CHINA KINGSTONE MINING HOLDINGS LIMITED 中國金石礦業控股有限公司 (Incorporated in the Cayman Islands with Limited Liability) (Stock Code: 1380)

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CHINA KINGSTONE MINING HOLDINGS LIMITED 中國金石礦業控股有限公司 (Incorporated in the Cayman Islands with limited liability) (Stock Code: 1380)

ANNOUNCEMENT (1) DISCLOSEABLE TRANSACTION IN RELATION TO PROCUREMENT AGREEMENT AND (2) ADVANCE TO ENTITIES AND PRICE SENSITIVE INFORMATION IN RELATION TO STRATEGIC COOPERATION WITH FOUR OTHER COMPANIES ENGAGED IN STONE MATERIAL INDUSTRY

(1) DISCLOSEABLE TRANSACTION IN RELATION TO PROCUREMENT AGREEMENT

The Board is pleased to announce that on 1 March 2012, Kingstone Guangzhou, a wholly owned subsidiary of the Company and Guangzhou Zhongling, an Independent Third Party, have entered into an agreement (‘‘Procurement Agreement’’) whereby Guangzhou Zhongling was engaged to procure various production, transportation and other related equipments for Kingstone Guangzhou. Under the Procurement Agreement, Kingstone Guangzhou is required to pay an amount of RMB94,726,238 (equals approximately HK$116,172,258.28) through Shenzhen Yuyoufa Trading Co., Ltd, an Independent Third Party, to Guangzhou Zhongling as prepayments in relation to procurement of equipment.

The Directors (including the independent non-executive Directors) are of the view that the terms of the Procurement Agreement are fair and reasonable and are on normal commercial terms as well as in the interest of the Group and the Shareholders as a whole.

– 1 – As one or more of the applicable percentage ratios is 5% or more but is less than 25%, the prepayment contemplated under the Procurement Agreement constitutes a discloseable transaction of the Company under Chapter 14 of the Listing Rules. Accordingly, the Procurement Agreement is subject to notification and announcement requirements under the Listing Rules.

(2) ADVANCE TO ENTITIES AND PRICE SENSITIVE INFORMATION IN RELATION TO STRATEGIC COOPERATION

In March 2012, Kingstone Guangzhou, a wholly owned subsidiary of the Company, formed strategic cooperation partnership with the Strategic Partners to jointly develop and expand stone material processing capacity in Yunfu, Guangdong Province and to develop national distribution network for stone products based on the following Letter of Intent and the Agreements:

1. Letter of Intent entered into between Kingstone Guangzhou and the Strategic Partners on 6 March 2012 setting out the basic framework of the cooperation between the relevant parties:

(i) Yunfu Huihua and Yunfu Chengjiu will jointly establish stone material processing base in Yunfu, Guangdong Province and develop national distribution network for stone products, and Kingstone Guangzhou will provide an advance in the amount of RMB240 million (equals approximately HK$294,336,000) to Yunfu Huihua and Yunfu Chengjiu for the above-mentioned purpose.

(ii) Yunfu Kailong and Yunfu Zhijing will jointly establish stone material processing base in Yunfu, Guangdong Province and develop national distribution network for stone products, and Kingstone Guangzhou will provide an advance in the amount of RMB70 million (equals approximately HK$85,848,000) to Yunfu Kailong and Yunfu Zhijing for the above-mentioned purpose.

(iii) After signing of the Letter of Intent, the Strategic Partners will introduce other companies engaged in stone material industry to join the strategic cooperation partnership.

2. Strategic Cooperation Agreement A entered into by Kingstone Guangzhou, Yunfu Huihua and Yunfu Chengjiu on 13 March 2012, together with a supplemental agreement entered into between the same parties on the same date, setting out details of the cooperation between the relevant parties; and

3. Strategic Cooperation Agreement B entered into by Kingstone Guangzhou, Yunfu Kailong and Yunfu Zhijing on 12 March 2012, together with a supplemental agreement entered into between the same parties on 13 March 2012, setting out details of the cooperation between the relevant parties.

– 2 – The Board is currently in the process of reviewing and assessing the prospects, risks and return of the strategic cooperation given the latest market development. Further announcement will be made by the Company in compliance with the Listing Rules where necessary in due course.

As the advancement made by Kingstone Guangzhou to Yunfu Huihua and Yunfu Chengjiu under the Strategic Cooperation Agreement A exceeds 8% of the total assets of the Company as defined under Rule 14.07(1) of the Listing Rules, the payment made under the Strategic Cooperation Agreement A constitutes an advance to an entity pursuant to Rule 13.13 of the Listing Rules and therefore is subject to the disclosure requirements under the same rule.

This announcement is also made pursuant to Rule 13.09(1) of the Listing Rules.

Shareholders and investors are advised to exercise caution when dealing in the shares of the Company.

(1) DISCLOSEABLE TRANSACTION IN RELATION TO PROCUREMENT AGREEMENT

Major Terms of the Procurement Agreement

Date : 1 March 2012

Parties : Kingstone Guangzhou Guangzhou Zhongling

Subject : The Procurement Agreement is a one year co-operation agreement between Kingstone Guangzhou and Guangzhou Zhongling whereby Guangzhou Zhongling will procure (i) mining equipments; (ii) equipments for cutting slabs; and (iii) heavy duty cranes and transportation equipment based on the needs of Kingstone Guangzhou from time to time during the term of the agreement.

Term : 2 March 2012 to 1 March 2013

Price : Factory price of the equipments plus a reasonable service fee to be agreed between Kingstone Guangzhou and Guangzhou Zhongling. The service fee includes bank charges warehouse rental charges transportation fees, toll fees and handling charges.

– 3 – Services to be provided by : (i) responsible for transportation of the equipment from the Guangzhou Zhongling factory to a mining site specified by Kingstone Guangzhou and assist to deal with all claims which may arise in connection therewith;

(ii) report to Kingstone Guangzhou on the progress in relation to supply of the equipment and work with Kingstone Guangzhou to take any corresponding actions in a timely manner;

(iii) arrange negotiations to resolve all potential disputes and other administrative work;

(iv) assist with the administrative procedures regarding any exchange of equipments, repairs and refunds during the period when claims are being made; and

(v) bear all loss suffered by Kingstone Guangzhou in relation to any breach of contract with suppliers.

Prepayment terms : Kingstone Guangzhou is required to pay an amount of RMB94,726,238 (equals approximately HK$116,172,258.28), which was arrived at based on arm’s length negotiation between Kingstone Guangzhou and Guangzhou Zhongling, within 15 days of signing of the Procurement Agreement to Guangzhou Zhongling as prepayments in relation to procurement of equipment. As at the date of this announcement, the prepayment of RMB94,726,238 (equals approximately HK$116,172,258.28) has been fully paid to Guangzhou Zhongling through Shenzhen Yuyoufa, an Independent Third Party and an alliance company of Guangzhou Zhongling, at the request of Guangzhou Zhongling in accordance with the terms of the Procurement Agreement.

The actual consideration under each procurement order will be deducted from the prepayment amount. The balance of any prepayment amount will be refunded to Kingstone Guangzhou at the completion of the Procurement Agreement.

– 4 – Reasons for and Benefits of the Procurement Agreement

Through the Procurement Agreement, the Group will be able to acquire marble slabs processing equipment, which will enable the Group to expand its production facility.

General Information on the Parties

The Group is principally engaged in marble mining and currently own and operates two marble mines, the Zhangjiaba Mine and the Tujisi Mine.

Guangzhou Zhongling is principally engaged in waterway dredging, port constructions, earthwork, investment by self-owned funds, investment consultancy, and wholesale and retail trade.

Shenzhen Yuyoufa, an alliance company of Guangzhou Zhongling, is principally engaged in channel dredging (excluding sand mining), port constructions, earthwork (excluding extraction).

To the best of the Directors’ knowledge, information and belief having made all reasonable enquiries, Guangzhou Zhongling and Shenzhen Yuyoufa and each of their respective ultimate beneficial owner is an Independent Third Party.

Implications under the Listing Rules

As one or more of the applicable percentage ratios is 5% or more but is less than 25%, the prepayment contemplated under the Procurement Agreement constitutes a discloseable transaction of the Company under Chapter 14 of the Listing Rules. Accordingly, the Procurement Agreement is subject to notification and announcement requirements under the Listing Rules.

(2) ADVANCE TO ENTITIES AND PRICE SENSITIVE INFORMATION IN RELATION TO PROPOSED TERMINATION OF STRATEGIC COOPERATION

Kingstone Guangzhou, a wholly owned subsidiary of the Company, has formed strategic cooperation partnership with the Strategic Partners to jointly develop and expand stone material processing capacity in Yunfu, Guangdong Province and develop national distribution network for stone products, by entering into the following Letter of Intent and the Agreements between the relevant parties in March 2012.

– 5 – Letter of Intent

Parties to the Letter of Intent: Kingstone Guangzhou Yunfu Huihua Yunfu Chengjiu Yunfu Kailong Yunfu Zhijing

The Letter of Intent was entered into on 6 March 2012, setting out the basic framework of the cooperation between relevant parties:

(iii) After signing of the Letter of Intent, the Strategic Partners will introduce other companies engaged in stone material industry to join the strategic cooperation partnership.

Strategic Cooperation Agreement A and Strategic Cooperation Agreement B

Strategic Cooperation Agreement A

Parties to Strategic Cooperation Agreement A: Kingstone Guangzhou Yunfu Huihua Yunfu Chengjiu

Subsequent to the Letter of Intent, the Strategic Cooperation Agreement A and its supplemental agreement were signed on 13 March 2012 to implement the cooperation. It was agreed between the parties that a strategic cooperation partnership will be formed whereby the parties can leverage on the respective advantage and business potential of each other to develop and expand marble reserves and processing capacity and sales network of marble products. Major terms of the cooperation between relevant parties are as below:

(i) Yunfu Huihua and Yunfu Chengjiu will jointly establish stone processing base in Yunfu, Guangdong Province, with storage capacity of stone slabs for no less than 500,000 m2,storage capacity of marble blocks for no less than 100,000 m3, and processing capacity of stone slabs for no less than 3,000,000 m2 per annum.

– 6 – (ii) Yunfu Huihua and Yunfu Chengjiu will give priority to meet Kingstone Guangzhou’s needs of processing capacity of marble slabs, and will provide Kingstone Guangzhou with storage capacity of marble slabs for more than 200,000 m2 per month, storage capacity of marble blocks for more than 50,000 m3 per month and processing capacity of marble slabs for more than 1,000,000 m2 per annum.

(iii) Yunfu Huihua and Yunfu Chengjiu will jointly make further investment to develop national distribution network for stone products, as well as to further develop the branded marble stone products of Kingstone Guangzhou, so as to ensure their aggregate revenue for the agent sales of Kingstone Guangzhou’s marble stone products in the coming three years will be no less than RMB1 billion (equals approximately HK$1,226,400,000).

(iv) Kingstone Guangzhou will provide an advance in the amount of RMB240 million (equals approximately HK$294,336,000) to Yunfu Huihua and Yunfu Chengjiu to be used specifically for the establishment and development in the above-mentioned establishment of stone processing base and development of national distribution network. As at the date of this announcement, such advance of RMB240 million (equals approximately HK$294,336,000) has been fully paid to Yunfu Huihua and Yunfu Chengjiu through Guangzhou Junqi, who acted as a business intermediary between relevant parties in relation to the strategic cooperation, at the request of Yunfu Huihua and Yunfu Chengjiu.

(v) Yunfu Huihua and Yunfu Chengjiu undertook to Kingstone Guangzhou that, once the above- mentioned stone processing base has been well established and the national distribution network has been well developed, such assets could be transferred to Kingstone Guangzhou, by making reference to reasonable market price.

(vi) In the event that, one year after the signing of the Strategic Cooperation Agreement A, Kingstone Guangzhou decides not to acquire the well-established stone processing base or the well-developed national distribution network, Kingstone Guangzhou will be refunded with its initial total investment under the Strategic Cooperation Agreement A, together with interest calculated based on the interest rate of one-year fixed term deposit announced by PBOC.

The Strategic Cooperation Agreement A shall be valid for the period commencing from 13 March 2012 to 14 March 2013.

Strategic Cooperation Agreement B

Parties to Strategic Cooperation Agreement B: Kingstone Guangzhou Yunfu Kailong Yunfu Zhijing

Subsequent to the Letter of Intent, the Strategic Cooperation Agreement B and its supplemental agreement were signed on 12 March 2012 and 13 March 2012, respectively, to implement the cooperation. It was agreed between the parties that a strategic cooperation partnership will be

– 7 – formed whereby the parties can leverage on the respective advantage and business potential of each other to develop and expand marble reserves and processing capacity and sales network of marble products. Major terms of the cooperation between relevant parties as specified in Strategic Cooperation Agreement B are substantially the same as those specified in Strategic Cooperation Agreement A except that:

(i) The stone processing base to be jointly established by Yunfu Kailong and Yunfu Zhijing will have storage capacity of stone slabs for no less than 200,000 m2, storage capacity of marble blocks for no less than 50,000 m3, and processing capacity of stone slabs for no less than 1,000,000 m2 per annum.

(ii) Yunfu Kailong and Yunfu Zhijing will provide Kingstone Guangzhou with storage capacity of marble slab for more than 100,000 m2 per month, storage capacity of marble blocks for more than 20,000 m3 per month and processing capacity of marble slabs for more than 500,000 m2 per annum.

(iii) Yunfu Kailong and Yunfu Zhijing shall ensure their aggregate revenue for the agent sales of Kingstone Guangzhou’s marble stone products in the coming three years to be no less than RMB500 million (equals to approximately HK$613,200,000).

(iv) The advance to be provided by Kingstone Guangzhou to Yunfu Kailong and Yunfu Zhijing will be RMB70 million (equals to approximately HK$85,848,000). As at the date of this announcement, such advance of RMB70 million (equals approximately HK$85,848,000) has been fully paid to Yunfu Kailong and Yunfu Zhijing through Guangzhou Junqi, who acted as a business intermediary between relevant parties in relation to the strategic cooperation, at the request of Yunfu Kailong and Yunfu Zhijing.

The Strategic Cooperation Agreement B shall be valid for the period commencing from 12 March 2012 to 13 March 2013.

Reasons for and Benefits of These Agreements

Reference is made to the section headed ‘‘Future Plans and Use of Proceeds’’ of the Prospectus. As disclosed in the Prospectus, the Company intended to use: (i) approximately 70% of the net proceeds of the global offering to finance the construction of the main production facilities of the Zhangjiaba Mine (as defined in the Prospectus) and marble slab processing facilities, procure mining and processing equipment, and acquire land use rights; (ii) approximately 20% to establish distribution channels and networks to sell the Company’s marble products and to build the Company’s brand; (iii) approximately 10% to acquire and develop additional marble reserves.

As disclosed in the paragraph headed ‘‘Information on the parties’’ below, each of the Strategic Partners is a company engaged in stone material industry with extensive experience in stone mining, contracting of building stone projects, and processing, import, export and sales of stone materials The Directors consider that, by further securing and enhancing capacity for processing of marble stones and establishing distribution network with strengthened customer relationships.

– 8 – The Board is currently in the process of reviewing and assessing the prospects, risks and return of the strategic cooperation given the latest market development. Further announcement will be made by the Company in compliance with the Listing Rules where necessary in due course.

Information on the Parties

The Group is principally engaged in marble mining and currently owns and operates two marble mines, the Zhangjiaba Mine and Tujisi Mine (as defined in the Prospectus).

Yunfu Huihua is principally engaged processing and sales of marble stones, granite blocks, slabs and relevant handicraft products.

Yunfu Chengjiu is principally engaged in processing and sales of granites, agglomerated stones, marble stones, artificial stone blocks, slabs and stone handicraft products.

Yunfu Kailong is principally engaged in processing and sales of granite stones, marble stones and stone handicraft products.

Yunfu Zhijing is principally engaged in processing and sales of stone blocks, stone slabs and stone handicraft products.

Guangzhou Junqi, who acted as a business intermediary between relevant parties in relation to the strategic cooperation.

To the best of the Directors’ knowledge, information and belief having made all reasonable enquiries, each of Yunfu Huihua, Yunfu Chengjiu, Yunfu Kailong and Yunfu Zhijing and each of their ultimate beneficial owner is an Independent Third Party.

Implications under the Listing Rules

This announcement is also made pursuant to Rule 13.09(1) of the Listing Rules.

– 9 – DEFINITIONS

In this announcement, the following expressions shall have the following meanings, unless the context otherwise required:

‘‘Agreements’’ the Strategic Cooperation Agreement A and the Strategic Cooperation Agreement B

‘‘associate’’ has the meaning ascribed thereto under the Listing Rules

‘‘Board’’ the board of Directors

‘‘Company’’ China Kingstone Mining Holdings Limited (中國金石礦業控股有限公司), a company incorporated in the Cayman Islands with limited liability whose shares are listed on the Main Board of the Stock Exchange

‘‘connected person(s)’’ has the meaning ascribed thereto under the Listing Rules

‘‘Director(s)’’ the director(s) of the Company

‘‘Group’’ the Company and its subsidiaries

‘‘Guangzhou Junqi’’ Guangzhou Junqi Investment Management Co., Ltd.* (廣州駿啟投資管理有限公司), a company incorporated under the laws of the PRC and an Independent Third Party

‘‘Guangzhou Zhongling’’ Guangzhou Zhongling Dredging Co., Ltd* (廣州中凌疏浚有限公司), a company incorporated under the laws of the PRC and an Independent Third Party

‘‘HK$’’ Hong Kong dollars, the lawful currency of Hong Kong

‘‘Independent Party(ies), together with his/her/its ultimate beneficial owner(s) is/are Third Party(ies)’’ independent of the Company and its connected persons

‘‘Letter of Intent’’ Letter of Intent of Strategic Investment and Cooperation* (戰略投資合作意向書) entered into between Kingstone Guangzhou, Yunfu Huihua, Yunfu Chengjiu, Yunfu Kailong and Yunfu Zhijing on 6 March 2012

‘‘Kingstone Guangzhou’’ Kingstone (Guangzhou) Stone Industry Co., Ltd.* (金石(廣州)石業有限公司), a wholly owned subsidiary of the Company

‘‘Listing Rules’’ the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited

‘‘m2’’ square meter(s)

– 10 – ‘‘m3’’ cubic meter(s)

‘‘PBOC’’ the People’s Bank of China (中國人民銀行)

‘‘PRC’’ the People’s Republic of China, excluding Hong Kong, the Macau Special Administrative Region of the PRC and Taiwan

‘‘Procurement Agreement’’ the agreement entered into between Kingstone Guangzhou and Guangzhou Zhongling on 1 March 2012 whereby Guangzhou Zhongling was engaged to procure various production, transportation and other related equipments for Kingstone Guangzhou

‘‘Prospectus’’ the prospectus of the Company dated 7 March 2011 relating to the initial public offering of the Company’s shares on the Main Board of the Stock Exchange

‘‘RMB’’ Renminbi, the lawful currency of the PRC

‘‘Shareholder(s)’’ the holder(s) of share(s) of the Company

‘‘Shenzhen Yuyoufa’’ Shenzhen Yuyoufa Trading Co., Ltd* (深圳市裕友發貿易有限公司), a company incorporated under the laws of the PRC and an Independent Third Party

‘‘Stock Exchange’’ The Stock Exchange of Hong Kong Limited

‘‘Strategic Cooperation Strategic Cooperation Agreement* (戰略合作協定書) entered into Agreement A’’ between Kingstone Guangzhou, Yunfu Huihua and Yunfu Chengjiu on 13 March 2012

‘‘Strategic Cooperation Strategic Cooperation Agreement* (戰略合作協定書) entered into Agreement B’’ between Kingstone Guangzhou, Yunfu Kailong and Yunfu Zhijing on 12 March 2012

‘‘Strategic Partners’’ Yunfu Chengjiu, Yunfu Huihua, Yunfu Kailong and Yunfu Zhijing

‘‘Yunfu Chengjiu’’ Yunfu Chengjiu Stone Co., Ltd.* (雲浮市成就石材有限公司), a company incorporate under the laws of the PRC and an Independent Third Party

‘‘Yunfu Huihua’’ Yunfu Huihua Stone Co., Ltd.* (雲浮市輝華石材有限公司), a company incorporate under the laws of the PRC and an Independent Third Party

– 11 – ‘‘Yunfu Kailong’’ Yunfu Kailong Stone Co., Ltd.* (雲浮市凱隆石材有限公司), a company incorporate under the laws of the PRC and an Independent Third Party

‘‘Yunfu Zhijing’’ Yunfu Zhijing Stone Co., Ltd.* (雲浮市致景石材有限公司), a company incorporate under the laws of the PRC and an Independent Third Party

Exchange rate: In this announcement, for reference only and unless otherwise specified, the translation of RMB into HK$ is based on the exchange rate of RMB1.00 = HK$1.2264.

Shareholders and investors are advised to exercise caution when dealing in the shares of the Company.

By Order of the Board China Kingstone Mining Holdings Limited Xiong Wenjun Executive Director

Hong Kong, 27 August 2012

As at the date of this announcement, the executive Directors of the Company is Mr. Xiong Wenjun, the independent non- executive Directors of the Company are Mr. Liu Yuquan, Ms. Leung Yee Shuen and Mr. Lei Zhaochun .

* For identification purpose only

– 12 –

CHINA KINGSTONE MINING HOLDINGS LIMITED 中 國 金 石 礦 業 控 股 有 限 公 司 (Incorporated in the Cayman Islands with Limited Liability) (Stock Code: 1380)

CHINA KINGSTONE MINING HOLDINGS LIMITED 中國金石礦業控股有限公司 (Incorporated in the Cayman Islands with Limited Liability) (Stock Code: 1380)