Xinjiang Xinxin Mining Industry Co., Ltd. - Proxy Solicitation & Information Statement 2012

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

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.

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

If you have sold or transferred all your shares in the Company, you should at once hand this circular, together with the enclosed form of proxy, to the purchaser or the transferee or to the bank or stockbroker or other agent through whom the sale or transfer was effected for transmission to the purchaser or transferee.

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.

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Xinjiang Xinxin Mining Industry Co., Ltd.[] *新疆新鑫礦業股份有限公司**

(a joint stock limited company incorporated in the People’s Republic of China with limited liability)

(Stock code: 3833)

CONTINUING CONNECTED TRANSACTIONS – RENEWED MUTUAL SUPPLY AGREEMENT AND

PROPOSED ISSUE OF MEDIUM-TERM NOTES AND

ELECTION OF SUPERVISOR AND

NOTICE OF EXTRAORDINARY GENERAL MEETING

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

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A notice convening an extraordinary general meeting of Xinjiang Xinxin Mining Industry Co., Ltd. to be held at 19th Level, Conference Room, Youse Building, No. 4 You Hao North Road, Urumqi, Xinjiang, the PRC on 14 December 2012 at 11:00 a.m. is set out on pages 43 to 47 of this circular.

A letter from the Independent Board Committee containing its recommendation to the Independent Shareholders is set out on pages 20 to 21 of this circular. A letter from the Independent Financial Adviser containing its advice to the Independent Board Committee and the Independent Shareholders is set out on pages 22 to 38 of this circular.

Whether or not you are able to attend the meeting, you are requested to complete the accompanying form of proxy in accordance with the instructions printed thereon and return the same to the Company’s H share registrar, Computershare Hong Kong Investor Services Limited at 17M Floor, Hopewell Centre, 183 Queen’s Road East, Wan Chai, Hong Kong as soon as possible and in any event not later than 24 hours before the time appointed for holding the meeting or any adjournment thereof. Completion and return of the form of proxy will not preclude you from attending and voting in person at the meeting or any adjournment thereof should you so wish.

For identification purposes only

30 October 2012

	Page
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from the Board. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	5
Letter from the Independent Board Committee. . . . . . . . . . . . . . . . . . . . . . . . . . .	20
Letter from the Independent Financial Adviser. . . . . . . . . . . . . . . . . . . . . . . . . . .	22
Appendix – General information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	39
Notice of EGM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	43

– i –

DEFINITIONS

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

“Announcement”
the announcement of the Company dated 11 June 2009 which includes details of, among others, the Existing Mutual Supply Agreement
“Articles of Association”
the articles of Association of the Company
“Associate(s)”
has the meaning ascribed to it under the Listing Rules
“Board” or “Board of Directors”
the board of directors of the Company
“Company”

Xinjiang Xinxin Mining Industry Co., Ltd.* (新疆新鑫礦業股份有限公司), a joint stock limited company incorporated in the PRC with limited liability, the H Shares of which are listed on the Stock Exchange

“Company’s Products”

nickel cathode, copper cathode, gold products, sulphuric acid, water, electricity and other ancillary materials provided/to be provided by the Company to the Xinjiang Non-ferrous Group and its Associates (as the case may be) under the Existing Mutual Supply Agreement and the Renewed Mutual Supply Agreement

“connected person(s)”
has the meaning ascribed to it under the Listing Rules
“Construction Services”

construction-related services, including project design, construction and facilities installation provided/to be provided by the Xinjiang Non-ferrous Group to the Company under the Existing Mutual Supply Agreement and the Renewed Mutual Supply Agreement

“Director(s)”
one or all of the director(s) of the Company
“EGM”

the extraordinary general meeting of the Company to be held on 14 December 2012 at 11:00 a.m. at 19th Level, Conference Room, Youse Building, No. 4 You Hao North Road, Urumqi, Xinjiang, the PRC for the approval of, among other things, the Renewed Mutual Supply Agreement and the Renewed Annual Caps

– 1 –

DEFINITIONS

“Existing Mutual Supply Agreement”
the master mutual supply agreement dated 11 June 2009 entered into between the Company and Xinjiang Nonferrous in respect of the mutual provision of production supplies and ancillary services, details of which please refer to the Announcement
“Group” the Company and its subsidiaries
“Hong Kong”
the Hong Kong Special Administrative Region of the PRC
“H Share(s)”
overseas listed foreign share(s) in the ordinary share capital of the Company with a nominal value of RMB0.25 each subscribed for and traded in Hong Kong dollars and listed on the Stock Exchange
“Independent Board Committee”
an independent committee of the Board comprising the independent non-executive Directors, namely Mr. Chen Jianguo, Mr. Wang Lijin and Mr. Li Wing Sum Steven, to advise the Independent Shareholders in respect of the Renewed Mutual Supply Agreement and the Renewed Annual Caps
“Independent Financial Adviser” or “Hercules Capital”
Hercules Capital Limited, a licensed corporation to carry out type 6 regulated activity (advising on corporate finance) under the SFO, and the independent financial adviser to the Independent Board Committee and the Independent Shareholders in relation to the Renewed Mutual Supply Agreement and the Renewed Annual Caps
“Independent Shareholders”
in respect of the Renewed Annual Caps and the transactions contemplated by the Renewed Mutual Supply Agreement, shareholders of the Company other than the Xinjiang Non-ferrous and its Associates
“Independent Third Party(ies)”
third party independent of and not connected with the Company and its connected persons
“Latest Practicable Date”
26 October 2012, being the latest practicable date prior to the printing of this circular for ascertaining certain information for inclusion in this circular
“Listing Rules”
the Rules Governing the Listing of Securities on the Stock Exchange

– 2 –

DEFINITIONS

“Medium-Term Notes”

the medium-term notes in aggregate principal amount of not more than RMB2 billion proposed to be issued by the Company

“NAFMII” the National Association of Financial Market Institutional Investors (中國銀行間市場交易商協會)
“PRC”
the People’s Republic of China (for the purpose of this circular, excluding Hong Kong, Taiwan and the Macau Special Administrative Region of the PRC)
“Renewed Annual Cap(s)”
the annual cap(s) for the provision of the Construction Services, the Supporting and Ancillary Services and the Company’s Products under the Renewed Mutual Supply Agreement for the three years ending 31 December 2015
“Renewed Mutual Supply Agreement”
the master mutual supply agreement dated 19 October 2012 entered into between the Company and Xinjiang Non-ferrous in respect of the mutual provision of the Construction Services, the Supporting and Ancillary Services and the Company’s Products
“RMB”
Renminbi, the lawful currency of the PRC
“SFO”
the Securities and Future Ordinance (cap 571 of the Laws of Hong Kong)
“Stock Exchange” The Stock Exchange of Hong Kong Limited
“subsidiary”
has the meaning ascribed to it under section 2 of the Companies Ordinance (Chapter 32, Laws of Hong Kong)

– 3 –

DEFINITIONS

“Supporting and Ancillary Services”
“Xinjiang Ashele”
“Xinjiang Non-ferrous”
“Xinjiang Non-ferrous Group”
“Xinjiang Wuxin”
“%”

services provided/to be provided by the Xinjiang Non-ferrous Group and its Associates to the Group under the Existing Mutual Supply Agreement and the Renewed Mutual Supply Agreement which include: (i) production supplies, transportation and supporting services: supplemental production materials (including copper concentrates, chemical materials, coal, coke and product packaging materials) and work safety products; (ii) storage, transportation and loading services: warehousing services in Beijing for the sales and distribution of nickel cathode to the Company’s end-customers in Beijing and its surrounding areas, Hebei province and the northeastern region of the PRC; transportation service for the delivery of materials including coke and coal; and (iii) other supporting and ancillary services; machinery repair and improvement; geological exploration in the mining areas

Xinjiang Ashele Copper Industry Company Limited* (新疆阿舍勒銅業股份有限公司), a joint stock company established in the PRC with limited liability and is an Associate of Xinjiang Non-ferrous
Xinjiang Non-ferrous Metal Industry (Group) Ltd.* (新疆有色金屬工業(集團)有限責任公司), a wholly state owned enterprise with limited liability and incorporated in the PRC, being one of the promoters and the controlling shareholder of the Company
Xinjiang Non-ferrous and its subsidiaries excluding the Company, its subsidiaries and Associates
Xinjiang Wuxin Copper Company Limited* (新疆五鑫銅業有限責任公司), a limited liability company incorporated in the PRC and a subsidiary of the Company

per cent.

* For identification purposes only

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LETTER FROM THE BOARD

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Xinjiang Xinxin Mining Industry Co., Ltd.[] *新疆新鑫礦業股份有限公司**

(a joint stock limited company incorporated in the People’s Republic of China with limited liability) (Stock code: 3833)

Executive Directors: Mr. Yuan Ze Mr. Shi Wenfeng, Mr. Zhang Guohua Mr. Liu Jun

Statutory address and principal place of business in the PRC: 7/F Youse Building No. 4 You Hao North Road Urumqi, Xinjiang

Non-executive Directors: Mr. Zhou Chuanyou Mr. Niu Xuetao

Registered office in Hong Kong: 6/F Nexxus Building 41 Connaught Road Central Central, Hong Kong

Independent Non-executive Directors: Mr. Chen Jianguo Mr. Wang Lijin Mr. Li Wing Sum Steven

30 October 2012

To the Shareholders

Dear Sir or Madam,

CONTINUING CONNECTED TRANSACTIONS – RENEWED MUTUAL SUPPLY AGREEMENT AND PROPOSED ISSUE OF MEDIUM-TERM NOTES AND ELECTION OF SUPERVISOR AND NOTICE OF EXTRAORDINARY GENERAL MEETING

INTRODUCTION

The purpose of this circular is:

(1) to give you details of the Renewed Mutual Supply Agreement, the Renewed Annual Caps, the proposed issue of the Medium-Term Notes and the election of supervisor representing shareholders of the Company;
For identification purposes only

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LETTER FROM THE BOARD

(2) to set out the recommendation of the Independent Board Committee in respect of the Renewed Mutual Supply Agreement and the Renewed Annual Caps; and
(3) to set out the letter of advice from Hercules Capital to the Independent Board Committee and the Independent Shareholders in respect of the Renewed Mutual Supply Agreement and the Renewed Annual Caps.

(A) RENEWED MUTUAL SUPPLY AGREEMENT

Date: 19 October 2012

Parties: The Company and Xinjiang Non-ferrous

Term: 1 January 2013 to 31 December 2015

Subject Matter

On 11 June 2009, the Company and Xinjiang Non-ferrous entered into the Existing Mutual Supply Agreement in respect of the mutual provision of the Construction Services, the Supporting and Ancillary Services and the Company’s Products. The Existing Mutual Supply Agreement will expire on 31 December 2012.

On 19 October 2012, the Company and Xinjiang Non-ferrous entered into the Renewed Mutual Supply Agreement in respect of the continuing provision of the Construction Services, the Supporting and Ancillary Services and the Company’s Products.

Term

The principal terms of the Renewed Mutual Supply Agreement include the followings:

the Renewed Mutual Supply Agreement is for a term commencing from 1 January 2013 and ending on 31 December 2015 which may be renewed upon agreement by Xinjiang Non-ferrous and the Company, subject to the approval by the Stock Exchange and/or the Independent Shareholders, if applicable;
the Company and the Xinjiang Non-ferrous Group are at liberty to procure from or provide to any Independent Third Party any of the required services and products save and except that Xinjiang Non-ferrous Group must provide the Company with services or supplies on terms no less favourable than those offered to any Independent Third Party and that Xinjiang Non-ferrous Group must source nickel cathode and copper cathode exclusively from the Company;

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LETTER FROM THE BOARD

each party of the Renewed Mutual Supply Agreement may terminate the mutual provision of products and services on not less than six months’ prior written notice, however Xinjiang Non-ferrous Group may not terminate its service if the Company has informed them by written notice that the Company is unable to obtain similar products and services from an Independent Third Party (save that the Company has provided written consent to the termination by Xinjiang Non-ferrous Group); and
the Renewed Mutual Supply Agreement is conditional and effective upon it having complied with the relevant Listing Rules and approved by the Independent Shareholders, if applicable, at the EGM.

The Xinjiang Non-ferrous Group and its Associates have agreed to provide the Company with the Construction Services and the Supporting and Ancillary Services. The Company has agreed to provide the Company’s Products to Xinjiang Non-ferrous Group and its Associates.

Consideration

The fees in relation to the above products, supplies and services payable between the Company and Xinjiang Non-ferrous during the term of the Renewed Mutual Supply Agreement are determined principally by commercial negotiation between the parties according to the principles of fairness and reasonableness with reference to the market price of the mutual supply services from time to time. Such transactions will be conducted in the ordinary and usual course of business of the Company, on normal commercial terms and on terms not less favourable to the Company than terms available to or from (as appropriate) Independent Third Parties.

In order to ensure that such principle is adhered to, the Company has adopted the following internal procedures:

(1) In respect of supply of products by Xinjiang Non-ferrous Group under the Supporting and Ancillary Services and the supply of Company’s Products by the Company, the relevant officer of the accounting department will check the prices of such products under the relevant invoices issued by Xinjiang Non-ferrous Group and the Company and compare such prices with the prevailing market prices of such products if they are supplied by/to other Independent Third Parties. The accounting manager will check the aforementioned pricing comparison performed by the accounting officer and the financial controller will only approve the relevant invoices after he has ensured that such prices will be on terms not less favourable to the Company than terms available to/from (as appropriate) Independent Third Parties.

Further, the internal audit department of the Company will perform periodic audit of the invoices to/from Xinjiang Non-ferrous Group with reference to the prevailing market prices of the relevant products and ensure that the abovementioned principle is adhered to.

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LETTER FROM THE BOARD

(2) In respect of the provision of Construction Services by Xinjiang Non-ferrous Group, the service fees payable will be determined with reference to the prevailing market prices under general commercial terms. Pursuant to the internal guidance of the Company on the construction projects, the Company is required to select service providers for all major construction projects, including the technical improvement projects, through an open tender process, through which the price and terms of services offered by the vendors will be compared and the service contracts will be awarded to vendor(s) which offer(s) the best price and/or terms of service. The tender process is that tenders with the highest scores, which are rated by the tender evaluation committee based on the same objective selection criteria such as qualification, resources, experience and technical expertise of the tenders, reputation and quality of work and pricing and terms of service, are to be selected.

The mutual supply services will be provided according to the following pricing policies in order of priority and to be settled on a monthly basis:

the State-prescribed price (國家指定價) (including any price prescribed by any relevant local government), if applicable;
where there is no State-prescribed price, then the State-guidance price (國家指導價);
where there is neither a State-prescribed price nor a State-guidance price, the market price which is determined by (i) the price offered by an Independent Third Party for providing similar services in an area where such supporting services are provided under general commercial terms, or (ii) where not applicable, the market price offered by an Independent Third Party for providing similar services in the PRC under general commercial terms;
where none of the above is applicable, the price shall be determined by the parties based on reasonable costs incurred by them in providing the services plus a profit margin of not more than 5% of such costs [(Note)] (the “Cost Plus Method”); and
the Company and Xinjiang Non-ferrous will ensure that any specific agreements which set out the specific terms and conditions for the provision of any such services are entered into between the parties in accordance with the terms and conditions of the Renewed Mutual Supply Agreement.
Note: The profit margin of not more than 5% is arrived at after negotiation between the parties considering the general industry practice and the Directors are of the view that such profit margin is fair and reasonable.

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LETTER FROM THE BOARD

The Company will provide the Company’s Products to Xinjiang Non-ferrous Group at market prices which are to be determined as afore-mentioned. Since the prices of all the existing Company’s Products can be determined with reference to the prevailing market prices, the Company expects that the pricing of the supply of the Company Products will not be based on the Cost Plus Method.

In respect of the provision of Construction Services by Xinjiang Non-ferrous Group, as set out in earlier paragraph of this section, the service fees payable will be determined with reference to the prevailing market prices.

In respect of the provision of Supporting and Ancillary Services by Xinjiang Non-ferrous Group, the fees payable by the Company will be determined according to the following pricing policy:

(a) Purchase of copper concentrates: prevailing market price
(b) Other supporting and ancillary services – transportation services: State-guidance price – supply of coal, oil, gas and diesel: State-guidance price – labor safety and sundry supplies: prevailing market price

Since none of the previous transactions regarding the Supporting and Ancillary Services and the Company’s Products were transacted based on the Cost-plus Method as all the Supporting and Ancillary Services and the Company’s Products have a Stateprescribed price, a State-guidance price or a market price (as appropriate), the Company expects that the prices of the Supporting and Ancillary Services and the Company’s Products would continue to be determined by reference to the prevailing market prices under general commercial terms and in compliance with the State-prescribed price or the State-guidance price, if any, in the future.

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LETTER FROM THE BOARD

Historical figures

The fees paid by the Group to Xinjiang Non-ferrous Group in relation to the provision of Construction Services and the Supporting and Ancillary Services by Xinjiang Non-ferrous Group and the fees received by the Group for the provision of Company’s Products to the Xinjiang Non-ferrous Group under the Existing Mutual Supply Agreement for each of the two years ended 31 December 2011 and the nine months ended 30 September 2012 are set out below:

	Transaction	Transaction	Transaction
	amounts for	amounts for	amounts for the
	the year ended	the year ended	nine months ended
	31 December 2010	31 December 2011	30 September 2012
	(RMB)	(RMB)	(RMB)
The Construction Services
fees under the Existing
Mutual Supply Agreement	189,032,219	364,904,951	172,433,280
The Supporting and Ancillary
Services fees under the
Existing Mutual Supply
Agreement	5,064,405	15,416,912	16,408,690
The Company’s Products fees
received under the Existing
Mutual Supply Agreement	22,270,604	31,185,285	15,936,700

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LETTER FROM THE BOARD

Proposed Annual Caps

The Directors have considered and proposed the following annual caps in respect of the services fees for the three years ending 31 December 2015 under the Renewed Mutual Supply Agreement:

		For the year ending 31 December	For the year ending 31 December	For the year ending 31 December
	2012	2013	2014	2015
	first nine
	months
	historical
	amount
	RMB’000	RMB’000	RMB’000	RMB’000
The Construction Services
Kalatongke Mine technological
improvements	20,201	130,890 (a)	66,000	72,000
Yakesi technological improvements	49,710	25,000 (b)	27,500	30,000
Fukang refinery factory expansion
projects	28,750	66,500 (c)	86,650	98,800
Zhongxin sundry maintenance projects	1,500	3,000	3,300	3,600
Xinjiang Wuxin 10,000 tons copper
smelting construction project	72,272	10,000 (d)	11,000	12,000
Proposed Annual Caps	172,433	235,390	194,450	216,400 (e)


The Supporting and Ancillary Services
Xinjiang Wuxin’s purchases of copper
concentrates	–	1,338,462 (f)	1,933,333	2,082,051
Xinjiang Wuxin’s other Supporting and
Ancillary Services	–	17,000	18,000	18,300
Other subsidiaries’ Supporting and
Ancillary Services	16,409	27,338	27,745	29,579
Proposed Annual Caps	16,409	1,382,800	1,979,080	2,129,930


Company’s Products
Sales of copper cathode	14,358	25,641	33,333	41,880
Sales of nickel cathode	45	–	–	–
Sales of crude gold	–	28,000 (g)	30,000	32,000
Sales of other products	1,534	1,879	1,677	1,080
Proposed Annual Caps	15,937	55,520	65,010	74,960

Notes:

The increase in the proposed annual cap for the Construction Services is due to:

(a) The closing cost of approximately RMB71 million of the civil engineering of the smelting workshop in Kalatongke Mine technological improvements will be paid in 2013.
(b) The main contracts of the Yakesi technological improvements project will be completed by the end of 2012 and the remaining supplemental contracts will run down through 2013 to 2015.

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LETTER FROM THE BOARD

(c) The additional 5,000 ton nickel cathode expansion project in Fukang refinery factory will commence in 2013 and onwards.
(d) The closing cost of the smelting foundation construction of Xinjiang Wuxin amounting approximately RMB73 million will be paid by the end of 2012.
(e) The increase in the proposed annual cap for the Construction Services in 2015 as compared with that in 2014 is due to the expected general inflation in the PRC in terms of materials and supplies.

The increase in proposed annual cap for the Supporting and Ancillary Services is due to:

(f) Xinjiang Wuxin intends to increase its purchases of copper concentrates as Xinjiang Wuxin will commence operations and start commissioning and trial production in 2013 and onwards. Xinjiang Wuxin intends to purchase copper concentrates from Xinjiang Ashele with volume of copper contains of approximately 30,000 tons, 40,000 tons and 40,000 tons for 2013, 2014 and 2015, respectively.

The increase in proposed annual cap for the Company’s Products is mainly due to:

(g) The increase in sales of crude gold. The production of crude gold is estimated with a moderate growth from the year of 2013 to 2015.
(h) The information set out in the box provides explanation on the increase in the Renewed Annual Caps when compared with the annual caps for the preceding two years and nine months. Such figures are only budget plan of the Company and shall not be regarded as the caps of such transactions. The Company may adjust such figures in the future as appropriate depending on the then circumstances.

In determining the Renewed Annual Caps for the three years ending 31 December 2015 under the Renewed Mutual Supply Agreement, the Directors have assumed that (i) the Company’s business will continue to grow and the need for the mutual provision of the Construction Services (apart from the civil engineering of smelting workshop, the closing cost of which will be accounted in 2013), the Supporting and Ancillary Services and the Company’s Products will continue to increase; and (ii) the prices of utilities, raw materials and finished products are expected to increase in 2013, 2014 and 2015. The above proposed annual caps for the Construction Services fees, the Supporting and Ancillary Services fees and the Company’s Products fees under the Renewed Mutual Supply Agreement for the three years ending 31 December 2015 have been determined based on the historical transaction amounts, the expected market conditions, the development trend in the non-ferrous metals industry, the expected demand and supply of the Company’s products and its production expansion plans.

The Renewed Annual Caps for the Supporting and Ancillary Services under the Renewed Mutual Supply Agreement for the three years ending 31 December 2015 are substantially higher than its historical transaction amounts for the two years ended 31 December 2011 and the nine months ended 30 September 2012. Such substantial increases are mainly because (i) the Company expects that Xinjiang Wuxin will commence operations and trial production in 2013 and intends to make substantial purchase of its major raw material – copper concentrates from Xinjiang Ashele, the largest copper concentrates producer in Xinjiang, in the three years ending 31 December 2015 in order to secure the supply of copper concentrates to meet the production needs of its single copper smelting system project with an annual targeted production capacity of more than

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LETTER FROM THE BOARD

100,000-ton, Xinjiang Wuxin will still be under preparation of commissioning and trial run and its purchase volume of copper concentrates will be very minimum by the end of 2012; (ii) the Company anticipates that the prices of copper concentrates in the three years ending 31 December 2015 will continue to rise.

The Renewed Annual Caps for the supply of the Company’s Products under the Renewed Mutual Supply Agreement for the three years ending 31 December 2015 are substantially higher than its historical transaction amounts for the two years ended 31 December 2011 and the nine months ended 30 September 2012. Such substantial increases are mainly because (i) at present, the gold produced by the Company is crude gold (合質金), and the Company is not a member of the PRC Gold Exchange. The sale channel of the Company’s gold product is relatively narrow and the Company has not yet developed its expertise in gold refinery. In order to increase the profit margin for the gold products of the Company, the Company intends to appoint the Xinjiang Non-ferrous Group and its Associates to conduct refining, processing, sale and distribution of its gold products; and (ii) the Company anticipates a moderate growth in the production volume of crude gold in the three years ending 31 December 2015.

The Directors consider that the above annual caps are reasonably determined pursuant to Rule 14A.35(2) of the Listing Rules.

Reasons for and benefits of entering into the Renewed Mutual Supply Agreement

The Company entered into the Renewed Mutual Supply Agreement to continue to procure from and provide to the Xinjiang Non-ferrous Group services for the following reasons:

the Xinjiang Non-ferrous Group has an established system of mining, ore processing, smelting, processing, repairing, manufacturing, equipment installation, construction, transportation, storage, design, and it has competitive strengths over other suppliers of similar services in Xinjiang;
the Company’s smelting operation is enhanced by the capability and techniques of the Xinjiang Non-ferrous Group in designing and producing nonstandardised production facilities and equipment;
the design institute of the Xinjiang Non-ferrous Group has the expertise in the design of production facilities in respect of mining, ore processing and refining of non-ferrous and precious metals and they are familiar with the Company’s production sites, facilities and equipment;
the Xinjiang Non-ferrous Group has an experienced and stable construction team in shafts construction and facilities installation; and
the automobile transportation companies, the materials procurement company and the storage warehouse of the Xinjiang Non-ferrous Group are able to provide the Company with a stable supply of materials, transportation services and warehousing services.

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LETTER FROM THE BOARD

The Directors are of the view that the terms of the Renewed Mutual Supply Agreement were entered into on normal commercial terms and such terms, the Renewed Annual Caps are fair and reasonable and in the interests of the Company and its shareholders as a whole.

INFORMATION RELATING TO THE COMPANY

The Company is principally engaged in the mining, ore processing, smelting and refining of nickel, copper and other non-ferrous metals, which include cobalt and precious metals such as gold, silver, platinum and palladium.

INFORMATION RELATING TO XINJIANG NON-FERROUS

Xinjiang Non-ferrous is principally engaged in, among other things, investment in non-ferrous industry and sale of non-ferrous products.

LISTING RULES IMPLICATIONS

As at the Latest Practicable Date, Xinjiang Non-ferrous is the controlling shareholder (as defined in the Listing Rules) of the Company and is beneficially interested in approximately 40.06% of the entire issued share capital of the Company. Accordingly, Xinjiang Non-ferrous is a connected person of the Company and the entering into the Renewed Mutual Supply Agreement constitute continuing connected transactions of the Company under Chapter 14A of the Listing Rules.

Given that one or more of the applicable percentage ratios (as defined under Rule 14.07 of the Listing Rules) in respect of the Renewed Annual Caps for the three years ending 31 December 2015 under the Renewed Mutual Supply Agreement exceed 5% on an annual basis, the Renewed Annual Caps and the Renewed Mutual Supply Agreement are subject to the reporting, announcement, annual review and the Independent Shareholders’ approval requirements under Chapter 14A of the Listing Rules.

Since Xinjiang Non-ferrous is the controlling shareholder of the Company, it and its Associates are required to and will be abstained from voting at the EGM in relation to the approval of the Renewed Mutual Supply Agreement and the Renewed Annual Caps.

BOARD’S APPROVAL

Since Mr. Yuan Ze, one of the Directors, is also a director of Xinjiang Non-ferrous, which is the controlling shareholder of the Company, he has abstained from voting on the relevant board resolutions for the approval of the Renewed Annual Cap and the Renewed Mutual Supply Agreement. Other than Mr. Yuan Ze, none of the Directors had any material interest in the transactions contemplated under the Renewed Annual Cap and the Renewed Mutual Supply Agreement and therefore none of them are required to abstain from voting on the relevant board resolutions.

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LETTER FROM THE BOARD

(B) PROPOSED ISSUE OF MEDIUM-TERM NOTES

Background

Considering the business development plan of the Company and the current status of the Company’s financial resources and also basing on the future development trend of the international and domestic economic and financial situation and for the purposes of fulfilling the Company’s needs for production and business operation, optimizing the Company’s debt structure, reducing financing cost and improving the efficiency of capital utilization, the Company proposes to issue Medium-Term Notes with an aggregated principal amount of not more than RMB2 billion in aggregate in the inter-bank bond market in the PRC.

According to the Articles of Association and the applicable PRC laws and regulations, the proposed issue of the Medium-term Notes is subject to the approval of the Shareholders. As such, the proposed issue of the Medium-term Notes will be submitted to the EGM for the approval by the Shareholders by way of special resolution.

Details of the Proposed Issue of the Medium-Term Notes

The principal terms for the proposed issue of the Medium-Term Notes are as follows:

Size of the issue:

The Company proposes to apply to the NAFMII for the registration of the Medium-Term Notes of RMB2 billion, the actual registration amount will be subject to the amount specified in the “Notice of Acceptance of Registration” to be issued by the NAFMII to the Company.

Valid term of registration:

The validity of the term of the registration will be subject to the valid term of the registered amount of the debt financing instruments as confirmed in the “Notice of Acceptance of Registration” to be issued by the NAFMII to the Company.

Issue period:

The Medium-Term Notes will be issued in tranches within the valid term of registration after completion of registration with the NAFMII.

Maturity of the notes:

A term of 3 years for each tranche of the Medium-Term Notes to be issued. One-off repayment of the principal at maturity as specified in the prospectus.

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LETTER FROM THE BOARD

Par value:

RMB100 per Medium-Term Note.

Coupon rate:

Simple interest calculated at fixed interest rate per annum without calculating compound interest. Specific coupon rate will be determined according to the book building results and with reference to the Company’s credit rating and the market conditions of the inter-bank bond market at the time of issue.

Interest payment:

Interest will be paid annually in the manner and at the respective interest payment dates as set out in the prospectus, and interest payable for the third year will be settled together with the principal.

Issue method:

Public issue at par value in the nationwide inter-bank bond market on a balance-underwritten basis.

Target investors:

Institutional investors in the nationwide inter-bank bond market (excluding those investors prohibited by applicable laws and regulations for the purchase).

10. Trading:

Trading of and dealing in the Medium-Term Notes in the domestic inter-bank bond market will commence after the completion of the issue of each tranche of the Medium-Term Notes. The first trading day will fall on the business day immediately following the date of registration of the debt securities.

Use of proceeds:

The proceeds from the issue of the Medium-Term notes will mainly be used in replenishing the Company’s working capital and improving its debt structure.

Term of validity of the resolution:

The resolution relating to the proposed issue of the Medium-Term Notes shall be valid within three years after the date of the passing of the resolution at the general meeting of the Company.

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LETTER FROM THE BOARD

Granting of authorization to deal with matters relating to the proposed issue of Medium-Term Notes

It is also proposed that an authorization to be granted to the Board to deal with all matters relating to the proposed issue of Medium-term Notes in his/their sole discretion, including but not limited to, determining the specific time of the issue of each tranche, the size of the issue, the use of the proceeds and other specific terms of the issue; to approve and execute all necessary legal documents, to make relevant information disclosure in accordance with applicable regulatory rules and regulations and to effect specific arrangements in relation to the issue, trading and circulation of the Medium-Term Notes.

Subject to the approval by the Shareholders at the EGM, the above authorization shall remain effective within the valid term of the registration of the Medium-Term notes or within the subsistence of the relevant matters.

(C) ELECTION OF SUPERVISOR

Reference is made to the announcement of the Company dated 14 September 2012 in relation to the resignation of Mr. He Pingtao as a supervisor of the Company with effect from 13 September 2012.

Pursuant to the requirement of the Articles of Association, a supervisor representing shareholders shall be elected to fill up the vacancy in the supervisory committee following the resignation of Mr. He Pingtao. In this regard, Mr. Cao Sanxing was proposed to be elected by the Shareholders at the EGM as a supervisor representing shareholders for a term commencing from the date of the approval of his election at the EGM, i.e., 14 December 2012, to the date of the expiration of the term of the third session of the supervisory committee, i.e., 13 October 2014.

The Board also proposed the granting of authorization to the Board to arrange for service contract to be entered into by the Company with Mr. Cao Sanxing upon such terms and conditions as the Board thinks fit, and to do all such acts and things to effect such matters.

The biographical details of Mr. Cao Sanxing are set out as follows:

Mr. Cao Sanxing, aged 36, graduated from Hainan University with a Bachelor’s degree majoring in international finance. Mr. Cao completed a postgraduate course in business management at Xiamen University in July 2006.

Mr. Cao started his career in July 1999. He joined Zijin Mining Group in October 2003 and served various posts including deputy chief of the Audit and Supervision Division under the Office of Zijinshan Gold Mine, deputy chief and chief of the Audit and Supervision Division under the Office of Bayannaoer Zijin Non-ferrous Metal Co., Ltd., chairman of the Board of Supervisors of Bayannaoer Zijin Non-ferrous Metal Co., Ltd.. At present, Mr. Cao serves as Chairman of the Board of Supervisors of Zijin Mining Group Northwest Co., Ltd. (a subsidiary of Zijin Mining Group Co., Ltd., stock code: 2899).

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LETTER FROM THE BOARD

If elected, the Company will arrange service contract to be signed with Mr. Cao and Mr. Cao will not be receiving any supervisor’s remuneration from the Company under his service contract. The actual expenses arising from executing duties by Mr. Cao as the supervisor will be reimbursed by the Company.

The term of office of Mr. Cao will commence from the date of the approval of his election at the EGM, i.e., 14 December 2012, to the date of the expiration of the term of the third session of the supervisory committee, i.e.,13 October 2014. As at the Latest Practicable Date, Mr. Cao does not have any interest in the shares of the Company within the meaning of Part XV of the SFO. He has not been subject to any public sanctions by statutory or regulatory authority. Save as disclosed above, Mr. Cao has not held any directorships in any public listed companies in the past three years and do not have any relationship with any Directors, senior management, substantial or controlling Shareholders (as defined in the Listing Rules) of the Company. Save as disclosed above, there are no other matters concerning the proposed election of Mr. Cao as the supervisor that need to be brought to the attention of the Shareholders and the Stock Exchange and there are no other matters which shall be disclosed pursuant to Rule 13.51(2)(h) to (v) of the Listing Rules.

EGM AND CLOSURE OF REGISTER OF MEMBERS

A notice convening the EGM to be held at 19th Level, Conference Room, Youse Building, No. 4 You Hao North Road, Urumqi, Xinjiang, the PRC on 14 December 2012 at 11:00 a.m. is set out on pages 43 to 47 of this circular.

Whether or not you are able to attend the meeting, you are requested to complete the accompanying form of proxy in accordance with the instructions printed thereon and return the same to the Company’s H share registrar, Computershare Hong Kong Investor Services Limited at 17M Floor, Hopewell Centre, 183 Queen’s Road East, Wan Chai, Hong Kong as soon as possible and in any event not later than 24 hours before the time appointed for holding the meeting or any adjournment thereof. Completion and return of the form of proxy will not preclude you from attending and voting in person at the meeting or any adjournment thereof should you so wish.

The register of members of the Company will be closed from Wednesday, 14 November 2012 to Friday, 14 December 2012 (both days inclusive), during which time no share transfers will be registered. In order to be eligible to attend the EGM, instruments of transfer accompanied by share certificates and other appropriate documents must be lodged with the Company’s H share registrar, Computershare Hong Kong Investor Services Limited at Shops 1712-1716, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Wan Chai, Hong Kong, no later than 4:30 p.m. on Tuesday, 13 November 2012. Shareholders of the Company whose names appear on the register of members of the Company at the opening of business on Friday, 14 December 2012 are entitled to attend the EGM.

PROCEDURES FOR VOTING AT THE EGM

According to Rule 13.39(4) of the Listing Rules, any vote at a general meeting must be taken by poll.

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LETTER FROM THE BOARD

RECOMMENDATION

The Directors consider that all resolutions proposed for consideration and approval by the Shareholders of the Company at the EGM are in the best interests of the Company and its shareholders as a whole. Accordingly, the Directors recommend the Shareholders to vote in favour of all the resolutions to be proposed at the EGM as set out in the notice of the EGM.

GENERAL

Your attention is drawn to the letter from the Independent Board Committee, the letter from the Independent Financial Adviser and the additional information set out in the appendix to this circular and the notice of the EGM.

By Order of the Board Zhang Junjie, Lam Cheuk Fai

Joint Company Secretaries

– 19 –

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

==> picture [133 x 81] intentionally omitted <==

Xinjiang Xinxin Mining Industry Co., Ltd.[] *新疆新鑫礦業股份有限公司**

(a joint stock limited company incorporated in the People’s Republic of China with limited liability) (Stock code: 3833)

30 October 2012

To the Independent Shareholders

Dear Sir or Madam,

CONTINUING CONNECTED TRANSACTIONS – RENEWED MUTUAL SUPPLY AGREEMENT

We refer to the circular dated 30 October 2012 (the “Circular”) of Xinjiang Xinxin Mining Industry Co., Ltd. (the “Company”) of which this letter forms part. Terms used in this letter shall have the same meanings as those defined in the Circular unless otherwise specified.

We, being the independent non-executive Directors, have been appointed by the Board as members of the Independent Board Committee to advise the Independent Shareholders of the Company on the Renewed Mutual Supply Agreement and the Renewed Annual Caps. Hercules Capital has been appointed as the Independent Financial Adviser to advise the Independent Shareholders and us on the fairness and reasonableness of, among other things the Renewed Mutual Supply Agreement and the Renewed Annual Caps. Details of Hercules Capital’s advice, together with the principal factors and reasons it has taken into consideration in giving such advice, are set out in the “Letter from the Independent Financial Adviser” on pages 22 to 38 of the Circular.

The Independent Shareholders’ attention is drawn to the “Letter from the Board”, the advice of Hercules Capital in its capacity as the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders in respect of whether (i) the Renewed Mutual Supply Agreement and the transactions contemplated thereunder are conducted in the ordinary and usual course of business of the Group; and (ii) the terms of the Renewed Mutual Supply Agreement and the transactions contemplated thereunder (together with the Renewed Annual Caps thereunder) are on normal commercial terms and fair and reasonable so far as the Independent Shareholders are concerned and in the interests of the Company and the shareholders as at whole set out in the “Letter from the Independent Financial Adviser” as well as other additional information set out in other parts of the Circular.

* For identification purposes only

– 20 –

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

Having taken into account the independent advice of Hercules Capital, in particular the principal factors, reasons and recommendations set out in the “Letter from the Independent Financial Adviser” on pages 22 to 38 of the Circular and having considered the terms of the Renewed Mutual Supply Agreement and the Renewed Annual Caps, we consider that (i) the Renewed Mutual Supply Agreement and the transactions contemplated thereunder are conducted in the ordinary and usual course of business of the Group; and (ii) the terms of the Renewed Mutual Supply Agreement and the transactions contemplated thereunder (together with the Renewed Annual Caps thereunder) are on normal commercial terms and fair and reasonable so far as the Independent Shareholders are concerned and in the interests of the Company and the shareholders as at whole. Accordingly, we recommend the Independent Shareholders to vote in favour of the ordinary resolutions to be proposed at the EGM to approve the Renewed Mutual Supply Agreement and the Renewed Annual Caps.

Yours faithfully,

Independent Board Committee Mr. Chen Jianguo, Mr. Wang Lijin and Mr. Li Wing Sum Steven Independent Non-Executive Directors

– 21 –

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

The following is the text of a letter of advice from Hercules Capital in relation to the Renewed Mutual Supply Agreement and the Renewed Annual Caps to the Independent Board Committee and the Independent Shareholders, which has been prepared for the purpose of inclusion in this circular.

==> picture [74 x 32] intentionally omitted <==

1503 Ruttonjee House 11 Duddell Street Central Hong Kong 30 October 2012

To the Independent Board Committee and the Independent Shareholders

Dear Sirs,

CONTINUING CONNECTED TRANSACTIONS

INTRODUCTION

We refer to our engagement as the independent financial adviser to advise the Independent Board Committee and the Independent Shareholders with respect to the continuing connected transactions contemplated under the Renewed Mutual Supply Agreement in relation to the mutual provision of Construction Services, Supporting and Ancillary Services and the Company’s Products between the Group and the Xinjiang Non-ferrous Group and its Associates (the “Continuing Connected Transactions”) and the Renewed Annual Caps thereof, details of which are set out in the letter from the Board contained in the circular dated 30 October 2012 to the shareholders of the Company (the “Shareholders”) (the “Circular”), of which this letter forms part. Capitalized terms used in this letter shall have the same meanings as defined elsewhere in the Circular unless the context requires otherwise.

On 19 October 2012, the Company entered into the Renewed Mutual Supply Agreement with Xinjiang Non-ferrous in relation to the provision of (i) the Construction Services and the Supporting and Ancillary Services by the Xinjiang Non-ferrous Group and its Associates to the Group; and (ii) the Company’s Products by the Group to the Xinjiang Non-ferrous Group and its Associates for a period of three years, commencing from 1 January 2013.

Xinjiang Non-ferrous is a controlling Shareholder, which was beneficially interested in approximately 40.06% of the entire issued share capital of the Company as at the Latest Practicable Date, and thus a connected person of the Company under Chapter 14A of the

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Listing Rules. Therefore, the transactions contemplated under the Renewed Mutual Supply Agreement constitute continuing connected transactions for the Company. As one or more of the applicable percentage ratios (as defined under Rule 14.07 of the Listing Rules) in respect of the Renewed Annual Caps for the three years ending 31 December 2015 exceed 5% on an annual basis, the Renewed Annual Caps and the Renewed Mutual Supply Agreement are subject to the reporting, announcement, annual review and the Independent Shareholders’ approval requirements under Chapter 14A of the Listing Rules. Xinjiang Non-ferrous and its Associates will abstain from voting in relation to the approval of the Renewed Mutual Supply Agreement and the Renewed Annual Caps at the EGM.

The Independent Board Committee, comprising all independent non-executive Directors, namely Mr. Chen Jianguo, Mr. Wang Lijin and Mr. Li Wing Sum Steven, has been established to advise the Independent Shareholders in respect of the fairness and reasonableness of the Continuing Connected Transactions and the Renewed Annual Caps. We, Hercules Capital Limited, have been appointed to give an independent opinion to the Independent Board Committee and the Independent Shareholders as to whether the Continuing Connected Transactions are conducted in the ordinary and usual course of business and the terms of which and the Renewed Annual Caps are on normal commercial terms, fair and reasonable so far as the Independent Shareholders are concerned and in the interests of the Company and the Shareholders as a whole, and whether the Independent Shareholders should vote in favour of the Continuing Connected Transactions and the Renewed Annual Caps.

BASIS OF OUR OPINION

In formulating our opinion and recommendation, we have relied on the information and representations supplied, and the opinions expressed, by the Directors and management of the Company and have assumed that such information and statements, and representations made to us or referred to in the Circular are true, accurate and complete in all material respects as of the date hereof and will continue as such at the date of the EGM. The Directors have collectively and individually accepted full responsibility for the Circular, including particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the Group and having made all reasonable enquiries have confirmed that, to the best of their knowledge and belief, the information contained in the Circular is accurate and complete in all material respects and not misleading or deceptive, and there are no other matters the omission of which would make any statement in the Circular misleading.

We consider that we have reviewed sufficient information to reach an informed view, to justify reliance on the accuracy of the information contained in the Circular and to provide a reasonable basis for our recommendation. We have no reasons to suspect that any material information has been withheld by the Directors or management of the Company, or is misleading, untrue or inaccurate, and consider that they may be relied upon in formulating our opinion. We have not, however, for the purpose of this exercise, conducted any independent investigation or audit into the businesses or affairs or future prospects of the Group and the related subject of, and parties to, the Renewed Mutual Supply Agreement. Our opinion is necessarily based on the financial, economic, market and other conditions in effect and the

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

information made available to us as at the Latest Practicable Date. Shareholders should note that subsequent developments (including any material change in market and economic conditions) may affect and/or change this opinion and that we do not have any obligation to update, revise or reaffirm this opinion.

PRINCIPAL FACTORS AND REASONS CONSIDERED

In arriving at our opinion regarding the Continuing Connected Transactions, we have considered the following principal factors and reasons:

1. Background and reasons for the Continuing Connected Transactions

(a) Background

The Group is principally engaged in the mining, ore processing, smelting and refining of nickel, copper and other non-ferrous metals, which include cobalt and precious metals such as gold, silver, platinum and palladium.

Xinjiang Non-ferrous, the controlling Shareholder, is principally engaged in, among other things, investment in non-ferrous industry and sale of non-ferrous products.

The Xinjiang Non-ferrous Group and its Associates have been providing the Construction Services and the Supporting and Ancillary Services to the Group, and the Group has been providing the Company’s Products to the Xinjiang Non-ferrous Group and its Associates, since October 2007. The Existing Mutual Supply Agreement shall expire on 31 December 2012. The Directors wish to continue the Continuing Connected Transactions with the Xinjiang Non-ferrous Group and its Associates on an on-going basis after the expiry of the Existing Mutual Supply Agreement. As such, the Company entered into the Renewed Mutual Supply Agreement with Xinjiang Non-ferrous on 19 October 2012.

(b) Provision of the Construction Services

The Xinjiang Non-ferrous Group and its Associates have been providing construction related services, including project design, construction and facility installation, to the Group from time to time in its ordinary and usual course of business. We understand from the management of the Company that the Xinjiang Non-ferrous Group and its Associates are major players in the non-ferrous metal industry in Xinjiang and have an established system of mining, ore processing, smelting, processing, repairing, manufacturing, equipment installation, construction, transportation, storage and design. The design institute of the Xinjiang Non-ferrous Group and its Associates has the expertise in design of production facilities in respect of mining, ore processing and refining of non-ferrous and precious metals, and the Xinjiang Non-ferrous Group and its Associates have an experienced and stable construction team in shafts construction and facility installation. The Company considers that the Xinjiang Non-ferrous Group and its Associates have competitive advantages over other suppliers of similar services in Xinjiang. In addition, with the capability and techniques of the Xinjiang

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Non-ferrous Group and its Associates in designing and producing non-standardized production facilities and equipment, the Group’s ore processing and smelting operations were enhanced through the co-operations with the Xinjiang Non-ferrous Group and its Associates in relation to the Group’s previous technical improvement projects. The Group has also been satisfied with the quality of services rendered by the Xinjiang Non-ferrous Group and its Associates in relation to the Group’s previous technical improvement projects. Therefore, the Company considers that it is appropriate to continue to engage the Xinjiang Non-ferrous Group and its Associates as one of the construction service providers of the Group.

(c) Provision of the Supporting and Ancillary Services

Pursuant to the Renewed Mutual Supply Agreement, the Xinjiang Non-ferrous Group and its Associates will provide the Supporting and Ancillary Services to the Company including (i) production supplies, transportation and supporting services such as supplemental production materials (including copper concentrates, chemical materials, coal, coke and product packaging materials) and work safety products; (ii) storage, transportation and loading services, including warehousing services in Beijing for the sales and distribution of nickel cathode to the Company’s end-customers in Beijing, Hebei province and the north-eastern region of the PRC, and transportation services for the delivery of materials including coke and coal; and (iii) other supporting and ancillary services like machinery repair and improvement and geological exploration in the mining areas.

We understand from the management of the Company that the aforementioned Supporting and Ancillary Services are essential for the Group to secure a smooth operation. Being major players in the non-ferrous metal industry in Xinjiang, the Xinjiang Non-ferrous Group and its Associates are capable of providing the supplies and materials, transportation, warehousing and geological exploration services that meet the needs and standard of the Group. Therefore, the Directors consider that it is in the interest of the Company to maintain a long-term supplier relationship with the Xinjiang Non-ferrous Group and its Associates for securing a stable supply of the Supporting and Ancillary Services, which are essential for the operations of the Group.

(d) Provision of the Company’s Products

Pursuant to the Renewed Mutual Supply Agreement, the Xinjiang Non-ferrous Group and its Associates will purchase the Company’s Products such as nickel cathode, copper cathode, gold products, sulphuric acid, water, electricity and other ancillary materials from the Group. We understand from the management of the Company that in order to enhance the profit margin of the crude gold produced by the Group, the Company intends to appoint the Xinjiang Non-ferrous Group and its Associates to conduct refining, processing, sale and distribution of its gold products as the Group has not yet developed its expertise in gold refinery and the sales channel of the Company’s gold products is relatively narrow as compared to that of the Xinjiang Non-ferrous Group and its Associates, which are members of the PRC Gold Exchange. The Directors consider that the appointment of the Xinjiang Non-ferrous Group and its Associates for conducting refining, processing and sales and distribution will enhance the value of the Company’s gold products and can help securing a stable sales channel and turnover for the Company.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Having considered that (i) the Xinjiang Non-ferrous Group and its Associates are in their ordinary and usual course of business to provide the Construction Services and the Supporting and Ancillary Services; (ii) the Xinjiang Non-ferrous Group and its Associates are major players in the non-ferrous metal industry in Xinjiang which have been offering high quality Construction Services that meet the Company’s stringent standards in the previous technical improvement and construction projects; (iii) the Group needs to purchase the Supporting and Ancillary Services for its daily operations from time to time; (iv) the entering into of the Renewed Mutual Supply Agreement in respect of the Supporting and Ancillary Services can stabilize the supply channels and the quality of products and services for the Group; and (v) the sale of the Company’s Products is carried out in the ordinary and usual course of business of the Company and provides additional turnover to the Group, we consider that the Continuing Connected Transactions are commercial transactions conducted in the ordinary and usual course of business of the Group and it is in the interests of the Company and the Shareholders as a whole to continue such transactions.

2. Terms of the Continuing Connected Transactions

Pursuant to the Renewed Mutual Supply Agreement, the Xinjiang Non-ferrous Group and its Associates agreed to provide the Construction Services and the Supporting and Ancillary Services to the Group and the Group agreed to provide the Company’s Products to the Xinjiang Non-ferrous Group and its Associates for a period of three years, commencing from 1 January 2013. The Company and the Xinjiang Non-ferrous Group are at liberty to procure from, or provide to, any Independent Third Party any of the required services and products save and except that the Xinjiang Non-ferrous Group must provide the Company with services or supplies on terms no less favourable than those offered to any Independent Third Party and that the Xinjiang Non-ferrous Group must source nickel cathode and copper cathode exclusively from the Company.

Each party of the Renewed Mutual Supply Agreement may terminate the mutual provision of products and services by giving to the other party not less than six months’ prior written notice. However, the Xinjiang Non-ferrous Group may not terminate its supply of services and/or products if the Company has informed them by written notice that the Company is unable to obtain similar products and/or services from other Independent Third Parties (save that the Company has provided written consent to the termination by the Xinjiang Non-ferrous Group).

The Renewed Mutual Supply Agreement is a framework agreement which sets out the principles upon which detailed terms and conditions of the transactions are to be determined between the parties. Under the Renewed Mutual Supply Agreement, the Company and Xinjiang Non-ferrous agreed that the actual price of the services and products would be determined principally by commercial negotiations between the parties with reference to the market price of the services and products from time to time and would be on normal commercial terms and on terms not less favourable to the Company than terms available to or from, as appropriate,

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Independent Third Parties. The following general pricing policies will be followed in order of priority and the payables between the parties in relation to the Continuing Connected Transactions will be settled on a monthly basis:

the State-prescribed price, including any price prescribed by any relevant local government, if applicable;
where there is no State-prescribed price, then the State-guidance price;
where there is neither a State-prescribed price nor a State-guidance price, the market price which is determined by (i) the price offered by an Independent Third Party for providing similar products or services in an area where such products or services are provided under general commercial terms; or (ii) where not applicable, the market price offered by an Independent Third Party for providing similar products or services in the PRC under general commercial terms; and
where none of the above is applicable, the price shall be determined by the parties based on reasonable costs incurred by them in providing the products or services plus a profit margin of not more than 5% of such costs (the “Cost-plus Method”).

(a) Provision of the Construction Services

According to the management of the Company, the service fees for the Construction Services are and will be determined by reference to the prevailing market prices under general commercial terms. Since the Construction Services were tailor-made to fit the specific requirements of the Company, we were unable to compare the terms of the transactions in respect of the Construction Services between the Xinjiang Non-ferrous Group and other Independent Third Parties. We were advised by the management of the Company that, pursuant to the internal guidance of the Company on construction projects, the Company is required to select service providers for all major construction projects, including the technical improvement projects, through an open tender process, through which the price and terms of services offered by the vendors will be compared and the service contracts will be awarded to vendor(s) which offer(s) the best price and/or terms of service. We have reviewed the tender assessment report of a previous technical improvement project in relation to pipe construction of the Kalatongke Mine and noted that the bidding parties included both members of the Xinjiang Non-ferrous Group and Independent Third Parties. We also noted that the tenders with the highest scores, which were rated by the tender evaluation committee based on the same objective selection criteria such as qualification, resources, experience and technical expertise of the tenders, reputation and quality of work and pricing and terms of service, were selected. We considered the results of the tender process fair and reasonable. With a similar open tender system in place, we believe that the prices and terms of the transactions in respect of the Construction Services will be determined on normal commercial terms, taking into account the nature of services and the prevailing market circumstances, and be fair and reasonable so far as the Independent Shareholders are concerned.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

(b) Provision of the Supporting and Ancillary Services and the Company’s Products

The prices of the Supporting and Ancillary Services will be determined according to the following pricing policies:

Products/Services

Pricing Policies

(i) Copper concentrates
(ii) Other Supporting and Ancillary Services
Transaction services
Coal, oil, gas and diesel
Labor safety and sundry supplies

prevailing market price State-guidance price State-guidance price prevailing market price

We understand from the management of the Company that the pricing of all previous transactions regarding products and services under the Supporting and Ancillary Services which have a State-guidance price were determined with reference to the prevailing market price and in compliance with the State-guidance price. We also understand from the management of the Company that there are no State-prescribed prices or State-guidance prices for the Company’s Products at present. Therefore, up to the Latest Practicable Date, the prices of the Company’s Products were determined by reference to the prevailing market prices under general commercial terms. The management of the Company confirmed that the prices of all the existing Company’s Products can be determined with reference to the prevailing market price, therefore, the Company expects that the pricing of the Company’s Products will not be determined based on the Cost-plus Method. The management of the Company also confirmed that none of the previous transactions regarding the Supporting and Ancillary Services and the Company’s Products were transacted based on the Cost-plus Method as all the Supporting and Ancillary Services and the Company’s Products have a State-prescribed price, a State-guidance price or a market price (as appropriate). The management of the Company expected that the prices of the Supporting and Ancillary Services and the Company’s Products would continue to be determined by reference to the prevailing market prices under general commercial terms and in compliance with the State-prescribed price or the State-guidance price, if any, in the future.

We were advised by the management of the Company that in order to ensure the actual price of the Supporting and Ancillary Services would be determined on normal commercial terms and on terms not less favourable to the Company than terms offered by Independent Third Parties, different levels of the accounting department of the Company would perform independent checks on the unit price charged by the Xinjiang Non-ferrous Group and its Associates and compare such price with the prevailing market price and/or the unit price of similar products purchased from other Independent Third Parties during the relevant period before payment is made. We have reviewed samples of invoices issued by the Xinjiang Non-ferrous Group to the Company and noted the signatures signed by the staff who performed the verification works on the invoices. In view of the above, we believe that the abovementioned policy has been followed by the Company in its daily operations. Furthermore, we have reviewed samples of invoices issued by the Xinjiang Non-ferrous Group and the Independent Third Parties to the Company in relation to similar Supporting and Ancillary Services rendered and noted that the terms offered by the Xinjiang Non-ferrous Group were similar to those offered by the Independent Third Parties.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

We understand from the management of the Company that the selling prices of the Company’s Products have been determined by sales department with reference to the prevailing market prices as quoted at Shanghai Yangtze River Non-ferrous Metal Spot Market. We have reviewed the samples of invoices issued by the Company to the Xinjiang Non-ferrous Group and the relevant prevailing market prices as quoted at Shanghai Yangtze River Non-ferrous Metal Spot Market and noted that the prices charged by the Company were similar to the prevailing market prices. We have also reviewed samples of invoices issued by the Company to the Xinjiang Non-ferrous Group and the Independent Third Parties in relation to the sales of similar products and noted that the terms offered by the Company to the Xinjiang Non-ferrous Group were similar to those offered to the Independent Third Parties. The management of the Company also confirmed us that the aforementioned pricing policy was and would be consistently applied to all transactions in respect of the mutual supply of the Supporting and Ancillary Services and the Company’s Products between the Group and the Xinjiang Non-ferrous Group and its Associates.

According to the management of the Company, the profit margin of not more than 5% under the Cost-plus Method was arrived at after negotiations between the parties to the Renewed Mutual Supply Agreement considering the general industry practice. In order to assess the reasonableness and fairness of the 5% margin under the Cost-plus Method, we have tried to look for public information regarding the profit margin of similar services and products for comparison purposes but found that no such information was available. Given that (i) both parties to the Renewed Mutual Supply Agreement are mutually bounded by the same maximum profit margin of 5% under the Cost-plus Method; (ii) the Cost-plus Method will be adopted only if there are no State-prescribed prices, State-guidance prices or market prices; (iii) the Directors consider that the chance of using the Cost-plus Method in determining the price of the Company’s Products is remote as all the existing Company’s Products can be determined with reference to the prevailing market price; and (iv) the maximum profit margin of 5% can act as a ceiling on the selling prices of the Supporting and Ancillary Services and the Company’s Products, we concurred with the view of the Directors that the Cost-plus Method is commercially justifiable.

Taking into account that (i) the Company has the liberty to procure from, or provide to, any Independent Third Party any of the Construction Services, Supporting and Ancillary Services and Company’s Products while the Xinjiang Non-ferrous Group must source nickel cathode and copper cathode exclusively from the Company; (ii) the Xinjiang Non-ferrous Group must provide the Company with services or supplies on terms no less favourable than those offered to any Independent Third Party and such practices have been and will be consistently applied by the Xinjiang Non-ferrous Group; and (iii) the Company may terminate the mutual provision of products and services by giving to the Xinjiang Non-ferrous Group not less than six months’ prior written notice while the termination of the provision of services and products by the Xinjiang Non-ferrous Group is subject to the consent of the Company, and the Xinjiang Non-ferrous Group may not terminate its supply of services and/or products if the Company has informed them by written notice that the Company is unable to obtain similar products and/or services from other Independent Third Parties, we consider that the terms of the Continuing Connected Transactions are fair and reasonable so far as the Independent Shareholders are concerned and in the interests of the Company and the Shareholders as a whole.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

3. Bases of the Renewed Annual Caps

The historical transaction amounts of the Continuing Connected Transactions are summarized as follows:

	Historical Transaction Amounts	Historical Transaction Amounts	Historical Transaction Amounts	Historical Transaction Amounts	Historical Transaction Amounts	Historical Transaction Amounts
						For the
				nine months
	For the year ended					ended
	31	December		30	September
	2010		2011			2012
	RMB’000		RMB’000			RMB’000
Provision of the Construction Services	189,032		364,905			172,433
Provision of the Supporting and
Ancillary Services	5,064		15,417			16,409
Provision of the Company’s Products	22,271		31,185			15,937

The proposed Renewed Annual Caps for the Continuing Connected Transactions are summarized as follows:

		Renewed Annual	Renewed Annual	Caps
		For the	year ending 31 December
		2013	2014	2015
		RMB’000	RMB’000	RMB’000
Provision of the Construction
	Services
−	Kalatongke Mine technological
	improvements	130,890	66,000	72,000
−	Xinjiang Yakesi Resources Co.,
	Ltd. (“Yakesi”) technological
	improvements	25,000	27,500	30,000
−	Fukang Refinery of Xinjiang
	Xinxin Mining Industry Co., Ltd.
	(“Fukang Refinery”) expansion
	projects	66,500	86,650	98,800
−	Xinjiang Zhongxin Mining Co.,
	Ltd. (“Xinjiang Zhongxin”) sundry
	maintenance projects	3,000	3,300	3,600
−	Xinjiang Wuxin 10,000-ton copper
	smelting construction project	10,000	11,000	12,000
Proposed Renewed Annual Caps		235,390	194,450	216,400

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

		Renewed Annual	Renewed Annual	Caps
		For the	year ending 31 December
		2013	2014	2015
		RMB’000	RMB’000	RMB’000
Provision of the Supporting and
	Ancillary Services
−	Purchase of copper concentrates	1,338,462	1,933,333	2,082,051
−	Purchase of other Supporting and
	Ancillary services	44,338	45,747	47,879
Proposed Renewed Annual Caps		1,382,800	1,979,080	2,129,930


Provision of the Company’s Products
−	Sales of copper cathode	25,641	33,333	41,880
−	Sales of gold products	28,000	30,000	32,000
−	Sales of others products	1,879	1,677	1,080
Proposed Renewed Annual Caps		55,520	65,010	74,960

According to the management of the Company, the proposed Renewed Annual Caps were estimated with reference to the historical transaction amounts, the expected market conditions, the development trend in the non-ferrous metal industry, the expected demand and supply of the Company’s products and its production expansion plans. In determining the Renewed Annual Caps, the Directors have assumed that (i) the Company’s business will continue to grow and the need for the mutual provision of the Construction Services (apart from the civil engineering of smelting workshop, the closing cost of which will be accounted for in 2013), the Supporting and Ancillary Services and the Company’s Products will continue to increase; and (ii) the prices of utilities, raw materials and finished products are expected to increase in the three years ending 31 December 2015.

(a) Provision of the Construction Services

We understand from the management of the Company that the Renewed Annual Caps under the provision of the Construction Services were determined by the Directors with reference to the estimations on the Group’s demand for the Construction Services for its existing developments, the historical transaction amount and the increase in market price of the Construction Services.

During the nine months ended 30 September 2012, the Group completed its expansion project in smelting of the Kalatongke Mine. Currently, the Group is undergoing two major technological renovation and expansion projects, including (i) mining of the Kalatongke Mine; and (ii) mining and ore processing of the mine(s) of Yakesi. The Company expected that the construction works for such projects would continue during 2013 and 2015. We have reviewed, and discussed with the management of the Company, the Company’s budgets for the construction services of the abovementioned projects and noted that the project related to the

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

mining of the Kalatongke Mine mainly involves the construction of transportation lane, horizontal wind filling lane, air shaft lane and the ramps while the project of Yakesi mainly involves the construction and installation of the 4,000-ton processing plant. We have also reviewed samples of the contracts in respect of the abovementioned projects entered into between the Xinjiang Non-ferrous Group and the Group. Having considered the anticipated progress of the construction work, the value of the construction contracts and the payment schedules, the construction fees payable to the Xinjiang Non-ferrous Group and its Associates in relation to the above technical improvement projects were estimated to be approximately RMB155.9 million, RMB93.5 million and RMB102.0 million for the year ending 31 December 2013, 2014 and 2015 respectively.

Furthermore, in order to improve the production capacity and efficiency of the operations of Fukang Refinery, Xinjiang Wuxin and Xinjiang Zhongxin, the Company expected that more improvement and construction projects would be carried out in the coming few years. An expansion project of the nickel system in Fukang Refinery has been planned to be carried out in 2013 and is expected to be completed by end of 2015. According to the management of the Company, the expansion project of the nickel system in Fukang Refinery is in the planning stage and no construction contracts have been signed yet. However, the Company expected that the Xinjiang Non-ferrous Group and its Associates would be one of the service providers for such project in respect of the nickel cathode expansion project and copper slag dehydration project on an ongoing basis until the completion of the project. The Company estimated that the construction fees payable to the Xinjiang Non-ferrous Group and its Associates in relation to the expansion project of the nickel system in Fukang Refinery and other improvement projects expected to be carried out for Xinjiang Wuxin and Xinjiang Zhongxin would be approximately RMB79.5 million, RMB101.0 million and RMB114.4 million for the year ending 31 December 2013, 2014 and 2015 respectively.

We have reviewed, and discussed with the management of the Company, the budget for the nickel cathode expansion project and copper slag dehydration project in Fukang Refinery and noted that such budget was arrived at after taking into account the works required, the expected construction progress and the prevailing market price for similar construction services. We were also confirmed by the management of the Company that the budget for the abovementioned projects were determined after extensive consultation and feasibility studies with project consultants in the field. We are satisfied that the budget of the construction projects has been made after due and careful consideration.

Given the Company’s needs and budgets of the scheduled construction works, we consider that the proposed Renewed Annual Caps for the Construction Services are fair and reasonable.

(b) Provision of the Supporting and Ancillary Services

We have discussed with the management of the Company and reviewed the calculation of the Renewed Annual Caps for purchase of the Supporting and Ancillary Services. We noted that the historical transaction amounts of the Supporting and Ancillary Services between the Group and the Xinjiang Non-ferrous Group increased substantially during 2010 and 2012. We

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

understand from the management of the Company that the increase in transaction amount of Supporting and Ancillary Services for 2011 was mainly due to the increases in transportation and storage fees charged by the Xinjiang Non-ferrous Group and its Associates as a result of the increased sales activities of the Group in 2011. In 2012, Xinjiang Non-ferrous Group and its Associates started to supply certain supplies and materials, which were sourced from Independent Third Parties by the Group in the previous years, to the Group and such transactions further boosted the transaction amount of the Supporting and Ancillary Services between the Group and the Xinjiang Non-ferrous Group for the nine months ended 30 September 2012. It is expected that such increase will continue during the three years ending 31 December 2015.

The Renewed Annual Caps for the Supporting and Ancillary Services during the three years ending 31 December 2015 are substantially larger than the historical transaction amount as Xinjiang Wuxin will commence operations and trial production in 2013 and start purchasing its major raw material – copper concentrates from Xinjiang Ashele, the largest copper concentrate producer in Xinjiang and an associated company of the Xinjiang Non-ferrous, for its production of copper cathode following the completion of the construction of its single copper smelting system at the end of 2012.

Having considered Xinjiang Wuxin’s targeted production volume of copper cathode for the three years ending 31 December 2015, the management of the Company estimated that the quantity of copper concentrates to be purchased from Xinjiang Ashele would increase at a compound annual growth rate of approximately 15.5% and the transaction amounts in relation to the purchase of copper concentrates by the Group from Xinjiang Ashele, which shall account for over 96.0% of the Renewed Annual Caps for the Supporting and Ancillary Services during the three years ending 31 December 2015, would increase at a compound annual growth rate of approximately 24.7% after taking into account the expected increase in the price of copper concentrates at a compound annual growth rate of approximately 8.0%.

We have discussed with the management of the Company the production plans of Xinjiang Wuxin for the three years ending 31 December 2015 and noted that the targeted production volume of copper cathode was projected to increase at a compound annual growth rate of approximately 15.5% for the three years ending 31 December 2015 having taken into account the maximum production capacity of Xinjiang Wuxin and the expected demand of copper cathode.

According to the statistics released by the National Bureau of Statistics of China, the production volume of refined copper for the year ended 31 December 2011 and the eight months ended 31 August 2012 were approximately 5.2 million tons and 3.9 million tons respectively, representing an increase of approximately 14.6% and 7.2% as compared to the last corresponding year and period respectively. With reference to the “12th Five-Year Development Plan of the Nonferrous Metals Industry” (有色金屬工業十二五發展規劃) released in early 2012, the production volume of refined copper will reach 6.5 million tons by end of 2015, representing a compound annual growth rate of approximately 7.3%. Based on the October 2012 Copper Bulletin released by The International Copper Study Group on 23

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

October 2012, China’s apparent usage growth in the first seven months of 2012 reflected a year-on-year 70% increase in net imports of refined copper. The strength in imports reflects the strong demand although the high import level may be accompanied by increased inventories. Meanwhile, National Bureau of Statistics of China also forecast that the apparent consumption of refined copper will increase to approximately 9.7 million tons in 2015, representing a compound annual growth rate of approximately 5.2%.

Given that (i) the maximum production capacity of Xinjiang Wuxin will be substantially higher than the production volume projected in its production plan for 2013 to 2015; (ii) Xinjiang Wuxin can secure the supply of copper concentrates, the major raw materials for production of copper cathode, from Xinjiang Ashele; (iii) the market demand of refined copper is generally projected to be on a rising trend in the next few years; and (iv) the Group is well experienced in sales and manufacturing of copper cathode and it recorded growths of approximately 30.8% in copper cathode output and approximately 29.2% in copper cathode sales in 2011, as compared to 2010, we are satisfied that the production plans of Xinjiang Wuxin have been prepared after due and careful consideration.

According to a report titled “Global Metals Playbook, 4Q12” released by Morgan Stanley in October 2012, the London Metal Exchange (“LME”) copper price fluctuated substantially in the past few years. The LME copper price recorded an increase from US$5,076 per ton in 2009 to US$8,838 per ton in 2011, representing a compound annual growth rate of approximately 32.0% and an average annual growth rate of approximately 12.9% during 2009 to 2011. Following the escalation in the first half of 2011, the price of copper started to drop in the second half of 2011 due to the effects of the debt crisis in Europe and the deceleration in Chinese economic growth. The statistics from Shanghai Futures Exchange (“SHFE”) indicated that the average spot price of copper in 2011 increased to approximately RMB66,121 per ton, representing a growth of approximately 11.1% as compared to that of 2010. However, the average spot price of copper for the eight months ended 31 August 2012 decreased by approximately 13.5%, as compared to that of the previous corresponding period, to approximately RMB57,227 per ton. Morgan Stanley estimated that the LME copper price would be US$8,598 in 2013 and decrease gradually to US$7,496 in 2015.

We noted the deviation between the market forecast and the assumptions adopted by the Company in respect of the price of copper concentrates in 2014 and 2015. Had the market forecast prices of copper concentrates, instead of the projected prices assumed by the Company, been applied for the calculation of the projected transaction amounts of sales of copper concentrates between the Group and Xinjiang Non-ferrous Group and its Associates, the projected transaction amounts in 2014 and 2015 would have been decreased by approximately 12.4% and 25.3% respectively. Therefore, lower amounts of Renewed Annual Caps will be needed if they are estimated based on the market forecast price of copper concentrates.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

Xinjiang Non-ferrous Group and its Associates during the relevant period and the actual rate to be charged will depend on the prevailing market rate at the time of the transactions; and (iii) the market forecast may not reflect the actual price movement of copper in the future, especially for the time of few years ahead, we consider that it is justifiable and reasonable for the Company to reserve a buffer in the Renewed Annual Caps for contingencies such as unforeseeable market fluctuations and the Renewed Annual Caps for the Supporting and Ancillary Services during the three years ending 31 December 2015 is fair and reasonable.

(c) Provision of the Company’s Products

We have discussed with the management of the Company and reviewed the calculation of the Renewed Annual Caps for the sale of the Company’s Products. We noted that the compound annual growth rate of the Renewed Annual Caps is approximately 16.2% for the three years ending 31 December 2015, with the compound annual growth rates for copper cathode, gold products and other products of approximately 27.8%, 6.9% and -24.3% respectively. We noted that the projected sales amount of gold products and copper cathode accounted for over 96% of the Renewed Annual Caps for the sale of the Company’s Products for each of the three years ending 31 December 2015. We also noted that the historical transaction amount of the Company’s Products between the Group and the Xinjiang Non-ferrous Group in 2011 increased by approximately 40.0% as compared to that of 2010. We were advised by the management of the Company that there was a substantial rise in transaction amount in 2011 because the Xinjiang Non-ferrous Group started to purchase copper concentrates from the Group in that year. However, the Group ceased to sell copper concentrates to the Xinjiang Non-ferrous Group in 2012 as the Group has to retain copper concentrates for its own production use. Therefore, the annualized transaction amount of the Company’s Products between the Group and the Xinjiang Non-ferrous Group in 2012 dropped by approximately 31.9% as compared to that of 2011.

In view of the commencement of production of copper cathode by Xinjiang Wuxin in 2013, it is expected that no more copper concentrates, which is a major raw material for production of copper cathode, will be sold by the Group to the Xinjiang Non-ferrous Group in the future. On the other hand, a substantial amount of copper cathode will be sold by the Group to the Xinjiang Non-ferrous Group since 2013. Based on the discussions between the Group and the Xinjiang Non-ferrous Group and its Associates, the sales volume of copper cathode to the Xinjiang Non-ferrous Group and its Associates was expected to increase by a compound annual growth rate of approximately 18.3% for the three years ending 31 December 2015 having considered the Group’s increasing production capacity of copper cathode following the commencement of operations of Xinjiang Wuxin in 2013 and the increasing demand of copper cathode, being one of the raw materials in production of copper alloy, one of the products of the Xinjiang Non-ferrous Group and its Associates, from the Group as a result of the business growth of the Xinjiang Non-ferrous Group and its Associates. We have reviewed the memorandum of understanding entered into between the Group and the Xinjiang Non-ferrous Group regarding the sales volume of copper cathode between the parties and noted that the tentative purchase volume of copper cathode agreed by both parties is in line with the projected sales volume adopted by the Group in budgeting the Renewed Annual Caps.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

In view of the prevailing market conditions and the increasing demand of copper in the PRC in the next few years, the management of the Company expected that the price of copper in the PRC would fluctuate in the short run and increase at a compound annual growth rate of approximately 8.0% for the three years ending 31 December 2015. Having considered the increases in trading volume and prices of copper cathode, the Company anticipated that the transaction amounts for copper cathode for the three years ending 31 December 2015 would be approximately RMB25.6 million, RMB33.3 million and RMB41.9 million respectively, representing a compound annual growth rate of approximately 27.8%.

As mentioned in the paragraph headed “(b) Provision of the Supporting and Ancillary Services” under the section headed “Bases of the Renewed Annual Caps” above, there is a deviation between the market forecast and the assumptions adopted by the Company in respect of the price of copper in 2014 and 2015. Had the market forecast prices of copper cathode, instead of the projected prices assumed by the Company, been applied for the calculation of the projected transaction amounts of sales of copper cathode between the Group and Xinjiang Non-ferrous Group and its Associates, the projected transaction amounts in 2014 and 2015 would have been decreased by approximately 12.4% and 25.3% respectively. Therefore, lower amounts of Renewed Annual Caps will be needed in 2014 and 2015 if they are estimated based on the market forecast price of copper cathode.

However, having considered that (i) the LME copper price has been fluctuated greatly in the past few years with a compound annual growth rate of approximately 32.0% and an average growth rate of approximately 12.9% for the period from 2009 to 2011; (ii) the Renewed Annual Caps represent only the maximum amounts that can be transacted between the Group and the Xinjiang Non-ferrous Group and its Associates during the relevant period and the actual rate to be charged will depend on the prevailing market rate at the time of the transactions; and (iii) the market forecast may not reflect the actual price movement of copper in the future, especially for the time of few years ahead, we consider that it is justifiable and reasonable for the Company to reserve a buffer in the Renewed Annual Caps for contingencies such as unforeseeable market fluctuations.

We understand from the management of the Company that the Company intends to appoint the Xinjiang Non-ferrous Group and its Associates to conduct refining, processing, sale and distribution of its gold products starting from 2013 so as to further enhance the profit margin of the crude gold produced by the Group. We have reviewed, and discussed with the management of the Company, the Company’s production plan of crude gold and noted that the Company’s annual production volume of crude gold in 2012 was approximately 70kg and it was expected to increase at a compound annual growth rate of approximately 6.9% for the three years ending 31 December 2015. We were advised by the management of the Company that the Company intends to sell all of its crude gold to the Xinjiang Non-ferrous Group and its Associates for refining, processing, sale and distribution in the future. With the assumption of a relatively stable gold price during the three years ending 31 December 2015, the management of the Company expected that the net sale proceeds from the sale of gold products to the Xinjiang Non-ferrous Group and its Associates would be approximately RMB28.0 million, RMB30.0 million and RMB32.0 million for the three years ending 31 December 2015 respectively, representing a compound annual growth rate of approximately 6.9%.

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

According to the statistics released by SHFE, the average spot price of gold in 2011 was approximately RMB329 per gram, representing an increase of approximately 22.7% as compared to that of 2010. However, the growth of gold price slowed down in 2012 and the average spot price of gold for the eight months ended 31 August 2012 only increased by approximately 2.5%, as compared to that of 2011, to approximately RMB337 per gram. According to a report titled “Metals and Mining” issued by HSBC in July 2012, it is estimated that the average gold price for 2012, 2013 and 2014 would be approximately US$1,760 per ounce, US$1,775 per ounce and US$1,750 per ounce respectively, representing a slight increase of approximately 0.9% in 2013 and a decrease of approximately 1.4% in 2014. We considered that the view of the management of the Company that the gold prices would be more or less the same during the three years ending 31 December 2015 is in general in line with the slight fluctuation of the average annual gold prices anticipated by HSBC.

In light of the above, the Company anticipated that there would be a compound annual growth rate of approximately 16.2% in the transaction amount for the Company’s Products between the Group and the Xinjiang Non-ferrous Group and its Associates for the three years ending 31 December 2015.

Having taken into account the above analysis, we consider that the Renewed Annual Caps proposed by the Directors are fair and reasonable.

4. Annual review of the Continuing Connected Transactions

The Company confirms us that it will comply with Rule 14A.37 to Rule 14A.41 of the Listing Rules during the term of the Renewed Mutual Supply Agreement, in particular:

(a) the Renewed Annual Caps shall not be exceeded;
(b) each year the independent non-executive Directors will review the Continuing Connected Transactions and confirm in the annual report of the Company that such transactions have been entered into:
(i) in the ordinary and usual course of business of the Company;
(ii) either on normal commercial terms or, if there are no sufficient comparable transactions to judge whether they are on normal commercial terms, on terms no less favourable to the Company than terms available to or from independent third parties; and
(iii) in accordance with the relevant agreements governing them on terms that are fair and reasonable and in the interests of the Shareholders as a whole;
(c) each year the auditors of the Company must provide a letter to the Board (with a copy provided to the Stock Exchange at least 10 business days prior to the bulk printing of the Company’s annual report), confirming that the Continuing Connected Transactions:

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LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

(i) have received the approval of the Board;
(ii) have been entered into in accordance with the pricing policy of the Group;
(iii) have been entered into in accordance with the terms of the Renewed Mutual Supply Agreement; and
(iv) have not exceeded the caps as disclosed;
(d) the Board must state in the annual report of the Company whether its auditors have confirmed the matters as referred to in paragraph (c) above; and
(e) upon any variation or renewal of the Renewed Mutual Supply Agreement, the Company will comply in full with all applicable reporting, disclosure and independent shareholders’ approval requirements of Chapter 14A of the Listing Rules.

Given the above, we are of the view that the interests of the Company and the Independent Shareholders under the Continuing Connected Transactions will be properly safeguarded.

RECOMMENDATION

Having considered the abovementioned principal factors and reasons, we consider that (i) the Continuing Connected Transactions are conducted in the ordinary and usual course of business of the Group; and (ii) the terms of the Continuing Connected Transactions (and the Renewed Annual Caps thereunder) are on normal commercial terms and fair and reasonable so far as the Independent Shareholders are concerned and in the interests of the Company and the Shareholders as a whole. We therefore recommend the Independent Board Committee to advise the Independent Shareholders, as well as the Independent Shareholders, to vote in favour of the resolutions to approve the Continuing Connected Transactions (and the Renewed Annual Caps thereunder) at the upcoming EGM.

Yours faithfully, For and on behalf of

Hercules Capital Limited

Louis Koo Amilia Tsang Managing Director Director

– 38 –

GENERAL INFORMATION

APPENDIX

1. RESPONSIBILITY STATEMENT

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

2. DISCLOSURE OF INTERESTS

Directors, supervisors and chief executive of the Company

(i) As at the Latest Practicable Date, save and except for Mr. Zhou Chuanyou, being a Director, who has interest in 480,924,000 Domestic Shares of the Company as set out in the section headed “Substantial shareholders of the Company” on page 40 of this circular and 3,638,000 H Shares of the Company (through Hong Kong CCIG International Industrial Co., Ltd. which is beneficially owned by him), none of the Directors, supervisors and chief executive of the Company had any interests and short positions in the shares, underlying shares and/or debentures (as the case may be) of the Company or any of its associated corporations (within the meaning of the SFO) which was required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interest and short position which any such Director, chief executive or supervisor is taken or deemed to have under such provisions of the SFO) or which was required to be entered into the register required to be kept by the Company under section 352 of the SFO or which was otherwise required to be notified to the Company and the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers in the Listing Rules.
(ii) As at the Latest Practicable Date, none of the Directors, proposed Directors, supervisors or proposed supervisors of the Company had any direct or indirect interest in any assets which have since 31 December 2011 (being the date to which the latest published audited financial statements of the Company were made up) been acquired or disposed of by or leased to any member of the Group, or are proposed to be acquired or disposed of by or leased to any member of the Group.

– 39 –

GENERAL INFORMATION

APPENDIX

Substantial shareholders of the Company

As at the Latest Practicable Date, so far as the Directors are aware, each of the following persons, not being a Director, chief executive or supervisor of the Company, had an interest in the Shares which falls to be disclosed to the Company and the Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of the SFO:

			Approximate
			percentage of	Approximate
	Number of		shareholding on	percentage of the
Name	shares held	Class of share	relevant class of shares	total share capital
			(%)	(%)
Xinjiang Non-ferrous Metal	885,204,000 (L)	Domestic share	61.01	40.06
Industry (Group) Ltd.*
(新疆有色金屬工業(集團)有
限責任公司)
Shanghai Yilian Kuangneng	282,896,000 (L)	Domestic share	19.50	12.80
Co. Ltd.*
(上海怡聯礦能實業有限公司)
(Note)
Zhongjin Investment (Group)	198,028,000 (L)	Domestic share	13.65	8.96
Ltd.*
(中金投資(集團)有限公司)
(Note)
The National Council for	69,000,000 (L)	H share	9.09	3.12
Social Security Fund of the
PRC
(中國全國社會保障基金理
事會) (Note)

(L) = Long positions

Note: The entire shareholding or equity interest of Shanghai Yilian Kuangneng Co. Ltd (上海怡聯礦能實業有限公司) and Zhongjin Investment (Group) Ltd. (中金投資(集團)有限公司) are beneficially owned by Mr. Zhou Chuanyou.

The English name is a translation of the Chinese name and provided for reference only.

Save as disclosed above, as at the Latest Practicable Date, there was no other person (other than a Director, supervisor or chief executive of the Company), who had an interest or short position in the Shares or underlying Shares which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO, or who was, directly or indirectly, interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any other member of the Group.

– 40 –

GENERAL INFORMATION

APPENDIX

3. SERVICE AGREEMENTS

As at the Latest Practicable Date, none of the Directors, proposed directors, supervisors or proposed supervisors of the Company had any existing or proposed service contract with any member of the Group (except contracts expiring or determinable by the Group within one year without payment of compensation (other than statutory compensation)).

4. INTEREST IN CONTRACT

As at the Latest Practicable Date, none of the Directors or supervisors of the Company had a material interest, either directly or indirectly, in any contract of significance to the business of the Group to which any member of the Group was a party.

5. NO MATERIAL ADVERSE CHANGES

As at the Latest Practicable Date, the Directors were not aware of any material adverse change in the financial or trading position of the Group since 31 December 2011 the date to which the latest published consolidated audited accounts of the Company were made up.

6. COMPETING INTEREST

As at the Latest Practicable Date, none of the directors of the Company and its subsidiary, or their respective associates (as defined in the Listing Rules) had interests in a business which competes or is likely to compete, either directly or indirectly, with the businesses of the Group.

7. EXPERT AND CONSENT

(a) The following is the qualifications of the expert who has given opinions and advice which are included in this circular:

Name Qualification

Hercules Capital A licensed corporation to carry out type 6 regulated activity (advising on corporate finance) under the SFO

(b) Hercules Capital does not have 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.
(c) Hercules Capital has given and has not withdrawn its written consent to the issue of this circular, with the inclusion of the references to its name and/or its opinion in the form and context in which they are included.
(d) Hercules Capital did not have any direct or indirect interest in any asset which had been acquired, or disposed of by, or leased to any member of the Group, or was proposed to be acquired, or disposed of by, or leased to any member of the Group since 31 December 2011, the date to which the latest published audited financial statements of the Group were made up.

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GENERAL INFORMATION

APPENDIX

8. MISCELLANEOUS

(a) The statutory address and principal place of business of the Company in the PRC is situated at Youse Building, No. 4 You Hao North Road, Urumqi, Xinjiang, the PRC 830000.
(b) The registered office of the Company in Hong Kong is 6/F Nexxus Building, 41 Connaught Road Central, Central, Hong Kong.
(c) The Hong Kong share registrar and transfer office of the Company is Computershare Hong Kong Investor Services Limited at Shops 1712-1716, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Wan Chai, Hong Kong.
(d) The joint company secretaries of the Company are Mr. Zhang Junjie and Mr. Lam Cheuk Fai.

9. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents are available for inspection during normal business hours at the registered office of the Company in Hong Kong at 6/F Nexxus Building, 41 Connaught Road Central, Central, Hong Kong, up to and including the date of the EGM:

(a) the letter of advice from Hercules Capital, the text of which is set out in this circular;
(b) the letter of consent referred to under the paragraph headed “Expert and Consent” in this appendix; and
(c) copies of the Existing Mutual Supply Agreement and Renewed Mutual Supply Agreement.

– 42 –

NOTICE OF EGM

==> picture [133 x 81] intentionally omitted <==

Xinjiang Xinxin Mining Industry Co., Ltd.[] *新疆新鑫礦業股份有限公司**

(a joint stock limited company incorporated in the People’s Republic of China with limited liability)

(Stock code: 3833)

NOTICE OF EXTRAORDINARY GENERAL MEETING

NOTICE IS HEREBY GIVEN that the extraordinary general meeting (“EGM”) of Xinjiang Xinxin Mining Industry Co., Ltd. (the “Company”) will be held at 11:00 a.m. on 14 December 2012 at 19th Level, Conference Room, Youse Building, No. 4 You Hao North Road, Urumqi, Xinjiang, the People’s Republic of China (the “PRC”) for the following purposes:

ORDINARY RESOLUTIONS

To consider and, if thought fit, pass with or without amendments, the following as ordinary resolutions:

the Renewed Mutual Supply Agreement (as defined in the Circular), a copy of which has been produced at the meeting marked “A” and initiated by the chairman of the meeting for identification purpose, as more particularly described in the Circular of which this notice forms part and all the transactions contemplated thereunder, be and hereby approved and confirmed. Any one director of the Company be and are hereby authorised to do all such acts and things and execute such other documents as he in his sole and absolute discretion deems necessary, desirable or expedient in relation to the implementation of the above;
the Renewed Annual Caps (as defined in the Circular) for the provisions of the Construction Services (as defined in the Circular), the Supporting and Ancillary Services (as defined in the Circular) and the Company’s Products (as defined in the Circular) under the Renewed Mutual Supply Agreement (as defined in the Circular) for the three years ending 31 December 2015 be and hereby approved and confirmed. Any one director of the Company be and are hereby authorised to do all such acts and things and execute such other documents as he in his sole and absolute discretion deems necessary, desirable or expedient in relation to the implementation of the above.

* For identification purposes only

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NOTICE OF EGM

the election of Mr. Cao Sanxing as a supervisor representing shareholders of the Company be and is hereby considered and approved, for a term commencing from 14 December 2012 until 13 October 2014.
there shall not be any supervisor remuneration payable by the Company to Mr. Cao Sanxing as a supervisor representing Shareholders of the Company be and is hereby approved.
the authorization of any director of the Company on behalf of the Company to sign the service contract with Mr. Cao Sanxing upon such terms and conditions as the Board thinks fit, and to do all such act and things to effect such matters.

SPECIAL RESOLUTION

To consider and approve the following resolution in relation to the proposed issue of the Medium-Term Notes of the Company:

“ THAT:

(a) subject to the approval by the relevant regulatory authorities and the conditions of the PRC bond market, the Company be authorized to issue the MediumTerm Notes on the following major terms:
(i) Size of the issue:

(ii) Valid term of registration:

(iii) Issue period:

The Medium-Term Notes will be issued in tranches within the valid term of registration after completion of registration with the NAFMII.

– 44 –

NOTICE OF EGM

(iv) Maturity of the notes:

A term of 3 years for each tranche of the Medium-Term Totes to be issued. One-off repayment of the principal at maturity as specified in the prospectus.

(v) Par value:

RMB100 per Medium-Term Note.

(vi) Coupon rate:

(vii) Interest payment:

(viii) Issue method:

Public issue at par value in the nationwide inter-bank bond market on a balance-underwritten basis.

(ix) Target investors:

Institutional investors in the nationwide inter-bank bond market (excluding those investors prohibited by applicable laws and regulations for the purchase).

(x) Trading:

(xi) Use of proceeds:

The proceeds from the issue of the Medium-Term notes will mainly be used in replenishing the Company’s working capital and improving its debt structure.

– 45 –

NOTICE OF EGM

(xii) Term of validity of the resolution:

The resolution relating to the proposed issue of the Medium-Term Notes shall be valid within three years after the date of the passing of the resolution at the general meeting of the Company.

(b) an authorization to be granted to the Board to deal with all matters relating to the proposed issue of Medium-term Notes in his/their sole discretion, including but not limited to, determining the specific time of the issue of each tranche, the size of the issue, the use of the proceeds and other specific terms of the issue; to approve and execute all necessary legal documents, to make relevant information disclosure in accordance with applicable regulatory rules and regulations and to effect specific arrangements in relation to the issue, trading and circulation of the Medium-Term Notes and such authorization shall remain effective within the valid term of the registration of the Medium-Term notes or within the subsistence of the relevant matters.”

By order of the Board Zhang Junjie, Lam Cheuk Fai Joint Company Secretaries

Xinjiang, the PRC 30 October 2012

– 46 –

NOTICE OF EGM

Notes:

1. Closure of register of members and eligibility for attending the EGM

The register of members of the Company will be closed from Wednesday, 14 November 2012 to Friday, 14 December 2012 (both days inclusive), during which time no share transfers will be registered. In order to be eligible to attend the EGM of the Company, instruments of transfer accompanied by share certificates and other appropriate documents must be lodged with the Company’s H share registrar, Computershare Hong Kong Investor Services Limited at Shops 1712-1716, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Wan Chai, Hong Kong, no later than 4:30 p.m. on Tuesday, 13 November 2012. Shareholders of the Company whose names appear on the register of members of the Company at the opening of business on Friday, 14 December 2012 are entitled to attend the EGM.

2. Notice of attendance

Shareholders who intend to attend the EGM should complete and lodge the accompanying reply slip and return it to the Company’s H Share registrar, Computershare Hong Kong Investor Services Limited, on or before Friday, 23 November 2012. The reply slip may be delivered by hand, by post or by fax to the Company’s H Share registrar. Completion and return of the reply slip does not affect the right of a shareholder of the Company to attend the EGM. If the number of shares carrying voting rights at the EGM represented by the shareholders who intend to attend the EGM reaches one half or more of the voting shares at the EGM, the Company may hold the EGM; if not, the Company shall within five days notify the shareholders again by public notice, of the matters to be considered, the date and the place for the EGM. The Company may then hold the EGM after the publication of such notice.

3. Proxy

Every shareholder of the Company who has the right to attend and vote at the EGM is entitled to appoint one or more proxies, whether or not they are members of the Company, to attend and vote on his behalf at the EGM. A proxy must be appointed by an instrument in writing and signed by the appointer or his attorney duly authorised in writing. If the appointer is a legal person, then the instrument shall be signed under a legal person’s seal or signed by its director or an attorney duly authorised in writing. The instrument appointing the proxy shall be deposited at the Company’s H Share registrar, Computershare Hong Kong Investor Services Limited, at 17M Floor, Hopewell Centre, 183 Queen’s Road East, Wan Chai, Hong Kong, not less than 24 hours before the time appointed for the holding of the EGM. If the instrument appointing the proxy is signed by a person authorised by the appointer, the power of attorney or other document of authority under which the instrument is signed shall be notarised. The notarised power of attorney or other document of authority shall be deposited together and at the same time with the instrument appointing the proxy at the Company’s H Share registrar. Return of a form of proxy will not preclude a shareholder of the Company from attending in person and voting at the EGM if he so wishes. If more than one proxy is appointed, such proxies shall only be entitled to vote by poll. Shareholders or their proxies are required to produce their identification documents when attending the EGM.

4. Others

The EGM is expected to last for approximately two hours. Shareholders and their proxies attending the meeting shall be responsible for their own travelling and accommodation expenses.

Terms used herein shall have the same meanings as those defined in the circular to the shareholders of the Company dated 30 October 2012 (the “Circular”) of which this notice forms part.

As at the date of this notice, the executive Directors are Mr. Yuan Ze, Mr. Shi Wenfeng, Mr. Zhang Guohua and Mr. Liu Jun; the non-executive Directors are Mr. Zhou Chuanyou and Mr. Niu Xuetao; and the independent non-executive Directors are Mr. Chen Jianguo, Mr. Wang Lijin and Mr. Li Wing Sum Steven.

– 47 –

AI assistant

Xinjiang Xinxin Mining Industry Co., Ltd. — Proxy Solicitation & Information Statement 2012

50896_rns_2012-10-30_7e594a26-795c-40ee-ae9d-e33a5c461666.pdf

Xinjiang Xinxin Mining Industry Co., Ltd.[] 新疆新鑫礦業股份有限公司*

CONTINUING CONNECTED TRANSACTIONS – RENEWED MUTUAL SUPPLY AGREEMENT AND

PROPOSED ISSUE OF MEDIUM-TERM NOTES AND

ELECTION OF SUPERVISOR AND

NOTICE OF EXTRAORDINARY GENERAL MEETING

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

CONTENTS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

Xinjiang Xinxin Mining Industry Co., Ltd.[] 新疆新鑫礦業股份有限公司*

INTRODUCTION

(A) RENEWED MUTUAL SUPPLY AGREEMENT

Subject Matter

Term

Consideration

LETTER FROM THE BOARD

LETTER FROM THE BOARD

Historical figures

Proposed Annual Caps

Notes:

LETTER FROM THE BOARD

Reasons for and benefits of entering into the Renewed Mutual Supply Agreement

INFORMATION RELATING TO THE COMPANY

INFORMATION RELATING TO XINJIANG NON-FERROUS

LISTING RULES IMPLICATIONS

BOARD’S APPROVAL

(B) PROPOSED ISSUE OF MEDIUM-TERM NOTES

Background

Details of the Proposed Issue of the Medium-Term Notes

10. Trading:

Granting of authorization to deal with matters relating to the proposed issue of Medium-Term Notes

(C) ELECTION OF SUPERVISOR

EGM AND CLOSURE OF REGISTER OF MEMBERS

PROCEDURES FOR VOTING AT THE EGM

RECOMMENDATION

GENERAL

By Order of the Board Zhang Junjie, Lam Cheuk Fai

Xinjiang Xinxin Mining Industry Co., Ltd.[] 新疆新鑫礦業股份有限公司*

CONTINUING CONNECTED TRANSACTIONS – RENEWED MUTUAL SUPPLY AGREEMENT

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

CONTINUING CONNECTED TRANSACTIONS

INTRODUCTION

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

BASIS OF OUR OPINION

PRINCIPAL FACTORS AND REASONS CONSIDERED

1. Background and reasons for the Continuing Connected Transactions

(a) Background

(b) Provision of the Construction Services

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

(c) Provision of the Supporting and Ancillary Services

(d) Provision of the Company’s Products

2. Terms of the Continuing Connected Transactions

(a) Provision of the Construction Services

Products/Services

Pricing Policies

3. Bases of the Renewed Annual Caps

(a) Provision of the Construction Services

LETTER FROM THE INDEPENDENT FINANCIAL ADVISER

(b) Provision of the Supporting and Ancillary Services

(c) Provision of the Company’s Products

4. Annual review of the Continuing Connected Transactions

RECOMMENDATION

Yours faithfully, For and on behalf of

Hercules Capital Limited

1. RESPONSIBILITY STATEMENT

2. DISCLOSURE OF INTERESTS

Directors, supervisors and chief executive of the Company

Substantial shareholders of the Company

3. SERVICE AGREEMENTS

4. INTEREST IN CONTRACT

5. NO MATERIAL ADVERSE CHANGES

6. COMPETING INTEREST

7. EXPERT AND CONSENT

Name Qualification

8. MISCELLANEOUS

Xinjiang Xinxin Mining Industry Co., Ltd. Proxy Solicitation & Information Statement 2012

Xinjiang Xinxin Mining Industry Co., Ltd.[] *新疆新鑫礦業股份有限公司**

Xinjiang Xinxin Mining Industry Co., Ltd.[] *新疆新鑫礦業股份有限公司**

Xinjiang Xinxin Mining Industry Co., Ltd.[] *新疆新鑫礦業股份有限公司**

Xinjiang Xinxin Mining Industry Co., Ltd.[] *新疆新鑫礦業股份有限公司**