Independent Technical Report Site 11 Fujian Yuanxin (Far South) Fujian Province, China

APPENDIX III COMPETENT PERSON’S REPORT — AAI REPORT SITE 11

INDEPENDENT TECHNICAL REPORT SITE 11 FUJIAN YUANXIN (FAR SOUTH) FUJIAN PROVINCE, CHINA

Timothy A. Ross, P.E., RM-SME Dr. Douglas F. Hambley Ph.D, P.E., P.Eng, PG, RM-SME and Vanessa A. Santos, P.G., RM-SME Agapito Associates, Inc. Grand Junction and Lakewood, Colorado, USA

Thomas R. Kelly, RM-SME Lima, Peru

Qinghua “Jason” Jin, P.E., RM-SME SGS North America, Inc. Tucson, Arizona, USA

Carl E. Brechtel, P.E., RM-SME Carl Brechtel Consulting LLC Arvada, Colorado, USA

Report Date: 14 September 2018

Effective Date: 31 March 2018

Prepared for:

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INDEPENDENT TECHNICAL REPORT SITE 11 FUJIAN YUANXIN (FAR SOUTH) FUJIAN PROVINCE, CHINA

TABLE OF CONTENTS

Page 1 Summary...... III11-13 1.1 Property Description and Ownership...... III11-14 1.2 Geology and Mineralization ...... III11-14 1.3 Development and Operations ...... III11-15 1.4 Mineral Resource Estimate ...... III11-15 1.5 Mineral Reserve Estimate...... III11-16 1.6 Economics ...... III11-19 1.7 Environmental and Permitting ...... III11-19 1.8 Processing Plant...... III11-19 1.9 Risk Assessment...... III11-20 1.10 Conclusions and Recommendations...... III11-20 2 Introduction ...... III11-21 2.1 Information Sources ...... III11-21 2.2 Qualified Persons ...... III11-22 3 Reliance on Other Experts ...... III11-23 4 Property Description and Location ...... III11-24 4.1 Location...... III11-24 4.2 Mineral Rights ...... III11-24 4.3 Environmental Liabilities, Permits, and Risks for the Property ...... III11-24 5 Accessibility, Climate, Local Resources, Infrastructure and Physiography ...... III11-27 5.1 Topography, Elevation, and Vegetation ...... III11-27 5.2 Accessibility ...... III11-27 5.3 Local Resources and Infrastructure...... III11-27 5.4 Climate ...... III11-28 6 History ...... III11-28 6.1 Ownership ...... III11-28 6.2 Exploration and Development Work ...... III11-28 6.3 Historical Mineral Resource and Mineral Reserve Estimates ...... III11-28 6.4 Production ...... III11-28

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7 Geological Setting and Mineralization ...... III11-29 7.1 Regional Stratigraphy...... III11-29 7.2 Regional Structure ...... III11-29 7.3 Property Geology ...... III11-30 7.3.1 Stratigraphy ...... III11-30 7.3.2 Structure ...... III11-31 8 Deposit Types ...... III11-31 9 Exploration ...... III11-34 9.1 Dongji Mining Area ...... III11-34 9.2 Dongji Deep General Exploration Area...... III11-34 10 Drilling ...... III11-35 10.1 Dongji Mining Area ...... III11-35 10.2 Dongji Deep General Exploration Area...... III11-35 10.3 Core Drilling—General Procedures, Recovery, and Sampling ...... III11-36 10.4 Core Recovery ...... III11-38 10.5 Drill-Hole Deviation...... III11-38 10.6 Comments on Section 10 ...... III11-38 11 Sample Preparation, Analyses, and Security ...... III11-38 11.1 Sample Preparation...... III11-38 11.2 Internal Quality Control ...... III11-41 11.3 Sample Security ...... III11-41 11.4 Density and Moisture Samples ...... III11-41 11.5 Comments on Section 11 ...... III11-41 12 Data Verification...... III11-42 12.1 Site Visits ...... III11-42 12.2 Witness Samples ...... III11-44 12.3 Data Review...... III11-44 13 Mineral Processing and Metallurgical Testing...... III11-45 13.1 Sample Selection ...... III11-46 13.2 Mineralogical Analysis ...... III11-46 13.3 Physical Testwork ...... III11-46 13.4 Gravity-Flotation Testwork...... III11-46

13.5 Ancillary Testwork ...... III11-47

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14 Mineral Resource Estimates ...... III11-47 14.1 Mineral Resource Classification System ...... III11-47 14.2 Mineral Resource Estimation Methodology under PRC MRL ...... III11-49 14.2.1 Economic Parameters ...... III11-49 14.2.2 Grade Capping ...... III11-50 14.2.3 Polygonal Method ...... III11-50 14.2.4 Tonnage Factor...... III11-52 14.2.5 Estimate Verification ...... III11-52 14.3 Reconciliation to 2014 CIM Definition Standards...... III11-52 14.3.1 Resource Classification ...... III11-53 14.3.2 Geostatistical Mineral Zone Analysis and Variography ...... III11-57 14.3.3 Considerations of Reasonable Prospects for Eventual Economic Extraction ...... III11-60 14.3.4 Mining Reconciliation Considerations ...... III11-60 14.4 Mineral Resource Statement ...... III11-60 15 Mineral Reserve Estimates ...... III11-64 15.1 Estimation Parameters ...... III11-65 15.1.1 Dongji Mining Area Reserve Estimation Parameters ...... III11-65 15.1.2 Breakeven Gold Equivalent Cut-Off Grade ...... III11-67 15.1.3 Reconciliation of Mineral Reserves to Production ...... III11-67 15.2 Reserve Classification ...... III11-68 15.2.1 Potential for Additional Reserves ...... III11-70 16 Mining Methods ...... III11-70 16.1 Mining Method...... III11-70 16.1.1 Mining at Dongji Mining Area ...... III11-70 16.2 Backfill ...... III11-75 16.3 Mining Fleet ...... III11-76 16.4 Mine Infrastructure...... III11-76 16.4.1 Mine Ventilation...... III11-76 16.4.2 Compressed Air ...... III11-76 16.4.3 Underground Haulage...... III11-76 16.4.4 Shafts...... III11-76 16.4.5 Winders ...... III11-77 16.4.6 Mine Water Discharge ...... III11-79 16.5 Labor ...... III11-79 16.6 Mining Schedule ...... III11-79

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17 Recovery Methods ...... III11-82 17.1 Crushing Circuit...... III11-82 17.2 Grinding Circuit...... III11-87 17.3 Flotation Circuit...... III11-87 17.4 Concentrate Dewatering ...... III11-87 18 Project Infrastructures ...... III11-89 18.1 Roads...... III11-89 18.2 Mine Waste Dumps ...... III11-89 18.3 Mine Ore Stockpiles...... III11-89 18.4 Electrical Energy ...... III11-89 18.5 Tailings Impoundments...... III11-89 19 Market Studies and Contracts ...... III11-89 19.1 Markets ...... III11-89 19.2 Contracts ...... III11-90 20 Environmental Studies, Permitting, and Social or Community Impact ...... III11-91 20.1 Introduction ...... III11-91 20.2 Laws and Regulations ...... III11-91 20.3 Waste and Tailings Disposal Management...... III11-91 20.4 Water Management ...... III11-93 20.5 Air and Noise ...... III11-94 20.6 Permitting Requirements ...... III11-94 20.7 Social and Community ...... III11-94 20.8 Remediation and Reclamation...... III11-96 21 Capital and Operating Costs ...... III11-97 21.1 Capital Cost Estimate...... III11-97 21.2 Operating Cost Estimate...... III11-97 22 Economic Analysis ...... III11-100 22.1 Taxes ...... III11-101 22.2 Economic Projection...... III11-101 22.3 Sensitivity of Reserves to Gold Price ...... III11-101 23 Adjacent Properties ...... III11-102 24 Other Relevant Data and Information ...... III11-102 24.1 Risk Assessment...... III11-102 25 Interpretation and Conclusions ...... III11-111 26 Recommendations ...... III11-112 27 References...... III11-112

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28 Date and Signature...... III11-113 28.1 Statement of Certification by Timothy A. Ross...... III11-113 28.2 Statement of Certification by Douglas F. Hambley ...... III11-116 28.3 Statement of Certification by Vanessa A. Santos...... III11-118 28.4 Statement of Certification by Thomas R. Kelly ...... III11-120 28.5 Statement of Certification by Qinghua Jin ...... III11-122 28.6 Statement of Certification by Carl E. Brechtel ...... III11-124

Appendix A—Mining and Exploration Licenses ...... III11-114

Appendix B—3D Oblique View of Vein Upper Surface...... III11-128

LIST OF TABLES

Page Table 1-1. Fujian Yuanxin Gold Mine Licenses ...... III11-14 Table 1-2. Fujian Yuanxin Mineral Resource (effective date 31 March 2018)...... III11-16 Table 1-3. Economic Parameters ...... III11-18 Table 1-4. Fujian Yuanxin Reserve Summary (effective date 31 March 2018) ...... III11-18 Table 2-1. QPs, Section Responsibilities, and Latest Site Visit ...... III11-22 Table 4-1. Issued Licenses to Fujian Yuanxin ...... III11-27 Table 6-1. Production History for Dongji Mining Area ...... III11-29 Table 9-1. Summary of Completed Exploration Projects (from Fuzhou Dongxin Mining Technology Co., Ltd. 2012) ...... III11-35 Table 10-1. Summary of Completed Drilling ...... III11-36 Table 12-1. Fujian Yuanxin Witness Samples ...... III11-44 Table 13-1. Gravity-Flotation Locked Cycle Test ...... III11-47 Table 14-1. Fujian Yuanxin Economic Parameters for Resource Estimation ...... III11-50 Table 14-2. Fujian Yuanxin Tonnage Factors ...... III11-52 Table 14-3. Statistic Report for Donji Mining Area ...... III11-57 Table 14-4. Fujian Yuanxin Mineral Resource (effective date 31 March 2018)...... III11-62 Table 15-1. Dongji Mining Area Estimated Reserve Cut-off Grade ...... III11-67 Table 15-2. Dongji Mining Area Reconciliations, Gold ...... III11-68 Table 15-3. Fujian Yuanxin Reserve Summary (effective date 31 March 2018) ...... III11-69 Table 16-1. Fujian Mining Area Production Schedule by License...... III11-82 Table 20-1. Overview Listing of PRC Laws Relevant to Mines and Mining Projects ....III11-92 Table 20-2. Environmental Permit ...... III11-95 Table 20-3. Fujian Yuanxin Environmental Related Expenditures ...... III11-96 Table 21-1. Buildup of Property Operating Costs by Cost Objects, Historical and Forecast Prediction ...... III11-98

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Table 21-2. Fujian Yuanxin Historical Total Costs/Process Tonne ...... III11-99 Table 21-3. Projected Operating and Capital Costs for the Fujian Yuanxin Mine ...... III11-100 Table 22-1. Fujian Yuanxin Production and Cost Forecast ...... III11-101 Table 22-2. Sensitivity of Gold Reserves to Gold Price ...... III11-102 Table 24-1. Overall Risk Assessment Guide...... III11-103 Table 24-2. Project Risk Assessment Table before Mitigation ...... III11-104

LIST OF FIGURES Figure 4-1. Fujian Yuanxin Location Map ...... III11-25 Figure 4-2. Base Map showing Fujian Yuanxin Mining and Exploration License Boundaries ...... III11-26 Figure 7-1. Fujian Yuanxin, Zhenghe County Eastern Gold Mining Area (from Fuzhou Dongxin Mining Technology Co., Ltd. 2012) ...... III11-30 Figure 7-2. Photo of 85o Controlling Fault on Proterozoic and Jurassic-Cretaceous Metavolcanics ...... III11-31 Figure 8-1. Dongji Mining Area and Dongji Deep General Exploration Area (from Fuzhou Dongxin Mining Technology Co., Ltd. 2012)...... III11-33 Figure 10-1. Geological Map of the Eastern Gold Mining Area of Zhenghe County, Fujian Province showing Exploration Lines and Drill Holes (from Fuzhou Dongxin Mining Technology Co., Ltd. 2012) ...... III11-37 Figure 11-1. New Contained and Sized Crushers...... III11-40 Figure 11-2. Atomic Absorption ...... III11-40 Figure 12-1. Exploration Adit to Determine Fault and Mineralization Continuity ...... III11-43 Figure 12-2. Core Showing Mineralization in ZK0-9 from Exploration Area ...... III11-43 Figure 14-1. Dongji Mining Area Grade Polygons—Longitudinal Section ...... III11-51 Figure 14-2. Dongji Mining Area Mineral Resource Classifications—Horizontal Projection (longitudinal section) ...... III11-55 Figure 14-3. Dongji Deep General Exploration Area Mineral Resource Classifications—Vertical Projection (plan view)...... III11-56 Figure 14-4. Gold Grade Distribution at Donji Mine Area...... III11-58 Figure 14-5. Downdip Variogram at 135˚ Azimuth and 35˚ Dip...... III11-59 Figure 14-6. Variogram Along Strike at 045˚ Azimuth and 0˚ Dip...... III11-59 Figure 14-7. Drill Hole and Sample Location Map...... III11-63 Figure 16-1. Dongji Mining Area Typical Stope Layout ...... III11-73 Figure 16-2. Dongji Mining Area Operating Backfill Plant Cement Mixing Area...... III11-76 Figure 16-3. Dongji Mining Area Headframe ...... III11-78 Figure 16-4. Dongji Mining Area Production Winder ...... III11-79 Figure 16-5. Fujian Mining Area Location of Reserves by License ...... III11-81 Figure 16-6. Production Schedule for the Upper Ore of Dongji Gold and Silver Mining Area ...... III11-83

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Figure 16-7. Production Schedule for the Upper Ore of Dongji Gold and Silver Mining Area-2 ...... III11-84

Figure 16-8. Production Schedule for the Upper Ore of Dongji Gold and Silver Mining Area-3 ...... III11-85

Figure 16-9. Production Schedule for the Lower Ore of Dongji Gold and Silver Mining Area ...... III11-86

Figure 17-1. Yuanxin Processing Plant Overall Flowsheet ...... III11-88

Figure 19-1. Gold Price History (Source www.kitco.com) ...... III11-90

Figure 19-2. Silver Price History (Source www.kitco.com) ...... III11-91

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MINE AND PROPERTY ABBREVIATIONS

The abbreviations system listed below is intended to simplify the discussion of the properties reviewed by Agapito Associates, Inc. (AAI) for Shandong Gold Mining Co., Ltd. (Shandong Gold), and the numerous sub-units (mining and exploration rights) associated with them.

Abbreviation License Number Mining or Exploration Right Name

Fujian Yuanxin Fujian Yuanxin (Far South)

Dongji Mining Area C3500002010124210102291 Fujian Province, Zhenghe County, Yuanxin Mining Co., Ltd., Dongji Gold (Silver) Mining Area

Dongji Deep General T35120080902015406 Fujian Province, Zhenghe County, Exploration Area Dongji Gold (Silver) Mining General Exploration (Dongji Deep Exploration Area)

ACRONYMS AND ABBREVIATIONS

Њ degree

% percent

3D three-dimensional

AAI Agapito Associates, Inc.

ANFO ammonium nitrate/fuel oil

Au gold

CIM Canadian Institute for Mining, Metallurgy and Petroleum

C Celsius

CAPEX capital expenditures cm centimeter cm3/hr cubic meters per hour

Cu copper

DLR Department of Land and Resources

EIA Environmental Impact Assessment

EIS Environmental Impact Statement

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FS Feasibility Study g gram

G18 Rongwu Expressway ha hectare

HKEx The Stock Exchange of Hong Kong Limited

IRR internal rate of return

L liter

LHD load-haul-dump kg kilogram km kilometer km2 square kilometer kV kilovolt kVA kilovolt-ampere kW kilowatt kWh kilowatt-hour m meter m3/min cubic meters per minute mFe magnetic iron mg milligram

MLR Ministry of Land and Resources

MOZ million ounces mm millimeter

MPa megapascal

MSL mean sea level

Mt million tonnes

Mtpy million tonnes per year

NI National Instrument

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OPEX operating expenditures oz. troy ounce

Pa pascal

Pb lead

PRC People’s Republic of China

P.E. Professional Engineer

PEA Preliminary Economic Assessment

P.Eng. Professional Engineer of Saskatchewan

PFS Preliminary Feasibility Study ppm part per million psi pounds per square inch

QA/QC quality assurance/quality control

ROI radius of influence

RQD Rock Quality Designation s second

S sulfur

S304 Provincial Highway Wendeng-Sanshandao Highway

SDG Shandong Gold Group Co., Ltd.

Shandong Gold Shandong Gold Mining Co., Ltd.

SME Society for Mining, Metallurgy, and Exploration, Inc.

SRM Standard Reference Material

G206 Tanfang National Highway t tonne (metric ton, 1000 kg)

TD Total Depth tph tonnes per hour

Zn zinc

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IMPORTANT NOTICE

This Independent Technical Report was prepared to Canadian National Instrument 43-101 Technical Report standards by Agapito Associates, Inc. (AAI). The quality of information, conclusions, and estimates contained herein is consistent with the level of effort involved in AAI’s services, based on i) information available at the time of preparation; ii) data supplied by outside sources; and iii) the assumptions, conditions, and qualifications set forth in this report. This report is intended to be used by Shandong Gold Mining Co., Ltd. (the “Company”), subject to the terms and conditions of its contracts with AAI. Those contracts permit the Company to file this Independent Technical Report with The Stock Exchange of Hong Kong Limited (the “HKEx”) in accordance with the requirements of Chapter 18 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “HKEx Listing Rules”), and prepared pursuant to the requirements of the HKEx Listing Rules.

CAUTIONS REGARDING FORWARD-LOOKING STATEMENTS

The following Independent Technical Report includes certain statements and information that contain forward-looking information within the meaning of applicable HKEx Listing Rules. All statements, other than statements of historical facts, including the requirements and potential output of the Fujian Yuanxin (Far South), the likelihood of commercial mining, the likelihood of securing a strategic partner, and the ability to fund future mine development are forward-looking statements and include forward-looking information. Such forward-looking statements and forward-looking information specifically include, but are not limited to, statements concerning Company plans at the Fujian Yuanxin (Far South), Company ability to fund the Fujian Yuanxin (Far South), the timing of granting of key permits; approval of the Environmental Impact Statement, the estimated gold production and the timing thereto, economic analyses, capital and operating costs, mine development programs, future gold prices, cash flow estimates, and economic indicators derived from the foregoing.

Generally, forward-looking information can be identified by the use of forward-looking terminology such as “intends” or “anticipates,” or variations of such words and phrases or statements that certain actions, events or results “may,” “could,” “should,” “would” or “occur.” Forward-looking statements are based on the opinions and estimates set out in this Independent Technical Report as of the date such statements are made and they are subject to known and unknown risks, uncertainties, and other factors that may cause the actual results, level of activity, performance or achievements of the Company to be materially different from those expressed or implied by such forward-looking statements or forward-looking information, including the receipt of all necessary approvals; the ability to conclude a transaction; uncertainty of future production; capital expenditures and other costs; financing and additional capital requirements; the receipt in a timely fashion of any further permitting for the Fujian Yuanxin (Far South); legislative, political, social or economic developments in the jurisdictions in which the Company carries on business; operating or technical difficulties in connection with mining or development activities; and the risks normally involved in the exploration, development, and mining business.

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Although the authors have attempted to identify important factors that could cause actual results to differ materially from those contained in forward-looking statements or forward-looking information, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that such statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements and forward-looking information. The Company and the authors of this Independent Technical Report do not undertake to update any forward-looking statements or forward-looking information that are incorporated by reference herein, except in accordance with applicable securities laws.

1 SUMMARY

This Independent Technical Report was prepared for the Fujian Yuanxin (Far South) (Fujian Yuanxin) property that includes the Dongji Gold (Silver) mining area (Dongji Mining Area). Fujian Yuanxin is an independent and fully funded company of Shandong Gold Mining Co., Ltd. (Shandong Gold), a subsidiary of the Shandong Gold Group Co. Ltd. (SDG). The purpose of this report is to provide detailed information in support of an application for listing on The Stock Exchange of Hong Kong Limited (HKEx). Agapito Associates, Inc. (AAI) is responsible for preparing the report, including AAI employees and Qualified Person (QP) subcontractors. Neither AAI nor any of the authors have any financial interest in SDG, Shandong Gold, or Fujian Yuanxin. AAI’s remuneration from Shandong Gold is independent of the report findings and does not depend on AAI making a specific finding. No contractual indemnities exist between AAI or its subcontractors and SDG, Shandong Gold, or Fujian Yuanxin for the content of this report.

To complete this Independent Technical Report, a team of four QPs and one geologist was organized, including AAI employees and subcontractors. A mining engineer (Mr. Thomas Kelly), geologist (Ms. Vanessa Santos), and processing engineer (Mr. Qinghua “Jason” Jin) conducted on-site visits of the Fujian Gold Mine. Ms. Santos was acting as the designate on the site visits under direction of geologist QP Douglas F. Hambley. In addition, Mr. Carl Brechtel reviewed the financial data and feasibility study to analyze the economics for the property. Mr. Timothy Ross provided overall review of the project.

This report was prepared in compliance with Canadian National Instrument 43-101 (“NI 43᎑101 Form 43᎑101F1 (June 2011), Mineral Resources and Mineral reserves presented herein are classified according to Canadian Institute of Mining, Metallurgy and Petroleum (“CIM”) Definition Standards — For Mineral Resources and Mineral Reserves, prepared by the CIM Standing Committee on Reserve Definitions and adopted by CIM Council on 10 May 2014 (2014 CIM Definition Standards). The Mineral Resource and Mineral Reserve estimates reported here are based on all available technical data and information as of 31 March 2018.

The Fujian Yuanxin mines are located in rolling terrain with excellent surface access via the national highway system. Power from the national grid is delivered to both sites that the company operates; operations water is available from groundwater at the sites and from mine dewatering. Mining is not arduous; excellent ground conditions and relatively shallow mining up until now have provided for low costs and good production rates.

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1.1 Property Description and Ownership

Fujian Yuanxin is located in the Dongxing Mining Area, Zhenghe County, Fujian Province, 7 kilometers (km) from the Shitun Township. The overall property involves only one mining license, the Dongji Gold (Silver) Mining Area (Dongji Mining Area) and one expired exploration license (Dongji Deep General Exploration Area). The licenses, ownership, and licensed production quantities are listed in Table 1-1.

Table 1-1. Fujian Yuanxin Gold Mine Licenses

Percentage Ownership by Licensed Mining Right Shandong Ore License Number Owner Gold Production (x 104 tpa)

Mining Right Dongji Mining Area C3500002010124210102291 Fujian Province 90.31 6 ZhengheYuan County Yuanxin Mining Co., Ltd. Exploration Right Dongji Deep T35120080902015406 Fujian Province 90.31 General ZhengheYuan Exploration Area County Yuanxin Mining Co., Ltd.

The Fujian Yuanxin property is owned by the Zhenghe County Dongji Gold (Silver) Mining Co., Ltd., an independent and fully-funded company of Shandong Gold, a subsidiary of the SDG.

1.2 Geology and Mineralization

Metallic occurrences in the region include iron, aluminum, zinc, copper, gold, and silver, mainly along the Tai Po deep fault zone and the Mesozoic Dongkeng volcanic basin, on and proximal to the northwest edge. The mineralization can be divided into two major types: one in the late Mesozoic metamorphic rocks in the Proterozoic skarn; the second is in the Mesozoic volcanic rocks in the volcanic to sub-volcanic hydrothermal gold, silver (copper, lead, and zinc) polymetallic deposits.

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1.3 Development and Operations

Dongji Mining Area mines a structure with a wide apparent width, due to the structure having a wide true width and the relatively flat dip of the deposit (less than 45Њ). The general approach to development is quite similar to other mines in the Shandong Gold group. During the AAI visit, all of the areas visited were observed to be in safe operating condition, with appropriate safety signage, safety equipment, and other general mine operational issues in compliance with Western mining standards.

1.4 Mineral Resource Estimate

Dr. Douglas F. Hambley, P.E, P.Eng., P.G. and Registered Member of the Society of Mining, Metallurgy, and Exploration (RM-SME), of AAI is responsible for the Mineral Resource estimate presented in this report. Dr. Hambley is a Qualified Person (QP) as defined by NI 43-101 and is independent of Shandong Gold. Ms. Vanessa Santos, RM-SME, acted as Dr. Hambley’s designate on the site visits and acted under his supervision in the review and compilation in support of the Mineral Resource. The Mineral Resources reported herein are classified as Measured, Indicated, and Inferred as defined in the 2014 CIM Definition Standards. The Mineral Resource estimate for Fujian Yuanxin has an effective date of 31 March 2018. Neither AAI nor the QPs are aware of any adverse material changes to the resources and reserves estimates since the effective date of this report.

Mineral Resources reported using the 2014 CIM Definition Standards have different assumptions and reporting requirements to estimates prepared under Chinese regulations.

The estimation and classification of resources for Shandong Gold and other gold mines in China is strictly regulated by the PRC MLR, as defined by the Specifications for Hardrock Gold Exploration, effective 1 March 2003 (PRC MLR 2002). Resource estimates are based on explicitly prescribed parameters, which include classifications of geologic complexity, minimum grades, minimum thicknesses, and capping procedures for high grades. Resources were estimated using methods currently applied by Shandong Gold that were stated to conform to PRC resource estimation and classification requirements. These estimates were investigated in detail and deemed transparent, valid, and reliable by the QPs of this report. The polygonal model was developed by Shandong Gold based on drill-hole and channel sample assay measurements which serves as the basis for Shandong Gold’s resources under PRC MLR guidelines. Polygons were included or rejected based on Economic Indices as defined by the PRC MLR (such as cut-off grade and vein thickness). The resulting tonnage and grade estimate was reconciled to the 2014 CIM Definition Standards, by assigning confidence categories to the polygons, and reviewing the estimates to determine that the polygons to be reported met considerations of reasonable prospects for eventual economic extraction. Tonnages and metal content for each polygon were summed to determine the resource for each confidence category.

The geometry of the polygons developed by Shandong Gold were analyzed, checked for accuracy and adopted for use in the Mineral Resource Estimate within this technical report by AAI’s QPs. AAI re-estimated the tonnage, grades and contained metal for each polygon and reconciled the estimates to the 2014 CIM Definition Standards, by assigning confidence categories to the defined polygons and determining which polygons reported met considerations of reasonable prospects for eventual economic extraction for gold. Tonnages and metal content for each polygon were summed to determine the tonnage and grade estimate for each confidence-level category.

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The 2014 CIM Definition Standards requires that Mineral Resources exhibit reasonable prospects for eventual economic extraction in the context of, at least, a conceptual mining scenario. Shandong Gold is a mature mining company that already produces gold and other metals using established underground mining and processing methods. The conceptual mining scenario is reasonably assumed to be the same mining method or methods already in operation on the Fujian Gold Mine property. These methods and their economic viability are discussed in Sections 16 through 22. The economic cut-offs associated with the conceptual mining assumptions and applied to estimation of the resource are discussed in Section 14.2 Mineral Resource Estimation Methodology under PRC MLR.

The Mineral Resource estimate for the Fujian Yuanxin property is summarized in Table 1-2 and has an effective date of 31 March 2018. Shandong Gold, either by direct ownership or agreement with SDG, controls 90.31 percent (%) of the mineral assets stated in Table 1-2. Mineral resources, as stated, are inclusive of Mineral Reserves. Mineral Resources that are not Mineral Reserves do not have demonstrated economic viability.

1.5 Mineral Reserve Estimate

Mr. Thomas R. Kelly, RM-SME, subcontractor to AAI is responsible for the mineral reserve estimate presented here. Mr. Kelly is a QP as defined by NI 43-101 and is independent of Shandong Gold. The mineral reserve calculation for Shandong Gold’s Fujian Yuanxin in Shandong Province, China was completed in accordance with NI 43-101 standards and based on all data and information available as of 31 March 2018. The mineral reserves presented herein are classified according to CIM Definition Standards — For Mineral Resources and Mineral Reserves, prepared by the CIM Standing Committee on Reserve Definitions and adopted by CIM Council on 10 May 2014. Ore is processed in the on-site mill facility (Dongji Mining Area) capable of processing 650 tpd. The time required to prepare the Mineral Reserve Estimate from the initial site visit, through the data review and economic analysis was 3 months.

Table 1-2. Fujian Yuanxin Mineral Resource (effective date 31 March 2018)

Tonnes Contained Attributable Metals to Shandong Attributable Mineral Resource Gold to Shandong Category Tonnes 90.31% Grades Contained Metals Gold 90.31% Au Ag AuEq (Mt) (Mt) (g/t) (g/t) (g/t) Au (t) Ag (t) Au (t) Ag (t)

Dongji Mining Area (C3500002010124210102291) Measured None None None None None None None None Indicated 0.87 0.79 4.12 42.84 4.18 3.59 37.29 3.24 33.68 Subtotal Measured and Indicated 0.87 0.79 4.12 42.84 4.18 3.59 37.29 3.24 33.68 Inferred 0.04 0.04 3.14 35.90 3.19 0.14 1.59 0.13 1.43

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Dongji Deep General Exploration Area (T35120080902015406) License under renewal Measured None None None None None None None None Indicated 0.15 0.14 4.37 47.52 4.43 0.68 7.35 0.61 6.64 Subtotal Measured and Indicated 0.15 0.14 4.37 47.52 4.43 0.68 7.35 0.61 6.64 Inferred 0.24 0.22 5.61 67.31 5.69 1.37 16.40 1.23 14.81 Combined Licenses Measured None None None None None None None None Indicated 1.03 0.93 4.16 43.54 4.22 4.26 44.64 3.85 40.31 Subtotal Measured and Indicated 1.03 0.93 4.16 43.54 4.22 4.26 44.64 3.85 40.31 Inferred 0.29 0.26 5.23 62.49 5.30 1.51 17.99 1.36 16.24

Notes:

1. Mineral Resources were reviewed by Dr. Douglas Hambley, P.E., P.Eng., P.G., RM-SME, who is the Qualified Person for the estimate and independent of Shandong Gold.

2. Mineral Resources are reported inclusive of Mineral Reserves. Mineral Resources that are not Mineral Reserves do not have demonstrated economic viability.

4. Gold equivalency is calculated using a gold price of 1,231.03 USD per troy ounce, 16.62 USD per troy ounce for silver, and respective metallurgical recoveries of 91.8% and 92%. AuEq (g/t) = Au (g/t) + {Ag (g/t) * [(16.62/1231) * (92/91.8)]}.

5. Estimates have been rounded as required by reporting guidelines. Totals may not sum due to rounding.

The Fujian Yuanxin Mineral Reserves are derived and classified according to the following criteria: Proven Mineral Reserves are the economically mineable part of the Measured Resource for which mining and processing and metallurgy information and other relevant factors demonstrate that economic extraction is feasible; Probable Mineral Reserves are the economically mineable part of an Indicated, and in some circumstances, a Measured Mineral Reserve. The confidence in the Modifying Factors applying to a Probable Mineral Reserve is lower than that applying to a Proven Mineral Reserve. The economic parameters are listed in Table 1-3.

The Proven and Probable mineral reserves for Fujian Yuanxin as of 31 March 2018 are summarized in Table 1-4. The Mineral Reserves are reported as tonnage delivered to the mill stockpile.

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Table 1-3. Economic Parameters

Economic Parameter Value

Au cut-off grade (g/t) 1.40 Minimum mining width for dips less than 50Њ(m) 1.2 Minimum mining width for dips greater than 50Њ(m) 0.8 Ore mining dilution (%) 7.10 Ore mining recovery (%) 90.6 Gold metallurgical recovery (%)* 91.8 Gold price (3-year average** London PM Fix USD/oz) 1,231.03 RMB to USD conversion rate*** 6.571 oz. = ounce; USD = United States of America dollars Cut-off grade calculation is in line with industry standards. * Throughout the report, metallurgical recovery includes both plant and refinery losses. ** 3-year monthly average from 1 April 2015 through 31 March 2018. *** Quarterly average from the second quarter of 2015 through the first quarter of 2018.

Table 1-4. Fujian Yuanxin Mineral Reserve Summary (effective date 31 March 2018)

Ore Tonnes Contained Contained Attributable Shandong Shandong to Shandong Gold Gold Ore Gold AuContained Attributable AgContained Attributable License Tonnes 90.31% AuEq Grade Au 90.31% Grade Ag 90.31% (Mt) (Mt) (g/t) (g/t) (t) Au (t) (g/t) (t) Ag (t)

Dongji Mining Area (C3500002010124210102291) Proven None None None None None None None None None Probable 0.84 0.76 4.40 3.85 3.25 2.94 39.99 33.79 30.52 Total Proven and Probable 0.84 0.76 4.40 3.85 3.25 2.94 39.99 33.79 30.52 Dongji Deep General Exploration Area (T35120080902015406) Proven None None None None None None None None Probable None None None None None None None None Total Proven and Probable None None None None None None None None Combined Licenses Proven None None None None None None None None None Probable 0.84 0.76 4.40 3.85 3.25 2.94 39.99 33.79 30.52 Total Proven and Probable 0.84 0.76 4.40 3.85 3.25 2.94 39.99 33.79 30.52

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3. Gold price assumptions is 1,231.03 USD per troy ounce, based on the 3-year monthly average London PM Fix gold price from 1 April 2015 through 31 March 2018 and silver price of 16.62 USD per troy ounce, a gold metallurgical recovery of 91.8% and silver metallurgical recovery of 92%. 4. Gold equivalency is calculated using a gold price of 1,231.03 USD per troy ounce and 16.62 USD per troy ounce for silver, and respective metallurgical recoveries of 91.8% and 92%. AuEq (g/t) = Au (g/t) + {Ag (g/t) * [(16.62/1231) * (92/91.8)]} 5. Figures in the table are rounded to reflect estimate precision; small differences generated by rounding are not material to estimates. 6. Reserves are estimated based on material that has been mined and processed to make a concentrate suitable for smelting.

1.6 Economics

Capital and operating costs for Fujian Yuanxin have been derived from comprehensive annual production and financial reports supplied by Shandong Gold. Shandong Gold owns 90.3% of the Fujian Yuanxin Mine. The actual operating costs were normalized to reference process tonnes and then used to predict operation performance for the production of the remaining reserves which will be completed near the beginning of 2021. The forecast operating cost is 50.90 USD/process tonnes (metric ton, 1000 kilogram [kg]) (t). Waste development costs are captured in operating costs. The remaining life-of-mine based on this reserve estimate is 4 years.

No capital costs were projected for Dongji Mining Area.

1.7 Environmental and Permitting

The mines operate under PRC laws, regulations, and guidelines. Based on observed operating practices, AAI believes that all necessary PRC government approvals are in place or are reasonably expected to be received for Fujian Yuanxin. The existing exploration and mining licenses cover all the active exploration and mining areas. Mining licenses are subject to annual fees and taxes. Renewal of mining licenses and extending mining depth are a normal business process if the mineral resources are defined, the required documentation is submitted, and the government resources royalties are paid. The Fujian Province has suspended all processing of mineral and exploration rights applications but applicable fees have been paid. The mining right expires in June of 2029.

1.8 Processing Plant

The Fujian Yuanxin process flowsheet is a standard flowsheet that is commonly used in the mining industry, including flotation recovery methods. No significant problems were identified during the review. The use of the latest high-quality equipment from highly respected manufacturers in the mining industry, such as Metso were observed. The processing plant is designed to treat 800 tpd.

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1.9 Risk Assessment

Mining by its nature is a relatively high-risk business when compared to many other industries. Each mine is hosted in a geologic deposit, the occurrence and mineralized grade of which and the resultant response to mining and processing of which are unique. Section 24 presents the risk assessment for the Fujian Yuanxin property before mitigation. The risk assessment is by nature a subjective and qualitative process. Mining projects are highly regulated in the PRC. Interruptions to production can occur if Fujian Yuanxin is not diligent in complying with the requirements of the various agencies. If the agencies are in conflict, Fujian Yuanxin may experience delays or nonrenewal of licenses that are not within their immediate control. There were no high-risk areas identified in Fujian Yuanxin.

1.10 Conclusions and Recommendations

The resource and reserve estimates presented here form the basis for Shandong Gold’s ongoing mining operations at Fujian Yuanxin. AAI is unaware of any significant technical, legal, environmental, or political considerations which would have an adverse effect on the extraction and processing of the resources and reserves located at the mines of Fujian Yuanxin.

Mineral resources which have not been converted to mineral reserves, and do not demonstrate economic viability, shall remain mineral resources. There is no certainty that all or any additional part of the mineral resources estimated will be converted into mineral reserves.

Areas of uncertainty that may materially impact the Mineral Resources and Reserves and subsequent mine life presented in this report include the following:

• Dilution assumptions may change with changing conditions.

• Besides costs, profitability also depends on income, which depends on the market price of the commodity produced. There is a risk due to commodity price changes, which has two considerations: the market price and trend for gold in USD and the RMB to USD exchange rate.

• The continued ability of the mining site to convert exploration licenses to mining licenses in timely manner. AAI also recommends, that as much as possible, Shandong Gold expedite the process of converting the exploration licenses associated with the project to mining licenses to avoid a stoppage in production.

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It was noted during the site visits that some geologic procedures could be improved with internationally accepted best practices. These mostly deal with the collection of geologic data. Review of the verification reports reveal that in many cases, these procedures are already part of Shandong’s documented, continuing improvement to standardize and advance geologic practice over all of its multiple operations including recent acquisitions.

During mine planning and technical studies for the area covered by the exploration license (Lower Block), consideration should be given to additional ground support measures. The stresses in the Lower Block may be considerably higher than the present stresses, resulting in undesired ground failures.

Mine ventilation requirements will increase with depth as the ambient in-situ rock temperature increases. This will need to be addressed with increased airflows, potential mine air-conditioning or other methods to reduce the working temperature for the underground workforce. Mine ventilation should be investigated soon to enable planning for installations in a timely manner.

Backfill systems and methods should be evaluated as the workings continue to depth. It is likely that simple hydraulic backfill of tailings with cement will not be an adequate fill medium. Paste fill may also present a number of challenges. Other methods should be evaluated, along with paste fill, to determine what method(s) may offer the most flexibility, provide the needed fill strength and be the most economically attractive for operations.

Additionally, it may be beneficial to look at different schedule sequences for the extraction of stope blocks. The schedule should take into account stress distribution and the potential for placing excessive stress into pillars, resulting in pillar failures. An orderly, systematic stoping schedule can go a long way toward mitigating the poor distribution of stresses during and after mining.

2 INTRODUCTION

This Independent Technical Report was prepared for the Fujian Yuanxin (Far South) (Fujian Yuanxin) property that includes the Dongji Gold (Silver) mining area (Dongji Mining Area). Fujian Yuanxin is an independent and fully funded company of Shandong Gold, a subsidiary of SDG. The purpose of this report is to provide detailed information in support of an application for listing on HKEx. AAI is responsible for preparing the report, including AAI employees and subcontractors. Neither AAI nor any of the authors have any financial interest in Shandong Gold or Fujian Yuanxin. AAI’s remuneration from Shandong Gold is independent of the report findings and does not depend on AAI making a specific finding. No contractual indemnities exist between AAI or its subcontractors and SDG, Shandong Gold, or Fujian Yuanxin for the content of this report.

2.1 Information Sources

The documentation reviewed, and other sources of information, are listed at the end of this report in Section 27.

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2.2 Qualified Persons

Table 2-1 lists the Qualified Persons (QPs) for this Independent Technical Report, their responsibilities, and the dates of their most recent visit to Fujian Yuanxin.

Table 2-1. QPs, Responsibilities, and Latest Visit

Most Recent Site QP Sections Visit

Timothy Ross Overall responsibility for this report and specifically for None Sections 1, 2, 3, 4, 5, 6, 20, 23, 24, 25, 26 and 27 Douglas Hambley Section 14, contributed to Sections 25, 26 and 27 None Vanessa Santos Sections 7, 8, 9, 10, 11, 12; contributed to Sections 1, 6, 3-4 September 14, 23, 25, 26, and 27 2017 Thomas Kelly Overall responsibility for Sections 15, 16, and 18; 3-4 September contributed to Sections 1, 6, 23, 25, 26, and 27 2017 Jason Jin Sections 13 and 17; contributed to Sections 1, 25, 26, and 10 September 2017 27 Carl Brechtel Sections 19, 21 and 22; contributed to Sections 1 and 27 None

Site inspections were conducted by Vanessa Santos and QP’s Thomas Kelly and Jason Jin.

Thomas Kelly inspected the surface facilities and surface infrastructure, which included:

• Winders and production headframe facilities

• Surface backfill plants

• Compressor installations

• Surface maintenance shops

• Ramp portals

• Engineering offices

Vanessa Santos inspected:

• Core storage shed

• Production labs

• Engineering offices

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Thomas Kelly and Vanessa Santos inspected the underground mine, which included:

• Main declines

• Shaft station installations

• Main haulage levels

• Production stopes

• Underground winder installations

• Stope access ramps

Qinghua “Jason” Jin inspected the mill and associated smelter.

Dr. Douglas Hambley did not conduct a site visit of this site; he is confident in his estimation of resources and does not believe a site visit to this site was required because:

• Ms. Santos, P.G., RM-SME, and Mr. Thomas Kelly, RM-SME, conducted a site visit on the dates shown in Table 2-1 and have fully briefed Dr. Hambley on their inspections and observations.

• Dr. Hambley did conduct site visits at Shandong Gold’s Linglong, Dongfeng, Jinqingding, Yinggezhuang and Chaihulanzi mines, which have similar geologic conditions and geologic settings to this site, including both shallow and steeply dipping mineralized zones and quartz vein, quartz-breccia, quartz-sericite-pyrite vein and disseminated deposits.

• Dr. Hambley has thoroughly reviewed all the geologic and other data available and required to accurately estimate the resource.

3 RELIANCE ON OTHER EXPERTS

This report has been prepared by AAI for Shandong Gold. The information, conclusions, opinions, and estimates contained herein are based on:

• site visits;

• information available to AAI at the time of preparation of this report;

• assumptions, conditions, and qualifications as set forth in this report; and

• data, reports, and other information supplied by Shandong Gold and other third party sources.

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For the purposes of this Technical Report, AAI has relied on ownership information provided by Shandong Gold. AAI has not researched property title or mineral rights for the Fujian Yuanxin properties and expresses no opinion as to the ownership status of the properties.

AAI has relied on Shandong Gold for guidance on applicable taxes, royalties, and other government levies or interests, and applicable revenue or income from Fujian Yuanxin.

4 PROPERTY DESCRIPTION AND LOCATION

4.1 Location

Figure 4-1 shows the general location of the Fujian Yuanxin site. Fujian Yuanxin is located in the in Dongxing Mining Area, Zhenghe County, Fujian Province, 7 km from the county town of Shitun Township. The overall property involves only one mining license, the Dongji Gold (Silver) Mining Area (Dongji Mining Area).

The Dongji Mining Area production has been from underground mining, employing shrinkage stoping and room-and-pillar mining methods. Production from Dongji Mining Area began in 2005.

4.2 Mineral Rights

Based on the information provided to AAI by Shandong Gold, Table 4-1 summarizes the current, licensed Mining and Exploration Rights. Licenses showing an expiration date prior to 31 March 2018 have been submitted for renewal with the granting agencies. These licenses have been issued by the PRC’s MLR and/or the Fujian Provincial Land and Resource Evaluation Center. Figure 4-2 shows the locations of the mining and exploration areas.

The license for Dongji Mining Area specifies a resource area of 0.4266 km2 and the exploration license for deep extension (Dongji Deep General Exploration Area) had an area of 6.83 km2. The exploration license is not currently renewable due to the Fujian Provincial halt on processing mineral license applications.

AAI did not independently verify the mining license information, such as location, area, and status of the licenses. All information that is included in this section was provided by Fujian Yuanxin and Shandong Gold. Attorneys for SDG have provided an opinion confirming the legality of the licenses (Appendix A). AAI is unaware of any permits that must be acquired to conduct the work proposed for Fujian Yuanxin, and if the permits have been obtained.

Royalties in the PRC are considered a tax, which totals 4% of sales/revenue.

4.3 Environmental Liabilities, Permits, and Risks for the Property

Fujian Yuanxin is an advanced property as defined in the NI 43-101 regulations. Consequently, environmental issues and the status of permitting are discussed in Section 20 of this Technical Report.

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Figure 4-1. Fujian Yuanxin Location Map

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Figure 4-2. Base Map showing Fujian Yuanxin Mining and Exploration License Boundaries

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Table 4-1. Issued Licenses to Fujian Yuanxin

Shandong Licensed License Number and Expiration Mining Gold Ore Owner Date Area Elevation Ownership Production (km2) (m) (%) (x 104 tpa)

Mining Right Dongji Mining Area C3500002010124210102291 2 June 2029 0.4266 600 to -100 90.31 60 Fujian Province ZhengheYuan County Yuanxin Mining Co., Ltd. Exploration Right Dongji Deep T35120080902015406 13 February 6.07 90.31 General Fujian Province 2020 Exploration Area ZhengheYuan County Yuanxin Mining Co., Ltd.

5 ACCESSIBILITY, CLIMATE, LOCAL RESOURCES, INFRASTRUCTURE AND PHYSIOGRAPHY

5.1 Topography, Elevation, and Vegetation

This eastern gold mining area in the mountainous area in northern Fujian Province is approximately 7 km from county towns of Shitun and Star as shown in Figure 4-1. The Fujian Yuanxin area is south of Mount Wuyi near the junction of the Fujian and Jiangxi Provinces. The area is a well-known tourist destination.

The area is characterized by hilly terrain covered with dense vegetation ranging from altitudes of 250 m ~ 825 m above sea level.

5.2 Accessibility

Fujian Yuanxin is serviced by provincial roads interconnecting with each other from Chengguan to Shitun Town. Jixia village roads connect to the mine.

5.3 Local Resources and Infrastructure

The mine has a sufficient water supply, power supply, and transportation to support the production levels.

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The area is a mountainous area and the local economy is based on forestry products. The seasonal work in the area results in a surplus labor force, which effectively meets the demand for exploration and mining.

5.4 Climate

The regional climate is mild and humid with abundant rainfall. The annual average temperature is 18.4ЊC. Occasional snow falls in the winter months. The average annual rainfall is 1,587.74 mm.

6 HISTORY

The information discussed in this section was provided by Shandong Gold, and has not been independently verified.

6.1 Ownership

Fujian Zhenghe Yuanxin Mine Co., Ltd. acquired the mineral and mining exploration licenses in 2003. Mining commenced at Fujian Yuanxin in 2005. The mining right was obtained for the range of 600 m to -100 m and remains valid to 2029.

6.2 Exploration and Development Work

The Fujian Yuanxin area was subject to systematic geologic survey work by the Provincial Geology Second brigade from 1967 to 1977. The Southern Fujian Group of Geology and Mineral Exploration Bureau of Fujian Province completed additional survey work from 1981 to 1986. Systematic survey work continued from 2003. This work was focused in two directions: the upper mine and lower mine. The mines are vertically separated by a fault displacement of 200-300 m. A detailed verification report was submitted in 2012 (Fuzhou Dongxin Mining Technology Co., Ltd., 2012).

6.3 Historical Mineral Resource and Mineral Reserve Estimates

Several resource and reserve estimates complying with Fujian Provincial Department of Land and Resource standards have been developed over the history of the property. However, the resource estimates discussed in Section 14 and the reserve estimates of Section 15 are in compliance with Canadian NI-43-101 standards and for the purposes of this report, supersede the historical estimates.

6.4 Production

The Dongji Mining Area gold mine was put into operation in 2005 as an underground shrinkage stope and room-and-pillar mine. The recent production history is listed in Table 6-1.

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Table 6-1. Production History for Dongji Mining Area

Metal (kg) Grade (g/t) Ore Silver Gold Year Mined (t) Gold Sold Sold Produced Gold Silver

2015 243,571 623 8,908 623 2.56 36.57 2016 255,066 695 8,499 699 2.73 33.32 2017 298,728 664 5,175 664 2.22 17.32 Q1 2018 79,700 175 1,026 177 2.55 12.18

7 GEOLOGICAL SETTING AND MINERALIZATION

The Fujian Yuanxin mining area is located at the intersection of the northeast and east sections of the northern section of the Tai Dao Deep fault zone and northwest of the Pucheng-Ningde volcanic zone.

7.1 Regional Stratigraphy

The northeast boundary is the Xiashan-Dongjie and Xiaoyaokeng-Jixia fault zones (which are all the northern part of the Zhenghe-Dapu fault zone). The northwest boundary includes the metamorphics of the middle to late Proterozoic Erathem, Wanquan Group, and Xiafeng Formation. To the southeast is the Mesozoic Cretaceous Lower Series Shimaoshan Group, made up of volcaniclastic and sedimentary strata. The narrow zone (6-7 km long and 1-3 km wide) between the two fault zones are the Mesozoic Jurassic Lower Series Lishan Group and the Upper Series Nanyuan Group volcaniclastic and sedimentary strata.

7.2 Regional Structure

The regional tectonics are characterized by the northeast-trending Xiaoyaokeng -Jixia fault zone and the Xiashan-Dongjie eastern fault zone both part of the Zhenghe-Dapu deep fault zone and are about 80 km in length, exhibiting common silicification, sericite, and pyrite mineralization (Figure 7-1).

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7.3 Property Geology

7.3.1 Stratigraphy

The Lower Cretaceous Lower Limestone Hill Group Huangkeng Formation (Kh1) is mainly distributed to the east of the Xiashan-Dongjie fault zone, trending southeast 120Њ to 140Њ at a dip of 30 to 40Њ and unconformably overlying the Jurassic Nanyuan Group. The upper part is made up of thick, purple, tuffaceous sandy conglomerate of gravelly sandstone. The lower part is made up of purple layers of tuffaceous breccia and volcanic breccia more than 300 m thick. The upper and lower portions are angularly unconformable.

Figure 7-1. Fujian Yuanxin, Zhenghe County Eastern Gold Mining Area (from Fuzhou Dongxin Mining Technology Co., Ltd. 2012)

The Lower Cretaceous Shikeshan Group and the Upper Huangkeng Group (Kh2) are distributed on the eastern edge of the mining area. The lithology is mainly volcanic breccia.

The Upper Jurassic Group Nanyuan Group (JKx) with a thickness of 410 m is made up of a light-gray porphyritic rhyolite which exhibits significant seritization. Later intrusions of biotite granite are distributed along the faults and exhibit silicification, chloritization, and pyrite mineralization, with lead and zinc mineralization along and outside the contact zone.

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The Sinian Daoxiang Formation (Zdx) has a thickness of 122 m and is made up of low-grade metamorphic rocks, tuffaceous limestone, siltstone and siliceous rocks with some alteration to phyllite.

The middle to late Proterozoic Wanchuan Group Lower Peak Group (Pt2-3x) is made up of quartz mica schist, mica-bearing quartzite, green mud plagioclase quartz schist, and quartz granulite along the Xieshan-Dongxing fault zone (FI-1 also F1).

7.3.2 Structure

The structure of the mining area is characterized by the Xianshan east-northeast-northeast-trending fault zone (FI or F1) (Figure 7-2), the northwest fault zone (FII also

F2) and their secondary parallel or derived faults. The stratigraphic unconformity (FIII) is also a weak tectonic interface and contributes to the process of diagenesis and mineralization.

Figure 7-2. Photo of 85o Controlling Fault on Proterozoic and Jurassic-Cretaceous Metavolcanics

8 DEPOSIT TYPES

Metallic occurrences in the region include iron, aluminum, zinc, copper, gold, and silver, mainly along the Tai Po Deep Fault Zone and to the northwest the Mesozoic Dongkeng volcanic basin.The mineralization can be divided into two major types: one in the late Mesozoic metamorphic rocks in the Proterozoic skarn (or magma period such as the Tieshan, Xieshan, Hu Tuen and other small- and medium-sized lead-zinc deposits); the second is in the Mesozoic volcanic rocks in the volcanic to sub-volcanic hydrothermal gold and silver (copper, lead, and zinc) polymetallic deposits.

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The main mineralized zone in the Dongji Mining Area is the No. I with a strike length of 440 m, dip length of 600 m, and an average thickness of 4.10 m. There are five other small mineralized zones. The No Ⅰ is split into two parts by faulting (F1-2) with a vertical fault throw of 200 to 300 m (Figure 8-1). In addition, the mineralized zone is broken by vertical extensional (trans-tensional) fracturing, compressive fracturing, and both northwest- and northeast-trending vein rock with displacements on the order of 2 to 20 m. The gold mainly occurs in the fault zone, in secondary fracture zones, and along the unconformity and the deposits are silicified-sulfide type (Wang 2013).

The upper Dongji mine occurs at an elevation of 600 to 360 m and the lower mine at 280 to -100 m elevation. The upper mine is currently mined and the lower mine is not. The upper mineralized zone also includes the number II, III, IV and V1mineralized zones and the lower mine includes the number I and V2 mineralized zones. Only the number I mineralized zone contributes significantly to production as the others have either been mined out or are small and discontinuous. Where branching occurs in Zone I into the smaller veins of I1 and I2, it is designated as I1+2. The Dongji Deep General Exploration Area license is downdip.

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Figure 8-1. Dongji Mining Area and Dongji Deep General Exploration Area (from Fuzhou Dongxin Mining Technology Co., Ltd. 2012)

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9 EXPLORATION

9.1 Dongji Mining Area

From 1962 to 1966, the Provincial Geology Second Brigade conducted the 1:200,000 regional geology survey in the mining area and completed regional geological mapping, submitting the “General Survey Report on 1:200000 Geological Measurement of Nanping County, Jianou County, Jianyang County, Songxi County, Pucheng County, Chongan County, Zhenghe County” (Fuzhou Dongxin Mining Technology Co., Ltd. 2012).

From 1966 to 1977, the Provincial Regional Survey Group finished the Pucheng portion and Jianou area of the 1:200,000 regional geological survey and fully investigated and researched the geology and mineral production in the area.

From 1981 to 1986, the Southern Fujian Group of Geology and Mineral Exploration Bureau of Fujian Province completed the 1:50,000 regional geology survey on the Zhenghe, Houshang, and Chuanshi areas. It then submitted the 1:50,000 Regional Geology Survey Report delineating a series of prospect anomalies (Fuzhou Dongxin Mining Technology Co., Ltd. 2012).

In 2003, a general survey on the No. I mineralized zone (upper mine) in the Dongji Mining Area included 10 km2 of 1:10,000 mineral geology survey, 0.5 km2 of 1:2,000 geological sketch survey, and 209.7m of mineralized outcrop sampling with 158 samples. The exploration work to 2012 is summarized in Table 9-1.

9.2 Dongji Deep General Exploration Area

From 2006 to 2008, a general survey of the deep portion of the No. I mineralized zone (lower mine) in the Dongji Mining Area was performed. In August 2008, the “General Survey Geological Design on Deep and Periphery Parts of No. I mineralized zone in Gold Mine of Dongji Mining Area, Zhenghe County, Shandong Province” was prepared and approved by the Fujian Provincial Department of Land and Resources (Fuzhou Dongxin Mining Technology Co., Ltd. 2012).

From 2008 to 2009, further surveys were performed on the No. I mineralized zone (lower mine) to systematically increase the density control on the deep part (lower mine) of the No. I mineralized zone. Exploration results and development recommendations from the upper mine, Fuzhou Dongxin Mining Technology Co., Ltd. were summarized in the “Detailed Survey Geological Report on Gold (Silver) Mine Deep Part of No. I Mineralized zone of Dongji Mining Area, Zhenghe County, Fujian Province” (including resource/reserves verification on mining area) in October 2009. This was followed by the updated Fuzhou Dongxin Mining Technology Co., Ltd. Dongxin Office (2012) report titled the “Geological Report of Resource Reserves Verification on Gold (Silver) Mine, Dongji Mining Area, Zhenghe County, Fujian Province,” which this work is based on.

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Table 9-1. Summary of Completed Exploration Projects (from Fuzhou Dongxin Mining Technology Co., Ltd. 2012)

Unit Completed Work Amount Work Project Upper Mine Lower Mine Total Engineering Measurement Point 265 8 273 Pit Prospecting Engineering Point 1285 0 1285

Gallery hydraulic loop Middle 202 geological measurement (1:500) section

Hydrological Drill hole Hole 3 3 3 Hydraulic dynamic loop long-term Stream number 2 2 2 observation Rock and ore physical property Group 6 0 6 measurement Water quality analysis Group 3 0 36

Channeling sampling and test number 73 0 73 Basic analysis Rock core sample and test number 59 144 203 Total number 132 144 276 Internal & Internal test number 24 48 72 external test External test number 30 30

10 DRILLING

10.1 Dongji Mining Area

Systematic mineral exploration drilling work has been conducted since 2003 in the Dongji Ming Area. Drilling surveys of the No. I mineralized zone (upper mine) began in 2003 with outcrop and adit sampling, and surface drilling totaling 421.8 m. Drilling totals are summarized in Table 10-1.

10.2 Dongji Deep General Exploration Area

Surface drilling directed at the No. I mineralized zone (lower mine) in the Dongji Mining Area was originally conducted from 2006 to 2008. During this period, there were 11 drill holes completed (nine holes in the deep No. I mineralized zone and two located on the periphery) with the drilling footages totaling 5,514.15 m. The nine drill holes in the deep No. I mineralized zone are located along Lines 4, 0, 3, 7 and 11.

From 2008 to 2009, surface drilling (deep drill holes) was conducted to systematically increase the density control on the deep part (lower mine) of the No. I mineralized zone, with eleven drill holes and total drilling footage of 5,518.42 m.

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The surface drilling conducted from 2009 to 2012 included seven holes totaling 3,077.81 m, along with one pit drilling for 282.04 m. Drilling totals are summarized in Table 10-1 and shown in Figure 10-1.

Table 10-1. Summary of Completed Drilling

Completed Work Amount Work Project Unit Upper Mine Lower Mine Total

Drilling Surface drill m/hole 0 3,078/7 3,078/7 Drill in put m/hole 104/3 282/1 386/4 Total m/hole 104/3 3,360/8 3,464/11

10.3 Core Drilling—General Procedures, Recovery, and Sampling

Diamond core drilling follows standard wireline diamond drilling techniques. Holes are generally collared in rotary bits through the overburden and strongly weathered bedrock. Upon encountering rock capable of being cored, wireline techniques commence and in most cases, holes are begun in HQ diameter rods and core barrels. Core recovered is approximately 63.5 mm in diameter. Deeper holes are commonly reduced in size when drilling conditions are challenging or the depth of the hole exceeds 1,000 m. Holes are reduced to NQ diameter with core recovered approximately 47.6 mm in diameter. Collar surveys are completed using Topcon GPS equipment with a sub-centimeter accuracy. Down-hole surveys are completed at 50-m intervals down the hole with a non-gyroscopic survey tool.

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Figure 10-1. Geological Map of the Eastern Gold Mining Area of Zhenghe County, Fujian Province showing Exploration Lines and Drill Holes (from Fuzhou Dongxin Mining Technology Co., Ltd. 2012)

Core is recovered from the drill hole via wireline and the core is emptied into 1.8-m-long open-top wooden core trays (or more recently plastic trays) with seven slots per tray. The end of each drill run is recorded on a tag placed at the end of material extracted from the core barrel. Generally, the tag is a small plastic tag with pre-labeled places to record the drill-hole number and the meters from, meters to, and the length of the drill run. Core is geologically and geotechnically logged, recoveries are determined by measuring the core length recovered versus the amount drilled, and all data is recorded on hard-copy drill logs by the geologic staff. Sample intervals are determined by the geologists and marked on the core itself. Samplers then proceed to either manually split the core with hammer and chisel, hydraulic core splitter, or by diamond core sawing (uncommon in core the author inspected during the site visit). Samples are generally 1-1.5 m in length or as appropriate due to changes in rock type, alteration, or visually identified mineralization. Sample numbers are placed into the core trays and the half-core is taken and placed in numbered sample bags for delivery to the analytical laboratory.

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10.4 Core Recovery

Cores are cleaned, put in order from top to bottom, aligned and measured to actual length. Core that is greater than 0.5 m are numbered with red paint; the loose rock ore cores are placed according to the volume of the corresponding intact core. The core box is solid and marked by hole number, depth, and core run number with red paint on the box. The rock cores are shipped back to the designated warehouse for storage.

The total hole recovery rate was reported to be greater than 90%. The recovery rate with5mof the drilling seam and roof and floor was more than 87%. Exploration core drilling at the Fujian is believed to have been conducted to international standards.

10.5 Drill-Hole Deviation

The hole deviation is measured after the drill-hole casing is installed. The azimuth angle and the zenith angle are measured at every 50 m of hole segment before the casing is installed, and at every 100 m of hole segment after the casing is installed. Two sets of instruments are operated at the same time when measuring hole deviation and when one instrument reading is greater than 1Њ,itis re-measured. Hole verticality should be no more than 1Њ every 100 m and the offset line distance of the final hole should ideally be within 1 m. The reported corrected action for deviated holes is to re-drill the hole within specification.

10.6 Comments on Section 10

Based on AAI’s observations and data review, exploration core drilling has been conducted to international standards. AAI has not observed any of the drilling and sampling processes followed, but has reviewed the protocols applied, and in keeping with typical Chinese standards, considers the methods to be industry standard and appropriate for use in a mineral resource and ore reserve estimate in accordance with the guidelines of CIM (2014).

11 SAMPLE PREPARATION, ANALYSES, AND SECURITY

11.1 Sample Preparation

Initial sample work to evaluate the mine and exploration properties was entrusted to the Central Laboratory of Second Bureau of China Metallurgical Geological Exploration Engineering Bureau, which possesses the national qualification and measurement attestation certification, with reliable quality in processing and testing. The basic analysis is for gold and silver. The total loss rate from sample processing is less than 5%, and the shrinkage error is less than 3% on the selected samples.

From the upper mine, 132 samples were taken and 24 samples were extracted for internal sample control at a rate of 18%. From the lower mine, 144 samples were tested and 48 samples were extracted for internal sample control at a rate of 33%. The passing rate for retesting is 95% per batch. The internal audit is by the Fujian Huanmin Geological Mineral Testing Co., Ltd., which has the qualifications of provincial and measurement attestation certification.

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Both drill core and underground channel samples are prepared in a similar manner at the production laboratory. The following displays the general sample preparation flow through the preparation facility. Approximately 60 to 80 channel and exploration samples per day over two shifts are prepared and analyzed. Exploration samples which are not derived from core drilling are channel samples from the exploration adits. Samples are assayed by the mine lab using Atomic Absorption (AA), which is typical in the gold industry.

The sample preparation flow was as follows:

• Drying 4-5 hours at 105o

100-mm jaw crusher (cleaned with low-grade material in the case ן Passing through a 60- • of high-grade ore) (Figure 11-1)

125-mm double roller ן Passing through a 200- •

• Sieving to 2 mm

• Homogenization and riffle splitting

• Sieving to 1 mm

75-mm double roller ן Passing through a 200- •

• Homogenization and riffle splitting or sample quartering

• Retention of a duplicate sample (one in ten are duplicates) (Figure 11-2)

• Sieving to -200 mesh

• Submission for assay

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Figure 11-1. New Contained and Sized Crushers

Figure 11-2. Atomic Absorption

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11.2 Internal Quality Control

At the production lab, samples are done in batches, with 1 in 10 samples made up as an internal duplicate, and 1 in 15 retested with new number designations. An external audit team will comes in once a month and selects 40 samples to be re-run.

11.3 Sample Security

While no written protocol for sample security of either underground channel samples or diamond drill-hole samples was seen during the site visit, mine and exploration personnel make significant efforts to ensure samples are recorded and described correctly; re-sampling of the underground channel samples provides additional verification of the original sample data. The author believes that the mine and exploration sample security protocol is adequate for the purposes of establishing the validity of the samples and their assay results for purposes of resource estimation. Additionally, production results also support the assay and resource estimates made in the past where mining has occurred and rudimentary reconciliation has been completed.

11.4 Density and Moisture Samples

The determination for mass and moisture is used in the calculation of ore volume, and to provide the basis for estimation of mineral resources and mineral reserves. In the prospecting process, representative mineralized samples are selected from workings of characteristic rock types. The sample size is between 80 and 100 cm3 and encased in wax to send to an outside PRC government lab for testing. Density determination is reported to be ongoing as the mine advances and new works are completed.

11.5 Comments on Section 11

AAI did not visit the assay laboratory that performed the analysis for the samples that were used in the resource estimation for Shandong Gold. AAI visited the Fujian mine laboratories and reviewed its procedures and they largely agree with the sample preparation and assay procedures that were reportedly used for the analysis of the exploration drill-hole samples.

The fire assay method is the international standard for producing total gold analyses for use in resource estimation. Aqua regia digestion gold assays are not considered standard by AAI as they do not necessarily represent the total gold content of the sample under analysis (underreporting). In AAI’s opinion, aqua regia gold assays are adequate where they are confirmed with fire assay analysis. Shandong Gold reportedly regularly confirms aqua regia gold analyses with fire assay check assays, but these data were not made available to AAI.

The assay Quality Assurance and Quality Control program at the Jiaojia Gold Mines conducted as part of the verification reporting is believed to be of adequate quality, consistently applied, and routinely monitored. Based on the results, the original gold assays are acceptably accurate and precise to support resource estimation. The silver assays are of unknown quality.

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In AAI’s opinion, the gold assays are of acceptable quality to be used for purposes of resource estimation. Because the gold assays were determined by aqua regia digestion methods, the true grade of the mineral resources may be underestimated slightly (0% to 5%). AAI recommends that Shandong Gold analyze all samples using the fire assay method or perform confirmation check assays of a significant proportion (at least 10%) of mineralized samples.

AAI recommends that Shandong Gold include a sufficient number of control samples (standards, duplicates, and blanks) in all sample batches submitted to the assay laboratory to adequately control assay accuracy and precision.

12 DATA VERIFICATION

12.1 Site Visits

Visits were made to each of the active mine sites and included an underground visit, inspection of relevant maps and documents, and interviews with key personnel. The site visits were made by geologist Vanessa Santos and QP mining engineer Thomas Kelly for the review. Observations with respect to the resource are in this section and verification issues related to Mining, Recovery, and Infrastructure are found in their respective chapters.

AAI had geologic discussions with Shandong Gold geologists and mine personnel who illustrated strong knowledge and thinking about the nature of the mineralization. The files and paperwork were in good order.

AAI visited the underground operations at the Dongji Mining Area; access was by ramp. AAI witnessed active faces at the 190-m level, backfilling of mined-out areas, and planned mining with exploration adits (Figures 12-1). Accompanied by Shandong geologists, AAI witnessed the structure and detailed explanation of the geology and ore controls. In addition, visits were made to the core shed where exploration cores and visible mineralization were seen (Figure 12-2).

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Figure 12-1. Exploration Adit to Determine Fault and Mineralization Continuity

Figure 12-2. Core Showing Mineralization in ZK0-9 from Exploration Area

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12.2 Witness Samples

AAI collected a set of nine samples from the Dongji mine workings and drill core during the site visit to confirm the presence of mineralization at the property. These samples are summarized in Table 12-1. Expected grades for the underground muck and face samples are the average grade of channel samples collected and assayed by Shandong Gold from the nearest cross-cut to the AAI sample location. The samples do indicate, qualitatively, that gold is present and that the recorded values can be relied upon for purposes of resource estimation.

Samples collected were sent to SGS-CSTC Standard Technical Services’ (TianJin) Co., Ltd.’s (SGS-CSTC) China facility for gold analysis. Samples were collected and security maintained by the author during the site visits, and delivered by the author or author’s designate to an independent package delivery service in the various cities near the mine sites. The package delivery service delivered the samples directly to SGS-CSTC. Package tracking and receipts were signed for each shipment at each transfer point. Both certified analytical gold standards and certified blank samples were inserted into the sample shipments at a rate of one standard or blank in every 10-15 samples. Analysis of the inserted standards and blanks were within acceptable variance from the expected values and no sample smearing or sample contamination is evident in the blanks or standards.

Table 12-1. Fujian Yuanxin Witness Samples

Sample Sample Expected Returned SGS Repeat Area Type Description Gold Grade Gold Grade Gold Grade (g/t) (g/t) (g/t)

190-m level, line 1 Face Mineralized zone 3 4.04 3.97 190-m level, line 1-3 Muck 3 1.24 1.3 190-m level, line 1-0 Face 3 >10 12.9 190-m level, line 1-0 Muck 3 >10 30

12.3 Data Review

AAI did not independently verify the drill-hole database. Original exploration records for collar coordinates, downhole surveys, geological logs, or assay certificates were not available.

AAI reviewed Shandong Gold’s compilations of original exploration data, but AAI did not review or independently verify original drill-hole collar locations, down-hole surveys, assay certificates, or geologic logs. AAI reviewed Shandong Gold’s assay composite procedures and confirmed that where the mineralized zone was continuous the calculated composite grades matched composite grades indicated on the longitudinal polygonal maps that were used to estimate mineral resources. It was however determined where the zone split into one or more veins or branches and had interburden areas of 2m or greater, the PRC MRL allowed for incorrect compositing. That method allows for summing the grade and thickness of each vein that is above the defined grade without adding the thickness of the material below cut-off. This is not consistent with industry best practice.

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There is a risk that veins with significant amounts of below cut-off grade material may not be mineable at a profit. Inclusion of this material in dilution calculations and mine designs would mitigate this risk.

All operations must undergo intense reporting and approvals, including annual reporting, verification, and approval for reserves. Exploration and development activities in China are strictly regulated by the PRC’s MLR, as defined by the Specifications for Hard-rock Gold Exploration effective 1 March 2003 (PRC MLR 2002). These regulations dictate the type of work to be conducted at each phase of exploration, development, and production; the required quality of sampling; acceptable analytical methods and quality of the analytical results; and the required use of outside laboratories (noted in Section 11 above) to re-assay samples and verify the results of channel samples and drill hole samples used to calculate the resource and reserve polygon grades.

To aid in short- and long-term mine planning, the MLR reports on the verification of the reserves of each mining license once every three to five years. This includes verification of the reserve and resource, use, cumulative measured ore, and changes in resource and reserves with an end of year effective date. The exploration license reports are largely static if no new work has been carried out and the exploration license has not been converted to a mining license. Additionally, annual reports are made to plan and categorize resource and reserves.

The code, checks, and required reporting give the reviewer confidence in the ability to depend on the information to report resources. The data however, while checked against itself, was not independently verified.

A detailed report by the Fuzhou Dongxin Mining Technology Co., Ltd. Dongxin Office (2012) No. 28 titled the Geological Report of Resource Reserves Verification on Gold (Silver) Mine, Dongji Mining Area, Zhenghe County, Fujian Province documents in great detail the evaluation and methodology of the resource assessment. The draft report submits a set of information, which includes a volume of report text, 48 pieces of attached figures (including integrated maps of 35 pieces, drilling histogram of 11 pieces, and tunnel sketch figure of 2 pieces) and two volumes of attached tables and references from previous evaluations and changes from those evaluations.

Based on the site visits, independent witness sampling results, production history, available verification reports, and PRC protocols for data collection and resource estimation, AAI is of the opinion that the available data will support estimation of Mineral Resources.

13 MINERAL PROCESSING AND METALLURGICAL TESTING

A metallurgical testing report was undertaken utilizing samples from the Yuanxin Mining Co. Ltd. Changchun Gold Research Institute performed this work and the results were included in a February 2013 report prepared by Shandong Gold Group Yantai Design & Research Engineering Co., Ltd. titled “Feasibility Study on Technical Renovation Project of Dongji Gold Mine.”

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13.1 Sample Selection

The report indicates that the test material was supplied by Yuanxin Mining Co. Ltd. by blending multiple samples (Shandong Gold Group Yantai Design & Research Engineering Co., Ltd. 2013). The size of these samples is not detailed and it is not known if they originated from drill core or bulk samples. Metallic minerals accounted for 4.76%wt and the gangue minerals accounted for 95.24%wt of the sample.

The sample head assay was 2.27% sulfur and the only important valuable element in the sample was gold, having an average grade of 3.02-g/t Au.

13.2 Mineralogical Analysis

The major metal sulfide minerals in the ore include pyrite, followed by sphalerite, galena, a small amount of chalcopyrite and arsenopyrite. The metal oxide minerals include ilmenite and limonite. The gangue minerals are mainly composed of quartz and feldspar, followed by epidote, a small amount of sericite, chlorite, calcite, dolomite, graphite, barite, tourmaline, zircon, and kaolinite.

The major gold minerals in the sample are electrum, followed by natural gold, and a small amount of kustelite.

The results show that the dissemination size of the gold minerals are mainly fine-grained and micro-grained gold, which together account for 85.34% of the gold content, followed by medium-grained gold, accounting for 13.64%, and finally coarse-grained gold which is only 1.02%.

13.3 Physical Testwork

No results for comminution testwork such as crusher work index, ball mill work index (BWI), and abrasion index are included in the provided report (Shandong Gold Group Yantai Design & Research Engineering Co., Ltd. 2013). It is believed that limited physical characteristic testwork was performed due to a large base of knowledge already obtained at the existing processing operations.

13.4 Gravity-Flotation Testwork

Two test programs were conducted in the laboratory. These efforts consisted of a flotation only test program and a combination of gravity and flotation test program.

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Table 13-1 provides the results of the gravity concentration followed by flotation study. In the gravity-flotation test program, the sample was ground to a 75% passing 74 microns (␮m) providing feed to a gravity circuit which was followed by flotation circuit. The flotation circuit consisted of a single-stage rougher, two-stage cleaner, and three-stage scavenger. A gravity concentrate grading 1233.7-g/t Au at a gold recovery of 5.85% and a flotation concentrate grading 43.98-g/t Au at a gold recovery of 81.65% were produced. The total gold recovery of this scheme is 87.50%.

Table 13-1. Gravity-Flotation Locked Cycle Test

Au Au Total Stream Mass Yield Au Grade Recovery Recovery (%) (g/t) (%) (%)

Gravity Concentrate 0.015 1233.7 5.85 87.50 Flotation Concentrate 5.868 43.98 81.65 Flotation Tailings 94.117 0.42 12.50 12.50 Feed 100.00 3.16 100.00 100.00

13.5 Ancillary Testwork

No ancillary testwork such as thickening and filtering data have been provided for review. However, these properties are believed to be well-understood based on experience from existing plant operations.

14 MINERAL RESOURCE ESTIMATES

14.1 Mineral Resource Classification System

National Instrument 43-101 Standards of Disclosure for Mineral Projects (“NI 43 101”), developed by the Canadian Securities Administrators and promulgated under Section 143 of the Canadian Securities Act in 2000, sets out disclosure standards for mineral projects in Canada. NI 43-101 also is an accepted standard for reporting on the HKEx under Chapter 18.29 of the HKEx Main Board Listing Rules and is employed by various Chinese public companies listed on the HKEx for disclosure on mineral projects. In this report, Mineral Resources and Mineral Reserves are stated in accordance with the May 2014 Canadian Institute of Mining, Metallurgy and Petroleum (CIM) Definition Standards for Mineral Resources and Mineral Reserves (the 2014 CIM Definition Standards) and the November 2003 CIM Estimation of Mineral Resources and Mineral Reserves Best Practice Guidelines (2003 CIM Best Practice Guidelines), as incorporated by reference in NI 43 101 Standards of Disclosure for Mineral Projects as revised on 9 May 2016.

Mineral Resource—a concentration or occurrence of solid material of economic interest in or on the Earth’s crust in such form, grade or quality and quantity that there are reasonable prospects for eventual economic extraction. The location, quantity, grade or quality, continuity and other geological characteristics of a Mineral Resource are known, estimated or interpreted from specific geological evidence and knowledge, including sampling.

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Mineral Resources are sub-divided, in order of increasing geological confidence, into Inferred, Indicated, and Measured classifications. An Inferred Mineral Resource has a lower level of confidence than that applied to an Indicated Mineral Resource. An Indicated Mineral Resource has a higher level of confidence than an Inferred Mineral Resource, but has a lower level of confidence than a Measured Mineral Resource. The resource classifications are defined in the 2014 CIM Definition Standards as follows:

Inferred Mineral Resource—that part of a Mineral Resource for which quantity and grade or quality are estimated on the basis of limited geological evidence and sampling. Geological evidence is sufficient to imply but not verify geological and grade or quality continuity. An Inferred Mineral Resource has a lower level of confidence than that applying to an Indicated Mineral Resource and must not be converted to a Mineral Reserve. It is reasonably expected that the majority of Inferred Mineral Resources could be upgraded to Indicated Mineral Resources with continued exploration.

Indicated Mineral Resource—that part of a Mineral Resource for which quantity, grade or quality, densities, shape and physical characteristics are estimated with sufficient confidence to allow the application of Modifying Factors in sufficient detail to support mine planning and evaluation of the economic viability of the deposit. Geological evidence is derived from adequately detailed and reliable exploration, sampling and testing and is sufficient to assume geological and grade or quality continuity between points of observation. An Indicated Mineral Resource has a lower level of confidence than that applying to a Measured Mineral Resource and may only be converted to a Probable Mineral Reserve.

Measured Mineral Resource—that part of a Mineral Resource for which quantity, grade or quality, densities, shape, and physical characteristics are estimated with confidence sufficient to allow the application of Modifying Factors to support detailed mine planning and final evaluation of the economic viability of the deposit. Geological evidence is derived from detailed and reliable exploration, sampling and testing and is sufficient to confirm geological and grade or quality continuity between points of observation. A Measured Mineral Resource has a higher level of confidence than that applying to either an Indicated Mineral Resource or an Inferred Mineral Resource. It may be converted to a Proven Mineral Reserve or to a Probable Mineral Reserve.

A Mineral Resource is not an inventory of all mineralization drilled or sampled, regardless of cut-off grade, likely mining dimensions, location, or continuity. A Mineral Resource is a realistic inventory of mineralization which, under assumed and justifiable technical, economic, and development conditions, might, in whole or in part, become economically extractable.

A Mineral Reserve is the economically mineable part of a Measured and/or Indicated Mineral Resource. Reserves include diluting materials and allowances for losses, and are defined by studies at Prefeasibility or Feasibility levels that include the application of Modifying Factors, as discussed in Section 15.

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14.2 Mineral Resource Estimation Methodology under PRC MRL

The estimation and classification of resources for Shandong Gold and other gold mines in China is strictly regulated by the PRC MRL, as defined by the Specifications for Hardrock Gold Exploration effective 1 March 2003 (PRC MLR 2002). Resource estimates are based on explicitly prescribed parameters, which include classifications of geologic complexity, minimum grades, minimum thicknesses, and capping procedures for high grades. Resources are typically estimated by mine geologists and engineers, and/or by third-party entities, including academic, scientific, and government institutions. Resources are typically re-estimated at year-end or other specific times to account for mining depletion and adjustments for new geologic information.

Resources and reserves are required to be reported to and approved by government regulators on an annual or more frequent basis, typically at the provincial or municipal government level. As a consequence, resources and reserves are subject to routine and sometimes rigorous independent audits. Plans for mining of reserves must be approved in advance, typically at the beginning of each calendar year, with planned versus produced metrics reconciled at the end of the period.

Shandong Gold’s resource estimation procedures are standardized across all properties in accordance with the Specifications for Hardrock Gold Exploration (PRC MLR 2002). Resources are quantified using the polygonal method, a form of polygonal projection onto either horizontal (plan view) or vertical (longitudinal) projections representing typically tabular, high- or low-angle vein systems. The polygonal method is one of the most widely used methods in China for quantifying tabular mineralized zones.

The salient procedures, parameters, and classifications of the method are described as follows.

14.2.1 Economic Parameters

The primary economic parameters for resource estimation are termed the Industrial Indices in the Specifications for Hardrock Gold Exploration (PRC MLR 2002). Minimum Industrial Indices are codified for various types of deposits, but can be adjusted at an operator’s discretion to improve economy and risk, and for other reasons. Indices include boundary cut-off grades for relevant metals, cut-off grades, deposit cut-off grades, minimum mining widths, and minimum waste dilution dimensions. Indices can be modified and updated with regulatory approval. The current Indices used to delineate the Mineral Resource polygons are summarized in Table 14-1.

The product of polygon grade and polygon thickness is applied as an alternative cut-off criterion where the mineralized thickness is less than the minimum mining width, but the gold grade is relatively high.

Cut-off indices are stipulated for associated minerals in accordance with the Specification for Comprehensive Exploration and Evaluation of Mineral Resources (GB/T 25283—2010) (Standardization Administration of the PRC 2010Resource qualification is based on gold content. Cut-offs for associated minerals are commonly: Ag: 2.0 g/t, sulfur (S): 2.0%wt, copper (Cu): 0.1%wt, magnetic Fe (mFe) 15.0%wt, lead (Pb): 0.2%wt, and zinc (Zn): 0.2%wt.

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Table 14-1. Fujian Yuanxin Economic Parameters for Resource Estimation

Minimum Minimum Waste Waste Minimum Exclusion Exclusion Boundary Polygon Deposit Grade- Minimum Waste Length Length Cut-off Cut-off Cut-off Thickness Mining Exclusion in the between Property Grade Grade Grade Cut-off Width Width Vein Veins Au Au (g/t) Au (g/t) Au (g/t) (g/t-m) (m) (m) (m) (m)

Dongji Mining Area (C3500002010124210102292) 1.00 1.50 3.00 NA 1.0 2.0 NA NA Dongji Deep General Exploration Area (T35120080902015406) 1.00 1.50 3.00 NA 1.0 2.0 NA NA

Notes: 1. NA = Not applied. 2. Polygons above the boundary cut-off grade, but below the polygon cut-off grade are designated as “low grade” polygons. “Low grade” polygons are mined where compatible with the mine plan. 3. Minimum Waste Exclusion Width is the minimum separation distance between mineral intercepts for treating intercepts as individual and separate veins. Intercepts must be combined and treated as one vein, and the composite grade of the vein diluted with the intervening waste, for widths below the minimum. 4. Minimum Waste Exclusion Length is the minimum length of waste polygons that can be left between resource polygons either on-strike or downdip within a vein, or between two separate veins. Waste must be combined with the resource polygons, causing dilution, at separation lengths below the minimum.

14.2.2 Grade Capping

Samples with anomalously high gold or other metal grades (grade outliers) are capped in accordance with the Specifications for Hardrock Gold Exploration (PRC MLR 2002). The outlier threshold is calculated for each mineralized zone as a multiple between six to eight times the average grade of the population of samples from the mineralized zone. A lower multiple is used for more uniform grade populations, while a higher multiple is used for more variable populations. In thick resource polygons, samples exceeding the outlier threshold are replaced by the length-weighted average (composite) grade of the drill hole or channel sample containing the outlier. For thin polygons, outliers are replaced by the average grade of the polygon itself. Polygons are typically considered “thick” if their average thickness is seven times greater than the minimum mining width.

14.2.3 Polygonal Method

For resource estimation, the drill-hole intercepts and underground channel samples associated with each specific mineralized zone (mineralized vein or system) are resolved into either plan view (horizontal) or vertical (longitudinal) projections using MapGIS (Zondy Cyber 2017) software. Vertical projections are preferred for steeply dipping mineralized zones.

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Each mineralized zone is subdivided into grade polygons defined by sample points (i.e., drill holes or channel samples). Interior to the mineralized zone, polygons are interpolated between sample points where the sample points define the vertices (corners) of the polygon boundary. Additional sample points that lie along one or more edges of the polygon are also included in cases where channel samples along drifts, raises and stopes define polygon boundaries. Interior polygons are typically defined by three or four sample points, producing triangular or quadrilateral polygons.

Polygons on the periphery of the mineralized zone are extrapolated some limited distance outward from the mineralized zone where mineralization is expected to persist beyond the sampling limits. Extrapolation distances vary depending upon the geologic environment, but generally do not exceed 15 to 30 m. Extrapolated polygons are assigned the lowest geologic confidence. Remote drill holes are normally disregarded for polygon construction.

An example of grade polygon construction in MapGIS (Zondy Cyber 2017) is shown in Figure 14-1.

Figure 14-1. Dongji Mining Area Grade Polygons—Longitudinal Section

Polygon volume is calculated by resolving the actual length of the sample intersections into the projected length in the mineralized zone’s projected coordinate system using MapGIS software (Zondy Cyber 2017). The projected lengths at the vertices and edges of a polygon are averaged and multiplied by the projected area of the polygon to compute volume. Volume is converted to tonnes according to the tonnage factor (Table 14-2).

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Table 14-2. Fujian Yuanxin Tonnage Factors

Tonnage Property Factor (t/m3)

Dongji Mining Area (C3500002010124210102291) 2.58-2.76 Dongji Deep General Exploration Area (T35120080902015406) 2.81

Metal grades are composited on a length-weighted basis for each sampling intercept. Composite grades are averaged on a length-weighted basis using the mineralized zone true thickness at each sample location. The average of the composite grades is assigned to the polygon. Grades are calculated for gold and associated minerals.

Resource total tonnes are reported as the sum of individual polygon tonnes. Resource tonnages represent gross, in-place tonnes without adjustments for planned losses or dilution during mining. Resource total grades are reported as tonnage-weighted averages.

14.2.4 Tonnage Factor

Polygon volumes are converted to tonnes on the basis of a tonnage factor (bulk density). Tonnage factors are determined for each license from density measurements performed on a statistically significant number of core, grab, and channel samples. Typically, a minimum of 30 samples are tested for each lithology comprising a mineralized zone. Corrections are ordinarily applied where moisture contents exceed 3.0%wt. Tonnage factors used for resource estimation are summarized in Table 14-2.

14.2.5 Estimate Verification

Various studies conducted by independent government and academic institutions have concluded that the polygonal method, as specifically applied at Shandong Gold’s mines, complies with the Specifications for Hardrock Gold Exploration (PRC MLR 2002) and that the method’s estimation results are reliable for reporting under the PRC standard.

14.3 Reconciliation to 2014 CIM Definition Standards by AAI

As discussed in the previous sections (14.2 Mineral Resource Estimation Methodology under PRC MLR) the estimation and classification of resources for Shandong Gold and other gold mines in China is strictly regulated by the PRC MLR, as defined by the Specifications for Hardrock Gold Exploration, effective 1 March 2003 (PRC MLR 2002). In that system, resources were estimated using methods currently applied by Shandong Gold that conform to PRC resource estimation and classification requirements. A polygonal model was developed by Shandong Gold based on drill-hole and channel sample assay measurements. Polygons were included or rejected based on Economic Indices as defined by the PRC MLR (such as cutoff grade and vein thickness).

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The 2014 CIM Definition Standards require that Mineral Resources exhibit reasonable prospects for eventual economic extraction in the context of, at least, a conceptual mining scenario. Shandong Gold is a mature mining company that already produces gold and other metals using established underground mining and processing methods. The conceptual mining scenario is based on the existing operations on the Fujian Yuanxin Gold Mine property. These methods and their economic viability are discussed in Sections 16 through 22. The economic cut-offs associated with conceptual mining and applied to resource estimation are discussed in Section 14.2 Mineral Resource Estimation Methodology under PRC MLR.

AAI’s QPs reconciled the resulting tonnage and grade estimate for each polygon to 2014 CIM Definition Standards. Confidence-level categories were assigned to each polygon based upon multiple criteria (refer to discussion in section Resource Classification) and by reviewing and re-estimating tonnages and grades of the polygons to determine that the polygons to be reported met considerations of reasonable prospects for eventual economic extraction. Tonnages and metal content for each polygon were summed to determine the overall tonnage and grade for each confidence-level category.

14.3.1 Resource Classification

In general, AAI accepted the PRC MLR polygons’ geometry but reviewed each polygon individually to adapt to CIM standards and the areas, thicknesses, tonnages and weighted-average grades were recalculated by AAI. The polygon values were checked against reported assay values, drill hole or channel sample thicknesses, area and tonnages (specific gravity) from multiple sources and checked for consistency. Each site was specified with a minimum reported polygon cutoff for minimum grade and mining width, usually ~1.0 gram/tonne of gold and 0.8 to 1.0 meters thick, the latter depending on the deposit continuity and inclination. The PRC MLR system allows for incorrect compositing in the case where the mineralized zone splits into one or more veins or branches and has interburden areas of 2 m or greater (see 12.3 Data Review). The method allows for summing the grade and thickness of each vein that is above the defined grade without adding the thickness of the material below cut-off. This is not consistent with industry best practice and where this was the case those resources were downgraded by AAI to Inferred. This was not a common occurrence at the Fujian Yuanxin Mine properties. AAI’s QPs excluded such polygons because they did not meet CIM standards for inclusion in a resource estimate, even at the lowest confidence level.

AAI’s QPs classified the resource polygons based on the level of geologic confidence associated with each polygon, referring principally to the predictability of grade, thickness, and geological continuity. Multiple criteria contribute to classifications which are considered contextually, including the degree of geologic control, conformance with the depositional model, location within the deposit, the classification of neighboring polygons, experience in mining in the adjacent portion of the mineralized zone in the active mine leases, and reconciliation of the tonnage and grade in the material mined to that predicted by the polygon estimates.

The following criteria were used to classify the Mineral Resource:

• There are no Measured Resources

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Polygons were classified as Indicated Resources where:

• Mineralized bodies have good continuity, and

• Polygon is supported by four or more mineralized intercepts in drill hole and/or underground channel samples and having a polygon area less than 10,000 m2 (equivalent to 100-m grid spacing) (slightly wider grid spacing could be considered in the case ן 100-m of favourable modifying factors as listed below), or

• Polygon is supported by three mineralized intercepts and having a polygon area less than .(100-m grid spacing ן m2 (equivalent to 100-m 5,000

Polygons were classified as Inferred Resources where:

• Mineralized bodies have good continuity, and

• Polygon is supported by four or more mineralized intercepts in drill hole and/or ן underground channel samples and an area greater than 10,000 m2 (equivalent to 100-m 100-m grid spacing), or

• Polygon is supported by three mineralized intercepts in drill hole and/or underground 100-m grid ן channel samples and an area greater than 5,000 m2 (equivalent to 100-m spacing), or

• Polygon is supported by two mineralized intercepts in drill hole and/or underground channel samples.

Polygons were not classified where:

• Supported by a single mineralized intercept in drill hole and/or underground channel samples

Confidence category modifying factors which could lead to a classification upgrade include:

• Presence of exploration drifts or cross-cuts.

• Whether the polygon adjoined mine workings.

• Whether one or more intercepts was based on channel samples from cross-cuts.

• Exceptions applied for polygons within stopes that have less than four mineralized intercepts in drill hole and/or underground channel samples and modest projections (typically 20 m or less), adjacent to stopes or down dip/plunge of mined mineralized zones.

Modifying factors which could lead to a classification downgrade or exclusion include:

• Large area polygon with poor sample control.

• High aspect-ratio (slender) polygon that had an unequal spacing between sample points.

• Polygon below or beyond enforced mining limits.

• Polygon mined out.

• Polygon that is isolated or remote.

— III11-54 — Figures 14-2 and 14-3 are representative examples of the Mineral Resource classifications for grade polygons located within the Dongji 11 SITE REPORT AAI — REPORT PERSON’S COMPETENT III APPENDIX Mining Area and Dongji Deep General Exploration Area licenses. I1-5— III11-55 —

Figure 14-2. Dongji Mining Area Mineral Resource Classifications—Horizontal Projection (longitudinal section) APPENDIX III COMPETENT PERSON’S REPORT — AAI REPORT SITE 11

Figure 14-3. Dongji Deep General Exploration Area Mineral Resource Classifications—Vertical Projection (plan view)

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14.3.2 Geostatistical Mineral Zone Analysis and Variography

AAI conducted a geostatistical analysis of the three-dimensional (3D) continuity of gold mineralization within the principal mineralized zones at the Fujian Yuanxin (Far South) Mine and Exploration properties that includes the Dongji Gold (Silver) mining area (Dongji Mining Area); the related mineralized zones being Zones I-1 and I-2 in the mine. The equivalent Mineralized Zone I in the deep exploration area is offset by a significant fault and was not evaluated. The statistical analysis was completed utilizing Surpac (version 6.7.3.) software’s statistical analysis module.

14.3.2.1 Basic Univariate Statistics

Basic statistics were completed on 1-m composites of drill hole sample assays within intercepts The summary of the basic statistics for each zone analyzed are shown in Table 14-3.

Table 14-3. Statistic Report for Donji Mining Area

Coefficient Number of Standard of Zone Composites Minimum Maximum Mean Deviation Variance Variation

Donji Mining I-1, I-2 and 942 0.0125 72.37 3.16 5.36 28.75 1.70 Area I-1+I-2

Figure 14-4 displays the cumulative frequency histograms of the 1-m composites for the Donji Mine Area. The shape of the distribution indicates a single normal sample population for the gold grades.

14.3.2.2 Mineralized Zone Variography

Variogram analysis was performed on the main mineralized zones at the Donji Mining Area. Variograms are summaries of the spatial continuity of data points in two or three dimensions. Most gold deposits and the associated sampling of these deposits or mineralized zones display complex variograms with poor structure. The pairwise relative variograms below were constructed on data for each zone based on 1-m composite samples of drill hole data for each zone analyzed. Data from the adjoining deep exploration area was not included due to the separation of the two areas by a fault with a 200-300 m throw (Figure 8-1), a gap in information due to a property boundary, and inadequate data in this deep exploration area.

The ranges identified in the variography, when sufficient data is present, identify the distance between data points, beyond which the two data points have little or no grade relationship statistically to one another. The analysis presented is to inform the reader that additional work was completed on the distribution of gold in the Dongji Mining Area. Figure 14-5 and 14-6 displays the grade distribution along down dip and strike variograms for the Donji Mining Area. Range down dip is

— III11-57 — APPENDIX III COMPETENT PERSON’S REPORT — AAI REPORT SITE 11 approximately 100 meters and along strike is approximately 60m and the 3D variogram and the analysis suggest reasonable continuity of the vein and grade predictability in the dip and strike direction. Geologic and historic mining of these mineralized zones further supports these conclusions.

The 3D variogram and the analysis suggest reasonable continuity of the vein and grade predictability in the dip and strike direction. Geologic and historic mining of these mineralized zones further supports these conclusions.

Relative variograms smooth an experimental variogram by scaling using the mean squared of each pair of data points being compared. This smooths the graph, making interpretation both more consistent and easier for the modeler. For the variogram to be meaningful, the number of data points must be sufficient for the spatial dependence to be statistically significant. In the data sets subject to the analysis, the data were heavily weighted along the strike direction due to the significant numbers of underground samples in active areas of the mine in cross cuts versus diamond drill hole samples that represent the majority of down dip sample population.

Figure 14-4. Gold Grade Distribution at Donji Mine Area

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Figure 14-5. Downdip Variogram at 135o Azimuth and 35o Dip

Figure 14-6. Variogram along Strike at 045o Azimuth and 0o Dip

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14.3.3 Considerations of Reasonable Prospects for Eventual Economic Extraction

Assessment for reasonable prospects for eventual economic extraction for each polygon was based on considerations of gold only. Mineral Resources were assumed to be potentially mineable using underground mining methods such as the transverse overhand cut-and-fill or room-and-pillar methods currently in operation. Consideration of the modifying factors when converting Mineral Resources to Mineral Reserves (see Section 15) indicated a cut-off grade of 1.40-g/t Au was applicable to the Mineral Reserve estimate. To ensure that each Mineral Reserve had an equivalent Mineral Resource polygon and that the Mineral Resource estimate could accommodate future mine planning considerations such as development requirements or dilution, a lower cut-off of 1-g/t Au was selected for the polygon boundary cut-off grade. The Mineral Resource polygons are considered to have reasonable prospects for eventual economic extraction using underground mining methods if they have a minimum thickness of 0.8-1 m (depending on the mineralized zone) and meet a gold grade cut-off criterion of 1-g/t Au. The gold price assumption was 1,231.03 USD/oz. and the gold metallurgical recovery was 91.8%. The silver price assumption was 16.62 USD/oz. and silver metallurgical recovery is reported at 92% (Fuzhou Dongxin Mining Technology Co., Ltd. (2012), Fujian 2012).

14.3.4 Mining Reconciliation Considerations

Advanced statistical and geostatistical modeling methods are common throughout metals mining, the polygonal model is considered reliable because it is methodical, transparent, standardized under PRC law, and has proved to be historically accurate for use with mine planning for more than two decades at Shandong Gold’s properties.

Reconciliation between modeled and mined resources serves to further validate the polygonal method and the reliability of Shandong Gold’s exploration methodology. A comparison between 1-year production forecasts based on polygonal modeling and actual end-of-year production at a number of Shandong Gold’s mines supports that the polygonal method is accurate and conservative, within practical tolerances. Mined tonnes and gold grades typically match 1-year forecast tonnes and grade within several percent or better, after accounting for planned mining losses and dilution. The reliability of the 1-year forecasts conveys a reasonably high degree of confidence in the Resource classifications.

14.4 Mineral Resource Statement

Dr. Douglas F. Hambley, P.E., P.Eng., P.G., and Registered Member of the Society of Mining, Metallurgy, and Exploration (RM-SME), of AAI is responsible for the Mineral Resource estimate presented in this report. Dr. Hambley is a Qualified Person (QP) as defined by NI 43-101 and is independent of Shandong Gold. Ms. Vanessa Santos, RM-SME, acted as Dr. Hambley’s designate on the site visits and acted under his supervision in the review and compilation in support of the Mineral Resource. The Mineral Resources reported herein are classified as Measured, Indicated, and Inferred as defined in the 2014 CIM Definition Standards. Shandong Gold, either by direct ownership or agreement with SDG, controls 90.31% of the Mineral Resources stated in Table 14-4. The Mineral Resource estimate for Fujian Yuanxin has an effective date of 31 March 2018. Neither AAI not the QP’s are aware of any adverse material changes to the resources and reserves estimates since the effective date of this report. The drill holes and sample locations are shown in Figure 14-7. The 3D oblique view of the upper surface of the Vein(s) is shown in Appendix B.

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Gold is the primary resource commodity. Silver is a minor associated by-product. Sulfur, lead, zinc, copper, iron, and other elements present in detectable concentrations are considered insignificant to mining economics and are not included in the resource statement.

The Mineral Resource excludes polygons that have been mined and accounts for mining depletion up to the effective date of the estimate. Depletion has been applied to the Resource to account for the extraction since the date of the verification or annual report that served as the basis to establish the Resource and Reserve. The depletion was provided by Shandong Gold and is the result internal accounting for the production allocated against the verified resource. Resource depletion is allocated first from Measured, then Indicated and any remainder from Inferred.

Factors that may affect the estimate include changes to geological or grade interpretations; changes to the cut-off grade tonnage factors, and thickness criteria used to define polygons and changes to the cut-off grade input parameters; changes to the selection of the number of samples that can influence the confidence classification assigned to a polygon; additional drilling that would allow inclusion of polygons on the edges of the current estimate; changes to assumed mining methods; changes to metallurgical recovery assumptions; and changes to the assumptions made when reconciling the economic indices in the PRC classifications, and changes to any of the social, political, economic, permitting, and environmental assumptions considered when evaluating reasonable prospects for eventual economic extraction.

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Table 14-4. Fujian Yuanxin Mineral Resource (effective date 31 March 2018)

Tonnes Contained Attributable Metals to Shandong Attributable to Gold Shandong Gold Mineral Resource Category Tonnes 90.31% Grades Contained Metals 90.31%

AuEq (Mt) (Mt) Au (g/t) Ag (g/t) (g/t) Au (t) Ag (t) Au (t) Ag (t) Dongji Mining Area (C3500002010124210102291) Measured None None None None None None None None Indicated 0.87 0.79 4.12 42.84 4.18 3.59 37.29 3.24 33.68

Subtotal Measured and Indicated 0.87 0.79 4.12 42.84 4.18 3.59 37.29 3.24 33.68 Inferred 0.04 0.04 3.14 35.90 3.19 0.14 1.59 0.13 1.43 Dongji Deep General Exploration Area (T35120080902015406) Measured None None None None None None None None Indicated 0.15 0.14 4.37 47.52 4.43 0.68 7.35 0.61 6.64

Subtotal Measured and Indicated 0.15 0.14 4.37 47.52 4.43 0.68 7.35 0.61 6.64 Inferred 0.24 0.22 5.61 67.31 5.69 1.37 16.40 1.23 14.81

Combined Licenses Measured None None None None None None None None Indicated 1.03 0.93 4.16 43.54 4.22 4.26 44.64 3.85 40.31

Subtotal Measured and Indicated 1.03 0.93 4.16 43.54 4.22 4.26 44.64 3.85 40.31

Inferred 0.29 0.26 5.23 62.49 5.30 1.51 17.99 1.36 16.24

Notes:

1. Mineral Resources were reviewed by Dr. Douglas Hambley, P.E., P.Eng., P.G., RM-SME, who is the Qualified Person for the estimate and independent of Shandong Gold.

2. Mineral Resources are reported inclusive of Mineral Reserves. Mineral Resources that are not Mineral Reserves do not have demonstrated economic viability.

3. Mineral Resources are reported using polygonal estimation methods. Polygons assume underground mining methods, a minimum thickness of 0.8 m to 1 m depending on the mineralized zone, a 1.0-g/t Au cut-off grade, a gold price of 1,231.03 USD per troy ounce, and a gold metallurgical recovery of 91.8%. 4. Gold equivalency is calculated using a gold price of 1,231.03 USD per troy ounce, 16.62 USD per troy ounce for silver, and respective metallurgical recoveries of 91.8% and 92%. AuEq (g/t) = Au (g/t) + {Ag (g/t) * [(16.62/1231) * (92/91.8)]}. 5. Estimates have been rounded as required by reporting guidelines. Totals may not sum due to rounding.

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Figure 14-7. Drill Hole and Sample Location Map

To the extent known, there are no known environmental, permitting, legal, title-related, taxation, socio-political or marketing issues that could materially affect the Mineral Resource estimate.

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There is upside potential if mineralization currently classified as Inferred can be converted to higher-confidence Mineral Resource categories, and eventually to Mineral Reserves. Historically, Shandong Gold has been able to identify additional mineralization that can support Mineral Resource estimates, and convert some or all of this material to Mineral Reserves.

Mineral Resources have been reported using a gold equivalent cut-off grade based on recoveries reported from the Dongji concentrator plant over time. Gold recovery is reported to be 91.8% Au and silver recovery is reported to be 92% Ag. AAI has used the 92% recovery factor for silver recovery but notes that it appears to be unusually high when compared with plants processing similar ores in other locations. Metal prices were LME monthly average close prices for a trailing three year period ending 31 March 2018. The gold price used is 1,231.03 USD/tr. oz. Au and the silver price used is 16.62 USD/tr. oz. Ag. The equivalency formula used is:

Au eq. (g/t) = Au (g/t) + {Ag (g/t)*[(16.62/1231)*(92/91.8)]}

15 MINERAL RESERVE ESTIMATES

The CIM Definitions Standards (CIM 2014) define a mineral reserve as follows:

A Mineral Reserve is the economically mineable part of a Measured or Indicated Mineral Resource. It includes diluting materials and allowances for losses, which may occur when the material is mined or extracted and is defined by studies at Pre-Feasibility or Feasibility level as appropriate that include application of Modifying Factors. Such studies demonstrate that, at the time of reporting, extraction could reasonably be justified.

The CIM Definitions Standards (CIM 2014) further state that:

Mineral Reserves are those parts of Mineral Resources which, after the application of all mining factors, result in an estimated tonnage and grade which, in the opinion of the Qualified Person(s) making the estimates, is the basis of an economically viable project after taking account of all relevant Modifying Factors. Mineral Reserves are inclusive of diluting material that will be mined in conjunction with the Mineral Reserves and delivered to the treatment plant or equivalent facility. The term ‘Mineral Reserve’ need not necessarily signify that extraction facilities are in place or operative or that all governmental approvals have been received. It does signify that there are reasonable expectations of such approvals.

Mr. Thomas R. Kelly, RM-SME, subcontractor to AAI, is responsible for the Mineral Reserve estimate presented herein. Mr. Kelly is a QP as defined by NI 43-101 and is independent of Shandong Gold. The Mineral Reserve calculation for Shandong Gold’s Dongji Mining Area, located in Fujian Province, China was completed in accordance with NI 43-101 standards and was based on all data and information available as of 31 March 2018. The Mineral Reserves presented herein are classified according to CIM Definition Standards — For Mineral Resources and Mineral Reserves, prepared by the CIM Standing Committee on Reserve Definitions and adopted by CIM Council on 10 May 2014. Ore is processed at the Dongji Mining Area mill facility capable of processing 650 tpd.

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15.1 Estimation Parameters

Dongji Mining Area is made up of one mining license issued by the PRC’s MLR and/or the Fujian Provincial DLR.

Reserves are only declared where either underground development is nearby or a feasibility study has been completed demonstrating their economic viability. The license has a production history and therefore, qualifies for reserve estimation. AAI foresees no changes to mining method or ground conditions as mining continues. AAI believes these parameters present a realistic depiction of the manner in which continued mining will unfold.

The following parameters were applied to estimate the Mineral Reserves:

15.1.1 Dongji Mining Area Reserve Estimation Parameters

The Mineral Reserve estimation for Dongji Mining Area was based on the following parameters:

• Minimum mining width for dips less than 50Њ: 1.2 m

• Minimum mining width for dips more than 50Њ: 0.8 m

• Ore mining dilution: 7.10%

• Ore mining recovery: 90.6%

• Gold metallurgical recovery: 91.8%

• Silver metallurgical recovery: 92%

• Cut-Off Grade: 1.40 g/t Au

• Gold Price: 1,231.03 USD/oz. Au

• Silver Price: 16.62 USG/oz. Ag

The parameters are weighted averages from 2015 through March 2018. The source data was provided by Dongji Mining Area. The mine uses panel mining across the apparent width of the stope lift in an overhand mining method with cemented backfill. Horsts of waste that are an integral part of the deposit exist and must be mined with the ore. These horsts are assigned no economic value and become internal dilution.

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The Reserve estimate was created using Measured and Indicated Resources, including all mineralized material above cut-off, and internal and external dilution. Each polygon was tested to check that the average grade was above the cut-off grade; if each polygon passed this test individually it was included in the ore reserve. The summation of the Measured and Indicated Resources within active mining areas, in areas adjacent to active areas or with a corresponding feasibility study demonstrating the profitable economic performance of the polygon, were then aggregated to become the Proven and Probable Mineral Reserve. This meets NI43-101 standards. No Inferred Resources were used to estimate the mineral reserve.

Additionally, external dilution was applied to the polygon resource tonnage. The dilution rate applied was 7.10%. The Dongji Mining Area dilution is historical, measured over the past 7 years by stope engineers and geologists.

Fujian Yuanxin calculates dilution by taking the tonnage of the total rock mined in a stope that is waste and/or backfill, and dividing that tonnage by the total recovered rock from a stope. The amount of recovered ore, mined waste, and backfill are determined from stope surveys, periodically performed in each of the stopes during each lift. AAI concurs with this methodology and has accepted the dilution as reported by Fujian Yuanxin for Dongji Mining Area.

Ore loss at Dongji Mining Area was estimated using the same base methodology as described for dilution estimation. Estimation is done by dividing the total ore mined by the total ore in the stope lift as defined by the geologist. The resulting number is the ore recovery. To find the ore loss, the ore recovery percentage is subtracted from one. The difference is the ore loss. The geologist estimates the ore mined in a stope by comparing the pre-mining geologic ore boundaries with the post-mining geology. AAI concurs with this methodology and has accepted the ore loss estimation as reported by Shandong Gold.

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15.1.2 Breakeven Gold Equivalent Cut-Off Grade

The mining breakeven cut-off grade was estimated using weighted-average production cost data from 2015 through March 2018, the reported processing plant recovery for the first semester of 2017, and an assumed metal price. The parameters and cut-off grade for each mine are shown in Table 15-1.

Table 15-1. Dongji Mining Area Estimated Reserve Cut-off Grades

Unit Cost (USD/process tonne) Weighted Item 2015 2016 2017 Q1 2018 Average

Gold metallurgical recovery 91.8% 91.8% 91.8% 91.8% 91.8% Total cash cost (USD/t) 44.43 54.56 57.73 35.10 50.94 Gold selling price (USD/oz.-t) 1,231.03 1,231.03 1,231.03 1,231.03 1,231.03 Cut-off grade (Au g/t) 1.22 1.50 1.59 0.97 1.40

The processing plant recovery for gold of 91.8% and silver of 92% at Dongji Mining Area is from information provided by Fujian Yuanxin during the August-September 2017 site visit. AAI believes the reported silver recovery to concentrate is high when compared with similar plants treating similar ores in other locations. Because silver is a by-product of no material significance to the cut-off grade the reported recovery for silver was used.

15.1.3 Reconciliation of Mineral Reserves to Production

Production monitoring and reconciliation of Mineral Reserves is the generally accepted method by which the Mineral Reserve estimate can be calibrated and refined. The most valid confirmation of both the Mineral Resource and Mineral Reserve estimate is through appropriate production monitoring and reconciliation of the estimates with mine and mill production. Proper reconciliation is required to validate the Reserve estimates and allows a check on the effectiveness of both estimation and operating procedures. Reconciliations identify anomalies which may prompt changes to the mine/processing operating practices and/or to the estimation procedure. Table 15-2 shown below shows the Dongji Mining Area reconciliation.

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Table 15-2. Dongji Mining Area Reconciliations, Gold

Mining Mined Mill Year Dilution Recovery Grade Recovery (%) (%) (g/t) (%)

2013 9.8 89.9 4.02 88.65 2014 9.2 92.2 2.71 88.91 2015 8.0 90.8 2.78 89.24 2016 7.9 96.4 2.64 90.17 2017 5.4 95.0 2.78 91.47 Q1 2018 5.1 95.2 2.55 90.93 2013-Q1 2018 Average 7.1 90.6 2.83 92.85

Note: Listed values are those used to determine cut-off grade; they are not intended to be a full reconciliation of yearly production.

The reconciliation for Dongji Mining Area is estimated using stope surveys of recovered ore, recovered grade, and other parameters. The mined grade is the diluted grade of the ore. Reserves are estimated by Shandong Gold from polygons of resources to which dilution and recovery parameters have been applied or are from feasibility studies that demonstrate the economic robustness of the project.

The Mineral Reserve excludes Polygons that have been mined and accounts for mining depletion up to the effective date of the estimate. Depletion has been applied to the Reserve to account for the extraction since the date of the verification or annual report that served as the basis to establish the Resource and Reserve. The depletion was provided by Shandong Gold and is the result internal accounting for the production allocated against the verified resource. Resource depletion is allocated first from Measured, then Indicated and any remainder from Inferred.

15.2 Reserve Classification

Mineral Reserves are estimated in Table 15-3 using the Measured and Indicated Resources and applying the parameters described in Section 15.1 of this report. Mineral Reserves for both mines have been estimated and classified by applying the following criteria:

• Proven Mineral Reserves are the economically viable, mineable part of the Measured Resource for which, after considering relevant mining information, processing/metallurgical information, and other relevant factors, the QP believes that economic extraction is feasible.

• Probable Mineral Reserves are the economically viable, mineable part of the Indicated Resource for which, after considering mining information, processing/metallurgical information, and other relevant factors, the QP believes that economic extraction is feasible.

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• Reserves have been estimated applying the cut-off grade estimated in Section 15.1.5 above and the following:

• Dilution is 7.10% at Dongji Mining Area as per information provided by Shandong Gold

• Ore recovery is 90.6% at Dongji Mining Area

• Plant recovery is reported at 91.8% for gold and 92% for silver at Dongji Mining Area.

Table 15-3. Fujian Yuanxin Mineral Reserve Summary (effective date 31 March 2018)

Dongji Mining Area (C3500002010124210102291) Proven None None None None None None None None None Probable 0.84 0.76 4.40 3.85 3.25 2.94 39.99 33.79 30.52 Total Proven and Probable 0.84 0.76 4.40 3.85 3.25 2.94 39.99 33.79 30.52 Dongji Deep General Exploration Area (T35120080902015406) License under renewal Proven None None None None None None None None None Probable None None None None None None None None None Total Proven and Probable None None None None None None None None None Combined Licenses Proven None None None None None None None None None Probable 0.84 0.76 4.40 3.85 3.25 2.94 39.99 33.79 30.52 Total Proven and Probable 0.84 0.76 4.40 3.85 3.25 2.94 39.99 33.79 30.52

Notes: 1. Mineral Reserves were reviewed by Mr. Thomas Kelly, RM-SME, subcontractor to AAI, who is the Qualified Person for the estimate and independent of Shandong Gold. 2. Reserves were based on a cut-off grade of 1.40-g/t Au, which was based on average operating costs for January 2015 through March 2018. 3. Gold price assumptions is 1,231.03 USD per troy ounce, based on the 3-year monthly average London PM Fix gold price from 1 April 2015 through 31 March 2018 and silver price of 16.62 USD per troy ounce, a gold metallurgical recovery of 91.8% and silver metallurgical recovery of 92%. 4. Gold equivalency is calculated using a gold price of 1,231.03 USD per troy ounce and 16.62 USD per troy ounce for silver, and respective metallurgical recoveries of 91.8% and 92%. AuEq (g/t) = Au (g/t) + {Ag (g/t) * [(16.62/1231) * (92/89.6)]} 5. Figures in the table are rounded to reflect estimate precision; small differences generated by rounding are not material to estimates. 6. Reserves are estimated based on material that has been mined and processed to make a concentrate suitable for smelting.

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15.2.1 Potential for Additional Reserves

The deposits mined in the Dongji Mine Area have resources that are suitable for classification as reserves in the mine as it now exists. There exists a lower block of mineralization on an exploration license that has not yet been delivered to Fujian Yuanxin; this lower mineralized block has gold and silver mineralization that has been encountered in various drill holes. Fujian Yuanxin believes that the lower block is a displaced portion of the mined block.

If additional drilling demonstrates continuity over mineable distance and thicknesses, Fujian Yuanxin may do a feasibility-level study with a complete economic analysis. The results of this study may indicate that the economics are favorable for development of the lower block. In future, this lower block has the potential to add significant tonnage and gold resources to the existing reserve base if the technical and economic studies are positive. Until adequate drilling, technical studies and economic studies have been completed, no reserve can be established in this lower block. Therefore there is no reserve declared for the exploration license at this time.

16 MINING METHODS

The Fujian Yuanxin mining group consists of one mining license (Dongji Mining Area) and one exploration license (Dongji Deep General Exploration Area). AAI understands that the Dongji Deep General Exploration Area exploration license will not be converted to a mining license; therefore, there will be no consideration of the area in this report. The ore produced at the Dongji Mining Area provides mineral for the present processing plant, operating at approximately 950 tpd.

Dongji has mined two distinct zones of mineralization. The upper was mined first via shaft accesses and adits. That area has now been completely mined and no ore remains for extraction. The lower block is accessed via a ramp, with secondary access from the shaft. The shaft is used to hoist ore; waste is hauled up the ramp for disposal on the surface. At the time of AAI’s visit, all ore and waste were being hauled up the ramp as the winder and headframe were down for maintenance.

16.1 Mining Method

The Dongji Mining Area uses the overhand cut-and-fill method to mine a structure with a wide apparent width that dips at less than 45Њ. The general approach to development is similar to other mines in the Shandong Gold. During AAI’s visit, all observed areas appeared to be in safe operating condition, with appropriate safety signage, safety equipment, and other general mine operational issues in compliance with Western mining standards.

16.1.1 Mining at Dongji Mining Area

Dongji Mining Area is served by one production shaft and a ramp from the surface. Internal ramps for rubber-tired stope access are found between levels. The rubber-tired equipment reports to the surface for maintenance and repair work.

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The production shaft is a vertical, 3.5-m-diameter concrete-lined shaft. As the shaft descends, the concrete liner gives way to steel wall plates and end plates with typical shaft dividers. The shaft depth is 510 m, with loading pockets at several levels to allow for loading the shaft conveyances. Conveyances are bottom dump, with a nominal capacity of approximately 5 t. Hoisting capacity is rated at 1,300 t of rock (ore plus waste) per 24 hours.

While the shaft is capable of hoisting both ore and waste, it is normal for the waste to be hauled up the ramp. Once the waste reaches the surface it is screened and crushed. Crushed rock and sand is then sold to the public. m in section, with grades up to 15%. The ramp goes to the bottom of the 4 ן The ramp is 4 m mining license at the -100-m elevation. Ramp conditions are good.

.m, with little or no ground support 4 ן Production levels have a nominal section of 4 m Smooth-blasting techniques have been applied to create stable, arched backs and vertical walls. All levels are trackless; load-haul-dumps (LHDs) and low-profile dump trucks are used for loading and hauling material.

16.1.1.1 Stope Access

Stope sills (new stopes started on levels or above pillars) are accessed by cross-cuts from the m in section and are driven on 30-m centers from the main 3.5 ן main levels. The cross-cuts are 3.5 m haulage level through the deposit to the hanging wall.

The Dongji Mining Area practice is to leave a substantial pillar between the level access and the stope block. Cross-cuts can be up to 75 m or more in length. Cross-cuts are trackless, and chutes are installed for loading ore into underground haul trucks on lifts above the first lift. AAI did not observe the chutes, due to time constraints while on site.

Cross-cuts are drilled with jacklegs and mucked with LHDs loading into underground haul trucks. Ground support is minimal (no bolts or other ground support measures were observed in the cross-cuts visited).

Stopes are accessed by ramps that are driven parallel to the deposit both on strike and dip from the sill to the next level above. The ramps are driven from the cross-cuts and provide vertical access to the deposit. A ramp typically proceeds upwards at a grade of 15% and is either spiral or zig-zag in its geometry.

Once a critical elevation has been reached in the access ramp, a negative sub-ramp branches from the access ramp to the deposit, driven at -15% to -20%. Once the deposit is reached, mining begins on the corresponding lift of panels. The ramp faces advance upward sufficiently ahead of the stope backs to allow for continuous ramp access as the stope backs go upward. Ramps are drilled with jacklegs and mucked with LHDs. Ground support is minimal (no bolts or other ground support measures were observed in the ramps visited).

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16.1.1.2 Stoping

The first panel on a new stope sill is excavated along the footwall contact, between cross-cuts from the level access or ramp accesses between levels. If the stope is three panels wide, the footwall panel is mined first, followed by the central panel, and then the hanging wall panel. Once that panel is completed, a raise is driven updip along the deposit’s central panel or footwall (depending upon the number of panels in the stope) to the next level or sublevel above.

The raise is then used for the delivery of backfill, ventilation circuitry, additional compressed air .m in section 3 ן and drill water, and as a second stope access. Raise dimensions are nominally 3 m Stope sill panels and raises in stopes are all drilled using jacklegs and blasted using burn-cut type pull rounds. Panels are mucked with LHDs.

Upon completion of the raise, the stope panel is tight-filled with cemented backfill. Typically, stopes are allowed to sit 3 to 5 days before mining starts in the adjacent panel.

Mining in the adjacent panel (normally the footwall panel if there are three panels) follows the same pattern, maintaining the required width and a nominal stope back elevation approximately 3.5 to 4 m above the stope sill. Upon reaching the adjacent cross-cut, the excavated panel is backfilled and allowed to rest for an additional 3 to 5 days before mining the final panel (if required), following the same routine. Once that panel is excavated, it is backfilled.

Access to the next lift is made by excavating the back of the cross-cut from the main level or the ramp. The access back is dropped to create suitable grade and elevation to access the next lift. The lower cross-cut or access ramp is filled with the blasted back muck, and sufficient muck is removed to create the ramps that provide access to the next lift. Excess muck is removed and either dumped as waste backfill in other stopes or hoisted to the surface for disposal.

Once the stope block is accessed on the next lift, stope mining commences. Mining is done along the same panel plan as the underlying sill cut, using the same sequence that begins with the footwall panel. When a panel is finished, it is backfilled and allowed to cure for 3 to 5 days before the next panel is excavated. Once the panels on one lift floor are completed and filled, the next accesses are created and the corresponding lift of mining commences. This continues until the upper stope limit is reached.

All drilling on cuts above the sill is done with jacklegs drilling breast rounds. All mucking is with LHDs. All access and stope blasting is done with ammonium nitrate/fuel oil (ANFO) and non-electric ignition. Figure 16-1 shows the general arrangement for stope access and stope mining at the Dongji Mining Area.

Dongji Mining Area personnel also report that conventional overhand cut-and-fill stoping using electric scrapers has been performed in the past. AAI did not observe any stopes being mined in this manner as they have been mined out. The use of this method was likely suitable for the steeper dipping portions of the deposit previously mined; the method presently used is suitable for the current geometry.

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Figure 16-1. Dongji Mining Area Typical Stope Layout APPENDIX III COMPETENT PERSON’S REPORT — AAI REPORT SITE 11

16.1.1.3 Ground Support

As noted in the stoping discussion, there is very little ground support. Although Dongji Mining Area personnel reported using some split-set rock bolts, none were observed during AAI’s visit. Ground conditions are considered excellent with very competent rock. As mining proceeds to deeper levels, ground control plans should be revisited, as conditions will likely change due to higher ground stresses.

When feasibility level work is performed regarding the exploration license (Lower Block), the ground conditions must be considered at the depth of mineralization in the exploration license area as there will be additional loading of stresses that may require significant additional ground support measures.

16.1.1.4 Dilution and Recovery of Ore in Stopes

During AAI’s visit, there was no way to visibly estimate how serious a problem dilution may be as the gold is very fine-grained and not visible to the eye. Additionally, the gold-bearing structure’s apparent horizontal thickness is quite wide, making it difficult to understand if any serious dilution issues exist. Because of the competent rock and the competent backfill, AAI estimates that dilution will be minimal, limited to some backfill dilution and some dilution along the contacts. No over-mucking of the stope floors into the backfill was observed, nor was any rutting in the backfill occurring. Dongji Mining Area reports an average historical dilution of 7.10%; AAI judges this to be reasonable based on our observations.

Loss of recoverable mineral reserve is estimated by Dongji Mining Area personnel to be approximately 6.8%. This is consistent with AAI’s observations of pillars and other non-recoverable remnants.

AAI understands that the Dongji Mining Area applied to convert an exploration license below the -100 level to a production license, but was denied. Therefore, remaining stopes have a maximum of approximately 280 m along dip to reach the bottom of the mining license. Within these stope blocks, there are significant non-ore grade blocks. Therefore, AAI believes the mining life for this reserve estimate at Dongji Mining Area is very limited until the material below the -100 level becomes available and is accessed for mining.

16.1.1.5 Mining Rates

Dongji Mining Area has all of the main levels developed for mining to the limit of its present mining license. Additionally, a number of cross-cuts and stope panels have been prepared for mining. Staff report that sufficient stope faces are active to keep the processing plant in material.

AAI believes that the mining rate is adequate given the limited life of the property. Since it is reasonable to believe that future mining will be limited to the presently known reserves, those reserves should be mined as efficiently as possible to eliminate any carrying costs or other costs that cannot be recouped by the completion of mining.

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16.2 Backfill

The preparation of backfill is similar to the other Shandong Gold sites visited. Backfill is mixed on the surface using classified tailings from the processing plant. Dongji Mining Area has a rudimentary fill plant in operation with a new plant under construction. All of the fill feed in the plant comes from the local processing plant.

A cyclone nest is used for classification, with the cyclone overflow reporting to the tailings pond and the underflow reporting to several large storage silos on the surface. Material stored in tanks is agitated to prevent settling. As required, material from the tanks is transferred to mixer cells where cement is added. The cement is fed from one of two cement silos. Material leaving the mixing tanks for placement underground has a nominal density of 70% solids by weight.

The backfill is introduced to the underground workings at all sites via the existing hoisting shaft. After leaving the corresponding shaft, the material is distributed via a network of pipes on each level to the delivery point in any given stope. All flow is gravity; separation does not appear to be an issue. AAI is unaware of any de-accelerators placed in the backfill lines to maintain a steady velocity in the mixed material flow.

Cement is used as an additive for the backfill. Dongji Mining Area staff report that up to 5% cement may be used. Less expensive substitutes, such as fly ash and gypsum, are also used when available. AAI did not observe any recent backfill placements underground during the site visit.

The mixing tanks at the Dongji Mining Area at the operating backfill plant are shown in Figure 16-2. There is a lack of instrumentation in the plant and it appears that a high degree of manual labor is required in the backfill preparation process. The backfill plant has a nominal capacity of 1,300 m3/day. This is much greater than the present need for fill; therefore, the plant is used intermittently.

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Figure 16-2.Dongji Mining Area Operating Backfill Plant Cement Mixing Area

16.3 Mining Fleet

Dongji Mining Area staff report the following equipment fleet. Most of the fleet is contractor-owned; hence there may be some redundancies in equipment pieces. AAI has not verified the equipment list.

• Six 5-t diesel underground haul trucks;

• Fifteen 10-t underground haul trucks;

• Eleven 0.7-m3 electric LHDs (seven diesel-powered and four electric-powered);

• Eleven 2- or 3-drum diesel scrapers; and

• 42 pneumatic rock drills.

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The Dongji Mining Area has an in-house maintenance system that provides for routine maintenance as well as rebuilds, repairs, and other work that may be required to maintain the equipment in safe operating condition. AAI did not visit the maintenance shops. AAI believes the fleet is adequate for the present production.

16.4 Mine Infrastructure

16.4.1 Mine Ventilation

Dongji Mining Area staff report a fresh air flow in the mine of 160 cubic meters per minute (m3/min), introduced through the ramp from the surface. There are several ventilation raises exhausting return air to the surface or routing return air to the shaft. The shaft is upcast with no personnel movement. Fan installation is underground. AAI did not have an opportunity to visit the fan installation. It is reported that air quality is checked every shift at every working face. All workplaces visited were adequately ventilated with secondary fans or with air flow through raises and other workings. AAI believes that ventilation is adequate.

16.4.2 Compressed Air

There is a compressor house on the surface that contains five compressors. They have a combined capacity of 110 m3/min at a pressure of 8.27 bars. The main airline goes down the ramp in a 25-cm-diameter steel pipe, with offtakes as required onto working levels. All drilling operations observed by AAI had sufficient air quantity and pressure.

16.4.3 Underground Haulage

Underground haulage from stopes is by underground haul truck. Waste is hauled up the ramp to the surface where it is stockpiled for crushing and classification prior to selling. Ore is hauled by truck to the shaft where it is hoisted to the surface.

Trucks dump to ore passes located near the shafts. The material flows to loadouts in the hoisting shaft for hoisting to the surface. Ore is discharged from bottom-dump skips to a coarse ore bin. The discharge is actuated via scrolls in the headframe that capture rollers on the skip, automatically opening the skip as the rollers travel through the scrolls.

16.4.4 Shafts

The Dongji Mining Area mine has one vertical shaft used for production. The production shaft is a circular shaft with a finished inside diameter of 3.5 m. The shaft is concrete-lined with steel dividers. Total shaft depth is 510 m, with two loading pockets for ore handling. Skip capacity is reported to be 3.7 m3; different figures were given by different staff members. Figure 16-3 shows the Dongji Mining Area headframe.

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16.4.5 Winders

Ore hoisting is done at the production shaft which has two bottom-dump skips. The headframe and winder were not operating during the site visit; AAI was told this was due to routine maintenance.

The winder is a koepe-style winder set on the surface with the ropes deflected through sheaves in the headframe. The winder is fitted with disc brakes and pinion brakes. It appears to AAI that the winder is adequate for the present service. Figure 16-4 shows the winder.

Figure 16-3. Dongji Mining Area Headframe

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Figure 16-4. Dongji Mining Area Production Winder

16.4.6 Mine Water Discharge

Underground workings at the Dongji Mining Area make approximately 600 m3 of water daily, with peak flows of up to 1,000 m3 daily. The water is clarified in sumps on the 30 and -3 levels and pumped to the surface. On surface, the water reports to surface storage for later use as process water. All pumping is with either centrifugal electric pumps or multiple-stage electrical lift pumps (well-type pumps).

16.5 Labor

Mine and mine maintenance shop labor at the Dongji Mining Area totals 144 persons, all of which are in management, administration, or technical services. Contract labor ranges from 170 to 200 people, depending upon the work load. The work schedule is three 8-hour shifts daily, with a work calendar of 330 days per year.

16.6 Mining Schedule

For the economic analysis discussed in Section 22, AAI developed a life-of-mine (LOM) production schedule for the Proven and Probable Mineral Reserves estimated in Section 15. The location of mining and exploration licenses that contain reserves and the location of the reserves within the licenses, is shown in Figure 16-5.

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The objective of the LOM schedule was to provide a reasonably consistent mill feed grade while maximizing the after-tax net revenue. This was done by sequencing the mining in a logical fashion to minimize development costs, mining reserves with similar grades concurrently, or blending ore from reserve areas of dissimilar grade. The sequencing was done on a polygon by polygon basis, generally dividing the reserve into mining levels, and scheduling mining of the highest levels before proceeding to lower levels. It was assumed that the same mining methods as discussed throughout Section 16 would be employed.

The LOM production schedule is shown in Table 16-1. The mining sequence by year is shown in Figures 16-6 through 16-9.

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Figure 16-5. Fujian Mining Area Location of Reserves by License

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Table 16-1. Fujian Yuanxin Production Schedule by License

Year 1 Q2-Q4 Year 2 Year 3 Year 4 Years 1-4 License 2018 2019 2020 2021 Totals

Yuanxin Mining Co., Ltd. Dongji Mining Area Mine Development (linear m) 1,180 1,580 1,580 870 5,220 Ore Production (1,000 tonnes) 190 260 260 140 840 Average Gold Grade (g/t) 5.41 3.54 3.47 2.98 3.85 Contained Gold (kg) 1,040 900 890 420 3,250 Average Silver Grade (g/t) 63.20 30.53 31.80 40.47 39.99 Contained Silver (kg) 12,120 7,800 8,150 5,720 33,790

Total Mine Development (linear m) 1,180 1,580 1,580 870 5,220 Total Ore (1,000 tonnes) 190 260 260 140 840 Average Gold Grade (g/t) 5.41 3.54 3.47 2.98 3.85 Contained Gold (kg) 1,040 900 890 420 3,250 Contained Gold (koz) 33 29 29 14 105 Average Silver Grade (g/t) 63.20 30.53 31.80 40.47 39.99 Contained Silver (kg) 12,120 7,800 8,150 5,720 33,790 Contained Silver (koz) 390 251 262 184 1,086

Projected Recovery (%) 93 93 93 93 93 Payable Gold (kg) 960 840 820 390 3,020 Payable Gold (koz) 31 27 27 13 97 Payable Silver (kg) 11,260 7,240 7,560 5,320 31,380 Payable Silver (koz) 362 233 243 171 1,009

17 RECOVERY METHODS

The Yuanxin Processing Plant is designed to treat 800 tpd (upgraded in 2015).

The current Yuanxin Processing Plant includes two stages of closed-circuit crushing; a single stage of closed-circuit grinding with classification using a spiral classifier and a cyclone system; a flotation circuit consisting of rougher flotation, three-stage cleaner flotation, and three-stage scavenger flotation. Gold concentrate is thickened, filtered, and shipped to a refinery plant.

Processing plant labor is scheduled for three 8-hour shifts, 330 days per year. The total number of processing plant employees is 103, consisting of 4 people working in management, 2 technicians, 79 people in operations and 18 maintenance personnel.

17.1 Crushing Circuit

The crushing plant uses two-stage crushing operated in closed circuit. The crushing plant consists of one primary Metso C96 jaw crusher, one secondary HP200 cone crusher, and one 2YKR1852H vibrating screen. The final screen undersize crushed product is 14~0mm.

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Figure 16-6. Production Schedule for the Upper Ore of Dongji Gold and Silver Mining Area PEDXIICMEETPRO’ EOT—AIRPR IE11 SITE REPORT AAI — REPORT PERSON’S COMPETENT III APPENDIX I1-4— III11-84 —

Figure 16-7. Production Schedule for the Upper Ore of Dongji Gold and Silver Mining Area-2 PEDXIICMEETPRO’ EOT—AIRPR IE11 SITE REPORT AAI — REPORT PERSON’S COMPETENT III APPENDIX I1-5— III11-85 —

Figure 16-8. Production Schedule for the Upper Ore of Dongji Gold and Silver Mining Area-3 APPENDIX III COMPETENT PERSON’S REPORT — AAI REPORT SITE 11

Figure 16-9. Production Schedule for the Lower Ore of Dongji Gold and Silver Mining Area

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17.2 Grinding Circuit

Grinding is performed in a single-stage closed grinding circuit.

The grinding circuit includes two ball mills. One mill has a diameter of 2.1 m and a length of 3.0 m and the other ball mill has a diameter of 2.7 m and a length of 3.6 m. Each ball mill operates in closed circuit with a spiral classifier. The ball mill discharges into the spiral classifier with return sand being recirculated to the ball mill. The spiral classifier overflow flows by gravity to the cyclone feed pump box and is pumped to hydrocyclone clusters for secondary classification. Cyclone underflow reports to the ball mill, and cyclone overflow is the final grinding product.

The grinding circuit reduces the crushed ore from -14-mm top size to a product of 90% passing 0.074 mm (200 mesh).

17.3 Flotation Circuit

The flotation circuit consists of rougher flotation, three-stage cleaner flotation, and three-stage scavenger flotation. The flotation cells for rougher and scavenger flotation are 8-m3 flotation cells, four rougher cells, four first scavenger cells, four second scavenger cells, and four third scavenger cells. The flotation cells for cleaner flotation are 4-m3 flotation cells, four first cleaner cells, two second cleaner cells, and two third cleaner cells.

17.4 Concentrate Dewatering

The gold concentrate from the flotation circuit is thickened and filtered. The filter cake with moisture content of approximately 10% is stored in super sacks at the concentrate storage area and is shipped to a refinery plant in a timely manner.

The Yuanxin Processing Plant overall flowsheet is shown in Figure 17-1.

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Figure 17-1. Yuanxin Processing Plant Overall Flowsheet

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18 PROJECT INFRASTRUCTURES

Since Dongji Mining Area has been a producing facility for a long period of time, the infrastructure is in place, and in AAI’s opinion is adequate and appropriate for the current operation.

18.1 Roads

The Dongji Mining Area is serviced by paved, all-weather roads that form part of the national road system. Site roads are also paved, with secondary gravel roads. All roads are suitable for the equipment used at the sites and provide adequate access for necessary work.

18.2 Mine Waste Dumps

Mine waste that is not used for backfill underground is hauled to the surface. The waste is then crushed and classified. Some of the waste rock is sold at a nominal price for use as aggregate. AAI did not observe any waste storage issues.

18.3 Mine Ore Stockpiles

Mined ore is hoisted to the surface from underground loading pockets and dumped into a holding pocket in the headframe. The ore is then loaded by chute into surface dump trucks and hauled to the coarse ore stockpile. The stockpile is located near the Dongji Mining Area processing plant. The stockpile is covered with geotextile to prevent loss from wind, rain, and snowmelt.

18.4 Electrical Energy

The Dongji Mining Area is served by the national power grid at a voltage of 12,900 kW. Substations at each area (mine, plant etc.) step down the energy for distribution around the site at suitable voltages. There is adequate electrical energy for all of the present and planned work at the Dongji Mining Area.

18.5 Tailings Impoundments

The tailings impoundment was not visited by AAI personnel.

19 MARKET STUDIES AND CONTRACTS

19.1 Markets

Because gold is a commodity that is highly liquid and widely tracked in the world market, a detailed market study on the potential sale was not completed. The 99.99% pure gold bullion produced by Shandong Gold is currently sold through the Shanghai Gold Exchange.

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Figure 19-1 shows the annual London PM Fix price per ounce from 2000 through the first quarter of 2018. For the purposes of this report, and as reviewed by QP Carl Brechtel, the resources and reserves are stated at the 3-year monthly average London PM Fix gold price of 1,231.03/oz. USD, from 1 April 2015 through 31 March 2018.

The precious metal silver produced with the gold can be sold at any time as long as the products meet market admission standards. No detailed market study on the potential sale of silver was completed. For the purposes of this report, and as reviewed by QP Carl Brechtel, the 3-year average monthly London PM Fix price for silver is 16.62/oz. USD, from 2000 through the first quarter of 2018. Historical prices of silver are shown in Figure 19-2.

19.2 Contracts

Shandong Gold has no contracts or agreements for mining, smelting, refining, transportation, handling or sales that are outside normal or generally accepted practices within the mining industry.

Figure 19-1. Gold Price History (Source www.kitco.com)

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Figure 19-2. Silver Price History (Source www.kitco.com)

20 ENVIRONMENTAL STUDIES, PERMITTING, AND SOCIAL OR COMMUNITY IMPACT

20.1 Introduction

The mining licenses as outlined in Section 4 give the right to carry out full mining and mineral processing operations. The assignment of a mining license requires an approved Environmental Impact Assessment (EIA). The EIA is a comprehensive assessment of the expected environmental impacts (groundwater, surface water, solid waste, etc.) with monitoring and follow-up assessment requirements.

Typical gold mine sources of environmental concern include potential water contamination from dewatering, tailings, and domestic wastewater. Noise pollution is sourced from the production and processing equipment. Air pollutants are typically those generated during the process of mining and transportation.

The mine operates under PRC laws, regulations, and guidelines. Based on observed operating practices, AAI believes that all necessary PRC government approvals are in place or are reasonably expected to be received for Fujian Yuanxin.

20.2 Laws and Regulations

Shandong Gold mines operate under PRC laws, regulations, and guidelines as briefly outlined in Table 20-1. The listing is not comprehensive, but is representative of the level of oversight.

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20.3 Waste and Tailings Disposal Management

Solid waste sources are primarily development rock, tailings, and domestic waste. Waste rock generated during mining is used to fill voids underground at Dongji Mining Area. This has the dual purpose of waste disposal and subsidence mitigation.

The Dongji Mining Area site has mine, mill, and tailings facilities. Waste rock is stored as valley fill.

Table 20-1. Overview Listing of PRC Laws Relevant to Mines and Mining Projects

Area of Focus Legislation

Mining Mineral Resource Law of People’s Republic of China

Implementation Rules of the Mineral Resources Law

Administrative Measures Concerning the Registration of Mineral Resources Exploitation

Provisions of the Administration of Obtaining Gold Mining Approval

Provisions of the Protection of the Geologic Environment of Mines

Environmental Water Law of the People’s Republic of China

Water and Soil Conservation Law of China

Water Pollution Prevention and Control Law of China

Detailed Rules for the Implementation of the Water Pollution Prevention and Control Law of China

Regulation on the Implementation of the Water and Soil Conservation Law of China

Regulation on the Administration of the License for Water Drawing and the Levy of Water Resource Fees

Measures for the Administration of Water Use Permit

Notice of the State Council on the Action Plan for the Prevention and Treatment of Water Pollution

Environmental Protection Law of China

Law on Appraising of Environment Impact

Regulation on Environmental Assessment of Planning

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Area of Focus Legislation

Cleaner Production Promotion Law of China

Circular Economy Promotion Law of China

Law on the Prevention and Control of the Environmental Pollution Caused by Solid Waste

Environmental Quality Standard for Surface Water

Quality Standard for Ground Water

Integrated Water Discharge Standard

Prevention and Control of Geological Disasters

Design Regulation for Environmental Protection of Construction Projects

Ambient Air Quality Standards

Environmental Quality Standard for Noise

Emission Standard of Air Pollutants for Boiler

Emission Standards of Industrial Enterprises Noise at Boundary

Identification Standards for Hazardous Wastes-Standards for Extraction Toxicity

Pollution Control Standard for Storage of General Industrial Solid Waste and Disposal Site

20.4 Water Management

Potential water contaminants generated at Fujian Yuanxin include suspended solids from the water generated in the underground mine drainage process. The tailings wastewater is a source of suspended solids, metals (lead, arsenic, cadmium, etc.), and residual chemicals from ore processing. The domestic wastewater is a potential source of suspended solids, chemical and biological oxygen demand.

Dewatering during mining of the ore deposit will lead to a decrease of the groundwater level in the mine and the surrounding area. If the quality is such that the groundwater can be used as domestic water, production water, and farmland irrigation water in the area of the mine. Tailings leachate, if not treated prior to release, has the potential to pollute groundwater, surface water, and soil in the surrounding area which could contaminate crops.

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20.5 Air and Noise

Air contaminants potentially generated at the site include dusts generated during the process of mining and transportation and processing plant dusts. Wet drilling, water sprays, and dilution by ventilation are measures utilized to control dust.

Drills, air compressors, and fans will produce the highest noise concerns in the underground.

20.6 Permitting Requirements

The permitting process is briefly outlined in Table 20-2. Based on observed operating practices, AAI believes that all necessary PRC government approvals are in place or are reasonably expected to be received for Fujian Yuanxin. The existing exploration and mining licenses cover all the active exploration and mining areas. Mining licenses are subject to annual fees and taxes. Renewal of mining licenses and extending mining depth are a normal business process if the mineral resources are defined, the required documentation is submitted, and the government resources royalties are paid.

20.7 Social and Community

The surrounding land use in the Fujian Yuanxin mining area is predominantly agriculture and forestry. The most important crop of the Fujian Province is tea. The Fujian Province is the most culturally and linguistically diverse province in China. No ecological sites or strict land control zones were noted in the immediate area of the mine; however, the Fujian Province has taken the step of halting the processing of mineral exploration licenses as the local government faces the challenge of sustainable development while, at the same time, preserving the natural and cultural heritage.

No ecological sites or strict land control zones were noted in the immediate area of the mine; however, 160 km to the west, the Wuyi Mountains were listed as a UNESCO World Heritage Site. The site was listed in 1999 as an effort to preserve the cultural, scenic, and biodiversity of the region. The world heritage site has a total area of 99,975 ha that is divided into four core parts: the Nine-Bend Stream Ecological Protection Area (36,400 ha) in the center, flanked by the Wuyishan National Nature Reserve (56,527 ha) to the west, and the Wuyishan National Scenic Area (7,000 ha) to the east. The fourth part, the Protection Area for the Remains of Ancient Han Dynasty (48 ha) is located in a separate area about 15 km to the southeast of the others. The core parts are surrounded by an additional buffer zone of 27,888 ha.

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Table 20-2. Environmental Permit

Permit Regulatory Body Description

EIA Report Ministry of Evaluations of impacts to the environment. Environmental Protection

Water Permit Ministry of Water Issued separate from mining permits and Resources covers the drainage basin and water consumption. Gold mining project water permits are generally granted at the provincial level in alignment with the Catalogue of Investment Projects Subject to Government Confirmation. The water permit sets the tariffs for water use.

Water Discharge Permit Ministry of Water Sets water-quality monitoring standards. Resources Includes requirements for recycling water.

Mining Permit/ License Ministry of Land and Bond payments for mine site rehabilitation are Resources required to obtain a miming license. A company holding a mining license must pay a security deposit for the treatment and restoration of the mines’ geological environment, based on the relevant state provisions. The deposit and interest will be refunded if the mining company has fulfilled its obligations and has passed inspection by the relevant MLR representative. Once a mine has ceased operations, the mining company will no longer be liable for water contamination.

Tailings and Waste Ministry of Companies that produce tailings must develop Storage Pollution Environmental Protection a pollution prevention plan and establish a Prevention Plan liability system.

— III11-95 — APPENDIX III COMPETENT PERSON’S REPORT — AAI REPORT SITE 11

Permit Regulatory Body Description

Mine Closure Ministry of Land and Mining companies must submit a mine closure Application Resources application as well as a geological report on mine closure for approval to the original issuer of the mine permit. The closure plan must include the basic information of the mine; the current status of the geologic environment of the mine; an analysis and evaluation of the impact on the geologic environment, proposed measures to be taken to protect, control, and restore of the geologic environment; a budgetary estimate of the operating funds for projects; and commitment to depositing a security for the protection, control, and restoration of geologic environment of the mine.

Mining Approval (Gold National Development Gold mining projects must be approved by the Specific) and Reform Commission National Development and Reform Commission.

20.8 Remediation and Reclamation

Remediation and reclamation plans were developed during the project permitting process. Expenditures for environmental control and restoration for the past 3 years are included in Table 20-3.

Table 20-3. Fujian Yuanxin Environmental Related Expenditures

Item Unit Q1 2018 2017 2016 2015

Restoration and environmental control in mine area Yuan None 1,691,564 1,000,622 321,531 Restoration and environmental control in mine area (per ore ton) Yuan/t None 5.93 3.46 1.27 Restoration and environmental control in mine area (per gold gram) Yuan/g None 2.55 1.44 0.52 Ore processed t 84,232 285,296 255,066 243,571 Gold output kg 176.99 664.26 695.49 623.11

— III11-96 — APPENDIX III COMPETENT PERSON’S REPORT — AAI REPORT SITE 11

21 CAPITAL AND OPERATING COSTS

Capital and operating costs (CAPEX and OPEX) for Fujian Yuanxin have been derived from comprehensive annual production and financial reports supplied by Shandong Gold. The reports cover the periods 2014, 2015, 2016, and 2017. Detailed costs listed in the reports include mining costs, processing costs, administration costs, selling costs, environmental protection costs, production taxes, resource tax, interest on loans, depreciation and amortization.

Ore is processed at Fujian Yuanxin to produce a concentrate which is shipped to a smelter. Payable products include gold and silver, with the quantity, received price, and revenue listed in the annual reports.

Costs in the reports are in RMB. The costs have been converted into USD using an exchange rate of 6.571 RMB/USD.

21.1 Capital Cost Estimate

No mine expansion is currently underway, and no CAPEX are projected to occur over the remaining mine life for this reserve estimate. Waste development costs are captured in OPEX and are expensed.

21.2 Operating Cost Estimate

Operating costs are classified by cost objects in Table 21-1 for reported actual production and financial data for the periods 2015, 2016, 2017 and Q1 2018 and for estimated production and financial data for Q2-Q4 2018, 2019 and 2020. The data are also normalized to actual and estimated process tonnage and payable gold ounces. Unit OPEX are reported for three areas: Mining (direct mining, tunneling, drilling, in-mine transport, surface transport, ventilation, backfilling, hoisting, and water handling); Processing (milling and concentration, and smelting and refining); and Administration (G&A), tax, financing, sales, and amortization and depreciation). Non-cash costs of amortization and depreciation have been removed from the OPEX. Table 21-2 lists the actual costs for 2015, 2016, 2017 and Q1 2018. The actual costs are normalized to cost/process tonne, and used to calculate an average cost to forecast the OPEX for mining the remaining reserves listed in Table 21-3.

AAI is of the opinion that the OPEX and Total cost are reasonable and provide an adequate basis to project the future operations costs. The total cost per gold ounce provides a very good margin in recent production, and the increase in gold grade for the remaining reserve will further reduce the cost per payable gold ounce.

— III11-97 — APPENDIX III COMPETENT PERSON’S REPORT — AAI REPORT SITE 11

Table 21-1. Buildup of Property Operating Costs by Cost Objects, Historical and Forecast Prediction

Forecast Prediction Cost Object (ore processed) Historical (USD/t) (USD/t) (USD/t) Q2-Q4 2015 2016 2017 Q1 2018 2018 2019 2020

Workforce Employment 7.39 9.38 6.99 5.52 7.7 7.7 7.7 Consumables 13.52 20.19 11.84 13.40 15.1 15.1 15.1 Fuel, electricity, water and other services 8.78 6.68 5.92 5.13 6.9 6.9 6.9 On- and Off-site Administration 9.92 13.36 27.34 8.44 16.3 16.3 16.3 Environmental protection and monitoring 0.19 0.53 0.90 — 0.5 0.5 0.5 Transportation of workforce 0.00 0.00 — — 0.0 0.0 0.0 Product marketing and support — — — — — — — Non-income taxes, royalties and other government charges 4.59 4.38 4.71 2.32 4.4 4.4 4.4 Contingencies 0.03 0.05 0.03 0.29 0.1 0.1 0.1 Cash OPEX Cost 44.43 54.56 57.73 35.10 50.9 50.9 50.9

Forecast Prediction Cost Object (produced gold) Historical (USD/g) (USD/g) Q1 Q2-Q4 2015 2016 2017 2018 2018 2019 2020 Workforce Employment 3.01 3.88 3.00 2.63 1.5 2.4 2.4 Consumables 5.50 8.36 5.08 6.38 3.0 4.6 4.7 Fuel, electricity, water and other services 3.57 2.76 2.54 2.44 1.4 2.1 2.1 On- and Off-site Administration 4.04 5.53 11.74 4.01 3.2 5.0 5.1 Environmental protection and monitoring 0.08 0.22 0.39 — 0.1 0.2 0.2 Transportation of workforce 0.00 0.00 — — 0.0 0.0 0.0 Product marketing and support ——————— Non-income taxes, royalties and other government charges 1.87 1.81 2.02 1.10 0.9 1.3 1.4 Contingencies 0.01 0.02 0.01 0.14 0.0 0.0 0.0 Cash OPEX Cost 18.08 22.59 24.79 16.71 10.1 15.5 15.8

— III11-98 — APPENDIX III COMPETENT PERSON’S REPORT — AAI REPORT SITE 11

Table 21-2. Fujian Yuanxin Historical Total Costs/Process Tonne

2015 2016 2017 Q1 2018

Process tonnes 253,417 289,486 285,296 84,232 Mining Cost (RMB) 26,900,890 53,259,923 52,089,680 11,866,590 RMB/t 106.15 183.98 182.58 140.88 USD/t 16.16 28.00 27.79 21.44 Processing Cost (RMB) 26,782,781 26,505,461 28,137,848 2,913,221 RMB/t 105.69 91.56 98.63 34.59 USD/t 16.08 13.93 15.01 5.26 Administration Cost (RMB) 20,303,869 24,016,566 27,984,831 4,649,068 RMB/t 80.12 82.96 98.09 55.19 USD/t 12.19 12.63 14.93 8.40 Total Cash Operating Cost (RMB) 73,987,540 103,781,949 108,212,359 19,428,879 RMB/t 291.96 358.50 379.30 230.66 USD/t 44.43 54.56 57.73 35.10 Produced Gold (g) 622,957 699,303 664,260 176,990 Cash Opex Cost/Au G (RMB/Au g) 118.77 148.41 162.91 109.77 Cash Opex Cost/Au G ($US/Au g) 18.08 22.59 24.79 16.71 Cash Opex Cost/Au oz ($US/Au oz) 562.15 702.44 771.07 519.58 Capex Cost (RMB) None None None None RMB/t None None None None USD/t None None None None Total Cost (RMB) 73,987,540 103,781,949 108,212,359 19,428,879 RMB/t 291.96 358.50 379.30 230.66 USD/t 44.43 54.56 57.73 35.10 Total Cost/Au G (RMB/Au g) 118.77 148.41 162.91 109.77 Total Cost/Au G ($US/Au g) 18.08 22.59 24.79 16.71 Total Cost/USD/Au oz 562.15 702.44 771.07 519.58

— III11-99 — APPENDIX III COMPETENT PERSON’S REPORT — AAI REPORT SITE 11

Table 21-3. Projected Operating and Capital Costs for the Fujian Yuanxin Mine

Q2-Q4 2018 2019 2020 2021

Process tonnes 190,000 260,000 260,000 140,000 Mining Cost (RMB) 30,300,000 40,400,000 40,500,000 22,300,000 RMB/t 157.90 157.90 157.90 157.90 USD/t 24.00 24.00 24.00 24.00 Processing Cost (RMB) 17,700,000 23,600,000 23,700,000 13,100,000 RMB/t 92.40 92.40 92.40 92.40 USD/t 14.10 14.10 14.10 14.10 Administration Cost (RMB) 16,200,000 21,500,000 21,600,000 11,900,000 RMB/t 84.30 84.30 84.30 84.30 USD/t 12.80 12.80 12.80 12.80 Total Cash Operating Cost (RMB) 64,200,000 85,500,000 85,800,000 47,300,000 RMB/t 334.70 334.70 334.70 334.70 USD/t 50.90 50.90 50.90 50.90 Produced Gold (g) 960,000 840,000 820,000 390,000 Cash Opex Cost/Au G (RMB/Au g) 66.60 102.00 104.00 120.90 Cash Opex Cost/Au G ($US/Au g) 10.10 15.50 15.80 18.40 Cash Opex Cost/Au oz ($US/Au oz) 315.20 482.60 492.10 572.20 Capex Cost (RMB) None None None None RMB/t None None None None USD/t None None None None Total Cost (RMB) 64,200,000 85,500,000 85,800,000 47,300,000 RMB/t 334.70 334.70 334.70 334.70 USD/t 50.90 50.90 50.90 50.90 ———— Total Cost/Au G (RMB/Au g) 66.60 102.00 104.00 120.90 Total Cost/Au G ($US/Au g) 10.10 15.50 15.80 18.40 Total Cost/USD/Au oz 315.20 482.60 492.10 572.20

22 ECONOMIC ANALYSIS

An economic analysis of the Fujian Yuanxin operations has been conducted using the mining reserves as adjusted beginning Q2 2018. The annual production schedule used in the economic analysis can be found in Table 16-1. Methodology for forecasting production and cost rates have been explained in sections 21. Non-cash charges in the mine reporting have been removed.

Calculations are based on RMB. No inflation or cost escalation is assumed and a flat gold price of 1,231.03 USD is used in the analysis (3-year monthly average London PM Fix gold price from 1 April 2015 through 31 March 2018). A currency conversion of 6.571 RMB per 1.00 USD is assumed.

— III11-100 — APPENDIX III COMPETENT PERSON’S REPORT — AAI REPORT SITE 11

22.1 Taxes

Resource tax and local taxes, plus other government charges, are contained in the mine operating reports. They are accounted for in the forecast OPEX because they are contained in the projected unit cost rates. These costs contain the resource tax, which is currently based on 4% of revenue from the major products before tax.

Income tax is 25% of net operating profit, calculated as revenue less OPEX and depreciation plus amortization.

22.2 Economic Projection

An economic model of the future financial performance of Fujian Yuanxin was developed based on the historical production rates and costs, and the remaining reserves. The average reserve grade was used to estimate future gold production. Silver grades have been defined in the reserves and have been considered. Historical reporting of silver production indicates it contributed minor revenue (approximately 0.2%) compared to gold. The production schedule and costs are listed in Table 22-1.

22.3 Sensitivity of Reserves to Gold Price

The reserve’s sensitivity to gold price assumptions has been investigated for a range of gold prices between 80% and 120% of the forecast price assumption of 1,231.03 USD/Au oz. This resulted in a range of gold prices between 984.82 and 1,477.24 USD/Au oz. Table 22-2 lists the associated cut-off grades for the active mining license(s) and corresponding estimated reserves by gold price.

Table 22-1. Fujian Yuanxin Production and Cost Forecast

Ore Period Processed Au Grade ** Payable Au** Revenue* OPEX CAPEX

(t) (g/t) (oz.) (USD) (USD) (USD)

Q2-Q4 2018 190,000 5.03 31,000 44,200,000 9,800,000 — 2019 260,000 3.28 27,000 37,100,000 13,000,000 — 2020 260,000 3.22 27,000 36,700,000 13,100,000 — 2021 140,000 2.77 13,000 18,300,000 7,200,000 —

Total 840,000 3.57 97,000 136,300,000 43,000,000 —

* Does not include payable silver. ** Payable gold grade and gold production based on process assumptions defined in Section 15 Mineral Reserve Estimate. Note: Figures in the table are rounded to reflect estimate precision; small differences generated by rounding are not material to estimates.

— III11-101 — APPENDIX III COMPETENT PERSON’S REPORT — AAI REPORT SITE 11

Table 22-2. Sensitivity of Gold Reserves to Gold Price

Dongji Mining Area -20% -10% 0% +10% +20% Gold metallurgical recovery 91.8% 91.8% 91.8% 91.8% 91.8% Total cash cost (USD/t) 50.94 50.94 50.94 50.94 50.94 Gold selling price (USD/oz.-t) 984.82 1,107.93 1,231.03 1,354.13 1,477.24 Cut-off grade Au (g/t) 1.75 1.56 1.40 1.28 1.17 Proven and Probable Reserves Ore tonnes (M) 0.76 0.77 0.84 0.84 0.84 Grade (g/t) 4.11 4.09 3.85 3.85 3.85 Contained Au (t) 3.13 3.14 3.25 3.25 3.25

23 ADJACENT PROPERTIES

There are no immediately adjacent mineralized properties which might materially affect the interpretation or evaluation of the mineralization or exploration targets for Fujian Yuanxin.

24 OTHER RELEVANT DATA AND INFORMATION

Section 24.1 discusses a risk assessment for the Fujian Yuanxin site. No other additional information or explanation is necessary.

24.1 Risk Assessment

Mining by its nature is a relatively high risk business when compared to many other industries. Each mine is hosted in a geologic deposit, the occurrence and mineralized grade of which and the resultant response to mining and processing of which are unique.

Under PRC mining regulations, periodic verification reports are prepared for each mining and exploration right by external entities. These verification reports include verifications of the mining right and reserve estimates within the integrated mining area, examination of whether surrounding mineral rights overlap, evaluation of the technical conditions of the deposit and a discussion of the main problems that could arise and require mitigation in mining and exploration. This includes a ranking of the complexity of the geologic environment per the requirements of the Provisions of the Protection of the Geologic Environment of Mines.

— III11-102 — APPENDIX III COMPETENT PERSON’S REPORT — AAI REPORT SITE 11

A risk analysis was undertaken in line with Guidance Note 7 (Rule 1.06 of the HKEx Listing Rules). Risk assessments address the likelihood and consequences of possible threats to the success of a particular project and are necessarily subjective and qualitative. Risk is classified from minor to major as follows:

• Major Risk: immediate danger of a failure, which if uncorrected, will have a material effect (>15% to 20%) on the project cash flow and performance and could lead to failure of the project.

• Moderate Risk: the factor, if uncorrected, could have a significant effect (10% to 15%) on the project cash flow and performance.

• Minor Risk: the factor, if uncorrected, will little or no material effect (<10%) on the project cash flow and performance and could lead to failure of the project.

The degree or consequence of a risk and its likelihood are combined into an overall risk assessment as shown in Table 24-1. The likelihood of a risk within a 7-year time frame is considered as likely, possible or unlikely. A likely risk will probably occur, a possible risk may occur and unlikely risk will probably not occur.

Table 24-1. Overall Risk Assessment Guide

Consequence of Risk Likelihood of Risk (within 7 years) Minor Moderate Major

Likely Medium High High Possible Low Medium High Unlikely Low Low Medium

Table 24-2 presents the risk assessment for the Fujian Yuanxin property. The risks are assigned before mitigation is considered. The risk assessment is by nature a subjective and qualitative process. Mining projects are highly regulated in the PRC. Interruptions to production can occur if Fujian Yuanxin is not diligent in complying with the requirements of the various agencies. If the agencies are in conflict, Fujian Yuanxin may experience delays or nonrenewal of licenses that is not within their immediate control. There are no high-risk areas identified in Fujian Yuanxin.

— III11-103 — APPENDIX III COMPETENT PERSON’S REPORT — AAI REPORT SITE 11

Table 24-2. Project Risk Assessment Table before Mitigation

Discussion of Hazard/Risk Consequence Hazard/Risk Issue and Mitigation Plans Likelihood Rating Risk

Geological & Resources Drilling data quality Diamond core drilling serves Possible Moderate Low as the basis for the vast majority of mineral resources. Great care has been taken by Shandong Gold and its contractors to insure quality samples are obtained for assaying. Risk exists in older, non-gyroscopic down-hole surveys of the drill hole that may create minor shifts in the 3D position of mineralization in the drill holes. Shandong Gold has indicated new drilling with include gyroscopic down-hole surveys to correct this risk.

Drill sample density Drill hole density is regulated Possible Moderate Medium by PRC for this type of gold deposit and may or may not be sufficiently dense to accurately sample the resource.

Sampling techniques Sampling technique has Possible Moderate Low changed recently from mechanical splitting of core into half-core for sampling to diamond sawing of the core into half-core to obtain the assay samples. This recent change will improve the accuracy and reliability of the core hole assay results.

— III11-104 — APPENDIX III COMPETENT PERSON’S REPORT — AAI REPORT SITE 11

Discussion of Hazard/Risk Consequence Hazard/Risk Issue and Mitigation Plans Likelihood Rating Risk

Compositing methodology The practice of excluding Likely Moderate Medium below cut-off-grade sample intervals within a vein intercept calculation is not consistent with industry best practices. There is a risk that veins with significant amounts of below cut-off-grade material may not be mineable at a profit. Inclusion of this material in dilution calculations and mine designs mitigates this risk. This methodology is defined by PRC MRL but represents poor and non-standard practice. We have recommended changing this to correct compositing method that includes the interburden grade and thickness.

Gold analysis methodology There is a risk that the Likely Minor Medium resource estimate based on aqua regia gold assays does not accurately represent the mineral resources of the Project. The fire assay method is the international standard for producing total gold analyses for use in resource estimation. Aqua regia digestion gold assays do not necessarily represent the total gold content of the sample under analysis. Shandong Gold reportedly regularly confirms aqua regia gold analyses with fire assay check assays, which mitigates this risk.

— III11-105 — APPENDIX III COMPETENT PERSON’S REPORT — AAI REPORT SITE 11

Discussion of Hazard/Risk Consequence Hazard/Risk Issue and Mitigation Plans Likelihood Rating Risk

Geologic interpretation Quality geologic interpretation Possible Moderate Medium is the foundation for high-quality resource estimation. Shandong Gold uses manually generated plan and sectional maps to interpret the geology and structural setting in its deposits. Consideration should be given to augmenting the manual systems with 3D software interpretation of the geology to reduce geologic risk.

Mineral Resources/Reserves Estimates of tonnes and grade Possible Moderate Medium and expected mining and processing conditions are derived from small samples of the whole. Verified historical data at producing properties may provide a more certain basis for assessing future conditions. Shandong Gold mines have considerable experience with the deposits.

Mining Surface subsidence Near surface old works that Possible Minor Low have not been backfilled could collapse and cause surface subsidence. This can occur at any underground mine site with near-surface workings.

— III11-106 — APPENDIX III COMPETENT PERSON’S REPORT — AAI REPORT SITE 11

Discussion of Hazard/Risk Consequence Hazard/Risk Issue and Mitigation Plans Likelihood Rating Risk

Mining at greater depth As mining increases in depth, Likely Moderate Medium stresses increase and lead to more difficult mining conditions including the potential for rock bursts and warmer ambient temperatures. Steps will need to be taken to address both issues. As mining deepens, the extent of mined out workings increases, which increases the stress transfer to remaining areas and can lead to more difficult mining conditions. Shandong Gold is aware of these issues and has established research centers to look for solutions.

Ore process/handling No significant risks were Unlikely Minor Low detected in evaluation of the mineral recovery processes.

Tailings storage facility Storage of tailings are subject Possible Moderate Medium to risk associated with dam failure. The safety of the storage facilities has been evaluated and are considered not to pose a threat.

Environmental Liability Ground or surface water The groundwater quality is not Likely Minor Medium quality deterioration suitable for use as domestic water in the mine, but can be used as production water for the mine and irrigation water for farmland. A portion of the waste water produced by the mine is recycled at the mine. The excess water is treated prior to release.

— III11-107 — APPENDIX III COMPETENT PERSON’S REPORT — AAI REPORT SITE 11

Discussion of Hazard/Risk Consequence Hazard/Risk Issue and Mitigation Plans Likelihood Rating Risk

Economic Capital and Operating Costs As China develops, labor and Possible Moderate Medium equipment costs will tend to rise. Significant cost history is available for estimating future costs; however emphasis should remain focused on recent costs.

Commodity pricing, interest Commodity prices, exchange Possible Moderate Medium rates, exchange rates rates and interest rates are subject to change with the world markets. Metals are typically priced in USD so the RMB to USD exchange rate is an important variable.

Seismic damage to surface According to the Seismic Likely Moderate Medium structures Intensity Zoning Map of China issued in 2001 by the China Seismological Bureau, the seismic intensity of the mine areas is classified as Grade VII. Building design must be performed in accordance with the “Code for Seismic Design of Buildings” (GB50011-2001.

Occupational health and An occupational health and Possible Moderate Moderate safety safety program is in place to monitor and minimize risk of exposure to workers. Compliance is monitored by external agencies.

High-risk items are noted even if current practices result in a lower risk, because, if, in the next 7 years, Shandong Gold fails to continue the current mitigation, the impact on the Property could be significant.

— III11-108 — APPENDIX III COMPETENT PERSON’S REPORT — AAI REPORT SITE 11

Other Risks:

In addition to the specific and general risks assessed in the Table 24-2, AAI sought input from Shandong Gold and other sources to provide additional disclosure where relevant and material to Shandong Gold’s business operations, in line with Rule 18.05(6) of the Listing Rule:

1. Project risks arising from environmental, social, and health and safety issues:

Mining projects may be affected by a variety of risks and issues, including environment as well as health and safety risks.

Environmental risks may occur as a result of human negligence such as mishandling of explosive or other dangerous articles in the operations, or force majeure such as flood, earthquake, fire and other natural disasters. The occurrence of any environmental hazards may delay production, increase production costs, cause personal injuries or property damage, result in liabilities and damage reputations. According to Shandong Gold, it has implemented certain measures to address environmental issues arising from the operations and to reduce the impact of operations on the environment. See “Business — Environmental Protection” of this prospectus for details. As advised by Shandong Gold’s Legal Advisors (King & Wood Mallesons 2018), during the Track Record Period, Shandong Gold did not have any material incidents of non-compliance with PRC environmental laws and regulations at its PRC Mines that resulted in material penalties.

According to Shandong Gold, it has implemented a comprehensive occupational health and safety system, which includes operational manuals with respect to its mining and production safety operations, procedures for handling hazardous chemicals and explosive materials, emergency plans, reporting and accident handling, among other things, based on national requirements or policies. It seeks continued improvement in its implementation and standards. See “Business — Occupational Health and Safety” of this prospectus for details. As advised by Shandong Gold’s Legal Advisors (King & Wood Mallesons 2018), during the Track Record Period, Shandong Gold had been in compliance with applicable PRC laws and regulations in respect of occupational health and safety in all material respects.

Mining projects may be subject to actions by local communities or other interested parties who object to the actual or perceived environmental impact of the projects. These actions may delay or halt the mining projects or create negative publicity related to the mining projects. Shandong Gold has confirmed that there has been no material environmental concern from the local community, and Shangdong Gold has established a good relationship with the local community.

Mining projects are also subject to extensive laws, rules, and regulations imposed by the PRC government regarding production safety, in particular, when the mining projects involve the handling and storage of explosives and other dangerous articles.

2. Any non-governmental organization impact on sustainability of mineral and/or other exploration projects:

Shandong Gold confirmed that, as of the date of this report, there was no non-governmental organization impact on the sustainability of Shandong Gold’s mining and/or exploration activities.

— III11-109 — APPENDIX III COMPETENT PERSON’S REPORT — AAI REPORT SITE 11

3. Compliance with host country laws, regulations and permits, and payments made to host country governments in respect of tax, royalties, and other significant payment on a country-by-country basis:

As the amount of the PRC tax penalties received by Shandong Gold during the Track Record Period accounts for an insignificant portion of the latest audited net assets of Shandong Gold and has been fully paid, the PRC Legal Advisers of Shandong Gold (King & Wood Mallesons 2018) have advised that the PRC tax penalties received by Shandong Gold during the Track Record Period will not have a material adverse impact on the operations of Shandong Gold. The Directors of Shandong Gold confirmed that, with the support of the legal opinion of its PRC Legal Advisers, during the Track Record Period and as of the Latest Practicable Date, Shandong Gold have complied with the relevant PRC laws and regulations in all material respects.

4. Sufficient funding plans for remediation, rehabilitation, and closure and removal of facilities in a sustainable manner as well as environmental liabilities of its projects or properties:

Mining projects are subject to extensive laws, rules, and regulations imposed by the PRC government regarding environmental matters, such as the treatment of wastes and environmental rehabilitation. In particular, mining companies are required to establish a plan on the protection, control, and restorage of the geologic environment of a mine

Shandong Gold has prepared a rehabilitation plan and stating that it seeks to adhere to its rehabilitation plan. Shandong Gold has made security deposits for restoration provisions and environmental governance. Please see the Shandong Gold’s accountant report for details.

5. Its historical experience in dealing with host country laws and practices, including management of differences between national and local practice:

Shandong Gold confirmed that, as of the date of this report, it had not experienced any material impediment in complying with PRC laws and practices or dealing with the differences between national and local practice in the PRC.

6. Its historical experience of dealing with concerns of local governments and communities on the sites of its mines, exploration properties, and relevant management arrangements:

The Directors of Shandong Gold confirmed that, with the support of the legal opinion of its PRC Legal Advisers, during the Track Record Period and as of the Latest Practicable Date, Shandong Gold have complied with the relevant PRC laws and regulations in all material respects. Shandong Gold believes it has built up trust between itself and local governments and communities. Shandong Gold has certain personnel to deal with local governments and communities in order to ensure effective and timely responses to any unforeseen issues that may arise between Shandong Gold and other parties.

Shandong Gold confirmed that, as of the date of this report, it had not experienced any material conflict with local governments and communities on the sites of its mines and exploration properties.

— III11-110 — APPENDIX III COMPETENT PERSON’S REPORT — AAI REPORT SITE 11

7. Any claims that may exist over the land on which exploration or mining activities are being carried out, including any ancestral or native claims:

Shandong Gold is required to obtain various licenses, permits, and certifications for its PRC operations. As advised by Shandong Gold’s PRC Legal Advisors (King & Wood Mallesons 2018), as of the Latest Practicable Date, other than the mining permits and exploration permits being renewed, Shandong Gold has obtained the requisite licenses, permits and certificates required by PRC laws and regulations for its current operations in material aspects. See the section headed “Business — Licenses and Permits” in the prospectus for more details.

As of the Latest Practicable Date, according to Shandong Gold, based on its knowledge, it is not aware of any pending or threatened litigation, arbitration, or administrative proceedings which it or its subsidiaries involved in and may have material adverse impacts on Shandong Gold’s financial condition or results of operation. Based on the material provided by Shandong Gold and after the proper verification by the PRC Legal Advisers of Shandong Gold, as of March 31, 2018, Shandong Gold was not involved in any unresolved litigation or arbitration in PRC, each of which had a disputed amount exceeding RMB 1 million. As the amount of the PRC administrative penalties received by Shandong Gold during the Track Record Period accounts for an insignificant portion of the latest audited net assets of Shandong Gold and has been fully paid, the PRC Legal Advisers of Shandong Gold have advised that the PRC administrative penalties received by Shandong Gold during the Track Record Period will not have a material adverse impact on the operations of Shandong Gold. The Directors of Shandong Gold confirmed that, with the support of the legal opinion of its PRC Legal Advisers, during the Track Record Period and as of the Latest Practicable Date, Shandong Gold have complied with the relevant PRC laws and regulations in all material respects.

25 INTERPRETATION AND CONCLUSIONS

Areas of uncertainty that may materially impact the Mineral Resources and Reserves and subsequent mine life presented in this report include the following:

• Changes in geotechnical conditions due to increasing depths

• Increases in the amount of seawater entering the mining areas

• Dilution assumptions

• Variations in commodity price

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• Conversion of exploration license into mining license

The amount of reserves remaining in the current developed mining license area is very limited, so it is urgently necessary to merge the exploration license areas into the one mining license.

26 RECOMMENDATIONS

It was noted during the site visits that some geologic procedures could be improved with internationally accepted best practices. These mostly deal with the collection of geologic data. Review of the verification reports reveal that in many cases these procedures are already part of Shandong’s documented, continuing improvement to standardize and advance geologic practice over all of its multiple operations including recent acquisitions.

Mine ventilation requirements will increase with depth as the ambient in situ rock temperature increases. This will need to be addressed with increased airflows, potential mine air-conditioning or other methods to reduce the working temperature for the underground workforce. Mine ventilation should be investigated soon to enable planning for installations in a timely manner.

27 REFERENCES

Canadian Institute for Mining, Metallurgy and Petroleum (CIM) (2014), CIM Definition Standards — For Mineral Resources and Mineral Reserves, CIM, Montreal, May 10, 10 p. available at .

King & Wood Mallesons (2018), “北京市金杜律師事務所關於山東黃金礦業股份有限公司首次公開發行境外上市外資股並上市的法律意見書,” PRC Legal Opinion, September. (in Chinese).

— III11-112 — APPENDIX III COMPETENT PERSON’S REPORT — AAI REPORT SITE 11

Fuzhou Dongxin Mining Technology Co., Ltd. (2012), “福建省政和縣東際礦區金（銀）礦資源儲量核實地質報告” [Gold (Silver) Mine in Dongji Mining Mining Area, Zhenghe County, Fujian Province, Geological Report of Resource Reserves Verification], report to Fujian Province Zhenghe Yuanxin Mining Co., Ltd., 162 pp., December, translated.

People’s Republic of China, Ministry of Land and Resources (2002), “Industrial Stand on Geology and Minerals of the People’s Republic of China — Specifications for Hard-rock Gold Exploration,” DZ/T 0205-2002, ICS 73.020;73.060.99 D 12.

Shandong Gold Group Yantai Design & Research Engineering Co., Ltd. (2013), “山東黃金集團源鑫礦業有限公司東際金礦技術改造工程可行性研究” [Feasibility Study on Technical Renovation Project of Dongji Gold Mine, Yuanxin Mining Co., Ltd. of Shandong Gold Group], 728-2013, pp. 80-98.

Standardization Administration of the People’s Republic of China (2010), “Specification for Comprehensive Exploration and Evaluation of Mineral Resources,” GB/T 25283-2010, issued November 10, 47 pp. (in Chinese).

Wang, Haibin (2013), “Metallogenic Regularity and Prospecting Direction of Gold between Hudun and Zhenge Area and Dongyou of Jian’ou Area, Fujian Province,” Beijing: Dissertation of the China University of Geosciences.

Zondy Cyber (2017), “MapGIS K9 Professional,” available at http://www.mapgis.com/.

28 DATE AND SIGNATURE

28.1 Statement of Certification by Timothy A. Ross

I, Timothy A. Ross, P.E. do hereby certify that:

1. I am a Mining Engineer and Vice President and Principal of Agapito Associates, Inc. at its office located at 1536 Cole Boulevard, Building 4, Suite 220, Lakewood, Colorado, USA and co-author of the report “Independent Technical Report, Site 11 Fujian Yuanxin (Far South), Fujian Province, China” dated 14 September 2018 and effective as of 31 March 2018 (the “Independent Technical Report”). I assume overall responsibility for this report and specifically for Sections 1, 2, 3, 4, 5, 6, 20, 23, 24, 25, 26 and 27 of this Independent Technical Report and I have reviewed and jointly edited all sections of this Independent Technical Report, except for Sections 7 through 12. Additionally, I have relied on the Qualified Persons for which Statements of Certification are also included in this Section 28. Each of those Qualified Person’s Statement of Certification specifies the report sections for which they are accepting responsibility.

2. I am licensed as a Professional Engineer in the states of Alabama (28419-E), Colorado (33117), Georgia (PE038920), Idaho (16397), Illinois (062.066368), Kentucky (22923), New Mexico (15973), Nevada (22061), Pennsylvania (P085961), Utah (363545-2202), Virginia (0402038410), West Virginia (9242), and Wyoming (9757).

— III11-113 — APPENDIX III COMPETENT PERSON’S REPORT — AAI REPORT SITE 11

3. I have practiced my profession as a Mining Engineer since 1977 and as a Consulting Mining Engineer since 1997.

4. I am a graduate of Virginia Polytechnic Institute and State University, Virginia, USA and earned my Bachelor of Science in Mining Engineering in 1977.

5. I am a Registered Member of the Society for Mining, Metallurgy, and Exploration, Inc. (Member Number 2768550RM) since 2006. I also serve on the Mining PE Exam Committee.

6. As a consulting engineer, I have been involved from 1997 to present with evaluation of resources and reserves and/or design of mines and other underground facilities in aggregates, industrial salts, coal, potash, gold, silver, copper and other trace minerals in the USA and Mexico, Columbia, Peru, Canada, China, Thailand, Australia, India, Germany, United Kingdom, and Russia.

7. As a result of my experience and qualifications, I am a Qualified Person as defined in National Instrument 43-101 and have five years’ experience which is relevant to the style of mineralization and type of deposit described in this report, and to the activities for which I am accepting responsibility.

8. I have no involvement with the Fujian Yuanxin (Far South) or Shandong Gold Mining Co., Ltd. beyond my involvement with the preparation and writing of this Independent Technical Report. I am independent of the issuer according to the definition of independence presented in Section 1.5 of National Instrument 43-101.

9. I did not visit the Fujian Yuanxin (Far South) or any if its mining or exploration properties.

10. As of the effective date of this Independent Technical Report, to the best of my knowledge, information, and belief, those sections or parts of the Independent Technical Report for which I was responsible contain all scientific and technical information that is required to be disclosed to make those sections or parts of the Independent Technical Report not misleading.

11. I have read National Instrument 43-101 and Form 43-101 F1. This report has been prepared in compliance with these documents to the best of my understanding.

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12. I consent to the filing of the Independent Technical Report with any stock exchange and other regulatory authority and any publication by them for regulatory purposes, including electronic publication in the public company files on their web sites accessible by the public, of the Independent Technical Report.

Dated this 14 September 2018.

SIGNED AND SEALED

PROFESSIONAL SEAL Timothy A. Ross, P.E. (Colorado)

— III11-115 — APPENDIX III COMPETENT PERSON’S REPORT — AAI REPORT SITE 11

28.2 Statement of Certification by Douglas F. Hambley

I, Douglas F. Hambley, Ph.D., P.E., P.Eng., P.G., RM-SME do hereby certify that:

1. I am a mining engineer and geologist and Senior Associate of Agapito Associates, Inc. at its office located at 1536 Cole Blvd., Suite 220, Lakewood, Colorado, USA and co-author of the report “Independent Technical Report, Site 11 Fujian Yuonxin, Shandong Province, Peoples Republic of China” dated 14 September 2018 and effective as of 31 March 2018 (the “Independent Technical Report”). I am solely responsible for Sections 14 and jointly responsible for Sections 1, 25, 26, and 27 of this Independent Technical Report.

2. I am a member in good standing of the Association of Professional Engineers and Geoscientists of Saskatchewan, being registered as a Professional Engineer (No. 16124) since January 2009 and of Professional Engineers Ontario, being registered as a Professional Engineer (No. 18026013) since July 1975.

3. I am also licensed as a Professional Engineer in the states of Colorado, Illinois, Michigan, Nebraska, Pennsylvania and Wisconsin and as a Professional Geologist in Illinois and Indiana. I served on the Board of Licensing for Professional Geologists of Illinois during its initial four years (1996 to 2000).

4. I have practiced my profession as a mining engineer and geologist since 1972.

5. I graduated from the Faculty of Applied Science at Queen’s University at Kingston, Ontario with a Bachelor of Science with Honours degree in Mining Engineering in May 1972. I earned a Doctor of Philosophy in Earth Sciences from the University of Waterloo in May 1991.

6. I am a Life Member of the Canadian Institute of Mining, Metallurgy, and Petroleum (CIM) and a Registered Member (No. 1299100RM) of the Society for Mining, Metallurgy, and Exploration (SME). I am a member of the Potash Subcommittee of the CIM Committee on Mineral Resources and Mineral Reserves, the SME Resources and Reserves Committee and the SME Registered Member Admissions Committee.

7. As an engineer and geologist with mining companies from 1972 to 1980 and as a consulting mining engineer and geologist since 1980, I have been involved with evaluation of resources and reserves and design of mines and other underground facilities in iron ore, base and precious metals, uranium, salt and potash and industrial minerals in Canada, the United States, Germany, Brazil, Kazakhstan, Russia, Congo (Brazzaville), South Korea, Ethiopia and China.

8. As a result of my experience and qualifications, I am a Qualified Person as defined in National Instrument 43-101 and have five years’ experience which is relevant to the style of mineralization and type of deposit described in this report, and to the activities for which I am accepting responsibility.

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9. I have no involvement with the Fujizn Yuanxin or Shandong Gold Mining Co., Ltd. beyond my involvement with the due diligence for and preparation and writing of the Independent Technical Report. I am independent of the issuer according to the definition of independence presented in Section 1.5 of National Instrument 43-101.

10. I have not visited the site.

11. As at the effective date of the Independent Technical Report, to the best of my knowledge, information, and belief, those sections or parts of the Independent Technical Report for which I was responsible contain all scientific and technical information that is required to be disclosed to make those sections or parts of the Independent Technical Report not misleading.

12. I have read National Instrument 43-101 and Form 43-101 F1. This report has been prepared in compliance with these documents to the best of my understanding.

13. I consent to the filing of the Independent Technical Report with any stock exchange and other regulatory authority and any publication by them for regulatory purposes, including electronic publication in the public company files on their web sites accessible by the public, of the Independent Technical Report.

Dated this 14 September 2018.

SIGNED AND SEALED

PROFESSIONAL SEAL Douglas F. Hambley, Ph.D., P.E. (Colorado), P.Eng. (Saskatchewan), P.G. (Illinois), RM-SME

— III11-117 — APPENDIX III COMPETENT PERSON’S REPORT — AAI REPORT SITE 11

28.3 Statement of Certification by Vanessa A. Santos

I, Vanessa A. Santos, P.G., RM-SME, do hereby certify that:

1. I am a Professional Geologist and Chief Geologist of Agapito Associates, Inc. at its office located at 715 Horizon Drive, Suite 340 Grand Junction, Colorado, 81506, USA and co-author of the report “Independent Technical Report, Site 11 Fujian Yuanxin, Shandong Province, China” dated 14 September 2018 and effective as of 31 March 2018 (the “Independent Technical Report”). I am solely responsible for Sections 7, 8, 9, 10, 11, and 12 and jointly responsible for 1, 6, 23, 25, 26, and 27 of this Independent Technical Report and I have reviewed and jointly edited all sections of this Independent Technical Report, except for 2, 3, 4, and 5.

2. I am a registered member of the Society of Mining, Metallurgy and Exploration, Inc. (Member Number 405-8318) since 2011.

3. I am also licensed as a Professional Geologist in South Carolina (2403) and Georgia (1664).

4. I have practiced my profession as a geologist since 1983.

5. I am a graduate of the University of Kentucky, and earned a MSc. in Geology in May 1983. I received my BSc. on geology in May 1980 from the University of Kentucky.

6. I am a member of Society of Mining, Metallurgy and Exploration, Inc., the Forum on the Geology of Industrial Minerals, Inc (Board Member and Officer, The Geological Society of Grand Junction (Member), I am a member of the Robert Dreyer Award Committee.

7. As a professional geologist, I have been involved from 1986 to present with evaluation of resources and reserves and in Brazil, Canada, Egypt, South Africa, Spain, Thailand, Turkey and the United States. I have worked in all facets of mining and exploration: evaluation, geologic reconnaissance, field mapping, drilling/coring, ore zone definition, geologic modeling and reserve estimation, QA/QC in minerals and commodities including potash, phosphate, trona, lithium, mica, feldspar, high purity quartz, and phlogopite, industrial sand, talc, limestone, dolomite, crushed stone, kaolin, ball and specialty clays and alluvial diamonds.

9. I have no involvement with the Fujian Yuanxin or Shandong Gold Mining Co., Ltd. beyond my involvement with preparation and writing of the Independent Technical Reports. I am independent of the issuer according to the definition of independence presented in Section 1.5 of National Instrument 43-101.

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10. I visited the site on 3 through 4 September 2017, and inspected the labs, offices, core storage, and underground workings at the Fujian Yuanxin or Shandong Gold Mining Co.

12. I have read National Instrument 43-101 and Form 43-101 F1. This report has been prepared in compliance with these documents to the best of my understanding.

Dated this 14 September 2018.

SIGNED AND SEALED

PROFESSIONAL SEAL Vanessa A. Santos (RM-SME 405-8318)

— III11-119 — APPENDIX III COMPETENT PERSON’S REPORT — AAI REPORT SITE 11

28.4 Statement of Certification by Thomas R. Kelly

I, Thomas R. Kelly, MSc., EM do hereby certify that:

1. I am a Mining Engineer and consultant to Agapito Associates, Inc. at its office located at 715 Horizon Dr. Ste. 340, Grand Junction, CO 81506, USA and co-author of the report “Independent Technical Report, Site 11 Fujian Yuanxin Mining Company, Fujian Province, China” dated 14 September 2018 and effective as of 31 March 2018 (the “Independent Technical Report”). I am responsible for Sections 15, 16 and 18 of this Independent Technical Report and I have reviewed and jointly edited sections 1, 6, 23, 25, 26 and 27 of this Independent Technical Report.

2. I am a Registered Member in good standing of the Society for Mining, Metallurgy and Exploration (SME), Registered Member No. 1696580.

3. I have practiced my profession as a Mining Engineer since 1974.

4. I am a graduate of the Colorado School of Mines, and earned a Bachelor of Science degree in Mining Engineering in May 1974 as well as a Master of Science Degree in Mining Engineering from the Colorado School of Mines in December 1995.

5. I am a Fellow of the Australasian Institute of Mining and Metallurgy, Fellow Number 109746.

6. As a Mining Engineer, I have been involved from 1974 to 2017 with evaluation of resources and reserves, design and operation of mines and other underground facilities in copper, gold, silver, lead, zinc, tin and tungsten in the United States (Nevada, Colorado, Idaho, Alaska, California), Bolivia, Peru, Chile, Colombia, Mexico, Honduras, Nicaragua, Costa Rica, Brazil, Ecuador, Republic of South Africa, Ghana, Guinea (West Africa), Indonesia and Kazakhstan.

8. I have no involvement with the Fujian Yuanxin Mining Company or Shandong Gold Mining Co., Ltd. beyond my involvement with the Prefeasibility, Feasibility and Pilot Study Studies and preparation and writing of the Independent Technical Reports. I am independent of the issuer according to the definition of independence presented in Section 1.5 of National Instrument 43-101.

9. I visited the site on September 3 and 4, 2017 and inspected the underground mine workings, surface plant related to underground mine operations and the engineering offices at each site.

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10. As at the effective date of the Independent Technical Report, to the best of my knowledge, information, and belief, those sections or parts of the Independent Technical Report for which I was responsible contain all scientific and technical information that is required to be disclosed to make those sections or parts of the Independent Technical Report not misleading.

11. I have read National Instrument 43-101 and Form 43-101 F1. This report has been prepared in compliance with these documents to the best of my understanding.

Dated this 14 September 2018.

SIGNED AND SEALED

Thomas R. Kelly, (RM-SME 1696580)

— III11-121 — APPENDIX III COMPETENT PERSON’S REPORT — AAI REPORT SITE 11

28.5 Statement of Certification by Qinghua Jin

I, Qinghua “Jason” Jin, P.E., RM-SME, do hereby certify that:

1. I am currently employed as a Senior Process Engineer with SGS North America Inc. with an office at 3845 N. Business Center Drive, Suite 111, Tucson, Arizona 85705 USA and a co-author of the report “NI 43-101 Technical Report, Site 11 Fujian Yuanxin (Far South), Fujian Province, China” dated 14 September 2018 and effective as of 31 March 2018 (the “Independent Technical Report”). I am solely responsible for Sections 13 and 17, and jointly responsible for Sections 1, 25, 26, and 27 of this Independent Technical Report.

2. I am a member in good standing of Association of Arizona State Board of Technical Registration, being registered as a Professional Engineer (License No. 53463).

3. I have practiced mineral processing for 26 years. I have worked on scoping, prefeasibility, and feasibility studies for mining projects in North America, South America, Europe, and Asia as well as worked on the design phases of some of these projects.

4. I am a graduate of Northeastern University in Shenyang, China, and earned a Bachelor of Engineering degree in Mineral Processing Engineering in 1990. I obtained two Master of Science degrees in Mining Engineering and Statistics, both from West Virginia University, USA, in 2002 and 2006, respectively.

5. I am a registered member of the Society for Mining, Metallurgy & Exploration (04138753RM).

6. As a result of my experience and qualifications, I am a Qualified Person as defined in National Instrument 43-101 and have five years’ experience which is relevant to the style of mineralization and type of deposit described in this report, and to the activities for which I am accepting responsibility.

7. I have no involvement with the Fujian Yuanxin (Far South) and associated mineral and exploration rights or Shandong Gold Mining Co., Ltd. I am independent of the issuer according to the definition of independence presented in Section 1.5 of National Instrument 43-101.

8. I visited the site on 10 September 2017 and inspected the Yuanxin Processing plant.

9. As of the effective date of this Independent Technical Report, to the best of my knowledge, information, and belief, those sections or parts of the Independent Technical Report for which I was responsible contain all scientific and technical information that is required to be disclosed to make those sections or parts of the Independent Technical Report not misleading.

10. I have read National Instrument 43-101 and Form 43-101 F1. This report has been prepared in compliance with these documents to the best of my understanding.

— III11-122 — APPENDIX III COMPETENT PERSON’S REPORT — AAI REPORT SITE 11

11. I consent to the filing of the Independent Technical Report with any stock exchange and other regulatory authority and any publication by them for regulatory purposes, including electronic publication in the public company files on their web sites accessible by the public, of the Independent Technical Report.

Dated this 14 September 2018.

SIGNED AND SEALED

PROFESSIONAL SEAL Qinghua Jin, P.E. (RM-SME Arizona 53463)

— III11-123 — APPENDIX III COMPETENT PERSON’S REPORT — AAI REPORT SITE 11

28.6 Statement of Certification by Carl E. Brechtel

I, Carl E. Brechtel, P.E., RM-SME, do hereby certify that:

1. I am a Mining Engineer for Carl Brechtel Consulting LLC and Consultant to Agapito Associates, Inc. at its office located at 1536 Cole Boulevard Building 4, Suite 220, Golden, CO 80401, USA and co-author of the report “Independent Technical Report, Site 11 Fujian Yuanxin (Far South), Fujian Province, China” dated 14 September 2018 and effective as of 31 March 2018 (the “Independent Technical Report”). I am solely responsible for Sections 19, 21 and 22, and jointly responsible for Sections 1 through 27 of this Independent Technical Report and I have reviewed and jointly edited all sections of this Independent Technical Report.

2. I am a Registered Member in good standing of the Society for Mining, Metallurgy and Exploration (SME), Registered Member No. 0035300.

3. I am also licensed as a Professional Engineer in the states of Colorado (No. 23212) and Nevada (No. 8744).

4. I have practiced my profession as a Mining Engineer since 1975.

5. I am a graduate of the University of Utah, and earned a Bachelor of Science in Geologic Engineering in May of 1973, and a Master of Science in Mining Engineering in May of 1978.

6. I am a Registered Member of the Society of Mining, Metallurgy and Exploration (SME) USA and a Member of the AusIMM (Australia).

7. As a Mining Engineer, I have been involved from 1979 to 2017 with evaluation of resources and reserves and design of mines and other underground facilities in gold, coal, trona, and oil shale in the USA, Honduras, Colombia, Guyana, Brazil, Argentina, Morocco, Ghana, Tanzania, Namibia, Russia, and Australia..

9. I have no involvement with the Fujian Yuanxin or Shandong Gold Mining Co., Ltd. beyond my involvement with the preparation and writing of the Independent Technical Reports. I am independent of the issuer according to the definition of independence presented in Section 1.5 of National Instrument 43-101.

10. I have not visited the mine site.

— III11-124 — APPENDIX III COMPETENT PERSON’S REPORT — AAI REPORT SITE 11

11. As of the effective date of the Independent Technical Report, to the best of my knowledge, information, and belief, those sections or parts of the Independent Technical Report for which I was responsible contain all scientific and technical information that is required to be disclosed to make those sections or parts of the Independent Technical Report not misleading.

12. I have read National Instrument 43-101 and Form 43-101 F1. This report has been prepared in compliance with these documents to the best of my understanding.

Dated this 14 September 2018.

SIGNED AND SEALED

PROFESSIONAL SEAL Carl E. Brechtel, P.E. (Colorado and Nevada USA)

— III11-125 — APPENDIX III COMPETENT PERSON’S REPORT — AAI REPORT SITE 11

APPENDIX A

MINING AND EXPLORATION LICENSES

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APPENDIX B

3D OBLIQUE VIEW OF VEIN UPPER SURFACE

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Figure B-1. Dongji Mine 3D Oblique View of Upper SurfaceVeins I, I1, and I2

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