monthly copper spot price from January 2010 to November 2011

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

Closing spot price
(US$/Tonnes)
11,000
10,000
9,000
8,000
7,000
6,000
5,000
4,000
3,000
2,000
Jan 2010 Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan 2011 Feb Mar Apr May Jun Jul Aug Sep Oct Nov
----- End of picture text -----

Source: London Metal Exchange

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LME yearly copper spot price from 2000 to 2010

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Source: London Metal Exchange

3.4 Copper consumer analysis

According to Standard CIB Global Research from Standard Bank Group, the world copper production consists of about 42% for electrical and electronic sectors, 28% for construction, 12% for transportation, 9% for industrial machinery, and the remaining 9% for consumer and general sectors.

In 2010, the world refined copper consumption hit the record high of 1,533,342 metric tonnes according to the statistics from World Bureau of Metal Statistics. The following table shows the world refined copper consumption from 2006 to 2010.

World refined copper consumption from 2006 to 2010

	**World **	**refined **	copper consumption
Year			(in metric tonne)
2010			1,533,342
2009			1,511,134
2008			1,402,725
2007			1,426,272
2006			1,298,379

Source: World Bureau of Metal Statistics

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4. Nickel industry

4.1 Overview of nickel industry

Since nickel has a slow rate of oxidation at room temperature, it is always used as a corrosion-resistant material. This property has led to the use for plating metals such as iron and brass, chemical apparatus, and in certain alloys which will retain a high silvery polish for long time. About 6% of world nickel production is still used for corrosion-resistant pure-nickel plating. Nickel is chiefly valuable in the modern world for the alloys it forms. About 60% of world production is used in nickel-steels, particularly stainless steel.

4.2 Nickel supply and demand

According to the International Nickel Study Group, the global nickel supply reached its historical high in 2010. However, regarding the nickel supply from China, the amount has continued to increase gradually. In 2010, the nickel supply of China accounts for 26% of the world supply. The two figures below illustrate the nickel supplies worldwide and in China from 2000 to June 2011 respectively.

World nickel production from 2000 to June 2011

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

Thousand tonnes
1,600
1,400
1,200
1,000
800
600
400
200
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 June
2011
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Source: World Bureau of Metal Statistics

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China nickel production from 2000 to June 2011

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Thousand tonnes
450
400
350
300
250
200
150
100
50
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 June
2011
----- End of picture text -----

Source: World Bureau of Metal Statistics

The world nickel demand has varied throughout the last few years. The nickel demand has increased dramatically from 1,305 thousand tonnes in 2009 to 1,511 thousand tonnes in 2010. However, the demand in China has maintained a fairly stable gain each year and dramatical gain in 2009 and 2010, while the current supply cannot fulfill the demand. The following two figures show the nickel demands worldwide and in China from 2000 to June 2011 respectively.

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World nickel demand from 2000 to June 2011

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

Thousand tonnes
----- End of picture text -----

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

1,600
1,400
1,200
1,000
800
600
400
200
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 June
2011
----- End of picture text -----

Source: World Bureau of Metal Statistics

China nickel demand from 2000 to June 2011

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

Thousand tonnes
600
500
400
300
200
100
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 June
2011
----- End of picture text -----

Source: World Bureau of Metal Statistics

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4.3 Nickel price

Nickel price, like most commodities, is volatile and greatly influenced by global demand and supply conditions. According to the London Metal Exchange (“ LME ”), the nickel price increased sharply from 2005 to 2006, but dropped to the original level within two years after that. The monthly nickel closing price in November 2011 was US$17,492 per tonne, which was 23.9% lower than that in November 2010. The two figures below show respectively the monthly and yearly closing prices for nickel.

LME monthly nickel closing price from January 2010 to November 2011

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Closing spot price
(US$/Tonnes)
35,000
30,000
25,000
20,000
15,000
10,000
5,000
0
Jan 2010 Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan 2011 Feb Mar Apr May Jun Jul Aug Sep Oct Nov
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Source: London Metal Exchange

LME yearly nickel closing price from 2000 to 2010

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

Closing spot price
(US$/Tonne)
40,000
35,000
30,000
25,000
20,000
15,000
10,000
5,000
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
----- End of picture text -----

Source: London Metal Exchange

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APPENDIX I

4.4 Nickel consumer analysis

Standard CIB Global Research from Standard Bank Group estimated that about 65% of the world nickel consumption is for the production of stainless steel. The other usages include 22% for the production of other alloys, 8% for electroplating and 5% for the manufacture of chemicals.

Based on the data from World Bureau of Metal Statistics, the world refined nickel consumption increased from 105,438 metric tonnes in 2009 to 131,825 metric tonnes in 2010, a growth of 25.0%. The table below illustrates the world refined nickel consumption from 2006 to 2010.

World refined nickel consumption from 2006 to 2010

	**World **	**refined **	copper consumption
Year			(in metric tonne)
2010			131,825
2009			105,438
2008			89,306
2007			122,171
2006			124,002

Source: World Bureau of Metal Statistics

Competition landscape

For the gold market, the unique pricing mechanism of gold products through commodities exchange has caused fewer price competitions for market share, as compared to other industries. Therefore, each individual mine owner of gold simply receives the market price and its individual position in the market is less relevant. Gold in any kind of form is priced with reference to the commoditized gold bar (usually 99.99% or 99.95% pure) at the basis of its gold content with the adjustment for refining charges.

The only key element of competition for the gold miners is the cost structure, such as mining and processing costs. Those with lower costs will be at better position to survive the competition.

Regarding the iron, copper and nickel mining industries, there is no standardized pricing mechanism in the market of these metal ores. The copper and nickel ores are traded by negotiation with reference to pure metal prices in Shanghai Metal Exchange, whereas the price of the iron ores is negotiated with reference to the price announced by the major producers in the region through their websites. Due to the heavy costs of transportation for long distance delivery, it is expected that customers of the Target Group are mainly the major producers located in Xinjiang or nearby regions in order to achieve cost effectiveness.

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APPENDIX I

Therefore, the Target Group has planned to build and maintain favorable relationships with those major producers to which the Target Group should be able to sell the products at a higher margin or secure the revenues for a certain period of time by entering middle to long term sales agreements with those major producers in the regions.

Entry and exit barriers

One of the major entry barriers for the Target Group is the requirement of large initial capital expenditure. Outsourcing the later stages of the exploration work can lessen the cost of hiring heavy machines and equipment. Another possible entry barrier is the licensing requirements and government regulations. Mining companies are required to obtain exploration and exploitation licences for mine operations.

The exit barriers include the heavy investments made in acquiring capital equipment with specific uses, contract contingencies with purchasers and suppliers, and other costs or penalties incurred when terminating agreements and contracts.

Future opportunities and challenges

Through continued exploration works and drilling activities, the Target Group would certainly be capable of increasing the reserves and resources of the existing exploitation licences and obtaining further exploitation licences. With the exploitation licences, the Target Group can fully capture the profit generating capacity of the mineral assets. Besides, the demand for metals continues to climb, leading to higher prices and greater profitability.

With strong global demand for both base and precious metals, mining companies are expected to experience growth. Sustaining growth is, therefore, the major challenge for the Target Group. The Target Group must keep up with performance improvement and cost saving, as well as training of workers.

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FURTHER INFORMATION ON THE ACQUISITION AND THE TARGET GROUP

PRC LAWS AND REGULATIONS

The relevant laws and regulations governing the gold, iron, copper and nickel mining businesses in Xinjiang, PRC are set out below:

Laws and regulations relating to mineral resources

The “Mineral Resources Law of the PRC” (中華人民共和國礦產資源法), which was first promulgated by the Standing Committee of the National People’s Congress (the “ NPC ”) on 19 March 1986 and became effective on 1 October 1986, was amended by the Standing Committee of the NPC on 29 August 1996 and became effective on 1 January 1997. Under the “Mineral Resources Law” of the PRC, all mineral resources of the PRC are owned by the State. The geology and mineral resources department of the State Council, which is now the Ministry of Land and Resources of the PRC (國土資源部) (the “ MOLAR ”), is responsible for the supervision and administration of the exploration and mining of the national mineral resources. The geology and mineral resources departments of the PRC government of the respective provinces, autonomous regions and municipalities are responsible for the supervision and administration of the exploration and exploitation of mineral resources within their own administrative regions. Enterprises engaged in the mining or exploration of mineral resources must obtain exploitation licences and exploration licences, as the case may be, which are transferable only in certain circumstances as provided under PRC laws and regulations, subject to approval by relevant administrative authorities.

Holders of exploration licences and of exploitation licences must pay the exploration right usage fees and mining right usage fees respectively.

In accordance with the “Regulations on Mineral Resources Management of Xinjiang” (新疆維吾爾自 治區礦產資源管理條例) promulgated on 13 January 1995 and amended on 11 October 1997 by the Standing Committee of the People’s Congress of Xinjiang, if an exploitation licencee does not carry out construction or production within one year after the date of the issuance of the exploitation licence, its exploitation licence will be revoked. If the annual output of a mine does not attain the planned annual output contemplated in the mining registration application for a long time, the coverage of the mine region and the mining scope may be reduced. The construction of a mine must follow the approved design of the mine, the basic construction procedures, and the construction inspection and acceptance system should be rigorously implemented. If any exploration activities damage the geological and ecological environment of a mine, exploitation licencee is responsible for the recovery of the damaged environment. For those causing damages to the production and lives of any third party, compensation should be paid and necessary compensatory measures should be taken in accordance with the relevant regulations.

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According to the “Mineral Resources Law of the PRC”, the “Administrative Measures on Registration of Tenement of Mineral Resources Exploration and Survey” (礦產資源勘查區塊登記管理辦法) and the “Administrative Measures on Registration of Mineral Resources Exploitation” (礦產資源開採登記 管理辦法), before the exploration and mining activities relating to mineral resources can commence, the project company must first obtain the exploration licences and the exploitation licences, which generally entitle the project company to the exploration and mining rights attached to the relevant mining project. Furthermore, if the mining activities involve gold resources, in accordance with the “Provisions on the Administration of Obtaining the Letter of Approval for Mining of Gold Minerals” (辦理開採黃金礦產批准書管理規定), which became effective as of 1 January 2004, a Gold Mining Permit (開採黃金礦產批准書) issued by the National Development and Reform Commission (國家發展和改革委員會) (“ NDRC ”) must also be obtained. Mining activities of iron, copper, nickel ore are not particularly required to obtain a permit similar to the gold mining permit.

In addition to the above laws and regulations, according to the “Catalogue for the Guidance of Foreign Investment Industries” (外商投資產業指導目錄) promulgated by the NDRC and Ministry of Commerce (商務部) (the “ MOFCOM ”), the mining or operation of certain types of minerals are classified as restricted or prohibited categories for foreign investment.

For example, the exploration and mining of gold and silver fall within the category of restricted foreign investment industries and requires higher level of governmental approval than permitted category.

According to the “Decisions of the State Council on Enhancing Geological Works” (國務院關於加強 地質工作的決定) (the “ Geological Decisions ”) promulgated on 20 January 2006, the PRC will focus on enhancing the exploration of mineral ores such as iron, copper, aluminium, lead, zinc, nickel, tungsten, tin, sylvite and gold. The construction of medium and large-sized mines of copper, aluminium, lead, zinc and nickel are industries encouraged according to the “Structural Adjustment of Industries Guidance Catalogue (2005)” (產業結構調整指導目錄（二零零五年本）) (“ Industries Guidance Catalogue ”), which was promulgated by NDRC on 2 December 2005. The exploration and mining of nonferrous metals, such as copper, lead, zinc and nickel in Xinjiang was included in the “Catalogue for the Guidance of Advantageous Industries for Foreign Investment in the Mid-west Regions (Amendment 2004)” (中西部地區外商投資優勢產業目錄（二零零四年修訂）) promulgated by NDRC and MOFCOM on 23 July 2004.

According to the “Eleventh Five-Year Plan for the Economic and Social development of Xinjiang (2006-2010)”, Xinjiang will further enhance the exploration and development of nonferrous metals such as copper, nickel, lead and zinc.

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APPENDIX I FURTHER INFORMATION ON THE ACQUISITION AND THE TARGET GROUP

Methods of obtaining exploration licence, exploitation licence and gold mining permit

Methods of obtaining exploration licence

In accordance with the “Administrative Measures on Registration of Tenement of Mineral Resources Exploration and Survey”, an applicant for the exploration licence must submit the following documents to the MOLAR or its local branch:

• an application form for registration and a map indicating the geographical scope of the blocks to be explored;

• a copy of the certificate of qualification of the exploration unit;

• exploration working plan, contract or engagement letter;

• an implementation plan for the exploration work and its appendixes;

• evidence of source of the funds for the exploration project;

• other materials required by the geology and mineral resources department of the State Council.

The MOLAR or its local branch must make a decision within 40 days after its receipt of the application documents, based on the principle of first-to-file, and notify the applicant of the result. If the application is approved, the applicant must pay the exploration right usage fee within 30 days of notification of approval. If the exploration right being applied for is based on a survey conducted using expenditures made by the State, the applicant must also pay the cost of exploration right, the amount of which is to be assessed by the MOLAR in cooperation with assessment agencies recognized by the State-owned Assets Supervision and Administration Commission of the State Council (國務院 國有資產監督管理委員會) (“ SASAC ”).

The maximum valid period of the initial term of the exploration licence is three years. In the case where a renewal is needed, an application must be submitted to the competent authority for renewal of such exploration licence at least 30 days prior to the expiration date stipulated thereon. Each renewal of the valid term cannot exceed two years.

Methods of obtaining exploitation licence

In accordance with the “Administrative Measures on Registration of Mineral Resources Exploitation”, an applicant for the exploitation licence must submit the following documents to the MOLAR or its local branch:

• an application form for registration and a map indicating the scope of the mining area;

• certificate of qualification of the applicant;

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• a plan for development and utilization of the mineral resources;

• approval documents for the establishment of the mining enterprise;

• evaluation report on the impact of exploitation of mineral resources on environment;

• other materials required by the geology and mineral resources department of the State Council.

The MOLAR or its local branch must make a decision within 40 days after its receipt of the application documents and notify the applicant of the result. If the application is approved, the applicant must pay the mining right usage fee within 30 days of notification of the approval. In the case where the mining right being applied for is for an area that has been surveyed and where the mineral reserve has been confirmed using expenditures made by the State, the applicant must also pay the cost of the mining right, the amount of which is to be assessed by the MOLAR in cooperation with assessment agencies recognized by the SASAC.

The maximum valid period of the initial term of the exploitation licence is determined according to the scale of the mine and is up to 30 years for a large-scale mine, up to 20 years for a medium-scale mine and up to 10 years for a small-scale mine. In the case where a renewal is needed, an application must be submitted to the competent authority for renewal of such permit at least 30 days prior to its expiration date.

Methods of obtaining gold mining permit

According to the “Provisions on the Administration of Obtaining the Letter of Approval for Mining of Gold Minerals”, the applicant for mining of gold minerals must submit the following documents to the NDRC:

• an application form for exploitation of gold minerals;

• a formal map specifically indicating the scope of the mining area;

• file records evidencing that the geological reserve report (地質儲量報告) which constitutes the basis of the construction has been appraised and filed; or documents evidencing the examination and approval of the geological reserves report;

• evaluation report on the impact on environment approved by competent environment protection authorities;

• where a boundary dispute concerning the mining area exists, the contract with respect to the boundary of the mining area that has been adjudicated by competent authorities;

• the contract and the articles of association of the company and the approval for establishment of the company, if the applicant is a company limited by shares.

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The NDRC must within 20 days upon receipt of all application documents decide whether or not to grant the permit. The review period may be extended by 10 days but the applicant has to be notified with the reasons for the extension.

The valid period for a gold mining permit varies from 5 years to 15 years, depending upon the production scale of the mine. In the case where a renewal is needed, an application must be submitted to the NDRC for renewal of the gold mining permit at least 30 days prior to the expiration date stipulated thereon.

According to the reform of government institutions of the PRC on 5 March 2008, the administration of the approval for mining of gold minerals has been delegated to the Ministry of Industry and Information Technology (中華人民共和國工業和信息部) (“ MIIT ”) with effect from 29 June 2008.

The holder of a gold mining permit is entitled to exploit gold mineral resources in the areas specified in the gold mining permit, subject to obtaining a corresponding exploitation licence.

Rights and obligations of holders of exploration licences

The holder of an exploration licence has, among others, the following rights:

• right to carry out exploration of the designated subject in the designated area and within the prescribed time as specified in the exploration licence;

• right to set up apparatus for power supply, water supply and communication channels in the exploration area and its adjacent areas, without prejudice to the original equipment for power supply, water supply and communication channels;

• right of access to the exploration area and its adjacent areas;

• right to temporarily use the land legally in accordance with the needs of the exploration project;

• priority in obtaining the mining right of mineral resources as specified in the exploration licence;

• priority in obtaining the exploration right of other newly discovered minerals within the designated exploration area;

• upon fulfillment of the prescribed minimum expenditure requirements, right to transfer the exploration right to a third party upon government approval;

• right to sell the mineral products extracted from the surface of the land in the exploration area, except for those mineral products which are required by the State Council to be sold to designated entities.

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FURTHER INFORMATION ON THE ACQUISITION AND THE TARGET GROUP

The holder of an exploration licence has, among others, the following obligations:

• to commence and complete the exploration work within the term of the exploration licence;

• to carry out the exploration work in accordance with the exploration plan and to ensure that there is no occurrence of unauthorised mining activities in the designated area;

• to carry out integrated exploration and assessment activities on the para-genetic and associated mineral resources;

• to submit an exploration report of the mineral resources to the relevant government authority for approval;

• to file with the exploration result of mineral resources for record as required;

• to act in line with the laws and regulations relating to labour safety, land rehabilitation and environment protection;

• to take steps to eliminate potential safety hazard upon the completion of the exploration work.

Rights and obligations of holders of exploitation licences

The holder of an exploitation licence has, among others, the following rights:

• to engage in mining activities in the designated area and within the term prescribed under the exploitation licence;

• to set up production facilities and amenities within the designated area;

• to sell the mineral products, except for those minerals which are required by the State Council to be sold to designated entities;

• to acquire the land use licences legally based on the requirement of its production and construction.

The holder of an exploitation licence has, among others, the following obligations:

• to carry out mining activities in the designated area and within the term of the exploitation licence;

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• to effectively protect and reasonably extract the mineral resources and integrate the use of the mineral resources;

• to pay resources tax and mineral resources compensation fees;

• to comply with laws and regulations relating to labour safety, soil and land conservation, land rehabilitation and environment protection;

• to submit a report on the conditions of exploitation and utilization of mineral resources to the relevant government authority.

Laws and regulations relating to the administration of gold

Under the “Administrative Regulations on Gold and Silver of the PRC” (中華人民共和國金銀管理條 例) promulgated and implemented on 15 June 1983 (the “ Administrative Regulations ”), the State shall pursue a policy of unified control over, and monopoly purchase and distribution of gold and silver, and the People’s Bank of China (the “ PBOC ”) shall be the State organisation responsible for the control of gold and silver. Purchase and sale of gold and silver were subject to the regulation of the PBOC. All gold and silver mined and refined by mining enterprises, rural communes, the armed forces and individuals engaged in the production of gold and silver (including those with ore exploration, mining, smelting and refining as their supplementary business), were required to be sold to the PBOC, and were not permitted to be retained for sale, exchange or use. Entities requiring gold and silver for use were required to submit a proposal to the PBOC on the use of gold and silver, which the PBOC would then examine and possibly approve.

On 30 October 2002, the Shanghai Gold Exchange commenced operation under the supervision of the State Council. Thereafter, the PBOC ceased its gold allocation and gold purchase operation. All PRC gold producers are now required to sell their standard gold bullion through the Shanghai Gold Exchange, and prices of gold on the Shanghai Gold Exchange are determined by market demand and supply, which essentially converge with the price of gold in the international market. On 27 February 2003, the State Council promulgated the “Decision of the State Council in relation to Termination of the Second Batch of Administrative Approval Projects and Amendment of the Management Method of Certain Administrative Approval Projects” (國務院關於取消第二批行政審批項目和改變一批行政審 批項目管理方式的决定) and cancelled the approval requirements for the production and sale of gold and gold products. As a result, although the Administrative Regulations have not been abolished, the policy of “centralized purchase and allocation of gold” as stipulated under the Administrative Regulations has been terminated in practice.

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FURTHER INFORMATION ON THE ACQUISITION AND THE TARGET GROUP

Since the promulgation of the “Administrative Permission Law of the PRC” (中華人民共和國行政許 可法) on 27 August 2003, which became effective as of 1 July 2004, the State Council reformed the administrative approval system and cleared the outstanding projects which were subject to administrative approval by its ministries and departments. The State Council promulgated the “Decision of the State Council on the Enactment of Administrative Permission for Certain Administrative Approval Projects Which Shall Be Retained” (國務院對確需保留的行政審批項目設定 行政許可的决定) on 29 June 2004 which was later amended on 29 January 2009. According to the decision (as amended), the import and export of gold and gold products remain subject to administrative examination and approval. The authority responsible for such examination and approval is the PBOC.

Laws and regulations relating to environmental protection

The State Environmental Protection Administration Bureau (國家環境保護部) is responsible for the supervision of environmental protection in, implementation of national standards for environmental quality and discharge of pollutants for, and supervision of the environmental management system of, the PRC. Environmental protection bureaus at the county level or above are responsible for environmental protection within their jurisdictions.

The “Environmental Protection Law of the PRC” (the “ Environmental Protection Law ”) (中華人民 共和國環境保護法), which became effective as of 26 December 1989, requires entities that operate production facilities that may cause pollution or produce other toxic materials to take steps to protect the environment and establish an environmental protection and management system. The system includes the adopting of effective measures to prevent and control exhaust gas, sewage, waste residues, dust or other waste materials. Entities discharging pollutants must register with the relevant environmental protection authorities.

The “Environmental Protection Law” and the “Administrative Regulations on Environmental Protection for Construction Project” (建設項目環境保護管理條例) which became effective as of 29 November 1998 stipulate that prior to the construction of new facilities or expansion or transformation of existing facilities that may cause a significant impact on the environment, a report on the environmental impact of the construction project needs to be submitted to the relevant environmental protection authority. The newly constructed production facilities may not be operated until the relevant authority is satisfied that such facilities are in compliance with all relevant environmental protection standards.

Under the “Mineral Resources Law of the PRC”, the amended “Land Administration Law of the PRC” (中華人民共和國土地管理法) which became effective as of 28 August 2004 and “Rules on Land Rehabilitation” (土地復墾規定) which became effective as of 1 January 1989, exploration of mineral resources must be in compliance with the legal requirements on environmental protection so as to prevent environmental pollution. If any damage is caused to cultivated land, grassland or forest as a

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result of exploration or mining activities, mining enterprises must restore the land to a state appropriate for use by reclamation, re-planting trees or grasses or such other measures as appropriate to the local conditions. If the rehabilitation is not possible or does not comply with the relevant requirements, the mining enterprise must pay a fee for land rehabilitation. Upon closure of a mine, a report in relation to land rehabilitation and environmental protection must be submitted for approval. Enterprises which fail to perform or satisfy the requirements on land rehabilitation may be penalised by the relevant land administration authority.

The State Environmental Protection Administration Bureau must formulate national standards on emission of pollutants in accordance with the national standards on environmental quality, and the State economic and technological conditions. Governments at the provincial level and of the autonomous regions and municipalities may formulate their respective local standards on the discharge of pollutants for items not specified in the national standards. These local governments may formulate local standards which are more stringent than the national ones for items already specified in the national standards. Pursuant to the requirements under the amended “Law on Prevention of Water Pollution of the PRC” (中華人民共和國水污染防治法) which became effective as of 1 June 2008, the amended “Law on Prevention of Air Pollution of the PRC” (中華人民共和國大氣污染防治 法), which became effective as of 1 September 2000, and “Administrative Regulations on Levy and Utilization of Sewage Charge” (排污費徵收使用管理條例) which became effective as of 1 July 2003, enterprises which discharge water or air pollutants must pay discharge fees pursuant to the types and volumes of pollutants discharged. The discharge fees are calculated by the local environmental protection authority which must review and verify the types and volumes of pollutants discharged. Once the discharge fees have been calculated, a notice on payment of discharge fees must be issued to the relevant enterprises. In addition, enterprises which discharge sulphur dioxide at a level exceeding the prescribed standards are required to install “desulphurising devices” or adopting other “desulphurising” measures to control the emission of sulphur dioxide.

Under the amended “Law on Prevention of Environmental Pollution Caused by Solid Waste of the PRC” (中華人民共和國固體廢物污染環境防治法), which became effective as of 1 April 2005, entities and individuals collecting, storing, transporting, utilising or disposing of solid waste must take precautions against the spread, loss, and leakage of such solid waste or adopt such other measures to prevent such solid waste from polluting the environment.

The penalties for breach of the environmental protection laws vary from warnings, fines, suspending production or operation to other administrative sanctions, depending on the degree of damage or the results of the incidents. The responsible person of the entity may be subject to criminal liabilities for serious breaches resulting in significant damage to private or public property or personal injury or death.

As the environmental protection is under the administration and supervision of authorities that are distinct from the ones issuing the exploration and exploitation licences, the breach of the relevant environmental protection laws would not entail revocation of the exploration and exploitation licences directly. However, the environmental protection authorities may seek cooperation from the authorities in charge of the issuance of such permits, which are competent to revoke the exploration and exploitation licences pursuant to the “Mineral Resources Law of the PRC”.

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Laws and regulations relating to production safety

The PRC government has formulated a relatively comprehensive set of laws and regulations on production safety, including the “Law on Production Safety of the PRC” (中華人民共和國安全生產 法), which became effective as of 1 November 2002, the “Law on Mine Safety of the PRC” (中華人民共和國礦山安全法), which became effective as of 1 May 1993, as well as “Regulations on the Implementation of the Law on Mine Safety of the PRC” (中華人民共和國礦山安全法實施條例), which became effective as of 10 October 1996, which pertain to the mining, processing and smelting operation of the mining industry. The State Administration of Work Safety (國家安全生產監督管理總 局) is responsible for the overall supervision and management of the national safety production while the departments in charge of safety production at the county level or above are responsible for the overall supervision and management of the safety production within their own jurisdictions.

The State implements a licensing system for production safety of mining enterprises under the “Regulations on Production Safety Permit” (安全生產許可證條例), which became effective as of 13 January 2004, and the “Implementation Measures for Non-coal Mining Enterprises Production Safety Permits” (非煤礦礦山企業安全生產許可證實施辦法), which became effective as of 8 June 2009. No mining enterprise may engage in production activities without holding a valid production safety permit (安全生產許可證). Enterprises which fail to fulfill the production safety conditions may not carry out any production activity. Mining enterprises which have obtained the production safety permit may not lower their production safety standards, and are subject to the supervision and inspection by the licensing authorities from time to time. If the licensing authorities are of the opinion that the mining enterprises do not fulfill the production safety requirements, the production safety permit may be withheld or revoked.

The State has also formulated a set of national standards on production safety for the mining industry. In general, the mine design must comply with the production safety requirements and industry practice. Each underground mineshaft is required to have at least two safety exits and the mine must be equipped with transportation and communication facilities which connect the mine to the outside. The mine design must be approved in accordance with the requisite procedures. The legal advisers of the Company as to the PRC laws have advised that Xinjiang Tianmu has complied with the national standards on production safety for the mining industry formulated by the State in its production.

A mining enterprise must establish a management body or a designated safety management team to be responsible for production safety matters. Education and training on production safety must be provided to workers to ensure that they fully understand the regulations on and the procedures required for production safety, and are able to master the necessary skills for operation safety for their own positions. Those who do not receive this education and training are not permitted to work at the mine.

Pursuant to the “Law on Mine Safety of the PRC”, the State has established safety supervision requirements for mines and established mine safety supervisory authorities. The responsibilities of such supervisory authorities include, among other things, the following: (i) to supervise the provision of safety education and training by mining enterprises; (ii) to approve mine design, and carry out examinations upon completion of mine construction; (iii) to monitor the status of the construction of

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FURTHER INFORMATION ON THE ACQUISITION AND THE TARGET GROUP

safety facilities carried out by the mining enterprises; (iv) to inspect the safety of mines and to require, if necessary, the mining enterprises to amend or resolve any works which fall below the requisite safety standards within a particular time limit; (v) to investigate mining accidents and to supervise the handling of mining accidents; (vi) to impose fines or administrative sanctions against the mining enterprises, the management or any related staff thereof who have severely violated the “Law on Mine Safety of the PRC”; and (vii) to suggest that relevant authorities suspend or close the operation of mining enterprises which cannot meet the basic safety requirements.

Upon the occurrence of accidents, mining enterprises must immediately take measures to rescue their workers and report any personal deaths or injuries to the relevant authority. In the event of a minor accident, the mining enterprise is responsible for investigating and handling the case. In the event of a serious accident, the government, the relevant authority, the labour union and the mining enterprise must conduct an investigation and handle the case together. In addition, mining enterprises must pay compensation to any staff injured or killed in an accident in accordance with the relevant requirements. Such mining enterprises may only resume production after the relevant danger at the scene has been eliminated.

In addition, under the Law on Production Safety of the PRC” (中華人民共和國安全生產法) and the “Law on Mine Safety of the PRC”, the penalties for breach of production safety laws vary from warnings, fines, suspension of production or operation and other administrative sanctions, depending on the degree of damage and the natures of the incident. The person who is personally responsible for such incident may be subject to demotion or termination of employment, or criminal liabilities for serious breaches resulting in significant incidents. The State has implemented an accountability system over incidents relating to production safety.

As the production safety is under the administration and supervision of authorities that are different from the ones issuing the exploration and exploitation licences, the breach of the relevant production safety laws would not entail revocation of the exploration and exploitation licences directly. However, the production safety authorities may seek cooperation from the authorities in charge of the issuance of such permits, which have the authority to revoke the exploration and exploitation licences according to the “Mineral Resources Law of the PRC”.

The production safety permits for Hongshannan gold mine and Heishiliang gold mine have expired. Xinjiang Tianmu has filed the relevant documents and materials with the Administration of Work Safety of Xinjiang Uygur Autonomous Region for the applications for extension of the validity periods of the production safety permits for these gold mines. The applications are still being processed by the Administration of Work Safety of Xinjiang Uygur Autonomous Region. The production in these gold mines is still continuing pending the issue of the renewed production safety permits. The continuing production in these gold mines may not comply with the “Regulations on Production Safety Permit” and the “Implementation Measures for Non-coal Mining Enterprises Production Safety Permits”. Xinjiang Tianmu will ensure the condition for the issue of the production safety permit for Hongshannan gold mine to be fulfilled as soon as possible and keep liasing with the Administration of Work Safety of Xinjiang Uygur Autonomous Region to seek the issue of the renewed production safety permits as soon as possible. For details, please refer to the section headed “Target Group and the mines — Licences and permits” in Appendix I to this circular.

— I-48 —

APPENDIX I

FURTHER INFORMATION ON THE ACQUISITION AND THE TARGET GROUP

Laws and regulations relating to taxation

The State encourages the development of the gold industry by implementing preferential treatment on taxation. “Circular Relating to Tax Policies on Gold” (關於黃金稅收政策問題的通知) issued by the Ministry of Finance (中華人民共和國財政部) (the “ MOF ”) and the “State Administration of Taxation” (國家稅務總局) of the PRC in 2002 provides that gold production enterprises engaged in the sales of standard gold and gold sand (containing gold content), are exempted from Value Added Tax (“ VAT ”). Transactions made by gold trading enterprises and intermediaries, which are members of the Shanghai Gold Exchange, on the Shanghai Gold Exchange without physical settlement are exempted from VAT, and transactions with physical settlement are subject to VAT levying and immediate refund.

Enterprises engaged in the mining of mineral resources must pay resources tax in accordance with relevant regulations of the State. In accordance with the “Provisional Regulations on Resources Tax of the PRC” (中華人民共和國資源稅暫行條例), which became effective as of 1 January 1994, for nonferrous metal ores, the amount of resources compensation levy payable is computed by multiplying the sales or self-used volume of mineral products with the applicable rate of the resource tax ranging from RMB0.4 to RMB30 per tonne of mineral products. The MOF and the State Administration of Taxation reserve the right to adjust the rate of the resource tax from time to time. According to the “Implementing Rules for the Provisional Regulations on Resources Tax of the PRC” (中華人民共和 國資源稅暫行條例實施細則) which became effective as of 30 December 1993, resources tax is levied according to the grade of mines and the applicable amount of tax per tonne of ore produced as provided in the schedules attached to such implementing rules.

The MOF and the State Administration of Taxation issued “Notice on Adjusting Policies with respect to Resource Tax of Rock Gold Ore” (關於調整岩金礦產資源稅有關政策的通知), which became effective as of 1 May 2006. The notice is about the adjustment of tax, which among other things, adjusted upwards the rates of resource tax for various grades of rock and gold mines. The resource tax rates applicable to gold ore ranges from RMB1.5 per tonne to RMB7.0 per tonne.

— I-49 —

FURTHER INFORMATION ON THE ACQUISITION AND THE TARGET GROUP

APPENDIX I

According to “Decisions of the State Council on Amending the Provisional Regulations of the People’s Republic of China on Resource Tax” (國務院關於修改 (中華人民共和國資源稅暫行條例) 的決定) issued by the State Council on 30 September 2011 and implemented since 1 November 2011, the revised resource tax rates are as follows:

	**Tax **	item								Tax rate
	1.	Crude oil								5%-10% of	sales
	2.	Natural gas								5%-10% of	sales
	3.	Coal				Coking coal				RMB8-20 per tonne
						Other	coal			RMB0.3-5 per tonne
	4.	Other non-metallic raw ores				Common non-metallic raw ores				RMB0.5-20 per tonne or per m3
						Precious non-metallic raw ores				RMB0.5-20 per kg or		per carat
	5.	Black metallic raw ores								RMB2-30 per tonne
						Rare earth				RMB0.4-60 per tonne
	6.	Nonferrous metallic raw		ores		Other	nonferrous metallic raw			RMB0.4-30 per tonne
						ores
	7.	Salt				Solid salt				RMB10-60	per tonne
						Liquid salt				RMB2-10 per tonne

On 16 March 2007, the National People Committee of the PRC enacted the “Enterprise Income Tax Law of the PRC” (the “ EIT Law ”) (中華人民共和國企業所得稅法) which became effective as of 1 January 2008. On 6 December 2007, the State Council enacted the “Implementation Rules for the Enterprise Income Tax Law of the PRC” (中華人民共和國企業所得稅法實施條例) which also became effective as of 1 January 2008.

According to this law and its implementation rules, foreign invested enterprises in the PRC are subject to the enterprise income tax at a uniform rate of 25%. A non-resident enterprise that has an establishment or premises within the PRC shall pay enterprise income tax at a rate of 25% on its income that is derived by such establishment or premises inside the PRC and income that is sourced outside the PRC but is actually connected with the said establishment or premises, unless it is a dividend income where an exemption may apply. A non-resident enterprise that has no establishment or premises within the PRC but has income from the PRC, and a non-resident enterprise that has establishment or premises in the PRC but its income has no actual connection to such establishment or premises in the PRC, shall be subject to PRC withholding tax at the rate of 10% on its income sourced from inside the PRC.

— I-50 —

APPENDIX I

FURTHER INFORMATION ON THE ACQUISITION AND THE TARGET GROUP

Other relevant laws and regulations

Laws and regulations relating to foreign investment in gold

Pursuant to the “Catalogue for the Guidance of Foreign Investment Industries (Revised 2007)” (外商投資產業指導目錄(2007年修訂)), exploration and mining of precious metals (gold, silver and platinum) is regulated as restricted industry. The “Verification and Approval of Foreign-Invested Projects Tentative Administrative Procedures” (外商投資項目核准暫行管理辦法), which became effective as of 9 October 2004, provides that a project within the restricted catalogue must be:

• submitted to and approved by provincial-level development and reform departments if it has a total investment amount of less than US$50 million;

• submitted to and approved by the NDRC if it has a total investment amount of US$50 million or more;

• first submitted to and examined by the NDRC and following such examination must be submitted to and approved by the State Council if it has a total investment amount of US$100 million or more.

Laws and regulations relating to geological environment protection

Pursuant to the “Provisions on the Protection of the Geologic Environment of Mines” (礦山地質環境保護規定) promulgated by the MOLAR on 2 March 2009 and becoming effective on 1 May 2009, (a) the land and resources administrative departments shall be responsible for the protection of the geologic environment of mines; (b) a mining right applicant shall make a plan on the protection, control and restoration of the geologic environment of a mine (礦山地質環境保護與治理 恢復方案), and report it to the competent authority when applying for an exploitation licence, or when applying to expand the exploitation scale or change the scope of mining area or exploitation manner; and (c) an exploitation licencee shall, pursuant to the relevant provisions of the State, pay a security deposit for the control and restoration of the geologic environment of a mine (礦山地質環境治理恢復保證金), the amount of which shall not be less than the expenses necessary for the control and restoration of the geologic environment of the mine.

According to the Geological Environment Protection Regulations for the Xinjiang Uygur Autonomous Region (新疆維吾爾自治區地質環境保護條例) announced on 10 January 2002, implemented on 1 May 2002 and amended on 26 November 2004 by the Standing Committee of the People’s Congress of Xinjiang, exploitation licencee must establish necessary geological environment protection facilities in mining in accordance with the approved geological environmental protection plan, and restore the geological environment damaged by mining activities in a timely manner. When mining activities are terminated, the recovering and restoration of the geological environment damaged must be completed. Exploitation licencee must adopt permanent safety measures for sites where toxic and harmful materials are stored and restore the geological environment. In violation of such regulations, the exploitation licencee will be ordered to recover and restore the damaged geological environment within a prescribed period by department of land and resources of the PRC at county level or above.

— I-51 —

APPENDIX I

FURTHER INFORMATION ON THE ACQUISITION AND THE TARGET GROUP

The land and resources department will undertake the restoration if the exploitation licencee fails to do so, but the cost of the restoration will be borne by the exploitation licencee. The exploitation licencee may be fined from RMB10,000 to RMB50,000 according to circumstances and its exploitation licence may be revoked.

The legal advisers of the Company as to the PRC laws have advised that save for the extension applications for the production safety permits for Heishiliang gold mine and Hongshannan gold mine as disclosed in the section headed “Target Group and the mines — Licences and permits” in Appendix I to this circular, as at the Latest Practicable Date:

• (i) Xinjiang Tianmu had complied with all applicable laws and regulations relating to environmental protection, production safety and taxation;

• (ii) Xinjiang Tianmu had obtained all the licences and permits for its business operations;

• (iii) it had not noticed any indications that there would be any situations which would or might cause Xinjiang Tianmu to be subject to material litigations, arbitrations or administrative penalties;

• (iv) Xinjiang Tianmu had fully paid all the relevant taxes in accordance with the relevant taxation laws in the PRC; and

• (v) Xinjiang Tianmu had fully paid the security deposits for the control and restoration of the geological environment of mine in accordance with the relevant provisions in the PRC.

— I-52 —

FURTHER INFORMATION ON THE ACQUISITION AND THE TARGET GROUP

APPENDIX I

RISK FACTORS

Set out below are the risk factors which may be associated with the Acquisition:

Fluctuation in the price of and demand for gold, iron, copper and nickel

The Board considers that there are many factors which may influence the price of and demand for gold, iron, copper and nickel in the international market, among others, the stability of the international economic situation and the fluctuation of the global political and social condition, which are beyond the control of the Enlarged Group. In addition, there is a possibility that the prices of commodities may fall to lower levels and the future price movement of gold, iron, copper and nickel is unpredictable at this moment.

Validity of the exploitation and exploration licences

Despite the fact that Xinjiang Tianmu has obtained the exploitation and exploration licences for conducting mining activities at the Target Mines during the licenced period, the exploitation and exploration licences are subject to renewal. The exploitation licences for Hongshannan gold mine and Heishiliang gold mine will expire in September 2012 and March 2013 respectively and the exploration licence for Baishiquan nickel-copper mine will expire in May 2014. In the event that Xinjiang Tianmu fails to renew any of the above exploitation or exploration licences upon expiration, the operation and financial performance of the Target Group will be adversely affected.

Significant and continuous capital investment

The mining business requires significant and continuous capital investment. Mining projects may not be completed as planned or scheduled or adversely affected by numerous factors, including failure to obtain necessary regulatory approvals or sufficient funding, technical difficulties and manpower or other resource constraints. The cost of these projects may exceed the original budgets and may not achieve the intended economic results or commercial viability. Thus, the actual capital investment for operation and development of Xinjiang Tianmu may significantly exceed the Target Group’s budgets because of factors beyond the Target Group’s control, which could adversely affect the Target Group’s financial condition and results of operations.

Xinjiang Tianmu’s operations are energy-intensive and water-intensive and Xinjiang Tianmu may face increased electricity or water prices and/or insufficient electricity or water supply

Xinjiang Tianmu consumes substantial amounts of electricity and water in connection with its mining and separating operations. Xinjiang Tianmu’s production plants are located in remote area of Xinjiang, PRC, where electricity and water supplies may not be as stable as in other cities within the PRC. Any lengthy disruption in electricity and water supplies could lead to production shutdowns which will adversely affect Xinjiang Tianmu’s production. In addition, any increase in electricity or water prices will also adversely affect Xinjiang Tianmu’s production costs, financial position and results of operations.

— I-53 —

APPENDIX I

FURTHER INFORMATION ON THE ACQUISITION AND THE TARGET GROUP

Any failure to obtain and maintain required government approvals, permits and licences for exploration and mining activities or renewals thereof could materially and adversely affect the Target Group’s business and results of operations

Under relevant PRC laws, Xinjiang Tianmu is required to obtain certain government approvals, permits and licences for each of the Target Mines, among which exploration licence, exploitation licences, production safety permits and gold exploitation licence are crucial to Xinjiang Tianmu’s business operations. There is no assurance that Xinjiang Tianmu will obtain such approvals, permits and licences in a timely manner in the future or at all. Any failure to obtain or any delay in obtaining or retaining any required governmental approvals, permits or licences could subject Xinjiang Tianmu to a variety of administrative penalties or other government actions and adversely impact the Target Group’s business operations. Specifically,

• under the “Mineral Resources Law” and the “Administrative Measures on Registration of Tenement of Mineral Resources Exploration and Survey”, if Xinjiang Tianmu fails to obtain or renew the exploration licences and conduct exploration without valid exploration licences, it may be ordered to cease exploration and subjected to a fine of up to RMB100,000, and for failure to present the annual report of the exploration or pass annual verification, it may be ordered to cease the exploration and subjected to a warning or a fine of up to RMB50,000, and, in the worst case, the exploration licences may be suspended;

• under the “Mineral Resources Law” and “Administrative Measures on Registration of Mineral Resources Exploitation” (礦產資源開採登記管理辦法), if Xinjiang Tianmu fails to obtain or renew the exploitation licences and conduct exploitation work without valid exploitation licences, it may be ordered to cease mining and pay for the damages caused, any mineral products and illicit gains may be confiscated, and it may also be fined; for failure to present the annual report or pass the annual verification, it may be ordered to cease exploitation activities and subjected to a warning or a fine of up to RMB50,000, and in the worst case, the exploitation licences may be suspended;

• under the “Regulations on Production Safety Permit” and the “Implementation Measures for Non-coal Mining Enterprises Production Safety Permits”, if Xinjiang Tianmu fails to obtain the production safety permit, it may be subject to the confiscation of the illicit gains and a fine ranging from RMB100,000 to RMB500,000; if it continues production without going through the extension procedures for the production safety permit upon its expiration, it may be ordered to suspend production and take the corrective measures within a prescribed time period, and it may be subjected to the confiscation of the illicit gains and a fine ranging from RMB50,000 to RMB100,000; and

• under the “Mineral Resources Law” and the “Provisions on the Administration of Obtaining the Letter of Approval for Mining of Gold Minerals”, if Xinjiang Tianmu fails to obtain or renew the permit for gold exploitation and engages in gold exploitation without valid permits, it may be ordered to stop the mining, and pay for the damages caused, any mineral products and illicit gains may be confiscated, and it may also be fined.

— I-54 —

APPENDIX I

FURTHER INFORMATION ON THE ACQUISITION AND THE TARGET GROUP

The production safety permits for Hongshannan gold mine and Heishiliang gold mine have expired. Xinjiang Tianmu has filed the relevant documents and materials with the Administration of Work Safety of Xinjiang Uygur Autonomous Region for the applications for extension of the validity periods of the production safety permits for these gold mines. The applications are still being processed by the Administration of Work Safety of Xinjiang Uygur Autonomous Region. The production in these gold mines is still continuing and pending the issue of the renewed production safety permits.

If any administrative penalties and other government actions are imposed on or taken against Xinjiang Tianmu due to its failure to obtain or delay in obtaining or retaining any required governmental approvals, permits or licences, its continuing production in Heishiliang gold mine and Hongshannan gold mine pending the issue of the renewed production safety permits, the Target Group’s business, financial condition and results of operations could be materially and adversely affected.

The operations of Xinjiang Tianmu are subject to risks relating to occupational hazards and production safety

The exploration and exploitation operations of Xinjiang Tianmu involve the transportation, handling and storage of explosives and other dangerous or hazardous materials. Xinjiang Tianmu may encounter accidents, maintenance or technical difficulties, mechanical failures or breakdowns during the exploration, exploitation or production processes. Accidents such as explosions, fires, equipment mishandling and/or mechanical failures may occur during the course of Xinjiang Tianmu’s operations. These risks subject Xinjiang Tianmu to potentially significant liabilities relating to personal injury, death or property damage, civil and/or criminal liabilities, including the revocation of its exploration and exploitation licences, and it may be forced to suspend its operations, which may adversely affect the Target Group’s business, reputation, financial condition and results of operations.

Changes to the PRC regulatory regime for the mining industry may materially and adversely affect the Target Group’s business and results of operations

The PRC local, provincial and central authorities exercise a substantial degree of control over the mining industry in the PRC. Xinjiang Tianmu’s operations are subject to a range of PRC laws, regulations, policies, standards and requirements in relation to, among other things, mine exploration, development, production, taxation, labor standards, occupational health and safety, waste treatment and environmental protection, and operation management. Any changes to these laws, regulations, policies, standards and requirements or to the interpretation or enforcement thereof may increase the Target Group’s operating costs and thus adversely affect the Target Group’s results of operations.

Xinjiang Tianmu’s operations are governed by extensive and increasingly stringent environmental and other laws and regulations

Xinjiang Tianmu’s operations are subject to extensive PRC environmental laws and regulations relating to air and water quality, waste management and public health and safety. To comply with these laws and regulations, Xinjiang Tianmu incurs significant costs associated with its production

— I-55 —

APPENDIX I

FURTHER INFORMATION ON THE ACQUISITION AND THE TARGET GROUP

facilities, production process and the installation of pollution control equipment. Xinjiang Tianmu must undergo inspections by relevant PRC environmental authorities and maintain various environmental permits. Failure to comply with relevant PRC environmental laws and regulations could materially and adversely affect the Target Group’s business and results of operations.

In addition, PRC environmental legislation is evolving in a manner that will require stricter standards and enforcement, increased fines and penalties for non-compliance, more stringent environmental assessments of proposed mines and a heightened degree of responsibility for companies and their officers, directors and employees. Amendments to current PRC laws and regulations governing operations and activities of mining companies or more stringent implementation thereof could have a material adverse impact on the Target Group and cause increases in capital expenditure, production costs or reductions in levels of production.

The operations of Xinjiang Tianmu are subject to risks relating to environmental protection and rehabilitation

Xinjiang Tianmu is required under the relevant PRC laws and regulations to conduct its exploitation operations in a manner that minimizes the environmental impact, such as through rehabilitation and revegetation of exploited land. Its exploitation operations at its mines employ underground mining and, as a result, its rehabilitation and revegetation obligations will be more limited than if it conducted open-pit mining operations. In the future, it may have rehabilitation obligations in areas that it have cleared for exploitation and production purposes and for its tailings pond.

The operations of the mines and mineral processing plant of Xinjiang Tianmu involve storage and handling of hazardous materials/wastes such as explosives and fuel and management of waste rock, tailings, hydrocarbons, wastewater and general waste. Ineffective handling of these potential pollutants may cause pollution to the surrounding ecological environment and underground water.

Environmental hazards may also occur in connection with its operations as a result of human negligence, force majeure or otherwise. Environmental events such as changes in the water table, landslides and instability of the stopes could materially and adversely affect its underground mining.

The occurrence of any environmental hazard may delay production, increase production costs, cause personal injuries or property damage, result in liability to Xinjiang Tianmu. Such incidents may also result in a breach of the conditions of its exploration and exploitation licences or other consents, approvals or authorisations, which may result in fines or penalties or even possible revocation of its exploration and/or exploitation licences.

Xinjiang Tianmu may also be subject to actions by environmental protection groups or other interested parties, whether governmental or non-governmental, who object to the actual or perceived environmental impact of its mines or other actual or perceived condition at its mines. These actions may delay or halt production or may create negative publicity related to its mines.

— I-56 —

FURTHER INFORMATION ON THE ACQUISITION AND THE TARGET GROUP

APPENDIX I

A violation of health, safety and environmental requirements and the occurrence of accidents could disrupt Xinjiang Tianmu’s operations and increase operating costs

Mining is a hazardous industry and failure to adopt and embed health, safety and environmental management systems could result in harm to the employees working in the Target Mines, the environment and the communities in which Xinjiang Tianmu operates as well as fines and penalties and damage to its reputation. A violation of the relevant health and safety laws or failure to comply with the instructions of the relevant health and safety authorities could lead to, among other things, a temporary shut down of all, or a portion of the Target Mines and the processing facilities and the imposition of costly compliance procedures, which could materially and adversely affect the Target Group’s business, financial condition, results of operations and prospects.

Inclement weather and climatic conditions, acts of God, adverse work environments and acts of terrorism or outbreak of a contagious or epidemic disease

A significant part of the Target Group’s mining business could be materially and adversely affected by weather and climatic conditions. Unfavorable weather and climatic conditions and natural disasters may prevent Xinjiang Tianmu from conducting work at the work sites or delivering the mineral to the customers in accordance with its schedules, or generally reduce Xinjiang Tianmu’s productivity. During periods of curtailed activity, Xinjiang Tianmu may continue to incur operating expenses, but Xinjiang Tianmu’s revenue from operations may be delayed or reduced.

Moreover, natural disasters and other acts of God which are beyond Xinjiang Tianmu’s control may adversely affect the economy, infrastructure and communities in Xinjiang, PRC. Xinjiang Tianmu also operates in areas that are under the threat of earthquakes, landslides, sandstorms or drought. If any of these inclement weather or climatic conditions or natural disasters occurs, the operations may be hampered, which could result in an adverse effect on the Target Group’s results of operations and financial condition.

Terrorist attacks in the areas in which Xinjiang Tianmu has operations, may cause damage or disruption to the operations of Xinjiang Tianmu. The risks of terrorist attacks may also create uncertainties and cause the Target Group’s business to suffer in ways that the Board cannot currently predict. In addition, an outbreak of any contagious disease such as severe acute respiratory syndrome, for which there is no known, effective, or readily available treatment, cure or vaccine, could have a material adverse effect on the Target Group’s financial condition and results of operations. An outbreak of a contagious or epidemic disease could adversely affect customers’ demand for Xinjiang Tianmu’s products, its ability to adequately staff its operations, as well as the general level of economic activity in the PRC and elsewhere. As a result, the Target Group’s business and operating results may be materially and adversely affected.

— I-57 —

APPENDIX I

FURTHER INFORMATION ON THE ACQUISITION AND THE TARGET GROUP

Risks relating to Xinjiang, PRC

Since the operations of the Target Group are conducted in Xinjiang, PRC, adverse changes in Xinjiang’s economic, political and social conditions as well as local governmental policies could have a material adverse effect on the economic or political stability of Xinjiang, which could in turn adversely affect the financial condition and results of operations of the Enlarged Group.

For other risks relating to the operations of the Target Mines and Xinjiang Tianmu, please refer to the section headed “Appendix A: Risk Analysis” in Appendix V to this circular.

— I-58 —

APPENDIX II-A ACCOUNTANTS’ REPORT ON THE TARGET GROUP

The following is the text of a report, prepared for the sole purpose of inclusion in this circular, received from the reporting accountants, HLB Hodgson Impey Cheng, Chartered Accountants, Certified Public Accountants, Hong Kong.

==> picture [228 x 86] intentionally omitted <==

31/F, Gloucester Tower The Lankmark 11 Pedder Street Central Hong Kong

12 April 2012

The Board of Directors Timeless Software Limited Units 111-113, 1st Floor, Building 9 Phase One, Hong Kong Science Park Tai Po, New Territories Hong Kong

Dear Sirs,

We set out below our report on the financial information (the “Financial Information”) regarding Goffers Management Limited (the “Target Company”) and its subsidiaries (hereinafter collectively referred to as the “Target Group”), for the financial years ended 31 December 2009, 2010 and 2011 (the “Relevant Periods”), for inclusion in the circular dated 12 April 2012 (the “Circular”) issued by Timeless Software Limited (the “Company”) in connection with the proposed very substantial acquisition relating to the acquisition of 51% of the issued share capital of the Target Company by Time Kingdom Limited, a wholly-owned subsidiary of the Company.

The Target Company was incorporated in the British Virgin Islands (the “BVI”) on 8 September 2000 with limited liability and is wholly and beneficially owned by Starmax Holdings Limited (the “Vendor”). The Target Company is principally engaged in investment holding. The address of the registered office and principal place of business of the Target Company is P.O. Box 957, Offshore Incorporations Centre, Road Town, Tortola, BVI. As at the date of this report, the Vendor is the legal and beneficial owner of the entire issued share capital of the Target Company.

— IIA-1 —

APPENDIX II-A ACCOUNTANTS’ REPORT ON THE TARGET GROUP

As at the date of this report, the Target Company has direct and indirect interests in the following subsidiaries:

		Issued and fully
	Place and date of	paid share	Attributable
	incorporation/	capital/registered	equity interest held
Name of subsidiary	establishment	capital	Direct	Indirect	Principal activities
Kangshun Investments Limited	BVI,	US$1,000	100%	—	Investment holding
(“Kangshun BVI”)	26 April 2011
Goffers Resources Limited	Hong Kong,	HK$1,000	100%	—	Investment holding
(“Goffers Resources”)	15 November 2010
Kangshun HK Limited (formerly	Hong Kong,	HK$1,000		100%	Investment holding
known as Gold Year	28 October 2010
International Limited)
(“Kangshun HK”)
新疆天目礦業資源開發有限公司	The People’s Republic	Renminbi (“RMB”)		51% *	Exploration and exploitation
(transliterated as Xinjiang	of China (“PRC”),	20,000,000			of gold, iron and
Tianmu Mineral Resources	1 November 2002				nickel-copper mines in the
Development Co. Ltd.)					Xinjiang Uygur Autonomous
(“Xinjiang Tianmu”)					Region (“Xinjiang”) of the
					PRC and the processing and
					sale of the outputs from the
					mines

• Xinjiang Tianmu was owned as to 46% by Goffers Resources, a direct wholly-owned subsidiary of the Target Company; as to 5% by 新疆康順礦業項目發展有限公司 (transliterated as Xinjiang Kangshun Mining Project Development Company Limited) (“Xinjiang Kangshun”), an indirect non wholly-owned subsidiary of the Vendor; and as to 49% by 哈密市六合資源開發有限公司 (transliterated as Hami Liuhe Resources Development Company Limited) (“Hami Liuhe”), an independent third party and the interest in Xinjiang Tianmu was accounted as an associate of the Target Group using the equity method of accounting in the consolidated financial statements of the Target Group. In July 2011, Xinjiang Kangshun transferred all of its 5% equity interest in Xinjiang Tianmu to Kangshun HK, an indirect wholly-owned subsidiary of the Target Company and thereafter, the Target Company became the holding company of Xinjiang Tianmu and the assets, liabilities and result of Xinjiang Tianmu was consolidated into the financial information of the Target Group. As at the date of this report, Xinjiang Tianmu is owned as to 51% indirectly by the Target Company and as to 49% by Hami Liuhe.

The financial year end date of the Target Company and its subsidiaries is 31 December.

No statutory audited financial statements have been prepared for the Target Company and Kangshun BVI as there is no such statutory requirement in the BVI.

No audited financial statements have been prepared for Goffers Resources and Kangshun HK for the period from their respective date of incorporation to 31 December 2011 since they are newly incorporated.

The financial statements of Xinjiang Tianmu for the years ended 31 December 2009, 2010 and 2011 were prepared in accordance with the relevant accounting principles and financial regulations applicable to enterprises established in the PRC. The financial statements of Xinjiang Tianmu for the years ended 31 December 2009 and 2010 were audited by 新疆瑞新有限責任會計師事務所 (Xinjiang Ruixin Certified Public Accountants), certified public accountants registered in the PRC.

— IIA-2 —

APPENDIX II-A

ACCOUNTANTS’ REPORT ON THE TARGET GROUP

For the purpose of this report, the sole director of the Target Company has prepared consolidated management accounts of the Target Group for the Relevant Periods (the “Underlying Financial Statements”) in accordance with Hong Kong Financial Reporting Standards (“HKFRSs”) issued by the Hong Kong Institute of Certified Public Accountants (the “HKICPA”). We have, for the purpose of this report, carried out appropriate audit procedures in respect of the Underlying Financial Statements in accordance with Hong Kong Standards on Auditing issued by the HKICPA. However, the scope of our procedures was limited in respect of the Target Group’s interest in an associate (namely, Xinjiang Tianmu) as stated in the consolidated statement of financial position as at 31 December 2009 and 2010 and the Target Group’s share of results of Xinjiang Tianmu as stated in the consolidated statement of comprehensive income for the financial years ended 31 December 2009 and 2010 and period from 1 January 2011 to 14 July 2011 (the date upon Xinjiang Tianmu became subsidiary of the Target Group). Since we were not appointed as reporting accountants of Xinjiang Tianmu until after 1 January 2011, we did not observe the counting of physical inventories of Xinjiang Tianmu as at 31 December 2009 and 2010. We were unable to obtain sufficient appropriate audit evidence by alternative audit procedures concerning the quantities of inventory of raw materials held by Xinjiang Tianmu as at 31 December 2009 and 2010. Since the Target Group’s 46% equity interest in Xinjiang Tianmu was accounted for using the equity method of accounting in the preparation of the Financial Information of the Target Group for the financial years ended 31 December 2009 and 2010 and period from 1 January 2011 to 14 July 2011 (the date upon Xinjiang Tianmu became subsidiary of the Target Group), any adjustments that might have been found to be necessary in respect of the inventories held by Xinjiang Tianmu as at 31 December 2009 and 2010 may have an effect on the Target Group’s share of net assets in Xinjiang Tianmu as at 31 December 2009 and 2010 and its share of results of Xinjiang Tianmu for the financial years ended 31 December 2009 and 2010 and period from 1 January 2011 to 14 July 2011 (the date upon Xinjiang Tianmu became subsidiary of the Target Group).

We have examined the Underlying Financial Statements and have carried out such additional procedures as we considered necessary in accordance with Auditing Guideline 3.340 “Prospectuses and the Reporting Accountant” as recommended by the HKICPA.

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

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

Except for any adjustments that might have been found to be necessary had we been able to obtain sufficient appropriate evidence concerning the Target Group’s interest in Xinjiang Tianmu as mentioned above, in our opinion, the Financial Information gives, for the purpose of this report, a true and fair view of the state of affairs of the Target Group as at 31 December 2009 and 2010 and of its results and cash flows for the Relevant Periods.

In our opinion, the Financial Information gives, for the purpose of this report, a true and fair view of the state of affairs of the Target Group as at 31 December 2011.

— IIA-3 —

ACCOUNTANTS’ REPORT ON THE TARGET GROUP

APPENDIX II-A

I. FINANCIAL INFORMATION Consolidated statement of comprehensive income

		Year ended	Year ended	Year ended
		31 December	31 December	31 December
		2009	2010	2011
	Notes	HK$	HK$	HK$
Revenue	8	—	—	142,609,613
Other income and gains	9	123,405	443,097	825,947
Gain in a bargain purchase	31	—	—	113,149,735
Production costs		—	—	(50,168,681)
Staff costs		—	—	(5,245,557)
Depreciation and amortisation		—	—	(12,905,120)
Other expenses		(10,446)	(11,447)	(9,306,633)
Share of profits/(loss) of an associate	18	7,109,082	23,807,318	(826,360)
Profit before tax		7,222,041	24,238,968	178,132,944
Income tax expense	10	(710,908)	(2,380,732)	(19,459,439)
Profit for the year	11	6,511,133	21,858,236	158,673,505
Other comprehensive income/(expense)
Exchange differences on translating foreign operations		—	—	3,900,875
Share of other comprehensive income of an associate	18	53,098	1,430,602	980,282
Recycling of cumulative exchange differences of
previously held interest in an associate	31	—	—	(2,035,098)
Other comprehensive income for the year		53,098	1,430,602	2,846,059
Total comprehensive income for the year		6,564,231	23,288,838	161,519,564
Profit attributable to:
Owner of the Target Company		6,511,133	21,858,236	134,500,032
Non-controlling interests		—	—	24,173,473
		6,511,133	21,858,236	158,673,505
Total comprehensive income attributable to:
Owner of the Target Company		6,564,231	23,288,838	135,434,663
Non-controlling interests		—	—	26,084,901
		6,564,231	23,288,838	161,519,564

— IIA-4 —

APPENDIX II-A

ACCOUNTANTS’ REPORT ON THE TARGET GROUP

Consolidated statement of financial position

Notes Non-current assets Property, plant and equipment 15 Exploration and evaluation assets 16 Mining rights 17 Interest in an associate 18 Prepaid lease payments 19 Deposits 20 Land restoration costs 21 Current assets Inventories 22 Prepaid lease payments 19 Trade and other receivables 20 Amount due from an associate 18 Amount due from a related company 23 Bank balances and cash 24 Current liabilities Trade and other payables 25 Amount due to holding company 26 Amounts due to related companies 26 Loan due to a related company 27 Current tax liabilities Dividend payable Net current (liabilities)/assets Total assets less current liabilities	At 31 December 2009 HK$ — — — 21,794,065 — — — 21,794,065 — — 4,692,032 646,151 — 250,477 5,588,660 — 1,343,017 153,066 — — 4,168,325 5,664,408 (75,748) 21,718,317	At 31 December 2010 HK$ — — — 42,986,407 — — — 42,986,407 — — 3,805,953 670,540 — 817,788 5,294,281 — 1,343,017 — — — 2,430,622 3,773,639 1,520,642 44,507,049	At 31 December 2011 HK$ 25,962,040 186,660,658 134,942,091 — 141,750 10,420,136 1,111,618
			359,238,293
			25,937,263 4,499 23,237,588 — 8,798,594 70,714,452
			128,692,396
			27,243,636 500,000 9,850,852 6,996,723 13,653,357 28,912,041
			87,156,609
			41,535,787
			400,774,080

— IIA-5 —

APPENDIX II-A

ACCOUNTANTS’ REPORT ON THE TARGET GROUP

Notes Non-current liabilities Deferred tax liabilities 28 Provision for restoration costs 29 Net assets Equity attributable to owner of the Target Company Share capital 30 Reserves Non-controlling interests Total equity	At 31 December 2009 HK$ 1,150,007 — 1,150,007 20,568,310 1,560 20,566,750 20,568,310 — 20,568,310	At 31 December 2010 HK$ 2,599,901 — 2,599,901 41,907,148 1,560 41,905,588 41,907,148 — 41,907,148	At 31 December 2011 HK$ 72,887,653 2,043,166
			74,930,819
			325,843,261
			1,560 164,640,251
			164,641,811 161,201,450
			325,843,261

— IIA-6 —

APPENDIX II-A

ACCOUNTANTS’ REPORT ON THE TARGET GROUP

Consolidated statement of changes in equity

Attributable to owner of the Target Company

At 1 January 2009 Profit for the year Other comprehensive income for the year Total comprehensive income for the year Dividend recognised At 31 December 2009 Profit for the year Other comprehensive income for the year Total comprehensive income for the year Dividend recognised At 31 December 2010 Profit for the year Other comprehensive income for the year Total comprehensive income for the year	Share capital Translation reserve HK$ HK$ 1,560 (428,884) — — — 53,098 — 53,098 — — 1,560 (375,786) — — — 1,430,602 — 1,430,602 — — 1,560 1,054,816 — — — 934,631 — 934,631	Retained profits HK$ 16,481,403 6,511,133 — 6,511,133 (2,050,000) 20,942,536 21,858,236 — 21,858,236 (1,950,000) 40,850,772 134,500,032 — 134,500,032	Non- controlling interests HK$ — — — — — — — — — — — 24,173,473 1,911,428 26,084,901	Total equity HK$ 16,054,079 6,511,133 53,098 6,564,231 (2,050,000) 20,568,310 21,858,236 1,430,602 23,288,838 (1,950,000) 41,907,148 158,673,505 2,846,059 161,519,564

— IIA-7 —

APPENDIX II-A

ACCOUNTANTS’ REPORT ON THE TARGET GROUP

Non-controlling interests arising on the acquisition of Xinjiang Tianmu (Note 31) Dividend recognised At 31 December 2011	Attributable to owner of the Target Company Share capital Translation reserve Retained profits HK$ HK$ HK$ — — — — — (12,700,000) 1,560 1,989,447 162,650,804	Non- controlling interests HK$ 135,116,549 — 161,201,450	Total equity HK$ 135,116,549 (12,700,000) 325,843,261

— IIA-8 —

APPENDIX II-A

ACCOUNTANTS’ REPORT ON THE TARGET GROUP

Consolidated statement of cash flows

	Year ended	Year ended	Year ended
	31 December	31 December	31 December
	2009	2010	2011
	HK$	HK$	HK$
Operating activities
Profit for the year	6,511,133	21,858,236	158,673,505
Adjustments for:
Income tax expense recognised in profit or loss	710,908	2,380,732	19,459,439
Share of (profits)/loss of an associate	(7,109,082)	(23,807,318)	826,360
Interest income	(11)	(4)	(129,494)
Depreciation and amortisation	—	—	12,905,120
Gain in a bargain purchase	—	—	(113,149,735)
Waiver of amount due to a related company	—	—	(430,135)
Loss on disposal of property, plant and
equipment	—	—	814,622
Operating cash flows before movements in working
capital	112,948	431,646	78,969,682
Decrease in inventories	—	—	5,883,899
Decrease/(increase) in trade and other receivables	469,953	(187,563)	(8,520,262)
Increase in amount due from an associate	(578,654)	—	—
Decrease in amounts due from related companies	—	—	15,064,271
Increase in trade and other payables	—	—	8,330,737
Decrease in amount due to holding company	—	—	(843,017)
Decrease in amounts due to related companies	—	(153,066)	—
Cash generated from operations	4,247	91,017	98,885,310
Income taxes paid	—	(523,331)	(7,055,262)
Net cash generated by/(used in) operating activities	4,247	(432,314)	91,830,048

— IIA-9 —

APPENDIX II-A

ACCOUNTANTS’ REPORT ON THE TARGET GROUP

	Year ended	Year ended	Year ended
	31 December	31 December	31 December
	2009	2010	2011
	HK$	HK$	HK$
Investing activities
Interest received	11	4	129,494
Purchase of property, plant and equipment	—	—	(11,261,575)
Additions of mining rights	—	—	(5,595,185)
Additions of exploration and evaluation assets	—	—	(8,747,791)
Net cash inflow on acquisition of Xinjiang
Tianmu (Note 31)	—	—	1,804,852
Dividends received from an associate	—	4,657,419	3,608,602
Net cash generated by/(used in) investing activities	11	4,657,423	(20,061,603)
Financing activities
Dividends paid to owner of the Target Company	—	(3,687,703)	(2,430,622)
Net cash used in financing activities	—	(3,687,703)	(2,430,622)
Net increase in cash and cash equivalents	4,258	537,406	69,337,823
Cash and cash equivalents at the beginning of
the financial year	260,911	250,477	817,788
Effect of foreign exchange rate changes	(14,692)	29,905	558,841
Cash and cash equivalents at the end of the
financial year	250,477	817,788	70,714,452
Analysis of the balances of cash and cash
equivalents
Bank balances and cash	250,477	817,788	70,714,452

— IIA-10 —

ACCOUNTANTS’ REPORT ON THE TARGET GROUP

APPENDIX II-A

NOTES TO THE FINANCIAL INFORMATION

1. BASIS OF PREPARATION OF THE FINANCIAL INFORMATION

The Target Company was incorporated in the BVI on 8 September 2000 with limited liability. The director of the Target Company regards the Vendor as the ultimate holding company of the Target Company. The address of the registered office and principal place of business of the Target Company is P.O. Box 957, Offshore Incorporations Centre, Road Town, Tortola, BVI.

The principal activity of the Target Company is investment holding. The principal activities of the Target Group are exploration and exploitation of gold, iron, nickel-copper mines in Xinjiang, the PRC and the processing and sale of the outputs from the mines.

The Financial Information of the Target Group is presented in Hong Kong dollars, which is the same as the functional currency of the Target Group.

Xinjiang Tianmu was owned as to 46% by Goffers Resources, a direct wholly-owned subsidiary of the Target Company. The financial information of Xinjiang Tianmu for the relevant periods was accounted for as an associate using the equity method in preparing the Financial Information of the Target Group so as to reflect the Target Company’s 46% equity interests in and significant influence on Xinjiang Tianmu throughout the relevant periods in accordance with HKAS 28 Investments in Associates .

In July 2011, the Target Company acquired an additional of 5% equity interest in Xinjiang Tianmu through its indirect wholly-owned subsidiary, namely Kangshun HK. Since then, Xinjiang Tianmu has become an indirect 51% owned subsidiary of the Target Company and such investment was accounted for as a subsidiary and the assets, liabilities and results of Xinjiang Tianmu was consolidated into the Financial Information of the Target Group for the financial period thereafter.

2. APPLICATION OF NEW AND REVISED HONG KONG FINANCIAL REPORTING STANDARDS

For the purpose of preparing and presenting the Financial Information for the Relevant Periods, the Target Group has consistently applied HKFRSs, Hong Kong Accounting Standards (“HKASs”), amendments and interpretations (“INT”) issued by the HKICPA that are effective for the annual accounting periods beginning on or after 1 January 2011.

The Target Group has not early applied the following new and revised standards, amendments and interpretation that have been issued but are not yet effective.

HKFRS 1 (Amendments) Severe Hyperinflation and Removal of Fixed Dates for First-time Adopters[1] HKFRS 7 (Amendments) Disclosures — Transfers of Financial Assets[1] HKFRS 7 (Amendments) Disclosures — Offsetting Financial Assets and Financial Liabilities[4]

— IIA-11 —

ACCOUNTANTS’ REPORT ON THE TARGET GROUP

APPENDIX II-A

HKFRS 9 and HKFRS 7 Mandatory Effective Date of HKFRS 9 and Transition (Amendments) Disclosures[6] HKFRS 9 Financial Instruments[6] HKFRS 10 Consolidated Financial Statements[4] HKFRS 11 Joint Arrangements[4] HKFRS 12 Disclosure of Interests in Other Entities[4] HKFRS 13 Fair Value Measurement[4] HKAS 1 (Amendments) Presentation of Items of Other Comprehensive Income[3] HKAS 12 (Amendments) Deferred Tax: Recovery of Underlying Assets[2] HKAS 19 (as revised in 2011) Employee Benefits[4] HKAS 27 (as revised in 2011) Separate Financial Statements[4] HKAS 28 (as revised in 2011) Investments in Associates and Joint Ventures[4] HKAS 32 (Amendments) Offsetting Financial Assets and Financial Liabilities[5] HK(IFRIC) — Int 20 Stripping Costs in the Production Phase of a Surface Mine[4]

Notes:

• 1 Effective for annual periods beginning on or after 1 July 2011

• 2 Effective for annual periods beginning on or after 1 January 2012

• 3 Effective for annual periods beginning on or after 1 July 2012

• 4 Effective for annual periods beginning on or after 1 January 2013

• 5 Effective for annual periods beginning on or after 1 January 2014

• 6 Effective for annual periods beginning on or after 1 January 2015

HKFRS 9 issued in 2009 introduces new requirements for the classification and measurement of financial assets. HKFRS 9 amended in 2010 includes the requirements for the classification and measurement of financial liabilities and for derecognition.

Key requirements of HKFRS 9 are described as follows:

• HKFRS 9 requires all recognised financial assets that are within the scope of HKAS 39 Financial Instruments: Recognition and Measurement to be subsequently measured at amortised cost or fair value. Specifically, debt investments that are held within a business model whose objective is to collect the contractual cash flows, and that have contractual cash flows that are solely payments of principal and interest on the principal outstanding are generally measured at amortised cost at the end of the subsequent reporting periods. All other debt investments and equity investments are measured at their fair values at the end of subsequent accounting periods. In addition, under HKFRS 9, entities may make an irrevocable election to present subsequent changes in the fair value of an equity investment (that is not held for trading) in other comprehensive income, with only dividend income generally recognised in profit or loss.

• The most significant effect of HKFRS 9 regarding the classification and measurement of financial liabilities relates to the presentation of changes in the fair value of a financial liability

— IIA-12 —

APPENDIX II-A

ACCOUNTANTS’ REPORT ON THE TARGET GROUP

(designated as at fair value through profit or loss) attributable to changes in the credit risk of that liability. Specifically, under HKFRS 9, for financial liabilities that are designated as at fair value through profit or loss, the amount of change in the fair value of the financial liability that is attributable to changes in the credit risk of that liability is presented in other comprehensive income, unless the recognition of the effects of changes in the liability’s credit risk in other comprehensive income would create or enlarge an accounting mismatch in profit or loss. Changes in fair value attributable to a financial liability’s credit risk are not subsequently reclassified to profit or loss. Previously, under HKAS 39, the entire amount of the change in the fair value of the financial liability designated as at fair value through profit or loss was presented in profit or loss.

HKFRS 9 is effective for annual periods beginning on or after 1 January 2015, with earlier application permitted.

The director of the Target Company anticipates that HKFRS 9 that will be adopted in the Target Group’s consolidated financial statements for the annual period beginning 1 January 2015 and that the application of the new standard may have an impact on amounts reported in respect of the Target Group’s financial assets and financial liabilities. However, it is not practicable to provide a reasonable estimate of that effect until a detailed review has been completed.

The amendments to HKAS 1 retain the option to present profit or loss and other comprehensive income in either a single statement or in two separate but consecutive statements. However, the amendments to HKAS 1 require additional disclosures to be made in other comprehensive income section such that items of other comprehensive income are grouped into two categories: (a) items that will not be reclassified subsequently to profit or loss; and (b) items that may be reclassified subsequently to profit or loss when specific conditions are met. Income tax on items of other comprehensive income is required to be allocated on the same basis.

The amendments to HKAS 1 are effective for annual periods beginning on or after 1 July 2012. The presentation of items of other comprehensive income will be modified accordingly when the amendments are applied in the future accounting periods.

The Target Group is in the process of making an assessment of the impact of HKFRS 10, HKFRS 11, HKFRS 12, HKFRS 13, HKAS 19 (as revised in 2011), HKAS 27 (as revised in 2011), HKAS 28 (as revised in 2011) and HK(IFRIC) - Int 20 but is not yet in a position to state whether these new standards, amendments and interpretation would have significant impact on the Financial Information.

The director of the Target Company anticipates that the application of the other new and revised standards and amendments will have no material impact on the results and the financial position of the Target Group.

3. SIGNIFICANT ACCOUNTING POLICIES

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

— IIA-13 —

APPENDIX II-A ACCOUNTANTS’ REPORT ON THE TARGET GROUP

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

Basis of consolidation

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

Income and expenses of subsidiaries acquired or disposed of during the Relevant Periods are included in the consolidated statement of comprehensive income from the effective date of acquisition up to the effective date of disposal, as appropriate. Total comprehensive income of subsidiaries is attributed to the owner of the Target Company and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance (effective from 1 January 2010 onwards).

Where necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with those used by other members of the Target Group.

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

Business combinations

Business combinations that took place on or after 1 January 2010

Acquisitions of businesses are accounted for using the acquisition method. The consideration transferred in a business combination is measured at fair value, which is calculated as the sum of the acquisition-date fair values of the assets transferred by the Target Group, liabilities incurred by the Target Group to the former owners of the acquiree and the equity interests issued by the Target Group in exchange for control of the acquiree. Acquisition-related costs are generally recognised in profit or loss as incurred.

At the acquisition date, the identifiable assets acquired and the liabilities assumed are recognised at their fair value, except that:

• deferred tax assets or liabilities, and assets or liabilities related to employee benefit arrangements are recognised and measured in accordance with HKAS 12 Income Taxes and HKAS 19 Employee Benefits respectively;

• liabilities or equity instruments related to share-based payment arrangements of the acquiree or share-based payment arrangements of the Target Group entered into to replace share-based payment arrangements of the acquiree are measured in accordance with HKFRS 2 Share-based Payment at the acquisition date (see accounting policy below); and

— IIA-14 —

APPENDIX II-A ACCOUNTANTS’ REPORT ON THE TARGET GROUP

• assets (or disposal groups) that are classified as held for sale in accordance with HKFRS 5 Non-current Assets Held for Sale and Discontinued Operations are measured in accordance with that standard.

Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree, and the fair value of the acquirer’s previously held equity interest in the acquiree (if any) over the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed. If, after assessment, the net of the acquisition-date amounts of the identifiable assets acquired and liabilities assumed exceeds the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree and the fair value of the acquirer’s previously held interest in the acquiree (if any), the excess is recognised immediately in profit or loss as a bargain purchase gain.

Non-controlling interests that are present ownership interests and entitle their holders to a proportionate share of the entity’s net assets in the event of liquidation may be measured either at fair value or at the non-controlling interests’ proportionate share of the recognised amounts of the acquiree’s identifiable net assets. The choice of measurement basis is made on a transaction-by-transaction basis. Other types of non-controlling interests are measured at their fair value or, when applicable, on the basis specified in another HKFRSs.

Where the consideration transferred by the Target Group in a business combination includes assets or liabilities resulting from a contingent consideration arrangement, the contingent consideration is measured at its acquisition-date fair value and included as part of the consideration transferred in a business combination. Changes in the fair value of the contingent consideration that qualify as measurement period adjustments are adjusted retrospectively, with the corresponding adjustments against goodwill. Measurement period adjustments are adjustments that arise from additional information obtained during the “measurement period” (which cannot exceed one year from the acquisition date) about facts and circumstances that existed at the acquisition date.

The subsequent accounting for changes in the fair value of the contingent consideration that do not qualify as measurement period adjustments depends on how the contingent consideration is classified. Contingent consideration that is classified as equity is not remeasured at subsequent reporting dates and its subsequent settlement is accounted for within equity. Contingent consideration that is classified as an asset or a liability is remeasured at subsequent reporting dates in accordance with HKAS 39, or HKAS 37 Provisions, Contingent Liabilities and Contingent Assets , as appropriate, with the corresponding gain or loss being recognised in profit or loss.

When a business combination is achieved in stages, the Target Group’s previously held equity interest in the acquiree is remeasured to fair value at the acquisition date (i.e. the date when the Target Group obtains control) and the resulting gain or loss, if any, is recognised in profit or loss. Amounts arising from interests in the acquiree prior to the acquisition date that have previously been recognised in other comprehensive income are reclassified to profit or loss where such treatment would be appropriate if that interest were disposed of.

If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, the Target Group reports provisional amounts for the items for which

— IIA-15 —

APPENDIX II-A ACCOUNTANTS’ REPORT ON THE TARGET GROUP

the accounting is incomplete. Those provisional amounts are adjusted during the measurement period (see above), or additional assets or liabilities are recognised, to reflect new information obtained about facts and circumstances that existed at the acquisition date that, if known, would have affected the amounts recognised at that date.

Investments in associates

An associate is an entity over which the Target Group has significant influence and that is neither a subsidiary nor an interest in a joint venture. Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control over those policies.

The results and assets and liabilities of an associate are incorporated in the Financial Information using the equity method of accounting, except when the investment is classified as held for sale, in which case it is accounted for in accordance with HKFRS 5 Non-Current Assets Held for Sale and Discontinued Operations . Under the equity method, investments in an associate are initially recognised in the consolidated statement of financial position at cost and adjusted thereafter to recognise the Target Group’s share of the profit or loss and other comprehensive income of the associate. When the Target Group’s share of losses of an associate exceeds the Target Group’s interest in that associate (which includes any long-term interests that, in substance, form part of the Target Group’s net investment in the associate), the Target Group discontinues recognising its share of further losses. Additional losses are recognised only to the extent that the Target Group has incurred legal or constructive obligations or made payments on behalf of the associate.

Any excess of the cost of acquisition over the Target Group’s share of the net fair value of the identifiable assets, liabilities and contingent liabilities of an associate recognised at the date of acquisition is recognised as goodwill, which is included within the carrying amount of the investment.

Any excess of the Target Group’s share of the net fair value of the identifiable assets, liabilities and contingent liabilities over the cost of acquisition, after reassessment, is recognised immediately in profit or loss.

The requirements of HKAS 39 are applied to determine whether it is necessary to recognise any impairment loss with respect to the Target Group’s investment in an associate. When necessary, the entire carrying amount of the investment (including goodwill) is tested for impairment in accordance with HKAS 36 Impairment of Assets as a single asset by comparing its recoverable amount (higher of value in use and fair value less costs to sell) with its carrying amount. Any impairment loss recognised forms part of the carrying amount of the investment. Any reversal of that impairment loss is recognised in accordance with HKAS 36 to the extent that the recoverable amount of the investment subsequently increases.

Upon disposal of an associate that results in the Target Group losing significant influence over that associate, any retained investment is measured at fair value at that date and the fair value is regarded as its fair value on initial recognition as a financial asset in accordance with HKAS 39. The difference between the previous carrying amount of the associate attributable to the retained interest and its fair value is included in the determination of the gain or loss on disposal of the associate. In addition, the

— IIA-16 —

APPENDIX II-A

ACCOUNTANTS’ REPORT ON THE TARGET GROUP

Target Group accounts for all amounts previously recognised in other comprehensive income in relation to that associate on the same basis as would be required if that associate had directly disposed of the related assets or liabilities. Therefore, if a gain or loss previously recognised in other comprehensive income by that associate would be reclassified to profit or loss on the disposal of the related assets or liabilities, the Target Group reclassifies the gain or loss from equity to profit or loss (as a reclassification adjustment) when it loses significant influence over that associate.

When a group entity transacts with its associate, profits and losses resulting from the transactions with the associate are recognised in the Target Group’s Financial Information only to the extent of interests in the associate that are not related to the Target Group.

Revenue recognition

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

Revenue from sales of goods is recognised when goods are delivered and titles have passed.

Dividend income from investments is recognised when the shareholder’s right to receive payment has been established (provided that it is probable that the economic benefits will flow to the Target Group and the amount of revenue can be measured reliably).

Interest income from a financial asset is recognised when it is probable that the economic benefits will flow to the Target Group and the amount of income can be measured reliably. Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts the estimated future cash receipts through the expected life of the financial assets to that asset’s net carrying amount on initial recognition.

Leasing

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

The Target Group as lessee

Operating lease payments are recognised as an expense on a straight-line basis over the lease term.

Leasehold land for own use

When a lease includes both land and building elements, the Target Group assesses the classification of each element as a finance or an operating lease separately based on the assessment as to whether substantially all the risks and rewards incidental to ownership of each element have been transferred to the Target Group unless it is clear that both elements are operating leases in which the entire lease

— IIA-17 —

APPENDIX II-A ACCOUNTANTS’ REPORT ON THE TARGET GROUP

is classified as an operating lease. Specifically, the minimum lease payments (including any lump-sum upfront payments) are allocated between the land and the building elements in proportion to the relative fair values of the leasehold interests in the land element and building element of the lease at the inception of the lease.

To the extent the allocation of the lease payments can be made reliably, interest in leasehold land that is accounted for as an operating lease is presented as “prepaid lease payments” in the Financial Information and is amortised over the lease term on a straight-line basis. When the lease payments cannot be allocated reliably between the land and building elements, the entire lease is generally classified as a finance lease and accounted for as property, plant and equipment.

Foreign currencies

In preparing the financial statements of each individual group entity, transactions in currencies other than the entity’s functional currency (foreign currencies) are recognised at the rates of exchange prevailing at the dates of the transactions. At the end of the reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.

Exchange differences on monetary items are recognised in profit or loss in the period in which they arise except for:

• exchange differences on foreign currency borrowings relating to assets under construction for future productive use, which are included in the cost of those assets when they are regarded as an adjustment to interest costs on those foreign currency borrowings;

• exchange differences on transactions entered into in order to hedge certain foreign currency risks; and

• exchange differences on monetary items receivable from or payable to a foreign operation for which settlement is neither planned nor likely to occur (therefore forming part of the net investment in the foreign operation), which are recognised initially in other comprehensive income and reclassified from equity to profit or loss on repayment of the monetary items.

For the purposes of presenting the Financial Information, the assets and liabilities of the Target Group’s foreign operations are translated into the presentation currency of the Target Group (i.e. Hong Kong dollars) using exchange rates prevailing at the end of each reporting period. Income and expense items are translated at the average exchange rates for the period, unless exchange rates fluctuate significantly during that period, in which case the exchange rates at the dates of the transactions are used. Exchange differences arising, if any, are recognised in other comprehensive income and accumulated in equity under the heading of translation reserve (attributable to non-controlling interests as appropriate).

— IIA-18 —

APPENDIX II-A

ACCOUNTANTS’ REPORT ON THE TARGET GROUP

On the disposal of a foreign operation (i.e. a disposal of the Target Group’s entire interest in a foreign operation, or a disposal involving loss of control over a subsidiary that includes a foreign operation, a disposal involving loss of joint control over a jointly controlled entity that includes a foreign operation, or a disposal involving loss of significant influence over an associate that includes a foreign operation), all of the exchange differences accumulated in equity in respect of that operation attributable to the owner of the Target Company are reclassified to profit or loss.

In relation to a partial disposal of a subsidiary that does not result in the Target Group losing control over the subsidiary, the proportionate share of accumulated exchange differences is re-attributed to non-controlling interests and are not recognised in profit or loss. For all other partial disposals (i.e. partial disposals of associates or jointly controlled entities that do not result in the Target Group losing significant influence or joint control), the proportionate share of the accumulated exchange differences is reclassified to profit or loss.

Goodwill and fair value adjustments on identifiable assets acquired arising on the acquisition of a foreign operation are treated as assets and liabilities of the foreign operation and translated at the rate of exchange prevailing at the end of each reporting period. Exchange differences arising are recognised in equity under the heading of translation reserve.

Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.

Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation.

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

Retirement benefit costs

Payments to defined contribution retirement benefit schemes are charged as an expense when employees have rendered services entitling them to the contributions.

Taxation

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

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

— IIA-19 —

APPENDIX II-A

ACCOUNTANTS’ REPORT ON THE TARGET GROUP

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

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

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

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset is realised, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Target Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.

Current and deferred tax are recognised in profit or loss, except when they relate to items that are recognised in other comprehensive income or directly in equity, in which case, the current and deferred tax is also recognised in other comprehensive income or directly in equity respectively. Where current tax or deferred tax arises from the initial accounting for a business combination, the tax effect is included in the accounting for the business combination.

Property, plant and equipment

Property, plant and equipment including buildings held for use in the production or supply of goods (other than construction in progress as described below), are stated in the consolidated statement of financial position at cost, less subsequent accumulated depreciation and subsequent accumulated impairment losses, if any.

Construction in progress represents plant and equipment in the course of construction for its own use purposes. Construction in progress is carried at cost, less any recognised impairment loss. Cost comprises construction expenditure and other direct costs attributable to such projects. Construction in progress is classified to the appropriate category of property, plant and equipment when completed and ready for intended use. Depreciation of these assets, on the same basis as other property assets, commences when the assets are ready for their intended use.

— IIA-20 —

APPENDIX II-A

ACCOUNTANTS’ REPORT ON THE TARGET GROUP

Depreciation is recognised so as to write off the cost of assets (other than construction in progress) less their residual values over their useful lives, using the straight-line method. The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis.

Assets held under finance leases are depreciated over their expected useful lives on the same basis as owned assets. However, when there is no reasonable certainty that ownership will be obtained by the end of the lease term, assets are depreciated over the shorter of the lease term and their useful lives.

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in profit or loss.

Mining rights

Mining rights are initially measured at cost. The carrying amount of exploration and evaluation assets is reclassified to mining rights when the technical feasibility and commercial viability of extracting mineral resources are demonstrable. Mining rights with finite useful lives are carried at costs less accumulated amortisation and any identified impairment loss. The mining rights are amortised using the units of production method.

Exploration and evaluation assets

Exploration and evaluation assets are recognised at cost on initial recognition. Subsequent to initial recognition, exploration and evaluation assets are stated at cost less any accumulated impairment losses. Exploration and evaluation assets include the cost of exploration rights and the expenditures incurred in the search for mineral resources as well as the determination of the technical feasibility and commercial viability of extracting those resources. When the technical feasibility and commercial viability of extracting mineral resources become demonstrable, previously recognised exploration and evaluation assets are reclassified as either intangible assets or property, plant and equipment. These assets are assessed for impairment before reclassification, and any impairment loss is recognised in profit or loss.

Impairment of exploration and evaluation assets

The carrying amount of the exploration and evaluation assets is reviewed annually and adjusted for impairment in accordance with HKAS 36 Impairment of Assets whenever one of the following events or changes in circumstances indicate that the carrying amount may not be recoverable (the list is not exhaustive):

• the period for which the Target Group has the right to explore in the specific area has expired during the period or will expire in the near future, and is not expected to be renewed;

— IIA-21 —

APPENDIX II-A ACCOUNTANTS’ REPORT ON THE TARGET GROUP

• substantive expenditure on further exploration for and evaluation of mineral resources in the specific area is neither budgeted nor planned;

• exploration for and evaluation of mineral resources in the specific area have not led to the discovery of commercially viable quantities of mineral resources and the Target Group has decided to discontinue such activities in the specific area; or

• sufficient data exist to indicate that, although a development in the specific area is likely to proceed, the carrying amount of the exploration and evaluation asset is unlikely to be recovered in full from successful development or by sale.

An impairment loss is recognised in profit or loss whenever the carrying amount of an asset exceeds its recoverable amount.

Impairment of tangible and intangible assets other than exploration and evaluation assets

At the end of each reporting period, the Target Group reviews the carrying amounts of its tangible and intangible assets with finite useful lives to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any).

Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment for at least annually, and whenever there is an indication that the asset may be impaired.

Recoverable amount is the higher of fair value less costs to sell and value in use. When it is not possible to estimate the recoverable amount of an individual asset, the Target Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. When a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest group of cash-generating units for which a reasonable and consistent allocation basis can be identified.

In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted. If the recoverable amount of an asset (or a cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or the cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss.

Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss.

— IIA-22 —

ACCOUNTANTS’ REPORT ON THE TARGET GROUP

APPENDIX II-A

Inventories

Inventories are stated at the lower of cost and net realisable value. Costs of inventories are determined on the weighted average basis. Net realisable value represents the estimated selling price for inventories less all estimated costs of completion and costs necessary to make the sale.

Cash and cash equivalents

Cash and cash equivalents include cash in hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of three months or less, and bank overdrafts (if any).

Provisions

Provisions are recognised when the Target Group has a present obligation (legal or constructive) as a result of a past event, it is probable that the Target Group will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation.

The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. When a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows (where the effect of the time value of money is material).

When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, a receivable is recognised as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably.

Provision for restoration costs

The Target Group is required to incur costs for restoration of the land after the underground sites have been mined. Provision for restoration costs is recognised when the Target Group has a present obligation as a result of past event, and it is probable that the Target Group will be required to settle that obligation. Provision is measured by reference to relevant rules and regulations applicable in the PRC at the end of the reporting period, and is discounted to their present value where the effect is material.

Restoration costs are provided in the period in which the obligation is identified and is capitalised to the land restoration costs. The costs are amortised on the straight-line basis over their estimate useful lives of 4 to 10 years.

Financial instruments

Financial assets and financial liabilities are recognised when a group entity becomes a party to the contractual provisions of the instrument.

— IIA-23 —

APPENDIX II-A

ACCOUNTANTS’ REPORT ON THE TARGET GROUP

Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognised immediately in profit or loss.

Financial assets

The Target Group’s financial assets comprise those classified as loans and receivables. The accounting policy adopted is set out below.

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Loans and receivables (including deposits, trade and other receivables, amount due from an associate, amount due from a related company and bank balances and cash) are measured at amortised cost using the effective interest method, less any impairment.

Interest income is recognised by applying the effective interest rate, except for short-term receivables when the recognition of interest would be immaterial.

Impairment of financial assets

Financial assets are assessed for indicators of impairment at the end of each reporting period. Financial assets are considered to be impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been affected.

For the financial assets, objective evidence of impairment could include:

• significant financial difficulty of the issuer or counterparty; or

• breach of contract, such as a default or delinquency in interest or principal payments; or

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

• the disappearance of an active market for that financial asset because of financial difficulties.

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

— IIA-24 —

APPENDIX II-A ACCOUNTANTS’ REPORT ON THE TARGET GROUP

For financial assets carried at amortised cost, the amount of the impairment loss recognised is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the financial asset’s original effective interest rate.

For financial assets carried at cost, the amount of the impairment loss is measured as the difference between the asset’s carrying amount and the present value of the estimated future cash flows discounted at the current market rate of return for a similar financial asset. Such impairment loss will not be reversed in subsequent periods.

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

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

Financial liabilities and equity instruments

Debt and equity instruments issued a group entity are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument.

Equity instruments

An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Target Group are recognised at the proceeds received, net of direct issue costs.

Financial liabilities

Financial liabilities (including trade and other payables, amount due to holding company, amounts due to related companies, loan due to a related company and dividend payable) are subsequently measured at amortised cost, using the effective interest method.

Derecognition

The Target Group derecognises a financial asset only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. If the Target Group neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the

— IIA-25 —

APPENDIX II-A ACCOUNTANTS’ REPORT ON THE TARGET GROUP

Target Group continues to recognise the asset to the extent of its continuing involvement and recognises an associated liability. If the Target Group retains substantially all the risks and rewards of ownership of a transferred financial asset, the Target Group continues to recognise the financial asset and also recognises a collateralised borrowing for the proceeds received.

On derecognition of a financial asset in its entirety, the difference between the asset’s carrying amount and the sum of the consideration received and receivable and the cumulative gain or loss that had been recognised in other comprehensive income and accumulated in equity is recognised in profit or loss.

The Target Group derecognises financial liabilities when, and only when, the Target Group’s obligations are discharged, cancelled or they expire. The difference between the carrying amount of the financial liability derecognised and the consideration paid and payable is recognised in profit or loss.

Related parties

A party is considered to be related to the Target Group if:

• (i) the party is a person or a close member of that person’s family and that person,

• (a) has controls or joint control over the Target Group;

• (b) has significant influence over the Target Group; or

• (c) is a member of the key management personnel of the Target Group or of a parent of the Target Group;

or

• (ii) the party is an entity where any of the following conditions applies:

• (a) the entity and the Target Group are members of the same group;

• (b) one entity is an associate or joint venture of the other entity (or of a parent, subsidiary or fellow subsidiary of the other entity);

• (c) the entity and the Target Group are joint ventures of the same third party;

• (d) one entity is a joint venture of a third entity and the other entity is an associate of the third entity;

• (e) the entity is a post-employment benefit plan for the benefit of employees of either the Target Group or an entity related to the Target Group;

• (f) the entity is controlled or jointly controlled by a person identified in (i); and

• (g) a person identified in (i)(a) has significant influence over the entity or is a member of the key management personnel of the entity (or of a parent of the entity).

— IIA-26 —

APPENDIX II-A

ACCOUNTANTS’ REPORT ON THE TARGET GROUP

4. FINANCIAL INSTRUMENTS

• (a) Categories of financial instruments

31 Financial assets Loans and receivables Deposits Financial assets included in trade and other receivables Amount due from an associate Amount due from a related company Bank balances and cash Financial liabilities At amortised cost Financial liabilities included in trade and other payables Amount due to holding company Amounts due to related companies Loan due to a related company Dividend payable	At December 2009 31 HK$ — 4,692,032 646,151 — 250,477 — 1,343,017 153,066 — 4,168,325	At December 2010 At 31 December 2011 HK$ HK$ — 10,420,136 3,805,953 16,709,344 670,540 — — 8,798,594 817,788 70,714,452 — 27,237,533 1,343,017 500,000 — 9,850,852 — 6,996,723 2,430,622 28,912,041	At December 2010 At 31 December 2011 HK$ HK$ — 10,420,136 3,805,953 16,709,344 670,540 — — 8,798,594 817,788 70,714,452 — 27,237,533 1,343,017 500,000 — 9,850,852 — 6,996,723 2,430,622 28,912,041
			27,237,533 500,000 9,850,852 6,996,723 28,912,041

(b) Financial risk management objectives and policies

The Target Group’s major financial instruments include deposits, trade and other receivables, amount due from an associate, amount due from a related company, bank balances and cash, trade and other payables, amount due to holding company, amounts due to related companies, loan due to a related company and dividend payable. Details of these financial instruments are disclosed in the respective notes. The risks associated with these financial instruments and the policies on how to mitigate these risks are set out below. The risks associated and the management policies remain unchanged during the Relevant Periods.

Market risks

There has been no change to the Target Group’s exposure to market risks or the manner in which these risks are managed and measured.

Foreign currency risk

Amount due from an associate and certain other receivables as at 31 December 2009 and 2010 are denominated in the currency other than the function currency of the respective group entities as

— IIA-27 —

APPENDIX II-A ACCOUNTANTS’ REPORT ON THE TARGET GROUP

disclosed in notes 18 and 20 respectively. The Target Group currently does not have a foreign currency hedging policy. However the management monitors foreign exchange exposure and will consider hedging significant currency exposure should the need arise.

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

		At		At		At
	**31 **	December	**31 **	December	**31 **	December
		2009		2010		2011
		HK$		HK$		HK$
RMB		5,327,047		4,277,792		—

The sensitivity analyses below have been determined based on the exposure to currency risks as at the end of the reporting period.

The following table details the Target Group’s sensitivity to a 5% appreciation and depreciation in RMB against relevant foreign currency and all other variables were held constant. 5% is the sensitivity rate used and represents management’s assessment of the reasonably possible change in foreign exchange rates. The sensitivity analysis includes outstanding foreign currency denominated monetary items, and adjusts their translation at the end of the reporting period for a 5% change in foreign currency rates. A positive number below indicates an increase in post-tax profit for the Relevant Periods where RMB strengthen 5% against the foreign currency. For a 5% weakening of RMB against the foreign currency, there would be an equal and opposite impact on the results for the Relevant Periods.

			Year ended 31	Year ended 31	Year ended 31
			December 2009	December 2010	December 2011
			HK$	HK$	HK$
RMB			266,352	213,890	—
_Interest _	_rate _	risk

The Target Group’s cash flow interest rate risk primarily relates to variable-rate bank balances. The Target Group has not used any interest rate swaps in order to mitigate its exposure associated with fluctuations relating to interest cash flows. However, the management monitors interest rate exposure and will consider other necessary actions when significant interest rate exposure is anticipated.

Price risk

As the Target Group has no significant investments in financial investments at fair value, the Target Group is not exposed to significant price risk.

— IIA-28 —

ACCOUNTANTS’ REPORT ON THE TARGET GROUP

APPENDIX II-A

Credit risk

The Target Group has no significant credit risk, including risk resulting from counterparty default and risk of concentration. The Target Group has policies in place for the control and monitoring of such credit risk.

At the end of the reporting period, the Target Group’s maximum exposure to credit risk which will cause a financial loss to the Target Group due to failure to discharge an obligation by the counterparties is arising from the carrying amounts of the respective recognised financial assets as stated in the consolidated statement of financial position. In order to minimise the credit risk, the Target Group has monitoring procedures to ensure that follow-up action is taken to recover overdue debts. In addition, the Target Group review the recoverable amount of each individual debt at the end of the reporting period to ensure that adequate impairment losses are made for irrecoverable amounts. In this regard, the director of the Target Company considers that the Target Group’s credit risk is significantly reduced.

The credit risk on liquid funds is limited because the counterparties are banks with high credit ratings assigned by international credit-rating agencies and state-owned banks with good reputation.

Liquidity risk

In the management of liquidity risk, the Target Group monitor and maintain a level of cash and cash equivalents deemed adequate by the management to finance the Target Group’s operations and mitigate the effects of fluctuations in cash flows.

All of the Target Group’s financial liabilities are repayable on demand or less than one year. In the opinion of the director of the Target Company, the preparation of maturity profile is not necessary.

(c) Fair value of financial instruments

The director of the Target Company considers that the carrying amounts of financial assets and financial liabilities recorded at amortised cost in the Financial Information approximate to their fair values.

Fair value measurements recognised in the consolidated statement of financial position

The following table provides an analysis of financial instruments that are measured subsequent to initial recognition at fair value, grouped into levels 1 to 3 based on the degree to which the fair value is observable:

• Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active market for identical assets or liabilities;

• Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and

— IIA-29 —

APPENDIX II-A ACCOUNTANTS’ REPORT ON THE TARGET GROUP

• Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs).

At the end of the reporting period, the Target Group did not have any assets and liabilities that were measured at the above fair value measurements hierarchy.

5. CAPITAL RISK MANAGMENT

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

The capital structure of the Target Group consists of cash and cash equivalents and equity attributable to owner of the Target Company, comprising share capital and reserves.

The director of the Target Company reviews the capital structure on a regular basis. As part of this review, the director considers the cost of capital and the risks associated with each class of capital. The Target Group will balance its overall capital structure through the payment of dividends and new share issues as well as the issue of new debt or the redemption of existing debt.

6. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

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

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

Critical judgements in applying accounting policies

The following are the critical judgements, apart from those involving estimations (see below), that management has made in the process of applying the Target Group’s accounting policies and that have the most significant effect on the amounts recognised in the Financial Information.

Renewal of exploration and mining right permits

The Target Group owns certain exploration and mining rights permits which will be expired at various dates ranging from September 2012 to August 2019. The Target Group may file an application for an

— IIA-30 —

APPENDIX II-A ACCOUNTANTS’ REPORT ON THE TARGET GROUP

extension of the validity periods of the exploration or exploitation licenses prior to the expiry date of the relevant licenses. The renewal is subject to the approval by the relevant PRC authorities. In the opinion of the director, after obtaining opinion from its legal counsel, the Target Group will be entitled to renew its exploration and mining rights permits upon the expiration at minimal costs.

If the Target Group is not able to obtain approval for renewal upon their expiry, the carrying amount of the exploration and evaluation assets and mining rights at the end of each reporting period might be significant reduced and the Target Group will increase amortisation charges of mining rights where useful lives are less than previously estimated lives, or it will write-off or write-down the carrying amounts of the exploration and evaluation assets and the mining rights, which significant impairment loss might be recognised.

Key sources of estimation uncertainty

The following are the key assumptions concerning the future, and other key sources of estimation uncertainty at the end of the reporting period that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year.

Estimated useful lives of property, plant and equipment

Management determines the estimated useful lives and related depreciation charges for its property, plant and equipment. This estimate is based on the historical experience of the actual useful lives of property, plant and equipment of similar nature and functions. It could change significantly as a result of technical innovations and competitor actions in response to severe industry cycles. Management will increase the depreciation charges where useful lives are less than previously estimated, or it will write-off or write-down obsolete or non-strategic assets that have been abandoned or sold.

Estimated impairment loss of trade and other receivables

The Target Group’s policy for doubtful receivables is based on the on-going evaluation of the collectability and ageing analysis of the trade and other receivables and on management’s judgements. Considerable judgement is required in assessing the ultimate realisation of these receivables, including the current creditworthiness and the past collection history of each debtor, and the present values of the estimated future cash flows discounted at the effective interest rates. If the financial conditions of the Target Group’s debtors were to deteriorate, resulting in an impairment of their ability to make payments, additional impairment loss of trade and other receivables may be required.

Estimated impairment loss of inventories

Net realisable value of inventories is the estimated selling price in the ordinary course of business, less estimated costs of completion and selling expenses. These estimates are based on the current market condition and the historical experience of selling products of similar nature. It could change significantly as a result of changes in customer taste and competitor actions in response to changes to economic conditions.

— IIA-31 —

ACCOUNTANTS’ REPORT ON THE TARGET GROUP

APPENDIX II-A

Impairment of exploration and evaluation assets

The carrying value of exploration and evaluation assets is reviewed for impairment when events or changes in circumstances indicate that the carrying amount may not be recoverable. The Target Group considers all facts and circumstances occurred to judge whether these facts and circumstances would suggest that the carrying amount of the exploration and evaluation assets may exceed its recoverable amount (i.e. impaired). Based on the judgement of the director of the Target Company there was no impairment on the exploration and evaluation assets and no impairment loss is recognised during the Relevant Periods. Management reassesses the impairment of exploration and evaluation assets at the end of the reporting period.

Impairment of mining rights and property, plant and equipment

The Target Group assesses whether there are any indicators of impairment for mining rights and property, plant and equipment at each reporting date. Mining rights and property, plant and equipment are tested for impairment when there are indicators that the carrying amounts may not be recoverable. When value in use calculations are undertaken, management estimate the expected future cash flows from the asset or cash-generating unit and choose a suitable discount rate in order to calculate the present values of those cash flows.

Provision for restoration costs

Provision for restoration costs has been estimated by the director of the Target Company by reference to the current regulatory requirements and the area affected estimated by the management. Significant changes in the regulatory requirements in relation to such costs will result in changes to the provision amounts from period to period. In addition, the expected timing of cash outflows of such restoration costs are estimated based on the expected completion date of the mines and is subject to any significant changes to the production plan.

7. SEGMENT INFORMATION

The director of the Target Company reviews the Target Group’s internal financial reporting and other information and also obtains other relevant external information in order to assess performance and allocate resources and operating segment is identified with reference to these.

The director of the Target Company considers that the business of the Target Group is organised in one operating segment as exploration and exploitation of gold, iron and nickel-copper mines in Xinjiang, the PRC and the processing and sale of the outputs from the mines. Additional disclosure in relation to segment information is not presented as the director of the Target Company assesses the performance of the only operating segment identified based on the consistent information as disclosed in the Financial Information.

The total net segment profit is equivalent to profit and total comprehensive income for the year as shown in the consolidated statement of comprehensive income and the total segment assets and total segment liabilities are equivalent to total assets and total liabilities as shown in the consolidated statement of financial position.

— IIA-32 —

APPENDIX II-A ACCOUNTANTS’ REPORT ON THE TARGET GROUP

Details of interest income, depreciation and amortisation in relation to the operating segment are disclosed in notes 9 and 11 respectively.

The Target Company is domiciled in the BVI with the Target Group’s major operations in the PRC. Total revenue and turnover as disclosure in note 8 below represented the revenue from external customers. All of the non-current assets of the Target Group are located in the PRC. All of the Group’s revenue was attributable to its operation in exploration and exploitation of gold, iron and nickel-copper mines in Xinjiang, the PRC and the processing and sale of the outputs from the mines.

Information about major customers

Revenue from customers during the Relevant Periods contributing over 10% of the total revenue of the Target Group are as follows:

			Year ended	Year ended	Year ended
		**31 **	December 2009	31 December 2010	31 December 2011
			HK$	HK$	HK$
Customer	A		—	—	109,456,133
Customer	B		—	—	25,701,395
			—	—	135,157,528

8.	REVENUE
		Year ended	Year ended	Year ended
		31 December 2009	31 December 2010	31 December 2011
		HK$	HK$	HK$
Sales	of gold products	—	—	135,157,528
Sales	of iron ore	—	—	7,452,085
		—	—	142,609,613

— IIA-33 —

APPENDIX II-A

ACCOUNTANTS’ REPORT ON THE TARGET GROUP

9. OTHER INCOME AND GAINS

	Year ended	Year ended	Year ended
	31 December 2009	31 December 2010	31 December 2011
	HK$	HK$	HK$
Bank interest income	11	4	129,494
Waiver of amount due to a related
company	—	—	430,135
Net foreign exchange gains	123,394	443,093	—
Other income	—	—	266,318
	123,405	443,097	825,947
10. INCOME TAX EXPENSE
	Year ended	Year ended	Year ended
	31 December 2009	31 December 2010	31 December 2011
	HK$	HK$	HK$
Current tax:
- Withholding tax	—	930,838	1,362,346
- PRC Enterprise Income Tax	—	—	19,297,834
Deferred tax:
- Current year	710,908	1,449,894	(1,200,741)
	710,908	2,380,732	19,459,439

The Target Company and Kangshun BVI are exempted companies incorporated in the BVI and, as such, are not liable for taxation in the BVI.

On 26 June 2008, the Hong Kong Legislative Council passed the Revenue Bill 2008 which reduced corporate profit tax rate from 17.5% to 16.5% with effect from the year of assessment 2008/2009.

No provision for Hong Kong Profits Tax has been made in the Financial Information as the Target Company and its subsidiaries had no assessable profits derived from or arising in Hong Kong during the Relevant Periods.

PRC subsidiary is subject to PRC Enterprise Income Tax at 25%.

Under the Enterprise Income Tax Law of the PRC, withholding tax is imposed on dividends declared in respect of profits earned by the PRC associate/subsidiary from 1 January 2008 onwards.

— IIA-34 —

APPENDIX II-A

ACCOUNTANTS’ REPORT ON THE TARGET GROUP

Pursuant to the Enterprise Income Tax Law and implementation regulations issued by the State Council, PRC income tax at the rate of 10% is applicable to dividends payable to investors that are “non-resident enterprises” (and that do not have an establishment or place of business in the PRC, or that have an establishment or place of business but the relevant income is not effectively connected with the establishment or place of business) to the extent such dividends have their sources within the PRC.

The tax charge for the year can be reconciled to the profit per the consolidated statement of comprehensive income as follows:

	Year ended	Year ended	Year ended
	31 December	31 December	31 December
	2009	2010	2011
	HK$	HK$	HK$
Profit before tax	7,222,041	24,238,968	178,132,944
Tax at Hong Kong Profits Tax rate of
16.5%	1,191,637	3,999,430	29,391,936
Tax effect of expenses not deductible for
tax purpose	1,724	1,889	2,129,345
Tax effect of income not taxable for tax
purpose	(20,362)	(73,111)	(18,740,679)
Tax effect of share of (profits)/loss of an
associate	(1,172,999)	(3,928,208)	136,349
Tax effect of withholding tax on
undistributed profits	710,908	1,449,894	1,072,676
Withholding tax	—	930,838	1,362,346
Tax effect of different tax rates of a group
entity operating in jurisdictions other
than Hong Kong	—	—	4,107,466
Income tax expense for the year	710,908	2,380,732	19,459,439

— IIA-35 —

ACCOUNTANTS’ REPORT ON THE TARGET GROUP

APPENDIX II-A

11. PROFIT FOR THE YEAR

Profit for the year has been arrived at after charging:

	Year ended	Year ended	Year ended
	31 December	31 December	31 December
	2009	2010	2011
	HK$	HK$	HK$
Director’s remuneration (Note 12)	—	—	—
Other staff’s retirement benefits scheme
contributions	—	—	404,936
Other staff costs	—	—	4,840,621
Total staff costs	—	—	5,245,557
Amortisation of mining rights	—	—	11,779,349
Amortisation of prepaid lease payments	—	—	2,244
Amortisation of land restoration costs	—	—	261,455
Cost of inventories recognised as expense	—	—	50,168,681
Depreciation of property, plant and
equipment	—	—	862,072
Loss on disposal of property, plant and
equipment (included in other expenses)	—	—	814,622
Auditors’ remuneration	—	—	18,265

12. DIRECTOR’S AND EMPLOYEES’ EMOLUMENTS

Director’s emoluments

During the Relevant Periods, there was no emolument paid or payable to the director of the Target Company.

Employees’ emoluments

During the Relevant Periods, of the five individuals with the highest emoluments in the Target Group, none of them was a director of the Target Company. The emoluments of the remaining Nil, Nil and 5 individuals respectively during the Relevant Periods were as follows:

	Year ended	Year ended	Year ended
	31 December	31 December	31 December
	2009	2010	2011
	HK$	HK$	HK$
Salaries and other benefits	—	—	360,845
Retirement benefits scheme contributions	—	—	6,371
	—	—	367,216

— IIA-36 —

APPENDIX II-A ACCOUNTANTS’ REPORT ON THE TARGET GROUP

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

During the Relevant Periods, no emoluments were paid by the Target Group to the director of the Target Company or the five highest paid individuals as an inducement to join or upon joining the Target Group, or as compensation for loss of office. There were no arrangements under which the director of the Target Company waived or agreed to waive any remuneration during the Relevant Periods.

13. DIVIDENDS

	Year ended	Year ended	Year ended
	31 December	31 December	31 December
	2009	2010	2011
	HK$	HK$	HK$
Dividends recognised as distributions
during the year	2,050,000	1,950,000	12,700,000

14. EARNINGS PER SHARE

Earnings per share has not been presented as such information is not considered meaningful for the purpose of this report.

15. PROPERTY, PLANT AND EQUIPMENT

Buildings and leasehold improvements Electronic equipment Furniture and fixtures Plant and machinery HK$ HK$ HK$ HK$ Cost At 1 January 2009 — — — — Exchange adjustments — — — — Additions — — — — At 31 December 2009 — — — — Exchange adjustments — — — — Additions — — — — At 31 December 2010 — — — — Acquisitions through business combinations (Note 31) 2,133,597 573,424 182,901 353,022	Motor vehicles Construction in progress HK$ HK$ — — — — — — — — — — — — — — 1,007,119 12,004,224	Total HK$ — — —
		— — —
		— 16,254,287

— IIA-37 —

APPENDIX II-A

ACCOUNTANTS’ REPORT ON THE TARGET GROUP

Buildings and leasehold improvements Electronic equipment Furniture and fixtures Plant and machinery HK$ HK$ HK$ HK$ Exchange adjustments 58,756 8,646 2,521 5,897 Transferred from construction in progress 9,735,720 — — — Additions 2,452,891 326,893 7,993 1,180,933 Eliminated on disposals (53,141) (4,790) (2,606) (745,828) At 31 December 2011 14,327,823 904,173 190,809 794,024 Accumulated depreciation At 1 January 2009 — — — — Exchange adjustments — — — — Provision for the year — — — — At 31 December 2009 — — — — Exchange adjustments — — — — Provision for the year — — — — At 31 December 2010 — — — — Exchange adjustments 1,018 330 26 603 Provision for the year 418,856 135,889 10,483 247,714 At 31 December 2011 419,874 136,219 10,509 248,317 Carrying amounts At 31 December 2009 — — — — At 31 December 2010 — — — — At 31 December 2011 13,907,949 767,954 180,300 545,707	Motor vehicles Construction in progress HK$ HK$ 13,794 158,653 — (9,735,720) 2,752 7,290,113 (8,257) — 1,015,408 9,717,270 — — — — — — — — — — — — — — 418 — 172,130 — 172,548 — — — — — 842,860 9,717,270	Total HK$ 248,267 — 11,261,575 (814,622)
		26,949,507
		— — —
		— — —
		— 2,395 985,072
		987,467
		—
		—
		25,962,040

— IIA-38 —

APPENDIX II-A ACCOUNTANTS’ REPORT ON THE TARGET GROUP

The above items of property, plant and equipment (other than construction in progress) are depreciated on a straight-line method over the estimated useful lives as follows:

Buildings and leasehold improvements:	8 to 20 years
Electronic equipment:	3 to 8 years
Furniture and fixtures:	3 to 8 years
Plant and machinery:	8 years
Motor vehicles:	5 to 8 years

Amongst the depreciation expenses HK$985,072 for the year ended 31 December 2011, approximately HK$123,000 were included in the cost of inventories. The remaining depreciation expenses were charged to the consolidated statement of comprehensive income.

16. EXPLORATION AND EVALUATION ASSETS

Cost At 1 January 2009 Additions Exchange adjustments At 31 December 2009 Additions Exchange adjustments At 31 December 2010 Acquisitions through business combinations (Note 31) Additions Transfer to mining rights (Note 17) Exchange adjustments At 31 December 2011	HK$ — — — — — — — 166,000,000 18,574,755 (234,806) 2,320,709 186,660,658

The amounts mainly represent the cost of acquisition of the exploration licenses in various locations in the PRC. The exploration and evaluation assets also include geological and geophysical costs, and drilling and exploration expenses directly attributable to exploration activities.

— IIA-39 —

ACCOUNTANTS’ REPORT ON THE TARGET GROUP

APPENDIX II-A

17. MINING RIGHTS

Cost At 1 January 2009 Additions Exchange adjustments At 31 December 2009 Additions Exchange adjustments At 31 December 2010 Acquisitions through business combinations (Note 31) Additions Transfer from exploration and evaluation assets (Note 16) Exchange adjustments At 31 December 2011 Amortisation At 1 January 2009 Charge for the year Exchange adjustments At 31 December 2009 Charge for the year Exchange adjustments At 31 December 2010 Charge for the year Exchange adjustments At 31 December 2011 Carrying amounts At 31 December 2009 At 31 December 2010 At 31 December 2011	HK$ — — —
	— — —
	— 139,000,000 5,595,185 234,806 1,920,084
	146,750,075
	— — —
	— — —
	— 11,779,349 28,635
	11,807,984
	—
	—
	134,942,091

— IIA-40 —

APPENDIX II-A ACCOUNTANTS’ REPORT ON THE TARGET GROUP

The mining rights represent the rights to conduct mining activities in various gold mines and iron mine situated in the PRC.

The mining rights are amortised using the units of production method. Effective amortisation rate for the years ended 31 December 2009, 2010 and 2011 approximate to Nil, Nil and 8.03% respectively.

18. INTEREST IN AN ASSOCIATE

Details of the Target Group’s interest in an associate are as follows:

	At	At	At
	31 December	31 December	31 December
	2009	2010	2011
	HK$	HK$	HK$
Unlisted investment at cost	462,264	462,264	—
Other comprehensive income — translation
reserve	(375,786)	1,054,816	—
Share of post-acquisition profits, net of
dividends received	21,707,587	41,469,327	—
	21,794,065	42,986,407	—

The amount due from an associate was unsecured, interest-free and repayable on demand.

As at 31 December 2009 and 2010, the Target Group had interest in the following associate:

			Proportion of
		Particulars of	nominal value of
	Place of	issued and fully	issued capital held
	registration/	paid registered	by the Target
Name of entity	operations	capital	Group	Principal activities
Xinjiang Tianmu	PRC	RMB20,000,000	46% (Indirect)	Exploration and exploitation of gold, iron
				and nickel-copper mines in Xinjiang of
				the PRC and the processing and sale of
				the outputs from the mines

Xinjiang Tianmu was owned as to 46% by Goffers Resources, a direct wholly-owned subsidiary of the Target Company. The financial information of Xinjiang Tianmu for the Relevant Periods was accounted for as an associate using the equity method in preparing the Financial Information of the Target Group so as to reflect the Target Company’s 46% equity interests in and significant influence on Xinjiang Tianmu throughout the relevant periods in accordance with HKAS 28 Investments in Associates .

— IIA-41 —

APPENDIX II-A ACCOUNTANTS’ REPORT ON THE TARGET GROUP

In July 2011, the Target Company acquired an additional of 5% equity interest in Xinjiang Tianmu through its indirect wholly-owned subsidiary, namely Kangshun HK. Since then, Xinjiang Tianmu has become an indirect 51% owned subsidiary of the Target Company and such investment was accounted for as a subsidiary and the assets, liabilities and results of Xinjiang Tianmu was consolidated into the Financial Information of the Target Group for the financial period thereafter.

The summarised financial information in respect of the Target Group’s associate is set out below:

	At	At	At
	31 December	31 December	14 July
	2009	2010	2011
	HK$	HK$	HK$
Total assets	68,508,370	126,023,892	122,183,636
Total liabilities	(21,129,967)	(32,575,180)	(58,016,525)
Net assets	47,378,403	93,448,712	64,167,111
The Target Group’s share of net assets of
an associate	21,794,065	42,986,407	29,516,871
			Period from 1
	Year ended	Year ended	January to
	31 December	31 December	14 July
	2009	2010	2011
	HK$	HK$	HK$
Revenue	65,284,839	124,541,846	8,727,682
Profit/(loss) for the year/period	15,454,527	51,755,039	(1,796,435)
The Target Group’s share of profits/(loss)
of an associate for the year/period	7,109,082	23,807,318	(826,360)
The Target Group’s share of other
comprehensive income of an associate
for the year/period	53,098	1,430,602	980,282

— IIA-42 —

APPENDIX II-A

ACCOUNTANTS’ REPORT ON THE TARGET GROUP

19. PREPAID LEASE PAYMENTS

	At	At	At
	31 December	31 December	31 December
	2009	2010	2011
	HK$	HK$	HK$
Carrying amounts
At beginning of the year	—	—	—
Acquisitions through business
combinations (Note 31)	—	—	146,490
Charged to profit or loss	—	—	(2,244)
Exchange adjustments	—	—	2,003
At end of the year	—	—	146,249
Analysis of the carrying amounts of prepaid	lease payments is as follows:
Prepaid lease payments	—	—	146,249
Less: Portion to be charged to profit or
loss in the coming twelve months
and shown as current assets	—	—	(4,499)
Amount due after one year	—	—	141,750

Included in prepaid lease payments were land use rights situated in the PRC under medium term lease and were acquired with lease period of 50 years. The prepaid lease payments were amortised over their lease periods.

— IIA-43 —

APPENDIX II-A

ACCOUNTANTS’ REPORT ON THE TARGET GROUP

20. TRADE AND OTHER RECEIVABLES

	At	At	At
	31 December	31 December	31 December
	2009	2010	2011
	HK$	HK$	HK$
Trade receivables	—	—	5,526,324
Prepayments, deposits and other
receivables	4,692,032	3,805,953	28,131,400
	4,692,032	3,805,953	33,657,724
Less: Deposits classified as non-current
assets (Note)	—	—	(10,420,136)
	4,692,032	3,805,953	23,237,588

Note: Deposits with the carrying amount of HK$10,420,136 as at 31 December 2011 represents deposits paid by the Target Group to the Ministry of Land and Resources of the PRC as required by Xinjiang Uygar Autonomous Region Regulations on the Management of Security Deposit for Ecological Control Restoration in Mines. The deposits are payable by down payments and annual instalments from year 2010 to 2018 and refundable upon the cessation of mining activities or closure of mines and the environmental rehabilitation work of relevant mines to meet the PRC government’s requirements.

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

At 31 December 2009 At 31 December 2010 31 HK$ HK$ 0 to 30 days — —	At December 2011 HK$ 5,526,324

The credit terms granted to customers are varied and are generally the result of negotiations between individual customers and the Target Group. No interest is charged on trade receivables and the Target Group does not hold any collateral over these balances. The management closely monitors the credit quality of trade receivables and considers the trade receivables that are neither past due nor impaired to be of a good credit quality. At the end of the reporting period, neither of the trade receivables are past due nor impaired.

Included in other receivables were dividends receivable from the Target Group’s associate, Xinjiang Tianmu of HK$4,680,896 and HK$3,607,252 as at 31 December 2009 and 2010 respectively. The dividends receivable from an associate was unsecured, interest-free and repayable on demand.

— IIA-44 —

ACCOUNTANTS’ REPORT ON THE TARGET GROUP

APPENDIX II-A

21. LAND RESTORATION COSTS

Cost At 1 January 2009 Exchange adjustments At 31 December 2009 Additions Exchange adjustments At 31 December 2010 Acquisitions through business combinations (Note 31) Additions Exchange adjustments At 31 December 2011 Amortisation At 1 January 2009 Charge for the year Exchange adjustments At 31 December 2009 Charge for the year Exchange adjustments At 31 December 2010 Charge for the year Exchange adjustments At 31 December 2011 Carrying amounts At 31 December 2009 At 31 December 2010 At 31 December 2011	HK$ — —
	— — —
	— 1,155,875 201,494 16,340
	1,373,709
	— — —
	— — —
	— 261,455 636
	262,091
	—
	—
	1,111,618

— IIA-45 —

APPENDIX II-A

ACCOUNTANTS’ REPORT ON THE TARGET GROUP

22. INVENTORIES

		At	At	At
		31 December	31 December	31 December
		2009	2010	2011
		HK$	HK$	HK$
Raw	materials and consumables	—	—	22,664,024
Finished goods		—	—	3,273,239
		—	—	25,937,263
23.	**AMOUNT DUE FROM A RELATED **	COMPANY
		At	At	At
		31 December	31 December	31 December
		2009	2010	2011
		HK$	HK$	HK$
Xinjiang Kangshun		—	—	8,798,594
Highest outstanding balance during the
year:
Xinjiang Kangshun		—	—	8,798,594

Note: Xinjiang Kangshun is a former equity holder of Xinjiang Tianmu and an indirect non wholly-owned subsidiary of the Vendor. The amount due is unsecured, interest-free and repayable on demand.

24. BANK BALANCES AND CASH

At 31 December 2009, 2010 and 2011, bank balances and cash of nil, nil and HK$70,251,191 respectively were denominated in RMB which is not freely convertible into other currencies.

Bank balances and cash comprise cash held by the Target Group and bank balances that earns interest at floating rates based on daily bank deposit rates. The bank balances are deposited with creditworthy banks with no recent history of default.

— IIA-46 —

APPENDIX II-A

ACCOUNTANTS’ REPORT ON THE TARGET GROUP

25. TRADE AND OTHER PAYABLES

			At		At		At
		**31 **	December	**31 **	December	**31 **	December
			2009		2010		2011
			HK$		HK$		HK$
Trade	payables		—		—		13,175,855
Other	payables		—		—		14,067,781
			—		—		27,243,636

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

	At	At	At
	31 December	31 December	31 December
	2009	2010	2011
	HK$	HK$	HK$
Within 1 year	—	—	12,936,244
1 to 2 years	—	—	47,548
2 to 3 years	—	—	10,243
3 years and above	—	—	181,820
	—	—	13,175,855

Trade payables are non-interest-bearing.

26. AMOUNTS DUE TO HOLDING COMPANY/RELATED COMPANIES

The amounts due are unsecured, interest-free and repayable on demand.

27. LOAN DUE TO A RELATED COMPANY

		At	At	At
		31 December	31 December	31 December
		2009	2010	2011
		HK$	HK$	HK$
Carrying	amount repayable on demand or
within	1 year	—	—	6,996,723

— IIA-47 —

APPENDIX II-A ACCOUNTANTS’ REPORT ON THE TARGET GROUP

The loan was provided by Xinjiang Kangshun and is unsecured, interest-free and repayable on demand. Xinjiang Kangshun is a former equity holder of Xinjiang Tianmu and an indirect non wholly-owned subsidiary of the Vendor.

28. DEFERRED TAX LIABILITIES

Withholding tax on undistributed profits HK$ At 1 January 2009 439,099 Charge to profit or loss 710,908 At 31 December 2009 1,150,007 Charge to profit or loss 2,380,732 Released upon the receipt of dividends from an associate (930,838) At 31 December 2010 2,599,901 Acquisition of Xinjiang Tianmu (Note 31) — Charge/(credit) to profit or loss 1,072,676 Exchange adjustments — At 31 December 2011 3,672,577	Intangible assets HK$ — — — — — — 70,526,982 (2,273,417) 961,511 69,215,076	Total HK$ 439,099 710,908 1,150,007 2,380,732 (930,838) 2,599,901 70,526,982 (1,200,741) 961,511 72,887,653

— IIA-48 —

ACCOUNTANTS’ REPORT ON THE TARGET GROUP

APPENDIX II-A

29. PROVISION FOR RESTORATION COSTS

At 1 January 2009 Exchange adjustments At 31 December 2009 Additional provision recognised Exchange adjustments At 31 December 2010 Acquisition of Xinjiang Tianmu (Note 31) Additional provision recognised Exchange adjustments At 31 December 2011	HK$ — —
	— — —
	— 1,816,278 201,494 25,394
	2,043,166

In accordance with relevant PRC rules and regulations, the Target Group is obliged to accrue the cost for land reclamation and mine closures for the Target Group’s existing mines. The provision for restoration costs has been determined by the director and management based on their best estimates by reference to relevant PRC rules and regulations.

30. SHARE CAPITAL

	At	At	At
	31 December	31 December	31 December
	2009	2010	2011
Authorised:
50,000 ordinary shares of US$1 each	US$50,000	US$50,000	US$50,000
Issued and fully paid:
200 ordinary shares of US$1 each	US$200	US$200	US$200
Equivalent to	HK$1,560	HK$1,560	HK$1,560

— IIA-49 —

ACCOUNTANTS’ REPORT ON THE TARGET GROUP

APPENDIX II-A

31. BUSINESS COMBINATIONS

Xinjiang Tianmu was owned as to 46% by Goffers Resources, a direct wholly-owned subsidiary of the Target Company; as to 5% by Xinjiang Kangshun, an indirect non wholly-owned subsidiary of the Vendor; and as to 49% by Hami Liuhe, an independent third party.

On 10 May 2011, Kangshun HK, an indirect wholly-owned subsidiary of the Target Company, entered into a share transfer agreement with Xinjiang Kangshun for the transfer of the 5% equity interest in Xinjiang Tianmu at nil consideration. The transfer was completed in July 2011, and thereafter the Target Company became the holding company of Xinjiang Tianmu.

Assets acquired and liabilities recognised at the date of acquisition

Non-current assets Property, plant and equipment Exploration and evaluation assets Mining rights Prepaid lease payments Deposits Land restoration costs Current assets Inventories Prepaid lease payments Prepayments, deposits and other receivables Amounts due from related companies Amount due from an equity holder of Xinjiang Tianmu Bank balances and cash Current liabilities Trade and other payables Amount due to an equity holder of Xinjiang Tianmu Loan due to an equity holder of Xinjiang Tianmu Current tax liabilities Non-current liabilities Deferred tax liabilities Provision for restoration costs

HK$ 16,254,287 166,000,000 139,000,000 142,052 10,279,192 1,155,875 31,698,162 4,438 14,531,111 7,340,774 16,080,820 1,804,852 (48,612,194) (685,967) (6,902,085) — (70,526,982) (1,816,278) 275,748,057

— IIA-50 —

APPENDIX II-A ACCOUNTANTS’ REPORT ON THE TARGET GROUP

The fair value of receivables acquired, which principally comprised deposits and other receivables approximated the gross contractual amounts. There are no contractual cash flows not expected to be collected.

Non-controlling interests

The non-controlling interests (49%) in Xinjiang Tianmu recognised at the acquisition date was measured at the non-controlling interests’ proportionate share of the acquiree’s identifiable net assets and amounted to HK$135,116,549.

Gain in a bargain purchase

Interest in an associate Non-controlling interests Less: fair value of identifiable net assets acquired Less: recycling of cumulative exchange differences Gain in a bargain purchase	HK$ 29,516,871 135,116,549 (275,748,057) (2,035,098)
	(113,149,735)

Net cash inflow on acquisition of Xinjiang Tianmu

						HK$
Cash	and	cash	equivalent	balances	acquired	1,804,852

Impact of acquisition of Xinjiang Tianmu on the results of the Target Group

Xinjiang Tianmu contributed revenues of approximately HK$142,610,000 and net profit of approximately HK$49,334,000 to the Target Group for the period from the date of acquisition to 31 December 2011. If the acquisition had occurred on 1 January 2011, the revenue of the Target Group would have been approximately HK$149,902,000 and profit before allocations would have been approximately HK$156,877,000. This pro forma information is for illustrative purposes only and is not necessarily an indication of the revenue and results of the Target Group that actually would have been achieved had the acquisition occurred on 1 January 2011, nor is it intended to be a projection of future results.

32. RETIREMENT BENEFITS SCHEME

The PRC employees of the Target Group are members of the state-managed retirement benefits scheme operated by the PRC government. The Target Group is required to contribute a certain percentage of their payroll to the retirement benefits scheme to fund the benefits. The only obligation of the Target Group with respect to the retirement benefits scheme is to make the required contributions under the scheme.

— IIA-51 —

APPENDIX II-A ACCOUNTANTS’ REPORT ON THE TARGET GROUP

33. OPERATING LEASE COMMITMENTS

The Target Group as lessee

At the end of the reporting period, the Target Group were committed to make the following future minimum lease payments in respect of rented premises under non-cancellable operating leases which fall due as follows:

				At		At		At
			**31 **	December	**31 **	December	**31 **	December
				2009		2010		2011
				HK$		HK$		HK$
Within	one	year		—		—		195,296

Leases are negotiated for terms up to 3 years.

34. RELATED PARTY TRANSACTIONS

Apart from those disclosed elsewhere in the Financial Information, the Target Group entered into the following significant related party transactions during the Relevant Periods.

	Year ended	Year ended	Year ended
	31 December	31 December	31 December
	2009	2010	2011
	HK$	HK$	HK$
Exploration expenditures paid to a related company
(Note (i))	—	—	7,654,341
Waiver of amount due to a related company
(Note (ii))	—	—	430,135

Notes:

(i) Exploration expenditures were paid to a related company which is a fellow subsidiary of Hami Liuhe, the non-controlling interest of the Target Group, at terms mutually agreed by both parties.

(ii) The waiver of amount due to a related company was mutually agreed by both parties.

Compensation of key management personnel

The key management personnel is the director of the Target Company. None of the director of the Target Company received or will receive any fees or emoluments in respect of his services to the Company during the Relevant Periods.

— IIA-52 —

APPENDIX II-A ACCOUNTANTS’ REPORT ON THE TARGET GROUP

35. CONTINGENT LIABILITIES

In the opinion of the director of the Target Company, the Target Company and Kangshun BVI did not have any material contingent liabilities as at the end of each of the Relevant Periods.

II. EVENTS AFTER THE REPORTING PERIOD

No significant events occurred after the reporting dates that would require disclosure in or alternations to the Financial Information.

III. SUBSEQUENT FINANCIAL STATEMENTS

No audited financial statements of the Target Group have been prepared in respect of any period subsequent to 31 December 2011.

Yours faithfully,

HLB Hodgson Impey Cheng

Chartered Accountants Certified Public Accountants Hong Kong

— IIA-53 —

ACCOUNTANTS’ REPORT ON XINJIANG TIANMU

APPENDIX II-B

The following is the text of a report, prepared for the sole purpose of inclusion in this circular, received from the reporting accountants, HLB Hodgson Impey Cheng, Chartered Accountants, Certified Public Accountants, Hong Kong.

==> picture [228 x 86] intentionally omitted <==

31/F, Gloucester Tower The Lankmark 11 Pedder Street Central Hong Kong

12 April 2012

The Board of Directors Timeless Software Limited Units 111-113, 1st Floor, Building 9 Phase One, Hong Kong Science Park Tai Po, New Territories Hong Kong

Dear Sirs,

We set out below our report on the financial information (the “Financial Information”) regarding 新疆天目礦業資源開發有限公司 (transliterated as Xinjiang Tianmu Mineral Resources Development Co. Ltd.) (“Xinjiang Tianmu”), for the financial years ended 31 December 2009, 2010 and 2011 (the “Relevant Periods”), for inclusion in the circular dated 12 April 2012 (the “Circular”) issued by Timeless Software Limited (the “Company”) in connection with the proposed very substantial acquisition relating to the acquisition of 51% of the issued share capital of Goffers Management Limited (the “Target Company”) by Time Kingdom Limited, a wholly-owned subsidiary of the Company.

Xinjiang Tianmu was established in the People’s Republic of China (the “PRC”) on 1 November 2002 as a Sino-foreign equity joint venture company. The principal activities of Xinjiang Tianmu are exploration and exploitation of gold, iron, nickel-copper mines in the Xinjiang Uygur Autonomous Region (“Xinjiang”) of the PRC and the processing and sale of the outputs from the mines. The address of Xinjiang Tianmu’s registered office and principal place of business is 5th floor, Weifu Building, No.31 Tianshan West Road, Hami City, Xinjiang, the PRC.

Xinjiang Tianmu was owned as to 46% by Goffers Resources Limited, a direct wholly-owned subsidiary of the Target Company; as to 5% by 新疆康順礦業項目發展有限公司 (transliterated as Xinjiang Kangshun Mining Project Development Company Limited) (“Xinjiang Kangshun”), an indirect non wholly-owned subsidiary of Starmax Holdings Limited (the “Vendor”); and as to 49% by 哈密市六合資源開發有限公司 (transliterated as Hami Liuhe Resources Development Company Limited) (“Hami Liuhe”), an independent third party. In July 2011, Xinjiang Kangshun transferred all of its 5% equity interest in Xinjiang Tianmu to Kangshun HK Limited (“Kangshun HK”), an indirect wholly-owned subsidiary of the Target Company. As at the date of this report, Xinjiang Tianmu is owned as to 51% indirectly by the Target Company and as to 49% by Hami Liuhe.

— IIB-1 —

APPENDIX II-B

ACCOUNTANTS’ REPORT ON XINJIANG TIANMU

The financial statements of Xinjiang Tianmu for the years ended 31 December 2009, 2010 and 2011 were prepared in accordance with the relevant accounting principles and financial regulations applicable to enterprises established in the PRC. The financial statements of Xinjiang Tianmu for the years ended 31 December 2009 and 2010 were audited by 新疆瑞新有限責任會計師事務所 (Xinjiang Ruixin Certified Public Accountants), certified public accountants registered in the PRC.

For the purpose of this report, the directors of Xinjiang Tianmu have prepared management accounts of Xinjiang Tianmu for the Relevant Periods (the “Underlying Financial Statements”) in accordance with Hong Kong Financial Reporting Standards (“HKFRSs”) issued by the Hong Kong Institute of Certified Public Accountants (the “HKICPA”). We have, for the purpose of this report, carried out appropriate audit procedures in respect of the Underlying Financial Statements in accordance with Hong Kong Standards on Auditing issued by the HKICPA. However, the scope of our procedures was limited as we were not appointed as reporting accountants of Xinjiang Tianmu until after 1 January 2011 and thus did not observe the counting of physical inventories as at 31 December 2009 and 2010. We were unable to obtain sufficient appropriate audit evidence by alternative audit procedures concerning the quantities of inventory of raw materials held by Xinjiang Tianmu as at 31 December 2009 and 2010. Any adjustments that might have been found to be necessary in respect of the above may have an effect on the net assets of Xinjiang Tianmu as at 31 December 2009 and 2010 and on its results for each of the Relevant Periods.

We have examined the Underlying Financial Statements and have carried out such additional procedures as we considered necessary in accordance with Auditing Guideline 3.340 “Prospectuses and the Reporting Accountant” as recommended by the HKICPA.

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

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

Except for the possible effects of the limitation in the scope of our audit procedures referred to above, the Financial Information gives, for the purpose of this report, a true and fair view of the state of affairs of Xinjiang Tianmu as at 31 December 2009 and 2010 and of its results and cash flows for each of the Relevant Periods.

In our opinion, the Financial Information gives, for the purpose of this report, a true and fair view of the state of affairs of Xinjiang Tianmu as at 31 December 2011.

— IIB-2 —

ACCOUNTANTS’ REPORT ON XINJIANG TIANMU

APPENDIX II-B

I. FINANCIAL INFORMATION

Statement of comprehensive income

		Year ended	Year ended	Year ended
		31 December	31 December	31 December
		2009	2010	2011
	Notes	HK$	HK$	HK$
Turnover	8	65,284,839	124,541,846	149,902,204
Other income and gains	9	408,142	6,212,680	1,122,031
Production costs		(33,342,536)	(52,626,502)	(51,667,807)
Staff costs		(5,343,152)	(6,536,502)	(9,541,494)
Depreciation and amortisation		(2,345,748)	(2,835,705)	(5,229,738)
Other expenses		(6,108,998)	(7,547,914)	(11,514,369)
Finance costs	10	(133,424)	—	—
Profit before tax		18,419,123	61,207,903	73,070,827
Income tax expense	11	(2,964,596)	(9,452,864)	(19,335,833)
Profit for the year	12	15,454,527	51,755,039	53,734,994
Other comprehensive income
Exchange differences arising on translation
of functional currency to presentation
currency		115,431	3,110,004	3,769,830
Other comprehensive income for the year		115,431	3,110,004	3,769,830
Total comprehensive income for the year		15,569,958	54,865,043	57,504,824

— IIB-3 —

ACCOUNTANTS’ REPORT ON XINJIANG TIANMU

APPENDIX II-B

Statement of financial position

Notes Non-current assets Property, plant and equipment 16 Exploration and evaluation assets 17 Mining rights 18 Prepaid lease payments 19 Deposits 20 Land restoration costs 21 Current assets Inventories 22 Prepaid lease payments 19 Trade and other receivables 20 Amounts due from related companies 23 Amounts due from equity holders of Xinjiang Tianmu 24 Bank balances and cash 25 Current liabilities Trade and other payables 26 Amount due to an equity holder of Xinjiang Tianmu 27 Amounts due to related companies 27 Loan due to an equity holder of Xinjiang Tianmu 28 Loan due to a related company 28 Current tax liabilities Net current assets	At 31 December 2009 HK$ 4,760,805 12,428,917 2,392,910 140,028 — 266,026 19,988,686 21,106,326 4,231 13,278,460 1,002,826 9,883,378 3,244,463 48,519,684 12,486,308 646,151 27,647 6,501,461 — 1,041,147 20,702,714 27,816,970	At 31 December 2010 HK$ 13,237,580 14,081,479 1,561,701 140,973 6,121,158 1,308,249 36,451,140 5,460,564 4,392 11,828,758 7,254,019 8,068,597 56,956,422 89,572,752 19,472,273 670,540 — 6,746,857 — 3,910,080 30,799,750 58,773,002	At 31 December 2011 HK$ 25,962,040 34,573,029 10,169,416 141,750 10,420,136 1,111,618
			82,377,989
			25,937,263 4,499 22,955,305 8,798,594 — 70,251,191
			127,946,852
			55,969,130 474,289 9,850,852 — 6,996,723 13,653,357
			86,944,351
			41,002,501

— IIB-4 —

APPENDIX II-B

ACCOUNTANTS’ REPORT ON XINJIANG TIANMU

Notes Total assets less current liabilities Non-current liabilities Provision for restoration costs 29 Net assets Equity attributable to owners of Xinjiang Tianmu Paid-up capital 30 Reserves Total equity	At 31 December 2009 HK$ 47,805,656 427,253 47,378,403 983,113 46,395,290 47,378,403	At 31 December 2010 HK$ 95,224,142 1,775,430 93,448,712 22,562,228 70,886,484 93,448,712	At 31 December 2011 HK$ 123,380,490
			2,043,166
			121,337,324
			22,562,228 98,775,096
			121,337,324

— IIB-5 —

APPENDIX II-B

ACCOUNTANTS’ REPORT ON XINJIANG TIANMU

Statement of changes in equity

At 1 January 2009 Profit for the year Other comprehensive income for the year Total comprehensive income for the year Transfer from retained profits At 31 December 2009 Profit for the year Other comprehensive income for the year Total comprehensive income for the year Capital re-investment transfer from retained profits Transfer from retained profits Dividend recognised At 31 December 2010	Paid-up capital HK$ 983,113 — — — — 983,113 — — — 21,579,115 — — 22,562,228	Attributable to owners of Xinjiang Capital reserve General reserves Translation reserve HK$ HK$ HK$ 6,476,859 2,034,989 4,241,095 — — — — — 115,431 — — 115,431 — 791,174 — 6,476,859 2,826,163 4,356,526 — — — — — 3,110,004 — — 3,110,004 — — — — 1,302,924 — — — — 6,476,859 4,129,087 7,466,530	Tianmu Retained profits HK$ 18,072,389 15,454,527 — 15,454,527 (791,174) 32,735,742 51,755,039 — 51,755,039 (21,579,115) (1,302,924) (8,794,734) 52,814,008	Total equity HK$ 31,808,445 15,454,527 115,431 15,569,958 — 47,378,403 51,755,039 3,110,004 54,865,043 — — (8,794,734) 93,448,712

— IIB-6 —

APPENDIX II-B

ACCOUNTANTS’ REPORT ON XINJIANG TIANMU

Profit for the year Other comprehensive income for the year Total comprehensive income for the year Transfer from retained profits Dividend recognised At 31 December 2011	Paid-up capital HK$ — — — — — 22,562,228	Attributable to owners of Xinjiang Capital reserve General reserves Translation reserve HK$ HK$ HK$ — — — — — 3,769,830 — — 3,769,830 — 4,387,587 — — — — 6,476,859 8,516,674 11,236,360	Tianmu Retained profits HK$ 53,734,994 —
			53,734,994
			72,545,203

Note:

General reserves are part of the owners’ fund and comprise statutory surplus reserve and enterprise expansion fund. Transfer from retained profits to the general reserves were made in accordance with the Articles of Association of Xinjiang Tianmu and were approved by the board of directors. The transfer to these reserves must be made before any distribution of dividends to equity holders of Xinjiang Tianmu. The statutory surplus reserve fund can be utilised to offset prior years’ losses or increase capital.

— IIB-7 —

APPENDIX II-B

ACCOUNTANTS’ REPORT ON XINJIANG TIANMU

Statement of cash flows

	Year ended	Year ended	Year ended
	31 December	31 December	31 December
	2009	2010	2011
	HK$	HK$	HK$
Operating activities
Profit for the year	15,454,527	51,755,039	53,734,994
Adjustments for:
Income tax expense recognised in profit or loss	2,964,596	9,452,864	19,335,833
Interest income	(74,777)	(107,917)	(268,471)
Interest expense	133,424	—	—
Depreciation and amortisation	2,345,748	2,835,705	5,229,738
Gain on de-recognition of other receivables	—	(5,878,277)	—
Waiver of amount due to a related company	—	—	(425,518)
Loss on disposal of property, plant and
equipment	—	—	805,879
Operating cash flows before movements in working
capital	20,823,518	58,057,414	78,412,455
Decrease/(increase) in inventories	1,914,641	15,839,971	(20,241,297)
Increase in trade and other receivables	(7,880,315)	(9,696,329)	(15,425,525)
(Increase)/decrease in amounts due from related
companies	(212,358)	(6,251,193)	7,254,019
(Increase)/decrease in amounts due from equity
holders of Xinjiang Tianmu	(8,244,492)	1,814,781	—
Increase in trade and other payables	8,361,920	2,848,650	16,316,601
(Decrease)/increase in amounts due to equity
holders of Xinjiang Tianmu	(551,986)	24,389	(196,251)
Decrease in amounts due to related companies	(5,628,453)	(27,647)	—
Cash generated from operations	8,582,475	62,610,036	66,120,002
Income taxes paid	(2,640,122)	(6,693,692)	(11,226,308)
Net cash generated by operating activities	5,942,353	55,916,344	54,893,694
Investing activities
Interest received	74,777	107,917	268,471
Purchase of property, plant and equipment	(1,267,470)	(9,831,058)	(14,786,547)
Proceeds from de-recognition of other receivables	—	10,903,150	—
Additions of mining rights	(1,166,040)	(94,111)	(8,071,455)
Additions of exploration and evaluation assets	(3,634,141)	(1,153,967)	(13,464,819)

— IIB-8 —

APPENDIX II-B

ACCOUNTANTS’ REPORT ON XINJIANG TIANMU

	Year ended	Year ended	Year ended
	31 December	31 December	31 December
	2009	2010	2011
	HK$	HK$	HK$
Net cash used in investing activities	(5,992,874)	(68,069)	(36,054,350)
Financing activities
Interest paid	(133,424)	—	—
Dividends paid to owners of Xinjiang Tianmu	(2,490,279)	(4,657,419)	(8,054,930)
Net cash used in financing activities	(2,623,703)	(4,657,419)	(8,054,930)
Net (decrease)/increase in cash and cash
equivalents	(2,674,224)	51,190,856	10,784,414
Cash and cash equivalents at the beginning of
the financial year	5,833,887	3,244,463	56,956,422
Effect of foreign exchange rate changes	84,800	2,521,103	2,510,355
Cash and cash equivalents at the end of the
financial year	3,244,463	56,956,422	70,251,191
Analysis of the balances of cash and cash
equivalents
Bank balances and cash	3,244,463	56,956,422	70,251,191

— IIB-9 —

ACCOUNTANTS’ REPORT ON XINJIANG TIANMU

APPENDIX II-B

NOTES TO THE FINANCIAL INFORMATION

1. BASIS OF PREPARATION OF THE FINANCIAL INFORMATION

Xinjiang Tianmu was established in the PRC on 1 November 2002 as a Sino-foreign equity joint venture company. The directors of Xinjiang Tianmu regard the Vendor, a limited liability company incorporated in the BVI, as the ultimate holding company of Xinjiang Tianmu. The address of the registered office and principal place of business of Xinjiang Tianmu is 5th floor, Weifu Building, No.31 Tianshan West Road, Hami City, Xinjiang, the PRC.

The principal activities of Xinjiang Tianmu are exploration and exploitation of gold, iron, nickel-copper mines in Xinjiang, the PRC and the processing and sale of the outputs from the mines.

The Financial Information of Xinjiang Tianmu is presented in Hong Kong dollars (“HK$”), whereas the functional currency of Xinjiang Tianmu is Renminbi (“RMB”). The choice of presentation currency is to better reflect the currency that mainly determines economic effects of transactions, events and conditions of Xinjiang Tianmu.

2. APPLICATION OF NEW AND REVISED HONG KONG FINANCIAL REPORTING STANDARDS

For the purpose of preparing and presenting the Financial Information for the Relevant Periods, Xinjiang Tianmu has consistently applied HKFRSs, Hong Kong Accounting Standards (“HKASs”), amendments and interpretations (“INT”) issued by the HKICPA that are effective for the annual accounting periods beginning on or after 1 January 2011.

Xinjiang Tianmu has not early applied the following new and revised standards, amendments and interpretation that have been issued but are not yet effective.

HKFRS 1 (Amendments) Severe Hyperinflation and Removal of Fixed Dates for First-time Adopters[1] HKFRS 7 (Amendments) Disclosures — Transfers of Financial Assets[1] HKFRS 7 (Amendments) Disclosures — Offsetting Financial Assets and Financial Liabilities[4] HKFRS 9 and HKFRS 7 Mandatory Effective Date of HKFRS 9 and Transition (Amendments) Disclosures[6] HKFRS 9 Financial Instruments[6] HKFRS 10 Consolidated Financial Statements[4] HKFRS 11 Joint Arrangements[4] HKFRS 12 Disclosure of Interests in Other Entities[4] HKFRS 13 Fair Value Measurement[4] HKAS 1 (Amendments) Presentation of Items of Other Comprehensive Income[3] HKAS 12 (Amendments) Deferred Tax: Recovery of Underlying Assets[2]

— IIB-10 —

APPENDIX II-B

ACCOUNTANTS’ REPORT ON XINJIANG TIANMU

HKAS 19 (as revised in 2011) Employee Benefits[4] HKAS 27 (as revised in 2011) Separate Financial Statements[4] HKAS 28 (as revised in 2011) Investments in Associates and Joint Ventures[4] HKAS 32 (Amendments) Offsetting Financial Assets and Financial Liabilities[5] HK(IFRIC) - Int 20 Stripping Costs in the Production Phase of a Surface Mine[4]

Notes:

• 1 Effective for annual periods beginning on or after 1 July 2011

• 2 Effective for annual periods beginning on or after 1 January 2012

• 3 Effective for annual periods beginning on or after 1 July 2012

• 4 Effective for annual periods beginning on or after 1 January 2013

• 5 Effective for annual periods beginning on or after 1 January 2014

• 6 Effective for annual periods beginning on or after 1 January 2015

HKFRS 9 issued in 2009 introduces new requirements for the classification and measurement of financial assets. HKFRS 9 amended in 2010 includes the requirements for the classification and measurement of financial liabilities and for derecognition.

Key requirements of HKFRS 9 are described as follows:

• HKFRS 9 requires all recognised financial assets that are within the scope of HKAS 39 Financial Instruments: Recognition and Measurement to be subsequently measured at amortised cost or fair value. Specifically, debt investments that are held within a business model whose objective is to collect the contractual cash flows, and that have contractual cash flows that are solely payments of principal and interest on the principal outstanding are generally measured at amortised cost at the end of the subsequent reporting periods. All other debt investments and equity investments are measured at their fair values at the end of subsequent accounting periods. In addition, under HKFRS 9, entities may make an irrevocable election to present subsequent changes in the fair value of an equity investment (that is not held for trading) in other comprehensive income, with only dividend income generally recognised in profit or loss.

• The most significant effect of HKFRS 9 regarding the classification and measurement of financial liabilities relates to the presentation of changes in the fair value of a financial liability (designated as at fair value through profit or loss) attributable to changes in the credit risk of that liability. Specifically, under HKFRS 9, for financial liabilities that are designated as at fair value through profit or loss, the amount of change in the fair value of the financial liability that is attributable to changes in the credit risk of that liability is presented in other comprehensive income, unless the recognition of the effects of changes in the liability’s credit risk in other comprehensive income would create or enlarge an accounting mismatch in profit or loss. Changes in fair value attributable to a financial liability’s credit risk are not subsequently reclassified to profit or loss. Previously, under HKAS 39, the entire amount of the change in the fair value of the financial liability designated as at fair value through profit or loss was presented in profit or loss.

— IIB-11 —

ACCOUNTANTS’ REPORT ON XINJIANG TIANMU

APPENDIX II-B

HKFRS 9 is effective for annual periods beginning on or after 1 January 2015, with earlier application permitted.

The directors of Xinjiang Tianmu anticipate that HKFRS 9 that will be adopted in Xinjiang Tianmu’s financial statements for the annual period beginning 1 January 2015 and that the application of the new standard may have an impact on amounts reported in respect of Xinjiang Tianmu’s financial assets and financial liabilities. However, it is not practicable to provide a reasonable estimate of that effect until a detailed review has been completed.

The amendments to HKAS 1 retain the option to present profit or loss and other comprehensive income in either a single statement or in two separate but consecutive statements. However, the amendments to HKAS1 require additional disclosures to be made in the other comprehensive income section such that items of other comprehensive income are grouped into two categories: (a) items that will not be reclassified subsequently to profit or loss; and (b) items that may be reclassified subsequently to profit or loss when specific conditions are met. Income tax on items of other comprehensive income is required to be allocated on the same basis.

The amendments to HKAS 1 are effective for annual periods beginning on or after 1 July 2012. The presentation of items of items of other comprehensive income will be modified accordingly when the amendments are applied in the future accounting periods.

Xinjiang Tianmu is in the process of making an assessment of the impact of HKFRS 10, HKFRS 11, HKFRS 12, HKFRS 13, HKAS 19 (as revised in 2011), HKAS 27 (as revised in 2011), HKAS 28 (as revised in 2011) and HK(IFRIC) - Int 20 but is not yet in a position to state whether these new standards, amendments and interpretation would have significant impact on the Financial Information.

The directors of Xinjiang Tianmu anticipate that the application of the other new and revised standards and amendments will have no material impact on the results and the financial position of Xinjiang Tianmu.

3. SIGNIFICANT ACCOUNTING POLICIES

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

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

Revenue recognition

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

— IIB-12 —

ACCOUNTANTS’ REPORT ON XINJIANG TIANMU

APPENDIX II-B

Revenue from sales of goods is recognised when goods are delivered and titles have passed.

Interest income from a financial asset is recognised when it is probable that the economic benefits will flow to Xinjiang Tianmu and the amount of income can be measured reliably. Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts the estimated future cash receipts through the expected life of the financial assets to that asset’s net carrying amount on initial recognition.

Leasing

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

Xinjiang Tianmu as lessee

Operating lease payments are recognised as an expense on a straight-line basis over the lease term.

Leasehold land for own use

When a lease includes both land and building elements, Xinjiang Tianmu assesses the classification of each element as a finance or an operating lease separately based on the assessment as to whether substantially all the risks and rewards incidental to ownership of each element have been transferred to Xinjiang Tianmu unless it is clear that both elements are operating leases in which the entire lease is classified as an operating lease. Specifically, the minimum lease payments (including any lump-sum upfront payments) are allocated between the land and the building elements in proportion to the relative fair values of the leasehold interests in the land element and building element of the lease at the inception of the lease.

To the extent the allocation of the lease payments can be made reliably, interest in leasehold land that is accounted for as an operating lease is presented as “prepaid lease payments” in the Financial Information and is amortised over the lease term on a straight-line basis. When the lease payments cannot be allocated reliably between the land and building elements, the entire lease is generally classified as a finance lease and accounted for as property, plant and equipment.

Foreign currencies

In preparing the Financial Information of Xinjiang Tianmu, transactions in currencies other than Xinjiang Tianmu’s functional currency (foreign currencies) are recognised at the rates of exchange prevailing at the dates of the transactions. At the end of the reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.

— IIB-13 —

APPENDIX II-B

ACCOUNTANTS’ REPORT ON XINJIANG TIANMU

Exchange differences on monetary items are recognised in profit or loss in the period in which they arise except for:

• exchange differences on foreign currency borrowings relating to assets under construction for future productive use, which are included in the cost of those assets when they are regarded as an adjustment to interest costs on those foreign currency borrowings;

• exchange differences on transactions entered into in order to hedge certain foreign currency risks; and

• exchange differences on monetary items receivable from or payable to a foreign operation for which settlement is neither planned nor likely to occur (therefore forming part of the net investment in the foreign operation), which are recognised initially in other comprehensive income and reclassified from equity to profit or loss on repayment of the monetary items.

For the purposes of presenting the Financial Information, the assets and liabilities of Xinjiang Tianmu are translated into the presentation currency of Xinjiang Tianmu (i.e. Hong Kong dollars) using exchange rates prevailing at the end of the reporting period. Income and expense items are translated at the average exchange rates for the period, unless exchange rates fluctuate significantly during that period, in which case the exchange rates at the dates of the transactions are used. Exchange differences arising, if any, are recognised in other comprehensive income and accumulated in equity under the heading of translation reserve.

Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.

Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation.

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

Retirement benefit costs

Payments to defined contribution retirement benefits scheme are recognised as an expense when employees have rendered services entitling them to the contributions.

Taxation

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

— IIB-14 —

APPENDIX II-B

ACCOUNTANTS’ REPORT ON XINJIANG TIANMU

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

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

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

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realised, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which Xinjiang Tianmu expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.

Current and deferred tax are recognised in profit or loss, except when they relate to items that are recognised in other comprehensive income or directly in equity, in which case, the current and deferred tax is also recognised in other comprehensive income or directly in equity respectively.

Property, plant and equipment

Property, plant and equipment including buildings held for use in the production or supply of goods (other than construction in progress as described below), are stated in the statement of financial position at cost, less subsequent accumulated depreciation and subsequent accumulated impairment losses, if any.

Construction in progress represents plant and equipment in the course of construction for its own use purposes. Construction in progress is carried at cost, less any recognised impairment loss. Cost comprises construction expenditure and other direct costs attributable to such projects. Construction in progress is classified to the appropriate category of property, plant and equipment when completed and ready for intended use. Depreciation of these assets, on the same basis as other property assets, commences when the assets are ready for their intended use.

— IIB-15 —

APPENDIX II-B

ACCOUNTANTS’ REPORT ON XINJIANG TIANMU

Depreciation is recognised so as to write off the cost of assets (other than construction in progress) less their residual values over their useful lives, using the straight-line method. The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis.

Assets held under finance leases are depreciated over their expected useful lives on the same basis as owned assets. However, when there is no reasonable certainty that ownership will be obtained by the end of the lease term, assets are depreciated over the shorter of the lease term and their useful lives.

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in profit or loss.

Mining rights

Mining rights are initially measured at cost. The carrying amount of exploration and evaluation assets is reclassified to mining rights when the technical feasibility and commercial viability of extracting mineral resources are demonstrable. Mining rights with finite useful lives are carried at costs less accumulated amortisation and any identified impairment loss. The mining rights with finite useful lives are amortised on the straight-line basis over their estimated useful lives of 4 to 10 years.

Exploration and evaluation assets

Exploration and evaluation assets are recognised at cost on initial recognition. Subsequent to initial recognition, exploration and evaluation assets are stated at cost less any accumulated impairment losses. Exploration and evaluation assets include the cost of exploration rights and the expenditures incurred in the search for mineral resources as well as the determination of the technical feasibility and commercial viability of extracting those resources. When the technical feasibility and commercial viability of extracting mineral resources become demonstrable, previously recognised exploration and evaluation assets are reclassified as either intangible assets or property, plant and equipment. These assets are assessed for impairment before reclassification, and any impairment loss is recognised in profit or loss.

Impairment of exploration and evaluation assets

The carrying amount of the exploration and evaluation assets is reviewed annually and adjusted for impairment in accordance with HKAS 36 Impairment of Assets whenever one of the following events or changes in circumstances indicate that the carrying amount may not be recoverable (the list is not exhaustive):

• the period for which Xinjiang Tianmu has the right to explore in the specific area has expired during the period or will expire in the near future, and is not expected to be renewed;

— IIB-16 —

ACCOUNTANTS’ REPORT ON XINJIANG TIANMU

APPENDIX II-B

• substantive expenditure on further exploration for and evaluation of mineral resources in the specific area is neither budgeted nor planned;

• exploration for and evaluation of mineral resources in the specific area have not led to the discovery of commercially viable quantities of mineral resources and Xinjiang Tianmu has decided to discontinue such activities in the specific area; or

• sufficient data exist to indicate that, although a development in the specific area is likely to proceed, the carrying amount of the exploration and evaluation asset is unlikely to be recovered in full from successful development or by sale.

An impairment loss is recognised in profit or loss whenever the carrying amount of an asset exceeds its recoverable amount.

Impairment of tangible and intangible assets other than exploration and evaluation assets

At the end of each reporting period, Xinjiang Tianmu reviews the carrying amounts of its tangible and intangible assets with finite useful lives to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any).

Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment for at least annually, and whenever there is an indication that the asset may be impaired.

Recoverable amount is the higher of fair value less costs to sell and value in use. When it is not possible to estimate the recoverable amount of an individual asset, Xinjiang Tianmu estimates the recoverable amount of the cash-generating unit to which the asset belongs. When a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest group of cash-generating units for which a reasonable and consistent allocation basis can be identified.

In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted. If the recoverable amount of an asset (or a cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or the cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss.

Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss.

— IIB-17 —

ACCOUNTANTS’ REPORT ON XINJIANG TIANMU

APPENDIX II-B

Inventories

Inventories are stated at the lower of cost and net realisable value. Costs of inventories are determined on the weighted average basis. Net realisable value represents the estimated selling price for inventories less all estimated costs of completion and costs necessary to make the sale.

Cash and cash equivalents

Cash and cash equivalents include cash in hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of three months or less, and bank overdrafts (if any).

Provisions

Provisions are recognised when Xinjiang Tianmu has a present obligation (legal or constructive) as a result of a past event, it is probable that Xinjiang Tianmu will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation.

The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. When a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows (where the effect of the time value of money is material).

When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, a receivable is recognised as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably.

Provision for restoration costs

Xinjiang Tianmu is required to incur costs for restoration of the land after the underground sites have been mined. Provision for restoration costs is recognised when Xinjiang Tianmu has a present obligation as a result of past event, and it is probable that Xinjiang Tianmu will be required to settle that obligation. Provision is measured by reference to relevant rules and regulations applicable in the PRC at the end of the reporting period, and is discounted to their present value where the effect is material.

Restoration costs are provided in the period in which the obligation is identified and is capitalised to the land restoration costs. The costs are amortised on the straight-line basis over their estimate useful lives of 4 to 10 years.

Financial instruments

Financial assets and financial liabilities are recognised when Xinjiang Tianmu becomes a party to the contractual provisions of the instrument.

— IIB-18 —

APPENDIX II-B

ACCOUNTANTS’ REPORT ON XINJIANG TIANMU

Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognised immediately in profit or loss.

Financial assets

Xinjiang Tianmu’s financial assets comprise those classified as loans and receivables. The accounting policy adopted is set out below.

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Loans and receivables (including deposits, trade and other receivables, amounts due from related companies, amounts due from equity holders of Xinjiang Tianmu and bank balances and cash) are measured at amortised cost using the effective interest method, less any impairment.

Interest income is recognised by applying the effective interest rate, except for short-term receivables when the recognition of interest would be immaterial.

Impairment of financial assets

Financial assets are assessed for indicators of impairment at the end of each reporting period. Financial assets are considered to be impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been affected.

For the financial assets, objective evidence of impairment could include:

• significant financial difficulty of the issuer or counterparty; or

• breach of contract, such as a default or delinquency in interest or principal payments; or

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

• the disappearance of an active market for that financial asset because of financial difficulties.

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

— IIB-19 —

ACCOUNTANTS’ REPORT ON XINJIANG TIANMU

APPENDIX II-B

For financial assets carried at amortised cost, the amount of the impairment loss recognised is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the financial asset’s original effective interest rate.

For financial assets carried at cost, the amount of the impairment loss is measured as the difference between the asset’s carrying amount and the present value of the estimated future cash flows discounted at the current market rate of return for a similar financial asset. Such impairment loss will not be reversed in subsequent periods.

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

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

Financial liabilities and equity instruments

Debt and equity instruments issued by Xinjiang Tianmu are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument.

Equity instruments

An equity instrument is any contract that evidences a residual interest in the assets of Xinjiang Tianmu after deducting all of its liabilities. Equity instruments issued by Xinjiang Tianmu are recognised at the proceeds received, net of direct issue costs.

Financial liabilities

Financial liabilities (including trade and other payables, amount due to an equity holder of Xinjiang Tianmu, amounts due to related companies, loan due to an equity holder of Xinjiang Tianmu and loan due to a related company) are subsequently measured at amortised cost, using the effective interest method.

Derecognition

Xinjiang Tianmu derecognises a financial asset only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. If Xinjiang Tianmu neither transfers nor retains substantially

— IIB-20 —

APPENDIX II-B

ACCOUNTANTS’ REPORT ON XINJIANG TIANMU

all the risks and rewards of ownership and continues to control the transferred asset, Xinjiang Tianmu continues to recognise the asset to the extent of its continuing involvement and recognises an associated liability. If Xinjiang Tianmu retains substantially all the risks and rewards of ownership of a transferred financial asset, Xinjiang Tianmu continues to recognise the financial asset and also recognises a collateralised borrowing for the proceeds received.

On derecognition of a financial asset in its entirety, the difference between the asset’s carrying amount and the sum of the consideration received and receivable and the cumulative gain or loss that had been recognised in other comprehensive income and accumulated in equity is recognised in profit or loss.

Xinjiang Tianmu derecognises financial liabilities when, and only when, Xinjiang Tianmu’s obligations are discharged, cancelled or they expire. The difference between the carrying amount of the financial liability derecognised and the consideration paid and payable is recognised in profit or loss.

Related parties

A party is considered to be related to Xinjiang Tianmu if:

• (i) the party is a person or a close member of that person’s family and that person,

• (a) has controls or joint control over Xinjiang Tianmu;

• (b) has significant influence over Xinjiang Tianmu; or

• (c) is a member of the key management personnel of Xinjiang Tianmu or of a parent of Xinjiang Tianmu;

or

• (ii) the party is an entity where any of the following conditions applies:

• (a) the entity and Xinjiang Tianmu are members of the same group;

• (b) one entity is an associate or joint venture of the other entity (or of a parent, subsidiary or fellow subsidiary of the other entity);

• (c) the entity and Xinjiang Tianmu are joint ventures of the same third party;

• (d) one entity is a joint venture of a third entity and the other entity is an associate of the third entity;

• (e) the entity is a post-employment benefit plan for the benefit of employees of either Xinjiang Tianmu or an entity related to Xinjiang Tianmu;

• (f) the entity is controlled or jointly controlled by a person identified in (i); and

• (g) a person identified in (i)(a) has significant influence over the entity or is a member of the key management personnel of the entity (or of a parent of the entity).

— IIB-21 —

ACCOUNTANTS’ REPORT ON XINJIANG TIANMU

APPENDIX II-B

4. FINANCIAL INSTRUMENTS

(a) Categories of financial instruments

	At	At	At
	31 December	31 December	31 December
	2009	2010	2011
	HK$	HK$	HK$
Financial assets
Loans and receivables
Deposits	—	6,121,158	10,420,136
Financial assets included in trade and other
receivables	4,282,115	6,786,087	16,427,058
Amounts due from related companies	1,002,826	7,254,019	8,798,594
Amounts due from equity holders of Xinjiang
Tianmu	9,883,378	8,068,597	—
Bank balances and cash	3,244,463	56,956,422	70,251,191
Financial liabilities
At amortised cost
Financial liabilities included in trade and other
payables	12,486,308	19,434,734	55,963,027
Amount due to an equity holder of Xinjiang Tianmu	646,151	670,540	474,289
Amounts due to related companies	27,647	—	9,850,852
Loan due to an equity holder of Xinjiang Tianmu	6,501,461	6,746,857	—
Loan due to a related company	—	—	6,996,723

(b) Financial risk management objectives and policies

Xinjiang Tianmu’s major financial instruments include deposits, trade and other receivables, amounts due from related companies, amounts due from equity holders of Xinjiang Tianmu, bank balances and cash, trade and other payables, amount due to an equity holder of Xinjiang Tianmu, amounts due to related companies, loan due to an equity holder of Xinjiang Tianmu and loan due to a related company. Details of these financial instruments are disclosed in the respective notes. The risks associated with these financial instruments and the policies on how to mitigate these risks are set out below. The risks associated and the management policies remain unchanged during the Relevant Periods.

— IIB-22 —

ACCOUNTANTS’ REPORT ON XINJIANG TIANMU

APPENDIX II-B

Market risks

There has been no change to Xinjiang Tianmu’s exposure to market risks or the manner in which these risks are managed and measured.

Foreign currency risk

Foreign currency risk refers to the risk that movement in foreign currency exchange rate will affect Xinjiang Tianmu’s financial results and its cash flows. The management considers that Xinjiang Tianmu is not exposed to significant foreign currency risk as majority of its transactions are denominated in Renminbi (functional currency of Xinjiang Tianmu) and there were only insignificant balances of financial assets and liabilities denominated in foreign currencies at the end of the reporting period. However, the management monitors foreign currency exposure and will consider hedging significant foreign currency exposure should the need arise.

Interest rate risk

Xinjiang Tianmu is exposed to fair value interest rate risk in relation to fixed-rate loan due to an equity holder of Xinjiang Tianmu (note 28). Xinjiang Tianmu’s cash flow interest rate risk primarily relates to variable-rate bank balances. Xinjiang Tianmu has not used any interest swaps in order to mitigate its exposure associated with fluctuations relating to cash flows of interest receipts. However, the management monitors interest rate exposure and will consider other necessary actions when significant interest rate exposure is anticipated.

Price risk

As Xinjiang Tianmu has no significant investments in financial investments at fair value, Xinjiang Tianmu is not exposed to significant price risk.

Credit risk

Xinjiang Tianmu has no significant credit risk, including risk resulting from counterparty default and risk of concentration. Xinjiang Tianmu has policies in place for the control and monitoring of such credit risk.

At the end of the reporting period, Xinjiang Tianmu’s maximum exposure to credit risk which will cause a financial loss to Xinjiang Tianmu due to failure to discharge an obligation by the counterparties is arising from the carrying amounts of the respective recognised financial assets as stated in the statement of financial position. In order to minimise the credit risk, Xinjiang Tianmu has monitoring procedures to ensure that follow-up action is taken to recover overdue debts. In addition, Xinjiang Tianmu review the recoverable amount of each individual trade debt at the end of the reporting period to ensure that adequate impairment losses are made for irrecoverable amounts. In this regard, the directors of Xinjiang Tianmu consider that Xinjiang Tianmu’s credit risk is significantly reduced.

— IIB-23 —

ACCOUNTANTS’ REPORT ON XINJIANG TIANMU

APPENDIX II-B

The credit risk on liquid funds is limited because the counterparties are banks with high credit ratings assigned by international credit-rating agencies and state-owned banks with good reputation.

Liquidity risk

In the management of liquidity risk, Xinjiang Tianmu monitor and maintain a level of cash and cash equivalents deemed adequate by the management to finance Xinjiang Tianmu’s operations and mitigate the effects of fluctuations in cash flows.

All of Xinjiang Tianmu’s financial liabilities are repayable on demand or less than one year. In the opinion of the directors of Xinjiang Tianmu, the preparation of maturity profile is not necessary.

(c) Fair value of financial instruments

The directors of Xinjiang Tianmu consider that the carrying amounts of financial assets and financial liabilities recorded at amortised cost in the Financial Information approximate to their fair values.

Fair value measurements recognised in the statement of financial position

The following table provides an analysis of financial instruments that are measured subsequent to initial recognition at fair value, grouped into levels 1 to 3 based on the degree to which the fair value is observable:

• Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active market for identical assets or liabilities;

• Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and

• Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs).

At the end of the reporting period, Xinjiang Tianmu did not have any assets and liabilities that were measured at the above fair value measurements hierarchy.

5. CAPITAL RISK MANAGMENT

Xinjiang Tianmu manages its capital to ensure that Xinjiang Tianmu will be able to continue as a going concern while maximising the return to stakeholders through the optimisation of the debt and equity balance. Xinjiang Tianmu’s overall strategy remains unchanged during the Relevant Periods.

The capital structure of Xinjiang Tianmu consists of cash and cash equivalents and equity attributable to owners of Xinjiang Tianmu, comprising paid-up capital and reserves.

— IIB-24 —

ACCOUNTANTS’ REPORT ON XINJIANG TIANMU

APPENDIX II-B

The directors of Xinjiang Tianmu review the capital structure on a regular basis. As part of this review, the directors consider the cost of capital and the risks associated with each class of capital. Xinjiang Tianmu will balance its overall capital structure through the payment of dividends as well as the issue of new debt or the redemption of existing debt.

6. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

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

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

Critical judgements in applying accounting policies

The following are the critical judgements, apart from those involving estimations (see below), that management has made in the process of applying Xinjiang Tianmu’s accounting policies and that have the most significant effect on the amounts recognised in the Financial Information.

Renewal of exploration and mining right permits

Xinjiang Tianmu owns certain exploration and mining rights permits which will be expired at various dates ranging from September 2012 to August 2019. Xinjiang Tianmu may file an application for an extension of the validity periods of the exploration or exploitation licences prior to the expiry date of the relevant licences. The renewal is subject to the approval by the relevant PRC authorities. In the opinion of the directors, after obtaining opinion from its legal counsel, Xinjiang Tianmu will be entitled to renew its exploration and mining rights permits upon the expiration at minimal costs.

If Xinjiang Tianmu is not able to obtain approval for renewal upon their expiry, the carrying amount of the exploration and evaluation assets and mining rights at the end of each reporting period might be significant reduced and Xinjiang Tianmu will increase amortisation charges of mining rights where useful lives are less than previously estimated lives, or it will write-off or write-down the carrying amounts of the exploration and evaluation assets and the mining rights, which significant impairment loss might be recognised.

Key sources of estimation uncertainty

The following are the key assumptions concerning the future, and other key sources of estimation uncertainty at the end of the reporting period that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year.

— IIB-25 —

ACCOUNTANTS’ REPORT ON XINJIANG TIANMU

APPENDIX II-B

Estimated useful lives of property, plant and equipment

Management determines the estimated useful lives and related depreciation charges for its property, plant and equipment. This estimate is based on the historical experience of the actual useful lives of property, plant and equipment of similar nature and functions. It could change significantly as a result of technical innovations and competitor actions in response to severe industry cycles. Management will increase the depreciation charges where useful lives are less than previously estimated, or it will write-off or write-down obsolete or non-strategic assets that have been abandoned or sold.

Estimated impairment loss of trade and other receivables

Xinjiang Tianmu’s policy for doubtful receivables is based on the on-going evaluation of the collectability and ageing analysis of the trade and other receivables and on management’s judgements. Considerable judgement is required in assessing the ultimate realisation of these receivables, including the current creditworthiness and the past collection history of each debtor, and the present values of the estimated future cash flows discounted at the effective interest rates. If the financial conditions of Xinjiang Tianmu’s debtors were to deteriorate, resulting in an impairment of their ability to make payments, additional impairment loss of trade and other receivables may be required.

Estimated impairment loss of inventories

Net realisable value of inventories is the estimated selling price in the ordinary course of business, less estimated costs of completion and selling expenses. These estimates are based on the current market condition and the historical experience of selling products of similar nature. It could change significantly as a result of changes in customer taste and competitor actions in response to changes to economic conditions.

Impairment of exploration and evaluation assets

The carrying value of exploration and evaluation assets is reviewed for impairment when events or changes in circumstances indicate that the carrying amount may not be recoverable. Xinjiang Tianmu considers all facts and circumstances occurred to judge whether these facts and circumstances would suggest that the carrying amount of the exploration and evaluation assets may exceed its recoverable amount (i.e. impaired). Based on the judgement of the directors of Xinjiang Tianmu there was no impairment on the exploration and evaluation assets and no impairment loss is recognised during the Relevant Periods. Management reassesses the impairment of exploration and evaluation assets at the end of the reporting period.

Impairment of mining rights and property, plant and equipment

Xinjiang Tianmu assesses whether there are any indicators of impairment for mining rights and property, plant and equipment at each reporting date. Mining rights and property, plant and equipment are tested for impairment when there are indicators that the carrying amounts may not be recoverable. When value in use calculations are undertaken, management estimate the expected future cash flows from the asset or cash-generating unit and choose a suitable discount rate in order to calculate the present values of those cash flows.

— IIB-26 —

ACCOUNTANTS’ REPORT ON XINJIANG TIANMU

APPENDIX II-B

Provision for restoration costs

Provision for restoration costs has been estimated by the directors of Xinjiang Tianmu by reference to the current regulatory requirements and the area affected estimated by the management. Significant changes in the regulatory requirements in relation to such costs will result in changes to the provision amounts from period to period. In addition, the expected timing of cash outflows of such restoration costs are estimated based on the expected completion date of the mines and is subject to any significant changes to the production plan.

7. SEGMENT INFORMATION

The directors of Xinjiang Tianmu review Xinjiang Tianmu’s internal financial reporting and other information and also obtain other relevant external information in order to assess performance and allocate resources and operating segment is identified with reference to these.

The directors of Xinjiang Tianmu consider that the business of Xinjiang Tianmu is organised in one operating segment as exploration and exploitation of gold, iron and nickel-copper mines in Xinjiang, the PRC and the processing and sale of the outputs from the mines. Additional disclosure in relation to segment information is not presented as the directors of Xinjiang Tianmu assess the performance of the only operating segment identified based on the consistent information as disclosed in the Financial Information.

The total net segment profit is equivalent to profit and total comprehensive income for the year as shown in the statement of comprehensive income and the total segment assets and total segment liabilities are equivalent to total assets and total liabilities as shown in the statement of financial position.

Details of interest income, depreciation and amortisation in relation to the operating segment are disclosed in notes 9 and 12 respectively.

Xinjiang Tianmu is domiciled in the PRC with its major operations in the PRC. Total revenue and turnover, as disclosed in note 8 below represented the revenue from external customers arising from the sales of gold products and iron ore in the PRC. The directors of Xinjiang Tianmu consider that all the assets and liabilities of Xinjiang Tianmu are located in the PRC.

— IIB-27 —

ACCOUNTANTS’ REPORT ON XINJIANG TIANMU

APPENDIX II-B

Information about major customers

Revenue from customers during the Relevant Periods contributing over 10% of the total revenue of Xinjiang Tianmu are as follows:

		Year ended	Year ended	Year ended
		31 December	31 December	31 December
		2009	2010	2011
		HK$	HK$	HK$
Customer	A	47,870,358	84,440,193	117,104,589
Customer	B	—	—	25,425,519
Customer	C	N/A1	26,403,845	—
		47,870,358	110,844,038	142,530,108

N/A[1] The corresponding revenue did not contribute more over 10% of the total revenue of Xinjiang Tianmu.

8. TURNOVER

				Year ended	Year ended	Year ended
				31 December	31 December	31 December
				2009	2010	2011
				HK$	HK$	HK$
Sales	of	gold	products	65,284,839	124,541,846	142,530,108
Sales	of	iron	ore	—	—	7,372,096
				65,284,839	124,541,846	149,902,204

9. OTHER INCOME AND GAINS

	Year ended	Year ended	Year ended
	31 December	31 December	31 December
	2009	2010	2011
	HK$	HK$	HK$
Bank interest income	74,777	107,917	268,471
Gain on de-recognition of other receivables	—	5,878,277	—
Waiver of amount due to a related company	—	—	425,518
Other income	333,365	226,486	428,042
	408,142	6,212,680	1,122,031

— IIB-28 —

ACCOUNTANTS’ REPORT ON XINJIANG TIANMU

APPENDIX II-B

10. FINANCE COSTS

		Year ended	Year ended	Year ended
		31 December	31 December	31 December
		2009	2010	2011
		HK$	HK$	HK$
Interest on loan due to an equity holder of Xinjiang
Tianmu		133,424	—	—
11.	INCOME TAX EXPENSE
		Year ended	Year ended	Year ended
		31 December	31 December	31 December
		2009	2010	2011
		HK$	HK$	HK$
PRC Enterprise Income Tax:
- current year		2,799,302	9,266,456	19,090,693
- under-provision in prior year		165,294	186,408	245,140
		2,964,596	9,452,864	19,335,833

Under the Law of the PRC on Enterprise Income Tax (the “EIT Law”) and Implementation Regulation of the EIT Law, the tax rate is 25% for Xinjiang Tianmu from 1 January 2008 onwards. Pursuant to the letter issued by the relevant PRC authority on 22 June 2005, Xinjiang Tianmu was entitled to a preferential tax rate of 15% over 6 years, beginning on 1 January 2004. PRC Enterprise Income tax is calculated at 15% of estimated assessable profit of Xinjiang Tianmu for the years ended 31 December 2009 and 2010 and at 25% of estimated assessable profit of Xinjiang Tianmu for the year ended 31 December 2011.

— IIB-29 —

APPENDIX II-B

ACCOUNTANTS’ REPORT ON XINJIANG TIANMU

The tax charge for the year can be reconciled to the profit per the statement of comprehensive income as follows:

	Year ended	Year ended	Year ended
	31 December	31 December	31 December
	2009	2010	2011
	HK$	HK$	HK$
Profit before tax	18,419,123	61,207,903	73,070,827
Tax at PRC Enterprise Income Tax rate of 15%,
15% and 25%	2,762,868	9,181,185	18,267,707
Tax effect of expenses not deductible for tax
purpose	36,434	85,271	822,986
Under-provision in prior year	165,294	186,408	245,140
Income tax expense for the year	2,964,596	9,452,864	19,335,833

No deferred tax assets and liabilities are recognised in the Financial Information as Xinjiang Tianmu did not have material temporary differences arising between the tax bases of assets and liabilities and their carrying amounts at 31 December 2009, 2010 and 2011.

— IIB-30 —

APPENDIX II-B

ACCOUNTANTS’ REPORT ON XINJIANG TIANMU

12. PROFIT FOR THE YEAR

Profit for the year have been arrived at after charging:

	Year ended	Year ended	Year ended
	31 December	31 December	31 December
	2009	2010	2011
	HK$	HK$	HK$
Directors’ remuneration (Note 13)	637,829	1,007,226	879,639
Other staff’s retirement benefits scheme
contributions	407,564	580,438	728,958
Other staff costs	4,297,759	4,948,838	7,932,897
Total staff costs	5,343,152	6,536,502	9,541,494
Amortisation of mining rights	891,788	992,690	3,112,378
Amortisation of prepaid lease payments	4,177	4,231	4,440
Amortisation of land restoration costs	96,641	292,401	441,195
Cost of inventories recognised as expense	33,342,536	52,626,502	51,667,807
Depreciation of property, plant and equipment	1,353,142	1,546,383	1,671,725
Loss on disposal of property, plant and equipment
(included in other expenses)	—	—	805,879
Auditors’ remuneration	16,996	17,216	18,069
Operating lease rentals in respect of rented
premises	90,646	183,632	205,741

13. DIRECTORS’ AND EMPLOYEES’ EMOLUMENTS

Directors’ emoluments

The emoluments paid or payable to the directors were as follows:

			Retirement
		Salaries and	benefits
		other	scheme
	Fees	benefits	contribution	Total
	HK$	HK$	HK$	HK$
Year ended 31 December 2009
Mr. Li Yan (Note (vi))	9,275	96,199	—	105,474
Mr. Felipe Tan (Note (i))	59,487	—	—	59,487
Mr. Wu Hua (Note (vii))	—	—	—	—

— IIB-31 —

APPENDIX II-B

ACCOUNTANTS’ REPORT ON XINJIANG TIANMU

Mr. Zhang Ming (Note (i)) Mr. Cheng Songlin (Note (vii)) Mr. Zhang Yunlong (Note (ii)) Mr. Li Zhi (Note (viii)) Mr. Wang Yongchun (Note (ix)) Ms. Ko Yuen Kwan (Note (iii)) Mr. Li Zhijie (Note (xii)) Mr. Xie Qishan (Note (xiii)) Mr. Lu Linjiang (Note (xiv)) Mr. Han Zhaoju (Note (iv)) Ms. Gao Jinxia (Note (iv)) Year ended 31 December 2010 Mr. Li Yan (Note (vi)) Mr. Felipe Tan (Note (i)) Mr. Wu Hua (Note (vii)) Mr. Zhang Ming (Note (i)) Mr. Cheng Songlin (Note (vii)) Mr. Zhang Yunlong (Note (ii)) Mr. Wang Yongchun (Note (ix)) Ms. Ko Yuen Kwan (Note (iii)) Mr. Xie Qishan (Note (xiii)) Mr. Lu Linjiang (Note (xiv)) Mr. Han Zhaoju (Note (iv)) Ms. Gao Jinxia (Note (iv))	Fees Salaries and other benefits Retirement benefits scheme contribution HK$ HK$ HK$ 14,164 130,191 — — — — — — — — — — — — — 42,491 — — — — — — — — 14,164 95,973 5,565 14,164 150,242 5,914 — — — 153,745 472,605 11,479 14,346 276,123 — 71,731 — — — — — 14,346 183,632 — — — — — — — — — — 57,385 — — — — — 14,346 165,444 8,583 14,346 180,754 6,190 — — — 186,500 805,953 14,773	Total HK$ 144,355 — — — — 42,491 — — 115,702 170,320 —
		637,829
		290,469 71,731 — 197,978 — — — 57,385 — 188,373 201,290 —
		1,007,226

— IIB-32 —

APPENDIX II-B

ACCOUNTANTS’ REPORT ON XINJIANG TIANMU

			Retirement
		Salaries and	benefits
		other	scheme
	Fees	benefits	contribution	Total
	HK$	HK$	HK$	HK$
Year ended 31 December 2011
Mr. Li Yan (Note (vi))	15,057	246,742	—	261,799
Mr. Felipe Tan (Note (i))	60,229	—	—	60,229
Mr. Wu Hua (Note (vii))	—	—	—	—
Mr. Zhang Ming (Note (i))	15,057	145,440	—	160,497
Mr. Cheng Songlin (Note (vii))	—	—	—	—
Mr. Zhang Yunlong (Note (ii))	—	—	—	—
Mr. Wang Yongchun (Note (ix))	—	—	—	—
Ms. Ko Yuen Kwan (Note (iii))	51,194	—	—	51,194
Mr. Lu Linjiang (Note (xiv))	15,057	141,146	3,988	160,191
Mr. Han Zhaoju (Note (iv))	15,057	160,298	10,374	185,729
Ms. Gao Jinxia (Note (iv))	—	—	—	—
Ms. Hu Caixia (Note (v))	—	—	—	—
Mr. Wang Ling (Note (v))	—	—	—	—
Mr. Ma Deyi (Note (v))	—	—	—	—
Mr. Peng Fanghong (Note (v))	—	—	—	—
Mr. Deng Gang (Note (v))	—	—	—	—
	171,651	693,626	14,362	879,639

Notes:

• (i) Appointed on 10 July 2002.

• (ii) Appointed on 23 July 2003.

• (iii) Appointed on 27 October 2007.

• (iv) Appointed on 12 August 2009.

• (v) Appointed on 13 January 2011.

• (vi) Appointed on 10 July 2002, resigned on 20 November 2004 and reappointed on 12 August 2009.

• (vii) Appointed on 10 July 2002 and resigned on 13 January 2011.

• (viii) Appointed on 30 July 2003 and resigned on 12 August 2009.

• (ix) Appointed on 30 July 2003 and resigned on 13 January 2011.

• (x) Appointed on 30 July 2003 and resigned on 21 April 2008.

• (xi) Appointed on 20 November 2004 and resigned on 21 April 2008.

• (xii) Appointed on 21 April 2008 and resigned on 12 August 2009.

• (xiii) Appointed on 21 April 2008 and resigned on 10 January 2010.

• (xiv) Appointed on 21 April 2008, resigned on 12 August 2009 and reappointed on 10 January 2010.

— IIB-33 —

ACCOUNTANTS’ REPORT ON XINJIANG TIANMU

APPENDIX II-B

Employees’ emoluments

Of the five highest paid individuals of Xinjiang Tianmu for the Relevant Periods, all are directors of Xinjiang Tianmu whose emoluments are included in the disclosures above.

During the Relevant Periods, no emoluments were paid by Xinjiang Tianmu to any of the directors or the five highest paid individuals (including directors and employees) as an inducement to join or upon joining Xinjiang Tianmu, or as compensation for loss of office. None of the directors waived any emoluments during the Relevant Periods.

14. DIVIDENDS

						Year ended	Year ended	Year ended
						31 December	31 December	31 December
						2009	2010	2011
						HK$	HK$	HK$
Dividends	recognised	as	distributions	during	the
year						—	8,794,734	29,616,212

15. EARNINGS PER SHARE

Earnings per share has not been presented as such information is not considered meaningful for the purpose of this report.

— IIB-34 —

APPENDIX II-B

ACCOUNTANTS’ REPORT ON XINJIANG TIANMU

16. PROPERTY, PLANT AND EQUIPMENT

Buildings and leasehold improvements Electronic equipment Furniture and fixtures HK$ HK$ HK$ Cost At 1 January 2009 3,966,970 274,793 5,257 Exchange adjustments 12,491 1,177 43 Additions — 315,236 26,469 At 31 December 2009 3,979,461 591,206 31,769 Exchange adjustments 161,476 33,937 4,900 Additions 441,410 455,101 144,924 At 31 December 2010 4,582,347 1,080,244 181,593 Exchange adjustments 328,103 44,402 7,027 Transferred from construction in progress 9,631,218 — — Additions 2,426,562 356,414 26,042 Eliminated on disposals (155,021) (26,138) (3,313) At 31 December 2011 16,813,209 1,454,922 211,349 Accumulated depreciation At 1 January 2009 1,920,910 130,892 2,588 Exchange adjustments 6,230 486 9 Provision for the year 183,357 74,300 952 At 31 December 2009 2,110,497 205,678 3,549 Exchange adjustments 84,632 13,007 375 Provision for the year 194,675 205,340 9,454 At 31 December 2010 2,389,804 424,025 13,378 Exchange adjustments 94,110 18,949 721 Provision for the year 523,795 265,393 17,685 Eliminated on disposals (102,449) (21,399) (735) At 31 December 2011 2,905,260 686,968 31,049 Carrying amounts At 31 December 2009 1,868,964 385,528 28,220 At 31 December 2010 2,192,543 656,219 168,215 At 31 December 2011 13,907,949 767,954 180,300	Plant and machinery HK$ 8,458,139 26,861 231,885 8,716,885 335,360 248,431 9,300,676 336,910 — 1,384,453 (1,950,676) 9,071,363 6,340,134 20,960 1,009,148 7,370,242 303,817 1,003,584 8,677,643 315,157 745,710 (1,212,854) 8,525,656 1,346,643 623,033 545,707	Motor vehicles Construction in progress HK$ HK$ 965,525 — 3,726 — 693,880 — 1,663,131 — 70,899 210,001 318,138 8,223,054 2,052,168 8,433,055 73,863 325,079 — (9,631,218) 2,722 10,590,354 (163,366) — 1,965,387 9,717,270 349,382 — 1,279 — 181,020 — 531,681 — 28,433 — 327,539 — 887,653 — 35,528 354,544 — (155,198) — 1,122,527 — 1,131,450 — 1,164,515 8,433,055 842,860 9,717,270	Total HK$ 13,670,684 44,298 1,267,470
			14,982,452 816,573 9,831,058
			25,630,083 1,115,384 — 14,786,547 (2,298,514)
			39,233,500
			8,743,906 28,964 1,448,777
			10,221,647 430,264 1,740,592
			12,392,503 464,465 1,907,127 (1,492,635)
			13,271,460
			4,760,805
			13,237,580
			25,962,040

— IIB-35 —

ACCOUNTANTS’ REPORT ON XINJIANG TIANMU

APPENDIX II-B

The above items of property, plant and equipment (other than construction in progress) are depreciated on a straight-line method over the estimated useful lives as follows:

Buildings and leasehold
improvements:	8 to 20 years
Electronic equipment:	3 to 8 years
Furniture and fixtures:	3 to 8 years
Plant and machinery:	8 years
Motor vehicles:	5 to 8 years

Amongst the depreciation expenses of HK$1,448,777, HK$1,740,592 and HK$1,907,127 for the years ended 31 December 2009, 2010 and 2011 respectively, approximately HK$95,635, HK$194,209 and HK$235,402 were included in the cost of inventories respectively. The remaining depreciation expenses were charged to the statement of comprehensive income.

17. EXPLORATION AND EVALUATION ASSETS

Cost At 1 January 2009 Additions Exchange adjustments At 31 December 2009 Additions Exchange adjustments At 31 December 2010 Additions Transfer to mining rights (Note 18) Exchange adjustments At 31 December 2011	HK$ 8,763,591 3,634,141 31,185 12,428,917 1,153,967 498,595 14,081,479 23,186,301 (3,478,516) 783,765 34,573,029

The amounts mainly represent the cost of acquisition of the exploration licences in various locations in the PRC. The exploration and evaluation assets also include geological and geophysical costs, and drilling and exploration expenses directly attributable to exploration activities.

— IIB-36 —

ACCOUNTANTS’ REPORT ON XINJIANG TIANMU

APPENDIX II-B

18. MINING RIGHTS

Cost At 1 January 2009 Additions Exchange adjustments At 31 December 2009 Additions Exchange adjustments At 31 December 2010 Additions Transfer from exploration and evaluation assets (Note 17) Exchange adjustments At 31 December 2011 Amortisation At 1 January 2009 Charge for the year Exchange adjustments At 31 December 2009 Charge for the year Exchange adjustments At 31 December 2010 Charge for the year Exchange adjustments At 31 December 2011 Carrying amounts At 31 December 2009 At 31 December 2010 At 31 December 2011	HK$ 4,220,482 1,166,040 14,443
	5,400,965 94,111 206,259
	5,701,335 8,071,455 3,478,516 364,851
	17,616,157
	2,108,746 891,788 7,521
	3,008,055 992,690 138,889
	4,139,634 3,112,378 194,729
	7,446,741
	2,392,910
	1,561,701
	10,169,416

— IIB-37 —

ACCOUNTANTS’ REPORT ON XINJIANG TIANMU

APPENDIX II-B

The mining rights represent the rights to conduct mining activities in various gold mines and iron mine situated in the PRC.

The mining rights are amortised on the straight-line basis over their estimated useful lives of approximately 4 to 10 years. Effective amortisation rate for the years ended 31 December 2009, 2010 and 2011 approximate to 16.51%, 17.41% and 17.67% respectively.

19. PREPAID LEASE PAYMENTS

	At	At	At
	31 December	31 December	31 December
	2009	2010	2011
	HK$	HK$	HK$
Carrying amounts
At beginning of the year	147,974	144,259	145,365
Charged to profit or loss	(4,177)	(4,231)	(4,440)
Exchange adjustments	462	5,337	5,324
At end of the year	144,259	145,365	146,249
Analysis of the carrying amounts of prepaid lease	payments is as follows:
Prepaid lease payments	144,259	145,365	146,249
Less: Portion to be charged to profit or loss in the
coming twelve months and shown as current
assets	(4,231)	(4,392)	(4,499)
Amount due after one year	140,028	140,973	141,750

Included in prepaid lease payments were land use rights situated in the PRC under medium term lease and were acquired with lease period of 50 years. The prepaid lease payments were amortised over their lease periods.

— IIB-38 —

APPENDIX II-B

ACCOUNTANTS’ REPORT ON XINJIANG TIANMU

20. TRADE AND OTHER RECEIVABLES

	At	At	At
	31 December	31 December	31 December
	2009	2010	2011
	HK$	HK$	HK$
Trade receivables	—	—	5,526,324
Prepayments, deposits and other receivables	13,278,460	17,949,916	27,849,117
	13,278,460	17,949,916	33,375,441
Less: Deposits classified as non-current assets
(Note)	—	(6,121,158)	(10,420,136)
	13,278,460	11,828,758	22,955,305

Note: Deposits with the carrying amounts of HK$6,121,158 and HK$10,420,136 as at 31 December 2010 and 2011 respectively represents deposits paid by Xinjiang Tianmu to the Ministry of Land and Resources of the PRC as required by Xinjiang Uygar Autonomous Region Regulations on the Management of Security Deposit for Ecological Control Restoration in Mines. The deposits are payable by down payments and annual instalments from year 2010 to 2018 and refundable upon the cessation of mining activities or closure of mines and the environmental rehabilitation work of relevant mines to meet the PRC government’s requirements.

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

					At		At		At
				**31 **	December	**31 **	December	**31 **	December
					2009		2010		2011
					HK$		HK$		HK$
0	to	30	days		—		—		5,526,324

The credit terms granted to customers are varied and are generally the result of negotiations between individual customers and Xinjiang Tianmu. No interest is charged on trade receivables and Xinjiang Tianmu does not hold any collateral over these balances. The management closely monitors the credit quality of trade receivables and considers the trade receivables that are neither past due nor impaired to be of a good credit quality. At the end of the reporting period, neither of the trade receivables are past due nor impaired.

— IIB-39 —

APPENDIX II-B

ACCOUNTANTS’ REPORT ON XINJIANG TIANMU

21. LAND RESTORATION COSTS

Cost At 1 January 2009 Exchange adjustments At 31 December 2009 Additions Exchange adjustments At 31 December 2010 Additions Exchange adjustments At 31 December 2011 Amortisation At 1 January 2009 Charge for the year Exchange adjustments At 31 December 2009 Charge for the year Exchange adjustments At 31 December 2010 Charge for the year Exchange adjustments At 31 December 2011 Carrying amounts At 31 December 2009 At 31 December 2010 At 31 December 2011	HK$ 425,912 1,342
	427,254 1,298,880 49,297
	1,775,431 199,331 68,405
	2,043,167
	64,289 96,641 298
	161,228 292,401 13,553
	467,182 441,195 23,172
	931,549
	266,026
	1,308,249
	1,111,618

— IIB-40 —

APPENDIX II-B

ACCOUNTANTS’ REPORT ON XINJIANG TIANMU

22. INVENTORIES

At 31 December 2009 31 HK$ Raw materials and consumables 4,252,609 Finished goods 16,853,717 21,106,326 23. AMOUNTS DUE FROM RELATED COMPANIES At 31 December 2009 31 HK$ 新疆亞克斯資源開發有限公司 (Xinjiang Yakesi Resources Company Limited) (“Xinjiang Yakesi”) (Note (i)) 14,953 哈密市聚寶資源開發有限公司 (transliterated as Hami Jubao Resources Company Limited) (“Hami Jubao”) (Note (i)) 209,870 新疆同源礦業有限公司 (transliterated as Xinjiang Tongyuan Minerals Limited) (“Xinjiang Tongyuan”) (Note (i)) — 新疆偉福礦業有限公司 (Xinjiang Weifu Mining Limited) (“Xinjiang Weifu”) (Note (i)) 778,003 哈密大地工程勘察有限責任公司(transliterated as Hami Dadi Geotechnical Engineering Company Limited) (“Hami Dadi”) (Note (ii)) — Xinjiang Kangshun (Note (iii)) — 1,002,826	At December 2010 At 31 December 2011 HK$ HK$ 4,875,213 22,664,024 585,351 3,273,239 5,460,564 25,937,263 At December 2010 At 31 December 2011 HK$ HK$ — — — — 3,637 — 188,322 — 7,062,060 — — 8,798,594 7,254,019 8,798,594	At December 2010 At 31 December 2011 HK$ HK$ 4,875,213 22,664,024 585,351 3,273,239 5,460,564 25,937,263 At December 2010 At 31 December 2011 HK$ HK$ — — — — 3,637 — 188,322 — 7,062,060 — — 8,798,594 7,254,019 8,798,594
		8,798,594

— IIB-41 —

APPENDIX II-B

ACCOUNTANTS’ REPORT ON XINJIANG TIANMU

At 31 December 2009 31 HK$ Highest outstanding balance during the year: Xinjiang Yakesi (Note (i)) 14,953 Hami Jubao (Note (i)) 209,870 Xinjiang Tongyuan (Note (i)) — Xinjiang Weifu (Note (i)) 778,003 Hami Dadi (Note (ii)) — Xinjiang Kangshun (Note (iii)) —	At December 2010 31 HK$ 14,953 209,870 3,637 778,003 7,062,060 —	At December 2011 HK$ — — 3,637 188,322 7,333,022 8,798,594

Notes:

• (i) Mr. Felipe Tan, one of the ultimate beneficial owners of Xinjiang Tianmu, has a controlling equity interest in these companies. The amounts due are unsecured, interest free and repayable on demand.

• (ii) The company is a fellow subsidiary of Hami Liuhe, the equity holder of Xinjiang Tianmu. The amount due is unsecured, interest-free and repayable on demand.

• (iii) Xinjiang Kangshun is a former equity holder of Xinjiang Tianmu and an indirect non wholly-owned subsidiary of the Vendor. In July 2011, Xinjiang Kangshun transferred all of its 5% equity interest in Xinjiang Tianmu to Kangshun HK. The amount due from Xinjiang Kangshun is being reclassified as amount due from a related company following the transfer of equity interest. The amount due is unsecured, interest-free and repayable on demand.

24. AMOUNTS DUE FROM EQUITY HOLDERS OF XINJIANG TIANMU

31 Xinjiang Kangshun (Note 23 (iii)) Hami Liuhe Highest outstanding balance during the year: Xinjiang Kangshun Hami Liuhe	At December 2009 31 HK$ 9,815,440 67,938 9,883,378 9,815,440 67,938	At December 2010 At 31 December 2011 HK$ HK$ 8,068,597 — — — 8,068,597 — 9,815,440 — 67,938 —	At December 2010 At 31 December 2011 HK$ HK$ 8,068,597 — — — 8,068,597 — 9,815,440 — 67,938 —
			—
			— —

The amounts due are unsecured, interest-free and repayable on demand.

— IIB-42 —

ACCOUNTANTS’ REPORT ON XINJIANG TIANMU

APPENDIX II-B

25. BANK BALANCES AND CASH

At 31 December 2009, 2010 and 2011, bank balances and cash of HK$3,244,463, HK$56,956,422 and HK$70,251,191 respectively were denominated in RMB which is not freely convertible into other currencies.

Bank balances and cash comprise cash held by Xinjiang Tianmu and bank balances that earns interest at floating rates based on daily bank deposit rates. The bank balances are deposited with creditworthy banks with no recent history of default.

26. TRADE AND OTHER PAYABLES

			At		At		At
		**31 **	December	**31 **	December	**31 **	December
			2009		2010		2011
			HK$		HK$		HK$
Trade	payables		4,167,154		1,501,243		13,175,855
Other	payables		8,319,154		17,971,030		42,793,275
			12,486,308		19,472,273		55,969,130

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

	At	At	At
	31 December	31 December	31 December
	2009	2010	2011
	HK$	HK$	HK$
Within 1 year	3,998,204	1,260,783	12,936,244
1 to 2 years	—	62,114	47,548
2 to 3 years	31,871	—	10,243
3 years and above	137,079	178,346	181,820
	4,167,154	1,501,243	13,175,855

Trade payables are non-interest-bearing.

Included in other payables are dividends payable to the equity holders of Xinjiang Tianmu of HK$4,680,896, HK$8,356,408 and HK$28,725,494 as at 31 December 2009, 2010 and 2011 respectively. The dividends payable are unsecured, interest-free and repayable on demand.

— IIB-43 —

ACCOUNTANTS’ REPORT ON XINJIANG TIANMU

APPENDIX II-B

27. AMOUNTS DUE TO AN EQUITY HOLDER OF XINJIANG TIANMU/RELATED COMPANIES

The amounts due are unsecured, interest-free and repayable on demand.

28. LOAN DUE TO AN EQUITY HOLDER OF XINJIANG TIANMU/A RELATED COMPANY

									At		At		At
								**31 **	December	**31 **	December	**31 **	December
									2009		2010		2011
									HK$		HK$		HK$
Carrying	amount	repayable	on	demand	or	within	1
year									6,501,461		6,746,857		6,996,723

The loan was provided by Xinjiang Kangshun and is unsecured and repayable on demand. The weighted average effective interest rate on the borrowings was 8.22% per annum for the year ended 31 December 2009. No interest was charged for the years ended 31 December 2010 and 2011.

Xinjiang Kangshun is a former equity holder of Xinjiang Tianmu and an indirect non wholly-owned subsidiary of the Vendor. In July 2011, Xinjiang Kangshun transferred all of its 5% equity interest in Xinjiang Tianmu to Kangshun HK. The loan due to Xinjiang Kangshun is being reclassified as loan due to a related company following the transfer of equity interest.

29. PROVISION FOR RESTORATION COSTS

At 1 January 2009 Exchange adjustments At 31 December 2009 Additional provision recognised Exchange adjustments At 31 December 2010 Additional provision recognised Exchange adjustments At 31 December 2011	HK$ 425,912 1,341
	427,253 1,298,880 49,297
	1,775,430 199,331 68,405
	2,043,166

— IIB-44 —

ACCOUNTANTS’ REPORT ON XINJIANG TIANMU

APPENDIX II-B

In accordance with relevant PRC rules and regulations, Xinjiang Tianmu is obliged to accrue the cost for land reclamation and mine closures for Xinjiang Tianmu’s existing mines. The provision for restoration costs has been determined by the directors based on their best estimates by reference to relevant PRC rules and regulations.

30. PAID-UP CAPITAL

					At		At		At
				**31 **	December	**31 **	December	**31 **	December
					2009		2010		2011
					HK$		HK$		HK$
Registered	and	paid-up	capital		983,113		22,562,228		22,562,228

31. RETIREMENT BENEFITS SCHEME

The employees of Xinjiang Tianmu are members of the state-managed retirement benefits scheme operated by the PRC government. Xinjiang Tianmu is required to contribute a certain percentage of their payroll to the retirement benefits scheme to fund the benefits. The only obligation of Xinjiang Tianmu with respect to the retirement benefits scheme is to make the required contributions under the scheme.

32. OPERATING LEASE COMMITMENTS

Xinjiang Tianmu as lessee

At the end of the reporting period, Xinjiang Tianmu were committed to make the following future minimum lease payments in respect of rented premises under non-cancellable operating leases which fall due as follows:

	At	At	At
	31 December	31 December	31 December
	2009	2010	2011
	HK$	HK$	HK$
Within one year	181,000	188,000	195,296
In the second to fifth years inclusive	363,000	188,000	—
	544,000	376,000	195,296

Leases are negotiated for terms up to 3 years.

— IIB-45 —

ACCOUNTANTS’ REPORT ON XINJIANG TIANMU

APPENDIX II-B

33. RELATED PARTY TRANSACTIONS

Apart from those disclosed elsewhere in the Financial Information, Xinjiang Tianmu entered into the following significant related party transactions during the Relevant Periods.

	Year ended	Year ended	Year ended
	31 December	31 December	31 December
	2009	2010	2011
	HK$	HK$	HK$
Rental expenses paid to related companies
(Note (i))	90,646	183,632	192,731
Interest expense paid to an equity holder of
Xinjiang Tianmu (Note (ii))	133,424	—	—
Interest income received from a related company
(Note (iii))	—	18,044	—
Exploration expenditures paid to a related company
(Note (iv))	4,532,327	6,886,200	11,185,891
Waiver of amount due to a related company
(Note (v))	—	—	425,518

Notes:

(i) These companies are either controlled by Mr. Felipe Tan or Mr. Zhang Ming, the ultimate beneficial owner or director of Xinjiang Tianmu respectively. The lease agreements were entered into at terms agreed between the contracting parties.

(ii) Interest expenses were paid to an equity holder of Xinjiang Tianmu. Further details regarding the loan are set out in note 28 to the Financial Information.

(iii) Interest income arose from advances to a related company controlled by Mr. Felipe Tan, the beneficial owner of Xinjiang Tianmu, was mutually agreed by both parties.

(iv) Exploration expenditures were paid to a related company which is a fellow subsidiary of Hami Liuhe, the equity holder of Xinjiang Tianmu, at terms mutually agreed by both parties.

(v) The waiver of amount due to a related company was mutually agreed by both parties.

Compensation of key management personnel

The key management personnel are the directors of Xinjiang Tianmu. The details of their remuneration are set out in note 13.

— IIB-46 —

APPENDIX II-B ACCOUNTANTS’ REPORT ON XINJIANG TIANMU

II. EVENTS AFTER THE REPORTING PERIOD

No significant events occurred after the reporting dates that would require disclosure in or alternations to the Financial Information.

III. SUBSEQUENT FINANCIAL STATEMENTS

No audited financial statements of Xinjiang Tianmu have been prepared in respect of any period subsequent to 31 December 2011.

Yours faithfully,

HLB Hodgson Impey Cheng Chartered Accountants Certified Public Accountants Hong Kong

— IIB-47 —

APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

A. UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

Unaudited Pro Forma Consolidated Statement of Financial Position

The unaudited pro forma consolidated statement of financial position of the Enlarged Group (the “Unaudited Pro Forma Consolidated Statement of Financial Position”) has been prepared in accordance with Rule 7.31 of the GEM Listing Rules for the purpose of illustrating the effects of the Acquisition as if the Acquisition had been completed at the date reported on (i.e. 30 September 2011).

The Unaudited Pro Forma Consolidated Statement of Financial Position is based on (i) the unaudited consolidated statement of financial position of the Group at 30 September 2011 (as extracted from Timeless Software Limited’s interim report for the six months ended 30 September 2011) and (ii) the audited consolidated statement of financial position of the Target Group at 31 December 2011 (as extracted from the financial information of the Target Group as shown in Appendix II-A, after making pro forma adjustments relating to the Acquisition that are (i) directly attributable to the transaction concerned and not relating to future events or decisions; and (ii) factually supportable.

The Unaudited Pro Forma Consolidated Statement of Financial Position should be read in conjunction with the historical financial information of the Group and other financial information included elsewhere in this circular. The Unaudited Pro Forma Consolidated Statement of Financial Position does not take account of any trading or other transactions subsequent to the date of the financial statements included in the Unaudited Pro Forma Consolidated Statement of Financial Position.

The Unaudited Pro Forma Consolidated Statement of Financial Position has been prepared by the Directors for illustrative purposes only and because of its hypothetical nature, it may not give a true picture of the financial position of the Group at 30 September 2011 or any future date.

— III-1 —

APPENDIX III

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

The Group at 30 September 2011 The Target Group at 31 December 2011 Pro forma adjustment Pro forma adjustment Pro forma adjustment Pro forma adjustment HK$’000 HK$’000 HK$’000 HK$’000 HK$‘000 HK$’000 Note 1 Note 2 Note 3 Note 4 Note 5 Notes 6, 7 Non-current assets Investment properties 10,854 — Property, plant and equipment 2,408 25,962 Exploration and evaluation assets — 186,661 40,339 Mining rights — 134,942 3,558 Goodwill 1,298 — 6,949 Interests in associates 4,183 — Prepaid lease payments — 142 Deposits — 10,420 Land restoration costs — 1,112 18,743 359,239 Current assets Inventories 3,317 25,937 Prepaid lease payments — 4 Trade and other receivables 11,002 23,238 Investment held for trading 11,757 — Amount due from a related company — 8,799 Bank balances and cash 57,480 70,714 (6,600) 83,556 128,692 Current liabilities Trade and other payables 6,901 27,244 500 Obligations under a finance lease due within one year 47 — Amount due to holding company — 500 (500) Amount due to a related company — 9,851 Loan due to a related company — 6,997 Current tax liabilities — 13,653 Dividend payable — 28,912 Promissory note — — 14,375 6,948 87,157 Net current assets 76,608 41,535 Total assets less current liabilities 95,351 400,774 Non-current liabilities Promissory note — — 47,303 Deferred tax liabilities — 72,888 10,974 Provision for restoration costs — 2,043 — 74,931 Net assets 95,351 325,843 Capital and reserves Share capital 56,868 2 (2) 13,500 Reserves 35,748 164,640 (6,600) 24,300 (164,640) Equity attributable to owners of the Company 92,616 164,642 Non-controlling interests 2,735 161,201 105,036 Total equity 95,351 325,843	Pro forma Enlarged Group at 30 September 2011 HK$’000 10,854 28,370 227,000 138,500 8,247 4,183 142 10,420 1,112
	428,828
	29,254 4 34,240 11,757 8,799 121,594
	205,648
	34,645 47 — 9,851 6,997 13,653 28,912 14,375
	108,480
	97,168
	525,996
	47,303 83,862 2,043
	133,208
	392,788
	70,368 53,448
	123,816 268,972
	392,788

— III-2 —

APPENDIX III

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

Notes to the Unaudited Pro forma Consolidated Statement of Financial Position:

1. The balances have been extracted from the unaudited consolidated statement of financial position of the Group at 30 September 2011 as disclosed in the published interim report of the Company for the six months ended 30 September 2011.

2. The adjustments represent the inclusion of the assets, liabilities and equity of the Target Group, as if the Acquisition had taken place at the date reported on (i.e. 30 September 2011). The balances have been extracted from the audited consolidated statement of financial position of the Target Group at 31 December 2011 as disclosed in Appendix II-A to this circular.

3. The adjustments represent payment for estimated acquisition-related costs (including fees to legal advisers, financial adviser, reporting accountants, competent persons, valuers, printer and other expenses) of approximately HK$6,600,000 in cash, which would be expensed in the consolidated statement of comprehensive income upon completion of the Acquisition in accordance with Hong Kong Financial Reporting Standard 3 (Revised) “Business Combinations” (“HKFRS 3 (Revised)”) issued by the HKICPA.

4. The adjustments represent fair value adjustment on exploration and evaluation assets and mining rights of Xinjiang Tianmu of approximately HK$40,339,000 and HK$3,558,000 respectively and the recognition of deferred tax on fair value adjustment at the PRC Enterprise Income tax rate of 25%. The estimated fair value of the exploration and evaluation assets and mining rights of Xinjiang Tianmu is based on a professional valuation conducted by Mr. Philip Alan Jones which stated that market values of the Target Mines as at 1 December 2011 was approximately HK$365,500,000.

5. This represents reclassification of the amount due to holding company of the Target Group of approximately HK$500,000 to other payables upon completion of the Acquisition.

6. Pursuant to the terms of the Acquisition Agreement, the Consideration for the proposed Acquisition of approximately HK$103,500,000 (subject to adjustment) shall be settled in the following manner:

7. (i) HK$40,500,000 shall be satisfied by the Purchaser procuring the Company to allot and issue the Consideration Shares, credited as fully paid at the Issue Price, on Completion to the Vendor; and

8. (ii) HK$63,000,000 shall be satisfied by the Purchaser issuing the Promissory Note to the Vendor on Completion.

The fair value of the Consideration is assumed as follows:

	Fair value
	HK$’000
Consideration Shares	37,800
Promissory Note	61,678
	99,478

— III-3 —

APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

For the purpose of the preparation of the Unaudited Pro Forma Consolidated Statement of Financial Position, the components of the Consideration are accounted for as follows:

• (i) the fair value of each Consideration Shares is assumed to be the published closing price of the shares quoted on the Stock Exchange on 30 September 2011 of HK$0.14 each as if the Acquisition had been completed on 30 September 2011. On this basis, the pro forma adjustment amounting to HK$13,500,000 represents the par value of 270,000,000 Consideration Shares with a par value of HK$0.05 each, and the pro forma adjustment amounting to HK$24,300,000 represents the share premium arising from the issue of the 270,000,000 Consideration Shares at the estimated fair value of HK$0.14 each.

• (ii) the estimated fair value of the Promissory Note with a principal amount of HK$63,000,000 was approximately HK$61,678,000, as if the Promissory Note was issued on 30 September 2011. The valuation of the Promissory Note was carried out by Roma Appraisals Limited, a firm of independent professional qualified valuers, and the valuation date is on 30 September 2011. The fair value of the Promissory Note has been arrived using the effective interest method by discounting future estimated repayments at discount rates ranging from 3.132% to 3.987% with reference to the Hong Kong Exchange Fund Notes yields. The fair value of the Promissory Note will have to be reassessed upon Completion.

On the basis that the Promissory Note is repayable with the first instalment of HK$3,000,000 on the date falling three months from the date of issue and the remaining HK$60,000,000 in six equal instalments with accrued interest payable on each anniversary of the date of issue, approximately HK$14,375,000 (representing the present values of the principal repayments of HK$13,000,000 which fall due within one year and accrued interest of approximately HK$1,823,000 discounted at the weighted average discount rate of 3.69%) are classified as current liabilities.

• (iii) Pursuant to the Acquisition Agreement, the Vendor has warranted and undertaken that, the total actual and completed sales of gold by Xinjiang Tianmu for the twelve months ending 30 June 2013 (the “Actual Sales”) shall not be less than 282 kg (the “Guarantee Sales”) and that any shortfall from the Guarantee Sales will be compensated to the Group by paying in cash an amount which is equivalent of 26.01% of the shortfall between the Guarantee Sales and the Actual Sales at HK$124,000 per kg. The maximum amount payable by the Vendor under the gold sales guarantee is approximately HK$9,095,000. For the purpose of preparing the unaudited pro forma financial information of the Enlarged Group, the Directors assumed that the Consideration will not be adjusted and the Guarantee Sales will be achieved after taking into consideration the latest management account of Xinjiang Tianmu. The effect of the shortfall from the Guarantee Sales will be assessed upon completion of the Acquisition.

• The adjustments reflect:

• (i) the estimated goodwill arising from the Acquisition of approximately HK$6,949,000:

• (ii) elimination of the share capital and pre-acquisition reserves of the Target Group of approximately HK$2 and HK$164,640,000, as if the Acquisition had been completed at the date reported on; and

• (iii) recognition of non-controlling interests of the Target Group of approximately HK$105,036,000.

In accordance with HKFRS 3 (Revised), the identifiable assets, liabilities and contingent liabilities of the Target Group will be recorded on the Unaudited Pro Forma Consolidated Statement of Financial Position at their fair values as if the Acquisition was completed on 30 September 2011.

— III-4 —

APPENDIX III

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

For the purpose of the preparation of the Unaudited Pro Forma Consolidated Statement of Financial Position, it has been assumed that:

• (a) the fair value of the identifiable assets and liabilities of the Target Group as at 31 December 2011 is assumed to be the same as their carrying amounts.

• (b) the estimated goodwill arising from the Acquisition of approximately HK$6,949,000 is recognised in the unaudited pro forma financial information and is measured at the excess of the estimated fair value of consideration of approximately HK$99,478,000 over the adjusted net amount of identifiable assets and liabilities of the Target Group acquired by the Group of approximately HK$92,529,000, as if the Acquisition had been completed at the date reported on.

The estimated fair value of the consideration of approximately HK$99,478,000 had been calculated as the sum of: (i) the fair value of the Consideration Shares of HK$37,800,000, which are valued at the published closing price of HK$0.14 each on 30 September 2011 as if the Acquisition had been completed on 30 September 2011; and (ii) the fair value of approximately HK$61,678,000 of the Promissory Note with a principal amount of HK$63,000,000, as if the Promissory Note was issued on 30 September 2011. The valuation of the Promissory Note was carried out by Roma Appraisals Limited, a firm of independent professional qualified valuers, and the valuation date is on 30 September 2011.

The adjusted net amount of identifiable assets and liabilities of the Target Group acquired by the Group is calculated as follows:

	At
	30 September
	2011
	HK$’000
Net assets of the Target Group attributable to owners of the Target Company	164,642
Add: Fair value adjustments for exploration and evaluation assets and mining
rights held by Xinjiang Tianmu (Note 4)	43,897
Less: Deferred tax effect on the fair value adjustment for exploration and
evaluation assets and mining rights (Note 4)	(10,974)
Less: Fair value adjustments and deferred tax effect on the fair value
adjustment for exploration and evaluation assets and mining rights shared
by 49% non-controlling interests of Xinjiang Tianmu (Note 7 (c))	(16,133)
Adjusted net assets of the Target Group attributable to owners of the
Company	181,432
Less: Interests shared by 49% non-controlling interests of the Target Group
(Note 7 (c))	(88,903)
The adjusted net amount of identifiable assets and liabilities of the Target
Group attributable to the Group	92,529

— III-5 —

APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

• (c) The amount of the increase in non-controlling interests of the Target Group of approximately HK$105,036,000 had been calculated at the sum of (i) the share of the fair value adjustments attributable to the 49% non-controlling interests of Xinjiang Tianmu of approximately HK$16,133,000 and (ii) 24.99% of the adjusted net amount of identifiable assets and liabilities of the Target Group of approximately HK$88,903,000. The adjustments to recognise the above non-controlling interests of the Target Group will have continuing effects on the Enlarged Group.

On Completion, the fair value of the Consideration and the adjusted net identifiable assets and liabilities of the Target Group will have to be assessed. Since the actual fair values of the assets, liabilities and contingent liabilities of the Target Group on Completion would be different from their estimated fair values used in the preparation of the Unaudited Pro Forma Consolidated Statement of Financial Position presented above, the actual financial position arising from the Acquisition might be materially different from the financial position shown in this Appendix.

For the purpose of the preparation of the Unaudited Pro Forma Consolidated Statement of Financial Position in accordance with the requirements of Hong Kong Accounting Standard 36 Impairment of Assets , the Directors consider that no impairment is required in respect of the Enlarged Group’s intangible assets taking into account the business potential of Xinjiang Tianmu and other factors as disclosed in the paragraph headed “Reasons for and benefits of the Acquisition” in the “Letter from the Board” in this circular. The reporting accountants concurred with the Directors’ assessment of impairment of intangible assets in unaudited pro forma financial information and adoption of consistent accounting policies and principal assumptions in the preparation of the consolidated financial statements of the Group after completion of the Acquisition. After completion of the Acquisition, the Group will perform annual impairment test for the cash-generating unit to which the intangible assets has been allocated in accordance with the Company’s accounting policies and the requirements of Hong Kong Accounting Standard 36 Impairment of Assets , and the Company’s auditors will perform audit procedures thereon in respect of their audit of the consolidated financial statements of the Group for the next financial year in accordance with the requirements of Hong Kong Accounting Standard 36 Impairment of Assets .

The Unaudited Pro Forma Consolidated Statement of Financial Position does not take account of any trading or other transactions subsequent to the date of the financial statements included in the Unaudited Pro Forma Consolidated Statement of Financial Position.

Pursuant to the Supplemental Agreement, the aggregate amount of the dividends declared by the Target Company to the Vendor and by Xinjiang Tianmu to the minority shareholder of Xinjiang Tianmu shall not exceed RMB60.5 million after the date of the Agreement. The RMB60.5 million represents the aggregate amount of the dividends declared or to be declared and paid by the Target Company to the Vendor and by Xinjiang Tianmu to the minority shareholder of Xinjiang Tianmu for the years ended 31 December 2010 and 31 December 2011.

Dividend of approximately RMB24.6 million (equivalent to approximately HK$29.6 million) in respect of the year ended 31 December 2010 had been declared by Xinjiang Tianmu to its equity shareholders. Such amount had been accounted for and was included in other payables as at 31 December 2011 in the Financial Information of Xinjiang Tianmu as disclosed in Appendix II-B to this circular. The Unaudited Pro Forma Consolidated Statement of Financial Position had not taken into account of the proposed dividend in respect of the year ended 31 December 2011 which has yet to be declared up to the date of this circular.

— III-6 —

APPENDIX III

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

Unaudited Pro Forma Consolidated Statement of Comprehensive Income

The unaudited pro forma consolidated statement of comprehensive income of the Enlarged Group (the “Unaudited Pro Forma Consolidated Statement of Comprehensive Income”) has been prepared in accordance with Rule 7.31 of the GEM Listing Rules for the purpose of illustrating the effects of the Acquisition as if the Acquisition had been completed at the commencement of the period being reported on (i.e. 1 April 2010).

The Unaudited Pro Forma Consolidated Statement of Comprehensive Income is based on (i) the audited consolidated statement of comprehensive income of the Group for the year ended 31 March 2011 (as extracted from Timeless Software Limited’s annual report for the year ended 31 March 2011); (ii) the audited consolidated statement of comprehensive income of the Target Group for the year ended 31 December 2011 (as extracted from the financial information of the Target Group as shown in Appendix II-A; and (iii) the audited statement of comprehensive income of Xinjiang Tianmu for the year ended 31 December 2011 (as extracted from the financial information of Xinjiang Tianmu as shown in Appendix II-B, after making pro forma adjustments relating to the Acquisition that are (i) directly attributable to the transaction concerned and not relating to future events or decisions; and (ii) factually supportable.

The Unaudited Pro Forma Consolidated Statement of Comprehensive Income should be read in conjunction with the historical financial information of the Group and other financial information included elsewhere in this circular. The Unaudited Pro Forma Consolidated Statement of Comprehensive Income does not take account of any trading or other transactions subsequent to the date of the financial statements included in the Unaudited Pro Forma Consolidated Statement of Comprehensive Income.

The Unaudited Pro Forma Consolidated Statement of Comprehensive Income has been prepared by the Directors for illustrative purposes only and because of its hypothetical nature, it may not give a true picture of the results of the Group for the year ended 31 March 2011 or any future period.

— III-7 —

APPENDIX III

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

Turnover Other income and gains Purchase costs/production costs Staff costs Depreciation and amortisation Other expenses Payment for acquisition-related costs Gain in a bargain purchase Fair value changes on investment properties Net losses on equity-linked notes Net gains on investments held for trading Finance costs Share of profits/(loss) of an associate (Loss)/profit before tax Income tax (Loss)/profit for the year Other comprehensive income/(expense) Exchange differences on translation of foreign operations Share of other comprehensive income/(expenses) of an associate Recycling of cumulative exchange differences Other comprehensive income/(expense) Total comprehensive income/(expense) for the year	The Group for the year ended 31 March 2011 HK$’000 Note 8 25,091 1,075 (20,268) (15,415) (849) (7,496) — — 3,788 (451) 1,710 (53) 1,330 (11,538) — (11,538) 1,315 (2,747) — (1,432) (12,970)	The Target Group for the year ended 31 December 2011 HK$’000 Note 9 142,610 826 (50,169) (5,246) (12,905) (9,307) — 113,150 — — — — (826) 178,133 (19,459) 158,674 3,901 980 (2,035) 2,846 161,520	Xinjiang Tianmu for the year ended 31 December 2011 Pro forma adjustment Pro forma adjustment Pro forma adjustment Pro forma adjustment HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 Note 10 Note 11 Note 12 Note 13 Note 14 149,902 (142,610) 1,122 (826) (51,668) 50,169 (9,541) 5,246 (5,230) 12,905 (27,237) (11,514) 8,758 — (6,600) — (113,150) — — — — (2,724) — 826 73,071 (19,336) 19,298 6,809 53,735 3,770 (3,901) — (980) — 2,035 3,770 57,505	Pro forma Enlarged Group for the year ended 31 March 2011 HK$’000 174,993 2,197 (71,936) (24,956) (33,316) (19,559) (6,600) — 3,788 (451) 1,710 (2,777) 1,330
				24,423 (12,688)
				11,735
				5,085 (2,747) —
				2,338
				14,073

Notes to the Unaudited Pro Forma Consolidated Statement of Comprehensive Income:

1. The balances have been extracted from the audited consolidated statement of comprehensive income of the Group for the year ended 31 March 2011 as disclosed in the published annual report of the Company for the year ended 31 March 2011.

— III-8 —

APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

1. The adjustments represent the inclusion of items of comprehensive income of the Target Group as if the Acquisition had taken place at the commencement of the period being reported on (i.e. 1 April 2010). The balances have been extracted from the audited consolidated statement of comprehensive income of the Target Group for the year ended 31 December 2011 as disclosed in Appendix II-A to this circular.

2. The adjustments represent the inclusion of items of comprehensive income of Xinjiang Tianmu as if the Acquisition had taken place at the commencement of the period being reported on (i.e. 1 April 2010). The balances have been extracted from the audited statement of comprehensive income of Xinjiang Tianmu for the year ended 31 December 2011 as disclosed in Appendix II-B to this circular.

3. The adjustments represent payment for the estimated acquisition-related costs of approximately HK$6,600,000 in cash, which would be expensed in the consolidated statement of comprehensive income upon completion of the Acquisition in accordance with HKFRS 3 (Revised). This adjustment is not expected to have a continuing effect on the Enlarged Group.

4. The Target Group held 46% equity interest in Xinjiang Tianmu and accounted for the results of Xinjiang Tianmu for the period from 1 January 2011 to 14 July 2011 using the equity method of accounting in the consolidated financial statements of the Target Group for the year ended 31 December 2011. In July 2011, the Target Company acquired an additional 5% equity interest in Xinjiang Tianmu through its indirect wholly-owned subsidiary, namely Kangshun HK. Since then, Xinjiang Tianmu has become an indirect 51% owned subsidiary of the Target Company and the results of Xinjiang Tianmu for the financial period thereafter was consolidated into the consolidated statement of comprehensive income of the Target Group for the year ended 31 December 2011. The adjustments represent the reversal of (i) the share of loss and the share of other comprehensive income of an associate, which were attributable to the 46% equity interest in Xinjiang Tianmu held by the Target Group and (ii) the results of Xinjiang Tianmu being consolidated into the consolidated statement of comprehensive income of the Target Group during the year ended 31 December 2011, as if the Acquisition had been completed at the commencement of the period being reported on. The adjustments have continuing effect on the Unaudited Pro Forma Consolidated Statement of Comprehensive Income.

5. The adjustments represent the effective interest expense of approximately HK$2,724,000 for the Promissory Note assuming the Promissory Note had been issued as at 1 April 2010. The valuation of the Promissory Note was carried out by Roma Appraisals Limited, a firm of independent professional qualified valuers, and the valuation date is on 1 April 2010. The interest expenses have been arrived using the effective interest method at discounted rates ranging from 3.037% to 5.138% with reference to the Hong Kong Exchange Fund Notes yields. These adjustments are expected to have a continuing effect on the Enlarged Group.

6. The adjustments represent the additional amortisation of mining rights arising from the fair value adjustment of approximately HK$27,237,000 using the units of production method, and the related deferred tax provided at the PRC Enterprise rate of 25% of approximately HK$6,809,000, on the basis that the Acquisition was completed on 1 April 2010.

The amortisation rates of the mining rights for the year are approximately 32.8%, 24.63% and 3.07% respectively. The additional amortisation for the year ended 31 December 2011 of approximately HK$27,237,000 is calculated by 32.8%, 24.63% and 3.07% respectively for the fair value adjustment of approximately HK$24,493,000, HK$73,059,000 and HK$39,386,000 respectively on the mining rights. The total fair value adjustments of approximately HK$136,938,000 represents the estimated fair value of the mining rights of HK$138,500,000 less the carrying amounts of the mining rights of approximately HK$1,562,000.

The carrying amounts of the mining rights have been extracted from the audited statement of financial position of Xinjiang Tianmu as at 31 December 2010 as disclosed in Appendix II-B to this circular and the estimated fair value of the mining rights of Xinjiang Tianmu is based on a professional valuation conducted by Mr. Philip Alan Jones which stated that market value of the above gold and iron mines as at 1 December 2011 was approximately HK$138,500,000.

— III-9 —

APPENDIX III

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

Details of the amortisation rates for the year ended 31 December 2011 are set out as follows:

	Heishiliang	Hongshannan	Tuchushan
	gold mine	gold mine	iron mine
Total quantity of ore extracted (tonnes)	41,000	33,000	31,000
Estimated total mineral resources (tonnes)	125,000	134,000	1,010,000
Amortisation rates	32.8%	24.63%	3.07%

The amortisation rate for the year of approximately 32.8% to the Heishiliang gold mine was computed as the total quantity of ore extracted for the year of approximately 41,000 tonnes divided by the estimated total mineral resources of approximately 125,000 tonnes in the Heishiliang gold mine; the amortisation rate for the year of approximately 24.63% to the Hongshannan gold mine was computed as the total quantity of ore extracted for the year of approximately 33,000 tonnes divided by the estimated total mineral resources of approximately 134,000 tonnes in the Hongshannan gold mine; and the amortisation rate for the year of approximately 3.07% to the Tuchushan iron mine was computed as the total quantity of ore extracted for the year of approximately 31,000 tonnes divided by the estimated total mineral resources of approximately 1,010,000 tonnes in the Tuchushan iron mine.

The total quantity of ore extracted and estimated total mineral resources represent that of financial year ended 31 December 2011. Details of such inputs are set out as follows:

• (i) total quantity of ore extracted from the mines of approximately 41,000 tonnes, 33,000 tonnes and 31,000 tonnes respectively as provided by the management of Xinjiang Tianmu.

• (ii) estimated total mineral resources of approximately 125,000 tonnes, 134,000 tonnes and 1,010,000 tonnes in the gold and iron mines respectively. The estimation was carried out by Mr. Philip Alan Jones, a firm of independent professional qualified valuers. Further details are set out in Appendix VI of this circular.

The deferred tax liabilities are released to the Unaudited Pro Forma Consolidated Statement of Comprehensive Income as a result of the released deferred tax arising on fair value adjustment of the mining rights.

This adjustment is expected to have a continuing effect on the Enlarged Group.

Unaudited Pro Forma Consolidated Statement of Cash Flows

The unaudited pro forma consolidated statement of cash flows of the Enlarged Group (the “Unaudited Pro Forma Consolidated Statement of Cash Flows”) has been prepared in accordance with Rule 7.31 of the GEM Listing Rules for the purpose of illustrating the effects of the Acquisition as if the Acquisition had been completed at the commencement of the period being reported on (i.e. 1 April 2010).

The Unaudited Pro Forma Consolidated Statement of Cash Flows is based on (i) the audited consolidated statement of cash flows of the Group for the year ended 31 March 2011 (as extracted from Timeless Software Limited’s annual report for the year ended 31 March 2011); (ii) the audited consolidated statement of cash flows of the Target Group for the year ended 31 December 2011 (as

— III-10 —

APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

extracted from the financial information of the Target Group as shown in Appendix II-A; and (iii) the audited statement of cash flows of Xinjiang Tianmu for the year ended 31 December 2011 (as extracted from the financial information of Xinjiang Tianmu as shown in Appendix II-B, after making pro forma adjustments relating to the Acquisition that are (i) directly attributable to the transaction concerned and not relating to future events or decisions; and (ii) factually supportable.

The Unaudited Pro Forma Consolidated Statement of Cash Flows should be read in conjunction with the historical financial information of the Group and other financial information included elsewhere in this circular. The Unaudited Pro Forma Consolidated Statement of Cash Flows does not take account of any trading or other transactions subsequent to the date of the financial statements included in the Unaudited Pro Forma Consolidated Statement of Cash Flows.

The Unaudited Pro Forma Consolidated Statement of Cash Flows has been prepared by the Directors for illustrative purposes only and because of its hypothetical nature, it may not give a true picture of the cash flows of the Group for the year ended 31 March 2011 or any future period.

		The Target	Xinjiang							Pro forma
		Group for	Tianmu for							Enlarged
	The Group	the year	the year							Group for
	for the year	ended 31	ended 31							the year
	ended 31	December	December	Pro forma	Pro forma	Pro forma	Pro forma	Pro forma	Pro forma	ended 31
	March 2011	2011	2011	adjustment	adjustment	adjustment	adjustment	adjustment	adjustment	March 2011
	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000
	Note 15	Note 16	Note 17Notes 13, 18		Note 14	Note 19	Note 20	Note 21	Note 22
Operating activities
(Loss)/profit for the year	(11,538)	158,674	53,735	(2,724)	(20,428)	(6,600)	(159,384)			11,735
Adjustments for:
Payment for acquisition
related-costs	—	—	—			6,600				6,600
Income tax expense recognised in
profit or loss	—	19,459	19,336		(6,809)		(19,298)			12,688
Interest income	(268)	(129)	(269)				129			(537)
Interest expense	53	—	—	2,724						2,777
Share of (profits)/loss of an
associate	(1,330)	826	—				(826)			(1,330)
Depreciation and amortisation	849	12,905	5,230		27,237		(12,905)			33,316
Fair value changes on investment
properties	(3,788)	—	—							(3,788)
Loss on disposal of property,
plant and equipment	—	814	806				(814)			806
Waiver of amount due to a related
company	—	(430)	(426)				430			(426)
Net losses on equity-linked notes	451	—	—							451
Net gains on investments held for
trading	(1,710)	—	—							(1,710)
Share-based payment expense	92	—	—							92
Gain in a bargain purchase	—	(113,150)	—				113,150			—

— III-11 —

APPENDIX III

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

		The Target	Xinjiang							Pro forma
		Group for	Tianmu for							Enlarged
	The Group	the year	the year							Group for
	for the year	ended 31	ended 31							the year
	ended 31	December	December	Pro forma	Pro forma	Pro forma	Pro forma	Pro forma	Pro forma	ended 31
	March 2011	2011	2011	adjustment	adjustment	adjustment	adjustment	adjustment	adjustment	March 2011
	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000
	Note 15	Note 16	Note 17Notes 13, 18		Note 14	Note 19	Note 20	Note 21	Note 22
Operating cash flows before
movements in working capital	(17,189)	78,969	78,412							60,674
(Increase)/decrease in inventories	(1,707)	5,884	(20,241)				(5,884)			(21,948)
Increase in trade and other
receivables	(2,215)	(8,520)	(15,426)				8,420			(17,741)
Decrease in investments held for
trading	3,591	—	—							3,591
Decrease in amounts due from
related companies	—	15,064	7,254				(15,064)			7,254
(Decrease)/increase in trade and
other payables	(362)	8,331	16,317				(9,127)	414		15,573
Increase in amounts due to equity
holders of Xinjiang Tianmu	—	—	(196)				196			—
Decrease in amounts due to
holding company	—	(843)	—							(843)
Cash (used in)/generated from
operations	(17,882)	98,885	66,120							46,560
Income tax paid	—	(7,055)	(11,226)				7,055			(11,226)
Net cash (used in)/generated by
operating activities	(17,882)	91,830	54,894							35,334
Investing activities
Interest received	268	129	269				(129)			537
Dividend received	154	—	—							154
Dividend received from an
associate	—	3,609	—					(3,609)		—
Payment for acquisition related
costs	—	—	—			(6,600)				(6,600)
Acquisition of the Target Group,
net of cash and cash
equivalents acquired	—	—	—						57,774	57,774
Net cash inflow on acquisition of
Xinjiang Tianmu	—	1,805	—				(1,805)			—
Purchase of property, plant and
equipment	(738)	(11,262)	(14,787)				11,262			(15,525)

— III-12 —

APPENDIX III

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

		The Target	Xinjiang								Pro forma
		Group for	Tianmu for								Enlarged
	The Group	the year	the year								Group for
	for the year	ended 31	ended 31								the year
	ended 31	December	December	Pro forma	Pro forma	Pro forma	Pro forma	Pro forma	Pro forma		ended 31
	March 2011	2011	2011	adjustment	adjustment	adjustment	adjustment	adjustment	adjustment	March 2011
	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000		HK$’000
	Note 15	Note 16	Note 17Notes 13, 18		Note 14	Note 19	Note 20	Note 21	Note 22
Proceed on partial disposal of
equity interest in a jointly
entity	12,706	—	—								12,706
Additions of mining rights	—	(5,595)	(8,071)				5,595				(8,071)
Additions of exploration and
evaluation assets	—	(8,748)	(13,465)				8,748				(13,465)
Net cash generated by/(used in)
investing activities	12,390	(20,062)	(36,054)								27,510
Financing activities
Proceeds from issue of equity
shares	106	—	—								106
Payment for transaction costs
attributable to issue of new
ordinary shares	(8)	—	—								(8)
Repayment of bank loans	(1,010)	—	—								(1,010)
Interest paid	(53)	—	—	(1,823)							(1,876)
Repayment of promissory note	—	—	—	(13,000)							(13,000)
Repayment of obligations under a
finance lease	(42)	—	—								(42)
Dividends paid to owners of
Xinjiang Tianmu	—	—	(8,055)					3,195			(4,860)
Dividends paid to owner of the
Target Company	—	(2,431)	—								(2,431)
Net cash used in financing
activities	(1,007)	(2,431)	(8,055)								(23,121)
Net (decrease)/increase in cash
and cash equivalents	(6,499)	69,337	10,785								39,723
Cash and cash equivalents at
the beginning of the
financial year	74,322	818	56,956						(57,774)		74,322
Effect of foreign exchange rate
changes	813	559	2,510								3,882
Cash and cash equivalents at
the end of the financial year	68,636	70,714	70,251								117,927

— III-13 —

APPENDIX III

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

Notes to the Unaudited Pro Forma Consolidated Statement of Cash Flows:

1. The balances have been extracted from the audited consolidated statement of cash flows of the Group for the year ended 31 March 2011 as disclosed in the published annual report of the Company for the year ended 31 March 2011.

2. The adjustments represent the inclusion of items of cash flows of the Target Group, as if the Acquisition had taken place at the commencement of the period being reported on (i.e. 1 April 2010). The balances have been extracted from the audited consolidated statement of cash flows of the Target Group for the year ended 31 December 2011 as disclosed in Appendix II-A to this circular.

3. The adjustments represent the inclusion of items of cash flows of Xinjiang Tianmu, as if the Acquisition had taken place at the commencement of the period being reported on (i.e. 1 April 2010). The balances have been extracted from the audited statement of cash flows of Xinjiang Tianmu for the year ended 31 December 2011 as disclosed in Appendix II-B to this circular.

4. The adjustments of cash outflow of HK$14,823,000 represent the actual interest expense paid of approximately HK$1,823,000 and the repayment of the principal instalments of HK$13,000,000 to the holder of the Promissory Note in accordance with the repayment schedule of the Promissory Note, as if the Acquisition had taken place at the commencement of the period being reported on (i.e. 1 April 2010). The interest payment is based on interest rate of 3% per annum on the principal amount of HK$63,000,000 of the Promissory Note. These adjustments are expected to have a continuing effect on the Enlarged Group.

5. The adjustments represent a reclassification of payment for estimated acquisition-related costs of approximately HK$6,600,000 in cash under investing activities. This adjustment is not expected to have a continuing effect on the Enlarged Group.

6. The Target Group held 46% equity interest in Xinjiang Tianmu and accounted for the results of Xinjiang Tianmu for the period from 1 January 2011 to 14 July 2011 using the equity method of accounting in the consolidated financial statements of the Target Group for the year ended 31 December 2011. In July 2011, the Target Company acquired an additional 5% equity interest in Xinjiang Tianmu through its indirect wholly-owned subsidiary, namely Kangshun HK. Since then, Xinjiang Tianmu has become an indirect 51% owned subsidiary of the Target Company and the results of Xinjiang Tianmu for the financial period thereafter was consolidated into the consolidated financial statements of the Target Group for the year ended 31 December 2011. The adjustments represent the reversal of (i) the share of loss and the share of other comprehensive income of an associate, which were attributable to the 46% equity interest in Xinjiang Tianmu held by the Target Group and (ii) the results of Xinjiang Tianmu being consolidated into the consolidated financial statements of the Target Group during the year ended 31 December 2011, as if the Acquisition had been completed at the commencement of the period being reported on. The adjustments have continuing effect on the Unaudited Pro Forma Consolidated Statement of Cash Flows.

7. The adjustment represents the elimination of the intra-group transaction of dividend payment and associated withholding taxes between the Target Group and Xinjiang Tianmu. The amount of approximately HK$3,609,000 is eliminated, as if the Acquisition had been completed at the date reported on.

8. The adjustments represent a reclassification of the opening balances of cash and cash equivalents of the Target Group and Xinjiang Tianmu under investing activities, as if the Acquisition had taken place at the commencement of the period being reported on (i.e. 1 April 2010).

The Unaudited Pro Forma Consolidated Statement of Cash Flows does not take account of any trading or other transactions subsequent to the date of the financial statements included in the Unaudited Pro Forma Consolidated Statement of Cash Flows.

— III-14 —

APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

Pursuant to the Supplemental Agreement, the aggregate amount of the dividends declared by the Target Company to the Vendor and by Xinjiang Tianmu to the minority shareholder of Xinjiang Tianmu shall not exceed RMB60.5 million after the date of the Agreement. The RMB60.5 million represents the aggregate amount of the dividends declared or to be declared and paid by the Target Company to the Vendor and by Xinjiang Tianmu to the minority shareholder of Xinjiang Tianmu for the years ended 31 December 2010 and 31 December 2011.

Dividend of approximately RMB24.6 million (equivalent to approximately HK$29.6 million) in respect of the year ended 31 December 2010 had been declared by Xinjiang Tianmu to its equity shareholders. Such amount had been accounted for and was included in other payables as at 31 December 2011 in the Financial Information of Xinjiang Tianmu as disclosed in Appendix II-B to this circular. The Unaudited Pro Forma Consolidated Statement of Cash Flows had not taken into account of the proposed dividend in respect of the year ended 31 December 2011 which has yet to be declared up to the date of this circular.

— III-15 —

APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

B. REPORT ON UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

The following is the text of a report, prepared for the sole purpose of inclusion in this circular, received from the auditors, HLB Hodgson Impey Cheng, Chartered Accountants, Certified Public Accountants, Hong Kong.

==> picture [228 x 85] intentionally omitted <==

31/F, Gloucester Tower The Landmark 11 Pedder Street Central Hong Kong

12 April 2012

The Board of Directors Timeless Software Limited Units 111-113, 1st Floor, Building 9 Phase One, Hong Kong Science Park Tai Po, New Territories Hong Kong

Dear Sirs,

REPORT ON THE UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

Introduction

We report on the unaudited pro forma financial information of Timeless Software Limited (the “Company”) and its subsidiaries (collectively, the “Group”), Goffers Management Limited (the “Target Company”) and its subsidiaries (collectively, the “Target Group”) and 新疆天目礦業資源開發 有限公司 (transliterated as Xinjiang Tianmu Mineral Resources Development Co. Ltd.) (“Xinjiang Tianmu”) (hereinafter collectively referred to as the “Enlarged Group”), comprising the unaudited pro forma consolidated statement of financial position, the unaudited pro forma consolidated statement of comprehensive income and the unaudited pro forma consolidated statement of cash flows of the Enlarged Group (the “Unaudited Pro Forma Financial Information”), as set out in Section A entitled “Unaudited Pro Forma Financial Information of the Enlarged Group” in Appendix III of the Company’s circular dated 12 April 2012 (the “Circular”). The Unaudited Pro Forma Financial Information has been prepared by the directors of the Company for illustrative purposes only, to provide information about how the Acquisition (as defined in the Circular) might have affected the financial information presented. The basis of preparation of the Unaudited Pro Forma Financial Information is set out in Section A of Appendix III of the Circular.

— III-16 —

APPENDIX III

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

Respective responsibilities of the directors of the Company and the reporting accountants

It is the responsibility solely of the directors of the Company to prepare the Unaudited Pro Forma Financial Information in accordance with paragraph 7.31 of the Rules Governing the Listing of Securities on the Growth Enterprise Market of The Stock Exchange of Hong Kong Limited (the “GEM Listing Rules”) and with reference to Accounting Guideline 7 “Preparation of Pro Forma Financial Information for Inclusion in Investment Circulars” issued by the Hong Kong Institute of Certified Public Accountants.

It is our responsibility to form an opinion, as required by paragraph 7.31(7) of the GEM Listing Rules, on the Unaudited Pro Forma Financial Information and to report our opinion to you. We do not accept any responsibility for any reports previously given by us on any financial information used in the compilation of the Unaudited Pro Forma Financial Information beyond that owed to those to whom those reports were addressed by us at the dates of their issue.

Basis of opinion

We conducted our engagement in accordance with Hong Kong Standard on Investment Circular Reporting Engagements (HKSIR) 300 “Accountants’ Reports on Pro Forma Financial Information in Investment Circulars” issued by the Hong Kong Institute of Certified Public Accountants. Our work consisted primarily of comparing the unadjusted financial information with source documents, considering the evidence supporting the adjustments and discussing the Unaudited Pro Forma Financial Information with the directors of the Company. This engagement did not involve independent examination of any of the underlying financial information.

We planned and performed our work so as to obtain the information and explanations we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the Unaudited Pro Forma Financial Information has been properly compiled by the directors of the Company on the basis stated, that such basis is consistent with the accounting policies of the Group and that the adjustments are appropriate for the purposes of the Unaudited Pro Forma Financial Information as disclosed pursuant to paragraph 7.31(1) of the GEM Listing Rules.

The Unaudited Pro Forma Financial Information has been prepared for illustrative purposes only, based on the judgements and assumptions of the directors of the Company, and, because of its hypothetical nature, does not provide any assurance or indication that any event will take place in the future and may not be indicative of:

• the financial position of the Enlarged Group as at 30 September 2011 or any future date; or

• the results or cash flows of the Enlarged Group for the year ended 31 March 2011 or any future periods.

— III-17 —

APPENDIX III

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

Opinion

In our opinion:

• a. the Unaudited Pro Forma Financial Information has been properly compiled by the directors of the Company on the basis stated;

• b. such basis is consistent with the accounting policies of the Group; and

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

Yours faithfully,

HLB Hodgson Impey Cheng

Chartered Accountants Certified Public Accountants Hong Kong

— III-18 —

APPENDIX IV

FINANCIAL INFORMATION OF THE GROUP AND MANAGEMENT DISCUSSION AND ANALYSIS

FINANCIAL INFORMATION OF THE GROUP

A. THREE-YEAR FINANCIAL INFORMATION

The financial information of the Group for (i) the six months ended 30 September 2011 is disclosed in the interim report of the Company for the six months ended 30 September 2011 published on 14 November 2011, from pages 1 to 10; (ii) the year ended 31 March 2011 is disclosed in the annual report of the Company for the year ended 31 March 2011 published on 30 June 2011, from pages 24 to 89; (iii) for the year ended 31 March 2010 is disclosed in the annual report of the Company for the year ended 31 March 2010 published on 29 June 2010, from pages 23 to 77; and (iv) the year ended 31 March 2009 is disclosed in the annual report of the Company for the year ended 31 March 2009 published on 29 June 2009, from pages 23 to 73. All of such interim and annual reports have been published on the website of the Stock Exchange (www.hkexnews.hk).

B. INDEBTEDNESS STATEMENT

At the close of business on 29 February 2012, being the latest practicable date for the purpose of this indebtedness statement prior to the printing of this circular, the Enlarged Group had outstanding indebtedness of approximately HK$7,574,000, comprising an unsecured non-interest bearing loan due to a former non-controlling interest of a subsidiary and an amount due to the Vendor with an aggregate amount of approximately HK$7,551,000 and obligations under finance lease of approximately HK$23,000.

At 29 February 2012, the Group had pledged bank deposits with carrying amounts of approximately HK$110,000 to secure the general credit facilities granted to the Group.

At 29 February 2012, the Group had contingent liabilities relating to an outstanding legal case, details of which are set out under the section headed “Material litigation” in Appendix VIII to this circular.

Save as disclosed above and apart from intra-group liabilities and normal trade payables, as at the close of business on 29 February 2012, the Enlarged Group did not have any outstanding loan capital issued or agreed to be issued, bank overdrafts, loans, debt securities or other similar indebtedness, liabilities under acceptance or acceptance credits, debentures, mortgages, charges, finance leases or hire purchase commitments, guarantees or other material contingent liabilities.

The Directors confirm that save for the legal case as set out in the section headed “Material litigation” in Appendix VIII to this circular, there has been no material change in the indebtedness or contingent liabilities of the Enlarged Group since 29 February 2012 and up to the Latest Practicable Date.

— IV-1 —

APPENDIX IV

FINANCIAL INFORMATION OF THE GROUP AND MANAGEMENT DISCUSSION AND ANALYSIS

C. MATERIAL ADVERSE CHANGE

Save for a loss of approximately HK$7.6 million recorded for the nine months ended 31 December 2011 as disclosed in the quarterly report of the Company for the period ended 31 December 2011, as at the Latest Practicable Date, the Directors confirm that there had been no material adverse change in the financial or trading position or prospects of the Group since 31 March 2011, the date to which the latest published audited financial statements of the Group were made up.

D. WORKING CAPITAL STATEMENT

The Directors are of the opinion that the Enlarged Group has available sufficient working capital for 125% of the Enlarged Group’s present requirements for at least 12 months from the date of this circular.

E. RECONCILIATION OF ACCOUNTANTS’ REPORT

Set out below are the reconciliations of the turnover, profit before tax and profit after tax of Xinjiang Tianmu included in the PRC audited financial information of Xinjiang Tianmu as stated in the announcement of the Company dated 7 September 2011 (the “ Announcement ”) (which has been prepared under accounting principles generally accepted in the PRC (“ PRC GAAP ”)) with the accountants’ report on Xinjiang Tianmu set out in Appendix II-B to this circular on the historical financial information of Xinjiang Tianmu (which has been prepared in accordance with Hong Kong Financial Reporting Standards (“ HKFRSs ”) issued by the Hong Kong Institute of Certified Public Accountants) in respect of the years ended 31 December 2009 and 2010.

Reconciliations of the turnover, profit before tax and profit after tax in the Announcement with the accountants’ report on Xinjiang Tianmu are as follows:

	**Year **	ended
	31 December
	2009	2010
	RMB’000	RMB’000
Turnover per Announcement	49,537	92,941
Nature of reconciling items:
Late adjustment for reclassification of nature of income (Note (i))	8,080	15,573
	57,617	108,514
Translate to Hong Kong Dollar at:	1.13308	1.1477
Turnover per accountants’ report on Xinjiang Tianmu (in HK$’000)	65,285	124,542

— IV-2 —

APPENDIX IV

FINANCIAL INFORMATION OF THE GROUP AND MANAGEMENT DISCUSSION AND ANALYSIS

	**Year **	ended
	31 December
	2009		2010
	RMB’000	RMB’000
Profit before tax per Announcement	16,515	53,826
Nature of reconciling items:
Late adjustment for understated interest income (Note (ii))	—		36
Late adjustment for provision for staff benefits (Note (iv))	(174)		(277)
Late adjustment for provision for amortisation of land restoration
costs (Note (v))	(85)		(255)
	16,256	53,330
Translate to Hong Kong Dollar at:	1.13308	1.1477
Profit before tax per accountants’ report on Xinjiang Tianmu (in
HK$’000)	18,419	61,208
	**Year **	ended
	31 December
	2009		2010
	RMB’000	RMB’000
Profit after tax per Announcement	14,045	45,752
Nature of reconciling items:
Late adjustment for understated interest income (Note (ii))	—		36
GAAP adjustment for expenses related to prior years (Note (iii))	(146)		(162)
Late adjustment for provision for staff benefits (Note (iv))	(174)		(277)
Late adjustment for provision for amortisation of land restoration
costs (Note (v))	(85)		(255)
	13,640	45,094
Translate to Hong Kong Dollar at:	1.13308	1.1477
Profit for the year per accountants’ report on Xinjiang Tianmu (in
HK$’000)	15,454	51,755

— IV-3 —

APPENDIX IV

FINANCIAL INFORMATION OF THE GROUP AND MANAGEMENT DISCUSSION AND ANALYSIS

Notes:

• (i) The adjustment represents the reclassification of value-added tax from other income, which is being exempted in accordance with Circular Relating to Tax Policies on Gold issued by the Ministry of Finance and the State Administration of Taxation of the PRC in 2002.

• (ii) The adjustment represents the accrued interest income understated for the year.

• (iii) The adjustment represents reconciliation of retained earnings due to GAAP differences in the PRC GAAP and HKFRSs for expenses attributable to prior years’ profit and loss.

• (iv) The adjustment represents the appropriation for staff welfare reserve recognised in profit or loss during the year.

• (v) The adjustment represents the amortisation of land restoration costs arising from the provision for the restoration costs for land reclamation and mine closures for Xinjiang Tianmu’s existing mines.

— IV-4 —

APPENDIX IV

FINANCIAL INFORMATION OF THE GROUP AND MANAGEMENT DISCUSSION AND ANALYSIS

MANAGEMENT DISCUSSION AND ANALYSIS

A. THE GROUP

Set out below is the management discussion and analysis of the Group as extracted, in substance, from the interim reports of the Company for the six months ended 30 September 2011 and the annual reports of the Company for each of the three years ended 31 March 2011 (“ Review of Operations ”). Terms used below shall have the same meanings as defined in the Review of Operations. All pages/sections/appendices mentioned below are those referred to in the Review of Operations.

For the six months ended 30 September 2011

“RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2011

The directors continued to take a conservative approach for accounting purposes and a stringent view on recognizing revenue was still being adopted especially for contracts of relatively longer term in nature in Mainland China.

For the six months ended 30 September 2011, the Group recorded unaudited turnover of approximately HK$11,810,000, representing an increase of 56.1% as compared to approximately HK$7,568,000 in the corresponding period in 2010. The loss attributable to owners of the Company for the six months ended 30 September 2011 was approximately HK$3,924,000, as compared to the loss of approximately HK$7,987,000 for the period ended 30 September 2010.

For the six months ended 30 September 2011, the other income mainly comprised interest income of approximately HK$80,000 (six months ended 30 September 2010: HK$132,000), rental income from investment properties of approximately HK$317,000 (six months ended 30 September 2010: HK$336,000) and gain on disposal of a commercial property situated in Guangzhou held by a PRC subsidiary of approximately HK$104,000 (nil for six months ended 30 September 2010).

LIQUIDITY AND FINANCIAL RESOURCES

The Group financed its operations and investing activities primarily with internally generated cash flow.

As at 30 September 2011, the Group had bank balances and cash of approximately HK$57,480,000 (31 March 2011: HK$68,636,000).

As at 30 September 2011, the Group had outstanding borrowing of approximately HK$47,000 (31 March 2011: HK$69,000), which was an obligations under a finance lease and will be fully repaid on 30 September 2012.

GEARING RATIO

As at 30 September 2011, the Group’s gearing ratio was approximately 0.05% (31 March 2011: 0.07%), based on total borrowings of approximately HK$47,000 (31 March 2011: HK$69,000) and equity attributable to owners of the Company of approximately HK$92,616,000 (31 March 2011: HK$93,656,000).

— IV-5 —

APPENDIX IV

FINANCIAL INFORMATION OF THE GROUP AND MANAGEMENT DISCUSSION AND ANALYSIS

CHARGE ON THE GROUP’S ASSETS

As at 30 September 2011, the Group has pledged bank deposits with carrying amounts of approximately HK$55,000 to secure the general credit facilities granted to a subsidiary.

CAPITAL STRUCTURE

As at 30 September 2011, the Company’s total number of issued shares was 1,137,361,503 (31 March 2011: 1,134,561,503). During the period, certain employees of the Group exercised share options granted to them under the 2003 share option scheme and 2,800,000 shares of the Company were issued and allotted thereof.

SEGMENTAL INFORMATION

The Group is currently organised into three operating divisions — software development, hardware sales and software sales. Turnover generated from software development, hardware sales and software sales accounted for 36.5% (six months ended 30 September 2010: 23.0%), 27.3% (six months ended 30 September 2010: 1.7%) and 36.2% (six months ended 30 September 2010: 75.3%) respectively during the period under review.

ORDER BOOK AND PROSPECTS FOR NEW BUSINESS

The amount of orders on hand of the Group was over HK$7,290,000 as at 30 September 2011.

MATERIAL ACQUISITIONS AND DISPOSAL OF SUBSIDIARIES AND AFFILIATED COMPANIES

On 27 May 2010, the Company entered into a sale and purchase agreement with an independent third party to sell approximately 12% equity interest in ZSSP (“ Sales Transaction ”) at a consideration of RMB10,800,000 (equivalent to approximately HK$12,706,000). The Sales Transaction was completed in August 2011. The Company retain a 3.31% equity interest of ZSSP.

Save as disclosed above, there was no material disposal or acquisition of subsidiaries and affiliated companies for the period under review.

FUTURE PLANS FOR MATERIAL INVESTMENTS

As announced in the announcement of the Company dated 7 September 2011, Time Kingdom Limited (the “ Purchaser ”), a wholly-owned subsidiary of the Company, entered into an agreement on the same date with Starmax Holdings Limited (the “ Vendor ”) and Mr. Felipe Tan (as the Guarantor), the major shareholder of the Vendor, pursuant to which the Vendor has conditionally agreed to sell and the Purchaser has conditionally agreed to purchase 102 shares (the “ Sale Shares ”) representing 51% of the issued share capital of Goffers Management Limited (the “ Target Company ”) for HK$103,500,000 (subject to adjustment) (the “ Consideration ”). The Consideration shall be satisfied

— IV-6 —

APPENDIX IV FINANCIAL INFORMATION OF THE GROUP AND MANAGEMENT DISCUSSION AND ANALYSIS

at completion: (i) as to HK$43,500,000 by the Purchaser procuring the Company to allot and issue 290,000,000 shares to the Vendor credited as fully paid at the issue price of HK$0.15 per share to the Vendor; and (ii) as to HK$60,000,000 by the Purchaser issuing the promissory note in the principal amount of HK$60,000,000 to the Vendor.

The Target Company and its subsidiaries are principally engaged in the exploration and exploitation of 12 gold, iron and nickel-copper mines in Xinjiang, PRC and the processing and sale of the outputs from the mines. Xinjiang Tianmu, a 51% owned subsidiary of the Target Company, holds exploration licences for five gold mines and one nickel-copper mine, and exploitation licences for another five gold mines and one iron mine in Xinjiang, PRC. Among the five gold mines and one iron mine for which Xinjiang Tianmu has exploitation licences, two gold mines and one iron mine are operating and generating revenue whereas the remaining three gold mines are at the stage of pre-production exploration meaning that they are not in production and are yet to generate revenue.

Upon completion of the sale and purchase of the Sale Shares, the Target Company together with its subsidiaries will be consolidated into the Group in respect of their financial statements. The acquisition constitutes a very substantial acquisition for the Company under Chapter 19 of the GEM Listing Rules. An extraordinary general meeting of the Company will be convened and held to seek approval from the shareholders for the agreement and the transactions contemplated thereunder.

EXPOSURE TO EXCHANGE RISKS

Since the Group’s borrowings and its source of income are primarily denominated in Hong Kong dollars or Renminbi and the exchange rate of Renminbi to Hong Kong dollars has been relatively stable throughout the period under review, the exposure to foreign exchange rate fluctuations is minimal.

CONTINGENT LIABILITIES

Material litigation

As announced in the announcement of the Company dated 23 September 2011, 天時北方軟件(北 京)有限公司 (“ Timeless Beijing ”) an indirect wholly-owned subsidiary of the Company, was served with a writ of civil proceedings on 13 September 2011 in respect of the civil proceedings commenced by 寧夏育信息技股份有限公司 (“ Ningxia Educational ”), an associated company of the Company in which the Company holds an equity interest of 25%, as plaintiff against Timeless Beijing as defendant for the claim of compensation for non-completion of the information engineering project by Timeless Beijing pursuant to the agreement between Ningxia Educational and Timeless Beijing made in 2001.

The following orders were sought to be granted by the Ningxia Higher People’s Court against Timeless Beijing: (i) Timeless Beijing to return and pay to Ningxia Educational the project fee in the sum of RMB11,834,793.85 prepaid by Ningxia Educational, the interest in the sum of RMB6,265,915.16 and the interest accrued up to the date of full payment by Timeless Beijing; (ii) legal counsel fees incurred by Ningxia Educational in the sum of RMB250,000 to be borne by Timeless Beijing; and (iii) the costs of the proceedings and other costs to be borne by Timeless Beijing.

— IV-7 —

FINANCIAL INFORMATION OF THE GROUP AND MANAGEMENT DISCUSSION AND ANALYSIS

APPENDIX IV

The first hearing was held on 19 October 2011 by the Ningxia Higher People’s Court but no order was granted. Ningxia Educational and Timeless Beijing were requested by the Ningxia Higher People’s Court to submit further evidence before the next hearing could be scheduled. As advised by the PRC legal advisers, the claim of Ningxia Educational is unlikely to be tenable. The directors of the Company considered that in view of the advice from the PRC legal advisers, the above litigation was unlikely to have any material impact on the operation and financial position of the Group.

EMPLOYEE INFORMATION

As at 30 September 2011, the Group employed a total staff of 108. Staff remuneration is reviewed by the Group from time to time and increases are granted normally annually or by special adjustment depending on length of service and performance when warranted. In addition to salaries, the Group provides staff benefits including medical insurance and provident fund. Share options and bonuses are also available to employees of the Group at the discretion of the directors and depending upon the financial performance of the Group.”

With regard to the six months ended 30 September 2011, the Directors further confirm that (i) as at 30 September 2011, the Group did not hold any significant investments; and (ii) the Group did not have any new line of business.

For the year ended 31 March 2011

“RESULTS FOR THE YEAR ENDED 31 MARCH 2011

The directors continued to take a conservative approach for accounting purposes and a stringent view on recognising revenue was still being adopted especially for contracts of relatively longer term in nature in Mainland China.

For the year ended 31 March 2011, the Group recorded audited turnover of approximately HK$25,091,000, representing an increase of 50% as compared to approximately HK$16,710,000 in last year. The loss attributable to owners of the Company was approximately HK$11,520,000, as compared to the loss of approximately HK$2,864,000 for the year ended 31 March 2010.

For the year ended 31 March 2011, the other income mainly comprised interest income of approximately HK$268,000 (2010: HK$672,000) and rental income from investment properties of approximately HK$565,000 (2010: HK$489,000).

LIQUIDITY AND FINANCIAL RESOURCES

The Group financed its operations and investing activities primarily with internally generated cash flow.

As at 31 March 2011, the Group had bank balances and cash of approximately HK$68,636,000 (2010: HK$74,322,000).

— IV-8 —

APPENDIX IV FINANCIAL INFORMATION OF THE GROUP AND MANAGEMENT DISCUSSION AND ANALYSIS

As at 31 March 2011, the Group had outstanding borrowing of approximately HK$69,000 (2010: HK$111,000), which was an obligations under a finance lease and will be fully repaid on 30 September 2012. The Group had no bank loan outstanding as at 31 March 2011 (2010: HK$975,000).

GEARING RATIO

As at 31 March 2011, the Group’s gearing ratio was approximately 0.07% (2010: 1.02%), based on total borrowings of approximately HK$69,000 (2010: HK$1,086,000) and equity attributable to owners of the Company of approximately HK$93,656,000 (2010: HK$106,502,000).

CHARGE ON THE GROUP’S ASSETS

As at 31 March 2011, a commercial property with a carrying value of approximately HK$2,038,000 situated in Guangzhou held by a PRC subsidiary was pledged (“ Pledged Asset ”) to a bank to secure the loan of approximately HK$975,000. During the year under review, the Pledged Asset had been released upon repayment of the secured bank loan by the subsidiary.

CAPITAL STRUCTURE

As at 31 March 2011, the Company’s total number of issued shares was 1,134,561,503 (2010:1,133,261,503). During the year, certain employees of the Group exercised share options granted to them under the 2003 share option scheme and 1,300,000 shares of the Company were issued and alloted thereof.

SEGMENTAL INFORMATION

The Group is currently organised into three operating divisions — software development, hardware sales and software sales. Turnover generated from software development, hardware sales and software sales accounted for 39.8% (2010: 86.6%), 15.1% (2010: 4.1%) and 45.1% (2010: 9.3%) respectively during the year under review.

ORDER BOOK AND PROSPECTS FOR NEW BUSINESS

The amount of orders on hand of the Group was over HK$14,202,000 as at 31 March 2011.

MATERIAL ACQUISITIONS AND DISPOSAL OF SUBSIDIARIES AND AFFILIATED COMPANIES

On 27 May 2010, the Company entered into a sale and purchase agreement with an independent third party to sell approximately 12% equity interest in Zhuhai Southern Software Park Development Company Limited (“ ZSSP ”) (“ Sale Interest ”) at a consideration of RMB10,800,000 (equivalent to approximately HK$12,706,000). Upon completion of the Sale Interest, the Company will retain a 3.31% equity interest of ZSSP. At the date of this report, the aforesaid transaction was not yet completed.

— IV-9 —

APPENDIX IV FINANCIAL INFORMATION OF THE GROUP AND MANAGEMENT DISCUSSION AND ANALYSIS

Save as disclosed above, there was no material disposal or acquisition of subsidiaries and affiliated companies for the year under review.

FUTURE PLANS FOR MATERIAL INVESTMENTS

The Group does not have any plan for material investments in the near future.

EXPOSURE TO EXCHANGE RISKS

Since the Group’s borrowings and its source of income are primarily denominated in Hong Kong dollars or Renminbi and the exchange rate of Renminbi to Hong Kong dollars has been relatively stable throughout the year under review, the exposure to foreign exchange rate fluctuations is minimal.

CONTINGENT LIABILITIES

As at 31 March 2011, there were no material contingent liabilities incurred by the Group.

EMPLOYEE INFORMATION

As at 31 March 2011, the Group employed a total staff of 51. Staff remuneration is reviewed by the Group from time to time and increases are granted normally annually or by special adjustment depending on length of service and performance when warranted. In addition to salaries, the Group provides staff benefits including medical insurance and provident fund. Share options and bonuses are also available to employees of the Group at the discretion of the directors and depending upon the financial performance of the Group.”

With regard to the year ended 31 March 2011, the Directors further confirm that (i) as at 31 March 2011, the Group did not hold any significant investments; and (ii) the Group did not have any new line of business.

For the year ended 31 March 2010

“RESULTS FOR THE YEAR ENDED 31 MARCH 2010

The directors continued to take a conservative approach for accounting purposes and a stringent view on recognising revenue was still being adopted especially for contracts of relatively longer term in nature in Mainland China.

For the year ended 31 March 2010, the loss attributable to owners of the Company was approximately HK$2,864,000, representing a decrease of 88.1% as compared to the loss of approximately HK$23,998,000 for the year ended 31 March 2009. The substantial decrease in net loss was mainly due to the following items:

1. The audited turnover of approximately HK$16,710,000 was significantly increased by 84.8% as compared to approximately HK$9,042,000 in last year; and

— IV-10 —

APPENDIX IV FINANCIAL INFORMATION OF THE GROUP AND MANAGEMENT DISCUSSION AND ANALYSIS

1. Gain on partial disposal of equity interest in a jointly controlled entity of approximately HK$3,846,000 was recorded for the year under review; and

2. Net gains on equity-linked notes of approximately HK$3,630,000 was recorded for the year under review while net losses on equity-linked notes of approximately HK$5,347,000 was recorded in last year; and

3. An impairment loss recognised on investments in a jointly controlled entity of approximately HK$1,379,000 was recorded in last year.

For the year ended 31 March 2010, the other income mainly comprised interest income of approximately HK$672,000 (2009: HK$1,468,000) and amortisation of financial guarantee obligations of approximately HK$460,000 (2009: HK$2,001,000) and rental income from investment properties of approximately HK$489,000 (2009: HK$677,000).

LIQUIDITY AND FINANCIAL RESOURCES

The Group financed its operations and investing activities primarily with internally generated cash flow.

As at 31 March 2010, the Group had bank balances and cash (excluding pledged bank deposits) of approximately HK$74,322,000 (2009: HK$72,208,000).

As at 31 March 2010, the Group had total outstanding borrowings of approximately HK$1,086,000 (2009: HK$1,294,000). The borrowings comprised a bank loan of approximately HK$975,000 (2009: HK$1,144,000), which is repayable by monthly installment and will be fully repaid on 15 March 2015, obligations under a finance lease of approximately HK$111,000 (2009: HK$150,000), which will be fully repaid on 30 September 2012.

GEARING RATIO

As at 31 March 2010, the Group’s gearing ratio was approximately 1.02% (2009: 1.23%), based on total borrowings of approximately HK$1,086,000 (2009: HK$1,294,000) and equity attributable to owners of the Company of approximately HK$106,502,000 (2009: HK$105,499,000).

CHARGE ON THE GROUP’S ASSETS

As at 31 March 2010, a commercial property with a carrying value of approximately HK$2,038,000 (2009: HK$2,202,000) situated in Guangzhou held by a PRC subsidiary was pledged to a bank to secure the loan of approximately HK$975,000 (2009: HK$1,144,000).

As at 31 March 2009, bank deposits totalling of approximately HK$11,407,000 were pledged to banks to secure the banking facilities granted to the Company’s subsidiaries and a jointly controlled entity. During the year under review, the pledged bank deposits had been released upon cancellation of the banking facilities by the subsidiaries and repayment of the secured bank loan by the jointly controlled entity.

— IV-11 —

FINANCIAL INFORMATION OF THE GROUP AND MANAGEMENT DISCUSSION AND ANALYSIS

APPENDIX IV

CAPITAL STRUCTURE

As at 31 March 2010, the Company’s total number of issued shares was 1,133,261,503 (2009:1,133,261,503).

SEGMENTAL INFORMATION

The Group is currently organised into three operating divisions — software development, hardware sales and software sales. Turnover generated from software development, hardware sales and software sales accounted for 86.6% (2009: 26%), 4.1% (2009: 74%) and 9.3% (2009: nil) respectively during the year under review.

ORDER BOOK AND PROSPECTS FOR NEW BUSINESS

The amount of orders on hand of the Group was over HK$2,669,000 as at 31 March 2010.

MATERIAL ACQUISITIONS AND DISPOSAL OF SUBSIDIARIES AND AFFILIATED COMPANIES

Save for the acquisition of the entire issued share capital of Encore Trading Limited, which had been completed in February 2010, there was no material disposal or acquisition of subsidiaries and affiliated companies for the year under review.

FUTURE PLANS FOR MATERIAL INVESTMENTS

The Group does not have any plan for material investments in the near future.

EXPOSURE TO EXCHANGE RISKS

Since the Group’s borrowings and its source of income are primarily denominated in Hong Kong dollars or Renminbi and the exchange rate of Renminbi to Hong Kong dollars has been relatively stable throughout the year under review, the exposure to foreign exchange rate fluctuations is minimal.

CONTINGENT LIABILITIES

Guarantee given

At 31 March 2009, the Group had given guarantee of RMB4,900,000 to a bank to secure the credit facilities granted to a jointly controlled entity of the Company. At 31 March 2009, the amount of facilities utilised was RMB4,900,000. On 6 August 2009, the guarantee period was expired and the loan of RMB4,900,000 had been repaid in full by the jointly controlled entity.

— IV-12 —

FINANCIAL INFORMATION OF THE GROUP AND MANAGEMENT DISCUSSION AND ANALYSIS

APPENDIX IV

As at 31 March 2009, the Company had given corporate guarantees of HK$5,000,000 to certain banks to secure the credit facilities granted to its subsidiaries. No subsidiaries had utilised the credit facilities during the year ended 2009. The corporate guarantees had been cancelled during the year under review.

SIGNIFICANT EVENT

(a) Litigation

During the year ended 31 March 2007, the Company initiated legal proceedings against a third party (the “ Landlord ”) in respect of an alleged breach of the tenancy agreement in failing to refund the deposit of HK$1,790,000 (the “ Case ”). Concurrently, the Landlord resisted the claim and counterclaimed against the Company on, including but not limited to, reinstatement work and rental losses. Hearing of the Case took place in the early half of 2009. The judgement, entered in favour of the Company, included the full amount claimed and costs of the action. At the date of report, an amount of HK$3,330,014.24, representing the full and final settlement of the deposit, interest accrued up to the date of payment and costs of the actions, has been received.

(b) Interest in a jointly controlled entity — Zhuhai Southern Software Park Development Company Limited (“ZSSP”)

On 27 May 2010, the Company entered into a sale and purchase agreement with an independent third party to sell approximately 12% equity interest of ZSSP (“ Sale Interest ”) at a consideration of RMB10,800,000 (equivalent to HK$12,000,000). Upon completion of the Sale Interest, the Company will retain a 3.31% equity interest of ZSSP.

EMPLOYEE INFORMATION

As at 31 March 2010, the Group employed a total staff of 42. Staff remuneration is reviewed by the Group from time to time and increases are granted normally annually or by special adjustment depending on length of service and performance when warranted. In addition to salaries, the Group provides staff benefits including medical insurance and provident fund. Share options and bonuses are also available to employees of the Group at the discretion of the directors and depending upon the financial performance of the Group.”

With regard to the year ended 31 March 2010, the Directors further confirm that (i) as at 31 March 2010, the Group did not hold any significant investments; and (ii) the Group did not have any new line of business.

— IV-13 —

APPENDIX IV

FINANCIAL INFORMATION OF THE GROUP AND MANAGEMENT DISCUSSION AND ANALYSIS

For the year ended 31 March 2009

“RESULTS FOR THE YEAR ENDED 31 MARCH 2009

The directors continued to take a conservative approach for accounting purposes and a stringent view on recognising revenue was still being adopted especially for contracts of relatively longer term in nature in Mainland China. For the year ended 31 March 2009, the loss attributable to equity holders of the Company was approximately HK$23,998,000 representing an increase of 35% as compared to the loss of approximately HK$17,801,000 for the year ended 31 March 2008. The Group recorded audited turnover of approximately HK$9,042,000, representing an increase of 210% as compared to approximately HK$2,920,000 in last year.

The other income mainly comprised bank interest income of approximately HK$1,468,000 (2008: HK$1,591,000) and amortisation of financial guarantee obligations of approximately HK$2,001,000 (2008: Nil).

During the year under review, the increase in net loss included for the most part the increase in impairment loss recognised on investments in a jointly controlled entity of approximately HK$1,379,000 from approximately HK$1,058,000 in last year, and in net losses on equity-linked notes of approximately HK$5,347,000 compared with net gains on equity-linked notes of approximately HK$643,000 in last year.

LIQUIDITY AND FINANCIAL RESOURCES

The Group financed its operations and investing activities primarily with internally generated cash flow.

As at 31 March 2009, the Group had bank balances and cash (excluding pledged bank deposits) of approximately HK$72,208,000 (2008: HK$89,412,000).

As at 31 March 2009, the Group had total outstanding borrowings of approximately HK$1,294,000 (2008: HK$1,578,000). The borrowings comprised a bank loan of approximately HK$1,144,000 (2008: HK$1,276,000), which is repayable by monthly installment and will be fully repaid on 15 March 2015, obligations under a finance lease of approximately HK$150,000 (2008: HK$186,000), which will be fully repaid on 30 September 2012.

GEARING RATIO

As at 31 March 2009, the Group’s gearing ratio was approximately 1.23% (2008: 1.23%), based on total borrowings of approximately HK$1,294,000 (2008: HK$1,578,000) and equity attributable to equity holders of the Company of approximately HK$105,499,000 (2008: HK$128,351,000).

— IV-14 —

APPENDIX IV

FINANCIAL INFORMATION OF THE GROUP AND MANAGEMENT DISCUSSION AND ANALYSIS

CHARGE ON THE GROUP’S ASSETS

As at 31 March 2009, a commercial property with a carrying value of approximately HK$2,202,000 (2008: HK$2,314,000) situated in Guangzhou held by a PRC subsidiary was pledged to a bank to secure the loan of approximately HK$1,144,000 (2008: HK$1,276,000).

Bank deposits totalling of approximately HK$11,407,000 (2008: HK$11,153,000) were pledged to banks to secure the banking facilities, in which, credit facilities of HK$5,000,000 (2008: HK$5,000,000) were available to the Company’s subsidiaries and loan facility of RMB4,900,000 (2008: RMB4,900,000) were available to a jointly controlled entity.

CAPITAL STRUCTURE

As at 31 March 2009, the Company’s total number of issued shares was 1,133,261,503 (2008: 1,133,261,503).

SEGMENTAL INFORMATION

The Group is currently organised into two operating divisions — software development and hardware sales. Turnover generated from software development and hardware sales accounted for 26% (2008: 100%) and 74% (2008: Nil) respectively during the year under review.

ORDER BOOK AND PROSPECTS FOR NEW BUSINESS

The amount of orders on hand of the Group was over HK$11,479,000 as at 31 March 2009.

MATERIAL ACQUISITIONS AND DISPOSAL OF SUBSIDIARIES AND AFFILIATED COMPANIES

There was no material disposal or acquisition of subsidiaries and affiliated companies for the year under review.

FUTURE PLANS FOR MATERIAL INVESTMENTS

The Group does not have any plan for material investments in the near future.

EXPOSURE TO EXCHANGE RISKS

Since the Group’s borrowings and its source of income are primarily denominated in Hong Kong dollars or Renminbi and the exchange rate of Renminbi to Hong Kong dollars has been relatively stable throughout the year under review, the exposure to foreign exchange rate fluctuations is minimal.

— IV-15 —

APPENDIX IV

FINANCIAL INFORMATION OF THE GROUP AND MANAGEMENT DISCUSSION AND ANALYSIS

CONTINGENT LIABILITIES

Guarantee given

As at 31 March 2009, the Group has given guarantee of RMB4,900,000 (2008: RMB4,900,000) to a bank to secure the credit facilities granted to a jointly controlled entity of the Company. At 31 March 2009, the amount of facilities utilised was RMB4,900,000 (2008: RMB4,900,000).

As at 31 March 2009, the Company has given corporate guarantees of HK$5,000,000 (2008: HK$5,000,000) to certain banks to secure the credit facilities granted to its subsidiaries. No subsidiaries has utilised the credit facilities as at 31 March 2009.

Pending litigation

During the year ended 31 March 2007, the Company initiated legal proceedings against a third party (the “ Landlord ”) in respect of an alleged breach of the tenancy agreement in failing to refund the deposit of HK$1,790,000. Concurrently, the Landlord resisted the claim and counterclaimed against the Company on, including but not limited to, reinstatement work and rental losses. The Company, having taken into consideration the underlying factors including advice obtained, did not see any grounds for withholding the deposit and, accordingly, the directors of the Company took the view that no contingency arises for which a provision is required to be made nor no allowance is required to be made to the deposit included in the financial statements as at 31 March 2009 and 2008.

EMPLOYEE INFORMATION

As at 31 March 2009, the Group employed a total staff of 49. Staff remuneration is reviewed by the Group from time to time and increases are granted normally annually or by special adjustment depending on length of service and performance when warranted. In addition to salaries, the Group provides staff benefits including medical insurance and provident fund. Share options and bonuses are also available to employees of the Group at the discretion of the directors and depending upon the financial performance of the Group.”

With regard to the year ended 31 March 2009, the Directors further confirm that (i) as at 31 March 2009, the Group did not hold any significant investments; and (ii) the Group did not have any new line of business.

— IV-16 —

APPENDIX IV

FINANCIAL INFORMATION OF THE GROUP AND MANAGEMENT DISCUSSION AND ANALYSIS

B. XINJIANG TIANMU

Set out below is a summary of the audited financial information relating to the financial performance of Xinjiang Tianmu extracted from the accountants’ report on Xinjiang Tianmu for the years ended 31 December 2009, 2010 and 2011:

	**Year **	ended 31 December	ended 31 December
	2009	2010	2011
	HK$’000	HK$’000	HK$’000
Turnover	65,285	124,542	149,902
Profit before tax	18,420	61,208	73,071
Income tax expense	(2,965)	(9,453)	(19,336)
Profit for the year	15,455	51,755	53,735
Exchange differences	115	3,110	3,770
Total comprehensive income for the year	15,570	54,865	57,505

Set out below is a summary of the audited financial information relating to the assets and liabilities of Xinjiang Tianmu extracted from the accountants’ report on Xinjiang Tianmu as at 31 December 2009, 2010 and 2011:

	As at 31 December	As at 31 December	As at 31 December
	2009	2010	2011
	HK$’000	HK$’000	HK$’000
Total assets	68,508	126,024	210,325
Total borrowings	6,501	6,747	6,997
Total liabilities	21,130	32,575	88,988
Net assets/Equity attributable to owners of Xinjiang
Tianmu	47,378	93,449	121,337
Gearing ratio	13.7%	7.2%	5.8%

The gearing ratio is calculated on the basis of total borrowings divided by equity attributable to owners of Xinjiang Tianmu.

— IV-17 —

APPENDIX IV FINANCIAL INFORMATION OF THE GROUP AND MANAGEMENT DISCUSSION AND ANALYSIS

Set out below is the management discussion and analysis on Xinjiang Tianmu for the years ended 31 December 2009, 2010 and 2011:

Revenue from customers contributing over 10% of the total revenue of Xinjiang Tianmu are mainly precious metals traders and a precious metal refining company which accounted for approximately 73.3%, 89.0% and 95.1% of the revenue of Xinjiang Tianmu for the three years ended 31 December 2009, 2010 and 2011 respectively.

For the year ended 31 December 2011

Turnover

For the year ended 31 December 2011, Xinjiang Tianmu recorded a turnover of approximately HK$149,902,000, representing an increase of approximately HK$25,360,000 or 20.4% as compared with the previous year. For the year ended 31 December 2011, the turnover attributed to sales of gold products and sales of iron ore was approximately HK$142,530,000 and HK$7,372,000, representing approximately 95.1% and 4.9% of the total turnover respectively.

The increase in total turnover was driven mainly by an increase in gold price and slightly by the trial production and sales of iron ore during year 2011. The average selling price of gold dores increased by approximately 22.5% from RMB276 per gram for 2010 to RMB338 per gram for 2011. Such gold dores are priced with reference to the applicable spot prices of gold in the Shanghai Gold Exchange.

Gross profit

Gross profit increased by approximately 35.1% from approximately HK$66,003,000 for the year ended 31 December 2010 to approximately HK$89,145,000 for the year ended 31 December 2011. The increase in gross profit was mainly attributable to the increase in average selling price of gold and the increase in gross profit margin.

The gross profit margin increased from approximately 53% for 2010 to 59% for 2011. It was mainly driven by the increase in average selling price of gold and the decrease in production cost. The total production cost decreased slightly from HK$52,627,000 for 2010 to HK$51,668,000 for the year ended 31 December 2011.

Profit for the year

Profit for the year was approximately HK$53,735,000, representing an increase of HK$1,980,000 or 3.8% as compared with the previous year. The increase in profit for the year was attributable to the increase in turnover and gross profit offset by an increase in income tax rate from 15% in 2010 to 25% in 2011.

— IV-18 —

APPENDIX IV

FINANCIAL INFORMATION OF THE GROUP AND MANAGEMENT DISCUSSION AND ANALYSIS

Financial position and liquidity

As at 31 December 2011, Xinjiang Tianmu’s audited net assets and net current assets were approximately HK$121,337,000 and HK$41,003,000 respectively. Xinjiang Tianmu had total cash and bank balances of approximately HK$70,251,000 as at 31 December 2011, and the corresponding current ratio was approximately 147.2% (calculated as a ratio of current assets to current liabilities). As at 31 December 2011, the total borrowings of Xinjiang Tianmu were approximately HK$6,997,000, which represent the loan due to Xinjiang Kangshun (as referred to in the letter from the Board in this circular). Such loan is unsecured, interest free and repayable on demand.

Gearing ratio

As at 31 December 2011, Xinjiang Tianmu’s gearing ratio was approximately 5.8%, based on total borrowings of approximately HK$6,997,000 divided by equity attributable to owners of Xinjiang Tianmu of approximately HK$121,337,000.

Segment information

For the year ended 31 December 2011, Xinjiang Tianmu is organized in one operating segment on exploration and exploitation of certain gold, iron and nickel-copper mines and the processing and sale of the gold dores and iron ores. Xinjiang Tianmu operated in one geographical area, Xinjiang, PRC and its revenue was solely generated from sales of gold dores and iron ores to customers in the PRC.

Capital commitments

As at 31 December 2011, Xinjiang Tianmu had no capital commitments.

Capital structure

Xinjiang Tianmu usually finances its working capital through funds generated from its operations and finance from its beneficial owners. Xinjiang Tianmu did not enter into any form of financial arrangement for hedging during the year ended 31 December 2011.

Exchange rate exposure

Xinjiang Tianmu is not exposed to significant foreign currency risk as majority of its transactions are denominated in Renminbi and there were only insignificant balances of financial assets and liabilities denominated in foreign currencies as at 31 December 2011. No hedging against foreign exchange risk has been carried out by Xinjiang Tianmu.

— IV-19 —

APPENDIX IV

FINANCIAL INFORMATION OF THE GROUP AND MANAGEMENT DISCUSSION AND ANALYSIS

Charge of assets

As at 31 December 2011, there was no pledge over the assets of Xinjiang Tianmu.

Employees and remuneration

Staff cost increased by approximately 46.0% from approximately HK$6,537,000 for the year ended 31 December 2010 to approximately HK$9,541,000 for the year ended 31 December 2011. The increase was driven by the increase in headcounts and the increase in average salary due to inflation and competitive demand for skilled and experienced staff in the mining sector. Xinjiang Tianmu had 121 staff as at 31 December 2011, compared to 105 staff as at 31 December 2010.

Significant investments and material acquisitions and disposal

Xinjiang Tianmu did not have any significant investments, material acquisitions and disposals for the year ended 31 December 2011. As at 31 December 2011, Xinjiang Tianmu did not have any future plans for significant investments.

Contingent liabilities

As at 31 December 2011, Xinjiang Tianmu did not have any contingent liabilities.

For the year ended 31 December 2010

Turnover

For the year ended 31 December 2010, Xinjiang Tianmu recorded a turnover of approximately HK$124,542,000, representing an increase of approximately HK$59,257,000 or 90.8% as compared with the previous year.

The increase was driven by increase in sales volume and increase in gold price. The sales volume increased by 39.4% from 282 kg for 2009 to 393 kg for 2010. As 2010 was the last tax concession year, all the production of the year were sold, keeping only minimal inventory, so as to fully enjoy the tax benefit. The average selling price of gold dores increased by 34.6% from RMB205 per gram for 2009 to RMB276 per gram for 2010. Such gold dores are priced with reference to the applicable spot prices of gold in the Shanghai Gold Exchange.

Gross profit

Gross profit increased by approximately 149.9% from approximately HK$26,417,000 for the year ended 31 December 2009 to approximately HK$66,003,000 for the year ended 31 December 2010. The increase in gross profit was mainly attributable to the 34.6% increase in average selling price and the 39.4% increase in sales volume.

— IV-20 —

APPENDIX IV

FINANCIAL INFORMATION OF THE GROUP AND MANAGEMENT DISCUSSION AND ANALYSIS

The gross profit margin increased from approximately 40% for 2009 to approximately 53% for 2010. It was mainly driven by the increase in average selling price of 34.6%. The total production cost increased from HK$33,343,000 for 2009 to HK$52,627,000 for the year ended 31 December 2010, mainly due to a 39.4% increase in sales volume. The production cost per unit for 2010 increased by approximately 13% compared to 2009 due to an increase in mining costs, resulted from inflation but moderated by better cost control mechanism.

Profit for the year

Profit for the year was approximately HK$51,755,000, representing an increase of HK$36,301,000 or 234.9% as compared with the previous year. The increase in profit for the year was mainly attributable to the increase in turnover.

Financial position and liquidity

As at 31 December 2010, Xinjiang Tianmu’s audited net assets and net current assets were approximately HK$93,449,000 and HK$58,773,000 respectively. Xinjiang Tianmu had total cash and bank balances of approximately HK$56,956,000 as at 31 December 2010, and the corresponding current ratio was approximately 290.8% (calculated as a ratio of current assets to current liabilities). As at 31 December 2010, the total borrowings of Xinjiang Tianmu were approximately HK$6,747,000, which represent the loan due to Xinjiang Kangshun (as referred to in the letter from the Board in this circular). Such loan was unsecured, charged with no interest and had no fixed terms of repayment.

Gearing ratio

As at 31 December 2010, Xinjiang Tianmu’s gearing ratio was approximately 7.2%, based on total borrowings of approximately HK$6,747,000 divided by equity attributable to owners of Xinjiang Tianmu of approximately HK$93,449,000.

Segment information

For the year ended 31 December 2010, Xinjiang Tianmu is organized in one operating segment on exploration and exploitation of certain gold, iron and nickel-copper mines and the processing and sale of the gold dores. Xinjiang Tianmu operated in one geographical area, Xinjiang, PRC and its revenue was solely generated from sales of gold dores to customers in the PRC.

Capital commitments

As at 31 December 2010, Xinjiang Tianmu had no capital commitments.

— IV-21 —

APPENDIX IV

FINANCIAL INFORMATION OF THE GROUP AND MANAGEMENT DISCUSSION AND ANALYSIS

Capital structure

Xinjiang Tianmu usually finances its working capital through funds generated from its operations and finance from its beneficial owners. Xinjiang Tianmu did not enter into any form of financial arrangement for hedging during the year ended 31 December 2010.

Exchange rate exposure

Xinjiang Tianmu is not exposed to significant foreign currency risk as majority of its transactions are denominated in Renminbi and there were only insignificant balances of financial assets and liabilities denominated in foreign currencies as at 31 December 2010. No hedging against foreign exchange risk has been carried out by Xinjiang Tianmu.

Charge of assets

As at 31 December 2010, there was no pledge over the assets of Xinjiang Tianmu.

Employees and remuneration

Staff cost increased by approximately 22.3% from approximately HK$5,343,000 for the year ended 31 December 2009 to approximately HK$6,537,000 for the year ended 31 December 2010. The increase was driven by the increase in headcounts and the increase in average salary due to inflation. Xinjiang Tianmu had 105 staff as at 31 December 2010, compared to 99 staff as at 31 December 2009.

Significant investments and material acquisitions and disposal

Xinjiang Tianmu did not have any significant investments, material acquisitions and disposals for the year ended 31 December 2010. As at 31 December 2010, Xinjiang Tianmu did not have any future plans for significant investments.

Contingent liabilities

As at 31 December 2010, Xinjiang Tianmu did not have any contingent liabilities.

For the year ended 31 December 2009

Turnover

For the year ended 31 December 2009, Xinjiang Tianmu recorded a turnover of approximately HK$65,285,000, representing an increase of approximately HK$23,981,000 or 58.1% as compared with the previous year.

— IV-22 —

APPENDIX IV

FINANCIAL INFORMATION OF THE GROUP AND MANAGEMENT DISCUSSION AND ANALYSIS

The increase was mainly driven by the significant increase in sales volume and steady increase in gold price during the year. The sales volume increased by 48.4% from 190 kg for 2008 to 282 kg for 2009 resulted from the increase in production according to the annual mining plan. The average selling price of gold dores increased by 5.7% from RMB194 per gram for 2008 to RMB205 per gram for 2009. Such gold dores are priced with reference to the applicable spot prices of gold in the Shanghai Gold Exchange.

Gross profit

Gross profit increased by approximately 56.6% from approximately HK$16,867,000 for the year ended 31 December 2008 to approximately HK$26,417,000 for the year ended 31 December 2009. The increase in gross profit was mainly attributable to the increase in turnover of approximately HK$23,981,000 or 58.1%.

The gross profit margin slightly decreased from approximately 41% for 2008 to approximately 40% for 2009. The total production cost increased from HK$19,087,000 for 2008 to HK$33,343,000 for 2009, mainly due to a 48% increase in sales volume.

Profit for the year

Profit for the year approximately HK$15,455,000, representing an increase of HK$5,909,000 or 61.9% as compared with the previous year. The increase was attributable to the increase in turnover during the year.

Financial position and liquidity

As at 31 December 2009, Xinjiang Tianmu’s audited net assets and net current assets were approximately HK$47,378,000 and HK$27,817,000 respectively. Xinjiang Tianmu had total cash and bank balances of approximately HK$3,244,000 as at 31 December 2009, and the corresponding current ratio was approximately 234.4% (calculated as a ratio of current assets to current liabilities). As at 31 December 2009, the total borrowings of Xinjiang Tianmu were approximately HK$6,501,000, which represent the loan due to Xinjiang Kangshun (as referred to in the letter from the Board in this circular). Such loan was unsecured, charged with no interest and had no fixed terms of repayment.

Gearing ratio

As at 31 December 2009, Xinjiang Tianmu’s gearing ratio was approximately 13.7%, based on total borrowings of approximately HK$6,501,000 divided by equity attributable to owners of Xinjiang Tianmu of approximately HK$47,378,000.

— IV-23 —

FINANCIAL INFORMATION OF THE GROUP AND MANAGEMENT DISCUSSION AND ANALYSIS

APPENDIX IV

Segment information

For the year ended 31 December 2009, Xinjiang Tianmu is organized in one operating segment on exploration and exploitation of certain gold, iron and nickel-copper mines and the processing and sale of the gold dores. Xinjiang Tianmu operated in one geographical area, Xinjiang, PRC and its revenue was solely generated from sales of gold dores to customers in the PRC.

Capital commitments

As at 31 December 2009, Xinjiang Tianmu had no capital commitments.

Capital structure

Xinjiang Tianmu usually finances its working capital through funds generated from its operations and finance from its beneficial owners. Xinjiang Tianmu did not enter into any form of financial arrangement for hedging during the year ended 31 December 2009.

Exchange rate exposure

Xinjiang Tianmu is not exposed to significant foreign currency risk as majority of its transactions are denominated in Renminbi and there were only insignificant balances of financial assets and liabilities denominated in foreign currencies as at 31 December 2009. No hedging against foreign exchange risk has been carried out by Xinjiang Tianmu.

Charge on assets

As at 31 December 2009, there was no pledge over the assets of Xinjiang Tianmu.

Employees and remuneration

Staff cost increased by approximately 22.1% from approximately HK$4,377,000 for the year ended 31 December 2008 to approximately HK$5,343,000 for the year ended 31 December 2009. The increase was driven by the increase in headcounts and the increase in average salary due to inflation. Xinjiang Tianmu had 99 staff as at 31 December 2009 compared to 83 staff as at 31 December 2008.

Significant investments and material acquisitions and disposal

Xinjiang Tianmu did not have any significant investments, material acquisitions and disposals for the year ended 31 December 2009. As at 31 December 2009, Xinjiang Tianmu did not have any future plans for significant investments.

Contingent liabilities

As at 31 December 2009, Xinjiang Tianmu did not have any contingent liabilities.

— IV-24 —

APPENDIX IV

FINANCIAL INFORMATION OF THE GROUP AND MANAGEMENT DISCUSSION AND ANALYSIS

C. THE TARGET GROUP

For the year ended 31 December 2011

Turnover

The Target Group generated revenue of approximately HK$142,610,000 (2010: nil) during the year ended 31 December 2011, solely attributable to the revenue from Xinjiang Tianmu, which, upon the Target Group’s increase in equity interest in Xinjiang Tianmu from 46% to 51% in July 2011, has been accordingly consolidated into the financial statements of the Target Group. For further details regarding the increase in the Target Group’s equity interest in Xinjiang Tianmu, please refer to note 1 to the accountants’ report on the Target Group as set out in Appendix II-A to this circular.

Profit for the year

The profit for the year ended 31 December 2011 of the Target Group was approximately HK$158,674,000.

The profit for the year was mainly attributed to the profit for the year of Xinjiang Tianmu and the gain in the bargain purchase of 5% equity interest of Xinjiang Tianmu at nil consideration from an indirect non-wholly owned subsidiary of the Vendor i.e. Xinjiang Kangshun (as referred to in the Letter from the Board in this circular) in July 2011. Such bargain purchase has taken into account the fair value of the assets and liabilities of Xinjiang Tianmu. For further details relating to this bargain purchase, please refer to note 31 to the accountants’ report on the Target Group as set out in Appendix II-A to this circular.

For the relevant analysis on the results of operations of Xinjiang Tianmu, please refer to the section headed “Management discussion and analysis — B. Xinjiang Tianmu” in this appendix.

Financial and liquidity position

As at 31 December 2011, the Target Group’s audited net assets and net current assets were approximately HK$325,843,000 and HK$41,536,000 respectively. The Target Group had total cash and bank balances of approximately HK$70,714,000 as at 31 December 2011, and the corresponding current ratio was approximately 147.7% (calculated as a ratio of current assets to current liabilities).

As at 31 December 2011, the total borrowings of the Target Group were approximately HK$6,997,000 which represent the loan due by Xinjiang Tianmu to Xinjiang Kangshun (as referred to in the letter from the Board in this circular). Such loan was unsecured, interest free and repayable on demand.

Capital commitments

As at 31 December 2011, the Target Group had no capital commitments.

— IV-25 —

APPENDIX IV

FINANCIAL INFORMATION OF THE GROUP AND MANAGEMENT DISCUSSION AND ANALYSIS

Capital structure

The Target Group usually finances its working capital through funds generated from its operations and finance from its beneficial owners. The Target Group did not enter into any form of financial arrangement for hedging during the year ended 31 December 2011.

Employees and remuneration

Other than those of Xinjiang Tianmu, the Target Group had no employees as at 31 December 2011 and no staff costs were incurred during the year ended 31 December 2011. For further details regarding the employees and remuneration of Xinjiang Tianmu, please refer to the section headed “B. Xinjiang Tianmu — For the year ended 31 December 2011 — Employees and remuneration” in this appendix.

Exchange rate exposure

The Target Group (other than Xinjiang Tianmu) is not exposed to any significant foreign currency risk as majority of its transactions are denominated in Hong Kong dollars and there were only insignificant balances of financial assets and liabilities denominated in foreign currencies as at 31 December 2011.

Charge on assets

As at 31 December 2011, there was no pledge over the assets of the Target Group.

Significant investments and material acquisitions and disposal

The Target Group did not have any significant investments, material acquisition and disposal for the year ended 31 December 2011. As at 31 December 2011, the Target Group did not have any future plans for significant investments.

Contingent liabilities

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

For the year ended 31 December 2010

Turnover

The Target Group did not record revenue during the year ended 31 December 2010.

The Target Group recorded a share of profits of an associate of approximately HK$23,807,000. The share of profits of an associate mainly represents the share of post-acquisition profits of Xinjiang Tianmu of the 46% equity interest held in Xinjiang Tianmu by the Target Group.

— IV-26 —

APPENDIX IV

FINANCIAL INFORMATION OF THE GROUP AND MANAGEMENT DISCUSSION AND ANALYSIS

Profit for the year

The profit for the year ended 31 December 2010 of the Target Group was approximately HK$21,858,000.

The profit for the year was mainly attributable to the profit for the year of Xinjiang Tianmu. For the relevant analysis on the results of operations of Xinjiang Tianmu, please refer to the section headed “Management discussion and analysis — B. Xinjiang Tianmu” in this appendix.

Financial and liquidity position

As at 31 December 2010, the Target Group’s audited net assets and net current assets were approximately HK$41,907,000 and HK$1,521,000 respectively. The Target Group had total cash and bank balances of approximately HK$818,000 as at 31 December 2010, and the corresponding current ratio was approximately 140.3% (calculated as a ratio of current assets to current liabilities). As at 31 December 2010, the Target Group had no borrowings.

Capital commitments

As at 31 December 2010, the Target Group had no capital commitments.

Capital structure

The Target Group usually finances its working capital through funds generated from its operations and finance from its beneficial owners. The Target Group did not enter into any form of financial arrangement for hedging during the year ended 31 December 2010.

Employees and remuneration

The Target Group had no employees as at 31 December 2010 and no staff costs incurred during the year ended 31 December 2010.

Exchange rate exposure

The Target Group is not exposed to any significant foreign currency risk as majority of its transactions are denominated in Hong Kong dollars and there were only insignificant balances of financial assets and liabilities denominated in foreign currencies as at 31 December 2010.

Charge on assets

As at 31 December 2010, there was no pledge over the assets of the Target Group.

— IV-27 —

APPENDIX IV FINANCIAL INFORMATION OF THE GROUP AND MANAGEMENT DISCUSSION AND ANALYSIS

Significant investments and material acquisitions and disposal

The Target Group did not have any significant investments, material acquisition and disposal for the year ended 31 December 2010. As at 31 December 2010, the Target Group did not have any future plans for significant investments.

Contingent liabilities

As at 31 December 2010, the Target Group did not have any contingent liabilities.

For the year ended 31 December 2009

Turnover

The Target Group did not record revenue during the year ended 31 December 2009.

The Target Group recorded a share of profits of an associate of approximately HK$7,109,000. The share of profits of an associate mainly represents the share of post-acquisition profits of Xinjiang Tianmu of the 46% equity interest held in Xinjiang Tianmu by the Target Group.

Profit for the year

The profit for the year ended 31 December 2009 of the Target Group was approximately HK$6,511,000.

The profit for the year was mainly attributable to the profit for the year of Xinjiang Tianmu. For the relevant analysis on the results of operations of Xinjiang Tianmu, please refer to the section headed “Management discussion and analysis — B. Xinjiang Tianmu” in this appendix.

Financial position and liquidity

As at 31 December 2009, the Target Group’s audited net assets and net current liabilities were approximately HK$20,568,000 and HK$76,000 respectively. The Target Group had total cash and bank balances of approximately HK$250,000 as at 31 December 2009, and the corresponding current ratio was approximately 98.7% (calculated as a ratio of current assets to current liabilities). As at 31 December 2009, the Target Group had no borrowings.

Capital structure

The Target Group usually finances its working capital through funds generated from its operations and finance from its beneficial owners. The Target Group did not enter into any form of financial arrangement for hedging during the year ended 31 December 2009.

— IV-28 —

APPENDIX IV

FINANCIAL INFORMATION OF THE GROUP AND MANAGEMENT DISCUSSION AND ANALYSIS

Employees and remuneration

The Target Group had no employees as at 31 December 2009 and no staff costs incurred during the year ended 31 December 2009.

Exchange rate exposure

The Target Group is not exposed to any significant foreign currency risk as majority of its transactions are denominated in Hong Kong dollars and there were only insignificant balances of financial assets and liabilities denominated in foreign currencies as at 31 December 2009. No hedging against foreign exchange risk has been carried out by Xinjiang Tianmu.

Charge on assets

As at 31 December 2009, there was no pledge over the assets of the Target Group.

Significant investments and material acquisitions and disposal

The Target Group did not have any significant investments, material acquisition and disposal for the year ended 31 December 2009. As at 31 December 2009, the Target Group did not have any future plans for significant investments.

Contingent liabilities

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

Future plans for material investments

The Target Group did not have any future plans for material investments as at 31 December 2009.

— IV-29 —

APPENDIX V COMPETENT PERSON’S REPORT ON THE TARGET MINES

The following is the text of the Competent Person’s Report on the Target Mines with the effective date of 1 December 2011 for the purpose of inclusion in this circular received from Mr. Philip Alan Jones.

Phil Jones Consulting Geologist

(ABN 25 116 285 896) Mineral Project Evaluation and Development

4 Buchan Place, Tel: +61 894030434 HILLARYS, WA, 6025 philjones@iinet.net.au Australia

12 April 2012

Timeless Software Limited Units 111 — 113, 1st Floor, Building 9, Phase One, Hong Kong Science Park, Tai Po, Hong Kong

Dear Sirs/Madams,

Re: Competent Person’s Report concerning the Gold, Iron, Nickel and Copper Project in Xinjiang, China (the “Report”)

INTRODUCTION

Timeless Software Limited (the “Company”) commissioned Philip Alan Jones (the “Competent Person”) to review the Hami gold, iron, nickel and copper projects (the “Project”) including mining operations located at Xinjiang, China.

Program Objectives

Objectives of the program were to review available data, participate in a site visit and provide the Company with both verbal feedback and this Report.

Purpose of the Report

The purpose of the Report is to provide potential equity investors and shareholders of the Company and The Stock Exchange of Hong Kong Limited (the “HKSE”) with an independent competent person’s report. The Report has been prepared in accordance with Chapter 18A of the Listing Rules of the HKSE.

— V-1 —

APPENDIX V COMPETENT PERSON’S REPORT ON THE TARGET MINES

Reporting Standard

This Report has been prepared to the standard of and is considered by the Competent Person to be, a Technical Report under the guidelines of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (the “JORC Code”). The JORC Code is the code adopted by the Australasian Institute of Mining and Metallurgy (the “AusIMM”) and the standard is binding upon all AusIMM members.

This Report is not a valuation report and does not express an opinion as to the value of mineral assets. Aspects reviewed in the Report do include product prices, socio-political issues and environmental considerations. The Competent Person does not express an opinion regarding the specific value of the assets and tenements involved.

Work Program

The Competent Person’s work program involved two phases:

• Phase 1: reviewing information provided; conducting a site visit to the Project operations located at Xinjiang in China; holding discussions with the Company personnel; and collecting and reviewing further documents; and

• Phase 2: analyzing the data provided, writing the Report, reviewing additional data and finalizing the Report.

Statement of Independence of the Competent Person

Neither the Competent Person nor the peer reviewer (“Peer Reviewer”) of the Report have any material existing or contingent interest in the outcome of the Report, nor do they have any pecuniary or other interest that could be reasonably regarded as being capable of affecting their independence or that of the Competent Person.

The Competent Person has no prior association with the Company in relation to the mineral assets that are the subject of the Report. The Competent Person has no beneficial interest in the outcome of the technical assessment conducted in connection with the preparation of the Report which is being capable of affecting its independence. The Competent Person’s fee for preparing the Report is based on its normal professional daily rates plus reimbursement for incidental expenses. The payment of the Competent Person’s professional fee is not contingent upon the outcome of the Report.

Warranties

The Company has represented in writing to the Competent Person that full disclosure has been made of all material information and that, to the best of its knowledge and understanding, such information is complete, accurate and true.

— V-2 —

APPENDIX V COMPETENT PERSON’S REPORT ON THE TARGET MINES

Indemnities

The Company has provided the Competent Person with an indemnity under which the Competent Person is to be compensated for any liability and/or any additional work or expenditure resulting from any additional work required:

• Which results from the Competent Person’s reliance on information provided by the Company which is inaccurate or incomplete; or

• Which relates to any consequential extension workload through queries, questions or public hearings arising from the Report.

Consents

The Competent Person consents to the Report being included, in full, and the reference to the Competent Person’s and the Peer Reviewer’s names in the shareholders’ circular to be issued by the Company, in the form and context in which the technical assessment is provided, and not for any other purpose.

Statement of Qualification of the Competent Person

I, Philip Alan Jones, hereby confirm that:

• I have carried out the assignment, located at:

4 Buchan Place Hillarys, Western Australia 6025

• I graduated with a Bachelor’s degree in Applied Science, Applied Geology from South Australian Institute of Technology in 1974 and a Restricted Quarry Managers Certificate (W.A.).

• I am a member of the Australasian Institute of Mining and Metallurgy and Australian Institute of Geoscientists.

• I have sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which is undertaking to qualify as a Competent Person as defined in the 2004 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’. I consent to the inclusion in the report of the matters based on the information in the form and context in which it appears.

• I have neither present nor prospective interests in the Company, the Project or the values reported herein.

• I am not aware of any material fact or material change with respect to the subject matter of the Report that is not reflected in the Report.

— V-3 —

APPENDIX V COMPETENT PERSON’S REPORT ON THE TARGET MINES

• The Report has been prepared consistent with the guidelines set by the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (the “JORC Code”) for Independent Expert Reports

REMARKS

The Report is based on information made available to the Competent Person prior to 1 December 2011. The Company has not advised the Competent Person of any material change, or event likely to cause material change, to the designs or forecasts since 1 December 2011.

The effective date of the report is 1 December 2011.

The Competent Person will not be liable for any loss or damage suffered by a third party relying on this Report (regardless of the cause of action, whether breach of contract, tort, and negligence).

The Competent Person will not accept any liability other than its statutory liability to any individual, organization, or company and takes no responsibility for any loss or damage arising from the use of this Report, or information, data, or assumptions contained therein.

We confirm that the Competent Person who contributed to this Report has no interest in:

• the Company; or

• the Project.

Yours faithfully,

Philip A. Jones

B.ASc., AusIMM, AIG

Emmanuel E. Mensah

Peer Reviewer, AusIMM

Note:

Philip A. Jones is a Competent Person under JORC Code and has over thirty years of extensive executive and site experience in mineral exploration, resource and reserve calculation and evaluation of mineral properties including gold, copper and nickel in Australia, New Zealand, South America, Africa, Indonesia, Kyrgyzstan Republic and China. He is a member of the Australasian Institute of Mining and Metallurgy and Australian Institute of Geoscientists

Emmanuel E. Mensah has about ten years experience as a geologist in exploration, prospect evaluation, project development, open pit and underground mining. He has been responsible for developing and maintaining Quality Control and Quality Assurance (QA/QC) procedures, generation of resource and grade control 3-D models as well as mining ore blocks and ensuring resource reporting and reconciliations are at least to AGA standards. He is a member of the Australasian Institute of Mining and Metallurgy. Emmanuel is the peer reviewer of the Report and has reviewed in the resources/reserves estimation.

— V-4 —

APPENDIX V COMPETENT PERSON’S REPORT ON THE TARGET MINES

TABLE OF CONTENTS

1.	Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-10
	1.1. Heishiliang (黑石梁) Gold Mine (“Heishiliang”) . . . . . . . . . . . . . . . . . . . . . . . . . . . V-10
	1.2. Hongshannan (紅山南) Gold Mine (“Hongshannan”) . . . . . . . . . . . . . . . . . . . . . . . . V-11
	1.3. Tuchushan (突出山) Iron Mine (“Tuchushan”) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-11
	1.4. Baishiquan (白石泉) Nickel and Copper Mine (“Baishiquan”) . . . . . . . . . . . . . . . . . V-12
	1.5. Reserve Estimates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-13
2.	Property Description and Location . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-14
	2.1. Tenements and Ownership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-21
3.	Accessibility, Climate, Local Resources, Infrastructure and Physiography . . . . . . . . . V-26
4.	Geological Setting, Deposit Types and Mineralization . . . . . . . . . . . . . . . . . . . . . . . . . V-27
	4.1. Regional Geology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-27
	4.2. Local Geology and Mineralisation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-28
5.	Exploration History . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-37
	5.1. Heishiliang Project. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-37
	5.2. Hongshannan Project . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-38
	5.3. Tuchushan Project . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-39
	5.4. Baishiquan Project . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-40
6.	Drilling and Sampling . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-43
7.	Sample Preparation, Analyses and Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-44
8.	Data Verification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-45
9.	Mineral Processing and Metallurgical Testing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-45
10.	Mineral Resource Estimates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-47
	10.1. Heishiliang Project. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-47
	10.2. Hongshannan Project . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-49
	10.3. Tuchushan Project . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-51
	10.4. Baishiquan Project . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-52
11.	Mining Methods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-56
12.	Recovery Methods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-58
	12.1. Gold Processing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-58
	12.2. Iron Ore Processing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-60
	12.3. Nickel-Copper Ore Processing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-60
13.	Project Infrastructure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-61
14.	Market Studies and Contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-61
15.	Environmental Studies, Permitting and Social or Community Impact. . . . . . . . . . . . . V-61
	15.1. Site Closure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-62

— V-5 —

APPENDIX V COMPETENT PERSON’S REPORT ON THE TARGET MINES

16. Emergency Response Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-62
17. Capital and Operating Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-63
18. Economic Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-63
19. Adjacent Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-65
20. Other Relevant Data and Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-65
21. Ore Reserve Estimates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-65
22. Interpretation and Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-67
23. Recommendations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-68
24. References. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-69
Appendix A: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-70
Appendix B: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-75
Appendix C:. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-77
Appendix D:. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-79
Appendix E: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-85
Appendix F: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-88
Appendix G:. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-90
Appendix H:. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-92
Appendix I: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-94
Appendix J: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-98
Appendix K:. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .V-102

— V-6 —

APPENDIX V COMPETENT PERSON’S REPORT ON THE TARGET MINES

**LIST **	OF TABLES
**Table **	1 — Reserve estimates for Heishiliang and Hongshannan gold mines . . . . . . . . . . . . V-13
**Table **	2 — Reserve estimates for the Baishiquan nickel-copper and the
	Tuchushan iron mines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-13
**Table **	3 — Licence details of Hami projects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-21
**Table **	4 — Summary of taxes due on each commodity type . . . . . . . . . . . . . . . . . . . . . . . . . V-25
**Table **	5 — Resource estimate for Heishiliang at April 2011 . . . . . . . . . . . . . . . . . . . . . . . . . V-47
**Table **	6 — Calculated Heishiliang resource estimate at a 1.00 g/t Au lower grade cut-off
	as at 30 November 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-49
**Table **	7 — Wardrop resource estimate at a 1.0 g/t Au lower grade cut-off
	as at 23 June 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-50
**Table **	8 — Calculated resource estimate at a 1.0 g/t Au lower grade cut-off
	as at 30 November 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-51
**Table **	9 — Brigade No.6 resource estimate for Tuchushan at April 2008. . . . . . . . . . . . . . . V-51
**Table **	10 — Resource estimate for Tuchushan >20% Fe . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-51
**Table **	11 — Calculated resource estimate at a 20% Fe lower grade cut-off
	as at 30 November 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-52
**Table **	12 — Wardrop resource estimate at a 0.3% Ni lower grade cut-off
	as at 22 June 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-54
**Table **	13 — Resource estimate for Baishiquan at a 0.3% Ni lower cut-off
	grade as at 30 November 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-55
**Table **	14 — Licenced mining rates with 2011 actual production . . . . . . . . . . . . . . . . . . . . . V-57
**Table **	15 — Summary of key assumptions used in the feasibility studies . . . . . . . . . . . . . . V-64
**Table **	16 — Reserve estimates for Heishiliang and Hongshannan gold projects
	at 1 December 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-66
**Table **	17 — Reserve estimates for Baishiquan and Tuchushan as at 1 December 2011 . . . . V-67
**Table **	18 — Risk assessment guideline. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-71
**Table **	19 — Project risk assessment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-73

— V-7 —

APPENDIX V COMPETENT PERSON’S REPORT ON THE TARGET MINES

LIST OF FIGURES

**Figure **	1 — Location map of Hami projects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-14
**Figure **	2 — Overview of the Heishiliang area . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-15
**Figure **	3 — Underground at Heishiliang . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-16
**Figure **	4 — Overview of the Hongshannan area . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-17
**Figure **	5 — Underground at Hongshannan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-18
**Figure **	6 — Overview of the Tuchushan area . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-19
**Figure **	7 — Underground at Tuchushan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-20
**Figure **	8 — Overview of the Baishiquan area. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-21
**Figure **	9 — Information on the Exploitation Licence at Heishiliang . . . . . . . . . . . . . . . . . . V-22
**Figure **	10 — Information on the Exploitation Licence at Hongshannan . . . . . . . . . . . . . . . V-23
**Figure **	11 — Information on the Exploitation Licence at Tuchushan. . . . . . . . . . . . . . . . . . V-24
**Figure **	12 — Desert track near Tuchushan typical for all four projects . . . . . . . . . . . . . . . V-26
**Figure **	13 — Regional geology map showing the projects and gold processing plant
	(green triangle) locations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-28
**Figure **	14 — Local Geological Map of Heishiliang showing drilling . . . . . . . . . . . . . . . . . . V-29
**Figure **	15 — Cross section through Au4 at Heishiliang . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-30
**Figure **	16 — Local Geology Map of Hongshannan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-31
**Figure **	17 — Cross Section View of the Hongshannan Vein . . . . . . . . . . . . . . . . . . . . . . . . . V-32
**Figure **	18 — Geology map of Tuchushan showing drilling locations . . . . . . . . . . . . . . . . . . V-33
**Figure **	19 — Cross section through Fe12 at Tuchushan . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-34
**Figure **	20 — Local Geology Map of Baishiquan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-35
**Figure **	21 — Cross section through Ni12 and Ni13 at Baishiquan . . . . . . . . . . . . . . . . . . . . V-36
**Figure **	22 — The Main Shaft at Heishiliang . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-37
**Figure **	23 — Core Samples at Heishiliang . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-38
**Figure **	24 — The Main Shaft at Hongshannan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-39
**Figure **	25 — The Main Shaft at Tuchushan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-40
**Figure **	26 — Two Shaft Head Frames at Baishiquan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-41
**Figure **	27 — The Drill Rig at Baishiquan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-42
**Figure **	28 — Core Samples at Baishiquan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-43

— V-8 —

APPENDIX V COMPETENT PERSON’S REPORT ON THE TARGET MINES

**Figure **	**29 **	**— **	Magnetic separator at Tuchushan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-46
**Figure **	**30 **	**— **	Long section along Au4 vein showing underground workings and resource
			outline . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-48
**Figure **	**31 **	**— **	Long section along vein AuI and AuII, through Hongshannan, showing
			mined out areas and resource blocks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-50
**Figure **	**32 **	**— **	Resource models of Ni12 and Ni13. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-53
**Figure **	**33 **	**— **	Location of resource zones at Baishiquan . . . . . . . . . . . . . . . . . . . . . . . . . . . . V-54
**Figure **	**34 **	**— **	Schematic diagram showing shrinkage stoping . . . . . . . . . . . . . . . . . . . . . . . . V-56
**Figure **	**35 **	**— **	The Processing Plant for ores from the Gold Mines . . . . . . . . . . . . . . . . . . . . V-58
**Figure **	**36 **	**— **	Simple flow chart of the gold processing plant . . . . . . . . . . . . . . . . . . . . . . . . V-59
**Figure **	**37 **	**— **	Geological map of the major tectonic units and location of mineral deposits
			in the Eastern Tianshan Belt, NW China. The mines shown as blue points. . V-65

— V-9 —

APPENDIX V COMPETENT PERSON’S REPORT ON THE TARGET MINES

1. EXECUTIVE SUMMARY

The four projects that are the subject of this Report are located within a 200 km radius of Hami in the Xinjiang Uygur Autonomous Region. Hami has a typical continental desert climate with large diurnal temperature ranges with hot summers and cold winters The region has an annual precipitation of 38-46 mm mainly falling in summer.

1.1. Heishiliang (黑石梁) Gold Mine

Heishiliang is located 164 km to the east of Hami City and currently mines gold ore from underground and trucks the ore approximately 120 km to a plant owned by Xinjiang Tianmu Mineral Resources Development Co. Ltd. (“Tianmu”). This plant has a 200 tonne per day capacity and located where sufficient electricity and water is available to operate the plant. The mine is working on a mineralised quartz vein along a major shear zone.

Licence Details

		Name of licence	Name of licence		Exploitation licence of the People’s Republic of China	Exploitation licence of the People’s Republic of China	Exploitation licence of the People’s Republic of China
		Licence No.			C6500002010114120107441
		Name of licence holder			Xinjiang Tianmu Mineral Resources Development Co. Ltd.
		Name of issuer			Department of Land and Resources, Xinjiang Uygur
					Autonomous Region
		Location			Hami City, Xinjiang Uygur Autonomous Region
		Business entities			Limited Company
		Effective date			29th November 2010 to 1st March 2013
		Mineral type of the mine			Gold
		Mining methodology			Open pit/ Underground mining
		Production scale			1,500 tonnes per year
		**Area of mining **	region		5.7344 square kilometers

R18A.05(3)

Site Visit

The Competent Person performed a site visit on 24 November 2011.

— V-10 —

APPENDIX V COMPETENT PERSON’S REPORT ON THE TARGET MINES

1.2. Hongshannan (紅山南) Gold Mine

Hongshannan is located 80 km to the southwest-west of Hami City. Like at Heishiliang, Tianmu mines gold ore from underground and trucks the ore approximately 120 km to the same Tianmu owned plant. The mine is also working on a mineralised quartz vein along a major shear zone.

Licence Details

		Name of licence	Name of licence		Exploitation licence of the People’s Republic of China	Exploitation licence of the People’s Republic of China	Exploitation licence of the People’s Republic of China
		Licence No.			C6500002010114120108340
		Name of licence holder			Xinjiang Tianmu Mineral Resources Development Co. Ltd.
		Name of issuer			Department of Land and Resources, Xinjiang Uygur
					Autonomous Region
		Location			Hami City, Xinjiang Uygur Autonomous Region
		Business entities			Limited Company
		Effective date			29th November 2010 to 27th September 2012
		Mineral type of the mine			Gold
		Mining methodology			Underground mining
		Production scale			15,000 tonnes per	year
		**Area of mining **	region		1.8394 square kilometers

R18A.05(3)

Site Visit

The Competent Person performed a site visit on 23 November 2011.

1.3. Tuchushan (突出山) Iron Mine

Tuchushan is located 130 km southwest of Hami City. The deposit has been explored for several years and commenced trial mining in 2011. The crushed ore is beneficiated using a simple magnetic separator at the mine site and then trucked 80 km to a third party processing plant. To receive payment for this product the trucked ore must achieve a minimum grade of 30% Fe and extra is paid for the iron content over this minimum grade.

— V-11 —

APPENDIX V COMPETENT PERSON’S REPORT ON THE TARGET MINES

Licence Details

		Name of licence	Name of licence		Exploitation licence of the People’s Republic of China	Exploitation licence of the People’s Republic of China	Exploitation licence of the People’s Republic of China
		Licence No.			C6500002010122220105953
		Name of licence holder			Xinjiang Tianmu Mineral Resources Development Co. Ltd.
		Name of issuer			Department of Land and Resources, Xinjiang Uygur
					Autonomous Region
		Location			Hami City, Xinjiang Uygur Autonomous Region
		Business entities			Limited Company
		Effective date			30th December 2010 to 30th August 2019
		Mineral type of the mine			Iron, gold, copper, zinc, gallium
		Mining methodology			Open Pit/ Underground mining
		Production scale			60,000 tonnes per	year
		**Area of mining **	region		0.48 square kilometers

R18A.05(3)

Site Visit

The Competent Person performed a site visit on 25 November 2011.

1.4. Baishiquan (白石泉) Nickel and Copper Mine

Baishiquan is located 170 km southeast of Hami. Tianmu has explored the project over several years including surface mapping, trenching, diamond drilling and geophysics. Tianmu has commenced preliminary mining construction work in preparation of the approval of an exploitation licence expected in the end of 2012. This preliminary work has included sinking two shafts and preliminary level development.

Licence Details

		Name of licence	Name of licence		Exploration Licence of the People’s Republic	Exploration Licence of the People’s Republic	of China
		Licence No.			T65120081202020944
		Name of licence holder			Xinjiang Tianmu Mineral Resources Development Co. Ltd.
		Name of issuer			Department of	Land and Resources, Xinjiang	Uygur
					Autonomous Region
		Location			Hami City, Xinjiang Uygur Autonomous Region
		Business entities			Limited Company
		Effective date			19th May 2011 to 19th May 2014
		Mineral type of the mine			Nickel and copper
		Area of exploration region			12.68 square kilometers

R18A.05(3)

Site Visit

The Competent Person performed a site visit on 26 November 2011.

— V-12 —

APPENDIX V COMPETENT PERSON’S REPORT ON THE TARGET MINES

1.5. Reserve Estimates

Reserve estimates have been made by the Competent Person based on resource estimates as follows: Heishiliang by Xinjiang Brigade No.6 of Xinjiang Bureau of Geology and Mineral Resources (“Brigade No.6”) in April 2011, Hongshannan and Baishiquan by Wardrop in June 2010, Baishiquan and Tuchushan by the Competent Person in November 2011. The modifying factors used by the Competent Person and applied to the resource estimates to produce these reserve estimates are based on data from Chinese feasibility studies and current operating mining parameters.

		**Reserve **	Category	Category	Tonnage	Tonnage	Tonnage	**Average **	**Average **	Grade
		(JORC Code)			**(tonnes **		*** 1000)**	(gram/tonne)
					Heishiliang
		Proved			0			0
		Probable			26			3.44
		Stockpiles			18			3.49
					Hongshannan
		Proved			106			5.14
		Probable			8			2.71
		Stockpiles			13			2.96

Table 1 — Reserve estimates for Heishiliang and Hongshannan gold mines

		Reserve Category Tonnage	Reserve Category Tonnage	Reserve Category Tonnage	Reserve Category Tonnage	Reserve Category Tonnage
		(JORC Code) (tonnes * 1000) Average Grade Average Grade
				Baishiquan			(Ni %)	(Cu %)
			Proved		0		0		0
		Probable			1,208		0.52		0.34
		Stockpiles			0
				Tuchushan			(Fe %)
			Proved		0		0
		Probable			322		32.96
		Stockpiles			14		39.65

Table 2 — Reserve estimates for the Baishiquan nickel-copper and the Tuchushan iron mines

Since these reserve estimates are derived from the resource estimates quoted elsewhere in this Report, it should be understood that all reserve estimates quoted in this Report are inclusive of the resource estimates NOT additional.

It is the Competent Person’s opinion that all the resource and reserve estimates were based on JORC (2004) compliant data and procedures, and calculated using methods that meet the JORC (2004) code standards. The four projects are sound economically as evidenced by the three mines already in operating profitability at Heishiliang, Hongshannan and Tuchushan and since the nickel and copper mine in Shaquan, Xinjiang near Baishiquan with similar nickel and copper ore is being mined profitably.

— V-13 —

APPENDIX V COMPETENT PERSON’S REPORT ON THE TARGET MINES

The mines/projects are all small with limited mine life as indicated by the quoted resources, however over the expected life of the mines should continue to produce profits as discussed in the financial appendix to this Report.

It is recommended that the current exploration program focused on diamond drilling from both the surface and underground and underground mapping and sampling is continued.

2. PROPERTY DESCRIPTION AND LOCATION

The four projects that are the subject of this Report are located within a 200 km radius of Hami in the Xinjiang Uygur Autonomous Region, China, Figure 1. Hami is located 500 km east of the provincial capital Urumqi and was originally famous for its fruit production, especially melons and grapes. Hami has more recently developed into a substantial mining centre with a large number of small to very large mining operations in the region, mainly for copper, nickel, gold, iron and coal.

==> picture [446 x 363] intentionally omitted <==

Figure 1 — Location map of Hami projects

— V-14 —

APPENDIX V COMPETENT PERSON’S REPORT ON THE TARGET MINES

The four projects that are the subject of this Report are:

Heishiliang Project

Heishiliang is located approximately 165 km the east of Hami and is under the jurisdiction of Qincheng Town. This underground gold mine has been operational since 2003 and reported to date as having produced 111,738 tonnes of ore at an average grade of 3.88 g/t Au.

==> picture [427 x 320] intentionally omitted <==

Figure 2 — Overview of the Heishiliang area

— V-15 —

APPENDIX V COMPETENT PERSON’S REPORT ON THE TARGET MINES

==> picture [429 x 326] intentionally omitted <==

Figure 3 — Underground at Heishiliang

Hongshannan Project

Hongshannan is located 80 km southwest-west of Hami. This underground gold mine has also been operational since 2003 and reported to date to have produced 266,009 tonnes of ore at an average grade of 4.55 g/t Au.

— V-16 —

APPENDIX V COMPETENT PERSON’S REPORT ON THE TARGET MINES

==> picture [416 x 312] intentionally omitted <==

Figure 4 — Overview of the Hongshannan area

— V-17 —

APPENDIX V COMPETENT PERSON’S REPORT ON THE TARGET MINES

==> picture [429 x 323] intentionally omitted <==

Figure 5 — Underground at Hongshannan

Tuchushan Project

Tuchushan is located 130 km southwest of Hami. This underground iron mine commenced trial mining in June 2011 and reported as producing approximately 30,525 tonnes of ore to date at an average grade of 39.65% Fe.

— V-18 —

APPENDIX V COMPETENT PERSON’S REPORT ON THE TARGET MINES

==> picture [416 x 312] intentionally omitted <==

Figure 6 — Overview of the Tuchushan area

— V-19 —

APPENDIX V COMPETENT PERSON’S REPORT ON THE TARGET MINES

==> picture [418 x 286] intentionally omitted <==

Figure 7 — Underground at Tuchushan

Baishiquan Project

Baishiquan is located 170 km southeast of Hami. No mining of ore has been carried out at Baishiquan however two shafts have been sunk and preliminary underground development commenced.

— V-20 —

APPENDIX V COMPETENT PERSON’S REPORT ON THE TARGET MINES

==> picture [416 x 312] intentionally omitted <==

Figure 8— Overview of the Baishiquan area

2.1. Tenements and Ownership

Xinjiang Tianmu Mineral Resources Development Co. Ltd also holds three exploitation licences and one exploration licence over the Hami projects, Table 3. The relevant reports and documents for the conversion from exploration licence to exploitation licence for Baishiquan are in preparation stage and will be submitted to the relevant departments of the PRC government in 2012. Legal opinion obtained from lawyers in the PRC indicates that after the submission of all the relevant documents, there should be no legal obstacles in obtaining the exploitation licence. It is expected that approval for the exploitation licence will be granted by the end of 2012.

	Name Licence Number Area Km2 Date Granted Date Expired Heishiliang C6500002010114120107441 5.74 November 2010 March 2013 Hongshannan C6500002010114120108340 1.84 November 2010 September 2012 Tuchushan C6500002010122220105953 0.48 December 2010 August 2019 Baishiquan Exploitation Licence Pending Baishiquan Exploration Licence T65120081202020944 12.68 May 2011 May 2014

Table 3 — Licence details of Hami projects

— V-21 —

APPENDIX V COMPETENT PERSON’S REPORT ON THE TARGET MINES

The total area of the granted exploitation licences is 8.06 square kilometres. The geographical co-ordinates for each licence are as follows:

	Heishiliang Exploitation Licence Coordinates (Xian 80 Co-ordination System) Point North East 1 4712597.57 32454076.57 2 4712498.48 32456879.43 3 4710450.79 32456800.89 4 4710549.85 32454004.03 Depth Range (mRL): 1320 1275

==> picture [367 x 277] intentionally omitted <==

Figure 9 — Information on the Exploitation Licence at Heishiliang

— V-22 —

APPENDIX V COMPETENT PERSON’S REPORT ON THE TARGET MINES

	Hongshannan Exploitation Licence Coordinates (Xian 80 Co-ordination System) Point North East 1 4673839.57 31512691.37 2 4672034.60 31515361.32 3 4672034.60 31515641.32 4 4671634.61 31515641.32 5 4671634.61 31514961.33 6 4673176.58 31512691.37 Depth Range (mRL): 700 375

==> picture [385 x 287] intentionally omitted <==

Figure 10 — Information on the Exploitation Licence at Hongshannan

— V-23 —

APPENDIX V COMPETENT PERSON’S REPORT ON THE TARGET MINES

	Tuchushan Exploitation Licence (Xian 80 Co-ordination System) Point North East 1 4620334.81 31504692.27 2 4620334.81 31505492.26 3 4619734.82 31505438.26 4 4619734.82 31504692.27 Depth Range (mRL): 1196 950

==> picture [379 x 283] intentionally omitted <==

Figure 11 — Information on the Exploitation Licence at Tuchushan

— V-24 —

APPENDIX V COMPETENT PERSON’S REPORT ON THE TARGET MINES

		**Baishiquan **	**Exploration **	**Exploration **	Licence	**Coordinates **	**(World **	**(World **	Geodetic System)
			Point			North			East
				1		41�57'00"			94�58'00"
				2		41�57'00"			94�58'30"
				3		41�57'15"			94�58'30"
				4		41�57'15"			94�59'00"
				5		41�57'30"			95�59'00"
				6		41�57'30"			95�01'00"
				7		41�58'00"			95�01'00"
				8		41�58'00"			95�02'00"
				9		41�57'15"			94�02'00"
			10			41�57'15"			95�01'30"
			11			41�56'00"			95�01'30"
			12			41�56'00"			94�58'00"

The requirements for a granted exploitation licence are as follows:

1. Approval of mine development and utilization plan

2. Approval of environmental impact assessment

3. Approval of environmental protection plan including a land reclamation program

4. Approval of mineral resources occupation registration licence by the Department of Land and Resources.

The resource taxes and levies due on each commodity type is summarised in Table 4.

	Commodity Type Resource Tax Income Tax Other Tax Value Added Tax Gold RMB 3.00/tonne 25% — — Iron RMB 6.00/tonne 25% 12% on VAT 17% on revenue Nickel & Copper RMB 6.00/tonne 25% 12% on VAT 17% on revenue

Table 4 — Summary of taxes due on each commodity type

There are no other payments, agreements and encumbrances with respect to these licences known by the Competent Person other than the purchase price discussed later in the financial section. There are no known significant factors and risks that may affect access, title, or the right or ability to perform work on the property.

— V-25 —

APPENDIX V COMPETENT PERSON’S REPORT ON THE TARGET MINES

3. ACCESSIBILITY, CLIMATE, LOCAL RESOURCES, INFRASTRUCTURE AND PHYSIOGRAPHY

Hami, with a population of over 550,000, is well served by highways to Urumqi in the west and all centres to the east, a railway and an airport. These transport links enable the easy supply of any mining or construction materials and the population that can provide skilled manpower for all the four mines. Electric power is readily available from the state grid and there is sufficient water at the gold processing plant for its normal operation.

All four projects are located in the Gobi Desert on the outwash plains at the base of the Tianshan Mountains. The climate of the region is continental arid with very limited rainfall, averaging less than 40 mm annually, and this rainfall is generally very light when it comes. Rare flooding downpours occur with spans of several years between these heavy falls. The average monthly temperatures range from +34[o] C in summer (July) down to -16[o] C in winter (January). Generally there is almost no vegetation or wildlife on any of the licences.

All four licences are easily accessible by 4WD vehicle and trucks carrying equipment to the mines or the ore out to the processing plants. The one third to two thirds of the trip from Hami is usually along very high quality sealed highways with the remainder along dirt tracks through the desert, Figure 12. Since the tracks traverse flat plains devoid of vegetation and the country is covered by a gravel layer (gobi), these tracks usually allow travel up to 60-80 kph.

==> picture [351 x 199] intentionally omitted <==

Figure 12 — Desert track near Tuchushan typical for all four projects

At all four mine sites the country is flat with a maximum topographic range of approximately 20 m over much of the extent of the licences. There are no topographical impediments for the construction of mining infrastructure or waste dumps at any of the mine sites.

The gold from both gold mines is being processed at Tianmu owned plant approximately 120 km from the two gold mines where there is sufficient electric grid power and underground water available. This plant was constructed in July, 2007 and has a design production capacity of 200 tonnes of ore per day.

— V-26 —

APPENDIX V COMPETENT PERSON’S REPORT ON THE TARGET MINES

The nickel-copper ore may be processed in a company owned plant, toll treating and selling to a third party processing plant. The iron ore is being transported 80 km to a processing plant operated by the Xinjiang subsidiary of Bao Steel Group Corporation, Xinjiang Gang Tie Ya Man Su Mining Co., Ltd. (“Bao Steel Xinjiang”) which also processes iron ore sourced from several other similar mines in the region. Road access to all three processing plants from the respective mines is very good.

4. GEOLOGICAL SETTING, DEPOSIT TYPES AND MINERALIZATION

4.1. Regional Geology

The principal features of the regional geology of eastern Xinjiang are the northwest-trending Altai Mountains that mark the southern margin of the Central Asia Orogenic Belt, which in turn represents the boundary between the North China Craton to the north and the Tarim Craton to the south. These cratons are underlain by rocks of Archean to Paleoproterozoic age and were originally part of Rodinia, a paleo-continent that began to disintegrate during the Proterozoic.

Rifting and ocean floor spreading occurred from the Neoproterozoic to the Cambrian but starting in the Ordovician this paleo-ocean began to close again, and by the Late Carboniferous amalgamation was completed. A stage of extensional tectonics began in the Permian continuing through the Triassic to the Neogene. The Permian was a stage of post-collision crustal evolution in the region characterized by mantle-derived magmatism. From the Late Triassic to Jurassic, the crustal evolution of the region was mainly dominated by the closing of the Paleo-Pacific Ocean. The Cretaceous to Neogene was a period of relative quiet and stability in the geological history of the region. From the Pleistocene on, as a result of the India—Eurasia collision, reactivation and on-going uplift of the orogenic belts took place, forming the present basin and mountain range framework.

Numerous precious and base metal deposits have been discovered in northern Xinjiang over the past 30 to 40 years; most of the deposits formed during post-collisional extension and are possibly related to a Late Carboniferous—Early Permian mantle plume event.

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Figure 13 — Regional geology map showing the projects and gold processing plant (green triangle) locations (after Chinese Academy of Geological Sciences, 1:2,500,000 scale, October 2002)

4.2. Local Geology and Mineralisation

4.2.1. Heishiliang Project

Quaternary - Holocene Tongchong loose sand, loam and gravel (Qh) is widespread along the valleys and most of the low-lying areas. Underlying these pluvial sediments and outcropping in the higher areas are mid-Variscan intrusives and rare Caledonian intrusives that regionally have intruded the terrestrial sediments and volcanics of the Jingerquan Group and the Jixian Formation of the Middle Proterozoic.

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Figure 14 — Local Geological Map of Heishiliang showing drilling (after Brigade No.6, 2011)

Splays off the Kangguer Fault Zone are found in the north of the mining area passing through the mining area with a northeast-east strike. The rocks in the Regional Kangguer Ductile Shear Zone experienced mylonitic deformation. The mylonite is often banded and lenticular with the mylonitic schistosity well developed along the fault.

Heishiliang has developed in mylonite granodiorite along the ductile shear metamorphic belt on the southern side of Kangguer Deep Fault zone. A total of seven mineral bodies have been delineated to date known as Au1, Au2, Au3, Au4, Au5-1, Au5-2 and Au5-3. The main vein of commercial interest is Au4, Figure 15.

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Figure 15 — Cross section through Au4 at Heishiliang (after Brigade No.6, 2011)

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The Heishiliang area contains orogenic-type gold-bearing quartz veins that formed during compressional to transpressional deformation at the convergent plate margins in accretionary and collisional orogens. Subduction-related thermal events, episodically raising geothermal gradients within the hydrated accretionary sequences initiated and drove long-distance hydrothermal fluid migration that included the gold mineralization along dilationary shears forming veins.

Magmatic rocks are common indicating a close relationship between the faulting, shear zone and the metamorphic activities. A typical example is quartz dioritic mylonite outcrops in the west of the mining area associated with early mylonitic, porphyroclast, lenticular and banded structures.

4.2.2. Hongshannan Project

The most commonly exposed rocks in the Hongshannan area are Upper Carboniferous Wutongwozi Group (C2W) pyroclastic and volcanic rocks. Along the western and southern edges of the area are large outcrops of Middle Variscan granite, granodiorite and diorite. Quartz veins are commonly developed in the area associated with east-to-west and northwest-to-southeast trending faults.

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Figure 16 — Local Geology Map of Hongshannan (after Brigade No.6, 2011)

Three gold mineral bodies have been delineated along the Hongshannan mineralized alteration zone known as AuI, AuII and AuIII. Drilling and underground mapping indicates that the depth of the individual mineralised shoots is far greater than their length.

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Like at Heishiliang, the Hongshannan gold-bearing quartz veins were formed during compressional to transpressional deformation at convergent plate margins in accretionary and collisional orogens. Subduction-related thermal events, episodically raising geothermal gradients within the hydrated accretionary sequences, initiated and drove long-distance hydrothermal fluid migration.

The Hongshannan deposit is comprised of a single, near-vertical gold-bearing quartz vein that has been traced for about 2,000 m along strike, to a depth of about 600 m below surface, and that varies in width from several centimetres to over one meter, with an average width of about 60 cm. Gold is the only mineral present of economic interest with pyrite as the most common accessory sulphide mineral. The quartz vein is not consistently mineralized, with the higher grade gold mineralization occurring as steeply plunging shoots along this quartz vein with the central portion of the 2 km strike length either unmineralized or contains sub-economic quantities of gold.

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Figure 17 — Cross Section View of the Hongshannan Vein (after Brigade No.6, 2011)

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4.2.3. Tuchushan Project

Tuchushan is located within the junction zone of the Tarim Plate (I), Zhongtian Plate (II) and Alatage Depression (III). The bedrock strata, the middle Carboniferous Digeer Xiaya Group (C2d[a] ), within the exploration area are bounded by the deep faults from Aqikekudouke to Shaquanzi. Quaternary colluvium and aeolian deposits cover the low lying areas, especially along the valleys.

A total of 22 magnetite mineral bodies and 1 multi-metal magnetite mineral body have been found at Tuchushan. Only 10 of the mineral bodies are exposed at the surface while the remaining 13 are blind. The main magnetite bodies of most commercial interest making up the resources are Fe1, Fe2, Fe11, Fe12 and Fe13.

The Tuchushan iron deposits are magnetite rich skarn deposits formed at the contact between the intermediate to basic volcanic rocks, volcanic lavas with crystalline limestone, marble and other calcium rich pelitic rocks that have undergone hydrothermal metasomatism, Figure 18 and Figure 19.

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Figure 18 — Geology map of Tuchushan showing drilling locations (after Brigade No.6, 2011)

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Figure 19 — Cross section through Fe12 at Tuchushan (after Brigade No.6, 2011)

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4.2.4. Baishiquan Project

Baishiquan is located approximately 3 km south of the Shaquanzi deep fault. The main outcropping strata are a Proterozoic medium to high grade metamorphic series overlain along the low lying areas and valleys by Quaternary alluvials and windblown sands, Figure 20.

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Figure 20 — Local Geology Map of Baishiquan (after Brigade No.6, 2011)

The region is extensively faulted by secondary faults derived from the Shaquanzi deep fault. Intrusive rocks, mainly small basic and acidic dykes, formed during the middle Variscan, are mainly distributed in the north, centre and east of the mining region.

The Baishiquan nickel-copper mineralisation is generally lenticular with layering and veins. The mineral bodies are generally small, mainly between tens of meters to 200 m in length, with some sections longer than 300 m. The average thickness of the mineralised shoots range from 1 -15 m, with some sections thicker than 15 m. The largest shoots are known as Nil, Ni2, Nil1, Ni12 and Ni13 which were modelled for the resource estimate, Figure 21.

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Figure 21 — Cross section through Ni12 and Ni13 at Baishiquan (after Brigade No.6, 2011)

Baishiquan mineralisation is believed to be a magma conduit system formed in the lower parts of the magma chamber. The magma in the chamber is interpreted as leaking laterally as intrusions without any fissure eruptions due to the magma in the chamber being denser than the surrounding country rocks. As the magma escaped from the chamber, pressure in the chamber decreased resulting in vesiculation and expansion of bubbles in the magma.

This decrease in the density of the chamber induced a gravitational instability of the roof rocks of the chamber and solid rock masses started to fall into the chamber resulting in collapse crater formation at the top. The less dense vesiculated magma ascended causing phreato-magmatic explosions after interaction with groundwater in shallow aquifers and a magma conduit was established.

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APPENDIX V COMPETENT PERSON’S REPORT ON THE TARGET MINES

5. EXPLORATION HISTORY

5.1. Heishiliang Project

Heishiliang was originally discovered as part of a regional exploration program by the China Geological Survey Bureau and was later confirmed by surface mapping and sampling by Brigade No.6. By 2005 a total of eight diamond drill holes for 720.1m had been drilled on the deposit.

In 2004-2008, Tianmu explored the Au4 vein and commenced trial mining. The trial mining, from two shafts, started in the middle of the veins and extended along the whole strike length of the mineralized veins. During the trial mining period additional diamond holes were drilled to confirm the deposit in the deeper sections. From the beginning of 2009 a further 37 diamond drills have been completed for 6,338.0 m.

5.1.1. Current Status

The mine is currently under production. The latest production capacity is about 40,000 tonnes per annum. The existing infrastructures include surface camp, workshops and access tracks, an underground mining and ore transportation system and shared ore processing facilities.

The central section of the veins has been mined out with 111,738 tonnes of ore mined to the end of November 2011 with 433.95 kg of contained gold at an average grade of 3.88 g/t Au.

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Figure 22 — The Main Shaft at Heishiliang

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Figure 23 — Core Samples at Heishiliang

5.2. Hongshannan Project

Brigade No.6 first identified the gold deposits in 2001 while conducting a regional mapping and geochemical survey. The discovery was followed up with more detailed mapping, trenching, and geochemical sampling in 2003. Further mineralised veins were identified in 2007 and to date a total of 30 diamond drill holes have been completed for a total of 7,615.2 m and mining progressed down to the 7th level.

5.2.1. Current Status

The mine is currently in production and further development is being constructed to access deeper ore. The proposed construction plan includes extending the existing shaft and underground development. The current production capacity is 20,000 tonnes. The existing infrastructure, also includes surface camp, workshops and access tracks and shared ore processing facilities.

To the end of November 2011, a total of 266,009 tonnes of ore has been mined containing 1,210.78 kg of gold at an average grade of 4.55 g/t Au.

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Figure 24 — The Main Shaft at Hongshannan

5.3. Tuchushan Project

In 2005-2006, as part of a project funded by the central government of China, Brigade No.6 conducted geological work at the Tuchushan including a 1:20,000 magnetic survey over 30 km[2] , 1:2000 scale geological mapping, trenching and diamond drilling. Thirteen magnetite iron mineralised bodies were delineated and evaluated.

In 2007-2008 more detailed exploration work was carried out over the deposit by Brigade No.6 including a further diamond drilling. To date 40 diamond drill holes have been completed for 4,623.0 m.

5.3.1. Current Status

The mine is currently under trial production and planned to start commercial production in early 2012. The current production capacity is about 70,000 tonnes. The existing infrastructure includes surface camp, workshops, magnetic separator and access tracks, underground mining infrastructure and two shafts.

Trial mining commenced in June 2011 and until 30 November 2011, 30,525 tonnes have been mined at an average grade of 39.65% Fe.

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Figure 25 — The Main Shaft at Tuchushan

5.4. Baishiquan Project

The nickel-copper mineralization at Baishiquan was discovered by the Brigade No.6 in 2002 as part of a regional exploration program.

Follow up work by the Brigade No.6 has included surface magnetic surveys, detailed surface mapping and geochemical sampling, trenching and diamond drilling.

In March 2008, Tianmu commissioned Brigade No.6 to conduct exploration work at Baishiquan including further mapping, trenching diamond drilling and other works.

To date a total of 52 diamond drill holes have been completed for 13,854.2 m.

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5.4.1. Current Status

Construction of mining infrastructure including two shafts and preliminary underground development has commenced, Figure 26, and an exploitation licence application is in the process of preparation of converting the exploration licence into exploitation licence. Trial production is planned to start in early 2013 and commercial production in 2014.

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Figure 26 — Two Shaft Head Frames at Baishiquan

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Figure 27 — The Drill Rig at Baishiquan

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Figure 28 — Core Samples at Baishiquan

6. DRILLING AND SAMPLING

All the drilling completed to date on all four projects has been done by the Brigade No.6 using their diamond drill rigs. These rigs are all modern Chinese manufactured rigs using current triple tube technology and core recoveries were excellent.

All drill hole collars were surveyed using differential GPS equipment by qualified surveyors and deviations down the holes were measured with suitable gyroscopic equipment at appropriate intervals, generally every 50 m.

Because of the steepness of the veins and mineralised bodies and the high angle of intersection of the drill holes, all such intercepts are greater than true width. This variation is taken into consideration when resources were estimated.

Maps and representative cross sections showing the drill hole locations, orientations and the attitude of the mineralisation with respect to the geology are given earlier in the Local Geology sections for each of the respective projects.

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7. SAMPLE PREPARATION, ANALYSES AND SECURITY

The core recoveries over the length of the holes, and most importantly over the mineralised intervals, were recorded in the geologists’ logs as excellent.

Since the gold ore zones were very narrow and in some places were fractured and friable, all of the core over the mineralised sections in the gold holes were submitted for assay with no core retained for reference. The nickel and iron core however was split using a diamond saw. The sampled intervals were chosen to correspond with lithological contacts as determined by the site geologists with the maximum sample interval being one metre.

Standard Chinese QA/QC sample protocols, that also in part comply with normal JORC standards, were followed with approximately one in twenty samples submitted for chemical analysis being submitted in duplicate.

No standards and blanks were included with the sample batches submitted to the laboratory however. These standards and blanks are most important in gold sampling where levels of detection are in parts per million and metallic gold can contaminate laboratory sample crushing and pulverising equipment. Duplicates and standards are also important when sampling and at the laboratory to help detect problems with sampling and assaying such as poor sample splitting, incorrect labelling, contamination, calibration problems with the assaying equipment etc.

Since only the mineralised quartz vein intervals in the gold holes at Heishiliang and Hongshannan were submitted to the laboratory for analysis, contamination of waste samples on either side of the veins with gold and artificially widening the ore grade intersections was not possible. Also, since the gold grade range measured in the drill holes was not high, with maximum grades so far of 25.0g/t Au at Heishiliang and 19.93g/t Au at Hongshannan, contamination between samples is not likely to be a major issue.

The laboratory followed standard Chinese Quality Control procedures that are also compliant with the JORC code requirements, with regard to the number of repeat analyses and insertion of standards. The Brigade geologists and laboratory chemists monitored these QA/QC samples and acted accordingly when anomalous variations were detected.

Informal monitoring of mine production to date at the two producing gold mines and at the iron mine has not detected any significant variations between predicted production grades based on drilling results and actual production grades.

The drill core was logged and sampled at the drill site. Samples were placed into marked bags and were transported to the Xinjiang Geology and Mineral Bureau in Urumqi for analysis. No specific security measures were undertaken to ensure sample integrity but given the nature of the mineralization and the standard sample-handling protocol, specific security measures are not considered to have been necessary.

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APPENDIX V COMPETENT PERSON’S REPORT ON THE TARGET MINES

It is the Competent Person’s opinion that, although it is desirable that standards and blanks were included in every batch of samples submitted to the laboratory for analysis, the sampling, sample preparation, security and analytical procedures are still acceptable by JORC standards with respect to the use of the sample assay results obtained as the basis of the following resource estimates.

8. DATA VERIFICATION

The Competent Person did not collect any independent check samples from core to confirm quoted grades. Since the entire core had been sampled at the gold mines, no meaningful samples of this core could be taken for comparison with earlier assays. No core cutting equipment was available to cut core at Baishiquan and Tuchushan although nickel bearing minerals and magnetite were clearly visible in this core. The gold mines have been operating for a number of years and the iron mine has been selling ore for a number of months so the presence of gold and iron in the mined material is clearly demonstrated.

Samples were collected of ore samples at each of the four projects which were analysed at an independent laboratory, SGS at Tianjin. The assay results from these samples are presented in Appendices I-K. These “selected” samples confirmed that these ore samples contain the expected ore grades as expected from the resource estimates.

9. MINERAL PROCESSING AND METALLURGICAL TESTING

No specific metallurgical studies have been considered in this Report for any of the projects.

The ore from the two gold mines is currently being processed at Tianmu owned Carbon in Leach (CIL) mill with reported gold recoveries of 95%. No problems were stated by the mill operator with any of the ore received from either mine.

The iron ore mined at Tuchushan is sold to a third party after minimal beneficiation using a simple magnetic separator, Figure 29. This magnetic separator simply rejects the rocks fed over the roller that are not attracted to the magnetic roller at the end of the conveyor belt. The customer pays at a set rate for the iron content of the material received above a 30% Fe minimum grade, based on analyses of grab samples collected off every truck load received. The latest contract price paid for this type of ore is RMB350/tonne assuming a Run Of Mine (“ROM”) grade of 40.0% Fe inclusive of transport and 17% VAT tax. For every 1.0% over 40% Fe an additional RMB10 per tonne is paid. Within the range 30-40%, RMB10 is deducted for every 1% less than 40%. The iron ore from Tuchushan is then added to a stockpile composed of iron ore received from several different sources. Since the customer takes the responsibility for the final processing of the ore and any contaminants, it is not necessary to consider these matters in this Report.

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Figure 29 — Magnetic separator at Tuchushan

The ore from Baishiquan will be treated off-site where sufficient grid power and water for processing is available, most likely near to Tianmu gold processing plant. Sale of the ore to a third party, similar to what is being done with the Tuchushan iron ore, is also being considered. The management of the nickel mine in Shaquan, Xinjiang nearby, where similar nickel ore in very similar geology and of similar mineralogy is mined, state that their ore is trucked to a mill where the average recovery is around the industrial average 75-80%. It is reasonable to expect that the Baishiquan ore will have similar recoveries after the exploitation licence has been granted and mining commences.

The 2011 feasibility study on this project assumed the ore would be sold to a third party for RMB313.2/tonne assuming a ROM grade of 0.54% Ni. The price paid for this type of ore in December 2011 by processing plants in the area was RMB541/tonne.

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10. MINERAL RESOURCE ESTIMATES

Resource estimates have been estimated by independent consultants for Heishiliang, Hongshannan and Baishiquan. The Competent Person had reviewed these estimates and agreed that they are compliant with the JORC Code. The Competent Person estimated the resources at Tuchushan and Baishiquan and updated the resource estimate at Heishiliang and Hongshannan to account for mine production after estimates were made.

10.1. Heishiliang Project

A Chinese resource was estimated in April 2011 for the Au4 vein. This resource estimate was based on the diamond drilling and underground sampling data available at that date. The method used was a polygonal method that is standard for Chinese Code resource estimates of vein hosted gold deposits and is applicable for JORC Compliance if carried out in a correct manner and the data used for the estimate meets JORC standards. Since both the data, i.e. the diamond drilling and underground channel sampling results met JORC standards, and the estimation method is of JORC standard, the Chinese resource estimate for the Heishiliang project is quoted in Table 5.

	Resource Category (Chinese Code) Resource Category (JORC Code) Tonnage (tonnes * 1000) Average Grade (gram/tonne) 331 Measured 0 0 332 Indicated 61 3.78 333 Inferred 98 3.14

Table 5 — Resource estimate for Heishiliang at April 2011.

Since the mining at Heishiliang is straightforward with selective mining of the quartz vein from underground and the ore is hand-picked after mining and before trucking to the processing plant, a minimum mining width of 0.3 m and a lower cut-off grade of 1.0 g/t Au the effective mining cut-off grade since all the quartz vein is mined, used for this estimate is appropriate. A bulk density of 2.65 t/m[3] was used in the resource estimate.

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Figure 30 — Long section along Au4 vein showing underground workings and resource outline (after Brigade No.6, 2011)

This resource estimate is based on the results of 19 diamond drill holes completed at the date of the resource estimate, a further seven diamond holes have been drilled since this date, but they have not significantly affected the estimate.

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APPENDIX V COMPETENT PERSON’S REPORT ON THE TARGET MINES

To bring the Heishiliang resource estimate to the effective date of this Report, the mine production from May 2011 to 30 November 2011 has to be subtracted. Over this period 33,559 tonnes of ore at an average grade of 3.20 g/t Au was recorded as mined and processed. This leaves a remaining resource as summarised in Table 6.

	Resource Category (JORC Code) Tonnage (tonnes * 1000) Average Grade (gram/tonne) Measured 0 0 Indicated 27 3.78 Inferred 98 3.14

Table 6 — Calculated Heishiliang resource estimate at a 1.0 g/t Au lower grade cut-off as at 30 November 2011

In addition to the resources quoted at Heishiliang there is an additional 17,700 tonnes of stockpiled ore at the mine site and at the processing plant at the end of November 2011.

10.2. Hongshannan Project

Wardrop produced a NI 43-101 compliant resource estimate for the Hongshannan project dated 19 March 2011 with an effective date of 23 June 2010. This Report took into consideration all the drilling and underground sampling data available at the effective date. The data used by Wardrop included assays for 432 samples of which 29 inclined NQ diamond drill holes drilled from the surface, 27 from underground drill holes, 287 from underground channels and 89 from trenches. Approximately half (49%) of these samples were located within the currently un-mined portion of the vein; the balance were from surface (trenches) and portions of the vein that have already been mined.

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Figure 31 — Long section along vein AuI and AuII, through Hongshannan, showing mined out areas and resource blocks (after Brigade No.6, 2011)

The assays were not capped, since there were no extreme outliers, or composited since the vein is narrow and variable width. A bulk density of 2.66 t/m[3] was used to convert volumes to tonnes. An Inverse Distance Squared (ID[2] ) algorithm was used to interpolate grades into the block model cells.

The Wardrop resource estimate at a 1.0 g/t Au lower grade cut-off at 23 June 2010 is summarised in Table 7.

	Resource Category (JORC Code) Tonnage (tonnes * 1000) Average Grade (gram/tonne) Measured 176 5.65 Indicated 9 2.98 Inferred 11 3.51

Table 7 — Wardrop resource estimate at a 1.0 g/t Au lower grade cut-off as at 23 June 2010

Since the date of the Wardrop resource estimate eight more drill holes have been drilled. These new holes had no significant impact on the Wardrop resource estimate.

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APPENDIX V COMPETENT PERSON’S REPORT ON THE TARGET MINES

To bring the Wardrop resource estimate to the effective date of this Report, mine production from 23 June 2010 to 30 November 2011 has to be subtracted. Over this period 62,343 tonnes of ore at an average grade of 3.54 g/t Au was recorded as mined and processed. This leaves a remaining resource as summarised in Table 8.

	Resource Category (JORC Code) Tonnage (tonnes * 1000) Average Grade (gram/tonne) Measured 114 5.65 Indicated 9 2.98 Inferred 11 3.51

Table 8 — Calculated resource estimate at a 1.0 g/t Au lower grade cut-off as at 30 November 2011

In addition to the resources quoted at Hongshannan there is an additional 12,800 tonnes of stockpiled ore at the mine site and at the processing plant at the end of November 2011.

10.3. Tuchushan project

A resource estimate was made by Brigade No.6 following Chinese Standards in April 2008 for the Tuchushan iron mineralisation. This estimate is summarised in Table 9.

	Category of Resource (Chinese Code) Tonnage (tonnes * 1000) Average Grade (Fe %) 331 0 0 332 360 38.2 333 994 40.6

Table 9 — Brigade No.6 resource estimate for Tuchushan at April 2008

These resources were for all the bodies interpreted from the drilling using a 20% Fe lower grade cut-off and a bulk density of 4.0 t/m[3] . As a check on this resource estimate the Competent Person calculated a resource estimate for only the larger bodies, Fe3, Fe5 and Fe12. This resource is summarised in Table 10.

	Resource Category (JORC Code) Tonnage (tonnes * 1000) Average Grade (Fe %) Measured 0 0 Indicated 360 37.9 Inferred 681 37.9

Table 10 — Resource estimate for Tuchushan >20% Fe

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The estimate is for a lower grade cut-off of 20% Fe and using an Inverse Distance Squared (ID[2] ) algorithm within wireframed shells in MineMap� block modelling software with a bulk density of 4.0 t/m[3] .

The shortfall of 313 thousand tonnes in the resource would almost all be explained by not including the smaller mineralised bodies in the resource estimate.

To bring the resource estimate to the effective date of this Report, mine production from 1 June 2011 to 30 November 2011 has to be subtracted. Over this period 30,525 tonnes of ore at an average grade of 39.65% Fe was recorded as mined, all from the access development drives with none coming from stopes. This leaves a remaining resource as summarised in Table 11.

	Resource Category (JORC Code) Tonnage (tonnes * 1000) Average Grade (Fe %) Measured 0 0 Indicated 329 37.90 Inferred 681 37.90

Table 11 — Calculated resource estimate at a 20% Fe lower grade cut-off as at 30 November 2011

In addition to the resources quoted at Tuchushan there is an additional 14,100 tonnes of stockpiled ore at the mine site at the end of November 2011.

10.4. Baishiquan project

Wardrop produced a NI 43-101 compliant resource and reserve estimate for Baishiquan dated 19 March 2011 with an effective date of 22 June 2010. This Report took into consideration all the drilling and underground sampling data available at the effective date. Of the fourteen mineralized bodies identified at the time of the Report, resources were only estimated for the two largest, Zones Ni12 and Ni13. The data used by Wardrop included 370 assays from 21 inclined NQ diamond drill holes drilled from the surface and from nine surface trenches.

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Figure 32 — Resource models of Ni12 and Ni13 (after Wardrop, 2011)

The assays were not capped since there were no extreme outliers. All samples were composited to 2m. Bulk densities of 2.90 t/m[3] for low grade mineralisation and 2.94 t/m[3] for high grade mineralisation were used to convert volumes to tonnes. An inverse distance squared algorithm was used to interpolate grades into the block model cells.

Tianmu in their economic studies have determined that the Baishiquan will produce a mined ore product at a profitable grade using a 0.3% Ni lower cut-off grade and this lower cut-off figure is used for the resource estimates in this Report.

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APPENDIX V COMPETENT PERSON’S REPORT ON THE TARGET MINES

The Wardrop resource estimate at a 0.3% Ni lower grade cut-off using an Inverse Distance Squared (ID[2] ) algorithm within wireframed shells in block modelling software at 22 June 2010 is summarised in Table 12.

	Resource Category (JORC Code) Tonnage (tonnes * 1000) Average Grade (Ni %) Average Grade (Cu %) Measured 0 0 0 Indicated 823.8 0.61 0.36 Inferred 503.3 0.59 0.36

Table 12 — Wardrop resource estimate at a 0.3% Ni lower grade cut-off as at 22 June 2010

Since the date of the Wardrop report, 35 additional drill holes were drilled in 2011. As a result of this more recent drilling, further nickel intersections were made at Zone Ni12/13 modelled by Wardrop and to the north and east of the Wardrop resources which significantly increased the resource inventory for Baishiquan. Figure 33. The Competent Person estimated the JORC compliant resources covered by this new drilling, Table 13.

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Figure 33 — Location of resource zones at Baishiquan

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APPENDIX V COMPETENT PERSON’S REPORT ON THE TARGET MINES

			Zone				Indicated	Indicated	Indicated					Inferred	Inferred	Inferred
				Tonnage								Tonnage
				(tonnes *								(tonnes *
				1000)			(Ni %)			(Cu %)			1000)	(Ni %)			(Cu %)
			Ni12/13 (1)		864		0.62				0.32		597	0.56				0.28
			Ni11		470		0.56				0.39		1,899	0.56				0.39
			Ni 2		42		0.63				0.35		128	0.54				0.29
			Ni 1		241		0.59				0.35		70	0.48				0.26
			Others		0		0.00				0.00		4,103	0.41				0.02
			TOTAL 1,617				0.60				0.35		6,796	0.47				0.15

Table 13 — Resource estimates for Baishiquan at a 0.3% Ni lower cut-off grade as at 30 November, 2011

Note (1) Previously modelled by Wardrop.

The estimates were calculated by wire framing the mineralised zones interpreted from the drilling in MineMap� block modelling software, generally the +0.3% Ni grade intervals but some lower grade zones were included for continuity, then using an Inverse Distance Squared (ID[2] ) algorithm searching up to 200m within each wireframed zone individually to interpolate grades into 10m (X) x 10m (Y) x 2m (Z) cells. Every modelled cell, only in Zones Ni1, Ni2, Ni11 and Ni12/13, within 25m of a drill intersection was categorised as Indicated while all other cells to 200m were considered to be Inferred. Only Zones Ni1, Ni2, Ni11 and Ni12/13 were considered to have sufficient drill hole density to permit Indicated resources while the other modelled Zones within 200m of a drill hole intersection were all categorised as Inferred.

No ore has been mined at Baishiquan since the Wardrop resource estimate.

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APPENDIX V COMPETENT PERSON’S REPORT ON THE TARGET MINES

11. MINING METHODS

The same mining method is used or will be used at all four mines, i.e. shrinkage stoping, Figure 34.

==> picture [185 x 274] intentionally omitted <==

Figure 34 — Schematic diagram showing shrinkage stoping

Shrinkage stope mining is most suitable for steeply dipping ore bodies (70�—90�) as found at all four projects in this Report. In shrinkage stoping, mining proceeds from the bottom of the stope upwards, in horizontal 5m slices, with the broken ore being left in place for miners to work from. The miners drill selectively upwards into the ore and blast the ore out as they retreat along the drive. Because blasted rock takes up a greater volume than in-situ rock (due to blasting swell factor), some of the blasted ore (approximately 40%) must be removed from drawpoints at the bottom of the stope to provide working space for the next ore slice. Once the top of the 40m stope is reached, all the ore is removed from the stope. The stope is left empty.

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APPENDIX V COMPETENT PERSON’S REPORT ON THE TARGET MINES

The operating mines all meet, and actually exceed their licenced mining rates, Table 14.

	Mine Licenced Annual Mining Rate (Tonnes) 2011 Actual June-November incl. (Tonnes) 2011 Annual Production (Tonnes) Hongshannan 15,000 6,722 33,020 Heishiliang 1,500 30,359 41,209 Tuchushan 60,000 30,525 30,525

Table 14 — Licenced mining rates with 2011 actual production

Since the mines are not for commodities under national “exploitation capacity macro-control” or “national protective exploitation”, the excess of production capacity will not affect the Exploitation Licence validity. The government has not made any objections with respect to the excess production and Tianmu has continued to pay the required taxes in accordance with the actual production capacity.

In both gold mines the quartz vein carrying the gold is easily recognizable by the miners and is being mined down to approximately 10cm minimum width. Before the gold ore is taken to the surface it is handpicked to remove waste rock. A second pass of hand picking of waste is carried out at the surface.

The iron ore is also easily recognizable underground and can be selectively mined to a minimum width of 0.4m. Since the ore is at the surface it is stockpiled in separate stockpiles according to its predicted grade where some hand picking of waste is carried out. High grade ore is blended with low grade ore to ensure that the minimum 30% Fe grade is exceeded and after two stages of crushing it passes over a magnetic separator to reject low grade, non-magnetic waste. This beneficiated ore is trucked to the processing plant.

No geotechnical problems have been noted to date in any of the three operating mines that has affected safety or production rates. Sidewall contamination is not reported as a problem.

The mining fleet and equipment inventory and staff levels, approximately 150 personnel, at each site are sufficient to easily meet the licenced production rates.

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APPENDIX V COMPETENT PERSON’S REPORT ON THE TARGET MINES

12. RECOVERY METHODS

12.1 Gold Processing

The gold ore for the two gold mines is processed at a centrally located mill where sufficient electricity and water for processing is available.

==> picture [418 x 314] intentionally omitted <==

Figure 35 — The Processing Plant for ores from the Gold Mines

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APPENDIX V COMPETENT PERSON’S REPORT ON THE TARGET MINES

The processing plant is Carbon In Leach (CIL) with a capacity of 200 tonnes of ore throughput a day, Figure 36. The reported gold recovery in this plant is 95%.

==> picture [329 x 402] intentionally omitted <==

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

Mining
Raw ore
Crushing
Grinding
Carbon in leach Tailing
Elution and electrowinning
Smelting
Gold bars
----- End of picture text -----

Figure 36 — Simple flow chart of the gold processing plant

The main characteristics of the plant are as follows:

12.1.1. Crushing and grinding

The ROM gold ore is put through a three stages of crushing followed by grinding in a ball mill to eventually produce a fine grained slurry ready for leaching with cyanide.

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APPENDIX V COMPETENT PERSON’S REPORT ON THE TARGET MINES

12.1.2. Carbon in Leach

The slurry is first passed through a JT3-1 gravity jig to separate out nuggety gold. This nuggety gold is sent directly to the gold smelting section for processing. The slurry then has cyanide and activated carbon added before passing through a series of eight leaching columns to dissolve the gold. The dissolved gold is absorbed by the activated carbon while in the leaching circuit.

After the slurry has been leached it is first screened to separate out the activated carbon with the absorbed gold before the slurry is dewatered in a thickener to recover most of the water and cyanide for recycling. The dewatered slurry is dumped in a specially constructed dam as tailings.

12.1.3. Elution and Electrowinning

The recovered carbon, loaded with the gold, is then piped to the elution plant where the gold is re-dissolved, or “stripped off” the carbon, in a pressurized tank using a concentrated caustic soda and cyanide solution leaving the barren carbon to be regenerated before being recycled. This concentrated gold solution is piped to tanks located at the gold processing section where the gold is recovered from the solution by electrowinning. The gold plated cathodes are removed and dried ready for smelting.

12.1.4. Smelting

The dried cathodes and nugget gold are mixed with fluxes and smelted to produce gold bullion bars. The slag produced by the smelting is recycled to recover any lost gold.

12.2 Iron Ore Processing

The iron ore produced at Tuchushan is sold as “mined ore” to a third party for processing with payment based on the Fe% of the truckloads. The minimum acceptable grade of a truckload of iron ore is 30% Fe with extra paid for the Fe content above this minimum grade.

The 2009 feasibility study assumed that the mined ore would be bought by third parties at the mine for RMB121.4/tonne. The latest contract price paid for this ore is RMB350/tonne assuming a ROM grade of 40.0% Fe inclusive of transport and 17% VAT tax. For every 1.0% over 40% Fe an additional RMB10 per tonne is paid. Within the range 30-40%, RMB10 is deducted for every 1% less than 40%.

12.3 Nickel-Copper Ore Processing

The logistics of treating the nickel-copper ore from Baishiquan has not been finalized. Processing in a company owned plant, toll treating and selling to a third party processing plant are being considered. The ore from Baishiquan may be treated off-site where sufficient grid power and water for processing is available, most likely near to the Tianmu gold processing plant. The type of nickel-copper ore processing plant that is expected to be used is a standard flotation plant similar to others operating in the region by other nickel-copper ore processing plant operators. The processing plant produces a nickel-copper mineral concentrate at a grade that can then be sold to a refinery for producing nickel and copper metal ingots. Industry standard recoveries of the nickel-copper bearing minerals for this type of processing plant are quoted as being 75-80%.

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APPENDIX V COMPETENT PERSON’S REPORT ON THE TARGET MINES

The ore at Baishiquan is very similar to the nickel ore at the Xinjiang Shaquan Nickel and Copper Mine and this ore is processed without any problems in a typical nickel ore processing plant in the area similar to the plant expected to treat the Baishiquan ore.

The 2011 feasibility study on Baishiquan assumed the mined ore would be processed by a third party who bought the ore, with ROM grade at 0.54% Ni, at the mine for RMB313.2/tonne. The current price paid by processing plants in the region for this grade ore is approximately RMB541/tonne.

This option of selling the unprocessed ore to a third party could be considered a base case since a plant would only be constructed or purchased if in a future feasibility study the modelled economics, after the metallurgical characteristics of the ore have been considered, were better than this option.

13. PROJECT INFRASTRUCTURE

Due to the flat topography of the region and the extreme aridity, finding sites for the infrastructure such as mining plant, roads and waste dumps is simple. The only difficulty is locating the processing plant where the electricity and water is available. The gold processing plant is located in such a suitable location.

14. MARKET STUDIES AND CONTRACTS

All the gold is sold as bullion bars to precious metal traders and refining company in China with its selling price determined by the market value of gold bullion quoted by the Shanghai Gold Exchange.

The iron ore is sold to the Bao Steel Xinjiang. An agreed rate is paid, based on the Fe%, per tonne of ore as long as the shipment meets a minimum 30% Fe content. No adjustments are made for contaminants such as phosphorous or sulphur. A representative sample of each weighed truck load is taken by both the mine and Bao Steel Xinjiang and these samples are independently assayed. Payment is made according to the average of the two grades.

No decision has been made on how the nickel-copper ore will be processed. If it is processed by a third party, a similar process to the iron ore will be used for payment.

15. ENVIRONMENTAL STUDIES, PERMITTING AND SOCIAL OR COMMUNITY IMPACT

All the projects are located in extremely arid desert with no sensitive environmental areas on or near the project areas. The sites are also located many tens of kilometres from any other human settlement other than similar mine sites operated by other parties. There are no environmental liabilities for any of the projects with the exception of environmental bonds tied to the demolition and restitution of the mine site after mine closure that are applicable to the operating mines which have been paid. Save for the extension applications for the production safety permits for Heishiliang gold mine and Hongshannan gold mine as disclosed in Appendix I, Tianmu had obtained all the licences and permits for its business operations. There are no non-governmental organisation impacts applicable on the sustainability of the mineral and/or exploration projects.

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APPENDIX V COMPETENT PERSON’S REPORT ON THE TARGET MINES

15.1. Site Closure

The Chinese National requirements for mine closure are covered under Article 21 of the Mineral Resources Law (1996) , the Rules for Implementation of the Mineral Resources Law of the People’s Republic of China (2006) , the Land Use Regulations of the People’s Republic of China (1986.6.25) and the Land Rehabilitation Regulation issued by the State Council on October 21, 1988 . In summary, these legislative requirements require that the mine operators prepare and submit a site closure report for assessment and approval and then after approval the site is rehabilitated as required.

Tianmu has a remediation and reclamation plan which includes the demolition and removal of all construction waste to an approved dump, backfilling all surface holes including the shafts and blending the waste dumps with the existing topography. The four mines individually are all budgeted to have sufficient cash flow for remediation, rehabilitation and, closure and removal of facilities.

16. EMERGENCY RESPONSE PLAN

Emergency can describe as ‘an unplanned event when a project operation loses control, or could lose control, of a situation that may result in risks to human health, property, or the environment, either within the facility or in the local community’. Emergencies are of the scale which will cause wide impacts but not small scale localized incidents. Examples of an emergency for a mining processing project are events such as pit wall collapse, underground mine explosion or a large-scale spillage/discharge of hydrocarbons or chemicals.

For managing emergency, the recognized international industry practice is to develop and implement an Emergency Response Plan (ERP). The general elements of an ERP are:

• Administration — policy, purpose, distribution, definitions of potential site emergencies and organisational resources (including setting of roles and duties).

• Emergency response areas — command centres, medical stations, assemble and evacuation points.

• Communication systems — both internal and external communications.

• Emergency response procedures — work area specific procedures (including training in the working area).

• Regular reviews of the plan.

• Business continuity and contingency — options and processes for business recovery from an emergency.

Tianmu implements the operational ERP for the operation of the Project, in line with Chinese National requirements and recognized international industry practices.

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APPENDIX V COMPETENT PERSON’S REPORT ON THE TARGET MINES

17. CAPITAL AND OPERATING COSTS

The two gold mines and iron mine are all currently operating profitably and the nickel and copper mine near Baishiquan at the nickel and copper mine in Shaquan, Xinjiang, is mining very similar nickel and copper ore as found at Baishiquan is also profitable. The capital and operating costs of these mines have been considered by the Competent Person. The Competent Person’s Valuation Report in Appendix VI discusses these costs in more detail.

The projected capital and operating costs for each mine were included in their respective feasibility studies and are summarised in Table 15 below.

18. ECONOMIC ANALYSIS

Both Heishiliang and Hongshannan are in operation as at the effective date of the resources estimates and both projects have to date demonstrated economic viability.

For an exploitation licence to be granted in China, a thorough feasibility study must be approved by the authorities. The modifying factors required by the JORC Code for converting resources to reserves are also considered in these studies and were considered by the Competent Person in estimating the reserves quoted in this Report.

The feasibility studies submitted for the three mines with granted exploitation licences have all been accepted as meeting proper professional standards by the Chinese authorities. The Baishiquan feasibility study and therefore the exploitation licence is expected to be similarly approved by the end of 2012.

The Chinese reserve estimates, derived from their resource estimates, are not necessarily compliant with the JORC Code, however the mining, economic and other modifying factors discussed in these studies are acceptable by the JORC Code and were considered by the Competent Person to convert the resource estimates to reserve estimates for this Report. In many cases the modifying factors actually used by the Competent Person were more conservative than used in the Chinese feasibility studies.

Feasibility studies for the two gold projects, the Tuchushan iron project and the Baishiquan nickel/copper project are listed as follows:-

1. Heishiliang feasibility study prepared in October 2011 by Urumqi Tianzhu Engineering Consulting Limited Company

2. Hongshannan feasibility study prepared in March 2008 by Urumqi Tianzhu Engineering Consulting Limited Company

3. Baishiquan feasibility study prepared in March 2011 by Urumqi Tianzhu Engineering Consulting Limited Company

4. Tuchushan feasibility study prepared in September 2009 by Geophysics and Geochemical Brigade of Xinjiang Bureau of Geology and Minerals

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APPENDIX V COMPETENT PERSON’S REPORT ON THE TARGET MINES

These studies discussed the proposed mining method as well as the relative capital and operating costs. As mentioned in earlier sections, the mining method in all four mines is similar to those of the two gold projects and thus, utilizing the historical data from the two operating gold projects, the assumed mining costs used in the Feasibility Studies appear to be reasonable as shown in Table 15.

These studies confirmed the economic viability of all four projects.

						Hongshannan		Baishiquan		Tuchushan
		Parameter		Heishiliang (Au)		(Au)		(Ni, Cu)		(Fe)
		Metal Price					313/tonne ore (Ni		121.40/tonne ore
		(RMB)		300/g (1)		165/g (1)		at 0.54%)		(Fe at 30%)
		Current Metal
		Price (RMB) (1)		325/g		325/g		541/tonne		350/tonne(2)
		Mining Recovery		86%		85%		85%		83.6%
		Mining Dilution		9.6%		15%		10%		11.8%
		Metallurgical
		recovery		91.13 - 93.68%		88.26%		N/A		N/A
		Mining
		Costs/tonne
		(RMB)		178.24		114.35		85.94		86.02
		Treatment
		Costs/tonne
		(RMB)		209.37		174		N/A		N/A
		Total Costs/tonne
		(RMB)		387.61		340.35		85.94		86.02
		Lower cut-off
		grade		1.0g/t Au		1.0g/t Au		0.30% Ni		20% Fe
		Projected Profit		5.42 million		1.81 million		14.61 million		2.52 million
		(RMB) (3)		(after tax)		(after tax)		(after tax)		(after tax)
		Projected
		Production Rate
		(Tonnes/year)		15,000		15,000		120,000		60,000
		Remediation/
		rehabilitation
		Costs (RMB)		N/A		376,700		N/A		699,100

Table 15 — Summary of key assumptions used in the feasibility studies

Notes:

• (1) For comparison $US1600/oz Au = Y325/gm = HKD400/gm at 1USD = Y6.33 = HKD7.78

• (2) According to the contract signed November 2011, the price paid per tonne of iron ore is RMB 350 / tonne inclusive of transportation and 17% VAT. For every 1.0% over 40% Fe receives an additional RMB10 per tonne. Within the range 30-40%, RMB10 is deducted for every 1% less than 40%. No payment is paid at all when the Fe grade falls below 30%.

• (3) Projected profits at the time of the respective reports

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APPENDIX V COMPETENT PERSON’S REPORT ON THE TARGET MINES

Comprehensive economic analyses of all four projects were conducted by the Competent Person during the valuation of the projects and the findings are presented within the Valuation Report in Appendix VI “Valuation Report on the Target Mines” of this Report.

19. ADJACENT PROPERTIES

The Hami region is developing into a major mining centre with numerous small to very large mines opened in the region with more being developed, Figure 37.

==> picture [416 x 188] intentionally omitted <==

Figure 37 — Geological map of the major tectonic units and location of mineral deposits in the Eastern Tianshan Belt, NW China. The mines shown as blue points.

These mines include gold, base metals including nickel and copper, as well as iron. The younger sediments are also host to major coal, oil and gas projects.

Since this Report covers only developed deposits within small tenements with little exploration potential, it is not considered necessary to discuss the surrounding properties except that the smaller mines produce ore of very similar type, and grades profitably and the ore is transported similar distances as the company for processing.

20. OTHER RELEVANT DATA AND INFORMATION

All data and information that are considered relevant for this Report are included in other sections of this Report.

21. ORE RESERVE ESTIMATES

Converting resource estimates for the two operating gold mines to reserves by the Competent Person is based on the following assumptions that are based on the feasibility study results and current mining parameters:

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APPENDIX V COMPETENT PERSON’S REPORT ON THE TARGET MINES

• Current mining recoveries are achieved, i.e. stated by the operators that only 10% of the resource is lost as pillars, sidewalls etc but a more conservative 15% assumed for these estimates. Since no crown pillars are left between mined out levels, the quartz vein is continuous, regular and very predictable over the length of the mined portion and the miners are using a very selective mining method that allows the extraction of all the easily recognisable quartz veins underground, this mining recovery is considered reasonable by the Competent Person.

Hand picking of the ore after mining continues to remove most of the mining dilution waste. An assumed 10% of waste is added to the resource tonnes at an assumed 0g/t Au grade to account for waste not picked out.

Current mining and processing methods are used maintaining the minimum mining widths and lower cut-off grades used in the resource estimates as economically viable.

The reserves for Heishiliang and Hongshannan are therefore estimated as follows in Table 16.

		**Reserve **	Category	Category	Tonnage	Tonnage	Tonnage	**Average **	**Average **	Grade
		(JORC Code)			**(tonnes **		*** 1000)**	(gram/tonne)
					Heishiliang
		Proved			0			0
		Probable			26			3.44
		Stockpiles			18			3.49
					Hongshannan
		Proved			106			5.14
		Probable			8			2.71
		Stockpiles			13			2.96

Table 16 — Reserve estimates for Heishiliang and Hongshannan gold projects as at 1 December 2011

Since these reserve estimates are derived from the resource estimates for these deposits quoted elsewhere in this Report, it should be understood that these reserve estimates are inclusive of these resources NOT additional.

The assumptions used to convert the resource estimates to reserve estimates for Baishiquan and Tuchushan, which are based on the feasibility study results and current operating parameters at the two gold mines are as follows:

• Mining losses of 15% as pillars, on sidewalls etc can be maintained. Since no crown pillars are left between mined out levels, the miners are using a proven (at the gold mines), very selective mining method that allows the extraction of all the easily recognisable nickel and iron ore underground, this mining recovery is considered reasonable by the Competent Person.

• Hand picking of the ore and magnetic separation of the iron ore after mining removes most of the mining dilution waste, but it has been assumed that 15% dilution is unavoidable which is 3.2 to 5% greater than assumed in the feasibility studies.

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APPENDIX V COMPETENT PERSON’S REPORT ON THE TARGET MINES

• Mining, methods are used that will maintain the minimum mining widths and lower cut-off grades used in the resource estimates as economically viable. It is noted that since the Ni/Cu and magnetite mineralisation is generally much wider than the quartz veins mined at the two gold mines and the ore has a significantly greater bulk density the mining costs per tonne of ore mined will be significantly less.

Based on these assumptions the estimated reserves at Baishiquan and Tuchushan are as follows, Table 17.

		Reserve Category Tonnage	Reserve Category Tonnage	Reserve Category Tonnage	Reserve Category Tonnage	Reserve Category Tonnage
		(JORC Code) (tonnes * 1000) Average Grade Average Grade
				Baishiquan			(Ni %)	(Cu %)
			Proved		0		0		0
		Probable			1,208		0.52		0.34
		Stockpiles			0
				Tuchushan			(Fe %)
			Proved		0		0
		Probable			322		32.96
		Stockpiles			14		39.65

Table 17 — Reserve estimates for Baishiquan and Tuchushan as at 1 December 2011

Since these reserve estimates are derived from the resource estimates quoted elsewhere in this Report for these deposits, it should be understood that these reserve estimates are inclusive of these resources NOT additional.

As required by the JORC Code, all the reserves quoted in this Report have been estimated by the Competent Person based on the results of feasibility studies. The feasibility studies used for this process by the Competent Person were carried out in China as required for exploitation licence approval by the Chinese authorities. The economic viability of the gold deposits is self-evident as both gold mines have been operating profitably for years at similar grades and recoveries as assumed in the above reserve estimates. Iron ore has also been mined and profitably sold at Tuchushan since July 2011. Although ore mining has not commenced at Baishiquan, the nearby Xinjiang Shaquan Nickel and Copper Mine profitably mines very similar grade nickel ore in a very similar geological environment and mineralogy and trucks their ore to a similar plant that Tianmu may consider to use at a similar distance from the mine.

22. INTERPRETATION AND CONCLUSIONS

Tianmu are currently profitably mining underground at Heishiliang and Hongshannan and processing their ore at a plant approximately 120 km from both mines.

Tianmu have also recently started underground trial mining Tuchushan and trucking the ore 80 km to a third party owned processing plant. The nickel-copper mine is being developed at Baishiquan where the ore will also be trucked at a processing plant in the vicinity of the gold plant. It is not finalised yet if this plant will be owned and operated by Tianmu or by a third party. Tianmu is also considering selling the nickel-copper ore directly.

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APPENDIX V COMPETENT PERSON’S REPORT ON THE TARGET MINES

All four projects have undergone extensive exploration including surface mapping, diamond drilling, trenching and, where mine openings permit, underground mapping and sampling so the extent and grade of the deposits are well known. The Competent Person believes that the exploration work all met JORC (2004) Code requirements for sampling and quality control.

The main risks pertaining to these projects are as follows:

Geological — All resource and reserve estimates are based on very limited sampling to represent a much larger quantity of ore contained within a deposit. The JORC (2004) Code ranks resource and reserve estimates according to risk. Only Measured Resources and Proved Reserves carry relatively small geological risks. Only the Hongshannan project has any Measured Resources and Proved Reserves.

Sovereign Risk — The Chinese mining regulations and laws have changed considerably over recent years and are expected to continue to evolve. Most of the changes have made mining regulations more transparent and have assisted foreign investment. The extent and direction of further changes to the mining regulations and laws and their impact on these projects cannot be estimated.

Metal Prices — The world economy is currently unstable resulting in widely fluctuating metal prices. Current prices for metals are generally high but no-one can confidently predict future metal prices and how these changes will impact the projects. It is noted however that all the projects are within China which is a major consumer of the metals sought at these projects and it is government policy to become self-sufficient in these metals.

Natural Disasters — Since the projects are all located in extreme deserts with limited seismicity the possibility of a major natural disaster is considered low however seismic activity and rare storms and floods are possible.

It is the Competent Person’s conclusion that the projects that are the subject of this Report are sound geologically, based on JORC (2004) compliant data and procedures, and sound economically as evidenced by the three mines already in operation at Heishiliang, Hongshannan and Tuchushan. Regarding Baishiquan, the Competent Person concurs with the assumptions and conclusions reached in the feasibility study regarding the marketability and the profitability of the ore as the Xinjiang Shaquan Nickel and Copper Mine near Baishiquan, where similar ore is being mined, has been operating profitably for several years. The mines/projects are all small with limited mine life as indicated by the quoted resources, however over the expected life of the mines they should produce profits as discussed in the financial appendix to this Report.

23. RECOMMENDATIONS

The Competent Person recommends that the current exploration programs continue on all four projects to extend the known resources. This exploration should include detailed mapping and trenching but focus on diamond drilling to extend the gold bearing veins at Heishiliang and Hongshannan at depth and locating blind nickel shoots at Baishiquan and blind iron pods at Tuchushan.

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APPENDIX V COMPETENT PERSON’S REPORT ON THE TARGET MINES

To save drilling costs, as much of the drilling as possible at the gold mines should be collared from the underground development. This drilling should pierce the quartz vein at centres no further than 50 m apart along the levels future sill drives will be developed to convert the Inferred resources to Indicated so increasing the reliability in the tonnage and grade estimates.

Since the mineralised pods at Baishiquan and Tuchushan are small and irregularly shaped, it is strongly recommended that diamond drill holes are drilled to pierce the pods at the proposed development levels at no wider than 40-50 m intervals before any development is initiated to properly delimit and confirm the grades of any mineralisation planned for mining.

24. REFERENCES

• A. The Joint Ore Reserves Committee of The Australasian Institute of Mining and Metallurgy, Australian Institute of Geoscientists and Minerals Council of Australia (JORC). December 2004. Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves: The JORC Code (2004 Edition).

• B. Hongshannan gold mine feasibility report prepared by Urumqi Tianzhu Engineering Consulting Limited Company, 2011

• C. Survey report of the iron mine in Tuchushan, Hami City, Xinjiang prepared by Brigade No.6 of Xinjiang Bureau of Geology and Mineral Resources, 2008

• D. Tuchushan iron mine feasibility report prepared by the Geophysics and Geochemical Brigade of Xinjiang Bureau of Geology and Mineral, 2009

• E. Survey report of the nickel-copper mine in Baishiquan, Hami City, Xinjiang Brigade No.6 of Xinjiang Bureau of Geology and Mineral Resources, 2009

• F. Internal production and exploration report of the gold mine in Heishiliang, Hami City, Xinjiang by Xinjiang Tianmu Mineral Resources Development Co. Ltd., 2010

• G. Heishiliang gold mine survey report prepared by Brigade No.194 of Shaanxi Coal Geological Bureau, 2010

• H. Internal production and geological report on Hongshannan gold mine prepared by Xinjiang Tianmu Mineral Resources Development Co. Ltd., 2010

• I. Baishiquan nickel-copper mine feasibility report prepared by Brigade No.6 of Xinjiang Bureau of Geology and Mineral Resources, 2011

• J. Heishiliang gold mine feasibility report prepared by Urumqi Tianzhu Engineering Consulting Limited Company, 2011

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APPENDIX V COMPETENT PERSON’S REPORT ON THE TARGET MINES

Appendix A: Risk Analysis

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APPENDIX V COMPETENT PERSON’S REPORT ON THE TARGET MINES

Risk Analysis

The following risk analysis follows Practice Note 4 of the GEM Listing Rules of the Stock Exchange of Hong Kong. Risk has been classified from major to minor as follows:

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

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

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

Overall Risks

The likelihood of a risk event occurring within a nominal 7 year time frame has been considered as:

Likely: will probably occur Possible: may occur Unlikely: unlikely to occur

The degree or consequence of a risk and its likelihood are combined into an overall risk assessment, as shown below:

	Likelihood of Risk (within 7 years)	Consequence of Risk Minor Moderate Major Medium High High Low Medium High Low Low Medium
	Likely
	Possible
	Unlikely

Table 18 — Risk assessment guideline

Project Risks

The main risks pertaining to these projects are as follows:

Resource Risk (Low to Medium)

Estimates of resources and reserve may change when new information becomes available or new factors arise. There may be variability in the quality of the deposits which may impact the total tonnages produced. Interpretations and deductions of the geology and controls on the mineralisation on which resource or reserve estimates based on (i.e. past drilling, sampling and similar examination)

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APPENDIX V COMPETENT PERSON’S REPORT ON THE TARGET MINES

may potentially be found to be inaccurate when further drilling or the commencement of actual production. Any adjustment could affect the development and mining plans, which could materially and adversely affect the revenue of the Project and the valuation of the Project. There can be no assurance the recovery from exploration assay tests will be the same under on-site conditions or in production-scale operations.

If the resources or reserves are over estimated in either quantity or quality of ore, the profitability of the project will be adversely affected. If however the quantity or quality is underestimated the profitability of the project will be enhanced.

Sovereign Risk (Low to Medium)

The Chinese mining regulations and laws have changed considerably over recent years and are expected to continue to evolve. Most of the changes have made mining regulations more transparent and assist foreign investment. The extent and direction of further changes to the mining regulations and laws and their impact on these projects cannot be estimated.

Underestimation of the operation costs risk (Medium to High)

The operating cost estimates, particularly for the iron and nickel-copper projects, are based on a number of assumptions. The mining business is capital intensive and the development and exploitation of resources, the depreciation and out of order of machinery and equipment and the expansion of production capacity require substantial capital expenditure. There may be potential increases to operating costs which arise from unforeseen operating complexities due to increases of the fuel price or inflation. Operations may not be completed in the scope of the time planned, may exceed the original budgets and may not achieve the intended economic results or commercial viability, all of which could have a material adverse effect on the results of operations and the business.

Terrorist attack and riots risk (Low to Medium)

There is risk of terrorist attacks and riots as have occurred in Xinjiang in recent years which may cause damage or disruption to the operations of the Project if similar events occurred in the future. The risks of terrorist attacks may create uncertainties, while terrorist or rioters could cause damage to the infrastructures and facilities, disrupt the work force etc affecting the production schedule and operation of the mines.

Outbreak of a contagious or epidemic disease (Low to Medium)

Possible outbreaks of contagious diseases such as severe acute respiratory syndrome or an unknown disease for which there may not be readily available treatment or a lack of facilities could adversely affect customers’ demand or the company’s ability to adequately staff its operations, as well as disrupt the general level of economic activity in Xinjiang and even the PRC which would obviously affect the operations of the Project.

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APPENDIX V COMPETENT PERSON’S REPORT ON THE TARGET MINES

Underperformance of plant and machinery risk (Low to Medium)

The Mines are located at the desert area in Xinjiang which is remote from the urbanized area in Xinjiang. Substantial amount of electricity and water are required in connection with the mining and processing operations. Since the mines are in remote areas, electricity and water supplies may not be as stable as in other cities within the PRC. Any lengthy disruption in electricity and water supplies could lead to shutdown of mine production which will adversely affect the Project’s production costs, mining and processing schedule.

A summary of the main Project risks are included, summarized and ranked by their importance as follows:

		Risk Issue Likelihood	Risk Issue Likelihood
		Consequence		Likelihood			Consequence Rating			Risk
		Geological
		Resource/Reserve
		tonnes	and grades
		significantly not
		achieved beyond the
		limits implied by the
		JORC classifications		Unlikely			Major			Medium
		Mine Workings
		Collapse		Unlikely			Major			Medium
		Significant Unexpected
		Faulting		Unlikely			Minor			Low
		Unexpected
		Groundwater Ingress		Unlikely			Moderate			Low
		**Economic **	Conditions
		Metal Price		Possible			Moderate			Medium
		Inflation Increases		Possible			Minor			Low
		Change in Interest
		Rate		Possible			Minor			Low
		Loss of Demand		Unlikely			Major			Medium
		Industrial	Disruption	Possible			Minor			Low
		Sovereign Risk		Possible			Moderate			Medium

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		Risk Issue Likelihood
		Consequence	Likelihood		Consequence Rating	Risk
		Environmental
		Significant
		Unpredicted
		Subsidence	Unlikely		Moderate	Low
		Ecology Damage	Possible		Minor	Low
		Extra costs in
		environment
		restoration	Possible		Minor	Low
		Contamination of
		Local Water System	Possible		Minor	Low
		Capital and
		Operating Costs
		Project Timing Delays	Possible		Minor	Low
		Capital Cost Increase	Possible		Moderate	Medium
		Operating Costs
		Underestimated
		Significantly	Unlikely		Major	Medium
		Licensing and
		Permitting	Possible		Moderate	Medium
		Operational Risk
		Underperformance of
		plant and machinery	Possible		Moderate	Medium
		Adverse weather
		condition	Unlikely		Moderate	Low
		Natural Hazard	Unlikely		Moderate	Low
		Lack of working force	Unlikely		Moderate	Low

Table 19 — Project risk assessment

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APPENDIX V COMPETENT PERSON’S REPORT ON THE TARGET MINES

Appendix B: Qualifications and Experience

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APPENDIX V COMPETENT PERSON’S REPORT ON THE TARGET MINES

Philip Alan Jones — Competent Person — Bachelor (Applied Geology), AusIMM, AIG

Philip has over thirty years experience as a geologist in exploration, prospect evaluation, project development, open pit and underground mining and as well as various management roles. He has experience in a wide variety of commodities including gold, uranium, iron ore, phosphate, copper, lead, zinc, silver, nickel and silica in Australia, Kyrgyzstan, China, Indonesia, New Zealand, Malaysia, Papua New Guinea, and Africa. He is a member of the Australasian Institute of Mining and Metallurgy and Australian Institute of Geoscientists.

Philip has extensive experience in open pit and underground mining operations including grade control, mine planning and production scheduling, production reconciliation and reporting, compiling departmental budgets. He has extensive experience in JORC compliant ore reserve and mineral resource estimate on numerous orebodies in wide ranging geological environments. He is competent in a wide variety of computer software packages including specialised exploration and mining software such as MineMap, Arcview GIS, MapInfo, Micromine and Surpac.

Philip acts as the Competent person for the Project and has made a site visit.

Emmanuel Ekow Mensah — Senior Geologist — Bachelor in Geological Engineering, AusIMM

Emmanuel has about ten years experience as a geologist in exploration, prospect evaluation, project development, open pit and underground mining. He has been responsible for developing and maintaining Quality Control and Quality Assurance (QA/QC) procedures, generation of resource and grade control 3-D models as well as mining ore blocks and ensuring resource reporting and reconciliations are at least to AGA standards. Emmanuel has been also responsible for providing training to the geology teams under his responsibility. He is a member of the Australasian Institute of Mining and Metallurgy.

Emmanuel is the peer reviewer of the Report and has reviewed in the section of resources/reserves estimate.

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APPENDIX V COMPETENT PERSON’S REPORT ON THE TARGET MINES

Appendix C: Abbreviations

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	�	micron	kPa	kilopascal
	oC	degree Celsius	kVA	kilovolt-amperes
	oF	degree Fahrenheit	kW	kilowatt
	�g	microgram	kWh	kilowatt-hour
	A	ampere	L	litre
	a	annum	L/s	litres per second
	Bbl	barrels	M	metre
	btu	British thermal units	M	Mega (million)
	C$	Canadian dollars	m2	square metre
	cal	calorie	m3	cubic metre
	CFM	cubic metres per minute	Min	minute
	cm	centimetre	MASL	metres above sea level
	cm2	square centimetre	Mm	millimetre
	d	day	mph	miles per hour
	dia	diameter	MVA	megavolt-amperes
	dmt	dry metric tonne	MW	megawatt
	dwt	deadweight ton	MWh	megawatt-hour
	ft	foot	m3/h	cubic metres per hour
	ft/s	foot per second	opt, oz/st	ounce per short ton
	ft2	square foot	oz	Troy ounce (31.1035g)
	ft3	cubic foot	oz/dmt	ounce per dry metric tonne
	g	gram	ppm	part per million
	G	giga (billion)	psia	pound per square inch absolute
	Gal	Imperial gallon	Psig	pound per square inch gauge
	g/L	gram per litre	RL	relative elevation
	g/t	gram per tonne	S	second
	gpm	Imperial gallons per minute	SG	Specific Gravity
	gr/ft3	grain per cubic foot	St	short ton
	gr/m3	grain per cubic metre	Stpa	short ton per year
	hr	hour	Stpd	short ton per day
	ha	hectare	T	metric tonne
	hp	horsepower	Tpa	metric tonne per year
	in	inch	Tpd	metric tonne per day
	in2	square inch	US$	United States dollar
	J	Joule	USg	United States gallon
	k	kilo (thousand)	USgpm	US gallon per minute
	kcal	kilocalorie	V	Volt
	kg	kilogram	W	Watt
	km	kilometre	wmt	wet metric tonne
	km/h	kilometre per hour	yd3	cubic yard
	km2	square kilometre	Yr	Year

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Appendix D: Glossary

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	Word	Definition
	accretionary	A mass of sediment and oceanic lithosphere that is transferred from a
		subducting plate to the less dense, overriding plate with which it converges...
	aeolian	Acted upon by wind.
	amalgamation	The joining together of two fault bounded bodies of rock.
	aquifers	A body of rock that contains sufficient saturated permeable material to
		conduct groundwater and to yield significant quantities of water to wells and
		springs.
	Archean	A geologic eon 3,800-2,500 million years ago beginning after the Hadean eon
		and ending at the start of the Proterozoic Eon.
	arid	A region with a severe lack of available water, to the extent of hindering or
		even preventing the growth and development of plant and animal life.
	assay	The testing and quantification analysis of an ore, metal, or alloy.
	backfill	Earth or other material used to replace material removed temporarily during
		construction or mining. Backfill may or may not be the material originally
		removed.
	banded	The appearance of rocks that have thin and nearly parallel bands of different
		textures, colors, and minerals.
	basic rock	Said of igneous rock having relatively low silica content. It is fairly rich in
		iron, magnesium and/or calcium; it includes most mafic rocks as well as
		other rocks. It is one of four subdivisions of a widely used system for
		classifying igneous rocks based on their silica content.
	basin	A large-scale down warping structural formation of rock strata formed by
		tectonic warping of previously flat lying strata.
	bedrock	The consolidated rock underlying the broken and weathered unconsolidated
		rock in the basal subsoil.
	calcium	Chemical symbol: Ca. A soft gray alkaline earth metal that is the
		fifth-most-abundant element by mass. It is a major material used in
		mineralization of bones and shells.
	Caledonian	An orogeny that encompasses events which ranged from the Ordovician to
		Early Devonian, roughly 490-390 million years ago.
	Cambrian	A geological period 542—488.3 million years ago. It is the first geological
		period of the Paleozoic Era.
	Carboniferous	A geological period from 359.2—299 million years ago. It is named as such
		due to the numerous coal beds laid down during this period.
	cathode	A negatively charged electrode through which electric current flows out of a
		polarized electrical device.
	colluvium	Loose bodies of sediment that have been deposited or built up at the bottom
		of a low-grade slope or against a barrier on that slope, transported by gravity.
	convergent	A continental edge that is also a plate edge and is being deformed by
	margin	collision with another plate.
	craton	A part of the Earth’s crust that has attained stability and has been little
		deformed for a prolonged period.

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	Cretaceous A geologic period 145.5—65.5 million years ago beginning after the Jurassic	Cretaceous A geologic period 145.5—65.5 million years ago beginning after the Jurassic	Cretaceous A geologic period 145.5—65.5 million years ago beginning after the Jurassic	Cretaceous A geologic period 145.5—65.5 million years ago beginning after the Jurassic
	period.
	crystalline A solid with structural order where the atoms or molecules are arranged in
	a regular, periodic manner. The structure has a large influence on hardness,
	density, transparency and diffusion.
	cyanide A chemical compound which consists of a carbon atom triple-bonded to a
	nitrogen atom. It is used to extract gold and silver by dissolving metals from
	their ores.
	diorite A greyish intrusive igneous rock composed of plagioclase feldspar, biotite,
	hornblende, and/or pyroxene. It is the result of a partial melting of a mafic
	rock above a subduction zone. It is commonly produced in volcanic			arcs, and
	in cordilleran mountain buildings. The extrusive volcanic equivalent rock
	type is	andesite.
	ductile Rock that is able to sustain, under a given set of conditions, 5-10% strain
	without losing strength.
	dykes A tabular body of intrusive igneous rock, crosscutting the host strata			at a high
	angle.
	electrowinning The electro-deposition of metals on cathodes that have been dissolved or
	liquefied. It is a key technique for the economical and simple purification of
	non-ferrous metals.
	elution To remove (adsorbed material) from an adsorbent by means of a solvent
	fault A planar fracture or discontinuity in a volume of rock, across which			there has
	been significant displacement as a result of the Earth’s movement.
	fissure A surface fracture or a crack in rock along which there is a			distinct
	separation. It is can be filled with mineral-bearing material.
	fluxes A chemical flowing agent.
	Geochemistry From the study of the distribution and quantity of chemical elements in
	minerals, ores, rocks, soils and water
	Geophysics The study of the Earth by quantitative physical		methods including magnetics,
	electrical properties, gravity and seismic velocity.
	grade The chemical level contained in a rock, usually the metal content.
	granodiorite An intrusive igneous rock similar to granite, but containing more plagioclase
	than orthoclase-type feldspar.
	gravel Composed of unconsolidated rock fragments that between sand and boulder
	size that have formed as a result of the weathering and erosion of			rocks.
	Holocene A geological period which began around 10,000 years ago. It is presently
	ongoing.
	hydrothermal Of or pertaining to hot water and to the action of hot water, such as a mineral
	deposit precipitated from a hot aqueous solution.
	intrusive rock Igneous rocks which form by the crystallization of magma within the crust.
	It is characterized by large crystal sizes which formed due to a slow cooling
	of the magma.
	Jurassic The geological period between 199.6—145.5		million years ago. It is also
	known	as the age of reptiles.

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	leaching A widely used extractive metallurgy where metals are extracted from ores as	leaching A widely used extractive metallurgy where metals are extracted from ores as	leaching A widely used extractive metallurgy where metals are extracted from ores as	leaching A widely used extractive metallurgy where metals are extracted from ores as
	soluble salts in aqueous media.
	lenticular A body of ore or rock or a deposit that is thick in the middle and			thin at the
	edges, resembling a convex lens in cross-section.
	limestone A sedimentary rock composed largely of the minerals calcite and aragonite
	making up about 10% of the total volume of all sedimentary rocks Many
	limestones are composed from skeletal fragments of marine organisms.
	loam Soil composed of sand, silt, and clay in relatively even concentration along
	with organic humus.
	magmatism The development and movement of magma, and its solidification to igneous
	rock.
	magnetite A mineral comprising iron and oxygen which exhibits magnetic properties.
	mantle plume A rising	pipe-shaped volume of molten mantle passing through solid mantle.
	marble Metamorphic rock that is composed re-crystallized carbonate minerals
	(mainly	calcite and dolomite).
	metamorphic A rock that has been altered by physical and chemical processes			involving
	heat, pressure and derived fluids.
	metasomatism The open-system metamorphic process in		which the original	chemical
	composition of a rock is changed by reaction with an external source in the
	presence of a fluid medium flowing through the rock.
	mylonite A fine-grained, compact metamorphic rock produced in highly sheared zones
	by dynamic re-crystallization of the constituent minerals resulting in a
	reduction of the grain size of the rock.
	Neogene A geologic period ranging from 23.03—2.588 million years ago.
	Neoproterozoic A geologic time ranging from 1000-542 million years ago.
	Ordovician A geologic period ranging from488.3—443.7 million years ago.
	orogenic Used to	describe the formation of long tracts of highly deformed rock as a
	result of engagement of tectonic plates. It		is the primary mechanism by
	which mountains are built on continents.
	orogenic belt A linear	or curved region that has been subjected to folding		and other
	deformation during an orogenic cycle.
	outcrop That part of a geologic formation or structure that appears at the			surface of
	the earth; also, bedrock that is covered only by surficial deposits such as
	alluvium.
	Paleoproterozoic A geological era about 2500 - 1600 million		years ago. It is the first of the
	three Eras of the Proterozoic Eon.
	pelitic Pertaining to or characteristic of a sediment or sedimentary rock which is
	composed of the finest clay or mud-sized particles.
	Permian A geological period from 299—251 million years ago. It follows the
	Carboniferous and precedes the Triassic. It ended with the largest mass
	extinction in Earth’s history, in which nearly		90% of marine species and 70%
	of terrestrial species died out.
	phosphorous Excessive phosphorous contamination in steel making causes brittleness.

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	phreato-magmatic An explosive volcanic eruption result from the	phreato-magmatic An explosive volcanic eruption result from the	interaction between water and	interaction between water and
	explosion magma.
	pillar Bedrock support remaining after removal or surrounding rock by mining.
	Pleistocene A geological epoch ranging from 2,588,000 to 11,700 years ago. The end of
	the Pleistocene marks the end of the most recent glacial period.
	pluvial An extended period of abundant rainfall lasting many thousands of years.
	Pluvial	is also applied to the sediments of these periods. The term is usually
	applied to periods during the Pleistocene Epoch.
	porphyroclast A clast or mineral fragment in a metamorphic rock, surrounded by a
	groundmass of finer grained crystals.
	Proterozoic An era	of geological time spanning the period from 2,500 to 570 million
	years ago.
	pyrite A pale	yellow iron sulfide with the formula FeSi. It is the most common of
	the sulfide minerals and is usually found associated with other sulfides or
	oxides	in quartz veins, sedimentary rock, metamorphic rock and coal beds.
	pyroclastic rocks Volcanic rocks formed from airborne ash, lapilli and bombs or blocks ejected
	from the volcano itself, mixed in with shattered country rock.
	quartz The second-most-abundant mineral in the Earth’s continental crust,			with the
	formula SiOi. It commonly forms in veins that may contain ore bearing
	minerals including gold.
	Quaternary The most recent geological period spanning from2.58 million years ago to
	the present.
	rift A place where the Earth’s crust and lithosphere are being pulled apart. The
	axis of	the rift may be actively volcanic.
	Rodinia The name of an ancient supercontinent assumed to contain most			or all of
	Earth’s landmass. According to plate tectonic reconstructions,			Rodinia
	existed	between 1.1 billion and 750 million years ago.
	schistosity The alignment of platy mineral grains or inequant crystals.
	sediment A rock	formed from the weathering of surrounding rocks that have been
	transported or deposited by air, water, or ice		at the Earth’s surface.
	shear A deformation resulting from stresses that causes one body of rock to slide
	past another.
	shear zone A zone	in which shearing has occurred.
	skarn A skarn is an altered (metamorphosed) rock that forms at the contact between
	an igneous intrusion and impure limestone		or dolomite which may host
	copper, lead, zinc, iron, gold, molybdenum, tin, and tungsten ore deposits.
	strike The intersection of a bed or fault with a horizontal plane. It is usually
	described as a quadrant compass bearing. The perpendicular to the			strike is
	the dip	of the bed or fault.
	Subduction The process that takes place at convergent plate boundaries by which one
	tectonic plate moves under another tectonic plate, sinking into the Earth’s
	mantle.
	sulphide A mineral compound characterized by its sulfur content along with a metal
	or semimetal.

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APPENDIX V COMPETENT PERSON’S REPORT ON THE TARGET MINES

		tectonic	Relating to, causing, or resulting from structural deformation in the earth’s	Relating to, causing, or resulting from structural deformation in the earth’s	Relating to, causing, or resulting from structural deformation in the earth’s
			crust.
		transpression	The response of a rock to deformation usually by compressive stress and
			forms particular textures. Also known as shear.
		trend	The compass direction of a linear feature as projected onto a horizontal
			plane.
		Triassic	A geologic period	spanning 251—199.6 million years ago.
		uplift	Any force that tends to raise a rock mass relative to its surroundings.
		Variscan	A geologic mountain-building event caused by Late Paleozoic continental
			collision between	Euramerica and Gondwana to form the supercontinent of
			Pangaea. It began in the Devonian period and concluded in the Permian
			period.
		vesiculation	The process of forming of gas bubbles in molten lava during solidification.

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Appendix E: Exploitation licence of Heishiliang

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Appendix F: Exploitation licence of Hongshannan

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Appendix G: Exploitation licence of Tuchushan

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Appendix H: Exploration licence of Baishiquan

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Appendix I: Laboratary result of Hongshannan and Heishiliang

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Appendix J: Laboratory result of Baishiquan

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Appendix K: Laboratory result of Baishiquan

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VALUATION REPORT ON THE TARGET MINES

APPENDIX VI

The following is the text of the Valuation Report on the Target Mines as of 1 December 2011 for the purpose of inclusion in this circular received from Mr. Philip Alan Jones.

Phil Jones Consulting Geologist

(ABN 25 116 285 896) Mineral Project Evaluation and Development

4 Buchan Place, HILLARYS, WA, 6025 Australia

Tel: +61 894030434 philjones@iinet.net.au

12 April 2012

Timeless Software Limited Units 111-113, 1st Floor Building 9, Phase One Hong Kong Science Park Tai Po, Hong Kong

Case Ref: KY/OT381/JUN11(b)

Dear Sir/Madam,

• Re: Valuation of the Four Mines Owned by 新疆天目礦業資源開發有限公司 (Xinjiang Tianmu Mineral Resources Development Co. Ltd.)

SUMMARY

In accordance with the instructions from Timeless Software Limited (hereinafter referred to as the “Company”), we have performed a valuation of the four mines located at Hami City (哈密市) of Xinjiang Uygur Autonomous Region (新疆維吾爾自治區), the People’s Republic of China (“the PRC”) (hereinafter referred to as the “Mines”), namely Heishiliang gold mine (hereinafter referred to as “Mine 1”), Hongshannan gold mine (hereinafter referred to as “Mine 2”), Tuchushan iron mine (hereinafter referred to as “Mine 3”) and Baishiquan nickel-copper mine (hereinafter referred to as “Mine 4”) as at 1 December 2011 (hereinafter referred to as the “Date of Valuation”). 新疆天目礦業 資源開發有限公司 (Xinjiang Tianmu Mineral Resources Development Co. Ltd.) (hereinafter referred to as “Xinjiang Tianmu”) possesses the exploitation and/or exploration rights in connection with the Mines.

This report states the purpose and basis of valuation, scope of work, economic and industry overviews, overviews of Xinjiang Tianmu and the Mines, major assumptions, valuation methodology and limiting conditions, and presents our opinion of values.

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VALUATION REPORT ON THE TARGET MINES

APPENDIX VI

This report has been prepared in accordance with the guidelines set by the VALMIN Code established by the VALMIN Committee in Australia.

Xinjiang Tianmu is principally engaged in the exploration and exploitation of gold, iron and nickel-copper mines in Xinjiang, the PRC and the processing and sale of the outputs from the mines. It holds six exploration licences for five gold mines and one nickel-copper mine, namely Baishiquan nickel-copper mine, and six exploitation licences for another five gold mines and one iron mine in Xinjiang, the PRC. Among the five gold mines and one iron mine with exploitation licences, two gold mines and one iron mine, namely Heishiliang gold mine, Hongshannan gold mine and Tuchushan iron mine, are operating and generating revenue whereas the remaining three gold mines are at the stage of pre-production exploration meaning that they are not in production and are yet to generate revenue.

The Reserve and Resource estimate tables of the Mines as at 30 November 2011 are respectively shown as follows:

Mine 1:

		Tonnage	Average
		(thousand	Grade
Gold Mine	Category of Resource	tonnes)	(gram/tonne)
Heishiliang	Measured	—	—
	Indicated	27	3.78
	Inferred	98	3.14
		Tonnage	Average
		(thousand	Grade
	Category of Reserve	tonnes)	(gram/tonne)
	Proved	—	—
	Probable	26	3.44
	Stockpiles	18	3.49

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VALUATION REPORT ON THE TARGET MINES

APPENDIX VI

Mine 2:

		Tonnage	Average
		(thousand	Grade
Gold Mine	Category of Resource	tonnes)	(gram/tonne)
Hongshannan	Measured	114	5.65
	Indicated	9	2.98
	Inferred	11	3.51
		Tonnage	Average
		(thousand	Grade
	Category of Reserve	tonnes)	(gram/tonne)
	Proved	106	5.14
	Probable	8	2.71
	Stockpiles	13	2.96
Mine 3:
		Tonnage
		(thousand	Average
Iron Mine	Category of Resource	tonnes)	Grade (%)
Tuchushan	Measured	—	—
	Indicated	329	37.90
	Inferred	681	37.90
		Tonnage
		(thousand	Average
	Category of Reserve	tonnes)	Grade (%)
	Proved	—	—
	Probable	322	32.96
	Stockpiles	14	39.65

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VALUATION REPORT ON THE TARGET MINES

APPENDIX VI

Mine 4:

Nickel-Copper Mine Category of Resource Tonnage (thousand tonnes) Baishiquan Measured — Indicated 1,617 Inferred 6,796 Category of Reserve Tonnage (thousand tonnes) Proved — Probable 1,208 Stockpiles —	Average Grade (%) Copper Nickel — — 0.35 0.60 0.15 0.47 Average Grade (%) Copper Nickel — — 0.34 0.52 — —

Source: Competent Person’s Report

Our investigation included discussions with members of the management of Xinjiang Tianmu in relation to the development and prospect of the gold, iron, nickel and copper mining industries in China and worldwide, and the development, operations and other relevant information of Xinjiang Tianmu and the Mines. In addition, we have made relevant inquiries and obtained further information and statistical figures regarding the gold, iron, nickel and copper mining industries from external public sources as we considered necessary for the purpose of the valuation.

As part of our analysis, we have reviewed such financial information and other pertinent data concerning Xinjiang Tianmu and the Mines provided to us by the management of Xinjiang Tianmu and had considered such information and data as attainable and reasonable. We have also consulted other sources of financial and business information. We also relied upon the information provided by and the parameters advised by the Competent Person’s Report.

The valuation of the Mines requires consideration of all pertinent factors, which may or may not affect the operation of the business and its ability to generate future investment returns.

In the process of valuing the Mines, we have taken into account of the operations, performance and financial information of various listed companies engaged in gold, iron, copper and nickel mining businesses in the PRC and worldwide. We have considered the adoption of the Income-Based Approach in arriving at the fair market values of the Mines.

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APPENDIX VI

Based on the investigation and analysis conducted, the valuation method employed, and the sensitivity analyses performed, the fair market values of the Mines as at the Date of Valuation, in our opinion, were reasonably stated as follows:

Fair Market Values of the Mines as at 1 December 2011

Heishiliang Gold Mine (“Mine 1”) : Hongshannan Gold Mine (“Mine 2”) : Tuchushan Iron Mine (“Mine 3”) : Baishiquan Nickel-Copper Mine (“Mine 4”) : Aggregate Fair Market Value of the Mines (Rounded) :	Range HK$ 24,000,000 to 25,000,000 71,000,000 to 78,000,000 38,000,000 to 41,000,000 206,000,000 to 248,000,000 339,000,000 to 392,000,000	Preferred Value HK$ 24,500,000 74,500,000 39,500,000 227,000,000
		366,000,000

Aggregate Fair Market Value of the Mines (Rounded)

1. PURPOSE OF VALUATION

This report is prepared solely for the use of the directors and management of the Company. The Company is a public company listed on the Growth Enterprise Market (“GEM”) of the Stock Exchange of Hong Kong Limited. In addition, we acknowledge that this report may be made available to the Company for public documentation purpose and included in the Company’s circular only.

We assume no responsibility whatsoever to any person other than the Company in respect of, or arising out of, the contents of this report. If others choose to rely in any way on the contents of this report they do so entirely on their own risk.

2. SCOPE OF WORK

Our valuation conclusion is based on the assumptions stated herein and the information provided by the management of the Company, the management of Xinjiang Tianmu and/or its representative(s) (together referred as the “Management”).

In preparing this report, we have had discussions with the Management in relation to the development and prospect of the gold, iron, nickel and copper mining industries, the development, operations and other relevant information of Xinjiang Tianmu and the Mines. As part of our analysis, we have reviewed such financial information and other pertinent data concerning Xinjiang Tianmu and the Mines provided to us by the Management and have considered such information and data as attainable and reasonable.

We have no reason to believe that any material facts have been withheld from us. However, we do not warrant that our investigations have revealed all of the matters which an audit or more extensive examination might disclose.

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VALUATION REPORT ON THE TARGET MINES

APPENDIX VI

3. ECONOMIC OVERVIEW

3.1 Overview of the Economy in China

According to the National Bureau of Statistics of China, the nominal Gross Domestic Product (“GDP”) in 2010 was RMB 39,798.3 billion, an increase of 10.3% in real term over the previous year. While in the first two quarters of 2011, China’s GDP was RMB 20,445.9 billion, which was 9.6% higher than that of the same period last year. China is the third largest economy in the world, ranked after the European Union and the United States, in terms of nominal GDP measured by the International Monetary Fund in 2010. Despite the global financial crisis in late 2008, the Chinese economy continued to be supported by the Chinese government through spending in infrastructure and real estates.

Throughout 2009, the global economic downturn reduced foreign demand for Chinese exports for the first time in many years. The government vowed to continue reforming the economy and emphasized the need to increase domestic consumption in order to make China less dependent on foreign exports. China economy rebounded quickly in 2010, outperforming all other major economies with robust GDP growth and the economy appears to remain in strong growth in 2011.

Over the past decade from 2001 to 2010, compound annual growth rate of China’s GDP was 9.3% and in the government’s latest plan, it is targeted to grow at 7% for the period from 2011 to 2015. Figure 1 further illustrates the GDP from 2006 to 2010 in China.

Figure 1 — China’s Gross Domestic Product from 2006 to 2010

==> picture [377 x 164] intentionally omitted <==

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

Billion RMB
45,000
39,798.3
40,000
34,090.3
35,000 31,404.5
30,000 26,581.0
25,000 21,631.4
20,000
15,000
10,000
5,000
0
2006 2007 2008 2009 2010
----- End of picture text -----

Source: National Bureau of Statistics of China

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APPENDIX VI

4. INDUSTRY OVERVIEW

4.1 Gold Industry

4.1.1 Gold Demand

Demand for gold is mainly derived from four sectors, namely jewellery consumption, industrial and dental uses, retail investments, and Exchange Traded Funds (“ETFs”) and similar products.

Throughout 2009, global jewellery demand continued to recover from the depressed levels in the first quarter which was affected in the aftermath of the global economic recessions. Global demand in the third quarter of 2011 amounted to 1,078.2 tonnes, an 8.1% increase from the third quarter of 2010, according to the World Gold Council. The global jewellery demand in the third quarter of 2011 has decreased by 10.3% when compared with the third quarter of 2010. India and China are the two largest markets for gold jewellery, which accounted for more than half of total world demand. Figure 2 shows the global identifiable jewellery consumption from the first quarter of 2009 to the third quarter of 2011.

Figure 2 - Global Identifiable Gold Demand for Jewellery Consumption (in tonnes)

		Identifiable Gold	Identifiable Gold
	Demand for Jewellery
Quarter		Consumption
2009 Q1			356.1
Q2			444.8
Q3			492.1
Q4			520.5
2010 Q1			520.5
Q2			416.1
Q3			518.2
Q4			562.0
2011 Q1			552.5
Q2			469.1
Q3			464.7

Source: Gold Demand Trends, Full year 2011, World Gold Council, published in February 2012

Gold demand for industrial and dental applications has been gradually declining in the third quarter of 2011 compared with the third quarter of 2010. On the other hand, demend from electronics in the third quarter of 2011 was 86.7 tonnes, 0.7% over that in the third quarter of 2010. Emerging from the global economic crisis prevailing in late 2008, this particular sector has been improving since the second quarter of 2009. Demand even rose to 86.1 tonnes in the third quarter of 2010.

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APPENDIX VI

Demand from the other industrial and decorative segment (classified as “Other industrial” in figure 3) also contributes to the elevated gold price, with demand increasing by 6.4% in the fourth quarter of 2010 from that of 2009. The demand increased from 18.2 tonnes in the first quarter of 2009 to 22.4 tonnes in the third quarter of 2011. Figure 3 shows the global identifiable gold demand for industrial and dental uses.

Figure 3 - Global Identifiable Gold Demand for Industrial and Dental Uses (in tonnes)

Quarter	Electronics	Other industrial	Dentistry	Total
2009 Q1	56.5	18.2	13.0	87.7
Q2	66.7	22.4	13.2	102.3
Q3	74.3	19.7	13.2	107.2
Q4	77.5	21.8	13.2	112.5
2010 Q1	79.0	22.4	12.8	114.3
Q2	80.4	23.3	12.4	116.1
Q3	86.1	22.0	11.8	120.1
Q4	81.3	23.2	11.6	116.1
2011 Q1	79.9	22.8	11.8	114.5
Q2	82.9	23.1	10.9	116.9
Q3	86.7	22.4	10.7	119.8

Source: Gold Demand Trends, Full year 2011, World Gold Council, published in February 2012

The net retail investment sector is further divided into several categories relating to global bar and coin demands, including bar hoarding, official coins, medals and imitation coins, and some other identified retail investment in gold. The demand for net retail investment in the third quarter of 2011 was 416.1 tonnes, which was 34.3% higher quarter over quarter. Among the various categories, physical bar hoarding demand accounted for over 77.2% and totaled 321.4 tonnes in the third quarter of 2011. Official coin demand remained resilient to the recovering global economy. The demand in the third quarter of 2011 amounted to 74.6 tonnes, capturing 17.9% of the net retail investment gold demand.

Although demand for gold in the ETFs and similar products sector remained healthy in terms of absolute level of investment demand, there was a demand of 77.6 tonnes from ETFs and similar products in the third quarter of 2011. Figure 4 shows the identifiable gold demand for net retail investment and gold ETFs.

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APPENDIX VI

Figure 4 - Identifiable Gold Demand for Net Retail Investment and Gold Exchange Traded Funds (in tonnes)

					Gold Exchange
Quarter		**Net Retail **	Investment		Traded Funds
	Bar Hoarding	Official Coin	Other	Total
2009 Q1	72.4	68.9	6.0	147.3	465.1
Q2	140.3	55.6	14.8	210.7	68.1
Q3	142.7	49.5	17.8	210.0	42.2
Q4	132.9	55.7	20.3	208.9	41.7
2010 Q1	182.0	45.3	22.5	249.8	4.7
Q2	216.7	68.8	16.0	301.4	291.6
Q3	228.9	56.6	24.3	309.8	49.1
Q4	271.4	41.9	25.5	338.8	22.3
2011 Q1	312.7	60.5	24.7	397.9	-62.1
Q2	256.1	50.2	25.0	331.3	51.7
Q3	321.4	74.6	20.0	416.1	77.6

Source: Gold Demand Trends, Full year 2011, World Gold Council, published in February 2012

4.1.2 Gold Supply

The supply of gold worldwide has been on a downward trend from 2005 to 2008. Two major factors were the de-hedging by gold producers and reducing contributions from official sector sales over the past few years. A bounce back had been observed in 2009 and 2010 when supply of gold increased to 4,344 tonnes in 2010. Up to September 2011, the world gold supply was 3,526 tonnes, which increased by 9.9% compared with the first three quarters of 2010. Figure 5 illustrates the world gold supply from 2000 to September 2011.

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APPENDIX VI

Figure 5 — World Supply of Gold from 2000 to September 2011

==> picture [319 x 177] intentionally omitted <==

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

Tonnes
5,000
4,500
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Sep
2011
----- End of picture text -----

Source: GFMS Limited and World Gold Council

The world gold mine production followed a similar pattern over the past few years. The volume amounted to 2,693 tonnes in 2010, a 4.0% increase over the previous year. In the third quarter of 2011, the world gold mine production increased by 2.6% over the third quarter of 2010. Figure 6 shows the world gold mine production from 2000 to September 2011.

Figure 6 — World Gold Mine Production from 2000 to September 2011

==> picture [307 x 179] intentionally omitted <==

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

Tonnes
3,000
2,500
2,000
1,500
1,000
500
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Sep
2011
----- End of picture text -----

Source: GFMS Limited and World Gold Council

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APPENDIX VI

4.1.3 Spot Price

The gold price has experienced a substantial increase over the past decade. The closing spot price in 2010 was more than five times higher than that in 2000. The closing spot price per ounce in December 2010 was US$ 1,421, a 29.5% increase in the twelve-month period from December 2009. Figure 7 shows the monthly closing spot price from January 2010 to November 2011, and figure 8 shows the closing spot price from 2000 to 2010.

Figure 7 — Monthly Closing Spot Price of Gold from January 2010 to November 2011

==> picture [319 x 198] intentionally omitted <==

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

Closing Spot Price
(US$/Ounce)
2,000
1,800
1,600
1,400
1,200
1,000
800
600
400
200
0
Jan02010 Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan 2011 Feb Mar Apr May Jun Jul Aug Sep Oct Nov
----- End of picture text -----

Source: Bloomberg

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APPENDIX VI

Figure 8 — Closing Spot Price of Gold from 2000 to 2010

==> picture [385 x 226] intentionally omitted <==

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

Closing Spot Price
(US$/Ounce)
1,600
1,400
1,200
1,000
800
600
400
200
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2000 2010
----- End of picture text -----

Source: Bloomberg

4.1.4 Gold Industry in China

The economy of China was least affected during the global economic recession in late 2008. While consumer demand for gold in the fourth quarter in 2009 began to recover among most of the countries, China was the country that had the second largest increase in demand in terms of value after India in the fourth quarter of 2010. Figure 9 below shows the comparison of consumer demand for gold in some selected countries between the fourth quarter of 2009 and that of 2010.

Figure 9 — Comparison of Consumer Demand for Gold among Some Selected Countries

	2009 Q4	2010 Q4	Percentage
Country/Region	(US$ million)	(US$ million)	Change
India	7,351	13,121	+78.5%
Mainland China	4,383	8,362	+90.8%
Hong Kong	156	237	+51.9%
Taiwan	-46	127	+376.1%
South Korea	115	165	+43.5%
Middle East	1,710	1,950	+14.0%
USA	3,347	3,469	+3.6%
UK	603	606	+0.5%
Germany	884	1520	+71.9%
Italy	760	782	+2.9%
Switzerland	682	1,151	+68.8%

Source: World Gold Council

— VI-12 —

APPENDIX VI

VALUATION REPORT ON THE TARGET MINES

Data releases according to the National Bureau of Statistics of China showed that China’s GDP in the fourth quarter of 2010 was RMB 39,798.3 billion, a 10.3% increase compared with that of the fourth quarter of 2009. Such economic growth was reflected in a 53.5% increase in consumer demand for gold from the fourth quarter of 2009 to that of 2010, reaching 190.3 tonnes. Figure 10 compares the volume of consumer demand for gold in China.

Figure 10 — Consumer Demand for Gold in China

			Percentage
	2009 Q4	2010 Q4	Change
	(tonnes)	(tonnes)
Jewellery	91.7	128.9	+40.6%
Net retail investment	32.3	61.4	+90.1%
Total	124.0	190.3	+53.5%

Source: World Gold Council

4.2 Iron Industry

4.2.1 Overview

Iron ores are rocks and minerals from which metallic iron can be economically extracted. According to the Mineral Information Institute, about 98% of iron ores are used to make steel. Raw iron by itself is not strong and hard enough for construction and other purposes. The raw iron is usually alloyed with a variety of elements such as nickel, vanadium and chromium to strengthen and harden it, making useful steel for construction, automobiles, and various types of transportation such as trucks, trains and train tracks.

4.2.2 Global Iron Ore Production

While iron-rich rocks are available worldwide, commercial mining in iron ores is mainly operated by the countries listed in figure 11. It is not particularly hard to prove the existence of the tonnage of rocks, but there are certain constraints to the economics of iron ore deposits. The geographical locations of the iron ores relative to the importing countries have been one issue. In some cases the cost of transportation is higher than the value of the cargo because of the respective locations, according to the Financial Times. Energy cost in production could be another issue too.

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APPENDIX VI

Figure 11 — World Iron Ore Mine Production

	2009	2010
	(million tonnes)	(million tonnes)
China	880	900
Australia	394	420
Brazil	300	370
India	245	260
Russia	92	100
Ukraine	66	72
South Africa	55	55
United States	27	49
Canada	32	35
Iran	33	33
Sweden	18	25
Kazakhstan	22	22
Venezuela	15	16
Mexico	12	12
Mauritania	10	11
Other Countries	43	50
World Total	2,244	2,430

Source: U.S. Geological Survey

Due to the highly capital-intensive nature of the iron ore mining industry, majority of the production is dominated by a few market players in the industry. As in early 2010, the world’s largest iron ore producers are listed in figure 12.

— VI-14 —

APPENDIX VI

VALUATION REPORT ON THE TARGET MINES

Figure 12 — Largest Iron Ore Producers as in Early 2010

Company	Base Country	Capacity
		(million tonnes)
Vale Group	Brazil	417.1
Rio Tinto Group	United Kingdom	273.7
BHP Billiton Group	Australia	188.5
ArcelorMittal Group	United Kingdom	78.9
Fortescue Metals Group	Australia	55.0
Evrazholding Group	Russia	50.4
Metalloinvest Group	Russia	44.7
AnBen Group	China	44.7
Metinvest Holding Group	Ukraine	42.8
Anglo American Group	South Africa	41.1
LKAB Group	Sweden	38.5
CVG Group	Venezuela	37.9
Cleveland-Cliffs Group	United States	34.6

Source: World Crude Steel Capacity Report

4.2.3 World Steel Industry

As steel is an alloy mostly consisting of iron, the market of steel has a direct influence on the demand for iron. For several decades, steel has been playing a crucial role in infrastructure and overall economic development, to an extent that the health of the steel industry is often regarded as an indicator of economic growth. Therefore, GDP growth may be considered as a predictor of the steelmaking industry worldwide. Currently, the steel industry has enough potential to grow at an accelerated pace due to numerous developmental projects around the world.

Compared with 2008, world crude steel production decreased by 8.85% to 1,211.5 million tonnes in 2009. However, the production slowly increased starting from 2009 to 1,414 million tonnes in 2010. According to the World Steel Association, the world crude steel production in November 2011 was about 115 million metric tonnes, which is 0.64% higher than that in November 2010. Figure 13 illustrates the world crude steel production by month.

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APPENDIX VI

Figure 13 — World Crude Steel Production by Month

==> picture [321 x 188] intentionally omitted <==

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

Million Metric tonnes
140
130
120
110
100
90
80
Jan 2010 Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan 2011 Feb Mar Apr May Jun Jul Aug Sep Oct Nov
----- End of picture text -----

Source: World Steel Association

The top ten steel producing countries listed in figure 14 had a total production of 1,148.4 million metric tonnes in 2010. China was the top producer of crude steel in 2010 with 626.7 million metric tonnes, sharing 44.3% of the world total crude steel output. Japan, the United States and Russia followed respectively.

Figure 14 — Top Ten Steel Producing Countries (in million metric tonnes)

		Production	Production	Percentage
Rank	Country	in 2009	in 2010	Change
1	China	573.6	626.7	+9.3%
2	Japan	87.5	109.6	+25.2%
3	United States	58.2	80.6	+38.5%
4	Russia	60.0	67.0	+11.7%
5	India	62.8	66.8	+6.4%
6	South Korea	48.6	58.5	+20.3%
7	Germany	32.7	43.8	+34.1%
8	Ukraine	29.9	33.6	+12.4%
9	Brazil	26.5	32.8	+23.8%
10	Turkey	25.3	29.0	+14.6%
	Top Ten Total	1,005.1	1,148.4	+14.3%
	World Total	1,211.5	1,413.6	+16.7%

Source: World Steel Association

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APPENDIX VI

4.2.4 Iron Industry in China

The spot price of China import iron ore fines with 62% iron content in December 2010 was RMB 1,121 per metric tonne, a 37.9% increase over the twelve-month period from December 2009, while the price was RMB 1,078 per metric tonne in June 2011. Figure 15 illustrates the closing spot price from January 2010 to November 2011 as below.

Figure 15 — China Import Iron Ore Fines (With 62% Iron Content) Closing Spot Price from January 2010 to November 2011

==> picture [316 x 190] intentionally omitted <==

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

RMB/Metric Tonnes
1,300
1,200
1,100
1,000
900
800
700
600
500
Jan 2010 Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan 2011 Feb Mar Apr May Jun Jul Aug Sep Oct Nov
----- End of picture text -----

Source: Steel Business Briefing Commodities Research

Since China is the largest crude steel producing country in the world, the crude steel production volume in China showed a similar pattern as that for the world. The average monthly production in 2010 was approximately 52 million metric tonnes and the production increased to an average level of about 57 million metric tonnes per month for the first three quarters of 2011. Figure 16 shows the monthly crude steel production in China from January 2010 to November 2011.

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APPENDIX VI

Figure 16 — Monthly Crude Steel Production in China from January 2010 to November 2011

==> picture [314 x 187] intentionally omitted <==

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

Million Metric Tonnes
65
60
55
50
45
40
35
30
Jan 2010 Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan 2011 Feb Mar Apr May Jun Jul Aug Sep Oct Nov
----- End of picture text -----

Source: World Steel Association

4.3 Nickel Industry

4.3.1 Overview

The global nickel market has witnessed strong growth in both production and consumption during 2010, after recovering from the recent economic downturn. China experienced the fastest growth in nickel consumption and was anticipated to account for a larger share in the future. Stainless steel and alloys are the main sources of nickel consumption. The demand for stainless steel has increased sharply over the past decade, as a result of the industrialization in developing countries such as China and India. The world nickel mine production in 2010 was approximately 10% higher than the previous year. Russia, Indonesia and the Philippines were the largest nickel producers. The worldwide nickel reserves reached 76,000,000 tonnes in 2010, in which over 30% were owned by Australia. Figure 17 shows the world nickel mine production in 2009 and 2010.

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APPENDIX VI

Figure 17 — World Nickel Mine Production in 2009 and 2010

Russia Indonesia Philippines Canada Australia New Caledonia China Cuba Colombia Brazil South Africa Botswana Venezuela Madagascar Dominican Republic Other Countries World Total	2009 (tonnes) 262,000 203,000 137,000 137,000 165,000 92,800 79,400 67,300 72,000 54,100 34,600 28,600 13,200 — — 51,700 1,397,700	2010 (tonnes) 265,000 232,000 156,000 155,000 139,000 138,000 77,000 74,000 70,200 66,200 41,800 32,400 14,300 7,500 3,100 77,800
		1,549,300

Source: U.S. Geological Survey

4.3.2 Nickel Price

Nickel price, like most commodities, is volatile and greatly influenced by global demand and supply conditions. According to the London Metal Exchange (“LME”), the monthly nickel closing price in November 2011 was US$ 17,492 per tonne, which was 23.9% lower than that in November 2010. Figure 18 shows the monthly closing price from January 2010 to November 2011.

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APPENDIX VI

Figure 18 — Monthly Nickel Closing Price from January 2010 to November 2011

==> picture [320 x 197] intentionally omitted <==

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

US$/Tonnes
35,000
30,000
25,000
20,000
15,000
10,000
5,000
0
Jan 2010 Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan 2011 Feb Mar Apr May Jun Jul Aug Sep Oct Nov
----- End of picture text -----

Source: London Metal Exchange

4.4 Copper Industry

Copper was one of the materials that human beings started extracting on earth which gave rise to the Bronze Age. Its usage has been increasing alongside with the advancement of technology. Copper is easily stretched, molded, and shaped; is resistant to corrosion; and conducts heat and electricity efficiently. As a result, there are a number of applications involving the use of copper including industrial, electrical and transportation.

Since copper is an excellent conductor of electricity, the production of cable, wire and electrical products for both the electrical and building industries accounts for its major usage, sharing 42% of total industrial consumption together. The construction industry, whose applications of copper include pipes for plumbing, heating and ventilating as well as building wire and sheet metal facings, ranks the second largest in terms of industrial usage. Figure 19 shows the share of global industrial consumption of copper by different industries.

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APPENDIX VI

Figure 19 — World Industrial Consumption of Copper

==> picture [301 x 109] intentionally omitted <==

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

Construction
Industrial Machinery
Consumer/General
Transportation
Electrical/Electronic
----- End of picture text -----

Industry Electrical/Electronic Construction Transportation Consumer/General Industrial Machinery Total	% 42 28 12 9 9
	100

Source: Standard CIB Global Research

4.4.1 Copper Demand, Production and Price

According to the International Copper Study Group (“ICSG”), a deficit of about 200,000 tonnes in the refined copper market balance for 2011 is estimated as growth in copper demand is expected to exceed the global growth in copper production.

The global economic crisis in late 2008 reduced world refined copper consumption significantly. There exist uncertainties in copper consumption in the year 2010 due to a severe recession in 2008 and 2009 experienced by a number of major copper consuming regions.

World apparent refined usage in 2011 is expected to grow by only 1.5% from that of 2010. There are numerous factors accounting for the slow growth of copper market, which include European Union sovereign debt issues and significant uncertainty created by market price volatility. Figure 20 shows the forecast on mine production, refined production and copper usage by the ICSG.

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APPENDIX VI

Figure 20 - Forecast of Mine Production, Refined Production and Usage of Copper

	2010	2011	2012
	(’000 tonnes)	(’000 tonnes)	(’000 tonnes)
Mine Production	15,979	16,098	17,612
Refined Production	19,035	19,475	20,136
Copper Usage	19,386	19,676	20,392

Source: ‘Copper Market Forecast 2011-2012’, International Copper Study Group

Copper spot price from the LME from January 2010 to November 2011 is depicted in figure 21.

Figure 21 — LME Copper Spot Price from January 2010 to November 2011

==> picture [320 x 172] intentionally omitted <==

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

US$/Tonnes
11,000
10,000
9,000
8,000
7,000
6,000
5,000
4,000
3,000
2,000
Jan 2010 Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan 2011 Feb Mar Apr May Jun Jul Aug Sep Oct Nov
----- End of picture text -----

Source: London Metal Exchange

5. XINJIANG TIANMU AND THE MINES

5.1 Xinjiang Tianmu

Xinjiang Tianmu is principally engaged in the exploration and exploitation of gold, iron and nickel-copper mines in Xinjiang, the PRC and the processing and sale of the outputs from the mines. It holds six exploration licences for five gold mines and one nickel-copper mine, namely Baishiquan nickel-copper mine (“Mine 4”), and six exploitation licences for another five gold mines and one iron mine in Xinjiang, the PRC. Among the five gold mines and one iron mine with exploitation licences, two gold mines and one iron mine, namely Heishiliang gold mine (“Mine 1”), Hongshannan gold mine

— VI-22 —

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APPENDIX VI

(“Mine 2”) and Tuchushan iron mine (“Mine 3”), are operating and generating revenue whereas the remaining three gold mines are at the stage of pre-production exploration meaning that they are not in production and are yet to generate revenue.

5.2 Hami City of Xinjiang Uygur Autonomous Region

Hami City is an oasis in Hami Prefecture. It is in a fault depression about 200 metres below sea level, and has a cold desert climate, with extreme differences between summer and winter, yet sunny and dry weather year-round. Of its inhabitants in Hami Prefecture, 68.95% are Han, 18.42% are Uygur, 8.76% are Kazakh, 2.97% are Hui and the remaining belonging to other nationalities.

5.3 The Mines

5.3.1 Heishiliang Gold Mine (“Mine 1”)

Mine 1 is an operating mine around 164 kilometres on the east of Hami City of the Xinjiang Uygur Autonomous Region. There is a 220 kilometres asphalt road from Hami City to Jingerquan (鏡兒泉) via National Highway 312 and Xiaohuangshan-Tulaergen Road (小黃山 — 圖拉爾根公路). From Jingerquan to Mine 1, there is a 20 kilometres gravel road which vehicles can pass through. There is about 160 kilometres (120 kilometres displacement) from the west of the mining area to Shankou Station (山口站) of Lanzhou-Xinjiang Railway (蘭新鐵路).

5.3.2 Hongshannan Gold Mine (“Mine 2”)

Mine 2 is an operating mine located about 80 kilometres southwest of Hami City of the Xinjiang Uygur Autonomous Region. Access to Mine 2 is partially through paved roads. The terrain is mostly of rocky desert, making off-road driving possible. The mining area is located about 50 kilometres south of Dananhuxiang (大南湖鄉). Dananhuxiang is 30 kilometres away from Hami City and linked by the level 3 highway between Hami and Luojia (哈密 — 羅鉀).

5.3.3 Tuchushan Iron Mine (“Mine 3”)

Mine 3 is an operating mine located about 130 kilometres southwest of Hami City. There is no major blockage of traffic for the mining area. There are several ways connecting Mine 3 and Hami City. There is a connected sideway from the mining area to Hami City at the northwest via the Tuwu Copper Mine (土屋銅礦). To the east of the mining area, there is another sideway connecting to Yamansu Town (雅滿蘇鎮). The distance between Yamansu Town and Hami City, which are connected by National Highway 312 is about 160 kilometres.

5.3.4 Baishiquan Nickel-Copper Mine (“Mine 4”)

Mine 4 is about 170 kilometres southeast of Hami City of the Xinjiang Uygur Autonomous Region. The mining area is reasonably accessible with paved road passing within a few kilometres with additional exploration roads built throughout the area. Mine 4 is not yet in production.

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5.4 Resource and Reserve Estimates

According to the competent person’s report on the Mines (hereinafter referred to as the “Competent Person’s Report”) prepared by Philip A. Jones, the resources of gold, iron, nickel and copper estimated as at 30 November 2011 in relation to the Mines were respectively as follows:

Mine 1:

Mine 1:
		Tonnage	Average
		(thousand	Grade
Gold Mine	Category of Resource	tonnes)	(gram/tonne)
Heishiliang	Measured	—	—
	Indicated	27	3.78
	Inferred	98	3.14
		Tonnage	Average
		(thousand	Grade
	Category of Reserve	tonnes)	(gram/tonne)
	Proved	—	—
	Probable	26	3.44
	Stockpiles	18	3.49
Mine 2:
		Tonnage	Average
		(thousand	Grade
Gold Mine	Category of Resource	tonnes)	(gram/tonne)
Hongshannan	Measured	114	5.65
	Indicated	9	2.98
	Inferred	11	3.51
		Tonnage	Average
		(thousand	Grade
	Category of Reserve	tonnes)	(gram/tonne)
	Proved	106	5.14
	Probable	8	2.71
	Stockpiles	13	2.96

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Mine 3:

			Tonnage
			(thousand		Average
Iron Mine	Category of Resource		tonnes)		Grade (%)
Tuchushan	Measured		—		—
	Indicated		329		37.90
	Inferred		681		37.90
			Tonnage
			(thousand		Average
	Category of Reserve		tonnes)		Grade (%)
	Proved		—		—
	Probable		322		32.96
	Stockpiles		14		39.65
Mine 4:
		Tonnage
	Category of	(thousand	**Average **		Grade (%)
Nickel-Copper Mine	Resource	tonnes)	Copper		Nickel
Baishiquan	Measured	—		—	—
	Indicated	1,617	0.35		0.60
	Inferred	6,796	0.15		0.47
		Tonnage
	Category of	(thousand	**Average **		Grade (%)
	Reserve	tonnes)	Copper		Nickel
	Proved	—		—	—
	Probable	1,208	0.34		0.52
	Stockpiles	—		—	—

Source: Competent Person’s Report

After our thorough review, we considered that the information contained in the Competent Person’s Report could be reasonably relied on.

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5.5 Mining and Ore Processing

Please refer to the sections of “Geological Setting, Deposit Types and Mineralization” and “Mineral Processing and Metallurgical Testing” of the Competent Person’s Report.

5.6 Taxes and Levies

Please refer to Table 4 “Summary of taxes due on each commodity type” of the Competent Person’s Report.

6. BASIS OF VALUATION

Our valuation is conducted on a Fair Market Value basis. Fair Market Value is defined as “the amount of money (or the cash equivalent of some other consideration) determined by the expert in accordance with the provisions of the VALMIN Code for which the mineral or petroleum asset or security should change hands on the valuation date in an open and unrestricted market between a willing buyer and a willing seller in an “arm’s length” transaction, with each party acting knowledgeably, prudently and without compulsion.”

7. INVESTIGATION AND ANALYSIS

Our investigation included discussions with members of the Management in relation to the development and prospect of the gold, iron, nickel and copper mining industries in China and worldwide, and the development, operations and other relevant information of Xinjiang Tianmu and the Mines. In addition, we have made relevant inquiries and obtained further information and statistical figures regarding the gold, iron, nickel and copper mining industries from external public sources as we considered necessary for the purpose of the valuation.

As part of our analysis, we have reviewed such financial information and other pertinent data concerning Xinjiang Tianmu and the Mines provided to us by the Management and had considered such information and data as attainable and reasonable. We have also consulted other sources of financial and business information. We have conducted site visits to the Mines during November 2011, the site visit photos have been attached in Appendix I of this report. We also relied upon the information provided by and the parameters advised by the Competent Person’s Report.

The valuation of the Mines requires consideration of all pertinent factors, which may or may not affect the operation of the business and its ability to generate future investment returns. The factors considered in our valuation include, but are not necessarily limited to, the following:

• The nature and prospect of the Mines;

• The financial condition of the Mines;

• The economy in general and the specific economic environment and market elements affecting the businesses, industries and markets;

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• Relevant licences and agreements;

• The business risk of the Mines such as the ability in maintaining competent technical and professional personnel; and

• Investment returns and market transactions of entities engaged in similar lines of business.

8. VALUATION METHODOLOGY

There are generally three accepted approaches to obtain the fair market values of the Mines, namely the Market-Based Approach, Income-Based Approach and Asset-Based Approach. Each of these approaches is appropriate in one or more circumstances, and sometimes, two or more approaches may be used together. Whether to adopt a particular approach will be determined by the most commonly adopted practice in valuing mineral assets that are similar in nature.

8.1 Market-Based Approach

The Market-Based Approach values a mineral asset by comparing prices at which other mineral assets in a similar nature changed hands in arm’s length transactions. The underlying theory of this approach is that one would not pay more than one would have to for an equally desirable alternative. By adopting this approach, the valuer will first look for valuation indication of prices of other similar mineral assets that have been sold recently.

The right transactions employed in analyzing indications of values need to be sold at an arm’s length basis, assuming that the buyers and sellers are well informed and have no special motivations or compulsions to buy or to sell.

8.2 Income-Based Approach

The Income-Based Approach focuses on the economic benefits due to the income producing capability of the mineral asset. The underlying theory of this approach is that the value of the mineral asset can be measured by the present worth of the economic benefits to be received over the useful life of the mineral asset. Based on this valuation principle, the Income-Based Approach estimates the future economic benefits and discounts them to their present values using a discount rate appropriate for the risks associated with realizing those benefits.

Alternatively, this present value can be calculated by capitalizing the economic benefits to be received in the next period at an appropriate capitalization rate. This is subject to the assumption that the mineral asset will continue to maintain stable economic benefits and growth rate.

8.3 Asset-Based Approach

The Asset-Based Approach values a mineral asset by aggregating the costs of developing the asset to its current condition, or replacing that asset.

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8.4 Mine Valuation

In the process of valuing the Mines, we have taken into account of the operations, performance and financial information of various listed companies engaged in gold, iron, copper and nickel mining businesses in the PRC and worldwide. The Market-Based Approach was not adopted in this case because most of the important assumptions of comparable transactions were hidden. The Asset-Based Approach was also not adopted because it could reflect the fair market values of the Mines. We have therefore considered the adoption of the Income-Based Approach in arriving at the fair market values of the Mines.

8.4.1 Discounted Cash Flow

Under the Income-Based Approach, we have adopted the discounted cash flow (“DCF”) method, which is based on a simple reversal calculation to restate all future cash flows in present terms. The expected free cash flow for each year was determined as follows:

Expected Free Cash Flow = Net Profit + Depreciation + After-Tax Finance Costs - Change in - Working Capital Capital Expenditure

The present value of the expected free cash flows was calculated as follows:

PVCF = CF1/(1+r)[1] + CF2/(1+r)[2] + ... + CFn/(1+r)[n]

In which

PVCF = Present value of the expected free cash flows;

• CF = Expected free cash flow;

• r = Discount rate; and

• n = Number of years.

8.4.2 Discount Rates of the Mines

In selecting the appropriate discount rates to be applied in the valuation, we have taken into account several major factors including the risks related to the operations of the Mines, our knowledge of discount rates commonly applied in valuing mining projects under the DCF method and considerations of the cost of debt. We have adopted 9% as the discount rates for Mine 1 and Mine 2 as in our opinion that are appropriate for the risks involved in the mining operations of Mine 1 and Mine 2. Compared to Mine 1 and Mine 2, as Mine 3 has a relatively short mining history, an additional 1% has been added to its discount rate, bringing it to 10%. Regarding Mine 4, since the commercial production of Mine 4 has not been commenced yet and there was no exploitation licence for Mine 4 as at the Date of Valuation, an additional 2% has been added to its discount rate to reflect the higher level of operational risk in Mine 4, bringing it to 11%.

Regarding the valuation of the Mines, we have already taken risks of the Mines into the consideration to reflect their fair market values. We believed that the adoption of the adjusted discount rates ranged from 9% to 11% could reflect the major operational risks and the specific risks of the Mines.

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8.4.3 Portfolio of Reserves Included in the Valuation

Only Proved and Probable Reserves were included in the valuation with reference to the Competent Person’s Report. These reserve figures have incorporated mining dilution and mining losses, and have also been based on an appropriate level of mine planning, mine design and scheduling. We have made reference to the feasibility studies of each of the Mines. Please refer to the disclosures made in Sections 1.5, 9, 12.2, 12.3 and 18 of the Competent Person’s Report. Apart from making reference to the feasibility studies of the Mines, we have visited each of the Mines to verify the appropriateness of the plan and design of the Mines from the feasibility studies. With the above information, we believed that the reserve figures are based on an appropriate level of mine planning, mine design and scheduling. Moreover, metallurgical losses and recovery have been included for Mine 1 and Mine 2 in order to reflect the uncertainty of conversion to actual reserves.

As we considered that the mine lives of the Mines are short while the Mines are of small scales based on the mine design and scheduling, there would not be a material influence to the valuation for the adoption of the average global grades.

8.4.4 Cash Flow Projections

8.4.4.1 Cash Flow Projections of Mine 1

The profit and loss forecast of Mine 1 was presented as follows:

Year	2011	2012
Annual Gold Ore Production (tonne)	41,209	39,650
Annual Gold Production (gram)	136,540	131,375
Gold Price (RMB/gram)	325	325
Unit Operating Cost (RMB/tonne of ore)	544	544
Revenue (RMB ’000)	44,344	42,666
Total Operating Cost (RMB ’000)	22,438	21,589
Gross Profit (RMB ’000)	21,906	21,077
Depreciation Expense (RMB ’000)	70	253
Earnings Before Interest and Tax (RMB ’000)	21,836	20,825
Income Tax Expense (RMB ’000)	5,459	5,206
Net Profit (RMB ’000)	16,377	15,618

Notes:

• The forecasted annual ore production of Mine 1 was based on the projection by the Management. In addition, we have also made reference to the historical productions for Mine 1. We observed no reason to be doubtful on the reasonableness of the forecasted production schedule;

• The reserve estimate of Mine 1 sourced from the Competent Person’s Report has been taken in the production schedule. Mining losses and mining dilution have already been incorporated in the production forecast. Therefore, the estimated mine life of Mine 1 was approximately 2 years;

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• Regarding the annual gold production, an average metallurgical recovery of about 95.75% has been adopted based on the actual operating data from January 2011 to November 2011 concerning the gold recovery provided by the Management;

• Based on the recent 12-month gold metal prices as at the Date of Valuation provided by Shanghai Gold Exchange as extracted from Bloomberg, the average gold price of RMB 325 per gram was adopted as the gold price in 2011. Steady metal price (no price growth over time) has been adopted in the projection;

• The unit operating cost of RMB 544 per tonne of ore has been adopted with reference to the actual operating costs of Mine 1 in 2011. It consists of mining expense of RMB 405 per tonne, processing expense of RMB 137 per tonne and resource tax of RMB 3 per tonne. Steady unit operating cost (no cost growth over time) has been adopted in the projection;

• The depreciation expense was estimated by the straight-line depreciation of the property, plant and equipment for the year ended 31 December 2010 and the forecasted capital expenditure provided by the Management with a useful life of 10 years; and

• The incomes tax expense was estimated based on the corporate tax rate of China of 25.00%.

The cash flow projection of Mine 1 was presented as follows:

Year	2011	2012
Net Profit (RMB ’000)	16,377	15,618
Depreciation Expense (RMB ’000)	70	253
Change in Working Capital (RMB ’000)	2,841	-5,939
Capital Expenditure (RMB ’000)	420	1,830
Free Cash Flow (RMB ’000)	1,084	19,980
Discount Factor	0.996	0.951
Present Value of Free Cash Flow (RMB ’000)	1,080	19,005

Notes:

• Since the Date of Valuation was 1 December 2011, the present value of free cash flow of 2011 was adjusted with a time factor of 0.08 to reflect the partial year cash flow from the Date of Valuation to 31 December 2011, which was relevant to this valuation;

• The change in working capital was estimated with reference to the average working capital ratios of the comparable companies, namely Zhaojin Mining Industry Company Limited (Stock Code: 1818.HK), Zijin Mining Group Company Limited (Stock Code: 2899.HK) and Lingbao Gold Company Limited (Stock Code: 3330.HK), as at the Date of Valuation extracted from Bloomberg;

• According to the Appendix I of the circular, the estimated capital expenditure of Mine 1 was about RMB 420,000 and RMB 1,700,000 in 2011 and 2012 respectively, while additional RMB 130,000 would be required for remediation and rehabilitation in 2012 with reference to the Management’s estimate; and

• The present value of free cash flow was estimated by discounting the free cash flow stream according to the timing of cash flow. As abovementioned in section 8.4.1 of the report, the free cash flow stream was computed with the net profit after adjusting for non-cash items such as depreciation charges, change in working capital and capital expenditure.

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8.4.4.2 Cash Flow Projection of Mine 2

The profit and loss forecast of Mine 2 was presented as follows:

Year	2011	2012	2013	2014	2015	2016
Annual Gold Ore Production (tonne)	33,020	30,000	30,000	30,000	30,000	5,102
Annual Gold Production (gram)	150,484	136,719	136,719	136,719	136,719	23,250
Gold Price (RMB/gram)	325	325	325	325	325	325
Unit Operating Cost (RMB/tonne of
ore)	609	609	609	609	609	609
Revenue (RMB ’000)	48,873	44,402	44,402	44,402	44,402	7,551
Total Operating Cost (RMB ’000)	20,112	18,273	18,273	18,273	18,273	3,107
Gross Profit (RMB ’000)	28,760	26,130	26,130	26,130	26,130	4,444
Depreciation Expense (RMB ’000)	138	1,428	1,468	1,508	1,548	1,625
Earnings Before Interest and Tax
(RMB ’000)	28,623	24,702	24,662	24,622	24,582	2,818
Income Tax Expense (RMB ’000)	7,156	6,175	6,165	6,155	6,145	705
Net Profit (RMB ’000)	21,467	18,526	18,496	18,466	18,436	2,114

Notes:

• The forecasted annual ore production of Mine 2 was based on the projection by the Management. In addition, we have also made reference to the historical productions for Mine 2. We observed no reason to be doubtful on the reasonableness of the forecasted production schedule;

• The reserve estimate of Mine 2 sourced from the Competent Person’s Report has been taken in the production schedule. Mining losses and mining dilution have already been incorporated in the production forecast. Therefore, the estimated mine life of Mine 2 was approximately 6 years;

• Regarding the annual gold production, an average metallurgical recovery of about 95.75% has been adopted based on the actual operating data from January 2011 to November 2011 concerning the gold recovery provided by the Management;

• Based on the recent 12-month gold metal prices as at the Date of Valuation provided by Shanghai Gold Exchange as extracted from Bloomberg, the average gold price of RMB 325 per gram was adopted as the gold price in 2011. Steady metal price (no price growth over time) has been adopted in the projection;

• The unit operating cost of RMB 609 per tonne of ore has been adopted with reference to the actual operating costs of Mine 2 in 2011. It consists of mining expense of RMB 469 per tonne, processing expense of RMB 137 per tonne and resource tax of RMB 3 per tonne. Steady unit operating cost (no cost growth over time) has been adopted in the projection;

• The depreciation expense was estimated by the straight-line depreciation of the property, plant and equipment for the year ended 31 December 2010 and the forecasted capital expenditure provided by the Management with a useful life of 10 years; and

• The incomes tax expense was estimated based on the corporate tax rate of China of 25.00%.

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The cash flow projection of Mine 2 was presented as follows:

Year	2011	2012	2013	2014	2015	2016
Net Profit (RMB ’000)	21,467	18,526	18,496	18,466	18,436	2,114
Depreciation Expense (RMB ’000)	138	1,428	1,468	1,508	1,548	1,625
Change in Working Capital
(RMB ’000)	1,411	-515	—	—	—	-5,111
Capital Expenditure (RMB ’000)	857	12,900	400	400	400	777
Free Cash Flow (RMB ’000)	1,589	7,569	19,564	19,574	19,584	8,073
Discount Factor	0.996	0.951	0.873	0.801	0.734	0.674
Present Value of Free Cash Flow
(RMB ’000)	1,584	7,199	17,072	15,671	14,384	5,440

Notes:

• Since the Date of Valuation was 1 December 2011, the present value of free cash flow of 2011 was adjusted with a time factor of 0.08 to reflect the partial year cash flow from the Date of Valuation to 31 December 2011, which was relevant to this valuation;

• The change in working capital was estimated with reference to the average working capital ratios of the comparable companies, namely Zhaojin Mining Industry Company Limited (Stock Code: 1818.HK), Zijin Mining Group Company Limited (Stock Code: 2899.HK) and Lingbao Gold Company Limited (Stock Code: 3330.HK), as at the Date of Valuation extracted from Bloomberg;

• According to the Appendix I of the circular, the estimated capital expenditure of Mine 2 was about RMB 857,000 and RMB 12,900,000 in 2011 and 2012 respectively. Moreover, capital expenditure of about RMB 400,000 would be required for maintenance of the mining facilities from 2013 to 2016, while additional RMB 376,700 would be required for remediation and rehabilitation in 2016 according to the Competent Person’s Report; and

• The present value of free cash flow was estimated by discounting the free cash flow stream according to the timing of cash flow. As abovementioned in section 8.4.1 of the report, the free cash flow stream was computed with the net profit after adjusting for non-cash items such as depreciation charges, change in working capital and capital expenditure.

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8.4.4.3 Cash Flow Projection of Mine 3

The profit and loss forecast of Mine 3 was presented as follows:

Year	2011	2012	2013	2014	2015
Annual Iron Ore Production (tonne)	30,525	100,000	100,000	100,000	36,200
Iron Ore Price (RMB/tonne)	282	282	282	282	282
Unit Operating Cost (RMB/tonne of ore)	127	127	127	127	127
Revenue (RMB ’000)	8,620	28,241	28,241	28,241	10,223
Total Operating Cost (RMB ’000)	3,872	12,686	12,686	12,686	4,592
Gross Profit (RMB ’000)	4,748	15,555	15,555	15,555	5,631
Depreciation Expense (RMB ’000)	822	1,282	1,322	1,362	1,472
Earnings Before Interest and Tax (RMB ’000)	3,926	14,272	14,232	14,192	4,158
Income Tax Expense (RMB ’000)	982	3,568	3,558	3,548	1,040
Net Profit (RMB ’000)	2,945	10,704	10,674	10,644	3,119

Notes:

• The forecasted annual ore production of Mine 3 was based on the projection by the Management. In addition, we have also made reference to the Tuchushan iron mine feasibility report prepared by the Geophysics and Geochemical Brigade of Xinjiang Bureau of Geology and Mineral (hereinafter referred to as the “Tuchushan Feasibility Report”. We observed no reason to be doubtful on the reasonableness of the forecasted production schedule;

• The reserve estimate of Mine 3 sourced from the Competent Person’s Report has been taken in the production schedule. Mining losses and mining dilution have already been incorporated in the production forecast. Therefore, the estimated mine life of Mine 3 was approximately 5 years;

• By utilizing the methodologies stated in the Tuchushan Feasibility Report and sales agreements signed by Xinjiang Tianmu, the price paid per tonne of iron ore is RMB 282 per tonne inclusive of transportation cost and 17% value-added tax (“VAT”). Steady ore price (no price growth over time) has been adopted in the projection;

• The unit operating cost of RMB 127 per tonne of ore has been adopted with reference to Tuchushan Feasibility Report and the actual operating costs of Mine 3 in 2011. It consists of mining expense of RMB 115 per tonne and tax charges of RMB 12. Regarding the tax charges, they include resource tax of RMB 6 per tonne and other taxes of 12% on VAT. Steady unit operating cost (no cost growth over time) has been adopted in the projection;

• The depreciation expense was estimated by the straight-line depreciation of the property, plant and equipment for the year ended 31 December 2010 and the forecasted capital expenditure provided by the Management with a useful life of 10 years; and

• The incomes tax expense was estimated based on the corporate tax rate of China of 25.00%.

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The cash flow projection of Mine 3 was presented as follows:

Year	2011	2012	2013	2014	2015
Net Profit (RMB ’000)	2,945	10,704	10,674	10,644	3,119
Depreciation Expense (RMB ’000)	822	1,282	1,322	1,362	1,472
Change in Working Capital (RMB ’000)	2,930	5,210	—	—	-7,499
Capital Expenditure (RMB ’000)	8,127	400	400	400	1,099
Free Cash Flow (RMB ’000)	-599	6,377	11,597	11,607	10,991
Discount Factor	0.996	0.946	0.860	0.782	0.711
Present Value of Free Cash Flow (RMB ’000)	-597	6,034	9,975	9,076	7,813

Notes:

• Since the Date of Valuation was 1 December 2011, the present value of free cash flow of 2011 was adjusted with a time factor of 0.08 to reflect the partial year cash flow from the Date of Valuation to 31 December 2011, which was relevant to this valuation;

• The change in working capital was estimated with reference to the average working capital ratios of the comparable companies, namely Sinocop Resources Holdings Limited (Stock Code: 476.HK), China Vanadium Titano-Magnetite Mining Company Limited (Stock Code: 893.HK) and Shandong Jinling Mining Company Limited (Stock Code: 000655.CH), as at the Date of Valuation extracted from Bloomberg;

• According to the Appendix I of the circular, the estimated capital expenditure of Mine 3 was about RMB 8,127,000 and RMB 400,000 in 2011 and 2012 respectively. Moreover, capital expenditure of about RMB 400,000 would be required for maintenance of the mining facilities from 2013 to 2015, while additional RMB 699,100 would be required for remediation and rehabilitation in 2015 according to the Competent Person’s Report; and

• The present value of free cash flow was estimated by discounting the free cash flow stream according to the timing of cash flow. As abovementioned in section 8.4.1 of the report, the free cash flow stream was computed with the net profit after adjusting for non-cash items such as depreciation charges, change in working capital and capital expenditure.

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8.4.4.4 Cash Flow Projection of Mine 4

The profit and loss forecast of Mine 4 was presented as follows:

Year	2011	2012	2013	2014	2015	2016	2017	2018
Annual Nickel-Copper Ore
Production (tonne)	—	—	84,000	180,000	240,000	240,000	240,000	224,500
Nickel-Copper Ore Price
(RMB/tonne)	573	573	573	573	573	573	573	573
Unit Operating Cost
(RMB/tonne of ore)	—	—	176	176	176	176	176	176
Revenue (RMB ’000)	—	—	48,139	103,156	137,541	137,541	137,541	128,658
Total Operating Cost
(RMB ’000)	—	—	14,816	31,749	42,333	42,333	42,333	39,599
Gross Profit (RMB ’000)	—	—	33,323	71,406	95,208	95,208	95,208	89,059
Depreciation Expense
(RMB ’000)	126	946	3,168	4,168	4,268	4,368	4,468	4,654
Earnings Before Interest
and Tax (RMB ’000)	-126	-946	30,155	67,238	90,940	90,840	90,740	84,405
Income Tax Expense
(RMB ’000)	—	—	7,539	16,810	22,735	22,710	22,685	21,101
Net Profit (RMB ’000)	-126	-946	22,616	50,429	68,205	68,130	68,055	63,304

Notes:

• The forecasted annual ore production of Mine 4 was based on the projection by the Management. In addition, we have also made reference to the Baishiquan nickel-copper mine feasibility report prepared by Brigade No.6 of Xinjiang Bureau of Geology and Mineral Resources (hereinafter referred to as the “Baishiquan Feasibility Report”. We observed no reason to be doubtful on the reasonableness of the forecasted production schedule;

• The reserve estimate of Mine 4 sourced from the Competent Person’s Report has been taken in the production schedule. Mining losses and mining dilution have already been incorporated in the production forecast. Therefore, the estimated mine life of Mine 4 was approximately 6 years;

• By utilizing the methodologies stated in the Baishiquan Feasibility Report as well as taking the general market practice into consideration, the selling price of the nickel-copper ore with about 0.52% nickel content and 0.34% copper content was estimated as RMB 573 per tonne. The price paid for concentrates is reckoned by concentrate grade, the relevant metal prices and a price discount factor that reflects smelter’s costs and other charges such as transportation and milling costs. The Competent Evaluator concurs with the assumptions and conclusions reached in the feasibility study regarding the pricing of the nickel-copper ore. Steady ore price (no price growth over time) has been adopted in the projection;

• The unit operating cost of RMB 176 per tonne of ore has been adopted with reference to Baishiquan Feasibility Report. It consists of mining expense of RMB 61 per tonne, resource tax of RMB 6 per tonne, VAT of 17% on revenue and other taxes of 12% on the VAT charged. Steady unit operating cost (no cost growth over time) has been adopted in the projection;

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APPENDIX VI

VALUATION REPORT ON THE TARGET MINES

• The depreciation expense was estimated by the straight-line depreciation of the property, plant and equipment for the year ended 31 December 2010 and the forecasted capital expenditure provided by the Management with a useful life of 10 years; and

• The incomes tax expense was estimated based on the corporate tax rate of China of 25.00%.

The cash flow projection of Mine 4 was presented as follows:

Year	2011	2012	2013	2014	2015	2016	2017	2018
Net Profit (RMB ’000)	-126	-946	22,616	50,429	68,205	68,130	68,055	63,304
Depreciation Expense
(RMB ’000)	126	946	3,168	4,168	4,268	4,368	4,468	4,654
Change in Working Capital
(RMB ’000)	—	—	13,603	15,546	9,716	—	—	-38,866
Capital Expenditure
(RMB ’000)	1,263	8,200	22,218	10,000	1,000	1,000	1,000	1,860
Free Cash Flow
(RMB ’000)	-104	-8,200	-10,036	29,050	61,757	71,498	71,523	104,964
Discount Factor	0.996	0.941	0.848	0.764	0.688	0.620	0.559	0.503
Present Value of Free Cash
Flow (RMB ’000)	-103	-7,718	-8,510	22,191	42,500	44,328	39,949	52,817

Notes:

• Since the Date of Valuation was 1 December 2011, the present value of free cash flow of 2011 was adjusted with a time factor of 0.08 to reflect the partial year cash flow from the Date of Valuation to 31 December 2011, which was relevant to this valuation;

• The change in working capital was estimated with reference to the average working capital ratios of the comparable companies, namely Xinjiang Xinxin Mining Industry Co., Limited (Stock Code: 3833.HK), Mining and Metallurgical Company Norilsk Nickel (Stock Code: GMKN.RM) and GobiMin Inc. (Stock Code: GMN.CN), as at the Date of Valuation extracted from Bloomberg;

• According to the Appendix I of the circular, the estimated capital expenditure of Mine 4 was about RMB 1,262,500, RMB 8,200,000, RMB 22,217,500 and RMB 10,000,000 from 2011 to 2014 respectively. Moreover, capital expenditure of about RMB 1,000,000 would be required for maintenance of the mining facilities from 2015 to 2018, while additional RMB 860,000 would be required for remediation and rehabilitation in 2018 with reference to the Management’s estimate; and

• The present value of free cash flow was estimated by discounting the free cash flow stream according to the timing of cash flow. As abovementioned in section 8.4.1 of the report, the free cash flow stream was computed with the net profit after adjusting for non-cash items such as depreciation charges, change in working capital and capital expenditure.

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VALUATION REPORT ON THE TARGET MINES

APPENDIX VI

8.4.5 Sensitivity Analyses

To determine how the different values of an independent variable would impact a particular dependent variable under a given set of assumptions, sensitivity analyses were carried out on the fair market values of the Mines in respect of the discount rates, commodity prices, total operating costs and capital expenditure from the status quo. The results of the sensitivity analyses were as follows:

	Applied	Fair Market Value
Absolute Change in Discount Rate	Discount Rate	of Mine 1
	(%)	(Approximately HK$)
+2%	11	24,000,000
+1%	10	24,000,000
0%	9	24,000,000
-1%	8	25,000,000
-2%	7	25,000,000
	Applied	Fair Market Value
Percentage Change in Gold Price	Gold Price	of Mine 1
	(HK$/g)	(Approximately HK$)
+10%	434.87	29,000,000
+5%	415.10	27,000,000
0%	395.34	24,000,000
-5%	375.57	22,000,000
-10%	355.80	20,000,000
		Fair Market Value
Percentage Change in Total Operating Cost		of Mine 1
		(Approximately HK$)
+10%		23,000,000
+5%		24,000,000
0%		24,000,000
-5%		25,000,000
-10%		26,000,000

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APPENDIX VI

		Fair Market Value
Percentage Change in Total Capital Expenditure		of Mine 1
		(Approximately HK$)
20%		24,000,000
10%		24,000,000
0%		24,000,000
-10%		25,000,000
-20%		25,000,000
	Applied	Fair Market Value
Absolute Change in Discount Rate	Discount Rate	of Mine 2
	(%)	(Approximately HK$)
+2%	11	71,000,000
+1%	10	73,000,000
0%	9	75,000,000
-1%	8	76,000,000
-2%	7	78,000,000
	Applied	Fair Market Value
Percentage Change in Gold Price	Gold Price	of Mine 2
	(HK$/g)	(Approximately HK$)
+10%	434.87	89,000,000
+5%	415.10	82,000,000
0%	395.34	75,000,000
-5%	375.57	67,000,000
-10%	355.80	60,000,000
		Fair Market Value
Percentage Change in Total Operating Cost		of Mine 2
		(Approximately HK$)
+10%		69,000,000
+5%		72,000,000
0%		75,000,000
-5%		78,000,000
-10%		80,000,000

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VALUATION REPORT ON THE TARGET MINES

APPENDIX VI

		Fair Market Value
Percentage Change in Total Capital Expenditure		of Mine 2
		(Approximately HK$)
20%		72,000,000
10%		73,000,000
0%		75,000,000
-10%		76,000,000
-20%		78,000,000
	Applied	Fair Market Value
Absolute Change in Discount Rate	Discount Rate	of Mine 3
	(%)	(Approximately HK$)
+2%	12	38,000,000
+1%	11	39,000,000
0%	10	39,000,000
-1%	9	40,000,000
-2%	8	41,000,000
	Applied Iron	Fair Market Value
Percentage Change in Iron Ore Price	Ore Price	of Mine 3
	(HK$/tonne)	(Approximately HK$)
+10%	378.15	47,000,000
+5%	360.96	43,000,000
0%	343.77	39,000,000
-5%	326.58	36,000,000
-10%	309.39	32,000,000
		Fair Market Value
Percentage Change in Total Operating Cost		of Mine 3
		(Approximately HK$)
+10%		36,000,000
+5%		38,000,000
0%		39,000,000
-5%		41,000,000
-10%		43,000,000

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APPENDIX VI

		Fair Market Value
Percentage Change in Total Capital Expenditure		of Mine 3
		(Approximately HK$)
20%		39,000,000
10%		39,000,000
0%		39,000,000
-10%		40,000,000
-20%		40,000,000
	Applied	Fair Market Value
Absolute Change in Discount Rate	Discount Rate	of Mine 4
	(%)	(Approximately HK$)
+2%	13	206,000,000
+1%	12	215,000,000
0%	11	226,000,000
-1%	10	237,000,000
-2%	9	248,000,000
	Applied
	Nickel-Copper	Fair Market Value
Percentage Change in Nickel-Copper Ore Price	Ore Price	of Mine 4
	(HK$/tonne)	(Approximately HK$)
+10%	767.37	257,000,000
+5%	732.49	242,000,000
0%	697.61	226,000,000
-5%	662.73	210,000,000
-10%	627.85	194,000,000
		Fair Market Value
Percentage Change in Total Operating Cost		of Mine 4
		(Approximately HK$)
+10%		213,000,000
+5%		219,000,000
0%		226,000,000
-5%		232,000,000
-10%		239,000,000

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VALUATION REPORT ON THE TARGET MINES

APPENDIX VI

						Fair Market Value	Fair Market Value
**Percentage **	**Change **	**in **	**Total **	**Capital **	Expenditure		of Mine 4
						(Approximately HK$)
20%							218,000,000
10%							222,000,000
0%							226,000,000
-10%							229,000,000
-20%							233,000,000

9. MAJOR ASSUMPTIONS

We have adopted certain specific assumptions in our valuation and the major ones are as follows:

• Xinjiang Tianmu has free and uninterrupted rights to operate the Mines throughout the period until all reserves of the Mines are fully exploited and subject to no land premium or any payment to the government of substantial amount;

• All relevant legal approvals and business certificates or licences to operate the business in the localities in which the Mines operate or intend to operate would be officially obtained and renewable upon expiry;

• The Mines will be operating by Xinjiang Tianmu as planned;

• There exist reliable and adequate transportation network and capacity for processing the mining products;

• There will be no major changes in the current taxation laws in the localities in which the Mines operate or intend to operate and the rates of tax payable shall remain unchanged and all applicable laws and regulations will be complied with;

• Based on the recent 12-month gold metal prices as at the Date of Valuation provided by Shanghai Gold Exchange as extracted from Bloomberg, the average gold price of RMB 325 per gram was adopted as the projected gold price in 2011. Steady metal price (no price growth over time) has been adopted in the projection;

• With reference to the Tuchushan Feasibility Report and sales agreements signed by Xinjiang Tianmu, the price paid per tonne of iron ore is RMB 282 per tonne inclusive of transportation cost and 17% VAT. Steady ore price (no price growth over time) has been adopted in the projection;

• With reference to the Baishiquan Feasibility Report and market practice for nickel-copper ore price calculation, the selling price of the nickel-copper ore with about 0.52% nickel content and 0.34% copper content was estimated as RMB 573 per tonne. The price paid for concentrates is

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VALUATION REPORT ON THE TARGET MINES

APPENDIX VI

reckoned by concentrate grade, the relevant metal prices and a price discount factor that reflects smelter’s costs and other charges such as transportation and milling costs. Steady ore price (no price growth over time) has been adopted in the projection;

• Steady operating costs (no cost growth over time) have been adopted in the projection;

• As the residual values of the plant and equipment for the Mines could not be reliably estimated at the end of the mine lives, their residual values have not been considered in the valuation;

• There will be no major changes in the political, legal, economic or financial conditions in the localities in which the Mines operate or intend to operate, which would adversely affect the revenues attributable to and the profitability of the Mines; and

• Interest rates and exchange rates in the localities for the operation of the Mines will not differ materially from those presently prevailed.

10. RISK FACTORS

The following are the risk factors of the Mines which have been considered in the valuation:

A. Resources and Reserves

There is possibility in the failure to achieve projected grades and tonnages. Estimates of resources may also change when new information becomes available or new factors arise. There may be variability in the quality of the deposits which may impact the total tonnages produced. Interpretations and deductions of the geology and controls on the mineralization on which resources estimates based on (i.e. past drilling, sampling and similar examination) may potentially be found to be inaccurate when further drilling or the commencement of actual production. Any adjustment could affect the development and mining plans, which could materially and adversely affect the revenue of Xinjiang Tianmu and the valuation of the Mines. There can be no assurance the recovery from exploration assay tests will be the same under on-site conditions or in production-scale operations.

B. Future Commodity Prices and Global Economy

Revenues stated in the forecast depend on future commodity prices, and the valuation result is highly sensitive to metal price fluctuation, both positively and negatively. A huge fall in commodity prices would substantially reduce the valuation. The worst case is the mine project become uneconomical.

C. Approval for Higher Production Levels

Increase in production is subject to governmental approvals. Since there appears to be reasonable chance that the appropriate approvals will be received, any failure to obtain such approvals may decrease valuation.

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VALUATION REPORT ON THE TARGET MINES

APPENDIX VI

D. Processing

The operating cost estimates, particularly for the iron and nickel projects, are based on a number of assumptions. The mining business is capital intensive and the development and exploitation of resources, the depreciation and out of order of machinery and equipment and the expansion of production capacity require substantial capital expenditure. There may be potential increases to operating costs which arise from unforeseen operating complexities due to increases of the fuel price or inflation. Operations may not be completed in the scope of the time planned, may exceed the original budgets and may not achieve the intended economic results or commercial viability, all of which could have a material adverse effect on the results of operations and the business.

E. Insufficient Electricity or Water Supply

The Mines are located at the desert area in Xinjiang which is remote from the urbanized area in Xinjiang. Substantial amount of electricity and water are required in connection with the mining and processing operations. Since the Mines are in remote areas, electricity and water supplies may not be as stable as in other cities within the PRC. Any lengthy disruption in electricity and water supplies could lead to shutdown of mine production which will adversely affect Xinjiang Tianmu’s production costs, mining and processing schedule.

F. Tenements and Licences Extension

As advised by the Management, the production safety permit of Mine 2 has expired in June 2010 while that of Mine 1 would expire in February 2012.

According to the PRC legal advisor, the approval for the application for extension of the validity period of the production safety permit for Mine 2 is subject to the condition that the modifications and expansion construction are completed and approved by the relevant government authority. However, the PRC legal advisor has advised that there would be no legal obstacle for the renewal of the production safety licence of Mine 2.

Regarding Mine 1, Xinjiang Tianmu has submitted all necessary documentations to the authority for the renewal of the production safety licence and the PRC legal advisor has also advised that there would be no legal obstacle for the renewal of the production safety licence of Mine 1.

In addition, the PRC legal advisor has advised that since Xinjiang Tianmu has not received any notice from the government requiring it to suspend production or notifying it that the applications for the extension of the validity periods of the production safety permits have been rejected, the risk of being held liable by the government for the continuing production in Mine 1 and Mine 2 when the government is still processing its extension applications for the production safety permits is low and therefore it is unlikely to have any material impact on the business operation of Mine 1 and Mine 2.

With reference to the above legal opinions provided by the PRC legal advisor, we believe that the risk concerning the renewal of the production safety licences was minimal.

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VALUATION REPORT ON THE TARGET MINES

APPENDIX VI

The exploitation licences and exploration licences form the basis of the value of the Mines. There is a risk that the application to extend the term of the exploitation licences and exploration licences might not be extended.

G. Environmental Issues

Since all the Mines are located in extremely arid desert with no sensitive environmental areas, there are no environmental liabilities for any of the Mines with the exception of the environmental guarantees are applicable to the operating mines which have been paid.

H. Social Issues

The Chinese national requirements for mine closure are covered under Article 21 of the Mineral Resources Law (1996) , the Rules for Implementation of the Mineral Resources Law of the People’s Republic of China (2006) , the Land Use Regulations of the People’s Republic of China (1986.6.25) and the Land Rehabilitation Regulation issued by the State Council on October 21, 1988 . In summary, these legislative requirements cover the need to conduct land rehabilitation, to prepare a site closure report and submit a site closure application for assessment and approval. The mine’s operation may involve extra cost for site closure.

I. Country and Political Risks

There is risk of terrorist attacks and riots as have occurred in Xinjiang in recent years which may cause damage or disruption to the operations of the Mines if similar events occurred in the future. The risks of terrorist attacks may create uncertainties, while terrorist or rioters could cause damage to the infrastructures and facilities, disrupt the work force etc affecting the production schedules and operations of the Mines.

J. Future Plans

The change of the production plans or the differences between the future and the actual productions may happen. Those variances may or may not be material. Accordingly, the valuation outcome may change.

11. INFORMATION REVIEWED

Our opinion requires consideration of relevant factors and information affecting the fair market values of the Mines. The factors and information considered included, but were not necessarily limited to, the following:

• The Competent Person’s Report;

• The Tuchushan Feasibility Report;

• The Baishiquan Feasibility Report;

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VALUATION REPORT ON THE TARGET MINES

APPENDIX VI

• Copies of the exploitation licences and exploration licences of the Mines;

• Financial statements of Xinjiang Tianmu and the Mines;

• Historical information of Xinjiang Tianmu and the Mines;

• Legal opinions from the PRC legal advisor;

• Market trends of the gold, iron, nickel and copper mining industries in China and worldwide;

• Registrations and legal documents related to Xinjiang Tianmu and the Mines;

• General descriptions in relation to Xinjiang Tianmu and the Mines; and

• Economic outlook in China.

We have also conducted research from various sources to verify the reasonableness and fairness of information provided and we believe that such information is reasonable and reliable. We have assumed the accuracy of information provided and relied to a considerable extent on such information in arriving at our opinion.

12. LIMITING CONDITIONS

The valuation reflects facts and conditions existing at the Date of Valuation. Subsequent events or circumstances have not been considered and we are not required to update our report for such events and conditions.

We would particularly point out that our valuation was based on the information such as the projections made by Xinjiang Tianmu, company background, business nature and market share of Xinjiang Tianmu provided to us.

To the best of our knowledge, all data set forth in this report are reasonable and accurately determined. The data, opinions, or estimates identified as being furnished by others that have been used in formulating this analysis are gathered from reliable sources; yet, no guarantee is made nor liability assumed for their accuracy.

We have relied to a considerable extent on the historical and/or prospective information provided by the Management and other third parties in arriving at our opinion of values. The information has not been audited or compiled by us. We are not in the position to verify the accuracy of all information provided to us. However, we have had no reason to doubt the truth and accuracy of the information provided to us and to doubt that any material facts have been omitted from the information provided. No responsibilities for the operation and financial information that have not been provided to us are accepted.

We assumed that the Management is competent and perform duties under the company regulation. Also, ownership of the Mines was in responsible hands, unless otherwise stated in this report. The quality of the Management may have direct impact on the viability of the business as well as the fair market values of the Mines.

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VALUATION REPORT ON THE TARGET MINES

APPENDIX VI

We have not investigated the title to or any legal liabilities of the Mines and have assumed no responsibility for the title to the Mines appraised.

Our conclusion of the fair market values was derived from generally accepted valuation procedures and practices that rely substantially on the use of various assumptions and the consideration of many uncertainties, not all of which can be easily quantified or ascertained. The conclusion and various estimates may not be separated into parts, and/or used out of the context presented herein, and/or used together with any other valuation or study.

We assume no responsibility whatsoever to any person other than the directors and management of the Company in respect of, or arising out of, the content of this report. If others choose to rely in any way on the contents of this report, they do so entirely on their own risk.

No change to any item in any part of this report shall be made by anyone except us. We have no responsibility for any such unauthorized change. Neither all nor any part of this report shall be disseminated to the public through any means of communication or referenced in any publications, including but not limited to advertising, public relations, news or sales media.

This report may not be reproduced, in whole or in part, and utilized by any third parties for any purpose, without our written consent and approval.

The working papers and models for this valuation are being kept in our files and would be available for further references. We would be available to support our valuation if required.

13. REFERENCES

The list of sources of information cited in this report is stated as follows:

• Bloomberg;

• GFMS Limited;

• International Copper Study Group;

• Legal opinions from the PRC legal advisor;

• London Metal Exchange;

• National Bureau of Statistics of China;

• Standard CIB Global Research;

• Steel Business Briefing Commodities Research;

• The Baishiquan Feasibility Report;

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VALUATION REPORT ON THE TARGET MINES

APPENDIX VI

• The Competent Person’s Report;

• The Tuchushan Feasibility Report;

• U.S. Geological Survey;

• World Crude Steel Capacity Report;

• World Gold Council; and

• World Steel Association.

14. REMARKS

Unless otherwise stated, all monetary amounts stated in this valuation report are in Hong Kong Dollars (HK$). The exchange rate adopted in the valuation was approximately RMB1= HK$1.217 which was the prevailing exchange rate as at the Date of Valuation.

We hereby confirm that we have neither present nor prospective interests in the Company, Xinjiang Tianmu, the Mines and its holding companies, subsidiaries and associated companies, or the values reported herein.

15. OPINION OF VALUES

Based on the investigation and analysis stated above, the valuation method employed, and the sensitivity analyses performed, the fair market values of the Mines as at the Date of Valuation, in our opinion, were reasonably stated as follows:

Fair Market Values of the Mines as at 1 December 2011

Heishiliang Gold Mine (“Mine 1”) : Hongshannan Gold Mine (“Mine 2”) : Tuchushan Iron Mine (“Mine 3”) : Baishiquan Nickel-Copper Mine (“Mine 4”) : Aggregate Fair Market Value of the Mines (Rounded) :	Range HK$ 24,000,000 to 25,000,000 71,000,000 to 78,000,000 38,000,000 to 41,000,000 206,000,000 to 248,000,000 339,000,000 to 392,000,000	Preferred Value HK$ 24,500,000 74,500,000 39,500,000 227,000,000
		366,000,000

Yours faithfully,

Philip A. Jones

B.ASc., AusIMM, AIG

Emmanuel Ekow Mensah

B.Sc (Geo Eng), AusIMM

Grant Thomas B.Sc (Hon), AusIMM

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VALUATION REPORT ON THE TARGET MINES

APPENDIX VI

Note:

Philip A. Jones is a Competent Evaluator and has over thirty years of extensive executive and site experience in mineral exploration, resource and reserve calculation and evaluation of mineral properties including gold, copper and nickel in Australia, New Zealand, South America, Africa, Indonesia, Kyrgyzstan Republic and China. He is a member of the Australasian Institute of Mining and Metallurgy, and Australian Institute of Geoscientists.

Emmanuel Ekow Mensah has about ten-year experience as a geologist in exploration, prospect evaluation, project development, open pit and underground mining. He has been responsible for developing and maintaining Quality Control and Quality Assurance (QA/QC) procedures, generation of resource and grade control 3-D models as well as mining ore blocks and ensuring resource reporting and reconciliations are at least to AGA standards. He is the co-author of this report and has reviewed in the valuation model of the Mines. He is a member of the Australasian Institute of Mining and Metallurgy.

Grant Thomas has about thirty-year experience in the mineral exploration and mining industry working on gold, coal, copper, lead, zinc, nickel, uranium, phosphate and diamond commodities. He also has extensive experience in mineral asset evaluation and valuation. He has previously explored and evaluated mineral projects in Australia, Brazil, China, Laos and Cambodia. He is the peer reviewer of the valuation model and report of the Mines.

Statement of Qualification of the Competent Evaluator

I, Philip Alan Jones, hereby confirm that:

• I have carried out the assignment, located at: 4 Buchan Place, Hillarys, Western Australia 6025

• I graduated with a Bachelor’s degree in Applied Science, Applied Geology from South Australian Institute of Technology in 1974 and a Restricted Quarry Managers Certificate (W.A.).

• I am a member of the Australasian Institute of Mining and Metallurgy, and Australian Institute of Geoscientists.

• I have studied the revised Chapter 18 and Chapter 18A of the Hong Kong Listing Rules and understood the definitions of “competent person” and “competent evaluator”. My past relevant experience, qualifications and my affiliation with professional associations have fulfilled the requirements to be a “competent person” as well as a “competent evaluator” as set out in the listing rules for the purpose of the valuation report.

• I am the primary author responsible for the preparation and compilation of the valuation report, with Emmanuel Ekow Mensah facilitating.

• I have neither present nor prospective interests in the Mines, Xinjiang Tianmu, the Company or the values reported herein.

• I am not aware of any material fact or material change with respect to the subject matter of the valuation report that is not reflected in the valuation report.

• This report has been prepared in accordance with the guidelines set by the VALMIN Code.

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VALUATION REPORT ON THE TARGET MINES

APPENDIX VI

APPENDIX I - SITE VISIT PHOTOS

— VI-49 —

VALUATION REPORT ON THE TARGET MINES

APPENDIX VI

==> picture [381 x 286] intentionally omitted <==

Overview of Mine 1

==> picture [380 x 287] intentionally omitted <==

Main Shaft of Mine 1

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VALUATION REPORT ON THE TARGET MINES

APPENDIX VI

==> picture [381 x 286] intentionally omitted <==

Overview of Mine 2

==> picture [380 x 287] intentionally omitted <==

Operation of Mine 2

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VALUATION REPORT ON THE TARGET MINES

APPENDIX VI

==> picture [381 x 286] intentionally omitted <==

Overview of Mine 3

==> picture [380 x 287] intentionally omitted <==

Operation of Mine 3

— VI-52 —

VALUATION REPORT ON THE TARGET MINES

APPENDIX VI

==> picture [381 x 286] intentionally omitted <==

Overview of Mine 4

==> picture [380 x 287] intentionally omitted <==

Core Samples of Mine 4

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VALUATION REPORT ON THE TARGET MINES

APPENDIX VI

APPENDIX II - ABBREVIATIONS AND GLOSSARY

— VI-54 —

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APPENDIX VI

	�	micron	kPa	kilopascal
	oC	degree Celsius	kVA	kilovolt-amperes
	oF	degree Fahrenheit	kW	kilowatt
	�g	microgram	kWh	kilowatt-hour
	A	ampere	L	litre
	a	annum	L/s	litres per second
	Bbl	barrels	M	metre
	btu	British thermal units	M	Mega (million)
	C$	Canadian dollars	m2	square metre
	cal	calorie	m3	cubic metre
	CFM	cubic metres per minute	Min	minute
	cm	centimetre	MASL	metres above sea level
	cm2	square centimetre	Mm	millimetre
	d	day	mph	miles per hour
	dia	diameter	MVA	megavolt-amperes
	dmt	dry metric tonne	MW	megawatt
	dwt	deadweight ton	MWh	megawatt-hour
	ft	foot	m3/h	cubic metres per hour
	ft/s	foot per second	opt, oz/st	ounce per short ton
	ft2	square foot	oz	Troy ounce (31.1035g)
	ft3	cubic foot	oz/dmt	ounce per dry metric tonne
	g	gram	ppm	part per million
	G	giga (billion)	psia	pound per square inch absolute
	Gal	Imperial gallon	Psig	pound per square inch gauge
	g/L	gram per litre	RL	relative elevation
	g/t	gram per tonne	S	second
	gpm	Imperial gallons per minute	SG	Specific Gravity
	gr/ft3	grain per cubic foot	St	short ton
	gr/m3	grain per cubic metre	Stpa	short ton per year
	hr	hour	Stpd	short ton per day
	ha	hectare	T	metric tonne
	hp	horsepower	Tpa	metric tonne per year
	in	inch	Tpd	metric tonne per day
	in2	square inch	US$	United States dollar
	J	Joule	USg	United States gallon
	k	kilo (thousand)	USgpm	US gallon per minute
	kcal	kilocalorie	V	Volt
	kg	kilogram	W	Watt
	km	kilometre	wmt	wet metric tonne
	km/h	kilometre per hour	yd3	cubic yard
	km2	square kilometre	Yr	Year

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APPENDIX VI VALUATION REPORT ON THE TARGET MINES VALMIN CODE Code for the Technical Assessment and Valuation of Mineral and Petroleum Assets and Securities for Independent Expert Reports 2005 Edition GDP Gross Domestic Product ETFs Exchange Traded Funds LME London Metal Exchange DCF Discounted Cash Flow

— VI-56 —

APPENDIX VII-A VALUATION REPORT ON THE PROPERTIES OF THE TARGET GROUP

The following is the text of a letter, summary of values and valuation certificates, prepared for the purpose of incorporation in this circular received from Roma Appraisals Limited, an independent valuer, in connection with its valuations as at 31 January 2012 of the property interests of the Target Group.

==> picture [80 x 47] intentionally omitted <==

Unit 3806, 38/F, China Resources Building, 26 Harbour Road, Wan Chai, Hong Kong Tel (852) 2529 6878 Fax (852) 2529 6806 E-mail info@roma-international.com http:// www.roma-international.com

12 April 2012

Timeless Software Limited

Unit 111-113, 1st Floor, Building 9, Phase One, Hong Kong Science Park, Tai Po, New Territories, Hong Kong

Case Ref: KY/RE694/AUG11

Dear Sir/Madam,

Re: Valuations of Property Interests held by Goffers Management Limited and its subsidiaries (hereinafter together referred to as the “Target Group”) in the People’s Republic of China

In accordance with your instructions for us to value the property interests intended to be acquired by Timeless Software Limited (the “Company”), its subsidiaries and / or associate companies (hereinafter together referred to as the “Group”) located in the People’s Republic of China (the “PRC”), we confirm that we have carried out inspections, made relevant enquiries and obtained such further information as we consider necessary for the purpose of providing you with our opinion of the market values of the property interests as at 31 January 2012.

1. BASIS OF VALUATION

Our valuations of the property interests are our opinion of the market values of the concerned properties which we would define as intended to mean “the estimated amount for which a property should exchange on the date of valuation between a willing buyer and a willing seller in an arm’s-length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion”.

— VIIA-1 —

VALUATION REPORT ON THE PROPERTIES OF THE TARGET GROUP

APPENDIX VII-A

2. PROPERTY CATEGORIZATION

In the course of our valuations, the properties are categorized into the following groups:

• Group I (Property held and occupied by the Target Group in the PRC); and

• Group II (Property rented by the Target Group in the PRC).

3. VALUATION METHODOLOGIES

For Property No.1, due to the specific purpose for which most of the buildings and structures of the property have been constructed, there are no readily identifiable market comparables. Thus the buildings and structures have been valued on the basis of their depreciated replacement costs instead of direct comparison method. The depreciated replacement cost approach is based on an estimate of the Market Value for the existing use of the land, plus the current cost of replacement of the existing structures less deductions for physical deterioration and all relevant forms of obsolescence and optimization. In practice, Depreciated Replacement Cost approach may be used as a substitute for the Market Value of specialized property only, due to the lack of market comparables. Our valuation does not necessarily represent the amount that might be realized from the disposition of the property and the depreciated replacement cost of the property interests is subject to the adequate potential profitability of the concerned business.

For Property No.2, we have attributed no commercial value to the property interests due to the prohibition against assignment or sub-letting or otherwise due to lack of substantial profit rent and/or short term nature of the property interests.

4. TITLE INVESTIGATION

For the properties located in the PRC, we have been provided with copies of various documents and have been advised by the Group that no further relevant documents have been produced. However, we have not examined the original documents to verify the existing title to the property interests or any amendment, which may not appear on the copies handed to us. In the course of our valuations, we have relied upon the advice and information given by the Group’s PRC legal advisor regarding the titles of the properties. All documents have been used for reference only.

In valuing the property interests, we have relied on the advice given by the Group and its legal adviser that the Target Group has valid and enforceable titles to the properties which are freely transferable, and has free and uninterrupted right to use the same, for the whole of the unexpired term granted subject to the payment of annual government rent / land use fees and all requisite land premium / purchase consideration payable have been fully settled.

5. VALUATION ASSUMPTIONS

Our valuations have been made on the assumption that the owner sells the property interests in the market in their existing states without the benefit of deferred term contracts, leasebacks, joint ventures, management agreements or any similar arrangements which would serve to affect the values of such property interests.

— VIIA-2 —

VALUATION REPORT ON THE PROPERTIES OF THE TARGET GROUP

APPENDIX VII-A

In addition, no account has been taken of any option or right of pre-emption concerning or affecting the sale of the property interests and no allowance has been made for the property interests to be sold in one lot or to a single purchaser.

6. SOURCE OF INFORMATION

In the course of our valuations, we have relied to a very considerable extent on the information provided by the Group and have accepted advice given to us on such matters as planning approvals or statutory notices, easements, tenure, identification of properties, particulars of occupation, site/ floor areas, ages of buildings and all other relevant matters which can affect the values of the property interests. All documents have been used for reference only.

We have no reason to doubt the truth and accuracy of the information provided to us. We have also been advised that no material facts have been omitted from the information supplied. We consider that we have been provided with sufficient information to reach an informed view, and have no reason to suspect that any material information has been withheld.

7. VALUATION CONSIDERATION

We have inspected the exterior and, where possible, the interior of certain properties. No structural survey has been made in respect of the properties. However, in the course of our inspections, we did not note any serious defects. We are not, however, able to report that the properties are free from rot, infestation or any other structural defects. No tests were carried out on any of the building services.

We have not carried out on-site measurement to verify the site/floor areas of the properties under consideration but we have assumed that the site/floor areas shown on the documents handed to us are correct. Except as otherwise stated, all dimensions, measurements and areas included in the valuation certificates are based on information contained in the documents provided to us by the Group and are therefore approximations.

No allowance has been made in our valuations for any charges, mortgages or amounts owing on the property interests nor for any expenses or taxation which may be incurred in effecting a sale. Unless otherwise stated, it is assumed that the property interests are free from encumbrances, restrictions and outgoings of an onerous nature which could affect their values.

In valuing the property interests, we have complied with all the requirements contained in Chapter 8 of the Rules Governing the Listing of Securities on the Growth Enterprise Market of The Stock Exchange of Hong Kong Limited, and the HKIS Valuation Standards on Properties (First Edition 2005) published by The Hong Kong Institute of Surveyors.

— VIIA-3 —

VALUATION REPORT ON THE PROPERTIES OF THE TARGET GROUP

APPENDIX VII-A

8. REMARKS

Unless otherwise stated, all monetary amounts stated in our valuations are in Renminbi (“RMB”).

Summary of values and our valuation certificates are attached.

Yours faithfully,

For and on behalf of

Roma Appraisals Limited

Alan W K Lee

BCom(Property) MFin

MHKIS RPS(GP) AAPI CPV CPV(Business)

Associate Director

• Note: Mr. Alan W K Lee is a Registered Professional Surveyor (General Practice), a member of Hong Kong Institute of Surveyors and an Associate of Australian Property Institute. He has over 8 years’ valuation experience in Hong Kong, Macau, the PRC, the Asia Pacific Region and European countries.

— VIIA-4 —

APPENDIX VII-A

VALUATION REPORT ON THE PROPERTIES OF THE TARGET GROUP

SUMMARY OF VALUES

Group I — Property held and occupied by the Target Group in the PRC

No. Property

Market Value in Existing State as at 31 January 2012

1. A parcel of land together with various buildings and ancillary structures situated in Luotuojuanzi Nonferrous Metal Industrial Park, Luotuojuanzi Development Zone, Hami City, Xinjiang Uygur Autonomous Region, The PRC

RMB6,200,000.

位於中國新疆維吾爾自治區哈密市駱駝圈子開發區 駱駝圈子有色工業園區之一塊土地連同若干建築物及附屬構築物

Sub-total: RMB6,200,000.

Group II — Property rented by the Target Group in the PRC

No. Property

Market Value in Existing State as at 31 January 2012

1. Level 5, No.31 Tian Shan West Road, Hami City, Xinjiang Uygur Autonomous Region, The PRC

No Commercial Value.

位於中國新疆維吾爾自治區 哈密市天山西路31號偉福大廈5樓

Sub-total: No Commercial Value. Grand Total: RMB6,200,000.

— VIIA-5 —

VALUATION REPORT ON THE PROPERTIES OF THE TARGET GROUP

APPENDIX VII-A

VALUATION CERTIFICATE

Group I — Property held and occupied by the Target Group in the PRC

No. Property Description and Tenure 1. A parcel of land The property comprises a parcel of land with a together with site area of 184,320.98 sq.m. (or about various buildings 1,984,031 sq.ft.) together with various buildings and ancillary and ancillary structures erected thereon, which structures situated were completed in various stages between 1993 in Luotuojuanzi and 2010. Nonferrous Metal Industrial Park, The property has a gross floor area (“GFA”) of Luotuojuanzi approximately 19,658.08 sq.m. (or about Development Zone, 211,600 sq.ft.) and there is no title document Hami City, obtained for the buildings and the structure of Xinjiang Uygur the property. Autonomous The land use rights of the property have been Region, The PRC granted for a term expiring on 9 February 2054 for industrial use. 位於中國 新疆維吾爾自治區 哈密市 駱駝圈子開發區駱 駝圈子有色工業園 區之一塊土地連同 若干建築物及附屬 構築物

Market Value in Particulars of Existing State as at Occupancy 31 January 2012 The property is RMB 6,200,000. occupied by the Target Group for the uses of exploration and mining of gold.

Notes:

1. Pursuant to an Approval of the Transaction of State-owned Land Use Rights Application (申請辦理國有土地使用權出讓手續的批覆) issued by Hami City Land Resources Bureau (哈密市國土資源局) dated 9 February 2004, a land parcel with a site area of 234,512 sq.m. for industrial use, containing the land of the property with a site area of 184,320.98sq.m., was agreed to be transferred to Xinjiang Tianmu Mineral Resources Development Co., Ltd. (新疆天目礦業資源開發有限公司) at a consideration of RMB7,738,896.

2. Pursuant to a State-owned Land Use Rights Transfer Agreement (土地使用權轉讓協議) entered into between Xinjiang Tianmu Mineral Resources Development Co., Ltd. (新疆天目礦業資源開發有限公司) and Xinjiang Yakesi Resources Company Limited (新疆亞克斯資源開發有限公司) dated 20 April 2004, portion of the land parcel, stipulated in Note 1, with a site area of 47,610.23 sq.m. was agreed to be transferred to the latter.

3. Pursuant to a State-owned Land Use Rights Transfer Agreement (土地使用權轉讓協議) entered into between Xinjiang Tianmu Mineral Resources Development Co., Ltd. (新疆天目礦業資源開發有限公司) and Hami Jubao Resources Company Limited (哈密市聚寶資源開發有限公司) dated 2 March 2008, portion of the land parcel, stipulated in Note 1, with a site area of 2,580.79 sq.m. was agreed to be transferred to the latter.

— VIIA-6 —

APPENDIX VII-A

VALUATION REPORT ON THE PROPERTIES OF THE TARGET GROUP

1. Pursuant to a State-owned Land Use Rights Certificate (國有土地使用證), Hami City Guo Yong (2008) Di No.0179 (哈密市國用(2008)第0179號) dated 24 March 2008 issued by Hami City People’s Government (哈密市 人民政府), the land use rights of the property with a site area of 184,320.98 sq.m. have been granted to Xinjiang Tianmu Mineral Resources Development Co., Ltd. (新疆天目礦業資源開發有限公司) for a term expiring on 9 February 2054 for industrial use.

2. The total construction cost incurred of the property is about RMB3,400,000.

3. As at the date of valuation, we have attributed no commercial value to the buildings with a total gross floor area of about 19,658.08 sq.m. (the “Buildings”) erected upon the land of the property due to the absence of relevant title documents. For your accounting reference purpose, we are of the opinion that the depreciated replacement costs of the Buildings (excluding the land of the property) on the assumptions that the relevant title documents have been obtained and the Buildings can be freely transferred together with the land of the property in the open market would be in the sum of approximately RMB5,300,000.

4. The opinion of the PRC legal advisor to the Group contains, inter alia, the following:

5. a. The land use rights of the property has been legally granted to Xinjiang Tianmu Mineral Resources Development Co., Ltd. (新疆天目礦業資源開發有限公司) by the way of auction;

6. b. The Target Group has completed the application of State-owned Land Use Rights Certificate with a term expiring on 9 February 2054 for industrial use on 24 March 2008;

7. c. No mortgage, guarantee and pledge attached on the land use rights of the property; and

8. d. No judicial restraint exists.

9. As advised by the Company, Xinjiang Tianmu Mineral Resources Development Co., Ltd (新疆天目礦業資源開發有限公司) is an indirect 51%-owned subsidiary of the Target Group.

— VIIA-7 —

VALUATION REPORT ON THE PROPERTIES OF THE TARGET GROUP

APPENDIX VII-A

VALUATION CERTIFICATE

Group II — Property rented by the Target Group in the PRC

Market Value in Particulars of Existing State as at No. Property Description and Tenure Occupancy 31 January 2012 2. Level 5, The property comprises a whole of Level 5 of a The property is No Commercial Value. No.31 Tian Shan commercial building completed in about 2000’s. occupied by the West Road, Target Group Hami City, The property has a gross floor area (“GFA”) of for office use. Xinjiang Uygur approximately 694.35 sq.m. (or about 7,474 Autonomous sq.ft.). Region, The PRC The property is leased to Xinjiang Tianmu Mineral Resources Development Co., Ltd (新疆 位於中國 天目礦業資源開發有限公司) from Xinjiang 新疆維吾爾自治區 Weifu Mining Limited (新疆偉福礦業有限公司), 哈密市天山西路31號 a company controlled by Mr. Felipe Tan who 偉福大廈5樓 has beneficial interest in Xinjiang Tianmu Mineral Resources Development Co., Ltd (新疆 天目礦業資源開發有限公司), for a term commencing on 1 November 2009 and expiring on 31 October 2012 at an annual rental of RMB 160,000.

Notes:

1. Pursuant to a lease entered into between 新疆偉福礦業有限公司 and Xinjiang Tianmu Mineral Resources Development Co., Ltd. (新疆天目礦業資源開發有限公司) dated 1 November 2009, the tenant is Xinjiang Tianmu Mineral Resources Development Co., Ltd. (新疆天目礦業資源開發有限公司), which is an indirect 51%-owned subsidiary of the Target Group.

2. The opinion of the PRC legal advisor to the Group stated that the Tenancy Agreement is legally valid and binding on the contracting parties.

— VIIA-8 —

VALUATION REPORT ON THE PROPERTIES OF THE TARGET GROUP

APPENDIX VII-A

PROPERTY INTEREST, PROPERTY VALUATION AND RECONCILIATION OF APPRAISED PROPERTY VALUES WITH NET BOOK VALUES (RULE 8.30 OF THE GEM LISTING RULES)

Roma Appraisals Limited, an independent valuer, has valued the property interests held by the Target Group as at 31 January 2012.

As at the date of valuation, we cannot attribute any commercial value to the buildings and ancillary structures of the property due to the absence of the relevant building ownership certificates. Details of the valuation of lands, buildings and ancillary structures erected on the property interests as at 31 January 2012 are set out in Appendix VII-A to this circular.

Set forth below is the reconciliation of the valuation figure of the Target Group’s property with the figures included in the combined financial statements:

	Buildings
	and ancillary structures
	of the property
	RMB’000	HK$’000
Net book value as at 31 December 2011 (included in buildings
and leasehold improvements in property, plant and equipment)
as set out in the accountants’ report on Xinjiang Tianmu in
Appendix II-B	2,421	2,956
Movements during the period:
Additions during the period	1,080	1,325
Exchange alignment	—	27
Depreciation charged for the period	(17)	(21)
Carrying amounts as at 31 January 2012	3,484	4,287
Valuation surplus	1,816	2,234
Valuation of the various buildings and ancillary structures
erected on the land of the property as at 31 January 2012 as
set out in the valuation report set out in Appendix VII-A
(Please refer to the Note below)	5,300	6,521

Note:

In the course of our valuation, we have attributed no commercial value to the buildings and ancillary structures of the property due to the absence of the relevant building ownership certificates. However, for internal reference purpose, we are of the opinion that the aggregate depreciated replacement cost of the various buildings and ancillary structures (excluding the land of the property) as at 31 January 2012 would be RMB5,300,000 assuming the Building Ownership Certificates have been fully obtained and the buildings and ancillary structure could be freely transferred, leased and mortgaged together with the land of the property in the market.

— VIIA-9 —

APPENDIX VII-B VALUATION REPORT ON THE PROPERTIES OF THE GROUP

The following is the text of a letter, summary of values and a valuation certificate prepared for the purpose of incorporation in this circular received from LCH (Asia-Pacific) Surveyors Limited, an independent professional surveyor, in connection with its valuations of the property interests held by the Group as at 31 January 2012.

==> picture [457 x 59] intentionally omitted <==

The readers are reminded that the report which follows has been prepared in accordance with the guidelines set by the International Valuation Standards 2011 (the “IVS”) published by the International Valuation Standards Council as well as the HKIS Valuation Standards on Properties, First Edition, 2005 (the “HKIS Standards”) published by the Hong Kong Institute of Surveyors (The “HKIS”). Both standards entitle the valuer to make assumptions which may on further investigation, for instance by the readers’ legal representative, prove to be inaccurate. Any exception is clearly stated below. Headings are inserted for convenient reference only and have no effect in limiting or extending the language of the paragraphs to which they refer. Translation of terms in English or in Chinese are for reader’s identification purpose only and have no legal status or implication in this report. This report is prepared and signed off in English format, translation of this report in language other than English shall only be used as a reference and should not be regarded as a substitution for this report. Piecemeal reference to this report is considered inappropriate and no responsibility is assumed from our part for such piecemeal reference. It is emphasised that the findings and conclusion presented below are based on the documents and facts known to the valuer at the Latest Practicable Date of this circular. If additional documents and facts are made available, the valuer reserves the right to amend this report and its conclusion.

17th Floor Champion Building Nos. 287-291 Des Voeux Road Central Hong Kong

12 April 2012

The Board of Directors Timeless Software Limited Units 111-113, 1st Floor Building 9, Phase One Hong Kong Science Park Tai Po New Territories Hong Kong

— VIIB-1 —

APPENDIX VII-B

VALUATION REPORT ON THE PROPERTIES OF THE GROUP

Dear Sirs,

In accordance with the instructions given by the management of Timeless Software Limited (hereinafter referred to as the “Company”) to us to value certain properties in which the Company and its subsidiaries (collectively, hereinafter together with the Company referred to as the “Group”) have interests in the People’s Republic of China (hereinafter referred to as the “PRC” or “China”), we confirm that we have conducted inspections, made relevant enquiries and obtained such further information as we consider necessary to support our conclusion of values of the property interests as at 31 January 2012 (hereinafter referred to as the “Date of Valuation”) for the Company’s internal management reference purpose. Our findings and conclusion of values of these properties are documented in a valuation report and submitted to the Company at today’s date.

We understand that the use of our work product (regardless of form of presentation) will form part of the Company’s due diligence but we have not been engaged to make specific sale or purchase recommendations, or give opinion for financing arrangement. We further understand that the use of our work product will not supplant other due diligence which the management of the Company should conduct in reaching its business decision regarding the properties valued. Our work is designed solely to provide information that will give the management of the Company a reference in its due diligence process, and our work should not be the only factor to be referenced by the Company.

At the request of the management of the Company, we prepared this summary report (including this letter, summary of values and the valuation certificate) to summarise our findings and conclusion as documented in the valuation report for the purpose of inclusion in this circular at today’s date for the Company’s shareholders’ reference. Terms herein used without definition shall have the same meanings as in the valuation report, and the assumptions and caveats adopted in the valuation report also applied to this summary report.

BASIS OF VALUATION AND ASSUMPTIONS

According to the IVS which the HKIS Standards also follows, there are two valuation bases, namely market value basis and valuation bases other than market value. In this engagement, we have provided our conclusion of values of the properties on market value basis.

The term “Market Value” is defined by the HKIS Standards as “the estimated amount for which a property should exchange on the date of valuation between a willing buyer and a willing seller in an arm’s-length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion”.

Unless otherwise stated, our valuations of the property interests have been made on the assumptions that, as of the Date of Valuation,

1. the legally interested party in each of the properties has absolute title to its relevant property interest;

— VIIB-2 —

APPENDIX VII-B VALUATION REPORT ON THE PROPERTIES OF THE GROUP

1. the legally interested party in each of the properties has free and uninterrupted rights to assign its relevant property interest for the whole of the unexpired terms as granted, and any premiums payable have already been fully paid;

2. the legally interested party in each of the properties sells its relevant property interest in the market in its existing state without the benefit of a deferred terms contract, leaseback, joint venture, management agreement or any other similar arrangement which would serve to increase the value of the property interest;

3. the properties have obtained relevant government’s/organisation’s approvals for the sale of the properties on strata-title basis and are able to be disposed of and transferred free of all encumbrances (including but not limited to the cost of transaction) in the market; and

4. the properties can be freely disposed of and transferred free of all encumbrances at the Date of Valuation for its existing uses in the market to both local and overseas purchasers without payment of any premium to the government.

Should any of the above not be the case, it will have adverse impact to the values as reported.

APPROACH TO VALUE

There are three generally accepted approaches in arriving at the market value of a property on an absolute title basis, namely the Sales Comparison Approach (or known as the Market Approach), the Cost Approach and the Income Approach.

In valuing the properties, we have adopted the investment method of the Income Approach (or sometimes referred to as a method of the Market Approach for the reversionary interests and the rate of return are market-derived) by taking into account the current rent receivable from the existing tenancy agreements and the reversionary potential of the property interests. Our conclusion of values of the properties are subject to the existing tenancy agreements. The underlying assumption of this method is that an investor will pay no more for the property than he or she would have to be paid for another property with an income stream of comparable amount, duration, and certainty.

Unless otherwise stated, we have not carried out any valuation on a redevelopment basis to the properties and the study of possible alternative development options and the related economics do not come within the scope of our work.

MATTERS THAT MIGHT AFFECT THE VALUES REPORTED

For the sake of valuation, we have adopted the areas as appeared in the copies of the documents as provided or obtained from the relevant authorities, and no further verification work has been conducted. Should it be established subsequently that the adopted areas were not the latest approved, we reserve the right to revise our report and the valuations accordingly.

— VIIB-3 —

VALUATION REPORT ON THE PROPERTIES OF THE GROUP

APPENDIX VII-B

No allowance has been made in our valuations for any charges, mortgages, outstanding premium or amounts owing on neither the properties valued nor any taxation which may be incurred in affecting a sale. Unless otherwise stated, it is assumed that the properties are free from all encumbrances, restrictions, and outgoings of an onerous nature which could affect their values.

In our valuations, we have assumed that each of the properties is able to be sold and purchased in the market without any legal impediment (especially from the regulators). Should this not be the case, it will affect the reported values significantly. The readers are reminded to have their own legal due diligence work on such issues. No responsibility or liability is assumed.

As at the Latest Practicable Date of this circular, we were unable to identify any adverse news against the properties which may affect the reported values in our work product. Thus, we are not in the position to report and comment on its impact (if any) to the properties. However, should it be established subsequently that such news did exist at the Date of Valuation, we reserve the right to adjust the values reported herein.

ESTABLISHMENT OF TITLES

Based on the purpose of this engagement and the market value basis of valuation, the management of the Company provided us the necessary documents to support the Group’s titles to the properties and that the Group has free and uninterrupted rights to transfer, mortgage or let its relevant property interests (in this instance, an absolute title) for the whole of the unexpired terms as granted, free of all encumbrances and any premiums payable have already been paid in full or outstanding procedures have been completed and to use the properties. However, we have not examined the original documents to verify the ownership and encumbrances, or to ascertain the existence of any amendments which may not appear on the copies handed to us. All documents disclosed (if any) are for reference only and no responsibility is assumed for any legal matters concerning the legal titles and the rights (if any) to the properties valued. Any responsibility for our misinterpretation of the documents cannot be accepted.

Our procedures to value, as agreed with the management of the Company, did not require us to conduct legal due diligence on the legality and formality on the way that the legally interested party obtained the properties from the relevant authorities. We agreed with the management of the Company that this should be the responsibility of the legal advisor to the management of the Company. Thus, no responsibility or liability is assumed from our part to the origin and continuity of the titles to the properties.

Due to inherent defects in the land registration system of China, we are unable to search the original documents of the properties from the relevant authorities to verify legal titles or to any material encumbrances which may not appear on the copies handed to us. We need to state that we are not legal professionals and are not qualified to ascertain the titles and to report any encumbrances that may be registered against the properties. However, we have relied solely on the copies of documents and the copy of the PRC legal opinions dated 18 December 2009 as provided by the management of the Company with regard to the legal titles of the properties as disclosed in the attached valuation certificate. We were given to understand that the PRC legal opinions was prepared by the Company’s PRC legal adviser, Guang Dong Shun Hua Law Office（廣東舜華律師事務所）. No responsibility or liability from our part is assumed in relation to those legal opinions.

— VIIB-4 —

APPENDIX VII-B

VALUATION REPORT ON THE PROPERTIES OF THE GROUP

In our report, we have assumed that the Group has obtained all the approval and/or endorsement from the relevant authorities to own or to use the properties, and that there would have no legal impediment (especially from the regulators) for the Group to continue the legal titles of the properties. Should this not be the case, it will affect our findings or conclusion of values in this report significantly. The readers are reminded to have their own legal due diligence work on such issues. No responsibility or liability is assumed.

INSPECTIONS AND INVESTIGATIONS OF THE PROPERTIES IN ACCORDANCE WITH VALUATION STANDARD 4 OF THE HKIS STANDARDS

We have conducted inspections to the exterior, and where possible, the interior of the properties in respect of which we have been provided with such information as we have requested for the purpose of engagement. We have not inspected those parts of the properties which were covered, unexposed or inaccessible and such parts have been assumed to be in a reasonable condition. We cannot express an opinion about or advise upon the condition of the properties and our work product should not be taken as making any implied representation or statement about the condition of the properties. No structural survey, investigation or examination has been made, but in the course of our inspections, we did not note any serious defects in the properties inspected. We are not, however, able to report that the properties are free from rot, infestation or any other structural defects. No tests were carried out to the utilities (if any) and we are unable to identify those utilities covered, unexposed or inaccessible.

We have not carried out on-site measurements to verify the correctness of the areas of the properties, but have assumed that the areas shown on the documents and official layout plans handed to us are correct. All dimensions, measurements and areas are approximations.

Our engagement and the agreed procedures did not include an independent land survey to verify the legal boundaries of the properties. We need to state that we are not in the land survey profession, therefore, we are not in the position to verify or ascertain the correctness of the legal boundaries of such properties that appeared on the documents handed to us. No responsibility from our part is assumed. The management of the Company or interested party in the properties should conduct their own legal boundaries due diligence work.

We have not arranged for any investigation to be carried out to determine whether or not any deleterious or hazardous material has been used in the construction of the properties, or has since been incorporated, and we are therefore unable to report that the properties are free from risk in this respect, and therefore we have not considered such factor in our valuations.

SOURCES OF INFORMATION AND ITS VERIFICATION IN ACCORDANCE WITH VALUATION STANDARD 5 OF THE HKIS STANDARDS

In the course of our work, we have been provided with copies of the documents regarding the properties, and these copies have been referenced without further verifying with the relevant bodies and/or authorities. Our procedures to value did not require us to conduct any searches or inspected the original documents to verify ownership or to verify any amendment which may not appear on the

— VIIB-5 —

APPENDIX VII-B VALUATION REPORT ON THE PROPERTIES OF THE GROUP

copies handed to us. We need to state that we are not legal professionals, therefore, we are not in the position to advice and comment on the legality and effectiveness of the documents provided by the management of the Company.

We have relied solely on the information provided by the management of the Company or its appointed personnel without further verification and have fully accepted advice given to us on such matters as planning approvals or statutory notices, locations, titles, easements, tenure, rentals, lettings, occupation, site and floor areas and all other relevant matters.

The scope of valuations has been determined by reference to the property list provided by the management of the Company. The properties on the list have been included in our valuations. The management of the Company has confirmed to us that the Group has no property interest other than those specified on the listed supplied to us.

Our valuations have been made only based on the advice and information made available to us. While a limited scope of general inquiries had been made to the local property market practitioners, we are not in a position to verify and ascertain the correctness of the advice given by the relevant personnel. No responsibility or liability is assumed.

Information furnished by others, upon which all or portions of our work product are based, is believed to be reliable but has not been verified in all cases. Our procedures to value or work do not constitute an audit, review, or compilation of the information provided. Thus, no warranty is made nor liability assumed for the accuracy of any data, advice, opinions, or estimates identified as being furnished by others which have been used in formulating our report.

When we adopted the work products from other professions, external data providers and the management of the Company or its appointed personnel in our work, the assumptions and caveats that adopted by them in arriving at their figures also applied in our work. The procedures we have taken do not provide all the evidence that would be required in an audit and, as we have not performed an audit, accordingly, we do not express an audit opinion.

We are unable to accept any responsibility for the information that has not been supplied to us by the management of the Company or its appointed personnel. Also, we have sought and received confirmation from the management of the Company or its appointed personnel that no materials factors have been omitted from the information supplied. Our analysis and valuations are based upon full disclosure between us and the Company of material and latent facts that may affect our works.

We have had no reason to doubt the truth and accuracy of the information provided to us by the management of the Company or its appointed personnel. We consider that we have been provided with sufficient information to reach an informed view, and have had no reason to suspect that any material information has been withheld.

Unless otherwise stated, all monetary amounts are in Renminbi Yuan (“RMB”).

— VIIB-6 —

VALUATION REPORT ON THE PROPERTIES OF THE GROUP

APPENDIX VII-B

LIMITING CONDITIONS IN THIS SUMMARY REPORT

Our findings or conclusion of values of the properties in this report are valid only for the stated purpose and only for the Date of Valuation, and for the sole use of the named Company. We or our personnel shall not be required to give testimony or attendance in court or to any government agency by reason of this report, and the valuer accepts no responsibility whatsoever to any other person.

Our valuations have been made on the assumption that no unauthorised alteration, extension or addition has been made in the properties, and that the inspections and the use of this report do not purport to be a building survey of the properties. We have assumed that the properties are free of rot and inherent danger or unsuitable materials and techniques.

No responsibility is taken for changes in market conditions and local government policy and no obligation is assumed to revise this summary report to reflect events or conditions, which occur or make known to us subsequent to the date hereof.

Neither the whole nor any part of this summary report or any reference made hereto may be included in any published documents, circular or statement, or published in any way, without our written approval of the form and context in which it may appear. Nonetheless, we consent to the publication of this summary report in this circular for the Company’s shareholders’ reference.

It is agreed that our maximum liability relating to services rendered under this engagement (regardless of form of action, whether in contract, negligence or otherwise) shall be limited to the charges paid to us for the portion of its services or work products giving rise to liability. In no event shall we be liable for consequential, special, incidental or punitive loss, damage or expense (including without limitation, lost profits, opportunity costs, etc.), even if it has been advised of their possible existence.

The Company is required to indemnify and hold us and our personnel harmless from any claims, liabilities, costs and expenses (including, without limitation, attorney’s fees and the time of our personnel involved) brought against, paid or incurred by us at a time and in any way based on the information made available in connection with our report except to the extent any such loses, expenses, damages or liabilities are ultimately determined to be the result of gross negligence of our engagement team in conducting its work. This provision shall survive even after the termination of this engagement for any reason.

— VIIB-7 —

VALUATION REPORT ON THE PROPERTIES OF THE GROUP

APPENDIX VII-B

STATEMENTS

The attached summary of values and valuation certificate are prepared in line with the requirements contained in Chapter 8 of the GEM Listing Rules as well as the guidelines contained in the IVS and the HKIS Standards. The valuations have been undertaken by valuers (see End Notes), acting as external valuers, qualified for the purpose of these valuations.

We retain a copy of this summary report together with the valuation report from which it was prepared, and these data and documents will, according to the Laws of Hong Kong, keep for a period of 6 years from the date of this report and to be destroyed thereafter. We considered these records confidential, and we do not permit access to them by anyone, with the exception for law enforcement authorities or court order, without the Company’s authorisation and prior arrangement made with us. Moreover, we will add the Company’s information into our client list for future reference.

The valuations of the properties depend solely on the assumptions made in our report and not all of which can be easily quantified or ascertained exactly. Should some or all of the assumptions prove to be inaccurate at a later date, it will affect the reported values significantly.

We hereby certify that the fee for this service is not contingent upon our conclusion of values and we have no significant interest in the properties, the Group or the values reported.

Our valuations are summarised below and the valuation certificate is attached.

Yours faithfully, For and on behalf of

LCH (Asia-Pacific) Surveyors Limited

Joseph Ho Chin Choi Elsa Ng Hung Mui BSc PgD MSc RPS(GP) B.Sc. M.Sc. RPS(GP) Managing Director Director

Contributing Valuer: Eugene Lai Chung Yee A.Sc.

Notes:

1. Mr. Joseph Ho Chin Choi has been conducting asset valuations and advisory work in Hong Kong, Macau, Taiwan, mainland China, the Philippines, Vietnam, Malaysia, Singapore, Thailand, Bangladesh, Japan, Australia, Kazakhstan, Madagascar, Mongolia, Scotland, Finland, Germany, Poland, Brazil, Argentina, Guyana, Venezuela, Canada and the United States of America for various purposes since 1988.He has more than 20 years of experience in valuing real estate properties in mainland China. He is a Fellow of The HKIS and a valuer on the List of Property Valuers for Undertaking Valuation for Incorporation or Reference in Listing Particulars and Circulars and Valuation in Connection with Takeovers and Mergers published by The HKIS.

2. Ms. Elsa Ng Hung Mui is a Registered Professional Surveyor who has been conducting valuation of real estate properties since 1994. She has rich experience in valuing properties in Hong Kong and the mainland China. She is a Member of The HKIS and a valuer on the List of Property Valuers for Undertaking Valuation for Incorporation or Reference in Listing Particulars and Circulars and Valuation in Connection with Takeovers and Mergers published by The HKIS.

— VIIB-8 —

VALUATION REPORT ON THE PROPERTIES OF THE GROUP

APPENDIX VII-B

SUMMARY OF VALUES

Properties held by the Group under various long-term title certificates in the PRC for investment and valued on market value basis

						Amount of
						valuations in
						its existing
			Amount of			state
			valuations in			attributable to
			its existing			the Group as
			state as at			at
			**31 **	January	Interest of the	31 January
	Property			2012	Group	2012
				RMB		RMB
1.	Room 2117 on Level 21		4,560,000		100 per cent.	4,560,000
	Yingu Mansion
	No. 9 West Road, North 4th Ring
	Haidian District
	Beijing
	The PRC
	100190
2.	Room 2115 on Level 21		4,340,000		100 per cent.	4,340,000
	Yingu Mansion
	No. 9 West Road, North 4th Ring
	Haidian District
	Beijing
	The PRC
	100190
		Total:	8,900,000			8,900,000

— VIIB-9 —

APPENDIX VII-B

VALUATION REPORT ON THE PROPERTIES OF THE GROUP

VALUATION CERTIFICATE

Properties held by the Group under various long-term title certificates in the PRC for investment and valued on market value basis

• Amount of valuation in its existing state attributable to

• Particulars of the Group as at

• Property Description and tenure occupancy 31 January 2012

• 1. Room 2117 on The property comprises an office unit on Level As inspected RMB4,560,000 Level 21 21 of a 22-storey commercial/office building and confirmed Yingu Mansion plus 3 levels of basement which was completed by the (100 per cent. No. 9 West Road in about 2005. management of interest) North 4[th] Ring the Company, Haidian District According to the information made available to the property is Beijing us, the property has a gross floor area of tenant occupied The PRC approximately 146.14 sq. m. and subject to a 100190 tenancy The property is subject to a right to use the land agreement. (See

• for a term expiring on 4 December 2051 for Note 3 below) comprehensive usage.

Notes:

1. Pursuant to the 北京市商品房現房買賣合同編號 XF16840 (Beijing Ready Commodity Housing Purchase and Sales Contract No. XF16840) dated 26 July 2006 and signed between 北京銀谷大厦房地產開發有限公司 (translated as Beijing Yingu Mansion Property Development Company Limited and hereinafter referred to as “Beijing Yingu”) and 天時北方軟件(北京)有限公司 (Timeless Software (Beijing) Company Limited and hereinafter referred to as “Timeless Beijing”), a wholly-owned subsidiary of the Company, the property having a gross floor area of 146.14 sq. m. was transferred to Timeless Beijing at a consideration of RMB2,031,346. Pursuant to a State-owned Land Use Rights Certificate known as 京海國用(2005出)第3576號 (Jing Hai Guo Yong (2005 Chu) Di 3576 Hao), the right to possess the land is held by the State and the rights to use the land has been assigned to Beijing Yingu for a term expiring on 4 December 2051 for comprehensive and basement carport usages.

2. Pursuant to a Building Ownership Certificate known as 京房權證海港澳臺移字第0103491號 (Jing Fang Quan Zheng Hai Gang Ao Tai Yi Zi Di 0103491 Hao) issued by 北京市海淀區建設委員會 (Beijing Municipal Haidian District Bureau of Construction) and dated 25 May 2007, the legally interested party in the property having a gross floor area of 146.14 sq. m. is Timeless Beijing for comprehensive usage.

3. Pursuant to a tenancy agreement entered between Timeless Beijing and 北京贏家偉業國際商務服務有限責任公司 (translated as Beijing Yingjia Weiye International Business Service Company Limited) (the “Tenant”), which is an independent third party to the Company, dated 28 March 2011, the property was leased to the Tenant for office purpose and for a term of 2 years commencing from 8 April 2011 to 7 April 2013 at a monthly rental of RMB22,225.46.

— VIIB-10 —

APPENDIX VII-B VALUATION REPORT ON THE PROPERTIES OF THE GROUP

1. According to the legal opinions prepared by the Company’s PRC legal adviser, the following opinions are noted:

2. (i) Timeless Beijing is the legally interested party in the property and has the rights to occupy, use, handle the proceed, lease, mortgage or freely transfer the property; and

3. (ii) the property is not subject to any mortgages or third party’s interests up to the date of legal opinion.

— VIIB-11 —

APPENDIX VII-B

VALUATION REPORT ON THE PROPERTIES OF THE GROUP

• Amount of valuation in its existing state attributable to

• Particulars of the Group as at

• Property Description and tenure occupancy 31 January 2012

• 1. Room 2115 on The property comprises an office unit on Level As inspected RMB4,340,000 Level 21 21 of a 22-storey commercial/office building and confirmed (100 per cent. Yingu Mansion plus 3 levels of basement which was completed by the interest) No. 9 West Road in about 2005. management of North 4[th] Ring the Company, Haidian District According to the information made available to the property is Beijing us, the property has a gross floor area of tenant occupied The PRC approximately 139.06 sq. m. and subject to a 100190 tenancy The property is subject to a right to use the land agreement. (See

• for a term expiring on 4 December 2051 for Note 3 below) comprehensive usage.

Notes:

1. Pursuant to the 北京市商品房現房買賣合同編號XF16836 (Beijing Ready Commodity Housing Purchase and Sales Contract No. XF16836) dated 26 July 2006 and signed between Beijing Yingu and Timeless Beijing, a wholly-owned subsidiary of the Company, the property having a gross floor area of 139.06 sq. m. was transferred to Timeless Beijing at a consideration of RMB1,932,934. Pursuant to a State-owned Land Use Rights Certificate known as 京海國用(2005出)第3576號 (Jing Hai Guo Yong (2005 Chu) Di 3576 Hao), the right to possess the land is held by the State and the rights to use the land has been assigned to Beijing Yingu for a term expiring on 4 December 2051 for comprehensive and basement carport usages.

2. Pursuant to a Building Ownership Certificate known as 京房權證海港澳臺移字第0103492號 (Jing Fang Quan Zheng Hai Gang Ao Tai Yi Zi Di 0103492 Hao) issued by Beijing Municipal Haidian District Bureau of Construction and dated 16 May 2007, the legally interested party in the property having a gross floor area of 139.06 sq. m. was Timeless Beijing for comprehensive usage.

3. Pursuant to a tenancy agreement entered between Timeless Beijing and 北京贏家偉業國際商務服務有限責任公司 (translated as Beijing Yingjia Weiye International Business Service Company Limited) (the “Tenant”), which is an independent third party to the Company, dated 14 April 2011, the property was leased to the Tenant for office purpose and for a term of 2 years commencing from 25 April 2011 to 24 April 2013 at a monthly rental of RMB21,148.71.

4. According to the legal opinions prepared by the Company’s PRC legal adviser, the following opinions are noted:

5. (i) Timeless Beijing is the legally interested party in the property and has the rights to occupy, use, handle the proceed, lease, mortgage or freely transfer the property; and

6. (ii) the property is not subject to any mortgages or third party’s interests up to the date of legal opinion.

— VIIB-12 —

GENERAL INFORMATION

APPENDIX VIII

RESPONSIBILITY STATEMENTS

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

INTERESTS OF DIRECTORS

Interests in the shares, underlying shares and debentures of the Company and its associated companies

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

• (i) Long positions in the ordinary Shares

	**Number of **	Shares held
	in the capacity of		Total	Approximate
	Beneficial	Controlled	number of	percentage of
Name of Directors	owner	corporation	Shares held	shareholding
Mr. Cheng Kin Kwan	221,440,000	—	221,440,000	16.95%
Mr. Law Kwai Lam	28,325,000	10,000,000	38,325,000	2.93%
Ms. Leung Mei Sheung,
Eliza	13,492,000	—	13,492,000	1.03%
Ms. Zheng Ying Yu	4,900,000	—	4,900,000	0.38%
Mr. Fung Chun Pong,
Louis	588,000	—	588,000	0.05%
Mr. Liao Yun	4,510,000	—	4,510,000	0.35%

— VIII-1 —

APPENDIX VIII

GENERAL INFORMATION

• (ii) Long positions in the share options of the Company

					Number of
					outstanding
					options held
		Date of grant			as at the
		and vesting	Exercisable	Exercise price	Latest	Approximate
		period	period	per Share	Practicable	percentage of
Name of Directors	Capacity	(dd/mm/yy)	(dd/mm/yy)	(HK$)	Date	shareholding
Mr. Cheng Kin Kwan	Beneficial owner	05/09/03	05/09/03 to	0.2280	6,960,000	0.53%
			04/09/13
		08/12/03	08/12/03 to	0.2130	800,000	0.06%
			07/12/13
		25/02/04	25/02/04 to	0.1900	7,700,000	0.59%
			24/02/14
				Sub-total:	15,460,000	1.18%
Mr. Law Kwai Lam	Beneficial owner	05/09/03	05/09/03 to	0.2280	2,000,000	0.15%
			04/09/13
		09/01/04	09/01/04 to	0.1900	1,000,000	0.08%
			08/01/14
		28/02/05	28/02/05 to	0.0722	1,000,000	0.08%
			27/02/15
		26/09/06	26/09/06 to	0.0772	3,500,000	0.27%
			25/09/16
		18/06/07	18/06/07 to	0.2980	800,000	0.06%
			17/06/17
				Sub-total	8,300,000	0.64%
Ms. Leung Mei Sheung,	Beneficial owner	05/09/03	05/09/03 to	0.2280	5,500,000	0.42%
Eliza			04/09/13
		08/12/03	08/12/03 to	0.2130	4,300,000	0.33%
			07/12/13
		25/02/04	25/02/04 to	0.1900	5,800,000	0.44%
			24/02/14
				Sub-total	15,600,000	1.19%
Ms. Zheng Ying Yu	Beneficial owner	05/09/03	05/09/03 to	0.2280	2,000,000	0.15%
			04/09/13
		08/12/03	08/12/03 to	0.2130	400,000	0.03%
			07/12/13
		09/01/04	09/01/04 to	0.1900	6,100,000	0.47%
			08/01/14
		13/12/04	13/12/04 to	0.0982	50,000	0.00%
			12/12/14
				Sub-total	8,550,000	0.65%

— VIII-2 —

GENERAL INFORMATION

APPENDIX VIII

					Number of
					outstanding
					options held
		Date of grant			as at the
		and vesting	Exercisable	Exercise price	Latest	Approximate
		period	period	per Share	Practicable	percentage of
Name of Directors	Capacity	(dd/mm/yy)	(dd/mm/yy)	(HK$)	Date	shareholding
Mr. Fung Chun Pong,	Beneficial owner	05/09/03	05/09/03 to	0.2280	2,000,000	0.16%
Louis			04/09/13
		09/01/04	09/01/04 to	0.1900	1,000,000	0.08%
			08/01/14
		19/04/04	19/04/04 to	0.2096	300,000	0.02%
			18/04/14
		24/03/06	24/03/06 to	0.1530	300,000	0.02%
			23/03/16
		18/06/07	18/06/07 to	0.2980	300,000	0.02%
			17/06/17
				Sub-total	3,900,000	0.30%
Mr. Liao Yun	Beneficial owner	05/09/03	05/09/03 to	0.2280	800,000	0.06%
			04/09/13
		26/11/03	26/11/03 to	0.2300	400,000	0.03%
			25/11/13
		09/01/04	09/01/04 to	0.1900	790,000	0.06%
			08/01/14
		19/04/04	19/04/04 to	0.2096	300,000	0.02%
			18/04/14
		16/09/04	16/09/04 to	0.0870	500,000	0.04%
			15/09/14
		30/09/04	30/09/04 to	0.0900	500,000	0.04%
			29/09/14
		13/12/04	13/12/04 to	0.0982	300,000	0.02%
			12/12/14
		22/09/05	22/09/05 to	0.0920	400,000	0.03%
			21/09/15
		24/03/06	24/03/06 to	0.1530	300,000	0.02%
			23/03/16
				Sub-total	4,290,000	0.32%
Ms. Tsang Wai Chun,	Beneficial owner	24/03/06	24/03/06 to	0.1530	500,000	0.04%
Marianna			23/03/16
		26/09/06	26/09/06 to	0.0772	1,500,000	0.11%
			25/09/16
				Sub-total	2,000,000	0.15%
Mr. Chan Mei Ying	Beneficial owner	24/03/06	24/03/06 to	0.1530	500,000	0.04%
Spencer			23/03/16

— VIII-3 —

GENERAL INFORMATION

APPENDIX VIII

Save as disclosed above, as at the Latest Practicable Date, none of the Directors and the chief executive of the Company had any interest or short position in the shares, underlying shares or debentures of the Company or any associated corporation (within the meaning of Part XV of the SFO) which (i) were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which they were taken or deemed to have under such provisions of the SFO); or (ii) were required, pursuant to Section 352 of the SFO, to be entered in the register of the Company referred to therein; or (iii) were required, pursuant to Rules 5.46 to 5.67 of the GEM Listing Rules relating to securities transactions by the Directors, to be notified to the Company and the Stock Exchange.

Interests in assets

As at the Latest Practicable Date, none of the Directors had any interest, direct or indirect, in any asset which has been, since 31 March 2011, being the date to which the latest published audited financial statements of the Group were made up, acquired or disposed of by or leased to any member of the Enlarged Group, or was proposed to be acquired or disposed of by or leased to any member of the Enlarged Group.

Interests in contracts

No contracts or arrangements in which any Director was materially interested and which was significant in relation to the business of the Enlarged Group were subsisting at the Latest Practicable Date.

Interests in competing business

As at the Latest Practicable Date, in so far as the Directors were aware of, none of the Directors, controlling Shareholders and their respective associates was interested in any business which competes or is likely to compete, either directly or indirectly, with the business of the Group.

Directors’ service contracts

As at the Latest Practicable Date, there were no existing or proposed service contracts between the Directors and any member of the Company which were not expiring or determinable by the Company within one year without payment of compensation, other than statutory compensation.

INTERESTS OF SUBSTANTIAL SHAREHOLDERS

So far as is known to the Directors and the chief executive of the Company, as at the Latest Practicable Date, other than the interests and short positions of the Directors and chief executive of the Company as disclosed above, the following persons had the following interests or short positions in the Shares, underlying Shares or debentures of the Company which would fall to be disclosed to the Company

— VIII-4 —

APPENDIX VIII

GENERAL INFORMATION

under the provisions of Divisions 2 and 3 of Part XV of the SFO, or, were expected, directly or indirectly, to be interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any other member of the Enlarged Group, together with particulars of any options in respect of such capital:

Long positions in the Shares

			Approximate
		Number of	percentage of
Name of Shareholders	Capacity	Shares held	shareholding
Educational Information Technology	Trustee	108,057,374	8.27%
(H.K.) Company Limited Note (1)
Starmax Holdings Limited Note (2)	Beneficial owner	270,000,000	20.67%
		Note (3)
Mr. Tan	Interest in	270,000,000	20.67%
	controlled	Note (3)
	corporation
	Beneficial owner	18,874,000	1.44%

Notes:

• (1) These Shares were held in trust for 寧夏教育信息技術股份有限公司 (Ningxia Educational Information Technology Company Limited), a company which is owned as to 25% by the Group.

• (2) Starmax Holdings Limited i.e. the Vendor is beneficially owned as to 90% by Mr. Tan who also directly holds 18,874,000 Shares.

• (3) It represents the interest in the Consideration Shares under the Agreement.

Save as disclosed above, as at the Latest Practicable Date, no such other persons who had interests or short positions in the Shares, underlying Shares or debentures of the Company which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO, or, were expected, directly or indirectly, to be interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any other member of the Enlarged Group.

MATERIAL LITIGATION

As stated in the announcement of the Company dated 23 September 2011, 天時北方軟件(北京)有限公司 (Timeless Northern Software (Beijing) Company Limited) (“ Timeless (Beijing) ”) an indirect wholly-owned subsidiary of the Company, was served with a writ of civil proceedings on 13 September 2011 in respect of the civil proceedings commenced by 寧夏教育信息技術股份有限公司(Ningxia Educational Information Technology Company Limited) (“ Ningxia Educational ”), an associated company of the Company in which the Company holds an equity interest of 25%, as plaintiff against Timeless (Beijing) as defendant for the claim of compensation for non-completion of the information engineering project by Timeless (Beijing) pursuant to the agreement between Ningxia Educational and Timeless (Beijing) made in 2001.

— VIII-5 —

APPENDIX VIII

GENERAL INFORMATION

The following orders were sought to be granted by the Ningxia Higher People’s Court against Timeless (Beijing): (i) Timeless (Beijing) to return and pay to Ningxia Educational the project fee in the sum of RMB11,834,793.85 prepaid by Ningxia Educational, the interest in the sum of RMB6,265,915.16 and the interest accrued up to the date of full payment by Timeless (Beijing); (ii) legal counsel fees incurred by Ningxia Educational in the sum of RMB250,000 to be borne by Timeless (Beijing); and (iii) the costs of the proceedings and other costs to be borne by Timeless (Beijing).

The Ningxia Higher People’s Court has dismissed the claims against Timeless (Beijing) by Ningxia Educational and ordered that the costs of the proceedings of the court be borne by Ningxia Educational. As stated in the announcement of the Company dated 5 April 2012, Ningxia Educational has appealed against the judgment of the Ningxia Higher People’s Court.

As at the Latest Practicable Date, the appeal brought by Ningxia Educational was still pending.

Save as disclosed above, as at the Latest Practicable Date, the Enlarged Group was not involved in any litigation or arbitration of material importance and there were no litigations or claims of material importance known to the Directors to be pending or threatened by or against the Enlarged Group.

MATERIAL CONTRACTS

Save for (i) the agreement dated 27 May 2010 and entered into between the Company as vendor and 深圳曼哈商業有限公司 (Shenzhen Manha Commercial Limited) in relation to the sale and purchase of 12% of the equity interest of 珠海南方軟件園發展有限公司 (Zhuhai Southern Software Park Development Company Limited) at a consideration of RMB10,800,000; (ii) the Agreement; and (iii) the Supplemental Agreement, no material contracts (not being contracts entered into in the ordinary course of business) were entered into by any member of the Enlarged Group within the two years immediately preceding up to and including 10 April 2012.

EXPERTS AND CONSENTS

• (i) The following are the qualifications of the experts who have given opinions, letters or advice which are contained in this circular:

HLB Chartered Accountants, Certified Public Accountants LCH Professional surveyor Roma Appraisals Professional surveyor Mr. Philip Alan Jones Competent person and evaluator as defined in Chapter 18A of the GEM Listing Rules

• (ii) Each of HLB, LCH, Roma Appraisals and Mr. Philip Alan Jones has given and has not withdrawn its/his written consent to the issue of this circular with the inclusion of the references to its/his name and/or its/his opinion, letter or advice in the form and context in which they are included.

— VIII-6 —

GENERAL INFORMATION

APPENDIX VIII

• (iii) As at the Latest Practicable Date, none of HLB, LCH, Roma Appraisals and Mr. Philip Alan Jones had any shareholding, directly or indirectly, in any member of the Group or any right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member of the Group.

• (iv) As at the Latest Practicable Date, none of HLB, LCH, Roma Appraisals and Mr. Philip Alan Jones had any interest, direct or indirect, in any asset which has been, since 31 March 2011, being the date to which the latest published audited financial statements of the Group were made up, acquired or disposed of by or leased to any member of the Enlarged Group, or was proposed to be acquired or disposed of by or leased to any member of the Enlarged Group.

GENERAL

• (i) The registered office and principal office of the Company is situated at Units 111-113, 1st Floor, Building 9, Phase One, Hong Kong Science Park, Tai Po, New Territories, Hong Kong.

• (ii) The share registrar of the Company is Computershare Hong Kong Investor Services Limited, which is situated at 17M Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong.

• (iii) The company secretary and compliance officer of the Company is Mr. Law Kwai Lam (“ Mr. Law ”). Mr. Law holds a Bachelor degree in Biochemistry from the University of Kansas. Mr. Law has been engaging in company secretarial practice and compliance since 1987. Prior to joining the Group, Mr. Law was the company secretary of a listed company in Hong Kong for 10 years.

• (iv) The audit committee of the Company comprises all the independent non-executive Directors, namely Ms. Tsang Wai Chun Marianna, Mr. Chan Mei Ying Spencer and Mr. Lam Kwai Yan. The primary duties of the audit committee of the Company are to review and supervise the financial reporting process and internal control system of the Group. Under the terms of reference of the audit committee of the Company, the committee is required, amongst other things, to oversee the relationship with the external auditors, review the Group’s preliminary results, interim results and annual financial statements, monitor compliance with statutory and the GEM Listing Rules’requirements, review the scope, extent and effectiveness of the activities of the internal control of the Group, engage independent legal or other advisers as it determines is necessary and perform investigations. The particulars of the audit committee members of the Company are as follows:

Ms. Tsang Wai Chun Marianna

Ms. Tsang Wai Chun Marianna (“ Ms. Tsang ”), aged 57, is an independent non-executive Director. Ms. Tsang is the director of Chan & Wat, Certified Public Accountants and is a member of the Institute of Chartered Secretaries and Administrators, the Hong Kong Institute of Company Secretaries, the Taxation Institute of Hong Kong and the Association of Professionals in Business

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GENERAL INFORMATION

APPENDIX VIII

Management and the Society of Registered Financial Planners. Ms. Tsang has over 28 years of company secretarial, accounting and finance, corporate affairs and related legal working experiences in major commercial corporations and professional firms. Ms. Tsang has an MBA and a postgraduate certificate in Professional Accounting.

Mr. Chan Mei Ying Spencer

Mr. Chan Mei Ying Spencer (“ Mr. Chan ”), aged 55, is an independent non-executive Director. Mr. Chan is a director of Ubique Solutions Ltd and has all-round experiences in corporate finance, business development, sales and marketing. Mr. Chan studied Computer Science in Melbourne, Australia before receiving a Master’s Degree in Business Administration from the Chinese University of Hong Kong. Mr. Chan also has attended an executive management program at INSEAD, Fontainbleau, France. Mr. Chan is currently a non-executive director of Sino Strategic International Limited (stock code: SSI), a company listed on the Australian Securities Exchange.

Mr. Lam Kwai Yan

Mr. Lam Kwai Yan (“ Mr. Lam ”), aged 51, is an independent non-executive Director. Mr. Lam has a degree in Business Studies from the University of Southern Queensland, Australia. Mr. Lam is a member of the Hong Kong Institute of Certified Public Accountants and the New Zealand Institute of Chartered Accountants, and a fellow member of the CPA Australia. Mr. Lam has worked for various large corporations, first starting his accounting career with Cable & Wireless (H.K.) Limited and worked in New Zealand for a number of years before returning to Hong Kong and starting an accounting practice. Mr. Lam has vast experiences with SME’s, including auditing and consulting on re-organization and restructuring businesses that have cross-border operations in China. Mr. Lam’s work also included advising and consulting for listed public companies.

• (v) In case of any discrepancy, the English text of this circular shall prevail over the Chinese text for the purpose of interpretation.

DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be made available for inspection during normal business hours at the principal place of business of the Company in Hong Kong, Units 111-113, 1st Floor, Building 9, Phase One, Hong Kong Science Park, Tai Po, New Territories, Hong Kong, up to and including the date of the EGM:

• (i) the memorandum and articles of association of the Company;

• (ii) the quarterly report of the Company for the three months ended 31 December 2011, interim report of the Company for the six months ended 30 September 2011, and the annual reports of the Company for the two years ended 31 March 2011;

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GENERAL INFORMATION

APPENDIX VIII

• (iii) the accountants’ report on the Target Group prepared by HLB for the three years ended 31 December 2009, 2010 and 2011, the text of which is set out in Appendix II-A to this circular;

• (iv) the accountants’ report on Xinjiang Tianmu prepared by HLB for the three years ended 31 December 2009, 2010 and 2011, the text of which is set out in Appendix II-B to this circular;

• (v) the report prepared by HLB on the unaudited pro forma financial information of the Enlarged Group, the text of which is set out in Appendix III to this circular;

• (vi) the Competent Person’s Report on the Target Mines as set out in Appendix V to this circular;

• (vii) the Valuation Report on the Target Mines as set out in Appendix VI to this circular;

• (viii) the report prepared by Roma Appraisals on the valuation of the properties of the Target Group, the text of which is set out in Appendix VII-A to this circular;

• (ix) the report prepared by LCH on the valuation of the properties of the Group, the text of which is set out in Appendix VII-B to this circular;

• (x) the written consents referred to in the paragraph headed “Experts and consents” in this appendix; and

• (xi) the material contracts referred to in the paragraph headed “Material contracts” in this appendix.

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NOTICE OF EGM

==> picture [51 x 51] intentionally omitted <==

TIMELESS SOFTWARE LIMITED

(incorporated in Hong Kong with limited liability)

(Stock code: 8028)

NOTICE IS HEREBY GIVEN that an extraordinary general meeting (the “ EGM ”) of Timeless Software Limited (the “ Company ”) will be held at Conference Hall 06, 2/F, Lakeside 2, No.10 Science Park West Avenue, Hong Kong Science Park, Shatin, New Territories, Hong Kong on Monday, 30 April 2012 at 3:00 p.m. to consider and, if thought fit, pass, with or without amendments, the following ordinary resolution of the Company:

ORDINARY RESOLUTION

“ THAT

• (a) the agreement (the “ Agreement ”) dated 7 September 2011 and entered into amongst Time Kingdom Limited, a wholly-owned subsidiary of the Company, as purchaser, Starmax Holdings Limited as vendor (the “ Vendor ”), and Mr. Felipe Tan as guarantor, as supplemented and amended by a supplemental agreement (the “ Supplemental Agreement ”) dated 10 April 2012 and entered into amongst the same parties, in relation to the sale and purchase of 102 shares of US$1.00 each (the “ Sale Shares ”) in the share capital of Goffers Management Limited (the “ Target Company ”), representing 51% of the issued share capital of the Target Company, for a total consideration of HK$103,500,000 (copies of the Agreement and the Supplemental Agreement are marked “A” and “B” and produced to the EGM and signed by the chairman of the EGM for identification purpose) and the transactions contemplated thereunder be and are hereby ratified, confirmed and approved;

• (b) the allotment and issue by the Company of 270,000,000 new ordinary shares (the “ Consideration Shares ”) of HK$0.05 each in the share capital of the Company to the Vendor at the issue price of HK$0.15 each as part of the consideration for the Sale Shares pursuant to the terms and conditions of the Agreement (as supplemented and amended by the Supplemental Agreement) be and is hereby approved;

• (c) the issue of the promissory note (the “ Promissory Note ”) in the principal amount of HK$63,000,000 by the Company to the Vendor as part of the consideration for the Sale Shares pursuant to the terms and conditions of the Agreement be and is hereby approved;

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NOTICE OF EGM

• (d) any one or more director(s) of the Company be and is/are hereby authorised to implement and take all steps and do all acts and things and execute all such documents (including under seal) which he/she/they consider necessary or expedient to give effect to the Agreement (as supplemented and amended by the Supplemental Agreement) and the transactions contemplated thereunder including but not limited to the allotment and issue of the Consideration Shares and the issue of the Promissory Note.”

By Order of the Board CHENG Kin Kwan Chairman & Chief Executive Officer

Hong Kong, 12 April 2012

Registered Office:

Units 111-113, 1st Floor Building 9, Phase One Hong Kong Science Park Tai Po, Hong Kong

Notes:

1. A member entitled to attend and vote at the meeting convened by the above notice may appoint one or more proxies to attend the meeting and vote on a poll instead of him. A proxy need not be a member of the Company.

2. To be valid, a form of proxy and the power of authority (if any) under which it is signed or a notarially certified copy of such power of authority must be deposited at the Company’s share registrar, Computershare Hong Kong Investor Services Limited at 17M Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong, not less than 48 hours before the time appointed for holding the meeting or the adjourned meeting.

3. The voting on the resolution at the EGM shall be conducted by way of poll.

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