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PERSISTENCE RESOURCES GROUP LTD
ʮ̡
PERSISTENCE RESOURCES GROUP LTD
ʮ̡
PERSISTENCE RESOURCES GROUP LTD
ʮ̡
GLOBAL OFFERING
Overall Coordinator, Sole Global Coordinator, Joint Bookrunner and Joint Lead Manager
Sole Sponsor
Stock Code: 2489
(Incorporated in the Cayman Island with limited liability)
Joint Bookrunners and Joint Lead Managers


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If you are in any doubt about any of the contents of this prospectus, you should obtain independent professional advice.
PERSISTENCE RESOURCES GROUP LTD
集 海 資 源 集 團 有 限 公 司
(Incorporated in the Cayman I slands with limited liability)
GLOBAL OFFERING
Total number of Offer Shares under the Global Offering : 500, 000,000 Shares (subject to the Over-allotment Option)
Number of Hong Kong Offer Shares : 50,000,000 Shares (subject to reallocation)
Number of International Offer Shares : 450,000,0 00 Shares (subject to reallocation and the
Over-allotment Option)
Offer Price (subject to a
Downward Offer Price Adjustment)
: Not more than HK$0.75 per Offer Share, and expected to
be not less than HK$0.55 per Offer Share, plus brokerage
of 1.0%, SFC transaction levy of 0.0027%, AFRC
transaction levy of 0.00015% and Stock Exchange trading
fee of 0.00565% (payable in full at the maximum Offer
Price on application in Hong Kong dollars and subject to
refund) (If the Offer Price is set at 10% below the bottom
end of the indicative Offer Price range after making a
Downward Offer Price Adjustment, the Offer Price will be
HK$0.495 per Offer Share)
Nominal value : HK$0.01 per Share
Stock code : 2489
Sole Sponsor
Overall Coordinator, Sole Global Coordinator, Joint Bookrunner and Joint Lead Manager
Joint Bookrunners and Joint Lead Managers
Joint Lead Managers
Hong Kong Exchanges and Clearing Limited, The Stock Exchange of Hong Kong Li mited and Hong Kong Securities Clearing Company Limited take no responsib ility for the contents of this prospectus, 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 prospectus.
A copy of this prospectus, having attached thereto the documents specified in the section headed ‘‘Documents delivered to the Registrar of Companies in Hong Kong and on display — Documents delivered to the Registrar of
Companies in Hong Kong’’ in Appendix VI to this prospectus, has been registered by the Registrar of Companies in Hong Kong as required by section 342C of the Companies (Winding U p and Miscellaneous Provisions) Ordinance
(Chapter 32 of the Laws of Hong Kong). The Securities and Futures Commission of Hong Kong and the Registrar of Companies in Hong Kong take no responsibil ity as to the contents of this prospectus or any other documents
referred to above.
The Offer Price is expected to be determined by agreement between the Overall Coordinator (for itself and on behalf of the Underwriters) and our Compan y on or around 12:00 noon on Wednesday, 20 December 2023 or such later
time as may be agreed between the parties. The Offer Price will be not more than HK$0.75 per Offer Share and is currently expected to be not less than HK$0.55 per Offer Share (subject to a Downward Offer Price Adjustment),
unless otherwise announced. Investors applying for Hong Kong Offer Shares must pay, on application, the maximum indicative Offer Price of HK$0.75 fo r each Hong Kong Offer Share together with brokerage of 1.0%, SFC
transaction levy of 0.0027%, AFRC transaction levy of 0.00015% and Stock Exchange trading fee of 0.00565%, subject to refund if the Offer Price is lowe r than HK$0.75 per Offer Share.
The Overall Coordinator (for itself and on behalf of the Underwriters), may, with the consent of our Company, reduce the indicative Offer Price range a nd/or the number of Offer Shares being offered under the Global Offering below
that stated in this prospectus at any time on or prior to the morning of the last day for lodging applications under the Hong Kong Public Offering. In such a case, an announcement of the reduction in the number of Offer Shares and/
or the indicative Offer Price range will be published on the websites of the Stock Exchange at www.hkexnews.hk and our Company at www.persistenceresource.com as soon as possible but in any event not later than the morning of
the day which is the last day for lodging applications under the Hong Kong Public Offering.
If, for any reason, the final Offer Price is not agreed between our Company and the Overall Coordinator (for itself and on behalf of the Underwriters) on or before 12:00 noon on Wednesday, 20 December 2023, the Global Offering
will not proceed and will lapse immediately.
Prior to making an investment decision, prospective investors should consider carefully all the information set out in this prospectus, including the risk factors set out in the section headed ‘‘Risk factors ’’in this
prospectus.
Prospective investors of the Offer Shares should note that under the Hong Kong Underwriting Agreement in respect of the Hong Kong Public Offering the O verall Coordinator (for itself and on behalf of the
Underwriters) is entitled to terminate the Hong Kong Underwriting Agreement by giving a notice in writing to our Company at any time prior to 8:00 a.m. ( Hong Kong time) on the Listing Date (which is expected to be
on Friday, 22 December 2023) upon the occurrence of the events set out under the section headed ‘‘Underwriting — Underwriting arrangements and expenses — Hong Kong Public Offering — Grounds for termination’’
in this prospectus. Should the Overall Coordinator (for itself and on beha lf of the Underwriters) terminate the Hong Kong Underwriting Agreement, th e Global Offering will not proceed and will lapse.
The Offer Shares have not been and will not be registered under the U.S. Securities Act or any state securities law of the United States and may not be offe red, sold, pledged or transferred within the United States, or to,
or for the account or benefit of U.S. persons, except that the Offer Shares may be offered, sold or delivered in offshore transactions outside the United States in reliance on Regulation S under the U.S. Securities Act.
No information on any website forms part of this prospectus.
ATTENTION
We ha
ve adopted a fully electronic application process for the Hong Kong Public Offering pursuant to Rule 12.11 of the Listing Rules. We will not provide printed copies of this prospectus or printed copies of any
application forms to the public in relation to the Hong Kong Public Offering. This prospectus is available at the website of the Stock Exchange at www.hkexnews.hk and our website at www.persistenceresource.com.
If you require a printed copy of this prospectus, you may download and print from the website addresses above.
IMPORTANT
14 December 2023


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IMPORTANT NOTICE TO INVESTORS:
FULLY ELECTRONIC APPLICATION PROCESS
We have adopted a fully electroni c application process for the Hong Kong Public Offering. We
will not provide printed copies of this prosp ectus to the public in relation to the Hong Kong
Public Offering.
This prospectus is available at the website of the Stock Exchange at www.hkexnews.hk under
the ‘‘HKEXnews > New Listings > N ew Listing Information ’’ section, and our website at
www.persistenceresource.com. If you require a printed copy of this prospectus, you may
download and print from the website addresses above.
To apply for the Hong Kong Offer Shares, you may use one of the following application channels:
Application
channel Platform Target inv estors Application time
HK eIPO White
Form service
www.hkeipo.hk or
the IPO App (which
can be downloaded by
searching ‘‘IPO App ’’
in App Store or Google
Play or downloaded at
www.hkeipo.hk/
IPOApp or
www.tricorglobal.com/
IPOApp).
Enquiries:
+852 3907 7333
Investors who would like to receive a
physical Share certificate. Hong Kong
Offer Shares successfully applied for
will be allotted and issued in your own
name.
From 9:00 a.m. on Thursday, 14
December 2023 to 11:30 a.m.
on Tuesday, 19 December 2023,
Hong Kong time.
The latest time for completing
full payment of application
monies will be 12:00 noon on
Tuesday, 19 December 2023,
Hong Kong time.
HKSCC EIPO
channel
Your broker or
custodian who is a
HKSCC Participant will
submit an EIPO
application on your
behalf through
HKSCC’sF I N Is y s t e m
in accordance with your
instruction.
Investors who would not like to receive
a physical Share certificate. Hong
Kong Offer Shares suc cessfully applied
for will be allotted and issued in the
name of HKSCC Nominees, deposited
directly into CCASS and credited to
your designated HKSCC Participant ’s
stock account.
Contact your broker or custodian
for the earliest and latest time
for giving such instructions, as
t h i sm a yv a r yb yb r o k e ro r
custodian.
We will not provide any physical channels to accept any application for the Hong Kong Offer Shares
by the public. The contents of the electronic version of this prospectus are identical to the printed
document as registered with the Registrar of Companies in Hong Kong pursuant to Section 342C of
the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Chapter 32 of the Laws of
Hong Kong).
If you are an inte rmediar y, br
 oker or agent , please remind your custome rs, clients or principals, as
applicable, that this prospectus is availa ble online at the website addresses above.
Please refer to ‘‘How t o apply for the Hong Kong Offer Shares ’’in this prospectus for further details
on the procedures through which you can apply for the Hong Kong Offer Shares electronically.
IMPORTANT


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Your application through the HK eIPO White Form service or HKSCC EIPO s e r v i c em u s tb ef o r
a minimum of 5,000 Hong Kong Offer Shares and in one of the numbers set out in the table. You are
required to pay the amount next to the number you select. If you are applying through the HK eIPO
White Form service, you may refer to the table below for the amount payable for the number of Hong
Kong Offer Shares you have selected. You must pay the respective maximum amount payable on
application in full upon application for Hong Kong Offer Shares. If you are applying through the
HKSCC EIPO channel, you are required to prefund your application based on the amount specified by
your broker or custodian, as determined based on the applicable laws and regulations in Hong Kong.
No. of
Hong Kong
Offer Shares
applied for
Maximum
amount
payable (2) on
application/
successful
allotment
No. of
Hong Kong
Offer Shares
applied for
Maximum
amount
payable (2) on
application/
successful
allotment
No. of
Hong Kong
Offer Shares
applied for
Maximum
amount
payable (2) on
application/
successful
allotment
No. of
Hong Kong
Offer Shares
applied for
Maximum
amount
payable (2) on
application/
successful
allotment
HK$ HK$ HK$ HK$
5,000 3,787.82
10,000 7,575.63
15,000 11,363.46
20,000 15,151.28
25,000 18,939.10
30,000 22,726.91
35,000 26,514.73
40,000 30,302.56
45,000 34,090.37
50,000 37,878.19
60,000 45,453.83
70,000 53,029.47
80,000 60,605.10
90,000 68,180.73
100,000 75,756.38
150,000 113,634.57
200,000 151,512.76
250,000 189,390.93
300,000 227,269.13
350,000 265,147.31
400,000 303,025.50
450,000 340,903.69
500,000 378,781.88
600,000 454,538.26
700,000 530,294.63
800,000 606,051.00
900,000 681,807.38
1,000,000 757,563.76
1,500,000 1,136,345.63
2,000,000 1,515,127.50
2,500,000 1,893,909.38
3,000,000 2,272,691.26
3,500,000 2,651,473.13
4,000,000 3,030,255.00
4,500,000 3,409,036.88
5,000,000 3,787,818.76
6,000,000 4,545,382.50
7,000,000 5,302,946.26
8,000,000 6,060,510.00
9,000,000 6,818,073.76
10,000,000 7,575,637.50
15,000,000 11,363,456.26
20,000,000 15,151,275.00
25,000,000
(1) 18,939,093.76
(1) Maximum number of Hong Kong Offer Shares you may apply for and this is 50% of the Hong Kong Offer Shares initially
offered.
(2) The amount payable is inclusive of brokerage, the SFC transaction levy, the Stock Exchange trading fee and the AFRC
transaction levy. If your application is successful, brokerage will be paid to the Exchange Par ticipants (as defined in the
L i s t i n gR u l e s )o rt ot h eHK eIPO White Form Service Provider (for applications made through the HK eIPO White Form
service), while the SFC transaction levy, the Stock Exchange trading fee and the AFRC transaction levy will be paid to the
SFC, the Stock Exchange and the AFRC, respectively.
No application for any other number of Hong Kong Offer Shares will be considered and any such
application is liable to be rejected.
IMPORTANT


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If there is any change in the following expected timetable, we will issue an announcement on
the website of the Stock Exchange at www.hkexnews.hk and our Company ’s website at
www.persistenceresource.com .
Date and time (1)
2023
H o n g K o n g P u b l i c O f f e r i n g c o m m e n c e s ....................... 9 : 0 0 a . m . o n T h u r s d a y , 1 4 D e c e m b e r
Latest time to complete electronic applications under
HK eIPO White Form service through one of the below ways (2) :
(1) the designated website www.hkeipo.hk
(2) the IPO App , which can be downloaded by searching ‘‘IPO App ’’
in App Store or Google Play Store or downloaded at
www.hkeipo.hk/IPOApp or www.tricorglobal.com/IPOApp .................... 1 1 : 3 0 a . m .
on Tuesday, 19 December
Application lists open (3) ........................................................... 1 1 : 4 5 a . m .
on Tuesday, 19 December
Latest time to complete payment of HK eIPO White Form
applications by effecting internet banking transfer(s)
or PPS payment transfer(s) and giving
electronic application instructions to HKSCC (4) ........... 1 2 : 0 0 n o o n o n T u e s d a y , 1 9 D e c e m b e r
If you are instructing your broker or custodian who is a HKSCC Participant to give electronic
application instructions via HKSCC’ s FINI system to apply for the Hong Kong Offer Shares on your
behalf, you are advised to contact your broker or custodian for the latest time for giving such
instructions which may be different from the latest time as stated above.
Application lists close (3) ................................... 1 2 : 0 0 n o o n o n T u e s d a y , 1 9 D e c e m b e r
Expected Price Determination Date (5) .......... o n o r b e f o r e 1 2 : 0 0 n o o n o n W e d n e s d a y , 2 0 D e c e m b e r
Where applicable, announcement of the Offer Price being set below
the bottom end of the indicative O ffer Price range after making a
Downward Offer Price Adjustment (see the section headed ‘‘Structure
and conditions of the Global Offering — Pricing and allocation ’’
in this prospectus) on the website of the Stock Exchange at
www.hkexnews.hk and our Company ’s website at
www.persistenceresource.com ................o n o r b e f o r e 1 1 : 0 0 p . m . o n T h u r s d a y , 2 1 D e c e m b e r
EXPECTED TIMETABLE
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Date and time (1)
2023
Announcement of:
the final Offer Price;
the level of indications of intere st in the International Offering;
the level of applications in th e Hong Kong Public Offering; and
the basis of allocation of t he Hong Kong Offer Shares,
to be published on the Stock Exchange ’s website
at www.hkexnews.hk and our Company’ s website
at www.persistenceresource.com
o n o r b e f o r e ............................................ 1 1 : 0 0 p . m . o n T h u r s d a y , 2 1 D e c e m b e r
The results of allocations in the Hong Kong Public Offering
(with successful applicants ’ identification doc ument numbers,
where applicable) to be available through a variety of
channels including:
. in the announcement to be posted on the
websites of the Stock Exchange at
www.hkexnews.hk and our Company at
www.persistenceresource.com , respectively
o n o r b e f o r e ......................................... 1 1 : 0 0 p . m . o n T h u r s d a y , 2 1 D e c e m b e r
. from the ‘‘IPO Results ’’f u n c t i o ni nt h eIPO App
or www.tricor.com.hk/ipo/result
(alternatively: www.hkeipo.hk/IPOResult ) f r o m......... 1 1 : 0 0 p . m . o n T h u r s d a y , 2 1 D e c e m b e r
to 12:00 midnight on Wednesday,
27 December 2023
. from the allocations results telephone enquiry line by
calling +852 3691 8488 between
9 : 0 0 a . m . a n d 6 : 0 0 p . m . f r o m ...................................... F r i d a y , 2 2 D e c e m b e r t o
Friday, 29 December
(excluding Saturday, Sunday and
public holiday in Hong Kong)
For those applying through HKSCC EIPO channel,
y o u m a y a l s o c h e c k w i t h y o u r b r o k e r o r c u s t o d i a n f r o m ..... 6 : 0 0 p . m . o n W e d n e s d a y , 2 0 D e c e m b e r
Despatch/collection of share certificate or
deposit of the share certificates into CCASS in respect of
wholly or partially successful applications pursuant
to the Hong Kong Public Offering on or before
(7) ........................ T h u r s d a y , 2 1 D e c e m b e r
EXPECTED TIMETABLE
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Date and time (1)
2023
Despatch/collection of HK eIPO White Form e-Auto Refund payment
instructions/refund cheques in respect of wholly or partially successful
applications if the Offer Price is less than the
price payable on application (if applicable)
and wholly or partially unsucce ssful applications pursuant
to the Hong Kong Public Offering on or before (6 and 7) .......................F r i d a y , 2 2 D e c e m b e r
Dealings in the Shares on the Stock Exchange
e x p e c t e d t o c o m m e n c e ....................................... 9 : 0 0 a . m . o n F r i d a y , 2 2 D e c e m b e r
Notes:
(1) The above expected timetable is a summary only. You should read carefully the sections headed ‘‘Underwriting ’’, ‘‘Structure
and conditions of the Global Offering’’ and ‘‘How to apply for Hong Kong Offer Shares ’’in this prospectus for details
relating to the structure of the Global Offering, procedures on the applications for Hong Kong Offer Shares and the
expected timetable, including conditions , effect of bad weather and the despatch o f refund cheques and Sh are certificates.
(2) You will not be permitted to submit your application to the HK eIPO White Form Service Provider through the designated
website at www.hkeipo.hk or the IPO App after 11:30 a.m. on the last day for subm itting applications. If you have already
submitted your applicatio n and obtained a payment reference number from the designated website at www.hkeipo.hk or the
IPO App prior to 11:30 a.m., you will be permitted to continue the application process (by completing payment of
application monies) until 12:00 noon on the last day for su bmitting applications, when the application lists close.
(3) If there is a ‘‘black ’’ rainstorm warning or a tropical cyclone warning signal number eight or above and/or Extreme
Conditions in force in Hong Kong at any time between 9:00 a.m. and 12:00 noon on Tuesday, 19 December 2023 the
application lists will not open and close on that day. F urther information is set o u ti nt h es e c t i o nh e a d e d‘‘How to apply for
the Hong Kong Offer Shares — E. Severe weather arrangements ’’in this prospectus.
(4) Applicants who apply for the Hong Kong Offer Shares by giving electronic application instructions to HKSCC via
CCASS or instructing your broker or custodian to apply on your behalf through HKSCC ’s FINI system should refer to the
section headed ‘‘How to apply for the Hong Kong Offer Shares — A. Application for Hong Kong Offer Shares — 2.
Application channels’’ in this prospectus.
(5) Please note that the Price Determination Date, being the date on which the final Offer Price is to be determined, is expected
to be on or around 12:00 noon on Wednesday, 20 December 2023 or such later time as may be agreed by our Company and
the Overall Coordinator (for itself and on behalf of the Underwriters). If, for any reason, the Offer Price is not agreed
between our Company and the Overall Coordinator (for itself and on behalf of the Underwriters) on or before 12:00 noon
on Wednesday, 20 December 2023, the Global Offering will not proceed and will lapse immediately. Notwithstanding that
the Offer Price may be fixed at below the maximum indicative Offer Price of HK$0.75 per Offer Share, applicants who
apply for the Offer Shares must pay on application the maximum indicative Offer Price of HK$0.75 per Offer Share plus
brokerage of 1.0%, SFC transaction levy of 0.0027%, AFRC transaction levy of 0.00015% and Stock Exchange trading fee
of 0.00565% but will be refunded the surplus application monies as provided in the section headed ‘‘How to apply for the
Hong Kong Offer Shares — D. Despatch/collection of share certificates and refund of application monies ’’ in this
prospectus.
(6) HK eIPO White Form e-Auto Refund pay ment instructions/refund cheques will be used in respect of wholly or partially
unsuccessful applications and in respect of wholly or partially successful applications if the Offer Price as finally
determined is less than the price payable on application. Part of the applicant ’s Hong Kong identity card number/passport
number, or, if the application is made by j oint applicants, part of the Hong Kong identity card number/ passport number of
EXPECTED TIMETABLE
– iii –


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the first-named applicant, provided by the applicant(s) may be printed on the refund cheque, if any. Such data may also be
t r a n s f e r r e dt oat h i r dp a r t yf o rr e f u n dp u r p o s e s .B a n k sm a yr e q u i r ev e r i f i c a t i o no fa na p p l i c a n t’s Hong Kong identity card
number/passport number before encashment of the refund cheque. Inaccurate completion of an applicant’ sH o n gK o n g
identity card number/passport number may invalidate or delay encashment of the refund cheque.
(7) Applicants who apply through HK eIPO White Form service for 1,000,000 or more Hong Kong Offer Shares may collect
(i) share certificates in person on Friday, 22 December 2023; and (ii) any refund cheques in person on Friday, 22 December
2023, from the Hong Kong Branch Share Registrar, Tricor Investor Services Limited, at 17 /F, Far East Finance Centre, 16
Harcourt Road, Hong Kong from 9:00 a.m. to 1:00 p.m. or such other date as notified by us as the date of despatch/
collection of share certificates/e-Auto Refund payment instructions/refund cheques. Applicants being individuals who are
eligible for personal collection must not authorise any other person to make collection on their behalf. Applicants being
corporations which are eligible for pers onal collection may attend by sending their authorised representatives each bearing a
letter of authorisation from their cor poration stamped with the corporation ’s chop. Both individuals and authorised
representatives of corporations must pr oduce, at the time of collection, eviden ce of identity acceptable to the Hong Kong
Branch Share Registrar.
Applicants who have applied for the Hong Kong Offer Shares through HKSCC EIPO service should refer to the section
headed ‘‘How to apply for the Hong Kong Offer Shares — D. Despatch/Collection of share certificates and refund of
application monies ’’in this prospectus for details.
Applicants who have applied through the HK eIPO White Form service and paid their application monies through single
bank accounts may have refund monies (if any) despatched to the bank account in the form of e-Auto Refund payment
instructions . Applicants who have applied through the HK eIPO White Form service and paid thei r application monies
through multiple bank accounts may have refund monies (if any) despatched to the address as specified in their application
instructions in the form of refund cheques by ordinary post at their own risk.
Applicants who have applied for less than 1,000,000 Hong Kong Offer Shares and any uncollected share certificates and/or
refund cheques will be despatched by ordinary post, at the applicants ’ risk, to the addresses specified in the relevant
applications. Further information is set out in the section headed ‘‘How to apply for the Ho ng Kong Offer Shares — D.
Despatch/Collection of share certific ates and refund of application monies ’’in this prospectus.
Share certificates for the Offer Shares will only become valid evidence of title to which they
relate at 8:00 a.m. (Hong Kong time) on the Listin g Date provided that (i) the Global Offering has
become unconditional in all respects; and (ii) the right of termination as described in the section
headed ‘‘Underwriting — Underwriting arrangements and expenses — Hong Kong Public Offering
— Grounds for termination ’’in this prospectus has not been exercised and has lapsed. Investors
who trade our Shares on the basis of publicly ava ilable allocation details prior to the receipt of
share certificates or prior to the share certificates becoming valid evidence of title do so entirely at
their own risk.
The above expected timetable is a summary on ly. You should read carefully the sections
headed ‘‘Underwriting ’’, ‘‘Structure and conditions of the Global Offering ’’and ‘‘How to apply for
the Hong Kong Offer Shares ’’in this prospectus for details relating to the structure of the Global
Offering, procedures on the applications for Hong Kong Offer Shares and the expected timetable,
including conditions, effect of bad weather and the despatch of refund cheques and share
certificates.
If the Global Offering does not become unconditional or is terminated in accordance with its
terms, the Global Offering will not proceed. In such case, our Company will make an announcement as
soon as practicable thereafter.
EXPECTED TIMETABLE
– iv –


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IMPORTANT NOTICE TO INVESTORS
This prospectus is issued by our Company so lely in connection with the Global Offering and
does not constitute an offer to sell or a solicitatio n of an offer to buy any security other than the
Offer Shares offered by this prospectus pursuant to the Global Offering. This prospectus may not be
used for the purpose of, and does not constitute, an offer to sell or a solicitation of an offer to buy
any security in any other jurisdiction or in any ot her circumstances. No action has been taken to
permit a public offering of the Offer Shares or the distribution of this prospectus in any jurisdiction
other than in Hong Kong. The distribution of this prospectus and the offering and sale of the Offer
Shares in other jurisdictions are subject to restr ictions, and may not be made except as permitted
under the applicable securitie s laws of such jurisdictions pursuant to registration with or
authorisation by the relevant securities regulatory authorities or an exemption therefrom.
Prospective investors should rely only on the in formation contained in this prospectus to make
the investment decision. Our Company, the Sole Sponsor, the Overall Coordinator, the Sole Global
Coordinator, the Joint Bookrunners, the Joint Lead Managers, the CMIs and the Underwriters have
not authorised anyone to provide prospective investors with information that is different from what is
contained in this prospectus. Any information or representation not made in this prospectus must not
be relied on by prospective investors as having been authorised by our Company, the Sole Sponsor,
the Overall Coordinator, the Sole Global Coordinator, the Joint Bookrunners, the Joint Lead
Managers, the CMIs, the Underwriters, any of t heir respective directors, advisers, officers,
employees, agents, affiliates or rep resentatives, or any other perso n or party involved in the Global
Offering.
Page
EXPECTED TIMETABLE ........................................................... i
CONTENTS ........................................................................ v
SUMMARY ........................................................................ 1
DEFINITIONS ...................................................................... 2 2
GLOSSARY OF TECHNICAL TERMS ............................................... 4 2
SUMMARY OF NI 43-101 ........................................................... 4 9
FORWARD-LOOKING STATEMENTS ............................................... 5 1
RISK FACTORS .................................................................... 5 4
WAIVER FROM STRICT COMPLIANCE WITH THE LISTING RULES ............... 8 9
INFORMATION ABOUT THIS PROSPECTUS AND THE GLOBAL OFFERING ........ 9 1
DIRECTORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING ............... 9 7
CORPORATE INFORMATION ...................................................... 1 0 7
INDUSTRY OVERVIEW ............................................................ 1 1 0
REGULATORY OVERVIEW ........................................................ 1 2 7
CONTENTS
– v –


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Page
HISTORY, REORGANISATION AND CORPORATE STRUCTURE .................... 1 4 2
BUSINESS ......................................................................... 1 5 4
DIRECTORS AND SENIOR MANAGEMENT ......................................... 3 0 5
CONNECTED TRANSACTIONS ..................................................... 3 3 2
RELATIONSHIP WITH OUR C ONTROLLING SHAREHOLDER ...................... 3 3 5
SUBSTANTIAL SHAREHOLDERS ................................................... 3 4 2
FINANCIAL INFORMATION ....................................................... 3 4 4
FUTURE PLANS AND USE OF PROCEEDS .......................................... 4 1 2
SHARE CAPITAL .................................................................. 4 2 0
CORNERSTONE INVESTOR ........................................................ 4 2 3
UNDERWRITING .................................................................. 4 2 8
STRUCTURE AND CONDITIONS OF THE GLOBAL OFFERING ..................... 4 4 0
HOW TO APPLY FOR THE HONG KONG OFFER SHARES .......................... 4 5 2
APPENDIX I — ACCOUNTANTS’ REPORT ..................................... I - 1
APPENDIX II — UNAUDITED PRO FORMA FINANCIAL INFORMATION ........ II-1
APPENDIX III — SRK REPORT ................................................. I II-1
APPENDIX IV — SUMMARY OF THE CONSTITUTION OF OUR COMPANY AND
CAYMAN ISLANDS COMPANY LAW .......................... I V - 1
APPENDIX V — STATUTORY AND GENERAL INFORMATION .................. V - 1
APPENDIX VI — DOCUMENTS DELIVERED TO THE REGISTRAR OF
COMPANIES IN HONG KONG AND ON DISPLAY .............. V I - 1
CONTENTS
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This summary aims at giving you an overview of the information contained in this prospectus
and should be read in conjunction with the full text of this prospectus. As the following is only a
summary, it does not contain all the information that may be important to you. You should read this
prospectus in its entirety before you decide to invest in the Offer Shares.
There are risks associated with any investment. Some of the particular risks in investing in the
Offer Shares are set out in the section headed ‘‘Risk factors’’ in this prospectus. You should read that
section carefully before you dec ide to invest in the Offer Shares. Various expressions used in this
summary are defined in the sections headed ‘‘Definitions ’’and ‘‘Glossary of technical terms ’’in this
prospectus.
OVERVIEW
We are a gold exploration, mining and processing company established in 2005 and located in
Yantai city of the Shandong Province in China. We sell gold bullion derived from gold concentrate
processed by us. According to the F&S Report, we we re the third largest gold mining company in the
Shandong Province in 2022 with a market share of 2.6% in terms of mine production volume but the top
two players have an aggregated market share of approximately 78.3% in terms of gold mine production
volume. Further, Shandong Province is the largest gold producing province in the PRC with gold mine
production volume of approximately 41.4 t, which accounted for approximately 14.0% of the total gold
mine production volume in China in 2022, while Yantai city accounted for more than 90% of the gold
mine production of the Shandong Province in 202 2. We believe we enjoy growth opportunities
attributable to our location in Yantai city. The List ing of our Company will constitute a spin-off of our
Company from Majestic Gold, which is listed on the TSX Venture Exchange, by way of a separate
listing of our Shares on the Main Board of the Stock Exchange.
According to the SRK Report, we had total Probable Mineral Reserves, Indicated Mineral
Resources and Inferred Mineral Resources amounted to approximately 23,130 kt, 35,840 kt and 39,710
kt, respectively, as at 30 June 2023. We operate two operating gold mines, namely, the Songjiagou
Open-Pit Mine and the Songjiagou Underground Mine, both are located at Songjiagou, the Muping-
Rushan gold metallogenic belt, wh ich is one of the three major gold metallogenic belts in Yantai, and
are in close proximity of around 400 metres from each other. We operate an ore processing plant within
4 km from our mines with an annual ore processing capacity of approximately 2,000 kt. Our mining
assets and ore processing plant are well supported by upstream and downstream gold supply chain
industries in the Yantai city, and are easily accessible by highway.
We have the track records to develop greenfie ld mining assets and related facilities and have
successfully turned them into actual mining and gold producing assets as both of our mining assets, ore
processing plant and related facilities such as tailings dam were developed by us. Both our management
and operations teams are led by professionals who have extensive industry experience. Our management
team is led by our Chairman, executive Director and chief execu tive officer, Dr. Shao, who held a
doctor of philosophy degree in mineral processing and has extensive experience in ore processing,
mining-related finance and investment management. Based on the fact that our gold production is mostly
SUMMARY
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attributable to our Songjiagou Open-Pit Mine, we have recorded an average production cost of
approximately RMB186.3 per gram in FY2022, which is below the industry average of RMB298.0 per
gram in 2022 as stated in the F&S Report.
We accredited this achievement to our effective gold grade control and production management
implemented by our technical team as part of our mining methodology which, before drilling and
blasting activities to be carried out with respect of our mining works, incorporates geostatistics into a
mix of mining methods (such as drilling, blasting, lo ading and transportation method for Songjiagou
Open-Pit Mine and shrinkage stope and cut-and-fill mining method for Songjiagou Underground Mine)
to help select and identify higher gold content orebody (i.e. ore with higher gold grade) to be extracted
based on ground and mining site conditions to improve our resource qua lity while controlling the
stripping volume so that we can ensure a stable grade of ore is being fed into our ore processing plant
for our ore processing operations. Our Directors believe that our streamlined business model enables us
to focus on our core mining and ore processing operations while keeping our operation costs low,
thereby enhancing Shareholders ’ value in the long run.
Prior to February 2021, we outsourced a substantial portion of our mining works comprising
demolition, blasting, drilling and excavation works, refining and logistics works to qualified third-party
subcontractors. Since February 2021 and up to the Late st Practicable Date, we carry out substantially all
of our mining works comprising demolition, drilling, bl asting and excavation works ourselves seeking to
reduce the costs of mining but outsource all the refining and logistics works to qualified third-party
subcontractors. We take safety seriously and have t raining programmes in place for our third-party
subcontractors. All third-party subcontractors are required to possess the requisite qualifications to
undertake the commissioned works and carry out their works according to our mine plannings and under
our supervisions and inspections. We were awarded the Advanced Unit in Production Safety at the
District Level from the government authority of Muping District in Yantai city.
As at the Latest Practicable Date, our staff force reached 452. During the Track Record Period, our
revenue amounted to approxim ately RMB361.0 million, RMB247 .9 million, RMB418.4 million and
RMB196.7 million, respectively, while our net prof it amounted to approximately RMB114.4 million,
RMB58.7 million, RMB121.0 million a nd RMB52.8 million, respectively.
COMPETITIVE STRENGTHS
We believe that our success is attributed to, a mong other things, the following competitive
strengths which distinguish us from our competitors : (i) our open-pit mine is instrumental to our low
production costs which is below th e industry average; (ii) our ability to develop greenfield mining assets
and our existing operating mining a ssets can support our next phase of growth strategies; (iii) our
commitment to safety and environmental management; (iv) we have a strong technical team for our
mining operation; and (v) our distinguished integrated management team. Please refer to the section
headed ‘‘Business — Competitive strengths ’’in this prospectus for further details.
SUMMARY
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BUSINESS STRATEGIES
We intend to implement the following business strategies to achieve sustainable growth to
strengthen our position in the Sh andong Province in the PRC: (i) f urther construction of mining
infrastructure in accordance with our mine optimisa tion plan; (ii) upgrade our gold reserves to increase
LoM through additional exploration activities at our existing mine area; and (iii) expand our business
and grow our market share through selective acquisitions of gold mining assets. For further details,
please refer to the section headed ‘‘Business — Business strategies ’’in this prospectus.
OUR MINERAL ASSETS AND RESERVES
As at the Latest Practicable Date, we had a complete set of portfolio of mining assets and related
infrastructure within cl ose proximity with each oth er, which include (i) one open-pit gold mine, namely
our Songjiagou Open-Pit Mine, with a permitted annual mine production volume of 900.0 kt and LoM
of approximately 8.5 years; (ii) one underground gold mine, namely our Songjiagou Underground Mine,
with a permitted annual mine production volume of 90.0 kt and LoM of approximately 6.0 years; (iii) an
ore processing plant with an annual ore processing capacity of approximately 2,000 kt; and (iv) a
tailings dam with a total storage capacity of approximately 42.2 million m
3.
LoM is the shortest timeframe that the Mineral Reserves of a mine are estimated to be fully
utilised. Such calculated LoM is subject to change u nder certain circumstances. For instance, if the
annual mining volume is reduced, ind icating a decrease in the utilisation rate of the Mineral Reserves or
if Mineral Reserves are increased by upgrading our Mineral Resources via additional exploration
activities, it would take a longer time to deplete th e Mineral Reserves of the mine. Pursuant to a
preliminary study conducted by SRK, by modifying the final pit structure of our Songjiagou Open-Pit
Mine in the future, it is viable for our Group to eco nomically capture additional Indicated Mineral
Resources and Inferred Mineral Resources. As advised by SRK, it is common in the gold mining
industry and commercially sensible for gold mines to perform exploratory activities to ascertain the
existence of economically mineab le Mineral Reserves only when the mining and exploratory activities
proceeded to a deeper level. Based on the Mineral Resources available at the Songjiagou Open-Pit Mine
a n dt h ei n d u s t r i a la n dt e c h n i c a le x p e r t i s er e l a t i n gt oe x p l o r a t i o np o s s e s s e db yt h eG r o u p ,S R Ki so ft h e
view that there is substantial potential for the Group ’s Songjiagou Open-Pit Mine to increase its LoM
along with the exploratory activities and further s tudies to be conducted in the future. Please see
paragraphs headed ‘‘Business — Our mineral assets and reserves — Our two gold mines ’’, ‘‘Business —
Our operations — Our ore processing facility’’ and ‘‘Business — Our operations — Tailings ’’for further
details.
Apart from the amount of Mineral Reserves, the LoM of our Songjiagou Open-Pit Mine of 8.5 year
is calculated based on the assumption that the prod uction capacity of the mine would reach a target of
3,300 ktpa annum as from 2026. As concurred by SRK, such production capacity is considered to be the
optimal production capacity that would be achievable by our Group based on our Group ’s mining plan.
In particular, our Group had already possessed the necessary machines and equipment, for example,
excavators and drill rigs to achieve such production c apacity. At the material time, the expanded mining
area of our Songjiagou Open-Pit Mine is expected to reach +33 metres ASL, which would provide
sufficient working benches and spaces for our Group ’s excavators and drill rigs to operate.
SUMMARY
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The following table sets forth the information on our Mineral Resources and Mineral Reserves as
at 30 June 2023 under NI 43-101, based on the SRK Report.
Mineral Resources Mineral Reserves
Asset
Resource
category
Ore
Tonnes
Gold
grade Gold content
Reserve
category
Ore
Tonnes
Gold
grade Gold content
(kt) (g/t) (kg) (koz) (kt) (g/t) (kg) (koz)
Songjiagou Indicated 34,200 1.10 37,600 1,210.0 Proven ————
Open-Pit Mine Inferred 36,700 0.95 34,800 1,120.0 Probable 22,600 1.17 26,400 849
Total 70,900 — 72,400 2,330.0 Total 22,600 — 26,400 849
Songjiagou Indicated 1,640 1.38 2,270 73.0 Proven ————
Underground Mine Inferred 3,010 1.24 3,730 120.0 Probable 530 1.39 737 23.7
Total 4,650 — 6,000 193.0 Total 530 — 737 23.7
CASH OPERATING COSTS
Cash operating costs for our mines primarily consist of workforce employment costs, consumable
costs and fuel, electricity, water and other services. The table below is based on the SRK Report and
sets forth a summary of historical and forecast of the cash operating costs per gram of gold produced of
our mines for the years indicated.
Historical Forecasts
Cost item Unit 2020 2021 2022 1H2023 2H2023 2024 2025 2026 2027
Workforce employment RMB/gram 20.26 26.28 32.05 40.76 36.61 39.72 21.34 10.41 10.18
Consumables RMB/gram 49.30 40.44 40.25 38.70 54.48 58.41 36.65 38.04 37.21
Fuel, electricity, water and other
services (Note) RMB/gram 44.74 74.60 59.02 77.85 45.55 48.69 31.32 15.16 14.88
On and off-site administration RMB/gram 6. 28 11.05 9.76 8.43 1.4 9 1.62 0.87 0.42 0.41
Environmental protection and
monitoring RMB/gram 0.04 0.00 0.00 0.00 0.01 0.01 0.01 0.00 0.00
Transportation of workforce RMB/gram 0.66 0.80 0.28 0.5 4 0.70 0.75 0.41 0.20 0.19
Product marketing and support RMB/gram ———— —————
Non-income taxes, royalties and
other government charges RMB/gram 15.53 19.68 17.45 18.81 19.99 20.03 17.25 15.42 15.04
Contingency allowances RMB/gram 7.83 10.46 6.20 9.46 5.48 5.94 3.19 1.56 1.52
Total RMB/gram 144.64 183.31 165.00 194.55 164.30 175.17 111.04 81.21 79.45
Note: Include smelting and refining costs.
The expected decrease in cash operating costs going f orward is mainly attributable to the expected
increase in (i) gold production volume; and (ii) gold grade of our Songjiagou Open-Pit Mine. Please
refer to the section headed ‘‘SRK Report — 19. Capital investment and operating costs ’’in Appendix III
to this prospectus for details of the cash ope rating costs and the relevant assumptions.
SUMMARY
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MINING LICENCES
As at the Latest Practicable Date, we held two mining licences in respect of our mines as follows:
Validity period of licence
Gold mine Licence name Licence holder Area
Type of
natural
resources
Permitted
annual
mine
production
volume
Licence
number From To Status
(sq.km.) (kt)
Songjiagou Open-Pit
Mine
Mining licence Yantai Zhongjia 0.5937 Gold 900 C37000020090
44110010983
17 May 2020 17 May 2031 Valid
Songjiagou Underground
Mine
Mining licence Yantai Zhongjia 0.4140 Gold 90 C37000020160
24210141314
18 February
2021
18 February
2031
Valid
We did not pledge any mining rights to secure any of our bank facilities during the Track Record
Period and up to the Latest Practicable Date.
OUR PRODUCTION PROCESS AND PROCESSING FACILITY
Our production process involves three major steps: (i) mining (both open-pit and underground
mining); (ii) ore processing, which in turn includes crushing, grinding and flotation; and (iii) gold
refining, which we outsource the refining of gold concentrate into gold bullion of Au99.95 to
Independent Third Party smelters. Our production activities at our Songjiagou Open-Pit Mine had not
exceeded any of the permitted annual volume that would lead to over-production as prohibited under the
relevant PRC laws and regulations during the Track Record Period and up to the Latest Practicable Date.
Our integrated ore processing facility comprises one mill to process the ores mined from our
Songjiagou Open-Pit Mine and Songjiagou Underground Mine. Our ore processing plant has a total
surface area of approximately 0.9 ha. The total designed ore processing capacity of our ore processing
facility amounted to approximately 2,000 ktpa (or 6.0 ktpd) as at 30 June 2023.
The table below sets forth the utilisation rate a nd volume of ore processed at our ore processing
plant with a capacity of 6.0 ktpd:
FY2020 FY2021 FY2022 6M2022 6M2023
Ore
processed
Utilisation
rate (Note)
Ore
processed
Utilisation
rate (Note)
Ore
processed
Utilisation
rate (Note)
Ore
processed
Utilisation
rate (Note)
Ore
processed
Utilisation
rate (Note)
(kt) (%) (kt) (%) (kt) (%) (kt) (%) (kt) (%)
Mill with a capacity of 6.0 ktpd 1,590 80.3 1,024 51.7 1,991 100.6 1,001 50.6 997 50.3
Note: Utilisation rate is calculated by dividing volume of ore processed for each period by the designed annual processing
capacity of the same period, which is calculated based on our designed ore processing capacity per day assuming we
operate 330 days per year. Our utilisat ion rate in FY2022 exceed ed 100% because the actu al working days of our
processing plant in that year surpassed the theoretical designed 330 working days per annum or equivalent to a
processing capacity of 1,980 ktpa.
SUMMARY
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OUR CUSTOMERS
Our principal product is gold bullion of Au99.95. As we are not a member of the Shanghai Gold
Exchange, we engage two Independent Third Party gold smelters, namely Shandong Guoda and
Shandong Humon, to refine our gol d concentrate into gold bullion of Au99.95 and sell to them (or their
subsidiaries) such gold bullion at the fixed price determined by us with reference to prevailing Au (T
+D) spot price as quoted on the Shanghai Gold Exchange for their subsequent sales on the Shanghai
Gold Exchange during the Track Record Period, which is in line with industry practice according to the
F&S Report. Since 2021, we only have one customer, namely, Shandong Guoda. As at the Latest
Practicable Date, (i) Shandong Guoda is indirectly owned as to approximately 66.2% by 山東招金集團
招遠黃金冶煉有限公司 (Shandong Zhaojin Group Zhao yuan Gold Smelting Co., Ltd.*) (‘‘ Shandong
Zhaojin Gold Smelting ’’); and (ii) Shandong Zhaojin Gold Smelting wholly-owned our cornerstone
investor, namely, Dongfang Gold Industry (Hong Kong) Limited, which will hold approximately 9.9%
of the total issued share capital of our Company immediately following the completion of the Global
Offering (without taking into account any Shares which may be issued upon the exercise of the Over-
allotment Option and any options which may be gr anted under the Share Option Scheme). For each of
FY2020, FY2021, FY2022 and 6M2023, our sales to Shandong Guoda amounted to approximately
RMB335.8 million, RMB247.9 million, RMB418.4 million and RMB196.7 million (accounted for
approximately 93.0%, 100.0%, 100% and 100% of our total revenue) respectively, and our sales to
Shandong Humon amounted to approximately R MB25.2 million, nil, nil and nil (accounted for
approximately 7.0%, nil, nil and nil of our total revenue) respectively.
Our Directors noted from Shandong Guoda that Shandong Guoda has been in the process of
changing its principal business from gold smelting t o copper smelting. However, it would be challenging
for Shandong Guoda to change its principal business from gold smelting to copper smelting with
immediate effect. Also, there are ample choices of a lternatives and there is no material difficulty for our
Group to engage and sell to other Independent Third Party smelters in the Shandong Province who
provide similar quality of services at similar pricing. Having considered the above, our Directors are of
the view that, the change of Shandong Guoda’ s principal business from gold smelting to copper smelting
would not have a material impact on our Group ’s operation and financial performance. For further
details, please refer to the sections headed ‘‘Risk factors — Risks relating to the business operations of
our Group — We rely significantly on Shandong Guoda to refine our gold concentrate into gold bullion
of Au99.95 and its subsequent purchase thereof ’’ and ‘‘Business — Sales and customers — Our
relationships with Shandong Guoda and Shandong Humon ’’in this prospectus. Further, both of these
customers are also our subcontractors during the Track Record Period. For further details, please refer to
the section headed ‘‘Business — Sales and customers — Major customers who are also our
subcontractors ’’in this prospectus.
Framework sales contracts with customers
We signed framework sales contracts with our customers primarily to establish the business
relationship and the principal frame work for the transactions between the parties. Despite such, both of
us and our customers acknowledged and accepted that there are contract terms in the framework sales
contracts namely product, weighing, transportati on, testing, sampling and arbitration and pricing and
settlement are not applicable and h ence would not be adopt ed and the actual transaction practice would
be modified based on actual commercial needs of the parties.
SUMMARY
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There were discrepancies between our framework sales contracts with customers and actual
transaction practices. Terms in actual transactio n practices such as minimum quantity requirement,
transportation and testing proce dures after smelting, timing of prici ng of gold bullion, requirement to
pay a security deposit and interest expenses for pricing before delivery of gold bullion and timing in
settlement of sales consideration of gold bullion by o ur customers differed from those stated in the
framework sales contracts. As advised by the PRC Legal Advisers, it is not uncommon for the actual
transaction procedures between two enterprises to differ from the terms and conditions as set out in the
relevant framework agreements signed between them in the PRC.
On 17 May 2023, we signed memoranda with our customers (the ‘‘Subsequent Memoranda ’’)t o
record in writing the modified practice adopted in actual transaction between us and our customer for
ease of reference. The PRC Legal Advisers are of the view, and the Sole Sponsor concurs that our
Group ’s framework sales contracts and the Subsequent Memoranda with Shandong Humon and
Shandong Guoda are valid and legally enforceable. Despite our Group ’s long-standing business practice
of using its customer ’s standardised template for framework sales contracts, to further enhance the
corporate governance of our Group, our Group has negotiated with Shandong Guoda and on 24
November 2023, our Group and Shandong Guoda entered into a new framework sales contract which
incorporates actual transaction practices and eliminate any non-adopted terms, as well as the addition of
customary contract terms such as re presentations and warranties, conf identiality, force majeure clauses,
etc. Further, our Company has the following safeguards to prevent the re-occurrence of abovementioned
discrepancies:
(a) the Board has formed a review committee headed by Mr. Raymond Lo, an Executive Director
of the Company and the chief financial officer who leads two members of the accounting
department to monitor every sales, smelting a nd sulfuric acid compensation transaction to
ensure that they are executed in accordanc e with the terms of the new framework sales
contract and the smelting contract. Any potential discrepancies are required to be reported to
the board of Directors of the Company before continuing the transaction. The board of
Directors of the Company would decide whether to cease the relevant transactions and revise
the relevant transaction terms in the new frame work sales contract or the smelting contract,
as the case maybe by negotiating with the Group’ s customer. In addition, the review
committee will submit a quarterly report to the Board every quarter to list out whether there
are trades that deviate from the new framework sales contract or the smelting contract, as the
case maybe;
(b) after Listing, the Company ’s compliance adviser will perform review on every sales, smelting
and sulfuric acid compensation transaction to ensure that they are executed in accordance
with the terms of the new framework sales contract and the smelting contract throughout the
effective period acting as the Company ’s compliance adviser; and
(c) the Group has engaged an external independent professional party to review every sales,
smelting and sulfuric acid compensation transaction of the Group with Shandong Guoda to
ensure that they are executed in accordanc e with the terms of the new framework sales
contract and the smelting con tract for a period from the Listing Date until 31 December
2024. Disclosures will be made in the annual report of the Company in respect of the review
result of independent professional party in due course.
SUMMARY
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Please refer to the section headed ‘‘Business — Sales and customers — Salient terms of the
framework sales contracts with customers ’’for further details including c ircumstances leading to such
discrepancies, and the views of our PRC Legal Advisers, the Sole Sponsor and Frost & Sullivan.
OUR SUPPLIERS AND SUBCONTRACTORS
During the Track Record Period, our suppliers and subcontractors of goods and services in the
PRC principally included: (i) suppliers of raw materials and consumables such as explosives, steel
grinding balls and chemical reagents used during our ore processing operation; (ii) suppliers of utilities
such as electricity; (iii) suppliers of parts and repl acements of machinery; (iv) our subcontractors for
carrying out mining works comprising demolition, drilling, blasting and excavation works, for our
Songjiagou Open-Pit Mine and Songjiagou Underground Mine prior to February 2021; (v) our
subcontractors for carrying out smelting work to refine our gold concentrate into gold bullion of
Au99.95; and (vi) subcontractors of logistic services for transportation of ore. A number of our suppliers
and subcontractors during the Track Record Period were individuals, which is common in the industry
according to the F&S Report.
For each of FY2020, FY2021, FY2022 and 6M2023, purchases from our five largest suppliers
amounted to approximately RMB45.5 million, RM B29.7 million, RMB57.5 million and RMB31.0
million, respectively, accounted for approximat ely 51.8%, 53.1%, 51.4% and 61.1% of our total
purchases. Purchases from our la rgest supplier amounted to approx imately RMB29.6 million, RMB19.2
million, RMB33.5 million and RMB16.9 million. respectively, for the same periods, accounted for
approximately 33.7%, 34.3%, 30.0% and 33.4% of our total purchases. For each of FY2020, FY2021,
FY2022 and 6M2023, purchases from our five largest subcontractors amounted to approximately
RMB19.7 million, RMB8.0 million, RMB17.2 million and RMB6.2 million, respectively, accounted for
approximately 22.4%, 14.4%, 15.4% and 12.2% of our total purchases. Purchases from our largest
subcontractor amounted to approximately RMB9.0 million, RMB4.1 million, RMB13.7 million and
RMB5.4 million, respectively, for the same periods , accounted for approximately 10.2%, 7.3%, 12.2%
and 10.6% of our total purchases. For further details, please refer to the section headed ‘‘Business —
Suppliers and subcontractors ’’in this prospectus.
COMPETITIVE LANDSCAPE
According to the F&S Report, the gold mining industry in the PRC is relatively fragmented as it is
dominated by small and medium-sized gold mines. However, the gold mining industry in the Shandong
Province is concentrated to five largest gold mining companies. Shandong Province is the largest gold
producing province in the PRC with gold mine production volume of approximately 41.4 t, which
accounted for approximately 14.0% of the total gold mine production volume in China in 2022, while
Yantai city accounted for more than 90% of the gol d mine production of the Shandong Province in
2022. The top ten PRC gold companies by domestic gold mine production volume collectively
accounted for approximately 48.5% of the total gold mine production volume in the PRC in 2022 while
the top five gold producers in Shandong Province by gold mine production volume accounted for
approximately 84.7% of the total gold mine production in Shandong Province in 2022. According to the
F&S Report, our annual gold mine production volume was approximately 1.1 t in 2022, making us the
third largest gold mining company in the Shandong Province with a market share of 2.6% in terms of
mine production volume. As we do not face competiti on in terms of price differentiation, we primarily
compete with nationwide leading gold producers and regional large and medium-sized gold producers in
SUMMARY
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the PRC in terms of our ability to obtain more gold re sources and reserves, which is dependent on our
financial conditions, technical ab ility, equipment and machinery and ma nagement experience. Please
r e f e rt ot h es e c t i o nh e a d e d‘‘Industry overview ’’in this prospectus for further details.
SUMMARY FINANCIAL INFORMATION
The following tables summarise our consolidated financial information for FY2020, FY2021,
FY2022, 6M2022 and 6M2023, which should be read i n conjunction with our fin ancial information
included in the Accountants ’ Report set forth in Appendix I to this prospectus, including the notes
thereto.
FY2020 FY2021 FY2022 6M2022 6M2023
(unaudited)
(RMB in thousand)
Revenue 360,999 247,872 418,413 217,331 196,659
Cost of sales 166,013 107,767 199,823 99,981 104,277
Gross profit 194,986 140,105 218,590 117,350 92,382
Administrative expenses (21,480) (22,490) (33,711) (14,569) (16,655)
Profit before tax 169,313 87,210 184,908 108,709 79,498
Income tax expenses (54,890) (28,494) (63,918) (36,237) (26,729)
Profit for the year/period 114,423 58,716 120,990 72,472 52,769
Profit attributable to:
Owners of the parent 82,403 41,624 83,214 51,438 37,261
Non-controlling interests 32,0 20 17,092 37,776 21,034 15,508
114,423 58,716 120,990 72,472 52,769
Breakdown of sales volume and average selling price:
FY2020 FY2021 FY2022 6M2022 6M2023
— Sales volume (kg) 987.4 645.5 1,084.9 568.2 468.1
— Average selling price
(RMB/gram) 365.6 384.0 385.7 382.5 420.1
Major components of cost of sales:
FY2020 FY2021 FY2022 6M2022 6M2023
(unaudited)
(RMB in thousand)
— Depreciation and
amortisation 37,556 17,350 45,130 22,383 23,231
— Subcontracting costs 26,660 12,589 25,608 13,876 9,535
— Utilities expenses 30,042 16, 400 33,831 17,424 17,149
— Raw materials costs 30,649 19,048 39,628 19,480 17,979
— Direct labour costs 14,978 11,062 29,119 15,213 16,157
SUMMARY
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--- page 20 ---
Revenue
During the Track Record Period, we recorded revenue of approximately RMB361.0 million,
RMB247.9 million, RMB418.4 million and RMB196. 7 million, respectively. The decrease in our
revenue in FY2021 was primarily due to the decrease in our gold sales volume by approximately 34.6%
from approximately 987.4 kg (or 31,745.6 ounces) in FY2020 to approximately 645.5 kg (or 20,753.3
ounces) in FY2021 mainly as a result of the temporary suspension of our mining operation from
February 2021 to August 2021 (for our Songjiagou Open-Pit Mine) and February 2021 to November
2021 (for our Songjiagou Underground Mine) after the occurrence of two safety incidents in two gold
mines in the Shandong Province (which are Independent Third Party) in January and February 2021,
which was partially offset by the increase in the a verage selling price of our gold from approximately
RMB365.6 per gram in FY2020 to approximately RMB384.0 per gram in FY2021. As we operated in
the ordinary and usual circumstances in absence of the temporary suspension of operations that affected
our operations in FY2021, our re venue in FY2022 was approxim ately RMB418.4 million, which
represented an increase of approximately RMB1 70.5 million or 68.8% compared to that of FY2021. In
particular, there was an increase in the average se lling price of gold from approximately RMB384.0 per
gram in FY2021 to approximately RMB385.7 per gram in FY2022.
Our revenue in 6M2023 was approximately RMB1 96.7 million, which represented a decrease of
approximately RMB20.6 million or 9.5% compared to that of 6M2022. In particular, our gold sales
volume decreased by approximately 17.6% from approximately 568.2 kg (or 18,268.1 ounces) in
6M2022 to approximately 468.1 kg (or 15,049.8 ounces) in 6M2023, mainly attributable to the fact that
our mining activities were paused during May to mid- July 2023 to facilitate the safety inspection on our
newly constructed benches solely due to scheduling conflicts between our Group and the designated
specialists of the government department for safety inspection as well as repair of the road connecting
our Songjiagou Open-Pit Mine and our processing plant ( ‘‘FY2023 Temporary Pause of Mining
Activities ’’), while there was an increase in the avera ge selling price of gold from approximately
RMB382.5 per gram in 6M2022 to approximately RMB420.1 per gram in 6M2023.
The gold bullion sale prices in our sales orders ar e determined with reference to the prevailing
Au(T+D) spot price quoted on the Shanghai Gold Exchange, which in turn has historically correlated
with international gold price, except for exchange differences. During the Track Record Period, the
monthly average gold spot price in the PRC generally exhibited an upward trend despite the fact that
price drops occurred in the fourth quarter of FY2020 and first quarter of FY2021. In FY2020 and
FY2021, our average selling price increased from approximately RMB365.6 per gram to approximately
RMB384.0 per gram despite the fact that the average gold spot price decreased year-on-year. We were
able to record an average selling price higher th an the average gold spot price in the PRC during
FY2021, mainly due to our success in fixing a high selling price in two batches of gold bullion sales
near the end of May and July 2021, respectively, which were close to the highest gold spot price in the
PRC in FY2021.
Further, we recognised certain amount of gold bu llion sales in the first quarter of FY2021 of which
the sales order was placed and hence, the selling price was fixed back in May 2020 when the gold spot
price in the PRC was in a period approaching to the peak during the Track Record Period. The sales
volume of the abovementioned gol d bullion sales represented approximately 78% of our total sales
volume during FY2021. Our average selling price fo r FY2022 increased slightly to approximately
RMB385.7 per gram as compared to RMB384.0 per gram for FY2021 mainly because the gold spot
price in the PRC remained relative high during 2022 due to the Russia-Ukraine tensions and
depreciation of RMB against USD. Our average se lling price increased from approximately RMB382.5
SUMMARY
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--- page 21 ---
per gram in 6M2022 to RMB420.1 per gram in 6M2023, representing an increase of approximately
9.8%. Such increase was mainly because the gold spot price in the PRC remained relatively high during
the first six months of 2023 due to increase in demand for safe-haven products.
Other income
During FY2022, our other income increased significantly by approximately 272.2% from
approximately RMB3.6 million in FY2021 to appr oximately RMB13.4 million in FY2022 mainly due to
the significant increase of approximately 650.0% of sales of sulfuric acid generated during the smelting
process from approximately RMB1.4 million in F Y2021 to approximately RMB10.5 million in FY2022.
Cost of sales
Our cost of sales decreased from approximately RMB166.0 million in FY2020 to approximately
RMB107.8 million in FY2021, representing a decrea se of approximately 35.1%. Such decease was
mainly due to the decrease in our production as a result of the temporary suspension of our mining
operations at both our Songjiagou Open-Pit Mine from February 2021 to August 2021 and our
Songjiagou Underground Mine from February to November 2021 for the government authority to carry
out safety inspection. Our cost of sales increased from approxim ately RMB107.8 million in FY2021 to
approximately RMB199.8 million in F Y2022, representing an increase of approximately 85.3%. Such
increase was mainly due to the increase in our production as we operated in the ordinary and usual
circumstances in FY2022. Our cost of sales increas ed from approximately RMB100.0 million in 6M2022
to approximately RMB104.3 million in 6M2023, repres enting an increase of approximately 4.3%. Such
increase was mainly due to (i) the increase in chang es in inventories of finished goods and work in
progress, mainly represented the inc rease in utilisation of inventories in prior period; (ii) the increase in
other production overheads; partially offset by (iii) the decrease in subcontracting costs, mainly
attributable to decrease in production during the period.
Gross profit and profit for the year
Our gross profit decreased to approximately RMB140.1 million in FY2021 due mainly to the
decrease in our revenue of approximately 31.3% in FY2021. Our gross profit margin increased to
approximately 56.5% in FY2021 mainly because of the increase in average gold selling price of
approximately 5.0% and the decrease in mining subc ontracting costs as we carry out substantially all the
mining works ourselves since February 2021. Therefore, our profit for the year decreased by
approximately 48.7% to approximately RMB58.7 million in FY2021.
Our gross profit increased to approximately RMB218.6 million in FY2022 due mainly to the
increase in our revenue of approximately 68.8% in FY2022 as a result of the increase in gold sales
volume. Our gross profit margin decreased from approximately 56.5% in FY2021 to approximately
52.2% in FY2022 mainly because of the increase in production costs (excluding the impact of changes
in inventories of finished goods and work in progress) incurred along with our increase in production
activities in FY2022 while our produc tion in FY2021 was mostly affected by the temporary operation
suspension. Our profit for the year increased by approximately 106.1% to approximately RMB121.0
million in FY2022.
Our gross profit decreased from approximately R M B 1 1 7 . 4m i l l i o ni n6 M 2 0 2 2t oa p p r o x i m a t e l y
RMB92.4 million in 6M2023 primarily due to a 9.5% d ecrease in our revenue in 6M2023 compared to
6M2022 resulting from a decrease in gold sales vo lume caused by the FY2023 Temporary Pause of
Mining Activities. Furthermore, our gross profit margin decreased from approximately 54.0% in 6M2022
to approximately 47.0% in 6M2023. Such decrease was mainly attributable to an increase in our cost of
SUMMARY
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sales while there was a decrease in gold production and sales volume during 6M2023, primarily due to
the fact that (i) certain components in the cost of sales were semi-variable costs which did not decrease
proportionally to the decrease in gold production and sales volume; and (ii) our ore processed volume
remained relatively stable during the period notwith standing the decrease in gold production and sales
volume. However, these negative effects on gross prof it margin were partially offset by the increase in
average gold selling price of approximately 9 .8% from RMB382.5 per gra m in 6M2022 to RMB420.1
per gram in 6M2023. Our profit for the period decreased by approximately 27.2% from approximately
RMB72.5 million in 6M2022 to approximately RMB52.8 million in 6M2023.
Highlight of consolidated statements of financial position
As at 31 December
As at
30 June
2020 2021 2022 2023
RMB’000 RMB ’000 RMB ’000 RMB ’000
Non-current assets 560,177 552,394 554,171 570,790
Current assets 248,973 223,195 331,878 396,755
Current liabilities 226,021 181 ,295 146,431 169,372
Net current assets 22,952 41,900 185,447 227,383
Non-current liabilities 37,128 64,749 63,514 68,107
Net assets 546,001 529,545 676,104 730,066
Non-controlling interests 63,816 40,908 122,233 137,741
We recorded net current assets of approxim ately RMB23.0 million as at 31 December 2020,
mainly attributable to (i) profit for the year of app roximately RMB114.4 million; (ii) the decrease in
amounts due to related parties of approximately RMB316.7 million; and partially offset by (iii) cash
paid and payable for the addition of mining right of approximately RMB101.3 million. Our net current
assets increased to approximately RMB41.9 million a s at 31 December 2021 due mainly to (i) profit for
the year of approximately RMB58.7 million; (ii) the reclassificatio n of payable for mining right of
approximately RMB28.3 million from current liabilitie s to non-current liabilities; and partially offset by
(iii) the dividend declared of approximately RMB40.0 million. Our net curr ent assets increased to
approximately RMB185.4 million as at 31 December 2022 mainly attributable to profit for the year of
approximately RMB121.0 million. Our net current asset further increased to approximately RMB227.4
million as at 30 June 2023 mainly attributable to profit for the period of approximately RMB52.8
million partially offset by increase in property, plan t and equipment of approximately RMB23.6 million.
Our non-current assets decreased from approximately RMB560.2 million as at 31 December 2020
to approximately RMB552.4 million a s at 31 December 2021 mainly attributable to, among others, the
decrease in our intangible assets mainly in rela tion to an adjustment to the initial valuation of our
mining rights of approximately RMB30.2 million in r espect of the renewal of mining licences for our
Songjiagou Open-Pit Mine. In April 2020, our Group entered into an agreement of transfer of mining
rights ( ‘‘Mining Rights Agreement ’’) with Yantai Municipal Natural Resources and Planning Bureau for
renewing the mining licence of our Songjiagou Open-Pit Mine at an initial consideration of
approximately RMB101.1 million (the ‘‘Initial Consideration ’’). Such Initial Consideration was just a
preliminary and rough estimation while both par ties mutually agreed, also as set out in the Mining
Rights Agreement, to enter into a supplemental agreement to finalise the consideration based on a
valuation report. The final considera tion of approximately RMB74.1 million (the ‘‘Final Consideration’’ )
was determined in December 2021 based on a valuation report prepared by a valuation firm entrusted by
SUMMARY
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--- page 23 ---
Yantai Municipal Natural Resources and Planning Bureau and a supplemental agreement was entered
into between the Group and the bureau. The difference between the Initial Consideration of RMB101.1
million and the present value of Final Consideration of approximately RMB70.9 million was adjusted
against the cost of the mining right in 2021.
Our net assets decreased slightly from approximately RMB546.0 million as at 31 December 2020
to approximately RMB529.5 million as at 31 December 2021 due mainly to (i) the profit for the year of
approximately RMB58.7 million in F Y2021; and offset by (ii) the dividends paid to non-controlling
shareholders of approximately RMB40.0 million; and (iii) the dividend declared of approximately
RMB33.9 million. Our net assets increased to appr oximately RMB676.1 million as at 31 December 2022
mainly attributable to (i) our profit for FY2022 o f approximately RMB121.0 million; (ii) capital
contribution from shareholder of approximately RMB 47.1 million; and offset by (iii) dividend declared
of approximately RMB38.9 million. Our net assets further increased to approximately RMB730.1
million as at 30 June 2023 mainly attributable to the profit for 6M2023 of approximately RMB52.8
million.
Highlight of consolidated statements of cash flows
FY2020 FY2021 FY2022 6M2022 6M2023
RMB’000 RMB ’000 RMB’ 000 RMB ’000 RMB ’000
(unaudited)
Net cash flows from operating
activities 186,756 113,955 199,290 117,622 96,220
Net cash flows (used in)
investing activities (60,906) (87,797) (56,060) (16,581) (28,353)
Net cash flows generated from/
(used in) financing activities (58,055) (45,130) (54,793) (30,550) (1,260)
Net increase (decrease) in cash
and cash equivalents 67,795 (18,972) 88,437 70,491 66,607
Cash and cash equivalents at the
beginning of year 134,696 202,907 182,398 182,398 282,187
Effect of foreign exchange rate
changes, net 416 (1,537) 11,352 667 1,207
Cash and cash equivalents at end
of year 202,907 182,398 282,187 253,556 350,001
Our net cash flows generated from operating activ ities during the Track Record Period amounted
to approximately RMB186.8 million, RMB114.0 m illion, RMB199.3 millio n and RMB96.2 million,
respectively. Our net cash generated from operating activities decreased from approximately RMB186.8
million for FY2020 to approximately RMB114.0 million for FY2021, was mainly due to (i) the decrease
in profit before tax after adjustments for non-cash items of approximat ely RMB93.0 million; (ii) changes
in working capital of approximately RMB6.1 million; and partially offset by (iii) the decrease in income
tax paid of approximately RMB26.3 million. Our net ca sh generated from operating activities increased
from approximately RMB114.0 million for FY2021 t o approximately RMB199.3 million for FY2022
mainly due to (i) the increase in profit before tax after adjustments for non-cash items of approximately
SUMMARY
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--- page 24 ---
RMB116.0 million; and (ii) the increase in income tax paid of approximately RMB21.9 million. Our net
cash generated from operating activities decrease d from approximately RM B117.6 million for 6M2022
to approximately RMB96.2 million for 6M2023 mainly due to the decrease in profit before tax after
adjustments for non-cash items of approximately RMB28.2 million.
Our net cash flows used in investing activities d uring the Track Record Period amounted to
approximately RMB60.9 million, RMB87.8 m illion, RMB56.1 million and RMB28.4 million,
respectively, represented mainly cash used in purchase of properties, plant and equipments and
additions of mining rights.
Our net cash flows used in financing activitie s during the Track Record Period amounted to
approximately RMB58.1 million, RMB45. 1 million, RMB54.8 million and RMB1.3 million,
respectively, represented mainly amounts due to related companies, interests paid, dividends paid and
advances to a related party. In view of the decreases in cash generated from operations mainly due to
the temporary suspension of our mining operation from February 2021 to August 2021 (for our
Songjiagou Open-Pit Mine) and February 2021 to November 2021 (for our Songjiagou Underground
Mine), and coupled with the net cash flows used in i nvesting activities mainly for purchase of items of
property, plant and equipment and additions to mi ning rights and net cash flows used in financing
activities mainly for dividends paid, we had net decrease in cash and cash equivalents (including the
effect on foreign exchange rate changes, net) of approximately RMB20.5 million in FY2021.
Key financial ratios
The following table sets forth certain of our key fi nancial ratios during the Track Record Period.
FY or as at 31 December
6M or as
at 30 June
2020 2021 2022 2023
Net profit margin (%) 31.7 23.7 28.9 26.8
Return on equity (%)
(1) 21.0 11.1 17.9 7.2
Return on assets (%) (2) 14.1 7.6 13.7 5.5
Interest coverage (times) 42.7 34.0 198.3 111.9
Current ratio (times) 1.1 1.2 2.3 2.3
Quick ratio (times) 0.9 1.0 2.0 2.1
Gearing ratio (%) 5.5 5.7 4.4 4.1
Notes:
(1) For 6M2023, the calculation of return on equity is calculated with reference to our Group’ s half-year profit, which
cannot be directly compared to the return on equity calculated with reference to our Group ’s full-year profit in
previous years.
(2) For 6M2023, the calculation of return on assets is calculated with reference to our Group ’s half-year profit, which
cannot be directly compared to the return on assets calculated with reference to our Group ’s full-year profit in
previous years.
SUMMARY
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--- page 25 ---
For further details of our Group ’s financial information, please refer to the section headed
‘‘Financial information ’’in this prospectus.
LISTING EXPENSES
Assuming an Offer Price of HK$0.65 per Offer Share (being the mid-point of the indicative Offer
Price range) and the Over-allotment Option is not ex ercised, the total estimated Listing expenses in
relation to the Global Offering (including underw riting commission), which are payable by us are
estimated to be approximately HK$60.0 million (equivalent to approximately RMB53.6 million),
representing approximately 18.5% of the gross proceeds from the Global Offering. These Listing
expenses mainly comprise (i) underwriting rel ated expenses payable to the Underwriters of
approximately HK$11.4 million; an d (ii) non-underwriting-related expenses, comprising (a) fees and
expenses of legal advisers and acc ountants of approximately HK$24.1 million; and (b) other fees and
expenses of approximately HK$24.5 million. Listing e xpenses incurred prior to the Track Record Period
were approximately HK$5.1 million (equivalent to approximately RMB4.5 million). Listing expenses
charged to profit or loss for FY2020, FY2021, FY2022 and 6M2023 were approximately HK$5.0
million, HK$4.6 million, HK$9.4 million and HK$4.7 millio n (equivalent to approximately RMB4.4
million, RMB3.8 million, RMB8.1 million and RMB4.2 m illion), respectively. We expect to charge the
remaining estimated listing expenses of approximately HK$11.4 million (equivalent to approximately
RMB10.8 million) to profit or loss in the period subsequent to the Track Record Period and upon
Listing and to deduct the listing expenses directly attributable to the issuance of shares of approximately
HK$19.8 million (equivalent to approxima tely RMB17.7 million) from equity upon Listing.
IMPACTS OF THE TEMPORARY SUSPENSION OF MINING OPERATIONS IN FY2021
Due to mine accidents that occu rred in other third-party mines in Yantai City in early 2021, all
mines (including our mines) in the Yantai City we re required by the local government to suspend
operation. In view of the above, both our Songjiagou Open-Pit Mine and Songjiagou Underground Mine
have suspended mining operations from February to August 2021 and February to November 2021,
respectively while our ore processing plant was required to suspend operation from March to August
2021 (except for certain test runs in April and May 2021) for the government authority to carry out
safety inspection. During this period, the utilisation rate of our ore processing plant fell by
approximately 28.6% to approximately 51.7% in FY2021 as compared to approximately 80.3% in
FY2020. In addition, our gold production volume during FY2021 decreased by approximately 414.5 kg
or 41.8% as compared to FY2020, which led to the decreases in our revenue of approximately 31.3%
and our profit for the year by approximately 48.7% in FY2021 as compared to FY2020.
Further, the local government introduced safety requirements on strengthening the management of
subcontracting works on mining activities, among o thers, mining activities shall be performed and/or
managed by the mine owner or a main contractor and p rohibiting further outsourcing to subcontractors
without proper qualification. Si nce we had already terminated sub stantially all of our mining works
subcontractors for the Songjiagou Open-Pit Mine in September 2020 and the Songjiagou Underground
Mine in January 2021 and we substantially carried out all the mining works ourselves, there has been no
material impact on the introduction of the safety requirements to our business operation and we have
complied with such requirements to ensure safety of our mines. Since we carried out the aforementioned
SUMMARY
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--- page 26 ---
mining works ourselves, the percentage of direct labour costs and subcontracting costs to sales
(excluding the effect of increase in average sellin g price of gold bullion) decreased from approximately
11.5% for FY2020 to approximately 9.5% for FY2021, representing an increase in gross profit margin of
approximately 2.0% and net profit margin of approximately 1.5%. For further details, please see section
headed ‘‘Business — Impacts of the temporary suspension of mining operations in FY2021 ’’in this
prospectus.
IMPACTS OF THE OUTBREAK OF COVID-19 PANDEMIC ON OUR BUSINESS
We have maintained a sound business performance during most of the time when there was an
outbreak of COVID-19 pandemic in the PRC in 2020. Other than the temporary two-weeks suspension
of our back office administrative functions after the Chinese New Year holidays in February 2020
during the initial stage of COVID- 19 pandemic in the PRC, none of these measures implemented by the
PRC government had negatively affected our business operations subsequently. In 2020, our monthly
revenue continued to remain stable at approxima tely RMB26.7 million to RMB33.9 million from March
to December 2020, and we achieved a 57.5% year-on-year growth in our annual revenue for FY2020 as
compared to the year ended 31 December 2019. Despite the regional outbreak of the Omicron variant
which led to temporary lockdown measures implemented by the PRC government in major cities such as
Shenzhen and Shanghai in 2022, similar lockdown measures were not implemented in Muping District
of Yantai city of the Shandong Province and hence, our operations have not been affected. On 7
December 2022, the PRC government announced the nationwide relaxation of COVID-19 restrictions
and with effect from 8 January 2023, the quarantine requirements for both COVID-19 patients and
inbound travellers were abolished. During the Track Record Period and up to the Latest Practicable
Date, trading activities on the Sh anghai Gold Exchange had not been suspended and were not affected
by the temporary lockdown measures implemented by the PRC government.
Save as disclosed above, during the outbreak of COVID-19, we did not experience any disruption
in our business operations and supply chain (including the supply of raw materials used in our mining
and processing operations) due to the outbreak of COVID-19, and there had been no loss of our major
customers and suppliers. For details of the impact of COVID-19 on our business, results of operation,
cash flow and financial condition, pl ease refer to the section headed ‘‘Business — Impacts of the
outbreak of COVID-19 pandemic on our business ’’.
RECENT DEVELOPMENT
Recent financial and operational developments
Our business model, revenue and cost structure remain unchanged after the Track Record Period
and hence our business remained stable which was in line with the past trends and our expectations.
Since 1 July 2023 and up to the Latest Practicable Date:
. according to the F&S Report, the average global gold spot price increased from
approximately US$1,798.9 per ounce in 2021 to US$1,801.3 per ounce in 2022 and
increased to US$1,917.0 per ounce in August of 2023 and further increased to US$2,023.35
per ounce as at the Latest Practicable Date; and the average gold spot price in the PRC
SUMMARY
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--- page 27 ---
increased from approximately RMB374.3 per gram in 2021 to RMB392.1 per gram in 2022
and increased to RMB455.7 per gram in August 2023 and further increased to RMB473.4 per
gram as at the Latest Practicable Date;
. based on our management accounts for the four months ended 31 October 2023, our ore
mined volume, ore processed volume and gold sales volume during the four months period
amounted to approximately 800.5 kt, 599.7 kt and 262.1 kg respectively, as compared to
approximately 677.4 kt, 662.0 kt and 356.7 kg respectively for the four months ended 31
October 2022. Our ore mined volume increased by approximately 18.2% during the four
months period as compared to the corresponding period in 2022 while there was a decrease in
our gold sales volume in the four months period by approximately 26.5%, as compared to the
corresponding period in 2022 due to the decrease in gold production as a result of the
decrease in gold grade;
. in September 2023, our Group obtained a 1-year bank borrowing with a principal amount of
RMB30,000,000 which bears an interest at the rate of 3.77% per annum; and
. our Group expects a decrease in forecasted profit in the year ending 31 December 2023
notwithstanding the forecasted increase in average gold spot price mainly due to (i)
implementation of the mine optimisation plan in 2023 which led to the decrease of the gold
grade of our Songjiagou Open-Pit Mine, a decrease in total sales volume and a decrease in
gross profit margin; and (ii) the increase in Listing expenses.
Recent regulatory developments
On 17 February 2023, the CSRC promulgated the Trial Administrative Measures of the Overseas
Securities Offering and Lis ting by Domestic Companies ( 《境內企業境外發行證券和上市管理試行辦
法》) and the Notice on the Administrative Filing Arra ngement Concerning Overseas Offering and
Listing by Domestic Companies ( 《關於境內企業境外發行上市備案管理安排的通知》) (collectively, the
‘‘Overseas Listing Trial Measures ’’) and five supporting guidelines, which require indirect overseas
offering and listing by PRC domestic companies to be subject to the CSRC ’s filing requirement starting
from 31 March 2023. The Overseas Listing Trial Measures will comprehensively improve and reform
the existing regulatory regime for overseas offe ring and listing by PRC domestic companies and will
regulate both direct and indirect overseas offering and listing by PRC domestic companies. According to
the Overseas Listing Trial Measures, a PRC domestic company seeking offering and listing securities in
overseas market, either directly or indirectly as defined in the Overseas Listing Measures, shall file with
the CSRC and report relevant information.
As advised by our PRC Legal Adviser, we are subject to the CSRC filing as the Listing constitutes
an indirect overseas offering and listing by domes tic companies under the Overseas Listing Trial
Measures. On 20 October 2023, the CSRC publicly informed us that they have confirmed the
Company ’s overseas offering and listing information s ubmitted to them, and therefore, we have
completed the CSRC filing for application of listing of the Shares on the Stock Exchange and Global
Offering. No other approvals from the CSRC are required to be obtained for the listing of the Shares on
the Stock Exchange, according to our PRC Legal Adviser. Please refer to the section headed
‘‘Regulat ory
overview — Laws and regulations relating to overs eas securities offering and listing by
domestic companies’’ in this prospectus for further information.
SUMMARY
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--- page 28 ---
No material adverse change
After performing sufficient due diligence work wh ich our Directors consider appropriate and after
due and careful consideration, our Directors confirmed that, up to the date of this prospectus, save for
the recent developments as described above and the impact of the listing expenses on the financial
performance of our Group for the year ending 31 December 2023, there has been no material adverse
change in our financial or trading position, indebted ness, mortgage, contingent liabilities, guarantees or
prospects since 30 June 2023, being the end date of the periods reported in the Accountant ’s Report set
out in Appendix I, and there is no event since 30 June 2023 that would materially affect the information
shown in the Accountant ’s Report set out in Appendix I.
GLOBAL OFFERING STATISTICS
All statistics in the following table are based on t he assumptions that (i) the Global Offering has
been completed and 500,000,000 Shares are issued pursuant to the Global Offering; and (ii)
2,000,000,000 Shares are issued and outstanding following the completion of the Global Offering.
B a s e do na n
Offer Price of
HK$0.495
p e rO f f e rS h a r e ,
after Downward
Offer Price
Adjustment of 10%
B a s e do nt h e
minimum indicative
Offer Price of
HK$0.55 per
Offer Share
Based on the
maximum
indicative Offer
Price of HK$0.75
per Offer Share
Market capitalisation of our
Shares (Note 1)
HK$990 million HK$1,100 million HK$1,500 million
Unaudited pro forma adjusted
net tangible assets per Share
(Note 2)
HK$0.37 HK$0.38 HK$0.43
Notes:
1. The calculation of the market capitalisation of our Company is based on 2,000,000,000 Shares expected to be in issue
immediately following the completion of the Global Offering and the Capitalisation Issue but does not take into account of
any Shares which may be allotted and issued upon the exercise of the Over-allotment Option and options which may be
granted under the Share Option Scheme.
2. The unaudited pro forma adjusted net tangible assets per Share as at 30 June 2023 is calculated after the adjustments
referred to in Appendix II to this prospectus and on the basis that 2,000,000,000 Shares are expected to be in issue
immediately following the completion of the Global Offering and the Capitalisation Issue but does not take into account of
any Shares which may be allotted and issued upon the exercise of the Over-allotment Option and options which may be
granted under the Share Option Scheme.
SUMMARY
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FUTURE PLANS AND USE OF PROCEEDS
The aggregate net proceeds from the Global Offering, after deducting underwriting fees and other
estimated expenses in connection w ith the Global Offering, assuming that the Over-allotment Option is
not exercised and an Offer Price of HK$0.65 per Offer Share (being the mid-point of the indicative
Offer Price range of HK$0.55 to HK$0.75 per Offer S hare) will be approximately HK$265.0 million,
which will be applied as follows:
Use of net proceeds
from the Global Offering
Amount of
net proceeds
from the
Global
Offering
Amount of
net proceeds
from the
Global
Offering
Percentage of
net proceeds
from the
Global
Offering
HK$ million RMB million %
Further construction of mining infrastructure 54.0 48.2 20.4
Upgrade of gold reserves 5.3 4.7 2.0
Selective acquisitio ns 145.6 130.0 55.0
Repayment of existing bank loans 33.6 30.0 12.6
Working capital 26.5 23.7 10.0
Total 265.0 236.6 100.0
Please refer to the section headed ‘‘Future plans and use of proceeds ’’ in this prospectus for
details.
DIVIDEND
All dividends were declared to the then shareholders of our Company and of Yantai Zhongjia pro
rata in accordance with their shareholdings. In FY2020, Yantai Zhongjia declared dividends amounted to
RMB20.0 million to its then shareholders, of whi ch RMB5.0 million were declared and paid to
Dahedong and RMB15.0 million were declared to and settled with the capital injection from Majestic
Yantai BVI. In FY2021, our Company declared divi dends of approximately RMB33.9 million to its then
shareholders of which were fully settled as at the La test Practicable Date. In the same year, Yantai
Zhongjia declared dividends amounted to RMB160.0 million to its then shareholders, of which
RMB40.0 million were declared and paid to Dahedong and RMB120.0 m illion were declared to Majestic
Yantai BVI. The dividend of RMB120.0 million declar ed to Majestic Yantai BVI has been settled in full
in September 2022. In FY2022, our Company declared and paid dividends of approximately RMB38.9
million to our Shareholders. In N ovember 2023, Yantai Z hongjia declared dividends amounted to
RMB36.0 million to its then shareholders, of whi ch RMB9.0 million were declared and paid to
Dahedong and RMB27.0 million were declared and pa id to Majestic Yantai BVI, which were fully
settled. Majestic Yantai BVI then declared and paid dividend amounted to HK$26.0 million to our
Company, which was fully settled in November 2023 and our Company declared and paid dividends of
approximately HK$26.0 million to our shareholders, which were fully settled. As at the Latest
SUMMARY
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Practicable Date, no other dividends have been declared and paid by the companies now comprising our
Group to their then shareholders. As at the Latest Practicable Date, our Company did not have any
dividend payables. Our Company does not have a dividend policy or any pre-determined dividend
distribution ratio. The declaration of dividends is subject to the discretion of our Board. Our Directors
may recommend a payment of dividends in the future after taking into account our operations and
earnings, capital requirements and surplus, general f inancial condition, contract ual restrictions, capital
expenditure and future development requirements, shareholders ’ interests and other factors which they
may deem relevant at such time. Any declaration and payment of the dividends will be subject to the
Articles of Association and the laws of the Cayman Islands. Any future declarations of dividends may or
may not reflect our historical declarations of dividends and will be at the absolute discretion of our
Directors. Any dividends declared will be in RMB with respect to our Shares on a per share basis, and
our Company will pay such dividends in RMB.
SHAREHOLDER INFORMATION
Immediately after the Global Offering (without taking into account any Shares which may be
issued pursuant to the exercise of the Over-allotment Option or any options that may be granted under
the Share Option Scheme) and the Capitalisation Issue, 70.5% of the issued share capital of our
Company will be owned by Majestic Gold. In this regard, Majestic Gold is our Controlling Shareholder
within the meaning of the Listing Rules. Majestic Gold is a limited liability company organised and
existing under the laws of British Columbia, Cana da, the shares of which have been listed on TSX
Venture Exchange (stock code: MJS.V). Prior to the Listing, Majestic Gold has been principally
involved in the acquisition, exploration and develo pment of mineral properties in Canada and Australia,
as well as in the PRC through our Group. Following completion of the Listing, Majestic Gold will cease
its operations in the PRC (other than by retaining a c ontrolling interest in our Company), and principally
be engaged in the acquisition, exploration and development of mineral properties in Canada and
Australia. For further details, please see the section headed ‘‘Relationship with our Controlling
Shareholder ’’in this prospectus.
RISK FACTORS
Our business is subject to a number of risks. Materi al risks we face include: (i) fluctuations in the
market price of gold, which may be caused by political tension or interest rate hikes; (ii) our existing
mining operations have a finite life and our business expansion plan may not achieve the intended
economic benefits. Further, the eventual closure of these operations will entail costs and risks regarding
on-going monitoring, rehabilitation and compliance w ith environmental standards; (iii) our operations
are subject to safety inspection from government which may cause temporary suspension of our
operations; (iv) failure to achieve our production estimates; (v) early termination or non-renewal of the
leasing arrangements of land and buildings by Dahedong could have a material adverse effect on our
business, financial conditions and results of oper ations; (vi) unable to obtain, retain or renew
government approvals, licences and permits necessary for our business operations; and (vii) we rely on
third-party subcontractors to conduc t refining and logistics works. You should carefully consider the risk
SUMMARY
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factors set out in this prospectus before you make a decision to invest in the Shares. For further
information and other risks that we face, please refer to the section headed ‘‘Risk factors’’ in this
prospectus.
PROPERTIES LEASED FROM DAHEDONG
The land on which our Songjiagou Open-Pit Mine is located, and the land and building for our ore
processing plant are leased from Dahedong. Dahedong is a minority shareholder of our 75%-owned
subsidiary, Yantai Zhongjia, which held 25% of the entire equity interest in Yantai Zhongjia, and is a
connected person. Our Executive Directors are of the views that the risk of early termination or non-
renewal upon expiry of the lease period of such leases by Dahedong is remote because Dahedong, being
the minority shareholder of Yantai Zhongjia, has vested economic interest to ensure Yantai Zhongjia
remains operational and profitable to generate returns to its shareholders (which include Dahedong).
There are no other commercial reasons or benefits for Dahedong to early terminate or not to renew the
leases as (i) Dahedong may be exposed to liabilities arising from claims by us for early termination
under the lease agreement, (ii) Dahedong may face interruptions of its business operations and disputes
from villagers who lost their livelihood if our opera tions are suspended, and (iii)Dahedong is not able to
use the land for any other purposes other than for mining activities, and without the mining licence to
operate the mining land, Dahedong can have no other usage over such land and extract no commercial
values out of such termination of lease arrangements . In particular, the Natural Resources Bureau has
provided written confirmation that the parcels of l and leased from Dahedon g where our Songjiagou
Open-Pit Mine is located and where the ore processing plant is constructed have been categorised as
mining land pursuant to the Third National Land Survey. For further details, please see paragraph
headed ‘‘Business — Properties — Leased land and buildings — Land use right and our Group ’sl e a s e
arrangement with Dahedong ’’.
NON-COMPLIANCES
During the Track Record Period and up to the Late st Practicable Date, we had experienced certain
non-compliance incidents in the PRC in relation to (i) properties with de fective titles; (ii) entering into
non-compliant bill arrangements; and (iii) under contribution of social insurance fund and housing
provident fund. Please refer to the sections headed ‘‘Business — Properties — Properties with defective
titles ’’, ‘‘Business — Compliance with laws and regulations — Non-compliant bill arrangements’’ and
‘‘Business — Compliance with laws and regulations — Non-compliance incidents ’’in this prospectus
for further details.
SUMMARY
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In this prospectus, unless the context otherwise requires, the following terms shall have the
following meanings:
‘‘6M2022 ’’ the six months ended 30 June 2022
‘‘6M2023 ’’ the six months ended 30 June 2023
‘‘1H2023’’ the first half of year 2023
‘‘2H2023’’ t h es e c o n dh a l fo fy e a r2 0 2 3
‘‘ABCI Capital ’’ ABCI Capital Limited, a corporation licensed to carry out Type 1
(dealing in securities) and Type 6 ( advising on corporate finance)
regulated activities under the SFO , one of the Joint Bookrunners
and one of the CMIs in respect of the Global Offering
‘‘ABCI Securities ’’ ABCI Securities Company Limited, a corporation licensed to
carry out Type 1 (dealing in securities) and Type 4 (advising on
securities) regulated activities under the SFO, one of the Joint
Lead Managers and one of the CMIs in respect of the Global
Offering
‘‘Accountants’ Report’’ the accountants ’ report of our Company, the text of which is set
out in Appendix I to this prospectus
‘‘affiliate(s)’’ any other person(s), directly or indirectly, controlling or
controlled by or under direct or indirect common control with
such specified person
‘‘AFRC’’ Accounting and Financial Reporting Council
‘‘Articles of Association ’’or
‘‘Articles ’’
the amended and restated articles of association of our Company,
conditionally adopted on 30 N ovember 2023, which will take
effect on the Listing Date, as amended, supplemented or
otherwise modified from time to time, a summary of which is set
out in Appendix IV to this prospectus, and as amended from time
to time
‘‘associate(s) or ‘‘close associates ’’ has the same meanings ascribed thereto under the Listing Rules
DEFINITIONS
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‘‘Astrum Capital ’’ Astrum Capital Management Lim ited, a corporation licensed to
carry out Type 1 (dealing in sec urities), Type 2 (dealing in
futures contracts), Type 6 (advising on corporate finance) and
Type 9 (asset management) regu lated activities under the SFO,
one of the Joint Lead Managers and one of the CMIs in respect of
the Global Offering
‘‘Baiheng ’’ 煙台市百恒金礦有限公司 (Yantai Baiheng Gold Mine Co.
Ltd.*), a limited liability company established in the PRC on 2
June 1984 and is a connected person. As at the Latest Practicable
Date, Baiheng was wholly-owned by SDZJ
‘‘Board ’’, ‘‘Board of Directors ’’or
‘‘our Board ’’
the board of Directors
‘‘BOCOM International Securities’’ BOCOM International Securities L imited, a corporation licensed
to carry out Type 1 (dealing in securities), Type 2 (dealing in
futures contracts), Type 4 (advising on securities) and Type 5
(advising on futures contracts) r egulated activities under the SFO,
one of the Joint Bookrunners, one of the Joint Lead Managers
and one of the CMIs in respect of the Global Offering
‘‘Business Day ’’or ‘‘business day’’ any day (other than a Saturday, Sunday or public holiday in Hong
Kong) on which licenced banks in Hong Kong are generally open
for normal banking business
‘‘BVI’’ the British Virgin Islands
‘‘Capitalisation Issue ’’ the allotment and issue of 1,499,920,000 new Shares to be made
upon capitalisation of certain sums standing to the credit of the
share premium account of our Company as referred to in the
section headed ‘‘Statutory and general information — A. Further
information about our Group — 6. Written resolutions of our
Shareholders passed on 30 November 2023 ’’in Appendix V to
this prospectus
‘‘Capital Market Intermediaries ’’
or ‘‘capital market
intermediary(ies) ’’or ‘‘CMI(s)’’
the capital market intermediaries participating in the Global
Offering and has the meaning ascribed thereto under the Listing
Rules and as set out in the Hon g Kong Underwriting Agreement
‘‘Cayman Companies Act ’’or
‘‘Companies
Act’’
the Companies Act (as revised) of the Cayman Islands, as
amended, supplemented or otherwise modified from time to time
‘‘CCASS ’’ the Central Clearing and Settlement System established and
operated by HKSCC
DEFINITIONS
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‘‘CCB International Capital ’’ CCB International Capital Limited, a corporation licensed to carry
out Type 1 (dealing in securities), Type 4 (advising on securities)
and Type 6 (advising on corporat e finance) regulated activities
under the SFO, one of the Joint Bookrunners, one of the Joint
Lead Managers and one of the CMIs in respect of the Global
Offering
‘‘CSSI ’’ China Sunrise Securities (Intern ational) Limited , a corporation
licensed to carry out Type 1 (dealing in securities) and Type 4
(advising on securities) regulated activities under the SFO, one of
the Joint Lead Managers and one of the CMIs in respect of the
Global Offering
‘‘Citrus Securities ’’ Citrus Securities Limited, a corporation licensed to carry out
Type 1 (dealing in securities) an d Type 4 (advising on securities)
regulated activities under the SFO , one of the Joint Bookrunners,
one of the Joint Lead Managers and one of the CMIs in respect of
the Global Offering
‘‘CMBC Securities ’’ CMBC Securities Company Limited, a corporation licensed to
carry out Type 1 (dealing in securities) and Type 4 (advising on
securities) regulated activities under the SFO, one of the Joint
Bookrunners, one of the Joint Lead Managers and one of the
CMIs in respect of the Global Offering
‘‘Companies (Miscellaneous
Provisions) Ordinance ’’
the Companies (Winding Up and Miscellaneous Provisions)
Ordinance (Chapter 32 of the Laws of Hong Kong) as amended,
supplemented or otherwise modified from time to time
‘‘Companies Ordinance ’’ the Companies Ordinance (Chapter 622 of the Laws of Hong
Kong) as amended, supplemented or otherwise modified from
time to time
‘‘Company ’’or ‘‘our Company ’’,
‘‘us’’or ‘‘we’’
Persistence Resources Group Ltd ( 集海資源集團有限公司)
(formerly known as Majestic Yantai Gold Ltd. from 21 May
2019 to 25 July 2019 and SINOGOLD Resources Holdings Group
Co., Ltd. 中金資源控股集團股份有限公司 f r o m2 6J u l y2 0 1 9t o
11 May 2022), an exempted company incorporated in the Cayman
Islands with limited liability on 21 May 2019 and registered as a
non-Hong Kong company under Part 16 of the Companies
Ordinance on 11 November 2019
DEFINITIONS
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‘‘Competent Person ’’or ‘‘SRK’’ has the same meaning ascribed thereto under Rule 18.01 of the
Listing Rules and, in the context of this prospectus, means SRK
Consulting China Ltd, an independent mining and geological
consultant, which is an Independent Third Party
‘‘connected person(s) ’’or ‘‘core
connected person(s)
has the same meaning ascribed thereto under the Listing Rules
‘‘connected transaction(s) ’’ has the same meaning ascribed thereto under the Listing Rules
‘‘Controlling Shareholder ’’ has the same meaning ascribed thereto under the Listing Rules
and, in the context of this pros pectus, means Majestic Gold
‘‘Corporate Governance Code ’’ the Corporate Governance Code as set out in Appendix 14 to the
Listing Rules
‘‘COVID-19 ’’ coronavirus disease 2019, a disease caused by a novel virus
designated as severe acute respiratory syndrome coronavirus 2
‘‘Criminal Law ’’ the Criminal Law of the PRC ( 《中華人民共和國刑法》), as
amended, supplemented or otherwise modified from time to time
‘‘CAD’’ Canadian dollars, the lawful currency of Canada
‘‘CSRC ’’ the China Securities Regulatory Commission ( 中國證券監督管理
委員會), a regulatory body responsible for the supervision and
regulation of the PRC national securities markets
‘‘Dahedong ’’ 煙台市大河東選礦有限公司 (Yantai City Dahedong Mineral
Processing Co. Ltd.*), a limited liability company established in
the PRC on 14 December 2009, a minority shareholder of Yantai
Zhongjia which held 25% of the entire equity interest in Yantai
Zhongjia, and is a connected person. As at the Latest Practicable
Date, Dahedong was owned as to 50% by Mr. Kong Fanbo, and
the remaining equity interests held in equal share of
approximately 16.67% by each of (i) Mr. Kong Fanzhong; (ii)
Mr. Wang Lei; and (iii) SDZJ
‘‘Deed of Indemnity ’’ the d
 eed of indemnity dated 30 November 2023 and entered into
by the Controlling Shareholder (a s indemnifier) in favour of our
Company (for ourselves and as trustee for each of our
subsidiaries), particulars of which are set out in the section
headed ‘‘Statutory and general information — E. Other
information — 1. Estate duty, tax and other indemnity ’’ in
Appendix V to this prospectus
DEFINITIONS
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‘‘Deed of Non-competition ’’ the deed of non-competition und ertaking dated 30 November
2023 executed by the Controlling Shareholder in favour of our
Company (for ourselves and as trustee for each of our
subsidiaries), particulars of which are set out in the section
headed ‘‘Relationship with our Controlling Shareholder — Deed
of Non-competition ’’in this prospectus
‘‘Director(s)’’ or ‘‘our Director(s) ’’ the director(s) of our Company
‘‘Downward Offer Price
Adjustment ’’
HK$0.495 per Offer Share, being an adjustment that has the
effect of setting the final Offer Price up to 10% below HK$0.55
per Offer Share (the bottom end of the indicative Offer Price
range)
‘‘Dr. Shao ’’ Dr. Shao Xuxin ( 邵緒新), an Executive Director, the chairman of
our Board and our chief executive officer
‘‘Eddid ’’ Eddid Securities and Futures Limited, a corporation licensed to
carry out Type 1 (dealing in sec urities), Type 2 (dealing in
futures contracts), Type 3 (leveraged foreign exchange trading),
Type 4 (advising on securities), Type 5 (advising on futures
contracts) and Type 9 (asset management) regulated activities
under the SFO, one of the Joint Lead Managers and one of the
CMIs in respect of the Global Offering
‘‘EIPO ’’ electronic initial public offering , a service offered by HKSCC for
public offer share subscription
‘‘EIT’’ the PRC enterprise income tax
‘‘EIT Law ’’ the Enterprise Income Tax Law of the PRC ( 中華人民共和國企業
所得稅法), as amended, supplemented or otherwise modified
from time to time
‘‘EIT Regulation ’’ the Regulation on the Implementation of the Enterprise Income
Tax Law of the PRC (中 華人民共和國企業所得稅法實施條例),
as ame
nded, supplemented or otherwise modified from time to
time
‘‘Elstone Securities ’’ Elstone Securities Limited, a corporation licensed to carry out
Type 1 (dealing in securities) and Type 4 (advising on securities)
regulated activities under the SFO, one of the Joint Lead
Managers and one of the CMIs in respect of the Global Offering
‘‘Executive Director(s) ’’ the executive Director(s)
DEFINITIONS
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--- page 37 ---
‘‘Extreme Conditions ’’ extreme conditions caused by a super typhoon as announced by
the Government of Hong Kong
‘‘F&S’’or ‘‘Frost & Sullivan ’’ Frost & Sullivan (Beijing) Inc., Shanghai Branch Co., a market
industry consultant engaged by our Company to prepare the F&S
R e p o r ta n da nI n d e p e n d e n tT h i r dP a r t y
‘‘F&S Report ’’ the industry report prepared by Frost & Sullivan and
commissioned by our Company, the content of which is set out
in the section headed ‘‘Industry overview ’’of this prospectus
‘‘FINI ’’or ‘‘Fast Interface for
New Issuance’’
an online platform operated by HKSCC that is mandatory for
admission to trading and, where applicable, the collection and
processing of specified information on subscription in and
settlement for all new issues
‘‘First Shanghai Securities ’’ First Shanghai Securities Limited, a corporation licensed to carry
out Type 1 (dealing in securities), Type 4 (advising on securities)
and Type 6 (advising on corporat e finance) regulated activities
under the SFO, one of the Joint Bookrunners, one of the Joint
Lead Managers and one of the CMIs in respect of the Global
Offering
‘‘Futu Securities ’’ Futu Securities International (Hong Kong) Limited, a corporation
licensed to carry out Type 1 (dealing in securities), Type 2
(dealing in futures contracts), Type 3 (leveraged foreign exchange
trading), Type 4 (advising on s ecurities), Type 5 (advising on
futures contracts), Type 7 (providing automated trading services)
and Type 9 (asset management) re gulated activities under the
SFO, one of the Joint Lead Managers and one of the CMIs in
respect of the Global Offering
‘‘FY2020’’ the financial year ended 31 December 2020
‘‘FY2021’’ the financial year ended 31 December 2021
‘‘FY2022’’ the financial year ended 31 December 2022
‘‘GDP’’ gross domestic product
‘‘Global Offering ’’ the Hong Kong Public Offering an d the International Offering
DEFINITIONS
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‘‘Group ’’, ‘‘our Group’’, ‘‘we’’,
‘‘our’’or ‘‘us’’
our Company and our subsidiaries or, where the context otherwise
requires, in respect of the period before our Company became the
holding company of our present subsidiaries, such subsidiaries as
if they were our subsidiaries at the relevant time, and the
businesses carried on by them or their predecessors (as the case
may be)
‘‘HK eIPO White Form ’’ the application of Hong Kong Public Offer Shares to be issued in
the applicant ’s own name by submitting applications online
through the designated website of the HK eIPO White Form
Service Provider at
www.hkeipo.hk or the IPO App
‘‘HK eIPO White Form Service
Provider’’
the HK eIPO White Form service provider designated by our
Company, as specified on the designated website of the HK eIPO
White Form at
www.hkeipo.hk or the IPO App
‘‘HKSCC ’’ Hong Kong Securities Clearing Company Limited, a wholly-
owned subsidiary of Hong Kong Exchanges and Clearing Limited
‘‘HKSCC EIPO ’’ the application for the Hong Kong Offer Shares to be issued in
the name of HKSCC Nominees and deposited directly into
CCASS to be credited to the applicant ’s or a designated HKSCC
Participant’ s stock account through causing HKSCC Nominees to
apply on the applicant ’s behalf by instructing the applicant ’s
broker or custodian who is a HKSCC Participant to submit an
EIPO application on behalf of the applicant through HKSCC ’s
FINI system in accordance with the applicant ’s instruction
‘‘HKSCC Nominees’’ HKSCC Nominees Limited, a wholly-owned subsidiary of
HKSCC
‘‘HKSCC Operational Procedures ’’ the operational procedures of HKSCC in relation to CCASS,
containing the practices, pro cedures and administrative
requirements relating to the operations and functions of CCASS,
as from time to time in force
‘‘HKSCC Participant(s) ’’ a participant admitted to participat e in CCASS as a direct clearing
participant, a general clearing participant or a custodian
‘‘Hong Kong’’ or ‘‘HK’’ the Hong Kong Special Administrative Region of the PRC
‘‘Hong Kong Branch Share
Registrar ’’
Tricor Investor Services Limited, the Hong Kong branch share
registrar of our Company
‘‘Hong Kong dollar(s) ’’or ‘‘HK$’’ Hong Kong dollar(s), the lawful currency of Hong Kong
DEFINITIONS
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‘‘Hong Kong Offer Shares ’’ the 50,000,000 new Shares initially offered by our Company for
subscription pursuant to the Hong Kong Public Offering, subject
to reallocation as described in the section headed ’’Structure and
conditions of the Global Offering ’’in this prospectus
‘‘Hong Kong Public Offering ’’ the conditional offer to the public in Hong Kong for subscription
of the Hong Kong Offer Shares at the Offer Price, on and subject
to the terms and conditions stated in this prospectus, details of
w h i c ha r ed e s c r i b e di nt h es e c t i o nh e a d e d ‘‘Structure and
conditions of the Global Offering ’’in this prospectus
‘‘Hong Kong Underwriters ’’ the underwriters of the Hong Kong Public Offering whose names
are set forth in the section headed ‘‘Underwriting — Hong Kong
Underwriters ’’in this prospectus
‘‘Hong Kong Underwriting
Agreement’’
the conditional underwriting a greement dated on or about
13 December 2023 relating to the Hong Kong Public Offering
e n t e r e di n t ob yo u rC o m p a n y ,the Executive Directors, the
Controlling Shareholder, the Sole Sponsor, the Overall
Coordinator, the Sole Global Coordinator, the Joint Bookrunners,
the Joint Lead Managers, the CMIs and the Hong Kong
Underwriters, particulars of whi c ha r es u m m a r i s e di nt h es e c t i o n
headed ‘‘Underwriting ’’in this prospectus
‘‘IAS’’ International Acco unting Standards
‘‘IFRS ’’ International Financial Reportin g Standards promulgated by the
International Accounting Standards Board, IFRS includes IAS and
interpretation
‘‘Independent Non-Executive
Director(s) ’’
our independent non-executive Director(s)
‘‘Independent Third Party(ies) ’’ individual(s) or company(ies) who or which is or are independent
of and not connected with (within the meaning of the Listing
Rules) any directors, chief execu tive, or substantial shareholders
of our Company or our subsidiaries or any of their respective
associates
DEFINITIONS
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‘‘International Offering ’’ the conditional placing of the International Offer Shares by the
International Underwriters for and on behalf of our Company with
professional, institutional and/or other investors for cash at the
Offer Price, subject to reallocatio n and the exercise of the Over-
allotment Option as further de scribed under the section headed
‘‘Structure and conditions of the Global Offering ’’ in this
prospectus
‘‘International Offer Shares ’’ the 450,000,000 Shares initia lly offered by our Company for
subscription pursuant to the International Offering, where
relevant, with any additional Shares that may be issued pursuant
to any exercise of the Over-allotment Option as described in the
section headed ‘‘Structure and conditions of the Global Offering ’’
in this prospectus
‘‘International Underwriters’’ the underwriters of the International Offering, who are expected
to enter into the International Underwriting Agreement to
underwrite the International Offering
‘‘International Underwriting
Agreement’’
the conditional underwriting agreement relating to the
International Offering and to be entered into on or about the
Price Determination Date by our Company, the Executive
Directors, the Controlling Shareholder, the Sole Sponsor, the
Overall Coordinator, the Sole Global Coordinator, the Joint
Bookrunners, the Joint Lead Managers, the CMIs and the
International Underwriters, particulars of which are summarised
in the section headed ‘‘Underwriting ’’in this prospectus
‘‘IPO App ’’ the mobile application for HK eIPO White Form service which
can be downloaded by searching ‘‘IPO App ’’in App Store or
Google Play Store or downloaded at
www.hkeipo.hk/IPOApp or
www.tricorglobal.com/IPOApp
‘‘Issue Mandate ’’ the general unconditional mandate given to our Board by the
Shareholders relating to allot, issue and deal with Shares, a
summary of which is contained in the section headed ‘‘Statutory
and general information — A. Further information about our
Group — 6. Written resolutions of our Shareholders passed on 30
November 2023 ’’in Appendix V to this prospectus
DEFINITIONS
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‘‘Joint Bookrunners ’’ collectively, Innovax Securitie s, CCB International Capital,
Zhongtai International Secu rities, ABCI Capital, BOCOM
International Securities, SPDB International Capital, Citrus
Securities, Quam Securities, Valuable Capital, CMBC Securities
and First Shanghai Securities
‘‘Joint Lead Managers ’’ collectively, Innovax Securitie s, CCB International Capital,
Zhongtai International Secur ities, ABCI Securities, BOCOM
International Securities, SPDB International Capital, Citrus
Securities, Quam Securities, Valu able Capital, CMBC Securities,
First Shanghai Securities, Futu Securities, Tiger Brokers,
Livermore, ZMF Asset Management, CSSI, Astrum Capital, Yue
Xiu Securities, Eddid Securities, Pacific Foundation Securities,
SBI China Capital and Elstone Securities
‘‘Land Administration Law ’’ the Land Administration Law of the PRC ( 《中華人民共和國土地
管理法》), as amended, supplemented or otherwise modified from
time to time
‘‘Latest Practicable Date ’’ 5 December 2023, being the latest practicable date prior to the
printing of this prospectus for the purpose of ascertaining certain
information contained in this prospectus
‘‘Listing ’’ the listing of our Shares on the Main Board by way of Global
Offering
‘‘Listing Committee ’’ the Listing Committee of the Stock Exchange
‘‘Listing Date ’’ the date on which dealings in our Shares first commence on the
Stock Exchange, which is expected to be on or around Friday, 22
December 2023
‘‘Listing Rules ’’ the Rules Governing the Listing of Securities on the Stock
Exchange, as amended, supplemented or otherwise modified from
time to time
‘‘Livermore ’’ Livermore Holdings Limited, a corporation licensed to carry out
Type 1 (dealing in securities) and Type 4 (advising on securities)
regulated activities under the SFO, one of the Joint Lead
Managers and one of the CMIs in respect of the Global Offering
‘‘M&A Rules ’’ the Rules on the Merger and Acquisition of Domestic Enterprises
by Foreign Investors ( 關於外國投資者併購境內企業的規定), as
amended, supplemented
or otherwise modified from time to time
DEFINITIONS
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‘‘Main Board ’’ the stock market (excluding th e option market) operated by the
Stock Exchange which is independent from and operated in
parallel with GEM of the Stock Exchange
‘‘Majestic Gold ’’ Majestic Gold Corp. (formerly known as (i) Byron Resources Inc.
from 30 October 1986 to 2 September 1992 and (ii) Select
Ventures Inc. from 3 September 1992 to 2 December 1996), a
company incorporated under the laws of the province of British
Columbia, Canada with limited lia bility by shares on 30 October
1986 and listed on the TSX Venture Exchange (stock code:
MJS.V). As at the Latest Practicable Date, Majestic Gold has no
ultimate controlling shareholder and was owned as to
approximately 80.01% by public shareholders who were
Independent Third Parties, approximately 16.34% by Mr. Kong
Fanzhong and his child, Mr. Kong Ning ( 孔寧) collectively,
approximately 3.64% by Mr. Wang Lei and approximately 0.01%
by Mr. Mackie James Thomas, an Executive Director. Majestic
Gold is the Controlling Shareholder of our Company
‘‘Majestic Yantai BVI ’’ Majestic Yantai Gold Ltd., a company incorporated under the
laws of the BVI with limited liability on 1 July 2004 and a direct
wholly-owned subsidiary of our Company
‘‘MEE’’ the Ministry of Ecology and Environment of the PRC (中 華人民
共和國生態環境部), the successor of the former Ministry of
Environmental Protection of the PRC ( 中華人民共和國環境保護
部)
‘‘MEM’’ the Ministry of Emergency Management of the PRC ( 中華人民共
和國應急管理部), the successor of the former State
A d m i n i s t r a t i o no fW o r kS a f e t y(國家安全生產監督管理總局)
‘‘Memorandum ’’or ‘‘Memorandum
of Association’’
the amended and restated memorandum of association of our
Company approved and adopted on 30 November 2023, which
will take effect on the Listing Date, a summary of which is set
o u ti nt h es e c t i o nh e a d e d‘‘Summary of the
 constitution of our
Company and Cayman Islands Company Law — 1. Memorandum
of Association ’’ in Appendix IV to this prospectus, and as
amended from time to time
‘‘MIIT ’’ the Ministry of Industry and Information Technology of the PRC
(中華人民共和國工業和信息化部)
DEFINITIONS
– 32 –


--- page 43 ---
‘‘MNR’’ the Ministry of Natural Resources of the PRC ( 中華人民共和國
自然資源部), the successor of the former Ministry of Land and
Resources of the PRC ( 中華人民共和國國土資源部)
‘‘MOF’’ the Ministry of Finance of the PRC ( 中華人民共和國財政部)
‘‘MOFCOM ’’ the Ministry of Commerce of the PRC ( 中華人民共和國商務部)
‘‘MOHRSS ’’ the Ministry of Human Resources and Social Security of the PRC
(中華人民共和國人力資源社會保障部)
‘‘MOHURD ’’ the Ministry of Housing and Urban-Rural Development of the
PRC ( 中華人民共和國住房和城鄉建設部)
‘‘Mr. Kong
Fanbo ’’ Mr. Kong Fanbo ( 孔凡波), a director of Yantai Zhongjia, the
major shareholder of Dahedong, an indirect shareholder of SDZJ
and Baiheng, the brother of Mr. Kong Fanzhong and the brother-
in-law of Mr. Wang Lei
‘‘Mr. Kong Fanzhong ’’ Mr. Kong Fanzhong ( 孔凡忠) ,af o r m e rd i r e c t o ro fY a n t a i
Zhongjia, the indirect major shareholder of SDZJ and Baiheng,
the brother of Mr. Kong Fanbo and the brother-in-law of Mr.
Wang Lei. As at the Latest Practicable Date, Mr. Kong Fanzhong
and his child, Mr. Kong Ning ( 孔寧)h e l da na g g r e g a t eo f
approximately 16.34% equity interest in Majestic Gold
‘‘Mr. Wang Lei ’’ Mr. Wang Lei (王 磊), the deputy general manager of Yantai
Zhongjia, a shareholder of Dahedong and the brother-in-law of
Mr. Kong Fanbo and Mr. Kong Fanzhong. As at the Latest
Practicable Date, Mr. Wang Lei h eld approximately 3.64% equity
interest in Majestic Gold
‘‘NDRC ’’ the National Development and Reform Commission of the PRC
(中華人民共和國國家發展和改革委員會)
‘‘NI 43-101 ’’ National Instrument 43-101 — Standards of Disclosure for
Mineral Projects, the primary rule governing mineral property
disclosure under Canadian securities laws, which was initially
enacted in February 2001 and most recently revised in June 2011,
and adopted the CIM Definition Standards for estimation of
Mineral Resources and Mineral Reserves
DEFINITIONS
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--- page 44 ---
‘‘Offer Price ’’ the final price per Offer Share in Hong Kong dollars (exclusive of
brokerage fee of 1.0%, SFC transaction levy of 0.0027%, AFRC
transaction levy of 0.00015% and the Stock Exchange trading fee
of 0.00565%), a which the Offer Shares are to be subscribed
pursuant to the Global Offering, which will not be more than
HK$0.75 and is currently expected to be not less than HK$0.55
and to be agreed upon by our Company and the Overall
Coordinator (for itself and on behalf of the Underwriters) on or
before the Price Determination Date, subject to any Downward
Offer Price Adjustment
‘‘Offer Shares ’’ together, the Hong Kong Offer Shares and the International Offer
Shares
‘‘Overall Coordinator ’’,o r ‘‘Sole
Global Coordinator ’’or ‘‘Innovax
Securities ’’
Innovax Securities Limited, a corporation licensed to carry out
Type 1 (dealing in securities) and Type 4 (advising on securities)
regulated activities under the SFO, the Overall Coordinator, the
Sole Global Coordinator, one of the Joint Bookrunners, one of the
Joint Lead Managers and one of the CMIs in respect of the
Global Offering
‘‘Over-allotment Option ’’ the option to be granted by our Company to the International
Underwriters exercisable by the Overall Coordinator (for itself
and on behalf of the International Underwriters), at its sole and
absolute discretion, to require our Company to allot and issue up
to an aggregate of 75,000,000 additional Shares, representing
15.0% of the Offer Shares initially available under the Global
Offering, at the Offer Price, to cover over-allocations in the
International Offering and/or to satisfy the obligation of the
Stabilising Manager to return secu rities borrowed under the Stock
Borrowing Agreement, subject to the terms of the International
Underwriting Agreement.
‘‘Pacific Foundation Securities ’’ Pacific Foundation Securities Limited, a corporation licensed to
carry out Type 1 (dealing in securities) and Type 9 (asset
management) regulated activities under the SFO, one of the Joint
Lead Managers and one of the CMIs in respect of the Global
Offering
‘‘PBOC ’’ the People ’s Bank of China ( 中國人民銀行), the central bank of
China
DEFINITIONS
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--- page 45 ---
‘‘PRC’’or ‘‘China ’’ the People ’s Republic of China, and for the purpose of this
prospectus, and unless otherwise indicated, shall exclude Hong
Kong, Macau Special Administrative Region of the PRC and
Taiwan
‘‘PRC Company Law ’’ the Company Law of the PRC ( 中華人民共和國公司法), as
amended, supplemented or otherwise modified from time to time
‘‘PRC GAAP ’’ generally accepted accounting principles in the PRC
‘‘PRC Government ’’or ‘‘State ’’ the central government of the PRC, including all governmental
sub-divisions (such as provincial, municipal and other regional or
local government entities) and instrumentalities thereof or, where
the context requires, any of them
‘‘PRC Legal Advisers ’’ Jincheng Tongda & Neal Law Firm Shenzhen Office, being the
legal advisers to our Company as to the PRC law
‘‘PRC Mineral Resources Law ’’ the Mineral Resources Law of the PRC ( 中華人民共和國礦產資
源法), as amended, supplemented or otherwise modified from
time to time
‘‘PRC Negotiable Instruments
Law’’
the Negotiable Instruments Law of the PRC ( 中華人民共和國票
據法), as amended, supplemented or otherwise modified from
time to time
‘‘Price Determination Agreement ’’ the agreement expected to be entered into between our Company
and the Overall Coordinator (for itself and on behalf of the
Underwriters) on the Price Determination Date to record and
determine the Offer Price
‘‘Price Determination Date ’’ the date, expected to be on or about 12:00 noon on Wednesday,
20 December 2023 or such later date as may be agreed between
our Company and the Overall Coordinator (for itself and on
behalf of the Underwriters), on which the Offer Price will be
fixed for the purpose of the Global Offering
‘‘Principal Share Registrar ’’ Maples Fund Services (Cayman) Limited, the Cayman Islands
share r
egistrar of our Company
DEFINITIONS
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‘‘Qingjia ’’ 煙台慶佳建材有限公司 (Yantai Qingjia Construction Materials
Co., Ltd*), a limited liability company established in the PRC on
13 September 2017, and is a connected person. As at the Latest
Practicable Date, Qingjia was wholly-owned by Mr. Kong
Fanqiang ( 孔凡強), who is the brother of Mr. Kong Fanbo and
Mr. Kong Fanzhong and the brother-in-law of Mr. Wang Lei
‘‘Quam Securities’’ Quam Securities Limited, a corporation licensed to carry out Type
1 (dealing in securities), Type 2 (dealing in futures contracts),
Type 4 (advising on securities), Type 6 (advising on corporate
finance) and Type 9 (asset manag ement) regulated activities under
the SFO, one of the Joint Bookrunners, one of the Joint Lead
Managers and one of the CMIs of the Global Offering
‘‘Regulation S ’’ Regulation S under the U.S. Securities Act
‘‘Relevant Persons ’’ the Sole Sponsor, the Overall Coordinator, the Sole Global
Coordinator, the Joint Bookrunners, the Joint Lead Managers, the
CMIs, the Underwriters and any of their or the Company ’s
respective directors, officers, e mployees, partners, agents,
advisers and any other parties involved in the Global Offering
‘‘Remaining Group’’ Majestic Gold and its subsidiaries after completion of the Listing,
which excludes our Group
‘‘Reorganisation ’’ the corporate reorganisation arrangement undergone by our Group
in preparation for the Listing, details of which are set out in the
section headed ‘‘History, Reorganisation and corporate structure
— Reorganisation ’’of this prospectus
‘‘Repurchase Mandate ’’ the general unconditional mandate given to our Board by the
Shareholders relating to the repurchase of Shares, a summary of
which is contained in the section headed ‘‘Statutory and general
information — A. Further information about our Group — 6.
Written resolutions of our Shareholders passed on 30 November
2023’’in Appendix V to this prospectus
DEFINITIONS
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‘‘Richard’sR e s o u r c e’’ Richard ’s Resource Technologies Inc. (formerly known as Double
Gain Investment Limited), a company incorporated under the laws
of the BVI with limited liability on 18 March 1999, an existing
Shareholder which will hold approximately 4.5% interest in our
Company upon the completion of the Reorganisation, the
Capitalisation Issue and the Global Offering (assuming the Over-
allotment Option is not exercised). As at the Latest Practicable
Date, Richard ’s Resource is wholly-owned by Ms. Cheung Yuen
Man, Rosa
‘‘RMB’’ Renminbi, the lawful currency of the PRC
‘‘Rules of HKSCC ’’ the General Rules of HKSCC and the HKSCC Operational
Procedures in effect from time to time
‘‘SAFE ’’ the State Administration of Foreign Exchange of the PRC ( 中華
人民共和國國家外匯管理局)
‘‘SAMR ’’ the State Administration for Market Regulation of the PRC ( 中華
人民共和國國家市場監督管理總局), the successor of the former
State Administration for Industry and Commerce of the PRC (中
華人民共和國國家工商行政管理總局)
‘‘SAT’’ the State Taxation Administration of the PRC ( 中華人民共和國國
家稅務總局)
‘‘SBI China Capital ’’ SBI China Capital Financial Services Limited, a corporation
licensed to carry out Type 1 (dealing in securities), Type 4
(advising on securities) and Typ e 9 (asset
 management) regulated
activities under the SFO, one of the Joint Lead Managers and one
of the CMIs of the Global Offering
‘‘SDZJ ’’ 山東中嘉礦業集團有限公司 (Shandong Zhongjia Mining Group
Co., Ltd.*) (formerly known as 山東中嘉礦業有限公司 (Shandong
Zhongjia Mining Co., Ltd.*) (from 23 April 2021 to 28 February
2022), a limited liability company established in the PRC on 23
April 2021, and is a connected person. As at the Latest Practicable
Date, SDZJ was owned by (i) 山東文豐和投資有限公司, a company
wholly-owned by Mr. Kong Fanzhong, as to approximately 53.9%;
(ii) 煙台鑫山投資有限公司, a company wholly-owned by Mr. Kong
Fanbo, as to approximately 23.1%; (iii) 山東輝茂晟投資有限公司
(Shandong Huimaosheng Investment Co., Ltd.*), a company wholly-
owned by Zou Honghai, an Independent Third Party, as to
approximately 20.0%; and (iv) 山東招金集團招遠黃金冶煉有限公
司 (Shandong Zhaojin Group Zhaoyuan Gold Smelting Co., Ltd.*), a
company indirectly wholly-owned by PRC government authorities,
as to approximately 3.0%
DEFINITIONS
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--- page 48 ---
‘‘SFC’’ the Securities and Futures Commission of Hong Kong
‘‘SFO’’ the Securities and Futures Ordinance (Chapter 571 of the Laws of
Hong Kong), as amended, supplemented or otherwise modified
from time to time
‘‘Shandong Guoda ’’ a group of companies comprises 山東國大黃金股份有限公司
(Shandong Guoda Gold Co., Ltd*) and its wholly-owned
subsidiaries, 煙台國大貴金屬冶煉有限公司 (Yantai Guoda
Precious Metal Smelting Co., Ltd*) and 煙台國大貿易有限公司
(Yantai Guoda Trading Co., Ltd.*), all of which are established in
the PRC in January 1999, October 2004 and April 2022,
respectively. Shandong Guoda is one of our major customers and
five largest subcontractors during the Track Record Period, and is
an Independent Third Party
‘‘Shandong Humon ’’ 山東恆邦冶煉股份有限公司 (Shandong Humon Smelting Co.,
Ltd*), a company established in the PRC in February 1994, one
of our major customers and five largest subcontractors during the
Track Record Period, and is an Independent Third Party
‘‘Shanghai Gold Exchange’’ Shanghai Gold Exchange ( 上海黃金交易所), approved by the
State Council and founded by the PBOC, which organises gold
transactions in China and perf orms regulated functions as
stipulated by the applicable PRC rules and regulations, as
amended from time to time
‘‘Share(s) ’’ ordinary share(s) with a nominal or par value of HK$0.01 each in
the share capital of our Company
‘‘Share Option Scheme ’’ the share option scheme cond itionally approved a
 nd adopted by
our Company on 30 November 2023, the principal terms of which
are summarised in the section headed ‘‘Statutory and general
information — D. Share option scheme ’’in Appendix V to this
prospectus
‘‘Shareholder(s) ’’ holder(s) of the Share(s) from time to time
‘‘Sole Sponsor ’’or ‘‘Innovax
Capital ’’
Innovax Capital Limited, a corporation licenced to carry out Type
1 (dealing in securities) and Type 6 (advising on corporate
finance) regulated activities under the SFO, appointed as the sole
sponsor to the Global Offering
DEFINITIONS
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‘‘Songjiagou Open-Pit Mine ’’ an open-pit gold mine located in the Muping District on the
Jiaodong Peninsula of the Shandong Province, the PRC in which
our Group holds the entire interest through our 75%-owned
indirect subsidiary, Yantai Zhon gjia, the details of which are set
out in the SRK Report in Appendix III to this prospectus
‘‘Songjiagou Underground Mine ’’ an underground gold mine located in the Muping District on the
Jiaodong Peninsula of the Shandong Province, the PRC, in which
our Group holds the entire interest through our 75%-owned
indirect subsidiary, Yantai Zhon gjia, the details of which are set
out in the SRK Report in Appendix III to this prospectus
‘‘SPDB International Capital ’’ SPDB International Capital Limited, a corporation licensed to
carry out Type 1 (dealing in securities) and Type 6 (advising on
corporate finance) regulated activities under the SFO, one of the
Joint Bookrunners, one of the Joint Lead Managers and one of
the CMIs of the Global Offering
‘‘SRK Report ’’or ‘‘Competent
Person ’sR e p o r t’’
the Competent Person ’s report prepared by SRK on the
Songjiagou Open-Pit Mine and the Songjiagou Underground
Mine, the effective date of which is 30 June 2023 and details of
which are set out in the section headed ‘‘SRK Report ’’ in
Appendix III to this prospectus
‘‘Stabilising Manager ’’ Innovax Securities
‘‘State Council ’’ the State Council of the PRC ( 中華人民共和國國務院)
‘‘Stock Borrowing Agreement ’’ the stock borrowing agreement expected to be entered into on or
about the Price Determination Date between the Stabilising
Manager and Majestic Gold
‘‘Stock Exchange ’’ The Stock Exchange of Hong Kong Limited
‘‘subsidiary(ies) ’’ has the meaning ascribed thereto under the Listing Rules
‘‘substantial Shareholder(s)’’ has the meaning ascribed thereto under the Listing Rules
‘‘Takeovers Code ’’ the Code on Takeovers and Mergers issued by the SFC, as
amended, supplemented or otherwise modified from time to time
‘‘Tiger Brokers ’’ Tiger Brokers (HK) Global Limited, a corporation licensed to
carry out Type 1 (dealing in sec urities), Type 2 (dealing in
futures contracts), Type 4 (advising on securities) and Type 5
(advising on futures contracts) r egulated activities under the SFO,
one of the Joint Lead Managers and one of the CMIs in respect of
the Global Offering
DEFINITIONS
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--- page 50 ---
‘‘Track Record Period ’’ the three years ended 31 December 2022 and the six months
ended 30 June 2023
‘‘Trading Day ’’ a day on which trading of the Shares takes place on the Stock
Exchange
‘‘TSX’’or ‘‘Toronto Stock
Exchange ’’
the Toronto Stock Exchange
‘‘TSXV’’or ‘‘TSX Venture
Exchange ’’
the TSX Venture Exchange, one of the two national stock
exchanges of Canada, focusing on micro, small cap and emerging
growth companies that do not satis fy the listing criteria of the
TSX
‘‘Underwriters’’ together, the Hong Kong Underwriters and the International
Underwriters
‘‘Underwriting Agreements’’ together, the Hong Kong Underwriting Agreement and the
International Underwriting Agreement
‘‘United States’’ or ‘‘U.S. ’’or
‘‘USA’’
the United States of America
‘‘U.S. dollar(s) ’’or ‘‘US$’’or
‘‘USD’’
United States dollars, the lawf ul currency of the United States
‘‘U.S. Securities Act’’ the United States Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder
‘‘Valuable Capital’’ Valuable Capital Limited, a corporation licensed to carry out
Type 1 (dealing in securities), Type 2 (dealing in futures
contracts), Type 4 (advising on securities), Type 5 (advising on
futures contracts) and Type 9 (asset management) regulated
activities under the SFO), one of the Joint Bookrunners, one of
the Joint Lead Managers and one of the CMIs in respect of the
Global Offering
‘‘W o r l dG o l dC o u n c i l’’ a market development organisation for the gold industry based in
the United Kingdom. Its members include many leading gold
mining companies in the world
‘‘Yantai Zhongjia’’ 煙台中嘉礦業有限公司 (Yan tai Zhongjia Mining Co. Ltd.*), a
limited liabilit
y company established in the PRC on 17 March
2005, our indirect 75%-owned subsidiary held through Majestic
Yantai BVI, and the remaining 25% equity interest is owned by
Dahedong
DEFINITIONS
– 40 –


--- page 51 ---
‘‘Yue Xiu Securities ’’ Yue Xiu Securities Company Lim ited, a corporation licensed to
carry out Type 1 (dealing in sec urities), Type 2 (dealing in
futures contracts), Type 4 (advising on securities) and Type 5
(advising on futures contracts) r egulated activities under the SFO,
one of the Joint Lead Managers and one of the CMIs in respect of
the Global Offering
‘‘Zhongtai International Securities’’ Zhongtai International Securities Limited, a corporation licensed
to carry out Type 1 (dealing in securities) and Type 4 (advising
on securities) regulated activities under the SFO, one of the Joint
Bookrunners, one of the Joint Lead Managers and one of the
CMIs in respect of the Global Offering
‘‘ZMF Asset Management ’’ ZMF Asset Management Limited, a corporation licensed to carry
out Type 1 (dealing in securities), Type 4 (advising on securities)
and Type 9 (asset management) re gulated activities under the
SFO, one of the Joint Lead Managers and one of the CMIs in
respect of the Global Offering
‘‘%’’ per cent.
* The English names of the PRC entities mentioned in this prospectus are translations from their Chinese names. If there is
any inconsistency, the Chinese names shall prevail.
Unless otherwise stated or the context requires otherwise in this prospectus:
. all dates and times refer to Hong Kong time;
. all information is as at the Latest Practicable Date; and
. certain monetary amount and percentage figures have been subject to rounding adjustments.
Accordingly, figures shown as totals in certain tables may not be an arithmetic aggregation
of the figures preceding them.
DEFINITIONS
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This glossary contains explanations of certain terms used in this prospectus in connection with our
Group ’s business and operations. These terms and their meanings may not correspond to the standard
industry meanings or usage of those terms.
‘‘adit ’’ a horizontal tunnel or drive from the surface into a mine
‘‘annual production capacity ’’ the maximum annual production capacity within the permitted
annual production volume that can be achieved by our Group in
the usual and ordinary course of business based on our existing
resources and mine design
‘‘ASL’’ above sea level
‘‘Au’’ is the symbol for the chemical element of gold
‘‘Au99.99, Au99.95, Au99.9,
Au99.5’’
the common standard for denoting gold purity adopted by
Shanghai Gold Exchange to conform with international practice,
in which Au99.99 and Au99.95 gold denotes gold contents of
99.99% and 99.95% or above, respectively, while Au99.9 and
Au99.5 gold denote gold contents of 99.9% and 99.5% or above,
respectively
‘‘Au (T+D) ’’or ‘‘Au (T+D)
contract ’’
a standardised contract employed by the Shanghai Gold
Exchange, which involves the de livery of certain amount of gold
at a specific point of time but such delivery of gold can be
delayed indefinitely
‘‘Au (T+D) spot price ’’ the market price of Au (T+D) contract as quoted on the Shanghai
Gold Exchange
‘‘CIM Definition Standards’’ the CIM Definition Standards on Mineral Resources and Mineral
Reserves issued and adopted by Canadian Institute of Mining,
Metallurgy and Petroleum on 19 May 2014
‘‘concentrate’’ or ‘‘gold
concentrate ’’
a powdery or wet product containing an upgraded mineral content
resulting from initial processi ng of mined ore to remove some
waste materials. A concentrate is an intermediary product, which
would still be subject to further processing, such as smelting, to
effect recovery of metal
‘‘crude gold ’’ unrefined gold produced at mine site or other gold sources before
sending to a smelter where the gold is refined to commercial-
grade gold product
‘‘crusher ’’ a machine for crushing rocks to smaller grain size
GLOSSARY OF TECHNICAL TERMS
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--- page 53 ---
‘‘cut-and-fill ’’ a method of stoping in which ore is removed in slices, or lifts,
with the excavation subsequently filled with rock or other waste
material (backfill), before t he next slice is extracted
‘‘cut-off grade ’’ the grade threshold above which a mineral is considered
economic to mine
‘‘deposit ’’ a natural occurrence of a useful mineral, or an ore, sufficient in
extent and degree of concentration to invite exploitation
‘‘dilution ’’ the reduction of grade for mined ore due to the inclusion of waste
material in the mined ore
‘‘drilling ’’ the use of a machine to create holes for exploration or for loading
with explosives
‘‘exploration ’’ activity to prove the location, volume and quality of an orebody
‘‘feed grade’’ in respect of mineral processing, the relative content of gold
compared to the full content including gold and other substances
in the ore fed at the processing mill, with reference to the mass
with gold in the total mass of the ore and expressed in g/t Au
‘‘floatation ’’ a process by which some mineral particles are induced to become
attached to bubbles of froth and float, and others to sink, so that
the valuable minerals are concentrated and separated from the
remaining rock or mineral material
‘‘GFA’’ gross floor area
‘‘g’’ gram
‘‘g/t’’ grams per metric tonne - metal concentration
‘‘gold bullion ’’ refined gold in the form of bars
‘‘gold mine production volume ’’or
‘‘gold production volume’’
production volume of gold that is mined from gold mines and as
by-products from non -ferrous metal ores
‘‘gold recovery rate ’’ the percentage of gold produced compared to the amount of gold
contained in the feed ore in the context of a processing plant, or
the percentage of gold produced compared to the amount of gold
contained in the feed concentrates in the context of a smelting
plant
GLOSSARY OF TECHNICAL TERMS
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--- page 54 ---
‘‘gold refining ’’or ‘‘refining’’ the final stage of the metallurgical process of refining crude gold
to a pure or very pure end-product (or 99.99% pure)
‘‘grade’’ the relative amount of valuable elements or minerals contained in
a parcel of ore material. For gold, grade is commonly expressed
in grams per tonne of milled ore (g/t Au)
‘‘ha’’ hectare
‘‘Indicated Mineral Resource(s) ’’or
‘‘Indicated Resource(s) ’’
see the definition under NI 43-101 in the section headed
‘‘Summary of NI 43-101 ’’in this prospectus
‘‘Inferred Mineral Resource(s) ’’or
‘‘Inferred Resource(s) ’’
see the definition under NI 43-101 in the section headed
‘‘Summary of NI 43-101 ’’in this prospectus
‘‘kg’’ kilogram(s), the basic unit of mass in the international system of
units
‘‘km’’ kilometre(s), a metric unit measure of distance
‘‘kt’’ thousand tonnes, a metric unit of weight, being equivalent to 1.0
million kg
‘‘ktpa ’’ kt per annum
‘‘ktpd ’’ kt of ore per day
‘‘koz’’ thousand ounces, a unit of weight
‘‘kV’’ kilovolt
‘‘kW’’ kilowatt
‘‘LoM’’ life of mine. It refers to the shortest timeframe that the Mineral
Reserve of a mine are estimated to be fully utilised after
considering the actual situatio n of the mine and strategic plan of
the mining operation. Should the mine owner decide to reduce the
mining and processing volume per annum and/or discover
additional Mineral Reserve, it would take longer time to utilise
the Mineral Reserve of the mine and the life of mine would be
lengthened
GLOSSARY OF TECHNICAL TERMS
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--- page 55 ---
‘‘large-scale mine ’’ a gold mine consisting of over 20 tonnes of the combination of
Measured Mineral Resources, Indicated Mineral Resources and
Inferred Mineral Resources, according to specifications for
hardrock gold exploration issued by the Ministry of Natural
Resources of the PRC (DZ/T0205-2002)
‘‘low-grade ore rocks ’’ ore rocks with gold content ranging from 0.2 to 0.3 g/t Au
‘‘Measured Mineral Resource(s) ’’
or ‘‘Measured Resource(s) ’’
see the definition under NI 43-101 in the section headed
‘‘Summary of NI 43-101 ’’in this prospectus
‘‘Mineral Reserve(s) ’’or
‘‘Reserve(s) ’’
the economically mineable part of a Measured Mineral Resource
and/or Indicated Mineral Resource. It includes diluting materials
and allowances for losses, which may occur when the material is
mined or extracted and is defined by studies at pre-feasibility or
feasibility level as appropriate that include application of
modifying factors. Such studies demonstrate that, at the time of
reporting, extraction could reasonably be justified. Furthermore,
Mineral Reserves are those portions of Mineral Resources that,
after the application of all mo difying factors, result in an
estimated tonnage and grade which, in the opinion of the
Competent Person making the estimates, can be the basis of a
technically and economically viable project, after taking account
of material relevant modifying f actors. Mineral Reserves are sub-
divided into proven and probable categories
‘‘Mineral Resource(s) ’’or
‘‘Resource(s) ’’
a concentration or occurrence o f solid material of economic
interest in or on the Earth’ s crust in such form, grade or quality
and quantity that there are reasonable prospects for eventual
economic extraction. The location, quantity, grade or quality,
continuity and other geological characteristics of a Mineral
Resource are known, estimated or interpreted from specific
geological evidence and knowledge, including sampling
‘‘mineralisation ’’ an area with continuous distribution belts of mineralisation,
including the occurrence of deposits, mine sites and alteration of
waste rock, as exploration indicators and under control of same
geology conditions. It is a key zone for estimation and further
planning of exploration of minerals
‘‘mining loss ’’ that part of a mineral reserve which is not recovered during the
mining process
‘‘mining rights’’ the rights to mine mineral resources and obtain mineral products
in areas where mining activities are licenced
GLOSSARY OF TECHNICAL TERMS
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‘‘Mt’’ million metric tonnes, being equivalent to 1.0 million tonnes or
1,000 kt
‘‘mu’’ the traditional Chinese unit of area ( 畝), one mu is equivalent to
approximately 666.67 sq.m.
‘‘open-pit mining ’’ mining of a deposit from a pit open to surface and usually carried
out by stripping of overburden materials
‘‘ore’’ mineral bearing rock which can be mined and treated profitably
under current or immediately foreseeable economic conditions
‘‘orebody’’ natural mineral accumulations which can be extracted for use
under existing economic conditions and using existing extraction
techniques
‘‘ore mined volume ’’ the volume of ores mined from gold mines
‘‘ore processed volume’’ the volume of ores sent to processing plant for processing to
produce gold concentrate
‘‘ore processing’’ or ‘‘processing ’’ the process which in general refe rs to the extraction of usable
portions of ores by using physical and chemical methods
‘‘ounce(s)’’ or ‘‘oz’’ a unit of weight for precious metals, and one kilogram equals
32.1507 troy ounce
‘‘permitted annual ore stripping
volume’’
the maximum volume of rocks permitted to be stripped in a year,
which is equivalent to the permitted annual production volume or
such volume times the average stripping ratio according to the
utilisation plan associated with the relevant mining licence
submitted to and approved by the government, as the case may
be. The stripping of rocks essentially refers to the processing of
ores as conducted in the processing plant
‘‘permitted annual production
volume’’
indicates the production scale of a mine. For our Songjiagou
Open-Pit Mine, the permitted annual production volume has to be
interpreted together with the utilisation plan for determining the
permitted annual ore stripping volume. For our Songjiagou
Underground Mine, the permitted annual production volume is
equivalent to its permitted annual ore stripping volume
‘‘Probable Mineral Reserve(s) ’’or
‘‘Probable Reserve(s)’’
see the definition under the section headed ‘‘Summary of NI 43-
101’’in this prospectus
GLOSSARY OF TECHNICAL TERMS
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‘‘Proven Mineral Reserve(s) ’’or
‘‘Proven Reserve(s) ’’
see the definition under the section headed ‘‘Summary of NI 43-
101’’in this prospectus
‘‘rehabilitation ’’ in the context of mining, the process of returning the land to
another productive use or the restoration of land and
environmental values to a mine site after the mining has been
completed
‘‘ROM’’ run-of-mine, of or relating to ore that is in its natural and
unprocessed state produced from a mine
‘‘small-scale mine ’’ a gold mine consisting of less than 5 tonnes of the combination of
Measured Mineral Resources, Indicated Mineral Resources and
Inferred Mineral Resources, according to specifications for hard-
rock gold exploration issued by the Ministry of Natural Resources
of the PRC (DZ/T0205-2002)
‘‘smelting ’’ a pyrometallurgical process of separating metal by fusion from
those impurities with which it is chemically combined or
physically mixed
‘‘sq.km. ’’ square kilometre(s)
‘‘sq.m. ’’or ‘‘m
2’’ square metre(s)
‘‘standard gold ’’ gold bullion which satisfies both standard content requirements
(Au99.99, Au99.95, Au99.9, Au99.5) and standard weight
requirements (50g, 100g, 1kg, 3kg, 12.5kg) set by Shanghai Gold
Exchange
‘‘stope ’’ an underground excavation from which ore is being extracted
‘‘stoping ’’ removal of the ore from an underground mine leaving behind an
open space known as a stope
‘‘tailings ’’ the waste materials (residue) produced by the processing plant
after extraction of valuable minerals
‘‘tailings dam ’’ a storage facility for tailings
‘‘tonne’’or ‘‘t’’ metric tonne, a metric unit of weight, being equivalent to 1,000
kg
GLOSSARY OF TECHNICAL TERMS
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‘‘underground mine’’ openings in the earth accessed via shafts and adits below the land
surface to extract minerals
‘‘vein ’’ sheet-like body of minerals formed by fracture filling or
replacement of host rock
GLOSSARY OF TECHNICAL TERMS
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In this prospectus, we have used a number of terms defined in the CIM Definition Standards
adopted by NI 43-101. The CIM Definition Standards is an internationally accepted mineral resource or
reserve classification system which became effective on 19 May 2014. NI 43-101 is used by the
Competent Persons to report the Mineral Resources and Mineral Reserves of our gold mines in this
prospectus.
NI 43-101 incorporates, by reference, the definitions for ‘‘Mineral Resource(s) ’’or ‘‘Resource(s)’’
provided in the section headed ‘‘Glossary of technical terms’’ in this prospectus. Mineral Resources are
sub-divided in order of the increasing geological confidence of the estimate into the following
categories:
. Inferred Mineral Resour ce or Inferred Resource — that part of a Mineral Resource for
which quantity and grade or quality are estimat ed on the basis of limited geological evidence
and sampling. Geological evidence is sufficient to imply but not verify geological and grade
or quality continuity.
An Inferred Mineral Resource has a lower level of confidence than that applying to an
Indicated Mineral Resource and must not be converted to a Mineral Reserve. It is reasonably
expected that the majority of Inferred Mineral Resources could be upgraded to Indicated
Mineral Resources with continued exploration.
. Indicated Mineral Resource or Indicated Resource — that part of a Mineral Resource for
which quantity, grade or quality , densities, shape and physical characteristics are estimated
with sufficient confidence to allow the application of Modifying Factors in sufficient detail to
support mine planning and evaluation of the economic viability of the deposit.
Geological evidence is derived from adequately detailed and reliable exploration, sampling
and testing and is sufficient to assume geolog ical and grade or quality continuity between
points of observation.
An Indicated Mineral Resource has a lower level of confidence than that applying to a
Measured Mineral Resource and may only be converted to a Probable Mineral Reserve.
. Measured Mineral Resource or Measured Resource — that part of a Mineral Resource for
which quantity, grade or quality, densities, shape, and physical characteristics are estimated
with confidence sufficient to allow the applic ation of Modifying Factors to support detailed
mine planning and final evaluation of the economic viability of the deposit.
Geological evidence is derived from detailed and reliable exploration, sampling and testing
and is sufficient to confirm geological and gr ade or quality continuity between points of
observation.
A Measured Mineral Resource has a higher level of confidence than that applying to either an
Indicated Mineral Resource or an Inferred Mineral Resource. It may be converted to a Proven
Mineral Reserve or to a Probable Mineral Reserve.
SUMMARY OF NI 43-101
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‘‘Mineral Reserve(s)’’ or ‘‘Reserve(s) ’’ under NI 43-101 is provided in the section headed
‘‘Glossary of technical terms’’ in this prospectus. NI 43-101 provides for a direct relationship between
Indicated Mineral Resources and Probable Mineral Reserves, and between Measured Mineral Resources
and Proven Mineral Reserves. Mineral Reserves are the economically mineable parts of Measured and/or
Indicated Mineral Resources after a consideration of the relevant modifying factors, which include
mining, metallurgical, economic, marketing, legal, environmental, social and governmental
considerations. These assessments demonstrate at the time of reporting that economic extraction could
reasonably be justified. In certain situations, Measured Mineral Resources could convert to Probable
Mineral Reserves because of uncertainties associa ted with the modifying factors that are taken into
account in the conversion from Mineral Resources to Mineral Reserves. NI 43-101 deems Inferred
Mineral Resources to be too poorly delineated to be transferred into a Mineral Reserve category.
Mineral Reserve figures incorporate mining dilution and mining losses and are based on an appropriate
level of mine planning, design and scheduling. Mineral Reserves are sub-divided into the following
categories:
. Probable Mineral Reserve or Probable Reserve — is the economically mineable part of an
indicated, and in some circumstances, a Measured Mineral Resource. The confidence in the
Modifying Factors applying to a Probable Mineral Reserve is lower than that applying to a
Proven Mineral Reserve.
. Proven Mineral Reserve or Proven Reserve — is the economically mineable part of a
Measured Mineral Resource. A Proven Mineral Reserve implies a high degree of confidence
in the Modifying Factors.
The following diagram summarises the general relationships between exploration results, Mineral
Resources and Mineral Reserves under the NI 43-101.
Proven
Exploration
Results
Inferred
Indicated
Measured Proven
Probable
Increasing level of
geological
knowledge and
confidence
Consideration of mining, processing, metallurgical, economic,
marketing, legal, environmental, infrastructure, social,
and governmental factors
(the “Modifying Factors”).
MINERAL
RESOURCES
MINERAL
RESERVES
Mineral Reserves are generally quoted as comprising a portion of total Mineral Resources rather
than the Mineral Resources being additional to the Mineral Reserves quoted . Under NI 43-101, either
procedure is acceptable, provided the method adopted is clearly identified. The SRK Reports in this
prospectus reports all Mineral Reserves as part of Mineral Resources.
SUMMARY OF NI 43-101
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FORWARD-LOOKING STATEMENTS CONTAINED IN THIS PROSPECTUS MAY NOT
MATERIALISE
We have included in this prospectus forward-looking statements that are not historical facts, but
relate to our intentions, beliefs, expectations or predictions for future event. These forward-looking
statements are contained principally in the sections headed ‘‘Summary ’’, ‘‘Risk factors ’’, ‘‘Industry
overview ’’, ‘‘Business’’, ‘‘Financial information ’’and ‘‘Future plans and use of proceeds ’’, which are, by
their nature, subject to risks and uncertainties. These forward-looking statements include, without
limitation, statements relating to our business object ives, strategies and plan of operation, our capital
expenditure plans, financial sources, the amount and nature of, and potential for, future development of
our business, our operations and business prospects, our dividend payment, the regulatory environment
of our industry in general, future development in our industry, and general ec onomic and political trends
in the PRC.
In some cases, we use the words ‘‘aim’’, ‘‘anticipate ’’, ‘‘believe ’’, ‘‘can’’, ‘‘consider’’, ‘‘continue ’’,
‘‘could’’, ‘‘estimate ’’, ‘‘expect ’’, ‘‘intend’’, ‘‘may’’, ‘‘might ’’, ‘‘ought to ’’, ‘‘plan’’, ‘‘potential ’’, ‘‘predict ’’,
‘‘proj
ect’’, ‘‘propose ’’, ‘‘seek’’, ‘‘should ’’, ‘‘will’’, ‘‘would ’’or similar expressions or the negative of
these words or other similar expressions or statements to identify forward-looking statements, are
forward-looking statements.
These forward-looking statements involve known and unknown risks, uncertainties and other
factors, some of which are beyond our control, which may cause our actual results, performance or
achievements, or industry results, to be materia lly different from any future results, performance or
achievements expressed or implied by the forward-looking statements.
These forward-looking statements are based on various assumptions regarding our present and
future business strategies and the environment in whi ch we will operate in the future. Important factors
that could cause our actual performance or achievements to differ materially from those in the forward-
looking statements include, without limitation, the following:
. our business prospects, business strategies and plan of operation;
. realisation of the benefits or our future plans and strategies;
. our future debt levels and capital needs;
. our production, research and development and capital expenditure plans;
. our ability to control or reduce costs;
. the ability of third parties to perform in accordanc e with contractual terms and specifications;
. our dividend policy;
. future development of our business, expansion, consolidatio n, trends and conditions in the
industry and markets in which we operate;
FORWARD-LOOKING STATEMENTS
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. the regulatory environment of our industry in general and restrictions that may affect the
industry in which we operate;
. the general industry outlook, competition for ou r business activities and future development
in our industry;
. macroeconomic measures taken by the PRC Government or governments of other relevant
countries or territories in which we may operate our business to manage economic growth
and general economic trends;
. changes in general political and economic conditions in the PRC and other relevant countries
or territories that may be detrimental to the industry in which we operate;
. our overall financial cond ition and performance;
. the actions of and developments affecting our competitors;
. capital market developments;
. other statements in this prospectus that are not historical facts; and
. other factors beyond our Group’ s control.
We believe that the sources of information and as sumptions contained in such forward-looking
statements are appropriate sources for such statements and we have taken reasonable care in extracting
and reproducing such information and assumptions . We have no reason to believe that information and
assumptions contained in such forward-looking statements are fake or misleading or that any fact has
been omitted that would render such forward-looking statements fake or misleading in any material
respect. These forward-looking statements are subject to risks, uncertainties and assumptions, some of
which are beyond our control. In addition, these forward -looking statements reflect the current views of
our Company with respect to future events and are not a guarantee of future performance.
The information and assumptions contained in the forward-looking statements have not been
independently verified by us, the Controlling Shareho lder, the Sole Sponsor, the Overall Coordinator,
the Sole Global Coordinator, the Joint Bookrunners, the Joint Lead Managers, the CMIs, the
Underwriters, any other party involved in the Global Offering or their respective directors, officers,
employees, advisers or agents, and no representation is given as to the accuracy or completeness of such
information or assumptions on which the forward-l ooking statements are made . Additional factors that
could cause actual performance or achievements of our Group to differ materially include, but are not
limited to, those discussed under the section headed ‘‘Risk factors ’’and elsewhere in this prospectus.
These forward-looking statements are based on current plans and estimates, and apply only as of
the date they are made. Our Company undertakes no obligations to update or revise any forward-looking
statements in light of new information, future events or otherwise. Forward-looking statements involve
FORWARD-LOOKING STATEMENTS
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inherent risks and uncertainties and are subject to assumptions, some of which are beyond our control.
Our Company cautions prospective investors that a number of important factors could cause actual
outcomes to differ, or to differ materially, from those expressed in any forward-looking statements.
Due to these risks, uncertainties and assumptions, the forward-looking events and circumstances
discussed in this prospectus might not occur in the way we expect, or at all. Accordingly, prospective
investors should not place undue reliance on any forward-looking information. All forward-looking
statements contained in this prospectus are qualified by reference to these cautionary statements set out
in this section.
In this prospectus, statements of or references to our intentions or those of any of our Directors are
made as at the date of this prospectus. Any such intentions may change in light of future developments.
FORWARD-LOOKING STATEMENTS
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Prospective investors should consider carefully all the inform ation set out in this prospectus
and including the risks and uncertainties described below before making an investment in the Offer
Shares. Prospective investors should pay particular attention to the fact that we conduct our
operations in the PRC and are governed by the local legal and regulatory environment which in
some respects may differ from that prevailing in o ther countries. The occurrence of any of the
following events could harm us and our Group ’s business, financial condition or results of operations
could be materially and adversely affected by any of these risks and uncertainties. If these events
occur, the trading price of the Shares could decline and prospective investors may lose all or part of
their investment.
RISKS RELATING TO THE BUSINESS OPERATIONS OF OUR GROUP
Fluctuations in the market price of gold could materially and adversely affect our Group ’s
profitability and cash flow.
Our revenue is generated from the sale of gold bullion refined by third party smelters derived from
gold concentrate processed by us, with reference t o the prevailing Au (T+D) spot price as quoted on the
Shanghai Gold Exchange. Historically, while the gold price has increased in value over time, it has
fluctuated widely and there can be no assurance that the gold price will not continue to fluctuate in the
future or that such prices will otherwise remain at s ufficiently high levels to support our profitability
and cash flow.
According to the F&S Report, average global market gold spot price increased from approximately
US$1,765.4 per ounce in 2020 to approximately US$1,798.9 per ounce in 2021, approximately
US$1,801.3 per ounce in 2022 and further increased to approximately US$1,931.5 per ounce in the first
half of 2023. The average gold spot price in the PRC in 2020, 2021, 2022 and the first half of 2023 was
approximately RMB387.1 per gram, RMB374.3 per gram, RMB392.1 per gram and RMB433.8 per
gram, respectively. For further details of the global and the PRC gold spot price on the Shanghai Gold
Exchange, please refer to the section headed ‘‘Industry overview — Gold industry in China and
Shandong — Gold price ’’of this prospectus.
Fluctuations in gold price are inherently difficult to predict, being dependent on numerous factors
such as (i) global macro-economic and political ev ents and sentiments such as regional conflicts
including Russian Ukraine conflict and Israel-Palestine conflict; (ii) supply and demand for gold; (iii)
interest rate and inflation rate expectations; (iv ) actual and predicted behavior of central banks in
relation to gold acquisition and disposals; and (v) performance of exchange traded gold funds and
speculative trading in gold. For illustration, accord ing to the F&S Report, the average global gold spot
price and the average gold spot price in the PRC in January 2022 was approximately US$1,816.8 per
ounce and RMB372.6 per gram, respectively. Upon the occurrence of the Russia-Ukraine tensions in
February 2022, the global spot price and the gold spot price in the PRC further increased by
approximately 6.6% and 5.3%, respectively to US$1,936.3 per ounce and RMB392.5 per gram,
respectively on 24 February 2022 when Russian President Vladmir Putin announced the launch of a
special military operation in eastern Ukraine, as co mpared to January 2022. After the outbreak of the
Israel-Palestine conflict on 7 October 2023, the global spot price and the gold spot price in the PRC
RISK FACTORS
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increased by approximately 7.6% and 4.5%, respectively, to US$1,957.5 per ounce and RMB468.3 per
gram on 9 November 2023 from US$1,819.6 per ounce on 6 October 2023 and RMB448.0 per gram on
28 September 2023 (the last trading day before 7 October 2023 due to the National Day holiday in
mainland China), respectively. Average global gold spot price is US$1,801.3 per ounce in 2022,
increasing to US$1,931.5 per ounce in first half of 2023, around 7.2% increase; average China gold spot
price is RMB392.1 per gram in 2022, increasing to RMB433.8 per gram in first half of 2023. If the gold
price should fall below or remain below our cost of production for any sustained period as a result of,
among others, the ease of Russia-Ukraine and/or Israel-Palestine tensions or the interest rate hike, our
business and results of operations would be materially and adversely affected. As a result, we may be
forced to suspend some or all of our operations, or reduce any planned capital expenditures in part or
completely. Further, the Mineral Reserves of our Songjiagou Open-Pit Mine and our Songjiagou
Underground Mine as at 30 June 2023 were estimated using, among other things, a gold price of
RMB310 per gram, such Mineral Reserves estimate may also be affected by significant fluctuations in
actual gold prices.
Our existing mining operations have a finite life and our business expansion plan may not achieve
the intended economic benefits. Further, the eventual closure of these operations will entail costs
and risks regarding on-going monitoring, rehab ilitation and compliance with environmental
standards.
Our existing mining operations have a finite life and will eventually close. According to the SRK
Report, the estimated LoM of our Songjiagou Open-Pit Mine and our Songjiagou Underground Mine are
8.5 years and 6.0 years, respectively. In order to maintain our future growth beyond the estimated LoM
of our current gold mines, we may need to expand our Mineral Resources or Mineral Reserves. Further,
the estimation of LoM already considered the implementation of our optimisation plan of our
Songjiagou Open-Pit Mine. If the mine optimisation plan is delayed or interrupted by various reasons,
including shortage of funding for the construction cos ts, severe weather conditions or any other factors
outside our controls, the net present value of the mine might decrease. Further, our gold production
volume and gold sales volume will be reduced and our revenue and profitability will be adversely
affected. Due to the finite nature of our existing mining operations, an integral part of our business
strategy is to expand our business by increasing our Mineral Reserves and production capacity, as well
as through selective acquisition of gold mines. How ever, we may not be able to successfully implement
our expansion plan, or our expansion plan may not achieve the intended economic benefits by the higher
cost to operate an underground gold mine to be acquired. Our expansion plan may also be delayed or
adversely affected by numerous factors, including the failure to obtain necessary regulatory approvals,
technical difficulties, and the lack of manpower or other resource constraints, which may divert
resources and management attention from our other business activities. In addition, the costs of our
expansion plans may exceed our planned investment budget. As a consequence of delays, cost overruns,
changes in market circumstances or other factors, the intended economic benefits from these expansion
plans may not materialise and our business, fina ncial condition and results of operations may be
materially and adversely affected.
The key costs and risks for mine closures are: (i) long-term management of permanent engineered
structures; (ii) achievement of environmental closure standards; (iii) orderly retrenchment of employees;
and (iv) relinquishment of the site with associated permanent struc tures and community development
infrastructure and programs to new owners. The successful completion of these tasks is dependent on
RISK FACTORS
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our ability to successfully implement negotiated agreements with the relevant government authorities,
community and employees. The consequences of a difficult closure range from increased closure costs
and handover delays to on-going e nvironmental rehabilitation costs and damage to our reputation if a
desired outcome cannot be achieved, all of which could materially and adversely affect our business and
results of operations.
We rely significantly on Shandong Guoda to refine our gold concentrate into gold bullion of
Au99.95 and its subsequent purchase thereof.
During the Track Record Period, we outsourced the refining of gold concentrate produced by us
into gold bullion of Au99.95 principally to Shandong Guoda, and we subsequently sold the gold bullion
to it for its subsequent sales on the Shanghai Gold Exchange. During the Track Record Period,
purchases of refining services from Shandong Guoda amounted to approximately RMB5.3 million,
RMB4.1 million, RMB13.7 million and RMB5.4 million, respectively, accounted for approximately
6.0%, 7.3%, 12.2% and 10.6% of our total purchases. Sales derived from Shandong Guoda during the
Track Record Period amounted to approximately RMB335.8 million, RMB247.9 million, RMB418.4
million and RMB196.7 million, re spectively, accounted for approxi mately 93.0%, 100.0%, 100% and
100% of our total revenue. Shandong Guoda became our sole subcontractor for gold refining services
and our sole customer since 2021.
According to Shandong Guoda, Shandong Guoda has been in the process of changing its principal
business from gold smelting to copp er smelting. For further details of Shandong Guoda, please refer to
the section headed ‘‘Business — Sales and customers — Our relationships with Shandong Guoda and
Shandong Humon — Shandong Guoda’’ in this prospectus. As there is no exclusive arrangement
between Shandong Guoda and us, in the event that Shandong Guoda does not renew our contract for
refining services for the aforesaid reason or other reasons or it adjusts the processing fees of its refining
services significantly, we may not be able to identify suitable subcontractor who would provide refining
services to us and would also purchase gold bullion from us in a timely manner or at all, which may
have a material adverse effect on our business, financial condition and results of operations.
As a developing mining company, we cannot guarantee that we will generate revenue or positive
cash flow and grow our business as planned.
We have over 18 years of operating history. We commenced commercial production for our
Songjiagou Open-Pit Mine in May 2011 and our Songjiagou Underground Mine in September 2019.
While we had generated profits or positive cash flo ws from our operations during the Track Record
Period, we cannot assure you that we will be able to achieve successful operation or commercial
viability. We may not be able to generate profits in the future.
We may encounter risks and uncertainties commonly experienced by early-stage mining
companies, including those relating to:
. our ability to maintain effective control over operating costs and expenses;
. our ability to maximise returns of our Shareholde rs by constantly evaluating risks against
opportunities in the market when a llocating capital for expansion;
RISK FACTORS
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. our ability to explore and identify new gold mine s to keep our mining operation sustainable;
. our ability to ramp up our processing capacities a nd production output according to our plan;
. the quality of our gold ore;
. our ability to respond to changes in the regu latory environment in the PRC; and
. our ability to manage the logistics, utility and supply needs of our expanded operations.
If we are unable to address any of these and other related risks, our business, financial condition
and operating results may be materially and adversely affected.
Our operations are currently concentrated on tw o gold mines and we are exposed to uncertainties
in relation to these mines.
As at the Latest Practicable Date, we had two gol d mines, namely, the Songjiagou Open-Pit Mine
and the Songjiagou Underground Mine. While we endeavour to acquire more gold mines in the future,
we expect these two gold mines to be our only operating gold mines in the near term, and therefore we
expect all of our revenue and operating cash flows to be derived from the sale of gold produced from
these two mines in the near future. According to the SRK Report as set out in Appendix III to this
prospectus, the possible risks of our Songjiagou Open-Pit Mine and our Songjiagou Underground Mine
which may occur within the respective LoMs include improper classification of Mineral Resource
category, significant geological structures, defo rmation of final pit wall. The Competent Person also
identified environmental risks (land disturbance and steep side slope, poor water management and dust
emission) and social risks (stakeholder engagement and cultural heritage protection) relating to our
operations. We cannot guarantee that our mitigation m easures will be sufficient to prevent such risk for
occurring in the future. In addition, all mines in the Shandong Province (including ours) were ordered to
temporarily suspend operations from February 2021 to enable the government authority to carry out
safety inspection in accordance wit h the requirements of the local aut horities after the occurrence of two
safety incidents in January and February 2021 at Qixia Hushan Gold Mine ( 棲霞市笏山金礦)o f
Shandong Wucailong Investment Company Limited ( 山東五彩龍投資有限公司) and Caojiawa Gold
Mine ( 曹家窪金礦) of Zhaoyuan Caojiawa Gold Mine ( 招遠市曹家窪金礦), two local enterprises which
are owned by Independent Third Parties. Our Songjiagou Underground Mine has passed the safety
inspection and obtained resumption approvals in April 2021 and resumed operations in December 2021
while our Songjiagou Open-Pit Mine passed the safe ty inspection and obtained resumption approvals in
August 2021 and resumed operations in late August 2021. We cannot guarantee that such shutdown will
not reoccur in the future. Any problem that causes our mines to suspend operations or causes them to
operate at less-than-optimal capacity, or the occurrence of any other negative event as described
elsewhere in this prospectus could reduce, disrupt or halt our operations, which in turn could materially
and adversely affect our business, financia l condition and results of operations.
RISK FACTORS
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Our operations are subject to safety inspection from government which may cause temporary
suspension of our operation.
Our operation was temporary suspended from February 2021 to August 2021 (for our Songjiagou
Open-Pit Mine) and February 2021 to November 2021 (for our Songjiagou Underground Mine) to
facilitate safety inspection from g overnment after the occurrence o f two safety incidents in two gold
mines in the Shandong Province (which are Independent Third Party) in January and February 2021.
Further, during May to mid-July 2023, our mining activities were paused to facilitate the safety
inspection on our newly constructed benches (i.e. the southern part of our Songjiagou Open-Pit Mine)
required for enabling us to obtain an enhanced safety production permit and conduct our mining works
under +21 m ASL. There was unexpected delay solely due to scheduling conflicts between our Group
and the designated specialists of government department for safety inspection. There is no assurance that
our Group would not be subject to further safety inspection from the government which leads to
temporary suspension of operations.
Early termination or non-renewal of the leasing arrangements of land and buildings by Dahedong
could have a material adverse effect on our business, financial conditions and results of operations.
During the Track Record Period and up to the Latest Practicable Date, we leased from Dahedong,
among others, two parcels of Collectively-owned Rural Land as mining area of our Songjiagou Open-Pit
Mine, a parcel of Collectively-owned Construction Land and the ore processing plant and related
facilities constructed on the Collectively-owne d Construction Land. The leases for the land for our
Songjiagou Open-Pit Mine will expire in September 2027 while the leases for the land and building of
the ore processing plant and dormitory will expire in December 2031, such leases will be renewed for a
further 10 years upon expiry of the lease period. If Dahedong decides not to lease the abovementioned
land and buildings to us upon expiry of the lease period or early terminate the lease arrangements prior
to the expiry of the lease period, our mining operatio ns will be materially and adversely interrupted as
we will not be able to access our Songjiagou Open-Pit Mine, which contributed over 90% of our ore
mined volume during the Track Record Period, to carry on our mining activities and will not be able to
process ore concentrate at the ore processing plant. Even if we are able to lease an ore processing plant
in the nearby area to process ore mined from our Songjiagou Underground Mine which is not subject to
lease arrangement, given the permitted annual prod uction volume from our Songjiagou Underground
Mine is only 10% of our Songjiagou Open-Pit Mine, our financial condition and results of operations
will be materially and adversely affected.
Our operations may be interrupted if we are denied access to our mines.
We conduct some of our mining activities on land tha t is collectively-owned by Independent Third
Parties. We have signed lease agreements with the owners of the collectively-owned land authorising us
to use and occupy the land for our mining operations and setting out details of the area, method of use
and relevant compensation for each affected mining area. If we are denied access to any of our mines
due to a breach of these lease agreements by the owners of the relevant collectively-owned land or the
expiration of any of such agreements, or if there is a dispute regarding our use of their land or the terms
of our agreements with them, it may require substantial time, cost and effort to regain access to our
mines and any interruptions to our operations or sustained inability to access our mines may have a
material adverse effect on our business, financial condition and results of operations.
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Our failure to achieve our production estimates could have a material adverse effect on our
business, financial condition and results of operations.
Our production estimates are based on, among other things, Mineral Reserves estimates, gold
recovery rate, assumptions regardin g ground conditions and physical characteristics of Mineral Reserves,
our mining schedule, utilisation of production fac ilities, costs of production and conditions of the
industry and the general economy. There are uncertainties relating to our production estimates, and
relating to our ability to achieve the mining schedule. Since our Mineral Reserves estimates as at 30
June 2023 are based on a gold price assumption of approximately RMB310 per gram, our operation and
actual production may also be affected by significant gold price change. According to the SRK Report,
as at 30 June 2023, the net present value of our Songjiagou Open-Pit Mine and our Songjiagou
Underground Mine in aggregate amounted to approximately RMB3,332 million, which indicated that our
gold mines are economically viable with pos itive net cash flow from 2022 to 2031. Such economic
analysis was carried out based on various assumptions and factors. Therefore, in a hypothetic situation
and assuming the current project design, LoM schedule and all other operational factors remain constant,
if the gold price decreases by a certain percentage, our projected operation may be considered
uneconomic and we may fail to achieve our production estimates. For more details of the economic
analysis by the Competent Person, please see the section headed ‘‘SRK Report — 20. Economic
analysis’’ in Appendix III to this prospectus.
Actual production may vary from estimates for a variety of reasons, including risks and hazards in
the SRK Report, including but not limited to:
. actual gold-containing ore mined from our Songjiagou Open-Pit Mine and our Songjiagou
Underground Mine varying from estimates in grade, tonnage, and metallurgical and other
characteristics;
. encountering unusual or unexpected geologic al conditions, such as the lack of significant
Mineral Resources and lower average grade of gold;
. mining dilution;
. actual gold recovery rate lower than estimates during the testing;
. industrial accidents;
. equipment failures during ore processing;
. natural phenomena such as we ather conditions, floods, rock slides and earthquakes;
. changes in the costs of electricity;
. decreases in gold price in the PRC which may cause Mineral Reserves that are currently
economic to become uneconomic;
. labour unrest, strikes, labour turnover;
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. interference from local co mmunities and competitors;
. political and socio-economic impact; and
. shortages of supplies needed for operation.
Such occurrences could result in damage to our mining assets, interruptions in production, injury
or death to persons, damage to our property or the property of others, monetary losses and legal
liabilities. These factors may cause a mineral deposit that has been mined profitably in the past to
become unprofitable. It is possible that actual fac ilities utilisation, gold recovery rate, operating cash
costs and economic returns will differ significantly from those currently estimated. We cannot assure
you that we will achieve our production estimates. Our failure to achieve our production estimates could
have a material and adverse effect on our busine ss, financial condition and results of operations.
We may not be able to obtain, retain or renew government approvals, licences and permits
necessary for our business operations.
Our ability to carry out our business operations is subject to our ability to obtain and retain
necessary approvals, licences and permits from rele vant PRC Government authorities and to renew them
when they expire. Any failure to obtain, retain or renew, or any delay in obtaining or renewing, such
approvals, licences or permits co uld subject us to a variety of administrative penalties or other
government actions and adversely impact our business operations.
Under the PRC Mineral Resources Law, all mineral resources in the PRC are owned by the state.
As a gold mining company, we are required to obtain certain government licences and permits, among
which mining licences are crucial for our mining operations. Mining licences are limited to a specific
geographic area and a certain time period. The validity of a mining licence is determined according to
the scale of the mine. During the Track Record Period and up to the Latest Practicable Date, we held
valid mining licences for our Songjiagou Open-Pit Mine and our Songjiagou Underground Mine, both of
which will expire in 2031. We plan to apply to the ap propriate authorities for a renewal when such
licence expires.
In addition, pursuant to relevant PRC laws and regulations, before commencing formal production,
we are required to pass the inspection and acceptanc e of safety facilities and environmental protection
facilities by the production safety authority and env ironmental protection authority and to obtain a
production safety permit.
As advised by our PRC Legal Advisers, during the Track Record Period and up to the Latest
Practicable Date, we had obtained the requisite approvals, licences and permits for our current
operations in all material aspects. However, we may not be able to obtain or renew such approvals,
licences or permits or obtain, retain or renew other approvals, licences and permits necessary for our
business operations in the future, either in respect of our Songjiagou Open-Pit Mine and our Songjiagou
Underground Mine or at any mines we may operate in the future. Our mining licences for our
Songjiagou Open-Pit Mine and our Songjiagou Underground Mine are subject to annual inspection by
the competent bureau of land and resources at central or provincial level. In the annual inspection, the
relevant authorities will consider whether our mini ng activities in the past year have been in compliance
with the relevant laws and regulations. If we do not pass the annual inspection, we may be penalised
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according to the relevant laws and regulations, be given a deadline to rec tify the situation, or our mining
licences may be suspended or revoked. Should our mining licence be suspended or revoked or we have
to incur additional significant costs to rectify non-compliances, our business , financial condition and
results of operations would be materially and adversely affected.
The preferential tax treatment currently enjoyed by our PRC subsidiary may be changed or
discontinued, which may adversely affect our business, financial condition and results of
operations.
Pursuant to the EIT Law, with respect to a high a nd new technology enterprise, the tax levied on
its income will be at a rate of 15% after obtaining the High-tech Certificate and completing the filing
with the competent tax authorities. Yantai Zhong jia was certified by the PRC government authorities as
a High and New Technology Enterprise, and therefore enjoyed preferential enterprise income tax rates of
15% from January 2020 to December 2022. In order to maintain this status as a high technology
enterprise, in the future, we will need to continue to file an application with the competent authorities
for their review and determination of our relevant subsidiary as high and new technology enterprise
within three months prior to the expiration of the app licable High-tech Certificate. After passing the
review, Yantai Zhongjia will still be required to co mplete the tax reduction and exemption filing with
the competent tax authorities to continue to have a p referential tax rate of 15%. Also during validity
term of High-tech Certificate, we are still subject to yearly qualification review. In arriving at the
current tax provision for Yantai Zhongjia for FY2020, FY2021, FY2022 and 6M2023, we have
prudently adopted, among others, the uniform EIT rate of 25% to avoid the potential impact on our
financial statements during the Track Record Period should the tax authority hold a different view on
the preferential tax rate we enjoyed. Also, we can not assure you that we will be able to pass all reviews
in the future and to complete the tax reduction and ex emption filing with the competent tax authorities
in order to maintain the preferential tax rate. We also cannot assure you that th e preferential tax rate
treatment for high technology enterprises under PRC law will not change or be discontinued in the
future.
The accuracy of the Mineral Resources and Mineral Reserves estimates of our Songjiagou Open-
Pit Mine and our Songjiagou Underground Mine is based on a number of assumptions, and we
may produce less gold than the current estimates.
The Mineral Resources and Mineral Reserves estimates of our Songjiagou Open-Pit Mine and our
Songjiagou Underground Mine are based on a number of assumptions made by the Competent Person in
accordance with NI 43-101. For more details about the procedures and parameters used for Mineral
Resources and Mineral Reserves estimates, please see the SRK Report as set out in Appendix III to this
prospectus. The accuracy of estimates depend o n the quantity and quality of available data, the
assumptions made and the judgements used in engineering and geological interpretation, which may
prove to be unreliable. There is no assurance that the estimates will prove accurate or that the Mineral
Reserves can be mined or processed profitably.
The Mineral Resources and Mineral Reserves estimates of our Songjiagou Open-Pit Mine and our
Songjiagou Underground Mine may change signific antly when new information becomes available or
new factors arise, and interpretations and deductions on which Mineral Resources and Mineral Reserves
estimates are based may prove to be inaccurate. Mineral Resources estimates indicate mineral
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concentration or occurrence of solid material of economic interest in our Songjiagou Open-Pit Mine and
our Songjiagou Underground Mine in such form, quality and quantity with reasonable prospects for
eventual economic extraction, based on specific geological evidence and knowledge, including sampling.
Mineral Reserves contained in this prospectus are an estimation of the amount of gold that we believe
can be economically mined and processed and are calculated based on a number of economic and
technical assumptions, including, among others, the estimates of future production costs and gold prices.
In the future, we may need to revise the Mineral Reserves estimates of our Songjiagou Open-Pit Mine
and our Songjiagou Underground Mine if, for instance, our production costs increase or gold prices
decrease and as a result the extraction of a portio n (or all) of the gold from Mineral Reserves at our
Songjiagou Open-Pit Mine and our Songjiagou Underground Mine becomes uneconomical. For example,
our gold content of Mineral Reserves estimates as at 30 June 2023 was based on a gold price
assumption of RMB310 per gram over an estimated Lo M of approximately 8.5 years for our Songjiagou
Open-Pit Mine and approximately 6.0 years for our Songjiagou Underground Mine. The aforementioned
gold price assumption is set with re ference to historical average gold price between January 2018 and
30 June 2023, which was approximately RMB310 per gram. According to the SRK Report, if gold price
decreases from RMB420 per gram to RMB290 per gram, our Mineral Reserves estimates in terms of ore
tonnage in respect of our Songjiagou Open-Pit Mine and Songjiagou Underground Mine will decrease
by approximately 10.2% from approximately 27,591 kt to approximately 24,780 kt and 24.2% from
approximately 745 kt to approximately 565 kt, respec tively. For more details on the impact of different
gold prices and other assumptions on Mineral Reserves estimates, please see the section headed ‘‘SRK
Report — 13. Mineral Reserve estimation’’ in Appendix III to this prospectus.
In addition, compared to ‘‘measured ’’or ‘‘indicated ’’resources category, ‘‘inferred ’’resources have
a greater amount of uncertainty as to their existence and as to whether they can be mined economically
as such resources are inferred from geological evidence and assumed but not verified. It cannot be
assumed that all or part of the ‘‘inferred resources’’ will ever be upgraded to a higher category.
The inclusion of Mineral Resources and Mineral Reserves estimates should not be regarded as a
representation that all these amounts can be economic ally mined or processed, and nothing contained in
this prospectus (including without limitation, the e stimates of LoM) should be interpreted as assurances
of the economic viability of our Songjiagou Open-Pit Mine and our Songjiago u Underground Mine or
the profitability of our future operations.
Our operating costs may be higher than expected.
During the Track Record Period, our operating costs are mainly represented by the Songjiagou
Open-Pit Mine. Despite open-pit mining is more cost efficient than underground mining according to
Frost & Sullivan, there are approximately 95% of gold mining in China involves underground mining. If
and when we acquire underground gold mines in future, our operating costs could increase primarily due
to additional expenses associated with underground mi ning infrastructure construction and equipment
purchasing. Further, the mining costs generally increase over the lifespan of a mine as pits become
deeper. If our mining costs, labour costs or other operating costs increase and we cannot increase our
average selling price and our production efficiency to offset any such increase, our profitability and
results of operations may be adversely affected.
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We rely on third-party subcontractors to conduct refining and logistics works.
We outsource substantially, all refining and logistics works to qualified Independent Third Party
subcontractors as it is common in the industry. During the Track Record Period, we engaged two
Independent Third Party subcontractors, namely, Shandong Guoda and Shandong Humon, to provide
refining services to us. The aggregate purchases of refining services from Shandong Guoda and
Shandong Humon during the Track Record Period amounted to approximately RMB5.7 million, RMB4.1
million, RMB13.7 million and RMB5.4 million, accounte d for approximately 6.5%, 7.3%, 12.2% and
10.6% of our total purchases, respectively. Since 2021, we have been engaging only Shandong Guoda as
our subcontractor for refining services. For details, please refer to the paragraph headed ‘‘Risks relating
to the business operations of our Group — We rely significantly on Shandong Guoda to refine our gold
concentrate into gold bullion of Au99.9 5 and its subsequent purchase thereof ’’in this section. In respect
of the subcontractors we engaged during the Track Record Period for logistic service, they are mainly
individuals. The aggregate purchases of logistics services from them during the Track Record Period
amounted to approximately RMB7.2 million, RM B5.0 million, RMB9.1 million and RMB3.8 million,
accounted for approximately 8.2%, 8.9%, 8.1% and 7.4% of our total purchases, respectively. For
further details of the major Independent Third Party subcontractors we have engaged during the Track
Record Period, please refer to the section headed ‘‘Business — Suppliers and subcontractors ’’of this
prospectus.
As a result, our operations will be affected by th e performance of these Independent Third Party
subcontractors. Although we monitor the works of Independent Third Party subcontractors to ensure that
they are carried out on time, on budget and in accordance with our mine plannings and specification, we
may not be able to control the quality, safety and e nvironmental standards of the works conducted by
Independent Third Party subcontractors to the same extent as the works conducted by our own
employees. In such event, we may become engaged in disputes with our Independent Third Party
subcontractors, which could lead to additional expenses, distractions and potentially loss of production
time and additional costs, any of whic h could materially and adversely affect our business, financial
condition and results of operations.
In addition, under the relevant PRC laws and reg ulations, an owner of the mining licence has a
statutory obligation to ensure production safety. In the event of any production safety-related accident
involving a subcontractor, we may be held directly lia ble or liable for compensation to the extent of our
faults regardless of any contractual provisions to the contrary. Any failure by the Independent Third
Party subcontractors to meet our quality, safety and environmental standards may result in liabilities to
us and have a material adverse effect on our busines s, financial condition and results of operations, and
could also affect our compliance with government ru les and regulations relating to mining and workers ’
safety.
Our business requires significant an d continuous capital investment.
As a result of our overall business expansion strategy, we will require a high level of capital
expenditure in the foreseeable future to fund our ongoing operations and future growth. We expect our
capital expenditures for our existing mines for the two years ending 31 December 2024 and the funding
for our expansion plans to, among others, further c onstruction of mining infrastructure in accordance
with our mine optimisation plan, upgrade our gold reserves to increase LoM through additional
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exploration activities and expand bu siness through selective acquisiti on. If we fail to construct additional
mining infrastructure at the expanded area to extend our boundary in the existing mined area in
accordance with the mine optimisation plan and de sign, our gold production volume and gold sales
volume will be reduced and our revenue and profita bility will be adversely affected. In view of the
above, we will require additional capital to continuously construct new benches in accordance with the
optimisation plan and design, implement our stra tegy of acquiring additional mining assets and
undertaking additional exploration activities in the future. We intend to fund o ur capital expenditures,
future acquisitions and additional exploration ac tivities out of internal sources of liquidity and/or
through access to additional financing from external s ources. Our ability to obtain external financing in
the future at a reasonable cost is subject to a variety of uncertainties, including:
. our future financial condition, resu lts of operations and cash flows;
. the condition of the global and domestic financial markets; and
. changes in the monetary policy of the PRC Government with respect to bank interest rates
and lending practices.
If we require additional funds and cannot obtain t hem on acceptable terms when required or at a
reasonable financing cost or at all, we may be unable to fulfill our working capital needs, upgrade our
existing facilities or expand our business. These or oth er factors may also prevent us from entering into
transactions that would otherwise benefit our business or implementing our future strategies. Any of
these factors may have a material adverse effect on our business, financial condition and results of
operations.
We may not be able to obtain financing on favourable terms, or at all, to fund our on-going
operations, existing and future capital expenditur e requirements, acquisitions and investment plans
and other funding requirements , and our ability to raise additi onal funds could be materially
affected by the fluctuations in the capital market.
The exploration, mining and production activities are highly capital intensive. During the Track
Record Period, we had funded part of our capital e xpenditures of approximately RMB120.4 million,
RMB58.5 million, RMB45.7 million and RMB39.6 million, respectively, with capital contributions and
borrowings from our Controlling Shareholder and bank loans. We expect to supplement such funding
with cash flow from our sales of gold bullion. Howe ver, to fund our current and future operations, we
expect to rely heavily on external sources. To fund our Group ’s ongoing operations and future growth,
our Group will require capital expenditures amounting to approximately RMB8.5 million and RMB209.8
million for the two years ending 31 D ecember 2024, respectively. For de tails, please refer to the section
headed ‘‘Business — Business strategies ’’in this prospectus. Our ability to obtain external financing in
the future is subject to a variety of uncertainties, in cluding our future financial condition, results of
operations and cash flows, the condition of the glob al and domestic financial m arkets, and changes in
bank interest rates and lending practices and conditions.
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Any disruptions, uncertainty or volatility in the capital and credit markets resulting from any
global financial crisis may also limit our ability to obta in financing to meet our funding requirements. If
adequate funding is not available to us on comme rcially acceptable terms in time, or at all, it may
materially and adversely affect our ability to fund our existing operations, to develop or expand our
business.
We may have difficulty in managing our future growth and any associated increased scale of our
operations.
We expect to expand through both organic growt h and acquisitions. Our future expansion may
place a significant strain on our managerial, operational, technical and financial resources. In order to
better allocate our resources to manage our growth, we must hire, recruit and manage our workforce
effectively and implement adequate internal controls in a timely manner. If we are unable to effectively
manage our growth and the associated increased scale of our operations, our business, financial
condition and results of operations coul d be materially and adversely affected.
We may experience problems in executing, managin g and integrating acquisitions, joint ventures
and strategic collaborations for ou r existing and future operations.
Our existing principal subsidiary, Yantai Zhon gjia, is operated through a joint venture with
Dahedong of which Majestic Yantai BVI owns 75% and Dahedong owns the minority interest of 25%.
We intend to adopt similar joint venture structure when we expand through future acquisitions. Yantai
Zhongjia is currently jointly managed based on the joint venture agreement between Majestic Yantai
BVI and Dahedong, of which Dahedong is entitled to nominate two of the five directors of Yantai
Zhongjia, as well as the supervisor of Yantai Zh ongjia while Majestic Yantai BVI is entitled to
nominate the remaining three directors of Yantai Zhongjia and the general manager, who is responsible
for day to day operations of Yantai Zhongjia. Each of Majestic Yantai BVI and Dahedong nominates
one cashier and one accounting officer, respectively. Yantai Zhongjia is responsible for its own
employees and liable for the employees ’ compensation and other benefits under the laws of the PRC.
The joint venture agreement does not give Dahedong any veto rights over any corporate actions of
Yantai Zhongjia.
The success of our existing and future joint ventu res depends on a number of factors, including the
financial resources of the other shareholders and joint venture partners, their willingness and ability to
honour their commitments under the joint venture agreements, the manner in which they exercise
control, veto or other governance rights in respect of the joint venture, and the extent to which they
cooperate in operational and strategic decisions with respect to the relevant mine. If we become engaged
in material disagreements with our joint venture part ners, the operational and financial results of the
underlying mines may be adversely affected.
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We may not be successful in future acquisitions. A ny acquisition or strategic investment that we
undertake could be difficult to integrate , which may adversely affect our operations.
We may strategically pursue acquisitions, joint v entures or strategic collaborations to strengthen
our industry leadership. Any such ac quisition, joint venture or strate gic collaboration may change the
scale of our business and operations and may expose u s to new geographic, geological, political, social,
operating, financial, legal, regulatory an d contractual risks, including but not limited to:
. significant changes in commodity prices afte r we have committed to complete a transaction
and established a purchase price or share exchange ratio;
. mineral ore bodies that may not meet expectations;
. difficulties integrating and assimilating the operations and personnel of any acquired
companies, realising anticipated synergies and maximising the financial and strategic position
of the combined enterprise, and maintaining uniform standards, policies and controls;
. higher costs of integration than we anticipated;
. diversion of management ’s attention from our day-to-day business;
. inability to manage the newly acquired entities due to new operating and regulatory
requirements;
. undetected liabilities which may be significant;
. disputes or breaches by our joint venture partners or strategic business partners, or the
inability of our joint venture partners or strategi c business partners to fulfill contractual
obligations due to their busines ses or financial condition; and
. difficulties in obtaining various governmental approvals.
Mineral Reserves of our Songjiagou Open-Pit Mine and our Songjiagou Underground Mine will
decline as we produce more gold. As part of our business strategies, we intend to increase our Mineral
Reserve base through acquisitions. There can be no assurance that we will be successful in these
acquisitions. In addition, we must obtain various regulatory approvals, licences and permits in order to
develop new Mineral Reserves. There is no assurance t hat we could successfully acquire additional gold
mines or companies with existing exploration or mining licences and additional gold mining assets or
develop gold resources or obtain necessary governmental approvals, which may materially and adversely
affect our business, financial cond ition and results of operations.
In respect of future acquisitions, we may encounte r difficulties in integrating acquired operations,
services, corporate culture and personnel into our existing business and operations. Further, we may
discover previously unidentified liabilities or other issues that we did not discover in our pre-acquisition
due diligence investigations. These activities may dive rt significant management attention from existing
business operations, which may harm our busin ess. In addition, acquisitions will require our
management to develop expertise in new areas, manage new business relationships and attract new
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types of customers. There can be no assurance that any acquisition, joint venture or strategic
collaboration will achieve the results intended. Any problems experienced by us in connection with an
acquisition, joint venture or strate gic collaboration as a result of one or more of these or other factors
could have a material and adverse e ffect on our business, financial c ondition and results of operations.
For any future acquisition or strategic investme nt, there can be no assurance that any anticipated
benefits of an acquisition or a strategic investment will be realised. Acquisitions of or strategic
i n v e s t m e n t si no t h e rg o l dm i n e sm a yr e s u l ti nt h ei n c urrence of debt and the impairment or amortisation
of expenses related to goodwill and other intangible assets. In add ition, acquisitions and strategic
investments involve numerous risks, including difficulties in the assimilation of operations, corporate
culture and personnel of the acquired business, diversion of management ’s attention from other business
concerns, risks of entering into new markets and the potential loss of key employees of the acquired
business. All of these factors may materially and adv ersely affect our busine ss, financial condition and
results of operations.
Our operations are subject to risks relating to occupational hazards and production safety.
As a gold mining and production company, we are subject to extensive laws, rules and regulations
imposed by the PRC Government regarding production safety. By its nature, gold mining and production
activities contain elements of significant risks and hazards. In particular, our operations involve the
handling and storage of explosives and other dangerous articles. We have implemented a set of
guidelines and rules regarding the handling of dangerous articles, which comply with applicable existing
PRC laws, regulations and policies. However, there is no assurance that our Group ’s operations would
not be disrupted or suspended in relation to occupational hazards and production safety.
Given the fact that the PRC Government has been strengthening the enforcement of safety
regulations in relation to the mining industry, more stringent laws and regulations regarding production
safety may be implemented and existing laws and re gulations may be more stringently enforced in the
future. There can be no assurance that accidents arising from the mishandling of dangerous articles will
not occur in the future. We may not be able to comply with all existing or future laws and regulations in
relation to production safety economically or at all.
Should we fail to comply with any production safety laws or regulations, we would be required to
suspend our operation, rectify the non-compliance w ithin a limited period and/or pay fines. Failure to
rectify any problem could lead to suspension of our operations and fines as well. In addition, accidents
may arise due to various reasons, such as the mishandling of dangerous articles in our operations.
Should we fail to comply with any relevant laws, regulations or policies or should any accident occur,
our business, reputation, financia l condition and results of operations may be adversely affected, and we
may be subject to penalties, civil liabilities or criminal liabilities.
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Our operations may face risks in relation to production delays and increased production costs
resulting from design defects, production safety and occurrence of accidents.
Our infrastructure and facilities may contain design defects, and the success of commissioning and
trial production may not guarantee smooth formal production in the future. The breakdown or
modification of the facilities may delay the production and incur significant costs. In addition, we may
experience in the future increase costs of production arising from compliance with production safety
laws and regulations.
Our employees and our Independent Third Party subcontractors may encounter accidents, technical
difficulties, mechanical failure or breakdown dur ing the mining and production processes, as well as
manmade and natural disasters beyond our control, for details please refer to the paragraph headed
‘‘Risks relating to the business operations of our Group — We face certain risks and uncertainties
beyond our control manmade and natural disasters that may negatively impact our operations ’’in this
section. There can be no assurance that accidents will not occur in the future. The occurrence of
accidents may disrupt or su spend our operations, increase production costs, result in liability to us and
harm our reputation. Such incidents may also result in breaches of the conditions for our mining licences
or any other approvals, licences or authorisations, which may resul t in fines and penalties or even
possible revocation of such permits, approvals, licences and authorisations.
We cannot guarantee that safety accidents will not occur at our gold mine in the future. The
occurrence of accidents ma y result in damage to or destruction of production facilities, personal injuries
or casualties, environmental damage, business interruption, delays in production, increased production
costs, monetary losses and potential legal liability to us. Such incidents may also result in breaches of
the conditions for our mining licences or any other approvals, licences or authorisations, which may
result in fines and penalties or even possible rev ocation of such permits, approvals, licences and
authorisations. Should we fail to comply with any relevant laws, regulations or policies or should any
accident occur, our business, reputat ion, financial condition and resu lts of operations may be adversely
affected, and we may be subject to penalties, civil liabilities or criminal liabilities.
Our operations are exposed to risks in relation to environmental protect ion and rehabilitation.
Operations of gold mines are subject to environmental risks and hazards. Our operations are
subject to PRC environmental laws and regulations, such as the treatment and discharge of hazardous
wastes and materials and environmental rehab ilitation. These laws and regulations set a series of
standards for waste substances that may be discharged into the environment, and impose fees for the
discharge of such waste substances. We are required to conduct our mining operations in a manner that
minimises the impact on the environment, such as through rehabilitation and re-vegetation of mined
land. In the future, we may have rehabilitation obligations in respect of areas we have cleared for
mining and production purposes.
Environmental hazards may occur in connection with our operations as a result of human
negligence, force majeure or otherwise. As advised by our PRC Legal Advisers, we did not have any
material incidents of non-compliance with PRC environmental laws and regulations at our Songjiagou
Open-Pit Mine and our Songjiagou U nderground Mine that resulted i n material penalties during the
Track Record Period. We cannot guarantee that our operations will not have environmental risks or
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hazards in the future. The occurrence of any environmental hazards may delay production, increase
production costs, cause personal injuries or property damage, result in liability to us and damage our
reputation. Such incidents may also result in breach es of the conditions for our mining and exploration
licences or other approvals, licences or authorisations, which may result in fines or penalties or even
possible revocation of such permits, approvals, licences and authorisations.
We may experience increased production costs arising from compliance with environmental laws
and regulations. Moreover, the development of the PRC ’s economy and the improvements in living
standards may lead to heightened awareness of envir onmental protection. As a result, it is possible that
more stringent environmental laws and regulations may be implemented in the future, or the existing
environmental laws and regulations may be mor e strictly enforced. We may not always be able to
comply with future laws and regul ations in relation to environmenta l protection and rehabilitation
economically or at all. Should we fail to comply w ith any such laws and regulations, we may be subject
to penalties and liabilities under PRC laws and regula tions, including but not limited to warnings, fines,
suspension of production and closure of the facility th at fails to comply with the relevant environmental
standards.
We were previously involved in bill arrangements that were not in full compliance with the PRC
Negotiable Instruments Law and we may be subject to penalties.
In 2020 and up to May 2020, our operating subsidiary, Yantai Zhongjia obtained and used bank
acceptance bills without underlying trade or debt tra nsactions, which were not in compliance with the
PRC Negotiable Instruments Law. Yantai Zhongjia obtained the bank acceptance bills from the
purchases of bank acceptance bills with cash for the e quivalent amount. Subsequently, Yantai Zhongjia
used such bank acceptance bills to settle paymen ts for purchases from its vendors, suppliers and
subcontractors in the ordinary course of business supported by underlying trade transactions, which was
in compliance with the PRC Negotiable Instruments Law. The fund involved in the bill arrangements
during FY2020 amounted to approximately RMB10.2 million. For details, please refer to the section
headed ‘‘Business — Compliance with laws and regulations — Non-compliant bill arrangements ’’in this
prospectus.
Yantai Zhongjia has fully settled all the relev ant bank acceptance bills in May 2020 and have not
entered into any further non-compliant bill arrangements since then. We have implemented certain
measures to strengthen our internal controls in this respect as at the Latest Practicable Date. However,
there is no assurance that these non-compliance incidents will not affect the credibility of our Group
with the PRC commercial bank, nor future approva ls of financing activities by such bank. We also
cannot assure you that the relevant regulatory au thorities will not impose penalties and/or fines on
Yantai Zhongjia retrospectively for the previous non-compliant bill transactions. Any penalties and/or
fines may adversely affect our bus iness, financial conditions and results of operations.
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We may not be adequately insured against losses and liabilities arising from our operations.
Mining and production activities involve numerous risks, including unexpected or unusual
geological conditions, fire, floods, earthquakes , severe weather conditions , other environmental
occurrences and political and social instability. The se risks can result in, am ong other things, damage to
and destruction of mining assets or production facilities, personal injury, environmental harm, financial
losses and legal liability.
According to the relevant PRC laws and regulatio ns, we are liable for losses and costs arising from
accidents resulting from fault or omission on the p art of us or our own employees. The relevant PRC
laws and regulations do not require mining companies to obtain insurance for such liabilities except for
insurance covering losses or costs resulting from work-related accid ents occurring to our employees,
which we have obtained for our employees. We maintain insurance for our operations in line with
industry practice in the PRC. We maintain employ er liability insurance for our employees, which
includes work accident insuran ce. We maintain additional production liability insurance for our
employees engaged in mining activities. We also main tain property insurance for certain of our assets
including building, machines, equipment and autom obiles. However, in line with industry practice in the
PRC, we have elected not to maintain certain types of insurances, such as business interruption
insurance or key man insurance.
Due to the nature of our business, we handle highly flammable and explosive materials and operate
under perilous conditions. We may experience accidents in the course of our operations, which may
cause significant property damage, personal injuries or other liabilities. Losses and liabilities incurred or
payments we may be required to make, if not adequately insured against, could have a material adverse
effect on our results of operations or otherwise materially disrupt our operations.
We may not be able to maintain the provision of adequate and uninterrupted supplies of
electricity, water, materials and equipment at commercially acceptable prices, or at all.
Major raw materials and consumables used in our production include explosives, steel grinding
balls and chemical reagents used during our ore processing operation. Electricity and water are the main
utilities used in our operations. Our mining and ore pro cessing processes require adequate and stable
supply of electricity. Supplier A, being the power supply company based in Yantai city, was one of our
five largest suppliers during the Track Record Period. During the Track Record Period, we did not
experience any material interruptions in our operations due to power shortages or outages. However,
since September 2021, our Group had to comply with the power restriction policy imposed by the PRC
government aiming to improve energy consumption across China, and in Shandong province and other
north-eastern provinces in the PRC. Such power rest riction did not lead to any temporary suspension of
our processing facilities or mines in Yantai city. W e cannot assure you that w e would not be subject to
any power outages in the future. If we are to be subject to power outages or there is prolonged power
shortage in the future or there are any possible changes in the power consumption policies adopted by
the PRC government, our production will be inevitably disrupted. Our business, financial conditions and
results of operation will therefore be adversely and materially affected.
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In addition, our water supply main ly from our reservoirs which store recycled wastewater from our
production. We also obtained an approval from the local Department of Water Resources in May 2017
to use approximately 460,000 cubic metres of water annually from Rushan River. There can be no
assurance that supplies of electricity, water or raw mat erials will not be interrupted or that their prices
will not increase in the future. In the event that our existing suppliers cease to supply us with electricity,
water or raw materials at commercially acceptable p rices or at all, our operations will be interrupted, and
our financial condition and results of operations will be materially and adversely affected.
We may incur amortisation expenses related to o ur mining right and may recognise impairment
losses related to our intangible assets, either of which may adversely affect our results of
operations.
As at 31 December 2020, 2021 and 2022 and 30 June 2023, we had intangible assets with net
book value of approximately RMB145.2 million, RM B132.3 million, RMB125 .1 million and RMB121.1
million, mainly represent our mining rights for our Songjiagou Open-Pit Mine and Songjiagou
Underground Mine. We will amortise our mining right over the useful life of our mine, using the unit of
production method based on actual volume mined and total estimated reserves. The process of
estimating quantities of reserves is inherently uncerta in and complex and requires significant judgments
and decisions based on available geological, engin eering and economic data. Mining rights are written
off to profit or loss if the mining property is abandoned, which may have a material adverse effect on
our result of operations. For further details, please see note 15 to the Accountants ’ report set out in
Appendix I to this prospectus. According to the SRK Report, the LoM of our gold mines is 8.5 and 6.0
years for Songjiagou Open-Pit Mine and Songjiangou Underground Mine respectively based on their
gold reserve estimates as at 30 June 2023. For the three years ended 31 December 2022 and the six
months ended 30 June 2023, our amortisation exp enses related to our mining rights amounted to
approximately RMB2.5 million, RMB3.3 million, RM B8.3 million and RMB3.8 million, respectively.
We intend to review the amount of the Mineral Reserves at our Songjiagou Open-Pit Mine and our
Songjiagou Underground Mine on an annual basis. The carrying amount of mining rights is reviewed for
impairment when events or changes in circumstances indicate that the carrying amount may not be
recoverable in accordance with the accounting policy. Estimating the value in use requires us to estimate
future cash flows from the cash-generating units and to choose a suitable discount rate in order to
calculate the present value of those cash flows. Any material decrease in the amount of our Mineral
Reserves for our mine or changes to our production plans may result in impairment of the carrying value
of our mining rights and related assets or results in a recognition of impairment losses related to our
intangible assets, which may have a material advers e effect on our business, financial condition and
results of operations.
We face certain risks and uncertainties beyond o ur control from manmade and natural disasters
that may negatively impact our operations.
Our business operations are subject to a number of operational risks and hazards, some of which
are beyond our control. These operational risks and hazards mainly include:
. major catastrophic events and natural disasters, including earthquakes, fires, floods,
landslides, drought, snowstorms and other hazardous weather conditions;
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. geological or mining conditions such as inst ability of the slopes and subsidence of the
working areas;
. unexpected or periodic interruptions due t o inclement or hazardous weather conditions;
. disruptions or shortages of water, power or fuel supply;
. industrial or manmade accidents occurring in connection with our mining or ore processing
operations; and
. critical equipment failures, malfunction and breakdowns of information management systems,
or unexpected maintenance or technical problems.
Natural disasters, especially ea rthquakes, snowstorms, floods and landslides, may require us to
evacuate personnel or curtail operations. Such risks and hazards may result in damage or loss to our
mining and processing operations, and they may also require us, among other things, to evacuate
personnel, delay or temporarily suspend our operations, reduce our productivity or delay delivery of our
products to our customers. Periods of curtailed activity may increase the operating costs. If any of these
accidents occurs, it could materially and adversely a ffect our business, financial condition and results of
operations.
Natural disasters, acts of war or terrorism or other factors beyond our control may adversely affect
the economy, infrastructure and livelihood of the people in the regions where we conduct our business.
Our operations may be under the threat of flood, earthquake, sandstorm, snowstorm, fire, drought, mud-
slides or other natural disasters causing instability of slopes and subsidence of working areas in our
mines, power, water or fuel shortages, critical equipment failures, malfunction and breakdown of
information management systems, unexpected maintenance or technical problems, or are susceptible to
potential wars or terrorist attacks. Serious natural di sasters may result in loss of lives, injury, destruction
of assets, reduction in our productivity and disruption of our business and operations. Acts of war or
terrorism may also injure our employees, cause loss of lives, disrupt our business network and destroy
our markets. Any of these factors and other factors beyond our control could have an adverse effect on
the overall business sentiment and environment, cause uncertainties in the regions where we conduct
business, cause our business to suffer in ways that we cannot predict and materially and adversely
impact our business, financial condition and results of operations.
We and some of our lessors have not obtained title certificates for certain properties owned, used
or leased by us, and we leased collectively-owned r ural land for non-agricul tural purposes, which
could materially and adversely affect our right to use such properties.
There were a number of title defects relating to p roperties in the PRC that we owned, used or
leased as at the Latest Practicable Date. As at the Latest Practicable Date, (i) Yantai Zhongjia had not
obtained valid ownership certificates ( 不動產權證) for certain owned buildings; and (ii) the lessors of
certain buildings leased by Yantai Zhongjia also had not obtained valid ownership certificates ( 不動產權
證), due to their respective failure to obtain the construction works planning permits ( 建設工程規劃許可
證), the construction works commencement permits ( 建築工程施工許可證) and the construction works
completion inspection certificates ( 建設工程竣工驗收備案文件). Yantai Zhongjia may be required to
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dismantle or relocate from the relevant properties within a prescribed period of time. For details, please
r e f e rt ot h es e c t i o nh e a d e d ‘‘Business — Properties — Properties with defective titles ’’ in this
prospectus.
As at the Latest Practicable Date, Yantai Zhongjia leased nine parcels of collectively-owned rural
land for non-agricultural purposes, comprising approximately 313,334.9 sq.m., 1,000,005 sq.m. and
707,096.9 sq.m. as its mining area for our Songjiago u Open-Pit Mine, tailing dams and rubble and waste
rock dumps in breach of the Land Administration Law, which may subject us to relocation risk in the
event that our occupancy of any of such land is challenged by the relevant PRC government authorities.
For details, please refer to the section headed ‘‘Business — Properties — Properties with defective titles
— We leased Collectively-owned Rural land for non-agricultural purposes ’’in this prospectus.
As a result, we cannot assure you that we will not be subject to any challenges, lawsuits or other
actions taken against us with respect to the properties owned, used or leased by us for which we or the
relevant lessors do not hold valid title certificates. F urthermore, we may be subject to fines and penalties
imposed by government authorities with respect to such properties. If any of such properties were
successfully challenged, we may be forced to relocat e our operations on the affected properties. Certain
of our operational activities are located on the aff ected properties, and we may be forced to cease these
activities in the event we face challenges in relatio n to our properties. If we fail to find suitable
replacement properties on terms acceptable to us for the affected operations, or if we are subject to any
material liability resulting from third -party challenges for our ownership usage or lease of properties for
which we or our lessors do not hold valid titles, ou r business, financial condition and results of
operations may be materially and adversely affected.
We may not be able to retain or secure key qualif ied personnel, key senior management or other
personnel for our operations.
We depend on certain key qualified personnel, key senior management and other employees in our
business, particularly those set out in the section headed ‘‘Directors and senior management ’’in this
prospectus. There can be no assurance that such parties will continue to provide services to us or will
honour the agreed terms and conditions of their employment contracts. Loss of any key personnel or
failure to recruit and retain personnel for our future operations and development may have a material
adverse effect on our business.
The market for employees with indu stry experience and technical s kills can be highly competitive.
We cannot be certain that the services of our senior management and a sufficient number of technically
skilled employees in the PRC will continue to be available to us. Any senior management departures or
unavailability (due to death, injury, illness or oth er reasons) or technically skilled worker shortages
could adversely affect our operational efficiency and production levels. We may be unable to hire or
retain appropriate technically sk illed employees or other management personnel, or may have to pay
higher levels of remuneration than we currently intend. In particular, qualified personnel may be scarce
in certain regions where our mines are located. If we are unable to hire and retain appropriate
management and technically skilled personnel, or if th ere are not sufficient succession plans in place,
our business may be materially and adversely affected.
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We may suffer if there is a theft of gold concentrate on our mining properties. Such activities can
disrupt business and can expose us to liability.
Our Group may not be able to safely guard against illegal activities such as theft of gold
concentrate stored on site. Any theft of gold concentrate from our processing plant may reduce the
amount of gold that we are able to produce or recover from our operations and the amount of gold we
are able to sell, which would have a material adverse effect on our business, results of operations and
financial position. For details of our Group ’s internal control procedures in relation to gold security,
please refer to the section headed ‘‘Business — Our operations — Safety monitoring facilities ’’of this
prospectus. During the Track Record Period, we had not experienced a breach of security that had a
material and adverse impact on our operations.
We are subject to risks relating to the transport of our inventory.
Our gold refining subcontractors are responsible for (i) bearing the cost for delivery of the gold
concentrate to their smelters; and (ii) transporting gold bullion to the Shanghai Gold Exchange. Our gold
concentrate is valuable item, and we are subject to risk of delay, damage or loss of such items, which
may occur for reasons beyond our control, including labour disputes or strikes, acts of war or terrorism
and natural disasters. While we seek to ensure the safety of our deliveries through installing GPS
tracking systems and engaging security personnel to guard our shipments, we cannot guarantee that there
will not be any safety accidents or loss of such deliveries. Moreover, we have less control over these
Independent Third Party subcontractors. Any delay, damage or loss of our work-in-progress and
products during the transportation process may have a material and adverse effect on our business,
financial condition and results of operations.
We cannot guarantee that we will not be involved i n claims, disputes and legal proceedings in our
ordinary course of business.
From time to time, we may be involved in claims, disputes and legal proceedings in our ordinary
course of business. These may include issues of concern relating to, among others, health and safety
accidents, environmental matters, breach of contract, employment or labour disputes and infringement of
intellectual property rights. As at the Latest Prac ticable Date, we were not involved in any litigations
and legal proceedings in the PRC that may materially affect our business and results of operations.
However, in August 2019, we were ordered by the Beijing City Second Intermediate People ’s Court to
be jointly and severally liable, as a co-guarantor under a loan arrangement entered into by an
Independent Third Party entity, which we had provided corporate guarante e in the amount of RMB50.0
million in favour of a financial institution, for the re payment obligation unde r such loan arrangement.
Yantai Zhongjia was fully released and dischar ged from all liabilities and obligations under such
corporate guarantee in August 2021. Please see the section headed ‘‘Business — Litigation ’’in this
prospectus for further details. Any claims, disp utes or legal proceedings initiated by us or brought
against us, with or without merit, may result in substantial costs and diversion of resources, and if we
are unsuccessful, could materially harm our reputation. Furthermore, claims, disputes or legal
proceedings against us may be due to defective supplies sold to us by our suppliers, who may not be
able to indemnify us in a timely manner, or at all, fo r any costs that we incur as a result of such claims,
disputes and legal proceedings.
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Our business operations may be affected by the COVID-19 pandemic and other outbreak of
diseases.
The outbreak of COVID-19 had spread across China and to over 200 countries and territories
globally in 2020. The new strain of COVID-19 is considered highly contagious and may pose a serious
threat to public health. In March 2020, the World H ealth Organization characterised the outbreak of
COVID-19 as a pandemic. The accelerated spread of the virus globally has caused extreme volatility in
the global financial market.
The outbreak, which may result in a high number o f fatalities, is likely to have an adverse impact
on the livelihood of the people in and the economy of the PRC. To prevent further transmission of
COVID-19, the PRC Government had adopted a series of measures in the first half of 2020 nationwide,
including among others, locking down certain cities, restrictions on enterprises from resuming work,
traffic control, travel bans, compulsory quarantine and social distancing. To comply with the PRC
government ’s measures to contain and mitigate the COVID-19 outbreak, we temporarily suspended our
back office administrative functions in the PRC after the Chinese New Year holidays in 2020. Our
subcontractors, suppliers and us may be required to quarantine some or all of their/our employees, or
disinfect the community to prevent the spread of the disease if any of their/our employees were
suspected of contracting or contracted an epidemic disease, which could cause material disruptions to
our business activities and those of our raw materials suppliers and subcontractors, shortages of labour
and delays in our production activities. The occurre nce of any of the above event may adversely affect
our operations and results of operations.
Furthermore, the COVID-19 pandemic has caused and may continue to cause a long-term adverse
impact on the economy and social c onditions in China and other affected countries, which may have an
indirect impact on the macro-economic situation, affecting consumer confidence and purchasing
behaviour in the PRC and globally, causing the demand for jewellery to be reduced from the general
public in the PRC and globally, and adve rsely affect our business operations.
We cannot predict whether COVID-19 pandemic or other outbreak of diseases in future will have
long-term impact on our business operations. If we are not able to effectively and efficiently operate our
business and implement our strategies as planned, we may not be able to grow our business and generate
revenue from as anticipated, our business operations, financial condition and prospects may
subsequently be materially and adversely affected.
We may not be able to detect and p revent fraud, bribery or other misconduct committed by our
employees, customers or other third parties.
We may be exposed to fraud, bribery, or ot her misconduct committed by our employees,
customers, or third parties that could subject us to financial losses and sanctions imposed by
governmental authorities, which may adversely affect our reputation. Our internal control procedures are
designed to monitor our operations and ensure overall compliance. However, our internal control
procedures may be unable to identify all incidents of non-compliance or suspicious transactions or
incidents of corruption or bribery in a timely manner or at all. Furthermore, it is not always possible to
detect and prevent fraud, bribery, and other misconduct, and the precautions we take to prevent and
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detect such activities may not be effective. We can not assure you that fraud, bribery, or other
misconduct will not occur in the future. If such fraud, bribery, or other misconduct does occur, it may
cause negative publicity as a result.
Our internal control and risk management systems may not fully protect us against various risks
inherent in our business.
We have established internal control and risk management systems consisting of the relevant
organisational framework policies, risk management policies and risk control procedures to manage our
risk exposures, primarily our operational risk, lega l risk and liquidity risk. For further details, please
refer to the section headed ‘‘Business — Internal control and risk management ’’ in this prospectus.
However, we may not be successful in implementing our internal control and risk management systems.
While we seek to continue to enhance such systems from time to time, we cannot assure you that our
internal control and risk management systems are adequate or effective notwithstanding our efforts, and
any failure to address any potential risks and internal control deficiencies could materially and adversely
affect our business, financial cond ition and results of operations.
Since our internal control and risk management systems depend on their implementation by our
employees, we cannot assure you that all of our employees will adhere to such policies and procedures,
and the implementation of such policies and procedures may involve human errors or mistakes.
Moreover, our growth and expansion may affect our ability to implement stringent internal control and
risk management policies and procedures as our business evolves. If we fail to timely adopt, implement
and modify, as applicable, our internal control and risk management policies and procedures, our
business, financial condition and results of operations could be materially and adversely affected.
Our deferred tax assets are subject to accounting uncertainties.
In the application of our accounting policies, ou r management is required to make judgments,
estimates and assumptions about the carrying amounts of certain assets and liabilities that are not readily
apparent from other sources. The estimates and associated assumptions are based on historical
experience and other factors that are considered to be relevant. Therefore, actual results may differ from
these accounting estimates. Please see Note 17 to the Accountants ’ report set out in Appendix I to this
prospectus for further details. As at 31 December 2020, 2021 and 2022 and 30 June 2023, the carrying
value of our deferred tax assets was approximately RMB5.4 million, RMB5.4 million, RMB5.9 million
and RMB6.3 million, respectively. Ba sed on our accounting policies, de ferred tax assets are recognised
to the extent that it is probable that future taxable profits will be available a gainst which the deductible
temporary differences, the carryforward of unused tax credits and unused tax losses can be utilised. The
realisation of a deferred tax asset mainly depends on our management ’s estimate as to whether sufficient
future profits will be available in the future. Management ’s assessment is constantly reviewed and
additional deferred tax assets are recognised if it becomes probable that future taxable profits will allow
the deferred income tax assets to be recovered. If suff icient future taxable profits are not expected to be
generated or are less than expected, a material reversal of deferred income tax assets may arise in future
periods.
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Failure to maintain appropriate i nventory levels could cause us to lose sales or face excessive
inventory risks and holding costs, which could have a material adverse effect on our business,
financial condition and results of operations.
Demand for our products is dependent on numerous market and other factors, including gold price.
Please see the paragraph headed ‘‘Risks relating to the business operations of our Group — Fluctuations
in the market price of gold could materially and adversely affect our Group ’s profitability and cash
flow ’’in this section above. We must maintain an approp riate level of raw materials and finished goods
inventory to meet market demand. The inventories of our Group comprise (i) gold concentrate; (ii) ore
stockpile; and (iii) raw materials. As at 31 December 2020, 2021 and 2022 and 30 June 2023, the
proportion of raw materials to our Group ’s total inventories was approximately 20.7%, 37.0%, 42.6%
and 68.6%, respectively. We adjust our production schedule regularly based on anticipated changes in
demand and our customers ’ orders so as to maintain our inventory of raw materials at an appropriate
level. However, we cannot guarantee that we will be able to maintain an adequate inventory level of our
products, and may cause us to lose sales and market share to our competitors. We may also be exposed
to risk of holding excessive inventory, which may increase our inventory holding costs and subject us to
the risk of inventory obsolescence or write-offs, which could have a material adverse effect on our
business, financial condition and results of operations.
We may be subject to additional administrative p rocedures and compliance costs for our gold sales
and gold smelting transactions with Shandon g Guoda if Shandong Guoda becomes a connected
person in the future.
As at the Latest Practicable Date, (i) Shandong Guoda is indirectly owned as to approximately
66.2% by 山東招金集團招遠黃金冶煉有限公司（Shandong Zhaojin Group Zh aoyuan Gold Smelting
Co., Ltd.*） (‘‘Shandong Zhaojin Gold Smelting ’’); and (ii) Shandong Zhaojin Gold Smelting wholly-
owned our cornerstone investor, namely, Dongfang Gold Industry (Hong Kong) Limited, which will
hold approximately 9.9% of the total issued share capital of our Company immediately following the
completion of the Global Offering (without taking into account any Shares which may be issued upon
the exercise of the Over-allotment Option and any o ptions which may be granted under the Share Option
Scheme).
In the event of any corporate actions of our Company such as share buy-back by our Company or
further share subscription by Dongfang Gold Industry (Hong Kong) Limited which may lead to an
increase in Dongfang Gold Industry (Hong Kong) Limited’ s shareholding in our Company to 10% or
more of the total issued share capital of our Comp any in the future and resulting in them becoming a
substantial shareholder in our Company, Shandong Guoda will become a connected person of our
Company. As a result, our gold sales and gold s melting transactions with Shandong Guoda in the
ordinary course of business of our Group will constitute continuing connected transactions of the Group,
which may be subject to reporting, announcement, annual review and independent shareholders ’
approval requirements under Chapter 14A of the Listing Rules, and hence, we will be subject to
additional administrative proce dures and compliance costs to comply with such requirements of the
Listing Rules. In the event that the independent shareholders ’ approval is not obtained for the continuing
connected transactions between our Group and Shandong Guoda, we will not be able to continue the
gold sales and gold smelting transactions with them , and will be required to source an alternative
customer with smelting capability. If we are unable to source an alternative customer with smelting
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capability that provides similar transaction terms as that of Shandong Guoda qui ckly, we will experience
a deviation in our profitability which could have a material adverse effect on our business, financial
condition and results of operations.
RISKS RELATING TO THE INDUSTRY IN WHICH WE OPERATE
We face industry competition.
According to the F&S Report, there were about 30 gold producers engaged in gold mining in the
Shandong Province in 2022. The top five gold producers by gold mine production volume accounted for
approximately 84.7% of the total gold mine production volume in the Shandong Province while we
ranked third and accounted for approximately 2.6% of total gold mine production volume in the
Shandong Province. Our major competitors are leadi ng nationwide local gold producers, regional large
and medium-sized gold producers and regional sma ll-sized gold producers. Our competitors may have
certain advantages over us, including greater financial, technical and mineral resources, greater
economies of scale and complete gold upstream and d ownstream industry chain. Industry competition
may lessen our opportunities to acquire new mineral resources or other gold mining companies and
ultimately may have a material adverse impact on our business, financial condition, results of operations
and growth prospects.
Potential change in consumers ’ behaviour and the development of new commodity classes could
affect the demand for gold.
According to the F&S Report, gold is mainly demanded for the purpose of jewellery fabrication,
investment, technology/industry and central banks reserves, with jewellery and investment as the key
drivers for gold demand. In 2022, demand from the jewellery industry, and investments in gold bars,
coins and exchange traded funds accounted for approximately 46.2% and 23.3%, respectively, of the
aggregate global gold demand. As the development of new commodity asset classes such as
cryptocurrencies, gold-backed non-fungible tokens and other virtual commodities offer an alternative
form of investment in addition to gold and other financial products such as stocks and bonds, any
changes in consumers ’ behaviour such as switching their investments in gold to that of the new
commodity asset classes may materia lly and adversely affect the global demand for gold, and ultimately
may have a material adverse impact on our business, financial condition, results of operations and
growth prospects.
Our business is subject to extensive regulatio ns and affected by government policies in the PRC
mining industry.
We are subject to extensive national, provincial and local government regulations, policies and
controls in the PRC that govern many aspects of o ur industry, including, without limitation:
. limits on increases in ore output volume;
. grant and renewal of mining rights;
. grant and renewal of safety production permits;
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. production safety and casualty ratings;
. taxes and fees;
. environmental, health and safety standards; and
. annual verification of mining lic ences and exploration licences.
The liabilities, costs, obligations and requirements associated with these laws and regulations may
be significant and may delay or interrupt our operations. Failure to comply with the relevant laws and
regulations in our mining operations may resul t in penalties or suspension of our operations.
Additionally, we cannot assure you that the relevant government agencies will not alter these laws or
regulations or impose additional or more stringent laws or regulations. Compliance with new laws or
regulations may require us to incur significant costs, capital expenditures or oth er obligations and secure
new sources of financing. More stringent laws or regulations may also restrict our business operations.
The cost of compliance with regulations is and will con tinue to be substantial, and any increase in costs
due to changes in laws or regulations or to our fa ilure to comply may subject us to, among others,
suspension of operations and penalties which coul d have a material adverse effect on our business,
financial condition and results of operations.
In addition, the current PRC Government polici es favour the acquisition and consolidation of
mines by large mining companies. However, we cannot assure you that such policies will not change in
the future. In the event that those policies favou ring our acquisition and expansion plans change, our
costs of carrying out our acquis ition and expansion plans may increase substantially and our ability to
effect such plans may decrease.
Our operations are exposed to risks in relation to environmental protectio n and rehabilitation and
our business operations may be affected by current o r future safety and environmental regulations.
Our operations are subject to environmental risks and hazards and we are subject to extensive and
increasingly stringent safety and environmental pro tection laws and regulations in the PRC. These laws
and regulations:
. impose environmental protection taxes;
. require the establishment of reserve s for reclamation and rehabilitation;
. impose fines for serious environmental offences; and
. allow the PRC Government, at its discretion, to close down any facilities failing to comply
with orders to correct or stop operations that have caused serious environmental damage.
Environmental hazards may occur in connection with our operations as a result of human
negligence, force majeure or otherwise. The occurrence of any environmental hazards may delay
production, increase produc tion costs, cause personal injuries or p roperty damage, result in liability to us
and/or damage our reputation. Claims may be asserted against us arising out of our operations in the
normal course of business, including claims relating to land use, safety, health and environmental
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matters. Some incidents may also result in a breach of conditions of our mining lic ences and exploration
licences, or other consents, approva ls or authorisations, which may result in fines or penalties or even
possible revocation of our mining licences and/or exploration licence. We are not insured against
environmental liabilities and there can be no a ssurance that environmental liabilities would not
materially and adversely affect our b usiness and results of operations.
The PRC Government is currently moving toward s more rigorous enforcement of applicable laws
and regulations, as well as the adoption and enforcement of more stringent environmental standards. As
a result, our budgeted capital expenditures for safety and environmental regulatory compliance may be
insufficient and we may need to allocate additional funds. Moreover, we cannot assure you that we can
comply with all applicable safety and environmental laws and regulations that may be adopted or
amended in the future. If we fail to comply with current or future safety or environmental laws and
regulations, we may be required to stop production, pa y penalties or fines and take corrective actions,
any of which may have a material adverse effect on our business, financial condition and results of
operations.
RISKS RELATING TO DOING BUSINESS IN THE PRC
Changes in the PRC ’s economic, political, legal and social conditions could affect our results of
operations and financial condition.
Substantially all of our assets are located in the PRC and all of our revenue is expected to be
generated in the PRC. Accordingly, our results of operations, financial condition and prospects are to a
significant degree subject to a number of risks relating to conducting business in the PRC.
The PRC ’s economy differs from the economies of most developed countries in many respects,
including the structure of the economy, level of gove rnment involvement, level of development, growth
rate, and control of capital investment, control of foreign exchange and allocation of resources. The
PRC’s economy has been transitioning from a planned economy to a more market oriented economy. For
the past three decades, the PRC Government has implemented economic reform measures to emphasize
the utilisation of market forces in economic develop ment. Economic reform measures, however, may be
adjusted, modified or applied inconsistently from industry to industry or across different regions of the
country.
The PRC has been one of the world ’s fastest-growing economies as measured by GDP in recent
years. However, the PRC may not be able to sustai n such a growth rate. In order to maintain the
sustainable growth of the economy, the PRC Government from time to time implements various
macroeconomic and other policies and measures, including contractionary or expansionary policies and
measures at times of, or in anticipation of, changes in the PRC ’s economic condition. Since 2008, there
has been a slowdown in the growth of the Chinese economy primarily as a result of the global financial
crisis and the deterioration in the global economy. In an effort to stimulate the growth of the Chinese
economy, the PRC Government has implemented and may continue to implement various monetary and
other economic measures to expand investments in infrastructure projects, increase liquidity in the credit
markets and to encourage employment. However, there is no assurance that such monetary and economic
measures will succeed in the future.
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In the future, we may not benefit from all, or any, of the economic reform measures, or the
monetary or other economic measures adopted by the PRC Government in response to the slowdown of
the Chinese economy.
We may be classified as a resident enterprise f or PRC enterprise income tax purposes. Such
classification may result in unfavorable tax con sequences to us and our non-PRC shareholders.
Under the EIT Law, issued by the National People ’s Congress ( ‘‘NPC’’) and EIT Regulation issued
by the State Council of the PRC, enterprises established outside of the PRC whose ‘‘de facto
management bodies ’’ located in the PRC are considered ‘‘resident enterprises ’’ for PRC enterprise
income tax purposes and will generally be subject to the uniform 25% enterprise income tax rate for
their global income. Under the EIT Regulation, a ‘‘de facto management body’’ is defined as a body that
has material and overall management and control over the manufacturing and business operations,
personnel and human resources, finances and properties of an enterprise. In addition, on 22 April 2009,
the SAT issued the ‘‘Notice of the SAT on Issues about the Determination of Chinese-Controlled
Enterprises Registered Abroad as Resident Enterprises on the Basis of ‘‘de facto management body ’’ ’’
(國家稅務總局關於境外註冊中資控股企業依據實際管理機構標準認定居民企業有關問題的通知), with
retroactive effect as of 1 January 2008 and as further amended on 29 December 2017, or Circular 82,
which clarified that a foreign enterprise controlled by a PRC company or a PRC company group will be
considered a ‘‘resident enterprise ’’with its ‘‘de facto management body ’’located within the PRC if all of
the following requirements are satisfied: (i) the sen ior management and core management departments in
charge of its daily operations function are mainly located in the PRC; (ii) its financial and human
resources decisions are subject to determination or approval by persons or bodies located in the PRC;
(iii) its major assets, accounting books, compan y seals, and minutes and files of its board and
shareholders ’ meetings are located or kept in the PRC; a n d( i v )h a l fo rm o r eo ft h ee n t e r p r i s e’s directors
with voting
rights or senior managem ent reside in the PRC. Further, the ‘‘Administrative Measures of
Enterprise Income Tax of Chinese-controlled Offshore Incorporated Resident Enterprises (Trial) ’’(境外
註冊中資控股居民企業所得稅管理辦法(試行)) issued by the SAT, or, the ‘‘Measures ’’, which has been
effective since 1 September 2011 and amended respectively on 17 April 2015 and 15 June 2018,
provided guidance on the administration of such Chinese-controlled offshore incorporated resident
enterprises.
However, Circular 82 and the Measures only applies to offshore enterprises controlled by a PRC
company or a PRC company group, not those controlled by individuals or foreign corporations like us.
There is no detailed implementing regulations or other guidance determining that offshore companies
controlled by individuals or foreign corporations lik e us are PRC resident enterprises. As of the Latest
Practicable Date, the PRC local ta x authorities had not assessed us as a ‘‘resident enterprise ’’. However,
we cannot assure you that we will not be considered a ‘‘resident enterprise ’’in the future because the
SAT may take the view that the determining criteri a set forth in Circular 82 and the Measures reflect
general position on how the ‘‘de facto management body ’’test should be applied in determining the tax
resident status of all offshore enterprises. If we are considered as a ‘‘resident enterprise ’’ for PRC
enterprise income tax purposes, a number of unfavorable PRC tax consequences could follow. First, our
Company or our offshore subsidiaries will be subject to the uniform enterprise income tax rate of 25%
as to our global income as well as tax reporting obligations. Second, although dividends paid by one
PRC tax resident to another PRC tax resident should qualify as ‘‘tax-exempt income ’’under the PRC
EIT Law, we cannot assure you that such dividends will not be subject to a 10% withholding tax, as the
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PRC tax authorities, which enforce the withholding tax on dividends, and the PRC foreign exchange
control authorities have not yet issued guidance with respect to the processing of outbound remittances
to entities that are not controlled by any PRC enterprise or enterprise group and treated as resident
enterprises for PRC enterprise income tax purposes . Finally, a 10% withholding tax will be imposed on
dividends we pay to our non-PRC enterprise shareholders and gains derived by our non-PRC enterprise
shareholders from transferring our Shares.
The legal protections available to you under the PRC legal system may be limited.
As all of our operations are conducted in the PRC through Yantai Zhongjia established under the
PRC law, our operations are principally governed by the PRC laws and regulations. The PRC legal
system is based on written statutes, and prior cour t decisions can only be cited as reference. Since late
1970s, the PRC Government has promulgated laws a nd regulations in relation to economic matters such
as foreign investment, corporate organisation and governance, commerce, taxation and trade, with a view
to developing a comprehensive system of commercial laws. However, due to the fact that these laws and
regulations have not been fully developed, and because of the limited volume of published cases and
their non-binding nature, the interpretation of PRC laws and regulations still involves a significant
degree of uncertainty. As a result, the legal protection available to you under the PRC legal system may
be limited.
Our operations in the PRC are subject to the PRC regulations governing the PRC companies.
These regulations contain provisions that are required to be included in the articles of association of the
PRC companies and are intended to regulate the internal affairs of these companies. The PRC Company
Law and regulations, in general, and the provisions for the protection of shareholder ’s rights and access
to information, in particular, may be considered le ss developed than those applicable to companies
incorporated in Hong Kong and other developed count ries or regions. In addition, PRC laws, rules and
regulations applicable to companies listed overseas do not distinguish between minority and controlling
shareholders in terms of their rights and protections. As such, our minority shareholders may not have
the same protections afforded to them by companie s incorporated under the laws of the Hong Kong and
certain other jurisdictions.
In addition, any litigation in the PRC may be protracted and result in substantial legal costs and
diversion of resources and management attention. Si milarly, legal uncertainty in the PRC may limit the
legal protection available to potential investors. We cannot predict th e effect of future legal
developments in the PRC, including promulgatio n of new laws, changes to existing laws or the
interpretation or enforcement thereof, or the pre -emption of local regulations by national law. As a
result, there is substantial uncertainty as to the l egal protection available to potential investors.
Upon the listing of our Shares on the Stock Excha nge, the Listing Rules will become a principal
basis for the protection of the rights of holders o f our Shares. The Listing Rules impose particular
standards of conduct and disclosure on our Company , our Directors and our Controlling Shareholder.
Further, substantial amendments to the PRC Company Law ( 中華人民共和國公司法) came into
effect on 26 October 2018 and latest a mendments to the PRC Securities Law ( 中華人民共和國證券法)
came into effect on 1 March 2020. As a result, the S tate Council and the CSRC may continuously revise
existing rules and regulations and adopt new rules and regulations to implement and reflect amendments
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to the PRC Company Law and the PRC Securities Law . We cannot assure you that any revision of the
current rules and regulations or the adoption of new rules and regulations by the State Council and the
CSRC will not have an adverse effect on the rights of holders of Shares.
In addition, we may be subject to various new regulations or policies relating to accounting
standards or financial reporti ng, which may be issued by the relevant authorities in the PRC or Hong
Kong from time to time. Any changes in our accounting policies and estimates may have a significant
impact on the reporting of our financial statements, including on our reported profit and shareholders ’
equity, and we may be required to adjust or restate our financial statements.
It may be difficult to effect service of process up on, or to enforce judgments obtained outside the
PRC against us, our Directors or our senior management members who reside in the PRC.
We are incorporated in the Cayman Islands. All of our assets, our operating subsidiaries and their
assets are located in the PRC. In addition, substantially all of our Directors and our officers reside
within the PRC and most of the assets of our Directors and officers are also located within the PRC. As
a result, it may be difficult for investors to eff ect service of process outside the PRC upon most of our
Directors and officers, including matters arising und er applicable securities laws. Moreover, a judgment
of a court of another jurisdiction may only be reciprocally recognised or enforced if the jurisdiction has
a treaty with the PRC or if judgments of the PRC courts have been recognised before in that
jurisdiction, subject to the satisfaction of other re quirements. However, the PRC does not have treaties
providing for the reciprocal enforcement of judgm ents of courts with the Cayman Islands, Japan, the
United Kingdom, the United States and most other western countries. Although Hong Kong and the
PRC entered into an agreement on reciprocal rec ognition of judgments, enforcement of judgments is
predicated on a written choice of court agreemen t that gives a PRC or Hong Kong court exclusive
jurisdiction. As a result, it may be difficult or im possible for investors to effect service of process
against our assets, management members or Directors in the PR C in order to seek recognition and
enforcement of foreign judgments in the PRC.
On 14 July 2006, the Supreme People ’s Court of the PRC and the government of the Hong Kong
Special Administrative Region entered into the Arrangement on Reciprocal Recognition and
Enforcement of Judgments in Civil and Commercial Matters by Courts of the Mainland and the Hong
Kong Special Administration Region Pursuant to Choice of Court Agreements between Parties
Concerned ( 關於內地與香港特別行政區法院相互認可和執行當事人協議管轄的民商事案件判決的安
排)( t h e ‘‘Arrangement ’’), which took effect on 1 August 2008. Under the Arrangement, where any
designated PRC court or any designated Hong Kong court has made an enforceable final judgment
requiring payment of money in a civil or commercial case pursuant to a choice of court agreement in
writing, any party concerned may apply to the rele vant PRC court or Hong Kong court for recognition
and enforcement of the judgment. On 18 January 2019, the Supreme People’ s Court of the PRC and the
government of the Hong Kong Special Administrative Region signed the Arrangement on Reciprocal
Recognition and Enforcement of Judgments in Ci vil and Commercial Matters by the Courts of the
Mainland and of the Hong Kong Sp ecial Administrative Region (關 於內地與香港特別行政區法院相互
認可和執行民商事案件判決的安排)( th
e ‘‘New Arrangement ’’), which seeks to establish a mechanism
with greater clarity and certainty for recognition and enforcement of judgments in wider range of civil
and commercial matters between Hong Kong and the PRC. The New Arrangement discontinued the
requirement for a choice of court agreement for b ilateral recognition and enforcement. The New
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Arrangement will only take effect after the promulga tion of a judicial interpretation by the Supreme
People ’s Court and the completion of the relevant legislative procedures in the Hong Kong. The New
Arrangement will, upon its effectiveness, supersede the Arrangement. Therefore, before the New
Arrangement becomes effective it may be difficult or is not possible to enforce a judgment rendered by
a Hong Kong court in the PRC if the parties in dispute have not agreed to enter into a choice of court
agreement in writing. In addition, the A rrangement has expressly provided for ‘‘enforceable final
judgement ’’, ‘‘specific legal relationship ’’and ‘‘written form’’ . A final judgement that does not comply
with the Arrangement may not be recognised and enforced in a PRC court and we cannot assure you
that a final judgement that complies with the Arrangement can be recognised and enforced in a PRC
court.
RISKS RELATING TO THE GLOBAL OFFERING
No assurance of liquidity and possible price and trading volume volatility of our Shares.
An active trading market for our Shares may not develop and the trading price of our Shares may
fluctuate significantly. Prior to the Global Offer ing, there has been no public market for our Shares. The
Offer Price range has been dete rmined through negotiation between our Company and the Overall
Coordinator (for itself and on behalf of the Underwriters) and the final Offer Price may not be indicative
of the price at which our Shares will be traded follo wing the completion of the Global Offering. In
addition, there is no assurance that an active trading market for our Shares will develop, or, if it does
develop, that it will be sustained following comple tion of the Global Offering, or that the trading price
of the Shares will not decline below the Offer Price.
The pricing and trading volume of our Shares may b e volatile. The market price of our Shares may
fluctuate significantly and rapidly as a result of t he following factors, among others, some of which are
beyond our control:
. variations in our operating results;
. changes in the analysis and recommendations of securities analysts;
. announcements made by us or our competitors;
. changes in investors ’ perception of our Group and the investment environment generally;
. addition or departure of key management;
. developments in the PRC mining industry;
. changes in the PRC Government spending;
. changes in pricing made by us or our competitors;
. fluctuations in market prices and trading volume of our Shares;
. involvement in litigation; and
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. general economic environment and other factors.
These broad market and industry fluctuations may adversely affect the market price of our Shares.
Prior dividend distributions are not an indicati on of our future dividend policy and we may not be
able to pay any dividends on our Shares.
For FY2020, FY2021, FY2022 and 6M2023, our Group declared and paid dividends of RMB5.0
million, RMB73.9 million, approxima tely RMB38.9 million and nil, respec tively, and all these dividends
had been paid as at the Latest Practicable Date. The declaration and payment of dividends during the
Track Record Period should not be considered as a guarantee or indication that we will declare and pay
dividends in such manner in the future, or will declare and pay any dividends in the future at all.
Whether dividends will be distributed and the amount of dividends to be paid will depend upon, among
others, our profitability, financial conditions, business development re quirements, future prospects and
cash requirements. Any declaration, payment and amount of dividends is at the discretion of our
Directors, and will be subject to, among others , our constitutional documents and the Cayman
Companies Act.
Termination of the Underwriting Agreements.
Prospective investors should note that the Underw riters are entitled to terminate their obligations
under the Underwriting Agreements by the Overall Coordinator (for itself and on behalf of the
Underwriters) giving written no tice to our Company upon the occurrence of any of the events stated in
the section headed ‘‘Underwriting — Grounds for termination’’ of this prospectus at any time prior to
8:00 a.m. (Hong Kong time) on the Listing Date. Su ch events include, without limitation, any act of
God, war, riot, public disorder, civil commotion, fire, flood, tsunami, explosion, epidemic, pandemic, act
of terrorism, earthquake, strike or lock-out. Should the Overall Coordinator (for itself and on behalf of
the Underwriters) exercises its rights and termina te the Underwriting Agreements, the Global Offering
will not proceed and will lapse.
Future issues, offers or sales of Shares may adver sely affect the prevailing market price of the
Shares.
Future issues of Shares by our Company or the disposals of Shares by any of the Shareholders or
the perception that such issues or sales may occur, ma y negatively impact the prevailing market price of
our Shares. We cannot give any assurance that such events will not occur in the future.
Shareholders ’ interests may be diluted as a result of additional equity fund-raising.
We may need to raise additional funds in the future to finance our business operation, expansion
and/or other funding needs. If additional funds are ra ised through the issuance of new equity or equity-
linked securities of our Company other than on a pro ra ta basis to existing Share holders, the percentage
of ownership of such Shareholders in our Company may be reduced, and such new securities may confer
rights and privileges that take priority over those conferred by our Shares.
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Investors may not enjoy the same shareholders ’ rights as the laws of Cayman Islands may differ
from those of Hong Kong or other jurisdictions where investors may be located.
Our Company is incorporated in the Cayman Islan ds, its affairs are governed by the Articles, the
Cayman Companies Act and common law applicable in the Cayman Islands. The laws of Cayman
Islands may differ from those of Hong Kong or other jurisdictions where investors may be located. As a
result, minority Shareholders may not enjoy the same rights as pursuant to the laws of Hong Kong or
such other jurisdictions. A summary of the Cayman Islands company law on protection of minority
shareholders is set out in the section headed ‘‘Summary of the constitution of our Company and Cayman
Islands Company Law — Summary of Cayman Islands company law and taxation — 6. Protection of
minorities ’’in Appendix IV to this prospectus.
The interest of our Controlling Shareholder ma y conflict with the interests of our Company ’s
public shareholders.
Immediately upon the completion of the Capitali sation Issue and the Global Offering (but without
taking into account of Shares that may be allotted and issued upon the exercise of the Over-allotment
Option and options that may be granted under the Sha re Option Scheme), our Controlling Shareholder
will own 70.5% of our enlarged issued share capital. Therefore, our Controlling Shareholder will be able
to exercise substantial control or influence over our business by directly or indirectly voting at
shareholders ’ meetings in matters that are significant to us and our public Shareholders. For example,
they may perform significant corporate actions, a ffect composition of the Board and affect the issue of
dividends. Our Controlling Share holder may take actions, and exer cise influence that favours their
interests over the interests of our Company or our public Shareholders. We cannot assure you that our
Controlling Shareholder will not cau se us to enter into transactions or take, or fail to take, other actions
or make decisions that conflict with the best interests of our other Shareholders.
Risk of impact of granting options under the Share Option Scheme.
Our Company has conditionally adopted the Share Option Scheme although no options have been
granted thereunder as at the Latest Practicable Date. Any exercise of the option to be granted under the
Share Option Scheme in the future and issue of our Shares thereunder would result in the reduction in
the ownership percentage of the Shareholders and ma yr e s u l ti nad i l u t i o ni nt h ee a r n i n g sp e rs h a r ea n d
net asset value per Share, as a result of the increase in the number of our Shares outstanding after such
issue.
Under the IFRS, the costs of the options to be granted to staff under the Share Option Scheme will
be charged to our statements of comprehensive income over the vesting period by reference to the fair
value at the date on which the options are granted under the Share Option Scheme. As a result, our
profitability and financial results may be adversely affected.
We are subject to foreign exchange risk.
Our principal place of business is in the PRC with our sales and purchases are mainly denominated
in Renminbi, while the proceeds from the Global Offe ring will be denominated in HK dollars. Further,
the presentation currency of our Group ’s financial statements is in RMB. During the Track Record
Period, we recognised exchange gain/(loss) on translation of foreign operations of approximately
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RMB1.2 million, RMB(1.3) million, RMB10.1 m illion and RMB1.2 million, respectively; and the
foreign exchange rate of RMB to HK$ had fluctuated from RMB1.00 to HK$1.087 to RMB1.00 to
HK$1.12. As such, we may be exposed to fluctuations in the exchange rate and any unfavourable
fluctuation against our Group may adversely affect the underlying value of our proceeds from the Global
Offering and the financial performance of our Group.
RISKS RELATING TO INFORMATION CONTAINED IN THIS PROSPECTUS
Investors should not place undue reliance on facts, s tatistics and data contained in this prospectus
with respect to the economies and our industry.
Certain facts, statistics and data in this prospectus are derived from various sources including
various official government sources that we believe to be reliable and appropriate for such information.
However, we cannot guarantee the quality or reliabili ty of such source materials. We have no reason to
believe that such information is false or misleadi ng or that any fact has been omitted that would render
such information false or misleading. Whilst our Directors have taken reasonable care in extracting and
reproducing the information, they have not been prepared or independently verified by us, the Sole
Sponsor, the Overall Coordinator, the Sole Global Coordinator, the Joint Bookrunners, the Joint Lead
Managers, the Underwriters or any of their respective directors, affiliates or advisers. Therefore, none of
them makes any representation as to the accuracy or co mpleteness of such facts, statistics and data. Due
to possibly flawed or ineffective collection methods or discrepancies between published information,
market practice and other problems, the statistics in this prospectus may be inaccurate or may not be
comparable to statistics produced for other publications or purposes and you should not place undue
reliance on them. Furthermore, there is no assurance that they are stated or compiled on the same basis
or with the same degree of accuracy as similar statistics presented elsewhere. In all cases, investors
should give consideration as to how much weight or im portance they should attach to, or place on, such
information or statistics.
Y o us h o u l dr e a dt h ee n t i r ep r o s p e c t u sa n dw es t rongly caution you not to place any reliance on
any information contained in press articles or media regarding us or the Global Offering.
There had been, prior to the publi cation of this prospectus, and there may be, after the date of this
prospectus but prior to the completion of the Global Offering, press and media coverage regarding us
and the Global Offering. Such press and media coverage may include references to certain information
that does not appear in this prospectus, including certain operating and financial information and
projections, valuations and other information. We have not authorised the disclosure of any information
concerning the Global Offering in the press or media and do not accept responsibility for the accuracy
or completeness of such press articles or other me dia coverage. We make no representation as to the
appropriateness, accur acy, completeness, or reliability of any o f the projections, valuations or other
forward-looking information about us. To the extent such statements are inconsistent with, or in conflict
with, the information contained in this prospectus, we disclaim responsibility for them. Accordingly,
prospective investors are cautioned to make their decisions on the basis of the information contained in
this prospectus only and should not rely on any other information.
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Forward-looking statements contained in this prospectus are subject to risks and uncertainties.
This prospectus contains certain s tatements and information that are ‘‘forward-looking ’’and uses
forward-looking terminology such as ‘‘anticipate ’’, ‘‘believe ’’, ‘‘could’’, ‘‘estimate ’’, ‘‘expect ’’, ‘‘may’’,
‘‘ought to ’’, ‘‘should ’’or ‘‘will’’ or similar terms. Those statements include, among other things, the
discussion of our Group ’s growth strategy and expectations concerning our future operations, liquidity
and capital resources. Investors of the Shares are cautioned that reliance on any forward-looking
statements involves risks and uncertainties and that any or all of those assumptions could prove to be
inaccurate and as a result, the forward-looking statements based on those assumptions could also be
incorrect. The uncertainties in this regard include, but are not limited to, those identified in this section,
many of which are not within our Group ’s control. In light of these and other uncertainties, the inclusion
of forward-looking statements in this prospectus should not be regarded as representations by our
Company that our plans or objectives will be achieved and investors should not place undue reliance on
such forward-looking statements. Our Company does not undertake any obligation to update publicly or
release any revisions of any forward-looking statements, whether as a result of new information, future
events or otherwise. See section headed ‘‘Forward-looking statements ’’in this prospectus for further
details.
Possible setting of the Offer Price after m aking a Downward Offer Price Adjustment.
We have the flexibility to make a Downward Offer P rice Adjustment to set the final Offer Price at
up to 10% below the bottom end of the indicative O ffer Price range per Offer Share. It is therefore
possible that the final Offer Price will be set at HK$0.495 per Offer Share upon the making of a full
Downward Offer Price Adjustment. In such a situation, the Global Offering will proceed and the
requirements under Rule 11.13 of the Listing Rules will not apply.
If the final Offer Price is set at HK$0.495, the estimated net proceeds we will receive from the
Global Offering will be reduced to HK$190.2 million, assuming that the Over-allotment Option is not
exercised and that such reduced proceeds will be used as described in the section headed ‘‘Future plans
and use of proceeds ’’in this prospectus.
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In preparation for the Listing, we have sought the f ollowing waiver from strict compliance with the
relevant provisions of the Listing Rules.
MANAGEMENT PRESENCE
Rule 8.12 of the Listing Rules requires that a ne w applicant applying for a primary listing on the
Stock Exchange must have a sufficient management presence in Hong Kong. This normally means that
at least two of its executive directors must be ordinarily resident in Hong Kong.
Our Group ’s business and operations has been and will continue to be located, managed and
conducted primarily in the PRC.
With the exception of Mr. Lo Cheuk Kwong Raymond, who is our Executive Director, chief
financial officer and company secretary who is ordinary resident in Hong Kong, all of our Executive
Directors and senior management members are and will continue to be ordinarily based in the PRC and/
or Canada. Our Company does not and, in the foreseeable future, will not have sufficient management
presence in Hong Kong, for the purpose of satisfying the requirements under Rule 8.12 of the Listing
Rules.
Accordingly, an application has been made to the Stock Exchange for a waiver from strict
compliance with the requirement to have a sufficient management presence in Hong Kong under Rule
8.12 of the Listing Rules and such waiver has been granted by the Stock Exchange. The arrangements
proposed by our Company for maintaining at all times regular, adequate and effective communication
with the Stock Exchange for the purpose of Rule 8.12 of the Listing Rules are as follows:
(a) our Company has appointed two authorised representatives pursuant to Rule 3.05 of the
Listing Rules, namely Mr. Lo Cheuk Kwong Raymond, our Executive Director, and Dr. Shao
Xuxin, our Executive Director. Mr. Lo Cheuk Kwong Raymond is ordinarily resident in
Hong Kong, and will act as our Company ’s principal channel of communication with the
Stock Exchange and will ensure that our Group complies with the Listing Rules at all times.
Each of the authorised representatives will be available to meet with the Stock Exchange in
Hong Kong within a reasonable time frame upon request of the Stock Exchange and will be
readily contactable by telephone, facsimile and email. Each of the two authorised
representatives is authorised to communi cate on behalf of our Company with the Stock
Exchange;
(b) our Company shall promptly inform the Stock Exchange if there is any change to the
authorised representatives;
(c) each of the authorised representatives has means to contact all members of our Board
(including independent non-executive Directors) or the senior management team promptly at
all times as and when the Stock Exchange wishes to contact them or any of them for any
matters. To enhance the communication between the Stock Exchange, the authorised
representatives and our Directors, our Company will implement a number of policies whereby
(a) each Director will provide his mobile phone numbers, residential phone numbers, office
WAIVER FROM STRICT COMPLIANCE WITH THE LISTING RULES
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phone numbers, facsimile numbers (if applicable) and email addresses to the authorised
representatives; (b) in the event that any Director expects to travel and be out of office, he
will provide the phone number of the place of his accommodation to the authorised
representatives; and (c) each Director and au thorised representative of our Company will
provide his mobile phone number, office phone number, facsimile number (if applicable) and
email address to the Stock Exchange;
(d) if circumstances require, meeting of our Board can be convened and held in such manner as
permitted under the Articles at short notice t o discuss and address any issue with which the
Stock Exchange is concerned in a timely manner;
(e) each of our Directors has confirmed that he possesses or can apply for valid travelling
documents to visit Hong Kong to meet with the Stock Exchange upon reasonable short
notice, when required; and
(f) our Company has appointed Innovax Capital as compliance adviser pursuant to Rule 3A.19
of the Listing Rules to provide our Company with professional advice on continuing
obligations under the Listing Rules, who w ill also act at all times, in addition to the two
authorised representatives of our Company, as the principal channel of communication
between our Company and the Stock Exchange, from the Listing Date to the date when our
Company published its annual report for the first full financial year immediately after the
Listing Date.
WAIVER FROM STRICT COMPLIANCE WITH THE LISTING RULES
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DIRECTORS ’ RESPONSIBILITY FOR THE CONTENTS OF THIS PROSPECTUS
This prospectus, for which our Directors collectively and individually accept full responsibility,
includes particulars given in compliance with the Companies (Miscellaneous Provisions) Ordinance, the
Securities and Futures (Stock Market Listing) Rules (Chapter 571V of the Laws of Hong Kong) and the
Listing Rules for the purpose of giving information w ith regard to our Group. Our Directors (including
any proposed Director who is named as such in this prospectus), having made all reasonable enquiries,
confirm that to the best of their knowledge and belief that the information contained in this prospectus 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 prospectus misleading.
CSRC FILING
On 20 October 2023, the CSRC publicly informed us that they have confirmed the Company ’s
overseas offering and listing information submitted to them, and therefore, we have completed the CSRC
filing for application of listing of the Shares on the Stock Exchange and Global Offering. The CSRC
accepts no responsibility for the fi nancial soundness of us or for the ac curacy of any of the statements
made or opinions expressed in this prospectus.
ALL OFFER SHARES ARE UNDERWRITTEN
This prospectus is published solely in connection with the Hong Kong Public Offering, which
forms part of the Global Offering. The Global Offering comprises the Hong Kong Public Offering and
the International Offering. The Global Offering is an offer of 50,000,000 Shares under the Hong Kong
Public Offering (subject to reallocation) and 450,000,000 Shares under the International Offering
(subject to reallocation and the Over-allotment Option), in each case at the Offer Price. Details of the
structure of the Global Offering are set out in the section headed ‘‘Structure and conditions of the
Global Offering’’ .
The Listing is sponsored by the Sole Sponsor and i s managed by the Overall Coordinator. The
Hong Kong Public Offering is fully underwritten by t he Hong Kong Underwrite rs under the terms of the
Hong Kong Underwriting Agreement, and is subjec t to the agreement on the Offer Price between the
Overall Coordinator (for itself and on behalf of the Underwriters) and our Company on the Price
Determination Date. An International Underwriting Agreement relating to the International Offering is
expected to be entered into on or about the Price Determination Date, subject to the Offer Price being
agreed. Further details of the Underwriters and the Underwriting Agreements are set out in the section
headed ‘‘Underwriting ’’of this prospectus.
DETERMINATION OF THE OFFER PRICE
The Offer Shares are being offered at the Offer Price, which will be determined by the Overall
Coordinator (for itself and on behalf of the Underwriters) and our Company on or around 12:00 noon on
Wednesday, 20 December 2023 (Hong Kong time) or such later date as may be agreed between the
Overall Coordinator (for itself and on behalf of the Underwriters) and our Company. The Offer Price
will not be more than HK$0.75 per Offer Share and is currently expected to be not less than HK$0.55
INFORMATION ABOUT THIS PROSPECTUS AND THE GLOBAL OFFERING
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per Offer Share, unless otherwise announced. Investor applying for the Hong Kong Offer Shares must
pay, on application, the maximum Offer Price of HK$0.75 per Offer Share, together with brokerage fee
of 1.0%, SFC transaction levy of 0.0027%, AFRC transaction levy of 0.00015% and Stock Exchange
trading fee of 0.00565%, subject to refund if the Offer Price is lower than HK$0.75 per Offer Share.
The Overall Coordinator (for itself and on behalf of the Underwriters) may, with the consent of our
Company, reduce the number of the Offer Share and/or the indicative Offer Price range stated in this
prospectus at any time on or prior to the expected P rice Determination Date. In such situation, our
Company will, as soon as practicable following the decision to set the final Offer Price below HK$0.55,
being the bottom end of the indicative Offer Price range, publish on the websites of the Stock Exchange
at www.hkexnews.hk and our Company at www.persistenceresource.com an announcement of the final
Offer Price after making a Downward Offer Price Adjustment. Such announcement will be issued before
and separate from the announcement of the results of allocation expected to be announced on Thursday,
21 December 2023. The Offer Price announced following making of a Downward Offer Price
Adjustment shall be the final Offer Price and shall not be subsequently changed. In the absence of an
announcement of a Downward Offer P rice Adjustment has been made, the final Offer Price will not be
outside the indicative Offer Price range as disclosed in this prospectus.
If, for any reason, the final Offer Price is not agreed by our Company and the Overall Coordinator
(for itself and on behalf of the Underwriters) on 12:00 noon on Wednesday, 20 December 2023, the
Global Offering will not proceed and will lapse.
INFORMATION ON THE GLOBAL OFFERING
The Hong Kong Offer Shares are offered solely on the basis of the information contained and
representations made in this prospectus on the ter ms and subject to the conditions set out herein. No
person is authorised to give any information in c onnection with the Global Offering or to make any
representation not contained in this prospectus, and any information or representation not contained
herein must not be relied upon as having been authorised by our Company, the Sole Sponsor, the
Overall Coordinator, the Sole Global Coordinator, the Joint Bookrunners, the Joint Lead Managers, the
CMIs, the Underwriters, any of their respective directors, agents, employees or advisors or any other
parties involved in the Global Offering.
Neither the delivery of this prospectus nor any offe ring, sale or delivery made in connection with
the Offer Shares should, under any circumstances, constitute a representation that there has been no
change or development reasonably likely to involve a change in our affairs since the date of this
prospectus or imply that the information contained in this prospectus is correct as of any date
subsequent to the date of this prospectus.
We have reserved the right to make a Downward O ffer Price Adjustment to provide flexibility in
pricing the Offer Shares. The ability to make a Dow nward Offer Price Adjustment does not affect our
obligation to cancel the offer and relaunch it with a supplemental prospectus or a new prospectus if
there is a material change in circumstances not disclosed in the prospectus and we decide to proceed
with the offer.
INFORMATION ABOUT THIS PROSPECTUS AND THE GLOBAL OFFERING
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If it is intended to set the final Offer Price at more than 10% below HK$0.55 (being the bottom
end of the indicative Offer Price range), we will first cancel the offer and then relaunch it at the revised
offer price and the requirements under Rule 11.13 of the Listing Rules will apply if the Global Offering
is to proceed.
Details of the structure of the Global Offering, inc luding its conditions, are set out in the section
headed ‘‘Structure and conditions of the Global Offering ’’in this prospectus, and the procedures for
applying for the Hong Kong Offer Shares are set out in the section headed ‘‘How to apply for the Hong
Kong Offer Shares’’ in this prospectus.
RESTRICTIONS ON OFFER AND SALE OF THE OFFER SHARES
Each person acquiring the Hong Kong Offer Shares under the Hong Kong Public Offering will be
required to, or be deemed by his acquisition of Offer Shares to, confirm that he is aware of the
restrictions on offers of the Offer Shares described in this prospectus, and that he is not acquiring, and
has not been offered, any Offer Shares in circumstances that contravene any such restrictions.
No action has been taken in any jurisdiction oth er than Hong Kong to permit a public offering of
the Offer Shares or the general distribution of this prospectus. Accordingly, this prospectus may not be
used for the purpose of, and does not constitute, an offer or invitation, nor is it calculated to invite or
solicit offers in any jurisdiction or in any circum stance in which such an offer or invitation is not
authorised or to any person to whom it is unlawful t o make such an offer or invitation. The distribution
of this prospectus and the offering of the Offer Shares in other jurisdictions are subject to restrictions
and may not be made except as permitted under the s ecurities laws of such jurisdiction pursuant to
registration with or an authorisation by the relevant securities regulatory authorities or an exemption
therefrom. In particular, the Offer Shares have not been offered and sold, and will not be offered or
sold, directly or indirectly in the PRC or the U.S., except in compliance with the relevant laws and
regulations of each of such jurisdictions.
The Offer Shares are offered to the public in Hong Kong for subscription solely on the basis of the
information contained and the representations made in this prospectus. No person is authorised in
connection with the Global Offering to give any information or to make any representation not
contained in this prospectus, and any information or representation not contained in this prospectus must
not be relied upon as having been authorised by our Company, the Sole Sponsor, the Overall
Coordinator, the Sole Global Coordinator, the Joint Bookrunners, the Joint Lead Managers, the CMIs,
the Underwriters, any of their respective directors, agents or advisers or any other person involved in the
Global Offering.
Each person subscribing for or purchasing of the Offer Shares will be required to, or is deemed by
his/her/its subscription or purchase of the Offer S hares, to confirm that he/she/it is aware of the
restrictions on offer of the Offer Shares described in this prospectus and that he/she/it is not subscribing
for, and has not been offered, any Offer Shares in circumstances that contravene any such restrictions.
INFORMATION ABOUT THIS PROSPECTUS AND THE GLOBAL OFFERING
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Prospective applicants for the Offer Shares should consult their financial advisers and take legal
advice, as appropriate to inform themselves of, and to observe, all applicable laws and regulations of
any relevant jurisdiction. Prospective applicants fo r the Offer Shares should inform themselves as to the
relevant legal requirements and any applicable exchange control regulations and applicable taxes in the
countries of their respective citizenship, residence or domicile.
STRUCTURE AND CONDITIONS OF THE GLOBAL OFFERING
Further details of the structure and conditions of the Global Offering are set out in the section
headed ‘‘Structure and conditions of the Global Offering’’ in this prospectus.
OVER-ALLOTMENT OPTION AND STABILISATION
Details of the arrangements relating to the Over-allotment Option and the related stabilisation
exercise are set out in the section headed ‘‘Structure and conditions of the Global Offering ’’in this
prospectus.
STOCK BORROWING ARRANGEMENT
Details of the stock borrowing arrangem ent are set out in the section headed ‘‘Structure and
conditions of the Global Offering ’’in this prospectus.
APPLICATION FOR LISTING ON THE STOCK EXCHANGE
Application has been made to the Stock Exchange for the listing of, and permission to deal in, our
Shares in issue and to be issued pursuant to the Global Offering and the Capitalisation Issue (including
any additional Shares which may be allotted and issu ed pursuant to the exercise of the Over-allotment
Option and any options which may be granted under the Share Option Scheme) on the Stock Exchange.
No part of the share capital of our Company is listed or dealt in on any other stock exchange and
no such listing or permission to deal is being or is proposed to be sought.
Under Section 44B(1) of the Companies (Miscellaneous Provisions) Ordinance, any allotment
made in respect of any application will be void if the listing of, and the permission to deal in, the Offer
Shares on the Stock Exchange is refused before t he expiration of three weeks from the date of the
closing of the Global Offering, or such longer period (not exceeding six weeks) as may, within the said
three weeks, be notified to our Company by or on behalf of the Stock Exchange.
Pursuant to Rule 8.08(1)(a) of the Listing Rul es, at the time of the Listing and at all times
thereafter, our Company must maintain the minimum prescribed percentage of at least 25% of the issued
share capital of our Company in the hands of the public (as defined in the Listing Rules). Accordingly, a
total of 500,000,000 Offer Shares, which represents 25% of the enlarged issued share capital of our
Company immediately following co mpletion of the Global Offering and the Capitalisation Issue (without
taking into account any Shares which may be allotte d and issued pursuant to the exercise of the Over-
allotment Option or any options which may be gran ted under the Share Option Scheme) will be made
available under the Global Offering.
INFORMATION ABOUT THIS PROSPECTUS AND THE GLOBAL OFFERING
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Only securities registered on our branch register of members kept in Hong Kong may be traded on
the Stock Exchange unless the Stock Exchange otherwise agrees.
COMMENCEMENT OF DEALINGS IN OUR SHARES
Dealings in our Shares on the Stock Exchange are expected to commence at 9:00 a.m. on Friday,
22 December 2023. Shares will be traded in board lots of 5,000 Shares each. The stock code for the
Shares will be 2489. No temporary docume nts or evidence of title will be issued.
SHARES WILL BE ELIGIBLE FOR ADMISSION INTO CCASS
Subject to the approval of, and permission to deal in, our Shares on the Stock Exchange and the
compliance with the stock admission requirements of HKSCC, our Shares will be accepted as eligible
securities by HKSCC for deposit, clearance and se ttlement in CCASS with effect from the Listing Date
or on any other date as determined by HKSCC. Settleme nt of transactions between participants of the
Stock Exchange is required to take place in CCASS on the second settlement day after any trading day.
All activities under CCASS are subject to the Ge neral Rules of HKSCC and HKSCC Operational
Procedures in effect from time to time.
All necessary arrangements have been made for our Shares to be admitted into CCASS. Investors
should seek the advice of their stockbr okers or other professional advisers for details of those settlement
arrangements and how such arrangements will affect their rights and interests.
PROFESSIONAL TAX ADVICE RECOMMENDED
Applicants for the Offer Shares are recommended to consult their professional advisers if they are
in doubt as to the taxation implications of the subscription for, purchase, holding or disposal of, dealing
in, or the exercise of any rights in relation to our Shares. It is emphasised that none of our Company,
the Sole Sponsor, the Overall Coordinator, the Sole Global Coordinator, the Joint Bookrunners, the Joint
Lead Managers, the CMIs, the Underwriters, any of their respective directors, agents or advisers or any
other person involved in the Global Offering accepts responsibility for any tax effects on or liabilities of
any person resulting from the subscription for, pur chase, holding or disposal of, dealing in, or the
exercise of any rights in relation to our Shares.
HONG KONG BRANCH SHARE REGISTER AND STAMP DUTY
All the Offer Shares will be registered on our Company ’s branch share register maintained in Hong
Kong by the Hong Kong Branch Share Registrar. Our pr incipal share register will be maintained in the
Cayman Islands by the Principal Share Registrar. Only securities registered on the branch share register
of our Company kept in Hong Kong may be traded on the Stock Exchange unless the Stock Exchange
otherwise agrees.
Dealings in our Shares registered on our branch share register in Hong Kong will be subject to
Hong Kong stamp duty. Unless our Company determines otherwise, dividends (if any) payable in Hong
Kong dollars in respect of our Shares will be paid by cheque sent at the Shareholder ’s risk by ordinary
INFORMATION ABOUT THIS PROSPECTUS AND THE GLOBAL OFFERING
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post to the registered address of each Shareholder e ntitled or, in the case of joint Shareholders, to the
registered address of that one whose name stands fir st in the register of members in respect of the joint
holding, or to such person and to such address as the holder or joint holders may in writing direct.
ROUNDING
Certain amounts and percentage figures included in this prospectus have been subject to rounding
adjustments. Accordingly, figures shown as totals in certain tables may not be an arithmetic aggregation
of the figures preceding them due to rounding.
LANGUAGE
If there is any inconsistency between the Englis h version of this prospectus and the Chinese
translation of this prospectus, the English version of this prospectus shall prevail. Names of any laws
and regulations, governmental authorities, institutions, natural persons or other entities which have been
translated into English and included in this prospe ctus and for which no official English translation
exists are unofficial translations for your reference only.
EXCHANGE RATE CONVERSION
Solely for your convenience, this prospectus contains translations of certain RMB amounts, US
dollar amounts and Hong Kong dollar amounts at specified rates. You should not construe these
translations as representations that any amoun ts in RMB, US dollars or Hong Kong dollars could
actually be converted at the rates indicated or at all. For the purpose of this prospectus, unless we
indicate otherwise, the translation of RMB amounts into Hong Kong dollar amounts have been made at
the rate of RMB1 to HK$1.12, the translation of RMB amounts into US dollar amounts have been made
at the rate of US$1 to RMB6.98 and the translation of US dollar amounts into Hong Kong dollar
amounts have been made at the rate of US$1 to HK$7.75.
INFORMATION ABOUT THIS PROSPECTUS AND THE GLOBAL OFFERING
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DIRECTORS
Name Residential address Nationality
Executive Directors
Dr. Shao Xuxin ( 邵緒新博士)
(Chairman and chief executive officer)
3309 13th Avenue West
Vancouver
British Columbia
V6R 2R8
Canada
Canadian
Mr. Mackie James Thomas 17338 0A Avenue
Surrey
British Columbia
V3Z 9P3
Canada
Canadian
Mr. Lo Cheuk Kwong Raymond
(盧卓光先生) (Chief financial officer and
company secretary)
Flat H, 31/F
Blk 25 Dover Court
South Horizons
Ap Lei Chau
Hong Kong
British
Mr. Chen Shaohui ( 陳紹惠先生) Room 204, 1st floor
No. 12 Guoyuan First Road
Xiling District
Yichang City
Hubei Province
PRC
Chinese
Independent Non-Executive Directors
Dr. Malaihollo Jeffrey Francis A Shutta Park Cottage
Mount Tamar
Bere Alston
Yelverton
PL20 7HL
United Kingdom
American
Mr. Chan Ngai Fan ( 陳毅奮先生)1 /F,
No. 8 Ho Tung Road
Kowloon Tong, Kowloon
Hong Kong
Chinese
D r .Z e n gM i n g(曾鳴博士) Flat 2104, 2nd Floor
Western District, Ding No. 11
Xueyuan Road
Haidian District
Beijing
PRC
Chinese
Ms. Liu Li ( 劉莉小姐) Room 7C, Block C, Zone A
Haian Mingzhu Garden
No. 233 Haide First Road
Nanshan District
Shenzhen City
Guangdong Province
PRC
Chinese
Further information of the profile and background of our Directors can be found in the section
headed ‘‘Directors and senior management ’’in this prospectus.
DIRECTORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING
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PARTIES INVOLVED IN THE GLOBAL OFFERING
Sole Sponsor Innovax Capital Limited
(A corporation licensed to carry out Type 1 (dealing in
securities) and Type 6 (advis ing on corporate finance)
regulated activities under the SFO)
Room B, 13/F, Neich Tower
128 Gloucester Road
Wan Chai
Hong Kong
Overall coordinator and Sole Global
Coordinator
Innovax Securities Limited
(A corporation licensed to carry out Type 1 (dealing
insecurities) and Type 4 (advising on securities)
regulated activities under the SFO)
Unit A –C, 20/F, Neich Tower
128 Gloucester Road
Wan Chai
Hong Kong
Joint Bookrunners, Joint Lead Managers
and CMIs
Innovax Securities Limited
(A corporation licensed to carry out Type 1 (dealing
insecurities) and Type 4 (advising on securities)
regulated activities under the SFO)
Unit A –C, 20/F, Neich Tower
128 Gloucester Road
Wan Chai
Hong Kong
CCB International Capital Limited
(a corporation licensed to carry out Type 1 (dealing in
securities), Type 4 (advis ing on securities) and Type 6
(advising on corporate finance) regulated activities
under the SFO)
12/F, CCB Tower
3 Connaught Road Central
Central
Hong Kong
DIRECTORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING
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Zhongtai International Securities Limited
(a corporation licensed to carry out Type 1 (dealing in
securities) and Type 4 (advising on securities)
regulated activities under the SFO)
19/F, Li Po Chun Chambers
189 Des Voeux Road Central
Central, Hong Kong
BOCOM International Securities Limited
(a corporation licensed to carry out Type 1 (dealing in
securities), Type 2 (dealing in futures contracts), Type
4 (advising on securities) and Type 5 (advising on
futures contracts) regulat ed activities under the SFO)
15/F, Man Yee Building,
68 Des Voeux Road Central,
Hong Kong
SPDB International Capital Limited
(a corporation licensed to carry out Type 1 (dealing in
securities) and Type 6 (advis ing on corporate finance)
regulated activities under the SFO)
33/F, SPD Bank Tower
One Hennessy
1 Hennessy Road
Hong Kong
Citrus Securities Limited
(a corporation licensed to carry out Type 1
(dealing in securities) and Type 4 (advising on
securities) regulated activities under the SFO)
Room 2201, 22/F, OfficePlus@Wan Chai,
303 Hennessy Road, Wanchai,
Hong Kong
DIRECTORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING
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Quam Securities Limited
(a corporation licensed to carry out Type 1 (dealing in
securities), Type 2 (dealing i n futures contracts), Type
4 (advising on securities), Type 6 (advising on
corporate finance) and Type 9 (asset management)
regulated activities under the SFO)
5/F and 24/F (Rooms 2401 and 2412)
Wing On Centre
111 Connaught Road Central
Hong Kong
Valuable Capital Limited
(a corporation licensed to carry out Type 1 (dealing in
securities), Type 2 (dealing i n futures contracts), Type
4 (advising on securities), Type 5 (advising on futures
contracts) and Type 9 (asset management) regulated
activities under the SFO)
RM 3601 –06 & 3617 –19, 36/F
China Merchants Tower
Shun Tak Centre
168–200 Connaught Road Central
Hong Kong
CMBC Securities Company Limited
(a corporation licensed to carry out Type 1
(dealing in securities) and Type 4 (advising on
securities) regulated activities under the SFO)
45/F, One Exchange Square,
8 Connaught Place, Central,
Hong Kong
First Shanghai Securities Limited
(a corporation licensed to carry out Type 1
(dealing in securities), Typ e 4 (advising on securities)
and Type 6 (advising on corporate finance) regulated
activities under the SFO)
19/F, Rm 2402-04 & 2505-10 Wing On House
71 Des Voeux Road Central
Hong Kong
DIRECTORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING
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Joint Bookrunner and CMI ABCI Capital Limited
(a corporation licensed to carry out Type 1 (dealing in
securities) and Type 6 (advis ing on corporate finance)
regulated activities under the SFO)
11/F, Agricultural Bank of China Tower
50 Connaught Road Central
Hong Kong
Joint Lead Managers and CMIs ABCI Securities Company Limited
(a corporation licensed to carry out Type 1 (dealing in
securities) and Type 4 (advising on securities)
regulated activities under the SFO)
13/F, Fairmont House
8C o t t o nT r e eD r i v e
Central, Hong Kong
Futu Securities International (Hong Kong) Limited
(a corporation licensed to carry out Type 1 (dealing in
securities), Type 2 (dealing in futures contracts),
Type 3 (leveraged foreign exchange trading), Type 4
(advising on securities), Type 5 (advising on Futures
Contracts), Type 7 (providing automated trading
services) and Type 9 (asset management) regulated
activities under the SFO)
Unit C1 –2, 13/F, United Centre
No. 95 Queensway
Hong Kong
Tiger Brokers ( HK) Global Limited
(a corporation licensed to carry out Type 1 (dealing in
securities), Type 2 (dealing in futures contracts), Type
4 (advising on securities) and Type 6 (advising on
corporate finance) regulated activities under the SFO)
1/F, FWD Financial Centre
308 Des Voeux Road Central
Hong Kong
DIRECTORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING
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Livermore Holdings Limited
(a corporation licensed to carry out Type 1 (dealing in
securities) and Type 4 (advising on securities)
regulated activities under the SFO)
Unit 1214A, 12/F
Tower II Cheung Sha Wan Plaza
833 Cheung Sha Wan Road
Kowloon
Hong Kong
ZMF Asset Management Limited
(a corporation licensed to carry out Type 1 (dealing in
securities), Type 4 (advis ing on securities) and Type 9
(asset management) regulated activities under the
SFO)
Unit 2502, 25/F, World Wide House
19 Des Voeux Road Central, Central
Hong Kong
China Sunrise Securities (International) Limited
(a corporation licensed to carry out Type 1 (dealing in
securities) and Type 4 (advising on securities)
regulated activities under the SFO)
Unit 4502, 45/F, The Center
99 Queen ’sR o a dC e n t r a l
Central
Hong Kong
Astrum Capital Management Limited
(a corporation licensed to carry out Type 1 (dealing in
securities), Type 2 (dealing in futures contracts), Type
6 (advising on corporate finance) and Type 9 (asset
management) regulated activities under the SFO)
Room 2704, Tower 1
Admiralty Centre
18 Harcourt Road
Admiralty, Hong Kong
DIRECTORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING
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Yue Xiu Securities Company Limited
(a corporation licensed to carry out Type 1 (dealing in
securities), Type 2 (dealing in futures contracts), Type
4 (advising on securities) and Type 5 (advising on
futures contracts) regulat ed activities under the SFO
Rooms Nos. 4917 –4937
49/F, Sun Hung Kai Centre
No.30 Harbour Road
Wanchai, Hong Kong
Eddid Securities and Futures Limited
(a corporation licensed to carry out Type 1 (dealing in
securities), Type 2 (dealing in futures contracts), Type
3 (leveraged foreign exchange trading), Type 4
(advising on securities), Type 5 (advising on futures
contracts) and Type 9 (asset management) regulated
activities under the SFO)
21/F, Citic Tower
1 Tim Mei Avenue
Central, Hong Kong
Pacific Foundation Securities Limited
(a corporation licensed to carry out Type 1 (dealing in
securities) and Type 9 (asse t management) regulated
activities under the SFO)
Suite 4409, 44/F, COSCO Tower
183 Queen ’sR o a dC e n t r a l
Hong Kong
SBI China Capital Financial Services Limited
(a corporation licensed to carry out Type 1 (dealing in
securities), Type 4 (advis ing on securities) and Type 9
(asset management) regulated activities under the
SFO)
4/F, Henley Building
No. 5 Queen ’s Road Central
Hong Kong
DIRECTORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING
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Elstone Securities Limited
(a corporation licensed to carry out Type 1 (dealing in
securities) and Type 4 (advising on securities)
regulated activities under the SFO)
Suite 1601 –04, 16/F, West Tower
Shun Tak Centre
168–200 Connaught Road Central
Hong Kong
Legal advisers to our Company As to Hong Kong laws
Li & Partners
Solicitors, Hong Kong
22nd Floor, World-Wide House
19 Des Voeux Road Central
Hong Kong
As to PRC laws
Jincheng Tongda & Neal Law Firm Shenzhen Office
PRC attorneys-at-law
42nd Floor, Media Finance Center
No. 9 Pengcheng 1st Road
Futian District
Shenzhen
PRC
As to Cayman Islands laws
Maples and Calder (Hong Kong) LLP
Cayman Islands attorneys-at-laws
26th Floor, Central Plaza
18 Harbour Road
Wanchai
Hong Kong
DIRECTORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING
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--- page 115 ---
Legal advisers to the Sole Sponsor,
the Overall Coordinator,
the Sole Global Coordinator,
the Joint Bookrunners, the Joint Lead
Managers and the Underwriters
As to Hong Kong laws
Howse Williams
Solicitors, Hong Kong
27th Floor, Alexandra House
18 Chater Road
Central
Hong Kong
As to PRC laws
Beijing Dacheng Law Offices, LLP (Guangzhou)
PRC attorneys-at-law
14/F, 15/F, CTF Finance Centre
No. 6 Zhujiang East Road
Zhujiang New Town
Guangzhou
PRC
Competent Person SRK Consulting China Ltd
B315 COFCO Plaza
No. 8 Jianguomennei Avenue
Dongcheng District
Beijing
PRC
Auditors and reporting accountants Ernst & Young
Certified Public Accountants
Registered Public In terest Entity Auditor
27/F, One Taikoo Place
979 King ’sR o a d
Quarry Bay
Hong Kong
Independent industry consultan t Frost & Sullivan (Beijing) Inc.,
Shanghai Branch Co.
2504 Wheelock Square
1717 Nanjing West Road
Shanghai 200040
PRC
DIRECTORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING
– 105 –


--- page 116 ---
Internal control consultant Avista Risk Advisory Limited
Suites 2401 –06, 24/F
Everbright Centre
No. 108 Gloucester Road
Wan Chai
Hong Kong
Compliance adviser Innovax Capital Limited
(A corporation licensed to carry out Type 1 (dealing in
securities) and Type 6 (advis ing on corporate finance)
regulated activities under the SFO)
Room B, 13/F, Neich Tower
128 Gloucester Road
Wan Chai
Hong Kong
Receiving bank China Construction Bank (Asia) Corporation Limited
26/F, CCB Tower
3 Connaught Road Central
Central
Hong Kong
DIRECTORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING
– 106 –


--- page 117 ---
Registered office P.O. Box 309
Ugland House
Grand Cayman
KY1-1104
Cayman Islands
Headquarters and principal place of
business in the PRC
Qiansongjiao Village
Wanggezhuang Town
Muping District
Yantai city
Shandong
PRC
Principal place of business
in Hong Kong registered
under Part 16 of
the Companies Ordinance
Level 20, Infinitus Plaza
199 Des Voeux Road Central
Hong Kong
Company website www.pers istenceresource.com
(the information contained on the website do not form
part of this prospectus)
Company secretary Mr. Lo Cheuk Kwong Raymond (FCPA, CPA (Aust.))
Flat H, 31/F,
Blk 25 Dover Court
South Horizons
Ap Lei Chau
Hong Kong
Authorised representatives
(for the purpose of the Listing Rules)
Mr. Lo Cheuk Kwong Raymond (FCPA, CPA (Aust.))
Flat H, 31/F,
Blk 25 Dover Court
South Horizons
Ap Lei Chau
Hong Kong
Dr. Shao Xuxin
3309 13th Avenue West
Vancouver
British Columbia
V6R 2R8
Canada
CORPORATE INFORMATION
– 107 –


--- page 118 ---
Audit committee Mr. Chan Ngai Fan (Chairman)
Dr. Malaihollo Jeffrey Francis A
Dr. Zeng Ming
Remuneration committee Dr. Zeng Ming (Chairman)
Dr. Malaihollo Jeffrey Francis A
Mr. Chan Ngai Fan
Dr. Shao Xuxin
Nomination committee Dr. Shao Xuxin (Chairman)
Dr. Malaihollo Jeffrey Francis A
Mr. Chan Ngai Fan
Dr. Zeng Ming
Principal Share Registrar and
transfer office
Maples Fund Services (Cayman) Limited
PO Box 1093, Boundary Hall
Cricket Square
Grand Cayman KY1-1102
Cayman Islands
Hong Kong Branch Share Registrar
and transfer office
Tricor Investor Services Limited
17/F, Far East Finance Centre
16 Harcourt Road
Hong Kong
Principal Banks Huaxia Bank Co., Ltd.
Yantai Branch
No. 123 South Street
Zhifu District
Yantai
Shandong
PRC
Yantai Bank Co., Ltd.
Muping Branch
No. 608 Ninghai Street
Muping District
Yantai
Shandong
PRC
CORPORATE INFORMATION
– 108 –


--- page 119 ---
Yantai Rural Commercial Bank Co., Ltd.
Muping Branch
No. 383 Zhengyang Road
Muping District
Yantai
Shandong
PRC
Yantai Rural Commercial Bank Co., Ltd.
Wanggezhuang Branch
No. 5 Tongda Street
Wanggezhuang
Muping District
Yantai
Shandong
PRC
Bank of China Limited
Laishan Branch
No. 139 Yingchun Avenue
Laishan District
Yantai
Shandong
PRC
CORPORATE INFORMATION
– 109 –


--- page 120 ---
Certain information and statistics set out in this section and other sections of this prospectus
were extracted from the F&S Report prepared by Frost & Sullivan, which was commissioned by us,
and from various official government publications and other publicly available publications. We
engaged Frost & Sullivan to prepare the F&S Report, an independent industry report, in connection
with the Global Offering. The information from official government sources has not been
independently verified by us, the Sole Sponsor , the Overall Coordinator, the Sole Global
Coordinator, the Joint Bookrunners, the Joint Lead Managers, the CMIs, the Underwriters, any of
their respective directors and advisers or any other persons or parties (other than Frost & Sullivan)
involved in the Global Offering, and no representa tion is given as to its accu racy. Unless and except
for otherwise specified, the market and indus try information and data presented in this ‘‘Industry
Overview ’’section is derived from the F&S Report.
SOURCE OF INFORMATION
We commissioned Frost & Sullivan to conduc t an analysis of the global and China ’s gold industry.
We have agreed to pay a fee of approximately RMB1 .4 million for the F&S Report, which will be paid
prior to the Listing. Our Directors are of the view that the payment of the fee does not affect the fairness
of conclusions drawn in the F&S Report.
Frost & Sullivan is an independent global mark et research and consulting firm founded in 1961
and based in the United States. It offers industry research and market strategies and provides growth
consulting and corporate training. The F&S Report in cludes both historical and forecast information on
global and China ’s gold mining markets and other economic data. To prepare the F&S Report, Frost &
Sullivan undertook both primary and secondary independent research through various resources within
global and China ’s gold mining markets. Primary research includes interviewing industry insiders,
competitors, downstream customers a nd recognised third-party industr y associations. Secondary research
includes reviewing corporate annua l reports, databases of relevant o fficial authorities, independent
research reports and publications, as well as the exclusive database established by Frost & Sullivan over
the past decades. Frost & Sullivan has adopted the following primary assumptions while compiling and
preparing the F&S Report: (i) government polic ies on gold and gold mining industries in China and
major overseas countries will remain consistent during the forecast period; and (ii) the gold and gold
mining market in mainland China and the globe will be driven by market drivers stated in the report.
Frost & Sullivan has also obtained the figures for the estimated total market size from historical data
analysis plotted against the macroeconomic data as well as the industry key drivers. Our Directors
confirm that, after making reasonable enquiries, there have not been any material adverse changes to the
market information set out in the F&S Report since the date of such report which may qualify,
contradict or have an impact on the inf ormation contained in this section.
INDUSTRY OVERVIEW
– 110 –


--- page 121 ---
THE GLOBAL GOLD INDUSTRY
Global gold supply
Generally, gold supply is positively correlated to gold price, as gold miners are motivated to
produce more gold when gold price goes up. Globally, countries such as China, Australia, Russia and
the U.S. are major gold supply countries. China is the world ’s largest gold mine production country
since 2007 and accounted for more than 15% of gold supply. Global gold supply has a modest increase
from 2017 to 2022. Gold supply decreased in 2020 and 2021 due to the pandemic and decrease in China
gold supply due to safety accidents in Shandong. In 2022, gold supply recovered mainly due to the
global economy recovering in post-pandemic time period and China ’s gold mine production resuming
from previous safety check especially for Shandong Province. Moving forward, under the context of the
continuation of global economy recovery, global gold supply is expected to grow at CAGR of 1.5%
during 2022 to 2027, driven by robust gold demand, rising in gold price, and exploitation and
exploration technology advancement. As for China gold supply, due to temporary stoppage on gold
mining activities for safety check after the occ urrence of safety accidents in Shandong, China ’sg o l d
production in 2021 decreased by around 24% compared with 2020 supply level. Such decrease is
considered to be temporary, and in 2022, gold production recovered, as China gold mine companies
resumed production after the safety check. Going forward, China ’s gold supply is expected to grow at
approximately 3.0% from 2022 to 2027, driven by the continuous improvement in gold production, such
as replacing low-efficient and ecologically unfriendly production capacities with innovative technologies
and equipment, rising gold price and steady growing gold demand in downstream sectors.
Gold Supply, Global and China, 2017 –2027E
0.4% 1.8%
3.0%1.5%
4,862.0 4,940.7 5,008.9 5,071.8 5,129.2
4,046.4
815.6
4,100.1
840.7
4,146.9
862.0
4,191.3
880.6
4,232.1
897.1
4,660.0 4,775.2 4,876.9 4,729.8 4,695.7 4,754.5
3,951.3
708.6
4,094.5
680.7
4,032.0
844.9
3,780.6
949.3
3,978.3
717.4
3,979.5
775.0
0
1,000
2,000
3,000
4,000
6,000
5,000
2017 2018 2019 2020 2021 2022 2023E 2024E 2025E 2026E
CAGR 17-22
CAGR 22-27E
ChinaGlobal
t
Rest of the World (“ROW”)China
2027E
Note: Gold Supply includes mining p roduction and recycled gold.
Source: World Gold Council, China Gold Association and Frost & Sullivan
Global gold demand
Gold is mainly demanded for the purpose of jewellery fabrication, investment, technology/industry
and central banks reserves, with jewellery and investment as the key drivers for gold demand. The
increase in gold demand as compared with 2021 is mainly attributed to the increase in gold reserve
demand by central banks. The Russia-Ukraine tensions, the climb of global crude oil price leading to
INDUSTRY OVERVIEW
– 111 –


--- page 122 ---
expensive energy consumption, and worries on potential global economy recession in 2023 as the
Federal Reserve is continuously raising interest rates, which result in central banks raising gold reserve
for hedging risks.
Consumers ’ purchase of jewelleries is closely associated with gold price fluctuation and purchasing
power, as well as political envir onment change. During 2017 to 202 1, there was a slight decrease in
gold demand from jewelleries, mainly due to (i) the imposition of import tariff on gold by the Indian
government since 2016 which caused an increase in local gold price; and (ii) the weak demand for gold
in China due to economic slowdown and tightened credit policy in 2016. Due to the government
lockdown policy, rising gold price and economic recession, demand for gold jewellery fell drastically in
2020. Driven by an effective COVID-19 vaccine rollout, improved consumer sentiment and economic
recovery, jewellery demand realised a rebound in 2021, with an increase of more than 60% compared
with 2020. In 2022, a modest decline is noted, which is due to China, as one of the major gold jewellery
consumption countries, shrank its demand caused by the pandemic lockdown. Going forward, global
demand for gold jewellery is anticipated to have an increase, considering the steady recovery from the
pandemic and resumption of gold jewellery retailing a ctivities, as well as the continuous rise of people ’s
income level and consumption upgrade.
Investments include purchase of gold bars and coins as well as exchange traded fund ( ‘‘ETF’’)
which is linked to gold price. Historically gold i nvestment exhibits a growing trend during 2017 to
2020, which was mainly attributed to ETF as a result of increase in gold price and consumers ’ purchase
of bars and coins for value preservation. In 2021, gold investment decreased by more than 40%
compared with 2020 level, which was mainly caused by decrease in gold investment by ETF as the
world is stepping into recovery phase from the pandemic, ETF gold investment cooled down and funds
were flowing into other investment products such as equity. In 2022, gold investment increased,
especially for investment in gold coin and bar, which is due to geopolitical concerns and hedging
against inflation. In the foreseeable future, considering the uncertainties of global economy recession
under the context of the Federal Reserve ’s aggressiveness in raising inte rest rate and Russia-Ukraine
tensions, gold investment is expected to exhibit a growth of CAGR of approximately 5.3% during 2022
to 2027.
The development of new/emerging commodity asset class (e.g. cryptocurrency, gold-backed NTFs
and other virtual commodities) provides investors with more available options on top of to gold and
typical financial products such as stocks and bond, for them to build up their investment portfolios.
However, such impact is believed to be limited considering gold as an investment product, due to 1)
gold is widely accepted by and traded in global marke t, indicating higher liquidity; 2) gold with long
history is traded under a pretty much comprehensive regulatory environment and 3) gold is typically
invested and held for risk hedging against the inflation and other risks while new commodity asset such
as cryptocurrency is more attracted for its expected high return associated with high risk.
INDUSTRY OVERVIEW
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Besides, gold is demanded for many other usages besides investment purpose. Gold is demanded
for jewelleries, for central bank reserves and for technology and industry production use which are
taking more than 70% of total gold demand in 2021, and such demands are quite different from the
emerging commodity class which are mainly for investment purpose. Therefore, it is believed that the
emerging commodity asset class has a limited impact on gold demand.
Gold Demand, Global, 2017– 2027E
–0.6% –3.3% 24.6% –1.5% 2.1%
2.5% 5.3% 2.3% 1.8% 3.1%
4,278.2 4,454.4 4,358.3
3,651.2
4,020.8
4,740.7
5,117.7 5,246.1 5,365.5 5,449.0 5,523.2
2,257.5 2,290.0 2,152.1 1,324.4 2,229.5
2,189.8 2,200.7
2,283.5 2,358.0 2,423.2 2,478.0
1,309.6 1,173.3 1,274.9 1,769.2 1,007.4
1,106.8
1,430.8 1,445.4 1,460.2 1,447.9 1,435.9
378.6 656.2 605.4 255.0 453.8
1,135.7 1,170.0 1,194.7 1,219.9 1,245.7 1,272.0
332.6 334.8 326.0 302.8 330.2 308.5 316.2 322.6 327.4 332.3 337.30
1,000
2,000
3,000
4,000
5,000
6,000
CAGR 17-22
CAGR 22-27E
Jewellery Investment Central Bank Technology/
Industry Total
2017 2018 2019 2020 2021 2022 2023E 2024E 2025E 2026E 2027E
Jewellery Investment Central Bank Technology/Industry
t
Source: World Gold Council and Frost & Sullivan
GOLD INDUSTRY IN CHINA AND SHANDONG
Gold demand in China
China ’s gold demand has increased to approximately 1,127.9 t in 2021, representing an increase of
a more than 30% compared with 2020, which was mainly attributed to the growth in gold demand for
jewellery and investment. Driven by improved economic environment due to the rollout of vaccine, and
improved consumer sentiment, jewellery demand showed a rebound from 2020. Moreover, investors are
putting more emphasis on gold investment, resultin g in the increase in gold investment such as gold bar
and coins.
In 2022, China ’sg o l dd e m a n dd e c r e a s e dab i td u et oC h i n a ’s lockdown to prevent pandemic
spread, demand for gold jewellery decreased. Furthermore, gold investment in gold bar and coin, as well
as gold ETF decreased due to the high gold price level in China. Gold used for technology/industry
purpose decreased in 2022, due to the pandemic lockdown and shrink in demand. Going forward,
consumption of gold jewellery is expected to have a continuous growth, considering the effective control
of pandemic in China and resumption of gold jewelle ry retailing activities, as well as the continuous rise
of people ’s income level and consumption upgrade.
In upward trend in gold investment in China is an ticipated, driven by increasing demand on gold
to hedge future uncertainties of global economy recession under the context of the Federal Reserve ’s
aggressiveness in raising interest rate and Russia-Ukraine tensions.
INDUSTRY OVERVIEW
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--- page 124 ---
Gold Demand, China, 2017 –2027E
10.0 62.2
–1.2% –3.7% –0.4% –0.6%
3.4% 5.0% 5.3% 4.0%
298.5
736.3
696.5 676.2
490.6
711.3
654.3
663.1 693.9 722.5 748.7 772.1
1,085.2
1,157.1 1,108.4
837.1
1,127.9
1,052.3
1,117.1 1,162.1 1,205.2 1,242.8 1,277.6
0.0 0.0 0.0
304.9 225.7
105.8
262.7
319.9 247.3 295.8
64.1
302.2
66.6
308.6
69.3 72.0 74.8
312.4 316.2
90.2 105.9 83.8 96.8 88.5 94.0 104.799.5 109.8 114.5
0
200
400
600
800
1,000
1,200
1,400
N.A.
100.8
2017 2018 2019 2020 2021 2022 2023E 2024E 2025E 2026E 2027E
Jewellery Investment Central Bank Technology/Industry
Jewellery Investment Central Bank Technology/
Industry Total
t
CAGR 17–22
CAGR 22–27E 3.7%
Note: Gold Demand in China does not include gold needed by gold smelting companies, banks or others for portfolio allocation,
trade turnover, leasing and inter-bank lending.
Source: China Gold Association and Frost & Sullivan
Gold price
Average gold spot price in China is closely associated with global average gold spot price so as to
prevent the arbitrage profits. The difference in between the two prices is primarily coming from the
foreign exchange rate fluctuation of RMB/USD as well as the gold import and export control imposed
by Chinese government. The gold price is predomin antly impacted by global political and economic
situations, and when there exists instabilities in po litical or economic environment or turbulence in stock
market, gold is usually treated as one of the risk-hedging tools, and its price will typically exhibit
upward trend. Moreover, monetary policies by central banks (e.g. fluctuation in currency exchange rate)
and macroeconomic factors (e.g. interest rate and inf lation expectation) are also important influential
factors of gold price. Shanghai Gold Exchange ( ‘‘SGE’’) was established by the People’ sB a n ko fC h i n a
upon approval by the State Council. SGE provides t rading, clearing, delivery and vaulting services of
gold, silver and platinum. In terms of gold traded in S GE, there are different categories and respective
gold prices according to types of standard gold (e.g. Au99.99, Au99.95, Au 99.5).
Gold spot price in China increased from approximately RMB 341.6 per gram on 2 Jan 2020 to
RMB 392.4 per gram on 31 Dec 2020, and further back to RMB 373.8 per gram on 31 Dec 2021, and
return to RMB 409.9 per gram on 30 Dec 2022, w hich is generally in line with global gold price
change. Average gold spot price in China increased by approximately 1.3% from RMB 387.1 per gram
in 2020 to RMB 392.1 per gram in 2022.
Average global gold spot price in January 2022 is USD1,816.8 per ounce; average gold spot price
in the PRC in January 2022 is RMB372.6 per gram. The global gold spot price at 22 March 2022 is
USD1,915.25 per ounce, and PRC gold spot price at 22 March 2022 is RMB395.48 per gram. Between
2020 and 2022, the minimum and maximum monthly average gold spot price was RMB347.0 per gram
in January 2020 and RMB422.6 per gram in August 2020.
INDUSTRY OVERVIEW
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--- page 125 ---
During 2017 to 2022, gold spot price in China grew at CAGR of 7.3%, from RMB275.4 per gram
in 2017 to RMB392.1 per gram in 2022, which was mainly due to the increasing demand globally on
gold to diversify investment as gold-linked financial instrument develops, as well as to hedge risks due
to the concerns on global economic a nd political environment uncertainties and ec onomic slowdown as
caused by pandemic lockdowns, rising in U.S. interest rate and central banks ’ increase in gold reserve,
and in future, it is expected to climb steadily at CAGR of 2.6%, to RMB445.1 per gram. Going forward,
China gold spot price is expected to go up steadily during 2022 to 2027 at CAGR of 2.6%, from
RMB392.1 per gram in 2022 to RMB445.1 per gram in 2027, considering the robust demand of gold.
Furthermore, worries of economic downturn under the context of high inflation and high fuel cost is to
last in the forecast time period, plus the existing g eopolitical uncertaintie s (e.g. Russia-Ukraine
tensions). Additionally, markets are also concerni ng on the over-aggressiveness of the Fed on rising
interest rate, which may cause possible economic recession soon afterwards. Therefore, gold is needed
for investment portfolio diversificatio n to hedge risks and value preservation.
The average global gold spot price and the average gold spot price in the PRC in January 2022
was approximately US$1,816.8 per ounce and RMB372.6 per gram, respectively. Upon the occurrence
of the recent Russia-Ukraine tensions, the global spot price and the gold spot price in the PRC further
increased by approximately 6.6% and 5.3%, respectively to US$1,936.3 per ounce and RMB392.5 per
gram, respectively on 24 February 2022 when Russian President Vladmir Putin announced the launch of
a special military operation in eastern Ukraine, as compared to January 2022. Such global gold spot
price and the gold spot price in the PRC further increased by approximately 6.1% to RMB416.5 per
gram and 2.7% to US$1,988.9 per ounce, respectively, on 9 March 2022, being the day before the
foreign ministers of Ukraine and Russia met in Tu rkey, as compared to that of 24 February 2022.
Average global gold spot price increased from approximately US$1,527.1 per ounce on 2 January
2020 to approximately US$1,887.6 per ounce on 30 December 2020, and further back to US$1,820.1 per
ounce on 31 December 2021 and US$1812.4 per ounce on 30 December 2022.
The gold spot price in China is generally in line with the global gold spot price, except for the fact
that the average global spot price in 2018 was higher than that in 2017, the average gold spot price in
China decreased in 2018 as compared with that in 2017, mainly due to depreciation of USD against
RMB. The increasing trend of average global spot price during the period between 2017 to 2022 was
due to the similar reasons leading to the increase of average gold spot price in China, as depicted in
above.
Gold was one of the star performers throughout much of 2020, and countries have introduced
fiscal and monetary policies stimuli to fight again st highly-likely economy recession. Coming to 2021,
the world is slowly and steadily recovering from C OVID-19 pandemic influence, investment in gold
gradually cooled down with market sentiment back towards normal. Overall, a slight increase of 1.9%
was noted for USD gold price of 2021, compared with 2020.
In 2022, the occurrence of Russia-Ukraine tensions led to the increase in global gold price. At the
same time, the hike of interest rate in the U.S. is noted, due to U.S. Federal Reserve is raising interest
rate to resolve the high inflation issue. Gold inve stment in coin and bars increased in 2022, due to
INDUSTRY OVERVIEW
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geopolitical concerns and hedging against inflati on. Furthermore central banks are increasing gold
reserves to hedge potential economy recession. Global gold spot price increased slightly from
USD1,798.9 per ounce in 2021 to USD1,801.3 per ounce in 2022.
In the first half of 2023, the global gold spot price continued to rise, reaching US$1,975.9 per
ounce in the second quarter and the average global gold spot price was US$1,931.5 per ounce in the
first half of 2023. The rise in gold spot price was primarily driven by increasing market risk aversion,
particularly against the backdrop of weak US economic data and unresolved banking crises in Europe
and America. As a traditional safe-haven asset, the gold spot price has further increased. With the
gradual receding of the impact of the epidemic and a series of policies to promote consumption to take
effect, as well as the increase in demand for safe-haven assets, China ’sg o l ds p o tp r i c ec o n t i n u e dt or i s e
in the first half of 2023, reaching RMB447.0 per gram in the second quarter and the average gold spot
price in the PRC was RMB433.8 per gram in the first half of 2023.
Going forward, global gold spot price is expected to go up steadily during 2022 to 2027 at CAGR
of 3.6%, from USD1,801.3 per ounce in 2022 to USD2,148.4 per ounce in 2027, considering the robust
demand of gold. Furthermore, worries of economic downturn under the context of high inflation and
high fuel cost is to last in the forecast time period, plus the existing geopolitical uncertainties (e.g.
Russia-Ukraine tensions). Additionally, markets are also concerned on the over-aggressiveness of the
Fed on rising interest rate, which may cause possible economic recession soon afterwards. Therefore,
gold is needed for investment portfolio diversif ication to hedge risks and value preservation.
The gold price is predominantly impacted by fact ors such as real rate, U.S. Dollar value, global
geographical uncertainties and infl ation expectation. Typically, when there exists instabilities in political
or economic environment or turbulence in stock market, gold is usually treated as one of the risk-
hedging tools, and its price will typically exhibit upward trend. Moreover, monetary policies by central
banks (e.g. fluctuation in currency exchange rate) and macroeconomic factors (e.g. interest rate and
inflation expectation) are also important influential factors of gold price.
During 2018 to 2022, global gold spot price grew at CAGR of 9.2%, from USD1,268.5 per ounce
in 2018 to USD1,801.3 per ounce in 2022. The increasing trend of global gold spot price and the gold
spot price in China during the period between 2018 to 2022 was mainly due to the increasing demand
on gold to diversify investment as gold-linked financial instrument develops, as well as to hedge risks
due to the worries on global econo mic and political environment un certainties and economic slowdown
as caused by pandemic lockdowns and rising in U.S. interest rate.
In 2019 and 2020, financial and monetary stimuli ( e.g, quantitative easing) and policies of cutting
interest rate are introduced by U.S. Federal Reserve and other major economies ’ central banks, to pump
liquidities to rescue U.S. stock market and fight ag ainst economic downturn during pandemic year. USD
depreciated and major asset class es including equity, sovereign deb t and crude oil commodities have
shown bearish performances, driving up gold price during 2020 as global market chases for gold for
value preservation and risk hedging. In 2021, the gradual economic recovery from the COVID-19
pandemic and cooling down of investment sentiment in gold lead to a slowdown of global gold spot
price growth.
INDUSTRY OVERVIEW
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Gold Spot Price (Quarterly Averages),
Global, 2005 –2027E
Gold Spot Price (Quarterly Averages) China,
2005– 2027E
500
1,000
1,500
2,000
2,500
7.5%
3.6%
Annual Average of Gold Spot Price
USD/oz
Historical Forecast
CAGR 17–22
CAGR 22–27E
05Q1
05Q3
06Q1
06Q3
07Q1
07Q3
08Q1
08Q3
09Q1
09Q3
10Q1
10Q3
11Q1
11Q3
12Q1
12Q3
13Q1
13Q3
14Q1
14Q3
15Q1
15Q3
16Q1
16Q3
17Q1
17Q3
18Q1
18Q3
19Q1
19Q3
20Q1
20Q3
21Q1
21Q3
22Q1
22Q3
23Q1E
23Q3E
24Q1E
24Q3E
25Q1E
25Q3E
26Q1E
26Q3E
27Q1E
27Q3E
7.3%
2.6%
80
130
180
230
280
330
380
480
430 Annual Average of Gold Spot Price
RMB/g
Historical Forecast
CAGR 17–22
CAGR 22–27E
05Q1
05Q3
06Q1
06Q3
07Q1
07Q3
08Q1
08Q3
09Q1
09Q3
10Q1
10Q3
11Q1
11Q3
12Q1
12Q3
13Q1
13Q3
14Q1
14Q3
15Q1
15Q3
16Q1
16Q3
17Q1
17Q3
18Q1
18Q3
19Q1
19Q3
20Q1
20Q3
21Q1
21Q3
22Q1
22Q3
23Q1E
23Q3E
24Q1E
24Q3E
25Q1E
25Q3E
26Q1E
26Q3E
27Q1E
27Q3E
Note: Global gold spot price is set as quarterly averaged gold spot price of London Bullion Market, and is set in USD per fine
troy ounce, which is a troy ounce (equals approximately 31.1 grams) of 99.5% pure gold.
China gold spot price refers to the closing price of Au99.95 traded in Shanghai Gold Exchange.
Source: London Bullion Market Association, Shanghai Gold Exchange, Frost & Sullivan
GOLD MINING INDUSTRY IN CHINA AND SHANDONG
Value chain
Value Chain of Gold Production
Ore Mining
• Gold is fabricated
into jewellery, coins,
electronics sectors, etc.
Mineral
Separation Gold Smelting FabricationExploration
Raw Materials and
Equipment Suppliers Gold Mining Companies End Users
• Equipment
• Power (electricity
 and petroleum)
• Chemical reagent
• Investment
• Central bank
• Jewellery
• Industry
• Gold Exploration Companies
• Gold Mining Companies
Gold Processing
Companies
• Gold Smelting Companies
• Gold Fabrication and Sales
Companies
• Gold minerals and other
minerals and impurity
elements are separated
by means of flotation,
magnetic separation,
electromagnetism, etc.
• Gold ore concentrate
is then sent to a
smelter to extract the
pure gold from the ore,
by means of melting
and electrolysis with
certain chemicals, etc.
• Once the potential
deposit is
discovered,
people evaluate
and then exploit ore
body if feasible.
• The ore is
extracted,
as the coarse ore.
Source: Frost & Sullivan
In China, it is a common industry practice for gold mining and processing companies to outsource
the refining process to gold smelting companies and sell the finished gold bullion to the same gold
smelting companies. Since the cost of obtaining th e operating licence as a smelting company is high, the
number of smelting companies in China is limited. The gold smelting industry is of a high
concentration. In 2022, there were about 27 smeltin g companies in Shandong province and the top five
gold smelting companies in Sh andong accounted fo r approximately 93.2% of Shandong ’st o t a lg o l d
smelting volume in 2022. There w ere about 30 gold producers engag ed in gold mining in Shandong
Province in 2022. The top five gold producers by gold mine production volume accounted for
approximately 84.7% of total gold mine production volume in Shandong Province. Some large gold
mining enterprises extend their business to gold smelting to pursue higher profits and stronger
competitiveness. Further, only mining and/or sme lting companies with registered membership in the
Shanghai Gold Exchange are qualified to sell gold bullion in the Shanghai Gold Exchange, the only one
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exchange platform of gold bullion in China. For mining and/or smelting companies without membership
in the Shanghai Gold Exchange mainly due to the limit on the total number of membership, they can
only sell the refined gold to registered members o f the Shanghai Gold Exchange to sell their refined
gold.
Gold Mineral Resources
The total gold resources of China has experienced a continuously growth for more than a decade
and for the first time the number has surpassed 10,000 t in 2015. At the end of 2022, China ’st o t a lg o l d
resources was approximately 16,463.1 t, representing a CAGR of approximately 4.5% from 2017.
Shandong is the province with the largest amount of gold identified resources in China. The gold
identified resources in Shandong increased from approximately 3,756.6 t in 2017 to approximately
4,703.6 t in 2022, representing a CAGR of approximately 4.6%. Shandong has abundant gold resource
and well-established supply chain in gold mining industry in China.
Most of Shandong ’s gold reserves are concentrated in Zhaoyuan and Laizhou.
Gold Identified Resources,
China & Shandong, 2017– 2022
Gold Identified Resources by Provinces,
China, 2022
0
5,000
10,000
15,000
20,000
3,756.6 4,107.83,930.2 4,500.04,308.8 4,703.6
9,439.0 9,708.2
14,131.1
10,023.2 10,438.3
15,750.5
11,250.5
13,195.6 13,638.4 14,747.2
16,463.1
11,759.5
4.5% 4.6%
Rest of China
t
Shandong
CAGR 17–22
China Shandong
20182017 20212019 2020 2022
4,703.6
1,226.1
1,157.7
883.9
858.2
827.8
716.0
658.3
572.6
559.7
4,299.2
Total Resources = 16,463.1 t
Shandong
Gansu
Tibet
Inner Mongolia
Henan
Xinjiang
Yunnan
Anhui
Shaanxi
Others
Sichuan
Source: China Gold Association and Frost & Sullivan
Gold production
China has been the largest gold mine producer in the world since 2007. China gold market
experienced a gloomy market consumption for gold (e.g. gold jewellery) and a tightened regulatory
control in 2017 which has affected its gold supply since then. Central government issued a series of
policies including Acceleration of Constructing Green Mines 《關於加快建設綠色礦山的實施意見》
and Guidance on Promoting Gold Industry Upgrade and Transformation 《關於推進黃金行業轉型升級
的指導意見》, emphasising the importance of environmenta l protection and requiring the new mines to
meet the environmental protection standards.
In July 2017, the Ministry of Nature Resources issued the Work Plan for the Clearance of Mining
Rights in Natural Reserves 《自然保護區內礦業權清理工作方案》, which requires comprehensive
investigation and gradual cancellation of existing mining rights in nature reserves, resulting in the
shutdown of gold mines in several provinces. China’ s gold production declined since 2017.
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T h ei m p a c to ft h eC O V I D - 1 9p a n d e m i co ng o l dmining industry in 2020 was mainly on the
reduced working days and the supply of raw materials and products, such as the explosives, support
materials and filling materials. Further, the produc tion of most gold mining companies were delayed for
weeks. On the other hand, the transportation of r aw materials and products was affected due to the
traffic control caused by the COVID-19 pandemic. However, the COVID-19 pandemic also contributed
to the rise in gold prices. The gold mining companies accelerated their production after the resumption
of production to capture the high price and profit. Besides, the increase in production capacity of gold
mining companies due to technology improvement and equipment upgrading also drove the increase of
the gold production after the first quarter of the year. Therefore, China ’s gold production in 2020 only
slightly declined by 3.9%, from 380.2 t in 2019 to 365.3 t in 2020.
The COVID-19 pandemic is increasing the downward pressure on the China ’s economy. In
addition, the gradual spread of the pandemic in the world caused panic in international markets and
raised concerns about the international economy, which drove the gold price going upward. And gold
mining companies were incentivized to increase production in order to capture the high price and profit
after the resumption of production.
Shandong is the largest source of gold produced from gold mines in China. However, from
February to September 2021, non-coal mines in Shandong Province, including gold mines, stopped
production for safety inspection. This had a huge negative impact on the gold production in the
province. As a result, total gold production in China decreased a lot, from approximately 365.3 t in 2020
to approximately 329.0 t in 2021.
As the safety inspection towards gold mines in Shandong Province ended in September 2021, the
gold produced from gold mines in Shandong largely increased in 2022. Also, as the negative impact of
the COVID-19 pandemic largely alleviated, the consumption of gold jewellery experienced a strong
recovery in 2022. As a result, gold production in China bounced back to 372.0 t in 2022. Driven by
numerous factors including the recovery from the pandemic, the increasing demand for gold as well as
the rising gold price, the accelerated automation a nd mechanisation in gold mining industry under the
context of ‘‘Made in China 2025 ’’, and the gold recycling activity from the electronics manufacturing
sector, China’ s gold production is expected to grow steadily to approximately 456.7t in 2027,
representing a CAGR of approximately 4.2% from 2022 to 2027.
Gold Production, China, 2017– 2027E
0
100
200
300
400
500
369.2 346.0 314.4 301.7 258.1 295.4 303.1 316.4 323.5 332.8 341.4
57.0 55.2 65.9 63.7
70.9
76.6 82.7 91.4 97.8 106.7 115.3
426.1
380.2 365.3
329.0
372.0 385.8 407.9 421.2 439.5 456.7
401.1
2017 2018 2019 2020 2021 2022 2023E 2024E 2025E 2026E 2027E
CAGR 17–22
CAGR 22–27E
TotalGold Produced as by-
product from NFM Ores
Gold Produced from
Gold Mines
6.1%
8.5%
–4.4%
2.9%
–2.7%
4.2%
Gold Produced as by-product from NFM (non-ferrous metal production) Ores Gold Produced from Gold Mines
t
Source: China Gold Association and Frost & Sullivan
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The gold produced from gold mines in Shandong declined from approximately 55.6 t in 2017 to
approximately 22.8 t in 2021. Besides the negative impact of the COVID-19 pandemic on the
production, another main reason for the decline is the strict safety and environmental policies. From
February to September 2021, non-coal mines in Shandong Province, including gold mines, stopped
production for safety inspection. This had a huge negative impact on the gold production in the
province.
As the safety inspection towards gold mines in Shandong Province ended in September 2021, the
gold produced from gold mines in Shandong increased to approximately 41.4 t in 2022, and is expected
to eventually reach approximately 46.3 t in 2027, representing a CAGR of approximately 2.3% from
2022 to 2027. Other main growth drivers are expected to be the increasing gold demand, rising gold
price, and technology advances.
Gold Produced from Gold Mines, Shandong, 2017 –2027E
55.6 57.7 58.9
55.2
22.8
41.4 42.2 43.7 44.4 45.4 46.3
0
10
20
30
40
50
60
2017 2018 2019 2020 2021 2022 2023E 2024E 2025E 2026E 2027E
CAGR 17–22
CAGR 22–27E
Gold Produced from Gold Mines, Shandong
–5.7%
2.3%t
Source: China Gold Association and Frost & Sullivan
Market drivers
Increasing Demand The increasing demand for gold will stimulate gold mining companies to
intensify efforts to exploit gold mine and expand production scale. With the
improvement of people’ s living standard and stronger purchasing power,
consumers’ demands for luxury products like jewellery rise sharply as well.
Meanwhile, the world’ s economy has been in a grim situation amid the COVID-
19 pandemic, and the increasing frequent regional conflicts, such as the Russia
Ukraine conflict and Israel-Palestine conflict, causing the financial character of
gold becoming increasingly evident. Thus, the increasing demand from the gold
application fields will largely drive this industry.
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Increasing Gold
Reserve
Internationalisation of RMB is an in evitable result of national economy
development, cross-border trade and investment progress. As RMB has been
included in the International Monetary Fund’ s unit of account, the Special
Drawing Right (SDR) in October 2016, RMB has finished a significant part of
being an international reserve currency. As an important means of reserve and
settlement, gold is still occupying a definite proportion in each central bank.
Gold reserves are effective ways to hed ge the risk of international financial
markets. However, China’ s gold reserve ’s share of total reserve is still below
the world ’s average. Raising the gold reserves is an inexorable trend to meet
the demand of RMB ’s internationalisation.
New Downstream
Applications of Gold
Through the development of new techniques, gold can be applied in more fields
efficiently and technology application may grow into new markets for gold.
Gold can be used in medical field such as gold nanoparticles for Rapid
Diagnostic Tests, gold-based drugs used to treat illness. Moreover, in the
technology field, gold can be utilized in touch sensitive screens for visual
display and advanced flash memory devices for data storage. Therefore, the
expanding downstream applications of gold will further drive the demand of the
gold.
Advanced
Technology
The Industry Structure Adjustment Catalogue (2019 edition) 《產業結構調整指
導目錄（2019年 本）》calls for encouraging deep gold exploration and mining
(1000 meters and below), which will contribute the research of deep mining
technology and accelerate the solution of deep mining technology problems,
promoting the improvement of gold production capacity in China. In addition,
the policy also encourages the recove ry of gold from tailings and waste rock,
which will improve the utilisation of gold resources in tailings, and contribute
to the increase in production capacity of gold mining industry.
Development trends
. Intelligent Mining Leveraging the development of science and technology, a new concept has
been introduced in mining industry that is to build a new unmanned mining model, to achieve
digitalised mining environment by intelligent t echnology and equipment, visualised control of
production process and networked information transmission. This approach could address the
problem of unsafe production and meanwhile enhance productivity. During the 13th five-year plan
period, the project of ‘‘key technology research and development of scaled unmanned mining
underground ’’was established under the special project ‘‘deep resources survey and mining ’’.
. Green Mining The state government has successively issued a series of policy documents such as
Requirements for Green Mine Construction in Gold Industry 《黃金行業綠色礦山建設要求》,
Techn i
cal Specification for the Control of Cyan ide Residue Contamination in the Gold Industry
《黃金行業氰渣污染控制技術規範》and Policy on Pollution Preven tion and Control Technology in
the Gold Industry (Draft for Comments) 《黃金行業污染防治技術政策（徵求意見）》, calling for the
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construction of green mines and the development of environmentally friendly gold mining
technologies. In this case, gold mining companies are bound to go on the way of green mining.
Specifically, the cut-and-fill st oping, which has less impact on th e environment, will be applied
further widely. The traditional gold flotation method such as mixed mercury method, chlorination
method and cyanidation method will be replaced by low-toxicity agents and bio-flotation method,
which have the advantage of energy-saving and eco-friendliness.
. Deep Mining With the consumption of shallow gold resources, China ’ gold mining industry is
gradually turning to deep mining. At present, th e depth of gold mines in China is mostly between
500 and 1000 meters, less than that in South Africa , Canada and other mining developed countries
where the depth is more than 2000 meters. China has great development space in the field of deep
mining. Meanwhile, the NDRC issued Guide Catalogue for Industrial Restructuring (2019 edition)
《產業結構調整指導目錄（2019年 本）》, encouraging the development of deep gold exploration and
mining, which will accelerate the deep gold mining technology in China.
. Overseas Acquisitions and Cooperation The proportion of low-grade ore and refractory gold
resources in China is large, re sulting in high cost of gold mining. Gold mining enterprises are
facing huge pressure from environmental policies. In addition, the current domestic gold demand is
rising rapidly, while the domestic supply is unable to meet the demand. So it is an inevitable trend
for gold mining industry to ‘go abroad ’ and seek for overseas gold resources, capital and
technology. Overseas acquisition and co operation will be a new trend for China’ s gold mining
industry.
Entry barriers
. Licence barrier. China implements an admittance system for the exploitation of gold resources.
The application for gold mining and smelting shall comply with the requirements of the national
gold industry planning, industrial policies and the state regulations on the approval of investment
projects, environmental protection and land administration, etc. Gold mining companies shall be
qualified for the exploitation of gold resources in order to obtain the ‘mining licence ’ and ‘safety
production licence ’ issued by the national government. In addition, gold mining enterprises can
only conduct mining within the area stipulated by th e state, and comply with increasingly strict
safety production and environmental protection regulations. It is difficult for new market entrants
to obtain relevant qualifications in a short period of time.
. Resources barrier. Gold reserves or resources is the key fact or to the sustainable development of
the gold mining companies. At present, a majority of domestic gold mine is possessed by large or
medium sized gold mining companies, which also enjoy considerable right of mineral exploration,
thus ensuring the increasing potential of the gold reserve to some extent. As for new entrants, it is
difficult for them to obtain substantial gold mine resources. Companies that do not have self-
owned mines have to rely on the gold ore suppliers, which give rise to uncertainty surrounding the
stability of the supply of raw materials and therefo re affecting the operat ing performance. Since
gold belongs to natural resource, the imbalanced distribution of gold raises the threshold to the
entrants in some region from the global perspective.
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. Land Settlement and Villagers Relocation. During the mining process, gold mining companies
must comply with laws and local government re gulations, and communicate with local villagers on
resettlement issues timely. Gold mining comp anies usually have to settle the villagers by
compensation, relocation or other ways in orde r to maintain good relationship with them and
ensure the smooth mining opera tion. In addition, many gold mining companies would also help
local villagers build agricultural product processing plants to increase their income, and build new
schools etc. to improve corporate image. These actions could increase the operating costs for
mining companies and raise the threshold for new entrants.
. Capital barrier. The initial investment is high as a large number of equipment and land resources
are required in the gold extraction and smelting s tage, exerting large pr essure on companies ’
capital. With the increasingly stringent requir ement for safety production and environmental
protection during gold processing stage, the inves tments in these two aspects will also increase,
which will incur additional expenditures. Moreover, for the purpose of ensuring sustainable and
enough mine reserves, it is necessary to adopt resource exploration, recycle procedure, and merger
and acquisition activities which impose higher requirements on companies ’ financial viability.
. Technology barrier. With the decrease of the grade of gol d mine and increase of mining depth,
the difficulty and complexity of gold mining proce dure rise accordingly, which builds up a high
technical barrier to new entrants. The exploration and mining of existing, newly-built,
reconstructive and expanded mines require up-to- date technical skills, complete equipment and
ancillary facilities. Besides, only companies equ ipped with advanced technology and sufficient
experience could satisfy the increasingly strict requirements proposed by government for safety
production and environmental protection, in creasing the difficulty for new entrants.
COMPETITIVE LANDSCAPE OF GOLD MINING INDUSTRY IN CHINA AND SHANDONG
PROVINCE
In 2022, China’ s gold mine production volume reached at 295.4 t. The top five and top three gold
producers by domestic gold mine production volume accounted for 40.6% and 32.7% of total gold mine
production volume in China in 2022, respectively. The second and fourth largest gold producers in
China were also the top and second largest gold producers in Shandong Province in 2022, respectively.
With the continuous asset reorganisation and reso urce integration of gold enterprises, the gold
mining industry in Shandong Province is concentrated. There are about 30 gold producers engaged in
gold mining in Shandong Province in 2022. The gold mine production volume of Shandong Province
reached approximately 41.4 t in 2022, and the top five gold producers by gold mine production volume
accounted for approximately 84.7% of total gold mine production volume in Shandong Province. The
rest of gold mining producers occupied approximately 15.3% market share, the average gold mine
production volume of each producer is around 0.2 t annually.
Among the 30 gold producers in S handong, only the top two producers have their own smelting
business. In addition, these two gold producers in Shandong Province have the membership of Shanghai
Gold Exchange due to scale and cost advantages.
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In terms of the price sold to gold smelters, the re is no competitive relationship between gold
producers, mainly because the gold bullion will be sold throug h the Shanghai Gold Exchange at the
same spot price of the day. In addition, the differen ce in the difficulty of gold concentrate processing is
the main feature between gold producers, because the processing fees for the smelting process will be
different.
In the Shandong Province, Company A ranked first with its gold mine production arriving 23.6 t,
followed by Company B of which gold mine production was 8.8 t in 2022. In terms of gold mine
production volume in Shandong Province, Company A and Company B have an aggregated market share
of 78.3% in 2022. The Company ranked third with mine production volume of 1.1 t in 2022.
Top 10 Gold Producers (by Mine
Production Volume), China, 2022
41.0
32.3
23.5
14.7
8.5
175.4 59.4%
295.4 100.0%
13.9%
10.9%
7.9%
5.0%
2.9%
Rank Mine Production
Volume (t)
Market
Share
1 Company C
2 Company A
3 Company E
4 Company B
Company F5
Others
Total
Company
59.4%
13.9%
10.9%
7.9%
5.0%
2.9%
Total Volume: 295.4 t
Company A
Company C
Company B
Company E
Company F
Others
Source: China Gold Association, Public information of Listed Company, Frost & Sullivan
Top 5 Gold Producers (by Mine
Production Volume), Shandong, 2022
23.6
8.8
1.1
0.8
0.7
6.3 15.3%
41.4 100.0%
57.0%
21.3%
2.6%
2.0%
1.8%
Rank Mine Production
Volume (t)
Market
Share
1 Company A
2 Company B
3 The Company
4 Company C
5 Company D
Others
Total
Company
57.0%
21.3%
2.6%
15.3%
1.8%2.0%
Total Volume: 41.4 t
Company B
Company A
Company C
The Company
Company D
Others
Source: China Gold Association, Public information of listed companies, Frost & Sullivan
Background information of the top gold producers in China:
1. Company A, established in 1996, a state-owned gold mining group directly under Shandong Provincial Government.
Company A is a group company which includes a public listed company, which is listed on the Shanghai Stock Exchange
and Hong Kong Stock Excha nge. Company A mainly engaged in the gold min ing, beneficiation and smelting of ores and
deep processing and sales of gold products. The major gold mines of Company A are located in Laizhou City and Zhaoyuan
City of Shandong Province as well as Fujian, Inner Mongolia, Gansu, Xinjiang and other provinces in the PRC.
2. Company B, established in 1992, a state-owned gold mining group and is a group company which includes a public listed
company, which is listed on the Hong Kong Stock Exchange. Company B mainly engaged in exploration, mining,
processing and smelting operations of gold and other metallic products, focusing on gold production business. The major
gold mines of Company B are located in Zhaoyuan City of Shandong Province. Company B principally produces two kinds
of gold products, which are Au 99.99 and Au99. 95 gold bullions under its own brand.
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3. Company C, established in 2003, is a central state-contro lled enterprise which is mainly engaged in the business of
prospection designing, resource development, gold production, trade, engineering procurement construction in the PRC.
Company C is a group company which includes two public listed company, one of which is listed on the Shanghai Stock
Exchange, and the other one is dually listed on the Toronto Stock Exchange and Hong Kong Stock Exchange, respectively.
The key gold mines of Company C are in Henan, Hubei, Shaanxi, Liaoning, Inner Mongolia and other provinces in the
PRC.
4. Company D, established in 1992, a sta te-owned gold mining company. Company D is located in Qixia City which is under
the administration of Yantai City an d mainly engaged in the gold mining.
5. Company E, established in 2000, a state-owned large multina tional mining group which is mai nly engaged in the business
of exploration and development of copper, gold, zinc and battery metals worldwide, as well as the research of engineering
technology. Company E is a public listed company, which is listed on the Shanghai Stock Exchange and Hong Kong Stock
Exchange.
6. Company F, established in 2001, a state-owned non-listed gold mining group which is mainly engaged in gold exploration,
gold mining, gold smelting and gold sales. The major gold mines of Company F are located in Yunnan Province. It is the
largest gold mining enterprise in Yunnan province.
Besides the Company, other companies included in the above two rankings include (listed not in particular order): Shandong Gold
Group Co., Ltd., Shandong Zhaojin Group Co., Ltd., China National Gold Group Co., Ltd., Qixia Gold Group Corporation, Zijin
Mining Group Company Limited, Yunan Gold & Mining Group Co., Ltd..
GOLD PRODUCTION COST
The total production cost of gold mining in China has increased continuously from approximately
RMB200.4 per gram in 2017 to approximately RMB298.0 per gram in 2022, representing a CAGR of
approximately 8.3%.
In 2022, raw material cost is the largest component of gold mining costs, the share of which
reached 37% in China. Due to numerous factors i ncluding the negative impact of the COVID-19
pandemic on transportation and other aspects, the cost of raw materials, including explosives, support
materials and filling materials, has increased in recent years.
Depreciation and amortisation accounted for 28% of the total gold mining costs in China in 2022.
Gold producers in China have increased their exploration activities in recent years, including conducting
topographical and geological surv eys, exploratory drilling, and sampling and trenching. Since the assets
consumed during these exploration activities are calcu lated as depreciation and amortization costs, the
average depreciation and amortization costs have increased.
Labour cost accounted for 10% of the total gold mining costs in China in 2022. It has also
increased in recent years, as a result of inflation in China.
Furthermore, energy consumption cost, which accounted for 9% of the total gold mining costs in
China in 2022, also experienced an increase in recent years, largely due to stricter requirements from the
government on energy protection which leads to higher electricity prices. Such policies include the
Notice on Further Deepening the Market-oriented R eform of Electricity Pricing for Coal-fired Power
Generation, which was published and took effect in October 2021.
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Total Production Cost of Gold Mining, China,
2017– 2022
Gold Production Cost Structure*, China,
2022
0
250
200
300
200.4
206.7
212.0
233.2
298.0279.6
2017
RMB/g
2018 2019 2020 2021 2022
37%
28%
10%
16%
9%
Other Cost
Energy Consumption
Labour Cost
Depreciation and Amortisation
Raw Material
Source: China Gold Association and Frost & Sullivan
Approximately 95% of gold mining in China involves underground mining. Compared with
underground mining, open-pit mining methods are less used in the gold mining industry in China. It has
a different gold production cost structure compar ed with underground mining. Compared with the
industry average cost structure, the raw mater ial costs of open-pit mining are 10% lower, the
depreciation and amortisation costs are 75% lower, the labour costs are 11% higher, and the energy
consumption costs are 4% higher.
Gold Production Cost Structure of Open-Pit Mining,
China, 2022
13%
27%
21%
18%
21%
Other Cost
Energy Consumption
Labour Cost
Raw Material
Depreciation and Amortisation
Source: Frost & Sullivan
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This section sets forth a summary of the law s and regulations applicable to our Group ’s business
and operations in the PRC, the jurisdiction which our Group operates. As this is a summary, it does not
contain detailed analysis of laws in this jurisdiction which is relevant to our Group ’s business.
OVERVIEW
PRC gold enterprises are subject to extensive PRC laws and regulations and government
supervision. Such laws and regulations encompass the areas of investment, exploration, mining,
processing, smelting, sales, trade as well as environmental protection and labour with respect to gold
mines and gold products.
We are mainly supervised and regulated by the following PRC government bodies:
The State Council, as the highest administrative body, is responsible for formulating and reforming
the Chinese government ’s investment system, approval system and investment project catalog for
governmental approval.
NDRC is responsible for (i) formulating a nd implementing main policies on China ’s economic and
social development; (ii) planning the major construction projects and distribution of productive forces;
and (iii) examining and approving investment proj ects with expenditure exceeding certain amount or in
special industrial sectors. The competent investment departments of all levels of local governments are
responsible for (i) implementing the specific policies formulated by NDRC; (ii) examining and
approving investment projects that are not exami ned and approved by NDRC; and (iii) the filing of other
enterprise investment projects that do not require examination and approval.
MIIT is responsible for (i) formulating the planning, industrial policies and standards of industry
and information and other sectors (including the g old industry); (ii) setting the access conditions of
industry and information and other sectors (incl uding the gold industry); and (iii) organising and
implementing the access conditions of such industries (including the gold industry). The competent
departments of industry and information of all levels of local governments are responsible for the
production and supervision of the enterprises of industry and information (including the gold industry)
within their administrative divisions.
MNR has the authority (i) to grant the land use right certificate and the mining right licence; (ii) to
approve the transfer and lease of mining rights; and (iii) to review the mining fees and reserves
assessment. The competent departments of natural resources of all levels of local governments are
responsible for the land and mining administration within their administrative divisions.
MEE is responsible for (i) formulating guide lines, policies and regulations of national
environmental protection; and (ii) conducting env ironmental impact assessment of the major economic
and technological policies, development plans and major economic development plans. The competent
ecology and environment departments of all levels of local governments are responsible for the
supervision and inspection of the ‘‘Three Simultaneities ’’ of the construction projects within their
administrative divisions, as well as the permit and supervision of the sewage of the industrial and
mining enterprises.
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MEM is responsible for the national supervision and administration of work safety to ensure the
implementation of relevant national laws and regu lations on work safety. The competent emergency
management departments of all levels of local governments are responsible for the supervision and
a d m i n i s t r a t i o no fw o r ks a f e t yo fi n d u s t r i a la n dm i n i n genterprises within their administrative divisions,
and the supervision and inspection of work safe ty of the construction projects in terms of the ‘‘Three
Simultaneities ’’.
SAMR is responsible for leading national product quality administration, product technology
supervision, standardisation and other items. The competent administration for market regulation
departments of all levels of local governments are responsible for the supervision and administration of
product quality of the industrial and mining enterprises within their administrative divisions.
LAWS AND REGULATIONS RELATING TO MINERAL RESOURCES
According to the PRC Mineral Resources Law, which was promulgated by the Standing Committee
of the National People’ s Congress on 19 March 1986, became effective on 1 October 1986, and was
amended on 29 August 1996 and 27 August 2009 respectively, all mineral resources of the PRC are
owned by the State. The geology and mineral resources department of the State Council, which is now
the MNR, is responsible for the supervision and administration of the exploration and mining of mineral
resources nationwide. The geology and min eral resources departments of the people’ s governments in
the respective provinces, autonomous regions and municipalities directly under the central government
are responsible for the supervision and administration of the exploration and mining of mineral
resources within their own jurisdictions.
According to the Interim Measures for the Supervision and Administration of Mineral Resources
(礦產資源監督管理暫行辦法), promulgated by the State Council and implemented on 29 April 1987,
calculation and mining of mineral reserves by the mining enterprises shall be based on the approved
industrial indicators regarding mineral reserves calculation, which could not be arbitrarily altered.
According to the Regulation for Registering to Explore for Mineral Resources Using the Block
System ( 礦產資源勘查區塊登記管理辦法), effective as of 12 February 1998 and amended on 29 July
2014, and the Procedures for Administration of Registration of Mining of Mineral Resources (礦 產資源
開採登記管理辦法), effective as of 12 February 1998 and amended on 29 July 2014, exploration or
mining of mineral resources must file registration and obtain exploration or mining licences, as the case
may be.
Rights and obligations of the h older of exploration licences
According to the Implementation Rules for the PRC Mineral Resources Law ( 中華人民共和國礦產
資源法實施細則) which
 became effective on 26 March 1994, the rights exercisable by the holder of an
exploration licence include, among other things, the following: (i) carrying out exploration in the
designated area and within the prescribed time as specified in the exploration licence; (ii) having access
to the exploration area and its adjacent areas; (iii) te mporarily using the land in accordance with the
needs of the exploration project; (iv) having the pr iority in obtaining the mining right of the mineral
resources as specified on the exploration licence and the exploration right of other newly discovered
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type of minerals within the designated exploration a rea; and (v) selling the mine ral products recovered
during the exploration operation in accordance with the project design which has been approved, except
for those mineral products which shall be sold to designated units as required by the State Council.
The obligations of the holder of an exploration lic ence include, among other things, the following:
(i) commencing and completing the exploration opera tion within the term prescribed in the exploration
licence; (ii) conducting the exploration in accorda nce with the exploration construction design and
refraining from any unauthorised mining activities; (iii) conducting comprehensive exploration and
assessment over the intergrown minerals or associat ed minerals while ascertaining the major minerals;
and (iv) compiling mineral explor ation reports to be submitted to relevant government authorities for
examination and approval.
Pursuant to the Regulation for Registering to Explore for Mineral Resources Using the Block
System ( 礦產資源勘查區塊登記管理辦法) which became effective on 12 February 1998 and was
amended on 29 July 2014, the holder of an exploration licence shall meet the following minimum
exploration investment requirement from the date of obtaining the exploration licence: (i) RMB 2,000
per square kilometre for the first exploration year; (ii) RMB 5,000 per square kilometre for the second
exploration year; and (iii) RMB 10,000 per square k ilometre for each exploration year from the third
exploration year.
Rights and obligations of ho lders of mining licences
According to the Implementation Rules for the PRC Mineral Resources Law ( 中華人民共和國礦產
資源法實施細則), the rights exercisable by the holder of a mining licence include, among other things,
the following: (i) engaging in mining activities in the designated mining area and within the term
prescribed under the mining licence; (ii) selling the mineral products, except f or those minerals which
shall be sold to designated units as required by the State Council; (iii) constructing production facilities
and amenities within the mining area; and (iv) acq uiring the land use right attaching to the mine
construction in accordance with law.
The obligations of a holder of a mining licence in clude, among other things, the following: (i)
conducting mine construction or mining within the term p rescribed in the mining licence; (ii) effectively
protecting, rationally mining and comprehensively u tilising the mineral resources; (iii) paying resource
tax and resources compensation fee pursuant to law; (iv) complying with the PRC laws and regulations
regarding work safety, water and soil conservancy, land recovery and environmental protection; and (v)
accepting the supervision and administration from both the competent authorities in charge of geology
and mineral resources and the other relevant competent authorities and submitting reports relating to
mineral resources utilisation.
Usage fees and renewal of exploration and mining licences
The holder of an exploration licence and the holde r of an mining licence are subject to exploration
right usage fees and mining right usage fees, respectively. In accordance with the Regulation for
Registering to Explore For Mineral Resources Using the Block System ( 礦產資源勘查區塊登記管理辦
法), the exploration right usage fee shall be calculated and paid on an annual basis. The rate of
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exploration right usage fee applicable for the first year to the third year of exploration shall be RMB
100 per square kilometre per year. Starting from the fourth year of exploration, RMB 100 per square
kilometre shall be added per year. However, the annual maximum amount of the exploration right usage
fee shall not exceed RMB500 per square kilometre. In accordance with the Procedures for
Administration of Registration of Mining of Mineral Resources ( 礦產資源開採登記管理辦法), the
mining right usage fee shall be paid on an annual basis. The rate of mining right usage fee shall be
RMB1,000 per square kilometre of mining area per year.
According to the Regulation for Registering to Explore for Mineral Resources Using the Block
System ( 礦產資源勘查區塊登記管理辦法), the maximum validity period of a exploration licence shall
be 3 years. The exploration right could be reserved, and the exploration licence could be extended
within 30 days prior to its expiration, upon approval of the competent authority. The exploration licence
could be extended for twice, and each extension shall not exceed 2 years.
Pursuant to the Procedures for Administration o f Registration of Mining of Mineral Resources ( 礦
產資源開採登記管理辦法), the validity period of a mining licen ce shall be determined according to the
scale of the mine. The maximum validity period of the initial term of a mining licence for a big-scale
mine, medium-scale mine and small-scale mine shall be 30 years, 20 years and 10 years, respectively.
The mining licence can be renewed within 30 days prior to its expiration, upon compliance with the
prescribed extension procedure. If the holder of a mining licence fails to renew its licence in time, such
mining licence shall be automatically annulled upon expiration.
Related resource tax and resource compensation fee
Pursuant to the Provisional Regulations on Resource Tax of the PRC ( 中華人民共和國資源稅暫行
條例) which became effective on 1 January 1994 and was amended on 30 September 2011, the mineral
resource tax rate for raw ore of non-ferrous metal minerals other than rare earth ore is RMB 0.4-30/
tonne, and the amount of resources tax payable shall be the amount of sales or private usage of mineral
products multiplied by the applicable tax rate. The above regulations was abolished and replaced by
Resource Tax Law of the PRC ( 中華人民共和國資源稅法) which became effective on 1 September
2020.
Pursuant to the Detailed Rules for the Implementa tion of
 the Provisional Regulation on Resource
Tax of the PRC (中 華人民共和國資源稅暫行條例實施細則) ,w h i c hw a sp r o m u l g a t e db yM O Fa n dt h e
SAT on 28 October 2011 and became effective as of 1 November 2011, the specific rate of resource tax
applicable to taxable products shall be governed by the list of taxable items attached to the above
Detailed Rules for the Implementation of the Provi sional Regulation on Resource Tax of the PRC, the
sales amount refers to the full price and other fees collected by the taxpayer from the purchaser upon the
taxable products, excluding output value-added tax.
Pursuant to the Notice on Comprehensive ly Promoting Reform of Resource Tax ( 關於全面推進資
源稅改革的通知) and the Notice on Issues on Specific Policies on the Reform of Resource Tax ( 關於資
源稅改革具體政策問題的通知) issued by the MOF and the SAT, both of which became effective on 1
July 2016, the basis of calculation for resource tax of 21 categories of resources (including gold ore)
shall be changed from sales quantity of raw ore to sa les amount of raw ore, concentrates (or raw ore
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processed products), sodium chloride junior products or gold ingots, in which the basis of tax
calculation for gold ore shall be the sales amount of gold ingots at the tax rate of 1%-4%. Resource tax
shall be calculated and collected upon the sale or self-use of taxable products. The Announcement of the
MOF and the SAT on the Implementation Criteria of Issues Related to Resource Tax ( 財政部、稅務總
局關於資源稅有關問題執行口徑的公告), which came into effect on 1 September 2020, has abolished
the above two documents and set out criteria for the determination of ‘‘taxable product ’’and ‘‘sales
amount ’’of such taxable products in respect of resource tax.
According to the Resource Tax Law of the PRC , which was promulgated by the Standing
Committee of the National People ’s Congress on 26 August 2019 and became effective on 1 September
2020, the specific rate of resource tax applicable to taxable products shall be governed by the List of
Taxable Items attached to the above Resource Tax Law of the PRC, and the resource tax rate for gold
ores (including raw ores and processed ores) shall be 2%-6%.
Pursuant to the Rules for the Administration of C ollection of Mineral Re source Compensation Fees
(礦產資源補償費徵收管理規定), promulgated by the State Council on 27 February 1994 and amended
on 3 July 1997, the holder of a mining licence shall pay the mineral resource compensation fees from
sale proceeds of mineral products on a pro rata basis.
LAWS AND REGULATIONS RELATING TO THE ADMINISTRATION OF GOLD
Pursuant to the Administrative Regulations on Gold and Silver of the PRC (中 華人民共和國金銀
管理條例), which was promulgated and implemented on 15 June 1983 and was amended on 8 January
2011, purchases of gold and silver shall be made centrally by the PBOC. No entity or individual shall
purchase gold and silver without the consent of the PBOC. All gold and silver produced by mining
enterprises, rural communes, brigades, armed forces or individuals engaged in the production of gold
and silver (including those with ore exploration, production and smelting as their supplementary
business) shall be sold to the PBOC, and shall not be retained individually for sale, exchange or use.
Entities requiring gold and silver for use shall file an application with the PBOC on the proposed use of
gold and silver for examination and approval.
On 30 October 2002, the Shanghai Gold Exchange commenced operation under the supervision of
the State Council. Since then, the PBOC has ceas ed its operation in gold allocation and purchase.
Nowadays, all gold enterprises in the PRC are requ ired to sell their standard gold bullion through the
Shanghai Gold Exchange, and price of gold on the Shanghai Gold Exchange are determined by market
demand and supply, which essentially converges with the price of gold in the international market. On
27 February 2003, the State Council promulgated the Decision in relation to Termination of the Second
Batch of Administrative Approval Items and Alteration of the Management Method of Certain
Administrative Approval Items ( 國務院關於取消第二批行政審批項目和改變一批行政審批項目管理方
式的決定) a nd
cancelled the approval requirements for the production, supply, purchase and sale of
gold. As a result, the policy of ‘‘centralised purchase and allocation of gold’’ as stipulated under the
Administrative Regulations on Gold and Silver of the PRC ( 中華人民共和國金銀管理條例) has been
terminated in practice.
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According to the Decision of the State Council on the Establishing Administrative Permission for
Certain Administrative Approval Item Necessary to Be Retained ( 國務院對確需保留的行政審批項目設
定行政許可的決定), which became effective on 1 July 2004 and was amended on 29 January 2009 and
25 August 2016 respectively, and the Decision and Measures for the Import and Export of Gold and
Gold Products ( 黃金及黃金製品進出口管理辦法) which became effective as of 1 April 2015 and was
amended on 16 April 2020, the import and export of gold and gold products shall be subject to
administrative examination and approval of the PBOC.
LAWS AND REGULATIONS RELATING TO ENVIRONMENTAL PROTECTION
The PRC laws and regulations relating to environmen tal protection mainly include: Environmental
Protection Law of the PRC ( 中華人民共和國環境保護法) (revised on 24 April 2014 and implemented
on 1 January 2015), Water Pollution Pre vention and Control Law of the PRC ( 中華人民共和國水污染防
治法) (revised on 27 June 2017 and implemented on 1 January 2018), Atmospheric Pollution Prevention
and Control Law of the PRC (中 華人民共和國大氣污染防治法)( r e v i s e da n di m p l e m e n t e do n2 6
October 2018), Law of the PRC on Prevention and Control of Environmental Pollution by Solid Waste
(中華人民共和國固體廢物污染環境防治法) (revise d on 29 April 2020 and implemented on 1
September 2020), Environmental Protection Tax Law of the PRC ( 中華人民共和國環境保護稅法)
(revised and implemented on 26 October 2018), Implementation Regulation on the Environmental
Protection Tax Law of the PRC ( 中華人民共和國環境保護稅法實施條例)( r e v i s e do n2 5D e c e m b e r
2017 and implemented on 1 J anuary 2018), Measures for Pollutant Discharge Permitting Administration
(For Trial Implementation) ( 排污許可管理辦法(試行)) (revised and implemented on 22 August 2019),
Law of the PRC on Prevention and Control of Pollution from Environmental Noise ( 中華人民共和國環
境噪聲污染防治法) (revised and implemented on 29 December 2018, and was abolished and replaced
by Law of the PRC on Noise Pollution Prevention and Control ( 中華人民共和國噪聲污染防治法)
which became effective on 5 June 2022), and Provisions for the Protection of Geological Environment
in Mines ( 礦山地質環境保護規定) (r e
 vised and implemented on 24 July 2019).
Pursuant to the aforesaid laws and r egulations, enterprises that discharge and dispose of toxic and
dangerous substances such as wastewater, waste gas and solid wastes shall comply with the national and
local standards of usage and shall declare to and register with the relevant environmental protection
administration authorities and pay pollution dis charge fees according t o law where applicable.
Pursuant to the Law on Environmental Impact Assessment of the PRC ( 中華人民共和國環境影響
評價法), which came into effect on 1 September 2003 and was amended on 2 July 2016 and 29
December 2018 respectively, construction entities should prepare or fill in the environment impact
reports, reporting forms or registration forms of the environment impact according to the degree of
environmental impact caused by the construction pro jects as follows: (i) if the environmental impact
may be significant, an environmental impact report shall be required, which shall thoroughly appraise
the potential environmental impact; (ii) if the environmental impact may be gentle, an environmental
impact report form of analysing or appraising the specific potential environmental impact shall be
required; and (iii) if the environmental impact may be so slight that it is unnecessary to conduct an
appraisal of the environmental impacts, an environ mental impact registration form shall be filled in and
submitted.
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Pursuant to the Interim Measures for Environmental Protection Acceptance of Completed
Construction Projects ( 建設項目竣工環境保護驗收暫行辦法) effective as of 20 November 2017 and
the Regulations on the Administration Const ruction Project Environmental Protection ( 建設項目環境保
護管理條例) ,w h i c hw a sr e v i s e do n1 6J u l y2 0 1 7a n di m p l e m e n t e do n1O c t o b e r2 0 1 7 ,a f t e rt h e
completion of a construction project for which an en vironmental impact report or an environmental
impact report form is required, the construction e ntity shall, according to standards and procedures
prescribed by the environmental pro tection administrative authoritie s, conduct environmental protection
completion acceptance check and compile an acceptance check report. A construction project for which
an environmental impact report or an environmental impact report form is required shall not be put into
production or use until the environmental protection completion acceptance check has been passed.
LAWS AND REGULATIONS RELATING TO PRODUCTION SAFETY
The PRC government has formulated a relatively comprehensive set of laws and regulations on
production safety, including the Work Safety Law of the PRC ( 中華人民共和國安全生產法) (effective
as of 1 November 2002 and revised on 27 August 2009, 31 August 2014 and 10 June 2021,
respectively), the Mine Safety Law of the PRC ( 中華人民共和國礦山安全法) (effective as of 1 May
1993 and revised on 27 August 2009) as well as the Regulations for the Implementation of the Mine
Safety Law of the PRC ( 中華人民共和國礦山安全法實施條例) (effective as of 30 October 1996)
promulgated by the State Council, covering mineral resources exploration, mining and mine
construction. The PRC government applies a work safety licensing system for production safety to
mining enterprises under the Regulations on Work Safety Permits ( 安全生產許可證條例) (eff ective
 as
of 13 January 2004 and revised on 18 July 2013 and 29 July 2014, respectively). No mining enterprise
may engage in production activities without holding a valid work safety licence. Any mining enterprise
which fails to satisfy the production safety conditions set out in the Regulations on Work Safety Permits
may not obtain a work safe licence and carry out any pr oduction activity. Mining enterprises which have
obtained the work safety licences shall not lower their production safety standards, and shall be subject
to the supervision and inspection by the licensing authorities from time to time. If the licencing
authority is of the opinion that any of such enterprises no longer satisfy the production safety
requirements, the work safety licence may be withheld or revoked. The valid period for a work safety
licence shall be 3 years. The enterprise may apply f or extension of the licence within 3 months prior to
expiration of the licence, and if the licenced enterprise has been strictly complied with the relevant laws
and regulations in relation to work safety and free of a ny fatal accident during the term of the licence,
with the consent of the licensing authority, the licen ce could be renewed without examination procedure.
The primary person in charge and the work safety management personnel of a mining enterprise shall
pass the assessment on their work safety knowledge and management capabilities conducted by the
competent work safety authority.
The PRC government has also formulated a set of national standards on production safety for the
mining industry. For example, the mine design sha ll comply with production safety requirements and
industry practice; mining enterprises must estab lish and improve the safe pr oduction responsibility
system. Managers of mines shall be responsible for the safe production in their respective enterprises.
Mining enterprises must give safety education and training to their workers and staff; those without
receiving safety education and training may not take up a post of duty.
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Pursuant to the relevant requirements of the Mine Safety Law of the PRC ( 中華人民共和國礦山安
全法), the Regulations on the Reporting, Investiga tion and Disposition of Work Safety Accidents ( 生產
安全事故報告和調查處理條例), the Notice on Regulating the Inspection for Acceptance upon
Completion of Safety Facilities in Metal and Non-metal Mine Construction Projects ( 關於規範金屬非金
屬礦山建設項目安全設施竣工驗收工作的通知), the authorities in charge of mining enterprises under
the people ’s governments at or above the county level shall exercise the following functions and
responsibilities with respect to the control of safety w ork in mines: (i) to inspect the implementation of
laws and regulations on safety in mines by mining enterprises; (ii) to examine and approve designs of
safety facilities in mine construction projects; (iii) to supervise the inspec tion for acceptance upon
completion of safety facilities in mine construction pro jects; (iv) to manage the training of managers of
mines and personnel in charge of safety work in mining enterprises; (v) to investigate and handle work
safety accidents at mines; and (vi) other controlling f unctions and responsibilities provided for in laws
and administrative rules and regulations. Upon occurrence of accidents, mining enterprises shall
immediately take measures to rescue their workers and report any casualty to the relevant authority. In
the event of a general mine accident, the mining enter prise shall be responsible for investigating and
handling the case. In the event of a fatal accident, the government, the relevant authority, the labour
union and the mining enterprise shall conduct investigation and handle the case together. In addition,
mining enterprise shall pay compensation to any staff who was injured or died in the accident in
accordance with the national requirements. Such mining enterprise may only resume production after the
relevant danger at the scene has been eliminated.
Pursuant to Measures on the Implementation of Work Safety Permit for Non-Coal Mining
Enterprises (非 煤礦礦山企業安全生產許可證實施辦法) (which came into effect on 17 May 2004 and
revised on 8 June 2009 and 26 May 2015), non-coal mining enterprises must obtain the production
safety permit and
are prohibited from engaging in any production activities without obtaining the permit.
LAWS AND REGULATIONS RELATING TO LAND
Pursuant to the Land Administration Law of the PRC ( 中華人民共和國土地管理法), which was
promulgated on 25 June 1986 and was revised on 29 December 1988, 29 August 1998, 28 August 2004
and 26 August 2019 respectively, and the Regulations on the Implementation of the Land Administration
Law of the PRC ( 中華人民共和國土地管理法實施條例), which was promulgated on 27 December 1998
and was revised on 8 January 2011, 29 July 2014 and 2 July 2021, land in the PRC is either state-owned
or collectively-owned. Land owned by the state and collectively-owned by villagers may be allocated to
units or individuals for use according to law. Lawfully registered land ownership and land use rights are
protected by law. In the case of temporary use of state-owned land or land collectively-owned by
farmers for construction projects or by geologica l survey teams, approval shall be obtained from the
land administrative department of the government at or above the county level. Land users shall sign
contracts with relevant land administrative departm ent or rural economic colle ctive organisations or
village committees for the temporary use of land, dep ending on the ownership of land and shall pay land
compensation fees as stipulated in the contracts for the temporary use of land. The term for the
temporary use of land shall generally not exceed two y ears. The state shall establish a territorial spatial
planning system, and territorial spatial plans approved in accordance with the law shall be the primary
basis for various activities of land development, protection, and construction. Where a territorial spatial
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plan has been worked out, the comprehensive plan for land utilisation and the urban-rural plan shall no
longer be effective. Before a terr itorial spatial plan is determined, the existing overall plan for land
utilisation and urban-rural plan legally approved s hall continue to be effective. The results of land
surveys are of great importance in the preparation of territorial spatial plans, as well as the management,
protection and utilisation of natural resources.
Pursuant to the PRC Mineral Resources Law and the Measures for the Administration of the
Examination and Approval of the Use of Woodlands by Construction Projects ( 建設項目使用林地審核
審批管理辦法) ,w h i c hw a sp r o m u l g a t e do n3 1M a r c h2 0 1 5a n dw a sa m e n d e do n2 2S e p t e m b e r2 0 1 6 ,i n
mining mineral resources, a mining enterprise or individual must observe the legal provisions on
environmental protection to prevent pollution of the environment. In mining mineral resources, a mining
enterprise or individual must economise on the use of land. In construction projects occupying forest
land, the forest land shall be used in a reasonable, economical, and intensive manner in accordance with
the protection and use plan. In case cultivated land, grassland or forest land is damaged due to mining,
the mining enterprise concerned sha ll take measures to utilise the land affected, such as by reclamation,
tree and grass planting, as appropriate to the local conditions. Anyone who, in mining mineral resources,
causes losses to the production and well-being of other persons shall be liable for compensation and
shall adopt necessary remedial measures.
Pursuant to the Regulation on Land Reclamation ( 土地復墾條例) which was promulgated and
came into effect on 5 March 2011 and the Measures for the Implementation of the Regulation on Land
Reclamation ( 土地復墾條例實施辦法), which came into effect on 1 March 2013 and was amended on
24 July 2019, the production and construction en tities or individuals shall be responsible for the
reclamation of the land destroyed by their produc tion and construction activities. A land user shall,
when handling the application for a piece of construc tion land or handling the a pplication for the mining
right, submit the plan for land reclamation for approval. Where the plan for land reclamation does not
meet the relevant requirements, the construction land use right or the mining licence cannot be obtained.
If a land user implements land reclamation in accordan ce with the land reclamation plan, he shall report
to the competent land and resources authorities of the local people ’s governments at or above the county
level for examination and acceptance.
LAWS AND REGULATIONS RELATED TO THE ENTERPRISE INCOME TAX
Pursuant to the EIT Law which became effective on 1 January 2008 and was amended on 24
February 2017 and on 29 December 2018 respectively, and the EIT Regulation which became effective
on 1 January 2008 and amended on 23 April 2019, enterprises lawfully incorporated in the PRC or
enterprises incorporated according to the laws of foreign countries (regions) but with de facto
management organisation located in the PRC are resident enterprises. Resident enterprises shall pay
enterprise income tax on all income sourced with in and outside the PRC at the tax rate of 25%. For
industries and projects which receive key support and encouragement for development from the State,
preferential treatment on enterprise income tax will be available; qualified small enterprises with thin
profit will be levied enterprise income tax at a redu ced tax rate of 20%; high-tech enterprises receiving
key support from the State will be levied enterprise income tax at a reduced tax rate of 15%.
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LAWS AND REGULATIONS RELATED TO LABOUR AND PERSONNEL
In accordance with the revised Labour Law of the PRC ( 中華人民共和國勞動法) which became
effective on 1 January 1995 and was amended on 27 August 2009 and on 29 December 2018
respectively, labour contract shall be entered between the employer and all of its employees, and the
policy that the wages shall be paid according to performance, equal pay for equal work, lowest wage
protection and special labour protection for female worker and juvenile workers shall be implemented.
The Labour Contract Law of the PRC ( 中華人民共和國勞動合同法) which became effective on 1
January 2008 and was amended on 28 December 2012, and the Implementing Regulations of the Labour
Contract Law of the PRC ( 中華人民共和國勞動合同法實施條例) which became effective on 18
September 2008, regulate the relationship between the employer and the employee as well as the
entering, execution, performance, modification, withdrawal or termination of labour contracts, improve
the labour contractual system, clarify the respec tive rights and obligations of both parties to labour
contracts, and protect the legal rights of the employer and the employee.
In accordance with the Social Insurance Law of the PRC ( 中華人民共和國社會保險法)w h i c h
came into effect on 1 July 2011 and was amended on 29 December 2018, and the Several Provisions on
Implementing the Social Insurance Law of the PRC ( 實施中華人民共和國社會保險法若干規定)
implemented on 1 July 2011, the State establishes s ocial insurance systems such as basic pension
insurance, basic medical insurance, work-related injury insurance, unemployment insurance and
maternity insurance so as to protect the rights of citi zens in receiving material assistance from the State
and the society in accordance with the law when ge tting old, sick, injured at work, unemployed and
giving birth. Employers and individuals within the territory of the PRC shall pay their social insurance
premiums in accordance with rele vant PRC laws and regulations.
In accordance with the Regulation on the Management of Housing Provident Fund ( 住房公積金管
理條例) which came into effect on 3 April 1999 and was amended on 24 March 2002 and 24 March
2019
respectively, the employer shall make deposit registration with the local management centre of
housing provident fund and establish housing provident fund account in an entrusted bank for each of its
employees. For any new employee, the deposit registration shall be undertaken by the employer within
30 days from the date of the employment, and establishment or transfer of housing provident fund
account of the new employee shall be handled.
LAWS AND REGULATIONS RELATED TO FOREIGN INVESTMENT
The PRC Company Law, which became effective on 1 July 1994 and was amended on 25
December 1999, 28 August 2004, 27 October 2005, 28 December 2013 and 26 October 2018
respectively, governs two types of companies: lim ited liability companies or joint stock limited
companies incorporated within the territory of PR C. Both types of companies have the status of legal
persons. Shareholders ’ liabilities of both limited liability compan y and joint stock limited company are
limited to the registered capital contributed by the S h a r e h o l d e r .T h eP R CC o m p a n yL a wm a ya l s oa p p l y
to foreign-invested companies unless laws on foreign investment have other stipulations.
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The Special Management Measures for Market Entry of Foreign Investment (Negative List) (2019
version) ( 外商投資准入特別管理措施(負面清單)(2019 年版)), promulgated and implemented on 30 June
2019 regulates the market entry of foreign investmen t in different industries by setting out a negative
list for the market entry of foreign investment. Among others, the negative list for the market entry of
foreign investment is further divided into ‘‘Catalog for Restricted Fore ign Investment Industries ’’and
‘‘Catalog for Prohibited Foreign Investment Industries ’’. Foreign investment is permitted to invest in
industries not included in the negative list for the m arket entry of foreign investment. The Special
Management Measures for Market Entry of Foreign Investment (Negative List) has been revised on 23
June 2020 and 27 December 2021 respectively. Businesses of the Company and its PRC subsidiary have
never been included in above 2019, 2020 and 2021 version of ‘‘Special Management Measures for
Market Entry of Foreign Investment (Negative List) ’’.
The Provisional Measures for the Filing Administration of Establishment and Changes of Foreign-
Invested Enterprises (2018 Revision) ( 外商投資企業設立及變更備案管理暫行辦法(2018 修訂)), which
was promulgated by the MOFCOM on 29 June 2018 and became effective on 30 June 2018, sets out the
prescribed procedures for the establishment and changes of foreign-invested enterprises which are not
subject to the special management measures on admission as stipulated by the State.
The Measures for the Reporting of Foreign Investment Information ( 外商投資信息報告辦法),
which was promulgated on 30 December 2019 and became effective on 1 January 2020, abolishes the
above Provisional Measures for the Filing Adminis tration of Establishment and Changes of Foreign-
Invested Enterprises (2018 Revision), and regulates that foreign investors or foreign-invested enterprises
shall report the investment information to the re levant commerce departments through enterprise
registration system and the National Enterprise Credit Information Publicity System on in a timely
manner without false or misleading information or material omissions.
The Foreign Investment Law of the PRC ( 中華人民共和國外商投資法) promu
 lgated on 15 March
2019 and became effective on 1 January 2020 regulates Foreign investment in the territory of the PRC
and confirms that the business forms, structures, an d rules of activities of forei gn-invested companies
shall be governed by the Company Law of the PRC, the Partnership Law of the PRC (中 華人民共和國
合夥企業法), and other laws. Foreign-invested companies formed under the Law of the PRC on
Chinese-foreign Cooperative Joint Ventures ( 中華人民共和國中外合作經營企業法) before the Foreign
Investment Law comes into force may maintain thei r original business forms, among others, for five
years after this law comes into force.
Pursuant to the Implementation Rules of the Foreign Investment Law of the PRC (中 華人民共和國
外商投資法實施條例), which was promulgated on 26 December 2019 and became effective on 1
January 2020, all levels of governments shall treat foreign-invested enterprises and domestic enterprises
equally in material aspects, including government funding arrangements, land supply, tax and fee
reduction and exemption, qualification licencing, project applications, and human resource policies.
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LAWS AND REGULATIONS RELATING TO OVERSEAS SECURITIES OFFERING AND
LISTING BY DOMESTIC COMPANIES
On 17 February 2023, the CSRC promulgated the Trial Administrative Measures of the Overseas
Securities Offering and Lis ting by Domestic Companies ( 《境內企業境外發行證券和上市管理試行辦
法》)( t h e ‘‘Overseas Listing Trial Measures ’’) and five supporting guidelines, which has come into
effect on 31 March 2023, pursuant to which a PRC domestic company seeking offering and listing
securities in overseas market, either directly or indirectly as defined in the Overseas Listing Measures,
shall file with the CSRC and report relevant information.
Pursuant to the Overseas Listing Trial Measures, if the issuer meets both of the following criteria,
the overseas securities offering and listing conducted by such issuer shall be deemed as ‘‘indirect
overseas offering and listing by PRC domestic companies ’’: (i) 50% or more of any of the issuer ’s
operating revenue, total profit, total assets or ne t assets as documented in its audited consolidated
financial statements for the most recent fiscal year is accounted for by PRC domestic companies; and
(ii) the main part of the issuer ’s business activities are conducted, or premises of its business are located
in the territory of mainland China, or the majority of senior management staff in charge of its business
operations and management are PRC c itizens or have their habitual resi dence located in the territory of
mainland China. The Overseas Listing Trial Measures also provide that where an issuer submits an
application for initial public offering or listing to t he competent overseas aut horities, the issuer shall
also file with the CSRC in accordance with the Overs eas Listing Trial Measures within 3 business days
upon submission of the ove rseas initial offering and listing application.
On the same day, the CSRC issued the Notice on Administration for Filing of Overseas Offering
and Listing by Domestic Companies ( 《關於境內企業境外發行上市備案管理安排的通知》), which,
among others, clarifies that (1) on or before the effective date of the Overseas Listing Trial Measures
(i.e. 31 March 2023), domestic comp anies that have already submitted valid applications for overseas
securities offering and listing but have not obtained a pproval from the competent overseas authorities or
stock exchanges may reasonably arrange timing for submission of the filing applications with the CSRC
and the filing shall be completed before the overs eas securities offering and listing; (2) prior to the
effective date of the Overseas Listing Trial Meas ures, d omestic companies that meet the following
requirements shall be deem ed as Existing Applicants ( 存量企業) which are not required to file with
CSRC with respect to overseas listing until their ref inance in future: (i) domestic companies that have
already been listed overseas, or (ii) domestic companies that have already obtained approval from the
competent overseas authorities or stock exchanges f or their indirect overseas securities offering and
listing (such as pass of hearing for listing in Hong Kon g or effectiveness of registration statement for
listing in the United States) without being required by o verseas competent authorities or stock exchanges
to reapply for any procedures of offering and listing (such as a new hearing for listing in Hong Kong)
and completion of their overseas offering and listing take place by 30 September 2023.
Reforms of investment system by the State Council
Pursuant to the Decision of the State Cou ncil on the Reform of Investment System ( 國務院關於投
資體制改革的決定), which came into effect on 16 July 2004, significant changes have been made to the
government approval regime for major investme nt projects in the PRC. Projects without utilising
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governmental funds no longer require examination and approval of the government, but require approval
and filing. With respect to non-government funded projects, approval would only be required for major
or restricted project, while other projects, rega rdless of the scale, will only be subject to a filing
requirement.
According to the Catalogue of Investment Projects Subject to Approval of the Government (2004
Version) ( 政府核准的投資項目目錄(2004 年本)), gold mining and processing projects with an ore
mining and processing capacity of 500 tonnes per day or above shall be subject to approval of the
department in charge of investments under the State Council, while other gold mining and processing
projects shall be subject to approval of the departments in charge of investments of provincial-level
governments.
According to the Catalogue of Investment Projects Subject to Approval of the Government (2013
Version) ( 政府核准的投資項目目錄(2013 年本)), gold mining and processing projects shall be subject to
approval of provincial-level governments. Such requirement has been followed by the Catalogue of
Investment Projects Subject to Approval of the Government (2014 Version) ( 政府核准的投資項目目
錄(2014 年本)) and the Catalog of Investment Projects Subject to Approval of the Government (2016
Version) ( 政府核准的投資項目目錄(2016 年本)).
Laws related to the prevention and control of occupational diseases
According to the Law of the PRC on the Prevention and Control of Occupational Diseases ( 中華人
民共和國職業病防治法) ,w h i c hw a sp r o m u l g a t e do n2 7O c t o b e r2 0 0 1a n dw a sr e v i s e do n3 1D e c e m b e r
2011, 2 July 2016, 4 November 2017 and 29 December 2018 respectively, a construction entity shall
conduct the pre-assessment o f occupational hazards at the feasibility study stage if a construction project
may cause any occupational hazards. The protectiv e facilities against occupational diseases of the
construction project shall be designed, constructed, and put to use in production and other operations at
the same time as the main body of the project. And before the acceptance check of a construction
project, the construction entity shall evaluat e the effects of occupational hazard control.
Laws Related to Intellectual Property
According to the Copyright Law of the PRC (2020 Amendment) ( 中華人民共和國著作權法(2020
修正)), which
was promulgated on 7 September 1990 and was revised on 27 October 2001, 26 February
2010 and 11 November 2020 respectively, and the Implementation Rules of the Copyright Law of the
PRC (2013 Revision) ( 中華人民共和國著作權法實施條例(2013 修訂)), which was promulgated on 2
August 2002 and was revised on 8 January 2011 and 30 January 2013 respectively, computer software
shall be included in the forms of ‘‘Works’’under protection of the Copyright Law of the PRC.
According to the Regulation on Computer Software Protection (2013 Revision) ( 計算機軟件保護
條例(2013修 訂)), which was promulgated on 20 December 2001 and was revised on 8 January 2011 and
30 January 2013 respectively, Chi nese citizens, legal entities or oth er organizations enjoy copyright in
the software which they have developed, whether published or not. A software copyright owner may
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register with the software registration institution recognized by the copyright administration department
of the State Council. A registration certificate i ssued by the software registration institution is a
preliminary proof of the registered items.
According to the Measures for the Administration of Internet Domain Names ( 互聯網域名管理辦
法), which was promulgated on 24 August 2017 and became effective on 1 November 2017, domain
name registration services shall, in principle, be subject to the principle of ‘‘apply first, register first ’’.I n
the process of providing domain name registration ser vices, an applicant for the registration of a domain
name shall provide authentic, accurate and complete identity information on the holder of the domain
name and other domain name registration information.
Policies related to novel coronavirus epidemic
According to the Notice on Reduction of Enterpr ise Social Security Premium Contribution in
Phases ( 關於階段性減免企業社會保險費的通知) jointly promulgated by MOHRSS, MOF and SAT on
20 February 2020, in order to relieve enterprise diff iculties caused by the novel coronavirus epidemic,
promote orderly resumption of work and production by enterprises and support stable and widened
employment, based on the epidemic impact and the fund threshold, the relevant authorities may exempt
medium, small and micro-enterprises premium contr ibution for the three social security items, the
exemption period shall not exceed five months; and may reduce half of the premium contribution for the
three social security items by other soc ial security participating organisations (excluding state agencies
and institutions) such as large enterprises, the reduction period shall not exceed three months.
Pursuant to the Notice on Extension of the Imp lementation Period of the Policies regarding
Enterprise Social Security Premium Con tribution Reduction and Other Issues ( 關於延長階段性減免企業
社會保險費政策實施期限等問題的通知) promulgated by MOHRSS, MOF and SAT on 22 June 2020,
policies of exempting micro, small and medium-sized enterprises from employer ’s contribution for the
three social security items shall be extended until the end of 2020; policies of reducing half of the
premium contribution payable by large-sized enterprises and
 other participating employers (excluding
state agencies and institutions) for the three socia l security items shall be extended until the end of June
2020.
According to the Notice on Implementing the Phased Support Policies Involving Housing
Provident Fund to Properly Cope with the novel coronavirus epidemic (關 於妥善應對新冠肺炎疫情實
施住房公積金階段性支持政策的通知) jointly promulgated by MOHURD, MOF, and PBOC on 21
February 2020, enterprises affected by the novel coronavirus epidemic may apply for postponing
contribution to the housing provident fund by 30 June 2020, and in regions with identified serious novel
coronavirus epidemic, enterprises may voluntarily contribute to the housing provident fund by 30 June
2020 on the premise of full cons ultation with their employees.
According to the Notice on Further Streamlinin g the Examination and Approval, Optimising
Services, Accurately and Steadily Promoting t he Production Resumption and Work Resumption of
Enterprises ( 關於進一步精簡審批優化服務精準穩妥推進企業復工復產的通知) promulgated by the
General Office of the State Council on 3 March 2020, except for Hubei Province and Beijing, low risk
areas shall not delay the commencement of produc tion by means of examination and approval or filing.
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And the provincial governments in the middle and hig h risk areas shall, in accordance with the principle
of minimum and necessity, formulate and announce the conditions for the resumption of work and
production in the whole province. After the enterprise takes anti-epidemic measures according to the
provisions, meets the conditions for the resumptio n of work and production and submits the record
information or commitment letter, it can organise th e resumption of work and production. In principle,
non-epidemic prevention and control key areas shall not restrict the travel of returning workers. The
input area is no longer required to carry out isolated observation for persons who hold a health
certificate issued by the output area (not a key area for epidemic prevention and control) and arrive by a
specific point-to-point means of transportation.
According to the Notice on Implementing the Te mporary Support Policies Relating to Housing
Provident Funds ( 關於實施住房公積金階段性支持政策的通知) jointly promulgated by MOHURD,
MOF and PBOC on 20 May 2022, enterprises being affected by the novel coronavirus epidemic may
apply for deferral contribution of housing provident funds, and the above support policies are valid until
31 December 2022.
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HISTORY AND DEVELOPMENT
History
We have over 18 years of experience in the mining industry in the PRC. Our history can be traced
back to March 2005 when our principal subsidiary, Yantai Zhongjia, was established as a sino-foreign
cooperative joint venture enterprise by our Controllin g Shareholder, Majestic Gold, a company listed on
the TSX Venture Exchange, through Majestic Yant ai BVI (which held as to 60% interest in Yantai
Zhongjia) with Yantai Muping Gold Mine* ( 煙台市牟平金礦) (now known as Yantai Mujin Mining Co.,
Ltd.* ( 煙台市牟金礦業有限公司), ‘‘Yantai Mujin ’’) (which held as to 40% interest in Yantai Zhongjia)
pursuant to a cooperative joint venture agreement entered into in May 2004 (the ‘‘2004 CJV
Agreement ’’). In May 2010, Yantai Zhongjia ’s current minority shareholder, Dahedong, entered into an
equity transfer agreement with Yantai Mujin to ac quire the 40% interest in Yantai Zhongjia. After
several rounds of increase in registered capital, Yantai Zhongjia is owned as to 75% by Majestic Yantai
BVI and 25% by Dahedong as at the Latest Practicab le Date. For details of Yantai Zhongjia, see the
paragraph headed ‘‘Our subsidiaries — Yantai Zhongjia ’’in this section below.
The development history of our mining operations is set forth below:
Songjiagou Open-Pit Mine
The Songjiagou Open-Pit Mine wa s initially exploited as an underground mine. In May 2005,
Yantai Zhongjia carried out gold e xploration activities in Songjiago u area and a mining licence to carry
out underground mining at the Songjiagou Open-Pit M ine was obtained for the first time in May 2006.
Yantai Zhongjia formally commenced commercial production at the Songjiagou Open-Pit Mine as
an underground mine and the sale of gold bullion in M ay 2011. In view of the characteristics of mines
and considering the mining operation efficiency, the management of Yantai Zhongjia decided to convert
the underground mining into a hybrid of open-pit and underground mine in 2012. Subsequently, in
January 2013, our Songjiagou Open-Pit Mine was then converted to a full open-pit mine.
Songjiagou Underground Mine
With a view to exploring more gold resources in Muping-Rushan gold metallogenic belt, in
January 2013, Yantai Zhongjia engaged No. 3 Geolo gical Mineral Resource Prospecting Institute of
Shandong Province* ( 山東省第三地質礦產勘查院) to carry out exploration works at the deep area
where the Songjiagou Underground Mine is located and its surrounding area. In 2014, we obtained the
relevant approvals in respect of the mining area of Songjiagou Underground Mine. In February 2016, we
obtained a mining licence for our Songjiagou Underground Mine, and the construction of the
underground mine and installation of ancillary infr astructure were completed in September 2018. Our
Songjiagou Underground Mine commenced commercial production in September 2019.
Processing plant
The construction of an ore processing plant with a processing capacity of 6.0 ktpd with related was
completed in April 2011.
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Business development milestones
The following events set forth the key milestones in the history of our business development:
Year Event
March 2005 Yantai Zhongjia was established in the PRC
May 2005 Yantai Zhongjia carried out gold e xploration activities by initiating a major
drill program in Songjiagou to evaluate the mineral potential
May 2006 The mining licence in respect of the Songjiagou Open-Pit was issued by the
Department of Land and Resources of Shandong Province to carry out
underground mining for the first time
May 2011 Songjiagou Open-Pit Mine commenced commercial production as an
underground mine at that time
February 2012 Songjiagou Open-Pit Mine whi ch was initially exploited as an underground
mine, was converted into a hybrid of open-pit mining/underground mining. We
obtained the mining licence issued by the Department of Land and Resources of
Shandong Province for open-pit/underground mining at the Songjiagou Open-
Pit Mine
January 2013 Our Songjiagou Open-Pit Mine was converted to a full open-pit mine
May 2015 We obtained the approval for the extension of the mining area of Songjiagou
Open-Pit Mine from 0.3421 km
2 to 0.5937 km 2
February 2016 We obtained the licence for the Songjiagou Underground Mine issued by the
Department of Land and Resources of Shandong Province for the first time
September 2016 We commenced the construction of the Songjiagou Underground Mine and the
installation of ancillary infrastructure
September 2018 The construction of the Songjiagou Underground Mine and installation of
ancillary infrastructure were completed
May 2019 Our Company was incorporated in the Cayman Islands
September 2019 Our Songjiagou Underground Mine commenced commercial production
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Year Event
November 2019 We obtained provincial approva l for our revised utilisation proposal in respect
of our Songjiagou Open-Pit Mine, increasing permitted annual production
volume to 900.0 kt and permitted annua l stripping volume to 7,200.0 kt
respectively per annum
May 2020 The mining licence of the Songjiagou Open-Pit Mine was renewed until May
2031
February 2021 Substantially all of our mining wo rks comprising demolition, drilling, blasting
and excavation works were conducted by ourselves without sub-contractors
February 2021 The mining licence of the Songjiagou Underground Mine was renewed until
February 2031
Details of the members of our Group and their re spective corporate history are set out below:
OUR COMPANY
Our Company was incorporated in the Cayman Islands as an exempted company with limited
liability on 21 May 2019. As of the date of incorpora tion, the authorised share capital of our Company
was US$50,000 divided into 50,000 ordinary shares of US$1.00 each, among which one fully paid Share
was issued to the initial subscriber which is an Indep endent Third Party at par value. On the same day,
such share was transferred to Richard ’s Resource. On the same day, in consideration of the acquisition
of the entire issue share capital of Majestic Yantai BVI from Richard’ s Resource and Majestic Gold, a
further five ordinary shares of a par value of US$1.00 each in our Company, credited as fully paid, was
allotted and issued to Richard’ s Resource and 94 ordinary shares of a par value of US$1.00 each were
allotted and issued to Majestic Gold.
On 24 April 2020, the authorised share capital of our Company was increased from US$50,000
divided into 50,000 shares with a par value of US$1.00 to the aggregate of US$50,000 and HK$370,000
by the creation of an additional 37,000,000 shares with a par value of HK$0.01 each. On the same date,
(i) 75,200 and 4,800 shares of our Company with a par value of HK$0.01 each were allotted and issued
to Majestic Gold and Richard ’s Resource, respectively, by our Company; (ii) 94 shares and six shares of
our Company with a par value of US$1.00 each held by Majestic Gold and Richard ’s Resource,
respectively, were repurchased by us; and (iii) the authorised but unissued share capital of our Company
was reduced by the cancellation of 50,000 shares of par value of US$1.00 each. After such changes, the
authorised share capital of our Company became HK$370,000 divided into 37,000,000 shares with a par
value of HK$0.01 each.
On 30 November 2023, the authorised share capital of our Company was increased from
HK$370,000 divided into 37,000,000 Shares to HK$100,000,000 divided into 10,000,000,000 Shares by
the creation of 9,963,000,000 additional Shares. For details of change in the share capital of our
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Company, please refer to the paragraph headed ‘‘Statutory and general information — A. Further
information about our Group — 2. Changes in the share capital of our Company ’’in Appendix V to this
prospectus.
OUR SUBSIDIARIES
Majestic Yantai BVI
Majestic Yantai BVI, an intermediate holding c ompany of our Group, was incorporated on 1 July
2004 in the BVI with an authorised share capital of US$50,000 divided into 50,000 shares of US$1.00
each. On the same day, Majestic Yantai BVI allotted a nd issued 90 shares and 10 shares (all credited as
fully paid), representing 90% and 10% of all the issu ed share of Majestic Yantai BVI, respectively, to
Majestic Gold and Richard ’s Resource.
As at the Latest Practicable Date, Richard ’s Resource is wholly-owned by Ms. Cheung Yuen Man,
Rosa (‘‘Ms. Cheung ’’), an Independent Third Party. Ms. Cheung is a certified practicing accountant
with around 30 years of experience in accounting and finance. She was acquainted with the management
of Majestic Gold through her family member in early 2004 when Majestic Gold required assistance with
setting up business structures and business contra cts to invest in the PRC. She subsequently introduced a
business acquaintance in the PRC who had knowledge of the mining industry in Shandong Province to
Majestic Gold, which led to the 2004 CJV Agreemen t between Majestic Gold and Yantai Mujin in May
2004. In appreciation of Ms. Cheung’ s assistance, she was invited to subscribe for 10% of the
shareholding in Majestic Yantai BVI in July 2004 at par value after Majestic Gold entered into the 2004
CJV Agreement with Yantai Mujin. Ms. Cheung assisted in the setting up of the then corporate structure
for Majestic Gold to hold the interest in the joint venture company, namely, Yantai Zhongjia, which was
established in March 2005 through Majestic Yant ai BVI. She also assisted in the incorporation of
Majestic Yantai BVI and the Company in July 2004 and May 2019, respectively and acted as the
respective company secretary from July 2004 to March 2020 and May 2019 to March 2020.
In late 2010, in view of Majestic Gold’ s proposed further capital injections to Yantai Zhongjia
through Majestic Yantai BVI and Ms. Cheung did not have intention of making any further capital
injections herself, Ms. Cheung agreed to the dilutio n of her shareholding interest in Majestic Yantai
BVI. As a result, on 1 December 2010, Richard ’s Resource transferred four shares in Majestic Yantai
BVI held by it to Majestic Gold at par value. As a result of such transfer, Majestic Yantai BVI was
owned as to 94% by Majestic Gold and 6% by Richard ’s Resource.
On 21 May 2019, pursuant to the Reorganisation, Majestic Gold and Richard ’sR e s o u r c e
transferred all their shares in Majestic Yantai BV I to our Company in exchange for the allotment and
issuance of 94 and five ordinary shares of a per value of US$1.00 each in our Company to Majestic
Gold and Richard ’s Resource, respectively. After the aforesaid transfer, Majestic Yantai BVI became a
direct wholly-owned subsidiary of our Company.
Majestic Yantai BVI is an investment holding company.
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Yantai Zhongjia
Yantai Zhongjia was established under its former name of Yantai Zhongjia Mining Development
Enterprise* (煙 台中嘉礦業開發企業) by Majestic Yantai BVI and Yantai Mujin in the PRC on 17
March 2005 as a sino-foreign cooperative joint venture without a legal person status. According to the
2004 CJV Agreement, Yantai Mujin agreed to contribute all its gold exploration licences over 75.04
sq.km. in Muping, Yantai, Shandong Province in return for 40% equity interest in Yantai Zhongjia and
our Controlling Shareholder, through its subsidia ry, Majestic Yantai BVI, would contribute funding in
various instalments over a peri od of four years up to a total sum of approximately US$4.3 million
(equivalent to approximately RMB35 million, as at the date of the 2004 CJV Agreement) in return for
60% equity interest in Yantai Zhongjia. The initial investment amount of Yantai Zhongjia was
approximately RMB58.3 million. The terms of the 2 004 CJV Agreement were determined based on
arm’s length negotiation between the parties. At the time of its establishment, the business scope of
Yantai Zhongjia was exploration of gold and other precious metals.
On 15 November 2009, Majestic Yantai BVI and Yantai Mujin entered into a new joint venture
agreement (the ‘‘2009 CJV Agreement ’’) to replace the 2004 CJV Agreement. According to the 2009
CJV Agreement, (i) Yantai Zhongjia was changed from a sino-foreign cooperative joint venture without
a legal person status to a sino-foreign cooperative joint venture with a legal person status; (ii) the
company name of Yantai Zhongjia Mining Development Enterprise* ( 煙台中嘉礦業開發企業)w a s
changed to Yantai Zhongjia Mining Co. Ltd.* ( 煙台中嘉礦業有限公司) ; and (iii) the parties confirmed
that Yantai Mujin had contributed its gold exploration rights in the areas of Muping, Yantai, Shandong
Province in return for 40% of the equity interest in Yantai Zhongjia and Majestic Yantai BVI had
contributed capital of approximately RMB35.5 million (equivalent to approx imately US$4.6 million as
at the date of the 2009 CJV Agreement) as the registered capital of Yantai Zhongjia in return for 60% of
the equity interest in Yantai Zhongjia. The relevant business filing relating to, among others, the change
of company name, change of the type of company and the increase of registered capital to approximately
RMB35.5 million was completed on 30 April 2010.
On 10 May 2010, Yantai Mujin and Dahedong entered into an equity transfer agreement, pursuant
to which, Yantai Mujin transfe rred its 40% equity interest in Ya ntai Zhongjia to Dahedong at a
consideration of RMB10.5 million which was determined based on arm’ s length negotiation between
Yantai Mujin and Dahedong. Such equity transfer was completed and settled on 22 July 2010. Upon
completion of such equity transfer, Yantai Zhong jia was owned as to 60% by Majestic Yantai BVI and
40% by Dahedong. Dahedong is a company engaged in gold processing and from January 2019 to 30
June 2022, operated an ore processing plant (independent and not used by the Group) which processes
mined ore into gold concentrate with a total capacity of 2,000 ktpd in Weihai City, Shandong Province.
As confirmed by Dahedong, the re gistered share capital of Dahedong is RMB24.0 million and the
revenue in the year ended 31 December 2021 was a pproximately RMB150 million. As at the Latest
Practicable Date, Dahedong was owned as to 50% by Mr. Kong Fanbo, and the remaining equity
interests held in equal share of approximately 16.67% by each of (i) Mr. Kong Fanzhong; (ii) Mr. Wang
Lei; and (iii) SDZJ. Dahedong Mineral Processing Factory of Wanggezhuang Town, Muping District,
Yantai City ( 煙台市牟平區王格莊鎮大河東選礦廠)( ‘‘Dahedong Mine ral
 Processing Factory ’’), was a
processing plant established in October 2006 operated by Mr. Kong Fanzhong and a mineral processing
HISTORY, REORGANISATION AND CORPORATE STRUCTURE
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subcontractor of Yantai Mujin in 2009. We were introduced to Dahedong Processing Factory by Yantai
Mujin in late 2009 when Yantai Mujin intended to exit from the joint venture with us. Dahedong
Processing Factory was deregistered on 11 December 2009 and Dahedong was established by Mr. Kong
Fanzhong, Mr. Kong Fanbo and Mr. Wang Lei as the initial shareholders on 14 December 2009 to join
the joint venture with us. As a result of the abovementioned equity transfer between Yantai Mujin and
Dahedong, the 2009 CJV Agreement was terminated and replaced by a new joint venture agreement
entered between Majestic Yantai BVI and Dahedong. Pursuant to the joint venture agreement between
Majestic Yantai BVI and Dahedong, Dahedong is entitled to nominate two of the five directors of
Yantai Zhongjia, as well as the supervisor of Yantai Zhongjia. Majestic Yantai BVI is entitled to
nominate the remaining three directors of Yantai Zhongjia. The general manager, who is responsible for
day to day operations of Yantai Zhongjia, shall be nominated by Majestic Yantai BVI, and the general
manager may nominate one or two assistant general manager(s). Both the general manager and the
assistant general manager, who are full time employees of Yantai Zhongjia, are appointed by, and report
to the board of directors of Yantai Zhongjia. Each of Majestic Yantai BVI and Dahedong nominates one
cashier and one accounting officer, respectively. Yantai Zhongjia is responsible for its own employees
and liable for the employees ’ compensation and other benefits under the laws of the PRC. The joint
venture agreement does not give Dahedong any veto rights over any corporate actions of Yantai
Zhongjia. Save as disclosed above, there is no sharing of personnel, resources and facilities between the
Group and Dahedong since the commencement of the Group ’s operations and during the Track Record
Period. From 6 July 2010 to 18 May 2021, there were a series of capital injections from Majestic Yantai
BVI and Dahedong to Yantai Zhongjia from time to time. Upon completion of the capital injections on
18 May 2021, the registered capital of Yantai Z hongjia was increased to RM B139.9 million and Yantai
Zhongjia was owned as to 75% by Majestic Yantai BVI and 25% by Dahedong. On 14 November 2022,
the registered capital of Yantai Zhongjia was furth er increased to RMB168.7 million on a pro rata basis
between Majestic Yantai BVI and Dahedong. On 6 December 2022, Yantai Zhongjia received the full
amount of capital increase of RMB21.6 million from Majestic Yantai BVI and on 13 November 2023,
Yantai Zhongjia received the full amount of capita l increase of RMB7.2 million from Dahedong. As at
the Latest Practicable Date, Yantai Zhongjia was owned as to 75% by Majestic Yantai BVI and 25% by
Dahedong.
HISTORY, REORGANISATION AND CORPORATE STRUCTURE
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REORGANISATION
The following diagram illustrates our shareholding structure immediately before the
Reorganisation:
25%
6%
75%
94%
Richard’s Resource(2)
(BVI)
Majestic Yantai BVI
(BVI)
Majestic Gold(1)
(Canada)
Yantai Zhongjia
(PRC)
Dahedong
(PRC)
Notes:
(1) No shareholder of Majestic Gold is interested in 20% or more of the shareholding interest in Majestic Gold as at the Latest
Practicable Date.
(2) As at the Latest Practicable Date, Richard ’s Resource is wholly-owned by Ms. Cheung, an Independent Third Party.
Our Group underwent Reorganisation pri or to the Listing to rationalise our Group ’s structure in
preparation for the Listing. The major steps of o ur Reorganisation are summarised as follows:
1. Incorporation of our Company
Our Company was incorporated on 21 May 2019 in the Cayman Islands as an exempted company
with limited liability with an authorised share capita l of US$50,000 divided into 50,000 ordinary shares
with par value of US$1.00 each as the listing vehicle. Immediately after the incorporation, one ordinary
share with per value of US$1.00, representing the entire issued share capital of our Company was held
by Richard’ sR e s o u r c e .
2. Acquisition of Majestic Yantai BVI by our Company
On 21 May 2019, our Company acquired the entire issued shares of Majestic Yantai BVI from
Majestic Gold and Richard ’s Resource. In consideration of such a cquisition, our Company issued and
allotted 94 ordinary shares and five ordinary s hares of our Company to Majestic Gold and Richard ’s
Resource, respectively. Upon completion of the acquisition, Majestic Yantai BVI became a direct
wholly-owned subsidiary of our Company.
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The following chart sets out the shareholding structure of our Group immediately following the
completion of the Reorganisation but immediately b efore the completion of the Capitalisation Issue and
the Global Offering:
25%
6%
75%
94%
100%
Richard’s Resource(2)
(BVI)
Majestic Yantai BVI
(BVI)
Majestic Gold(1)
(Canada)
Yantai Zhongjia
(PRC)
Dahedong
(PRC)
Company
(Cayman Islands)
Notes:
(1) No shareholder of Majestic Gold is interested in 20% or more of the shareholding interest in Majestic Gold as at the Latest
Practicable Date. During the Track Record Period, there had been no material changes in the shareholdings of Majestic Gold
w h i c hr e s u l t e di nac h a n g ei nc o n t r o lt h e r e o fa n di nt u r no v e rt h eC o m p a n yd u r i n gt h eT r a c kR e c o r dP e r i o da n du pt ot h e
Latest Practicable Date.
(2) As at the Latest Practicable Date, Richard ’s Resource is wholly-owned by Ms. Cheung, an Independent Third Party.
CAPITALISATION ISSUE
Pursuant to the written resolutions of our Share holders passed on 30 November 2023, conditional
on the share premium account of our Company being credited as a result of the Global Offering, our
Directors are authorised to cap italise HK$14,999,200 standing to the credit of the share premium
account of our Company by applying such sum in paying up in full at par 1,499,920,000 Shares for
issue and allotment to holders of Shares whose names appear on the register of members of our
Company on the date of passing such resolution in proportion (as near as possible without involving
fractions so that no fraction of a share shall be issu ed and allotted) to their then existing respective
shareholdings in our Company. The Shares to be issued and allotted pursuant to such resolution shall
carry the same rights in all respects with the existing issued Shares.
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The shareholding structure of our Group immediately following the completion of the
Reorganisation, the Capitalisation Issue and the Globa l Offering (assuming the Over-allotment Option is
not exercised) is set out as follows:
25%
25%
75%
4.5%
100%
70.5%
Public
Shareholders
Majestic Yantai BVI
(BVI)
Richard’s Resource(2)
(BVI)
Yantai Zhongjia
(PRC)
Dahedong
(PRC)
Company
(Cayman Islands)
Majestic Gold(1)
(Canada)
Notes:
(1) As at the Latest Practicable Date, Majestic Go ld did not have ultimate controlling shareholders.
(2) As at the Latest Practicable Date, Richard ’s Resource is wholly-owned by Ms. Cheung, an Independent Third Party.
COMPLIANCE WITH PRC INVESTMENT REGULATIONS
Our PRC Legal Advisers have confirmed that Yantai Zhongjia, as a sino-foreign cooperative joint
venture, has acquired requisite approvals, permits, licences and filings for its establishment in the PRC,
and based on compliance certificate issued by Yantai Bureau of Commerce, Yantai Zhongjia has never
been investigated or penalized due to violation of t he PRC laws and regulations in relation to foreign
investment.
On 17 February 2023, the CSRC promulgated the Overseas Listing Trial Measures and five
supporting guidelines, which has come into effect on 31 March 2023, pursuant to which a PRC domestic
company seeking offering and listing securities in o verseas market, either directly or indirectly as
defined in the Overseas Listing Measures, shall file with the CSRC and report relevant information.
Pursuant to the Overseas Listing Tr ial Measures, if the issuer meets both of the following criteria, the
overseas securities offering and listing conducted by such issuer shall be deemed as ‘‘indirect overseas
o f f e r i n ga n dl i s t i n gb yP R Cd o m e s t i cc o m p a n i e s’’: (i) 50% or more of any of the issuer ’s operating
revenue, total profit, total assets or net assets as documented in its audited consolidated financial
HISTORY, REORGANISATION AND CORPORATE STRUCTURE
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statements for the most recent fiscal year is accounted for by PRC domestic companies; and (ii) the
main part of the issuer ’s business activities are conducted, or pr emises of its business are located in the
territory of mainland China, or the majority of senior management staff in charge of its business
operations and management are PRC c itizens or have their habitual resi dence located in the territory of
mainland China.
Given that we generated a substantial amount of our total revenue as shown in our audited
consolidated financial statements for the year ended 31 December 2022 in the PRC and that our business
activities are mainly conducted in the PRC, our PRC Legal Adviser is of the opinion that the Listing is
an indirect overseas offering under the Overseas Listing Trial Measures and we are required to complete
the filing procedures with CSRC and report relevant i nformation with respect to the listing application
after the submission of our listing application to the Stock Exchange. On 20 October 2023, the CSRC
publicly informed us that they have confirmed the Company ’s overseas offering and listing information
submitted to them, and therefore, we have complet ed the CSRC filing for application of listing of the
Shares on the Stock Exchange and Global Offering. No other approvals from the CSRC are required to
be obtained for the listing of the Shares on the Stock Exchange, according to our PRC Legal Adviser.
REASONS FOR LISTING
In accordance with the corporate structure and ownership of our Company, the Listing of our
Company will constitute a spin-off of our Compan y from Majestic Gold, which is listed on the TSX
Venture Exchange, by way of a separate listing of our Shares on the Main Board of the Stock Exchange.
The board of directors of Majestic Gold consider s that the Listing is in the best interests of
Majestic Gold and its shareholders take n as a whole for the following reasons:
(1) the Stock Exchange, as a leading player of the international financial markets, could offer us
a direct access to the international capital markets, enhance our fund-raising capabilities and
broaden our fund-raising channels and our Shareholders base as well as strengthen our
corporate governance;
(2) as we focus on the PRC market, it is more convenient for us to raise funds required to
finance our future development through the Stock Exchange platform than through other
stock exchange, such as TSX;
(3) by the Listing, our Company will have our own separate management structure while the
management of the Remaining Group will be able to focus on its remaining business in
Canada and Australia, which will increase its operational efficiency and attract investment
and in the interests of the shareholders of Majestic Gold as a whole. For details, please refer
to the section headed "Relationship with our Controlling Shareholder — Independence from
the Remaining Group" in this prospectus; and
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(4) a listing on the Stock Exchange will further raise our brand awareness, business profile and
thus, enhance our corporate image to attract new customers, business partners and strategic
investors as well as to recruit, motivate and retain key management personnel for our Group ’s
business.
APPROVALS AND CONFIRMATION FROM THE SHAREHOLDERS OF MAJESTIC GOLD
AND THE TSX VENTURE EXCHANGE
Pursuant to the policy of the TSX Venture Exch ange, the Listing constitutes a reviewable
disposition of the interest in our Company by Majestic Gold, which shall comply with the specific
conditions and obtain the necessary approval and fi nal acceptance from the TS X Venture Exchange. On
25 October 2021, Majestic Gold has obtained co nditional approval from the TSX Venture Exchange,
pursuant to which, the TSX Venture Exchange has conditionally accepted the disposition of Majestic
Gold ’s interest in our Company by way of the Listing on t he conditions that, among others, (1) Majestic
Gold must demonstrate that it meets the continued listing requirements and specifically the activity
requirement under the policy of the TSX Venture Exchange; (2) Majestic Gold must have obtained
written approval of its shareholders holding at least 50% of its issued and outstanding common shares
for the disposition of its interest in our Company b y way of the Listing; and (3) Majestic Gold shall
provide to the TSX Venture Exchange of a copy of (i) this prospectus, and; (ii) the Hong Kong
Underwriting Agreement. On 18 May 2 022, the shareholders of Majestic Gold approved the disposition
of interest in our Company via the Listing by way of a written approval and on 11 November 2023, the
TSX Venture Exchange also approved the dispositio n of interest in our Company via the Listing by way
of a written approval-in-principle.
Set out below is the continued listing requirements of TSX Venture Exchange:
(a) public distribution and market capitalisation: ( i )n ol e s st h a n5 0 0 , 0 0 0l i s t e ds h a r e si n
public float; (ii) at least 10% of listed shares m ust be in public float; (iii) listed shares in
public float must have minimum market capitalisation of at least CAD100,000; (iv) at least
150 public shareholders holding at least one board lot each, free of resale restrictions;
(b) working capital: adequate working capital or financial resources of the greater of (i)
CAD50,000 and (ii) an amount required in order to maintain operations and cover general
and administrative expenses for a period of six months;
(c) assets and operations: issuer must not substantially reduc e or impair its principal operating
assets or seeks or is placed under protection of insolvency or bankruptcy laws or is placed
into receivership.
(d) activity: either the issuer satisfied (A) or (B).
(A) For the issuer ’s most recently completed financi al year: (i) positive cash flow; (ii)
significant operating revenue; or (iii) C AD50,000 of exploration or development
expenditures.
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(B) In aggregate, for the issuer ’s two most recently completed f inancial years, CAD100,000
of exploration or development expenditures.
Based on the published annual report of Majestic Gold for the year ended 31 December 2022, its
shareholders list, current market statistic s, legal memorandum issued by Majestic Gold ’s legal adviser
and confirmation from Majestic Gold on working capital needs, our Directors were of the view, and the
Sole Sponsor concurred, that Majestic Gold will co ntinue to meet the continued listing requirement of
the TSX Venture Exchange after the disposition of i nterest in our Company by way of the Listing; and
based on legal advice received, no other consent or regulatory approval or requirement has to be
obtained or otherwise complied with by Majestic Go ld in Canada for or in connection with the Listing.
HISTORY, REORGANISATION AND CORPORATE STRUCTURE
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OVERVIEW
We are a gold exploration, mining and processing company established in 2005 and located in
Yantai city of the Shandong Province in China. We sell gold bullion derived from gold concentrate
processed by us. According to the F&S Report, we we re the third largest gold mining company in the
Shandong Province in 2022 with a market share of 2.6% in terms of mine production volume but the top
two players have an aggregated market share of approximately 78.3% in terms of gold mine production
volume. Further, Shandong Province is the largest gold producing province in the PRC with gold mine
production volume of approximately 41.4 t, which accounted for approximately 14.0% of the total gold
mine production volume in China in 2022, while Yantai city accounted for more than 90% of the gold
mine production of the Shandong Province in 202 2. We believe we enjoy growth opportunities
attributable to our location in Yantai city.
According to the SRK Report, we had total Probable Mineral Reserves, Indicated Mineral
Resources and Inferred Mineral Resources amounted to approximately 23,130 kt, 35,840 kt and 39,710
kt, respectively, as at 30 June 2023. We operate two operating gold mines, namely, the Songjiagou
Open-Pit Mine and the Songjiagou Underground Mine, both are located at Songjiagou, the Muping-
Rushan gold metallogenic belt, wh ich is one of the three major gold metallogenic belts in Yantai, and
are in close proximity of around 400 metres from each other. We operate an ore processing plant within
4 km from our mines with an annual ore processing capacity of approximately 2,000.0 kt. Our mining
assets and ore processing plant are well supported by upstream and downstream gold supply chain
industries in the Yantai city, and are easily accessi ble by highway. The table below sets out a summary
of the details of our principal operating minin g assets as at the Latest Practicable Date:
Name Details
Songjiagou Open-Pit Mine . An open-pit gold mine with an area of approximately 0.594 sq.km.
. Commenced commercial production since May 2011
. Permitted annual mine production volume of 900.0 kt
. Annual gold production volume (before smelting) of approximately
845.4 kg (or 27,180 ounces)
. LoM of approximately 8.5 years
. As at 30 June 2023, Probable Mineral Reserves amounted to
approximately 22,600 kt at a cut-off grade of 0.3 g/t Au
Songjiagou Underground
Mine
. An underground gold mine with an area of approximately 0.414
sq.km.
. Commenced commercial produc tion since September 2019
. Permitted annual mine production volume of 90.0 kt
. Annual gold production volume (before smelting) of approximately
113.2 kg (or 2,398 ounces)
. LoM of approximately 6.0 years
. As at 30 June 2023, Probable Mineral Reserves amounted to
approximately 530 kt at a cut-off grade of 0.7 g/t Au
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Name Details
Ore processing plant . An ore processing plant with an annual capacity of approximately
2,000.0 kt of ore
. Processing ore from our Songjiagou Open-Pit Mine and Songjiagou
Underground Mine
. Processing ore into gold concentrate for further refining into gold
bullion by third party smelters
We have the track records to develop greenfie ld mining assets and related facilities and have
successfully turned them into actual mining and gold producing assets as both of our mining assets, ore
processing plant and related facilities such as tailings dam were developed by us. Both our management
and operations teams are led by professionals who have extensive industry experience. Our management
team is led by our Chairman, executive Director and chief execu tive officer, Dr. Shao, who held a
doctor of philosophy degree in mineral processing and has extensive experience in ore processing,
mining-related finance and investment management. For details of his biography, please refer to the
section headed ‘‘Directors and senior management ’’in this prospectus. Based on the fact that our gold
production is mostly attributable to our Songjiago u Open-Pit Mine, we have recorded an average
production cost of approximately RMB186.3 per gram in FY2022, which is below the industry average
of RMB298.0 per gram in 2022 as stated in the F&S Report.
We accredited this achievement to our effective gold grade control and production management
implemented by our technical team as part of our mining methodology which, before drilling and
blasting activities to be carried out with respect of our mining works, incorporates geostatistics into a
mix of mining methods (such as drilling, blasting, lo ading and transportation method for Songjiagou
Open-Pit Mine and shrinkage stope and cut-and-fill mining method for Songjiagou Underground Mine)
to help select and identify higher gold content orebody (i.e. ore with higher gold grade), to be extracted
based on ground and mining site conditions to improve our resource qua lity while controlling the
stripping volume so that we can ensure a stable grade of ore is being fed into our ore processing plant
for our ore processing operations. Our Directors believe that our streamlined business model enables us
to focus on our core mining and ore processing operations while keeping our operation costs low,
thereby enhancing Shareholders ’ value in the long run.
We process ores mined from our Songjiagou Open-Pit Mine and our Songjiagou Underground
Mine and process them into gold concentrate at our ore processing plant. We derive revenue from the
sale of gold bullion, which we engage Independent Third Party gold smelters to refine gold concentrate
produced by our ore processing plan t into gold bullion of Au99.95. Our customers are gold smelters or
their subsidiaries, who are registered with the Shanghai Gold Exchange, and sells the gold bullion
purchased from us on the Shanghai Gold Exchange.
During the Track Record Period, our revenu e amounted to approxim ately RMB361.0 million,
RMB247.9 million, RMB418.4 million and RMB196.7 million, respectively, while our net profit
amounted to approximately RMB114.4 million, RMB58.7 million, RMB121.0 million and RMB52.8
million, respectively.
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COMPETITIVE STRENGTHS
We believe that our success is attributed to, a mong other things, the following competitive
strengths which distinguish us from our competitors:
Our open-pit mine is instrumental to our low production cost which is below the industry average
A majority of our Group’ s gold production is attributable to our Songjiagou Open-Pit Mine.
According to SRK, the level of capital required and cost structure for running an underground mine is
different from that of an open-pit mine due to the fact that an underground mine requires more capital
expenditures (and hence, also great er depreciation charges) to const ruct the mining infrastructure
underground and procure the equi pment for conducting excavation ac tivities underground, the facilities
to bring up the ore, and other structure and fixed costs for safety measures and prevention of
uncertainties in underground situation, leading to the fact that the production cost of an open-pit mine is
generally lower than an underground mine. In particular, according to Frost & Sullivan, among all gold
mines in the PRC, approximately 95% of gold mining involves underground mining.
Based on the above and our Songjiagou Open-Pit Mine, we recorded an average production cost
below the industry average. According to the F&S Report, the total production cost of gold mining in
the PRC has increased from RMB200.4 per gram in 2017 to RMB298.0 per gram in 2022. While the
gold mining industry continues to focus on cost management, the total production cost of gold mining
continues to rise due to continuous increase in safety and environmental protection costs, we are able to
effectively manage and control our operating costs to be below the industry average as mentioned above
as our average production cost during the Track Record Period was approximately RMB167.4 per gram,
RMB186.8 per gram, RMB186.3 per gram and RMB220.7 per gram, respectively. Please also refer to
the section headed ‘‘Financial information — Key factors affecting our results of operations — Cost of
sales ’’on other factors contributing to lower average production cost below the industry average.
We have the ability to develop greenfield mining a ssets and our existing operating mining assets
can support our next phase of growth strategies
We have the proven track records and the ability to develop greenfield mining assets and related
facilities and have successfully turned them into actu al mining and gold producing assets. Developing a
greenfield mine is complex, difficult and time-c onsuming as it involves, among others, drillings for
exploration to identify reserves, application for and obtaining the relevant mining licences and
construction of mines and related infrastructure such as ore processing plant and tailings dam, which
generally take years to complete before a greenfield mine can commence operations and generate
revenue. There is also no guarantee that a new mine will achieve the expected productivity at the
estimated cost and profitability. As evidenced belo w, we have overcome the abovementioned obstacles
over the past 15 years which led to us being able to operate two operating gold mines as at the Latest
Practicable Date which are already r evenue generating and profit making.
Prior to our involvement in the Songjiagou Open-Pit Mine, only small-scale underground mining
operations were carried out. After our Controlling Sha reholder through Majestic Yantai BVI entered into
a joint venture agreement in May 2004 with the previous owner, Yantai Mujin, to establish Yantai
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Zhongjia and acquire the gold exploration rights, we initiated a major drill program in 2005 to evaluate
the mineral potential in order to facilitate commen cement of mining operations at Songjiagou on a larger
scale than previously envisioned. In August 2010, we organised and funded the construction of an ore
processing plant with the capacity of 6.0 ktpd consisting of one crushing series and two identical
grinding floatation series to cope with the expanded ore processing capacity. In October 2011, we
completed the construction of a ta ilings dam with the total storage cap acity of approximately 9.5 million
m3 to contain tailings from our ore processing plant and we formally commenced the sale of gold
bullion from gold concentrate processed from ore mined from our Songjiagou Open-Pit Mine. As we
increased our mining and ore processing capacity, we subsequently expanded and rebuilt the tailings
dam in December 2014 to consist of an initial dam, a final stockpiling dam, a flood discharge system, a
backwater system, an observation system and a management system, with the total storage capacity of
42.2 million m
3 in order to cater for the increase in tailings from our ore processing plant. In February
2016, based on the results of the exploration works previously conducted in the Songjiagou area, we
applied for and obtained a mining licence to develop our Songjiagou Underground Mine from scratch.
We spent more than three years and incurred approxi mately RMB97.7 million for the construction of the
underground mine, including the installation of all ancillary infrastructure comprising among others,
ramp, fully serviced shaft, hydraulic jumbo drills an d electric scrapers. Our Songjiagou Underground
Mine commenced commercial production in September 2019.
As a result of our efforts as described above, as at the Latest Practicable Date, we were operating a
complete set of portfolio of mining assets and related infrastructure within close proximity with each
other, which include (i) one open-pit gold mining asset, namely our Songjiagou Open-Pit Mine; (ii) one
underground gold mining asset, namely our Songjia gou Underground Mine; (iii) an ore processing plant;
and (iv) a tailings dam.
Our Songjiagou Open-Pit Mine has been in oper ations for over 10 years and has a permitted
annual mine production volume of 900.0 kt while our Songjiagou Underground Mine has a well-
established underground development (such as shaft sinking and horizontal level developments, and
existing surface infrastructure), which enables ope ration on various levels from 142 metres ASL to -270
metres ASL. Pursuant to the mining licence, our Songjiagou Underground Mine has a permitted annual
mine production volume of 90.0 kt. Our ore processing plant has an annual ore processing capacity of
approximately 2,000.0 kt, which is sufficient to support our planned production growth. Our ore
processing plant involves conventional three-stage crushing within a closed circuit, grinding within a
closed circuit and floatation consisting of one stage of rouging, two stages of scavenging and two stages
of cleaning. Our tailings dam is located at a valley 2 km southeast from our ore processing plant to
contain the tailings from our ore processing plant. It is 160 metres in height, with a total storage
capacity of approximately 42.2 million m
3. Please see paragraphs headed ‘‘Our mineral assets and
reserves — Our two gold mines’’ , ‘‘Our operations — Our ore processing facility’’ and ‘‘Our operations
— Tailings ’’in this section for further details.
Our Directors estimate that our existing mining and related infrastructure are sufficient for our
existing operations as at the Latest Practicable Da te. As we intend to achieve sustainable growth to
strengthen our position in the Shandong Province by undertaking the n ext phase of expansion plans as
elaborated in the paragraph headed ‘‘Business strategies ’’ in this section, we will need to incur
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substantial capital expenditure. While part of such capital expenditures is expected to be funded through
the net proceeds from the Global Offering, the remaining portion is expected to be funded by bank
financing and internal resources. In view of the above, our operating gold mines and existing mining
infrastructure not only provide us with stable revenue and a sustainable asset base to maintain our
current and anticipated production, but are also capable to support our business expansion in the
medium-to-long run, which also save us significan t lead time otherwise required to turn greenfield
mining assets into operating gold producing assets so that we can focus our attention to cater for rapid
future growth strategies in accordance with our business strategies.
We are committed to safety and environmental management
We have consistently adopted high safety standar ds in compliance with national requirements and
continuously update and improve upon our internal control measures to enhance production safety in our
operations. Our production management system and technologies enable mines to achieve a high level of
mechanisation, digitisation and intelligent control in the gold production process. Moreover, we monitor
various production and safety indicators in real-time to ensure the safety of our open-pit and
underground operations. We regularly conduct trainings for our staff. As a result, we have recorded
minimal occupational health or work safety accidents of two, two, two and nil for each of FY2020,
FY2021, FY2022 and 6M2023 and our accident frequency rate per hundred workers was 0.8, 0.6, 0.5
and 0, respectively, during this period. During the Track Record Period, our Group ’s total recordable
incident rate (‘‘ TRIR ’’) per million hours worked was 2.2, 1.7, 1.6 and 0, respectively, which is lower
than the global average TRIR per million hours wo rked for 2020, 2021 and 2022 of 6.5, 5.2 and 3.4,
respectively. For details, please refer to the paragraph headed ‘‘Environmental, social and corporate
governance — B. Social — Occupational health and safety — Work safety accidents during the Track
Record Period ’’in this section.
We take occupational safety seriously. Despite having a temporary suspension of mining
operations from February to August 2021 (in respect of our Songjiagou Open-Pit Mine) and February to
November 2021 (in respect of our Songjiagou Underground Mine) to enable the government authority to
carry out safety inspection of all mines in Shandong, as a result of two mining incidents in Shandong, in
January and February 2021 respectively, which did not involve our Group, we were able to pass the
enhanced safety inspection in accordance with the requirements of local authorities and resumed the
mining activities of our Songjiagou Open-Pit Mine a nd Songjiagou Underground Mine in late August
2021 and December 2021 respectively.
We have also developed and implemented environmental protection measures in accordance with
the industry and national standards. We emphasise on minimising the impact of mining activities on the
environment and ecosystem while creating value. We seek to recover as much gold concentrate from
gold ore to minimise loss of natural resources in line with the latest Catalogue for the Guidance of
Adjustment to Industrial Structure (產 業結構調整指導目錄) issued in October 2019 by the National
Development and Reform Commission and became effective on 1 January 2020 and was amended on 30
December 2021, which encourages the recovery of gold from tailin gs and waste rock. Through our
efforts, we have also constructed and maintained a water dam which recycles wastewater from our ore
processing plant to supply water for our ore processing plant. We have a large tailings dam to contain
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our tailings in the form of sand. We also activel y carry out land rehabilitation. We believe our good
safety records and compliance with industry and national standards on environmental protection
measures enable us to achieve sustainable growth and maintain positive relationships with the
communities around our existing mines as well as the applicable regulatory authorities in the Muping
District in Yantai city.
We have a strong technical team for our mining operation
We have a strong technical team of, among others, three mining operations engineers and six
geologists, many of whom previously worked at SRK, and headed by Mr. Huang Yong, a qualified
mineral resources/reserves appraiser in the PRC by the Ministry of Land and Resources of the PRC in
2002 and a recipient of China Nonferrous Metals Industry Science and Technology Award ( 中國有色金
屬工業科學技術獎) in respect of research on optimisation of open-pit mining in 2006, who has over 40
years of experience in mine design and mining consulting. On average, our technical team has more than
15 years of experience in mining operational man agement. Most of them came from leading domestic
institutions and international consulting firms in the mining industry. We believe that their deep
understanding of mining operations and solid tec hnical skills gained through years of ground-level
experience make them competent supervisors of our mining operations to ensure smooth production.
Our technical team implements effective gold grade control and production management in our
operation. Before drilling and blasting activities to b e carried out with respect of our mining works, our
technical team incorporates geostatistics applications into a mix of mining methods (such as drilling,
blasting, loading and transportation method for Songjiagou Open-Pit Mine and shrinkage stope and cut-
and-fill mining methods for Songjiagou Underground Mine) to help select and identify higher gold
content orebody, (i.e. ore with higher gold grade), to be extracted based on ground and mining site
conditions to improve our resource quality while co ntrolling the stripping volume to ensure a stable
grade of ore is being fed into our ore processing plant for our ore processing operations. As a result, we
recorded much higher feed grade for our ore processing during the Track Record Period of 0.70 g/t Au,
0.62 g/t Au, 0.62 g/t Au and 0.54 g/t Au, respectively, despite having significantly lower cut-off grade
of 0.3 g/t Au from our Songjiagou Open-Pit Mine. During the Track Record Period, we achieved gold
recovery rate of over 94.6%. Such higher gold recovery rate indicates our processing efficiency as we
have a higher level of resource utilisation and less wastage of resou rces to reduce environmental
pollution.
We are led by a distinguished integrated management team
We have a dedicated and strong management team consisting of well-educated and highly
experienced talents. We have a senior management team that combines strong PRC-based leadership
with an on-the-ground management team. Their collective experience covers the full spectrum in the
mining industry value chain, ranging from exploration, mining to ore processing. Our management team
is led by our Chairman, executive Director and chie f executive officer, Dr. Shao, who held a doctor of
philosophy degree in mineral processing and has extens ive experience in ore processing, mining-related
finance and investment management. Dr. Shao oversees the overall development strategy of our Group
and leads our local management team. Our executive Director, Mr. James Thomas Mackie, has over 14
years of corporate experience in financial management and administration, including corporate
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governance, government and securities compliances and had previously served as chief financial officer
for a number of mining exploration companies listed on the TSX Venture Exchange. Our executive
Director, Mr. Chen Shaohui, who held a bachelor ’s degree in mineral processing and was a qualified
senior engineer in the PRC, has over 38 years of experience in the mining industry where he held senior
managerial positions. Our senior management team in the PRC has an average of more than 30 years of
experience in mining operational management. For more details of the experience and qualifications of
our directors and senior management members, please see the section headed ‘‘Directors and senior
management ’’in this prospectus.
Under the leadership, strategic vision and dir ection of our executive Directors and management
team, a majority of them have been with us for ove r 10 years, we have built a business with proven
track record of success. Over the past decade, we have successfully developed greenfield mining assets
and turned them into actual mining and gold producing assets, and became the third largest gold mining
company in the Shandong Province in 2022 with a market share of approximately 2.6% in terms of mine
production volume, but the top two players have an aggregated market share of approximately 78.3% in
terms of gold mine production volume according to the F&S Report. We believe that our stable
management team and its knowle dge, experience, capability and c ommitment enable us to position
ourselves as one of the established mining companies in the PRC in the near future.
BUSINESS STRATEGIES
We strive to achieve sustainable growth to str engthen our position in the Shandong Province by
exploiting our operational efficiencies and growth o pportunities, further developing our existing assets
and acquiring value-accretive assets in the PRC to substantially scale up our mining operations, gold
concentrate processing operations and increase our gold reserves. To that end, we intend to implement
the following business strategies:
Further construction of mining i nfrastructure in accordance with our mine optimisation plan
According to the SRK Report, ore bodies at our Songjiagou Open-Pit Mine are found in the
elevation ranges of +145 metres ASL down to –402 metres ASL. As at 31 December 2022, there were
approximately 2,400 kt of Probable Mineral Reserves available at our Songjiagou Open-Pit Mine for our
mining operation until June 2023 without constructin g additional mining infrastructure (representing
approximately 10.6% of the Probable Mineral Reserves of approximately 22,700 kt as at 31 December
2022). As at 31 December 2022, our mining operations were conducted at two benches at the elevation
+33 metres ASL and +21 metres ASL.
To continue our mining activities a fter June 2023, we have begun the construction of additional
mining infrastructure and we have taken such opportunity to conduct a mine optimisation plan and
design in 2021 which included, among others, the expansion of the mining surface area by about 150
metres south of the existing boundary of our Songjiagou Open-Pit Mine so as to expand our mining
surface area horizontally. This enabled us to extend the pit opening area from 0.34 sq.km. to 0.46
sq.km. and to deepen the depth of the pit to –171 metres ASL to reach out to more gold containing ore
in the unmined areas to access approximately 22,100 kt of Probable Mineral Reserves as at 30 June
2023 (representing approximately 98.0% of the Probable Mineral Reserves of approximately 22,600 kt
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available at our Songjiagou Open-Pit Mine as at 30 June 2023) until 2031. As part of the mine
optimisation plan, we plan to construct benches from top down and each with a height of 12 to 15
metres, i.e. starting from +117 metres ASL, at the ex panded mining surface area to facilitate our mining
work. In this regard, we initially planned to construct four new benches (i.e. first to fourth new benches)
to facilitate our mining work that would enable us to reach a depth of 48 metres below the new mining
surface area to strip a total stripping volume of 312 kt of ores to support our mining activities until June
2024. In second quarter of 2023, we have further formulated the construction of three more new benches
(i.e. fifth to seventh new benches) to reach a depth of 84 metres below the new mining surface area to
strip a total stripping volume of 976 kt of ores to support our mining activities until June 2025. For
details of our mine optimisation plan, please refer to the paragraph headed ‘‘Our mineral assets and
reserves — Our two gold mines — Our Songjiagou Open-Pit Mine ’’in this section of the prospectus.
We commenced the construction of new benches below the new mining surface area since 1
October 2021, each with a height of 12 metres. As at the Latest Practicable Date, we have completed the
construction of the first, second and third new benches and began the construction of first phase of
fourth and fifth benches. We funded the constructio n costs of approximately RMB39.6 million for the
first three new benches and phase one of both fourth and fifth benches from our internal resources. We
intend to complete the construction of the rema ining two benches step by step over a period of 18
months from 1 January 2024 to 30 June 2025.
In addition, in May 2020, we have obtained the re newed mining licence fo r Songjiagou Open-Pit
Mine with the revised approved permitted annual mine production volume to accommodate a substantial
increase in our mining capacity in terms of annual ore stripping volume from approximately 1,205.6 kt
per year based on 135 kt of the previous permitted a nnual mine production volume to approximately
8,100 kt per year based on 900 kt of permitted annual mine production volume. As such, the enlarged
mining area will be able to support us to fully utilise the newly revised permitted annual mine
production volume and the revised annual ore stripping volume granted to our Songjiagou Open-Pit
Mine.
In addition to the expansion of mining surface ar ea by constructing the new benches, we intend to
construct and develop certain mining infrastructure at the new mining area and to acquire certain
machineries. The construction and development plans include (i) the construction of water storage pool
and drainage system for dewatering of groundwater for safety purposes at the expanded mining area; and
(ii) the construction of site office, substation and topsoil storage yard for stock piling of topsoil to
prepare for future reclamation. We will also acquire three excavators under this expansion plan to
support our mine to be expanded to expand our mining operations.
Based on the feasibility study conducted by our technical team and pit optimisation design
recommended by SRK, we have planned to utilise appr oximately 20.4% or HK$54.0 million (RMB48.2
million) of our net proceeds from t he Global Offering for implementing the abovementioned
development and construction plans and the purchase of machineries in stages but expected to be not
later than 30 June 2025. For further details including the estimated expenditure for each step of the
construction and development plan and the timeframe to implement t he above expansion plan, please
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refer to the paragraph headed ‘‘Our mineral assets and reserves — Our two gold mines — Our
Songjiagou Open-Pit Mine’’ in this section and the section headed ‘‘Future plans and use of proceeds —
Use of proceeds ’’in this prospectus.
Upgrade our gold reserves to increase LoM through additional exploration activities at our
existing mine area
According to the SRK Report, we had total Probable Mineral Reserves, Indicated Mineral
Resources and Inferred Mineral Resources amounted to approximately 23,130 kt, 35,840 kt and 39,710
kt, respectively, and our Songjiagou Open-Pit Mine and Songjiagou Underground Mine had a LoM of
approximately 8.5 years and 6.0 years at a planned production capacity of 3,300 kt and 90 kt of ore,
respectively, as at 30 June 2023. As part of our plans for organic growth and based on the results of
exploration works conducted previously in 2013 and the recommendation of SRK, our Songjiagou Open-
Pit Mine area has potential for in-fill Mineral Resource exploration and upgrade. Pursuant to a
preliminary study conducted by SRK, by modifying the final pit structure of our Songjiagou Open-Pit
Mine in the future, it is viable for our Group to eco nomically capture additional Indicated Mineral
Resources and Inferred Mineral Resources. As such , we intend to invest capital to identify additional
mineral resources in the unmined areas next to and below the current pit ’s opening area covered by our
mining licence for our Songjiagou Open-Pit Mine by carrying out further exploration works involving
top to oblique drillings below ground surface and oblique drillings inside the pit area, which in
aggregate involving 26 drillings at various depths ranging from 0 to 55 0 metres with the aggregate depth
of over 6,500 metres in three phases so as to increase our gold mineral resources and to increase the
LoM of our Songjiagou Open-Pit Mine. While we had not carried out additional exploration activities
after 2013, we have regularly, dur ing the course of our daily mining activities conducted blast holes and
added channels on benches to update our Mineral Resources in local areas to guide our actual daily
production. The technical experience gained from carrying out such blast holes and channel on benches
to update our Mineral Resources are applicable to pe rforming additional exploration activities involving
additional 26 drillings. Accordin gly, our Executive Directors are of the view that it is feasible for us to
carry out the additional exploration activities involving additional 26 drillings at various depths to
upgrade our Inferred Mineral Resources to Indicated Mineral Resources so as to increase our gold
Mineral Reserves to increase the LoM of our Songjiagou Open-Pit Mine.
Based on the results of exploration works conducted previously and the recommendation of SRK,
we have planned to utilise approximately 2.0% or HK$5.3 million (RMB4.7 million) of our net proceeds
from the Global Offering to fund our exploration ac tivities at our Songjiagou Open-Pit Mine by carrying
out the abovementioned additional d rillings in stages by 31 December 2024, which will cover the costs
for drilling, exploration and professional fees for pre paring relevant independent consultation reports.
For details of the estimated expenditure on each stage and timeframe, please refer to the section ‘‘Future
plans and use of proceeds ’’in this prospectus. Our Directors be lieve that such drillings and exploration
activities will provide an opportunity for us to enhan ce the reserves of our Songjiagou Open-Pit Mine by
increasing drilling density and depth, which will in turn increase its LoM.
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Expand our business and grow our market share through selective acquisitions of gold mining
assets
According to the F&S Report, we were the third largest gold mining company in the Shandong
Province in 2022 with a market share of 2.6% in terms of mine production volume. We plan to continue
to strengthen our market position in Muping-Rusha n gold metallogenic belt and solidify our market
position in the Shandong Province and expand our market share in this regio n through both organic
growth and strategic acquisitions. We intend to purs ue acquisition opportunities of gold mining assets in
the Shandong Province through selective acquisitio ns of high-quality gold mines to rapidly expand our
mineral resources and to boost our gold concentrate processing capacity at our ore processing plant in
the future to support our sustainable growth in the longer run. We believe we will be able to leverage
our past experiences to deepen our penetration into the gold mining industry in the Shandong Province.
Most of our Executive Directors have prior experiences in acquisition of mining assets in the PRC
and Western Australia in the past decade prior to the delineation of our Group ’s business from that of
our Controlling Shareholder. Such acquisition experience includes t he proposed acquisition of two gold
mining assets in the PRC in 2014 and 2015 and one gold mining asset and other precious metals
exploration project in Western Australia in 2019. They were supported by our technical team headed by
Mr. Huang Yong, who had prior experience in due diligence of numerous mining assets in the PRC and
other countries. We have, together with our Executive Directors and our technical team headed by Mr.
Huang Yong, in the past, successfully capitalised the mineral resources we acquired as demonstrated by
our abilities in (i) identified, conducted due diligence, negotiated and acquired the majority stake in the
mining rights of the Songjiagou Open-Pit Mine by way of (a) establishing our principal subsidiary,
Yantai Zhongjia, as the joint venture enterprise with Yantai Mujin pursuant to the 2004 CJV Agreement
(and later Dahedong, after Yantai Mujin transferre d its interest in Yantai Zhongjia to Dahedong) and (b)
made it operational with a long history of turning a greenfield mining project to a profitable gold mining
asset; (ii) we, based on the results of the exploration works previously conducted in the Songjiagou area,
applied for and obtained a mining licence to develop the Songjiagou Underground Mine from scratch;
and (iii) developed our Songjiagou Open-Pit Mine a nd Songjiagou Underground Mine from greenfield
mining assets within the planned schedule and budget through efficient and robust project management
on the back of our strong technical capability.
Given that (i) our Executive Directors have been involved in the search process, due diligence
process and negotiation process in respect of those potential acquisitions ov er the past decade, they
continued to familiarise themselves with the comprehensive technique s in respect of acquisition over the
years and could leveraging their prior acquisition experiences to identify acquisition target and negotiate
for acquisition terms which are in the best interes ts of our Company and the shareholders as a whole;
(ii) the intention of our Group to use the same joint venture model similar to that of the acquisition of
mining rights for the Songjiagou Open-Pit Mine in 2005, and the laws and regulations on sino-foreign
joint venture of mining assets in the PRC have not changed in a materially adverse manner since then;
(iii) most of our Executive Directors have in-depth e xperiences in the mining industry of ranging from
over 14 to 38 years, and they were assisted by our strong technical team headed by Mr. Huang Yong
which has an average of more than 15 years of experience in mining operational management; and (iv)
there were not less than 14 gold mines in the Shand ong Province that fulfil certain of (ie, not all
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criteria) our acquisition selection criteria that are pote ntially available for acquisition, and if any of these
fail to meet our expectation in terms of due diligen ce results, we may expand our acquisition outside of
the Shandong Province, but still w ithin the PRC, our Directors believe that we have the industry
expertise and would be able to execute our acquisitio n strategy as contemplated without difficulties.
We will continue to be opportunistic in pursuing such inorganic growth opportunities, with a
strong focus on transactions that will be value-accretive to our shareholders. As we may be subject to
higher costs or risks when we undertake new explora tion project due to uncertainties in availability of
resources, as such, our Directors consider strategic investment in or acquisitions of suitable mining
assets to be better alternative means of rapid and effi cient expansion into new mining assets to save our
costs and time as compared to explore and develop a brand new mining asset from scratch. According to
the F&S Report, Shandong Province has abundant gold resources and well-established supply chain in
gold mining industry in China. It is the province with the largest amount of identified gold resources in
China with approximately 4.7 kt or 28.6% of total ide ntified gold resources in China in 2022. As such,
leveraging our expertise, we belie ve we are well-positioned to identif y and capture attractive acquisition
opportunities in the Shandong Provi nce to expand our mineral resources and quickly ramp up operations
of acquired mines.
Selection criteria of the acquisition targets
In terms of selection of acquisition targets, we w ill focus on high quality gold mining assets that
are strategically value-accretive to minimise the business risks of our Grou p. We consider high quality
gold mining assets being those with natural characteristic of chemical composition of the ore which has
low contents of other minerals and metal sulphides, so that the gold deposits contain minimal level of or
almost no impurities such as arsenic and carbon and has high purity of pyrites, which enable the gold to
be easily separated from the ore through a simple floatation process to achieve a high gold recovery in
concentrate at reasonably low mineral separation processing costs. We primarily focus on mines near
commencement of commercial operations with high growth prospect.
In deciding whether to acquire a particular mining asset, we also consider other factors such as
strategic value-accretion, location, licensing and compliance matters, quantum of mineral reserves and
the level of synergies that could be created by the investment. We would consider acquisition targets
that fulfil criteria including, among others, (i) w ithin Shandong Province; (ii) either open-pit or
underground mines with potential gold resources of at least 10 tonnes, and a depth of less than 1,000
metres for better economic benefits; (iii) has LoM of over five years after commencement of operations
(excluding mine construction period); and (iv) has a payback period of less than ten years. For
acquisition target that is a mine near commencem ent of commercial operations, we expect the
acquisition cost for the mining right to be high as we expect such mining a sset would have a valid
mining licence of over two years, valid land-use-right a nd related mining infrast ructure (including an ore
processing plant) ready for use.
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Proposed acquisition structure and management of the joint venture entity
We intend to establish a new sino-foreign joint venture entity in the PRC after the Listing to
acquire a controlling stake of not less than 51% of the equity interest in a mining asset so that we can
align the mining asset with our overall business strategies, utilise our management ’s existing experience
and available managerial capacity to operate it in such manner as if they were our own mining asset.
Having considered that the minin g asset may have not commenced commercial production, and therefore
may expose us to new geological, operating, financial, legal and regulatory risks, we expect that we can
diversify our risks in developing a new gold proje ct by having a joint venture partner who is familiar
with the relevant mining asset to be acquired. Specifically, we believe that such acquisition can improve
our economies of scale by shouldering a portion of our fixed expenditures.
We plan to focus on the effective integration of human resources, organisational structure and
corporate culture when integrating newly acquired m ining asset, which we believe will lead to improved
overall management efficiency and service capab ilities, thereby enhancing our local competitiveness,
eliminating excessive and unnecessary expenditures, and improving our results of operations and overall
profit margin. We anticipate that our technical tea m will be involved in handling the technical aspect of
the day-to-day operations of the newly acqui red mining asset upon completion of the mining
infrastructure and its commercial p roduction. We also intend to appoin t a manager to be stationed on the
site of the newly acquired mining asset to oversee its day-to-day operations, who will report to our
management team. We believe that by expanding our reserves through acquisitions, we will benefit from
the current PRC government policies that encourages the consolidation of mines in Shandong Province,
and such resources will be a driving force for our future growth.
Investment payback
In the event that we were able to identify gold m ining assets fulfilling the abovementioned
selection criteria, the overall bud get for the mining asset will be ap proximately RMB300 million (based
on our affordability having considered our net proceeds from the Global Offe ring and our internal
resources) largely comprises the costs of acqui ring the mining asset with a mining licence for an
appraised value of approximately RMB260 million and additional investment for the construction of
additional mining infrastructure to optimise and expand the production for approximately RMB40
million. While we intend to acquire a majority stake in t he mining asset, if the acquisition costs exceed
our abovementioned budget, we will consider acquiring a lesser stake so that the acquisition costs
remain to be within the budget.
We estimated that it takes around three years to complete the construction of mining infrastructure.
In such case, we estimated that the gold mining a sset requires five years of profit to cover the
abovementioned initial cost on the assumptions that (i) the gold price remain at approximately
RMB420.1 per gram; (ii) the mining asset has an annual gold production volume of not less than 500
kg; and (iii) the profitability of the gold mining asset is similar to that of our Group in 6M2023.
Overall, the investment payback period for us to recover our investment costs in acquiring the gold
mining assets would be estimated at approximately eight years. If we proceed to acquire a majority stake
in the mining asset, upon completion of the acquisition, the acquisition target will become a subsidiary
of our Group and its financial results will be consolidated into the consolidated financial statements of
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our Group. With our strong management team and our selection criteria, we expect that after the
acquisition target achieves com mercial operations, there will be an increase in our Group ’so v e r a l l
revenue, gross profit and net profit after tax.
Feasibility of our acquisition plan
We have planned to utilise approximately 55.0% or HK$145.6 million (RMB130.0 million) of our
net proceeds from the Global Offering and our in ternal resources for the remaining amount of our
portion of the total initial capital contribution of the joint venture entity in the aggregate amount of not
less than RMB300 million, to fund our selective acq uisitions as mentioned above step by step by 30
September 2024, as our capital con tribution for the joint venture entity to be established for such
acquisition. The following table sets out the expected timeframe to implement our acquisition plan:
By 31 January 2024
(a) Searching/identifying potential acquisition gold mines.
By 29 February 2024
(b) (i) Commence legal, financial and technica l due diligence by professional teams on the
preferred potential target reviewed by our inhouse technical team;
(ii) Commence preliminary due diligence an d feasibility study by inhouse technical team on
the potential acquisition target.
(iii) Commence negotiation with owner of the potential target; and
(iv) Establish a new entity in the PRC for the potential sino-foreign joint venture for the
acquisition.
By 31 March 2024
(c) (i) Enter into formal definitive agreement with the owner of the potential target;
(ii) Apply for the relevant regulatory app rovals, including the business licence;
(iii) First capital contribution; and
(iv) Injection of the mining assets into the new ly established sino-foreign joint venture.
By 30 June 2024
(d) (i) Second capital contribution; and
(ii) Obtain mining licence by the sino-foreign joint venture.
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By 30 September 2024
(e) (i) Third capital contribution; and
(ii) Commence operation of the mining assets by the sino-foreign joint venture.
As of the Latest Practicable Date, we had not e ngaged in any commercial negotiation or entered
into any letter of intent or agreement for potential a cquisitions. As at the Latest Practicable Date, while
our Directors have yet to identify any specific acquis ition target, formed any specific acquisition plan or
entered into any agreement with potential target, they were aware there were not less than 14 gold mines
in the Shandong Province that fulfil certain of the abovementioned selection criteria that are potentially
available. This was because, being identified by the Yantai People ’s Government as one of the key
target companies for listing, our Group was advised by the Muping People ’s Government that it had
issued a plan in June 2021 (updated in December 2021) and Yantai Zhongjia was to be one of the four
gold mining companies to acquire other gold mining resources in the Muping District (the ‘‘Integration
Plan’’).
According to the Integration Plan, among all the mining companies in the Muping District, it was
the government ’s plan to allow Yantai Zhongjia to acquire ot her gold mining assets and as a result,
Yantai Zhongjia will be one of the four consolidated gold mining companies at the end. Further, as
stated in the Integration Plan, there were 21 under ground gold mines (mining licences or companies,
including our mines) in the Muping District which are owned by private companies and state-owned
enterprises. Our Directors are of the view that th e Integration Plan has a positive implication to the
feasibility of the Group ’s acquisition plan as our Group ’s plan to acquire mining assets in Muping
District is in line with the direction of the local gove rnment policy. Among the four companies named in
the Integration Plan as the preferred gold mining c ompanies for consolidation of mining assets in
Muping District, Yantai Zhongjia is the only one company identified in the policy of ‘‘Three-year
actions plan for promoting the listing of companies ’’issued by Yantai People ’s Government in July
2021 as a key target company for listing.
On 31 August 2022, we received a letter from Yan tai Municipal Muping District Natural
Resources Bureau ( 煙台市牟平區自然資源局) in support of Yantai Zhongjia to participate in the
Integration Plan, pursuant to which the Bureau will provide preferential assistance to us to acquire gold
mines in the Muping District, including but not limited to arrange meetings with other gold mine owners
listed in the Integration Plan and facilitate the negotiation process as far as they are concerned, speeding
up the transfer of legal title on the mining assets and rectification measures in a timely manner.
Moreover, we believe our history of operating the Songjiagou Open-Pit Mine and Songjiagou
Underground Mine and making them profitable has given us an edge over the other three potential
acquirers named in the Integration Plan, representin g a strong competitive advantage and creditability of
our Group to consolidate gold mining assets in the Muping District.
We have reviewed the Integration Plan and noted that there are 14 underground gold mines that
fulfill certain or most of our acquisition selection criteria. No open-pit gold mine is identified. Further,
we were advised by Frost & Sullivan that they were ab le to identify at least 40 underground gold mines
in the Shandong Province, including the said 14 underground gold mines in the Muping District, that are
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all underground mines and have a LoM of more than five years after commencement of operations.
Among the aforementioned gold mines, we have engage d in preliminary discussions with their owners
concerning legal compliance and the operational p erformance of these mines. Additionally, we have
conducted site visits and/or background searches. Based on the understanding we have obtained so far,
we have shortlisted three underground gold mines within the Muping District, Shandong Province that
align with our criteria for selective acquisition. Ou r Directors believe that the expected timeframe for
selective acquisition is feasible primarily because the owners of the shortlisted three gold mines, upon
enquiry, are fully willing to collaborate and provide all necessary due diligence information, including
legal, financial, and business perspectives, in a timel y manner. This collaboration ensures that there are
no significant obstacles to conducting a comprehensive due diligence exercise on the target mines.
Based on this and our proven operating experience, together with the industry experience of our
Directors and our strong technical team, our Company is well-positioned to select a suitable gold mine
by 31 January 2024. Furthermore, considering that our Group will be listed on the Stock Exchange, we
believe that our Group ’s listing status will instil confidence in the owners of the gold mines as they will
be able to readily ascertain that our Group possesses substantial financial resources and is well-prepared
for the acquisition. On such basis, it is expected that the commercial negotiation process will be
proactive between our Group and the owners of the targeted gold mine by 29 February 2024. As a
result, our Directors are optimistic about completing the negotiation process and signing a formal
definitive agreement with the owners of the targeted gold mine by 31 March 2024.
In the event that none of the due diligence results of the acquisition target selected from such lists
meet our expectation, we will consider other companies in the Shandong Province as well as outside the
Shandong Province, such as Yunan, Sichuan and Gansu, that fulfil certain of the abovementioned
selection criteria, as the alternative pla ns. Leveraging our executive Directors’ and technical team ’s
experiences in acquisition of mining assets in the pas t, our proven track record of historical successful
strategic acquisition of our Songjiagou Open-Pit M ine, our established marke t position, standardised
internal control measures and extensive industrial experience, we believe we can successfully implement
our acquisition strategies and realise integration w ith the acquired mining asset. Our Directors believe
that such acquisition will complement our exis ting resources with an aim to scale up our gold
concentrate processing output, as well as to increase our gold reserves to support our sustainable growth
in the longer run.
OUR BUSINESS MODEL
We are a gold exploration, mining and processing company located at the Muping-Rushan gold
metallogenic belt, which is one of the three majo r gold metallogenic belts in Yantai city of the
Shandong Province in China. We explore and mine gold-containing ore from our two gold mines,
namely, the Songjiagou Open-Pit Mine and the Songjiagou Underground Mine, and process ore into
gold concentrate at our ore processing plant with an annual ore processing capacity of approximately
2,000 kt. We sell gold bullion of Au99.95 refined by third party smelters derived from gold concentrate
processed by us. As advised by Frost & Sullivan, the registered members of the Shanghai Gold
Exchange are typically (i) financial institutions; (ii) corporates engaged in trading of gold or gold related
products; (iii) corporates engaged in smelting bus iness and possess smelting plants to refine gold
concentrate into gold bullion; or (iv) a combination of the aforementioned. Since none of the
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aforementioned is the principal business of our Group, we have never applied and have not intended to
apply to be registered as a member of the Shanghai Gold Exchange in the foreseeable future. According
to Frost & Sullivan, a typical reason for gold mining c ompanies to register as a member of the Shanghai
Gold Exchange is to facilitate their gold smelting bus iness and/or trading activities since they have scale
and cost advantages to do so. We sell the gold bullio n to the gold smelters or their subsidiaries, who are
registered with the Shanghai Gold Exchange, for their subsequent sales on the Shanghai Gold Exchange.
Therefore, the gold smelters are our major customers who are also our subcontractors.
During the Track Record Period, there had been no change in the business focus of our Group. The
following diagram illustrates our busine ss model as at Latest Practicable Date:
Suppliers and subcontractors
Raw materials
Utilities
Equipment and machinery
Subcontracting works such as
logistics
Smelters and customers
Refining gold concentrate
into gold bullion of Au99.95
Our Group
Processing ores
into gold
concentrate
1. Supply to our
Group for mining
and processing
3. Sale of gold
bullion of Au99.95
•
•
•
•
Mining works•
•
•
Purchasing gold bullion of
Au99.95
•
2. Refining gold
concentrate into gold
bullion of Au99.95
Prior to February 2021, we outsourced a substantial portion of our mining works comprising
demolition, drilling, blasting and excavation works, refi ning and logistics works to qualified third-party
subcontractors. Since February 2021 and up to the Late st Practicable Date, we carry out substantially all
of our mining works comprising demolition, drilling, bl asting and excavation works ourselves seeking to
reduce the costs of mining but outsource all the refining and logistics works to qualified third-party
subcontractors. We take safety seriously and have tra ining programmes in place for our staff and third-
party subcontractors. All third-party subcontractor s are required to possess the requisite qualifications to
undertake the commissioned works and carry out their works according to our mine plannings and under
our supervision and inspection. For deta ils, please refer to the paragraph headed ‘‘Suppliers and
subcontractors ’’below in this section.
During the Track Record Period and up to the Latest Practicable Date, as we are not a registered
member of the Shanghai Gold Exchange for the sales of gold bullion, we sold gold bullion of Au99.95
to gold smelters (or one of the gold smelters ’ subsidiary), namely, Shandong Guoda and Shandong
Humon, whom we engaged to refine the gold concentrate processed by us and are registered with the
Shanghai Gold Exchange, for their subsequent sales on the Shanghai Gold Exchange. We entered into
separate agreements in respect of the sale of gold b ullion and procurement of refining services and
hence, all revenue derived from t he sale of gold bullion to these gold smelters and the expenses paid to
them for refining services were recognised on a gross basis. For further details, please refer to the
paragraph headed ‘‘Sales and customers ’’in this section.
During the Track Record Period, our revenu e amounted to approxim ately RMB361.0 million,
RMB247.9 million, RMB418.4 million and RMB196 .7 million, while our net profit amounted to
approximately RMB114.4 million, RMB58.7 million, RMB121.0 million and RMB52.8 million,
respectively.
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OUR MINERAL ASSETS AND RESERVES
As at 30 June 2023 and up to the Latest Practicable Date, we operated two gold mines, namely, the
Songjiagou Open-Pit Mine and the Songjiagou Unde rground Mine, located in Yantai City in the
Shandong Province. The maps below illustrate the geographical loca tions of our two operating mines
and other mining infrastructure:
5
4 1 2
6
3
Muping
2
1
2
1
1
1
1
1
5
4 1 2
6
3
Songjiagou Underground Mine
Processing Plant
Tailings Dam
Songjiagou
Open-Pit Mine
Legend
Gold Metallogenic Belt Area
Zhaoyuan-Laizhou
Gold Metallogenic Belt
Penglai Qixia Gold
Metallogenic Belt
Muping-Rushan Gold
Metallogenic Belt
Yantai
Shandong Peninsula The location of our gold mining assets and facilities
Yantai
Shandong
Peninsula
1.
2.
3.
Gold Deposit
Our major mining assets and facilities located at Muping-Rushan gold metallogenic belt in the
Shandong Province, the PRC, include:
(i) one open-pit gold mine, namely the Songjiagou Open-Pit Mine, with an area of
approximately 0.594 sq.km. and operates on various levels from 150 metres ASL to –400
metres ASL, with a permitted annual produ ction volume of 900.0 kt as at the Latest
Practicable Date; and
(ii) one underground gold mine, namely our Songjiagou Underground Mine, with an area of
approximately 0.414 sq.km. and operates on various levels from 142 metres ASL to –270
metres ASL, with a permitted annual production volume of 90.0 kt.
Our two gold mines are located in close proximity of around 400 metres from each other, and
within 4 km from our ore processing plant with an annual ore processing capacity of approximately
2,000 kt, a tailings dam and together with other ancillary facilities, which are easily accessible by
highway and are approximately 50 km from the port of Yantai. Our two mines generally operate in three
shifts per day, eight hours per shift, for 330 days per year. During the Track Record Period, our total
gold production volume was approximately 991.4 kg (or 31,874.3 ounces), 576.9 kg (or 18,547.8
ounces), 1,072.5 kg (or 34,481.7 ounces) and 472.5 kg (or 15,191.2 ounces), respectively.
Mineral Resources and Mineral Reserves
According to the SRK Report, we had total Probable Mineral Reserves, Indicated Mineral
Resources and Inferred Mineral Resources amounted to approximately 23,130 kt, 35,840 kt and 39,710
kt, respectively, as at 30 June 2023. Assuming that no new Mineral Reserves are identified, the
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Songjiagou Open-Pit Mine will have a LoM of about 8.5 years at annual production capacity of
approximately 3,300 ktpa and the Songjiagou Underground Mine will have a LoM of about 6.0 years at
annual production capacity of approximately 90 ktpa.
The following table sets forth the information on our Mineral Resources and Mineral Reserves as
at 30 June 2023 under NI 43-101, based on the SRK Report:
Mineral Resources Mineral Reserves
Asset
Resource
category
Ore
Tonnes Gold grade Gold content
Reserve
category
Ore
Tonnes Gold grade Gold content
(kt) (g/t) (kg) (koz) (kt) (g/t) (kg) (koz)
Songjiagou Indicated 34,200 1.10 37,600 1,210.0 Proven ————
Open-Pit Mine Inferred 36,700 0.95 34,800 1,120.0 Probable 22,600 1.17 26,400 849
Total 70,900 — 72,400 2,330.0 Total 22,600 — 26,400 849
Songjiagou Indicated 1,640 1.38 2,270 73.0 Proven ————
Underground Inferred 3,010 1.24 3,730 120.0 Probable 530 1.39 737 23.7
Mine Total 4,650 — 6,000 193.0 Total 530 — 737 23.7
The table below sets forth the average mining lo ss rate and the average dilution rate of our two
gold mines during the Track Record Period, which are comparable to industry average, and the
estimated LoM based on the current levels of gold production and Mineral Reserves as at 30 June 2023:
Average mining
loss rate (Note)
Average
dilution rate (Note) LoM
(%) (%) (years)
Songjiagou Open-Pit Mine 5 5 8.5
Songjiagou Underground Mine 8 11 6.0
Note: According to the F&S Report, the average mining loss rate and the average dilution rate in the PRC gold mining
industry in 2022 are 6.9% and 11.0%, respectively. In 2022, the industry average mining loss rate for open-pit
mining and underground mining in China was 5.0% and 6.9%, respectively while the industry average mining
dilution rates for open-pit mining and underground mining in China were 6.0% and 11.0%, respectively. Open-pit
mining has lower mining loss rate and lower mining dilution rate than underground mining due to the fact that it
naturally generates higher res ource utilisation efficiency than underground mining.
Our Directors confirmed that no material adverse changes had occurred with respect to our Mineral
Reserves or Mineral Resources of our mines since 30 June 2023, the effective date of the SRK Report
included in Appendix III to this prospectus, and up to the Latest Practicable Date.
As at 30 June 2023, both of our mines were and are still in production. The production scale of
our mines is governed by our mining licence, which sets out the perm itted annual production volume.
For our Songjiagou Open-Pit Mine, the permitted a nnual production volume as set out in its mining
licence has to be interpreted together with the u tilisation plan, which sets out certain technical
parameters of our Songjiagou Open-Pit Mine, including the average stripping ratio (a specific term used
in open-pit mining only). As a result, for our So ngjiagou Open-Pit Mine, the permitted annual ore
stripping volume, which refers to the volume of rocks permitted to be stripped in a year, is equivalent to
the permitted annual production volume times the average stripping ratio of 9.00 from FY2020 onwards
according to the utilisation plan as submitted by Yan tai Zhongjia and approved b y the government. The
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stripping ratio is specific to open-pit mines to acc ommodate the large amount of waste rocks inevitably
extracted with ores in the course of conducting minin g activities in open-pit mines. For our Songjiagou
Underground Mine, its permitted annual ore strippi ng volume equals to its pe rmitted annual production
volume as stated in its mining licence. Since we have reached the ores of our Songjiagou Underground
Mine through the construction of ramps and tunnels underground, stripping ratio is not applicable. The
stripping of rocks essentially refers to the processing of ores as conducted in the processing plant. As
such, the permitted annual ore stripping volume is observed by us as the limit to the volume of ores that
we can send to the processing plant for processing in a year. Ore processed volume is the volume of
ores that we send to our processing plant for processing, while ore mined volume is the volume of ores
excavated from our mining operation.
During our normal mining operation, we may produce a large amount of waste rocks. Further, we
may from time to time construct mining infrastructur e for safety and transportation purposes and as a
result, we also mined and processed ‘‘ore-rocks ’’ generated from the construction of mining
infrastructure. According to the confirmation le tter issued by Yantai Municipal District Natural
Resources Bureau* ( 煙台市牟平區自然資源局) on 17 May 2022, the authority acknowledged and
confirmed with us that the ‘‘ore-rocks ’’have relatively low gold grade and produced as a result of
constructing infrastructure such as r oads and ramps in the mining site. Such ‘‘ore-rocks ’’ are not
regarded as ore produced during our normal mining process and thus, the ‘‘ore-rocks ’’mined is excluded
when comparing with the permitted annual stripping volume. In respect of our ore processed volume,
our Group did not exceed the permitted annual ore stripping volume during the Track Record Period.
Based on the above, we confirmed that our Group h as not exceeded any permitted volume during the
Track Record Period and up to the Latest Practicable Date.
In addition to the above production restrictions under our mining licences, our productivity is also
restricted by our existing resources and mine design. We have designed our mines to enable the
maximum annual ore mined volume that can be achieved by our Group in the usual and ordinary course
of business based on our existing resources and mine structure. According to the SRK Report, the
estimated production capacity is 3,300 ktpa and 90 ktpa for our Songjiagou Open-Pit Mine and
Songjiagou Underground Mine, respectively. Such volumes refer to the optimal annual volume of ore
mined and processed to be achieved by our Group du ring the period of mine optimisation plan for our
mines.
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The following table sets forth our permitted an nual production volume, permitted annual ore
stripping volume, ore mined volume, ore processed volume and gold production volume for the period
indicated:
FY2020 FY2021 FY2022 6M2023
Permitted annual production volume
Songjiagou Open-Pit Mine (kt) 900.0 900.0 900.0 900.0
(Note 1)
Songjiagou Underground Mine (kt) 90.0 90.0 90.0 90.0 (Note 1)
Total (kt) 990.0 990.0 990.0 990.0
Permitted annual ore stripping volume
Songjiagou Open-Pit Mine (kt)
(Note 4) 8,100.0 8,100.0 8,100.0 8,100.0 (Note 1)
Songjiagou Underground Mine (kt) 90.0 90.0 90.0 90.0 (Note 1)
Total (kt) 8,190.0 8,190.0 8,190.0 8,190.0
Ore mined volume
Songjiagou Open-Pit Mine (kt) 1,499.2 960.0 1,899.2 615.1
Songjiagou Underground Mine (kt) 89.9 10.7 90.0 44.3
Total (kt) 1,589.1 970.7 1,989.2 659.4
Ore processed volume
Songjiagou Open-Pit Mine (kt) 1,500.2
(Note 3) 1,013.1 (Note 3) 1,900.9 (Note 3) 952.4 (Note 3)
Songjiagou Underground Mine (kt) 89.9 10.7 90.0 44.3
Total (kt) 1,590.1 1,023.8 1,990.9 996.7
Gold production volume
Songjiagou Open-Pit Mine (kg) 935.3 570.7 1,024.0 451.5
Songjiagou Underground Mine (kg) 56.1 6.2 48.5 21.0
Total
(Note 2) (kg) 991.4 576.9 1,072.5 472.5
Notes:
1. This is annual volume for FY2023.
2. Actual volume of gold realised after smelting.
3. The total ore processed volume from the Songjiagou Open-Pit Mine was more than its total ore mined volume in
each of FY2020, FY2021, FY2022 and 6M2023 because of ore stockpile from the previous period.
4. The permitted annual ore stripping volume is equivalent to the permitted annual production volume times the average
stripping ratio of 9.00 according to the utilisation pla n as submitted by Yantai Zhongjia and approved by the
government. The permitted annual ore stripping volume is observed by us as the limit to the volume of ores that we
can send to the processing plant for processing, as indicated by the ore processed volume.
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Our Directors confirmed that our Group ’s production activities, as in dicated by the ore processed
volume, had not exceeded any of the permitted annual ore stripping volume that would lead to over-
production as prohibited under relevant PRC laws and regulations during the Track Record Period and
up to the Latest Practicable Date.
During the Track Record Period, our gold production volume was approximately 991.4 kg (or
31,874.3 ounces), 576.9 kg (or 18,547.8 ounces), 1,072.5 kg (or 34,481.7 ounces) and 472.5 kg (or
15,191.2 ounces), respectively. During the Track Record Period, our revenue amounted to approximately
RMB361.0 million, RMB247.9 million, RMB418.4 m illion and RMB196.7 million, while our net profit
amounted to approximately RMB114.4 million, RMB58.7 million, RMB121.0 million and RMB52.8
million, respectively. The decrease in our reven ue in FY2021 was mainly due to the decrease in our
gold production volume as a result of the temporary suspension of our mining operations for the
government authority to carry out safety inspection in accordance with the requirements of the local
authorities as further elaborated in the paragraph headed ‘‘Impacts of the temporary suspension of
mining operations in FY2021 — Lower production volume and utilisation rate’’ in this section of the
prospectus below. The ore mined volume of our Songjiagou Open-Pit Mine decreased by approximately
35.2% for 6M2023 as compared to FY2022 (on an annualised basis). Such decrease was mainly
attributable to the fact that our mining activities were paused during May to mid-July 2023 to facilitate
the safety inspection on our newly constructed benches (i.e. the southern part of our Songjiagou Open-
Pit Mine). Such safety inspection was required by government for enabling us to obtain an enhanced
safety production permit and conduct mining works under +21 m ASL. While our Directors expected
that the safety inspection would be conducted and completed within May 2023, there was unexpected
delay solely due to scheduling conflicts between our Group and the designated specialists of the
government department for safety inspection. As confirmed by Muping Emergency Management Bureau,
the government body which led the safety inspection, confirmed that they did not note any material
findings during the safety inspecti on. Further, in light of the fact that our mining activities were paused
at the material time, we took the opportunity to re pair the road connecting our Songjiagou Open-Pit
Mine and our processing plant which is used by us for the transportation of ores as such repairing work
would significantly affect our transportation of ores when our Songjiagou Open-Pit Mine is in normal
operation. The road repairment was completed in the end of June 2023 and the safety inspection was
c o m p l e t e di nm i d - J u l y2 0 2 3 .A ne n h a n c e ds a f e t yp r o d u c t i o np e r m i te n a b l i n gu st oc o n d u c tm i n i n g
works under +21 m ASL was issued by the government department to us on 19 July 2023 and our
Songjiagou Open-Pit Mine resumed normal operation on the same day. In particular, the ore mined
volume in July 2023 was approximately 104 kt and that for the period from 1 August 2023 to end of
August was 205 kt, which resumed back to the range of our normal operation.
Mining rights, mining licences and other licences
As at the Latest Practicable Date, we held two va lid mining licences in the Shandong Province in
China. Our valid mining licences had a total permitted production volume of approximately 990.0 kt per
year and covered a total area of approximately 1.008 sq.km.
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The following table sets forth the details of the mining licences and the safety production permits
that we held in the PRC in respect of our mines as well as the blasting operation permit which we held
as at the Latest Practicable Date:
Validity period of
licence/permit
Licence/
Permit name
Licence/
Permit holder Area
Type of
natural
resources
Permitted
annual
mine
production
volume
Licence/
Permit number From To Status
(km
2)( kt)
Songjiagou Open-Pit
Mine
Mining licence Yantai Zhongjia 0.5937 Gold 900 C37000020090
44110010983
(Note 1)
17 May 2020 17 May 2031 Valid
Safety production
permit
Yantai Zhongjia — Gold — (2023) 06-0002 2 March 2023 1 March 2026 Valid
Blasting operation
permit
Yantai Zhongjia —— — 3706001300087 8 September
2022
8S e p t e m b e r
2025 (Note 3)
Valid
Songjiagou
Underground
Mine
Mining licence Yantai Zhongjia 0.4140 Gold 90 C37000020160
24210141314
(Note 2)
18 February
2021
18 February
2031
Valid
Safety production
permit
Yantai Zhongjia — Gold — (2022) 00-0042 12 September
2022
11 September
2025 (Note 4)
Valid
Blasting operation
permit
Yantai Zhongjia —— — 3706001300082 25 May 2022 25 May 2025 Valid
Tailings dam Safety production
permit
Yantai Zhongjia —— — (2023) 00-0117 8 December
2023
7 December
2026
Valid
Notes:
1. This mining licence was renewed in May 2020 as the validity period of the previous licence was from 17 May 2015 to 17
May 2020.
2. This mining licence was renewed in February 2021 as the val idity period of the previous licence was from 18 February
2016 to 18 February 2021.
3. This blasting operation permit was renewed in September 2022 as the validity of the previous permit was from 24 June
2021 to 11 September 2022.
4. This safety production permit was renewed in September 2022 as the validity of the previous permit was from 12 September
2019 to 11 September 2022.
We did not pledge any mining rights to secure any of our bank facilities during the Track Record
Period and up to the Latest Practicable Date. For furt her details of our bank facilities, please refer to the
section headed ‘‘Financial information — Indebtedness ’’in this prospectus.
According to the PRC Mineral Resources Law, the Regulation for Registering to Explore for
Mineral Resources Using the Block System ( 礦產資源勘查區塊登記管理辦法) and the Procedures for
Administration of Registration of Mining of Mineral Resources ( 礦產資源開採登記管理辦法), before
the exploration and mining activities relating to min eral resources can commenc e, the project company
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must first obtain the exploration licences and the m ining licences, which generally entitle the project
company to the exploration and mining rights attached to the relevant mining project. The holder of a
mining licence has, among others, the rights to engage in mining activities i n the designated area and
within the term prescribed under the mining licen ce, to conduct exploration within the designated
mining area for the purpose of their own producti on, and to set up production facilities and amenities
within the designated area, to sell the mineral pro ducts except for those minerals which are required by
the State Council to be sold to designated entities and to acquire the land use rights legally based on the
requirement of its production and construction. Therefore, as advised by our PRC Legal Advisers, no
separate exploration licence is required to be obtained as long as Yantai Zhongjia conducts exploration
within the designated mining area under its mining licences for its own production.
In May 2020 and February 2021, we successfully renewed the mining licences for our Songjiagou
Open-Pit Mine and our Songjiagou Underground Mine for a further term of 11 and 10 years,
respectively. If any of our mines have a residual Proven and Probable Mineral Reserves upon expiration
of our mining licences, we will submit a renewal application. Under the PRC laws and regulations and
as advised by our PRC Legal Advisers, if residual reserves remain after the term of the mining rights
expires, the holders of such mining rights are en titled to apply for extensions of additional terms.
Application for renewal of a mining licence must be made at least 30 days prior to expiration date. As
advised by our PRC Legal Advisers, there is no speci fic restriction or limitation on the number of times
the licences may be renewed.
Our two gold mines
Our Songjiagou Open-Pit Mine
Our Songjiagou Open-Pit Mine is a large-scale mine, which we operate through our principal
subsidiary, Yantai Zhongjia, a sino-foreign equity joint venture in which we hold 75% equity interest
and Dahedong holds the remaining 25% equity inte rest during the Track R e c o r dP e r i o da n du pt ot h e
Latest Practicable Date.
The permitted annual ore stripping volume for our Songjiagou Open-Pit Mine was 8,100.0 kt based
on 900.0 kt of permitted annual production volum e for FY2020, FY2021 an d FY2022 after we have
renewed the mining licence in May 2020 with the rev ised permitted annual production volume. The cut-
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off grade of the ore is 0.30 g/t Au. During the Track Record Period, the ore mined volume at our
Songjiagou Open-Pit Mine was approximately 1,499.2 kt, 960.0 kt, 1,899.2 kt and 615.1 kt,
respectively. Our Directors confirmed that our Group ’s production activities (as indicated by ore
processed volume) at our Songjiagou Open-Pit Mine had not exceeded any of the permitted annual
volume that would lead to over-production as prohibited under relevant PRC laws and regulations during
the Track Record Period and up to the Latest Practicable Date.
Our Songjiagou Open-Pit Mine is located at Muping-Rushan gold metallogenic belt in the
Shandong Province, the PRC, which is one of the thr ee major gold metallogenic belts in Yantai city of
the Shandong Province. It is located in the eastern part of Jiaobei Terrane and the northeast margin of
the Jiaolai Basin on the Shandong Peninsula, which is easily accessible by highway and is
approximately 50 km south of downtown Yant ai city, an important coastal city in China ’s well-
developed eastern Shandong Peninsula. It is a m oderate temperature hydrothermal filling and
metasomatic conglomerate type gold deposit, associ ated with mesothermal filling activities and followed
by alterations and metasomatism.
The geomorphology of the mining area is charac terised by gently undulating hills, and overall
topography slopes downward from west to east. The highest elevation is 140 metres ASL and the lowest
is 78 metres ASL with a relief of 62 metres.
As at 30 June 2023, at a cut-off grade of 0.3 g/t Au, our Songjiagou Open-Pit Mine has Probable
Mineral Reserves of approximately 22,600 kt at averaging gold grade of 1.17 g/t, approximately 34,200
kt of Indicated Mineral Resources at averaging gold grade of 1.10 g/t, and approximately 36,700.0 kt of
Inferred Mineral Resources at averaging gold grade of 0.95 g/t. As the plan of the mine, our Songjiagou
Open-Pit Mine will have a LoM of about 8.5 years at an annual production capacity of approximately
3,300 ktpa ore. Based on the SRK Report and projection by using discount cash flow modelling, our
Songjiagou Open-Pit Mine has a net present value of approximately RMB3,246 million at a discount
rate of 9%. Therefore, it is technically feasible and economically viable.
LoM is the shortest timeframe that the Mineral Reserves of a mine are estimated to be fully
utilised. Such calculated LoM is subject to change u nder certain circumstances. For instance, if the
annual mining volume is reduced, ind icating a decrease in the utilisation rate of the Mineral Reserves or
if Mineral Reserves are increased by upgrading our Mineral Resources via additional exploration
activities, it would take a longer time to deplete the Mineral Reserves of the mine. There are Mineral
Resources for our Songjiagou Open-Pit Mine having potentials to be upgraded to Mineral Reserves to
increase the current estimated LoM. The LoM of our Songjiagou Open-Pit Mine of 8.5 years is
estimated based on, among others, the Probable Mineral Reserves of 22,600 kt of ores as at 30 June
2023. However, this estimation has not taken into account the 36,700 kt Indicated Mineral Resources as
at 30 June 2023.
As advised by SRK, a portion of Inferred Mineral Resources, which is usually 50% to 70%, could
be upgraded to Indicated Mineral Resources through continued exploration. Furthermore, Indicated
Mineral Resources could potentially be converted into Probable Mineral Reserves (included in the
calculation of LoM) if the relevant resources are determined to be economically viable for exploitation
through certain preliminary feasibility studies. Pur suant to a preliminary study conducted by SRK, by
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modifying the final pit structure of our Songjiagou Open-Pit Mine in the future, it is viable for our
Group to economically capture additional Indicated Mineral Resource s and Inferred Mineral Resources.
As advised by SRK, it is common in the gold mining in dustry and commercially sensible for gold mines
to perform exploratory activities to ascertain the existence of economically min eable Mineral Reserves
only when the mining and exploratory activities p roceeded to a deeper level. Based on the Mineral
Resources available at the Songjiagou Open-Pit Mine and the industrial and technical expertise relating
to exploration possessed by the Group, SRK is of the view that there is substantial potential for the
Group ’s Songjiagou Open-Pit Mine to increase its LoM alo ng with the exploratory activities and further
studies to be conducted in the future.
Mine optimisation plan
The availability and stability of gold resources of our mines is of utmost importance to our
Group ’s business. Therefore, we are in the process of implementing a plan to optimise the structure of
our Songjiagou Open-Pit Mine in order to facilitate the e xtraction of Indicated Mineral Resources that
can be converted to Probable Mineral Reserves of 22,600 kt with average gold grade of 1.17 g/t within
an 8.5 year timeframe starting from 2023. We expect such plan can support the mining operations of our
Group in mid to long run.
Our Songjiagou Open-Pit Mine is a cone-shaped pit formed along with our excavation activities
according to our mining plan. The final open-pit structure is about 811 metres to the east, 787 metres to
the north and 308 metres in vertical direction. Based on the geological study of our technical team, the
Mineral Resources of our Songjiagou Open-Pit Mine is unevenly distributed and in various depths
underground. According to the SRK Report, Mineral Resources at our Songjiagou Open-Pit Mine are
found in the elevation ranges of +145 metres ASL down to –402 metres ASL. As such, it is not
technically feasible for a single pit structure, or pit shape to facilitate the extraction of all those
Indicated Mineral Resources that can be converted to Probable Mineral Reserves of 22,600 kt with
average gold grade of 1.17 g/t available at our Songjiagou Open-Pit Mine as at 30 June 2023 within the
current pit opening area if the surface boundary of the mining site is not expanded as there is no such
big drill rig, excavator or truck that can reach this d epth. Therefore, the final open-pit structure is
typically divided into horizontal layers in the form of working benches. The height of the working
benches depends on the type of deposit, the miner al being mined, and the equipment being used,
generally in the range of 12 to 15 metres. In each level, there will be roads and ramps to connect with
the next level of bench for dump trucks for ore haulage to surface. Construction of ramps connecting
each working benches is necessary so that access to different levels of benches is gained through a
system of ramps with typical widths range from 20 to 40 metres. Mining on a new level of working
benches is begun by extending a ramp downward. The open-pit structure is progressively widened by
constructing bench by bench towards the pit bottom. Such mining infrastructure allows for mining
activities to be carried out on safe mining surface area in a number of benches at any one time. It has
the advantage of less infrastructure stripping, less infrastructure investment, short construction period
and add stability of the slopes of the open pit mine. The bench is not boundless, it is constrained to the
final open-pit wall. The use of benches will be ended when all Probable Mineral Reserves are extracted
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pursuant to the mine optimisation plan. Therefor e, the lifetime of the use of each bench follows the
remaining length of the mine optimisation plan at t he construction such bench which approximates the
prevailing LoM of the mine.
Second new bench (completed)
First new bench (completed)
Pushing back to
construct bench by bench
Drilling holes
Unmined area
Not drawn to scale
Fourth new bench (active in operation)
Sixth new bench
Fifth new bench (active in operation)
Seventh new bench
Current pit bottom
Third new bench (completed)
Legend
+105 m
+117 m
–171 m
+81 m
+69 m
+57 m
+45 m
+93 m
Existing bench
(active in operation)
W
E
SN
+33 m
+21 m +21 m
+33 m
+9 m +9 m
An open-pit is gradually expanded in a few phases/stages and finally ending in the final open-pit
so that a consistent level of waste stripping volume could be maintained over the life of mine to
improve pit economics. As an industry practice, we devised and adopted a mining plan at the beginning
to form an initial pit structure (usually a smaller c one at initial stage) followed by modifications or
expansions of pit structure so that the extractions of waste rocks and ore are balanced to ensure the
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viability and sustainability of the mine developme nt process. In 2021, we have commenced the mine
optimisation plan for, among others, implementing the modification of pit structure and formulating the
future mining and production plan.
— The pit structure of our Songjiagou Open-Pi t Mine before the mine optimisation plan
Prior to the implementation of mine optimisation plan, the excavation activities of our Songjiagou
Open-Pit Mine were primarily carried out at two benches at the elevation +45 metres ASL and +33
metres ASL in 2021 and the bottom of the pit at the material time was at +21 metres ASL. The gold
Mineral Resources available at these two benches (i.e. +45 metres ASL and +33 metres ASL) and at +21
metres ASL could support our mining operations until June 2023. After the excavation work at these
mining area is completed and in the event that the m ine optimisation plan is absent, we would continue
our excavation work based on such initial pit structure, i.e. below the elevation of +21 metres ASL. As
our excavation work proceeds, the p it bottom will eventually reach –39 metres ASL, forming the final
pit structure. As confirmed by SRK, we could only capture Indicated Mineral Resources that can be
converted to Probable Mineral Reserves of approximately 8,000.0 kt below +21 metres ASL,
representing approximately 35.4% of the total 22,600 kt with average gold grade of 1.17 g/t Probable
Mineral Reserves available as at 30 June 2023 without the mine optimisation plan. Therefore, our
mining operations may become less effective as we will not be able to extract all those Indicated
Mineral Resources that can be converted to Probable Mineral Reserves.
— Implementation of the mine optimisation plan
With the full implementation of the mine optimi sation plan, the bottom of the optimised final pit
structure will eventually reach the elevation of –171 metres ASL (as compared to –39 metres ASL
without the mine optimisation plan) and capture al l remaining Indicated Mineral Resources that can be
converted to Probable Mineral Reserves of 22,100 kt (representing approximately 98.0% of as at 30 June
2023 the Probable Mineral Reserves of approximately 22,600.0 kt available at our Songjiagou Open-Pit
Mine), which is expected to facilitate our mining operation until 2031.
As part of the mine optimisation plan, we have ex tended the southern boundary of the pit opening
by about 150 metres, extending the pit opening area from 0.34 sq.km. to 0.46 sq.km. The extended pit
opening area enables us to expand the final pit structure and reach out to Mineral Resources in the
unmined areas outside the initial pit structure. Furt her, we plan to construct b enches from top down and
each with a height of 12 to 15 metres, i.e. starting from +117 metres ASL, at the expanded mining
surface area to facilitate our mining work. We initially planned to construct four new benches (i.e. first
to fourth new benches) to facilitate our mining wor k that would enable us to reach a depth of 48 metres
below the new mining surface are to support our minin g activities until June 2024. In second quarter of
2023, we have further formulated the construction of three more new benches (i.e. fifth to seventh new
benches) to reach a depth of 84 metres below the new mining surface area to support our mining
activities until June 2025. The ores contained in the rocks stripped, for the construction of these new
benches, will increase the ore stripping volume of 169 kt, 705 kt and 102 kt in 2023, 2024 and 2025,
respectively. After the construction of the new benches, the elevation of the expanded new mining area
will reach +45 metres ASL and our annual production capacity can be increased from the current annual
production capacity of approximately 2,000 ktpa to 3,300 ktpa in 2026. As concurred by SRK, such
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production capacity is considered to be the optimal production capacity that would be achievable by our
Group based on our Group ’s mining plan. In particular, our Group had already possessed the necessary
machines and equipment, for example, excavators and drill rigs to achieve such p roduction capacity. At
the material time, the expanded mining area of our Songjiagou Open-Pit Mine is expected to reach +33
metres ASL, which would provide sufficient working benches and spaces for our Group ’s excavators and
drill rigs to operate. Pursuant to our production pla n, we will then mainly focus our excavation activities
at both the new benches and at the same time conti n u et om i n eb e l o w+ 2 1m e t r e sA S L ,s c a l eu po u r
mining operation and eventually reach more gold containing Mineral Resources at a deeper level,
extracting all Indicated Mineral Resources that can be converted to Probable Mineral Reserves (i.e.
22,600.0 kt with average gold grade of 1.17 g/t available as at 30 June 2023) effectively within 8.5
years. Therefore, the lifetime of the use of benches follows the length of the mine optimisation plan of
8.5 years.
The following table sets out the commencement date of construction and the construction status of
the four new benches:
Commencement
date of construction
Status as at the Latest
Practicable Date
First bench (above the elevation of +117
metres ASL)
1 October 2021 Construction and mining
operation completed in
May 2022
First phase of second bench (between the
elevation of +105 metres ASL and +117
metres ASL)
1 January 2022 Construction and mining
operation completed in
July 2022
Second phase of second bench (between the
elevation of +105 metres ASL and +117
metres ASL)
1 August 2022 Construction and mining
operation completed in
December 2022
Third bench (between the elevation of +93
metres ASL and +105 metres ASL)
1 June 2023 Construction and mining
operation completed in
July 2023
First phase of fourth bench (between the
elevation of +81 metres ASL and +93
metres ASL)
1 July 2023 Commenced construction,
expected to be
completed in December
2023
Second phase of fourth bench (between the
elevation of +81 metres ASL and +93
metres ASL)
1 January 2024 Not yet commenced
construction, expected
to be completed in June
2024
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Commencement
date of construction
Status as at the Latest
Practicable Date
First phase of fifth bench (between the
elevation of +69 metres ASL and +81
metres ASL)
1 July 2023 Commenced construction,
expected to be
completed in December
2023
Second phase of fifth bench (between the
elevation of +69 metres ASL and +81
metres ASL)
1 January 2024 Not yet commenced
construction, expected
to be completed in June
2024
Sixth bench (between the elevation of +57
metre ASL and +69 metres ASL)
1 April 2024 Not yet commenced
construction, expected
to be completed in
December 2024
First phase of seventh bench (between the
elevation of +45 metres ASL and +57
metres ASL)
1 October 2024 Not yet commenced
construction, expected
to be completed in
December 2024
Second phase of seventh bench (between
the elevation of +45 metres ASL and +57
metres ASL)
1 January 2025 Not yet commenced
construction, expected
to be completed in
June 2025
— Benefit of the mine optimisation plan
As mentioned above, the mine optimisation plan enables us to expand our pit structure and to
capture more Mineral Resources. Our Directors noted that the resources to be captured by the optimised
final pit are Probable Mineral Reserves, which is of a relatively lower confidence level as compared to
Proven Mineral Reserves. As advised by SRK, the difference between Probable Mineral Reserves and
Proven Mineral Reserves is that the level of confidence in estimating the Proven Mineral Reserves is
relatively higher as a result of detailed exploration, sampling and tes ting conducted and comprehensive
modifying factors assessed. As further advised by SRK , detailed exploration, sampling and testing (i.e.
leading to Measured Mineral Resources) can facilitate a more precise positioning of an ore body and
estimation of grades. Such precise positioning and estimation are commonly adopted for mine with ore
body that can be easily interpreted and interpolat ed (such as a sedimentary iron deposit) or is large
enough in dimensions (such as a porphyry copper deposit) to arrange sufficient exploration works. For
Songjiagou Open-Pit Mine, its ore body is relativ ely scattered and hence, the adequately detailed
exploration, sampling and testing (i.e. leading to Indicated Mineral Resources) are appropriate for us to
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design and construct its mining infrastructure. SRK is also of the view that the risks of ‘‘overestimate of
mineral resource potential’’ and ‘‘lack of significant mineral reserves ’’are unlikely for our Songjiagou
Open-Pit Mine and hence, it is unnecessary to conduct large scale of sampling and testing or additional
exploration activities in order to further prove the existence of gold resources and hence, it is adequately
reliable for us to rely on Probable Mineral Reserve to implement the mine optimisation plan.
In addition, the enlarged mining area will enable us to scale up our excavation activity so that we
can better utilise the mining licence of Songjiago u Open-Pit Mine which was renewed in 2020 with a
revised permitted annual ore stripping volume from ap proximately 1,205.6 kt per year to approximately
8,100.0 kt per year. With the enlarged mining area and increased permitted annual ore stripping volume,
we expect that our ore mined volume will reach our optimal production capacity, as advised by SRK, of
3,300 ktpa in FY2026. As a result of the increased ore tonnage volume, it is expected that the unit cost
of production will decrease with the increased mining volume due to economies of scale and in turn, our
gold production volume and gross profit would increase in FY2026, partially offset by the depreciation
on capital expenditure to be spent on the additional mining infrastructure. From FY2027 to FY2031, the
extent of increase in ore tonnage and gross profit are expected to be greater than the prior years as more
gold containing Mineral Resources will be extracted at a deeper level. Based on the above, our Directors
are of the view, and SRK concurs that the implementation of eight-year optimisation plan is beneficial
to the Group’ s mid-to-long term business development and in compliance of the latest approved
utilisation plan to convert Indicated Mineral Resources to estimate Probable Mineral Reserves at the
Songjiagou Open-Pit Mine.
— Risk of the mine optimisation plan
Since the mine optimisation plan will primarily be conducted by stripping of rocks to modify the
pit structure which is similar to the daily excava tion activities of our Group, our Directors are of the
view that the chance of failing to implement the mine optimisation plan is highly remote. In the highly
unlikely event that the mine optimisation plan is del ayed or interrupted as a result of shortage of funding
for the construction costs, severe weather conditions or any other factors outside our controls, the net
present value of the mine will decrease. Further, the efficiency of extracting the Indicated Mineral
Resources that can be converted to Probable Mineral Reserves and gross profit will decrease.
Nevertheless, should we fail to implement the mi ne optimisation plan, we would not be completely
suspending our mining operations as we would continue our excavation work under the current pit
bottom below +21 metres ASL, where Probable Mineral Reserves of approximately 8,000 kt are located.
Future plans
In addition to the mine optimisation plan as mentioned above, we intend to carry out further
exploration works involving top to oblique drillings below ground surface and oblique drillings inside
the pit area, which in aggregate involving 26 drillin gs at various depths ranging from 0 to 550 metres
with the aggregate depth of over 6,500 metres in three phases so as to increase our gold mineral reserves
and to increase the LoM of our Songjiagou Open-Pit Mine. Please refer to the paragraphs headed
‘‘Business strategies — Further construction of mining infrastructure in accordance with our mine
optimisation plan ’’and ‘‘Business strategies — Upgrade our gold reserves to increase LoM through
additional exploration activiti es at our existing mine area ’’ in this section for further details. Upon
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Listing, our Company will comply with the relevant requirements under the Listing Rules including but
not limited to the disclosure requirements of details of exploration, development and mining production
activities and summary of expenditure incurred on the se activities under Chapter 18 of the Listing Rules
to keep our Shareholders and investors informed.
Our Songjiagou Underground Mine
Auxiliary shaft
Azimuth: 35˚
Dip: –5˚
Ramp exit
Drain hole
–80 m level
–160 m level
Auxiliary blind air shaft
Elevation –132.2 m
+49 m level
+9 m level
–40 m level
Blind air shaft
Air shaft
We operate our Songjiagou Underground Mine thr ough Yantai Zhongjia with a permitted annual
mine production volume of about 90.0 kt. The cut-off grade of the ore is 0.7 g/t Au, which is more than
two times the grade of our Songjiagou Open-Pit Mine. During the Track Record Period, the ore mined
volume at our Songjiagou Underground Mine was approximately 89.9 kt, 10.7 kt, 90.0 kt and 44.3 kt,
respectively. Our Directors confirmed that our Group ’s production activities (as indicated by ore
processed volume) at our Songjia gou Underground Mine had not ex ceeded any of the permitted annual
volume that would lead to over-production as prohibited under relevant PRC laws and regulations during
the Track Record Period and up to the Latest Practicable Date.
Songjiagou Underground Mine is also located at the Muping-Rushan gold metallogenic belt in the
Shandong Province, the PRC, which is approximately 405 metres away from our Songjiagou Open-Pit
Mine. It is a moderate temperature hydrotherma l filling and metasomatic conglomerate type gold
deposit, associated with mesothermal filling activ ities and followed by alterations and metasomatism.
Current underground production comes from the upper three levels in the mine while development
of the ramp in the lower three levels continues. Th e ramp was collared at an elevation of +80 metres and
is designed to achieve a total length of 2,265 metres in this phase of development. As at 30 June 2023,
the ramp has served six production levels at the elevations of +49 metres, +9 metres, –40 metres, –80
metres, –120 metres, and –160 metres. As at 30 June 2023, the ramp has advanced a total of 2,265
metres down to the –160 metres level. Each level is accessed by a 3.5 metres diameter fully serviced
s h a f tt h a tw a ss u n kt o–185 metres.
Horizontal roadway has been advanced 1,952 metres at level +49 metres, 3,094 metres at level +9
metres, 4,891 metres at level –40 metres, 45 metres at level –80 metres and 1,092 metres at level –160
metres. Underground mining operations are highly mechanised and include high efficiency, rapid-
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penetrating, hydraulic jumbo drills for development work, rotary drilling equipment employing extension
steel for inclined medium and longer holes, 20 tonne dump trucks for ore haulage to surface via the
ramp, and electric scrapers to facilitate ore recovery and loading in work areas.
Ventilation is provided by high capacity axial f ans through air ducts secured by hangers on the
side of mine passageways, while compressed air and water are introduced to the mine through metal
pipes sized to accommodate fluctuating demand. Pu mping stations have been installed underground to
deal with water inflows, which are common in most underground mines — and the lifting system for the
service shaft utilises a multi-rope friction hoist wi th dual cages for transporting miners and their gear.
As at 30 June 2023, at a cut-off grade of 0.7 g/t Au, our Songjiagou Underground Mine has
Probable Mineral Reserves of approximately 530.0 kt at averaging gold grade of 1.39 g/t, approximately
1,640.0 kt of Indicated Mineral Resources at averaging gold grade of 1.38 g/t, and approximately
3,010.0 kt of Inferred Mineral Resources at averaging gold grade of 1.24 g/t. After taking into account
our Group’ s current production capacity, our Songjiagou Underground Mine will have a LoM of about
6.0 years. Based on the SRK Report and projection by using discounted cash flow modelling, our
Songjiagou Underground Mine has a net present val ue of approximately RMB85.0 million at a discount
rate of 9%. Therefore, it is technically feasible and economically viable.
Future plans
As the current underground production is coming from the upper three levels up to –160 metres
ASL, we will continue to develop and co nstruct the lower three levels up to –270 metres ASL as
permitted under the mining licence. As at the La test Practicable Date, we had no plan to carry out
further exploration activities at our Songjiagou Underground Mine. Upon Listing, our Company will
comply with the relevant requirements under the Listing Rules including but not limited to the
disclosure requirements of details of exploratio n, development and mining production activities and
summary of expenditure in curred on these activities under Chapt er 18 of the Listing Rules to keep our
Shareholders and investors informed.
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OUR OPERATIONS
Overview
Our production process involves three major steps: (i) mining (both open-pit and underground
mining); (ii) ore processing, which in turn includes crushing, grinding and floatation; and (iii) gold
refining, which we outsource the refining of gold concentrate into gold bullion of Au99.95 to
Independent Third Party smelters. The following chart illustrates the major steps of our production
processes. In general, the period from extracting the ores from our mining operations to production of
our finished products in the form of gold bullio n of Au99.95 is approximately three weeks.
Generally 17 to 23 days
Mining
Raw ore
Gold concentrate
Gold
bullion of
Au99.95
Primary crushing
Secondary crushing
Subcontractor to
refine gold
concentrate
Grinding
Floatation
Generally 2 days
Generally 1 day
Generally
3 weeks
(Generally twice a month)
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The flowchart below illustrates our mining operations to the production of gold concentrate
p r o c e s s e db yu s :
ROM Stock Pile ROM Hopper
Front-end Loader
Crushing Circuit
Flotation Circuit
Grinding Circuit
Primary Jaw
Crusher
Buffer Bins
Secondary
Cone Crusher
Tertiary Cone
Crushers
Crushed Ore Silos
Vibrating
Screens
Heavy Duty Ore Feeder
Ball Mill
Double-spiral
Classifiers
Ball Mill
Floatation Cells
Concentrate
Thickener
Floatation Cells
Ceramic Filter
Gold Concentrate
Concentrate Pump Tailings Pump
Conditioning Tank
Tailings to tailing dam
Belt Conveyor
Our main production facilities include one open-pit mine, one underground mine, an ore processing
plant and other ancillary facilities such as a tailings dam.
Mining
We conduct our mining activities systematically and implemented gold grade control and
production management using geostatistics applicat ions. Before drilling and blasting activities to be
carried out for our mining operations, we incorporate geostatistics into a mix of mining methods (such
as drilling, blasting, loading and transportation method for Songjiagou Open-Pit Mine and shrinkage
stope and cut-and-fill mining method for Songjiagou Underground Mine) to help select and identify
higher gold content orebody to be extracted based on ground conditions and localised thinning of the
veins in our mining sites to improve our resource qu ality while controlling the extraction volume. As a
result, we can ensure a stable grade of ore is being extracted and fed into our ore processing plant for
our ore processing operations.
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Our Songjiagou Open-Pit Mine
The flowchart below illustrates our mining oper ations using the conven tional drilling, blasting,
loading and transportation metho d at our Songjiagou Open-Pit Mine:
Grade control and
planning
Blasting hole
design
Blasting hole
layout Drilling hole
Survey-divide
the ore and
waste
Muck pile Blasting
Ore processing
mill
Hole charging
Loading by ore
or waste zone
Loading and
transportation Tailing dam
We carry out open-pit mining at our Songjiagou Open-Pit Mine using conventional mining
methods of drill-blast-load-haul mining cycle to exploit rocks within the pit. We drill ore body by high
air-pressure drill rigs, break ore body through blasting, excavate raw ore by hydraulic excavators and
transport raw ore to the ore processing plant by trucks. Tailings from our ore processing plant are
contained at our tailings dam. Our ore processing plant and tailings dam are located in close proximity
of about 4 km away from our Songjiagou Open-Pit Mine.
Our Songjiagou Open-Pit Mine is a producing open-pit, generally operates approximately eight
hours per shift, three shifts per day, 330 days per year.
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Our Songjiagou Underground Mine
The flowchart below illustrates our mining opera tions using the upward cut-and-fill mining and
shrinkage stope mining at our Songjiagou Underground Mine:
Geological
exploration
Geology model
building Mining design Mine
development
Ventilation Drilling hole Stope engineering
prepared/Cutting
Ore removal Filling mined
area Finished the
Stoping
Waste rock
Loading
Transportation
Ore processing
Ore
Tailing dam
Tailings
Blasting
We carry out underground mining at our Songjiagou Underground Mine, which is mainly accessed
through an access ramp, six haulage ways and a verti cal auxiliary shaft. Off-road dump trucks are used
to move both ore and wastes to surface along the haulage way and the access ramp. The mining methods
include upward cut-and-fill mining where the recovery of ore starts from the bottom undercut, advancing
upward vertically and shrinkage stope mining whe re pillars with high grade of ore are recovered, while
pillars with low grade gold is left permanently. Sam e drilling, blasting and ventilation are applied for
both mining methods and rely on cemented paste fill or cemented rock fill to support the stoping
operation. We excavate raw ore by hydraulic excavators and transport raw ore to the processing plant by
trucks.
We employ a mix of mining methods which are base d on mining and geological conditions that are
expected to be quite variable. Where warranted by gr ound conditions, mined out areas will be backfilled
with tailings which, in addition to providing good ground support, reduces output into the surface
tailings disposal area.
Our Songjiagou Underground Mine is a producing underground mine, generally operates eight
hours per shift, three shifts per day, 330 days per year. Hauling of ore along the access ramp operates
one shift per day. The production capacity is 90 ktpa of ore during the Track Record Period.
Prior to February 2021, we outsourced substantially all of the mining works comprising
demolition, drilling, blasting and excavation works at our Songjiagou Open-Pit Mine and Songjiagou
Underground Mine to third-party subcontractors, namely, 遼源卓力化工有限責任公司 (Liaoyuan Zhuoli
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Chemical Industry Co., Ltd*) (‘‘ Liaoyuan Zhuoli ’’)a n d 山東章鑒礦山工程有限公司 (Shandong
Zhangjian Mining Engineering Co., Ltd*) ( ‘‘Shandong Zhangjian ’’). The subcontractors worked under
the supervision and management of our in-house onsite engineers. They were required to carry out their
work according to the project design and production plan and in accordance w ith the applicable safety
and environmental protection requirements under the PRC laws and regulations. Any loss and liability
that arise in respect of material safety incidents shall be borne by the party who is responsible for such
incidents. For details of the mining works performed by our subcontractors, please refer to the paragraph
headed ‘‘Suppliers and subcontractors — Subcontractors — Mining activities ’’in this section. Since
February 2021 and up to the Latest Practicable Date, we carry out such mining works ourselves (except
for certain blasting engineering works in respect of our Songjiagou Underground Mine which we
continued to subcontract to Independent Third Party subcontractor until July 2022), seeking to reduce
the costs of mining. Since we carried out the aforementioned mining works ourselves, the percentage of
direct labour costs and subc ontracting costs to sales (excluding the effect of increase in average selling
price of gold bullion) decreased from approximately 11.5% for FY2020 to approximately 9.5% for
FY2021, representing an increase in gross profit margin of approximately 2.0% and net profit margin of
approximately 1.5%. We also lease certain drillin g equipment from an Independent Third Party.
Ore processing
The ore deposit from our mines has low level of or almost no impurities such as carbon and
arsenic and has high purity of pyrites. As such, the ore is amenable to a simple floatation process for
mineral separation to achieve a high gold recovery in concentrate at reasonably low mineral separation
processing costs, which allows us to effectively manage and control our operating costs. We have a
complete set of ore processing fac ility with an annual ore processing cap acity of approximately 2,000 kt,
comprising a plant with the capacity of 6.0 kt pd, a tailings dam and other ancillary facilities.
The ore processing plant is located on the industrial site, about 4 km southeast of our Songjiagou
Open-Pit Mine. The plant with the capacity of 6. 0 ktpd was put into operation in May 2011, which
consists of one crushing series and two identical grinding floatation series.
Crushing Circuit
The crushing circuit includes a ROM stockpile , a coarse crushing circuit, a medium and fine
crushing circuit, and a screening circu it. The crushing process is a traditional ‘‘three-stage crushing with
one closed circuit’’ , and ore less than 1,000 mm is crushed to achieve 80% less than 12 mm.
Ores mined from both our Songjiagou Open-Pit Mine and Songjiagou Underground Mine are
transported to the ROM stockpile at the ore processing plant by trucks, and fed into the ROM hopper by
the front-end loader. Ores are then fed into a jaw crusher for primary crushing (or coarse crushing), and
then fed into a secondary cone crusher for fine crushing through belt conveyors. Ores discharged from
the secondary crusher are screened at the screening workshop. Oversize materials are transported to the
buffer bins by third belt conveyor for tertiary crushi ng which will then be transported to the screening
workshop again for screening. Undersize mater ials which are 80% less than 12 mm are sent to the
grinding circuit by the fourth belt conveyor.
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Grinding circuit
The grinding circuit consists of two crushed or e silos, two grate ball mills and two double-spiral
classifiers grinding the crushed ore to obtain 50% less than 75 μm .T h ec r u s h e do r ei ss e n tt ot h e
crushed ore silos after screening. The crushed ore in the silo is fed onto the fifth belt conveyor and sent
to the ball mill. The floatation pH adjuster lime is evenly added to the material stream on the fifth belt
conveyor and the ore discharged from the ball mill is fed into the spiral classifier for classification. The
return sand from the classifier is sent back to the mill for re-grinding. The overflow fineness of 50% less
than 75 μm flows into the floatation circuit by itself.
Floatation circuit
The floatation circuit includes a conditioning tank and a row of floatation cells. The overflow from
the spiral classifier flows into a conditioning tank by itself. Water is added to the particles to form a
slurry and the slurry is pumped to a series of floata tion machines for the extraction of gold concentrate.
After mixing with the floatation reagents, it then ente rs into the floatation circuit consisting of a row of
floatation cells to produce gold concentrate and ta ilings. Chemicals are added to the slurry, and air is
added to the bottom of the thickening pond and rises through the slurry. Chemicals added to the slurry
attach themselves to the metal-bearing ore and to the passing air bubbles and float to the top of the
pond, where they form a gold concentrate froth. This gold concentrate froth is then collected and fed to
the dewatering circuit.
Dewatering
The dewatering circuit primarily contains a concentrate thickener and two ceramic filters. The gold
concentrate froth from the floatation circuit is pumped into a concentrate thickener, with its overflow
used as return water and the underflow fed into the ce ramic filter. The filter cake has a moisture content
of less than 8% forming the gold concentrate and is stored in the warehouse.
Our ore processing process is designed to be environmentally friendly. In addition, the water
discharged from the ore processing plant is recycled for ore grinding. Therefore, the ore processing plant
does not discharge wastewater. We have also adopted the technology of pressure filtration and dry
heaping of tailings, which reduces the size of tailings and demand for fresh water. For further details,
please see the paragraph headed ‘‘Environmental, social and governance — Our environmental, social
and climate-related risks and opportunities — A. Environment — Environmental protection ’’in this
section.
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Our ore processing facility
Our integrated ore processing facility comprises one mill to process the ores mined from our
Songjiagou Open-Pit Mine and Songjiagou Underground Mine. Our ore processing plant has a total
surface area of approximately 0.9 ha. The total designed ore processing capacity of our ore processing
facility amounted to approximately 2,000 ktpa (or 6.0 ktpd) as at 30 June 2023.
The following table sets forth the details of our ore processing facility;
Ore processing
facility
Designed ore
processing
capacity Description
(ktpd)
Mill with a capacity of
6.0 ktpd
6.0 Gold concentrate is produced after processing and
delivered to third party smelters. Such ore
processing plant is leased from Dahedong, a
minority shareholder of Yantai Zhongjia and a
connected person of our Company. Since we funded
the costs of construction of such processing plant,
there was no rental payable for such lease.
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Utilisation rate
The table below sets forth the utilisation rate a nd volume of ore processed at our ore processing
plant with a capacity of 6.0 ktpd:
FY2020 FY2021 FY2022 6M2022 6M2023
Ore
processed
Utilisation
rate (Note)
Ore
processed
Utilisation
rate (Note)
Ore
processed
Utilisation
rate (Note)
Ore
processed
Utilisation
rate (Note)
Ore
processed
Utilisation
rate (Note)
(kt) (%) (kt) (%) (kt) (%) (kt) (%) (kt) (%)
Mill with a capacity of
6.0 ktpd 1,590 80.3 1,024 51.7 1,991 100.6 1,001 50.6 997 50.3
Note: Utilisation rate is calculated by dividing volume of ore processed for each period by the designed annual processing
capacity of the same period, which is calculated based on our designed ore processing capacity per day assuming we
operate 330 days per year. Our utilisat ion rate in FY2022 exceed ed 100% because the actu al working days of our
processing plant in that year surpassed the theoretical designed 330 working days per annum or equivalent to a
processing capacity of 1,980 ktpa.
The utilisation rate of our ore processing plant decreased from approximately 80.3% in FY2020 to
approximately 51.7% in FY2021 because of the Temporary Operation Suspension as mentioned above.
For further details, please r efer to the paragraph headed ‘‘Impacts of the temporary suspension of mining
operation in FY2021 — Lower production volume and utilisation rate’’ in this section. The utilisation
rate of our ore processing plant increased from approximately 51.7% in FY2021 to 100.6% in FY2022,
as we operated in the ordinary and usual circumstances in absence of the Temporary Operation
Suspension such as that affected our operations in FY2021. The utilisation rate of our ore processing
plant remained relatively stable at approximately 50.6% in 6M2022 and 50.3% in 6M2023. We expect to
maintain maximum utilisation rate of 100% when we c omplete the additional construction of mining
infrastructure in accordance with our mine optimisation plan at our Songjiagou Open-Pit Mine by
expanding the mining surface area by about 150 metres south of its boundaries, as further elaborated in
the paragraph headed ‘‘Business strategies — Further construction of minin g infrastructure in accordance
with our mine optimisation plan ’’in this section.
Gold recovery rate and feed grade
The gold recovery rate of our ore processing plant was over 94.6% during the Track Record Period
at a feed grade of 0.70 g/t Au, 0.62 g/t Au, 0.62 g/t Au and 0.54 g/t Au, respectively, which is slightly
higher than the industry ’s average of around 93.1% in 2022. This was attributable to our effective gold
grade control and processing efficiency as we have a higher level of resource utilisation and less wastage
of resources to reduce environmental pollution. Our feed grade was higher than our cut-off grade of 0.30
g/t Au from our Songjiagou Open-Pit Mine mainly due to the increase in the grade and purity of the
surface materials processed from our Songjiagou Open-Pit Mine and relatively higher cut-off grade from
our Songjiagou Underground Mine of 0.70 g/t Au since its commencement of commercial production in
September 2019. The decrease in feed grade for 6M2023 was mainly attributable to the fact that the gold
grade of ores extracted in the newly constructed benches was relatively lower.
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Production machinery and equipment
Main production machinery and equipment that we use at our ore processing facility include ball
mills, belt conveyors, mixing drum, ceramic filter, cr ushers, heavy-duty ore feed er, floatation machine
and submerged pump. We own a majority of the machinery and equipment necessary for our processing
operations. Main mine equipment on site includes drill rigs, excavato rs, truck, loader and bulldozer. We
have sufficient equipment to support our production capacity of 3,300 ktpa of ore as we also lease
certain mine equipment from an Independent Third Party. We purchase most of our machinery and
equipment at our mines and ore processing plant through a selective tendering process. During the Track
Record Period, we utilised intern al resources of approximately R MB2.0 million, RMB20.5 million,
RMB12.2 million and RMB4.3 million to purchase produ ction machinery and equipment, respectively.
As at 30 June 2023, the carrying value of our plant a nd machinery was approximately RMB94.9 million
or approximately 29.6% of the total carrying value of our property, plant and equipment as at 30 June
2023. As at 30 June 2023, the average remaining useful life of our main ore processing and mining
machinery and equipment was 7.7 years and 4.2 years, respectively.
Minor maintenance and repair works of our machinery and equipment are generally conducted by
our in-house mechanics periodically. For complicated maintenance and repairs of our machinery and
equipment, it will be conducted by external vendors, on an as-need basis. The average scheduled
downtime for maintenance and repair works per equipment ranged from one day to five days depending
on the complexity of the repair and maintenance works. The plant and machinery are either depreciated
over five to 20 years on a straight-line basis or based on production volume.
Tailings
Tailings have been sent to the tailings dam which is located in a valley 2 km southeast from our
ore processing facility. The tailings dam was designed as a valley type, and was completed and put into
use in October 2011. In December 2014, we carried out a capacity expansion to rebuild or expand the
original tailings dam consisted of an initial dam, a final stockpiling dam, a floo d discharge system of the
tailings dam area, a return water system, observa tion system and management system. The expanded
tailings dam elevation is +160 metres in total with the total storage capacity of approximately 42.2
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million m 3 and an effective storage capacity of approximately 30.0 million m 3 in total. After expansion,
the tailings dam is a third-class storage facility and h as the capacity to support 10 years of production at
current throughput as of 30 June 2023.
The tailings of the ore processing plant are pumped to the tailings main dam through the tailings
pump station in the ore processing plant, and the tailings conveying main pipe is laid along the axis of
the tailings dam. The slurry branch pipe is laid perpe ndicular to the main pipe with a horizontal interval
of 20 metres. The branch pipe is laid along the dam slo pe in the tailings dam. The alternately distributed
and evenly discharged ore along the axis of the dam is adopted to maintain the uniform rise of the dam
body. After filling up, the main pipeline is elevated, and then the next-level sub-dam will be piled up.
Safety monitoring facilities
In accordance with the design and safety mana gement requirements, the tailings dam has
established a sound safety management system w ith an online monitoring system, including a dam
displacement monitoring system, an saturation lin e monitoring system and a safety warning facility. The
tailings dam is well constructed, managed and operated, and has acquired a saf ety production licence
from the government safety supervision agency.
We keep the gold concentrate we produce in the storage facilities located at our processing plant
with access restricted to authorised persons. The sto rage facilities are guarded by our own security team,
and the storage facilities are equipped with stringent security systems.
Explosives supply and management
Two explosive magazine (including one which is 40-tonne) have been constructed on the mines to
store explosives. According to the production plan, the required blasting materials are applied for by our
Group, and were delivered to the explosive mag azine by the Suppliers. Onsite blasting can only be
performed under the supervision of policies. During the Track Record Period and up to the Latest
Practicable Date, we procured explosive s from Independent Third Party suppliers.
Laboratory
We have a laboratory on site within close proximity to our ore processing plant. It has a complete
set of equipment and instruments for sample preparation, fire assay and volumetric analysis, which can
fully meet the daily production testing req uirements of the ore processing plant.
Water supply
Water for the industrial use is extracted from the Rushan River, which flows by 2 km east of our
production site, which we have obtained the approval from the local Department of Water Resources in
May 2017 to use approximately 465,000 m
3 of water per annum. A pump station on the bank of
Songjiagou River, Jincheng Village , about 2 km west of the ore processing plant, supplies water for the
plant ’s production demand. Water for domestic use is s ourced from a local ground well. According to
the SRK Report, the water supply is adequate to support mine ’s production.
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Our ore processing plant has two 1,230 m 3 concrete head tanks (15 metres in diameter and 7
metres in height): one is for storing new water from the Rushan River, which is mainly used for
production supplementation, ground washing, dust s uppression and fire protection; the other is for
storage of ore processing return water, with return water utilisation rates ranging from 80% to 85%. A
water pumping station is built on the bank of the S ongjiaohe River near Jincheng Village, which is 2 km
southeast from the ore processing plant, and the river water is pumped to the new water head tank
through pipelines. The clarified water from the tailings dam is diverted through the culvert to the valley
between the tailings dam and the ore processing pl ant. A dam is built at the valley mouth next to the
plant to form a small reservoir, which stores a la rge amount of tailings clarified water that is then
pumped to the return water head tank of ore processi ng plant. The unfiltered water from the tailings dam
is directly pumped back to the return water head tank through the return water tank at dam toe. The
concentrate unfiltered water and ground washing wa ter of the ore processing plant are pumped back to
the return water head tank after sedimentation and cl arification in the ore processing plant settling tank.
During the Track Record Period and up to the La test Practicable Date, we did not discharge any
wastewater from our gold mining and ore processing operations, nor were we required to pay a fee for
discharging wastewater. During the same perio d and up to the Latest Practicable Date, we did not
experience any material interruption in o ur operation as a result of water shortage.
Power supply
Electricity for the mines is supplied by the lo cal 10 kV electricity power line and by 120 kW
diesel generators on standby. Electricity for the ore processing plant is sourced from the 35 kV/10.5 kV
substation in Dahedong Village, W anggezhuang Town, 5 km away from the mines, and delivered over
dedicated lines. The voltage of the substation is flexible and can be switched to 10 kV, 6 kV or 380
volts as required by the mines. According to the SRK Report, the power supply is adequate to support
the mine production.
Our mining and ore processing processes involve the consumption of a substantial amount of
electricity and hence, an uninterrupted and stable s upply of electricity is crucial to our business and
operations. During the Track Record Period, our total electricity consumption was approximately 47,182
MWh, 28,336 MWh, 44,212 MWh and 22,209 MWh, respectively and our electricity costs were
approximately RMB30.0 million, RMB16.4 m illion, RMB33.8 million and RMB17.1 million,
respectively, accounted for approximately 18.1%, 15.2%, 16.9% and 16.4% of our cost of sales in the
same periods. We had entered into an agreement with Supplier A, a local electr icity supply provider to
procure electricity for the operation of our Songjiagou Open-Pit Mine and Songjiagou Underground
Mine. The price is promulgated by the PRC government. The contract is generally for five calendar
years.
During the Track Record Period and up to the Latest Practicable Date, our Directors confirmed that
we did not experience any material interruptions in our operations due to power shortages or outages.
However, since September 2021, our Group had to comply with the power restriction policy imposed by
the PRC government aiming to reduce energy consumption across China, and in Shandong province and
other north-eastern provinces in the PRC. As a res ult, the possibility of power outages or prolonged
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power shortage in electricity supply would impose an inherent risk to our business and operation, our
Directors would monitor the situation and consid er the need to enhance the capacity of our power supply
system if necessary.
We believe that there are no material difficulties in securing the supply of water and electricity for
our operations. For details of the risks associated with the power supply or processing water, please see
the section headed ‘‘Risk factors — Risks relating to the business operations of our Group — We may
not be able to maintain the provision of adequate and uninterrupted supplies of electricity, water,
materials and equipment at commercially accepted prices, or at all ’’in this prospectus.
Transportation
Gold mines Ore processing plant Smelters
Our transportation consists of two main stages: (i) raw ore is transported by trucks from our two
mines to our ore processing plant, for which Independent Third Party subcontractors are responsible; and
(ii) gold concentrate is picked up and transported from our ore processing plant to the smelters by the
smelters. The gold concentrate is transported by road. Our mines and ore processing plant are served by
well-established and connect ed infrastructures of roads.
Logistics subcontractors are responsible for transportation of ore and smelters are responsible for
transportation of gold concentrate and they are generally insured by insurance policies taken out by
them. Our Group considers that such logistics service providers can be replaced with other logistics
service providers offering similar services with similar terms and fees. Our Directors have confirmed
that our Group had not experienced any material shortage of transportation capacity during the Track
Record Period. For further details, please see the paragraph headed ‘‘Suppliers and subcontractors —
Subcontractors — Logistics’’ in this section.
Third party smelters
We generally notify the smelters when the gold conc entrate is ready to be delivered to the smelters
located in the Shandong Province from our ore processing plant twice every month. The two smelters
we engaged during the Track Record Period are one of the largest precious metals smelters in the
Shandong Province. We have over 10 years and five years of business relationships with them, namely,
Shandong Humon and Shandong Guoda.
At the point that the gold concentrate is picked up at our ore processing plant, all the risks related
to the gold concentrate are transferred to the smelters. They also bear the costs of transportation and
insurance of the gold concentrate following their receipt.
Before our gold concentrate leaves our ore processing plant to be transported to the Independent
Third Party gold smelters, our responsible staff an d representatives from the third-party gold smelters
weigh the gold concentrate on-site using weighing scales that meet the PRC national standards, and
samples are also taken by both parties from each batch of gold concentrate to confirm the gold content
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of our gold concentrate. An extra sample is kept for further assaying if necessary. In general, the
assaying of the gold concentrate takes around four to seven days after pick-up from our ore processing
plant. In case of any material discrepancies in the gold content of our gold concentrate, a third-party
laboratory will be engaged to conduct a further assay, the result of which will be final and conclusive.
After that, it generally takes around one day for the gold smelters to refine our gold concentrate into
gold bullion of Au99.95. During the Track Record Period and up to the Latest Practicable Date, as we
are not a registered member of the Shanghai Gold E xchange for the sales of gold bullion, we sold gold
bullion of Au99.95 to such gold smelters (or one of the gold smelters ’ subsidiary) who are registered
with the Shanghai Gold Exchange, for their subsequent sales on the Shanghai Gold Exchange. For
further details, please refer to the paragraph headed ‘‘Sales and customers ’’in this section.
In general, the Independent Third Party gold smelters charge us a refining fee according to the
tonnage of our gold concentrate. Additional charges will be incurred or the delivery rejected, if certain
deleterious elements are identified in excessive quantities by the gold smelters. As confirmed by our
Directors, this had not happened during the Track Record Period. Each of the gold smelters is an
Independent Third Party and our Directors confirmed there has been no dispute or disagreement with the
gold smelters during the Track Reco rd Period. For further details of the salient terms of the refining
contracts with the Independent Third Party gold smelters, please refer to the paragraph headed
‘‘Suppliers and subcontractors — Subcontractors — Refining works ’’in this section.
SALES AND CUSTOMERS
Our principal product is gold bullion of Au99.95. We believe our sales volume is largely
dependent upon our production volume. During the Track Record Period, our sales volume of gold
bullion of Au99.95 amounted to approximately 987.4 kg (or 31,745.6 ounces), 645.5 kg (or 20,753.3
ounces), 1,084.9 kg (34,880.3 ounces) and 468.1 kg (15,049.8 ounces), respectively, and the average
selling price for our gold bullion was approximately RMB365.6 per gram, RMB384.0 per gram,
RMB385.7 per gram and RMB420.1 per gram, respec tively. In line with the industry practice in the
PRC, we generally do not engage in marketing ac tivities and we do not expect to incur significant
marketing expenses in the future. According to the F&S Report, the demand for gold in the PRC is
expected to reach approximately 1,227.6 tonnes in 2027, while the supply of gold in the PRC is
expected to be approximately 897.1 tonnes. As such, our Directors believe that there would be sufficient
demand on the gold bullions produced by us in the foreseeable future.
According to the website of the Shanghai Gold Exchange, the Shanghai Gold Exchange had 289
registered members as at the Latest Practicable Date . Due to limited space available for membership, it
is difficult to be admitted as a member of the Shanghai Gold Exchange if there is no vacancy. As we are
not a registered member of the Shanghai Gold Exchange, during the Track Record Period, all of our
gold bullion of Au99.95 was sold at an agreed pric e with reference to the prevailing Au (T+D) spot
price as quoted on the Shanghai Gold Exchange to the two Independent Third Party gold smelters,
namely, Shandong Guoda and Shandong Humon, who refine gold concentrate produced by us, purchase
from us the gold bullion refined for their subsequent sales on the Shanghai Gold Exchange. Despite such
practice, it is not mandatory for us to sell to Sh andong Guoda and Shandong Humon the gold bullion
refined by them under our arrangement with them.
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(a) Refining and sales processes
Before refining, the weight, gold grade and agreed recovery rate of each batch of gold concentrates
delivered to smelters are recorded. Such information enables our sme lters and us to calculate the amount
of gold bullion to be generated from each batch of gold concentrates delivered. M onthly smelting report
capturing these information would be provided by Shandong Guoda and Shandong Humon to us for
monitoring the amount of gold bullion availabl e for sale. As confirmed by Shandong Guoda and
Shandong Humon, for the refining of a batch of gold concentrates received from mining companies, they
return the amount of gold based on a theoretical am ount calculated by multiplying the weight of gold
concentrates with the gold grade of such batch of gold concentrates and the applicable gold recovery
rate. In other words, the smelters would always deem that the applicable gold recovery rate would be
met during their refining process. In particular, the gold grades of gold concentrates are agreed by both
parties based on sample testing results or based on the umpired results.
The gold recovery rates are set out in the refining service agreement, which in general increase
with gold grade. When the smelters devise the applicable gold recovery rates, they have already
considered their refining capability and efficiency to ensure the amount of gold produced would not be
less than the theoretical amount to be produced from a batch of gold concentrates and at the same time
balancing their market competitiveness. If the actua l amount of gold produced is less than the theoretical
amount, it is typically caused by the failure in the smelters ’ refining process instead of the quality of the
gold concentrates supplied by mining companies. H ence, the smelters should bear the loss if the agreed
gold recovery rate is not achieved, instead of the mining companies. There was no discrepancy in gold
recovery rate during the Track Record Perio d and up to the Latest Practicable Date.
We typically make settlement in respect of smelt ing services provided by smelters on a monthly
basis. After refining, the gold bullion produced is kept at our smelters (who are also our customers on
group level) instead of transferring back to us to avoid any risks arisen during transportation process. As
confirmed by Shandong Guoda and Shandong Humon, they would not charge us and other gold mining
companies any storage or safe keeping fees for gol d bullion at their premises which is in line with the
industry practice. Nevertheless, we understood from our smelters that since our gold concentrates are
processed by them in bulk together with gold concentrates from their other customers, they are unable to
confirm with us the amount and volume of gold bullion that was solely refined from our gold
concentrates but not from any other of their customers. As such, we record the amount and volume of
the gold concentrate delivered in our inventory acc ount. Once we deliver gold bullion to our customers
and confirm the quantity, we recognise the corresponding amount of gold concentrate as our cost of
sales and the sales amount of gold bullion as our revenue. As at 31 December 2020, 2021 and 2022 and
30 June 2023, our gold concentrates in our invent ory account of approxima tely RMB11.9 million,
RMB2.6 million, RMB0.8 million and RMB1.3 m illion were delivered to our smelters and the
corresponding sales amount of gold bullion represented approximately 8.7%, 2.6%, 0.4% and 1.7% of
our annual sales volume for FY2020, FY2021, FY2022 and 6M2023, respectively.
When we decide to sell our gold, we will place a sales order to our customers. We will give sales
order to our customers after consid ering various factors, including (i) the prevailing Au (T+D) spot price
as quoted on the Shanghai Gold Exchange which is dir ectly related to our revenue; (ii) expected future
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trend of market price of gold; (iii) our production cap acity to ensure our Group could fulfil the relevant
sales orders within a reasonable time; and (iv) the e xpected gross profit margin to be realised from such
sales price. We may place sales orders prior to havi ng the respective amount of gold bullion on hand,
i.e., prior to the smelting services provided by smelte rs. Our sales orders specify the volume of gold
bullion to be sold and the selling price of the gold bullion to be sold under such sales order. The sales
orders are delivered to and confirmed by our customers. We do not fix a delivery date at the time as the
sales prices for the gold bullion were fixed upon the placement of sales orders. Nevertheless, based on
the mutual understanding between Shandong Guoda and Shandong Humon and us, the sales orders
placed by us are typically fulfille d within one year. In practice, we will provide an expectation to our
customers regarding the expected time for completing the sales order (i.e. the timing of delivering the
gold bullion) through our routine communication with our customers. Pursuant to the refining service
agreements entered into with our smelters during th e Track Record Period, the smelters are not obliged
to refine the gold concentrates within a specific period of time after the receipt of gold concentrates
from us. However, we have obtained an understanding from the smelters in relation to the expected
refining time regarding each batch of gold concentrat es sent to our smelting subcontractors. In practice,
the refining process is considered completed when t he gold bullion from a batch of gold concentrate is
ready for delivery and settlement. Revenue from the sale of gold bullion is recognised on delivery of the
gold bullion, which is at the point in time when control of the asset is transferred to the customer. To
control the refining time of our smelters, we regularly communicate with them regarding the expected
time for the gold bullion from a batch of gold concen trates to be ready for delivery and settlement and
also monitor the monthly smelting reports. Durin g the Track Record Period, although there was no
contractual obligation on the refining time, the average timespan from the delivery of gold concentrates
to smelters, the smelting of the gold concentrates, the delivery of gold bullion from respective smelting
division to the selling division of the smelters to th e settlement of relevant delivery of gold bullion is
around one month. Further, we have negotiated and entered into a supplemental agreement with our
smelter, Shandong Guoda, with effect from 6 January 2023 that they will complete the refining process
of our gold concentrates or enable us to settle with them the amount of gold produced or to be produced
from our gold concentrates in the form of cash payments or physical gold, within 30 days from the date
of delivery of our gold concentrates to them.
During the Track Record Period, save for the sale of 135 kg of gold bullions to Shandong Guoda
that were smelted by Shandong Humon in FY2019, all of our gold bullions were sold to the same
customer who smelted the gold bu llions in accordance with the sales process as stated above. We
recognised revenue of approxima tely RMB33.4 million and RMB6.7 million from the sale of these
135kg of gold bullions smelted by Shandong Hu mon to Shandong Guoda in FY2019 and FY2020,
respectively, which accounted for approximately 14.6% and 1.9% of the total revenue in FY2019 and
FY2020, respectively. At the material time, Shandong Guoda was competing with Shandong Humon in
providing smelting services to our Group. To co mpete with Shandong Humon, Shandong Guoda offered
our Group a shorter smelting time, shorter settlement period for sales of gold bullion and lower smelting
fee as compared to Shandong Humon. In particular, in comparing the gold sales transactions between
our Group, Shandong Humon and Shandong Guoda in FY2019, but before the sales of the
aforementioned 135 kg of gold bullion, the average smelting time and average settlement period of
Shandong Humon were 32.2 days and 7.5 days, respectively, longer than those offered by Shandong
Guoda at 15.5 days and 0.3 days, respectively. Fu rther, the smelting fee offered by Shandong Humon
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was RMB150 per tonne of gold concentrates, which was greater than that offered by Shandong Guoda of
RMB140 per tonne of gold concentrates. As such, our decision to sell these 135 kg of gold bullion to
Shandong Guoda instead of Shandong Humon, directly after Shandong Humon ’s smelting, were
primarily a commercial choice made by our Group. T his decision was made with an intent to: (i) shift
more business to Shandong Guoda in light of the shorter smelting time and settlement period they
offered; (ii) negotiate more favourable smelting tim e, settlement period and smelting fee with Shandong
Guoda by increasing the transaction scale with them ; and (iii) negotiate similar terms with Shandong
Humon by demonstrating that Shandong Guoda was offering more competitive terms to our Group.
Before we decided to sell the relevant 135 kg of gold bullions to Shandong Guoda, we had not placed
sales orders with Shandong Humon specifically for t hese 135 kg of gold bullions and hence, there was
no cancellation of sales orders with Shandong Humon with regard to these gold bullions. These 135 kg
gold bullions were delivered to Shandong Guoda as part of the batches of gold bullions to fulfill the on-
going sales orders placed by our Group with them. All of these 135 kg of gold bullions, smelted by
Shandong Humon, were sold under the same sales orders with Shandong Guoda as the gold bullions
smelted by Shandong Guoda. As such, there was no difference in price fixing in respect of these 135 kg
of gold bullions as compared to the sales of other gold bullions smelted by Shandong Guoda. Regarding
the settlement time, the average settlement time in respect of these 135 kg of gold bullions was 3.4
days, which was slightly longer than the average s ettlement time of gold bullion smelted by and sold to
Shandong Guoda during the same period, which was 0.3 days. In respect of the delivery of these 135 kg
gold bullions, we arranged transportation with Shandong Guoda to pick up the gold bullions from
Shandong Humon and delivered them to the selling d ivision of Shandong Guoda. Testing was conducted
on these gold bullions before acceptance by Shandong Guoda. Such additional logistics arrangement was
not material and hence, did not resu lt in any significant delay in the delivery, pricing and settlement of
such gold bullions. No additional profit was derived from the sale of these 135 kg of gold bullions to
Shandong Guoda instead of Shandong Humon since there were no other sales orders placed for these
135 kg gold bullions at a different price with Shandong Humon.
On the basis that (i) it is not mandatory for us t o sell to the same customer who smelts the gold
bullion under our existing refining contracts; (ii) the framework sales contracts with our customers
include a contractual term on testing before acceptance to cater for gold bullions purchased from other
gold smelters; and (iii) Shandong Guoda has confirmed to our Group that it has, in its ordinary course
of business, purchased gold bullions smelted by other smelters, our Executive Directors are of the view,
and the Sole Sponsor and Frost & Sullivan concur, t hat it is not an uncommon practice for our Group ’s
customers, who are large gold smelters themselves , to purchase gold bullions from different gold
smelters.
Pursuant to the ‘‘Notice regarding issues on Tax Policy on Gold Transactions ’’(關於黃金稅收政策
問題的通知)( t h e ‘‘Notice ’’) issued by the Ministry of Finance and the State Taxation Administration
(國家稅務總局), gold production enterprises engaged in sales of gold (except for standard gold) such as
our Group are exempt from value added tax ( ‘‘VAT’’). We have obtained a written confirmation from
Yantai Muping Branch of State Taxation Administration (the ‘‘YMBSTA ’’) on 14 April 2023, which our
PRC Legal Advisers confirmed that YMBSTA is the competent authority for administration of VAT,
that confirmed in light of the aforementioned requi rements pursuant to the Notice, Yantai Zhongjia was
not engaged in sales of standard gold and hence, is exempt from VAT. Notwithstanding the foregoing,
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in late 2020, solely upon the request of Shandong Guoda, the Group voluntarily agreed to issue VAT
invoice for its sales transactions of gold to support the internal control requirements of Shandong
Guoda. Nevertheless, Yantai Zhongjia was not required to pay the relevant VAT as stated on the VAT
invoices or the VAT invoices would state that the transaction was tax-fee. Such practice was
acknowledged and approve d in written by YMBSTA.
(b) Pricing and internal control procedures
The selling prices as specified in the sales orders are determined with reference to the prevailing
Au (T+D) gold spot price as quoted on the Shanghai Gold Exchange on the day of the sales order. The
Au (T+D) spot price is a standardised pricing term of the Shanghai Gold Exchange and commonly used
in the PRC gold industry. There is no contractual obligation for us to specify the number of days as
referred to in the Au(T+D) spot price. The Au (T+D) spot price is adopted even if the date of the sales
order and the date of actual delivery to customers were the same. During the T rack Record Period, the
variance between the agreed prices on sales orders and the average gold spot prices on the dates of sales
orders are all less than ±2%. Such arrangement is mutually beneficial for our Group and for the
customers since this can allow us to reduce the impa ct of short-term fluctuation in gold price on our
working capital management while the customers can ensure a more expectable supply of gold bullion to
them. Depending on our negotiation with them, we may be required to place a security deposit for our
sales orders placed with gold bullion yet to be de livered. During the Track Record Period, we paid
security deposit in the amount of approximately RMB9.0 million to Shandong Humon in FY2020 and
did not pay any such security deposit in FY2021, FY2022 and 6M2023. Accordingly, our sales pursuant
to each sales order are concluded in batches such that revenue is recognised each time when our gold
bullion is delivered from the smelting division of t he gold smelters (where our gold bullions are kept
after smelting) to the division in-charge of selling of g old bullion (i.e., our customers) and accepted by
our customers. Respective settlements are also received in batches after the delivery of gold bullion in
batches within the same sales order. In particular , the smelting fees and sales proceeds of gold bullion
with Shandong Guoda and Shandong Humon are settled separately in gross.
During the Track Record Period, the Group did not have a detailed written policy to govern the
volume of gold bullion sales in a particular period. The average and range of time gap between pricing
the gold bullion with and the actual delivery to our customers during the Track Record Period was 78.7
days and 0 to 261 days, respectively, which are in line with the industry average. There was a
significant time gap between the pricing and actual delivery of the gold bullion because we placed sales
orders to fix the sales price of gold bullion when w e were satisfied with the prevailing Au (T+D) spot
price but prior to having the relevant gold bullion o n hand, and under such circumstances, we require
time to produce the gold bullions for delivery and to complete the sales. During the Track Record
Period, our Group from time to time placed a new sal es order (i.e. pricing the gold bullion) before
completing the previous ones. Such new sales order would not be completed until the previous ones
were fulfilled which lengthened the average time g ap between pricing the gold bullion and the actual
delivery to our Group ’s customers. In addition, our Group delivered gold bullion under a sales order in
batches and hence, the inventory turnover days were likely to be shorter than the number of days
required for the full completion of the sales order.
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Our sales department is responsi ble for the day-to-day sales of gold bullion, including analysing
the sales price and sales volume. Sales price shal l be fixed in accordance with the prevailing Au (T+D)
spot price as quoted on the Shanghai Gold Exchange. In determining the sales order volume, we will
estimate our production capacity and amount of gold b ullion available for sales when we place our sales
orders. In the event that the prevailing Au (T+D) sp ot price is in upward trend as compared with the
average Au (T+D) spot price in the pr evious three months, our sales department shall check the quantity
of gold bullion available for sales, which sales quantity shall not exceed our Group ’s scheduled
production for the next three months or 200 kg, whichever is lower. This is to avoid concentration of
sales volume in a particular period. The volume of g old bullion sales shall be relatively lesser if the
prevailing Au (T+D) spot price is in a downward trend. Our sales department will submit an analysis
report in respect of the abovementioned to the Chairman of Yantai Zhongjia for approval before placing
the sales orders, including any special circumstances to the above.
We also have policy and procedures in place to a void prolonged delay in settlement of our gold
bullion sales. After acceptance by the customer, our head of finance department shall monitor the agreed
settlement date, and any delays in delivery and se ttlement date shall be reported in writing to our
Deputy General Manager, who shal l then understand the reasons for delay with the smelters to facilitate
the follow-up actions with our relevant departments and customers. Monthly reports of mining
operations shall be submitted to the Deputy General M anager for review to ensure our sales are settled
in accordance with the prescribed period. In particular, the Deputy General Manager used to monitor
closely with the smelter to ensure that all delivered and processed gold concentrates into gold bullion
must be transferred to the customer for immediate sales for proper cut off at each month end.
(c) Reasons for our Group to adopt and our customers to accept the pricing and delivery
arrangement of our gold bullion
The abovementioned prici ng arrangement with our customers, i. e. determined based on prevailing
Au (T+D) spot price, is adopted after taking into account the fact there is an active market of gold
bullion in the PRC (i.e. the Shanghai Gold Exchange), and hence, it is fair for us and for our customers
to use the prevailing Au (T+D) spot price as the pric e reference of the sales transactions of our gold
bullion.
(i) Reasons for our Group to adopt the pricing and delivery arrangement of our gold bullion
Under this pricing arrangement, we can lock the sales price in advance to the production of gold
bullion by placing sales orders with our customers in order to secure a majority portion of our revenue
at a relatively early stage of a year and to minimise our price risk exposure without subject to the
possible volatility of gold price for the remainder of the year. We are inclined to place sales orders and
lock the sales price of gold bullion if the price level can enable us to make a reasonable profit. By doing
so, the advantage of such is that we can secure in the first half of year most of our Group’ s revenue for
the year derived from the delivery of gold bullion and hence, has roughly locked in the profit for the
whole year without subject to the possible volatility of the price of gold for the remainder of the year.
Our Executive Directors prefer achieving a more promising financial performance of our Group by
locking the sales price of gold bullion at a relatively early stage of a year rather than the uncertainty in
earning the potential upside of the price o f gold bullion for the remainder of the year.
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Based on our Executive Directors ’ understanding from three dominant market players and the
Group ’s customers, namely Shandong Humon and Shandong Guoda, they consider that such delayed
delivery arrangement or a similar delivery arrangement is not uncommon in their transactions with their
gold suppliers and the adoption of pricing and delivery arrangement is determined by the commercial
negotiation between the relevant parties. The three dominant market players were among the top four
gold producers by mine production volume in China 2022, two of which were also the top two gold
producers by mine production volume in Shandong in 2022. As such, our Executive Directors
considered, and the Sole Sponsor concurred, the views of the three dominant market players are a
meaningful indication of the preva iling industry practice. As advised by Frost & Sullivan, gold smelting
and refining industry in China has the problem of excess capacity and smelters are always eager to
source more gold concentrates so that they can utilis e their excess smelting capacities and earn smelting
fees. As such, Frost & Sullivan is of the view that i t is not uncommon for gold smelters to accept the
delayed delivery arrangement as an incentive for gold mining companies to choose them as smelter.
Substantially all of our Group ’s sales to Shandong Guoda and Shandong Humon were conducted
under the delayed delivery arrangement. As advised by Shandong Guoda, approximately half of the gold
procured by them were through delayed delivery arrangement. Notwithstanding the fact that, to the best
knowledge of our Directors, the delayed delivery arrangement or similar arrangement are not uncommon
in other industry players, including the three dominant players in the industry, the extent of delayed
delivery arrangement of our Group is generally greater than that of other industry players, including the
three dominant market players in the industry. Our D irectors believe that the greater extent of delayed
delivery arrangement of our Group is mainly attrib utable to the fact that when our Group considers the
gold price can enable us to secure a reasonable profit margin in an early part of a year, we will place
sales orders with our customers to fix the gold se lling price in advance to our gold production which
causes the delayed delivery arrangement. Under the approach of advance pricing and delayed delivery
arrangement, we might forfeit the upside of gold pri ce when it is in a rising trend, while we can secure a
majority portion of our revenue at a relatively ear ly stage of a year and to minimise our price risk
exposure without subject to the possible volatility of gold price for the remainder of the year. We are
inclined to place sales orders and lock the sales price of gold bullion if the price level can enable us to
make a reasonable profit. By doing so, the advantage of such is that we can secure in the first half of
year most of our Group’ s revenue for the year derived from the delivery of gold bullion and hence, has
roughly locked in the profit for the whole year wit hout subject to the possible volatility of the price of
gold for the remainder of the year. Our Executive Directors prefer achieving a more promising financial
performance of our Group by locking the sales price of gold bullion at a relatively early stage of a year
rather than the uncertainty in earni ng the potential upside of the price of gold bullion for the remainder
of the year. Having considered the aforementioned, our Directors are of the view that it is reasonable for
our Group to have a greater extent of delayed delivery arrangement as compared to other industry peers.
In addition, in the PRC, gold smelters encounte r the problem of excess capacity and it is their
main concern to enhance the utilisation rates of th eir smelting facilities. The increase in utilisation of
smelting facilities will reduce the overall unit cost o f production for gold smelters and increase the
revenue derived from provision of smelting services and sales of precious metals, non-ferrous metals and
chemical by-products generated during the gold smelting process. The acceptance of the delayed
delivery arrangement is one of their measures to a ttract more mining companies to use their smelting
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services or enhance the utilisation rates of smelting facilities. If a smelter refuses to adopt such
arrangement, mining companies may switch to another smelter which offers the desired transaction terms
and the smelter may experience a decrease in its competitiveness, decrease in gold concentrates supplies
to fill their smelting capacity, loss of smelting revenue , increase in unit production costs and decrease in
profits. Nevertheless, when the smelters receive th e sales order from gold mining companies with the
delayed delivery arrangement, the smelters are exp osed to the downward price risk of gold. Such risk
could be mitigated by adopting the hedge arrangement, which is commonly adopted by the smelters.
Based on the foregoing, it is justifiable for gold smelters to accept the delayed delivery arrangement.
The ranges of delivery time of our Group under the delayed delivery arrangement were 0 to 222
days, 0 to 261 days, 0 to 179 days and 27 to 101 days during the Track Record Period, respectively.
Such ranges of delivery time were within the ranges of delivery time of certain of our Group ’s industry
peers, including the three dominant market players in the industry, under the delayed delivery
arrangement or similar arrangement and in the event that the smelters are not required to pay sales
consideration upfront, being less than one year during the Track Record Period. The average delivery
times of the Group under the delayed delivery arrangement were 96.1 days, 88.2 days, 56.5 days and
60.6 days during the Track Record Period, respectively. Such average delivery times were comparable to
the most common delivery time of certain of our Group ’s industry peers, including the three dominant
market players in the industry, under the delayed delivery arrangement or similar arrangement, being 30
days, 60 days and 90 days during the Track Record Period. As further advised by the three dominant
market players, gold suppliers tended to have a short er delivery time in recent years due to the smaller
size of sales orders received in light of the increasing gold price.
(ii) Reasons for our customers to accept the pricin g and delivery arrangement of our gold bullion
Our customers may face a downward risk in gold price since our gold bullion is not delivered to
them at the same time when the gold sales price is fi xed. Nonetheless, our customers would be able to
maintain a reasonable amount of net profit in respect of their smelting services and sales of gold bullion
even though the gross and net profit margins of g old smelting business are thin or even may have a
slight loss, the profitability of smelting business is justifiable because (i) the smelting industry has the
problem of excess capacity and smelters are always eager to source more gold concentrates so that they
can utilise their excess smelting c apacities and earn smelting fees. As a result, there is intense
competition among gold smelters to acquire gold conc entrates and the gold mining companies have
relatively greater bargaining power over gold sme lters in respect of smelting services, leading to the
reasons for negotiation of pricing and delivery terms ; (ii) the gold smelters could earn decent amount of
net profit due to sizeable operation in its smelting segment; (iii) smelters could mitigate the risk of gold
price fluctuations arising from the pricing and delivery arrangements by entering into hedging
arrangement; (iv) the sales of other precious metals, non-ferrous metals or chemical by-products
generated during the gold smelting p rocess will enhance the overall efficiency and profitability of the
gold smelters; and (v) smelters reco gnise the responsibility of being the essential part of the value chain
of the gold industry in China as smelters do contribute to the local GDP for the local government and
the local government will usually assist them in sourcing and obtaining mine resources.
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As understood from our customers, it is not their intention to realise profits from purchasing gold
bullion from us for onward sales to the Shanghai Gold Exch ange, but commercially sensible to utilise
their excess smelting capacity of their smelting operation of their group companies and to earn smelting
fees from us when we acquire the smelting services p rovided by their group companies, given the fact
that the smelting business is one of the principal bu sinesses of our customers. As confirmed by Frost &
Sullivan, Shandong Guoda and Shand ong Humon, the gold refining indu stry in China has the problem
of excess capacity and due to scarcity of gold resources, they are always eager to source more gold
concentrates to support their refining business. In pa rticular, smelters strive to increase the refining
volume to achieve better economy of scale and hence, reducing the unit production costs and
maximising the profits. As such, gold mining companies have relatively greater bargaining power over
smelting companies to request for the abovemention ed pricing and delivery arrangement of gold bullion
that may be favourable to mining companies but such arrangement is s till the normal market practice as
accepted by smelters in China. If a smelter refuses to adopt such arrangement, mining companies may
switch to another smelter which offers more favo urable transaction terms and the smelter may
experience a decrease in its competitiveness, decrease in gold concentrates supplies to fill smelting
capacity causing suspension of operation of the smelting process, including the furnaces, loss of
smelting revenue, increase in unit production costs, d ecrease in profits and may incur huge energy costs
in resumption of operation to reheat furnaces back to the operating temperature and will incur idle
labour costs during suspension of operation.
As confirmed by our customers, the downward risk in gold price could be mitigated since our
supply of gold to them is not their principal source of gold bullion, considering their own extraction
activities and gold supplies from other suppliers. In p ractice, after receiving sales order from us, they
may consider selling the same amount of gold to Shanghai Gold Exchange out of their own stock
immediately or entering into a short position of Au ( T+D) contract or a gold forward contract with the
Shanghai Gold Exchange to net off our sales orders to hedge against the risk of fluctuation of gold price
and minimise their risk exposure, at their sole discretion where appropriate. As confirmed by Shandong
Guoda and Shandong Humon who are registered members of the Shanghai Gold Exchange, they also
have such hedging arrangement with their other gold mining companies since it is a common practice
adopted by other registered members of the Shanghai Gold Exchange, according to Frost & Sullivan.
Based on the foregoing, the effect of our sales orders, in particular, the gold price is fixed in the sales
orders with delayed gold delivery, on our customers ’ gross profit margin is inconsequential and the risk
of price fluctuations borne by our customers is remote or is under their control. Nevertheless, the
measures adopted by our customer to net off our sa les order do not constitute any back-to-back on-
selling arrangement between our Gr oup and our customers. Moreover, our customers may not suffer
from the price fixing arrangement. For example, if the gold spot price went up after our sales orders
were placed, we would indeed suffer a notional loss since the profit from the increase in gold spot price
was forgiven while our customers would earn a notio nal profit. Historically, as a result of the price
fixing arrangement, our average selling price for F Y2021 was higher than the average gold spot price in
the PRC while those for FY2020, FY2022 and 6M2023 were lower than the average gold spot price in
the PRC.
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In addition to smelting fees, they are able to gener ate other sources of rev enue as described above
as well as revenue derived from sales of gold bullion (as produced by gold concentrate source from the
gold mining companies or supply by the group companies of gold smelters) to the Shanghai Gold
Exchange by the smelters is recorded on the book of t he smelters, or its group companies. With such a
large amount of revenue on book, the smelters can demonstrate its massive business scale to commercial
banks, which is favourable to the smelters to negotiate with banks for financing at a better term or for
the issuance of corporate bonds with high credit rating to strengthen their cash flows and liquidity.
As confirmed by our Executive Directors and our customers, as between the two customers during
the Track Record Period, our customers provided similar pricing and delivery arrangements to us, and
such pricing and delivery arrangements were also provided to their other gold mining and processing
suppliers. As further confirmed by our customers, they accept the arrangement of delayed gold delivery
to attract gold mining companies to use their sme lting division where they can utilise their excess
smelting capacities and earn smelting fees. As conf irmed by the Frost & Sullivan, such sale and logistic
arrangement between our Group and our customers are in line with the gold mining industry in the PRC.
In view of the above, our Executive Directors are of the view that our pricing arrangements with our
customers are reasonable and sustainable.
The following diagram illustrates the proces s and cash flows in a typical gold bullion sale
transaction through our third-party gold smelters:
Our ore
processing
plant
Smelters
Shanghai
Gold
Exchange
(i) Deliver gold
concentrate
(ii) Provision of refinery
service to refine gold concentrate
into gold bullion of
Au99.95 at a fee
(v) Subsequent sale of gold
bullion of Au99.95 at
prevailing market price
(iii) Sale of gold bullion of Au99.95 at agreed price
with reference to the prevailing Au (T+D) spot price
(vi) Settlement of funds(iv) Settlement of funds for
sales of gold bullion
The following table sets forth our sales to Shandong Guoda and Shandong Humon during the
Track Record Period:
FY2020 FY2021 FY2022 6M2023
Amount % Amount % Amount % Amount %
(RMB in thousands, except percentages)
Revenue
Shandong Guoda 335,778 93.0 247,872 100.0 418,413 100.0 196,659 100.0
Shandong Humon 25,221 7.0 —— —— ——
Total 360,999 100.0 247,872 100.0 418,413 100.0 196,659 100.0
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Our relationships with Shandong Guoda and Shandong Humon
Our business relationships with Shandong Guoda and Shandong Humon commenced in 2017 and
2008, respectively. During the Track Record Period, we outsourced the refining of gold concentrate
produced by us into gold bullion of Au99.95 principally to Shandong Guoda, and in a lesser degree to
Shandong Humon for FY2020. As we are not a member of the Shanghai Gold Exchange, after refining,
we sold the gold bullion back to them for their subsequent sales on the Shanghai Gold Exchange at the
agreed price with reference to the prevailing A u (T+D) spot price as quoted on the Shanghai Gold
Exchange.
Shandong Guoda
Shandong Guoda was one of the two customers of our Group and the revenue generated from the
sale of gold bullion to Shandong Guoda accounte d for approximately 93.0%, 100.0%, 100.0% and
100.0% for FY2020, FY2021, FY2022 and 6M2023, respectively. In addition to the sales of gold
bullion to Shandong Guoda, due to the increase in the price of sulfuric acid, we commenced selling to
Shandong Guoda sulfuric acid in gold concentrate generated during the smelting process separately since
October 2021, and recorded other income amounted to RMB1.4 million, RMB10.5 million and RMB2.4
million in FY2021, FY2022 and 6M2023, respectively. Sh andong Guoda has similar arrangement in
relation to sulfuric acid with some but not all of its ot her refining services customers depending on the
scale of the gold supply from gold mining companies and whether the gold mining companies actively
negotiate the separate compensation arrangement on sulfuric acid with them. During the Track Record
Period, sales to Shandong Guoda w ere settled by bank transfer with in two days of sale. Shandong
Guoda was also one of our five largest subcontractors for each of FY2020, FY2021, FY2022 and
6M2023, with purchases accounted for approximately 6.0%, 7.3%, 12.2% and 10.6% of our total
purchases, respectively.
Shandong Guoda is a group of companies comprises 山東國大黃金股份有限公司 (Shandong
Guoda Gold Co., Ltd*) ( ‘‘Shandong Guoda Gold ’’) and its wholly-owned subsidiaries, 煙台國大貴金
屬冶煉有限公司 (Yantai Guoda Precious Metal Smelting Co., Ltd*) ( ‘‘Yantai Guoda ’’)a n d 煙台國大
貿易有限公司 (Yantai Guoda Trading Co., Ltd.*) ( ‘‘Yantai Guoda Trading ’’). According to public
information, as at the Latest Practicable Date , Shandong Guoda Gold is a limited liability company
established in the PRC in January 1999 with a regis tered capital of approxi mately RMB173.4 million,
which is primarily engaged in the business of production of gold, silver, copper, sulfuric acid, iron
powder and industry gypsum; sale of own products and ore sludge, arsenic trioxide, sulfuric acid and
fuming sulfuric acid. As at the Latest Practi cable Date, Shandong Guoda Gold is owned by three
Independent Third Party corporate shareholders, namely, (i) as to approximately 66.2% by 山東招金集
團招遠黃金冶煉有限公司 (Shandong Zhaojin Group
Zhaoyuan Gold Smelting Co., Ltd.*) ( ‘‘Shandong
Zhaojin Gold Smelting ’’), which is a wholly-owned subsidiary of Shandong Zhaojin Group Corporation
Limited and is indirectly ultimately wholly-o wned by PRC government authorities; (ii) as to
approximately 30.1% by China Gold Development Group (H.K.) Limited, an indirect subsidiary of Zijin
Mining Group Company Limited (stock code: 2899 .HK; 601899.SH); and (iii) as to approximately 3.7%
by China Gold Group Limited. On the other hand, Yantai Guoda is a limited liability company
established in the PRC in October 2004 with a regis tered capital of approximately RMB40.3 million,
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which is primarily engaged in the business of refining of non-ferrous metals, precious metals and alloys;
the use of precious metals for rolling processing; manufacturing of crafts and jew elleries; and processing
of chemical or metallurgical products containing precious metals (excluding dangerous goods). Yantai
Guoda Trading is a limited liability company established in the PRC in 19 April 2022 with a registered
capital of approximately RMB10.0 million, which is primarily engaged in the business of wholesale of
hardware products, sales of gold and silver products, wholesale of jewellery, retail of jewellery, sales of
non-ferrous metal alloys, refining of non-ferrous metals, precious metals and alloys, jewellery recycling
and repair services, sales of arts and crafts and ceremonial supplies (except ivory and its products), arts
and crafts and retail of collectibles (except ivory and its products), domestic trade agents, internet sales
(except for the sale of goods that require a licence).
As at the Latest Practicable Date, (i) Shandong Guoda is indirectly owned as to approximately
66.2% by Shandong Zhaojin Gold Smelting; and (ii) Shandong Zhaojin Gold Smelting wholly-owned
our cornerstone investor, namely, Dongfang Gold Industry (Hong Kong) Limited, which will hold
approximately 9.9% of the total issued share capital of our Company immediately following the
completion of the Global Offering (without taking into account any Shares which may be issued upon
the exercise of the Over-allotment Option and any o ptions which may be granted under the Share Option
Scheme).
Our Directors noted from Shandong Guoda that Shandong Guoda has been in the process of
changing its principal business from gold smelting t o copper smelting. As at the Latest Practicable Date,
both Zhaojin Mining and Shandong Guoda are controlled by Shandong Zhaojin Group Corporation
Limited. However, our Directors, after having made enquiries with a member of the senior management
of Shandong Zhaojin Group Corporation Limited, understood that (i) there was no concrete timeline for
the change in business of Shandong Guoda, and Shandong Guoda would continue to primarily engage in
gold smelting with the development of copper sme lting business; (ii) Shandong Guoda would need to
overcome a number of difficulties to implement such change of principal business as it would involve
significant capital investment for, among others, technology and plant and equipment required for
copper smelting, which are differe nt from gold smelting; (iii) copper s melting would need to overcome
more pollution and environmental problems as compa red to gold smelting, which also adds difficulties
to changing from gold smelting to copper smeltin g; (iv) Shandong Province is not a major copper
producing province in the PRC, there might not be sufficient supply of copper for the copper smelting
business in the Shandong Province. Hence, the utilisation of copper smelting plant is expected to be
lower than gold smelting plant. Based on the above, ou r Directors consider that it would be challenging
for Shandong Guoda to change its principal business from gold smelting to copper smelting with
immediate effect.
Having taking into account the above and the fac t that the gold smelting industry is a relatively
mature industry, there are ample choices of alternativ es and there is no material difficulty for our Group
to engage and sell to other Independent Third Party smelters in the Shandong Province who are also
registered members of the Shanghai Gold Exchange t o provide similar quality of services at similar
pricing, our Directors are of the view that the change of Shandong Guoda ’s principal business from gold
smelting to copper smelting would not have a material impact on the Group ’s operation and financial
performance. According to Frost & Sullivan, there are at least four out of seven gold smelters (apart
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from Shandong Humon and Shandong Guoda) in the Shandong Province which are also registered
members of the Shanghai Gold Exchange available to provide their s melting services to our Group, as
well as there were 27 gold smelters in Shandong Province in 2022. As at the Latest Practicable Date, we
were reaching out to a number of Independent Third Party smelters in the Shandong Province for
potential business cooperation, in order to further reduce the risk arising from the possible change of
principal business of Shandong Guoda.
Shandong Humon
Shandong Humon was one of the two customers of our Group and the revenue generated from the
sale of gold bullion to Shandong Humon accounted for approximately 7.0%, nil, nil and nil for FY2020,
FY2021, FY2022 and 6M2023, respectively. During FY2020, sales to Shandong Humon were settled by
bank transfer within two business days of sale. Shandong Humon was also one of our five largest
subcontractors for FY2020, with purchases accounted for approximately 0.4% of our total purchases.
Prior to 2020, Yantai Humon Group Co., Ltd. ( 煙台恆邦集團有限公司), a substantial shareholder of
Shandong Humon, had provided corporate guara ntees in the amount of RMB20 million, in respect of
banking facilities obtained by Yantai Zhongjia. Such corporate guaran tee had been released in April
2020. Please refer to the section headed ‘‘Financial information — Indebtedness — Bank borrowings —
secured ’’in this prospectus for further details. In FY2021, FY2022 and 6M2023, due to the relatively
higher fees for its refining services charged to our Group as compared to the fees charged by Shandong
Guoda, we did not outsource any refining works to Shandong Humon in FY2021, FY2022 and 6M2023,
as it was cheaper for us to outsource such refining works to Shandong Guoda. Nevertheless, as at the
Latest Practicable Date, we had entered into a fra mework agreement with Shandong Humon for the
provision of refining services of our gold bullion. Our Directors confirmed that our Group can continue
to outsource the refining works to Shandong Humon at any time during the period of the framework
agreement at our discretion as long as it is beneficial for us to do so.
According to public information, as at the Latest Practicable Date, Shandong Humon is a state-
controlled limited liability company established i n the PRC in February 1994 with its shares listed on
the Shenzhen Stock Exchange (stock code: 2237.SZ), which is principally engaged in the business of
gold and silver smelting, and the production and sale of non-ferrous metals, rare metals and other metals
in the PRC. Shandong Humon also owns gold mines in Shandong Province. Based on its interim report
for the six months ended 30 June 2023, it recorded a revenue of approximately RMB32,227.7 million
and net profit of approximately RMB280.7 million.
Customer concentration
During the Track Record Period, we engaged two Independent Third Party smelters to refine gold
concentrate produced by our ore proceeding plant i nto gold bullion, and we subsequently sold the gold
bullion to them for their subsequent sales on the Shanghai Gold Exchange. As such, for each of
FY2020, FY2021, FY2022 and 6M2023, we had two customers and our sales derived from Shandong
Guoda represented approximately 93.0%, 100.0%, 100.0% and 100.0% of our total revenue,
respectively. It appears that our Group ’s sales were highly concentrated on one of our two customers.
According to the F&S Report and our executive Directors believe that our arrangement with Independent
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Third Party smelters as our customers is industry sp ecific and it is likely for us to continue with such
arrangement in the foreseeable future. Our executive Directors considered that we are capable of
maintaining our revenue in the future because of the following reasons:
(i) our gold bullion of Au99.95 is a nationwide homogeneous product tradable on the Shanghai
Gold Exchange. According to the market research of Frost & Sullivan, it is industry norm for
gold producers such as our Group to sell gold bu llion to a few customers, usually less than
three. The main reason is that the gold price is highly correlated to the gold price on the
Shanghai Gold Exchange and it is not necessary for the gold producers to sell gold bullion to
t o om a n yc u s t o m e r sw h i c hm a yo n l yi n c u re x t r aadministrative costs with no increment of
revenue. As such, Frost & Sullivan is of the view that the Group ’s reliance on only a very
limited number of major customers is consistent with the industry norm. As we are not a
registered member on the Shanghai Gold Exchange, we sell our gold bullion refined by the
relevant smelters, who are our subcontractors, for their subsequent sales on the Shanghai
Gold Exchange. As such, our gold bullion w ill be sold at the Shanghai Gold Exchange
eventually, and there is no issue of a lack of demand for our gold bullion. Our Directors
consider the smelters, who are also our customers, as just being an intermediary for us to sell
our gold bullion out of convenience. It is a matter of our choice and it remains at our
absolute discretion as to whether or not we sell the gold bullion through them, or through
other companies who are members of Shanghai Gold Exchange, given that the sales price for
our gold bullion will be fixed prior to our sales with reference to the prevailing Au (T+D)
spot price as quoted on the Shanghai Gold Exchange. According to the F&S Report, gold
mining and processing companies mainly engage in ore mining and mineral separation
business, and it is a common industry practice for mining companies to outsource, among
others, refining services to qualified subcontractors, as well as to sell the finished gold
bullion to the same gold smelters due to licensing barrier. In 2022, among the 30 gold
producers in Shandong, only the top two producers have their own smelting business. In
addition, these two gold producers in Shandong Province have the membership of Shanghai
Gold Exchange due to scale and cost advan tages. For mining companies who are not a
registered member of the Shanghai Gold Exchange, they can only sell the refined gold to
registered members or entrust the members of the Shanghai Gold Exchange to sell their
refined gold. Therefore, our sales to Shandong Guoda and Shandong Humon are in line with
industry practice; and
(ii) according to the F&S Report, there were about 27 gold smelters in the Shandong Province in
2022 and nine of them were also registered members of the Shanghai Gold Exchange, and the
top five gold smelters in Shandong Province accounted for approximately 93.2% of
Shandong’s total gold smelting volume in 2022. As further advised by Frost & Sullivan, it is
not an industry norm for gold smelters to enter into exclusive refining arrangements with
gold producers even if the gold smelters were owned by the group company of the gold
producers. While we have in the past, due to our business decision after due and careful
consideration of the shareholding background and financial standing of each of Shandong
Guoda and Shandong Humon, to engage them to provide refining services, based on market
research and enquiries by Frost & Sullivan as well as fee quotations obtained by our Group,
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at least four out of the other seven gold sme lters in the Shandong Province which are also
registered members of the Shanghai Gold Exchange are available to provide their refining
services to our Group, and given the fact that there is no exclusive refining arrangement for
the gold smelters and gold is a valuable commod ity, as well as there were 27 gold smelters in
Shandong Province in 2022, our executive Directors believe that there are ample choices of
alternatives and there is no material difficulty to engage and sell to other Independent Third
Party smelters in the Shandong Province who are also registered members of the Shanghai
Gold Exchange. Given that the smelting industry i s a relatively mature industry, our Directors
consider that there should be no difficult y for us to obtain similar quality of services at
similar pricing from other smelters. Based on quotations obtained by our Group from three
Independent Third Party smelters as well as th e contract for smelting works entered into with
Shandong Humon, the smelting charges of these smelters ra nge from RMB220 per tonne to
RMB230 per tonne, which are 10% to 15% more than the smelting charges charged by
Shandong Guoda in FY2022. Taking into account the fact that our refining subcontracting
costs amounted to only approximately RMB5 .7 million, RMB4.1 million, RMB13.7 million
and RMB5.4 million, representing approxima tely 3.4%, 3.8%, 6.8% and 5.2% of our cost of
sales during the Track Record Period, respectiv ely, such smelting subcontracting costs are not
significant part of our cost of sales. Hence, hi gher smelting charges or any change of smelter
would not lead to any material financial impact on our Group.
Having considered the views of the execu tive Directors and Frost & Sullivan that:
(i) the gold bullion of Au99.95 being a valuable commodity and an actively traded product on
the Shanghai Gold Exchange, the gold bullion can be sold on the Shanghai Gold Exchange at
a transparent market price;
(ii) it is the industry norm for gold producers to sell gold bullion to a few customers and to
outsource refining services to qualified subcontractors;
(iii) our Group may easily find (1) other replacement customers give n the demand for gold
bullion exceeds its supply in the PRC; and (2) othe r replacement smelters given the smelting
industry is a relatively mature industry and there are ample choices of alternatives of other
gold smelters who can provide similar quality of services at similar pricing as elaborated
above, hence, any change in our relationship with Shandong Guoda and Shandong Humon
will not have any material adverse impact on our business as such exposure can be
effectively mitigated by switching to oth er potential customers or smelters;
(iv) the likelihood of each of Shandong Guoda and Shandong Humon will materially adversely
change or terminate their business relationship with our Group is low because both of them
have substantial businesses with state-owne d interest, hence, they are selective on their
business partners. Our Group, as a top five gold producer in the Shandong Province, has
established business relationships with each of them for over five years, and we have never
had any disputes with them since the commencement of business with them; and
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(v) both Shandong Guoda and Shandong Humon a re engaged in the business of gold smelting
and are subcontractors of our Group for refining services. Our Group, being the third largest
gold mining company in the Shandong Province in 2022 with a market share of 2.6% in
terms of mine production volume, is one of th eir important customers for their smelting
business in the Shandong Province. As such, our business relationships with each of
Shandong Guoda and Shandong Humon are mutually complementary to each other,
the Sole Sponsor concurred with the views of our executive Directors that our high customer
concentration would not give rise to our Group ’s undue reliance on the two Independent Third
Party smelters and it is unlikely that they will mate rially and adversely change or terminate their
business relationships with us in the future. Nevertheless, we may selectively diversify our gold
bullion sales to other additional high quality cust omers or smelters in future should the need arise,
which we will also carefully select with regard to th eir demand, creditworthiness, operating scale
and reputation. However, we do not see the commercial need to overly diversify our customer base
at this stage, which would bring additional administrative burdens.
Salient terms of the framework sales contracts with customers
We signed framework sales contracts with our customers primarily to establish the business
relationship and the principal frame work for the transactions between the parties. Despite such, both of
us and our customers acknowledged and accepted that there are contract terms in the framework sales
contracts namely product, transportation, weighing, testing, sampling and arbitration and pricing and
settlement are not applicable and h ence would not be adopt ed and the actual transaction practice would
be modified based on actual commercial needs of the parties.
Discrepancies between our framework sales contract s with customers and actual transaction practices
We set out below details of, and the circums tances relating to the se discrepancies:
(a) while the framework sales contracts set ou t the minimum quantity for each batch of product
to be sold, such limit is not applicable since our customers in practice accept the delivery of
gold bullion even if the quantity is less than the minimum quantity;
(b) our Group engages Shandong Humon and Sh andong Guoda for smelting gold concentrates
into gold bullions. Before the smelting process, relevant weighing, testing, sampling and
arbitration procedures for gold grade and other conditions are conducted on our Group ’sg o l d
concentrates. Since the gold bullion produced through this process is typically sold to the
same party, our Group is not required to arrang e further transportation and there is no need to
repeat the relevant testing procedures of gold grade and other conditions. Therefore, the
contract terms for transportation and relevant testing procedures are not applicable and hence
not followed;
(c) pricing of gold bullion takes place before delivery and laboratory testing results. This was
primarily because (i) the relevant testing procedures are not applicable as mentioned in (b)
above; (ii) our Group was sa tisfied with the prevailing market prices of gold and hence,
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decided to secure the revenue and profit to be realised by placing the relevant sales orders
with sale price of gold fixed at the said market prices; and (iii) such practice is accepted by
our customers as a result of successful negotiation with customers. Therefore, the contract
term requiring delivery of product or agreement of the results of relevant testing procedures
before determining the price is not followed;
(d) the pricing of gold bullion takes place before delivery for the reason as stated in sub-
paragraph (c) above, which leads to a longer delivery time for our Group compared to the
specified period as stated in the framework sales contract. This extension is a result of
successful negotiations with customers given that our Group is one of the largest gold
producers in the Shandong Province. For gold smelters, such advance pricing arrangement
serves as incentives for gold m ining companies to choose a specific smelter and build long-
term relationships while any price risk aris ing from such arrangement could be mitigated by
hedge arrangement adopted by the smelters;
(e) as a result of successful negotiation with our customers, the requirement to pay a security
deposit and interest expenses for pricing be fore delivery of gold bullion, as stated in the
framework sales contract, was not app licable or not fully applicable; and
(f) our customers settle the sales consideration of gold bullion upon delivery. Since the relevant
testing procedures are not applicable as mentioned in (b) above, the contract term requiring
our customers to settle after the agreement of t he results of relevant testing procedures is not
applicable.
Such actual transaction practic e has been consistently applied in the Track Record Period and
reflected in various transaction documents such as sale orders, delivery notes, settlement statement, etc.
On 17 May 2023, we signed memoranda with our customers (the ‘‘Subsequent Memoranda ’’)t or e c o r d
in writing the modified practice adopted in actual tr ansaction between us and our customer for ease of
reference. Hence, the actual transaction procedures between our Group and our customer should be
interpreted from the framework sa les contracts together with the Subs equent Memoranda, which are also
set out in the paragraphs head ‘‘Sales and customers ’’in this section.
Despite our Group ’s long-standing business practice of using its customer ’s standardised template
for framework sales contracts, to further enhance the corporate governance of our Group, our Group has
negotiated with Shandong Guoda and on 24 November 2023, our Group and Shandong Guoda entered
into a new framework sales contract which incorporates actual transaction practices and eliminates any
non-adopted terms, as well as the addition of customa ry contract terms such as representations and
warranties, confidentiality, force majeure clauses, etc.
Views of the PRC Legal Advisers and the Sole Sponsor
As advised by the PRC Legal Advisers, it is not uncommon for the actual transaction procedures
between two enterprises to differ from the terms a nd conditions as set out in the relevant framework
agreements signed between them in the PRC, any amended terms as agreed by both parties to the
agreement could be made in written form or mutual unde rstanding if it is an industry trade practice to do
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so. Pursuant to Article 469 of the Civil Code of the PRC ( 中華人民共和國國民法典), the parties may
conclude a contract in writing, orally, or in other forms. Pursuant to Article 543 of the Civil Code of the
PRC, the parties (to the contract) may modify contract upon agreement through negotiation. Therefore,
the abovementioned is not illegal for both parties i n a framework agreement to amend the transaction
terms in practice if they both agree so. Further, pursuant to Article 509 of the Civil Code of the PRC,
the parties (to the contract) shall fully perform their r espective obligations as contracted. Based on the
foregoing, the condition that all of our Group ’s sales transactions are genuinely transacted and supported
by relevant transaction documents and the fact that there have been no disputes or any claims against
each other or going to a tribunal for settlement of any disagreements on the amended terms has ever
occurred, and Articles 469, 509 and 543 of the Civil Code of the PRC as elaborated above, the PRC
Legal Advisers are of the view, and the Sole Sponsor concurs that our Group ’s framework sales
contracts and the Subsequent Memoranda with Shandong Humon and Shandong Guoda are valid and
legally enforceable.
As confirmed by our customers, it is their re quisite internal review requirement to adopt
standardised contract for the framework sales contracts, primarily due to the fact that it is their standard
practice as a state-owned enterprise. Additionally, the primary objective of the internal review is to
ensure that the parties they engage with are well-established and possess a sound background, and the
framework sales contracts they enter into do not crea te any unexpected legal liabilities. In the case of
our Group and the relevant framework sales contracts, these requirements have been satisfactorily met.
Further, the routine transactions between our Group and its customers under the framework sales
contracts are still subject to the customers ’ internal review and approval processes. Both our Group and
our customers have been trading with the above busin ess practice since before the Track Record Period
and no disputes or any claims had arisen against each other.
Furthermore, in order to achieve best business practice, our Group entered into the Subsequent
Memoranda with our customers, which confirm the changes made to the key terms of the framework
sales contracts. The Subsequent Memoranda also serve as a reference for the actual transaction practices
between our Group and our customers, which both p arties are expected to follow. Nevertheless, the
execution of the Subsequent Memoranda does not bypass the customers ’ internal review requirement, as
routine transactions between our Group and our custom ers are still subject to their internal review and
approval processes. The agreements were received and approved through their internal review process
and were consistently upheld. These transactions were acknowledged and approved in accordance with
their actual practice. Furthermore, there has been no objections raised by our Group ’s customers or their
internal reviewer, and there was no dispute throughout all these years.
Based on the aforesaid, the PRC Legal Advisers are of the view, and the Sole Sponsor concurs that
the entering into of the Subsequent Memoranda would not be considered a circumvention of the
requisite internal review requirem ents of the relevant customers in respect of their framework sales
contracts, and it is unlikely that our Group will be subject to any enforcement or disciplinary action by
any government authorities.
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Comparison to market practice in the PRC
Based on our Executive Directors ’ understanding from the dominant market players of the PRC
gold industry which are listed companies in Hong Kong, and as confirmed by Frost & Sullivan, that it is
not uncommon to have differences between framework sales contractual terms and actual transactions
terms. While the nature and extent of these differences can vary depending on factors such as the length
of the business relationship, bargaining power, and specific commercial needs, the differences can be
broadly categorised into ‘‘products ’’, ‘‘transportation and laboratory testing ’’, ‘‘pricing and delivery ’’,
‘‘advance payment ’’and ‘‘settlement ’’. However, given that the background of each enterprise differs
and their business relationships with customers vary, the nature and extent of differences in each of the
aforesaid categories are not comparable among enterprises.
The following summarises the salient terms as set out in the framework sales contracts which are
adopted in the transactions between our Group and our customers, being the smelters when read together
with the Subsequent Memoranda:
. Term . The framework sales contracts with the smelters are generally for a term of one year.
For the framework sales contract entered into with a member of Shandong Guoda group, it
will be renewed automatically for a further term of one year if there is no disagreement
between the parties.
. Product . Gold bullion of Au99.95 in accordance with the required standard as set out in the
contract.
. Pricing. The selling price is generally fixed by us on the date of placing a sale order with
reference to the prevailing Au (T+D) spot price quoted on the Shanghai Gold Exchange, after
deducting handling fee. The final selling price may be further reduced due to the substandard
quality of gold.
. Payment and settlement . The customers generally settle th e sales amount two days after the
delivery of the inventory of gold bullion to our customers, being the selling division of our
gold smelters upon our request for settlement. The amount will generally be settled by way of
bank transfer.
. Deposits . In respect of our sales to our customers, in the event that the price is fixed for a
committed quantity of gold bullion while the gold bullion is yet to be delivered, our
customers will require our Group to pay a security deposits of up to 20% of the market price
for the relevant committed quantity of gold bu llion. The entire amount of the security deposit
will be refunded when we have delivered the agreed volume of gold bullion to our customers
and it will settle the sales amount within two business days after delivery of the gold bullion.
Certain part of security deposit will also be refunded if the market price of gold bullion
decreases to below the agreed gold sales price after the sales were committed but before the
delivery of the gold bullion. On the other hand, our customers had the right to (i) obtain
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additional security deposit if the market pric e of the gold bullion has increased subsequent to
the commitment of sales or (ii) withhold the deposit if our Group fails to deliver the
committed gold sales at the agreed date.
. Quality . The gold bullion shall comply with the required gold standard as set out in the
contracts and the applicable laws and regulations.
The framework sales contract s do not specify any minimum sales commitment or set out any
termination rights of any parties. Revenue from contracts with customers is recognised when control of
goods or services is transferred to the customers at an amount that reflects the consideration to which we
expect to be entitled in exchange for those goods or ser vices. During the Track Record Period and up to
the Latest Practicable Date, our Directors confirmed (a) that we did not experience any breach of the
aforementioned framework sales contracts which could cause a material adverse effect on our business,
financial condition or results of operations; and (b ) save for the framework sales contracts, the
abovementioned memoranda, the individual sales order and other sales documents (including the
delivery notes, acceptance notes and bank-in slips), there was no side agreement, arrangement,
undertaking or fund flow between our Group and its customers. To pursue best practice of corporate
governance, a new framework sales contract has been entered into between our Group and Shandong
Guoda on 24 November 2023 which has already incorporated actual transaction practice, and eliminated
any not-adopted terms in the gold sales transaction between the Group and its customer. Therefore, our
Company does not expect that there would be any material deviation between the actual transaction
procedures and the new framework sales contract. Further, our Company has the following safeguards to
prevent the re-occurrence of Discrepancies:
(i) the Board has formed a review committee headed by Mr. Raymond Lo, an Executive Director
of the Company and the chief financial officer who leads two members of the accounting
department to monitor every sales, smelting and sulfuric acid compensation transaction of the
Group to ensure they are executed in accordance with the new framework sales contract and
the smelting contract. Any poten tial discrepancies are required to be reported to the board of
Directors of the Company before continuing the transaction. The board of Directors of the
Company would decide whether to cease the relevant transactions, revise the relevant
transaction terms in the new framework sale s contract or the smelting contract, as the case
may be by negotiating with the Group ’s customer. In addition, the review committee will
submit a quarterly report to the Board every quarter to list out whether there are trades that
deviate from the new framework sales contract or the smelting contract, as the case may be;
(ii) after Listing, our Company ’s compliance adviser will perform review on the sales, smelting
and sulfuric acid compensation transactions of our Group to ensure there are no discrepancies
between our Group’ s actual transaction procedures and those as set out in aforementioned
new framework sales contract and the smelting c ontract on a quarterly basis throughout the
effective period acting as our Company ’s compliance adviser; and
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(iii) our Group has engaged an external independent professional party to review the sales,
smelting and sulfuric acid compensation tran sactions of our Group wi th Shandong Guoda and
to report any discrepancies between our Group ’s actual transaction procedures and the
aforementioned new framework sales contract and the smelting contract on a quarterly basis
for a period from the Listing Date until 31 December 2024. Disclosures will be made in the
annual report of our Company in respect of the review result of independent professional
party in due course.
Gold forward contracts entered into with our customers
In view of the increasing gold spot price in the PRC in 2020, we entered into gold forward
contracts with Shandong Humon and Shandong Guoda to capture investment opportunities during the
year. We generated investment income amounted to approximately RMB2.7 million in FY2020 from
such gold forward contracts. Under the forward con tracts, we agreed to buy or sell a certain quantity of
gold at an agreed price (being the gold spot price on the day when the forward contract is entered into)
between us and our customers with no delivery of gold. In practice, we entered into same amount of
forward contracts to close our position and hence, we did not have any open position as at 31 December
2020 and there was no actual physical delivery of gold for these forward contracts. We did not enter
into such gold forward contracts in FY2021 and therea fter since our Directors did not intend to and will
not engage in such investment activities but to focus on our principal mining business.
Major customers who are also our subcontractors
We sell gold bullion of Au99.95 to our smelters or th eir subsidiaries who are registered with the
Shanghai Gold Exchange, for their subsequent sales on the Shanghai Gold Exchange. As such,
Shandong Guoda and Shandong Humon are our customers who are also our subcontractors during the
Track Record Period. The table below sets out the percentage of revenue and gross profit generated from
our sales to our customers who are also our subcontractors during the Track Record Period:
FY2020 FY2021 FY2022 6M2023
Shandong Guoda
Amount paid by Shandong Guoda
(as a customer) as a percentage of
our revenue (%) 93.0 100.0 100.0 100.0
Gross profit (RMB ’000) 181,575 140,105 218,590 92,382
Gross profit margin (%) 54.1 56.5 52.2 47.0
Amount paid to Shandong Guoda
(as a subcontractor) as a percentage of
our total purchases (%) 6.0 7.3 12.2 10.6
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FY2020 FY2021 FY2022 6M2023
Shandong Humon
Amount paid by Shandong Humon
(as a customer) as a percentage of
our revenue (%) 7.0 ———
Gross profit (RMB ’000) 13,411 ———
Gross profit margin (%) 53.2 ———
Amount paid to Shandong Humon
(as a subcontractor) as a percentage of
our total purchases (%) 0.4 ———
For further details on background information and years of relationship with our customers who
are also our subcontractors, please refer to the paragraph headed ‘‘Suppliers and subcontractors —
Subcontractors’’ in this section. During the Track Record Period and up to the Latest Practicable Date,
there had been no material disputes between our Group and our customers.
As at the Latest Practicable Date, none of our Directors, their respective close associates or any
existing Shareholders (who or which, to the knowle dge of our Directors own more than 5% of the issued
share capital of our Company immediately following the completion of the Global Offering and the
Capitalisation Issue) had any interest in any customers during the Track Record Period. There were no
material disputes with our customers during the Track Record Period.
SEASONALITY
Our Directors considered that, and as confirmed by Frost & Sullivan, our gold mining and ore
processing business is generally not subject to any seasonal fluctuations.
IMPACTS OF THE TEMPORARY SUSPENSION OF MINING OPERATIONS IN FY2021
In early 2021, Qixia Hushan Gold Mine (棲 霞市笏山金礦) of Shandong Wucailong Investment
Company Limited ( 山東五彩龍投資有限公司) and Caojiawa Gold Mine ( 曹家窪金礦) of Zhaoyuan
Caojiawa Gold Mine ( 招遠市曹家窪金礦), two local enterprises which are owned by Independent Third
Parties, encountered safety incidents. Immediately after such incidents, in late February 2021, Yantai
Municipal Party Committee and Yantai Municipal Government announced ‘‘Yantai City ’sw o r kp l a nf o r
cleaning-up and rectifying non-coal mines ’’《煙台市清理整頓非煤礦山工作方案》(‘‘Cleaning-up Work
Plan
’’), which required, among others, (i) all mines in Yantai City (including ours) to suspend mining
operations in order for the government authority to carry out safety inspection (ii) Yantai Municipal
Party Committee and Yantai Municipal Government implemented classified polic ies and comprehensive
rectification measures for non-coal mining enterprises in Yantai City, including ‘‘Several Regulations of
the Municipal Government Safety Committee on furth er strengthening the sa fety management of non-
coal underground mines ’’《市政府安委會關於進一步強化非煤地下礦山安全管理的若干規定》(‘‘Safety
Regulations ’’)a n d ‘‘Detailed rules for resumption and accep tance of non-coal underground mines in
Yantai (Trial) ’’《煙台市非煤地下礦⼭復⼯驗收細則(試⾏)》, banned and required any non-coal mines
that fail to meet the prescribed standards in the Safety Regulations to exit in an orderly manner.
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Pursuant to the Safety Regulations, among others, (i) it is strictly prohibited to organise production and
construction without approval; (ii) the mine operators are required t o strengthen the supervision of
closed mines; (iii) construction of mines should stri ctly comply with the pre-approved design of mines
and subject to annual review on compliance with the pre-approved design; (iv) there should be
centralised and unified management of mine safety, which shall be overseen by key personnel; (v) safety
management of subcontracting works shall be strengthened; (vi) the safety education and training of all
staff shall be strengthened; (vii) there should be strict management of explosives and hot work; (viii) the
mine operator should increase automation in production and improve the communication network; and
(ix) the mine operator should establish sound emergency rescue system.
Lower production volume and utilisation rate
In view of the above, both our Songjiagou Open-Pit Mine and Songjiagou Underground Mine have
suspended mining operations from February to August 2021 and February to November 2021,
respectively while our ore processing plant was required to suspend from March to August 2021 (except
for certain test runs for safety inspections as required by the government authorities in April and May
2021) for the government authority to carry out safety inspection ( ‘‘Temporary Operation
Suspension ’’). As part of the safety measures, we obtained our own blasting operation permit and built
explosive magazine for each of our Songjiagou Open-Pit Mine and Songjiagou Underground Mine
separately in order to resume mining operations. We met the prescribed safety standards under the
Cleaning-up Work Plan and the Safety Regulations. Yantai Zhongjia had obtained the blasting operation
permit in June 2021 and our Songjiagou Open-Pit Mine had passed the safety inspection, obtained the
resumption approvals, and resumed operations in August 2021. Given our Songjiagou Open-Pit Mine
has its own explosive magazine, and hence complied with the requirements of strict management of
explosives under the Safety Regulations, our Songjiagou Open-Pit Mine was able to obtain the supply of
explosives to resume mining operations in August 2021 as soon as the resumption approvals were
obtained. However, despite the fact that our Songjiagou Underground Mine has passed the safety
inspection in late April 2021 and obtained the resum ption approvals in early May 2021, Yantai Zhongjia
was required to construct a separate explosive magaz ine before the supply of explosives was permitted
under the Safety Regulations. Hence, our Songjiagou Underground Mine only resumed mining
operations in December 2021. There have been no mat erial deficiencies identified by the relevant
government authority during the safety inspectio n of our Songjiagou Open-Pit Mine and Songjiagou
Underground Mine in 2021.
In view of the Temporary Operation Suspension as mentioned above, our ore processing plant did
not reach its designated production capacity in FY 2021 as the utilisation rate was approximately 51.7%
as compared to approximately 80.3% in FY2020. The utilisation rate for our ore processing plant only
fell approximately 28.6% in FY2021 as compared to FY2020 because we had ore stock pile to support
our ore processing operations in February 2021 despite the suspension of mining operations, as well as
the test runs in April and May 2021 for safety inspections as required by the government authorities. As
a result, our gold production volume during FY2021 was 576.9 kg (or 18,547.8 ounces), representing a
decrease of approximately 414.5 kg (or 13,326.5 ounces) or 41.8% as compared to FY2020. Despite the
above, except for February and March 2021 which we recorded minimal or no sales of gold bullion, we
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were able to record monthly sales of gold bullion throughout the most of FY2021. As a result of the
abovementioned Temporary Operation Suspension, our revenue decreased by approximately 31.3% and
our profit for the year decreased by approximately 48.7% in FY2021 as compared to FY2020.
Carrying out own mining activities
As provided by the Cleaning-up Work Plan and the Safety Regulations, the local government
imposed measures on strengthening the management of subcontracting works on mining activities,
among others, mining activities s hall be performed and/or managed by the mine owner or a main
contractor with proper qualification where further outsourcing to subcontractors are prohibited. Prior to
February 2021, we outsourced substantially all of the mining works comprising demolition, drilling,
blasting and excavation works at our mines to third-party subcontractors. Since we had already
terminated substantially all of our mining works subcontractors for the Songjiagou Open-Pit Mine in
September 2020 and the Songjiagou Underground Mine in January 2021 in order to reduce cost of
mining prior to the Cleaning-up Plan and the Safety Regulations coming into fo rce, and we substantially
carried out the mining works comprising demolitio n, drilling and excavation ourselves, which do not
require specific licences or permits to do so, except for blasting works which we continued to outsource
until July 2022 as such works require a blasting operation permit, and that both our Songjiagou Open-
Pit Mine and Songjiagou Underground Mine have obtained valid production safety permits, we were
able to comply with the safety requirements introduced by the local government in early 2021. We also
leased the relevant machineries from Independent Third Parties and employed our own personnel to
perform mining works. The machineries include four down hole drilling rigs and four air compressors in
respect of drilling activities. The personnel employed b y us possessed the relevant qualifications, such
as mechanical and safety engineering, as required under the relevant laws and regulations. Further as
part of the safety measures, we obtained our own blasting operation permit in June 2021 before we
resumed mining operations. As advised by our PRC Leg al Advisers, as at the Latest Practicable Date we
had obtained all licences, permits and certificates for the purpose of operating our business, including
those for demolition, drilling, blasting and excavation w orks at our mines that we previously outsourced
to third party subcontractors. Accordingly, there has been no material impact on the introduction of the
safety requirements to our business operation and we have complied with such requirements to ensure
safety of our mines.
IMPACTS OF THE OUTBREAK OF COVID-19 PANDEMIC ON OUR BUSINESS
Since the end of December 2019, the outbreak of COVID-19 has materially and adversely affected
the global economy. To contain the spread of COVID-19, the PRC government implemented mandatory
quarantine, closure of work places and facilities, trav el restrictions and other relevant measures. We
have maintained a sound business performance during most of the time when there was an outbreak of
the COVID-19 pandemic in the PRC. Other than the temporary two-weeks suspension of our back office
administrative functions after the Chinese New Year holidays in February 2 020 during the initial stage
of COVID-19 pandemic in the PRC, none of these measures implemented by the PRC government had
negatively affected our business operations subsequently. In 2020, our monthly revenue continued to
remain stable at approximately RMB26.7 million to RMB33.9 million from M arch to December 2020,
and we achieved a 57.5% year-on-year growth in our annual revenue for FY2020 as compared to the
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year ended 31 December 2019. Despite the regional outbreak of the Omicron variant which led to
temporary lockdown measures implemented by the PRC government in major cities such as Shenzhen
and Shanghai in early to mid 2022, similar lockdown measures were not implemented in Muping
District of Yantai city of the Shandong Province and hence, our operations have not been affected. On 7
December 2022, the PRC government announced the nationwide relaxation of COVID-19 restrictions
and with effect from 8 January 2023, the quarantine requirements for both COVID-19 patients and
inbound travellers were abolished. During the Track Record Period and up to the Latest Practicable
Date, trading activities on the Sh anghai Gold Exchange had not been suspended and were not affected
by the temporary lockdown measures implemented by the PRC government.
Subsequent to the relaxation of COVID-19 restrictions on 7 December 2022 as announced by the
PRC government, our Group began to have suspected or confirmed COVID-19 cases among our
employees. Despite the fact that our infected employees were not required to be quarantined according
to latest government policies, we recommended our employees to work from or stay at home until they
showed no symptoms of COVID-19. Nevertheless, during the Track Record Period and up to the Latest
Practicable Date, including the period subsequen t to the relaxation of COVID-19 restrictions, the
business operations of our Group have not been materially and adversely affected as a result of COVID-
19. We will closely monitor and ensure our Group ’s compliance in the latest policies from the PRC
government in relation to the COVID-19.
Based on current situation, up to the Latest Practicable Date, our Directors were of the view that
the COVID-19 pandemic or the recurrence of which will not have a material adverse impact on the
financial position of our Group having considered the following factors:
(i) according to the F&S Report, the outbreak of COVID-19 has mainly affected the gold mining
industry in terms of reduced working days as a result of delayed resumption of production by
gold mining companies and the restricted supply of raw materials and products, such as
explosives, support materials and filing mater ials due mainly to the traffic control imposed by
the PRC government. As a result, gold production in the first quarter of FY2020 in China has
fallen by approximately 10.9% or approximately 10.1 tonnes to approximately 82.6 tonnes as
compared to the same period in 2019. However, according to the F&S Report, the outbreak
of COVID-19 has led to the rise in gold price. T he gold mining industry had accelerated their
production after their resumption of operation in order to capture high price and profit,
driving the increase in gold production in the following months. Besides, the increase in
production capacity of gold mining companies attributable to technology improvement and
equipment upgrading also drove the increase of the gold production in China after the first
quarter of FY2020. Therefore, according to the F&S Report, the overall gold production in
China has only declined slightly by approximately 3.9% from approximately 380.2 tonnes in
2019 to approximately 365.3 tonnes in 2020;
(ii) our mining and processing operations continued to operate smoothly and properly during the
outbreak of COVID-19 and the gold trading system of the Shanghai Gold Exchange
continued to be running smoothly and orderly during this period;
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(iii) there had been no loss of our major customers and suppliers since the outbreak of COVID-19
up to the Latest Practicable Date; and
(iv) our supply of raw materials used for our production was not materially affected, and we had
not encountered any material supply chain disruption in FY2020 and subsequent to the Track
Record Period and up to the Latest Practicab le Date. In any event, we generally maintain
current inventory level of raw materials to fulfil our ore processing operations for the next 30
days. We will replenish our inventories according to our inventory control and management
policy, and we will also closely monitor and assess the situation and make prompt and
regular enquiries with our major suppliers. We purchased raw materials and consumables
from around 40 suppliers in FY2020, which we maintained a list of suppliers comprising
multiple suppliers for the same supply of raw mat erials to ensure we always have available
alternative sources of supplie s. In the event that there were any disruptions to the supply of
raw materials, we will reach out to other local suppliers for the purchase of the relevant raw
materials that are required for our production during the interim period.
Going forward, we do not believe there is other material impact on our business operations and
growth and expansion plans. However, there are many uncertainties related to the COVID-19 pandemic,
such as the eventual spread of the virus, the severity and duration of the pandemic and possible further
action by governments around the world to contain the virus, and the extent that the COVID-19 directly
or indirectly affect our business, results of opera tion, cash flow and financial condition will also depend
on highly unstable and unpredictable future developments. See ‘‘Risk factors — Risks relating to the
business operations of our Group — Our business operations may be affected by the COVID-19
pandemic and other outbreak of diseases. ’’
COMPETITION
According to the F&S Report, the gold mining industry in the PRC is relatively fragmented as it is
dominated by small and medium-sized gold mines. However, the gold mining industry in the Shandong
Province is concentrated to five largest gold mining companies. Shandong Province is the largest gold
producing province in the PRC with gold mine production volume of approximately 41.4 t, which
accounted for approximately 14.0% of the total gold mine production volume in China in 2022, while
Yantai city, accounted for more than 90% of the gold mine production of the Shandong Province in
2022. The top ten PRC gold companies by domestic gold mine production volume collectively
accounted for approximately 48.5% of the total gold mine production volume in the PRC in 2022 while
the top five gold producers in Shandong Province by gold mine production volume accounted for
approximately 84.7% of the total gold mine production in Shandong Province in 2022. According to the
F&S Report, our annual gold mine production volume was approximately 1.1 t in 2022, making us the
third largest gold mining company in the Shandong Province with a market share of 2.6% in terms of
mine production volume but the top two players have an aggregated market share of approximately
78.3% in terms of gold mine production volume.
According to the F&S Report, the gold industr y is, among others, (i) subject to extensive
regulations such as mining licence, safety production licence and environmental protection regulations;
and (ii) a capital-intensive industry that requires significant investment for a large number of equipment,
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land resources, compliance with stringent requirements for safety production and environmental
protection; to adopt resource exploration, recycl e procedure and merger and acquisition activities to
ensure sustainable and sufficient mine reserves; and to invest in advanced technology to cope with the
rising difficulty and complexity of gold mining procedure due to the decrease in gold grade and the
increase in mining depth. For more inform ation, please refer to the section headed ‘‘Industry overview
— Entry barriers ’’in this prospectus.
Since gold is a well-established commodity activ ely traded on spot and derivative markets, the
price of gold is typically determined as a function o f the markets as a whole and is not substantially
differentiated by products an d brands. Therefore, we do not face competition in terms of price
differentiation. We primarily compete with nationwide leading gold producers and regional large and
medium-sized gold producers in the PRC in terms of our ability to obtain more gold resources and
reserves, which is dependent on our financial conditions, technical ability, equipment and machinery and
management experience. For more information of our competitive strengths, please refer to the
paragraph headed ‘‘Competitive strengths ’’in this section.
SUPPLIERS AND SUBCONTRACTORS
During the Track Record Period, our suppliers and subcontractors of goods and services which
were specific to our business and were required on a regular basis to enable us to continue to carry on
our business principally included: (i) suppliers of raw materials and consumables such as explosives,
steel grinding balls and chemical reagents used in our ore processing operation; (ii) electricity supplier;
(iii) suppliers of parts and replacements of machinery; (iv) subcontractors for car rying out mining works
comprising demolition, drilling, blasting and excavation works for our Songjiagou Open-Pit Mine and
Songjiagou Underground Mine prior to February 2021; (v) subcontractors for car rying out smelting work
to refine our gold concentrate into gold bullio n of Au99.95; (vi) logistics subcontractors for
transportation of ore; and (vii) equipment leasing subcontractors for the lea sing of certain drilling
equipment. A number of our suppliers and subcontractors during the Track Record Period were
individuals, which is common in the industry according to the F&S Report. These individual suppliers
and subcontractors are mostly villagers residing near our mining and operations sites who are mainly
traders of raw materials and ore transportation service providers, respectively. We have developed more
than three years of business relationships with most of these individual suppliers and subcontractors. As
these individual suppliers and subcontractors are residing near our mining and operation sites, we can
ensure timely delivery of raw materials and services w ithout incurring additional travelling expenses that
may be charged by the suppliers and subcontractors.
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Our total purchases include purchases of raw mate rials, utilities, mining subcontracting services,
logistics subcontracting services and refining subcontracting services. The following table sets out a
breakdown of our total purchases by type of materials or services during the Track Record Period:
FY2020 FY2021 FY2022 6M2023
RMB’000 % RMB ’000 % RMB ’000 % RMB ’000 %
Suppliers
Raw materials 31,205 35.5 23,634 42.2 52,393 46.8 24,046 47.4
Utilities 30,042 34.2 19,477 34 .8 33,831 30.3 17,149 33.8
Subtotal 61,247 69.7 43,111 77.0 86,224 77.1 41,195 81.2
Subcontractors
Mining subcontracting 13,725 15.6 1,544 (Note) 2.7 631 0.6 ——
Logistics 7,229 8.2 4,964 8.9 9,054 8.1 3,763 7.4
Refining subcontracting 5,706 6.5 4,067 7.3 13,655 12.2 5,382 10.6
Equipment leasing
subcontracting costs —— 2,286 4.1 2,268 2.0 390 0.8
Subtotal 26,660 30.3 12,861 23.0 25,608 22.9 9,535 18.8
Total 87,907 100.0 55,972 100.0 111,832 100.0 50,730 100.0
Note: This amount included an under-provision of subcontracting fees approximately RMB519,000 in relation to services
provided by Liaoyuan Zhuoli in FY2020 despite the mining subcontracting arrangement with it had been terminated
since September 2020 arising from pr olonged settlement mainly caused by the Temporary Operation S uspension.
Save for this incident, there were no other under-provisions of subcontracting costs during the Track Record Period.
Please refer to the section headed ‘‘Financial information — Sensitivity analysis ’’ in this
prospectus for a discussion of the fluctuation in our purchases from our suppliers and subcontractors
during the Track Record Period.
Apart from compensation of defective products, we generally do not require our suppliers to
provide any after-sales warranty except for spare parts for equipment and machinery, which our
suppliers generally provide us with product warra nties for a term of six months. We usually settle
payments to a majority of our suppliers within 30 to 90 days from the date of invoices.
Raw materials
While the principal raw materials for our operation is the ore extracted from our Songjiagou Open-
Pit Mine and Songjiagou Underground Mine, we procure raw materials and consumables, which mainly
include explosives used in our mining operations and steel grinding balls and chemical reagents used
during our ore processing operation. All of these materials and consumables are sourced from suppliers
in the PRC. During the Track Record Period, our costs of purchases of raw materials and consumables
amounted to approximately RMB31.2 million, RM B23.6 million, RMB52.4 million and RMB24.0
million, respectively, accounted for approximately 35.5%, 42.2%, 46. 8% and 47.4%, of our total cost of
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purchases, respectively. We require the quality of our raw materials and consumables to meet industry
and national standards. Our suppliers generally deliv er raw materials and consumables to our designated
locations.
The following summarises the salient terms of the purchase contracts with our suppliers for the
purchase of raw materials and consumables:
. Contract price and payment . The products shall be sold at the agreed unit price as set out
in the contract. Payments for the purchases shall be settled within a period ranging from 30
to 60 days from the date of the relevant invoices by way of bank transfer or bank drafts.
. Term . Generally for a fixed term of one year.
. Scope . The suppliers shall provide raw materials and consumables in accordance with the
required standards as set out in the contract.
. Suppliers ’ obligations . The raw materials and consumables shall meet the agreed quality
standards as set out in the contract and the applicable industry regulations. The suppliers
shall deliver the raw materials and consumables to us at their own delivery costs.
. Warranty & indemnity . For defective products, the suppliers are generally required to
compensate us with the same kind of raw materials and consumables.
. Termination . No provision on termination rights of e ither parties is set out in the contract.
. Renewal . The contract does not set out any renewal clause.
Utilities
We entered into an agreement with Supplier A, a local electricity supplier, to procure electricity
for our operations. Our Directors consider that the price is comparable to the market rates that the
electricity supplier charges other electricity users. The contract is for a term of five calendar years. For
further details, please refer to the paragraph headed ‘‘Our operations — Power supply ’’in this section.
Parts and replacements of machinery
We have sourced parts and replacements of machinery for our mining and ore processing
operations from Independent Third Party suppliers in the PRC for maintenance of our production
machinery and equipment at market prices. For deta ils of our mining and production equipment, please
refer to the paragraph headed ‘‘Our operations — Production machinery and equipment’’ in this section.
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Major suppliers
We maintain an approved supplier list and make procurements only through the suppliers that are
on our list. Pursuant to our procurement policy, we in vite qualified suppliers to submit tenders and all
tenders must be submitted in writing. The t ender documents, including tenders ’ business licences as well
as specifications and selection of their products, are examined by our management and procurement
officers. Our management and procurement officers consider various factors including the suppliers ’
qualifications, track record, quality, service and c osts, among other factors. During the Track Record
Period and up to the Latest Practicable Date, all of our supplies were sourced locally in the PRC.
We seek to maintain long-term business relations hips with suppliers, many of whom have business
relationships with us for over four years. For further details on background information of our five
largest suppliers during the Track Record Period, please see the paragraph headed ‘‘Background
information of our top five suppliers during the Track Record Period ’’in this section. To effectively
manage our risks associated with the price fluctua tions of our raw materials, consumables, parts and
replacements of machinery, we analyse the consumption and other data of major raw materials,
consumables, parts and replacements of machinery, carry out research on market trends, and prepare
annual procurement budgets. We endeavour to strictly implement the tendering process in our
procurement system and optimise the level of our inventories, which in turn improves our cost
management and efficiency. Most of the raw materials, consumables, parts and replacements of
machinery used by us are readily available from m ultiple suppliers and can be sourced at competitive
market prices. Therefore we do not rely on any partic ular supplier for any particular item. During the
Track Record Period, we did not encounter any material disruption to our business as a result of
shortage or delay in the supply of raw materials , consumables, utilities, parts and replacements of
machinery.
For each of FY2020, FY2021, FY2022 and 6M2023, purchases from our five largest suppliers
amounted to approximately RMB45.5 million, RM B29.7 million, RMB57.5 million and RMB31.0
million, respectively, accounted for approximat ely 51.8%, 53.1%, 51.4% and 61.1% of our total
purchases. Purchases from our la rgest supplier amounted to approx imately RMB29.6 million, RMB19.2
million, RMB33.5 million and RMB16.9 million, resp ectively, for the same period, accounted for
approximately 33.7%, 34.3%, 30.0% and 33.4% of our total purchases.
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The tables below set forth the breakdown of our purchases from our five largest suppliers in each
of year/period during the Track Record Period:
For the year ended 31 December 2020
Rank Supplier
Business
relationship
since year
Products
supplied to
us
Credit term and
payment method Purchase
Approximate
%o fo u r
Group ’st o t a l
purchases
RMB ’000 %
1 Supplier A 2015 Electricity 15 days from the
end of the calendar
month and bank
transfer
29,582 33.7
2 煙台曼之瑞國際貿易有限公司
(Yantai Manzhirui International
Trading Co., Ltd*) ( ‘‘Yantai
Manzhirui ’’)
2019 Crushing
equipment
Ten days from the
end of the calendar
month and bank
transfer and bank
acceptance bills
6,103 6.9
3 煙台市瑞合金屬製品有限公司
(Yantai Ruihe Metal Product
Co., Ltd*) and its associated
companies ( ‘‘Yantai Ruihe
Group ’’)
2016 Steel
grinding
balls
Two months from
the date of invoice
and bank transfer
and bank
acceptance bills
4,502 5.1
4 安徽省當塗縣鋼球廠 (Anhui
Dangtu Steel Grinding Balls
Factory*) ( ‘‘Anhui Dangtu ’’)
2017 Steel
grinding
balls
Two months
from
the date of invoice
and bank transfer
and bank
acceptance bills
3,311 3.8
5 Supplier B 2019 Diesel Upon delivery and
bank transfer
2,004 2.3
Total 45,502 51.8
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For the year ended 31 December 2021
Rank Supplier
Business
relationship
since year
Products
supplied to
us
Credit term and
payment method Purchase
Approximate
%o fo u r
Group ’st o t a l
purchases
RMB ’000 %
1 Supplier A 2015 Electricity 15 days from the
end of the calendar
month and bank
transfer
19,222 34.3
2 Yantai Manzhirui 2019 Crushing
equipment
Ten days from the
end of the calendar
month and bank
transfer
3,034 5.4
3 山東魯豐石油有限責任公司
(Shandong Lufeng Petroleum
Co., Ltd.*) (‘‘ Shandong
Lufeng ’’)
2021 Diesel Upon delivery and
bank transfer
2,933 5.2
4 Yantai Ruihe Group 2016 Steel
grinding
balls
Payment upon the
receipt of invoice
and bank transfer
2,547 4.6
5 山東聖世達化工有限責任公司
(Shandong Shengshida Chemical
Co., Ltd.*)
(‘‘Shandong Shengshida ’’)
2021 Explosives Two months from
the date of delivery
and bank transfer
1,997 3.6
Total 29,733 53.1
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For the year ended 31 December 2022
Rank Supplier
Business
relationship
since year
Products
supplied to
us
Credit term and
payment method Purchase
Approximate
%o fo u r
Group ’st o t a l
purchases
RMB ’000
1. Supplier A 2015 Electricity 15 days from the
end of the calendar
month and bank
transfer
33,526 30.0
2. Yantai Manzhirui 2019 Crushing
equipment
Ten days from the
end of the calendar
month and bank
transfer
6,642 5.9
3. Shandong Shengshida 2021 Explosives Two months from
the date of delivery
and bank transfer
6,415 5.7
4. Shandong Lufeng 2021 Diesel Upon delivery and
bank transfer
6,029 5.4
5. 濰坊龍海民爆有限公司
(Weifang Longhai Civil
Blasting Co., Ltd.*)
2022 Explosives Two months from
the delivery and
bank transfer
4,928 4.4
Total 57,540 51.4
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For the six months ended 30 June 2023
Rank Supplier
Business
relationship
since year
Products
supplied to
us
Credit term and
payment method Purchase
Approximate
%o fo u r
Group ’st o t a l
purchases
RMB ’000
1. Supplier A 2015 Electricity 15 days from the
end of the calendar
month and bank
transfer
16,930 33.4
2. 青島豐利石油能源有限公
司(Qingdao Fengli Petroleum
Energy Co., Ltd)
2022 Diesel Payment before
delivery and bank
transfer
5,839 11.5
3. Shandong Shengshida 2021 Explosives Two months from
the date of delivery
and bank transfer
3,693 7.3
4. 馬鞍山明聖磨料商貿
有限公司(Maonshan
Mingsheng Abrasive Trading
Co., Ltd.*)
2020 Steel grinding
balls
Three months from
the date of delivery
and bank transfer
2,536 5.0
5. Yantai Ruihe Group 2016 Steel grinding
balls
Payment upon the
receipt of invoice
and bank transfer
1,968 3.9
Total 30,966 61.1
Background information of our top five suppliers during the Track Record Period
Supplier A, a branch of a collectively-owned enterprise established in the PRC in November 1991,
which is primarily engaged in the business of elect ricity supply. As at the Latest Practicable Date,
Supplier A was wholly-owned by a state-owned enterprise based in the Shandong Province, which has
135 subordinate organisations in the Shandong Province and supplied electricity to approximately 53.5
million customers in the PRC.
Yantai Ruihe Group comprises 煙台市瑞合金屬製品有限公司 (Yantai Ruihe Metal Product Co.
Ltd.*) ( ‘‘Yantai Ruihe’’) and its associated companies, 煙台市牟平區百瑞礦產品銷售有限公司 (Yantai
Muping Bairui Mining Supplies Sales Co. Ltd.*) ( ‘‘Yantai Bairui’’ )a n d 牟平區寶能礦山機械配件經銷
處 (Muping Baoneng Mining Machinery Accessories Sales Centre*) ( ‘‘Muping Baoneng ’’). Yantai
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Ruihe is a limited liability company established in t he PRC in May 2015 with a registered capital of
RMB0.1 million, is primarily engaged in the busine ss of processing, wholesale and retail of steel
grinding balls. Yantai Bairui is a limited liability company established in the PRC in February 2020
with a registered capital of RMB100,000, which is principally engaged in the sale of mining supplies.
Muping Baoneng is an individual industrial and commercial household established in the PRC in August
2019, which is principally engaged in the sale of mining machinery accessories, hardware products and
mechanical and electrical equipment. As at the Latest Practicable Date, Yantai Ruihe Group was
ultimately controlled by Jiang Zhengli ( 姜正利), an Independent Third Party.
Yantai Manzhirui, a limited liability company e stablished in the PRC in December 2018 with a
registered capital of RMB1.0 million, is primarily en gaged in the sales of mining and construction
machinery and other machinery and equipment. As at the Latest Practicable Date, Yantai Manzhirui was
wholly-owned by 葛允海 (Ge Yunhai) an Independent Third Party individual.
Anhui Dangtu a collectively-owned enterprise established in the PRC in August 1989 with a
registered capital of RMB0.3 million, is primarily enga ged in the business of processing, manufacturing,
and sales of ordinary carbon steel balls, castings , and casting of alloy steel balls. As at the Latest
Practicable Date, it was wholly -owned by Chawan Town Council of Dangtu County of the PRC.
馬鞍山明聖磨料商貿有限公司 (Maonshan Mingsheng Abrasive Trading Co., Ltd.*), a limited
liability company established in the PRC in Novemb er 2014 with a registered capital of RMB0.5
million, is primarily engaged in the sales of steel balls, steel shot, castings and wear-resistant materials.
It is a successor of Anhui Dangtu which operates the factory of Anhui Dangtu. As at the Latest
Practicable Date, it was wholly-owned by Shen Ming ( 沈明), an Independent Third Party individual.
Supplier B is a limited liability company establis hed in the PRC in August 2000 with a registered
capital of RMB150.0 million, which is primarily enga ged in the production and operation of hazardous
chemicals, refining of oil and manufacturing of special equipment for chemical production, petroleum
products and lubricants. As at the Latest Practicab le Date, Supplier B was owned as to approximately
40% by an Independent Third Party individual, 26.7% by a corporate shareholder (a limited liability
company established in the PRC which is principally engaged in the production and sales of
polypropylene and related products and owned by five Independent Third Party individuals), and the
remaining equity interests of 33.3% by four Independent Third Party individuals.
Shandong Lufeng is a limited lia bility company established in the PRC in December 2019 with a
registered capital of RMB10.0 million, which is pri marily engaged in the wholesale of diesel, fuel,
industrial white oil, crude white oil, asphalt and light circulating oil. As at the Latest Practicable Date, it
was owned as to 99.0% by Du Jie ( 都杰) and the remaining 1.0% by Zhang Wei ( 張偉), two
Independent Third Party individuals.
青島豐利石油能源有限公司 (Qingdao Fengli Petroleum Energy Co., Ltd*) is a limited liability
company established in the PRC in March 2000 with a r egistered capital of RMB50.0 million, which is
primarily engaged in the wholesale of crude oil and refined oil, operation of hazardous chemical
products, inter-provincial general cargo ship transpo rtation, intra-provincial ship transportation, port
operations, domestic ship management services and sales of petroleum products. As at the Latest
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Practicable Date, it was owned as to 99.0% by Du Jie ( 都杰) and the remaining 1.0% by Wang
Yuanming ( 王源明), both were Independent Third Parties. Du Jie is the controlling shareholder of both
Shandong Lufeng and Qingdao Fengli Petroleum Energy Co., Ltd*.
山東聖世達化工有限責任公司 (Shandong Shengshida Chemical Co., Ltd.*) is a limited liability
company established in the PRC in March 2000 with a r egistered capital of RMB31.4 million, which is
primarily engaged in the manufacturing and the sales of hardware products, plastic products, mining
machineries, the production and sale of explosives and the operation of hazardous chemical business. As
at the Latest Practicable Date, it was owned as to approximately 99.7% by 深圳市金奧博科技股份有限
公司 (Shenzhen Jianobo Technology Co. Ltd.*), a company whose shares are listed on the Shenzhen
Stock Exchange and approximately 0.3% by Bai Yunfeng ( 白雲峰) an individual, both were Independent
Third Parties.
濰坊龍海民爆有限公司 (Weifang Longhai Civil Blasting Co. , Ltd.*) is a limited liability company
established in the PRC in October 2000 with a regis tered capital of RMB53.6 million, which is primarily
engaged in the production and sales of civilian explo sives. As at the Latest Practicable Date, it was
owned as to 55.3% by Zhong Qingguo ( 鐘慶國) and the remaining 44.7% by various Independent Third
Party individuals.
All of our major suppliers during the Track Record Period were Independent Third Parties. During
the Track Record Period and up to the Latest Practicable Date, none of our Directors, their close
associates or any Shareholder who, to the knowledge of our Directors, owned more than 5% of our
issued share capital, had any interest in any of our fi ve largest suppliers. To the best of our Directors ’
knowledge, information and belief, having made all reasonable enquiries, save for the purchase contracts
for the supply of raw materials entered into by us with all of our major suppliers in the ordinary course
of business as described in paragraph headed ‘‘Suppliers and subcontractors — Suppliers’’ in this
section, there were no other past or present relationships or dealings (including family, business,
employment, trust, fund flow, financing or otherwise) between our Group and each of our major
suppliers during the Track Record Period, their resp ective shareholders, directors or senior management,
and any of their respective assoc iates. Our Directors confirmed that there was no side agreement,
arrangement, undertaking or fund flow between our Group and our major suppliers during the Track
R e c o r dP e r i o da n du pt ot h eL a t e s tP r a c t i c a b l eD a t e .
During the Track Record Period, we had not experienced any material shortage or delay of service
supply due to defaults of supplies from our suppliers. Our Directors confirmed that none of our suppliers
was our customer during the Track Record Period.
Subcontractors
In line with the industry practice in the PRC, we outsource refining and logistics to qualified
subcontractors, as well
as lease certain drilling e quipment from equipment leasing subcontractor to
support our mining operations. Prior to February 2021, we also outsourced a substantial portion of our
mining works comprising demolition, drilling, blastin g and excavation works to qua lified subcontractors.
Engagement of subcontractors enables us to achieve better cost controls, reduce our capital expenditures
and operating cash costs and minimise our exposure to operational risks associated with labour and
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safety. We believe that the services provided by our subcontractors are common in the market, and it
would not be difficult for us to find alternative subcontractors to provide similar services on terms
comparable with those between our existing subcontractors and us.
The table below sets forth the number of our su bcontractors by major activities as at the dates
indicated:
As at 31 December As at 30 June
20232020 2021 2022
Mining activities 2 3 1 —
Refining 2 1 1 1
L o g i s t i c s 6 37 16 5 4 3
Equipment leasing — 12 2
Total 67 76 69 46
The fluctuation in the number of subcontractors engaged by us during the Track Record Period
was mainly due to the increase in the number of logis tics service providers, who are mostly individuals
or local villagers, to cater to our increase in demand for ore and waste rocks transportation services as a
result of the resumption of our mining activities in late August 2021 (for our Songjiagou Open-Pit
Mine) and in December 2021 (for our Songjiagou Underground Mine) after the Temporary Operation
Suspension, which required more logistic service providers to transport ore and waste rocks as our effort
to resume normal production volume.
For each of FY2020, FY2021, FY2022 and 6M2023, purchases from our five largest
subcontractors amounted to approximately RMB 19.7 million, RMB8.0 million, RMB17.2 million and
RMB6.2 million, respectively, accounted for approx imately 22.4%, 14.4%, 15.4% and 12.2% of our
total purchases. Purchas es from our largest subcontractor amoun ted to approximately RMB9.0 million,
RMB4.1 million, RMB13.7 million and RMB5.4 millio n, respectively, for the same period, accounted
for approximately 10.2%, 7.3%, 12.2% and 10.6% of our total purchases.
Mining activities
Prior to February 2021, we outsourced substa ntially all of our mining works comprising
demolition, drilling, blasting and excavation works to two mining subcontractors in the Shandong
Province, namely Liaoyuan Zhouli and Shandong Zhangjian to provide mining works at our Songjiagou
Open-Pit Mine and Songjiagou Underground Mine, respectively. We require these subcontractors to be a
qualified mine construction company holding the requisite production safety licences. During FY2020,
we decided to carry out the mining works ourselves, seeking to reduce our cost of mining. As such, we
have terminated the mining subcontracting arrangement with Liaoyuan Zhouli in September 2020 and
Shandong Zhangjian in January 2021, respectively. In 2021 and until July 2022, we subcontracted
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blasting engineering works in respect of our Songjiagou Underground Mine to an Independent Third
Party. Thereafter and up to the Latest Practicable Da te, we conducted such blasting engineering works
ourselves.
Salient terms of the contracts with subcontractors in respect of mining works
A. Mining works
The following summarises the salient terms of the co ntracts with our subcontractors in respect of
mining works prior to February 2021:
. Contract price and payment . Agreed charges ranging from RMB4.2 per tonne to RMB4.8
per tonne in relation to our Songjiagou Open-Pit Mine and an agreed fixed charge of
approximately RMB100 per tonne in relation to our Songjiagou Underground Mine, subject
to adjustment according to the grade of ore extracted. The charges are paid on a monthly
basis.
. Term . Fixed term, generally for one to three years.
. Scope . The subcontractor shall provide, among o ther things, demolition, drilling, blasting
and excavation works in accordance with the relevant PRC laws and regulations. In general,
our subcontractors are responsible for purchasing explosive materials required for blasting
works.
. Subcontractors ’ obligations . The mining works must meet our quality standards and the
subcontractor must comply with the standards and requirements as set out in the contract.
The performance and conduct of the subcontractor is also subject to the supervision of our
personnel. The subcontractor shall be responsible for all risks and losses associated with any
accidents and quality issues arising from the works carried out by the subcontractor.
. Warranty and indemnity. The subcontractor shall compensate us for any losses suffered by
us due to any quality issues of the subcontracting works.
. Termination . We may terminate the contract by serving prior written notice to the
subcontractor.
. Renewal . The contract does not set out any renewal clause.
B. Blasting engineering works
The following summarises the salient terms of the contract with the subcontractor, an Independent
Third Party, who provided blasting engineering works in respect of our Songjiagou Underground Mine
from December 2021 to July 2022. Thereafter and up to the Latest Practicable Date, we conducted such
works ourselves.
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. Contract price and payment. Monthly charges are calculated based on the actual number of
days requiring blasting engineering works in our Songjiagou Underground Mine, which
comprise: (i) management fee in the total amount of RMB43,000 per month; (ii) explosive
blasting fee of RMB11,205 per t onne of explosives used; (iii) blasting fee ranging from
RMB4.96 to RMB13.37 per detonator used; (iv) blasting fee of RMB4.62 per metre of
detonating cord used; and (vi) RMB15,000 per m onth for each blasting technician engaged.
. Payment method and period. Fees are payable on a monthly basis and payment shall be
made within 3 days upon receipt of the invoice from the subcontractor by depositing into the
bank account designated by the subcontractor.
. Term. Valid from 7 December 2021 to 10 July 2022
. Scope. The subcontractor shall carry out blasting works in our Songjiagou Underground
Mine in accordance with our schedule. The subcontractor may make suggestions on the type
and number of technicians to provide the blasting engineering works, which shall be agreed
by us in writing before implementation.
. Subcontractor ’s obligations. The subcontractor shall provide regular technical and safety
trainings to technicians working in our Songjiagou Underground Mine. The subcontractor
shall ensure it and the workers employed by it have valid licences to carry out blasting
works.
. Termination. The subcontractor shall be entitled to un ilaterally terminate the contract in the
event that we do not pay the charges in accordance with the contract.
Refining works
During the Track Record Period, we have engaged two Independent Third Party subcontractors,
namely Shandong Guoda and Shando ng Humon for the smelting and refining of gold concentrate
produced by us into gold bullion of Au99.95. It usually takes around one day to refine gold concentrate
into gold bullion of Au99.95.
Salient terms of the contracts with subcontractors in respect of refining works
The following summarises the salient terms of the co ntracts with our subcontractors in respect of
refining works:
. Contract price and payment . Prior to October 2021, the agreed processing charges ranging
from RMB100 per tonne to RMB150 per tonne of gold concentrate for processing, subject to
adjustments due to impurities found in our gold c oncentrate. Such processing charges were
determined after considering, among other fa ctors, gold grade and recovery rate of gold
concentrate, as well as the value of by-products (such as sulfuric acid in gold concentrate)
generated during the smelting process which will not be separately accounted for. From 10
October 2021 to 15 March 2022, in view of the significant increase in price of sulfuric acid,
we renegotiated with our refining subcontractors to receive a separate compensation for
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sulfuric acid generated during the smelting process at RMB140 per tonne to RMB150 per
tonne of gold concentrate processed. At the sam e time, the refining processing charges have
been revised to RMB200 per tonne to RMB220 per tonne. From 16 March 2022, the
compensation for sulfuric acid was further r evised to (i) if the external selling price of
sulfuric acid by our refining subcontractors exceeds RMB400 per tonne, to be 35% of their
selling price minus RMB400 per tonne, pl us RMB100 per tonne o f gold concentrate
processed; (ii) if the external selling price of sulfuric acid by our refining subcontractors
equals to or below RMB400, to be RMB100 per t onne of gold concentrate processed; or (iii)
if the external selling price of sulfuric acid by our refining subcontractors exceeds RMB1,000
per tonne, then the compensation for sulfuric acid will be renegotiated by the parties. As
from 10 October 2022, the refining processing charges have been revised to RMB200 per
tonne.
. Term . Valid for an indefinite period until terminated.
. Scope . The subcontractors shall refine the gold concentrate produced by us in accordance
with the gold recovery rate as set out in the c ontract. The subcontractors shall bear the
delivery cost of delivering the gold concentrate from our ore processing plant to the gold
smelters.
. Subcontractors ’ obligations . Both parties shall take a sample from each batch of gold
concentrate being delivered to the subcontractors for refining with an extra sample being kept
for a third-party assessment, the result of which shall, in case of any material discrepancies in
the gold content of our gold concentrate, be final and conclusive. The refining work of the
subcontractors must meet the gold recovery rate according to the gold content of our gold
concentrate as set out in the contract. With effect from 6 January 2023, the subcontractors
shall complete the abovementioned assessment and the relevant refining services within 30
days of delivery of gold concentrate in order to enable settlement (whether by cash or gold
bullion) to be completed within the same period.
. Warranty and indemnity . No warranties or indemnities a re provided in the contract.
. Termination . No provision on termination rights of e ither parties is set out in the contract.
. Renewal . No renewal clause is set out in the contract.
During the Track Record Period, our subcontractors for refining works had never failed to meet the
gold recovery rate according to the gold content of our gold concentrate as set out in the contracts. In
respect of our arrangement with Shandong Guoda regarding the charge of smelting fees and the
compensation for sulfuric acid, we understand from Shandong Guoda that they have the similar
arrangements and terms with their other customers a nd it is the normal market practice for smelters to
provide separate compensation for sulfuric acid when the market price of sulfuric acid is high. Frost &
Sullivan also confirmed that such compensatio n for sulfuric acid is not uncommon in the mining
industry in China.
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Logistics works
During each year of the Track Record Period, we engaged up to around 80 Independent Third
Party subcontractors, who are mostly individuals or local villagers in the Shandong Province for the
provision of transportation services to transport o re and waste rocks from our Songjiagou Open-Pit Mine
and Songjiagou Underground Mine to our ore processing plant. Since 2021, we also engaged an
Independent Third Party subcontractor for the provision of transportation services to transport explosives
from our suppliers to our mines. We did not engag e logistics contractors for transporting gold
concentrate from our ore processing plant to the smelters as the smelters are responsible for such
transportation.
Salient terms of the contracts with subcontractors in respect of logistics works
The following summarises the salient terms of the contracts with our subcontractors for the
logistics works:
A. Ore and waste rocks transportation
. Contract price and payment . Agreed fixed charges of RMB4.0 per tonne. The charges are
paid on a monthly basis by way of bank transfers.
. Term . Generally for a fixed term of one year.
. Scope . The subcontractors shall transport the ore and waste rocks extracted from our mining
sites to our ore processing plant or other designated location.
. Subcontractors ’ obligations . The subcontractors shall ensure the logistics works are carried
out in a safe and lawful manner and they shall be responsible for over-loadings, traffic
accidents, administrative proceedings, safety accidents, personal injuries and loss of
properties.
. Warranty and indemnity . No warranties or indemnities a re provided in the contract.
. Termination . No provision on termination rights of e ither parties is set out in the contract.
. Renewal . Automatically renewed u pon expiry of the contract.
B. Explosives transportation
. Contract price and payment. Agreed fees of RMB12,000 –18,000 per vehicle per month and
RMB4,360 per driver per month. The charges are paid on a monthly basis by way of bank
transfers.
. Term. Generally for a fixed term of one year.
. Scope. The subcontractor shall provide two prescribed vehicles with two qualified drivers.
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. Subcontractors ’ obligations. The subcontractor shall ensure it has the relevant licences or
permits and insurance, as well as compliance with the relevant laws and regulations for the
delivery of dangerous items.
. Warranty and indemnity. No warranties or indemnities are provided in the contract.
. Termination. The contract will be terminated if there is any change in government policy or
force majeure event, or due to the subcontractor no longer having the relevant licences or
permits to deliver dangerous items or any reasons caused by our Group that render contract
cannot be performed one month after the date of execution of the contract.
. Renewal. No provision on renewal of contract after the fixed term of one year.
Equipment leasing
Since 2021, we have leased drilling equipment from a n Independent Third Party equipment leasing
subcontractor to support our mining operations.
Salient terms of the contract with equipment leasing subcontractor
The following summaries the salient terms of the contract with our equipment leasing
subcontractor for the leasing of drilling equipment:
. Contract price and payment. Agreed fees of RMB29 per metre drilled. The charges are paid
on a monthly basis by way of bank transfers.
. Term. Generally for a fixed term of one year.
. Scope. The subcontractor shall lease the whole set of the drilling equipment and provide
regular maintenance services for wear and tear.
. Subcontractors ’ obligations. The subcontractor shall be responsible to replace any spare
parts and bear the fuel costs to ensure the d rilling equipment can function normally. The
subcontractor shall provide technician to gu ide and supervise the usage of such drilling
equipment.
. Warranty and indemnity. No warranties or indemnities are provided in the contract.
. Termination. No provision on termination rights of either parties is set out in the contract.
. Renewal. Our group shall give first right of refusal to renew the contract upon expiry based
on same terms and conditions.
Our Group considers the market for such third pa rty logistics subcontr actors to be competitive,
which can be replaced with other third party subcontra ctors in the market offering similar services at
similar terms and fees.
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Selection and management of subcontractors
In general, we select subcontractors through a selective tendering process taking into account the
subcontractors ’ competence, qualification, expertise and experience. We require candidates to provide
their licencing record and information on their previous engagement in the relevant works, enabling us
to evaluate their technical know-how, management competence and financial condition to determine
whether they are able to perform the outsourced works. Based on the review of the candidates and the
materials submitted by them, we negotiate commerc ial terms with them and make the final decision.
All of our subcontractors must possess the requisite qualifications for undertaking the works for
which they are commissioned. During the Track Record Period and up to the Latest Practicable Date, to
the best knowledge of our Directors, each of our subcontractors held all necessary qualifications for
them to provide the relevant services to us.
We assign technical personnel to conduct daily on-site supervision of our subcontractors, which
ranges from reviewing engineering quality and quantif ying mineral losses and depletion to supervising
and managing the process, ensuring that they operate in accordance with the technical specifications of
our project and industry standards. We require our subcontractors to comply with the applicable laws
and regulations in respect of safety and environmental protection and to hold the requisite permits and
licences. During the Track Record Period and up to the Latest Practicable Date, we had not experienced
any material disputes with our subcontractors or any suspension or delay of operations as a result of
subcontractors ’ safety issue.
In the event we find deficiencies in our subcontractors ’ work or safety management, we would
provide rectification directives to such subcontract ors and require them to take corrective measures. In
the event that we discover any significant safety hazards in the safety management of our
subcontractors, we are entitled to suspend their wor k and require them to pay penalties for breaching
our internal control policies. In addition, we requir e our subcontractors to purchase insurances for their
employees and properties and to provide physical check-ups for their employees.
We have more than three years of relationship with majority of our subcontractors. For further
details on background information of our five largest subcontractors for each of FY2020, FY2021,
FY2022 and 6M2023, please see the paragraph headed ‘‘Background information of our top five
subcontractors during the Track Record Period ’’in this section. Our Directors confirmed that we had not
experienced any material dispute with our subcontractors or any suspension or delay of operations as a
result of subcontractors ’ safety issue during the Track Record Period and up to the Latest Practicable
Date.
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The tables below set forth the breakdown of our purchases from our five largest subcontractors in
each of year/period ended during the Track Record Period:
For the year ended 31 December 2020
Rank Subcontractor
Business
relationship
since year
Services
provided to us
Credit term and
payment method Purchases
Approximate%
of our Group ’s
total purchases
RMB ’000 %
1 Shandong
Zhangjian
2017 Mining works at our
Songjiagou
Underground Mine
Ten days from the
end of the calendar
month and bank
transfer
8,992 10.2
2 Shandong Guoda 2017 Refining serv ices Prepayment and bank
transfer and bank
acceptance bills
5,317 6.0
3 Liaoyuan Zhuoli 2018 Mining works at our
Songjiagou Open-Pit
Mine
7d a y sf r o mt h ed a t e
of invoice and bank
transfer
4,733 5.4
4 Shandong Humon 2008 Refining services Ten days from the
date of delivery and
bank transfer
389 0.4
5 Wang Qingsong
(王青松)
2017 Logistics services 60 days from the end
of month and cheque
281 0.3
Total 19,712 22.4
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For the year ended 31 December 2021
Rank Subcontractor
Business
relationship
since year
Services
provided to us
Credit term and
payment method Purchases
Approximate%
of our Group ’s
total purchases
RMB ’000 %
1 Shandong Guoda 2017 Refining services Prepayment and bank
transfer
4,067 7.3
2. 煙台海泰機械租賃
有限公司 (Yantai
Haitai Machinery
Leasing Co., Ltd.*)
(‘‘Yantai Haitai ’’)
2021 Drilling equipment
rental services
7 days from the date
of invoice and bank
transfer
2,286 4.1
3 Shandong
Zhangjian
2017 Mining works at our
Songjiagou
Underground Mine
Ten days from the end
of the calendar month
and bank transfer
809 1.4
4 Liaoyuan Zhuoli 2018 Mining works at our
Songjiagou Open Pit
Mine
7 days from the date of
invoice and bank
transfer
519 0.9
5 河南八達平安運輸
有限公司 (Henan
Bada Pingan
Transportation
Co., Ltd.*)
(‘‘Henan Bada ’’)
2020 Transportation services
of explosives
10 days from the end
of month and bank
transfer
366 0.7
Total 8,047 14.4
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For the year ended 31 December 2022
Rank Subcontractor
Business
relationship
since year
Products supplied to
us
Credit term and
payment method Purchase
Approximate %
of our Group ’s
total purchases
RMB ’000
1. Shandong Guoda 2017 Refining services Prepayment and bank
transfer
13,655 12.2
2. Yantai Haitai 2021 Drilling equipment
rental services
7 days from the date of
invoice and bank
transfer
1,514 1.4
3. 煙台旺金機械租賃有限
公司 (Yantai Wangjin
Machinery Leasing
Co., Ltd.*)
2022 Drilling equipment
rental services
7 days from the date of
invoice and bank
transfer
754 0.7
4. 煙台市牟平區東方爆破
工程有限公司 (Yantai
Muping Dongfang
Blasting Engineering
Co., Ltd.*)
2021 Blasting engineering
works
3 days upon receipt of
the invoice and bank
transfer
631 0.6
5. Qu Dapeng ( 曲大鵬) 2020 Logistics services 60 days from the end
of month and bank
transfer
597 0.5
Total 17,151 15.4
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For the six months ended 30 June 2023
Rank Subcontractor
Business
relationship
since year
Products supplied to
us
Credit term and
payment method Purchase
Approximate %
of our Group ’s
total purchases
RMB ’000
1. Shandong Guoda 2017 Refining services Prepayment and bank
transfer
5,382 10.6
2. Yantai Haiti 2021 Drilling equipment
rental services
7 days from the date of
invoice and bank
transfer
265 0.5
3. Henan Bada 2020 Transportation services
of explosive
10 days from the end
of month and bank
transfer
206 0.4
4. 牟平區鵬源運輸服務隊
(Muping Pengyuan
Transportation Services
Team*)
2023 Logistics services 60 days from the end
of month and bank
transfer
178 0.4
5. 牟平區自超運輸服務部
(Muping Zichao
Transportation Services
Department*)
2022 Logistics services 60 days from the end
of month and bank
transfer
174 0.3
Total 6,205 12.2
Background information of our top five subcontractors during the Track Record Period
Shandong Zhangjian, a limite d liability company established in the PRC in June 2006 with a
registered capital of approximately RMB66. 0 million, is primarily engaged in the business of
underground and open-pit mining works, mining construction, earthmoving, tunnelling, culvert
engineering in accordance with qualifications; sales of mineral products; development of mining
technology, enterprise ma nagement consulting services; and engineering of mechanical and electrical
installation for construction. As at the Latest Prac ticable Date, Shandong Zhangjian was owned by Jian
Shousheng ( 簡守省) and Zhang Huacan ( 章華燦), two Independent Third Party individuals.
Liaoyuan Zhuoli, a limited liability company e stablished in the PRC in October 2001 with a
registered capital of RMB17.0 million, is primarily en gaged in manufacturing of emulsified explosives;
manufacturing of chemical products (excluding dangerous chemical articles that are flammable or
explosive); manufacturing of packaging products; and design and construction. As at the Latest
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Practicable Date, Liaoyuan Zhuoli is owned as to 80% by 中國葛洲壩集團易普力股份有限公司 (China
Gezhuoba Group Yipuli Co., Ltd.*), which in turn is a subsidiary of 中國葛洲壩集團股份有限公司
(China Gezuoba Group Co., Ltd.), a company that was listed on the Shanghai Stock Exchange (stock
code: 600068.SS) prior to its cancellation of listing upon the completion of a share swap and merger
with China Energy Engineering Corporation Lim ited (a joint stock company listed on the Stock
Exchange (stock code: 3996.HK) and the Shanghai Stock Exchange (stock code: 601868.SS)), and 20%
by 遼源礦業(集團)有限責任公司 (Liaoyuan Mining Group Co., Ltd.*) which is indirectly wholly owned
by the State-Owned Assets Supervision and Admi nistration Commission of the PRC of Jilin Province
and the Department of Finance of Jilin Province.
Wang Qingsong ( 王青松) is an Independent Third Party individual subcontractor for transportation
of ore based in the PRC.
Yantai Haitai is a limited liability company e stablished in the PRC in October 2021 with a
registered capital of RMB700,000, which is primarily engaged in the leasing of construction machineries
and equipment and earthwork construction. As at th e Latest Practicable Date, it was wholly-owned by
Ren Junxin ( 任俊新) and Ren Suying ( 任素英), two Independent Third Party individuals.
Henan Bada is a limited liability company est ablished in the PRC in November 2006 with a
registered capital of RMB1.0 million, which is primarily engaged in the provision of road transportation
services. As at the Latest Practicable Da te, it was wholly-owned by Chen Qiang ( 陳強) and Suo Shouyu
(鎖守玉), two Independent Third Party individuals.
煙台市牟平區東方爆破工程有限公司 (Yan tai M uping Dongfang Blasting Engineering Co., Ltd.*)
is a limited liability company established in the PR C in February 2004 with a registered capital of
RMB1.2 million, which is primarily engaged in the bu siness of urban controlled blasting engineering,
mine blasting, soil blasting engineering construction works. As at the Latest Practicable Date, it was
wholly-owned by Zhu Duanxiang ( 祝端香)a n dL iG u o( 李國), two Independent Third Party individuals.
Qu Dapeng (曲 大鵬) is an Independent Third Party individual subcontractor for transportation of
ore based in the PRC.
牟平區鵬源運輸服務隊 (Muping Pengyuan Transportation Services Team*) is a sole
proprietorship which was established by Ms. Chen Cuicui ( 陳翠翠), an Independent Third Party
individual in the PRC in June 2022. It is primarily engaged in road cargo transportation, general cargo
storage services and loading and unloading services. Ms. Chen Cuicui is the wife of Mr. Qu Dapeng and
the sole proprietorship was established to be the su ccessor of Mr. Qu Dapeng to provide transportation
services to the Group.
煙台旺金機械租賃有限公司 (Yantai Wangjin Machinery Leasing Co., Ltd.*) Yantai Wangjin is a
limited liability company established in the PRC i n July 2022 with a registered capital of RMB1.0
million, which is primarily engaged in the leasin g of construction machineries and equipment and
earthwork construction. As at the Latest Practicable Date, it was owned as to 90% by Li Meng ( 李猛)
and 10% by Li Qinming ( 李欽明), two Independent Third Party individuals.
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牟平區自超運輸服務部 (Muping Zichao Transportation S ervices Department*) is a sole
proprietorship which was es tablished by Wang Zichao ( 王自超), an Independent Third Party individual
in the PRC in December 2021. It is primarily engaged in road cargo transportation, general cargo
storage services and loading and unloading services. Such proprietorship was established to be the
successor of Mr. Wang Zichao to provide transportation services to the Group.
All of our major subcontractors during the Track Record Period were Independent Third Parties.
During the Track Record Period and up to the Latest Pr acticable Date, none of our Directors, their close
associates or any Shareholder who, to the knowledge of our Directors, owned more than 5% of our
issued share capital, had any interest in any of our fi ve largest subcontractors. Please also refer to the
paragraph headed ‘‘Sales and customers — Our relationships with Shandong Guoda and Shandong
Humon ’’in this section for the background information of Shandong Guoda and Shandong Humon. Save
for (i) the contracts for provision of services ente red into by us with all of our major subcontractors in
the ordinary course of business a s described in paragraph headed ‘‘Suppliers and subcontractors —
Subcontractors’’ in this section; (ii) the sales of gold bullion to Shandong Guoda and Shandong Humon
who were also our customers in the ordinary course of business during the Track Record Period, details
of which are disclosed in the paragraph headed ‘‘Sales and customers — Our relationships with
Shandong Guoda and Shandong Humon ’’in this section; (iii) the gold forward contracts entered into by
us with Shandong Guoda and Shandong Humon in 2020, details of which are disclosed in the paragraph
headed ‘‘Sales and customers — Gold forward contracts entered into with our customers ’’ in this
section; (iv) the guarantee in favour of bank provided by Shandong Humon prior to 2020 for the bank
borrowings of Yantai Zhongjia, all of which had been released since April 2020; and (v) the bank
acceptance bills agreements entered into by Yanta i Zhongjia with Shandong Humon prior to the Track
Record Period, for the purpose of obtaining ban k acceptance bills, to the best of our Directors ’
knowledge, information and belief, having made all reasonable enquiries, there were no other past or
present relationships or dealings (including family, business, employment, trust, fund flow, financing or
otherwise) between our Group and each of our major subcontractors during the Track Record Period,
their respective shareholders, directors or senior management, and any of their respective associates. Our
Directors confirmed that there was no side agreement, arrangement, undertaking or fund flow between
our Group and our major subcontractors during the Track Record Period and up to the Latest Practicable
Date.
During the Track Record Period and up to the Late st Practicable Date, we had not experienced any
material shortage or delay of supply due to defaults of our subcontractors. Please see the section headed
‘‘Risk factors — Risks relating to the business operations of our Group — Our operations may face risks
in relation to production delays and increased produc tion costs resulting from design defects, production
safety and occurrence of accidents’’ in this prospectus for further details. Save as disclosed in the
paragraph headed ‘‘Sales and customers — Major customers who are also our subcontractors ’’in this
section, our Directors confirmed that none of our subcontractors was our customer during the Track
Record Period.
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INVENTORY MANAGEMENT
Our inventories mainly include gold concentrat e, ore stockpile and raw materials. We manage our
inventories by monitoring the inventory levels by expected demand and our production plan. Our
production manager maintains perpetual records for all major ty pes of supplies to facilitate the
obsolescence provision analysis and coordinates physical inventory counts. Our mining manager
reconciles sub-ledgers of the inventory records to the general ledger on a monthly basis, and calculates
the provision for obsolescence on a quarterly basis.
To manage our raw ore, we require our mine operations to maintain perpetual inventory records.
Our chief geologist or engineer determines the g rade in raw ore to enable a net realisable value
calculation. Our site controller ensures that all direct and mining department cos ts are properly allocated
to raw ore and that all inventory-related transactio ns are completely and accurately reported. Our site
controller also completes impairment tests on raw ore quarterly and our financial manager reviews and
approves impairment adjustments.
We transfer the gold concent rates produced from our proce ssing plant to our smelting
subcontractors for refining them into gold bullion. Since our gold concentrates are processed at the
smelters in bulk together with the gold concentrates from other of their customers in line with industry
norm, the smelters are unable to confirm with us the amount and volume of gold bullion that was solely
refined from our gold concentrates but not from other of their customers. As such, our gold concentrates
are considered to be refined into gold bullion upon d elivery to and acceptance b y our customers, which
is also the time when we recognise revenue from s ales of gold bullion. Further, we do not require the
smelters to transfer back the gold bullion to us after refining because of security concern and also due to
the fact that, in practice, we would also sell our go ld bullion to our smelters. As a result, during the
period since the receipt of gold concentrates by ou r smelters to the delivery of gold bullion to and the
acceptance by our customers, our gold concentrates are incidentally kept at our smelters.
To monitor and control our inventory kept at our smelters, we maintain a record of each batch of
gold concentrates sent to our smelters, with parame ters including weight and gold grade of the gold
concentrates and the applicable gold recovery rate. These parameters enable us to calculate the
theoretical amount of gold bullion to be produced from our gold concentrates. These parameters are also
recorded by our smelters and are captured in the mon thly smelting reports provided by the smelters to
us. We will then cross-check our records with the m onthly smelting reports to identify any material
discrepancies which will be followed up and resolv ed with our smelters. As such, despite the fact that
our smelters are unable to confirm with us the amount and volume of gold bullion that was solely
refined from our gold concentrates, our smelters can confirm the amount of our gold concentrates and
gold bullion produced and to be produced on their acco unt based on the monthly smelting reports. We
also regularly communicate, cross-check and reconcile with our smelters regarding the amount of gold
bullion produced or to be produced from our gold concen trates or available for delivery and settlement.
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QUALITY CONTROL
As a gold mining and production c ompany, quality control is cruci al to our operations. We have
established a stringent quality co ntrol system to ensure the qua lity of our products throughout the
mining and ore processing stages. To ensure our refining subcontractors deliver quality works, we take a
sample from each batch of gold concentrate being d elivered to them for refining with an extra sample
being kept for a third-party assessment, the result of which shall, in case of any material discrepancies
in the gold content of our gold concentrate, be final and conclusive. They have also contractually agreed
that their refining works must meet the gold recove ry rate according to the gold content of our gold
concentrate as specified by us in the refining services agreement. During the Track Record Period and
up to the Latest Practicable Date, we did not receiv e any material complaints due to quality issues of our
products.
With respect to mining and ore processing, we implement a comprehensive quality control system
to monitor the quality at each key stage of mining an d ore processing. We establish specific guidelines
for the size of ore mined and the mining process to manage the quality of ores mined. Ores mined from
each of our Songjiagou Open-Pit Mine and Songjiagou Underground Mine are sample-tested at our
laboratories to monitor the grade of the ore. We designate competent and experienced managerial
personnel to supervise our mini ng and ore processing activities.
We provide quality and technical specification s to suppliers and generally require suppliers to
provide warranty for the supplies we procure. We i nspect the physical conditions and the quantities
received of each shipment of raw materials, consumables, parts and replacement before accepting the
shipments into our inventory. We engage subcontractors for certain parts of the operation and we require
all these subcontractors to meet our qualification requirements and conduct their operations in
accordance with our internal standards, industry standards and the relevant PRC laws and regulations.
We routinely supervise and regularly inspect their works to ensure their works are undertaken in
accordance with our quality standards. We conduc t quality inspections when they have completed the
works before we accept their works.
AWARDS AND RECOGNITIONS
The following table sets out our achievements over the years:
Award/recognition Year/period Issuer
Advanced Taxpayer Enterprise of the Region in 2012
(2012年度 全區納稅先進企業)
February 2013 Government authority of Muping
District in Yantai city
Advanced Taxpayer Enterprise of the Region in 2013
(2013年度 全區納稅先進企業)
February 2014 Government authority of Muping
District in Yantai city
The Advanced Unit in Production Safety at the
District Level ( 年度區級安全生產工作先進單位)
February 2014 Government authority of Muping
District in Yantai city
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Award/recognition Year/period Issuer
Advanced Taxpayer Enterprise of the Region in 2014
(2014年度 全區納稅先進企業)
February 2015 Government authority of Muping
District in Yantai city
Advanced Taxpayer Enterprise of the Region in 2015
(2015年度 全區納稅先進企業)
February 2016 Government authority of Muping
District in Yantai city
Advanced Taxpayer Enterprise of the Region in 2017
(2017年度 全區納稅先進企業)
February 2018 Government authority of Muping
District in Yantai city
Outstanding Taxpayer Enterprise of the Region in
2018 (2018年度 全區納稅優秀企業)
February 2019 Government authority of Muping
District in Yantai city
Advanced Taxpayer Unit ( 納稅先進單位) February 2019 Government authority of
Wanggezhuang Town
Outstanding Taxpayer Enterprise of the Region in
2019 (2019年度 全區納稅優秀企業)
March 2020 Government authority of Muping
District in Yantai city
High-tech Enterprise ( 高新技術企業) December 2020 Department of Science and
Technology of Shandong,
Department of Finance of
Shandong and Tax Department
of Shandong
Star Taxpayer Enterprise of the Region in 2020
(2020年度 全區納稅明星企業)
March 2
021 Government authority of Muping
District in Yantai City
2022 Top Ten Enterprises (2022年度十 強企業) May 2023 Committee of Muping District in
Yantai City, People ’s
Government of Muping District,
Yantai City
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RESEARCH AND DEVELOPMENT
During the Track Record Period, we carried out a number of research and development projects
ourselves, and we engaged an Independent Third party company to conduct research to improve our ore
processing efficiency by preventing blockage during ore processing and to design screening plates to
improve the efficiency of screening. Our research and development projects mainly focus on improving
our production process, ore concentrate processing efficiency, precision of ore selection to reduce
production cost and to improve safety protectio n to reduce safety risks at our mining facilities and
equipment.
Our research and development projects are mainly carried out by our technical team, comprised
three mining operations engineers and six geologist s as at the Latest Practicable Date, the majority of
whom hold a bachelor ’s degree. On average, our technical team members have over 15 years of
experience in mining related industries. During the Track Record Period, our technical team had
developed a number of mining related softwares such as blasting supervision dynamic control software,
3D scene reproduction and visualisation managem ent system, online safety monitoring and controlling
system of our tailings dam, open truck digital dispa tching system and 3D mine surveying integrated
information management software, and a number of devices for use in our mines, such as devices for
precise measurement of tailings, strengthening the stability of rocky slopes, monitoring of rockfalling in
an open-pit mines and testing of filling materials in underground mines. Due to the research and
development efforts of our technical team, we hav e successfully developed 3 inventions and 26 utility
models. As at the Latest Practicable Date, we had fi led and registered these softwares, invention and
utility models in the PRC. For further details, please see the section headed ‘‘Statutory and general
information — B. Further information about our business — 2. Intellectual property rights of our
Group ’’in Appendix V to this prospectus. FY2020, FY2021, FY2022 and 6M2023, we have recognised
research and development expe nses of approximately RMB4.9 million, RMB5.0 million, RMB9.2
million and RMB3.2 million, respectively. Our res earch and development costs are charged to our
statements of profit and loss as incurred.
During the Track Record Period, our research and development expenses in our statements of
profit or loss primarily included salaries, wages and employment benefits of our technical team and
service fees paid to Independent Third Party company for or attributable to research and development
purpose. In FY2020, we scaled up our research and de velopment activities by eng aging the Independent
Third Party to conduct research for us and separately recorded the costs of our technical team
attributable to research and development activitie s. As a result, we began to recognise research and
development expenses separately in our statements of profit or loss starting from FY2020.
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INSURANCE
As at the Latest Practicable Date, we maint ained the following insurance policies:
(a) property insurance;
(b) machinery and equipment insurance;
(c) employer liability insurance; and
(d) work safety liability insurance.
We maintain insurance policies that are requir ed under the PRC laws and regulations as well as
based on our assessment of our operational needs and industry practice. Our Directors consider that our
existing insurance coverage is sufficient for our pres ent operations and in line with the industry practice
in the PRC.
During the Track Record Period, our total insurance expenses amounted to approximately RMB0.4
million, RMB0.5 million, RMB0.6 million and RMB0.1 million, respectively. During the Track Record
P e r i o da n du pt ot h eL a t e s tP r a c ticable Date, no material claims had been made in respect of any
insurance policies maintained by members of our Group.
INTELLECTUAL PROPERTIES
As at the Latest Practicable Date, we had registered one trademark in the PRC and four trademarks
in Hong Kong, and registered three patents for invention, 26 patents for utility models, seven software
copyrights and one art copyright in the PRC. We had also registered two domain names
www.persistenceresource.com and www.zj-mining.cn, and applied for registration of one trademark
each in the PRC and Hong Kong. For further details, please see the section headed ‘‘Statutory and
general information — B. Further information about our business — 2. Intellectual property rights of
our Group ’’in Appendix V to this prospectus.
During the Track Record Period and up to the La test Practicable Date, we were not involved in
any dispute or infringement of intellectual properties. As at the Latest Practicable Date, we were not
aware of any material infringements (i) by us of any i ntellectual property rights owned by third parties;
or (ii) by any third parties of any intellectual property rights owned by us and we were also not aware of
any pending or threatened claims against us or any of our subsidiaries in relation to the material
infringement of any intellectual property rights of third parties that would have a material and adverse
effect on our business.
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PROPERTIES
Owned land and buildings
As at the Latest Practicable Date, we owned one parcel of land in the PRC covering a site area of
approximately 3,306.6 sq.m. (the ‘‘Owned Land ’’), six buildings with an aggregate GFA of
approximately 504.5 sq.m. for administrative use and 15 buildings constructed on the Owned Land
(collectively, the ‘‘Owned Buildings ’’) with a total GFA of approximately 2,737.3 sq.m. for the mining
and production operations and ancillary activities o f our Songjiagou Underground Mine. As at the Latest
Practicable Date, details of the land use right in respect of the Owned Land and the usages of the
Owned Buildings are set out in the tables below:
Owned Land
Owner Location Total site area Nature
Expiry date of
land use right
(sq.m.)
(approximately)
Yantai Zhongjia South of Tanjia Village
Shandong Province, PRC
(中國山東省譚家村南)
3,306.6 Mining 25 August 2069
Owned Buildings
As at the Latest Practicable Date, we owned 21 build ings, of which six buildings with an aggregate
GFA of approximately 504.5 sq.m. had ownership certificates, and 15 buildings erected on our Owned
Land, with an aggregate GFA of approximately 2,737.3 sq.m., did not have ownership certificates
(‘‘Defective Owned Buildings ’’). These buildings were used by us for administrative purpose, including
office, dormitory and staff canteen, and for ancillary mining activities, including maintenance plant, car
wash and water holding facility, winding tower and air compressor room among others.
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Leased land and buildings
As at the Latest Practicable Date, we leased (i) 16 parcels of collectively-owned land, of which 14
parcels are rural land collectively owned by villagers (the ‘‘Collectively-owned Rural Land ’’)a n dt w o
parcels are construction land collectively owned by villagers (the ‘‘Collectively-owned Construction
Land ’’), for our Songjiagou Open-Pit Mine site ancillary mining operations and administrative use,
details of which are set out in the table below:
No. Location
Total
site area/GFA Lessor Land nature Rental
Usage by
o u rG r o u p L e a s ep e r i o d
(sq.m.)
(approximately)
Leased land
1. Southwest of Fayunkuang
Village, Shandong Province,
PRC ( 中國山東省發雲夼
村西南山小馬後夼地段)
(Note 1)
206,667.7 Dahedong Collectively-
owned Rural
Land
A one-off payment
of RMB8,990,000
Mining area of
Songjiagou
Open-Pit Mine
September 2007
to September
2027 (Note 2)
2. South and southeast of
Songjiagou Village,
Shandong Province, PRC
(中國山東省宋家溝村南及東
南山地段) (Note 1)
106,667.2 Dahedong Collectively-
owned Rural
Land
A one-off payment
of RMB3,744,000
Mining area of
Songjiagou
Open-Pit Mine
September 2007
to September
2027 (Note 2)
3. West of Qiansongjiao
Village, Shandong Province,
PRC ( 中國山東省前松椒村西
土地)
667.0 Qiansongjiao
Village
Committee of
Wanggezhuang
Town, an
Independent
Third Party
Collectively-
owned
Construction
Land
An annual rental
fee of RMB20,000
(Notes 3 and 6)
Office August 2012 to
July 2032
(Note 2)
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No. Location
Total
site area/GFA Lessor Land nature Rental
Usage by
o u rG r o u p L e a s ep e r i o d
(sq.m.)
(approximately)
4. Southeast of Dahedong
Village, Shandong Province,
PRC ( 中國山東省大河東村
東南地帶)
270,001.4 Dahedong
Village
Committee of
Wanggezhuang
Town, an
Independent
Third Party
Collectively-
owned Rural
Land
RMB18,630,000
( p a i di nt w o
instalments)
Tailings dam March 2010 to
February 2030
(Note 2)
5. Northeast of Jincheng
Village, Shandong Province,
PRC ( 中國山東省金城村
東北地帶)
214,001.1 Jincheng
Village
Committee of
Wanggezhuang
Town, an
Independent
Third Party
Collectively-
owned Rural
Land
RMB14,766,000
( p a i di nt w o
instalments)
Tailings dam March 2010 to
February 2030
(Note 2)
6. Northwest of Wangezhuang
Village, Shandong Province,
PRC ( 中國山東省萬格莊村
西北地帶)
221,334.4 Wangezhuang
Village
Committee of
Yazi Town, an
Independent
Third Party
Collectively-
owned Rural
Land
RMB15,272,000
( p a i di nt w o
instalments)
Tailings dam March 2010 to
February 2030
(Note 2)
7. Southeast of Qiansongjiao
Village, Shandong Province,
PRC ( 中國山東省前松椒村
東南地帶)
294,668.1 Qiansongjiao
Village
Commi
 ttee of
Wanggezhuang
Town, an
Independent
Third Party
Collectively-
owned Rural
Land
RMB20,332,000
( p a i di nt w o
instalments)
Tailings dam March 2010 to
February 2030
(Note 2)
8. Southwest of Fayunkuang
Village, Shandong Province,
PRC ( 中國山東省發雲夼村
西南)
146,667.4 Fayunkuang
Village
Committee of
Wanggezhuang
Town, an
Independent
Third Party
Collectively-
owned Rural
Land
A one-off payment
of RMB10,120,000
Waste rock
dump
February 2011
to February
2031 (Note 2)
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No. Location
Total
site area/GFA Lessor Land nature Rental
Usage by
o u rG r o u p L e a s ep e r i o d
(sq.m.)
(approximately)
9. Northwest of Songjiagou
Village, Shandong Province,
PRC ( 中國山東省宋家溝村
西北)
456,669.0 Songjiagou
Village
Committee of
Wanggezhuang
Town, an
Independent
Third Party
Collectively-
owned Rural
Land
A one-off payment
of RMB31,510,000
Waste rock
dump
February 2011
to February
2031 (Note 2)
10. South of Dahedong Village,
Shandong Province, PRC
(中國山東省大河東村南)
(Note 4)
6,667.0 Dahedong Collectively-
owned
Construction
Land
The rental fee is
included in the
rental fee of the
leased building
and related
facilities erected
thereon
(Note 4)
Ore processing December 2011
to December
2031 (Note 2)
11. Housongjiao Village,
Shandong Province, PRC
(中國山東省後松椒村)
103,760.5 Housongjiao
Village
Committee of
Wanggezhuang
Town, an
Independent
Third Party
Collectively-
owned Rural
Land
A one-off payment
of RMB1,572,660
(Note 5)
Rubble dump September 2019
to September
2039
12. Huangyanghou Village,
Shandong Province, PRC
(中國山東省黃陽後村)
2,666.7 Huangyangh ou
Village
Commi
 ttee, an
Independent
Third Party
Collectively-
owned Rural
Land
A one-off payment
of RMB65,000
Tailing dam
(reserve)
August 2022 to
August 2042
(Note 2)
13. Huangyanghou Village,
Shandong Province, PRC
(中國山東省黃陽後村)
23,333.5 Huangyanghou
Village
Committee, an
Independent
Third Party
Collectively-
owned Rural
Land
A one-off payment
of RMB35,000
Tailing dam
(reserve)
August 2022 to
August 2042
(Note 2)
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No. Location
Total
site area/GFA Lessor Land nature Rental
Usage by
o u rG r o u p L e a s ep e r i o d
(sq.m.)
(approximately)
14. Fayunkuang Village,
Shandong Province, PRC
(中國山東省發雲夼村)
866.7 Fayunkuang
Village
Committee of
Wanggezhuang
Town, an
Independent
Third Party
Collectively-
owned Rural
Land
A one-off payment
of RMB39,500
Mining area of
Songjiagou
Underground
Mine (reserve)
December 2022
to December
2042
15. Huangyanghou Village,
Shandong Province, PRC
(中國山東省黃陽後村)
2,000.0 Huangyanghou
Village
Committee, an
Independent
Third Party
Collectively-
owned
Rural
Land
A one-off payment
of RMB59,060
Tailing dam
(reserve)
February 2023
to February
2043 (Note 2)
16. Huangyanghou Village,
Shandong Province, PRC
(中國山東省黃陽後村)
3,666.7 Huangyanghou
Village
Committee, an
Independent
Third Party
Collectively-
owned
Rural
Land
A one-off payment
of RMB83,880
Tailing dam
(reserve)
February 2023
to February
2043 (Note 2)
Leased buildings
1. West of Qiansongjiao
Village, Shandong Province,
PRC ( 中國山東省前松椒村
西土地)
518.0 Qiansongjiao
Village
Commi
 ttee of
Wanggezhuang
Town, an
Independent
Third Party
Collectively-
owned
Construction
Land
RMB2,076,029.53
(Note 6)
Office building December 2014
to December
2034 (Note 7)
2. West of Qiansongjiao
Village, Shandong Province,
PRC ( 中國山東省前松椒村
西土地)
2,430.0 Qiansongjiao
Village
Committee of
Wanggezhuang
Town, an
Independent
Third Party
Collectively-
owned
Construction
Land
RMB29,563,515
(Note 6)
Office building December 2012
to December
2032
(Note 7)
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No. Location
Total
site area/GFA Lessor Land nature Rental
Usage by
o u rG r o u p L e a s ep e r i o d
(sq.m.)
(approximately)
3. South of Dahedong Village,
Shandong Province, PRC
(中國山東省大河東村南)
7,075.3 Dahedong Collectively-
owned
Construction
Land
RMB54,695,541.04
(Note 4)
Ore processing
plant and related
facilities
December 2011
to December
2031 (Note 2)
4. South of Dehedong Village,
Shandong Province, PRC
(中國山東省大河東村南)
764.1 Dahedong Collectively-
owned
Construction
Land
RMB1,676,311.60
(Note 6)
Dormitory September 2021
to September
2041 (Note 2)
5. Southwest of Fayunkuang
Village, Shandong Province,
PRC ( 中國山東省發雲夼村
西南地段)
196.6 Fayunkuang
Village
Committee of
Wanggezhuang
Town, an
Independent
Third Party
Collectively-
owned Rural
Land
RMB3,289,239.81
(Note 6)
Explosive
storage
December 2014
to December
2034 (Note 7)
6. Southwest of Fayunkuang
Village, Shandong Province,
PRC ( 中國山東省發雲夼村西
南地段)
177.4 Fayu
nkuang
Village
Committee of
Wanggezhuang
Town, an
Independent
Third Party
Collectively-
owned Rural
Land
RMB2,575,268.30
(Note 6)
Explosive
storage and
power
distribution room
September 2020
to September
2037 (Note 7)
7. Northeast of Jincheng
Village, Shandong Province,
PRC ( 中國山東省金城村東
北)
179.7 Jincheng Village
Committee of
Wanggezhuang
Town, an
Independent
Third Party
Collectively-
owned Rural
Land
RMB719,991
(Note 6)
Dormitory and
warehouse
July 2021 to
December 2040
(Note 7)
Notes:
1. These parcels of land and buildings had been sub-leased throughout the Track Record Period by our Group from Dahedong,
which had in turn entered into separate lease ag reements with the relev ant villager committees.
2. The respective lessors agreed to sign an agreement to renew the relevant lease for a further 10 years upon the expiry of the
relevant lease period.
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--- page 268 ---
3. As Yantai Zhongjia paid for the construction costs in relation to the office building erected on such parcel of land, it has
been agreed between the lessor and Yantai Zhongjia that the annual rental fee of such parcel of land would be adjusted from
RMB20,000 to nil during the entire lease period.
4. Such land, building and related facilities are leased by Yanta i Zhongjia from Dahedong, a minority shareholder of Yantai
Zhongjia and a connected person of our Company. Dahedong is the holder of building certificate and land use right
certificate for such land and building. Both our Group and Dahedong understand that, under the PRC laws, it is not
permissible for our Group to register the building certificate of the ore processing plant and hence, agree that our Group
would lease the processing plant instead. As advised by the PRC Legal Advisers, pursuant to the Measures for Building
Registration ( 房屋登記辦法, which was then applicable when the ore processing plant was constructed) and the Operating
Procedure for the Real Estat e Registration (Trial) ( 不動產登記操作規範(試行), which is still in effect), the ownership
registration of a building shall be consistent with the land use right where the building was co nstructed, and especially for
buildings constructed on the collectively o wned construction land, i.e. the ownership of such buildings shall be registered
under the name of the land use right holder. As Dahedong is the holder of the land use right of the relevant land parcel
where the ore processing plant and relat ed facilities and the dormitory are constr ucted, the ownership of the relevant
buildings have been or shall be registered under the name of Dahedong, notwithstanding the fact that the constructions of
relevant buildings and facilities were funded by our Group. As such, our Group could only obtain the right of use of these
buildings and facilities by entering into leasing arrangements with Dahedong.
As confirmed by Dahedong, they considered the land use right of the relevant land parcel as an important asset for their
long-term investment. Upon completion of our Group ’s mining activities in Songjiagou are a, we understand from Dahedong
that they will consider applying for change of the nature of land use right for other investment purposes if they are
permitted to do so under the then relevant laws and regulations. Further, our Group and Dahedong mutually agreed that the
land was leased solely for the operation of our mines and therefore, there is no commercial need for Dahedong to sell and
our Group to purchase the land. It was agreed at the outset that no rental is payable throughout the duration of the lease
period because Dahedong is the minority shareholder of Yantai Zhongjia and to support the business development of Yantai
Zhongjia as the rental will be set-off against the construction costs paid by Yantai Zhongjia. Such funding and leasing
arrangements were at first agreed between our Group and Dahedong. Further, since (1) the relevant construction costs were
paid by our Group to the contractors directly, (2) the relevant infrastructures could be retained to and used by Dahedong
after the use of our Group (i.e. after the life of mine of the Songjiagou Open-Pit Mine and Songjiagou Underground Mine)
and (3) the ownership of the relevant bu ildings and facilities can only be register ed under the name of Dahedong, our Group
in essence constructed these buildings and facilities for and pai d the relevant constructions costs on behalf of Dahedong and
hence, Dahedong agreed to lease these buildings and facilities to our Group at cost of construction which offset the relevant
construction costs. Such arrangeme nt was subsequently confirme d in writing pursuant an agree ment entered into between
our Group and Dahedong. Accord ingly, the construction costs of approximately RMB54.7 m illion (or RMB7,731 per sq.m.)
for the processing plant and related fac ilities and approximately RMB1.7 million (o r RMB2,225 per sq.m.) for the dormitory
were set-off against the rental for the l ease period. Our Directors confirmed that we directly engaged the third party
contractors, including building construction companies, building material suppliers, foundation contractors, etc. for the
construction of the ore pr ocessing plant and related facilities and the dormitory, and the ter ms of payment were negotiated
between us and the building contractors on an arms ’ length basis. Based on the quotation o btained from another qualified
Independent Third Party building contractor, the constructio n costs incurred by our Group on the said properties fell within
the range of the quoted price and were therefore reasonable.
Based on the substance of the lease arrangement, leased properties are recorded as right-of-use assets in the Accountants ’
Report. As such, we did not incur any rental charges during the Track Record Period, but we have incurred amortisation
expenses in respect of the rights of use for such land and building for ore processing plant of approximately RMB2.7
million, RMB2.8 million, RMB2.8 million and RMB1.4 million, re spectively. The amortisation expense of our right-of-use
assets was calculated using the straight -line basis over the shorter of the lease term and the estimated useful lives of the
buildings of 20 years. As the straight-line basis and estimated useful lives adopted for calculating the amortisation expenses
were the same as the calculation for depreciation of the Group’ s buildings, our Directors considered that such bases of
determination of the amortisation expenses are reasonable. Please refer to Note 2.4 of the Accountants ’ Report in Appendix
I to this prospectus for the summary of significant accounting policies. Such amount of amortisation expenses are
comparable to the rental quotation obtained by us for processing plants in close proximity to our mines. The relevant lease
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liabilities were set off against the construction cost accor ding to the arrangement between the parties. Given that
construction cost paid by Yantai Zhongjia was set off by rental fee according to the arrangement between the counterparties,
there were no lease liabilities fo r relevant leased properties.
5. Pursuant to the lease agreement, Yantai Zhongjia is required to pay an annual management fee of RMB20,000 commencing
from 2020 to the end of the lease period.
6. Yantai Zhongjia paid for the respective construction costs of these buildings, which were used to set off the respective
rental fees of these buildings during the respective lease periods.
7. Pursuant to the respective lease agreements of these leased buildings, Yantai Zhongjia has a right of pre-emption to renew
the lease upon the expiry of the respective lease periods.
Land use right and our Group ’s lease arrangement with Dahedong
In January 2011, Dahedong applied to Yantai Land and Resources Bureau, Muping Branch ( 煙台
國土資源局牟平分局) for, and paid for, the relevant taxes of RMB170,008.5 in accordance with the
relevant PRC law effective and applicable at that time, and was registered as the initial land use right
holder of the Collectively-owned Construction Land for the ore processing plant and obtained the
Collectively-owned Land land use right certificate ( 集體土地使用證). There was no consideration but
only tax payment was required for initial registration of the Collec tively-owned Land land use right
pursuant to the Measures for Land Registration ( 土地登記辦法) which was effective as of 1 February
2008 and expired on 29 December 2017, as such procedure was not regarded as a transfer of land,
which was only applicable to acquire state-owned land use rights under the PRC legal framework with
respect to land resources at that time. As advised by our PRC Legal Advisers, Dahedong was not
required to pay any further consideration for initial land use right registration for the ore processing
plant pursuant to the Interim Regulation on Real Estate Registration ( 不動產登記暫行條例), which came
into force on 1 March 2015 and revised on 24 March 2019, and the Detailed Implementation Rules of
the Interim Regulation on Real Estate Registration ( 不動產登記暫行條例實施細則), which came into
force on 1 January 2016 and revised on 24 July 2019. The above two regulations confirmed that all real
estate ownership certificates issued and real estate r egistration in accordance with law before they came
into force shall remain valid and effective. Since the land use right for the ore processing plant is valid
until 25 December 2061, our Directors are of the view that it is unnecessary to request Dahedong to
renew the land use right for the ore processing plant at this juncture.
As confirmed by Dahedong, they were optimistic about the prospect of the gold mining business in
Songjiagou area and in particular, it had the inten tion to cooperate with Yantai Zhongjia in the long run
when it was introduced to our Group by Yantai Mujin back in 2009. In the event that Dahedong were
not the shareholder of Yantai Zhongjia or ceased cooperation with the Group, Dahedong advised that
they might consider renting out the land to other gold mining companies or applying to change the
nature of the land-use right for further investment purpose.
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During the Track Record Period and up to the Latest Practicable Date, we leased from Dahedong:
(i) two parcels of Collectively-owned Rural Land (being leased land numbered 1 and 2) as
mining area of our Songjiagou Open-Pit Mine which we paid one-off rental payment of
RMB8,990,000 and RMB3,744,000 respectively. Such leases were sub-leased by us from
Dahedong, which had in turn leased by Dahedong from the relevant villager committees;
(ii) one parcel of Collectively-owned Construction Land (being leased land numbered 10) for ore
processing plant, which rental fee is included in the rental fee of the leased building and
related facilities erected thereon as discussed below;
(iii) one building as ore processing plant and related facilities constructed on the Collectively-
owned Construction Land (being leased building numbered 3), of which the relevant rental of
RMB54,695,541.04 for the lease period was set-off by the construction costs paid by Yantai
Zhongjia; and
(iv) one building as dormitory constructed on the Collectively-owned Land (being leased building
numbered 4), of which the relevant rental of RMB1,676,311.60 for the lease period was set-
off by the construction costs paid by Yantai Zhongjia.
Please refer to the tables on leased land and leased buildings in the paragraph headed ‘‘Properties
— Leased land and buildings ’’in this section of the prospectus above for further details of the salient
terms of the abovementioned leases from Dahedong.
The leases for the Collectively-owned Rural Land for our Songjiagou Open-Pit Mine will expire in
September 2027 while the leases for the Collec tively-owned Construction Land and the buildings
constructed thereon for ore processing plant a nd related facilities will expire in December 2031.
Dahedong had agreed by signing a letter of undertaking that all of such leases will be renewed for a
further 10 years upon expiry of the lease periods, i.e., until September 2037 and December 2041,
respectively. In September 2022, Dahedong further undertook in writing to our Group that it would not
terminate the lease arrangement for the whole duratio n of the lease period or the extended lease period,
and to give our Group the priority to use the ore processing exclusively. Dahedong must also reserve
sufficient capacity to our Group for ore processi ng as an alternative. If the lease arrangement is
terminated by Dahedong, Dahedong must give at least 12 months ’ advance written notice of termination
to our Group and must during the notice period completely assist Yantai Zhongjia in identifying another
ore processing plant. If Dahedong terminates the lease arrangement with our Group, Dahedong must pay
compensation to our Group calculated based on the remaining number of years in the relevant lease
period times RMB2.8 million per year, being the ave rage amount of our lease expense during the Track
Record Period.
Business risks of termination of leases
In the unlikely event that Dahedong decides not to lease the abovementioned land and buildings to
us, our mining operations will be materially and adversely interrupted as we will not be able to access
our Songjiagou Open-Pit Mine, which contributed over 90% of our ore mined volume during the Track
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Record Period, to carry on our mining activities and will not be able to process ore concentrate at the
ore processing plant. Even if we are able to lease an ore processing plant in the nearby area to process
ore mined from our Songjiagou Und erground Mine, given the permitted annual production volume from
our Songjiagou Underground Mine is only 10% of our Songjiagou Open-Pit Mine, our financial
condition and results of operations will be materia lly and adversely affected if we are not able to access
to our Songjiagou Open-Pit Mine to carry on our mining activities.
The risk of early termination of leases is remote
Our Executive Directors are of the view that the r isk of early termination or non-renewal upon
expiry of the lease period of the abovementioned leases by Dahedong is remote because of the following
reasons:
(i) The leases were entered into with Dahedong by our principal subsidiary, Yantai Zhongjia,
which is a sino-foreign joint venture entity, o f which Dahedong held 25% equity interest as
at the Latest Practicable Date. Dahedong has vested economic interest to ensure Yantai
Zhongjia remains operational and profitable to generate returns to its shareholders (which
include Dahedong) by way of profit distribution in terms of dividends. In FY2020 and
FY2021, Dahedong received dividend o f RMB5.0 million and RMB40.0 million,
respectively.
(ii) Each of the leases is valid for the next five or nine years, as the case may be, and it has been
agreed that it will be renewed for a further ten years each. Pursuant to the lease agreement
dated 15 July 2008 and the confirmation lette rs from the relevant village committees as the
respective land owners in respect of the Collectively-owned Rural Land, the lease period of
the Collectively-owned Rural Land is from 30 September 2007 until 30 September 2027, and
further agreed to be renewed for another 10 years. Pursuant to the lease agreement dated 1
January 2012, the lease period of the ore processing plant is until 31 December 2031, and
further agreed to be renewed to 31 December 2041. As such, we are able to lease the relevant
land and building from Dahedong for the entir e duration of our mining licences which will
expire in February 2031 and May 2031, respectively. If there are any legal and financial
disputes in relation to Yantai Zhongjia ’s usage of the land and buildings, Dahedong shall be
liable and be responsible to resolve the dis putes. As such, Dahedong cannot terminate the
leases under the lease agreement as it will be a contractual breach of the lease agreement for
which Dahedong will be subject to liabilities arising from claims by us.
(iii) The Natural Resources Bureau has provided a written confirmation that the Collectively-
owned Rural Land for our Songjiagou Open-Pit Mine that was sub-leased by us from
Dahedong and the Collectively Collectively-owned Construction Land on which our ore
processing plant is constructed have been categorised as mining land pursuant to the Third
National Land Survey. We, via Yantai Zhon gjia, held the only mining licence to the
Songjiagou Open-Pit Mine. Therefore, there is no commercial reason for Dahedong to
terminate the leases to Yantai Zhongjia as Dahedong will not be able to operate the
Songjiagou Open-Pit Mine without a mining licence and it can have no other usages over
such land and extract no commercial values out of it if it terminates the lease arrangements.
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(iv) In September 2022, Dahedong further unde rtook in writing to us that it would not terminate
the lease arrangement with our Group for the whole duration of the lease period or the
extended lease period, and to give our Group the priority to use the ore processing
exclusively. Dahedong must also reserve sufficient capacity to our Group for ore processing
as an alternative. If the lease arrangement is terminated by Dahedong, Dahedong must give at
least 12 months ’ advance written notice of termination to our Group and must during the
notice period completely assist Yantai Zhongjia in identifying another ore processing plant. If
Dahedong terminates the lease arrangement with our Group, Dahedong must pay
compensation to our Group calculated based on the remaining number of years in the
relevant lease period times RM B2.8 million per year, being th e average amount of our lease
expense during the Track Record Period.
(v) The Collectively-owned Rural Land for our Songjiagou Open-Pit Mine was sub-leased by us
from Dahedong, which in turn was leased by Dahedong from the relevant villager
committees. In addition, most of our emplo yees are local villagers who live in the
surrounding area, and some local villagers are a lso our logistics service providers for the
provision of transportation services to transport ore and waste rocks from our mine to our ore
processing plant. If Dahedong terminates the lease arrangements with us which results in
suspension of our mining operations, the villag ers will lose their jobs, and will lead to further
disputes with Dahedong.
(vi) Pursuant to the joint venture agreement entered into between Dahedong and Majestic Yantai
BVI, Dahedong is prohibited to carry out businesses that compete with our Group in the
Songjiagou area. If Dahedong does not lease the land and buildings to us, it cannot use such
land and buildings for itself as it is restricte d from carrying out mining and ore processing
businesses in Songjiagou area unde r the joint venture agreement.
Alternative plan for ore processing pl ant in the event of lease termination
Despite the above, if Dahedong decides to terminate the lease arrangements of the land and
buildings on which our ore processing plant is located, our Executive Directors are of the views that
there are no difficulties for us to lease other ore pro cessing plants for continuation of our operations.
Our Executive Directors were awar e that, and as supported by Frost & S ullivan, there are at least 13 ore
processing plants owned by Independent Third Parties located within the proximity of 40 k.m. available
for leasing to us or providing ore processing services to us. As at the Latest Practicable Date, we have
entered into one letter of intent with one Independent Third Party ore processing plant owner, which has
agreed to lease its plant or land to us for us to construct the plant.
Properties with defective titles
As at the Latest Practicable Date, our Defective Owned Buildings and certain of our leased
buildings (all of our leased buildings except for th e ore processing plant) were with defective titles
(‘‘Defective Leased Buildings ’’). Our Directors confirmed that there has been no claims or disputes due
to title defects of any of our owned and leased proper ties during the Track Record Period and up to the
Latest Practicable Date.
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During the Track Record Period and up to the Latest Practicable Date, (i) Yantai Zhongjia had not
obtained valid ownership certificates ( 不動產權證) for the Defective Owned Buildings; and (ii) the
lessors of Defective Leased Buildings had not obtain ed valid ownership certificates. This was due to the
failure to obtain the construction work planning permits (建 設工程規劃許可證), the construction work
commencement permits ( 建築工程施工許可證), the construction work completion inspection certificates
(建設工程竣工驗收備案文件), and hence, in breach of the Urban and Rural Planning Law of the PRC
(2019 Amendment) ( 《中華人民共和國城鄉規劃法》(2019 年修正)) and the Construction Law of the
PRC (2019 Amendment) 《中國人民共和國建築法(2019 修正)》. For details, please refer to the section
headed ‘‘Risk factors — Risks relating to the business operations of our Group — We and some of our
lessors have not obtained title certificates for cer tain properties owned, used or leased by us, and we
leased collectively-owned rural land for non-agricultural purposes, which could materially and adversely
affect our right to use such properties ’’of this prospectus.
(i) Reasons for non-compliance
The reason for the non-compliance in respect of the Defective Owned Buildings and the Defective
Leased Buildings was due to the lack of comprehensive understandings of the relevant regulatory
requirements in respect of the construction and le asing of buildings by our responsible staff at the
relevant time.
(ii) Primary use of the Defective Owned Buildin gs and the Defective Leased Buildings
During the Track Record Period and up to the Late st Practicable Date, Yantai Zhongjia uses the
Defective Owned Buildings as staff dormitory, s taff canteen, offices, an d other areas for ancillary
mining activities including shaft and winding tower s, equipment room, power distribution room and
mine water reservoirs with an aggregate GFA of approximately 2,737.3 sq.m.
During the Track Record Period and up to the La test Practicable Date, we used the Defective
Leased Buildings as our office, canteen, dormitories, explosives and other storage areas, power
distribution room with an aggregate GFA of approximately 6,056 sq.m.
(iii) Applicable laws, maximum pena lty and potential legal impact
Pursuant to the Urban and Rural Planning Law of the PRC (2019 Amendment) ( 《中華人民共和國
城鄉規劃法》(2019 年修正)), a construction work planning permit must be obtained from the relevant
authority before the commencement of construction in the urban and rural areas, the failure of which
may lead to the urban and rural planning authorities of the PRC government at or above the county level
ordering for corrective measures to dismantle the relevant buildings within a specified time frame and
subject to a maximum penalty of 10% of the construction cost. Further, pursuant to the Measures for the
Administration of Construction Permits for Construction Projects (2021 Amendment), a maximum
penalty of 2% of the construction cost will be impos ed for failure to obtain a construction work
commencement permit prior to commencement of cons truction for buildings with construction value
exceeding RMB300,000 or construction area exceeding 300 square metres.
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Based on the above applicable laws and as advised by our PRC Legal Advisers, the aggregate
maximum penalty that Yantai Zhongjia may be subject to in respect of the Defective Owned Buildings
for its failure to obtain construction work plann ing permits and construction work commencement
permits before construction of the Defective Owned Buildings and to make the necessary filing with the
relevant authority amounted to approximately RMB370,000, which we had made a full provision as at
30 June 2023 for the penalty in respect of the Defectiv e Owned Buildings with de fective titles. Further,
we may be subject to the business risk of reloca tion if these buildings are required by the local
authorities to be demolished. In relation to Defectiv e Leased Buildings, although Yantai Zhongjia is the
lessee and may not be subject to penalties as such p enalties may be imposed on the lessors (if any),
Yantai Zhongjia may be required to relocate if any of the Defective Leased Buildings are required to be
demolished.
(iv) Remedial actions
In respect of the Defective Owned Buildings, as advised by our PRC Legal Advisers, Yantai
Zhongjia must obtain the construction work planning permits, followed by the construction work
commencement permits and construction work comple tion inspection certificates in order to proceed
with its application for the ownership certificat es to rectify the defective titles. As at the Latest
Practicable Date, Yantai Zhongjia had obtai ned the construction land planning permit (建 設用地規劃許
可證) in respect of the Defective Owned Buildings. Our Directors will, with the cooperation of Yantai
Municipal Housing and Urban-Rural Development Bureau Muping Branch* ( 煙台市牟平區住房和城鄉
建設局)( t h e ‘‘Housing Bureau ’’), use their best endeavours to comp lete the relevant rectification
procedures to obtain the other relevant permits and certificates in respect of the Defective Owned
Buildings as soon as practicable.
In respect of Defective Leased Buildings, while it is not our primary obligations to do so, we have
communicated with and will endeavour to procure the relevant lessors to make supplemental
applications to obtain the construction work plann ing permits, construction work commencement
permits, construction work completion inspec tion certificates and ownership certificates.
We have engaged 山東屹立工程檢測監定有限公司 (Shandong Yili Engineering Inspection and
Appraisal Co. Ltd.*) (the ‘‘Inspection Institution ’’), an Independent Third Party, to examine the
structures of all Defective Owned Buildings and t he Defective Leased Buildings including cement
foundation, walls, indoor components and outdoor appearance, respectively. According to the reports
issued by the Inspection Instituti on, all Defective Owned Buildings and the Defective Leased Buildings
are in conformity of the relevant safety requirements in material respects under the applicable PRC laws
and regulations and can be used safely under the applicable PRC laws and regulations. In addition, our
Songjiagou Open-Pit Mine and Songjiagou Undergro und Mine have passed the safety inspection
conducted by the government in relation to the Temporary Operation Suspension.
In the meantime, our Controlling Shareholder has p rovided an
 irrevocable indemnity in our favour
against all claims, actions, demands, costs, charges, fees, expenses and fines suffered or incurred or to
be suffered or incurred by us due to the title defects of our properties.
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(v) Views of our PRC Legal Advisers and Directors
Defective Owned Buildings
To assess the possible legal risks and conseq uences for the title defects of the Defective
Owned Buildings, we have conducted interviews with the Housing Bureau and were confirmed,
among other things, that (a) on the basis that Yantai Zhongjia has promptly carried out the
rectification procedures for the title defects and conducted safety inspection on the Defective
Owned Buildings, the Housing Bureau did not c onsider the title defects to be material non-
compliance, and Yantai Zhongjia may continue to use the Defective Owned Buildings; (b) the
Housing Bureau would not impose any penalty on Yantai Zhongjia; and (c) the Housing Bureau
would cooperate with Yantai Zhongjia to complete its rectification procedures.
Our PRC Legal Advisers confirmed that the Housing Bureau is the competent authority to
give the above confirmation, and based on the res ults of the interviews with the Housing Bureau,
our PRC Legal Advisers are of the view that: (a) Yantai Zhongjia may continue to use the
Defective Owned Buildings as it has been wor king with the Housing Bureau to complete the
relevant rectification procedures ; (b) the possibility of Yantai Zho ngjia being required to dismantle
the Owned Buildings or penalties to be imposed on Yantai Zhongjia is remote; and (c) there is no
material legal impediment to obtain ownership certificates for the Defective Owned Buildings after
obtaining the aforesaid permits and certifi cates from relevant government authorities.
Further, the Yantai People ’s Government has, in its policy of ‘‘Three-year actions plan for
promoting the listing of companies ’’issued in July 2021, indicated that it would, among others,
grant timely supports and guidance in assisting companies seeking listing in resolving any
historical land and other legal issues, and prior n otification to the working group that promotes
listing of companies is required prior to taking any enforcement actions. On the basis that (a) our
Group, being identified by the Yantai People ’s Government as one of the key target companies for
listing, would benefit under such policy to be prio ritised in seeking assistance from the relevant
government authority in our rectification measu res in a timely manner and protection against
enforcement actions; (b) the Housing Bureau has confirmed, among other things, that (i) Yantai
Zhongjia may continue to use the Defective Owned Buildings, (ii) the abovementioned historical
non-compliances did not constitute material non-compliances, (iii) the Housing Bureau would not
impose any penalties on Yantai Zhongjia, and (iv) the Housing Bureau would cooperate with
Yantai Zhongjia to complete its rectification procedures; and (c) our PRC Legal Advisers are of
the view that there is no material legal impediment for Yantai Zhongjia to rectify the title defects,
our Directors believe that the title defects and non-compliances in respect of all of the Defective
Owned Buildings, individually or collectively, would not have a material and adverse effect on the
results of our operations or business.
Defective Leased Buildings
While it is not our primary obligations to rec tify the title defects in respect of the Defective
Leased Buildings, to assess the possible impacts on Yantai Zhongjia, we have obtained a written
confirmation from Yantai Municipal Mupi ng District Natural Resources Bureau* ( 煙台市牟平區自
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然資源局)( t h e ‘‘Natural Resources Bureau’’ ) that (i) the land that Yantai Zhongjia had been
occupying for its operations were categorised as mining areas under the Third National Land
Survey (as defined below in this section) which was consistent to the current land usage of Yantai
Zhongjia, as such Yantai Zhongjia could continue to occupy the relevant land and the buildings
erected thereon, which included the Defective Leased Buildings; and (ii) Yantai Zhongjia had not
been and will not be investigated or penalised in any form for the use of relevant buildings,
including the Defective Leased Buildings. Furth er, we conducted an interview with the Housing
Bureau and were confirmed that (i) based on the result of the national land survey, the Defective
Leased Buildings did not violate any planned use of land and the fact that Yantai Zhongjia
conducted safety inspection on the Defective L eased Buildings, Yantai Zhongjia may continue to
use the Defective Leased Buildings; (ii) the Housing Bureau would not impose any penalty on
Yantai Zhongjia; and (iii) the Housing Bureau would cooperate with the village committees for the
rectification procedures.
Our PRC Legal Advisers are of the view that the Natural Resources Bureau and the Housing
Bureau are the competent authorities to give the above confirmation based on the confirmation
from the Natural Resources Bureau and the interview with the Housing Bureau, the risk of Yantai
Zhongjia being required to relocate from t he Defective Leased Buildings is remote.
On the basis of (i) our Group being identified by the Yantai People ’s Government as one of
the key target companies for listing would benefit under Yantai People ’s Government ’s policy of
‘‘Three-year actions plan for promoting the listing of companies ’’ issued in July 2021 to be
prioritised in seeking assistance from the government to rectify the non-compliance; (ii) the
confirmations obtained from the relevant govern ment authorities; and (iii) the opinion of our PRC
Legal Advisers, our Directors are of the view that any enforcement actions including a corrective
order or a penalty are unlikely and remote, and the title defects and the lack of the permits and
certificates required to be obtained by the relevant lessors in respect of the Defective Leased
Buildings, individually or collectively, would not have a material and adverse effect on our
business.
(vi) Enhanced internal control measures
To prevent the reoccurrence of the above non-compliances in the future, we have enhanced our
internal control measures including: (a) having our internal audit department to check whether all
necessary permits and certificates have been obtained before the commencement of any construction
works, otherwise the construction should be strictly prohibited; (b) seeking legal advices from legal
advisers qualified under the PRC laws when it is unc lear whether any permits and certificates must be
obtained before construction; (c) obtaining writte n approval from the management of our Group before
construction; (d) conducting internal audit departm ent meeting regularly to discuss and monitor whether
the required permits and certificates have been obtai ned; and (e) providing ongoing training to managers
regularly to keep them abreast of the latest legal requirements.
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We leased Collectively-owned Rural Land for non-agricultural purposes
As at the Latest Practicable Date, out of the 16 parcels of leased land, 14 parcels are Collectively-
owned Rural Land leased from eight villages, ni ne parcels of which had been used by us for non-
agricultural purposes for our mining operations an d ancillary activities for our Songjiagou Open-Pit
Mine in breach of the Land Administration Law. The remaining five parcels of Collectively-owned
Rural Land were not in use and for reserve only as at the Latest Practicable Date, hence, not in breach
of the Land Administrative Law. On the other han d, the remaining two parcels of leased land are
Collectively-owned Construction Land, which we are allowed to use for our operations in compliance
with the relevant PRC laws.
(i) Reasons for non-compliance
The non-compliance was mainly caused by the un familiarity with the relevant regulatory
requirements of our responsible staff at the relevant time.
(ii) Primary use of the properties
During the Track Record Period and up to the Latest Practicable Date, Yantai Zhongjia had been
leasing two parcels of Collectively-owned Rural Land with an aggregate site area of approximately
313,334.9 sq.m. as the mining area of our Songjiagou Open-Pit Mine, nine parcels of Collectively-
owned Rural Land with an aggregate site area of approximately 1,707,101.9 sq.m. as tailings dam, waste
rock dumps and rubble dump and the remaining four parcels of Collectively-owned Rural Land with an
aggregate site area of approximately 31,666.9 sq.m. and one parcel of collectively-owned Rural land
with site area of approximately 866.7 sq.m. as reserve land for tailings dam and mining area of our
Songjiagou Underground Mine, respectively, in the future.
(iii) Applicable laws and potential legal impact
Pursuant to the Land Administration Law, a parc el of Collectively-owned Rural Land must not be
used for non-agricultural purposes without the permission of the relevant PRC government authority,
whether through assignment, reassignment or lease. In the event that any unlawful use of such land is in
violation of the provisions of the general plans for the utilisation of land, namely the overall plan for
land utilisation ( 土地利用總體規劃)( t h e ‘‘Overall Plan for Land Utilisation ’’), the natural resources
authorities of the PRC government at or above county l evel may order for corrective action, such as an
order for dismantling buildings or other facilities illegally built on the land, returning and restoring such
land to the original state, within a specified pe riod, confiscation of the construction and impose a
penalty. As such, if an order is issued to dismantle th e properties and other facilities on the Collectively-
owned Rural Land, we must stop the operation of our Songjiagou Open-Pit Mine on the agricultural
land.
Further, pursuant to the Land Administratio n Law and its implementation rules, occupying
farmland for non-agricultural purposes, such as mining, without authorisation, and damaging the
conditions for growing crops or causing desertification and salinisation due to land development in
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breach of the Land Administration Law, the natura l resources authorities, the agriculture and rural
affairs authorities, and other authorities of the PRC government at and above the county level may order
for correction or improvement within a pre scribed time limit and impose a penalty.
(iv) National spatial planning ( 國土空間規劃)i su n d e r w a y
To support the planning of sustainable economic developments and the use of land in urban and
rural areas, the PRC had conducted two national wide land surveys before 2018, which resulted in the
implementation of the Overall Plan for Land Utilisa tion for the periods from 1996 to 2005 and 2006 to
2020, respectively. With the Overa ll Plan for Land Utilisation expiring in 2020, the State Council has
officially announced the commencement of third national land survey (the ‘‘Third National Land
Survey’’) in September 2018. Similar to the national wide land surveys, the Third National Land Survey
is a fundamental investigation of the status of na tural resources in the PRC conducted in a unified
manner by the PRC government in preparation for an overall national spatial planning (the ‘‘National
Spatial Planning ’’) for the next decades, which will replace the Overall Plan for Land Utilisation for
2006 to 2020. In August 2021, the Office of the Leading Group for the Third National Land Survey of
the State Council (國 務院第三次全國國土調查領導小組辦公室), the MNR and the National Bureau of
Statistics jointly released the key data results of the Third National Land Survey.
Under the Overall Plan for Land Utilisation for 2006 to 2020, nine parcels of Collectively-owned
Rural Land currently leased by us for our operations are categorised as agricultural use. However,
pursuant to the results of the Third National Land Sur vey, all nine parcels of Collectively-owned Rural
Land including the land parcels for our mining area (namely, our Songjiagou Open-Pit Mine) have been
categorised as land for mining. We have obtained c onfirmations from and conducted interviews with the
Natural Resources Bureau to confirm the details of the Third National Land Survey and the National
Spatial Planning and the relevant impact on us. According to the Natural Resources Bureau, the result of
the Third National Land Survey would be adopted as the National Spatial Planning.
As further confirmed by the Natural Resources Bureau, prior to the finalisation of the National
Spatial Planning, the Overall Plan for Land Utilis ation which was effective from 2006 to 2020 will
continue to be valid; however, it will not require Ya ntai Zhongjia during the transitional period (when
the National Spatial Planning is underway and before it becomes effective) to rectify the use of land in
respect of the nine parcels of Collectively-owned Rural Land according to the Overall Plan for Land
Utilisation as the Third National Land Survey had indicated such land as mining land.
(v) Remedial actions
Pursuant to the Natural Resources Bureau, all 11 parcels of Collective-owned Rural Land
(including those two parcels currently not in use but for reservation only) would be categorised as
mining land eventually under the National Spatial Planning which conformed to our current usage of the
relevant land and no enforcement actions would be t aken during the interim, it was not necessary for us
to conduct any remedial actions in respect of our use of the relevant land.
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(vi) Views of our PRC Legal Advisers and Directors
To assess the possible penalty and legal consequence, we have obta ined written confirmations from
and conducted interview with the supervisor of the Natural Resources Bureau. Such interview was
attended by the Sole Sponsor, its legal advisors and the PRC Legal Advisers. Pursuant to the
aforementioned written confirmations and interview , we were confirmed, among other things, that (i) the
land use of the collectively-owned land (including C ollectively-owned Rural Land and Collectively-
owned Construction Land) leased by us was categorised as mining use upon the Third National Land
Survey, which would be included in the National Spa tial Planning; (ii) it would not make a corrective
order or impose a penalty on Yantai Zhongjia for using the Collectively-owned Rural Land for non-
agricultural purposes and Yantai Zhongjia may continue to use the Collectively-owned Rural Land for
its mining and production activities during the transition period; (iii) it was not necessary for us to carry
out any rectification procedures for our current us e of land. We were further confirmed by the Natural
Resources Bureau in writing that (i) the supervisor of the Muping District Natural Resources Bureau has
the authority to represent the Natural Resources Bureau in the interview; and (ii) the Natural Resources
Bureau is responsible for, among others, undertaking the work of the central, provincial and municipal
departments to implement the central government ’s major guidelines and policies on natural resources
and territorial space planning (excluding urban and rural planning), decision-making and deployment,
and to monitor and manage activities s uch as natural resources and territorial space development and
utilisation, with full authority to investigate and deal with the development and utilisation of natural
resources, land and space planning (excluding ur ban and rural planning) and illegal surveying and
mapping cases.
According to the Land Administration Law of the P RC, MNR is responsible for the administration
and supervision of land nationwide while the setup and functions of department of natural resources
above the county level shall be decided by the people ’s government at the same level. Pursuant to the
Organization Law of the PRC for Local People ’s Congresses at All Levels and Local People ’s
Governments at All Levels ( 《中華人民共和國地方各級人民代表大會和地方各級人民政府組織法》),
working departments of the people’ s governments of counties, cities or municipal districts shall be under
the direct leadership of the respective people ’s government and operational guidance or leadership of the
competent departments of the people ’s governments at higher level in accordance with laws and
regulations. According to the Measures for Lan d and Resources Administrative Penalties ( 《國土資源行
政處罰辦法》, ‘‘Meas ures ’’), (1)
 cases concerning land and resources shall be governed by the bureau of
natural resources at the county level where the land or mineral resources are located; (2) bureau of
natural resources at the provincial or municipal level has the jurisdiction over major and complex illegal
cases of land and resources within their respective a dministrative areas; and (3) MNR has jurisdiction
over major and complex cases of land and resource violations nationwide, which means cases involving
land and resources under the jurisdiction of the MNR as required by the State Council, cases across
provincial administrative regions, other cases tha t the MNR deems to fall under its jurisdiction. Under
the following circumstances, the department of natural resources of higher level has the right to exercise
jurisdiction over cases under the jurisdiction of a competent department in land and resources at the
lower level: (1) a case that should have been filed and investigated by a competent department in land
and resources at the lower level, but the competent department in land and resources at the lower level
fails to do so; and (2) a complicated case with serious circumstances and significant impacts. The PRC
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Legal Advisers have also anonymously consulted the Department of Natural Resources of Shandong
Province, which confirmed that for cases concerning natural resources and land within the Shandong
Province, local bureau of natural resources shall be the competent authority to investigate and impose
penalty, and supervision against such actions shall be carried out by the people ’s government or the
supervisory committee at the same level.
Based on the above and the written confirmations from the Natural Resources Bureau, our PRC
Legal Advisers are of the view that (a) the Natural Resources Bureau is the competent authority to give
the above confirmations in relation to the nine parcels of leased land which are located in the Muping
District; (b) Muping District Natural Resources Bureau is under the direct management of the people ’s
government at the same level and enjoy operational guidance of the Yantai Municipal Natural Resources
Bureau; (c) any order and/or penalty to be imposed by the Natural Resources Bureau causing a material
adverse effect on Yantai Zhongjia for its continuous use of such Collectively-owned Rural Land and
buildings constructed thereon for its current minin g and production activities is remote; (d) there are no
matters they are aware of that could have a material a dverse effect on Yantai Zhongjia for using the
Collectively-owned Rural Land for its operations ; (e) so far, the PRC Legal Advisers are not aware of
any incident implying that Yantai Municipal or Provi ncial Natural Resources Departments will take over
jurisdiction of the nine parcels of leased land, thus the possibility of the aforesaid confirmation issued
by the Muping District Natural Resources Bureau being challenged by higher level of natural resources
authorities is remote; and (f) the interviewee was duly authorised to represent the Natural Resources
Bureau in making the aforesaid confirmations.
Based on (i) the written confirmation from the Natural Resources Bureau confirming that the
supervisor of the Natural Resources Bureau has the authority to represent the Natural Resources Bureau
in the interview; and (ii) the views of the PRC Legal Advisers as stated above, the Sole Sponsor
concurred with the PRC Legal Advis ers that (a) the possibility of the confirmations from the Natural
Resources Bureau being challenged by higher-level authorities is remote; and (b) the supervisor of
Natural Resources Bureau was duly authorised to represent the Natural Resources Bureau in the
interview.
Our Directors are of the view that, given (i) the res ults of the Third National Land Survey; (ii) and
the confirmations from the Natural Resources Bureau confirming that all those 11 parcels of Collective-
owned Rural Land would be categorised as mining area eventually under the National Spatial Planning;
and (iii) our Group being identified by the Yantai People ’s Government as one of the key target
companies for listing, our use of Collectively-owned Rural Land for non-agricultural use would not have
a material and adverse impact on the results of our operations or business.
(vii) Enhanced internal control measures
To prevent the reoccurrence of the above non-compliances in the future, we have enhanced our
internal control measures concerning the leasing of Collectively-owned Rural Land including: (a)
designating a responsible staff for making the necessary applications to the relevant government
authorities to change the land use nature of any Co llectively-owned Rural Lands to be leased by our
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Group; (b) conducting inspections regularly by the internal audit department to ensure compliance with
the PRC laws; and (c) providing ongoing training to managers regularly to keep them abreast of the
latest legal requirements.
Property valuation
As at the Latest Practicable Date, we had no si ngle property with a carrying amount of 15% or
more of our total assets, and on this basis, we are not required by Rule 5.01A of the Listing Rules to
include in this prospectus any valuation report. Purs uant to section 6(2) of the Companies (Exemption of
Companies and Prospectuses from Compliance with Provisions) Notice (Chapter 32L of the Laws of
Hong Kong), this prospectus is exempted from compliance with the requirements of section 342(1)(b) of
the Companies (Miscellaneous Provisions) Ordinance in relation to paragraph 34(2) of the Third
Schedule to the Companies (Miscellaneous Provisions) Ordinance, which requires a valuation report
with respect to all of our interests in land or buildings.
LITIGATION
We may be involved in legal proceedings, disputes or administrative proceedings in the ordinary
course of our business from time to time, including c laims primarily relating to disputes arising from
agreements with third party contractors and su ppliers. We were involved in the following legal
proceedings of material importance during the Track Record Period.
Legal proceedings relating to a corporate guarantee
In 2019, in consideration of 山東東方海洋集團有限公司 (Shandong Eastern Ocean Group Co.,
Ltd*) ( ‘‘Shandong Eastern ’’), an Independent Third Party, providing a corporate guarantee in the
principal amount of RMB50 million in favour of a ban k from which Yantai Zho ngjia obtained certain
bank facilities since September 2018, at the request of Shandong Eastern, Yantai Zhongjia entered into a
corporate guarantee in favour of a financial institution (the ‘‘Shandong Eastern Corporate
Guarantee ’’), pursuant to which Yantai Zhongjia guaranteed the repayment obligations of Shandong
Eastern in respect of its loan in the principal amount of RMB50 million (the ‘‘Shandong Eastern
Loan ’’). Such arrangement was established on the basis that (1) our Group intended to increase its cash
reserve for the commencement of operation of Songjiagou Underground Mine in 2019; and (2) the
principal amount guaranteed by Yantai Zhongjia under the Shandong Eastern Corporate Guarantee was
the same as the principal amount guaranteed by Shandong Eastern in respect of the bank loan of Yantai
Zhongjia as described above. The Shandong Eastern Loan was also secured by a pledge of shares by
Shandong Eastern in a listed company owned by Shandong Eastern and a pledge of certificate of deposit
of RMB50 million provided by an Independent Third Party. According to the F&S Report, it is an
industry practice for companies in Shandong Province, especially private companies, to obtain banking
facilities by seeking third-party companies to provide corporate gua rantees for bank, and vice versa.
Following the defaults by Shandong Eastern under th e Shandong Eastern Loan, th e financial institution
filed a law suit against Yantai Zhongjia and t he other co-guarantors at the Beijing City Second
Intermediate People ’s Court (the ‘‘Second Intermediate Court ’’) claiming for the outstanding sums
owed by Shandong Eastern together w ith the relevant interests, penalties and costs. In August 2019, the
Second Intermediate Court issu ed a civil mediation paper (the ‘‘Civil Mediation Paper’’ ) and confirmed
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the arbitration mediation paper issued by the Beijin g Arbitration Committee, pursuant to which (i) the
financial institution as the lender shall have the priority to dispose the pledged shares and receive the
proceed of such disposal; (ii) Yantai Zhongjia and th e co-guarantors are jointly and severally liable for
the repayment obligations under t he Shandong Eastern Loan; and (iii) Yantai Zhongjia and the other co-
guarantors shall have the right to recover from Shandong Eastern after performing their respective
payment obligations under the Shandong Eastern Corporate Guarantee.
Subsequently, in March 2021, the f inancial institution sold and transferred its debts under the
Shandong Eastern Loan to another company, which is an Independent Third Party. In August 2021, the
Independent Third Party has fully released an d discharged Yantai Zhongjia from all liabilities and
obligations under the Shandong Eastern Corporate Guarantee. As confirmed by our PRC Legal Advisers,
Yantai Zhongjia has been fully released and dischar ged from all liabilities and obligations under the
Shandong Eastern Corporate Guarantee, and the matter is now concluded.
Our Directors confirmed that, during the period from August 2019 and up to 29 August 2021,
being the date when Yantai Zhongjia was fully released and discharged from the Shandong Eastern
Corporate Guarantee, Yantai Zhongjia was not notified or requested to make any repayment under the
Shandong Eastern Corporate Guarantee pursuant to the Civil Mediation Paper. Therefore, no provision
for loss in connection with the aforementioned was made by our Group during the Track Record Period.
In addition, Shandong Eastern and its group of companies have separately entered into back-to-back
agreements with Yantai Zhongjia in December 2019 to indemnify us against all losses suffered or
incurred by us as a result of or in connection with the Civil Mediation Paper, including the repayment
obligations under the Shandong Eastern Corporate Guarantee together with the relevant interests,
penalties and costs.
During the Track Record Period, our Group has obtained several loans from four banks for our
working capital and operations that were guaranteed by third party companies (including Dahedong and
Baiheng). As at the Latest Practicable Date, our Group only had one bank loan outstanding and there
was no corporate guarantee outstanding that was provided by our Group in favour of bank for the
benefit of third party companies. For further details of such corporate guarantees, please refer to the
section headed ‘‘Financial information — Indebtedness — Interest-bearing bank borrowings’’ and
‘‘Financial information — Indebtedness — Contingent liabilities — Guarantees issued ’’ in this
prospectus.
We have in place a set of internal control and risk management procedures to address various
potential operational, financial and legal risks id entified in relation to our operations, including our
Group ’s exposure of counterparty risk under the cross guarantee arrangement and performing ongoing
evaluations of our guaranteed parties ’ financial condition. Our Directors are of the view that our current
internal control measures in this connection are adequate and effective.
Saved as disclosed above, during the Track Record Period and up to the Latest Practicable Date,
no member of our Group was engaged in any claim, litigation, arbitration or administrative proceedings
of material importance and no claim, litigation, arbitr ation or administrative p roceedings of material
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importance was known to our Directors to be pending or threatened against any member of our Group.
As at the Latest Practicable Date, none of our Directors or senior management was involved in any
material litigation, arbitration o r administrative proceedings.
COMPLIANCE WITH LAWS AND REGULATIONS
As at the Latest Practicable Date and save as discl osed in this prospectus, we had, in all material
aspects, complied with all the relevant and applicab le PRC laws and regulations and we had obtained all
licences, permits and certificates for t he purpose of operating our business.
Based on the confirmation letters issued by the rel evant PRC government authorities, our Directors
confirmed that, with the support of the legal opinion of our PRC Legal Advisers, during the Track
Record Period and up to the Latest Practicable Da te, we have complied with all of the relevant PRC
laws and regulations in all material respects, and we had obtained all of the approvals, licences and
permits from appropriate regulat ory authorities that are material for our business operations.
Non-compliant bill arrangements
Overview
From January 2020 and up to May 2020, our principal operating subsidiary, Yantai Zhongjia
obtained bank acceptance bills without being supported by underlying trade or debt transactions, which
were not in compliance with Article 10 of the PRC Negotiable Instruments Law (the ‘‘Non-compliant
Bill Arrangements’’ ) from the purchases of bank acceptanc e bills from Dahedong and Qingjia with cash
equivalent to the face value of the b ills, which have ceased since May 2020.
Each of Dahedong and Qingjia is a connected person of our Company for the purpose of the
Listing Rules. As at the Latest Practicable Date:
(i) Dahedong was owned as to 50% by Mr. Kong Fanbo, a director of our subsidiary, Yantai
Zhongjia, with the remaining equity interests held in equal share of approximately 16.67% by
each of Mr. Kong Fanzhong, Mr. Wang Lei ( 王磊) and SDZJ. Mr. Kong Fanbo and Mr.
Kong Fanzhong are brothers and Mr. Wang Lei is their brother-in-law, and SDZJ is a
connected person of our Company by virtue of the aggregate interests of approximately 77%
held directly and indirectly by Mr. Kong Fanbo and Mr. Kong Fanzhong as at the Latest
Practicable Date; and
(ii) Qingjia was wholly-owned by Mr. Kong Fanqiang ( 孔凡強), who is the brother of Mr. Kong
Fanbo and Mr. Kong Fanzhong.
Subsequently, Yantai Zhongjia used such bank acceptance bills to settle pa yments for purchases
from its vendors, suppliers and subcontractors in the ordinary course of business supported by
underlying trade transactions, which was in compliance with the PRC Negotiable Instruments Law.
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The table below sets forth a breakdown of trans actions involving bank acceptance bills obtained
from non-compliant sources in FY2020:
FY2020
(RMB ’000)
Settlement of
purchases from
vendors/suppliers/
subcontractors
Purchased from Dahedong 10,000
Purchased from Qingjia 200
Total 10,200
Our Group has not received bank acceptance bills from customers for sales of gold bullion. On the
other hand, during FY2020, we acquired certain bank acceptance bills from compliant sources, primarily
from Dahedong in relation to the lease of tailings dam in compliance with the PRC Negotiable
Instruments Law, which amounted to approximately RMB2.0 million.
Background facts
Bank acceptance bills purchased by us from Dahedong and Qingjia
From January 2020 and up to May 2020, Yantai Zh ongjia purchased bank acceptance bills from
Dahedong and Qingjia by cash for the equivalent value, which were not in compliance with the PRC
Negotiable Instruments Law as they were not supported by underlying trade or debt transactions.
The total amount of bank acceptance bills involv ed in the Non-compliant Bill Arrangements
amounted to approximately RMB10.2 million in F Y2020. Yantai Zhongjia used most of these bank
acceptance bills to pay for purchases from its 18 vendors, suppliers and subcontractors (of which four of
them were our major suppliers and subcontractors in FY2020) in its ordinary course of business in the
total amount of approximately RMB10.2 million in FY2020. All of the vendors, suppliers and
subcontractors are Independent Third Parties.
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The following diagram illustrates the flow of bank acceptance bills in the Non-compliant Bill
Arrangements, which have ceased since May 2020:
Used the bank
acceptance bills
to pay for
underlying trade
 transactions
Purchased bank
acceptance bills
Dahedong and Qingjia Yantai
Zhongjia
Vendors/suppliers/
subcontractors
Yantai Zhongjia has ceased all the Non-compliant Bill Arrangements and fully settled all such
bank acceptance bills since May 2020.
Reasons for engaging in the Non-compliant Bill Arrangements
Our Directors confirmed that the purchases of bank acceptance bills from Dahedong and Qingjia
by Yantai Zhongjia were conducted at their requests to facilitate their need of working capital and due
to a lack of understanding of the laws and regulations in the PRC by our personnel involved, which led
to such inadvertent breach of the Law on Negotiable Instruments. In essence, the purchases of bank
acceptance bills from Dahedong and Qingjia for cash is similar in nature to inter-group transaction
between our Group and our related parties (e.g. amount due to/due from related parties).
Immaterial impacts on our business operation and financial condition
Our Directors confirmed that the Non-compliant Bill Arrangements and the cessation thereof did
not materially affect our Group ’s financial performance for FY2020. Such Non-compliant Bill
Arrangements have ceased for more than 12 months since May 2020 and up to the Latest Practicable
Date:
(a) The use of bank acceptance bills was not essential to our Group ’s treasury management.
As mentioned above, the acquis itions of bank acceptance bills by our Group under the Non-
compliant Bill Arrangements were primarily due to maintaining good relationships among the
relevant parties namely, Dahedong and Qingjia. Nevertheless, the cessation of the Non-
compliant Bill Arrangements has not had any impact on the business relationship between
Yantai Zhongjia and the relevant parties. As such, the cessation of the Non-compliant Bill
Arrangements did not materially affect the financial performance of our Group;
(b) The use of bank acceptance bills under the Non-compliant Bill Arrangements did not
improve the liquidity position of our Group. During the Track Record Period, Yantai
Zhongjia utilised most of the bank acceptance bills acquired from Dahedong and Qingjia to
settle its purchases from vendors, suppliers an d subcontractors in the ordinary course of
business. Our Group did not obtain financing or additional cash from such Non-compliant
Bill Arrangements;
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(c) O u rG r o u ph a sn o ti n c u r r e dn o rs a v e di n t e r e s t so rf i n a n c i n gc o s t si nr e s p e c to ft h eN o n -
compliant Bill Arrangements. Our Group has not incurred any interest expenses or other
finance costs or received any income or gain arising from the Non-compliant Bill
Arrangements. On the other hand, our Group has not saved any interest nor finance costs
under the Non-compliant Bill Arrangements since our Group has obtained no financing from
the arrangement;
(d) during the Track Record Period, we did not recognise any revenue and cost of sales beyond
the actual sales and trade purchases; and
(e) the Non-compliant Bill Arrangements had no e ffect on our cash flow or financial position or
brought any cost saving or benefits to us financially, as demonstrated by our operating results
and cash flow in FY2020 (being more than seven months after we ceased the Non-compliant
Bill Arrangements in May 2020). We were equally able to carry out operations and maintain
a healthy liquidity position without the Non-compliant Bill Arrangements.
Legal implications
Applicable laws, maximum pena lty and potential legal impact
Pursuant to Article 10 of the PRC Negotiable Instruments Law, the issuance, obtaining and transfer
of bank acceptance bills must be supported by underlying trade or debt transactions. As such, the
obtaining and purchase of bank acceptance bills b y Yantai Zhongjia from the aforementioned source
without underlying trade or debt transactions, was in breach of the PRC Negotiable Instruments Law.
However, there are no express provisions in the PRC Negotiable Instruments Law which impose
penalties and other legal consequences on our PRC subsidiary, Yantai Zho ngjia, its legal representative,
directors and senior management for engaging in such Non-compliant Bill Arrangements. All bank
acceptance bills issued and transferred remained valid and recognised by the relevant banks that issued
the same (as regards to those bank acceptance bills purchased) for payment at the relevant maturity
dates.
Confirmations from the releva nt government authorities
We have obtained a confirmation via an interview with the Vice President and the Head of
Financial Services Management of the Yantai Muping branch of PBOC ( ‘‘PBOC Muping ’’) attended by
the Sole Sponsor, its legal advisers and the PRC Legal Advisers on 5 January 2021 confirming, among
other things, that (i) no administrative penalty was promulgated in relation to the Non-compliant Bill
Arrangements under the current PRC laws and regulations, and it had not conducted any investigation
nor imposed any administrative penalties nor take n any legal actions against Yantai Zhongjia, its
shareholders, directors or senior management; and ( ii) the Non-compliant Bill Arrangements (a) did not
constitute a material non-compliance; (b) did not involve any economic benefits, including rebate, fee or
commission to Yantai Zhongjia, its shareholders, directors or senior management; and (c) did not
involve any fraudulent acquisition o f bank acceptance bills nor money l aundering. Subsequent to the
interview conducted with PBOC Muping where the Non-compliant Bill Arrangements were discussed,
we obtained written confirmations from PBOC Mup ing on 5 January 2022, 13 May 2022 and 15 August
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2022 confirming that, among others, (i) Yantai Zhongjia has not been investigated or punished in any
form; (ii) the interviewees in respect of the aforementioned interview on 5 January 2021 were duly
authorised to represent the PBOC Muping in making th e aforesaid confirmations. Further, based on the
enquiries made with the Jinan branch of PBOC, being a higher-level authority of PBOC Muping, the
Jinan branch of PBOC confirmed that PBOC Muping is the competent authority to be consulted and
issue regulatory confirmations in respect of activities relating to the usage of bank acceptance bills.
Our PRC Legal Advisers confirmed that according to the PRC People ’s Bank of China Law (2003
Amendment) ( 《中華人民共和國中國人民銀行法(2003 修正)》), the Procedures on Administrative
Penalties of the People ’s Bank of China ( 《中國人民銀行行政處罰程序規定》) and the Implementation
Measures for the Administration of Negotiable Instruments (2011 Revision) 《票據管理實施辦法(2011
修訂)》, the PBOC Muping is the competent authority for the administration of negotiable instruments
and anti-money-laundering management in financial industry, and its branches are responsible for
investigation and punishment over illegal financial activities conducted by finan cial institutions, entities
and individuals within their jurisdiction. Ba sed on the written confirmation obtained from PBOC
Muping that the interviewees were duly authorised to represent the PBOC Muping in making
confirmations during the interview; and the result of the aforementioned enquiries with the Jinan branch
of PBOC that PBOC Muping is the competent authority to be consulted and issue regulatory
confirmations in respect of activ ities relating to the usage of bank acceptance bills, our PRC Legal
Advisers are of the view, and the Sole Sponsor concurred that (i) the PBOC Muping is the competent
authority for the supervision of activities relating b ank acceptance bills; (ii) the Vice President and the
Head of Financial Services Management of PBOC Muping are duly authorised to provide confirmations
on behalf of PBOC Muping; and (iii) the possibility of confirmation provided by PBOC Muping that
could be challenged by highe r-level authorities is remote.
Opinion of our PRC Legal Advisers
As advised by our PRC Legal Advisers, the Non-compliant Bill Arrangements were not in
compliance with the PRC Negotiable Instruments L aw which provides that bank acceptance bills must
be issued, acquired or transferred based on underlying trade or debt transactions. Our PRC Legal
Advisers also advised that no administrative pen alty or legal liability is promulgated under the PRC
Negotiable Instruments Law for the Non-compliant Bill Arrangements in breach of Article 10 of the
PRC Negotiable Instruments Law.
Our PRC Legal Advisers are of the view that the risk of penalty to be imposed by the relevant
governmental competent authoritie s taking legal actions against Ya ntai Zhongjia for breach of contract
due to the Non-compliant Bill Arrangements are remote, based on the following:
(i) th
ere was no dispute between Yantai Zhong jia and Dahedong and/or Qingjia, being the
counterparties who sold bank acceptance bills relating to the Non-compliant Bill
Arrangements;
(ii) there are no express provisions in the PRC Negotiable Instruments Law imposing penalties
and other legal consequences our PRC subsidiary, Yantai Zhongjia, its legal representative,
directors and senior management for engaging in such Non-compliant Bill Arrangements;
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(iii) Yantai Zhongjia has ceased all such Non-co mpliant Bill Arrangements since May 2020; and
(iv) the confirmation of PBOC Muping confirming among other things, that such Non-compliant
Bill Arrangements did not constitute a materia l non-compliance, nor involved obtaining bank
acceptance bills fraudulently, nor violating the laws and regulations of the PRC relating to
money laundering.
Views of our Directors
Our Directors confirmed that:
(a) all the transactions under the Non-compliant Bill Arrangements were executed and approved
by Mr. Kong Fanzhong, who was a former director and former legal representative of Yantai
Zhongjia, in his capacity as legal representa tive of Yantai Zhongjia. Mr. Kong Fanzhong was
then responsible to oversee our day-to-day operations including the approval of the Non-
compliant Bill Arrangements with Dahedong and Qingjia. Despite Mr. Kong Fanzhong was
then full time employee of Yantai Zhongjia, he is also a minority shareholder of Dahedong
holding approximately 16.67% direct interests. Mr. Kong Fanzhong is the brother to Mr.
Kong Fanbo, who is the major shareholder of Dahedong. Qingjia is a company owned by a
brother of Mr. Kong Fanzhong and Mr. Kong Fanbo. At the time when the Non-compliant
Bill Arrangements were entered into, Mr. Kong Fanzhong was aware that such kind of
arrangement was not uncommon in the PRC, he was not adequately advised by professionals
on matter pertaining to the PRC Negotiable Instruments Law and was not aware that the Non-
compliant Bill Arrangements did not comply w ith the relevant PRC laws. He had no intention
and no financial incentive to breach the relevant rules and regulations and/or did not obtain
any direct and personal benefit from it. The reasons for him to enter into the Non-compliant
Bill Arrangements were due to working capital needs of companies held among his family
members.
(b) our Board members only became aware of such transactions did not comply with the relevant
PRC laws in or prior to May 2020 when they were informed by the Sole Sponsor and our
PRC Legal Adviser in the course of our preparation for the Listing;
(c) no fraudulent, bribery or other illegal activ ities under the PRC Negotiable Instruments Law
were involved in the obtaining and using of b ank acceptance bills involved in the Non-
compliant Bill Arrangements as there was no connotation of unethical behaviour or lack of
integrity by Mr. Kong Fanzhong in his capacity a s legal representative of Yantai Zhongjia in
procuring and approving the Non-compliant Bill Arrangements given that this kind of
arrangement was not uncommon in the PRC;
(d) none of our Directors, senior management of our Group or any of their respective associates
received any rebates, commissions or benef its in connection with the Non-compliant Bill
Arrangements and they had no intention to obtain and had not obtained any personal benefit
directly or indirectly from the No n-compliant Bill Arrangements;
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(e) Yantai Zhongjia has ceased all Non-compliant Bank Acceptance Arrangements since May
2020 and will not have similar arrangements on ban k acceptance bills with any other relevant
parties going forward;
(f) as soon as our Directors became aware of the Non-compliant Bill Arrangements, we had
notified and circulated to all of our Directors, management and relevant employees involved
in finance and audit functions that all transa ctions involving bank acceptance bills without
underlying trade or debt transactions are strictly prohibited and that no one is allowed to
approved such transactions. Our Directors gave instructions and training to the staff of Yantai
Zhongjia to cease the Non-comp liant Bill Arrangements; and
(g) we had strengthened our internal control measures as elaborated in the paragraph headed
‘‘Enhanced internal control measures ’’below, especially on the approval, supervision and
monitoring of the use of any banking facilities i ncluding bank acceptance bills and any other
kind of payment method, to prevent future reoccurrence of any Non-compliant Bill
Arrangements. As part of our efforts to strengthen our internal control management, we have
also restructured our senior management com position at the level of Yantai Zhongjia in May
2021 including the change of our legal representative following the resignation of Mr. Kong
Fanzhong and to segregate the line of reporting in relation the execution and supervision of
our day-to-day business operations.
Views of the Sole Sponsor
In view of the above, our Directors are of the view, and the Sole Sponsor concurs, that as none of
our Directors was involved in the Non-compliant Bill Arrangements, there was no issue on our
Directors ’ integrity or suitability as required under R ules 3.08 and 3.09 of the Listing Rules.
Enhanced internal control measures
We have ceased all Non-compliant Bill Arrang ements and have fully settled all such bank
acceptance bills in May 2020. We have engaged Avista Risk Advisory Limited (the ‘‘Internal Control
Consultant ’’) to perform a detailed review of our internal control and risk management system,
including the obtaining and use of bank acceptance bills by our Group, to identify deficiencies in our
internal control system, and to furnish recommendations to enhance our internal control measures. To
prevent the reoccurrence of the Non-compliant Bill Arrangements in the future, we have implemented
the following enhanced in ternal control measures:
(i) in July 2020, we have implemented and enhanced our internal approval guidelines and
policies for approving, reporting and monitoring all financing transactions, which we required
Directors and senior management to review, check and verify all financial transactions before
approving any financial transactions. We have designated responsible officers, being our
Chief Financial Officer, deputy general manager and finance manager to approve, supervise
and monitor all financing activities, incl uding the use of bank acceptance bills without
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underlying trade or debt transactions. In the event of any financing transactions involving
related entities and/or personal interests and/or t heir close associates, the relevant responsible
officer must not involve in the approval and review process;
(ii) in July 2020, we notified and circulated to all of our Directors, management and relevant
employees involved in finance and audit functions that all transactions involving bank
acceptance bills without underlying trade or debt transacti ons are strictly prohibited and that
no one is allowed to approve such transactions and have implemented a policy that
management and employees entering into or approve any transactions involving bank
acceptance bills in violation of the prohibition will be subject to various disciplinary actions,
including financial and legal responsibilities;
(iii) in July 2020, our Directors gave instructions and training to the staff of Yantai Zhongjia in
relation to the Non-compliant Bill Arrangements;
(iv) our finance department shall be responsible to maintain a register to record all bank
acceptance bills to be received by our Group and the finance manager is required to conduct
a monthly compliance check against the record of bank acceptance bills, including whether or
not the amount of the bank accept ance bills exceeds the purcha se amount, the validity of the
bills and whether the bank acceptance bills are s upported by underlyi ng transactions, and
record the result of the periodic check in a r eport to be submitted to our chief financial
officer and deputy general manager for a further review;
(v) designated our chief financial officer and deputy general manager to review the monthly
report prepared by the finance manager, and to conduct periodic checks on underlying
supporting documents to ensure the bank acceptance bills are used by our Group in a
compliant manner;
(vi) established an disciplinary mechanism and a report mechanism whereby a suspected violation
of the enhanced internal control policy on ban k acceptance bills will be reported to our chief
financial officer and a confirmed violation should be escalated to our Board immediately;
(vii) required our chief financial officer, deputy general manager and finance manager to seek
legal advice from Hong Kong legal advisers and PRC legal advisers on the PRC regulations
about all transactions involvi ng bank acceptance bills prior to entering into the same; and
(viii) established the Audit Committee comprisin g three independent non -executive Directors to
oversee and review our internal control system, including the effectiveness of such system in
controlling the use of bank acceptanc e bills in our financial activities.
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The Internal Control Consultant conducted follow-up reviews on our enhanced internal control
measures in respect of the obtaining and use of bank acceptance bills, for th e period from 1 June 2020
to 31 December 2021. They were not aware of any significant deficiencies in the design and
implementation (save for (viii), which will be implemented upon Listing) of the enhanced internal
control measures in respect of our bank acceptance bills activities.
Considering that the Non-compliant Bill Arrangements has never occurred after May 2020 and the
result of the follow-up review conducted by the Internal Control Consultant, our Directors are of the
view, and the Sole Sponsor concurs, that such enhanced internal control measures are adequate and
effective to prevent the occurrence of Non-comp liant Bill Arrangements activities in the future.
We will engage Internal Control Consultant for a t least 12 months after Listing to conduct periodic
review and assessment of our internal control measures, report the results of such assessment to our
Directors and the Audit Committee and propose additional measures for improvement (if any). We will
also disclose in our first annual report after Listin g whether there are any further bank acceptance bills
activities identified by our Directors, senior manage ment, Audit Committee and/or the Internal Control
Consultant.
Indemnity from our Controlling Shareholder
Our Controlling Shareholder has provided us with an irrevocable indemnity to fully indemnify us
from and against all liabilities, claims, actions, dem ands, costs, charges, fees, expenses and fines
suffered or incurred or to be suffered or incu rred by us arising from the Non-Compliant Bill
Arrangements.
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Non-compliance incidents
During the Track Record Period and up to the Late st Practicable Date, we had experienced certain
non-compliance incidents in the PRC in relation to ( i) properties with defective titles; and (ii) entering
into Non-compliant Bill Arrangements. For more details, please refer to the paragraphs headed
‘‘Properties — Properties with defective titles ’’and ‘‘Compliance with laws and regulations — Non-
compliant bill arrangements ’’in this section. We had also experien ced other non-compliance incidents
during the Track Record Period and up to the Latest Practicable Date, details of which are set out in the
table below:
Non-compliance incidents
Reasons for
non-compliance
Legal consequence and
potential maximum penalties
Remedies and rectification and
internal control measures taken to
prevent future breach and ensure
on-going compliance
Potential impact on our
operations and financial
condition
Under contribution of social insurance fund and housing provident fund
In the five months ended 31
May 2020, we had not fully
complied with the relevant
regulations on payment of
social insurance fund
contribution for our employees,
with an estimated under
contribution amount of
approximately RMB96,000.
Further, in the four months
ended 30 April 2020, we had
not fully complied with the
relevant re gulations on
payment of housing provident
fund contribution for our staff,
with an estimated under
contribution amount of
approximately RMB230,000.
The breach was not wilful
and was caused by the
unintentional oversight of the
PRC laws and regulations by
our human resources
department.
According to the Social
Insurance Law of the PRC ( 《中
華人民共和國社會保險法》), if
an employer fails to pay its
social insurance contribution,
the competent authority may
demand that the employer to
pay all outstanding social
insurance contributions within a
prescribed time limit. If the
employer fails to make such
payment within the prescribed
time limit, the relevant authority
may apply to the relevant
administrative department at
county level for a decision to
make a transfer of payment
from the employer ’sb a n k
account for the outstanding
amount. The employer may also
be subject to a fine at a daily
rate of 0.2% on the outstanding
amount, accruing from when the
social insurance funds are due.
According to the Administrative
Regulations on the Housing
Provident Fund ( 《住房公積金管
理條例》), a newly established
entity shall, within 30 days of
its establishment, register at the
housing provident fund
management centre, and shall,
within 20 days from the date of
registration, open a housing
provident fund account for its
employees at an entrusted bank
with the approval documents of
the housing provident fund
management centre. The housing
provident fund management
centre may order an entity to
make registration and open a
bank account within a time
limit if an entity fails to do so,
and if the entity fails to make
registration and open the
relevant bank account within the
pres
cribed time limit, a fine in
the amount between RMB10,000
and RMB50,000 may be
imposed. Further, if an
employer fails to pay housing
provident funds, the regulator
has the power to order the
employer to make contribution
within a prescribed time limit
and if the employer fails to act
accordingly, an application of
As for the non-compliance relating
to social insurance fund, Yantai
Zhongjia has completed the
necessary rectification actions to
comply with the relevant laws and
regulations in the PRC concerning
the payment of social insurance
fund. Since June 2020, Yantai
Zhongjia has made contribution
payment for the social insurance
fund in full in accordance with the
relevant laws and regulations in the
PRC. Since then, there has been no
non-compliance in this aspect.
Further, we have obtained a
confirmation from Muping Branch of
Yantai Municipal Human Resources
and Social Insurance Bureau* ( 煙台
市牟平區人力資源和社會保障局),
confirming that Yantai Zhongjia had
no record of administrative penalties
due to breach of any laws or
regulations related to social
insurance.
As for the non-compliance relating
to housing provident fund, Yantai
Zhongjia has registered with the
housing provident fund management
centre in June 2020, and has made
payment for the housing provident
fund in full in accordance with the
relevant laws and regulations in the
PRC since May 2020. We have
accrued the estimated under
contribution amount for the four
months ended 30 April 2020 in our
accounts for FY2020. Further, we
have obtained a confirmation from
Muping Management Division of
Yantai Municipal Housing Provident
Fund Management Centre* ( 煙台市
住房公積金管理中心牟平管理部)
confirming that Yantai Zhongjia has
made contribution to housing
provident fund for its employees
since May 2020. We have also
conducted interview with the
relevant authority and confirmed
among other things, that (i) on the
basis that no employee would file a
complaint in respect of the
underpayment of housing provident
fund, Muping Management Division
of Yantai Municipal Housing
Provident Fund Management Centre*
(煙台市住房公積金管理中心牟平管理
部) wo
uld not request Yantai
Zhongjia to pay outstanding housing
Our PRC Legal Advisers are of
the view that (i) Muping Branch
of Yantai Municipal Human
Resources and Social Insurance
Bureau* (煙 台市牟平區人力資源
和社會保障局) and Muping
Management Division of Yantai
Municipal Housing Provident
Fund Management Centre* ( 煙
台市住房公積金管理中心牟平管
理部) are competent authorities
to issue the respective
confirmations; and (ii) In light
of the confirmations by
competent authorities and on the
basis that no employee would
file a complaint in respect of
the underpayment of social
insurance fund and housing
provident fund, the risk of
penalty to be imposed by the
relevant authorities is remote.
Our Directors confirm that as at
the Latest Practicable Date,
Yantai Zhongjia has not
received any complaint from
any of the employee in relation
to the social insurance and
housing provident fund
contribution, and in case of any
relevant complaints from
employees received by Yantai
Zhongjia, Yantai Zhongjia will
rectify the issue timely,
including but not limited to
make adequate social insurance
and housing provident fund
contribution as required by then
relevant laws and policy.
We have adopted internal
control procedures to prevent
the recurrence of the non-
compliance incidents.
Our Controlling Shareholder has
provided an irrevocable
indemnity against all claims,
actions, demands, costs, charges,
fees, expenses and fines
suffered or incurred or to be
suffered or incurred by us due
to the underpayment of social
insurance fund and housing
provident fund.
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Non-compliance incidents
Reasons for
non-compliance
Legal consequence and
potential maximum penalties
Remedies and rectification and
internal control measures taken to
prevent future breach and ensure
on-going compliance
Potential impact on our
operations and financial
condition
compulsory enforcement can be
made the People ’sC o u r to ft h e
PRC.
provident fund; and (ii) Yantai
Zhongjia has no record of complaint
filed against it.
We have formalised a set of
procedures to prevent the recurrence
of failure to make social insurance
and housing provident fund
contributions in full, including:
. designating our finance
department and administration
department to supervise whether
our human resources department
has implemented the relevant
procedures to make social
insurance and housing provident
funds contributions according to
the relevant laws and regulators
for our employees;
. providing training to our staff
in the human resources
department when the relevant
laws and regulations relating to
social insurance and housing
provident fund have been
amended;
. implementing procedures to
calculate and pay social
insurance and housing provident
funds for our employees; and
. reviewing the implementation of
the policies on social insurance
and housing provident funds by
our human resources department
regularly to ensure they have
been properly implemented in
accordance with the PRC laws
and regulations.
B a s e do nt h ef o r e g o i n g ,w ea r e
of the view that non-compliance
incident does not have any
material effect on the operations
and financial condition of our
Group.
Our Directors believe that the foregoing non-compliance incidents have not caused or will not
cause any material and adverse financial or operati onal impact on us, as our Controlling Shareholder had
irrevocably undertaken to fully indemnify us for all losses, claims, penalties, fines and expenses as a
result of such non-compliances.
INTERNAL CONTROL AND RISK MANAGEMENT
We are subject to various risks during our operations. For further details, please see the section
headed ‘‘Risk factors’’ in this prospectus. We have established internal control and risk management
systems and relevant policies and procedures which we consider suitable for our business operation. Our
Directors are responsible for formulating and overseeing the implementation of internal control measures
and the effectiveness of our risk management system, which are designed to provide reasonable
assurance regarding the achievement of objectives relating to our operations, r eporting and compliance.
Our policies and procedures are aimed at managing our mining and production operations, monitoring
our business performance and minimising risk exposure.
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In December 2019, we have appointed the Internal Control Consultant to perform a detailed review
of our internal control and risk management systems, and to conduct follow-up reviews. The scope of
work of the Internal Control Consultant included the reviewing of our internal control systems on
control environment, risk assessment and monitoring, corporate governance, environmental and social
governance, information disclosure system, financial reporting, income and procurement management,
production process, inventory management, anti-fraud procedures, human resources and remunerations,
treasury, taxation and general control on information technology.
The Internal Control Consultant has identified the following deficiencies in our internal control
system and recommended certain measures to be implemented by our Group:
(i) we failed to make full contributions of social insurance and housing provident funds for our
employees in 2020. Please refer to the paragraph headed ‘‘Compliance with laws and
regulations — Non-compliance incidents — Under contribution of social insurance fund and
housing provident fund’’ in this section for details of the internal control measures adopted
by us;
(ii) Yantai Zhongjia did not hold the necessary permits and certificates in respect of 15 Defective
Owned Buildings on its Owned Land and had been leasing Collectively-owned Rural Land
and buildings for non-agricultural use. P lease refer to the paragraphs headed ‘‘Properties —
Properties with defective titles ’’in this section for details of suc h internal control deficiencies
and the respective enhanced internal control policies and measures adopted by us;
(iii) from January 2020 to May 2020 , Yantai Zhongjia has engaged in certain Non-compliant Bill
Arrangements in breach of the PRC Negotiable Instruments Laws. Please refer to the
paragraph headed ‘‘Compliance with laws and regulations — Non-compliant bill
arrangements ’’in this section for details of such intern al control deficiency and the enhanced
internal control policy and measures adopted by us; and
(iv) in FY2020, our Group has provided corporate guarantees in favour of banks in the PRC in
respect of banking facilities obtained by third pa rties, for details please refer to the section
headed ‘‘Financial Information — Indebtedness — Contingent liabilities — Guarantees
issued ’’ in this prospectus. Further, during the Track Record Period, certain of our bank
borrowings have been cross guaranteed by such third parties. We intend to utilise internal
resources to repay certain bank loan or utilise net proceeds from the Global Offering
amounting to approximately 12.6% or HK $33.6 million (RMB30.0 million) and such
guarantees will be released upon repayment of the bank loans, for details please refer to the
section headed ‘‘Future plans and use of proceeds — Use of proceeds ’’in this prospectus.
Going forward, we intend to end all cross-guarantee arrangements after the loans have been
fully repaid.
Our Directors confirmed that none of such deficiencies has caused material adverse effect on, or
serious disruption to, the business operations and finance of our Group.
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Our Internal Control Consultant conducted reviews and follow-up reviews and concluded that we
had implemented (or will implement no later than the Listing) all of the recommendations made by our
Internal Control Consultant and no further internal control deficiencies wer e identified during the
follow-up review. We have implemented various pol icies and procedures to ensure effective risk
management at each aspect of our operations, including the production and sales of products,
administration of daily operations, financial re porting and recording, compliance procedures with
applicable laws and regulations on safety, environmental protec tion and maintenance of required
licences, permits and certificates, which shall be reviewed regularly by the Audit Committee of our
Board after Listing. In addition to corporate govern ance related policies tha t we will adopt prior to the
Listing, we have also put in place various written po licies in accordance with the Integrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission. We cannot
guarantee that our internal control measures will be e ffective in protecting us against various risks in our
business. For further details, please see the sections headed ‘‘Risk factors — R i s k sr e l a t i n gt ot h e
business operations of our Group — We may not be able to detect and prevent fraud, bribery or other
misconduct committed by our employees , customers or other third parties ’’and ‘‘Risk factors — Risks
relating to the business operations of our Group — Our internal control and risk management systems
may not fully protect against various risks inherent in our business ’’in this prospectus.
CORPORATE GOVERNANCE
To further enhance the quality of our corporate governance, our Group has adopted or intended to
adopt the following measures:
. our legal advisers as to Hong Kong laws have conducted training sessions to our Directors in
June 2020 and February 2022, and provided to them training materials regarding ongoing
obligations, duties and responsibilities of directors of publicly listed companies under the
Companies (Miscellaneous Provisions) Ordinance, the Companies Ordinance, the SFO and
the Listing Rules;
. we have appointed Dr. Shao, our executive Direc tor, Chairman and Chief Executive Officer,
who will act as the principal channel of communication between members of our Group and
our Company in relation to legal, regulatory and financial reporting compliance matters of
our Group as well as the chief coordinator to oversee the internal control procedures in
general. Details of Dr. Shao ’s qualifications and experience are set out in the section headed
‘‘Directors and senior management ’’in this prospectus;
. our Company has appointed Innovax Capital as our compliance adviser to advise our Group
on compliance matters upon Listing in accordance with Rule 3A.19 of the Listing Rules; and
. we have established an Audit Committee with written terms of reference in accordance with
Appendix 14 to the Listing Rules to review the i nternal control system and procedures for
compliance with the requirements of the Listing Rules, the Companies Ordinance and other
applicable laws, rules and regulations.
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Our Group aims to ensure that our operations are in c ompliance with the applicable laws, rules and
regulations with respect to our business operatio ns in the PRC. Our relevant senior management will
continue to review and enhance our internal control system to ensure regulatory compliance in our
business operations in the PRC and recommend remedial proposals on any internal control deficiency to
our audit committee, which will then advise our Board. Any proposal approved by our Board will be
implemented and closely monitored. Progress and effectiveness of any remedial plan will be reported to
the audit committee. Any material internal control failing, weakness or deficiency identified during the
review process and the relevant follow up or remedial measures (if applicable) taken by our Group will
be disclosed in our annual report after Listing.
ENVIRONMENTAL, SOCIAL AND CORPORATE GOVERNANCE
Governance structure of our Group for envi ronmental, social and governance matters
Our Directors consider that as a responsible mining company and employer, establishing and
implementing sound environmental, social and governance ( ‘‘ESG’’) principles and practices are
essential to our Group, and meanwhile it can increase the sustainable investment value of our Group and
provide long-term returns to our Shareholders. In order to integrate ESG into our daily decision-making
and operation more effectively, we have established an ESG working group (the ‘‘ESG Working
Group ’’) and an energy conservation and emission reduction leading group (the ‘‘Emission Reduction
Leading Group ’’), and formulated a series of ESG policies. Our Group ’s ESG policies and procedures
manual provide guidance on our Group ’s ESG governance, which set out (i) the ESG functions and roles
of our Board, the ESG Working Group and the Emissi on Reduction Leading Group; and (ii) the detailed
policies and related measures for each of the ESG sc ope. The ESG-related measures specified in this
policy cover energy management, efficient use of resources (including but not limited to energy, water
resources, other raw materials), waste management, green procurement, climate change response, labor
standards, occupational health and safety, supply chain management, product quality and anti-corruption,
to integrate ESG elements into the daily operations of our Group.
Our Board is responsible for formulating and supervising overall ESG strategies of our Group and
determining the ESG-related risks. Our ESG Working Group and Emission Reduction Leading Group
comprise many employees from different departments, and each of the groups is headed by the deputy
general manager of Yantai Zhongjia. The ESG Working Group is responsible for assisting the
formulation of ESG strategies and implementing the ESG policies and measures across all departments.
It is also responsible for regularly identifying and reviewing the ESG issues and risks and putting
forward improvement suggestions. In order to achiev e the long-term emission reduction goals, Emission
Reduction Leading Group is established to primarily focus on matters relatingt oe n e r g yc o n s u m p t i o n
and emission. They will supervise and check the energy management of all departments, formulate the
relevant management systems and work plans, and regularly conduct energy calculation for the
production units, so as to continuously improve the energy utilisation efficienc y of our Group. Emission
Reduction Leading Group will organise annual meetings, summarise the work for the year and set the
work goal for the next year, while the ESG Working Group will also supervise and check the relevant
work progress. Both groups will report to our Board.
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In addition to our internal opera ting environment, we also value the environmental and social risk
management in the supply chain. We have formulated the environmental and social risk policies for the
supply chain management, and encourage all the su ppliers to proactively promote the environment
protection and improve the employee benefits protection, so as to reduce the environmental and social
risks in the supply chain.
Metrics and targets
In order to effectively evaluate and manage the ESG-related risks, we have adopted the following
metrics and targets:
(i) in respect of greenhouse gas emissions, the metrics mainly include the amount of the energy
indirect (Scope 2) greenhouse gas emissions calculated based on the CO
2-equivalent (tonnes).
We plan to reduce the amount of greenhouse gas emissions produced in the course of
operation;
(ii) in respect of energy use, the metrics mainl y include the amount of energy consumption with
the unit of megawatt hour (MWh). We plan to improve the energy efficiency and reduce the
unnecessary energy consumption; and
(iii) in respect of resource utilisation, the metri cs mainly include the volume of water consumed
with the unit of cubic metre. Our target is t o use water resource more effectively in our
business operations and to save water resource.
We will strive to reduce the greenhouse gas emissions, improve the efficiency in the use of energy
and other resources, and practically protect the environment. To advance our ESG performance, we have
set a reduction target of 1% for each of our metrics: greenhouse gas emissions, energy consumption, and
water consumption by the end of the year ending 31 December 2025, as compared to their
corresponding levels in FY2022.
A. Environment
Emissions management
Our Group’ s emissions and wastes are generated m ainly from our mining activities and ore
processing activities, which mainl y include waste rocks and tailings, solid waste, wastewater, dust
and noise. Our Group formulates different emission management depending on relevant
government policies and environmental factors. Our production wastewater and solid waste
treatment procedures specify the procedures of production wastewater reuse and the procedures of
transportation, reuse and collection of solid waste, to ensure the proper treatment of emissions and
waste, and we also establish the Environmental M anagement System, to provide guidelines on the
detection and treatment procedures of waste, waste gas, waste water, noise and other emissions
generated in the operation process. We strictly co mply with and implement the requirements of
environmental laws and regulations of the PRC, including but not limited to the Environmental
Protection Law of the PRC ( 《中華人民共和國環境保護法》), the Mineral Resources Law of the
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PRC (《中華人民共和國礦產資源法》) and the Law on Environmental Impact Assessment of the
PRC (《中華人民共和國環境影響評價法》), and has developed relevant policies and measures to
effectively manage emissions and ensure operational compliance. For further details, please refer to
the section headed ‘‘Regulatory overview — Laws and regulations on environmental protection ’’in
this prospectus. Our Directors are of the opinion that our Group ’s operations do not generate
significant emissions and wastes which would significantly pollute the environment, and we have
conducted the Registration of Solid Waste Sources with the PRC government and obtained a Water
Extraction Permit issued from the PRC government.
The environmental protection policies and proc edures in respect of the emissions and wastes
generated from our operations are summarised below:
Emissions and wastes Major environmental protection measures adopted
1. Waste rocks and tailing
management
All waste rocks generated from mining could be used as
the construction materials for roads, tailing dams,
retaining walls and swales. As such, during the Track
Record Period, we supplied the waste rocks generated to
external recycler for further utilisation.
In respect of the tailings produced during our ore
processing activities, part of which will be used in the
backfilling the stopes in our Songjiagou Underground
Mine. To do so, cements are added to dry tailings to
produce cement slurry, which can be directly used for
backfilling the stopes in our Songjiagou Underground
Mine.
During the Track Record Period, we supplied surplus
tailings to third parties, who recycles such tailings as
construction materials, so as to minimise the impact on
the environment.
2. Solid waste management In respect of each type of waste, including scrap metals
and municipal solid waste, there are designated collection
and storage locations around the work area. For example,
scrap iron are collected and stored in various designated
locations before being sold for recycling. Domestic solid
wastes are collected and processed centrally by
government environmental health departments.
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Emissions and wastes Major environmental protection measures adopted
3. Wastewater treatment We are committed t o recycling water to reduce the use of
fresh water and the volume of wastewater discharged.
The mine water from our Songjiagou Open-Pit Mine and
our Songjiagou Underground Mine is collected and
processed through desilters. The processed water can be
reused for mining and dust control. We also collect and
treat the water from the upper level of tailing dams which
will be reused in our processing plant.
We have built drainage ditches around our Songjiagou
Open-Pit Mine to prevent precipitation from entering the
mine. When excessive mine water is discharged during
rainy seasons, the mine water will be processed in the
desilter before being disch arged into the environment.
There are existing domestic wastewater treatment units on
the construction site, and the t reated domestic wastewater
is reused for irrigation in site and farmland. We have also
engaged a third-party testing company to regularly test
wastewater.
Consumption of water is one of our key performance
indicators (‘‘ KPI(s)’’) in respect of our emissions and
waste management and resource usage management. For
details, please see the paragraph headed ‘‘Management of
use of resources ’’below.
4. Dust control The main sources of dust emission are blasting, mining,
loading, ore processing, waste rock storage and treatment
and movement of vehicles and equipment. We formulate
various measures including: (i) collecting dusts and
installing vacuum cleaners in the processing plant; (ii)
deploying carts to splash water in the mining area, waste
rock loading area and roads to reduce dust emission; and
(iii) engaging qualified compa nies to test dust particles.
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Emissions and wastes Major environmental protection measures adopted
5. Noise control The noise emission mainly comes from blasting, jackdrill,
loaders, ore processing equipment, air compressors and
other noise-making equipment and machinery. We are
committed to reducing the impact of noise on the
environment by installing processing equipment in the
closed rooms.
We take various measures to minimise the noise produced
during our operations, such as the use of damping and
noise reduction device, inst allation of muffler on the air
compressor, the setting of s peed limit for vehicles,
adoption of sound insulation m easures, and the limitation
of the blasting in the daytime, so as to reduce the impact
of noise on the environment.
During the Track Record Period, our cost of compliance with the applicable environmental
protection rules and regulations in the PRC amou nted to approximately RMB0.5 million, RMB0.4
million, RMB0.7 million and RMB0.4 million, re spectively. Moving forward, we expect our
environmental protection rules and regul ations will maintain at a similar level.
Our principal operating subsidiary, Yantai Zhongjia, was included in the 2022 soil
contamination supervision list of Shandong Province published by the Administration Department
for Ecology and Environment of Shandong Province ( 山東省生態環境廳). Pursuant to the Soil
Pollution Prevention and Control Law of the PRC ( 《中華人民共和國土壤污染防治法》),
Administrative Measures for Soil Environment of Industrial and Mining Land (Trial) ( 《工礦用地
土壤環境管理辦法(試行)》) and Soil Pollution Prevention and Control Regulations of Shandong
Province (《山東省土壤污染防治條例》) (collectively, the ‘‘Soil Pollution Prevention Laws and
Regulations ’’), amongst others, non-ferrous metal mining and processing enterprises above scale
shall be included in the soil contamination sup ervision list so that relevant authorities could
supervise these enterprises in the list on a timely b asis. Pursuant to the So il Pollution Prevention
Laws and Regulations, enterprises included in the soil contamination supervision list are required
to: (i) establish procedures for managing the disc harge of toxic or hazardous waste; (ii) establish
procedures for screening of soil contamination, and (iii) conduct an annual examination on the soil
and underground water on the land used for its operation and report the results to the competent
authorities of ecology and environment.
Our Directors confirmed that, as concurred by our PRC Legal Advisers, Yantai Zhongjia was
included in the soil contamination supervision lis t because
 it is operatin g in one of the industries
that has been under close supervision pursuant t o the Soil Contamination Prevention Laws and
Regulations, and not as a result of its non-complia nce with the Soil Pollution Prevention Laws and
Regulations. After we became aware of the soil contamination supervision list, we have established
the required waste management and screening procedures and carried out the examination and
reporting at least one a year in compliance w ith the Soil Pollution Prevention Laws and
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Regulations. As at the Latest Practicable Date, we had not received any notice or demand from any
competent authorities on penalties, enforcement actions or allegations of non-compliance with the
Soil Contamination Prevention Laws and Regulati ons as a result of Yantai Zhongjia being included
in the soil contamination supervision list. Given t hat we have established the relevant procedures
and carried out examination and reporting as required under the Soil Pollution Prevention Laws
and Regulations and we have never received any notice or demand from any competent authorities
on penalties, enforcement actions or allegations in relation to soil contamination, our PRC Legal
Advisers are of the view that Yantai Zhongjia is in compliance with the Soil Pollution Prevention
Laws and Regulations in material respects, and any enforcement actions or a penalty are unlikely
and remote. In view of the above, our Directors further confirmed that being included in the soil
contamination supervision list would not have a material and adverse financial effect on our
business.
Management of use of resources
We are committed to making optimal use of resour ces, such as prioritising the purchase of
energy-efficient production facilities, in order to reduce the consumption of natural resources. We
have formulated the policies and procedures on resource conservation, including the ‘‘Office
Electricity Management System ’’, ‘‘Energy Quota Assessment System ’’ and the ‘‘Fuel Saving
Management System ’’. In order to provide clear directions, methods and procedures for resource
conservation in the workplace, such as the operation of air-conditioning and lighting systems, the
approval of fuel-consuming equipment, and division of labor in energy management among units
and departments. We implemented various measures in the daily office operations of mining sites
and ore processing plant, such as identifying abnormal energy consumption and conducting
necessary investigation and re ctification, carrying out energy calculation of the production
departments, adopting the light-emitting diode (LED) lighting system and bringing in natural light
to the extent possible, and arranging the last employee to leave the workplace to check and turn
off lighting and air conditioning to avoid wasting resources.
In respect of our emissions and wastes management and resources usage management, we
primarily adopt electricity consumption and water consumption as our KPIs. In FY2020, FY2021,
FY2022 and 6M2023, we consumed approximately 47,182 MWh, 28,336 MWh, 44,034 MWh and
21,340 MWh of energy in the course of our operations, respectively. As for energy consumption
intensity, we consumed approximately 47,411 MWh/tonne of production volume, 56,780 MWh/
tonne of production volume and 40,588 MWh/tonne of production volume and 45,599 MWh/tonne
of production volume in FY2020, FY2021, FY2022 and 6M2023, respectively. In FY2020,
FY2021, FY2022 and 6M2023
(1) , we consumed approximately 150,357 cubic metres, 48,221 cubic
metres, 102,532 cubic metres and 49,368 cubic metres of water resources in our daily operations,
respectively. In terms of water consumption inten sity, we consumed approximately 151,087 cubic
metres/tonne of production volume, 96,627 cubic metres/tonne of production volume, 94,508 cubic
metres/tonne of production volume and 105,487 cubic metres/tonne of production volume in
FY2020, FY2021, FY2022 and 6M2023, respectively.
(1) As we increased the use of recycled water through rainwater recovery in FY2021, FY2022 and 6M2023, the water
consumption and its water consumption intensity in FY2021, FY2022 and 6M2023, are lower than those in FY2020.
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In addition, we have also measured CO 2 emissions as one of the greenhouse gases based on
electricity and energy consumption. In FY2020, FY2021, FY2022 and 6M2023, we emitted
approximately 28,785 tonnes of CO 2-equivalent, 17,288 tonnes of CO 2-equivalent, 26,865 tonnes
of CO 2-equivalent and 13,020 tonnes of CO 2-equivalent of greenhouse gases (indirect emissions)
from our operations, respectively. For emission intensity of greenhouse gases (indirect emissions),
we emitted approximately 28,925 tonnes of CO 2-equivalent/tonnes of production volume, 34,641
tonnes of CO 2-equivalent/tonnes of production volume, 24,763 tonnes of CO 2-equivalent/tonnes of
production volume and 27,820 tonnes of CO 2-equivalent/tonnes of production volume in FY2020,
FY2021, FY2022 and 6M2023, respectively.
For illustration purpose only, below is a table comparing the ESG metrics of our Group and
the major gold producers in Shandong Province:
Our Group
Shandong
Gold
Mining
Co., Ltd.
Zhaojin
Mining
Industry
Co. Ltd.
Shandong
Humon
Smelting
Co., Ltd
(Note 1) (Note 1) (Note 1)
Emission data — Greenhouse Gas
Total emissions intensity (both Scope
1 direct and Scope 2 energy indirect
greenhouse gas emission in tonnes)
(tCO
2-e/million RMB revenue) 72.49 25.74 76.71 Not disclosed
Waste data — Hazardous waste
Hazardous waste intensity
(tonnes per million RMB revenue) 0.005 133.94 52.06 Not disclosed
Waste data — Non-hazardous waste
Non-hazardous waste intensity
(tonnes per million RMB revenue) 5,552.58 223.79 547.68 Not disclosed
(Note 2)
Consumption of energy
Total energy intensity
(MWh per million RMB revenue) 137.0 0 33.60 82.55 Not disclosed
Social data — Total workforce
Employees number (Person) 429 16,993 6,760 4,899
Notes:
(1) The ESG metrics were extracted from their published ESG reports.
(2) The amount of non-hazardo us waste produced by our Group, which is 5 ,552.58 tonnes per mi llion RMB revenue, is
relatively high compared to Shandong Gold Mining Co., Ltd. and Zhaojin Mining Industry Co. Ltd. in Shandong
Province. This difference can be attributed to the fact tha t our Group operates on a smaller scale in terms of revenue
and/or the number of gold mines in operation.
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As shown in the table above, the result of ESG performance indicators relating to emission
and waste, consumption of energy and social data varies among our Group and each of the
comparable companies, mainly a ttributable to the followings:
1. the scope of business for the comparable companies includes smelting and refining
while our Group ’s business is specialising in gold exploration, mining and processing
and does not have a smelting business. The d ifference in combination of business
segments between our Group and the comparable companies will lead to significant
variance in the scale of business operation and hence, the number of labour force
applied, the efficiency in use of energy or emission data; and
2. even Shandong Gold Mining Co., Ltd. and Zhaojin Mining Industry Co. Ltd. are
companies listed in the Stock Exchange, th ere are insufficient published information
(i.e. segmental information for its gold and copper businesses/smelting and refining
business), to understand the variance in envi ronmental data between them. As a result,
it is impracticable to infer the reasons for and circumstance leading to the difference
between our Group and the comparable companies.
Management of the environment and natural resources
We understand that our operating activities may have an impact on environmental and natural
resources, so we do our best to minimise such impact to achieve sustainable development. To this
end, we formulate a series of policies to reduce the negative impact of operating activities on the
environment and land, as well as prevent environmental accidents. Our ‘‘Mineral Resources
Development and Utilization Plan ’’contains mine environmental governance measures, including
waste, waste gas, wastewater, noise treatment measures, as well as soil and water conservation and
land reclamation measures. The ‘‘Emergency Plan for Environmental Accidents ’’, ‘‘Emergency
Response System for Environmental Accidents ’’ and ‘‘Environmental Accident Management
System ’’also assist staffs in responding to different levels and types of environmental accidents.
According to the SRK Report, none of our mi nes are located within the area of natural
reserves. The development of our Songjiagou Open-Pit Mine and Songjiagou Underground Mine is
and will unlikely to cause harm to wild animals or plants. However, we still strive to protect
environment and minimise environmental footprint generated in the course of our operations, in
order to protect ecosystems and combat climate change. We strictly regulate the emission of
exhaust gas, wastewater, solid waste and noise from our production plant to ensure that each
production process complies with the environmental standards of national and local governments.
According to the SRK Report, our Songjiagou Open-Pit Mine and Songjiagou Underground
Mine will result in destruction of a land of a tot al of approximately 83.1 hectares. Under the
relevant PRC laws and regulations, we are required to be responsible for site closure and land
rehabilitation in relation to mining activities and submit a land rehabilitation plan to the Ministry
of Natural Resources or the local land and resources branch for review when renewing the mining
licences. The purpose of land rehabilitation is to reh abilitate the land damaged by the operations in
order to control water and soil loss and protect the ecological environment. As at 30 June 2023, an
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environmental rehabilitation deposit of approxi mately RMB19.2 million has been deposited in the
form of restricted and secured deposits for o ur Songjiagou Open-Pit Mine and Songjiagou
Underground Mine in accordance with relevant PRC laws and regulations. The proposed measures
in relation to site closure and land rehabilitation are as follows:
Measures Details
1. Geological environment
restoration
We will take measures to mitigate geological disasters,
particularly landslides during t he rainy season, including
slope cutting during open pit mining or backfilling of steep
slope areas with tailings after completion of underground
mining.
Our mining operations may cause impacts or losses to the
growth of the plants and animals and the habitats due to
landslides or stripping.
2. Greening and
rehabilitation
We have minimised environmental impacts by greening the
area around the mining area and the tailings dam.
We have also begun to gradually rehabilitate the mining site
by replanting the slopes in the mining areas.
3. Topsoil stripping Topsoil will be stripped from mining, ore processing sites,
waste stone quarries and infrastructure areas and then reused
for land rehabilitation.
4. Progressive restoration Restoration will be carried out progressively with mining
activities. In addition, any damaged agricultural land must
be restored to the agricultural use phase at the lowest crop
yield when possible.
5. Replanting At completion of the project, we will rehabilitate the
relevant land for replanting by covering it with topsoil and
seeds. The species used will be local perennials that are
capable of growing in the conditions of the district where
the mining areas are located.
6. Rehabilitation
monitoring and
maintenance
Rehabilitation monitoring and maintenance will continue
throughout the period of the project and after the completion
of the project.
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During the Track Record Period and up to the Latest Practicable Date, we are committed to
complying with and implementing the approved r ehabilitation plan. For FY2020, FY2021, FY2022
and 6M2023, the present value of our rehabilitatio n provision is approxima tely RMB22.0 million,
RMB23.3 million, RMB23.9 million and RMB24.3 million, respectively.
As advised by our PRC Legal Advisers, during the Track Record Period and up to the Latest
Practicable Date, we have complie d in all material aspects with the a pplicable laws and regulations
relating to environmental protection. During the Track Record Period and up to the Latest
Practicable Date, we have not received any notice or warning, nor have we been subject to any
investigation or suffered any ma terial fines or penalties that wou ld have a material adverse effect
on our production and operations as a result of any breach of the relevant PRC environmental laws
and regulations.
Our environmental and climate related risks and opportunities
Under the guidance of our ESG Risk Management Work Plan, our ESG Working Group is
responsible for identifying ESG-related risks, inc luding environmental and climate related risks,
through strategies and measures such as feedback from internal and external stakeholders,
developing an ESG Risk Identif ication and Register, and identifying business opportunities and
reporting related matters to our Board. We assess the extent to which these risks affect our Group
and prioritise them. Subsequently, we develop co rresponding measures and regularly review the
effectiveness of existing measures to control and mitigate the relevant risks. Please refer to the
paragraphs headed ‘‘A. Environment ’’ and ‘‘B. Social ’’ in this section for the risk response
measures.
We are well aware that the risks of environmental and climate change may cause financial
losses and non-financial l osses to our operations. These risks include: (i) transition risks associated
with changes in policies, laws, technologies and m arkets; and (ii) physical risks associated with
hurricanes, floods and continuous high temperature.
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The following is a summary of the environmental and climate related risks and opportunities
we have identified:
(i) Environmental and climate related
risks
Potential impacts
. Extreme weather events such as
floods, storms, snowstorms or
extreme heat
. Our mining operations may be effected
due to adverse weather, resulting in
lower production rates
. The revenue may decrease because the
supply chain is intervened or disrupted
. Changes in environmental or
climate related regulations
. In order to comply with the increasingly
stringent environmental regulations, the
compliance cost increases, which affects
the profit
. Policies to reduce CO
2 emissions . In order to cope with the changes in the
policies, operating models may be
changed, leading to the increase in
operating costs or tax liabilities, which
affects the profit
(ii) Environmental and climate related
opportunities
Potential impacts
. To adopt energy efficient
machineries and equipments to
improve efficiency of resource
utilisation
. Operating costs may decrease
. To develop energy efficient and
low carbon production
technologies
. Competitiveness may be enhanced,
resulting in the decrease in operation
cost
We will work with third-party professional or ganisations to improve the calculation and
reporting of GHG emissions. We will also maintain close communication with internal and external
stakeholders to integrate climate change issues into our Group’ s risk management process and ESG
governance.
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B. Social
Employees
We believe that our employees are crucial to our success. Our human resources department is
responsible for the recruitment, management and training of the employees. As at the Latest
Practicable Date, we had a total of 452 full-time e mployees. Other than one employee in Canada
and one employee in Hong Kong, all of our employees are based in the PRC.
As at the Latest Practicable Date, our Group had a total of 452 full-time employees
(including our executive Directors), of which 450 full-time employees were local employees and 2
full-time employees were foreign employees.
The following table sets out a breakdown of our employees by function on the dates
indicated:
As at 31 December
As at
30 June
2023
As at
the Latest
Practicable
Date2020 2021 2022
Management 10 10 9 9 8
Operation 241 331 374 379 399
A d m i n i s t r a t i o n 2 22 63 13 13 0
Accounting/finance 5 6 6 7 8
Safety and environmental
p r o t e c t i o n 66333
O t h e r 1 0 1 2664
Total 294 391 429 435 452
We strictly comply with the requirements of emp loyment related laws and regulations in the
PRC, including but not limited to the Labour Law of the PRC ( 《中華人民共和國勞動法》), the
Provisions on Prohibition of Using Child Labour ( 《禁止使用童工規定》) and the Law of the PRC
on Prevention and Control of Occupational Diseases ( 《中華人民共和國職業病防治法》). In order
to ensure compliance and improve employment management, we have formulated a series of
employment management related policies, including but not limited to Human Resource
Management System, Employee Handbook and Recruitment Norms and Procedures, which set out
measures on employment matters such as compensation and dismissal, recruitment and promotion,
working hours, rest periods, equal opportunities, diversity, anti-discrimination and other benefits
and welfare.
To ensure we comply with the Labour Law of th e PRC and pursue the principle of equality
when conducting recruitment, we generally recruit employees through recruitment websites,
campus recruitments and open markets. When we make recruitment decisions, we take into account
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factors such as our business strategy, devel opment plans, industry trends and competitive
environment. To ensure that the recruitment process is in compliance with relevant local laws and
regulations, we verify the candidates ’ information, including but not limited to age and
identification documents, thereby ensuring that the regulations on child labour and forced labour
are not violated in the operation.
We are committed to promoting equal opport unities in the workplace and value a diverse
workforce. We specify in the ESG policies and pr ocedures manual to provide equal opportunities
in employment matters such as recruitment, promotion and training, not allowing any
discrimination based on the factors such as age, ge nder, marital status, race, colour, nationality,
religion, sexual orientati on. The tables below set forth further d etails of our diverse workforce at
the dates indicated:
By age group:
As at
30 June 2023
As at
the Latest
Practical Date
At or below 20 0 0
Between 21 –30 27 27
Between 31 –40 83 91
Between 41 –50 142 144
Between 51 –60 167 169
At or above 61 16 21
Total 435 452
By gender:
As at
30 June 2023
As at
the Latest
Practical Date
Male 377 389
Female 58 63
Total 435 452
We recognise the importance of maintaining good relationships with our employees.
Remuneration payable to our employees includes salaries and allowances. In accordance with the
relevant statutory requirements, we make contributions to the employees ’ mandatory social
insurance funds to provide retirement, medical, w ork injury, maternity and unemployment benefits.
We also provide additional benefits to the employees such as free accommodation, medical, food
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and transportation allowance. However, we failed t o make full contributions to social insurance
and housing provident fund for our employees during the Track Record Period. For further details,
please refer to the paragraph ‘‘Compliance with laws and regulations — Non-compliance
incidents’’ in this section.
We conduct trainings for new employees annually and conduct regular trainings for on-the-
job employees. In general, our tr ainings focus on developing job-related skills of the management
and technical staff. We also provide external training opportunities for the employees. We provide
employees with training opportunities related to the safe use of machinery and execution of work,
including induction and on-the-job training.
We established a trade union in the PRC which all the Chinese employees are eligible to join.
Our trade union protects the legal rights and interests of our employees, promotes and enhances
our operational efficiency by addressing issues relating to workers, for example, their demands and
suggestions to the workplace. During the Track Record Period and up to the Latest Practicable
Date, we have not experienced any significant labour disputes within our Group or labour disputes
on the operation of our Group, nor have we experie nced any difficulty in recruiting and retaining
the experienced employees.
Occupational Health and Safety
We operate in a responsible manner to ensure the health and safety of our employees,
subcontractors and the communities in which we operate. We adopt occupati onal health and safety-
related policies, including the ‘‘Employee Safety Manual ’’, ‘‘Safety Production Rules and
Regulations ’’and the ‘‘Safety Production R esponsibility System ’’, which stipulate the procedures
for handling hazardous materials and hazardous processes in the workplace, as well as safety
production measures, so as to reduce the risk of accidents during work. At the same time, in order
to protect the employees ’ health, we have formulated the ‘‘Occupational Hygiene Management
System ’’and ‘‘Occupational Disease Preventio n and Control Responsibility System ’’, to maintain
workplace hygiene and ensure the good health of staffs. We have developed fundamental
operational occupational health and safety management systems and procedures for our Songjiagou
Open-Pit Mine and Songjiagou Underground Mine. These management systems and procedures
cover basic safety production management for drilling, transportation, ventilation, explosive
storage, and fire and flood prevention. We have also established safety measures covering various
aspects including mining, flood and fire protection, explosion prevention and transportation. In
February 2014, we were awarded ‘‘the Advanced Unit in Production Safety at the District Level ’’
(年度區級安全生產工作先進單位) from the government authority of the Muping District in Yantai
City. We have taken measures to comply with th e applicable laws and regulations relevant to
occupational health and safety. For our operations, we are subject to laws and regulations of the
PRC in respect of occupational health and safety, such as the Law of the PRC on the Prevention
and Control of Occupational Diseases ( 中華人民共和國職業病防治法), t
 h eW o r kS a f e t yL a wo f
the PRC ( 中華人民共和國安全生產法), the Mine Safety Law of the PRC ( 中華人民共和國礦山安
全法), the Regulations for the Implementation of the Mine Safety Law of the PRC ( 中華人民共和
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國礦山安全法實施條例) and the Regulations on the Reporting, Investigation and Disposition of
Work Safety Accidents (生產安 全事故報告和調查處理條例). For the details, please refer to the
section headed ‘‘Regulatory overview ’’in this prospectus.
In particular, our Songjiagou Open-Pit Mine and Songjiagou Underground Mine have
obtained valid production safety permits. Please refer to the paragraph headed ‘‘Our mineral assets
and reserves — Mining rights, mining licences and other licences ’’in this section for the details.
We have also obtained a safety permit for our tailings dam, which has established a perfect safety
management system equipped with an online monitoring system covering dam displacement
monitoring, leach line monitoring and safety alarms. We also continuously provide our employees
with safety training courses, the contents of which include but are not limited to post safety
operation and safety and occupational sanitation matters.
We require the subcontractors to possess appropriate qualifications in their contracted tasks
and production safety. We provide regular safety trainings to our subcontractors, who work under
the supervision of our departments such as Safety Division, Production Technology Department.
For further details, please see the paragraph headed ‘‘Suppliers and subcontractors —
Subcontractors ’’in this section.
In response to the outbreak of the COVID-19 pandemic, we are committed to minimising the
risk of infection amount our employees, and have adopted a series of quarantine measures. For the
information on our safety measures during the outbreak of the pandemic, please see the paragraph
headed ‘‘Impacts of the outbreak of COVID-19 pandemic on our business ’’in this section.
As advised by our PRC Legal Advisers, during the Track Record Period and up to the Latest
Practicable Date, we had been in compliance w ith the applicable PRC laws and regulations in
respect of occupational health and safety in all material respects.
Work safety accidents during the Track Record Period
During the Track Record Period, we recorded six occupational health or work safety
accidents of our workers as follows:
FY2020 FY2021 FY2022 6M2023
Number of work safety accidents 2 2 2 0
Accident frequency rate (Note 1) 0.8 0.6 0.5 0.0
Total recordable incident rate
(‘‘TRIR ’’) (Note 2) 2.2 1.7 1.6 0.0
Notes:
1. Accident frequency rate represents the number of workplace accidents per hundred workers. It is calculated as
the number of workplace accidents during the year divided by the number of workers, then multiplied by 100.
As at 31 December 2020, 2021 and 2022 and 30 June 2023, our Group had total operational workers of 241,
331, 374 and 379, respectively.
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2. TRIR represents the number of workplace accidents per one million man-hours worked. It is calculated as the
number of workplace accidents during the year/period divided by the number of man-hours worked, then
multiplied by 1,000,000. Number of man-hours worked fo r a year is estimated based on the total number of
the Group ’s employees and subcontractor s as at the end of the year/period, multiplied by total number of
working days per year per worker for eight hours per day.
For comparison purpose, according to Frost & Sullivan, the global industry average TRIR per million hours
worked for gold mining companies (with similar production capacity as composed with us) in the year 2020,
2021 and 2022 were 6.5, 5.2 and 3.4, respectively.
According to Work Injury Insurance Regulations 《工傷保險條例》, the severity of injuries will
be assessed by the degree of labour dysfunction a nd the degree of self-care disorder. During the
Track Record Period, except for two cases of su dden death due to sudden illness, the severity of
injuries in all the other nine workplace accidents were considered to be minor with light grades 9
or 10 or no grade being assessed. These accidents primarily included fracture, incision of fingers,
bruise on legs, infection on eyes and sudden death due to sudden illness, the breakdown of which
is as follows:
Nature of injury
Number of
accident Materiality grade (Note) Amount claimed
Fracture 3 Two cases being assessed as
grade 9 and one case being
assessed as grade 10
Fully covered by work safety
liability insurance
Incision of fingers 3 Two cases being assessed as
minor injury with no level
being assessed, and one case
being assessed as grade 10
No amount claimed for two
cases, and the other one case
f u l l yc o v e r e db yw o r ks a f e t y
liability insurance
Bruise on legs 2 One case being assessed as
minor injury with no grade
being assessed, and one case
was pending assessment
No amount claimed for one case
and the other case is pending
assessment for claim
Infection on eyes 1 One case of minor injury with
no grade being assessed
No amount claimed
Sudden death due
to sudden illness
2 Two cases of severe work injury Fully covered by work safety
liability insurance
Note: According to Work Injury Insurance Regulations 《工傷保險條例》, labour ability assessment refers to the
degree of labour dysfunction and the degree of self-care restriction. Labour dysfunction is divided into ten
grades of disability, the most serious grade is grade 1 and the lightest grade is grade 10.
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Based on the advice of the PRC Legal Advisers, pursuant to Regulations on Reporting,
Investigation and Handling of Work Safety Incidents ( 生產安全事故報告和調查處理條例), work
safety incidents are generally divided into four categories based on casualty or direct economic
losses caused in a work safety incident, n amely, particularly major incidents ( 特別重大事故),
material incidents ( 重大事故), relatively big incidents ( 較大事故) and ordinary incidents (一 般事
故). A material incident refers to an incident that has caused at least 10 but less than 30 deaths, or
at least 50 but less than 100 serious injuries or direct economic losses of at least RMB50 million
but less than RMB100 million. Besides, accor ding to Work Safety Law of the PRC (2021
Amendment) ( 中華人民共和國安全生產法 (2021修 正)), an enterprise that is liable for the work
safety incidents shall be imposed fines by the relevant emergency management authority, and in
the event of a material incident, a fine of not less than RMB2 million nor more than RMB10
million shall be imposed. Pursuant to a written confirmations dated 13 January 2022 and 16
August 2022, the Emergency Management Bureau of Yantai Muping has confirmed that it has
never imposed any penalties on Yantai Zhongjia. All of the aforementioned work safety accidents
were reported to the Human Resources and Social Security Bureau of Muping ( 煙台市牟平區人力
資源和社會保障局) for determination of claims under th e Work Injury Insurance Regulations ( 《工
傷保險條例》). No litigation or legal actions arose from t hese occupational health or work safety
accidents during the Track Record Period. Given that (i) save for one case of sudden death due to
sudden illness and one case of death caused by slip and fall at work, there were no casualties or
direct economic losses caused by the above ten occupational health or work safety accidents which
have caused at least 10 but less than 30 death, or at least 50 but less than 100 serious injuries or
direct economic losses
of at least RMB50 million b ut less than RMB100 million per incident; and
(ii) there were no fines of not less than RMB2 m illion or more than 10 million have been imposed,
our PRC Legal Advisers were of the view that the above nine occupational health or work safety
accidents were unlikely to be considered as material incidents under the Regulations on Reporting,
Investigation and Handling of Work Safety Incidents ( 生產安全事故報告和調查處理條例)o rt h e
Work Safety Law of the PRC (2021 Amendment) ( 中華人民共和國安全生產法(2021修 正)),
respectively.
Notwithstanding this, according to the revie w and follow-up review of the Internal Control
Consultant, our Internal Control Advisor has performed review procedures on our health and safety
procedures and concluded that our overall health and safety procedures and controls are adequately
designed and operating effectively, and no control deficiencies were reported during the period of
review. Accordingly, our Directors are of the view that our Group’ s safety procedures are adequate
and effective.
During the Track Record Period and up to t he Latest Practicable Date, save for the
occupational health or work safety accidents as disclosed above, there had not been any
occupational health or work safety accident or any claim arising from such accident that would
have a material adverse effect on our business, financial condition and results of operations.
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Anti-corruption, bribery and anti-money laundering
We value business ethics and integrity and prohi bit corruption, bribery and money laundering
in any form. We have a set of anti-corruption, brib ery and money laundering policies, including
the ‘‘Anti-Corruption, Bribery and Fraud Management System ’’and the ‘‘Anti-Money Laundering
Management System ’’, which set out measures for preventing, reporting, investigating and training
on corruption and money laundering, in order to guide and supervise our staffs to prevent corrupt
practices. We have put in place a set of anti-corruption, bribery and money laundering policies,
details of some of the internal con trol measures are as follows:
. We established the whistle-blowing mechan ism to report any suspected misconduct;
. Staff are required to declare any conflicts of interests when performing their duties;
. We perform background search for the candidates of key position, to assess his/her integrity
level during the recruitment process and ma intain the record for future reference;
. For any suspected misconduct identified or reported, relevant department will perform
assessment and/or investigations against a ny suspected or illegal behaviour to protect our
Group’s interests;
. To mitigate the risk in money laundering, all receipt must be performed through company ’s
bank accounts and no cash receipt is allowed;
. Finance manager is responsible to ensure that all receipt are from our client ’s company
account and match the bank information of our record;
. Where any crime related to corruption, briber y or money laundering is substantiated by our
Group, a report will be submitted promptly to relevant regulators or law enforcement
authorities when the management of our Group considers it necessa ry or after seeking for
legal advice;
. Training will be arranged for staff (including Directors) to enhance their awareness towards
anti-corruption, bribery and money laundering.
Community investment
We shoulder social responsibilities and are committed to contributing to the local
communities. We have made donations to local pub lic charity institutions and governmental
agencies and helped those in need in the co mmunities. During FY2020, FY2021, FY2022 and
6M2023, our charitable donations were appr oximately RMB2.0 millio n, RMB83,000, RMB1.0
million and nil, respectively.
In addition, we also contributed to the local communities by making investment to nearby
villages which would enable us to maintain good relationships with the villagers.
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As part of our contribution to the local communities, we provide employment opportunities
to villagers in nearby villages. Such employment opportunities include truck drivers and workers
in our mining areas and ore processing plant. In ad dition, in order to improve the social well-being
of the local communities and reduce the impacts of our mining and ore processing operation on the
original residential areas of villagers, we compl eted the construction of six residential buildings
near our Songjiagou Open-Pit Mine and Songjiagou Underground Mine in August 2019 at a budget
of approximately US$14.4 million, to relocate an d house up to 240 families. Such relocation would
also facilitate ongoing operations and potential exp ansion of surface mining activities in the future.
The buildings include appliances , recreation rooms, child playgr ounds and other modern amenities
including elevators, air conditioning and parking lots. All the construction engagements were
completed in accordance with national standards and approved following the inspection by the
relevant government authorities. In addition, on 18 September 2020, we agreed to grant an interest-
free loan of RMB4 million to Songjiagou Weikun Ve getables and Fruits Farmers Specialised
Cooperation ( 宋家溝煒坤蔬果農民專業合作社) for the construction of a greenhouse to support the
agricultural economic development of these villagers and farmers in the Muping District of Yantai.
The loan is interest-free, unsecured and repayabl e by 17 September 2025. Further, our mining and
production activities may cause certain degree of disruptions and inconvenience to the daily lives
of the villagers who reside nearby. To compensate the villagers, we have implemented a scheme to
compensate such villagers since 2012, whereby monetary compensations are given quarterly to
each participating villagers.
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SUMMARY INFORMATION OF OUR DIRECTORS AND SENIOR MANAGEMENT
The following table sets out the information regarding our current Directors and members of our
senior management.
Name Age Position/Title Roles and responsibilities
Date of joining
our Group
Date of first
appointment as
Director/senior
management of
our Company
Executive Directors
Dr. SHAO Xuxin
(邵緒新博士)
60 Chairman of our
Board, chief
executive officer
and Executive
Director
Primarily responsible for overall
strategic planning development,
business planning, investment
planning and overseeing business
operation of our Group
1 July 2004 21 May 2019
Mr. MACKIE
James Thomas
55 Executive Director Primarily responsible for legal,
administration and human
resources matters of our Group
29 October 2018
(Note 1)
21 May 2019
Mr. LO Cheuk
Kwong Raymond
(盧卓光先生)
60 Executive Director,
chief financial
officer and
company secretary
of our Company
Primarily responsible for
financial management, budgeting,
internal control and company
secretarial matters of our Group
15 October 2019 8 May 2020
Mr. CHEN Shaohui
(陳紹惠先生)
65 Executive Director Primarily responsible for
overseeing general business
operations and management of
our Group
1 June 2008 8 May 2020
Independent non-ex ecutive Directors
Dr. MALAIHOLLO
Jeffrey Francis A
57 Independent non-
executive Director
Primarily responsible for
providing independent judgment
to our Board on issues of
strategy, policy, performance,
accountability, resources, key
appointments and standards of
conduct
30 November
2023
30 November
2023
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--- page 316 ---
Name Age Position/Title Roles and responsibilities
Date of joining
our Group
Date of first
appointment as
Director/senior
management of
our Company
Mr. CHAN Ngai
Fan
(陳毅奮先生)
43 Independent non-
executive Director
Primarily responsible for
providing independent judgment
to our Board on issues of
strategy, policy, performance,
accountability, resources, key
appointments and standards of
conduct
30 November
2023
30 November
2023
Dr. ZENG Ming
(曾鳴博士)
66 Independent non-
executive Director
Primarily responsible for
providing independent judgment
to our Board on issues of
strategy, policy, performance,
accountability, resources, key
appointments and standards of
conduct
30 November
2023
30 November
2023
Ms. LIU Li
(劉莉小姐)
46 Independent non-
executive Director
Primarily responsible for
providing independent judgment
to our Board on issues of
strategy, policy, performance,
accountability, resources, key
appointments and standards of
conduct
30 November
2023
30 November
2023
Senior management
Mr. HUANG Yong
(黃勇先生)
66 Head of mine
operations
Primarily responsible for overall
management for exploration and
mining operation
1 December
2014 (Note 2)
1 August 2020
Mr. ZHOU Shufeng
(周書鋒先生)
41 Chairman of the
board and general
manager of Yantai
Zhongjia
Primarily responsible for the
management of daily operation
of Songjiagou Open-Pit Mine
and Songjiagou Underground
Mine
1 June 2016 21 May 2021
Notes:
(1) Mr. MACKIE James Thomas was appointed as the chief financial officer of Maje stic Gold, our Controlling
Shareholder, in March 2013 and has since been responsible for all aspects of the financial and reporting operations of
Majestic Gold and the corporate finance of its subsidiaries, including Yantai Zhongjia.
(2) Mr. HUANG Yong joined Majestic Gold as an on-site co nsultant at Yantai Zhongjia in December 2014, and has
since been responsible to bring in latest mining technology to improve mining efficienc y at our Songjiagou Open-Pit
Mine and Songjiagou Underground Mine.
DIRECTORS AND SENIOR MANAGEMENT
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BOARD OF DIRECTORS
Our Board currently consists of eight Directors comprising four executive Directors and four
independent non-executive Directors. The term of service for our Directors is three years, and they are
permitted to be re-elected in accordance with the Articles of Association. Responsibilities of our Board
include but are not limited to (i) convening Shareholders ’ meetings, reporting on our Board’ sw o r ka t
these meetings, implementing our Shareholders ’ resolutions passed at these meetings; (ii) determining
business operation, financial, capital and invest ment plans; (iii) determining internal management
structure, setting down fundamental management ru les; (iv) appointing and discharging members of
senior management, determining Directors ’ remuneration and formulating our proposals for profit
distributions; and (v) exercising other functions and powers empowered by relevant laws, regulations
and the Articles of Association.
Executive Directors
Dr. SHAO Xuxin ( 邵緒新博士), aged 60, was appointed as a Director of our Company on 21 May
2019 and was subsequently re-designated as our executive Director and appointed as the Chairman of
our Board and the chief executive officer on 28 March 2022. Dr. Shao is principally responsible for
overall strategic planning and development, business planning, investment planning, human resources
allocation and overseeing business operation of our Group. He is the chairman of the nomination
committee and a member of the remuneration committee.
Dr. Shao has over 30 years of experience in ore processing, mining-related finance and investment
management. Since July 2004, Dr. Shao has been serving as a director of our subsidiary, Majestic
Yantai BVI. Dr. Shao has also been an adviser of Majestic Gold since 2004, mainly responsible for
formulating group policy and strategies for running the gold mine operation in the PRC and maintaining
relationship with the local Ch inese business partners.
The following table sets forth the key working experience of Dr. Shao:
Period Company/Institution Last position
Roles and
responsibilities
From July 1990 to
September 1996
China University of Mining &
Technology-Beijing
Lecturer, associate
professor and deputy
department head of
the Department of
Mineral Processing
Teaching
From October 1996 to
December 1997
The University of Kentucky, the
United States
Research scientist for
the Centre for Applied
Energy Research
Primarily responsible
for conducting
research on ultra-fine
coal dewatering
DIRECTORS AND SENIOR MANAGEMENT
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Period Company/Institution Last position
Roles and
responsibilities
From February 1998
to April 1998
Process Research Associates Ltd., a
company principally engaged in
research and testing laboratory
serving the mining and exploration
industries
Process metallurgist Primarily responsible
for conducting
metallurgical tests and
liaison with clients
From July 1998 to
March 2003
Atlantic Gold Cor poration (formerly
known as Spur Ventures Inc.)
(previously listed on the TSX
Venture Exchange, stock symbol:
AGB), whose principal businesses
included minera l exploration and
development and oil and gas
extraction
Project manager Primarily responsible
for management of
phosphate mining,
processing and
fertilizer project in the
PRC
From January 2004 to
April 2016
Sterling Group Ventures, Inc.
(previously quoted on OTC Link in
the United States, stock symbol:
SGGV), whose prev ious principal
businesses included mineral
exploration for phosphate in the
PRC
Director, president
and chief financial
officer
Primarily responsible
for overall
management of the
mining projects in the
PRC and
administration of the
company
F r o mM a r c h2 0 0 4t o
August 2008
Bullabulling Gold (UK) Limited
(formerly known as GGG Resources
PLC and Central China Goldfields
plc) (previously listed on the
London Stock Exchange and
Australian Securities Exchange,
stock symbols: GGG and GGB,
respectively), whose principal
businesses included mineral
exploration
Adviser Primarily responsible
for advising on its
gold and copper
projects in the PRC
and liaison with its
Chinese joint venture
partner and related
Chinese governmental
departments
DIRECTORS AND SENIOR MANAGEMENT
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Period Company/Institution Last position
Roles and
responsibilities
From September 2006
to April 2008
Delta 9 Cannabis Inc. (formerly
known as Verona Development
Corp.) (listed on the Toronto Stock
Exchange, stock symbols: DN,
DN.WT, DN.WT.A, DN.DB), whose
previous principal businesses
included acquisitio n, exploration and
development of mineral properties
Director Mainly in charge of
the operation of
coalbed methane
businesses in the PRC
From April 2010 to
March 2014
a subsidiary of Goldrea Resources
Corp. (listed on the Canadian
Securities Exchange, Frankfurt Stock
Exchange and OTC Pink Open
Market, stock symbols: GOR, GOJ1
and GORAF, respectively), whose
principal businesses included
acquisition, exploration and
development of mineral properties
Director Mainly in charge of
supervising its gold
operation in the PRC
Dr. Shao obtained a bachelor ’s degree in mineral processing from Wuhan Institute of Technology
(formerly known as Wuhan Institu te of Chemical Technology* ( 武漢化工學院)) in July 1983, and a
doctor of philosophy degree in mineral processing from China University of Mining & Technology —
Beijing in July 1990.
Dr. Shao does not have any current or past directorships in any listed companies in the last three
years.
Dr. Shao was a director of the following companies at the time or within 12 months from the time
of their respective dissolution. Th e relevant details are as follows:
Company name
Place of
incorporation/
establishment
Principal
business before
dissolution
Date of
dissolution
Means of
dissolution
Reasons for
dissolution
Yantai Jinze Gold Co.,
Ltd.* ( 煙台金澤黃金
有限公司)
PRC Gold
exploration
2 April 2013 Deregistration Cessation of
business
Chenxi Hongyu Mining
Co., Ltd.* (辰 溪縣
宏宇礦 業有限公司)
PRC Phosphate
mining
1 November 2017 Deregistration Cessation of
business
DIRECTORS AND SENIOR MANAGEMENT
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--- page 320 ---
Company name
Place of
incorporation/
establishment
Principal
business before
dissolution
Date of
dissolution
Means of
dissolution
Reasons for
dissolution
Fast Fresh Intelligent
Logistics Network
(Shenzhen) Co., Ltd.*
(速鮮智能物流網絡
(深圳)有限公司)
PRC Logistics 19 August 2019 Deregistration Cessation of
business
Huadianai Culture and Art
Media (Beijing) Co.,
Ltd.* ( 花點愛文化藝術傳
媒(北京)有限公司)
PRC Wholesale and
retail of flowers
14 January 2020 Deregistration Cessation of
business
Sunshine Flower Industry
(Nanjing) Co., Ltd.*
(陽光花卉產業(南京)
有限公司)
PRC Planting,
processing and
retail of flowers
and horticultural
crops
1 April 2020 Deregistration Cessation of
business
Wuhan Ruijiahe
Technology Co., Ltd.*
(武漢瑞佳和科技有限
公司)
PRC Flower planting
and flower sales
15 June 2020 Deregistration Cessation of
business
Dr. Shao confirmed that the above companies were solvent immediately prior to their respective
dissolution. Dr. Shao further confirmed that there was no wrongful act or omission on his part leading to
the dissolution of the above companies and that no misconduct or misfeasance on his part had been
involved in the dissolution of the above companies. Dr. Shao confirmed that he is not aware of any
actual or potential claim that has been or will be made against him as a result of the dissolution of the
above companies.
Based on public searches, the confirmation of Dr. Shao that the dissolution of the above companies
were due to the above companies own voluntary decision to cease business/operation, the dissolution
documents of the above companies and background searches conducted on Dr. Shao, the Company ’s
legal advisors are of the views that there was not any: (a) wrongful act or omission on Dr. Shao ’sp a r ti n
connection with the dissolution of the relevant companies; (b) misconduct or misfeasance on Dr. Shao ’s
part that had been involved in the dissolution of the relevant companies; and (c) actual or potential
claim that the Company ’s legal advisors are aware of that had been or will be made against Dr. Shao as
a result of the dissolution of the relevant companies.
Mr. MACKIE James Thomas , aged 55, was appointed as our Director on 21 May 2019 and was
subsequently re-designated as our executive Dir ector on 28 March 2022. Mr. Mackie is principally
responsible for the legal, administration, and human resources matters of our Group.
DIRECTORS AND SENIOR MANAGEMENT
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--- page 321 ---
Mr. Mackie has been serving as a director of our subsidiary, Majestic Yantai BVI, since October
2018. Mr. Mackie has over 15 years of experience in financial management and administration,
including corporate governance, government and securities compliance. Mr. Mackie was appointed as
the chief financial officer and director of Majestic Gold in March 2013. He has since been responsible
for corporate finance matters, including technical accounting, risk advisory, planning and forecasting,
tax management and treasury functions of Majestic Go ld together with its subsidiaries, including Yantai
Zhongjia. In November 2013, he resigned as a director and was appointed as the corporate secretary of
Majestic Gold.
The following table sets forth the key working experience of Mr. Mackie:
Period Company/Institution Last position
Roles and
responsibilities
From September 2005
to September 2012
Golden Oak Corporate Services
Ltd., whose principal businesses
included providing financial
reporting and compliance services
Corporate controller services for
companies listed on the TSX Venture
Exchange
Primarily responsible
for financial reporting
and corporate
governance matters
From September 2012
to July 2014
Global Hunter Corp. (previously
listed on the TSX Venture
Exchange, stock symbol: BOB.H),
whose principal businesses
included acquisition, exploration
and development of mineral
properties
Chief financial officer and corporate
secretary
Primarily responsible
for corporate finance
and corporate
governance matters
From September 2012
to July 2014
Delta 9 Cannabis Inc. (formerly
known as Verona Development
Corp.) (listed on the Toronto
Stock Exchange, stock symbols
DN, DN.WT, DN.WT.A, DN.DB),
whose previous principal
businesses included acquisition,
exploration and development of
mineral properties
Chief financial officer and corporate
secretary
Primarily responsible
for corporate finance
and corporate
governance matters
Mr. Mackie obtained a secondary school graduation diploma from Earl of March Secondary School
in November 1986. Mr. Mackie is a Certified General Accountant of The Certifie d General Accountants
Association of British Columbia and the Certified G eneral Accountants Association of Canada since
August 2007 and October 2007, respectively.
Mr. Mackie does not have any current or past directorships in any listed companies in the last
three years.
Mr. LO Cheuk Kwong Raymond ( 盧卓光先生), aged 60, joined our Group as the vice president
of our Group on 15 October 2019, was appointed as a Director on 8 May 2020, was appointed a director
of Majestic Yantai BVI on 15 May 2020 and was subsequently re-designated as our executive Director,
chief financial officer and company secretary on 28 March 2022. Mr Lo is principally responsible for
the financial management, budgeting, internal control and company secretarial matters of our Group.
DIRECTORS AND SENIOR MANAGEMENT
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--- page 322 ---
Mr. Lo has over 37 years of experience in auditing, accounting, asset management, and financial
management.
The following table sets forth the key working experience of Mr. Lo:
Period Company/Institution Last position Roles and responsibilities
From October 1984 to
August 1987
KPMG (formerly known as Peat,
Marwick, Mitchell & Co.
Senior accountant Primarily responsible for clients ’
audit services
From September 1991
to April 2000
Bowden Industries Limited, a
subsidiary of Gold Peak Industries
(Holdings) Limited (listed on the
Stock Exchange, stock code:
40.HK), which is principally
engaged in the production and sale
of batteries and electronics
products
Assistant general
manager
Primarily responsible for system
development, internal controls and
financial matters of its PRC joint
ventures
From April 2000 to
August 2001
Chen Hsong Machinery Company,
Limited, a subsidiary of Chen
Hsong Holdings Limited (listed on
the Stock Exchange, stock code:
57.HK), which is principally
engaged in plastic injection
molding machines-related
businesses
Chief officer —
finance, personnel and
administration division
Primarily responsible for system
development, internal controls,
customs declaration and accounting
matters of its PRC joint ventures
From September 2001
to February 2003
GMT Shipping (HK) Limited, a
company principally engaged in
the provision of dry cargo shipping
services
Group chief financial
officer
Primarily responsible for
formalising the group structure for
tax planning and setting up
accounting and voyage costing
system
From February 2004 to
June 2005
Chen Chien Holdings Limited, a
company principally engaged in
trading and manufacturing of
mould bases and processing steel
Financial controller Primar ily responsible for system
development, internal controls,
customs declaration and accounting
matters of both its Hong Kong
head office and its PRC
manufacturing company
From October 2009 to
May 2011
GMT Shipping (HK) Limited, a
company principally engaged in
the provision of dry cargo
shopping services
Group chief executive
officer
Primarily responsible for the daily
management of the group and
significant capital investment
projects
From January 2012 to
July 2016
Chung Ming Metal Resources
Holdings Limited, a company
principally engaged in stainless
steel and copper recycling
businesses
Group chief financial
officer
Primarily responsible for overall
financial management
DIRECTORS AND SENIOR MANAGEMENT
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--- page 323 ---
Period Company/Institution Last position Roles and responsibilities
Since August 2006 Perfect Team Consultants Limited,
a company principally engaged in
providing consulting services
Sole shareholder and
sole director
Operating his own consultancy
services business
Mr. Lo obtained a bachelor of commerce in accountancy degree from The University of
Wollongong, Australia in October 1990 and obtained his master of business administration degree from
The Hong Kong Polytechnic University in Nove mber 1997. Mr. Lo was admitted as a Certified
Practising Accountant of The Australian Society of Ce rtified Practising Accountants in October 1992
and a fellow member of the Hong Kong Institute of Certified Public Accountants (formerly known as
Hong Kong Society of Accountants) in December 1998.
Mr. Lo does not have any current or past directorships in any listed companies in the last three
years.
Mr. Lo was a director of the following companies at the time or within 12 months from the time of
their respective dissolution. The relevant details are as follows:
Company name
Place of
incorporation/
establishment
Principal
business before
dissolution
Date of
dissolution
Means of
dissolution
Reasons for
dissolution
Polyson Limited Hong Kong Trading of
electrical
appliances
18 July 2000 Voluntary
dissolution
Members ’
voluntary
winding up
HSCV Holdings Limited Hong Kong Management
consultancy
15 April 2005 Deregistration Cessation of
business
Sino Link Creation Limited H ong Kong Trading 31 July 2009 Deregistration Cessation of
business
KT Enterprise Limited Hong Kong Trading 19 October
2018
Deregistration Cessation of
business
Mr. Lo confirmed that the above companies were solvent immediately prior to their respective
dissolution. Mr. Lo further confirmed that there was no wrongful act or omission on his part leading to
the dissolution of the above companies and that no misconduct or misfeasance on his part had been
involved in the dissolution of the above companies . Mr. Lo confirmed that he is not aware of any actual
or potential claim that has been or will be made against him as a result of the dissolution of the above
companies.
DIRECTORS AND SENIOR MANAGEMENT
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Based on public searches, the confirmation of Mr. Lo that the dissolution of the above companies
were due to the above companies own voluntary decision to cease business/operation, the dissolution
documents of the above companies and background searches conducted on Mr. Lo, the Company ’sl e g a l
advisors are of the views that there was not any: (a) wrongful act or omission on Mr. Lo ’sp a r ti n
connection with the dissolution of the relevant comp anies; (b) misconduct or misfeasance on Mr. Lo ’s
part that had been involved in the dissolution of the relevant companies; and (c) actual or potential
claim that the Company ’s legal advisors are aware of that had been or will be made against Mr. Lo as a
result of the dissolution of the relevant companies.
Mr. CHEN Shaohui ( 陳紹惠先生), aged 65, joined our Group on 1 June 2008 as the general
manager of Yantai Zhongjia, was appointed a director of Yantai Zhongjia in May 2010 and was
appointed as a Director on 8 May 2020. Mr. Chen was subsequently re-designated as our executive
Director on 28 March 2022. Mr. Chen is primarily responsible for overseeing general business
operations and management of our Group including m anaging the mining properties and facilities of our
Group.
Mr. Chen has over 38 years of relevant experience in the industry including master planning,
preparation of feasibility report, evaluation assessments and environment impact report in major mines
in China.
The following table sets forth the key working experience of Mr. Chen:
Period Company/Institution Last position Roles and responsibilities
From August 1983 to
November 1997
Hebei Huanqiu Contracting &
Engineering Co., Ltd* ( 河北寰球工程
有限公司) (formerly known as
Chemical Mine Planning and Design
Institute of Ministry of Chemical
Industry of China* ( 化學工業部化學
礦山規劃設計院)), whose principal
businesses included mining projects ’
design and administration management
President Mainly in charge of the technical
department
From December 1997 to
October 2000
Tus Environmental Science and
Technology Co., Ltd. (formerly known
as SDIC Yuanyi Industry Co., Ltd)
(listed on the Shenzhen Stock
Exchange, stock code: 0826.SZ), a
c o m p a n yp r e v i o u s l ye n g a g e di nt h e
phosphorus industry
Chief engineer Primarily resp onsible for supervising
and management of engineering works
From October 2000 to
November 2011
Hubei Yichang Phosphorus Chemical
Industry Corporation Limited* ( 湖北
宜昌磷化工業集團公司), a company
principally engaged in phosphorus
industry
Chief engineer Primarily resp onsible for supervising
and management of engineering works
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Period Company/Institution Last position Roles and responsibilities
From January 2004 to
May 2006
Micro Express Ltd., a wholly-owned
subsidiary of Sterling Group Ventures,
Inc. (previously quoted on OTC Link
in the United States, stock symbol:
SGGV), whose principal businesses
included exploration and development
of lithium
Vice president Primarily responsible for the early
stage development of Jiajika
Spodumene Mine in Ganzi City of
Sichuan Province of the PRC
From June 2006 to June
2012
Xinjiang Mejes Mining Co. Inc.*
(新疆瑪嘉斯礦業有限公司), whose
principal business was gold
exploration.
General manager
and chairman of
the board
Primarily responsible for gold
exploration, licence application and
general daily administration
management
Mr. Chen obtained a bachelor ’s degree in mineral processing from Wuhan Institute of Technology
(formerly known as Wuhan Institute of Chemical Technology* ( 武漢化工學院)) in July 1983. He was
qualified as a senior engineer in the PRC in July 1993.
Mr. Chen does not have any current or past directorships in any listed companies in the last three
years.
Mr. Chen was a director/supervisor of the following companies at the time or within 12 months
from the time of their respective dissolutio n. The relevant details are as follows:
Company name
Place of
incorporation/
establishment Position
Principal
business before
dissolution
Date of
dissolution
Means of
dissolution
Reasons for
dissolution
Fast Fresh Intelligent Logistics
Network (Shenzhen) Co., Ltd.*
(速鮮智能物流網絡
(深圳)有限公司))
PRC Supervisor Logistics 19 August 2019 Deregistration Cessation of
business
Huadianai Culture and Art Media
(Beijing) Co., Ltd.* ( 花點愛
文化藝術傳媒(北京)有限公司)
PRC Supervisor Wholesale and
retail of flowers
14 January 2020 Deregist ration Cessation of
business
Sunshine Flower Industry
(Nanjing) Co., Ltd.*
(陽光花卉產業(南京)
有限公司)
PRC Supervisor Planting,
processing and
retail of flowers
and horticultural
crops
1 April 2020 Deregist ration Cessation of
business
Wuhan Ruijiahe
Technology Co., Ltd.*
(武漢瑞佳和科技有限公司)
PRC Director Flower planting
and flower sales
15 June 2020 Deregistra tion Cessation of
business
Mr. Chen confirmed that the above companies were solvent immediately prior to their respective
dissolution. Mr. Chen further confirmed that there was no wrongful act or omission on his part leading
to the dissolution of the above companies and that no misconduct or misfeasance on his part had been
DIRECTORS AND SENIOR MANAGEMENT
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involved in the dissolution of the above companies. Mr. Chen confirmed that he is not aware of any
actual or potential claim that has been or will be made against him as a result of the dissolution of the
above companies.
Based on public searches, the confirmation o f Mr. Chen that the dissolution of the above
companies were due to the above companies own voluntary decision to cease business/operation, the
dissolution documents of the above companies and background searches conducted on Mr. Chen, the
Company ’s legal advisors are of the views that there was not any: (a) wrongful act or omission on Mr.
Chen ’s part in connection with the dissolution of the rele vant companies; (b) misconduct or misfeasance
on Mr. Chen ’s part that had been involved in the dissolutio n of the relevant companies; and (c) actual or
potential claim that the Company ’s legal advisors are aware of that had been or will be made against Mr.
Chen as a result of the dissolution of the relevant companies.
Independent non-executive Directors
Dr. MALAIHOLLO Jeffrey Francis A , aged 57, was appointed as our independent non-executive
Director on 30 November 2023, primarily responsible for providing independent judgment to our Board
on issues of strategy, policy, performance, account ability, resources, key appointments and standard of
conduct. Dr. Malaihollo is a member of each of the audit committee, the remuneration committee and
the nomination committee.
Dr. Malaihollo has over 20 years of relevant experience in the mining industry.
The following table sets forth the key working experience of Dr. Malaihollo:
Period Company/Institution Last position Roles and responsibilities
From June 2000 to
August 2010
Loeb Aron & Company Ltd, a
company principally engaged in
the provision of mining
consultancy and research services
and acted as a corporate finance
arranger.
Director and head of
research
Primarily responsible for
management of the company and
research
From November 2004
to June 2012
Bullabulling Gold (UK) Limited
(formerly known as GGG
Resources Plc and Central China
Goldfields plc) (previously listed
on the London Stock Exchange and
Australian Securities Exchange,
stock symbols: GGG and GGB,
respectively), whose principal
businesses included mineral
exploration
Managing director and
director
Primarily responsible for running
and managing the company ’s
affairs, including exploration work,
fundraising, the s econdary listing
of the company on the Australian
Securities Exchange and liaison
with its joint venture partners
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Period Company/Institution Last position Roles and responsibilities
From September 2011
to July 2012
Bullabulling Gold Limited
(previously listed on the London
Stock Exchange and Australian
Securities Exchange, stock
symbols: BBG and BAB,
respectively), whose principal
businesses included mineral
exploration
Director Primarily responsible for
management of the company
From October 2013 to
October 2016
Cyprium Metals Limited (formerly
known as ARC Exploration
Limited) (listed on the Australian
Securities Exchang e, stock symbol:
CYM), a company principally
engaged in mineral exploration in
Australia and Indonesia
Managing director and
chief executive director
Primarily responsible for managing
the company ’sa f f a i r s ,w h i c h
included budgeting, planning and
executing exploration work,
fundraising and marketing and
liaising with its joint venture
partners
Since July 2016 Copper Lake Resources Ltd. (listed
on the TSX Venture Exchange and
Frankfurt Stock Exchange, stock
symbols: CPL and WOI,
respectively), a company
principally engaged in exploration
of gold and base metals in Ontario,
Canada
Non-executive director Primarily responsible for planning,
directing and controlling the
activities of the company
From September 2016
to July 2022
Shuka Minerals PLC (formerly
known as Edenville Energy plc)
(listed on the London Stock
Exchange, stock symbol: EDL), a
company principally engaged in
the exploration and development of
energy commodities,
predominantly coal in Africa
Non-executive chairman Primarily responsible for planning
and directing the company ’s
strategic directio n and overseeing
management of the company
Dr. Malaihollo obtained a bachelor’ s degree in arts with a major in geological sciences from
University of California, Santa Barbara in July 1987 and a doctor of philosophy degree from the
University of London in December 1993. He is curren tly a fellow of each of the Australasian Institute of
Mining and Metallurgy (FAusIMM) and Geological Society of London, a member of each of the
Geological Society of America and t he Association of Mining Analysts.
Save for the current directorships disclosed above, Dr. Malaihollo does not have any current or
past directorships in any listed companies in the last three years.
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Dr. Malaihollo was a director of the following companies at the time or within 12 months from the
time of their respective dissolution. The relevant details are as follows:
Company name
Place of
incorporation/
establishment
Principal
business before
dissolution
Date of
dissolution
Means of
dissolution
Reasons for
dissolution
International Islamic
Christian Organisation
for Reconciliation and
Reconstruction Ltd
United
Kingdom
Charity 15 January 2008 Voluntary
dissolution
Cessation of
operation
Central China Goldfields
Limited
United
Kingdom
Mining of gold
and other
minerals
6 November
2012
Voluntary
dissolution
Cessation of
business
Marshall Lake Mining
Limited (formerly
known as Eyeconomy
Holdings Plc)
United
Kingdom
Mining of other
non-ferrous
metal ores
1 February 2018 Voluntary
dissolution
Cessation of
business
Basudara Maluku Ltd United
Kingdom
Other education 17 March 2020 Voluntary
dissolution
Cessation of
business
Banda Resources Ltd United
Kingdom
Other
professional,
scientific and
technical
activities
7 April 2020 Voluntary
dissolution
Cessation of
business
Saparua Investments Ltd United
Kingdom
Other
professional,
scientific and
technical
activities
22 September
2020
Voluntary
dissolution
Cessation of
business
Sarinah Resources Ltd United
Kingdom
Looking
for mining
opportunities
in SE Asia
19 September
2023
Strike off Cessation of
business
Triquetra Resources
Limited
United
Kingdom
Looking
for mining
opportunities
in SE Asia
24 October
2023
Strike off Cessation of
business
Dr. Malaihollo confirmed that the above companies were solvent immediately prior to their
respective dissolution. Dr. Malaihollo further confirmed that there was no wrongful act or omission on
his part leading to the dissolution of the above companies and that no misconduct or misfeasance on his
part had been involved in the dissolution of the abov e companies. Dr. Malaiho llo confirmed that he is
not aware of any actual or potential claim that has b een or will be made against him as a result of the
dissolution of the above companies.
DIRECTORS AND SENIOR MANAGEMENT
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Based on public searches, the c onfirmation of Dr. Malaihollo that the dissolution of the above
companies were due to the above companies own voluntary decision to cease business/operation, the
dissolution documents of the above companies and background searches conducted on Dr. Malaihollo,
the Company ’s legal advisors are of the views that there was not any: (a) wrongful act or omission on
Dr. Malaihollo ’s part in connection with the dissolution of the relevant companies; (b) misconduct or
misfeasance on Dr. Malaihollo ’s part that had been involved in the dissolution of the relevant
companies; and (c) actual or potential claim that the Company ’s legal advisors are aware of that had
been or will be made against Dr. Malaihollo as a result of the dissolution of the relevant companies.
Mr. CHAN Ngai Fan ( 陳毅奮先生), aged 43, was appointed as our independent non-executive
Director on 30 November 2023, primarily responsible for providing independent judgment to our Board
on issues of strategy, policy, perform ance, accountability, resources, k ey appointments and standards of
conduct. Mr. Chan is the chairman of the audit co mmittee and a member of each of the remuneration
committee and the nomination committee.
Mr. Chan has over 15 years of experience in auditing, accounting and financial management.
The following table sets forth the key working experience of Mr. Chan:
Period Company/Institution Last pos ition Roles and responsibilities
From November 2004 to
June 2006
New Universe Holdings Limited, a
company principally engaged in
investment holding
Assistant accountant Primarily responsi ble for the overall
accounting operations
From June 2006 to July
2007
Oriental Resource Enterprises Limited,
a company principally engaged in
corporate services and bookkeeping
services
Assistant accountant Primarily responsible for accounting,
taxation, company secretarial matters,
trading documentation and other
related services
From August 2007 to
February 2011
JBPP & Company (formerly known as
Grant-Thornton and later merged with
BDO Limited), a company principally
engaged in providing audit and
assurance, tax and advisory services
Assistant manager —
Assurance
Primarily responsible for audit
services
F r o mM a r c h2 0 1 1t o
April 2015
Naigai Mining (China) Company
Limited* ( 內外礦業(中國)有限公司),
a company principally engaged in
exploitation and sales of stone in the
PRC
Financial controller Primarily responsible for financial
reporting and other financial matters
From May 2015 to April
2018
KPa-BM Holdings Limited (listed on
the Stock Exchange, stock code:
2663.HK), which is principally
engaged in the building construction
businesses
Financial controller Primarily responsible for the financial
reporting, treasury and financial
control matters
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Period Company/Institution Last pos ition Roles and responsibilities
From August 2017 to
September 2018
Sino Vision Worldwide Holdings
Limited (formerly known as DX.com
Holdings Limited) ( ‘‘Sino Vision ’’)
(listed on the Stock Exchange, stock
code: 8086.HK), which is principally
engaged in the e-commerce business
and the provision of online sales
platforms
Independent non-executive
director
Primarily responsible for providing
independent judgment to the board
From September 2016 to
March 2019
Shenzhen Mingwah Aohan High
Technology Corporation Limited
(listed on the Stock Exchange, stock
code: 8301.HK), which is mainly
engaged in the development and
trading of intelligent cards and related
equipment in the PRC
Executive director and
chief financial officer
(April 2018 to January
2019) and Non-executive
director
(September 2016 to April
2018; and January 2019
to March 2019)
Primarily responsible for managing
the company’ s overall affairs
From January 2019 to
May 2019
Sino Vision Company secretary Primarily responsible for the company
secretarial matter
From May 2019 to April
2020
Heysea Yachts Holdings Company
Limited, a company principally
engaged in manufacture of yachts in
the mid-to-large range
Chief financial officer and
company secretary
Primarily responsible for overseeing
finance and accounts operations
January 2019 to present Centenary United Holdings Limited
(listed on the Stock Exchange, stock
code: 1959.HK), a company which is
mainly engaged as an integrated auto
service provider in Guangdong
Province, the PRC
Joint company secretary Primarily responsible for the company
secretarial matters and coordination of
investor relations
From September 2019 to
September 2023
Sanxun Holdings Group Limited
(listed on the Stock Exchange, stock
code: 6611.HK), which is mainly
engaged in real estate development in
the PRC
Independent non-executive
director
Primarily responsible for providing
independent judgment to the board
July 2020 to present Leader Education Limited (listed on
the Stock Exchange, stock code:
1449.HK), which is mainly engaged in
as a private formal higher education
service provider in Heilongjiang
Province, the PRC
Independent non-executive
director
Primarily responsible for providing
independent judgment to the board
January 2022 to present Capital Finance Holdings Limited
(listed on the Stock Exchange, stock
code: 8239.HK), which is mainly
engaged in the provision of short-term
financing services in the PRC and
Hong Kong
Independent non-executive
director
Primarily responsible for providing
independent judgment to the board
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Period Company/Institution Last pos ition Roles and responsibilities
F r o mM a r c h2 0 2 2t o
30 June 2023
Contel Technology Company Limited
(listed on the Stock Exchange, stock
code: 1912.HK), which is mainly
engaged in sourcing and sale of
integrated circuit products and
solutions
Independent non-executive
director
Primarily responsible for providing
independent judgment to the board
May 2022 to present China Bozza Development Holdings
Limited (listed on the Stock
Exchange, stock code 1069.hk)
(provisional liquidators appointed for
restructuring purposes), which is
mainly engaged in (a) forestry
management; (b) money lending; and
(c) provision of management and
related services for the leases of
container houses
Company secretary,
authorised representative
and process agent
Primarily responsible for the company
secretarial matter
Mr. Chan obtained a higher diploma in accountancy, a bachelor of arts degree in accountancy and
a master of corporate governance degree from The Hong Kong Polytechnic University in December
2006, December 2007 and October 2013, respectively.
Mr. Chan was admitted as a certified public accoun tant of the Hong Kong Institute of Certified
Public Accountants in February 2011 and is currently registered as a certified public accountant
(practising). Mr. Chan was admitted to graduatesh ip of The Institute of Chartered Secretaries &
Administrators in December 2016 and was admitted as an associate of The Hong Kong Institute of
Chartered Secretaries (now known as The Hong Ko ng Chartered Governance Institute) in November
2019.
The Directors are of the view that, and the Sole Sponsor concurs, despite Mr. Chan holding the
positions as a company secretary or joint company secretary in two listed companies and independent
non-executive director in four ot her listed companies, he would still be able to devote sufficient time
and effort to discharge his duties as our Company ’s independent non-executive Director on the following
grounds:
. Mr. Chan merely acts as external company secretary or joint company secretary of two listed
companies where he is primarily responsible for company secretarial affairs, Mr. Chan does
not currently have any other full tim e employment with any company;
. as an independent non-executive Director of our Company, Mr. Chan is to provide
supervision and independent advice to our Group and is therefore not expected to participate
in the daily management of our Group ’s businesses, and will not require his full-time
participation;
DIRECTORS AND SENIOR MANAGEMENT
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. Mr. Chan has advised and confirmed that no complaints were lodged against him in relation
to the amount of time he has devoted to the affairs of the listed companies detailed above,
and that he has had a high attendance rate for t he board meetings in such listed companies;
. Mr. Chan is fully aware of the requirements under the Listing Rules for a director to devote
sufficient time in our Company ’s matters and will make sure that he is able to do so to fulfil
his duties and obligations as a director; and
. As a certified public accountant of the Hong Kong Institute of Certified Public Accountant
since February 2011 and an associate of The Hong Kong Institute of Chartered Secretaries
(now known as The Hong Kong Chartered Govern ance Institute) since November 2019, his
prior work experience as financial controller in listed companies from March 2011 to April
2018 and he has been acting as independent non-executive directors of listed companies since
August 2017, Mr. Chan is experienced in matters of Hong Kong listed companies and
familiar with the Listing Rules and other laws and regulations in Hong Kong, which makes
him more efficient in dealing with the corporate matters of the companies of which he is an
independent non-executive director and enables him to manage and perform his duties and
obligations as an independent non-executive director of multiple listed companies at the same
time.
Saved as disclosed above, Mr. Chan does not have any current or past directorships in any listed
companies in the last three years.
Dr. ZENG Ming ( 曾鳴博士), aged 66, was appointed as our independent non-executive Director
on 30 November 2023, primarily responsible for providing independent judgment to our Board on issues
of strategy, policy, performance, accountability, resources, key appointm ents and standards of conduct.
Dr. Zeng is the chairman of the remuneration co mmittee and a member of each of the audit committee
and the nomination committee.
Dr. Zeng has over 39 years of experience in mineral processing, coal upgrading and coal
preparation.
The following table sets forth the key working experience of Dr. Zeng:
Period Company/Institution Last position Roles and responsibilities
From February 1982 to
August 1985
Bluestar Lehigh Engineering Institute
Co., Ltd.* ( 中藍連海設計研究院有限
公司) (formerly known as Chemical
Mines Design and Research Institute
of the Ministry of Chemical Industry*
(化學工業部化工礦山設計研究院))
Assistant
engineer
Primarily responsible for design of
mines
Since July 1988 China University of Mining &
Technology — Beijing
Professor of
mineral
processing
engineering
Primarily responsible for teaching and
research
DIRECTORS AND SENIOR MANAGEMENT
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Dr. Zeng obtained a bachelor ’s degree in coal mining machinery from Chongqing University in
December 1982, a master ’s degree in mining machinery and a doctor of philosophy degree in mineral
processing engineering from China University of Mining & Technology — Beijing in July 1988 and
June 2000, respectively. Dr. Zeng qualified as a senior engineer in the PRC in August 1998.
Dr. Zeng does not have any current or past directorships in any listed companies in the last three
years.
Ms. LIU Li ( 劉莉小姐), aged 46, was appointed as our independent non-executive Director on 30
November 2023, primarily responsible for providing independent judgment to our Board on issues of
strategy, policy, performance, accountability, resources, key appo intments and standards of conduct.
Ms. Liu has over 15 years of experience in financial management.
The following table sets forth the key working experience of Ms. Liu:
Period Company/Institution Last Position Roles and responsibilities
M a y2 0 0 8t oN o v e m b e r
2012
Zhongguan Agricultural Holdings
(Shenzhen) Co., Ltd.* ( 中冠農業控
股(深圳)有限公司) formerly known as
Huaao Brothers Life Sciences
Technology (Shenzhen) Co., Ltd.*
(華奧兄弟生物科技(深圳)有限公司),
a company principally engaged in
research and development of
biological breeding technology
Financial
Controller
Primarily responsible for overall
financial management
M a y2 0 1 6t oS e p t e m b e r
2020
Shenzhen Zhangzhong Information
Technology Co., Ltd.* ( 深圳市掌眾信
息技術有限公司), a subsidiary of
Shenzhen Zhangzho ng Intelligent Co.,
Ltd. (深 圳掌眾智能科技股份有限公
司) (listed on the NEEQ, stock code:
430217), a company principally
engaged in technology development
and technical consulting for
computers, communication equipment,
and electronic products
Chief financial
officer
Primarily responsible for overall
financial management
Since September 2022
to November 2023
Shenzhen Mao San Innovation
Technology Co., Ltd.* ( 深圳市猫仨創
新科技有限公司), a company
pr
incipally engaged in sales of daily
necessities, rubber products, plastic
products; metal products and glasses
executive
director and
general manager
Primarily responsible for the daily
management of the company and
financial management
Since September 2023 Chant Heat Energy Science &
Technology (Zhongshan) Co., Ltd*
(長青熱能科技(中山)有限公司),
a company principally engaged in the
production of gas appliances
Chief operating
officer
Primarily responsible for the daily
management of the company
DIRECTORS AND SENIOR MANAGEMENT
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Ms. Liu obtained a bachelor ’s degree in accounting from the Chongqing University of Technology
(formerly know as Chongqing Industry College)* in June 1999, a Master ’s degree in international
journalism from the City University of London in November 2014 and a Master ’s degree in business
administration from the Hong Kong University of Science and Technology in November 2022.
Ms. Liu was admitted as a certified public account ant of the Chinese Institute of Certified Public
Accountants in June 2008. Ms. Liu obtained the qua lification certificate of secretary to the board of
directors issued by the Shenzhen Stock Exchange in October 2016 and obtained the qualification
certificate of board secretary from the National Equities Exchange and Quotations (NEEQ) in April
2017.
Ms. Liu does not have any current or past directorships in any listed companies in the last three
years.
Disclosure required under Rule 13.51(2) of the Listing Rules
Save as disclosed above and elsewhere in this prospectus, each of our Directors and senior
management confirms with respect t o himself that, as at the Latest Practicable Date: (i) he/she did not
hold directorships in the last three years in other public companies the securities of which are listed on
any securities market in Hong Kong or overseas; (ii) he/she is indep endent from and not related to any
of our Directors, members of senior management, substantial Shareholders or Controlling Shareholder;
(iii) he/she does not have any interest in the Shares within the meaning of Part XV of the SFO; (iv)
there is no other information that needs to be disclo sed pursuant to Rule 13.51(2) of the Listing Rules;
and (v) to the best knowledge, information and belief of our Directors having made all reasonable
enquiries, there are no other matters with respect to the appointment of our Directors that need to be
brought to the attention of our Sharehol ders as at the Latest Practicable Date.
None of our Directors have any interests in any business apart from the business of our Group
which competes or is likely to compete, either direc tly or indirectly, with business of our Group. Please
refer to the paragraph headed ‘‘Statutory and general information — C. Further information about our
Directors, senior management and substantial Shareholders ’’in Appendix V to this prospectus for further
information about our Directors, including deta ils of the interest of our Directors in the shares,
underlying shares or debentures of our Company or our associated corporation (within the meaning of
Part XV of the SFO) and particulars of their respec tive service contract or letter of appointment and
remuneration.
SENIOR MANAGEMENT
Mr. HUANG Yong (黃 勇先生), aged 66, joined Majestic Gold as an on-site consultant at Yantai
Zhongjia in December 2014 and has since been responsible to bring in latest technology to improve
mining efficiency at our Songjiagou Open-Pit Mine and Songjiagou Underground Mine. He joined our
Group as the head of mine operations on 1 August 2020 and is primarily responsible for overall
management for exploration and mining operation.
Mr. Huang has over 40 years ’ experience in mine design and mining consulting.
DIRECTORS AND SENIOR MANAGEMENT
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The following table shows the key working experience of Mr. Huang:
Period Entity Last position Roles and responsibilities
From January 1982 to
November 1994
Dexing Copper Mine (德 興銅礦),
Jiangxi
Engineer Primarily responsible for ore body
modelling
From February 1996 to
September 1998
Dexing Copper Mine, Jiangxi Deputy chief engineer Primarily responsible for surface
mining information system
From October 1998 to
February 2001
Jiangxi Copper Corporation
Limited, a company principally
engaged in copper mining business
Deputy chief enginee r Primarily responsible for surface
mining information system
From December 2002 to
August 2007
Jiangxi University of Science and
Technology (formerly known as
Southern Institute of Metallurgy*
(南方冶金學院))
Professor Primarily responsible for
researching on m ining planning
systems and mine digitalisation
From December 2007 to
November 2014
SRK Consulting China Ltd. Principal consultant
(mining) and the
general manager of its
Nanchang office
Primarily responsible for mining
consulting
Mr. Huang obtained a bachelor ’s degree in mining engineering from Central South University
(formerly known as Central-South Institute of Mining and Metallurgy) in December 1981 and
subsequently obtained a Diploma in Geostatistics from École Nationale Supérieure des Mines de Paris,
France in April 1996. He was also a recipient of China Nonferrous Metals Industry Science and
Technology Award ( 中國有色金屬工業科學技術獎) in February 2006. He was qualified as a mineral
resources/reserves appraiser in the PRC by the Ministry of Land and Resources of the PRC in December
2002 and a member of the Australasian Institute of Mining & Metallurgy since February 2012. Mr.
Huang was also appointed as the vice-chairman and member of the Information Academic Committee
(Second Session) ( 信息學術委員會(第二屆)) of the Nonferrous Metals Society of China in September
2000.
Mr. Huang does not have any current or past directorships in any listed companies in the last three
years.
Mr. Huang was a director and manager of the following companies at the time or within 12 months
from the time of their respective dissolutio n. The relevant details are as follows:
Company name
Place of
incorporation/
establishment
Principal
business before
dissolution
Date of
dissolution
Means of
dissolution
Reasons for
dissolution
Jiangxi Jinmai Taike
Technology Development
Co., Ltd.* (江 西金邁泰
克科技發展有限公司)
PRC Software and
information
technology
7 May 2018 Deregistration Cessation of
business
DIRECTORS AND SENIOR MANAGEMENT
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Mr. Huang confirmed that the above company was solvent immediately prior to its dissolution. Mr.
Huang further confirmed that there was no wrongful act or omission on his part leading to the
dissolution of the above company and that no misconduct or misfeasance on his part had been involved
in the dissolution of the above company. Mr. Huang confirmed that he is not aware of any actual or
potential claim that has been or will be made against him as a result of the dissolution of the above
company.
Mr. ZHOU Shufeng ( 周書鋒先生), aged 41, joined Yantai Zhongjia as a safety officer on 1 June
2016 and was appointed as head of safety in May 2017. He was subsequently promoted to safety
director and assistant general manager in July 2020 and the chairman of the board of Yantai Zhongjia,
legal representative and general manager of Yantai Zhongjia in May 2021. Mr. Zhou is primarily
responsible for the management of daily operation of Songjiagou Open-Pit Mine and Songjiagou
Underground Mine.
Mr. Zhou has approximately 10 years of experience in the mining industry.
The following table sets forth the key working experience of Mr. Zhou:
Period Company/Institution Last p osition Roles and Responsibilities
From July 2005 to
December 2007
Shandong Traffic Engineering
Supervision Consultation Co., Ltd ( 山
東省交通工程監理諮詢有限公司),
whose principal business included
construction management services
On-site
supervisor
Primarily in charge of project site
supervision and management
F r o mM a r c h2 0 0 8t o
April 2012
Safety Production Supervision and
Administration Bureau of Laishan
District, Yantai City ( 煙台市萊山區安
全生產監督管理局), whose principal
work included supervising production
safety in Laishan District, Yantai City
Coordinator Primarily responsible for production
safety
From April 2012 to
April 2016
Yantai Jinma Mining Group Co., Ltd.
(煙台金馬礦業集團有限公司), whose
principal business included mining,
processing and building material
production
Assistant director
of the Product
Safety
Department
Primarily responsible for mine
production safety
Mr. Zhou obtained diploma in highway and road engineering from Ludong University( 魯東大學)
(formerly known as Yantai Teachers College (煙 台師範學院)) in June 2005.
Mr. Zhou does not have any current or past directorships in any listed companies in the last three
years.
Each of our Directors and senior management are independent from and not related to any of our
Directors, Substantial Shareholders, or senior management of our Company as at the Latest Practicable
Date.
DIRECTORS AND SENIOR MANAGEMENT
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COMPANY SECRETARY
Mr. LO Cheuk Kwong Raymond serves as the company secretary of our Company. See the
paragraph headed ‘‘Board of Directors — Executive Directors ’’in this section for further details of his
biography.
BOARD COMMITTEES
Our Board delegates certain responsibilities to var ious committees. In accordance with the Articles
of Association and the Listing Rules, we have estab lished the audit committee, remuneration committee
and nomination committee.
Audit committee
We have established an audit committee on 30 N ovember 2023 with written terms of reference in
compliance with Rule 3.21 of the Listing Rules and paragraph C.3 of the Corporate Governance Code as
set forth in Appendix 14 to the Listing Rules ( ‘‘Corporate Governance Code ’’). The responsibilities of
the audit committee are to supervise our internal control, financial information disclosure and financial
reporting matters, which include but are not limited to:
. supervising the disclosure of our accounting information and other major issues, reviewing
critical accounting policies and their implementation;
. proposing the appointment, re-appointment o r removal of our external auditors; reviewing
and monitoring their independence and objectiv ity and the effectiveness of the audit process
in accordance with applicable standards;
. reviewing our financial statements and records; and
. overseeing the audit process, internal control procedures and risk management system of our
Company.
The audit committee consists of Mr. Chan Ngai F an, Dr. Malaihollo Jeffrey Francis A and Dr.
Zeng Ming. The chairman of the audit committee i s Mr. Chan Ngai Fan, who holds the appropriate
professional qualifications.
Remuneration committee
We have established a remuneration committe e on 30 November 2023 with written terms of
reference in compliance with Rule 3.25 of the Lis ting Rules and paragraph B.1 of the Corporate
Governance Code as set forth in Appendix 14 to the Listing Rules. The responsibilities of our
remuneration committee inc lude, but are not limited to:
. making recommendations to our Board on the overall policy and structure for remuneration
of all our Directors and senior management and the establishment of a formal and transparent
procedure for developing policy on such remuneration;
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. reviewing and approving the management ’s remuneration proposals with reference to our
Board ’s corporate goals and objectives resolv ed by our Board from time to time; and
. making recommendations to our Board on the terms of specific remuneration packages,
bonuses and other forms of compensation payable to our Directors and senior management.
The remuneration committee consists of Dr. Zeng Ming, Dr. Malaihollo Jeffrey Francis A, Mr.
Chan Ngai Fan and Dr. Shao Xuxin. The chairman of the Remuneration Committee is Dr. Zeng Ming.
Nomination committee
We have established a nomination committe e on 30 November 2023 with written terms of
reference in compliance with paragraph A.5 of the Corporate Governance Code as set forth in Appendix
14 to the Listing Rules. The responsibilities of our no mination committee include, but are not limited to:
. reviewing the structure, size and composition of our Board;
. making recommendations to our Board regarding candidates to fill vacancies in our Board
and/or members of senior management team;
. assessing the independence of independent non-executive Directors;
. reviewing the management ’s remuneration proposals to ensure none of our Directors
determine their own remunerations; and
. overseeing the process for evaluating the performance of our Board.
Besides, it is also the duty of our Nomination Co mmittee to review our board diversity policy (the
‘‘Board Diversity Policy ’’), which sets out the objective and approach to achieve and maintain diversity
on our Board. We will ensure that the members of our Board have the appropriate balance of skills,
experience and diversity of perspectives that are required to support our Group ’s business strategy.
Pursuant to our Board Diversity Policy, we seek to ach ieve board diversity through consideration of
various factors such as professional experience, skills, knowledge, gender, age, cultural and education
background, ethnicity and length of service.
Our Board also aspires to having an appropriate proportion of directors who have direct experience
in our Group ’s core markets, with different ethnic backgrounds, and reflecting our Group ’s strategy. Our
Board comprises eight members, including four executive Directors and four independent non-executive
Directors. Our Directors have a balanced mix of experiences, including in mining, management and
strategic development, administration and human resources, accounting and finance. Our Board also has
a relatively wide range of age, ranging from 43 to 66 years old. Furthermore, our Board has a good mix
of new and experienced Directors. Our executive Directors possess valuable knowledge and insights of
our Group’ s business, while the other four newly appointed independent non-executive Directors are
expected to bring in fresh ideas and new perspectives to our Group as well and an element of
independence. Our Company has reviewed the membership, structure and composition of our Board, and
DIRECTORS AND SENIOR MANAGEMENT
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is of the opinion that the structure of our Board is reasonable, and the experience and skills of the
Directors in various aspects and fields can enable our Company to maintain a high standard of
operation.
Additionally, our Company will take opportunities to promote gender diversity at all levels of our
Company, including but not limited to our Board and the senior management levels. We have one
female Director on our Board. Upon Listing, our Group will allocate more resources in training our
female staff with an aim to promoting more female staff to the position of Director or senior
management of our Company.
Our Nomination Committee is delegated to be resp onsible for compliance with the relevant code
governing board diversity under the Corporate Governance Code and, after Listing, will review our
Board Diversity Policy from time to time to ensure its continued effectiveness. Our implementation of
our Board Diversity Policy will be disclosed in our corporate governance report on an annual basis.
The nomination committee consists of Dr. Shao Xu xin, Dr. Malaihollo Jeffrey Francis A, Mr. Chan
Ngai Fan and Dr. Zeng Ming. The chairman of the nomination committee is Dr. Shao Xuxin.
REMUNERATION OF OUR DIRECTORS AND STAFF
Our Directors and members of our senior management receive compensation in the form of fees,
salaries, allowances, benefits in kind, discretion ary bonuses and defined contributions, and their
respective remuneration is determined with reference to salaries paid by comparable companies,
experience, responsibilities, workload, the time devoted to our Group, individual performance and the
performance of our Group. Our Group also reimburses them for expenses which are necessarily and
reasonably incurred for providing services to our Group or executing their functions in relation to the
operations of our Group. Our Group regularly reviews and determines the remuneration packages of our
Directors and senior management. After Listing, the remuneration committee will assist our Board in
reviewing and determining the remuneration packages.
For the three years ended 31 December 2022 and the six months ended 30 June 2023, the
aggregate amount of salaries and other allowances, discretionary bonus, retirement scheme contributions,
other social welfare and benefits in kind (if applicable) paid by our Group to our Directors amounted to
approximately RMB2.0 million, RMB1.7 million, RM B2.1 million and RMB1.2 million, respectively.
The remuneration and benefits in kind (if applicable) received by the five highest-paid individuals
(including our Directors) for the three years ended 31 December 2022, and the six months ended 30
June 2023 was approximately RMB2.6 million, RMB2.5 million, RMB3.0 million and RMB1.6 million,
respectively.
During the Track Record Period, no remuneration was paid by our Group to, or receivable by, our
Directors or the five highest-paid individuals (i) as an inducement to join or upon joining our Group or
(ii) for loss of any office as a director of any member of our Group or of any other office in connection
with the management of the affairs of any member of our Group. In addition, none of our Directors had
DIRECTORS AND SENIOR MANAGEMENT
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waived any remuneration during the Track Record Period. Save as disclosed hereinabove, no other
payments have been paid, or are payable, by our Company or any of its subsidiaries to our Directors or
the five highest-paid individuals during the Track Record Period.
Under the arrangements currently in force within our Group, the aggre gate remuneration (including
fees, salaries, allowances, pension-defined co ntribution plans and other benefits in kind where
applicable) of our Directors (including independent non-executive Directors in their capacity as
Directors), excluding any discretionary benefits or bonuses or other fringe benefits, for the year ending
31 December 2023 are estimated to be approximately RMB2.4 million.
Our policy concerning the remuneration of our Directors is that the amount of remuneration is
determined by reference to the relevant Director ’s experience, responsibilities, workload and the time
devoted to our Group. Please refer to notes 9 and 10 to the Accountants ’ Report set out in Appendix I to
this prospectus for details of the remuneration of our Directors and the five highest paid individuals
during the Track Record Period. See section headed ‘‘Statutory and general information — C. Further
information about our Directors, senior management and substantial Shareholders — 3. Particulars of
Directors ’ service contracts and letters of appointment ’’in Appendix V to this prospectus for further
details of the terms of the service contracts.
COMPLIANCE ADVISER
In accordance with Rule 3A.19 of the Listing R ules, we have appointed Innovax Capital as our
compliance adviser. The compliance adviser will provide us with guidance and advice as to compliance
with the requirements under the Listing Rules. P ursuant to Rule 3A.23 of the Listing Rules, the
compliance adviser will, among others, advi se us in the following circumstances:
(i) before the publication of any regulatory announcement, circular, or financial report;
(ii) where a transaction, which might constitu te a notifiable or connected transaction, is
contemplated, including share issues and share repurchases;
(iii) where we propose to use the proceeds of the Globa l Offering in a manner different from that
detailed in this prospectus or where the business activities, development or results of our
Group deviate from any forecast, estimate or o ther information in this prospectus; and
(iv) where the Stock Exchange makes an inquiry of our Company regarding unusual movements
in the price or trading volume of the Shares or any other matters under Rules 13.09 and
13.10 of the Listing Rules.
The term of appointment of the compliance adviser shall commence on the Listing Date and is
expected to end on the date on which we comply with Rule 13.46 of the Listing Rules in respect of our
financial results for the first full financial year commencing after the Listing Date.
DIRECTORS AND SENIOR MANAGEMENT
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CORPORATE GOVERNANCE CODE
Our Directors recognise the importance of incorporating elements of good corporate governance in
the management structures and internal control p rocedures of our Group so as to achieve effective
accountability. Our Company expects to comply with the Corporate Governance Code and the associated
Listing Rules after Listing.
Except for the deviation from paragraph A.2.1 of the Corporate Governance Code, our Company ’s
corporate governance practices have complied with the Corporate Governance Code as at the Latest
Practicable Date. Paragraph A.2.1 of the Corporate Governance Code stipulates that the roles of
chairman of the board and chief executive should be separate and should not be performed by the same
individual. Dr. Shao is the chairman of our Board and the chief executive officer of our Company. In
view that Dr. Shao has been assuming day-to-day re sponsibilities in operating and managing our Group
since 2004 and the steady development of our Group, our Board believes that with the support of Dr.
Shao’s extensive experience and knowledge in the business of our Group, vesting the roles of both
chairman and chief executive officer of our Company in Dr. Shao strengthens the consistent and solid
leadership of our Group, and thereby allows for efficient business planning and decision which is in the
best interest to our Group as a whole.
Our Directors consider that the deviation from paragraph A.2.1 of the Corporate Governance Code
is appropriate in such circumstances. Notwithstanding the above, our Board is also of the view that the
current management structure is effective for our Group ’s operations, and sufficient checks and balances
are in place. Our Board will continue to review the effectiveness of the corporate governance structure
of our Company in order to assess whether separation of the roles of chairman of our Board and chief
executive officer is necessary.
DIRECTORS AND SENIOR MANAGEMENT
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OVERVIEW
Prior to Listing, our Group has obtained banking facilities from a commercial bank in the PRC, in
respect of which each of Dahedong and Baiheng has provided corporate guarantees and each of Mr.
Zhou Shufeng, the chairman of the board of Yantai Zhongjia and general manager of Yantai Zhongjia
and Ms. Xu Shaoying ( 徐少英), the spouse of Mr. Zhou Shufeng has provided personal guarantees in
favour of such bank. These financial assistance transactions involving Dahedong, Baiheng, Mr. Zhou
Shufeng and Ms. Xu Shaoying, who will become our connected persons will continue after the Listing
and hence will constitute our continuing connected transactions under Chapter 14A of the Listing Rules
upon Listing.
CONNECTED PERSONS
Dahedong is and will, after the Listing, hold 25% o f the entire equity interest in Yantai Zhongjia,
thus it is and will remain a substantial shareh older of Yantai Zhongjia after the Listing.
As at the Latest Practicable Date:
(i) Dahedong was owned as to 50% by Mr. Kong Fanbo, a director of our subsidiary, Yantai
Zhongjia, with the remaining equity interests held in equal share of approximately 16.67% by
each of Mr. Kong Fanzhong, Mr. Wang Lei ( 王磊) and SDZJ. Mr. Kong Fanbo and Mr.
Kong Fanzhong are brothers and Mr. Wang Lei is their brother-in-law, and SDZJ is a
connected person of our Company by virtue of the aggregate interests of approximately 77%
held directly and indirectly by Mr. Kong Fanbo and his family member, namely, Mr. Kong
Fanzhong as at the Latest Practicable Date;
(ii) Baiheng was a wholly-owned subsidiary of SDZJ;
(iii) Mr. Zhou Shufeng is the chairman of the boa rd of Yantai Zhongjia and general manager of
Yantai Zhongjia; and
(iv) Ms. Xu Shaoying is the spouse of Mr. Zhou Shufeng.
As such, each of Dahedong, Baiheng, Mr. Zhou Shufeng and Ms. Xu Shaoying, will become a
connected person of the Company upon Listing.
CONNECTED TRANSACTIONS
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FULLY EXEMPT CONTINUING CONNECTED TRANSACTIONS
Guarantees provided by Dahedong, Baiheng, Mr. Zhou Shufeng and Ms. Xu Shaoying
Dahedong and Baiheng have provided corporate guarantees and Mr. Zhou Shufeng and Ms. Xu
Shaoying have provided personal guarantees in favour of a commercial bank in the PRC in respect of
banking facilities granted to Yantai Zhongjia, our principal subsidiary. Details of the banking facilities
are set out below:
Borrower Lending bank
Corporate/personal
guarantors
Annual
interest
rate Maturity date
Outstanding
principal balance
as at the Latest
Practicable Date
(RMB)
Yantai Zhongjia Huaxia Bank Co.,
Ltd. Yantai
Branch
Dahedong, Baiheng,
Mr. Zhou Shufeng
and Ms. Xu
Shaoying
3.77% 5 September
2024
30,000,000
Dahedong, Baiheng, Mr. Zhou Shufeng and Ms. Xu Shaoying provided the above corporate or
personal guarantees to enable Y antai Zhongjia to obtain the abov e banking facilities. Dahedong,
Baiheng, Mr. Zhou Shufeng and Ms. Xu Shaoying did not receive any form of consideration from our
Group for the provision such corporate guarantees. Such banking facilities were adopted by our Group
as a reserve of our working capital and also to main tain business relationship with the bank for any
instance of additional funding needs during the Track Record Period and up to the Latest Practicable
Date. Apart from Huaxia Bank Co., Ltd., we have liaised with a sizeable bank in Hong Kong for
potential banking facilities amounting to HK$30 million. Based on our communication with and the
draft term sheet of the potential banking facilities provided to our Group by the bank, our Directors are
of the view that our Group has the capability to obtain other banking facilities from another bank.
As at the Latest Practicable Date, our Group was unable to obtain the consent of the lending bank
to early release the corporate or personal guarantees provided by Dahedong, Baiheng, Mr. Zhou Shufeng
and Ms. Xu Shaoying or replace them with corporate guarantees to be given by our Company and/or
other subsidiaries of our Group prior to or upon Listing. As such, the corporate or personal guarantees
provided by Dahedong, Baiheng, Mr. Zhou Shufeng and Ms. Xu Shaoying will be financial assistance
received by our Group which will constitute continuing connected tran sactions under Chapter 14A of the
Listing Rules upon Listing. As such guarantees were provided by our connected persons for the benefit
of our Group on normal commercial terms or better to our Group and were not secured by the assets of
our Group, by virtue of Rule 14A.90 of the Listing Rules, the financial assistance contemplated
thereunder will be considered as fully exempt con tinuing connected transactions upon Listing and are
not subject to any reporting, announcement, annual review and independent Shareholders’ approval
requirements under Chapter 14A of the Listing Rules.
CONNECTED TRANSACTIONS
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Our Group will comply with the relevant requirements under Chapter 14A of the Listing Rules
should there be any material change to the terms thereof or if our Group enters into any other
connection transactions in relation thereto after Listing.
DIRECTORS ’ VIEW
Our Directors (including our independent non-ex ecutive Directors) consider that the continuing
connected transactions have been entered into by our Group during the ordinary and usual course of our
business, on normal commercial terms or better, are fair and reasonable and in the interests of our Group
and our Shareholders as a whole.
Additionally, our Directors and the Sole Sponsor believe that the impact of the guarantees
provided by Dahedong, Baiheng, Mr. Zhou Shufeng and Ms. Xu Shaoying on our Group ’s financial
independence from its connected persons is not significant due to the following reasons:
(a) our Group ’s working capital needs are supported by pr ofit and positive cash flows generated
from operation of our principal subsidiary, namely Yantai Zhongjia, not bank loans. We had
generated profits or positive cash flows from our operations during the Track Record Period,
being approximately RMB114.4 million, RM B58.7 million, RMB121. 0 million and RMB52.8
million in FY2020, FY2021, FY2022 and 6M 2023, respectively;
(b) the outstanding principal balance which the corporate/personal guarantees provided by
Dahedong, Baiheng, Mr. Zhou Shufeng and Ms. Xu Shaoying relate to is only RMB30
million in total, which is insignificant as compared to the balance of cash and cash
equivalents of our Group of approximately RMB350.0 million as at 30 June 2023; and
(c) our Group has the capability to obtain other banking facilities from a nother bank apart from
Huaxia Bank Co., Ltd. based on our Group ’s communication with and the draft term sheet of
the potential banking facilities amounting t o HK$30 million provided by a sizeable bank in
Hong Kong.
CONNECTED TRANSACTIONS
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OUR CONTROLLING SHAREHOLDER
Immediately after the Global Offering (without taking into account any Shares which may be
issued pursuant to the exercise of the Over-allotment Option or any options that may be granted under
the Share Option Scheme) and the Capitalisation Issue, 70.5% of the issued share capital of our
Company will be owned by Majestic Gold. In this regard, Majestic Gold is our Controlling Shareholder
within the meaning of the Listing Rules.
Majestic Gold is a limited liability company or ganised and existing under the laws of British
Columbia, Canada, the shares of which have been listed on TSX Venture Exchange (stock code:
MJS.V). Prior to the Listing, Majestic Gold has been principally involved in the acquisition, exploration
and development of mineral properties in Canada and Australia, as well as in the PRC through our
Group. Following completion of the Listing, Maje stic Gold will cease its operations in the PRC (other
than by retaining a controlling interest in our Comp any), and principally be engaged in the acquisition,
exploration and development of mineral properties in Canada and Australia (the ‘‘Remaining
Business’’).
Save as disclosed above, there is no other person w ho will, immediately following the completion
of the Global Offering (without taking into account the allotment and issue of S hares upon the exercise
of the Over-allotment Option or any options to be granted under the Share Option Scheme) and the
Capitalisation Issue, be directly or indirectly interested in 30% or more of the Shares then in issue or
have a direct or indirect equity in terest in any member of our Group r epresenting 30% or more of the
equity in such entity.
INDEPENDENCE FROM THE REMAINING GROUP
We are satisfied that we can operate independ ently from the Remaining Group, the ultimate
holding company of which is our Co ntrolling Shareholder and their re spective close associates (other
than the members of our Group), after the Listing for the following reasons.
Clear business delineation between the business of our Group and the Remaining Group
Following completion of the Listing, the Remaining Group will principally be engaged in the
Remaining Business whilst our Group will continue to be engaged in the gold exploration, mining and
processing business in the PRC. The businesses of each of our Group and the Remaining Group will be
clearly delineated based on their geographical locations. Our Group has been conducting its gold mining
business through Yantai Zhongjia in Yantai, Shandong Province of the PRC, while the Remaining
Group will be conducting the Remaining Business in Canada and Australia and will not conduct mining
business in the PRC. There will not be any overlap b etween the locations of the mining projects of our
Group and the existing and proposed projects of the Remaining Group following completion of the
Listing.
Save as disclosed in this section, our Controlling Shareholder and Director s confirmed that they do
not have any interest in a business, apart from the business of our Group, which competes or is likely to
compete, directly or indirectly, with our business and would require disclosure under Rule 8.10 of the
RELATIONSHIP WITH OUR CONTROLLING SHAREHOLDER
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Listing Rules. To ensure that competition will not exist in the future, our Cont rolling Shareholder has
entered into the Deed of Non-competition with our Company to the effect that it will not, and will
procure each of their respective close associates (other than members of our Group) not to, directly or
indirectly, participate in, engage in, or conduc t any business which may be in competition with the
business of our Group. For details of the non-competition undertakings given by our Controlling
Shareholder, please refer to the paragraph headed ‘‘Deed of non-competition ’’in this section.
Our business is independent of the Remaining Group
Independence of the members of our Board
Our Board comprises four executive Directors and four independent non-executive Directors. One
of our executive Directors, Mr. Mackie James Thomas, will continue to serve as the chief financial
officer of Majestic Gold. After the Listing, given t hat our Company will continue to be a subsidiary of
Majestic Gold and thus the need for Majestic Gold to consolidate the accounts of our Group with that of
the Remaining Group. Mr. Mackie James Thomas will be supported by the finance team of the
Remaining Group to handle Majestic Gold’ s accounting and consolidation functions as its chief financial
officer, and, with the assistance of our Group ’s supporting staff, he is expected to devote half of his time
in the day-to-day operation of our Group upon Listing, ma inly responsible for the legal, administration
and human resources matters of our Group. As Mr. Mackie James Thomas has been appointed as the
chief financial officer of Majestic Gold since 2013 and has since been responsible for financial
management and corporate finance matters of Majes tic Gold together with its subsidiaries, including
Yantai Zhongjia, his knowledge of the Remaining Group and our Group ’so p e r a t i o n s ,a sw e l la sh i s
experience in accounts consolidation, benefit both the Remaining Group and our Group. Our Directors
believe that Mr. Mackie James Thomas will be able to satisfactorily perform his respective roles in the
Remaining Group and our Group with the assistance of the relevant supporting staff as described above.
Save as Mr. Mackie James Thomas, none of our Direct ors hold any board or seni or managerial position
in the Remaining Group.
Our Company will also adopt corporate governance measures to manage potential conflicts of
Directors ’ interest after the Listing in accordance with the r equirements of the Listing Rules. In addition,
as part of the preparation for the Listing, our Director s have received training on their responsibilities as
directors of a Hong Kong listed company. Each of our Directors is aware of his fiduciary duties as a
Director, which require, among other things, that h e acts for the benefit and in the best interests of our
Company and does not allow any conflict between his du ties as a Director and his/her personal interests.
In the event that there is a potential conflict of interest arising out of any transaction to be entered into
between our Group and any of our Directors or their respective close associates, the interested
Director(s) shall abstain from voting at the relevant board meetings of our Company in respect of such
transactions and shall not be counted in the quorum. In addition, we have an independent senior
management team to carry out the business operatio n of our Group independently from our Controlling
Shareholder.
Based on the reasons above, our Directors are of the view that our Group is capable of managing
our business independently from o ur Controlling Shareholder and their respective close associates
following the completion of the Listing.
RELATIONSHIP WITH OUR CONTROLLING SHAREHOLDER
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Save as disclosed above, each of our Group and the Remaining Group will be managed and
operated by their respective own management teams separately and independently and in the interests of
their respective shareholders.
Independence of our senior management team
Our senior management team comprises three members. Our Company has our own management
team and separate functional departments including accounting, administration, and human resources
departments. All essential administration and daily operations of our Company are carried out by a team
of staff employed by our Company independently of and without any support from the Remaining
Group.
On the basis of the aforesaid, our Directors b elieve that we operate independently of the
Remaining Group and in the interests of our Shareholders as a whole.
Independence of the administrative capability
All administrative functions of our Company are carried out independently without reliance on the
Remaining Group. Our Company has its own adminis trative functions, which include accounting and
finance, general administration, sales and marketing, procurement and human resources. Accordingly,
upon completion of the Listing, our Company will be administratively independent from Remaining
Group.
In the event that any conflict of interest arises between the Remaining Group and our Group, our
independent non-executive Directors will also provide checks and balances over the decisions of our
Board on significant transactions, connected transactions and other transactions involving any actual or
potential conflict of interests.
Save as disclosed above, none of our Directors or senior management holds any office in or is
employed by the Remaining Group immediately upon Listing. On the basis of the current Board and
senior management composition, it is believed that our Board and senior management will operate and
manage our business independently of the Remaining Group. Our Group will therefore operate
independently and in the interest s of its shareholders as a whole.
Financial independence
Our Group has an independent accounting, financial and internal controls system, and will make
financial decisions according to our own business n eeds. In addition, we also have our own independent
treasury function.
As at 31 December 2020, 2021 and 2022 and 30 June 2023, our amounts due to Majestic Gold
related to non-trade activities amounted to approximately RMB23.3 million, RMB23.9 million, RMB0.4
million and RMB0.5 million, respectivel y, mainly represent shareholder ’s advances provided by Majestic
Gold to our Group. The balances due to Majestic Go ld were unsecured, interest-free and repayable on
demand. On 5 June 2020, our Group entered into a deed of waiver with Majestic Gold to waive an
amount of debt amounted of CAD62.1 million (equi valent to approximately RMB322.8 million) (the
RELATIONSHIP WITH OUR CONTROLLING SHAREHOLDER
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‘‘Outstanding Amount ’’) due to Majestic Gold conditional upon, among others, (i) the policies of the
TSX Venture Exchange and applicable securities laws; (ii) the approval of the board of directors of each
of our Company and Majestic Gold; and (iii) the wr itten approval of shareholders of Majestic Gold
holding, in aggregate, at least 50% of the issued shares of Majestic Gold. As at the Latest Practicable
Date, the above conditions had been fulfilled. The wai ver of the Outstanding Debt is credited as capital
reserve from accounting perspective. For further details, please see Note 34 to the Accountants ’ Report
in Appendix I to this prospectus. In July 2023, we have further settled the outstanding balance due to
Majestic Gold as at 30 June 2023 of approximately RMB0.5 million. Going forward, it is expected that
our Group is in a position to obtain financing indepe ndently without the financial assistance from
Majestic Gold. As at the Latest Practicable Date, our Group did not have any outstanding borrowings
secured by guarantee provided by our Controlling S hareholder. We had generated profits or positive
cash flows from our operations during the Track Record Period. As at 30 June 2023, we had cash and
cash equivalents of approximately RMB350.0 million for working capital purposes. Hence, our Directors
accordingly believe that the our Gr oup will be financially independent from the Controlling Shareholder
upon Listing.
DEED OF NON-COMPETITION
Our Controlling Shareholder has irrevocably and unconditionally undertaken to us in the Deed of
Non-competition (for itself and as trustee for its subsidiaries) that, other than the Remaining Business, it
will not, and will procure that none of its respectiv e associates (other than members of our Group) will,
during the Restricted Period (as defined below), di rectly or indirectly, either on their own account, in
conjunction with, on behalf of, or through any person, firm or company, among other things, carry on,
participate or be interested, engaged or otherwise involved in or acquire or hold (in each case whether as
a shareholder, partner, agent or otherwise and whether for profit, reward or otherwise) the gold mining
related operations, including geological explora tion and mining of gold, gold processing, gold smelting
and technical services, and production and sales of specialised equipment and supplies and construction
materials for gold mines and/or any other new business that the Group may undertake from time to time
after the Listing within the PRC (collectively referred to as ‘‘Restricted Business ’’)a n dw h e r et h e y
become aware of such engagement of the Restricted Business they shall notify the Company forthwith.
The above restriction does not apply to our Contro lling Shareholder with respect to its interests in
the shares of any member of our Group, or interests in the shares of a company (other than our Group)
which are listed on a recognised stock exchange provided that (i) the total number of the shares held by
the Controlling Shareholder and/or its associates (i n aggregate) does not amount to more than 5% of the
issued shares of such company; and (ii) the Controlling Shareholder and/or its associates are not entitled
to appoint a majority of the directors of that company.
Further, our Controlling Shareholder has undertak en that if any new business investment/other
business opportunity relating to the Restricted Businesses (the ‘‘Competing Business Opportunity ’’)i s
identified by or offered to it or any of its close associ ates (other than members of our Group), it shall,
and shall procure that its close associates shall, refer such Competing Business Opportunity to our
RELATIONSHIP WITH OUR CONTROLLING SHAREHOLDER
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Company on a timely basis by giving written notice (the ‘‘Offer Notice’’ ) containing all information
reasonably necessary for our Company to consider whether to pursue such Competing Business
Opportunity.
Upon receiving the Offer Notice, our Company sha ll seek opinions and decisions from a Board
committee who do not have an interest in th e Competing Business Opportunity (the ‘‘Independent
Board ’’) as to whether to pursue or decline the Compe ting Business Opportunity. The Controlling
Shareholder shall be entitled to pur sue such Competing Business Opportunity only if (i) it has received a
written notice from the Company declining the New Opportunity and confirming that the New
Opportunity would not constitute competition with the Re stricted Business, or (ii) it has not received the
notice from our Company within ten (10) Busines s Days from the receipt of the Offer Notice by our
Company. If there is any material change in the natur e, terms or conditions of such Competing Business
Opportunity pursued by the Contro lling Shareholder, it shall refer s uch revised Competing Business
Opportunity to our Company as if it were a new Competing Business Opportunity.
In the event that the Controlling Shareholder and/o r its associates (other than the Group) wish to
dispose of their business investment or interest in any entity relating to the Rema ining Business and/or
the Restricted Business they have acquired, the Cont rolling Shareholder and/or its associates (other than
the Group) shall provide our Group with pre-emptive right ( ‘‘Pre-emptive Right’’ ) to acquire any such
interest in the Remaining Business and/or Restricted Business under the same circumstances. Where the
relevant committee of the Board of Directors decides to waive the Pre-emptive Right by way of written
notice, the Controlling Shareholder and/or its associates (other than the Group) may offer to sell such
business investment or interest in the Remaining Business and/or Restricted Business to other third
parties on such terms which are no more favourable than those made available to our Group. In deciding
whether to exercise the above Pre-emptive Right, our Directors will consider various factors including
the purchase price and their values and benefits, as well as the benefit that they will bring to our Group.
Our Controlling Shareholder has further undertaken to us that it will provide and procure its close
associates to provide on best endeavour basis, all information necessary for the annual review by our
independent non-executive Directors for the enforcement of the Deed of Non-competition. They will
make a written confirmation in our annual report on the compliance with the Deed of Non-competition.
Controlling Shareholder acknowledges and agrees t hat the Directors who have no material interest
in the matters discussed will/may, based on the information available to them, including information and
confirmation provided by or obtained from the Contro lling Shareholder and/or its associates (other than
members of the Group) as described above, review on an annual basis (a) the compliance with the non-
competition undertakings; and (b) all the decisions t aken in relation to whether to exercise the option
under the Deed of Non-competition and whether to pursue any Competing Business Opportunity or other
business opportunities which may be referred o r offered to our Company by any of the Controlling
Shareholder and/or its associates (other than members of the Group) under the Deed of Non-competition.
Findings of such review will be disclosed in the Company ’s annual report after the Listing.
The obligation of our Controlling Shareholder under the Deed of Non-competition shall continue
during the period (the ‘‘Restricted Period’’ ) which: (i) the Shares remain listed on the Stock Exchange;
and (ii) our Controlling Shareholder and/or its close associates (other than members of our Group),
RELATIONSHIP WITH OUR CONTROLLING SHAREHOLDER
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individually or jointly, are entitled to exercise, or c ontrol the exercise of, not less than the 30% of the
voting power at general meetings of our Company, or control the composition of a majority of the
Board; or (iii) close associates of our Controlling Shareholder remain as a director of any member of our
Group.
FURTHER UNDERTAKINGS BY OUR CONTROLLING SHAREHOLDER
Our Controlling Shareholder has also given under takings in respect of the Shares to our Company
and the Stock Exchange as required by Rule 10.07 of the Listing Rules, see section headed
‘‘Underwriting — Underwriting arrangements and expenses — Hong Kong Pubic Offering —
Undertakings to the Stock Exchange pursuant to the Listing Rules — Undertakings by our Controlling
Shareholder ’’in this prospectus for details.
CORPORATE GOVERNANCE MEASURES TO AVOID CONFLICT OF INTERESTS
Our Directors believe that there are adequate corporate governance measures in place to manage
any potential conflicts of interest and ensure com pliance with the Deed of Non-competition. In addition,
our Company has adopted the following corporate governance measures to further strengthen protection
of the interests of our Shareholders as a whole:
(i) we are committed to ensuring that the Board has a balanced composition of executive and
independent non-executive Directors so that there is a strong independent element on the
Board, which can effectively exercise independent judgment. The independent non-executive
Directors, details of whom are set out in the section headed ‘‘Directors and senior
management ’’ in this prospectus, together possess the requisite industry knowledge and
experience for their views to carry weight. Two of our independent non-executive Directors
have experience as directors of listed companies and will be able to provide impartial and
professional advice to protect the interests of our minority Shareholders;
(ii) any Director with material interest in any matter in respect of which a conflict or potential
conflict of interest with our Group may arise must make full disclosu re in respect of such
matter to the Board, and any conflicted Director (including any Director who holds a position
in the Remaining Group), will abstain from par ticipation in any Board meeting when matters
relating to any rights granted in favour of o ur Company under the Deed of Non-competition
are discussed, unless his attendance is requested by a majority of the independent non-
executive Directors. Notwithstanding his attendance, he shall not vote or be counted towards
the quorum in respect of such matters;
(iii) the independent Board co mmittee comprising independent non-executive Directors who are
independent of the Remaining Group will be responsible for reviewing, considering and
deciding whether to pursue or decline any Competing Business Opportunity referred to by
our Controlling Shareholder pursuant to the Deed of Non-competition, and an independent
financial adviser or other professional advisers may be appointed or engaged as the
independent Board committee considers necessary to advise them on the terms of such
Competing Business Opportunity;
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(iv) the independent Board co mmittee comprising independent non-executive Directors who are
independent of the Remaining Group will decide whether or not to pursue the Competing
Business Opportunity/exercise the Pre-emptive Right. Such independent Board committee
may appoint or engage an independent financial adviser or other professional advisers to
advise it. The Remaining Group shall provide all information reasonably required by such
independent Board committee to assist them in their assessment of the exercise or non-
exercise of the Competing Business Opportunity and/or Pre-emptive Right;
(v) as required by the Listing Rules, the independent non-executive Directors will review any
continuing connected transactions annually and confirm in the Company ’s annual report that
such transactions have been entered into in our Group ’s ordinary and usual course of
business, are either on normal commercial terms or on terms no less favourable to our Group
than those available to or from Independent Third Parties and are on terms that are fair and
reasonable and in the interests of our Company and our Shareholders as a whole; and
(vi) we have appointed Innovax Capital, with effect upon the Listing, as our compliance adviser
who will provide it with professional advice and guidance, in respect of compliance with the
Listing Rules and applicable laws including v arious requirements relating to directors ’ duties
and corporate governance.
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SUBSTANTIAL SHAREHOLDERS
So far as our Directors are aware, immediately following completion of the Global Offering (taking
no account of the Shares which may be issued upon the exercise of the Over-allotment Option or any
options granted or to be granted under the Share Option Scheme) and the Capitalisation Issue, the
following persons will have an interest or a short position in the Shares or underlying Shares which
would be required to be disclosed to our Company under the provisions of Divisions 2 and 3 of Part XV
of the SFO, or, directly or indirectly, be interested in 10% or more of the nominal value of any class of
share capital carrying rights to vote in all circumstances at general meetings of any member of our
Group:
(i) Long position in Shares
Name of Shareholder Capacity
Number of
Shares as at
the Latest
Practicable
Date
Approximate %
of shareholding
as at the Latest
Practicable Date
Number of
S h a r e sa sa t
t h ed a t eo ft h i s
prospectus and
immediately
prior to the
Capitalisation
Issue and the
Global Offering
Approximate %
of shareholding
as at the date of
this prospectus
and immediately
prior to the
Capitalisation
Issue and the
Global Offering
Number of Shares
immediately upon
completion of the
Capitalisation
Issue and the
Global Offering
Approximate %
of shareholding
immediately
upon completion
of the
Capitalisation
Issue and the
Global Offerings
Majestic Gold Beneficial
owner
75,200 94% 75,200 94% 1,410,000,000 70.5%
(ii) Interests in other members of our Group
Name of subsidiary of our Group Name of shareholder
Percentage of the
subsidiary ’s issued
share capital
Yantai Zhongjia Dahedong 25%
See section headed ‘‘Statutory and general information — C. Further information about our
Directors, senior management and Substantial Shareholders — 1. Interests and short position of
Directors and the chief executive in the shares, underlying shares or debentures of our Company and its
associated corporations ’’ in Appendix V to this prospectus for details of our Director ’s interests in
Shares immediately following the completion o f the Global Offering and the Capitalisation Issue.
Save as disclosed herein, our Directors are not aware of any person who will, immediately
following the Global Offering (taking no account o f the Shares which may be issued upon any exercise
of the Over-allotment Option or the options granted or to be granted under the Share Option Scheme)
and the Capitalisation Issue, have an interest or shor t position in the Shares or underlying Shares which
would be required to be disclosed to our Company under the provisions of Divisions 2 and 3 of Part XV
SUBSTANTIAL SHAREHOLDERS
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of the SFO, or, directly or indirectly, be interested in 10% or more of the nominal value of any class of
share capital carrying rights to vote in all circumstances at general meetings of any member of our
Group.
CONTROLLING SHAREHOLDER
See section headed ‘‘Relationship with our Co ntrolling Shareholder ’’ in this prospectus for
information on our Controlling Shareholder.
Our Controlling Shareholder has also given under takings in respect of the Shares to our Company
and the Stock Exchange as required by Rule 10.07 of the Listing Rules, see section headed
‘‘Underwriting — Underwriting arrangements and expenses — Hong Kong Pubic Offering —
Undertakings to the Stock Exchange pursuant to the Listing Rules — Undertakings by our Controlling
Shareholder ’’in this prospectus for details.
SUBSTANTIAL SHAREHOLDERS
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Prospective investors should read this sectio n in conjunction with the consolidated financial
statements, including the notes thereto, as set out in the Accountants ’ Report in Appendix I to this
prospectus. We have included in this prospectus the Accountants ’ Report for FY2020, FY2021,
FY2022 and 6M2023, which has been prepared in accordance with IFRSs. Prospective investors are
advised to read the whole of the Accountants ’ Report set out in Appendix I to this prospectus and do
not rely solely on the information provided in this section.
The following discussion and analysis contains forward-looking statements that involve risks,
uncertainties and assumptions. We caution you that our business and financial performance are
subject to substantial risks and uncertainties some of which are beyond our control. Our actual
results could differ materially from those projected in the forward-looking statements. In evaluating
our business, you should carefully consider the information provided under the sections headed ‘‘Risk
factors’’ and ‘‘Forward-looking statements’’ in this prospectus.
OVERVIEW
We are a gold exploration, mining and processing company established in 2005 and located in
Yantai city of the Shandong Province in China. We explore and mine gold-containing ore, process it
into gold concentrate, and sell gold bullion of Au99.95 refined by third party smelters derived from gold
concentrate processed by us. We sell the gold bullio n to the gold smelters or their subsidiaries, who are
registered with the Shanghai Gold Exchange, for their subsequent sales on the Shanghai Gold Exchange.
During the Track Record Period, our revenu e amounted to approxim ately RMB361.0 million,
RMB247.9 million, RMB418.4 million and RMB196.7 million, respectively, while our net profit
amounted to approximately RMB114.4 million, RMB58.7 million, RMB121.0 million and RMB52.8
million, respectively. The following discussion and a nalyses are based on the financial results of our
Group during the Track Record Period as presented in the Accountants ’ Report contained in Appendix I
to this prospectus.
KEY FACTORS AFFECTING OUR RESULTS OF OPERATIONS
We believe that key factors affec ting our results of operations and financial position include the
following:
Gold price
Our revenue during the Track Record Period is derived from the sale of gold bullion to the gold
smelters or their subsidiaries, who are registered with the Shanghai Gold Exchange, for their subsequent
sales on the Shanghai Gold Exchang e. The sales prices of gold bullion are primarily determined by us
on the date of placing a sales order with reference to the prevailing Au (T+D) spot prices quoted on the
Shanghai Gold Exchange, which in turn have histor ically correlated with international gold prices.
Historically, while the gold price has increased in va lue over time, it has fluctuated widely and there can
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be no assurance that the gold price will not continue to fluctuate in the future or that such prices will
otherwise remain at sufficiently high levels to support our profitability and cash flow. As such,
fluctuations in gold price directly affect our results of operations.
In addition, the average selling price of our gold bullion sales recognised during the Track Record
Period was also affected by the timing effect on deliv ery of gold bullion over a long settlement period.
Since there is no restriction imposed on the settle ment period of gold bullion under the sales contract
and the sale price is fixed when we place a sales order, our Group may record an average selling price
in a year which is higher or lower than the PRC gold spot price when we delivered the gold bullion to
our customer. During the Track Record Period, our Group recorded average selling price of RMB365.6
per gram, RMB384.0 per gram, RMB385.7 per gram and RMB420.1 per gram, respectively, while the
average gold spot price in the PRC was RMB387.1 per gram in FY2020, RMB374.3 per gram in
FY2021, RMB392.1 per gram in FY2022 and RMB433.8 per gram in 6M2023, according to the F&S
Report. For further details, please see the section headed ‘‘Industry overview — Gold industry in China
and Shandong — Gold price ’’in this prospectus.
Fluctuations in gold price are inherently difficult to predict, being dependent on numerous factors
such as (i) global macro-economic and political even ts and sentiments; (ii) supply and demand for gold;
(iii) interest rate and inflation rate expectations; (iv) actual and predicted behavior of central banks in
relation to gold acquisition and disposals; and (v) performance of exchange traded gold funds and
speculative trading in gold. If the gold price should fall below or remain below our cost of production
for any sustained period, our business and results of operations would be materially and adversely
affected. Please refer to paragraph headed ‘‘Sensitivity analysis ’’below in this section to the prospectus
for further details.
Production and sales volume
Our revenue is directly affected by our production and sales volume of gold because all of our
revenue is derived from the sales of gold we produced. As all of the gold we produced is sold with
reference to the spot price as quoted on the Shanghai Gold Exchange, our sales volume of gold is
substantially the same as our production volume of gold with small discrepancies due to a number of
factors, including the timing of revenue recognitio n and the gold inventory. During the Track Record
Period, our ore mined volume was approximately 1,589.1 kt, 970.7 kt, 1,989.2 kt and 659.4 kt, and ore
processed volume was approximately 1,590.1 kt, 1,023.8 kt, 1,990.9 kt and 996.7 kt, respectively.
Further, during the Track Record Period, our gold p roduction volume was approximately 991.4 kg,
576.9 kg, 1,072.5 kg and 472.5 kg, and sales volum e of gold bullion of Au99.95 was approximately
987.4 kg, 645.5 kg, 1,084.9 kg and 468.1 kg, respectively. For further details, please refer to the section
headed ‘‘Business — Our operations — Mining ’’in this prospectus.
Our gold production and sales volumes are, among others, predominantly subject to the capacity,
efficiency and stable production of our mining and processing operations. As at 30 June 2023, our ore
processing plant has an annual ore processing capacity of approximately 2,000 kt, which is sufficient to
support our planned production growth in near future. However, any interruption of our mining
operation or breakdown of our ore processing plant or failure in sourcing third party ore processing
subcontractor when required could materially and adversely affect our gold production and sales volume
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and in turn affect our business, financial conditions and results of operation. Our production and sales
volume may also be affected by changes in gold prices because a decrease in gold prices may cause
current economical reserves to become less economical or uneconomical to mine. In addition, fatal
accidents, injuries and natural phenomena that are beyond our control, such as weather conditions,
floods and rocks slides, may temporarily suspend part of our mining operations and affect our gold
production volume.
Cost of sales
While we experienced growth in revenue during the Track Record Period, our gross profit margin
increased, mainly as a result of the increase i n average selling price of our gold bullion from
approximately RMB365.6 per gram in FY2020 to RMB384.0 per gram in FY2021, RMB385.7 per gram
in FY2022 and further to RMB420.1 per gram in 6M2023. Nevertheless, if the gold price falls which is
beyond our control, our ability to control cost of sales will be an important factor in maintaining or
increasing our gross profit margins and our overall profitability. For FY202 0, FY2021, FY2022 and
6M2023, our cost of sales was approximately RMB166.0 million, RMB107 .8 million, RMB199.8
million and RMB104.3 million, respec tively. According to Frost & Sullivan, the total production cost of
gold mining in China has increased continuously in recent years due to the increase in various costs
such as raw material costs, labour costs and energy costs. Further, our average production cost was
RMB167.4 per gram, RMB186.8 per gram, RMB186.3 per gram and RMB220.7 per gram during the
Track Record Period, while the industry average of which was RMB233.2 per gram, RMB279.6 per
gram and RMB298.0 per gram for FY2020, FY2021 and FY2022, respectively. According to Frost &
Sullivan, the fluctuations in the average productio n costs of various gold producers during the Track
Record Period are generally related to (1) the contin uous increase in various costs of production, such as
raw material costs, depreciation and amortisation, la bour costs and energy consumption costs, primarily
as a result of COVID-19 pandemic; and (2) the changes in gold production volume since, for example,
an increase in production volume would reduce the fixed costs shared by each unit of gold produced and
hence, reducing the average production cost. Our average production cost increased in FY2021, which
was in line with the industry trend. Such increase was mainly attributable to the decrease in production
volume of our Group and other gold producers in Shandong Province due to suspension of operation as
ordered by the PRC government for safety inspection. In addition, our Directors believe that the
production costs and cost structures of different gold mining companies are, however, different because
of the following:
(a) different gold mining companies have their own portfolio of open-pit and/or underground
gold mines, which could affect the overall cost structure and capital required in running the
gold mines;
(b) the operating costs of an open-pit mine are relatively lower than those of an underground
mine, mainly attributable to the fact that t he underground mine requires more capital
expenditure (and hence, greater depreciation charges), to construct the mining infrastructure
underground and procure the equipment for cond ucting excavation activities underground,
construct the facilities to bring up the ore, a nd other structure and fixed costs for safety
measures and prevention of uncer tainties in underground situation;
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(c) difference in level of technical expertise, structure and characteristics of gold mines will lead
to difference in efficiency of gold grade control and hence, the feed grade and processing
costs vary among gold mining companies;
(d) the nature and mix of ore deposits are different for each mine. Among open-pit mines in
China, the processing costs will be much higher for mine having more than one kind of ore
which have negative chemical reac tion in separating them from gold;
(e) the variation in extent on utilisation of gold reserves among gold mining companies because
of different scale of operation. According to F rost & Sullivan, industry peers with sizable
operating scale typically do not process ore rock s with relatively low gold grade except when
they could achieve economies of scale in production, our Group managed to extract and
process low-grade ore rocks with feed grades ranging from 0.54 to 0.70 g/t Au during the
Track Record Period. Hence, as our Group was permitted to produce more gold with renewed
mining licence in FY2020, the increase in our Group ’s gross profit was relatively higher than
industry peers as we fully utilised resources; and
(f) the cost structure is different at different stages of development in the gold mines.
In light of the foregoing and the fact that the business of a gold mining company is entirely based
on the number of gold mines and amount of gold reserves, it would not be uncommon for gold mining
companies to experience fluctuation in cost of sales and different proportion of cost structure at different
stage of development in the gold mines. The cost of sa les may increase significantly due to increase in
mining and production volume, major infrastructure development in gold mines or substantial increase in
labour costs.
Please refer to paragraph headed ‘‘Sensitivity analysis ’’below in this section to the prospectus for
further details.
Our mine developments and capital expenditures
According to the F&S Report, the gold industry is a capital-intensive industry that requires
significant investment for a large number of equipment, land resources, compliance with stringent
requirements for safety production and environmenta l protection; to adopt resource exploration, recycle
procedure and merger and acquisition activities to ens ure sustainable and sufficient mine reserves; and
to invest in advanced technology to cope with th e rising difficulty and complexity of gold mining
procedure due to the decrease in gold grade and the increase in mining depth. From 2011 and up to
2019, we conducted substantially all of our mining operations at our Songjiagou Open-Pit Mine. In
February 2016, we have obtained the mining licence for our Songjiagou Underground Mine and spent
approximately RMB97.7 million for th e construction of the underground mine, including the installation
of all ancillary infrastructure where full produc tion capacity of 300 tonnes of ore is being achieved on a
daily basis. Songjiagou Underground Mine commenced its commercial production since September
2019. We expect that these two mines will continue to be our principal operating mines in the next few
years. In the event that we decide to construct additio nal mining infrastructure or refurbish our aging
mining and processing equipment or we are required to replace these equipment due to wear and tear,
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we may incur substantial capital expenditure. D uring the Track Record Period, our total capital
expenditures on plant, properties and equipment were approximately RMB16.6 million, RMB35.4
million, RMB44.4 million and RMB3 9.6 million, respectively.
Apart from the intensive capital expenditure that may be required for maintaining the operations of
our two existing mines, we will continue to invest in expanding our scale of operations. As part of our
growth strategies, we intend to, among others, acquire one gold mining asset. For more details, please
r e f e rt ot h es e c t i o nh e a d e d‘‘Business — Business strategies ’’in this prospectus. In addition to the
acquisition cost of such gold minin g asset, the amount of additional capital expenditure to be incurred
for its operation would depend on our assessment of the status and condition of its plant and equipment,
which could be material.
Capital expenditures today will increase our fu ture depreciation costs, which will lead to an
increase in our future cost of sales. Therefore, our management needs to consider, on an ongoing basis,
the capital expenditures necessary to achieve our sustainable production objectives and additional
contribution to revenue growth against other demands on cash as well as the additional future increase
in cost of sales attributable to the additional depreciation costs. In addition, acquisitions and strategic
investments involve numerous risks, including difficulties in the assimilation of operations, corporate
culture and personnel of the acquired business, diversion of management ’s attention from other business
concerns, risks of entering into new markets and the potential loss of key employees of the acquired
business. All of these factors may materially and adv ersely affect our busine ss, financial condition and
results of operations.
PRC government control and policies on the gold mining industry
The PRC local, provincial and central authorities exe rcise a substantial degree of control over the
gold and mining industry in China. Our operations are subject to a range of PRC laws, regulations,
policies, standards and requirements in relation to, among other things, exploration, mining, production,
taxation, labour standards, occupational health and safety, waste treatment and environmental protection
and operation management. The PRC government has full authority to grant, renew and terminate the
permits and licences in respect of exploration, mining and production activities. While we expect to be
able to renew our licences and permits, if for any reasons we are unable to do so, our business and
results of operations would be materially and adversely affected.
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SENSITIVITY ANALYSIS
Our financial performance is principally affect ed by gold price, raw materials costs and utilities
expenses, which are interlinked. The following sens itivity analysis illustrates the impact of hypothetical
changes on our profit before tax in relation to the pe rcentage changes to average selling price of gold,
raw materials costs, utilities expen ses, direct labour costs and subcont racting costs, assuming all other
factors remain unchanged, based on the historical f luctuations of the average selling price of gold, raw
materials costs, utilities expenses a nd subcontracting costs, respe ctively, during the Track Record
Period:
Impact on profit before tax
by fluctuation of average selling price of gold FY2020 FY2 021 FY2022 6M2023
(RMB in thousands)
+/–1% 3,610 2,479 4,184 1,967
+/–5% 18,050 12,394 20,921 9,833
+/–10% 36,100 24,787 41,841 19,666
Impact on profit before tax
by fluctuation of raw materials costs FY2020 FY2021 FY2022 6M2023
(RMB in thousands)
+/–1% 306 190 396 180
+/–5% 1,532 952 1,981 899
+/–10% 3,065 1,905 3,963 1,798
Impact on profit before tax
by fluctuation of utilities expen ses FY2020 FY2021 FY2022 6M2023
(RMB in thousands)
+/–1% 300 164 338 171
+/–5% 1,502 820 1,692 857
+/–10% 3,004 1,640 3,383 1,715
Impact on profit before tax
by fluctuation of direct labour costs FY2020 FY2021 FY2022 6M2023
(RMB in thousands)
+/–1% 150 111 291 162
+/–5% 749 553 1,456 808
+/–10% 1,498 1,106 2,912 1,616
Impact on profit before tax
by fluctuation of subcontracting costs FY2020 FY2021 FY2022 6M2023
(RMB in thousands)
+/–1% 267 126 256 95
+/–5% 1,333 629 1,280 477
+/–10% 2,666 1,259 2,561 953
FINANCIAL INFORMATION
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Prospective investors should note that the above analysis on the his torical financial information is
based on assumptions and is for reference only and should not be viewed as actual effect.
BASIS OF PREPARATION
Our historical financial information has been prepared in accordance with IFRSs, which comprise
all standards and interpretations approved by the In ternational Accounting Standards Board. All IFRSs
effective for the accounting period commencin g from 1 January 2022, together with the relevant
transitional provisions, have been early adopted by our Group in the preparation of the historical
financial information throughout the relevant periods. The historical financial information has been
prepared under the historical cost convention. All intra-group transactions and balances have been
eliminated on consolidation.
Possible impact of amendments, new standards and interpretations issued but not yet effective for
the Track Record Period
Our Group has not applied the following new and revised IFRSs, that have been issued but are not
yet effective, in our audited conso lidated financial statements.
A m e n d m e n t st oI A S7a n dI F R S7 Supplier Finance Arrangements 1
Amendments to IFRS 10 and
IAS 28
Sale or Contribution of Assets between an Investor and its
Associate or Joint Venture 2
Amendments to IFRS 16 Lease Liability in a Sale and Leaseback 1
Amendments to IAS 1 Classification of Liabilitie sa sC u r r e n to rN o n - c u r r e n t1,3
Amendments to IAS 1 Non-current Liabilities with Covenants (the ‘‘2022 Amendments ’’)1
1 Effective for annual periods beginning on or after 1 January 2024.
2 No mandating effective date yet determined but available for adoption.
3 As a consequence of 2022 Amendments, the effective date of the 2020 Amendments was deferred to annual periods
beginning on or after 1 January 2024.
We anticipate that the application of the new and revised IFRSs will have no material impact on
our Group’ s financial position and financial pe rformance in the foreseeable future.
FINANCIAL INFORMATION
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SIGNIFICANT ACCOUNTING POLICIES, SIGNIFICANT ACCOUNTING JUDGMENTS AND
ESTIMATES
Some of our accounting policies require us to appl y estimates and assumptions as well as complex
judgments relating to accounting items. The estimates and assumptions we use and the judgments we
make in applying our accounting policies have a significant impact on our financial position and
operating results. Our management continually ev aluates such estimates, assumptions and judgments
based on past experience and other factors, including industry practices and expectations of future
events that are believed to be reasonable under the circumstances. There has not been any material
deviation between our management ’s estimates or assumptions and actual results, and we have not made
any material changes to these estimates or assumptions during the Track Record Period. We do not
expect any material changes in these estimates and assumptions in the foreseeable future.
When reviewing our consolidated financial statements, you should consider (i) our significant
accounting policies; (ii) the judgm ents and other uncertainties affecting the application of such policies;
and (iii) the sensitivity of reported results to change s in conditions and assumptions. Our significant
accounting policies, estimates and judgments, which a re important for an understanding of our financial
condition and results of operations, including any changes in accounting policy and disclosures, are set
forth in detail in Notes 2.3, 2.4 and 3 to the Accountants ’ Report in Appendix I to this prospectus.
FINANCIAL INFORMATION
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RESULTS OF OPERATIONS
The following table sets forth a summary of our consolidated statements of profit or loss and other
comprehensive income for the periods indicated , details of which are set out in the Accountants’ Report
in Appendix I to this prospectus.
FY2020 FY2021 FY2022 6M2022 6M2023
(unaudited)
(RMB in thousands)
REVENUE 360,999 247,872 418,413 217,331 196,659
Cost of sales (166,013) (107,767) (199,823) (99,981) (104,277)
GROSS PROFIT 194,986 140,105 218,590 117,350 92,382
Other income and gains 3,973 3,613 13,403 8,392 5,428
Administrative expenses (21,480) (22,490) (33,711) (14,569) (16,655)
Other expenses (2,930) (30,194) (10,419) (1,036) —
Finance costs (5,236) (3,824) (2,955) (1,428) (1,657)
PROFIT BEFORE TAX 169,313 87,210 184,908 108,709 79,498
Income tax expenses (54,890) (28,494) (63,918) (36,237) (26,729)
PROFIT FOR THE YEAR 114,423 58,716 120,990 72,472 52,769
Profit attri butable to:
Owners of the parent 82,403 41,624 83,214 51,438 37,261
Non-controlling interests 32,020 17,092 37,776 21,034 15,508
114,423 58,716 120,990 72,472 52,769
OTHER COMPREHENSIVE
INCOME
Other comprehensive income/(loss) that may be
reclassified to profit or loss in subsequent periods:
Exchange differences on translation of foreign
operations 17,651 7,614 (19,407) (13,437) (9,266)
Other comprehensive income/(loss) that may be not
reclassified to profit or loss in subsequent periods:
Exchange differences on translation of financial
statements of the Company (16,430) (8,895) 29,543 13,500 10,459
OTHER COMPREHENSIVE INCOME/(LOSS) FOR
THE YEAR 1,221 (1,281) 10,136 63 1,193
TOTAL COMPREHENSIVE INCOME
FOR THE YEAR 115,644 57,435 131,126 72,535 53,962
Total comprehensive income attributable to:
Owners of the parent 83,624 40,343 93,350 51,501 38,454
Non-controlling interests 32,020 17,092 37,776 21,034 15,508
115,644 57,435 131,126 72,535 53,962
FINANCIAL INFORMATION
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DESCRIPTION OF PRINCIPAL COMPONENTS IN THE CONSOLIDATED STATEMENTS OF
PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
Revenue
We generate all of our revenue from the sale of gold bullion to two smelters (or in respect of one
of them, its subsidiary) in the PRC, which are Inde pendent Third Parties. After ores are mined from our
Songjiagou Open-Pit Mine and Songjiagou Underground Mine, they are processed into gold concentrates
in our processing plant. The gold concentrates are then transported to the smelters for refining into gold
bullion. These gold bullions are sold to the smelters or their subsidiaries for their subsequent sale on the
Shanghai Gold Exchange during the Track Record Period, which is in line with industry practice
according to the F&S Report, at the agreed sales price determined by us on the date of placing the
relevant sales order with reference to the prevailing Au (T+D) spot price as quoted on the Shanghai
Gold Exchange.
We recognise revenue from the sales of gold bullion when the gold bullion is delivered to our
customers, being the selling division of our gold smelters. Given that our customers generally settle the
sales amount of the gold bullion shortly after the delivery of gold bullion as aforementioned, we do not
have trade receivables at the end of each reporting period during the Track Record Period. For details,
please see the section headed ‘‘Business — Sales and customers ’’in this prospectus.
The following table sets forth the breakdown of our revenue and sales volume for the periods
indicated.
FY2020 FY2021 FY2022 6M2022 6M2023
Revenue Volume Revenue Volume Revenue Volume Revenue Volume Revenue Volume
RMB ’000 kg RMB ’000 kg RMB ’000 kg RMB ’000 kg RMB ’000 kg
Gold sales 360,999 987.4 247,872 645.5 418,413 1,084.9 217,331 568.2 196,659 468.1
FINANCIAL INFORMATION
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The following table sets forth our ore mined volume, ore processed volume and gold production
volume for the period indicated:
FY2020 FY2021 FY2022 6M2023
Permitted annual production volume
Songjiagou Open-Pit Mine (kt) 900.0 900.0 900.0 900.0 (Note 1)
Songjiagou Underground Mine (kt) 90.0 90.0 90.0 90.0 (Note 1)
Total (kt) 990.0 990.0 990.0 990.0
Permitted annual ore stripping volume
Songjiagou Open-Pit Mine (kt)
(Note 4) 8,100.0 8,100.0 8,100.0 8,100.0
Songjiagou Underground Mine (kt) 90.0 90.0 90.0 90.0
Total (kt) 8,190.0 8,190.0 8,190.0 8,190.0
Ore mined volume
Songjiagou Open-Pit Mine (kt) 1,499.2 960.0 1,899.2 615.1
Songjiagou Underground Mine (kt) 89.9 10.7 90.0 44.3
Total (kt) 1,589.1 970.7 1,989.2 659.4
Ore processed volume
Songjiagou Open-Pit Mine (kt) 1,500.2
(Note 3) 1,013.1 (Note 3) 1,900.9 (Note 3) 952.4 (Note 3)
Songjiagou Underground Mine (kt) 89.9 10.7 90.0 44.3
Total (kt) 1,590.1 1,023.8 1,990.9 996.7
Gold production volume
Songjiagou Open-Pit Mine (kg) 935.3 570.7 1,024.0 451.5
Songjiagou Underground Mine (kg) 56.1 6.2 48.5 21.0
Total (Note 2) (kg) 991.4 576.9 1,072.5 472.5
Notes:
1. This is annual volume for FY2023.
2. Actual volume of gold realised after smelting.
3. The total ore processed volume from the Songjiagou Open-Pit Mine was more than its total ore mined volume in
each FY2020, FY2021, FY2022 and 6M2023 because of ore stockpile from the previous period.
FINANCIAL INFORMATION
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4. The permitted annual ore stripping volume is equivalent to the permitted annual production volume times the average
stripping ratio of 9.00 according to the utilisation pla n as submitted by Yantai Zhongjia and approved by the
government. The permitted annual ore stripping volume is observed by us as the limit to the volume of ores that we
can send to the processing plant for processing, as indicated by the ore processed volume.
Our Directors confirmed that our Group ’s production activities, as indicated by the permitted
annual production volume, had n ot exceeded any of the permitted a nnual ore stripping volume that
would lead to over-production as prohibited under relevant PRC laws and regulations during the Track
R e c o r dP e r i o da n du pt ot h eL a t e s tP r a c t i c a b l eD a t e .
The following table sets forth the key statistic of our gold sales for the periods indicated.
FY2020 FY2021 FY2022 6M2022 6M2023
(unaudited)
Revenue from gold sales
(RMB in million) 361.0 247.9 418.4 2 17.3 196.7
FY2020 FY2021 FY2022 6M2022 6M2023
Sales volume (kg) 987.4 645.5 1,084.9 568.2 468.1
Our average selling price
(RMB/gram) (1) 365.6 384.0 385.7 382.5 420.1
Average gold spot price in the PRC
(RMB/gram) (2)
— From January to June 369.1 377.2 391.7 391.7 433.8
— From July to December 403.6 372.0 392.4 ——
— From January to December 387.1 374.3 392.1 ——
Notes:
(1) Calculated as our revenue from gold sales divided by sales volume.
(2) The monthly average gold spot price was extracted from the Shanghai Gold Exchange for the periods indicated,
according to the F&S Report. For reference, the minimum and maximum monthly average gold spot price during the
Track Record Period was RMB347.0 per gram in January 2020 and RMB455.7 per gram in August 2023.
Our sales volume decreased from approximately 987.4 kg (or 31,745.6 ounces) in FY2020 to
approximately 645.5 kg (or 20,753.3 ounces) in FY2021, mainly due to (i) the decrease in ore processed
from 1,590.1 kt in FY2020 to 1,023.8 kt in FY2021 as a result of the Temporary Operation Suspension
to enable government authority to carry out safety inspection in accordance with the requirements of
local authorities following two safety incidents o ccurred in Shandong in Januar y and February 2021; and
(ii) the decrease in feed grade of our ore processed from 0.70 g/t Au in FY2020 to 0.62 g/t Au in
FY2021. The decrease in feed grade was mainly because our Songjiagou Underground Mine, which has
higher feed grade than our Songjiagou Open-Pit Mine, was suspended from operation during most of the
time of FY2021 as discussed above.
FINANCIAL INFORMATION
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Our sales volume increased from approximately 645.5 kg (or 20,753.3 ounces) in FY2021 to
approximately 1,084.9 kg (or 34,880.3 ounces) in FY2022 mainly due to the increase in gold production
f r o m5 7 6 . 9k gi nF Y 2 0 2 1t o1 , 0 7 2 . 5k gi nF Y 2 0 2 2a sw eo p e r a t e di nt h eo r d i n a r ya n du s u a l
circumstances in absence of the Temporary Operation Suspension that affected our production volume in
FY2021.
Our sales volume decreased from approximately 568.2 kg (or 18,268.1 ounces) in 6M2022 to
468.1 kg (or 15,049.8 ounces) in 6M2023 mainly due to the decrease in gold production volume of
approximately 16.3% from approximately 564.3 kg in 6M2022 to approximately 472.5 kg in 6M2023
due to the FY2023 Temporary Pause of Mining Activities.
Our selling price of gold bullion was determined with reference to the prevailing Au (T+D) spot
price quoted on the Shanghai Gold Exchange. When we decide to sell our gold, we will place a sales
order to our customers which specifies the volume of gold bullion to be sold and the selling price of the
gold bullion to be sold under such sales order. The sales orders are delivered to and confirmed by our
customers. We do not fix a delivery date at the time as the sales prices for the gold bullion were fixed
upon the placement of sales orders. Nevertheless, based on the mutual understanding between Shandong
Guoda and Shandong Humon and us, the sales order s placed by us are typically fulfilled within one
year. In practice, we will also provide an expectation to our customers regarding the expected time for
completing the sales order (i.e. the timing of d elivering the gold bullion) through our routine
communication with our customers. The selling prices a s specified in the sales orders are determined
with reference to the prevailing Au (T+D) spot pric e as quoted on the Shanghai Gold Exchange on the
day of the sales order. The Au (T+D) spot price is adopted even if the date of the sales order and the
date of actual delivery to customers were the same. During the Track Record Period, the variance
between the agreed prices on sales orders and the average Au (T+D) spot prices on the dates of sales
orders are all less than ±2%. Accordingly, our sales pursuant to each sales order are concluded in
batches such that revenue is recognised each time when our gold bullion is delivered from the smelting
division of the gold smelters (where our gold bullions are kept after smelting) to the division in-charge
of selling of gold bullion (i.e., our cu stomers) and accepted by our cust omers. Respective settlements are
also received in batches after the delivery of gold bullion in batches within the same sales order. In
particular, the smelting fees and sales proceed s of gold bullion with Shandong Guoda and Shandong
Humon are settled separately in gross. Please refer to the section headed ‘‘Business — Sales and
customers ’’on the factors we consider in placing a sales order. During the Track Record Period, the
monthly average gold spot price generally exhibited an upward trend despite the fact that price drops
occurred in the fourth quarter of FY2020 and first quarter of FY2021. In FY2020, our average selling
price was approximately RMB365.6 per gram which was in line with the increasing gold spot price in
the PRC during the period. In FY2020, we placed sales orders and hence, fixed the selling price of most
our gold bullion sales during the first half of a year. As such, the time of placing our sales orders is
more relevant to the average selling p rice of gold realised by us, than the actual sales of gold (i.e. upon
our delivery of gold and the acceptance by our customers) made by us. Therefore, our average selling
prices during FY2020 were close to the average gold spot price during the first half of FY2020. While
gold mining businesses, in particular their ope ration, are generally not subject to seasonality as
confirmed by Frost & Sullivan, our sales orders pl aced in FY2020 were concentr ated in the first half of
the year. This was primarily because we were satisfi ed with the prevailing market prices of gold in the
FINANCIAL INFORMATION
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--- page 367 ---
first half of FY2020 and hence, decided to secure the revenue and profit to be realised by placing the
relevant sales orders with sale price of gold fixed at the said market prices. Although it is a normal
market practice for mining companies to fix the sale price of gold in sales order placed, different mining
companies may have different business strategies and therefore, may not exhibit the same pattern of
placement of sales orders as us. The volume of sales orders placed in the first half of a year represented
approximately 99.9% of the total volume of sales orders placed during FY2020.
In FY2021, our average selling price continue d to increase to approxima tely RMB384.0 per gram
despite the fact that the average gold spot price decreased year-on-year. We were able to record an
average selling price higher than the average PRC gold spot price during FY2021, mainly due to our
success in fixing a high selling price in two batch es of gold bullion sales near the end of May and July
2021, respectively which were close to the highest gold spot price in FY2021. Further, we recognised
certain amount of gold bullion sales in the first quar ter of FY2021 of which the sales order was placed
and hence, the selling price was f ixed back in May 2020 when the PRC ’s gold spot price was in a period
approaching to the peak during the Track Record Period. The sales volume of the abovementioned gold
bullion sales represented approximately 78% of our total sales volume during FY2021.
Our average selling price for FY2022 increased slightly to approximately RMB385.7 per gram as
compared to RMB384.0 per gram for FY2021 mainly because of the PRC ’s gold spot price remained
relative high during 2022 primarily due to the re cent Russia-Ukraine tensions and the concern of
economy recession. Such average selling price of gold realised by us during FY2022 was slightly lower
than the average gold spot price in the PRC during FY2022, mainly attributable to the sales orders
placed by us in January and early February 2022 when the gold spot price was relatively low.
Our average selling price increased from app roximately RMB382.5 p er gram in 6M2022 to
RMB420.1 per gram in 6M2023, representing an increase of approximately 9.8%. Such increase was
mainly because of the PRC ’s gold spot price remained relative high during the first half of 2023 due to
increase in demand for safe-haven products.
FINANCIAL INFORMATION
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Cost of sales
The following table sets forth the components of o ur cost of sales and their respective percentages
in the total cost of sales for the periods indicated.
FY2020 FY2021 FY2022 6M2022 6M2023
Amount % Amount % Amount % Amount % Amount %
(unaudited)
(RMB in thousands, except percentages)
Depreciation and amortisation 37,556 22.6 17,350 16.1 45,130 22.6 22,383 22.4 23,231 22.3
Subcontracting costs 26,660 16.1 12,589 11.7 25,608 12.8 13,876 13.9 9,535 9.1
Utilities expenses 30,042 18.1 16,400 1 5.2 33,831 16.9 17,424 17.4 17,149 16.4
Raw materials costs 30,649 18.5 19,048 17.7 39,628 19.8 19,480 19.5 17,979 17.2
Direct labour costs 14,978 9.0 11,062 10.3 29,119 14.6 15,213 15.2 16,157 15.5
Other production overheads (1) 12,286 7.4 11,924 11.1 9,681 4.9 2,767 2.8 6,015 5.8
Other taxes (2) 12,863 7.7 8,875 8.2 15,065 7.5 7,804 7.8 7,061 6.8
Changes in inventories of
finished goods and work in
progress (3) 979 0.6 10,519 9.8 1,761 0.9 1,034 1.0 7,150 6.9
Total 166,013 100.0 107,767 100.0 199,823 100.0 99,981 100.0 104,277 100.0
Notes:
1. Other production overheads mainly in clude (i) safety production costs; (ii) repair and maintenance costs; (iii)
environmental and reclamation cos ts; (iv) village distribution cost; and (v) other miscellaneous costs.
2. Other taxes mainly includes mineral re source taxes which represent the amou nts paid to the government authorities
for mining activities and are charg ed at a fixed rate on the sales amount.
3. Changes in inventories of finished goods and work in progress represent the unallocated raw materials costs, direct
labour costs and other production overheads. In FY2021, the amount was mainly attributable to the sales of gold
produced from prior year since we have less gold production during the year as a result of the Temporary Operation
Suspension.
Depreciation and amortisation
Our depreciation and amortisation mainly include (i) depreciation of mining infrastructure, which
is calculated using the units of production basis according to the extraction of the proven and probable
mineral reserves; (ii) depreciation of buildings , plant and machinery relating to our mining and
processing operations and right-of-use assets, which are calculated using the straight-line basis over the
respective estimated useful lives of assets; and (iii) amortisation of mining rights over the useful lives of
the mines.
FINANCIAL INFORMATION
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Our depreciation and amortisation decreased from approximately RMB37.6 million for FY2020 to
approximately RMB17.4 million in FY2021, representing a decrease o f approximately RMB20.2 million
or 53.7% mainly due to the decrease in volume of ore mined during the period by approximately 38.9%
as a result of the Temporary Operation Suspension to enable government authority to carry out safety
inspection.
Our depreciation and amortisation increased from approximately RMB17.4 million in FY2021 to
approximately RMB45.1 million in FY2022, repres enting an increase of approximately RMB27.7
million or 159.2% mainly due to the increase in production activities of our mines and processing plant
in FY2022 while our operation in FY2021 was affected by the Temporary Operation Suspension and
hence, a portion of depreciation and amortisation was recognised as suspension costs in FY2021. In
particular, our mining infrastructure is depreciated based on unit of production method and our ore
mined volume for FY2022 increased by approximately 97.8% for Songjiagou Open-Pit Mine and
741.1% for Songjiagou Underground Mine as compared to FY2021.
Our depreciation and amortisation remained relatively stable at approximately RMB22.4 million in
6M2022 and approximately RMB23.2 million in 6M2023. In particular, in respect of the depreciation of
our mining infrastructure, which is depreciated based on unit of production method, the continuous
increase in the construction of mining infrastructure during second half of 2022 and first half of 2023
resulted in the increase of incurred depreciation. However, this increase was partially offset by the
decrease in ore mined volume, which amounted to approximately 32.6% for 6M2023 as compared to
6M2022.
For FY2020, FY2021 and FY2022, our Group ’s depreciation and amortisation on average
represented approximately 20.4% of the total cost of sales, which was lower than the overall industry
average of 28% in China in 2022 but in line with th e industry average of 21% for open-pit mining
industry in China in 2022.
FINANCIAL INFORMATION
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Subcontracting costs
Our subcontracting costs mainly comprise mining subcontracting costs, logistics subcontracting
costs, smelting subcontracting costs and equipment leasing subcontracting costs, which represent our
payments to subcontractors rela ting to our mining works, logistic s works and smelting works and for
leasing of equipment used for mining operations. Please refer to the section headed ‘‘Business —
Suppliers and subcontractors — Subcontractors’’ in this prospectus for further details of our
subcontracting arrangement. A b reakdown of our subcontracting costs by activities for the periods
indicated is set forth below:
FY2020 FY2021 FY2022 6M2022 6M2023
(unaudited)
(RMB in thousands)
Mining subcontracting costs 13,725 1,445 631 631 —
Logistics subcontracting costs 7,229 4,790 9,054 4,483 3,763
Smelting subcontracting costs 5,706 4,067 13,655 7,247 5,382
Equipment leasing subcontracting
costs — 2,287 2,268 1,515 390
26,660 12,589 25,608 13,876 9,535
Our subcontracting costs decreased from approximately RMB26.7 million in FY2020 to
approximately RMB12.6 million in F Y2021, representing a decrease of approximately 52.8%. Such
decrease was mainly due to the combined effect of (i) the decrease in mining subcontracting costs of
approximately 89.5% mainly because we terminated the mining subcontracting arrangements in respect
of our Songjiagou Open-Pit Mine with Liaoyuan Zhuoli in September 2020 and our Songjiagou
Underground Mine with Shandong Zhangjian in Ja nuary 2021 as we conducte d the mining activities
ourselves seeking to reduce the costs of mining; ( ii) the decrease in smelting subcontracting costs of
approximately 28.7% as a result of the net effect of (a) the increase in the average smelting unit price
per tonne charged by the smelter from approximately RMB121.9 per tonne in FY2020 to RMB141.9 per
tonne as we had renegotiated with them in October 2021 to separately receive compensation for sulfuric
acid, a chemical by-product genera ted during the smelting process of gold concentrates at the smelter, at
RMB150 per tonne of gold concentrate processed and they had increased the smelting charges to
RMB200 per tonne with effect from O ctober 2021; and (b) th e decrease in gold production volume; (iii)
the decrease in logistic subcontracting costs of ap proximately 33.7% mainly due to the decrease in ore
mined volume; and offset by (iv) the increase in equipment leasing subcontracting costs as we leased
certain drilling equipment from an Independent Third Party to support our mining operation.
Our subcontracting costs increased from app roximately RMB12.6 million in FY2021 to
approximately RMB25.6 million in FY2022, representing an increase o f approximately 103.2%. Such
increase was mainly due to the combined effect of (i) the increase in smelting subcontracting costs of
approximately 234.1% primarily as a result of (a) the increase in ore processed volume by approximately
94.5% from 1,023.8 kt in FY2021 to 1,990.9 kt in FY2022; and (b) the increase in the smelting price
FINANCIAL INFORMATION
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per tonne charged by Shandong Guoda from RMB100 to RMB120 per tonne in FY2021 to RMB200 per
tonne in FY2022, representing an increase of approximately 66.7% to 100.0%; (ii) the increase in
equipment leasing subcontracting costs as we starte d leasing equipment since August 2021; and (iii) the
increase in logistics subcontracting costs of approximately 89.6% mainly due to (a) the increase in ore
mined volume of approximately 104.9%, partially offset by (b) the decrease in use of logistics
subcontracting service for transporting ore from ore stockpile to our warehouse in FY2022; and (iv) the
decrease in mining subcontractin g costs of approximately 57.1% as we conducted mining activities
ourselves.
Our subcontracting costs de creased from approximately R MB13.9 million in 6M2022 to
approximately RMB9.5 million in 6M2023, represe nting a decrease of approximately 31.7%. Such
decrease was mainly due to the combined effect of (i) the decrease in smelting subcontracting costs of
approximately 25.7% primarily as a result of the decrease in gold production volume of approximately
16.3% from approximately 564.3 kg in 6M2022 to approximately 472.5 kg in 6M2023 due to lower gold
grade from 0.65 g/t in 6M2022 to 0.54 g/t in 6M2022; (ii) the decrease in equipment leasing
subcontracting costs from approximately RMB 1.5 million in 6M2022 to RMB0.4 million in 6M2023,
representing a decrease of approximately 73.3%; and (iii) the decrease in logistics subcontracting costs
of approximately 16.1% due to the FY2023 Temporary Pause of Mining Activities to facilitate the safety
inspection for our newly expanded mining area.
Utilities expenses
Our utilities expenses mainly include the cost of electricity we consumed during our mining and
processing activities. For further de tails, please see the section headed ‘‘Business — Our operations —
Power supply’’ in this prospectus.
Unlike most industry peers with sizable operating scale that do not process low-grade ore rocks,
we managed to also extract and process low-grade ore rocks with feed grades ranging from 0.54 to 0.70
g/t Au during the Track Record Period. As a result, our Group requires more energy consumption in
crushing and grinding process than that of the industry peers. During the Track Record Period, our
Group ’s energy costs on average represented approximately 16.7% of the total cost of sales, which was
higher than the overall industry average of 9% in China and 13% for open-pit mining industry in China
in 2022.
Our utilities expenses decreased fro m approximately RMB30.0 millio n in FY2020 to approximately
RMB16.4 million in FY2021 mainly due to the decrease in our ore processed volume of approximately
35.6% in FY2021 as compared to FY2020 as a result of the Temporary Operation Suspension. Our
utilities expenses increased from approximately RMB 16.4 million in FY2021 to approximately RMB33.8
million in FY2022 mainly due to (i) the increase in production activities of our processing plant in
FY2022, in particular, our ore processed volume i ncreased by approximately 94.5% in FY2022 as
compared to FY2021, while our production in FY2021 was affected by the Temporary Operation
Suspension and hence, a portion of utilities expense s was recognised as susp ension costs in FY2021.
Our utilities expenses remained relatively stabl e at approximately RMB17.4 million in 6M2022 and
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approximately RMB17.1 million in 6M2023 in sp ite of the FY2023 Temporary Pause of Mining
Activities mainly because our ore processed volume remai ned relatively stable at approximately 996.7 kt
in 6M2023 and approximately 1,000.7 kt in 6M2022.
Raw materials costs
Our raw materials costs mainly include explosives , steel grinding balls and chemical reagents used
during our ore processing operation. All of these materials are sourced from multiple suppliers in the
PRC at competitive market prices. The amount of raw materials we use are generally in proportion with
the volume of the ore we mined or processed. Fo r further details, please see the section headed
‘‘Business — Raw materials ’’in this prospectus.
Our raw material costs for FY2020, FY2021 and FY2022 on average represented approximately
18.7% of the total cost of sales were lower than the overall industry average of 37% and lower than the
industry average for open-pit mining of 27% in 2022 according to the F&S Report mainly due to
different classification of costs such as the explosive costs in our subcontracting costs were classified by
the industry peers as raw material costs.
Our raw materials costs decreased from a pproximately RMB30.6 million in FY2020 to
approximately RMB19.0 million in FY2021, representing a decrease o f approximately RMB11.6 million
or 37.9%. Such decrease was mainly due to the decrease in our ore processed volume from 1,590.1 kt in
FY2020 to 1,023.8 kt in FY2021. Our raw materials costs increased from approximately RMB19.0
million in FY2021 to approximately RMB39.6 million in FY2022, repres enting an increase of
approximately RMB20.6 million or 108.4%. Such increase was mainly due to the increase in production
activities of our processing plant, in particular, our ore processed volume increased by approximately
94.5% from 1,023.8 kt in FY2021 to 1,990.9 kt in FY2022, while our operation in FY2021 was affected
by the Temporary Operation Suspension and hence, a portion of raw materials costs incurred primarily
for maintenance purpose was recognised as suspension costs in FY2021. Our raw materials costs
decreased from RMB19.5 million in 6M2022 to approximately RMB18.0 million in 6M2023,
representing a decrease of approximately RMB1.5 million or 7.7%. Such decrease was mainly due to
the lesser consumption of various raw materials and consumables and parts and replacements for
machinery while our ore processed volume remained relatively stable in 6M2023 as compared to
6M2022. For further details of our ore processed volume, please refer to the section headed ‘‘Business
— Our operations — Our ore processing facility — Utilisation rate ’’in this prospectus.
Direct labour costs
Our direct labour mainly costs consist of wages, sal aries and social insurance contributions that we
pay to our employees engaged in mining, production and processing activities.
Our direct labour costs decreased from approximately RMB15.0 million in FY2020 to
approximately RMB11.1 million in FY2021, representing a decrease of approximately RMB3.9 million
or 26.0%. Such decrease was mainly due to (i) the decrease in wages and salaries of approximately
RMB3.5 million; (ii) the decrease in staff messing and welfare expenses of approximately RMB1.2
million; and partially offset by (iii) the increase i n contribution to social insurance and housing
FINANCIAL INFORMATION
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provident funds of approximately RMB0.8 million. The decreases in wages a nd salaries and staff
messing and welfare expenses were mainly due to the Temporary Operation Suspension. The increase in
contribution to social insurance and housing provident funds was because the enterprise relief measures
by the PRC government in response to the outbreak of COVID-19 was no longer given in FY2021. Our
direct labour costs increased from approximately RMB11.1 million in FY2021 to approximately
RMB29.1 million in FY2022, representing an incr ease of approximately RMB18.0 million or 162.2%.
Such increase was mainly due to (i) the increase in production activities of our mines and processing
plant in FY2022 while our operation in FY2021 was affected by the Temporary Operation Suspension
and hence, a portion of direct labour cost was recognised as suspension costs in FY2021; and (ii) the
increase in the number of staff involved in mining operations of approximately 33.3% in FY2022 as
compared to FY2021 for expanding our mining capacity. Our direct labour costs increased from
approximately RMB15.2 millio n in 6M2022 to approximately RMB16.2 million in 6M2023,
representing an increase of approximately RMB1 .0 million or 6.6%. Such increase was mainly due to
the increase in the number of staff involved in mining operations of approximately 5.9% in 6M2023 as
compared to 6M2022 for expanding our mining capacity.
Gross profit and gross profit margin
The following table sets forth a breakdown of our g ross profit and gross profit margin for sales of
gold for the periods indicated.
FY2020 FY2021 FY2022 6M2022 6M2023
Gross
profit
Gross
profit
margin
Gross
profit
Gross
profit
margin
Gross
profit
Gross
profit
margin
Gross
profit
Gross
profit
margin
Gross
profit
Gross
profit
margin
(unaudited)
(RMB in thousands, except percentages)
Gold sales 194,986 54.0% 140,105 56.5% 218,590 52.2% 117,350 54.0% 92,382 47.0%
Our gross profit margin increased from approximately 54.0% in FY2020 to approximately 56.5%
in FY2021, mainly because of (i) the increase in avera ge gold selling price of approximately 5.0%; and
(ii) the decrease in mining subcontracting fees a s we conduct most of mining activities by our own
labour force in FY2021. Our gross profit margin decreased from approximately 56.5% in FY2021 to
approximately 52.2% in FY2022, main ly attributable to the increase in production costs (excluding the
impact of changes in inventories of finished goods and work in progress) incurred along with our
increase in production activities in FY2022 while our production in FY2021 wa s mostly affected by the
Temporary Operation Suspension. Our gross profit margin decreased from approximately 54.0% in
6M2022 to approximately 47.0% in 6M2023. Such decrease was mainly attributable to the increase in
our cost of sales while there was a decrease in gold production and sales volume during 6M2023,
primarily due to the fact that (i) certain compon ents in the cost of sales such as depreciation and
amortisation, utilities expenses, direct labour costs and other taxes were semi-variable costs which did
not decrease proportionally to the decrease in gold production and sales volume. In particular, while our
sales volume decreased by approximately 17.6%, (a) our depreciation and amortisation increased by
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approximately 3.8%, mainly attributable to the add itions in property, plant and equipment during the
second half FY2022 and 6M2023 and the fact the depre ciation and amortization relating to right of use
of assets is relatively fixed; (b) our utilities expenses decreased by only approximately 1.6%, mainly due
to the fact that the utility consumptions of our pr ocessing plant and machines do not decrease
proportionally to the decrease in p rocessing volume; (c) our raw material costs decreased by only
approximately 7.7%, mainly due to the fact that we have used similar amount of raw materials, for
example, crushing materials and steel grind balls, for the level of operation in 6M2022 and 6M2023; (d)
our direct labour costs increased by approximately 6.2%, mainly attributable to increase in staff for
blasting work and safety production; and (e) our other production overheads increased by 117.4%,
mainly attributable to the expenses incurred for s afety production; and (ii) our ore processed volume
remained relatively stable during the period notwith standing the decrease in gold production and sales
volume. However, these negative effects on the gross profit margin were partially offset by the increase
in average gold selling price of approximately 9.8% from RMB382.5 per gr am in 6M2022 to RMB420.1
per gram in 6M2023. For details on the increase of our cost of sales, please refer to the paragraphs
headed ‘‘Period to period comparison of results of operations ’’in this section.
O t h e ri n c o m ea n dg a i n s
The following table sets forth the components of our other income and gains and their respective
percentages for the periods indicated.
FY2020 FY2021 FY2022 6M2022 6M2023
Amount % Amount % Amount % Amount % Amount %
(unaudited)
(RMB in thousands, except percentages)
Investment income 2,673 67.3 —— —— —— ——
Sales of sulfuric acid —— 1,408 39.0 10,503 78.4 7,202 85.8 2,381 43.9
Government grants 281 7.1 292 8.0 237 1.8 —— 92 1.7
Interest income 928 23.4 1,664 46.1 2,243 16.7 929 11.1 1,976 36.4
Gains on disposal of property,
plant and equipment —— —— 12 0.1 —— 59 1.1
Others 91 2.2 249 6.9 408 3.0 261 3.1 920 16.9
Total 3,973 100.0 3,613 100.0 13,403 100.0 8,392 100.0 5,428 100.0
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We generated investment income amounted to a pproximately RMB2.7 million in FY2020 from the
gold forward contracts we entered into with Shandong Humon and Shandong Guoda. There is no actual
delivery of gold in such gold forward contracts. For details, please refer to ‘‘Business — Sales and
customers — Gold forward contracts enter ed into with our customers’’ in this prospectus.
During FY2021, FY2022 and 6M2023, we received compensation from Shandong Guoda in respect
of sulfuric acid generated during the smelting pro cess amounted to approximately RMB1.4 million,
RMB10.5 million and RMB2.4 million, respectively. Th e trend of compensation price of sulfuric acid
received by us are in line with the trend of industrial price of sulfuric acid since March 2022. Prior to
that and since October 2021, Shandong Guoda has fixed the compensation unit price at RMB150
sulfuric acid generated per tonne of gold concentrates processed. From 16 March 2022, the
compensation for sulfuric acid was further revised t o be (i) if the external selling price of sulfuric acid
as achieved by our smelting subcontractor exceed s RMB400 per tonne, 35% of such external selling
price minus RMB400 per tonne, plus RMB100, for each tonne of gold concentrates processed; (ii) if the
external selling price of sulfuric acid achieved by our smelting subcontractor is equal to or below
RMB400 per tonne, RMB100 for each tonne of gold concentrates processed; or (iii) if the external
selling price of sulfuric acid achieved by our smelting subcontractor exceeds RMB1,000 per tonne, then
the compensation for sulfuric acid will be renegotiated by the parties. There was no such arrangement
during FY2020.
For details, please refer to ‘‘Business — Suppliers and subcontractors — Subcontractors —
Refining works ’’in this prospectus.
We received various government grants, including the subsidies for the purchase of machinery in
FY2020, FY2021, FY2022 and 6M2023. For the government grants recognised as other income and
gains in profit or loss during the Track Record Period, there were no unfulfilled conditions.
We also generated interest income of approximately RMB0.9 million, RMB1.7 million, RMB2.2
million and RMB2.0 million in FY202 0, FY2021, FY2022 and 6M2023, respectively, arising from the
restricted and pledged deposits.
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Administrative expenses
The following table sets forth the components of ou r administrative expenses and their respective
percentages for the periods indicated.
FY2020 FY2021 FY2022 6M2022 6M2023
Amount % Amount % Amount % Amount % Amount %
(unaudited)
(RMB in thousands, except percentages)
Salaries and wages 5,075 23.6 5,872 26.1 7,609 22.6 3,339 22.9 4,719 28.3
Research and development
expenses 4,921 22.9 4,960 22.1 9,156 27.2 2,246 15.4 3,229 19.4
Travelling 2,176 10.1 1,985 8.8 1,665 4.9 886 6.1 785 4.7
Depreciation 1,637 7.6 2,039 9.1 2,024 6.0 1,246 8.6 971 5.8
Other tax expenses 1,332 6.2 1,763 7.8 1,839 5.4 927 6.4 907 5.4
Entertainment 437 2.0 323 1.4 508 1.5 103 0.7 465 2.8
Rent and utilities 342 1.6 581 2.6 566 1.7 323 2.2 1 0
Office expenses 1,104 5.1 1,019 4.5 1,900 5.6 1,040 7.1 1,357 8.1
Repair and maintenance 54 0.3 106 0.5 295 0.9 33 0.2 38 0.2
Listing expenses 4,402 20.6 3,842 17.1 8,149 24.2 4,426 30.4 4,183 25.1
Total 21,480 100.0 22,490 100.0 33,711 100.0 14,569 100.0 16,655 100.0
Please also refer to the section headed ‘‘Business — Research and development ’’in this prospectus
for details of our research a nd development activities.
Other expenses
The following table sets forth the components of our other expenses and their respective
percentages for the periods indicated.
FY2020 FY2021 FY2022 6M2022 6M2023
Amount % Amount % Amount % Amount % Amount %
(unaudited)
(RMB in thousands, except percentages)
Suspension cost —— 28,728 95.1 —— —— ——
Donation 2,090 71.3 83 0.3 1,000 9.6 1,000 96.5 ——
Losses on disposal of property,
plant and equipment —— 975 3.2 —— —— ——
Exchange loss 807 27.5 30 0.1 9,399 90.2 —— ——
Others 33 1.2 378 1.3 20 0.2 36 3.5 ——
Total 2,930 100.0 30,194 100.0 10,419 100.0 1,036 100.0 ——
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During the Track Record Period, we made donations of approximately RMB2.1 million,
RMB83,000, RMB1.0 million and nil, respectively, to local public charity institutions and governmental
agencies and helped those in need in the commun ities. We incurred exchange loss of approximately
RMB9.4 million in FY2022 mainly attributable to the dividend of RMB120.0 million received by
Majestic Yantai BVI from Yantai Zhongjia which was denominated in RMB, i.e. being the foreign
currency of Majestic Yantai BVI, while RMB depreciated during the period.
During FY2021, we incurred suspension cos t of approximately RMB28.7 million, primarily
represented depreciation and amor tisation charges, labour costs, spare parts and utilities incurred during
the Temporary Operation Suspension. Given that during the Temporary Operation Suspension we had no
mining operation, the expenses (such as depreciation and amortisation charges, labour costs) incurred
during the period were not directly related to our production, the relevant amount should not be included
in the inventory cost and then transferred into cost of sales. The following table sets forth the
components of our suspension cost incurred in FY2021.
FY2021
(RMB in
thousands)
Direct labour costs 12,034
Depreciation and amortisation 7,461
Utilities expenses 3,077
Repair and maintenance 5,696
Others 460
Total 28,728
Finance costs
The following table sets forth the components of our finance costs and their respective percentages
for the periods indicated.
FY2020 FY2021 FY2022 6M2022 6M2023
Amount % Amount % Amount % Amount % Amount %
(unaudited)
(RMB in thousands, except percentages)
Interest on borrowings 4,059 77.5 2,643 69.1 937 31.7 430 30.1 717 43.3
Increase in discounted amounts
of provisions and other
long-term liabilities arising
from the passage of time 1,177 22.5 1,181 30.9 2,018 68.3 998 69.9 940 56.7
Total 5,236 100.0 3,824 100.0 2,955 100.0 1,428 100.0 1,657 100.0
FINANCIAL INFORMATION
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Our interest on borrowings during the Track Re cord Period was approximately RMB4.1 million,
RMB2.6 million, RMB0.9 million and RMB0.7 million, respectively. For further details of our bank
borrowing, please see the paragraph headed ‘‘Indebtedness ’’in this section.
Our interest on provisions and other long-term liabilities arising from the passage of time during
the Track Record Period primarily represented the interest or accretion expenses recognised for the
discounted present value of our provision for rehabili tation, payables for compensation to villagers and
mining rights, which remained relatively stable at approximately RMB1.2 million and RMB1.2 million
for FY2020 and FY2021, and approximately RMB1.0 million and RMB0.9 million for 6M2022 and
6M2023, respectively. Such amou nt increased significantly from approximately RMB1.2 million for
FY2021 to approximately RMB2.0 million for FY2022 , mainly attributable to the accretion expense for
mining rights of approximately RMB0.9 million for FY2022, which was absent for FY2021. For further
details, please refer to the paragraphs headed ‘‘Principal components of our non-current assets and non-
current liabilities — Provision ’’and ‘‘Principal components of our non-current assets and non-current
liabilities — Other long-term liabilities ’’in this section.
Income tax expenses
We are subject to income tax on an entity basis on profit arising in or derived from the
jurisdictions in which members of our Group are domiciled and operate. We are incorporated in the
Cayman Islands as an exempted company with limited liability under the Companies Act and,
accordingly, are exempted from payment of the Cayman Islands income tax. We have a subsidiary
incorporated as a BVI business company under the BVI Business Companies Act and is exempted from
payment of income tax of the BVI.
Our operating subsidiary, Yantai Zhongjia, is established in the PRC and taxes on profits
assessable in the PRC have been calculated at the pre vailing tax rates, based on existing legislation,
interpretations and practices in respect thereof. W e were generally subject to a uniform EIT rate of 25%
during FY2020, FY2021, FY2022 and 6M2023. Being accredited as High-tech enterprise in December
2020, Yantai Zhongjia enjoyed the preferential tax rate of 15% for FY2020 in its PRC statutory tax
filings. In arriving at the current tax provision fo r Yantai Zhongjia for FY2 020, FY2021, FY2022 and
6M2023, we have prudently adopted, among others, the uniform EIT rate of 25% to avoid the potential
impact on our financial statements during the Track Record Period should the tax authority hold a
different view on the preferential tax rate we enjoyed. Nevertheless, we have obtained a confirmation
from the Yantai Muping Branch of State Taxation Administration* ( 國家稅務總局煙台市牟平區稅務局)
confirming that no irregularities were discovered by the tax authority in respect of the adoption of the
preferential tax rate of 15% in the PRC statutory tax filings.
In addition to the applicable EIT rate, our effective tax rate may be affected by, among other
things, expenses not deductible for tax ation purposes, utilisation of previously unrecognised tax losses
and non-recognition of deductible temporary differen ces. Our effective tax rates remained relatively
stable at approximately 32.4% in FY2020, approximately 32.7% in FY2021, approximately 34.6% in
FY2022, approximately 33.3% in 6M2022 and approximately 33.6% in 6M2023.
FINANCIAL INFORMATION
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Our Directors confirmed that as at the Latest Practicable Date: (i) our Group has made all required
tax filings under the relevant tax l aws and regulations in PRC and has paid all outstanding tax liabilities
due; and (ii) that our Group is not subject to any dispute or potential dispute with the tax authorities in
PRC as at the Latest Practicable Date.
Non-controlling interests
Non-controlling interests represent minority in terests held by Dahedong. For further details of
interests of Dahedong in Yantai Zhong jia, please see the section headed ‘‘History, Reorganisation and
corporate structure ’’in this prospectus. For FY2020, FY2021, FY2022 and 6M2023, profit attributable
to our non-controlling interests amounted to approximately RMB32.0 million, RMB17.1 million,
RMB37.8 million and RMB15.5 million, respectively.
Other comprehensive income/(expense)
Our other comprehensive income/(expense) represented the exchange differences on translation of
group companies with functional currency different from the presentation currency of our Group ’s
consolidated financial statements (i.e. RMB). Such exchange d ifference was mainly attributable to
Majestic Yantai BVI, which was incorporated in BVI with CAD as the functional currency and was
subsequently changed to HKD as the functional currency in FY2020. Majestic Yantai BVI primarily
held certain balances due to Majestic Gold, being shareholder ’s advances from Majestic Gold to Majestic
Yantai BVI, which were monetary liabilities denominated in CAD. Majestic Gold had conditionally
agreed to waive such balances due to it by us pursuant to a deed of waiver dated 4 June 2020 entered
into between our Company and Majestic Gold. For further details, please see the paragraph headed
‘‘Related party transactions — (e) Balances due to Majestic Gold ’’in this section and the section headed
‘‘Relationship with our Controlling Shareholder — Financial independence’’ in this prospectus. In
respect of the exchange gain of approximately RMB1 .2 million in FY2020, it was mainly attributable to
the remaining un-waived balance of the shareholder ’s advances from Majestic Gold on the book of our
Company (with HKD as the functional currency) with a depreciation of HKD against RMB during
FY2020. In FY2021, we recorded exchange loss of approximately RMB1.3 million notwithstanding that
there was a depreciation of HKD against RMB in FY 2021, mainly due to the significant increase in
monetary assets of Majestic Yantai BVI as mostly represented by cash and cash equivalents and
dividend receivable, primarily as a result of dividends declared by Yantai Zhongjia during the period.
The exchange gain of approximately RMB10.1 million in FY2022 and RMB1.2 million in 6M2023 was
mainly attributable to the monetary assets held by our Company and Majestic Gold and the appreciation
of HKD against RMB during the period.
FINANCIAL INFORMATION
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PERIOD TO PERIOD COMPARISON OF RESULTS OF OPERATIONS
FY2021 compared to FY2020
Revenue
Our revenue decreased from a pproximately RMB361.0 million for FY2020 to approximately
RMB247.9 million for FY2021, representing a d ecrease of approximately RMB113.1 million, or
approximately 31.3%, primarily due to the decrease in our gold sales volume by approximately 34.6%
from approximately 987.4 kg (or 31,745.6 ounces) in FY2020 to approximately 645.5 kg (or 20,753.3
ounces) in FY2021, which was partia lly offset by the increase in the average selling price of our gold
from approximately RMB365.6 per gram in FY2020 to approximately RMB384.0 per gram in FY2021.
The decrease in our gold sales volume was mainly due to the decrease in our gold production volume
caused by the Temporary Operation Suspension to enable government authority to carry out safety
inspection in accordance with the requirements of loc al authorities for all mines in Shandong, including
ours, as a result of two safety incidents occurred in January and February 2021 at Qixia Hushan Gold
Mine ( 棲霞市笏山金礦) of Shandong Wucailong Investment Company Limited ( 山東五彩龍投資有限公
司) and Caojiawa Gold Mine ( 曹家窪金礦) of Zhaoyuan Caojiawa Gold Mine ( 招遠市曹家窪金礦), two
local enterprises which are owned by Independent Third Parties. For further details on the PRC gold
price, please refer to the section headed ‘‘Industry overview ’’in this prospectus.
Cost of sales
Our cost of sales decreased from approximat ely RMB166.0 million for FY2020 to approximately
RMB107.8 million for FY2021, representing a d ecrease of approximately RMB58.2 million, or
approximately 35.1%, primarily due to the net effect of: (i) the decrease in subcontracting expenses of
approximately RMB14.1 million due to (a) the decrease in mining subcontracting costs of approximately
89.5% mainly because we terminated the mining subcontracting arrangements in respect of our
Songjiagou Open-Pit Mine with Liaoyuan Zhuoli in September 2020 and our Songjiagou Underground
Mine with Shandong Zhangjian in January 2021 as we conducted the mining activities ourselves seeking
to reduce the costs of mining; (b) the decrease in sme lting subcontracting costs of approximately 28.7%
as a result of the net effect of (1) t he increase in the average smeltin g unit price per tonne charged by
the smelter from approximately RMB121.9 per tonne to RMB141.9 per tonne as we had renegotiated
with them in October 2021 to separately receive compensation for sulfuric acid, a chemical by-product
generated during the smelting process of gold concentrate at the smelter at RMB150 per tonne of gold
concentrate processed and they ha d increased the smelting charges to RMB200 per tonne with effect
from October 2021; and (2) the decrease in gold production volume; (c) the decrease in logistic
subcontracting costs of approximately 33.7% mainly due to the decrease in ore mined volume; and
offset by (d) the increase in equipment leasing subcontracting costs as we leased certain mine equipment
from an Independent Third Party after terminatio n of mining subcontracting arrangements; (ii) the
decrease in our depreciation and amortisation of approximately RMB20.2 million due to the decrease in
volume of ore mined during the period by approximately 38.9%; (iii) the decrease in utilities costs of
approximately RMB13.6 million; and (iv) the decre ase in cost of raw materials of approximately
RMB11.6 million in line with the decrease in our proc essing volume due to the Temporary Operation
Suspension.
FINANCIAL INFORMATION
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Gross profit and gross profit margin
As a result of the foregoing, our gross profit decreased from approximately RMB195.0 million for
FY2020 to approximately RMB140 .1 million for FY2021, representing a decrease of approximately
RMB54.9 million or approximately 28.1%. Our gross pr ofit margin further increased from approximately
54.0% for FY2020 to approximately 56.5% for FY2021, primarily due to (i) the increase in average gold
selling price of approximately 5.0%; and (ii) the decrease in mining subcontra cting fees as we conduct
most of mining activities by our own labour force in FY2021.
Other income and gains
Our other income and gains decreased fro m approximately RMB4.0 million in FY2020 to
approximately RMB3.6 million in F Y2021, representing a decrease of approximately RMB0.4 million or
approximately 10.0%, primarily due to (i) the decrease in investment income of approximately RMB2.7
million as we did not engage in any gol d forward contracts in FY2021, and partially offset by (ii) the
increase in compensation income from the sale of sulfuric acid in gold concentrate generated during the
smelting process of approximately RMB1.4 milli on; and (iii) the increase in interest income of
approximately RMB0.7 million mainly from fixed deposits placed in banks.
Administrative expenses
Our administrative expenses increased from approximately RMB21.5 million in FY2020 to
approximately RMB22.5 million in FY2 021, representing an increase o f approximately RMB1.0 million,
or approximately 4.7%. Such increase was primarily a ttributable to the increase in salaries and wages of
approximately RMB0.8 million due to the increas e in headcounts for our senior management.
Other expenses
Our other expenses increased from approxima tely RMB2.9 million in FY2020 to approximately
RMB30.2 million in FY2021, representing an increase of approximately RMB27.2 million, or
approximately 930.5%, mainly du e to the suspension costs of appr oximately RMB28.7 million incurred
in FY2021 during the Temporary Operation Suspension and offset by the decrease in donation amount
of approximately RMB2.0 million. Such suspension costs primarily represented depreciation and
amortisation charges, labour costs, spare parts a nd utilities incurred during the suspension period.
Finance costs
Our finance costs decreased from approximately RMB5.2 million in FY2020 to approximately
RMB3.8 million in FY2021, representing a decrease of approximately RMB1.4 million, or
approximately 26.9%. Such decrease was mainly attributable to the decrease in bank borrowings.
FINANCIAL INFORMATION
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Income tax expenses
Our income tax expenses decreased from a pproximately RMB54.9 million for FY2020 to
approximately RMB28.5 million for FY2021, representing a decrea se of approximately RMB26.4
million, or approximately 48.1%, primarily due to the decrease in the profit before tax during the year.
The effective tax rate remained relatively stabl e at approximately 32.7% in FY2021 as compared to
32.4% in FY2020.
Profit and net profit margin for the year
For the reasons described above, our profit for the year decreased from approximately RMB114.4
million in FY2020 to approximately RMB58.7 million in FY2021, representing a decrease of
approximately RMB55.7 million, or approximately 48.7%. Our net profit margin decreased from
approximately 31.7% in FY2020 to approximately 23.7% in FY2021.
Non-controlling interests
Our profit attributable to non-c ontrolling interests decreased from approximately RMB32.0 million
in FY2020 to approximately RMB17.1 million in FY2021, representing a decrease of approximately
RMB14.9 million, or approximately 46.6%, primarily du e to the overall decrease in profit and net profit
margin for the year.
FY2022 compared to FY2021
Revenue
Our revenue increased from approximate ly RMB247.9 million for FY2021 to approximately
RMB418.4 million for FY2022, representing an increase of approximately RMB170.5 million, or
approximately 68.8%, primarily due to the increase in our gold sales volume by approximately 68.1%
from approximately 645.5 kg (or 20,753.3 ounces) in FY2021 to approximately 1,084.9 kg (or 34,880.3
ounces) in FY2022, and the increase in the averag e selling price of our gold from approximately
RMB384.0 per gram in FY2021 to approximately RMB385.7 per gram in FY2022. The increase in our
gold sales volume was mainly due to the increase in our gold production volume as we operated in the
ordinary and usual circumstances in absence the Temporary Operation Suspension which affected our
operations in most of FY2021.
Cost of sales
Our cost of sales increased fro m approximately RMB107.8 million for FY2021 to approximately
RMB199.8 million for FY2022, representing an inc rease of approximately RMB92.0 million, or
approximately 85.3%, primarily due to (i) the increas e in depreciation and amortisation of approximately
RMB27.7 million or 159.2%, mainly due to the increase in production activities of our mines and
processing plant in FY2022 while our operation was affected by the Temporary Operation Suspension in
FY2021 and hence, a portion of depreciation and amortisation was recognised as suspension costs in
FY2021; (ii) the increase in raw material costs of a pproximately RMB20.6 m illion, or 108.4%, mainly
due to the increase in production a ctivities of our processing plant in FY2022, in particular, our ore
FINANCIAL INFORMATION
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processing volume increased by approximately 94.5% from 1,023.8 kt in FY2021 to 1,990.9 kt in
FY2022, while our operation was affected by the Temporary Operation Suspension and hence, a portion
of raw material costs incurred primarily for maintenance purpose; (iii) the increase in direct labour costs
of approximately RMB18.0 million, or 162.2%, mainly due to (a) the increase in production activities of
our mines and processing plant in FY2022 while our operation in FY2021 was affected by the
Temporary Operation Suspension and hence, a portion of direct labour cost was recognised as
suspension costs in FY2021; and (b) the increase in the average number of staff involved in mining
operation of approximately 33.3% in FY2022 as compared to FY2021 for expanding our mining
capacity; (iv) the increase in utilities expenses of approximately RM B17.4 million, or 106.1%, mainly
due to the increase in production a ctivities of our processing plant in FY2022, in particular, our ore
processed volume increased by approximately 94.5% in FY2022 as compared to FY2021, while our
production in FY2021 was affected by the Temporary Operation Suspension and hence, a portion of
utilities expenses was recognised as suspension costs in FY2021; and (v) the increase in subcontracting
costs of approximately RMB13. 0 million, or 103.2%, mainly due to the combined effect of (a) the
increase in smelting subcontracting costs of appr oximately 234.1% primarily as a result of (1) the
increase in ore processed volume of approximately 94.5%, from 1,023.8 kt in FY2021 to 1,990.9 kt in
FY2022; and (2) the incr ease in the smelting price per tonne charged by the Shandong Guoda from
RMB100 to RMB120 per tonne in FY2021 to RMB200 per tonne in FY2022, representing an increase
of approximately 66.7% to 100.0%; (b) the increase in equipment leasing subcontracting costs as we
started leasing equipment since August 2021; (c) the increase in logistics subcontracting costs of
approximately 89.6%, mainly due to (1) the incr ease in ore mined volume of approximately 104.9%,
partially offset by (2) the decrease in use of logistics services of transporting ore from ore stockpile to
our warehouse in FY2022; and (d) the decrease in mining subcontracting costs of approximately 57.1%
as we conducted mining activities ourselves in FY2022.
Gross profit and gross profit margin
As a result of the foregoing, our gross profit i ncreased from approximat ely RMB140.1 million for
FY2021 to approximately RMB218.6 million for FY2022, representi ng an increase of approximately
RMB78.5 million or approximately 56.0%. Our gross pr ofit margin decreased from approximately 56.5%
for FY2021 to approximately 52.2% for FY2022, primarily due to the increase in production costs
(excluding the impact of changes in inventories of finished goods and work in progress) incurred along
with our increase in production activities in FY2022 while our production in FY2021 was mostly
affected by the Temporary Operation Suspension.
Other income and gains
Our other income and gains increased from a pproximately RMB3.6 million in FY2021 to
approximately RMB13.4 million in FY2022, representing an increase of approximately RMB9.8 million
or approximately 272.2%, primarily due to the increase in compensation income from the sale of sulfuric
acid in gold concentrate generated during the smelting process of approximately RMB10.5 million as
compared to approximately RMB1.4 million in FY2021.
FINANCIAL INFORMATION
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Administrative expenses
Our administrative expenses increased from approximately RMB22.5 million in FY2021 to
approximately RMB33.7 million in FY2022, repres enting an increase of approximately RMB11.2
million, or approximately 49.8%. Such increase was primarily attributable to the increase in research and
development expenses of approximately RMB4.2 million and the increase in the listing expenses of
approximately RMB4.3 million i n preparation for the Listing.
Other expenses
Our other expenses decreased from approximately RMB30.2 million in FY2021 to approximately
RMB10.4 million in FY2022, re presenting a decrease of appr oximately RMB19.8 million, or
approximately 65.6%, mainly due to the suspension costs of approximately RMB28.7 million incurred
in FY2021 during the Temporary Operation Suspension, partially offset by the exchange loss of
approximately RMB9.4 million incurred in FY2022 m ainly attributable to the dividend of RMB120
million received by Majestic Yantai BVI from Yantai Zhongjia. Such suspension costs primarily
represented depreciation and amor tisation charges, labour costs, spare parts and utilities incurred during
the suspension period.
Finance costs
Our finance costs decreased from approximately RMB3.8 million in FY2021 to approximately
RMB3.0 million in FY2022, representing a decrease of approximately RMB0.8 million, or
approximately 21.1%. Such decrease was mainly attributable to the decrease in bank borrowings,
partially offset by the increase in accre tion expense arising from mining rights.
Income tax expenses
Our income tax expenses increased from a pproximately RMB28.5 million for FY2021 to
approximately RMB63.9 million for FY2022, repres enting an increase of approximately RMB35.4
million, or approximately 124.2%, primarily due to the i ncrease in the profit before tax during the year.
The effective tax rate increased from approximately 32.7% in FY2021 to approximately 34.6% in
FY2022.
Profit and net profit margin for the year
For the reasons described above, our profit for the year increased from approximately RMB58.7
million in FY2021 to approximately RMB121.0 m illion in FY2022, representing an increase of
approximately RMB62.3 million, or approximatel y 106.1%. Our net profit margin increased from
approximately 23.7% in FY2021 to approximately 28.9% in FY2022.
FINANCIAL INFORMATION
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Non-controlling interests
Our profit attributable to non-controlling inter ests increased from approximately RMB17.1 million
in FY2021 to approximately RMB37.8 million in FY202 2, representing an increase of approximately
RMB20.7 million, or approximately 121.1%, primarily due to the overall increase in profit and the
increase in net profit margin for the year.
6M2023 compared to 6M2022
Revenue
Our revenue decreased from approximately RM B217.3 million for 6M2022 to approximately
RMB196.7 million for 6M2023, rep resenting a decrease of approximately RMB20.6 million, or
approximately 9.5%, primarily due to the decreas e in our gold sales volume by approximately 17.6%
from approximately 568.2 kg (or 18,268.1 ounces) in 6M2022 to approximately 468.1 kg (or 15,049.8
ounces) in 6M2023, which was partially offset by th e increase in the average selling price of our gold of
approximately 9.8% from approximately RMB382.5 per gram in 6M2022 to approximately RMB420.1
per gram in 6M2023. The decrease in our gold sales volume was mainly due to the decrease in our gold
production volume.
Cost of sales
Our cost of sales increased from approximate ly RMB100.0 million for 6M2022 to approximately
RMB104.3 million for 6M2023, r epresenting an increase of a pproximately RMB4.3 million, or
approximately 4.3%, primarily due to (i) the increase in changes in inventories of finished goods and
work in progress of approximately RMB6.1 million or approximately 591.5%, m ainly represented the
increase in utilisation of inventories in prior period; (ii) the increase in other production overheads of
approximately RMB3.2 million or approximately 117.4%; (iii) the i ncrease in depreciation and
amortisation of approximately RMB0.8 million or 3.6%, mainly due to the effect of continuous increase
in the construction of mining infrastructure durin g second half of 2022 and first half of 2023 resulting in
the increase of incurred depreciation which was p artially offset by the effect of decrease in ore mined
volume of approximately 32.6% for 6M2023 as compared to 6M2022; (iv) the increase in direct labour
costs of approximately RMB1.0 million, or 6.6%, mainly due to the increase in the number of staff
involved in mining operation of approximately 5.9% in 6M2023 as compared to 6M2022 for expanding
our mining capacity and partially offset by (v) the decrease in raw material costs of approximately
RMB1.5 million, or 7.7% mainly due to the lesser con sumption of raw materials and consumables and
parts and replacements for machinery while our ore processed volume remained relatively stable in
6M2023 as compared to 6M2022; and (vi) the decrease in subcontracting costs of approximately
RMB4.4 million, or 31.7%, mainly due to the com bined effect of (a) the decrease in smelting
subcontracting costs of approximately 25.7% primarily as a result of the decrease in gold production
volume of approximately 16.3% from approximately 564.3 kg in 6M2022 to approximately 472.5 kg in
6M2023 due to lower gold grade from 0.65 g/t in 6M2022 to 0.54 g/t in 6M2023; and (b) the decrease
in equipment leasing subcontracting costs of approximately 73.3% and the decrease in logistics
subcontracting costs of approximately 16.1% as we paused our mining activitie s during May to mid-July
2023 to facilitate the safety inspection for our newly expanded mining area.
FINANCIAL INFORMATION
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Gross profit and gross profit margin
As a result of the foregoing, our gross profit decreased from approximately RMB117.4 million for
6M2022 to approximately RMB92.4 million for 6M2023, representing a decrease of approximately
RMB25.0 million or approximately 21.3%. Our gross pr ofit margin decreased from approximately 54.0%
for 6M2022 to approximately 47.0% for 6M2023. Such decrease was mainly attributable to the increase
in cost of sales while there was a decrease in gol d production and sales volume during 6M2023,
primarily due to the fact that (i) certain components in cost of sales were semi-variable costs which did
not decrease directly proportional to the decrease in gold production and sales volume; and (ii) our ore
processed volume remained relatively stable during the period notwithstanding the decrease in gold
production and sales volume; partially offset by the increase in average gold selling price of
approximately 9.8% from RMB382.5 per gram in 6M2022 to RMB420.1 per gram in 6M2023.
Other income and gains
Our other income and gains decreased from approximately RMB8.4 million in 6M2022 to
approximately RMB5.4 million in 6M2023, representing a decrease of approximately RMB3.0 million or
approximately 35.7%, primarily due to the decrease in compensation income from the sale of sulfuric
acid in gold concentrate generated during the smelting process of approximately 66.7% from
approximately RMB7.2 million to a pproximately RMB2.4 million due to the drop in the market price of
sulfuric acid in 6M2023. The average monthly market price of sulfuric acid experienced a significant
decrease from RMB859.2 per tonne in 6M2022 to RMB133.7 per tonne in 6M2023, representing a
decrease of approximately 84.4%. As per our agreement with Shandong Guoda, the compensation
income from sulfuric acid sales was fixed at RMB100 per tonne if the external selling price of sulfuric
acid was equal to or below RMB400 per tonne. Consequently, our recorded compensation income from
sulfuric acid sales in 6M2023 was relatively low er compared to 6M2022, when the average monthly
market price of sulfuric acid was below RMB400. For detailed information on the calculation formula
for sulfuric acid compensation, please refer to the paragraph headed ‘‘Description of principal
components in the consolidated statements of pr ofit or loss and other comprehensive income — Other
income and gains ’’in this section of the prospectus.
Administrative expenses
Our administrative expenses increased from approximately RMB14.6 million in 6M2022 to
approximately RMB16.7 million in 6M2 023, representing an increase of a pproximately RMB2.1 million,
or approximately 14.4%. Such increase was primarily attributable to the increase in the salaries and
wages of approximately RMB1.4 million and the inc rease in research and development costs of
approximately RMB1.0 million.
Other expenses
Our other expenses decreased from approximat ely RMB1.0 million in 6M2022 to nil in 6M2023,
representing a decrease of approximately RMB1.0 million, or approximately 100%, mainly due to the
absence of donation incurred in 6M2022.
FINANCIAL INFORMATION
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Finance costs
Our finance costs increased from approximately RMB1.4 million in 6M2022 to approximately
RMB1.7 million in 6M2023, representing an inc rease of approximately RMB0.3 million, or
approximately 21.4%. Such increase was mainly attributable to the increase in bank borrowings.
Income tax expenses
Our income tax expenses decreased from app roximately RMB36.2 million for 6M2022 to
approximately RMB26.7 million for 6M2023, representing a decrease of approximately RMB9.5 million,
or approximately 26.2%, primarily due to the decrease in the profit before tax during the year. The
effective tax rate increased from approximately 33.3% in 6M2022 to approximately 33.6% in 6M2023.
Profit and net profit margin for the period
For the reasons described above, our profit for the period decreased from approximately RMB72.5
million in 6M2022 to approximately RMB52.8 million in 6M2023, representing a decrease of
approximately RMB19.7 million, or approximately 27.2%. Our net profit margin decreased from
approximately 33.3% in 6M2022 to approximately 26.8% in 6M2023.
Non-controlling interests
Our profit attributable to non-c ontrolling interests decreased from approximately RMB21.0 million
in 6M2022 to approximately RMB15.5 million in 6M2 023, representing a decrease of approximately
RMB5.5 million, or approximately 26.2%, primarily due to the overall decrease in profit and the
decrease in net profit margin for the period.
FINANCIAL INFORMATION
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LIQUIDITY AND CAPITAL RESOURCES
Cash flows
During the Track Record Period, we funded our operations primarily with net cash generated from
our operations, bank borrowings and capital injection from shareholders, and our funds were primarily
used for purchase of raw materials, various operating expenses and capital expenditure. The following
table sets forth a summary of our consolidated statements of cash flows for the periods indicated.
FY2020 FY2021 FY2022 6M2022 6M2023
(unaudited)
(RMB in thousands)
Profit before tax 169,313 87,210 184,908 108,709 79,498
Adjustments for non-cash items 42,545 31,651 49,980 25,045 26,053
Operating cash flows before
movements in working capital 211,858 118,861 234,888 133,754 105,551
Changes in working capital 11,301 5,180 (3,605) (6,994) (32)
Cash generated from operations 223,159 124,041 231,283 126,760 105,519
Tax paid (36,403) (10,086) (31,993) (9,138) (9,299)
Net cash flows from operating
activities 186,756 113,955 199,290 117,622 96,220
Net cash flows (used in) investing
activities (60,906) (87,797) (56,060) (16,581) (28,353)
Net cash flows generated from/
(used in) financing activities (58,055) ( 45,130) (54,793) (30,550) (1,260)
Net increase (decrease) in cash and
cash equivalents 67,795 (18,972) 88,437 70,491 66,607
Cash and cash equivalents at
beginning of year 134,696 202,907 182,398 182,398 282,187
Effect of exchange rate changes 416 (1,537) 11,352 667 1,207
Cash and cash equivalents at end of
year 202,907 182,398 282,187 253,556 350,001
Operating activities
Our net cash flows generated from operating a ctivities in FY2020 amounted to approximately
RMB186.8 million, reflecting mainly profit before tax of approximately RMB169.3 million, net of
income tax paid of approximately RMB36.4 million; adjusted by non-cash items including mainly the
depreciation of property, plant and equipment and ri ght-of-use assets of approximately RMB37.5 million
and finance cost of approximately RMB5.2 million; and further adjusted by movement in working
FINANCIAL INFORMATION
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capital including mainly (i) the decrease in prepayments, other receivables and other assets of
approximately RMB8.2 million in respect of the settle ment of security deposits to Shandong Humon; (ii)
the increase in trade payables of approximately RMB5.7 million due to longer settlement period for
certain suppliers and subcontractors; and (iii) the i ncrease in restricted and pledged bank deposits of
approximate RMB5.0 million.
Our net cash flows generated from operating a ctivities in FY2021 amounted to approximately
RMB114.0 million, reflecting mainly profit befor e tax of approximately RMB87.2 million, net of
income tax paid of approximately RMB10.1 million; adjusted by non-cash items including mainly the
depreciation of property, plant and equipment and ri ght-of-use assets of approximately RMB23.5 million
and finance cost of approximately RMB3.8 million; and further adjusted by movement in working
capital including mainly (i) the decrease in invent ories of approximately RMB9.2 million due to the
decrease in gold concentrate and ore stockpile which our mining and processing work were temporarily
suspended in certain months of FY2021; (ii) increase in trade payables of approximately RMB2.0
million mainly due to increase in payables to our e quipment leasing subcontractors and payables to
Shandong Guoda due to timing difference in settling the payable to Shandong Guoda; (iii) the decrease
in other payables and accruals of approximately RMB4.0 million mainly due to decrease in other tax
payables; (iv) the increase in prepayments, other r eceivables and other assets of approximately RMB1.5
million mainly due to increase in prepayment for listing expenses; and (v) the increase in restricted and
pledged bank deposits of approximate RMB1.4 million. Our net cash generated from operating activities
decreased from approximately RMB186.8 millio n for FY2020 to approximately RMB114.0 million for
FY2021, representing a decrease of approximately RMB72.8 million. Such decrease was mainly due to
(i) the decrease in profit before tax after adjustments for non-cash items of approximately RMB93.0
million as a result of the Temporary Operation Suspension to enable government authority to carry out
safety inspection; (ii) changes in working capital o f approximately RMB6.1 million; and partially offset
by (iii) the decrease in income tax pa id of approximately RMB26.3 million.
Our net cash flows generated from operating a ctivities in FY2022 amounted to approximately
RMB199.3 million, reflecting mainly profit before tax of approximately RMB184.9 million, net of
income tax paid of approximately RMB32.0 million; adjusted by non-cash items including mainly the
depreciation of property, plant and equipment and right-of-use assets and amortisation of intangible
assets of approximately RMB47.0 million and fina nce cost of approximately RMB3.0 million; and
further adjusted by movement in working capital including mainly (i) the decrease in trade payables of
approximately RMB3.4 million mainly due to de crease in payables to our top suppliers and
subcontractors; (ii) the increase in prepayments, o ther receivables and other assets of approximately
RMB1.5 million mainly due to increase in prepayment fo r listing expenses and prepayments for research
and development activities; and (iii) the increase in res tricted and pledged bank d eposits of approximate
RMB1.9 million. Our net cash generated from ope rating activities increased from approximately
RMB114.0 million for FY2021 to approximately RMB199.3 million for FY2022, representing an
increase of approximately RMB85.3 million. Such in crease was mainly due to (i) the increase in profit
before tax after adjustments for non-cash items of approximately RM B116.0 million as our profit before
tax after adjustments for non-cash items for FY2021 was affected by the Temporary Operation
Suspension to enable government to carry out safety inspection; and offset by (ii) the increase in income
tax paid of approximately RMB21.9 million.
FINANCIAL INFORMATION
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Our net cash flows generated from operating activities in 6M2022 amounted to approximately
RMB117.6 million, reflecting mainly profit before tax of approximately RMB108.7 million, net of
income tax paid of approximately RMB9.1 million; ad justed by non-cash items including mainly the
depreciation of property, plant and equipment and right-of-use assets and amortisation of intangible
assets of approximately RMB23.6 million and fina nce cost of approximately RMB1.4 million; and
further adjusted by movement in working capital including mainly (i) the decrease in trade payables of
approximately RMB3.6 million mainly due to decrease in payables to our t op suppliers; (ii) the increase
in prepayments, other receivables and other assets of approximately RMB2.2 million mainly due to
increase in prepayment for listing expenses and rece ivable from Shandong Guoda; and (iii) the increase
in restricted and pledged bank de posits of approximate RMB1.3 million.
Our net cash flows generated from operating activities in 6M2023 amounted to approximately
RMB96.2 million, reflecting mainly profit before t ax of approximately RMB 79.5 million, net of income
tax paid of approximately RMB9.3 million; adjusted by non-cash items including mainly the
depreciation of property, plant and equipment and right-of-use assets and amortisation of intangible
assets of approximately RMB24.5 million and fina nce cost of approximately RMB1.7 million; and
further adjusted by movement in working capital including mainly (i) the decrease in inventories of
approximately RMB7.3 million mai nly due to decrease in ore stockpile as we paused our mining
activities during May to mid-July 2023 to facilitate th e safety inspection for our newly expanded mining
area; (ii) the increase in prepayments, other receivables and other assets of approximately RMB2.8
million mainly due to increase in prepayment for listing expenses and research and development
expenses; and (iii) the increase in restricted and pledged bank deposits of approximate RMB1.6 million.
Our net cash generated from operating activities d ecreased from approximately RMB117.6 million for
6M2022 to approximately RMB96.2 million for 6M2023, representing a decrease of approximately
RMB21.4 million. Such decrease was mainly due to the d ecrease in profit before tax after adjustments
for non-cash items of approximately RMB28.2 million.
For details of year on year comparison of our Group’ s items of assets and liabilities, please refer to
the paragraphs headed ‘‘Principal components of our current assets and current liabilities ’’ and
‘‘Principal components of non-current assets and non-current liabilities ’’below in this section.
Investing activities
Our net cash used in investing activities in FY2020 was approximately RMB60.9 million, which
was attributable to (i) the addition of mining right s of approximately RMB30.2 million; (ii) the cash
used for the purchase of property, plant and equipm ent of approximately RMB17.5 million comprising
mainly mining infrastructure; (iii) advances of lo an to third parties of approximately RMB12.1 million;
and partially offset by the proceeds from the gold forward contract of approximately RMB2.7 million.
Our net cash used in investing activities in FY2021 was approximately RMB87.8 million, which
was attributable to (i) the cash used for the purchase of property, plant and equipment of approximately
RMB34.6 million comprising mainly plant and m achinery; (ii) the addition of mining rights of
approximately RMB27.0 million; (iii) the addition o f right-of-use assets of approximately RMB2.5
million; and partially offset by the proceeds fro m the repayment of loans from third parties of
approximately RMB31.9 million. Our n et cash used in investing activitie s increased from approximately
FINANCIAL INFORMATION
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RMB60.9 million for FY2020 to approximately RMB87.8 million for FY2021, representing an increase
of approximately RMB26.9 million. Such increase wa s mainly due to net effect of (i) the repayment of
loans from third parties in FY2021 compared to loan advance to third party in FY2020; and (ii) the
increase in purchase of items of property, plant and equipment in FY2021.
Our net cash used in investing activities in FY2022 was approximately RMB56.1 million, which
was attributable to (i) the cash used for the purchase of property, plant and equipment of approximately
RMB48.4 million comprising mainly plant and machin ery; and (ii) the addition of intangible assets of
approximately RMB7.7 million. Our net cash used in investing activities decr eased from approximately
RMB87.8 million for FY2021 to approximately RMB5 6.1 million for FY2022, representing a decrease
of approximately RMB31.7 million. Such decrease was mainly due to (i) our advances of loans to
related parties of approximately RMB31.9 million i n FY2021 which was absent in FY2022; and (ii) the
decrease in additions to intangible assets of approximately RMB19.3 million in FY2022.
Our net cash used in investing activities in 6M2 022 was approximately RMB16.6 million, which
was attributable to (i) the cash used for the purchase of property, plant and equipment of approximately
RMB15.2 million comprising mainl y plant and machinery; and (ii) the addition of mining rights of
approximately RMB1.4 million.
Our net cash used in investing activities in 6M2 023 was approximately RMB28.4 million, which
was attributable to the cash used for the purchase of property, plant and equipment of approximately
RMB28.4 million comprising mainly plant and machi nery. Our net cash used in investing activities
increased from approximately RMB16.6 million f or 6M2022 to approximately RMB28.4 million for
6M2023, representing an increase of approximate ly RMB11.8 million. Such increase was mainly due to
the purchases of property, plant and equipme nt of approximately RMB28.4 million in 6M2023.
Financing activities
Our net cash used in financing activities in FY2020 was approximately RMB58.1 million, which
was mainly attributable to (i) repayment of interest bearing bank borrowings of approximately RMB90.0
million; (ii) the interest paid of approximately RMB4.2 million; and partia lly offset by (iii) the new
bank loans obtained of RMB30.0 m illion; and (iv) increase in amount due to related parties of
approximately RMB6.9 million.
FINANCIAL INFORMATION
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Our net cash used in financing activities in FY2 021 was approximately RMB45.1 million, which
was mainly attributable to (i) the dividends paid of approximately RMB40.0 million; (ii) repayment of
bank loans of RMB30.0 million; (iii) interest paid of approximately RMB2.7 million; and partially offset
by (iv) the new bank loans obtained of RMB30.0 millio n; and (v) the increase in amount due to related
parties of approximately RMB0.9 million. Our net cash used in financing activities decreased from
approximately RMB58.1 million for FY2020 to approximately RMB45.1 million for FY2021,
representing a decrease of approximately RMB13.0 million. Such decrease was mainly due to (i) the
increase in the total dividends paid of approximate ly RMB40.0 million; (ii) the decrease in the amounts
due to related companies of approximately RMB6.1 million; and partially offset by (iii) the decrease in
repayment of bank borrowings o f approximately RMB60.0 million.
Our net cash used in financing activities in FY2 022 was approximately RMB54.8 million, which
was mainly attributable to (i) the dividends pa id of approximately RMB38.9 million; and (ii) the
repayment of advance from related parties of a pproximately RMB14.8 million. Our net cash used in
financing activities increased from approximately RMB45.1 million for FY2021 to approximately
RMB54.8 million for FY2022 represe nting an increase of approximately RMB9.7 million. Such increase
was mainly due to the increase in advances to a related party of approximately RMB14.8 million in
FY2022.
Our net cash used in financing activities in 6M2 022 was approximately RMB30.6 million, which
was mainly attributable to the repayment of bank loans of RMB30.0 million.
Our net cash used in financing activities in 6M2 023 was approximately RMB1.3 million, which
was mainly attributable to repayment of other long-team liabilities and interest paid. Our net cash used
in financing activities decreased from approxi mately RMB30.6 million for 6M2022 to approximately
RMB1.3 million for 6M2023, representing an decrease of approximately RMB29.3 million. Such
decrease was mainly due to the absence of re payment of loan of RMB30.0 million in 6M2023.
FINANCIAL INFORMATION
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PRINCIPAL COMPONENTS OF OUR CURRENT ASSETS AND CURRENT LIABILITIES
The following table sets forth the details of our c urrent assets and current liabilities as of the dates
indicated.
As at 31 December
As at
30 June
As at
31 October
2020 2021 2022 2023 2023
(unaudited)
(RMB in thousands)
Current assets
Inventories 28,989 19,788 18,652 11,310 17,534
Prepayments, other receivables
and other assets 2,786 4,364 5,845 8,632 7,729
Due from related parties 1 — 7,200 7,200 7,200
Restricted and pledged deposits 14,290 15,645 17,594 19,212 19,222
Cash and cash equivalents 202,907 182,398 282,187 350,001 372,990
Current portion of other
long-term assets — 1,000 400 400 350
Total current assets 248,973 223,195 331,878 396,755 425,025
Current liabilities
Trade payables 13,839 15,871 12,426 9,576 17,679
Other payables and accruals 92,965 20,455 20,897 33,106 18,241
Due to related parties 59,649 60,255 447 456 302
Provisions 1,912 1,351 1,305 1,305 1,305
Deferred income 680 510 340 255 198
Tax payable 25,911 45,484 73,647 87,305 91,275
Interest-bearing bank borrowings 30,000 30,000 30,000 30,000 30,000
Lease liabilities ———— —
Current portion of other
long-term liabilities 1,065 7,369 7,369 7,369 7,369
Total current liabilities 226,021 1 81,295 146,431 169,372 166,369
Net current assets 22,952 41,900 185,447 227,383 258,656
Our net current assets increased from approximately RMB23.0 million as at 31 December 2020 to
approximately RMB41.9 million as a t 31 December 2021, representing an increase of approximately
RMB18.9 million. Such increase was mainly attributable to profit for the year of approximately
RMB58.7 million; and partially offset by the dividend declared of approximately RMB40.0 million.
FINANCIAL INFORMATION
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Our net current assets increased from approximately RMB41.9 million as at 31 December 2021 to
approximately RMB185.4 million as at 31 December 202 2, representing an increase of approximately
RMB143.5 million. Such increase was mainly attributable to profit for the year of approximately
RMB121.0 million.
Our net current assets increased from approxim ately RMB185.4 million as at 31 December 2022 to
approximately RMB227.4 million as at 30 June 2023, representing a n increase of approximately
RMB42.0 million. Such increase was mainly attrib utable to the profit for period of approximately
RMB52.8 million, partially offset by increase in property, plant and equipment of approximately
RMB23.6 million.
Based on our unaudited consolidated financial information as at 31 October 2023, our net current
assets increased from approximately RMB227.4 m illion as at 30 June 2023 to approximately RMB258.7
million as at 31 October 2023, representing an increase of approximately RMB31.3 million. Such
increase was mainly attributable to th e profit generated during the period.
Working capital sufficiency statement
Taking into account our cash generating capabilities, financial resources available to us and the net
proceeds from the Global Offering (after a possible D ownward Offer Price Adjustment setting the final
Offer Price up to 10% below HK$0.55, being the bottom end of the indicative Offer Price range), our
Directors are of the opinion, and the Sole Sponsor concurs, that we have sufficient working capital
required for our operation at present for 125% of our present requirements for at least next 12 months
from the date of this prospectus.
Inventories
Our inventories consist of (i) go ld concentrate; (ii) ore stockpile; and (iii) raw materials used in
our mining and processing operations. The following table sets forth the components of our inventories
as at the dates indicated.
As at 31 December
As at
30 June
2020 2021 2022 2023
(RMB in thousands)
Gold concentrate 11,916 2,565 836 1,268
Ore stockpile 11,068 9,899 9,868 2,285
Raw materials 6,005 7,324 7,948 7,757
Total 28,989 19,788 18,652 11,310
Our inventories decreased from approximat ely RMB29.0 million as at 31 December 2020 to
approximately RMB19.8 million as at 31 December 2021 . Our inventories decreased in FY2021 mainly
due to the decrease in gold concentrate and ore stockpile because our mining and processing work were
FINANCIAL INFORMATION
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temporarily suspended in certain months of FY2021. Our inventories remained relatively stable at
approximately RMB18.7 million a s at 31 December 2022 but decreased to approximately RMB11.3
million as at 30 June 2023. In light of the fact that our mining activities were paused during May to
mid-July to facilitate the safety inspection in the newly expanded mining area of Songjiagou Open-Pit
Mine, we had utilised additional ore stockpile for our ore processing activities in 6M2023.
Our management performs regular review on ageing analysis of our inventories and the condition
of our inventories, and makes provision against obsolete and slow-moving inventory items which are
identified as no longer suitable for sale or use in the production. The following table sets forth the
ageing analysis of our inventories as at the dates indicated:
As at 31 December As at 30 June
2020 2021 2022 2023
(RMB in thousands)
Within one year 27,003 16,296 15,777 7,665
One to two years 821 1,610 566 1,507
Two to three years 299 708 706 490
Over three years 866 1,174 1,603 1,648
Total 28,989 19,788 18,652 11,310
Our inventories with age of over one year were solely represented by our raw materials. These
aged raw materials mainly comprised of metal consumables or spare parts which have long shelf life.
Our Group had regularly conducted review or maintenance work on these metal consumables or spare
parts and ensured that they are in usable condition. Our management confirmed that, after performing
the abovementioned analysis, there is no recoverability issue regarding inventories and no provision for
impairment of inventories was required during the Track Record Period.
The following table sets forth our average inventory turnover days for the Track Record Period:
FY2020 FY2021 FY2022 6M2023
Average inventory turnover days
(Note) 65.3 82.6 35.1 26.0
Note: Average inventory turnover days is derived by dividing the arithmetic mean of the opening and ending balance of
inventories by the cost of sales for the respective year and multiplied by the number of days in the year/period.
Our average inventory turnover days increased from approximately 65.3 days in FY2020 to
approximately 82.6 days in FY2021 mainly due to the decrease in cost of sales recognised during the
period as a result of the Temporary Operation Suspension. Our average inventory turnover days
decreased to approximately 35.1 days in FY2022 mainly due to the fact that our average balance of
inventories in FY2022 was lower than that in FY2021. Our average inventory turnover days decreased
FINANCIAL INFORMATION
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to approximately 26.0 days in 6M2023 mainly du e to the decrease in ore stockpile as we utilised
additional ore stockpile during May to mid-July 2023 when we paused our mining activities to facilitate
the safety inspection in the newly expanded mining area of Songjiagou Open-Pit Mine.
As at 31 October 2023, approximately RMB5.7 million or approximately 50.5%, of our total
inventories as at 30 June 2023 of approximately RMB11.3 million were utilised.
Prepayments, other receivables and other assets
Our prepayments primarily relate to prepayment s of listing expenses and prepayments made to
vendors, subcontractors and suppliers for the procurement of raw materials and consumables, parts and
replacements of machinery. Our deposits and other rece ivables mainly represent security deposits paid to
Shandong Humon for the committed gold bullion sal es. For details of committed gold bullion sales,
please refer to the paragraphs ‘‘Business — Sales and customers — Salient terms of the sales contracts
with customers ’’in this prospectus. The following table sets forth the components of our prepayments,
other receivables and other assets as at the dates indicated.
As at 31 December
As at
30 June
2020 2021 2022 2023
(RMB in thousands)
Prepayments
— Listing expenses 2,089 2,965 3,991 5,273
— Others 697 707 1,371 2,917
Deposits and other receivables — 682 483 442
Interest receivables — 10 ——
Total 2,786 4,364 5,845 8,632
Our prepayments, other receivables and other assets increased from approximately RMB2.8 million
as at 31 December 2020 to approximately RMB4.4 million as at 31 December 2021, representing an
increase of approximately RMB1.6 million, mainly due to (i) the increase in prepayments of listing
expenses of approximately RMB0.9 million; and (ii) the increase in deposits and other receivables of
approximately RMB0.7 million mainly in relation t o the receivables from Shandong Guoda for the
compensation income of sale of sulfuric acid. Our prepayments, other receivables and other assets
increased to approximately RMB5.8 million as at 3 1 December 2022, representing an increase of
approximately RMB1.4 million, mainly due to (i) the increase in prepayments of listing expenses of
approximately RMB1.0 million; and (ii) the increase in other prepayments of approximately RMB0.7
million mainly in relation to the research and dev elopment of certain systems for our Songjiagou
Underground Mine and the techniques in analysing the gold grade in ores. Our prepayments, other
receivables and other assets increased to approximately RMB8.6 million as at 30 June 2023,
representing an increase of approximately RM B2.8 million mainly due to (i) the increase in
prepayments of listing expenses of approximate ly RMB1.3 million; and (ii) the increase in other
FINANCIAL INFORMATION
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prepayments of approximately RMB1.5 million inc luding an amount of approximately RMB1.1 million
paid for a research and development contract for intelligent despatching and monitoring system for
transportation in ramps.
Restricted and pledged deposits
As at 31 December 2020, 2021 and 2022 and 30 June 2023, our restricted and pledged deposits
amounted to approximately RMB14.3 million, RM B15.6 million, RMB17.6 million and RMB19.2
million, respectively, mainly represented environmental rehabilitation deposits placed in banks for
environmental rehabilitation of land we developed for our mine as required under the relevant PRC laws
and regulations.
Trade payables
Our trade payables mainly represent the outstanding amounts payable by us to our suppliers for the
procurement of raw materials and utilities and to subc ontractors for the procure ment of subcontracting
services. The following table sets forth the balance of our trade payables as at the dates indicated.
As at 31 December
As at
30 June
2020 2021 2022 2023
(RMB in thousands)
Trade payables 13,839 15,871 12,426 9,576
Our trade payables increased from approxima tely RMB13.8 million as at 31 December 2020 to
approximately RMB15.9 million as a t 31 December 2021, representing an increase of approximately
RMB2.1 million or 15.2%. Such increase was mainly due to (i) the increase in payable to Yantai Haitai
Machinery Leasing Co., Ltd.* ( 煙台海泰機械租賃有限公司), the equipment leasing subcontractor we
engaged since 2021 for conducting mining work by o urselves, of approximately RMB2.3 million; (ii)
the increase in payable to Shandong Guoda of app roximately RMB1.9 million due to the timing
difference in settling the payabl e to Shandong Guoda; and partially offset by (iii) the settlement of
amount due to Liaoyuan Zhuoli of approximately RMB1.5 million. Our trade payables decreased from
approximately RMB15.9 million as at 31 Decembe r 2021 to approximately RMB12.4 million as at 31
December 2022, representing a decr ease of approximately RMB3.5 million or 22.0%. Such decrease was
mainly due to (i) the decrease in payable to Ya ntai Haitai Machinery Leasing Co., Ltd.* ( 煙台海泰機械
租賃有限公司) of approximately RMB2.2 million as we began to engage another equipment leasing
subcontractor since October 2022; and (ii) the decrease in payables to certain of our other top suppliers
and subcontractors, including Shandong Guoda and Yantai Ruihe Group, of approximately RMB2.4
million due to the timing difference in settlement, p artially offset by the incr ease in payable to Yantai
Wangjin Machinery Leasing Co., Ltd.* ( 煙台旺金機械租賃有限公司) of approximately RMB1.8
million, which is our new machi ne leasing subcontractor.
FINANCIAL INFORMATION
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Our trade payables decreased from approxima tely RMB12.4 million as at 31 December 2022 to
approximately RMB9.6 million as a t 30 June 2023 representing a decrease of approximately RMB2.8
million or 22.6%. Such decrease was mainly due t o (i) the decrease in payable to Yantai Wangjin
Machinery Leasing Co., Ltd.* of approximately RM B1.8 million since we ceased to have business with
them in 6M2023; (ii) the decrease in payables to certain of our top five suppliers, including Shandong
Shengshida and Yantai Ruihe of approximately RMB1.7 million due to timing difference in settlement,
partially offset by the increase in payables to S handong Guoda of approxima tely RMB0.7 million due to
timing difference in settlement.
Our suppliers and subcontractors typically grant us a credit period of 30 to 90 days. The following
table sets forth the ageing analysis of our trade payables based on the invoice date as at the dates
indicated.
As at 31 December
As at
30 June
2020 2021 2022 2023
(RMB in thousands)
Within one month 7,774 9,022 9,152 6,207
One to two months 2,889 3,764 2,174 2,074
Two to three months 676 2,272 357 339
Over three months 2,500 813 743 956
Total 13,839 15,871 12,426 9,576
The following table sets forth our average trade payables turnover days for the Track Record
Period:
FY2020 FY2021 FY2022 6M2023
(RMB in thousands)
Average trade payables
turnover days
(Note) 45.7 96.9 46.2 39.3
Note: Average trade payables turnover days is derived by dividing the arithmetic mean of the opening and ending balance
of trade payables by the total purch ase for the respective year and multip lied by the number of days in the year/
period.
Our average trade payables turnover days were relatively stable at approximately 45.7 days in
FY2020, 46.2 days in FY2022 and 39.3 days in 6M2023. Our average trade payable turnover days were
exceptionally high, amounting to approximately 96.9 days in FY2021, mainly because of the increase in
our trade payables near the end of the year, mainly a ttributable to increase in payables to Yantai Haitai
Machinery Leasing Co., Ltd.* ( 煙台海泰機械租賃有限公司) and Shandong Guoda, partially offset by
the settlement of amount due to Liaoyuan Zhuol i and the decrease in total purchase in FY2021
compared to FY2020 as a result of the Temporary Operation Suspension.
FINANCIAL INFORMATION
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As at 31 October 2023, approximately RMB8.6 m illion, or approximately 90.2%, of our trade
payables outstanding as at 30 June 2023 of ap proximately RMB9.6 million had been settled.
Other payables and accruals
The following table sets forth the components of our other payables and accruals as of the dates
indicated.
As at 31 December
As at
30 June
2020 2021 2022 2023
(RMB in thousands)
Mining rights payables 71,136 ———
Other payables 7,998 8,840 9,115 21,267
Other tax payables 9,900 7,671 7,618 7,844
Accrued salaries 3,879 3,908 4,124 3,959
Interest payable 52 36 40 36
Total 92,965 20,455 20,897 33,106
Our other payables and accruals decreased fro m approximately RMB93.0 million as at 31
December 2020 to approximately RMB20.5 million as at 31 December 2021, representing a decrease of
approximately RMB72.5 million. Such decrease was mainly attributable to (i) price adjustment to the
consideration of mining rights of RMB30.2 millio n; (ii) the settlement of mining rights payable of
approximately RMB6.3 million during the year; and (iii) the reclassification of remaining mining rights
payables of approximately RMB34.6 million to other long-term liabilities pursuant to the supplementary
agreement entered into with Yantai Municipal Bureau of Natural Resources and Planning in December
2021 to set out the settlement schedu les. In April 2020, our Group ente red into an agreement of transfer
of mining rights ( ‘‘Mining Rights Agreement ’’) with Yantai Municipal Natural Resources and Planning
Bureau for renewing the mining licence of our Songjiagou Open-Pit Mine at an initial consideration of
approximately RMB101.1 million (the ‘‘Initial Consideration ’’). Such Initial Consideration was just a
preliminary and rough estimation while both par ties mutually agreed, also as set out in the Mining
Rights Agreement, to enter into a supplemental agreement to finalise the consideration based on a
valuation report. We paid RMB30.0 million of the In itial Consideration in 2020 and the remaining
balance of RMB71.1 million was recognised as our current liability since the balance was not expected
to be settled in more than one year as at 31 December 2021. The final considera tion of approximately
RMB74.1 million (the ‘‘Final Consideration ’’) was determined in Decembe r 2021 based on a valuation
report prepared by a valuation firm entrusted by Yantai Municipal Natural Resources and Planning
Bureau, and the supplemental agreement was entered into between the Group and the bureau. Pursuant
to the supplemental agreement, the remaining balan ce of the Final Consideration (i.e. RMB74.1 million
less RMB30.0 million) shall be paid in seven annual instalments. The difference between the Initial
Consideration of RMB101.1 million a nd the present value of Final Consideration of approximately
RMB70.9 million was adjusted against the cost of the mining right and mining rights payables in 2021.
FINANCIAL INFORMATION
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In respect of the remaining balance of such mining rights payables, the first instalment of approximately
RMB6.3 million was paid in 2021, the second instalment of RMB6.3 million was recognised as current
portion of other long-term liabilities and the remaining instalments of RMB28.3 million were recognised
as other long-term liabilities as at 31 December 2021 in accordance with the payment term as set out in
the supplemental agreement. Our other payables and a ccruals remained relatively stable at approximately
RMB20.9 million as at 31 December 2022. Our other payables and accruals increased to approximately
RMB33.1 million as at 30 June 2023 mainly due to th e increase in other payables of approximately
RMB12.2 million, mainly attributable to the payable s to the contractors for the construction of the
mining infrastructure.
The following table sets forth the components of our other payables as of the dates indicated.
As at 31 December
As at
30 June
2020 2021 2022 2023
(RMB in thousands)
Capital expenditure and equipment
payables 4,945 7,471 6,057 18,649
Entrusted research and development
expenses payables 2,176 ———
Village distribution payables 334 484 345 351
Listing expenses payables 21 123 1,243 1,786
Others 522 762 1,470 481
7,998 8,840 9,115 21,267
Our other payables increased from approxim ately RMB8.0 million as at 31 December 2020 to
approximately RMB8.8 million as at 31 December 20 21, representing an incr ease of approximately
RMB0.8 million. Such increase was mainly due to the increase in capital e xpenditure payables of
approximately RMB2.5 million in relation to certa in renovation and facilities improvement for our
processing plants and ancillary buildings, and partia lly offset by the settlement of entrusted research and
development expenses payables. Our other payables remained relatively stable at approximately RMB9.1
million as at 31 December 2022. Our other payables increased to approximately RMB21.3 million as at
30 June 2023 mainly attributable to the increase in payables to contractors for the construction of the
mining infrastructure.
Due to related parties
Please refer to the paragraphs headed ‘‘Related party transactions — (c) Balances due to
Dahedong ’’and ‘‘Related party transactions — (e) Balances due to Majestic Gold ’’in this section for
further details.
FINANCIAL INFORMATION
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Provisions
The following table sets forth the components of our provisions as at the dates indicated.
As at 31 December
As at
30 June
2020 2021 2022 2023
(RMB in thousands)
Provision for relocation 1,662 981 935 935
Provision for penalties 250 370 370 370
Total 1,912 1,351 1,305 1,305
Provision for relocation
Our provision for relocation mainly represent s the provisions for construction costs of the
residential buildings and other infrastructures for the relocation of villages surrounding our Songjiagou
Open-Pit Mine. For details, please refer to the section headed ‘‘Business — Environmental, social and
corporate governance — B. Social — Community investment ’’in this prospectus. Our provision for
relocation decreased from approximately RMB1. 7 million as at 31 December 2020 to approximately
RMB1.0 million, RMB0.9 million and RMB0.9 million as at 31 December 2021, 31 December 2022 and
30 June 2023, respectively mainly due to the settlement of construction costs during the respective
years.
Provision for penalties
Our provision for penalties mainly represents the provision for penalties for arising from the late
application for construction work planning permit in respect of the buildings constructed on the land
owned by us of approximately RMB250,000, RMB370,000, RMB370,000 and RMB370,000 as at 31
December 2020, 2021 and 2022 and 30 June 2023, respectively. For details, please refer to the section
headed ‘‘Business — Properties ’’in this prospectus.
Deferred income
As at 31 December 2020, 2021 and 2022 and 30 June 2023, our Group recorded deferred income
of approximately RMB0.7 million, RMB0.5 million, RMB0.3 million and RMB0.3 million, respectively.
The deferred income represented government subsidi es granted to our Group for our production facilities
or expense items but yet to be recognised as income. The deferred income is released to the statement of
profit or loss over the expected useful lives of the facilities by equal annual instalments.
Tax payable
As at 31 December 2020, 2021 and 2022 and 30 June 2023, our tax payable of approximately
RMB25.9 million, RMB45.5 million, RMB73.6 million a nd RMB87.3 million, respectively, represent
income tax payable to the government authority of the PRC.
FINANCIAL INFORMATION
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Our tax payable increased from approximate ly RMB25.9 million as at 31 December 2020 to
approximately RMB45.5 million as a t 31 December 2021, representing an increase of approximately
RMB19.6 million. Such increase was mainly due to (i ) income tax expenses of approximately RMB28.5
million, and offset by (ii) income tax paid of approximately RMB10.1 million.
Our tax payable increased from approximate ly RMB45.5 million as at 31 December 2021 to
approximately RMB73.6 million as a t 31 December 2022, representing an increase of approximately
RMB28.1 million. Such increase was mainly due to (i ) income tax expenses of approximately RMB63.9
million, and offset by (ii) income tax paid of approximately RMB32.0 million.
Our tax payable increased from approximate ly RMB73.6 million as at 31 December 2022 to
approximately RMB87.3 million as at 30 June 2023, representing an increase of approximately
RMB13.7 million. Such increase was mainly due to (i ) income tax expenses of approximately RMB26.7
million, and offset by (ii) income tax paid of approximately RMB9.3 million.
Our tax payments for FY2020 and FY2022 were si gnificantly larger than that of FY2019 and
FY2021 mainly because higher profit before tax during the year.
PRINCIPAL COMPONENTS OF OUR NON-CURRENT ASSETS AND NON-CURRENT
LIABILITIES
The following table sets forth a summary of our n on-current assets and non-current liabilities as at
the date indicated.
As at 31 December
As at
30 June
2020 2021 2022 2023
(RMB in thousands)
Non-current assets
Property, plant and equipment 262,409 282,083 296,929 320,578
Intangible assets 145,238 132,322 125,090 121,110
Right-of-use assets 134,998 128,627 119,720 115,243
Deferred tax assets 5,432 5,408 5,906 6,321
Other long-term assets 12,100 3,954 6,526 7,538
Total non-current assets 560,177 552,394 554,171 570,790
Non-current liabilities
Provisions 21,971 23,316 23,913 24,258
Other long-term liabilities 8,693 36,158 30,066 30,127
Deferred tax liabilities 6,464 5,275 9,535 13,722
Total non-current liabilities 37,128 64,749 63,514 68,107
FINANCIAL INFORMATION
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Property, plant and equipment
The following table sets forth the net carrying amo unts of our property, plant and equipment as at
the dates indicated.
As at 31 December
As at
30 June
2020 2021 2022 2023
(RMB in thousands)
Mining infrastructure 171,110 175,839 190,237 216,602
Plant and machinery 88,110 97,708 97,340 94,865
Buildings 1,294 2,414 2,253 2,172
Office equipment and electronic and
other devices 1,086 1,134 718 540
Motor vehicles 809 934 2,531 2,754
Leasehold improvements — 4,054 3,850 3,645
Total 262,409 282,083 296,929 320,578
Our net carrying amounts of property, plant and equipment increased from approximately
RMB262.4 million as at 31 December 2020 to approximately RMB282.1 million as at 31 December
2021, representing an increase of approximately RMB19.7 million or approximately 7.5%, mainly due to
the addition of plant and machinery of approximat ely RMB20.5 million mainly for our underground
mining operations. The net carrying amounts of property, plant and equipment increased to
approximately RMB296.9 million as at 31 December 202 2, representing an increase of approximately
RMB14.9 million or approximately 5.3%, mainly d ue to the addition of mining infrastructure of
approximately RMB30.2 million mainly for the Song jiagou Open-Pit Mine. Our net carrying amounts of
property, plant and equipment in creased to approximately RMB320.6 million as at 30 June 2023 mainly
due to the addition of mining infrastructure of appr oximately RMB34.8 million primarily attributable to
the construction of new benches of our Songjiagou O pen-Pit Mine, the expan sion of tailing dam and the
repair work performed on the road connecting our Open-Pit Mine and the processing plant.
Intangible assets
Our intangible assets with net book value of approximately RMB145.2 million, RMB132.3 million,
RMB125.1 million and RMB121.1 million, as at 31 D ecember 2020, 2021 an d 2022 and 30 June 2023,
respectively, mainly represent our mining rights for our Songjiagou Open-Pit Mine and Songjiagou
Underground Mine.
FINANCIAL INFORMATION
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The following table sets forth the breakdown of n et carrying amounts of our intangible assets as at
the dates indicated:
As at 31 December
As at
30 June
2020 2021 2022 2023
(RMB in thousands)
Mining rights
Songjiagou Open-Pit Mine
— Opening balance 46,217 144,853 111,313 106,740
— Additions 101,136 ———
— Price adjustment — (30,214) ——
— Amortisation provided during
the year/period (2,500) (3,326) (4,573) (1,974)
Net carrying amount 144,853 111,313 106,740 104,766
Songjiagou Underground Mine
— Opening balance 248 385 21,009 17,254
— Additions 180 20,632 ——
— Amortisation provided during
the year/period (43) (8) (3,755) (1,870)
Net carrying amount 385 21,009 17,254 15,384
Software —— 1,096 960
145,238 132,322 125,090 121,110
The net book value of our intangible assets decr eased from approximately RMB145.2 million as at
31 December 2020 to RMB132.3 million as at 31 D ecember 2021, representing a decrease of
approximately RMB12.9 million. Such decrease was mainly attributable to (i) the price adjustment to
our mining rights of approximately RMB30.2 millio n for our Songjiagou Open-Pit Mine, the basis of
adjustment is as elaborated in the paragraph headed ‘‘Other payables and accruals ’’in this section of the
prospectus; (ii) the amortisation provided dur ing the year of approximately RMB3.3 million; and
partially offset by (iii) the additions mining rights for our Songjiagou Underground Mine of
approximately RMB20.6 million for the renewal of mining licence.
FINANCIAL INFORMATION
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The net book value of our intangible assets decr eased from approximately RMB132.3 million as at
31 December 2021 to RMB125.1 million as at 31 D ecember 2022, representing a decrease of
approximately RMB7.2 million. Such de crease mainly attributable to the amortisation provided during
the period of approximately RMB8.5 million and o ffset by the addition of software of approximately
RMB1.3 million.
The net book value of our intangible assets decr eased from approximately RMB125.1 million as at
31 December 2022 to RMB121.1 million as at 30 June 2023, representing a decrease of approximately
RMB4.0 million. Such decrease mainly attributable to the amortisation provided during the period of
approximately RMB4.0 million.
Right-of-use assets
Our right-of-use assets represent the cost s of land use rights in respect of our Group ’sl e a s e h o l d
land in the PRC and buildings erected on land leased by us for our ancillary mining activities and
administrative activities. The carrying amount of our right-of-use a ssets as at 31 December 2020, 2021
and 2022 and 30 June 2023 was approximately RMB135.0 million, RMB128.6 million, RMB119.7
million and RMB115.2 million, respectively. The y ear-on-year differences were mainly due to
depreciation charges incurred during the relevant years.
Deferred tax assets
As at 31 December 2020, 2021 and 2022 and 30 June 2023, our net deferred tax assets of
approximately RMB5.4 million, RMB5.4 million, RM B5.9 million and RMB6.3 million, respectively,
mainly arose from the accrued liabilities relating to our provisions for rehabilitation and other long-term
liabilities, as well as the temporary differences be tween the tax bases and the carrying amounts in
respect of our Group ’s mining infrastructure.
FINANCIAL INFORMATION
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Other long-term assets
The following table sets forth the components of our other long-term assets as at the dates
indicated:
As at 31 December
As at
30 June
2020 2021 2022 2023
(RMB in thousands)
Loan to an Independent Third Party 10,000 ———
Loan to an Independent Third Party
farmers cooperation 2,100 4,000 4,000 4,000
Advance payments for purchase of
property, plant and equipment — 954 2,926 3,938
Total 12,100 4,954 6,926 7,938
Analysed into:
Current portion — 1,000 400 400
Non-current portion 12,100 3,954 6,526 7,538
12,100 4,954 6,926 7,938
As at 31 December 2020, our othe r long-term assets comprised of (i) an interest-free loan of
RMB10.0 million granted to an Independent Third Party, which is wholly-owned by an ex-employee of
our Group, on 1 August 2020 for its working capital needs. The loan is unsecured, interest free and
repayable by no later than 24 July 2022. Such loan was repaid in full in November 2021; and (ii) an
interest-free loan of RMB2.0 million granted to an Independent Third Party farmers cooperation on 18
September 2020 for the construction of a greenhouse to support the agricultural economic development,
social well being and stability of the local communitie s comprising mainly villagers and farmers in the
Muping District of Yantai. The loan is unsecured, interest free and repayable by 17 September 2025.
Our other long-term assets decr eased from approximately RMB12.1 million as at 31 December 2020 to
approximately RMB4.0 million as at 3 1 December 2021, mainly due to (i) repayment of the interest-free
loan of RMB10.0 million from the Independent Third Party, which is wholly-owned by an ex-employees
of our Group in November 2021; (ii) additional loan granted to the Independent Party farmers
cooperation of RMB2.0 million; and (iii) the prepayments to three Independent Third Party companies in
the aggregate amount of approximately RMB954,000 for the acquisition of safety management systems
for our mining operation. Our other long-term assets increased to approximately RMB6.9 million as at
31 December 2022 mainly because o f the consideration of approximately RMB1.5 million paid for
purchase of six buildings for commercial use. Our other long-term assets increased to approximately
RMB7.9 million as at 30 June 2023 due mainly to the increase in advance payments for the purchase of
property, plant and equipment.
FINANCIAL INFORMATION
– 396 –


--- page 407 ---
Provisions
Our provisions classified as non-current liabilities represent the estimated costs for complying with
our Group ’s obligations on final land rehabilitation and mine closure in accordance with the rules and
regulations of the PRC, based upon detailed calculations of the amount and timing of the future cash
expenditure to perform the required works, as well as the impact of inflation, changes in discount rates
for time value of money and the risk specific to the liability such that the amount of provision reflects
the present value of the expenditures expected to be required to settle the obligation. The obligation
generally arises when the asset is installed or the ground environment is disturbed at the production
location. These costs are expected to be incurred upon mine closure.
The following table sets forth the movements of t he provision for rehabilitation during the Track
Record Period:
2020 2021 2022 2023
(RMB in thousands)
As at 1 January 21,303 21,791 23,316 23,913
Interest increment 681 714 664 345
Change in discount rate (187) 631 (67) —
Change in estimated rehabilitation
cost 174 ———
As at 31 December/30 June 21,791 23,316 23,913 24,258
Other long-term liabilities
The following table sets forth the components of our other long-term liabilities as at the dates
indicated:
As at 31 December
As at
30 June
2020 2021 2022 2023
(RMB in thousands)
Instalment of the purchase of mining
rights — 34,602 29,142 29,534
Village distribution payables 9,527 8,925 8,293 7,962
Retention money 231 ———
Total 9,758 43,527 37,435 37,496
Analysed into:
Current portion 1,065 7,369 7,369 7,369
Non-current portion 8,693 36,158 30,066 30,127
9,758 43,527 37,435 37,496
FINANCIAL INFORMATION
– 397 –


--- page 408 ---
For details of our payables for the compensatio n to villagers, please refer to the section headed
‘‘Business — Environmental, social and corporate governance — B. Social — Community investment ’’
in this prospectus. The decreasing balance during the Track Record Period was mainly due to settlement
in the respective year.
For details of our payables for mining rights, please refer to the paragraphs under ‘‘Other payables
and accruals’’ in this section of the prospectus.
Deferred tax liabilities
As at 31 December 2020, 2021 a nd 2022 and 30 June 2023, our deferred tax liabilities of
approximately RMB6.5 million, RMB5.3 million, RM B9.5 million and RMB13.7 million, respectively,
mainly arose from withholding tax on the distr ibutable profits of our PRC subsidiaries.
INDEBTEDNESS
The following table sets forth the components of our indebtedness as of the date indicated:
As at 31 December
As at
30 June
As at
31 October
2020 2021 2022 2023 2023
(unaudited)
(RMB in thousands)
Amounts due to related
parties 59,649 60,255 447 456 302
Interest-bearing bank
borrowings 30,000 30,000 30,000 30,000 30,000
Lease liabilities ———— —
Total 89,649 90,255 30,447 30,456 30,302
Amounts due to related parties
Please refer to the paragraphs headed ‘‘Related party transactions — (c) Balances due to
Dahedong ’’and ‘‘Related party transactions — (e) Balances due to Majestic Gold ’’in this section for
further details.
FINANCIAL INFORMATION
– 398 –


--- page 409 ---
Interest-bearing bank borrowings
The following table sets forth the information of guarantors and pledged assets of our interest-
bearing bank borrowings as at the dates indicated:
As at 31 December
As at
30 June
As at
31 October
2020 2021 2022 2023 2023
Notes (unaudited)
(RMB in thousands)
Bank borrowings — secured:
Guaranteed by (i) Dahedong,
(ii) Baiheng and (iii) Mr. Kong
Fanzhong, and (iv) spouse of
Mr. Kong Fanzhong (1), (2), (3) — 30,000 —— —
Guaranteed by (i) Dahedong,
(ii) Mr. Kong Fanzhong and
(iii) two Independent third party
companies (1), (2), (3) 10,000 ——— —
Guaranteed by (i) Dahedong,
(ii) Mr. Kong Fanzhong and
(iii) spouse of Mr. Kong
Fanzhong (1), (2), (3) 10,000 ——— —
Guaranteed by (i) Dahedong,
(ii) Mr. Kong Fanzhong,
(iii) Mr. Kong Fanbo,
(iv) Baiheng, and (v) a former
shareholder of Baiheng (1), (2), (3), (4) 10,000 ——— —
Guaranteed by (i) Dahedong,
(ii) Baiheng, (iii) Mr. Zhou
Shufeng and (iv) spouse of
Mr. Zhou Shufeng
(1), (2), (5)
—— 30,000 30,000 30,000
Total bank borrowings —
secured 30,000 30,000 30,000 30,000 30,000
Notes:
(1) Our Group has also provided corporate guarantees to Shandong Eastern, Dahedong and Baiheng. For details, please
refer to the paragraphs headed ‘‘Indebtedness — Contingent liabilities ’’in this section.
(2) Immediately following the Listing, the guarantees provided by Dahedong, Baiheng and Mr. Zhou Shufeng and the
spouse of Mr. Zhou Shufeng to our Group constitute fully-exempt continuing connected transactions of our
Company. For details, please refer to the section headed ‘‘Connected transactions ’’in this prospectus.
(3) Mr. Kong Fanzhong is a former director of Yantai Zhongjia.
FINANCIAL INFORMATION
– 399 –


--- page 410 ---
(4) Mr. Kong Fanbo is a director of Yantai Zhongjia.
(5) Mr. Zhou Shufeng is the chairman of the board of directors of Yantai Zhongjia and general manager of Yantai
Zhongjia.
Our short-term interest-bearing bank borrowings are repayable within one year, denominated in
RMB and with fixed interest rates. The effective interest rates for these loans were 4.80% to 7.70% in
FY2020, 4.35% in FY2021, 4.80% in FY2022 and 4.80% in 6M2023.
As at 31 October 2023, being the latest practicable date for the purpose of determining
indebtedness, our Group had on e bank loan amounted to RMB30.0 million, which was fully utilised and
was secured by guarantees from Dahedong, Baiheng, Mr. Zhou Shufeng and the spouse of Mr. Zhou
Shufeng. Such guarantees will not be released prio r to the Listing and are expected to continue after
Listing. Our Directors and the Sole Sponsor believe that the impact of the guarantees provided by
Dahedong, Baiheng, Mr. Zhou Shufeng and Ms. Xu Shaoying on our Group ’s financial independence
from its connected persons is not significant. For details of the above, please refer to section headed
‘‘Connected transactions ’’ in this prospectus. During the Track Record Period and up to the Latest
Practicable Date, we did not have unutilised banking facility.
During the Track Record Period, the bank borrowi ng agreements that we entered into with banks
and financial institutions were subject to general a nd customary covenants commonly found in lending
arrangements with financial institutions. If our Grou p were to breach the covenants, the loans would
become payable on demand. Our Group regularly monitors its compliance with these covenants.
Agreements for our bank borrowings do not contain any material covenants that may have a material
adverse effect on our ability to obtain additional borrowings or issue debt or equity securities in the
future. Our Directors confirmed that we have not defaulted in the repayment of the principal bank
borrowings and relevant interest expenses during the Track Record Period.
Contingent liabilities
Guarantees issued
The following table sets forth the guarantees granted by our Group as at the dates indicated.
As at 31 December
As at
30 June
As at
31 October
2020 2021 2022 2023 2023
(RMB in thousands)
(unaudited)
Baiheng
(1) 50,000 ——— —
Shandong Eastern (2) 50,000 ——— —
Total 100,000 ——— —
FINANCIAL INFORMATION
– 400 –


--- page 411 ---
Notes:
(1) Our Group provided a corporate guarantee in the sum of RMB50.0 million for the period from December 2016 to
December 2023 in favour of a bank in the PRC, for the banking facilities obt ained by Baiheng. We have received a
sum of RMB15.0 million in terms of loan from Baiheng which we recorded as security deposits from Baiheng in
2016 in consideration of our provision of such corporate guarantee for the benefit of Baiheng. Such security deposit
was returned in two tranches to Baiheng in 2018 and 2019 of RMB10.0 million and RMB5.0 million, respectively. In
addition, as security, Baiheng agreed to transfer its mining permits to Yantai Zhongjia in the event that Baiheng was
unable to repay the loan. Further, Dahedong has provided a back-to-back guarantee to Yantai Zhongjia and will
become liable to pay for the entire amounts that Yantai Zhongjia will pay on behalf of Baiheng in the event of
default. If Dahedong is unable to repa y the liabilities, it will transfer 5% out of its 25% equity interest in Yantai
Zhongjia to Majestic Yantai. As at 31 D ecember 2021, Baiheng had fully se ttled the outstanding bank loans.
(2) Our Group provided a corporate guarantee amounted to RMB50.0 million for the period from January 2019 to
December 2021 in favour of a financia l institution in the PRC for the financing facilities obtained by Shandong
Eastern, an Independent Third Party. The debt was also secured by a pledge of shares in a listed company owned by
Shandong Eastern and a pledge of certificate of deposit of RMB50.0 million provided by an Independent Third Party.
In August 2018, we were involved in a dispute with this fi nancial institution in conn ection with the guaranteed
liabilities. For further details of this litig ation, please refer to the section headed ‘‘Business — Litigation — Legal
proceedings relating to a corporate guarantee ’’in this prospectus. In March 2021, the financial institution sold and
transferred its debts to another company, which is an Independent Third Party. In August 2021, the Independent
Third Party has released our Group from all liabilities and obligations under the corporate guarantee.
Save as disclosed above in this section, and apa rt from intra-group liabilities, as at 31 October
2023, being the latest practicable date for the purpose of the indebtedness statement, our Group did not
have any loan capital issued and outstanding or agreed to be issued, bank overdrafts, loans or other
similar indebtedness, liabilities under acceptances (other than normal trade bills) or acceptable credits,
debentures, mortgages, charges, finance leases or hire purchases commitments, guarantees, material
covenants, or other material conti ngent liabilities. Our Directors confirmed that there has not been any
material change in our Group’ s indebtedness since the Latest Practicable Date and up to the date of this
prospectus.
CAPITAL EXPENDITURES
During the Track Record Period, we incurred capital expenditures amounted to approximately
RMB120.4 million, RMB58.5 million, RMB45.7 million a nd RMB39.6 million, respectively, primarily
relating to the renewal of our mining rights, the construction of mining infrastructure, purchase of plant
and machinery and additions in right-of-use assets. We have financed our capital expenditure primarily
through cash generated from operatin g activities and bank borrowings.
Our Group ’s projected capital expenditures are subject to revision based upon any future changes
in our business plan, market conditions, and economic and regulatory environment. Please refer to the
section headed ‘‘Future plans and use of proceeds ’’in this prospectus for further details. We expect to
fund our contractual commitments and expenditures principally through the net proceeds we receive
from the Global Offering, cash generated from our operating activitie s and proceeds from borrowings.
FINANCIAL INFORMATION
– 401 –


--- page 412 ---
COMMITMENTS
Our capital commitments outstanding amounted to approximately RMB670,000, RMB320,000,
RMB5.3 million and RMB6.5 million as at 31 Dece mber 2020, 2021 and 2022 and 30 June 2023,
respectively, were mainly related to the constructio n of mining infrastructure for our Songjiagou Open-
Pit Mine.
RELATED PARTY TRANSACTIONS
With respect to the material related party transactions set forth in the Accountants ’ Report in
Appendix I to this prospectus, our Directors confirmed that these transactions were conducted on normal
commercial terms or such terms that were no less favourable to our Group than those available to
Independent Third Parties and were fair and reasonable and in the interest of our Shareholders as a
whole and would not distort our results for the Track Record Period or make our historical results not
reflective of our future performance. For details, please refer to Note 34 to the Accountants ’ Report in
Appendix I to this prospectus. Certain related party transactions entered into by our Group during the
Track Record Period and the balances with related parties at the end of each reporting period are set out
below.
(a) Guarantees provided to our Group
During the Track Record Period, our banki ng facilities in the amount of RMB30.0 million,
RMB30.0 million, RMB30.0 million and RMB30.0 millio n, respectively were guaranteed by, among
others, Dahedong, Baiheng, Mr. Kong Fanbo (a director of Yantai Zhongjia), Mr. Kong Fanzhong (a
former director of Yantai Zhongjia), Ms. Jiang Yunuo (the spouse of Mr. Kong Fanzhong), Mr. Zhou
Shufeng (the chairman of the board of directors of Yantai Zhongjia and general manager of Yantai
Zhongjia), and/or Ms. Xu Shaoying (the spouse o f Mr. Zhou Shufeng). The banking facility in the
amount of RMB30.0 million obtained in August 2022 which was guaranteed by Dahedong, Baiheng, Mr.
Zhou Shufeng and his spouse will not be released prior to the Listing. Immediately following the
Listing, the guarantees provided by Dahedong, Baiheng, Mr. Zhou Shufeng and his spouse for our
Group constitute fully-exempted continuing connect ed transactions of our Company. Our Directors and
the Sole Sponsor believe that the impact of the guarantees provided by Dahedong, Baiheng, Mr. Zhou
Shufeng and Ms. Xu Shaoying on our Group ’s financial independence from its connected persons is not
significant. For details of the above, please refer to the section headed ‘‘Connected transactions ’’in this
prospectus.
(b) Guarantee provided by our Group to Baiheng
In FY2020, our Group has provided corporate gua rantees amounted to RMB50.0 million in favour
of a bank in the PRC for banking facilities obtained by Baiheng. Such guarantees had been released in
December 2021. For details, please refer to the paragraph headed ‘‘Indebtedness — Contingent
liabilities ’’in this section.
FINANCIAL INFORMATION
– 402 –


--- page 413 ---
(c) Balances due to Dahedong
As at 31 December 2020, 2021 and 2022 and 30 June 2023, we had balances due to Dahedong
amounted to approximately RMB36.3 million, RMB 36.3 million, nil and nil, respectively. The balances
due to Dahedong were non-trade, unsecured, interest-free and repayable on demand, which were waived
by Dahedong in October 2022.
(d) Balances due from Dahedong
As at 31 December 2020, 2021 and 2022 and 30 June 2023, we had balances due from Dahedong
amounted to nil, nil, RMB7.2 million and RMB7.2 million, respectively. The balances due from
Dahedong was relating to unpaid capital contribution by Dahedong to Yantai Zhongjia, which amounts
were non-trade, unsecured, interest-free and repayable on demand. Such balances were fully settled on
13 November 2023.
(e) Balances due to Majestic Gold
As at 31 December 2020, 2021 and 2022 and 30 June 2023, our amounts due to Majestic Gold
related to non-trade activities amounted to approximately RMB23.3 million, RMB23.9 million, RMB0.4
million and RMB0.5 million, respectivel y, mainly represent shareholder ’s advances provided by Majestic
Gold to our Group. The balances due to Majestic Go ld were unsecured, interest-free and repayable on
demand. On 5 June 2020, our Group has entered into a deed of waiver with Majestic Gold to waive the
debt amounted to CAD62.1 million (equivalent to ap proximately RMB322.8 million) due to Majestic
Gold. Majestic Gold had further waived the deb t amounted to approximately RMB10.8 million in
October 2022 and the remaining balance of approximately RMB13.5 million as at 31 December 2022
was fully settled by January 2023. We have further se ttled the outstanding balance due to Majestic Gold
as at 30 June 2023 of approximately RMB0.5 million i n July 2023. For further details, please refer to
the section headed ‘‘Relationship with our Controlling Shareholder — Financial independence ’’in this
prospectus.
(f) Purchase of bank acceptance no tes from Dahedong and Qingjia
In 2020 and up to May 2020, our Group purchased certain bank acceptance bills from Dahedong
and Qingjia by cash for the equivalent value as described under the section headed ‘‘Business —
Compliance with laws and regulations — Non-compliant bill arrangements’’ . In FY2020, the purchases
of such bank acceptance bills from Dahedong and Qingjia were approximately RMB10.0 million and
RMB0.2 million, respectively. For details, please refer to the ‘‘Business — Compliance with laws and
regulations — Non-compliant bill arrangements’’ in this prospectus.
(g) Payment made by Majestic Gold on behalf of our Company
During the Track Record Period, payments made by Majestic Gold on behalf of our Company
amounted to approximately RMB881,000, RMB874,000, RMB887,000 and RMB456,000, respectively.
Such payment represents mainly (i) Listing expenses and other professional fees paid by Majestic Gold
on behalf of our Company mainly in relation to the Li sting amounted to approximately RMB5.7 million,
nil, nil and nil during the Track Record Period resp ectively; and (ii) management fees paid to Majestic
FINANCIAL INFORMATION
– 403 –


--- page 414 ---
Gold for services rendered by Dr. Shao and Mr. Mackie, our Executive Directors amounted to
approximately RMB0.9 million, RMB0.9 million, RMB0.9 million and RMB0.5 million, during the
Track Record Period respectively.
RETAINED PROFITS
Our retained profits amounted to approxima tely RMB19.8 million, RMB88.9 million, RMB92.4
million, RMB122.4 million and RMB153.4 milli on, as at 1 January 2020, 31 December 2020, 31
December 2021, 31 December 2022 and 30 June 2023, respectively. The significant improvement in our
financial performance during the Track Record Per iod was mainly attributable to (1) the increase in
production scale of our Songjiagou Open-Pit Mine fo llowing the renewal of respective mining licence
which reduced the unit production cost of our product; (2) the significant increase in gold prices during
the Track Record Period, leading to the increase in our Group ’s profit margin; and (3) the absence of
significant non-operating costs in relation to the se ttlement with villagers sin ce our operation has been
on track.
CASH OPERATING COSTS
Cash operating costs for our mines primarily consist of mining operation costs and processing
costs. A majority of these costs relate to the costs of workforce employment, consumables and fuel,
electricity, water and other services. During the Tr ack Record Period, our cash operating costs per gram
of gold produced was approximately RMB144.64, RMB183.31, RMB165.00 and RMB194.55,
respectively.
The tables below set forth a summary of historical and forecast of the cash operating costs per
gram of gold produced of our Songjiagou Open-Pit Mine and Songjiagou Underground Mine,
respectively, for the years indicated, based on the SRK Report.
Songjiagou Open-Pit Mine
Historical Forecast
Cost item Unit 2020 2021 2022 1H2023 2H2023 2024 2025 2026 2027
Workforce employment RMB/gram 22.47 26.89 28.63 35.44 34.53 37.53 18.97 8.88 8.60
Consumables RMB/gram 45.16 40.02 38. 85 35.16 53.64 58.07 34.80 37.14 35.95
Fuel, electricity, water and other
services (Note) RMB/gram 49.13 72.11 59.45 82.00 45.21 48.75 30.02 13.94 13.58
On and off-site administration RMB/gram 6.88 11.27 10.71 9.48 1.63 1.78 0.89 0.42 0.41
Environmental protection and
monitoring RMB/gram 0.04 0.00 0.00 0.10 0.01 0.02 0.01 ——
Transportation of workforce RMB/gram 0.7 2 0.82 0.30 0.61 0.76 0.83 0.42 0.20 0.19
Product marketing and support RMB/gram —————————
Non-income taxes, royalties and
other government charges RMB/gram 17.88 20. 24 19.87 21.93 20.25 20.34 17.31 15.41 15.03
Contingency allowances RMB/gram 8.75 9.02 4.54 7.04 5.89 6.44 3.13 1.51 1.47
Total RMB/gram 151.05 180.36 162.36 191.66 161.92 174.03 105.65 77.50 75.21
Note: Include smelting and refining costs.
FINANCIAL INFORMATION
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--- page 415 ---
Songjiagou Underground Mine
Historical Forecast
Cost item Unit 2020 2021 2022 1H2023 2H2023 2024 2025 2026 2027
Workforce employment RMB/gram 6.70 6.81 54.92 70.89 51.11 52.23 52.16 55.47 78.57
Consumables RMB/gram 74.69 53.84 49. 60 58.79 60.28 60.66 60.58 64.42 91.25
Fuel, electricity, water and other
services (Note) RMB/gram 17.78 155.21 56.12 54.29 47.94 48.25 48.19 51.07 71.22
On and off-site administration RMB/gram 2 .53 3.85 3.39 2.50 0.52 0.53 0.53 0.56 0.79
Environmental protection and
monitoring RMB/gram 0.02 0.00 0.00 0.00 0.00 0.00 0.00 0.01 0.01
Transportation of workforce RMB/gram 0.2 7 0.28 0.10 0.16 0.24 0.25 0.25 0.26 0.37
Product marketing and support RMB/gram —————————
Non-income taxes, royalties and
other government charges RMB/gram 1.05 1 .49 1.22 1.16 18.17 18.00 16.46 15.71 15.81
Contingency allowances RMB/gram 2.21 57.18 17.34 23.15 2.63 2.69 2.69 2.86 4.05
Total RMB/gram 105.25 278.67 182.67 210.92 180.88 182.61 180.85 190.37 262.08
Note: Include smelting subcontracting costs.
As a result of the Temporary Operation Suspension, the cash operating costs per gram of gold
produced of our mines for FY2021 were distorted and hence, were not comparable to those for FY2020,
FY2022 and 6M2023.
In FY2020, the cash operating costs per gram of gold produced of our Songjiagou Underground
Mine were generally lower than our Songjiagou Open-Pit Mine during the Track Record Period (except
for FY2021), since our Songjiagou Underground Mine has a higher gold grade which reduces the
operating costs shared by each unit of gold produced. Such situation was reversed in FY2022 and
6M2023, mainly due to the increase in mining cost of our Songjiagou Underground Mine, primarily as a
result of (i) the increase in compliance cost of stringent safety requirements imposed by the government
following the mine accident happened in Shandong Province in 2021; and (ii) the increase in blasting
activities in response to the progress of mini ng work in our Songjiagou Underground Mine.
Further, the cash operating costs per gram of gold produced of our mines decrease when the
volume of gold produced increases, or vice versa, main ly attributable to the effect of economies of scale.
From FY2024 to FY2027, the cash operating costs per gram of gold produced of our Songjiagou Open-
Pit Mine are expected to decrease significantly, mainly attributable to the expected increase in (i) gold
production volume which amplifies the effect of economies of scale; and (ii) gold grade pursuant to the
model of calculating the life of mine of our Songjiago u Open-Pit Mine. However, since our Songjiagou
Underground Mine has reached its maximum production capacity in FY2022, such effect of economies
of scale or a significant reduction in cash operating costs is not expected. On the contrary, an increasing
trend is expected for the cash operating costs per gram of gold produced of our Songjiagou Underground
Mine, mainly attributable to the expected decrease in gold grade from 1.66 g/t in FY2024 to 1.10 g/t in
FY2027.
FINANCIAL INFORMATION
– 405 –


--- page 416 ---
Please refer to section headed ‘‘SRK Report — 19. Capital investment and operating costs ’’in
Appendix III to this prospectus for details of the cash operating costs and the relevant assumptions.
KEY FINANCIAL RATIOS
The table below sets forth certain of our key financial ratios as of and for the periods indicated.
FY2020 FY2021 FY2022 6M2023
Gross profit margin (%) (1) 54.0 56.5 52.2 47.0
Net profit margin (%) (2) 31.7 23.7 28.9 26.8
Return on equity (%) (3) 21.0 11.1 17.9 7.2
Return on assets (%) (4) 14.1 7.6 13.7 5.5
Interest coverage (times) (5) 42.7 34.0 198.3 111.9
As at 31 December
As at
30 June
2020 2021 2022 2023
Current ratio (times) (6) 1.1 1.2 2.3 2.3
Quick ratio (times) (7) 0.9 1.0 2.0 2.1
Gearing ratio (%) (8) 5.5 5.7 4.4 4.1
Notes:
(1) Gross profit margin is calculated bas ed on the gross profit for the year/perio d divided by the total revenue for the
respective year/period and multiplied by 100%. Please ref er to the paragraphs headed ‘‘Period to period comparison
of results of operations ’’above in this section for more details on our gross profit margins.
(2) Net profit margin is calculated based on the profit for the year/period divided by the tot al revenue for the respective
year/period and multiplied by 100%. Please refer to the paragraphs headed ‘‘Period to period comparison of results of
operations ’’above in this section for more de tails on our net profit margins.
(3) Return on equity is calculated based on the profit for the year divided by the total equity at the end of the year, then
multiplied by 100%. For 6M2023, the calculation of retur n on equity is calculated with reference to our Group ’sh a l f -
year profit, which cannot be directly compared to the return on equity calculated with reference to our Group’ sf u l l -
year profit in previous years.
(4) Return on assets is calculated based on the profit for the year divided by the total assets at the end of the year, then
multiplied by 100%. For 6M2023, the calculation of return on assets is calculated with reference to our Group’ sh a l f -
year profit, which cannot be directly compared to the return on assets calculated with reference to our Group ’sf u l l -
year profit in previous years.
(5) Interest coverage is calculated based on the profit before interest on borrowings and tax for the year/period divided
by the interest expenses for the respective year/period.
(6) Current ratio is calculated based on the current assets at the end of the year d ivided by current lia bilities at the end of
the year/period.
(7) Quick ratio is calculated based on the aggregate of cash a nd cash equivalents and deposits and other receivables at
the end of the year divided by curren t liabilities at the end of the year.
FINANCIAL INFORMATION
– 406 –


--- page 417 ---
(8) Gearing ratio is calculated based on the total debts divided by total equity and multiplied by 100% as at the end of
respective year/period. Total debts refer to all interest-bearing bank borrowings of our Group as at 31 December
2020, 2021 and 2022 and 30 June 2023.
Return on equity
Our return on equity decreased from approximately 21.0% in FY2020 to approximately 11.1% in
FY2021 mainly due to the decrease in profit for the year of approximately 48.7% from approximately
RMB114.4 million in FY2020 to approximately RMB58.7 million in FY2021.
Our return on equity increased to approximately 17.9% in FY2022 mainly due to substantial
increase in our net profit for FY2022 of approximately 106.1% from approxim ately RMB58.7 million in
FY2021 to approximately RMB121.0 million in FY2022 as our operations in FY2021 was affected by
the Temporary Operation Suspension.
Return on assets
Our return on assets decreased from approximately 14.1% in FY2020 to approximately 7.6% in
FY2021 mainly due to substantial decrease in our net profit for FY2021 of approximately 48.7% from
approximately RMB114.4 million in FY2020 to approximately RMB58.7 million in FY2021, partially
offset by the decrease in total assets in FY2021. Such decrease was mainly due to the decreases in
inventories and cash and cash equivalents. The decrease in cash and cash equivalents was mainly due to
increase in cash used in investing and financing activities.
Our return on asset increased to approximately 13.7% in FY2022 mainly due to substantial
increase in our net profit for FY2022 of approximately 106.1% from approxim ately RMB58.7 million in
FY2021 to approximately RMB121.0 million in FY2022, partially offset by the increase in total assets
in FY2022.
Interest coverage
Our interest coverage decreased from approximately 42.7 times in FY2020 to approximately 34.0
times for FY2021 mainly due to the decrease in profit before tax and interests for the year. Our interest
coverage increased to approximately 198.3 times for FY2022 mainly due to the increase in profit before
tax and interests and decrease in interest expens es for the year. Our interest coverage decreased to
approximately 111.9 times for 6M2023 mainly due to the decrease in profit before tax and interests for
the period.
Current ratio and quick ratio
Our current ratio increased from approximately 1.1 times as at 31 December 2020 to approximately
1.2 times as at 31 December 2021 mainly due to the de creases in decrease in other liabilities mainly
attributable to decrease in other payables for mining rights. Our current ratio further increased to
approximately 2.3 times as at 31 December 2022 and approximately 2.3 times as at 30 June 2023 mainly
due to the increase in cash and cash equivalent generated from operations. The fluctuation of our quick
ratio was similar to our current ratio.
FINANCIAL INFORMATION
– 407 –


--- page 418 ---
Gearing ratio
Our gearing ratio increased from approximately 5.5% as at 31 December 2020 to approximately
5.7% as at 31 December 2021 because of the decrease in total equity for the period. Our gearing ratio
decreased from approximately 5.7% as at 31 December 2021 to approximately 4.4% as at 31 December
2022 as a result of the increase in total equity for the period. Our gearing ratio remained relatively
stable at approximately 4.1% as at 30 June 2023.
OFF-BALANCE SHEET ARRANGEMENTS
Saved as disclosed in the paragraphs headed ‘‘Indebtedness — Contingent liabilities ’’ and
‘‘Commitments ’’ in this section of the prospectus, we have not entered into any off-balance sheet
arrangements.
QUALITATIVE AND QUANTITATIVE DISCLOSURE ABOUT MARKET RISK
We are exposed to a variety of financial risks such as interest rates risk, credit risk and liquidity
risk. Details of such risks which we are exposed are set out in Note 38 to the Accountants ’ Report set
out in Appendix I to this prospectus.
DISCLOSURE PURSUANT TO RULES 13.13 TO 13.19 OF THE LISTING RULES
Our Directors confirmed that, as at the Latest Pr acticable Date, there were no circumstances that
would give rise to a disclosure requirement under Rules 13.13 to 13.19 of the Listing Rules.
DISTRIBUTABLE RESERVES
Our Company was incorporated in Cayman Islands and is an investment holding company. As at
30 June 2023, we had distributable reserves of approximately RMB4.5 million.
DIVIDEND
All dividends were declared to the then shareholders of our Company and of Yantai Zhongjia pro
rata in accordance with their shareholdings. In FY2020, Yantai Zhongjia declared dividends amounted to
RMB20.0 million to its then shareholders, of whi ch RMB5.0 million were declared and paid to
Dahedong and RMB15.0 million were declared to and settled with the capital injection from Majestic
Yantai BVI.
In FY2021, our Company declared dividends o f approximately RMB33.9 million to its then
shareholders of which were fully settled as at the La test Practicable Date. In the same year, Yantai
Zhongjia declared dividends amounted to RMB160.0 million to its then shareholders, of which
RMB40.0 million were declared and paid to Dahedong and RMB120.0 m illion were declared to Majestic
Yantai BVI. The dividend of RMB120.0 million declar ed to Majestic Yantai BVI has been settled in full
in September 2022. In FY2022, our Company declared and paid dividends of approximately RMB38.9
million to our Shareholders. In N ovember 2023, Yantai Z hongjia declared dividends amounted to
RMB36.0 million to its then shareholders, of whi ch RMB9.0 million were declared and paid to
FINANCIAL INFORMATION
– 408 –


--- page 419 ---
Dahedong and RMB27.0 million were declared and pa id to Majestic Yantai BVI, which were fully
settled. Majestic Yantai BVI then declared and paid dividend amounted to HK$26.0 million to our
Company, which was fully settled in November 2023 and our Company declared and paid dividends of
approximately HK$26.0 million to our shareholders, which were fully settled. As at the Latest
Practicable Date, our Company did not have any dividend payables.
Our Company does not have a dividend policy or any pre-determined dividend distribution ratio.
The declaration of dividends is subject to the disc retion of our Board. Our Directors may recommend a
payment of dividends in the future after taking into account our operations and earnings, capital
requirements and surplus, general financial condition, contractual restrictions, capital expenditure and
future development requirements, shareholders ’ interests and other factors which they may deem
relevant at such time. Any declaration and payment o f the dividends will be subject to the Articles of
Association and the laws of the Cayman Islands. Any future declarations of dividends may or may not
reflect our historical declarations of dividends and will be at the absolute discretion of our Directors.
LISTING EXPENSES
Assuming an Offer Price of HK$0.65 per Offer Share (being the mid-point of the indicative Offer
Price range) and that the Over-allotment Option is not exercised, the total estimated Listing expenses in
relation to the Global Offering (including underw riting commission), which are payable by us are
estimated to be approximately HK$60.0 million (equivalent to approximately RMB53.6 million),
representing approximately 18.5% of the gross proceeds from the Global Offering. These Listing
expenses mainly comprise (i) underwriting rel ated expenses payable to the Underwriters of
approximately HK$11.4 million; an d (ii) non-underwriting-related expenses, comprising (a) fees and
expenses of legal advisers and acc ountants of approximately HK$24.1 million; and (b) other fees and
expenses of approximately HK$24.5 million. Listing e xpenses incurred prior to the Track Record Period
were approximately HK$5.1 million (equivalent to approximately RMB4.5 million). Listing expenses
charged to profit or loss for FY2020, FY2021, FY2022 and 6M2023 were approximately HK$5.0
million, HK$4.6 million, HK$9.4 million and HK$4.7 million, (equivalent to approximately RMB4.4
million, RMB3.8 million, RMB8.1 million and RMB4.2 m illion), respectively. We expect to charge the
remaining estimated listing expenses of approximately HK$11.4 million (equivalent to approximately
RMB10.8 million) to profit or loss in the period subsequent to the Track Record Period and upon
Listing and to deduct the listing expenses directly attributable to the issuance of shares of approximately
HK$19.8 million (equivalent to approxima tely RMB17.7 million) from equity upon Listing.
Our Directors would like to emphasise that th e amount of the listing expenses stated above is a
current estimate for reference only and the final amou nt to be recognised in the consolidated financial
statements of our Group for the year ending 31 December 2023 is subject to adjustment based on audit
and possible changes in variables and assumptions.
NO MATERIAL ADVERSE CHANGE
After performing sufficient due diligence work wh ich our Directors consider appropriate and after
due and careful consideration, our Directors confirmed that, up to the date of this prospectus, save for
the recent developments as described in ‘‘Summary — Recent development ’’ and the impact of the
FINANCIAL INFORMATION
– 409 –


--- page 420 ---
listing expenses on the financial performance of our Group for the year ending 31 December 2023, there
has been no material adverse change in our financial or trading position, indebtedness, mortgage,
contingent liabilities, guar antees or prospects since 30 June 2 023, being the end date of the periods
reported in the Accountant’ s Report set out in Appendix I, and there is no event since 30 June 2023 that
would materially affect the information shown in the Accountant ’s Report set out in Appendix I.
UNAUDITED PRO FORMA STATEMENT OF ADJUSTED CONSOLIDATED NET TANGIBLE
ASSETS
The following unaudited pro forma statement of adjusted consolidated net tangible assets of our
Group has been prepared in accordance with Rule 4.29 of the Listing Rules and with reference to
Accounting Guideline 7 ‘‘Preparation of Pro Forma Financial Information for Inclusion in Investment
Circulars ’’issued by the HKICPA for illustration purpose only, and is set out below to illustrate the
effect of the Global Offering on the consolidated net tangible assets of our Group attributable to owners
of our Company as at 30 June 2023 as if it had taken place on that date.
The unaudited pro forma statement of adjusted consolidated net tangible assets has been prepared
for illustrative purposes only and because of its hypot hetical nature, it may not give a true picture of the
consolidated net tangible assets of our Group had the Global Offering been completed as of 30 June
2023 or any future date. It is prepared based on our consolidated net tangible assets as of 30 June 2023
as set out in the section headed ‘‘Accountants ’ Report ’’in Appendix I to this prospectus, and adjusted as
described below:
Audited
consolidated net
tangible assets
attributable to
equity owners of
the parent as at
30 June 2023
Estimated net
proceeds from
the Global
Offering
Unaudited pro
forma adjusted
consolidated net
tangible assets
attributable to
owners of the
Company
Unaudited pro forma
adjusted consolidated net
tangible assets per Share
RMB ’000
(note 1)
RMB ’000
(note 2)
RMB ’000 RMB HK$ equivalent
(note 3)
B a s e do na nO f f e rP r i c eo f
HK$0.495 per Share
after a Downward
Offer Price Adjustment
of 10% 471,215 200,755 671,970 0.34 0.37
B a s e do na nO f f e rP r i c eo f
HK$0.55 per Share 471,215 226,011 697,226 0.35 0.38
B a s e do na nO f f e rP r i c eo f
HK$0.75 per Share 471,215 317,852 789,067 0.39 0.43
FINANCIAL INFORMATION
– 410 –


--- page 421 ---
Notes:
1. The consolidated net tangible assets attributable to owners of the parent as et 30 June 2023 is extracted from the
Accountants ’ Report set out in Appendix I to this Prospectus, which is based on the consolidated net assets of our
Group attributable to owners of the Company as at 30 June 2023 of approximately RMB592 million with an
adjustment for the intangible assets of RMB121 million.
2. The estimated net proceeds from the Global Offering are based on the Offer Price of HK$0.495, HK$0.55 per Share
or HK$0.75 per Share, being the price after making a Downward Offer Price Adjustment of 10%, the low-end price
or high-end price after deduc tion of the estimated underw riting fees and other relat ed expenses payable by the
Company and takes no account of any Share which may be issued upon the exercise of the Over-allotment Option.
The estimated net proceeds from the Global Offering are converted from Hong Kong dollars into RMB at an
exchange rate of HK$1.00 to RMB0.9184.
3. The unaudited pro forma adjusted consolidated net tangible assets per Share has been arrived at after having made
the adjustments referred to in the pre ceding paragraphs and on the basis of a total of 2,000,000,000 shares, were in
issue assuming that Global Offering has been completed as at 30 June 2023, excluding Shares which may be issued
upon the exercise of the Over-allotment Options and options which may be granted under the Share Option Scheme.
FINANCIAL INFORMATION
– 411 –


--- page 422 ---
FUTURE PLANS
See section headed ‘‘Business — Business strategies ’’in this prospectus for a detailed description
of our business strategies and future plans.
REASONS FOR THE LISTING
Our business is capital intensive and will require substantial expenditure for, among other things,
the construction of our mining infrastructure, purchase of machinery and equipment and other
operational capital expenditure. Our expansion plan is also capital intensive as we have planned to
consolidate quality gold mine resources through me rgers and acquisitions. In order to implement our
strategic goal to maintain our position in the gold mining industry in the Shandong Province and meet
our capital needs, our Directors consider that the separate listing of our Group on the Stock Exchange
will provide us with sufficient funds because immedi ate implementation of these business strategies
would place undue financial burden on our Group in terms of cashflow if we are to use all our cash on
hand for business growth purposes. Please also refer to the section headed ‘‘History, reorganisation and
corporate structure — Reasons for Listing ’’in this prospectus for the reasons of spin-off and separate
listing of our Group from that of our Controlling Shareholder. Our Directors consider that the Listing
will benefit our Group as follows:
(i) Funding our expansion plans
Based on our current estimate, our expansion plans to, among others, further construction of
mining infrastructure in accordance with our mine optimisation plan, upgrade our gold reserves to
increase LoM through additional e xploration activities and expand our business through selective
acquisitions will involve an investment of approximately RMB395.8 million. Such expansion plans as
detailed in the section headed ‘‘Business — Business strategies ’’ in this prospectus and ‘‘Use of
proceeds ’’in this section will ramp up our operations and scale up our gold concentrate production
output in a rapid and effective manner to boost our revenue growth, as well as to upgrade our gold
reserves to support our sustainable growth in the longer run. Although we were able to successfully
expand our business organically using internally generated funds and bank borrowings during the Track
Record Period and had been able to repay bank loans as they fell due in the past, going forward, we
require working capital to maintain our current capacity, fund our acquisitions and construction costs of
new mining infrastructure and exploration activities, as well as extra funding to finance our business
strategies for expansion. We believe that it is crucia l to maintain a robust liquidity position at all times,
particularly in the form of steady and strong level of cash balance, to ensure smooth business operations
and be able to devote sufficient resources in the implementation of our business plans upon Listing.
(ii) Establish an efficient and sustainable fundraising platform
The Listing can provide our Group with an efficient and sustainable fund-raising platform both at
the time of Listing and post-Listing to gain direct access to the capital market for equity such as the
issuance of new Shares by way of a rights issue and an open offer in the secondary market post-Listing
FUTURE PLANS AND USE OF PROCEEDS
– 412 –


--- page 423 ---
and/or debt financing. Our Directors consider that the Global Offering will broaden our Group ’s capital
base and expose us to a wide range of private and ins titutional investors especially those from the Asia
Pacific region and strengthening our financial position.
(iii) Strengthening our corporate pro file, credibility and competitiveness
The Listing on the Stock Exchange in Hong Kong is an efficient and complementary means of
advertising our Group which would enhance our profile and recognition in Hong Kong and the PRC and
assist us in reinforcing our corporate image, which would help implement our business strategies,
especially in terms of consolidate quality gold mine resources through mergers and acquisitions. Our
listing status in Hong Kong would assist us in reinfo rcing our image and place confidence in enhancing
the confidence of stakeholders in the industry including our investors, business partners and/or sellers of
various acquisition targets in the PRC, who are more willing to establish business relationship with
listed companies given their reputation, listing status, public financial disclosures and enhanced internal
control system and corporate governance. Our Directors are of the view that the Listing will increase our
bargaining power in negotiating tra nsaction terms with suppliers and/or sellers of various acquisition
targets. For instance, our Group may be able to negotiate more favourable terms from our suppliers and/
or sellers of acquisition targets, such as longer settleme nt period and higher credit limit, after the Listing
due to the enhanced transparency on our Group ’s financial and operational information as a listed
company of the Stock Exchange. We believe that the public listing status will help us in our pursuit for
attracting business opportunities by way of collaboration or strategic partnership.
(iv) Meaningful incentive scheme to retain talents
In addition, a public listing status may also enabl e us to attract and retain talents as they are more
willing to establish employment relationships with a listed company. We have, as part of the Listing,
adopted the Share Option Scheme as our incentives to our employees. As our business requires the
support of experienced engineers and skilled pers onnel who have experience in gold mining industry,
the Listing enables us to adopt a meaningful stock options programme for our employees to drive their
performance and commitment. The Listing will enab le our Company to offer equ ity-based and publicly
tradable shares under the Share Option Scheme to our employees as incentive. As the performance of
the Share price will generally relate to our performance, we believe through the incentive scheme, our
employees will be more motivated to improve our performance to create value for our Shareholders.
In view of the above, although our Group had sufficient financial resources to meet the working
capital requirements during the Track Record Period, our Directors consider that it is strategically and
commercially justifiable to pursue the Listing and the Global Offering, and the net proceeds from the
Global Offering are required and necessary to finance the future growth and expansion of our Group.
FUTURE PLANS AND USE OF PROCEEDS
– 413 –


--- page 424 ---
USE OF PROCEEDS
The aggregate net proceeds from the Global Offe ring, after deducting underwriting fees and other
estimated expenses in connection w ith the Global Offering, assuming that the Over-allotment Option is
not exercised and an Offer Price of HK$0.65 per Offer Share (being the mid-point of the indicative
Offer Price range of HK$0.55 to HK$0.75 per Offer S hare) will be approximately HK$265.0 million.
Our Directors intend to apply the net proceeds from the Global Offering for the following purposes:
Amount of net
proceeds from
the Global
Offering
Amount of net
proceeds from
the Global
Offering
Percentage
of the net
proceeds from
the Global
Offering
HK$ million RMB million %
(a) Further construction of mining
infrastructure in accordance with our
mine optimisation plan 54.0 48.2 20.4
(b) Upgrade gold reserves to increase
LoM through additional exploration
activities at our existing mine area 5.3 4.7 2.0
(c) Expand our business through
selective acquisitions of gold mining
assets 145.6 130.0 55.0
(d) Repayment of existing bank loans
guarantees 33.6 30.0 12.6
(e) Working capital 26.5 23.7 10.0
265.0 236.6 100.0
We set out below the detailed breakdown and description of our intended use of net proceeds of
the Global Offering:
. approximately HK$54.0 million (RMB48.2 million), representing approximately 20.4% of the
net proceeds will be used to fund the constructio n of mining infrastructure in accordance with
our mine optimisation plan, which includes the extension of the southern boundary of the pit
opening of our Songjiagou Open-Pit Mine by about 150 metres increasing the pit opening
area from 0.34 sq.km. to 0.46 sq.km., the construction of the remaining four of the seven
new benches under the new mining surface area fo r our mining activities, the construction of
other mining and ancillary infrastructure including water pool and drainage system, site
office, substation and topsoil storage yard and the acquisition of excavators. For further
information, please refer to the sections headed ‘‘Business — Business strategies — Further
construction of mining infrastructure in accordance with our mine optimisation plan ’’and
‘‘Business — Our mineral assets and reserves — Our two gold mines — Our Songjiagou
FUTURE PLANS AND USE OF PROCEEDS
– 414 –


--- page 425 ---
Open-Pit Mine ’’ in this prospectus. More specifically, we plan to construct and develop
certain mining infrastructure at the new minin g area and to purchase certain machineries as
follows:
Amount of net proceeds
from the Global Offering Timeframe
HK$ million RMB million
(a) Construction and development of mining infrastructure at the
new mining site
— stripping of 667 kt waste rocks and 95 kt ore for
the construction of phase 2 of the fourth bench of
12 metres below the third bench of the new mining
surface area (ie, between the elevation of +81
metres ASL and +93 metres ASL) of open-pit slope
to carry out mining activities 5.1 4.6
1 January 2024
to 30 June 2024
— stripping of 1,062 kt waste rocks and 169 kt ore for
the construction of phase 2 of the fifth bench of 12
metres below the fourth bench of the new mining
surface area (ie, between the elevation of +69
metres ASL and +81 metres ASL) of open-pit slope
to carry out mining activities 8.3 7.4
1 January 2024
to 30 June 2024
— stripping of 1,873 kt waste rocks and 331 kt ore for
the construction of the sixth bench of 12 metres
below the fifth bench of the new mining surface
area (ie, between the elevation of +57 metres ASL
and +69 metres ASL) of open-pit slope to carry out
mining activities 14.8 13.2
1 April 2024
to 31 December 2024
— stripping of 1,411 kt waste rocks and 205 kt ore for
the construction of phase 1 of the seventh bench of
12 metres below the sixth bench of the new mining
surface area (ie, between the elevation of +45
metres ASL and +57 metres ASL) of open-pit slope
to carry out mining activities 10.9 9.7
1 October 2024
to 31 December 2024
— stripping of 705 kt waste rocks and 102 kt ore for
the construction of phase 2 of the seventh bench of
12 metres below the sixth bench of the new mining
surface area (ie, between the elevation of +45
metres ASL and +57 metres ASL) of open-pit slope
to carry out mining activities 5.4 4.8
1 January 2025
to 30 June 2025
(b) Construction of water drainage system to dewater
groundwater
— water storage pool and drainage system equipped
with water sprinkles, substation, cables and water
pumps 0.6 0.5 by 31 December 2023
(c) Construction of a uxiliary facilities
— site office and accommodation, including
construction of fencing, cabling and network
2.2 2.0 by 31 December 2023
by 31 December 2023
— topsoil storage yard for stock piling of topsoil to
prepare for future reclamation 2.2 2.0
49.5 4.2
(d) Purchase of machineries
— three excavators
4.5 4.0
by 31 December 2023
Total 54.0 48.2
FUTURE PLANS AND USE OF PROCEEDS
– 415 –


--- page 426 ---
. approximately HK$5.3 million (RMB4.7 million), representing approximately 2.0% of the net
proceeds will be used to upgrade gold reserves to increase LoM through additional
exploration activities involving additional 26 drillings at various de pths ranging from 0 to
550 metres with the aggregate depth of over 6,5 00 metres in three phases with an intention to
increase our gold mineral reserves and to increase the LoM of our Songjiagou Open-Pit
Mine. Pursuant to a preliminary study conducted by SRK, by modifying the final pit structure
of our Songjiagou Open-Pit Mine in the future, there are potentials for our Songjiagou Open-
Pit Mine to increase its LoM. For further info rmation, please refer to the section headed
‘‘Business — Business strategies — Upgrade our gold reserves to increase LoM through
additional exploration activities at our existing mine area ’’ in this prospectus. More
specifically, we plan to allocate as follows:
Amount of net proceeds
from the Global Offering Timeframe
HK$ million RMB million
(a) phase 1 of additional 10 drillings 1.7 1.5 1 January 2024 to
30 June 2024
(b) phase 2 of additional 16 drillings 2.7 2.4 1 July 2024 to
31 December 2024
(c) professional fees for preparation
of geological report and
assessment
0.9 0.8 1 April 2024 to
31 May 2024
Total 5.3 4.7
As at the Latest Practicable Date, we had not co mmenced any additional exploration works.
. approximately HK$145.6 million ( RMB130.0 million), representing approximately 55.0% of
the net proceeds will be used to expand our business and grow our market share through
selective acquisitions of high-quality gold mining assets in the Shandong Province. We
primarily focus on mines near commencement of commercial operations with high growth
prospect. In deciding whether to invest in or acquire a particular mining asset, we consider
multiple key factors such as strategic value-accr etion location, licensing and compliance
matters and quantum of mineral reserves and the level of synergies created by the investment.
We would consider acquisition targets that fulf ill criteria including, among others, (i) within
Shandong Province; (ii) either open-pit or underground mines with potential gold resources
of at least 10 tonnes and a depth of less than 1,000 metres for better economic benefits; (iii)
has LoM of over five years after commencement of operations (excluding mine construction
period); and (iv) has payback period of less than ten years. For acquisition target that is a
mine near commencement of commercial operations, we expect the acquisition cost for the
mining right to be high as we expect such mining asset would have a valid mining licence of
over two years, valid land-use-right and relate d mining infrastructure (including an ore
processing plant) ready for use.
FUTURE PLANS AND USE OF PROCEEDS
– 416 –


--- page 427 ---
As of the Latest Practicable Date, we had not engaged in any commercial negotiation or
entered into any letter of intent or agreement for potential acquisitions, and had yet to
identify any specific acquisition target. However, being identified by the Yantai People ’s
Government as one of the key target companies for listing, our Group was advised by the
Muping People ’s Government that it had issued the Integration Plan in June 2021 (updated in
December 2021) and Yantai Zhongjia was to be one of the four gold mining companies to
acquire other gold mining resources in the Muping District. According to the Integration
Plan, among all the mining companies in the Muping District, it was the government ’sp l a nt o
allow Yantai Zhongjia to acquire other gold mining assets and as a result, Yantai Zhongjia
will be one of the four consolidated gold mining companies at the end. Further, as stated in
the Integration Plan, there were 21 underground gold mines (mining licences or companies,
including our mines) in the Muping District which are owned by private companies and state-
owned enterprises. Based on the above, our Directors were aware not less than 14
underground gold mines in the Shandong Province that fulfil certain of (ie, not all) the
abovementioned selection criteria available for our selection and such business strategy is in
line with the direction of the local government p olicy. No open-pit gold mine is identified. In
addition, this is supported by Frost & Sullivan ’s market research as they were able to identify
at least 40 gold mines in the Shandong Province, which included the 14 underground gold
m i n e si nt h eM u p i n gD i s t r i c t ,a ss t a t e di nt h e Integration Plan, that fulfil most of the
acquisition selection criteria set by us as desc ribed above, that are mostly underground mines
and have a LoM of more than five years after commencement of operations. In the event that
none of the due diligence results of the acquis ition target selected from such lists meet our
expectation, we will consider other companies in the Shandong Province as well as outside
the Shandong Province, such as Yunan, Sichuan and Gansu, that fulfil certain of the
abovementioned selection criteria, as the altern ative plans. As at the Latest Practicable Date,
based on the understanding we have obtained s o far, we have shortlisted three underground
gold mines within the Muping District, Shandong Province that align with our criteria for
selective acquisition. Our Directors belie ve that the expected timeframe for selective
acquisition is feasible primarily because the owners of the shortlisted three new mines, upon
enquiry, are fully willing to collaborate and pro vide all necessary due d iligence information.
For details, please refer to the section headed ‘‘Business — Expand our business and grow
our market share through selective acquisitions of gold mining assets — Feasibility of our
acquisition plan ’’in this prospectus.
We intend to, through our indirect wholly-own ed subsidiary in Hong Kong, establish a new
sino-foreign joint venture entity in the PRC afte r the Listing, to acquire a controlling stake of
not less than 51% of the equity interest in a mining asset. A combination of the net proceeds
from the Global Offering of RMB130.0 millio n and internal resources of the remaining
amount will be used to fund all of our portion of the total initial commitment of capital
contribution of the joint venture entity in th e aggregate amount of not less than RMB300
million. It is intended that the capital contrib ution will cover, among others, the acquisition
cost for mining licence, the value of the mining asset and additional investment for
construction of additional minin g infrastructure. The capital will be contributed by both
parties in stages over a period of two years after the date when the business licence of the
FUTURE PLANS AND USE OF PROCEEDS
– 417 –


--- page 428 ---
joint venture entity is obtained. If the capital c ontribution amount is not sufficient to cover
the abovementioned costs or if the new mining asset requires further investment for further
development of mining infrastructure or worki ng capital, we expect the joint venture entity to
obtain external financing from banks and/or further capital contribution from its shareholders.
The table below sets forth the capital contrib ution to be made out of the net proceeds from
the Global Offering for the new sino-foreig n joint venture entity to be established for
acquiring the new mining asset.
Amount of net proceeds
from the Global Offering Timeframe
HK$ million RMB million
(a) first capital contribution 72.8 65.0 by 31 March 2024
(b) second capital contribution 36.4 32.5 by 30 June 2024
(c) third capital contribution 36.4 32.5 by 30 September 2024
Total 145.6 130.0
For further information (including the detailed expected timeframe and key milestones),
please see the section headed ‘‘Business — Business strategies — Expand our business and
grow our market share through selective acquisitions of gold mining assets — Feasibility of
our acquisition plan ’’in this prospectus.
. approximately HK$33.6 million (RMB30.0 million), representing approximately 12.6% of the
net proceeds will be used to repay certain borrowings from the PRC banks, which have been
used as our working capital, within 12 months after Listing, to eliminate unnecessary
continuing connected transactions, to repay borrowing with relatively higher interest rates
and to improve our gearing ratio. As at 31 December 2020 and 2021 and 2022 and 30 June
2023, our gearing ratio was approximately 5.5%, 5.7%, 4.4% and 4.1%, respectively.
Our Directors believe that high gearing ratio for our Group could materially and adversely
affect our liquidity. Following the completion of the Global Offering, we expect our gearing
ratio to further improve, providing us with the balance sheet and cash flow strength to pursue
strategic opportunities when they become ava ilable. Going forward, we intend to negotiate
future bank borrowings in the PRC either with our Group ’s assets as securities or a corporate
guarantee to be provided by our Company.
. approximately HK$26.5 million (RMB23.7 million), representing approximately 10.0% of the
net proceeds will be used for general working capital purposes.
If the Offer Price is fixed at the top end of the indicative Offer Price range, being HK$0.75 per
Offer Share, and assuming the Over-allotment Option is not exercised, the net proceeds we receive from
the Global Offering will increase by approximately HK$48.2 million. We intend to apply the additional
net proceeds for the above purposes on a pro-rata basis. If the Offer Price is set at the bottom end of the
FUTURE PLANS AND USE OF PROCEEDS
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indicative Offer Price range, being HK$0.55 per Offe r Share, and assuming the Over-allotment Option is
not exercised, the net proceeds we receive from the Global Offering will decrease by approximately
HK$48.2 million. We intend to reduce the net proc eeds for the above purposes on a pro-rata basis.
If the Over-allotment Option is exercised in full, we estimate that we will receive net proceeds of
approximately HK$312.0 million, assuming an Offer Price of HK$0.65 per Offer Share, being the mid-
point of the indicative Offer Price range stated in this prospectus. If the Offer Price is set at the top end
of the indicative Offer Price range, the additional estimated net proceeds upon full exercise of the Over-
allotment Option will increase by approximately HK$55.5 million. If the Offer Price is set at the bottom
end of the indicative Offer Price range, the additional estimated net proceeds upon full exercise of the
Over-allotment Option will decrea se by approximately HK$55.5 million. In the event the Over-allotment
Option is exercised in full, we intend to apply the additional net proceeds for the above purposes in the
proportions stated above.
In the event that we receive net proceeds from the Global Offering higher or lower than the
estimated amount stated above (including where we make a Downward Offer Price Adjustment to set the
Offer Price at HK$0.495 per Offer Share upon making a full Downward Offer Price Adjustment), we
will increase or decrease the intended use of the net proceeds for the above purposes on a pro rata basis.
If we make a Downward Offer Price Adjustment to set the final Offer Price at HK$0.495 per Offer
Share, the estimated net proceeds we will receive from the Global Offering will be further reduced to
approximately HK$190.2 million. T o the extent our net proceeds are fu rther reduced, we will decrease
the intended use of the net proceeds for the above purpose on a pro rata basis.
To the extent that the net proceeds are not immediately applied to the above purposes and to the
extent permitted by applicable laws and regulations, we will deposit the net proceeds into short term
demand deposits with authorised financial institutions and/or licen sed banks (as defined under the
Securities and Futures Ordinance or the appli cable laws in the PRC for PRC based deposits).
We will issue an announcement in the event that there is any material change in the use of
proceeds from the Global Offering as set out above.
We will bear the underwriting commissions, SFC transaction levy, AFRC transaction levy and
Stock Exchange trading fee payable by us in connection with the issue of the Shares together with any
applicable fees relating to the Global Offering.
FUTURE PLANS AND USE OF PROCEEDS
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SHARE CAPITAL
The following is a description of the share cap ital of our Company in issue and to be issued as
fully paid or credited as fully paid immediately fo llowing the Global Offering and the Capitalisation
Issue (without taking into account any Shares which may be issued under the Over-allotment Option or
any options granted or to be granted pursuant to the exercise of any options which may be granted under
the Share Option Scheme):
Authorised share capital:
HK$
10,000,000,000 Shares 100,000,000
Shares issued and to be issued, fully paid or credited as fully paid:
80,000 Shares in issue as at the date of this prospectus 800
1,499,920,000 Shares to be issued under the Capitalisation Issue 14,999,200
500,000,000 Shares to be issued under the Global Offering 5,000,000
2,000,000,000 Shares in total 20,000,000
Note: If the Over-allotment Option is exercised in full, then 75,000,000 additional Shares will be issued resulting in a total issued
share capital of 2,075,000,000 Shares with an aggregate nominal value of HK$20,750,000.
Assumptions
The above table assumes that the Global Offering and the Capitalisation Issue have become
unconditional but takes no account of any Shares which may be taken up under any exercise of the
Over-allotment Option or the options which may be granted under the Share Option Scheme or of any
Shares which may be allotted and issued or repurchased by our Company pursuant to the general
mandates as described below.
Minimum public float
Pursuant to Rule 8.08(1)(a) of the Listing Rules, at the time of the Listing and at all times
thereafter, our Company must maintain the ‘‘minimum prescribed percentage ’’of 25% of the total issued
share capital of our Company in the hands of the public (as defined in the Listing Rules).
Rankings
The Offer Shares and the Shares that may be issued pursuant to exercise of the Over-allotment
Option will rank pari passu in all respects with all Shares in issue or to be issued as set out in the above
table, and will qualify in full for all dividends and o ther distributions hereafter declared, made or paid
on the Shares after the date of this prospectus oth er than participation in the Capitalisation Issue.
SHARE CAPITAL
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SHARE OPTION SCHEME
Pursuant to the resolutions in writing of our Shareholders passed o n 30 November 2023, our
Company has conditionally adopted the Share Option Scheme. See section headed ‘‘Statutory and
general information — D. Share Option Scheme ’’in Appendix V to this prospectus for the principal
terms.
Our Group did not have any outstanding share options, warrants, convertible instruments, or
similar rights convertible into the Sha res as at the Latest Practicable Date.
GENERAL MANDATE TO ISSUE SHARES
Conditional on the conditions as stated in the section headed ‘‘Structure and conditions of the
Global Offering ’’in this prospectus, our Directors have been granted the Issue Mandate to allot, issue
and deal in a total number of Shares of not more than the aggregate of:
(i) 20% of the total number of Shares in issue immediately following completion of the Global
Offering and the Capitalisation Issue; and
(ii) the total number of the Shares repurchased by our Company (if any) pursuant to the
Repurchase Mandate described more fully below.
The Issue Mandate is in addition t o the powers of our Directors to allot, issue or deal with Shares
under an issue by way of rights, an issue of Shares pursuant to the exercise of subscription rights
attaching to any warrants of our Company or pursu ant to any options granted under the Share Option
Scheme, or an issue of Shares in respect of any scrip dividend or similar arrangement for the allotment
and issue of Shares in lieu of the whole or part of the dividend on Shares.
The Issue Mandate to issue Shares will expire when one of the following expires first:
(i) at the conclusion of our Company ’s next annual general meeting; or
(ii) the expiration of the period within which o ur Company is required by the Articles or any
applicable laws of the Cayman Islands to hold its next annual general meeting; or
(iii) when varied or revoked by an ordinary resol ution of our Shareholders in general meeting.
See section headed ‘‘Statutory and general information — A. Further information about our Group
— 6. Written resolutions of our Share holders passed on 30 November 2023 ’’in Appendix V to this
prospectus for further details of this general mandate.
SHARE CAPITAL
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GENERAL MANDATE TO REPURCHASE SHARES
Conditional on the conditions as stated in the section headed ‘‘Structure and conditions of the
Global Offering ’’ in this prospectus, our Directors have been granted the Repurchase Mandate to
exercise all the powers of our Company to repurchase Shares with an aggregate number of Shares of not
more than 10% of the total number of the Shares in is sue immediately following the completion of the
Global Offering and the Capitalisation Issue.
The Repurchase Mandate only relates to repurchases made on the Stock Exchange or on any other
stock exchange on which the Shares are listed (and which is recognised by the SFC and the Stock
Exchange for this purpose), and which are in accordan ce with the Listing Rules and all applicable laws.
See section headed ‘‘Statutory and general information — A. Further information about our Group — 7.
Repurchase by our Compa ny of our own securities ’’in Appendix V to this prospectus for the summary
of the relevant requirements in the Listing Rules.
The Issue Mandate to repurchase shares will expire when one of the following expires first:
(i) at the conclusion of our Company ’s next annual general meeting; or
(ii) the expiration of the period within which o ur Company is required by the Articles or any
applicable laws of the Cayman Islands to hold its next annual general meeting; or
(iii) when varied or revoked by an ordinary resol ution of our Shareholders in general meeting.
CIRCUMSTANCES UNDER WHICH GENERAL MEETING AND CLASS MEETING ARE
REQUIRED
As a matter of the Companies Act, an exempted company is not required by law to hold any
general meetings or class meetings. The holding of g eneral meeting or class meeting is prescribed for
under the articles of association of a company. Accordingly, our Company will hold general meetings as
prescribed for under the Articles, see section headed ‘‘Summary of the constitution of our Company and
Cayman Islands Company Law — Summary of the constitution of the Company — 2. Articles of
Association ’’in Appendix IV to this prospectus for the summary of the Articles.
SHARE CAPITAL
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THE CORNERSTONE PLACING
We have entered into cornerstone investment agreement with a cornerstone investor
(‘‘Cornerstone Investor ’’), pursuant to which the Cornerstone Investor has agreed to subscribe for
198,000,000 Shares at the Offer Price (the ‘‘Cornerstone Placing ’’), which represents approximately
9.9% of the Shares issued and outstanding immediatel y following the completion of the Capitalisation
Issue and the Global Offering (without taking into account any Shares which may be issued upon the
exercise of the Over-allotment Option and any op tions which may be granted under the Share Option
Scheme).
The Cornerstone Placing forms part of the International Offering. The Offer Shares to be
subscribed for by the Cornerstone Investor will rank pari passu in all respects with the other fully paid
Shares in issue immediately following completion o f the Global Offering and to be listed on the Stock
Exchange, and will be counted towards the public float of our Company. The Cornerstone Investor will
not subscribe for any Offer Shares under the Global Offering other than pursuant to their respective
cornerstone investment agreement. Immediately following the completion of the Global Offering, the
Cornerstone Investor will neither have any Board representation in our Company, nor will the
Cornerstone Investor become a substantial Shareholder (as defined in the Listing Rules).
To the best knowledge of our Directors, (i) the Cornerstone Investor is an Independent Third Party
and is not our connected person (as defined in the Listing Rules); (ii) the subscription of the relevant
Offer Shares by any of the Cornerstone Investor is not financed (directly or indirectly) by our Company,
our Directors, chief executive, our Controlling Shareholder, substantial Shareholders, existing
Shareholders or any of our subsidiaries or any of their respective c lose associates; and (iii) the
Cornerstone Investor is not accustomed to take instructions from our Company, our Directors, chief
executive, our Controlling Shareholder, substantial Shareholders, existing Shareholders or any of our
subsidiaries or any of their respective close associat es in relation to the acquisition, disposal, voting or
other disposition of the Offer Shares registered in its name or otherwise held by it.
As confirmed by the Cornerstone Investor, its subs cription under the Cornerstone Placing would be
financed by its own internal financial resources. The Cornerstone Investor has also confirmed that all
necessary approvals have been obtained with respect to the Cornerstone Placing, none of the
Cornerstone Investor or its shareholders are listed on any stock exchange, no specific approvals from
any stock exchange, its shareholde r and/or other regulatory authoritie s are required for the cornerstone
investment. There are no side agreements or arrangements between our Group and the Cornerstone
Investor or any benefit, direct or indirect, conferred on the Cornerstone Investor by virtue of or in
relation to the Cornerstone Placing, other than a guar anteed allocation of the relevant Offer Shares at the
final Offer Price.
The Offer Shares to be subscribed b y the Cornerstone Investor may be affected by the reallocation
of the Offer Shares between the International Offering and the Hong Kong Public Offering in the event
of over-subscription under the Hong Kong Public Offering as described in the section headed ‘‘Structure
and Conditions of the Global Offering — The Hong Kong Public Offering ’’in this prospectus. Details
of the allocation to the Cornerstone Investor will be disclosed in the announcement of results of
allocations in the Hong Kong Public Offering to be published on or around Thursday, 21 December
CORNERSTONE INVESTOR
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2023. Pursuant to the cornerstone investment agreement with the Cornerstone Investor, the Cornerstone
Investor will make full payment of its investment amount by the last day of the Hong Kong Public
Offering (Hong Kong time), and there is no mechanism for the deferred settlement of the investment
amount or deferred delivery arrangement in respect of the Shares to be subscribed by the Cornerstone
Investor in the cornerstone investment agreement.
THE CORNERSTONE INVESTOR
The Cornerstone Investor, Dongfang Gold Industry (Hong Kong) Limited, has agreed to subscribe
for 198,000,000 Shares at the Offer Price. The fo llowing tables set forth details of the Cornerstone
Placing and approximate percentage of total number of Offer Shares and percentage of total issued share
capital of our Company upon Listing, based on different Offer Price scenarios:
Based on Offer Price of HK$0.75
(being the high-end of the indicative Offer Price range)
Cornerstone Investor Investment Amount
Number of
Offer Shares to be
subscribed for
Approximate
percentage of total
number of Offer
Shares (without taking
into account any
Shares which may be
issued upon the
exercise of the Over-
allotment Option and
any options which may
be granted under the
Share Option Scheme)
Approximate
percentage of total
issued share capital of
our Company
immediately following
the completion of the
Global Offering
(without taking into
account any Shares
which may be issued
upon the exercise of
the Over-allotment
Option and any
options which may be
granted under the
Share Option Scheme)
Dongfang Gold Industry
(Hong Kong) Limited HK$148.5 million 198,000,000 39.6% 9.9%
Total HK$148.5 million 198,000,000 39.6% 9.9%
CORNERSTONE INVESTOR
– 424 –


--- page 435 ---
Based on Offer Price of HK$0.65
(being the mid-point of the indicative Offer Price range)
Cornerstone Investor Investment Amount
Number of
Offer Shares to be
subscribed for
Approximate
percentage of total
number of Offer
Shares (without taking
into account any
Shares which may be
issued upon the
exercise of the Over-
allotment Option and
any options which may
be granted under the
Share Option Scheme)
Approximate
percentage of total
issued share capital of
our Company
immediately following
the completion of the
Global Offering
(without taking into
account any Shares
which may be issued
upon the exercise of
the Over-allotment
Option and any
options which may be
granted under the
Share Option Scheme)
Dongfang Gold Industry
(Hong Kong) Limited HK$128.7 million 198,000,000 39.6% 9.9%
Total HK$128.7 million 198,000,000 39.6% 9.9%
Based on Offer Price of HK$0.55
(being the low-end of the indicative Offer Price range)
Cornerstone Investor Investment Amount
Number of
Offer Shares to be
subscribed for
Approximate
percentage of total
number of Offer
Shares (without taking
into account any
Shares which may be
issued upon the
exercise of the Over-
allotment Option and
any options which may
be granted under the
Share Option Scheme
Approximate
percentage of total
issued share capital of
our Company
immediately following
the completion of the
Global Offering
(without taking into
account any Shares
which may be issued
upon the exercise of
the Over-allotment
Option and any
options which may be
granted under the
Share Option Scheme)
Dongfang Gold Industry
(Hong Kong) Limited HK$108.9 million 198,000,000 39.6% 9.9%
Total HK$108.9 million 198,000,000 39.6% 9.9%
CORNERSTONE INVESTOR
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--- page 436 ---
Dongfang Gold Industry (Hong Kong) Limited is a limited private company incorporated under the
laws of Hong Kong with limited liability on 8 February 2022 and a wholly-owned subsidiary of 山東招
金集團招遠黃金冶煉有限公司 (Shandong Zhaojin Group Zhaoyuan Gold Smelting Co., Ltd.*)
(‘‘Shandong Zhaojin Gold Smelting ’’). As of the Latest Practicable Date, Shandong Zhaojin Gold
Smelting was wholly-owned by 山東招金集團有限公司 (Shandong Zhaojin Group Corporation Limited)
and is indirectly ultimately wholly-owned by PRC g overnment authorities. We became acquainted with
Shandong Zhaojin Gold Smelting during the ordinary course of business as it is the major shareholder of
our principal customer, Shandong Guoda.
During the Track Record Period, save for Shandong Guoda, who is our customer and
subcontractor, we did not enter into any transaction with Shandong Zhaojin Gold Smelting or any of its
subsidiaries.
Our Directors believe that introducing the Corn erstone Investor to the Global Offering can secure
the subscription of a certain amount of the Offer Shares, thus reducing the risk of unsuccessful issuance
under volatile market conditions. In addition, our Dir ectors are of the view that the investment of the
Cornerstone Investor demonstrates to the potential investors that it is confident in our business and
prospects given that the parent companies of Cornerstone Investor are dominant players in both
upstream and downstream gold industry in PRC.
CONDITIONS PRECEDENT
The subscription obligation of the Cornerstone Investor is subject to, among other things, the
following conditions precedent:
(a) the Hong Kong Underwriting Agreement and the International Underwriting Agreement being
entered into and having become effective and unconditional (in accordance with their
respective original terms or as subsequently waived or varied by agreement of the parties
thereto) by no later than the time and date as specified in these underwriting agreements, and
neither of the aforesaid underwriting a greements having been terminated;
(b) the Offer Price having been agreed upon among our Company, the Overall Coordinator and
the Sole Global Coordinator (on behalf of the Underwriters);
(c) the Listing Committee of the Stock Exchange having granted the approval for the listing of,
and permission to deal in, the Shares (including the Shares to be subscribed for by the
Cornerstone Investor) as well as other applicable waivers and approvals and that such
approval, permission or waiver having not been revoked prior to the commencement of
dealings in the Shares on the Stock Exchange;
(d) no laws shall have been enacted or promulgated by any governmental authority which
prohibits the consummation of the transactions contemplated in the Global Offering or under
the cornerstone investment agreement and there shall be no orders or injunctions from a court
of competent jurisdiction in effect precluding or prohibiting consummation of such
transactions; and
CORNERSTONE INVESTOR
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(e) the representations, warran ties, undertakings, confirmations and acknowledgements of the
Cornerstone Investor under the cornerstone investment agreement are accurate and true in all
respects and not misleading and that there is no breach of the cornerstone investment
agreement.
RESTRICTIONS ON DISPOSAL BY THE CORNERSTONE INVESTOR
The Cornerstone Investor has agreed that w ithout the prior written consent of each of our
Company, the Overall Coordinator, the Sole Global Coordinator and the Sole Sponsor, it will not,
whether directly or indirectly, at any time during the period of twelve (12) months from the Listing
Date, dispose of any of the relevant Offer Shares o r any interest in any company or entity holding any
of the relevant Offer Shares includi ng any securities convertible into or exchangeable or exercisable for
or that represent the right to receive any of the foregoing securities, save for certain limited
circumstances, such as transfers to any of its who lly-owned subsidiaries who will be bound by the same
obligations of the Cornerstone Investor.
CORNERSTONE INVESTOR
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--- page 438 ---
HONG KONG UNDERWRITERS
Innovax Securities Limited
CCB International Capital Limited
Zhongtai International Securities Limited
ABCI Securities Company Limited
BOCOM International Securities Limited
SPDB International Capital Limited
Citrus Securities Limited
Quam Securities Limited
Valuable Capital Limited
CMBC Securities Company Limited
First Shanghai Securities Limited
Futu Securities International (Hong Kong) Limited
Tiger Brokers (HK) Global Limited
Livermore Holdings Limited
ZMF Asset Management Limited
China Sunrise Securities (International) Limited
Astrum Capital Management Limited
Yue Xiu Securities Company Limited
Eddid Securities and Futures Limited
Pacific Foundation Securities Limited
SBI China Capital Financial Services Limited
Elstone Securities Limited
UNDERWRITING ARRANGEMENTS AND EXPENSES
Hong Kong Public Offering
Hong Kong Underwriting Agreement
Pursuant to the Hong Kong Underwriting Agree ment, our Company is initially offering for
subscription by the public in Hong Kong of 50,000,000 Hong Kong Offer Shares at the Offer Price
under the Hong Kong Public Offering, on and subj ect to the terms and conditions set forth in this
prospectus. The Hong Kong Underwriters have agre ed, on and subject to the terms and conditions in the
Hong Kong Underwriting Agreement, to procure subsc ribers for, or failing which they shall subscribe
for, the Hong Kong Offer Shares.
The Hong Kong Underwriting Agreement is subject to various conditions, which include, without
limitation:
(a) the Stock Exchange granting listing of, and p ermission to deal in, our Shares in issue and to
be issued as mentioned in this prospectus; and
UNDERWRITING
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(b) the International Underwriting Agreement hav ing been executed, becoming unconditional and
not having been terminated.
Grounds for termination
The respective obligations of the Hong Kong Underwriters to subscribe for, or procure subscribers
for, the Hong Kong Offer Shares under the Hong Kong Underwriting Agreement are subject to
termination. The Overall Coordinator (for itself and on behalf of the Hong Kong Underwriters) may in
its absolute discretion terminate the Hong Kong Underwriting Agreement with immediate effect by
written notice to our Company at any time at or before 8:00 a.m. (Hong Kong time) on the Listing Date
if:
(i) there shall develop, occur, exist or come into effect:
(a) any change or prospective change (whether or not permanent) which will have a
material adverse effect in the business or in the financial or trading position of our
Group; or
(b) any material adverse change or development involving a prospective material adverse
change or development, or any event or seri es of event resulting or representing or
likely to result in any deterioration or development involving a prospective deterioration
(whether or not permanent) in local, nationa l, regional or international financial,
political, military, industrial, economic, legal framework, regulator y, fiscal, currency,
credit or market conditions (including, without limitation, conditions in stock and bond
markets, money and foreign exchange markets and inter-bank markets) in or affecting
any of Canada, the Cayman Islands, the BVI, Hong Kong, the PRC or any other
jurisdictions where any member of our Gro up is incorporated or operates or derives
income (collectively, the ‘‘Relevant Jurisdictions ’’); or
(c) any deterioration of any pre-existing local, n ational, regional or international financial,
economic, political, military, industrial, fiscal , regulatory, currency, credit or market
conditions in or affecting any of the Relevant Jurisdictions; or
(d) any new laws or any material adverse change or development involving a prospective
material adverse change in existing laws or any change or development involving a
prospective change in the interpretation or application thereof by any court or
governmental authority in or affecting any of the Relevant Jurisdictions; or
(e) a material adverse change or development or event involving a prospective material
adverse change in taxation or exchange control (or in the implementation of any
exchange control) or foreign investment regulations in or affecting any of the Relevant
Jurisdictions adversely affecting an investment in shares; or
UNDERWRITING
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--- page 440 ---
(f) any local, national, regional or international outbreak or escalation of hostilities
(whether or not war is or has been declared) or other state of emergency or crisis in any
of the Relevant Jurisdictions; or
(g) any event, act or omission which gives rise or is likely to give rise to any material
liability of any of our Company, Controlling S hareholder and Executive Directors under
the Hong Kong Underwriting Agreement pursu ant to the indemnities contained therein;
or
(h) the imposition of any moratorium, suspe nsion or material restriction on dealings in
shares or securities generally on the Sto ck Exchange due to exceptional financial
circumstances or otherwise; or
(i) the imposition of economic or other sanctions , in whatever form, directly or indirectly,
in or affecting any of the Relevant Jurisdic tions which in the reasonable opinion of the
Overall Coordinator (for itself and on behalf of the Hong Kong Underwriters) would or
might have a material adverse effect on any member of our Group or its present or
prospective shareholders in their capacity as such; or
(j) any event, or series of events, in the na ture of force majeure (including without
limitation, any acts of God, acts of government, declaration of a national or
international emergency or war, acts or threat of war, outbreak or escalation of
hostilities (whether or not war is declared), calamity, crisis, economic sanction, riot,
public disorder, civil commotion, fire, flooding, explosion, epidemic (including but not
limited to the severe acute respiratory syndrome, avian flu, COVID-19, H1N1 and
H5N1 and such related/mutated forms and the escalation, mutation or aggravation of
such diseases), pandemic, outbreak of disease, acts of terrorism, strike or lockout) in or
affecting any of the Relevant Jurisdictions which in the reasonable opinion of the
Overall Coordinator (for itself and on behalf of the Hong Kong Underwriters) would or
might have a material adverse effect on any member of our Group or its present or
prospective shareholders in their capacity as such; or
(k) any material adverse change or development involving a prospective material adverse
change, or a materialisation of any of the risks set out in the section headed ‘‘Risk
factors’’ in this prospectus which in the reasonab le opinion of the Overall Coordinator
(for itself and on behalf of the Hong Kong Underwriters) would or might have a
material adverse effect on any member of our Group or its present or prospective
shareholders in their capacity as such; or
(l) any change in the system under which the value of the Hong Kong dollar is linked to
that of the U.S. dollar or a material deva luation of Hong Kong dollar or Renminbi
against any foreign currency; or
UNDERWRITING
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--- page 441 ---
(m) any demand by any creditor for repayment or payment of any indebtedness of material
importance from any member of our Group or in respect of which any member of our
Group is liable prior to its stated maturity; or
(n) save as disclosed in this prospectus, a contravention by any member of our Group of
the Listing Rules or applicable laws which in the reasonable opinion of the Overall
Coordinator (for itself and on behalf of the Hong Kong Underwriters) would or might
have a material adverse effect on any member of the Group or its present or prospective
shareholders in their capacity as such; or
(o) a prohibition on our Company for whatever reason from allotting the Shares pursuant to
the terms of the Global Offering; or
(p) non-compliance of this prospectus, the CSRC Filings (as defined in the Hong Kong
Underwriting Agreement) or any aspect of th e Global Offering with the Listing Rules or
any other applicable laws; or
(q) an order or a petition is presented for the winding-up or liquidation of any member of
our Group or any member of our Group mak ing any composition or arrangement with
its creditors or entering into a scheme of arra ngement or any resolution being passed for
the winding-up of any member of our Group or a provisional liquidator, receiver or
manager being appointed over all or part of the assets or undertaking of any member of
our Group or anything analogous thereto in respect of any member of our Group; or
(r) any loss or damage sustained by any member of our Group which in the reasonable
opinion of the Overall Coordinator (for itself and on behalf of the Hong Kong
Underwriters) would or might have a material adverse effect on any member of our
Group or its present or prospective shareholders in their capacity as such; or
(s) save as disclosed in this prospectus, any litigation or claim of material importance of
any third party being threatened or instigated against any member of our Group; or
(t) an executive Director being charged with an indictable offence or prohibited by the
operation of law or is otherwise disqualif ied from taking part in the management of a
company; or
(u) the chairman of our Company vacating his office; or
(v) the commencement by any governmental, regulatory or judicial body or organisation of
any action against an executive Director or an announcement by any governmental,
regulatory or judicial body or organisation that it intends to take any such action; or
(w) any matter or event resulting in a breach of any of the warranties, representations or
undertakings contained in the Hong Kong Underwriting Agreemen t or there has been a
material breach of any other provisions thereof; or
UNDERWRITING
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--- page 442 ---
(x) the issue or requirement to issue by our Company of a supplement or amendment to this
prospectus (or any other documents used in connection with the contemplated
subscription and sale of the Offer Shares) pursuant to the Companies Ordinance or the
Listing Rules or the CSRC Filings (as defined in the Hong Kong Underwriting
Agreement) or any requirement or request of the Stock Exchange and/or the SFC and/or
the CSRC, which in the sole and absolute opinion of the Overall Coordinator (for itself
and on behalf of the Hong Kong Underwriters):
(a) has or will or may individually or in the aggregate have a material adverse effect
on the business, financial, trading or other condition or prospects of our Group
taken as a whole; or
(b) has or will or may have a material adverse effect on the success of the Global
Offering or the level of Offer Shares being applied for or accepted or the
distribution of Offer Shares; or
(c) makes or will or may make it impracticable, inadvisable, inexpedient or not
commercially viable (i) for any material part of the Hong Kong Underwriting
Agreement, International Underwriting A greement and/or the Global Offering to
be performed or implemented in accordance with its terms or (ii) to proceed with
or to market the Global Offering on the terms and in the manner contemplated in
this prospectus; or
(ii) the Overall Coordinator or the Hong Kong Underwriters shall become aware of the fact that,
or have cause to believe that:
(a) any of the warranties given by our Compa ny, Controlling Shareho lder and Executive
Directors under the Hong Kong Underw riting Agreement or pursuant to the
International Underwriting Agreement is untrue, inaccurate, misleading or breached in
any material respect when given or repeated as determined by the Overall Coordinator
(for itself and on behalf of the Hong Kong Underwriters), or has been declared or
determined by any court or government al authorities to be illegal, invalid or
unenforceable in any material respect; or
(b) any statement contained in this prospectus, the formal notice or any announcement
issued by or on behalf of our Company in connection with the Hong Kong Public
Offering (including any supplement or amendment thereto) was or is untrue, incorrect
or misleading in any material respect, or any matter arises or is discovered which
would, if such document was to be issued at that time, constitute a material omission
therefrom, or that any forecasts, expressi ons of opinion, intention or expectation
expressed in such document are not, in all material aspects, fair and honest and based
on reasonable assumptions, when taken as a whole; or
(c) there has been a material breach on the part of any of our Company, Controlling
Shareholder and Executive Directors of any of the provisions of the Hong Kong
Underwriting Agreement or the Inter national Underwriting Agreement; or
UNDERWRITING
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(d) any matter has arisen or has been discovered which would, had it arisen or been
discovered immediately before the date of this prospectus and not having been disclosed
in this prospectus, constitute a material omission therefrom; or
(e) any material adverse change or development involving a prospective change in the
assets, liabilities, conditions , business affairs, prospects, profits, losses or financial or
trading position or performance of any member of our Group; or
(f) approval by the Stock Exchange of the lis ting of, and permission to deal in, the Offer
Shares to be issued or sold (including any additional Offer Shares that may be issued or
sold pursuant to the exercise of the Over-allo tment Option) under the Global Offering is
refused or not granted, other than subject to customary conditions, on or before the
Listing Date, or if granted, the approval is s ubsequently withdrawn, qualified (other
than by customary conditions) or withheld; or
(g) we withdraw this prospectus (and/or any other documents used in connection with the
Global Offering) or the Global Offering.
Undertakings to the Hong Kong Underwriters
Undertakings by our Company
Our Company has undertaken to the Sole Sponsor, the Overall Coordinator, the Sole Global
Coordinator, the Joint Bookrunners, the Joint Lead Managers, the CMIs and the Hong Kong
Underwriters, and each of our Controlling Shareholder and Executive Directors has undertaken to and
covenanted with the Sole Sponsor, the Overall Coordinator, the Sole Global Coordinator, the Joint
Bookrunners, the Joint Lead Managers, the CMIs and the Hong Kong Underwriters that he/she/it will
procure our Company that:
(a) except pursuant to the Global Offering, the Capitalisation Issue, the exercise of any share
options to be granted under the Share Option Scheme or the subscription rights attaching to
the Over-allotment Option or under the circumstances provided under Rules 10.08(1) to
10.08(4) of the Listing Rules, not without the prior written consent of the Overall
Coordinator (for itself and on behalf of the Hong Kong Underwriters), and subject always to
the provisions of the Listing Rules, offer, allot, issue or sell, or agree to allot, issue or sell,
grant or agree to grant any option, right or warrant over, or otherwise dispose of (or enter
into any transaction which is designed to, or might reasonably be expected to, result in the
disposition (whether by actual disposition o r effective economic disposition due to cash
settlement or otherwise) by our Company or any of its affiliates (as defined in the Hong
Kong Underwriting Agreement)), either directly or indirectly, conditionally or
unconditionally, any Shares or any securities c onvertible into or exchangeable for such
Shares or any voting right or any other right attaching thereto or enter into any swap,
derivative or other arrangement that transfers to another, in whole or in part, any of the
economic consequences of subscription or ownership of Shares or such securities or any
voting right or any other right attaching thereto , whether any of the foregoing transaction is
to be settled by delivery of Shares or such sec urities, in cash or otherwise or announce any
UNDERWRITING
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i n t e n t i o nt oe f f e c ta n ys u c ht r a n s a c t i o nd u r i ng the period commencing from the date of the
Hong Kong Underwriting Agreement up to and inc luding the date falling six months after the
Listing Date (the ‘‘First Six-month Period ’’);
(b) not at any time during the First Six-month Period, issue or create any mortgage, pledge,
charge or other security interest or any rights in favour of any other person over, directly or
indirectly, conditionally or unconditionally, any Shares or other securities of our Company or
any interest therein (including but not limited t o any securities that are convertible into or
exchangeable for, or that represent the right to receive, any Shares or securities of our
Company) or repurchase any Shares or securities of our Company or grant any options,
warrants or other rights to subscribe for any Shares or other securities of our Company or
agree to do any of the foregoing, except pursuant to the Global Offering, the Capitalisation
Issue or the exercise of any share options to be granted under the Share Option Scheme or
the subscription rights attaching to the Ove r-allotment Option or under the circumstances
provided under Rules 10.08(1) to 10.08(4) of the Listing Rules or under Note (2) to Rule
10.07(2) of the Listing Rules;
(c) not at any time within the period of six months immediately following the expiry of the First
Six-month Period (the ‘‘Second Six-month Period ’’) do any of the acts set out in (a) and (b)
above such that our Controlling Shareholder, directly or indirectly, would cease to be a
controlling shareholder of our Company (within the meaning defined in the Listing Rules);
and
(d) in the event that our Company does any of the acts set out in (a) or (b) above after the expiry
of the First Six-month Period or the Second Six-month Period, as the case may be, take all
steps to ensure that any such act, if done, shall not create a disorderly or false market for any
Shares or other securities of our Company or any interest therein.
Provided that none of the above undertakings shall (a) restrict our Company ’s ability to sell,
pledge, mortgage or charge any share capital or other securities of or any other interest in any of the
subsidiaries provided that such sale or any enforcement of such pledge, mortgage or charge will not
result in such subsidiaries ceasing to be a subsidiary of our Company; or (b) restrict any of the
subsidiaries from issuing any share capital or other securities thereof or any other interests therein
provided that any such issue will not result in that subsidiary ceasing to be a subsidiary of our
Company.
UNDERWRITING
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Undertakings by our Controlling Shareholder
Our Controlling Shareholder has r epresented, warranted and und ertaken to the Sole Sponsor, the
Overall Coordinator, the Sole Global Coordinator, the Joint Bookrunners, the Joint Lead Managers, the
CMIs, the Hong Kong Underwriters and our Company that, except pursuant to the Global Offering, the
Capitalisation Issue, the exercise of the subscriptio n rights attaching to any share options to be granted
under the Share Option Scheme or pursuant to the Over-allotment Option and unless in compliance with
the Listing Rules, it shall not, without the prior written consent of the Sole Sponsor, the Overall
Coordinator and the Sole Global Coordinator (for itself and on behalf of the Hong Kong Underwriters),
directly or indirectly, and shall procure that none of its close associates (as defined in the Listing Rules)
or companies controlled by it or any nominee or trustee holding in trust for it shall, during the First Six-
month Period:
(a) offer for sale, sell, transfer, contract to sell, or otherwise dispose of (including without
limitation by the creation of any option, right, warrant to purchase or otherwise transfer or
dispose of, or any lending, charges, pledges or encumbrances over, or by entering into any
transaction which is designed to, or might reas onably be expected to, result in the disposition
(whether by actual disposition or effective economic disposition due to cash settlement or
otherwise)) any of the Shares (or any interest therein or any of the voting or other rights
attaching thereto) in respect of which it is s hown in this prospectus to be the beneficial
owner (directly or indirectly) or any other sec urities convertible into or exchangeable for or
which carry a right to subscribe, purchase or acquire any such Shares (or any interest therein
or any of the voting or other rights attaching thereto); or
(b) enter into any swap, derivative or other arrang ement that transfers to another, in whole or in
part, any of the economic consequences of the acquisition or ownership of any such Shares
(or any interest therein or any of the voting or other rights attaching thereto) or such
securities, at any time during the First Six-month Period, save as provided under Note (2) to
Rule 10.07(2) of the Listing Rules and subjec t always to compliance with the provisions of
the Listing Rules, and in the event of a disposal of any Shares (or any interest therein or any
of the voting or other rights attaching there to) or such securities at any time during the
Second Six-month period, (l) such disposal shall not result in our Controlling Shareholder
ceasing to be a our controlling shareholder (as defined in the Listing Rules) of our Company
at any time during the Second Six-month Period; and (2) it shall take all steps to ensure that
any such act, if done, shall not create a disorderly or false market for any Shares or other
securities of our Company or any interest therein.
Without prejudice to our Controlling Shareholder ’s undertaking above, the Controlling Shareholder
undertakes to the Sole Sponsor, the Overall Coordinator, the Sole Global Coordinator, the Joint
Bookrunners, the Joint Lead Managers, the CMIs, the Hong Kong Underwriters and our Company that
within the First Six-month Period and the Second Six-month Period it shall:
(a) if and when it pledges or charges, directly or i ndirectly, any Shares (or any interest therein or
any of the voting rights or other rights attachin g thereto) or other securities of our Company
beneficially owned it (or any beneficial interest therein), immediately inform our Company,
the Sole Sponsor, the Overall Coordinator, the Sole Global Coordinator, the Joint
UNDERWRITING
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Bookrunners, the Joint Lead Managers, the CM Is and the Hong Kong Underwriters in writing
of such pledge or charge together with the number of such Shares or other securities so
pledged or charged; and
(b) if and when it receives indications, either verbal or written, from any pledgee or chargee that
any Shares (or any interest therein or any of the voting rights or other rights attaching
thereto) or other securities of our Company (or any beneficial interest therein) pledged or
charged by it will be disposed of, immediately inform our Company, the Sole Sponsor, the
Overall Coordinator, the Sole Global Coordinator, the Joint Bookrunners, the Joint Lead
Managers, the CMIs and the Hong Kong Unde rwriters in writing of such indications.
Our Company shall notify the Stock Exchange as soon as our Company has been informed of such
event and shall make a public disclosure by way of announcement in accordance with the Listing Rules.
Undertakings to the Stock Exchan ge pursuant to the Listing Rules
Undertakings by our Controlling Shareholder
In accordance with Rule 10.07(1) of the Listing R ules, our Controlling Shareholder has undertaken
to the Stock Exchange and our Company that except pursuant to the Global Offering or unless in
compliance with the requirements of the Listing Rules, it shall not, and shall procure that the relevant
registered holder(s) shall not, (i) at any time during the period commencing on the date by reference to
which disclosure of its shareholding in our Company is made in this prospectus and ending on the date
which is six months from the Listing Date, dispos e of, nor enter into any agreement to dispose of or
otherwise create any options, rights, interests or encumbrances in respect of, any of the Shares or other
securities of our Company in respect of which it is shown by this prospectus to be the beneficial owner;
and (ii) at any time during the period of six months from the date on which the period referred to in
paragraph (i) above expires, dispose of, nor enter into any agreement to dispose of or otherwise create
any options, rights, interests or encumbrances in respect of, any of the Shares referred to in paragraph
(i) above if, immediately following such disposal or upon the exercise or enforcement of such options,
rights, interests or encumbrances, it w ould cease to be our Controlling Shareholder.
Our Controlling Shareholder has further under taken to us and the Stock Exchange that it will,
within a period commencing on the date by referenc e to which disclosure of its shareholding is made in
this prospectus and ending on the date which is 12 months from the Listing Date, immediately inform us
of:
(a) any pledges or charges of any Shares or other securities of our Company beneficially owned
by any of our Controlling Shareholder in favour of any authorised institution (as defined in
the Banking Ordinance (Chapter 155 of the Laws of Hong Kong)) pursuant to Note (2) to
Rule 10.07(2) of the Listing Rules for a bona fide commercial loan, and the number of such
Shares or other securities of our Company so pledged or charged; and
UNDERWRITING
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(b) when it or the relevant requested holders receive indication, either verbal or written, from any
pledgee or chargee of any Shares or other secu rities of our Company pledged or charged that
any of such securities will be disposed of.
Undertaking by our Company
Pursuant to Rule 10.08 of the Listing Rules, our Company has undertaken to the Stock Exchange
that no further Shares or securities convertible into equity securities of our Company (whether or not of
a class already listed) will be issued or form the subject of any agreement or arrangement to such an
issue within six months from the Listing Date (whether or not such issue of Shares or securities will be
completed within six months from the Listing Date), e xcept pursuant to the Global Offering (including
the exercise of the Over-allotment Option) and the Capitalisation Issue or in certain circumstances
prescribed by Rule 10.08 of the Listing Rules which i nclude the grant of options and the issue of Shares
pursuant to the Share Option Scheme.
International Offering
International Underwriting Agreement
In connection with the International Offering , it is expected that our Company, our Controlling
Shareholder and Executive Directors will enter into the International Underwriting Agreement with the
Sole Sponsor, the Overall Coordinator, the Sole Global Coordinator, the Joint Bookrunners, the Joint
Lead Managers, the CMIs, the International Underwriters and other parties (if any) on terms and
conditions that are substantially similar to the Hong Kong Underwriting Agreement as described above
and on the additional terms described below.
Under the International Underwriting Agreement, subject to the conditions set forth therein, the
International Underwriters are expected to procure subscribers and purchasers to subscribe for or
purchase, or failing which they shall subscribe for or purchase, the International Offer Shares initially
being offered pursuant to the International Offering. It is expected th at the International Underwriting
Agreement may be terminated on similar gro unds as the Hong Kong Underwriting Agreement.
Prospective investors shall be reminded that in the e vent that the International Underwriting Agreement
is not entered into, the Global Offering will not pro ceed. The International Underwriting Agreement is
conditional on and subject to the Hong Kong Underwriting Agreement having been executed, becoming
unconditional and not having been terminated. It is expected that pursuant to the International
Underwriting Agreement, our Company and Controllin g Shareholder will make similar undertakings as
those given pursuant to the Hong Ko ng Underwriting Agreem ent as described in the paragraph headed
‘‘Undertakings to the Hong Kong Underwriters ’’above in this section.
Our Company is expected to grant to the Interna tional Underwriters the O ver-allotment Option.
The Overall Coordinator or its agent, on behalf of the International Underwriters, can exercise the Over-
allotment Option to require our Company to allot and issue up to an aggregate of 75,000,000 additional
Shares, representing 15% of the Offer Shares initiall y available under the Global Offering, at the Offer
Price per International Offer Share , solely to cover over-allocations, if any, in the International Offering.
UNDERWRITING
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The Over-allotment Option may be exercised by the Overall Coordinator any time from the Listing
Date and until the 30th day after the last day for the lodging of applications under the Hong Kong
Public Offering, being Thursday, 18 January 2024. The purpose of the exercise of the Over-allotment
Option is to settle any over-allocations in the International Offering, if any. See section headed
‘‘Structure and conditions of the Global Offering ’’for further details of the Over-allotment Option.
Commission, fees and expenses
Our Company will pay an underwriting commission of 3.5% of the aggregate Offer Price of all the
Offer Shares, including Offer Shares to be issu ed pursuant to the Over-allotment Option (the ‘‘Fixed
Fees ’’). Our Company may, at our sole and absolute discretion, pay an incentive fee of up to 0.2% of
the Offer Price in respect of all the Offer Shares ( including Offer Shares to be issued pursuant to the
Over-allotment Option) (the ‘‘Discretionary Fees ’’). The ratio of Fixed Fees and Discretionary fees
payable is therefore 95:5 (on the basis that the Discretionary Fees will be fully paid). For unsubscribed
Hong Kong Offer Shares reallocated to the International Offering, we will pay an underwriting
commission at the rate applicable to the Internationa l Offering and such commission will be paid to the
relevant International Underwriters and not the Hong Kong Underwriters.
Based on the Offer Price of HK$0.65 per Offer Share (being the mid-point of the indicative range
of the Offer Price), the aggregate commission and fee s, together with Stock E xchange listing fees, SFC
transaction levy, AFRC transaction levy, Stock Exchange trading fees, legal and other professional fees
and printing and other expenses relating to the Global Offering, are estimated to amount to
approximately HK$60.0 million in total (assuming the Over-allotment Option is not exercised), and are
payable by our Company. We will also pay for all expenses in connection with any exercise of the
Over-allotment Option.
SOLE SPONSOR ’S AND UNDERWRITERS ’ INTEREST IN OUR COMPANY
The Sole Sponsor will receive a sponsorship fee to the Global Offering. The Overall Coordinator
and the Underwriters will rece ive an underwriting commission. Particulars of these underwriting
commission and expenses are set forth under the paragraph headed ‘‘Commission, fees and expenses ’’
above.
We have appointed Innovax Capital as our compliance adviser pursuant to Rule 3A.19 of the
Listing Rules for the period commencing on the Listing Date and ending on the date on which we
comply with Rule 13.46 of the Listing Rules in respect of our financial results for the full financial year
commencing after the Listing Date.
Save as disclosed above, none of the Sole Sponsor, the Overall Coordinator, the Sole Global
Coordinator, the Joint Bookrunners, the Joint Lead Managers, the CMIs or the Underwriters is interested
legally or beneficially in any Shares or other secu rities of our Company or any members of our Group
or has any right or option (whether legally enforceable or not) to subscribe for or purchase or to
nominate persons to subscribe for or purchase any Shares or other securities of our Company or any
members of our Group or has any interest in the Global Offering.
UNDERWRITING
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Following the completion of the Global Offering, the Underwriters and their affiliated companies
may hold a certain portion of the Shares as a result of fulfilling their respective obligations under the
Hong Kong Underwriting Agreement and/or the International Underwriting Agreement.
The Sole Sponsor satisfies the independence crite ria applicable to sponsor set out in Rule 3A.07 of
the Listing Rules.
MINIMUM PUBLIC FLOAT
Our Directors and the Overall Coordinator will ensure that there will be 25% of the total issued
Shares held in public hands in accordance with Rule 8.08 of the Listing Rules after completion of the
Global Offering.
UNDERWRITING
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THE GLOBAL OFFERING
This prospectus is published in connection with the Hong Kong Public Offering as part of the
Global Offering. The Global Offering consists of:
(a) the Hong Kong Public Offering of 50,000,000 Offer Shares (subject to reallocation as
mentioned below) in Hong Kong as described under the paragraph headed ‘‘The Hong Kong
Public Offering ’’below in this section; and
(b) the International Offering of an aggregate of 450,000,000 Offer Shares (subject to
reallocation and the Over-allotment Option a s mentioned below) which will conditionally be
placed with selected professional, institutional, and other investors under the International
Offering.
Investors may apply for the Hong Kong Offer Shares under the Hong Kong Public Offering or
indicate an interest, if qualified to do so, for the International Offer Shares under the International
Offering, but may not do both.
The number of Offer Shares to be offered under the Hong Kong Public Offering and the
International Offering may be subject to reallocation as described in the paragraph headed ‘‘The Hong
Kong Public Offering — Reallocation ’’below in this section.
References in this prospectus to applications, a pplication monies or the procedure for application
relate solely to the Hong Kong Public Offering.
THE HONG KONG PUBLIC OFFERING
Number of Offer Shares initially offered
Our Company is initially offering 50,000,000 Hong Kong Offer Shares for s ubscription (subject to
reallocation) at the Offer Price by members of the public in Hong Kong under the Hong Kong Public
Offering, representing 10% of the total number of Offer Shares initially ava ilable under the Global
Offering. The Hong Kong Offer Sha res initially offered under the H ong Kong Public Offering, subject
to any reallocation of Offer Shares between the I nternational Offering and the Hong Kong Public
Offering, will represent 2.5% of the enlarged issued share capital of our Company immediately
following the completion of the Capitalisation I ssue and the Global Offering, assuming the Over-
allotment Option is not exercised.
The Hong Kong Public Offering is open to all m embers of the public in Hong Kong as well as to
institutional and professional investors. Professional and institutional investors generally include
brokers, dealers, companies (including fund managers) whose ordinary business involves dealing in
shares and other securities and corporate entities whi ch regularly invest in shares and other securities.
Completion of the Hong Kong Public Offering is subject to the conditions as set out in the
paragraph headed ‘‘Conditions of the Global Offering ’’in this section.
STRUCTURE AND CONDITIONS OF THE GLOBAL OFFERING
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Allocation
Allocation of Offer Shares to inv estors under the Hong Kong Public Offering will be based solely
on the level of valid applications received under the Hong Kong Public Offering. The basis of allocation
may vary, depending on the number of Hong Kong Offer Shares validly applied for by applicants. Such
allocation could, where appropriate, consist of ba lloting, which could mean that some applicants may be
allotted more Hong Kong Offer Shares than others who have applied for the same number of Hong
Kong Offer Shares, and those applicants who are not successful in the ballot may not receive any Hong
Kong Offer Shares.
The total number of Hong Kong Offer Shares available under the Hong Kong Public Offering
(after taking account of any reallocation referred to below) will be divided into two pools (with any odd
board lots being allocated to pool A) for allocation purposes.
(a) Pool A: 25,000,000 Offer Shares in Pool A will be allocated on an equitable basis to
applicants who have applied for Hong Kong Offer Shares with an aggregate price of HK$5
million (excluding the brokerage, SFC transac tion levy, the Stock Exchange trading fee and
the AFRC transaction levy payable) or less.
(b) Pool B: 25,000,000 Offer Shares in Pool B will be allocated on an equitable basis to
applicants who have applied for Hong Kong Offer Shares with an aggregate price of more
than HK$5 million (excluding the brokerage, SFC transaction levy, the Stock Exchange
trading fee and the AFRC transaction levy payable) and up to the total value of pool B.
For the purpose of this sub-section only, the ‘‘subscription price ’’for Hong Kong Offer Shares
means the price payable on application (without r egard to the Offer Price as finally determined).
Investors should be aware that the allocation ratio s for applications in the two pools, as well as the
allocation ratios for applications in the same pool, are likely to be different. Where one of the pools is
undersubscribed, the surplus Hong Kong Offer Share s will be transferred to satisfy demand in the other
pool and be allocated accordingly. For the purpose of this paragraph only, the ‘‘price ’’for Offer Shares
means the price payable on application therefor (without regard to the Offer Price as finally determined).
Applicants can only receive an allocation of Hong Kong Offer Shares from either pool A or pool B
and not from both pools. Multiple or suspected mu ltiple applications under the Hong Kong Public
Offering and any application for more than 25,000,000 Hong Kong Offer Shares, being the 50% of the
50,000,000 Hong Kong Offer Share s initially available under the Hong Kong Public Offering are liable
to be rejected.
Reallocation
The allocation of Offer Shares between the Hong Kong Public Offering and the International
Offering is subject to reallocation. Paragraph 4.2 of Practice Note 18 of the Listing Rules requires a
clawback mechanism to be put in place which would have the effect of increasing the number of Offer
Shares under the Hong Kong Public Offering to a certain percentage of the total number of Offer Shares
STRUCTURE AND CONDITIONS OF THE GLOBAL OFFERING
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offered under the Global Offering if the International Offering is fully subscribed or oversubscribed and
the certain prescribed total demand levels are reached under the Hong Kong Public Offering, subject to
the following:
(a) if the number of Hong Kong Offer Shares validly applied for under the Hong Kong Public
Offering represents 15 times or more but less than 50 times the number of Offer Shares
initially available for subscription under the Hong Kong Public Offering, then 100,000,000
Offer Shares will be reallocated to the Hong K ong Public Offering from the International
Offering, so that the total number of Offer Shares (before taking into account any exercise of
the Over-allotment Option) available for subscription under the Hong Kong Public Offering
will be 150,000,000 Offer Shares, representing 30% of the number of the Offer Shares
initially available for subscription under the Glo bal Offering (before taking into account any
exercise of the Over-allotment Option);
(b) if the number of Hong Kong Offer Shares validly applied for under the Hong Kong Public
Offering represents 50 times or more but less than 100 times the number of Offer Shares
initially available for subscription under the Hong Kong Public Offering, then 150,000,000
Offer Shares will be reallocated to the Hong K ong Public Offering from the International
Offering, so that the total number of Offer Shares (before taking into account any exercise
the Over-allotment Option) available for subscription under the Hong Kong Public Offering
will be 200,000,000 Offer Shares, representing 40% of the number of the Offer Shares
initially available for subscription under the Glo bal Offering (before taking into account any
exercise of the Over-allotment Option); and
(c) if the number of Hong Kong Offer Shares validly applied for under the Hong Kong Public
Offering represents 100 times or more the num ber of Offer Shares initially available for
subscription under the Hong Kong Public Offering, then 200,000,000 Offer Shares will be
reallocated to the Hong Kong Public Offering from the International Offering, so that the
total number of Offer Shares (before taking into account any exercise the Over-allotment
Option) available for subscription under the Hong Kong Public Offering will be 250,000,000
Offer Shares, representing 50% of the number of the Offer Shares initially available for
subscription under the Global Offering (before taking into account any exercise of the Over-
allotment Option).
The Offer Shares to be offered in the Hong Kong P ublic Offering and the International Offering
may, in certain circumstances, be reallocated as bet ween these offerings at the discretion of the Sole
Global Coordinator and the Overall Coordinator. Subject to the foregoing paragraph, the Sole Global
Coordinator and the Overall Coordinator may in their d iscretion reallocate Shares from the International
Offering to the Hong Kong Public Offering to satis fy valid applications under the Hong Kong Public
Offering. In addition, if the Hong Kong Public O ffering is not fully subscribed, the Sole Global
Coordinator and the Overall Coordinator will have the discretion (but shall not be under any obligation)
to reallocate to the International Offering all or any unsubscribed Hong Kong Offer Shares in such
amounts as they deem appropriate.
STRUCTURE AND CONDITIONS OF THE GLOBAL OFFERING
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In each case, the additional Offer Shares reallo cated to the Hong Kong Public Offering will be
allocated between Pool A and Pool B and the number o f Offer Shares allocated to the International
Offering will be correspondingly reduced, in such manner as the Overall Coordinator (for itself and on
behalf of the Underwriters) deems appropriate. In accordance with the Guidance Letter HKEX-GL91-18
issued by the Stock Exchange, in the event of reallocation of Offer Shares between the Hong Kong
Public Offering and the International Offering in th e circumstances where (i) the International Offer
Shares are fully subscribed or oversubscribed and the Hong Kong Offer Shares are oversubscribed by
less than 15 times the number of the Offer Shares in itially available for subscription under the Hong
Kong Public Offering or (ii) the International Offer Shares are undersubscribed and the Hong Kong
Offer Shares are fully subscribed or oversubscrib ed irrespective of the number of time, the maximum
total number of Offer Shares that may be reallocated to the Hong Kong Public Offering following such
reallocation shall be not more than double of the in itial allocation to the Hong Kong Public Offering
(i.e. 100,000,000 Offer Shares); and the final Of fer Price shall be fixed at the bottom end of the
indicative Offer Price range stated in this prospectus (i.e. HK$0.55 per Offer Share) stated in this
prospectus.
Details of any reallocation of Offer Shares b etween the Hong Kong Public Offering and the
International Offering will be disclosed in the results announcement of the Global Offering, which is
expected to be published on Thursday, 21 December 2023.
Applications
Each applicant under the Hong Kong Public Offering will also be required to give an undertaking
and confirmation in the application submitted by him or her that he/she and any person(s) for whose
benefit he or she is making the application have not applied for or taken up, or indicated an interest for,
and will not apply for or take up, or indicate an interest for, any International Offer Shares under the
International Offering, and such applicant ’s application is liable to be rej ected if the said undertaking
and/or confirmation is breached and/or untrue (as the case may be) or if he or she has been or will be
placed or allocated International Offer S hares under the International Offering.
The listing of the Shares on the Stock Exchange is sponsored by the Sole Sponsor. Applicants
under the Hong Kong Public Offering are required to pay, on application, the maximum Offer Price of
HK$0.75 per Offer Share in addition to any brokerage, SFC transaction levy, AFRC transaction levy and
Stock Exchange trading fee payable on each Offer Share, amounting to a total of HK$3,787.82 for one
board lot of 5,000 Shares. If the Offer Price, as fin ally determined in the manner described in the
paragraph headed ‘‘Pricing and allocation’’ of this section below, is less than the maximum Offer Price
of HK$0.75 per Offer Share, appropriate refund payments (including the brokerage, SFC transaction
levy, AFRC transaction levy and the Stock Exchange trading fee attribut able to the surplus application
monies) will be made to successful a pplicants who have applied through the HK eIPO White Form
service, without interest. Further details are set out in the section headed ‘‘How to apply for the Hong
Kong Offer Shares’’ in this prospectus.
References in this prospectus to applications, a pplication monies or the procedure for application
relate solely to the Hong Kong Public Offering.
STRUCTURE AND CONDITIONS OF THE GLOBAL OFFERING
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--- page 454 ---
THE INTERNATIONAL OFFERING
Number of Offer Shares offered
Subject to reallocation as described above and t he Over-allotment Option, the International
Offering will consist of 450,000,000 Shares, representing approximately 90% of the total number of
Offer Shares initially available under the Global Offering, assuming the Over-allotment Option is not
exercised. Subject to the reallocation of the Offer Shares between the International Offering and the
Hong Kong Public Offering, the number of Interna tional Offer Shares initially offered under the
International Offering will represent approximately 22.5% of our Company ’s enlarged issued share
capital immediately after completion of the Capitalis ation Issue and Global Offering (without taking into
account of any Shares which may be allotted and issued by our Company pursuant to the exercise of any
options which may be granted under the Share Option Scheme or the Over-allotment Option).
Allocation
Pursuant to the International Offering, the Int ernational Offer Shares will be conditionally placed
on behalf of our Company by the International Und erwriters or through selling agents appointed by
them. The International Offer Shares will be selectiv ely placed to certain professional, institutional and/
or other investors in Hong Kong and elsewhere in the world outside the United States who generally
include brokers, dealers, companies (including fund managers) whose ordinary business involves dealing
in shares and other securities and co rporate entities which regularly invest in shares and other securities.
The International Offering is subject to the Hong Kong Public Offering being unconditional.
Allocation of International Offer Shares pursuan t to the International Offe ring will be effected in
accordance with the ‘‘book-building ’’process based on a number of factors, including the level and
timing of demand, the total size of the relevant investor ’s invested assets or equity assets in relevant
sector and whether or not it is expected that the relevant investor is likely to buy further Offer Shares,
and/or hold or sell its Offer Shares, after the lis ting of the Shares on the Stock Exchange. Such
allocation is intended to result in a distribution of the Shares on a basis which would lead to the
establishment of a solid professional and institution al shareholder base to the benefit of our Company
and our Shareholders as a whole.
The Overall Coordinator (for itself and on behalf of the Underwriters) may require any investor
who has been offered Offer Shares under the Intern ational Offering, and who has made an application
under the Hong Kong Public Offering to provide sufficient information to the Overall Coordinator so as
to allow it to identify the relevant applications under the Hong Kong Public Offering and to ensure that
they are excluded from any application of Offer Shares under the Hong Kong Public Offering.
Reallocation
The total number of Offer Shares to be issued pursuant to the International Offering may change as
a result of the clawback arrangement described in the paragraph headed ‘‘The Hong Kong Public
Offering — Reallocation ’’above in this section, the exercise of the Over-allotment Option in whole or
STRUCTURE AND CONDITIONS OF THE GLOBAL OFFERING
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--- page 455 ---
in part and/or any reallocation of unsubscribed Offer Shares originally included in the Hong Kong
Public Offering and/or any Offe r Shares from the Internationa l Offering to the Hong Kong Public
Offering at the discretion of the Overall Coordinator.
OVER-ALLOTMENT OPTION
In connection with the Global Offering, we are exp ected to grant the Over-allotment Option to the
International Underwriters, exercisable by the Overall Coordinator on behalf of the International
Underwriters.
Pursuant to the Over-allotment Option, the Int ernational Underwriters will have the right,
exercisable by the Overall Coordinator (for itself and on behalf of the International Underwriters) at any
time from the Listing Date and until the 30th day after the last day for the lodging of applications under
the Hong Kong Public Offering, being Thursday, 18 January 2024, to require our Company to allot and
issue, at the Offer Price, up to an aggregate of 75,000,000 additional Shares, representing 15% of the
number of Offer Shares initially being offered under the Global Offering, on the same terms and
conditions as those applicable to the Global Offering, to cover over-allocation s in the International
Offering and/or the obligations of the Stabilising M anager to return securities borrowed under the Stock
Borrowing Agreement. We will make an announcement if the Over-allotment Option is exercised.
If the Over-allotment Option is exercised in fu ll, the additional Offer Shares allotted and issued
will represent approximately 15% of the enlarged issued share capital of our Company immediately
following the completion of the Capitalisation Issu e and the Global Offering and the exercise of the
Over-allotment Option.
STOCK BORROWING ARRANGEMENT
In order to facilitate the settlement of over-alloca tion in connection with the Global Offering, the
Stabilising Manager may choose to borrow, whether on its own or through its affiliates and agents, up to
75,000,000 Shares from Majestic Gold pursuant to a stock borrowing arrangement (being the maximum
number of Shares which may be allotted and issued by our Company upon exercise of the Over-
allotment Option), or acquire Shares from other sources, including the exercise of the Over-allotment
Option.
If such stock borrowing arrangement with Majestic Gold is entered into, it will only be effected by
the Stabilising Manager or its agent for settlement of ov er-allocation in the International Offering and
such arrangement is not subject to the restrictions of Rule 10.07(1)(a) of the Listing Rules provided that
the requirements set out in Rule 10.07(3) of the Li sting Rules are complied with, in particular, such
stock borrowing arrangement as fully described in this prospectus will be for the sole purpose of
covering any short position prior to the e xercise of the Over-allotment Option.
STRUCTURE AND CONDITIONS OF THE GLOBAL OFFERING
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--- page 456 ---
STABILISATION
Stabilisation is a practice used by underwriters in some markets to facilitate the distribution of
securities. To stabilise, the underwriters may bid fo r, or purchase, the new securities in the secondary
market during a specified period of time to retard and, possibly, prevent any decline in the market price
of the securities below the Offer Price. In Hong Kon g, activity aimed at reducing the market price is
prohibited and the price at which stabilisation is e ffected is not permitted to e xceed the Offer Price.
In connection with the Global Offering, the Stabilis ing Manager and/or its affiliates and agents, on
behalf of the Underwriters, may, to the extent perm itted by applicable laws of Hong Kong or elsewhere,
over-allocate or effect any other transactions with a view to stabilising or maintaining the market price
of our Shares at a level higher than that which might otherwise prevail in the open market for a limited
period from the Listing Date and until the 30th day after the last day for th e lodging of applications
under the Global Offering, being Thursday, 18 January 2024. Any market purchases of Shares will be
effected in compliance with all applicable laws and regulatory requirements. However, there is no
obligation on the Stabilising Manager or its agent t o conduct any such stabilising activity, which if
commenced, will be done at the absolute discretion of the Stabilising Manager and may be discontinued
at any time. Any such stabilising activity is required to be brought to an end on the 30th day after the
last day for the lodging of applications under the Hong Kong Public Offering, being Thursday,
18 January 2024. The number of Shares that may be over-allocated will not exceed the number of
Shares that may be allotted and issued under the Ove r-allotment Option, namely 75,000,000 Shares,
which is 15% of the Offer Shares initially available under the Global Offering.
In Hong Kong, stabilising activities must be carried out in accordance with the Securities and
Futures (Price Stabilizing) Rules (Chapter 571 W of the Laws of Hong Kong). Stabilising actions
permitted in Hong Kong pursuant to the Securities and Futures (Price Stabilizing) Rules include: (i)
over-allocation for the purpose of preventing or minimising any reduction in the market price of our
Shares; (ii) selling or agreeing to sell our Shares so as to establish a short position in them for the
purpose of preventing or minimising any reduction in the market price of our Shares; (iii) purchasing or
subscribing for, or agreeing to purchase or subscribe for, our Shares pursuant to the Over-allotment
Option in order to close out any position established under (i) or (ii) above; (iv) purchasing, or agreeing
to purchase, any of our Shares for the sole purpose o f preventing or minimising any reduction in the
market price of our Shares; (v) selling or agreeing t o sell any Shares in order to liquidate any position
held as a result of those purchases; and (vi) offering or attempting to do anything described in (ii), (iii),
(iv) or (v) above.
Specifically, prospective applicants for and investors in our Shares should note that:
(a) the Stabilising Manager, or any person acting for it, may, in connection with the stabilising
action, maintain a long position in our Shares;
(b) there is no certainty regarding the exte nt to which and the time period for which the
Stabilising Manager, or any person actin g for it, will maintain such a long position;
STRUCTURE AND CONDITIONS OF THE GLOBAL OFFERING
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--- page 457 ---
(c) liquidation of any such long position by the Stabilising Manager may have an adverse impact
on the market price of our Shares;
(d) no stabilising action can be taken to support the price of our Shares for longer than the
stabilising period which will begin on the Listing Date, and is expected to expire on
Thursday, 18 January 2024, being the 30th day after the last date for lodging applications
under the Hong Kong Public Offering. After this date, when no further stabilising action may
be taken, demand for our Shares, and therefore the price of our Shares, could fall;
(e) the price of our Shares cannot be assured to stay at or above the Offer Price either during or
after the stabilising period by the taking of any stabilising action; and
(f) stabilising bids may be made or transactions effected in the course of the stabilising action at
any price at or below the Offer Price, which means that stabilising bids may be made or
transactions effected at a price below the price paid by applicants for, or investors in, our
Shares.
Our Company will ensure or procure that a public announcement in complia nce with the Securities
and Futures (Price Stabilizing) Rules will be made within seven days of the expiration of the stabilising
period. In connection with the Global Offering, t he Stabilising Manager may over-allocate up to and not
more than an aggregate of 75,000,000 additional Share s and cover such over-allocations by the exercise
of the Over-allotment Option, which will be exerci sable by the Overall Coordinator, or by making
purchases in the secondary market at prices that do not exceed the Offer Price or through stock
borrowing arrangements or a combin ation of these means. In particular, for the purpose of settlement of
over-allocations in connection with the Internationa l Offering, the Stabilising Manager may borrow up to
75,000,000 Shares from Majestic Gold, equivalent to the maximum number of Shares to be allotted and
issued by the Company on full exercise of the Over-allotment Option, under the Stock Borrowing
Agreement. The same number of Shares so borrowed must be returned to Majestic Gold or its nominees,
as the case may be, on or before the third Business Day following the earlier of (i) the last day for
exercising the Over-allotment Option and (ii) the d ay on which the Over-allotment Option is exercised
in full. The stock borrowing arrangement will be effe cted in compliance with all applicable laws, rules
and regulation requirements.
No payments or other benefit will be made to Maje stic Gold by the Stabilising Manager in relation
to the stock borrowing arrangement.
PRICING AND ALLOCATION
Determination of the Offer Price
The International Underwriters will be soliciting fro m prospective investors indications of interest
in acquiring the Offer Shares in the International O ffering. Prospective investors will be required to
specify the number of the Offer Shares under the International Offering they would be prepared to
STRUCTURE AND CONDITIONS OF THE GLOBAL OFFERING
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--- page 458 ---
acquire either at different prices or at a particular price. This process, known as ‘‘book-building ’’,i s
expected to continue up to, and to cease on or around, the last day for lodging applications under the
Global Offering.
Pricing for the Offer Shares for the purpose of the Global Offering will be fixed on the Price
Determination Date, which is expected to be on or around 12:00 noon on Wednesday, 20 December
2023, by agreement between the Overall Coordinator (for itself and on behalf of the Underwriters) and
our Company and the number of Offer Shares to be allocated under the Global Offering will be
determined shortly thereafter.
The Offer Price per Offer Share under the Hong K ong Public Offering will be identical to the
Offer Price per Offer Share under the International Offering based on the Hong Kong dollar price per
Offer Share under the International Offering, as determined by the Overall Coordinator, for themselves
and on behalf of the Underwriters, and our Company.
R a n g eo fO f f e rP r i c e
The Offer Price will be not more than HK$0.75 per Offer Share and is expected to be not less than
HK$0.55 per Offer Share unless otherwise announced, as further explained below, not later than the
morning of the last day for lodging applications under the Hong Kong Public Offering. Prospective
investors should be aware that the Offer Price to be determined on the Price Determination Date
may be, but is not expected to be, lower than the bottom end of the indicative Offer Price range as
stated in this prospectus (subject to a Downward Offer Price Adjustment).
Price payable on application
Applicants for Offer Shares under the Hong Kong Public Offering must pay, on application, the
maximum Offer Price of HK$0.75 for each Hong Kong Offer Share (plus the brokerage, Stock Exchange
trading fee, AFRC transaction lev ya n dS F Ct r a n s a c t i o nl e v yp a y a b l eon each Offer Share), amounting
to a total of HK$3,787.82 per board lot of 5,000 Offer Shares.
If the Offer Price, as finally determined in the manner described above, is lower than the maximum
Offer Price of HK$0.75 per Offer Share, appropriate refund payments (including the related brokerage,
the Stock Exchange trading fee, AFRC transaction lev y and the SFC transaction levy attributable to the
excess application monies) will be ma de to applicants, without interest.
If, for any reason, our Company and the Overall Coordinator (for itself and on behalf of the
Underwriters) are unable to reach agreement on the Offer Price at or before 12:00 noon on Wednesday,
20 December 2023, the Global Offering will not proceed and will lapse.
Further details are set out in the section headed ‘‘How to apply for the Hong Kong Offer Shares ’’
in this prospectus.
STRUCTURE AND CONDITIONS OF THE GLOBAL OFFERING
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--- page 459 ---
Announcement of Offer Price reduction
The Overall Coordinator (for itself and on behalf of the Underwriters) may, where considered
appropriate, based on the level of interest expressed by prospective investors during the book-building
process in respect of the International Offering, and with the consent of our Company, determine the
final Offer Price to be no more than 10% below the bottom end of the indicative Offer Price range, at
any time on or prior to the expected Price Determination Date.
In such situation, our Company will, as soon as prac ticable following the decision to set the final
Offer Price below HK$0.55 (bottom end of the indi cative Offer Price range), publish on the websites of
the Stock Exchange at www.hkexnews.hk and the Company at www.persistenceresource.com an
announcement of the final Offer Price after mak ing a Downward Offer Price Adjustment. Such
announcement will be issued before and separate from the announcement of the results of allocations
expected to be announced on Thursday, 21 December 2023. The Offer Price announced following
making of a Downward Offer Price Adjustment shall be the final Offer Price and shall not be
subsequently changed. In the absence of an announcement that a Downward Offer Price Adjustment has
been made, the final Offer Price will not be outside the indicative Offer Price range as disclosed in this
prospectus.
Announcement of Offer Price and the basis of allocations
Irrespective of whether a Downward Offer Price Adjustment is made, announcement of the final
Offer Price, together with the level of indication of interest in the International Offering, and the level of
applications in the Hong Kong Public Offering and the basis of allocation of the Hong Kong Offer
Shares are expected to be available under the Hong Kong Public Offering and the Hong Kong identity
card/passport/Hong Kong business registration numbers of successful applicants under the Hong Kong
Public Offering are expected to be made available in a variety of channels in the manner described in
the section headed ‘‘How to apply for Hong Kong Offer Shares — D. Despatch/Collection of share
certificates and refund of application monies ’’.
UNDERWRITING
The Hong Kong Public Offering is fully underwritten by the Hong Kong Underwriters under the
terms of the Hong Kong Underwriting Agreement . We expect to enter into the International
Underwriting Agreement relating to the Internationa l Offering on the Price Determination Date. These
underwriting arrangements and the Underwriting A greements are summarised in the section headed
‘‘Underwriting ’’of this prospectus.
STRUCTURE AND CONDITIONS OF THE GLOBAL OFFERING
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--- page 460 ---
CONDITIONS OF THE GLOBAL OFFERING
Acceptance of all applications for the Offer Shares is conditional upon, am ongst other things, the
satisfaction of all the following conditions, in each c ase on or before the dates and times specified in the
Underwriting Agreements (unless and to the extent such conditions are validly waived on or before such
dates and times) and in any event not later than 30 days after the date of this prospectus:
1. Listing
The Listing Committee granting the approval of the listing of, and permission to deal in, the
Shares in issue and the Shares to be issued pursuant to the Global Offering and the Capitalisation Issue
(including the Shares which fall to be allotted and issued upon the exercise of any options which may be
granted under the Share Option Scheme or the Over-a llotment Option) and such listing and permission
not subsequently being revoked prior to the commencement of dealings in the Shares on the Stock
Exchange.
2. International Underwriting Agreement
The execution and delivery o f the International Underwriting Agreement on the Price
Determination Date.
3. Obligations under the Underwriting Agreements
The obligations of the Underwriters under each of the Underwriting Agreements becoming and
remaining unconditional (including, if relevant, as a result of a waiver of any condition(s)) and such
obligations not being terminated in accordanc e with the terms of the Underwriting Agreements.
4. Price determination
The Offer Price having been determined and the execution of the Price Determination Agreement
on or before the Price Determination Date.
If, for any reason, the Offer Price is not agreed between our Company and the Overall
Coordinator (for itself and on behalf of the Underwriters) on or before 12:00 noon on Wednesday,
20 December 2023, the Global Offering will not proceed and will lapse.
The consummation of each of the Hong Kong Public Offering and the International Offering is
conditional upon, among other things, the other offering becoming and remaining unconditional and not
having been terminated in accordance with their respective terms.
If the above conditions are not fulfilled or waived prior to the times and dates specified, the Global
Offering will lapse and the Stock Exchange will be notified immediately. Notice of the lapse of the
Hong Kong Public Offering will be published by us on the websites of the Stock Exchange at
www.hkexnews.hk and our Company at www.persistenceresource.com on the next Business Day
following such lapse. In such eventuality, all application monies will be returned, without interest, on
the terms set out in the section headed ‘‘How to apply for the Hong Kong Offer Shares — D. Despatch/
STRUCTURE AND CONDITIONS OF THE GLOBAL OFFERING
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--- page 461 ---
Collection of Share Certificates and refund of application monies’’ of this prospectus. In the meantime,
all application monies will be held in separate bank account(s) with the receiving banks or other
licensed bank(s) in Hong Kong licensed under the Banking Ordinance (Chapter 155 of the Laws of
Hong Kong) (as amended from time to time).
Share certificates for the Offer Shares are expected to be issued on Thursday, 21 December 2023
but will only become valid evidence of title at 8:00 a.m. (Hong Kong time) on Friday, 22 December
2023 provided that (i) the Global Offering has become unconditional in all respects, and (ii) the right of
termination as described in the section headed ‘‘Underwriting — Underwriting arrangements and
expenses — Hong Kong Public Offering — Grounds for termination ’’in this prospectus has not been
exercised and has lapsed.
Investors who trade our Shares prior to the receipt of the Share certificates or prior to the Share
certificates bearing valid evidence of title do so entirely at their own risk.
Application for Listing on the Stock Exchange
We have applied to the Listing Committee for the g ranting of the listing of, and permission to deal
in, our Shares in issue and to be issued pursuant to the Global Offering (including any Shares which
may be issued pursuant to the exercise of the Over- allotment Option) on the Main Board of the Stock
Exchange.
SHARES WILL BE ELIGIBLE FOR CCASS
All necessary arrangements have been made for the Shares to be admitted into CCASS.
If the Stock Exchange grants the listing of, and p ermission to deal in, the Shares and our Company
complies with the stock admission requirements o f HKSCC, the Shares will be accepted as eligible
securities by HKSCC for deposit, clearance and settlement in CCASS with effect from the date of
commencement of dealings in the Shares on the Stock Exchange or any other date HKSCC chooses.
Settlement of transactions between participants of the Stock Exchange is required to take place in
CCASS on the second settlement day after any trading day.
All activities under CCASS are subject to the Ge neral Rules of HKSCC and HKSCC Operational
Procedures in effect from time to time.
DEALING ARRANGEMENTS
Assuming that the Global Offering becomes unconditional at or before 8:00 a.m. in Hong Kong on
Friday, 22 December 2023, it is expected that dealings in Shares on the Stock Exchange will commence
at 9:00 a.m. on Friday, 22 December 2023.
The Shares will be traded in board lots of 5,000 Shares each. The stock code of the Shares is
2489.
STRUCTURE AND CONDITIONS OF THE GLOBAL OFFERING
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--- page 462 ---
IMPORTANT NOTICE TO INVESTORS OF HONG KONG OFFER SHARES
FULLY ELECTRONIC APPLICATION PROCESS
We have adopted a fully electronic applicatio n p r ocess for the Hong Kong Public Offering
and below are the procedures for application.
This prospectus is available at the website of the Stock Exchange at www.hkexnews.hk
under the ‘‘HKEXnews > New Listings > New Listing Information’’ section, and our website at
www.persistenceresource.com.
The contents of this prospectus are identical to the prospectus as registered with the Registrar of
Companies in Hong Kong pursuant to Section 342C of the Companies (Miscellaneous Provisions)
Ordinance.
A. APPLICATION FOR HONG KONG OFFER SHARES
1. Who can apply
You can apply for Hong Kong Offer Shares if you or the person(s) for whose benefit you are
applying for:
. are 18 years of age or older; and
. have a Hong Kong address (for the HK eIPO White Form service only).
Unless permitted by the Listing Rules, or a wa iver and/or consent has been granted by the
Stock Exchange to us you cannot apply for any Hong Kong Offer Shares if you or the person(s)
for whose benefit you are applying for:
. are an existing Shareholder or close associates; or
. are a Director or any of his/her close associates.
HOW TO APPLY FOR THE HONG KONG OFFER SHARES
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2. Application channels
The Hong Kong Public Offering period will begin at 9:00 a.m. on Thursday, 14 December
2023 and end at 12:00 noon on Tuesday, 19 December 2023 (Hong Kong time).
To apply for Hong Kong Offer Shares, you may use one of the following application
channels:
Application
channel Platform Target inv estors Application time
HK eIPO White
Form service
www.hkeipo.hk or
the IPO App (which
can be downloaded by
searching ‘‘IPO App’’
in App Store or Google
Play or downloaded at
www.hkeipo.hk/
IPOApp or
www.tricorglobal.com/
IPOApp ).
Enquiries:
+852 3907 7333
Investors who would like to receive
a physical Share certificate. Hong
Kong Offer Shares successfully
applied for will be allotted and
issued in your own name.
From 9:00 a.m. on Thursday, 14
December 2023 to 11:30 a.m.
on Tuesday, 19 December 2023,
Hong Kong time.
The latest time for completing
full payment of application
monies will be 12:00 noon on
Tuesday, 19 December 2023,
Hong Kong time.
HKSCC EIPO
channel
Your broker or
custodian who is a
HKSCC Participant will
submit an EIPO
application on your
behalf through
HKSCC’sF I N Is y s t e m
in accordance with your
instruction.
Investors who would not like to
r e c e i v eap h y s i c a lShare certificate.
Hong Kong Offer Shares
successfully applied for will be
allotted and issued in the name of
HKSCC Nominees, deposited
directly into CCAS S and credited to
your designated HKSCC
Participant ’s stock account.
Contact your broker or custodian
for the earliest and latest time
for giving such instructions, as
t h i sm a yv a r yb yb r o k e ro r
custodian.
The HK eIPO White Form service and the HKSCC EIPO ch annel are facilities subject to
capacity limitations and potential service interruptions and you are advised not to wait until the
last day of the application period to apply for Hong Kong Offer Shares.
For those applying through the HK eIPO White Form service, once you complete payment
in respect of any application instructions given by you or for your benefit through the HK eIPO
White Form service to make an application for Hong Kong Offer Shares, an actual application
shall be deemed to have been made. If you are a person for whose benefit the electronic
application instructions are given, you shall be deemed to have declared that only one set of
electronic application instructions has been given for your benefit. If you are an agent for another
person, you shall be deemed to have declared that you have only given one set of electronic
application instructions for the benefit of the person for whom you are an agent and that you are
duly authorised to give those instructions as an agent.
For the avoidance of doubt, giving an application instruction under the HK eIPO White
Form service more than once and obtaining different payment reference numbers without effecting
full payment in respect of a partic ular reference number will not constitute an actual application.
HOW TO APPLY FOR THE HONG KONG OFFER SHARES
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--- page 464 ---
If you apply through the HK eIPO White Form service, you are deemed to have authorised
the HK eIPO White Form service provider to apply on the terms and conditions in this
prospectus, as supplemented and amended by the terms and conditions of the HK eIPO White
Form service.
By instructing your broker or custodian to apply for the Hong Kong Offer Shares on your
behalf through the HKSCC EIPO channel, you (and, if you are joint applicants, each of you jointly
and severally) are deemed to have instructed and authorised HKSCC to cause HKSCC Nominees
(acting as nominee for the relevant HKSCC Partic ipants) to apply for Hong Kong Offer Shares on
your behalf and to do on your behalf all the things stated in this prospectus and any supplement to
it.
For those applying through HKSCC EIPO channel, an actual application will be deemed to
have been made for any application instructions given by you or for your benefit to HKSCC (in
which case an application will be made by HKSCC Nominees on your behalf) provided such
application instruction has not been withdrawn or o therwise invalidated before the closing time of
the Hong Kong Public Offering.
HKSCC Nominees will only be acting as a nominee for you and neither HKSCC nor HKSCC
Nominees shall be liable to you or any other person in respect of any actions taken by HKSCC or
HKSCC Nominees on your behalf to apply for Hong Kong Offer Shares or for any breach of the
terms and conditions of this prospectus.
3. Information required to apply
You
must provide the following info rmation with your application:
For individual applicants For corporate applicants
. Full name(s) 2 as shown on your identity
document
. Identity document’ s issuing country or
jurisdiction
. Identity document type, with order of
priority:
i. HKID card; or
ii. National identification document;
or
iii. Passport; and
. Identity document number
. Full name(s) 2 as shown on your identity
document
. Identity document ’s issuing country or
jurisdiction
. Identity document type, with order of
priority:
i. Legal Entity Identifier ( ‘‘LEI’’)
registration document; or
ii. Certificate of incorporation; or
iii. Business registration certificate; or
iv. Other equivalent document; and
. Identity document number
HOW TO APPLY FOR THE HONG KONG OFFER SHARES
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--- page 465 ---
Notes:
1. If you are applying through the HK eIPO White Form service, you are required to provide a valid e-mail
address, a contact telephone number and a Hong Kong Address. You are also required to declare that the
identity informatio n provided by you follows the requirements a s described in Note 2 below. In particular,
where you cannot provide a HKID number, you must confirm that you do not hold a HKID card.
2. The applicant ’s full name as shown on their identity document must be used. If an applicant ’s identity
document contains both an English and Chinese name, both English and Chinese names must be used.
Otherwise, either English or Chinese names will be accepted. The order of priority of the applicant ’s identity
document type must be strictly followed and where an i ndividual applicant has a v alid HKID card, the HKID
number must be used when making an application to subscribe for shares in a public offer. Similarly for
corporate applicants, a LEI number must be used if an entity has a LEI certificate.
3. If the applicant is a trustee, the client identification data ( ‘‘CID’’) of the trustee, as set out above, will be
required. If the applicant is an investment fund (i.e. a collective investment scheme, or CIS), the CID of the
asset management company or the individual fund, as appropriate, which has opened a trading account with
the broker will be required, as above.
4. The maximum number of joint account holders on FINI is capped at 4
1 in accordance with market practice.
5. If you are applying as a nominee, you must provide: (i) the full name (as shown on the identity document),
the identity document ’s issuing country or jurisdiction, the identity document type; and (ii), the identity
document number, for each of the beneficial owners or, in the case(s) of joint beneficial owners, for each joint
beneficial owner. If you do not include this information, the application will be treated as being made for your
benefit.
6. If you are applying as an unlisted company and (i) the principal business of that company is dealing in
securities; and (ii) you exercise statutory control over that company, then the application will be treated as
being for your benefit and you should provide the required information in your application as stated above.
‘‘Unlisted company’’ means a company with no equity securities listed on the Stock Exchange or any other
stock exchange.
‘‘Statutory control ’’means you:
. control the composition of the board of directors of the company;
. control more than half of the voting power of the company; or
. hold more than half of the issued share capital of the company (not counting any part of it which
carries no right to participate beyond a specified am ount in a distribution of either profits or capital).
1 Subject to change, if the Company ’s Articles of Association and app licable company law prescribe a
lower cap.
For those applying through HKSCC EIPO channel, and making an application under a power
of attorney, we and the Overall Coordinator, as our agent, have discretion to consider whether to
accept it on any conditions we think fit, including evidence of the attorney ’s authority.
Failing to provide any required information may result in your application being rejected.
HOW TO APPLY FOR THE HONG KONG OFFER SHARES
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4. Permitted number of Hong Kon g Offer Shares for application
Board lot size : 5,000
Permitted number of
Hong Kong Offer Shares
for application and
amount payable on
application/successful
allotment
: Hong Kong Offer Shares are available for application in
specified board lot sizes only. Please refer to the amount
payable associated with each specified board lot size in the
table below.
The maximum Offer Price is HK$0.75 per Share.
If you are applying through the HKSCC EIPO channel, you
are required to pre-fund your application based on the
amount specified by your broker or custodian, as
determined based on the applicable laws and regulations in
Hong Kong.
By instructing your broker or custodian to apply for the
Hong Kong Offer Shares on your behalf through the
HKSCC EIPO channel, you (and, if you are joint
applicants, each of you jointly and severally) are deemed
to have instructed and authorised HKSCC to cause HKSCC
Nominees (acting as nominee for the relevant HKSCC
Participants) to arrange payment of the final Offer Price,
brokerage, SFC transaction levy, the Stock Exchange
trading fee and the AFRC transaction levy by debiting the
relevant nominee bank account at the designated bank for
your broker or custodian.
If you are applying through the HK eIPO White Form
service, you may refer to the table below for the amount
payable for the number of Shares you have selected. You
must pay the respective maximum amount payable on
application in full upon application for Hong Kong Offer
Shares.
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--- page 467 ---
No. of
Hong Kong
Offer Shares
applied for
Maximum
amount
payable (2) on
application/
successful
allotment
No. of
Hong Kong
Offer Shares
applied for
Maximum
amount
payable (2) on
application/
successful
allotment
No. of
Hong Kong
Offer Shares
applied for
Maximum
amount
payable (2) on
application/
successful
allotment
No. of
Hong Kong
Offer Shares
applied for
Maximum
amount
payable (2) on
application/
successful
allotment
HK$ HK$ HK$ HK$
5,000 3,787.82
10,000 7,575.63
15,000 11,363.46
20,000 15,151.28
25,000 18,939.10
30,000 22,726.91
35,000 26,514.73
40,000 30,302.56
45,000 34,090.37
50,000 37,878.19
60,000 45,453.83
70,000 53,029.47
80,000 60,605.10
90,000 68,180.73
100,000 75,756.38
150,000 113,634.57
200,000 151,512.76
250,000 189,390.93
300,000 227,269.13
350,000 265,147.31
400,000 303,025.50
450,000 340,903.69
500,000 378,781.88
600,000 454,538.26
700,000 530,294.63
800,000 606,051.00
900,000 681,807.38
1,000,000 757,563.76
1,500,000 1,136,345.63
2,000,000 1,515,127.50
2,500,000 1,893,909.38
3,000,000 2,272,691.26
3,500,000 2,651,473.13
4,000,000 3,030,255.00
4,500,000 3,409,036.88
5,000,000 3,787,818.76
6,000,000 4,545,382.50
7,000,000 5,302,946.26
8,000,000 6,060,510.00
9,000,000 6,818,073.76
10,000,000 7,575,637.50
15,000,000 11,363,456.26
20,000,000 15,151,275.00
25,000,000
(1) 18,939,093.76
(1) Maximum number of Hong Kong Offer Shares you may apply for and this is 50% of the Hong Kong Offer
Shares initially offered.
(2) The amount payable is inclusive of brokerage, the SFC transaction levy, the Stock Exchange trading fee and
the AFRC transaction levy. If your application is successful, brokerage will be paid to the Exchange
Participants (as defined in the Listing Rules) or to the HK eIPO White Form Service Provider (for
applications made through the HK eIPO White Form service), while the SFC tr ansaction levy, the Stock
Exchange trading fee and the AFRC transaction lev y will be paid to the SFC, the Stock Exchange and the
AFRC, respectively.
5. Multiple applications prohibited
You or your joint applicant(s) shall not make more than one application for your own benefit,
except where you are a nominee and provide the information of the underlying investor in your
application as required under the paragraph headed ‘‘A. Applications for Hong Kong Offer Shares
— 3. Information required to apply ’’in this section. If you are suspected of submitting or cause to
submit more than one application, all o f your applications will be rejected.
Multiple applications made either through (i) the HK eIPO White Form service, (ii) HKSCC
EIPO channel, or (iii) bot h channels concurrently are prohibited and will be rejected. If you have
made an application through the HK eIPO White Form service or HKSCC EIPO channel, you or
the person(s) for whose benefit you have made the application shall not apply for any International
Offer Shares.
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6. Terms and conditions of an application
By applying for Hong Kong Offer Shares through the HK eIPO White Form service or
HKSCC EIPO channel, you (or as the case may be, HKSCC Nominees will do the following things
on your behalf):
(i) undertake to execute all relevant documents and instruct and authorise us and/or the
Overall Coordinator, as our agents, to execute any documents for you and to do on your
behalf all things necessary to register any Hong Kong Offer Shares allocated to you in
your name or in the name of HKSCC Nominees as required by the Articles of
Association, and (if you are applying through the HKSCC EIPO channel) to deposit the
allotted Hong Kong Offer Shares directly into CCASS for the credit of your designated
HKSCC Participant ’s stock account on your behalf;
(ii) confirm that you have read and understand the terms and conditions and application
procedures set out in this prospectus and the designated website of the HK eIPO White
Form service (or as the case may be, the agreement you entered into with your broker
or custodian), and agree to be bound by them;
(iii) (if you are applying through the HKSCC EIPO channel) agree to the arrangements,
undertakings and warranties under the participant agreement between your broker or
custodian and HKSCC and observe the General Rules of HKSCC and the HKSCC
Operational Procedures for giving application instructions to apply for Hong Kong
Offer Shares;
(iv) confirm that you are aware of the restrictions on offers and sales of shares set out in
this prospectus and they do not apply to you, or the person(s) for whose benefit you
have made the application;
(v) confirm that you have read this prospectus and any supplement to it and have relied
only on the information and representations contained therein in making your
application (or as the case may be, causi ng your application to be made) and will not
rely on any other informat ion or representations;
(vi) agree that the Relevant Persons, the Hong Kong Branch Share Registrar and HKSCC
will not be liable for any information and representations not in this prospectus and any
supplement to it;
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(vii) agree to disclose the details of your app lication and your personal data and any other
personal data which may be required about you and the person(s) for whose benefit you
have made the application to us, the Relevant Persons, the Hong Kong Branch Share
Registrar, HKSCC, HKSCC Nominees, the Stock Exchange, the SFC and any other
statutory regulatory or governmental bodies or otherwise as required by laws, rules or
regulations, for the purposes under the paragraph headed ‘‘G. Personal data — 3.
Purposes ’’and ‘‘G. Personal data — 4. Transfer of personal data ’’in this section;
(viii) agree (without prejudice to any other rights which you may have once your application
(or as the case may be, HKSCC Nominees ’ application) has been accepted) that you
will not rescind it because of an innocent misrepresentation;
(ix) agree that subject to Section 44A(6) of the Companies (Miscellaneous Provisions)
Ordinance, any application made by you or HKSCC Nominees on your behalf cannot be
revoked once it is accepted, which will be ev idenced by the notification of the result of
the ballot by the Hong Kong Branch Share Registrar by way of publication of the
results at the time and in the manner a s specified in the paragraph headed ‘‘B.
Publication of results ’’in this section;
(x) confirm that you are aware of the situations specified in the paragraph headed ‘‘C.
Circumstances in which you will not b e allocated Hong Kong Offer Shares ’’in this
section;
(xi) agree that your application or HKSCC Nominees ’ application, any acceptance of it and
the resulting contract will be governed by and construed in accordance with the laws of
Hong Kong;
(xii) agree to comply with the Companies Ordinance, the Companies (Miscellaneous
Provisions) Ordinance, the Articles of Assoc iation and laws of any place outside Hong
Kong that apply to your application and that neither we nor the Relevant Persons will
breach any law inside and/or outside Hong Kong as a result of the acceptance of your
offer to purchase, or any action arising from your rights and obligations under the terms
and conditions contained in this prospectus;
(xiii) confirm that (a) your application or HKSCC Nominees ’ application on your behalf is
not financed directly or indirectly by our Company, any of the directors, chief
executives, substantial Shareholder(s) or exi sting shareholder(s) of our Company or any
of its subsidiaries or any of their respec tive close associates; and (b) you are not
accustomed or will not be accustomed to taking instructions from our Company, any of
the directors, chief executives, substantial shareholder(s) or existing shareholder(s) of
our Company or any of its subsidiaries or an y of their respective close associates in
relation to the acquisition, disposal, voting o r other disposition of the Shares registered
in your name or otherwise held by you;
(xiv) warrant that the information you have provided is true and accurate;
HOW TO APPLY FOR THE HONG KONG OFFER SHARES
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--- page 470 ---
(xv) confirm that you understand that we and the Overall Coordinator will rely on your
declarations and representations in deciding whether or not to allocate any Hong Kong
Offer Shares to you and that you may be prosecuted for making a false declaration;
(xvi) agree to accept Hong Kong Offer Shares applied for or any lesser number allocated to
you under the application;
(xvii) declare and represent that this is the only application made and the only application
intended by you to be made to benefit you or the person for whose benefit you are
applying;
(xviii) (if the application is made for your own benefit) warrant that no other application has
been or will be made for your benefit by giving electronic application instructions to
HKSCC directly or indirectly or through the application channel of the HK eIPO
White Form Service Provider or by any one as your agent or by any other person; and
(xix) (if you are making the application as an agent for the benefit of another person) warrant
that (1) no other application has been or will be made by you as agent for or for the
b e n e f i to ft h a tp e r s o no rb yt h a tp e r s o no rb ya n yo t h e rp e r s o na sa g e n tf o rt h a tp e r s o n
by giving electronic application instructions to HKSCC and HK eIPO White Form
Service Provider and (2) you have due authority to give electronic application
instructions on behalf of that other person as its agent.
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B. PUBLICATION OF RESULTS
Results of allocation
You can check whether you are successfully allocated any Hong Kong Offer Shares through:
Platform Date/Time
Applying through HK eIPO White Form service or HKSCC EIPO channel:
Website From the ‘‘IPO Results ’’function in
the IPO App or at
www.tricor.com.hk/ipo/result or
www.hkeipo.hk/IPOResult with a
‘‘search by ID ’’function.
The full list of (i) wholly or partially
successful applicants using the HK
eIPO White Form service and
HKSCC EIPO channel, and (ii) the
number of Hong Kong Offer Shares
conditionally allotted to them, among
other things, will be displayed on the
‘‘IPO Results ’’in the IPO App or at
www.hkeipo.hk/IPOResult or
www.tricor.com.hk/ipo/result .
24 hours, from 11:00 p.m. on
Thursday, 21 December 2023 to 12:00
midnight on Wednesday, 27 December
2023 (Hong Kong time)
The Stock Exchange ’s website at
www.hkexnews.hk and our website at
www.persistenceresource.com which
will provide links to the above
mentioned websites of the Hong Kong
Branch Share Registrar.
No later than 11:00 p.m. on Thursday,
21 December 2023 (Hong Kong time).
Telephone +852 3691 8488 — the allocation
results telephone enquiry line
provided by the Hong Kong Share
Registrar
between 9:00 a.m. and 6:00 p.m. from
Friday, 22 December 2023 to Friday,
29 December 2023 (Hong Kong time)
on a business day
For those applying through HKSCC EIPO channel, you may also check with your broker or
custodian from 6:00 p.m. on Wednesday, 20 December 2023 (Hong Kong time).
HKSCC Participants can log into FINI and revi ew the allotment result from 6:00 p.m. on
Wednesday, 20 December 2023 on a 24-hour basis and should report any discrepancies on
allotments to HKSCC as soon as practicable.
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Allocation announcement
We expect to announce the results of the final Offer Price, the level of indications of interest
in the Global Offering, the level of applications in the Hong Kong Public Offering and the basis of
allocations of Hong Kong Offer Shares on the Stock Exchange ’s website at www.hkexnews.hk and
our website at www.persistenceresource.com by no later than 11:00 p.m. on Thursday, 21
December 2023 (Hong Kong time).
C. CIRCUMSTANCES IN WHICH YOU WILL NOT BE ALLOCATED HONG KONG OFFER
SHARES
You should note the following situations in which Hong Kong Offer Shares will not be allocated
to you or the person(s) for whose benefit you are applying for:
1. If your application is revoked:
Your application or the application mad e by HKSCC Nominees on your behalf may be
revoked pursuant to Section 44A(6) of the Companies (Miscellaneous Provisions) Ordinance.
2. If we or our agents exercise our discretion to reject your application:
We, the Overall Coordinator, the Hong Kong Branch Share Registrar and their
respective agents and nominees have full discretion to reject or accept any application, or to
accept only part of any application, without giving any reasons.
3. If the allocation of Hong Kong Offer Shares is void:
The allocation of Hong Kong Offer Shares will be void if the Stock Exchange does not
grant permission to list the Shares either:
. within three weeks from the closing date of the application lists; or
. within a longer period of up to six weeks i f the Stock Exchange notifies us of that
longer period within three weeks of the closing date of the application lists.
4. If:
. you make multiple applications or suspected multiple applications. You may refer to the
paragraph headed ‘‘A. Applications for Hong Kong Offer Shares — 5. Multiple
applications prohibited ’’in this section on what constitutes multiple applications;
. your application instruction is incomplete;
. your payment (or confirmation of funds, as the case may be) is not made correctly;
. the Underwriting Agreements do not become unconditional or are terminated;
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. we or the Overall Coordinator believe that by accepting your application, it or we
would violate applicable securities or other laws, rules or regulations.
5. If there is money settlement failure for allotted Shares:
Based on the arrangements between HKSCC Par ticipants and HKSCC, HKSCC Participants
will be required to hold sufficient application fund s on deposit with their designated bank before
balloting. After balloting of Hong Ko ng Offer Shares, the receiving bank will collect the portion of
these funds required to settle each HKSCC Participant ’s actual Hong Kong Offer Shares allotment
from their designated bank.
There is a risk of money settlement failure. In the extreme event of money settlement
failure by a HKSCC Participant (or its designate d bank), who is acting on your behalf in settling
payment for your allotted shares, HKSCC will contact the defaulting HKSCC Participant and its
designated bank to determine the cause of failure and request such defaulting HKSCC Participant
to rectify or procure to rectify the failure.
However, if it is determined that such settleme nt obligation cannot be m et, the affected Hong
Kong Offer Shares will be reallocated to the Global Offering. Hong Kong Offer Shares applied for
by you through the broker or custodian may be affe cted to the extent of the settlement failure. In
the extreme case, you will not be allocated any Hong Kong Offer Shares due to the money
settlement failure by such HKSCC Participant. N one of us, the Relevant Persons, the Hong Kong
Branch Share Registrar and HKSCC is or will be liable if Hong Kong Offer Shares are not
allocated to you due to the money settlement failure.
D. DESPATCH/COLLECTION OF SHARE CERTIFICATES AND REFUND OF APPLICATION
MONIES
You will receive one Share certificate for all Hong Kong Offer Shares allotted to you under the
Hong Kong Public Offering (except pursuant to a pplications made through the HKSCC EIPO channel
where the Share certificates will be deposited into CCASS as described below).
No temporary document of title will be issued in respect of the Shares. No receipt will be issued
for sums paid on application.
Share certificates will only become valid at 8:00 a.m. on Friday, 22 December 2023 (Hong Kong
time), provided that the Global Offering has bec ome unconditional and the right of termination
described in the section headed ‘‘Underwriting ’’has not been exercised. Investors who trade Shares prior
to the receipt of Share certificates or the Share certificates becoming valid do so entirely at their own
risk.
The right is reserved to retain an y Share certificate(s) and (if applicable) any surplus application
monies pending clearance of application monies.
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The following sets out the relevant procedures and time:
HK eIPO White Form service HKSCC EIPO channel
Despatch/collection o f Share certificate 3
For application of
1,000,000 Hong Kong
O f f e rS h a r e so rm o r e
Collection in person a t the Hong Kong Branch
Share Registrar, Tricor Investor Services
Limited, at 17/F, Far East Finance Centre, 16
Harcourt Road, Hong Kong
Time: from 9:00 a.m. to 1:00 p.m. on Friday,
22 December 2023
4 (Hong Kong time)
If you are an individual, you must not authorise
any other person to collect for you. If you are a
corporate applicant, your authorised
representative must bear a letter of authorisation
from your corporation stamped with your
corporation ’s chop.
Both individuals and authorised representatives
must produce, at the time of collection,
evidence of identity acceptable to the Hong
Kong Branch Share Registrar.
Note: If you do not collect your Share
certificate(s) personally within the time above,
it/they will be sent to the address specified in
your application instructions by ordinary post at
your own risk
Share certificate(s) will be issued in the
name of HKSCC Nominees, deposited
into CCASS and cr edited to your
designated HKSCC Participant ’ss t o c k
account
No action by you is required
For application of less
than 1,000,000 Hong
Kong Offer Shares
Your Share certificate(s) will be sent to the
address specified in your application
instructions by ordinary post at your own risk
Time: Thursday, 21 December 2023
Refund mechanism for surplus application monies paid by you
Date Friday, 22 December 2023 Subject to the arrangement between you
and your broker or custodian
Responsible party Hong Kong Branch Share Registrar Your broker or custodian
Application monies paid
through single bank
account
HK eIPO White Form e-Auto Refund payment
instructions to your designated bank account
Your broker or custodian will arrange
refund to your designated bank account
subject to the arrangement between you
and it
Application monies paid
through multiple bank
accounts
Refund cheque(s) will be despatched to the
address as specified in your application
instructions by ordinary post at your own risk
3 Except in the event of a tropical cyclone warning signal number 8 or above, a black rainstorm warning and/or an
‘‘extreme conditions ’’announcement issued after a super typhoon in force in Hong Kong in the morning on the
Friday, 22 December 2023 rendering it impossible for the relevant share certificates to be dispatched to HKSCC in a
timely manner, our Company shall procure the Hong Kong Branch Share Registrar to arrange for delivery of the
supporting documents and share certificates in accordance with the contingency arrangements as agreed between
them. You may refer to ‘‘ — E. Severe weather arrangements ’’in this section.
4 As agreed with the issuer and communicated to the subscribers in the relevant subscription channel/application forms
(if any).
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--- page 475 ---
E. SEVERE WEATHER ARRANGEMENTS
The opening and closing of the application lists
The application lists will not open or close on Tuesday, 19 December 2023 if, there is:
. a tropical cyclone warning signal number 8 or above;
. a black rainstorm warning; and/or
. an Extreme Conditions,
(collectively, ‘‘Severe Weather Signals ’’),
in force in Hong Kong at any time between 9:00 a.m. and 12:00 noon on Tuesday, 19 December 2023.
Instead they will open between 11:45 a.m. and 12:00 noon and/or close at 12:00 noon on the next
business day which does not have Severe Weather Signals in force at any time between 9:00 a.m. and
12:00 noon.
Prospective investors should be aware that a postponement of the opening/closing of the
application lists may result in a delay in the lis ting date. Should there be any changes to the dates
mentioned in the section headed ‘‘Expected timetable ’’in this prospectus, an announcement will be
made and published on the Stock Exchange ’s website at www.hkexnews.hk and our website at
www.persistenceresource.com of the revised timetable.
If a Severe Weather Signal is hoisted on Thursday, 21 December 2023, the Hong Kong Branch
Share Registrar will make appropriate arrangements for the delivery of the share certificates to the
CCASS depository ’s service counter so that they would be available for trading on Friday, 22 December
2023.
If a Severe Weather Signal is hoisted on Thursday, 21 December 2023:
. for physical share certificates of over 1,000,000 offer shares issued under your own name,
you may pick them up from the Hong Kong Branch Share Registrar’ s office after the Severe
Weather Signal is lowered or cancelled (e.g. on Friday, 22 December 2023).
. for physical share certificates of less than 1,000,000 offer shares issued under your own
name, despatch will be made by ordinary post when the post office re-opens after the Severe
Weather Signal is lowered or cancelled (e.g. in the afternoon of Thursday, 21 December 2023
or on Friday, 22 December 2023).
Prospective investors should be aware that if they choose to receive physical share certificates
issued in their own name, there may be a delay in receiving the share certificates.
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--- page 476 ---
F. ADMISSION OF THE SHARES INTO CCASS
If the Stock Exchange grants the listing of, an d permission to deal in, the Shares on the Stock
Exchange and we comply with the stock admission requirements of HKSCC, the Shares will be accepted
as eligible securities by HKSCC for deposit, clea rance and settlement in CCASS with effect from the
date of commencement of dealings in the Shares o r any other date HKSCC chooses. Settlement of
transactions between Exchange Participants (as def ined in the Listing Rules) is required to take place in
CCASS on the second settlement day after any trading day.
All activities under CCASS are subject to the Ge neral Rules of HKSCC and HKSCC Operational
Procedures in effect from time to time.
All necessary arrangements have been made en abling the Shares to be admitted into CCASS.
You should seek the advice of your broker or other professional advisor for details of the
settlement arrangement as su ch arrangements may affect your rights and interests.
G. PERSONAL DATA
The following Personal information collection statement applies to any personal data collected and
held by our Company, the Hong Kong Branch Share Registrar, the receiving bank(s) and the Relevant
Persons about you in the same way as it applies to personal data about applicants other than HKSCC
Nominees. This personal data may include client iden tifier(s) and your identification information. By
giving application instructions to HKSCC, you acknowledge that you have read, understood and agree to
all of the terms of the Personal information collection statement below.
1. Personal Information Collection Statement
This Personal Information Collection Stateme nt informs the applicant for, and holder of,
Hong Kong Offer Shares, of the policies and practices of our Company and the Hong Kong Branch
Share Registrar in relation to personal data and th e Personal Data (Privacy) Ordinance (Chapter
486 of the Laws of Hong Kong).
2. Reasons for the collection of your personal data
It is necessary for applicants and registered holders of Hong Kong Offer Shares to ensure that
personal data supplied to our Company or its agents and the Hong Kong Branch Share Registrar is
accurate and up-to-date when applying for Hong Kong Offer Shares or transferring Hong Kong
Offer Shares into or out of their names or in procuring the services of the Hong Kong Branch
Share Registrar.
Failure to supply the requested data or supplying inaccurate data may result in your
application for Hong Kong Offer Shares being rejected, or in the delay or the inability of our
Company or the Hong Kong Branch Share Registrar to effect transfers or otherwise render their
HOW TO APPLY FOR THE HONG KONG OFFER SHARES
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--- page 477 ---
services. It may also prevent or delay registration or transfers of Hong Kong Offer Shares which
you have successfully applied for and/or the des patch of Share certificate(s) to which you are
entitled.
It is important that applicants for and holders of Hong Kong Offer Shares inform our
Company and the Hong Kong Branch Share Registrar immediately of any inaccuracies in the
personal data supplied.
3. Purposes
Your personal data may be used, held, processed, and/or stored (by whatever means) for the
following purposes:
. processing your application and refund cheque and e-Auto Refund payment
instruction(s), where applicable, verif ication of compliance with the terms and
application procedures set out in this prospectus and announcing results of allocation of
Hong Kong Offer Shares;
. compliance with applicable laws and reg ulations in Hong Kong and elsewhere;
. registering new issues or transfers into or out of the names of the holders of the Shares
including, where applicable, HKSCC Nominees;
. maintaining or updating the reg ister of members of our Company;
. verifying identities of applicants for and holders of the Shares and identifying any
duplicate applications for the Shares;
. facilitating Hong Kong Offer Shares balloting;
. establishing benefit entitlements of holders of the Shares, such as dividends, rights
issues, bonus issues, etc.;
. distributing communications from o ur Company and its subsidiaries;
. compiling statistical information and profiles of the holder of the Shares;
. disclosing relevant information t o facilitate claims on entitlements; and
. any other incidental or associated purposes relating to the above and/or to enable our
Company and the Hong Kong Branch Share Reg istrar to discharge their obligations to
applicants and holders of the Shares and/or regulators and/or any other purposes to
which applicants and holders of the Shares may from time to time agree.
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4. Transfer of personal data
P e r s o n a ld a t ah e l db yo u rC o m p a n ya n dt h eH o n gK o n gB r a n c hS h a r eR e g i s t r a rr e l a t i n gt o
the applicants for and holders of Hong Kong Offer Shares will be kept confidential but our
Company and the Hong Kong Branch Share Registrar may, to the extent necessary for achieving
any of the above purposes, disclose, obtain or transfer (whether within or outside Hong Kong) the
personal data to, from or with any of the following:
. our Company’ s appointed agents such as financial advisers, receiving banks and
overseas principal share registrar;
. HKSCC or HKSCC Nominees, who will use the personal data and may transfer the
personal data to the Hong Kong Branch Share Registrar for the purposes of providing
its services or facilities or performing its functions in accordance with its rules or
procedures and operating FINI and CCASS (including where applicants for the Hong
Kong Offer Shares request a deposit into CCASS);
. any agents, contractors or third-party se rvice providers who offer administrative,
telecommunications, computer, payment or other services to our Company or the Hong
Kong Branch Share Registrar in connection w ith their respective business operation;
. the Stock Exchange, the SFC and any other statutory regulatory or governmental bodies
or otherwise as required by laws, rules or regulations, including for the purpose of the
Stock Exchange ’s administration of the Listing Rules and the SFC ’s performance of its
statutory functions; and
. any persons or institutions with which the holders of Hong Kong O ffer Shares have or
propose to have dealings, such as their bankers, solicitors, accountants or brokers etc.
5. Retention of personal data
Our Company and the Hong Kong Branch Share Registrar will keep the personal data of the
applicants and holders of Hong Kong Offer Shares for as long as necessary to fulfil the purposes
for which the personal data were collected. Personal data which is no longer required will be
destroyed or dealt with in accord ance with the Personal Data (Privacy) Ordinance (Chapter 486 of
the Laws of Hong Kong).
6. Access to and correction of personal data
Applicants for and holders of Hong Kong Offer Shares have the right to ascertain whether
our Company or the Hong Kong Branch Share Registrar hold their personal data, to obtain a copy
of that data, and to correct any data that is inaccurate. Our Company and the Hong Kong Branch
Share Registrar have the right to charge a reasonable fee for the processing of such requests. All
requests for access to data or correction of data should be addressed to our Company and the Hong
Kong Branch Share Registrar, at their registered address disclosed in the section headed
‘‘Corporate information’’ in this prospectus or as notified from time to time, for the attention of the
company secretary, or the Hong Kong Branch Share Registrar for the attention of the privacy
compliance officer.
HOW TO APPLY FOR THE HONG KONG OFFER SHARES
– 468 –


--- page 479 ---
The following is the text of a report, prepared for the purpose of incorporation in this prospectus,
received from the Reporting A ccountants, Ernst & Young, Certified Public Accountants.
ACCOUNTANTS’ REPORT ON HISTORICAL FINANCIAL INFORMATION TO THE
DIRECTORS OF PERSISTENCE RESO URCES GROUP LTD AND INNOVAX CAPITAL
LIMITED
Introduction
We report on the historical financial information of Persistence Resources Group Ltd (the
‘‘Company ’’) and its subsidiaries (together, the ‘‘Group ’’) set out on pages I-4 to I-84, which comprises
the consolidated statements of profit or loss and other comprehensive income, statements of changes in
equity and statements of cash flows of the Group for each of the years ended 31 December 2020, 2021
and 2022 and the six months ended 30 June 2023 (the ‘‘Relevant Periods ’’), and the consolidated
statements of financial position of the Group as a t 31 December 2020, 2021 and 2022 and 30 June 2023
and the statements of financial position of the Co mpany as at 31 December 2020, 2021 and 2022 and 30
June 2023, and material accounting policy information and other explanatory information (together, the
‘‘Historical Financial Information ’’). The Historical Financial Information set out on pages I-4 to I-84
forms an integral part of this report, which has been prepared for inclusion in the prospectus of the
Company dated 14 December 2023 (the ‘‘Prospectus ’’) in connection with the initial listing of the shares
of the Company on the Main Board of The Stock Exchange of Hong Kong Limited (the ‘‘Stock
Exchange ’’).
Directors ’ responsibility for the Historical Financial Information
The directors of the Company are responsible for the preparation of the Historical Financial
Information that gives a true and fair view in accord ance with the basis of preparation set out in note 2.1
to the Historical Financial Information, and for such internal control as the directors determine is
necessary to enable the preparation of the Historical Financial Information that is free from material
misstatement, whether due to fraud or error.
Reporting accountants ’ responsibility
Our responsibility is to express an opinion on the H istorical Financial Information and to report
our opinion to you. We conducted our work in accordance with Hong Kong Standard on Investment
Circular Reporting Engagements 200 Accountants ’ Reports on Historical Financial Information in
Investment Circulars issued by the Hong Kong Institute of Certified Public Accountants ( ‘‘HKICPA ’’).
APPENDIX I ACCOUNTANTS ’ REPORT
– I-1 –


--- page 480 ---
This standard requires that we comply with ethical standards and plan and perform our work to obtain
reasonable assurance about whether the Historica l Financial Information is free from material
misstatement.
Our work involved performing procedures to obtain evidence about the amounts and disclosures in
the Historical Financial Information. The procedures selected depend on the reporting accountants ’
judgement, including the assessment of risks of ma terial misstatement of the Historical Financial
Information, whether due to fraud or error. In making those risk assessments, the reporting accountants
consider internal control relevant to the entity ’s preparation of the Historical Financial Information that
gives a true and fair view in accordance with the basis of preparation set out in note 2.1 to the Historical
Financial Information, in order to design procedures that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the effectiveness of the entity ’s internal control. Our work
also included evaluating the appropriateness of accounting policies used and the reasonableness of
accounting estimates made by the directors, as well as evaluating the overall presentation of the
Historical Financial Information.
We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
Opinion
In our opinion, the Historical Financial Information gives, for the purposes of the accountants ’
report, a true and fair view of the financial pos ition of the Group and the Company as at 31 December
2020, 2021 and 2022 and 30 June 2023, and of the financial performance and cash flows of the Group
for each of the Relevant Periods in accordance with the basis of preparation set out in note 2.1 to the
Historical Financial Information.
Review of interim comparative financial information
We have reviewed the interim comparative financial information of the Group which comprises the
consolidated statement of profit or loss and other comprehensive income, statement of changes in equity
and statement of cash flows for the six months ended 30 June 2022 and other explanatory information
(the ‘‘Interim Comparative Financial Information’’ ). The directors of the Company are responsible for
the preparation and presentation of the Interim Comparative Financial Information in accordance with
the basis of preparation set out in note 2.1 to the His torical Financial Information. Our responsibility is
to express a conclusion on the Interim Comparative Financial Information based on our review. We
conducted our review in accordance with Hong Kong Standard on Review Engagements 2410 Review of
Interim Financial Information Performed by the Independent Auditor of the Entity issued by the
HKICPA. A review consists of making inquiries, primarily of persons responsible for financial and
accounting matters, and applying analytical and other review procedures. A review is substantially less
in scope than an audit conducted in accorda nce with Hong Kong Standards on Auditing and
consequently does not enable us to obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do not express an audit opinion. Based on
our review, nothing has come to our attention that causes us to believe that the Interim Comparative
APPENDIX I ACCOUNTANTS ’ REPORT
– I-2 –


--- page 481 ---
Financial Information, for the purposes of the accountants ’ report, is not prepared, in all material
respects, in accordance with the basis of preparation set out in note 2.1 to the Historical Financial
Information.
Report on matters under the Rules Governing the Li sting of Securities on the Stock Exchange and
the Companies (Winding Up and Miscellaneous Provisions) Ordinance
Adjustments
In preparing the Historical Financial Information, no adjustments to the Underlying Financial
Statements as defined on page I-4 have been made.
Dividends
We refer to note 12 to the Historical Financial Information which contains information about the
dividends paid by the Company in respect of the Relevant Periods.
No historical financial statements for the Company
As at the date of this report, no statutory financial statements have been prepared for the Company
since its date of incorporation.
Certified Public Accountants
Hong Kong
14 December 2023
APPENDIX I ACCOUNTANTS ’ REPORT
– I-3 –


--- page 482 ---
I HISTORICAL FINANCIAL INFORMATION
PREPARATION OF HISTORICAL FINANCIAL INFORMATION
Set out below is the Historical Financial Information which forms an integral part of this
accountants ’ report.
The financial statements of the Group for the Relevant Periods, on which the Historical Financial
Information is based, were audited by Ernst & Young in accordance with International Standards on
Auditing issued by the International Auditing and Assurance Standards Board (‘‘ IAASB ’’)( t h e
‘‘Underlying Financial Statements ’’).
The Historical Financial Inform ation is presented in Renminbi ( ‘‘RMB’’) and all values are
rounded to the nearest thousand (RMB’ 000) except when otherwise indicated.
CONSOLIDATED STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE
INCOME
Year ended 31 December
Six months ended
30 June
Notes 2020 2021 2022 2022 2023
RMB ’000 RMB ’000 RMB ’000 RMB ’000 RMB ’000
(unaudited)
REVENUE 5 360,999 247,872 418,413 217,331 196,659
Cost of sales (166,013) (107,767) (199,823) (99,981) (104,277)
GROSS PROFIT 194,986 140,105 218,590 117,350 92,382
Other income and gains 5 3,973 3,613 13,403 8,392 5,428
Administrative expenses (21,480) (22,490) (33,711) (14,569) (16,655)
Other expenses 6 (2,930) (30,194) (10,419) (1,036) —
Finance costs 7 (5,236) (3,824) (2,955) (1,428) (1,657)
PROFIT BEFORE TAX 8 169,313 87,210 184,908 108,709 79,498
Income tax expense 11 (54,890) (28,494) (63,918) (36,237) (26,729)
PROFIT FOR THE YEAR/PERIOD 114,423 58,716 120,990 72,472 52,769
Profit attributable to:
Owners of the parent 82,403 41,624 83,214 51,438 37,261
Non-controlling interests 32,0 20 17,092 37,776 21,034 15,508
114,423 58,716 120,990 72,472 52,769
APPENDIX I ACCOUNTANTS ’ REPORT
– I-4 –


--- page 483 ---
Year ended 31 December
Six months ended
30 June
Notes 2020 2021 2022 2022 2023
RMB ’000 RMB ’000 RMB ’000 RMB ’000 RMB ’000
(unaudited)
EARNINGS PER SHARE
ATTRIBUTABLE TO ORDINARY
EQUITY HOLDERS OF THE
PARENT (Expressed in RMB per
share)
Basic and Diluted 13 1,030 520 1,040 643 466
OTHER COMPREHENSIVE
INCOME/(LOSS)
Other comprehensive (loss)/income
that may be reclassified to profit or
loss in subsequent periods:
Exchange differences on translation
of financial statements of
subsidiaries 17,651 7,614 (19,407) (13,437) (9,266)
17,651 7,614 (19,407) (13,437) (9,266)
Other comprehensive income/(loss)
that may not be reclassified to
profit or loss in subsequent periods:
Exchange differences on translation
of financial statements of the
Company (16,430) (8,895) 29,543 13,500 10,459
(16,430) (8,895) 29,543 13,500 10,459
OTHER COMPREHENSIVE
INCOME/(LOSS) FOR THE YEAR/
PERIOD 1,221 (1,281) 10,136 63 1,193
TOTAL COMPREHENSIVE INCOME
FOR THE YEAR/PERIOD 115,644 57,435 131,126 72,535 53,962
Total comprehensive income
attributable to:
Owners of the parent 83,624 40,343 93,350 51,501 38,454
Non-controlling interests 32,0 20 17,092 37,776 21,034 15,508
115,644 57,435 131,126 72,535 53,962
APPENDIX I ACCOUNTANTS ’ REPORT
– I-5 –


--- page 484 ---
CONSOLIDATED STATEMEN TS OF FINANCIAL POSITION
As at 31 December
As at
30 June
2023Notes 2020 2021 2022
RMB ’000 RMB ’000 RMB ’000 RMB ’000
NON-CURRENT ASSETS
Property, plant and equipment 14 262,409 282,083 296,929 320,578
Intangible assets 15 145,238 132,322 125,090 121,110
Right-of-use assets 16(a) 134,998 128,627 119,720 115,243
Deferred tax assets 17 5,432 5,408 5,906 6,321
Other long-term assets 18 12,100 3,954 6,526 7,538
Total non-current assets 560,177 552,394 554,171 570,790
CURRENT ASSETS
Inventories 19 28,989 19,788 18,652 11,310
Prepayments, other receivables and other assets 20 2,786 4,364 5,845 8,632
Due from related parties 35 1 — 7,200 7,200
Restricted and pledged deposits 21 14,290 15,645 17,594 19,212
Cash and cash equivalents 21 202,907 182,398 282,187 350,001
Current portion of other long-term assets 18 — 1,000 400 400
Total current assets 248,973 223,195 331,878 396,755
CURRENT LIABILITIES
Trade payables 22 13,839 15,871 12,426 9,576
Other payables and accruals 23 92,965 20,455 20,897 33,106
Due to related parties 35 59,649 60,255 447 456
Provisions 24 1,912 1,351 1,305 1,305
Deferred income 25 680 510 340 255
Tax payable 25,911 45,484 73,647 87,305
Interest-bearing bank borrowings 26 30,000 30,000 30,000 30,000
Lease liabilities 16(b) ————
Current portion of other long-term liabilities 27 1,065 7,369 7,369 7,369
Total current liabilities 226,0 21 181,295 146,431 169,372
APPENDIX I ACCOUNTANTS ’ REPORT
– I-6 –


--- page 485 ---
As at 31 December
As at
30 June
2023Notes 2020 2021 2022
RMB ’000 RMB ’000 RMB ’000 RMB ’000
NET CURRENT ASSETS 22,952 41,900 185,447 227,383
TOTAL ASSETS LESS CURRENT LIABILITIES 583,129 594,294 739,618 798,173
NON-CURRENT LIABILITIES
Provisions 24 21,971 23,316 23,913 24,258
Other long-term liabilities 27 8 ,693 36,158 30,066 30,127
Deferred tax liabilities 17 6,464 5,275 9,535 13,722
Total non-current liabilities 3 7,128 64,749 63,514 68,107
NET ASSETS 546,001 529,545 676,104 730,066
EQUITY
Equity attributable to owners of the parent
S h a r e c a p i t a l 2 8 1111
Reserves 29 482,184 488,636 553,870 592,324
482,185 488,637 553,871 592,325
Non-controlling interests 63,816 40,908 122,233 137,741
TOTAL EQUITY 546,001 529,545 676,104 730,066
APPENDIX I ACCOUNTANTS ’ REPORT
– I-7 –


--- page 486 ---
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Attributable to owners of the parent
Share
capital
Capital
reserve*
Statutory
surplus
reserve*
Special
reserve*
Exchange
fluctuation
reserve*
Retained
profits* Total
Non-
controlling
interests
Total
equity
RMB ’000 RMB ’000 RMB ’000 RMB ’000 RMB ’000 RMB ’000 RMB ’000 RMB ’000 RMB ’000
(note 28) (note 29) (note 29) (note 29) (note 29)
As at 1 January 2020 1 50,875 — 2,839 2,160 19,839 75,714 31,796 107,510
Profit for the year ————— 82,403 82,403 32,020 114,423
Other comprehensive income for the year:
Exchange differences on translation of
financial statements of group companies ———— 1,221 — 1,221 — 1,221
Total comprehensive income for the year ———— 1,221 82,403 83,624 32,020 115,644
Contribution from a shareholder — 322,847 ———— 322,847 — 322,847
Transfer from retained profits —— 12,808 —— (12,808) ———
Dividends paid to non-cont rolling shareholders ——————— (5,000) (5,000)
Contribution from non-controlling shareholders ——————— 5,000 5,000
Provision of safety fund surplus reserve ——— 573 — (573) ———
As at 31 December 2020 1 373,722 12,808 3,412 3,381 88,861 482,185 63,816 546,001
APPENDIX I ACCOUNTANTS ’ REPORT
– I-8 –


--- page 487 ---
Attributable to owners of the parent
Share
capital
Capital
reserve*
Statutory
surplus
reserve*
Special
reserve*
Exchange
fluctuation
reserve*
Retained
profits* Total
Non-
controlling
interests
Total
equity
RMB ’000 RMB ’000 RMB ’000 RMB ’000 RMB ’000 RMB ’000 RMB ’000 RMB ’000 RMB ’000
(note 28) (note 29) (note 29) (note 29) (note 29)
As at 1 January 2021 1 373,722 12,808 3,412 3,381 88,861 482,185 63,816 546,001
Profit for the year ————— 41,624 41,624 17,092 58,716
Other comprehensive income
for the year:
Exchange differences on translation of
financial statements of group companies ———— (1,281) — (1,281) — (1,281)
Total comprehensive income/(loss) for the year ———— (1,281) 41,624 40,343 17,092 57,435
Transfer from retained profits —— 6,837 —— (6,837) ———
Dividends paid to non-cont rolling shareholders ——————— (40,000) (40,000)
Dividend declared ————— (33,891) (33,891) — (33,891)
Provision of safety fund surplus reserve ——— 741 — (741) ———
Utilisation of safety fund surplus reserve ——— (3,357) — 3,357 ———
As at 31 December 2021 1 373,722 19,645 796 2,100 92,373 488,637 40,908 529,545
APPENDIX I ACCOUNTANTS ’ REPORT
– I-9 –


--- page 488 ---
Attributable to owners of the parent
Share
capital
Capital
reserve*
Statutory
surplus
reserve*
Special
reserve*
Exchange
fluctuation
reserve*
Retained
profits* Total
Non-
controlling
interests
Total
equity
RMB ’000 RMB ’000 RMB ’000 RMB ’000 RMB ’000 RMB ’000 RMB ’000 RMB ’000 RMB ’000
(note 28) (note 29) (note 29) (note 29) (note 29)
As at 1 January 2022 1 373,722 19,645 796 2,100 92,373 488,637 40,908 529,545
Profit for the year ————— 83,214 83,214 37,776 120,990
Other comprehensive income for the year:
Exchange differences on translation of
financial statements of group companies ———— 10,136 — 10,136 — 10,136
Total comprehensive income for the year ———— 10,136 83,214 93,350 37,776 131,126
Contribution from shareholders — 10,770 ———— 10,770 36,349 47,119
Transfer from retained profits —— 15,110 —— (15,110) ———
Dividend declared ————— (38,886) (38,886) — (38,886)
Capital injection by non-controlling
shareholders ——————— 7,200 7,200
Provision of safety fund surplus reserve ——— 1,698 — (1,698) ———
Utilisation of safety fund surplus reserve ——— (2,494) — 2,494 ———
As at 31 December 2022 1 384,492 34,755 — 12,236 122,387 553,871 122,233 676,104
APPENDIX I ACCOUNTANTS ’ REPORT
– I-10 –


--- page 489 ---
Attributable to owners of the parent
Share
capital
Capital
reserve*
Statutory
surplus
reserve*
Special
reserve*
Exchange
fluctuation
reserve*
Retained
profits* Total
Non-
controlling
interests
Total
equity
RMB ’000 RMB ’000 RMB ’000 RMB ’000 RMB ’000 RMB ’000 RMB ’000 RMB ’000 RMB ’000
(note 28) (note 29) (note 29) (note 29) (note 29)
As at 1 January 2022 1 373,722 19,645 796 2,100 92,373 488,637 40,908 529,545
Profit for the period ————— 51,438 51,438 21,034 72,472
Other comprehensive income for the period:
Exchange differences on translation of
financial statements of group companies ———— 63 — 63 — 63
Total comprehensive income for the period ———— 63 51,438 51,501 21,034 72,535
Transfer from retained profits —— 8,414 —— (8,414) ———
Provision of safety fund surplus reserve ——— 768 — (768) ———
Utilisation of safety fund surplus reserve ——— (870) — 870 ———
As at 30 June 2022 (unaudited) 1 373,722 28,059 694 2,163 135,499 540,138 61,942 602,080
APPENDIX I ACCOUNTANTS ’ REPORT
– I-11 –


--- page 490 ---
Attributable to owners of the parent
Share
capital
Capital
reserve*
Statutory
surplus
reserve*
Special
reserve*
Exchange
fluctuation
reserve*
Retained
profits* Total
Non-
controlling
interests
Total
equity
RMB ’000 RMB ’000 RMB ’000 RMB ’000 RMB ’000 RMB ’000 RMB ’000 RMB ’000 RMB ’000
(note 28) (note 29) (note 29) (note 29) (note 29)
As at 1 January 2023 1 384,492 34,755 — 12,236 122,387 553,871 122,233 676,104
Profit for the period ————— 37,261 37,261 15,508 52,769
Other comprehensive income for the period:
Exchange differences on translation of
financial statements of group companies ———— 1,193 — 1,193 — 1,193
Total comprehensive income for the period ———— 1,193 37,261 38,454 15,508 53,962
Transfer from retained profits —— 6,203 —— (6,203) ———
Provision of safety fund surplus reserve ——— 804 — (804) ———
Utilisation of safety fund surplus reserve ——— (804) — 804 ———
As at 30 June 2023 1 384,492 40,958 — 13,429 153,445 592,325 137,741 730,066
* These reserve accounts represent the total consolidated reserves of RMB482,184,000, RMB488,636,000 and RMB553,870,000 and RMB592,324,000 in th e consolidated statements
of financial position as at 31 December 2020, 2021 and 2022, 30 June 2023, respectively.
# Issued capital amounted to HKD800, HKD800, HKD800 and HKD800 as at 31 December 2020, 2021 and 2022, 30 June 2023, respectively.
APPENDIX I ACCOUNTANTS ’ REPORT
– I-12 –


--- page 491 ---
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year ended 31 December
Six months ended
30 June
Notes 2020 2021 2022 2022 2023
RMB ’000 RMB ’000 RMB ’000 RMB ’000 RMB ’000
(unaudited)
CASH FLOWS FROM OPERATING
ACTIVITIES
Profit before tax 169,313 87,210 184,908 108,709 79,498
Adjustments for:
Depreciation of items of property,
plant and equipment 8 28,652 14,678 29,582 14,834 15,998
Depreciation of right-of-use assets 8 8,822 8,840 8,947 4,474 4,477
Amortisation of intangible assets 8 2,543 3,334 8,508 4,321 3,980
Loss/(gain) on disposal of items of
property, plant and equipment 8 (35) 975 (12) (12) (59)
Investment income 5 (2,673) ————
Finance costs 7 5,236 3,824 2,955 1,428 1,657
211,858 118,861 234,888 133,754 105,551
(Increase)/decrease in inventories 1,395 9,201 1,136 991 7,342
(Increase)/decrease in prepayments,
other receivables and other assets 8,165 (1,525) (1,481) (2,236) (2,787)
(Decrease)/increase in trade payables 5,711 2,032 (3,445) (3,551) (2,850)
Decrease/(increase) in restricted and
pledged bank deposits (4,964) (1,355) (1,949) (1,333) (1,618)
Increase/(decrease) in other payables
and accruals 2,504 (3,957) 1,583 (1,197) (464)
Increase/(decrease) in provisions (1,510) 784 551 332 345
Cash generated from operations 223,159 124,041 231,283 126,760 105,519
Tax paid (36,403) (10,086) (31,993) (9,138) (9,299)
Net cash flows from operating
activities 186,756 113,955 199,290 117,622 96,220
APPENDIX I ACCOUNTANTS ’ REPORT
– I-13 –


--- page 492 ---
Year ended 31 December
Six months ended
30 June
Notes 2020 2021 2022 2022 2023
RMB ’000 RMB ’000 RMB ’000 RMB ’000 RMB ’000
(unaudited)
CASH FLOWS FROM
INVESTING ACTIVITIES
Investment income 2,673 ————
Advances of loans to third parties (12,100) ————
Cash received from repayment of loan — 8,100 ———
Advances of loans to related parties — (31,857) ———
Purchases of items of property, plant
and equipment (17,455) (34,619) (48,379) (15,240) (28,412)
Proceeds from disposal of property,
plant and equipment 232 — 12 12 59
Additions to intangible assets (30,180) (26,952) (7,653) (1,353) —
Additions to right-of-use assets 16 (4,076) (2,469) (40) ——
Net cash flows used in investing
activities (60,906) (87,797) (56,060) (16,581) (28,353)
CASH FLOWS FROM FINANCING
ACTIVITIES
Advanced from related parties 6,936 862 918 451 456
Repayment of advance from related
parties —— (14,823) — (461)
Issuance of shares — 1 ———
Repayment of other long-term
liabilities (839) (1,300) (1,069) (535) (534)
New bank loans 30,000 30,000 30,000 ——
Interest paid (4,152) (2,659) (933) (466) (721)
Dividends paid — (2,034) (38,886) ——
Dividends paid to non-controlling
interests (5,000) (40,000) ———
Contribution from non-controlling
shareholders 5,000 ————
Repayment of bank loans (90,000) (30,000) (30,000) (30,000) —
Net cash flows used in financing
activities (58,055) (45,130) (54,793) (30,550) (1,260)
NET INCREASE/(DECREASE) IN
CASH AND CASH
EQUIVALENTS 67,795 (18,972) 88,437 70,491 66,607
APPENDIX I ACCOUNTANTS ’ REPORT
– I-14 –


--- page 493 ---
Year ended 31 December
Six months ended
30 June
Notes 2020 2021 2022 2022 2023
RMB ’000 RMB ’000 RMB ’000 RMB ’000 RMB ’000
(unaudited)
Cash and cash equivalents at
beginning of year/period 134,696 202,907 182,398 182,398 282,187
Effects of exchange rate changes on
cash and cash equivalents 416 (1,537) 11,352 667 1,207
CASH AND CASH EQUIVALENTS
AT END OF YEAR/PERIOD 202,907 182,398 282,187 253,556 350,001
ANALYSIS OF BALANCES OF
CASH AND CASH
EQUIVALENTS
Cash and cash equivalents 21 202,907 182,398 282,187 253,556 350,001
CASH AND CASH EQUIVALENTS
AS STATED IN THE
CONSOLIDATED STATEMENTS
OF FINANCIAL POSITION AND
STATEMENTS OF CASH
FLOWS 202,907 182,398 282,187 253,556 350,001
APPENDIX I ACCOUNTANTS ’ REPORT
– I-15 –


--- page 494 ---
STATEMENT OF FINANCIAL POSITION
As at 31 December 30 June
2023Notes 2020 2021 2022
RMB ’000 RMB ’000 RMB ’000 RMB ’000
NON-CURRENT ASSETS
Investment in a subsidiary 1111
Property, plant and equipment —— 21 19
Total non-current assets 1 1 22 20
CURRENT ASSETS
Prepayments, other receivables
and other assets 20 2,161 3,152 4,050 5,382
Due from a subsidiary 34 305,831 316,897 310,866 320,854
Cash and cash equivalents 21 538 325 38,735 34,015
Total current assets 308,530 320,374 353,651 360,251
CURRENT LIABILITIES
Due to related parties 34 14,324 22,886 20,966 21,634
Other payables and accruals 21 123 1,274 1,789
Total current liabilities 14,345 23,009 22,240 23,423
NET CURRENT ASSETS 294,185 297,365 331,411 336,828
NET ASSETS 294,186 297,366 331,433 336,848
EQUITY
Share capital 28 1111
Reserves 29 294,185 297,365 331,432 336,847
TOTAL EQUITY 294,186 297,366 331,433 336,848
The Company was incorporated in the Cayman Islands on 21 May 2019. On its date of
incorporation, 100 ordinary shares o f USD1 were issued and allotted (note 28).
APPENDIX I ACCOUNTANTS ’ REPORT
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--- page 495 ---
II NOTES TO THE HISTORICAL FINANCIAL INFORMATION
1. CORPORATE INFORMATION
The Company is an exempted company incorporated in the Cayman Islands. The address of the
registered office of the Company is PO Box 309, Ugland House, Grand Cayman, KY1-1104, Cayman
Islands.
The Company is an investment holding company. During the Relevant Periods, the subsidiaries
now comprising the Group were i nvolved in the mining, processing and sale of gold bullion (the
‘‘Listing Business ’’) in the People ’s Republic of China (the ‘‘PRC’’).
The Company and its subsidiaries now comprising the Group underwent the Reorganisation as set
out in the section headed ‘‘History, Reorganisation and Corporate Structure — Reorganisation ’’in the
Prospectus. Apart from the Reorganisation, the Company has not commenced any business or operation
since its incorporation.
As at the date of this report, the Company had direc t or indirect interests in its subsidiaries, all of
which are private limited liability companies (or, if incorporated outside Hong Kong, the subsidiaries
have substantially similar characteristics to a private company incorporated in Hong Kong), the
particulars of which are set out below:
Name Notes
Place and date
of incorporation/
registration and place
of operations
Nominal value
of registered
share capital
Percentage of
equity interest
attributable to
the Company Principal activities
Directly held:
Majestic Yantai
Gold Ltd.*
(1) British Virgin Islands/
1J u l y2 0 0 4
USD50,000 100% Investment
holding
Indirectly held:
煙台中嘉礦業有限公司
Yantai Zhongjia
Mining Co., Ltd.
(‘‘Yantai Zhongjia ’’)**
(2) PRC/Mainland China/
17 March 2005
RMB168,705,500 75% Mining, processing
and sale of gold
* This company is a wholly-owned subsidiary of the Company.
** This company is a subsidiary indirectly owned by the Company.
APPENDIX I ACCOUNTANTS ’ REPORT
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--- page 496 ---
The English name of the subsidiary registered in the PRC represents the best efforts made by
management of the Company to translate the Chinese name of this company as it does not have an
official English name.
(1) No audited financial statements have been prepared and issued for the entity for the years
ended 31 December 2020, 2021 and 2022 as this company is not subject to any statutory
audit requirement under the relevant rules and regulations.
(2) The statutory financial statements for the years ended 31 December 2020, 2021 and 2022
prepared in accordance with PRC accounting principles and regulations have been audited by
Shandong Tianluxin Certified Public Accountants Firm ( 山東天陸新會計師事務所有限公司),
a certified public accounting firm registered in the PRC.
2.1 BASIS OF PREPARATION
The Historical Financial Information has been pr epared in accordance with International Financial
Reporting Standards ( ‘‘IFRSs ’’), which comprise all standards and interpretations approved by the
International Accountin g Standards Board (the ‘‘IASB ’’). All IFRSs effective for the accounting period
commencing from 1 January 2023, together with the relevant transitional provisions, have been early
adopted by the Group in the preparation of the Historical Financial Information throughout the Relevant
Periods and in the period covered by the Interim Comparative Financial Information.
The Historical Financial Information has been prepared under the historical cost convention.
All intra-group transactions and balances have been eliminated on consolidation.
2.2 ISSUED BUT NOT YET EFFECTIVE IFRSs
The Group has not applied the following revised IFRSs, that have been issued but are not yet
effective, in this Historical Financial Information.
Amendments to IAS 7 and
IFRS 7
Supplier Finance Arrangements
1
Amendments to IFRS 10 and
IAS 28
Sale or Contribution of Assets between an Investor and its
Associate or Joint Venture 2
Amendments to IFRS 16 Lease Liability in a Sale and Leaseback 1
Amendments to IAS 1 Classification of Liabilities as Current or Non-current
(the ‘‘2022 Amendments ’’)1,3
Amendments to IAS 1 Non-current Liabilitie s with Covenants (the ‘‘2022
Amendments’’)1
Amendments to IAS 21 Lack of Exchangeability 4
1 Effective for annual periods beginning on or after 1 January 2024
2 No mandatory effective date yet dete rmined but available for adoption
3 As a consequence of the 2022 Amendments, the effective date of the 2020 Amendments was deferred to annual
periods beginning on or after 1 January 2024
4 Effective for annual periods beginning on or after 1 January 2025
APPENDIX I ACCOUNTANTS ’ REPORT
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The Group is in the process of making an assessm ent of the impact of these new and revised
IFRSs upon initial application. So far, the Group considers that, these new and revised IFRSs are
unlikely to have a significant impact on the Group ’s result of operations and financial position.
2.3 MATERIAL ACCOUNTING POLICIES
Subsidiaries
A subsidiary is an entity (including a structured e ntity), directly or indirectly, controlled by the
Company. Control is achieved when the Group is exposed, or has rights, to variable returns from its
involvement with the investee and has the ability to affect those returns through its power over the
investee (i.e., existing rights that give the Group th e current ability to direct the relevant activities of the
investee).
When the Company has, directly or indirectly, les s than a majority of the voting or similar rights
of an investee, the Group considers all relevant facts and circumstances in assessing whether it has
power over an investee, including:
(a) the contractual arrangement with th e other vote holders of the investee;
(b) rights arising from other contractual arrangements; and
(c) the Group ’s voting rights and potential voting rights.
The financial statements of the subsidiaries a re prepared for the same reporting period as the
Company, using consistent accounting policies. The r esults of subsidiaries are consolidated from the
beginning of the Relevant Periods or the date on which a subsidiary was incorporated, whichever is the
later, and continue to be consolidated until the date that such control ceases.
Profit or loss and each component of other comprehensive income are attributed to the owners of
the parent of the Group and to the non-controlling int erests, even if this results in the non-controlling
interests having a deficit balance. All intra-group assets and liabilities, equ ity, income, expenses and
cash flows relating to transactions between m embers of the Group are eliminated in full on
consolidation.
The Group reassesses whether or not it controls an investee if facts and circumstances indicate that
there are changes to one or more of the three elements of control described above. A change in the
ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction.
If the Group loses control over a subsidiary, it der ecognises (i) the assets (including goodwill) and
liabilities of the subsidiary, (ii) the carrying am ount of any non-controlling interest and (iii) the
cumulative translation differences recorded in equity; and recognises (i) the fair value of the
consideration received, (ii) the fair value of any investment retained and (iii) any resulting surplus or
deficit in profit or loss. The Group’ s share of components previously recognised in other comprehensive
income is reclassified to profit or loss or accumulated losses, as appropriate, on the same basis as would
be required if the Group had directly dis posed of the related assets or liabilities.
APPENDIX I ACCOUNTANTS ’ REPORT
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--- page 498 ---
Fair value measurement
Fair value is the price that wou ld be received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants at the measurement date. The fair value measurement is
based on the presumption that the transaction to sel l the asset or transfer the liability takes place either
in the principal market for the asset or liability, o r in the absence of a principal market, in the most
advantageous market for the asset or liability. The principal or the most advantageous market must be
accessible by the Group. The fair value of an asset o r a liability is measured usi ng the assumptions that
market participants would use when pricing the asse t or liability, assuming that market participants act
in their economic best interest.
A fair value measurement of a non-financial asset takes into account a market participant ’s ability
to generate economic benefits by using the asset in its highest and best use or by selling it to another
market participant that would use the asset in its highest and best use.
The Group uses valuation techniques that are ap propriate in the circumstances and for which
sufficient data are available to measure fair value, maximising the use of relevant observable inputs and
minimising the use of unobservable inputs.
All assets and liabilities for which fair value is meas ured or disclosed in the financial statements
are categorised within the fair value hierarchy, described as follows, based on the lowest level input that
is significant to the fair value measurement as a whole:
Level 1 — b a s e do nq u o t e dp r i c e s( u n a d j u s t e d )i nactive markets for identical assets or
liabilities
Level 2 — based on valuation techniques for which the lowest level input that is significant
to the fair value measurement is observable, either directly or indirectly
Level 3 — based on valuation techniques for which the lowest level input that is significant
to the fair value measurement is unobservable
For assets and liabilities that are recognised in the financial statements o n a recurring basis, the
Group determines whether transfers have occurre d between levels in the hierarchy by reassessing
categorisation (based on the lowest level input th at is significant to the fair value measurement as a
whole) at the end of each reporting period.
Impairment of non-financial assets
Where an indication of impairment exists, or when annual impairment testing for an asset is
required (other than inventorie s and financial assets), the asset ’s recoverable amount is estimated. An
asset ’s recoverable amount is the higher of the asset ’s or cash-generating unit ’s value in use and its fair
value less costs of disposal, and is determined for an individual asset, unless the asset does not generate
cash inflows that are largely independent of those from other assets or groups of assets, in which case
the recoverable amount is determined for the cash-generating unit to which the asset belongs. In testing
APPENDIX I ACCOUNTANTS ’ REPORT
– I-20 –


--- page 499 ---
a cash-generating unit for impairment, a portion of the carrying amount of a corporate asset (e.g., a
headquarters building) is allocated to an individual cash-generating unit if it can be allocated on a
reasonable and consistent basis or, otherwise, to the smallest group of cash-generating units.
An impairment loss is recognised only if the carrying amount of an asset exceeds its recoverable
amount. In assessing value in use, the estimated future cash flows are discounted to their present value
using a pre-tax discount rate that reflects current market assessments of the time value of money and the
risks specific to the asset. An impairment loss is charged to profit or loss in the period in which it arises
in those expense categories consistent w ith the function of the impaired asset.
An assessment is made at the end of each reporting p eriod as to whether there is an indication that
previously recognised impairment losses may no longer exist or may have decreased. If such an
indication exists, the recoverable amount is estimated. A previously recognised impairment loss of an
asset other than goodwill is reversed only if there h as been a change in the estimates used to determine
the recoverable amount of that asset, but not to an amount higher than the carrying amount that would
have been determined (net of any depreciation/amortisation) had no impairment loss been recognised for
the asset in prior years. A reversal of such an impairment loss is credited to profit or loss in the period
in which it arises.
Related parties
A party is considered to be related to the Group if:
(a) the party is a person or a close member of that person ’s family and that person
(i) has control or joint control over the Group;
(ii) has significant influence over the Group; or
(iii) is a member of the key management personnel of the Group or of a parent of the
Group;
or
(b) the party is an entity where any of the following conditions applies:
(i) the entity and the Group are members of the same group;
(ii) one entity is an associate or joint venture of the other entity (or of a parent, subsidiary
or fellow subsidiary of the other entity);
(iii) the entity and the Group are joint ventures of the same third party;
(iv) one entity is a joint venture of a third entity and the other entity is an associate of the
third entity;
APPENDIX I ACCOUNTANTS ’ REPORT
– I-21 –


--- page 500 ---
(v) the entity is a post-employment benefit plan for the benefit of employees of either the
Group or an entity related to the Group;
(vi) the entity is controlled or jointly co ntrolled by a person identified in (a);
(vii) a person identified in (a)(i) has signific ant influence over the entity or is a member of
the key management personnel of the en tity (or of a parent of the entity); and
(viii) the entity, or any member of a group of wh ich it is a part, provides key management
personnel services to Group or to the parent of the Group.
Property, plant and equipment and depreciation
Property, plant and equipment, other than cons truction in progress, are stated at cost less
accumulated depreciation and any impairment losses. The cost of an item of property, plant and
equipment comprises its purchase price and any dir ectly attributable costs of bringing the asset to its
working condition and loca tion for its intended use.
Expenditure incurred after items of property, plant and equipment have been put into operation,
such as repairs and maintenance, is normally char g e dt op r o f i to rl o s si nt h ep e r i o di nw h i c hi ti s
incurred. In situations where the recognition criteria a re satisfied, the expenditu re for a major inspection
is capitalised in the carrying amount of the asset as a replacement. Where significant parts of property,
plant and equipment are required to be replaced at intervals, the Group recognises such parts as
individual assets with specific useful lives and depreciates them accordingly.
Depending on the nature of the item of property, plant and equipment, depreciation is calculated
on the straight-line basis to write off the cost of each asset to its residual value over its estimated useful
life or it is calculated using the units of production (‘‘ UOP’’) basis to write off the cost of the asset
proportionately to the value obtained from the extraction of the proven and probable mineral reserves.
The estimated useful lives of property, plant and equipment are as follows:
Buildings 20 years
Plant and machinery 5 to 20 years
Office equipment, and electronic and
other devices
5 years
Motor vehicles 5 years
Mining infrastructure Respective lives of mines
Leasehold improvements Over the shorter of the lease terms and 5%
Included in property, plant and equipment is mi ning infrastructure located at the mining sites.
Depreciation is provided to write off the cost of the mining infrastructure using the UOP method based
on the indicated mineral resources.
APPENDIX I ACCOUNTANTS ’ REPORT
– I-22 –


--- page 501 ---
Where parts of an item of property, plant and equipment have different useful lives, the cost of
that item is allocated on a reasonable basis among th e parts and each part is depreciated separately.
Residual values, useful lives and the depreciation method are reviewed, and adjusted if appropriate, at
least at each financial year end.
An item of property, plant and equipment including any significant part initially recognised is
derecognised upon disposal or when no future economic benefits are expected from its use or disposal.
Any gain or loss on disposal or retirement recognised in profit or loss in the year the asset is
derecognised is the difference between the net sales proceeds and the carrying amount of the relevant
asset.
Construction in progress represents a building under construction, which is stated at cost less any
impairment losses, and is not depreciated. Cost comp rises the direct costs of construction and capitalised
borrowing costs on related borrowed funds during the period of construction. Construction in progress is
reclassified to the appropriate category of property, plant and equipment when completed and ready for
use.
Intangible assets (other than goodwill)
Mining rights
Mining rights are stated at cost less accumulated amortisation and any impairment losses. Mining
rights include the cost of acquiring mining licences, exploration and evaluation costs transferred from
exploration rights and assets upon determination that an exploration p roperty is capable of commercial
production, and the cost of acquiring interests in the mineral reserves of existing mining properties. The
mining rights are amortised over the estimated useful lives of the mines, in accordance with the
production plans of the entity concerned and th e indicated resources of the mines using the UOP
method. Mining rights are written off to profit or loss if the mining property is abandoned.
Software
Software is stated at cost less any impairment l osses and is amortised on the straight-line basis
over its estimated useful life of 5 years.
Research and development expenses
All research costs are charged to the statement of profit or loss as incurred.
Leases
The Group assesses at contract inception whether a contract is, or contains, a lease. A contract is,
or contains, a lease if the contract conveys the right to control the use of an identified asset for a period
of time in exchange for consideration.
APPENDIX I ACCOUNTANTS ’ REPORT
– I-23 –


--- page 502 ---
Group as a lessee
The Group applies a single recognition and measurem ent approach for all leases, except for short-
term leases and leases of low-value assets. T he Group recognises lease liabilities to make lease
payments and right-of-use assets representing the right to use the underlying assets.
(a) Right-of-use assets
Right-of-use assets are recognised at the commencement date of the lease (that is the date the
underlying asset is available for use). Right-of-use assets are measured at cost, less any accumulated
depreciation and any impairment losses, and adjusted for any remeasurement of lease liabilities. The cost
of right-of-use assets includes the amount of lease lia bilities recognised, initial direct costs incurred, and
lease payments made at or before the commencement date less any lease incentives received. Right-of-
use assets are depreciated on a straight-line basis over the shorter of the lease terms and the estimated
useful lives of the assets as follows:
Leasehold land 30 to 50 years
Buildings 20 years
If ownership of the leased asset transfers to the Group by the end of the lease term or the cost
reflects the exercise of a purchase option, depreciation is calculated using the estimated useful life of the
asset.
(b) Lease liabilities
Lease liabilities are recognised at the commencemen t date of the lease at the present value of lease
payments to be made over the lease term. The lease payments include fixed payments (including in-
substance fixed payments) less any lease incentives receivable, variable lease payments that depend on
an index or a rate, and amounts expected to be paid under residual value guarantees. The lease payments
also include the exercise price of a purchase option reasonably certain to be exercised by the Group and
payments of penalties for termination of a lease, if the lease term reflects the Group exercising the
option to terminate the lease. The variable lease payments that do not depend on an index or a rate are
recognised as an expense in the period in which the event or condition that trigge rs the payment occurs.
In calculating the present value of lease payments, the Group uses its incremental borrowing rate at
the lease commencement date because the interest rate implicit in the lease is not readily determinable.
After the commencement date, the amount of lease liabilities is increased to reflect the accretion of
interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is
remeasured if there is a modification, a change in the lease term, a change in lease payments (e.g., a
change to future lease payments resulting from a change in an index or rate) or a change in assessment
of an option to purchase the underlying asset.
APPENDIX I ACCOUNTANTS ’ REPORT
– I-24 –


--- page 503 ---
(c) Short-term leases
The Group applies the short-term lease recognitio n exemption to its short-term leases of machinery
and equipment (that is those leases that have a lease term of 12 months or less from the commencement
date and do not contain a purchase option).
Financial assets
Initial recognition and measurement
Financial assets are classified, at initial recogn ition, as subsequently measured at amortised cost,
fair value through other comprehensive income, and fair value through profit or loss.
The classification of financial assets at initial recognition depends on the financial asset ’s
contractual cash flow characteristics and the Group ’s business model for managing them. With the
exception of trade receivables that do not contain a significant financing component or for which the
Group has applied the practical expedient, the Group initially measures a financial asset at its fair value
plus in the case of a financial asset not at fair value through profit or loss, transaction costs. Trade
receivables that do not contain a significant financing component or for which the Group has applied the
practical expedient are measured at the transaction price determined under IFRS 15 in accordance with
the policies set out for ‘‘Revenue recognition ’’below.
In order for a financial asset to be classified and measured at amortised cost or fair value through
other comprehensive income, it needs to give rise to cash flows that are solely payments of principal
and interest ( ‘‘SPPI ’’) on the principal amount outstanding. Financial assets with cash flows that are not
SPPI are classified and measured at fair value through profit or loss, irrespective of the business model.
The Group ’s business model for managing financial assets refers to how it manages its financial
assets in order to generate cash flows. The business model determines whether cash flows will result
from collecting contractual cash flows, selling the financial assets, or both. Financial assets classified
and measured at amortised cost are held within a business model with the objective to hold financial
assets in order to collect contractual cash flows, while financial assets classified and measured at fair
value through other comprehensive income are held within a business model with the objective of both
holding to collect contractual cash flows and se lling. Financial assets which are not held within the
aforementioned business models are classified and measured at fair value through profit or loss.
All regular way purchases and sales of financial assets are recognised on the trade date, that is, the
date that the Group commits to purchase or sell the a sset. Regular way purchases or sales are purchases
or sales of financial assets that require delivery o f assets within the period generally established by
regulation or convention in the marketplace.
APPENDIX I ACCOUNTANTS ’ REPORT
– I-25 –


--- page 504 ---
Subsequent measurement
The subsequent measurement of financial assets depends on their classification as follows:
Financial assets at amortised cost (debt instruments)
Financial assets at amortised cost are subsequently measured using the effective interest method
and are subject to impairment. Gains and losses are recognised in profit or loss when the asset is
derecognised, modified or impaired.
The Group’ s financial assets at amortised cost include financial assets included in other long-term
assets, financial assets included in prepayments, deposits and other receivable s, restricted and pledged
deposits, amounts due from related parties and cash and cash equivalents.
Impairment
The Group recognises an allowance for expected credit losses ( ‘‘ECLs ’’)f o ra l ld e b ti n s t r u m e n t s
not held at fair value through profit or loss. ECLs are based on the difference between the contractual
cash flows due in accordance with the contract and all the cash flows that the Group expects to receive,
discounted at an approximation of the original effective interest rate. The expected cash flows will
include cash flows from the sale of collateral held or o ther credit enhancements that are integral to the
contractual terms.
General approach
ECLs are recognised in two stages. For credit exposures for which there has not been a significant
increase in credit risk since initial recognition, ECLs are provided for credit losses that result from
default events that are possible within the next 12 months (a 12-month ECL). For those credit exposures
for which there has been a significa nt increase in credit risk since initial recognition, a loss allowance is
required for credit losses expected over the remaining life of the exposure, irrespective of the timing of
the default (a lifetime ECL).
At the end of each of the Relevant Periods, the Group assesses whether the credit risk on a
financial instrument has increased significantly since initial recognition. When making the assessment,
the Group compares the risk of a default occurring on the financial instrument as at the reporting date
with the risk of a default occurring on the financial instrument as at the date of initial recognition and
considers reasonable and supportable information that is available without undue cost or effort,
including historical and forward-looking information.
The Group considers a financial asset in default when contractual payments are 90 days past due.
However, in certain cases, the Group may also consider a financial asset to be in default when internal
or external information indicates that the Group is unlikely to receive the outstanding contractual
amounts in full before taking into account any credit enhancements held by the Group. A financial asset
is written off when there is no reasonable expectation of recovering the contractual cash flows.
APPENDIX I ACCOUNTANTS ’ REPORT
– I-26 –


--- page 505 ---
Financial assets at amortised cost are subject to impairment under the general approach and they
are classified within the following stages for measurement of ECLs except for trade receivables which
apply the simplified approach as detailed below.
Stage 1 — Financial instruments for which credit risk ha s not increased significantly since initial
recognition and for which the loss allowance is measured at an amount equal to 12-month ECLs
Stage 2 — Financial instruments for which credit risk has increased significantly since initial
recognition but that are not credit-impaired financia l assets and for which the loss allowance is measured
at an amount equal to lifetime ECLs
Stage 3 — Financial assets that are credit-impaired at the reporting date (but that are not purchased
or originated credit-impaired) and for which the loss allowance is measured at an amount equal to
lifetime ECLs
Simplified approach
For trade receivables, the Group applies a simplified approach in calculating ECLs. Therefore, the
Group does not track changes in credit risk, but instead recognises a loss allowance based on lifetime
ECLs at the end of each of the Relevant Periods. The Group has established a provision matrix that is
based on its historical credit loss experience, adjusted for forward-looking factors specific to the debtors
and the economic environment.
Derecognition of financial assets
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar
financial assets) is primarily derecognised (i.e., removed from the Group ’s consolidated statements of
financial position) when:
. the rights to receive cash flows from the asset have expired; or
. the Group has transferred its rights to recei ve cash flows from the asset or has assumed an
obligation to pay the received cash flows in full without material delay to a third party under
a ‘‘pass-through ’’arrangement; and either (a) the Group has transferred substantially all the
risks and rewards of the asset, or (b) the Gr oup has neither transferred nor retained
substantially all the risks and rewards of the asset, but has transferred control of the asset.
When the Group has transferred its rights to rec eive cash flows from an asset or has entered into a
pass-through arrangement, it evaluates if and to what extent it has retained the risk and rewards of
ownership of the asset. When it has neither transferred nor retained substantially all the risks and
rewards of the asset nor transferred control of the asset, the Group continues to recognise the transferred
asset to the extent of the Group ’s continuing involvement. In that case, the Group also recognises an
associated liability. The transferred asset and the associated liability are measured on a basis that reflects
the rights and obligations that the Group has retained.
APPENDIX I ACCOUNTANTS ’ REPORT
– I-27 –


--- page 506 ---
Continuing involvement that takes the form of a guarantee over the transferred asset is measured at
the lower of the original carrying amount of the asset and the maximum amount of consideration that the
Group could be required to repay.
Financial liabilities
Initial recognition and measurement
Financial liabilities are recognised when, and only when, the Group becomes a party to the
contractual provisions of the financial instruments. The Group determines the classification of its
financial liabilities at initial recognition. Financial liabilities are classified, at initial recognition, as loans
and borrowings, or payables, as appropriate.
All financial liabilities are recognised initially at fair value and, in the case of financial liabilities
not at fair value through profit or loss, net of directly attributable transaction costs.
The Group ’s financial liabilities include trade payable s, financial liabilities included in other
payables and accruals, amounts due to related partie s, other long-term liabilities, interest-bearing bank
borrowings and lease liabilities.
Subsequent measurement
After initial recognition, interest-bearing bank borrowings are subsequently measured at amortised
cost, using the effective interest rate method unless the effect of discounting would be immaterial, in
which case they are stated at cost. Gains and losses are recognised in profit or loss when the liabilities
are derecognised as well as through the effective interest rate amortisation process.
Amortised cost is calculated by taking into a ccount any discount or premium on acquisition and
fees or costs that are an integral part of the effective int erest rate. The effective interest rate amortisation
is included in finance costs in profit or loss.
Financial guarantee contracts
Financial guarantee contracts issued by the Group are those contracts that require a payment to be
made to reimburse the holder for a loss it incurs because the specified debtor fails to make a payment
when due in accordance with the terms of a debt instrument. A financial guarantee contract is recognised
initially as a liability at its fair value, adjusted for tra nsaction costs that are directly attributable to the
issuance of the guarantee. Subseque nt to initial recognition, the Group m easures the financial guarantee
contracts at the higher of: (i) the ECL allowance determined in accordance with the policy as set out in
‘‘Impairment of financial assets ’’; and (ii) the amount initially recogn ised less, when appropriate, the
cumulative amount of in come recognised.
APPENDIX I ACCOUNTANTS ’ REPORT
– I-28 –


--- page 507 ---
Derecognition of financial liabilities
A financial liability is derecognised when the obligation under the liability is discharged or
cancelled, or expires.
When an existing financial liability is replaced by another from the same lender on substantially
different terms, or the terms of an existing liability are substantially modified, such an exchange or
modification is treated as a derecognition of the or iginal liability and a recognition of a new liability,
and the difference between the respective ca rrying amounts is recognised in profit or loss.
Offsetting of financial instruments
Financial assets and financial liabilities are offs et and the net amount is reported in the statement
of financial position if there is a currently enforceable legal right to offset the recognised amounts and
there is an intention to settle on a net basis, or to realise the assets and settle the liabilities
simultaneously.
Inventories
Inventories are stated at the lower of cost and net realisable value. Cost is determined on the
weighted average basis and, in the case of work in progress and finished goods, comprises direct
materials, direct labour and an appropriate propor tion of overheads. Net realisable value is based on
estimated selling prices less any estimated cost s to be incurred to completion and disposal.
Cash and cash equivalents
For the purpose of the consolidated statements of cash flows, cash and cash equivalents comprise
cash on hand and demand deposits, and short term hig hly liquid investments that are readily convertible
into known amounts of cash, are subject to an insignificant risk of changes in value, and have a short
maturity of generally within three months when acquired, less bank overdrafts which are repayable on
demand and form an integral part of the Group ’s cash management.
For the purpose of the consolidated statements of financial position, cash and cash equivalents
comprise cash on hand and at banks which is not restricted as to use.
Provisions
A provision is recognised when a p resent obligation (legal or const ructive) has arisen as a result of
a past event and it is probable that a future outflow o f resources will be required to settle the obligation,
provided that a reliable estimate can be made of the amount of the obligation.
When the effect of discounting is material, the a mount recognised for a provision is the present
value at the end of each of the Relevant Periods of the future expenditures expected to be required to
settle the obligation. The increase in the discounte d present value amount arising from the passage of
time is included in finance costs in profit or loss.
APPENDIX I ACCOUNTANTS ’ REPORT
– I-29 –


--- page 508 ---
Provisions for the Group ’s obligations for rehabilitation are based on estimates of required
expenditure at the mines in accordance with the r ules and regulations of the PRC. The obligation
generally arises when an asset is installed or the ground environment is disturbed at the production
location. The Group estimates its liabilities for the final rehabilitation and mine closure based upon
detailed calculations of the amount and timing of the future cash expenditure to perform the required
work. Spending estimates are escalated for inflation, then discounted at a discount rate that reflects
current market assessments of the time value of money and the risks specific to the liability such that
the amount of provision reflects the present value of the expenditures expected to be required to settle
the obligation. When the liability is initially recogn ised, the present value of the estimated cost is
capitalised by increasing the carrying amo unt of the related mining infrastructure.
Over time, the discounted liability is increased for the change in the present value based on the
appropriate discount rate. The periodic unwinding of the discount is recognised within finance costs in
profit or loss. The asset is depreciated using the UO P method over its expected life and the liability is
accreted to the projected expenditu re date. Additional disturbances or c hanges in estimates (such as mine
plan revisions, changes in estimated costs, or changes in timing of the performance of reclamation
activities) will be recognised as a dditions or charges to the corresponding assets and rehabilitation
liabilities when they occur at th e appropriate discount rate.
Income tax
Income tax comprises current and deferred tax. I ncome tax relating to items recognised outside
profit or loss is recognised outside profit or loss, either in other comprehensive income or directly in
equity.
Current tax assets and liabilities are measured at th e amount expected to be recovered from or paid
to the taxation authorities, based on tax rates (an d tax laws) that have been enacted or substantively
enacted by the end of each of the Relevant Periods, taking into consideration interpretations and
practices prevailing in the countries in which the Group operates.
Deferred tax is provided, using the liability method , on all temporary differences at the end of each
of the Relevant Periods between the tax bases of a ssets and liabilities and their carrying amounts for
financial reporting purposes.
Deferred tax liabilities are recognised for all taxable temporary differences, except:
. when the deferred tax liability arises from the initial recognition of goodwill or an asset or
liability in a transaction that is not a business combination and, at the time of the transaction,
affects neither the accounting pro fit nor taxable profit or loss; and
. in respect of taxable temporary differences associated with investments in subsidiaries, when
the timing of the reversal of the temporary differences can be controlled and it is probable
that the temporary differences will not reverse in the foreseeable future.
APPENDIX I ACCOUNTANTS ’ REPORT
– I-30 –


--- page 509 ---
Deferred tax assets are recognised for all deductible temporary differences, and the carryforward of
unused tax credits and any unused tax losses. Deferred tax assets are recognised to the extent that it is
probable that taxable profit will be available against which the deductible temporary differences, and the
carryforward of unused tax credits and unused tax losses can be utilised, except:
. where the deferred tax asset relating to the deductible temporary differences arises from the
initial recognition of an asset or liability in a trans action that is not a business combination
and, at the time of the transaction, affects neith er the accounting profit nor taxable profit or
loss; and
. in respect of deductible temporary differences a ssociated with investments in subsidiaries,
deferred tax assets are only recognised to the extent that it is probable that the temporary
differences will reverse in the foreseeable future and taxable profit will be available against
which the temporary differences can be utilised.
The carrying amount of deferred tax assets is reviewed at the end of each of the Relevant Periods
and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to
allow all or part of the deferred tax asset to be utilise d. Unrecognised deferred t ax assets are reassessed
at the end of each of the Relevant Periods and are recognised to the extent that it has become probable
that sufficient taxable profit will be available t o allow all or part of the deferred tax asset to be
recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the
period when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have
been enacted or substantively enacted by the end of each of the Relevant Periods.
Deferred tax assets and deferre d tax liabilities are offset if and only if the Group has a legally
enforceable right to set off current tax assets and cu rrent tax liabilities and the deferred tax assets and
deferred tax liabilities relate to income taxes levie d by the same taxation authority on either the same
taxable entity or different taxable entities which in tend either to settle current tax liabilities and assets
on a net basis, or to realise the assets and settle the l iabilities simultaneously, in each future period in
which significant amounts of deferred tax liabilitie s or assets are expected to be settled or recovered.
Government grants
Government grants are recognised at their fair value where there is reasonable assurance that the
grant will be received and all attaching conditions w ill be complied with. When the grant relates to an
expense item, it is recognised as income on a systematic basis over the periods that the costs, for which
it is intended to compensate, are expensed.
Where the grant relates to an asset, the fair value is credited to a deferred income account and is
released to profit or loss over the expected useful life of the relevant asset by equal annual instalments
or deducted from the carrying amount of the asset and released to profit or loss by way of a reduced
depreciation charge.
APPENDIX I ACCOUNTANTS ’ REPORT
– I-31 –


--- page 510 ---
Revenue recognition
Revenue from contracts with customers
Revenue from contracts with customers is recognised when control of goods or services is
transferred to the customers at an amount that reflects the consideration to which the Group expects to
be entitled in exchange for those goods or services.
When the consideration in a contract includes a variable amount, the amount of consideration is
estimated to which the Group will be entitled in exchang e for transferring the goods or services to the
customer. The variable consideration is estimated at contract inception and constrained until it is highly
probable that a significant revenue reversal in the amount of cumulative revenue recognised will not
occur when the associated uncertainty with the variable consideration is subsequently resolved.
When the contract contains a financing component which provides the customer with a significant
benefit of financing the transfer of goods or services to the customer for more than one year, revenue is
measured at the present value of the amount receivable, discounted using the discount rate that would be
reflected in a separate financing transaction between the Group and the customer at contract inception.
When the contract contains a financing component which provides the Group with a significant financial
benefit for more than one year, revenue recognised under the contract includes the interest expense
accreted on the contract liability under the effectiv e interest method. For a contract where the period
between the payment by the customer and the transfer of the promised goods or services is one year or
less, the transaction price is not adjusted for the effe cts of a significant financing component, using the
practical expedient in IFRS 15.
(a) Sale of products
Revenue from the sale of products is recognised at the point in time when control of the asset is
transferred to the customer, generally on delivery of the products.
Other income
Interest income is recognised on an accrual basis using the effective interest method by applying
the rate that exactly discounts the estimated future cash receipts over the expected life of the financial
instrument or a shorter period, when appropriate, to the net carrying amount of the financial asset.
Employee benefits
Pension obligations
The Group contributes on a monthly basis to various defined contribution retirement benefit plans
organised by the relevant municipal and provincial governments in the PRC. The municipal and
provincial governments undertake to assume the retirement benefit obligations payable to all existing
and future retired employees under these plans and the Group has no further obligation for post-
retirement benefits beyond the contributions made. Contributions to these plans are expensed as
incurred.
APPENDIX I ACCOUNTANTS ’ REPORT
– I-32 –


--- page 511 ---
The Group also operates a defined contribution M andatory Provident Fund retirement benefit
scheme (the ‘‘MPF Scheme ’’) under the Mandatory Provident Fund Schemes Ordinance for all of its
employees. Contributions are made based on a percentage of the employees ’ basic salaries and are
charged to profit or loss as they become payable in accordance with the rules of the MPF Scheme. The
assets of the MPF Scheme are held separately from those of the Group in an independently administered
fund. The Group ’s employer contributions vest fully with th e employees when contributed into the MPF
Scheme.
Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of qualifying
assets, i.e. assets that necessarily take a substantia l period of time to get ready for their intended use or
sale, are capitalised as part of the cost of those asse ts. The capitalisation of such borrowing costs ceases
when the assets are substantially ready for their intended use or sale. Investment income earned on the
temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted
from the borrowing costs capitalised. All other borrowing costs are expensed in the period in which they
are incurred. Borrowing costs consist of interest and other costs that an entity incurs in connection with
the borrowing of funds.
Dividends
Final dividends are recognised as a liability when they are approved by the shareholders in a
general meeting. Proposed final dividends are dis closed in the notes to the Historical Financial
Information.
Foreign currencies
The Historical Financial Information is presented in RMB. The Company ’s functional currency is
Hong Kong dollars because the Company ’s funds obtained from shareholders and expenditures are
mainly denominated in Hong Kong dollars. The Group’ s operation is mainly carried out in Mainland
China and it is more appropriate to present the fina ncial information in RMB. Each entity in the Group
determines its own functional currency and items included in the financial statements of each entity are
measured using that functional currency. Foreign currency transactions recorded by the entities in the
Group are initially recorded using their respective fun ctional currency rates prevailing at the dates of the
transactions.
Differences arising on settlement or translation o f monetary items are recognised in profit or loss
with the exception of monetary items that are d esignated as part of the hedge of the Group ’sn e t
investment of a foreign operation. These are recognised in other comprehensive income until the net
investment is disposed of, at which time the cumulative amount is reclassified to profit or loss.
Monetary assets and liabilities denominated in fore ign currencies are translated at the functional
currency rates of exchange ruling at the end of each of the Relevant Periods. Differences arising on
settlement or translation of monetary items are recognised in profit or loss.
APPENDIX I ACCOUNTANTS ’ REPORT
– I-33 –


--- page 512 ---
Non-monetary items that are measured in terms o f historical cost in a foreign currency are
translated using the exchange rates at the dates of t he initial transactions. Non -monetary items measured
at fair value in a foreign currency are translated us ing the exchange rates at the date when the fair value
was measured. The gain or loss arising on translation of a non-monetary item measured at fair value is
treated in line with the recognition of the gain or loss on change in fair value of the item (i.e.,
translation difference on the item whose fair value gain or loss is recognised in other comprehensive
income or profit or loss is also recognised in other comprehensive income or profit or loss,
respectively).
In determining the exchange rate on initial recogn ition of the related asset, expense or income on
the derecognition of a non-monetary asset or non-monet ary liability relating to an advance consideration,
the date of initial transaction is the date on which the Group initially recognises the non-monetary asset
or non-monetary liability arising from the advance consideration. If there are multiple payments or
receipts in advance, the Group determines the transaction date for each payment or receipt of the
advance consideration.
The functional currencies of certain overseas subsidiaries are currencies other than RMB. As at the
end of the reporting period, the assets and liabilities of these entities are translated into RMB at the
exchange rates prevailing at the end of the reportin g period and their statements of profit or loss are
translated into RMB at the exchange rates that approximate to those prevailing at the dates of the
transactions.
The resulting exchange differences are recognised i n other comprehensive income and accumulated
in the foreign exchange reserve. On disposal of a foreign operation, the component of other
comprehensive income relating to that particular foreign operation is recognised in profit or loss.
For the purpose of the consolidated statement of cash flows, the cash flows of overseas
subsidiaries are translated into RMB at the weight ed average exchange rates for the year of the cash
flows. Frequently recurring cash flows of Mainland China and overseas subsidiaries which arise
throughout the year are translated into RMB at the weighted average exchange rates for the year.
3. SIGNIFICANT ACCOUNTING JUDGEMENTS AND ESTIMATES
The preparation of the Group ’s Historical Financial Information requires management to make
judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets
and liabilities, and their accompanying disclosures, and the disclosure of contingent liabilities.
Uncertainty about these assumptions and estimates could result in outcomes that could require a
material adjustment to the carrying amounts of the assets or liabilities affected in the future.
APPENDIX I ACCOUNTANTS ’ REPORT
– I-34 –


--- page 513 ---
Estimation uncertainty
The key assumptions concerning the future and other key sources of estimation uncertainty at the
end of each of the Relevant Periods, that have a significant risk of causing a material adjustment to the
carrying amounts of assets and liabilities within th e next financial year, are disclosed below:
Environment rehabilitation obligations
Environment rehabilitation obligations are inherently imprecise and only represent approximate
amounts because of subjective judgements involved in the estimation of the costs. Environment
rehabilitation obligations are subject to cons iderable uncertainty which affects the Group’ s ability to
estimate the ultimate cost of remediation efforts. Thes e uncertainties include: (i) the exact nature and
extent of the contamination at various sites including, but not limited to, mines and land development
areas, whether operating, closed or sold, (ii) the exte nt of required clean-up efforts, (iii) varying cost of
alternative remediation strategies, (iv) changes in e nvironmental remediation requirements, and (v) the
identification of new remediation sites. In addition, as prices and cost levels change from year to year,
the estimation of environment rehabilitation obligations also changes. Despite the inherent imprecision
in these estimates, these estimates are used in assess ing the provision for rehabilitation. The carrying
amounts of provision for rehabilitation at 31 D ecember 2020, 2021 and 2022 and 30 June 2023 were
RMB21,971,000, RMB23,316,000, RMB23,913,000 and RMB24,258,000, respectively. Further details
are included in note 24.
Useful lives of property, plant and equipment
Depreciation is calculated on the straight-line basis to write off the cost of each item of property,
plant and equipment to its residual value over its estimated useful life. Useful lives are determined based
on management ’s past experience with similar assets, estimated changes in technologies and, in the case
of mining related property, plant and equipment, estimated lives of mines. If the estimated useful lives
change significantly, adjustments to deprecia tion will be provided in the future year. The carrying
amounts of property, plant and equipment at 31 December 2020, 2021 and 2022 and 30 June 2023 were
RMB262,409,000, RMB282,083,000, RMB296,929,000 and RMB320,578,000, respectively. Further
details are included in note 14.
Impairment of non-financial assets (other than goodwill)
The Group assesses whether there are any indicators of impairment for all non-financial assets
(including the right-of-use assets) at the end of each of the Relevant Periods. Other non-financial assets
are tested for impairment when there are indicators that the carrying amounts may not be recoverable.
An impairment exists when the carrying value of an asset or a cash-generating unit exceeds its
recoverable amount, which is the higher of its fair value less costs of disposal and its value-in-use. The
calculation of the fair value less costs of disposal is based on available data from binding sales
transactions in an arm ’s length transaction of similar assets or observable market prices less incremental
costs for disposing of the asset. When value in use calculations are undertaken, management must
estimate the expected future cash flows from the asset or cash-generating unit and choose a suitable
discount rate in order to calculate the present value of those cash flows.
APPENDIX I ACCOUNTANTS ’ REPORT
– I-35 –


--- page 514 ---
Deferred tax assets
Deferred tax assets are recognised for all deduc tible temporary differenc es, the carryforward of
unused tax credits and unused tax losses, to the extent that it is probable that taxable profit will be
available against which the deductible temporary di fferences, and the carryforward of unused tax credits
and unused tax losses can be utilised. Significant management judgement is required to determine the
amount of deferred tax assets that can be recognised, based upon the likely timing and level of future
taxable profits together with future tax planning str ategies. Further details are included in note 17 to the
Historical Financial Information.
Mineral reserves
Engineering estimates of the Group ’s mineral reserves are inherently imprecise and only represent
approximate amounts because of the significant judgements involved in developing such information.
There are authoritative guidelines regarding the engin eering criteria that have to be met before estimated
mine reserves can be designated as ‘‘proved ’’ and ‘‘probable ’’. Proved and probable mine reserve
estimates are updated at regular intervals taking into account recent production and technical information
about each mine. In addition, as prices and cost level s change from year to year, the estimate of proved
and probable mine reserves also changes. This change is considered a change in estimates for accounting
purposes and is reflected on a prospectiv e basis at related depreciation rates.
4. OPERATING SEGMENT INFORMATION
For management purpose, the Group has one reportable operating segment which is mining and
processing gold that is ultimately sold as gold bullio n. Management monitors the operating results of its
business units as a whole for the purpose of making decisions about resource allocation and performance
assessment.
Geographical information
No geographical information is presented as the Group ’s revenue from the external customers is
derived solely from its operation in Mainland China and no non-current assets of the Group are located
outside Mainland China.
APPENDIX I ACCOUNTANTS ’ REPORT
– I-36 –


--- page 515 ---
Information about major customers
Revenue from each of the major customers which amounted to 10% or more of the Group ’s
revenue during the Relevant Periods is set out below:
Year ended 31 December
Six months ended
30 June
2020 2021 2022 2022 2023
RMB’000 RMB ’000 RMB ’000 RMB’ 000 RMB ’000
(unaudited)
Customer A 25,221 —— ——
Customer B 335,778 247,872 418,413 217,331 196,659
360,999 247,872 418,413 217,331 196,659
5. REVENUE, OTHER INCOME AND GAINS
Revenue represents income from the sale of gold bullion.
An analysis of revenue, other income and gains is as follows:
Year ended 31 December
Six months ended
30 June
2020 2021 2022 2022 2023
RMB’000 RMB ’000 RMB ’000 RMB’ 000 RMB ’000
(unaudited)
Revenue from contracts with
customers
Sale of gold bullion 360,999 247,872 418,413 217,331 196,659
360,999 247,872 418,413 217,331 196,659
Represented by:
Year ended 31 December
Six months ended
30 June
2020 2021 2022 2022 2023
RMB’000 RMB ’000 RMB ’000 RMB’ 000 RMB ’000
(unaudited)
Revenue from sale of gold bullion
Recognised at a point in time 360,999 247,872 418,413 217,331 196,659
APPENDIX I ACCOUNTANTS ’ REPORT
– I-37 –


--- page 516 ---
All sales of gold bullion are expected to be recognised as revenue within one year.
O t h e ri n c o m ea n dg a i n s
Year ended 31 December
Six months ended
30 June
2020 2021 2022 2022 2023
RMB’000 RMB ’000 RMB ’000 RMB’ 000 RMB ’000
(unaudited)
Investment income 2,673 —— ——
Sales of sulfuric acid — 1,408 10,503 7,202 2,381
Government grants* 281 292 237 — 92
Interest income 928 1,664 2,243 929 1,976
Gains on disposal of property, plant
and equipment 35 — 12 — 59
Gains on foreign exchange 56 —— 55 920
Others — 249 408 206 —
Total 3,973 3,613 13,403 8,392 5,428
* Various government grants have been received from t he PRC local government authorities to support the daily
operation of a subsidiary. There are no unfulfilled conditions related to these government grants.
6. OTHER EXPENSES
Year ended 31 December
Six months ended
30 June
2020 2021 2022 2022 2023
RMB’000 RMB ’000 RMB ’000 RMB’ 000 RMB ’000
(unaudited)
Suspension cost* — 28,728 —— —
Donation 2,090 83 1,000 1,000 —
Losses on disposal of property,
plant and equipment — 975 —— —
Exchange loss 807 30 9,399 ——
Others 33 378 20 36 —
Total 2,930 30,194 10,419 1,036 —
* The operations of Yantai Zhongjia were suspended from February 2021 to November 2021 as required by the
government in order to carry out safety inspection. Suspension cost primarily represents labour costs, depreciation
and amortisation charges, expenses on spare parts and utilities incurred during the suspension period.
APPENDIX I ACCOUNTANTS ’ REPORT
– I-38 –


--- page 517 ---
7. FINANCE COSTS
An analysis of finance costs is as follows:
Year ended 31 December
Six months ended
30 June
2020 2021 2022 2022 2023
RMB’000 RMB ’000 RMB ’000 RMB’ 000 RMB ’000
(unaudited)
Interest on bank borrowings 4,059 2,643 937 430 717
Increase in discounted amounts of
provisions and other long-term
liabilities arising from the
passage of time 1,177 1,181 2,018 998 940
5,236 3,824 2,955 1,428 1,657
8. PROFIT BEFORE TAX
The Group’ s profit before tax is arrived at after charging/(crediting):
Year ended 31 December
Six months ended
30 June
Notes 2020 2021 2022 2022 2023
RMB ’000 RMB ’000 RMB ’000 RMB ’000 RMB ’000
(unaudited)
Cost of inventories sold 166,013 107,767 199,823 99,981 104,277
Employee benefit expense
(including directors ’ and chief
executive ’s remuneration):
Wages, salaries and other benefits 21,343 24,250 31,672 15,708 23,871
Pension scheme contributions 773 4,252 5,598 2,958 6,113
22,116 28,502 37,270 18,666 29,984
Depreciation of items of property,
plant and equipment 14 28,652 14,678 29,582 14,834 15,998
Depreciation of right-of-use assets 16 8,822 8,840 8,947 4,474 4,477
Amortisation of intangible assets* 15 2,543 3,334 8,508 4,321 3,980
Listing expenses 4,402 3,842 8,149 4,426 4,183
Research and development costs 4,921 4,960 9,156 2,246 3,229
Loss/(gain) on disposal of items of
property, plant and equipment (35) 975 (12) (12) (59)
Auditor’s remuneration 3 5 3 3 3
* The amortisation of intangible assets for the year/period are included in ‘‘Cost of sales ’’in the consolidated statement
of profit or loss and other comprehensive income.
APPENDIX I ACCOUNTANTS ’ REPORT
– I-39 –


--- page 518 ---
9. DIRECTORS ’ AND CHIEF EXECUTIVE ’S REMUNERATION
Dr. SHAO Xuxin and Mr. MACKIE James Thomas were appointed as executive directors of the
Company on 21 May 2019. Mr. LO Cheuk Kwong and Mr. CHEN Shaohui were appointed as the
executive directors of the Company on 8 May 2020.
Year ended 31 December
Six months ended
30 June
2020 2021 2022 2022 2023
RMB’000 RMB ’000 RMB ’000 RMB’ 000 RMB ’000
(unaudited)
Fees ——— ——
Other emoluments:
Salaries, allowances and benefits
in kind 1,859 1,696 2,090 999 1,168
Performance-related bonuses 100 —— ——
Pension scheme contributions
and social welfare 16 21 26 13 13
Total 1,975 1,717 2,116 1,012 1,181
Certain of the directors received remuneration from the subsidiaries now comprising the Group for
their appointment as directors of these subsidiaries. The remuneration of each of these directors as
recorded in the financial statements of the subsidiaries is set out below:
Year ended 31 December 2020
Fees
Salaries,
allowances
and benefits
in kind
Performance-
related
bonuses
Pension
scheme
contributions
and social
welfare
Total
remuneration
RMB ’000 RMB ’000 RMB ’000 RMB ’000 RMB ’000
Executive directors:
— Mr. CHEN Shaohui — 480 100 — 580
— Dr. SHAO Xuxin — 485 —— 485
— Mr. MACKIE James
Thomas — 396 —— 396
— Mr. LO Cheuk Kwong — 498 — 16 514
— 1,859 100 16 1,975
APPENDIX I ACCOUNTANTS ’ REPORT
– I-40 –


--- page 519 ---
Year ended 31 December 2021
Fees
Salaries,
allowances
and benefits
in kind
Performance-
related
bonuses
Pension
scheme
contributions
and social
welfare
Total
remuneration
RMB ’000 RMB ’000 RMB ’000 RMB ’000 RMB ’000
Executive directors:
— Mr. CHEN Shaohui — 324 — 63 30
— Dr. SHAO Xuxin — 481 —— 481
— Mr. MACKIE James
Thomas — 393 —— 393
— Mr. LO Cheuk Kwong — 498 — 15 513
— 1,696 — 21 1,717
Year ended 31 December 2022
Fees
Salaries,
allowances
and benefits
in kind
Performance-
related
bonuses
Pension
scheme
contributions
and social
welfare
Total
remuneration
RMB ’000 RMB ’000 RMB ’000 RMB ’000 RMB ’000
Executive directors:
— Mr. CHEN Shaohui — 207 — 10 217
— Dr. SHAO Xuxin — 488 —— 488
— Mr. MACKIE James
Thomas — 399 —— 399
— Mr. LO Cheuk Kwong — 996 — 16 1,012
— 2,090 — 26 2,116
APPENDIX I ACCOUNTANTS ’ REPORT
– I-41 –


--- page 520 ---
Six months ended 30 June 2022 (unaudited)
Fees
Salaries,
allowances
and benefits
in kind
Performance-
related
bonuses
Pension
scheme
contributions
and social
welfare
Total
remuneration
RMB ’000 RMB ’000 RMB ’000 RMB ’000 RMB ’000
Executive directors:
— Mr. CHEN Shaohui — 100 — 51 05
— Dr. SHAO Xuxin — 241 —— 241
— Mr. MACKIE James
Thomas — 197 —— 197
— Mr. LO Cheuk Kwong — 461 — 84 69
— 999 — 13 1,012
Six months ended 30 June 2023
Fees
Salaries,
allowances
and benefits
in kind
Performance-
related
bonuses
Pension
scheme
contributions
and social
welfare
Total
remuneration
RMB ’000 RMB ’000 RMB ’000 RMB ’000 RMB ’000
Executive directors:
— Mr. CHEN Shaohui — 107 — 51 12
— Dr. SHAO Xuxin — 242 —— 242
— Mr. MACKIE James
Thomas — 198 —— 198
— Mr. LO Cheuk Kwong — 621 — 86 29
— 1,168 — 13 1,181
Dr. SHAO Xuxin is the chief executive officer and an executive director of the Company. There
was no arrangement under which a director or the chief executive waived or agreed to waive any
remuneration during the Relevant Periods and the six months ended 30 June 2022.
APPENDIX I ACCOUNTANTS ’ REPORT
– I-42 –


--- page 521 ---
10. FIVE HIGHEST PAID EMPLOYEES
The five highest paid employees during the years ended 31 December 2020, 2021 and 2022, and
the six months ended 30 June 2022 and 2023 included three, two, three, three and three directors,
respectively, details of whose remuneration are set out in note 9 above. Details of the remuneration for
the Relevant Periods of the remaining highest paid employees who are neither a director nor chief
executive of the Company for the years ended 31 December 2020, 2021 and 2022, and the six months
ended 30 June 2022 and 2023 are as follows:
Year ended 31 December
Six months ended
30 June
2020 2021 2022 2022 2023
RMB’000 RMB ’000 RMB ’000 RMB’ 000 RMB ’000
(unaudited)
Salaries, allowances and benefits in
kind 878 1,305 900 446 449
Performance-related bonuses 100 50 150 50 50
Pension scheme contributions and
social welfare 31 150 92 48 42
Total 1,009 1,505 1,142 544 541
The number of non-director and non-chief executive highest paid employees whose remuneration
fell within the following bands is as follows:
Year ended 31 December
Six months ended
30 June
2020 2021 2022 2022 2023
(unaudited)
Nil to HKD500,000 ——— 22
HKD500,001 to HKD1,000,000 2 3 2 ——
T o t a l 232 22
11. INCOME TAX
The Group is subject to income t ax on an entity basis on profits arising in or derived from the tax
jurisdictions in which members of the Group are d omiciled and operate. Pursuant to the rules and
regulations of the Cayman Islands and British V irgin Islands, the Company and its subsidiary
incorporated in the Cayman Islands and British Virgin Islands, respectively, are not subject to any
income tax.
APPENDIX I ACCOUNTANTS ’ REPORT
– I-43 –


--- page 522 ---
In December 2020, Yantai Zhongjia was identified as a ‘‘High and New Technology Enterprise ’’
and thus was granted a preferential rate of 15% from 1 January 2020 to 31 December 2022, if certain
conditions are met. The new ‘‘High and New Technology Enterprise ’’certificate is being applied for and
has not been issued yet. In arriving at the current tax provision for Yantai Zhongjia during the years
ended 31 December 2020, 2021 and 2022, and the six months ended 30 June 2022 and 2023, the Group
adopted the statutory income tax rate of 25% after considering that the tax authority may hold a
different view about the preferential tax rate.
Year ended 31 December
Six months ended
30 June
2020 2021 2022 2022 2023
RMB’000 RMB ’000 RMB ’000 RMB’ 000 RMB ’000
(unaudited)
Current tax:
PRC corporate income tax 48,887 29,659 60,156 30,781 22,957
Deferred tax (note 17) 6,003 (1,165) 3,762 5,456 3,772
Total tax charge for the year/period 54,890 28,494 63,918 36,237 26,729
A reconciliation of income tax expense applicable to profit before tax at the statutory rate for the
jurisdictions in which the Company and the majority of its subsidiaries are domiciled to the income tax
expense at the effective income tax rate for each of the Relevant Periods is as follows:
Year ended 31 December
Six months ended
30 June
2020 2021 2022 2022 2023
RMB’000 RMB ’000 RMB ’000 RMB’ 000 RMB ’000
(unaudited)
Profit before tax 169,313 87,210 184,908 108,709 79,498
At the statutory income tax rate of
25% 42,328 21,803 46,227 27,177 19,875
Effect of tax rate differences in
other jurisdictions 1,799 1,210 4,963 1,494 1,268
Effect of withholding tax at 10% on
the distributable profits of the
Group ’s PRC subsidiaries 6,464 4,811 10,260 5,687 4,187
Expenses not deductible for tax 4,299 670 2,468 1,879 1,399
Total 54,890 28,494 63,918 36,237 26,729
APPENDIX I ACCOUNTANTS ’ REPORT
– I-44 –


--- page 523 ---
12. DIVIDENDS
Year ended 31 December
Six months ended
30 June
2020 2021 2022 2022 2023
RMB’000 RMB ’000 RMB ’000 RMB’ 000 RMB ’000
(unaudited)
Dividends — 33,891* 38,886** ——
* The dividends declared to Majestic Gold Corp. amounted to RMB31,857,000 had been offset against the loan granted
by the Company to Majestic Gold Corp., in June 2021.
** All the dividends declared in 2022 had been paid in October 2022.
13. EARNINGS PER SHARE ATTRIBUTABLE TO ORDINARY EQUITY HOLDERS OF THE
PARENT
The calculation of the basic earnings per share amounts is based on the profit for the year
attributable to ordinary equity holders of the parent, and the weighted average number of ordinary shares
used in the calculation is the number of or dinary shares in issue during the year.
The Group had no potentially dilutive ordinary s hares in issue during the years ended 31 December
2020, 2021 and 2022, and the six months ended 30 June 2022 and 2023.
APPENDIX I ACCOUNTANTS ’ REPORT
– I-45 –


--- page 524 ---
The calculations of basic earnings per share are based on:
Year ended 31 December
Six months ended
30 June
2020 2021 2022 2022 2023
(unaudited)
Earnings
Profit attributable to ordinary
equity holders of the parent, used
in the basic earnings per share
calculation: (RMB ’000) 82,403 41,624 83,214 51,438 37,261
Shares
Weighted average number of
ordinary shares in issue during
the year used in the basic
earnings per share calculation:
(’0 0 0 ) 8 08 08 0 8 08 0
Earnings per share (RMB per share) 1,030 520 1,040 643 466
APPENDIX I ACCOUNTANTS ’ REPORT
– I-46 –


--- page 525 ---
14. PROPERTY, PLANT AND EQUIPMENT
Buildings
Plant and
machinery
Office
equipment
and
electronic
and other
devices
Motor
vehicles
Mining
infrastructure
Leasehold
improvements Total
RMB’000 RMB’ 000 RMB ’000 RMB ’000 RMB ’000 RMB ’000 RMB ’000
31 December 2020
Cost
As at 31 December 2019 2,082 167,276 3,374 4,115 223,493 — 400,340
Additions — 1,983 801 430 13,372 — 16,586
Disposals — (620) —— — — (620)
As at 31 December 2020 2,082 168,639 4,175 4,545 236,865 — 416,306
Accumulated depreciation
As at 31 December 2019 (519) (71,856) (2,808) (3,529) (46,960) — (125,672)
Charge for the year (269) (9,100) (281) (207) (18,795) — (28,652)
Disposals — 427 —— — — 427
As at 31 December 2020 (788) (80,529) (3,089) (3,736) (65,755) — (153,897)
Net carrying amount
As at 31 December 2020 1,294 88,110 1,086 809 171,110 — 262,409
As at 31 December 2019 1,563 95,420 566 586 176,533 — 274,668
31 December 2021
Cost
As at 31 December 2020 2,082 168,639 4,175 4,545 236,865 — 416,306
Additions 1,147 20,521 502 584 8,530 4,094 35,378
Disposals — (1,478) (111) (355) —— (1,944)
As at 31 December 2021 3,229 187,682 4,566 4,774 245,395 4,094 449,740
Accumulated depreciation
As at 31 December 2020 (788) (80,529) (3,089) (3,736) (65,755) — (153,897)
Charge for the year (27) (10,124) (446) (240) (3,801) (40) (14,678)
Disposals — 679 103 136 —— 918
As at 31 December 2021 (815) (89,974) (3,432) (3,840) (69,556) (40) (167,657)
Net carrying amount
As at 31 December 2021 2,414 97,708 1,134 934 175,839 4,054 282,083
As at 31 December 2020 1,294 88,110 1,086 809 171,110 — 262,409
APPENDIX I ACCOUNTANTS ’ REPORT
– I-47 –


--- page 526 ---
Buildings
Plant and
machinery
Office
equipment
and
electronic
and other
devices
Motor
vehicles
Mining
infrastructure
Leasehold
improvements Total
RMB’000 RMB’ 000 RMB ’000 RMB ’000 RMB ’000 RMB ’000 RMB ’000
31 December 2022
Cost
As at 31 December 2021 3,229 187,682 4,566 4,774 245,395 4,094 449,740
Additions — 12,175 21 2,013 30,219 — 44,428
Disposals ——— (82) —— (82)
As at 31 December 2022 3,229 199,857 4,587 6,705 275,614 4,094 494,086
Accumulated depreciation
As at 31 December 2021 (815) (89,974) (3,432) (3,840) (69,556) (40) (167,657)
Charge for the year (161) (12,543) (437) (416) (15,821) (204) (29,582)
Disposals ——— 82 —— 82
As at 31 December 2022 (976) (102,517) (3,869) (4,174) (85,377) (244) (197,157)
Net carrying amount
As at 31 December 2022 2,253 97,340 718 2,531 190,237 3,850 296,929
As at 31 December 2021 2,414 97,708 1,134 934 175,839 4,054 282,083
30 June 2023
Cost
As at 31 December 2022 3,229 199,857 4,587 6,705 275,614 4,094 494,086
Additions — 4,275 — 604 34,768 — 39,647
Disposals ——— (82) —— (82)
As at 30 June 2023 3,229 204,132 4,587 7,227 310,382 4,094 533,651
Accumulated depreciation
As at 31 December 2022 (976) (102,517) (3,869) (4,174) (85,377) (244) (197,157)
Charge for the period (81) (6,750) (178) (381) (8,403) (205) (15,998)
Disposals ——— 82 —— 82
As at 30 June 2023 (1,057) (109,267) (4,047) (4,473) (93,780) (449) (213,073)
Net carrying amount
As at 30 June 2023 2,172 94,865 540 2,754 216,602 3,645 320,578
As at 31 December 2022 2,253 97,340 718 2,531 190,237 3,850 296,929
The ownership certificates of certain property, plant and equipment with an aggregate net carrying
value of RMB1,294,000, RMB2,414,000 and RMB2,253,000, and RMB2,172,000, have not yet been
obtained as at 31 December 2020, 2021 and 2022 and 30 June 2023, respectively.
APPENDIX I ACCOUNTANTS ’ REPORT
– I-48 –


--- page 527 ---
15. INTANGIBLE ASSETS
Mining
rights Software Total
RMB’000 RMB ’000 RMB ’000
31 December 2020
Cost
As at 31 December 2019 62,665 — 62,665
Additions 101,316 — 101,316
As at 31 December 2020 163,981 — 163,981
Accumulated depreciation
As at 31 December 2019 (16,200) — (16,200)
Amortisation provided during the year (2,543) — (2,543)
As at 31 December 2020 (18,743) — (18,743)
Net carrying amount
As at 31 December 2020 145,238 — 145,238
As at 31 December 2019 46,465 — 46,465
31 December 2021
Cost
As at 31 December 2020 163,981 — 163,981
Additions 20,632 — 20,632
Price Adjustment* (30,214) — (30,214)
As at 31 December 2021 154,399 — 154,399
Accumulated depreciation
As at 31 December 2020 (18,743) — (18,743)
Amortisation provided during the year (3,334) — (3,334)
As at 31 December 2021 (22,077) — (22,077)
Net carrying amount
As at 31 December 2021 132,322 — 132,322
As at 31 December 2020 145,238 — 145,238
APPENDIX I ACCOUNTANTS ’ REPORT
– I-49 –


--- page 528 ---
Mining
rights Software Total
RMB’000 RMB ’000 RMB ’000
31 December 2022
Cost
As at 31 December 2021 154,399 — 154,399
Additions — 1,276 1,276
As at 31 December 2022 154,399 1,276 155,675
Accumulated depreciation
As at 31 December 2021 (22,077) — (22,077)
Amortisation provided during the year (8,328) (180) (8,508)
As at 31 December 2022 (30,405) (180) (30,585)
Net carrying amount
As at 31 December 2022 123,994 1,096 125,090
As at 31 December 2021 132,322 — 132,322
30 June 2023
Cost
As at 31 December 2022 154,399 1,276 155,675
Additions ———
As at 30 June 2023 154,399 1,276 155,675
Accumulated depreciation
As at 31 December 2022 (30,405) (180) (30,585)
Amortisation provided during the year (3,844) (136) (3,980)
As at 30 June 2023 (34,249) (316) (34,565)
Net carrying amount
As at 30 June 2023 120,150 960 121,110
As at 31 December 2022 123,994 1,096 125,090
* In 2020, Yantai Zhongjia obtained a mining right from Yantai Natural Resources and Planning Bureau at an initial
consideration of RMB101,136,000 (the ‘‘Initial Consideration ’’). The final purchase price of RMB74,120,800 (the
‘‘Final Consideration ’’) was determined in 2021 based on the final evaluation results executed by Yantai Natural
Resources and Planning Bureau. The present value (the ‘‘PV’’) of final consideration was RMB70,922,000, after
considering the instalment payment. The difference between the Initia l Consideration and the PV of Final
Consideration was adjusted against the cost of the mining right in 2021.
APPENDIX I ACCOUNTANTS ’ REPORT
– I-50 –


--- page 529 ---
16. RIGHT-OF-USE ASSETS/LEASE LIABILITIES
The Group as a lessee
The Group has lease contracts for leasehold land and buildings used in its operations. Lump sum
payments were made upfront to acquire the leasehold land with lease periods from 30 to 50 years and
buildings with lease periods of 20 years, and no ongoing payments will be made under the terms of the
lease.
(a) Right-of-use assets
The carrying amounts of the Group ’s right-of-use assets and the movements during the Relevant
Periods are as follows:
Leasehold land Buildings Total
RMB’000 RMB ’000 RMB ’000
As at 1 January 2020 85,922 55,395 141,317
Additions — 2,503 2,503
Depreciation charge (4,211) (4,611) (8,822)
As at 31 December 2020 and
1 January 2021 81,711 53,287 134,998
Additions — 2,469 2,469
Depreciation charge (4,190) (4,650) (8,840)
As at 31 December 2021 and
1 January 2022 77,521 51,106 128,627
Additions 40 — 40
Depreciation charge (4,211) (4,736) (8,947)
As at 31 December 2022 and
1 January 2023 73,350 46,370 119,720
Additions
Depreciation charge (2,112) (2,365) (4,477)
As at 30 June 2023 71,238 44,005 115,243
The leasehold land are all situat ed in Shandong Province, the PRC.
The net carrying value of land with land use r ight certificates amounts to RMB897,000,
RMB877,000 and RMB857,000 and RMB847,000 as at 31 December 2020, 2021 and 2022 and 30 June
2023, respectively.
APPENDIX I ACCOUNTANTS ’ REPORT
– I-51 –


--- page 530 ---
(b) Lease liabilities
The carrying amounts of the Group ’s lease liabilities and the movements during the Relevant
Periods are as follows:
Year ended 31 December
Six months ended
30 June
2020 2021 2022 2022 2023
RMB’000 RMB ’000 RMB ’000 RMB’ 000 RMB ’000
(unaudited)
Carrying amount at 1 January (1,573) —— ——
Payments 1,573 —— ——
Carrying amount at end of the
year/period ——— ——
The amounts recognised in profit or loss in relation to leases are as follows:
Year ended 31 December
Six months ended
30 June
2020 2021 2022 2022 2023
RMB’000 RMB ’000 RMB ’000 RMB’ 000 RMB ’000
(unaudited)
Depreciation charge of right-of-use
assets 8,822 8,840 8,947 4,474 4,477
Expenses relating to short-term
leases 152 131 111 51 72
Total amount recognised in
profit or loss 8,974 8,971 9,058 4,525 4,549
APPENDIX I ACCOUNTANTS ’ REPORT
– I-52 –


--- page 531 ---
17. DEFERRED TAX
Deferred tax liabilities
Changes in
rehabilitation
assets
Withholding
taxes Total
RMB’000 RMB ’000 RMB ’000
At 1 January 2020 3,193 — 3,193
Deferred tax charged /(credited) to profit
or loss during the year (365) 6,464 6,099
Gross deferred tax liabilities at
31 December 2020 2,828 6,464 9,292
Deferred tax assets
Provision for
rehabilitation
Other
long-term
liabilities
Depreciation
in excess of
related
depreciation
allowance Total
RMB’000 RMB ’000 RMB ’000 RMB ’000
At 1 January 2020 5,326 2,525 313 8,164
Deferred tax credited/
(charged) to profit or loss
during the year 167 (143) 72 96
Gross deferred tax assets at
31 December 2020 5,493 2,382 385 8,260
APPENDIX I ACCOUNTANTS ’ REPORT
– I-53 –


--- page 532 ---
Deferred tax liabilities
Changes in
rehabilitation
assets
Withholding
taxes Total
RMB’000 RMB ’000 RMB ’000
At 1 January 2021 2,828 6,464 9,292
Deferred tax charged/(credited) to
profit or loss during the year 95 (1,189) (1,094)
Gross deferred tax liabilities at
31 December 2021 2,923 5,275 8,198
Deferred tax assets
Provision for
rehabilitation
Other
long-term
liabilities
Depreciation
in excess of
related
depreciation
allowance Total
RMB’000 RMB ’000 RMB ’000 RMB ’000
At 1 January 2021 5,493 2,382 385 8,260
Deferred tax credited/
(charged) to profit or loss
during the year 336 (150) (115) 71
Gross deferred tax assets at
31 December 2021 5,829 2,232 270 8,331
Deferred tax liabilities
Changes in
rehabilitation
assets
Withholding
taxes Total
RMB’000 RMB ’000 RMB ’000
At 1 January 2022 2,923 5,275 8,198
Deferred tax charged/(credited) to
profit or loss during the year (248) 4,260 4,012
Gross deferred tax liabilities at
31 December 2022 2,675 9,535 12,210
APPENDIX I ACCOUNTANTS ’ REPORT
– I-54 –


--- page 533 ---
Deferred tax assets
Provision for
rehabilitation
Other
long-term
liabilities
Depreciation
in excess of
related
depreciation
allowance Total
RMB’000 RMB ’000 RMB ’000 RMB ’000
At 1 January 2022 5,829 2,232 270 8,331
Deferred tax credited/
(charged) to profit or loss
during the year 149 (158) 259 250
Gross deferred tax assets at
31 December 2022 5,978 2,074 529 8,581
Deferred tax liabilities
Changes in
rehabilitation
assets
Withholding
taxes Total
RMB’000 RMB ’000 RMB ’000
At 1 January 2023 2,675 9,535 12,210
Deferred tax charged/(credited) to
profit or loss during the period (98) 4,187 4,089
Gross deferred tax liabilities at
30 June 2023 2,577 13,722 16,299
APPENDIX I ACCOUNTANTS ’ REPORT
– I-55 –


--- page 534 ---
Deferred tax assets
Provision for
rehabilitation
Other
long-term
liabilities
Depreciation
in excess of
related
depreciation
allowance Total
RMB’000 RMB ’000 RMB ’000 RMB ’000
At 1 January 2023 5,978 2,074 529 8,581
Deferred tax credited/
(charged) to profit or loss
during the period 86 (83) 314 317
Gross deferred tax assets at
30 June 2023 6,064 1,991 843 8,898
For presentation purposes, certain deferred tax assets and liabilities have been offset in the
statements of financial position as at 31 Dec ember 2020, 2021 and 2 022 and 30 June 2023. The
following is an analysis of the deferred tax balances of the Group for financial reporting purposes:
As at 31 December
As at
30 June
20232020 2021 2022
RMB’000 RMB ’000 RMB ’000 RMB ’000
Net deferred tax assets recognised in the
consolidated statement of financi al position 5,432 5,408 5,906 6,321
Net deferred tax liabilities recognised in the
consolidated statement of financi al position 6,464 5,275 9,535 13,722
There are no income tax consequences attaching to the payment of dividends by the Company to
its shareholders.
APPENDIX I ACCOUNTANTS ’ REPORT
– I-56 –


--- page 535 ---
18. OTHER LONG-TERM ASSETS
As at 31 December
As at
30 June
20232020 2021 2022
RMB’000 RMB ’000 RMB ’000 RMB ’000
Loans receivable* 12,100 4,000 4,000 4,000
Advance payments for purchases of property,
plant and equipment — 954 2,926 3,938
12,100 4,954 6,926 7,938
As at 31 December
As at
30 June
20232020 2021 2022
RMB’000 RMB ’000 RMB ’000 RMB ’000
Analysed into:
Current portion — 1,000 400 400
Non-current portion 12,100 3,954 6,526 7,538
12,100 4,954 6,926 7,938
* The loans receivables are non-trade in nature, unsecured and interest-free. The loans receivable of RMB12,100,000 as
at 31 December 2020 were partially repaid in November 2021 and the remaining loans receivable of RMB4,000,000
as at 31 December 2021 were repayable in 4 years from 2022 to 2025. According to the supplementary agreement in
September 2022, RMB4,000,000 as at 31 December 2022 was repayable in ten years from 2023 to 2032.
19. INVENTORIES
As at 31 December
As at
30 June
20232020 2021 2022
RMB’000 RMB ’000 RMB ’000 RMB ’000
Gold concentrate 11,916 2,565 836 1,268
Ore stockpile 11,068 9,899 9,868 2,285
Raw materials 6,005 7,324 7,948 7,757
Total 28,989 19,788 18,652 11,310
APPENDIX I ACCOUNTANTS ’ REPORT
– I-57 –


--- page 536 ---
20. PREPAYMENTS, DEPOSIT S AND OTHER RECEIVABLES
The Group
As at 31 December
As at
30 June
20232020 2021 2022
RMB’000 RMB ’000 RMB ’000 RMB ’000
Prepayments 2,786 3,672 5,362 8,190
Deposits and other receivables — 682 483 442
Interest receivables — 10 ——
2,786 4,364 5,845 8,632
The Company
As at 31 December
As at
30 June
20232020 2021 2022
RMB’000 RMB ’000 RMB ’000 RMB ’000
Prepayments 2,161 3,152 4,050 5,382
2,161 3,152 4,050 5,382
Other receivables are unsecured, non-interest-bearing and repayable on demand.
The Group has applied the general approach in calculating the expected credit loss for deposits and
other receivables under IFRS 9. The Group considers the historical loss rate and adjusts for forward-
looking macroeconomic data in calculating the expected credit loss rate. As at 31 December 2020, 2021
and 2022 and 30 June 2023, the Group estimated that the expected loss rate for deposits and other
receivables was insignificant.
21. CASH AND CASH EQUIVALENTS, RES TRICTED AND PLEDGED DEPOSITS
The Group
As at 31 December
As at
30 June
20232020 2021 2022
RMB’000 RMB ’000 RMB ’000 RMB ’000
Cash and bank balances 217,197 198,043 299,781 369,213
Less: Restricted and pledged deposits (14,290) (15,645) (17,594) (19,212)
Cash and cash equivalents 202,907 182,398 282,187 350,001
APPENDIX I ACCOUNTANTS ’ REPORT
– I-58 –


--- page 537 ---
The Company
As at 31 December
As at
30 June
20232020 2021 2022
RMB’000 RMB ’000 RMB ’000 RMB ’000
Cash and cash equivalents 538 325 38,735 34,015
At 31 December 2020, 2021 and 2022 and 30 June 2023 the cash and cash equivalents of the
Group denominated in Hong Kong dollars ( ‘‘HK$’’) amounted to approximately RMB50,000,
RMB329,000, RMB2,768,000, and RMB411,000, those denominated in Canadian dollars amounted to
approximately RMB1,101,000, RMB578,000, RMB596 ,000 and RMB639,000 and those denominated in
United States dollars ( ‘‘USD’’) amounted to approximately RMB15,000, RMB13,541,000,
RMB57,340,000 and RMB56,065,000, respectively. All other cash and cash equivalents held by the
Group are denominated in RMB.
The RMB is not freely convertible into other c urrencies, however, under Mainland China’ s Foreign
Exchange Control Regula tions and Administration of Settlement , Sale and Payment of Foreign Exchange
Regulations, the Group is permitted to exchange RMB for other currencies thr ough banks authorised to
conduct foreign exchange business.
At 31 December 2020, 2021 and 2022 and 30 June 2023 the cash and cash equivalents of the
Company denominated in Hong Kong dollars ( ‘‘HK$’’) amounted to approximately RMB26,000,
RMB319,000, RMB2,761,000 and RMB406,000, those denominated in Canadian dollars amounted to
approximately RMB512,000, nil, nil and nil an d those denominated in United States dollars ( ‘‘USD’’)
amounted to approximately nil, RMB6,000, RMB35,974,000 and RMB33,609,000, respectively.
Cash at banks earns interest at floating rates based on daily bank deposit rates. The bank balances
are deposited with creditworthy banks with no recent history of default. The carrying amounts of the
cash and cash equivalents approximated to their fair values.
The restricted and pledged deposits amounting to RMB14,290,000, RMB15,645,000,
RMB17,594,000, and RMB19,212,000 as at 31 December 2020, 2021, 2022 and 30 June 2023 were
placed as environmental rehabilitation d eposits which are restricted to use.
22. TRADE PAYABLES
As at 31 December
As at
30 June
20232020 2021 2022
RMB’000 RMB ’000 RMB ’000 RMB ’000
Trade payables 13,839 15,871 12,426 9,576
APPENDIX I ACCOUNTANTS ’ REPORT
– I-59 –


--- page 538 ---
An ageing analysis of the trade payables as at the end of each of the Relevant Periods, based on
the invoice date, is as follows:
As at 31 December
As at
30 June
20232020 2021 2022
RMB’000 RMB ’000 RMB ’000 RMB ’000
Within 1 month 7,774 9,022 9,152 6,207
1 to 2 months 2,889 3,764 2,174 2,074
2 to 3 months 676 2,272 357 339
Over 3 months 2,500 813 743 956
Total 13,839 15,871 12,426 9,576
The trade payables are non-interest-bearing and normally settled on 30 to 90 days.
23. OTHER PAYABLES AND ACCRUALS
As at 31 December
As at
30 June
20232020 2021 2022
RMB’000 RMB ’000 RMB ’000 RMB ’000
Mining rights payables 71,136 ———
Other payables 7,998 8,840 9,115 21,267
Other tax payables 9,900 7,671 7,618 7,844
Accrued salaries 3,879 3,908 4,124 3,959
I n t e r e s t p a y a b l e 5 23 64 03 6
Total 92,965 20,455 20,897 33,106
Other payables are repayable on demand.
24. PROVISIONS
As at 31 December
As at
30 June
2023Notes 2020 2021 2022
RMB’000 RMB ’000 RMB ’000 RMB ’000
Provision for relocation (a) 1,662 981 935 935
Provision for penalties (a) 250 370 370 370
Provision for rehabilitation (b) 21,971 23,316 23,913 24,258
Less: Current portion (1,912) (1,351) (1,305) (1,305)
Non-current portion 21,971 23,316 23,913 24,258
APPENDIX I ACCOUNTANTS ’ REPORT
– I-60 –


--- page 539 ---
(a) The provision for relocation is related to the relocation of villages surrounding the mine and
the provision for penalties arising from the late application for construction project planning
permit.
Provision for
relocation
Provision for
penalties Total
RMB’000 RMB ’000 RMB ’000
At 1 January 2020 3,840 250 4,090
Utilised during the year (2,178) — (2,178)
At 31 December 2020 and 1 January 2021 1,662 250 1,912
Charged to profit or loss during the year — 120 120
Utilised during the year (681) — (681)
At 31 December 2021 and 1 January 2022 981 370 1,351
Utilised during the year (46) — (46)
At 31 December 2022 and 1 January 2023 935 370 1,305
Utilised during the year ———
At 30 June 2023 935 370 1,305
(b) The provision for rehabilitation is related to the estimated costs of complying with the
Group’s obligations for land reclamation. These costs are expected to be incurred on mine
closure, which, based on current mineral reserve estimates, will last for periods ranging from
6t o1 2y e a r s .
The movements in the present value of the pr ovision for rehabilitation are as follows:
Year ended 31 December
Six months ended
30 June
2020 2021 2022 2022 2023
RMB’000 RMB ’000 RMB ’000 RMB ’000 RMB ’000
(unaudited)
As at the beginning of the
year/period 21,303 21,971 23,316 23,316 23,913
Interest increments 681 714 664 332 345
Change in discount rate (187) 631 (67) ——
Change in estimated
rehabilitation cost 174 ————
As at the end of the year/period 21,971 23,316 23,913 23,648 24,258
APPENDIX I ACCOUNTANTS ’ REPORT
– I-61 –


--- page 540 ---
25. DEFERRED INCOME
Government
grants
RMB’000
As at 1 January 2020 850
Recognised in profit or loss during the year (170)
As at 31 December 2020 and 1 January 2021 680
Recognised in profit or loss during the year (170)
As at 31 December 2021 and 1 January 2022 510
Recognised in profit or loss during the period (170)
As at 31 December 2022 and 1 January 2023 340
Recognised in profit or loss during the period (85)
As at 30 June 2023 255
The deferred income represents government subs idies granted to the Group in relation to its daily
operation.
26. INTEREST-BEARING BANK BORROWINGS
As at 31 December 2020 As at 31 December 2021
Effective
interest
rate (%) Maturity RMB’000
Effective
interest
rate (%) Maturity RMB’000
Current
Bank borrowings
— secured
4.80 to
7.70 2021 30,000 4.35 2022 30,000
As at 31 December 2022 As at 30 June 2023
Effective
interest
rate (%) Maturity RMB’000
Effective
interest
rate (%) Maturity RMB’000
Current
Bank borrowings
— secured 4.80 2023 30,000 4.80 2023 30,000
APPENDIX I ACCOUNTANTS ’ REPORT
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--- page 541 ---
The Group’ s bank borrowings amounting to RMB10,000,000, nil, nil and nil as at 31 December
2020, 2021, 2022 and 30 June 2023, respectively, were guaranteed by Yantai Dahedong Processing Co.
Ltd. ( ‘‘Dahedong ’’), the non-controlling shareholder of a subs idiary, Kong Fanzhong, a director of a
subsidiary, and his spouse. Such guarantee has been released after full repayment of amount outstanding
in 2021.
The Group’ s bank borrowings amounting to nil, RMB30,000,000, nil and nil as at 31 December
2020, 2021, 2022 and 30 June 2023, respectively, were guaranteed by Dahedong, Kong Fanzhong and
his spouse, and Yantai Baiheng Gold Mine Co. Ltd. ( ‘‘Baiheng ’’). Such guarantee has been released
after full repayment of amount outstanding in April 2022.
The Group’ s bank borrowings amounting to RMB10,000,000, nil, nil and nil as at 31 December
2020, 2021, 2022 and 30 June 2023, respectively, were guaranteed by Dahedong, Kong Fanzhong and
other independent third parties. Such guarantee has been released after full repayment of amount
outstanding in 2021.
The Group’ s bank borrowings amounting to RMB10,000,000, nil, nil and nil as at 31 December
2020, 2021, 2022 and 30 June 2023, respectively, were guaranteed by Dahedong, Kong Fanzhong, Kong
Fanbo and Baiheng and an independent third party. Such guarantee has been released after full
repayment of amount outstanding in 2021.
The Group ’s bank borrowings amounting to nil, nil, RMB30,000,000 and RMB30,000,000 as at 31
December 2020, 2021, 2022 and 30 June 2023, respectively, were guaranteed by Dahedong, Zhou
Shufeng, chairman of the board and general manager of Yantai Zhongjia, and his spouse, and Baiheng.
Bank borrowings
As at 31 December
As at
30 June
20232020 2021 2022
RMB’000 RMB ’000 RMB ’000 RMB ’000
Analysed into:
Repayable within one year 30,000 30,000 30,000 30,000
The Group’ s borrowings are all denominated in RMB with fixed interest rates.
The Group’ s bank borrowings amounted to RMB30,000,000 as at 30 June 2023 was repaid on 25
August 2023.
APPENDIX I ACCOUNTANTS ’ REPORT
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27. OTHER LONG-TERM LIABILITIES
As at 31 December
As at
30 June
20232020 2021 2022
RMB’000 RMB ’000 RMB ’000 RMB ’000
Instalment of the purchase of mining rights* — 34,602 29,142 29,534
Village distribution payable s** 9,527 8,925 8,293 7,962
Retention money 231 ———
9,758 43,527 37,435 37,496
Analysed into:
Current portion 1,065 7,369 7,369 7,369
Non-current portion 8,693 36,158 30,066 30,127
9,758 43,527 37,435 37,496
* Yantai Zhongjia obtained a mining right from Yantai Natural Resources and Planning Bureau in 2020 and the final
purchase price of RMB74,120,800 was determined in 2021. According to the mining rights transfer agreement,
excluding the down payment of RMB30,000,000, the remaining payments amounted to RMB44,120,800 shall be paid
in 7 years from 2021 to 2027, which was interest free and unsecured.
** According to agreement with villagers, Yantai Zhongjia gave additional compensation to villa gers for occupying land
within 20 years from 2012 to 2032. The compensation amounted to RMB22,654,800 in total, which is interest free
and unsecured.
28. SHARE CAPITAL
As at 31 December
As at
30 June
20232020 2021 2022
HKD ’000 HKD ’000 HKD ’000 HKD ’000
Authorised:
50,000 ordinary shares of USD1 each ————
37,000,000 ordinary shares of HKD0.01 each 370 370 370 370
APPENDIX I ACCOUNTANTS ’ REPORT
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--- page 543 ---
As at 31 December
As at
30 June
20232020 2021 2022
RMB’000 RMB ’000 RMB ’000 RMB ’000
Issued and fully paid:
1o r d i n a r ys h a r eo fU S D 1 ————
1 ordinary share of HKD0.01 1111
A summary of movements in the Company ’ss h a r ec a p i t a li sa sf o l l o w s :
Number of
shares in
issue
Share
capital
RMB’000
At 21 May 2019 (date of incorporation) (Note (a)) 100 1
At 1 January 2020 100 1
New shares issued (Note (b)) 80,000 1
Shares repurchased (Note (c)) (100) (1)
At 31 December 2020, 2021, 2022 and 30 June 2023 80,000 1
(a) The Company was incorporated in the Cayman Islands on 21 May 2019 with authorised share
capital of USD50,000 divided into 50,000 shares with a par value of USD1 each. The
Company issued 94 ordinary shares to Maje stic Gold Corp. and 6 ordinary shares to
Richard’s Resources Technologies Inc. on the same day.
(b) On 23 April 2020, the Company (i) increased its authorised share capital of HKD370,000
divided into 37,000,000 shares of a par va lue of HKD0.01 each; and (ii) issued 75,200
ordinary shares to Majestic Gold Corp. and 4,800 ordinary shares to Richard ’s Resources
Technologies Inc. with a par value of HKD0.01 each.
(c) On 23 April 2020, the Company (i) repurchased 94 shares from Majestic Gold Corp. and 6
ordinary shares from Richard ’s Resources Technologies Inc. with a par value of USD1 each;
and (ii) reduced its authorised but unissued share capital by the cancellation of USD50,000
divided into 50,000 shares with a par value of USD1 each such that the authorised share
capital of the Company is HKD370,000 divided into 37,000,000 shares of a par value of
HKD0.01 each.
APPENDIX I ACCOUNTANTS ’ REPORT
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29. RESERVES
The Group
The amounts of the Group ’s reserves and the movements therein for the years ended 31 December
2020, 2021 and 2022 and the six months ended 30 June 2023 are presented in the consolidated
statements of changes in equity.
Capital reserve
Capital reserve represents (i) contributions from shareholders; and (ii) the difference between the
consideration paid for acquiring the non-contro lling interest and the carrying value of net assets
attributed to the non-controlling interest.
Statutory surplus reserve
In accordance with the Company Law of the PRC a nd the Articles of Association of Yantai
Zhongjia, Yantai Zhongjia is re quired to allocate 10% of its profit after tax determined under PRC
accounting standards to the statutory surplus reserve until such reserve reaches 50% of the authorised
share capital of Yantai Zhongjia. Subject to certai n restrictions set out in the Company Law of the PRC,
part of this reserve may be converted to increase the share capital, provided that the remaining balance
after the capitalisation is not less th an 25% of the authorised share capital.
Special reserve
Pursuant to a notice regarding Safety Productio n Expenditure jointly issued by the Ministry of
Finance and the State Administration of Work Safety of the PRC in February 2012, the Group is
required to establish a safety fund surplus reser ve based on the volume of mine extracted. The safety
fund can only be transferred to retained earnings to offset safety related expenses as and when they are
incurred, including expenses related to safety protection facilities and equipment maintenance as well as
safety production inspection, consultation and training.
Exchange fluctuation reserve
The foreign exchange reserve comprises all exchange differences arising from the translation of the
financial statements of entities who se functional currency is not RMB.
APPENDIX I ACCOUNTANTS ’ REPORT
– I-66 –


--- page 545 ---
The Company
Capital
reserve
Exchange
fluctuation
reserve
Retained
profits/
(Accumulated
losses) Total
RMB ’000 RMB ’000 RMB ’000 RMB ’000
As at 1 January 2020 — (104) (5,802) (5,906)
Loss for the period —— (6,326) (6,326)
Other comprehensive expense for the year:
Exchange differences on translation of
financial statements of the Company — (16,430) — (16,430)
Total comprehensive loss for the period — (16,430) (6,326) (22,756)
Contribution from a shareholder 322,847 —— 322,847
As at 31 December 2020 and
1 January 2021 322,847 (16,534) (12,128) 294,185
Profit for the period —— 45,966 45,966
Other comprehensive expense for the period:
Exchange differences on translation of
financial statements of the Company — (8,895) — (8,895)
Total comprehensive income/(loss)
for the period — (8,895) 45,966 37,071
Dividend declared —— (33,891) (33,891)
As at 31 December 2021 and
1 January 2022 322,847 (25,429) (53) 297,365
Profit for the period —— 43,412 43,412
APPENDIX I ACCOUNTANTS ’ REPORT
– I-67 –


--- page 546 ---
Capital
reserve
Exchange
fluctuation
reserve
Retained
profits/
(Accumulated
losses) Total
RMB ’000 RMB ’000 RMB ’000 RMB ’000
Other comprehensive expense for the year:
Exchange differences on translation of
financial statements of the Company — 29,543 — 29,543
Total comprehensive income/(loss) for the
period — 29,543 43,412 72,955
Dividend declared —— (38,888) (38,888)
As at 31 December 2022 322,847 4,114 4,471 331,432
As 1 January 2022 322,847 (25,429) (53) 297,365
Loss for the period —— (5,999) (5,999)
Other comprehensive expense for the period:
Exchange differences on translation of
financial statements of the Company — 13,500 — 13,500
Total comprehensive income/(loss) for the
period — 13,500 (5,999) 7,501
As at 30 June 2022 (unaudited) 322,847 (11,929) (6,052) 304,866
As 1 January 2023 322,847 4,114 4,471 331,432
Loss for the period —— (5,044) (5,044)
Other comprehensive expense for the period:
Exchange differences on translation of
financial statements of the Company — 10,459 — 10,459
Total comprehensive income/(loss) for the
period — 10,459 (5,044) 5,415
As at 30 June 2023 (unaudited) 322,847 14,573 (573) 336,847
APPENDIX I ACCOUNTANTS ’ REPORT
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--- page 547 ---
30. PARTLY-OWNED SUBSIDIARIES WITH MA TERIAL NON-CONTRO LLING INTERESTS
Details of the Group ’s subsidiary that has material non-controlling interest are set out below:
As at 31 December
As at
30 June
20232020 2021 2022
RMB’000 RMB ’000 RMB ’000 RMB ’000
Percentage of equity interest held by non-
controlling interests:
Yantai Zhongjia Mining Co., Ltd. 25% 25% 25% 25%
Profit for the year/period allocated to non-
controlling interests:
Yantai Zhongjia Mining Co., Ltd. 32,020 17,092 37,776 15,508
Accumulated balances of non-controlling
interests at the end of each of the Relevant
Periods:
Yantai Zhongjia Mining Co., Ltd. 63,816 40,908 122,233 137,741
The following tables illustrate the summarised financial information of the above subsidiary. The
amounts disclosed are before any inter-company eliminations:
Year ended 31 December
Six months ended
30 June
2020 2021 2022 2022 2023
RMB’000 RMB ’000 RMB ’000 RMB ’000 RMB ’000
(unaudited)
Revenue 360,999 247,872 418,413 217,331 196,659
Other income and gains 3,916 3,556 13,128 8,392 3,782
Total expenses (236,835) (183,059) (280,439) (141,588) (138,410)
Profit for the year/period 128,080 68,369 151,102 84,135 62,031
Total comprehensive income for the
year/period 128,080 68,369 151,102 84,135 62,031
Net cash flows from operating
activities 190,993 126,202 218,889 124,768 102,581
Net cash flows used in investing
activities (60,906) (55,940) (56,060) (16,581) (28,353)
Net cash flows used in financing
activities (59,102) (104,051) (88,402) (31,001) (1,716)
Net increase/(decrease) in cash and
cash equivalents 70,985 (33,789) 74,427 77,186 72,512
APPENDIX I ACCOUNTANTS ’ REPORT
– I-69 –


--- page 548 ---
As at 31 December
As at
30 June
20232020 2021 2022
RMB’000 RMB ’000 RMB ’000 RMB ’000
Current assets 245,649 205,590 280,834 349,218
Non-current assets 560,177 637,906 554,150 570,271
Current liabilities (588,454) (6 88,946) (480,508) (502,425)
Non-current liabilities (30,664) ( 59,474) (53,979) (54,385)
31. NOTE TO THE CONSOLIDAT ED STATEMENTS OF CASH FLOWS
(a) Major non-cash transactions
On 5 June 2020, the Group signed an agreement w ith its shareholder, Majestic Gold Corp., to
waive the debt due from the Group amounting to CAD62,073,000 (equivalent to RMB322,847,000) and
the amount was credited to capital reserve in 2020.
In June 2021, the Group granted an interest-fre e loan of HK$38,798,238.80 (equivalent to
RMB31,857,000) to its shareholder, Majestic Gold Corp., for working capital purpose. On 27 October
2021, it is resolved that dividend of HK$38,798,238.80 (equivalent to RMB31,857,000) was declared to
its shareholders, Majestic Gold Corp., and the dividend payable to Majestic Gold Corp., for the sum of
HK$38,798,238.80 (equivalent to RMB31,857,000) would be offset against the loan granted by the
Company in June 2021.
On 25 October 2022, the Group signed an agreement with its shareholder, Majestic Gold Corp., to
waive the debt due from the Group amounting to RMB10,770,000 and the amount was credited to
capital reserve in 2022.
On 25 October 2022, the Group signed an agreement with its shareholder, Dahedong, to waive the
debt due from the Group amounting to RMB36,349,431.83 and the amount was credited to non-
controlling interests in 2022.
In November 2022, the registered capital of Yantai Zhongjia was increased from RMB139,905,500
to RMB168,705,500, of which the shareholder Majestic Yantai Gold Ltd. increased its capital by
RMB21,600,000 and Dahedong increased its capital by RMB7,200,000. As of 31 December 2022, the
capital increase of Dahedong to Yantai Zhongjia had not been paid. On 13 November 2023, Yantai
Zhonjia received the full amount of capital increase of RMB7,200,000 from Dahedong.
APPENDIX I ACCOUNTANTS ’ REPORT
– I-70 –


--- page 549 ---
(b) Changes in liabilities arisi ng from financing activities
Interest
payable
Interest-
bearing
bank
borrowings
Due to
shareholders
Included in
other
payables and
accruals/other
long-term
liabilities
Total
liabilities
from
financing
activities
RMB ’000 RMB ’000 RMB ’000 RMB ’000 RMB ’000
At 1 January 2020 145 90,000 376,365 10,101 476,611
Cash flows from financing activities (4,152) (60,000) 6,936 (839) (58,055)
Interest expense 4,059 —— — 4,059
Incremental interest on provisions and other
long-term liabilities —— — 496 496
Debt exemption with a shareholder —— (322,847) — (322,847)
Currency translation differences —— (805) — (805)
At 31 December 2020 and 1 January 2021 52 30,000 59,649 9,758 99,459
Cash flows from finan cing activities (2,659) — 862 (1,300) (3,097)
Interest expense 2,643 —— — 2,643
Incremental interest on provisions and other
long-term liabilities —— — 467 467
Currency translation differences —— (256) — (256)
At 31 December 2021 and 1 January 2022 36 30,000 60,255 8,925 99,216
Cash flows from fin ancing activities
(unaudited) (466) (30,000) 451 (535) (30,550)
Interest expense (unaudited) 430 —— — 430
Incremental interest on provisions and other
long-term liabili ties (unaudited) —— — 219 219
Currency translation differences (unaudited) —— 604 — 604
At 30 June 2022 (unaudited) —— 61,310 8,609 69,919
At 1 January 2022 36 30,000 60,255 8,925 99,216
Cash flows from finan cing activities (933) — (13,905) (1,069) (15,907)
Interest expense 937 —— — 937
Incremental interest on provisions and other
long-term liabilities —— — 437 437
Debt exemption with shareholder —— (47,1 19
 ) — (47,119)
Currency translation differences —— 1,216 — 1,216
At 31 December 2022 and 1 January 2023 40 30,000 447 8,293 38,780
Cash flows from finan cing activities (721) — (5) (534) (1,260)
Interest expense 717 —— — 717
Incremental interest on provisions and other
long-term liabilities —— — 203 203
Currency translation differences —— 14 — 14
At 30 June 2023 36 30,000 456 7,962 38,454
APPENDIX I ACCOUNTANTS ’ REPORT
– I-71 –


--- page 550 ---
32. CONTINGENT LIABILITIES
As at 31 December
As at
30 June
20232020 2021 2022
RMB’000 RMB ’000 RMB ’000 RMB ’000
Guarantees provided to:
Baiheng* 50,000 ———
Shandong Eastern Ocean Group Co., Ltd
(‘‘Shandong Eastern ’’)** 50,000 ———
100,000 ———
* At 31 December 2020, the Group, togethe r with certain related parties had prov ided a joint guarantee for the bank
borrowing of RMB50,000,000 to Bai heng (note 34). As at 31 December 2021, Baiheng has settled the bank
borrowing of RMB50,000,000.
At 31 December 2020, the fair value of the financial guarantees was insignificant.
** At 31 December 2020, the Group had provided joint and several guarantees for Shandong Eastern’ sd e b to f
RMB50,000,000 (excluding relevant financing interest and other fees incurred). The debt was also secured by a
pledge of shares of a listed company owned by Shandong Eastern and a pledge of RMB50,000,000 certificate of
deposit provided by an independent third party. As at 31 December 2021, the Group ’s guarantee liability has been
relieved.
At 31 December 2020, the fair value of the financial guarantee was insignificant.
At 31 December 2021, 2022, and 30 June 2023, all guarantees provided to related parties and third
parties had been released.
33. COMMITMENTS
The Group had the following capital commitments at the end of each of the Relevant Periods:
As at 31 December
As at
30 June
20232020 2021 2022
RMB’000 RMB ’000 RMB ’000 RMB ’000
Contracted, but not provided for:
Mining infrastructure 670 320 5,289 6,498
670 320 5,289 6,498
APPENDIX I ACCOUNTANTS ’ REPORT
– I-72 –


--- page 551 ---
34. RELATED PARTY TRANSACTIONS
(1) Name and relationship
Name of related parties Relationship with the Group
Majestic Gold Corp. Controllin g shareholder of the Company
Yantai Dahedong Processing Co. Ltd.
(‘‘Dahedong ’’)
Non-controlling shareholder of Yantai Zhongjia
Kong Fanzhong A director of Yantai Zhongjia and shareholder of
Majestic Gold Corp.
Kong Fanbo A director of Yantai Zhongjia and a close family member
of Kong Fanzhong ’s family
Yantai Baiheng Gold Mine Co. Ltd.
(‘‘Baiheng ’’)
An entity controlled by Kong Fanzhong and significantly
influenced by Kong Fanbo
Yantai Qingjia Construction Materials
Co., Ltd ( ‘‘Qingjia ’’)
An entity controlled by a close family member of Kong
Fanzhong’s family
(2) Significant related parties’ transactions
The following transactions were carried out with related parties during the Relevant Periods:
Year ended 31 December
Six months ended
30 June
2020 2021 2022 2022 2023
RMB’000 RMB ’000 RMB ’000 RMB ’000 RMB ’000
(unaudited)
Payment made by a related party
on behalf of the group:
Majestic Gold Corp. 881 874 887 451 456
Funds borrowed from a related party:
Majestic Gold Corp. 3,334 103 ———
Funds advance to a related party:
Majestic Gold Corp. — 31,857 ———
Purchase bank acceptance bills from
related parties:
Dahedong 10,000 ————
Qingjia 200 ————
Repayment of amounts due to a
related party:
Majestic Gold Corp. —— 14,317 — 461
APPENDIX I ACCOUNTANTS ’ REPORT
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--- page 552 ---
(3) Other transactions with related parties
Dahedong, Kong Fanzhong, Kong Fanbo and Baiheng with other independent third party, have
guaranteed certain bank borrowings made to the Group of RMB30,000,000, RMB30,000,000,
RMB30,000,000, and RMB30,000,000 as at 31 December 2020, 2021, 2022 and 30 June 2023, as
further detailed in note 26 to the Historical Financial Information.
Yantai Zhongjia guaranteed a bank borrowing of RMB20,000,000 to Dahedong from November
2018 to November 2020.
Yantai Zhongjia guaranteed a bank borrowing of RMB50,000,000 to Baiheng from December 2016
to December 2021, a bank borrowing of RMB20,000,000 of Baiheng from January 2019 to October
2020.
On 5 June 2020, the Group signed an agreement w ith its shareholder, Majestic Gold Corp., to
waive the debt due from the Group amounting to CAD62,073,000 (equivalent to RMB322,847,000) and
the amount was credited to capital reserve in 2020.
On 25 October 2022, the Group signed an agreement with its shareholder, Majestic Gold Corp., to
waive the debt due from the Group amounting to RMB10,770,000 and the amount was credited to
capital reserve in 2022.
On 25 October 2022, the Group signed an agreement with its shareholder, Dahedong, to waive the
debt due from the Group amounting to RMB36,349,431.83 and the amount was credited to capital
reserve in 2022.
In November 2022, the registered capital of Yantai Zhongjia was increased from RMB139,905,500
to RMB168,705,500, of which the shareholder Majestic Yantai Gold Ltd. increased its capital by
RMB21,600,000 and Dahedong increased its capital by RMB7,200,000. In December 2022, Yantai
Zhongjia received the full amount of capital increase of RMB21,600,000 from Majestic Yantai Gold
Ltd. On 13 November 2023, Yantai Zhonjia received the full amount of capital increase of
RMB7,200,000 from Dahedong.
APPENDIX I ACCOUNTANTS ’ REPORT
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--- page 553 ---
(4) Outstanding balances with related parties
Balances relating to non-trade activities
The Group
Due from related parties:
As at 31 December
As at
30 June
20232020 2021 2022
RMB’000 RMB ’000 RMB ’000 RMB ’000
Dahedong —— 7,200 7,200
Majestic Gold Corp. 1 ———
1 — 7,200 7,200
Due to related parties:
As at 31 December
As at
30 June
20232020 2021 2022
RMB’000 RMB ’000 RMB ’000 RMB ’000
Dahedong 36,349 36,349 ——
Majestic Gold Corp. 23,300 23,906 447 456
59,649 60,255 447 456
The balances with the above related parties were non -trade, unsecured, interest-free and repayable
on demand.
As at 31 December 2022 and 30 June 2023, the balance due from Dahedong amounting to
RMB7,200,000 was relating to unpaid capital contribution by Dahedong to Yantai Zhongjia. On 13
November 2023, Yantai Zhonjia received the full amount of capital increase of RMB7,200,000 from
Dahedong.
For the remaining amount due to Majestic Gold Corp. amounting to RMB456,000, the Group has
fully settled the outstanding balance in July 2023.
APPENDIX I ACCOUNTANTS ’ REPORT
– I-75 –


--- page 554 ---
The Company
Due from related parties
As at 31 December
As at
30 June
20232020 2021 2022
RMB’000 RMB ’000 RMB ’000 RMB ’000
Majestic Yantai Gold Ltd. 305,831 316,897 310,866 320,854
Due to related parties
As at 31 December
As at
30 June
20232020 2021 2022
RMB’000 RMB ’000 RMB ’000 RMB ’000
Majestic Gold Corp. 12,530 13,136 447 456
Yantai Zhongjia Mining Co., Ltd. 1,037 ———
Majestic Yantai Gold Ltd. 757 9,750 20,519 21,178
14,324 22,886 20,966 21,634
The balances with the above related parties were unsecured, interest-free and repayable on demand.
(5) Compensation of key management personnel of the Group
Year ended 31 December
Six months ended
30 June
2020 2021 2022 2022 2023
RMB’000 RMB ’000 RMB ’000 RMB ’000 RMB ’000
(unaudited)
Short-term employee benefits 3,212 2,956 3,974 1,785 2,191
Pension scheme contributions 56 205 247 118 94
Total compensation paid to
key management personnel 3,268 3,161 4,221 1,903 2,285
Further details of directors’ emoluments are included in note 9 to the Historical Financial
Information.
APPENDIX I ACCOUNTANTS ’ REPORT
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--- page 555 ---
35. FINANCIAL INSTRUMENTS BY CATEGORY
The carrying amounts of each of the categories of financial instruments as at the end of each of the
Relevant Periods are as follows:
Financial assets
Financial assets at amortised cost
As at 31 December
As at
30 June
20232020 2021 2022
RMB’000 RMB ’000 RMB ’000 RMB ’000
Financial assets included in other
long-term assets 12,100 4,000 4,000 4,000
Financial assets included in prepayments,
other receivables and other assets — 692 483 442
Restricted and pledged deposits 14,290 15,645 17,594 19,212
Due from related parties 1 — 7,200 7,200
Cash and cash equivalents 202,907 182,398 282,187 350,001
229,298 202,735 311,464 380,855
Financial liabilities
Financial liabilities at amortised cost
As at 31 December
As at
30 June
20232020 2021 2022
RMB’000 RMB ’000 RMB ’000 RMB ’000
Trade payables 13,839 15,871 12,426 9,576
Financial liabilities included in other payables
and accruals 79,186 8,876 9,155 21,791
Interest-bearing bank borrowings 30,000 30,000 30,000 30,000
Other long-term liabilities 9,758 43,527 37,435 37,496
Due to related parties 59,649 60,255 447 456
192,432 158,529 89,463 99,319
APPENDIX I ACCOUNTANTS ’ REPORT
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--- page 556 ---
36. FAIR VALUE AND FAIR VALUE HIERARCHY OF FINANCIAL INSTRUMENTS
Management has assessed that the fair values of cash and cash equivalents, restricted and pledged
deposits, amounts due from related parties, financial assets included in prepayments, deposits and other
receivables, trade payables, financial liabilities inc luded in other payables and accruals, amounts due to
related parties, other long-term liabilities and the interest-bearing bank borrowings approximate to their
carrying amounts largely due to the short-term maturities of these instruments.
The fair values of other long-term assets and oth er long-term liabilities have been calculated by
discounting the expected future cash flows using rates currently available for instruments with similar
terms, credit risk and remaining maturities.
The Group ’s corporate finance team headed by the chief financial officer is responsible for
determining the policies and procedures for the fair value measurement of financial instruments. The
corporate finance team reports directly to the chief financial officer and the board of directors. At the
end of each of the Relevant Periods, the corporate finance team analyses the movements in the values of
financial instruments and determines the major input s applied in the valuation. The valuation is reviewed
and approved by the chief financial officer. The valuation process and results are discussed with the
board of directors once a year for annual financial reporting.
37. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
The Group’ s principal financial instruments mainly in clude financial assets included in other long-
term assets, financial assets included in prepaymen ts, deposits and other receivables, restricted and
pledged deposits, cash and cash equivalents, trad e payables, financial liabilities included in other
payables and accruals, other long-term liabilities, wh ich arise directly from its operations. The Group
has other financial assets and liab ilities such as amounts due from related parties, interest-bearing bank
borrowings, lease liabilities and amounts due to related parties. The m ain purpose of these financial
instruments is to raise finance for the Group ’s operations.
The main risks arising from the Group ’s financial instruments are interest rate risk, credit risk and
liquidity risk. Generally, the Group introduces conservative strategies on its risk management. To keep
the Group’ s exposure to these risks to a minimum, the Group has not used any derivatives and other
instruments for hedging purposes. The Group does not hold or issue derivative financial instruments for
trading purposes. The board of directors reviews and agrees policies for managing each of these risks
and they are summarised below:
(a) Interest rate risk
The Group ’s exposure to risk for changes in market interest rates relates primarily to the Group ’s
interest-bearing bank borrowings set out in note 26. The Group does not use derivative financial
instruments to hedge interest rate risk, and obtains all bank borrowings with a fixed rate.
APPENDIX I ACCOUNTANTS ’ REPORT
– I-78 –


--- page 557 ---
The following table demonstrates the sensitivity to a reasonably possible change in interest rates,
with all other variables held constant, of the Group ’s profit before tax and the Group ’s equity.
Increase/
(decrease) in
basis points
Increase/
(decrease)
in profit
before tax
Increase/
(decrease)
in equity*
RMB’000 RMB ’000
30 June 2023
If interest rate increases 50 75 —
If interest rate decreases (50) (75) —
2022
If interest rate increases 50 (101) —
If interest rate decreases (50) 101 —
2021
If interest rate increases 50 (244) —
If interest rate decreases (50) 244 —
2020
If interest rate increases 50 (340) —
If interest rate decreases (50) 340 —
* Excluding retained profits
(b) Credit risk
The Group trades only with recognised and cred itworthy customers with no requirement for
collateral. It is the Group ’s policy that all customers who wish to trade on credit terms are subject to
credit verification procedures. In order to minimise the credit risk, the Group reviews the recoverable
amount of each individual trade receivable periodically and management also has monitoring procedures
to ensure the follow-up action is taken to recover overdue receivables. The balances of trade receivables
were nil as at 31 December 2020, 2021 and 2022 and 30 June 2023. In this regard, the directors of the
Company consider that the Group ’s credit risk is significantly reduced.
Maximum exposure and year-end staging
The tables below show the credit quality and the maximum exposure to credit risk based on the
Group ’s credit policy, which is mainly based on past due information unless other information is
available without undue cost or effort, and year-end staging classification as at 31 December 2020, 2021
and 2022 and 30 June 2023.
The amounts presented are gross carrying amounts for financial assets.
APPENDIX I ACCOUNTANTS ’ REPORT
– I-79 –


--- page 558 ---
30 June 2023
12-month
ECLs Lifetime ECLs
Stage 1 Stage 2 Stage 3 Total
RMB’000 RMB ’000 RMB ’000 RMB ’000
Financial assets included in
other long-term assets
— Not yet past due 4,000 —— 4,000
Financial assets included in
prepayments, other receivables
and other assets
— Normal* 442 —— 442
Restricted and pledged deposits
— Not yet past due 19,212 —— 19,212
Due from related parties 7,200 —— 7,200
Cash and cash equivalents
— Not yet past due 350,001 —— 350,001
380,855 —— 380,855
31 December 2022
12-month
ECLs Lifetime ECLs
Stage 1 Stage 2 Stage 3 Total
RMB’000 RMB ’000 RMB ’000 RMB ’000
Financial assets included in
other long-term assets
— Not yet past due 4,000 —— 4,000
Financial assets included in
prepayments, other receivables
and other assets
— Normal* 483 —— 483
Restricted and pledged deposits
— Not yet past due 17,594 —— 17,594
Due from related parties 7,200 —— 7,200
Cash and cash equivalents
— Not yet past due 282,187 —— 282,187
311,464 —— 311,464
APPENDIX I ACCOUNTANTS ’ REPORT
– I-80 –


--- page 559 ---
31 December 2021
12-month
ECLs Lifetime ECLs
Stage 1 Stage 2 Stage 3 Total
RMB’000 RMB ’000 RMB ’000 RMB ’000
Financial assets included in
other long-term assets
— Not yet past due 4,000 —— 4,000
Financial assets included in
prepayments, other receivables
and other assets
— Normal* 692 —— 692
Restricted and pledged deposits
— Not yet past due 15,645 —— 15,645
Cash and cash equivalents
— Not yet past due 182,398 —— 182,398
202,735 —— 202,735
31 December 2020
12-month
ECLs Lifetime ECLs
Stage 1 Stage 2 Stage 3 Total
RMB’000 RMB ’000 RMB ’000 RMB ’000
Financial assets included in
other long-term assets
— Not yet past due 12,100 —— 12,100
Restricted and pledged deposits
— Not yet past due 14,290 —— 14,290
Due from related parties 1 —— 1
Cash and cash equivalents
— Not yet past due 202,907 —— 202,907
229,298 —— 229,298
* The credit quality of the finan cial assets included in prepayments, other r eceivables and other assets is considered to
be ‘‘normal ’’when they are not past due and there is no information indicating that the financial assets had a
significant increase in credi t risk since initial recognition.
APPENDIX I ACCOUNTANTS ’ REPORT
– I-81 –


--- page 560 ---
(c) Liquidity risk
The Group ’s objective is to maintain a balance between continuity of funding and flexibility
through the use of interest-bearing bank borrowing s. Cash flows are closely monitored on an ongoing
basis.
The maturity profile of the Group ’s financial liabilities as at the end of each of the Relevant
Periods, based on contractual undiscounted payments, is as follows:
On
demand
Less than
3m o n t h s
3t o1 2
months
Over
1 year Total
RMB’000 RMB ’000 RMB ’000 RMB ’000 RMB ’000
30 June 2023
Interest-bearing bank borrowings — 30,256 —— 30,256
Trade payables 9,576 ——— 9,576
Other payables and accruals 21,791 ——— 21,791
Other long-term liabilities —— 7,369 34,285 41,654
Due to related parties 456 ——— 456
31,823 30,256 7,369 34,285 103,733
31 December 2022
Interest-bearing bank borrowings — 356 30,628 — 30,984
Trade payables 12,426 ——— 12,426
Other payables and accruals 9,155 ——— 9,155
Other long-term liabilities —— 7,369 34,819 42,188
Due to related parties 447 ——— 447
22,028 356 37,997 34,819 95,200
APPENDIX I ACCOUNTANTS ’ REPORT
– I-82 –


--- page 561 ---
On
demand
Less than
3m o n t h s
3t o1 2
months
Over
1 year Total
RMB’000 RMB ’000 RMB ’000 RMB ’000 RMB ’000
31 December 2021
Interest-bearing bank borrowings — 323 30,141 — 30,464
Trade payables 15,871 ——— 15,871
Other payables and accruals 8,876 ——— 8,876
Other long-term liabilities —— 7,369 42,188 49,557
Due to related parties 60,255 ——— 60,255
85,002 323 37,510 42,188 165,023
31 December 2020
Interest-bearing bank borrowings — 465 31,194 — 31,659
Trade payables 13,839 ——— 13,839
Other payables and accruals 79,186 ——— 79,186
Other long-term liabilities —— 1,065 11,761 12,826
Due to related parties 59,649 ——— 59,649
Financial guarantees* 100,000 ——— 100,000
252,674 465 32,259 11,761 297,159
* The Group is exposed to liquidity risk that arises from financial guarantees given by the subsidiary of the Group. The
guarantees are callable if the respective subsidiary is unable to meet its obligations (note 32).
(d) Capital management
The primary objectives of the Group ’s capital management are to safeguard the Group ’s ability to
continue as a going concern and to maintain healthy capital ratios in order to support its business and
maximise shareholders’ value.
The Group manages its capital structure and mak es adjustments to it in light of changes in
economic conditions. To maintain or adjust the capital structure, the Group may adjust the dividend
payment to shareholders, return capital to shareholders or issue new shares.
APPENDIX I ACCOUNTANTS ’ REPORT
– I-83 –


--- page 562 ---
The Group monitors capital using a gearing rati o, which is net debt divided by total capital plus
net debt. The Group includes, within net debt, inte rest-bearing bank borrowings, lease liabilities,
amounts due to related parties, trade payables, fina ncial liabilities included in other payables and
accruals, and other long-term lia bilities, less cash and cash equivale nts. Capital represents equity
attributable to owners of the parent. The gearing ratios as at the end of each of the Relevant Periods
were as follows:
As at 31 December As at
30 June
20232020 2021 2022
RMB’000 RMB ’000 RMB ’000 RMB ’000
Interest-bearing bank borrowings 30,000 30,000 30,000 30,000
Due to related parties 59,649 60,255 447 456
Trade payables 13,839 15,871 12,426 9,576
Financial liabilities included in other payables
and accruals 79,186 8,876 9,155 21,791
Other long-term liabilities 9,758 43,527 37,435 37,496
Less: Cash and cash equivalents (202,907) (182,398) (282,187) (350,001)
Net debt (10,475) (23,869) (192,724) (250,682)
Equity attributable to owners of the parent 482,185 488,637 553,871 592,325
Capital and net debt 471,710 464,768 361,147 341,643
Gearing ratio N/A N/A N/A N/A
As at 31 December 2020, 2021 and 2022 and 30 June 2023, the Group ’s cash, cash equivalents
exceeded the financial liabilities. As such, no gea ring ratio as at 31 December 2020, 2021 and 2022 and
30 June 2023 was presented.
38. EVENTS AFTER THE RELEVANT PERIODS
In September 2023, the Group obtained a 1-year bank borrowing with a principal amount of
RMB30,000,000 which bears an interest at the rate of 3.77% per annum and is guaranteed by Dahedong,
Baiheng, Zhou Shufeng, the chairman of the board and the general manager of Yantai Zhongjia, and his
spouse.
39. SUBSEQUENT FINANCIAL STATEMENTS
No audited financial statements have been prepared by the Company, the Group or any of the
companies now comprising the Group in respect of any period subsequent to 30 June 2023.
APPENDIX I ACCOUNTANTS ’ REPORT
– I-84 –


--- page 563 ---
The information set forth in this Appendix does not form part of the accountants ’ report on the
historical financial information of the Group for the Track Record Period (the ‘‘Accountants ’ Report ’’)
prepared by Ernst & Young, Certified Public Accountants, Hong Kong, the reporting accountants of the
Company, as set out in Appendix I to this prospectus, and is included herein for information only. The
unaudited pro forma financial information shoul d be read in conjunction with the section headed
‘‘Financial Information ’’in this prospectus and the Accountant’ s Report set out in Appendix I to this
prospectus.
A. UNAUDITED PRO FORMA STATEMENT OF ADJUSTED CONSOLIDATED NET
TANGIBLE ASSETS
The following unaudited pro forma statement of adjusted consolidated net tangible assets of our
Group prepared in accordance with Rule 4.29 of the Listing Rules and with reference to Accounting
Guideline ( ‘‘AG’’) 7 Preparation of Pro Forma Financial Information for Inclusion in Investment
Circulars issued by the HKICPA is set out below to illustrate the effect of the Global Offering on the
consolidated net tangible assets of our Group attributable to owners of the Company as at 30 June 2023
as if it had taken place on 30 June 2023.
This unaudited pro forma statement of adjusted cons olidated net tangible assets has been prepared
for illustrative purposes only and because of its hypot hetical nature, it may not give a true picture of the
consolidated net tangible assets of our Group as at 30 June 2023 or at any future dates following the
Global Offering. It is prepared based on our audited consolidated net tangible assets of our Group as at
30 June 2023, and adjusted as described below. The unaudited pro forma statement of adjusted
consolidated net tangible assets does not form part of the Accountants ’ Report.
Audited
consolidated net
tangible assets
attributable to
equity owners of
the parent as at
30 June 2023
Estimated net
proceeds from
the Global
Offering
Unaudited pro
forma adjusted
consolidated net
tangible assets
attributable to
owners of the
Company
Unaudited pro forma
adjusted consolidated net
tangible assets per Share
RMB ’000 RMB ’000 RMB ’000 RMB HK$ equivalent
(note 1) (note 2) (note 3) (note 4) (note 5)
B a s e do na nO f f e rP r i c eo f
HK$0.495 per Share
after a Downward
Offer Price Adjustment
of 10% 471,215 200,755 671,970 0.34 0.37
B a s e do na nO f f e rP r i c eo f
HK$0.55 per Share 471,215 226,011 697,226 0.35 0.38
B a s e do na nO f f e rP r i c eo f
HK$0.75 per Share 471,215 317,852 789,067 0.39 0.43
APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION
– II-1 –


--- page 564 ---
Notes:
1. The consolidated net tangible assets attributable to owners of the parent as at 30 June 2023 is extracted from the
Accountants ’ Report set out in Appendix I to this Prospectus, which is based on the consolidated net assets of our
Group attributable to owners of the Company as at 30 June 2023 of approximately RMB592 million with an
adjustment for the intangible assets of RMB121 million.
2. The estimated net proceeds from the Global Offering are based on the Offer Price of HK$0.495, HK$0.55 per Share
or HK$0.75 per Share, being the price after making a Downward Offer Price Adjustment of 10%, the low-end price
or high-end price after deduc tion of the estimated underw riting fees and other relat ed expenses payable by the
Company and takes no account of any Share which may be issued upon the exercise of the Over-allotment Option.
The estimated net proceeds from the Global Offering are converted from Hong Kong dollars into RMB at an
exchange rate of HK$1.00 to RMB0.9184.
3. The unaudited pro forma adjusted consolidated net tangible assets per Share has been arrived at after having made
the adjustments referred to in the pre ceding paragraphs and on the basis of a total of 2,000,000,000 shares, were in
issue assuming that Global Offering has been completed as at 30 June 2023, excluding Shares which may be issued
upon the exercise of the Over-allotment Options and options which may be granted under the Share Option Scheme.
4. The unaudited pro forma adjusted consolidated net tangible assets of the Group attributable to owners of the
Company per Share is converted from RMB into Hong Kong dollars at the rate of HK$1.00 to RMB0.9184. No
representation is made that the RMB amounts have been, could have been or could be converted to Hong Kong
dollars, or vice versa at that rate or at any other rates or at all.
5. No adjustment has been made to reflect any trading results or other transactions entered into by our Group
subsequent to 30 June 2023.
APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION
– II-2 –


--- page 565 ---
B. INDEPENDENT REPORTING ACCOUNTANTS ’ ASSURANCE REPORT ON THE
COMPILATION OF PRO FORMA FINANCIAL INFORMATION
To the Directors of Persistence Resources Group Ltd
We have completed our assurance engagement to report on the compilation of pro forma financial
information of Persistence Resources Group Ltd (the ‘‘Company ’’) and its subsidiaries (hereinafter
collectively referred to as the ‘‘Group ’’) by the directors of the Company (the ‘‘Directors’’)f o r
illustrative purposes only. The pro forma financial information consists of the pro forma consolidated
net tangible assets as at 30 June 2023, and related notes as set out on pages II-1 of the Prospectus dated
14 December 2023 issued by the Company (the ‘‘Pro Forma Financial Information ’’). The applicable
criteria on the basis of which the Directors have compiled the Pro Forma Financial Information are
described in Appendix II to the Prospectus.
The Pro Forma Financial Information has been co mpiled by the Directors t o illustrate the impact of
the global offering of shares of the Company on the Group ’s financial position as at 30 June 2023 as if
the transaction had taken place at 30 June 2023. As part of this process, information about the Group ’s
financial position has been extract ed by the Directors from the Group ’s financial statements for the
period ended 30 June 2023, on which an accountants ’ report has been published.
Directors ’ responsibility for the Pro Forma Financial Information
The Directors are responsible for compiling the Pro Forma Financial Information in accordance
with paragraph 4.29 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong
Kong Limited (the ‘‘Listing Rules ’’) and with reference to Accounting Guideline ( ‘‘AG’’)7 Preparation
of Pro Forma Financial Information for Inclusion in Investment Circulars issued by the Hong Kong
Institute of Certified Public Accountants (the ‘‘HKICPA ’’).
Our independence and quality control
We have complied with the independence and other ethical requirements of the Code of Ethics for
Professional Accountants issued by the HKICPA, which is founded on fundamental principles of
integrity, objectivity, professional competence and du e care, confidentiality an d professional behavior.
Our firm applies Hong Kong Standard on Quality Control 1 Quality Control for Firms that
Perform Audits and Reviews of Financial Statements, and Other Assurance and Related Services
Engagements , and accordingly maintains a comprehensive system of quality control including
documented policies and procedures regarding compliance with ethical requirements, professional
standards and applicable legal and regulatory requirements.
APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION
– II-3 –


--- page 566 ---
Reporting accountants ’ responsibilities
Our responsibility is to express an opinion, as requi red by paragraph 4.29(7) of the Listing Rules,
on the Pro Forma Financial Information and to report our opinion to you. We do not accept any
responsibility for any reports previously given by us on any financial information used in the
compilation of the Pro Forma Financial Information beyond that owed to those to whom those reports
were addressed by us at the dates of their issue.
We conducted our engagement in accordance with Hong Kong Standard on Assurance
Engagements 3420 Assurance Engagements to Report on the Compilation of Pro Forma Financial
Information Included in a Prospectus issued by the HKICPA. This standard requires that the reporting
accountants plan and perform procedures to obtain reasonable assurance about whether the Directors
have compiled the Pro Forma Financial Information in accordance with paragraph 4.29 of the Listing
Rules and with reference to AG 7 issued by the HKICPA.
For purposes of this engagement, we are not responsible for updating or reissuing any reports or
opinions on any historical financial information used in compiling the Pro Forma Financial Information,
nor have we, in the course of this engagement, performed an audit or review of the financial information
used in compiling the Pro For ma Financial Information.
The purpose of the Pro Forma Financial Inform ation included in the Prospectus is solely to
illustrate the impact of the global offering of shares of the Company on unadjusted financial information
of the Group as if the transaction had been undertaken at an earlier date selected for purposes of the
illustration. Accordingly, we do not provide any ass urance that the actual outcome of the transaction
would have been as presented.
A reasonable assurance engagement to report on whether the Pro Forma Financial Information has
been properly compiled on the basis of the applicable criteria involves performing procedures to assess
whether the applicable criteria used by the Direct ors in the compilation of the Pro Forma Financial
Information provide a reasonable basis for presenting the significant effects directly attributable to the
transaction, and to obtain sufficient appropriate evidence about whether:
. the related pro forma adjustments give appropriate effect to those criteria; and
. the Pro Forma Financial Information reflects t he proper application of those adjustments to
the unadjusted financial information.
The procedures selected depend on the reporting accountants ’ j u d g m e n t ,h a v i n gr e g a r dt ot h e
reporting accountants ’ understanding of the nature of the Group, the transaction in respect of which the
Pro Forma Financial Information has been compiled, and other relevant engagement circumstances.
The engagement also involves evaluating the overall presentation of the Pro Forma Financial
Information.
We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION
– II-4 –


--- page 567 ---
Opinion
In our opinion:
(a) the Pro Forma Financial Information has been properly compiled on the basis stated;
(b) such basis is consistent with the accounting policies of the Group; and
(c) the adjustments are appropriate for the purpose of the Pro Forma Financial Information as
disclosed pursuant to paragraph 4.29(1) of the Listing Rules.
Certified Public Accountants
Hong Kong
14 December 2023
APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION
– II-5 –


--- page 568 ---
Qualified Person’ sR e p o r t
for Songjiagou Gold Project,
Shandong Province,
People ’s Republic of China
Report Prepared for
Persistence Resources Group Ltd
Report Prepared by
SRK Consulting China Ltd.
SRK Project Number: SCN740
Effective date: 30 June 2023
Signature date: 14 December 2023
APPENDIX III SRK REPORT
– III-1 –


--- page 569 ---
Qualified Person’ sR e p o r t
for Songjiagou Gold Project
Shandong Province,
People ’s Republic of China
Persistence Resources Group Ltd
Level 20, Infinitus Plaza, 199 Des Voeux Road Central, Sheung Wan, Hong Kong
E-mail: info@persistenceresource.com
Website: www.persistenceresource.com
Tel: +852 3796 3146
Fax: +852 3796 3000
SRK Consulting China Ltd.
B315 –319, COFCO Plaza
No.8 Jianguomennei Dajie
Dongcheng District
Beijing, China
E-mail: china@srk.cn
Website: www.srk.cn
T e l :+ 8 61 06 5 1 11 0 0 0
F a x :+ 8 61 08 5 1 20 3 8 5
SRK Project Number: SCN740
Effective date: 30 June 2023
Signature date: 14 December 2023
Compiled by: Peer Reviewed by:
Anshun Xu, Ph.D., FAusIMM
Corporate Consultant (Geology)
Alexander Thin, B.Eng., FAusIMM
Principal Consultant (M ining and Evaluation)
Authors:
Dr Yuanhai Li, Nan Xue, Lanliang Niu, Yonggang Wu, Pengfei Xiao, and Dr Anshun Xu
Peer Reviewers:
Dr Yiefei Jia and Alexander Thin
APPENDIX III SRK REPORT
– III-2 –


--- page 570 ---
IMPORTANT NOTICE
SRK Consulting China Ltd. (the ‘‘SRK’’) was requested by Persistence Resources Group Ltd
(‘‘Persistence Resources ’’or the ‘‘Company ’’) to prepare a Qualified Person ’sR e p o r t( t h e‘‘QPR’’or
‘‘CPR’’) for Songjiagou Gold Project (the ‘‘SJG Project ’’) located in Shandong Province of the
People ’s Republic of China (the ‘‘PRC’’or ‘‘China ’’) in compliance with the requirements of Canadian
National Instrument 43-101 (the ‘‘NI 43-101 ’’) and the Rules Governing the Listing of Securities on The
Stock Exchange of Hong Kong Limited (the ‘‘Listing Rules ’’). The quality of information, conclusions
and estimates contained herein is consiste nt with the level of effort involved in SRK ’s services, based
on: (i) information available at the time of preparati on, (ii) data supplied by outside sources, and (iii) the
assumptions, conditions and qualifications set for th in this QPR. This QPR is intended for use by
Persistence Resources subject to the terms and conditions of its agreement with SRK and relevant
securities legislation. The QPR will be included into the documents submitted to The Stock Exchange of
Hong Kong Limited (the ‘‘Stock Exchange ’’) for Persistence Resources Initial Public Offering (the
‘‘IPO’’). Any other uses of this QPR by a ny third party are at that party ’s sole risk. The responsibility
for this disclosure remains with Persistence Resources. The user of this document should ensure that this
is the most recent QPR for the SJG Project as it is not valid if an updated QPR has been issued.
COPYRIGHT
This QPR is protected by copyright vested in SRK Consulting China Ltd. It may not be reproduced
or transmitted in any form or by any means whatso ever to any person without the written permission of
the copyright holder.
EXECUTIVE SUMMARY
SRK Consulting China Ltd. (the ‘‘SRK’’) was requested by Persistence Resources Group Ltd
(‘‘Persistence Resources ’’or the ‘‘Company ’’) to prepare a Qualified Person ’sR e p o r t( t h e‘‘QPR’’or
‘‘CPR’’)
for Songjiagou Gold Project (the ‘‘SJG Project ’’) located in the People ’s Republic of China
(the ‘‘PRC’’or ‘‘China ’’) in compliance with the requirements of Canadian National Instrument 43-101
(the ‘‘NI 43-101 ’’) and the Rules Governing the Listing of Securities on The Stock Exchange of Hong
Kong Limited (the ‘‘Listing Rules ’’).
Yantai Zhongjia Mining Co., Ltd. (the ‘‘Yantai Zhongjia’’ ), a limited liability company
established in the PRC is 75% indirectly owned by Persistence Resources. Yantai Zhongjia holds two
mining licences for the SJG Project, in respect of the Songjiagou Open-Pit Mine (the ‘‘SJG Open-Pit
Mine ’’) and the Songjiagou Underground Mine (the ‘‘SJG Underground Mine ’’). The SJG Open-Pit
Mine is a producing open pit mine and will continue to be mined about 8.5 years using open pit
methods. The SJG Underground Mine is a producing underground mine and will continue to be mined
about 6.0 years by underground methods.
This QPR is an independent review of the SJG Project ’s geology, exploration, Mineral Resources,
Mineral Reserves, mining, mineral processing, capital investment, operating cost, and environmental and
social aspects.
APPENDIX III SRK REPORT
– III-3 –


--- page 571 ---
Outline of work program
The scope of work includes the construction of a mineral resource model for the gold ( ‘‘Au’’)
mineralisation delineated by drilling on the SJG Pro ject and the preparation of a QPR in compliance
with the NI 43-101 and the Listing Rules.
The Mineral Resource statement reported herein is a collaborative effort between Persistence
Resources and SRK personnel. The exploration datab ase was compiled and maintained by Persistence
Resources and was reviewed by SRK.
The geological model and wireframes defining the Songjiagou mineralisation were constructed by
SRK based on the exploration database provided by Persistence Resources. In SRK ’s opinion, the
geological model is a reasonable representation of the distribution of the targeted mineralisation at the
current level of sampling. The geostatistical analys is, variography and grade models were completed by
SRK from June 2018 to September 2018 and were updated in June 2023.
Based on the Mineral Resource statements and mo dels, and the feasibility studies and designs of
the mines by other third parties, SRK converted the qualified Mineral Resources into Mineral Reserves,
and rescheduled the productions of the mines.
Overview
The SJG Project, owned by Yantai Zhongjia, is located in the eastern part of the Jiaobei Terrane
and northeast margin of the Jiaolai Basin on the Shandong Peninsula, approximately 50 kilometres
(‘‘km’’) south of Yantai City, an important coastal city in China ’s well-developed eastern Shandong
Peninsula.
The SJG Project consists of SJG Open-Pit Mine, SJ G Underground Mine, and related facilities that
are suitable for supporting the operations. The SJG Open-Pit Mine is a producing open pit applying
conventional drilling-blasting-loading-ha uling mining techniques to produce about 960 –1,900 kilotons
per annum ( ‘‘ktpa’’) ore in years from 2020 to 2022. The SJG Underground Mine is a producing
underground mine applying cut-and-fill mining and shrinkage stope mining to produce ores since 2019.
The processing plant has a designed capacity of 6,000 tonnes per day ( ‘‘tpd’’) to produce gold
concentrate.
The SJG Open-Pit Mine and the SJG Underground M ine are situated in the Muping-Rushan gold
belt. It is a moderate temperature hydrothermal fillin g and metasomatic conglomerate type gold deposit.
SRK has worked on the SJG Project since 2012, conducting technical services and preparing various
technical reports on the SJG Proj ect, and conducted data verification programs and carried out quality
assurance and quality control programs on some exp loration programs. Based on the review of active
database and economic and technical parameters provided by Yantai Zhongjia technical department,
SRK has estimated and updated the Mineral Resources and Mineral Reserves of the SJG Project.
The Mineral Resource statements for SJG Open-Pit Mine and SJG Underground Mine are shown in
Table ES-1 and Table ES-2, respectively.
APPENDIX III SRK REPORT
– III-4 –


--- page 572 ---
Table ES-1: Mineral Resources Statement for SJG Open-Pit Mine,
as of 30 June 2023 [1, 2]
Category Cut-off Grade Quantity Gold Grade Gold Content
g/t Au kt g/t kg koz
Indicated 0.3 34,200 1.10 37,600 1,210
Inferred 0.3 36,700 0.95 34,800 1,120
Notes:
1. All figures are rounded to reflect the relative accuracy of the estimate.
2. The information in this QPR with reg ard to Mineral Resource estimates is based on information compiled by Dr
Anson Xu and Mr Pengfei Xiao, employees of SRK Consulting China Ltd. Dr Xu, FAusIMM, and Mr Xiao,
MAusIMM, have sufficient experience relevant to the style of mineralisation and type of deposit under consideration
and to the activity which they are undertaking to qualify as Qualified Persons as defined in the NI 43-101. Dr Xu and
Mr Xiao consent to the reporting of this information in the form and context in which it appears.
Table ES-2: Mineral Resources Statement for SJG Underground Mine,
as of 30 June 2023 [1, 2]
Category Cut-off Quantity Gold Grade Gold Content
g/t Au kt g/t kg koz
Indicated 0.7 1,640 1.38 2,270 73
Inferred 0.7 3,010 1.24 3,730 120
Notes:
1. All figures are rounded to reflect the relative accuracy of the estimate.
2. The information in this QPR with reg ard to Mineral Resource estimates is based on information compiled by Dr
Anshun Xu and Mr Pengfei Xiao, employees of SRK Con sulting China Ltd. Dr Xu, FAusIMM, and Mr Xiao,
MAusIMM, have sufficient experience relevant to the style of mineralisation and type of deposit under consideration
and to the activity which they are undertaking to qualify as Qualified Persons as defined in the NI 43-101. Dr Xu and
Mr Xiao consent to the reporting of this information in the form and context in which it appears.
The Mineral Reserve statement for SJG Open-P it Mine and SJG Underground Mine are shown in
Table ES-3 and Table ES-4, respectively.
T h em i n ep l a np r e p a r e db a s e do nt h eM i n e r a lR e s erves generates an 8.5-year mine life for the SJG
Open-Pit Mine at a production rate of 3,300 ktpa, and a 6.0-year mine life for the SJG Underground
Mine at a production rate of 90 ktpa.
The capital costs and operating costs provided to SRK were modified to match production capacity
and the current economic conditions. The economic an alysis results demonstrate the economic viability
of the SJG Project.
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Table ES-3: Mineral Reserve Statement for SJG Open-Pit Mine,
as of 30 June 2023 [ 1 ,2 ,3 ,4 ]
Category Cut-off Ore Quantity Gold Grade Gold Content
g/t Au kt g/t kg koz
Probable 0.3 22,600 1.17 26,400 849
Notes:
1. All figures are rounded to reflect the relative accuracy of the estimate.
2. Both the mining dilution a nd loss rates are set to 5%.
3. The Mineral Reserves are included in the Mineral Resources. They shouldn ’t be added to the Mineral Resources.
4. The information in this QPR which relates to Mineral Reserve conversion is based on information compiled by Mr
Yonggang Wu, MAusIMM, and Dr Anshun Xu, FAusIMM, employees of SRK Consulting China Ltd. Both Dr Xu
and Mr Wu have sufficient experience relevant to the style of mineralisation and type of deposit under consideration
a n dt ot h ea c t i v i t yw h i c ht h e ya r eu n d e r t a k i n gt oq u a l i f ya sQ u a l i f i e dP e r s o n sa sd e f i n e di nt h eN I4 3 - 1 0 1 .D rX u
supervised the work of Mr Wu. Dr Xu and Mr Wu consent to the reporting of this information in the form and
context in which it appears.
Table ES-4: Mineral Reserve Statement for SJG Underground Mine,
as of 30 June 2023 [ 1 ,2 ,3 ,4 ]
Domain Category Cut-off
Ore
Quantity
Gold
Grade Gold Content
g/t Au kt g/t kg koz
6 Probable 0.7 8 2.26 17 0.6
7 Probable 0.7 153 2.03 312 10.0
11 Probable 0.7 119 1.07 127 4.1
16 Probable 0.7 251 1.12 280 9.0
Total Probable 0.7 530 1.39 737 23.7
Notes:
1. All figures are rounded to reflect the relative accuracy of the estimate.
2. The mining dilution rate is 11%. The mining loss rate is 8%.
3. The Mineral Reserves are included in the Mineral Resources. They shouldn ’t be added to the Mineral Resources.
4. The information in this QPR which relates to Mineral Reserve conversion is based on information compiled by Mr
Yonggang Wu, MAusIMM, and Dr Anshun Xu, FAusIMM, employees of SRK Consulting China Ltd. Both Dr Xu
and Mr Wu have sufficient experience relevant to the style of mineralisation and type of deposit under consideration
APPENDIX III SRK REPORT
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--- page 574 ---
a n dt ot h ea c t i v i t yw h i c ht h e ya r eu n d e r t a k i n gt oq u a l i f ya sQ u a l i f i e dP e r s o n sa sd e f i n e di nt h eN I4 3 - 1 0 1 .D rX u
supervised the work of Mr Wu. Dr Xu and Mr Wu consent to the reporting of this information in the form and
context in which it appears.
Based on the SRK ’s review and projection using discount cash flow modelling, the SJG Open-Pit
Mine has a net present value (the ‘‘NPV’’) of Renminbi (the ‘‘RMB’’) 3,246 million at a discount rate of
9%, and the SJG Underground Mine has an NPV of RMB85 million at a discount rate of 9%.
Property description and location
The SJG Project is located in the eastern part of the Jiaobei Terrane and northeast margin of the
Jiaolai Basin on the Shandong Peninsula. The SJG Open-Pit Mine and the SJG Underground Mine are
regarded as a conglomerate type of gold deposits, asso ciated with mesothermal filling activities followed
by alterations and metasomatism.
Table ES-5 summarises the status of key operational licences and permits for the SJG Project. SRK
has reviewed the information provided by Yanta i Zhongjia and is satisfied that the extent of the
properties described in the various rights are con sistent with the maps and diagrams received from
Yantai Zhongjia.
Table ES-5: Key Operational Licenses and Permits
Holder
Business
License
Mining
Licenses
Safety
Production
Permits
Water Use
Permit
Yantai Zhongjia Y Y Y Y
Note: ‘‘Y’’denotes the licence/permit is granted and has been sighted by SRK.
Accessibility, climate, local resources , infrastructure and physiography
The SJG Project is located approximately 50 km south of Yantai City, an important coastal city in
the well-developed eastern Shandong Peninsula of China. The SJG Project is easily accessed by road,
railway, sea, and air.
T h em i n ea r e ah a saw a r ma n ds e m i - h u m i dm o n soon climate with marine characteristics and no
drastic seasonal changes. Generally, there is no extreme cold or hot weather to hinder mining and
processing operations.
Local provision of mining labour is sufficient for the operation of the SJG Project. Industry and
agriculture are well developed in the area. Mining equipment and accessories are available in Yantai
City, as are workshops for mechanical maintenance. Materials such as cement, steel, wood, and chemical
agent are generally purchasable in Yantai City.
APPENDIX III SRK REPORT
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--- page 575 ---
Domestic and industrial water can be supplied by the Rushan River, which passes approximately
about 2 km east of the SJG Project area, adequate to support mine ’s production. Electrical power is
available locally. A 10 kilovolt ( ‘‘kV’’) power line and a diesel generator owned by Yantai Zhongjia,
with an installed generation capacity of 120 kilowatts ( ‘‘kW’’) are adequate to support the mine ’s
production.
The geomorphology of the SJG Project area is originally characterised by gently undulating hills,
and overall the topography slopes downward from west to east. The highest elevation is about 140
metres ( ‘‘m’’) above sea level ( ‘‘ASL’’) and the lowest is 78 m ASL with a relative relief of 62 m in the
SJG Project area.
History
The area has been explored by various Chinese geological brigades since the 1960s, and such
exploration was carried out according to Chinese n ational exploration standards. The following are
simple chorological description o f exploration activities in history:
. Between 1982 and 1989 the Sha ndong Geophysical and Geochemical Prospecting Institute
(the ‘‘Shandong GGPI ’’) conducted a gravity survey at a scale of 1:200,000 and a stream
sedimentary survey at a scale of 1:50,000.
. Between 1983 and 1986, the No. 3 Geological M ineral Resource Prospecting Institute of
Shandong Province (the ‘‘No. 3 Geological Institute ’’) undertook regional gold
metallogenetic research.
. Between 1984 and 1993, the No. 3 Geologica l Institute and the No. 1 Geological Mineral
Resource Prospecting Institute of Shandong Province (the ‘‘No. 1 Geological Institute ’’)
carried out regional geological mapping on a scale of 1:50,000.
. In 1991 the No. 3 Geological Institute conducted preliminary mineral prospecting in the
Songjiao-Songjiagou area. Several gold mineralised bodies were defined by a few trenches
and drill holes.
. In 1997 and 1998, prospecting work continued with geological mapping, surveying,
trenching, tunnelling and drilling, and the explor ation results were compiled in a report titled
Geological Prospecting Report of Songjiagou Gold Prospect in Muping District, Yantai City,
Shandong Province by No. 3 Geological Institute in February 1998. The geological report
was approved by the Yantai Bureau of Land and Resources in 2001.
. In 1998 the No. 3 Geological Institute conducted prospecting in the Fayunkuang area and
estimated a total Mineral Resource in former Chinese Categories D and E Categories (similar
to Inferred Mineral Resource of JORC Code) of approximately 1,800 kt with an average
grade of 6.8 g/t Au. The exploration res ults were summarised in a report titled Fayunkuang
Gold Prospect in Muping District, Yantai City, Shandong Province ,s u b m i t t e db yN o .3
Geological Institute in October 2012.
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--- page 576 ---
. Between 1999 and 2003, the No. 3 Geological Institute was commissioned by Yantai Mujin
Mining Co., Ltd. (the ‘‘Yantai Mujin ’’) to conduct general exploration in the Songjiagou
area. Yantai Mujin completed 20 shallow drill holes and carried out 1,600 m of induced
polarization (the ‘‘IP’’) geophysical profiling that resu lted in the identification of nine
anomalies. Exploration works completed during this period also included geological mapping,
magnetic surveying, trenching, 14 drill holes with a total depth of 1,640 m, and 2,860 m long
of underground workings.
. Between October 2003 and December 2011, exploration was conducted by Yantai Zhongjia
itself within the mine area. The main works include the topographic survey at a scale of
1:2,000 covering 1 km
2, 30 drill holes with a total length of 8,947.59 m, 472.32 cubic metres
trenches, density testing of 106 samples and logging of hydrogeology and engineering
geology for 13 drill holes.
. During 2012 and April 2013, th e No. 3 Geological Institute was commissioned by Yantai
Zhongjia to conduct detailed exploration cam paign. The main works include 1:10,000
geological revision covering 12 km
2, 1:10,000 hydrogeological revision covering 12 km 2,
1:2,000 topographic survey covering 1.30 km 2, 1:2,000 hydrogeological revision covering
3.76 km 2, 1,204.08 cubic metres trenches, 20 drill holes with a total length of 7,093.42
metres, basic analysing of 7,853 samples, 75 samples for geotechnics test, 7 samples for
complete water quality analysis, 8 samples for rock-mineral determination, 8 samples for
quantitative spectrographic analysis, 137 samples for density and humidity test, 89
composites, 991 basic internal duplicates, 7 compositing internal duplicates, and 320 external
duplicates.
Geological setting and mineralisation
The SJG Project is situated in China ’s Shandong Peninsula, along the southeastern margin of the
North China Plate and on the western margin of the Pacific Plate, in the eastern part of the Jiaobei
Terrane and northeastern margin of the Jiaolai Basin, which is regarded as part of the Muping-Rushan
gold belt.
Regional tectonics are character ised by two major orogenesis: the Indosinian collision between the
North China and Yangtze cratons, with the nearly east-west directional suture defined as the Triassic
Qinling-Dabie-Sulu metamorphic belt during the late Permian to Triassic epoch; and the Yanshanian
subduction of the Pacific Plate beneath Eurasia Plate during the Middle Jurassic epoch.
The rock layer consists of Paleoproterozoic Jingshan Group metamorphic rocks, Mesozoic
Cretaceous Laiyang Group sediments and Cenozoic quaternary system and is dominated by Laiyang
Group. The local structure features two major fault zones, the northeast striking Yazi Fault Zone and the
northwest oriented Tanjia Fault Zone. Main magma tic activity is represented by monzonite granite.
APPENDIX III SRK REPORT
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--- page 577 ---
The highest grades of gold mineralisation are conf ined to relatively narrow although vertically and
horizontally persistent zones. Gold mineralisation is associated with sulphides. Mineralised rocks present
in grained, in-filling, clastic, or brecciated texture s. The boundaries between wa ll rocks, internal waste,
and host rocks are not visually obvious, and must be determined by chemical analysis.
Deposit types
Gold mineralisation occurs in pyrite-sericite altered conglomerates in the Linsishan Formation,
which is part of the Cretaceous Laiyang Group. Gold enrichment occurs as veins as well as in
disseminated structures and stockwork distributions.
The deposit is a moderate temperature hydrothermal filling and me tasomatic conglomerate type
gold deposit. As there is no clear boundary between wall rocks and ore chemical analysis is used for
defining ore bodies.
Exploration
The SJG Open-Pit Mine has been well prospected w ithin the current licenced area, with completed
works including geophysics and geochemical studies, exploration, geological mapping, surveying,
trenching, underground channelling, and drilling.
The SJG Underground Mine has been explored with drilling, trenching and underground
channelling and has potential for in-fill Mineral Resource exploration and upgrade.
Drilling, trenching and un derground channelling
The SJG Project has been explored with several campaigns at various stages. These stages can be
classified into two types: 1) prior to 2005, the No.3 Geological Institute took main responsibility in the
exploration and submitted reports for relevant authorities; and 2) post 2005, Yantai Zhongjia has taken
over the exploration and the No. 3 Geological In stitute has been assisting Yantai Zhongjia with
exploration.
A total of 145 diamond drill holes have been completed since 1997, including 17 underground drill
holes with a total length of 1,435 m and 128 surface drill holes with an aggregate length of 37,053 m.
Prior to Yantai Zhongjia, there were 32 drill holes completed by No. 3 Geological Institute. A total of
1,152 samples were collected from the underground drilling and 26,654 samples were collected from the
surface drilling. Drilling was performed using mostly HQ core and a few NQ core sized drill rods. More
than half of the holes were drilled with dips of –60° or –45° to the northwest, and a few were drilled
vertically (dip angle –90°). Core recoveries generally averaged above 95% and recoveries of mineralised
intervals were about 97%. The statistics and calculations were performed by No. 3 Geological Institute.
APPENDIX III SRK REPORT
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--- page 578 ---
The surface trenching used in earlier stage revealed good indications of mineralisation, which
encouraged systematic drilling to follow up. A total of 75 trenches with an aggregate length of 5,883 m
were excavated by Yantai Zhongjia in 1999 –2007, from which 5,378 samples were collected. Gold
content of these samples ranged from zero to 46.2 g/t Au, with about 5% of the assay values exceeding
1.0 g/t Au. Trenches were dug by backhoe and then cleaned prior to sampling. The trenches were
completed by third-parties and were sampled by Y antai Zhongjia personnel. Trench sections were
trapezoidal, with upper widths of 1.2 m a nd bottom widths greater than 0.8 m.
A total of 91 underground channels have been completed on the +9 m, –40 m, –80 m, and –120 m
level in the underground voids of SJG Open-Pit Mine, from which 3,309 channel samples were
collected. Data from these channel samples were compiled by Yantai Zhongjia. The underground
engineering was undertaken by Yantai Huazhong Mine Engineering Company Limited, as reported by
No. 3 Geological Institute. The unde rground tunnels were excavated with dimension of 2.2 m high by
2.2 m wide.
In 2018, a total of 15 underground channels were sampled in the SJG Underground Mine, on the
+ 4 9m ,+ 9ma n d –40 m levels, and a total of 257 underground channel chips were dispatched to SGS
Laboratory in Tianjin, China (the ‘‘SGS Tianjin ’’) for sample preparation and chemical assay. SRK has
supervised the sampling program.
The underground channelling suggests that the g old mineralisation of the SJG Project has a
considerable extension from surface down to at least –120 m level. There are both surface and
underground drill holes having intercepted gold mineralisation at deeper zones below this level.
The database for Mineral Resource estimation used in this QPR consists of 128 surface diamond
drill holes with an aggregate length of 37,053 m dr illed from surface since 1997, and 106 underground
channels totalling 12,262 m, in addition to 17 underground drill holes with a total length of 1,435 m, as
well as 75 surface trenches with an aggregate length of 5,883 m.
The actual workload completed in SJG Project might exceed these amounts. Quite a few of drill
holes and trenches and/or channel data was not incorporated due to missing of verifiable collar or
sample records. Prospecting pits and other workings had previously been conducted in the SJG Project
area but are not included in the database provided.
The exploration generally followed a systematic sectional layout, designed with a number of
exploration lines oriented northwest-southeast. The designed exploration lines cross-cut the gold
enriched mineralised veins with overa ll north-easterly strikes. The ex ploration lines were spaced about
60 m apart and drill holes on a 60 m × 80 m grid were supplemented by surface trenching spaced about
30 m to 60 m apart. The vertical extension of the gold mineralisation was verified by underground
cross-cuts spaced about 30 m apart on the +9 m, –40 m, –80 m, and –120 m levels.
Regional geochemical and geophysical investigations have been conducted by various geological
brigades and institutes during the reconnaissance s tage. SRK has not been provided with such data as it
is not material to this review.
APPENDIX III SRK REPORT
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--- page 579 ---
Sample preparation, analyses, and security
Samples related to Mineral Resource statement for the SJG Open-Pit Mine were derived from
exploration conducted mainly between 2005 and 2007, with about 20% from the exploration campaigns
prior to 2005 and after 2007, which were validated for Mineral Resource estimation. The database for
SJG Underground Mine Mineral Resource estimates combined sample data in various stages, mainly
consisting of drilling program since 2005, trench es conducted prior to 2005, and the underground
channelling in 2018.
Sampling was completed by No. 3 Geological Institute or Persistence Resources staff under
supervision of a Competent Person (the ‘‘CP’’) from Persistence Resources. Samples were logged and
prepared to rock chips at the SJG Project site and then shipped to SGS Tianjin. Samples were analysed
by SGS Tianjin using screen fire assays, in which 1 kilogram ( ‘‘kg’’) quantities of pulp were subjected
to screening for metal content prior to analysis. Th e screen fire assay is typically used for nugget gold
samples that contain coarse gold particles.
Drill core was logged by No. 3 Geological Institute and Persistence Resources staff; and core
samples were obtained by cutting the core into two halves. One half was placed in sample bags; the
remaining half-cores were returned to the core box . The basic length of drill core samples was 1 m.
Trench samples were collected using channel method with a sectional size of 10 centimetres ( ‘‘cm’’)×5
cm and a basic sample length of 1 m.
Underground channel sampling was conducted by Yantai Zhongjia. The samples were taken from
cross-cuts as well as from drifts along veins. Samp le length varied from 0.5 m to 2.4 m with an average
length of 1 m. The channel section size was 10 cm × 3 cm.
Specific gravity (the ‘‘SG’’) samples were collected and analysed by No. 3 Geological Institute.
Density, humidity, and gold grade were determined.
Prior to 2007, the previous exploration has been summarised in a report prepared in compliance
with China exploration standard by No. 3 Geological In stitute, in which an internal laboratory check and
an external check with pulp duplicates are obligatory. The previous technical report and Mineral
Resource estimation were prepared by Wardrop Engineering Inc. (the ‘‘Wardrop ’’) in accordance with
NI 43-101, and as reported by Yantai Zhongjia. The Qualified Persons include Nory Narciso, John
Huang and Greg Mosher. The quality assurance and quality control (the ‘‘QA/QC ’’) programs were
assessed.
. Assay data was reviewed for 174 blanks (3.5% of the total sample population) that were
analysed in conjunction with samples from the drilling and trenching programs. All analyses
of blanks were below the detection (<5 parts per billion ( ‘‘ppb’’) gold) threshold, indicating
that there is no evidence of cross-sample contamination during the sample preparation
process.
APPENDIX III SRK REPORT
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--- page 580 ---
. The same set of four standards were used for bo th the drilling and trenching programs: CDN-
GS15A with an expected mean value of 14.83 g/t Au and 2 standard deviations (the ‘‘SD’’)
of 0.61 g/t Au; CDN-GS1P5B with an expected mean of 1.46 g/t Au and 2 SD of 0.12 g/t;
CDN-GSP1 with an expected mean of 0.12 g/t Au and 2 SD of 0.02 g/t Au; and CDN-
GSP5B with an expected mean of 0.44 g/t Au and 2 SD of 0.04 g/t Au. All standards were
prepared by CDN Resource Laboratorie s of Delta, British Columbia, Canada.
. The high failure rate for analyses of standard CDN-GS15A is noteworthy: 58% for the drill
program and 78% for the trench program. Failures include both over and under-estimations.
These results suggest that high assay values may be inaccurate, either positively or
negatively, and such a high failure rate coul d potentially compromise the quality of the
dataset, except for the fact that only 18 of the nearly 5,000 assays exceed 10 g/t Au, so the
potential impact is consid ered to be negligible. ’’
SRK notes that SGS Tianjin has its own protocols for quality control applying standards, blanks
and duplicates as well. As advised, actions were taken by Persistence Resources with respect to the out-
of-bound values, i.e., repeated sampling and assaying, using duplicates and standard samples to monitor
the procedures.
SGS Tianjin returned the sample pulps and coarse rejects to Yantai Zhongjia. The sample rejects
and pulps are stored together with drill core s in a security facility near Yantai Zhongjia ’so f f i c e
building.
SRK has performed QA/QC check after 2011 and is of opinion the previous database is integrated
and suitable for Mineral Resource estimation.
The sampling program at the underground of SJG Underground Mine in 2018 has been supervised
by SRK and the samples were prepared and analysed i n SGS Tianjin. A screening fire assay with atomic
absorption spectrometry (the ‘‘AAS’’) finish has been applied.
Data verification
The exploration data used for Mineral Resource estimation in this QPR was compiled by
Persistence Resources; most of it was previously used by Wardrop in preparation of the preliminary
economic analysis (the ‘‘PEA’’) technical report issued in 2011. Wardrop stated in 2011 that they have
verified both drill assays (73%) and trench assays (18%) as received from Persistence Resources against
assay reports issued by SGS Tianjin.
SRK has reviewed the geological report prepared by No. 3 Geological Institute issued in 2011 and
compared it with the compiled database; furthermore, the assay result datasheet from SGS Tianjin was
partly inspected by SRK.
In 2012 SRK collected a random group of field sam ples within the open pit during the site visit
and three additional samples, one each from feed pro cessing, concentrate, and tailings. The samples
randomly collected by SRK were prepared and analysed by the Intertek Laboratory in Beijing (the
APPENDIX III SRK REPORT
– III-13 –


--- page 581 ---
‘‘Intertek ’’). The results of this random check verified that t he gold mineralisation is distributed broadly
within the Linsishan Formation conglomerate with gold grades varying from 0.1 g/t Au up to several
grams per tonne of gold.
A total of 102 coarse rejects (particle s sized approximately one millimetre or ‘‘mm’’) and 48 pulp
duplicates (sized approximately 75 microns or ‘‘μm’’) were selected by SRK for independent verification
purposes in 2012. The samples were collected from Yantai Zhongjia ’s core storage located near the SJG
Open-Pit Mine; and each sample massed approximately 200 g. The coarse rejects (grain size
approximately 1 mm) were further pulverised to 75 μm in the ALS Chemical Assaying Laboratory in
Guangzhou, China (the ‘‘ALS’’). All the verification samples were analysed by ALS. The applied
method was aqua regia digestio n followed by fire assays.
There are noticeable discrepancies between coarse rejects and the original assays, however more
than half of the comparable results have a relative deviation within a range of +/ –20%. The
discrepancies discovered in the coarse reject assays are considered reasonable if considering the style of
mineralisation and nugget effect. SRK has analysed the sample results with grades above 0.3 g/t Au (the
cut-off grade at SJG Open-Pit Mine) and is of opinion that the overall comparison provides a confidence
in the original assays. The sample preparation in S GS Tianjin has been further revisited and monitored
by Persistence Resources and it was concluded that the processes were compliant with industrial applied
QA/QC protocols.
The comparison between pulp duplicates and original assays were matched well and the deviation
is general with a range of +/ –10% with few discrepancies.
The SJG Open-Pit Mine has been operated for many years at a relatively low cut-off grade and the
daily ore feeds in the processing plant have confirmed that.
To test and verify the grades of the SJG Underground Mine, SRK has supervised a sampling
program of the underground channels in 2018. A total of 257 samples from three underground levels,
namely 85 samples from +49 level, 112 samples from +9 level and 60 samples from –40 level, were
taken continuously along the cross-cuts walls. Samples were taken at the panel of an approximate size at
1m×1m .
The underground samples, about 4 –5 kg each, were despatched to SGS Tianjin for preparation and
analyses. A screening fire a ssay method was applied, with AAS finish. SRK reviewed the assays of
these underground samples and is of opinion that the results coincide with the underground development
of cross-cuts of the mineralised bodies. Therefore, this sample information was accepted in the
integration of the drill hole database.
Mineral Resource estimation
SRK converted the database provided by Persistence Resources into comma-separated values (the
‘‘CSV’’) format, validated the database, and removed repeated samples. The drill hole database used for
Mineral Resource estimation contains 326 geological engineering works including 145 drill holes (128
surface drill holes and 17 underground drill holes), 75 trenches, and 106 underground engineering.
APPENDIX III SRK REPORT
– III-14 –


--- page 582 ---
The database contains 36,748 gold samples in to tal, including 27,805 from drill holes, 5,377 from
trenches, and 3,566 from underground engineering. The maximum gold grade is 263.09 g/t Au and the
average gold grade is 0.37 g/t Au prior to grade capping.
The topographic model was converted from the topographic survey map conducted in 2014 and has
been updated to 30 June 2023. The block model u sed fixed size blocks for modelling. Grade
interpolation was done using Ordinary Kriging.
The block models for the SJG Open-Pit Mine and SJG Underground Mine were created by SRK
and the Mineral Resource estimation were constrained within the low grade shell (modelled basing on
the lithology and topography) and the mineralised domains (modelled basing on a cut-off grade of 0.7 g/
t Au), respectively.
Mineral Reserve estimation
The SJG Open-Pit Mine is a producing mine. The technical department of the mine maintains an
active database for the open pit operation, and pr ovided SRK with related technical and economic
parameters for the open pit optim isation and the design of the ope n pit. SRK reviewed and used
Persistence Resources ’ database and parameters to estimate Mineral Reserves.
With respect to the SJG Underground Mine, a feasibility study report (the ‘‘FSR’’) by Yantai Dehe
Metallurgy Design Institute Ltd. has been reviewed by SRK to estimate Mineral Reserves.
The cut-off grades were defined to be 0.3 g/t and 0.7 g/t run-of-mine (the ‘‘RoM’’) to estimate
Mineral Reserves for SJG Open-Pit Mine and SJG Underground Mine, respectively.
SJG Open-Pit Mine
The open pit optimisation was limited within mining licence area. A series of nested open pit
shells were generated using floatin g-cone scenario to simulate pushbacks enlarged at about 1,500 kt ore
interval. Economics of these open pit shells were an alysed to select the open pit shell for the Mineral
Reserve estimation.
SJG Underground Mine
Mineralised zones, including Nos. 6, 7, 11, 16 and 19, were initially selected by SRK to report
potential Mineral Reserves. Zones were sliced to create levels, then stopes along strike direction were
designed. All stopes within domain 19 have gold grade less than the cut-off grade and were excluded.
Stopes within the Inferred Mineral Resources wer e excluded from reporting of Mineral Reserves. The
stopes with a RoM gold grade greater than the cut-off grade of 0.7 g/t Au were included and reported
within the Mineral Reserves.
APPENDIX III SRK REPORT
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--- page 583 ---
Mining
SJG Open-Pit Mine
SJG Open-Pit Mine is currently operated as an open pit using conventional road-truck technique
which is assumed as the bench development method. The mining sequence will be controlled by two
pushbacks.
The mine is scheduled to operate 8 hours per shift, 3 shifts per day and 330 days per year. The
production capacity is assumed to be 3,300 ktpa ore.
Conventional drill-blast-load-haul mining cycle is assumed to move rocks within the open pit. The
bench height is 12 m high. The blast holes have a grid pattern of (3.5 × 3.8 – 4.0 × 4.0) m. The
explosives applied include emulsion for wet rocks and ammonium nitrate/fuel oil (the ‘‘ANFO ’’) for dry
rocks. Ore is trucked directly to the processing plant and waste rock trucked directly to buyers, as such
there is no requirement for waste dumps.
The open pit is inspected monthly for open pit stability.
Mine service facilities have been well developed and will continue to support daily operations.
SJG Underground Mine
The SJG Underground Mine utilises cut-and-fill mi ning and shrinkage stope mining methods and
relies on cemented paste fill or cemented rock fill to support the stoping operation. The development
system mainly consists of a trackless access ramp, si x level haulage ways, an a uxiliary shaft, a surface
upcast and an underground upcast.
Off-road/underground dump trucks move both ore and wastes to surface along the level haulage
way and the access ramp.
The mine is scheduled to operate 8 hours per shift, 3 shifts per day, 330 days per year. Hauling of
ore along the access ramp is scheduled to operate just one shift per day. The production capacity is
a s s u m e dt ob e9 0k t p ao r e .
Mine service facilities have been well developed or shared with the SJG Open-Pit Mine to support
daily operations.
Mineral processing
The ore of Songjiagou deposit is low-grade gold with low content of sulphides. Both processing
test results and historical production records show that the ore is amenable to conventional floatation
process. A simple floatation flowsheet achie ves a satisfied gold recovery to a concentrate.
APPENDIX III SRK REPORT
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Yantai Zhongjia organised and funded the construction of a processing plant with a throughput of
6,000 tpd, a tailings storage facility (the ‘‘TSF’’) and other suitable auxiliary facilities. The TSF is in
good condition and has capacity to support 10 years of production at current throughput as of 30 June
2023.
The processing plant adopts a processing flowsheet including the following major operations:
. A process of conventional three-stage crushing in closed circuit and one-stage screening is
adopted to crush the RoM from a maximum size of 1,000 mm to 80% passing 12 mm.
. A process of one-stage grinding in closed circuit with conventional spiral classification is
adopted to grind the crushed ore to approximately 50% passing 75 μm.
. Roughing floatation of the spiral classifier overflow followed by two scavenger cells produce
rough concentrate and final tailings. The final tailings are pumped to the TSF. Two cleaning
stages are conducted on the rough concentrate to produce a final gold concentrate.
. The final concentrate is dewatered through co ndensing and filtration in the processing plant.
The dewatered concentrate is sold to nearby smelters.
The historical performance of the processing plant is shown in Table ES-6.
Table ES-6: Historical Processing Performances
Item Unit 2020 2021
[1] 2022 H1 2023 [2]
RoM tonnage kt 1,590 1,024 1,991 997
RoM gold grade g/t 0.70 0.62 0.62 0.54
Gold content in RoM kg 1,109 640 1,229 541
Concentrate production kt 46.83 28.66 68.04 26.79
RoM/concentrate t/t 33.96 35.72 29.26 37.20
Concentrate grade g/t 22.69 21.28 17.21 19.10
Gold content in concentrate kg 1,062 610 1,171 512
Gold recovery rate % 95.82 95.33 95.31 94.62
Notes:
1. Processing was conducted in months January, February, April, May, and August to December.
2. The first half of 2023.
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Environmental, social, health and safety impact
The sources of inherent environmental risk are p roject activities that may result in potential
environmental impacts. The environmental risks for the SJG Project are:
. Land disturbance and steep side slope;
. Poor water management; and
. Dust emission.
The above environmental risks are categorised as moderate/tolerable risks (i.e., requiring risk
management measures). In addition, Yantai Zhongjia is of the view that t he environment issues
identified above will be under consideratio n and resolved in the foreseeable future.
Based on the review of the information provide d and the site visit observations, it is SRK ’s
opinion that the environmental risks for SJG Project are generally being managed in accordance with
Chinese national requirements.
Mine closure and land rehabilitation
No comprehensive site closure plan was provided to SRK for review, but SRK was provided with
a Land Reclamation Plan/approval and a Mine Site Geological Environment Protection and
Rehabilitation Plan/approval fo r SJG Open-Pit Mine and SJG Underground Mine respectively.
SRK notes that the proposed approach to site rehabilitation is generally in line with the relevant
recognised Chinese i ndustry practices.
Capital cost and operating cost
Records of capital cost ( ‘‘Capex ’’) and operating cost ( ‘‘Opex ’’)h a v eb e e np r o v i d e dt oS R K .
Production capacity ratio was applied to modify records to estimate future costs.
SJG Open-Pit Mine
T h el i f eo fm i n e( t h e ‘‘LoM’’) Capex and forecasts are shown in Table ES-7. The Opex forecasts
are shown in Table ES-8.
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Table ES-7: Capex Records and Forecasts for SJG Open-Pit Mine (’ 000 RMB)
Item Actual Value SRK Forecast
Sunk Capex — 473,798
Initial Capex 759,082 —
Sustaining Capex — 128,040
Total 759,082 601,837
Table ES-8: LoM Opex Forecasts for SJG Open-Pit Mine ( ’000 RMB)
Item Total H2 2023 2024 2025 2026 2027 2028 2029 2030 2031
Mining 383,619 16,530 32,821 36,973 49,601 49,601 49,601 49,601 49,601 49,289
Processing 1,146,481 42,177 83,616 96,3 85 154,271 154,271 154,271 154,271 154,271 152,947
Administration 137,794 8,082 16,147 16,464 16,184 16,184 16,184 16,184 16,184 16,184
Refining 62,717 1,264 2,309 4,600 9,825 10,151 9,519 9,407 7,662 7,980
Mineral resource tax 324,267 8,054 14,55 9 26,387 53,387 53,791 46,287 45,744 37,256 38,803
Total 2,054,878 76,107 149,452 180,810 283,268 283,997 275,861 275,207 264,973 265,202
SJG Underground Mine
The Capex records and forecasts are shown in Table ES-9. The LoM Opex forecasts are shown in
Table ES-10.
Table ES-9: Capex Records and Forecasts for SJG Underground Mine ( ’000 RMB)
Item Actual Value SRK Forecasts
Sunk Capex — 83,132
Initial Capex 150,790 —
Sustaining Capex — 4,125
Total 150,790 87,258
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Table ES-10: LoM Opex Forecasts for SJG Underground Mine ( ’000 RMB)
Item Total H2 2023 2024 2025 2026 2027 2028 2029
Mining 79,476 6,790 13,464 13,464 13,464 13,464 13,464 5,367
Processing 43,020 3,699 7,298 7,298 7,298 7,298 7,298 2,832
Administration 4,372 370 739 739 739 739 739 305
Refining 1,749 181 355 355 334 236 220 69
Mineral resource tax 9,897 1,155 2,237 2,037 1,815 1,249 1,070 333
Total 138,514 12,195 24,093 23,894 23,650 22,986 22,791 8,905
SJG Project
The combined operating costs of historical and forecasted are shown in Table ES-11 for the SJG
Project. Please note that:
. the production in year 2021 was signif icantly interrupted by the People ’s Government of
Shandong Province due to safety production inspection.
. the operating costs after year 2024 are less th an those of in history, which is mainly caused
by the expanded mining rates of SJG Open-Pit Mine, from 1,500 ktpa ore to 3,300 ktpa ore.
Table ES-11: Short-term Opex Records and Forecasts for SJG Project (RMB/g gold
produced)
Historical Forecasts
Item 2020 2021 2022 H1 2023 H2 2023 2024 2025 2026 2027
Workforce employment 20.26 26.28 32.05 40.76 36.61 39.72 21.34 10.41 10.18
Consumables 49.30 40.44 40.25 38.70 54.48 58.41 36.65 38.04 37.21
Fuel, electricity, water and
other Services 44.74 74.60 59.02 77.85 45.55 48.69 31.32 15.16 14.88
On and off-site administrat ion 6.28 11.05 9.76 8.43 1.49 1.62 0.87 0.42 0.41
Environmental protection and monitoring 0.04 0.00 0.00 0.00 0. 01 0.01 0.01 0.00 0.00
Transportation of workfo rce 0.66 0.80 0.28 0.54 0.70 0.75 0.41 0.20 0.19
Product marketing and transport — — — — —————
Non-income taxes, royalties and other
governmental charges 15.53 19.68 17.45 18.81 19.99 20.03 17.25 15.42 15.04
Contingency allowances 7.83 10.46 6.20 9.46 5.48 5.94 3.19 1.56 1.52
Total 144.64 183.31 165.00 194.55 164.30 175.17 111.04 81.21 79.45
APPENDIX III SRK REPORT
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Economic analysis
The discounted cash flow (the ‘‘DCF’’) method is selected as the foundation of economic analysis.
The base date is set at 30 June 2023. The sunk costs were not considered during economic analysis, as
sunk costs should not affect the rational decision-maker ’s best choice.
The results in Table ES-12, showing a positive NPV , indicate that the SJG Project is economically
viable.
Table ES-12: Summary of Overall Economic Analysis
Item Unit
SJG
Open-Pit
Mine
SJG
Underground
Mine Total Comments
Production capacity ktpa ore 3,300 90 3,390
Life of mine years 8.5 6 /
Ore tonnage kt 22,600 530 23,130
Gold grade in ore g/t 1.17 1.39 1.17
Gold content in ore kg 26,400 737 27,137
Gold content in ore koz 849 23.7 872
Processing recovery rate % 95.00 95.00 95.00 historical data based
Concentrate gold grade g/t 20.00 20.00 20.00
Concentrate tonnage kt 1,254 35 1,289
Gold content in concentrate kg 25,087 700 25,786
Gold content in concentrate koz 807 22 829
Payable gold kg 23,331 651 23,981
Gold price RMB g/t 310 310 310 long-term forecasts
Sales revenue million RMB 7,721 236 7,956
Operating cost million RMB 2,055 139 2,193
Operating cost RMB/t ore 91 261 95
Mineral resource tax million RMB 324 10 334
Corporate income tax million RMB 787 6 793
Sunk capital cost million RMB 474 83 557
NPV (9%) million RMB 3,246 85 3,332 9% is derived from
WACC
Risk assessment
SRK completed a risk assessment of the risks ide ntified for the SJG Project in relation to their
likelihood of occurrence within the LoM and consequ ence in accordance with Guidance Note 7 to the
Listing Rules.
In general, project risk decreases from exploration, development, through to the production stage.
SRK considers the SJG Project to be an advanced project.
SRK considered various technical aspects which may affect the feasibility and future cash flow of
the SJG Project and conducted a qualitative risk ana lysis which has been summarised in Table ES-13. In
this risk analysis, various risk sources/issues have been assessed for likelihood and consequence, and
then an overall risk rating has been assigned.
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--- page 589 ---
Table ES-13: Risk Assessment for SJG Project
Risk Issue Likelihood Consequence Overall
Geology and Mineral Resources
Lack of significant Mineral Resource tonnage Unlikely Moderate Low
Lower average grade of gold (i.e., 15% lower) Unlikely Major Medium
Unexpected groundwater ingress Unlikely Moderate Low
Overestimate of Mineral Resource potential Unlikely Minor Low
Improper classification of Mineral Resource
category
Possible Moderate Medium
Misleading geological description
(related to low-qual ity exploration done)
Unlikely Moderate Low
Mining
Significant geological structures Possible Moderate Medium
Deformation of final open pit wall Possible Moderate Medium
Designing of final open pit is wrong Unlikely Moderate Low
Long-term schedule is optimistic Unlikely Moderate Low
Ore production capacity is op timistic Unlikely Major Low
Lack of significant Mineral Reserves Unlikely Moderate Low
Mineral Processing
Unfit configuration of equipment Unlikely Moderate Low
Actual throughput cannot meet design capacity Unlikely Moderate Low
Unsuitable flowsheet Unlikely Moderate Low
Lower metal recovery Unlikely Moderate Low
Poor plant design Unlikely Moderate Low
Environmental and Social
Land disturbance and ecological protection Unlikely Moderate Low
ARD impact to the environment Possible Moderate Medium
Land rehabilitation and site closure Unlikely Moderate Low
Stakeholder engagement and cultural heritage
protection
Unlikely Moderate Low
Capital and Operating Costs
Project timing delay Unlikely Minor Low
Poor mine management-plan Possible Minor Low
Capital cost increases Possible Minor Low
Higher capital costs — ongoing Unlikely Minor Low
Operating cost underestimated Possible Moderate Medium
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Recommendations
Geology
Grade control should be performed for both SJG Open-Pit Mine and SJG Underground Mine to
meet grade requirement of the processing plant.
As observed by SRK from the mineral resource model, it can be noted that there are significant
Inferred Mineral Resources occurred deeply, especially for those occurred in open pit walls and at depth
below the open pit base for SJG Open-Pit Mine. SRK suggests further exploration campaign may be
performed to upgrade the category of these Inferred Mineral Resources to reduce exploitation risks and
extend the life of mine.
Mining
In order to substantially scale up mining operations, gold concentrate processing and increase gold
mineral reserves, optimising open pit mine design should be implemented to cater for the increase in
mining capacity, which includes expanding to the south of the current open pit boundary so that the
Mineral Resources in the expanded area can be accessible as much as possible, the stripping of topsoil,
wastes and ore materials to expose Mineral Resources as soon as possible, the construction of water
storage pool and drainage system, the construction of site office and accommodation, the construction of
stockpiles to store topsoil for future reclamation, and acquiring of additional equipment to support the
expansion plan.
With respect to the SJG Underground Mine, SRK considers that Yantai Zhongjia should strengthen
its communication with technicians and management of Mineral Resources to ensure the mining
operations could be performed as planned.
Legal claims or proceedings
SRK has been advised by Persistence Resources and its legal advisers that there are no legal
claims or proceedings that could influence Yantai Zhongjia ’s rights to explore and/or mine at both SJG
Open-Pit Mine and SJG Underground Mine.
Effective date
The effective date for this QPR is deemed to be 30 June 2023 (the ‘‘Effective Date ’’). The Mineral
Resource and Mineral Reserve statements set out in this QPR are reported as of 30 June 2023 and
represent the Mineral Resources and Mineral Reserves at the Effective Date as audited by SRK.
The LoM plans and associated technical and economic parameters included in the LoM plans and
techno-economic models all commence on 1 July 2023.
The financial results for the SJG Open-Pit M ine and SJG Underground Mine are taken to be
correct on 30 June 2023, the Effective Date of this QPR.
APPENDIX III SRK REPORT
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--- page 591 ---
Material change statement
Based on the information provided by Persistence Resources, there are no events that have
occurred since the Effective Date that are likely to have a material impact on the Mineral Resource and
Mineral Reserve statements for the SJG Open-Pit Mine and SJG Underground Mine at the date of
publication of this QPR.
Requirement and reporting standard
This QPR has been prepared in the format of the NI 43-101 technical report with some
modification to fit the requirements of the Stock Exchange, and the Mineral Resources and Mineral
Reserves were estimated according to Canadian Ins titute of Mining, Metallurgy and Petroleum (the
‘‘CIM’’) Definition Standards for Mineral Resources a nd Mineral Reserves adopted by the NI 43-101.
The CIM Definition Standards are compatible with the JORC Code which is binding upon all
Australasian Institute of Mining and Metallurgy (the ‘‘AusIMM’’)m e m b e r s .
Reliance on SRK
This QPR is addressed to and may be relied upon by Persistence Resources, the Directors of
Persistence Resources and Persistence Resources ’ various financial, legal and accounting advisors (the
‘‘Advisers ’’) in support of the proposed listing of Persistence Resources on the Stock Exchange (the
‘‘Proposed Listing ’’), specifically in respect of compliance with the requirements of the Listing Rules.
SRK agrees that this QPR may be made available to and relied upon by the Advisers.
SRK is responsible for this QPR and for all the technical information contained therein. SRK
declares that it has taken all reasonable care to ensure that this QPR and the technical information
contained therein is, to the best of its knowledge, in accordance with the facts and contains no omission
likely to affect its import.
SRK confirms that the presentation of technical in formation contained elsewhere in the prospectus
released by Persistence Resources i n connection with the Proposed Listing which relates to information
in the QPR is accurate, balanced and not in consistent with the Qualified Person ’s Report.
SRK believes that its opinion should be considered as a whole and selecting portions of the
analysis or factors considered by it, without consider ing all factors and analyses together, could create a
misleading view of the process underlying the opinions presented in this QPR. The preparation of a
QPR is a complex process and does not lend itself to partial analysis or summary.
This QPR includes technical information, which requires subsequent calculations to derive
subtotals, totals and weighted averages. Such calculations may involve a degree of rounding and
consequently introduce an error. Where such errors occur, SRK does not consider them to be material.
Independence
SRK will be paid a fee for this work at commercial rates in accordance with normal professional
consulting practice.
APPENDIX III SRK REPORT
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Payment of fees is in no way contingent upon the conclusions to be reached in this QPR.
Forward looking statements
This QPR contains statements of a forward-looking nature which are subject to a number of known
and unknown risks, uncertainties and other factors that may cause the results to differ materially from
those anticipated in this QPR. The achievability of th ese projections is neither assured nor guaranteed by
SRK. The projections cannot be assured as they are based on economic assumptions, many of which are
beyond the control of Persistence Resources and SRK. Future cash flows and profits derived from such
projections are inherently uncertain and actual results may be significantly more or less favourable.
APPENDIX III SRK REPORT
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TABLE OF CONTENTS
1 INTRODUCTION AND TERMS OF REFERENCE . . . .......................... I I I - 4 1
1 . 1 S c o p e o f w o r k .......................................................... I I I - 4 1
1 . 2 W o r k p r o g r a m .......................................................... I I I - 4 2
1.3 Basis of Qualified Person’ s r e p o r t .......................................... I I I - 4 2
1 . 4 R e p o r t i n g s t a n d a r d , r e p o r t i n g c o m p l i a n c e a n d r e l i a n c e ........................ I I I - 4 2
1 . 4 . 1 R e p o r t i n g s t a n d a r d ............................................... I I I - 4 2
1 . 4 . 2 R e p o r t i n g c o m p l i a n c e ............................................ I I I - 4 3
1 . 4 . 3 R e l i a n c e ........................................................ I I I - 4 3
1 . 5 E f f e c t i v e d a t e ........................................................... I I I - 4 4
1 . 5 . 1 C o m m o d i t y p r i c e ................................................ I I I - 4 4
1 . 5 . 2 M a t e r i a l c h a n g e ................................................. I I I - 4 4
1 . 5 . 3 L e g a l c l a i m s a n d p r o c e e d i n g s ..................................... I I I - 4 4
1.5.4 Sufficiency of rehabilitation funding ............................... I I I - 4 5
1 . 5 . 5 C l a i m s o v e r l a n d ................................................ I I I - 4 5
1 . 6 Q u a l i f i c a t i o n s o f S R K a n d S R K t e a m ...................................... I I I - 4 5
1 . 7 S i t e v i s i t s .............................................................. I I I - 4 8
1 . 8 A c k n o w l e d g e m e n t ....................................................... I I I - 4 8
1.9 Limitations, reliance on information, declaration, consent and cautionary statements III-49
1 . 9 . 1 L i m i t a t i o n s ..................................................... I I I - 4 9
1 . 9 . 2 R e l i a n c e o n i n f o r m a t i o n .......................................... I I I - 4 9
1 . 9 . 3 D e c l a r a t i o n ..................................................... I I I - 5 0
1 . 9 . 4 C o n s e n t ........................................................ I I I - 5 0
1 . 9 . 5 C a u t i o n a r y s t a t e m e n t s ............................................ I I I - 5 0
1.10 Indemnities provided by Persistence Resources .............................. I I I - 5 0
2 R E L I A N C E O N O T H E R E X P E R T S ........................................... I I I - 5 1
3 L I C E N C E S A N D P E R M I T S .................................................. I I I - 5 2
3 . 1 B u s i n e s s l i c e n c e ......................................................... I I I - 5 2
3 . 2 M i n i n g l i c e n c e s ......................................................... I I I - 5 2
3 . 3 S a f e t y o p e r a t i o n a l p e r m i t s ................................................ I I I - 5 3
3 . 4 O t h e r o p e r a t i o n a l p e r m i t s ................................................. I I I - 5 4
4 R E G I O N A L D E S C R I P T I O N .................................................. I I I - 5 6
4.1 Location and accessibility ................................................ I I I - 5 6
4 . 2 C l i m a t e ................................................................ I I I - 5 7
4 . 3 L o c a l r e s o u r c e s a n d i n f r a s t r u c t u r e ......................................... I I I - 5 7
4 . 4 P h y s i o g r a p h y ........................................................... I I I - 5 7
5 H I S T O R Y ................................................................... I I I - 5 9
5 . 1 O w n e r s h i p h i s t o r y ....................................................... I I I - 5 9
5 . 2 E x p l o r a t i o n h i s t o r y ...................................................... I I I - 5 9
6 G E O L O G I C A L S E T T I N G A N D M I N E R A L I S A T I O N ........................... I I I - 6 1
6 . 1 R e g i o n a l g e o l o g y ........................................................ I I I - 6 1
6 . 2 P r o p e r t y g e o l o g y ........................................................ I I I - 6 2
6 . 3 M i n e r a l i s e d z o n e s ....................................................... I I I - 6 4
APPENDIX III SRK REPORT
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7 D E P O S I T T Y P E S ............................................................ I I I - 6 8
8 E X P L O R A T I O N ............................................................. I I I - 6 9
8 . 1 G e o l o g i c a l m a p p i n g ...................................................... I I I - 6 9
8 . 2 S u r v e y ................................................................. I I I - 6 9
8 . 3 O t h e r .................................................................. I I I - 6 9
9 D R I L L I N G , T R E N C H I N G A N D U N D E R G R O U N D W O R K I N G S ................. I I I - 7 0
9 . 1 T r e n c h i n g .............................................................. I I I - 7 0
9 . 2 U n d e r g r o u n d c h a n n e l l i n g ................................................. I I I - 7 0
9.3 Drilling . ............................................................... I I I - 7 0
9.4 Drilling and trenching pattern and density .................................. I I I - 7 1
10 SAMPLE PREPARATION, ANALYSES, AND SECURITY . . . ................... I I I - 7 3
1 0 . 1 S a m p l e p r e p a r a t i o n a n d a n a l y s e s ........................................... I I I - 7 3
1 0 . 1 . 1 D r i l l c o r e s a m p l e s ............................................... I I I - 7 3
1 0 . 1 . 2 T r e n c h s a m p l e s ................................................. I I I - 7 3
1 0 . 1 . 3 U n d e r g r o u n d c h a n n e l s a m p l e s ..................................... I I I - 7 3
1 0 . 1 . 4 S p e c i f i c g r a v i t y s a m p l e s .......................................... I I I - 7 3
1 0 . 1 . 5 O t h e r i n f o r m a t i o n ............................................... I I I - 7 4
10.2 Quality assurance and qu ality control programs .............................. I I I - 7 4
1 0 . 3 S R K c o m m e n t s .......................................................... I I I - 7 6
1 1 D A T A V E R I F I C A T I O N ...................................................... I I I - 7 7
1 1 . 1 V e r i f i c a t i o n s b y P e r s i s t e n c e R e s o u r c e s a n d W a r d r o p ......................... I I I - 7 7
1 1 . 2 V e r i f i c a t i o n s b y S R K .................................................... I I I - 7 7
1 1 . 3 S a m p l e a s s a y s i n 2 0 1 8 ................................................... I I I - 8 0
12 MINERAL RESOURCE ESTIMATION ........................................ I I I - 8 1
1 2 . 1 I n t r o d u c t i o n ............................................................ I I I - 8 1
1 2 . 2 E s t i m a t i o n p r o c e d u r e s .................................................... I I I - 8 1
1 2 . 3 D a t a b a s e ............................................................... I I I - 8 2
12.4 Compositing ............................................................ I I I - 8 4
12.5 Outlier value assessment . . ................................................ I I I - 8 4
1 2 . 6 S t a t i s t i c a l a n a l y s i s a n d v a r i o g r a p h y ........................................ I I I - 8 9
1 2 . 6 . 1 S t a t i s t i c a l a n a l y s i s o f c o m p o s i t e s .................................. I I I - 8 9
1 2 . 6 . 2 V a r i o g r a m s ..................................................... I I I - 8 9
1 2 . 7 B l o c k m o d e l ............................................................ I I I - 9 1
1 2 . 8 G r a d e i n t e r p o l a t i o n ...................................................... I I I - 9 2
1 2 . 9 M o d e l v a l i d a t i o n ........................................................ I I I - 9 3
1 2 . 1 0 M i n e r a l R e s o u r c e c l a s s i f i c a t i o n ............................................ I I I - 9 4
1 2 . 1 1 M i n e r a l R e s o u r c e s t a t e m e n t ............................................... I I I - 9 4
12.12 Grade sensitivity analysis . ................................................ I I I - 9 6
1 2 . 1 3 H i s t o r i c a l M i n e r a l R e s o u r c e e s t i m a t i o n ..................................... I I I - 9 7
1 3 M I N E R A L R E S E R V E E S T I M A T I O N .......................................... I I I - 9 9
1 3 . 1 E s t i m a t i o n p r o c e d u r e s .................................................... I I I - 9 9
13.2 Feasibility study report . . . ................................................ I I I - 9 9
1 3 . 3 C u t - o f f g r a d e ........................................................... III-100
1 3 . 4 S J G O p e n - P i t M i n e ...................................................... III-101
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13.4.1 Year-end open pit outline ......................................... III-101
1 3 . 4 . 2 M i n e r a l R e s e r v e m o d e l ........................................... III-102
1 3 . 4 . 3 M i n i n g d i l u t i o n a n d r e c o v e r y ..................................... III-102
1 3 . 4 . 4 P i t o p t i m i s a t i o n a n d f i n a l o p e n p i t d e s i g n ........................... III-103
1 3 . 4 . 5 M i n e r a l R e s e r v e c l a s s i f i c a t i o n ..................................... III-107
1 3 . 4 . 6 M i n e r a l R e s e r v e s t a t e m e n t ........................................ III-107
13.4.7 Mineral Reserve sensitivity ....................................... III-108
1 3 . 4 . 8 P r o d u c t i o n s c h e d u l e ............................................. III-108
1 3 . 5 S J G U n d e r g r o u n d M i n e .................................................. III-110
1 3 . 5 . 1 M i n e r a l R e s e r v e m o d e l ........................................... III-110
1 3 . 5 . 2 M i n i n g d i l u t i o n a n d r e c o v e r y ..................................... III-110
1 3 . 5 . 3 M i n e r a l R e s e r v e e s t i m a t i o n ....................................... III-110
1 3 . 5 . 4 M i n e r a l R e s e r v e c l a s s i f i c a t i o n ..................................... III-115
1 3 . 5 . 5 M i n e r a l R e s e r v e s t a t e m e n t ........................................ III-116
13.5.6 Mineral Reserve sensitivity ....................................... III-117
1 3 . 5 . 7 P r o d u c t i o n s c h e d u l e ............................................. III-117
1 3 . 6 A s c e r t a i n M i n e r a l R e s e r v e s ............................................... III-118
1 3 . 7 C o n c l u s i o n s a n d r e c o m m e n d a t i o n s ......................................... III-118
1 3 . 7 . 1 S J G O p e n - P i t M i n e .............................................. III-118
1 3 . 7 . 2 S J G U n d e r g r o u n d M i n e .......................................... III-119
1 4 M I N I N G .................................................................... III-120
1 4 . 1 M i n i n g t e c h n i c a l c o n d i t i o n s ............................................... III-120
1 4 . 1 . 1 H y d r o g e o l o g y ................................................... III-120
1 4 . 1 . 2 E n g i n e e r i n g g e o l o g y a n d g e o t e c h n i c a l e n g i n e e r i n g ................... III-121
1 4 . 2 S J G O p e n - P i t M i n e ...................................................... III-121
1 4 . 2 . 1 M i n e o p e r a t i o n s h i s t o r y a n d c u r r e n t s t a t u s .......................... III-121
1 4 . 2 . 2 M i n e d e v e l o p m e n t ............................................... III-123
1 4 . 2 . 3 M i n i n g m e t h o d s ................................................. III-123
1 4 . 2 . 4 S l o p e m o n i t o r i n g ................................................ III-125
1 4 . 2 . 5 W a s t e d u m p .................................................... III-125
1 4 . 2 . 6 M i n e e q u i p m e n t ................................................. III-125
1 4 . 2 . 7 M i n e s e r v i c e s ................................................... III-125
1 4 . 3 S J G U n d e r g r o u n d M i n e .................................................. III-127
1 4 . 3 . 1 M i n e o p e r a t i o n s h i s t o r y a n d c u r r e n t s t a t u s .......................... III-127
1 4 . 3 . 2 M i n e d e v e l o p m e n t ............................................... III-128
1 4 . 3 . 3 M i n i n g m e t h o d s ................................................. III-129
14.3.4 Ground support . ................................................ III-130
1 4 . 3 . 5 M i n e e q u i p m e n t ................................................. III-131
1 4 . 3 . 6 M i n e s e r v i c e s ................................................... III-131
1 4 . 4 S R K c o m m e n t s .......................................................... III-135
1 4 . 4 . 1 S J G O p e n - P i t M i n e .............................................. III-135
1 4 . 4 . 2 S J G U n d e r g r o u n d M i n e .......................................... III-135
1 5 M I N E R A L P R O C E S S I N G T E S T A N D R E C O V E R Y ............................ III-136
1 5 . 1 I n t r o d u c t i o n ............................................................ III-136
APPENDIX III SRK REPORT
– III-28 –


--- page 596 ---
1 5 . 2 T e c h n o l o g i c a l m i n e r a l o g y ................................................ III-137
15.2.1 Mineral compositio n and occurrence status .......................... III-137
1 5 . 2 . 2 M i n e r a l c h e m i c a l c o m p o s i t i o n ..................................... III-138
1 5 . 3 M i n e r a l p r o c e s s i n g t e s t ................................................... III-139
1 5 . 3 . 1 H i s t o r i c a l t e s t w o r k .............................................. III-139
1 5 . 3 . 2 L a b o r a t o r y t e s t .................................................. III-140
1 5 . 4 P r o c e s s i n g f l o w s h e e t ..................................................... III-142
1 5 . 4 . 1 C r u s h i n g ....................................................... III-143
1 5 . 4 . 2 G r i n d i n g ....................................................... III-144
1 5 . 4 . 3 F l o a t a t i o n ...................................................... III-144
1 5 . 4 . 4 C o n c e n t r a t e d e w a t e r i n g ........................................... III-144
1 5 . 5 P r o c e s s i n g e q u i p m e n t .................................................... III-144
1 5 . 6 P r o d u c t i o n p e r f o r m a n c e .................................................. III-146
1 5 . 7 S e r v i c e s ................................................................ III-147
1 5 . 7 . 1 M a t e r i a l a n d r e a g e n t s u p p l y ....................................... III-147
1 5 . 7 . 2 L a b o r a t o r y ...................................................... III-147
1 5 . 7 . 3 M a i n t e n a n c e .................................................... III-147
1 5 . 7 . 4 P r o c e s s i n g w a t e r ................................................ III-148
15.8 Tailings storage facility . . ................................................ III-148
1 5 . 8 . 1 T a i l i n g s d a m .................................................... III-149
1 5 . 8 . 2 S e e p a g e d r a i n i n g s y s t e m .......................................... III-150
1 5 . 8 . 3 F l o o d c o n t r o l a n d d i s c h a r g e s y s t e m ................................ III-150
1 5 . 8 . 4 T a i l i n g s d i s c h a r g i n g s y s t e m ....................................... III-151
1 5 . 8 . 5 T a i l i n g s d i s p o s a l ................................................ III-152
15.8.6 Safety monitoring facilities and management ........................ III-152
1 5 . 9 C o n c l u s i o n s a n d r e c o m m e n d a t i o n s ......................................... III-152
16 PROJECT INFRASTRUCTURE ............................................... III-153
1 6 . 1 R o a d s .................................................................. III-153
1 6 . 2 P o w e r s u p p l y ........................................................... III-154
1 6 . 3 W a t e r s u p p l y ........................................................... III-154
1 6 . 4 C o m m u n i c a t i o n ......................................................... III-155
1 6 . 5 C o m m u n i t y a n d o f f i c e ................................................... III-155
1 7 M A R K E T S T U D I E S A N D C O N T R A C T S ....................................... III-156
1 7 . 1 S a l e s r e c o r d ............................................................ III-156
1 7 . 2 G o l d p r i c e .............................................................. III-156
1 7 . 3 C o n t r a c t s ............................................................... III-159
1 8 E N V I R O N M E N T A L , P E R M I T , S O C I A L A N D C O M M U N I T Y I M P A C T ..........III-161
1 8 . 1 O b j e c t i v e ............................................................... III-161
1 8 . 2 E S H S r e v i e w p r o c e s s , s c o p e a n d s t a n d a r d s .................................. III-161
1 8 . 3 S t a t u s o f E S H S a p p r o v a l s a n d p e r m i t s ...................................... III-161
1 8 . 4 E n v i r o n m e n t a l c o n f o r m a n c e a n d c o m p l i a n c e ................................... III-161
1 8 . 5 K e y E S H S A s p e c t s ........................................................ III-162
1 8 . 6 E v a l u a t i o n o f e n v i r o n m e n t a l a n d s o c i a l R i s k s ............................... III-169
APPENDIX III SRK REPORT
– III-29 –


--- page 597 ---
1 9 C A P I T A L I N V E S T M E N T A N D O P E R A T I N G C O S T S .......................... III-170
1 9 . 1 I n t r o d u c t i o n ............................................................ III-170
1 9 . 2 S J G O p e n - P i t M i n e ...................................................... III-170
1 9 . 2 . 1 S u n k C a p e x .................................................... III-170
19.2.2 Initial Capex .................................................... III-171
1 9 . 2 . 3 S u s t a i n i n g C a p e x ................................................ III-171
1 9 . 2 . 4 W o r k i n g c a p i t a l ................................................. III-171
1 9 . 2 . 5 O p e x r e c o r d s ................................................... III-173
19.2.6 Opex forecasting ................................................ III-174
1 9 . 3 S J G U n d e r g r o u n d M i n e .................................................. III-177
1 9 . 3 . 1 S u n k C a p e x .................................................... III-177
19.3.2 Initial Capex .................................................... III-178
1 9 . 3 . 3 S u s t a i n i n g C a p e x ................................................ III-179
1 9 . 3 . 4 W o r k i n g c a p i t a l ................................................. III-179
1 9 . 3 . 5 O p e x r e c o r d s ................................................... III-181
19.3.6 Opex forecasting ................................................ III-181
2 0 E C O N O M I C A N A L Y S I S ..................................................... III-184
2 0 . 1 A s s u m p t i o n s ............................................................ III-184
2 0 . 2 S J G O p e n - P i t M i n e ...................................................... III-186
2 0 . 3 S J G U n d e r g r o u n d M i n e .................................................. III-186
2 0 . 4 C o n c l u s i o n s ............................................................ III-187
2 1 A D J A C E N T P R O P E R T I E S ................................................... III-188
22 OTHER RELEVANT DATA AND INFORMATION . . . .......................... III-189
2 3 R I S K A S S E S S M E N T ......................................................... III-190
2 4 I N T E R P R E T A T I O N A N D C O N C L U S I O N S .................................... III-192
2 4 . 1 G e o l o g y ................................................................ III-192
2 4 . 2 D a t a v e r i f i c a t i o n ........................................................ III-192
2 4 . 3 M i n e r a l R e s o u r c e e s t i m a t i o n .............................................. III-192
2 4 . 4 M i n e r a l R e s e r v e e s t i m a t i o n ............................................... III-192
2 4 . 5 M i n i n g ................................................................. III-193
2 4 . 6 G o l d r e c o v e r y ........................................................... III-194
2 4 . 7 C a p i t a l i n v e s t m e n t a n d o p e r a t i n g c o s t ...................................... III-194
2 4 . 8 E c o n o m i c a n a l y s i s ....................................................... III-194
25 RECOMMENDATIONS ...................................................... III-195
2 5 . 1 G e o l o g y ................................................................ III-195
2 5 . 2 M i n i n g ................................................................. III-195
2 6 R E F E R E N C E S ............................................................... III-196
APPENDIX III SRK REPORT
– III-30 –


--- page 598 ---
A P P E N D I C E S..................................................................... III-198
A p p e n d i x A : M i n i n g l i c e n c e s ......................................................... III-199
Appendix B: Drilling, trenching and channelling information . . . .......................... III-202
A p p e n d i x C : B a s i c s t a t i s t i c a n d v a r i o g r a m ............................................. III-211
A p p e n d i x D : S R K i n d e p e n d e n t s a m p l i n g a n d a s s a y ...................................... III-213
A p p e n d i x E : I n n o v a t i o n C o m p a n y C e r t i f i c a t e........................................... III-219
A p p e n d i x F : C o m p l i a n c e w i t h C h a p t e r 1 8.............................................. III-221
LIST OF TABLE
T a b l e 3 - 1 : S o n g j i a g o u B u s i n e s s L i c e n c e .......................................... I I I - 5 2
T a b l e 3 - 2 : M i n i n g L i c e n c e f o r S J G O p e n - P i t M i n e ................................. I I I - 5 2
T a b l e 3 - 3 : M i n i n g L i c e n c e f o r S J G U n d e r g r o u n d M i n e ............................. I I I - 5 3
T a b l e 3 - 4 : S a f e t y O p e r a t i o n a l P r o d u c t i o n P e r m i t f o r S J G O p e n - P i t M i n e .............. I I I - 5 3
T a b l e 3 - 5 : S a f e t y O p e r a t i o n a l P r o d u c t i o n P e r m i t f o r S J G U n d e r g r o u n d M i n e .......... I I I - 5 4
Table 3-6: Safety Operational Permit for Tailings Storage Facility . ................... I I I - 5 4
T a b l e 3 - 7 : W a t e r U s e P e r m i t .................................................... I I I - 5 5
T a b l e 1 0 - 1 : S t a n d a r d A n a l y s e s i n 2 0 0 7 a s S u m m a r i s e d b y W a r d r o p ................... I I I - 7 5
T a b l e 1 1 - 1 : R a n d o m C h e c k S a m p l e s C o l l e c t e d b y S R K .............................. I I I - 7 7
T a b l e 1 2 - 1 : C h a r a c t e r i s t i c V a l u e S u m m a r y o f O r i g i n a l S a m p l e ........................ I I I - 8 2
T a b l e 1 2 - 2 : G r a d e C a p p i n g D e t a i l s ................................................ I I I - 8 5
T a b l e 1 2 - 3 : S t a t i s t i c a l A n a l y s i s R e s u l t o f C o m p o s i t e s ............................... I I I - 8 9
T a b l e 1 2 - 4 : V a r i o g r a m P a r a m e t e r s ................................................ I I I - 9 0
Table 12-5: Block Model Limits for the SJG Open-Pit Mine and SJG Underground Mine . III-91
T a b l e 1 2 - 6 : M a i n C r i t e r i a a n d A t t r i b u t e s o f B l o c k M o d e l ............................ I I I - 9 1
T a b l e 1 2 - 7 : A v e r a g e G o l d G r a d e C o m p a r i s o n b e t w e e n B l o c k s a n d C o m p o s i t e s .......... I I I - 9 3
Table 12-8: Mineral Resources within SJG Open-Pit Mine, as of 30 June 2023
[1, 2] ...... I I I - 9 5
Table 12-9: Mineral Resources within SJG Underground Mine, as of 30 June 2023 [1, 2] .... III-95
Table 12-10: Tonnage and Grades under Different Cut-offs — S J G O p e n - P i t M i n e ....... I I I - 9 6
Table 12-11: Tonnage and Grades under Different Cut-offs — SJG Underground Mine [1, 2] III-97
T a b l e 1 2 - 1 2 : M i n e r a l R e s o u r c e E s t i m a t e H i s t o r y ..................................... I I I - 9 8
T a b l e 1 3 - 1 : A s s u m p t i o n s t o C a l c u l a t e C u t - o f f G r a d e ................................ III-100
Table 13-2: Description of Key Fields in Mineral Reserve Model for SJG Open-Pit Mine . III-102
T a b l e 1 3 - 3 : M A T C o d i n g f o r S J G O p e n - P i t M i n e ................................... III-102
T a b l e 1 3 - 4 : S u m m a r y o f P i t E c o n o m i c s f o r S J G O p e n - P i t M i n e ....................... III-104
T a b l e 1 3 - 5 : P i t I n v e n t o r i e s w i t h i n P i t 2 3 ........................................... III-106
T a b l e 1 3 - 6 : P i t I n v e n t o r i e s w i t h i n F i n a l P i t ........................................ III-106
T a b l e 1 3 - 7 : F i n a l P i t G e o m e t r y P r o p e r t i e s ......................................... III-107
Table 13-8: Mineral Reserve Statement for SJG Open-Pit Mine,
as 30 June 2023
[ 1 ,2 ,3 ,4 ] .............................................. III-107
Table 13-9: Possible Ore Tonnage within Final Open Pit of SJG Open-Pit Mine ......... III-108
T a b l e 1 3 - 1 0 : S u m m a r y o f P u s h b a c k S t a t i s t i c s ....................................... III-108
T a b l e 1 3 - 1 1 : L i f e o f M i n e S c h e d u l e f o r S J G O p e n - P i t M i n e ( S R K ) ..................... III-109
T a b l e 1 3 - 1 2 : S t o p e M i n e a b l e I n v e n t o r y i n D o m a i n 6 ................................. III-111
APPENDIX III SRK REPORT
– III-31 –


--- page 599 ---
T a b l e 1 3 - 1 3 : S t o p e M i n e a b l e I n v e n t o r y i n D o m a i n 7 ................................. III-112
T a b l e 1 3 - 1 4 : S t o p e M i n e a b l e I n v e n t o r y i n D o m a i n 1 1 ................................ III-113
T a b l e 1 3 - 1 5 : S t o p e M i n e a b l e I n v e n t o r y i n D o m a i n 1 6 ................................ III-114
T a b l e 1 3 - 1 6 : S u m m a r y o f M i n e a b l e I n v e n t o r y ....................................... III-115
Table 13-17: Mineral Reserve Statement for SJG Underground Mine,
as of 30 June 2023 [ 1 , 2 ,3 ,4 ] ............................................. III-116
Table 13-18: Possible Ore Tonnage within Expl oited Stopes of SJG Underground Mine . . . III-117
T a b l e 1 3 - 1 9 : L o M S c h e d u l e f o r S J G U n d e r g r o u n d M i n e ( S R K ) ........................ III-118
Table 13-20: Short-term Production Schedule for SJG Open-Pit Mine (Yantai Zhongjia) . . . III-119
Table 13-21: Short-term Production Schedule for SJG Underground Mine (Yantai Zhongjia) . . III-119
T a b l e 1 4 - 1 : S J G O p e n - P i t M i n e P r o d u c t i o n R e c o r d s ................................. III-122
T a b l e 1 4 - 2 : K e y P a r a m e t e r s o f M i n e D e v e l o p m e n t .................................. III-123
T a b l e 1 4 - 3 : K e y P a r a m e t e r s o f M i n i n g M e t h o d ..................................... III-124
T a b l e 1 4 - 4 : M i n e E q u i p m e n t L i s t f o r S J G O p e n - P i t M i n e ............................ III-125
T a b l e 1 4 - 5 : S J G U n d e r g r o u n d M i n e P r o d u c t i o n R e c o r d s ............................. III-127
T a b l e 1 4 - 6 : D e v e l o p m e n t T u n n e l D i m e n s i o n s ...................................... III-128
T a b l e 1 4 - 7 : U n d e r g r o u n d M i n e E q u i p m e n t i n P l a c e f o r S J G U n d e r g r o u n d M i n e .........III-131
T a b l e 1 5 - 1 : S t a t i s t i c s o f G e o l o g i c a l S a m p l e A n a l y s i s R e s u l t s ......................... III-139
T a b l e 1 5 - 2 : T e s t W o r k R e s u l t s ................................................... III-139
T a b l e 1 5 - 3 : T e s t R e s u l t s o f G r a v i t y a n d A m a l g a m a t i o n .............................. III-141
T a b l e 1 5 - 4 : F l o a t a t i o n T e s t R e s u l t s ............................................... III-142
T a b l e 1 5 - 5 : M a i n P r o c e s s i n g E q u i p m e n t ........................................... III-145
T a b l e 1 5 - 6 : H i s t o r i c a l P r o c e s s i n g P e r f o r m a n c e s ..................................... III-146
T a b l e 1 7 - 1 : G o l d S a l e s R e c o r d ................................................... III-156
T a b l e 1 7 - 2 : S u m m a r y S t a t i s t i c s o f E x c h a n g e R a t e a n d G o l d P r i c e ..................... III-158
Table 17-3: Gold Price Forecasts of CMF (USD/oz) ................................. III-158
Table 17-4: Gold Price Forecasts of CME . ......................................... III-159
T a b l e 1 7 - 5 : K e y I n f o r m a t i o n o f A v a i l a b l e R e f i n i n g C o n t r a c t s ......................... III-160
T a b l e 1 8 - 1 : D e t a i l s o f E I A R e p o r t s a n d A p p r o v a l s .................................. III-161
T a b l e 1 8 - 2 : D e t a i l s o f W S C P R e p o r t s a n d A p p r o v a l s ................................ III-161
T a b l e 1 8 - 3 : H i s t o r i c a l O H S R e c o r d s .............................................. III-167
Table 19-1: Summary of Sunk Capex for SJG Open-Pit Mine ( ’0 0 0 R M B ) ............. III-170
Table 19-2: DA Calculation of Sunk Capex for SJG Open-Pit Mine ( ’0 0 0 R M B ) ........ III-171
Table 19-3: Investment Plan for SJG Open-Pit Mine ( ’0 0 0 R M B ) ..................... III-171
Table 19-4: Estimate of Working Capital for SJG Open-Pit Mine ( ’0 0 0 R M B ) .......... III-172
T a b l e 1 9 - 5 : M i n i n g C o s t R e c o r d s f o r S J G O p e n - P i t M i n e ............................ III-172
T a b l e 1 9 - 6 : M i n i n g C o s t F o r e c a s t s f o r S J G O p e n - P i t M i n e ........................... III-174
Table 19-7: Processing and Administration Costs ’ F o r e c a s t s f o r S J G P r o j e c t ............ III-175
T a b l e 1 9 - 8 : T h i r d - p a r t y C h a r g e s f o r S J G O p e n - P i t M i n e ............................. III-175
Table 19-9: LoM Opex Forecasts for SJG Open-Pit Mine ( ’0 0 0 R M B ) ................. III-176
T a b l e 1 9 - 1 0 : L o M O p e x F o r e c a s t s f o r S J G O p e n - P i t M i n e ( R M B / t R o M ) ............... III-176
Table 19-11: LoM Opex Forecasts for SJG Open-Pit Mine ( ’0 0 0 R M B ) ................. III-176
T a b l e 1 9 - 1 2 : L o M O p e x F o r e c a s t s f o r S J G O p e n - P i t M i n e ( R M B / t R o M ) ............... III-177
T a b l e 1 9 - 1 3 : L o M O p e x F o r e c a s t s f o r S J G O p e n - P i t M i n e ( R M B / g g o l d p r o d u c e d ) .......III-177
APPENDIX III SRK REPORT
– III-32 –


--- page 600 ---
Table 19-14: Summary of Sunk Capex for SJG Underground Mine ( ’0 0 0 R M B ) .......... III-178
Table 19-15: DA Calculation of Sunk Capex for SJG Underground Mine ( ’0 0 0 R M B ) .... III-178
Table 19-16: Investment Plan for SJG Underground Mine ( ’0 0 0 R M B ) .................. III-179
Table 19-17: Estimate of Working Capital for SJG Underground Mine ( ’0 0 0 R M B ) ....... III-179
T a b l e 1 9 - 1 8 : M i n i n g C o s t R e c o r d s f o r S J G U n d e r g r o u n d M i n e ........................ III-180
T a b l e 1 9 - 1 9 : M i n i n g C o s t F o r e c a s t s f o r S J G U n d e r g r o u n d M i n e ....................... III-181
Table 19-20: LoM Operating Cost Forecasts for SJG Underground Mine ( ’0 0 0 R M B ) ..... III-182
T a b l e 1 9 - 2 1 : L o M O p e x F o r e c a s t s f o r S J G U n d e r g r o u n d M i n e ( R M B / t R o M ) ............III-182
Table 19-22: LoM Opex Forecasts for SJG Underground Mine ( ’0 0 0 R M B ) ............. III-182
T a b l e 1 9 - 2 3 : L o M O p e x F o r e c a s t s f o r S J G U n d e r g r o u n d M i n e ( R M B / t R o M ) ............III-183
Table 19-24: LoM Opex Forecasts for SJG Underground Mine (RMB/g gold produced) . . . III-183
T a b l e 2 0 - 1 : D i s c o u n t R a t e E s t i m a t e ( W A C C m e t h o d ) ................................ III-185
T a b l e 2 0 - 2 : T a x e s a n d S u r c h a r g e A p p l i e d t o F i n a n c i a l A n a l y s i s ....................... III-185
Table 20-3: Cash Flow Calculation for SJG Open-Pit Mine (million RMB) . . ........... III-186
T a b l e 2 0 - 4 : N P V s a t V a r i o u s D i s c o u n t R a t e s f o r S J G O p e n - P i t M i n e .................. III-186
Table 20-5: Cash Flow Calculation f or SJG Underground Mine (million RMB) ......... III-186
T a b l e 2 0 - 6 : N P V s a t V a r i o u s D i s c o u n t R a t e f o r S J G U n d e r g r o u n d M i n e ............... III-187
T a b l e 2 0 - 7 : S u m m a r y o f O v e r a l l E c o n o m i c A n a l y s i s ................................ III-187
T a b l e 2 3 - 1 : R i s k A s s e s s m e n t f o r S J G P r o j e c t ....................................... III-190
LIST OF FIGURES
F i g u r e 1 - 1 : O w n e r s h i p S t r u c t u r e C h a r t ............................................ I I I - 4 1
F i g u r e 3 - 1 : T y p i c a l R e s i d e n t A p a r t m e n t s .......................................... I I I - 5 5
Figure 4-1: SJG Project Location and Accessibility ................................. I I I - 5 6
F i g u r e 4 - 2 : V i e w o f L a n d s c a p e o f t h e S J G P r o j e c t .................................. I I I - 5 8
Figure 6-1: Regional Geology of Shandong Peninsula ............................... I I I - 6 2
F i g u r e 6 - 2 : S i m p l i f i e d L o c a l G e o l o g y ............................................. I I I - 6 3
F i g u r e 6 - 3 : S o n g j i a g o u M i n e r a l i s e d Z o n e .......................................... I I I - 6 5
F i g u r e 6 - 4 : G e o l o g y o f S J G P r o j e c t ............................................... I I I - 6 6
F i g u r e 6 - 5 : T y p i c a l G o l d M i n e r a l i s a t i o n H o s t R o c k s ................................ I I I - 6 7
Figure 9-1: Drilling and Trenching Completed in SJG Project ........................ I I I - 7 1
F i g u r e 1 0 - 1 : S t o r a g e o f C o a r s e R e j e c t s , P u l p s , a n d D r i l l C o r e s ........................ I I I - 7 6
F i g u r e 1 1 - 1 : P e r f o r m a n c e o f C o a r s e R e j e c t A s s a y s v s . S R K V e r i f i c a t i o n S a m p l e s ........ I I I - 7 9
F i g u r e 1 1 - 2 : P e r f o r m a n c e o f P u l p D u p l i c a t e A s s a y s v s . S R K V e r i f i c a t i o n S a m p l e s ....... I I I - 8 0
Figure 12-1: Topographic 3D Map (Azimuth: 0°, Dip: –9 0 ° ) .......................... I I I - 8 3
Figure 12-2: Original Sample Length Probability Distribution Histogram ................ I I I - 8 4
F i g u r e 1 2 - 3 : V a r i o g r a p h y U s e d f o r G r a d e I n t e r p o l a t i o n ............................... I I I - 9 0
F i g u r e 1 2 - 4 : S o l i d M o d e l o f M i n e r a l i s e d C o n g l o m e r a t e ............................... I I I - 9 2
F i g u r e 1 2 - 5 : S J G U n d e r g r o u n d M i n e S o l i d W i r e f r a m e ................................ I I I - 9 2
F i g u r e 1 2 - 6 : M i n e r a l R e s o u r c e C l a s s i f i c a t i o n ........................................ I I I - 9 4
Figure 13-1: Sensitivity Analysis of Cut-off Grade for SJG Open-Pit Mine . . . ........... III-101
Figure 13-2: Sensitivity Analysis of Cu t-off Grade for SJG Underground Mine .......... III-101
F i g u r e 1 3 - 3 : P i t E c o n o m i c s A n a l y s i s f o r S J G O p e n - P i t M i n e .......................... III-105
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F i g u r e 1 3 - 4 : T o p V i e w o f P i t 2 3 a n d F i n a l P i t f o r S J G O p e n - P i t M i n e .................. III-105
F i g u r e 1 3 - 5 : P r o f i l e o f P i t 2 3 a n d F i n a l P i t f o r S J G O p e n - P i t M i n e .................... III-106
F i g u r e 1 3 - 6 : P l a n V i e w o f P u s h b a c k s .............................................. III-109
F i g u r e 1 3 - 7 : M i n e a b l e S t o p e s L o c a t i o n i n E a c h D o m a i n ( A z i m u t h : 3 1 0 ° , D i p : 0 ° ) .......III-115
Figure 13-8: Stacked Column Plots of Life of Mine Schedule for SJG Underground . . .... III-117
F i g u r e 1 4 - 1 : O p e n P i t i n P r o d u c i n g ................................................ III-122
F i g u r e 1 4 - 2 : M i n i n g C y c l e i n S J G O p e n - P i t M i n e ................................... III-124
F i g u r e 1 4 - 3 : P o r t a l s f o r S J G U n d e r g r o u n d M i n e ..................................... III-127
F i g u r e 1 4 - 4 : L o n g i t u d i n a l P r o f i l e o f D e v e l o p m e n t S y s t e m ............................ III-128
F i g u r e 1 4 - 5 : P a s t e P l a n t .......................................................... III-130
F i g u r e 1 4 - 6 : M a i n F a n a t t h e P o r t a l o f U p c a s t ....................................... III-132
F i g u r e 1 4 - 7 : P u m p i n g S t a t i o n ..................................................... III-132
F i g u r e 1 4 - 8 : C o m p r e s s e d A i r S t a t i o n a n d P o w e r D i s t r i b u t i o n R o o m .................... III-133
F i g u r e 1 4 - 9 : E l e v a t e d W a t e r T a n k ................................................. III-134
F i g u r e 1 4 - 1 0 : U n d e r g r o u n d e x p l o s i v e m a g a z i n e ...................................... III-134
Figure 14-11: Maintenance Facility . ................................................ III-135
Figure 15-1: The Location of Mining and Processing Facilities ........................ III-136
F i g u r e 1 5 - 2 : A e r i a l P h o t o o f t h e P r o c e s s i n g P l a n t .................................... III-136
F i g u r e 1 5 - 3 : R e s p o n s e o f G r i n d i n g F i n e n e s s t o G o l d R e c o v e r y o f F l o a t a t i o n P r o c e s s .....III-141
F i g u r e 1 5 - 4 : C l o s e d C i r c u i t A p p l i e d t o F l o a t a t i o n T e s t ............................... III-142
F i g u r e 1 5 - 5 : S i m p l i f i e d P r o c e s s i n g F l o w s h e e t ....................................... III-143
F i g u r e 1 5 - 6 : P h o t o s o f P r o c e s s i n g E q u i p m e n t ....................................... III-145
F i g u r e 1 5 - 7 : G o l d R e c o v e r y v s . F e e d G r a d e a n d C o n c e n t r a t e G r a d e v s . F e e d G r a d e ......III-146
F i g u r e 1 5 - 8 : T S F P h o t o .......................................................... III-149
F i g u r e 1 6 - 1 : C o n c r e t e P a v e d R o a d C o n n e c t i n g M i n i n g A r e a a n d P r o c e s s i n g P l a n t ........III-153
F i g u r e 1 6 - 2 : S i m p l i f i e d G e n e r a l L a y o u t o f S J G P r o j e c t ............................... III-153
F i g u r e 1 6 - 3 : D a h e d o n g S u b s t a t i o n ................................................. III-154
F i g u r e 1 6 - 4 : S t a n d - b y P o w e r S u p p l y ............................................... III-154
F i g u r e 1 6 - 5 : P u m p S t a t i o n f o r P r o c e s s i n g P r o d u c t i o n ................................. III-155
Figure 16-6: Off-site Office Building .............................................. III-155
F i g u r e 1 7 - 1 : G o l d P r i c e T r e n d s S i n c e J a n u a r y 2 0 1 8 .................................. III-157
F i g u r e 1 7 - 2 : E x c h a n g e R a t e s o f R M B / U S D S i n c e J a n u a r y 2 0 1 8 ....................... III-158
F i g u r e 1 8 - 1 : O n - s i t e W a t e r S p r i n k l i n g .............................................. III-164
F i g u r e 1 8 - 2 : R e v e g e t a t i o n o n t h e O p e n P i t W a l l o f M i n i n g A r e a ....................... III-166
F i g u r e 1 8 - 3 : O n - s i t e O H S B o a r d s .................................................. III-167
F i g u r e 1 8 - 4 : A p a r t m e n t L a y o u t f o r t h e R e l o c a t e d R e s i d e n t s ........................... III-168
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GLOSSARY OF TERMS AND ABBREVIATIONS
Abbreviation Terminology
’ minute of arc
% percent/percentage
/p er
° degree(s) of arc
°C degree(s) Centigrade
3D three-dimensional
AAS Atomic absorption spectroscopy
AER Annual Environmental Report
Ag The chemical symbol for silver
ALS ALS Chemical Assaying Laboratory in Guangzhou, China
ANFO ammonium nitrate/fuel oil
ARD acid rock drainage
As The chemical symbol for arsenic
ASL above sea level
Au The chemical symbol for gold
AusIMM Australasian Institute of Mining and Metallurgy
B.Eng. Bachelor of Engineering
B×H breadth × height
BD bulk density
Canadian NI 43-101 National Instrument 43-101, which is a national instrument for the
(Canadian) Standards of Disclosure for Mineral Projects, including
Companion Policy 43-101 as amended from time to time.
Capex capital cost
CIM Canadian Institute of Mining, Metallurgy and Petroleum
CIM Definition Standards The Definition Standar ds on Mineral Resources and Mineral Reserves
adopted by CIM
cm centimetre(s)
CME Chicago Mercantile Exchange
CMF Consensus Market Forecasts
CMP composite(s)
Co The chemical symbol for cobalt
Conc. Concentrate
CP Competent Person
CPR Competent Person ’sR e p o r t
CRF cemented rock fill
CSA compensations for sulfuric acid
CSV comma-separated values
Cu The chemical symbol for copper
Cut-off grade The grade threshold above which a mineral material is considered
potentially economic and is selectively mined and processed as ore
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Abbreviation Terminology
CuSO 4 copper sulphate
CoV Coefficient of Variation
DA depreciation and amortisation
Dahedong Yantai City Dahedong Processing Co., Ltd.
m/s metre(s) per second
DCF discounted cash flow
DNR of Shandong Department of Natural Resources of Shandong Province
Dr Doctor of Philosophy
ECAP Environmental Corrective Action Plan
EIA The Environmental Impact Assessment
EPMP Environmental Protection and Management Plan
ESHS Environmental, Social, Health and Safety
etc. et cetera (= and so on)
FAusIMM Fellow of the AusIMM
Fe The chemical symbol for iron
FSR feasibility study report
gg r a m ( s )
g/t gram(s) per tonne
GPS global positioning system
GRG gravity recoverable gold
H1 2023 the first half of 2023
H2 2023 the second half of 2023
ha hectare(s)
HQ core core diameter of 63.5 mm
i.e., id Est (= that is)
ID3 inverse distance power of 3
IDW inverse distance squared
IFC International Finance Corporation
Indicated Mineral Resource An Indicated Mineral Resource is that part of a mineral resource for
which tonnage, densities, shape, ph ysical characteristics, grade and
mineral content can be estimated with a reasonable level of confidence. It
is based on exploration, sampling and testing information gathered
through appropriate techniques from locations such as outcrops, trenches,
pits, workings and drill holes. The locations are too widely or
inappropriately spaced to confirm geological and/or grade continuity but
are spaced closely enough for continuity to be assumed
Inferred Mineral Resource An Inferred Mineral Res ource is that part of a mineral resource for which
tonnage, grade and mineral content can be estimated with a low level of
confidence. It is inferred from geological evidence and assumed but not
verified geological and/or grade con tinuity. It is based on information
gathered through appropriate techniques from locations such as outcrops,
trenches, pits, workings, and drill holes which may be limited or of
uncertain quality and reliability
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Abbreviation Terminology
Intertek Intertek Laboratory in Beijing
IP Induced Polarisation, which is an exploration technique whereby an
electrical current is pulsed through the ground and the response from the
sub surface measured in order to identify minerals of interest. Strong IP
responses may be a result of sulphide which may be associated with gold
mineralisation
IPO Initial Public Offering
IRR internal rate of return
Jinyuan Metallurgical Lab. Metallurgical Laboratory of Yantai Jinyuan Mining Machinery Co., Ltd.
JORC Code Australasian Code for Repor ting of Exploration Results, Mineral
Resources and Mineral Reserves, 2012 edition, as published by the Joint
Mineral Reserves Committee.
JORC Committee Joint Mineral Reserves Comm ittee of The Australasian Institute of Mining
and Metallurgy, Australian Institute of Geoscientists and Minerals
Council of Australia
kg kilogram(s), equivalent to 1,000 grams
kg/t kilogram(s) per tonne
km kilometre(s), equivalent to 1,000 metres
km
2 square kilometre(s)
koz 1,000 troy ounces
kt kiloton(s)
ktpa kiloton(s) per annum
kV kilovolt(s)
kW kilowatt(s)
kWh/t kilowatt(s) hour per tonne
L×B×H length × breadth × height
LHD load-haul-dump machine
LoM life of mine
m metre(s)
M Million(s)
m ASL metre(s) above sea level
M.Eng. Master of Engineering
M.Sc. Master of Science
m/kt metre(s) per kiloton
m2 square metre(s)
m3 cubic metre(s)
m3/d cubic metre(s) per day
m3/s cubic metre(s) per second
m3/t cubic metre(s) per tonne
m3/year cubic metre(s) per year
MAusIMM Member of the AusIMM
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Abbreviation Terminology
Measured Mineral Resource A Measured Resource is that part of a mineral resource for which
tonnage, densities, shape, physical ch aracteristics, grade and mineral
content can be estimated with a high level of confidence. It is based on
detailed and reliable exploration, sampling and testing information
gathered through appropriate techniques from locations such as outcrops,
trenches, pits, workings and drill holes
Mineral Reserve The economically mineable part of a measured and/or indicated mineral
resource. It includes diluting mater ials and allowances for losses which
may occur when the material is mined. Appropriate assessments and
studies have been carried out and include consideration of and
modification by realistically assume d mining, metallurgical, economic,
marketing, legal, environmental, an d social and government factors, as
defined in the CIM Definition Standar ds. These assessments demonstrate
at the time of reporting that extraction could reasonably be justified.
Mineral Reserves are sub-divided in order of increasing confidence into
Probable Mineral Reserves and Proven Mineral Reserves
Mineral Resources A concentration or occurrence of material of intrinsic economic interest in
or on the earth’ s crust in such form, quality and quantity that there are
reasonable prospects for eventual economic extraction, as defined in the
CIM Definition Standards. The loc ation, quantity, grade, geological
characteristics and continuity of a mineral resource are known, estimated
or interpreted from specific geological evidence and knowledge
mg/l milligram(s) per litre
mg/m
3 milligram(s) per cubic metre
mm millimetre(s)
Mn The chemical symbol for manganese
Mo The chemical symbol for molybdenum
Moz Million ounce(s)
Mr Mister
Yantai Mujin Yantai Mujin Mining Co., Ltd.
MW Megawatt(s), equivalent to 1,000,000 watts
NCF net cash flow
Ni The chemical symbol for nickel
NI 43-101 Canadian National Instrument 43-101
No. 1 Geological Institute No. 1 Geological Mineral Resource Prospecting Institute of Shandong
Province
No. 3 Geological Institute No. 3 Geological Mineral Resource Prospecting Institute of Shandong
Province
No. 6 Geological Institute No. 6 Geological Mineral Resource Prospecting Institute of Shandong
Province
NPV net present value
NQ core core diameter of 47.6 mm
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Abbreviation Terminology
O.K. Ordinary Kriging
OHS occupational health and safety
Opex operating cost
oz ounce
Pb The chemical symbol for lead
PEA Preliminary Assessment Technical Report on the Songjiagou Project,
Shandong Province, China, which was prepared by Wardrop and dated in
2011
Persistence Resources or
the Company
Persistence Resources Group Ltd
PGE platinum group element
pH potential of hydrogen
Ph.D. Doctor of Philosophy
ppb part(s) per billion
PRC People ’s Republic of China
Probable Mineral Reserve A Probable Mineral Reserve is the economically mineable part of an
Indicated, and in some circumstances Measured Resource. It includes
diluting materials and allowances for losses which may occur when the
material is mined. Appropriate assessments, which may include feasibility
studies, have been carried out, and include consideration of and
modification by realistically assume d mining, metallurgical, economic,
marketing, legal, environmental, social and governmental factors. These
assessments demonstrate at the time o f reporting that extraction could
reasonably be justified
Proven Mineral Reserves A Proven Mineral Reserve is the economically mineable part of a
Measured Resource. It includes dilu ting materials and allowances for
losses which may occur when the material is mined. Appropriate
assessments, which may include feasibility studies, have been carried out,
and include consideration of and modi fication by realistically assumed
mining, metallurgical, economic, marketing, legal, environmental, social
and governmental factors. These a ssessments demonstrate at the time of
reporting that extraction could reasonably be justified.
Provincial Government the People ’s Government of Shandong Province.
QA/QC Quality Assurance/Quality Control
QMS Quality Management System
QPR or CPR Qualified Person ’sR e p o r t
RMB Renminbi, which is the official currency of the People ’s Republic of
China.
RMB/a RMB per annum
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Abbreviation Terminology
RMB/t RMB per tonne
RoM run-of-mine
RTK real-time kinematic
S The chemical symbol for Sulphur
SBX Sodium butyl xanthate
SD standard deviations
SG specific gravity
SGS Tianjin SGS Laboratory in Tianjin, China
Shandong GGPI Shandong Geophysical and Geochemic al Prospecting Institute
SJG Songjiagou, the name of the v illage near the SJG Project.
SJG Open-Pit Mine Songjiagou Open-Pit Mine, which is the open-pit operating mine of the
SJG Project.
SJG Project The SJG Project consists of SJG Open-Pit Mine, SJG Underground Mine,
and related facilities.
SJG Underground Mine Songjiagou North Mine, which is the underground operating mine north
of the SJG Open-Pit Mine.
SRK SRK Consulting China Ltd. trading as SRK Consulting
Stock Exchange The Stock Exchange of Hong Kong Limited
t tonne(s), equivalent to 1,000kg
t/h tonne(s) per hour
t/m3 tonne(s) per cubic metre
TFe Total iron, including magnetic and non-magnetic iron
tpa tonne(s) per annum
tpd tonne(s) per day
tph tonne(s) per hour
TSF tailings storage facility
TSX Toronto Stock Exchange
TSXV TSX Venture Exchange
USD United States Dollar
USGS United States Geological Survey
V The chemical symbol for vanadium
Valmin Code Code for Technical Assessment and Valuation of Mineral and Petroleum
Assets and Securities for Independent Expert Reports
VAT value-added tax
Wardrop Wardrop Engineering Inc.
WRD waste rock dump
WSCP Water and Soil Conservation Plan
Yantai Design Institute Shandong Gold Group Yantai Design and Research Engineering Co., Ltd.
Yantai Zhongjia Yantai Zhongjia Mining Co., Ltd.
Zn The chemical symbol for zinc
μm micron(s), 1/1,000 of a millimetre
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1 INTRODUCTION AND TERMS OF REFERENCE
SRK Consulting China Ltd. ( ‘‘SRK’’) was requested by Persistence Resources Group Ltd
(‘‘Persistence Resources ’’ or ‘‘Company ’’) to prepare a Qualified Person ’s Report (the ‘‘QPR’’ or
‘‘CPR’’) for Songjiagou Gold Project (the ‘‘SJG Project ’’) located in The People ’s Republic of China
(the ‘‘PRC’’or ‘‘China ’’) in compliance with the requirements of Canadian National Instrument 43-101
(the ‘‘NI 43-101 ’’) and the Rules Governing the Listing of Securities on The Stock Exchange of Hong
Kong Limited (the ‘‘Listing Rules ’’).
The ownership structure chart is presented in Figure 1-1.
Persistence Resources Group Ltd
ʮ̡
Figure 1-1: Ownership Structure Chart
1.1 Scope of work
The scope of work includes the construction of a mineral resource model for the gold
mineralisation delineated by drilling on the SJG Pro ject and the preparation of a QPR in compliance
with NI 43-101 and the Stock Exchange listing requirements. This work typically involves the
assessment of the following aspects of the SJG Project:
. Regional, local and mine geology;
. Exploration history, quality and independent data verification;
. Geological modelling, Mineral Resource estimation and validation;
. Mining;
. Processing and mineral recovery;
. Environmental and social;
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. Operating and capital costs; and
. Economic analysis.
1.2 Work program
The Mineral Resource statement reported herein is a collaborative effort between Persistence
Resources and SRK personnel. The exploration datab ase was compiled and maintained by Persistence
Resources and was reviewed by SRK.
The geological model and wireframes for the Songjiagou mineralisation were constructed by SRK
based on the exploration database provided by Persistence Resources. In SRK’ s opinion, the geological
model is a reasonable representation of the distribution of the targeted mineralisation at the current level
of sampling. The geostatistical analysis, variography and grade models were completed by SRK from
June 2018 to September 2018; and were updated in June 2023.
1.3 Basis of Qualified Person ’s report
This QPR is based on information collected by SRK during site visits (see section ‘‘1.7 Site visits ’’
for details) and on additional information provided b y Persistence Resources throughout the course of
SRK’s investigations. Other information was obta ined from the public domain. SRK has no reason to
doubt the reliability of the information provided by Persistence Resources. This QPR is based on the
following sources of information:
. Discussions with Persistence Resources personnel;
. Inspection of the SJG Project area, including outcrops, drill cores, open pit, open pit benches,
underground mine, processing plant, tailings storage facilities and environmental and social
aspects;
. Review of exploration and geological data provided by Persistence Resources;
. Data verification, including re-sampling and re-assaying of duplicates and verification
drilling; and
. Additional information from public domain sources.
1.4 Reporting standard, repor ting compliance and reliance
1.4.1 Reporting standard
This QPR has been prepared in the format of NI 43-101 technical report with some modification to
fit the requirements of Stock Exchange, and the Mineral Resources and Mineral Reserves were estimated
according to Canadian Institute of Mi ning, Metallurgy and Petroleum (the ‘‘CIM ’’) Definition Standards
APPENDIX III SRK REPORT
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for Mineral Resources and Mineral Reserves adopted by the NI 43-101. The CIM Definition Standards
are compatible with the JORC Code which is binding upon all Australasian Institute of Mining and
Metallurgy (the ‘‘AusIMM ’’)m e m b e r s .
1.4.2 Reporting compliance
SRK confirms that this QPR complies with the discl osure and reporting requirements of the Listing
Rules, including:
. Rules 18.02 to 18.04 inclusive, relating to co nditions for listing of Persistence Resources;
. Rules 18.05 to 18.08 inclusive, relating to content of the document for listing of Persistence
Resources;
. Rules 18.18 to 18.27 inclusive, relating to sta tements on Mineral Resources and/or Mineral
Reserves;
. Rules 18.28 to 18.30 inclusive, relating to reporting standard; and
. Guidance Note 7 to the Listing Rules, titled ‘‘Suggested Risk Assessment for Mineral
Companies ’’[Rule 18.05(5)].
SRK understands the requirements set out in the Listing Rules with regard to the qualifications and
experience of the Independent Qualified Person. SRK confirms that the staff employed on the SJG
Project satisfy these requirements of the Listing Rules.
Compliance with the Listing Rules is s h o w ni nA p p e n d i xFt ot h i sQ P R .
1.4.3 Reliance
This QPR is addressed to and may be relied upon by Persistence Resources, the Directors of the
Persistence Resources and Persistence Resources ’ various financial, legal and accounting advisors (the
‘‘Advisers ’’) in support of the proposed listing of Persistence Resources on The Stock Exchange of
Hong Kong Limited (the ‘‘Proposed Listing ’’), specifically in respect of compliance with the
requirements of the Listing Rules. SRK agrees that this QPR may be made available to and relied upon
by the Advisers.
SRK is responsible for this QPR and for all the technical information contained therein. SRK
declares that it has taken all reasonable care to ensure that this QPR and the technical information
contained therein is, to the best of its knowledge, in accordance with the facts and contains no omission
likely to affect its import.
SRK confirms that the presentation of technical in formation contained elsewhere in the prospectus
released by Persistence Resources i n connection with the Proposed Listing which relates to information
in the QPR is accurate, balanced and not inconsistent with the QPR.
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SRK believes that its opinion should be considered as a whole and selecting portions of the
analysis or factors considered by it, without consider ing all factors and analyses together, could create a
misleading view of the process underlying the opinions presented in this QPR. The preparation of a
QPR is a complex process and does not lend itself to partial analysis or summary.
SRK has no obligation or undertaking to advise any person of any development in relation to the
SJG Project which comes to its attention after the date of the QPR or to review, revise or update the
QPR or opinion in respect of any such development occurring after the date of the QPR.
1.5 Effective date
The effective date for this QPR is deemed to be 30 June 2023 (the ‘‘Effective Date ’’). The Mineral
Resource and Mineral Reserve statements set out in this QPR are reported as of 30 June 2023 and
represent the Mineral Resources and Mineral Reserves at the Effective Date as audited by SRK.
The life of mine (the ‘‘LoM’’) plans and associated technical and economic parameters included in
the LoM plans and techno-economic models all commence on 1 July 2023.
The financial results for the Songjiagou Open-Pit Mine (the ‘‘SJG Open-Pit Mine ’’)a n d
Songjiagou Underground Mine (the ‘‘SJG Underground Mine ’’) are taken to be correct on 30 June
2023, the Effective Date of this QPR.
1.5.1 Commodity price
The gold price is 310 RMB/g (or 1,450 USD/oz) for the Mineral Reserves estimate. The price
selected by SRK is derived from forecast of Consensus Market Forecasts (the ‘‘CMF’’) delivered in June
2023 by assuming an exchange rate of 6.69 RMB/USD.
1.5.2 Material change
Based on the information provided by Persistence Resources, there are no events that have
occurred since the Effective Date that are likely to have a material impact on the Mineral Resource and
Mineral Reserve statements for the SJG Open-Pit Mine and SJG Underground Mine at the date of
publication of this QPR.
1.5.3 Legal claims and proceedings
SRK has been advised by Persistence Resources and its legal advisers that there are no legal
claims or proceedings that could influence Yantai Zhongjia ’s rights to explore and/or mine at both SJG
Open-Pit Mine and SJG Underground Mine.
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1.5.4 Sufficiency of rehabilitation funding
SRK notes that Yantai Zhongjia has put efforts on the open pit slope rehabilitations including
plating parthenocissus and other vegetations by allocating annual budgets, upon the request of the local
governments. Persistence Resour ces appointed a consultancy to prepare a rehabilitation plan, and some
staff have been assigned to impl ement this rehabilitation plan.
1.5.5 Claims over land
Persistence Resources has advised SRK that there are no land claims that may exist over the land
on which exploration or mining activity is being c arried out. From a list of outstanding liabilities
provided by Persistence Resources, SRK could not f ind any outstanding claims that could materially
influence Persistence Resources ’ rights or prevent it from continuing with its operations.
1.6 Qualifications of SRK and SRK team
The SRK Consulting comprises over 1,500 professi onals, offering expertise in a wide range of
resource engineering disciplines. The SRK Consulting ’s independence is ensured by the fact that it holds
no equity in any project and that its ownership res ts solely with its staff. This fact permits SRK to
provide its clients with conflict-free and objective recommendations on cruc ial judgment issues. SRK
has a demonstrated track record in undertaking independent assessments of Mineral Resources and
Mineral Reserves, project evaluations and aud its, technical reports and independent feasibility
evaluations to bankable standards on behalf of exploration and mining companies and financial
institutions worldwide. The SRK Consulting has also worked with a large number of major international
mining companies and their projects, providing mining industry consultancy service inputs.
The short biographies of key SRK personnel involved in this QPR are shown below:
. Anshun Xu (Anson Xu), Ph.D. (Geology), FAusIMM, is a Corporate Consultant (Geology)
who specialises in the exploration of min eral deposits. He has more than 25 years ’ experience
in exploration and development of various types of mineral deposits including Cu-Ni
sulphide deposits related to ultra-basic rocks, tungsten and tin deposits, diamond deposits,
and especially deep expertise in various types o f gold deposits, including vein-type, fracture-
breccia zone type, alteration type, and Carlin type. He was responsible for the Mineral
Resource estimations of several diamond deposits, and for reviews of Mineral Resource
estimations of several gold deposits. He recently completed several due diligence jobs for
clients from both China and overseas including technical review projects such as Canadian
NI43-101 reports and Stock Exchange IPO technical reports. Dr Xu was the project manager
of this project and the Qualified Person (the ‘‘QP’’) who takes overall responsibility for this
QPR.
. Pengfei Xiao, M.Sc., MAusIMM, is a Principal Consultant (Geology). He specialises in
mineral exploration applying comprehensive geological and geophysical methods; and his
expertise also includes mineral resource m odelling and estimation. He is familiar with both
theory and practice in sampling, sample preparation, and chemical analysis. As a consulting
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geoscientist, he has been active in over 60 p rojects including due diligence reviews,
exploration design, data verification, and Mineral Resource estimation in China, Mongolia,
Africa, America, and Southeast and Central Asia. His experience relates precious metals (Au,
A g ,a n dP G E ) ,b a s em e t a l s( C u ,N i ,P b ,Z n ) ,a n do t h e rm e t a ld e p o s i t s( F e ,M n ,V ,M o ,C o ) ,
and also includes a few non-metal projects (phosphorite, potash, gypsum). In the past five
years, he has been working in geology and Mineral Resource assessment with SRK and co-
authored a dozen Qualified Person ’s Reports aiding clients in successful property
transactions, more than half of which have been published in stock exchanges. Mr Xiao
assisted Dr Xu in completing the geological m odelling and Mineral Resource estimate.
. Yonggang Wu, M.Eng., MAusIMM, is a Principal Consultant (Mining). He joined SRK after
graduation from Jiangxi University of Science and Technology in 2007. He has acquired
specialised knowledge of mining engineering and MineSight software and has been involved
in a large number of projects to date. Minerals involved include Au, Pb, Zn, Mn, Cu, Fe,
fluorite, potassium salts, alum, phosphorus, and many more. He has accumulated extensive
experience in Mineral Resource and Mineral Res erve estimation, open pit limit optimisation
and design, underground mining design, long -term production planning, and due diligence
studies. Yonggang has expertise in geologi cal and mining modelling and is proficient in
using MineSight, AutoCAD, and other specialised software packages. Yonggang assisted Dr
Xu in completing the mineral reserve modelling and estimate.
. Lanliang Niu, B.Eng., MAusIMM, is a Principal Consultant (Mineral Processing), who
graduated in 1987 from Beijing University of Science and Technology majoring in ore
processing. He has worked on the industrial testing of gold leaching with low grade ores,
managed or participated in processing and metallurgical testing for more than 10 precious
and non-ferrous metals projects. With SRK, he has been responsible for the ore processing
and metallurgical scope of work and involved in many key projects. He was responsible for
the metallurgical and processing review, and economic analysis.
. Yuanhai Li, Ph.D., MAusIMM, is a Principal Consultant (Environmental) with SRK
Consulting China Ltd., who is an environmental scientist with 11 years ’ experience in
environmental management for the hazardous waste treatment industries. This experience has
been gained mainly from within United State s and China. He has particular expertise in
environmental due diligence reviews, phase II/ III site investigations, environmental impact
assessment, wetland and landfill rehabilita tion, and environmental risk assessment. In
addition, he has extensive experience in en vironmental engineering with a thorough
knowledge of dealing with various environmental hazardous waste/solid waste issues,
including contaminated site assessment, landfill closures/brownfield redevelopment, and
contaminated site remedial designs. He also has a deep understanding of water/wastewater
treatment design, water distribution systems, storm water management systems, geographic
information systems (the ‘‘GIS’’), and geotechnical issues through various projects.
Furthermore, he is also experienced in AutoCAD/MicroStation, ArcGIS, and GMS. Dr Li
was responsible for the review of environmental issues.
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. Nan Xue, MSc, MAusIMM, is a Principal Consultant (Environmental) at SRK China. He
holds a master ’s degree in Environmental Science fro m Nankai University, in Tianjin. He has
more than ten years ’ experience in environmental impact assessment, environmental planning,
environmental management, and environmen tal due diligence. He has been involved in a
number of large EIA projects and pollution source surveys for SINOPEC as well as in the
environmental-planning project funded by UNDP. He has particular expertise in construction
project engineering analysis, pollution source c alculation, and impact predictions. He also has
an acute understanding of equator principles and International Finance Corporation
environmental and social performance standards. After joining SRK, Nan has been involved
in a number of IPO and due diligence projects in China, Laos, Russia, Mongolia, Philippines,
and Indonesia; these projects include the Fuguiniao Mining project, Zijin Mining project,
Hanking Mining project, and Future Bright Mining project. Mr Xue updated the review and
report on the environmental and permit issues.
. Yiefei Jia, PhD, FAusIMM (CP), is a Principal Consultant (geology) with a specialty of
exploration of mineral deposits. He has more than 25 years ’ experience in the field of
exploration, development, and Mineral Resour ces estimate of precious metal (gold, silver and
PGE), base metal (lead, zinc, copper, nickel, vanadium and titanium), and black metals (iron
and manganese) as well as non-metallic metal (fluorite and graphite) and decorative stone
(marble) ore deposits in different geological settings in Australia, Africa, Asia, and North and
Central America. He has extensive experience in project management, exploration design and
Mineral Resource assessment. He, as Competent Person, has led and coordinated many due
diligence projects with technical reports either for fund raising or overseas stock listing such
as on Stock Exchange. Dr Jia provided internal peer review to ensure the quality the report
meets the required standard.
. Alexander Thin, Beng (Hons), Gdip Engineering, FAusIMM (CP), FIMMM (C.Eng),
FSAIMM, RPEQ, is a Principal Consultant (Mining and Evaluation) with SRK Australasia.
He is an experienced mining professional, with over 30 years ’ experience growing businesses
across Africa and Australasia (Australia, Papua New Guinea, Solomon Island and Fiji), from
start-ups to corporates and multinationals — listed and unlisted. His strategy and leadership
experience spans feasibility studies, minera l asset audits and evaluations, independent
technical reports, techno-economic studies, capital raising, merger and acquisitions, managing
joint ventures, research and development, local and international stock exchange compliance,
business development, company promotion, and investor/stakeholder relations. His industry
experience spans operational (underground and open pit), technical, consulting and corporate
within the metalliferous resources sector, cove ring precious metals, base metals and bulk
commodities. Alexander provided external peer revi ew to ensure the quality the report meets
the required standard.
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1.7 Site visits
The site visit histories are shown below:
. Mr Anshun Xu and Pengfei Xiao visited the SJG Project site between 30 and 31 October
2012, accompanied by personnel of Persistence Resources. The visit covered open pit,
exploration site, processing plant, core storage and laboratory. The second site visit, between
23 and 30 November 2012, covered the technical reviewing of mining, processing, licensing/
permitting, and environmental and social aspects.
. Mr Pengfei Xiao visited the SJG Project site between 29 and 31 January 2013. He compared
the historical core samples and coarse/duplicate samples and collected verification samples
from coarse rejects and pulp duplicates independently.
. Mr Anshun Xu, Lanliang Niu, Yuanhai Li and Yonggang Wu visited the SJG Project site
between 6 and 8 June 2018, accompanied by personnel of Persistence Resources. The visit
covered open pit, processing plant, and underground mine;
. Mr Anshun Xu, Lanliang Niu and Nan Xue conducted site visits from 14 to 16 November
2019.
. Mr Yonggang Wu conducted site visits from 10 to 12 October 2020.
. Mr Yuntao Liu, on behalf of Mr Lanliang Niu and Yonggang Wu conducted site visits from 7
to 8 November 2021.
. Mr Anshun Xu and Yonggang Wu conducted site visits from 24 to 26 July 2023,
accompanied by personnel of Persistence Resources. The visit covered open pit, underground
mine, processing plant, an d tailing storage facilities.
The purpose of site visits was to review the digitalisation of the exploration database and
validation procedures, review the exploration procedures used to acquire the data, define the geological
modelling procedures, examine the drill cores, interv iew SJG Project personnel, and collect all relevant
information for the preparation of a revised miner al resource model and the compilation of the QPR.
During these visits, particular attention was paid to the treatment and validation of historical drilling
data.
The site visits also investigated the geological an d structural controls on the distribution of the
gold mineralisation to aid the construction of three-dimensional (the ‘‘3D’’) gold mineralisation domains.
SRK was given full access to relevant data and conducted interviews with Persistence Resources
personnel to obtain information on the past exploration work, to understand the procedures used to
collect, record, store, and analyse historical and current exploration data.
1.8 Acknowledgement
SRK would like to acknowledge the support and collaboration provided by Persistence Resources
personnel for this assignment. Their collaboration w as greatly appreciated and instrumental to the
success of SJG Project.
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1.9 Limitations, reliance on information, declaration, consent and cautionary statements
1.9.1 Limitations
Mineral Reserve estimates are based on many factors, including data with respect to drilling and
sampling. Mineral Reserves are derived from estimates of future technical factors, which include data
with respect to operating and capital costs and product prices. The Mineral Reserve estimates contained
in this QPR should not be interpreted as assurances of economic life of the SJG Project. As Mineral
Reserves are only estimates based on the factors and assumptions described herein, future Mineral
Reserve estimates may need to be revised. For example, if production costs increase or product prices
decrease, a portion of the current Mineral Resources, from which the Mineral Reserves are derived, may
become uneconomical to recover and would therefore result in lower estimated Mineral Reserves.
Furthermore, should any of the assumed factors change adversely, the values and parameters for the SJG
Open-Pit Mine and SJG Underground Mine as reported herein may need to be revised and may result in
lower estimates.
This QPR contains statements of a forward-looking nature. These forward-looking statements are
estimates and involve a number of risks and uncertainties that may cause the actual results to differ
materially from those anticipated in this QPR. The a chievability of the projections, LoM plans, budgets
and forecast parameters as included in this QPR is neither warranted nor guaranteed by SRK. The
projections as presented and discussed herein have been proposed by Persistence Resources management
and have been adjusted where appropriate by SRK.
The projections cannot be assured as they are based on economic assumptions, many of which are
beyond the control of Persistence Resources and Yantai Zhongjia. Future cash flows and profits derived
from such forecasts are inherently uncertain and actual results ma y be significantly more or less
favourable.
This QPR includes technical information, which requires subsequent calculations to derive
subtotals, totals and weighted averages. Such calculations may involve a degree of rounding and
consequently introduce an error. Where such errors occur, SRK does not consider them to be material.
Unless otherwise expressly stated, all the opinions and conclusions set out in this QPR are those of
SRK.
1.9.2 Reliance on information
SRK’s opinion, contained herein and effective 30 June 2023, is based on information collected by
SRK throughout the course of SRK ’s investigations, which in turn reflect various technical and
economic conditions at the time of writing. Given the nature of the mining business, these conditions
can change significantly over relatively short per iods of time. Consequently, actual results may be
significantly more or less favourable.
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SRK has reviewed the information provided by Persistence Resources and is satisfied that the
extents of the properties described in the various rights are consistent w ith the maps and diagrams
received from Persistence Resources.
This QPR may include technical information that requires subsequent calculations to derive sub-
totals, totals, and weighted averages. Such calcul ations inherently involve a degree of rounding and
consequently introduce a margin of error. Where these occur, SRK does not consider them to be
material.
1.9.3 Declaration
SRK is not an insider, associate, or an affiliate of Persistence Resources, and neither SRK nor any
affiliate has acted as advisor to Pe rsistence Resources, its subsidiaries or its affiliates in connection with
SJG Project. The results of the technical review by SRK are not dependent on any prior agreements
concerning the conclusions to be reached, nor are there any undisclosed understandings concerning any
future business dealings.
Consequently, SRK, the Competent Person (the ‘‘CP’’) consider themselves to be independent of
Persistence Resources, their respective directors, senior management and Persistence Resources ’
Advisers.
In this QPR, SRK provides assurances to the Board of Directors of Persistence Resources, in
compliance with the requirements of the reporting standards, that the Mineral Resources and Mineral
Reserves as provided to SRK by Persistence Resources and reviewed and where appropriate modified by
SRK, are reasonable given the information currently available.
1.9.4 Consent
SRK consents to the issuing of this QPR in the form and content in which it is to be included in
documentation distributed to shar eholders of Persistence Resources.
Neither the whole nor any part of this QPR nor any reference thereto may be included in any other
document without the prior written consent of the CP as to the form and context in which it appears.
1.9.5 Cautionary statements
The reader and any potential or existing shareholder or investor in Persistence Resources is
cautioned that Yantai Zhongjia is involved in mining the SJG Open-Pit Mine and SJG Underground
Mine and there is no guarantee that any unmodified part of the Mineral Resources will ever be
converted into Mineral Reserves nor ultimately extracted at a profit.
1.10 Indemnities provided by Persistence Resources
SRK provides technical services, including preparation of the report based on the agreements
between SRK and the client, and only charges the client with the amount of fees both parties agreed on,
without any other fees or charges.
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2 RELIANCE ON OTHER EXPERTS
SRK trusts the information from Persistence Resources regarding mine ownership, legal and
financial liability. SRK did not carry out indepe ndent validation of the information regarding land
ownership and use rights summarised in ‘‘3 Licences and Permits’’ of this QPR. SRK did not verify the
legality of any underlying agreement(s) that may exist concerning the permits or other agreement(s)
between third parties but have relied on Persistence Resources. SRK was informed by Persistence
Resources that there are no known litigations potentially affecting the SJG Project.
Persistence Resources provided the digital database used for geological modelling. SRK verified
this database and removed repeated samples. It is SRK ’s opinion that the database used for Mineral
Resource estimation has been validated and was collected and built in a professional manner.
The topography used in estimating the Minera l Resource statement in this QPR relies on the
topographic survey map dated June 2023 provided by Persistence Resources. SRK trusts the results of
this survey.
SRK also relied on the geological reports approved by related governmental authorities which were
compiled by various Chinese geological brigades.
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3 LICENCES AND PERMITS
SRK relies on the information provided by Yanta i Zhongjia and SRK understands that a legal due
diligence review of SJG Project has b een undertaken by Yantai Zhongjia ’s legal advisors. The following
sections summarise matters related to operational licences and permits.
3.1 Business licence
Details of the business licences for the SJG Project are presented in Table 3-1.
Table 3-1: Songjiagou Business Licence
Item Description
Project Yantai Zhongjia
Business licence number 91370600717854556W
Issued to Yantai Zhongjia
Issued by Yantai Industry and Commerce Bureau
Issue date 24 December 2015
Expiry date 16 March 2035
Licenced business activities Gold and precious metals mine mining, processing, smelting, and
sale
3.2 Mining licences
The current two mining licences (Appendix A) owned by Yantai Zhongjia were issued by the
Department of Natural Resources of Shandong Province ( ‘‘DNR of Shandong ’’). The information
pertaining to these two mining licences are shown in Table 3-2 and Table 3-3 respectively. SRK notes
that both the SJG Open-Pit Mine and SJG Underground Mine are operational.
Table 3-2: Mining Licence for SJG Open-Pit Mine
Item Description
Mine name Songjiagou Open-Pit Mine
Mining licence number C3700002009044110010983
Issued to Yantai Zhongjia
Issued by DNR of Shandong
Issue date 17 May 2020
Expiry date 17 May 2031
Mining method Open pit/Underground Mining
Production capacity 900,000 tonnes per annum ( ‘‘tpa’’)
Area 0.5937 square kilometres ( ‘‘km
2’’)
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Table 3-3: Mining Licence for SJG Underground Mine
Item Description
Mine name Songjiagou North Mine
Mining licence number C3700002016024210141314
Issued to Yantai Zhongjia
Issued by DNR of Shandong
Issue date 18 February 2021
Expiry date 18 February 2031
Mining method Underground Mining
Production capacity 90,000 tpa
Area 0.4140 km 2
Persistence Resources advised SRK that the comprehensive uses of waste materials to recover gold
mineral resources are allowed and encouraged by government in actual production. SRK understands
that the Mineral Resources estimated and reported in the report by SRK according to NI 43-101/CIM
Definition Standards are not the same as the miner al resources estimated and reported by Chinese
geological teams according to Chinese standard. It is SRK’ s opinion that the production plan proposed
in the report by SRK was based on the Mineral Resources estimated according to the NI 43-101/CIM
Definition Standards, which may include th e waste materials in Chinese standard.
3.3 Safety operational permits
Details for the existing safety operational permits of the SJG Project are presented in Table 3-4,
Table 3-5 and Table 3-6 respectively.
Table 3-4: Safety Operational Prod uction Permit for SJG Open-Pit Mine
Item Description
Project SJG Open-Pit Mine
Safety production
permit number
(Lu) FM [2023] 06-0002
Issued to Yantai Zhongjia
Issued by Department of Emergency Management of Shandong Province
Licenced activity Open Pit Operation
Issue date 19 July 2023
Expiry date 1 March 2026
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Table 3-5: Safety Operational Produc tion Permit for SJG Underground Mine
Item Description
Project SJG Underground Mine
Safety production
permit number
(Lu) FM [2022] 00-0042
Issued to Yantai Zhongjia
Issued by Department of Emergency Management of Shandong Province
Licenced activity Underground Operation
Issue date 12 September 2022
Expiry date 11 September 2025
Table 3-6: Safety Operational Permit for Tailings Storage Facility
Item Description
Project Tailings Storage Facility
Safety production
permit number
(Lu) FM [2023] 00-0117
Issued to Yantai Zhongjia
Issued by Department of Emergency Management of Shandong Province
Licenced activity Tailings Storage Facility Operation
Issue date 8 December 2023
Expiry date 7 December 2026
3.4 Other operational permits
SRK sighted a relocation agreement between Ya ntai Zhongjia and the residents in Songjiagou
Village and Fayunkuang Village in a site visit in 2018. The relocation was completed in 2019. All
apartment units were equipped with air conditions, solar panel hot water tank, communication system,
water, electricity, etc. Figure 3-1 shows the typical r esident apartments for the local residents. However,
no land use permit within the mining and proce ssing area is sighted as part of this review.
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SRK sighted a water use permit for Yantai Zhongjia, and details of this permit are presented in
Table 3-7.
Figure 3-1: Typical Resident Apartments
T a b l e3 - 7 :W a t e rU s eP e r m i t
Item Description
Project Yantai Zhongjia
Water use permit number D370612S2021-0063
Issued to Yantai Zhongjia
Issued by Yantai Muping District Water Bureau
Issue date 16 May 2022
Expiry date 15 May 2024
Water source Surface water
Water use allocation 464,900 cubic meters per year ( ‘‘m
3/year ’’)
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4 REGIONAL DESCRIPTION
4.1 Location and accessibility
The geographical coordinates of the SJG Project site are centred at approximately 121°22´ East
longitude and 37°07´ North latitude.
The SJG Project is located approximately 50 km south of Yantai City, which was previously
known to the West as ‘‘Chefoo’’, an important coastal city in China ’s well developed eastern Shandong
Peninsula. The SJG Project is easily accessible by means of road, railway, sea and air (Figure 4-1).

Figure 4-1: SJG Project Lo cation and Accessibility
Provincial Highway S304 is approximately 8 k m north of the mine, and National Expressway
G309 passes 11 km south of the mine. The western and eastern areas of the SJG Project are connected
to Provincial Roads S208 and S207, respectively. Roads in the region are generally paved with asphalt
and maintained well.
The nearest railway station is at Yazi Town, about 10 km southwest of the SJG Project. The
railway joins the Laiyang-Yantai rail line and provides a link to China’ s national railway network.
The Yellow Sea surrounds the Shandong Peninsula to the northeast, east, and south, and the SJG
Project is approximately 50 km far away from the shoreline.
Yantai Penglai International Airport, located approximately 93 km directly northwest of the SJG
Project, hosts daily flights to and from many Chinese cities including Beijing, Shanghai, and Jinan, the
capital city of Shandong Province, as well as weekly flights to Japan, South Korea, Hong Kong, and
Taiwan. It takes approximately one hour to drive from the airport to the mine site.
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4.2 Climate
T h em i n ea r e ah a saw a r ma n ds e m i - h u m i dm o n s o o nclimate with displays marine characteristics.
Generally, there are no drastic seasonal changes. The year round average annual relative humidity is 68
percent ( ‘‘%’’); recorded statistics shows the yearly precipitation is around 650 millimetres ( ‘‘mm’’).
The annual average temperature is about 12 degrees Centigrade ( ‘‘°C’’), with about 210 frost-free
days per year. The highest temperature reaches 30°C and the lowest drops to 5°C below zero (minus 5°
C, or –5°C). Generally, there is no extreme cold or hot weather to hinder the mining and processing
operations.
The prevailing winds are southerly and predomin antly occur in spring and summer; and secondary
prevailing winds come from the north and mainly occur in winter.
4.3 Local resources and infrastructure
The mine area is densely populated by Han Chine se, with minorities of Hui and Manchu. Muping
District has a population of approximately 500,000 people. Local provision of mining labour is
sufficient for the operation of the SJG Project.
Industry and agriculture are well developed in the area, including wheat, corn, and sweet potato;
economic crops include peanuts, apples, peaches, pears, ginkgo, and chestnuts. Yantai is famous
throughout China for a particular variety of apple and is home to the country’ s largest and oldest grape
winery. Manufacturing, fishing, international trade, and tourism are important industries in the Yantai
region and are instrumental in supporting and creating the local infrastructure.
Mining equipment and accessories are available in Yantai City, as are workshops for mechanical
maintenance. Materials such as cement, steel, wood, and chemical agent are generally purchasable in
Yantai City.
Daily necessities are supplied to the SJG Project . Office and accommodatio n buildings are built
near the current open pit. Telecomm unication and internet services are a vailable in the SJG Project area.
A post office, hospital facilities, an d schools are available locally.
4.4 Physiography
The geomorphology of the SJG Project area is originally characterised by gently undulating hills,
and overall topography slopes downward from west to east. The highest elevation is 140 meters above
sea level ( ‘‘mA S L’’) and the lowest is 78 m ASL, with a relative relief of 62 m in the SJG Project area.
A view of the SJG Project area is presented in Figure 4-2.
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The mainly local water system is the Rushan River to the east of the mine, a seasonal river flowing
south through Longjiaoshan Reservoir into the Y ellow Sea. The local water supply is adequate to
support the mine ’s production.
Figure 4-2: View of Landscape of the SJG Project
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5H I S T O R Y
5.1 Ownership history
The mining licence for the SJG Open-Pit Mine was initially issued by the Shandong Department of
Land and Resources in 2006, based on the Geological General Exploration Report of Songjiagou Gold
Prospect in Muping District, Yantai City, Shandong Province , submitted in December 2002 by No. 3
Geological Mineral Resource Prospec ting Institute of Shandong Province (the ‘‘No. 3 Geological
Institute ’’). Mine construction commenced in December 2002. The mining licen ce holder at the time
was Yantai Mujin Mining Co., Ltd. (the ‘‘Yantai Mujin ’’). On 2 August 2010, ownership of the mining
licence was transferred to Yantai Zhongjia, the current owner of the SJG Project.
The mining licence for the SJG Underground Mine was initially issued by the Shandong
Department of Land and Resources on 18 February 2016.
5.2 Exploration history
The area has been explored by various Chinese geological teams since the 1960s. In 1969 the No.
6 Geological Mineral Resource Prospec ting Institute of Shandong Province (the ‘‘No. 6 Geological
Institute ’’) carried out preliminary regional gold investigation and found gold occurrences in the SJG
Project area.
Between 1982 and 1989 the Shand ong Geophysical and Geochemical Prospecting Institute (the
‘‘Shandong GGPI ’’) conducted a gravity survey at a scale of 1:200,000 and a stream sedimentary
survey at a scale of 1:50,000.
Between 1983 and 1986, the No. 3 Geological Institute undertook regional gold metallogenetic
research.
Between 1984 and 1993, the No. 3 Geological Institute and the No. 1 Geological Mineral Resource
Prospecting Institute of Shandong Province (the ‘‘No. 1 Geological Institute’’ ) carried out regional
geological mapping on a scale of 1:50,000.
In 1991 the No. 3 Geological Institute conducted preliminary mineral prospecting in the
Songjiagou area. Several gold mineralised bodies were defined by a few trenches and drill holes.
In 1997 and 1998, prospecting work continued with geological mapping, surveying, trenching,
tunnelling and drilling, and the exploratio n results were reported in a report titled Geological
Prospecting Report of Songjiagou Gold Prospect in Muping District, Yantai City, Shandong Province by
No. 3 Geological Institute in February 1998. The geol ogical report was approved by the Yantai Bureau
of Land and Resources in 2001.
In 1998 the No. 3 Geological Institute conduct ed prospecting in the Fayunkuang area and
estimated a total mineral resource of former Chinese Categories D and E (similar to Inferred Mineral
Resource) of approximately 1,800 kt with an average grade of 6.8 g/t gold ( ‘‘Au’’). The exploration
results were summarised in a report titled Fayunkuang Gold Prospect in Mup ing District, Yantai City,
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Shandong Province, submitted in October 2012. The ‘‘Fayunkuang’’ area covered by that report is
within the current SJG Project area. The main worklo a dc o m p l e t e di n1 9 9 8i n c l u d e dd e t a i l e dg e o l o g i c a l
mapping at scales of 1:2,000 and 1:1,000, and a total of 12 drill holes with an aggregate length of
5,036 m.
During 1999 and 2003, the No. 3 Geological Institute was commissioned by Yantai Mujin to
conduct general exploration in the SJG Project area. Yantai Mujin completed 20 shallow drill holes, and
carried out 1,600 m of induced polarization (the ‘‘IP’’) geophysical profiling which resulted in the
identification of nine anomalies. The completed expl oration during the period also included geological
mapping, magnetic surveying, trenching, 14 drill holes with a total depth of 1,640 m, and 2,860 m long
of underground workings.
Between October 2003 and December 2011, exploration was conducted by Yantai Zhongjia itself
within the mine area. The main works include the topographic survey at a scale of 1:2,000 covering 1
km2, 30 drill holes with a total length of 8947.59 m, 472.32 cubic meters (‘‘ m3’’) trenches, density
testing of 106 samples and logging of hydrogeology and engineering geology for 13 drill holes.
During 2012 and April 2013, the No. 3 Geologica l Institute was commissioned by Yantai Zhongjia
to conduct detailed exploration campaign. The main works include 1:10,000 geological revision
covering 12 km 2, 1:10,000 hydrogeological revision covering 12 km 2, 1:2,000 topographic survey
covering 1.30 km 2, 1:2,000 hydrogeological revision covering 3.76 km 2, 1,204.08 m 3 trenches, 20 drill
holes with a total length of 7,093.42 meters ( ‘‘m’’), basic analysing of 7,853 samples, 75 samples for
geotechnics test, 7 samples for complete water quality analysis, 8 samples for rock-mineral
determination, 8 samples for quan titative spectrographic analysis, 137 samples for density and humidity
test, 89 composites, 991 basic internal duplicates, 7 compositing internal duplicates, and 320 external
duplicates.
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6 GEOLOGICAL SETTING AND MINERALISATION
6.1 Regional geology
The SJG Project is located in China ’s Shandong Peninsula, along the southeastern margin of the
North China craton and on the western margin of the Pacific Plate. The Shandong Peninsula, also called
the Jiaodong Peninsula, is known as a gold enriched district. It is bounded to the west by the northeast-
trending Tan-Lu Major Fault Zone, which extends more than 3,000 km from the Russian Far East to the
Yangtze River in south China. To the south, the Shandong Peninsula extends into the Yangtze craton.
The regional tectonics is characterised by two ma jor orogenesis, the Indosinian collision between
the North China and Yangtze cratons, with the nearl y east-west directional suture defined as the
Qinling-Dabie-Sulu metamorphic belt from Triassic period; and the Yanshanian subduction of the
Pacific plate beneath Eurasia during the Middle Jurassic epoch.
The Shandong Peninsula is broadly divisible into two pre-Jurassic components: the Jiaobei Terrane
of North China strata in the north, and the Sulu (the ‘‘Jiaonan ’’) Terrane of Yangtze strata in the south.
The two terranes are separated by the northeast trend ing Wulian-Qingdao-Rongcheng ductile shear belt
and the Jiaolai depression (the ‘‘Laiyang Basin ’’), comprising Jurassic and Cretaceous-age sedimentary
rocks. The SJG Project is located in the eastern part of the Jiaobei Terrane.
The Jiaobei Terrane is largely represented by granitoid intrusions and Archaean greenstone, and is
also comprised of Proterozoic and Mesozoic rock sequences and Quaternary alluvium. The Sulu Terrane
is characterised by the presence of high-pressure metamorphic minerals and is interpreted to be the
eastern extension of the Qinling-Dabie orogenic belt.
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Figure 6-1: Regional Geology of Shandong Peninsula
The granitoid rocks of the peninsula are dominated by Mesozoic-age intrusions as well as by
Precambrian granitoids, but economic m ineralisation is exclusively asso ciated with Mesozoic intrusive
bodies.
The eastern Shandong (the ‘‘Jiaodong ’’) gold district is divided from west to east into the
Zhaoyuan-Laizhou, Penglai-Qixia, and Muping-Rushan gold belts (Figure 6-1). The SJG Project is
located within the Muping-Rushan gold belt situat ed in the eastern part of the Jiaobei Terrane. Gold
mineralisation is characterised as either vein-f illing or as disseminated structures/stockwork.
6.2 Property geology
The SJG Project is situated in the eastern part of the Jiaobei Terrane and on the northeast margin
of the Jiaolai Basin and is regarded as part of the M uping-Rushan gold belt. A simplified map of local
geology is shown in Figure 6-2.
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Figure 6-2: Simplified Local Geology
Note: modified from No. 3 Geological Institute 2011.
Local strata include metamorphic rocks of the Paleoproterozoic Jingshan Group, sedimentary rocks
of the Mesozoic Cretaceous Laiyang Group, and Cenozoic Quaternary system. The Laiyang Group
dominates the SJG Project area. A ductile shear zo ne and ductile brittle fault zone are major geological
structures in the area. Major magmatic activity is re presented by monzonite granite. Other dykes include
diabase, diorite, hornblende porphyrite, and lamprophyre.
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Paleoproterozoic metamorphic rocks of the Jingshan Group are mainly distributed to the north of
the SJG Project area near Tanjia village, and are comprised of biotite granulite, graphite-bearing gneiss,
leucogranite, and marble. These strata generally dip southeast with angles varying from 15° to 50°.
Cretaceous-age rocks are predominately represented by the Linsishan Formation, part of the
Laiyang Group and comprised of conglomerate and sandstone. The Linsishan Formation in the SJG
Project area has an overall northeast strike and dips southeast with an angle of 20° to 40°. The
formation is divisible into two con formably contacted sections according to the clast size. The first
section of Linsishan Formation consists of relatively l arger clasts with grain sizes of about 3 centimetres
(‘‘cm’’) –20 cm and is predominately composed of monzonitic granite and quartz; marble, gneiss, schist
and granulite are occasionally visible in this secti on. The second section is characterised by finer
grained and rounded clasts made of sandstone and siltstone.
The gold mineralisation is mainly hosted within th e conglomerate in first section of the Laiyang
Group Linsishan Formation.
Quaternary sediments in the property area are classified as Linyi Formation, represented by alluvial
deposits distributed to the lower terrain near Tanjia, Fayunkuang, an d Songjiagou villages.
Local structure features two major fault zones, the north-easterly striking Yazi Fault Zone and the
north-westerly orientated Tanjia Fault Zone. The two major fault zones mark the margin of the SJG
Project ’s mineralisation and lie at or near the contact be tween metamorphic Proterozoic rocks and the
overlying Laiyang Group conglomerate.
Alteration minerals associated with the fault zone in clude sericite, silica, pyrite, carbonate, chlorite,
and potassium feldspar, which present in a large halo around the fault zone and its contained
mineralisation.
Dykes are developed in the property area and represent intrusive activities during the Proterozoic
and Mesozoic periods; they are composed of diabase, diorite, granite, and lamprophyre.
6.3 Mineralised zones
The SJG Project ’s gold mineralised zones are concentrated within an area of approximately 1.0
km
2 which is covered by the aggregate areas of Yantai Zhongjia ’s currently valid mining licences
(Figure 6-3). The defined mineralised zones are bounded within the Laiyang Group Linsishan Formation
conglomerate without distinct boundaries, and a number of gold enriched bodies present as gold veins
occurring within the lithological zone characterised by Linsishan Fo rmation conglomerate (Figure 6-4).
Historical exploration before 2005 had been primarily focusing on mineralisation with gold grade
greater than 1 g/t Au. Although the previous underground workings suggest that most mineralisation was
confined to relatively narrow zones, there was also evidence, by way of room-and-pillar stopes, that in
some areas mineralisation extended laterally away fr om the controlling structures for 10 m or more. The
underground sampling carried out by Persistence Resources substantially confirmed that the highest
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grades of gold mineralisation are confined to relatively narrow although vertically and horizontally
persistent zones. Away from those higher-grade corridors, gold grades dropped to 0.5 g/t Au or less,
with rare, interspersed higher values.


Figure 6-3: Songjiagou Mineralised Zone
The open pit mining operation begun in 2005 and indicates that the zones of Linsishan Formation
conglomerate are generally mineralised. There is also evidence that lamprophyre dykes intruded into the
Cretaceous conglomerate and interrupted the gold enriched bodies (see Figure 6-4).
Gold mineralisation is associated with sulphides that include electrum, pyrite, chalcopyrite, galena,
sphalerite, and bornite. Gold is most abundantly a ssociated with electrum and pyrite. The secondary
metallic minerals include sphalerite, galena, chalcopyrite, magnetite, and limonite. The associated
gangue minerals are represented by feldspar, quartz, muscovite, calcite, and clay minerals.
Sulphur ( ‘‘S’’) grades vary from 1.1% to 7.8% according to tests done on 13 samples by No. 3
Geological Institute, with an average grade of 3.7%. Silver ( ‘‘Ag’’) grades have been analysed within a
range of 0.5 g/t and 8.5 g/t Ag. The harmful element arsenic ( ‘‘As’’) was found to occur with grades
ranging from 0.0040% to 0.0302% As. The average grade of arsenic is about 0.0012% As. As the
content of arsenic is far lower than the required standard of 0.5% in the content of the gold product as
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stipulated in the sales contract, SRK does not consid er this could materially affect the saleability of the
gold produced at the mines. Furthermore, in view of the graded of arsenic, SRK do not consider that it
would be likely to adversely impact the environment.
Figure 6-4: Geology of SJG Project
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Based on observation as well as on the phase analysis results, the types of gold mineralised zones
present at the SJG Project include oxidised, mixed, and primary sulphide (Figure 6-5); primary sulphide
or accounts for the largest proportion. The minera lised rocks present in grained, in-filling, clastic, or
brecciated textures.
Partly oxidised mineralised co nglomerate Primary host rock
Figure 6-5: Typical Gold Mineralisation Host Rocks
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7 DEPOSIT TYPES
Gold mineralisation of the SJG Project is hosted within the pyritic-sericitic conglomerate of the
Linsishan Formation from Laiyang Group of Cretaceous-age. Gold enrichment occurs as veins, as well
as in disseminated and stockwork distributions. The SJG vein-type mineralisation could be appropriately
described as mesothermal genesis. The disseminated and stockwork types of mineralisation have some
aspects of epithermal mineralisation but are both spa tially and genetically associated with the vein-type;
as such it can be considered a variant of that type.
The SJG Project ’s conglomerate type gold deposit is believed to be associated with mesothermal
filling activities and followed by alterations and metasomatism.
Wall rocks are generally consistent with the host rocks, comprised of conglomerate and occasional
lamprophyre. Wall rocks and intern al waste contain small quantities of gold, usually less than 0.10 g/t
Au. The boundaries between wall rock, internal waste, and the host rocks are not visually obvious, and
must be determined by chemical analysis.
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8 EXPLORATION
8.1 Geological mapping
Geological mapping has been successively conducted by previous explorers as described in section
‘‘5.2 Exploration history ’’of this QPR. The geological report pre pared by No. 3 Geological Institute in
January 2011 provided geological maps at scales of 1:10,000 and 1:2,000. Other than cross section
information, no updated surface geological mapping has been conducted since 2011.
8.2 Survey
Topographic and engineering surveys have been conducted mainly by No. 3 Geological Institute,
and Yantai Mujin carried out previous underground surveys. Local control points were set up and
utilised in these surveys. Handhel d global positioning system (the ‘‘GPS’’) and real-time kinematic (the
‘‘RTK’’) instruments were used.
Topography for the SJG Project area, locations of all borehole and trench collars, and surface
samples were surveyed and mapped at scales of 1:2,000 and 1:1,000.
Yantai Zhongjia used its own professionally equipped survey team to meet the requirements for
frequent surveys during the normal production cycle of open pit mining, such as blasting, stripping, and
grade-control sampling. The mining area ’s topography is surveyed and updated regularly for mine
planning purposes.
SRK notes that the previous survey was conducted and reported using different coordinate system;
Yantai Zhongjia has reconciled all the survey results and converted all coordinates to China Xi ’an 1980
system.
SRK’s Mineral Resource estimation as stated in t his QPR used the topography map dated on 31
July 2018, and then was updated with the latest open pit map or mining voids, which was provided to
SRK by Yantai Zhongjia.
8.3 Other
Regional geochemical and geophysical investigations have been conducted by various geological
brigades and institutes during the reconnaissance stage. SRK has not been provided with such data for
review as it is not material to this QPR.
Inventory density determination was based on tes ts using a total of 81 samples collected from the
deposit over various periods: 7 samples were taken in 1998, 35 samples were taken in 2002, 32 samples
in 2007, and 7 samples in 2010.
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9 DRILLING, TRENCHING AND UNDERGROUND WORKINGS
9.1 Trenching
The surface trenching used in the earlier stages rev ealed good indications of mineralisation, which
encouraged systematic drilling to follow up. A total of 75 trenches with an aggregate length of 5,883 m
were excavated by Yantai Zhongjia between 1999 and 2007, from which 5,378 samples were collected.
Gold content of these samples ranged from zero to 46.2 g/t Au, with about 5% of the assay values
exceeding 1.0 g/t Au.
Trenches were dug by back-hoe and were cleaned prior to sampling. The trenches were completed
by third-parties and were sampled by Yantai Zhongjia personnel. Trench sections were trapezoidal, with
upper widths of 1.2 m and bottom widths greater than 0.8 m.
The distribution of assay values suggests that the mineralised fractures that are being exploited
underground extend to the surface. This finding is reinforced by the fact that surface mining is taking
place in the area of the trenches.
Most of the trenches have been backfilled or levelled by recent mining activities.
9.2 Underground channelling
A total of 91 underground channels have been completed on the +9 m, –40 m, –80 m, and –120 m
levels in the SJG Project prior to 2012, from which 3,309 channel samples were collected. Data from
these underground channel samples were compiled by Yantai Zhongjia. The underground engineering
was undertaken by Yantai Huazhong Mine Engineering Company Limited, as reported by No. 3
Geological Institute. The underg round tunnels were excavated with section size of 2.2 m high by 2.2 m
wide.
In 2018, a total of 15 underground channels were sampled in the SJG Underground Mine, on the
+ 4 9m ,+ 9ma n d –40 m levels, and a total of 257 underground channel chips were dispatched to SGS
Laboratory in Tianjin, China (the ‘‘SGS Tianjin ’’) for sample preparation and chemical assay. SRK has
supervised the sampling program.
The underground channelling suggests that the g old mineralisation of the SJG Project has a
considerable extension from surface down to at least –120 m ASL. There were both surface and
underground drill holes having intercepted gold mineralisation at deeper zones below this level, which
confirmed the discovery and interpretations from underground channels.
9.3 Drilling
A total of 145 diamond drill holes have been completed since 1997, including 17 underground drill
holes with a total length of 1,435 m and 128 surface drill holes with an aggregate length of 37,053 m.
Prior to Yantai Zhongjia, there were 32 drill hol es completed by No. 3 Geological Institute.
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Drilling was conducted by No. 3 Geological Inst itute. A total of 1,152 samples were collected
from the underground drilling and 26,654 samples were collected from the surface drilling.
Drilling was performed using mostly HQ and a fe w NQ sized drill rods. More than half of the
holes were drilled with dips of –60° or –45° to the northwest, and a few were drilled vertically (dip
angle –90°).
Core recoveries generally averaged above 95% and recoveries of mineralised intervals were about
97%. The statistics and calcul ations were performed by No. 3 Geological Institute.
9.4 Drilling and trenching pattern and density
The database for Mineral Resource estimation used in this QPR consists of 128 diamond holes for
a total of 37,053 m drilled on the surface since 1997, a nd 106 underground workings totalling 12,262 m,
in addition to 17 underground drill holes with a tot al length of 1,435 m, as well as 75 surface trenches
with an aggregate length of 5,883 m.
The actual workload completed in SJG Project might exceed these amounts. Quite a few of drill
holes and trenches and/or channel data was not incorporated due to missing of verifiable collar or
sample records. Prospecting pits and other workings had previously been conducted in the SJG Project
area but are not included in the database provided. Layout of the drilling and trenching used in the
Mineral Resource estimation in this QPR is shown in Figure 9-1.
Figure 9-1: Drilling and Trenching Completed in SJG Project
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The exploration generally followed a sectional layout, designed with a number of exploration lines
oriented northwest-southeast. The designed exploration lines cross-cut the gold enriched mineralised
veins with overall north-easterly strikes. The exploration lines were spaced about 60 m apart and drill
holes on a 60 m × 80 m grid supplemented by surface trenching spaced about 30 m to 60 m apart. The
vertical extension of the gold mineralisation was verified by underground cross-cuts spaced about 30 m
apart on the +9 m, –40 m, –80 m, and –120 m levels.
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10 SAMPLE PREPARATION, ANALYSES, AND SECURITY
10.1 Sample preparation and analyses
Multiple batches of samples were prepared and ass ayed for the SJG Project. The samples used for
Mineral Resource estimate were derived from exploration conducted since 1997.
Sampling was completed by No. 3 Geological Institu te and Persistence Resources staff under the
supervision of a CP from Persistence Resources. Samples were logged and prepared to rock chips on site
and then shipped to the SGS Tianjin.
All samples for routine chemical assays collected between 2005 and 2007 were further prepared by
SGS Tianjin following a standard rock preparation p rocedure of drying, weighi ng, crushing, splitting,
and pulverization. The pulverised pulps were about 74 microns ( ‘‘μm’’, Tyler 200 mesh).
Samples were analysed by SGS Tianjin using screen fire assays, where 1 kg quantities of pulp
were subjected to screening for metallic content prior to analysis. The screen fire assay is typically used
for nugget gold samples that contain coarse gold particles.
10.1.1 Drill core samples
Drill cores were logged by No. 3 Geological Institute and Persistence Resources staff; core
samples were obtained by cutting the core lengthwis e into two halves. One half of each core was placed
in sample bags that were then shipped by commercia l courier to the SGS Tianjin. The basic length of
drill core samples was 1 m. The half-core that was not sampled was placed back in the core box, and all
cores were stored for archival purposes in Yantai Zhongjia ’s storage facilities.
10.1.2 Trench samples
Trench samples were collected using the cha nnel method with a sectional size 10 cm × 5 cm and
basic sample length of 1 m. The trench sampling was conducted by No. 3 Geological Institute and
Persistence Resources staff.
10.1.3 Underground channel samples
Underground channel sampling was conducted by Yantai Zhongjia. The samples were taken from
cross-cuts, as well as from drifts along the veins. Sample length varied from 0.5 m to 2.4 m with an
average length of 1 m. The channel section size was 10 cm × 3 cm.
10.1.4 Specific gravity samples
Specific gravity (the ‘‘SG’’) samples were collected and analysed by No. 3 Geological Institute.
Density, humidity and gold grade were determined. Tests of 81 SG samples returned an average SG
value of 2.7.
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10.1.5 Other information
The routine chemical assay samples collected in 2008 were prepared and analysed by No. 3
Geological Institute. The sample pr eparation was similar to the process for samples taken between 2005
and 2007. No. 3 Geological Institute used fire assays to determine the gold grade. SRK has been advised
by Yantai Zhongjia that since no CP was responsible for the sampling and sample preparation process in
2008, these samples were not reviewed for a QPR under NI 43-101.
10.2 Quality assurance and quality control programs
Prior to 2007, the previous exploration has been summarised in a report prepared in compliance
with China exploration standard by No. 3 Geological In stitute, in which an internal laboratory check and
an external check with pulp duplicates are obligatory. The previous technical report and Mineral
Resource estimation were prepared by Wardrop Engineering Inc. (the ‘‘Wardrop ’’) in accordance with
NI 43-101, and as reported by Yantai Zhongjia, there was a qualified person responsible for the
exploration, and the quality assurance and quality control (the ‘‘QA/QC ’’) programs were assessed.
As reported by Wardrop in 2011, the 2007 drillin g and trenching programs used blanks and
standard reference materials as the basis of the QA/QC program. The following paragraphs are extracted
from the Preliminary Assessment Technical Report on the Songjiagou Project, Shandong Province,
China (the ‘‘PEA’’) prepared by Wardrop and dated in 2011:
. Assay data was reviewed for 174 blanks (3.5% of the total sample population) that were
analysed in conjunction with samples from the drilling and trenching programs. All analyses
of blanks were below the detection (<5 parts per billion ( ‘‘ppb’’) gold) threshold, indicating
that there is no evidence of cross-sample contamination during the sample preparation
process.
. The same set of four standards were used for bo th the drilling and trenching programs: CDN-
GS15A with an expected mean value of 14.83 g/t Au and 2 standard deviations (the ‘‘SD’’)
of 0.61 g/t Au; CDN-GS1P5B with an expected mean of 1.46 g/t Au and 2 SD of 0.12 g/t;
CDN-GSP1 with an expected mean of 0.12 g/t Au and 2 SD of 0.02 g/t; and CDN-GSP5B
with an expected mean of 0.44 g/t Au and 2 SD of 0.04 g/t. All standards were prepared by
CDN Resource Laboratories of Delta, British Columbia, Canada.
. Assay data is available for 133 standard samples as summarised in Table 10-1.
. The high failure rate for analyses of standard CDN-GS15A is noteworthy: 58% for the drill
program and 78% for the trench program. Failures include both over and under-estimations.
These results suggest that high assay values may be inaccurate, either positively or
negatively, and such a high failure rate coul d potentially compromise the quality of the
dataset, except for the fact that only 18 of the nearly 5,000 assays exceed 10 g/t, so the
potential impact is consid ered to be negligible.
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Table 10-1: Standard Analyses in 2007 as Summarised by Wardrop
Standard Drilling Program Trenching
Used (Count) Over Under Fail (%) Used (Count) Over Under Fail (%)
C D N - G S 1 5 A 2 495 5 8 916 7 8
CDN-GS1P5B 22 5 1 27 11 2 — 18
CDN-GSP1 24 1 — 41 3 ———
CDN-GSP5B 18 ——— 12 1 — 8
T o t a l 8 8 1 56 2 4 4 546 2 2
The accuracy of analyses for the remaining standards is considerably better and improves markedly
at the lower analytical levels. This suggests that most assay values obtained from the 2007 exploration
programs are accurate.
As advised, action was taken by Persistence Resources with respect to the out-of-bound values.
Wardrop considers that the assays are suitable for use in the Mineral Resource estimation that is the
subject of this QPR. Wardrop believes sample preparation, analyses and security are ‘‘acceptable ’’.
SRK notes that SGS Tianjin has its own protocols for quality control applying standards, blanks
and duplicates as well.
SGS Tianjin returned the sample pulps and coarse rejects to Yantai Zhongjia. The sample rejects
and pulps are stored together with drill cores in a security facility near Yantai Zhongjia ’s office building
(see Figure 10-1).
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SRK has performed QA/QC check after 2011 (see ‘‘11 Data Verification’’ ) and is of opinion the
previous database is integrated and su itable for Mineral Resource estimation.
pulp and coarse reject containers remained drill cores
Figure 10-1: Storage of Coarse Rejects, Pulps, and Drill Cores
10.3 SRK comments
SRK considers that the sampling, sample preparation, security, and analytical procedures
performed between 2005 and 2007 for the SJG Project are consistent with generally accepted industry
practices and are therefore adequate.
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11 DATA VERIFICATION
11.1 Verifications by Persistence Resources and Wardrop
The exploration data used for Mineral Resource estimation in this QPR was compiled by
Persistence Resources; a majority of it was previou s l yu s e db yW a r d r o pi np r e p a r a t i o no ft h eP E Ar e p o r t
issued in 2011. Wardrop stated in 2011 that they have digitally verified both drill assays (73%) and
trench assays (18%) as received from Persistence Resources against assay reports issued by SGS Tianjin.
No errors or discrepancies were found in either dataset.
11.2 Verifications by SRK
SRK has reviewed the geologica l report prepared by No. 3 Geolo gical Institute as issued in 2011
and compared it with the compiled database; furthermore, the assay result datasheet from SGS Tianjin
was partly inspected by SRK.
SRK had a site visit to the SJG Project to inspect the field geology. The presence of an operating
mine was taken as sufficient proof of th e existence of gold mineralisation.
During SRK ’s visit, a random group of field samples was collected from the current open pit plus
three additional samples, one each from the feed processing plant feed ore, concentrate, and tailings.
The samples randomly collected by SRK were prepared and analysed by the Intertek Laboratory in
Beijing (the ‘‘Intertek ’’). The assay results for these random check samples are provided in Table 11-1.
Table 11-1: Random Check Samples Collected by SRK
Sample Number Gold Grade (g/t)
SJ01 0.121
SJ02 0.262
SJ03 0.374
SJ04 0.206
SJ05 6.340
SJ06 0.394
SJ07 0.881
SJ08 2.330
SJ09 0.323
SJ10 2.270
SJ11 0.936
A — feed 0.328
B — concentrate 29.600
X — tailings 0.043
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The random check results verified that the gold min eralisation is distributed broadly within the
Linsishan Formation conglomerate with gold grades varying from about 0.1 g/t Au up to several grams
per tonne.
A total of 102 coarse rejects (1 mm sized) and 48 pulp duplicates (75 μm sized) were selected by
SRK for an independent verification purpose. The samples were collected from Yantai Zhongjia ’sc o r e
storage located near SJG Project; each sample was approximately about 200 grams ( ‘‘g’’) in weight. The
coarse rejects with about 1 mm grain size were further pulverised to 75 μm in the ALS Chemical
Assaying Laboratory in Guangzhou, China (the ‘‘ALS’’). All of the verification samples were analysed
by ALS. The applied method was aqua regia digestion followed by fire assay.
The verification sample results were compared with their counterparts amongst the original assays.
A detailed log of the verification samples is provided in Appendix D. The performances of coarse reject
and pulp duplicate assays are illustrated in F igure 11-1 and Figure 11-2, respectively.
In general, there are notable discrepancies between coarse rejects and the original assays. About
half of the comparable results show re lative deviations within a range from –20% to 20%, while the rest
(about 50%) show relatively large deviations. These discrepancies may be generated by the nugget
effect, uneven splitting and reduction during sample preparation, and/ or different chemical analysis
approaches, as well as improper sample handling. SRK has analysed the sample results with grades
above 0.3 g/t Au (the cut-off grade at SJG Open-Pit Mine) and is of opinion that the overall comparison
provides a confidence in the original assays. The sample preparation in SGS Tianjin has been further
revisited and monitored by Persistence Resources and it was concluded that the processes were
compliant with QA/QC protocols. SRK is of opinion that due to the existence of nugget effect, the
coarse rejects are not comparable to the pulps used for sample analyses.
Comparatively, the pulp duplicate assays returned acceptable results considering a cut-off grade of
0.3 g/t Au. The comparison between pulp duplicates and original assays were matched well and the
deviation is general with a range of +/ – 10% with few discrepancies.
The SJG Open-Pit Mine has been put into operatio n since 2011 at a relatively low cut-off grade
and the daily ore feeds in the processi ng plant have corroborated that.
APPENDIX III SRK REPORT
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--- page 646 ---

Figure 11-1: Performance of Coarse Reject Assays vs. SRK Verification Samples
APPENDIX III SRK REPORT
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--- page 647 ---
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
4.00
4.50
0.00 0.50 1.00 1.50 2.00 2.50 3.00 3.50 4.00 4.50
Veriﬁca/g415on Au g/t
Original Au g/t
samples linear trend line y=x 20% devia/g415on -20% devia/g415on
Figure 11-2: Performance of Pulp Duplicate Assays vs. SRK Verification Samples
11.3 Sample assays in 2018
To test and verify the grades of the SJG Underground Mine, SRK has supervised a sampling
program of the underground channels. A total of 257 samples from three underground levels, namely 85
samples from the +49 level, 112 from the +9 level and 60 from the –40 level, were taken continuously
along the cross-cuts walls. Samples were taken at the panel of an approximate size at 1 m × 1 m.
The underground samples, between 4 and 5 kg each, were despatched to SGS Tianjin for
preparation and analyses. A screening fire assa y method was applied, with atomic absorption
spectroscopy finish. SRK has reviewed the assays of these underground samples and is of opinion that
the results coincide with the underground deve lopment of cross-cuts of the mineralised bodies.
Therefore, this sample information was accepted in t he integration of the drill hole database. A copy of
the detailed sample assays returned from SGS Tian jin is maintained by SRK and could be available
upon request.
APPENDIX III SRK REPORT
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--- page 648 ---
12 MINERAL RESOURCE ESTIMATION
12.1 Introduction
The Mineral Resource estimate presented herein represents the Mineral Resource evaluation
prepared for the SJG Project in accordan ce with the CIM Definition Standards.
The Mineral Resource estimation work was completed by Mr Pengfei Xiao (MAusIMM) under the
supervision of Dr Anshun Xu (FAusIMM), both employees of SRK, an appropriate ‘‘independent
Qualified Person ’’as this term is defined in NI 43-101. The effective date of the Mineral Resource
statement is 30 June 2023.
This section describes the Mineral Resource es timation methodology and summarizes the key
assumptions made by SRK. In SRK ’s opinion, the Mineral Resource evaluation reported herein is a
reasonable representation of the global gold mineral resources found in the SJG Project at the current
level of sampling. The Mineral Resources have been estimated in conformity with generally accepted
CIM Definition Standards and are reported in accorda nce with the Stock Exchange listing requirements.
Mineral Resources are not Mineral Reserves and do not have demonstrated economic viability. There is
no certainty that all or any part of the Mineral Resource will be converted into Mineral Reserves.
The mineral resource model prepared by SRK makes use of an integrated drill hole database
compiled in 2018. SRK converted the database provided by Persistence Resources into comma-separated
values (the ‘‘CSV’’) format, validated the database, and removed repeated samples. No exploration data
is available in the years after 2018.
The database used to estimate the SJG Project Mineral Resources was reviewed by SRK. SRK
believes the current drilling information is sufficiently reliable to interpret with confidence the
boundaries for hydrothermal filling metasomatic altered conglomerate mineralisation and that the assay
data are sufficiently reliable to support Mineral Resource estimation.
Surpac (Version 6.8), a software package used f or geological modelling and mine planning, was
used to construct the Mineral Resource estimation.
The Mineral Resource estimate included Mineral Resources for both SJG Open-Pit Mine and SJG
Underground Mine.
12.2 Estimation procedures
The Mineral Resource evaluation methodology involved the following procedures:
. Database compilation and verification;
. Data preparation (compositing and capping) for geostatistical analysis and variography;
. Construction of the block model and grade interpolation;
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--- page 649 ---
. Mineral Resource classification and validation; and
. Preparation of the Mineral Resource statement.
12.3 Database
SRK converted the database provided by Persistence Resources into CSV format and conducted
validation and removal of repeated samples. The dat abase used for the Mineral Resource estimation
consists of 326 geological engineering works including 145 drill holes (128 surface drill holes and 17
underground drill holes), 75 trenches, and 106 underground engineering (include tunnels prior to 2012
and in 2018). Appendix B provides detailed information for all geological engineering works.
As shown in Table 12-1, the database contains 36,748 gold samples in total, including 27,805 from
drill holes, 5,377 from trenches, and 3,566 from underground engineering. The maximum gold grade is
263.09 g/t. The average gold grade is 0.37 g/t prior to grade capping.
Table 12-1: Characteristic Va lue Summary of Original Sample
All Data
Au g/t
Uncapped
Au g/t
Capped Length Drill Hole Data
Au g/t
Uncapped
Au g/t
Capped Length
Sample numbers 36,748 36,748 36,748 Sample numbers 27,805 27,805 27,805
Minimum 0.00 0.00 0.02 Minimum 0.00 0.00 0.06
Maximum 263.09 11.00 8.00 Maximum 263.09 11.00 8.00
Mean 0.37 0.28 1.03 Mean 0.25 0.20 1.02
Median 0.03 0.03 1.00 Median 0.03 0.03 1.00
SD
[1] 3.42 0.96 0.17 SD [1] 2.57 0.76 0.16
Variance 11.68 0.92 0.03 Variance 6.62 0.57 0.02
CoV[2] 9.17 3.46 0.16 CoV [2] 10.14 3.74 0.15
Skewness 44.76 8.13 5.21 Skewness 66.84 10.23 7.25
Kurtosis 2,710.73 75.88 130.34 Kurtosis 6,009.70 122.71 213.16
Trench Data
Au g/t
Uncapped
Au g/t
Capped Length Underground Data
Au g/t
Uncapped
Au g/t
Capped Length
Sample numbers 5,377 5,377 5,377 Sample numbers 3,566 3,566 3,566
Minimum 0.00 0.00 0.30 Minimum 0.00 0.00 0.02
Maximum 46.21 11.00 1.80 Maximum 237.80 11.00 4.40
Mean 0.26 0.24 1.01 Mean 1.46 0.91 1.13
Median 0.04 0.04 1.00 Median 0.05 0.05 1.00
SD[1] 1.15 0.71 0.07 SD [1] 8.09 1.95 0.28
Variance 1.33 0.51 0.01 Variance 65.43 3.78 0.08
CoV[2] 4.37 2.92 0.07 CoV [2] 5.53 2.15 0.25
Skewness 22.61 9.77 2.65 Skewness 17.56 3.73 0.63
Kurtosis 709.31 118.17 45.22 Kurtosis 399.90 14.43 7.56
Notes:
1. Standard deviation
2. Coefficient of variation
APPENDIX III SRK REPORT
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
Figure 12-1: Topographic 3D Map (Azimuth: 0°, Dip: –90°)
The drill holes ’ distribution is shown in Figure 12-1, overlaid on the topographic 3D model
converted from the file provided by Persistence Resources. The topographic map uses the Xi ’an 1980
geodetic system on a scale of 1:1,000 and contour intervals of 1 m.
In November 2014, Yantai Zhongjia conducted a topographical survey. The survey data was used
for the topographical model. In addition, monthly survey for the open pit has been updated to 30 June
2023.
APPENDIX III SRK REPORT
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12.4 Compositing
SRK composited the sample prior to grade interpol ation; as the statistics of the original samples
indicated that 75% of samples were 1 m long (shown in Figure 12-2), SRK chose 1 m as the length for
compositing.

Figure 12-2: Original Sample Length Probability Distribution Histogram
12.5 Outlier value assessment
Previously, a cap (top cut/grade capping) value at 40 g/t Au had been used for grade capping in
SJG Project according to the analysis on board sample data. The grade control data in recent years
suggested that for the average grade in the SJG Open-Pit Mine was far below 40 g/t Au. SRK has used
99.7% of the grade range of all samples; the lowe r limit of outliers = (the average value for all raw
samples) + 3 × (the standard deviation for all raw samples). Thus, a cap value at 11 g/t Au has been
applied for replace all the higher values of 1 m composites.
SRK is of the opinion that the analysis and processing methods are reasonable and acceptable,
which capped and replaced 148 samples with gold grade values above 11 g/t Au (Table 12-2).
APPENDIX III SRK REPORT
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Results of the statistical analysis of 1 m composites are shown in Table 12-3.
Table 12-2: Grade Capping Details
Sample Number From
(m)
To
(m)
Length
(m)
Original
Grade
(g/t Au)
Capped
Grade
(g/t Au)
1-CM0-3B 239.14 239.99 0.85 11.120 11
1-CM0-3B 314.61 315.61 1.00 49.070 11
1-CM0-3B 372.15 373.15 1.00 18.150 11
1-CM6S-3B 10.43 11.43 1.00 33.370 11
1-CM6S-3B 160.83 161.83 1.00 33.370 11
1-CM7S-3B 54.96 55.96 1.00 19.140 11
1-CM9-3B 78.90 79.06 0.16 18.290 11
1-CM9-3B 199.87 200.87 1.00 37.370 11
1-YM1N-3B 239.21 240.21 1.00 17.990 11
1-YM1N-3B 262.20 263.20 1.00 17.990 11
1-YM1N-3B 443.81 444.81 1.00 23.530 11
1-YM2N 194.30 195.41 1.11 21.424 11
1-YM2N-3B 9.81 10.81 1.00 73.620 11
1-YM3N-3B 80.03 81.03 1.00 11.650 11
2-CM0-3B 226.14 227.14 1.00 18.620 11
2-CM0-3B 228.19 229.19 1.00 20.930 11
2-CM11-1-3B 4.45 5.45 1.00 11.200 11
2-CM3-3-3B 22.81 23.81 1.00 31.750 11
2-CM4-1-3B 3.62 4.62 1.00 47.840 11
2-CM4-1-3B 4.77 5.77 1.00 63.440 11
2-CM4-1-3B 12.12 13.12 1.00 17.740 11
2-CM5-2-3B 10.04 10.26 0.22 23.840 11
2-YM1-3B 15.79 16.49 0.70 16.820 11
2-YM1-3B 137.50 138.50 1.00 20.280 11
2-YM1-3B 175.34 176.34 1.00 12.250 11
2-YM1-3B 178.35 179.35 1.00 33.590 11
2-YM1-3B 179.35 180.01 0.66 140.190 11
2-YM1-3B 191.71 192.71 1.00 20.740 11
2-YM1-3B 196.04 197.04 1.00 11.540 11
2-YM1-3B 281.22 282.22 1.00 207.750 11
2-YM1-3B 325.63 326.63 1.00 56.620 11
2-YM1-3B 355.09 356.09 1.00 12.090 11
2-YM2-3B 311.23 312.23 1.00 20.770 11
2-YM3-3B 11.04 12.04 1.00 14.410 11
2-YM3-3B 83.51 84.51 1.00 61.090 11
2-YM3-3B 113.73 114.73 1.00 15.200 11
APPENDIX III SRK REPORT
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--- page 653 ---
Sample Number From
(m)
To
(m)
Length
(m)
Original
Grade
(g/t Au)
Capped
Grade
(g/t Au)
3-CM0-3B 161.05 162.05 1.00 23.730 11
3-CM1N-3B 15.22 16.22 1.00 16.540 11
3-CM1S-3B 19.04 19.99 0.95 47.580 11
3-CM4S-3B 58.51 59.51 1.00 15.440 11
3-YM2N-3B 8.07 9.07 1.00 14.600 11
3-YM2N-3B 15.77 16.77 1.00 30.530 11
3-YM2N-3B 20.02 21.02 1.00 89.790 11
3-YM2N-3B 23.66 24.66 1.00 51.830 11
3-YM2N-3B 326.56 327.56 1.00 13.680 11
3-YM2N-3B 333.98 334.98 1.00 18.240 11
3-YM2NN-3B 7.93 8.93 1.00 32.190 11
3-YM2NN-3B 20.33 21.33 1.00 139.890 11
3-YM2NN-3B 23.92 24.92 1.00 18.600 11
3-YM2NN-3B 145.16 146.16 1.00 15.490 11
3-YM2NN-3B 321.71 322.71 1.00 25.690 11
3-YM2NN-3B 377.39 378.39 1.00 24.280 11
3-YM2S-3B 29.72 30.72 1.00 35.620 11
3-YM2S-3B 97.95 98.95 1.00 21.820 11
3-YM2SN-3B 33.72 34.72 1.00 49.300 11
3-YM2SN-3B 207.05 208.05 1.00 29.320 11
4-CM0-3B 124.58 125.37 0.79 14.800 11
4-CM1-3B 17.82 18.69 0.87 47.580 11
4-CM3S-3B 15.31 16.26 0.95 16.270 11
4-YM2N-3B 10.92 11.92 1.00 117.680 11
4-YM2N-3B 147.08 148.08 1.00 16.680 11
4-YM2NN-3B 10.77 11.77 1.00 78.030 11
4-YM2NN-3B 147.02 148.02 1.00 16.370 11
4-YM2NN-3B 165.06 166.06 1.00 41.650 11
4-YM2S-3B 16.19 17.19 1.00 11.930 11
624-ZK52 30.00 30.35 0.35 37.320 11
624-ZK90 137.33 138.53 1.20 14.750 11
CK16-1 24.00 25.00 1.00 17.000 11
CK16-1 107.00 108.00 1.00 15.900 11
CK16-1 128.00 129.00 1.00 16.900 11
CK16-1 129.00 130.00 1.00 14.000 11
CK24-1 81.20 82.20 1.00 35.800 11
CK28-1 104.00 105.00 1.00 23.600 11
CK4-2 20.00 21.00 1.00 18.100 11
KDZK11 72.44 73.44 1.00 24.020 11
APPENDIX III SRK REPORT
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--- page 654 ---
Sample Number From
(m)
To
(m)
Length
(m)
Original
Grade
(g/t Au)
Capped
Grade
(g/t Au)
KDZK3 11.60 12.60 1.00 15.440 11
L3A 161.00 162.50 1.50 237.800 11
L4A 139.50 141.00 1.50 98.050 11
L4A 144.00 145.50 1.50 15.460 11
SJ05-03 108.00 109.00 1.00 55.340 11
SJ05-04 136.00 137.00 1.00 12.040 11
SJ05-05 67.00 67.50 0.50 47.380 11
SJ05-08 152.00 153.00 1.00 53.120 11
SJ05-11 470.40 470.60 0.20 263.090 11
SJ05-12 49.00 50.00 1.00 41.480 11
SJ05-12 51.00 52.00 1.00 15.110 11
SJ05-14 408.00 409.00 1.00 13.040 11
SJ05-14 416.00 417.00 1.00 26.850 11
SJ05-16 148.00 149.00 1.00 16.350 11
SJ05-21 270.00 271.00 1.00 30.160 11
SJ05-21 273.00 274.00 1.00 26.720 11
SJ05-24 3.00 4.00 1.00 66.230 11
SJ05-25 281.00 282.00 1.00 17.720 11
SJ06-27 241.20 242.20 1.00 11.100 11
SJ06-27 426.20 427.20 1.00 28.700 11
SJ06-27 428.20 429.20 1.00 29.300 11
SJ06-28 233.20 234.20 1.00 11.698 11
SJ06-29 401.20 401.60 0.40 18.170 11
SJ06-30 160.70 161.80 1.10 14.720 11
SJ06-30 202.60 203.60 1.00 13.710 11
SJ06-30 301.60 302.40 0.80 18.300 11
SJ06-30 310.40 311.40 1.00 16.090 11
SJ06-31 119.40 120.40 1.00 13.016 11
SJ06-32 271.00 272.00 1.00 21.002 11
SJ06-32 275.00 276.00 1.00 11.667 11
SJ06-32 295.00 296.00 1.00 30.237 11
SJ06-35 352.00 353.00 1.00 41.509 11
SZK0-2 38.60 39.52 0.92 19.100 11
SZK16-5 122.75 123.75 1.00 15.660 11
SZK24-2 29.00 30.00 1.00 19.730 11
SZK64-1 47.80 48.80 1.00 41.190 11
SZK72-1 74.07 75.07 1.00 17.500 11
SZK72-4 57.76 58.76 1.00 22.730 11
SZK72-4 113.96 114.96 1.00 27.570 11
APPENDIX III SRK REPORT
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--- page 655 ---
Sample Number From
(m)
To
(m)
Length
(m)
Original
Grade
(g/t Au)
Capped
Grade
(g/t Au)
SZK8-2 87.99 89.01 1.02 12.300 11
SZK8-2 89.01 90.01 1.00 14.300 11
SZK8-2 127.43 128.43 1.00 18.400 11
SZK8-3 93.13 94.13 1.00 12.700 11
SZK96-2 164.20 165.20 1.00 18.300 11
TC4-1 16.00 17.00 1.00 11.300 11
TC48-3 87.60 88.60 1.00 12.200 11
TC48-3 88.60 89.60 1.00 46.210 11
UL206-C 16.00 17.29 1.29 12.700 11
UL206-C 50.47 51.86 1.39 15.800 11
UL206-E 13.94 14.62 0.68 14.800 11
ZK1 22.00 23.10 1.10 41.660 11
ZK1 107.20 108.20 1.00 65.560 11
ZK1 262.40 263.50 1.10 21.120 11
ZK13 144.72 145.72 1.00 24.700 11
ZK13 205.09 206.09 1.00 14.860 11
ZK13 209.40 210.40 1.00 221.990 11
ZK151 17.64 18.14 0.50 15.030 11
ZK16 382.40 383.40 1.00 27.970 11
ZK17 326.28 327.28 1.00 12.050 11
ZK17 341.31 342.31 1.00 14.310 11
ZK19 224.52 225.52 1.00 42.370 11
ZK19 226.53 227.53 1.00 46.430 11
ZK19 227.53 228.53 1.00 13.290 11
ZK19 232.56 233.56 1.00 13.450 11
ZK19 233.56 234.56 1.00 16.240 11
ZK19 234.56 235.86 1.30 11.800 11
ZK19 240.19 240.99 0.80 70.440 11
ZK19 242.79 243.79 1.00 15.580 11
ZK2 232.10 233.60 1.50 35.990 11
ZK52 24.71 25.69 0.98 31.200 11
ZK52 192.63 193.03 0.40 64.600 11
ZK6 233.90 235.50 1.60 11.500 11
ZK9 191.30 192.30 1.00 14.110 11
APPENDIX III SRK REPORT
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--- page 656 ---
Table 12-3: Statistical Analysis Result of Composites
Item before Capping after Capping Length
(g/t Au) (g/t Au)
Sample counts 36,491 36,491 36,491
Minimum 0.010 .010 .10
Maximum 237.80 11.00 1.00
Mean 0.42 0.32 0.99
First quartile 0.03 0.03 1.00
Median 0.07 0.07 1.00
Third quartile 0.18 0.18 1.00
SD[1] 3.23 0.97 0.15
Variance 10.43 0.93 0.02
CoV[2] 7.78 3.19 0.16
Skewness 34.46 7.53 –4.01
Kurtosis 1,731.14 66.61 16.05
Length weighted mean 0.47 0.28 /
Length weighted SD [1] 2.91 0.88 /
Length weighted variance 8.47 0.78 /
Length weighted CoV [2] 7.97 3.21 /
Notes:
1. Standard deviation
2. Coefficient of variation
12.6 Statistical analysis and variography
12.6.1 Statistical analysis of composites
After grade capping, samples with grades less than 0.1 g/t Au account for approximate 61% of
total samples, those with grades less than 0.3 g/t Au account for 84%, and those with grades less than
1.1 g/t Au account for 95%.
Based on the analysis of drill hole data, and from t he point of view of spatial distribution of the
sample grades, the high and low grade boundaries are not obvious; hence, SRK did not set any such
boundary for the Mineral Resource estimation.
12.6.2 Variograms
During the process of variogram modelling, a lag distance of 2 m was assigned along the
downhole, and 10 m in all other directions.
APPENDIX III SRK REPORT
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Variograms were modelled with nuggets and double spherical structures. Nugget and sill values
adopted the modelled results along the downhole. The simulated variogram parameters are shown in
Figure 12-3 and Table 12-4, and details are provided in Appendix C.
In general, gold has good correlation along the direction of azimuth 90° and dip angle 0°. The
modelled range along the downhole is 45 m. Horizontal ranges along east-west direction and south-north
axes are 120 m and 80 m respectively. Therefore, the major axis of search ellipsoid is in direction of
azimuth 90° and dip angle 0°. The ellipsoid has a size of 120 m × 80 m × 50 m (X × Y × Z).
 -
 0.20
 0.40
 0.60
 0.80
 1.00
 1.20
 -  20  40  60  80  100  120

 -
 0.20
 0.40
 0.60
 0.80
 1.00
 1.20
 -  20  40  60  80  100  120  140  160  180  200
 -
 0.20
 0.40
 0.60
 0.80
 1.00
 1.20
 -  20  40  60  80  100  120  140  160  180  200
 -
 0.20
 0.40
 0.60
 0.80
 1.00
 1.20
 -  20  40  60  80  100  120  140  160  180  200
gamma (h)
gamma (h)
Major Axis: Variogram Plot for Au Composites
gamma (h)
Semi-major Axis: Variogram Plot for Au Composites
gamma (h)
Minor Axis: Variogram Plot for Au Composites
Down Hole: Combined Variogram Plot for Au Composites
(drillhole data only)
distance (m) distance (m)
distance (m) distance (m)
Figure 12-3: Variography Used for Grade Interpolation
Table 12-4: Variogram Parameters
Direction Nugget Sill Variation Range
Along the downhole
0.445 0.555
45
90, 0 120
0, 0 80
0, –90 50
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Table 12-5: Block Model Limits for the SJG Open-Pit Mine and SJG Underground Mine
Axis Minimum Maximum Block Size Minimum Block Size
(m) (m)
X (Easting) 620,900 622,360 10 5
Y (Northing) 4,111,200 4,111,300 10 5
Z( E l e v a t i o n ) –420 156 6 3
Table 12-6: Main Criteria and Attributes of Block Model
Item Description
TOPO The volume percentage of a block under surface (as of 30 June 2023)
KAUUN Au uncapped grade, ordinary kriging interpolation
KAUCA Au capped grade, ordinary kriging interpolation
BD Bulk density
DIST Distance from block unit to nearest sample
ADIST Average distance from block unit to sample
DH# Drill hole counts
SAM# Sample counts
ZONE Lithology encoding, 1 for conglomerate
CAT Mineral Resource category encoding, 2 for Indicated, 3 for Inferred
12.7 Block model
Table 12-5 shows the parameters used for the block model, which used fixed sized blocks for
modelling. The main criteria and attributes of the block model are shown in Table 12-6.
APPENDIX III SRK REPORT
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12.8 Grade interpolation
SRK converted the solid model (see Figure 12-4) and imported it into Surpac for use in creating
solid constraints for the grade interpolation.
Figure 12-4: Solid Model of M ineralised Conglomerate
Figure 12-5: SJG Underground Mine Solid Wireframe
APPENDIX III SRK REPORT
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--- page 660 ---
The grade interpolation used ordin ary kriging based on the statistical and variogram analysis of the
composited samples. Quartered circles were used for grade estimation.
Grade interpolation was conducted in two passes. The ellipsoid used for the first search pass was
120 m × 80 m × 50 m, had a major axis azimuth of 90° and a dip angle of 0°, and a minor axis dip
angle of 0°. Three to 40 composite samples were used to estimate the block grades, with a maximum of
two samples for any individual borehole, trench, or channel. A quartered circle was applied with a
maximum of two composite samples within one qua rtered circle used for grade interpolation.
The ellipsoid used for the second search pass was 60 m × 40 m × 25 m, had a major axis azimuth
of 90° and a dip angle of 0°, and a minor axis dip angle of 0°. Two to 40 composite samples were used
to estimate the block grades, with a maximum of three samples for any individual borehole, trench, or
channel, and a maximum of two composite samples within one quartered circle.
For the Mineral Resources of SJG Underground Mine, SRK has constructed a solid wireframe at a
threshold of 0.7 g/t Au, as shown in Figure 12-5.
12.9 Model validation
B a s e do nt h e1 mc o m p o s i t e s’ length, SRK adopted Ordinary Kriging (the ‘‘O.K. ’’), inverse
distance squared (the ‘‘IDW’’), and inverse distance power of 3 (the ‘‘ID3’’) to estimate the grade,
where the average grade of block model and composites ( ‘‘CMP’’) are compared and shown in Table
12-7.
As shown in Table 12-7, the relative difference b etween the grade interpolation results of the
average block model and average composites is approximately within 20%, which indicates that the
O.K. method is feasible.
Table 12-7: Average Gold Grade Comparison between Blocks and Composites
CMP (g/t) Estimation Method (g/t) Relative Difference (%)
O.K. IDW ID3 O.K./CMP IDW/CMP ID3/CMP
0.37 0.45 0.45 0.44 1.2 1.2 1.2
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12.10 Mineral Resource classification
Mineral Resources at the SJG Project are classified as Indicated Mineral Resources and Inferred
Mineral Resources as shown in Figure 12-6. Each Mineral Resource block is classified individually.
Figure 12-6: Mineral Resource Classification
Notes:
1. Green — Indicated; Red — Inferred
2. Blocks shown are above 0.3 g/t Au
3. SJG Open-Pit Mine only, while the SJG Underground Mine classification were performed using solid constraint of
vein models
The blocks estimated with composites no less t han three drill holes and with average informing
distance no more than 60 m were classified as Indicated Mineral Resources. After identifying all
Indicated Mineral Resources, all remaining block s with gold grade value were classified as Inferred
Mineral Resources.
The classification of SJG Underground Mine was performed according to solid vein model
constraints.
12.11 Mineral Resource statement
The previous cut-off grade for reporting of Mineral Resources for the SJG Open-Pit Mine was 0.3
g/t Au. The SJG Open-Pit Mine has been operated for several years with a relatively low cut-off grade
that has proved suitable. Based on the analysis on grade control and production data, SRK applied the
cut-off grade at 0.3 g/t Au for reporting the Mineral Resources within SJG Open-Pit Mine. For the
Mineral Resources at the SJG Underground mine, a cut-off grade at 0.7 g/t Au was applied. The
assumptions for the cut-offs are as:
For SJG Open-Pit Mine
. Gold Price: 410 RMB/g;
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. Mining Dilution: 5%;
. Processing Recovery: 95%;
. Operating Cost: 110 RMB/t ore;
And for SJG Underground Mine
. Gold Price: 410 RMB/g;
. Mining Dilution: 12.5%;
. Processing Recovery: 95%;
. Operating Cost: 220 RMB/t ore.
The Mineral Resource estimates as of 30 June 2023, within the current mining licence for SJG
Open-Pit Mine and the SJG Underground Mine are provided in Table 12-8 and Table 12-9.
Table 12-8: Mineral Resources within SJG Open-Pit Mine, as of 30 June 2023 [1, 2]
Category Cut-off Quantity Gold Grade Gold Content
g/t Au kt g/t kg koz
Indicated 0.3 34,200 1.10 37,600 1,210
Inferred 0.3 36,700 0.95 34,800 1,120
Notes:
1. All figures are rounded to reflect the relative accuracy of the estimate.
2. The information in this QPR with reg ard to Mineral Resource estimates is based on information compiled by Dr
Anshun Xu and Mr Pengfei Xiao, employees of SRK Con sulting China Ltd. Dr Xu, FAusIMM, and Mr Xiao,
MAusIMM, have sufficient experience relevant to the style of mineralisation and type of deposit under consideration
and to the activity which they are undertaking to qualify as Qualified Persons as defined in the NI 43-101. Dr Xu and
Mr Xiao consent to the reporting of this information in the form and context in which it appears.
Table 12-9:Mineral Resources within SJG Underground Mine, as of 30 June 2023 [1, 2]
Category Cut-off Quantity Gold Grade Gold Content
g/t Au kt g/t kg koz
Indicated 0.7 1,640 1.38 2,270 73
Inferred 0.7 3,010 1.24 3,730 120
Notes:
1. All figures are rounded to reflect the relative accuracy of the estimate.
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2. The information in this QPR with reg ard to Mineral Resource estimates is based on information compiled by Dr
Anshun Xu and Mr Pengfei Xiao, employees of SRK Con sulting China Ltd. Dr Xu, FAusIMM, and Mr Xiao,
MAusIMM, have sufficient experience relevant to the style of mineralisation and type of deposit under consideration
and to the activity which they are undertaking to qualify as Qualified Persons as defined in the NI 43-101. Dr Xu and
Mr Xiao consent to the reporting of this information in the form and context in which it appears.
12.12 Grade sensitivity analysis
The Mineral Resource as stated for the SJG Project is sensitive to the cut-off grade selected, which
is detailed in Table 12-10 and Table 12-11.
Table 12-10: Tonnage and Grades under Different Cut-offs — SJG Open-Pit Mine
Cut-off (g/t Au) Category Quantity (kt ) Gold Grade (g/t) Gold Content (kg)
0.1 Indicated 52,737 0.78 41,051
Inferred 88,414 0.50 43,818
0.2 Indicated 41,477 0.95 39,420
Inferred 53,659 0.73 38,935
0.3 Indicated 34,206 1.10 37,623
Inferred 36,660 0.95 34,769
0.4 Indicated 28,695 1.24 35,711
Inferred 27,203 1.16 31,512
0.5 Indicated 24,530 1.38 33,849
Inferred 21,139 1.36 28,802
0.6 Indicated 21,171 1.51 32,002
Inferred 17,332 1.54 26,716
0.7 Indicated 18,628 1.63 30,355
Inferred 14,551 1.71 24,908
0.8 Indicated 16,451 1.75 28,724
Inferred 12,457 1.87 23,347
0.9 Indicated 14,697 1.85 27,240
Inferred 10,964 2.01 22,087
1.0 Indicated 13,067 1.97 25,693
Inferred 9,790 2.14 20,979
Note: This table is only intended to demonstrate the impact of grade sensitivity on Mineral Resource tonnage and does not
represent a Mineral Resource estimate.
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Table 12-11: Tonnage and Grades under Different Cut-offs — SJG Underground Mine [1, 2]
Cut-off (g/t Au) Category Quantity
(kt)
Gold Grade
(g/t)
Gold Content
(kg)
0.1 Indicated 6,423 0.56 3,611
Inferred 30,109 0.33 10,056
0.2 Indicated 4,367 0.76 3,316
Inferred 14,853 0.53 7,921
0.3 Indicated 3,208 0.95 3,033
Inferred 9,257 0.71 6,567
0.4 Indicated 2,748 1.05 2,872
Inferred 6,562 0.86 5,634
0.5 Indicated 2,374 1.14 2,704
Inferred 5,196 0.97 5,024
0.6 Indicated 1,929 1.27 2,459
Inferred 3,992 1.09 4,368
0.7 Indicated 1,642 1.38 2,272
Inferred 3,011 1.24 3,732
0.8 Indicated 1,397 1.50 2,090
Inferred 2,251 1.40 3,158
0.9 Indicated 1,289 1.55 1,999
Inferred 1,690 1.59 2,681
1.0 Indicated 1,220 1.58 1,933
Inferred 1,408 1.72 2,415
Notes:
1 This table is only intended to demonstrate the impact of gr ade sensitivity on Mineral Res ource tonnage and does not
represent a Mineral Resource estimate.
2 The SJG Underground Mine tonnage and grade presented in table above was estimated under the constraint of
broader breccia model and the wireframe constructed at a threshold of 0.7 g/t Au was not applied.
12.13 Historical Mineral Resource estimation
The historical Mineral Resource estimates fo r the SJG Project are listed in Table 12-12 and
discussed below:
. In 2006, Wardrop completed a Mineral Resource estimate complying with NI 43-101
standards using Ordinary Kriging at a 0.5 g/t Au cut-off grade. The Mineral Resource
consisted of 6,100 kt of Indicated Mineral Resources at an average grade of 0.96 g/t Au and
12,100 kt of Inferred Mineral Resources at an average grade of 0.84 g/t Au.
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. In 2007, Wardrop completed an update of the Mineral Resource estimate again using
Ordinary Kriging at a 0.5 g/t Au cut-off grade. The Mineral Resource consisted of 8,800 kt
of Indicated Mineral Resources at an average grade of 1.5 g/t Au and 18,200 kt of Inferred
Mineral Resources at an average grade of 1.3 g/t Au.
. In April 2010, Wardrop completed another upda te of the Mineral Resource estimation again
using Ordinary Kriging at a 0.4 g/t Au cut-off grade and set a topping grade value at 40 g/t
Au. The Mineral Resource consisted of 24,900 kt of Indicated Mineral Resources at an
average grade of 1.25 g/t Au and 28,100 kt of Inferred Mineral Resources at an average
grade of 1.88 g/t Au.
. In October 2010, Wardrop completed a third update of the Mineral Resource estimation,
again using Ordinary Kriging at a 0.3 g/t Au cu t-off grade and a lower limit for outlier value
at 40 g/t Au. The Mineral Resource consisted of 33,700 kt of Indicated Mineral Resources at
an average grade of 1.15 g/t Au and 38,800 kt of Inferred Mineral Resources at an average
grade of 1.47 g/t Au.
. In January 2013, SRK completed an update of the Mineral Resource estimation using
Ordinary Kriging. The outlier is also 40 g/t, which is same as that of Wardrop. As of 31
January 2013, the SJG Project contains 26,600 kt of Indicated Mineral Resources at an
average gold grade of 1.40 g/t, and 23,400 kt of Inferred Mineral Resources at an average
gold grade of 1.45 g/t Au within the optimised open pit, at a cut-off grade of 0.3 g/t Au. In
addition to the open pit, there are about 5,600 kt Inferred Mineral Resources occurred outside
of the optimised open pit with an average gold grade of 2.56 g/t Au at a cut-off grade of 0.8
g/t Au.
Table 12-12: Mineral Resource Estimate History
Date/Year Cut-off Grade
(g/t Au)
Category Quantity
(kt)
Gold Grade
(g/t)
2006 0.5 Indicated 6,100 0.96
Inferred 12,100 0.84
2007 0.5 Indicated 8,800 1.5
Inferred 18,200 1.3
April 2010 0.4 Indicated 24,900 1.25
Inferred 28,100 1.88
October 2010 0.3 Indicated 33,700 1.15
Inferred 38,800 1.47
31 January 2013
(SJG Open-Pit Mine) 0.3 Indicated 26,600 1.40
Inferred 23,400 1.45
31 January 2013
(SJG Underground Mine) 0.8 Indicated ——
Inferred 5,600 2.56
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13 MINERAL RESERVE ESTIMATION
13.1 Estimation procedures
The Mineral Reserve estimate involved the following procedures:
. Desktop review of the available study report and the client data;
. Calculation of cut-off grade;
. Processing of year end map and underground voids model;
. Preparation of mineral reserve model;
. Mineable analysis including final open pit validation and underground stopes modelling;
. Mineral Reserve classification;
. Preparation of the Mineral Reserve statement;
. Sensitivity analysis of Mineral Reserve; and
. Preparation of life of mine plan.
MineSight software, which is courtesy of Persistence Resources, was used to estimate the Mineral
Reserve.
13.2 Feasibility study report
SRK was provided a document issued by Shandong Research Ins titute of Geological Sciences
dated 19 November 2019, in which the Institute has examined and approved the application and agreed
to increase the production capacity to 900 ktpa f or the open-pit mining. The modifying factors
associated with mining and processing will be assumed by SRK based on the available information to
date.
As an operating mine, SRK notes that the mine fre quently retained external technical service on
the open-pit optimisation and design as well as grade controls. The database from the external service
also provides the basis of SRK ’sr e v i e w s .
With respect to the SJG Underground Mine, the detailed feasibility study report (the ‘‘FSR’’)
reviewed by SRK is listed below. SRK understands that the FSR has been applied to guide the mine
development since 2016. After review of the mineral resource model, SRK believes that the production
capacity of 90 ktpa ore is technically feasible.
. Detailed Feasibility Study Report on SJG Underground Mine for Yantai Zhongjia ,w h i c hi s
prepared by Yantai Dehe Metallurgy Design Institute Ltd. and dated in May 2016.
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13.3 Cut-off grade
Assumptions to calculate the cut-off grade are listed in Table 13-1. The cut-off grades were
r o u n d e du pt o0 . 3g / tA ua n d0 . 7g / tA ur u n - o f - m i n e( t h e‘‘RoM’’) for SJG Open-Pit Mine and SJG
Underground Mine, respectively.
The cut-off grade shown in Table 13-1 was calculated by SRK based on industry standard
technical and economic assumptions. These assumptions were true at the time of calculation, but may
change over time, so different cut -off grades can be produced. Scatte r plots of sensitivity analysis on
price and costs for these two mines are shown in Figure 13-1 and Figure 13-2. The gold prices analysed
are the minimum and maximum prices shown in Table 17-2. The refining costs analysed are values
shown in Table 17-5. The other variables analysed are in line with common practice. With respect to the
SJG Open-Pit Mine, the cut-off grade is most sensitive to the gold price and processing costs. With
respect to the SJG Underground Mine, the cut-off gr ade is most sensitive to the gold price and mining
costs.
Table 13-1: Assumptions to Calculate Cut-off Grade
Item Unit Value Comments
Processing recovery rate % y = –22.802 x 2
+ 36.418 x
+ 81.464
See Figure 15-7.
y — processing recovery rate.
x — feed grade
Concentrate grade g/t 20.00 Derived from the average concentrate
grade in history.
Mining cost RMB/t RoM 110 See Table 19-19.
Processing cost RMB/t RoM 45 See Table 19-7.
Administration cost RMB/t RoM 8.42 See Table 19-7.
Refining cost RMB/t dry concentrate 50 See Table 17-5.
Mineral resource tax % sales revenue 4.2 See ‘‘20.1 Assumptions ’’.
Price constant RMB/g –0.5 Based on the available sales contract
Payable gold % 93.00 See Table 17-5
Gold price RMB/g 310 See ‘‘17.2 Gold price ’’.
Marginal cut-off grade g/t RoM 0.23 SJG Open-Pit Mine
Economic cut-off grade g/t RoM 0.63 SJG Underground Mine
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Figure 13-1: Sensitivity Analysis of Cut-off Grade for SJG Open-Pit Mine
Figure 13-2: Sensitivity Analysis of Cut-off Grade for SJG Underground Mine
13.4 SJG Open-Pit Mine
13.4.1 Year-end open pit outline
A monthly-end open pit as of 30 June 2023 was provided to SRK by Yantai Zhongjia. It was used
as the top geometry limit of the Mineral Reserve es timate to report remnant, but not used during open
pit optimisation.
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13.4.2 Mineral Reserve model
The Mineral Resource estimate was finalised by SRK using Surpac software. The block model was
exported to a comma delimited file with a constan t block size of 5×5×3 m (X×Y×Z). The data was
imported to MineSight software to carry out open pit optimisation.
Key fields added to the mineral resource model are TOPO, AUOKD, SGW and MAT. Descriptions
of these additional fields are shown in Table 13-2 a nd Table 13-3. This new model was named mineral
reserve model on which the Mineral Reserves were estimated.
Table 13-2: Description of Key Fields in Mineral Reserve Model for SJG Open-Pit Mine
Field Description
TOPO Volume percentage below the topography for a block.
AUOK Gold grade interpolated using ordinary kriging method. It was directly
imported from the data file.
CAT Category of Mineral Resources. 2 for Indicated, 3 for Inferred.
AUOKD The diluted gold grades. It equals to AUOK*0.95.
MAT Materials code. See Table 13-3.
SGW Specific gravity for waste rock . It is 2.62 tonne per cubic metre ( ‘‘t/m
3’’).
Table 13-3: MAT Coding for SJG Open-Pit Mine
MAT CAT AUOKD Description
1 2 >= 0.3 Economically Indicated. The cut-off grade of 0.3 is adopted
during daily mining operation.
2 2 <0.3 Indicated wastes
3 3 >= 0.3 Economically Inferred. The cut-off grade of 0.3 is adopted during
daily mining operation.
4 3 <0.3 Inferred wastes
5/ / W a s t e r o c k s
13.4.3 Mining dilution and recovery
The commonly used rates of 5% were assumed by SRK to estimate Mineral Reserves for mining
dilution and loss.
SRK recommends that Yantai Zhong jia introduce a final reconciliation process to support the
estimation of mining dilution and ore loss to reconcile the mineral resource model and mineral reserve
estimate.
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13.4.4 Pit optimisation and final open pit design
Open pit optimisation and final open pit design had been finished by Yantai Zhongjia before the
Mineral Resource was estimated by SRK. The steps of Mineral Resource estimation by the Yantai
Zhongjia were reviewed by SRK and some inconsistencies and potential flaws have been observed in the
process. SRK undertook an independent optimisation to validate the suitability of the Yantai Zhongjia
final open pit for use in Mineral Reserve estimation.
The open pit optimisation was strictly limited with in mining licence area. A series of nested open
pit shells were generated using floating-cone scenario to simulate pushbacks enlarged at about 1,500 kt
ore interval. Although the floating cone doesn ’t guarantee an optimal result, it is flexible and can
produce technically feasible mining sequences. The base cone radius is set to 10 m to simulate a
minimum open pit base width of 20 m. The overall slope angle is set to 45 degrees, which is a
commonly used angle when lacking geotechnical inf ormation. Other key parame ters including costs,
price, processing recovery rate were set to ensure that pre-defined ore blocks would be sent to
processing plant. The following two passes of o pen pit optimisation were carried out by SRK:
. First pass: the blocks with MAT code (Table 13-3) 1 were treated as ore, while all the other
blocks were treated as waste.
. Second pass: the blocks with MAT code (Table 13-3) 1 or 3 were treated as ore, while all the
other blocks were treated as waste. The start open pit for the second pass is the maximum
open pit generated in the first pass optimisation.
In total 29 open pit shells were generated, the economics of these are shown in Table 13-4 and
Figure 13-3. Assumptions to estimate the open pit economic values are shown below:
. The net value rather than the net present value (the ‘‘NPV’’) was calculated for each open pit.
The NPV is closely related to the production s chedule, while the net value is independent of
production schedule. SRK prefers net value to NPV to select optimal open pit shell, as it can
be reasonably expected that the economically acceptable NPV would be realised for the open
pit with maximum net value.
. The capital costs were set to zero, as maximising the net value is independent of the capital
investment.
. The costs and processing indices to calculate open pit ’s economic value are shown in Table
13-1. The long-term gold prices shown in Table 17-3 were converted to RMB290, RMB310
and RMB420 per tonnage of RoM for conservative, base and optimistic cases, respectively,
to study whether the optimal open pit selectio n will be materially affected by gold price.
. The blocks with MAT code (Table 13-3) 1 were treated as ore, while all the other blocks
were treated as waste.
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The lines in Figure 13-3 show that the cumulative open pit values increase to peak point at Pit 23
for all three cases of gold price, which provides an i ndication that the optimal open pit selection will
unlikely be materially affected by the gold price and the Pit 23 is the competent open pit that should be
selected. The inventories within Pit 23 are shown in Table 13-5.
Geometry comparison between Pit 23 and final open pit is shown in Figure 13-4 and Figure 13-5.
Globally, the final open pit designed by Yantai Zhongjia moves more material at south-eastern wall and
is developed to greater depth, while in other location it moves less material.
The final open pit was deemed by SRK to be conserva tive, but technically feasible and suitable for
use to report Mineral Reserves for SJG Open-Pit Mine . Open pit inventories within the final open pit are
presented in Table 13-6. Summary of the final open pit geometry properties are shown in Table 13-7.
Table 13-4: Summary of Pit Economics for SJG Open-Pit Mine
Pit
Ore
Tonnage
(kt)
Waste
Tonnage
(kt)
Strip
Ratio
(t/t)
Gold
Content
(kg)
Gold
Grade
(g/t)
Pit Economic Value
(million RMB)
290
RMB/t
310
RMB/t
420
RMB/t
1 1,166 6,023 5.16 625 0.54 –20 –95 2
2 1,279 6,567 5.13 943 0.74 44 61 154
3 1,342 6,425 4.79 1,398 1.04 150 175 311
4 1,373 3,728 2.71 1,472 1.07 207 233 376
5 1,363 4,544 3.33 1,508 1.11 204 230 377
6 1,375 3,679 2.68 1,638 1.19 247 276 435
7 1,380 5,050 3.66 1,714 1.24 245 275 442
8 1,380 4,056 2.94 1,735 1.26 265 295 464
9 1,377 3,256 2.36 1,689 1.23 266 296 460
10 1,382 2,935 2.12 1,701 1.23 273 303 468
11 1,394 4,633 3.32 1,766 1.27 263 294 466
12 1,428 7,482 5.24 1,841 1.29 236 268 447
13 1,417 3,700 2.61 1,764 1.24 275 306 477
14 1,423 3,463 2.43 1,731 1.22 270 300 469
15 1,408 3,299 2.34 1,926 1.37 320 354 542
16 1,422 4,524 3.18 1,755 1.23 260 291 461
17 1,433 2,711 1.89 1,863 1.30 312 345 526
18 1,400 6,758 4.83 1,617 1.16 194 223 380
19 1,383 5,330 3.85 1,343 0.97 151 174 305
20 1,361 4,091 3.01 1,152 0.85 124 145 257
21 1,364 3,068 2.25 1,183 0.87 147 168 283
22 1,295 2,054 1.59 1,474 1.14 238 264 407
23 808 1,780 2.20 860 1.06 126 141 225
24 11 9,237 848.19 7 0.61 –138 –138 –137
25 30 3,284 109.13 25 0.82 –45 –45 –43
26 11 3,311 304.01 5 0.50 –49 –49 –48
27 27 5,000 183.00 17 0.62 –73 –72 –71
28 101 4,295 42.36 105 1.04 –46 –44 –34
29 22 2,339 106.45 16 0.73 –33 –32 –31
Total 31,154 126,621 4.06 34,872 1.12 4,412 5,028 8,417
APPENDIX III SRK REPORT
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
Figure 13-3: Pit Economics Analysis for SJG Open-Pit Mine
Figure 13-4: Top View of Pit 23 and Final Pit for SJG Open-Pit Mine
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
Figure 13-5: Profile of Pit 23 and Final Pit for SJG Open-Pit Mine
Table 13-5: Pit Inventories within Pit 23
MAT Quantity (kt) Gold Content (kg) Gold Grade (g/t) Remarks
1 30,952 34,697 1.12 Economically Indicated
2 16,034 2,950 0.18 Sub-economically Indicated
3 10,681 10,504 0.98 Economically Inferred
4 16,270 2,714 0.17 Sub-economically Inferred
5 56,171 —— Wastes
Total 130,107 50,865 0.39
Note: Year-end map on 30 June 2023 was not used to cut the block model, as open pit optimization is independent of the
year-end map.
Table 13-6: Pit Inventories within Final Pit
MAT Quantity (kt) Gold Content (kg) Gold Grade (g/t) Remarks
1 22,647 26,407 1.17 Economically Indicated
2 9,388 1,724 0.18 Sub-economically Indicated
3 6,761 6,980 1.03 Economically Inferred
4 9,013 1,504 0.17 Sub-economically Inferred
5 34,735 —— Wastes
Total 82,544 36,615 0.44
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Table 13-7: Final Pit Geometry Properties
Item Unit Value Remarks
Easting size m 811
Northing size m 787
Pit depth m 308
Bench height m 12
Berm width m 4 or 6
Bench face angle degrees 65
Inter-ramp slope angle degrees 46.0/51.4 6/4 m wide berm
Pit base elevation m ASL –171
Pit ramp width m 12/9 dual/single lane
Pit ramp gradient % 10
Flat transition length m 60
13.4.5 Mineral Reserve classification
Materials with MAT code 1 in Table 13-6 within the f inal open pit, which is Indicated Mineral
Resources, were classified as the Probable Mineral Reserves. All the other materials were classified as
waste.
13.4.6 Mineral Reserve statement
The Mineral Reserve statement is shown in Table 13-8.
Table 13-8: Mineral Reserve Statement for SJG Open-Pit Mine, as of 30 June 2023 [ 1 ,2 ,3 ,4 ]
Category Cut-off Ore Quantity Gold Grade Gold Content
g/t Au kt g/t kg koz
Probable 0.3 22,600 1.17 26,400 849
Notes:
1. All figures are rounded to reflect the relative accuracy of the estimate.
2. Both the mining dilutio n and loss are set to 5%.
3. The Mineral Reserves are included in the Mineral Resources. They shouldn ’t be added to the Mineral Resources.
4. The information in this QPR which relates to Mineral Reserve conversion is based on information compiled by Mr
Yonggang Wu, MAusIMM, and Dr Anshun Xu, FAusIMM, employees of SRK Consulting China Ltd. Both Dr Xu
and Mr Wu have sufficient experience relevant to the style of mineralisation and type of deposit under consideration
a n dt ot h ea c t i v i t yw h i c ht h e ya r eu n d e r t a k i n gt oq u a l i f ya sQ u a l i f i e dP e r s o n sa sd e f i n e di nt h eN I4 3 - 1 0 1 .D rX u
supervised the work of Mr Wu. Dr Xu and Mr Wu consent to the reporting of this information in the form and
context in which it appears.
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13.4.7 Mineral Reserve sensitivity
The CMF forecasts varied between 290 and 420 RMB/g for the long-term gold price (Table 17-4).
This varied gold price can lead to a cut-off grade v aried from 0.24 g/t Au to 0.17 g/t Au. The impact of
the change in cut-off grade on the open pit inventory is shown in Table 13-9. Compared with the
Mineral Reserves, the relative d ifferences of tonnage are about –1% and 10%, respectively.
Table 13-9: Possible Ore Tonnage within Final Open Pit of SJG Open-Pit Mine
Gold Price (RMB/g) Cut-off (g/t Au) Ore Quantity (kt) Gold Grade (g/t) Gold Content (kg)
290 0.24 24,780 1.09 26,978
310 0.23 25,094 1.08 27,052
420 0.17 27,591 1.00 27,550
13.4.8 Production schedule
SJG Open-Pit Mine is scheduled to operate 8 hours per shift, 3 shifts per day, 330 days per year.
The production capacity is planned to be 3,300 ktpa ore. Production plans have been finalised by Yantai
Zhongjia using two pushbacks within the final open pit to control the mining sequence. A summary of
the pushback statistics is shown in Table 13-10 and a plan view of the pushbacks is presented in Figure
13-6.
Table 13-10: Summary of Pushback Statistics
Pushback Ore Tonnage
(kt)
Gold Content
(kg)
Gold Grade
(g/t)
Waste Tonnage
(kt)
Strip Ratio
(t/t)
1 8,772 11,807 1.35 8,639 0.98
2 9,332 9,840 1.05 28,596 3.06
3 4,543 4,760 1.05 22,663 4.99
Total 22,647 26,407 1.17 59,897 2.64
After the review of the pushback designed by Yantai Zhongjia, SRK considers that they are
technically feasible to manage the strip ratio ove r the LoM. These pushbacks were adopted by SRK to
generate the LoM schedule for the SJG Project.
SRK was told, by Yantai Zhongjia, that the increase in processing throughputs beyond those of
currently achieved by Yantai Zhongjia will be conducted by independent third-parties in future. SRK
considers this to be an acceptable plan but notes that limited detail has been developed and provided by
Yantai Zhongjia.
Optimised schedules prepared to maximise the economic value over the LoM schedule is presented
in Table 13-11. It should be noted that portions of low grade tonnage were planned to feed to the
processing plant in years to the end of 2025 by Yantai Zhongjia.
APPENDIX III SRK REPORT
– III-108 –


--- page 676 ---
Figure 13-6: Plan View of Pushbacks
T a b l e1 3 - 1 1 :L i f eo fM i n eS c h e d u l ef o rS J GO p e n - P i tM i n e( S R K )
I t e m U n i t T o t a l H 2 2 0 2 32 0 2 42 0 2 52 0 2 62 0 2 72 0 2 82 0 2 92 0 3 02 0 3 1
Mining
Ore tonnage kt 22,647 393 922 1,558 3,300 3,300 3,300 3,300 3,300 3,273
Waste tonnage kt 59,897 2,700 6,300 3,400 4,800 9,400 9,400 9,400 9,400 5,097
Ore + Waste tonnage kt 82,544 3,093 7,222 4,958 8,100 12,700 12,700 12,700 12,700 8,370
Yantai Zhongjia kt 22,647 393 922 1,558 3,300 3,300 3,300 3,300 3,300 3,273
Independent third-party kt 59,897 2,700 6,300 3,400 4,800 9,400 9,400 9,400 9,400 5,097
S t r i p r a t i o t / t2 . 6 46 . 8 66 . 8 32 . 1 81 . 4 52 . 8 52 . 8 52 . 8 52 . 8 51 . 5 6
Gold grade g/t 1.17 1.35 1.05 1.24 1.25 1.30 1.21 1.20 0.98 1.03
Gold content kg 26,407 532 972 1,937 4,137 4,274 4,008 3,961 3,226 3,360
Processing
RoM tonnage kt 22,647 393 922 1,558 3,300 3,300 3,300 3,300 3,300 3,273
Yantai Zhongjia kt 14,214 393 922 1,558 1,890 1,890 1,890 1,890 1,890 1,890
Independent third-party kt 8,433 ——— 1,410 1,410 1,410 1,410 1,410 1,383
R o M g o l d g r a d e g / t1 . 1 71 . 3 51 . 0 51 . 2 41 . 2 51 . 3 01 . 2 11 . 2 00 . 9 81 . 0 3
RoM gold content kg 26,407 532 972 1,937 4,137 4,274 4,008 3,961 3,226 3,360
Recovery rate % 95.00 95.00 95.00 95.00 95.00 95.00 95.00 95.00 95.00 95.00
Concentrate gold grade g/t 20.00 20.00 20.00 20.00 20.00 20.00 20.00 20.00 20.00 20.00
M a s s r e c o v e r y r a t e %5 . 5 46 . 4 25 . 0 15 . 9 05 . 9 56 . 1 55 . 7 75 . 7 04 . 6 4 5
Concentrate tonnage kt 1,254 25 46 92 197 203 190 188 153 160
Gold content in concentrate kg 25,087 505 923 1,840 3,930 4,060 3,808 3,763 3,065 3,192
Tails tonnage kt 21,393 368 876 1,466 3,103 3,097 3,110 3,112 3,147 3,113
APPENDIX III SRK REPORT
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--- page 677 ---
13.5 SJG Underground Mine
13.5.1 Mineral Reserve model
The mineral resource model prepared by SRK using Surpac software was exported to a comma
delimited file with a constant block size of 5×5× 3 m (X×Y×Z) to MineSight software to carry out mine
design to estimate Mineral Reserves.
The Mineral Resource estimate is a global estimate. The nearest neighbour method was applied to
local grade estimate to estimate Mineral Reserves. Theoretically, the nearest neighbour method can
estimate the global mean well but with a smaller standard deviation compared to other interpolation
methods like inverse distance weigh ted and Kriging. Actually, the ite ration process of Mineral Reserve
estimate indicates that just small portions of Mineral Resources (Figure 13-7) can be converted to
Mineral Reserves for SJG Underground Mine, so SRK doesn ’t think the local estimate will materially
affect the Mineral Reserves conversion.
13.5.2 Mining dilution and recovery
The rates of mining loss and dilution in the FSR are proposed to be 8% and 11%, respectively.
These two rates are commonly benchmarks used in China and hence were adopted by SRK to estimate
Mineral Reserves for SJG Underground Mine.
13.5.3 Mineral Reserve estimation
The steps in the process to estimate the Mineral Reserve are shown below:
. A total of 18 mineralised zones (Domains) were interpreted by SRK to estimate the Mineral
Resources for SJG Underground Mine. Among these Domains 6, 7, 11, 16 and 19 reported to
include the Indicated Mineral Resources. All stopes within Domain 19 have gold grade less
than the cut-off grade, as such the domain was excluded from reporting of Mineral Reserves.
Finally just four domains were selected by SRK to report potential Mineral Reserves.
. The development system described in section ‘‘14.3.2 Mine development ’’was applied to
limit the mining boundary in vertical direction, which is 49 m ASL down to –160 m ASL.
. The domains/Zones were sliced to create levels, then stopes were designed along strike
direction based on the existing cross cuts. The stopes are between 50 and 60 m long with a
vertically interval of 40 m to 50 m.
. The contained Mineral Resource tonnage was multiplied by a mining recovery rate of 92%
and divided by the value of 1 minus the dilution rate of 11% to calculate the Run-of-mine
tonnage. The gold grade of Indicated Mineral Resources were multiplied by the value of 1
minus mining dilution rate of 11% to calculate R oM gold grade. The list of stope inventories
are shown between Table 13-12 and Table 13-15. Both Inferred Resources and wastes were
treated as 0 grade.
APPENDIX III SRK REPORT
– III-110 –


--- page 678 ---
. Stopes within the Inferred Mineral Resources were excluded from reporting of Mineral
Reserves.
. All stopes with a RoM gold grade no less than cut-off grade of 0.7 g/t were deemed to be
both technically feasible and economically viable and reported as Mineral Reserves.
Table 13-12: Stope Mineable Inventory in Domain 6
Level Stope
Indicated Inferred [1] Waste [1] Total [1]
Tonnage
(kt)
Grade
(g/t Au)
Tonnage
(kt)
Grade
(g/t Au)
Tonnage
(kt)
Grade
(g/t Au)
Tonnage
(kt)
Grade
(g/t Au)
9
1[2] 30.34 3.49 <0.01 2.73 3.75 — 34.09 3.11
2[2] 48.74 3.47 —— 6.02 — 54.76 3.09
3[2] 7.03 0.86 —— 0.87 — 7.90 0.76
4 8.30 0.64 6.30 0.91 1.80 — 16.40 0.32
–40
1 9.69 2.77 0.40 1.09 1.25 — 11.34 2.37
2 3.66 2.21 —— 0.45 — 4.11 1.97
3 11.66 0.48 0.10 1.36 1.45 — 13.21 0.43
4 23.13 1.14 17.29 1.36 5.00 — 45.41 0.58
–80
1 0.21 1.12 0.85 1.12 0.13 — 1.19 0.20
2 0.99 0.48 1.71 0.47 0.33 — 3.03 0.16
3 0.90 0.30 3.00 0.66 0.48 — 4.39 0.06
4 —— 6.33 1.47 0.78 — 7.11 —
Total 157.74 2.45 36.24 1.19 23.97 — 217.95 1.97
Note:
1. Both Inferred and Waste was treated with 0 g/t Au grade to estimate Mineral Reserves due to its insufficient
geological confidence level.
2. Void stope.
APPENDIX III SRK REPORT
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--- page 679 ---
Table 13-13: Stope Mineable Inventory in Domain 7
Indicated Inferred [1] Waste [1] Total [1]
Level Stope Tonnage
(kt)
Grade
(g/t Au)
Tonnage
(kt)
Grade
(g/t Au)
Tonnage
(kt)
Grade
(g/t Au)
Tonnage
(kt)
Grade
(g/t Au)
9
1 12.20 1.32 10.77 1.39 2.84 — 25.80 0.62
2[2] 19.97 2.04 9.46 1.84 3.64 — 33.07 1.23
3 5.41 1.98 9.62 0.89 1.86 — 16.89 0.63
4 —— 14.95 1.14 1.85 — 16.80 —
–40
1 58.94 2.87 —— 7.28 — 66.22 2.56
2 34.31 2.67 0.06 1.20 4.25 — 38.61 2.37
3 0.43 1.20 14.75 1.21 1.88 — 17.06 0.03
4 —— 71.11 1.29 8.09 — 73.51 —
–80
1 22.07 2.37 13.69 1.70 4.42 — 40.18 1.30
2 21.77 2.04 4.93 1.38 3.30 — 30.00 1.48
3 —— 6.10 1.10 0.75 — 6.86 —
4 —— 10.00 1.35 1.24 — 11.24 —
–120
1 —— 0.72 1.67 0.09 — 0.81 —
2 —— 8.47 1.26 1.05 — 9.52 —
3 —— 0.62 1.09 0.08 — 0.69 —
4 —— 0.04 1.35 0.00 — 0.04 —
Total 175.09 2.43 169.60 1.32 42.60 — 387.29 1.68
Note:
1. Both Inferred and Waste was treated with 0 g/t Au grade to estimate Mineral Reserves due to its insufficient
geological confidence level.
2. Void stope.
APPENDIX III SRK REPORT
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--- page 680 ---
Table 13-14: Stope Mineable Inventory in Domain 11
Level Stope
Indicated Inferred [1] Waste [1] Total [1]
Tonnage
(kt)
Grade
(g/t Au)
Tonnage
(kt)
Grade
(g/t Au)
Tonnage
(kt)
Grade
(g/t Au)
Tonnage
(kt)
Grade
(g/t Au)
9
1 8.70 0.87 0.98 1.18 1.20 — 10.87 0.70
2 15.43 1.77 18.08 2.53 4.14 — 37.65 0.73
3 —— 1.69 3.70 0.21 — 1.89 —
4 —— 0.55 1.84 0.07 — 0.62 —
–40
1 8.45 0.90 —— 1.04 — 9.50 0.80
2[2] 64.80 2.36 —— 8.01 — 72.81 2.10
3[2] 28.13 2.68 2.24 3.82 3.75 — 34.13 2.21
4 11.89 1.40 9.31 1.43 2.62 — 23.83 0.70
80
1 1.92 1.02 1.84 1.00 0.47 — 4.23 0.46
2 20.07 1.64 0.78 1.31 2.58 — 23.43 1.40
3 24.94 1.67 —— 3.08 — 28.02 1.48
4 14.36 1.31 6.26 1.28 2.55 — 23.17 0.81
–120
2 6.08 1.60 4.38 1.60 1.29 — 11.75 0.83
3 6.48 1.58 7.16 1.57 1.69 — 15.33 0.67
4 0.08 1.28 3.29 1.28 0.42 — 3.78 0.03
Total 214.41 1.90 60.16 1.97 33.94 — 308.51 1.71
Note:
1. Both Inferred and Waste was treated with 0 g/t Au grade to estimate Mineral Reserves due to its insufficient
geological confidence level.
2. Void stope.
APPENDIX III SRK REPORT
– III-113 –


--- page 681 ---
Table 13-15: Stope Mineable Inventory in Domain 16
Level Stope
Indicated Inferred [1] Waste [1] Total [1]
Tonnage
(kt)
Grade
(g/t Au)
Tonnage
(kt)
Grade
(g/t Au)
Tonnage
(kt)
Grade
(g/t Au)
Tonnage
(kt)
Grade
(g/t Au)
9
1[2] 0.54 7.73 3.29 12.38 0.47 — 4.31 0.97
2[2] 5.42 1.46 0.91 1.72 0.78 — 7.11 1.11
3 14.74 1.44 —— 1.82 — 16.56 1.28
4 6.20 0.23 4.34 0.23 1.30 — 11.84 0.12
–40
1 21.04 1.53 —— 2.60 — 23.64 1.36
2 23.30 1.56 —— 2.88 — 26.18 1.39
3 31.46 1.34 —— 3.89 — 35.35 1.19
4 12.13 0.84 4.17 0.41 2.01 — 18.32 0.56
–80
1 34.91 1.15 —— 4.31 — 39.22 1.03
2 15.43 1.37 —— 1.91 — 17.34 1.22
3 25.16 1.36 —— 3.11 — 28.27 1.21
4 9.83 1.16 2.86 1.04 1.57 — 14.26 0.80
–120
1 10.24 1.03 2.73 1.02 1.60 — 14.57 0.72
2 12.17 1.03 0.10 1.01 1.52 — 13.79 0.90
3 11.87 1.04 0.14 1.04 1.48 — 13.50 0.91
4 2.13 1.04 2.71 1.04 0.60 — 5.43 0.41
–160
1 —— 0.09 1.03 0.01 — 0.10 —
2 5.96 1.06 1.07 1.06 0.87 — 7.89 0.80
3 3.46 1.06 2.16 1.08 0.69 — 6.31 0.58
4 —— 0.47 1.05 0.06 — 0.53 —
Total 246.00 1.26 25.04 2.31 33.50 — 304.53 1.21
Note:
1. Both Inferred and Waste was treated with 0 g/t Au grade to estimate Mineral Reserves due to its insufficient
geological confidence level.
2. Void stope.
A summary of mineable inventories (stopes above the cut-off grade), after applying Dilution and
Ore Loss for each Domain are shown in Table 13-16. The location of the mineable stopes within the
domain is presented in Figure 13-7.
The Mineral Reserve was estimated from the inve ntories when classifying the Inferred Mineral
Resources as waste and applying a 0 g/t Au grade. W ith further Mineral Resource definition drilling
some of the Inferred Mineral Resources may contribu te additional ounces to the production profile.
APPENDIX III SRK REPORT
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--- page 682 ---
Table 13-16: Summary of Mineable Inventory
Domain
Indicated Inferred Waste Total [1]
Tonnage
(kt)
Grade
(g/t Au)
Tonnage
(kt)
Grade
(g/t Au)
Tonnage
(kt)
Grade
(g/t Au)
Tonnage
(kt)
Grade
(g/t Au)
67 2 . 6 2 0 1 . 0 9 1 — 82 . 2 6
7 119 2.61 17 1.64 17 — 153 2.03
11 83 1.53 22 1.96 13 — 119 1.07
16 216 1.30 7 1.03 28 — 251 1.12
Total 425 1.73 47 1.70 58 — 530 1.39
Note:
1. Both Inferred and Waste was treated with 0 g/t Au grade due to its insufficient geol ogical confidence level.

Figure 13-7: Mineable Stopes Location in Each Domain (Azimuth: 310°, Dip: 0°)
13.5.4 Mineral Reserve classification
The Mineable Inventory in Table 13-16 include mineable portions of Indicated Mineral Resources,
Inferred Mineral Resources and external wastes.
The Inferred Mineral Resource were considered as waste, given a 0 g/t Au grade and all material
was converted to Probable Mineral Reserves.
APPENDIX III SRK REPORT
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--- page 683 ---
13.5.5 Mineral Reserve statement
Mineral Reserve statement is shown in Table 13-17.
Table 13-17: Mineral Reserve Statement for SJG Underground Mine,
as of 30 June 2023 [ 1 ,2 ,3 ,4 ]
Domain Category Cut-off
Ore
Quantity Gold Grade Gold Content
g/t Au kt g/t kg koz
6 Probable 0.7 8 2.26 17 0.6
7 Probable 0.7 153 2.03 312 10.0
11 Probable 0.7 119 1.07 127 4.1
16 Probable 0.7 251 1.12 280 9.0
Total Probable 0.7 530 1.39 737 23.7
Notes:
1. All figures are rounded to reflect the relative accuracy of the estimate.
2. The mining dilution rate is 11%. The mining recovery rate is 92%.
3. The Mineral Reserves are included in the Mineral Resources. They shouldn ’t be added to the Mineral Resources.
4. The information in this QPR which relates to Mineral Reserve conversion is based on information compiled by Mr
Yonggang Wu, MAusIMM, and Dr Anshun Xu, FAusIMM, employees of SRK Consulting China Ltd. Both Dr Xu
and Mr Wu have sufficient experience relevant to the style of mineralisation and type of deposit under consideration
a n dt ot h ea c t i v i t yw h i c ht h e ya r eu n d e r t a k i n gt oq u a l i f ya sQ u a l i f i e dP e r s o n sa sd e f i n e di nt h eN I4 3 - 1 0 1 .D rX u
supervised the work of Mr Wu. Dr Xu and Mr Wu consent to the reporting of this information in the form and
context in which it appears.
APPENDIX III SRK REPORT
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--- page 684 ---
13.5.6 Mineral Reserve sensitivity
The CMF forecasts varied between 290 and 420 RMB/g for the long-term gold price (Table 17-4).
This varied gold price can lead to a cut-off grade varied from 0.67 g/t Au to 0.50 g/t Au. The relevant
possible ore tonnages are listed in Table 13-18. Co mpared with the Mineral Reserves, the relative
differences of tonnage are about –5% and 25%, respectively.
Table 13-18: Possible Ore Tonnage within Exploited Stopes of SJG Underground Mine
Gold Price (RMB/g) Cut-off (g/t Au) Quantity (kt) Gold Grade (g/t) Gold Content (kg)
290 0.67 565 1.35 761
310 0.63 597 1.31 782
420 0.50 745 1.17 868
13.5.7 Production schedule
SJG Underground Mine will produce 8 hours per shift, 3 shifts per day, 330 days per year. The
production capacity is to be 90 ktpa ore. The life of m ine shall be about 6.0 years, which include a 5.5-
year full production period and a 0.5-year ramp-down period. The LoM schedule is shown in Figure 13-
8 and Table 13-19.
Figure 13-8: Stacked Column Plots of Life of Mine Schedule for SJG Underground
APPENDIX III SRK REPORT
– III-117 –


--- page 685 ---
Table 13-19: LoM Schedule for SJG Underground Mine (SRK)
Item Unit Total H2 2023 2024 2025 2026 2027 2028 2029
Ore tonnage kt 530 46 90 90 90 90 90 35
Gold grade g/t 1.39 1.67 1.66 1.66 1.56 1.10 1.03 0.83
Gold content kg 737 76 149 150 141 99 93 29
Processing recovery rate % 95.00 95.00 95.00 95.00 95.00 95.00 95.00 95.00
Concentrate gold grade g/t 20.00 20.00 20.00 20.00 20.00 20.00 20.00 20.00
Concentrate tonnage kt 35.0 3.6 7.1 7.1 6.7 4.7 4.4 1.4
Gold content in concentrate kg 700 72 142 142 134 94 88 27
T a i l s t o n n a g e k t 4 9 54 28 38 38 38 58 63 3
13.6 Ascertain Mineral Reserves
SRK doesn’ tt h i n ki t ’s necessary to carry out further detailed exploration campaigns to ascertain
Mineral Reserves for the SJG Project by considering the following reasons:
. Both the SJG Open-Pit Mine and the SJG Under ground Mine are producing mines as at the
Effective Date.
. SRK, based on its experiences, think it ’s extremely difficult to upgrade the Mineral
Resources with low geological confidence to the Measured category for a gold deposit due to
its intrinsic geological properties.
Although the further detailed exploration campaign is not necessary for the SJG Project, the
production exploration, grade contro l and the detailed production plans are required to minimise the risk
caused by the Mineral Resource category during d aily operation. SRK was told that these commonly
procedures have been practiced regularly in the daily operation by Yantai Zhongjia itself, and the related
fees have been included in the operating costs. W hen publicly reporting is required or materially
changing of Mineral Reserves has happened, internal expert or externally independent expert will review
or carry out the estimate of the Mineral Resources and Mineral Reserves.
13.7 Conclusions a nd recommendations
13.7.1 SJG Open-Pit Mine
SRK’s review of the open pit optimisation results indicate that the final open pit design proposed
by Yantai Zhongjia is conservative, but it is technica lly feasible and economically viable and suitable
for Mineral Reserve estimate.
The LoM production capacity is scheduled to be 3,300 ktpa ore over an 8.5-year period. The SJG
Open-Pit Mine Probable Mineral Reserves is 22,600 kt at 1.17 g/t Au. Without the open pit
optimisation, the existing design of the SJG Open-Pit Mine can cater for the mining of approximately
455 kt of Probable Mineral Reserves (representing approximately 2.0% of the Probable Mineral
Reserves of approximately 22,600 kt available at the SJG Open-Pit Mine). It is estimated that there are
approximately 22,100 kt of Probable Mineral Reserves (representing approximately 98.0% of the
Probable Mineral Reserves of approximately 22,600 kt available at the SJG Open-Pit Mine) that can be
APPENDIX III SRK REPORT
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--- page 686 ---
accessible at the unmined areas next to and below the current infrastructure, which has the potential to
increase the mining production output and to cater for mining operations for the next years at Yantai
Zhongjia’s current mining capacity
SRK was provided with a production schedule for the next two and half years operation by Yantai
Zhongjia, which is shown in Table 13-20. This short-term schedule is different with that shown in Table
13-11 in terms of RoM tonnage and gold grade. With reference to the historical production pattern of
Yantai Zhongjia, Yantai Zhongjia estimate that low grade tonnage of 463 kt, 926 kt and 649 kt per each
year could be filtered back to the pr ocessing plant for processing fo r the year period H2 2023 and fiscal
year 2024 and fiscal year 2025 respectively.
Table 13-20: Short-term Production Schedule for SJG Open-Pit Mine (Yantai Zhongjia)
Item Unit H2 2023 2024 2025
RoM tonnage kt 856 1,848 2,207
Gold grade g/t 0.57 0.53 0.88
13.7.2 SJG Underground Mine
SRK understands that the FSR has been applied to guide the mine development since year 2016.
Technically feasible stopes were designed based on the planned development system and mining
methods. Stope economics of each stope were analysed to select economically viable stopes that were
reported as the Mineral Reserves.
The LoM production capacity is scheduled to be 90 ktpa ore over an a 6.0-year period. The SJG
Underground Mine Probable Mineral Reserves is 530 kt at 1.39 g/t Au.
SRK was provided with a production schedule for the next two and half years operation by Yantai
Zhongjia, which is shown in Table 13-21. This short-term schedule is similar to that shown in Table 13-
19.
Table 13-21: Short-term Production Schedule for SJG Underground Min e (Yantai Zhongjia)
Item Unit H2 2023 2024 2025
RoM tonnage kt 46 90 90
Gold grade g/t 1.70 1.70 1.70
APPENDIX III SRK REPORT
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--- page 687 ---
14 MINING
14.1 Mining technical conditions
14.1.1 Hydrogeology
The average annual precipitation is about 654.4 mm, which is mostly during the months from June
to September. The maximum daily precipitation is about 141.3 mm.
The SJG Project is in the charging area of sub-hydrogeological unit of Jiaolai Basin, which
belongs to the hydrogeological unit of Ludong low-hilly intrusive rock, aggregated rock and
metamorphic rock. The terrain is predominantly low hilly. The orebodies are in elevation ranges of
+145 m ASL down to –402 m ASL. The erosion basis, which is in the south-east of mine area, is +60 m
ASL.
The stratum in the area is predominantly the continental sedimentation of Quaternary, and
conglomerate of the Linsishan Formation, Laiyang Group, and gneiss and granulite of Douya Formation,
Jingshan Group of Cretaceous. The other strata in clude monzonitic granite in Linglong superunit of
Neoproterozoic Era, and widely spread dykes of Mesozoic and Proterozoic. The local settings are friable
fractures, which has been moderately developed due to several times of local tectonics. The primary
fractures are north-east striking, which controls the spread of gold dykes, while the secondary fractures
are north-west striking.
The underground layers are divided into porous aquifer of uncompacted Quaternary, fissure aquifer
of weathered bed rock, fissure aquifer of geological fractures, aquitard and aquiclude, based on the
groundwater type and permeability.
Aquitard and aquiclude are mainly consist of co nglomerate, gneiss, monzonitic granite and other
various dykes occurring below the weathered layer, which are widely spread in and around the SJG
Project area with extremely low permeability and water yield property and located below the water level.
The main source of local groundwater is atmospheric precipitation. The porous aquifer of
uncompacted Quaternary is charged with not only the atmospheric precipitation, but also the fissure
water of bed rock and the surface runoff. The fissu re aquifer of bed rock is charged with not only the
atmospheric precipitation, but also the fissure water of the upper uncompacted Quaternary.
Most of the orebody is located below the local base of erosion and below the groundwater level, so
ground water cannot be drained out of the mine by gravity. The main aquifer has low permeability, with
local areas having moderate permeability. Groundwater recharges slowly and the volume of mine water
inrush is small.
Generally, hydrogeological conditions are relatively straight forward.
Long-term drainage and dewatering of groundwater would change the groundwater quality and
quantity. Potentially this would cause the water leve l to fall, which could bring about negative effect to
the processing water and domestic water of residents.
APPENDIX III SRK REPORT
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14.1.2 Engineering geology and geotechnical engineering
Conglomerates and dykes are widely spread in the whole SJG Project area. Details are as follows:
. Conglomerate mainly consists of pyritizatio n and sericite with a very small number of thin
layers of sandstone occurred in them. The colours are grey-white, grey-green and purple-red.
The primary component of conglomerate is mylo nitization monzonitic granite. The matrix is
primarily composed of felsic sandstone. The rock integrity is fair to good. The rock is semi-
hard to hard with a Protodyakonov coefficient ranging from 6 to 10. The rock quality is fair
to good.
. Dykes include diorite (porphyrite), lamprophyre and dolerite (porphyrite), all of which are
formed in fractures in a pre-existing mesozoic conglomerate with a thickness of dozens of
centimetres to several meters and a striking length of several meters to hundred meters.
Fissures are not developed. The rock integrity is fair to good. The rock hardness is fair. The
rock quality is fair to good. Some dykes developed along the fractures with a thickness of
several centimetres to dozens of centimetres. These dykes are usually cut by later fractures
and developed in small size. There is no need to support them.
Monzonitic granites primarily occur in the north of the SJG Project area. The weathering that
occurs to surface rock is caused by well-developed fi ssures at depth the fissures are decreased slowly.
Affected by the terrain, lithology and groundwater, t he depth of strong weathering varied widely, which
is usually ranging from 1 to 15 meters. The rock integrity is fair to good.
SRK understands that the currently available engineering geology study cannot provide
information about how weathered the rocks are (eroded rocks), and how many structural weaknesses
occur within the rocks, such as a faults, shears, joints or foliations. If possible, the risks related to open
pit wall stability should be studied to provide a sound guide for overall slope angle.
The slope monitoring and management will continue for the entire life of mine. SRK suggests that
slope stability monitoring should be enhanced, and a rock mechanics study should be carried out as soon
as possible to finalise these parameters to confirm open pit wall deformation and slope stability.
Globally, the engineering geological conditions are straightforward due to straightforward
geomorphology, unitary lithology, simple structure and stable of wall rocks and rock mass.
14.2 SJG Open-Pit Mine
14.2.1 Mine operations history and current status
SJG Open-Pit Mine was initially exploited as an u nderground mine in 2006. Af ter several years of
exploration and mining operation, it was converted to a hybrid of open pit mining and underground
mining in 2011. Underground mining ceased in 2013, after which open pit mining continued. As of 30
June 2023, the mining operations were conducted in the open pit with the open pit ’s upper opening area
of about 0.41 km
2, and the open pit is producing at four benches of +81 m ASL, +69 m ASL, +21 m
ASL and +9 m ASL. Figure 14-1 is the producing open pit.
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The production records of last three years and the first half of 2023 ( ‘‘H1 2023 ’’) are shown in
Table 14-1. It should be noted that the production in year 2021 was significantly interrupted by the
People ’s Government of Shandong Province (the “Provincial Government ’’) due to safety production
inspection. It can be seen that the actual ore production capacity is about 960 –1,900 ktpa in the years
from 2020 to 2022.
Figure 14-1: Open Pit in Producing
Table 14-1: SJG Open-Pit Mine Production Records
Category Unit 2020 2021 [1, 2] 2022 H1 2023 [3]
Ore tonnage kt 1,499 960 1,899 615
Waste tonnage kt 205 75 401 217
Ore + waste tonnage kt 1,704 1,035 2,300 832
Strip ratio t/t 0.14 0.08 0.21 0.35
Ore milled kt 1,500 1,013 1,901 952
Notes:
1. Mining was conducted in months January, February, and from August to December.
2. Processing was conducted in months January, February, April, May, and from August to December.
3. Low in mining production in May 2023 due to maintenance of road from open pit to mill. No ore but waste
production in June 2023 due to application of safety production licence.
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14.2.2 Mine development
Conventional road-truck method will continue be applied to the mine development. The key
parameters applied on site are shown in Table 14-2.
R o a d sa r o u n dt h eo p e np i tc a nb ed u gf r e e l y ,w i t hsupplementation of rock breaking. Conventional
drill-blast-load-haul cycle, as described in ‘‘14.2.3 Mining methods ’’,i sa p p l i e dt oc o n s t r u c ti no p e np i t
ramps and cut slots to access benches below the active bench and to prepare a void space for the
following large-scale production and storing of water inflows temporarily.
Table 14-2: Key Parameters of Mine Development
Item Unit Value Comments
Road/open pit ramp width m 12/9 Dual/single
Road/open pit ramp maximum gradient % 10
C u ts l o tl e n g t h m 6 0–80
Cut slot width m 20
Truck t 40
14.2.3 Mining methods
The mining sequence will be controlled by two pushbacks. Conventional dr ill-blast-load-haul
mining cycle is being and will be applied to move rocks within the open pit. Key parameters of the
mining method are shown in Table 14-3 and the mining cycle is presented in Figure 14-2.
Grade control has been and will be carried out based on the samples from blasthole. The cut-off
grade applied to separate ore from wastes vari ed from 0.2 to 0.3 g/t Au. The mining dilution and
recovery rates are 5%.
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Table 14-3: Key Parameters of Mining Method
Item Unit Value
Bench height m 12
Active bench face angle degrees 70
Grid pattern of blastholes m 3.5×3.8 –4.0×4.0
Blasthole diameter mm 110
Blasthole length m 13
Over-drill length of blasthole m 1
Explosive / Emulsion and ammonium nitrate/fuel oil
(the ‘‘ANFO ’’)
Explosive consumption kg/t ore about 0.25
Drill rig / See Table 14-4
Excavator m3 See Table 14-4.
Truck t See Table 14-4.
Drilling
Loading and hauling Blast-hole pattern
Figure 14-2: Mining Cycle in SJG Open-Pit Mine
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14.2.4 Slope monitoring
Regular (monthly) open pit slope inspections are undertaken as no special monitoring devices are
installed to monitor the open pit stability.
14.2.5 Waste dump
The waste has been and will continued to be disposed by buyers. It ’s the buyers responsibility to
transport wastes out mine area. There is no need to consider permanent waste dumping.
14.2.6 Mine equipment
The mine equipment on site is shown in Table 14-4.
Table 14-4: Mine Equipment List for SJG Open-Pit Mine
Equipment Manufacturer Mode Size Quantity Comments
Drill rig Jinke Zuankong JK590C / 2 115 mm bit
Drill rig Jinke Zuankong JK591C / 2 115 mm bit
Drill rig Jinke Zuankong JK59BA-3A / 2 115 mm bit
Air compressor Atlas XRVS 1050 CD 29.8 m 3/min 1
Air compressor LIUTECH LUY310-25GIII 31.0 m 3/min
Excavator Doosan DX300LC-7 1.27 m 3 2 load ore and break over-sized rock
Excavator Doosan DX300LC-9C 1.4 m 3 1
Excavator Doosan DX380LC-9C 1.71 –1.9 m 3 8
Excavator Doosan DX305LC-9C 1.4 m 3 1 load ore and break over-sized rock
Truck / / 40 t 47 belonging to third-party
Loader Lovol FL955F 5 t 1
Watercart Sinotruck JYJ5161GSSE 8.7 m 3 1
Watercart Dongfeng 153 12 m 3 1
14.2.7 Mine services
Mine drainage and dewatering
Surface run-off above +81 m ASL d rains by gravity to interceptor ditches around the open pit
opening.
Surface run-off and groundwater below +81 m ASL drains by gravity to old underground voids
like level haulage ways, shafts etc. along the fissures, joints, and foliations. The water is then gathered
and pumped out to surface via pipes installed in t he auxiliary shaft of SJG Underground Mine. The
water pumped out will be used within open pit for water spray purpose and sold to a processing plant
near to the SJG Underground Mine.
Drainage of groundwater below –120 m ASL is not considered at present, as it will happen
towards the end of open pit life. SRK understand that Yantai Zhongjia didn’ t have a plan for this at the
Effective Date, but there is sufficient time to make a plan for the future.
There are two water tankers (See Table 14-4) to spray water for dust suppression.
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Electric power supply
All equipment is diesel driven, with minima l electric power required for lighting.
Compressive air
Compressed air for the drill rigs is provided by mobile compressors.
Explosives supply and management
Currently, SJG Project has two explosive magazines. SJG Open-Pit Mine and SJG Underground
Mine each has one own magazine and cannot be shared with each other. A 40 t explosive magazine has
been constructed on the SJG Open-Pit Mine site to store explosives. The magazine of SJG Open-Pit
Mine is in normal use. According to the production pla n, the required blasting materials are applied for
by Yantai Zhongjia, then delivered to the explosi ve magazine by the producer. Onsite blasting can only
be performed under the supervision of policies.
Fuel
There are two fuel tanks on site, which belong to Yantai Zhongjia. The fuel was supplied from the
gasoline stations located in the town of Wanggezhuang.
Maintenance facilities
Maintenance facilities and workshop are located near to the perimeter of open pit.
Yantai Zhongjia oversees the maintenance of trucks, drill rigs and ancillary equipment, while the
excavator maintenance will be undertaken on-site by the manufacturer.
Communications
Two-way radios are applied in open pit to provide simple producing communication. No special
dispatch communication is required.
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14.3 SJG Underground Mine
14.3.1 Mine operations history and current status
Development of SJG Underground Mine was commenced in September 2016, and production
commenced in 2019. Photos taken during site visit are shown in Figure 14-3.
Access ramp ’s portal Industrial site of auxiliary shaft
Upcast portal
Figure 14-3: Portals for SJG Underground Mine
Commercial production commenced in 2019, with some ore produced in 2018 during the pre-
production period. Current underground production is coming from the upper three levels in the mine
while development of the ramp and the lower three levels continues. The production records in the last
three years and H1 2023 are shown in Table 14-5. It should be noted that the production in year 2021 is
significantly interrupted by th e Provincial Government due to safety production inspection.
Table 14-5: SJG Underground Mine Production Records
Category Unit 2020 2021
[1] 2022 H1 2023
Ore mined and milled kt 89.9 10.7 90.0 44.3
Notes:
1. Both mining and processing were conducted in months January and December.
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SJG Underground Mine produces 8 hours per shift, 3 shifts per day, 330 days per year. Hauling of
ore along the access ramp will operate just one shift per day and is designed for an ore production
capacity of 90 ktpa.
14.3.2 Mine development
The development system consists of a trackless access ramp, six level haulage ways, an auxiliary
shaft, a surface ventilation upcast shaft and an underground ventilation upcast shaft. Properties of these
tunnels are shown in Table 14-6.
Off-road dump truck, each with a nominated capacity of 20 t, are used to move both ore and waste
to surface along the level haulage way and the access ramp.
The mine development system shown in Figure 14-4 has been completed at the Effective Date.
Table 14-6: Development Tunnel Dimensions
Tunnels Net Cross Section Location/level Length (m)
Access ramp [1] 4.5×4.0 (width×height) 4111092, 40622241, +80 (N, E, Z) 2,265
Auxiliary shaft 4.0 (diameter) 4111168, 40621939, +120 (N, E, Z) 305
Surface ventilation upcast shaft 3.5 (diameter) 4110712, 40622173, +98 (N, E, Z) 49
Underground ventilation upcast shaft 2.5 (diameter) 4110681, 40621996, +49 (N, E, Z) 209
Level haulage way [2] 4.5×4.0 (width×height) +49, +9, –40, –80, –120, –160 (Level) /
Notes:
1. The access ramp has been advanced to –132.2 m ASL as at the Effective Date.
2. As of 30 June 2023, level haulage ways have been advanced 1,952 m at Level +49 m; 3,094 m at Level +9 m;
4,891 m at Level –40 m; 45 m at Level –80 m; and 1,092 m at Level –160 m. Level –120 m is not yet advanced.
Figure 14-4: Longitudinal Profile of Development System
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14.3.3 Mining methods
The mining methods include cut-and-fill mining and shrinkage stope mining.
Cut-and-fill mining
Stope development includes: a footwall haulage d rive on the main level for ventilation, hauling of
ore; two cross cuts at the main level for water draina ge; a raise connection in the footwall, with access
drive to each slice for filling material, workers, and storage of ore; an undercut of the stope area.
The stopes are between 50 and 60 m in length and include a 5 m thick sill pillar at the bottom of
the cut and fill panel that is recoverable.
Recovery of ore starts from the bottom undercut, advancing upward at 1.8 m slice interval/cut. The
blastholes are 1.8 m long with a dip angle of 0 degree or slightly dipping at 0.8 –1.0 m spacing. Short
bolt or round timber is used in a stope to provide temporary support as required.
Mobile fan will be used after blasting to remove t he blasting fumes. The exhausted air will return
to the upper level haulage way. Fresh air flows through the working face of drilling at a speed of no less
than 1.5 meters per second ( ‘‘m/s’’).
The ore is scraped to the ore pass in the footwall and discharged to trucks below the hopper.
The bottom slice is filled with cemented fill that has a cement-sand ratio of 1:4, while all the other
slices are filled with fully cemented paste.
The production capacity of a stope is assumed to be 80 tpd, with each stope producing 1,000 t per
8.5 m of advance. The rates of mining loss and dilution are 8% and 11%, respectively.
Shrinkage mining
Stope development includes: a footwall haulage drive, about 6 m away from the orebody; crosscuts
at 5 –6 m interval, hauling of ore; an upcast in rib for v entilation and workers; an undercut of the stope
area, 2 m high.
The stopes are 40 m in length and each panel includes a 6 m wide rib pillar and a 3 m thick crown
pillar. The stopes produce 1000 t per 11.8 m of advance.
Drilling, blasting and ventilation are same as thos e applied to cut-and-filling method. Ore is loaded
from ore pass using electric load-haul-dump (the ‘‘LHD’’)m a c h i n e .
Pillars with high grade of gold will be recovered, while the pillars with low grade gold will be left
permanently. A reinforced concrete sill, which i s a 500 mm thick will be used to enable the crown
pillars to be recovered. Half of the rib pillar can be recovered by drilling shallow blastholes from the
upcast in the rib.
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Once all the ore has been removed from a stope, the void would be filled with a mix of waste rock
and paste. Raises for backfilling, which are connected to the crosscuts of a stope in the upper level, have
a profile of 2×1.5 m at 10 –15 m spacing.
The production capacity of a stope is assumed t o be 80 tpd. The rates of mining loss and dilution
are 8% and 12%, respectively.
14.3.4 Ground support
The mine plan relies on backfill as a ground support medium. The voids underground will be filled
using either cemented paste fill or cemented rock fill (the ‘‘CRF’’). A surface paste plant (Figure 14-5)
near to the compressed air st ation has been installed.
The paste plant includes a 300 m 3 upright bin, a 50 t cement tank, a Φ1,500 × 1,500 high
concentration stirred-tank and a screw feeder etc.
The dry tails are transported to pa ste plant by truck. After mixing with cement in the stirred-tank,
the paste flows to the underground stope by gravity along two sets of Φ133 × 12 manganese steel pipe
in the auxiliary shaft, then distributed via a DN80 pol yethylene pipe in level haulage way and finally a
Φ89×10 polyethylene pipe in a stope.
The average filling volume is 81 cubic meters per day ( ‘‘m3/d’’). The maximum filling volume per
shift is 52.5 m 3/d. The filling density is 68% to 70%.
Figure 14-5: Paste Plant
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14.3.5 Mine equipment
Underground mine equipment in place are shown in Table 14-7.
Table 14-7: Underground Mine Equipment in Place for SJG Underground Mine
Equipment Mode Quantity Remarks
Drill rig 7655 10
Drill rig YSP-45 3
Mobile fan JK58-1No4.0 6
Mobile fan JK58-1No4.5 6
Main fan FKZ45-6-No18 1 160 kilowatts ( ‘‘kW’’)
Main fan FKZ40-6-No14 1 30 kW
Scraper / 2 15 kW
LHD LDCY-0.75 2 37 kW
Shotcrete machine / 2
Hoist JKMD-1.85×4 (I) 1 Auxiliary shaft
Double-deck cage #2 multi rope 1 Auxiliary shaft
Trucks YC6L290-20 3 20 t
Water pumps MD120-50*7 3 120 m 3/h
Air compressor SAC132A 1
Air compressor SAC55A 1
Drilling jumbo for driving Yz-820 2
Drilling jumbo for driving Atlas 281 1
Drilling jumbo for driving Atlas K111 1
Drilling jumbo for mining Simba 1254 1
Drill rig SWDE165 1
Drill rig SWDB165 1
Scaling jumbo XMPYT-58/700 1
Long-hole drill rig YGZ-90 1
Shallow-hole drill rig YT28 3
Front end loader FL956F 2
Front end loader ZL30E-I 1
Front end loader ZL30E- Ⅱ 1
Truck Dongfeng 8
Concrete mixer JZC450 1
Shotcrete machine SPJ08-07-22 1
Light truck 2
Pick-up truck 4
14.3.6 Mine services
Ventilation
The ventilation plan for stopes and headings is in diagonal pattern . Fresh air flows to a working
face along the auxiliary shaft and the level haulag e way. The exhaust air flows to surface along the
upper level haulage way, underground upcast, and surface upcast shafts.
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The calculated air requirement is 43 cubic meters per second ( ‘‘m3/s’’). One FKZ45-6-No.18 fan
(Figure 14-6) was installed at the portal of upcast to draw out exhaust air with a capacity of 64 m 3/s.
main fan online monitor
Figure 14-6: Main Fan at the Portal of Upcast
Ventilation in the access ramp is independent of t he ventilation plan for stopes and headings. A
2.5 m diameter exhaust raise is constructed at the connection linking the access ramp and the active
levels. A mobile fan is installed at the top of this raise to stop and redirect the exhausted air to the upper
non-active level with supplementation of air do ors and other air redirecting facilities. The air
requirement for the working area is 21 m
3/s. The mobile fan is FKZ40-6-No.14, which has a nominated
airflow rate of 15.8 –34.4 m 3/s.
Locally, the mobile fans, JK58-1N0.4, are used in drive headings, stope development workfaces to
discharge exhaust air.
Mine drainage and dewatering
The normal groundwater inflow is 1,950 m 3/d reaching a maximum of 3,900 m 3/d. In addition to
the groundwater inflow, water from produc tion and backfilling operations totals 60 m 3/d.
The pumping station (Figure 14-7) located at the bottom of service shaft at –160 m ASL is
equipped with three sets of MD120-50×7 pump with each has a flow rate of 120 m 3/h and a water head
of 350 m. There are two water sumps next to the pump station with a total volume of 700 m 3.
Groundwater from each level flows to the water sumps by gravity and is pumped to the elevated tank on
surface, by single stage pumping along two seamless steel pipes that have a size of Φ159×6 and are
installed in the service shaft.
underground pump station at Level –160 online monitor
Figure 14-7: Pumping Station
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Compressed air
The compressed air station is located near to the service shaft shown in Figure 14-8.
Screw compressors of FHOGD-132F are installed t o produce compressive air. The compressed air
will be distributed to each level along the seamless steel pipes in service shaft, which consists of a main
pipe of Φ108×6 and a branch pipe of Φ76×6.
building for compressed air and power distribution
single screw air compressor power distribution
Figure 14-8: Compressed Air Station and Power Distribution Room
Power supply
A 10 kilovolts (‘‘ kV’’) power distributor is located next to the compressive air station to provide
electricity power for loadings at and below su rface, which is shown in Fi gure 14-8. The surface
electrical demands includes mainly the hoist, air compressors, domestics, office and lighting. The sub-
surface loadings include primarily the water pumps, mine equipment and lighting.
A diesel generator with a voltage of 10 kV and a power of 1,000 kW is on site for standby power
generation.
Water supply
The water requirement for mining operation include 100 m 3/d for underground mining operation,
300 m 3/d for the paste plant and 144 m 3 and 200 m 3 for above and below ground firefighting. An
elevated tank (Figure 14-9) is located near to the auxiliary shaft with a volume of 300 m 3. Water storage
impoundments will meet the requirement of mining operation and firefighting. Water is distributed by
seamless steel pipe, Φ108 in diameter.
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Domestic water requirement is 6 m 3/d for workshops onsite supplied via a 10 m 3 water tank next
to the elevated tank.
Figure 14-9: Elevated Water Tank
Explosive supply and management
Underground explosive bins have been built at +49 m ASL to store 3 t explosives and 7,500 pieces
of detonators, shown in Figure 14-10. The magazine of SJG Underground Mine is in normal use.
Detonator bin Explosive bin
Magazines bin
Figure 14-10: Underground explosive magazine
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Maintenance facilities
The maintenance facility (Figure 14-11) is locate d near to the portal of access ramp. The area is
about 165 m 2.
Figure 14-11: Maintenance Facility
Communications
Digital multimedia broadcasting consists of: vide o monitoring in the control centre; telephone and
cameras at important/key locations i.e., workfaces, mechatronics chambers, water pump stations, etc.;
horn loudspeakers; two-way radios, alarms and positioning sensor hold by workers; and hoist safety
control system served for service shaft.
Two special communication cables distribute to s ub-surface levels along the service shaft and
upcasts to deliver signal.
14.4 SRK comments
14.4.1 SJG Open-Pit Mine
The open pit slope monitoring and management will continue for the life of the operation. SRK
suggests that slope stability monitoring should be enhanced, and a rock mechanics study should be
carried out as soon as possible to verify the slope design parameters, to minimise the potential for
disruptions to production resulting from open pit wall deformation and slope instability.
14.4.2 SJG Underground Mine
SRK suggests Yantai Zhongjia should strengthen its daily safety training for workers and
management of Mineral Resources to ensure the mining operation could be performed as planned.
Regular patrols are recommended to validate ground support effect and find potential surface
subsidence risk as soon as possible.
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15 MINERAL PROCESSING TEST AND RECOVERY
15.1 Introduction
Yantai Zhongjia organised and funded the construction of a processing plant in the SJG Project,
Figure 15-1 and Figure 15-2. The processing plant is located about 4 km southeast to the mines. It was
put into operation in May 2011 with a throughput of 6,000 tpd.
Figure 15-1: The Location of Mining and Processing Facilities
Figure 15-2: Aerial Photo of the Processing Plant
The processing plant has a history of gold concentr ate production, using simple floatation process
or amalgamation — floatation process to produce gold concentrate. Local smelters were commissioned,
and the gold concentrate was processed into gold bullions.
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SRK did not sight any mineralogical studies or processing study data or test work. However, the
historical processing of ore from the current operation and historical production data demonstrates that
the future ore can be efficiently processed and supports the basis for the Mineral Resource, Mineral
Reserve estimation and economic evaluation of this deposit.
15.2 Technological mineralogy
15.2.1 Mineral composition and occurrence status
The mineral composition of the depos it is relatively simple. The metal minerals are mainly pyrite,
with a small amount of chalcopyrite, sphalerite, galena, magnetite, and limonite. The gold minerals are
generally native gold and electrum. The non-metallic minerals are mainly feldspar and quartz, with a
small amount of potassium feldspar, muscovite, clay minerals and carbonate minerals. The main mineral
characteristics are as follows:
Gold mineral
Microscopic observations of 30 grains of gold minerals show that the gold minerals are mainly in
breccia form (with 13 grains, accounting for 44% of t he total gold grains), followed by twig-like form
(17%), round-grains (13%), fine-vein form (7%), long-horned granules (7%), flaky form (3%), wheat
grain-shaped form (3%), and lenticular form (3%). The gold grains are mainly medium and fine
particles, and the size is generally (0.020 to 0.100) mm × (0.020 to 0.100) mm, with the smallest one of
0.006 mm × 0.010 mm and the largest one of 0.100 mm × 0.350 mm. The gold minerals mainly occur in
the pyrite crystal gaps and the crystal gaps between pyrite and gangue minerals (with 12 grains,
accounting for 40% of the total particles), followe d by wrapped by pyrite and gangue minerals (27%),
occurring in the pyrite fractures (23%) and between the pyrite and gangue minerals (10%).
Pyrite
The Pyrite is mainly pentagonal dodecahedron, followed by cubic, round-granule, amorphous and
irregular form. The particle size ranges from 0.0 5 mm to 10 mm, which is generally 2 mm to 5 mm, and
it is partially fragmented. The pyrite distributes in the cement in the form of granules, aggregates,
clumps, veins and disseminated. It mainly distributes around the gravel, and a very small amount of
pyrite veins cut through the gravel. The early-stage pyrite is fine-grained (<0.1 mm), which is not
closely related to gold mineralisation, while the late pyrite particles are larger (0.1 mm to 8 mm) with
better crystalline form and mainly are pentagona l dodecahedron, which is closely related to gold
mineralisation.
Magnetite
The magnetite is the particulate aggregate. It is distributed along the gaps of the gangue minerals,
sometimes co-existing with pyrite in the forms of emulsion intergrowth or latticed joined crystals.
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Chalcopyrite
The Chalcopyrite is granular shape with a small cont ent and shows metallic lustre. Its particle size
is small, about 0.05 mm and mostly distributed in pyrite fractures, with a small amount contained in
pyrite and gangue minerals.
Sphalerite
Sphalerite is present in xenomorphic — hypidiomorphic granular form, with a particle size of
0.02 mm to 0.08 mm. It is distributed in the pyrite crystal gaps or wrapped by pyrite and is partially
symbiotic with chalcopyrite in irregular forms.
Galena
It is an idiomorphic — hypidiomorphic granular, with quite few contents, and distributes along the
pyrite fracture.
Quartz
It is an irregular granular in the form of branched aggregate. One kind is the quartz in the protolith
that has nothing to do with gold mineralisation, and the other kind is the quartz formed by late
silicification, which is symbiotic with metal sulphide and is related to gold mineralisation.
Feldspar
The Feldspar is granulated, with a particle size of 0.1 mm to 0.3 mm, and the larger one is about
0.5 mm. It is partially etched into sericite.
Calcite
The Calcite is in fine-vein form. It is metasoma tic feldspar or fissure filling metasomatism type.
Sericite
The Sericite is in fine-scaly form, which is mai nly the product of hydrothermal metasomatic
feldspar.
15.2.2 Mineral chemical composition
In the exploration history of the SJG Project, the c onstituted elements of these minerals have been
analysed many times, and the results are quite different, indicating that the distribution of these elements
in the deposit is uneven. However, in general, go ld and silver in the ore are valuable elements for
processing recovery, while the other elements are of low contents and have no recoverable value. The
statistical results of analysis of several geological samples are shown in Table 15-1.
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Table 15-1: Statistics of Geological Sample Analysis Results
Description
Assay Result
Au (g/t) Ag (g/t) As (%) Cu (%) Pb (%) Zn (%) S (%)
Minimum 0.50 0.50 0.000910 0.001 0.002 0.001 0.14
Maximum 221.99 16.00 0.013410 0.150 0.009 0.011 5.48
Average 2.67 1.70 0.005020 0.005 0.005 0.002 1.76
15.3 Mineral processing test
The sulphide material is the main carrier mineral of the gold and silver, and exhibits good
floatability. The Jiaodong Peninsula is China ’s largest gold producing area. Most gold mines in this area
use the floatation method to produce gold concentrates, which are sold to smelters to produce gold
bullion by cyanide leaching. Before the ban on amalgamation method in the late 1990s, most processing
plants used mercury plates to pre-recover coarse gold in the grinding circuit.
The initial ore processing test work of the SJG Project was not available. However, before Yantai
Zhongjia took over the mine, several processing plants were processing the ore of the SJG Project with
single floatation flowsheet or amalgamation-floata tion flowsheet, both of which obtained good recovery.
15.3.1 Historical test work
In 2002, during the detailed survey period of the SJG Project, Yantai Mujin, the previous tenant of
the SJG Project, conducted test work on 1,091 t of ore at the nearby Wanggezhuang Processing Plant.
The ore feed rate was 5 tonne per hour ( ‘‘t/h’’) for a total of 218 hours. The test procedure was:
. Two-stage crushing in open circuit. The size of the crushing product is less than 25 mm;
. One-stage grinding in closed circuit. The fineness of the grinding product shall achieve 65%
less than 200 meshes; and
. One roughing + twice scavenging + one cleaning floatation.
The test results in Table 15-2 show that the gol d ore in the SJG Project is brittle and easy to
process, and it has good processing performance. However, the grade of the tested ore was high as 4.22
g/t, making the sample not representative.
Table 15-2: Test Work Results
Description Percentage (%) Au Grade (g/t) Au Recovery (%)
Feed 100.00 4.22 100.00
Concentrate 3.39 118.99 95.60
Tailing 96.61 0.19 4.40
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15.3.2 Laboratory test
In January 2010, to verify the processing parameters of the Songjiagou ore and provide the
technical basis for the construction of a new large-sca le processing plant, the Metallurgical Laboratory
of Yantai Jinyuan Mining Machinery Co. Ltd. (the ‘‘Jinyuan Metallurgical Lab. ’’)u n d e r t o o ka
metallurgical test work program.
Test sample
The test sample was collected from the ball mill feed conveyor of a 1,000 tpd running plant on 16
January 2010. The sample weighed 150 kg, grading 0.68 g/t Au, a particle size of –12 mm and a
specific gravity of 2.62. Its bulk density was 1.73 t/m 3.
The sample is considered by SRK to be representative of future ore, since the ore is simple. There
was no necessity to do more tests.
Response of grinding fineness of floatation
The result of grind size test work by open circuit floatation are presented in Figure 15-3. Sodium
butyl xanthate (the ‘‘SBX’’) was used for collecting gold and gold bearing minerals, and #2 oil (mainly
terpene oil) was used as the frother. The results show that the gold recovery increases as the grind size
decreases. Due to the low grade of the feed, there will be a balance between the increasing recovery and
the increased grinding cost. SRK considers this to be between 50% and 65% at –75 μm. The laboratory
recommended 50% passing 75 μm( P 50 =7 5μ m) as the optimum grind size.
Response of gravity and amalgamation
Two processes of gravity concentration followe d by floatation and mercury amalgamation were
carried out at P 65=75 μm. The equipment used for gravity separation and amalgamation is not described
in the metallurgical test report. SRK presumes it to b e shaking table and amalgamating table. The results
are shown in Table 15-3. The gravity recovery is 46% at a concentrate grade of 63 g/t Au, and 41% of
gold is recovered into amalgam, implying the presence of nugget gold and gravity recoverable gold (the
‘‘GRG’’).
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
Figure 15-3: Response of Grinding Fineness to Gold Recovery of Floatation Process
Table 15-3: Test Results of Gravity and Amalgamation
Gravity-Floatation Amalgamation-Floatation
Description Percentage
(%)
Grade
(g/t Au)
Recovery
(%)
Percentage
(%)
Grade
(g/t Au)
Recovery
(%)
Gravity/amalgamation 0.47 62.92 46.57 / / 41.47
Rougher floatation concentrate 6.37 3.81 40.37 6.25 4.11 37.78
Scavenger floatation concentrate 4.69 0.83 6.12 4.36 2.21 14.18
Tailing 88.11 0.05 6.94 89.39 0.05 6.57
Calculated feed 100.0 0.64 100.0 100.0 0.71 100.0
Closed circuit floatation
A closed circuit floatation test was conducte d at 52% passing 75 µm using SBX and #2 oil as the
collector and frother, respectively. The test results are presented in Table 15-4. The gold recovery
reaches 92.87% while the concentrate grade is 22.53 g/t Au. The test work flowsheet, Figure 15-4,
consists of one rougher, two scavengers and one cleaner.
Another floatation test was undertaken using copper sulphate (the ‘‘CuSO 4’’) as activator to
improve gold recovery, but the results did not improve.
Test results show that the ore of SJG Project is easy to process and a simple floatation flowsheet
can achieve high gold recovery. The floatation performance is good, but the nugget effect on floatation
is not detected well. Gravity recovery may be applicable for pre-recovering of nugget gold. SRK
recommends that a centrifugal separator such as Knelson Concentrator is considered.
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Table 15-4: Floatation Test Results
Description Percentage (%) Grade (g/t Au) Gold Recovery (%)
Concentrate 2.81 22.53 92.87
Tailings 97.19 0.05 7.13
Calculated feed 100.0 0.68 100.0
Figure 15-4: Closed Circuit Applied to Floatation Test
15.4 Processing flowsheet
The processing plant consists of one crushing series and two identical grinding-floatation series. A
simplified processing flowsheet of the processing plant is shown in Figure 15-5.
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Figure 15-5: Simplified Processing Flowsheet
15.4.1 Crushing
The crushing circuit includes a RoM stockpile, a coarse crushing circuit, a medium and fine
crushing circuit, and a screening circuit. The crushing process is a traditional ‘‘three-stage crushing with
one closed circuit’’ , and the ore which is not more than 1,000 mm is crushed to achieve 80% less than
12 mm (P 80 = 12 mm).
The ore is transported to the RoM stockpile at the processing plant by truck and fed into the
450 m 3 RoM hopper by the front-end loader. A heavy-duty ore feeder installed at the bottom of the
RoM hopper feeds ore to a jaw crusher for primary crushing. The crushed product is sent to the buffer
bin by the #1 belt conveyor, from where it will be fed into a cone crusher by the moving belt feeder at
the lower part of the buffer bin for secondary crushing. Ore discharged from the secondary crusher is
transported by the #2 belt conveyor to the two vibrating screens at the screening workshop for
screening. The oversize materials are transported to the buffer bins by the #3 belt conveyor for tertiary
crushing. There are two tertiary cone crushers, which are fed respectively by two moving belt feeders,
and the ore produced is also transported to the screening workshop through the #2 belt conveyor. The
fineness of the undersize material is P
80 = 12 mm, and it is sent to two 1,800 m 3 crushed ore silos by
the #4 belt conveyor.
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15.4.2 Grinding
The grinding circuit consists of two crushed or e silos, two grate ball mills and two double-spiral
classifiers, which form two identical ‘‘one-stage closed-circuit ’’grinding series, grinding the crushed ore
to 50% less than 200 meshes (P 50 =7 5 μm).
The crushed ore in the silo is fed onto the #5 belt conveyor by two electromagnetic vibrating
feeders installed in the lower part of the silo and s ent to the ball mill. The floatation potential of
hydrogen (the ‘‘pH’’) adjuster lime is evenly added to the material stream on the #5 belt conveyor. The
ball mill and the double-spiral classifier form a clo sed circuit, and the ore discharged from the ball mill
is fed into the spiral classifier for classification. The return sand from the classifier is sent back to the
mill for re-grinding. The overflow fineness is P 50 =7 5 μm, which flows into the floatation circuit by
itself.
15.4.3 Floatation
The floatation circuit includes a pulp conditioning tank and a ‘‘one rougher + two scavenger + two
cleaner ’’floatation process. The overflow from the spiral classifier flows into a conditioning tank. After
mixing with the floatation reagents, it then enters th e floatation circuit consisting of a row of floatation
cells to produce gold concentrate and tailings. The tailings are pumped into the tailings storage facility
(the ‘‘TSF’’) through the pipeline, and the concentrate is pumped into the dewatering circuit.
15.4.4 Concentrate dewatering
The floatation concentrate is pumped into a thic kener, with its overflow used as return water and
the underflow fed into the ceramic filter. The filter cake has a moisture content of less than 8% and is
stored in the warehouse.
15.5 Processing equipment
The main mineral proces sing equipment is shown in Table 15-5. The ore storage facilities, pumps
and other auxiliary equipment are not listed. As th e ore is easy to separate and the processing flowsheet
is simple, the total number of ore processing equipment is small with reasonable configuration and
stable operation. Photos of some equipment are shown in Figure 15-6.
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Table 15-5: Main Processing Equipment
No. Equipment Mode/Specification Motor Power (kW) Quantity
1 Heavy-duty ore feeder GBZ2480 45 1
2 Jaw crusher C140 200 1
3 Electric magnetic iron remover RCDB1000 3
4 Cone crusher HP500 400 1
5 Cone crusher HP500XS 400 2
6 Vibrating screen DYK3675-AT 37*2 2
7 #1 belt conveyer TD75100100 L=97 m 75 1
8 #2 belt conveyer TD75120100 L=100 m 160 1
9 #3 belt conveyer TD75100100 L=95 m 75 1
10 Ball mill MQG3645 1250 2
11 Spiral classifier 2FG-3000 30 2
12 Agitating tank BJ4.5×4.5 m 22 2
13 Floatation machine JYF/BSK-24 m 3 55 3
14 Floatation machine JYF/BS-24 m 3 37 13
15 Floatation machine JYF/BSK-16 m 3 30 4
16 Roots blower L84WD Q=176 m 3/min, P=49 kPa 215 3
17 Submerged pump 65Q-LPR 11 3
18 Reagent agitating tank BJW2×2 m 3 2
19 Computer dosing machine 16PT 1
20 Thickener NZS-18 m 5.5 1
21 Ceramic filter TCG-21 m 2 5.5 2
Figure 15-6: Photos of Processing Equipment
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15.6 Production performance
The metallurgical performance for the processing plant is summarised in Table 15-6. It should be
noted that the production in year 2021 was significantly interrupted by the Provincial Government due
to a safety production inspection. The production data shows that the ore responded well to the
conventional floatation process, and the gold recovery increases with the ore grade.
Table 15-6: Historical Processing Performances
Item Unit 2020 2021 [1] 2022 H1 2023
RoM tonnage kt 1,590 1,024 1,991 997
R o M g o l d g r a d e g / t0 . 7 00 . 6 20 . 6 20 . 5 4
Gold content in RoM kg 1,109 640 1,229 541
Concentrate production kt 46.83 28.66 68.04 26.79
RoM/concentrate t/t 33.96 35.72 29.26 37.20
Concentrate grade g/t 22.69 21.28 17.21 19.10
Gold content in concentrate kg 1,062 610 1,171 512
Gold recovery rate % 95.82 95.33 95.31 94.62
Note:
1. Processing was conducted in months January, February, April, May, and August to December.
The gold recovery and concentrate grade data of the monthly production data from July 2018 to
June 2022 is plotted in Figure 15-7. The gold recovery increases with the feed grade in a definite
functional relationship. The concentrate grade is low, likely having nothing to do with the feed grade.
Figure 15-7: Gold Recovery vs. Feed Grade and Concentrate Grade vs. Feed Grade
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SRK noted that due to the good sales market for this low-grade concentrate, the processing plant
used a relatively coarse grind to obtain high processing recovery and maintain low production costs,
which resulted in the low concentrate grade.
After long-term production and operation, Yantai Zhongjia believes that the best concentrate grade
is between 15 g/t and 25 g/t and does not consider increasing the grinding fineness (increasing the
grinding cost) to improve the concentrate grade. Increasing the grinding fineness to improve the
concentrate grade does not substantially increase the business economic benefit.
15.7 Services
15.7.1 Material and reagent supply
The daily energy, materials and reagent consumptions of mineral processing are as follows:
. Lining plate of crusher and ball mill: 0.2 kg/t;
. Lime: 1 kg/t;
. Xanthate: 100 g/t;
. #2 oil: 30 g/t;
. Water: 3 cubic meters per tonne (‘‘ m3/t’’), among which new water is 0.6 m 3/t; and
. Electricity: 24 kilowatts hour per tonne ( ‘‘kWh/t ’’).
Compared to most gold floatation plants, the above consumptions are very low. Because of
inhibitors of limestone sulphide minerals, tests and experiences have shown that it can achieve the same
recovery rate without the addition of lime.
The SJG Project is located in an active gold mining area, where the equipment, spare parts,
consumables and reagents are easy to purchase due to abundant supply.
15.7.2 Laboratory
The laboratory is adjacent to the processing plant. It has a complete set of equipment and
instruments for sample preparation, fire assay and volumetric analysis, which can fully meet the daily
production testing requirements of the processing plant.
15.7.3 Maintenance
All the processing workshops are equipped with maintenance vehicles or electric hoists. The
equipment maintenance is mainly conducted on-site. Although the maintenance workshop is built, it is
mainly used as warehouse, storing a small quantity of spare parts and consumable materials. Yantai
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Zhongjia told SRK that due to the simple process of mineral processing and high equipment level, the
maintenance workload is light. SRK observed that the workshop was clean, and the equipment was in
good condition.
15.7.4 Processing water
The processing plant has two 1,230 m 3 concrete head tanks (15 m in diameter and 7 m in height):
one is for storing new water from the Rushan River, which is mainly used for production
supplementation, ground washing, dust suppression and fire protection. The second tank is for the
storage of processing return water, with return water utilisation rates ranging from 80% to 85%.
A water pumping station is built on the bank of the Songjiagou River near Jincheng Village, which
is 2 km southeast from the processing plant, and the river water is pumped to the new water head tank
through pipelines. The clarified water from the TSF is d iverted through the culvert to the valley between
the TSF and the processing plant. A dam is built at the valley mouth next to the processing plant to
form a reservoir, which stores a large number of tailings clarified water which is pumped to the return
water head tank of processing plant. The unfiltered water from the TSF is directly pumped back to the
return water head tank through the return water ta nk at dam toe. The concentrate unfiltered water and
ground washing water of the processing plant are pumped back to the return water head tank after
sedimentation and clarification in the processing plant settling tank. SRK be lieves that the processing
plant water is well managed, and there is no shortage of water in the past and future.
15.8 Tailings storage facility
The TSF is located in a valley 2 km southeast of the processing plant. It was designed by
Shandong Gold Group Yantai Design and Research Engineering Co., Ltd. (the ‘‘Yantai Design
Institute ’’) in July 2010. The TSF was designed as a valley type, and the foundation dam was 24.6 m
high (elevation between +75.4 m an d +100.0 m), which was a permeab le dam. The tailings stockpiling
dam above the foundation dam was constructed by upstream da mming method. The final stockpiling
dam height was 24 m (elevation between +100.0 m and +124.0 m), the total dam height was 48.6 m, the
dam crest width was 6.0 m, and the dam crest length was 175.83 m. The slope of the dam toe surface
was provided with rubble prism and cut off key- wall. The total storage capacity was 9.48 million m
3,
with an effective storage capacity of 7.11 million m 3. The TSF was completed and put into use in
October 2011.
In December 2014, the Yantai Design Institute ca rried out a capacity expansion design for the
TSF. At that time, the elevation of tailings had reac hed +122 m. The original design TSF consisted of
initial dam, final stockpiling dam, flood discharge sys tem of TSF area, return water system, observation
system and management system. The expansion design was conducted to rebuild or expand these
facilities.
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The expanded TSF elevation is 36 m higher than the original design dam crest elevation of
+124 m, which is +160.0 m in total, and the total s torage capacity is increased to 42.228 million m 3,
with a newly added effective storage capacity of 22.93 million m 3. The total remaining capacity is 30.04
million m 3. At a tailings bulk specific gravity of 1.35 t/m 3, the tailings storage capacity increases 31,000
kt. Figure 15-8 shows the current status of the TSF.
Figure 15-8: TSF Photo
15.8.1 Tailings dam
The tailings dam above the foundation dam adopts upstream damming method, and a safety
platform 2 m wide is reserved for each 2 m lift, and horizontal and vertical drainage channels were
constructed.
In the expansion design, the new sub-dam is constructed after the 20 m wide safety platform is
installed at elevation of +124 m. The expansion dam consists of 12 benches (sub-dams/lifts), for each
lifting 3 m in height. The wall for each dam lift is piled w ith roller-compacted coarse tailings. The slope
of the sub-dam surface is 1:3, and the width of the dam wall is 3 m. To improve the stability of the
tailings dam, a 15 m wide safety platform is reserv ed at dam crest elevation of +136 m and +148 m, and
the total slope of the dam wall is 1:4.83.
Due to the surface of storage facility rising after e xpansion, an auxiliary dam is built up in the east
of the TSF. The auxiliary dam has masonry gravity dam as the foundation dam. The elevation of the
dam toe is +132 m, the dam height is from 13 m to +145 m, and the width of dam crest is 3 m. The dam
toe is equipped with seepage draining system. The final dam is built with earth-rock materials, the
height of the dam is 15 m, and the final elevation is +160 m.
A retaining dam is built at the upstream of the ta ilings dam to intercept the upstream valley water.
It is an impervious roller-compacted earth-rock dam. The dam was constructed with earth and stones at
the TSF site during the period of TSF construction . The elevation of the dam crest is +143.4 m, the dam
height is 23 m, and the width of dam crest is 6 m. The dam crest is used as the road for the nearby
Huangyang Village. The expansion design is to hei ghten and widen the retaining dam. A 2 m wide horse
track is set at the slope surface elevation of +130 m and +150 m respectively, and a 6 m wide horse
track is set at elevation of +143 m to be used as the road to Huangyang Village.
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15.8.2 Seepage draining system
A prism facility is arranged at the initial dam toe of the main dam, and the elevation of the prism
crest is +85 m with a crest width of 2 m. To drain and consolidate the tailings in front of the dam as
soon as possible, lower the saturation line of the final dam, improve the strength of the dam and
enhance the stability of the final dam, a MY200 circul ar plastic blind ditch is set in the final dam body
for each 4 m higher from the elevation of +100 m, and infiltration water is diverted from the dam
through DN80PE pipes.
The final dam adopts seepage drainage mattress and horizontal drainage pipe, and a row of seepage
drainage layer is installed in the dam wall every 9 m from the elevation of +124 m. The drainage pipe is
arranged along the longitudinal layout of the TSF area (perpendicular to the dam axis) with a horizontal
spacing of 20 m and a single piece length of 70 m. The inner portal of the TSF is connected to the
infiltration blind ditch, the outer outlet of the dam is connected to the horizontal drainage channel, and
the water flows into the return water tank at the back of dam. The TSF dam body has complete seepage
drainage facilities, and the dam slope drainage pipe is operating effectively. In a new flood discharge
system built, the original return water tank at the dam toe which was used as a collection tank for
clarification and seepage water, is currently only used as a return water tank for unfiltered water, and
the water will be pumped to the return water head tank of processing plant through pump station.
To drain and consolidate the tailings in front of the auxiliary dam as soon as possible, and lower
the saturation line of the final dam, a horizontal drainage system is set at the dam crest elevation of
+145 m and +151 m respectively, and the drainage facilities are arranged in line with the stockpiling
dam structure of the main dam. The slope protection a nd drainage facilities of the final stockpiling dam
are consistent with the stockpiling dam structure of the main dam. The drainage water from auxiliary
dam slope and infiltration water from the TSF flows to the collecting tank at the outside slope of initial
dam. The collecting tank is 6 m (length) × 5 m (width) × 3 m (height), with masonry structure, has two
pumps in the pump station to drain water out of th e collecting tank to the TSF without affecting the
surrounding environment.
15.8.3 Flood control and discharge system
The flood discharge system in the origin al TSF area adopted the drainage shaft — drainage culvert
— return water tank to discharge the clarified wate r in the TSF to the dam toe return water tank. The
section size of the drainage culvert is φ = 2.0 m and the length is about 1,538 m. Five framed drainage
shafts, 3.5 m diameter are built of which the No. 4 sh aft and No. 5 shaft are used for later heightening
T h eh e i g h to ft h ed r a i n a g es h a f t sa r e :H 1=1 5 m( + 8 5 m – +100 m), H2 = 18 m (+99 m –
+117 m), H3 = 12 m (+113 m – +125 m), H4 = 15 m (+120.71 m – + 1 3 5 . 7 1m ) ,H 5=1 5m( + 1 3 4m –
+149 m).
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To meet the flood discharge requirements after the expansion of the TSF, a new flood discharge
system is designed, that is, a set of flood discharge system is arranged at northern TSF area. Drainage
facilities include drainage shafts — drainage culverts — tunnels — stilling pools, which discharge the
clarified water from the TSF to the valley between the processing plant and the TSF. When the new
flood discharge system is commissioned, the original flood discharge system of the TSF will be sealed.
The expansion design utilises the existing No. 4 and No. 5 drainage shafts in the TSF, and adds a
No. 6 frame drainage shaft, 12 m in height (+147 m to +159 m). The original flood discharge culvert
portals at the bottom of No. 3 and No. 4 drainage shafts are sealed, and a new culvert is built to connect
No. 3 and No. 6 drainage shafts. The culvert section size is φ = 2.0 m, with reinforced concrete
structure.
A drainage tunnel is drilled in the western of the TSF area. The tunnel has a straight arched
straight wall with a section size of B × H = 2 m × 2.4 m, and the straight wall is 1.8 m high with a top
arch angle of 124°. The length of the tunnel is 739.2 m, and the exit elevation is +103 m. It is
connected to the original culvert of the TSF area through the new culvert. The tunnel exit is located
inside the valley to the east of the processing plant, and the outlet is connected to an open channel,
which leads the overflow water flows into the return water pond next to the processing plant. A return
water pump station is located next to the pond to pump the clarified back water to the return water tank
in the processing plant.
The distance from the drainage shaft to each a uxiliary jetty head can meet the requirements of
tailings clarification distance. The TSF is a third-class storage facility, and the drainage system can meet
the flood discharge capacity for once in 500 years. Currently, the new flood discharge system has been
activated and the original drainage culvert has been sealed.
The slope of the tailings dam is provided with ver tical and horizontal drainage ditches. A vertical
drainage ditch is set at 15 m intervals. The tailings dam wall is arranged with a horizontal drainage ditch
for each two-bench sub-dam (vertical height of 6 m). The drainage ditch is a masonry structure, and the
bottom of the ditch is 300 mm higher than the bottom of the dam abutment interceptor ditch and they
are connected to discharge the rainwater from the slope of the dam and the seepage water from the
drainage pipe to the interceptor ditch of the dam abut ment. With the extension of the stockpiling dam,
the dam abutment interceptor ditch is set up along na tural terrain of the joint slope between the two dam
abutments and two sides of the slope, and the ditch is connected to the interceptor ditch of the original
dam abutment from the dam crest down. It is used to discharge water seepage and intercept the
rainwater from the slopes to prevent rainwater from directly scouring the dam slope.
15.8.4 Tailings discharging system
The tailings are pumped to the tailings mai n dam through the tailings pump station in the
processing plant. The main tailings pipe is laid along the axis of the tailings dam. The slurry branch
pipe is laid perpendicular to the main pipe with a horizontal interval of 20 m. The branch pipe is laid
along the dam slope in the TSF. They alternately distr ibute and evenly discharge tailings along the axis
of the dam to maintain the uniform rise of the dam bod y. After filling up, the main pipeline is elevated,
and then the next-level sub-dam will be piled up.
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15.8.5 Tailings disposal
The waste and tailing are handled and proce ssed by the independent third party for raw
construction and ceramics material and finally achieve the goal of zero discharge.
15.8.6 Safety monitoring facilities and management
In accordance with the design a nd safety management requirements, the TSF has established a
sound safety management system with an online monitoring system, including a dam displacement
monitoring system, and saturation line mon itoring system and a safety warning facility.
The TSF is well constructed, managed and operated, and has acquired a safety production licence
from the government safety supervision agency.
15.9 Conclusions a nd recommendations
The ore of the SJG Project is low-sulphide gold ore. The historical ore processing production
practice and the processing test results show that th e gold mineral and gold carrier minerals have good
floatability, and a simple floatation flows heet can achieve a recovery rate over 90%.
The mineralogy test work, the gravity tests and the amalgamation tests have confirmed the
presence of coarse gold particles. There is no systematic study on the loss of coarse gold in floatation
tailings. SRK recommends conducting on-site gravity separation tests to asse ss the ability to recover
gold from the floatation production tailings at the processing plant.
The processing plant is well constructed, with reasonable equipment configuration, reasonable
process, stable operation and good management. Historically, the actual ore processing capacity is about
1,600 ktpa, it shows a relationship between gold recovery rate (‘‘ y’’) and ore grade ( ‘‘x’’): y = –22.802x
2
+ 36.418x + 81.464.
The total storage capacity of the TSF is 42.28 million m 3, and the TSF is well constructed and
managed. For a production capacity of 1,600 ktpa, the remaining service life of mine is about 10 years
as of 30 June 2023.
A possible cost reduction is lime, the floatation reagent. SRK recommends not using lime to float
but under natural pH conditions.
SRK recommends undertaking test work and using gravity separation equipment for recovery test
on site to decide whether gravity separation would be appropriate.
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16 PROJECT INFRASTRUCTURE
16.1 Roads
The open pit, underground mine, processing plant, and office building are easily accessed via
existing paved roads. The concrete paved road shown in Figure 16-1 connects the mining area and the
processing plant over a distance of about 4 km. The site layout is shown in Figure 16-2.
Figure 16-1: Concrete Paved Road Connecting Mining Area and Processing Plant
Figure 16-2: Simplified General Layout of SJG Project
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16.2 Power supply
Electricity is primarily supplied by the 35 kV/10.5 kV Dahedong Substation (Figure 16-3) in
Dahedong Village, Wanggezhuang Town, 5 km from the mine, and delivered over dedicated power
lines. The voltage of the substation is flexible and can be switched to 10 kV, 6 kV, or 380 volts as
required by the mines. The power supply is adequate to support the development of SJG Project.
Secondary power supply is supplied by the local 10 kV electricity power line. There is an existing 120
kW diesel generator (Figure 16-4) on site to supply power in case of power shortage.
Figure 16-3: Dahedong Substation
room for diesel generator diesel generator
Figure 16-4: Stand-by Power Supply
16.3 Water supply
Water for the processing plant is extracted from the Rushan River, which flows by about 2 km east
of the SJG Project area. A pump station (Figure 16-5) has been built on the bank of Songjiagou River,
Jincheng Village, about 2 km west of the processing plant and supplies water for the processing plant ’s
production demand. The Songjiagou River is a tributary of Rushan River.
Water for domestic use is sou rced from a local ground well.
The water supply is adequate to su pport the mines and the processing plant. Additional information
is detailed in section ‘‘15.7.4 Processing water ’’.
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p u m ps t a t i o n p u m pi np u m ps t a t i o n
Figure 16-5: Pump Station for Processing Production
16.4 Communication
The SJG Project area has a well-developed comm unication system with a wireless network, cable
network, and fixed-line teleph one network already in operation.
16.5 Community and office
Yantai Zhongjia values the relationship between the mine and the community, is actively involved
in the infrastructure construction (i.e., roads, bridges, water and power plants), and organises local
citizens to participate in industr ial and standardised production.
An office building shown in Figure 16-6, which was constructed in 2012, has already been put into
use.
Overall, the work environment and operational facilities are in good condition.
Figure 16-6: Off-site Office Building
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17 MARKET STUDIES AND CONTRACTS
The gold market is globally mature . Smelters and refineries with good reputations exist all over the
world and demand for gold remains high.
There is a large consumer market for gold and a large number of gold smelters in China, often
sellers can negotiate good payment terms.
17.1 Sales record
Gold sales recorded in the last three years and H1 2023 are shown in Table 17-1. It should be
noted that the production in year 2021 is significantly interrupted by the Provincial Government due to
safety production inspection.
Table 17-1: Gold Sales Record
Product Unit 2020 2021 [1, 2] 2022 H1 2023
Gold kg 987.4 645.5 1,084.9 468.1
Gold koz 31.7 20.8 34.9 15.1
Notes:
1. Production in year 2021 was significantly interrupted by the Provincial Government due to safety production
inspection.
2. Selling was conducted in months January, February, April to December.
17.2 Gold price
The World Bank monthly gold price data since July 2018, which are 99.5% fine, London afternoon
fixing, average of daily rates, were used by SRK to draw the trend line shown in Figure 17-1. The
exchange rate of converting United States Dollar (the ‘‘USD’’) to RMB since July 2018 is shown in
Figure 17-2, based on the open data of Bank of China. Summary statistics of gold prices and exchange
rates in the last 36 months are presented in Table 17-2. Based on publications of the United States
Geological Survey ( ‘‘USGS ’’), high level of gold price in the last two years are mainly caused by
several factors:
. gold demand increased to safe-haven buying as a result of the global COVID-19 pandemic;
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. demand from central banks and investors increased;
. the United States Federal Reserve Board cut interest rates; and
. trade negotiations halted between the United States and China.
Gold price forecasts of Consensus Market Forecasts (the ‘‘CMF’’) delivered in June 2023 are
shown in Table 17-3. Gold Future — Quotes of Chicago Mercantile Exchange (the ‘‘CME’’) delivered
in June 2023 are shown in Table 17-4 after considered the prudent assumptions by the Company. At the
Effective Date, the price forecasts of CMF at middle level were used for economic analysis, while the
long-term forecast of CMF at middle level was used for Mineral Reserve estimate. The gold price was
converted to RMB/g by considering an exchange rate of 6.69 RMB/USD (yearly mean value in Table
17-2).
As a special commodity, the price of gold is greatly influenced by external factors. SRK suggests
conducting periodically study on gold demand and supply as well as the price. As at the Effective Date,
the Mineral Reserves tonnage is moderately sensitive to the gold price, as shown in ‘‘13.4.7 Mineral
Reserve sensitivity ’’and ‘‘13.5.6 Mineral Reserve sensitivity ’’.
Figure 17-1: Gold Price Trends Since July 2018
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Figure 17-2: Exchange Rates of RMB/USD Since July 2018
Table 17-2: Summary Statistics of Exchange Rate and Gold Price
Exchange Rate (RMB/USD) Gold Price (USD/troy oz) Gold Price (RMB/g)
Item Monthly Yearly Monthly Yearly Monthly Yearly
Month numbers 36 36 36 36 36 36
Minimum 6.34 6.41 1,664.45 1,598.60 359.67 362.10
Maximum 7.19 7.05 1,999.77 1,850.03 447.69 409.15
Standard deviation 0.2605 0.2068 82.3803 56.0118 23.9339 10.6180
Mean 6.68 6.69 1,837.91 1,796.14 394.48 385.71
Degrees of freedom 35 35 35 35 35 35
Probability 95% 95% 95% 95% 95% 95%
Lower limit 6.59 6.62 1,810.03 1,777.19 386.38 382.12
Upper limit 6.76 6.76 1,865.78 1,815.09 402.57 389.31
Probability 99% 99% 99% 99% 99% 99%
Lower limit 6.56 6.59 1,800.51 1,770.71 383.61 380.89
Upper limit 6.79 6.78 1,875.30 1,821.57 405.34 390.53
Table 17-3: Gold Price Forecasts of CMF (USD/oz)
Price Level 2023 2024 2025 2026 2027 post-2027
High 2,170 2,221 2,417 2,161 2,172 1,960
Middle 1,900 1,880 1,710 1,620 1,580 1,450
Low 1,676 1,569 1,472 1,425 1,387 1,355
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Table 17-4: Gold Price Forecasts of CME
Item Unit 2023 2024
Price in USD USD/oz 1,993 1,949
Exchange rate USD/RMB 0.1475 0,1494
Price in RMB RMB/oz 13,506 13,040
Price in RMB RMB/g 420.09 405.59
17.3 Contracts
Three refining contracts have been reviewed by SRK. Refining charge and payable gold are shown
in Table 17-5. Generally, these contracts include the following stipulations:
. Inclusions of stone, sand, bags, or other debris are not allowed in the gold concentrate; any
volume of impurities will be deducted from the total t onnage processed.
. Concentrate sent to the smelter should have an ev en grade distribution; otherwise, the refiner
has the right to charge according to the minimum grade.
. At least 70% of the gold concentrate should pass –200 meshes in size; otherwise, refiner has
the right to treat it as lump ore and charge RMB60/t for grinding.
. Refiner picks up the gold concentrate at the mine and bears the cost for delivery.
. The gross refiner charges varied with time between RMB150 and 200 per tonne of
concentrate for processing but compensations for sulfuric acid ( ‘‘CSA’’) was returned from
refiners. In a contract (contract number GD-8.4-05-014-20211010-SW), the gross refining fee
is RMB200 per ton and the CSA is RMB150 per ton and the CSA is further revised as
follows:
— in the case of sulfuric acid price greater than RMB400 per tonne and not greater than
RMB1,000 per tonne and, the CSA = (sulfuric acid price – 400) × 35% + 100;
— in the case of sulfuric acid price not-greater than RMB400 per tonne, the CSA = 100;
and
— in the case of sulfuric acid price greater than RMB1,000 per tonne, the CSA is
renegotiated.
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The gold produced by the refiners is returned to Yantai Zhongjia and then sold to the market by
Yantai Zhongjia itself. A purchase contract of raw gold, which was signed between a precious metal
refining company and Yantai Zhongjia on 1 January 2021, has been reviewed by SRK.
Table 17-5: Key Information of Available Refining Contracts
Contract Number HBYL20-Y0203
GD-8.4-05-016-
20211010-SW zj20211008jjf
GD-8.4-05-016-
20221010-SN
Sign Date 1 April 2020 10 October 2021 18 October 2021 10 October 2022
Gross Refining Cost
(RMB/t dry concentrate) 150 200 200 200
Concentrate Grade
(g/t Au) Payable Gold (%) Payable Gold (%) Payable Gold (%) Payable Gold (%)
6.00– 9.99 / 80 / 80
10.00– 14.99 85 85 85 85
15.00 –17.99 91 91 91 91
18.00 –19.99 92 92 92 92
20.00 –29.99 93 93 93 93
30.00 –39.99 94 94 94 94
40.00 –49.99 95 95 95 95
50.00 –59.99 96 96 96 96
>=60.00 97 97 97 97
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18 ENVIRONMENTAL, PERMIT, SOCIAL AND COMMUNITY IMPACT
18.1 Objective
The objective of this QPR is to identify and/or verify the existing and potential Environmental,
Social, Health and Safety (the ‘‘ESHS ’’) liabilities and risks, and assess any associated proposed
remediation measures for the SJG Project.
18.2 ESHS review process, scope and standards
The process for the verification of the environmental compliance and conformance for the SJG
Project comprised a review and inspection of the SJG Project ’s environmental management performance
against:
. Chinese national environmental regulatory requirements; and
. Equator Principles (World Bank/Inte rnational Finance Corporation (the ‘‘IFC’’)
environmental and social standards and guidelines) and other internationally recognised
environmental management practices.
18.3 Status of ESHS approvals and permits
The details of the Environmental Impact Assessment (the ‘‘EIA’’) reports and approvals for the
SJG Project are presented in Table 18-1. The det ails of the Water and Soil Conservation Plan (the
‘‘WSCP ’’) reports and approvals for the SJG Project are presented in Table 18-2.
Table 18-1: Details of EIA Reports and Approvals
Gold Mine Prepared by Production Date Approved by Approval Date
SJG Open-Pit Mine Shandong Academy of
Environmental Science
December 2014 Shandong Environmental
Protection Bureau
26 January 2015
SJG Underground
Mine
Shandong Academy of
Environmental Science
April 2015 Shandong Environmental
Protection Bureau
5 May 2015
Table 18-2: Details of WSCP Reports and Approvals
Gold Mine Prepared by Production Date Approved by Approval Date
SJG Open-Pit Mine Zhaozhuang Hydrology
Survey and Design Institute
February 2017 Shandong Water
Resources Bureau
10 March 2017
SJG Underground
Mine
Weihai Hydrology Bureau October 2014 Shandong Water
Resources Bureau
7 October 2014
18.4 Environmental conformance and compliance
SRK notes that the EIA reports and WSCP reports for the SJG Project has been compiled in
accordance with relevant Chinese laws and regu lations. SRK has reviewed these documents and
conducted an environmental site visit against recognised international industry environmental
management standards, guidelines, and practices. During the site visit, the SJG Project was generally
being developed and/or operated in accordance with its approval conditions.
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In the following sections, SRK provid es comments in respect to the SJG Project’ s existing and
proposed environmental management measures.
18.5 Key ESHS Aspects
Land disturbance
The WSCP reports for the SJG Project estimated th at it will lead to land disturbance area of 78.36
hectares ( ‘‘ha’’) for the SJG Open-Pit Mine and 4.78 ha for the SJG Underground Mine. The disturbed
land estimates in the WSCP reports are generally consistent with SRK ’s observation at the time of this
site visit. No current surveyed documents of the estimated areas of land disturbance for the SJG Project
have been sighted as part of this review. SRK observed that some of the slopes in the open pit area are
very steep, and Yantai Zhongjia states that some mitigation measures including slope cutbacks will be
conducted in the near future to prevent the potential slope failures.
SRK recommends that the operational areas of land disturbed and progressively rehabilitated for
the SJG Project be surveyed and recorded on an ann ual basis, as well as slope stability monitoring.
Flora and fauna
The development of mining may result in impacts to or loss of floral and fauna habitats by
landslides, or stripping. Where these potentia l impacts to flora and fauna are determined to be
significant, Yantai Zhongjia shou ld propose effective measures to r educe and manage these potential
impacts. SRK notes that the SJG Project area is orig inally characterised by gently undulating hills, and
overall topography slopes downward from west to east. The highest elevation is about 140 m ASL and
the lowest is 78 m ASL. The main vegetation comprises Japanese red pines, oaks, black locusts, apple
trees, pear trees, lespedeza, etc. Animals including hedgehogs, lepus capensis, sparrows, magpies, snakes
and frogs live within the mining area. According to t he EIA reports for the SJG Project, the two mines
are not located within natural reserves, and no endangered wild animals or plants have been found.
Yantai Zhongjia ’s EIA reports contain proposed measures fo r controlling and monitoring soil erosion
and minimising loss of flora and fauna habitat. Thes e proposed measures include topsoil salvaging and
reuse, limitations on the area disturbed by SJG Proj ect, and revegetation of the industrial area. Yantai
Zhongjia has planted trees and set up slope protection and adopted other measures to control and
monitor soil erosion and minimise loss of flora and fauna habitat.
Waste rock and tailings management
SRK observed a temporary waste rock dump (the ‘‘WRD’’) next to the mining area and no records
of the rates and volumes of waste rock backfilled/stored for the SJG Project have been sighted as part of
this review. Yantai Zhongjia informed SRK that all of the waste rock from mining was reused for
construction material for roadway, retaining walls , and swales or for sale to other off-site construction.
The capacity of the operational TSF is expanded from 7.1 million m
3 to 42.2 million m 3 in 2016.
Yantai Zhongjia reported that the tailings from the pr ocessing plant are discharged into the operating
TSF. SRK noted that a water retaining pond was constructed and the dam at the operating TSF was
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reinforced by rocks at the time of SRK ’s site visit. Yantai Zhongjia states that the TSF has installed a
supernatant liquid returning system to the processing plant to save water resources, stormwater discharge
pipe system, and online phreatic monitoring system for the dam safety. During the time of 2019 site
visit, SRK also noted that the experime nt of tailings reuse was in the progress.
SRK has not sighted a comprehensive geochemical/acid rock drainage (the ‘‘ARD’’) assessment for
the waste rock and tailings. However, the EIA reports states that a toxic leaching test has been
undertaken on the waste rock. The EIA report states that the waste rock is categorised as general
industrial solid waste, and leaching liquid from thi s waste rock meets all relevant standards and the
discharged leaching liquid will not impact the water environment.
Solid waste management
The solid-waste types for the SJG Project comprise scrap metal and municipal solid waste. At the
time of the site visit, these solid wastes were genera lly being managed in a contr olled manner. For each
waste type, there were designated collection and storage points around the SJG Project. SRK observed
that scrap iron was being collected and stockpiled in a number of designated areas prior to being
disposed. During the site visit, municipal solid-w aste collection points were installed in designated
areas, and all the municipal solid waste is collected in designated areas and disposed of offsite. Overall,
these project sites had good housekeeping.
Water management
The potential impacts of SJG Project to surface water and groundwater are due to the direct
discharge of untreated domestic wastewater or untreated mine water/processing water into the
environment, or infiltration of leach from the w aste rock dumps and tailings into the ground. Mine
water from the mines is collected and treated by sedimentation tank, and it is reused for mining and dust
depression. The water supplies for the ore processing are sourced from the Rushan River, which is a
seasonal river located about 2 km from the east border of the SJG Project area. Yantai Zhongjia states
that supernatant liquid from the TSF is pumped back to the processing plant for reuse, by which water
can be saved significantly. Potable water for all sta ff is supplied from the local municipal water plant.
During the rainy season when excessive mine water comes out of the mines, the mine water is
treated by sediment pond before discharged int o the environment. There is an existing domestic
wastewater treatment plant on site, and all treated domestic wastewater is reused for site irrigation.
SRK observed the water/flood collection system constructed for the TSF and mine site. However,
SRK has not sighted any operational water monitoring report and/or plans for the SJG Project at the
time of the site visit.
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Figure 18-1: On-site Water Sprinkling
Air emissions
The fugitive dust emission sources for the SJG Proj ect are mainly from blasting, mining, loading,
ore crushing and screening, wast e rock storage and handling, and m ovement of vehicles and mobile
equipment.
The EIA reports provide the following proposed site dust management measures:
. Collect dust in the crushing and processing workshop; and
. Water sprinkling of the mining area, waste rock loading area and roads.
Yantai Zhongjia stated that there are water tru cks on the mining site, as shown in Figure 18-1.
SRK noticed that dust collectors were installed in the processing plant.
Noise emissions
The main sources of noise emissions for the SJG P roject are blasting, rock drills, loaders,
processing equipment, mobile equipment, air compressors, and other noise-making equipment and
machinery.
The EIA reports state that the noise emissions from normal production (not including blasting) are
within the allowed limits. SRK observed that the processing equipment is installed in enclosed rooms
and that warning signs for using sound insulating earmuff in the processing plant areas are clearly
posted. Other measures to minimise the impact of nois es on the environment include installing vibration
and noise reduction devices, installing muffler on air compressors, setting up the speed limit for
vehicles, conducting explosions in the daytime. No operational noise monitoring report or plans have
been sighted as part of this review.
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Hazardous materials management
SRK noted that some maintenance works was conducted in the yard of the processing plant and
there are a number of lubricant drums stored in the workshop of the processing plant. SRK sighted that
the waste oil was stored in a separate shed. Yantai Zhongjia stated that blasting is under the control of
department of public safety. During the site visit, SRK observed the processing reagents are stored in
the workshop of the processing plant without secondary containment.
Environmental protection and management plan
The EIA reports provided the structure and scope for an operational Environmental Protection and
Management Plan (the ‘‘EPMP ’’), including the site’ s proposed environmental monitoring program and
is in line with Chinese requirements. However, a fu lly functioning and documented operational EPMP
has not yet been developed and implemented for the SJG Project. The environmental monitoring
program proposed in the EIA reports specified the monitoring points, analysis items, and monitoring
frequency and methods. The proposed monitoring items includes domestic wastewater, waste gas,
groundwater, noise, and solid waste.
Site closure planning and rehabilitation
The recognised international industry practice for managing site closure is to develop and
implement an operational site closure planning process and document this through an operational closure
plan. While this site closure planning process is not specified within the Chinese national requirements
for mine closure, the implementation of thi s process for a Chinese mining project will:
. Facilitate achieving compliance with these Chi nese national legislative requirements; and
. Demonstrate conformance to recognised international industry management practices.
No comprehensive site closure plan was provided to SRK for review, but SRK was provided with
a Land Reclamation Plan/approval and a Mine Site Geological Environment Protection and
Rehabilitation Plan/approval for SJG Open-Pit Min e and SJG Underground Mine respectively. These
sighted plans generally provide the following in respect to the proposed site closure and rehabilitation
measures:
. Land Reclamation Objective — The land reclamation programme is aimed at rehabilitating
land disturbed by mining operations, to control soil loss and conserve the ecological
environment.
. Geological-Environment Rehabilitation — Measures will be taken to mitigate geological
hazards, especially landslides during a raining season, including slope cutbacks during open
pit mining or backfilling steep slope area with tailings after the completion of the open pit
and underground mining.
. Top-Soil Stripping — Topsoil will be stripped from the mining and processing sites, waste
rock dump areas, and infrastructure areas an d then stockpiled for reuse in rehabilitation.
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. Progressive Rehabilitation — Rehabilitation will be conducte d progressively with mining
activity. In addition, any farmland disturbed sh all be returned to agricultural use at minimum
crop productivity whenever possible.
. Industrial and TSF Areas — At the time of project completion, the associated land will be
rehabilitated by covering with topsoil and seed s to allow for revegetation. The species to be
used will be local perennials that are capable of growing in the local conditions of the mine
sites.
. Rehabilitation Monitoring — Monitoring will be carried out throughout the SJG Project
lifetime and for a number of years after closure.
. Environmental Bonds — According to the related Chinese regulations, a Land Reclamation
bond and a Geological Environment Rehabilitation bond should be paid for each licenced
mine site. Phased bond payment receipts at the current stage, for the two mines were sighted
by SRK, and a full payment at each mine site will be made in the future accordingly.
SRK notes that the above propos ed approach to site rehabilitation is generally in line with the
relevant recognised Chinese industry practices, and Figure 18-2 was provided to SRK as an evidence for
progressive rehabilitation. According to the Chinese legal requirements, a mine geological environment
treatment and restoration fund account should be established by the mine. Yantai Zhongjia provided
SRK with a document which shows RMB3,289,320 and RMB500,000 are deposited in this account for
SJG Open-Pit Mine and SJG Underground Mine, respectively.
Figure 18-2: Revegetation on the Open Pit Wall of Mining Area
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Occupational health and safety
SRK has reviewed the Safety Assessment Reports as provided by the SJG Project and is of the
opinion that the reports cover items that are generally in line with recognised Chinese industry practices
and Chinese safety regulations.
Fundamental operational occupational health and safety (the ‘‘OHS’’) management systems and
procedures have been developed for the SJG Project. The OHS management systems and procedures
cover basic safety production manag ement for drilling, transportation, ventilation, explosive storage, and
fire and flood prevention. In addition, the safety assessment report for the open pit activity provides
safety management measures including open pit mining, flood and fire prevention, explosion, and
transportation. SRK notes that these proposed safety management measures could be the basis for
operational OHS management systems and procedures. Figure 18-3 shows the typical on-site OHS
boards to improve the people ’s awareness in regard to OHS.
Figure 18-3: On-site OHS Boards
SRK notes that in the last few years, some mining or processing related injuries occurred in the
SJG Project site, the numbers of which were summar ised in the Table 18-3. It is suggested that Yantai
Zhongjia may need to put more efforts on the OHS management. However, overall the OHS
management is in line with Chinese mining industrial practices.
Table 18-3: Historical OHS Records
Year Near Miss Minor Serious Fatality Total
2020 — 2 —— 2
2021 — 2 —— 2
2022 ——— 22
H1 2023 —————
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Social aspects
The general surrounding land use mainly comprises forest and agriculture land.
The main administrative body for the SJG Proj ect is the Provincial Government, with some
delegation of environmental regul ation to Yantai City and Muping District. SRK has not sighted any
historical or current non-compliance notices and/or other documented regulatory directives in relation to
the development of the SJG Project ’s mines and processing operations. No cultural heritage sites were
identified within the SJG Project area.
The EIA reports for the SJG Project provided several public participation surveys for project
development. The survey results s howed positive support for the SJG Project. Yantai Zhongjia maintains
good relationships with the local communities. Jo b opportunities have been provided to the local
residents including truck drivers, and workers in the mining area and processing plant. Those residents
living within the SJG Project area or to be impacted by the mining activity have been relocated with
proper compensation, as well as apartment units, as shown in Figure 18 –4. However, noise and waste
rock were raised by the local residents as the key environmental concerns for the SJG Project ’s
development.
SRK has not sighted any documentation in rela tion to any actual or potential impacts of non-
governmental organisations on th e sustainability of the SJG Project.
Figure 18-4: Apartment Layout for the Relocated Residents
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18.6 Evaluation of environmental and social Risks
The sources of inherent environmental risk are p roject activities that may result in potential
environmental impacts. These project activities h ave been previously described within this QPR.
The environmental risks for the SJG Project are:
. Land disturbance and steep side slope;
. Poor water management; and
. Dust emission.
The above environmental risks are categorised as moderate/tolerable risks (i.e., requiring risk
management measures). In addition, Yantai Zhongjia is of the view that t he environment issues
identified above will be under consideratio n and resolved in the foreseeable future.
Based on the review of the information provide d and the site visit observations, it is SRK ’s
opinion that the environmental risks for SJG Project are generally being managed in accordance with
Chinese national requirements.
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19 CAPITAL INVESTMENT AND OPERATING COSTS
19.1 Introduction
The deliverable of this section is to provide readers with independent opinions of SRK about the
SJG Project ’s capital costs ( ‘‘Capex ’’) and operating costs (‘‘ Opex’’).
19.2 SJG Open-Pit Mine
19.2.1 Sunk Capex
The SJG Open-Pit Mine is a producing mine. Many costs have been expended as at the Effective
Date and these expended costs were treated as sunk Capex. The original value and net value of sunk
Capex are shown in Table 19-1, as of 30 June 2023.
The depreciation and amortization ( ‘‘DA’’) calculation of sunk Capex is shown in Table 19-2. The
residual values are about RMB8.4 million.
Table 19-1: Summary of Sunk Capex for SJG Open-Pit Mine ( ’000 RMB)
Item Original Value Net Value
Property, plant and equipment 405,785 254,300
Buildings ——
Plant and machinery 186,635 82,491
Office equipment and furniture 4,586 541
Motor vehicles 7,229 2,757
Mining infrastructures 203,241 164,866
Leasehold improvements 4,094 3,645
Intangible assets 133,765 105,137
Mining right 133,257 104,766
Other intangible assets 508 371
Right-of-use assets 219,533 114,361
Land lease 124,937 70,356
Buildings 94,596 44,005
Total 759,082 474,619
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Table 19-2: DA Calculation of Sunk Capex for SJG Open-Pit Mine ( ’000 RMB)
Item Total H2 2023 2024 2025 2026 2027 2028 2029 2030 2031
Depreciation 289,900 10,998 23,135 27,699 40,216 39,898 39,250 38,877 38,419 31,409
Amortization 175,493 3,093 7,232 12,152 25,619 25,541 25,510 25,518 25,518 25,309
Total 465,393 14,091 30,368 39,851 65,835 65,440 64,760 64,395 63,936 56,718
19.2.2 Initial Capex
SRK was told by Persistence Resources there will be no additional capital expenditure to increase
the production capacity to 3,300 ktpa, as both the ex ceeding capacities for mining operations and
processing operations will be the respons ibilities of independent third-parties.
SRK agreed that there is no need to spend additiona l capital to expand the production capacity for
the mining and processing operation.
19.2.3 Sustaining Capex
SRK was provided with a sustaining Capex plan, which is shown in Table 19-3.
19.2.4 Working capital
The working capital as at the Effective Date is about RMB213 million. The working capital
forecasts were set to 25% of operating costs at each production year. Working capital forecasts are
shown in Table 19-4.
Table 19-3: Investment Plan for SJG Open-Pit Mine ( ’000 RMB)
Item Total H2 2023 2024 2025 2026 2027 2028 2029 2030 2031
Closure and
rehabilitation 8,749 ——— 1,458 1,458 1,458 1,458 1,458 1,458
Drilling of 26 holes 4,700 — 4,700 ———————
Development of
new mining site 64,893 25,171 34,877 4,845 ——————
Water drainage system 500 500 ————————
Mining equipment 4,000 4,000 ————————
Auxiliary facilities 4,000 4,000 ————————
Sustaining costs 41,197 ——— 6,896 6,906 6,887 6,884 6,832 6,792
Total 128,040 33,671 39,577 4,845 8,355 8,364 8,345 8,342 8,290 8,250
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Table 19-4: Estimate of Working Capital for SJG Open-Pit Mine (’ 000 RMB)
Item H2 2023 2024 2025 2026 2027 2028 2029 2030 2031
Start value 212,582 34,026 33,723 38,606 57,470 57,552 57,394 57,366 56,929
End value 34,026 33,723 38,606 57,470 57,552 57,394 57,366 56,929 56,600
Increments (178,556) (303) 4,883 18,865 81 (158) (28) (436) (330)
Table 19-5: Mining Cost Records for SJG Open-Pit Mine
Item 2020 2021 2022 H1 2023
Annual Cost (RMB/a)
Workforce employment 19,159,553 15,045,308 26,716,685 14,205,515
Consumables 38,506,788 22,397,547 36,255,224 14,091,391
Fuel, electricity, water and other services 41,889,107 40,352,318 55,473,574 32,866,096
On and off-site administration 5,870,122 6,307,587 9,990,756 3,798,193
Environmental protection and monitoring 37,273 208 1,014 492
Transportation of workforce 616,502 457,880 282,709 244,393
Product marketing and transport ————
Non-income taxes, royalties and other
governmental charges 15,247,115 11,324,818 18,541,799 8,788,868
Contingency allowances 7,457,354 5,045,829 4,231,996 2,822,965
Total 128,783,814 100,931,495 151,493,757 76,817,912
Unit Cost (RMB/t RoM)
Workforce employment 12.77 14.85 14.05 14.92
Consumables 25.67 22.11 19.07 14.80
Fuel, electricity, water and oth er services 27.92 39.83 29.18 34.51
On and off-site administration 3.91 6.23 5.26 3.99
Environmental protection and monitoring 0.02 0.00 0.00 0.00
Transportation of workforce 0.41 0.45 0.15 0.26
Product marketing and transport ————
Non-income taxes, royalties and other
governmental charges 10.16 11.18 9.75 9.23
Contingency allowances 4.97 4.98 2.23 2.96
Total 85.84 99.62 79.69 80.66
APPENDIX III SRK REPORT
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Unit Cost (RMB/g gold produced)
Workforce employment 22.47 26.89 28.63 35.44
Consumables 45.16 40.02 38.85 35.16
Fuel, electricity, water and oth er services 49.13 72.11 59.45 82.00
On and off-site administration 6.88 11.27 10.71 9.48
Environmental protection and monitoring 0.04 0.00 0.00 0.00
Transportation of workforce 0.72 0.82 0.30 0.61
Product marketing and transport ————
Non-income taxes, royalties and other
governmental charges 17.88 20.24 19.87 21.93
Contingency allowances 8.75 9.02 4.54 7.04
Total 151.05 180.36 162.36 191.66
19.2.5 Opex records
A summary of cash costs, which excludes the depreciation, amortisation and financial costs from
the total costs, is shown in Table 19-5. It should be noted that:
. the costs are combination of mining, processing and administration; and
. production in year 2021 was significantly interrupted by the Provincial Government due to
safety production inspection.
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19.2.6 Opex forecasting
Contractor mining was terminated in January 2021, as required by the Provincial Government for
safety reasons, which makes the breakdown of opera ting costs materially changed, especially for those
related to workforce employment, consumables and fuel, electricity, water and other services. At the
Effective Date, mining cost forecasts of SRK were derived after clarification with the management of
Yantai Zhongjia for the practical operation without the involvement of contractors. The results are
shown in Table 19-6.
Table 19-6: Mining Cost Forecasts for SJG Open-Pit Mine
Item Unit Mining
Mining rate ktpa 3,300
Workforce employment RMB/a 8,100,000
Consumables RMB/a 36,473,684
Fuel, electricity, water and other services RMB/a 2,027,368
On and off-site administration RMB/a —
Environmental protectio n and monitoring RMB/a —
Transportation of workforce RMB/a —
Product marketing and transport RMB/a —
Non-income taxes, royalties and other governmental charges RMB/a —
Contingence allowance RMB/a 3,000,000
Grand total RMB/a 49,601,053
Fixed costs RMB/a 11,460,000
Variable costs RMB/a 38,141,053
Average total RMB/t mined 15.03
Fixed costs RMB/t mined 3.47
Variable costs RMB/t mined 11.56
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Forecasts of processing and administration costs are shown in Table 19-7.
Table 19-7: Processing and Administration Costs ’ Forecasts for SJG Project
Item Unit Processing Administration
Throughput ktpa RoM 1,980 1,980
Workforce employment RMB/a 14,474,000 9,883,000
Consumables RMB/a 31,540,000 —
Fuel, electricity, water and other services RMB/a 40,842,000 139,000
On and off-site administration RMB/a 209,000 1,421,000
Environmental protection and monitoring RMB/a 15,000 —
Transportation of workforce RMB/a 13,000 748,000
Product marketing and transport RMB/a ——
Non-income taxes, royalties and other
governmental charges RMB/a 83,000 3,024,000
Contingence allowance RMB/a 1,349,000 1,350,000
Grand total RMB/a 88,525,000 16,565,000
Fixed costs RMB/a 18,150,000 14,816,000
Variable costs RMB/a 70,375,000 1,749,000
Average total RMB/t RoM 44.71 8.37
Fixed costs RMB/t RoM 9.17 7.48
Variable costs RMB/t RoM 35.54 0.88
The third-party charges for processing operation were set at 1.1 times the processing costs. See
Table 19-8.
Table 19-8: Third-party Charges for SJG Open-Pit Mine
Item Unit Fixed Variable Total
Processing RMB/t RoM — 49.18 49.18
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LoM operating cost and surcharge forecasts are shown in Table 19-9 and Table 19-10 for annual
and unit estimate, respectively. The forecasts can also be presented alternatively from Table 19-11 to
Table 19-13.
Table 19-9: LoM Opex Forecasts for SJG Open-Pit Mine ( ’000 RMB)
Item Total H2 2023 2024 2025 2026 2027 2028 2029 2030 2031
Mining 383,619 16,530 32,821 36,973 49,601 49,601 49,601 49,601 49,601 49,289
Processing 1,146,481 42,177 83,616 96,385 154,271 154,271 154,271 154,271 154,271 152,947
Administration 137,794 8,082 16,147 16,464 16,184 16,184 16,184 16,184 16,184 16,184
Refining 62,717 1,264 2,309 4,600 9,825 10,151 9,519 9,407 7,662 7,980
Mineral resource tax 324,267 8,054 14,559 26,387 53,387 53,791 46,287 45,744 37,256 38,803
Total 2,054,878 76,107 149,452 180,810 283,268 283,997 275,861 275,207 264,973 265,202
Table 19-10: LoM Opex Forecasts for SJG Open-Pit Mine (RMB/t RoM)
Item Total H2 2023 2024 2025 2026 2027 2028 2029 2030 2031
Mining 16.94 42.01 35.59 23.72 15.03 15.03 15.03 15.03 15.03 15.06
Processing 50.62 107.19 90.67 61.85 46.75 46.75 46.75 46.75 46.75 46.73
Administration 6.08 20.54 17.51 10.56 4.90 4.90 4.90 4.90 4.90 4.94
Refining 2.77 3.21 2.50 2.95 2.98 3.08 2.88 2.85 2.32 2.44
Mineral resource tax 14.32 20.47 15.79 16.93 16.18 16.30 14.03 13.86 11.29 11.86
Total 90.73 193.43 162.06 116.02 85.84 86.06 83.59 83.40 80.29 81.03
Table 19-11: LoM Opex Forecasts for SJG Open-Pit Mine ( ’000 RMB)
Item Total H2 2023 2024 2025 2026 2027 2028 2029 2030 2031
Workforce employment 275,885 16,229 32,457 32,457 32,457 32,457 32,457 32,457 32,457 32,457
Consumables 947,515 25,214 49,868 59,561 135,749 135,749 135,749 135,749 135,749 134,126
Fuel, electricity, water and
other services 415,679 21,251 41,866 51,37 1 50,935 51,261 50,629 50,517 48,772 49,076
On and off-site administration 13,014 766 1, 531 1,531 1,531 1,531 1,531 1,531 1,531 1,531
Environmenta l protection
and monitoring 119.0 7.0 14.0 14.0 14.0 14.0 14.0 14.0 14.0 14.0
Transportation of workforce 6,078 358 715 715 715 715 715 715 715 715
Product marketing and transport ——————————
Non-income taxes, royalties and
other governmental charges 349,551 9,517 17, 466 29,627 56,332 56,737 49,232 48,690 40,201 41,749
Contingency allowances 47, 039 2,767 5,534 5,534 5,534 5,534 5,534 5,534 5,534 5,534
Total 2,054,878 76,107 149,452 180,810 283,268 283,997 275,861 275,207 264,973 265,202
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Table 19-12: LoM Opex Forecasts for SJG Open-Pit Mine (RMB/t RoM)
Item Total H2 2023 2024 2025 2026 2027 2028 2029 2030 2031
Workforce employment 12.18 41.25 35.20 20.83 9.84 9.84 9.84 9.84 9.84 9.92
Consumables 41.84 64.08 54.08 38.22 41.14 41.14 41.14 41.14 41.14 40.98
Fuel, electricity, water and
other services 18.35 54.01 45.40 32.96 15.43 15.53 15.34 15.31 14.78 14.99
On and off-site administration 0.57 1.95 1.66 0.98 0.46 0.46 0.46 0.46 0.46 0.47
Environmental p rotection and
monitoring 0.01 0.02 0.02 0.01 0.00 0.00 0.00 0.00 0.00 0.00
Transportation of workforce 0.27 0.91 0.78 0.46 0.22 0.22 0.22 0.22 0.22 0.22
Product marketing and transport ——————————
Non-income taxes, royalties and
other governmental charges 15.43 24.19 18.94 19.01 17.07 17.19 14.92 14.75 12.18 12.76
Contingency allowances 2.08 7.03 6.00 3.55 1.68 1.68 1.68 1.68 1.68 1.69
Total 90.73 193.43 162.06 116.02 85.84 86.06 83.59 83.40 80.29 81.03
Table 19-13: LoM Opex Forecasts for SJG O pen-Pit Mine (RMB/g gold produced)
Item Total H2 2023 2024 2025 2026 2027 2028 2029 2030 2031
Workforce employment 11.83 34.53 37.80 18.97 8.88 8.60 9.17 9.27 11.39 10.93
Consumables 40.61 53.64 58.07 34.80 37.14 35.95 38.34 38.79 47.63 45.18
Fuel, electricity, water and
other services 17.82 45.21 48.75 30.02 13.94 13.58 14.30 14.44 17.11 16.53
On and off-site administration 0.56 1.63 1.78 0.89 0.42 0.41 0.43 0.44 0.54 0.52
Environmental p rotection and
monitoring 0.01 0.01 0.02 0.01 0.00 0.00 0.00 0.00 0.00 0.00
Transportation of workforce 0.26 0.76 0.83 0.42 0.20 0.19 0.20 0.20 0.25 0.24
Product marketing and transport ——————————
Non-income taxes, royalties and
other governmental charges 14.98 20.25 20.34 17.31 15.41 15.03 13.90 13.91 14.10 14.06
Contingency allowances 2.02 5.89 6.44 3.23 1.51 1.47 1.56 1.58 1.94 1.86
Total 88.08 161.92 174.03 105.65 77.50 75.21 77.90 78.64 92.97 89.34
19.3 SJG Underground Mine
19.3.1 Sunk Capex
The SJG Underground Mine is a producing mine. Much of the associated Capex has been
expended as at the Effective Date. These expended costs were treated as sunk Capex. The original value
and net value of sunk Capex are shown in Table 19-14, as at the Effective Date.
The DA calculation of sunk Capex is shown in Table 19-15. The residual values are about
RMB0.6 million.
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Table 19-14: Summary of Sunk Capex for SJG Underground Mine ( ’000 RMB)
Item Original Value Net Value
Property, plant and equipment 127,863 66,278
Buildings 3,228 2,172
Plant and machinery 17,497 12,373
Office equipment and furniture ——
Motor vehicles ——
Mining infrastructures 107,139 51,733
Leasehold improvements ——
Intangible assets 21,910 15,973
Mining right 21,142 15,384
Other intangible assets 768 589
Right-of-use assets 1,016 882
Land lease 1,016 882
Buildings ——
Total 150,790 82,312
Table 19-15: DA Calculation of Sunk Capex for SJG Underground Mine ( ’000 RMB)
Item Total H2 2023 2024 2025 2026 2027 2028 2029
Depreciation 65,698 6,402 12,667 12,667 11,399 9,696 9,238 3,630
Amortization 16,855 1,479 2,914 2,914 2,914 2,812 2,761 1,060
Total 82,553 7,880 15,581 15,581 14,313 12,508 11,999 4,690
19.3.2 Initial Capex
Initial Capex is not considered applicable fo r the SJG Underground Mine as it has been in
operation since 2019 and that there is no further ren o v a t i o np l a nt oe x p a n dc u r r ent production capacity.
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19.3.3 Sustaining Capex
The following sustaining Capex should be considered:
. The sustaining Capex, starting from the year 2025, is set to 3% of yearly operating costs.
. Closure and rehabilitation costs, starting from the year 2025, were calculated based on the
Land Reclamation Plan for Songjiagou North Mine , which was prepared by Shandong
Haitian Geographic Information Engineering Ltd. and dated in June 2014. The total costs of
closure and rehabilitation is estimated to be about RMB1.3 million. The time value of these
costs has been included.
T h ei n v e s t m e n tp l a nw a sa s s u m e db yS R Ka n ds h o w ni nT a b l e1 9 - 1 6 .
Table 19-16: Investment Plan for SJG Underground Mine ( ’000 RMB)
Item Total H2 2023 2024 2025 2026 2027 2028 2029
Sustaining costs 2,872 —— 656 655 652 652 257
Closure and rehabilitation 1,254 —— 251 251 251 251 251
Total 4,125 —— 906 906 903 902 508
19.3.4 Working capital
The working capital as at the Effective Date i s about RMB15.3 million. The working capital
forecasts were set to 25% of operating costs at each production year. Working capital forecasts are
shown in Table 19-17.
Table 19-17: Estimate of Working C apital for SJG Underground Mine ( ’000 RMB)
Item H2 2023 2024 2025 2026 2027 2028 2029
Start value 15,301 5,520 5,464 5,464 5,459 5,434 5,430
End value 5,520 5,464 5,464 5,459 5,434 5,430 5,143
Increments (9,781) (56) 0 (5) (25) (4) (287)
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Table 19-18: Mining Cost Records for SJG Underground Mine
Item 2020 2021 2022 H2 2023
Annual Cost (RMB/a)
Workforce employment 930,356 117,857 7,655,625 5,011,668
Consumables 10,366,577 931,462 6,913,735 4,156,334
Fuel, electricity, water and other services 2,468,036 2,685,067 7,822,645 3,838,201
On and off-site administration 351,850 66,567 472,878 176,559
Environmental protection and monitoring 2,234 2 48 23
Transportation of workforce 36,953 4,832 13,381 11,361
Product marketing and transport ————
Non-income taxes, royalties and other
governmental charges 145,257 25,851 169,840 81,839
Contingency allowances 307,153 989,282 2,416,667 1,636,366
Total 14,608,416 4,820,921 25,464,820 14,912,349
Unit Cost (RMB/t RoM)
Workforce employment 10.35 11.02 85.09 113.20
Consumables 115.29 87.12 76.84 93.88
Fuel, electricity, water and other services 27.45 251.13 86.94 86.69
On and off-site administration 3.91 6.23 5.26 3.99
Environmental protection and monitoring 0.02 0.00 0.00 0.00
Transportation of workforce 0.41 0.45 0.15 0.26
Product marketing and transport ————
Non-income taxes, royalties and other
governmental charges 1.62 2.42 1.89 1.85
Contingency allowances 3.42 92.52 26.86 36.96
Total 162.46 450.88 283.03 336.83
Unit Cost (RMB/g gold produced)
Workforce employment 6.70 6.81 54.92 70.89
Consumables 74.69 53.84 49.60 58.79
Fuel, electricity, water and other services 17.78 155.21 56.12 54.29
On and off-site administration 2.53 3.85 3.39 2.50
Environmental protection and monitoring 0.02 0.00 0.00 0.00
Transportation of workforce 0.27 0.28 0.10 0.16
Product marketing and transport ————
Non-income taxes, royalties and other
governmental charges 1.05 1.49 1.22 1.16
Contingency allowances 2.21 57.18 17.34 23.15
Total 105.25 278.67 182.67 210.92
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19.3.5 Opex records
The Opex for the SJG Underground Mine in the last three years are shown in Table 19-18. It
should be noted that:
. the costs are combination of mining, processing and administration; and
. production in year 2021 was significantly interrupted by the Provincial Government due to
safety production inspection, which makes unit costs in year 2021 are obviously greater than
those in other years.
19.3.6 Opex forecasting
Contractor mining was terminated in January 2021, as required by the Provincial Government for
safety reasons, which makes the breakdown of opera ting costs materially changed, especially for those
related to workforce employment, consumables and fuel, electricity, water and other services. At the
Effective Date, mining cost forecasts are shown in Table 19-19.
Table 19-19: Mining Cost Forecasts for SJG Underground Mine
Item Unit
Yantai
Zhongjia
Mining rate ktpa 90
Workforce employment RMB/a 5,784,000
Consumables RMB/a 2,568,000
Fuel, electricity, water and other services RMB/a 1,152,000
On and off-site administration RMB/a —
Environmental protectio n and monitoring RMB/a —
Transportation of workforce RMB/a —
Product marketing and transport RMB/a —
Non-income taxes, royalties and other governmental charges RMB/a —
Contingence Allowance RMB/a 240,000
Grand total RMB/a 9,744,000
Fixed costs RMB/a 6,024,000
Variable costs RMB/a 3,720,000
Average total RMB/t mined 108.27
Fixed costs RMB/t mined 66.93
Variable costs RMB/t mined 41.33
The LoM Opex forecast is shown in Table 19-20 and Table 19-21 for annual and unit estimate,
respectively. The forecast can be presented alternatively in tables from Table 19-22 to Table 19-24.
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Table 19-20: LoM Operating Cost Forecasts for SJG Underground Mine ( ’000 RMB)
Item Total H2 2023 2024 2025 2026 2027 2028 2029
Mining 79,476 6,790 13,464 13,464 13,464 13,464 13,464 5,367
Processing 43,020 3,699 7,298 7,298 7,298 7,298 7,298 2,832
Administration 4,372 370 739 739 739 739 739 305
Refining 1,749 181 355 355 334 236 220 69
Mineral resource tax 9,897 1,155 2,237 2,037 1,815 1,249 1,070 333
Total 138,514 12,195 24,093 23,894 23,650 22,986 22,791 8,905
Table 19-21: LoM Opex Forecasts for SJG Underground Mine (RMB/t RoM)
Item Total H2 2023 2024 2025 2026 2027 2028 2029
Mining 149.88 148.57 149.60 149.60 149.60 149.60 149.60 155.30
Processing 81.13 80.93 81.09 81.09 81.09 81.09 81.09 81.94
Administration 8.24 8.10 8.21 8.21 8.21 8.21 8.21 8.84
Refining 3.30 3.97 3.94 3.95 3.71 2.62 2.45 1.98
Mineral resource tax 18.66 25.28 24.85 22.64 20.16 13.88 11.89 9.64
Total 261.22 266.85 267.70 265.48 262.77 255.40 253.24 257.71
Table 19-22: LoM Opex Forecasts for SJG Underground Mine ( ’000 RMB)
Item Total H2 2023 2024 2025 2026 2027 2028 2029
Workforce employment 40,773 3,446 6,891 6,891 6,891 6,891 6,891 2,871
Consumables 47,153 4,064 8,003 8,003 8,003 8,003 8,003 3,073
Fuel, electricity, water and
other services 37,170 3,232 6,366 6,366 6,345 6,247 6,231 2,382
On and off-site administration 412 35 70 70 70 70 70 29
Environmental protection and
monitoring 3.8 0.3 0.6 0.6 0.6 0.6 0.6 0.3
Transportation of workforce 192 16 33 33 33 33 33 14
Product marketing and transport ————————
Non-income taxes, royalties and
other governmental charges 10,709 1,225 2,375 2,175 1,952 1,387 1,208 388
Contingency allowances 2,101 178 355 355 355 355 355 148
Total 138,514 12,195 24,093 23,894 23,650 22,986 22,791 8,905
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Table 19-23: LoM Opex Forecasts for SJG Underground Mine (RMB/t RoM)
Item Total H2 2023 2024 2025 2026 2027 2028 2029
Workforce employment 76.89 75.40 76.57 76.57 76.57 76.57 76.57 83.09
Consumables 88.93 88.93 88.93 88.93 88.93 88.93 88.93 88.93
Fuel, electricity, water and
other services 70.10 70.73 70.73 70.74 70.50 69.41 69.24 68.95
On and off-site administration 0.78 0.76 0.77 0.77 0.77 0.77 0.77 0.84
Environmental protection and
monitoring 0.01 0.01 0.01 0.01 0.01 0.01 0.01 0.01
Transportation of workforce 0.36 0.36 0.36 0.36 0.36 0.36 0.36 0.39
Product marketing and transport ————————
Non-income taxes, royalties and
other governmental charges 20.20 26.80 26.38 24.16 21.69 15.41 13.42 11.22
Contingency allowances 3.96 3.89 3.95 3.95 3.95 3.95 3.95 4.28
Total 261.22 266.85 267.70 265.48 262.77 255.40 253.24 257.71
Table 19-24: LoM Opex Forecasts for SJG U nderground Mine (RMB/g gold produced)
Item Total 2023 2024 2025 2026 2027 2028 2029
Workforce employment 62.65 51.11 52.23 52.16 55.47 78.57 84.17 112.66
Consumables 72.46 60.28 60.66 60.58 64.42 91.25 97.75 120.57
Fuel, electricity, water and other services 57.12 47.94 48.25 48.19 51.07 71.22 76.11 93.48
On and off-site administration 0.63 0.52 0.53 0.53 0.56 0.79 0.85 1.14
Environmental protection and monitoring 0.01 0.00 0.00 0.00 0.01 0.01 0.01 0.01
Transportation of workforce 0.30 0.24 0.25 0.25 0.26 0.37 0.40 0.53
Product marketing and transport ————————
Non-income taxes, royalties and
other governmental charges 16.46 18.17 18.00 16.46 15.71 15.81 14.75 15.22
Contingency allowances 3.23 2.63 2.69 2.69 2.86 4.05 4.34 5.81
Total 212.84 180.88 182.61 180.85 190.37 262.08 278.37 349.41
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20 ECONOMIC ANALYSIS
20.1 Assumptions
The assumptions used to carry out the economic analysis are listed below:
. The discounted cash flow method (the ‘‘DCF’’) is selected as the foundation of economic
analysis. The discount rate was calculated using weighted average cost of capital (the
‘‘WACC ’’) method. The value calculated is 8.83% in Table 20-1. As at the Effective Date,
the discount rate of 9% is adopted.
. T h eb a s ed a t ei sa s s u m e dt ob e3 0J u n e2 0 2 3 ,a n da l lt h ea s s u m p t i o n sa r es u b j e c tt o
conditions obtained at the base date.
. The gold bullion price is described in section ‘‘17.2 Gold price’’ .
. The LoM schedules are shown in Table 13-11 and Table 13-19 for SJG Open-Pit Mine and
SJG Underground Mine, respectively.
. The costs that have been invested to develop the SJG Project to date were treated as the sunk
costs and will not be considered during economic analysis. The investment plans of
sustaining Capex are shown in Table 19-3 and Table 19-16 for SJG Open-Pit Mine and SJG
Underground Mine, respectively.
. The LoM operating costs are shown in Table 19-9 and Table 19-20 for SJG Open-Pit Mine
and SJG Underground M ine, respectively.
. The deferred taxes as of 30 June 2023 were used for adjustment of corporate income taxes
(the ‘‘CIT’’) in the next five years.
. The taxes applied to financial analysis are shown in Table 20-2. The value-added tax (the
‘‘VAT’’) is not charged in China for gold commod ities. The taxes for housing property, land
tenure and water resource royalty were assumed to have been included in the operating costs
and were not separated from the total. Mineral resource taxes are shown in Table 19-9 and
Table 19-20 for SJG Open-Pit Mine and SJG Underground Mine, respectively.
. The financial interests were assumed to be 0.
. DA calculations of sunk Capex are shown in Table 19-2 and Table 19-15 for SJG Open-Pit
Mine and SJG Underground Mine, respectiv ely. DA calculation of initial Capex is not
applicable due to further initial Capex is zero.
. All the ore mined is assumed to be feed to the processing plant and gold bullion sold in each
producing year.
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. The processing recovery rate is calculated by the formula y = –22.802x 2 + 36.418x + 81.464,
which is historically based, where ‘‘x’’is the mined grade.
Table 20-1: Discount Rate Estimate (WACC method)
Item Unit Value Remarks
Risk free rate of return % 3.97 5-year treasury bill rate since year 2021
Market risk premium % 6.00
Beta 1.5
Cost of equity/CAPM % 12.97
Debt margin % 10.00
Cost of debt % 13.97
Rate of CIT % 15.00 rate for an innovation company (see Appendix E)
Post-tax cost of debt % 11.87
Target debt equity ratio % 30.0
WACC in nominal terms % 12.64
Inflation rate % 3.50
WACC in real terms % 8.83
Table 20-2: Taxes and Surcharge Applied to Financial Analysis
Item Value
Corporate income tax 15% for an innovation company (see Appendix E)
Mineral resources tax 4.2% of sales revenue
Housing property tax Original value × 70% × 1.2%
Land tenure tax RMB5.6 per square meters
Water resource royalty RMB0.4 per tonne water
APPENDIX III SRK REPORT
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20.2 SJG Open-Pit Mine
The net cash flow (the ‘‘NCF’’) was calculated and shown in Table 20 –3. NPVs at various
discount rates, which are shown in Table 20 –4, provide an indication that it is economically viable for
SJG Open-Pit Mine to report Mineral Reserves.
Table 20-3: Cash Flow Calculation for SJG Open-Pit Mine (million RMB)
Cash Flow Total H2 2023 2024 2025 2026 2027 2028 2029 2030 2031
Cash inflow 7,965 370 347 628 1,271 1,281 1,102 1,089 887 989
Sales revenue 7,721 192 347 628 1,271 1,281 1,102 1,089 887 924
Fixed asset residuals 8 ———————— 8
Working capital 236 179 0 ——— 000 5 7
Cash outflow 2,994 126 216 253 450 434 399 396 357 364
Operating cost 1,731 68 135 154 230 230 230 229 228 226
Working capital 24 —— 51 9 0 ————
M i n e r a l r e s o u r c e t a x 3 2 4 81 52 65 35 44 64 63 73 9
CIT 787 16 26 63 140 141 115 112 84 90
Capital cost 128 34 40 5 8 8 8 8 8 8
NCF 4,971 245 131 375 821 847 703 693 530 625
Table 20-4: NPVs at Various Discount Rates for SJG Open-Pit Mine
D i s c o u n t R a t e ( % ) 6789 1 0 1 1 1 2
NPV (million RMB) 3,712 3,547 3,392 3,246 3,109 2,981 2,860
20.3 SJG Underground Mine
The NCF was calculated and shown in Table 20-5. NPVs at various discount rates that were shown
in Table 20-6 provide an indication that it is economically viable for SJG Underground Mine to report
Mineral Reserves.
Table 20-5: Cash Flow Calculation for SJG Underground Mine (million RMB)
Cash Flow Total 2023 2024 2025 2026 2027 2028 2029
Cash inflow 251.5 37.3 53.3 48.5 43.2 29.8 25.5 13.9
Sales revenue 235.6 27.5 53.3 48.5 43.2 29.7 25.5 7.9
Fixed asset residuals 0.6 —————— 0.6
Working capital 15.3 9.8 0.1 — 0.0 0.0 0.0 5.4
Cash outflow 148.5 13.4 26.2 26.3 25.4 24.0 23.7 9.4
Operating cost 128.6 11.0 21.9 21.9 21.8 21.7 21.7 8.6
Working capital 0.0 —— 0.0 ————
Mineral resource tax 9.9 1.2 2.2 2.0 1.8 1.2 1.1 0.3
CIT 5.8 1.2 2.1 1.5 0.9 0.1 0.1 —
Capital cost 4.1 —— 0.9 0.9 0.9 0.9 0.5
NCF 103.1 23.9 27.1 22.2 17.8 5.8 1.7 4.5
APPENDIX III SRK REPORT
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--- page 754 ---
Table 20-6: NPVs at Various Discount Rate for SJG Underground Mine
D i s c o u n t R a t e ( % ) 6789 1 0 1 1 1 2
NPV (million RMB) 91 89 87 85 84 82 81
20.4 Conclusions
A summary of economic analysis is shown in Tab le 20-7. The positive NPVs indicate that the SJG
Project is economically viable.
Table 20-7: Summary of Overall Economic Analysis
Item Unit
SJG
Open-Pit
Mine
SJG
Underground
Mine Total Comments
Production capacity ktpa ore 3,300 90 3,390
Life of mine years 8.5 6 /
Ore tonnage kt 22,600 530 23,130
Gold g rade i n o re g /t 1 .171 .391 .17
Gold content in ore kg 26,400 737 27,137
Gold content in ore koz 849 23.7 872
Processing recovery rate % 95.00 95.00 95.00 historical data based
Concentrate gold grade g/t 20.00 20.00 20.00
Concentrate tonnage kt 1,254 35 1,289
Gold content in concentrate kg 25,087 700 25,786
Gold content in concentrate koz 807 22 829
Payable gold kg 23,331 651 23,981
Gold price RMB g/t 310 310 310 long-term forecasts
Sales revenue million RMB 7,721 236 7,956
Operating cost million RMB 2,055 139 2,193
Operating cost RMB/t ore 91 261 95
Mineral resource tax million RMB 324 10 334
Corporate income tax million RMB 787 6 793
Sunk capital cost million RMB 474 83 557
NPV (9%) million RMB 3,246 85 3,332 9% is derived from WACC
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21 ADJACENT PROPERTIES
No information is available regarding any adjacent properties.
APPENDIX III SRK REPORT
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--- page 756 ---
22 OTHER RELEVANT DATA AND INFORMATION
No other relevant data or information is available for the SJG Project.
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23 RISK ASSESSMENT
SRK completed a risk assessment of the specific ris ks identified for the SJG Project in relation to
their likelihood of occurrence with in the LoM and consequence in accordance with Guidance Note 7 to
the Listing Rules.
In general, the risk of a project decreases from exploration, through development, to the production
stage. The SJG Project is an advanced project.
SRK considered various technical aspects which may affect the feasibility and future cash flow of
the SJG Project. SRK ’s final Risk Assessment is presented in Table 23-1.
Table 23-1: Risk Assessment for SJG Project
Risk Issue Likelihood Consequence Overall
Geology and Mineral Resources
Lack of significant Mineral Resource tonnage Unlikely Moderate Low
Lower average grade of gold (i.e. 15% lower) Unlikely Major Medium
Unexpected groundwater ingress Unlikely Moderate Low
Overestimate of Mineral Resource potential Unlikely Minor Low
Improper classification of Mineral Resource category Possible Moderate Medium
Misleading geological descri ption (related to low-quality
exploration done)
Unlikely Moderate Low
Mining
Significant geological structures Possible Moderate Medium
Deformation of final open pit wall Possible Moderate Medium
Designing of final open pit is wrong Unlikely Moderate Low
Long-term schedule is optimistic Unlikely Moderate Low
Ore production capacity is op timistic Unlikely Major Low
Lack of significant Mineral Reserves Unlikely Moderate Low
Mineral Processing
Unfit configuration of equipment Unlikely Moderate Low
Actual throughput cannot meet design capacity Unlikely Moderate Low
Unsuitable flowsheet Unlikely Moderate Low
Lower metal recovery Unlikely Moderate Low
Poor plant design Unlikely Moderate Low
Environmental and Social
Land disturbance and ecological protection Unlikely Moderate Low
ARD impact to the environment Possible Moderate Medium
Land rehabilitation and site closure Unlikely Moderate Low
Stakeholder engagement and cultural heritage protection Unlikely Moderate Low
Capital and Operating Costs
Project timing delay Unlikely Minor Low
Poor mine management-plan Possible Minor Low
Capital cost increases Possible Minor Low
Higher capital costs — ongoing Unlikely Minor Low
Operating cost underestimated Possible Moderate Medium
In the risk assessment, various risk issues have been assessed for Likelihood, Consequence, and
Overall Rating. SRK has used a matrix as described below.
APPENDIX III SRK REPORT
– III-190 –


--- page 758 ---
The Likelihood of a risk is considered within a certain time frame, e.g., five years, as:
. Likely : will probably occur;
. Possible : may occur; or
. Unlikely :u n l i k e l yt oo c c u r .
The Consequence of a risk is classified as:
. Major : the factor poses an immediate danger to the SJG Project that, if uncorrected, will
have a material effect on the SJG Project cash flow and performance and could lead a project
failure;
. Moderate: the factor, if uncorrected, will have a significant effect on the SJG Project cash
flow and performance; or
. Minor : the factor, if uncorrected, will have little or no effect on the SJG Project cash flow
and performance.
The overall risk assessment combines the Likelihood and Consequence of a risk and be classified
as Low (unlikely and possible minor risks, and unlikely moderate risk), Medium (likely minor, possible
moderate, and unlikely major risks) and High (likely moderate and major risks, and possible major
risks).
APPENDIX III SRK REPORT
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24 INTERPRETATION AND CONCLUSIONS
24.1 Geology
The SJG Project is situated in the eastern part of the Jiaobei Terrane and on the northeast margin
of the Jiaolai Basin, on the Shandong Peninsula, and is regarded as a member of the Muping-Rushan
gold belt. The gold mineralisation at the SJG Project is hosted within the pyritic-sericitic conglomerate
of Linsishan Formation, part of the Cretaceous-age Laiyang Group. Gold enrichment occurs as veins as
well as in disseminated structures and stockwork distributions. The SJG Project ’s conglomerate gold
deposit is associated with mesothermal filling ac tivities followed by alterations and metasomatism.
The boundaries between wall rocks, internal waste, and host rocks are not visually obvious, and
must be determined by grade control drilling.
24.2 Data verification
It is SRK ’s opinion that the sample preparation, QA/QC, and assay procedures conducted at the
SJG Open-Pit Mine since 2005 are reasonable and comply with industrial standards.
SRK made data verification through coarse rejects and pulp duplicates for the original assays in
2012. SRK considers that the resu lts returned from verification sam ples are satisfying. In 2018, SRK
monitored the sampling program for the underground channelling samples at the SJG Underground Mine
and satisfied with the results.
24.3 Mineral Resource estimation
As of 30 June 2023, at a cut-off grade of 0.3 g/t Au, within the current mining licence for SJG
Open-Pit Mine, it contains 34,200 kt of Indicated Mineral Resources at an average gold grade of 1.10 g/
t Au and 36,700 kt of Inferred Mineral Resources at an average gold grade of 0.95 g/t Au.
In addition, as of 30 June 2023, at a cut-off grade of 0.7 g/t Au, within the current mining licence
for SJG Underground Mine, it contains 1,640 kt of Indicated Mineral Resources at an average gold
grade of 1.38 g/t Au and 3,010 kt of Inferred Mineral Resources at an average gold grade of 1.24 g/t
Au.
24.4 Mineral Reserve estimation
SJG Open-Pit Mine
SRK was provided a document issued by Shandong Research Ins titute of Geological Sciences
dated 19 November 2019, in which the Institute has examined and approved the application and agreed
to increase the production capacity to 900 ktpa for th e open-pit mining. The modifying factors included
mining and processing were estimated by SRK based on the available information to date. SJG Open-Pit
Mine will be exploited as an open pit mine.
APPENDIX III SRK REPORT
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A cut-off grade was calculated to be 0.3 g/t au RoM to report Mineral Reserves. Open pit
optimisation results indicate that the final open pit designed by Yantai Zhongjia is a little conservative,
but it is technically feasible and economically viable. SRK accepts the final open pit design of Yantai
Zhongjia.
The SJG Open-Pit Mine was reported to include Probable Mineral Reserves at about 22,600 kt
with 1.17 g/t Au, as of 30 June 2023. Without the open pit optimisation, the existing design of the SJG
Open-Pit Mine can cater for the mining of approximately 455 kt of Probable Mineral Reserves
(representing approximately 2.0% of the Probable Mineral Reserves of approximately 22,600 kt
available at the SJG Open-Pit Mine). It is estimated that there are approximately 22,100 kt of Probable
Mineral Reserves (representing approximately 98.0 % of the Probable Mineral Reserves of approximately
22,600 kt available at the SJG Open-Pit Mine) that can be accessible at the unmined areas next to and
below the current infrastructure, which has the potential to increase the mining production output and to
cater for mining operations for the next years at Yantai Zhongjia ’s current mining capacity.
SJG Underground Mine
SRK understands that the FSR has been applied to guide the mine development since year 2016.
A cut-off grade was calculated to be 0.7 g/t Au RoM to report Mineral Reserves. Technically
feasible stopes were initially designed based on the planned development system and mining methods.
Stope economics of each stope were analysed to selec t economically viable stopes. The materials within
economically viable stopes were reported as the Mineral Reserves.
The SJG Underground Mine was reported to include Probable Mineral Reserves at about 530 kt
with 1.39 g/t Au grade. The production capacity is supposed to be 90 ktpa ore. The life of mine shall be
about 6.0 years.
24.5 Mining
SJG Open-Pit Mine
Conventional road-truck technique is assumed as the bench development method. Mining sequence
will be controlled by two pushbacks.
Conventional drill-blast-load-haul mining cycle is assumed to move rocks within the open pit. The
bench height is 12 m high. The mining rate is 3,300 ktpa ore.
No special device is installed to monitor the open pit stability, but the regularly patrolling per
month is undergoing.
The waste rock have been and will be sold to th ird-parties. There is no need to consider
permanently waste dumping.
Mine service facilities have been well developed and will be renovated to support daily ongoing
operations.
APPENDIX III SRK REPORT
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SJG Underground Mine
The development system mainly consists of a trackless access ramp, six level haulage ways, an
auxiliary shaft, a surface upcast and an underground upcast.
Off-road dump trucks are proposed to move both or e and wastes to surface along the level haulage
way and the access ramp.
The mining methods include upward cut-and-fill mining and shrinkage stope mining. The designed
ore production capacity of ore is 90 ktpa.
The mine plan relies on backfill as a ground support medium.
Mine service facilities have been well developed or shared with the SJG Open-Pit Mine to support
daily operations.
24.6 Gold recovery
Inventory from the SJG Project has relatively simple characteristics, with good floatability. The
processing recovery rate is assumed to be 95.00% in the future operation.
24.7 Capital investment and operating cost
Records of capital cost and operating cost have been provided to SRK. Production capacity ratio
was applied to modify records to estimate future values.
SJG Open-Pit Mine
The net value of sunk Capex is about RMB474 million. The initial Capex is zero. The sustaining
Capex is about RMB128 million.
The operating costs were estimated to be about RMB91 per ton RoM.
SJG Underground Mine
The net value of sunk Capex is about RMB83 million. The initial Capex is zero. The sustaining
Capex is about RMB4.1 million.
The operating costs were estimated to be about RMB261 per ton RoM.
24.8 Economic analysis
The NPVs at a discount rate of 9% are about RMB3,246 million and RMB85 million for SJG
Open-Pit Mine and SJG Underground Mine, respectively. These positive NPVs provide an indication
that it is economically viable for the SJ G Project to report Mineral Reserves.
APPENDIX III SRK REPORT
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25 RECOMMENDATIONS
25.1 Geology
Grade control should be performed for both SJG Open-Pit Mine and SJG Underground Mine to
meet grade requirement of the processing plant.
As observed by SRK from the mineral resource model, it can be noted that there are significant
Inferred Mineral Resources occurred deeply, especially for those occurred in open pit walls and at depth
below the open pit base for SJG Open-Pit Mine. SRK suggests further exploration campaign may be
performed to upgrade the category of these Inferred Mineral Resources to reduce exploitation risks and
extend the life of mine.
25.2 Mining
In order to substantially scale up mining operations, gold concentrate processing and increase gold
mineral reserves, optimising ope n-pit mine design should be implemented to cater for the increase in
mining capacity, which includes expanding to the south of the current open pit boundary so that the
mineral resources in the expanded area can be accessible as much as possible, the stripping of topsoil,
wastes and ore materials to expose mineral resources as soon as possible, the construction of water
storage pool and drainage system, the construction of site office and accommodation, the construction of
a stockpile to store topsoil for future reclamation, and acquiring of additional equipment to support the
expansion plan.
With respect to the SJG Underground Mine, SRK considers Yantai Zhongjia should strengthen its
communication with technicians and management to mi neral resources to ensure the mining operation
could be performed as planned.
APPENDIX III SRK REPORT
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--- page 763 ---
26 REFERENCES
1. Muping Dahedong Gold Ore Processing Test Report , Yantai Jinyuan Machinery Processing
and Metallurgy Laboratory, February 2010
2. Resource Verification Report of Songjiagou Gold Project, Muping Area, Yantai, Shandong ,
No 3 Geological Mineral Resource Prospecting I nstitute of Shandong Province, January 2011
3. Preliminary Assessment Technical Report of Songjiagou Project, Shandong Province, China,
Wardrop Engineering Inc., March 2011
4. Resource Utilization and Development Plan of Songjiagou Gold Project, Muping Area,
Yantai, Shandong , Yantai Dehe Metallurgical Design and Research Institute Corporation
Limited, July 2011
5. Technical Report on the Cut-off Grade Study of Songjiagou Gold Project in Wanggezhuang
Town, Muping District, Yantai City, Shandong Province, China , SRK Consulting China Ltd.,
August 2012
6. Land Reclamation Plan for Songjiagou Open-Pit Mine , Shandong Haitian Geographic
Information Engineering Ltd., December 2013
7. Approval of Land Reclamation Plan for Songjiagou Open-Pit Mine , Shandong Land and
Resources Bureau, 25 February 2014
8. Mine Site Geological Environment Protection a nd Rehabilitation Plan for Songjiagou Open-
Pit Mine, Shandong Huaying Geological Engineering Survey Ltd., February 2014
9. Approval of Mine Site Geological Environmen t Protection and Rehabilitation Plan for
Songjiagou Open-Pit Mine , Shandong Land and Resources Bureau, 9 April 2014
10. Land Reclamation Plan f or Songjiagou North Mine, Shandong Haitian Geographic
Information Engineering Ltd., June 2014
11. Mine Site Geological Environment Protection a nd Rehabilitation Plan for Songjiagou North
Mine , Shandong Huaying Geological Engineering Survey Ltd., July 2014
12. Approval of Land Reclamation Plan for Songjiagou North Mine , Shandong Land and
Resources Bureau, 29 August 2014
13. Approval of Mine Site Geological Environmen t Protection and Rehabilitation Plan for
Songjiagou North Mine , Shandong Land and Resources Bureau, 2 September 2014
14. Approval of Water and Soil Conservation Plan for Songjiagou North Mine, Shandong Water
Resources Bureau, 7 October 2014
APPENDIX III SRK REPORT
– III-196 –


--- page 764 ---
15. Water and Soil Conservation Plan for Songjiagou North Mine, Weihai Hydrology Bureau,
October 2014
16. Environmental Impact Assessment Report for Songjiagou Gold Project , Shandong Academy
of Environmental Science, December 2014
17. Approval of Environmental Impact Assessment Report for Songjiagou Gold Project ,
Shandong Environmental Protection Bureau, 26 January 2015
18. Environmental Impact Assessment Report for Songjiagou North Gold Mine , Shandong
Academy of Environmental Science, April 2015
19. Approval of Environmental Impact Assessment Report for Songjiagou North Gold Mine,
Shandong Environmental Protection Bureau, 5 May 2015
20. Independent Technical Report of Songjiagou Gold Project, Shandong Province, the People ’s
Republic of China , SRK Consulting China Ltd., January 2016
21. Detailed Feasibility Study Report on SJG Underground Mine for Yantai Zhongjia ,Y a n t a i
Dehe Metallurgy Design Institute Ltd., May 2016
22. Water and Soil Conservation Pla n for Songjiagou Open-Pit Mine , Zhaozhuang Hydrology
Survey and Design Institute, February 2017
23. Approval of Water and Soil Conservati on Plan for Songjiagou Open-Pit Mine, Shandong
Water Resources Bureau, 10 March 2017
APPENDIX III SRK REPORT
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APPENDICES
APPENDIX III SRK REPORT
– III-198 –


--- page 766 ---
Appendix A:
Mining licences
APPENDIX III SRK REPORT
– III-199 –


--- page 767 ---
APPENDIX III SRK REPORT
– III-200 –


--- page 768 ---
APPENDIX III SRK REPORT
– III-201 –


--- page 769 ---
Appendix B:
Drilling, trenching and ch annelling information
APPENDIX III SRK REPORT
– III-202 –


--- page 770 ---
Hole ID Easting
(m)
Northing
(m)
Elevation
(m ASL)
Depth
(m)
1-CM0 621,489.30 4,110,444.78 9.00 474.90
1-CM0 –3B 621,488.81 4,110,445.25 9.00 420.05
1-CM1 621,582.43 4,110,728.96 9.00 230.00
1-CM10S-3B 621,674.40 4,110,807.16 9.00 13.72
1-CM2N-3B 621,243.84 4,110,670.04 9.00 191.26
1-CM3N-3B 621,282.79 4,110,720.21 9.00 13.38
1-CM4N-3B 621,302.51 4,110,742.49 9.00 13.72
1-CM4S-3B 621,470.49 4,110,613.77 9.00 14.02
1-CM5S-3B 621,492.77 4,110,638.81 9.00 19.35
1-CM6N-3B 621,362.34 4,110,806.86 9.00 240.39
1-CM6S-3B 621,512.03 4,110,656.32 9.00 161.83
1-CM7S-3B 621,549.13 4,110,670.47 9.00 272.04
1-CM8S-3B 621,563.52 4,110,695.64 9.00 11.28
1-CM9-3B 621,581.30 4,110,729.64 9.00 230.00
1-YM1N-3B 621,382.00 4,110,517.35 9.00 510.51
1-YM2N 621,217.07 4,110,635.35 9.00 331.62
1-YM2N-3B 621,358.53 4,110,535.78 9.00 53.60
1-YM3N-3B 621,214.84 4,110,638.89 9.00 332.00
268-ZK58 622,031.11 4,111,078.02 119.11 217.59
280-ZK59 621,781.81 4,111,261.95 126.12 234.45
2-CM0 621,489.73 4,110,445.30 –40.00 373.00
2-CM0-3B 621,489.48 4,110,445.94 –40.00 373.00
2-CM10-1-3B 621,610.79 4,110,741.54 –40.00 15.00
2-CM11-1-3B 621,629.14 4,110,766.10 –40.00 17.10
2-CM1-1-3B 621,423.25 4,110,525.32 –40.00 28.00
2-CM1-2-3B 621,380.98 4,110,564.43 –40.00 10.62
2-CM1-3-3B 621,246.04 4,110,637.02 –40.00 37.00
2-CM2-2-3B 621,402.87 4,110,584.21 –40.00 8.00
2-CM2-3-3B 621,259.92 4,110,662.42 –40.00 21.24
2-CM3-1-3B 621,476.91 4,110,598.94 –40.00 180.96
2-CM3-2-3B 621,428.53 4,110,608.51 –40.00 10.00
2-CM3-3-3B 621,292.04 4,110,668.33 –40.00 33.45
2-CM4-1-3B 621,494.00 4,110,619.96 –40.00 16.00
2-CM4-2-3B 621,449.43 4,110,628.75 –40.00 9.00
2-CM4-3-3B 621,301.65 4,110,704.85 –40.00 20.73
2-CM5-1-3B 621,511.88 4,110,644.65 –40.00 14.56
2-CM5-2-3B 621,463.68 4,110,642.42 –40.00 21.00
2-CM6-1-3B 621,521.06 4,110,656.77 –40.00 15.00
2-CM6-2-3B 621,494.65 4,110,669.34 –40.00 11.00
2-CM7-1-3B 621,533.33 4,110,671.73 –40.00 12.32
APPENDIX III SRK REPORT
– III-203 –


--- page 771 ---
Hole ID Easting
(m)
Northing
(m)
Elevation
(m ASL)
Depth
(m)
2-CM7-2-3B 621,537.32 4,110,712.78 –40.00 10.44
2-CM8-1-3B 621,567.97 4,110,699.22 –40.00 11.00
2-CM9-1-3B 621,589.71 4,110,717.20 –40.00 34.00
2-CM9-2-3B 621,578.97 4,110,758.15 –40.00 10.44
2-YM1-3B 621,401.92 4,110,494.61 –40.00 400.00
2-YM2-3B 621,350.54 4,110,521.66 –40.00 365.00
2-YM3-3B 621,220.18 4,110,613.59 –40.00 126.00
3-CM0-3B 621,490.76 4,110,444.62 –80.00 262.00
3-CM1N-3B 621,422.81 4,110,573.33 –80.00 29.28
3-CM1S-3B 621,471.67 4,110,535.34 –80.00 24.41
3-CM2N-3B 621,437.43 4,110,598.08 –80.00 24.00
3-CM2S-3B 621,486.11 4,110,557.73 –80.00 22.75
3-CM3N-3B 621,451.95 4,110,624.43 –80.00 10.00
3-CM3S-3B 621,507.49 4,110,586.13 –80.00 16.61
3-CM4N-3B 621,492.68 4,110,675.38 –80.00 8.04
3-CM4S-3B 621,543.41 4,110,638.53 –80.00 61.00
3-CM5N-3B 621,548.68 4,110,706.11 –80.00 15.00
3-CM5S-3B 621,585.61 4,110,674.07 –80.00 12.77
3-CM6N-3B 621,140.23 4,110,320.64 –80.00 9.38
3-CM6S-3B 621,622.67 4,110,722.28 –80.00 59.00
3-CM7N-3B 621,623.55 4,110,791.57 –80.00 12.97
3-YM1N-3B 621,417.44 4,110,493.95 –80.00 360.00
3-YM1NN-3B 621,416.62 4,110,494.73 –80.00 360.00
3-YM1S-3B 621,413.44 4,110,496.31 –80.00 116.00
3-YM1SN-3B 621,412.62 4,110,497.08 –80.00 116.00
3-YM2N-3B 621,365.10 4,110,535.96 –80.00 415.00
3-YM2NN-3B 621,364.28 4,110,536.74 –80.00 415.00
3-YM2S-3B 621,360.56 4,110,538.14 –80.00 311.00
3-YM2SN-3B 621,359.74 4,110,538.92 –80.00 311.00
4-CM0-3B 621,489.52 4,110,446.62 –120.00 181.66
4-CM1-3B 621,485.01 4,110,526.54 –120.00 86.66
4-CM-1N-3B 621,358.61 4,110,458.35 –120.00 44. 81
4-CM-1S-3B 621,423.89 4,110,412.20 –120.00 48.40
4-CM2N-3B 621,450.18 4,110,589.43 –120.00 19.04
4-CM2S-3B 621,495.05 4,110,556.17 –120.00 8.50
4-CM3N-3B 621,475.05 4,110,607.97 –120.00 17.88
4-CM3S-3B 621,522.83 4,110,568.38 –120.00 20.40
4-CM4N-3B 621,524.05 4,110,646.76 –120.00 21.30
4-CM4S-3B 621,566.81 4,110,606.89 –120.00 23.23
4-YM1N-3B 621,430.06 4,110,491.78 –120.00 473.00
APPENDIX III SRK REPORT
– III-204 –


--- page 772 ---
Hole ID Easting
(m)
Northing
(m)
Elevation
(m ASL)
Depth
(m)
4-YM1NN-3B 621,429.44 4,110,492.36 –120.00 473.00
4-YM1S-3B 621,430.06 4,110,491.78 –120.00 78.29
4-YM1SN-3B 621,429.44 4,110,492.36 –120.00 78.29
4-YM2N-3B 621,380.61 4,110,531.03 –120.00 250.80
4-YM2NN-3B 621,379.99 4,110,531.62 –120.00 250.80
4-YM2S-3B 621,380.61 4,110,531.03 –120.00 86.43
4-YM2SN-3B 621,379.99 4,110,531.62 –120.00 86.16
624-ZK52 621,460.85 4,110,547.15 133.08 147.13
624-ZK53 622,572.88 4,110,556.28 107.98 260.14
624-ZK90 622,178.54 4,110,930.84 115.90 220.00
CK0-1 621,161.70 4,110,705.28 129.72 125.70
CK12-1 621,353.98 4,110,678.17 133.23 135.20
CK16-1 621,380.66 4,110,693.37 128.39 146.90
CK24-1 621,398.44 4,110,750.58 123.83 82.20
CK28-1 621,451.87 4,110,751.06 87.34 119.00
CK3-1 621,192.15 4,110,658.49 121.18 85.00
CK32-1 621,456.81 4,110,787.85 120.73 125.00
CK36-1 621,498.78 4,110,790.33 116.44 111.20
CK40-1 621,530.19 4,110,802.69 112.01 113.00
CK4-1 621,280.65 4,110,675.17 127.61 112.90
CK4-2 621,316.74 4,110,635.25 127.69 25.00
CK7-1 621,177.77 4,110,631.82 114.21 57.50
CK8-1 621,321.99 4,110,664.28 132.65 134.80
KDZK1 621,414.88 4,110,508.88 –120.45 120.60
KDZK10 621,529.70 4,110,564.19 –119.85 91.07
KDZK11 621,360.45 4,110,460.63 –119.58 104.28
KDZK2 621,462.85 4,110,469.78 –120.40 120.30
KDZK3 621,488.90 4,110,523.76 –120.95 50.60
KDZK4 621,458.60 4,110,554.04 –119.80 86.28
L2A 621,488.73 4,110,445.27 –40.00 357.50
L3A 621,488.60 4,110,445.24 –80.00 252.50
L3B1 621,541.97 4,110,641.09 –80.00 60.00
L3B2 621,490.91 4,110,673.50 –80.00 117.50
L4A 621,489.52 4,110,446.62 –120.00 180.00
L4B 621,485.01 4,110,526.54 –120.00 100.00
SHK1 621,502.48 4,110,926.02 107.23 550.50
SJ05-01 621,444.51 4,110,441.09 138.90 150.40
SJ05-02 621,479.20 4,110,472.74 139.42 160.00
SJ05-03 621,515.56 4,110,497.29 138.39 185.00
SJ05-04 621,404.09 4,110,402.52 135.81 150.00
APPENDIX III SRK REPORT
– III-205 –


--- page 773 ---
Hole ID Easting
(m)
Northing
(m)
Elevation
(m ASL)
Depth
(m)
SJ05-05 621,643.52 4,110,661.80 119.41 160.00
SJ05-06 621,606.88 4,110,628.62 122.07 84.18
SJ05-07 621,580.98 4,110,588.69 123.02 77.40
SJ05-08 621,387.18 4,110,561.08 137.36 180.03
SJ05-09 621,611.88 4,110,779.21 100.34 180.00
SJ05-10 621,554.94 4,110,732.57 95.66 150.00
SJ05-11 621,717.37 4,110,392.23 129.81 576.05
SJ05-12 621,373.63 4,110,485.43 118.62 180.00
SJ05-13 621,264.44 4,110,404.87 103.03 180.00
SJ05-14 621,646.99 4,110,309.67 113.32 527.70
SJ05-15 621,272.43 4,110,491.75 124.17 200.00
SJ05-16 621,313.80 4,110,702.67 138.16 200.09
SJ05-17 621,330.60 4,110,443.02 109.88 178.40
SJ05-18 621,400.09 4,110,802.12 122.16 182.90
SJ05-19 621,369.07 4,110,772.01 131.73 61.00
SJ05-20 621,369.09 4,110,772.05 131.73 314.00
SJ05-21 621,833.91 4,110,543.57 102.20 599.50
SJ05-22 621,341.69 4,110,728.25 136.10 182.92
SJ05-23 621,344.87 4,110,726.28 135.91 230.12
SJ05-24 621,313.80 4,110,702.67 138.16 275.91
SJ05-25 621,771.39 4,110,474.98 99.67 600.03
SJ05-26 621,584.82 4,110,239.31 102.75 600.14
SJ06-27 621,739.65 4,110,551.71 114.71 482.00
SJ06-28 621,660.71 4,110,487.23 124.69 471.30
SJ06-29 621,583.03 4,110,243.75 102.86 458.16
SJ06-30 621,644.76 4,110,593.89 114.56 377.90
SJ06-31 621,644.76 4,110,593.89 114.56 391.60
SJ06-32 621,478.99 4,110,381.03 130.59 306.13
SJ06-33 621,560.69 4,110,434.07 131.54 405.09
SJ06-34 621,620.12 4,110,428.54 134.05 418.00
SJ06-35 621,567.73 4,110,451.51 134.05 390.22
SJ06-40 621,879.99 4,111,244.63 123.00 200.00
SZK0-1 621,182.78 4,110,678.33 127.63 130.03
SZK0-2 621,278.81 4,110,623.32 119.31 153.67
SZK0-3 621,372.08 4,110,543.44 134.66 170.05
SZK0-5 621,755.04 4,110,222.79 133.63 658.75
SZK0-6 621,066.38 4,110,801.92 122.02 264.35
SZK108-1 622,166.50 4,110,953.69 117.91 313.65
SZK108-2 622,278.63 4,110,831.56 117.56 305.00
SZK16-3 621,248.32 4,110,806.57 139.65 335.34
APPENDIX III SRK REPORT
– III-206 –


--- page 774 ---
Hole ID Easting
(m)
Northing
(m)
Elevation
(m ASL)
Depth
(m)
SZK16-4 621,790.76 4,110,351.94 113.54 552.50
SZK16-5 621,365.31 4,110,725.55 104.49 318.10
SZK2011-10 621,396.86 4,110,922.87 122.85 282.40
SZK2011-11 621,571.28 4,110,924.39 88.36 312.27
SZK24-1 621,236.63 4,110,884.55 142.43 262.23
SZK24-2 621,297.01 4,110,842.47 125.18 252.60
SZK24-3 621,373.89 4,110,778.88 106.88 299.95
SZK31-1 621,249.36 4,110,332.98 106.90 470.72
SZK32-2 621,441.58 4,110,820.12 113.92 310.92
SZK32-3 621,368.27 4,110,860.59 108.54 291.01
SZK40-1 621,985.42 4,110,419.50 98.97 453.10
SZK40-3 621,453.28 4,110,863.28 99.37 367.29
SZK48-1 621,623.51 4,110,791.68 97.85 130.19
SZK48-2 621,679.78 4,110,756.09 88.12 183.45
SZK48-3 621,497.67 4,110,918.56 107.22 389.70
SZK48-5 621,417.42 4,110,978.31 115.12 373.75
SZK48-6 621,203.38 4,111,148.55 107.67 457.65
SZK56-1 621,676.07 4,110,841.20 85.93 132.66
SZK56-2 621,739.85 4,110,783.72 84.62 180.35
SZK56-4 621,496.63 4,111,000.28 87.54 331.26
SZK56-5 621,896.84 4,110,646.35 78.47 391.65
SZK63-1 620,977.88 4,110,246.50 89.33 613.10
SZK64-1 621,804.71 4,110,798.93 82.09 211.94
SZK64-2 621,901.81 4,110,731.87 78.30 501.28
SZK64-3 621,952.26 4,110,683.58 77.15 407.92
SZK7-1 621,233.08 4,110,583.98 114.26 182.12
SZK7-2 621,305.66 4,110,527.25 131.90 160.35
SZK72-1 621,898.91 4,110,800.63 82.31 282.04
SZK72-2 621,759.36 4,110,917.26 81.21 358.79
SZK72-3 621,629.04 4,111,027.75 85.21 256.65
SZK72-4 621,969.76 4,110,764.49 80.56 297.57
SZK72-5 622,009.00 4,110,714.65 78.85 262.92
SZK7-4 621,113.42 4,110,682.22 118.69 266.53
SZK80-1 621,999.51 4,110,832.83 94.45 370.92
SZK80-2 622,049.43 4,110,766.21 90.64 346.70
SZK80-3 622,130.86 4,110,680.25 82.70 392.60
SZK8-1 621,293.79 4,110,687.78 133.37 50.35
SZK8-2 621,444.00 4,110,561.83 131.59 200.04
SZK8-3 621,258.13 4,110,714.93 141.58 193.38
SZK8-6 621,140.50 4,110,815.85 118.45 264.69
APPENDIX III SRK REPORT
– III-207 –


--- page 775 ---
Hole ID Easting
(m)
Northing
(m)
Elevation
(m ASL)
Depth
(m)
SZK8-7 620,944.72 4,110,971.98 126.37 307.65
SZK92-3 622,112.10 4,110,833.45 92.73 247.56
SZK92-4 621,977.36 4,110,924.61 117.30 386.95
SZK92-5 621,806.98 4,111,078.35 117.72 399.76
SZK92-6 622,453.13 4,110,538.69 87.89 271.65
SZK92-7 622,190.98 4,110,759.07 108.81 295.75
SZK96-2 622,010.97 4,110,905.59 111.00 250.50
TC0-1 621,146.82 4,110,732.25 128.62 45.00
TC0-2 621,264.60 4,110,640.74 123.52 66.30
TC0-3 621,314.57 4,110,620.11 128.65 113.00
TC0-4 621,118.40 4,110,749.17 119.69 35.70
TC108-1 621,716.01 4,111,342.09 122.76 117.30
TC11-1 621,153.31 4,110,612.66 109.68 220.00
TC12-1 621,272.15 4,110,747.49 144.95 105.20
TC12-2 621,439.61 4,110,607.21 124.17 23.00
TC12-3 621,224.41 4,110,781.45 138.98 61.00
TC124-1 621,797.78 4,111,366.68 93.37 43.60
TC124-2 622,586.52 4,110,766.73 72.04 68.30
TC124-3 622,641.66 4,110,667.64 76.47 54.00
TC15-1 621,198.53 4,110,536.30 105.72 131.00
TC15-2 621,118.83 4,110,624.05 106.46 110.00
TC16-1 621,245.50 4,110,809.13 139.86 181.00
TC16-2 621,474.87 4,110,617.59 118.25 24.00
TC16-3 621,217.74 4,110,825.72 138.45 28.70
TC19-1 621,176.40 4,110,515.26 105.42 119.00
TC20-1 621,350.11 4,110,760.26 136.39 33.30
TC20-2 621,473.24 4,110,656.19 113.25 77.50
TC24-1 621,365.13 4,110,786.42 130.78 37.00
TC24-2 621,477.19 4,110,690.91 106.64 127.50
TC24-3 621,319.26 4,110,828.34 120.62 63.00
TC24-4 621,281.20 4,110,850.34 132.10 26.00
TC24-5 621,213.22 4,110,908.90 142.29 99.80
TC28-1 621,408.56 4,110,787.76 124.44 14.00
TC3-1 621,131.19 4,110,699.93 124.68 44.00
TC3-2 621,303.73 4,110,581.27 130.54 66.00
TC32-1 621,437.12 4,110,804.42 120.09 25.00
TC32-2 621,539.06 4,110,716.98 97.63 57.50
TC32-3 621,374.13 4,110,850.95 106.68 81.50
TC32-4 621,288.13 4,110,921.67 138.80 115.70
TC3-3 621,352.90 4,110,522.20 132.24 22.00
APPENDIX III SRK REPORT
– III-208 –


--- page 776 ---
Hole ID Easting
(m)
Northing
(m)
Elevation
(m ASL)
Depth
(m)
TC36-1 621,481.98 4,110,804.35 116.72 21.50
TC36-2 621,567.91 4,110,732.26 97.63 33.00
TC40-1 621,517.28 4,110,815.81 112.23 18.40
TC40-2 621,611.21 4,110,730.56 92.51 21.50
TC40-3 621,476.43 4,110,855.21 97.70 58.30
TC40-4 621,301.29 4,110,995.31 132.93 205.70
TC4-1 621,178.90 4,110,746.15 136.84 29.00
TC4-2 621,280.65 4,110,675.17 127.61 55.00
TC4-3 621,387.36 4,110,581.03 131.44 71.00
TC44-1 621,554.22 4,110,825.84 109.79 15.00
TC48-1 621,539.75 4,110,854.33 95.34 153.00
TC48-2 621,501.07 4,110,902.02 104.39 28.00
TC48-3 621,352.43 4,111,030.90 120.50 200.00
TC56-1 621,541.27 4,110,917.77 97.35 20.00
TC56-2 621,404.88 4,111,064.93 103.00 65.70
TC624-1 622,509.27 4,110,667.47 100.99 8.00
TC624-2 622,514.57 4,110,661.50 101.43 30.50
TC624-3 622,086.32 4,110,979.31 97.29 85.00
TC7-1 621,136.29 4,110,664.11 118.96 52.00
TC7-2 621,219.83 4,110,598.34 118.23 174.30
TC7-3 621,115.38 4,110,684.66 118.83 32.00
TC7-4 621,092.24 4,110,708.33 115.85 45.60
TC80-1 621,803.43 4,110,966.99 83.68 119.90
TC8-1 621,301.81 4,110,698.66 137.10 131.00
TC8-2 621,290.40 4,110,694.05 135.28 44.00
TC8-3 621,407.75 4,110,595.15 132.30 44.20
TC8-4 621,189.48 4,110,772.90 133.12 21.50
TC92-1 621,569.19 4,111,280.89 110.99 185.55
TC92-2 621,854.37 4,111,040.54 99.84 104.60
UL106-A 621,681.30 4,110,753.95 9.00 105.00
UL106-C 621,511.33 4,110,621.47 9.00 99.70
UL106-D 621,497.62 4,110,612.03 9.00 100.36
UL106-E 621,483.45 4,110,585.56 9.00 100.13
UL206-A 621,501.79 4,110,575.13 –40.00 65.28
UL206-B 621,502.82 4,110,574.16 –40.00 63.24
UL206-C 621,578.40 4,110,684.64 –40.00 83.64
UL206-D 621,676.08 4,110,760.79 –40.00 65.28
UL206-E 621,515.42 4,110,650.62 –40.00 60.52
UL206-F 621,357.05 4,110,689.66 –40.00 75.10
UL206-G 621,550.48 4,110,649.73 –40.00 43.49
APPENDIX III SRK REPORT
– III-209 –


--- page 777 ---
Hole ID Easting
(m)
Northing
(m)
Elevation
(m ASL)
Depth
(m)
ZK1 621,597.36 4,110,710.46 91.98 409.00
ZK11 621,515.51 4,110,799.13 115.40 403.64
ZK13 621,375.41 4,110,575.95 139.62 507.76
ZK150 621,436.75 4,110,489.61 135.24 201.48
ZK151 621,380.12 4,110,537.03 133.91 200.39
ZK16 621,500.13 4,110,531.67 132.33 470.62
ZK17 621,675.44 4,110,667.46 113.22 375.00
ZK18 621,303.65 4,110,591.41 129.34 250.60
ZK19 621,431.17 4,110,492.83 133.79 253.74
ZK2 621,762.65 4,110,765.92 83.55 328.50
ZK2011-05 621,187.11 4,110,558.92 110.70 260.08
ZK2011-08 621,161.90 4,110,719.50 131.36 226.06
ZK21 621,182.98 4,110,699.06 130.20 80.53
ZK23 621,364.79 4,110,790.45 129.80 80.20
ZK26 621,340.58 4,110,678.85 134.90 84.10
ZK27 621,454.92 4,110,708.06 106.81 64.25
ZK28 621,584.21 4,110,820.05 104.00 50.81
ZK3 621,827.27 4,110,870.61 81.09 292.20
ZK33 621,354.78 4,110,419.65 124.10 70.52
ZK35 621,570.58 4,110,480.24 133.60 79.61
ZK4 621,667.46 4,110,762.32 88.65 362.30
ZK40 621,119.99 4,110,746.86 115.00 70.08
ZK41 621,200.39 4,110,796.86 133.40 80.76
ZK42 621,257.19 4,110,853.76 139.80 88.01
ZK5 621,817.05 4,110,670.91 82.44 315.00
ZK51 621,424.52 4,110,581.88 132.88 200.04
ZK52 621,460.85 4,110,547.15 133.08 200.20
ZK6 621,602.34 4,110,569.71 122.76 440.00
ZK7 621,281.18 4,110,100.95 82.71 616.90
ZK8 621,174.87 4,110,538.15 109.96 510.70
ZK9 621,299.27 4,110,618.40 131.58 530.00
Note: 1980 Xi ’an Coordinate System
APPENDIX III SRK REPORT
– III-210 –


--- page 778 ---
Appendix C:
Basic statistic and variogram
APPENDIX III SRK REPORT
– III-211 –


--- page 779 ---
Probability Histogram and Cumulative F requency Curve for Capped Au Grades
 -
 0.20
 0.40
 0.60
 0.80
 1.00
 1.20
 -  20  40  60  80  100  120

 -
 0.20
 0.40
 0.60
 0.80
 1.00
 1.20
 -  20  40  60  80  100  120  140  160  180  200
 -
 0.20
 0.40
 0.60
 0.80
 1.00
 1.20
 -  20  40  60  80  100  120  140  160  180  200
 -
 0.20
 0.40
 0.60
 0.80
 1.00
 1.20
 -  20  40  60  80  100  120  140  160  180  200
gamma (h)
gamma (h)
Major Axis: Variogram Plot for Au Composites
gamma (h)
Semi-major Axis: Variogram Plot for Au Composites
gamma (h)
Minor Axis: Variogram Plot for Au Composites
Down Hole: Combined Variogram Plot for Au Composites
(drillhole data only)
distance (m) distance (m)
distance (m) distance (m)
Variogram (drill hole data)
APPENDIX III SRK REPORT
– III-212 –


--- page 780 ---
Appendix D:
SRK independent sampling and assay
APPENDIX III SRK REPORT
– III-213 –


--- page 781 ---
Coarse duplicates ’ assay result
Samples taken on Jan 30 – 31 2012 by SRK
Coarse duplicate
Number Original ID Original-Au
(g/t)
ALS-Au
(g/t)
SJG001 D0004167 0.482 0.292
SJG002 STC15-1H94 3.830 2.210
SJG003 STC3-1H37 0.446 0.188
SJG004 STC0-1H35 0.294 0.156
SJG005 STC0-1H34 0.210 0.168
SJG006 STC0-1H39 0.071 0.047
SJG007 STC4-1H17 0.922 0.809
SJG008 STC4-1H16 3.380 4.070
SJG009 STC3-1H36 0.290 0.189
SJG010 SCK32-1H129 0.267 0.522
SJG011 SCK32-1H128 0.271 0.154
SJG012 STC7-1H175 0.271 0.192
SJG013 STC7-1H174 0.292 0.083
SJG014 STC7-1H173 0.348 0.359
SJG015 STC7-1H171 0.622 0.258
SJG016 STC7-1H170 0.323 0.297
SJG017 STC11-1H71 0.233 0.177
SJG018 STC11-1H75 0.207 0.168
SJG019 STC7-1H12 0.640 0.564
SJG020 STC7-1H195 0.295 0.234
SJG021 STC4-1H07 0.919 0.822
SJG022 STC4-1H08 0.270 0.242
SJG023 STC4-1H09 2.460 1.855
SJG024 STC4-1H10 2.580 2.800
SJG025 STC4-1H11 0.849 1.635
SJG026 STC11-1H76 0.237 0.167
SJG027 STC11-1H80 0.407 0.446
SJG028 STC11-1H81 0.614 0.546
SJG029 STC20-2H13 0.204 0.190
SJG030 SCK8-1H122 0.420 50.005
SJG031 SCK8-1H43 0.423 0.446
SJG032 SCK8-1H37 0.304 0.186
SJG033 SCK12-1H105 0.238 0.352
SJG034 SCK7-1H01 0.564 0.552
SJG035 SCK7-1H02 0.326 0.268
SJG036 SCK7-1H03 0.422 0.366
APPENDIX III SRK REPORT
– III-214 –


--- page 782 ---
Samples taken on Jan 30 – 31 2012 by SRK
Coarse duplicate
Number Original ID Original-Au
(g/t)
ALS-Au
(g/t)
SJG037 SCK7-1H05 0.236 2.640
SJG038 SCK16-1H279 0.949 0.499
SJG039 SCK28-1H7 0.597 0.276
SJG040 SCK28-1H8 2.510 2.840
SJG041 SCK28-1H9 0.289 0.593
SJG042 SCK12-1H77 0.430 0.370
SJG043 SCK12-1H78 0.946 1.795
SJG044 SCK16-1H246 1.430 4.090
SJG045 SCK16-1H261 0.815 0.633
SJG046 SCK16-1H276 0.700 1.745
SJG047 SCK16-1H277 1.650 0.940
SJG048 SCK16-1H239 0.666 1.155
SJG049 SCK16-1H240 1.090 1.105
SJG050 SCK8-1H111 4.480 1.330
SJG051 SCK8-1H113 0.342 0.256
SJG052 SCK8-1H58 0.973 0.334
SJG053 SCK8-1H59 0.764 0.944
SJG054 SCK8-1H61 0.630 0.178
SJG055 SCK8-1H63 0.347 0.853
SJG056 SCK32-1H120 0.981 0.916
SJG057 SCK32-1H119 0.770 0.801
SJG058 SCK32-1H118 4.420 2.180
SJG059 SCK32-1H117 0.685 1.230
SJG060 SCK28-1H30 1.660 1.705
SJG061 SCK16-1H241 0.335 0.137
SJG062 SCK16-1H247 3.040 1.130
SJG063 SCK16-1H248 1.130 1.535
SJG064 SCK16-1H250 20.000 7.080
SJG065 SCK16-1H251 0.360 0.312
SJG066 SCK8-1H107 0.684 0.560
SJG067 SCK28-1H5 1.670 1.260
SJG068 SCK16-1H257 7.300 3.760
SJG069 SCK16-1H258 5.560 2.960
SJG070 SCK16-1H260 1.560 1.385
SJG071 SCK28-1H37 0.534 0.283
SJG072 SCK28-1H38 0.337 0.325
SJG073 SCK28-1H40 0.739 0.487
APPENDIX III SRK REPORT
– III-215 –


--- page 783 ---
Samples taken on Jan 30 – 31 2012 by SRK
Coarse duplicate
Number Original ID Original-Au
(g/t)
ALS-Au
(g/t)
SJG074 SCK28-1H41 0.317 0.115
SJG075 SCK8-1H13 0.371 0.411
SJG076 SCK12-1H68 0.572 1.205
SJG077 SCK8-1H52 0.406 0.448
SJG078 SCK8-1H53 0.531 0.349
SJG079 SCK16-1H253 0.460 0.274
SJG080 SCK16-1H254 0.387 0.309
SJG081 SCK12-1H17 0.687 0.609
SJG082 SCK16-1H267 49.200 22.900
SJG083 SCK28-1H29 0.734 0.187
SJG084 SCK0-1H23 0.230 0.698
SJG085 STC4-2H33 0.258 0.329
SJG086 STC4-2H35 0.307 0.238
SJG087 SCK0-1H122 0.306 0.253
SJG088 STC4-2H7 0.597 0.333
SJG089 STC4-2H8 0.408 0.193
SJG090 STC4-2H10 0.333 0.078
SJG091 SCK3-1H18 0.226 0.076
SJG092 SCK3-1H33 0.833 0.525
SJG093 SCK3-1H25 0.467 0.160
SJG094 SCK3-1H28 0.575 0.690
SJG095 SCK4-1H11 1.040 0.749
SJG096 SCK4-1H12 2.710 2.350
SJG097 SCK4-1H19 0.458 0.211
SJG098 SCK4-1H18 0.725 0.508
SJG099 SCK4-1H17 0.406 0.370
SJG100 STC24-2H93 0.562 0.517
SJG101 STC24-2H94 0.243 0.173
SJG102 STC24-2H95 0.255 0.195
APPENDIX III SRK REPORT
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--- page 784 ---
Pulp duplicates ’ assay result
Samples taken on Jan 30 – 31 2012 by SRK
Pulp duplicate
Number Original ID Original-Au
(g/t)
ALS-Au
(g/t)
SJG103 SCK3-1H66 0.313 0.243
SJG104 SCK3-1H68 0.319 0.176
SJG105 STC24-2H85 0.411 0.483
SJG106 STC4-2H45 0.316 0.194
SJG107 SCK32-1H25 0.357 0.431
SJG108 SCK4-1H102 0.290 0.123
SJG109 SCK32-1H19 1.060 1.235
SJG110 SCK0-1H54 0.353 0.133
SJG111 STC8-1H115 0.319 0.125
SJG112 STC8-1H118 1.700 1.240
SJG113 SCK32-1H21 0.703 1.500
SJG114 SCK32-1H24 0.856 0.962
SJG115 SCK32-1H8 1.060 1.025
SJG116 SCK4-2H8 0.594 0.504
SJG117 SCK4-2H19 0.334 0.275
SJG118 SCK4-2H22 0.988 0.796
SJG119 SCK4-2H24 0.800 0.961
SJG120 SCK4-2H20 2.860 4.060
SJG121 SCK4-2H1 0.395 0.398
SJG122 SCK4-2H8 0.704 0.409
SJG123 SCK4-1H91 0.731 0.473
SJG124 SCK4-1H97 0.385 0.388
SJG125 SCK4-1H95 0.777 0.723
SJG126 SCK4-1H108 1.050 1.030
SJG127 SCK4-1H107 0.575 0.536
SJG128 SCK4-1H111 0.464 0.238
SJG129 SCK36-1H21 0.371 0.276
SJG130 SCK32-1H19 0.385 0.272
SJG131 SCK32-1H25 0.531 0.769
SJG132 SCK32-1H28 0.683 0.525
SJG133 SCK32-1H21 0.785 0.672
SJG134 SCK32-1H27 0.353 0.199
SJG135 SCK32-1H52 0.410 0.162
SJG136 SCK32-1H53 2.820 2.190
SJG137 SCK32-1H54 0.400 0.288
SJG138 SCK7-1H2 0.422 0.392
APPENDIX III SRK REPORT
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--- page 785 ---
Samples taken on Jan 30 – 31 2012 by SRK
Pulp duplicate
Number Original ID Original-Au
(g/t)
ALS-Au
(g/t)
SJG139 SCK36-1H3 0.566 0.518
SJG140 SCK36-1H4 1.080 1.125
SJG141 SCK36-1H2 0.806 0.847
SJG142 SCK8-1H9 0.416 0.297
SJG143 SCK8-1H77 0.454 0.390
SJG144 SCK8-1H10 0.474 0.573
SJG145 SCK8-1H75 3.630 3.230
SJG146 SCK8-1H11 0.453 0.405
SJG147 SCK36-1H1 0.139 0.155
SJG148 SCK36-1H2 0.776 1.390
SJG149 SCK36-1H3 0.321 1.035
SJG150 SCK36-1H4 1.360 1.900
APPENDIX III SRK REPORT
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--- page 786 ---
Appendix E:
Innovation Company Certificate
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APPENDIX III SRK REPORT
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Appendix F:
Compliance with Chapter 18
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Chapter 18 SRK
18.01 DEFINITIONS AND INTERPRETATION Noted.
18.02 –
18.04 CONDITIONS FOR LISTING OF NEW APPLICANT MINERAL COMPANIES
18.02 In addition to satisfying the requirements of Chapter 8, a Mineral Company which has applied for listing
must also satisfy the requirements of this Chapter.
1.4
18.03 A Mineral Company must:
(1) establish to the Exchange ’s satisfaction that it has the right to participate actively in the exploration
for and/or extraction of Natural Resources, either:
Figure 1-1
(a) through control over a majority (by value) of the assets in which it has invested together
with adequate rights over the exploration for and/or extraction of Natural Resources; or
Note: ‘control over a majority ’ means an interest greater than 50%.
(b) through adequate rights (arising under arrangements acceptable to the Exchange), which
give it sufficient influence in decisions over the exploration for and/or extraction of the
Natural Resources;
(2) establish to the Exchange ’s satisfaction that it has at least a portfolio of: 12.11
(a) Indicated Resources; or
(b) Contingent Resources,
identifiable under a Reporting Standard and substantiated in a Competent Person ’s Report.
This portfolio must be meaningful and of sufficient substance to justify a listing;
(3) if it has commenced production, provide an estimate of cash operating costs including the costs
associated with:
19.2
19.3
(a) workforce employment;
(b) consumables;
(c) fuel, electricity, water and other services;
(d) on and off-site administration;
(e) environmental protection and monitoring;
(f) transportation of workforce;
(g) product marketing and transport;
(h) non-income taxes, royalties and other governmental charges; and
(i) contingency allowances;
Note: A Mineral Company must:
. set out the components of cash operating costs separately by category;
. explain the reason for any departure from the list of items to be included under cash
operating costs; and
. discuss any material cost items that should be highlighted to investors.
(4) demonstrate to the Exchange ’s satisfaction that it has available working capital for 125% of the
group’s present requirements, that is for at least the next 12 months, which must include:
19.2.4
19.3.4
(a) general, administrative and operating costs;
(b) property holding costs; and
(c) the cost of any proposed exploration and/or development; and
Note: Capital expenditures do not need to be included in working capital requirements. Where they
are financed out of borrowings, relevant interest and loan repayments must be included.
(5) ensure that its working capital statement in the listing document under Listing Rule 8.21A states it
has available sufficient working capital for 125% of the group ’s present requirements, that is for at
least 12 months from the date of its listing document.
19.2.4
19.3.4
18.04 If a Mineral Company is unable to satisfy either the profit test in rule 8.05(1), the market capitalisation/
revenue/cash flow test in rule 8.05(2), or the market capitalisation/revenue test in rule 8.05(3), it may still
a p p l yt ob el i s t e di fi tc a ne s t a b l i s ht ot h eE x c h a n g e’s satisfaction that its directors and senior managers,
taken together, have sufficient experience relevant to the exploration and/or extraction activity that the
Mineral Company is pursuing. Individuals relied on must have a minimum of five years relevant industry
experience. Details of the relevant experience must be disclosed in the listing document of the new
applicant.
Not applicable.
Satisfied rule
8.05(1).
Note: A Mineral Company relying on this rule must demonstrate that its primary activity is the exploration
for and/or extraction of Natural Resources.
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Chapter 18 SRK
18.05 –
18.08 CONTENTS OF LISTING DOCUMENTS FOR NEW APPLICANTS
18.05 In addition to the information set out in Appendix 1A, a Mineral Company must include in its listing
document:
(1) a Competent Person ’s Report; 1.1
(2) a statement that no material changes have occurred since the effective date of the Competent
Person’s Report. Where there are material changes, these must be prominently disclosed;
1.5.2
(3) the nature and extent of its prospecting, exploration, exploitation, land use and mining rights and a
description of the properties to which those rights attach, including the duration and other principal
terms and conditions of the concessions and any necessary licences and consents. Details of
material rights to be obtained must also be disclosed;
3
(4) a statement of any legal claims or proceedings that may have an influence on its rights to explore or
mine;
1.9
(5) disclosure of specific risks and general risk s. Companies should have regard to Guidance Note 7 on
suggested risk analysis; and
23
(6) if relevant and material to the Mineral Company ’s business operations, information on the
following:
(a) project risks arising from environmental, social, and health and safety issues; 18.6
(b) any non-governmental organisation impact on sustainability of mineral and/or exploration
projects;
18.5
(c) compliance with host country laws, regulations and permits, and payments made to host
country governments in respect of tax, royalties and other significant payments on a
country by country basis;
18.4
(d) sufficient funding plans for remediation, rehabilitation and, closure and removal of
facilities in a sustainable manner;
18.5
(e) environmental liabilities of its projects or properties; 18.5
(f) its historical experience of dealing with host country laws and practices, including
management of differences between national and local practice;
18.4
(g) its historical experience of dealing with c oncerns of local governments and communities on
the sites of its mines, exploration properties, and relevant management arrangements; and
18.4
18.5
(h) any claims that may exist over the land on which exploration or mining activity is being
carried out, including any ancestral or native claims.
3
18.3
18.06 –
18.08 Additional disclosure requirements that apply to certain new applicant Mineral Companies
18.06 If a Mineral Company has begun production, it must disclose an estimate of the operating cash cost per
appropriate unit for the minerals and/or Petroleum produced.
19.2.5, 19.2.6
19.3.5, 19.3.6
18.07 If a Mineral Company has not yet begun production, it must disclose its plans to proceed to production with
indicative dates and costs. These plans must be supported by at least a Scoping Study, substantiated by the
opinion of a Competent Person. If exploration rights or rights to extract Resources and/or Reserves have not
yet been obtained, relevant risks to obtaining these rights must be prominently disclosed.
Not applicable.
Has commenced
production.
18.08 If a Mineral Company is involved in the exploration for or extraction of Resources, it must prominently
disclose to investors that its Resources may not ultimately be extracted at a profit.
12.1
18.09 –
18.13 RELEVANT NOTIFIABLE TRANSACTIONS INVOLVING THE ACQUISITION OR DISPOSAL OF
MINERAL OR PETROLEUM ASSETS
Not applicable.
No such notifiable
transaction.
18.09 A Mineral Company proposing to acquire or dispose of assets which are solely or mainly Mineral or
Petroleum Assets as part of a Relevant Notifiable Transaction must:
(1) comply with Chapter 14 and Chapter 14A, if relevant;
(2) produce a Competent Person ’s Report, which must form part of the relevant circular, on the
Resources and/or Reserves being acquired or disposed of as part of the Relevant Notifiable
Transaction;
Note: The Exchange may dispense with the requirement for a Competent Person ’s Report on
disposals where shareholders have sufficient information on the assets being disposed of.
(3) in the case of a major (or above) acquisition, produce a Valuation Report, which must form part of
the relevant circular, on the Mineral or Petroleum Assets being acquired as part of the Relevant
Notifiable Transaction; and
(4) comply with the requirements of rules 18.05(2) to 18.05(6) in respect of the assets being acquired.
Note: Material liabilities that remain with the issuer on a disposal must also be discussed.
APPENDIX III SRK REPORT
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Chapter 18 SRK
18.10 –
18.11 Requirements that apply to listed issuers
18.10 A listed issuer proposing to acquire assets which are solely or mainly Mineral or Petroleum Assets as part
of a Relevant Notifiable Transaction must comply with rule 18.09.
18.11 On completion of a Relevant Notifiable Transaction involving the acquisition of Mineral or Petroleum
Assets, unless the Exchange decides otherwise, a listed issuer will be treated as a Mineral Company.
18.12 –
18.13 Requirements that apply to Mineral Companies and listed issuers
18.12 The Exchange may dispense with the requirement to produce a new Competent Person ’s Report or a
Valuation Report under rules 18.05(1), 18.09(2) or 18.09(3), if the issuer has available a previously
published Competent Person ’s Report or Valuation Report (or equivalent) which complies with rules 18.18
to 18.34 (where applicable), provided the report is no more than six months old. The issuer must provide
this document and a no material change statement in the listing document or circular for the Relevant
Notifiable Transaction.
18.13 An issuer must obtain the prior written consent of a Competent Person(s) or Competent Evaluator for their
material to be included in the form and context in which it appears in a listing document or circular for the
Relevant Notifiable Transaction, whether or not such person or firm is retained by the listing applicant or
the issuer.
18.14 –
18.17 CONTINUING OBLIGATIONS
Not applicable.
Will comply after
Listing.
18.14 Disclosure in reports
18.14 A Mineral Company must include in its interim (half-yearly) and annual reports details of its exploration,
development and mining production activities and a summary of expenditure incurred on these activities
during the period under review. If there has been no exploration, development or production activity, that
fact must be stated.
18.15 –
18.17 Publication of Resources and Reserves
18.15 A listed issuer that publicly discloses details of Resources and/or Reserves must give an update of those
Resources and/or Reserves once a year in its annual report, in accordance with the reporting standard under
which they were previously disclosed or a Reporting Standard.
18.16 A Mineral Company must include an update of its Resources and/or Reserves in its annual report in
accordance with the Reporting Standard under which they were previously disclosed.
18.17 Annual updates of Resources and/or Reserves must comply with rule 18.18.
Note: Annual updates are not required to be supported by a Competent Person ’s Report and may take the
form of a no material change statement.
18.18 –
18.27 STATEMENTS ON RESOURCES AND/OR RESERVES
18.18 Presentation of data
18.18 Any data presented on Resources and/or Reserves by a Mineral Company in a listing document, Competent
Person ’s Report, Valuation Report or annual report, must be presented in tables in a manner readily
understandable to a non-technical person. All assumptions must be clearly disclosed and statements should
include an estimate of volume, tonnage and grades.
12.11
13.4.6
13.5.5
18.19 Basis of evidence
18.19 All statements referring to Resources and/or Reserves:
(1) in any new applicant listing document or circular relating to a Relevant Notifiable Transaction,
must be substantiated in a Competent Person ’s Report which must form part of the document; and
12.11
13.4.6
13.5.5
(2) in all other cases, must at least be substantiated by the issuer ’s internal experts. Not applicable.
Will comply after
Listing.
18.20
Petroleum Competent Persons ’Reports
Not applicable.
N o tap e t r o l e u m
company.
18.20 A Competent Person ’s Report for Mineral Companies involved in the exploration for and/or extraction of
Petroleum Resources and Reserves must include the information set out in Appendix 25.
APPENDIX III SRK REPORT
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Chapter 18 SRK
18.21 –
18.22 Competent Person
18.21 A Competent Person must: 1.6
(1) have a minimum of five years experience relevant to the style of mineralization and type of deposit
under consideration or to the type of Petroleum exploration, reserve estimate (as appropriate), and
to the activity which the Mineral Company is undertaking;
1.6
(2) be professionally qualified, and be a member in good standing of a relevant Recognised
Professional Organisation, in a jurisdiction where, in the Exchange ’s opinion, the statutory
securities regulator has satisfactory arrangements (either by way of the IOSCO Multilateral MOU or
other bi-lateral agreement acceptable to the Exchange) with the Commission for mutual assistance
and exchange of information for enforcing and s ecuring compliance with the laws and regulations
of that jurisdiction and Hong Kong; and
1.6
(3) take overall responsibility for the Competent Person ’s Report. 1.6
18.22 A Competent Person must be independent of the issuer, its directors, senior management and advisers.
Specifically the Competent Person retained must:
1.9.3
(1) have no economic or beneficial interest (present or contingent) in any of the assets being reported
on;
(2) not be remunerated with a fee dependent on the findings of the Competent Person ’s Report;
(3) in the case of an individual, not be an officer, employee or proposed officer of the issuer or any
group, holding or associated company of the issuer; and
(4) in the case of a firm, not be a group, holding or associated company of the issuer. Any of the firm ’s
partners or officers must not be officers or proposed officers of any group, holding or associated
company of the issuer.
18.23
Additional requirements of Competent Evaluators
Not applicable.
This is not an
evaluation report.
18.23 In addition to the requirements set out in rules 18.21(2) and 18.22, a Competent Evaluator must:
(1) have at least ten years relevant and recent general mining or Petroleum experience (as appropriate);
(2) have at least five years relevant and recent experience in the assessment and/or valuation of Mineral
or Petroleum Assets or securities (as appropriate); and
(3) hold all necessary licences.
Note: A Competent Person ’s Report or Valuation Report may be performed by the same Competent Person
provided he or she is also a Competent Evaluator.
18.24 Scope of Competent Persons ’Reports and Valuation Reports
18.24 A Competent Person ’s Report or Valuation Report must comply with a Reporting Standard as modified by
this Chapter, and must:
(1) be addressed to the Mineral Company or listed issuer; 1.4
(2) have an effective date (being the date when the contents of the Competent Person ’sR e p o r to r
Valuation Report are valid) less than six months before the date of publishing the listing document
or circular relating to a Relevant Notifiable Transaction required under the Listing Rules; and
1.5
(3) set
out
what
Reporting Standard has been used in preparing the Competent Person ’s Report or Valuation
Report, and explain any departure from the relevant Reporting Standard.
1.4
18.25 –
18.26 Disclaimers and Indemnities
18.25 A Competent Person ’s Report or Valuation Report may contain disclaimers of sections or topics outside
their scope of expertise in which the Competent Person or Competent Evaluator relied upon other experts ’
opinions, but must not contain any disclaimers of the report in its entirety.
1.4.3
18.26 The Competent Person or Competent Evaluator must prominently disclose in the Competent Person ’s Report
or Valuation Report the nature and details of all indemnities provided by the issuer. Indemnities for reliance
placed on information provided by issuers and third pa rty experts (for information outside the Competent
Person ’s or Competent Evaluator ’s expertise) are generally acceptab le. Indemnities for fraud and gross
negligence are generally unacceptable.
1.9
1.10
18.27 Obligations of sponsor
18.27 Any sponsor appointed to or by a new applicant Mineral Company under Chapter 3A must ensure that any
Competent Person or Competent Evaluator meets the requirements of this Chapter.
1.6
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Chapter 18 SRK
18.28 –
18.34 REPORTING STANDARD
18.28 –
18.30 Mineral reporting standard
18.28 In addition to satisfying the requirements of Chapt er 13 (as modified by this Chapter), a Mineral Company
exploring for and/or extracting mineral Resources and Reserves must also satisfy rules 18.29 and 18.30.
18.29 A Mineral Company must disclose information on mineral Resources, Reserves and/or exploration results
either:
1.4
(1) under:
(a) the JORC Code;
(b) NI 43 –101; or
(c) the SAMREC Code,
as modified by this Chapter; or
(2) under other codes acceptable to the Exchange as communicated to the market from time to time,
provided the Exchange is satisfied that they give a comparable standard of disclosure and sufficient
assessment of the underlying assets.
Note: The Exchange may allow presentation of Reserves under other reporting standards provided
reconciliation to a Reporting Standard is provided. A Reporting Standard applied to specific assets
must be used consistently.
18.30 A Mineral Company must ensure that:
(1) any estimates of mineral Reserves disclosed are supported, at a minimum, by a Pre-feasibility
Study;
13.2
(2) estimates of mineral Reserves and mineral Resources are disclosed separately; 12, 13
(3) Indicated Resources and Measured Resources are only included in economic analyses if the basis on
which they are considered to be economically extractable is explained and they are appropriately
discounted for the probabilities of their conversion to mineral Reserves. All assumptions must be
clearly disclosed. Valuations for Inferred Resources are not permitted;
12.11
(4) for commodity prices used in Pre-feasibility Studies, Feasibility Studies and valuations of Indicated
Resources, Measured Resources and Reserves:- (a) the methods to determine those commodity
prices, all material assumptions and the basis on which those prices represent reasonable views of
future prices are explained clearly; and (b) if a contract for future prices of mineral Reserves exists,
the contract price is used; and
17.2
(5) for forecast valuations of Reserves and profit forecasts, sensitivity analyses to higher and lower
prices are supplied. All assumptions must be clearly disclosed.
Not applicable.
No forecast
valuation of
Reserves
included.
18.31 –
18.33 Petroleum reporting standard
Not applicable.
This is not a
petroleum
company.
18.31 In addition to satisfying the requirements of Chapt er 13 (as modified by this Chapter), a Mineral Company
exploring for and/or extracting Petroleum Resources and Reserves must also satisfy rules 18.32 and 18.33.
18.32 A Mineral Company must disclose information on Petroleum Resources and Reserves either:
(1) under PRMS as modified by this Chapter; or
(2) under other codes acceptable to the Exchange if it is satisfied that they give a comparable standard
of disclosure and sufficient assessment of the underlying assets.
Note: A Reporting Standard applied to specific assets must be used consistently.
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Chapter 18 SRK
18.33 A Mineral Company must ensure that:
(1) where estimates of Reserves are disclosed, the method and reason for choice of estimation are
disclosed (i.e. deterministic or probabilistic methods, as defined in PRMS). Where the probabilistic
method is used, the underlying confidence levels applied must be stated;
(2) if the NPVs attributable to Proved Reserves and Proved plus Probable Reserves are disclosed, they
are presented on a post-tax basis at varying discount rates (including a reflection of the weighted
average cost of capital or minimum acceptable rate of return that applies to the entity at the time of
evaluation) or a fixed discount rate of 10%;
(3) Proved Reserves and Proved plus Probable Reserves are analysed separately and principal
assumptions (including prices, costs, exchange rates and effective date) and the basis of the
methodology are clearly stated;
(4) if the NPVs attributable to Reserves are disclosed, they are presented using a forecast price as a
base case or using a constant price as a base case. The bases for the forecast case must be
disclosed. The constant price is defined as the unweighted arithmetic average of the closing price
on the first day of each month within the 12 months before the end of the reporting period, unless
prices are defined by contractual arrangements. The basis on which the forecast price is considered
reasonable must be disclosed and Mineral Companies must comply with rule 18.30;
Note: In the forecast case under PRMS, the economic evaluation underlying the investment decision
is based on the entity’ s reasonable forecast of future conditions, including costs and prices,
which will exist during the life of the project.
(5) if estimated volumes of Contingent Resources or Prospective Resources are disclosed, relevant risk
factors are clearly stated;
Note: Under PRMS, wherever the volume of a Contingent Resource is stated, risk is expressed as
the chance that the accumulation will be commercially developed and graduate to the
reserves class. Wherever the volume of a Prospective Resource is stated, risk is expressed as
the chance that a potential accumulation will result in a significant discovery of Petroleum.
(6) economic values are not attached to Possible Reserves, Contingent Resources or Prospective
Resources; and
(7) where an estimate of future net revenue is disclosed, whether calculated without discount or using a
discount rate, it is prominently disclosed that the estimated values disclosed do not represent fair
market value.
18.34
Mineral or Petroleum Asset Valuation Reports
Not applicable.
This is not a
mineral or
petroleum asset
valuation report.
18.34 A Mineral Company must ensure that:
(1) any valuation of its Mineral or Petroleum Assets is prepared under the VALMIN Code, SAMVAL
Code, CIMVAL or such other code approved by the Exchange from time to time;
(2) the Competent Evaluator states clearly the basis of valuation, relevant assumptions and the reason
why a particular method of valuation is considered most appropriate, having regard to the nature of
the valuation and the development status of the Mineral or Petroleum Asset;
(3) if more than one valuation method is used and different valuations result, the Competent Evaluator
comments on how the valuations compare and on the reason for selecting the value adopted; and
(4) in preparing any valuation a Competent Evaluator meets the requirements set out in rule 18.23.
APPENDIX III SRK REPORT
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CERTIFICATE AND CONSENT
To accompany the report entitled Qualified Person ’s Report for Songjiagou Gold Project, Shandong
Province, People ’s Republic of China (the ‘‘SJG Project ’’) and dated 30 June 2023,
I, Anshun Xu, do hereby certify that:
1) I am a Corporate Consultant in Geology and Mineral Resources, partner and director with the
firm of SRK Consulting China Ltd. (the ‘‘SRK’’) with an office at: B315 COFCO Plaza, 8
Jianguomennei Dajie, Beijing, the People ’s Republic of China (the ‘‘PRC’’or ‘‘China ’’).
2) I graduated with a Bachelor ’s degree in Geology of Mineral Deposits from Nanjing
University, China (B.Sc.) in 1982, a Master ’s degree in Geology of Mineral Deposits from
Chengdu University of Technology, China (M.Sc.) in 1988, and a Doctoral degree in
Geology from University of Nebraska-Lincoln, USA (Ph.D.) in 1996. I have practiced my
profession since 1982. From 1982 to 1990, I worked in teaching geochemistry and geology
of ore deposits in Chengdu University of Technology. From 1990 to 1996, I worked in
University of Nebraska-Lincoln in teaching and researching assistance; and from 1996 to
2004 I worked in Canadian mining companies, and since 2005 I worked in mining consulting
business in SRK. I worked in exploration management, mineral resource estimates, and
technical review and preliminary economic assessment and reporting for various types of
mineral deposits, including iron, gold, silver, copper, nickel, cobalt, lead-zinc, diamond,
bauxite, and others located in China, Canada, Mongolia, Kazakhstan, Indonesian, Philippines,
North Korea, Congo (King), Cameron, Madagascar, and Peru, etc. I authored/co-authored
several technical reports for IPO listing or transactions in the TSX/TSXV and The Stock
Exchange of Hong Kong Limited.
3) I am a fellow of the Australasian Ins titute of Mining and Metallurgy (the ‘‘FAusIMM ’’)( N o .
224861) since 2005, and in a good standing.
4) I have visited the subject property from 30 to 31 October 2012; on 11 April 2013, between 6
and 8 June 2018, between 14 and 16 November 2019, and between 24 and 26 July 2023.
5) I have read the definition of Qualified Person set out in National Instrument 43-101 and
certify that by virtue of my education, affilia tion to a professional association, and past
relevant work experience, I fulfilled the requirements to be a Qualified Person for the
purposes of National Instrument 43-101 and this technical report has been prepared in
compliance with National Instrument 43-101 and Form 43-101F1.
6) I, as a Qualified Person, am independent of t he issuer as defined in Section 1.5 of National
Instrument 43-101.
APPENDIX III SRK REPORT
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7) I am a co-author and chief compiler of this technical report and have supervised the
independent verification completed by SRK a nd the preparation of the mineral resource
model described in Section 13, and Sections 20, 23, 24, and 25 of this technical report. I
accept professional responsibility for those sections I co-authored.
8) I have had no prior involvement with SJG Project.
9) I have read National Instrument 43-101 and confirm that this technical report has been
prepared in compliance therewith.
10) SRK was retained by Persistence Resources Group Ltd (the ‘‘Persistence Resources ’’)t o
prepare a technical report about the SJG Pro ject pursuant to Canadian Securities
Administrators National Instrument 43-101 and Form 43-101F1 guidelines. The preceding
report is based on site visits, a review of proj ect files, and discussions with Persistence
Resources and Songjiagou mine ’s personnel.
11) I have not received, nor do I expect to receive, any interest, directly or indirectly, in the SJG
Project or securities of Persistence Resources.
12) That, as of the date of this certificate, to the best of my knowledge, information and belief,
this technical report contains all scientific and technical information that is required to be
disclosed to make the technical report not misleading.
Anson Xu, PhD, FAusIMM (#224861)
Corporate Consultant (Geology)
APPENDIX III SRK REPORT
– III-229 –


--- page 797 ---
To accompany the report entitled Qualified Person ’s Report for Songjiagou Gold Project, Shandong
Province, People ’s Republic of China (the ‘‘SJG Project ’’) and dated 30 June 2023,
I, Yuanhai Li, do hereby certify that:
1) I am a Principal Environmental Consultant w ith the firm of SRK Consulting China Ltd. (the
‘‘SRK’’) with an office at: B315 COFCO Plaza, 8 Jia nguomennei Dajie, Beijing, the People ’s
Republic of China (the ‘‘PRC’’or ‘‘China ’’).
2) I graduated with a Bachelor ’s degree in Environmental Engineering from Tsinghua
University, China (B.Sc.) in 1999, a Master ’s degree in Structural Engineering from Shantou
University, China (M.Sc.) in 2002, and a Doctoral degree in Environmental Engineering from
Florida State University, USA (Ph.D.) in 200 6. I am a Principal Environmental Consultant
with SRK with over 19 years ’ experience in the environmental engineering field. Since I
graduated with a doctoral degree in Environmental Engineering from the Florida State
University, I have worked in various environm ental projects in New Jersey/New York area of
USA, China, Mongolia, as well as South Asian Countries. I have particular expertise in
environmental due diligence reviews, environmental compliance and impact assessments for
mining, mineral processing, refining, smelting; and infrastructure/hydropower project. In
addition, I have extensive experience in e nvironmental enginee ring with a thorough
knowledge of various environmental hazardous waste/solid waste issues, including
contaminated site assessment, landfill closures/brownfield redevelopment, and contaminated
site remedial designs. I also have a deep understanding of water/wastewater treatment design,
water distribution systems, sto rm water management systems.
3) I am a member of the Australasian Institute of Mining and Metallurgy (the ‘‘MAusIMM’’)
(No. 314225) since 2013, and in a good standing.
4) I have visited the subject property between 6 and 8 June 2018.
5) I am a co-author of this technical report and prepared the Licences and Permits, and
Environmental, Permit, Social and Community Impact described in Section 3, 18, 23, and 26
of this technical report. I accept professional responsibility for those sections I co-authored.
6) I have had no prior involvement with SJG Project.
7) I have read National Instrument 43 –101 and confirm that this technical report has been
prepared in compliance therewith.
8) SRK was retained by Persiste nce Resources Group Ltd (the ‘‘Persistence Resources ’’)t o
prepare a technical report about the SJG Pro ject pursuant to Canadian Securities
Administrators National Instrument 43-101 and Form 43-101F1 guidelines. The preceding
report is based on site visits, a review of proj ect files, and discussions with Persistence
Resources and Songjiagou mine ’s personnel.
APPENDIX III SRK REPORT
– III-230 –


--- page 798 ---
9) I have not received, nor do I expect to receive, any interest, directly or indirectly, in the SJG
Project or securities of Persistence Resources.
10) That, as of the date of this certificate, to the best of my knowledge, information and belief,
this technical report contains all scientific and technical information that is required to be
disclosed to make the technical report not misleading.
Yuanhai Li, PhD, MAusIMM (#314225)
Principal Environmental Consultant
APPENDIX III SRK REPORT
– III-231 –


--- page 799 ---
To accompany the report entitled Qualified Person ’s Report for Songjiagou Gold Project, Shandong
Province, People ’s Republic of China (the ‘‘SJG Project ’’) and dated 30 June 2023,
I, Lanliang Niu, do hereby certify that:
1) I am a Principal Consultant in Mineral Processing, working for SRK Consulting China Ltd.
(the ‘‘SRK’’) with an office at: B315 COFCO Plaza, 8 Jianguomennei Dajie, Beijing, the
People ’s Republic of China (the ‘‘PRC’’or ‘‘China ’’).
2) I graduated with a Bachelor ’s degree in Mineral Processing from Beijing University of
Science & Technology in 1987. I have practiced my profession since 1983. From 1983 to
1995 I worked in technical research and consulting of gold industry in Rock and Mineral
Test Centre of Henan Province. I am rewarded a Second Prize and a Third Prize of Ministry
of Geology and Minerals of PRC for the significant contribution to development of
geological technology practices on gold heap leach. From 1996 to 2005, I am engaged in
mineral processing research on various minerals. From 2005 to 2007 I worked in a rare earth
mine in Sichuan Province. Since 2007 I worked in mineral processing consulting business in
SRK. I participated in more than a hundred projects in SRK.
3) I am a member of the Australasian Institute of Mining and Metallurgy (the ‘‘MAusIMM’’)
(No. 301789) since 2009.
4) I have visited the subject property from 6 to 8 June 2018, and from 14 to 16 November 2019.
5) I am a co-author of this technical report and prepared the section 15 of this technical report. I
accept professional responsibility for those sections I co-authored.
6) I have had no prior involvement with SJG Project.
7) I have read National Instrument 43 –101 and confirm that this technical report has been
prepared in compliance therewith.
8) SRK was retained by Persiste nce Resources Group Ltd (the ‘‘Persistence Resources ’’)t o
prepare a technical report about the SJG Pro ject pursuant to Canadian Securities
Administrators National Instrument 43-101 and Form 43-101F1 guidelines. The preceding
report is based on site visits, a review of proj ect files, and discussions with Persistence
Resources and Songjiagou mine ’s personnel.
9) I have not received, nor do I expect to receive, any interest, directly or indirectly, in the SJG
Project or securities of Persistence Resources.
APPENDIX III SRK REPORT
– III-232 –


--- page 800 ---
10) That, as of the date of this certificate, to the best of my knowledge, information and belief,
this technical report contains all scientific and technical information that is required to be
disclosed to make the technical report not misleading.
Lanliang Niu, MAusIMM (#301789)
Principal Consultant (Mineral Processing)
APPENDIX III SRK REPORT
– III-233 –


--- page 801 ---
As a co-author of the report entitled Qualified Person ’s Report for Songjiagou Gold Project,
Shandong Province, the People ’s Republic of China and dated 30 June 2023,
I, Pengfei Xiao, do hereby certify that:
1) I am employed by, and carried out the assignment (Principal Geologist and Managing
Director) for SRK Consulting China Limited ( ‘‘SRK ’’) with an office at: B315 COFCO
Plaza, 8 Jianguomennei Dajie, Beijing, 100005, the People ’s Republic of China; Phone: 86-
10-6511 1000, Fax: 86-10-8512 0385, Email: pxiao@srk.cn.
2) I graduated with a Bachelor ’s degree in Geophysics in China University of Sciences (B.Sc.)
in 2005, a Master ’s degree in Solid Earth Physics and Mineral Exploration from China
University of Sciences; Institute of Geolog y and Geophysics, China Academy of Sciences
(M.Sc.) in 2008.
I have been directly involved in mineral p roject evaluation for this type of gold
mineralization for more than 12 years.
3) I am a Member with the Australasian Ins titute of Mining and Metallurgy since 2011
(MAusIMM #307962).
4) I have visited the subject property together with SRK team in October 2012; accompanying
by client personnel in January 2013 and May 2018.
5) I have read the definition of ‘‘Competent Person ’’set out in HKEx listing rules and certify
that by reason of my education, affiliation with a professional association (as defined in the
listing rules) and past relevant work experience, I fulfil the requirements to be a ‘‘competent
person ’’for the purposes of the technical report.
6) I have had no prior involvement with SJG Project; I have no interest, nor do I expect to
receive any interest, either directly or indire ctly, in the SJG Project, nor in the securities of
the Company, or their subsidiary mining companies.
7) I am not aware of any material fact or material change with respect to the subject matter of
the Technical Report that is not reflected in the Technical Report, the omission to disclose
which makes the Technical Report misleading.
8) I consent to the filing of the Technical Assessment Report with HKEx and other regulatory
authority and any publication by them, including electronic publication in the public
company files on their websites accessible by the public, of the Technical Report.
Pengfei Xiao
Principal Consultant (Geology)
APPENDIX III SRK REPORT
– III-234 –


--- page 802 ---
To accompany the report entitled Qualified Person ’s Report for Songjiagou Gold Project, Shandong
Province, People ’s Republic of China (the ‘‘SJG Project ’’) and dated 30 June 2023,
I, Yonggang Wu, do hereby certify that:
1) I am a Principal Consultant in Mining Engineering with the firm of SRK Consulting China
Ltd. (the ‘‘SRK’’) with an office at: Room 1405-1, Investment Building, No. 66 East
Yangming Road, Donghu District, Nanchang City, Jiangxi Province, the People ’s Republic of
China (the ‘‘PRC’’or ‘‘China ’’).
2) I graduated with a Bachelor’ s degree in Mining Engineeri ng from Jiangxi University of
Science and Technology, China (B.Eng.) in 2004, and a Master ’s degree in Mining
Engineering from Jiangxi University of Science and Technology, China (M.Eng.) in 2007. I
joined SRK after graduation from Jiangxi University of Science and Technology in 2007. I
have acquired specialised knowledge of mining engineering and MineSight software and has
been involved in a large number of projects to date. Minerals involved include Au, Pb, Zn,
Mn, Cu, Fe, fluorite, potassium salts, alum, phosphorus, and many more. I have accumulated
extensive experience in mineral resource/rese rve estimation, open pit limit optimisation and
design, underground mining design, long- term production planning, and due diligence
studies. I have expertise in geological and m ining modelling and is proficient in using
MineSight, AutoCAD, and other specialised software packages.
3) I am a member of the Australasian Institute of Mining and Metallurgy (the ‘‘MAusIMM’’)
(No. 320985) since 2015, and in a good standing.
4) I have visited the subject property from 6 to 8 June 2018, from 10 to 12 October 2020 and
from 7 to 8 November 2021, and between 24 and 26 July 2023.
5) I am a co-author of this QPR and the preparation of the mineral reserve model described in
Section 13, and Sections 14, 16, 17, 19 and 20 of this QPR. I accept professional
responsibility for those sections I co-authored.
6) I have had no prior involvement with SJG Project.
7) I have read National Instrument 43-101 and confirm that this technical report has been
prepared in compliance therewith.
8) SRK was retained by Persiste nce Resources Group Ltd (the ‘‘Persistence Resources ’’)t o
prepare a technical report about the SJG Pro ject pursuant to Canadian Securities
Administrators National Instrument 43-101 and Form 43-101F1 guidelines. The preceding
report is based on site visits, a review of proj ect files, and discussions with Persistence
Resources and Songjiagou mine ’s personnel.
9) I have not received, nor do I expect to receive, any interest, directly or indirectly, in the SJG
Project or securities of Persistence Resources.
APPENDIX III SRK REPORT
– III-235 –


--- page 803 ---
10) That, as of the date of this certificate, to the best of my knowledge, information and belief,
this technical report contains all scientific and technical information that is required to be
disclosed to make the technical report not misleading.
Yonggang Wu, MAusIMM (#320985)
Principal Consultant (Mining)
APPENDIX III SRK REPORT
– III-236 –


--- page 804 ---
SUMMARY OF THE CONSTITUTION OF THE COMPANY
1 Memorandum of Association
The Memorandum of Association of the Comp any was conditionally a dopted on 30 November
2023 and states, inter alia , that the liability of the members of the Company is limited, that the objects
for which the Company is established are unrestricted and the Company shall have full power and
authority to carry out any object not prohibited by the Companies Act or any other law of the Cayman
Islands.
The Memorandum of Association is on display on the websites of the Stock Exchange and the
Company as specified in Appendix VI in the section headed ‘‘Documents on display’’ .
2 Articles of Association
The Articles of Association of the Company were conditionally adopted on 30 November 2023 and
include provisions to the following effect:
2.1 Directors
(a) Power to allot and issue Shares
Subject to the provisions in the Memorandum of Association (and to any direction that may be
given by the Company in general meeting) and without prejudice to any rights attached to any existing
shares, the Directors may allot, issue, grant options over or otherwise dispose of shares with or without
preferred, deferred or other rights or restrictions, whether in regard to dividend or other distribution,
voting, return of capital or otherwise and to such p ersons, at such times and on such other terms as the
Directors think proper.
(b) Power to dispose of the assets of the Company or any subsidiary
Subject to the provisions of the Companies Act, the Memorandum and Articles of Association and
to any directions given by special resolution, th e business of the Company shall be managed by the
Directors who may exercise all the powers of the Company. No alteration of the Memorandum and
Articles of Association and no such direction shall in validate any prior act of the Directors which would
have been valid if that alteration had not been made or that direction had not been given.
(c) Compensation or payment for loss of office
There are no provisions in the Articles of Associa tion relating to compensation or payment for loss
of office of a Director.
(d) Loans to Directors
There are no provisions in the Articles of Associa tion relating to making of loans to Directors.
APPENDIX IV SUMMARY OF THE CONSTITUTION OF OUR COMPANY
AND CAYMAN ISLANDS COMPANY LAW
– IV-1 –


--- page 805 ---
(e) Financial assistance to purchase Shares
There are no provisions in the Articles of Association relating to the giving of financial assistance
by the Company to purchase shares in the Company or its subsidiaries.
(f) Disclosure of interest in contracts w ith the Company or any of its subsidiaries
No person shall be disqualified from the office of Director or alternate Director or prevented by
such office from contracting with the Company, either as vendor, purchaser or otherwise, nor shall any
such contract or any contract or transaction entered into by or on behalf of the Company in which any
Director or alternate Director shall be in any way interested be or be liable to be avoided, nor shall any
Director or alternate Director so contracting or being so interested be liable to account to the Company
for any profit realised by or arising in connectio n with any such contract or transaction by reason of
such Director or alternate Director holding office or of the fiduciary relations hip thereby established,
provided that the nature of the interest of any Director or any alternate Director in any such contract or
transaction shall be disclosed by them at or prior to its consideration and any vote thereon.
A Director shall not be entitled to vote on (nor shall such Director be counted in the quorum in
relation to) any resolution of the Directors in respect of any contract or arrangement or any other
proposal in which the Director or any of his close associates has any material interest, and if he shall do
so his vote shall not be counted (nor shall such Director be counted in the quorum for the resolution),
but this prohibition shall not apply to any of the following matters, namely:
(i) the giving to such Director or any of his close associates of any security or indemnity in
respect of money lent or obligations incurre do ru n d e r t a k e nb yh i mo ra n yo ft h e ma tt h e
request of or for the benefit of the Company or any of its subsidiaries;
(ii) the giving of any security or indemnity to a third party in respect of a debt or obligation of
the Company or any of its subsidiaries for which the Director or any of his close associates
has himself/themselves assumed responsibility in whole or in part and whether alone or
jointly under a guarantee or indemnity or by the giving of security;
(iii) any proposal concerning an offer of share s, debentures or other securities of or by the
Company or any other company which the Company may promote or be interested in for
subscription or purchase where the Director or any of his close associates is/are or is/are to
be interested as a participant in the underwriting or sub-underwriting of the offer;
(iv) any proposal or arrangement concerning the benefit of employees of the Company or any of
its subsidiaries including:
(A) the adoption, modification or operation of any employees ’ share scheme or any share
incentive scheme or share option scheme under which the Director or any of his close
associates may benefit; or
APPENDIX IV SUMMARY OF THE CONSTITUTION OF OUR COMPANY
AND CAYMAN ISLANDS COMPANY LAW
– IV-2 –


--- page 806 ---
(B) the adoption, modification or operation o f a pension fund or retirement, death or
disability benefits scheme which relates to the Director, his close associates and
employees of the Company or any of its subsidiaries and does not provide in respect of
any Director or any of his close associates, as such any privilege or advantage not
generally accorded to the class of persons to which such scheme or fund relates; and
(v) any contract or arrangement in which the Director or any of his close associates is/are
interested in the same manner as other holders of shares or debentures or other securities of
the Company by virtue only of their interest in shares or debentures or other securities of the
Company.
(g) Remuneration
The remuneration to be paid to the Directors, if any, shall be such remuneration as the Directors
shall determine. The Directors shall also be entitled to be paid all travelling, hotel and other expenses
properly incurred by them in connection with their atte ndance at meetings of Directors or committees of
Directors, or general meetings of the Company, or separate meetings of the holders of any class of
shares or debentures of the Company, or otherwise in connection with the business of the Company or
the discharge of their duties as a Director, or to receive a fixed allowance in respect thereof as may be
determined by the Directors, or a combination p artly of one such method and partly the other.
The Directors may by resolution approve additional remuneration to any Director for any services
which in the opinion of the Directors go beyond that Director ’s ordinary routine work as a Director. Any
fees paid to a Director who is also counsel, attorney or solicitor to the Company, or otherwise serves it
in a professional capacity shall be in add ition to their remuneration as a Director.
(h) Retirement, appointment and removal
The Company may by ordinary resolution appoin t any person to be a Director, either to fill a
vacancy or as an additional Director.
The Company may by ordinary resolution remove any Director (including a managing or other
executive Director) before the expiration of such Director ’s term of office, notwithstanding anything in
the Articles of Association or in any agreement between the Company and such Director, and may by
ordinary resolution elect another person in their stead. Nothing shall be taken as depriving a Director so
removed of compensation or damages payable to such Director in respect of the termination of his
appointment as Director or of any other appointment or office as a result of the termination of his
appointment as Director.
The Directors may appoint any person to be a Director, either to fill a vacancy or as an additional
Director provided that the appointment does not cause the number of Directors to exceed any number
fixed by or in accordance with the Articles of Ass ociation as the maximum number of Directors. Any
Director so appointed shall hold office only until th e first annual general meeting of the Company after
such Director ’s appointment and shall then be eligible for re-election at that meeting.
APPENDIX IV SUMMARY OF THE CONSTITUTION OF OUR COMPANY
AND CAYMAN ISLANDS COMPANY LAW
– IV-3 –


--- page 807 ---
There is no shareholding qualification for Directors nor is there any specified age limit for
Directors.
The office of a Director shall be vacated if:
(i) the Director gives notice in writing to the Company that he resigns the office of Director;
(ii) the Director is absent (for the avoidance of doubt, without being represented by proxy or an
alternate Director appointed by him) for a continuous period of 12 months without special
leave of absence from the Directors, and the Directors pass a resolution that he has by reason
of such absence vacated office;
(iii) the Director dies, becomes bankrupt or makes any arrangement or composition with his
creditors generally;
(iv) the Director is found to be or becomes of unsound mind; or
(v) the Director is removed from office by notice in writing served upon such Director signed by
not less than three-fourths in number (or, if that is not a round number, the nearest lower
round number) of the Directors then in office (including such Director).
At every annual general meeting of the Company one-third of the Directors for the time being, or,
if their number is not three or a multiple of three, then the number nearest to, but not less than, one-
third, shall retire from office by rotation, provided that every Director (including those appointed for a
specific term) shall be subject to retirement by rotation at least once every three years. A retiring
Director shall retain office until the close of the meeting at which he retires and shall be eligible for re-
election at such meeting. The Company at any annual general meeting at which any Directors retire may
fill the vacated office by electing a like number of persons to be Directors.
(i) Borrowing powers
The Directors may exercise all the powers of the Company to borrow money and to mortgage or
charge its undertaking, property and assets (present and future) and uncalled capital or any part thereof
and to issue debentures, debenture stock, mortgages, bonds and other such securities whether outright or
as security for any debt, liability or obligation of the Company or of any third party.
2.2 Alteration to constitutional documents
No alteration or amendment to the Memorandum or Articles of Association may be made except
by special resolution.
2.3 Variation of rights of existing shares or classes of shares
If at any time the share capital of the Company is divided into different classes of shares, all or
any of the rights attached to any class for the time being issued (unless otherwise provided by the terms
of issue of the shares of that class) may, whether or not the Company is being wound up, be varied only
APPENDIX IV SUMMARY OF THE CONSTITUTION OF OUR COMPANY
AND CAYMAN ISLANDS COMPANY LAW
– IV-4 –


--- page 808 ---
with the consent in writing of the holders of not less th an three-fourths of the voting rights of the issued
shares of that class, or with the approval of a resolution passed by a majority of not less than three-
fourths of the votes cast at a separate meeting of the holders of the shares of that class. To any such
meeting all the provisions of the Articles of Associ ation relating to general meetings shall apply mutatis
mutandis , except that the necessary quorum shall be one or more persons holding or representing by
proxy or duly authorised representative at least one-third of the voting rights of the issued shares of that
class.
The rights conferred upon the holders of shares of any class shall not, unless otherwise expressly
provided in the rights attaching to or the terms of issue of the shares of that class, be deemed to be
varied by the creation or issue of further shares ranking pari passu therewith.
2.4 Alteration of capital
The Company may by ordinary resolution:
(a) increase its share capital by such sum as the ord inary resolution shall prescribe and with such
rights, priorities and privileges annexed th ereto, as the Company in general meeting may
determine;
(b) consolidate and divide all or any of its share capital into shares of larger amount than its
existing shares. On any consolidation of fully paid shares and division into shares of larger
amount, the Directors may settle any difficulty which may arise as they think expedient and
in particular (but without prejudice to the generality of the foregoing) may as between the
holders of shares to be consolidated determine which particular shares are to be consolidated
into each consolidated share, an d if it shall happen that any person shall become entitled to
fractions of a consolidated share or shares, such fractions may be sold by some person
appointed by the Directors for that purpose an d the person so appointed may transfer the
shares so sold to the purchasers thereof and the validity of such transfer shall not be
questioned, and so that the net proceeds of such sale (after deduction of the expenses of such
sale) may either be distributed among the persons who would otherwise be entitled to a
fraction or fractions of a consolidated share or shares rateably in accordance with their rights
and interests or may be paid to the Company for the Company ’s benefit;
(c) by subdivision of its existing shares or any of them divide the whole or any part of its share
capital into shares of smaller amount than is fix ed by the Memorandum of Association or into
shares without par value; and
(d) cancel any shares that at the date of the passing of the ordinary resolution have not been
taken or agreed to be taken by any person and diminish the amount of its share capital by the
amount of the shares so cancelled.
The Company may by special resolution reduce its share capital or any capital redemption reserve
fund, subject to the provisions of the Companies Act.
APPENDIX IV SUMMARY OF THE CONSTITUTION OF OUR COMPANY
AND CAYMAN ISLANDS COMPANY LAW
– IV-5 –


--- page 809 ---
2.5 Special resolution — majority required
A ‘‘special resolution ’’is defined in the Articles of Associa tion to have the same meaning as in the
Companies Act, for which purpose, the requisite ma jority shall be not less than three-fourths of the
votes of such members of the Company as, being entitled to do so, vote in person or, in the case of
corporations, by their duly authorised representatives or, where proxies are allowed, by proxy at a
general meeting of which notice speci fying the intention to propose the r esolution as a special resolution
has been duly given and includes a special resolution approved in writing by all of the members of the
Company entitled to vote at a general meeting of the Company in one or more instruments each signed
by one or more of such members, and the effective date of the special resolution so adopted shall be the
date on which the instrument or the last of such instruments (if more than one) is executed.
In contrast, an ‘‘ordinary resolution ’’is defined in the Articles of Association to mean a resolution
passed by a simple majority of the votes of such me mbers of the Company as, being entitled to do so,
vote in person or, in the case of corporations, by their duly authorised representatives or, where proxies
are allowed, by proxy at a general meeting held in accordance with the Articles of Association and
includes an ordinary resolution approved in writin g by all the members of the Company aforesaid.
2.6 Voting rights
Subject to any rights or restrictions attached to any shares, at any general meeting every member
of the Company present in person (or, in the case of a member being a corporation, by its duly
authorised representative) or by proxy shall have (a) the right to speak; (b) one vote on a show of hands;
and (c) one vote for every share of which he is the holder on a poll.
Where any member is, under the Listing Rules, re quired to abstain from voting on any particular
resolution or restricted to voting only for or only aga inst any particular resolution, any votes cast by or
on behalf of such member in contravention of such requirement or restriction shall not be counted.
In the case of joint holders the vote of the senior holder who tenders a vote, whether in person or
by proxy (or in the case of a corporation or other non-natural person, by its duly authorised
representative or proxy) shall be accepted to the exclusion of the votes of the other joint holders, and
seniority shall be determined by the order in which the names of the holders stand in the register of
members of the Company.
A member of unsound mind, or in respect of whom an order has been made by any court having
jurisdiction in lunacy, may vote, whether on a show of hands or on a poll, by their committee, receiver,
curator bonis, or other person on such member ’s behalf appointed by that court, and any such
committee, receiver, curator bonis or other person may vote by proxy.
No person shall be counted in a quorum or be entitle d to vote at any general meeting unless he is
registered as a member on the record date for such meeting, nor unless all calls or other monies then
payable by him in respect of shares have been paid.
APPENDIX IV SUMMARY OF THE CONSTITUTION OF OUR COMPANY
AND CAYMAN ISLANDS COMPANY LAW
– IV-6 –


--- page 810 ---
At any general meeting a resolution put to the vote of the meeting shall be decided by way of a
poll save that the chairperson of the meeting may allo w a resolution which relates purely to a procedural
or administrative matter as prescribed under the Listing Rules to be voted on by a show of hands.
Any corporation or other non-natural person which is a member of the Company may in
accordance with its constitutional documents, or in the absence of such provision by resolution of its
directors or other governing body, authorise such person as it thinks fit to act as its representative at any
meeting of the Company or of any class of members , and the person so authorised shall be entitled to
exercise the same powers as the corporation could exercise if it were an individual member.
If a recognised clearing house (or its nominee(s)) is a member of the Company it may authorise
such person or persons as it thinks fit to act as its representative(s) at any general meeting of the
Company or at any general meeting of any class of members of the Company, provided that, if more
than one person is so authorised, the authorisatio n shall specify the number and class of shares in
respect of which each such person is so authorised. A person authorised pursuant to this provision shall
be entitled to exercise the same rights and powers o n behalf of the recognised clearing house (or its
nominee(s)) which that person represents as that recognised clearing house (or its nominee(s)) could
exercise as if such person were an individual member of the Company holding the number and class of
shares specified in such authorisation, including, the right to speak and, where a show of hands is
allowed, the right to vote individually on a show of hands.
2.7 Annual general meetings and extraordinary general meetings
The Company shall hold a general meeting as its annual general meeting for each financial year
within six months (or such other period as may be permitted by the Listing Rules or the Stock
Exchange) after the end of such financial year. An annual general meeting shall be specified as such in
the notices calling it.
The Directors may call general meetings, and they shall on a members ’ requisition forthwith
proceed to convene an extraordinary general meeting of the Company. A members ’ requisition is a
requisition of one or more members holding at the date of deposit of the requisition not less than 10% of
the voting rights, on a one vote per share basis, of the issued shares which as at that date carry the right
to vote at general meetings of the Company. The members ’ requisition must state the objects and the
resolutions to be added to the agenda of the meetin g and must be signed by the requisitionists and
deposited at the principal office of the Company in Hong Kong or, in the event the Company ceases to
have such a principal office, the registered office of the Company, and may consist of several documents
in like form each signed by one or more requisitionist s. If there are no Directors as at the date of the
deposit of the members’ requisition or if the Directors do not within 21 days from the date of the
deposit of the members ’ requisition duly proceed to convene a general meeting to be held within a
further 21 days, the requisitionists, or any of them r epresenting more than one-half of the total voting
rights of all the requisitionists, may themselves convene a general meeting, but any meeting so convened
shall be held no later than the day which falls thre e months after the expiration of the said 21 day
period. A general meeting convened by requisitionists shall be convened in the same manner as nearly
as possible as that in which general meetings are to be convened by Directors.
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2.8 Accounts and audit
The Directors shall cause proper books of account to be kept with respect to all sums of money
received and expended by the Company and the matte rs in respect of which the receipt or expenditure
takes place, all sales and purchases of goods by the Company and the assets and liabilities of the
Company. Such books of account must be retained for a minimum period of five years from the date on
which they are prepared. Proper books shall not be deemed to be kept if there are not kept such books
of account as are necessary to give a true and fair view of the state of the Company’ s affairs and to
explain its transactions.
The Directors shall determine whether and to what extent and at what times and places and under
what conditions or regulations the accounts and books of the Company or any of them shall be open to
the inspection of members of the Company not being Directors, and no member (not being a Director)
shall have any right of inspecting any account or book or document of the Company except as conferred
by the Companies Act or authorised by the Directors or by the Company in general meeting.
The Directors shall cause to be prepared and to be laid before the Company at every annual
general meeting a profit and loss account for the per iod since the preceding account, together with a
balance sheet as at the date to which the profit and loss account is made up, a Directors ’ report with
respect to the profit or loss of the Company for th e period covered by the profit and loss account and
the state of the Company ’s affairs as at the end of such period, an auditors ’ report on such accounts and
such other reports and accounts as may be required by law.
2.9 Auditors
The Company shall at every annual general meeting by ordinary resolution appoint an auditor or
auditors of the Company who shall hold office until the next annual general meeting. The Company may
by ordinary resolution remove an auditor before the expiration of his period of office. No person may be
appointed as an auditor of the Company unless such person is independent of the Company. The
remuneration of the auditors shall be fixed by the C ompany at the annual general meeting at which they
are appointed by ordinary resolution, or in the manner specified in such resolution.
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2.10 Notice of meetings and business to be conducted thereat
An annual general meeting shall be called by not less than 21 days ’ notice and any extraordinary
general meeting shall be called by not less than 14 days ’ notice, which shall be exclusive of the day on
which it is served or deemed to be served and of the day for which it is given. The notice convening an
annual general meeting shall specify the meeting as such, and the notice convening a meeting to pass a
special resolution shall specify the intention to p ropose the resolution as a special resolution. Every
notice shall specify the place, the day and the hour of the meeting, particulars of the resolutions and the
general nature of the business to be conducted at the meeting. Notwithstanding the foregoing, a general
meeting of the Company shall, whether or not the notice specified has been given and whether or not
the provisions of the Articles of Association reg arding general meetings have been complied with, be
deemed to have been duly convened if it is so agreed:
(a) in the case of an annual general meeting, by all members of the Company entitled to attend
and vote at the meeting; and
(b) in the case of an extraordinary general meeting, by a majority in number of the members
having a right to attend and vote at the meeting, together holding not less than 95% in par
value of the shares giving that right.
If, after the notice of a general meeting has been sent but before the meeting is held, or after the
adjournment of a general meeting but before the adjourned meeting is held (whether or not notice of the
adjourned meeting is required), the Directors, in thei r absolute discretion, consider that it is impractical
or unreasonable for any reason to hold a general meeting on the date or at the time and place specified
in the notice calling such meeting, they may change or postpone the meeting to another date, time and
place.
The Directors also have the power to provide in e very notice calling a general meeting that in the
event of a gale warning or a black rainstorm warning is in force at any time on the day of the general
meeting (unless such warning is cancelled at leas t a minimum period of time prior to the general
meeting as the Directors may specify in the releva nt notice), the meeting shall be postponed without
further notice to be reconvened on a later date.
Where a general meeting is postponed:
(a) the Company shall endeavour to cause a notice of such postponement, which shall set out the
reason for the postponement in accordance with the Listing Rules, to be placed on the
Company ’s website and published on the Stock Exchange ’s website as soon as practicable,
provided that failure to place or publish such notice shall not affect the automatic
postponement of a general meeting due to a gale warning or black rainstorm warning being in
force on the day of the general meeting;
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(b) the Directors shall fix the date, time and place for the reconvened meeting and at least seven
clear days ’ notice shall be given for the reconvened m eeting; and such notice shall specify
the date, time and place at which the postponed meeting will be reconvened and the date and
time by which proxies shall be submitted in o rder to be valid at such reconvened meeting
(provided that any proxy submitted for the origi nal meeting shall continue to be valid for the
reconvened meeting unless revoked or replaced by a new proxy); and
(c) only the business set out in the notice of the original meeting shall be transacted at the
reconvened meeting, and notice given for the reconvened meeting does not need to specify
the business to be transacted at the reconvened meeting, nor shall any accompanying
documents be required to be recirculated. Where any new business is to be transacted at such
reconvened meeting, the Company shall give a fresh notice for such reconvened meeting in
accordance with the Articles of Association.
2.11 Transfer of shares
Transfers of shares may be effected by an instrument of transfer, which shall be in writing and in
any standard form of transfer as prescribed by the Stock Exchange or such other form as the Directors
may approve. The instrument of transfer shall be executed by or on behalf of the transferor and, unless
the Directors otherwise determine, the transferee, and the transferor shall be deemed to remain the
holder of the share until the name of the transfe ree is entered in the register of members of the
Company.
The Directors may decline to register any transfer of any share which is not fully paid up or on
which the Company has a lien. The Directors may als o decline to register any transfer of any shares
unless:
(a) the instrument of transfer is lodged with th e Company accompanied by the certificate for the
shares to which it relates (which shall upon the registration of the transfer be cancelled) and
such other evidence as the Directors may reasonably require to show the right of the
transferor to make the transfer;
(b) the instrument of transfer is in respect of only one class of shares;
(c) the instrument of transfer is properly stamped (in circumstances where stamping is required);
(d) in the case of a transfer to joint holders, the number of joint holders to whom the share is to
be transferred does not exceed four;
(e) the shares concerned are free of any lien in favour of the Company; and
(f) a fee of such amount not exceeding the maximum amount as the Stock Exchange may from
time to time determine to be payable (or such lesser sum as the Directors may from time to
time require) is paid to the Company in respect thereof.
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If the Directors refuse to register a transfer of any share they shall notify the transferor and the
transferee within two months of such refusal.
The registration of transfers shall be suspended during such periods as the register of members of
the Company is closed. The Directors may, on at least 10 business days ’ notice (or on at least 6
business days ’ notice in the case of a rights issue) being giv en by advertisement published on the Stock
Exchange ’s website, or, subject to the Listing Rules, in the manner in which notices may be served by
the Company by electronic means as provided in t he Articles of Association or by advertisement
published in the newspapers, close the register of members at such times and for such periods as the
Directors may from time to time determine, provided that the register of members shall not be closed for
more than 30 days in any year (or such longer period as the members of the Company may by ordinary
resolution determine, provided that such period shall not be extended beyond 60 days in any year).
2.12 Power of the Company to purchase its own shares
Subject to the provisions of the Companies Act, the Company may purchase its own shares
provided that (a) the manner of purchase has first been authorised by the members of the Company by
ordinary resolution, and (b) any such purchase shall only be made in accordance with any relevant code,
rules or regulations issued by th e Stock Exchange or the Securities and Futures Commission of Hong
Kong from time to time in force.
2.13 Power of any subsidiary of the Company to own shares
There are no provisions in the Articles of Association relating to the ownership of shares by a
subsidiary.
2.14 Dividends and other methods of distribution
Subject to the Companies Act and the Articles o f Association, the Company may by ordinary
resolution resolve to pay dividends and other distri butions on shares in issue and authorise payment of
the dividends or other distributions out of the funds of the Company lawfully available therefor,
provided no dividends shall exceed the amount recommended by the Directors. No dividend or other
distribution shall be paid except out of the realised or unreleased profits of the Company, out of the
share premium account or as otherwise permitted by law.
The Directors may from time to time pay to the m embers of the Company such interim dividends
as appear to the Directors to be justified by the prof its of the Company. The Directors may in addition
from time to time declare and pay special dividends on shares of such amounts and on such dates as
they think fit.
Except as otherwise provided by the rights attached to any shares, all dividends and other
distributions shall be paid according to the amounts paid up on the shares that a member holds during
any portion or portions of the period in respect of which the dividend is paid. For this purpose no
amount paid up on a share in advance of calls shall be treated as paid up on the share.
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The Directors may deduct from any dividends or other distribution payable to any member of the
Company all sums of money (if any) then payable by the member to the Company on account of calls or
otherwise. The Directors may retain any dividends or other monies payable on or in respect of a share
upon which the Company has a lien, and may apply the same in or towards satisfaction of the debts,
liabilities or engagements in respect of which the lien exists.
No dividend shall carry interest against the Company. Except as otherwise provided by the rights
attached to any shares, dividends and other distributions may be paid in any currency.
Whenever the Directors or the Company in general meeting have resolved that a dividend be paid
or declared on the share capital of the Company, the Directors may further resolve: (a) that such
dividend be satisfied wholly or in part in the form of an allotment of shares credited as fully paid up on
the basis that the shares so allotted are to be of the same class as the class already held by the allottee,
provided that the members of the Company entitle d thereto will be entitled to elect to receive such
dividend (or part thereof) in cash in lieu of such allotment; or (b) that the members of the Company
entitled to such dividend will be entitled to elect to r eceive an allotment of shares credited as fully paid
up in lieu of the whole or such part of the dividend as the Directors may think fit on the basis that the
shares so allotted are to be of the same class as the c lass already held by the allottee. The Company may
upon the recommendation of the Directors by ordinary resolution resolve in respect of any one particular
dividend of the Company that notwithstanding the f oregoing a dividend may be satisfied wholly in the
form of an allotment of shares credited as fully paid without offering any right to members of the
Company to elect to receive such dividend in cash in lieu of such allotment.
Any dividend, interest or other monies payable in cash in respect of shares may be paid by wire
transfer to the holder or by cheque or warrant sent through the post directed to the registered address of
the holder or, in the case of joint holders, to the registered address of the holder who is first named on
the register of members of the Company or to such person and to such address as the holder or joint
holders may in writing direct. Every such cheque or w arrant shall be made payable to the order of the
person to whom it is sent. Any one of two or more joint holders may give effectual receipts for any
dividends, other distributions, bonuses, or other monies payable in respect of the shares held by them as
joint holders.
Any dividend or other distribution which remain s unclaimed after a period of six years from the
date on which such dividend or distribution become s payable shall be forfeited and shall revert to the
Company.
The Directors, with the sanction of the members of the Company by ordinary resolution, may
resolve that any dividend or other distribution be paid wholly or partly by the distribution of specific
assets, and in particular (but without limitation) by the d istribution of shares, debentures, or securities of
any other company or in any one or more of such ways, and where any difficulty arises in regard to
such distribution, the Directors may settle it as they think expedient, and in particular may disregard
fractional entitlements, round the s ame up or down or provide that the s ame shall accrue to the benefit
of the Company, and may fix the value for distribution of such specific assets or any part thereof and
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may determine that cash payments shall be made to any members of the Company upon the basis of the
value so fixed in order to adjust the rights of all members, and may vest any such specific assets in
trustees as may seem expedient to the Directors.
2.15 Proxies
A member of the Company entitled to attend and vote at a general meeting of the Company shall
be entitled to appoint another person who must be an individual as his proxy to attend and vote instead
of him and a proxy so appointed shall have the same r ight as the member to speak at the meeting. Votes
may be given either personally or by proxy. A proxy need not be a member of the Company. A member
may appoint any number of proxies to attend in his stead at any one general meeting or at any one class
meeting.
The instrument appointing a proxy shall be in wr iting and shall be executed under the hand of the
appointor or of his attorney duly authorised in writing, or, if the appointor is a corporation or other non-
natural person, under the hand of its duly authorised representative.
The Directors shall, in the notice convening any m eeting or adjourned meeting, or in an instrument
of proxy sent out by the Company, specify the manner (including by electronic means) by which the
instrument appointing a proxy shall be deposited and the place and the time (being not later than the
time appointed for the commencement of the meeting or adjourned meeting to which the proxy relates)
at which the instrument appointing a proxy shall be deposited.
The instrument appointing a proxy may be in any usual or common form (or such other form as
the Directors may approve) and may be expressed to be for a particular meeting or any adjournment
thereof or generally until revoked.
2.16 Calls on shares and forfeiture of shares
Subject to the terms of the allotment and issue of any shares, the Directors may make calls upon
the members of the Company in respect of any monies unpaid on their shares (whether in respect of par
value or premium), and each member of the Company shall (subject to receiving at least 14 clear days ’
notice specifying the times or times of payment) pa y to the Company at the time or times so specified
the amount called on his shares. A call may be revoked or postponed, in whole or in part, as the
Directors may determine. A call may be required to be paid by instalments. A person upon whom a call
is made shall remain liable for calls made upon him, notwithstanding the subsequent transfer of the
shares in respect of which the call was made.
A call shall be deemed to have been made at the time when the resolution of the Directors
authorising the call was passed. The joint holders of a share shall be jointly and severally liable to pay
all calls and instalments due in respect of such share.
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If a call remains unpaid after it has become due and payable, the person from whom it is due shall
pay interest on the amount unpaid from the day it became due and payable until it is paid at such rate as
the Directors may determine (and in addition all ex penses that have been incurred by the Company by
reason of such non-payment), but the Directors may waive payment of the interest or expenses wholly or
in part.
If any call or instalment of a call remains unpaid after it has become due and payable, the
Directors may give to the person from whom it is due not less than 14 clear days ’ notice requiring
payment of the amount unpaid together with any interest which may have accrued and any expenses
incurred by the Company by reason of such non-paym ent. The notice shall specify where payment is to
be made and shall state if the notice is not complied with the shares in respect of which the call was
made will be liable to be forfeited.
If such notice is not complied with, any share in respect of which it was given may, before the
payment required by the notice has been made, be forfeited by a resolution of the Directors. Such
forfeiture shall include all dividends, other distributions or other monies payable in respect of the
forfeited shares and not paid before the forfeiture.
A forfeited share may be sold, re-allotted or otherwise disposed of on such terms and in such
manner as the Directors think fit.
A person any of whose shares have been forfeited shall cease to be a member of the Company in
respect of the forfeited shares and shall surrender to the Company for cancellation the certificate for the
shares forfeited and shall remain liable to pay to th e Company all monies which at the date of forfeiture
were payable by him to the Company in respect of the shares, together with interest at such rate as the
Directors may determine, but that person ’s liability shall cease if and when the Company shall have
received payment in full of all monies due and payable by them in respect of those shares.
2.17 Inspection of register of members
The Company shall maintain or cause to be maintained the register of members of the Company in
accordance with the Companies Act. The Directors may, on giving 10 business days ’ notice (or 6
business days ’ notice in the case of a rights issue) by advertisement published on the Stock Exchange ’s
website or, subject to the Listing Rules, in the manner in which notices may be served by the Company
by electronic means as provided in the Articles o f Association or by advertisement published in the
newspapers, close the register of members at such times and for such periods as the Directors may
determine, either generally or in respect of any clas s of shares, provided that the register shall not be
closed for more than 30 days in any year (or such longer period as the members of the Company may by
ordinary resolution determine, provided that such period shall not be extended beyond 60 days in any
year).
Except when the register is closed, the register of members shall during business hours be kept
open for inspection by any member of the Company without charge.
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2.18 Quorum for meetings and separate class meetings
No business shall be transacted at any general meeting unless a quorum is present. Two members
of the Company present in person or by proxy, or if a corporation or other non-natural person by its
duly authorised representative or proxy, shall be a quorum unless the Company has only one member
entitled to vote at such general meeting in which case the quorum shall be that one member present in
person or by proxy, or in the case of a corporation or other non-natural person by its duly authorised
representative or proxy.
The quorum for a separate general meeting of the holders of a separate class of shares of the
Company is described in paragraph 2.3 above.
2.19 Rights of minorities in relation to fraud or oppression
There are no provisions in the Articles of Association concerning the rights of minority
shareholders in relation to fraud or oppression.
2.20 Procedure on liquidation
Subject to the Companies Act, the Company may by special resolution resolve that the Company
be wound up voluntarily.
Subject to the rights attaching to any shares, in a winding up:
(a) if the assets available for distribution amongst the members of the Company shall be
insufficient to repay the whole of the Company ’s paid-up capital, such assets shall be
distributed so that, as nearly as may be, the losses shall be borne by the members of the
Company in proportion to the capital paid up, or which ought to have been paid up, on the
shares held by them at the commencement of the winding up;
(b) if the assets available for distribution amongst the members of the Company shall be more
than sufficient to repay the whole of the Company ’s paid up capital at the commencement of
the winding up, the surplus shall be distributed amongst the members of the Company in
proportion to the capital paid up on the shares held by them at the commencement of the
winding up.
If the Company shall be wound up, the liquidator m ay with the approval of a special resolution of
the Company and any other approval required by the Companies Act, divide amongst the members of
the Company in kind the whole or any part of the assets of the Company (whether such assets shall
consist of property of the same kind or not) and may, for that purpose, value any assets and determine
how the division shall be carried out as between the members or different classes of members of the
Company. The liquidator may, with the like approval, vest the whole or any part of such assets in
trustees upon such trusts for the benefit of the membe rs of the Company as the liquidator, with the like
approval, shall think fit, but so that no member of the Company shall be compelled to accept any assets,
shares or other securities in resp ect of which there is a liability.
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2.21 Untraceable members
The Company shall be entitled to sell any shar es of a member of the Company or the shares to
which a person is entitled by virtue of transmission on death or bankruptcy or operation of law if: (a) all
cheques or warrants, not being less than three in number, for any sums payable in cash to the holder of
such shares have remained uncashed for a period of 12 years; (b) the Company has not during that time
or before the expiry of the three month period referred to in (d) below received any indication of the
whereabouts or existence of the member; (c) during the 12-year period, at least three dividends in
respect of the shares in question have become payable and no dividend during that period has been
claimed by the member; and (d) upon expiry of the 12-year period, the Company has caused an
advertisement to be published in the newspapers or, subject to the Listing Rules, by electronic
communication in the manner in which notices may be served by the Company by electronic means as
provided in the Articles of Associa tion, giving notice of its intention to sell such shares and a period of
three months has elapsed since such advertisemen t and the Stock Exchange has been notified of such
intention. The net proceeds of any such sale shall belong to the Company and upon receipt by the
Company of such net proceeds it shall become indebted to the former member for an amount equal to
such net proceeds.
SUMMARY OF CAYMAN ISLANDS COMPANY LAW AND TAXATION
1I n t r o d u c t i o n
The Companies Act is derived, to a large extent, from the older Companies Acts of England,
although there are significant differences between the Companies Act and the current Companies Act of
England. Set out below is a summary of certain provisions of the Companies Act, although this does not
purport to contain all applicable qualifications an d exceptions or to be a complete review of all matters
of corporate law and taxation which may differ from equivalent provisions in jurisdictions with which
interested parties may be more familiar.
2 Incorporation
The Company was incorporated in the Cayman Islands as an exempted company with limited
liability on 21 May 2019 under the Companies Act. As s uch, its operations must be conducted mainly
outside the Cayman Islands. The Company is required to file an annual return each year with the
Registrar of Companies of the Cayman Islands and p ay a fee which is based on the size of its authorised
share capital.
3 Share Capital
The Companies Act permits a company to issue ordinary shares, preference shares, redeemable
shares or any combination thereof.
The Companies Act provides that where a company issues shares at a premium, whether for cash
or otherwise, a sum equal to the aggregate amount of the value of the premia on those shares shall be
transferred to an account called the ‘‘share premium account ’’. At the option of a company, these
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provisions may not apply to premia on shares of that company allotted pursuant to any arrangement in
consideration of the acquisition or cancellation of s hares in any other company and issued at a premium.
The Companies Act provides that the share premium account may be applied by a company, subject to
the provisions, if any, of its memorandum and articles of association, in such manner as the company
may from time to time determine including, but without limitation:
(a) paying distributions or dividends to members;
(b) paying up unissued shares of the company to be issued to members as fully paid bonus
shares;
(c) in the redemption and repurchase of shares (subject to the provisions of section 37 of the
Companies Act);
(d) writing-off the preliminary expenses of the company;
(e) writing-off the expenses of, or the commission paid or discount allowed on, any issue of
shares or debentures of the company; and
(f) providing for the premium payable on redemption or purchase of any shares or debentures of
the company.
No distribution or dividend may be paid to members out of the share premium account unless
immediately following the date on which the dis tribution or dividend is proposed to be paid the
company will be able to pay its debts as they f all due in the ordinary course of business.
The Companies Act provides that, subject to confirmation by the Grand Court of the Cayman
Islands, a company limited by shares or a company limi t e db yg u a r a n t e ea n dh a v i n gas h a r ec a p i t a lm a y ,
if so authorised by its articles of association, by spe cial resolution reduce its share capital in any way.
Subject to the detailed provisions of the Co mpanies Act, a company limited by shares or a
company limited by guarantee and having a share c apital may, if so authorised by its articles of
association, issue shares which are to be redeemed or are liable to be redeemed at the option of the
company or a shareholder. In addition, such a company may, if authorised to do so by its articles of
association, purchase its own shares, including any redeemable shares. The manner of such a purchase
must be authorised either by the articles of associa tion or by an ordinary resolution of the company. The
articles of association may provide that the manner of purchase may be determined by the directors of
the company. At no time may a company redeem or purchase its shares unless they are fully paid. A
company may not redeem or purchase any of its shares if, as a result of the redemption or purchase,
there would no longer be any member of the company holding shares. A payment out of capital by a
company for the redemption or purchase of its own shares is not lawful unless immediately following
the date on which the payment is proposed to be made, the company shall be able to pay its debts as
they fall due in the ordinary course of business.
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There is no statutory restriction in the Cayman Islands on the provision of financial assistance by a
company for the purchase of, or subscription for, its own or its holding company ’s shares. Accordingly,
a company may provide financial assistance if the directors of the company consider, in discharging
their duties of care and to act in good faith, for a pro per purpose and in the interests of the company,
that such assistance can properly be given. Such assistance should be on an arm ’s-length basis.
4 Dividends and Distributions
With the exception of section 34 of the Companies A ct, there are no statutory provisions relating
to the payment of dividends. Based upon English case law which is likely to be persuasive in the
Cayman Islands in this area, dividends may be paid only out of profits. In addition, section 34 of the
Companies Act permits, subject to a solvency test and the provisions, if any, of the company ’s
memorandum and articles of association, the payment of dividends and distributions out of the share
premium account (see paragraph 3 above for details).
5 Shareholders ’ Suits
The Cayman Islands courts can be expected to follow English case law precedents. The rule in
Foss v. Harbottle (and the exceptions thereto which permit a m inority shareholder to commence a class
action against or derivative actions in the nam e of the company to challenge (a) an act which is ultra
vires the company or illegal, (b) an act which constitu tes a fraud against the minority where the
wrongdoers are themselves in control of the company, and (c) an action which requires a resolution with
a qualified (or special) majority which has not been obtained) has been applied and followed by the
courts in the Cayman Islands.
6 Protection of Minorities
In the case of a company (not being a bank) having a share capital divided into shares, the Grand
Court of the Cayman Islands may, on the application of members holding not less than one-fifth of the
shares of the company in issue, appoint an inspector to examine into the affairs of the company and to
report thereon in such manner as the Grand Court shall direct.
Any shareholder of a company may petition the Grand Court of the Cayman Islands which may
make a winding up order if the court is of the opinion that it is just and equitable that the company
should be wound up.
Claims against a company by its shareholders must, as a general rule, be based on the general laws
of contract or tort applicable in the Cayman Islands or their individual rights as shareholders as
established by the company’ s memorandum and articles of association.
The English common law rule that the majority will not be permitted to commit a fraud on the
minority has been applied and followed by the courts of the Cayman Islands.
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7 Disposal of Assets
The Companies Act contains no specific restric tions on the powers of directors to dispose of assets
of a company. As a matter of general law, in the exercise of those powers, the directors must discharge
their duties of care and to act in good faith, for a p roper purpose and in the interests of the company.
8 Accounting and Auditing Requirements
The Companies Act requires that a company shall cause to be kept proper books of account with
respect to:
(a) all sums of money received and expended by the company and the matters in respect of
which the receipt and expenditure takes place;
(b) all sales and purchases of goods by the company; and
(c) the assets and liabilities of the company.
Proper books of account shall not be deemed to be kept if there are not kept such books as are
necessary to give a true and fair view of the state of the company ’s affairs and to explain its
transactions.
9 Register of Members
An exempted company may, subject to the provi sions of its articles of association, maintain its
principal register of members and any branch registers at such locations, whether within or without the
Cayman Islands, as its directors may from time to time think fit. There is no requirement under the
Companies Act for an exempted company to make any returns of members to the Registrar of
Companies of the Cayman Islands. The names and addresses of the members are, accordingly, not a
matter of public record and are not available for public inspection.
10 Inspection of Books and Records
Members of a company will have no general right under the Companies Act to inspect or obtain
copies of the register of members or corporate rec ords of the company. They will, however, have such
rights as may be set out in the company’ s articles of association.
11 Special Resolutions
The Companies Act provides that a resolution is a special resolution when it has been passed by a
majority of at least two-thirds of such members as , being entitled to do so, vote in person or, where
proxies are allowed, by proxy at a general meeting o f which notice specifying the intention to propose
the resolution as a special resolution has been dul y given, except that a company may in its articles of
association specify that the required majority sh all be a number greater than two-thirds, and may
additionally so provide that such majority (being not l ess than two-thirds) may differ as between matters
required to be approved by a special resolution. Written resolutions signed by all the members entitled
to vote for the time being of the company may take effe ct as special resolutions if this is authorised by
the articles of association of the company.
APPENDIX IV SUMMARY OF THE CONSTITUTION OF OUR COMPANY
AND CAYMAN ISLANDS COMPANY LAW
– IV-19 –


--- page 823 ---
12 Subsidiary Owning Shares in Parent
The Companies Act does not prohibit a Cayman Islands company acquiring and holding shares in
its parent company provided its objects so perm it. The directors of any subsidiary making such
acquisition must discharge their duties of care and to act in good faith, for a proper purpose and in the
interests of the subsidiary.
13 Mergers and Consolidations
The Companies Act permits mergers and consolidations between Cayman Islands companies and
between Cayman Islands companies and non-Cayman Islands companies. For these purposes, (a)
‘‘merger ’’means the merging of two or more constituent com panies and the vesting of their undertaking,
property and liabilities in one of such comp anies as the surviving company, and (b) ‘‘consolidation ’’
means the combination of two or more constituent companies into a consolidated company and the
vesting of the undertaking, property and liabilities of such companies to the consolidated company. In
order to effect such a merger or consolidation, the directors of each constituen t company must approve a
written plan of merger or consolidation, which must t hen be authorised by (a) a special resolution of
each constituent company and (b) such other authorisation, if any, as may be specified in such
constituent company ’s articles of association. The written pla n of merger or consolidation must be filed
with the Registrar of Companies of the Cayman Isla nds together with a declaration as to the solvency of
the consolidated or surviving company, a list of the assets and liabilities of each constituent company
and an undertaking that a copy of the certificate of merger or consolidation will be given to the
members and creditors of each constituent company and t hat notification of the merger or consolidation
will be published in the Cayman Isla nds Gazette. Dissenting sharehol ders have the right to be paid the
fair value of their shares (which, if not agreed be tween the parties, will be determined by the Cayman
Islands court) if they follow the required procedures, subject to certain exceptions. Court approval is not
required for a merger or consolidation which is eff ected in compliance with these statutory procedures.
14 Reconstructions
There are statutory provisions which facilitate reconstructions and amalgamations approved by (a)
75% in value of shareholders, or (b) a majority in number representing 75% in value of creditors,
depending on the circumstances, as are present at a meeting called for such purpose and thereafter
sanctioned by the Grand Court of the Cayman Islands. Whilst a dissenting shareholder would have the
right to express to the Grand Court his view that the transaction for which approval is sought would not
provide the shareholders with a fair value for their shares, the Grand Court is unlikely to disapprove the
transaction on that ground alone in the absence of evidence of fraud or bad faith on behalf of
management and if the transaction were approved and consummated the dissenting shareholder would
have no rights comparable to the appraisal rights (i.e. the right to receive payment in cash for the
judicially determined value of his shares) ordinaril y available, for example, to dissenting shareholders of
United States corporations.
15 Take-overs
Where an offer is made by a company for the shares of another company and, within four months
of the offer, the holders of not less than 90% of the shares which are the subject of the offer accept, the
offeror may at any time within two months after th e expiration of the said four months, by notice
APPENDIX IV SUMMARY OF THE CONSTITUTION OF OUR COMPANY
AND CAYMAN ISLANDS COMPANY LAW
– IV-20 –


--- page 824 ---
require the dissenting shareholders to transfer t heir shares on the terms of the offer. A dissenting
shareholder may apply to the Grand Court of the Cayman Islands within one month of the notice
objecting to the transfer. The burden is on the dissenting shareholder to show that the Grand Court
should exercise its discretion, which it will be unlikely to do unless there is evidence of fraud or bad
faith or collusion as between the offeror and the holders of the shares who have accepted the offer as a
means of unfairly forcing out minority shareholders.
16 Indemnification
Cayman Islands law does not limit the extent to which a company ’s articles of association may
provide for indemnification of officers and directors, except to the extent any such provision may be
held by the Cayman Islands courts to be contrary to public policy (e.g. for purporting to provide
indemnification against the consequences of committing a crime).
17 Restructuring
A company may present a petition to the Grand Co urt of the Cayman Islands for the appointment
of a restructuring officer on the grounds that the company:
(a) is or is likely to become unable to pay its debts; and
(b) intends to present a compromise or arrangement to its creditors (or classes thereof) either
pursuant to the Companies Act, the law of a foreign country or by way of a consensual
restructuring.
The Grand Court may, among other things, make an order appointing a restructuring officer upon
hearing of such petition, with such powers and to carry out such functions as the court may order. At
any time (i) after the presentation of a petition for the appointment of a restructuring officer but before
an order for the appointment of a restructuring officer has been made, and (ii) when an order for the
appointment of a restructuring officer is made, until such order has been discharged, no suit, action or
other proceedings (other than criminal proceedings) shall be proceeded with or commenced against the
company, no resolution to wind up the company s hall be passed, and no winding up petition may be
presented against the company, except with the leave of the court. However, notwithstanding the
presentation of a petition for the appointment of a restructuring officer or the appointment of a
restructuring officer, a creditor who has security over the whole or part of the assets of the company is
entitled to enforce the security without the leave of t he court and without reference to the restructuring
officer appointed.
18 Liquidation
A company may be placed in liquidation compulsorily by an order of the court, or voluntarily (a)
by a special resolution of its members if the company is solvent, or (b) by an ordinary resolution of its
members if the company is insolvent. The liquidator’ s duties are to collect the assets of the company
(including the amount (if any) due fro m the contributories (shareholders)), settle the list of creditors and
discharge the company ’s liability to them, rateably if insuffici ent assets exist to discharge the liabilities
in full, and to settle the list of contributories and divide the surplus assets (if any) amongst them in
accordance with the right s attaching to the shares.
APPENDIX IV SUMMARY OF THE CONSTITUTION OF OUR COMPANY
AND CAYMAN ISLANDS COMPANY LAW
– IV-21 –


--- page 825 ---
19 Stamp Duty on Transfers
No stamp duty is payable in the Cayman Islands on transfers of shares of Cayman Islands
companies except those which hold interests in land in the Cayman Islands.
20 Taxation
Pursuant to section 6 of the Tax Concessions Act (As Revised) of the Cayman Islands, the
Company has obtained an undertaking from the Financial Secretary of the Cayman Islands:
(a) that no law which is enacted in the Cayman Islands imposing any tax to be levied on profits,
income, gains or appreciations shall apply to the Company or its operations; and
(b) in addition, that no tax to be levied on profits, income, gains or appreciations or which is in
the nature of estate duty or inheritance tax shall be payable:
(i) on or in respect of the shares, debentures or other obligations of the Company; or
(ii) by way of the withholding in whole or in part of any relevant payment as defined in
section 6(3) of the Tax Concessions Act (As Revised).
The undertaking is for a period of twenty years from 9 March 2020.
The Cayman Islands currently levy no taxes on individuals or corporations based upon profits,
income, gains or appreciations and there is no taxati on in the nature of inheritance tax or estate duty.
There are no other taxes likely to be material to the Company levied by the Government of the Cayman
Islands save certain stamp duties which may be applic able, from time to time, on certain instruments
executed in or brought within the jurisdiction of the Cayman Islands. The Cayman Islands are not party
to any double tax treaties that are applicab le to any payments made by or to the Company.
21 Exchange Control
There are no exchange control regulations or currency restrictions in the Cayman Islands.
22 General
Maples and Calder (Hong Kong) LLP, the Company ’s legal advisers on Cayman Islands law, have
sent to the Company a letter of advice summarising aspects of Cayman Islands company law. This letter,
together with a copy of the Companies Act, is on dis play on the websites as referred to in the section
headed ‘‘Documents delivered to the Registrar of Companies in Hong Kong and on display —
Documents on display’’ in Appendix VI. Any person wishing to have a detailed summary of Cayman
Islands company law or advice on the differences between it and the laws of any jurisdiction with which
he/she is more familiar is recommended to seek independent legal advice.
APPENDIX IV SUMMARY OF THE CONSTITUTION OF OUR COMPANY
AND CAYMAN ISLANDS COMPANY LAW
– IV-22 –


--- page 826 ---
A. FURTHER INFORMATION ABOUT OUR GROUP
1. Incorporation of our Company
Our Company was incorporated in the Cayman Isl ands with limited liability under the Companies
Act as an exempted company on 21 May 2019 with our registered office located at PO Box 309, Ugland
House, Grand Cayman, KY1-1104, Cayman Islands. Our Company has established a principal place of
business in Hong Kong at Level 20, Infinitus Plaza, 199 Des Voeux Road Central and was registered as
a non-Hong Kong company in Hong Kong under Part 16 of the Companies Ordinance on 11 November
2019. In connection with such registration, Mr. Lo Cheuk Kwong Raymond has been appointed as the
authorised representative of our Company. The address for service of process on our Company in Hong
Kong is Level 20, Infinitus Plaza, 199 Des Voeux Road Central, Hong Kong.
As our Company is incorporated in the Cayman Islands, it operates subject to the Companies Act
and our constitution, which comprises the Memoran dum and the Articles of Association. A summary of
various parts of the constitution and relevant aspects of the Companies Act is set out in the section
headed ‘‘Summary of the constitution of our Company and Cayman Islands Company Law ’’in Appendix
IV to this prospectus.
2. Changes in the share capital of our Company
The following changes in the share capital of our Company have taken place since the date of
incorporation and up to the L atest Practicable Date:
(a) On 21 May 2019, our Company was incorporat ed in the Cayman Islands with limited liability
with an authorised share capital of US$50,000 divided into 50,000 Shares of US$1.00 each.
On the same day, one Share credited as fu lly paid, was allotted and issued to Vistra
(Cayman) Limited, our initial subscriber and an Independent Third Party. On the same day,
the initial subscriber ’s one Share was transferred at par value of US$1.00 to Richard ’s
Resource. On the same day, our Company allotted and issued five and 94 Shares credited as
fully paid, to Richard ’s Resource and Majestic Gold, respectively;
(b) On 24 April 2020, the authorised and issued share capital of our Company were re-dominated
by (i) an increase in our Company ’s authorised share capital by HK$370,000 by the creation
of an additional 37,000,000 Shares of HK$0.01 each; (ii) an allotment and issue of 75,200
Shares and 4,800 Shares of HK$0.01 each to Majestic Gold and Richard ’s Resource,
respectively; (iii) a repurchase of 94 shares and six shares of US$1.00 each then held by
Majestic Gold and Richard ’s Resource, respectively; and (iv) following the above repurchase,
a diminution in the authorised but unissued sha re capital of our Company by the cancellation
of 50,000 shares of US$1.00 in the share capital of our Company;
(c) On 30 November 2023, the authorised share capital of our Company was increased from
HK$370,000 divided into 37,000,000 Shares of HK$0.01 each to HK$100,000,000 divided
into 10,000,000,000 Shares of HK$0.01 each by the creation of 9,963,000,000 additional
Shares of HK$0.01 each.
APPENDIX V STATUTORY AND GENERAL INFORMATION
– V-1 –


--- page 827 ---
Assuming the Global Offering becomes unconditional, immediately following completion of the
Global Offering and the Capitalisation Issue (taking no account of the Shares which may be issued upon
the exercise of the Over-allotment Option or the options granted or to be granted under the Share Option
Scheme), the authorised share capital of our Company will be HK$100,000,000 divided into
10,000,000,000 Shares and the issued share capital of our Company will be HK$20,000,000 divided
into 2,000,000,000 Shares, fully paid or credited as fully paid, with 8,000,000,000 Shares remaining
unissued.
Other than pursuant to the Issue Mandate to issue Shares referred to in the paragraph headed ‘‘A.
Further information about our Group — 6. Written resolutions of our Shareholders passed on 30
November 2023 ’’in this appendix to this prospectus, our Directors do not have any present intention to
issue any of the authorised but unissued share capital of our Company and, without prior approval of
our Shareholders in general meeting, no issue of Shares will be made which would effectively alter the
control of our Company.
Save as disclosed in this appendix and in the section headed ‘‘History, Reorganisation and
corporate structure ’’in this prospectus, there has been no alteration in the share capital of our Company
since our incorporation.
3. Corporate Reorganisation
In order to rationalise our corporate structure and business, our Group underwent the corporate
Reorganisation. Please refer to the section headed ‘‘History, Reorganisation and corporate structure —
Reorganisation ’’in this prospectus for more details.
4. Changes in share capital of our subsidiaries
Our Company’ s subsidiaries are referred to in the Accountants ’ Report, the text of which is set out
in Appendix I to this prospectus.
Save as disclosed in the section headed ‘‘History, Reorganisation and corporate structure ’’in this
prospectus, there has been no other change to the share capital of any of the subsidiaries of our
Company within two years immediately prior to the date of this prospectus.
APPENDIX V STATUTORY AND GENERAL INFORMATION
– V-2 –


--- page 828 ---
5. Particulars of our subsidiary in the PRC
Set out below is a summary of the corporate information of Yantai Zh ongjia, our subsidiary
established in the PRC:
Full name 煙台中嘉礦業有限公司 (Yantai Zhongjia Mining Co. Ltd*)
Date of establishment 17 March 2005
Place of establishment The PRC
Corporate nature Limited liability company (Foreign investment, non-wholly
owned)
Registered capital RMB168,705,500
Attributable interest of our
Company
75%
Term of business operation Indefinite
Scope of business (as shown on the
business licence)
Geological exploration, mining (valid under license),
processing of gold and precious metals and sale of self-made
products
Legal representative Mr. Zhou Shufeng ( 周書鋒)
6. Written resolutions of our Shareholders passed on 30 November 2023
Pursuant to written resolutions passed by all the then Shareholders on 30 November 2023, the
following resolutions, among other resolutions, were duly passed:
(a) our Company approved and adopted the Memorandum and Articles of Association, the terms
o fw h i c ha r es u m m a r i s e di nA p p e n d i xVt ot h i sp r ospectus, with effect from the Listing Date;
(b) the authorised share capital of our Company was increased from HK$370,000 divided into
37,000,000 Shares of HK$0.01 each to HK$100,000,000 divided into 10,000,000,000 Shares
of HK$0.01 each by the creation of an additional 9,963,000,000 Shares of HK$0.01 each,
ranking pari passu with the existing Shares in all respects;
APPENDIX V STATUTORY AND GENERAL INFORMATION
– V-3 –


--- page 829 ---
(c) conditional upon (i) the Stock Exchange granting the listing of, and permission to deal in, the
Shares in issue and to be issued (pursuant to t he Global Offering, the Over-allotment Option
and the Share Option Scheme) as mentioned in thi s prospectus; and (ii) the obligations of the
Underwriters under the Underw riting Agreements becoming unconditional (including, if
relevant, as a result of the waiver of any condition(s)) and not being terminated in accordance
with the terms of the Underwriting Agreements or otherwise:
(i) the Global Offering and the Over-allotment Option were approved and our Directors
were authorised to approve to allot and issue the Offer Shares and the Shares as may be
required to be allotted and issued upon the exercise of the Over-allotment Option on
and subject to the terms and conditions stated in this prospectus;
(ii) the rules of the Share Option Scheme, th e principal terms of which are set out in the
paragraph headed ‘‘D. Share Option Scheme ’’ in this appendix, were approved and
adopted, and our Directors or any committee thereof established by our Board were
authorised, at their sole discretion, to: (i) administer the Share Option Scheme; (ii)
modify/amend the rules of the Share Option Scheme from time to time as such
modification/amendments may be acceptable or not objected by, nor required to be
approved by our Shareholders under applicable laws, rules and regulations, including
the Listing Rules; (iii) grant options to subs cribe for Shares under the Share Option
Scheme up to the limits referred to in the Share Option Scheme; (iv) allot, issue and
deal with the Shares pursuant to the exercise of any option which may be granted under
the Share Option Scheme; (v) make applicatio n at the appropriate time or times to the
Stock Exchange for the listing of, and permission to deal in, any Shares or any part
thereof that may hereafter from time to time be allotted and issued pursuant to the
exercise of the options granted under the Share Option Scheme; and (vi) take all such
actions as they consider necessary, desirable or expedient to implement or give effect to
the Share Option Scheme; and
(iii) conditional on the share premium account of our Company being credited as a result of
the issue of the Offer Shares of the Global Offering, our Directors were authorised to
capitalise HK$14,999,200 standing to the credit of the share premium account of our
Company by applying such sum in paying up in full at par 1,499,920,000 Shares for
allotment and issue to holders of Shares whose names appear on the register of
members of our Company at the close of business on 30 November 2023 (or as they
may direct) in proportion (as nearly as possible without involving fractions so that no
fraction of a Share shall be allotted and issu ed) to their then existing shareholdings in
our Company and so that the Shares to be allo tted and issued pursuant to the resolution
should rank pari passu in all respects with the then existing issued Shares and our
Directors were authorised to give effect to such capitalisation;
(d) a general unconditional mandate was given to our Directors to allot, issue and deal with
Shares (including the power to make or grant a n offer or agreement, or grant securities or
options which would or might require Shares to be allotted and issued), otherwise than by
APPENDIX V STATUTORY AND GENERAL INFORMATION
– V-4 –


--- page 830 ---
way of a rights issue, or pursuant to any scrip dividend schemes or similar arrangements
providing for the allotment and issue of Shares in lieu of the whole or part of a dividend on
Shares in accordance with the Articles of Association or pursuant to the issue of Shares upon
the exercise of any subscription or convers ion rights attached to any warrants of our
Company (if any) or pursuant to the exercise of options which may be granted under the
Share Option Scheme or any other option sch eme(s) or similar arrangement for the time
being adopted for the grant or issue to directors and/or officers and/or employees of our
Company and/or any of our subsidiaries or rights to acquire Shares or pursuant to a specific
authority granted by our Shareholders in general meeting, not exceeding 20% of the number
of Shares in issue and to be issued immediatel y following completion of the Global Offering
but before any exercise of the Over-allotment Option until the conclusion of the next annual
general meeting of our Company, unless renewed by an ordinary resolution of our
Shareholders in a general meeting, either unc onditionally or subject to conditions or the
expiration of the period within which the next annual general meeting of our Company is
required by the Articles of Association or any applicable law of the Cayman Islands to be
held or the passing of an ordinary resolution by our Shareholders in general meeting of our
Company varying or revoking the authority given to our Directors, whichever occurs first.
(e) a general unconditional mandate was given to our Directors to exercise all powers of our
Company to repurchase Shares on the Stock Exchange, or on any other stock exchange on
which the securities of our Company may be listed and which is recognised by the SFC and
the Stock Exchange for this purpose, such number of Shares not exceeding 10% of the
number of Shares in issue immediately following completion of the Global Offering but
before any exercise of the Over-allotment Op tion until the conclusion of the next annual
general meeting of our Company, unless renewed by an ordinary resolution of our
Shareholders in a general meeting, either unc onditionally or subject to conditions or the
expiration of the period within which the next annual general meeting of our Company is
required by the Articles of Association or any applicable law of the Cayman Islands to be
held or the passing of an ordinary resolution by our Shareholders in general meeting of our
Company varying or revoking the authority given to our Directors, whichever occurs first;
and
(f) conditional on the passing of the resolutions referred in sub-paragraphs (d) and (e) above, the
extension of the general mandate to allot, issue and deal with Shares as mentioned in
paragraph (d) above by the addition to the total number of Shares which may be allotted or
agreed conditionally or unconditi onally to be allotted by our Directors pursuant to such
general mandate of the total number of Shares repurchased by our Company pursuant to
paragraph (e) above, provided that such extended amount shall not exceed 10% of the total
number of Shares in issue immediately following the Global Offering but before any exercise
of the Over-allotment Option un til the conclusion of the next annual general meeting of our
Company, unless renewed by an ordinary resolution of our Shareholders in a general
meeting, either unconditionally or subject to conditions or the expiration of the period within
which the next annual general meeting of our Company is required by the Articles of
Association or any applicable law of the Ca yman Islands to be held or the passing of an
APPENDIX V STATUTORY AND GENERAL INFORMATION
– V-5 –


--- page 831 ---
ordinary resolution by our Shareholders in general meeting of our Company varying or
revoking the authority given to our Directors, whichever occurs first, be and is hereby
approved.
7. Repurchase by our Company of our own securities
(a) Listing Rules
This paragraph contains information required by the Stock Exchange to be included in this
prospectus concerning the repurchas e by our Company of our own securities.
(i) Shareholders’ approval
All proposed repurchases of securities (wh ich must be fully paid up) must be approved
in advance by an ordinary resolution of our Shareholders in a general meeting, either by way
of general mandate or by specific approval of a particular transaction.
Note: Pursuant to the written resolutions passed on 30 November 2023 by all our then Shareholders, a general
unconditional mandate (the ‘‘Repurchase Mandate ’’) was granted to our Directors to exercise all powers of
our Company to repurc hase on the Stock Exchange, or on any other s tock exchange on whic h the securities of
our Company may be listed and which is recognised by the SFC and the Stock Exchange for this purpose,
such number of Shares not exceeding 10% of the total number of Shares in issue or to be issued immediately
following completion of the Global Offering and the Capitalisation Issue (taking no account of the Shares
which may be taken up under any exercise of the Over-allotment Option or the options under the Share
Option Scheme), at any time until the conclusion of the next annual general meeting of our Company, the
expiration of the period within which the next annual general meeting of our Company is required by any
applicable laws or the Articles of Association to be h e l do rw h e ns u c hm a n d a t ei sr e v o k e do rv a r i e db ya n
ordinary resolution of the then Shareholders in general meeting, whichever occurs first.
(ii) Core connected persons
The Listing Rules prohibit a company from knowingly repurchasing securities on the
Stock Exchange from a ‘‘core connected person’’ , that is, a director, chief executive or
substantial shareholder of the company or any of its subsidiaries or a close associate of any
of them, and a core connected person shall not knowingly sell his securities to the company
on the Stock Exchange.
(iii) Source of funds
Repurchases must be funded out of funds legally available for the purpose in
accordance with the Articles of Association, the applicable laws of the Cayman Islands and
the Listing Rules. A listed company is prohibi ted from repurchasing its own shares on the
Stock Exchange for a consideration other th an cash or for settlement otherwise than in
accordance with the trading rules of the Stock Exchange.
Under the Cayman Islands laws, any repurchase of securities by our Company may be
made out of profits or share premium of our Company or out of a fresh issue of Shares made
for the purpose of the repurchase or, subject to the Companies Act, out of capital and, in the
APPENDIX V STATUTORY AND GENERAL INFORMATION
– V-6 –


--- page 832 ---
case of any premium payable on the repurchase, out of the profits of our Company or from
sums standing the credit of the share premium account of our Company or, subject to the
Companies Act, out of capital.
(iv) Status of repurchased Shares
The Listing of all repurchased Shares (whether offered on the Stock Exchange or
otherwise) will automatically be cancelled a nd the certificates for those Shares shall be
cancelled and destroyed.
(v) Trading restrictions
A listed company may not issue or announce a proposed issue of new securities for a
period of 30 days immediately following a r epurchase (other than an issue of securities
pursuant to an exercise of warrants, share options or similar instruments requiring the
company to issue securities which were outstanding prior to such repurchase) without the
prior approval of the Stock Exchange. In add ition, a listed company is prohibited from
repurchasing its shares on the Stock Exchange if the purchase price is 5% or more than the
average closing market price for the five pre ceding trading days on which its shares were
traded on the Stock Exchange.
The Listing Rules also prohibit a listed com pany from repurchasing its securities on the
Stock Exchange if the repurcha se would result in the number of listed securities which are in
the hands of the public falling below the relevant prescribed minimum percentage as required
by the Stock Exchange.
A listed company is required to procure that the broker appointed by it to effect a
repurchase of securities discloses to the Stock Exchange such information with respect to the
repurchase as the Stock Exchange may require.
(vi) Suspension of repurchase
Pursuant to the Listing Rules, a listed compa ny may not make any repurchases of shares
after inside information has come to its know ledge until the information has been made
publicly available. In particular, during the period of one month immediately preceding the
earlier of: (i) the date of the board meeting (as such date is first notified to the Stock
Exchange in accordance with the Listing R ules) for the approval of a listed company’ s results
for any year, half-year, quarter-year or any other interim period (whether or not required by
the Listing Rules); and (ii) the deadline for a l isted company to publish an announcement of
its results for any year, half-year or quarter-year period under the Listing Rules, or any other
interim period (whether or not required under the Listing Rules), and in each case ending on
the date of the results announcement, the listed company may not repurchase its shares on the
Stock Exchange unless the circumstances are exceptional.
APPENDIX V STATUTORY AND GENERAL INFORMATION
– V-7 –


--- page 833 ---
(vii) Reporting requirements
Certain information relating to repurchases of securities on the Stock Exchange or
otherwise must be reported to the Stock Exchange not later than 30 minutes before the earlier
of the commencement of the morning trading session or any pre-opening session on the
following Business Day. In addition, a listed company ’s annual report is required to disclose
details regarding repurchases of securities mad e during the year, inclu ding a monthly analysis
of the number of securities repurchased, the purchase price per share or the highest and
lowest price paid for all such purchase, where relevant, and the aggregate prices paid.
(b) Reasons for repurchase
Our Directors believe that it is in the best interests of our Company and our Shareholders for
our Directors to have a general authority from our Shareholders to enable our Company to
repurchase Shares in the market. Such repurchases may, depending on market conditions and
funding arrangements at the time, lead to an enhancement of the net asset value of our Company
and our subsidiaries and/or the earnings per Share and will only be made when our Directors
believe that such repurchases will benefit our Company and our Shareholders.
(c) Funding of repurchase
In repurchasing securities, our Company may only apply funds legally available for such
purpose in accordance with the Articles of Association, the Listing Rules and the applicable laws
of Cayman Islands.
The exercise in full of the Repurchase Mandate, on the basis of 2,000,000,000 Shares in
issue immediately after the completion of the Glob al Offering and the Capitalisation Issue (without
taking into account any Shares which may be issued pursuant to the exercise of the Over-allotment
Option or any options which may be granted under the Share Option Scheme), would result in up
to 200,000,000 Shares being repurchased by our Company during the period in which the
Repurchase Mandate remains in force.
There might be a material adverse impact on the working capital or gearing position of our
Company (as compared with the position disclosed in this prospectus) in the event that the
Repurchase Mandate is exercised in full. However, our Directors do not propose to exercise the
Repurchase Mandate to such an extent as would, in the circumstances, have a material adverse
effect on the working capital requirements of our Company and our subsidiaries or the gearing
levels which, in the opinion of our Directors, are from time to time appropriate for our Company
and our subsidiaries.
(d) General
None of our Directors or, to the best of their knowledge having made all reasonable
enquiries, any of their close associates have any present intention to sell any Shares to our
Company or our subsidiaries.
APPENDIX V STATUTORY AND GENERAL INFORMATION
– V-8 –


--- page 834 ---
Our Directors have undertaken to the Sto ck Exchange that, so far as the same may be
applicable, they will exercise the Repurchase M andate in accordance w ith the Listing Rules and
the applicable laws of Cayman Islands.
If, as a result of a share repurchase, a Shareholder ’s proportionate interest in the voting rights
of our Company increases, such increase will be treated as an acquisition for the purpose of the
Takeovers Code. Accordingly, a Shareholder or a group of Shareholders acting in concert (within
the meaning of the Takeovers Code) may obtain or consolidate control of our Company and
become obliged to make a mandatory offer in accordance with rule 26 of the Takeovers Code as a
result of any such increase. Save as aforesaid, our Directors are not aware of any consequences
which would arise under the Takeovers Code as a consequence of any repurchase made pursuant to
the Repurchase Mandate.
Our Directors will not exercise the Repurchase Mandate if the repurchase would result in the
number of Shares which are in the hands of the public falls below 25% of the total number of
Shares in issue.
Our Company had not repurchased any Shares (whether on the Stock Exchange or otherwise)
in the six months prior to the Latest Practicable Date.
No core connected person has notified our Company that he or she or it has a present
intention to sell Shares to our Company, or has undertaken not to do so, if the Repurchase
Mandate is exercised.
B. FURTHER INFORMATION ABOUT OUR BUSINESS
1. Summary of material contracts
The following contracts (not being contracts entered into in the ordinary course of business) have
been entered into by our Company or our subsidiaries within the two years preceding the date of this
prospectus and are or may be material:
( a ) t h el e t t e ro fw a i v e ro fd e b td a t e d2 5O c t o b er 2022 between Majestic Gold Corp. and Yantai
Zhongjia Mining Co. Ltd. pursuant to which Majestic Gold Corp. waived the amount of
RMB10,770,000 previously advanced to Yantai Zhongjia Mining Co. Ltd.;
(b) the letter of waiver of debt dated 25 October 2022 between Yantai City Dahedong Mineral
Processing Co. Ltd. and Yantai Zhongjia Mining Co. Ltd. pursuant to which Yantai City
Dahedong Mineral Processing Co. Ltd. waived the amount of RMB36,349,431.83 previously
advanced to Yantai Zhongjia Mining Co. Ltd.;
(c) the Deed of Indemnity;
(d) the Deed of Non-competition;
(e) the Hong Kong Underwriting Agreement; and
APPENDIX V STATUTORY AND GENERAL INFORMATION
– V-9 –


--- page 835 ---
(f) a cornerstone investment agreement dated 13 December 2023 entered into between the
Company, Dongfang Gold Industry (Hong Kong) Limited ( 東方金業(香港)有限公司)a n d
Innovax Securities Limited ( 創陞證券有限公司), pursuant to which Dongfang Gold Industry
(Hong Kong) Limited ( 東方金業(香港)有限公司) agreed to subscribe for 198,000,000 Shares
at a maximum price of HK$0.75 per share.
2. Intellectual property rights of our Group
(a) Trademarks
As at the Latest Practicable Date, we had regi stered the following trademark in Hong Kong:
Trademark Owner Classes
Registration
number Duration of validity
(A) (B)
 Our Company 14, 37, 42 305134004 5 December 2019 –
4 December 2029
(A) (B)
 Our Company 14, 37, 42 305943295 26 April 2022 –
25 April 2032
(A) (B)
 Our Company 14, 37, 42 305963220 20 May 2022 –
19 May 2032
(A) (B)
 Our Company 14, 37, 42 305963239 20 May 2022 –
19 May 2032
As at the Latest Practicable Date, we had regi stered the following trademark in the PRC:
Trademark Owner Classes
Registration
number Duration of validity
Our Company 7, 37, 42 50746519 7 August 2021 –
6 August 2031
APPENDIX V STATUTORY AND GENERAL INFORMATION
– V-10 –


--- page 836 ---
(b) Patents
As at the Latest Practicable Date, we have registered the following patents which we consider
to be or may be material to our business:
No. Patent Name Patent type Patentee
Place of
registration Patent number Grant date Expiry date
1. A concentrating machine
(一種選礦機 )
Invention
patent
Yantai Zhongjia PRC 201811083735X 16 June 2020 18 September
2038
2. An automatic irrigation
system based on slope
protection purpose
(一種基於邊坡防護目的
的自動灌溉系統)
Utility model
patent
Yantai Zhongjia PRC 2019214766993 9 October
2020
6S e p t e m b e r
2029
3. A detachable and
degradable environment
friendly dust screen ( 一種便
於拆卸的
可降解環保防塵網)
Utility model
patent
Yantai Zhongjia PRC 2019214866879 9 June 2020 9 September
2029
4. A new intelligent NC
dosing device ( 一種新式
智能數控加藥裝置)
Utility model
patent
Yantai Zhongjia PRC 2019214866830 28 July 2020 9 September
2029
5. A Yin-yang high
performance abrasion-
resistance ball (一 種
陰陽型高性能耐磨球)
Utility model
patent
Yantai Zhongjia PRC 2019214954475 15 May 2020 10 September
2029
6. An energy-efficient wet
iron separator ( 一種節能
高效濕式除鐵器)
Utilit
y model
patent
Yantai Zhongjia PRC 2019215426819 11 August
2020
17 September
2029
7. A drainage well water yield
real-time monitoring device
(一種排滲井出水量的實時
監測裝置)
Utility model
patent
Yantai Zhongjia PRC 201921704803X 28 July 2020 12 October
2029
8. A shrink and adjust
sensitive riffle ( 一種縮分調
節靈敏的二分器)
Utility model
patent
Yantai Zhongjia PRC 2019219014339 14 July 2020 6 November
2029
9. An uncoupled air spacer for
charging ( 一種用於裝藥的
不耦合式空氣間隔柱)
Utility model
patent
Yantai Zhongjia PRC 2019219436504 14 July 2020 12 November
2029
10. A quick reading and
accurate measuring device
for the length of gun-mud
filling ( 一種讀數快測值
精準的炮泥填塞長度測量
裝置)
Utilit
y model
patent
Yantai Zhongjia PRC 2019220600069 14 July 2020 26 November
2029
11. A high precision measuring
device for tailing pulp
quantity ( 一種測量精度高的
尾礦漿量測量裝置)
Utility model
patent
Yantai Zhongjia PRC 2020231395709 14 September
2021
22 December
2030
APPENDIX V STATUTORY AND GENERAL INFORMATION
– V-11 –


--- page 837 ---
No. Patent Name Patent type Patentee
Place of
registration Patent number Grant date Expiry date
12. A vegetation fixtures for
strengthening the stability
of rocky slopes ( 一種加強
岩質邊坡穩定性的植被固定
裝置)
Utility model
patent
Yantai Zhongjia PRC 2020231471011 14 September
2021
23 December
2030
13. A high stability slope
rockfall moni toring device
for open-pit mine ( 一種用於
露天礦的穩定性高的邊坡落
石監測裝置)
Utility model
patent
Yantai Zhongjia PRC 2020231687162 14 September
2021
24 December
2030
14. An underground filling
aggregate strength testing
device ( 一種井下充填骨料
強度檢測裝置)
Utility model
patent
Yantai Zhongjia PRC 2020231685449 1 October
2021
24 December
2030
15. A sprinkler with wide
coverage for underground
fire safety ( 一種用於井下
消防安全的覆蓋面廣的噴淋
裝置)
Utilit
y model
patent
Yantai Zhongjia PRC 202023206037X 17 September
2021
25 December
2030
16. A warning device for
preventing from entering
into underground mine
working area accidentally
(一種地下礦山作業區域防
誤入警戒裝置)
Utility model
patent
Yantai Zhongjia PRC 2020232056726 14 September
2021
25 December
2030
17. A ball mill that reduces the
collision and wear between
the grinding body and the
liner ( 一種減小研磨體與襯
板碰撞磨損的球磨機)
Invention
patent
Yantai
Zhongjia
PRC 2021108684733 12 April
2022
30 July 2041
18. A mining production data
information management
device that is simple for
maintenance ( 一種便於檢修
的礦業生產數 據信息管理裝
置)
Utility model
patent
Yantai
Zhongjia
PRC 2021234213800 28 June 2022 31 December
2031
19. A safety treatment device
for blasting cha rge blockage
and cleaning ( 一種炮孔裝藥
堵塞清理安全處理裝置)
Utilit
y model
patent
Yantai
Zhongjia
PRC 2022201085628 28 June 2022 17 January
2032
20. A new type of rotary
beneficiation feeder ( 一種新
型旋轉選礦餵料機)
Utility model
patent
Yantai
Zhongjia
PRC 202220248022X 28 June 2022 2 February
2032
21. An ore transmission device
convenient for maintenance
(一種便於維修的礦石傳輸
裝置)
Utility model
patent
Yantai
Zhongjia
PRC 2022200124841 30 August
2022
5J a n u a r y
2032
22. An angle-adjustable mobile
mineral conveying device
(一種角度可調的移動式礦
料輸送裝置)
Utility model
patent
Yantai
Zhongjia
PRC 2022200517681 30 August
2022
11 January
2032
APPENDIX V STATUTORY AND GENERAL INFORMATION
– V-12 –


--- page 838 ---
No. Patent Name Patent type Patentee
Place of
registration Patent number Grant date Expiry date
23. A small-scale ore filling
device ( 一種小規模礦體填
充裝置)
Utility model
patent
Yantai
Zhongjia
PRC 2022201803375 30 August
2022
24 January
2032
24. An easy-to-use crushing
equipment for ore
processing ( 一種便於使用的
選礦用破碎設 備)
Utility model
patent
Yantai
Zhongjia
PRC 2022202924362 28 October
2022
14 February
2032
25. A system and method for
comprehensive resource
u t i l i z a t i o no fg o l do r e
associated minerals
(一種金礦共伴生礦物的資
源化綜合利用系統及方法)
Invention
patent
Yantai Zhongjia,
China University of
Mining & Technology
(中國礦業大學)a n d
Jiangsu Yiyi Hehua
Screening Equipment
Co., Ltd. ( 江蘇億億和
華篩分設備有限公司)
PRC 2
021110168028 20 September
2022
31 August
2041
26. A device for preventing
excavator hydraulic breaker
parts from falling
(一種防止挖掘機 液壓破碎
錘部件掉落的裝置)
Utility model
patent
Yantai
Zhongjia
PRC 2022227785265 17 February
2023
21 October
2032
27. A device for suppressing
dust from tail gas emission
of mining transport trucks
(一種抑制礦用運輸卡車尾
氣排放揚塵的裝置)
Utility model
patent
Yantai
Zhongjia
PRC 2022229016243 17 February
2023
2N o v e m b e r
2032
28. A High Efficiency Medium
and Deep Hole Charger ( 一
種效率高的中深孔裝藥器)
Utility model
patent
Yantai Zhongjia PRC 2022235102015 16 May 2023 28 December
2032
29. A rapid detection device for
roadway roof pumice ( 一種
快速探測巷道頂板浮石裝
置)
Utilit
y model
patent
Yantai Zhongjia PRC 2023201102115 18 July 2023 16 January
2033
APPENDIX V STATUTORY AND GENERAL INFORMATION
– V-13 –


--- page 839 ---
(c) Software copyrights
As at the Latest Practicable Date, our Group had registered the following software copyrights
in the PRC which are material to our Group ’s business:
No. Registered No. Software Name
Copyright
Owner
Date of
registration
1 2019SR1028291 Zhongjia Blasting Supervision
Dynamic Control Software V1.0
(中嘉爆破監理動態管控軟件V1.0)
Yantai Zhongjia 11 October 2019
2 2019SR1028293 Zhongjia Mining Visual 3D Scene
Reproduction and Visualisation
Management System V1.0 ( 中嘉
礦業三維場景再現可視化管理系
統V1.0)
Yantai Zhongjia 11 October 2019
3 2019SR1035701 Zhongjia Online Safety
Monitoring and Controlling
System of Tailings dam V1.0
(中嘉尾礦庫在線安全監測監控
系統V1.0)
Yantai Zhongjia 12 October 2019
4 2019SR1035740 Zhongjia Open Truck Digital
Dispatching System V1.0 ( 中嘉露
天卡車鏟運數字化調度系統V1.0)
Yantai Zhongjia 12 October 2019
5 2019SR1035810 Zhongjia 3D Mine Surveying
Integrated Information
Management Software V1.0 ( 中嘉
三維礦業測量綜合信息管理軟件
V1.0)
Yantai Zhongjia 12 October 2019
6 2023
SR0330049 A mine goaf detection and
monitoring system V1.0 ( 一種礦
山採空區探測及監測系統V1.0)
Yantai Zhongjia 14 March 2023
7 2023SR1000612 A non-coal mine rubber-tired
vehicle vehicle management
system V1.0 ( 一種非煤礦山膠輪
車車輛管理系統V1.0)
Yantai Zhongjia 1 September 2023
(d) Art copyrights
As at the Latest Practicable Date, our Group had r egistered and maintained the following art
copyright in the PRC which is material to our Group ’s business:
Registered No. Art type Copyright Owner Date of registration
2020F00987491 Art product Our Company 24 February 2020
APPENDIX V STATUTORY AND GENERAL INFORMATION
– V-14 –


--- page 840 ---
(e) Domain names
As at the Latest Practicable Date, our Group ha d registered and maintained the following
domain names which are material to our Group ’s business:
Domain name Registration date Expiry date Registrant
www.persistenceresource.com 22 May 2022 22 May 2024 Our Company
www.zj-mining.cn 8 January 2018 8 January 2027 Yantai Zhongjia
The above domain names will be renewed prior to their respective expiration.
C. FURTHER INFORMATION ABOUT OUR DIRECTORS, SENIOR MANAGEMENT AND
SUBSTANTIAL SHAREHOLDERS
1. Interests and short position of Directors a nd the chief executive in the shares, underlying
shares or debentures of our Company and its associated corporations
So far as the Directors are aware, immediately following completion of the Global Offering and
the Capitalisation Issue and without taking into account of any Shares which may be issued upon the
exercise of the Over-allotment Option and any op tions which may be granted under the Share Option
Scheme, based on the information available on the Latest Practicable Date, the interests or short
positions of our Directors and the chief executive of our Company in the shares, underlying shares and
debentures of our Company and its associated corporations (within the meaning of part XV of the SFO)
which will have to be notified to our Company and the Stock Exchange pursuant to divisions 7 and 8 of
part XV of the SFO (including interests and shor tp o s i t i o n sw h i c ht h e ya r et a k e no rd e e m e dt oh a v e
under such provisions of the SFO) or which will be required, pursuant to section 352 of the SFO, to be
recorded in the register referred to therein or whic hw i l lb er e q u i r e dt ob en o t i f i e dt oo u rC o m p a n ya n d
the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed
Issuers contained in the Listing Rules, will be as follows:
(a) Interest in Shares of our Company
Name of Director Nature of interests Number of Shares
Approximate %
of interest in
our Company
Nil
APPENDIX V STATUTORY AND GENERAL INFORMATION
– V-15 –


--- page 841 ---
(b) Interest in associated corporation of our Company
Name of Director
Name of
associated
corporation
Nature of
interests
Number of
shares held in
the associated
corporation
Approximate
% of interest
in associated
corporation
Mackie James Thomas Majestic Gold Beneficial
Owner
100,000 0.01
Notes:
1. All interests stated are long positions.
2. Interests and short positions of substantial sh areholders in the shares or underlying shares of
our Company
So far as our Directors are aware, immediately following the Global Offering and the
Capitalisation Issue and without taking into account of any Shares which may be issued upon the
exercise of the Over-allotment Option and any op tions which may be granted under the Share Option
Scheme, the following on person(s), not being Directors or chief executive of our Company, who (based
on the information available on the Latest Practicab le Date) will have the interests or short positions in
the Shares or underlying Shares of our Company which will fall to be disclosed to our Company under
the provisions of divisions 2 and 3 of part XV of the SFO, or, directly or indirectly interested in 10% of
more of the issued voting shares of any other member of our Group:
(a) Interests and short positions in o ur Shares and underlying Shares
Name Nature of interests Number of Shares
Approximate %
of shareholding
Majestic Gold Beneficial owner 1,410,000,000 70.5
(b) Interests of substantial shareholders of any member of our Group (other than our Company)
Name of subsidiary Name of shareholder % of interest
Yantai Zhongjia Dahedong
(Note) 25
Note: As at the Latest Practicable Date, Dahedong was owned as to 50% by Mr. Kong Fanbo, and the remaining equity
interests held in equal share of approximately 16.67% by each of (i) Mr. Kong Fanzhong; (ii) Mr. Wang Lei; and
(iii) SDZJ. Mr. Kong Fanbo and Mr. Ko ng Fanzhong are brother s and Mr. Wang Lei is their brother-in-law.
APPENDIX V STATUTORY AND GENERAL INFORMATION
– V-16 –


--- page 842 ---
3. Particulars of Directors ’service contracts and letters of appointment
Each of our executive Directors, namely, Dr. Shao, Mr. Mackie James Thomas, Mr. Lo Cheuk
Kwong Raymond and Mr. Chen Shaohui, has entered into a service agreement with our Company for an
initial term of three years commencing from the Listin g Date. During the initial term, either party to the
service agreement shall be entitled to terminate the s ervice agreement by ser ving not less than three
months ’ written notice upon the other side.
Each of our executive Directors is entitled to a discretionary bonus, the amount of which is
determined with reference to the operating results of our Group and the performance of our executive
Directors. Each of our executive Directors shall a bstain from voting and not be counted in the quorum in
respect of any resolution of our Board regarding the amount of annual salary and discretionary bonus
payable to himself.
Each of our independent non-executive Directors, namely, Dr. Malaihollo Jeffrey Francis A, Mr.
Chan Ngai Fan, Dr. Zeng Ming and Ms. Liu Li has entered into a letter of appointment with our
Company for an initial term of three years commencin g from the Listing Date. During the initial term,
either party shall be entitled to terminate th e term by serving not less than three months ’ written notice
upon the other side.
Each of our Directors is entitled to t he respective basic salary/serv ice fee set out below (subject to
annual adjustment after consultati on with remuneration committee at the discretion of our Directors, and
taking no account of the discretio nal bonus they may be entitled to).
Our Company shall reimburse our Directors, upon production of valid receipts and/or vouchers if
requested, all necessary and reasonable expenses (including travel, hotel, meals and other out-of-pocket
expenses) properly incurred by our Directors in the performance of their duties under the service
contracts or letters of appointment.
The current basic annual salaries/service fees (excluding discretionary bonus) of each of our
Directors are as follows:
Name
Annual basic
salary/service fee
Executive Directors
Dr. Shao Xuxin HK$1,500,000
Mr. Mackie James Thomas HK$1,300,000
Mr. Lo Cheuk Kwong Raymond HK$1,200,000
Mr. Chen Shaohui HK$300,000
Independent non-executive Directors
Dr. Malaihollo Jeffrey Francis A HK$240,000
Mr. Chan Ngai Fan HK$240,000
Dr. Zeng Ming HK$240,000
Ms. Liu Li HK$240,000
APPENDIX V STATUTORY AND GENERAL INFORMATION
– V-17 –


--- page 843 ---
Save as aforesaid, none of our Directors has or is proposed to have a service contract with our
Company or any of our subsidiaries other than contracts expiring or determinable by the employer
within one year without the payment of compensa tion (other than statutory compensation).
4. Directors ’ remuneration
Our Company ’s policies concerning remuneration of executive Directors are (i) the amount of
remuneration is determined on the basis of the relevant Director ’s experience, responsibility, workload
and the time devoted to our Company; and (ii) non-cash benefits may be provided to our Directors under
their remuneration package.
For the three years ended 31 December 2022 and the six months ended 30 June 2023, the
aggregate amount of salaries and other allowances, discretionary bonus, retirement scheme contributions,
other social welfare and benefits in kind (if applicable) paid by our Group to our Directors amounted to
approximately RMB2.0 million, RMB1.7 million, RM B2.1 million and RMB1.2 million, respectively.
For further details in respect of our Directors ’ remuneration, please refer to the Appendix I to this
prospectus.
During the Track Record Period, no remuneration was paid by our Group to, or receivable by, our
Directors (i) as an inducement to join or upon joining our Group or (ii) for loss of any office as a
director of any member of our Group or of any other office in connection with the management of the
affairs of any member of our Group. None of our Directors had waived any remuneration during the
Track Record Period.
Save as disclosed in this prospectus, for the three years ended 31 December 2022 and the six
months ended 30 June 2023, no other emoluments have been paid or are payable by our Company to our
Directors. Under the arrangements currently in force within our Group, our Company estimates that the
aggregate remuneration (including fees, salaries, a llowances, pension-defined contribution plans and
other benefits in kind where applicable) of our Directors (including independent non-executive Directors
in their capacity as Directors), excluding any discretionary benefits or bonuses or other fringe benefits,
for the year ending 31 December 2023 w ill be approximately RMB2.4 million.
Save as disclosed in Appendix I to this prospectus, none of our Directors received any other
remuneration or benefits in kind from our Group during the Track Record Period.
5. Related party transactions
Save as disclosed in this prospectus and in Note 34 to the Accountants ’ Report, the text of which
is set out in Appendix I to this prospectus, during the three years immediately preceding the date of this
prospectus, we had not engaged in any other material related party transactions.
APPENDIX V STATUTORY AND GENERAL INFORMATION
– V-18 –


--- page 844 ---
6. Disclaimers
Save as aforesaid and saved as disclosed elsewhere in this prospectus:
(a) none of our Directors or the chief executive of our Company, as at the Latest Practicable
Date, has any interest or short position in any share, underlying share and debenture of our
Company or any of its associated corporatio ns (within the meaning of the SFO), which will
have to be notified to our Company and the Stock Exchange pursuant to Divisions 7 and 8 of
Part XV of the SFO (including interests and short positions which they are deemed to have
under such provisions of the SFO), or which will be required, pursuant to Section 352 of the
SFO, to be entered in the register referred to therein, or which will be required, pursuant to
the Model Code for Securities Transactions by Directors of Listed Issuers contained in the of
the Listing Rules, to be notified to our Compan y and the Stock Exchange, in each case once
the Shares are listed on the Stock Exchange;
(b) save in connection with the Underwriting Agr eements, none of the experts referred to in the
paragraph headed ‘‘E. Other information — 11. Consents of experts ’’of this appendix has
any shareholding in any member of our Group or the right or option (whether legally
enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any
member of our Group;
(c) none of the experts referred to in the paragraph headed ‘‘E. Other information — 11.
Consents of experts ’’of this appendix has any direct or indirect interest in the promotion of,
or in any assets which have been, within the two ye ars immediately preceding the date of this
prospectus, acquired or disposed of by or leased to any member of our Group, or are
proposed to be acquired or disposed of by or leased to any member of our Group;
(d) taking no account of Shares which may be pursuant to options which may be granted under
our Share Option Scheme, none of our Directors knows of any person (not being a Director
or chief executive of our Company) who will, immediately following completion of the
Global Offering, have any interest in Shares or underlying Shares which would fall to be
disclosed to our Company under the provisions of Divisions 2 and 3 of Part XV of the SFO,
or who will be interested, directly or indirectly, in 5% or more of the nominal value of any
class of share capital carrying rights to vote in all circumstances at general meeting of any
other member of our Group;
(e) none of our Directors has been interested in the promotion of, or has any direct or indirect
interest in any assets which have been, within the two years immediately preceding the date
of this prospectus, acquired or disposed of by or leased to any member of our Group;
(f) none of our Directors is materially interested in any contract or arrangement subsisting at the
date of this prospectus which is significant in relation to the business of our Group taken as a
whole; and
(g) our Directors confirm that none of our Directors, their respective close associates or
Shareholders who are interested in 5% or more of the issued share capital of our Company
have any interest in the five largest customers or the five largest suppliers or the five largest
subcontractors of our Group.
APPENDIX V STATUTORY AND GENERAL INFORMATION
– V-19 –


--- page 845 ---
D. SHARE OPTION SCHEME
The following is a summary of the principal te rms of the Share Option Scheme conditionally
adopted by the written resolutions of our Sharehol ders passed on 30 November 2023. The terms of the
Share Option Scheme are in compliance with the provisions of Chapter 17 of the Listing Rules.
1. Purpose
T h eS h a r eO p t i o nS c h e m ei sas h a r ei n c e n t i v es cheme and is established to recognise and
acknowledge the contributions the E ligible Participants (as defined in paragraph 2 below) have had or
m a yh a v em a d et oo u rG r o u pb y :
(i) motivating the Eligible Participants to op timise their performance and efficiency for the
benefit of our Group; and
(ii) attracting and retaining or otherwise maintaining on-going business relationships with the
Eligible Participants whose contributi ons are or will be beneficial to our Group.
2. Who may join
Our Board may, at its discretion, invite any perso n belonging to any of the following classes of
persons (the ‘‘Eligible Participants’’ ) to take up options to subscribe for Shares:
(i) any directors, employees, executives or officers of our Company or any of our subsidiaries,
including persons who are granted Options as an inducement to enter into employment
contracts with our Company or any of our Subsidiaries (the ‘‘Employee Participants ’’);
(ii) any directors or employees of the holding companies, fellow subsidiaries or associated
companies of our Company (the ‘‘Related Entity Participants ’’);
(iii) any persons who provide services to our Group on a continuing or recurring basis in its
ordinary and usual course of business which are in the interests of the long-term growth of
our Group including advisers, consultants, suppliers and agents to our Group (the ‘‘Service
Provider Participants ’’), but excluding placing agents, financial advisors providing advisory
services for fundraising, mergers or acquisitions, professional services providers such as
auditors and valuers who provide assurance, or are required to perform their services with
impartiality or objectivity; and
(iv) an associate of any of the persons re ferred to in paragraphs (i) or (ii) above.
The eligibility of any of the above categories of Eligible Participants to the grant of any option
shall be determined by our Board from time to time on the basis of our Board ’s sole opinion as to the
relevant Eligible Participant ’s contribution to the development and growth of our Group, the assessment
of which are:
(i) contribution to the development and performance of our Group;
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(ii) quality of work performed for our Group;
(iii) initiative and commitment in performing his/her duties; and
(iv) length of service or contribution to our Group.
3. Acceptance of an offer of options
An option shall be deemed to have been granted and accepted by the grantee and to have taken
effect when the duplicate offer document constituting acceptances of the options duly signed by the
grantee, together with a remittance in favour of our Company of HK$1.00 by way of consideration for
the grant thereof, is received by our Company on or before the relevant acceptance date. Such payment
shall in no circumstances be refundable. Any offer may be accepted by an Eligible Participant in respect
of less than the number of Shares for which it is offered provided that it is accepted in respect of a
board lot for dealing in Shares on the Stock Exchang e or an integral multiple thereof and such number is
clearly stated in the duplicate offer document and accep ted by the Eligible Participant. To the extent that
the offer to grant an option is not accepted by any prescribed acceptance date, it shall be deemed to
have been irrevocably declined.
Subject to paragraphs 12, 13, 14, 15 and 16 below, an option shall be exercised in whole or in part
and, other than where it is exercised to the full extent outstanding, shall be exercised in integral
multiples of such number of Shares as shall represen t one board lot for dealing in Shares on the Stock
Exchange for the time being, and by giving notice in writing to our Company stating that the option is
thereby exercised and the number of Shares in respect of which it is exercised. Each such notice must be
accompanied by a remittance for the full amount of the subscription price for the Shares in respect of
which the notice is given.
Within 21 days after receipt of the notice and the remittance and, where appropriate, receipt of the
auditors ’ or independent financial adviser ’s certificate pursuant to paragraph 18 below, our Company
shall allot and issue the relevant number of Shares to the grantee credited as fully paid and issue to the
grantee a share certificate for the Shares so allotted.
The exercise of any option shall be subject to the members of our Company in general meeting
approving any necessary increase in the authorised share capital of our Company.
4. Maximum number of Shares
The maximum number of Shares in respect of which options may be granted (including Shares in
respect of which options, whether exercised or still outstanding, hav e already been granted) under the
Share Option Scheme and under any other share option schemes of our Company must not in aggregate
exceed 10% of the total number of Shares in issue at the time dealings in the Shares first commence on
the Stock Exchange, being 200,000,000 Shares (the ‘‘Scheme Limit’’ ), excluding Shares which would
have been issuable pursuant to options which have lapsed in accordance with the terms of the Share
Option Scheme (or any other share option schemes of our Company) for the purpose of calculating the
Scheme Limit and, if applicable, the service provi der sublimit (as defined in the Listing Rules) which
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shall be set within the Scheme Limit. Subject to the issue of a circular by our Company and the
approval of our Shareholders in general meeting and/or such other requirements and exceptions
prescribed under the Listing Rules from time to time, our Board may:
(i) after three years of: (a) the Adoption Date (as defined in paragraph 10 below); or (b) the date
of the Shareholders ’ approval for the last refreshment (as applicable), seek approval from our
Shareholders to refresh the Scheme Limit and, if applicable, the service provider sublimit (as
defined in the Listing Rules). Any refreshment within any three-year period must be
approved by our Share holders, subject to: (1) the controlling shareholders, Directors
(excluding independent non-executive Directors), chief executives of our Company, and each
of their respective associates, abstaining from voting in favour of such resolution at the
general meeting; and (2) the Company complyin g with requirements under the Listing Rules,
save that the maximum number of Shares which may be issued upon exercise of all options
to be granted under the Share Option Scheme and any other schemes of our Company shall
not exceed 10% of our Shares in issue as at the date of approval by our Shareholders in
general meeting where the Scheme Limit is refreshed; and
(ii) seek separate approval from our Shareholders in general meeting for granting Options beyond
the Scheme Limit, provided that the Options in excess of the Scheme Limit are granted only
to the Eligible Participant specifically iden tified by our Company before such approval is
sought, and the number and terms of such Options must be fixed before shareholders ’
approval.
If our Company conducts a share consolidation o r subdivision after the Scheme Limit or the
service provider sublimit (as defined in the Listin g Rules) has been approved in accordance with the
above paragraph, the maximum number of Shares that may be issued in respect of all Options to be
granted under the Scheme Limit or the service provider sublimit (as defined in the Listing Rules) as a
percentage of the total number of Shares at the date immediately before and after such consolidation or
subdivision shall be the same, ro unded to the nearest whole share.
5. Maximum number of options to any one individual
Where any grant of options to an Eligible Partic ipant would result in the Shares issued and to be
issued in respect of all Options granted to such Eligible Participant (excluding any Options lapsed in
accordance with the terms of the Share Option Scheme) in any 12-month period up to and including the
date of such grant representing in aggregate over 1% of the Shares in issue as at the date of such grant,
such grant shall be subject to:
(i) the issue of a circular by our Company containing the identity of the Eligible Participant, the
numbers of and terms of the options to be granted (and options previously granted to such
Eligible Participant), and such details and information as required under the Listing Rules;
and
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(ii) the approval of our Shareholders in genera l meeting and/or other re quirements prescribed
under the Listing Rules from time to time with such Eligible Participant and his/her close
associates (or associates if such Eligible Participant is a connected person of our Company)
(as defined in the Listing Rules) abstaining from voting.
The numbers and terms (including the exercise price) of options to be granted to such Eligible
Participant must be fixed before our Shareholders ’ approval and the date of our Board meeting at which
our Board proposes to grant the options to such Eligib le Participant shall be taken as the date of grant
for the purpose of calculating the subscription price of the Shares under the Listing Rules. Our Board
shall forward to such Eligible Participant an offe r document in such form as our Board may from time to
time determine or, alternatively, documents accompanying the offer document which state, among
others:
(i) the Eligible Participant ’s name, address and occupation;
(ii) the date on which an option is offered to an Eligible Participant which must be a date on
which the Stock Exchange is open for the business of dealing in securities;
(iii) the date upon which an offer must be accepted;
(iv) the date upon which an option is deemed to be granted and accepted in accordance with
paragraph 3 above;
(v) the number of Shares in respect of which the option is offered;
(vi) the subscription price and the manner of payment of such price for the Shares on and in
consequence of the exercise of the option;
(vii) the date of the notice given by the grantee in respect of the exercise of the option; and
(viii) the method of acceptance of the option which sh all, unless our Board otherwise determines,
be in accordance with the provision of the Share Option Scheme as set out in paragraph 3
above.
6. Subscription price
The subscription price in respect of any option shall, subject to any adjustments made under the
Share Option Scheme, shall be at the absolute discretion of our Board, provided that it shall be not less
than the highest of:
(i) the closing price of the Shares as stated in the Stock Exchange ’s daily quotation sheets on the
date of grant, which must be a day on which the Stock Exchange is open for the business of
dealing in securities;
(ii) the average of the closing prices of the Shares as stated in the Stock Exchange ’s daily
quotation sheets for the five business days immediately preceding the date of grant; and
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(iii) the nominal value of a Share.
7. Granting options to connected persons
Any grant of options to a Director, chief executiv e or substantial Shareholder (as defined in the
Listing Rules) of our Company or any of their respec tive associates (as defined in the Listing Rules) is
required to be approved by the independent non-executive Directors (excluding any independent non-
executive Director who is the grantee of the options).
If our Board proposes to grant options to a substantial shareholder or any independent non-
executive Director or their respective associates (as d efined in the Listing Rules) which will result in the
number of Shares issued and to be issued upon exercise of options granted and to be granted (excluding
any options lapsed in accordance with the terms of t he Share Option Scheme) to such person in the 12-
month period up to and including the date of such grant: representing in aggregate over 0.1% of the
Shares in issue, such further grant of options will be subject to the approval of the independent non-
executive Directors as referred to in the above paragraph, the issue of a circular by our Company and
the approval of our Shareholders in general meetin g on a poll at which the grantees, their respective
associates and all core connected persons of our Company shall abstain from voting in favour, and/or
such other requirements prescribed under the Lis ting Rules from time to time. Any vote taken at the
meeting to approve the grant of such options shall be taken as a poll. Any change in the terms of an
option granted to a Director, chief executive or substantial shareholder of the Company or any of their
respective associates is also required to be approved by our Shareholders in the manner specified in this
paragraph if the initial grant of such options requires such approval (except where the changes take
effect automatically under the existing terms of this Scheme).
The circular to be issued by our Company to our Shareholders pursuant to the above paragraph
shall contain the following information:
(i) the details of the number and terms of the op tions to be granted to each selected Eligible
Participant, which must be fixed before our Shareholders ’ meeting and the date of our Board
meeting for proposing such further grant shall be taken as the date of grant for the purpose of
calculating the subscription price under the Listing Rules;
(ii) the views of the independent non-executive Directors (excluding any independent non-
executive Director who is the grantee of the options) as to whether the terms of such grant
are fair and reasonable and whether such grant is in the interests of our Company and our
Shareholders as a whole, and their recommendation to the independent Shareholders as to
voting;
(iii) the information required under Rules 17.02(2)(c) and (d) of the Listing Rules; and
(iv) the information required under Rule 2.17 of the Listing Rules.
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--- page 850 ---
8. Restrictions on the time of grant of options
Our Board shall not make an offer to any Eligible Pa rticipant after inside information has come to
our Company ’s knowledge until such inside information has been announced pursuant to the
requirements of the Listing Rules. In particular, during the period commencing one month immediately
preceding the earlier of:
(i) the date of our Board meeting (such date to first be notified to the Stock Exchange in
accordance with the Listing Rules) for the approval of our Company ’s results for any year,
half-year, quarterly or other interim period (whether or not required under the Listing Rules);
and
(ii) the deadline for our Company to publish an announcement of the results for any year, or
half-year, or quarterly or other interim period (whether or not required under the Listing
Rules),
and ending on the date of actual publication of the results announcement, no option may be
granted.
9. Rights are personal to grantee
An option is personal to the grantee and shall not be assignable. No grantee shall in any way sell,
transfer, charge, mortgage, encumber or otherwise dispose of or create any interest whatsoever in favour
of any third party over or in relation to any optio n or attempt to do so, subject to the Stock Exchange
g r a n t i n gaw a i v e r ,o nac a s e - b y - c a s eb a s i s ,t h eG r a n t e em a yt r a n s f e rs u c ho p t i o nt oav e h i c l e( s u c ha sa
trust or a private company) for the benefit of the relevant Eligible Participant (for example, for estate
planning or tax planning purposes) that would continue to meet the purpose of the Scheme and comply
with the requirements under Chapter 17 of the Listing Rules. Any breach of the foregoing by a grantee
shall entitle our Company to cancel any outstanding options or any part thereof granted to such grantee.
10. Time of exercise of option and duration of the Share Option Scheme
Our Board shall, in accordance with the provisi ons of the Share Option Scheme, be entitled but
shall not be bound, at any time within a period of ten years commencing on the date on which our
Shareholders of our Company approve the Share Option Scheme (the ‘‘Adoption Date ’’)t om a k ea n
offer to such Eligible Participant as our Board may in its discretion select to subscribe for such number
of Shares at the subscription price as our Board shall determine. The Share Option Scheme shall be
valid and effective until the close of business of our Company on the da te which falls ten years after the
Adoption Date, after which period no further options may be offered but the provisions of the Share
Option Scheme shall remain in force to the extent n ecessary to give effect to the exercise of any options
granted prior thereto or otherwise as may be required in accordance with the provisions of the Share
Option Scheme.
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11. Performance target and clawback
Our Board may, at its absolute discretion, fix any minimum period for which an option must be
held, any performance targets attached to an Optio n and any other conditions that must be fulfilled
before the options can be exercised upon the grant of an option to an Eligible Participant. In any event,
the minimum period for which an option must be held before it can be exercised shall be 12 months.
Our Board at its absolute discretion, determine such malus and/or clawback provisions to be
applied to an option or an offer of grant so as to provide, upon the occurrence of the applicable malus
and/or clawback event(s) including but not limited to serious misconduct, a material misstatement in our
Company ’s financial statements and fraud. If our Board exercises its discretion under this paragraph, it
will give the relevant grantee or Eligible Partic ipant (as the case may be) written notice of such
determination and our Board ’s interpretation of and determination pursuant to this paragraph shall be
final, conclusive and binding.
12. Rights on ceasing employment/death
If the grantee of an option ceases to be an Eligible Participant:
(i) by any reason other than death, ill-health, i njury, disability or termination of his/her
relationship with our Company and/or any of our subsidiaries on one or more of the grounds
specified in paragraph 13 below, the grantee may exercise the option up to the entitlement of
the grantee as at the date of cessation (to the extent not already exercised) in whole or in part
in accordance with the provision of paragraph 3 above within a period of one month (or such
longer period as our Board may determine) fr om such cessation which date shall be the last
actual working day with our Company or our relevant subsidiary whether salary is paid in
lieu of notice or not, failing which it will lapse (or such longer period as our Company may
determine); or
(ii) by reason of death, ill-health, injury or dis ability (all evidenced to the satisfaction of our
Board) and none of the events which would be a ground for termination of his relationship
with our Company and/or any of its subsidiaries under paragraph 13 below has occurred, the
grantee or his personal representative(s) may exercise the option (to the extent already
exercised) in whole or in part in accordance with the provision of paragraph 3 above within a
period of 12 months (or such longer period as our Board may determine) from the date of
cessation of being an Eligible Participant or death.
13. Rights on dismissal
If the grantee of an option ceases to be an Eligible Participant by reason of such grantee ’s
resignation from the employment of our Company or any of its subsidiaries or the termination of his/her
employment or contract on the grounds that he/she has been guilty of serious misconduct, or has
committed any act of bankruptcy or is unable to pay h is/her debts or has become insolvent or has made
APPENDIX V STATUTORY AND GENERAL INFORMATION
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--- page 852 ---
any arrangements or composition with his/her creditors generally, or has been convicted of any criminal
offence involving his/her integrity or honesty or has been in breach of contract, an option shall lapse
automatically and not be exercisable ( to the extent not already exercised).
14. Rights on takeover
If a general offer is made to all our Shareholders (or all such Shareholders other than the offeror
and/or any person controlled by the offeror and/or any person acting in concert with the offeror (as
defined in the Takeovers Code)) and such offer becomes or is declared unconditional during the option
period of the relevant option, the grantee of an optio n shall be entitled to exercise the option in full (to
the extent not already exercised) at any time within 14 days after the date on which the offer becomes or
is declared unconditional.
15. Rights on winding-up
In the event that a notice is given by our Company to its members to convene a general meeting
for the purposes of considering, and if thought fit, approving a resolution to voluntarily wind-up our
Company, our Company shall forthwith give notice thereof to all grantees and thereupon, each grantee
(or his legal personal representative(s)) shall be entitled to exercise all or any of his options (to the
extent not already exercised) at any time not later than two business days prior to the proposed general
meeting of our Company referred to above by givi ng notice in writing to our Company, accompanied by
a remittance for the full amount of the aggregate subs cription price for the Shares in respect of which
the notice is given, whereupon our Company shall as soon as possible and, in any event, no later than
the business day immediately prior to the date of the proposed general meeting, allot the relevant Shares
to the grantee credited as fully paid.
16. Rights on compromise or arrangement between our Company and its members or creditors
If a compromise or arrangement between our Company and our members or creditors is proposed
for the purposes of a scheme for the reconstruction of our Company or our amalgamation with any other
companies pursuant to the laws of the jurisdiction in which our Company was incorporated, our
Company shall give notice to all the grantees of the options on the same day as we give notice of the
meeting to our members or cred itors summoning the meeting to consider such a compromise or
arrangement and any grantee may by notice in writing to our Company accompan ied by a remittance for
the full amount of the aggregate subscription price for the Shares in respect of which the notice is given
(such notice to be received by our Company no later than two business days prior to the proposed
meeting), exercise the option to its full extent or to the extent specified in the notice and our Company
shall as soon as possible and in any event no later than the business day immediately prior to the date of
the proposed meeting, allot and issue such number o f Shares to the grantee which falls to be issued on
such exercise of the option credited as fully pa id and register the grantee as holder thereof.
With effect from the date of such meeting, the right s of all grantees to exercise their respective
options shall forthwith be suspended. Upon such compromise or arrangement becoming effective, all
options shall, to the extent that they have not been exercised, lapse and determine. If for any reason
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--- page 853 ---
such compromise or arrangement does not become effective and is terminated or lapses, the rights of
grantees to exercise their respective options shall with effect from such termination be restored in full
but only upon the extent not already exercised and shall become exercisable.
17. Ranking of Shares
The Shares to be allotted upon the exercise of an option will not carry voting rights until
completion of the registration of the grantee (or any other person) as the holder thereof. Subject to the
aforesaid, Shares allotted and issued on the exercise of options will rank pari passu and shall have the
same voting, dividend, transfer and other rights (including those arising on liquidation) as attached to
the other fully-paid Shares in issue on the date of exercise, save that they will not rank for any dividend
or other distribution declared or recommended or resolved to be paid or made by reference to a record
date falling on or before the date of exercise.
18. Effect of alterations to capital
In the event of any alteration in the capital str ucture of our Company whilst any option may
become or remains exercisable, whether by way of capitalisation issue, rights issue, consolidation,
subdivision or reduction of share capital of our Company, such corresponding alterations (if any) shall
be made in the number of Shares subject to any outstanding options and/or the subscription price per
Share of each outstanding option as the auditors of our Company or an independent financial adviser
shall certify in writing to our Board to be in their /his opinion fair and reasonable in compliance with
Rule 17.03(13) of the Listing Rules and the note there to and the supplementary guidance attached to the
letter from the Stock Exchange dated 5 September 2005 to all issuers relating to share option schemes.
The capacity of the auditors of our Company or the approved independent financial adviser, as the case
may be, in this paragraph is that of experts and not arbitrators and their certificate shall, in the absence
of manifest error, be final and conclusive and binding on our Company and the grantees.
Any such alterations will be made on the basis that a grantee shall have the same proportion of the
equity capital of our Company rounded to the nearest whole Share (as interpreted in accordance with the
supplementary guidance attached to the letter from the Stock Exchange dated 5 September 2005 to all
issuers relating to share option schemes) for whic h any grantee of an option is entitled to subscribe
pursuant to the options held by him before such alte ration provided that no such alteration shall be made
if the effect of which would be to enable a Share to be issued at less than its nominal value. The issue
of securities as consideration in a transaction is not to be regarded as a circumstance requiring any such
alterations.
19. Expiry of option
An option shall lapse automatically and shall not be exercisable (to the extent not already
exercised) on the earliest of:
(i) the date of expiry of the option as may be determined by our Board;
(ii) the expiry of any of the periods referred to in paragraphs 12, 13 and 14 above;
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(iii) the date upon which the scheme of arrangement of our Company referred to in paragraph 16
above becomes effective;
(iv) subject to paragraph 15 above, the date of commencement of the winding-up of our
Company;
(v) the date upon which the grantee ceases to b e an Eligible Participant by reason of such
grantee ’s resignation from the employment of our Company or any of our subsidiaries or the
termination of his or her employment or contract on the grounds that he or she has been
guilty of serious misconduct, or has committe d any act of bankruptcy or is unable to pay his
or her debts or has become insolvent or has made any arrangement or has compromised with
his or her creditors generally, or has been conv icted of any criminal offence involving his or
her integrity or honesty or has been in breach of contract. A resolution of our Board to the
effect that the employment of a grantee has or has not been terminated on one or more of the
grounds specified in this paragraph shall be conclusive; or
(vi) the date upon which our Board shall exercise our Company ’s right to cancel the option at any
time after the grantee commits a breach of par agraph 9 above or the options are cancelled in
accordance with paragraph 21 below.
20. Alteration of the Share Option Scheme
The Share Option Scheme may be altered in any re spect by resolution of our Board except that:
(i) any alteration to the terms and conditions of the Share Option Scheme which are of a
material nature or any alteration to advantage of the grantees or the Eligible Participants (as
the case may be) in respect of the matters cont ained in Rule 17.03 of the Listing Rules must
be approved by our Shareholders in general meeting; and
(ii) any change to the terms of options granted to a n Eligible Participant under the Share Option
Scheme must be approved by our Board, the Re muneration Committee, our independent non-
executive Directors and/or our Shareholders (as the case may be) if the initial grant of such
options was approved by our Board, the Remun eration Committee, ou r independent non-
executive Directors and/or our Shareholders (a s the case may be) while this requirement does
not apply where the alterations take effect auto matically under the existing terms of the Share
Option Scheme.
If the proposed alteration shall adversely affect an y option granted or agreed to be granted prior to
the date of alteration, such alteration s hall be further subject to the grantees ’ approval in accordance
with the terms of the Share Option Scheme. The amended terms shall still comply with Chapter 17 of
the Listing Rules and any change to the authority of our Board in relation to any alteration to the terms
of the Share Option Scheme must be approved by our Shareholders in general meeting.
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21. Cancellation of options
Any cancellation of options granted but not exercised must be approved by the grantees of the
relevant options in writing. For the avoidance of doubt, such approval is not required in the event that
any option is cancelled pursuant to paragraph 9 above.
22. Termination of the Share Option Scheme
Our Company may by resolution in general meeting or our Board may at any time terminate the
Share Option Scheme and in such event no further option shall be offered but the provisions of the
Share Option Scheme shall remain in force to the extent necessary to give effe ct to the exercise of any
outstanding option granted prior thereto or otherwise as may be required in accordance with the
provisions of the Share Option Scheme.
Outstanding options granted prior to such te rmination but not yet exercised at the time of
termination shall continue to be valid and exercisable in accordance with the Share Option Scheme.
23. Administration of our Board
The Share Option Scheme shall be subject to the administration of our Board whose decision of
which on all matters arising in rela tion to the Share Option Scheme or its interpretation or effect (save
as otherwise provided herein) shall be final and binding on all parties who may be affected thereby.
24. Conditions of the Share Option Scheme
The Share Option Scheme is conditional on:
(i) the Stock Exchange granting approval to the listing of and permission to deal on the Main
Board in the Shares which may fall to be issued pursuant to the exercise of the options to be
granted under the Share Option Scheme;
(ii) the obligations of the Underwriters u nder the Underwriting Agreements becoming
unconditional (including, if relevant, as a res ult of the waiver of an y such condition(s) by
the Sole Lead Manager) and not being terminated in accordance with the terms of the
Underwriting Agreements or otherwise; and
(iii) the commencement of dealings in the Shares on the Stock Exchange.
If the conditions in paragraph 2 4 above are not satisfied within 12 calendar months from the
Adoption Date:
(i) the Share Option Scheme shall forthwith determine;
(ii) any option granted or agreed to be granted pursuant to the Share Option Scheme and any
offer shall be of no effect; and
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--- page 856 ---
(iii) no person shall be entitled to any rights or be nefits or be under any obligations under or in
respect of the Share Option Scheme or any option granted thereunder.
25. Disclosure requirements
Our Company will disclose details of the Share Op tion Scheme in its annual and interim reports
including the number of options, date of grant, exercis e price, exercise period and vesting period during
the financial year/period in the annual/interim repor ts in accordance with the Listing Rules in force from
time to time.
Our Company will also disclose the details of th e grant of options under the Share Option Scheme
in accordance with the Listing Rules in force from time to time on an individual basis if such options
were granted to:
(a) a Director, chief executive officer or substantial Shareholder of our Company, or an associate
of any of them;
(b) an Eligible Participant with options and awa rds granted and to be granted exceeding the 1%
limit set out in paragraph 5 above; or
(c) a Related Entity Participant or Service Prov ider Participant with options and awards granted
and to be granted in any 12-month period exceeding 0.1% of the Shares in issue at that time.
As at the Latest Practicable Date, no option had been granted or agreed to be granted under the
Share Option Scheme.
Application has been made to the Stock Exchange for the listing o f, and permission to deal in, the
Shares which may fall to be issued pursuant to the exercise of the options to be granted under the Share
Option Scheme, being 200,000,000 Shares in total.
E. OTHER INFORMATION
1. Estate duty, tax and other indemnity
Our Directors have been advised that no materia l liability for estate duty would be likely to fall
upon any member of our Group. Our Controlling Shareholder (the ‘‘Indemnifier ’’) has entered into the
Deed of Indemnity with and in our favour (for our Company and on behalf of each of our subsidiaries)
whereby the Indemnifier shall indemnify and at all times keep each member of our Group fully and
effectively indemnified against, among other things:
(a) any estate duty, death duty, inheritance tax, succession duty or any other similar tax or duty
which is or becomes payable by our Company or any member of our Group by the operation
of any estate duty, death duty, inheritance tax, succession duty or any other similar
legislation in Hong Kong, the BVI, the Cayman Islands, the PRC, or any other relevant
APPENDIX V STATUTORY AND GENERAL INFORMATION
– V-31 –


--- page 857 ---
jurisdiction as a result or in consequence of any event or transaction occurring on or before
the date on which the Global Offering becomes unconditional, whether or not such event or
transaction shall have taken place in conjunc tion with any circumstances whenever occurring;
(b) any taxation falling on any member of our G roup resulting from or by reference to any
income, profits or gains earned, accrued or received (or deemed to be so earned, accrued or
received) or any other relevant assessable sums on or before the date on which the Global
Offering becomes unconditional or any transactions, matters, things, events, acts or omissions
occurring or deemed to occur on or before such date, whether alone or in conjunction with
any other transaction, matter, thing, event, act, o mission or circumstance whenever occurring,
and whether or not such taxation is chargeable against or attributable to any other person,
firm or company;
(c) all costs (including all lega l costs), expenses, interests, p enalties, fines, charges or other
liabilities which any member of our Group may reasonably and properly incur in connection
with:
(i) the investigation, assessment or the contesting of any claim under paragraph (b);
(ii) the settlement of any claim under paragraph (b);
(iii) any legal proceedings in which any member of our Group claims under or in respect of
paragraph (b) and in which judgment is given for or against any member of our Group;
and/or
(iv) the enforcement of any such settlement referred to in (ii) and/or judgment referred to in
(iii).
(d) any and all expenses, payments, sums, outgoings, fees, demands, claims (including
counterclaims), complaints, ac tions, proceeding, suits, litigations, arbitrations, judgments,
damages, losses, costs (including but not lim ited to legal and other professional costs),
charges, contributions, liabilities, fines, pe nalties and tax which any member of our Group
may incur, suffer or accrue, whether directly or indirectly, from or on the basis of or in
connection with any breach or non-compliance of any applicable laws, rules or regulations
(whether currently in force or repealed) in the Cayman Islands, the BVI, Hong Kong, the
PRC (including but not limited to non-complia nce incidents not fully complying with the
relevant PRC laws and regulations (including the PRC Negotiable Instruments Law)), as
more particularly set out in the section headed (i) ‘‘Business — Properties — Properties with
defective titles’’ ; (ii) ‘‘Business — Compliance with laws and regulations — Non-compliant
bill arrangements ’’; and (iii) ‘‘Business — Compliance with laws and regulations — Non-
compliance incidents ’’in this prospectus), and/or any part of the world on or before the date
on which the Global Offering becomes unconditional;
APPENDIX V STATUTORY AND GENERAL INFORMATION
– V-32 –


--- page 858 ---
(e) all costs (including all legal and other professi onal costs), expenses, interests, penalties, fines,
charges or other liabilities which any member o f our Group may reasonably and properly
incur in connection with:
(i) the investigation, assessment or the contesting of any claim under paragraph (d);
(ii) the settlement of any claim under paragraph (d);
(iii) any legal proceedings in which any member of our Group claims under or in respect of
paragraph (d) and in which judgment is given for or against any member of our Group;
and/or
(iv) the enforcement of any such settlement refe rred to in paragraph (ii) and/or judgments
referred to in paragraph (iii) above.
In addition, the Indemnifier had undertaken to indemnify and keep indemnified our Company and
our subsidiaries on demand against any expenses, payments, sums, outgoings, fees, demands, claims
(including counterclaims), complaints, actions, proceedings, suits, litigations, arbitrations, judgments,
losses, damages, costs (including but not limited to legal and other professional costs), charges,
contributions, liabilities, fines or penalties which may be made, suffered or incurred by any of them in
respect of or arising directly or indirectly from an y claim, including but not limited to, all reasonable
costs (including legal and other professional costs), expenses, interests, penalties, fines, charges and
other liabilities which our Compa ny and our subsidiaries may pro perly incur in connection with:
(i) the investigation, assessment or the contesting of any claim under the Deed of Indemnity;
(ii) the settlement of any claim under the Deed of Indemnity;
(iii) any legal proceedings in which any member of our Group claims under or in respect of the
Deed of Indemnity and in which judgment is given for or against any member of our Group;
and/or
(iv) the enforcement of any such settlement referre d to in paragraph (ii) and/or judgment referred
to in paragraph (iii) above.
The Indemnifier had also undertaken to indemnify and keep indemnified our Company and our
subsidiaries on demand from any depletion or reduc tion in value of its assets or any loss (including all
legal and other professional costs and suspension of operation), costs, expenses, damages or other
liabilities which any member of our Group may incur o r suffer arising from or in connection with the
implementation of the Reorganisation.
APPENDIX V STATUTORY AND GENERAL INFORMATION
– V-33 –


--- page 859 ---
Save and except the above, the Indemnifier shall be under no liability under the Deed of Indemnity
in respect of any tax, tax claim or tax related liability ( ‘‘such tax liability’’ ):
(i) to the extent that full provision or reserve h as been made for such tax liability in the audited
consolidated accounts of our Group and the audited accounts of the relevant member of our
Group for an accounting period ended for the three years ended 31 December 2022 and the
six months ended 30 June 2023 (the ‘‘Accounts’’) as set out in Appendix I to this prospectus;
(ii) such tax liability for which any member of our Group is primarily liable as a result of any
transactions entered into by any member of our Group in respect of any accounting period
commencing on or after 30 June 2023 and ending on the date which the Global Offering
becomes unconditional in the ordinary course of business, or in the ordinary course of
acquiring or disposing of capital assets on or before the date on which the Global Offering
becomes unconditional and carried out, made or entered into pursuant to a legally binding
commitment created on or before the date of Listing or pursuant to any statement of intention
made in this prospectus;
(iii) to the extent that such liability arises or is incurred as a result of any change in the law, rules
or regulations, or the interpretation or practice thereof by any statutory or governmental
authority in Hong Kong, the PRC or any part of the world, including but without limitation
the Inland Revenue Department, having retrospective effect coming into force after the date
of the Deed of Indemnity or to the extent tha t such liability arises or is increased by an
increase in rates of taxation, payments, fines, fees or premium as required by the PRC laws
and regulations (as the case may be) after the date of the Deed of Indemnity with
retrospective effect (except t he imposition of or an increase in the rate of Hong Kong profits
tax or any tax of any part of the world on the profits of companies for the current or any
earlier financial period);
(iv) to the extent that such liability is discha rged by another person who is not any member of
our Group and that no member of our Group is required to reimburse such person in respect
of the discharge of the liability; and
(v) to the extent of any provision or reserve made for such liability in the Accounts referred to in
paragraph (i) above which is finally established to be an over-provision or an excessive
reserve, in which case the Indemnifier ’s liability (if any) in respect of taxation shall be
reduced by an amount not exceeding such over-provision or excessive reserve, provided that
the amount of any such provision or reserve app lied to reduce the liability of the Indemnifier
or any of them in respect of such liability shal l not be available in respect of any such
liability arising thereafter.
2. Interests in competing business
Save as disclosed in this prospectus, none of our Di rectors, our Controlling Shareholder and their
respective close associates of each are interested in any business which competes or is likely to compete,
either directly or indirectly, with the businesses of our Group.
APPENDIX V STATUTORY AND GENERAL INFORMATION
– V-34 –


--- page 860 ---
3. Litigation
Save as disclosed in the section headed ‘‘Business — Litigation ’’in this prospectus, as at the
Latest Practicable Date, neither our Company or any of our subsidiaries was engaged in any litigation or
arbitration of material importance and no litigation, arbitration or claim of material importance was
known by our Directors to be pending or threatened by or against any member of our Group.
4. Preliminary expenses
The preliminary expenses of our Company are estimated to be approximately US$13,450
(equivalent to approximately HK$104,238) and are payable by our Company.
5. The Sole Sponsor
The Sponsor has made an application on behalf of our Company to the Listing Committee of the
Stock Exchange for listing of, and permission to d eal in, the Shares in issue as mentioned herein and
any Shares falling to be issued pursuant to the Globa l Offering and the exercise of the Over-allotment
Option. All necessary arrangements have been made enabling such Shares to be admitted into CCASS.
6. Independence of the Sole Sponsor and the Sole Sponsor ’sf e e
The Sole Sponsor satisfies the independence cr iteria applicable to sponsors as set out in Rule
3A.07 of the Listing Rules. Our Company agreed to pay the Sole Sponsor a fee of approximately
HK$8.0 million as the sponsor to our Company for the Listing.
7. No material adverse change
Save as disclosed in this prospectus, our Directors confirm that there has been no material adverse
change in our Group ’s financial or trading position since 30 June 2023 (being the date to which our
Company ’s latest audited consolidated financial statements were made up) up to the date of this
prospectus.
8. Promoter
Our Company has no promoter for the purpose of the Listing Rules. Within the two years
immediately preceding the date of this prospectus, n o cash, securities or other benefit has been paid,
allotted or given nor are any proposed to be paid, allotted or given to any promoter in connection with
the Global Offering and the related transactions described in this prospectus.
9. Agency fees or commissions received
Save as disclosed in this prospectus, none of our Directors or the experts named in the paragraph
headed ‘‘E. Other information — 11. Consents of experts’’ in this appendix had received any agency fee
or commissions from our Group within the two years preceding the date of this prospectus.
APPENDIX V STATUTORY AND GENERAL INFORMATION
– V-35 –


--- page 861 ---
10. Qualifications of experts
The following are the qualifications of the experts who have given opinion or advice which are
contained in this prospectus:
Innovax Capital Limited Licensed to carry out Type 1 (dealing in securities) and Type 6
(advising on corporate finance) regulated activities under the SFO
Ernst & Young Certified Public Accountants
Jincheng Tongda &
Neal Law Firm Shenzhen
Office
Legal advisers to our Company as to PRC laws
Maples and Calder
(Hong Kong) LLP
L e g a la d v i s e rt oo u rC o m p a n ya st oC a y m a nI s l a n d sl a w s
Frost & Sullivan (Beijing)
Inc., Shanghai Branch
Co.
Independent industry consultant
SRK Consulting China Ltd Competent person (w ith the meaning of Chapter 18 of the Listing
Rules)
11. Consents of experts
Each of Innovax Capital Limited, Ernst & Young, Jincheng Tongda & Neal Law Firm Shenzhen
Office, Maples and Calder (Hong Kong) LLP, Frost & Sullivan (Beiji ng) Inc., Shanghai Branch Co. and
SRK Consulting China Ltd has given and has not w ithdrawn its written consent to the issue of this
prospectus with the inclusion of its report and/or le tter and/or the references to its name included herein
in the form and context in which they are respectively included.
As at the Latest Practicable Date, none of the exper ts named above has any shareholding interests
in our Company or any of our subsidiaries or the right (whether legally enforceable or not) to subscribe
for or to nominate persons to subscribe for secu rities in our Company or any of our subsidiaries.
12. Binding effect
This prospectus shall have the effect, if an application is made in pursuance hereof, of rendering
all persons concerned bound by all of the provisions (other than the penal provisions) of sections 44A
and 44B of the Companies (Miscellaneous Provisions) Ordinance insofar as applicable.
13. Bilingual prospectus
The English language and Chinese language versions of this prospectus are being published
separately, in reliance upon the exemption prov i d e db ys e c t i o n4o ft h eC o m p a n i e s( E x e m p t i o no f
Companies and Prospectuses from Compliance with Provisions) Notice (Chapter 32L of the Laws of
Hong Kong).
APPENDIX V STATUTORY AND GENERAL INFORMATION
– V-36 –


--- page 862 ---
14. Miscellaneous
Save as disclosed in this prospectus:
(a) within two years immediately preceding the date of this prospectus:
(i) no share or loan capital of our Company or any of our subsidiaries has been issued,
agreed to be issued or is proposed to be issued fully or partly paid either for cash or for
a consideration other than cash;
(ii) no commissions, discounts, brokerages or other special terms have been granted in
connection with the issue or sale of any share or loan capital of our Company or any of
our subsidiaries and no commission has been paid or is payable in connection with the
issue or sale of any share or loan capital of our Company or any of the subsidiaries;
( i i i ) n oc o m m i s s i o nh a sb e e np a i do rp a y a b l e(except to Underwriter) for subscribing or
agreeing to subscribe, or procuring or agreeing to procure subscriptions, for any shares
of our Company or any of the subsidiaries; and
(b) no founder, management or deferred shares of our Company have been issued or agreed to be
issued.
(c) no share, warrant or loan capital of our Company or any of our subsidiaries is under option
or is agreed conditionally or uncond itionally to be put under option;
(d) none of the equity and debt securities of our Company is listed or dealt with in any other
stock exchange nor is any listing or permission to deal being or proposed to be sought;
(e) all necessary arrangements have been made enabling the Shares to be admitted into CCASS;
(f) our Directors confirm that none of them shall be required to hold any shares by way of
qualification and none of them has any in terest in the promotion of our Company;
(g) there has not been any interruption in the business of our Group which have or have had a
significant effect on the financial position of our Group in the 12 months immediately
preceding the date of this prospectus;
(h) the principal register of members of our Com pany will be maintained in the Cayman Islands
by Maples Fund Services (Cayman) Limited and a branch register of members of our
Company will be maintained in Hong Kong by Tricor Investor Services Limited. Unless our
Directors otherwise agree, all transfer and other documents of title of Shares must be lodged
for registration with and registered by our Company ’s share register in Hong Kong and may
not be lodged in the Cayman Islands;
(i) there is no arrangement under which future dividends are waived or agreed to be waived;
APPENDIX V STATUTORY AND GENERAL INFORMATION
– V-37 –


--- page 863 ---
(j) the Global Offering does not involve the exercise of any right of pre-emption or the transfer
of subscription rights;
(k) no company within our Group is presently listed on any stock exchange or traded on any
trading system;
(l) our Directors have been advised that under the Cayman Islands company law the use of a
Chinese name by our Company does not contravene the Companies Act; and
(m) our Company has no outstanding convertible debt securities or debentures.
APPENDIX V STATUTORY AND GENERAL INFORMATION
– V-38 –


--- page 864 ---
DOCUMENTS DELIVERED TO THE REGISTRAR OF COMPANIES IN HONG KONG
The documents attached to the copy of this prosp ectus delivered to the Registrar of Companies in
Hong Kong for registration were:
(1) the written consents referred to in the section headed ‘‘Statutory and general information —
E. Other information — 11. Consents of experts’’ in Appendix V to this prospectus; and
(2) copies of the material contracts referred to in the section headed ‘‘Statutory and general
information — B. Further information about our business — 1. Summary of material
contracts’’ in Appendix V to this prospectus.
DOCUMENTS ON DISPLAY
Copies of the following documents will be published on the websites of the Stock Exchange at
www.hkexnews.hk and our Company at www.persistenceresource.com :
(1) the Memorandum of Association and the A rticles of Associa tion of our Company;
(2) the accountants ’ report on the financial information o f our Group for the three years ended 31
December 2022 and the six months ended 30 June 2023 prepared by Ernst & Young, the text
of which is set out in Appendix I to this prospectus;
(3) the audited consolidated financial statements of our Group for the three years ended 31
December 2022 and the six months ended 30 June 2023;
(4) the report on the unaudited pro forma financial information of our Group prepared by Ernst
& Young, the text of which is set out in Appendix II to this prospectus;
(5) the material contracts referred to in the section headed ‘‘Statutory and general information —
B. Further information about our business — 1. Summary of material contracts ’’in Appendix
V to this prospectus;
(6) the service contracts and letters of appointm ent with Directors, referred to in the section
headed ‘‘Statutory and general information — C. Further information about our Directors,
senior management and Substantial Shareholders — 3. Particulars of Directors ’ service
contracts and letters of appointment ’’of Appendix V to this prospectus;
(7) the written consents referred to in the section headed ‘‘Statutory and general information —
E. Other information — 11. Consents of experts’’ of Appendix V to this prospectus;
(8) the PRC legal opinion prepared by Jincheng Tongda & Neal Law Firm Shenzhen Office, our
legal advisers as to PRC laws, in respect of certain aspects of our Group;
(9) the SRK Report prepared by SRK Consulting China Ltd, the texts of which are set out in
Appendix III to this prospectus;
APPENDIX VI DOCUMENTS DELIVERED TO THE REGISTRAR OF
COMPANIES IN HONG KONG AND ON DISPLAY
– VI-1 –


--- page 865 ---
(10) the industry report prepared by Frost & S ullivan (Beijing) Inc., Shanghai Branch Co.;
(11) the letter of advice prepared by Maples and Calder (Hong Kong) LLP, our legal advisers as
to Cayman Islands laws, summarising certain aspects of Cayman Islands companies law
referred to in Appendix IV to this prospectus;
(12) the Companies Act; and
(13) the rules of the Share Option Scheme.
APPENDIX VI DOCUMENTS DELIVERED TO THE REGISTRAR OF
COMPANIES IN HONG KONG AND ON DISPLAY
– VI-2 –


--- page 866 ---
PERSISTENCE RESOURCES GROUP LTD
ʮ̡
PERSISTENCE RESOURCES GROUP LTD
ʮ̡
PERSISTENCE RESOURCES GROUP LTD
ʮ̡
GLOBAL OFFERING
Overall Coordinator, Sole Global Coordinator, Joint Bookrunner and Joint Lead Manager
Sole Sponsor
Stock Code: 2489
(Incorporated in the Cayman Island with limited liability)
Joint Bookrunners and Joint Lead Managers
