CHINA INVESTMENT FUND COMPANY LIMITED 中國投資 ...

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

* For identification purpose only

If you are in doubt about any aspect of this circular or as to the action to be taken, you should consultappropriate independent advisers to obtain independent professional advice.

If you have sold or transferred all your shares in China Investment Fund Company Limited (the “Company”),you should at once hand this circular and the accompanying form of proxy to the purchaser or to the transfereeor to the bank, stockbroker or other agent through whom the sale or transfer was effected for transmission tothe purchaser or transferee.

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

CHINA INVESTMENT FUND COMPANY LIMITED中國投資基金有限公司 *

(Incorporated in the Cayman Islands with limited liability)

(Stock code: 00612)

CONNECTED TRANSACTIONSCONTINUING CONNECTED TRANSACTIONS

PROPOSED INCREASE IN AUTHORIZED SHARE CAPITALAND

RE-ELECTION OF RETIRING DIRECTOR

Independent Financial Adviserto the Independent Board Committee and Independent Shareholders

The IBC Letter (as hereinafter defined) containing the recommendation of the Independent Board Committeeto the Independent Shareholders (as hereinafter defined) in relation to the Connected Transactions and theContinuing Connected Transactions is set out on pages 56 to 57 of this circular. A letter of advice from VedaCapital to the Independent Board Committee and the Independent Shareholders in relation to the ConnectedTransactions and the Continuing Connected Transactions is set out on pages 58 to 85 of this circular.

A notice convening the extraordinary general meeting of the Company (“EGM”) to be held at 4/F., Aon ChinaBuilding, 29 Queen’s Road Central, Hong Kong, on 30 April 2010 at 9:30 a.m. or any adjournment thereof isset out on pages 179 to 181 of this circular. Whether or not you are able to attend the EGM, you are requestedto complete the enclosed form of proxy in accordance with the instructions printed thereon and return the sameto the share registrar of the Company, Tricor Standard Limited at 26th Floor, Tesbury Centre, 28 Queen’s RoadEast, Wanchai, Hong Kong as soon as possible and in any event not less than 48 hours before the time appointedfor holding of the EGM or any adjournment thereof (as the case may be). Completion and return of the form ofproxy will not preclude you from attending and voting in person at the EGM or any adjournment thereof (as thecase may be) should you so wish. In such event, the instrument appointing a proxy shall be deemed to berevoked.

14 April 2010

CONTENTS

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Page

Definitions ...................................................................................................................................... 1

Letter from the Board .................................................................................................................. 7

Letter from the Independent Board Committee ...................................................................... 56

Letter from Veda Capital ............................................................................................................. 58

Appendix I — Valuation Report on the Gold Ridge Property ....................................... 86

Appendix II — Valuation Report on the Talc Mine .......................................................... 94

Appendix III — Report on forecast underlying the valuationof the Gold Ridge Property ................................................................... 102

Appendix IV — Report on forecast underlying the valuation of the Tale Mine ............ 104

Appendix V — Technical Report on the Gold Ridge Property ....................................... 106

Appendix VI — Technical Report on the Talc Mine .......................................................... 149

Appendix VII — General information ................................................................................... 174

Notice of EGM ............................................................................................................................... 179

DEFINITIONS

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In this circular, unless the context otherwise requires, the following expressions have the followingmeanings:

“Announcement” the announcement of the Company dated 30 December 2009 inrelation to the Connected Transactions, the Continuing ConnectedTransactions and the proposed increase in authorized share capitalof the Company

“associate(s)” has the meaning ascribed thereto under the Listing Rules

“Baron Asia” Baron Asia Limited, a company incorporated in Hong Kong withlimited liability and is indirect wholly-owned by Ms. Wan

“Baron Asset Management” Baron Asset Management Limited, a company incorporated inHong Kong with limited liability and a licensed corporation to carryout Type 4 (Advising on Securities), Type 6 (Advising on CorporateFinance) and Type 9 (Asset Management) regulated activities underthe SFO

“Baron Natural Resources” Baron Natural Resources Holdings Limited, a companyincorporated in the BVI under the BVI Business Companies Actand a wholly-owned subsidiary of Baron Group Limited

“Baron Properties Holding” Baron Properties Holding Limited, a company incorporated in theBVI with limited liability and a wholly-owned subsidiary of BaronGroup Limited

“Board” board of Directors (including independent non-executive Directors)

“Business Day(s)” a day (other than Saturday and days on which a tropical cyclonewarning No. 8 or above or a “black rainstorm warning signal” ishoisted in Hong Kong at any time between 9:00 a.m. and 5:00p.m.) on which banks are open in Hong Kong for general bankingbusiness

“BVI” British Virgin Islands

“Co-operation Agreement” has the meaning ascribed thereto in the section headed “The ShingView Acquisition” of this circular

“Company” China Investment Fund Company Limited, a company incorporatedin the Cayman Islands with limited liability, the shares of whichare listed on the Main Board of the Stock Exchange

“connected person(s)” has the meaning ascribed thereto under the Listing Rules

DEFINITIONS

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“Connected Transactions” collectively, the Fame Oriented Acquisition and the Shing ViewAcquisition

“Consultancy Agreement” the consultancy agreement dated 21 December 2009 and enteredinto between the Company and Ms. Wan in relation to theappointment of Ms. Wan as a consultant to the Company

“Continuing Connected collectively, the transactions contemplated under the ManagementTransactions” Agreement, the Consultancy Agreement and the Sharing of

Administrative Office Agreement

“Copper One” Copper One USA Inc., a successor-in-interest by name change toContinent Resources (USA) Inc., a Nevada corporation

“Director(s)” the director(s) of the Company

“EGM” an extraordinary general meeting of the Company to be held at4/F., Aon China Building, 29 Queen’s Road Central, Hong Kong,on 30 April 2010 at 9:30 a.m. to consider, and if thought fit, toapprove the Connected Transactions, the Continuing ConnectedTransactions, the proposed increase in authorized share capital ofthe Company and the re-election of retiring Director, the notice ofwhich is set out on pages 179 to 181 of this circular, or anyadjournment thereof

“Facilities” all the office equipment, furniture, appliances and general facilitiesbelonging to Baron Properties Holding and used at the Premises

“Fame Oriented” Fame Oriented Holdings Limited, a company incorporated in theBVI with limited liability which is legally and beneficially ownedby Baron Natural Resources

“Fame Oriented Acquisition” the acquisition of a 12.5% equity interest in Fame Oriented by theCompany from Baron Natural Resources as contemplated underthe Fame Oriented Agreement

“Fame Oriented Agreement” the acquisition agreement dated 21 December 2009 entered intobetween the Company and Baron Natural Resources in relation tothe Fame Oriented Acquisition, as supplemented by a supplementalagreement entered into between the same parties on 25 February2010

“FO Assignment Agreement” has the meaning ascribed thereto under the section headed “TheFame Oriented Acquisition” of this circular

DEFINITIONS

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“Fronteer Development” Fronteer Development USA Inc., a company incorporated in theState of Delaware, USA

“Fronteer Properties” (i) 112 unpatented lode/placer claims located in Township 14 South,Range 27 East, Sections 15, 16, 17, 20, 21, 22, 27 & 28, CochiseCounty, Arizona, (ii) 20 patented mining claims located inTownship 14 South, Range 27 East, Sections 21, 22, 27, CochiseCity, Arizona and (iii) certain fee lands located in Township 14South, Range 27 East

“Gold Ridge Property” the Gold Ridge Property, one of the patented mining claims of theFronteer Properties and is located in north central Cochise Countyin southeastern Arizona in the southern foothills of the Dos CabezasMountains. It consists of 73.95-acres of private property, 333.38-acres of patented mining claims and 112 unpatented mining claimscovering 1,718.74-acres. In addition, the property holdings includeone leased group of 12 unpatented mining claims covering 216.34-acres. Golden Fame controls the mineral rights on a total of 2,342-acres

“Golden Fame” Golden Fame (USA) Inc., a company incorporated in the State ofNevada, USA, which is wholly-owned by Fame Oriented

“Group” the Company and its subsidiaries

“HK$” Hong Kong dollars, the lawful currency of Hong Kong

“Hong Kong” the Hong Kong Special Administrative Region of the PRC

“I3P Agreement” has the meaning ascribed thereto under the section headed “TheFame Oriented Acquisition” of this circular

“IBC Letter” the letter from the Independent Board Committee containing therecommendation of the Independent Board Committee to theIndependent Shareholders in relation to the Connected Transactionsand the Continuing Connected Transactions, the text of which isset out on pages 56 to 57 of this circular

“Independent Board the independent committee of the Board comprising only theCommittee” independent non-executive Directors, namely, Mr. Yan Mou Keung,

Ronald, Mr. Cheng Wing Keung, Raymond and Mr. Kwong KwanTong, established for the purpose of advising the IndependentShareholders in relation to the Connected Transactions and theContinuing Connected Transactions

DEFINITIONS

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“Independent Shareholders” Shareholder(s) other than Mr. Mak, Ms. Wan and their respectiveassociates

“Independent Third Party(ies)” person(s) or company(ies) who/which is/are not connected withthe directors, chief executive or substantial shareholders of theCompany and its subsidiaries, or any of their respective associates

“IFRS” International Financial Reporting Standards

“Latest Practicable Date” 9 April 2010, being the latest practicable date prior to the printingof this circular for ascertaining certain information for inclusionin this circular

“Listing Rules” the Rules Governing the Listing of Securities on the StockExchange

“Management Agreement” the investment management agreement dated 21 December 2009and entered into between the Company and Baron AssetManagement in relation to the provision of services during theManagement Period

“Management Period” the period commencing from the Renewal Date to 30 June 2011

“Mr. Alex Wan” Mr. Wan Chuen Hing, Alexander, an executive Director

“Mr. Cheng” Mr. Cheng Ming Cheung, Teddy, an Independent Third Party

“Mr. Lam” Mr. Lam Kwing Wai, Alvin Leslie, who is a Shareholder holdingnot more than 5% of the issued share capital of the Company as atthe Latest Practicable Date

“Mr. Mak” Mr. Mak Kwok Yum, an uncle of Ms. Wan and a connected personof the Company

“Ms. Wan” Ms. Wan Ho Yan, Letty, a former executive Director and asubstantial shareholder of the Company who, together with herassociates, held 230,280,511 Shares, representing approximately21.03% of the issued share capital of the Company as at the LatestPracticable Date

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

“Premises” all that the whole of the 4th Floor of Aon China Building,29 Queen’s Road Central, Hong Kong

DEFINITIONS

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“Previous Agreement” the investment management agreement dated 18 December 2008and entered into between the Company and Baron AssetManagement

“Renewal Date” 1 January 2010

“RMB” Renminbi, the lawful currency of the PRC

“Savills” Savills Valuation and Professional Service Limited

“SFO” the Securities and Futures Ordinance (Chapter 571 of the Laws ofHong Kong)

“Share(s)” share(s) of HK$0.01 each in the issued share capital of the Company

“Shareholder(s)” holder(s) of the Share(s)

“Sharing of Administrative the sharing of administrative office agreement dated 21 DecemberOffice Agreement” 2009 and entered into between Baron Asia and the Company in

relation to the sharing of the Premises and the Facilities

“Shing View” Shing View Global Investment Limited, a company incorporatedin the BVI with limited liability and the ultimate holding companyof WFOE

“Shing View Acquisition” the acquisition of a 17.5% equity interest in Shing View by theCompany from Mr. Lam as contemplated under the Shing ViewAgreement

“Shing View Agreement” the acquisition agreement dated 21 December 2009 and enteredinto between the Company and Mr. Lam in relation to the ShingView Acquisition, as supplemented by a supplemental agreemententered into between the same parties on 25 February 2010

“Shiyan Hao Shun” Shiyan Hao Shun Mineral Company Limited (十堰浩舜礦業有限責任公司), a company established in the PRC, which is theowner of the mining licence of the Talc Mine

“sq. ft.” square feet

“sq. km.” square kilometres

“Stock Exchange” The Stock Exchange of Hong Kong Limited

“substantial shareholder” has the meaning ascribed thereto under the Listing Rules

DEFINITIONS

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“SV Assignment Agreement” has the meaning ascribed thereto under the section headed “TheShing View Acquisition” of this circular

“Talc Mine” the talc mine located at Chen Zhuang Village, Hu Jia Jian Town,Yuan County, Shiyan City, Hubei Province (湖北省十堰市鄖縣胡家菅鎮陳莊村) in the PRC and is 100% directly owned byShiyan Hao Shun

“Veda Capital” Veda Capital Limited, a licenced corporation to carry out Type 6(Advising on Corporate Finance) regulated activity under the SFOand the independent financial adviser to advise the IndependentBoard Committee and the Independent Shareholders in relation tothe Connected Transactions and the Continuing ConnectedTransactions

“WFOE” Sheng Hua Talc (Hubei) Company Limited (昇華滑石 (湖北)有限公司), a wholly foreign-owned enterprise established in the PRCand an indirect wholly-owned subsidiary of Shing View

“Underlying Agreement” has the meaning ascribed thereto under the section headed “TheFame Oriented Acquisition” of this circular

“USA” The United States of America

“US$” United States dollars, the lawful currency of USA

“%” per cent.

For reference purposes only and unless otherwise stated, RMB and US$ have been translated intoHK$ using the rates of RMB0.88 to HK$1.00 and US$1.00 to HK$7.75 respectively in this circular.

For reference purposes only, the Chinese names of the PRC entities have been translated into Englishin this circular. In the event of any discrepancies between the Chinese names of the PRC entities andtheir respective English translations, the Chinese version shall prevail.

LETTER FROM THE BOARD

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(Stock code: 00612)

Executive Directors: Registered office:Mr. William Robert Majcher Cricket SquareMr. Wan Chuen Hing, Alexander Hutchins Drive

P.O. Box 2681Independent non-executive Directors: Grand Cayman KY1-1111Mr. Yan Mou Keung, Ronald Cayman IslandsMr. Cheng Wing Keung, RaymondMr. Kwong Kwan Tong Principal place of business

in Hong Kong:4th Floor, Aon China Building29 Queen’s Road CentralCentral, Hong Kong

14 April 2010

To the Shareholders

Dear Sir or Madam,

CONNECTED TRANSACTIONSCONTINUING CONNECTED TRANSACTIONS

PROPOSED INCREASE IN AUTHORIZED SHARE CAPITALAND

RE-ELECTION OF RETIRING DIRECTOR

INTRODUCTION

Reference is made to the Announcement in relation to, among other things, (i) the Fame OrientedAgreement entered into between the Company and Baron Natural Resources on 21 December 2009whereby the Company has conditionally agreed to acquire from Baron Natural Resources a 12.5%equity interest in Fame Oriented for a consideration of HK$19,200,000; (ii) the Shing View Agreemententered into between the Company and Mr. Lam on 21 December 2009 whereby the Company hasconditionally agreed to acquire from Mr. Lam a 17.5% equity interest in Shing View for a considerationof HK$19,880,000; (iii) the Management Agreement entered into between the Company and Baron

* For identification purposes only


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Asset Management on 21 December 2009 in relation to the appointment of Baron Asset Managementas the Company’s investment manager for the Management Period; (iv) the Consultancy Agreemententered into between the Company and Ms. Wan on 21 December 2009 in relation to the appointmentof Ms. Wan as a consultant to the Company; (v) the Sharing of Administrative Office Agreemententered into between the Company and Baron Asia on 21 December 2009 in relation to the sharing ofthe use of the Premises and the Facilities during the period from 1 February 2010 to 30 June 2011;and (vi) the proposed increase in authorized share capital of the Company from HK$15,000,000divided into 1,500,000,000 Shares to HK$30,000,000 divided into 3,000,000,000 Shares by the creationof an additional 1,500,000,000 Shares.

The Independent Board Committee has been established to advise the Independent Shareholders inrelation to the Connected Transactions and the Continuing Connected Transactions. Veda Capital hasbeen appointed as the independent financial adviser to advise the Independent Board Committee andthe Independent Shareholders in relation to the Connected Transactions and the Continuing ConnectedTransactions.

Reference is also made to the announcement of the Company dated 22 December 2009 in relation to,among other things, the appointment of Mr. Alex Wan as an executive Director. It is disclosed thatMr. Alex Wan will be subject to re-election at the next general meeting of the Company in accordancewith the articles of association of the Company.

Reference is also made to the announcement of the Company dated 26 February 2010 whereby it wasannounced the Company entered into supplemental agreements with the parties to the Fame OrientedAgreement and the Shing View Agreement to extend the long stop date to fulfill the conditionsprecedent set out therein to on or before 5:00 p.m. on 30 April 2010 or such other date as the relevantparties may agree.

The purpose of this circular is to provide the Shareholders with further details in respect of, amongother things, (i) the Connected Transactions, the Continuing Connected Transactions and the proposedincrease in authorized share capital of the Company; (ii) the recommendations of the IndependentBoard Committee; (iii) a letter of advice from Veda Capital to advise the Independent Board Committeeand the Independent Shareholders; (iv) the re-election of retiring Director; and (v) a notice conveningthe EGM.

(A) The Fame Oriented Acquisition

Background

On 31 July 2009, Copper One entered into a purchase agreement (the “Underlying Agreement”)with Fronteer Development, pursuant to which Copper One agreed to acquire 100% interest inmineral and other rights held by Fronteer Development in the Fronteer Properties for aconsideration of US$400,000. Copper One is copper-focused exploration and developmentcompany which is listed on the Venture Board of the Toronto Stock Exchange (TSXV: CUO).Fronteer Development is a gold-focused exploration and development company whose sharesare listed on the Main Board of the Toronto Stock Exchange (TSX: FRG) and the American


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Stock Exchange (AMEX: FRG). At the time when the Underlying Agreement was firstnegotiated, there was no arrangement, understanding, agreement or negotiation between theCompany and other parties to the Underlying Agreement, the FO Assignment Agreement andthe Fame Oriented Agreement. To the best of the Directors’ knowledge, information and beliefhaving made all reasonable enquiries, Copper One and Fronteer Development are third partiesindependent of the Company and its connected persons.

On 30 October 2009, Golden Fame entered into an assignment agreement (the “FO AssignmentAgreement”) with Copper One, pursuant to which Copper One has assigned its rights in theUnderlying Agreement to Golden Fame with the consent of Fronteer Development for aconsideration of US$150,000. Mr. David Eaton negotiated on behalf of Baron Natural Resourcesin the FO Assignment Agreement. Mr. Eaton works for Baron Natural Resources and he hasover 20 years of experience in equity capital markets in North America. He is the coveragebanker for listed companies in mining sector and Copper One is one of his clients. BaronNatural Resources only came to know about the Underlying Agreement at the time of thenegotiation of FO Assignment Agreement. The rights in the FO Assignment Agreement includethe rights to purchase a 100% interest in mineral and other rights held by Fronteer Developmentin the Fronteer Properties. Golden Fame is wholly-owned by Fame Oriented, which in turn iswholly-owned by Baron Natural Resources. Golden Fame will be responsible for the outstandingbalance payment of US$350,000 payable to Fronteer Development and will also be responsiblefor further exploration, exploitation and other mining operations for the Fronteer Properties.For the avoidance of doubt, there would not be any additional costs payable by Golden Famefor acquiring the legal title to the Fronteer Properties other than the US$350,000 payable toFronteer Development.

The title of the Gold Ridge Property, which Golden Fame has an option to acquire after thepayment of US$350,000, has no duration and such title allows Golden Fame to explore theproject without the need of any licence. The underground working permit is required for whichapplication is in progress by rehabilitation of the tunnel. According to the management, nofurther licence will be required to begin operation in the project.

There are risks associated with obtaining the licence during new application or renewal uponexpiry, and failure to obtain or renew will result in the cease of operation. However, theprocedures are relatively straight forward when the operations are in compliance with all therelevant rules and regulations, yet there is no certainty that any future change in the rules mayaffect the licence application or renewal process.

Ms. Wan, the ultimate beneficial owner of Baron Natural Resources and a former Director anda substantial shareholder of the Company, was periodically informed by the management ofBaron Natural Resources at the time when the FO Assignment Agreement and the I3P Agreementwas negotiated. Ms. Wan is neither an employee nor a director of Baron Natural Resources.The management of Baron Natural Resources is made up of geological and mining experts,who were mainly responsible for the initial stage and/or negotiation of the FO AssignmentAgreement and the I3P Agreement. The management of Baron Natural Resources is notconsidered as the associates of Ms. Wan under Rule 14A.11 of the Listing Rules.


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On 31 July 2009, Fronteer Development entered into the Underlying Agreement with CopperOne. Both parties were not associates of Baron Natural Resources and accordingly, BaronNatural Resources and its associates were not involved in the negotiation of the UnderlyingAgreement. In August 2009, Baron Natural Resources and its associates started the negotiationof the FO Assignment Agreement with Copper One and, using historical data, Baron NaturalResources estimated that the Gold Ridge Property would have a resource of 200,000 ounces ofgold. The size of the Gold Ridge Property is small in international standard and there isuncertainty surrounding the feasibility of the Gold Ridge Property at the time when gold priceis trading at around US$900 per ounce. Ms. Wan was of the view that the Gold Ridge Propertydoes not suit the risk profile of the Company and therefore did not choose to participate. Afterthe conclusion of the FO Assignment Agreement, Baron Natural Resources engaged in additionalgeological analysis and exploration by undertaking surface drilling, sampling, assaying,analyzing historical geological and production data and confirmed that the Gold Ridge Propertyhas a total resource of approximately 900,000 ounces of gold. Subject to additional explorationinformation, the underlying assets have the potential to double the resources.

According to the consultant and technical adviser, additional exploration will requirerehabilitation and underground drilling of approximately 1500 feet. This will cost aroundUS$270,000 and this will be borne by Eagle Action Limited and Baron Natural Resources,being parties to the I3P Agreement, pursuant to the Fame Oriented Agreement.

Currently, Fame Oriented is in the process of receiving competing bids for the rehabilitationand underground drilling. During the months of February and March 2010, various contractorshave visited the sites and are now in the process of submitting bids for the job. It is expectedthat the contractors will be confirmed in April or May 2010, and the work will commenceimmediately thereafter. The whole process will take approximately 6-8 weeks. The gold pricewas trading at a range of US$900 to US$960 per ounce in July 2009. In December 2009, thegold price was trading at US$1,080 to US$1,200 per ounce, which has substantially increasedin value. The increase in gold price not only generates additional revenue for the Gold RidgeProperty but also decreases the risk of operation of the Gold Ridge Property substantially. TheGold Ridge Property, on a standalone basis, may attract international mining companies’investment or even an independent listing, which will create a substantial return to the Company’sinvestment. Based on the aforementioned information, Ms. Wan recommended the Gold RidgeProperty to the Board for consideration and initiated the negotiation process through BaronNatural Resources management team for the Fame Oriented Agreement.

On 11 December 2009, Baron Natural Resources entered into an agreement with an IndependentThird Party whereby the Independent Third Party agreed to acquire a 71% equity interest inFame Oriented from Baron Natural Resources (the “I3P Agreement”) at the same pricing asthe Company. The Independent Third Party is a BVI Company named Eagle Action Limited.Eagle Action Limited has no equity interest relationship and prior business relationship withBaron Natural Resources. Eagle Action Limited is not connected with Baron Natural Resources.“Same pricing” means the price per each percentage of equity interest of Fame Oriented in theI3P Agreement is the same in the Fame Oriented Agreement. Baron Natural Resources focuseson operation management and direct investment into mining-related projects and creates valueby advancing near-term production projects into production stage and taking advantage ofdistressed situations.


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On 21 December 2009, the Company and Baron Natural Resources entered into the Fame OrientedAgreement whereby the Company has conditionally agreed to acquire from Baron Natural Resourcesa 12.5% equity interest in Fame Oriented for a consideration HK$19,200,000. The Company willbe a passive investor and will not be responsible for further investment or operation for the FronteerProperties. The management of Fame Oriented is same as that of Baron Natural Resources. Themanagement of Fame Oriented and Baron Natural Resources, which consists of 5 mining andexploration professionals each with over 20 years of diverse exploration, mining and operationexperience in gold and silver deposits around the world, will be responsible to run and manage theFronteer Properties. The management have joined Baron Natural Resources and Fame Orientedsince the conclusion of the FO Assignment Agreement.

The Company will be a passive investor but has the rights to nominate one director to the boardof director of Fame Oriented in order to protect the interest of the Company in the Gold RidgeProperty. As at the Latest Practicable Date, Fame Oriented has one director on its board. TheCompany may appoint Mr. William Robert Majcher, an executive Director, to the board ofdirector of Fame Oriented to take up a non-executive role. Mr. William Robert Majcher willhave no voting rights in the board of directors of Fame Oriented.

The Fame Oriented Agreement

Date

21 December 2009 (supplemented by a supplemental agreement dated 25 February 2010)

Parties

i. Baron Natural Resources, a company indirect wholly-owned by Ms. Wan; and

ii. the Company

Assets to be acquired

12.5% equity interest in Fame Oriented.

Consideration

The consideration payable by the Company for the Fame Oriented Acquisition isHK$19,200,000, which is determined after arm’s length negotiation with reference to apreliminary technical report of the Gold Ridge Property dated 10 December 2009 prepared byMine Mappers L.L.C., a professional geological consultancy firm. Based on the preliminarytechnical report, the Gold Ridge Property is valued at US$19,824,937 and the considerationwill be paid by the Company to Baron Natural Resources in the following manner:

i. on the date of the Fame Oriented Agreement, the deposit of HK$9,600,000 (representing 50%of the consideration) in cash is payable by the Company to Baron Natural Resources; and

ii. on completion of the Fame Oriented Agreement, the balance of the consideration ofHK$9,600,000 in cash is payable by the Company to Baron Natural Resources.


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Mine Mappers L.L.C. has mainly used the income approach technique known as discountedcash flow method to assess the market value of business enterprise value of the Gold RidgeProperty. Under the said method, Mine Mappers L.L.C. has discounted the projected cash flowof the Gold Ridge Rroperty based on the sales, operating cost and capital expenditure forecastas disclosed in the draft technical report and other relevant documents, financial informationand projection provided by the management of Fame Oriented and Baron Natural Resources.The final valuation report is set out in Appendix I to this circular and the information underRule 14.62 of the Listing Rules including, among other things, details of the principalassumptions and a letter from the Company’s reporting accountants, are set out in Appendix IIIto this circular. To the best information and knowledge of the Directors after making necessaryenquires, Mine Mappers L.L.C. is independent and not connected with the Company.

Mine Mappers L.L.C. qualifies as a technical adviser under Rule 18.04 of the Listing Rulesand its geologists have substantial experience in geological/engineering studies and valuationfor mining projects in North America and other parts of the world. Mine Mappers L.L.C. hasperformed detailed studies for numerous North American and Europe listed companies, includingQuadra Mining Limited (TSX: QUA) and Lafarge S.A. (EPA:LG).

The Company intends to finance the Fame Oriented Acquisition out of its internal resources.

The Directors (excluding the independent non-executive Directors who have expressed theiropinion in the IBC letter) consider that the terms of the Fame Oriented Agreement are onnormal commercial terms, fair and reasonable and are in the interests of the Company and theShareholders as a whole.

Conditions precedent

Completion of the Fame Oriented Agreement is conditional upon:

(a) the due diligence investigation on Fame Oriented, Golden Fame and the FronteerProperties, including but not limited to the shareholding and corporate structure of FameOriented and Golden Fame, the ownership of the Fronteer Properties, the status of theperformance of the respective obligations of the parties under the Underlying Agreementand the FO Assignment Agreement and the mining claims of Golden Fame (including itspredecessors-in-title) over the Fronteer Properties, having been completed to thesatisfaction of Company in its sole discretion;

(b) the warranties under the Fame Oriented Agreement remaining true and correct and notmisleading in any material respects at all time from the date thereof up till the completionof the Fame Oriented Agreement;

(c) the completion of the Underlying Agreement and the FO Assignment Agreement inaccordance with their respective terms; and

(d) the passing by the Independent Shareholders of the necessary resolution to approve theFame Oriented Agreement and the transactions contemplated thereunder in accordancewith the Listing Rules.


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If the conditions specified above have not been fulfilled (or in respect of (a) and (b) only,waived by the Company) on or before 5:00 p.m. on 30 April 2010 (or such other date as theparties to the Fame Oriented Agreement may agree) and either parties give notice to terminatethe Fame Oriented Agreement, the Fame Oriented Agreement shall thereupon terminatewhereupon Baron Natural Resources shall return the deposit without interests to the Companyforthwith on demand.

Completion

Completion of the Fame Oriented Agreement shall take place on the third Business Day afterthe date on which all the conditions precedent shall have been fulfilled or waived by the Company(or such other date as the parties hereto may agree).

INFORMATION ON FAME ORIENTED AND GOLDEN FAME

Fame Oriented is a company incorporated in the BVI on 24 June 2009 with limited liabilityand is an investment holding company. Baron Natural Resources owns 29% equity interest inFame Oriented and Fame Oriented owns 100% equity interest in Golden Fame as at the LatestPracticable Date.

Golden Fame is a newly incorporated project company for the purpose of engaging in explorationand mining activities in the Fronteer Properties. Golden Fame will acquire the legal title to theFronteer Properties upon completion of the Underlying Agreement and the FO AssignmentAgreement.

Financial Information of Fame Oriented

Immediately upon completion of the Fame Oriented Agreement, Fame Oriented will become12.5% owned by the Company. Set out below are the summary of the financial information ofFame Oriented (prepared under IFRS):

From 24 June 2009(the date of

incorporation) to30 November 2009

(unaudited)US$

Turnover NilProfit/(Loss) before and after tax Nil

As at 30 November 2009(unaudited)

US$

Net assets 10,000

The loss for the period has been covered by a shareholder’s loan which has been waived by theshareholder.


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Information on the Fronteer Properties

Fronteer Properties include (i) 112 unpatented lode/placer claims located in Township 14 South,Range 27 East, Sections 15, 16, 17, 20, 21, 22, 27 & 28, Cochise County, Arizona, (ii) 20patented mining claims located in Township 14 South, Range 27 East, Sections 21, 22, 27,Cochise City, Arizona and (iii) certain fee lands located in Township 14 South, Range 27 East.

Information on the Gold Ridge Property

The Gold Ridge Property is located in north central Cochise County in southeastern Arizona inthe southern foothills of the Dos Cabezas Mountains. The Gold Ridge Property consists of73.95-acres of private property, 333.38-acres of patented mining claims and 112 unpatentedmining claims covering 1,718.74-acres. In addition, the property holdings include one leasedgroup of 12 unpatented mining claims covering 216.34-acres. Golden Fame controls the miningrights on a total of 2,342-acres which includes Gold Ridge, Gold Prince and the Dives Mines435 drill holes have been drilled to date at the Gold Prince Mine of the Gold Ridge Propertywhile other concession such as the Gold Ridge and the Dives Mines have yet to undertake largescale exploration work. According to the preliminary technical report issued by Mine MappersL.L.C., the veins of the Gold Ridge Property have produced approximately 22,000 ounces ofgold at grades approaching 0.5-ounces per ton from small tonnage underground mines. A newmineral resource estimate for the Gold Prince portion of the Gold Ridge Property is 2,999,931tons at a grade of 0.3-ounces per ton gold.

According to the laws of the State of Arizona, the Underlying Agreement and the FO AssignmentAgreement, Golden Fame has the rights to explore and exploit the Gold Ridge Property. Bypaying US$350,000 to Fronteer Development, Golden Fame will obtain the title of the GoldRidge Property. Upon receiving the relevant permits, including but not limited to undergroundworking permit, Golden Fame will have the rights to explore and exploit the Gold Ridge Property.The management of Golden Fame is expected to undertake diamond drill at the Gold RidgeProperty to increase the number of ores available for future mining while advancing intoproduction.

The Gold Ridge Property is the major asset under the Fronteer Properties and the Fame OrientedAgreement. While there are other claims under the Fronteer Properties, those claims have notyet explored with limited geological information as to their resource potential.

The Gold Ridge Property has no existing operation. The Gold Ridge Property is in the processof applying to the underground permit under the laws of the State of Arizona. Such permit isprocedural in nature and Golden Fame expects to receive the permit in April 2010, when thedevelopment and the rehabilitation of the Gold Ridge Property begins. To the best of theDirectors’ knowledge, information and belief having made all reasonable enquiries, the GoldRidge Property has complied with all rules and regulations in the jurisdiction it is locatedpreviously.


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The Gold Ridge Property will use small tonnage, underground shrink-slope mining. It is expectedthe initial production would be a 250 tonnes per day operation with 360 days a year, totaling90,000 tonnes per year operation. According to our technical expert and confirmed by ourconsultant, the Gold Ridge Property, at the Gold Prince section, initially should host a 250tonnes per day operation. This has taken into account the existing infrastructure, the miningmethod (underground mining with modified shrink and slope method), transportation capacityand our neighbor mill facility to come up with this estimated operation capacity. It is understoodthat Golden Fame would hire contract miners for the underground mining of the ores. After theores are mined and crushed, the ores would be shipped to neighbor mill for processing intogold concentrate or smelter as flux materials. It is also a long-term strategy for the Gold RidgeProperty to increase its production to 500 tonnes per day with its own mill. Currently, GoldenFame is in the process of applying the relevant permit for the rehabilitation and developmentwork on the Gold Prince Mine of the Gold Ridge Property to get ready for production, which isexpected to begin within 2010. Rehabilitation of the underground tunnel and exploration drillingcrews are being chosen to being the related work. The mining method will be undergroundstope mining at a rate of 250 tonnes per day, for which the ore will be mined and transported toone of the neighbor mills or smelters either as ore to be processed into gold concentrate or asflux materials. Then the products will be sold locally. The management expects the workingcapital requirement is in the range of HK$21 million for the underground rehabilitation and thepreparation of the mining. The Gold Prince Mine is previously being operated and thereforemost of the infrastructure and facilities are in place.

Future expansion plan, after the successful completion of further exploration drilling in otherclaim area, the management may consider expanding the production to 400 - 500 tonnes perday and to build a mill for Gold Ridge ores at 500 tonnes per day capacity. However, it is toopreliminary at this stage to decide on future production as it is dependent on the explorationresults and the management has not entered into any concrete plan for future expansion as yet.Two teams of contract underground drillers and miners have been contacted and subsequentlyvisited the underground mine to assess the production plan. It is understood that the managementteam of Golden Fame is waiting for the proposal to be provided by the two teams before makinga decision on the final production plan. For further details of the technical aspects of the GoldRidge Property, please refer to the technical report on the Gold Ridge Property set out inAppendix V to this circular.

The Directors estimated that, for the two years following the issue of this circular, the GoldRidge Property will require a working capital and capital investment of approximately HK$21million. Pursuant to the Fame Oriented Agreement, the working capital and capital investmentwill be borne by Baron Natural Resources and is not the responsibility of the Company. Thereis no ceiling for the working capital and capital investment that will be borne by Baron NaturalResources. The Directors, after due and careful enquiry, are of the opinion that, in the absenceof unforeseeable circumstances and after taking into account of Baron Natural Resources’financial resources, Baron Natural Resources has sufficient working capital to finance theoperation of the Gold Ridge Property for the two years following the issue of this circular.

As at the Latest Practicable Date, to the best of the Directors’ knowledge, information andbelief and having made all reasonable enquiries, the Gold Ridge Property does not have anyclaim in relation to the exploration and/or mining rights made or notified by third parties againstthe Company, Fame Oriented nor Golden Fame.


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Reasons and benefits of the Fame Oriented Acquisition

The Directors (excluding the independent non-executive Directors) consider that the enteringof the Fame Oriented Acquisition represents a good opportunity to diversify the Company’sexisting investments to maximise Shareholders’ value by capturing the potential growth of thegold price. In view of the potential benefits generated from the Fame Oriented Acquisition tothe Company, the Directors (excluding the independent non-executive Directors who haveexpressed their opinion in the IBC Letter) consider that the terms and conditions of the FameOriented Agreement are fair and reasonable and on normal commercial terms. The FameOriented Acquisition is in line with the Company’s investment objectives, policies andrestrictions and is in the interests of the Shareholders as a whole.

Mining activities are always associated with risks, one of them being resources may not beeconomically extractable until they become reserve. The technical adviser has adopted therecovery rate for the estimation of resources of the Gold Ridge Property, which is justified bythe Board. The Directors consider that the Shareholders have been duly informed of the risksas the risks relating to the Fame Oriented Acquisition have been disclosed in the paragraphheaded “Risks relating to the Fame Oriented Acquisition” of this circular below. In addition,the Fame Oriented Acquisition is subject to the Independent Shareholders’ approval.

Despite the Gold Ridge Property only has resources and half of them are in the inferred category,the Board considers exploitation of the Gold Ridge Property is fair and reasonable and in theinterests of the Company and the Shareholders as a whole based on the following factors:

a. It is a historical mine with past production being in place. It will incur very minimalcapital expenditure to resume production.

b. It is a small operation of which does not have a lot of technical difficulty.

c. Gold price is in the historical peak and the Board believes the gold price will stabilize atthis level, which makes the project very profitable.

d. Without the consideration of the inferred resources, the project is still considered to be asizeable project with approximately one million ounces of gold.

e. The existence of neighbour mills and smelters has created demand for the products.

f. The project is located in the State of Arizona, USA. It is a mining friendly area andmining in general is subject to minimal political risk.

g. The Board considers the Gold Ridge Property to be economically viable after consideringthe current gold price.

The Company does not know the reason for production hiatus in the 1930’s, from 1984 to1992, and from 1993 to 1996 as it is not related to the Company’s decision to invest in the GoldRidge Property. The investment decision is made after all the due diligence work, which isrelated to the legal due diligence and the review of technical report and valuation report as mentionedbelow.


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The Board, assisted by its investment adviser, has a standard due diligence procedure forinvestment. The due diligence was set out in two aspects: legal and technical. The Board hasfocused its legal due diligence on the title of the Gold Ridge Property and also built in thenecessary condition precedents to insure against any potential title liability. On the technicalside, the Board has reviewed in details the technical report and the valuation report of the GoldRidge Property and performed site visit due diligence.

The Board considered that, with the advice from its consultant and technical adviser, the GoldRidge Property is of merit and the due diligence work as mentioned above is sufficient inarriving the investment decision.

The Gold Ridge Property does not have competitive advantages as compared with othercompetitors within gold mine industry. However, taking into accounts that (i) the Gold RidgeProperty has historical mines with past production being taken place and (ii) its relativelysmall scale operations, it is the view of the Directors that the exploitation of the Gold RidgeProperty will incur very minimal capital expenditure and are in the best interest of the Companyand its Shareholders.

Gold price has been on an increasing trend from 2002. In 2002 gold was approximately US$300per ounce. As at the Latest Practicable Date, gold was approximately US$1,150 per ounce.Gold demand can be divided into two categories: fabrication and investment.

Fabrication demand comprises demand from jewelry, production of electronics, dental products,and gold used for other industrial and decorative applications. In 2009, approximately 80% ofthe global demand for gold was fabrication demand. Most of this demand was for jewelry,which contributed approximately 80% of the total fabrication demand. In 2009, the PRC andIndia in aggregate accounted for approximately 40% of global demand in gold. This trend isexpected to continue going forward as both countries register approximately 7% to 8% in GDPgrowth in 2009.

Investment demand comprises demand for coins and bullion. Demand for physical gold haslargely been driven by net incremental gold stocks held in support of derivative transactionsand exchange-traded funds. Investment demand is a function of the current and anticipatedvalue of gold relative to other investments, such as cash, fixed income securities, equities andproperties, resulting largely from monetary policy considerations and expectations regardingfuture gold prices. Since the financial tsunami, major governments adopt a loose monetarypolicy and with near to zero effective interest rate (excluding Australia). This has caused investorsto worry about deflation in all economy and depreciation of all major currencies. Gold,accordingly, has become a shelter for investors and speculators a like.

Based on the above basis, the Directors consider that the acquisition of a minority interests inthe Gold mine represents a good opportunity to diversify the Company’s existing investmentsto maximize Shareholder’s value by capturing the potential growth of the gold price.

The Directors are of the view that the Gold Ridge Property (i) helps diversify the Company’sexisting investment portfolio; (ii) improves the financial result of the Company in the comingyears; and (iii) is in line with its our investment objective.


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Summary of laws and regulations regarding the Gold Ridge Property in the US

Mining activities in the State of Arizona are subject to federal, state and local law. Three typesof laws are of particular importance to our U.S. mineral properties: those affecting land ownershipand mining rights; those regulating mining operations; and those dealing with the environment.

Land Ownership and Mining Rights

The Gold Ridge Property contains a core area of private patented mining claims covering 322acres which include the historic Gold Prince, Gold Ridge and Dives mines. This core areaincludes the targets of the most recent exploration drilling and the areas identified as prospectivefor future underground exploration drilling. The Gold Ridge Property also includes 112unpatented mining claims covering 1,718 acres and an adjacent leased group of 12 unpatentedmining claims covering 216 acres.

Because the core area is located on private patented land our exploration and mining activitiesconducted there are not subject to the General Mining Law of 1872 (General Mining Law) asamended, 30 U.S.C. §§ 21-161. The balance of the Gold Ridge Property, including all theunpatented mining claims, is situated on land owned by the United States and the mining rightsto such lands are subject to the General Mining Law, which allows the location of miningclaims on certain Federal Lands upon the discovery of a valuable mineral deposit and propercompliance with claim location requirements. A valid mining claim provides the holder withthe right to conduct mining operations for the removal of locatable minerals, subject tocompliance with the General Mining Law and Arizona state law governing the staking andregistration of mining claims, as well as compliance with various federal, state and localoperating and environmental laws, regulations and ordinances.

As the owner of the private patented mining claims and the owner or lessee of the unpatentedmining claims, we have the right to conduct mining operations on the lands subject to the priorprocurement of required operating permits and approvals, compliance with the terms andconditions of the mining lease for operations conducted on the leased lands, and compliancewith applicable federal, state, and local laws, regulations and ordinances.

Mining Operations

The operation of mines on private patented mining claims and unpatented mining claims aregoverned by both federal and state laws. In addition, the unpatented mining claims are subjectto federal laws that govern mining claim location and maintenance and mining operations onFederal Lands, which are administered by the Bureau of Land Management. Additional federallaws, such as those governing the purchase, transport or storage of explosives, and thosegoverning mine safety and health, apply to both private patented mining claims and unpatentedmining claims.

The State of Arizona likewise requires various permits and approvals before mining operationscan begin on private patented mining claims and unpatented mining claims, although the stateand federal regulatory agencies usually cooperate to minimize duplication of permitting efforts.


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Taxation at the Federal Level:

• Federal tax is imposed for each taxable year on the taxable income of every corporation.

• Amount of tax imposed shall be the sum of either:

– 15% of so much of the taxable income as does not exceed $50,000,

– 25% of so much of the taxable income as exceeds $50,000 but does not exceed$75,000,

– 34% of so much of the taxable income as exceeds $75,000 but does not exceed$10,000,000, and

– 35% of so much of the taxable income as exceeds $10,000,000,

– In the case of a corporation which has taxable income in excess of $15,000,000,the amount of the tax determined under the foregoing provisions of this paragraphshall be increased by an additional amount equal to the lesser of (i) 3 % of suchexcess, or (ii) $100,000.

Taxation at the State level (Arizona)

• Corporate Income Tax

Businesses in the State of Arizona are taxable at 6.968% of taxable income or $50,whichever is greater.

• Personal Property Tax

Businesses must list and report to the local county assessor’s office all personal property(other than motor vehicles) used in the business.

• Transaction Privilege Tax (TPT)

It is imposed on the seller for doing business in the state, although the tax may be passedon to the customer. Various business activities are subject to transaction privilege taxand must be licensed, including owners/builders, severance (metal mining), transportation,nonmetal mining, air/railroad, and private cars/pipelines.

• Use tax

It is the companion tax to the transaction privilege tax. Businesses making out-of-statepurchases for their own use-not for resale-on which no tax is paid, are required to paythe use tax. It must be reported and paid on merchandise purchased as an exempt sale forresale that is subsequently used by the business and on purchases from an out-of-statevendor for use in Arizona.


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Hiring issues

There are a number of federal and state laws that employers must follow when hiring employees.Generally speaking, these laws prohibit discrimination in employment decisions based on race,color, religion, sex, age, ethnic/national origin, disability, or veteran status.

Fair Labor Standard Act (FLSA)

The Act requires employers of covered employees who are not otherwise exempt to pay theseemployees a minimum wage of not less than $7.25 per hour effective July 24, 2009. Youthsunder 20 years of age may be paid a minimum wage of not less than $4.25 an hour during thefirst 90 consecutive calendar days of employment with an employer. Employers may not displaceany employee to hire someone at the youth minimum wage.

Employee Retirement Income Security Act (ERISA)

ERISA sets uniform minimum standards to ensure that employee benefit plans are establishedand maintained in a fair and financially sound manner. In addition, employers have an obligationto provide promised benefits and satisfy ERISA’s requirements for managing and administeringprivate retirement and welfare plans.

Federal Mine Safety and Health Act (Mine Act)

The Mine Act requires that MSHA inspect all mines each year. All underground mines are toreceive at least four inspections annually; all surface operations are to be inspected at leasttwice annually. MSHA is specifically prohibited from giving advance notice of an inspection,and it is authorized to enter mine property without a warrant.

The Mine Act requires or authorizes additional inspections and investigations to ensure safeand healthy work environments for miners. Mines determined to be exceptionally hazardousmay receive more frequent inspections. Additionally, MSHA must investigate all fatal accidentsand miners’ complaints of discrimination based upon the exercise of their rights under theMine Act.

To promote compliance with the provisions of the Act and its safety and health standards, allviolations found during inspections and investigations must be cited. All violations are subjectto civil penalties, and all violations must be corrected within the time frames established by MSHA.

The Mine Act permits representatives of the operator and the miners to accompany MSHAduring inspections and participate in pre- and post-inspection conferences. If violations arecited, the circumstances surrounding the violations are discussed during post-inspectionconferences. If these discussions do not result in resolution, the mine operator may appeal thecitation and the penalty to the Federal Mine Safety and Health Review Commission, anindependent body, with further appeal to the U.S. Courts of Appeals.


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In addition to setting safety and health standards for preventing hazardous and unhealthyconditions, MSHA’s regulations require immediate notification of accidents, injuries, andillnesses; training programs that meet the statutory requirements of the Mine Act; and approvalfor use of certain equipment in gassy underground mines.

Mine operators must notify MSHA when they open or close a mine.

Environmental Law

The development, operation, closure, and reclamation of mining projects in the United Statesrequires numerous notifications, permits, authorizations, and public agency decisions.Compliance with environmental and related laws and regulations requires us to obtain permitsissued by regulatory agencies, and to file various reports and keep records of our operations.Certain of these permits require periodic renewal or review of their conditions and may besubject to a public review process during which opposition to our proposed operations may beencountered. Our most recent operations were conducted under various permits and registrationsfor activities connected to mineral exploration, reclamation, and environmental considerations.Unless and until a mineral resource is proved, it is unlikely our operations will move beyondthe exploration stage. If in the future we decide to proceed beyond exploration, there will benumerous notifications, permit applications, and other decisions to be addressed at that time.

Environmental Matters

United States mining and exploration activities are subject to various federal and state lawsand regulations governing the protection of the environment, including the Clean Air Act; theClean Water Act; the Comprehensive Environmental Response, Compensation and LiabilityAct; the Emergency Planning and Community Right-to-Know Act; the Endangered SpeciesAct; the Federal Land Policy and Management Act; the National Environmental Policy Act;the Resource Conservation and Recovery Act; and related state laws.

Risks relating to the Fame Oriented Acquisition

The cash position of the Company decreases as a result of entering into the Fame Oriented Acquisition

As a result of entering into the Fame Oriented Acquisition, the cash position of the Companywill decrease and should any investment opportunity arises, the Company may not have sufficientinternally generated cash resources and bank facilities to finance these activities. In addition, ifthe Company is unable to obtain adequate financing on acceptable terms, or at all, to satisfy itsoperating, development and expansion plans, its business and results of operations may bematerially and adversely affected.

Changes in laws and regulations relating to the gold mining industry in the USA may materiallyand adversely affect the results of operation of gold mine

Although it is considered that the government in USA is stable, it is not possible to guarantee thatthe current investment climate will continue if social or political upheaval or a change in leadershipoccurs. Possible risks include changes to taxation rates or current taxation concessions, limitationson the repatriation of dividends, the transfer of funds, inflation, interest rates, exchange rates,government policy (including fiscal, monetary and regulatory policies), consumer spending,


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employment rates, social upheaval or war. Whilst the Company has not experienced any majorpolitical instability, the emergence of such political instability in the future may lead to outbreaks ofcivil unrest which may have an adverse effect on the Company’s mining business, and may affectthe Company’s overall financial position and operating results and profitability.

The ore reserves and mineral resources are estimates based on a number of assumptions, anyadverse changes in which could require to lower the gold mine’s ore reserves and mineralresources

Ore reserves and mineral resource are estimates based on assumptions, knowledge, experienceand industry practice. No assurance can be given that any particular level of recovery of goldfrom ore reserves or mineral resources will in fact be realized or that an identified mineralresource will ever qualify as a commercially mineable (or viable) ore body which can be legallyand economically exploited. Such resources may not ultimately be able to be extracted at aprofit. Estimates which were valid when made may change significantly when new informationbecomes available and may be affected by factors such as the quality of the results of exploration,drilling and analysis of samples.

Mineral resource and ore reserve estimates are imprecise and depend to some extent oninterpretations, which may ultimately prove to be inaccurate. Should the Company encountermineralization different from that predicted by past drilling, sampling and similar examination,mineral resource and/or ore reserve estimates may have to be adjusted downward. This downwardadjustment could materially affect the Company’s development and mining plans, which couldmaterially and adversely affect the Company’s business and results of operations.

The grade of ore ultimately mined may differ from that indicated by drilling results. Short termfactors relating to ore reserves, such as the need for orderly development of ore bodies or theprocessing of new or different grades, may also materially and adversely affect the mineoperations. There can be no assurance that gold recovered in laboratory tests will be duplicatedunder on-site conditions or in production-scale operations. Material changes in ore reservesresulting from unexpected changes to the gold price, grades, production costs, stripping ratiosand recovery rates may affect their economic viability. Ore reserves are reported as generalindicators of mine life and should not be interpreted as assurances of mine life or of theprofitability of current or future operations.

The economic viability of ore reserves and mineral resources may also be affected by suchfactors as permit regulations and requirements, environmental factors, unforeseen technicaldifficulties, unusual or unexpected geological formations and work interruptions.

An increase in the price of production inputs, including labour, power, mine consumables orother inputs can materially and adversely affect the results of operation of gold mine

The result of operation of the gold mine will be subject to the price of production inputs,including labour, power, mine consumables or other inputs. An increase in the price of productioninputs could adversely affect the performance of the gold mine business and results of operation.In more serious cases, if the price of production inputs increase dramatically, such increasecould cause the shutdown of the gold mine operation.


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Uncertainties in relation to the application of taxation laws and regulations could materiallyand adversely affect the Gold Ridge Property and results of operations

Any material changes in the USA tax laws and regulation could materially and adversely affectthe gold mine’s business and results of operations.

The Company’s future income, asset values and the price of the Shares are subject to the generaleconomic climate

A number of factors affecting the general global economic climate and outside the control ofthe Group may impact significantly on the Group, its performance and the price of its Shares,including but not limited to:

• inflation;• currency fluctuations;• interest rates;• legislative changes;• political decisions; and• industrial disruption.

The Company’s future income, asset values and the price of the Shares can be affected by thesefactors and, in particular, by the market price for gold that the Company may produce and sell.

(B) The Shing View Acquisition

Background

On 23 September 2009, Mr. Mak and Mr. Cheng entered into a co-operation agreement (the“Co-operation Agreement”) pursuant to which Mr. Mak and Mr. Cheng will cooperate in thedevelopment of the Talc Mine for a consideration of HK$9,600,000, payable by Mr. Mak toMr. Cheng. Mr. Cheng owned 100% equity interest of Shiyan Hao Shun, which owned themining license of the Talc Mine. Upon completion of the Co-operation Agreement, Shing View,which was originally beneficially owned by Mr. Mak, will be owned as to 80% byMr. Mak and as to 20% by Mr. Cheng, and Shing View will indirectly own 100% equity interestof Shiyan Hao Shun. Under the Co-operation Agreement, Mr. Mak has undertaken to financethe capital expenditure and working capital required for the commencement of the operation ofthe Talc Mine.

On 9 October 2009, Mr. Mak and Mr. Lam entered into an assignment agreement (the “SVAssignment Agreement”) pursuant to which Mr. Mak agreed to assign, and Mr. Lam agreed toacquire, all the rights and interests of Mr. Mak under the Co-operation Agreement (includinghis 80% equity interest in Shing View) at the consideration of HK$90,800,000. Upon completionof the SV Assignment Agreement, Mr. Lam and Mr. Cheng will own 80% and 20% of ShingView respectively. Mr. Mak also undertakes that he will invest the full amount of the capitalexpenditure and the working capital required for the development of the Talc Mine. Mr. Makwill also be responsible for the operations of the Shiyan Hao Shun.


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On 21 December 2009, the Company and Mr. Lam entered into the Shing View Agreementwhereby the Company has conditionally agreed to acquire from Mr. Lam a 17.5% equity interestin Shing View for a consideration HK$19,880,000. The Company will be a passive investorand will not be responsible for further investment or operation for the Talc Mine. Themanagement of Shing View and Shiyan Hao Shun, which consists of 3 mining and explorationprofessionals with over 15 years of precious metals and industrial materials, including talc,exploration, mining and operation experience, will be responsible to run and manage the TalcMine.

Set out below are the biographies of the management of Shiyan Hao Shun:

Mr. Cao Yi Hong (曹懌鴻), aged 44, began his career by working at Guangxi Teng CountyDali Lead and Zinc Mine (廣西藤縣大黎鉛鋅礦) and held various positions such as miningtechnician, engineer and mine engineer. Mr. Cao was mainly responsible for ore processingand production. From 2004 to 2006, he worked for the project in Gansu Cheng County XiaoGou Li Gold Mine (甘肅成縣小溝金礦) as general manager. Mr. Cao was mainly responsiblefor the overall management and operation of the gold mine, including inter alia, geologicalexploration, mining and processing, regulatory compliance, safety and environmental protection,product sales and daily operation and management. From 2004 to 2006, he was the responsibleofficer of Gansu Kai Yuan Gold Mine Co., Ltd. (甘肅開源金礦開發有限公司) and providedconsulting services regarding mining, product control, regulatory compliance and mining safetyand environmental protection issues. From 2006 to 2010, he was the general manager andresponsible officer of Shiyan Hao Shun. Since November 2009, he has been the general managerof WFOE.

Mr. Li Man Ying (李滿盈), aged 48, began his career in Tong Guan Gold Mine (潼關金礦) asore processing technician in 1978. He was mainly responsible for ore processing and production.He worked in Tong Guan Gold Mine for approximately 24 years. From 2002 to 2006, he joinedGansu Cheng County Xiao Gou Li Gold Mine (甘肅成縣小溝金礦) as ore processingengineer. He was mainly responsible for ore processing and management of equipment, as wellas developing the mineral resources. Since 2007, he joined Shiyan Hao Shun as the ore processingengineer. He was responsible for ore processing, scientific planning, overseeing all aspects ofthe operation of the ore processing facility.

Mr. Li Jun (李俊), aged 41, joined PRC Nonferrous Shao Guan No. 16 Processing Factory (中國有色韶關16冶煉廠) as ore processing technician from 1993 to 2006. He was mainlyresponsible for ore processing and production, monitoring the ventilation system, electricitysupply system, transportation system of the mines, the set up of the mining safety system.From 2006 to 2009, he joined Fujian Zijin Mining Co., Ltd. (福建紫金礦業有限公司) as oreprocessing engineer. He was mainly responsible for ore processing and management ofequipment, as well as developing the mineral resources. In 2010, he worked in Shiyan HaoShun as ore processing engineer. He was responsible for ore processing and involved inoverseeing all aspects of the operation of the ore processing facility.


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There was no arrangement, understanding, agreement or negotiation between the Companyand Mr. Mak, Mr. Cheng, Mr. Lam and/or its connected persons or their respective associatesin respect of the Shing View Acquisition before the negotiation of the Shing View Agreementcommenced. The Company, its connected persons and/or their associates other than Mr. Makwere not involved in the initiation and/or the negotiation of the Co-operation Agreement andthe SV Assignment Agreement. To the best of their knowledge, the Company currently has noother business relationship with Mr. Lam, Mr. Mak and Mr. Cheng.

Mr. Cheng has owned the Talc Mine for over 2 years. At the beginning of the year, Mr. Mak hasprincipally agreed with Mr. Cheng to cooperate and develop the Talc Mine. Mr. Mak has carriedout extensive due diligence and planning work and a cooperation agreement was signed in23 September 2009. On 9 October 2009, Mr. Lam entered a preliminary agreement withMr. Mak to acquire Mr. Mak’s interest in the Co-operation Agreement at a price equivalent tothe value to be determined by a mutually agreed professional valuer. Mr. Lam and Mr. Makalso agreed that when an assessed value is determined by the professional valuer, the pricing ofthe SV Assignment Agreement will be determined then. Mr. Lam is a long-term business contactand acquaintance of the Company, and has initiated the negotiation process for the Shing ViewAgreement after the conclusion of the SV Assignment Agreement.

Mr. Mak has appointed Hubei Northwest Geological Institute (湖北省鄂西北地質礦產調查所) and a subsidiary of the Guangzhou non-ferrous group (廣州粵有研礦物資源科技有限公司) to conduct additional geological analysis and exploration study from the period of Marchto December 2009. Hubei Northwest Geological Institute is an independent third party to theCompany, Mr. Lam, Mr. Mak, Mr. Cheng, their respective connected persons and/or associates.The geological team of the Talc Mine was able to confirm the 333 resource category increasesfrom approximately 200,000 tonnes to over 800,000 tonnes. Such increase also led to thegovernment agreed to increase the annual production of talc from 20,000 tonnes to 80,000tonnes in November 2009 and will make the Talc Mine one of the largest talc operations in thePRC.

The Shing View Agreement

Date

21 December 2009 (supplemented by a supplemental agreement dated 25 February 2010)

Parties

i. Mr. Lam; and

ii. the Company

Assets to be acquired

17.5% equity interest in Shing View.


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Consideration

The consideration for the Shing View Acquisition is HK$19,880,000, which is determinedafter arm’s length negotiation and 17.5% equity interest in Shing View, with reference to apreliminary valuation indicated by Savills. Based on the preliminary valuation, the Talc Mineis valued at RMB100,000,000 (equivalent to approximately HK$113,636,000) and theconsideration will be paid by the Company to Mr. Lam in the following manner:

i. on the date of the Shing View Agreement, the deposit of HK$9,940,000 (representing50% of the consideration) in cash is payable by the Company to Mr. Lam; and

ii. on completion of the Shing View Agreement, the balance of the consideration ofHK$9,940,000 in cash is payable by the Company to Mr. Lam.

Savills has mainly used the income approach technique known as discounted cash flow methodto assess the market value of business enterprise value of the Talc Mine. Under the said method,Savills has discounted the projected cash flow of the Talc Mine based on the sales, operatingcost and capital expenditure forecast in the feasibility study of the Talc Mine, geological reportsand other relevant documents, financial information and projection provided by the ShiyanHao Shun and the Company.

When evaluating the appropriate rate for Shiyan Hao Shun, Savills has used the Capital AssetsPricing Model (“CAPM”). Under CAPM, the appropriate expected rate of return is the sum ofthe risk-free return and the equity risk premium required by investors to compensate for themarket risk assumed. In addition, the expected rate of return of Shiyan Hao Shun is expected tobe affected by other firm specific risk factors that are independent of the general market. Thediscount rate of approximately 17% per annum was determined by the risk-free rate, marketreturn, estimated unlevered beta of Shiyan Hao Shun and firm specific risk factor.

The final valuation report is set out in Appendix II to this circular and the information underRule 14.62 of the Listing Rules including, among other things, details of the principalassumptions and a letter from the Company’s reporting accountants, are set out in AppendixIV to this circular. To the best of information and knowledge of the Directors after makingnecessary enquires, Savills is independent and not connected with the Company, Mr. Lam andtheir respective ultimate beneficial owners.

Savills does not qualify as a technical adviser under Rule 18.04 of the Listing Rules but hassubstantial experience in the business valuation of companies engaged in different kinds ofbusiness, including mines, forestry, toll road, electronic, textile, pharmacy, hotel, golf,manufacturing companies and water plant etc.

The Company intends to finance the Shing View Acquisition out of its internal resources.

The Directors (excluding the independent non-executive Directors who have expressed theiropinion in the IBC Letter) consider that the terms of the Shing View Agreement are on normalcommercial terms, fair and reasonable and are in the interests of the Company and theShareholders as a whole.


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Conditions precedent

Completion of the Shing View Agreement is conditional upon:

(a) the due diligence investigation on Shing View and its subsidiaries, Shiyan Hao Shun andthe Talc Mine, including but not limited to the shareholding and corporate structure ofShing View and its subsidiaries and Shiyan Hao Shun, the ownership of the Talc Mine,the validity and subsistence of the mining and other licences (if any) in the possession ofShiyan Hao Shun, having been completed to the satisfaction of the Company in its solediscretion;

(b) the warranties under the Shing View Agreement remaining true and correct and notmisleading in any material respects at all times from the date of the Shing View Agreementup till the completion thereof;

(c) completion of the transfer of the entire equity interests in Shiyan Hao Shun free andclear from all encumbrances to Shing View or its wholly-owned subsidiary in compliancewith all applicable laws and regulations of the PRC;

(d) completion of the Co-operation Agreement and the SV Assignment Agreement inaccordance with their respective terms;

(e) renewal of the mining licence of the Talc Mine for such duration and upon and subject tosuch other terms and conditions as may be imposed by the PRC governmental authoritiesto the reasonable satisfaction of the Company; and

(f) the passing by the Independent Shareholders of the necessary resolution to approve theShing View Agreement and the transactions contemplated thereunder in accordance withthe Listing Rules.

If all conditions specified above have not been fulfilled (or, in respect of (a) and (b) only,waived by the Company) on or before 5:00 p.m. on 30 April 2010 (or such other date as theparties to the Shing View Agreement may agree) and either parties give notice to terminate theShing View Agreement, the Shing View Agreement shall thereupon terminate whereuponMr. Lam shall return the deposit without interests to the Company forthwith on demand.

Undertaking by Mr. Lam

Under the Co-operation Agreement, Mr. Mak has undertaken to finance the capital expenditureand working capital required for the commencement of the operation of the Talc Mine up toRMB7,500,000 (“CAPEX Funding Undertaking”).

Mr. Lam has irrevocably and unconditionally undertaken to the Company to procure thecompliance by Mr. Mak of the CAPEX Funding Undertaking and to indemnify the Companyagainst all losses, damages, liabilities and diminution in value of Shing View and/or itssubsidiaries which the Company may suffer or incur as a result of or in connection with thenon-compliance by Mr. Mak of the CAPEX Funding Undertaking to the extent of the Company’spercentage shareholding interest in Shing View immediately upon completion of the ShingView Agreement.


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The Company will be a passive investor. As at the Latest Practicable Date, Shing View has onedirector on its board. The Company will appoint its Director, Mr. Alex Wan, to take up a non-executive role and monitor Mr. Mak’s undertaking and the further operation of the Tale Mine.Mr. Alex Wan will have no voting rights in the board of directors of Shing View.

Completion

Completion of the Shing View Agreement shall take place on the third Business Day after thedate on which all the conditions precedent shall have been fulfilled or waived by the Company(or such other date as the parties hereto may agree).

Information on Shing View

Shing View is a company incorporated in the BVI on 1 February 2008 with limited liability andis an investment holding company. Shing View owns 100% of the equity interest in the WFOEwhich will acquire 100% equity interest in Shiyan Hao Shun, the owner of the mining licenceof the Talc Mine.

Financial Information of Shing View

Immediately upon completion of the Shing View Agreement, Shing View will become 17.5%owned by the Company. Set out below are the summary of the financial information of ShingView (prepared under IFRS):

From 1 February 2008(the date of From

incorporation) 1 January toto 31 December 2008 to 30 October 2009

(unaudited) (unaudited)RMB RMB

Turnover Nil NilProfit/(Loss) before and after tax Nil Nil

As at 31 December 2008 As at 30 October 2009(unaudited) (unaudited)

RMB RMB

Net assets 7 6,800

The loss for the period has been covered by a shareholder’s loan which has been waived by theshareholder.


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Information on Shiyan Hao Shun and the Talc Mine

Shiyan Hao Shun is a company established in the PRC on 12 January 2007 with a registeredcapital of RMB5,000,000. It is principally engaged in the business of talc mining. The principalasset of Shiyan Hao Shun is its mining licence of the Talc Mine. As informed by Shiyan HaoShun, the mining licence of the Talc Mine expired in November 2009 and it has already madean application for the renewal thereof to the relevant PRC governmental authorities. The termfor the mining licence will be 5 years and the production capacity will increase from 20,000tonnes per annum to 80,000 tonnes per annum.

According to the laws of the PRC and the Co-operation Agreement, Shing View and its indirectlywholly-owned subsidiary, Shiyan Hao Shun, has a mining licence of 3.22 sq. km. for a productioncapacity of 20,000 tonnes. The management of Shing View and Shiyan Hao Shun is not expectingto conduct any further exploration program at this stage as the management is focusing onadvancing the Talc Mine into commercial production.

According to the management account provided by Shiyan Hao Shun, the unaudited net loss ofShiyan Hao Shun for the year ended 31 December 2008 was approximately RMB588,067. Thenet assets of Shiyan Hao Shun as at 31 December 2008 was RMB4,125,534. The unaudited netloss during the period from 1 January 2009 to 31 October 2009 was approximately RMB493,483.

The Talc Mine is located at Chen Zhuang Village, Hu Jia Jian Town, Yuan County, Shiyan City,Hubei Province (湖北省十堰市鄖縣胡家菅鎮陳莊村) in the PRC. The mining licence of theTalc Mine currently covers an area of about 3.22 sq. km. Based on an initial estimation preparedby a PRC mining research institute, the Talc Mine has an estimated talc resources of not lessthan 800,000 tonnes as at 20 November 2009. Based on representations made by Shiyan HaoShun’s management, talc powder (final products) is trading at a range of RMB600 to RMB1,400per tonne, depending on mesh size and grading. The Directors, after making independent enquiryand market research, are of the view that the trading range of RMB600 to RMB1,400 pertonne, depending on the mesh size and grading, is reasonable.

The Talc Mine requires mining licence, safety production licence and explosive licence. Themining licence is in the process of renewal which will increase the production capacity to80,000 tonnes per annum. The safety production and explosive licence will be applied in duecourse before production.

The effective period of mining licence of the Talc Mine is from November 2006 to November2009 and it has an approved annual capacity of 20,000 tonnes.

The Talc Mine has no existing operation. The Talc Mine is in the process of renewing themining licence, which is expected to be renewed by April 2010 as additional information wasrequested. Other permits, including the safety production permit, shall be issued before thestart of the operation, which is expected to be in June 2010. To the best of the Directors’knowledge, information and belief and having made all reasonable enquiries, the Talc Minehas complied with all rules and regulations in the jurisdiction it is located previously.


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There are risks associated with obtaining the licence during new application or renewal uponexpiry, and failure to obtain or renew will result in the cease of operation. However, theprocedures are relatively straight forward when the operations are in compliance with all therelevant rules and regulations, yet there is no certainty that any future change in the rules mayaffect the licence application or renewal process.

Rehabilitation is being taken place for the existing tunnel. Once the relevant licences are obtained,the management will hire contract miners to mine the talc products, both using undergroundstoping method and open-pit blasting method. Then the talc will be crushed on site and shippedto the processing plant to grind into industrial use talc. The buyers will be from both local andoverseas, depending on the quality of the talc. The management has estimated a working capitalof RMB 7.5 million to start the operation at 20,000 tonnes of talc annually.

As mentioned, Shiyan Hao Shun is in the process of renewing and upgrading the mining licencefrom 20,000 tonnes per annum to 80,000 tonnes per annum and expects to obtain the renewedlicense in April 2010. It is expected that the Talc Mine will have a production of 80,000 tonnesof quality talc per year. Contract mining with local professional geological brigade will beused. Once the ore is mined out, they will be shipped to Shing View’s processing plant for theprocessing into final products. According to the management of Shiyan Hao Shun and ShingView, the land for the processing plant has been rented and the construction of the plant, whichwill take approximately 4 months, will begin in April 2010. The management of Shing Viewhas contacted a number of potential buyers for the final talc products already. It is expectedcommercial operation will commence in 2010. For further details of the technical aspects ofthe Talc Mine, please refer to the technical report on the Talc Mine set out in Appendix VI tothis circular.

Future expansion plan to 80,000 tonnes of talc annually is being contemplated for which theexisting facility has already considered the possibility of future increase. The equipment andworking capital cost will be at the range of RMB 5 million and such expansion will have to bediscussed by the shareholders of Shing View in the future. It is currently too preliminary todecide on such plan and the management will update the Shareholders accordingly if any planmaterializes.

The Directors estimated that, for the two years following the issue of this circular, the TalcMine will require a working capital and capital investment of approximately RMB7.5 million.Pursuant to the Shing View Agreement, the working capital and capital investment will beborne by Mr. Mak and is not the responsibility of the Company. The Directors, after due andcareful enquiry, are of the opinion that, in the absence of unforeseeable circumstances andafter taking into account of Mr. Mak’s financial resources, Mr. Mak has sufficient workingcapital to finance the operation of the Talc Mine for the two years following the issue of thiscircular.

As at the Latest Practicable Date, to the best of the Directors’ knowledge, information andbelief and having made all reasonable enquiries, the Talc Mine does not have any claim inrelation to the exploration and/or mining rights made or notified by third parties against theCompany, Shing View and/or Shiyan Hao Shun.


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Reasons and benefits of the Shing View Acquisition

Talc is mainly used for production of food, pharmaceutical and cosmetic goods and due to therapid economic growth in the PRC, the Directors (excluding the independent non-executiveDirectors) consider there is strong potential growth for the talc market in the PRC. The ShingView Acquisition therefore represents an attractive opportunity for the Company to becomeinvolved in the PRC talc industry. The Directors (excluding the independent non-executiveDirectors who have expressed their opinion in the IBC Letter) consider that the Shing ViewAcquisition would help diversifying the Company’s existing investments portfolio and improvingthe financial result of the Company and therefore are fair and reasonable and on normalcommercial terms. The Shing View Acquisition is in line with the Company’s investmentobjectives, policies and restrictions and is in the interests of the Shareholders as a whole.

Mining activities are always associated with risks, one of them being resources may not beeconomically extractable until they become reserve. The technical adviser has adopted therecovery rate for the estimation of resources of the Talc Mine, which is justified by the Board.The Directors consider that the Shareholders have been duly informed of the risks as the risksrelating to the Shing View Acquisition have been disclosed in the paragraph headed “Risksrelating to the Shing View Acquisition” of this circular below. In addition, the Shing ViewAcquisition is subject to the Independent Shareholders’ approval.

Despite the Talc Mine only has resources and most of the resources are in the inferred category,the Board considers exploitation of the Talc Mine is fair and reasonable and in the interests ofthe Company and the Shareholders as a whole based on the following factors:


b. With the renewed mining licence, the operation will become one of the largest in China.

c. The Board believes the Chinese economy will continue to grow and the demand forindustrial minerals, such as talc, will continue to increase.

d. The Chinese mining industry traditionally have very limited budget for explorationcompared to the Western mining industry due to the lack of capital markets for juniormining projects. The rather limited measured and indicated resources do not suggest thelack of resources thereof, but indicated that further exploration work should be warrantedto confirm the inferred resources.

e. The Talc Mine also has the geological potential to host other minerals, for which thecurrent consideration does not take this into account.

The Board, assisted by its investment adviser, has a standard due diligence procedure forinvestment. The due diligence was set out in two aspects: legal and technical. The Board hasfocused its legal due diligence on the title of the Talc Mine and also built in the necessarycondition precedents to insure against any potential title liability. On the technical side, theBoard has reviewed in details the technical report and the valuation report of the Talc Mine andperformed site visit due diligence.

The Board considered that, with the advice from its consultant and technical adviser, the TalcMine is of merit and the due diligence work as mentioned above is sufficient in arriving theinvestment decision.


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The Talc Mine does not have competitive advantages as compared with other competitors withinthe talc mine industry. However, taking in accounts that (i) the Talc Mine is historical minewith past production being taken place and (ii) its relatively small scale operations, it is theview of the Directors that the exploitation of the Talc Mine will incur very minimal capitalexpenditure and are in the best interest of the Company and its Shareholders.

Given the GDP growth rate of approximately 8.9% in 2009 and a target growth rate of 8% in2010, the Directors believe that selective potential investment opportunities in the PRC are inline with the investment objective of the Company seeking medium to long term capitalappreciation. Talc is a base material used in everyday life, including but not limited to, theproduction of food, pharmaceutical and cosmetic goods. With the increase in GDP, all basematerials, are expected to have a strong market demand going forward.

The Directors are of the view the Talc Mine (i) helps diversify the Company’s existing investmentportfolio; (ii) improves the financial result of the Company in the coming years; and (iii) is inline with the Company’s investment objective.

Summary of laws and regulations regarding the talc industry in the PRC

I. Under the “Mineral Resources Law of the PRC”

1. All mineral resources in the PRC are owned by the state. The state shall beresponsible for the exploration and exploitation of the mineral resources, whereasthe local government authorities shall be responsible for the administration of theexploration and exploitation of the mineral resources within their own jurisdictions.

2. Mining enterprises must obtain mining or exploration licenses.

3. According to the requirements of the “Measures on Registration of MineralResources Exploitation”, mining right usage fees shall be payable on an annualbasis by the licensees of the mining licenses.

II. Under the “Mineral Resources Law”, “Land Administration Law of the PRC” and“Rules on Land Rehabilitation”

A report on the environmental impact shall be submitted to the government’senvironmental protection authority by the entities prior to the commencement of theproduction and operating activities. The production and operating activities maycommence only after such the approval is obtained. In the course of the operations, theaforesaid legal requirements shall be observed and the operations shall be subject to thesupervision and management by various authorities such as environmental protection,land administration and so on.


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III. Laws And Regulations on Production Safety

Minerals enterprises shall comply with “Law on Production Safety of the PRC”, the“Law on Mine Safety of the PRC” and “Regulations on the Monitoring of Mine Safety”.The departments in charge of safety production at the county level or above are responsiblefor the overall supervision and management of the safety production within their ownjurisdictions. Under the “Regulations on Production Safety Licence”, mining enterprisemust obtain mining licenses and education and training on safety production must beprovided to workers.

IV. Taxation Regulations

Under “Taxation Law of the PRC”, “Provisional Regulations on Resource Tax of thePRC” and “Provisional Regulations on Resources Tax of the PRC”:

Reference for Tax rate/ ReferenceTax categories tax calculation tax amount for tax

Corporate income tax Production income, operation 25% Provisionalincome and other income, Regulations onnet of the related costs, Corporateexpenses and losses incurred Income Tax

of the PRC

Value-added tax Increased value 6% ProvisionalRegulations onValue-AddedTax of the PRC

Business tax Service income 3%-5% ProvisionalRegulations onBusinessTax of the PRC

City maintenance Business tax and VAT 5% (county, Provisionaland construction tax municipality, Regulations on

town), 7% City Maintenance(urban area) and Construction Tax

of the PRC

Resources tax Taxable amount RMB2-4/tonne Provisional(non-ferrous Regulations onmetals) Resources Tax

of the PRC


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V. Labour Regulations

Enterprises must comply with the law and regulations such as “Labor Law of the PRC”,“Labour Contract Law”, “Implementation Rules for the Labor Contract Law”,“Implementation Regulations for the Labour Contract Law” and “Labour DisputeMediation Arbitration Law” as well as relevant local regulations in employing workers.

1. enterprises must sign labour contracts with workers, otherwise they may have topay twice the salary and economic compensation;

2. enterprises must pay for the pension, medical, industrial, injury and maternityinsurances.

VI. Environmental Protection Regulations

Mining enterprises must comply with the relevant requirements with respect to theprotection, rehabilitation and prevention of soil erosion under the “Land AdministrationLaw” and the “Land Rehabilitation Provisions”. A report on the environmental impactshall be submitted to the relevant environmental protection authority for any possibleimpacts on the environment as stipulated in the “Environmental Protection Law” and anenvironmental protection management system shall be established. Enterprises whichdischarge water or air pollutants and the levy of charges thereon are subject to the “Lawon Prevention of Water Pollution”, the “Law on Prevention of Air Pollution” and the“Administrative Regulations on Levy and Utilisation of Sewage Charge”.

Risks relating to the Shing View Acquisition

The cash position of the Company decreases as a result of entering into the Shing View Acquisition

As a result of entering into the Shing View Acquisition, the cash position of the Company willdecrease and should any investment opportunity arises, the Company may not have sufficientinternally generated cash resources and bank facilities to finance these activities. In addition, ifthe Company is unable to obtain adequate financing on acceptable terms, or at all, to satisfy itsoperating, development and expansion plans, its business and results of operations may bematerially and adversely affected.

Changes in laws and regulations relating to the talc mining industry in the PRC may materiallyand adversely affect the results of operation of Talc Mine

It is not possible to guarantee that the current PRC investment climate will continue if social orpolitical upheaval or a change in leadership occurs. Possible risks include changes to taxationrates or current taxation concessions, limitations on the repatriation of dividends, the transferof funds, inflation, interest rates, exchange rates, government policy (including fiscal, monetaryand regulatory policies), consumer spending, employment rates, social upheaval or war. Whilstthe Company has not experienced any major political instability, the emergence of such politicalinstability in the future may lead to outbreaks of civil unrest which may have an adverse effecton the Company’s mining business, and may affect the Company’s overall financial positionand operating results and profitability.


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The ore reserves and mineral resources are estimates based on a number of assumptions, any adversechanges in which could require to lower the Talc Mine’s ore reserves and mineral resources

Ore reserves and mineral resource are estimates based on assumptions, knowledge, experienceand industry practice. No assurance can be given that any particular level of recovery of talcfrom ore reserves or mineral resources will in fact be realized or that an identified mineralresource will ever qualify as a commercially mineable (or viable) ore body which can be legallyand economically exploited. Such resources may not ultimately be able to be extracted at aprofit. Estimates which were valid when made may change significantly when new informationbecomes available and may be affected by factors such as the quality of the results of exploration,drilling and analysis of samples.


The grade of ore ultimately mined may differ from that indicated by drilling results. Short termfactors relating to ore reserves, such as the need for orderly development of ore bodies or theprocessing of new or different grades, may also materially and adversely affect the mineoperations. There can be no assurance that talc recovered in laboratory tests will be duplicatedunder on-site conditions or in production-scale operations. Material changes in ore reservesresulting from unexpected changes to the talc price, grades, production costs, stripping ratiosand recovery rates may affect their economic viability. Ore reserves are reported as generalindicators of mine life and should not be interpreted as assurances of mine life or of theprofitability of current or future operations.


An increase in the price of production inputs, including labour, power, mine consumables orother inputs can materially and adversely affect the results of operation of Talc Mine

The result of operation of the Talc Mine will be subject to the price of production inputs,including labour, power, mine consumables or other inputs. An increase in the price of productioninputs could adversely affect the performance of the Talc Mine business and results of operation.In more serious cases, if the price of production inputs increase dramatically, such increasecould cause the shutdown of the Talc Mine operation.

Uncertainties in relation to the application of taxation laws and regulations could materiallyand adversely affect the Talc Mine and results of operations

Any material changes in the PRC tax laws and regulation could materially and adversely affectthe Talc Mine’s business and results of operations.


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The Company’s future income, asset values and the price of the Shares can be affected by thesefactors and, in particular, by the market price for talc that the Company may produce and sell.

(C) Management Agreement

On 21 December 2009, the Company entered into the Management Agreement with BaronAsset Management in relation to the appointment of Baron Asset Management as the Company’sinvestment manager for the Management Period. The Management Agreement will supersedethe Previous Agreement and become the latest investment management agreement entered intobetween the Company and Baron Asset Management.

Principal terms

The principal terms of the Management Agreement include:

Management Period: From the Renewal Date until 30 June 2011

Services: Baron Asset Management shall provide non-exclusive investmentmanagement services and administrative services to the Companyincluding, inter alia:

(a) identify, review and evaluate investment and divestmentopportunities for the Company and negotiate the best termsof such investment and divestment for the Company;

(b) evaluate and consider potential investments and to renderinvestment advice to the Board based on availableinformation;

(c) assist the Board in structuring acquisitions and disposals,submit investment and divestment proposals to the Board;and


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(d) monitor and review the performance and status of theinvestments from time to time.

Management fee: Management fee for the period from 1 January 2010 to 31 December2010 is HK$1,800,000, which is payable in advance on or before31 January 2010 or within seven (7) days after the Shareholders’approval having been obtained (whichever is later); and

Management fee for the period from 1 January 2011 to 30 June2011 is HK$900,000, which is payable in advance on or before31 January 2011.

Reasons for entering into the Management Agreement

Baron Asset Management has provided investment management services to the Company since1 January 2009. The Board is of the view that the investment management services provided byBaron Asset Management are valuable which help to contribute favourable profit and assetgrowth to the Company. The Company considers that the Management Period of 1.5 yearsprovides flexibility (without the need to convene a general meeting solely for this purpose) forIndependent Shareholders’ approval at the annual general meeting of the Company in 2011.

Reasons for the change in management fee calculation

The amount of management fee payable to Baron Asset Management in accordance withPrevious Agreement was calculated based on fixed monthly fee of HK$65,000 and is nowrevised to HK$150,000 per month for the duration of the Management Agreement afterdiscussion between the Company and Baron Asset Management, representing approximately2% of the audited consolidated net asset value of the Company of last financial year.

Under Rule 21.04(1) of the Listing Rules, the Company is required to appoint an investmentadviser to provide asset management and advisory services. As the Company expands its scopeof investments to include global natural resources opportunities, the Company expects itsinvestment adviser to provide crucial and up-to-date market information to the Company.Furthermore, the investment adviser should be able to provide due diligence expertise and dealsourcing capabilities to the Company. The Board, after considering the experience of personnelin Baron Asset Management and its associated companies, including Baron Natural Resources,believes that Baron Asset Management and its group companies are experienced in the field ofnatural resources investments and can fulfill its objectives. Baron Natural Resources will provideall necessary technical support and expertise to Baron Asset Management.


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The Board is of the view that the change in management fee calculation is fair and reasonablewith the reasons stated below:

i) Baron Asset Management has the relevant experience and technical know-how inacquisitions and investments, particularly in areas relating to the global natural resources;and

ii) Global asset management practice usually takes in professional fees of 2%-4% of the netasset value of portfolio size.

In international asset management advisory industry, both monthly payment and annual paymentare common practice. Payment terms pursuant to the Management Agreement are strictly basedon commercial negotiations. If either party opts to terminate the Management Agreement priorto expiry of the Management Period, there will be a refund of outstanding balance due to theCompany. Accordingly, the Board considers that the change in management fee calculation isfair and reasonable to the Company and the Shareholders as a whole.

The maximum aggregate annual value for each of the two years ending 31 December 2011under the Management Agreement are set out below:

HK$

1 January 2010 to 31 December 2010 1,800,0001 January 2011 to 31 December 2011 900,000

As it is expected that the fees payable under the Management Agreement for each of the twoyears ending 31 December 2011 will exceed 25% of the relevant percentage ratios, the transactioncontemplated under the Management Agreement constitutes a non-exempt continuing connectedtransaction for the Company under Rule 14A.35 of the Listing Rules and will be subject to thereporting, announcement and the Independent Shareholders’ approval requirements.

Information of Baron Asset Management

Baron Asset Management, a company incorporated in Hong Kong with limited liability underthe Companies Ordinance (Chapter 32 of the Laws of Hong Kong) on 16 June 2005, is principallyengaged in the business of advising on securities and investment management and a licensedcorporation to carry out Type 4 (Advising on Securities), Type 6 (Advising on Corporate Finance)and Type 9 (Asset Management) regulated activities under the SFO.


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Set out below are the biographies of the directors of Baron Asset Management:

Mr. Alexander Cleveland Logie (“Mr. Alexander Logie”)

Mr. Alexander Logie has over 20 years of experience in banking and asset management industry.He acted in senior positions including founder, co-founder, president, CEO and advisor innumerous private equity funds and hedge funds in the recent ten years. He was also the vicepresident of Citibank Canada from 1985 to 1996, who managed a $60 billion currency andinterest rate swap portfolio, arranged structured financing for the Bank’s balance sheet andhelped manage the Bank’s funding gap; and the vice president of Phoenix Hedge Fund from1996 to 1998, who managed a proprietary market neutral trading book of fixed income andcurrency derivatives.

Mr. Alexander Logie is the President, CEO and Founder, of Candlebrook Capital Corp.“Candlebrook” from February 2007 to present, which is an international private equity andhedge fund advisors and placement agents. The private equity and hedge fund under Candlebrookincluded Vertex One, Synergy Global Capital, Brevet Capital, Third Eye Capital and VisionBrazil.

Mr. Alexander Logie is a responsible officer of Baron Asset Management and a licensed personfor Type 4 (Advising on Securities) and Type 9 (Asset Management) regulated activities underSFO.

Mr. Sze Tsai Ping, Michael (“Mr. Michael Sze”)

Mr. Michael Sze has over 30 years of experience in the financial and securities field. He graduatedwith a Master of Laws (LLM) Degree from the University of Hong Kong. He is currently aMember of the Market Misconduct Tribunal and a Member of the Disciplinary AppealsCommittee of the Stock Exchange. He was a former Council Member, Member of the MainBoard Listing Committee of the Stock Exchange, Member of the Cash Market ConsultativePanel of Hong Kong Exchanges & Clearing Limited and Member of the Securities and FuturesAppeals Panel.

Mr. Michael Sze is a Fellow of the Institute of Chartered Accountants in England and Wales,the Hong Kong Institute of Certified Public Accountants and the Association of CharteredCertified Accountants. He is also a Fellow of the Hong Kong Institute of Directors Limited.

Mr. Wan Chuen Fai (“Mr. Thomas Wan”)

Mr. Thomas Wan has over 5 years of experience in asset management industry in providingevaluation and recommendation on potential investment opportunities for professional investors.He also participates in fund management and risk control.

Mr. Thomas Wan was an associate director of Bridge Partners Investment Management Limitedfrom June 2002 to November 2006. He acted as asset management manager and responsibleofficer for Regal Portfolio Management Limited from December 2006 to September 2007.Mr. Thomas Wan is a responsible officer of Baron Asset Management and a licensed person forType 4 (Advising on Securities) and Type 9 (Asset Management) regulated activities underSFO.


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Mr. Lam Saihong Dennis (“Mr. Dennis Lam”)

Mr. Dennis Lam has over 5 years of experience in the asset management industry. He previouslyheld equity research and portfolio management responsibilities at Franklin TempletonInvestments and Schroder Investment Management (Hong Kong) Limited.

Mr. Dennis Lam graduated summa cum laude from Boston University with a B.A. in Economicsand Mathematics and received a Master of Arts degree in Statistics from Harvard University.Mr. Dennis Lam is a CFA charterholder, a certified Financial Risk Manager (FRM) and afellow member of the Global Association of Risk Professionals.

Information of Baron Natural Resources

Baron Natural Resources, a company incorporated in the BVI under the BVI Business CompaniesAct on 18 December 2008, is principally engaged in investments in the field of natural resources.

Set out below are the biographies of the senior management of Baron Natural Resources:

Dr. Lawrence Dick (“Dr. Dick”)

Dr. Dick is a professional geologist with more than 35 years of experience in geology andmineral exploration. Beginning in 1973, he received an honors degree B.Sc. at the Universityof British Columbia and subsequently his M.Sc. and Ph.D. at Queen’s University in Kingston,Ontario. He is the author and co-author of several publications and papers relating to geologicalsciences dating back to 1978. He is a past President and Councilor of the Geological Associationof Canada, Cordilleran Section as well as a Full and Fellow Member of the Society of EconomicGeologists and the Geological Association of Canada respectively.

Beginning in 1979, he held increasingly responsible positions with Chevron Resources Companyin the Americas to the level of Senior Staff Geologist where he remained until 1990. During histenure with Chevron, he led the team that discovered the Golden Bear deposit in northernBritish Columbia in 1980. In 1982, he led the team that discovered and developed to finalfeasibility stage, the Can Can gold-silver deposit in north-central Chile. During 1990-1995 hewas Manager of Exploration for Cia. Minera Dona Ines de Collahuasi, a joint venture corporationformed by Shell/Billiton, Chevron, Falconbridge and Anglo American to explore the largeCollahuasi landholdings in northern Chile. The resultant discoveries of approximately 1.5 billiontonnes of copper-molybdenum reserves have now been developed into one of the world’s largestoperating copper-molybdenum mines.

For his efforts in Chile during these years, in 1993 he was awarded the “Chevron Chairman’sAward” and in 1994, the “Mente et Malleo Award” at the Chilean Geological Congress for themost successful exploration team in Chile during the years 1991-1994. From 1995-2001,Dr. Dick founded General Minerals Corporation, a TSX company specializing in mineralexploration in Latin America and China. General Minerals technical successes included thediscovery of the Vizacachitas porphyry copper deposit (Chile), the Escalones copper-gold skarn/porphyry deposit (Chile), the Atocha silver deposits (Bolivia) as well as the discovery andexploration of more than 30 base and precious metals targets throughout Latin America.


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Mr. Bob Perry (“Mr. Perry”)

Mr. Perry is a professional exploration geologist with more than 25 years of domestic andinternational experience in mining and gold, uranium and base-metal exploration. In 1973, hereceived a B.A. in Geology at the University of Colorado and subsequently his M.Sc. in Geologyat the University of Colorado. He is the author and co-author of several publications and papersrelating to the gold mine and economic geology.

He was a district exploration manager at Energy Reserves Group from 1977 to 1981. From1981 to 1989, Mr. Perry was the senior geologist at Canyon Resources Corporation. From1989 to 1996, he was the founder and president of Lupine Minerals Corporation. From 1997 to2000, he was the COO and the Principal of Gold Discovery Company. From 2005 to 2008, heheld the position of Vice President of Exploration at Vista Gold Corporation, where he wasresponsible for managing all geologic related evaluation and exploration programs on thecompany’s properties as well as potential acquisition target, overseeing programs in Australia,Indonesia, Mexico and several western US states. In May 2008, he joined Intuitive ExplorationInc. as Vice President of Exploration.

Mr. Alan Edwards (“Mr. Edwards”)

Mr. Edwards is a successful mining professional with 25 years of diverse mining industryexperience, with an emphasis on copper deposit development. He was President and CEO ofFrontera Copper Corporation which was acquired in early 2009. From 2004 to 2007, Mr. Edwardsheld the position of Executive Vice President and Chief Operating Officer of Apex Silver MinesCorporation, where he was responsible for the engineering, construction and commissioningof the San Cristobal project in Bolivia. From 1996-2000, he worked for Cyprus Amax MineralsCompany where he rose to the position of President/General Manager of Sociedad MineraCerro Verde S.A. in Peru.

He worked with Phelps Dodge Corporation for 15 years, holding various positions includingGeneral Manager of Operations, Chino Mines Company. He has held senior operating positionswith P.T. Freeport Indonesia and Kinross Gold Corporation. He has obtained a B.Sc. in MiningEngineering and a MBA (Finance), both from the University of Arizona.

Mr. Daniel Laux (“Mr. Laux”)

Mr. Laux has over 25 years experience as an exploration and mine geologist. He received aB.Sc. in geology from Arizona State University in 1983. He has worked at the Cyprus Bagdadand Cyprus Miami mines in Arizona and the Carlin Gold mine in Nevada. Since 1984 he workedwith MagmaChem Exploration where he obtained and analyzed geological data. He has beeninvolved in comprehensive geological data compilations from Chile to Alaska.

He is a member of the Society of Economic Geologists, the Prospectors & DevelopersAssociation of Canada, the Geological Society of Nevada, and the Arizona Geological Society.


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Ms. Hazel Mullin (“Ms. Mullin”)

Ms. Mullin has a B.Sc. in geology from Edinburgh University and M.Sc. in Mineral ResourceEvaluation from Cardiff University. She has worked for over a decade as a geologist in theMining and Exploration Industry, working for various consultancies including the UKexploration arm of Gold Fields, the British Geological Survey and most recently as a consultinggeologist for consulting groups in Canada. She has extensive experience in GIS, the evaluationof ore bodies, mineral resources, date analysis and presentation, fieldwork programs & fieldevaluations.

Views of Directors

The Directors (excluding the independent non-executive Directors who have expressed theiropinion in the IBC Letter) consider that the terms of the Management Agreement are on normalcommercial terms, fair and reasonable and are in the interests of the Company and theShareholders as a whole.

(D) Consultancy Agreement

Date: 21 December 2009

Parties: The CompanyMs. Wan

Subject Matter

The Company has agreed to appoint and Ms. Wan has agreed to accept the appointment as aconsultant of the Company to provide consultancy services in relation to the business andoperation of the Company pursuant to the Consultancy Agreement.

Duration

Subject to the fulfillment of the condition precedent under the Consultancy Agreement, from21 December 2009 to 30 June 2011 (both dates inclusive). The Company considers that theduration of 1.5 years provides flexibility (without the need to convene a general meeting solelyfor this purpose) for Independent Shareholders’ approval at the annual general meeting of theCompany in 2011.

Termination

Either party may terminate the Consultancy Agreement by giving to the other party not lessthan two months’ notice in writing.


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Fee

Pursuant to the Consultancy Agreement, the Company shall pay to Ms. Wan in respect of herservices thereunder a remuneration to be determined by the Board on a time cost and projectbasis, provided that the remuneration shall not exceed HK$1,000,000 for each of the two financialyears ending 31 December 2011 of the Company. Accordingly, the maximum aggregate annualvalue for each of the two years ending 31 December 2011 under the Consultancy Agreement isHK$1,000,000. It is based on the time cost for appointing Ms. Wan as consultant, which isHK$1,000 per hour for each of the two years ending 31 December 2011. The Board is of theview that the time cost of HK$1,000 per hour is fair and reasonable when compared with theindustry practices and the above fee arrangement is fair and reasonable to the Company and theShareholders as a whole.

As the fees payable under the Consultancy Agreement for each of the two years ending31 December 2011 will exceed 25% of the relevant percentage ratios and Ms. Wan is a connectedperson of the Company by reason of her being a former executive Director within the preceding12 months from the date of the Consultancy Agreement, the transaction contemplated underthe Consultancy Agreement constitutes a non-exempt continuing connected transaction for theCompany under Rule 14A.35 of the Listing Rules and will be subject to the reporting,announcement and the Independent Shareholders’ approval requirements.

Condition precedent

The appointment of Ms. Wan as the consultant under the terms of the Consultancy Agreementshall be conditional upon the approval of the Independent Shareholders having been obtainedin compliance with the requirements of the Listing Rules.

Reasons for entering into of the Consultancy Agreement

Ms. Wan was a Director from 31 December 2004 to 21 December 2009 and she is familiar withthe operations of the Company. Ms. Wan’s duties include, inter alia, following up on theCompany’s existing investment projects, corporate finance and corporate administrative duties,providing advice and opinion in all aspects of the Company. Despite the resignation of Ms.Wan as an executive Director, the Company considers that being a former Director of theCompany, the experience and knowledge of Ms. Wan will be beneficial to the Company andher advice will be valuable to the management of the Company. In this regard, the Boardconsiders that it is in the interests of the Company and the Shareholders as a whole to retainMs. Wan as a consultant of the Company.

The Directors (excluding the independent non-executive Directors who have expressed theiropinion in the IBC Letter) consider that the terms of the Consultancy Agreement are on normalcommercial terms, fair and reasonable and are in the interests of the Company and theShareholders as a whole.


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(E) Sharing of Administrative Office Agreement

Date: 21 December 2009

Parties: Baron AsiaThe Company

Subject matter

Baron Properties Holding, a fellow subsidiary of Baron Asia which in turn is wholly-owned byBaron Group Limited, is the tenant of the Premises for a term of 3 years commencing from 1June 2009. Pursuant to the Sharing of Administrative Office Agreement, the Company is entitledto share the use of the Premises and Facilities during the term of the agreement.

Duration

From 1 February 2010 to 30 June 2011 (both dates inclusive).

Termination

Either party may terminate the Sharing of Administrative Office Agreement by giving to theother party not less than two months’ notice in writing, which is a commercial decision agreedupon by the Company and Baron Asia. The Directors consider that it will take approximatelytwo months to move to other premises, if desired.

Fee

The Company will pay Baron Asia by way of fee the sum of HK$200,000 per month, which ispayable monthly in advance within 5 days of the beginning of each calendar month.

The maximum aggregate annual value for each of the two years ending 31 December 2011under the Sharing of Administrative Office Agreement are set out below:

HK$

1 January 2010 to 31 December 2010 2,200,0001 January 2011 to 31 December 2011 1,200,000

Baron Asia is a company incorporated in Hong Kong with limited liability and is principallyengaged in investment holding. Since Baron Asia is indirectly wholly-owned by Ms. Wan,Baron Asia is a connected person of the Company and that the fees payable under the Sharingof Administrative Office Agreement for each of the two years ending 31 December 2011 willexceed 25% of the relevant percentage ratios, the transaction contemplated under the Sharingof Administrative Office Agreement constitutes a non-exempt continuing connected transactionfor the Company under Rule 14A.35 of the Listing Rules and will be subject to the reporting,announcement and the Independent Shareholders’ approval requirements.


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Condition precedent

The Sharing of Administrative Office Agreement is conditional upon, inter alia, the approvalof the Independent Shareholders for the transaction contemplated under the Sharing ofAdministrative Office Agreement having been obtained in compliance with the requirementsof the Listing Rules, and the obtaining of all approvals, permits and consents from any thirdparties which are necessary in connection with the execution and performance of Sharing ofAdministrative Office Agreement and any of the transactions contemplated thereunder by theparties thereto.

Reason for entering into the Sharing of Administrative Office Agreement

The Company occupies approximately 4,000 sq.ft. office space of the Premises and the all-in-cost per sq. ft. is approximately HK$50 per month. Baron Asia and the Board are of the viewthat the monthly fee payable under the Sharing of Administrative Office Agreement is fair,reasonable and on normal commercial terms, when comparing to other Grade A offices inCentral, Hong Kong.

The Directors (excluding the independent non-executive Directors who have expressed theiropinion in the IBC Letter) consider that the terms of the Sharing of Administrative OfficeAgreement are on normal commercial terms, fair and reasonable and are in the interests of theCompany and the Shareholders as a whole.

(F) Proposed Increase in Authorized Share Capital

The current authorized share capital of the Company is HK$15,000,000 divided into1,500,000,000 Shares. As at the Latest Practicable Date, the issued share capital of the Companycomprised 1,095,200,000 Shares. To ensure that there is sufficient authorized unissued sharecapital to accommodate future expansion of the Group and to give flexibility for the Directorsto raise fund by allotting and issuing Shares in the future, as and when necessary, the Directorspropose to increase the authorized share capital of the Company from HK$15,000,000 dividedinto 1,500,000,000 Shares to HK$30,000,000 divided into 3,000,000,000 Shares by creation ofan additional 1,500,000,000 new Shares. The additional new Shares, when issued and allotted,shall rank pari passu in all respects with existing Shares. The Directors expect that the increasein the authorized share capital of the Company will facilitate its future equity fund raisingactivities.

The increase in authorized share capital of the Company is conditional upon the approval bythe Shareholders by way of an ordinary resolution at the EGM. None of the Directors currentlyhave any intention of issuing any part of the new authorized share capital of the Company uponthe approval of the Shareholders having been obtained in respect of the increase in the authorizedshare capital of the Company at the EGM.


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(G) Re-election of Retiring Director

Pursuant to article 87(3) of the Company’s articles of association, Mr. Alex Wan, who wasappointed as an executive Director with effect from 21 December 2009 to fill a casual vacancy,shall hold office only until the next following general meeting of the Company. Mr. Alex Wan,being eligible, offers himself for re-election at the EGM.

Biographical details of Mr. Alex Wan are as follows:

Mr. Alex Wan, aged 50, graduated with a bachelor’s degree in economics from University ofCalifornia, Berkeley, the US. He has also undertaken a master’s degree course in businessadministration majoring in international management in Golden Gate University, US. Mr. AlexWan has over 19 years of banking experience in the US and the Asia Pacific Region. Duringthe period from 1995 to 1998, Mr. Alex Wan was the manager of Asian Global RelationshipCenters and the head of Credit and Corporate Finance for the West Coast Region of CitibankInternational Private Banking Group. He was responsible for the management and investmentof high net worth clients’ funds with a portfolio of over US$500 million on a discretionarybasis. During the period from 1998 to 1999, Mr. Alex Wan was the managing director and headof Asia Pacific and the West Coast of Blue Stone Capital Partners, L.P., a US investment andmerchant banking company. In 2000, Mr. Alex Wan was the general manager and businessdevelopment director of Beenz.com Greater China Limited covering the PRC, Taiwan, Koreaand Hong Kong. Beenz.com is a global customer relationship management solutions provider.From 2002 to 2008, Mr. Alex Wan had been the IT Business Director and Chief FinancialOfficer of Sino Resources Group Limited - previously known as Kenfair International (Holdings)Limited, a company whose securities are listed on the Stock Exchange.

Mr. Alex Wan has been appointed as an executive Director on 30 November 2001 and hasresigned as an executive Director with effective from 1 November 2004. As at the LatestPracticable Date, Mr. Alex Wan does not have any interest in shares of the Company within themeaning of Part XV of the SFO. He is an uncle of Ms. Wan, a substantial shareholder of theCompany. Save as disclosed above, Mr. Alex Wan does not have any other relationships withany directors, senior management or substantial shareholders of the Company and he has notheld any directorship nor has he held any senior management positions in other listed publiccompanies in the last three years preceding the Latest Practicable Date.

There is no service contract entered into between the Company and Mr. Alex Wan. Mr. AlexWan has not been appointed for any specified term and will be entitled to monthly salary ofHK$20,000 determined by the remuneration committee of the Company by reference to themarket terms, his experiences, duties and responsibilities in the Company, and a performance-based discretionary bonus to be determined by reference to the Company’s and individual’sperformance. Mr. Alex Wan will be subject to retirement by rotation and re-election inaccordance with the articles of association of the Company.

There is no information which is discloseable nor is/was Mr. Alex Wan involved in any of thematters required to be disclosed pursuant to any of the requirements of the provisions underRules 13.51(2)(h) to 13.51(2)(v) of the Listing Rules and there are no other matters that needto be brought to the attention of the Shareholders in respect of the re-election of Mr. Alex Wanas an executive Director.


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INFORMATION ON THE COMPANY

The Company is an investment holding company listed under Chapter 21 of the Listing Rules and isprincipally engaged in investing in companies and projects. The Company is a passive investor andmanaged by a team of professional fund/project managers.

As at 31 December 2009, the unaudited fair value of assets by percentage of the Company is asfollows:

%

Private equity fund 1.3Convertible debenture 5.8Unlisted equity securities 6.1HK listed shares 33.4Other assets (including cash, property, plant

and equipment, prepayments, etc.) 53.4

Total 100

Given the fluctuation in the worldwide financial markets following the financial turmoil in the UnitedStates, the Directors and the investment managers of the Company have adopted a cautious approachby not disposing further its investments, which include trading securities, convertible debentures andother private equity investments. It is the Directors’ and the investment managers’ view to adopt await-and-see strategy and to maintain a sufficient cash balance (the “Strategies”) in order to wait forthe market recovery.

At the beginning of 2009, the U.S and Chinese government introduce a series of economics revivalplan, which has led to a rebound in the growth of the global market, especially the stock market. TheStrategies have proved to be correct and the sufficient liquidity position has allowed the Company tomake further investments in low cost. For the year ended 31 December 2009 (unaudited), the Companyhas recorded:

1. a dividend income of approximately HK$9.9 million;

2. an interest income of approximately HK$0.8 million from available-for-sale financial assets;

3. a net realized loss of approximately HK$1.2 million on disposal of available-for-sale financialassets;

4. a net realized gain of approximately HK$14.1 million on disposal of financial assets designatedas held for trading;

5. a loss of approximately HK$4.1 million on reclassification from financial assets designated asheld for trading to available-for-sale financial assets; and

6. a net unrealized gain of approximately HK$3.7 million on financial assets designated as heldfor trading.


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The Company has made an unaudited net profit of HK$17.9 million for the year ended 31 December2009.

For the year ended 31 December 2008

(a)

Stock Financial assets designated RealisedCode as held for trading Proceeds Cost of Sales profit/(loss)

HK$ HK$ HK$

223 Kenfair International (Holdings) Limited 3,006,880 2,429,700 577,1803328 Bank of Communications Company Limited 2,750,935 2,569,336 181,599677 Golden Resources Development

International Limited 1,076,720 1,077,120 (400)223 Sino Resources Group Limited 208,000 436,800 (228,800)

Total 7,042,535 6,512,956 529,579

(b)

Market/ UnrealisedStock Financial assets designated Historical Carrying fair value lossCode as held for trading cost value 31/12/2008 31/12/2008

HKD HKD HKD HKD

78 Regal Hotels InternationalHoldings Ltd 2,290,000 1,920,000 645,000 (1,275,000)

120 Cosmopolitan InternationalHoldings Limited 16,259,280 17,027,100 15,162,000 (1,865,100)

223 Sino Resources Group Limited 18,388,657 18,522,720 5,347,350 (13,175,370)310 Prosperity Investment

Holdings Limited 13,738,800 13,738,800 3,266,280 (10,472,520)355 Century City International

Holdings Limited 5,334,680 2,217,120 697,320 (1,519,800)1881 Regal Real Estate Investment Trust 2,652,000 2,130,000 970,000 (1,160,000)3328 Bank of Communications

Company Limited 1,544,206 1,544,206 1,408,680 (135,526)2628 China Life Insurance

Company Limited 3,567,500 3,567,500 3,532,500 (35,000)883 CNOOC Limited 3,634,170 3,634,170 3,620,000 (14,170)941 China Mobile Limited 3,136,000 3,136,000 3,112,000 (24,000)323 Maanshan Iron & Steel

Company Limited 2,792,160 2,792,160 2,760,000 (32,160)310 Option Prosperity Investment

Holdings Limited 6,552,000 6,552,000 1,047,600 (5,504,400)982 iOne Holding Limited 7,040,000 7,040,000 3,564,000 (3,476,000)

Total 86,929,453 83,821,776 45,132,730 (38,689,046)


– 49 –

For the period ended 30 June 2009

(a)

Stock Financial assets designated RealisedCode as held for trading Proceeds Cost of Sales profit/(loss)

HK$ HK$ HK$

3328 Bank of Communications Company Limited 6,941,591 6,507,009 434,582223 Sino Resources Group Limited 9,752,460 5,860,836 3,891,624323 China National Building Material

Company Limited 2,807,500 2,760,000 47,500883 CNOOC Limited 3,728,980 3,620,000 108,980941 China Mobile (Hong Kong) Limited 3,155,000 3,112,000 43,0002628 China Life Insurance Company Limited 3,587,500 3,532,500 55,000310 Option Prosperity Investment Holdings Limited 5,008,320 1,047,600 3,960,720982 iOne Holdings Limited 3,520,000 3,564,000 (44,000)

Total 38,501,351 30,003,945 8,497,406

(b)

Market/ UnrealisedStock Financial assets designated Historical Carrying fair value profit/(loss)Code as held for trading cost value 30/06/2009 30/06/2009

HKD HKD HKD HKD

78 Regal Hotels InternationalHoldings Limited 2,290,000 645,000 612,000 (33,000)

120 Cosmopolitan InternationalHoldings Limited 17,263,380 16,166,100 13,594,000 (2,572,100)

223 Sino Resources Group Limited 16,465,518 16,465,518 18,789,480 2,323,962310 Prosperity Investment Holdings Limited 19,999,200 9,526,680 20,488,680 10,962,000355 Century City International

Holdings Limited 5,334,680 697,320 688,380 (8,940)1881 Regal Real Estate Investment Trust 2,652,000 970,000 1,120,000 150,000

Total 64,004,778 44,470,618 55,292,540 10,821,922

(c)

RealisedAvailable for Sale financial assets Proceeds Cost of Sales profit/(loss)

HK$ HK$ HK$

1 Unlisted bonds - LLOYHDS 2,292,695 7,809,415 (5,516,720)


– 50 –

It is the Board’s strategy to take a cautious and prudent approach in managing the Group’s investmentportfolio. The investment objective of the Company is to seek medium to long term capital appreciationby diversifying its investment portfolio into the following major categories.

1. Private equity investments

The Company ventured into private equity investment in 2007 by entering into a subscriptionagreement with Coutts Bank, a merchant banking subsidiary of RBS, to acquire an interest inCoutts Private Equity Limited Partnership (“CPELP”). CPELP offers the Company to access amulti-manager private equity fund that invests in international buy-out opportunities. Theinvestment objective of CPELP is to seek medium to long term capital appreciation. The sizeof CPELP at initial closing in July 2007 was approximately US$516 million. The subscriptioncommitment made by the Company was approximately US$600,000, representing approximately0.12% of the CPELP fund size. As of 31 December 2009, the investment in CPELP has incurreda loss on investment revaluation reserve of approximately HK$0.6 million.

2. Debt securities and preferred shares in major banks

The Company invested in two debt securities issued by Llodys Bank of the United Kingdom in2008 and 2009 bearing coupon rates of 7.875% and 6.9% respectively. The performance of theLlodys 6.9% and Llodys 7.875% securities were profit of approximately HK$4.3 million andloss of approximately HK$5.5 million respectively. Llodys bank has a credit rating ofapproximately AA- at the time of acquisition and the fluctuation of the valuation was causedby the financial tsunami in 2008.

The Company also invested in the preferred shares of HSBC in 2008. The investment made bythe Company was approximately HK$7.8 million. As of 31 December 2009, this investmentmade a gain on investment revaluation reserve of approximately HK$51,000 and earned adividend income of approximately HK$1 million. Having said that, at some point in 2008,there was no market or liquidity for the HSBC preferred shares and such was not foreseen bythe Company as HSBC preferred shares have a credit rating of over AA.

3. Trading strategies in listed securities

The Company trades in listed securities in Hong Kong. For the financial year ended 31 December2007, 2008 and 2009 (unaudited), the Group made a net realized/unrealized gain ofapproximately HK$10 million, a net realized/unrealized loss of approximately HK$38 millionand net realized/unrealized gain of approximately HK$18 million on trading in listed sharesrespectively.

Going forward, it is the Board’s intention to continue its existing strategy as stated above butwith a modification in skewing towards direct investments. With the growing importance innatural resources, the Company aims to expand its investment scope to cover passive investmentsin such areas.


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Since the fund raising from January 2007, the Company has received the net proceeds ofapproximately HK$56 million from the issue of shares. The Company has used the proceeds toinvest in private equity fund and listed shares in Hong Kong. For the three years ended31 December 2009, the Company has recorded the following:

1. a dividend income of approximately HK$8.9 million from the investment in Hong Konglisted shares;

2. a gain on investment revaluation reserve of approximately HK$11.4 million from theinvestment in Hong Kong listed shares;

3. a loss of approximately HK$3 million on reclassification from financial assets designatedas held for trading to available-for-sale financial assets;

4. a realized loss of approximately HK$11.3 million from the investment in Hong Konglisted shares; and

5. a loss on investment revaluation reserve of approximately HK$0.6 million arising onrevaluation of the private equity fund investment.

Balance ofCPELP Investment in Investment in Investment in Net Proceeds

Proceeds from (Private Stock #310 Stock #223 Stock #120 from thethe fund raising Equity Fund) (Share) (Share) (Share) Total fund raising

Date (HKD) (HKD) (HKD) (HKD) (HKD) (HKD) (HKD)

31 Jul 07 11,893,000 11,893,000 11,893,000(1,174,364) (1,174,364) 10,718,636

(887,380) (887,380) 9,831,2564 Sept 07 21,249,167 (234,000) 21,015,167 30,846,423

(718,816) (718,816) 30,127,607(14,710,200) (14,710,200) 15,417,407

(10,106,800) (10,106,800) 5,310,6073 Dec 07 (468,000) (468,000) 4,842,60726 Feb 08 10,491,360 10,491,360 15,333,9672 June 08 (234,000) (234,000) 15,099,9671 Sept 08 (468,000) (468,000) 14,631,967

(9,028,000) (9,028,000) 5,603,967(2,532,000) (2,532,000) 3,071,967

10 Sep 08 10,214,400 10,214,400 13,286,367(6,018,200) (6,018,200) 7,268,167

(6,260,400) (6,260,400) 1,007,76728 Nov 08 (234,000) (234,000) 773,7671 Dec 09 (234,000) (234,000) 539,76710 Dec 09 2,120,000 2,120,000 2,659,767

Total 55,967,927 (1,872,000) (18,899,200) (15,597,580) (16,939,380)


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Investment

Realised Loss on Dividend Revaluation Exchange

gain/(loss) reclassification income reserve reserve Total

HKD HKD HKD HKD HKD HKD

CPELP — — — (603,977) 1,163 (602,814)

Investment in Stock #310 (5,466,440) — 8,945,090 — — 3,478,650

Investment in Stock #223 (5,841,996) — — — — (5,841,996)

Investment in Stock #120 — (3,088,980) — 11,361,600 — 8,272,620

Total (11,308,436) (3,088,980) 8,945,090 10,757,623 1,163 5,306,460

Save as disclosed above, the Company has also invested in debt securities, convertible debenturesand preferred shares. For the three years ended 31 December 2009, the Company has recordedthe following:

1. an interest income of approximately HK$1.3 million from the investment in debt securitiesand convertible debentures;

2. a dividend income of approximately HK$1.2 million from the investment in preferredshares and debt securities;

3. a gain on investment revaluation reserve of approximately HK$51,000 from the investmentin preferred shares;

4. a net realized loss of approximately HK$1.2 million from the investment in debt securities;and

5. an exchange loss of approximately HK$1.7 million and a gain on exchange reserve ofapproximately HK$1 million from the investment in convertible debentures.

InvestmentRealised revaluation Dividend Interest Exchange Exchange

gain/(loss) reserve income income loss reserve TotalHKD HKD HKD HKD HKD HKD HKD

Lloyhds 7.875% (Unlisted Bond) (5,516,720 ) — — 307,125 — — (5,209,595)Lloyhds 6.9% (Unlisted Bond) 4,335,165 — 113,952 231,725 — — 4,680,842Convertible debentures CAD1.41m — — — 793,181 (1,672,449 ) 1,052,620 173,352HSBC preferred shares — 50,961 1,053,772 — — — 1,104,733

Total (1,181,555 ) 50,961 1,167,724 1,332,031 (1,672,449 ) 1,052,620 749,332

There is no agreement or understanding between the Company and any of its investee companiesin relation to control or voting matters. Acquisition of shares in the investee company by theCompany is on an open market basis.


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As at the Latest Practicable Date, the Company holds 50,840,000 shares in CosmopolitanInternational Holdings Limited (“Cosmo”) (Stock Code:120), representing 2.3% of the issuedshare capital of Cosmo. On 22 December 2009, Cosmo disclosed under statutory disclosure ofinterest regulation that it held 161,184,000 shares in the Company, representing 14.99% of theissued share capital of Company. Save as disclosed above, there are no cross holding interestsbetween the Company and its investments.

Given the downturn in global economy and the after effect of the financial tsunami, the Directorswill continue to take a cautious and prudent approach in managing the Group’s investmentportfolio and developing the investment strategies. The Company will continue to look out forinvestment opportunities that offer outstanding returns and within the acceptable risk profile ofthe Company.

Since January 2007, significant cashflows of the Company represent:

(i) net proceeds from the issue of new Shares;(ii) sale proceeds on disposal of subsidiaries;(iii) sale proceeds in relation to the disposal of financial assets;(iv) dividend income;(v) cost of acquiring financial assets;(vi) operating cost (inclusive of investment management fee, rental expense, directors’

remuneration, staff salaries, etc.); and(vii) purchase of a property in Hong Kong.

Working capital is defined as the amount of cashflow that is required for the normal operationof the Company. In this regard, the working capital requirements of the Company include therental and administration costs. The working capital requirement for 2009 was approximatelyHK$5.6 million.

LISTING RULES IMPLICATION

Since Baron Natural Resources, which is a company indirectly wholly-owned by Ms. Wan, is anassociate of Ms. Wan and Ms. Wan is a former executive Director within the 12 month period prior tothe date of the Fame Oriented Agreement, Baron Natural Resources is a connected person of theCompany under the Listing Rules. As the consideration under the Fame Oriented Acquisition doesnot exceed 25% of the relevant percentage ratios, the Fame Oriented Acquisition constitutes a connectedtransaction for the Company under Chapter 14A of the Listing Rules and will be subject to theIndependent Shareholders’ approval.

Mr. Mak is an uncle of Ms. Wan and is deemed to be an associate of Ms. Wan pursuant to Rule14A.11(4)(c) of the Listing Rules. Since Ms. Wan is a former executive Director within the 12 monthperiod prior to the date of the Shing View Agreement, Mr. Mak is a connected person of the Companyunder the Listing Rules. Notwithstanding that Mr. Mak is not a party to the Shing View Agreement,since the SV Assignment Agreement and the Shing View Agreement will be completedcontemporaneously with each other and the 17.5% equity interest in Shing View proposed to beacquired by the Company from Mr. Lam under the Shing View Agreement will come directly fromthe 80% equity interest proposed to be acquired by Mr. Lam from Mr. Mak under the SV Assignment


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Agreement, the transactions contemplated under the SV Assignment Agreement and the Shing ViewAgreement will be treated as if they were one transaction. As the consideration under the Shing ViewAcquisition does not exceed 25% of the relevant percentage ratios, the Shing View Acquisitionconstitutes a connected transaction for the Company under Chapter 14A of the Listing Rules and willbe subject to the Independent Shareholders’ approval.

Baron Asset Management, as the investment manager of the Company under the ManagementAgreement, is a connected person of the Company pursuant to Rule 21.13 of the Listing Rules. As itis expected that the fees payable under the Management Agreement for each of the two years ending31 December 2011 will exceed 25% of the relevant percentage ratios, the transaction contemplatedunder the Management Agreement constitutes a non-exempt continuing connected transaction forthe Company under Rule 14A.35 of the Listing Rules and will be subject to the reporting, announcementand the Independent Shareholders’ approval requirements.

As the fees payable to Ms. Wan under the Consultancy Agreement for each of the two years ending31 December 2011 will exceed 25% of the relevant percentage ratios, the transaction contemplatedunder the Consultancy Agreement constitutes a non-exempt continuing connected transaction for theCompany under Rule 14A.35 of the Listing Rules and will be subject to the reporting, announcementrequirements and the Independent Shareholders’ approval requirements.

Since Baron Asia is indirectly wholly-owned by Ms. Wan, Baron Asia is a connected person of theCompany and that the fees payable under the Sharing of Administrative Office Agreement for eachof the two years ending 31 December 2011 will exceed 25% of the relevant percentage ratios, thetransaction contemplated under the Sharing of Administrative Office Agreement constitutes a non-exempt continuing connected transaction for the Company under Rule 14A.35 of the Listing Rulesand will be subject to the reporting, announcement and the Independent Shareholders’ approvalrequirements.

INDEPENDENT BOARD COMMITTEE

The Independent Board Committee which comprises Mr. Yan Mou Keung, Ronald, Mr. Cheng WingKeung, Raymond and Mr. Kwong Kwan Tong, all being the independent non-executive Directors,has been established to advise the Independent Shareholders in respect of the Connected Transactionsand the Continuing Connected Transactions.

Veda Capital has been appointed as the independent financial adviser to advise the Independent BoardCommittee and the Independent Shareholders in respect of the Connected Transactions and theContinuing Connected Transactions.

The Independent Board Committee and the Directors, having taken into account the advice of VedaCapital, consider that the Connected Transactions and the Continuing Connected Transactions wereentered into on normal commercial terms and that the terms of the Connected Transactions and theContinuing Connected Transactions are fair and reasonable and in the interests of the Group so far asthe Independent Shareholders are concerned and accordingly recommend the Independent Shareholdersto vote in favour of the ordinary resolutions which will be proposed at the EGM for approving theConnected Transactions and the Continuing Connected Transactions.

The text of the IBC Letter is set out on pages 56 to 57 of this circular and the text of the letter fromVeda Capital containing its advice is set out on pages 58 to 85 of this circular.


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EGM

The EGM will be held at 4th Floor of Aon China Building, 29 Queen’s Road Central, Hong Kong, on30 April 2010 at 9:30 a.m. to consider, if thought fit, approve, amongst other things, the terms of theConnected Transactions and the Continuing Connected Transactions by the Independent Shareholdersand the proposed increase in authorized share capital of the Company and the re-election of retiringDirector by the Shareholders.

A notice convening the EGM is set out on pages 179 to 181 of this circular. A form of proxy for useat the EGM is enclosed. Whether or not you are able to attend the EGM in person, you are requestedto complete and return the form of proxy in accordance with the instructions printed thereon to theshare registrar of the Company, Tricor Standard Limited at 26th Floor, Tesbury Centre, 28 Queen’sRoad East, Wanchai, Hong Kong as soon as possible and in any event no later than 48 hours beforethe time appointed for holding of the EGM or any adjournment thereof (as the case may be). Completionand return of the form of proxy will not preclude you from attending and voting in person at the EGMor any adjournment thereof (as the case may be) should you so wish.

As at the Latest Practicable Date, (i) Mr. Mak, Ms. Wan and their associates together hold 230,280,511Shares, representing approximately 21.03% of the issued share capital of the Company, will abstainfrom voting on the resolutions to approve the Connected Transactions and the Continuing ConnectedTransactions to be proposed at the EGM and (ii) Mr. Lam, who is a party to and having a materialinterest in the Shing View Agreement, will abstain from voting on the resolution to approve the ShingView Acquisition.

RECOMMENDATION

The Board having taken into account the advice of Veda Capital and the Independent Board Committeeconsiders that the terms of the Connected Transactions and the Continuing Connected Transactionsare fair and reasonable and are beneficial to and in the best interests of the Company and theShareholders as a whole. Accordingly, the Directors recommend the Shareholders to vote in favourof the relevant resolutions at the EGM.

ADDITIONAL INFORMATION

Your attention is drawn to the IBC Letter and the letter from Veda Capital set out in this circularwhich contains the recommendation of the Independent Board Committee to the IndependentShareholders and the advice of Veda Capital to the Independent Board Committee and the IndependentShareholders respectively. Your attention is also drawn to the additional information set out in AppendixVII to this circular.

For and on behalf of the BoardChina Investment Fund Company Limited

Mr. William Robert MajcherExecutive Director

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

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(Stock code: 00612)

14 April 2010

To the Independent Shareholders

Dear Sir or Madam,

CONNECTED TRANSACTIONSAND

CONTINUING CONNECTED TRANSACTIONS

We refer to the circular of the Company dated 14 April 2010 (the “Circular”) to the Shareholders, ofwhich this letter forms part. Capitalised terms used in this letter shall have the same meanings asdefined in the Circular unless the context otherwise requires.

We have been appointed by the Board as members to form the Independent Board Committee and toadvise you the terms of the Connected Transactions and the Continuing Connected Transactionswhether such terms are fair and reasonable and in the interests of the Company and the IndependentShareholders as a whole and how to vote on resolutions regarding the Connected Transactions andthe Continuing Connected Transactions.

Veda Capital has been appointed as the independent financial adviser to advise the Independent BoardCommittee and the Independent Shareholders as to whether the terms of the Connected Transactionsand the Continuing Connected Transactions are fair and reasonable so far as the IndependentShareholders are concerned, whether such terms are in the interests of the Company and theIndependent Shareholders as a whole and how to vote on the resolutions regarding the ConnectedTransactions and the Continuing Connected Transactions. Details of its advice, together with theprincipal factors taken into consideration in arriving at such advice, are set out on pages 58 to 85 ofthe Circular.

Your attention is also drawn to the letter from the Board set out on pages 7 to 55 of the Circular andthe additional information set out in Appendix VII to the Circular.


LETTER FROM THE INDEPENDENT BOARD COMMITTEE

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Having considered the terms of the Connected Transactions and the Continuing Connected Transactionsand the advice of Veda Capital, we are of the opinion that the terms of the Connected Transactionsand the Continuing Connected Transactions are fair and reasonable so far as the IndependentShareholders are concerned and are in the interests of the Company and the Independent Shareholdersas a whole. Accordingly, we recommend the Independent Shareholders to vote in favour of theresolutions to be proposed at the EGM to approve the Connected Transactions and the ContinuingConnected Transactions.

Yours faithfully,Independent Board Committee of

CHINA INVESTMENT FUND COMPANY LIMITED

Mr. Yan Mou Keung, Ronald Mr. Cheng Wing Keung, Raymond Mr. Kwong Kwan TongIndependent non-executive Independent non-executive Independent non-executive

Director Director Director

LETTER FROM VEDA CAPITAL

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The following is the full text of a letter of advice from Veda Capital to the Independent Board Committeeand the Independent Shareholders in relation to the Connected Transactions and the ContinuingConnected Transactions prepared for the purpose of inclusion in this circular.

Veda Capital LimitedSuite 3214, 32/F., COSCO Tower183 Queen’s Road Central, Hong Kong

14 April 2010

To the Independent Board Committee and the Independent Shareholders ofChina Investment Fund Company Limited

Dear Sirs,

CONNECTED TRANSACTIONSAND

CONTINUING CONNECTED TRANSACTIONS

INTRODUCTION

We refer to our appointment to advise the Independent Board Committee and the IndependentShareholders in respect of the fairness and the reasonableness of the terms of the ConnectedTransactions and the Continuing Connected Transactions, details of which are set out in the circularto the Shareholders dated 14 April 2010 (the “Circular”), of which this letter forms part. Terms usedin this letter have the same meanings as defined in the Circular unless the context requires otherwise.

Reference is made to the Announcement in relation to, among other things, (i) the Fame OrientedAgreement entered into between the Company and Baron Natural Resources on 21 December 2009whereby the Company has conditionally agreed to acquire from Baron Natural Resources 12.5%equity interest in Fame Oriented for a consideration of HK$19.20 million; (ii) the Shing ViewAgreement entered into between the Company and Mr. Lam on 21 December 2009 whereby theCompany has conditionally agreed to acquire from Mr. Lam 17.5% equity interest in Shing View fora consideration of HK$19.88 million; (iii) the Management Agreement entered into between theCompany and Baron Asset Management on 21 December 2009 in relation to the appointment ofBaron Asset Management as the Company’s investment manager for the Management Period; (iv)the Consultancy Agreement entered into between the Company and Ms. Wan on 21 December 2009in relation to the appointment of Ms. Wan as a consultant to the Company; and (v) the Sharing ofAdministrative Office Agreement entered into between the Company and Baron Asia on 21 December2009 in relation to the sharing of the use of the Premises and the Facilities during the period from 1February 2010 to 30 June 2011.


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Since Baron Natural Resources, which is a company indirectly wholly-owned by Ms. Wan, is anassociate of Ms. Wan and Ms. Wan is a former executive Director within the 12 month period prior tothe date of the Fame Oriented Agreement, Baron Natural Resources is a connected person of theCompany under the Listing Rules. As the consideration under the Fame Oriented Acquisition doesnot exceed 25% of the relevant percentage ratios, the Fame Oriented Acquisition constitutes a connectedtransaction for the Company under Chapter 14A of the Listing Rules and will be subject to theIndependent Shareholders’ approval.

Mr. Mak is an uncle of Ms. Wan and is deemed to be an associate of Ms. Wan pursuant to Rule14A.11(4)(c) of the Listing Rules. Since Ms. Wan is a former executive Director within the 12 monthperiod prior to the date of the Shing View Agreement, Mr. Mak is a connected person of the Companyunder the Listing Rules. Notwithstanding that Mr. Mak is not a party to the Shing View Agreement,since the SV Assignment Agreement and the Shing View Agreement will be completedcontemporaneously with each other and the 17.5% equity interest in Shing View proposed to beacquired by the Company from Mr. Lam under the Shing View Agreement will come directly fromthe 80% equity interest proposed to be acquired by Mr. Lam from Mr. Mak under the SV AssignmentAgreement, the transactions contemplated under the SV Assignment Agreement and the Shing ViewAgreement will be treated as if they were one transaction. As the consideration under the Shing ViewAcquisition does not exceed 25% of the relevant percentage ratios, the Shing View Acquisitionconstitutes a connected transaction for the Company under Chapter 14A of the Listing Rules and willbe subject to the Independent Shareholders’ approval.

Baron Asset Management, as the investment manager of the Company under the ManagementAgreement, is a connected person of the Company pursuant to Rule 21.13 of the Listing Rules. As itis expected that the fees payable under the Management Agreement for each of the two years ending31 December 2011 will exceed 25% of the relevant percentage ratios, the transaction contemplatedunder the Management Agreement constitutes a non-exempt continuing connected transaction forthe Company under Chapter 14A.35 of the Listing Rules and will be subject to the reporting,announcement and the Independent Shareholders’ approval requirements.

As the fees payable to Ms. Wan under the Consultancy Agreement for each of the two years ending31 December 2011 will exceed 25% of the relevant percentage ratios, the transaction contemplatedunder the Consultancy Agreement constitutes a non-exempt continuing connected transaction for theCompany under Rule 14A.35 of the Listing Rules and will be subject to the reporting, announcementrequirements and the Independent Shareholders’ approval requirements.

Since Baron Asia is indirectly wholly-owned by Ms. Wan, Baron Asia is a connected person of theCompany and that the fees payable under the Sharing of Administrative Office Agreement for eachof the two years ending 31 December 2011 will exceed 25% of the relevant percentage ratios, thetransaction contemplated under the Sharing of Administrative Office Agreement constitutes anon-exempt continuing connected transaction for the Company under Rule 14A.35 of the ListingRules and will be subject to the reporting, announcement and the Independent Shareholders’ approvalrequirements.


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The Independent Board Committee, comprising Mr. Yan Mou Keung, Ronald, Mr. Cheng Wing Keung,Raymond and Mr. Kwong Kwan Tong, has been established to advise the Independent Shareholdersas to (i) whether the Connected Transactions and the Continuing Connected Transactions were enteredinto on normal commercial terms; (ii) whether the terms of the Connected Transactions and theContinuing Connected Transactions are fair and reasonable so far as the Independent Shareholdersare concerned; (iii) whether the terms of the Connected Transactions and the Continuing ConnectedTransactions are in the interests of the Company and the Independent Shareholders as a whole; and(iv) how the Independent Shareholders should vote in respect of the relevant resolutions to approvethe Connected Transactions and the Continuing Connected Transactions at the EGM. The appointmentof Veda Capital has been approved by the Independent Board Committee.

BASIS OF OUR OPINION

In formulating our opinion and advice, we have relied upon accuracy of the information andrepresentations contained in the Circular and information provided to us by the Company, theDirector(s) and the management. We have assumed that all statements, information and representationsmade or referred to in the Circular and all information and representations which have been providedby the Company, the Director(s) and the management, for which they are solely and wholly responsible,were true at the time they were made and continue to be true as at the date of the EGM. We have alsoassumed that all statements of belief, opinion and intention made by the Director(s) in the Circularwere reasonably made after due and careful enquiry and were based on honestly-held opinions.

We have no reason to doubt the truth, accuracy and completeness of the information and representationsprovided to us by the Director(s) and have been confirmed by the Director(s) that no material factsand representations the omission of which would make any statement in the Circular, including thisletter, misleading. We have not, however, conducted any independent in-depth investigation into thebusiness affairs, financial position or future prospects of the Group, nor have we carried out anyindependent verification of the information provided by the Director(s) and management of theCompany. We consider that we have reviewed sufficient information to reach an informed view andto justify reliance on the accuracy of the information and representations contained in the Circularand to provide a reasonable basis for our recommendation regarding the Connected Transactions andthe Continuing Connected Transactions.


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PRINCIPAL FACTORS AND REASONS CONSIDERED

In giving our recommendation to the Independent Board Committee and the Independent Shareholdersin respect of the fairness and reasonableness of the terms of the the Connected Transactions and theContinuing Connected Transactions, we have taken into consideration the following factors andreasons:

A. BACKGROUND AND FINANCIAL INFORMATION OF THE GROUP

The Company is an investment holding company listed under Chapter 21 of the Listing Rulesand is principally engaged in investing in companies and projects. The Company is a passiveinvestor and managed by a team of professional fund/project managers.

According to the Group’s 2008 annual report (the “AR 2008”), the revenue of the Group wasapproximately HK$1.95 million for the year ended 31 December 2008, which represented adecrease of approximately 17.02% as compared to the revenue for the year ended31 December 2007 of approximately HK$2.35 million. As advised by the Company, suchdecrease in revenue was mainly attributable to the unfavorable investment climate during theyear 2008. As set out in the AR 2008, the Group recorded net loss of approximately HK$43.46million for the year ended 31 December 2008 and net profit of approximately HK$7.95 millionfor the year ended 31 December 2007. As advised by the Directors, the net loss was mainly dueto the unrealized loss on financial assets at fair value through profit or loss of approximatelyHK$38.69 million.

According to the Group’s 2009 interim report (the “IR 2009”), the revenue of the Group wasapproximately HK$0.86 million for the six months ended 30 June 2009, representing an increaseof approximately 26.47% as compared to the corresponding figure of approximately HK$0.68million for the six months ended 30 June 2008. As advised by the Directors, the increase inrevenue was mainly due to the increase in interest income and dividend income from available-for-sale financial assets. As set out in the IR 2009, the Group recorded net profit of approximatelyHK$11.55 million for the six months ended 30 June 2009 and net loss of approximately HK$3.33million for the six months ended 30 June 2008. As advised by the Company, such financialimprovement was mainly attributable to the unrealized gain on financial assets at fair valuethrough profit or loss.


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B. FAME ORIENTED ACQUISITION

1. Information on assets being acquired

As set out in the Letter from the Board (the “Board Letter”), Fame Oriented is a companyincorporated in the BVI on 24 June 2009 with limited liability and is an investmentholding company. As advised by the Company, as at the Latest Practicable Date, FameOriented is owned as to 71.00% by an Independent Third Party and as to 29.00% byBaron Natural Resources and its major asset is Golden Fame which has entered into theFO Assignment Agreement to acquire the Fronteer Properties.

Golden Fame is a newly incorporated project company for the purpose of engaging inexploration and mining activities in the Fronteer Properties. As advised by the Company,Golden Fame is wholly owned by Fame Oriented and will acquire the legal title to theFronteer Properties upon completion of the Underlying Agreement and the FO AssignmentAgreement. Further details of the Underlying Agreement and the FO Assignment havebeen set out under the section headed “(A) The Fame Oriented Acquisition” in the BoardLetter.

As set out in the Board Letter, Fronteer Properties include (i) 112 unpatented lode/placerclaims located in Township 14 South, Range 27 East, Sections 15, 16, 17, 20, 21, 22, 27& 28, Cochise County, Arizona, (ii) 20 patented mining claims located in Township 14South, Range 27 East, Sections 21, 22, 27, Cochise City, Arizona and (iii) certain feelands located in Township 14 South, Range 27 East.

The Gold Ridge Property is one of the patented mining claims of the Fronteer Propertiesand is located in north central Cochise County in southeastern Arizona in the southernfoothills of the Dos Cabezas Mountains. The Gold Ridge Property consists of73.95-acres of private property, 333.38-acres of patented mining claims and 112unpatented mining claims covering 1,718.74-acres. In addition, the property holdingsinclude one leased group of 12 unpatented mining claims covering 216.34-acres. GoldenFame controls the mining rights on a total of 2,342-acres which includes Gold Ridge,Gold Prince and the Dives Mines 435 drill holes have been drilled to date at the GoldPrince Mine of the Gold Ridge Property while other concession such as the Gold Ridgeand the Dives Mines have yet to undertake large scale exploration work. According tothe preliminary technical report issued by Mine Mappers L.L.C., the veins of the GoldRidge Property have produced approximately 22,000 ounces of gold at grades approaching0.5-ounces per ton from small tonnage underground mines. A new mineral resourceestimate for the Gold Prince portion of the Gold Ridge Property is 2,999,931 tons at agrade of 0.3-ounces per ton gold.

According to the laws of the State of Arizona, the Underlying Agreement and the FOAssignment Agreement, Golden Fame has the rights to explore and exploit the GoldRidge Property. By paying US$350,000 to Fronteer Development, Golden Fame willobtain the title of the Gold Ridge Property. Upon receiving of the relevant permits,including but not limited to underground working permit, Golden Fame will have the


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rights to explore and exploit the Gold Ridge Property. The management of Golden Fameis expected to undertake diamond drill at the Gold Ridge Property to increase the numberof ores available for future mining while advancing into production.

The Gold Ridge Property is the major asset under the Fronteer Properties and the FameOriented Agreement. While there are other claims under the Fronteer Properties, thoseclaims have not yet explored with limited geological information as to their resourcepotential.

As set out in the Board Letter, the Gold Ridge Property has no existing operation. TheGold Ridge Property is in the process of applying to the underground permit under thelaws of the State of Arizona. Such permit is procedural in nature and Golden Fameexpects to receive the permit in April 2010, when the development and the rehabilitationof the Gold Ridge Property begins. To the best of the Directors’ knowledge, informationand belief having made all reasonable enquiries, the Gold Ridge Property has compliedwith all rules and regulations in the jurisdiction it is located previously.

Immediately upon completion of the Fame Oriented Agreement, Fame Oriented willbecome 12.5% owned by the Company. Set out below are the summary of the financialinformation of Fame Oriented (prepared under IFRS):

From 24 June 2009(the date of incorporation) to

30 November 2009(unaudited)

US$

Turnover NilProfit/(Loss) before and after tax Nil

As at 30 November 2009(unaudited)

US$

Net assets 10,000

As set out in the Board Letter, the loss for the period has been covered by a shareholder’sloan which has been waived by the shareholder.

Further background details of the Fame Oriented Acquisition and information on theGold Ridge Property has been set out in the sub-sections headed “Background” and“Information on the Gold Ridge Property” respectively under the section headed “(A)The Fame Oriented Acquisition” in the Board Letter.


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2. Reasons for the Fame Oriented Acquisition

As set out in the Board Letter, the Directors consider that the entering of the Fame OrientedAcquisition represents a good opportunity to diversify the Company’s existing investmentsto maximise Shareholders’ value by capturing the potential growth of the gold price. Inview of the potential benefits generated from the Fame Oriented Acquisition to theCompany, the Directors consider that the terms and conditions of the Fame OrientedAgreement are fair and reasonable and on normal commercial terms. The Fame OrientedAcquisition is in line with the Company’s investment objectives, policies and restrictionsand is in the interests of the Shareholders as a whole.

Also set out in the Board letter, despite the Gold Ridge Property only has resources andhalf of them are in the inferred category, the Board considers exploitation of the GoldRidge Property is fair and reasonable and in the interests of the Company and theShareholders as a whole based on the following factors:


b. It is a small operation of which does not have a lot of technical difficulty.

c. Gold price is in the historical peak and the Board believes the gold price willstabilize at this level, which makes the project very profitable.

d. Without the consideration of the inferred resources, the project is still consideredto be a sizeable project with approximately one million ounces of gold.

e. The existence of neighbour mills and smelters has created demand for the products.

f. The project is located in the State of Arizona, USA. It is a mining friendly areaand mining in general is subject to minimal political risk.

g. The Board considers the Gold Ridge Property to be economically viable afterconsidering the current gold price.

The Board considered that, with the advice from its consultant and technical adviser, theGold Ridge Property is of merit and the due diligence work is sufficient in arriving theinvestment decision. The Gold Ridge Property does not have competitive advantages ascompared with other competitors within gold mine industry. However, taking into accountsthat (i) the Gold Ridge Property have historical mines with past production being takenplace; and (ii) its relatively small scale operations, it is the view of the Directors that theexploitation of the Gold Ridge Property will incur very minimal capital expenditure andare in the best interest of the Company and its Shareholders.


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Also set out in the Board Letter, Gold price has been on an increasing trend from 2002.In 2002 gold was approximately US$300 per ounce. As at the Latest Practicable Date,gold was approximately US$1,150 per ounce. Gold demand can be divided into twocategories: fabrication and investment. Fabrication demand comprises demand fromjewelry, production of electronics, dental products, and gold used for other industrialand decorative applications. In 2009, approximately 80% of the global demand for goldwas fabrication demand. Most of this demand was for jewelry, which contributedapproximately 80% of the total fabrication demand. In 2009, the PRC and India inaggregate accounted for approximately 40% of global demand in gold. This trend isexpected to continue going forward as both countries register approximately 7% to 8%in gross domestic product growth in 2009.

Investment demand comprises demand for coins and bullion. Demand for physical goldhas largely been driven by net incremental gold stocks held in support of derivativetransactions and exchange-traded funds. Investment demand is a function of the currentand anticipated value of gold relative to other investments, such as cash, fixed incomesecurities, equities and properties, resulting largely from monetary policy considerationsand expectations regarding future gold prices. Since the financial tsunami, majorgovernments adopt a loose monetary policy and with near to zero effective interest rate(excluding Australia). This has caused investors to worry about deflation in all economyand depreciation of all major currencies. Gold, accordingly, has become a shelter forinvestors and speculators alike. Based on the above basis, the Directors consider that theacquisition of a minority interests in the Gold mine represents a good opportunity todiversify the Company’s existing investments to maximize Shareholder’s value bycapturing the potential growth of the gold price.

The Directors are of the view that the Gold Ridge Property (i) helps diversify theCompany’s existing investment portfolio; (ii) improves the financial result of the Companyin the coming years; and (iii) is in line with its investment objective.

We noted from the IR 2009 that, given the fluctuation in the worldwide financial markets,the Directors continue to adopt cautious and prudent approach in managing the portfolioof investments of the Group and developing the investment strategies and the Group iscontinually looking for investment opportunities which offer outstanding returns andwithin the acceptable risk profile of the Group. We have searched for information inrelation to, among others, the industry of gold mining and noted from the websites ofGOLDPRICE.ORG (www.goldprice.org) and London Bullion Market Association(www.lbma.org.uk) that the price and demand for gold was under a growing trend for thelast five years. As observed from the statistics from the website of London Bullion MarketAssociation (www.lbma.org.uk), although the price of gold has experienced a drop sinceAugust 2008, it has showed a rebound in mid 2009 and urged up to the historical high forthe 10 year gold price history by the end of 2009. The following charts set out the goldprice in US Dollars per ounce for recent years.


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5 Year Gold Price in USD/oz

1300

1200

1100

1000

900

800

700

600

500

400

3002006 2007 2008 2009 2010

Source: www.goldprice.org

In addition, as a result of the global financial turmoil, the USA has adopted with themonetary policy of increasing the supply of money by selling treasury bonds to resolveits current economic depression. This policy will result in inflation and future depreciationin the US currency. Consequently, gold, as a commodity which past record has clearlydemonstrated its ability withstand inflation and maintain its value, is expected to behighly sought by investors to safeguard themselves from the depreciation effects in thefuture. Having considered the increasing trend of the value of gold for the last five years,we concur with the Directors that gold is an alternative investment for investors inparticular when the stock market is still unstable after the global financial crisis andhence we also consider the prospect of companies engaged in gold mining will beoptimistic. In addition, given (i) the ability of gold to preserve its value and withstandinflation; (ii) the stock market is still unstable; (iii) the increasing trend of gold price;and (iv) the Company only acquired 12.5% equity interest in Fame Oriented, we considerthe investment in gold mining industry through Fame Oriented Acquisition is in linewith the investment objective of the Company which intends to identify investmentopportunities which offer outstanding returns and within the acceptable risk profile ofthe Group.

We also noted from the Board Letter that the Company will be a passive investor andwill not be responsible for further investment or operation for Fronteer Properties. Themanagement of Fame Oriented and Baron Natural Resources, which consists of5 mining and exploration professionals each with over 20 years of diverse exploration,mining and operation experience in gold and silver deposits around the world, will beresponsible to run and manage Fronteer Properties. The management has joined BaronNatural Resources and Fame Oriented since the conclusion of the FO AssignmentAgreement.


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We noted from the Technical Report on the Gold Ridge Property (the “FO TechnicalReport”) as set out in Appendix V to the Circular, the mineral resource, land tenure,environmental and permitting conditions at Gold Ridge Property are such that a smalltonnage, high-grade underground mining operation holds excellent potential for asuccessful financial outcome. Notwithstanding the Gold Ridge Property only has resourcesand half of them are in the inferred category, we also noted from the FO Technical Reportthat exploration and development work to move the project forward from exploration tomining is highly recommended and the technical adviser of the FO Technical Report isin the opinion that the project on Gold Ridge Property is a project of merit.

Having considered (i) the Fame Oriented Acquisition provides opportunities to theCompany to enhance its revenue sources and diversify the Company’s existinginvestments; (ii) the growing trend of the gold price and the optimistic prospect of goldmining industry as mentioned above; and (iii) the direct mining and operation experienceof the management of Baron Natural Resources and Fame Oriented; (iv) the Gold RidgeProperty is a historical mine with past production being in place and it is expected thatvery minimal capital expenditure would be incurred to resume production; (v) the opinionand recommendation of the technical adviser of the FO Technical Report and the FOValuation (as defined hereafter) as set out below; and (vi) the Fame Oriented Acquisitionis in line with the investment objective of the Company as mentioned above, we agreewith the view of the Directors that the Fame Oriented Acquisition is fair and reasonableand in the normal course of business of the Company and in the interests of the Companyand the Independent Shareholders as a whole notwithstanding the Gold Ridge Propertyonly has resources and half of them are in the inferred category.

3. Consideration

As set out in the Board Letter, the consideration payable by the Company for the FameOriented Acquisition is HK$19.20 million, which is determined after arm’s lengthnegotiation with reference to a preliminary technical report of the Gold Ridge Propertyprepared by Mine Mappers L.L.C., a professional geological consultancy firm. Based onthe preliminary technical report, the Gold Ridge Property is valued at US$19,824,937..According to the valuation report in respect of the Gold Ridge Property as set out inAppendix I to the Circular (the “FO Valuation Report”), the market value of GoldRidge Property is valued at US$19,824,937 as at 10 December 2009 (the “FO Valuation”)and Mine Mappers L.L.C., the valuer, has mainly used the income approach techniqueknown as discounted cash flow method to assess the market value of business enterprisevalue of the Gold Ridge Property. Under the said method, Mine Mappers L.L.C. hasdiscounted the projected cash flow of the Gold Ridge Rroperty based on the sales,operating cost and capital expenditure forecast as disclosed in the draft technical reportand other relevant documents, financial information and projection provided by themanagement of Fame Oriented and Baron Natural Resources.


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We have reviewed the FO Valuation Report and observed that market value is defined asthe estimated amount for which an asset should exchange on the date of valuation betweena willing buyer and a willing seller in an arm’s-length transaction after proper marketingwherein the parties had each acted knowledgably, prudently and without compulsion.We noted from the FO Valuation Report that it is generally acceptable to use mineralresources in the income approach if mineral reserves are also present and if, in general,mined ahead of the mineral resources in the same income approach model, provided thatthe mineral resources as depicted in the income approach model are likely to beeconomically viable. As set out in the FO Valuation Report, the valuer has send a draftvaluation and its calculation to the management of Golden Fame and they have reviewedand orally confirmed to the valuer that facts stated in the FO Valuation Report andcalculation are accurate in all material aspects. We also noted from the report from HLM& Co. Certified Public Accountants in Appendix III to the Circular that the auditors ofthe Company has stated in its opinion that given the basis as mentioned on its report, theFO Valuation, so far as the calculations are concerned, has been properly compiled in allmaterial respects in accordance with the bases and assumptions made by the Directors.

In light of the above, we are of the view that the FO Valuation Report has been reasonablyprepared and are normal in nature. As such, we consider the FO Valuation is an appropriatereference for Independent Shareholders to assess the fairness and reasonableness of theconsideration for the Fame Oriented Acquisition.

As set out in the Board Letter, on 11 December 2009, Baron Natural Resources enteredinto an agreement with an Independent Third Party whereby the Independent Third Partyagreed to acquire a 71% equity interest in Fame Oriented from Baron Natural Resourcesat the same pricing as the Company. Based on the consideration of HK$19.20 million forthe acquisition of 12.5% of Fame Oriented under the Fame Oriented Agreement and theexchange rate of US$1 to HK$7.78, the consideration for 100% of Fame Oriented isderived to be approximately US$19.74 million (equivalent to approximately HK$153.60million), which represents a discount of approximately 0.41% to the FO Valuation ofUS$19,824,937.

In view of the above and given we are of the opinion that the FO Valuation is an appropriatereference for Independent Shareholders to assess the fairness and reasonableness of theconsideration for the Fame Oriented Acquisition, we concur with the Directors that theconsideration for the Fame Oriented Acquisition is fair and reasonable. IndependentShareholders are advised to refer to the FO Valuation Report contained in Appendix I tothe Circular for details of the bases and assumptions of the FO Valuation.


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C. SHING VIEW ACQUISITION

1. Information on assets being acquired

As set out in the Board Letter, Shing View is a company incorporated in the BVI on1 February 2008 with limited liability and is an investment holding company. ShingView owns 100% of the equity interest in the WFOE which will acquire 100% equityinterest in Shiyan Hao Shun, the owner of the mining licence of the Talc Mine.

Shiyan Hao Shun is a company incorporated in the PRC on 12 January 2007 with aregistered capital of RMB5,000,000. It is principally engaged in the business of talcmining. The principal asset of Shiyan Hao Shun is its mining licence of the Talc Mine.As informed by Shiyan Hao Shun, the mining licence of the Talc Mine expired inNovember 2009 and it has already made an application for the renewal thereof to therelevant PRC governmental authorities. The term for the mining licence will be 5 yearsand the production capacity will increase from 20,000 tonnes per annum to 80,000 tonnesper annum.

According to the laws of the PRC and the Co-operation Agreement, Shing View and itsindirectly wholly-owned subsidiary, Shiyan Hao Shun, has a mining licence of 3.22sq. km. for a production capacity of 20,000 tonnes. The management of Shing View andShiyan Hao Shun is not expecting to conduct any further exploration program at thisstage as the management is focusing on advancing the Talc Mine into commercialproduction.

According to the management account provided by Shiyan Hao Shun, the unaudited netloss of Shiyan Hao Shun for the year ended 31 December 2008 was approximatelyRMB588,067. The net assets of Shiyan Hao Shun as at 31 December 2008 wasRMB4,125,534. The unaudited net loss during the period from 1 January 2009 to31 October 2009 was approximately RMB493,483.

The Talc Mine is located at Chen Zhuang Village, Hu Jia Jian Town, Yuan County, ShiyanCity, Hubei Province (湖北省十堰市鄖縣胡家菅鎮陳莊村) in the PRC. The mininglicence of the Talc Mine currently covers an area of about 3.22 sq. km. Based on aninitial estimation prepared by a PRC mining research institute, the Talc Mine has anestimated talc resources of not less than 800,000 tonnes as at 20 November 2009. Basedon representations made by Shiyan Hao Shun’s management, talc powder (final products)is trading at a range of RMB600 to RMB1,400 per tonne, depending on mesh size andgrading. The Directors, after making independent enquiry and market research, are ofthe view that the trading range of RMB600 to RMB1,400 per tonne, depending on themesh size and grading, is reasonable.


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The Talc Mine requires mining licence, safety production licence and explosive licence.The mining licence is in the process of renewal which will increase the production capacityto 80,000 tonnes per annum. The safety production and explosive licence will be appliedin due course before production. The effective period of mining licence of the Talc Mineis from November 2006 to November 2009 and it has an approved annual capacity of20,000 tonnes.

The Talc Mine has no existing operation. The Talc Mine is in the process of renewing themining licence, which is expected to be renewed by April 2010 as additional informationwas requested. Other permits, including the safety production permit, shall be issuedbefore the start of the operation, which is expected to be in June 2010. To the best of theDirectors’ knowledge, information and belief having made all reasonable enquiries, theTalc Mine has complied with all rules and regulations in the jurisdiction it is locatedpreviously.

There are risks to obtain the licence during new application or renewal upon expiry, andfailure to obtain or renew will result in the cease of operation. However, the proceduresare relatively straight forward when the operations are in compliance with all the relevantrules and regulations, yet there are no certainty that any future change in the rules mayaffect the licence application or renewal process.

Immediately upon completion of the Shing View Agreement, Shing View will become17.5% owned by the Company. Set out below are the summary of the financial informationof Shing View (prepared under IFRS):

From 1 February 2008 From(the date of incorporation) to 1 January 2009 to

31 December 2008 30 October 2009(unaudited) (unaudited)

RMB RMB

Turnover Nil NilProfit/(Loss) before and after tax Nil Nil

As at As at31 December 2008 31 December 2009

(unaudited) (unaudited)RMB RMB

Net assets 7 6,800


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As set out in the Board Letter, the loss for the period has been covered by a shareholder’sloan which has been waived by the shareholder.

Further background details of the Shing View Acquisition and information on the TalcMine has been set out in the sub-sections headed “Background” and “Information onShiyan Hao Shun and the Talc Mine” respectively under the section headed “(B) TheShine View Acquisition” in the Board Letter.

2. Reasons for the Shine View Acquisition

As set out in the Board Letter, talc is mainly used for production of food, pharmaceuticaland cosmetic goods and due to the rapid economic growth in the PRC, the Directorsconsider there is strong potential growth for the talc market in the PRC. The Shing ViewAcquisition therefore represents an attractive opportunity for the Company to becomeinvolved in the talc industry in the PRC. The Directors consider that the Shing ViewAcquisition would help diversifying the Company’s existing investments portfolio andimproving the financial result of the Company and therefore are fair and reasonable andon normal commercial terms. The Shing View Acquisition is in line with the Company’sinvestment objectives, policies and restrictions and is in the interests of the Shareholdersas a whole.

Also set out in the Board Letter, despite the Talc Mine only has resources and most of theresources are in the inferred category, the Board considers exploitation of the Talc Mineis fair and reasonable and in the interests of the Company and its the Shareholders as awhole based on the following factors:


b. With the renewed mining licence, the operation will become one of the largest inChina.

c. The Board believes the Chinese economy will continue to grow and the demandfor industrial minerals, such as talc, will continue to increase.

d. The Chinese mining industry traditionally have very limited budget for explorationcompared to the Western mining industry due to the lack of capital markets forjunior mining projects. The rather limited measured and indicated resources donot suggest the lack of resources thereof, but indicated that further explorationwork should be warranted to confirm the inferred resources.

e. The Talc Mine also has the geological potential to host other minerals, for whichthe current consideration does not take this into account.


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The Board considered that, with the advice from its consultant and technical adviser, theTalc Mine is of merit and the due diligence work is sufficient in arriving at the investmentdecision. The Talc Mine does not have competitive advantages as compared with othercompetitors within the talc mine industry. However, taking into accounts that (i) the TalcMine is historical mine with past production being taken place; and (ii) its relativelysmall scale operations, it is the view of the Directors that the exploitation of the TalcMine will incur very minimal capital expenditure and are in the best interests of theCompany and the Shareholders.

Also set out in the Board Letter, given the gross domestic product growth rate ofapproximately 8.9% in 2009 and a target growth rate of 8% in 2010, the Directors believethat selective potential investment opportunities in the PRC are in line with the investmentobjective of the Company seeking medium to long term capital appreciation. Talc is abase material used in everyday life, including but not limited to, the production of food,pharmaceutical and cosmetic goods. With the increase in gross domestic product growth,all base materials, are expected to have a strong market demand going forward.

The Directors are of the view that the Talc Mine (i) helps diversify the Company’s existinginvestment portfolio; (ii) improves the financial results of the Company in the comingyears; and (iii) is in line with its investment objective.

We noted from the Board Letter that the Company will be a passive investor and will notbe responsible for further investment or operation for the Talc Mine. The management ofShing View and Shiyan Hao Shun, which consists of 3 mining and explorationprofessionals with over 15 years of precious metals and industrial materials, includingtalc, exploration, mining and operation experience, will be responsible to run and managethe Talc Mine. The management has joined Shing View and Shiyan Hao Shun forapproximately 2 years.

Also set out in the Board Letter, Mr. Mak has appointed Hubei Northwest GeologicalInstitute (湖北省鄂西北地質礦產調查所) and a subsidiary of the Guangzhou non-ferrousgroup (廣州粵有研礦物資源科技有限公司) to conduct additional geological analysisand exploration study for the period from March to December 2009. The geologicalteam of the Talc Mine was able to confirm the 333 resource category increases fromapproximately 200,000 tonnes to over 800,000 tonnes. Such increase also led to thegovernment agreed to increase the annual production of talc from 20,000 tonnes to 80,000tonnes in November 2009 and will make the Talc Mine one of the largest talc operationsin the PRC.

We have searched for information in relation to talc and noted that talc has been used forproduction of products in various industries including but not limited to paper products,plastic products, heat-resistant products, textile products, paint, food, pharmaceuticaland cosmetic goods. We have reviewed a research report dated November 2009 (the“Research Report”) in respect of, among others, the talc industry in PRC conducted by北京佐思信息咨詢有限責任公司, an independent third party of the Company. Thefollowing charts set out the export price (in US dollars per ton) of talc from the years2006 to 2008.


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0

50

100

150

200

250

1月 2月 3月 4月 5月 6月 7月 8月 9月 10月 11月 12月

2006年 2007年 2008年

Sources: The Research Report

In view of the extensive application of talc in different industries and the growing trendof the export price of talc, we concur with the Directors that talc mining industry isoptimistic. In addition, given (i) the extensive application of talc including applicationon products of life necessities; (ii) the stock market is still unstable; (iii) the growingtrend of the export price of talc; and (iv) the Company only acquired 17.5% equity interestin Shine View, we consider the investment in talc mining industry through Shine ViewAcquisition is in line with the investment objective of the Company which intends toidentify investment opportunities which offer outstanding returns and within theacceptable risk profile of the Group.

We noted from the technical report of the Talc Mine (the “SV Technical Report”) as setout in Appendix VI to the Circular, the estimated resources in the Talc Mine was 870,202tonnes, of which 93,050 was indicated and 777,152 was inferred. It is expected that theindicated resource has a recovery rate of 80% and the inferred resource has a recoveryrate of 65%. Accordingly, assuming an 80,000 tonnes per annum operation, the mine lifewill be about 7 years. Notwithstanding that the Talc Mine only has resources and most ofthe resources are in the inferred category, we noted from the SV Technical Report thatthe technical adviser of the SV Technical Report has concluded that the projects on theTalc Mine is a project of merit.


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Having considered (i) the Shine View Acquisition provides opportunities to the Companyto enhance its revenue sources and diversify the Company’s existing investments; (ii) theextensive application of talc in different industries; (iii) the direct mining and operationexperience of the management of Shing View and Shiyan Hao Shun; (iv) the Gold RidgeProperty is a historical mine with past production being in place and it is expected thatvery minimal capital expenditure would be incurred to resume production; (v) the potentialannual production of the Talc Mine; (vi) the conclusion from the technical adviser of theSV Technical Report and the SV Valuation (as defined hereafter) as mentioned below;and (vii) the Shine View Acquisition is in line with the investment objective of theCompany as mentioned above, we agree with the view of the Directors that the ShineView Acquisition is fair and reasonable and in the normal course of business of theCompany and in the interests of the Company and the Independent Shareholders as awhole notwithstanding the Talc Mine only has resources and most of the resources are inthe inferred category.

3. Consideration

The consideration for the Shing View Acquisition is HK$19.88 million, which isdetermined after arm’s length negotiation and 17.5% equity interest in Shing View, withreference to a preliminary valuation indicated by Savills. Based on the preliminaryvaluation, the Talc Mine is valued at RMB100 million (equivalent to approximatelyHK$113.64 million).

According to the valuation report prepared by Savills in respect of the valuation of 17.5%equity interest in Shiyan Hao Shun as set out in Appendix II to the Circular (the “SVValuation Report”), the market value of 17.5% equity interest in Shiyan Hao Shun as at31 October 2009 was valued at RMB17.50 million (equivalent to approximately HK$19.88million under the exchange rate of RMB1.0 to HK$1.136) (the “SV Valuation”).

We have reviewed the SV Valuation Report and noted that the valuer has adopted theincome approach technique known as discounted cash flow method to assess the marketvalue of Shiyan Hao Shun and under the said method, the valuer have discounted theprojected cash flow of Shiyan Hao Shun to present worth based on profit and cash flowsforecast prepared by Mine Mappers, L.L.C., other relevant documents and financialinformation provided by Shiyan Hao Shun and the Company. We also observed thatmarket value is defined as the estimated amount for which an asset should exchange onthe date of valuation between a willing buyer and a willing seller in an arm’s-lengthtransaction after proper marketing wherein the parties had each acted knowledgably,prudently and without compulsion. As set out in the SV Valuation Report that it isgenerally acceptable to use mineral resources in the income approach if mineral reservesare also present and if, in general, mined ahead of the mineral resources in the sameincome approach model, provided that the mineral resources as depicted in the incomeapproach model are likely to be economically viable. As set out in the SV Valuation


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Report, the valuer has send a draft valuation and its calculation to the management ofShiyan Hao Shun and the Company and they have reviewed and orally confirmed to thevaluer that that facts stated in the SV Valuation Report and calculation are accurate in allmaterial aspects. We noted from the report from HLM & Co. Certified Public Accountantsas set out in Appendix IV to the Circular that the auditors of the Company has stated inits opinion that given the basis as mentioned on its report, the SV Valuation, so far as thecalculations are concerned, has been properly compiled in all material respects inaccordance with the bases and assumptions made by the Directors.

In light of the above, we are of the view that the SV Valuation Report has been reasonablyprepared and are normal in nature. As such, we consider the SV Valuation is an appropriatereference for Independent Shareholders to assess the fairness and reasonableness of theconsideration for the Shine View Acquisition.

As set out in the Board Letter, on 9 October 2009, Mr. Mak and Mr. Lam entered into theSV Assignment Agreement pursuant to which Mr. Mak agreed to assign, and Mr. Lamagreed to acquire, all the rights and interests of Mr. Mak under the Co-operationAgreement (including his 80% equity interest in Shing View) at the consideration ofHK$90.80 million. Also set out in the Board Letter, under the Co-operation Agreement,Mr. Mak has undertaken to finance the capital expenditure and working capital requiredfor the commencement of the operation of the Talc Mine up to RMB7.5 million (equivalentto approximately HK$8.52 million under the exchange rate of RMB1.0 to HK$1.136).Mr. Lam has irrevocably and unconditionally undertaken to the Company to procure thecompliance by Mr. Mak of the CAPEX Funding Undertaking and to indemnify theCompany against all losses, damages, liabilities and diminution in value of Shing Viewand/or its subsidiaries which the Company may suffer or incur as a result of or inconnection with the non-compliance by Mr. Mak of the CAPEX Funding Undertaking tothe extent of the Company’s percentage shareholding interest in Shing View immediatelyupon completion of the Shing View Agreement.

Based on the pricing under the SV Assignment, the acquisition cost for 17.5% equityinterest of Shing View is derived to be approximately HK$19.86 million (the“SV Derivable Value”). Having taken into account (i) the consideration for the ShingView Acquisition of HK$19.88 million represent an immaterial difference with the SVDerivable Value and the SV Valuation; and (ii) the Company will not be responsible forfurther investment or operation for the Talc Mine and the capital expenditure for thecommencement of the operation of the Talc Mine will be financed by Mr. Mak up toRMB7.5 million (equivalent to approximately HK$8.52 million under the exchange rateof RMB1.0 to HK$1.136) under the CAPEX Funding Undertaking, we concur with theDirectors that the consideration for the Shine View Acquisition is fair and reasonable.Independent Shareholders are advised to refer to the SV Valuation Report contained inAppendix II to the Circular for details of the bases and assumptions of the SV Valuation.


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D. FINANCIAL EFFECT FROM THE CONNECTED TRANSACTIONS

(i) Net asset value

As reported in the IR 2009, the unaudited net asset value of the Group as at 30 June 2009was approximately HK$107.58 million. As advised by the Company, there will be nomaterial effect on the net assets of the Company upon completion of the ConnectedTransactions as both of Fame Oriented and Shing View will not be consolidated into theGroup upon completion of the Connected Transactions.

(ii) Earnings

In view of the optimistic prospect of the gold mining and talc mining industries andfactors mentioned under the sections headed “Reasons for the Fame Oriented Acquisition”and “Reasons for the Shine View Acquisition”, we consider that it is a fair expectationthat the Connected Transactions will have a positive impact on the earnings position ofthe Group upon completion.

E. RECOMMENDATION ON CONNECTED TRANSACTIONS

Having considered the above-mentioned principal factors and reasons, in particular, takinginto account that:

(i) the Connected Transactions provide opportunities to the Company to enhance its revenuesources and diversify the Company’s existing investments;

(ii) the Connected Transactions are aligned with the business strategy of the Company as setout in IR 2009;

(iii) the growing trend of the gold price and the optimistic prospect of gold mining industry;

(iv) the direct mining and operation experience of the management of Baron Natural Resourcesand Fame Oriented;

(v) the extensive application of talc in different industries;

(vi) the direct mining and operation experience of the management of Shing View and ShiyanHao Shun; and

(vii) the potential annual production of the Talc Mine,


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we consider (i) each of the Connected Transactions is in the normal course of business of theCompany; (ii) the terms of each of the Connected Transactions are on normal commercialterms and are fair and reasonable so far as the Independent Shareholders are concerned; and(iii) each of the Connected Transactions and the terms thereof are in the interests of the Companyand the Independent Shareholders as a whole. We would therefore recommend the IndependentShareholders and advise the Independent Board Committee to recommend the IndependentShareholders to vote in favour of the resolutions to approve the Connected Transactions to beproposed at the EGM.

F. MANAGEMENT AGREEMENT

On 21 December 2009, the Company entered into the Management Agreement with BaronAsset Management in relation to the appointment of Baron Asset Management as the Company’sinvestment manager for the Management Period. The Management Agreement will supersedethe Previous Agreement and become the latest investment management agreement entered intobetween the Company and Baron Asset Management. Details of the principal terms of theManagement Agreement have been set out in the Board Letter.

1. Reasons for entering into the Management Agreement

Baron Asset Management has provided investment management services to the Companysince 1 January 2009. The Board is of the view that the investment management servicesprovided by Baron Asset Management are valuable which help to contribute favourableprofit and asset growth to the Company. The Company considers that the ManagementPeriod of 1.5 years provides flexibility (without the need to convene a general meetingsolely for this purpose) for Independent Shareholders’ approval at the annual generalmeeting of the Company in 2011.

Given that under the Listing Rules, the Company is required to appoint an investmentadviser to provide asset management and advisory services, we consider the enteringinto the Management Agreement is for compliance of the Listing Rules and is fair andreasonable.

2. Management fee

As set out in the Board Letter, the amount of management fee payable to Baron AssetManagement in accordance with Previous Agreement was calculated based on fixedmonthly fee of HK$65,000 and is now revised to HK$150,000 per month for the durationof the Management Agreement after discussion between the Company and Baron AssetManagement, representing approximately 2% of the audited consolidated net asset valueof the Company of last financial year.


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Under Rule 21.04(1) of the Listing Rules, the Company is required to appoint aninvestment adviser to provide asset management and advisory services. As the Companyincreases its scope of investments to include global natural resources opportunities, theCompany expects its investment adviser to provide crucial and up-to-date marketinformation to the Company. Furthermore, the investment adviser should be able to providedue diligence expertise and deal sourcing capabilities to the Company. The Board, afterconsidering the experiences of personnel in Baron Asset Management and its associatedcompanies, including Baron Natural Resources, believes that Baron Asset Managementand its group companies are experienced in the field of natural resources investmentsand can fulfill its objectives. Baron Natural Resources will provide all necessary technicalsupport and expertise to Baron Asset Management. Details information on Baron AssetManagement and its directors have been set out in under the sub-section headed“Information of Baron Asset Management” under the section headed “(C) ManagementAgreement”.

The Board is of the view that the change in management fee calculation is fair andreasonable with the reasons stated below:

i) Baron Asset Management has the relevant experience and technical know-how inacquisitions and investments, particularly in areas relating to the global naturalresources; and

ii) Global asset management practice usually takes in professional fees of 2%-4% ofthe net asset value of portfolio size.

As set out in the Board Letter, in international asset management advisory industry, bothmonthly payment and annual payment are common practice. Payment terms pursuant tothe Management Agreement are strictly based on commercial negotiations. If either partyopts to terminate the Management Agreement prior to expiry of the Management Period,there will be a refund of outstanding balance due to the Company. Accordingly, theBoard considers that the change in management fee calculation is fair and reasonable tothe Company and the Shareholders as a whole.

The maximum aggregate annual value for each of the two years ending 31 December2011 under the Management Agreement are set out below:

HK$

1 January 2010 to 31 December 2010 1,800,0001 January 2011 to 31 December 2011 900,000


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In order to access the fairness of the management fee payable to Baron Asset Management,we have conducted research on the management fees charged by fund houses whichhave international exposure and companies which provide asset management services.As observed, the management fees charged by other companies which provide assetmanagement services is based on a percentage of the net asset value of the portfolio andsuch percentages ranging from 0.50% to 2.5%.We also noted that it is not uncommon inthe market to make upfront payment on the management fee.

In light of the above and taking into consideration that (i) the Company has increased itsscope of investments to include global natural resources and expects its investment adviserto provide crucial and up-to-date market information to the Company for its investmentsincluding investment on global natural resources and provide recommendationsconcerning potential investments of the Company given that the Group is continuallylooking for investment opportunities which offer outstanding returns and within theacceptable risk profile of the Group; (ii) Baron Natural Resources will provide allnecessary technical support and expertise to Baron Asset Management given the Companywill become an investor in gold and talc mining industries upon completion of the FameOriented Acquisition and the Shine View Acquisition; (iii) the direct experience of thedirectors of Baron Asset Management; and (iv) there will be a refund of outstandingbalance due to the Company if either party opts to terminate the Management Agreementprior to expiry of the Management Period, we consider the management fee charged byBaron Asset Management is not more favorable than independent third party and theterms of the Management Agreement (including the management fee) is fair andreasonable and in the interest of the Company and Independent Shareholders as whole.

G. CONSULTANCY AGREEMENT

The Company has agreed to appoint and Ms. Wan has agreed to accept the appointment as aconsultant of the Company to provide consultancy services in relation to the business andoperation of the Company pursuant to the Consultancy Agreement from 21 December 2009 to30 June 2011 (both dates inclusive). The Company considers that the duration of 1.5 yearsprovides flexibility (without the need to convene a general meeting solely for this purpose) forIndependent Shareholders’ approval at the annual general meeting of the Company in 2011.


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1. Reasons for entering into the Consultancy Agreement

As set out in the Board Letter, Ms. Wan was a Director from 31 December 2004 to 21December 2009 and she is familiar with the operations of the Company. Ms. Wan’s dutiesinclude, inter alia, following up Company’s existing investment projects, corporate financeand corporate administrative duties, providing advice and opinion in all aspects of theCompany. Despite the resignation of Ms. Wan as an executive Director, the Companyconsiders that being a former Director the experience and knowledge of Ms. Wan will bebeneficial to the Company and her advice will be valuable to the management of theCompany. In this regard, the Board considers that it is in the interests of the Companyand the Shareholders as a whole to retain Ms. Wan as a consultant of the Company. TheDirectors consider that the terms of the Consultancy Agreement are on normal commercialterms, fair and reasonable and are in the interests of the Company and the Shareholdersas a whole.

Having consider that Ms. Wan has been providing services to the Company for 5 yearsand was familiar with the management and operation of the Group, we concur with theview of the Directors that it is in the interests of the Company and the IndependentShareholders as a whole to retain Ms. Wan as a consultant to the Company.

2. Fee

Pursuant to the Consultancy Agreement, the Company shall pay to Ms. Wan in respectof her services thereunder a remuneration to be determined by the Board on a time costand project basis, provided that the remuneration shall not exceed HK$1,000,000 (the“Annual Remuneration”) for each of the two financial years ending 31 December 2011of the Company. Accordingly, the maximum aggregate annual value for each of the twoyears ending 31 December 2011 under the Consultancy Agreement is HK$1,000,000. Itis based on the time cost for appointing Ms. Wan as consultant, which is HK$1,000 perhour (the “Hourly Rate”) for each of the two years ending 31 December 2011. TheBoard is of the view that the time cost of HK$1,000 per hour is fair and reasonable whencompared with the practices in the industry principally engaging in investments incompanies and other business entities and the above fee arrangement is fair and reasonableto the Company and the Shareholders as a whole.

We were given to understand by the Company that the time cost of HK$1,000 per hour iswith reference to the hourly cost rate of a director in other professionals and Ms. Wan isrequired to submit a monthly timesheet indicating the number of hours that she has spendon consulting for Director’s review and approval.


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We noted from the AR 2008 that Ms. Wan was the highest paid Director for the financialyear 2008. For comparison purpose, we have compared the Annual Remuneration andthe Hourly Rate with the remuneration of the highest paid directors at investmentcompanies (the “Comparables”) which are listed on both the Main Board and GrowthEnterprise Market of the Stock Exchange and to the best of our knowledge, we haveidentified 22 Comparables. We have reviewed from the respective latest annual reportsof the Comparables published on or before 21 December 2009 (being the date of theConsultancy Agreement) and tabulated below (i) the annual remuneration of the highestpaid directors of the Comparables for such latest financial year; and (ii) the hourly rateof the highest paid directors of the Comparables for such latest financial year under theassumption that each of the highest paid director of the Comparables work for 238 daysa year (based 5 working days for 52 weeks and the reduction of 12 statutory holidays and10 business days of annual leaves) and 8 working hours for each day:

Annual Hourly rateCompany remuneration of the of the highest(Stock code) Principal business highest paid director paid director

(Note 1)(HK$) (HK$ per hour)

China Assets (Holdings) Limited Engaged in the investment holding 185,000 97.16(170) in Hong Kong and the Mainland China

China Financial Leasing Group Limited To achieve medium term (i.e. from three 1,018,000 534.66(2312) to five years) capital appreciation through

investments in listed and unlisted companies,mainly in Hong Kong and the PRC

China Innovation Investment Limited To achieve medium term (i.e. from three 3,582,240 1,881.43(1217) to five years) capital appreciation through

investments in listed and unlisted companies,mainly in Hong Kong and the PRC

China Merchants China Direct Investing in companies with significant 79,807 41.92Investments Limited (133) business involvement in the PRC (Note 2)(Note 3)

Earnest Investments Holdings Limited Investments in listed and unlisted companies 57,600 30.25(339) (Note 3) in Hong Kong and the PRC

Garron International Limited (1226) Investment holding in Hong Kong and 2,112,000 1109.24the Mainland China

Grand Investment International Limited Investing in listed and unlised enterprises 492,000 258.4(1160) establised in Hong Kong, the People’s

Republic of China and Macau

Harmony Asset Limited (428) Investment in securities listed on the 2,445,720 1,284.52Stock Exchange and unlisted investmentswith a potential for earnings growth andcapital appreciation

Mastermind Capital Limited (905) Investment in listed and unlisted companies 126,000 66.18in Hong Kong and the PRC


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Annual Hourly rateCompany remuneration of the of the highest(Stock code) Principal business highest paid director paid director

(Note 1)(HK$) (HK$ per hour)

National Investments Fund Limited Investment in listed and unlisted companies 572,000 300.42(1227)

New Capital International Holding of securities and equity investments 720,000 378.15Investment Limited (1062) as a single business

OP Financial Investments Limited To achieve earnings in the form of medium 150,000 78.78(1140) to long-term capital appreciation mainly

through investments in listed and unlistedcompanies in the Greater China

Opes Asia Development Limited (810) Investment in listed and unlisted companies 838,666 440.48

Prime Investments Holdings Limited An investment company mainly investing in 3,230,712 1,696.80(721) a diversified portfolio of investments in

listed and unlisted companies establishedand/or doing business in Hong Kong andthe PRC

Prosperity Investment Holdings Limited Holding of equity or equity-related investments 100,800 52.94(310) (Note 3) and the provision of management services to

these investee companies

Radford Capital Investment Limited Investment in listed securities in Hong Kong 280,075 147.10(901)

Shanghai International Shanghai Growth An investment company to enable investment 100,385 52.72Investment Limited (770) (Note 3) in companies and other entities established (Note 2)

or having significant operations in orbusiness with the PRC by non-PRCpersons

Sino Katalytics Investment Corporation Investment in a diversified portfolio of listed 1,824,000 957.98(2324) and unlisted companies in Hong Kong

and the PRC

Temujin International To hold investments for medium to long-term 60,000 31.51Investments Limited (204) (Note 3) capital appreciation purpose

UBA Investments Limited (768) Investment holding and trading of securities 12,600 6.62(Note 3)

Unity Investments Holdings Limited Investment in listed securities in Hong Kong 642,000 337.18(913) and other main stock markets around

the world and also in unlisted companies

Yu Ming Investments Limited (666) Holding of listed and unlisted companies 2,610,000 1,370.80in Hong Kong

Minimum 126, 000 66.18

Maximum 3,582,240 1,881.43

Mean 1,301,776 683.71

Annual Remuneration 1,000,000 —

Hourly Rate — 1,000


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Notes:

1. The hourly rates are calculated under the assumption that each of the highest paid director of theComparables work for 238 days a year (based on 5 working days for 52 weeks and the reduction of12 statutory holidays and 10 business days of annual leaves) and 8 working hours for each day.

2. The remunerations recorded in US Dollars has been converted into HK$ under the conversion basisof HK$7.78 = USD 1.0.

3. Taking into account that it is fair and reasonable to expect that the annual remuneration of a highestpaid director of a listed company in Hong Kong should be in excess of the basic allowance and themandatory provident fund deduction of tax payment, we have treated Comparables with the annualremuneration of the highest paid director less than HK$120,000, being the maximum amount of thebasic allowance and mandatory provident fund deduction of tax payment, as outliers and excludedfrom the comparison.

As shown in the above table, the Annual Remuneration falls below the mean and withinthe ranges of the annual remuneration of the highest paid directors of the Comparables.Also shown in the above table, the Hourly Rate falls above the mean and within therange of the hourly rate of the highest paid directors of the Comparables.

We noted from AR 2008 that the aggregate remuneration received by Ms. Wan wasHK$722,000 (the “Previous Remuneration”) for the financial year 2008 and as advisedby the Company, the Previous Remuneration was determined with reference to, amongothers, the market terms and the experiences, duties and responsibilities of Ms. Wan inthe Company. Further advised by the Company, save for the consultancy fee of HK$1,000per hour, no other benefits or bonus payments will offer to Ms. Wan under the ConsultancyAgreement.

We noted from the Company’s announcement dated 2 February 2010, based on preliminaryreview on the Company’s management accounts, the Company is expected to record aprofit for the year ended 31 December 2009 as compared to the loss for the year ended31 December 2008 as a result of the improved return on the investments of the Company.As such, having taken into account that (i) the financial results of the Group for the yearended 31 December 2009 is expected to turnaround from the loss making position forthe year ended 31 December 2008 during the period that Ms. Wan was on the Boardalthough her resignation became effective on 21 December 2009; (ii) the AnnualRemuneration and the Hourly Rate both fall into the ranges of those of the Comparables;(iii) the Previous Remuneration was determined with reference to, among others, themarket terms and the experiences, duties and responsibilities of Ms. Wan in the Companyand the market conditions are expected to be improved in coming year after having gonethrough the trough of the global financial crisis; and (iv) save for the consultancy fee ofHK$1,000 per hour, Ms. Wan will not be entitled for any bonus payment and benefitsunder the Consultancy Agreement, we consider the Annual Remuneration and the HourlyRate are acceptable and are fair and reasonable notwithstanding the Hourly Rate is abovethe mean of the hourly rate of the highest paid directors of the Comparables and theAnnual Remuneration represent a premium to the Previous Remuneration.


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We also noted that the Comparables may include the highest paid directors who areworking on a full time basis for the respective listed companies and on other businessproject/segments and such highest paid directors may also involved as other capacity ofthe respective listed companies. We were advised by the Company that, given Ms. Wanhas been providing services to the Company for 5 years and was familiar with the overallmanagement and operation of the Group, the consultancy provided by Ms. Wan wouldbe important to the management decision made by the Directors and the consultancyfrom Ms. Wan is believed to serve as a safeguard for the proper functioning of the operationof the Group. In addition, as advised by the Company, the consultancy services to beprovided by Ms. Wan including, among others, (i) act as consultant of any companies inthe Group; (ii) report to the Board periodically, and as and when required by the Board,projections, accounts and other information relating to or concerning the business of theGroup; and (iii) subject to the overall direction of the Board, manage and conduct thebusiness of the Company with the Company’s existing managers and executives to thebest of her ability in the best interests of the Group and in a proper and business-likemanner would also cover operational units which are in relation to the business of theGroup. In view of the above, we consider the role of Ms. Wan is as important as a Directorand a senior management of the Company and therefore it is relevant to make comparisonwith the Annual Remuneration and the Hourly Rate to those of the Comparables.

H. SHARING OF ADMINISTRATIVE OFFICE AGREEMENT

The Company and Baron Asia entered into the Sharing of Administrative Office Agreement on21 December 2009 in relation to the sharing of the use of the Premises and the Facilities duringthe period from 1 February 2010 to 30 June 2011. Baron Properties Holding, a fellow subsidiaryof Baron Asia which in turn is wholly-owned by Baron Group Limited, is the tenant of thePremises for a term of 3 years commencing from 1 June 2009. Pursuant to the Sharing ofAdministrative Office Agreement, the Company is entitled to share the use of the Premises andFacilities during the term of the agreement.

The Company will pay Baron Asia by way of fee the sum of HK$200,000 per month, which ispayable monthly in advance within 5 days of the beginning of each calendar month. Themaximum aggregate annual value for each of the two years ending 31 December 2011 underthe Sharing of Administrative Office Agreement are set out below:

HK$

1 January 2010 to 31 December 2010 2,200,0001 January 2011 to 31 December 2011 1,200,000

As set out in the Board Letter, the Company occupies approximately 4,000 sq.ft. office spaceof the Premises and the all-in-cost per sq. ft. is approximately HK$50 per month (the “Rent”).Baron Asia and the Board are of the view that the monthly fee payable under the Sharing ofAdministrative Office Agreement is fair, reasonable and on normal commercial terms, whencomparing to other Grade A offices in Central, Hong Kong. The Directors consider that theterms of the Sharing of Administrative Office Agreement are on normal commercial terms, fairand reasonable and are in the interests of the Company and the Shareholders as a whole.


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We have reviewed quotations of rental rate in the same building of the Premises provided byproperty agents and noted that the monthly rental prices requested by independent third partiesranged from approximately HK$48 to HK$50 per sq. ft. and hence are not more favorable thanthe Rent. Given the above, we concur with the Directors that the terms of the Sharing ofAdministrative Office Agreement are on normal commercial terms, fair and reasonable and arein the interests of the Company and the Shareholders as a whole.

I. RECOMMENDATION ON CONTINUING CONNECTED TRANSACTIONS

Having considered the above-mentioned principal factors and reasons, we consider (i) each ofthe Continuing Connected Transactions is in the normal course of business of the Company;(ii) the terms of each of the Continuing Connected Transactions are on normal commercialterms and are fair and reasonable so far as the Independent Shareholders are concerned; and(iii) each of the Continuing Connected Transactions and the terms thereof are in the interests ofthe Company and the Independent Shareholders as a whole. We would therefore recommendthe Independent Shareholders and advise the Independent Board Committee to recommend theIndependent Shareholders to vote in favour of the resolutions to approve the ContinuingConnected Transactions to be proposed at the EGM.

Yours faithfully,For and on behalf ofVeda Capital Limited

Hans Wong Julisa FongChairman Managing Director

APPENDIX I VALUATION REPORT ON THE GOLD RIDGE PROPERTY

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The following is the text of the report of the valuation of Golden Fame (as defined below) as at 10December 2009 prepared by Mine Mappers, L.L.C. for the purpose of inclusion in this circular.

The DirectorsChina Investment Fund Company Limited4th Floor, Aon China Building29 Queen’s Road CentralHong Kong

Mine Mappers, L.L.C.2114 West Grant Road, Box 114

Tucson, AZ 85745T/F: (715) 387-8397

14 April 2010

Dear Sirs,

VALUATION OF BUSINESS ENTERPRISE VALUE OF GOLD PROJECT

In accordance with your instructions, we have undertaken a valuation on behalf of Golden Fame(USA) Inc. (hereinafter referred to as “Golden Fame”) to determine the Market Value (as definedbelow) of the business enterprise value of Golden Fame, which is holding the Gold Ridge Project(hereinafter referred to as the “Gold Project”) as at 10 December 2009 (the”Valuation Date”).

INTRODUCTION

Golden Fame is a company incorporated in the State of Nevada on 13 May, 1981 which is wholly-owned by Fame Oriented Holdings Limited. The principal assets and business of Golden Fame is theholding of the Gold Project, which located in north central Cochise County in south eastern Arizonain the southern foothills of the Dos Cabezas Mountains. It consists of 73.95-acres of private property,333.38-acres of patented mining claims and 112 unpatented mining claims covering 1,718.74-acres.In addition, the property holdings include one leased group of 12 unpatented mining claims. GoldenFame controls the mining rights on a total of 2,342-acres which includes Gold Ridge, Gold Princeand the Dives Mines.

A new mineral resource estimate for the Gold Prince portion of the Gold Project is 2,999,931 tons ata grade of 0.3-ounces per ton gold according to the technical report and Golden Fame’s information.

The purpose of this valuation is to express an independent opinion of the Market Value (as definedbelow) of Golden Fame as at the Valuation Date for internal reference purpose.


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Our valuation is our opinion of the Market Value which is defined as “the estimated amount forwhich an asset should exchange on the date of valuation between a willing buyer and a willing sellerin an arm’s-length transaction after proper marketing wherein the parties had each acted knowledgeably,prudently and without compulsion”.

THE BASIS OF VALUATION AND VALUATION METHODOLOGY

The approach of the valuation follows CIMVAL standard.

The valuation procedures employed include the review of physical and economic conditions of thesubject asset and an assessment of key assumptions, estimates, and representations made by theproprietor or the operator of the subject asset. All matters we consider essential to the properunderstanding of the valuation are disclosed in our valuation report.

In arriving at our assessed value, we have considered three accepted approaches. They are marketapproach, cost approach and income approach. In this valuation, the market approach is not appropriateas there are insufficient comparable transactions to form reliable basis for our opinion of value. Thecost approach is not appropriate as it ignores the economic benefits of ownership of the business. Wehave therefore relied solely on the income approach in determining opinion of the value.

It is generally acceptable to use mineral resources in the income approach if mineral reserves are alsopresent and if, in general, mined ahead of the mineral resources in the same income approach model,provided that the mineral resources as depicted in the income approach model are likely to beeconomically viable.

By adopting the income approach as the most appropriate approach, we have used the discountedcash flow method to assess the Market Value of business enterprise value of Golden Fame. Under thesaid method, we have discounted the projected cash flow of Golden Fame to present worth based onthe sales quantities, operating cost and capital expenditure forecast provided by the technical reportdated 14 April 2010 and other relevant documents, financial information and projection provided byGolden Fame.

For the purpose of our valuation, we have derived the future cash flows of Golden Fame based on theavailable information and by taking into consideration of other pertinent factors. The factors consideredin the appraisal included, but were not limited to, the followings:

• market and the business risks of Golden Fame;

• the general economic outlook as well as specific investment environment for the business;

• the nature and current financial status of Golden Fame;

• the market expectation and required rate of return for similar business; and

• the assumptions as stated in the Basis of Assumptions of this report.


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The discount rate of approximately 17% per annum was determined by risk free rate of approximately3.5%, market return (included risk free rate) of approximately 6.79%, size discount factor of 6% andfirm specific factors of 2%. The estimated unlevered beta of Golden Fame was estimated by thecompanies (Great Basin Gold Ltd. (AMEX:GBG), Vista Gold Corp. (AMEX:VGZ), US GoldCorporation (AMEX:UXG), Seabridge Gold, Inc. (AMEX:SA), NovaGold Resources Inc.(AMEX:NG) and Royal Gold, Inc. (NASDAQ:RGLD)). A sensitivity analysis was prepared based ondiscount rates ranging from approximately 16% to 18%. The sensitivity result of Golden Fame fallsin the range of USD18.4 million to USD21.4 million.

The US Risk Free Rate is 3.50% based on the US Government long term bond rate as of October30th, 2009. The US Market ROR (US Market Expected Return) used is 10.27%. (Data is provided byBloomberg – October 30th, 2009)

The US Market Premium was calculated by:

US Market Premium = US Market ROR – US Risk Free Rate

10.27% – 3.5% = 6.77%

The estimated beta for the Gold Ridge was calculated by using avg. comparable 3-years beta (providedby Bloomberg) of similar Gold Mining Companies that are listed in US and have mining propertiesand projects in US:

Great Basin Gold Ltd. (AMEX:GBG) = 0.923 beta

Vista Gold Corp. (AMEX:VGZ) = 1.016 beta

US Gold Corporation (AMEX:UXG) = 0.875 beta

Seabridge Gold, Inc. (AMEX:SA) = 0.832 beta

NovaGold Resources Inc. (AMEX:NG) = 0.64 beta

Royal Gold, Inc. (NASDAQ:RGLD) = 0.56 beta

Their average betas are calculated to be 0.8076 which is used for the calculation of the UnadjustedCost of Capital of the project.

Unadjusted Cost of Capital = US Risk Free Rate + (Average Comparable Companies’ beta * USMarket Premium)

8.97% = 3.5% + (0.8076*6.77%)


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Due to the various stages and scales of projects from comparable Gold Mining Companies, a SizeDiscount and Specific Risk factors are needed to more accurately reflect the risk of the Gold Ridgeproject. The Size Discount in accordance to professional valuation industry practices is by usingranges of (-0.37% to 6.36%) to account for the Market Cap differences. Gold Ridge project selectedto use a Size Discount of 6%* (high range) to account for the scale difference. The specific risk is 2%to account for the Gold Ridge Project has not started production.

Adjusted Cost of Capital = Cost of Capital + Size Discount + Specific Risk

16.97% = 8.97% + 6% + 2%

Discount Rates Results(USD)

16% 21,382,14917% 19,824,93718% 18,398,445

We have been provided with extracts of copies of relevant documents and financial information relatingto Golden Fame. We have relied upon the aforesaid information in forming our opinion of the MarketValue. However, we have not inspected the original documents to ascertain any amendments whichmay not appear on the copies handed to us. We have no reason to doubt the truth and accuracy of thesaid information which is material to the valuation. We have also made relevant inquiries and obtainedfurther information as considered necessary for the purpose of this valuation.

While we have exercised our professional knowledge and cautions in adopting assumptions and otherrelevant key factors in our valuation, those factors and assumptions are still vulnerable to the changeof the business, economic environment, competitive uncertainties or any other abrupt alternations ofexternal factors.

On-site inspections were taken, and the properties and works were found to be in a condition thatcould perform the required purpose. We did not carry out any structural survey or on-site measurements.We are not able to report that the relevant properties are free from rot, infestation or any other structuraldefect.

THE BASIS OF ASSUMPTIONS

In the course of valuation, the following specific assumptions and caveats have been made. We havebased on the followings to conclude the Market Value of Golden Fame.

• We have assumed that Golden Fame can renew the mining right continuously until all theresources have been mined;

• Capital and operating costs were estimated for a small tonnage, underground shrink-slope miningmethod. Additional capital was added to account for acquisition, exploration and development,permitting and reclamation requirements;

• Capital is amortized over 7-years;


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• Transportation of produced material is by over-the road truck, charged out at USD3.50/loadedmile;

• Costs are in terms of 2009 dollars;

• According to technical report and company information, there are reserve tonnage 2,999,931short tons and 0.3 ounces of gold per tons and the production of Gold Project amounting 250tons per day for 360 days per year;

• The production output for each of the year covered in the cash flow projection is estimated tobe approximately 27,000 ounces which is equal to 0.3 ounces of gold per ton x 250 tons perday x 360 days per year;

• We have assumed that the tax rate is 46%. Federal tax rate varied between 38% and 42% from2000 to 2009. We have assumed federal tax rate of 39% and state of Arizona tax rate of 7%.The operating cost projected per tonne is approximately USD84.83. These factors are assumednot to change during cash flow projection period;

• Mine life is 15-years;

• Regarding general gold market situation and selling price estimation provided by Golden Fame.The selling price of gold is estimated to be USD1100 per ounce;

• We have assumed that the actual Gold Project production profile will be same as the projectedprofile in the technical report; and

• We have assumed that the projected business can be achieved with the effort of the managementof Golden Fame.

Notwithstanding the incorporation of foreseeable changes in our valuation, a number of generalassumptions have been made in the preparation of the reported assessed figures. These assumptionsare:

• The financial and operational information such as management account of Golden Fame, titlesand products provided to us by Golden Fame is accurate and we relied to a considerable extenton such information in arriving at our opinion of value;

• There are no hidden or unexpected conditions associated with the assets valued that mightadversely affect the reported value;

• All required licenses, certificates, consents, or other legislative or administrative approvalsfrom any local, provincial, or national government or private entity or organisation have beenor can readily be obtained or renewed or replaced on which the valuation contained in ourreport are based;


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• There will be no major changes in existing government policies, political, legal (includinglegislation or regulations or rules), fiscal (including interest rate and exchange rate) or economicconditions in the country or district where the business is in operation;

• There will be no major changes in the current taxation law in the areas in which Golden Famecarries on its business, that the rate of tax payable remains unchanged and that all applicablelaws and regulations will be complied with;

• Golden Fame has obtained all necessary permits and approvals to carry out mining and businessoperations in the Gold Project;

• The inflation, interest rates and currency exchange rate will not differ materially from thosepresently prevailing;

• Golden Fame will retain its key management and technical personnel to maintain its ongoingoperations;

• There will be no major business disruptions through international crisis, industrial disputes,industrial accidents or severe weather conditions that will affect the existing business;

• Golden Fame will remain free from claims and litigation against the business or its customersthat will have a material impact on value;

• Golden Fame is unaffected by any statutory notice and the operation of the business gives, orwill give, no rise to a contravention of any statutory requirements;

• The business is not subject to any unusual or onerous restrictions or encumbrances; and

• The potential bad debt of Golden Fame will not materially affect its business operations.

LIMITING CONDITIONS

We have to a considerable extent relied on the financial data and other related information providedby Golden Fame and technical report. We are not in a position to comment on the lawfulness of thebusiness.

No responsibility is taken for changes in market conditions and no obligation is assumed to revisethis report to reflect events or change of government policy or financial condition or other conditions,which occur subsequent to the date hereof.

This report is provided strictly for the sole use only of the party to whom it is addressed. Neither thewhole nor any part of this report or any reference made hereto may be included in any publisheddocuments, circular or statement, or published in any way, without our written approval of the formand context in which it may appear. Nonetheless, we consent to the publication of this report in thiscircular for the Shareholders’ reference.


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MANAGEMENT CONFIRMATION OF FACTS

A draft of this report and our calculation has been sent to the management of Golden Fame. Theyhave reviewed and orally confirmed to us that facts as stated in this report and calculation are accuratein all material respects and that they are not aware of any material matters relevant to our engagementwhich have been excluded.

REMARKS

Unless otherwise stated, all money amounts are stated in US Dollar.

We hereby confirm that we have neither present nor prospective interests in Golden Fame and theirrespective holding companies, subsidiaries and associated companies, and its subsidiaries, or thevalue reported herein.

The conclusion of value is based on accepted valuation procedures and practices that rely onsubstantially on the use of numerous assumptions and the consideration of many uncertainties, not allof which can be easily quantified or ascertained. Further, while the assumptions and other relevantfactors are considered by us to be reasonable, they are inherently subject to significant business,economic and competitive uncertainties and contingencies, many of which are beyond the control ofGolden Fame.

OPINION OF THE VALUE

Based on the investigation and analysis stated above and on the method employed, we are of theopinion that the Market Value of Golden Fame as at 10 December 2009 was reasonably stated by theamount of USD19,824,937 (US DOLLAR NINETEEN MILLION EIGHT HUNDRED ANDTWENTY-FOUR THOUSAND NINE HUNDRED AND THIRTY-SEVEN).

Yours faithfully,For and on behalf of

Mine Mappers, L.L.C.Mark Osterberg, Ph. D. P.G.

Note: Mr. Mark Qsterberg is the qualified valuer under the CIMVAL standard.

ANNEXURE

Mr. Mark Osterberg (“Mark”) has performed DCF-ROE resource calculation and project permittingscoping study for proposed construction materials mining operation for Rising Rock, L.L.C. in January2010.

Mark has determined reserves, built simple mining plans and developed DCF-ROE based financialevaluations for construction materials operators in Wisconsin and Michigan for Rocky MountainEnterprises, Gillett Cement Products, Inc., Pewabic East Partnership, Rising Rock, L.L.C., NorRok,Inc., Lincoln County Road Commission beginning from September 2001.


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Mark has measured mining resource based on mapping and drilling data and calculated net presentvalue and rate of return for investment group interested in acquisition of the quarry from April toMay, 2009.

Mark has measured reserve volume and material quality for company reserve base. Mark has calculatedDCF-ROI valuation as part of potential divestment strategy for a private consortium in May, 2007.

Mark has mapped approximately one-fourth of the surface extent of the El Abra Porphyry CopperProspect in northern Chile as part of acquisition evaluation team charged with determining up-sidepotential for grades and tonnes for Cyprus Mining Company in June, 1995.

APPENDIX II VALUATION REPORT ON THE TALC MINE

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The following is the text of a letter, a summary of valuation prepared for the purpose of incorporationin this circular received from Savills, an independent valuer, in connection with its valuation as at31 October 2009 of 17.5% equity interest in Shiyan Hao Shun Mineral Company Limited.

The Directors Savills Valuation and

China Investment Fund Company Limited Professional Services Limited

4th Floor, Aon China Building 23/F Two Exchange Square

29 Queen’s Road Central Central, Hong Kong

T: (852) 2801 6100

F: (852) 2530 0756

EA Licence: C-023750

savills.com

14 April 2010

Dear Sirs,

VALUATION OF 17.5% EQUITY INTEREST IN SHIYAN HAO SHUN MINERAL COMPANYLIMITED (十堰浩舜礦業有限責任公司)

In accordance with your instructions, we have undertaken a valuation on behalf of China InvestmentFund Company Limited (the “Company”) to determine the Market Value (as defined below) of 17.5%equity interest in Shiyan Hao Shun Mineral Company Limited (十堰浩舜礦業有限責任公司)(hereinafter referred to as “Shiyan Hao Shun”) as at 31 October 2009 (the “Valuation Date”).

Shiyan Hao Shun is incorporated in the PRC on 12 January 2007 with a registered capital ofRMB5,000,000. Shiyan Hao Shun is principally engaged in the business of talc mining. The principalasset of Shiyan Hao Shun is its mining right of the Talc Mine. As informed by Shiyan Hao Shun, themining right of the Talc Mine was expired in November 2009 and it has already made an applicationfor the renewal thereof to the relevant PRC governmental authorities. The term for the mining rightwill be 5 years and the production capacity will increase from 20,000 tonnes per annum to 80,000tonnes per annum.


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The purpose of this valuation is to express an independent opinion of the Market Value of Shiyan HaoShun as at the Valuation Date for internal reference purpose.

Our valuation is our opinion of the Market Value which is defined as “the estimated amount forwhich an asset should exchange on the date of valuation between a willing buyer and a willing sellerin an arm’s-length transaction after proper marketing wherein the parties had each acted knowledgeably,prudently and without compulsion”.

VALUATION METHODOLOGY AND BASIS

The approach of the valuation follows CIMVAL standard.

The valuation procedures employed include the review of physical and economic conditions of thesubject asset and an assessment of key assumptions, estimates, and representations made by theproprietor or the operator of the subject asset. All matters we consider essential to the properunderstanding of the valuation are disclosed in our valuation report.

In arriving at our assessed value, we have considered three accepted approaches. They are marketapproach, cost approach and income approach. In this valuation, the market approach is not appropriateas there are insufficient comparable transactions to form reliable basis for our opinion of value. Thecost approach is not appropriate as it ignores the economic benefits of ownership of the business. Wehave therefore relied solely on the income approach in determining our opinion of value.

It is generally acceptable to use mineral resources in the income approach if mineral reserves are alsopresent and if, in general, mined ahead of the mineral resources in the same income approach model,provided that the mineral resources as depicted in the income approach model are likely to beeconomically viable. Based on the consultant report prepared by Beijing ZUOSI InformationConsulting Co. Ltd. provided by the Company and technical report prepared by Mine Mappers L.L.C,,such mineral resources and reserves are both economically viable.

We have taken reference to Beijing ZUOSI’s forecast on talc selling price in forming the opinion. AsBeijing ZUOSI is only the market analyst to provide future trends, it does not qualify as an expertunder Listing Rules Chapter 1, which includes engineer, valuer, accountant and any other personwhose profession gives authority to a statement made by him. We have taken into consideration ofcurrent technical report to form the opinion.

We have adopted the income approach technique known as discounted cash flow method to assess theMarket Value of Shiyan Hao Shun. Under the said method, we have discounted the projected cashflow of Shiyan Hao Shun to present worth based on profit and cash flows forecast prepared by MineMappers, L.L.C., other relevant documents and financial information provided by Shiyan Hao Shunand the Company.


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For the purpose of our valuation, we have derived the future cash flows of Shiyan Hao Shun based onthe available information and presently prevailing operating conditions of the business and by takinginto consideration of other pertinent factors which basically include the followings:

— the market and the business risks of Shiyan Hao Shun;— the general economic outlook as well as specific investment environment for the business;— the nature and current financial status of Shiyan Hao Shun;— the historical performance of Shiyan Hao Shun;— the market expectation and required rate of return for similar business; and— the assumptions as stated in the Specific and General Assumptions of this report.

When evaluating the appropriate rate for Shiyan Hao Shun, we have used the Capital Assets PricingModel (the “CAPM”). Under CAPM, the appropriate expected rate of return is the sum of the risk-free return and the equity risk premium required by investors to compensate for the market riskassumed. In addition, the expected rate of return of Shiyan Hao Shun is expected to be affected byother firm specific risk factors that are independent of the general market. The discount rate ofapproximately 17% per annum was determined by risk free rate of approximately 3.54%, marketreturn(included risk free rate) of approximately 10%, size discount factor of 5% and firm specificfactors of 2%. The estimated unlevered beta of Shiyan Hao Shun was estimated by the companies(Guangdong Highsun Yongye (Grp) Co., Ltd. (000861.SZ), Whitemud Resource (TSXV: WMK),Black Bull Resources (TSXV: BBS-V) and Infrastructure Materials Corp. (OCTBB: IFAM)).

When evaluating the appropriate rate for Shiyan Hao Shun, we have used the CAPM. Under CAPM,comparable companies are used and selected from following criteria: (1) same/similar industry andproduct to subject company (2) actively trade in market (3) public information are available. Theappropriate expected rate of return is the sum of the risk-free return and the equity risk premiumrequired by investors to compensate for the market risk assumed. In addition, the expected rate ofreturn of Shiyan Hao Shun is expected to be affected by other firm specific risk factors that areindependent of the general market.

Under the CAPM, four companies that engaged in kaolin and limestone business, which are with themost similar business and product to the subject company and with public information available areselected as comparable companies. Among these comparable companies, one is listed on the PRCstock exchange, two are listed on the Canadian stock exchange and one is listed on the US stockexchange. As the PRC company has a higher discount rate as compare to the other three companies,we have imposed a high size discount rate, 5%, in order to mitigate any effect from high standarddeviation of parameters extracted from those 4 companies.

The US Risk Free Rate is 3.50% based on the US Government long term bond rate as of October30th, 2009. The US Market ROR (US Market Expected Return) used is 10.27%. (Data is provided byBloomberg – October 30th, 2009)

The US Market Premium was calculated by:

US Market Premium = US Market ROR – US Risk Free Rate

6.77% = 10.27% – 3.5%


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The Canadian Risk Free Rate is 3.48% based on the Canadian Government long term bond rate as ofOctober 30th, 2009. The Market ROR (Canadian Market Expected Return) used is 11.16%. (Data isprovided by Bloomberg – October 30th, 2009)

The Canadian Market Premium was calculated by:

Canadian Market Premium = Canadian Market ROR – Canadian Risk Free Rate

7.68% = 11.16% – 3.48%

The China Risk Free Rate is 3.73% based on the Chinese Government long term bond rate as ofOctober 30th, 2009. The Market ROR (China Market Expected Return) used is 15.73%. (Data isprovided by Bloomberg – October 30th, 2009)

The China Market Premium was calculated by:

China Market Premium = China Market ROR – China Risk Free Rate

12.0% = 15.73% – 3.73%

The estimated beta for the Talc Project was calculated by using avg. comparable 3-years beta (providedby Bloomberg) of similar Industrial Minerals Mining Companies that are listed in US, Canada andChina:

Guangdong Highsun Yongye (Grp) Co., Ltd (000861.sz) = 1.143 beta

Cost of Capital = China Risk Free Rate + (000861.sz beta * China Market Premium)

17.45% = 3.73% + (1.143*12%)

Whitemud Resource (TSXV: WMK) = 0.746 beta

Cost of Capital = Canada Risk Free Rate + (WMK beta * Canada Market Premium)

9.21% = 3.48% + (0.746*7.68%)

Black Bull Resources (TSXV: BBS-V) = 0.819 beta

Cost of Capital = Canada Risk Free Rate + (WMK beta * Canada Market Premium)

9.77% = 3.48% + (0.819*7.68%)

Infrastructure Materials Corp. (OTCBB: IFAM) = 0.198 beta

Cost of Capital = US Risk Free Rate + (IFAM beta * US Market Premium)

4.84% = 3.50% + (0.198*6.77%)


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The average Cost of Capital of the comparable companies is calculated to be approximately 10.32%which is used as the unadjusted Cost of Capital of the Talc Project.

10.32% = (17.45% + 9.21% + 9.77% + 4.84%)/4

Due to the various stages and scales of projects from comparable Industrial Minerals MiningCompanies, a Size Discount and Specific Risk factors are needed to more accurately reflect the riskof the Talc project. The Size Discount in accordance to professional valuation industry practices is byusing ranges of (-0.37% to 6.36%) to account for the Market Cap differences. Talc project selected touse a Size Discount of 5%* (high range) to account for the scale difference. The specific risk is 2% toaccount for the Talc Project has not started production.

Adjusted Cost of Capital = Cost of Capital + Size Discount + Specific Risk)

(17.32% = 10.32% + 5% + 2%)

A sensitivity analysis was prepared based on discount rates ranging from 16% to 18%. The sensitivityresult of 17.5% equity interest in the Company falls in the range of RMB16.9 million to RMB18.2million.

Discount Rates Results(RMB million)

16% 18.217% 17.518% 16.9

We have been provided with extracts of copies of relevant documents and financial information relatingto Shiyan Hao Shun. We have relied upon the aforesaid information in forming our opinion of theMarket Value. However, we have not inspected the original documents to ascertain any amendmentswhich may not appear on the copies handed to us. We have no reason to doubt the truth and accuracyof the said information which is material to the valuation. We have also been advised by the Companyand Shiyan Hao Shun that no material facts have been omitted from the information provided. Wehave also made relevant inquiries and obtained further information as considered necessary for thepurpose of this valuation.

While we have exercised our professional knowledge and cautions in adopting assumptions and otherrelevant key factors in our valuation, those factors and assumptions are still vulnerable to the changeof the business, economic environment, competitive uncertainties or any other abrupt alternations ofexternal factors.

On-site inspections were taken, and the properties and works were found to be in a condition that canperform the required purpose. We did not carry out any structural survey or on-site measurements.We are not able to report that the relevant properties are free from rot, infestation or any other structuraldefect.


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SPECIFIC ASSUMPTIONS

In the course of valuation, the following specific assumptions and caveats have been made. We havebased on the followings to conclude the Market Value of Shiyan Hao Shun.

• The mining right of Shiyan Hao Shun will expire in November 2009. We have assumed thatShiyan Hao Shun can renew the mining right continuously in the future;

• Based on the planning of Shiyan Hao Shun, the production will be 35,000 tonnes in 2010 and80,000 tonnes in 2011 and afterwards. We have assumed that related formal government approvalfor expansion can be obtained;

• We have assumed that Shiyan Hao Shun has exercised due diligence on profit and cash flowforecast provided by the Company which is fair and appropriate;

• Based on the instruction from the Company, the capital expenditure of plant and machinerieswill be borne by one of the existing shareholders of Shiyan Hao Shun, which is considered inour valuation;

• We have assumed that the projected business can be achieved with the effect of the managementof Shiyan Hao Shun;

• We have assumed that the accuracy of financial and operational information provided to us byShiyan Hao Shun and relied to a considerable extent on such information in arriving at ouropinion of value; and

• We have assumed that there are no hidden or unexpected conditions associated with the assetsvalued that might adversely affect the reported value.

GENERAL ASSUMPTIONS

Notwithstanding the incorporation of foreseeable changes in our valuation, a number of assumptionshave been made in the preparation of the reported assessed figures. The assumptions are:

• All required licences, certificates, consents, or other legislative or administrative authorityfrom any local, provincial, or national government or private entity or organisation have beenor can readily be obtained or renewed or replaced on which the valuation contained in ourreport are based;


– 100 –

• There will be no major changes in existing political, legal, fiscal or economic conditions in thecountry or district where the business is in operation;

• There will be no major changes in the current taxation law in the areas in which Shiyan HaoShun carries on its business, that the rate of tax payable remains unchanged and that all applicablelaws and regulations will be complied with;

• Shiyan Hao Shun has obtained all necessary permits and approvals to carry out mining andbusiness operations in the talc mines;

• The inflation, interest rates and currency exchange rate will not differ materially from thosepresently prevailing;

• Shiyan Hao Shun will retain its key management and technical personnel to maintain its ongoingoperations.

• There will be no major business disruptions through international crisis, industrial disputes,industrial accidents or severe weather conditions that will affect the existing business;

• Shiyan Hao Shun will remain free from claims and litigation against the business or its customersthat will have a material impact on value;

• Shiyan Hao Shun is unaffected by any statutory notice and the operation of the business gives,or will give, no rise to a contravention of any statutory requirements;

• The business is not subject to any unusual or onerous restrictions or encumbrances; and

• The potential bad debt of Shiyan Hao Shun will not materially affect its business operations.

LIMITING CONDITIONS

We have to a considerable extent relied on the financial data and other related information providedby Shiyan Hao Shun and the Company. We are not in a position to comment on the lawfulness of thebusiness.

No responsibility is taken for changes in market conditions and no obligation is assumed to revisethis report to reflect events or change of government policy or financial condition or other conditions,which occur subsequent to the date hereof.

In accordance with our standard practice, we must state that this report and valuation is for the useonly of the party to whom it is addressed and no responsibility is accepted to any third party for thewhole or any part of its contents.


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MANAGEMENT CONFIRMATION OF FACTS

A draft of this report and our calculation has been sent to management of Shiyan Hao Shun and theCompany. They have reviewed and orally confirmed to us that facts as stated in this report andcalculation are accurate in all material respects and that they are not aware of any material mattersrelevant to our engagement which have been excluded.

REMARKS

Unless otherwise stated, all money amounts are stated in Renminbi.

We hereby confirm that we have neither present nor prospective interests in Shiyan Hao Shun andtheir respective holding companies, subsidiaries and associated companies, Shiyan Hao Shun and itssubsidiaries, or the value reported herein.

The conclusion of value is based on accepted valuation procedures and practices that rely onsubstantially on the use of numerous assumptions and the consideration of many uncertainties, not allof which can be easily quantified or ascertained. Further, while the assumptions and other relevantfactors are considered by us to be reasonable, they are inherently subject to significant business,economic and competitive uncertainties and contingencies, many of which are beyond the control ofShiyan Hao Shun and us.

OPINION OF THE VALUE

Based on the investigation and analysis stated above and on the method employed, we are of theopinion that the Market Value of 17.5% equity interest in Shiyan Hao Shun as at 31 October 2009was reasonably stated by the amount of RMB17,500,000 (RENMINBI SEVENTEEN MILLION ANDFIVE HUNDRED THOUSAND).

Yours faithfullyFor and on behalf of

Savills Valuation and Professional Services Limited

Charles C K Chan Paul HungMSc FRICS FHKIS MCIArb RPS(GP) CBA ASA Bsc

Managing Director Business Valuer

Note: Mr. Charles C K Chan is a Chartered Estate Surveyor, MSc, FRICS, FHKIS, MCIArb, RPS(GP), has been aqualified valuer and has about 25 years’ experience in the valuation of properties in Hong Kong and has extensiveexperience in company valuation in Hong Kong and the PRC.

Mr. Paul Hung is a Certified Business Appraiser, ASA, BSc who has over 10 years experience in valuation ofmineral resources projects in Hong Kong and the PRC.

APPENDIX III REPORT ON FORECAST UNDERLYING THEVALUATION OF THE GOLD RIDGE PROPERTY

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Set out below is the full text of the report from HLM & Co. Certified Public Accountants on discountedcash flow method to assess the market value of business enterprise value of Gold Ridge Project as at10 December 2009 and prepared for the purpose of inclusion in this circular.

REPORT FROM HLM & CO.

14 April 2010The Board of DirectorsChina Investment Fund Company Limited4/F., Aon China Building,29 Queen’s Road Central,Hong Kong

Dear Sirs,

We have been engaged to report on the calculations of the discounted cash flow method to assess theMarket Value (the “Valuation”) of business enterprise value of Gold Ridge Project (hereinafter referredto as the “Gold Project”) dated 10 December 2009 prepared by Mine Mappers, L.L.C., an independenttechnical adviser. The Valuation is set out in Appendix I of the circular of China Investment FundCompany Limited (the “Company”) dated 14 April 2010 (the “Circular”) in connection with theacquisition of 12.5% equity interests in Fame Oriented Holdings Limited by the Company. FameOriented Holdings Limited owns 100% equity interest in Golden Fame (USA) Inc., which held theFronteer Properties, which the Gold Ridge Property is the major asset under the Fronteer Properties.The Valuation based on the discounted cash flow method is regarded as a profit forecast under Rule14.61 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited(the “Listing Rules”).

Directors’ Responsibility for the Valuation

The directors of the Company are responsible for the preparation of the Valuation in accordance withthe bases and assumptions determined by the directors and as set on pages 89 to 91 of the Circular.This responsibility includes carrying out appropriate procedures relevant to the preparation of theValuation and applying an appropriate basis of preparation; and making estimates that are reasonablein the circumstances.

Room 305, Arion Commercial Centre2-12 Queen’s Road West, Hong Kong香港皇后大道西2-12號聯發商業中心305室Tel 電話: (852) 3103 6980Fax 傳真: (852) 3104 0170E-mail 電郵: [email protected]

APPENDIX III REPORT ON FORECAST UNDERLYING THEVALUATION OF THE GOLD RIDGE PROPERTY

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Reporting Accountants’ Responsibility

It is our responsibility to report, as required by Rule 14.62(2) of the Listing Rules, on the calculationsof the Valuation is based. We are not reporting on the appropriateness and validity of the bases andassumptions on which the Valuation are based and our work does not constitute any valuation of GoldProject.

We conducted our work in accordance with the Hong Kong Standard on Assurance Engagements3000 “Assurance Engagements Other Than Audits or Reviews of Historical Financial Information”.This standard requires that we comply with ethical requirements and plan and perform the assuranceengagement to obtain reasonable assurance on whether the Valuation, so far as the calculations areconcerned, have been properly compiled in accordance with the bases and assumptions as set out onpages 89 to 91 of the Circular. We reviewed the arithmetical calculations and the compilation of theValuation in accordance with the bases and assumptions.

The Valuation does not involve the adoption of accounting policies. The Valuation depend on futureevents and on a number of assumptions which cannot be confirmed and verified in the same way aspast results and not all of which may remain valid throughout the period. Our work has been undertakenfor the purpose of reporting solely to you under Rule 14.62(2) of the Listing Rules and for no otherpurpose. We accept no responsibility to any other person in respect of our work, or arising out of orin connection with our work.

Opinion

Based on the foregoing, in our opinion, the Valuation, so far as the calculations are concerned, hasbeen properly compiled in all material respects in accordance with the bases and assumptions madeby directors of the Company as set out on pages 89 to 91 of the Circular.

Yours faithfully,

HLM & Co.Certified Public AccountantsHong Kong

APPENDIX IV REPORT ON FORECAST UNDERLYING THEVALUATION OF THE TALE MINE

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Set out below is the full text of the report from HLM & Co. Certified Public Accountants on discountedcash flow method to assess the market value of Shiyan Hao Shun Mineral Company Limited as at 31October 2009 and prepared for the purpose of inclusion in this circular.

REPORT FROM HLM & CO.

14 April 2010The Board of DirectorsChina Investment Fund Company Limited4/F., Aon China Building,29 Queen’s Road Central,Hong Kong

Dear Sirs,

We have been engaged to report on the calculations of the discounted cash flow method to assess theMarket Value (the “Valuation”) of Shiyan Hao Shun Mineral Company Limited (hereinafter referredto as “Shiyan Hao Shun”) dated 31 October 2009 prepared by Savills Valuation and ProfessionalServices Limited, a professional valuation firm. The Valuation is set out in Appendix II of the circularof China Investment Fund Company Limited (the “Company”) dated 14 April 2010 (the “Circular”)in connection with the acquisition of 17.5% equity interests in Shing View Global Investment Limitedby the Company. Shing View Global Investment Limited, through its wholly-owned subsidiary, owns100% equity interest in Shiyan Hao Shun, which principal asset is its mining right of the Talc Mine.The Valuation based on the discounted cash flow method is regarded as a profit forecast under Rule14.61 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited(the “Listing Rules”).

Directors’ Responsibility for the Valuation

The directors of the Company are responsible for the preparation of the Valuation in accordance withthe bases and assumptions determined by the directors and as set on pages 99 to 100 of the Circular.This responsibility includes carrying out appropriate procedures relevant to the preparation of theValuation and applying an appropriate basis of preparation; and making estimates that are reasonablein the circumstances.

Room 305, Arion Commercial Centre2-12 Queen’s Road West, Hong Kong香港皇后大道西2-12號聯發商業中心305室Tel 電話: (852) 3103 6980Fax 傳真: (852) 3104 0170E-mail 電郵: [email protected]

APPENDIX IV REPORT ON FORECAST UNDERLYING THEVALUATION OF THE TALE MINE

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Reporting Accountants’ Responsibility

It is our responsibility to report, as required by Rule 14.62(2) of the Listing Rules, on the calculationsof the Valuation is based. We are not reporting on the appropriateness and validity of the bases andassumptions on which the Valuation are based and our work does not constitute any valuation ofShiyan Hao Shun.

We conducted our work in accordance with the Hong Kong Standard on Assurance Engagements3000 “Assurance Engagements Other Than Audits or Reviews of Historical Financial Information”.This standard requires that we comply with ethical requirements and plan and perform the assuranceengagement to obtain reasonable assurance on whether the Valuation, so far as the calculations areconcerned, have been properly compiled in accordance with the bases and assumptions as set out onpages 99 to 100 of the Circular. We reviewed the arithmetical calculations and the compilation of theValuation in accordance with the bases and assumptions.

The Valuation does not involve the adoption of accounting policies. The Valuation depend on futureevents and on a number of assumptions which cannot be confirmed and verified in the same way aspast results and not all of which may remain valid throughout the period. Our work has been undertakenfor the purpose of reporting solely to you under Rule 14.62(2) of the Listing Rules and for no otherpurpose. We accept no responsibility to any other person in respect of our work, or arising out of orin connection with our work.

Opinion

Based on the foregoing, in our opinion, the Valuation, so far as the calculations are concerned, hasbeen properly compiled in all material respects in accordance with the bases and assumptions madeby directors of the Company as set out on pages 99 to 100 of the Circular.

Yours faithfully,

HLM & Co.Certified Public AccountantsHong Kong

APPENDIX V TECHNICAL REPORT ON THE GOLD RIDGE PROPERTY

– 106 –

The Director ByChina Investment Fund Company Limited4th Floor, Aon China Building Mark Osterberg, Ph. D. P.G.29 Queen’s Road Central Mine Mappers, L.L.C.Hong Kong 2114 West Grant Road, Box 114

Tucson, AZ 8574514 April 2010

Table of Contents

Table of Figures. 107Table of Tables. 1071. SUMMARY 1082. INTRODUCTION 1083. RELIANCE ON OTHER EXPERTS 1104. PROPERTY LOCATION AND DESCRIPTION 1105. MINERAL PROPERTIES 111

5.1 Other Land Related Issues 1115.2 Claims and Title 1115.3 Environmental Liability 1145.4 Permitting 115

6. CLIMATE AND PHYSIOGRAPHY 1167. HISTORY 116

7.1 Production 1178. GEOLOGICAL SETTING 120

8.1 Regional Geology 1208.2 Local Geology 1238.3 Structure 123

9. DEPOSIT TYPE 12410. MINERALIZATION AND ALTERATION 12511. EXPLORATION 126

11.1 Mapping 12611.2 Geochemistry 12711.3 Geophysics 128

12. DRILLING 12812.1 Methods 129

13. SAMPLING METHOD AND APPROACH 12913.1 Sample Preparation, Analyses and Security 130

14. DATA VERIFICATION 13015. ADJACENT PROPERTIES 13116. METALLURGY 13217. MINERAL RESOURCE ESTIMATES 133

17.1 Historic Resource Estimate 13317.2 Conditions and Assumptions 13517.3 Mineral Resource Estimate Methodology 13517.4 Resource Estimate 13717.5 Grade Estimate 13817.6 Caveats 140

18. OTHER RELEVANT DATA AND INFORMATION 14019. INTERPRETATION AND CONCLUSIONS 14020. RECOMMENDATIONS 14121. REFERENCES 14122. BASE CASE MINING OPERATION 14223. COST ANALYSIS 14224. RISKS RELATING TO THE GOLD RIDGE PROPERTY 14325. AUTHORS CERTIFICATE AND SIGNATURE 14526. ANNEXURE — QUALIFICATIONS AND EXPERIENCE 147


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Table of Figures.

Figure 1. Project location. 112Figure 2. Land Status. 113Figure 3. Regional geology, after Drewes (1985). 122Figure 4. Gold Ridge project geology. 124Figure 5. Mapped quartz vein and faults on Gold Prince mine 3-Level. 125Figure 6. Rock chips, rock channel and soil geochemistry. 127Figure 7. Drill hole traces from underground drill stations in the Gold Prince mine. 128Figure 8. Geochemical assay verification-surface assays. 131Figure 9. 3D representation of proven, probable and possible resource zones. 136Figure 10. Relationship between cut-off grade and

weighted average grade from the drill hole database. 138

Table of Tables.

Table 1. Summary of historical activity at the Gold Ridge Project Area. 118Table 2. Gold Prince mine past production summary. 119Table 3. Gold Prince drilling summary. 129Table 4. Assay verification results. 130Table 5. Reserve base calculated by Queenstake Resources Start of Year 1986. 134Table 6. Production credited to Queenstake Resources in Year 1986. 134Table 7. Reserves tabulated by Queenstake Resources at End of Year 1986. 135Table 8. Resource tonnage estimate. 137Table 9. Gold grades for Gold Ridge resource from production records and drilling. 139Table 10. Gold grades, weighted for channel length from level chip channel samples. 139


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1. SUMMARY

Mine Mappers L.L.C. was commissioned by Golden Fame (USA) Inc. to provide an independenttechnical report, which is in compliance with the National Instrument 43-101 standard, forpotential investors and the incorporation in this Circular. This technical report was prepared onthe basis o f Canadian Institute of Mining, Metallurgy and Petroleum (the “CIMVAL Code”).

The Gold Ridge project area, located in southeastern Arizona, USA, contains a significant goldresource in steeply dipping, continuous and semi-continuous quartz-sulfide veins. These veinshave produced approximately 22,000 ounces of gold at grades approaching 0.5-ounces per tonfrom small tonnage underground mines. A new mineral resource estimate for the Gold Princeportion of the project is 2,999,931 tons at a grade of 0.3-ounces per ton gold.

The Golden Fame (USA) Inc. are sufficient to support any anticipated exploration, developmentand mining activities centered on the Gold Prince, Dives and Gold Ridge portions of the property.Environmental, permitting and reclamation requirements were reviewed by qualified outsideexperts and not deemed to presently contain any fatal flaw issues.

The mineral resource, land tenure, environmental and permitting conditions at Gold Ridge aresuch that a small tonnage, high-grade underground mining operation holds excellent potentialfor a successful financial outcome. Exploration and development work to move the projectforward from exploration to mining is highly recommended.

2. INTRODUCTION

The Gold Ridge project is located in southeastern Arizona in an area of good infrastructure andmaterial support and holds significant potential for a small tonnage, high-grade profitable goldmining operation. Exploration is planned to test the mining potential in early 2010, to be followedforthwith by development and production as exploration results warrant.

2.1 Background of the Fame Oriented Acquisition

Reference is made to the background of the Fame Oriented Acquisition under the “Letterfrom the Board”. On 31 July 2009, Copper One entered into a purchase agreement (the“Underlying Agreement”) with Fronteer Development, pursuant to which Copper Oneagreed to acquire 100% interest in mineral and other rights held by Fronteer Developmentin the Fronteer Properties for a consideration of US$400,000. Copper One is copper-focused exploration and development company which is listed on the Venture Board ofthe Toronto Stock Exchange (TSXV: CUO). Fronteer Development is a gold-focusedexploration and development company whose shares are listed on the Main Board of theToronto Stock Exchange (TSX: FRG) and the American Stock Exchange (AMEX: FRG).At the time when the Underlying Agreement was first negotiated, there was noarrangement, understanding, agreement or negotiation between the Company and otherparties to the Underlying Agreement, the FO Assignment Agreement and the FameOriented Agreement.


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On 30 October 2009, Golden Fame entered into an assignment agreement (the “FOAssignment Agreement”) with Copper One, pursuant to which Copper One has assignedits rights in the Underlying Agreement to Golden Fame with the consent of FronteerDevelopment for a consideration of US$150,000. Mr. David Eaton negotiated on behalfof Baron Natural Resources in the FO Assignment Agreement. Mr. Eaton works forBaron Natural Resources and he has over 20 years of experience in equity capital marketsin North America. He is the coverage banker for listed companies in mining sector andCopper One is one of his clients. Baron Natural Resources only came to know about theUnderlying Agreement at the time of the negotiation of FO Assignment Agreement. Therights in the FO Assignment Agreement include the rights to purchase a 100% interest inmineral and other rights held by Fronteer Development in the Fronteer Properties. GoldenFame is wholly-owned by Fame Oriented, which in turn is wholly-owned by Baron NaturalResources. Golden Fame will be responsible for the outstanding balance payment ofUS$350,000 payable to Fronteer Development and will also be responsible for furtherexploration, exploitation and other mining operations for the Fronteer Properties. MineMappers L.L.C. understands that there would not be any additional costs payable byGolden Fame for acquiring the legal title to the Fronteer Properties other than theUS$350,000 payable to Fronteer Development.

Ms. Wan, the ultimate beneficial owner of Baron Natural Resources and a former Directorand a substantial shareholder of the Company, was periodically informed by themanagement of Baron Natural Resources at the time when the FO Assignment Agreementand the I3P Agreement was negotiated. Ms. Wan is neither an employee nor a director ofBaron Natural Resources. The management of Baron Natural Resources is made up ofgeological and mining experts, who were mainly responsible for the initial stage and/ornegotiation of the FO Assignment Agreement and the I3P Agreement.

On 31 July 2009, Fronteer Development entered into the Underlying Agreement withCopper One. Both parties were not associates of Baron Natural Resources and accordingly,Baron Natural Resources and its associates were not involved in the negotiation of theUnderlying Agreement. In August 2009, Baron Natural Resources and its associatesstarted the negotiation of the FO Assignment Agreement with Copper One.

On 11 December 2009, Baron Natural Resources entered into an agreement with anIndependent Third Party whereby the Independent Third Party agreed to acquire a 71%equity interest in Fame Oriented from Baron Natural Resources (the “I3P Agreement”)at the same pricing as the Company. The Independent Third Party is a BVI Companynamed Eagle Action Limited. “Same pricing” means the price per each percentage ofequity interest of Fame Oriented in the I3P Agreement is the same in the Fame OrientedAgreement. Baron Natural Resources focuses on operation management and directinvestment into mining-related projects and creates value by advancing near-termproduction projects into production stage and taking advantage of distressed situations.


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On 21 December 2009, the Company and Baron Natural Resources entered into the FameOriented Agreement whereby the Company has conditionally agreed to acquire fromBaron Natural Resources a 12.5% equity interest in Fame Oriented for a considerationHK$19,200,000. The Company will be a passive investor and will not be responsible forfurther investment or operation for the Fronteer Properties.

This study was commissioned by Michael R. Pawlowski, President of ContinentResources, Incorporated in October 2009 to assess the reliability of existing datasets forthe project and to provide a mineral resource level valuation for the project.

3. RELIANCE ON OTHER EXPERTS

Outside experts in land, legal, environmental and permitting related matters were relied on forland tenure, legal and corporate structure, environmental conditions and permitting issues.Specifically, the information in Chapter 5 of this report regarding legal status of the land, theproposed acquisition agreement and royalties was contributed by Golden Fame (USA) Inc.consulting attorney J. Michael Perry. The environmental review was contributed by KarenSchwab, R.G. of Kimberlite Water Quality Permitting and Compliance Services LLC. Permittingstatus and issues were addressed by Fred B. Brost, P.E., Mining & Environmental Consultants,Inc.

4. PROPERTY LOCATION AND DESCRIPTION

The Gold Ridge Property is located in north central Cochise County in southeastern Arizona inthe southern foothills of the Dos Cabezas Mountains, approximately 16-miles east-southeastof Willcox, Arizona (Figure 1). The property lies on a County maintained gravel road abouttwo and a half miles northeast of the settlement of Dos Cabezas. Willcox is approximatelyeighty-five miles east of Tucson, Arizona and lies along U.S. Interstate Highway 10. Modernservices and accommodations are available in Willcox and it is served by the Southern PacificRailway. State Highway 186 connects Willcox with Dos Cabezas, providing easy year-roundaccess.


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5. MINERAL PROPERTIES

The property package consists of 73.95-acres of private property, 333.38-acres of patentedmining claims and 112 unpatented mining claims covering 1718.74-acres. In addition, theproperty holdings include one leased group of 12 unpatented mining claims covering216.34-acres. Golden Fame controls the mineral rights on a total of 2342-acres (Figure 2).

5.1 Other Land Related Issues

The company also owns a three-acre parcel with street access, currently occupied by anadobe building that houses existing cardboard core boxes, assay rejects and unsortedmiscellanea near the village of Dos Cabezas. A second unimproved lot is locatedapproximately 1/4-mine northeast of the storage facility.

Golden Fame also controls cattle grazing rights and water rights on its fee-held and free-range lands. In effect, free-range rights allow other, unrelated parties to access grazingpastures and watering sources until specifically excluded. Presently cattle from theHurtado Ranch in Dos Cabezas are grazing the lands controlled by Golden Fame and arewatering from ponds fed by drainage from the 6-Level portal of the Gold Prince, theDives Portal and a small portal on western Gold Ridge. A surface water agreement withthe rancher will likely be consummated at some point in the future.

5.2 Claims and Title

Western States Minerals Corporation assigned its interests in the Gold Ridge project toNewWest Gold Corporation in June, 2005. NewWest Gold Corporation, in June, 2006,assigned its’ interests to NewWest Gold LLC which subsequently merged into its’ parentcorporation, NewWest Gold USA Inc, a Deleware corporation. Most recently, NewWestGold USA Inc. changed its’ name to Fronteer Development (USA) Inc., an indirectlywholely owned subsidiary of the Fronteer Development Group Inc., a Canadian companytraded on the Toronto and New York stock exchanges.

Continent Resources (USA) Inc. optioned the Dos Cabezas Property from FronteerDevelopment Group, under an agreement dated July 31, 2009. The Continent Resources(USA) Inc. company name was changed to Copper One Inc. on October 13, 2009. GoldenFAME (USA) Inc. then optioned the Dos Cabezas Property from Copper One Inc. (formerContinent Resources Inc.) on October 19, 2009.


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According to the laws of Arizona, the Underlying Agreement and the FO AssignmentAgreement, Golden Fame has the rights to explore and exploit the Gold Ridge Property.By paying US$350,000 to Fronteer Development, Golden Fame will obtain the title ofthe Gold Ridge Properties. Upon receiving of the relevant permits, including but notlimited to underground working permit, Golden Fame will have the rights to explore andexploit the Gold Ridge Properties. Mine Mappers, L.L.C. understands from themanagement of Golden Fame that they expected to undertake diamond drill at the GoldRidge Property to increase the number of ores available for future mining while advancinginto production.

The Gold Ridge Property is one of the patented mining claims of the Fronteer Properties.Patented claim is a claim for which the Federal Government has passed its title to theclaimant, making it private land. A person may mine and remove minerals from a miningclaim without a mineral patent. However, a mineral patent gives the owner exclusive titleto the locatable minerals. It also gives the owner title to the surface and other resources.With a patented claim, the Company owns the land as well as the minerals. Therefore,there is no duration of the rights to explore and exploit the Gold Ridge Property.

The mineral properties listed in section 5.1 are current.

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Gold Ridge Project

Lordsburg, NM

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Phoenix

Tucson

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Figure 1. Project location. The project is located approximately 90-miles east ofTucson, Arizona in Cochise County.


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Land Status

Patented Claims

Unpatented Claim Monuments

Unpatented Claims

Private Minerals Not Controlled0 2,500 5,000 teeF052,1

Figure 2. Land Status.


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5.3 Environmental Liability

The Gold Ridge Property is located on private patented land and subsequent development,operations, and reclamation operations will be funded and operated by a privately-ownedcompany. A Phase I Environmental Site Assessment was conducted of the Site in 1993and concluded that there were no environmental threats to the environment from theGold Ridge Property.

Leachability tests were conducted on waste rock samples in 1996 and the ArizonaDepartment of Environmental Quality (ADEQ) issued a written statement concludingthat the waste rock was determined to be inert, as defined in Arizona Revised Statute(A.R.S.) §49-201.20.

Water samples were collected from the Gold Prince and Dives mines during a site visitconducted on August 12, 2009. Groundwater in the underground workings meets allnumeric aquifer water quality standards and surface water quality standards for thedesignated uses of the nearby ephemeral washes.

Permitting requirements for development and operation should be minimal. since theores and waste rock are indicated to be non-acid generating, resulting in good qualitygroundwater. The activity of dewatering the underground workings during developmentcan potentially be covered under a general Aquifer Protection Permit from the ArizonaDepartment of Environmental Quality.

Groundwater rights or groundwater withdrawal permits should not be required from theArizona Department of Water Resources for pumping groundwater out of the undergroundworkings. In addition, no record keeping or reporting of annual pumpage volume will berequired.

A mine reclamation plan and financial assurance mechanism will be required by theArizona Mine Inspector’s Office if the planned activities at the Gold Ridge Propertieswill result in surface disturbance of greater than five acres, including disturbance ormodification of any existing waste rock stockpiles or roads. In order to document currentsite conditions and existing surface disturbance, an aerial fly-over should be conductedand a map generated prior to beginning any exploratory or mining operations at the Site.


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5.4 Permitting

The following permits and applications may be required for a mining operation at GoldRidge:

1. Reclamation plan with a bond posted against its completion.

2. An identification number with both the Federal Mine Safety and HealthAdministration (“MSHA”) and the Arizona State Mine Inspectors office as soonas the project advances beyond the exploration phase.

3. An MSHA approved ventilation plan and a ground support plan.

4. A mine rescue team on call.

5. Arizona Department of Water Resources permits for exploration holes and wells.

6. County highway use restrictions and maintenance requirements.

7. NPDES Multi-Sector General Permit for Industrial Activities for storm water runoffissued by the Arizona Department of Environmental Quality.

8. An Air Quality Permit for crushing and screening.

9. An Aquifer Protection Permit.

Some of these documents may not be needed if the scope and scale of a mining operationremain below certain thresholds. For example, an Air Quality Permit may not be requiredif emissions are below certain threshold values or if a contracted, mobile crushing andscreening company is used. In this case it is normal for an Air Quality Permit to beattached to the mobile equipment and the responsibility of the crushing and screeningcontractor. The mine rescue team requirement may be met by contracting within a “minesafety” cooperative if MSHA would rule that a “small and remote” classification wouldbe appropriate for an operation at Gold Ridge. And finally, a reclamation plan may notbe required from the State of Arizona if certain conditions may be met by the miningoperation.

As informed by the management, the Gold Ridge Property is in the process of applyingto the underground permit under the state of Arizona. Such permit is procedural in natureand Golden Fame expects to receive the permit in April 2010, when the development andthe rehabilitation of the Gold Ridge Property begins. According to the management, theGold Ridge Property has complied with all rules and regulations in the jurisdiction it islocated previously and after making all reasonable enquiry to the management, the GoldRidge Property does not have any claim in relation to the exploration and/or miningrights made or notified by third parties against the Company, Fame Oriented nor GoldenFame.


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6. CLIMATE AND PHYSIOGRAPHY

The climate is arid and vegetation consists mainly of sagebrush, grasses, cacti and other desertshrubs. Juniper and the occasional pine, are found at higher elevations and on north facingslopes. Sporadic heavy rain and thunder storms occur in mid- to late-summer during theso-called “Monsoon”. Sporadic, occasional storms may bring snow to the higher elevations inthe winter.

The Dos Cabezas Mountains form a northwesterly trending range approximately 20-miles longand varying in width from 3- to 10-miles. They reach a maximum altitude of 8,300 feet, roughly4,000 feet above the elevation of the adjacent plains. Topography is rugged in places. Awell-developed state and county road system and branching local gravel-covered roads providereliable year-round access to the property.

The area generally is a ranching district used for cattle grazing. Wildlife includes deer, coyotesand the usual desert population of small mammal species. No special environmental problemsare anticipated with respect to development of the mining operations.

7. HISTORY

Mining commenced in the Dos Cabezas district prior to 1862 with intermittent work on thevarious properties until 1950. Summary details are listed in Table 1. Gold-quartz veins andcontact metamorphic copper deposits were discovered and intermittently mined. Total districtproduction is about 10,000-ounces of gold, 430,000-ounces of silver, 4-million pounds of copper,1.4-million pounds of lead and 38,000-pounds of zinc. Most of the silver and all of the basemetals came from the contact metamorphic deposits. Gold production came principally fromthe Gold Prince, the Gold Ridge and the Dives mines. Most production was delivered in theearly 1930’s. Notably, the Dos Cabezas mining company drove the present 5 level of the GoldPrince Mine in 1949.

The Gold Prince mine was operated by the small mines division of the Phelps Dodge Companybetween 1984 and 1986, during which time 14,238 tons were shipped with an average grade of.313 opt. Significant core drilling was completed during this time. This production was shippedto Phelps Dodge smelters and used for flux.

Queenstake Resources U.S.A., Inc. leased the property between October, 1986 and September,1992. They drilled additional core holes, developed additional mine openings and undertookminor production. The final 22 months of this production was conducted through agreementwith Queenstake by contract miners.


– 117 –

7.1 Production

High-grade gold mineralization occurs in gold-sulfide-quartz veins at the Gold RidgeProject. The veins are part of a three-mile long vein swarm that includes both barren andmineralized veins. Past production from the Gold Prince Mine is shown in Table 2.Production tons and grade from the Gold Ridge and Dives mines are not known.

Year Organization Primary Activity

1877 Unknown Dives discovered, located asthe Bear Cave claim

1878 — 1880’s T.C. Bain Gold Prince mine discovered(known as Murphy mine)

1878 Unknown Gold Ridge mine discovered(known as Juniper mine)

1881-1882 Unknown 2 opt ore produced from Gold Ridge mine

1890’s Casey Brothers Operated Gold Ridge mine

1911-1914 About 1,000 oz Au produced from Dives

1914 T.W. Smith Relocated claims on Gold Ridge mine

1916 Dos Cabezas Gold Ridge UnknownMining Co.

1919 Dives Mining Company 10 stamp amalgamation-concentrationmill on Dives

1918-1921 Gold Prince Mining Company 25 tpd mill, 3,000 feet of workings

1922 Twin Peaks Mining Company Owned Dives mine, but did little work

1922 J.H. Huntsman Purchased Gold Ridge mine @ sheriff’ssale for $45,000

1930’s Consolidated Gold Mines Dives 1800' (500 level) constructedCompany, Ltd. 50 tpd float mill (later 150 tpd)

1931-1933 Dos Cabezas Mining Company Additional development &production (some leasees)


– 118 –

Year Organization Primary Activity

1933 Tidmarsh Engineering Co. Owned Gold Prince mine(Tucson)

1936-1939 Sutton, Steele and Steele Owned Gold Prince mine(Dallas, TX)

1939 Alice & Nancy Huntsman Owners of Gold Ridge mine

1940 Outwest Mining Company Owned Gold Prince mine

1949-1950 Dos Cabezas Mining Co. Property acquired & Gold Prince operated(John E. Mowinkle)

1984-1986 Phelps Dodge Corp. Produced silica-flux to Hidalgosmelter under lease from Mowinkle

1986-1995 Queenstake Resources Produced silica-flux to Hidalgosmelter under lease from Mowinkle

1991-1992 Vorin Partners Produced silica-flux to Hidalgosmelter under sub-lease

1993-1994 Western States Minerals Corp. Option & purchase of property

1993-1996 Western States Minerals Corp. Produced silica-flux to Hidalgo smelter

2005-2007 Western States Minerals Corp. New West Gold leased theand New West Gold Inc. property from Western States

2009 Fronteer Development Western States sold the property to(USA) Inc. Fronteer Development Inc.

(former New West Gold USA)

2009 Continent Resources Inc Continent signed purchaseagreement to acquire fromFronteer Development Inc.

Table 1. Summary of historical activity at the Gold Ridge Project Area.


– 119 –

Ounces OperatingTime Period Ore Tons Ore Grade Produced Company

Pre — 1932 Unknown Unknown Unknown Unknown

1932 — 1933 4,171 0.58 2,419 Unknown

1949 — 1950 2,800 0.4 1,120 Unknown

1984 — 1986 14,238 0.313 4,456 Phelps Dodge

1988 497 0.34 169 Queenstake Resources

1989 5,111 0.254 1,298 Queenstake Resources



1992 2,212 0.312 691 Contract Mining for

Queenstake Resources

1993 1,321 0.164 217 WSMC

1994 12,359 0.457 5,642 WSMC

1995 10,523 0.231 2,430 WSMC

1996 4,936 0.188 927 WSMC

TOTALS 63,932 0.344 22,023

Table 2. Gold Prince mine past production summary.


– 120 –

8. GEOLOGICAL SETTING

8.1 Regional Geology

The Dos Cabezas area is interpreted to be a large late Cretaceous-early Tertiaryplutonic-volcanic center constructed on a deformed and intruded Precambrian, Paleozoicand Cretaceous metavolcanic and a metasedimentary rocks. These rocks weresubsequently cut by the Apache Pass Fault Zone, a regional vertical shear zone that isposited to control the location of high-grade gold vein systems like that at Gold Ridge.

The Gold Ridge project lies within the Dos Cabezas Quadrangle, underlain bymetamorphic and plutonic rocks of Precambrian age. Paleozoic and Mesozoic sedimentaryand volcanic rocks occur in two northwesterly trending belts through the quadrangle,along the trace of the Apache Pass Fault Zone. Dacitic volcanic rocks of Cretaceous orPaleocene age also occupy considerable areas and are important in relation to mineraldeposits in the area (Figure 3).

The Apache Pass Fault, traced along a west-northwesterly trend for more than 20-miles,is the dominant structural feature of the Gold Ridge project area. The fault is interpretedto have had a long history of recurrent movement and is believed to be an importantcontrol for the localization of the ore-bearing veins of the district. Numerous late north-to northwesterly-trending faults cross the main shear zone and offset mineralized veinsfrom a few feet to several hundred feet. The Apache Pass Fault Zone is characterized bya marked magnetic low along its length.

The Precambrian rocks of the larger Dos Cabezas area include metasedimentary andmetavolcanic rocks of the Pinal Schist, metamorphosed rhyolite and amphibolites whichintrude the Pinal Schist. Later granitic plutons intrude all of the older rocks and havebeen dated at 1,450 million years.

Pinal Schist rocks include phyllitic siltstone or some greywacke, foliated parallel tobedding and interbedded with coarser-grained clastic rocks and quartzite. Quartzites arelight-colored and moderately thick-bedded. The Precambrian metavolcanic rocks occuras a few intercalated lenses northeast of the Apache Pass Fault Zone. They are gray,massive to weakly porphyritic rocks and contain locally extensive lithic volcanic inclusionsand are thought to be derived from andesite-dacite lava flows or tuffs. The 1450-myintrusions are of intermediate to felsic composition, typically coarse-grained and, in places,display porphyroblastic and rapakivi textures.


– 121 –

Paleozoic rocks lie unconformably upon the Precambrian rocks in two distinct west-northwesterly trending belts. The south-most of the two belts is generally undisturbedand contains thick sedimentary sequences. The northerly belt, containing the GoldenPrince, Gold Ridge and Dives mines, hosts thinned sedimentary sequences along theApache Pass Fault Zone. Of particular note are carbonate rocks of the Permian HorquillaLimestone which host contact metamorphic copper deposits, cropping to the north of thegold-bearing veins.

Mesozoic sedimentary rocks lie unconformably over the Paleozoic rocks and include theLower Cretaceous Bisbee Formation consisting of shale, sandstone, siltstone, interbeddedlimestone and basal Glance conglomerate. Facies variations within rocks of the Bisbeegroup are common. Upper Cretaceous shales, graywackes, sandstone and conglomeratelying above the Bisbee group host the gold-bearing veins in the Dos Cabezas MiningDistrict.

The Dos Cabezas volcanic pile of late Cretaceous or early Paleocene age is made uplargely of dacitic breccias but also includes some rhyolite breccias, rhyolitic weldedtuffs as well as rhyolitic and andesitic intrusive bodies. Rhyolitic breccia is particularlyabundant near Dos Cabezas Peaks and near Cooper Peak and may represent local volcaniccenters. Several smaller pipes of mixed rhyolitic and dacitic breccias are interpreted asvolcanic cones developed as the main magma mass moved upwards. Blocks ofPrecambrian intrusive as well as Paleozoic rocks are found in some of these breccias.

A Paleocene granodiorite stock intrudes the Laramide Dos Cabezas volcanic pile andolder rocks and has been postulated as a possible source for the copper and goldmineralization of the District.

Plugs and dikes of aphanitic to slightly porphyritic rhyolite of Miocene and Oligoceneage are the youngest igneous rocks in the Dos Cabezas. They occur within the ApachePass Fault Zone and are exposed on the surface and in underground workings on theGold Ridge project.


– 122 –

Precambrian GraniteYg

Laramide DaciteTKd

Bisbee Group

Laramide GraniteTKg

0 2,000 4,000 teeF000,1

Figure 3. Regional geology, after Drewes (1985).

Quaternary alluvial deposits, with placer deposits, cover the canyon floors and extendout into the main basin. The placers were worked in the earlier years of mining in thedistrict.


– 123 –

8.2 Local Geology

Gold-bearing, irregular, quartz-sulfide veins occur within a sheared and faulted zone inthe Cretaceous Bisbee Group sediments. The productive veins in the Gold Prince Mineparallel the main shear zone and are localized along a complex set of relatedwest-northwest, south dipping quartz veins and shears. The fault zone juxtaposesPrecambrian rapakivi granodiorite adjacent to over-turned to vertically-dipping andsheared Cretaceous Bisbee Group sediments, and overlying late Paleozoic limestone.Dioritic intrusive rocks are usually present at the Bisbee Group-rapakivi granite contact.

The high-grade gold-bearing vein system at the Gold Prince mine is part of a three-milevein swarm that includes both barren and mineralized veins. West of the Gold Princemine, the Gold Ridge mine appears to have been offset approximately 400 feet to thenorth along an ill-defined cross-fault.

Bisbee Group sediments are, in general, weakly metamorphosed. Graphitic phyllite,laminated gray quartzite and phyllite and arkose are intruded by andesite dikes. Exoticbreccias, probably tectonic and not hydrothermal in origin are occasionally encountered.Lithology varies in thickness from inches to tens of feet and small to moderate beddingoffsets are seen along vertically-dipping, bedding plane faults. Empirically, quartz-sulfideveins seem developed best in areas with an arkosic footwall and a graphitic phyllitehanging wall.

Gold mineralized zones in intrusive andesite and exotic breccias have sporadic butanomalous gold values. Exotic breccias usually cross-cut bedding but are sometimes areparallel to bedding. Andesite dikes are typically sericitized and silicified and may havesome relationship to mineralization found in breccias in the gold veins and gold veinstructures.

8.3 Structure

Hembree (1989) describes a steeply dipping shear zone, from 500- to 1000-feet-wide,thought to represent a zone of differential shear stress between two main strands of theApache Pass Fault zone. This feature is exposed on surface and in underground workingsand has been followed for 1.5-miles between the Gold Prince and the Dives mines. Thegold/silver-base metal sulfide bearing veins of the District occupy this northwest trendingshear zone. This zone is locally offset, sometimes for as much as several hundred feet,by several north to northwesterly trending faults which cross it.


– 124 –

9. DEPOSIT TYPE

The mines of the Gold Ridge project bear considerable similarity to, and some differenceswith, the Low-Sulfide Au-Quartz vein model of by Byron R. Berger in Cox and Singer (1986).This deposit type bears gold in massive, persistent quartz veins that cut mafic to intermediatevolcanic and volcanosedimentary country rocks. They are associated spatially with large graniticstocks and batholiths. They range in age from Precambrian to Tertiary. Deposits of California’smother-lode and the Canadian Abitibi are members of this deposit type.

These deposits typically host both productive and barren quartz veins. Productive portionstypically form lense-shaped bodies that may persist to great depth, may repeat according tostructural or igneous controls and may be offset by cross-faults. Higher grade portions may beassociated with Fe- and Cu-sulfides or may be located in non-sulfide bearing quartz veins.They typically do not form large tonnage reserves but form mines that have productive livesmeasured in decades.

The deposits of the Gold Ridge project do not appear in association with mafic to intermediatevolcanic rocks but they are associated with intermediate dikes. They do contain significant,high-grade gold bodies in quartz veins in shear zone settings. The highest grade portions areassociated with Fe- and Cu-sulfides and the wall rocks may be moderately sericitized.

Patented Claims


Unpatented Claims

Private Minerals Not Control led

OutcropsCode

Unknown

Jasperoid

Quartz Vein

Tertiary Rhyoli te

Tertiary Andesite

Laramide Rhyolite

Laramide Andesite

Bisbee Gp Siltstone

Bisbee Gp Shale

Bisbee Gp Sandstone

Horquilla Limestone

Precambrian granite

Pinal Schist

0 1,200 2,400 teeF006

Figure 4. Gold Ridge project geology.


– 125 –

10. MINERALIZATION AND ALTERATION

Two principal styles of mineralization are found in the Dos Cabezas Mining District. Gold-base metal sulfide quartz veins occur within the Apache Pass Fault Zone and contactmetamorphic, skarn type deposits of chalcopyrite, pyrite and magnetite in carbonate rocks arefound immediately adjacent to Laramide stocks.

Gold and silver bearing quartz-sulfide veins consist of coarsely crystalline quartz with pyrite,galena, sphalerite and chalcopyrite. Native gold occurs in pyrite as very-fine-grained blebs andfillings in crystal defect sites in pyrite and sphalerite. Native gold is also found preferentiallyin friable and cupriferous pyrite relative to massive euhedral pyrite in the quartz veins. Thecupriferous pyrite has a peacock-colored, bornite tarnish on fracture surfaces (Pawlowski 1985).

These sulfides are frequently arranged in bands or coarse aggregates within the quartz andappear to be more common on the hanging wall side of the veins. Oxidation may extend todepths of 200- to 300-feet from the surface. Gold grade ranges from nil to greater than 10.0ounces/ton (Pawlowski 1985). The gold/silver ratio is roughly 1:1. Base metal values, lead,zinc and copper, in descending order of abundance, vary from 0.05% to 0.75%. Lenticular oreshoots are 100- to 400-feet in length and are found in various locations throughout the width ofthe shear zone. They persist from the surface to the lowermost workings.

0 100 200 teeF05

Gold Prince 3 Level

Faults

Quartz Vein

Drift

Figure 5. Mapped quartz vein and faults on Gold Prince mine 3-Level.


– 126 –

The Gold Prince mine contains gold in disseminated ores in wall rock, in early carbon-calciumcarbonate-quartz veins and in the quartz veins. All are hosted by the Cretaceous Bisbee Groupshales and quartzites.

Wallrock alteration associated with the veins includes silicification and chlorite-sericite-pyriteassemblages. Alteration intensity is greater in the more competent units.

11. EXPLORATION

The project area contains three underground mines with a total drift length of 5,862-feet. TheGold Prince mine has five developed levels with numerous development and productionopenings. Underground rock chip and channel sample geochemistry, stope production records,drift and surface geological mapping, surface soil and rock chip geochemistry and surface andunderground drilling records are available.

11.1 Mapping

Surface geological mapping was included in the database as an AutoDesk CAD file andincluded layers for outcrops, attitudes, contacts, faults, annotation, grids and legends(Figure 4).

A partial set of underground drift maps are also present in the database. These mapsdepict the location of sinuous quartz veins and structures (Figure 5). Note that full setsof drift maps for the Gold Prince and other mines in the Gold Ridge project were notavailable to this study.


– 127 –

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Paten ted C laim s


Unpatented Claims

Private Minerals Not Contro lled

DC_SoilsAu_ppm

!( -0.005000 - 0 .060000

!( 0.060001 - 0.322000

!( 0.322001 - 0.710000

!( 0.710001 - 1.870000

!( 1.870001 - 10 .533000

DC_ rocksAu_ppm

#* -0.005000 - 0 .197000

#* 0.197001 - 0.820000

#* 0.820001 - 2.188000

#* 2.188001 - 10 .000000

#* 10.000001 - 93.300000

Outcrops

Code

Unknown

Jasperoid

Quar tz Ve in

Tertia ry Rhyoli te

Tertia ry Andesite

Laramide Rhyoli te

Laramide Andesite

Bisbee Gp Si ltstone

Bisbee Gp Shale

Bisbee Gp Sandstone

Horqu illa Limestone

Precambrian gr anite

Pinal Schist

0 1,200 2,400 teeF006

Figure 6. Rock chips, rock channel and soil geochemistry. The prominent cluster tothe center-right is the Gold Prince mine. The center-left cluster, separated by anarrow, untested septum, lies above the western extension of known veins in theGold Prince mine. Note the legend category of DC Rocks referring to Western StatesMinerals consulting geologists “Dos Cabezas” project.

11.2 Geochemistry

281 soil samples were collected from a grid oriented across the Apache Pass Fault Zone,covering the Gold Ridge project. An additional 254 rock chip geochemical samples werecollected from the area covered by the soil geochemical grid (Figure 6). Both geochemicalsets contain 35-element ICP results plus fire assay Au and Ag results.

1592 rock chip and channel samples were also collected from underground drifts. Thesesamples were analysed for Au and Ag.


– 128 –

11.3 Geophysics

Drewes (1985) references gravity and magnetic surveys for the Dos Cabezas quadrangle.Details for these surveys are not available.

12. DRILLING

Results from 435 drill holes are in the database for the Gold Prince mine. These holes includecollar, survey, lithology and assay information. Original paper drill logs were not examined forthis report. The distribution of drill holes is shown on Figure 7.

13

000

E

13000

E

13

500

E

13500

E

14

000

E

14000

E

14

500

E

14500

E

12000 N

12500 N

13000 N

12000 N

12500 N

13000 N

Figure 7. Drill hole traces from underground drill stations in the Gold Prince mine. Thisdrilling is largely confined to the historic mine’s 4, 5 and 6 levels respectively. Someconfusion may arise from this figure and the reader is reminded that this figuresuperimposes these mining levels. It is included to portray the 3-dimensional distributionof drill information in a 2-dimensional context.


– 129 –

The database indicates the following distribution of drill holes between surface and underground,core, reverse circulation and mining company. Queenstake Resources drilled 28 undergroundcore holes and 50 production-development long-wall holes. 12 surface reverse circulation rotaryholes and 260 production-development holes were drilled by Western States MineralsCorporation, Phelps Dodge Mining Company drilled 44 underground core holes and 41underground long-wall holes.

12.1 Methods

12 NX, 30 AX, 29 BQ and 2 EX core holes account for 11235-feet of drilling. Undergroundproduction-development long-wall holes account for 13344-feet. The remaining 12 holeswere reverse circulation with an aggregate length of 3,195-feet.

Type Number Purpose Company

Core 44 Exploration and Development Phelps DodgeCore 28 Exploration and Development QueenstakeLong-hole 50 Development QueenstakeLong-hole 41 Development Phelps DodgeLong-hole 260 Development Western StatesRC 12 Exploration Western States

Total 435

Table 3. Gold Prince drilling summary.

13. SAMPLING METHOD AND APPROACH

The database indicates rock chip geochemical samples were collected by both Placer Domeand Western States Minerals Corporation geologists. Each sample records location, sampletype and geological context. In addition, each underground rock chip channel sample is locatedand sample width recorded for each channel.

Rock chips were taken semi-continuously along sub-horizontal lines across outcrop. Samplelocations were located using a Garmin 12 handheld GPS unit and by compass and tape from aknown point. Sample descriptions include location coordinates, lithology, an abbreviateddescription of the alteration and mineralization observed in the sampled material, nominal ormeasured sample length, sample type, outcrop type, and the location of the sample relative tothe main vein structure. The tabulated sample locations include the field compass-and-tapemeasurements, and calculated coordinates.


– 130 –

13.1 Sample Preparation, Analyses and Security

Geochemical results are provided in spreadsheet format and each sample record containsinformation indicating laboratory, batch, analytical methodology and results. Originallaboratory reports were not located in the database but are believed to be available forexamination.

14. DATA VERIFICATION

Two days were spent on the Gold Ridge project area collecting check geochemical samplesand an additional two days were used to assess the quality of the geological database.

Geochemical check samples were collected from surface and underground locations. Samplesites were selected to represent the possible full range of assay values including high-grade,low grade and nil values. Results are tabulated in Table 3. These results confirm the presenceof significant high-grade mineralization. They also confirm the geological observations positedby available reports for low-grade and nil assay sample characteristics.

The outcrop portion of the geological map was also checked and confirmed by comparing thetrace of a prominent quartz vein on the ground with its mapped depiction.

Both geochemical and geological databases are deemed to be of good quality and the geologicaldatabase meets professional standards.

Au Ag AgSAMPLE (g/mt) (g/mt) ppm Description

R102809-01 0.58 <3 1.4 1-m wide chip channel. White quartz vein.Schist wall rock.

R102809-02 2.43 3 6.6 Dump. Quartz vein material.R102809-03 NA NA NA Sample not submitted to laboratory.R102809-04 1.20 <3 1.3 1-m wide chip channel sample. Sheared quartz vein.R102809-05 2.88 <3 1.7 0.3-m wide chip channel sample. Quartz vein.R102809-06 16.60 14 12.2 Dump. Quartz vein material.R102809-07 0.21 4 0.5 3-m wide chip channel. White quartz vein.

Schist wall rock.R102809-08 21.77 40 45.3 Dump. Quartz vein material.R102809-09 0.03 <3 0.2 3-m wide chip channel. Schist sample

without quartz vein.R102809-10 6.86 21 23.9 Dump. Quartz vein material.U11052009-1 0.07 3-m wide white quartz veinU11052009-2 0.10 2.5-m wide white quartz veinU11052009-3 0.65 3-m wide white quartz veinU11052009-4 150.96 3-m wide white quartz vein, 6-level main stope pillar

Table 4. Assay verification results. These results were intended to confirm the range, scopeand variation of high-, moderate- and low-grade sample material. As such, sample mediawere selected to represent these classes. Note specifically that these samples were notactual field duplicates of previously sampled material.


– 131 –

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0 1,200 2,400 teeF006

Figure 8. Geochemical assay verification-surface assays. Triangles represent original data,squares represent verification assays. Color scheme for Au value range is equal for bothdata-sets.

15. ADJACENT PROPERTIES

The Dos Cabezas mountains contain many small mines and prospects, mostly related to thelarge late Cretaceous-early Tertiary plutonic-volcanic center. In general, these occurrences areeither skarns and other contact deposits immediately adjacent to the intrusions or vein depositssimilar to those at the Gold Ridge project. Production statistics are not recorded for most ofthese occurrences. The most notable, for which production records exist, are those of the Mascotmine group.

The Mascot mine group, including the Elma mine, lies approximately 3000-feet north of theDives, Gold Ridge and Gold Prince mines. Historic production from veins and contact skarnreplacements in carbonate rocks is approximately 68,000-tons of copper ores consisting ofirregular masses of bornite, chalcopyrite, magnetite, pyrite, molybdenite, chlorite, epidote,garnet and talc.


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16. METALLURGY

Bateman Metallurgical Laboratories of Sparks, Nevada applied a combined gravity and flotationconcentration method in 1987 and 1988 for Queenstake Resources of a bulk sample taken fromthe Level 5 drift. The initial test work applied a 100-percent passing 65-mesh grind followedby gravity concentration and flotation of the gravity tails. The gravity concentrate contained1.124 opt gold that represented 62.6-percent of the gold in 14.4-percent of the original feedweight. The flotation concentrate assayed 0.804 opt gold and contained 33.4-percent of thegold in 4.7-percent of the gravity tail weight. An agitated cyandition process that recovered77.3-percent of the contained gold in 96 hours then treated the bulk flotation concentrate, butthe reagent consumption was high, which suggest some preg-robbing characteristics. Overallrecovery of 88.4-percent was obtained from the first test.

A second gravity-flotation test was conducted with a head feed of 80-percent passing 100mesh. This test recovered 97.8-percent of the gold and 100-percent of the silver in the ore. Thegravity concentrate contained 3.46 ounces of gold and 3.52 ounces of silver per ton, whichrepresented 63.3-percent of the gold in 4.62-percent of the feed weight. The gravity concentrationtails responded well to flotation, with 1.282 ounces of gold and 3.26 ounces of silver per ton inthe flotation product. These results represent a recovery by gravity and flotation of 94.6-percentof the gold and 99.8-percent of the silver in 7.4-percent of the feed weight.

Western States Minerals Corporation contracted Hazen Research Inc. of Golden, Colorado tocontinue the metallurgical testing of the Gold Prince Mine ores in 1995 and 1996. The firstfroth flotation test in 1995 recovered over 95-percent of the gold in a concentrate representedin about 8-percent of the feed ore.

The second froth flotation test of the Gold Prince Composite yielded the following conclusions:

• Rougher flotation at a product of 80-percent passing 202 microns consistently recoveredmore than 97-percent of the gold values to a concentrate representing 12 to 14 weight-percent of the feed.

• Rougher flotation, followed by regrinding of the concentrate prior to a cleaner-stage offlotation, recovered 97.3-percent of the gold in the sample to a concentrate representing5.7 weight-percent of the feed at grade of 3.61 opt gold. Additional cleaning to increasethe gold grade of the concentrate would be expected to significantly reduce the goldrecovery, and the process is not economically practical.

• Naturally occurring carbon in the ore is recovered to the rougher flotation concentrateand exhibits a preg-robbing effect during cyanidation that can be overcome somewhatby prefloating the carbon from the ore and almost entirely by adding activated carbon.

• Bulk sulfide/gold flotation, followed by regrinding and Carbon In Leach cyanidation ofthe froth flotation concentrate, recovered 90.5-percent of the total gold in the Gold PrinceComposite sample. Subsequent carbon stripping, followed by electrowinning of the goldvalues, would probably be a suitable method for producing a direct-sale gold product atthe Dos Cabezas Project.


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Gold grain sizes range from one to 165 microns, with the majority of gold grains from 1 to 12microns. Most of the gold identified to date occurs in the form of electrum (a naturally occurringalloy of gold and silver). Gold tends to be found in the underground veins tends to be found inpyrite. Pyrite is primary sulfide mineral with subordinate amounts of galena and sphalerite,and minor amounts chalcopyrite. Trace amounts of pyrrhotite, covellite and arsenopyrite haveidentified.

17. MINERAL RESOURCE ESTIMATES

17.1 Historic Resource Estimate

Measured resource, as defined in 43-101, is part of a mineral resource for which quantity,grade or quality, densities, shape and physical characteristics are so well established thatthey can be estimated with confidence sufficient to allow the appropriate application oftechnical and economic parameters, to support production planning and evaluation ofthe economic viability of the deposit. The estimate is based on detailed and reliableexploration, sampling and testing information gathered through appropriate techniquesfrom locations such as outcrops, trenches, pits, workings and drill holes that are spacedclosely enough to confirm both geological and grade continuity.

Indicated resource, as defined in 43-101, is part of a mineral resource for which quantity,grade or quality, densities, shape and physical characteristics can be estimated with alevel of confidence sufficient to allow appropriate application of technical and economicparameters to support mine planning and evaluation of the economic viability of thedeposit. The estimate is based on detailed and reliable exploration and testing informationgathered through appropriate techniques from locations such as outcrops, trenches, pits,workings and drill holes that are spaced closely enough for geological grade and gradecontinuity to be reasonably assumed.

Inferred resource, as defined in 43-101, is part of a mineral resource for which the quantityand grade or quality can be estimated on the basis of geological evidence and limitedsampling and reasonably assumed, but not verified, geological and grade continuity. Theestimate is based on limited information and sampling gathered through appropriatetechnique such as outcrops, trenches, pits, working and drill holes.


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Western States Minerals Corporation in 1996, reviewed an ore reserve estimate made byQueenstake personnel and their consultants based on 73 core holes drilled by PhelpsDodge and Queenstake and considerable underground sampling. Polygons were drawnaround the hole intercepts and true widths utilized in the calculations. Several variationsof the reserves exist, all with similar overall magnitude. The 1986 Queenstake reserveestimate was used for comparison with the actual production because the accompanyingmaps provide greater detail than later map versions. The summary of that reserve estimateis presented below in table 5:

Reserve/Resource Mineralized ContainedCategory Tons Au-opt Au

Proven (measured) 2,378 0.423 1,007Probable (indicated) 24,332 0.45 10,956Total Reserve Estimate 26,710 0.448 11,963

Possible (inferred) 76,679 0.336 25,748Geologic (speculative) 133,380 0.398 53,099Total Resource Estimate 210,059 0.375 78,847

Table 5. Reserve base calculated by Queenstake Resources Start of Year 1986. Actualproduction for 1986 is in the following table (Table 6).

Queenstake Resources production for 1986 is tabulated below. These blocks are presumedto have been mined in 1986.

Block Number Tons Grade Ounces

Block 1 4,463 0.848 3,785Block 21 2,056 0.178 367Block 3 3,715 0.434 3,785Block 4 1,832 0.249 456Block 5 13,586 0.354 4,811

Tons 25,652 0.515 13,204

Table 6. Production credited to Queenstake Resources in Year 1986.


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Category Resource Grade (opt) Ounces

Proven (measured) 600 0.3 180Probable (indicated) 14,413 0.368 5,305Total Reserve Estimate 15,013 0.365 5,485

Possible Resources(inferred) 56,793 0.35 19,895

Geologic Resources(speculative)1 116,355 0.29 33,722

Total Resource Estimate 173,148 0.31 53,617

Table 7. Reserves tabulated by Queenstake Resources at End of Year 1986. It isstrictly not known but presumed that the additional reserves were indicated bydevelopment drilling as noted in Table 3, located in the Chapter 12.1, above.

It is not clearly stated but it is believed this resource estimate was accepted by WesternStates Minerals Corporation as the valid reserve base on which the acquisition of theGold Prince mine was executed.

17.2 Conditions and Assumptions

The Queenstake 1986 Resource Estimate relied solely on 73 core holes, supplementedby channel sampling of exposed faces. An updated resource estimate is presented belowthat includes all available data, including production lot grades and tonnages.

17.3 Mineral Resource Estimate Methodology

The current mineral resource estimate is based on a remodeled vein system in the GoldPrince mine that utilizes all available drilling and stope production records.

The existing Mintec Meds database provided to Mine Mappers, L.L.C. by Mary Pawlowskiof Continent Resources, how Copper One Inc. was imported into Mintec’s MineSight3D modeling software. This database contained files for 435 drill holes and files for theGold Prince mine’s workings. Additional files provided surface and underground assaygeochemistry and surface outcrop geology. These files were incorporated into a newMintec MineSight 3D model of the vein system. It is presumed that this model was builtby either Queenstake or Phelps Dodge.

3D solids were constructed for three principal veins in the Gold Prince drilling andunderground working database. These three veins were subsequently merged into onemaster vein to account for, and to model, country rock lying between the sinuous veinsets. Potentially economic mineralization in the Gold Prince mine is confined, for allextents and purposes, to veins. Wall rock lying immediately adjacent to the veins islargely un-mineralized and will dilute any potential mineral resource.


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Next, clipping solids were built to represent the outer boundaries of possible, probableand proven resource zones. The merged master vein was clipped to these outer boundaries,producing a modeled vein without significant non-vein dilution. The proven resourcezone lays no more than ± 50-feet from an existing underground working, roughlyhalf-way between adjacent levels in the Gold Prince mine or within ± 50-feet of a drillhole intercept. The probable resource zone lies outside the proven zone and generallylies within 100-feet of a drill hole intercept or underground working. The possible resourcezone lies outside the proven resource zone and incorporates material along strike anddown-dip of proven and probable mineralization that is deemed to be geologicallyreasonable. A specific search radius was not defined for this material and it is not includedin the reported resource below.

Figure 9. 3D representation of proven, probable and possible resource zones. Thered zone is proven resource, yellow is probable resource and blue is possible resource.


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17.4 Resource Estimate

A tonnage factor of 12.5 cubic feet per ton was used to convert volume to tons and theveins were modeled to exclude, as much as possible, internal dilution. Additionalsubtractions will also be necessary to account for material above the Gold Prince mine’s6 Level. The delay in the definition of the dilution loss is in the best interest of theCompany because the production initially will focus in the level 6. The definition of thedilution loss mainly focus on level 1-5 for which will not form part of the productionplan in the year 1 production. Existing and available maps of the underground workingsdo not contain sufficient detail to determine these subtractions. A survey of the safelyaccessible stopes will be carried out in the period, late January 2010 to early February2010 to measure past production so that it can be properly applied to the existing resourcebase.

Category Tonnes

Resource - Measured 1,734,602

Resource - Indicated 1,265,329

Sub-total - M&I Resource 2,999,931

Resource - Inferred 3,619,419

Total 6,619,350

Table 8. Resource tonnage estimate. Work is currently underway to improve theestimate of mining dilution and the volume of past mining production. Assuming a250 tonnes per day operation, the mine life will be about 33 years with a miningrecovery rate of approximately 90%.

The recovery rate of 90% is based on historical production record and recent metallurgicaltest done on the ores. No formal feasibility study has been performed on the mines of theGold Ridge Property in the last 10 years, it is prudent and accordingly to the industrystandard for the technical adviser to focus on only the measured and indicated resources(M&I) in the calculation of mine life.

Mine life =amount of ore (M&I)

(days of operation per year x tonnes per day)

= 2,999,931/(250X360)= 33.33, which is approximately equal to 33

The relevant recovery rate was not applicable to the determination of the mining life ofGold Prince mine as the calculation basis is by the amount of ore explotation.

The proven category resource includes material from the Gold Prince mine that wasproduced by the previous mine operators. As noted in the caption for Table 8, work isunderway to confirm these figures, including losses from dilution and past miningproduction.


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17.5 Grade Estimate

The scope of project did not include formal geostatistical analysis of grade-distancevariability. The following figure shows the relationship between cut-off grade and theweighted average grade of all quartz vein intercepts in the drill hole database.

Figure 10. Relationship between cut-off grade and weighted average grade fromthe drill hole database. Cut-off grade is shown on the abscissa and weighted averagegrade on the chart’s ordinate.

The mathematical intercept, a cut-off of 0.000 Au yields a calculated weighted averagegrade of 0.161 ounce per ton gold. The grade relationship was not calculated for cut-offgrades in excess of 0.35 ounces per ton.

The drill hole database contains 397 intervals coded as quartz vein out of a total of 6353individual intercepts. The average gold grade, weighted against assay interval, regardlessof cut-off grade, is 0.171 ounces per ton, slightly greater than the 0.161 ounce per tonvalue seen on Figure 2.


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The weighted average grade from the Western States Minerals Corporations productionis 0.249 ounces per ton for 42 individual lots that totaled 8777 tons.

Source Grade

WSMC Production 0.249Drill holes-Quartz vein only 0.171Drill holes-0.5 opt Cut-off 0.242

Table 9. Gold grades for Gold Ridge resource from production records and drilling.

Level Au (opt) Interval Samples (n)

2 Level 0.123 67.0 193 Level 0.154 397.1 884 Level 0.109 416.5 925 Level 0.205 546.8 126GPSS2 0.094 296.6 95

Table 10. Gold grades, weighted for channel length from level chip channel samples.Normal grade controls practiced by competent operators would exclude materialbelow a certain cut-off grade. These weighted average grades do not reflect suchmining practices.

Gold grades from underground channel samples of vein material, weighted against channelinterval are shown on Figure 4 for levels 2 through 5. The bulk of past production camefrom stopes located between levels 4 and 5.

The current high price levels for gold argue that an aggressive grade strategy is notunreasonable. Normal and usual ore control procedures practiced by past operators allowedhead grades to remain around 0.5-ounces per ton as demonstrated by the discrepancybetween stope production records from Western States Minerals Corporation and thechip channel samples from the Gold Prince mine workings. Nonetheless sinceuncertainties do exist in the appropriate datasets for Gold Ridge, a conservative approachis herein adopted for the valuation of the Gold Ridge project. The average grade forproven and probable ore zones is set to 0.3-ounces per ton gold and the average grade forthe possible ore is set at 0.15-ounce per ton gold.


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17.6 Caveats

Data limitations on this resource assessment are as follows:

Original drill hole logs were not available for this study. It was not possible to verify theaccuracy and precision of geological logging. Furthermore, the internal rock type coding,all that was available for this study, list numeric rock codes from 0 to 10. The rock codelegend found in the database lists only numeric codes 0 to 6. Finally, neither collar nordownhole survey data certificates were found in the database.

Channel sample grades from the mining and access levels of the Gold Prince mine wereused to estimate the average grade for the reserve but were not physically verified in thisstudy. The grade intervals listed in the spreadsheet from which Table 4 was constructedwere coded as VC, BC, RC and FC respectively. These codes are assumed to representvein center, back, rib, and floor respectively. It is not known if that is actually the meaningof the interval codes. Production records from these levels do lend considerable credenceto their use.

It is not likely that serious errors will arise from these discrepancies but they do increasethe uncertainty of the reserve measurement.

18. OTHER RELEVANT DATA AND INFORMATION

Ore-bearing veins at the Gold Ridge project, averaging from 3- to 6-feet in width, dip from 50°to 75°, steeper than the angle of repose of broken rock. And, significantly, both hanging- andfoot- walls of the vein are stable. Ore blocks mined to date have been regular and clean; sulfidesfound in the veins are not easily oxidized. These characteristics are well suited for shrinkagestoping mining methods, requiring minimal startup and continuing capital expenditure, yetpermit production rates suitable for small tonnage-high grade mining operations.

19. INTERPRETATION AND CONCLUSIONS

The Gold Ridge project merits further exploration work to define additional mining reserves.Considerable potential exists to convert speculative and inferred resources to indicated, especiallybelow the current 6-Level of the Gold Prince mine. Considerable potential also exists to discoveradditional resources along strike to those known in the Gold Ridge project area.

Metallurgical testing to date has yielded acceptable rates of recovery for the Gold Ridge oresand past mining production has demonstrated that dilution can be controlled.

My opinion is that the Gold Ridge project is a project of merit.


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20. RECOMMENDATIONS

Geological mapping should be carried out on the surface and in any safely accessibleunderground workings. Particular attention should be paid to structural indicators that mightcontribute to a more complete understanding of fault kinematics and lead to more preciselydirected surface and underground drilling.

The currently available digital drill hole database contains lithology coding and Au and Agassay information. An attempt should be made to locate, and then recover, any additionaldescriptions of lithology, alteration, mineralization and structural characteristics from originalpaper drilling records.

The geochemical database should be rigorously examined for multi-element correlations thatmight yield pathfinder elemental characteristics for distinguishing endowed and barren veins.

Surface and underground drilling should immediately test the down-vein projection ofore-grade mineralization in the Gold Prince mine. In particular drilling should test targets belowthe 6-Level in the Gold Prince mine.

Successful drilling results should be followed up by mine design appropriate to a prefeasibilitystudy that would lead to a formal ore reserve calculation.

21. REFERENCES

Camm, 1991. Simplified Cost Models For Prefeasibility Mineral Evaluations. United StatesBureau of Mines Information Circular 9298.

Cox, D.P., and Singer, D.A., eds., 1986, Mineral deposit models: U.S. Geological Survey Bulletin1693, 379 p Drewes, H. 1985. Geologic map and structural sections of the Dos CabezasQuadrangle, Cochise County, Arizona. USGS Miscellaneous Investigations Series Map I-1570.

Hembree, D. 1989. Overview of the Dos Cabezas Project, Cochise County, Arizona, USA.Unpublished company report, Queenstake Resources, (USA) Inc.

Pawlowski, M. R., 1985. The Gold Prince Mine Summary of Geological Exploration,Development and Gold Production. Unpublished company report, Phelps Dodge Exploration.

Pawlowski, Mary, 2009. Gold Ridge Project, Cochise County, Arizona. Unpublished companyreport. Golden FAME, Inc.

Dos Cabezas Project, Gold Prince Mine, Executive Summary, 2000. Unpublished report, WesternStates Minerals Corporation.

Zelton, J. E., 1986. Mineral Resources of a part of the Dos Cabezas Wilderness Study Area(AZ-040-065), Cochise County, Arizona. Mineral Lands Assessment Open File Report MLA2-86. United States Bureau of Mines.


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22. BASE CASE MINING OPERATION

As informed by the management, the initial production would be a 250 tonnes per day operationwith 360 days a year, totaling 90,000 tonnes per day operation. It is understood that GoldenFame would hire contract miners for the underground mining of the ores. After the ores aremined and crushed, the ores would be shipped to neighbor mill for processing into goldconcentrate or smelter as flux materials. It is also a long-term strategy for the Gold RidgeProperty to increase its production to 500 tonnes per day with its own mill. Currently, GoldenFame is in the process of applying the relevant permit for the rehabilitation and developmentwork on the Gold Prince Mine of the Gold Ridge Property to get ready for production, which isexpected to begin within 2010. Two teams of contract underground drillers and miners havebeen contacted and subsequently visited the underground mine to assess the production plan. Itis understood that the management team of Golden Fame is waiting for the proposal to beprovided by the two teams before making a decision on the final production plan.

The management estimated that, for the two years following the issue this circular, the GoldRidge Property will require a working capital and capital investment of approximately HK$21million. Pursuant to the Fame Oriented Agreement, the working capital and capital investmentwill be borne by Baron Natural Resources and is not the responsibility of the Company. Atpresent, Mine Mappers, L.L.C. understands that there is no ceiling for the working capital andcapital investment that will be borne by Baron Natural Resources.

23. COST ANALYSIS

Mining operating cost USD/ton

Labor 26.79Equipment 1.33Steel 3.46Lumber 2.19Fuel 0.38Lube 0.39Explosives 3.22Tires 0.37Construction material 3.71

Total 41.84


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Flotation cost USD/ton

Labor 33.21Equipment 5.80Steel 0.86Lube 0.06Electricity 1.83Reagents 0.94Sales Tax 0.29

Total 43.00

Total operating cost USD/ton 84.83

24. RISKS RELATING TO THE GOLD RIDGE PROPERTY

Risks Relating to the Fame Oriented Acquisition

The cash position of the Company decreases as a result of entering into the Fame OrientedAcquisition

As a result of entering into the Fame Oriented Acquisition, the cash position of the Companywill decrease and should any investment opportunity arises, the Company may not have sufficientinternally generated cash resources and bank facilities to finance these activities. In addition, ifthe Company is unable to obtain adequate financing on acceptable terms, or at all, to satisfy itsoperating, development and expansion plans, its business and results of operations may bematerially and adversely affected.

Changes in laws and regulations relating to the gold mining industry in the US may materiallyand adversely affect the results of operation of gold mine

Although it is considered that the government in US is stable, it is not possible to guaranteethat the current investment climate will continue if social or political upheaval or a change inleadership occurs. Possible risks include changes to taxation rates or current taxationconcessions, limitations on the repatriation of dividends, the transfer of funds, inflation, interestrates, exchange rates, government policy (including fiscal, monetary and regulatory policies),consumer spending, employment rates, social upheaval or war. Whilst the Company has notexperienced any major political instability, the emergence of such political instability in thefuture may lead to outbreaks of civil unrest which may have an adverse effect on the Company’smining business, and may affect the Company’s overall financial position and operating resultsand profitability.


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The ore reserves and mineral resources are estimates based on a number of assumptions,any adverse changes in which could require to lower the gold mine’s ore reserves and mineralresources

Ore reserves and mineral resource are estimates based on assumptions, knowledge, experienceand industry practice. No assurance can be given that any particular level of recovery of goldfrom ore reserves or mineral resources will in fact be realized or that an identified mineralresource will ever qualify as a commercially mineable (or viable) ore body which can be legallyand economically exploited. Such resources may not ultimately be able to be extracted at aprofit. Estimates which were valid when made may change significantly when new informationbecomes available and may be affected by factors such as the quality of the results of exploration,drilling and analysis of samples.


The grade of ore ultimately mined may differ from that indicated by drilling results. Short termfactors relating to ore reserves, such as the need for orderly development of ore bodies or theprocessing of new or different grades, may also materially and adversely affect the mineoperations. There can be no assurance that gold recovered in laboratory tests will be duplicatedunder on-site conditions or in production-scale operations. Material changes in ore reservesresulting from unexpected changes to the gold price, grades, production costs, stripping ratiosand recovery rates may affect their economic viability. Ore reserves are reported as generalindicators of mine life and should not be interpreted as assurances of mine life or of theprofitability of current or future operations.


An increase in the price of production inputs, including labour, power, mine consumables orother inputs can materially and adversely affect the results of operation of gold mine

The result of operation of the gold mine will be subject to the price of production inputs,including labour, power, mine consumables or other inputs. An increase in the price of productioninputs could adversely affect the performance of the gold mine business and results of operation.In more serious cases, if the price of production inputs increase dramatically, such increasecould cause the shutdown of the gold mine operation.


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Uncertainties in relation to the application of taxation laws and regulations could materiallyand adversely affect the Gold Ridge Property and results of operations

Any material changes in the USA tax laws and regulation where it does business could materiallyand adversely affect the gold mine’s business and results of operations.

The Company’s future income, asset values and the price of the Shares are subject to thegeneral economic climate



The Company’s future income, asset values and the price of the Shares can be affected by thesefactors and, in particular, by the market price for gold that the Company may produce and sell.

25. AUTHORS CERTIFICATE AND SIGNATURE

1. I, Mark W. Osterberg am currently employed as Principal Geologist and ManagingMember by:

Mine Mappers, L.L.C.2114 West Grant Road, Box 114Tucson, AZ 85745, USA

2. I graduated with a Bachelor of Science degree in Geology from the University ofWisconsin, Oshkosh, in 1979, a Masters of Science degree in Geology from the Universityof Minnesota in 1983 and a Doctorate of Philosophy degree in Economic Geology fromthe University of Arizona in 1990.

3. I have worked continuously as a geologist since my graduation from the University ofWisconsin, Oshkosh for a total of 30+ years.

4. I am a registered professional geologist with credentials from the State of Wisconsin andthe State of Arizona, USA.

5. I am the author of the report entitled “Technical Report Gold Ridge Project”, dated10 December 2009. I take responsibility for all sections of this report excepting thosedependent on outside experts, namely section 5.


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6. I have worked on this project since October 2009.

7. I am currently a member of the American Association of Petroleum Geologists.

8. To the best of my knowledge, information and belief, this technical report contains allthe scientific and technical information that is required to be disclosed to make thistechnical report not misleading.

9. I am currently employed by Mine Mappers, L.L.C. and all their subsidiaries as definedin Section 1.4 of NI 43-101 and in Section 3.5 of the Companion Policy to NI 43-101.

10. I have read National Instrument 43-101 and Form 43-101F1, and the technical report hasbeen prepared in compliance with that instrument and form.

11. The technical report contains information relating to mineral titles, permitting,environmental issues, regulatory matters and legal agreements. I am not a legal,environmental or regulatory professional and do not offer a professional opinion regardingthese issues.

12. A copy of this report is submitted as a computer readable file in Adobe Acrobat (c) PDF(c) format. The requirements of electronic filing necessitate submission of the report asan unlocked, editable file. I accept no responsibility for any changes made to the fileafter it leaves my control.

Mark W. Osterberg

Dr. Mark Osterberg has worked for major gold and base metal mining companies and has over28 years experience in the mining business. He has provided high level technical expertise toprojects in the USA and overseas and has managed multiyear exploration and developmentprojects. He has expertise and experience in gold and construction materials such as talc. Hisproject related experience includes grass-roots, green-fields reconnaissance programs,brownfields exploration and development programs, mine geology and modeling. He is anqualified person as defined under the national instrument 43-101 and a professional geologistin the state of Wisconsin and Arizona, USA.


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26. ANNEXURE — QUALIFICATIONS AND EXPERIENCE

Mr. Mark Osterberg (“Mark”) has contributed exploration-geological modeling chapters forQuadra Mining Limited’s 2008 43-101 filing in August, 2009.

Mark has authored 43-101 certification document for Blackbird type Cu-Co prospect for ToroResources Corporation in October, 2007.

Mark has authored 43-101 certification document for Carlin-type gold property for NevadaMine Properties II, Inc. in November, 2005.

Mark has performed geological investigations for chimney creek carlin-type gold deposit forhis Ph. D. studies from April, 1986 to February, 1990.

Mark has performed property mapping, drilling and sectional reserve calculation for mesothermalshear-zone hosted, greenstone-type gold deposits in historic Mother Lode region of Californiafor Meridian Gold Corporation and Gold Fields Mining Corporation. from February, 1989 toFebruary, 1990.

Mark has determined reserves, built simple mining plans and developed DCF-ROE basedfinancial evaluations for construction materials operators in Wisconsin and Michigan for RockyMountain Enterprises, Gillett Cement Products, Inc., Pewabic East Partnership, Rising Rock,L.L.C., NorRok, Inc., Lincoln County Road Commission beginning from September 2001.

Mark has performed DCF-ROE resource calculation and project permitting scoping study forproposed construction materials mining operation for Rising Rock, L.L.C. in January 2010.

Mark has supervised 10-hole drilling program designed to substantiate and prove mining reserveat large sand and gravel operation in suburban Milwaukee. Mark has also worked up sectionalmodel and calculated mining reserve for Lafarge-North America in July, 2006.

Mark has led Tintaya concession minerals exploration activities and managed 30-person Spanishlanguage office. Mark has mapped 50 by 30 km area at 1:5000 scale, completed 5 ground EMand 3 geochemical surveys in 5 months and drilled and modeled 38 diamond drill holes. Markhas released area around Antapaccay porphyry Cu-Au discovery for development andconstruction activities and estimated concession mineral potential for long range planningpurposes for BHP from February to December, 2000.


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Mark has re-mapped surface lithology, alteration and mineralization for the Questa miningdistrict. Mark has provided mapping constraint for re-modeled sectional geological interpretationand refined rock stability controls for slope stability studies for SRK Consultants and MolyCorpfrom May 2005 to January 2006.

Mark has mapped underground geology and developed ore control model for Pinos Altospolymetallic skarn. Mark has participated in surface and underground exploration programsthat led to a 50-percent increase in ore reserves at Cyprus Pinos Altos mine for Cyprus MiningCompany from February, 1990 to December, 1992.

APPENDIX VI TECHNICAL REPORT ON THE TALC MINE

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The Director ByChina Investment Fund Company Limited4th Floor, Aon China Building Mark Osterberg, Ph. D. P.G.29 Queen’s Road Central Mine Mappers, L.L.C.Hong Kong 2114 West Grant Road, Box 114

Tucson, AZ 8574514 April 2010

Contents

Table of Tables 149Summary 150Introduction 150Reliance on Other Experts. 152Property Location and Description 152Environmental Liability 152Climate and Physiography 152History 152Production 153Geological Setting 153Local Geology 153Mineralization and Alteration 153Deposit Type 154Sampling Method and Approach 154Sample Preparation, Analyses and Security 154Data Verification 155Mining, Metallurgy and Mineral Processing 155Resource Estimate 155Mineral resource estimate comments and notes 157Risks relating to the Talc Mine 158Interpretation and Conclusions 160Recommendations 160References 161Date and Signature Page 161Appendices 162Annexure — Qualifications and Experience 172

Table of Tables

Table 1. Representative results of test from the Xujiapo talc deposit. 154Table 2. Independent laboratory check analyses. 155Table 3. Resource classification criteria. 156Table 4. Measured resources from the Xujiapo talc deposit. 156Table 5. Reserve quality criteria. 156


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SUMMARY

The Xujiapo talc deposit, located at Chen Zhuang Village, Hu Jia Jian Town, Yuan County, ShiyanCity, Hubei province, Peoples Republic of China contains resources of more than 800,000 tonnes ofcommercial grade talc. Access to the property is via an all-weather capable road network. Depositconfiguration is such that mining operations may be safely and efficiently run at a production rate ofapproximately 30,000 tonnes per annum. It is understood that the project company is in the processof renewing the mining license with an increased capacity to 80,000 tonnes per annum.

It is the opinion of the author that the Xujiapo talc project is a project of merit.

INTRODUCTION

Reference is made to the background of the Shing View Acquisition under the “Letter from theBoard” of this circular. On 23 September 2009, Mr. Mak and Mr. Cheng entered into a co-operationagreement (the “Co-operation Agreement”) pursuant to which Mr. Mak and Mr. Cheng will cooperatein the development of the Talc Mine for a consideration of HK$9,600,000, payable by Mr. Mak toMr. Cheng. Mr. Cheng owned 100% equity interest of Shiyan Hao Shun, which owned the mininglicense of the Talc Mine. Upon completion of the Co-operation Agreement, Shing View, which wasoriginally beneficially owned by Mr. Mak, will be owned as to 80% by Mr. Mak and as to 20% by Mr.Cheng, and Shing View will indirectly own 100% equity interest of Shiyan Hao Shun. Under the Co-operation Agreement, Mr. Mak has undertaken to finance the capital expenditure and working capitalrequired for the commencement of the operation of the Talc Mine.

On 9 October 2009, Mr. Mak and Mr. Lam entered into an assignment agreement (the “SV AssignmentAgreement”) pursuant to which Mr. Mak agreed to assign, and Mr. Lam agreed to acquire, all therights and interests of Mr. Mak under the Co-operation Agreement (including his 80% equity interestin Shing View) at the consideration of HK$90,800,000. Upon completion of the SV AssignmentAgreement, Mr. Lam and Mr. Cheng will own 80% and 20% of Shing View respectively. Mr. Makalso undertakes that he will invest the full amount of the capital expenditure and the working capitalrequired for the development of the mine owned by Shiyan Hao Shun. Mr. Mak will also be responsiblefor the operations of the Shiyan Hao Shun.

On 21 December 2009, the Company and Mr. Lam entered into the Shing View Agreement wherebythe Company has conditionally agreed to acquire from Mr. Lam a 17.5% equity interest in ShingView for a consideration HK$19,880,000. The Company will be a passive investor and will not beresponsible for further investment or operation for the Talc Mine. The management of Shing Viewand Shiyan Hao Shun, which consists of 3 mining and exploration professionals with over 15 years ofprecious metals and industrial materials, including talc, exploration, mining and operation experience,will be responsible to run and manage the Talc Mine.


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Mr. Cheng has owned the Talc Mine for over 2 years. At the beginning of the year, Mr. Mak hasprincipally agreed with Mr. Cheng to cooperate and develop the Talc Mine. Mr. Mak has carried outextensive due diligence and planning work and a cooperation agreement was signed in 23 September2009. On 9 October 2009, Mr. Lam entered a preliminary agreement with Mr. Mak to acquireMr. Mak’s interest in the Co-operation Agreement at a price equivalent to the value to be determinedby a mutually agreed professional valuer. Mr. Lam and Mr. Mak also agreed that when an assessedvalue is determined by the professional valuer, the pricing of the SV Assignment Agreement will bedetermined then. Mr. Lam is a long-term business contact and acquaintance of the Company, and hasinitiated the negotiation process for the Shing View Agreement after the conclusion of the SVAssignment Agreement.

Shiyan Hao Shun is in the process of renewing and upgrading the mining license from 20,000 tonnesper annum to 80,000 tonnes per annum and expects to obtain the renewed license in April 2010. It isexpected that the Talc Mine will have a production of 80,000 tonnes of quality talc per year. Contractmining with local professional geological brigade will be used. Once the ore is mined out, they willbe shipped to Shing View’s processing plant for the processing into final products. According to themanagement of Shiyan Hao Shun and Shing View, the land for the processing plant has been rentedand the construction of the plant, which will take approximately 4 months, will begin in April. Themanagement of Shing View has contacted a number of potential buyers for the final talc productsalready. It is expected commercial operation will commence in 2010.

The Directors estimated that, for the two years following the issue of this circular, the Talc Mine willrequire a working capital and capital investment of approximately RMB7.5 million. Pursuant to theShing View Agreement, the working capital and capital investment will be borne by Mr. Mak and isnot the responsible of the Company. The Directors, after due and careful enquiry, are of the opinionthat, in the absence of unforeseeable circumstances and after taking into account of Mr. Mak’s financialresources, the Talc Mine has sufficient working capital for the two years from the date of this circular.

Mine Mappers L.L.C. was commissioned by the Company to provide an independent expert report,which is in compliant with the National Instrument 43-101 standard, for the incorporation in thiscircular. This technical report was prepared on the basis of Canadian Institute of Mining, Metallurgyand Petroleum (the “CIMVAL Code”)

A site visit to the Xujiapo talc deposit was made on 23 January 2010 in the company of Mr. AlexWan. Surface and underground exposures were examined and the results of previous exploration anddevelopment programs were discussed with Mr. Cho Yi-Hong, General Manager, Mr. Li Man-In,mining engineer and Mr. Hu An-Sun, Manager, Hubei Northwest Geological Institute.

Prior to the site visit, reports describing the results of the previous exploration and developmentprograms were studied. The site visit substantiated the veracity of the physical work. Subsequentlaboratory test works undertaken by the Company have confirmed laboratory results as well.

Reserves are based on substantial drilling and by underground development and pilot scale miningand are supported by sound and cautious evaluation. It is concluded that the evaluation of the Xujiapotalc deposit is a project of merit.


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RELIANCE ON OTHER EXPERTS

Outside experts in land, legal, environmental and permitting related matters were relied on for landtenure, legal and corporate structure, environmental conditions and permitting issues. The main sourcesfor the geological portion of this report were a series for reports prepared for Shiyan Hao Shun by theHubei Northwest Geological Institute based on work performed by the national government mineralinventory survey teams.

PROPERTY LOCATION AND DESCRIPTION

The deposit is located at Chen Zhuang Village, Hu Jia Jian Town, Yuan County, Shiyan City, HubeiProvince, the Peoples Republic of China within a 3.2-km2 mineral area bounded by the followinggeographic coordinates (Xian 1980) Longitude 110°13’50” to 110°14’30” East, Latitude 32°41’28”to 32°42’39” North. The Jiangjunhe station on Xiangyu railway is 27-km north of the deposit. Agood paved road network connects the property to Shiyan Hao Shun.

ENVIRONMENTAL LIABILITY

No significant environmental issues have been identified on the property.

Several families live on the mineral property and it is not known what impact an operation will haveon their homes or livelihoods.

CLIMATE AND PHYSIOGRAPHY

The topography is rugged and steep with local relief of 300- to 500-meters. The highest peak in theregion reaches 1229.22-meters above sea level. The climate is subtropical and is cold in winter andhot in summer. The rainy season extends from July to September and freezing temperatures aregenerally confined to November to March. A high energy stream flows through eastern side of themineral area.

HISTORY

Regional scale (1:200,000) geological mapping and geochemical evaluations were completed between1960 and 1980 by government survey teams charged with inventorying China’s mineral resources.Follow-up, detailed work during the 1980’s on the Baihe 1:50,000 sheet and surrounding sheetsdiscovered a number of large- and medium-size precious metals, base metals and non-metallic mineralsdeposits, including the Xujiapo talc deposit. Results of these programs and projects are maintainedby the Hubei Northwest Geological Institute.

The Xujiapo talc deposit was initially evaluated in the late 1980s during the exploration and evaluationof gold and silver deposits of the same region. Details of the project scale exploration and developmentprograms are described below.

Geological mapping was compiled at 1:2000 scale, focused on the gold-silver occurrences in closeproximity to the talc deposit. The map is outcrop based and was supplemented with traverses acrossthe critical exposures. In addition, trenches were excavated across critical areas. 236 samples werecollected for routine laboratory testing.


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Supporting topographic and survey control points maps were also constructed at this time by thegeological teams responsible for mapping and drilling.

According to the laws of the PRC and the Cooperation Agreement, Shing View and its indirect whollyowned subsidiary, Shiyan Hao Shun, has a mining license of 3.22 sq. km. for a production capacity of20,000 tonnes.

As informed by Shiyan Hao Shun, the mining licence of the Talc Mine expired in November 2009and it has already made an application for the renewal thereof to the relevant PRC governmentalauthorities. The term for the mining licence will be 5 years.

After making all reasonable enquiry to the management, the Talc Mine does not have any claim inrelation to the exploration and/or mining rights made or notified by third parties against the Company,Shing View and/or Shiyan Hao Shun.

According to the management of Shing View, Shiyan Hao Shun is not expecting to conduct anyfurther exploration program at this stage as the management is focusing on advancing the Talc Mineinto commercial production.

PRODUCTION

No formal large-scale production has been undertaken as of this report. According to the management,the Talc Mine, is a historical mine with small-scale production having taken place. It is expected thatcommercial production will commence sometimes in 2010.

GEOLOGICAL SETTING

This deposit is located in the west margin of Wudang-uplift of South Qinling-Indosinian fold belt.The immediate project area is a sequence of broadly folded and sheared, metasomatized submarinebasalts and tholeiites with interstitial fine-grained talc-tremolite-quartz schists.

LOCAL GEOLOGY

Geological work undertaken by the government geological services established a detailed stratigraphywithin the area and determined that economic occurrences of talc were restricted to the interstitialschist beds lying above metasomatized basalt and below metasomatized tholeiites. Talc bodies arelenticular- to lens-shaped and appear to follow and mimic broad open folds across the project area.The talc bodies also typically display shear deformation textures. Thickness of talc-bearing horizonranges from less than one- to more than 5-meters, averaging 2.19-meters (Li Zhen, et al, 2008)

MINERALIZATION AND ALTERATION

Au-Ag mineralization was reported by government survey teams to lie immediately below talc bodiesimplying a hydrothermal connection to the talc mineralization. The threshold abundance of preciousmetals association with talc mineralization is unknown.


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DEPOSIT TYPE

The talc deposits occur within a favorable horizon between submarine volcanic sequences and appearto be in stratigraphic and structural conformity with the surrounding un-mineralized rocks. The positedassociation with precious metal mineralization suggests a common genetic origin. It appears mostlikely that the talc was an alteration product generated by the hydrothermal system responsible forprecious metal mineralization.

The current configuration of the talc deposits was strongly influenced by the post-emplacementstructural deformation-the talc bearing horizons are exquisitely susceptible to shearing associatedwith folding.

This interpretation concurs with that discussed in the government survey reports.

SAMPLING METHOD AND APPROACH

260 samples were collected for laboratory analysis. Sample media were collected from channels cutacross the talc horizon in underground workings and from splits of drill core. Underground channelsamples were of approximately equal volume to those collected from drill core splits.

SAMPLE PREPARATION, ANALYSES AND SECURITY

Samples were delivered to the Geological and Mineral Survey of Northwest Hubei Province laboratoryfor chemical analyses and whiteness determination. Results of this work are summarized as follows:

Talc is found in talc schist and quartz-bearing talc schist. Higher quality talc is from talc schist. Talcdominates the mineralogical content of both rock types. Quartz occurs as irregular pod shaped bodiesfrom 10-cm3 to several cubic meter in volume and also occurs as sub-microscopic inclusions in certainof the ores, further discussed in the metallurgical processing section below.

Representative analyses are tabulated below. Sample #5, in particular, is very close to stoichiometrictalc. Excess silica is present in sample #3 and may be representative of quartz-talc schist. Otherminor and trace components, seen in thin section, are tremolite, sericite, calcite, apatite and pyrite.Whiteness, determined after grinding to 400 mesh, for most tested samples is in excess of 80-percent.

Loss onSample SiO2 MgO Al2O3 Fe2O3 TiO2 K2O Na2O CaO Ignition whiteness

5# 62.11 31.45 0.025 0.38 0.01 0.069 0.069 1.02 4.48 99.613# 71.5 22.51 0.088 0.14 0.01 0.045 0.066 1.39 3.8 99.54

Stoichiometric Talc 61.11 30.84 1.57 0.04

Stoichiometric talc analysis averaged from description in Hurlburt, 1971.

Table 1. Representative results of test from the Xujiapo talc deposit.

Samples from 31 separate sites were submitted for testing to the laboratory. All sites produced samplesthat exceeded standards for industrial uses of talc.

Appendix 1 contains a copy of test report with detailed mineralogy and metallurgical test results.


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DATA VERIFICATION

Ten samples were re-evaluated at an independent laboratory and the results used to assess the accuracyand precision of analytical results. These quality assurance-quality control results are tabulated below.

Inspected resultsSample Analysis items (%) by other laboratory (%)

SiO2 MgO CaO Fe2O3 SiO2 MgO CaO Fe2O3

Tc9A-H4 58.03 30.36 2.15 0.87 57.41 31.06 1.95 0.9Tc9-3-H4 62.07 31.4 1.21 0.38 61.63 31.38 1.11 0.46C9-2-H4 62.11 31.11 1.18 0.45 61.55 31.32 1.22 0.45Tc44-H8 50.47 30.25 3.35 1.4 51.07 30.4 3.05 1.45Tc42-H5 57.4 30.5 2.35 0.93 57.9 90.95 2.55 1.01ZK1015-H8 63.34 31.23 1.21 0.47 63.43 31.09 1.18 0.4ZK911-H7 63.15 31.67 1.09 0.41 62.83 32.1 1.1 0.35ZK815-H7 64.15 31.52 1.14 0.41 63.86 31.86 1.24 0.36ZK128-H9 62.14 31.16 1.09 0.41 62.37 31.49 1.15 0.4ZK441-H9 53.1 30.4 3.07 1.15 52.8 30.25 3.05 1.2

Table 2. Independent laboratory check analyses.

MINING, METALLURGY AND MINERAL PROCESSING

The geometry of the talc orebodies is, in general, flat-lying to gently dipping and the author concurswith the Chinese technical reports suggestion that sublevel stoping may be an appropriate miningmethod.

Processing will likely involve grinding and re-grinding and, perhaps some degree if beneficiation toremove minor deleterious components.

RESOURCE ESTIMATE

The potential mining resource was calculated by the polygonal method. This approach is conservativeand reliable.

The reserve covers an area of approximately 2-km2, lying within the area covered by the drilling of50 core holes and approximately 725-meters of underground drifting and stoping exposure.

Resources were classified into three categories using the following criteria.

Class Criteria

Class 122b 100-m drill grid spacing, underground exposure, pilot mining.Class 333-334

1200-m by 100-m grid spacing and outward extension of 122b resource.


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Table 3. Resource classification criteria.

Six individual resource bodies were measured using this criteria. Results are tabulated below.

Mineral resources/Ore body reserves category Resource Total

122b 29140I

1333-334

1153282 182422

122b 34224I

2333-334

144089 78313

I3

333-3341

57994 57994

II2

333-3341

250079 250079

122b 29686II

2333-334

128257 57943

II3

333-3341

243451 243451

122b 93050Total 333-3341 777152 870202

Table 4. Measured resources from the Xujiapo talc deposit.

The following criteria was adopted to characterize the talc resource quality, after the Code forGeological Exploration of Talc (DZT0207-2002).

Grade SiO2 MgO CaO Fe2O3 Whiteness

Cut off 27 26 No limit ≤3.0 50Minimum industrial 36 27 ≤0.35 ≤2.0 60

Minimum ore thickness 0.8

Mining thickness 1

Table 5. Reserve quality criteria.

Density was determined from the averaged measurement of 30 samples and determined to be 2.66grams per cubic centimeter.


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MINERAL RESOURCE ESTIMATE COMMENTS AND NOTES

Measured resource, as defined in 43-101, is part of a mineral resource for which quantity, grade orquality, densities, shape and physical characteristics are so well established that they can be estimatedwith confidence sufficient to allow the appropriate application of technical and economic parameters,to support production planning and evaluation of the economic viability of the deposit. The estimateis based on detailed and reliable exploration, sampling and testing information gathered throughappropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes thatare spaced closely enough to confirm both geological and grade continuity.

Indicated resource, as defined in 43-101, is part of a mineral resource for which quantity, grade orquality, densities, shape and physical characteristics can be estimated with a level of confidencesufficient to allow appropriate application of technical and economic parameters to support mineplanning and evaluation of the economic viability of the deposit. The estimate is based on detailedand reliable exploration and testing information gathered through appropriate techniques from locationssuch as outcrops, trenches, pits, workings and drill holes that are spaced closely enough for geologicalgrade and grade continuity to be reasonably assumed.

Inferred resource, as defined in 43-101, is part of a mineral resource for which the quantity and gradeor quality can be estimated on the basis of geological evidence and limited sampling and reasonablyassumed, but not verified, geological and grade continuity. The estimate is based on limited informationand sampling gathered through appropriate technique such as outcrops, trenches, pits, working anddrill holes.

Based on the current Chinese resources, if they were reconciled into NI43-101 standard, the resourceestimate would be as follows:

Category Tonnes

Resource – Indicated 93,050

Resource – Inferred 777,152

Total 870,202

It is expected the indicated resource has a recovery rate of 80% and the inferred resource has arecovery rate of 65%. The recovery rate of 80% and 65% is an estimation by the Chinese feasibilitystudy based on their experience, which is approved by the Chinese government, and confirmed andagreed by the technical adviser and our consultants. Accordingly, assuming an 80,000 tonnes perannum operation, the mine life will be about 7 years.


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The Talc Mine has a Chinese standard feasibility study and it has received a mining license issued bythe PRC government previously, the technical adviser is of the opinion that, under the CIMVALstandard, there is probable reserve within the indicated resource, and was mined ahead, and thereforeboth M&I and inferred resources should be included in the calculation and that a 65% discount isused to demonstrate low geological confidence associated with inferred resources in the calculationof the mine life.

Mine life =(Indicated resources x recovery rate + inferred resources x recovery rate)

Operational tonnage per year

= (93,050X0.8+777,152X0.65)/80,000,

= 7.24, which is approximately equal to 7

Relevant recovery rates apply in the Talc Mine since the mining life is calculated on the basis of netresources. The operating tonnage per year for the Talc Mine is limited to 80,000, which is the maximumamount of talc allowed to be mined under the mining license in the PRC.

The polygonal method of resource calculation is conservative and strict and tends to discount thegeological project of resources. Surface mapping and trenching, underground pilot mining anddevelopment and drill core results indicate that potential mining resource may be 3 or 4 times largerthan the strictly defined measured resource.

RISKS RELATING TO THE TALC MINE

Risks Relating to the Shing View Acquisition

The cash position of the Company decreases as a result of entering into the Shing View Acquisition

As a result of entering into the Shing View Acquisition, the cash position of the Company will decreaseand should any investment opportunity arises, the Company may not have sufficient internally generatedcash resources and bank facilities to finance these activities. In addition, if the Company is unable toobtain adequate financing on acceptable terms, or at all, to satisfy its operating, development andexpansion plans, its business and results of operations may be materially and adversely affected.

Changes in laws and regulations relating to the talc mining industry in the PRC may materiallyand adversely affect the results of operation of Talc Mine

It is not possible to guarantee that the current PRC investment climate will continue if social orpolitical upheaval or a change in leadership occurs. Possible risks include changes to taxation rates orcurrent taxation concessions, limitations on the repatriation of dividends, the transfer of funds, inflation,interest rates, exchange rates, government policy (including fiscal, monetary and regulatory policies),consumer spending, employment rates, social upheaval or war. Whilst the Company has not experiencedany major political instability, the emergence of such political instability in the future may lead tooutbreaks of civil unrest which may have an adverse effect on the Company’s mining business, andmay affect the Company’s overall financial position and operating results and profitability.


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The ore reserves and mineral resources are estimates based on a number of assumptions, anyadverse changes in which could require to lower the Talc Mine’s ore reserves and mineral resources

Ore reserves and mineral resource are estimates based on assumptions, knowledge, experience andindustry practice. No assurance can be given that any particular level of recovery of talc from orereserves or mineral resources will in fact be realized or that an identified mineral resource will everqualify as a commercially mineable (or viable) ore body which can be legally and economicallyexploited. Such resources may not ultimately be able to be extracted at a profit. Estimates which werevalid when made may change significantly when new information becomes available and may beaffected by factors such as the quality of the results of exploration, drilling and analysis of samples.

Mineral resource and ore reserve estimates are imprecise and depend to some extent on interpretations,which may ultimately prove to be inaccurate. Should the Company encounter mineralization differentfrom that predicted by past drilling, sampling and similar examination, mineral resource and/or orereserve estimates may have to be adjusted downward. This downward adjustment could materiallyaffect the Company’s development and mining plans, which could materially and adversely affect theCompany’s business and results of operations.

The grade of ore ultimately mined may differ from that indicated by drilling results. Short termfactors relating to ore reserves, such as the need for orderly development of ore bodies or the processingof new or different grades, may also materially and adversely affect the mine operations. There canbe no assurance that talc recovered in laboratory tests will be duplicated under on-site conditions orin production-scale operations. Material changes in ore reserves resulting from unexpected changesto the talc price, grades, production costs, stripping ratios and recovery rates may affect their economicviability. Ore reserves are reported as general indicators of mine life and should not be interpreted asassurances of mine life or of the profitability of current or future operations.

The economic viability of ore reserves and mineral resources may also be affected by such factors aspermit regulations and requirements, environmental factors, unforeseen technical difficulties, unusualor unexpected geological formations and work interruptions.

An increase in the price of production inputs, including labour, power, mine consumables or otherinputs can materially and adversely affect the results of operation of Talc Mine

The result of operation of the Talc Mine will be subject to the price of production inputs, includinglabour, power, mine consumables or other inputs. An increase in the price of production inputs couldadversely affect the performance of the Talc Mine business and results of operation. In more seriouscases, if the price of production inputs increase dramatically, such increase could cause the shutdownof the Talc Mine operation.

Uncertainties in relation to the application of taxation laws and regulations could materially andadversely affect the Talc Mine and results of operations

Any material changes in the PRC tax laws and regulation where it does business could materially andadversely affect the Talc Mine’s business and results of operations.


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A number of factors affecting the general global economic climate and outside the control of theGroup may impact significantly on the Group, its performance and the price of its Shares, includingbut not limited to:


The Company’s future income, asset values and the price of the Shares can be affected by thesefactors and, in particular, by the market price for talc that the Company may produce and sell.

INTERPRETATION AND CONCLUSIONS

The Xujiapo talc project merits further exploration work to define additional mining reserves.Considerable potential exists to convert Class 331-334

1 and resources beyond 333-334

1 to 122b criteria

reserves.

Metallurgical and process related testing to date has yielded acceptable rates of recovery for talcores.

My opinion is that the Xujiapo project is a project of merit.

RECOMMENDATIONS

An updated geological map of the mine workings would be a useful aid to development and miningproduction planning staff. Emphasis should be placed on the location of higher quality steatiteoccurrences, small-scale shears and offsets and other structures that might control the small-scaledisplacement of productive talc bodies.

Talc schist, quartz-bearing talc schist and other altered wall rocks that lie immediately adjacent to theknown resource bodies should be analysed for talc and other deleterious components. Much interestin such talc bearing rocks currently exists for so-called “green” substitutes for Portland cement andother bulk commodities. It is not inconceivable that a bulk-tonnage, open cast mining operation maybe feasible if such a market may be tapped for the impure talc bearing rocks that enclose the purerand higher quality talc occurrences.

A competent underground mining engineer should physically examine the underground workingsand establish a maintenance program to ensure that the mine may be safely entered and worked.


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REFERENCES

Hurlburt, C. S., 1971. Dana’s Manual of Mineralogy, 18th Edition. John Wiley and Sons, Inc., NewYork, 579 pages.

Ge Peilong, et al., 2003. Exploration Report of Talc Deposit of Xujiapo Mineral Area, Yun County,Hubei Province. Xiangfandiyuan Mineral Development Limited, Shiyan, 21 pages.

Qi Yueming, Chi Jingyan and Yang Mingyin, 2003. Review Opinion; Survey Report for the talc oreat mining area of Hubei Yunxian Xujiapo. Xiuangfandiyuan Mineral Development Limited, Wuhan,Hubei, 10 pages.

DATE AND SIGNATURE PAGE

1. I, Mark W. Osterberg am currently employed as Principal Geologist and Managing Memberby:

Mine Mappers, L.L.C.2114 West Grant Road, Box 114

Tucson, AZ 85745, USA

2. I graduated with a Bachelor of Science degree in Geology from the University of Wisconsin,Oshkosh, in 1979, a Masters of Science degree in Geology from the University of Minnesota in1983 and a Doctorate of Philosophy degree in Economic Geology from the University of Arizonain 1990.

3. I have worked continuously as a geologist since my graduation from the University of Wisconsin,Oshkosh for a total of 30+ years.

4. I am a registered professional geologist with credentials from the State of Wisconsin and theState of Arizona, USA.

5. I am the author of the report entitled “Technical Report on the Tale Mine”, dated 4 February2010. I take responsibility for all sections of this report excepting those dependent on outsideexperts, namely section 3.

6. I have worked on this project since October 2009.

7. I am currently a member of the American Association of Petroleum Geologists.

8. To the best of my knowledge, information and belief, this technical report contains all thescientific and technical information that is required to be disclosed to make this technical reportnot misleading.

9. I am currently employed by Mine Mappers, L.L.C. and all their subsidiaries as defined inSection 1.4 of NI 43-101 and in Section 3.5 of the Companion Policy to NI 43-101.


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10. I have read National Instrument 43-101 and Form 43-101F1, and the technical report has beenprepared in compliance with that instrument and form.

11. The technical report contains information relating to mineral titles, permitting, environmentalissues, regulatory matters and legal agreements. I am not a legal, environmental or regulatoryprofessional and do not offer a professional opinion regarding these issues.

12. A copy of this report is submitted as a computer readable file in Adobe Acrobat (c) PDF (c)format. The requirements of electronic filing necessitate submission of the report as an unlocked,editable file. I accept no responsibility for any changes made to the file after it leaves mycontrol.

Mark W. Osterberg

Dr. Mark Osterberg has worked for major gold and base metal mining companies and has over 28years experience in the mining business. He has provided high level technical expertise to projects inthe USA and overseas and has managed multiyear exploration and development projects. He hasexpertise and experience in gold and construction materials such as talc. His project related experienceincludes grass-roots, green-fields reconnaissance programs, brownfields exploration and developmentprograms, mine geology and modeling. He is an qualified person as defined under the nationalinstrument 43-101 and a professional geologist in the state of Wisconsin and Arizona, USA.

APPENDICES

The following report was commissioned by the China Investment Fund Company Limited to determinedeleterious materials and impurities content and potential operational methods to mitigate andameliorate such factors.

Testing report of talc

I. Preface

Talc is a kind of hydrated magnesium silicate, belonging to layer-structure silicate mineral.Theoretical chemical formula: Mg

3[SiO

10](OH)

2 or 3MgO.4SiO

2.H

2O. Theoretical chemical

composition: MgO31.68%, SiO263.47, H

2O4.75%; including a little iron and aluminum etc.

Talc is white, light green and light grey. The more impurities are, the darker the color is. Theore is often sheet like, fibrous and compact mass like. Luster: pearly luster or grease luster;hardness: 1; density: about 2.7; with soapy feeling.


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II. Raw ore assay

1. Chemical analysis of raw ore

Chemical analysis is made on raw ore to investigate content of each element in raw ore.See Table 1 for result of analysis:

Table 1

Composition MgO SiO2 Fe2O3 Ca K2O Na2O Al2O3 Others

Content (%) 26.87 68.94 0.34 0.51 0.09 0.03 0.28 2.94

Result of Table 1 shows that: the ore contains relatively high percentage of silicon, whichaffects grade of talc

2. Phase analysis of raw ore

Phase analysis is made on raw ore to investigate content of other essential mineral in rawore. See table 2 for result of analysis.

Table 2

Mineral names Talc Quartz Mica Asbestos Feldspar Augustite Others

Content (%) 83.56 7.68 4.48 3.42 0.28 0.20 0.38

Result of Table 2 shows that: content of other impurities in raw ore is not high; contentof quartz and mica is higher.


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3. Identification of raw ore

Raw ore has been identified to investigate existing status of quartz in raw ore and itsdissemination size. See table 3, Figure 1, Figure 2, Figure 3 and Figure 4 for identificationresults.

Table 3

Size fraction (mm) Quartz content (%)

+0.5 5.18

-0.5+0.1 61.84

-0.1+0.045 28.29

-0.045+0.01 4.43

-0.01 0.26

Figure 1


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Figure 2

Figure 3


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Figure 4

From identification result of raw ore, dissemination size of quartz mineral in talc mineralhas very wide range: wherein, quartz content with size fraction of less than -0.1 reaches32.82%, which brings difficulty to silicon-removing test.


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III. Test

To improve quality of talc, quartz mineral must be removed from raw ore. According to differenceof hardness between talc mineral and quartz mineral, considering production cost and productiontechnology requirement of talc products, the method of grinding grading is adopted to separatequartz mineral and talc mineral to improve quality of talc. See Table 4 for test result of grindinggrading.

Table 4

Grinding time Size fraction (mesh) Yield (%) Content of SiO2 (%)

1 hour +200 19.27 78.38-200+325 8.99 69.34-325+800 43.78 65.16

-800+1250 7.41 68.52-1250 20.55 65.04Total 100.00 68.32

2 hours +200 11.85 77.23-200+325 5.23 68.28-325+800 43.20 67.15

-800+1250 7.67 63.68-1250 32.05 67.94Total 100.00 68.41

3 hours +200 4.94 71.74-200+325 4.59 68.65-325+800 42.25 68.17

-800+1250 7.79 68.64-1250 40.43 68.33Total 100.00 68.47


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Result of Table 4 shows that: with grinding time increased, yield of material with fine sizefraction is increased, but content of silicon in material of fine size fraction is also increased,showing some quartz is over-ground into superfine material, which leading to increase of quartzcontent in products and affecting quality of products. At the same time, result of Table 4 alsoshows that: difference of grinding time means that quartz in raw ore can be distributed intomaterial of different size fraction. Result of products with -1250 mesh shows that: the shorterthe grinding time is, the less the silicon content in product is. It shows: controlling propergrinding time and adopting grading method can make effective separation of quartz and talc atcertain size fraction range.

IV. Product testing

Products with -325+800 mesh and -1250 mesh are examined to further check existing status ofquartz in super-fine size fraction. See Figure 5, figure 6, figure 7 and figure 8 for examinationresults.

Figure 5 -325+800 mesh product


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Figure 6 -325+800 mesh product

Figure 7 -1250 mesh product


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Figure 8 -1250 mesh product

From results of figure 5, 6, 7 and 8, grain of quartz in products is coarser than talc, showingthat some quartz of coarse grain in same size fraction cannot be separated. This is mainlybecause of hydraulic separation adopted for the test; at the same time dispersion result of talcis affected at superfine condition, thereby affecting grading result. We stir and then re-gradeproducts with -1250 mesh of size fraction at the condition of grinding for one hour, to removequartz of coarse grain. See Table 5 for result of re-grading test.

Table 5

Size fraction (mesh) MgO(%) Yield (%) SiO2 (%)

+1250 27.56 8.63 74.85

-1250 29.83 91.37 64.11

Total 29.63 100.00 65.04

Result of Table 5 shows that: under the grinding condition, result of classification is controlled;content of quartz in superfine material can be controlled at minimum range.


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V. Recommended production flow chart

According to testing result and difference of hardness between talc and quartz, dry-grindingair classification flow is recommended to process the talc mineral. Products with differentgrade can be obtained at proper grinding fineness according to difference of hardness betweenquartz and talc. See figure 9 for recommended production flow chart.

Raw ore

Crushing

Grinding

Grading

Baking

Grinding

Air classification

Product 1 Product 2 Product 3 Product 4 Product 5 End

Figure 3 Recommended production flow chart of talc


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VI. Conclusion

1. Dissemination size for quartz mineral has wider granularity range. According to differenceof hardness between talc and quartz, the method of section grinding and section gradingis recommended to produce products with different grades through using the least cost;

2. We propose not to adopt the process of de-quartz floatation because it has followingproblems: (1) Granularity for dissemination size of quartz mineral is uneven. Over-grinding will be caused if quartz and talc are completely separated, which affects resultof floatation; (2) The problem of drying superfine material; (3) Environmental protection;(4) Production cost.

3. Equipment should be selected after process flow and processing capacity are confirmed.

4. Products with different grade can be obtained from the talc mineral through grindinggrading and can be used for plastics, cable, rubber, cosmetic and medicine etc.

5. The talc has better grade and has very good development value.

ANNEXURE — QUALIFICATIONS AND EXPERIENCE

Mr. Mark Osterberg (“Mark”) has contributed exploration-geological modeling chapters for QuadraMining Limited’s 2008 43-101 filing in August, 2009.

Mark has authored 43-101 certification document for Blackbird type Cu-Co prospect for ToroResources Corporation in October, 2007.

Mark has authored 43-101 certification document for Carlin-type gold property for Nevada MineProperties II, Inc. in November, 2005.

Mark has performed geological investigations for chimney creek carlin-type gold deposit for his Ph.D. studies from April, 1986 to February, 1990.

Mark has performed property mapping, drilling and sectional reserve calculation for mesothermalshear-zone hosted, greenstone-type gold deposits in historic Mother Lode region of California forMeridian Gold Corporation and Gold Fields Mining Corporation. from February, 1989 to February,1990.

Mark has determined reserves, built simple mining plans and developed DCF-ROE based financialevaluations for construction materials operators in Wisconsin and Michigan for Rocky MountainEnterprises, Gillett Cement Products, Inc., Pewabic East Partnership, Rising Rock, L.L.C., NorRok,Inc., Lincoln County Road Commission beginning from September 2001.

Mark has performed DCF-ROE resource calculation and project permitting scoping study for proposedconstruction materials mining operation for Rising Rock, L.L.C. in January 2010.


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Mark has supervised 10-hole drilling program designed to substantiate and prove mining reserve atlarge sand and gravel operation in suburban Milwaukee. Mark has also worked up sectional modeland calculated mining reserve for Lafarge-North America in July, 2006.

Mark has led Tintaya concession minerals exploration activities and managed 30-person Spanishlanguage office. Mark has mapped 50 by 30 km area at 1:5000 scale, completed 5 ground EM and 3geochemical surveys in 5 months and drilled and modeled 38 diamond drill holes. Mark has releasedarea around Antapaccay porphyry Cu-Au discovery for development and construction activities andestimated concession mineral potential for long range planning purposes for BHP from February toDecember, 2000.

Mark has re-mapped surface lithology, alteration and mineralization for the Questa mining district.Mark has provided mapping constraint for re-modeled sectional geological interpretation and refinedrock stability controls for slope stability studies for SRK Consultants and MolyCorp from May 2005to January 2006.

Mark has mapped underground geology and developed ore control model for Pinos Altos polymetallicskarn. Mark has participated in surface and underground exploration programs that led to a 50-percentincrease in ore reserves at Cyprus Pinos Altos mine for Cyprus Mining Company from February,1990 to December, 1992.

APPENDIX VII GENERAL INFORMATION

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1. RESPONSIBILITY STATEMENT

This circular includes particulars given in compliance with the Listing Rules for the purpose ofgiving information with regard to the Company. The Directors collectively and individuallyaccept full responsibility for the accuracy of the information contained in this circular andconfirm, having made all reasonable enquiries, that to the best of their knowledge and beliefthere are no other facts the omission of which would make any statement herein misleading.

2. SHARE CAPITAL

As at the Latest Practicable Date, the authorised and issued share capital of the Company wasas follows:

Authorised HK$

1,500,000,000 Shares 15,000,000

Issued and credited as fully paid

1,095,200,000 Shares 10,952,000

All the issued share capital of the Company rank pari passu with each other in all respectsincluding the rights as to dividends, voting and return of capital. The Company had no debtsecurities in issue as at the Latest Practicable Date.

3. DISCLOSURE OF INTERESTS

(a) Directors

As at the Latest Practicable Date, none of the Directors or the chief executive of theCompany had or was deemed to have any interest or short position in any Share, underlyingshares and debentures of the Company or any of its associated corporations (within themeaning of Part XV of the SFO) which (i) were required to be notified to the Companyand the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (includinginterest or short position which they had or deemed to have under such provisions of theSFO); or (ii) were required, pursuant to Section 352 of the SFO, to be entered in theregister referred to therein; or (iii) were required to be notified to the Company and theStock Exchange pursuant to the Model Code for Securities Transactions by Directors ofListed Issuers contained in the Listing Rules.

None of the Directors or proposed directors of the Company (if any) had any interest orshort position in the Shares or underlying shares of the Company which would fall to bedisclosed pursuant to Divisions 2 and 3 of Part XV of the SFO.


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(b) Substantial Shareholders

As at the Latest Practicable Date, so far as is known to the Directors and the chiefexecutives of the Company, the following persons (other than Directors) had an interestor short position in the Shares and underlying shares of the Company which would needto be disclosed to the Company or the Stock Exchange under the provisions of Divisions2 and 3 of Part XV of the SFO, or who was, directly or indirectly, interested in 10% ormore of the nominal value of any class of share capital carrying rights to vote in allcircumstances at general meetings of any other member of the Group, were as follows:

Long position in the Shares and underlying shares of the Company

Number ofName of Shares held Approximatesubstantial and underlying percentage ofshareholders Capacity shares held Shareholding

Ms. Wan Interests of controlled 230,280,511 21.03%corporations (Note 1)

Profit Giant Holdings Beneficial owner 206,592,000 18.87%Limited (“Profit Giant”) (Note 1)

Interests of controlled 23,688,511 2.16%Corporations (Note 1)

Cosmopolitan Interest of controlled 161,184,000 14.72%International corporations (Note 2)Holdings Limited(“Cosmo”)

Notes

(1) Ms. Wan is deemed to be interested in 230,280,511 Shares held directly or indirectly by ProfitGiant which is wholly owned by Ms. Wan.

(2) Cosmo is deemed to be interested in 161,184,000 Shares held by Joint Talent Investments Limitedwhich is ultimately wholly owned by Cosmo. Cosmo is a company which issued shares are listedon the main board of the Stock Exchange.

Save as disclosed above, as at the Latest Practicable Date, the Directors or the chiefexecutive of the Company were not aware of any persons (other than Directors) whohad, or were deemed to have, interest or short positions in the Shares and underlyingshares of the Company, which would fall to be disclosed to the Company and the StockExchange under the provisions of Divisions 2 and 3 of Part XV of the SFO, or who was,directly or indirectly, interested in 10% or more of the nominal value of any class ofshare capital carrying rights to vote in all circumstances at general meetings of any othermember of the Group.


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4. DIRECTORS’ COMPETING INTERESTS

As at the Latest Practicable Date, none of the Directors and his respective associates had anyinterest in a business, which competes or may compete with the business of the Group.

5. DIRECTORS’ SERVICE CONTRACTS

As at the Latest Practicable Date, none of the Directors had entered or proposed to enter intoany service contract with the Company or any other member of the Group which is notdeterminable by the Group within one year without payment of compensation, other thanstatutory compensation.

6. MATERIAL ADVERSE CHANGE

As at the Latest Practicable Date, the Directors were not aware of any material adverse changein the financial or trading position of the since 31 December 2008, being the date to which thelatest published audited financial statements of the Group were made up.

7. INTEREST IN CONTRACTS AND ASSETS

As at the Latest Practicable Date, none of the Directors has any direct or indirect interest in anyassets acquired or disposed of by or leased to any member of the Group or is proposed to beacquired or disposed of by or leased to any member of the Group since 31 December 2008,being the date to which the latest published audited accounts of the Company were made up.

As at the Latest Practicable Date, there was no contract or arrangement subsisting in which anyDirector was materially interested and which was significant in relation to the business of theGroup.

8. LITIGATION

As at the Latest Practicable Date, neither the Company nor any of its subsidiaries is engaged inany litigation or arbitration of material importance and so far as the Directors are aware, nolitigation or claims of material importance are pending or threatened by or against the Companyor any of its subsidiaries.


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9. EXPERTS AND CONSENTS

The following are the qualifications of the experts who have given opinion or advice, which arecontained in this circular.

Name Qualification

Veda Capital a licenced corporation to carry out Type 6 (Advising on CorporateFinance) regulated activity under the SFO

Mine Mappers, L.L.C. an independent technical adviser which its member is a professionalgeologist in the State of Wisconsin and the State of Arizona, USAand a qualified person as defined under NI43-101

Savills a professional valuation firm which its members are CharteredFinancial Analyst, Certified Public Accountant, and CharteredEstate Surveyor

HLM & Co. Certified Public Accountants

Each of the above experts has given and has not withdrawn its written consent to the issue ofthis circular with the inclusion therein of its reports and references to its name in the form andcontext in which they appear.

As at the Latest Practicable Date, none of the above experts had direct or indirect shareholdinginterest in any member of the Group, or any right to subscribe for or to nominate persons tosubscribe for shares in any member of the Group, or any interests, directly or indirectly, in anyassets which have been acquired, disposed of or leased to or which are proposed to be acquired,disposed of or leased to any member of the Group since 31 December 2008, being the date towhich the latest published audited accounts of the Company were made up.

10. MISCELLANEOUS

The English text of this circular shall prevail over Chinese text.

11. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be available for inspection at 4th Floor, Aon ChinaBuilding, 29 Queen’s Road Central, Hong Kong during the normal business hours from thedate of this circular up to and including the date of the EGM:

(i) the Fame Oriented Agreement;

(ii) the Shing View Agreement;

(iii) the Management Agreement;

(iv) the Consultancy Agreement;

(v) the Sharing of Administrative Office Agreement;


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(vi) the IBC Letter;

(vii) the letter from Veda Capital to the Independent Board Committee and the IndependentShareholders as set out on pages 58 to 85 of this circular;

(viii) the valuation report on the Gold Ridge Property, the text of which is set out in AppendixI to this circular;

(ix) the valuation report on the Talc Mine, the text of which is set out in Appendix II to thiscircular;

(x) the report on forecast underlying the valuation of the Gold Ridge Property, the text ofwhich is set out in Appendix III to this circular;

(xi) the report on forecast underlying the valuation of the Talc Mine, the text of which is setout in Appendix IV to this circular;

(xii) the technical report on the Gold Ridge Property, the text of which is set out in AppendixV to this circular;

(xiii) the technical report on the Talc Mine, the text of which is set out in Appendix VI to thiscircular;

(xiv) the consent letters referred to in the section headed “Experts and Consents” in thisappendix; and

(xv) this circular.

NOTICE OF EGM

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(Stock code: 00612)

NOTICE IS HEREBY GIVEN that the extraordinary general meeting of the shareholders of ChinaInvestment Fund Company Limited (the “Company”) will be held at 4th Floor of Aon China Building,29 Queen’s Road Central, Hong Kong, Hong Kong on 30 April 2010 at 9:30 a.m. for the purpose ofconsidering and, if thought fit, pass with or without amendments the following resolutions as ordinaryresolutions of the Company:

ORDINARY RESOLUTIONS

1. “THAT the Fame Oriented Agreement (as defined and described in the circular of the Companydated 14 April 2010 (the “Circular”), a copy of which is produced to this meeting and marked“A” and signed by the chairman of this meeting for identification purpose) and the transactionscontemplated under or incidental to the Fame Oriented Agreement be and are hereby approved,confirmed and ratified and that the directors of the Company (the “Directors”) be and arehereby authorized on behalf of the Company:

(a) to sign, seal, execute, perfect and deliver all such documents and do all such deeds, acts,matters and things as they may in their discretion consider necessary or desirable for thepurpose of or in connection with the implementation of the Fame Oriented Agreementand all transactions contemplated thereunder; and

(b) to exercise or enforce all of the rights of the Company under the Fame Oriented Agreementand to complete the Fame Oriented Agreement in accordance with its terms.”

2. “THAT the Shing View Agreement (as defined and described in the Circular, a copy of whichis produced to this meeting and marked “B” and signed by the chairman of this meeting foridentification purpose) and the transactions contemplated under or incidental to the Shing ViewAgreement be and are hereby approved, confirmed and ratified and that the Directors be andare hereby authorized on behalf of the Company:

(a) to sign, seal, execute, perfect and deliver all such documents and do all such deeds, acts,matters and things as they may in their discretion consider necessary or desirable for thepurpose of or in connection with the implementation of the Shing View Agreement andall transactions contemplated thereunder; and


NOTICE OF EGM

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(b) to exercise or enforce all of the rights of the Company under the Shing View Agreementand to complete the Shing View Agreement in accordance with its terms.”

3. “THAT:

(a) the Management Agreement (as defined and described in the Circular, a copy of whichmarked “C” is produced to the meeting and signed by the chairman of the meeting forthe purpose of identification) and the transaction contemplated thereunder be and arehereby approved, confirmed and ratified subject to the annual caps of HK$1,800,000and HK$900,000 for each of the two financial years ending 31 December 2011 respectivelyand such annual caps be and are hereby approved; and

(b) the Directors be and are hereby authorized to take all steps necessary or expedient intheir opinion to implement and/or to give effect to the Management Agreement.”

4. “THAT:

(a) the Consultancy Agreement (as defined and described in the Circular, a copy of whichmarked “D” is produced to the meeting and signed by the chairman of the meeting forthe purpose of identification) and the transaction contemplated thereunder be and arehereby approved, confirmed and ratified subject to the annual caps of HK$1,000,000and HK$1,000,000 for each of the two financial years ending 31 December 2011respectively and such annual caps be and are hereby approved; and

(b) the Directors be and are hereby authorized to take all steps necessary or expedient intheir opinion to implement and/or to give effect to the Consultancy Agreement.”

5. “THAT:

(a) the Sharing of Administrative Office Agreement (as defined and described in the Circular,a copy of which marked “E” is produced to the meeting and signed by the chairman ofthe meeting for the purpose of identification) and the transaction contemplated thereunderbe and are hereby approved, confirmed and ratified subject to the annual caps ofHK$2,200,000 and HK$1,200,000 for each of the two financial years ending 31 December2011 respectively and such annual caps be and are hereby approved; and

(b) the Directors be and are hereby authorized to take all steps necessary or expedient intheir opinion to implement and/or to give effect to the Sharing of Administrative OfficeAgreement.”

6. “THAT the authorized share capital of the Company be increased from HK$15,000,000 toHK$30,000,000 by the creation of 1,500,000,000 shares of HK$0.01 each ranking pari passuin all respects with the shares in the original share capital of the Company.”

NOTICE OF EGM

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7. “THAT Mr. Wan Chuen Hing, Alexander be re-elected as executive director of the Company.”

By order of the BoardMr. William Robert Majcher

Executive Director

Hong Kong, 14 April 2010

Registered office:Cricket SquareHutchins DriveP.O. Box 2681Grand Cayman KY1-1111Cayman Islands

Principal place of business in Hong Kong:4th FloorAon China Building29 Queen’s Road CentralHong Kong

Notes:

(1) A shareholder entitled to attend and vote at the meeting may appoint one or more than one proxy to attend and tovote instead of him. A proxy need not be a shareholder of the Company.

(2) In the case of joint holders of any share, any one of such persons may vote at the said meeting, either personally orby proxy, in respect of such share as if he was solely entitled thereto, but if more than one of such joint holders ispresent at the said meeting, personally or by proxy, that one of the said persons so present whose name stands firston the register of members in respect of such share shall alone be entitled to vote in respect thereof.

(3) In order to be valid, the form of proxy together with the power of attorney or other authority (if any) under whichit is signed or a notarially certified copy of that power or authority, must be deposited at the share registrar of theCompany in Hong Kong, Tricor Standard Limited at 26th Floor, Tesbury Centre, 28 Queen’s Road East, HongKong not less than 48 hours before the time appointed for holding the meeting or any adjourned meeting thereof.Completion and return of a form of proxy will not preclude shareholders from attending and voting in personshould they so wish.

(4) A form of proxy for use at the meeting is enclosed with the circular of the Company despatched to the shareholdersof the Company on 14 April 2010.

(5) As at the date of this notice, the executive directors of the Company are Mr. William Robert Majcher and Mr. WanChuen Hing, Alexander and the independent non-executive directors of the Company are Mr. Yan Mou Keung,Ronald, Mr. Cheng Wing Keung, Raymond and Mr. Kwong Kwan Tong.

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