Competent Person's Report of Hengshi Mining's Iron Projects In
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APPENDIX IV COMPETENT PERSON’S REPORT Competent Person’s Report of Hengshi Mining’s Iron Projects in Laiyuan County, Hebei Province, P.R. China Report prepared for Hengshi Mining Investments Limited Prepared by 18 November 2013 –IV-1– APPENDIX IV COMPETENT PERSON’S REPORT Competent Person’s Report of Hengshi Mining’s Iron Projects in Laiyuan County, Hebei Province, P.R. China For Hengshi Mining Investments Limited 91 Guangping Street Laiyuan County Hebei Province, China SRK Project Number SCN352 SRK Consulting China Ltd B1205, COFCO Plaza, 8 Jianguomennei Dajie Dongcheng District, Beijing 100005 Contact: Dr. Yiefei Jia Telephone No.: +86 10 8512 0365 Email: [email protected] URL: www.srk.cn 18 November 2013 Compiled by: Peer reviewed by: Dr. Yiefei Jia, FAusIMM Mike Warren, FAusIMM Principal Consultant Corporate Consultant (Geology) (Project Evaluations) Authors: Yuanjian Zhu, Qiuji Huang, Lanliang Niu, Dr Yuanhai Li and Dr Yiefei Jia Peer Reviewers: Dr Anson Xu (internal), Mr. Mike Warren (external) –IV-2– APPENDIX IV COMPETENT PERSON’S REPORT EXECUTIVE SUMMARY Hengshi Mining Investments Limited (“Hengshi Mining”, “the Company” or “the Customer”) commissioned SRK Consulting China Limited (“SRK”) to undertake an independent assessment of all relevant technical aspects of Aowei Mining Investments Limited (“Aowei Mining”)’s four operating iron mines of the Gufen iron mine (“Gufen Mine”), the Wang’ergou iron mine (“Wang’ergou Mine”), the Shuanmazhuang iron mine (“Shuanmazhuang Mine”) and the Zhijiazhuang iron mine (“Zhijiazhuang Mine”), together with their associated processing plants, all of which are located in Laiyuan County, Hebei Province, the People’s Republic of China (“P.R. China”). It is understood that the SRK Independent Technical Review Report (the “Report”) is required for inclusion in documents that the Company plans to use for a proposed listing (the “Listing”) on the Main Board of the Stock Exchange of Hong Kong Limited (“HKEx”). Summary of Principal Objectives The principal objective of this Report is to provide the Company and financial institutions with an independent technical review report suitable for inclusion in documents for the Listing on the Main Board of the HKEx. Outline of Work Program The work program for this project consisted of a review of data provided; a site visit and inspection in August 2012; discussions with Company personnel and the relevant geological and mining professionals and consultants who conducted the geological exploration and feasibility study; Quality Assurance and Quality Control (“QA/QC”) supervision from July to September 2011 and from June to July 2012; resource modelling and estimation of the four iron mines, conducted from April to May 2012 and during October 2012; analysis of the data provided by the Company and generated by SRK; preparation of this Report. and another site visit and inspection took place in July 2013 for the update of this Report. RESULTS Overall The reviewed properties are operated by Hengshi Mining’s three subsidiaries. Laiyuan County Xinxin Mining Limited (“Xinxin Mining”), which is wholly owned by Aowei Mining, has one mining license of the Gufen Mine covering an area of 1.3821 square kilometres (“km2”), three dry processing facilities and two wet processing plants. Xinxin Mining has a plan for technical renovation to upgrade capacities of mining and processing plants. Laiyuan County Jingyuancheng Mining Limited (“Jingyuancheng Mining”) which is 100% owned by Aowei Mining has two mining licenses of the Shuanmazhuang iron mine covering an area of 2.1871 km2 and the Wang’ergou iron mine covering an area of 1.5287 km2, and six dry processing facilities and five wet processing plants, of which four dry processing plants and four wet processing plants have been temporarily closed. Jingyuancheng Mining plans to close four old dry processing facilities and wet processing plants temporarily for technical renovation and capacity update and build one new dry processing facility and one new wet processing plant. Laiyuan County Jiheng Mining Limited (“Jiheng Mining”) which is 90% owned by Aowei Mining has one mining license of the Zhijiazhuang iron mine covering an area of 0.3337 km2 and two dry processing facilities, one of –IV-3– APPENDIX IV COMPETENT PERSON’S REPORT which has been temporarily closed. Jiheng Mining doesn’t have an associated wet processing plant and plans to technically renovate the existing two dry processing facilities and build a new wet processing plant near the mine. The details of mines and associated facilities and plants are listed in the following tables. Permit Stated By-product in 2012 (1,000t)(d) Mining Planned Mining Capacity Capacity TFe TFe ≥8%, TFe Status as of Mines Product (Mtpa)(a) (Mtpa)(b) ≥PAG(c) <PAG (c) 8%–5% June 30, 2013 Xinxin Mining Trial Gufen Mine ...... RawOre 3.00 5.00 313 859 1,606 Production Jingyuancheng Mining Trial Wang’ergou Mine . Raw Ore 2.40 5.25 382 696 2,302 Production Trial Shuanmazhuang Mine Raw Ore 4.00 8.75 206 375 1,239 Production Jiheng Mining Zhijiazhuang Mine . Raw Ore 1.00 2.40 570 403 2,528 Production Total ........... 10.40 21.40 1,471 2,333 7,674 Notes: (a) Permit Stated Mining Capacity refers to the mining capacity stated on the mining permit of each mine. For Gufen Mine, Wang’ergou Mine and Shuanmazhuang Mine, it refers to the mining of raw ores with the TFe cut-off grade of 15% or above; for Zhijiazhuang Mine, it refers to the mining of raw ores with the TFe cut-off grade of 25% or above. (b) Planned Capacity refers to the expanded mining capacity after technical renovation and equipment upgrade stated by Aowei Mining to achieve based on the JORC Code compliant Ore Reserves of each iron mine estimated under a TFe cut-off grade=8%. (c) As confirmed by relevant administrative authorities in charge of land and resource, working safety and environment, the “iron ores” under the approved mining capacity is defined as minerals with a TFe grade at or above the cut-off grade of 15% for Gufen Mine, Wang’ergou Mine and Shuanmazhuang Mine, and 25% for Zhijiazhuang Mine (“Permit Applied Grade or PAG”), and based on such confirmation letters. (d) Production in 2012 refers to the by-products during the mine development (carrying out overburden stripping). It included the raw ores with grades of greater than PAG, between PAG and 8% and weakly mineralised wall rocks with grades between 5% and 8% TFe. –IV-4– APPENDIX IV COMPETENT PERSON’S REPORT Existing Planned Processed Capacity Capacity in 2012 Status as of Dry Processing Facilities Feed (Mtpa)(e) (Mtpa)(f) (1,000t) June 30, 2013 Xinxin Mining Dry Processing Facility No. 1 ...... RawOre 1.35 1.75 586 Production Dry Processing Facility No. 2 ...... RawOre 1.35 1.75 855 Production Dry Processing Facility No. 3 ...... RawOre 1.80 2.25 1,317 Production Subtotal .................. Raw Ore 4.50 5.75 2,758 Jingyuancheng Mining Dry Processing Facility No. 1 ...... RawOre 3.30 4.30 742 Production Dry Processing Facility No. 2 ...... RawOre 4.00 5.30 1,011 Production Dry Processing Facility No. 3 ...... RawOre 8.00 To be built(g) Dry Processing Facilities Nos. 4–7 . Raw Ore (4.86) 3,437 Closed(h) Subtotal .................. Raw Ore 7.30 17.60 5,191 Jiheng Mining Dry Processing Facility No. 1 ...... RawOre 2.50 3.00 Production(i) Dry Processing Facility No. 2 ...... RawOre 1.20 1.20 1,156 To be renovated(j) Subtotal .................. Raw Ore 3.70 4.20 1,156 Total ...................... 15.50 27.55 9,104 Notes: (e) Existing capacity refers to the raw ore processing capacity stated in the processing design report. (f) Planned capacity refers to the expanded raw ore processing capacity after technical renovation. (g) Dry processing facilities No. 3 at Jingyuancheng Mining is planned to be constructed starting from January 2014 and is expected to commence production in late 2014. (h) Dry processing facilities Nos. 4–7 at Jingyuancheng Mining were temporarily closed on May 22, 2013. (i) Dry processing facility No. 1 at Jiheng Mining was completed in January 2013 and is now under trial production. (j) Dry processing facility No. 2 at Jiheng Mining is to be technically renovated in the third quarter of 2013. –IV-5– APPENDIX IV COMPETENT PERSON’S REPORT Existing Planned Produced Capacity Capacity in 2012 Status as of Wet Processing Plants Feed/ Product (Mtpa)(e) (Mtpa)(f) (1,000t) June 30, 2013 Xinxin Mining Wet Processing Pre-Concentrate Feed 0.68 0.80 286 Production Plant No. 1 ....... Concentrate 0.15 0.25 69 Wet Processing Pre-Concentrate Feed 0.68 0.80 339 Production Plant No. 2 ....... Concentrate 0.23 0.25 81 Subtotal .......... Pre-Concentrate 1.36 1.60 625 Feed Concentrate 0.38 0.50 150 Jingyuancheng Mining Wet Processing Pre-Concentrate Feed 2.40 3.50 Completed(k) Plant No. 1 ....... Concentrate 0.80 0.90 Wet Processing Pre-Concentrate Feed 1.20 To be built(l) Plant No. 2 ....... Concentrate 0.40 Wet Processing Pre-Concentrate Feed 2.09 1,181 To be closed(m) Plants Nos. 3–6 .... Concentrate 0.38 243 Subtotal .......... Pre-Concentrate 2.40 4.70 1,181 Feed Concentrate 1.18 1.30 243 Jiheng Mining Wet Processing Pre-Concentrate Feed 1.60 To be built(n) Plant No. 1 ....... Concentrate 1.00 Subtotal .......... Pre-Concentrate 1.60 Feed Concentrate 1.00 Total ............ Pre-Concentrate Feed 3.76 7.90 1,806 Concentrate 1.56 2.80 392 Notes: (e) Existing capacity refers to the iron concentrate production capacity stated in the processing design report. (f) Planned capacity refers to the expanded iron concentrate production capacity after technical renovation. (k) Wet processing plant No. 1 at Jingyuancheng Mining was completed in March 2013 and is now under trial production.