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THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION If you are in any doubt as to any aspect of this circular or as to the action to be taken, you should consult your stockbroker or other registered dealer in securities, bank manager, solicitor, professional accountant or other professional adviser. If you have sold or transferred all your shares in China Metal Resources Holdings Limited (“Company”), you should at once hand this circular, together with the accompanying form of proxy, to the purchaser or the transferee or to the bank, stockbroker or other agent through whom the sale or transfer was effected for transmission to the purchaser or the transferee. The Stock Exchange of Hong Kong Limited (“Stock Exchange”) takes no responsibility for the contents of this circular, makes no representation as to its accuracy or completeness and expressly disclaims any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this circular. This circular appears for information purposes only and does not constitute an invitation or offer to acquire, purchase or subscribe for securities. CHINA METAL RESOURCES HOLDINGS LIMITED 中國金屬資源控股有限公司 (Incorporated in the Cayman Islands with limited liability) (Stock Code: 8071) VERY SUBSTANTIAL ACQUISITION AND CONNECTED TRANSACTION, PROPOSED CONTINUING CONNECTED TRANSACTION, SPECIFIC MANDATE TO ISSUE NEW SHARES AND NOTICE OF EXTRAORDINARY GENERAL MEETING Financial adviser to the Company Hantec Capital Limited Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders This circular, for which the directors of the Company (“Directors”) collectively and individually accept full responsibility, includes particulars given in compliance with the Rules Governing the Listing of Securities on the Growth Enterprise Market (“GEM”) of the Stock Exchange for the purpose of giving information with regard to the Company. The Directors, having made all reasonable enquiries, confirm that, to the best of their knowledge and belief: (i) the information contained in this circular is accurate and complete in all material respects and not misleading; (ii) there are no other matters the omission of which would make any statement in this circular misleading; and (iii) all opinions expressed in this circular have been arrived at after due and careful consideration and are founded on bases and assumptions that are fair and reasonable. A notice convening the extraordinary general meeting of the Company (“EGM”) to be held at Unit 1006, 10th Floor, Tower One Lippo Centre, No. 89 Queensway, Hong Kong on 30 May 2008 at 11:00 a.m. is set out on pages EGM-1 to EGM-4 of this circular. Whether or not you are able to attend the EGM, you are requested to complete and return the accompanying form of proxy in accordance with the instructions printed thereon and deposit the same as soon as possible and in any event not later than 48 hours before the time of the EGM or any adjournment thereof to the Company’s Hong Kong branch share registrar, Tricor Tengis Limited, at 26th Floor, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong. Completion and return of the form of proxy will not preclude you from attending and voting at the EGM or any adjournment thereof should you so wish. This circular will remain on the “Latest Company Announcements” page of the GEM website for at least seven (7) days from the date of its publication. 13 May 2008 CHARACTERISTICS OF GEM GEM has been established as a market designed to accommodate companies to which a high investment risk may be attached. In particular, companies may list on GEM with neither a track record of profitability nor any obligation to forecast future profitability. Furthermore, there may be risks arising out of the emerging nature of companies listed on GEM and the business sectors or countries in which the companies operate. Prospective investors should be aware of the potential risks of investing in such companies and should make the decision to invest only after due and careful consideration. The greater risk profile and other characteristics of GEM mean that it is a market more suited to professional and other sophisticated investors. Given the emerging nature of companies listed on GEM, there is a risk that securities traded on GEM may be more susceptible to high market volatility than securities traded on the Main Board and no assurance is given that there will be a liquid market in the securities traded on GEM. The principal means of information dissemination on GEM is publication on the internet website operated by the Stock Exchange. Listed companies are not generally required to issue paid announcements in gazetted newspapers. Accordingly, prospective investors should note that they need to have access to the GEM website at www.hkgem.com in order to obtain up-to-date information on GEM-listed issuers. - i - CONTENTS Pages Characteristics of GEM ...................................................................................................... i Definitions ........................................................................................................................... 2 Letter from the Board ......................................................................................................... 7 Letter from the Independent Board Committee ................................................................. 26 Letter from the Independent Financial Adviser ................................................................. 28 Appendix IA – Financial information of the Group Appendix IB – Accountants’ report on Leland Appendix IC – Unaudited pro forma financial information of the Group and Leland Appendix IIA – Accountants’ report on the Target Group Appendix IIB – Accountants’ report on the Subsidiary and the CJV Appendix IIC – Accountants’ report on the CJV Appendix III – Unaudited pro forma financial information of the Enlarged Group Appendix IV – Valuation report on the project of the CJV Appendix V – Reports on forecasts underlying the valuation on the project of the CJV Appendix VI – Property valuation report Appendix VII – Technical report Appendix VIII – General information Notice of EGM - 1 - DEFINITIONS In this circular, the following expressions shall, unless the context requires otherwise, have the following meanings: “Acquisition” the acquisition of the Sale Share and the Sale Loan pursuant to the terms and conditions of the Agreement “Agreement” the agreement dated 4 January 2008 and entered into between the Purchaser and the Vendor in respect of the Acquisition “associates(s)” has the meaning ascribed thereto in the GEM Listing Rules “Board” the board of Directors “Bondholder” the holder of the Convertible Bonds “business day” any day (other than a Saturday or Sunday or public holiday) on which licensed banks in Hong Kong are generally open for business throughout their normal business hours “BVI” the British Virgin Islands “CJV” 雲南西部礦業有限公司 (Yunnan Xibu Mining Company Limited*), a Chinese foreign co-operative joint venture company established under the PRC laws on 14 May 2004 “Company” China Metal Resources Holdings Limited, a company incorporated in the Cayman Islands with limited liability and the issued Shares of which are listed on GEM “Completion” completion of the Acquisition in accordance with the terms and conditions of the Agreement “Completion Date” the date of Completion, being the date falling two business days after all the conditions of the Agreement have been fulfilled or waived or such later date as may be agreed between the Vendor and the Purchaser “connected person(s)” has the meaning ascribed thereto in the GEM Listing Rules “Consideration” the consideration for the Acquisition, being HK$1,800 million “Consideration Shares” up to 2,957,575,000 new Shares that may be allotted and issued by the Company at the Issue Price as partial consideration for the Acquisition - 2 - DEFINITIONS “Continuing Connected the continuing connected transaction to be constituted by the Transaction” transactions contemplated under the Supply Agreement “Conversion Price” the initial conversion price of HK$0.40 per Conversion Share, pursuant to the terms of the Convertible Bonds “Conversion Shares” the Shares to be issued upon the exercise of the conversion rights attaching to the Convertible Bonds “Convertible Bonds” the convertible bonds in the principal amount of up to HK$1,561.74 million, that may be issued by the Company in favour of the Vendor as partial consideration for the Acquisition “Deposit” the deposit of HK$65 million paid by the Purchaser to the Vendor on the date of the Agreement, as deposit and partial consideration for the Acquisition “Directors” the directors of the Company “EGM” the extraordinary general meeting to be held at Unit 1006, 10th Floor, Tower One Lippo Centre, No. 89 Queensway, Hong Kong at 11:00 a.m. on 30 May 2008 to approve the various matters as set out in the notice of the EGM, a copy of which is set out on pages EGM-1 to EGM-4 of this circular “Exploration Area” an area of approximately 113.96 sq. km. of the gold mining site located at Luoxi City, Yunnan Province, the PRC “Enlarged Group” the Group following completion of the Acquisition “Fund Raising Exercise” any fund raising exercise, including by way of placing of new shares or issue of other securities to investors who are third party independent of the Company and its connected persons (as defined in the GEM Listing Rules), excluding by way of rights