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The Stock Exchange of Hong Kong Limited and the Securities and Futures Commission take no responsibility for the contents of this Application Proof, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this Application Proof.

Application Proof of Fuli Gemstones International Holdings Limited 富麗寶石國際控股有限公司 (Incorporated in the Cayman Islands with limited liability) (the “Company”)

WARNING

The publication of this Application Proof is required by The Stock Exchange of Hong Kong Limited (the “Stock Exchange”) and the Securities and Futures Commission (the “Commission”) solely for the purpose of providing information to the public in Hong Kong. This Application Proof is in draft form. The information contained in it is incomplete and is subject to change which can be material. By viewing this document, you acknowledge, accept and agree with the Company, its sole sponsor, advisers or members of the underwriting syndicate that: (a) this document is only for the purpose of providing information about the Company to the public in Hong Kong and not for any other purposes. No investment decision should be based on the information contained in this document; (b) the publication of this document or supplemental, revised or replacement pages on the Stock Exchange’s website does not give rise to any obligation of the Company, its sole sponsor, advisers or members of the underwriting syndicate to proceed with an offering in Hong Kong or any other jurisdiction. There is no assurance that the Company will proceed with the offering; (c) the contents of this document or supplemental, revised or replacement pages may or may not be replicated in full or in part in the actual final listing document; (d) this Application Proof is not the final listing document and may be updated or revised by the Company from time to time in accordance with the Rules Governing the Listing of Securities on the Stock Exchange; (e) this document does not constitute a prospectus, offering circular, notice, circular, brochure or advertisement offering to sell any securities to the public in any jurisdiction, nor is it an invitation to the public to make offers to subscribe for or purchase any securities, nor is it calculated to invite offers by the public to subscribe for or purchase any securities; (f) this document must not be regarded as an inducement to subscribe for or purchase any securities, and no such inducement is intended; (g) neither the Company nor any of its affiliates, advisers or underwriters is offering, or is soliciting offers to buy, any securities in any jurisdiction through the publication of this document; (h) no application for the securities mentioned in this document should be made by any person nor would such application be accepted; (i) the Company has not and will not register the securities referred to in this document under the United States Securities Act of 1933, as amended, or any state securities laws of the United States; (j) as there may be legal restrictions on the distribution of this document or dissemination of any information contained in this document, you agree to inform yourself about and observe any such restrictions applicable to you; and (k) the application to which this document relates has not been approved for listing and the Stock Exchange and the Commission may accept, return or reject the application for the subject public offering and/or listing. If an offer or an invitation is made to the public in Hong Kong in due course, prospective investors are reminded to make their investment decisions solely based on the Company’s prospectus registered with the Registrar of Companies in Hong Kong, copies of which will be distributed to the public during the offer period. THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.

IMPORTANT

IMPORTANT: If you are in any doubt about any of the contents of this document, you should seek independent professional advice. Fuli Gemstones International Holdings Limited 富麗寶石國際控股有限公司 (Incorporated in the Cayman Islands with limited liability) [REDACTED]

Total number of [REDACTED] under the : [REDACTED] Shares (subject to the [REDACTED]) [REDACTED] Number of [REDACTED] : [REDACTED] Shares (subject to reallocation) Number of [REDACTED] : [REDACTED] Shares (subject to reallocation and the [REDACTED]) Maximum [REDACTED] : HK$[REDACTED] per [REDACTED], plus brokerage of 1%, SFC transaction levy of 0.0027% and Stock Exchange trading fee of 0.005% (payable in full on application in Hong Kong dollars and subject to refund) Nominal value : US$0.01 per Share Stock code : [•] Sole Sponsor and [REDACTED]

[REDACTED]

Hong Kong Exchanges and Clearing Limited, The Stock Exchange of Hong Kong Limited and Hong Kong Securities Clearing Company Limited take no responsibility for the contents of this document, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this document. A copy of this document, having attached thereto the document specified in “Appendix VII — Documents Delivered to the Registrar of Companies and Available for Inspection” to this document, has been registered by the Registrar of Companies in Hong Kong as required by section 342C of the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Chapter 32 of the Laws of Hong Kong). The Securities and Futures Commission of Hong Kong and the Registrar of Companies in Hong Kong take no responsibility for the contents of this document or any other document referred to above. The [REDACTED] is expected to be determined by agreement between the [REDACTED] (for itself and on behalf of the [REDACTED]) and our Company on the [REDACTED]. The [REDACTED] is expected to be on or around [REDACTED], [REDACTED] and, in any event, not later than [REDACTED], [REDACTED]. The [REDACTED] will be not more than HK$[REDACTED] per [REDACTED] and is currently expected to be not less than HK$[REDACTED] per [REDACTED], unless otherwise announced. Applicants for the [REDACTED] are required to pay, upon application, the maximum [REDACTED] of HK$[REDACTED] per [REDACTED], plus a brokerage of 1%, SFC transaction levy of 0.0027% and Stock Exchange trading fee of 0.005%, subject to refund if the [REDACTED] as finally determined should be lower than HK$[REDACTED] per [REDACTED]. If, for any reason, the [REDACTED] is not agreed by [REDACTED], [REDACTED] between the [REDACTED] (for itself and on behalf of the [REDACTED]) and our Company, the [REDACTED] will not proceed and will lapse immediately. Prior to making an investment decision, prospective investors should carefully consider all of the information set out in this document, including the risk factors set out in “Risk Factors” in this document. The [REDACTED] (for itself and on behalf of the [REDACTED]) may, with the consent of our Company, reduce the number of [REDACTED] and/or the indicative [REDACTED] range that is stated in this document (which is HK$[REDACTED] to HK$[REDACTED] per [REDACTED]) at any time on or prior to the morning of the last day for lodging applications under the [REDACTED]. In such a case, notices of the reduction in the number of [REDACTED] and/or the indicative [REDACTED] range will be published on the website of our Company at www.fuligemstones.com and on the website of the Stock Exchange at www.hkexnews.hk as soon as practicable following the decision to make such reduction, and in any event no later than the morning of the day which is the last day for lodging applications under the [REDACTED]. Further details are set forth in “Structure of the [REDACTED]” and “How to Apply for the [REDACTED]” in this document. The obligations of the [REDACTED] under the [REDACTED] to subscribe for, and to procure subscribers for, the [REDACTED], are subject to termination by the [REDACTED] (for itself and on behalf of the [REDACTED]) if certain grounds arise prior to 8:00 a.m. on the [REDACTED]. Such grounds are set out in “[REDACTED] — [REDACTED] Arrangements and Expenses — [REDACTED] — Grounds for Termination” in this document. It is important that you refer to that section for further details. The [REDACTED] have not been, and will not be, registered under the [REDACTED] or any state securities law in the United States and may not be offered, sold, pledged or transferred within the United States. There will be no [REDACTED] of the securities of our Company in the United States.

ATTENTION [REDACTED]

[REDACTED] THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.

IMPORTANT

[REDACTED] THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.

IMPORTANT

[REDACTED] THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.

EXPECTED TIMETABLE

[REDACTED]

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EXPECTED TIMETABLE

[REDACTED]

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EXPECTED TIMETABLE

[REDACTED]

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CONTENTS

IMPORTANT NOTICE TO INVESTORS

This document is issued by our Company solely in connection with the [REDACTED] and the [REDACTED], and does not constitute an offer to sell or a solicitation of an offer to buy any security other than the [REDACTED] offered by this document pursuant to the [REDACTED]. This document may not be used for the purpose of making, and does not constitute, an offer or invitation in any other jurisdiction or in any other circumstances. No action has been taken to permit a [REDACTED] of the [REDACTED] or the distribution of this document in any jurisdiction other than Hong Kong. The distribution of this document and the [REDACTED] and sale of the [REDACTED] in other jurisdiction are subject to restrictions and may not be made except as permitted under the applicable securities laws of such jurisdictions pursuant to the registration with or authorization by the relevant securities regulatory authorities or an exception therefrom.

You should rely only on the information contained in this document to make your [REDACTED] decision. The [REDACTED] is made solely on the basis of the information contained and the representations made in this document. Our Company has not authorized anyone to provide you with information that is different from what is contained in this document. Any information or representation not made in this document must not be relied on by you as having been authorized by our Company, the Sole Sponsor, the [REDACTED],the [REDACTED],the[REDACTED], any of the [REDACTED], any of their respective directors, officers, representatives or advisors or any other person involved in the [REDACTED].

Page

Expected Timetable ...... i

Contents...... iv

Summary ...... 1

Definitions ...... 14

Glossary of Technical Terms ...... 27

Forward-looking Statements ...... 32

Risk Factors...... 34

Waivers from Strict Compliance with the Listing Rules ...... 64

Information about this Document and the [REDACTED]...... 69

Directors and Parties Involved in the [REDACTED] ...... 73

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CONTENTS

Page

Corporate Information ...... 77

Industry Overview...... 79

Regulatory Overview...... 92

History, Reorganization and Corporate Structure ...... 108

Path to Commercialization ...... 128

Business ...... 148

Relationship with our Controlling Shareholders ...... 213

Directors and Senior Management ...... 221

Substantial Shareholders...... 260

Share Capital...... 262

Financial Information ...... 266

Future Plans and [REDACTED]...... 313

[REDACTED] ...... 316

Structure of the [REDACTED]...... 332

How to Apply for the [REDACTED] ...... 346

Appendix I — Accountants’ Report ...... I-1

Appendix II — [REDACTED] Financial Information of the Group...... II-1

Appendix III — Property Valuation Report ...... III-1

Appendix IV — Competent Person’s Report ...... IV-1

Appendix V — Summary of the Constitution of the Company and Cayman Islands Company Law ...... V-1

Appendix VI — Statutory and General Information ...... VI-1

Appendix VII — Documents Delivered to the Registrar of Companies and Available for Inspection...... VII-1

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SUMMARY

This summary aims to give you an overview of the information contained in this document. As the following is only a summary, it does not contain all the information that may be important to you. You should read the whole document in its entirety before you decide to invest in the [REDACTED]. There are risks associated with any investment. Some of the particular risks in investing in the [REDACTED] are set out in the section headed “Risk factors” in this document. You should read that section carefully before you decide to invest in the [REDACTED]. Various expressions used in this summary are defined in the section headed “Definitions” in this document.

OVERVIEW

We are a developing mining company at the mine site infrastructure development and mine construction preparation stage. According to the F&S Report, our YQS Nanshan Project held the largest amount of exploitable rough peridot as of December 31, 2020 among those identified by Frost & Sullivan internationally based on its independent research. Peridot is one of the oldest gemstones in the world with a 3,500-year history. It is the birth stone for the month of August and has always been associated with an emotive message of light. According to the Competent Person’s Report, peridot is the specific name given to gem-quality olivine. Nearly all of the olivine contained in our YQS Nanshan Project is peridot. Peridot’s color ranges from pure green to yellowish green, and greenish yellow and further to brownish green, and to brown. Peridot is a transparent gemstone and is one of the few gemstones generally available in the market that are natural and untreated. Our gem-grade peridot can be classified into (i) peridot gemstones, which are transparent olivine that is anticipated to produce cut-and-polished peridot of no less than 3mm; and (ii) gem-grade peridot sands which are transparent olivine that is anticipated to produce peridot gem dots of less than 3mm. We strive to become a mining company with a mine-to-market business model encompassing mining operations, our own ore and gemstone processing capacities, in-house marketing abilities, as well as sales channels with extensive coverage of the gemstone value chain. We aim to become the leading global producer and supplier of quality peridot gemstones, and to build one of the most innovative, creative, and environmentally responsible gemstone mining companies in the world. To achieve our goal, we have devised a comprehensive commercialization scheme. See “Path to Commercialization” in this document for details. Our YQS Nanshan Project is located in Emu Town, Dunhua City, Jilin Province, China and is approximately 50km northwest of downtown Dunhua City. The mine site is accessible through daily domestic flights to Changchun, followed by around four hours of traveling by road. The region surrounding our YQS Nanshan Project consists of low-to medium-relief terrain and hilly areas. Elevation ranges from 420m to 750m above sea level with steep slopes and deep valleys. The Zhuerduo River (珠爾多河) is the main watercourse in the region flowing from west to east in the northern part of the project area, and then flowing southward into the Mudan River (牡丹江)to the east of our YQS Nanshan Project. In accordance with our commercialization scheme, we expect to complete our overall mine construction by the third quarter of 2023 and to commence commercial production in the fourth quarter of 2023. See “— Our Commercialization Roadmap” below. We expect that upon commercial production, our YQS Nanshan Project will produce three principal products, namely cut-and-polished peridot gemstones, peridot gem dots and rough peridot gemstones; and two by-products, namely industrial-grade peridot sands and basalt. Taking into consideration the ecosystem of the gemstone industry value chain and leveraging our “mine-to-market” business model, we have identified three major sales channels aside from direct sales to brands, designers, and jewelry and accessories manufacturers, namely (i) international and regional trade shows; (ii) e-commerce channels; and (iii) auction channels. We believe that these channels are effective and complementary to our initiatives in directly

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SUMMARY approaching our target customer groups. We have accordingly devised development strategies for each of these channels. See “Path to Commercialization — Sales Channel Development” in this document for details. OUR BUSINESS MODEL

We strive to become the go-to supplier for peridot gemstones in the international gemstone and jewelry industry. We intend to adopt a mine-to-market business model which encompasses: (i) peridot mining at our YQS Nanshan Project; (ii) processing of the peridot ores mined from our YQS Nanshan Project into rough peridot and cut-and-polished peridot; and (iii) marketing and sales of our peridot products. We believe the mine-to-market business model will facilitate the offering of traceability for our peridot gemstones, enforce unified brand positioning strategies and more effectively internalize profit margin by eliminating intermediaries. On the other hand, our intended offering of multiple principal products and by-products enables us to adjust our product mix based on market demand trends we observe. The diagram below sets forth an illustration of our business model:

Mine

Peridot Ores

Basalt

Sales Ore processing Industrial-grade facilities Peridot Sands

Rough Peridot Gemstones Demand Supply

Gemstone processing Sales facilities

Cut-and-polished Peridot Gem Dots Peridot Gemstones

Sales

Note: Images above are for illustration purpose only. OUR MINERAL RESOURCES AND MINING RIGHTS Our Peridot Resources and Reserves Resources The following table sets forth the estimated Resources of our YQS Nanshan Project under the JORC Code as of December 31, 2020, as extracted from the Competent Person’s Report:

Grade Estimated Category Resources Peridot gemstone Peridot sand (carat(s) per (million tonnes) tonne) % Indicated ...... 5.2 236 16.6 Inferred ...... 6.1 210 16.1

Note: Cut-off grade for peridot gemstone is 20 carats per tonne.

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SUMMARY

Reserves The following table sets forth the Probable Ore Reserves of our YQS Nanshan Project under the JORC Code by product type as of December 31, 2020, as extracted from the Competent Person’s Report:

Probable Ore Reserves Peridot gemstone grade Peridot sand grade (million tonnes) (carats per tonne) % 5.19 204.11 15.80 Mining License The following table sets forth the material information of our Mining License:

Approved Mining License holder Validity production volume Licensed Area Resource type

Yanbian Fuli December 8, 2016 to 300,000 tonnes per 1.6731 km2 GemstonesNote December 8, 2026 annum

Note: The mine site is known as Dunhua City Yiqisong Nanshan Peridot Mine* (敦化市意氣松南山橄欖石寶石礦).

During the Track Record Period and as of the Latest Practicable Date, we did not pledge our mining rights under our Mining License to secure any of our borrowings. See “Business — Licenses and Permits — Mining License” in this document for further details. OUR STRENGTHS

We believe that the following competitive strengths distinguish us from our competitors in the colored gemstone mining industry: (i) large probable reserve of peridot allowing for stable supply of peridot gemstones to capture market shares in China and globally; (ii) advantageous project location coupled with the nature of our deposit, enabling a high-yielding mining operation; (iii) a mine-to-market business model with integrated operations allowing us to enhance our profit margin, enforce a unified branding and offer traceability which is highly valued in the gemstone industry; (iv) early success in establishing a network of key supply chain players; (v) seasoned and experienced management team covering all aspects of our mine-to-market business model; and (vi) a balanced product mix that is adaptable to various market conditions. See “Business — Our Strengths” in this document for details. OUR STRATEGIES

Our mission is to become the leading global producer and supplier of quality peridot gemstones. To this end, we have formulated the following strategies: (i) complete the development of our YQS Nanshan Project and bring it to production and commercialization; (ii) systematically execute our global marketing strategies; and (iii) develop our sales channels and sales capability. See “Business — Our Strategies” in this document for details. OUR COMMERCIALIZATION ROADMAP

In accordance with our commercialization scheme, our YQS Nanshan Project will have a life-of-mine of approximately 21 years. Our overall mine construction is expected to commence in the third quarter of 2021 and last around two years. Our mine production schedule is devised primarily with reference to our sales plan, commencing commercial production in the fourth quarter of 2023 with a relatively conservative ramp-up period of approximately six years to allow for gradual market developments in conjunction with our marketing, promotion and consumer education initiatives.

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SUMMARY

According to our commercialization timeline, we expect to reach full capacity production in 2030, and after that running at full production capacity up to 2041 with a final production ramp-down from 2042 till 2044. See “Path to Commercialization — Our Commercialization Roadmap — Production” for details. Based on our overall mine site construction plan, we have divided our construction work into three sections, namely (i) above-the-ground facilities construction; (ii) underground facilities and mine construction; and (iii) ore processing facilities construction. We plan to build an onsite ore processing facilities to process the peridot ores mined from our YQS Nanshan Project into rough peridot gemstones, rough peridot sands and basalt. To align with the expected annual mine production volume upon full capacity production, the ore processing facilities are also planned to have a designed annual processing capacity of 300,000 tonnes of peridot ores. Construction of the ore processing facilities is currently scheduled to complete in 2023, before our scheduled commercial production. See “Business — Our YQS Nanshan Project — Mine Site” in this document for details. In order to better prioritize our resource allocation and deployment, we plan to engage third-party gemstone processing subcontractors to process our gem-grade rough peridot into cut-and-polished peridot gemstones and peridot gem dots during the production ramp-up period. See “Business — Subcontractors” in this document for details. In the longer run, however, we plan to establish our own gemstone processing capability by constructing our own gemstone processing facilities, currently intended to be located in Dunhua City where our operating center is also located. See “Business — Our YQS Nanshan Project — Gemstone Processing Facilities and Construction” in this document for details. CAPITAL AND OPERATING EXPENDITURE

On the basis of a maximum annual production capacity of 300,000 tonnes of peridot ore and a life-of-mine of approximately 21 years, the total capital expenditure required for the development and operation of our YQS Nanshan Project is projected to amount to RMB289.6 million, according to the Competent Person’s Report. The projected total capital expenditure includes (i) approximately RMB70.6 million of marketing expenditure projected to be incurred prior to commencement of our commercial production; (ii) approximately RMB157.5 million as initial capital expenditure for construction of our mine site, our onsite ore processing facilities as well as general layout engineering; (iii) approximately RMB35.1 million as additional capital expenditure for the construction of our gemstone processing facilities; and (iv) approximately RMB26.3 million as a general buffer of around 10% on top of the above projected capital expenditure. As of December 31, 2020, we had invested approximately RMB30.7 million in our YQS Nanshan Project, according to the Competent Person’s Report.

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SUMMARY

The following table sets forth a breakdown of the projected initial capital expenditure by category for the periods indicated as shown in the Competent Person’s Report:

Cost (RMB’000) Item Mining Construction Equipment Installation Other Total Engineering — Mine ...... 43,455 26,733 28,792 2,057 — 101,037 — Ore processing facilities .. — 5,532 7,475 846 — 13,853 — General layout engineering . — 20,238 1,260 — — 21,498 — Others ...... ————21,130 21,130 Marketing expenditure ...... ————70,568 70,568 Contingency fee (10%) ...... 4,346 5,250 3,753 290 9,170 22,809 Total initial capital expenditure ...... 47,801 57,753 41,279 3,194 100,868 250,894 The following table sets forth a breakdown of the projected additional capital expenditure for the development of our gemstone processing facilities by category as shown in the Competent Person’s Report:

Cost (RMB’000) Item Construction Equipment Installation Other Total Construction ...... 20,524 — — — 20,524 Gemstone processing equipment ...... — 9,140 517 — 9,657 Public and supportive facilities ...... 1,091 — — — 1,091 Land use right ...... — — — 3,877 3,877 Contingency fee (10%)...... 2,161 914 52 388 3,515 Total sustaining capital expenditure .... 23,776 10,054 569 4,265 38,664 The following table sets forth a breakdown of the projected operating expenditure by category, as shown in the Competent Person’s Report:

Cost item Amount Unit Mining and ore processing — Materials ...... 114 RMB per tonne of ore — Power and water...... 96 RMB per tonne of ore — Salary and welfare ...... 77 RMB per tonne of ore — Manufactory ...... 89 RMB per tonne of ore — General and Administrative ...... 422 RMB per tonne of ore Gemstone processing Outsourced processing (2023-2029) — Hand-cut processing (above 7mm) ...... 65 RMB per carat — Machine processing for small gem (above 3 to 7mm) .... 20 RMB per carat — Machine processing for peridot gem dot (1 to 3mm) ..... 20 RMB per carat Gemstone processing facilities (2030-) — Hand-cut processing (above 7mm) ...... 46 RMB per carat Machine processing for small gem (above 3 to 7mm) ...... 14 RMB per carat Machine processing for peridot gem dot (1 to 3mm) ...... 14 RMB per carat Marketing ...... 8,449 RMB per tonne of ore

Our Directors expect that the [REDACTED] from the [REDACTED] will be sufficient to bring our YQS Nanshan Project to commercialization.

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SUMMARY

OUR PRODUCTION AND PROCESSING

We will use the underground cut-and-fill, regular room and pillar, as well as random pillar open stoping mining methods to carry out mining at our YQS Nanshan Project site. Our mining processes comprise mainly drilling and blasting, ventilation, shoveling and loading, as well as onsite transportation of ores. We plan to complete construction of our onsite ore processing facilities concurrent with our mine construction to process the peridot ores mined from our YQS Nanshan Project into rough peridot gemstones, peridot sands and basalt. The typical processing steps involved in our ore processing operations include sorting, crushing and screening of the peridot ore. In our peridot gemstone processing facilities, the rough peridot processed in our ore processing facilities will be further processed, either by hand or machine, primarily into various sizes of cut-and-polished peridot products. For further details, see “Business — Our Production and Processing” in this document.

MARKETING AND SALES

During the Track Record Period and up to the Latest Practicable Date, we embarked on a series of brand awareness initiatives, such as distributing information about our peridot and our brand to our supply chain and end-markets to build market traction for our peridot ahead of our commercial production. We have established collaborative relationships with Liv Luttrell, Zeemou Zeng Limited, Annoushka Ltd and Stephen Webster Limited, all internationally well-known designers or jewelry companies carrying fine jewelry products designed by their respective founders, about creating customized jewelry pieces using our peridot. We have also entered into non-binding memoranda of understanding with most of these collaborative partners and other jewelry and watch companies to use our peridot in their jewelry collections and pieces and the global marketing and promotion of our peridot in 2021. See “Recent Developments and No Material Adverse Change — Recent Developments” below for details.

CUSTOMERS

Upon commencement of commercial production, we expect that our target customers will include jewelry, fashion and accessories brands, designers and manufacturers, gemstone dealers, as well as end-consumers. As part of our pre-market sounding-out initiatives, we sold limited amounts of rough peridot, cut-and-polished peridot and jewelry during the Track Record Period, which were produced using peridot collected during our exploration stage, and generated revenue of RMB1.1 million, RMB1.2 million, and RMB707,000 for the years ended December 31, 2018, 2019 and 2020, respectively. These sales were generally made to retail customers during trade shows or through our three retail showrooms located in our Dunhua operating center, the Yanji airport and the Changbaishan tourism area, or to our employees, management and minority shareholders, their friends and families, and related companies. We generally did not provide credit terms for these sales. None of our Directors, their respective associates or any of our Shareholders owning more than 5% of the share capital of our Company was related to, or owned any interest in, any of our top five customers during the Track Record Period. For the three years ended December 31, 2018, 2019 and 2020, revenue generated from our top five customers amounted to RMB627,000, RMB353,000 and RMB200,000 for the corresponding periods, representing 55.8%, 30.6%, and 28.3% of our total revenue, respectively, while revenue from the largest customer amounted to RMB427,000, RMB269,000, and RMB111,000, representing 38.0%, 23.3%, and 15.7% respectively, of our total revenue for the corresponding periods. See “Business — Marketing and Sales — Customers” in this document for details.

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SUMMARY

SUPPLIERS

Given the stage of development of our project, during the Track Record Period our suppliers were primarily either (i) capital expenditure related, whom we procured mine and infrastructure construction related materials, equipment and services from; (ii) or production related, whom we procured gemstone processing services, materials and consumables in the course of producing our gemstone products that were showcased in various trade shows and our showrooms or sold, as the case may be. For the three years ended December 31, 2018, 2019 and 2020, purchases from our top five suppliers were RMB5.0 million, RMB9.9 million and RMB5.7 million, representing 83.7%, 78.4% and 71.6%, of our total purchases, respectively, and purchases from our largest supplier were RMB3.5 million, RMB8.2 million and RMB1.8 million, respectively, representing 59.0%, 65.1% and 23.1%, of our total purchases, respectively. All of our top five suppliers during the Track Record Period are Independent Third Parties. None of our Directors, their associates or our current Shareholders (who, to the knowledge of our Directors, owns more than 5% of share capital of our Company) has any interest in any of our top five suppliers during the Track Record Period. See “Business — Suppliers” for details.

SUBCONTRACTORS

During the Track Record Period, we outsourced some of our gemstone processing and all jewelry fabrication work to subcontractors who were Independent Third Parties. During the Track Record Period, we engaged a total of ten subcontractors, all of which were Independent Third Parties, to carry out gemstone processing and jewelry fabrication and the total subcontracting charges incurred were RMB0.6 million, RMB0.7 million and RMB0.6 million during the three years ended December 31, 2018, 2019 and 2020, respectively.

With a view to better prioritizing our resource allocation and deployment during our initial years of the production ramp-up period, we plan to engage third-party gemstone processing subcontractors to process our gem-grade rough peridot into cut-and-polished peridot gemstones and peridot gem dots before we develop our own gemstone processing facilities. See “Business — Subcontractors” in this document for details.

SUMMARY OF HISTORICAL FINANCIAL INFORMATION

The following tables set out our summary consolidated financial information as at and for the three years ended December 31, 2018, 2019 and 2020. You should read this summary together with the consolidated financial information set forth in the Accountants’ Report of our Group in Appendix I to this document, including the related notes, as well as the information set forth in the “Financial Information” section in this document.

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SUMMARY

Summary Consolidated Statements of Profit or Loss Data

The table below sets forth a summary of our consolidated statements of profit or loss for the periods indicated:

Year ended December 31, 2018 2019 2020 RMB’000 RMB’000 RMB’000 Revenue ...... 1,123 1,154 707 Cost of sales ...... (341) (378) (274) Gross profit...... 782 776 433 Selling and distribution expenses ...... (4,004) (6,419) (7,523) Administrative expenses ...... (9,814) (12,932) (18,098) Loss before tax ...... (13,058) (18,608) (25,899) Income tax credit ...... 2,208 1,497 1,755 Loss for the year...... (10,850) (17,111) (24,144)

Summary Consolidated Statements of Financial Position Items

The table below sets forth a summary of our consolidated statements of financial position as of the dates indicated:

As of December 31, 2018 2019 2020 RMB’000 RMB’000 RMB’000 Total non-current assets...... 28,393 41,504 54,645 Total current assets ...... 9,390 43,749 43,701 Total current liabilities ...... 18,635 71,094 32,610 Net current assets/(liabilities) ...... (9,245) (27,345) 11,091 Total assets less current liabilities ...... 19,148 14,159 65,736 Total non-current liabilities ...... 2,960 11,394 1,931 Net assets ...... 16,188 2,765 63,805 Non-controlling interests ...... — — 3,885 Total equity...... 16,188 2,765 63,805

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SUMMARY

Summary Consolidated Statements of Cash Flows

The table below sets forth a summary of our consolidated statements of cash flows for the years indicated:

Year ended December 31, 2018 2019 2020 RMB’000 RMB’000 RMB’000 Net cash used in operating activities ...... (7,001) (14,789) (28,799) Net cash flows from/(used in) investing activities ...... 2,484 (10,170) (32,258) Net cash flows from financing activities ... 5,230 24,505 60,785 Net increase/(decrease) in cash and cash equivalents...... 713 (454) (272) Cash and cash equivalents at beginning of year ...... 374 1,030 603 Effect of foreign exchange rate changes ... (57) 27 (53) Cash and cash equivalents at end of year .. 1,030 603 278

KEY FINANCIAL RATIOS

Year ended/As of December 31, 2018 2019 2020 Gross profit margin ...... 69.6% 67.2% 61.2% Current ratio ...... 0.5 0.6 1.3 Quick ratio ...... 0.1 0.5 1.1 Gearing ratio...... 77.9% 1,257.9% 5.9% RISK FACTORS

Our business and operations involve certain risks and uncertainties, many of which are beyond our control. These risks can be broadly categorized as: risks relating to our business; risks relating to doing business in the PRC; and risks relating to our Shares and the [REDACTED]. Major risks we face include, among others, the following: (i) as a developing mining company with a single peridot mining project which is at the mine site infrastructure development and mine construction preparation stage, we cannot assure you that we will be able to bring our mining project to commercial production or that our operations will be profitable; (ii) our extensive marketing and promotional initiatives may not be successful in building market demand for our peridot; (iii) we may not succeed in raising prices of peridot gemstones with our marketing and promotional efforts, and the substantially expanded market supply of peridot from our YQS Nanshan Project may instead depress market prices of peridot; (iv) we face uncertainties relating to the quality and characteristics of our gem-grade peridot; (v) our future mining operations are exposed to risks and hazards that are commonly associated with the mining industry, such as those relating to geological conditions, equipment failure, weather conditions and government action; and (vi) if we fail to obtain, retain and/or renew government approvals, permits and licenses required for our mining activities, our business, financial condition, results of operations and prospects could be materially and adversely affected. COMPETITIVE LANDSCAPE

The overall global colored gemstone market is competitive and fragmented with many industry players. Except for a few recognized players in the global colored gemstone market such as Gemfields Group Limited, most are small scale or artisanal miners. Companies with high quality and stable mines, sufficient capital, strong sales channel networks as well as convenient geographical locations tend to gain more competitive advantages. Some leading companies in the

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SUMMARY industry tend to integrate with the downstream industry by building own jewelry brands or cooperating with downstream jewelry brand owners and designers. Furthermore, leading industry players are committed to educating consumers through marketing strategies in order to increase customer awareness and visibility of colored gemstones. Marketing, brand building and sustainable or environmentally friendly mining have become the new factors of competition in the global colored gemstone industry. See “Industry Overview — Competitive Landscape of the Colored Gemstone Industry” in this document for detail. LEGAL PROCEEDINGS AND COMPLIANCE

During the Track Record Period and up to the Latest Practicable Date, we did not commit any material non-compliance with applicable laws or regulations, which taken as a whole, in the opinion of our Directors, are likely to have a material and adverse effect on our business, financial condition or results of operations. As of the Latest Practicable Date, we were not a party to any legal or administrative proceedings. In addition, our Directors are not aware of any claims or proceedings threatened against us or in relation to our mining rights which have been contemplated by government authorities or third parties that might materially and adversely affect our operations, financial condition and reputation. Our Directors confirm that during the Track Record Period and up to the Latest Practicable Date, we have complied with the relevant laws and regulations in all material aspects and have obtained all the material approvals, permits and licenses for our current business operations. OUR CONTROLLING SHAREHOLDERS

We have received [REDACTED] investments from eight investors, namely, Mr. Jiang Daiwei (through Starry Global), Tegus Partnership and the Lenders (as defined in “History, Reorganization and Corporate Structure” in this document), for an aggregate consideration of HK$50,726,380. Such [REDACTED] investments represented [REDACTED]% of the total issued Shares immediately following the completion of the [REDACTED] and the [REDACTED] (assuming the [REDACTED] is not exercised and without taking into account any Shares which may be issued upon the exercise of any options which may be granted under the Share Option Scheme). See “History, Reorganization and Corporate Structure” in this document for details. WAIVER APPLICATIONS

We have applied for, [and the Stock Exchange has granted us], (i) a waiver from strict compliance with Rule 8.12 of the Listing Rules; (ii) a waiver from strict compliance with Rules 3.28 and 8.17 of the Listing Rules; and (iii) a waiver from strict compliance with Rule 8.05(1)(a) of the Listing Rules. See “Waivers from Strict Compliance with the Listing Rules” in this document for details. DIVIDEND

Our Company does not have any specific dividend policy nor pre-determined dividend payout ratios. In the future, declaration and payment of any dividends would require the recommendation of our Board and will be at their discretion. During the Track Record Period, we did not declare or distribute any dividends. See “Financial Information — Dividend” in this document for details.

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SUMMARY

[REDACTED] EXPENSES Assuming the [REDACTED] of HK$[REDACTED] per [REDACTED], being the mid-point of the indicative range of the [REDACTED] stated in this document (and assuming no [REDACTED] is exercised), the total amount of expenses in relation to the [REDACTED] are estimated to be RMB[REDACTED] including the [REDACTED] commission and other [REDACTED] expenses and fees. The expenses in relation to the [REDACTED] shall be borne by our Company, of which RMB5.9 million and RMB[REDACTED] was and will be charged to our Group’s profit and loss for the year ended December 31, 2020 and the year ending December 31, 2021, respectively, and RMB[REDACTED] of its estimated [REDACTED] expenses is directly attributable to the issue of the [REDACTED] and is to be accounted for as a deduction from equity in accordance with the relevant accounting standard after [REDACTED] for the year ending December 31, 2021. The total expenses for the [REDACTED] represents [REDACTED]% of the [REDACTED] from the [REDACTED], based on the mid-point of the proposed [REDACTED] range (assuming that the [REDACTED] is not exercised) and the above estimated total expenses for the [REDACTED]. [REDACTED] STATISTICS

Based on an [REDACTED] Based on an [REDACTED] of HK$[REDACTED] of HK$[REDACTED] per Share per Share Market capitalization of our Shares1 ..... HK$[REDACTED] HK$[REDACTED] million million

RMB HK$2 RMB HK$2 [REDACTED] adjusted consolidated net tangible assets attributable to owners of the parent per Share as at December 31, 20203 ...... [REDACTED] [REDACTED] [REDACTED] [REDACTED]

Notes: 1. All statistics in this table are based on the assumption that the [REDACTED] is not exercised. The calculation of market capitalization is based on [REDACTED] Shares expected to be issued and outstanding following completion of the [REDACTED] and the [REDACTED]. 2. The [REDACTED] adjusted consolidated net tangible assets attributable to owners of the parent per Share are converted into Hong Kong dollars at an exchange rate of RMB0.845 to HK$1.00. 3. The [REDACTED] adjusted consolidated net tangible assets attributable to owners of the parent per Share is arrived at after adjustments referred to in Appendix II to this document and based on [REDACTED] Shares expected to be issued and outstanding following completion of the [REDACTED] and the [REDACTED]. USE OF [REDACTED]

We estimate that we will receive [REDACTED] from the [REDACTED] of approximately HK$[REDACTED] million (after deducting the [REDACTED] commission and other estimated expenses paid and payable by us in connection with the [REDACTED]), assuming an [REDACTED] of HK$[REDACTED] per [REDACTED], being the mid-point of the [REDACTED] range of HK$[REDACTED] to HK$[REDACTED], and no exercise of the [REDACTED]. In accordance with our commercialization scheme devised for the purpose of bringing our YQS Nanshan Project to full commercialization, we will apply our [REDACTED] in the following manner: • Approximately HK$[REDACTED] million (or RMB[REDACTED] million), being [REDACTED]%ofthe[REDACTED], will be applied for the construction and mining operations of our YQS Nanshan Project; • Approximately HK$[REDACTED] million (or RMB[REDACTED] million), being [REDACTED]% of the [REDACTED], will be applied for the implementation and running of our global marketing strategies (see “Path to Commercialization — Our Commercialization Roadmap — Our Global Marketing Strategies” in this document for details);

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SUMMARY

• Approximately HK$[REDACTED] million (or RMB[REDACTED] million), being [REDACTED]%ofthe[REDACTED], will be applied for our sales channel development initiatives (see “Path to Commercialization — Our Commercialization Roadmap — Sales Channel Development” in this document for details); and • Approximately HK$[REDACTED] million (or RMB[REDACTED] million), being [REDACTED]%ofthe[REDACTED], will be allocated for our general working purposes. See “Future Plans and [REDACTED]” in this document for details. RECENT DEVELOPMENTS AND NO MATERIAL ADVERSE CHANGE Recent Developments

Since January 1, 2021 and up to the Latest Practicable Date, we have continued our brand awareness initiatives to build market traction for our peridot. We participated in the 2021 China International Consumer Products Expo held in May 2021 in Haikou, Hainan, China. During the expo, we showcased our rough peridot, cut-and-polished peridot as well as the jewelry designer pieces made with our peridot and designed by Zeemou Zeng Limited and Memorigin Watch Co., Ltd. We also gave a presentation on peridot during the expo for educational purposes to generate interest and create market traction ahead of our commercial production. In 2021, we have entered into non-binding memoranda of understanding with Zeemou Zeng Limited, Annoushka Ltd, Stephen Webster Limited, Memorigin Watch Co., Ltd. and Cuihuating (Beijing) Jewelry Co., Ltd.*(萃華廷(北京)珠寶有限公司) to explore potential areas of collaboration, including the use of our peridot in their respective jewelry collections and pieces, and global marketing and promotion of our peridot. See “Business — Marketing and Sales — Marketing Activities” for details. As a developing mining company yet to commence commercial production, we have been funding our operational, liquidity and capital requirements primarily through equity contributions, advances from Shareholders and other borrowings. On April 1, 2021, we entered into an agreement with Mr. Yu Bing Han, a Shareholder then holding 0.38% of the total issued share capital of our Company, for a Shareholder’s loan with principal amount of HK$13.0 million at an interest rate of 2.0% per year. See also “Financial Information — Indebtedness” in this document for further details.

On May 30, 2021, Jilin Dunhua Development Investment Group Co., Ltd.* (吉林敦化發展投資集團有限公司)(“Jilin Dunhua”), a state-owned enterprise wholly-owned by the State-owned Assets Administrative Commission of Dunhua City (敦化市國有資產管理局) and an Independent Third Party, entered into a capital increase agreement with us to subscribe for an increased registered capital of RMB644,468 in Yanbian Fuli at a consideration of RMB34 million. See “History, Reorganization and Corporate Structure — Subsequent Events to the Reorganization but before the [REDACTED] — (v) Increase in the registered capital of Yanbian Fuli and subscription by Jilin Dunhua” in this document for details. No Material Adverse Change

Since December 31, 2020 and up to the Latest Practicable Date, our business and financial performance generally continued in line with past trends and expectations. To the best of our knowledge, there were no changes in the general economic and market conditions in the industry in which we operate that may have a material adverse effect on our business operations or financial condition.

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SUMMARY

Impact and Measures Taken in Response to the Outbreak of COVID-19 An outbreak of respiratory illness caused by COVID-19 emerged in late 2019 and continues to spread globally. Since the outbreak, significant restrictions have been imposed within many countries in an effort to contain the coronavirus outbreak. Such measures include quarantine measures, travel restrictions, encouraging work-from-home arrangements and cancellation of public activities. The extent to which COVID-19 will impact our results of operations depends on the future developments of the outbreak, including new information concerning the global severity of and actions taken to contain the outbreak, which are highly uncertain and unpredictable. To the extent the COVID-19 pandemic adversely affects our business and financial results, it may also have the effect of heightening many of the other risks described in the “Risk Factors” section, such as those relating to our liquidity position. Our operations could also be severely disrupted if our suppliers, customers, or business partners were affected by such health epidemics. As a developing mining company at the mine infrastructure development and mine construction preparation stage with no material revenue, our Directors are of the view that the COVID-19 pandemic has not had any material adverse impact on our business, results of operations and financial condition. Business operations During the COVID-19 pandemic in early 2020, the above-the-ground mine-site preparation work of our YQS Nanshan Project was suspended as we usually would during winter months due to weather conditions. We resumed our above-the-ground site work in April 2020. Since then and up to the Latest Practicable Date, we have not experienced any adverse impact from COVID-19 outbreak on the construction preparation of our YQS Nanshan Project. During the initial outbreak of the COVID-19 pandemic, we arranged for employees to work from home as recommended by the relevant government. As of the Latest Practicable Date, all of our employees have returned to work in their respective offices other than our employees in UK where we still encourage them to work from home when possible and only return to the office if necessary. We have also adopted enhanced public hygiene and precautionary measures as well as supplied personal cleansing and protective products to our employees within the office areas. Marketing and sales initiatives We initially scheduled attendances for a number of jewelry trade shows in 2020, among which we only attended two in person as of December 31, 2020, whereas three were postponed. With a view to mitigating the impact of travelling restrictions imposed by various countries which largely restricted our ability to conduct face-to-face meetings with targeted value chain players, we instead arranged videoconference sessions and utilized email communications with our key target brands and designers for relationship building purposes. In light of the above, our Directors believe that the outbreak of COVID-19 will not have material adverse impact on our overall business operations and financial performance for the year ending December 31, 2021. However, there can be no assurance that the direct and indirect effects of COVID-19 will not have a greater impact on the global economy and our industry as a whole. If the pandemic evolves, economic slowdown and/or negative business sentiment could still potentially have an adverse impact on our industry or the industries in which our target customers operate, which could adversely affect our business operations and financial condition. See “Risk Factors — Risk relating to our business — Any outbreak of widespread contagious diseases, such as the outbreak of COVID-19, may have a material adverse effect on our business, prospects, financial condition and results of operations.”

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DEFINITIONS

In this document, unless the context otherwise requires, the following expressions shall have the following meanings.

“affiliate(s)” with respect to any specific person, any other person, directly or indirectly, controlling or controlled by or under direct or indirect common control with such specified person

“Accountants’ Report” the accountants’ report prepared by Ernst & Young for the Track Record Period, the texts of which are set out in Appendix 1 to this document

“Articles” or “Articles of the amended and restated articles of association of our Association” Company conditionally adopted on [•] and with effect from the [REDACTED], a summary of which is set out in Appendix V to this document

“associate(s)” has the meaning as ascribed to it under the Listing Rules

“Beijing Fuli” Fuli Peridot Trading (Beijing) Limited* (富麗欖石貿易(北京)有限公司), a company established under the laws of the PRC on September 30, 2018, an indirect wholly-owned subsidiary of our Company and the holding company for our 93.10% equity interests of Yanbian Fuli

“Board” or “Board of Directors” the board of directors of our Company

“business day” a day on which banks in Hong Kong are generally open for business to the public and which is not a Saturday, Sunday or public holiday in Hong Kong

“BVI” the British Virgin Islands

“CAGR” compound annual growth rate

“[REDACTED]” the allotment and issue of [REDACTED] Shares to be made upon the capitalization of certain sums standing to the credit of the share premium account of our Company, see “Statutory and General Information — A. Further Information about Our Group — 4. Written Resolutions Passed by Our Shareholders on [•]” in Appendix VI to this document for further details

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DEFINITIONS

[REDACTED] [REDACTED]

“China” or “PRC” the People’s Republic of China and for the purpose of this document, excludes Hong Kong, the Macau Special Administrative Region and Taiwan

“Companies Ordinance” the Companies Ordinance (Chapter 622 of the Laws of Hong Kong), as amended, supplemented or otherwise modified from time to time

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DEFINITIONS

“Companies (Winding Up and the Companies (Winding Up and Miscellaneous Provisions) Miscellaneous Provisions) Ordinance (Chapter 32 of the Laws of Hong Kong), as Ordinance” amended or supplemented from time to time

“Company” or “our Company” Fuli Gemstones International Holdings Limited (富麗寶石國際控股有限公司) (previously known as Fuli Peridot International Holdings Limited (富麗橄欖石國際控股有限公司)), a company incorporated in the Cayman Islands as an exempted company with limited liability on February 15, 2019

“Competent Person’s Report” the independent technical report dated [•] prepared by the Independent Technical Consultant, the text of which is set out in Appendix IV to this document

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

“Controlling Shareholder(s)” has the meaning ascribed to it under the Listing Rules and, in the context of this document, refers to Mr. Yu and Kind Modest

“COVID-19” an infectious disease caused by severe acute respiratory syndrome coronavirus 2 (SARS-Cov-2), also known as Coronavirus Disease 2019

“CSRC” the China Securities Regulatory Commission (中國證券監督管理委員會)

“Deed of Indemnity” a deed of indemnity dated [•] and entered into by our Controlling Shareholders in favor of our Company (for ourselves and as trustee for each of our subsidiaries) to provide certain indemnities, see “Statutory and General Information — E. Other Information — 1. Estate Duty, Tax and Other Indemnities” in Appendix VI to this document for further particulars

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

“EIT Law” the Enterprise Income Tax Law of the PRC《中華人民共 ( 和國企業所得稅法》) promulgated by the National People’s Congress of the PRC on March 16, 2007 and became effective on January 1, 2008, which was subsequently amended on February 24, 2017 and December 29, 2018

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DEFINITIONS

“EIT Rules” the Regulation on the Implementation of the EIT Law

“Extreme Conditions” any extreme conditions or events, the occurrence of which will cause interruption to the ordinary course of business operations in Hong Kong and/or that may affect the [REDACTED]

“F&S Report” an independent market research report, commissioned by us and prepared by Frost & Sullivan for the purpose of the [REDACTED]

“Feasibility Study” the feasibility study report prepared by Jilin North-eastern Asia International Engineering Group Co. Ltd.* (吉林東北亞國際工程技術集團有限公司), an Independent Third Party, which was first issued in August 2017 and was subsequently updated in April 2018 and April 2021

“Foreign Investment Law” the Foreign Investment Law of the PRC《中華人民共和國 ( 外商投資法》), promulgated by the National People’s Congress of the PRC in March 2019 and became effective on January 1, 2020

“Frost & Sullivan” Frost & Sullivan (Beijing) Inc., Shanghai Branch Co., an independent industry consultant engaged by us for the preparation of the F&S Report

“Fuli Gemstones” Fuli Gemstones Company Limited (富麗寶石有限公司), a company incorporated under the laws of the BVI on January 17, 2020, a direct wholly-owned subsidiary of our Company and the holding company of the entire shareholding interests of Fuli UK

“Fuli HK” Fuli Peridot Mining Industry (Hong Kong) Limited (富麗橄欖石礦業(香港)有限公司), a company incorporated under the laws of Hong Kong on July 16, 2018, an indirect wholly-owned subsidiary of our Company and the holding company of the entire equity interests of Beijing Fuli

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DEFINITIONS

“Fuli International” Fuli International Company Limited (富麗國際股份有限公司), a company incorporated under the laws of the BVI on October 23, 2018, a direct wholly-owned subsidiary of our Company and the holding company of the entire shareholding interests of Fuli HK

“Fuli Mining” Fuli Mining Company Limited (富麗礦業有限公司), a company incorporated under the laws of the BVI on January 17, 2020, a direct wholly-owned subsidiary of our Company and the holding company of the entire shareholding interests of Fuli US

“Fuli UK” Fuli Gemstones (UK) Limited, a company incorporated under the laws of England and Wales on January 27, 2020, an indirect wholly-owned subsidiary of our Company

“Fuli US” Fuli Gemstones, Inc., a company incorporated under the laws of New York, the United States on February 6, 2020, an indirect wholly-owned subsidiary of our Company

[REDACTED] [REDACTED]

“Grand Start” Grand Start Developments Limited (盛創發展有限公司), a company incorporated under the laws of the BVI on October 8, 2018 and wholly owned by Mr. Jiang

“Group”, “our Group”, “we” or our Company and our subsidiaries or, where the context “us” requires, in respect of the period prior to our Company becoming the holding company of its present subsidiaries, such subsidiaries as if they were subsidiaries of our Company at the relevant time

“ha” hectare(s)

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

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DEFINITIONS

[REDACTED] [REDACTED]

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

[REDACTED] [REDACTED]

“Independent Technical Consultant” SRK Consulting China Limited

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DEFINITIONS

“Independent Third Party(ies)” an individual or a company which is independent from and not connected with (within the meaning of the Listing Rules) any Directors, chief executive, substantial shareholders of our Company, its subsidiaries or any of their respective associates

[REDACTED] [REDACTED]

“Kind Modest” Kind Modest Limited (和謙有限公司), a company incorporated under the laws of the BVI on September 12, 2018 and wholly owned by Mr. Yu

“km” kilometer(s)

“km2” square kilometer(s)

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DEFINITIONS

“kWh” kilowatt hour(s)

“Latest Practicable Date” June 21, 2021, being the latest practicable date for the purpose of ascertaining certain information contained in this document prior to its publication

[REDACTED] [REDACTED]

“Listing Rules” the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited, as amended or supplemented from time to time

“m3” cubic meter(s)

“Main Board” the stock exchange (excluding the option market) operated by the Stock Exchange which is independent from and operated in parallel with the GEM of the Stock Exchange. For the avoidance of doubt, the Main Board excludes the GEM

“Memorandum” or the amended and restated memorandum of association of our “Memorandum of Association” Company conditionally adopted on [•] and with effect from the [REDACTED], a summary of which is set out in Appendix V to this document

“Mining License” the mining license (numbered C22000020161271101143443) issued by Department of Land and Resources of Jilin Province (吉林省國土資源廳) (now known as the Department of Natural Resources of Jilin Province (吉林省自然資源廳)) issued on December 8, 2016 to Yanbian Fuli for the mine site known as Dunhua City Yiqisong Nanshan Peridot Gemstone Mine* (敦化市意氣松南山橄欖石寶石礦)

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DEFINITIONS

“Mining Licensed Area” the area covered by the Mining License of a total of 1.6731 km2 currently held by us

“Ministry of Finance” the Ministry of Finance of the PRC (中華人民共和國財政部)

“mm” millimeter(s)

“MOFCOM” the Ministry of Commerce of the PRC (中華人民共和國商務部)

“Mr. Jiang” Mr. Jiang Yingliang (姜英良), one of the co-founders of our Group, an executive Director and our chief executive officer

“Mr. Yu” Mr. Yu Haiyang (于海洋), one of the co-founders of our Group, an executive Director, the chairman of our Board and one of our Controlling Shareholders

“NDRC” the National Development and Reform Commission of the PRC (中華人民共和國發展和改革委員會)

“Negative List” the Special Administrative Measures (Negative List) for the Access of Foreign Investment (2020 version)《外商投資准 ( 入特別管理措施(負面清單)(2020年版)》) which was jointly promulgated by the MOFCOM and the NDRC on June 23, 2020 and became effective on July 23, 2020

“Non-competition Undertaking” a non-competition undertaking dated [•] and executed by each of our Controlling Shareholders in favor of our Company (for ourselves and as trustee for each of our subsidiaries), see “Relationship with Our Controlling Shareholders — Non-competition Undertaking” in this document for further details

“NPV” net present value, the difference between the present value of cash inflows and the present value of cash outflows over a period of time

[REDACTED] [REDACTED]

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DEFINITIONS

[REDACTED] [REDACTED]

“PRC Legal Advisors” Commerce & Finance Law Offices, our legal advisors as to the laws of the PRC

[REDACTED] [REDACTED]

“Reorganization” the corporate reorganization of our Group conducted in preparation for the [REDACTED] as described in “History, Reorganization and Corporate Structure — Reorganization” in this document

“Repurchase Mandate” the general unconditional mandate to repurchase Shares given to our Directors by our Shareholders, see “Statutory and General Information — A. Further Information about Our Group — 4. Written Resolutions Passed by Our Shareholders on [•]” in Appendix VI to this document

“RMB” or “Renminbi” Renminbi, the lawful currency of the PRC

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DEFINITIONS

“SAFE” the State Administration of Foreign Exchange of the PRC (中華人民共和國國家外匯管理局), the PRC governmental agency responsible for matters relating to foreign exchange administration, including local branches, when applicable

“State Administration for Market the State Administration for Market Regulation of the PRC Regulation” (中華人民共和國國家市場監督管理總局), formerly known as the State Administration for Industry and Commerce of the PRC (中華人民共和國國家工商行政管理總局)

“SAT” the State Administration of Taxation of the PRC (國家稅務局)

“SFC” the Securities and Futures Commission of Hong Kong

“SFO” the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong), as amended or supplemented from time to time

“Shareholder(s)” holder(s) of Shares

“Share(s)” ordinary share(s) with a par value of US$0.01 each in the share capital of our Company

“Share Option Scheme” the share option scheme conditionally adopted by our Company on [•], the principal terms of which are summarized in “Statutory and General Information — D. Share Option Scheme” in Appendix VI to this document

“Sole Sponsor”, [REDACTED] or China Galaxy International Securities (Hong Kong) Co., “China Galaxy International” Limited, a licensed corporation under the SFO permitted to conduct type 1 (dealing in securities), type 4 (advising on securities) and type 6 (advising on corporate finance) regulated activities (as defined under the SFO)

“sq.m.” or “m2” square meter(s)

[REDACTED]

“Starry Global” Starry Global Enterprises Limited (星際環球企業有限公司), a company incorporated under the laws of the BVI on May 28, 2018 and wholly owned by Mr. Jiang Daiwei, a minority Shareholder and a supervisor of Beijing Fuli and Yanbian Fuli

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DEFINITIONS

[REDACTED]

“Stock Exchange” The Stock Exchange of Hong Kong Limited

“subsidiary(ies)” has the meaning as ascribed to it under the Listing Rules

“Substantial Shareholder(s)” has the meaning as ascribed to it under the Listing Rules

“Takeovers Code” the Code on Takeovers and Mergers issued by the SFC, as amended or supplemented from time to time

“Tegus Partnership” Tegus Company Limited Partnership (特嘉斯有限合伙企業), a limited partnership established under the laws of the BVI on January 22, 2019, and the partners of which include Mr. Peng Jianqiang (彭建強) (as to 29.75%), as general partner, and Mr. Jiao Wenliang (焦文亮) (as to 10.33%), Mr. Bai Yunsong (白雲松) (as to 8.26%), Mr. Li Feng (李鋒) (as to 8.26%), Ms. Zhang Zhixi (張之曦) (as to 8.26%), Ms. Yu Xiaolin (于曉霖) (as to 8.26%), Ms. Ming Yan (明焱) (as to 8.26%), Mr. Hou Zhuosen (侯焯森) (as to 6.61%), Mr. Chi Yongxi (遲永喜) (as to 3.72%), Mr. Liu Jiayu (劉佳宇) (as to 3.31%), Mr. Yang Rong (楊榮) (as to 2.48%), Ms. Feng Jian (馮劍) (as to 1.65%), and Ms. Shu Yun (舒雲) (as to 0.83%), all as limited partners. Save as Mr. Peng Jianqiang, Ms. Yu Xiaolin, Mr. Chi Yongxi, Ms. Feng Jian and Mr. Liu Jiayu, the remaining eight individuals are Independent Third Parties

“Track Record Period” the financial years ended December 31, 2018, 2019 and 2020

“UK” or “United Kingdom” the United Kingdom of Great Britain and Northern Ireland

[REDACTED]

“US$” or “USD” United States dollar, the lawful currency of the United States

“U.S.” or “United States” the United States of America, its territories and possessions, any state of the United States and the District of Columbia

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DEFINITIONS

[REDACTED] [REDACTED]

“Yanbian Fuli” Yanbian Fuli Peridot Mining Industry Co., Ltd* (延邊富麗橄欖石礦業有限公司), a company established under the laws of the PRC on April 27, 2015 and owned by our Company, Tonghua Xintong Investment Holding Group Co., Ltd* (通化信通投資控股集團有限公司) and Jilin Dunhua Development Investment Group Co., Ltd* (吉林敦化發展投資集團有限公司) as to 93.10%, 4.90% and 2.00%, respectively, and the holder of the Mining License

“YQS Nanshan Project” the peridot mining project under the Mining License and covered by the Competent Person’s Report

“£” or “GBP” British pounds, the lawful currency of the United Kingdom

“%” per cent

Unless otherwise specified, all references to any shareholdings of our Company assume the [REDACTED] is not exercised and do not take into account any Shares which may be issued upon the exercise of any options which may be granted under the Share Option Scheme.

For ease of reference, the names of Chinese laws and regulations, licenses, permits and approvals, institutions, natural persons or other entities (including certain of our subsidiaries) have been included in this document in both the Chinese and English languages and in the event of any inconsistency, the Chinese version shall prevail. English translations of company names and other terms from the Chinese language are marked with “*” and are provided for identification purposes only.

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GLOSSARY OF TECHNICAL TERMS

This glossary of technical terms contains terms used in this document in connection with our Group and our business. Some of these terms may not correspond to the standard industry definitions.

“ASL” elevation above the sea level

“basalt” a predominant gangue mineral enveloping the peridotite inclusions and monomers

“carat(s)” or “ct” the unit of weight for gemstones where one carat equals 0.200 grams or 1/5 gram

“clarity” indicates, in relation to a gemstone, the relative absence of inclusions (internal physical irregularities enclosed within the gemstone) and blemishes (external physical irregularities confined exclusively to the gemstone’s surface) that affect the gemstone’s appearance and durability

“cut-and-polished peridot” peridot gemstones which have been through processing such as cutting, bruting, faceting and polishing

“exploration” activity to prove the location, volume and quality of a deposit

“gem-grade peridot sands” high-quality rough peridot sands which is aesthetically qualified to be processed into peridot gem dot

“GIA” Gemological Institute of America Inc., a non-profit institute under Section 501(c)(3) of the U.S. Internal Revenue Code with primary services including providing education services, gemological laboratory services and publishing gemological publications

“hauling” the drawing or conveying of the product of the mine from the working places to the bottom of the hoisting shaft, or slope

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GLOSSARY OF TECHNICAL TERMS

“Indicated Resource(s)” that part of the mineral Resource(s) 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 gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes, and is sufficient to assume geological and grade (or quality) continuity between points of observation where data and samples are gathered. An Indicated Resource has a lower level of confidence than that applying to a Measured Resource and may only be converted to a Probable Ore Reserve

“industrial-grade peridot sands” peridot sands that is not suitable to be used as gemstone. It can be used as metallurgical auxiliary materials, high manganese steel casting sand, high temperature refractory materials, casting molds and other special building materials

“Inferred Resource(s)” that part of the mineral Resource(s) 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. It is based on exploration, sampling and testing information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes. An Inferred Resource has a lower level of confidence than that applying to an Indicated Resource and must not be converted to an Ore Reserve. It is reasonably expected that the majority of Inferred Resources could be upgraded to Indicated Resources with continued exploration

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GLOSSARY OF TECHNICAL TERMS

“JORC Code” Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves prepared by the Joint Ore Reserves Committee of the Australasian Institute of Mining and Metallurgy, Australian Institute of Geoscientists and Minerals Council of Australia (JORC), effective December 20, 2012

“KOL(s)” key opinion leader(s), person(s) or organization(s) who purported to have product knowledge and influence in a particular field, who is/are trusted by relevant interest groups and has/have significant effects on consumer behavior

“life-of-mine” the number of years that our YQS Nanshan Project is expected to continue operations based on the production schedule under our commercialization scheme

“Measured Resource(s)” that part of the mineral Resource(s) 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 gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes, and is sufficient to confirm geological and grade (or quality) continuity between points of observation where data and samples are gathered. A Measured Resource has a higher level of confidence than that applying to either an Indicated Resource or an Inferred Mineral Resource. It may be converted to a Proved Ore Reserve or under certain circumstances to a Probable Ore Reserve

“muck” ore or rock that has been broken by blasting

“mucking” the process of removing muck from the mine

“olivine” a group of rock-forming minerals that are typically found in mafic and ultramafic igneous rocks such as basalt, gabbro, dunite, diabase, and peridotite

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GLOSSARY OF TECHNICAL TERMS

“Ore Reserve(s)” the economically mineable part of the Measured and/or Indicated Resource(s), which include(s) 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 reference point at which Ore Reserves are defined, usually the point where the ore is delivered to the processing plant, must be stated. It is important that, in all situations where the reference point is different, such as for a saleable product, a clarifying statement is included to ensure that the reader is fully informed as to what is being reported

“peridot” mineral olivine of gem quality, and peridot is a silicate of magnesium and iron, and its primary chemical composition

of (Mg, Fe)2SiO4 with Fe being the coloring element where the color of peridot changes according to the content of Fe

“peridot gem dots” cut-and-polished gem-grade peridot sands

“peridot gemstone(s)” peridot with a particle size of above 3 mm

“peridot ore(s)” the naturally occurring solid body(ies) from which peridot can be extracted profitably

“peridot sands” peridot with a particle size between 1 mm and 3 mm

“Probable Ore Reserve(s)” the economically mineable part of Indicated Resource(s), and in some circumstances, Measured Resource(s). The confidence in the modifying factors applying to a Probable Ore Reserve is lower than that applying to a Proved Ore Reserve

“Proved Ore Reserve(s)” the economically mineable parts of the Measured Resources, which include diluting materials and allowances of losses. A Proved Ore Reserve implies a high degree of confidence in the modifying factors

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GLOSSARY OF TECHNICAL TERMS

“Resource(s)” the concentration or occurrence of solid material of economic interest(s) 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 Resource are known, estimated or interpreted from specific geological evidence and knowledge, including sampling. Resources are sub-divided, in order of increasing geological confidence, into Inferred, Indicated and Measured categories

“rough peridot gemstone(s)” natural peridot gemstones which have been sorted and graded but not yet further processed into cut-and-polished peridot

“waste” the part of an ore deposit that is too low in grade to be of economic value at the time of mining, but which may be stored separately for possible treatment later

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FORWARD-LOOKING STATEMENTS

This document contains forward-looking statements that are, by their nature, subject to significant risks and uncertainties. The forward-looking statements are contained principally in “Summary”, “Risk Factors”, “Industry Overview”, “Path to Commercialization”, “Business”, “Financial Information” and “Future Plans and [REDACTED]”. When used in this document, the words “aim”, “anticipate”, “believe”, “could”, “estimate”, “expect”, “going forward”, “intend”, “may”, “might”, “plan”, “project”, “propose”, “seek”, “should”, “target”, “will”, “would” and the negative of these words and other similar expressions, as they relate to our Group or our management, are intended to identify forward-looking statements. These statements relate to events that involve known and unknown risks, uncertainties and other factors, including those listed under “Risk Factors”, which may cause our actual results, performance or achievements to be materially different from performance or achievements expressed or implied by the forward-looking statements. You are strongly cautioned that reliance on any forward looking statement involves know and unknown risks and uncertainties. These forward-looking statements include, without limitation, statements relating to:

• our business strategies and our operating and expansion plans;

• our strategies, plans, objectives and expectations, including for our future operations, profitability, operating expenditure, liquidity and capital resources, and our ability to achieve them;

• future events and developments, trends, competition and conditions in the industry and markets in which we operate or plan to operate;

• the regulatory environment, policies and operating conditions as well as the general industry outlook and markets we operate or expects to operate in;

• our ability to control or even reduce costs;

• our ability to identify and successfully take advantage of new business development opportunities;

• our capital expenditure plans, and our future debt levels and capital needs;

• our dividend payout;

• general economic, political and business conditions in Hong Kong and the PRC;

• capital market developments, and the effects of the global financial markets and economic crisis;

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FORWARD-LOOKING STATEMENTS

• all other risks and uncertainties discussed in “Risk Factors” in this document; and

• other factors beyond our control.

Subject to the requirements of applicable laws, rules and regulations, we do not have any obligation to update or otherwise revise the forward-looking statements in this document, whether as a result of new information, future events or otherwise. As a result of these and other risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this document might not occur in the way we expect, or at all. Accordingly, you should not place undue reliance on any forward-looking information. All forward-looking statements contained in this document are qualified by reference to the cautionary statements set forth in this section as well as the risk factors and uncertainties set out in “Risk Factors” in this document.

In this document, statements of or references to our intentions or those of any of our Directors are made as at the date of this document. Any such intentions may change in light of future developments.

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RISK FACTORS

Investing in the [REDACTED] involves a high degree of risk. You should carefully consider all of the information set out in this document, including the risks and uncertainties described below and in “Competent Person’s Report — 24. Project Qualitative Risk Analysis” in Appendix IV to this document in respect of, among others, our business and industry, when considering making an investment in [REDACTED]. Our business, financial condition or results of operations could be materially and adversely affected by any of these risks. As a result, the trading price of [REDACTED] in this [REDACTED] could decline, and you could lose all or part of your investment.

Our business and operations involve certain risks and uncertainties, many of which are beyond our control. These risks can be broadly categorized as: (i) risks relating to our business; (ii) risks relating to doing business in the PRC; and (iii) risks relating to our Shares and the [REDACTED].

RISKS RELATING TO OUR BUSINESS

As a developing mining company with a single peridot mining project which is at the mine site infrastructure development and mine construction preparation stage, we cannot assure you that we will be able to bring our mining project to commercial production or that our operations will be profitable.

We are a developing mining company with a single peridot mining project. We obtained the Mining License for our YQS Nanshan Project in December 2016, after which we commissioned the Feasibility Study and engaged the Independent Technical Consultant with a view to commence the preparation of the Competent Person’s Report. During the Track Record Period, we focused our efforts on market education and brand awareness initiatives to build market traction before committing substantial capital expenditure on mine construction. As a result, as of the Latest Practicable Date, our YQS Nanshan Project remained at the mine site infrastructure development and mine construction preparation stage. Based on our commercialization scheme, we currently expect overall mining construction to be completed before the fourth quarter of 2023. Based on our commercialization scheme, our projected total capital expenditure have included (i) approximately RMB70.6 million of marketing expenditure projected to be incurred prior to the commencement of our commercial production; (ii) approximately RMB157.5 million as initial capital expenditure for construction of our mine site, our onsite ore processing facilities as well as general layout engineering; (iii) approximately RMB35.1 million as additional capital expenditure for the construction of our gemstone processing facilities; and (iv) approximately RMB26.3 million as a general buffer of around 10% on top of the above projected capital expenditure. Mine construction is inherently subject to uncertainties, including engineering and other technical complexities. As a result, it may lead to significant change in construction plan, substantial increase in construction costs, and significant delay in our construction timetable and process.

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RISK FACTORS

There is no assurance that we may be able to complete mine construction and bring our YQS Nanshan Project to commercial production and operations in accordance with our commercialization scheme.

Furthermore, under our commercialization scheme, we plan to construct ore processing facilities on our mine site along with our mine construction. We also plan to complete the construction of our own gem processing facilities by 2029 to commence operation in 2030 when we expect our mine to reach full production capacity. Construction of these processing facilities involve significant capital expenditure. Actual capital expenditure required for these construction may significantly exceed our initial estimation including from engineering and construction difficulties that we may encounter. Substantial increase in capital expenditure and/or material under-estimation of our ongoing operating costs may also negatively impact the overall economic benefits expected to be derived from our YQS Nanshan Project, its estimated internal rate of return as well as project payback period. Engineering and technical complexities may also significantly delay our construction schedule as a result. In the event of any of the above, our commercialization and business development schedules, and our financial condition and results of operations could be adversely affected, and our operations may not be profitable.

In addition, our YQS Nanshan Project is, and is expected to be, our only mining project in the near term. As a result, our planned business development, prospects, financial performance and commercial viability will be dependent on the successful commercialization and continuous development of our YQS Nanshan Project. Our operations following commercial production of our YQS Nanshan Project, including our mining, peridot processing, marketing and sales operations, will be subject to various operating risks and uncertainties, many of which are beyond our control. For example, we may encounter risks and uncertainties frequently experienced by other mining companies in their early stage of mine development, including those relating to:

• our ability to manage large-scale mining operations and to maintain effective control on our costs and operating expenses;

• our ability to ramp-up our mining capacities according to our commercialization scheme;

• our ability to execute our marketing and sales channel development strategies to foster market demand and establish appropriate pricing levels for our products;

• our ability to develop and maintain internal systems and procedures to ensure compliance with the extensive regulatory requirements applicable to mining industry in the PRC;

• our ability to respond to changes in our regulatory environment;

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RISK FACTORS

• our ability to manage the logistics, utility and supply needs of our mining operations; and

• our ability to maintain, monitor and enhance our internal control system.

Prospective investors should also note that given the early stage of development of our YQS Nanshan Project, our historical financial performance is neither representative of, nor expected to be comparable to our business and financial performance going forward during our full-scale construction stage or after our project commercialization, and accordingly, should not be relied upon as an indication of our future performance.

Our extensive marketing and promotional initiatives may not be successful in building market demand for our peridot.

We are a developing mining company at the mine site infrastructure development and mine construction preparation stage. According to Frost & Sullivan, our YQS Nanshan Project held the largest amount of exploitable rough peridot as of December 31, 2020 among those identified by Frost & Sullivan internationally based on its independent research. In the current gemstone market, however, peridot has not drawn sufficient interest due to the historically inconsistent global supply. According to the F&S Report, tourmaline, sapphire and emerald were the top three cut-and-polished colored gemstones in terms of global sales volume for the year ended December 31, 2019, with market shares of 28.3%, 13.8% and 10.2%, respectively, while sales volume of cut-and-polished peridot gemstones represented only 0.9% during the same period. Under our commercialization scheme, we have devised extensive marketing and sales channel development initiatives aimed at building interest in peridot gemstones and substantially expanding its market demand. The mine production ramp-up program under our commercialization scheme is devised according to and in line with our sales plan for gem-grade peridot, which in turn is compiled on the basis that our extensive marketing, promotional and sales channel development initiatives will be effective in driving up our sales and market demand for our gem-grade peridot products. Given our YQS Nanshan Project is yet to commence commercial production, our marketing and sales development initiatives have not been tested for their effectiveness in achieving our desired goals. Insufficient market demand for our gem-grade peridot could result in significant downward adjustments to the scale of our mining operations, production and sales. Moreover, these sales and marketing initiatives are expected to require substantial financial resources and are to be implemented on a continuous basis, where many of them are also scheduled to be implemented before we expect to generate any meaningful revenue, if at all, during our mine construction stage. We have allocated a total of HK$[REDACTED], or approximately [REDACTED]%, of the [REDACTED] from the [REDACTED] to be used in the implementation of these marketing and sales channel development initiatives during our mine construction stage and up to 2024. These sales and marketing expenditure are expected to be recognized as expenses in the year of incurrence, and thus will result in substantial losses in our results of operations until we succeed in

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RISK FACTORS generating sufficient revenue to cover these expenses. We cannot assure you that any of these marketing and market development initiatives will be successful in generating our targeted sales revenue, expanding market demand for our peridot gemstones either within our targeted timeframe, or to the level that aligns with our targeted output volume from our commercial production, or to such level that would generate sufficient revenue to compensate for our sales and marketing and other operating expenditures, or at all.

We consider the traceability, or chain of custody, to be an important feature and one of our key advantages in promoting our gem-grade peridot to major brands and designers internationally. As of the Latest Practicable Date, we have been in touch with selected overseas service providers to explore routes and technical requirements for developing a traceability platform for our gem-grade peridot, which is expected to be completed by the end of 2022 with sufficient lead-in time prior to our scheduled commercial production and sales. However, we cannot assure you that we can successfully develop this traceability platform in the planned timeframe, or at all, or that such feature, if and when offered, will be sufficiently appreciated by our target customers, or that it will generate the intended positive impact on their procurement preference towards our peridot.

We may not succeed in raising prices of peridot gemstones with our marketing and promotional efforts, and the substantially expanded market supply of peridot from our YQS Nanshan Project may instead depress market prices of peridot.

Colored gemstones are non-standard products and their prices can vary significantly depending on the respective individual grade based on color, clarity, cut and carat weight. Given that colored gemstones are typically viewed as consumer discretionary and luxury products, their prices are also influenced by consumer preference and perception in its value. While market prices of cut-and-polished peridot gemstones were on a gradual upward trend between 2015 and 2019, its general pricing levels remained largely below other major colored gemstones, according to the F&S Report. Given the lack of sufficient interest in peridot gemstones at present, we believe that peridot has substantial potential for price increases. We intend to utilize our extensive marketing and promotional initiatives to influence and drive consumer perception on the value of peridot gemstones and significantly improve its market prices going forward. However, there is no assurance that these efforts would yield positive impact on the pricing of peridot. While the Competent Person’s Report has adopted a more prudent and conservative pricing trend of peridot gemstones as compared with those forecasted under the F&S Report in arriving at the NPV of our YQS Nanshan Project, failure to improve market prices of peridot to the level comparable to that applied in the economic value analysis under the Competent Person’s Report, or worse, a decline in market prices could have a material negative impact on our prospects and financial performance, as well as the economic analysis and accordingly the estimated NPV, internal rate of return and payback period as presented in the Competent Person’s Report. See “Competent

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RISK FACTORS

Person’s Report — 21.3 Sensitivity Analysis” in Appendix IV to this document and “Path to Commercialization — Capital and Operating Expenditure — Net Present Value and Sensitivity Analysis” in this document for further details.

We face uncertainties relating to the quality and characteristics of our gem-grade peridot.

As of the Latest Practicable Date, we have yet to commence commercial production. In formulating our sales plan and strategies on marketing and sales channel development as well as our target customer groups, we take into consideration estimations on the color, clarity, cut, carat weight and other quality and characteristics of gem-grade peridot to be mined from our YQS Nanshan Project based on the samples taken during our exploration stage. Our targeted customer groups include high-end customers, luxury brands and designers. There is no assurance that peridot mined during our commercial production will have comparable qualities and characteristics as those from our historical samples obtained during our exploration. Material deviations of any such gemstone qualities from our estimations may cause us to identify the wrong target customer group, expend our financial and other resources on marketing and sales strategies that prove to be wasteful and delay our commercialization timeline, and adversely affect our business development and performance, our results of operations and our prospects. Inferior quality of our gem-grade peridot would also harm our reputation and significantly hinder our ability to attract our target customer groups, or price our products at advantageous price levels. It may significantly limit the demand and market of our gem-grade peridot, thereby adversely affecting our brand and product positioning, our business prospects, our financial condition and results of operations, and the estimated economic value of our YQS Nanshan Project.

Our non-binding memoranda of understanding and collaborative arrangements do not create binding sales commitments for our peridot gemstones and may not result in sales or revenue.

We have established collaborative relationships with a number of internationally well-known designers or jewelry companies carrying fine jewelry products designed by their respective founders, about creating customized jewelry pieces using our peridot. We have further entered into non-binding memoranda of understanding with a number of designers as well as jewelry and watch companies to explore potential areas of collaboration, including the use of our peridot in their respective jewelry collections and pieces, and the global marketing and promotion of our peridot. See “Business — Marketing and Sales” in this document for further details. Under these non-binding memoranda of understanding, we and each of the counterparties have agreed to negotiate the terms of future sales contracts, which will specify the amount of peridot to be sold, the expected quality and specifications, price and other terms. However, unlike a binding sales contract which creates enforceable sale and purchase obligations, these memoranda are non-binding and may not lead to future sales contract or sale or at all. If we are not able to secure

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RISK FACTORS binding purchase orders or sales contracts for our products, we will not be able to generate revenue at the levels we expect, or at all, in which case our business, financial condition and results of operations will be materially and adversely affected.

We will use third-party service providers for gem processing during our production ramp-up period.

As set out in “Path to Commercialization — Our Commercialization Roadmap — Gemstone Processing” in this document, we plan to continue to outsource our gemstone processing to third-party service providers during our mine production ramp-up period from 2023 to 2029. By outsourcing gemstone processing to third-party service providers, we are able to rely on the experienced workforce, and established processing capacity and capability of these service providers during our production ramp-up period and allocate our resources to focus on other aspects of our business operations. At the same time, we may face risks commonly associated with outsourcing and subcontracting, including, among others, (i) our ability to identify, secure and retain reputable, quality service providers; (ii) our ability to monitor and ensure their service and product quality, as well as their adherence to our product and quality specifications; (iii) breaches or disputes in contract performance; and (iv) our bargaining power over subcontracting fees. Regardless, as gemstone cutting could materially affect the quality and grading of the end-products, sub-quality or unsatisfactory subcontracted work could materially damage our product quality, affect our ability to deliver gemstone products to our customers in accordance with their quality specifications, thus adversely affecting our reputation, our relationship with customers, our business development, our financial condition and our results of operations.

Our peridot Resource and Ore Reserve are estimates based on a number of assumptions, and we may produce less than our current estimates.

Our peridot Resource and Ore Reserve estimates are based on a number of assumptions that have been made by the Independent Technical Consultant in accordance with the JORC Code. See the Competent Person’s Report in Appendix IV to this document for details. Our peridot Resource and Ore Reserve estimates involve expressions of judgment based on various factors such as knowledge, experience and industry practice, and the accuracy of these estimates may be affected by many factors, including quality of the results of exploration, drilling and analysis of peridot samples, as well as the procedures adopted by and the experience of the person making the estimates. In addition, the Independent Technical Consultant has classified our peridot Resource in the Indicated and Inferred categories and our Ore Reserve in the Probable category. The level of geological knowledge and confidence required for the Indicated and Inferred Resource category are lower than the Measured Resource category. According to the Competent Person’s Report, there are no Measured Resource defined in our YQS Nanshan Project.

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RISK FACTORS

Estimates of peridot Resource and Ore Reserve at our YQS Nanshan Project may change significantly when new information becomes available or new factors arise, and interpretations and deductions on which our peridot Resource and Ore Reserve estimates are based may prove to be inaccurate. Should we encounter mineralization different from that predicted by past drilling, sampling and similar examination, key parameters applied in the estimation of our peridot Resource and Ore Reserve, such as percentage of peridot inclusion, mining and processing loss rates, dilution rate and recovery rate may have to be adjusted, resulting in revisions to our peridot Resource and/or Ore Reserve estimates. Any significant downward adjustment to our peridot Resource and/or Ore Reserve estimates, or any significant revisions on the estimation of topological occurrence of peridot deposit, could materially affect our mining plan and the expected output from our YQS Nanshan Project, in which case our business, financial condition, results of operations and prospects would be materially and adversely affected.

Our future mining operations are exposed to risks and hazards that are commonly associated with the mining industry, such as those relating to geological conditions, equipment failure, weather conditions and government action.

There are inherent risks and hazards associated with mining operations. As and when we commence commercial production, our mining operations will be subject to risks associated with unexpected geological conditions such as significant geological structure integrity issues, poor ground conditions, excessive surface subsidence and groundwater ingress, and operational risks such as unexpected failure or technical problems with critical machineries and equipment, industrial accidents, power or fuel supply interruptions, as well as environmental related risks such as unintended impact to ecological system, waste rocks and hazardous substance management, dust pollution, prolonged adverse weather conditions and natural disasters. Any of these risks may result in personal injuries, damage or destruction of properties or production facilities as well as environmental damage, which in turn may damage our reputation among regulatory authorities, local residents and our customers, disrupt our production and sales schedules, cause us to incur significant costs on rectification, and adversely affect our business operations and financial performance.

Our YQS Nanshan Project is located in the elevated mountainous region at round 420m to 750m ASL in northeastern China, where winter generally lasts from mid-November to mid-April, with lowest temperature reaching below -40oC and average snow depth of 1.7m. We currently expect that our YQS Nanshan Project will employ a combination of cut-and-fill, regular room and pillar as well as random pillar open stoping mining methods and we do not expect our mining activities to be affected by general seasonal factors. However, adverse weather hazards, such as heavy and sustained rainfall and snow, may cause us to slow down our mining activities, and may also disrupt our transportation, damage power supply and drainage systems and cause machinery and equipment failure. Natural disasters such as earthquakes, floods and landslides may also lead to severe damage to our facilities and the surrounding infrastructure, block our access to our YQS

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RISK FACTORS

Nanshan Project, cause instability to our adits, damage our underground drainage and ventilation systems, and endanger our onsite personnel. We may need to evacuate our personnel and suspend our mining and processing activities. Inclement weather conditions and natural disasters are unpredictable by nature. There is no assurance that we will not encounter these adverse events in the future and in such event, our mining and processing operations could be severely disrupted and we may incur substantial repair and re-building costs. Our business and operations, financial condition and results of operations would accordingly be adversely affected.

Historically, there were cases where local or provincial governments had requisitioned lands due to re-zoning, development needs or otherwise even if mining licenses were granted. While we are not aware of any indication there would be risk of requisition for the land at our YQS Nanshan Project, we cannot assure you that we will not be exposed to such risk. Given that our YQS Nanshan Project is, and is expected to be, our only mining project in the near term, requisition of any portion of the land covered by our Mining License or our mine site could materially and adversely affect our mining activities, business operations, financial condition, results of operations and prospects.

Our mining construction and operations are subject to occupational hazards and safety risks.

As a mining company, we are subject to extensive national, provincial and local laws, rules, regulations, policies and controls regarding occupational hazards and safety. As an example, our mining construction and operations will involve the use of machineries and equipment as well as the transportation, handling and storage of explosives and other dangerous or hazardous materials, which are subject to handling and operational risks. We, or any third-party contractors will engage for our mine construction, may encounter accidents, mechanical failures or breakdown, or are exposed to hazardous substances, dust and wastewater in their work. These risks could subject us to potential significant liabilities relating to personal injury, death or property damage, civil, administrative and/or criminal liabilities, regulatory fines, penalties, suspension or even revocation of our mining license.

We cannot assure you that accidents such as fire, equipment mishandling and mechanical failures which may result in property damage, severe personal injuries or even fatalities will not occur during the course of our mine construction or our mining and processing operations. Should we fail to comply with any relevant laws, regulations or policies or should any accident occur as a result of any of the foregoing events, our commercialization timeline, business development, reputation, financial condition and results of operations may be adversely affected, and we may be subject to penalties, civil liabilities, administrative liabilities or criminal liabilities. Despite our endeavors to enhance workplace safety and environment, there can be no assurance that accidents will not occur in the future. During the Track Record Period, we were not involved in any

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RISK FACTORS accidents, claims or proceedings in relation to occupational safety and health. Any occurrence of such accidents, claims or proceedings may materially adversely affect our business, financial condition and results of operations.

If we fail to obtain, retain and/or renew government approvals, permits and licenses required for our mining activities, our business, financial condition, results of operations and prospects could be materially and adversely affected.

Under the Mineral Resources Law of the PRC《中華人民共和國礦產資源法》 ( ), all mineral resources in the PRC are owned by the State. Mining companies including our Group are required to obtain certain government approvals, permits and licenses prior to undertaking any mining and relevant production activities. Our Mining License is issued for a specific area, production scale and validity period. Our ability to carry on mining activities depends on whether we are able to renew the Mining License upon its expiration and obtain other approvals and permits from relevant PRC authorities, and to renew such approvals and permits upon their expiration.

As advised by our PRC Legal Advisors, we have obtained the necessary licenses, approvals and permits that are material for our current operations in China. However, we are still required to pass further inspections and obtain relevant building, safety and environmental approvals upon completion of construction before they can be put to official use for our commercial production. Such approvals and permits include Evaluation Report on the Efficiencies of Facilities on the Prevention and Control of Occupational Disease Hazards (職業病危害控制效果評價與防護設施驗收), Filing of Completion Acceptance of Fire Prevention Facilities (消防設施竣工驗收) and Safety Production Permit (安全生產許可證). We may also be required to obtain additional licenses, permits and approvals following any new PRC laws and regulations that may be promulgated in the future. We cannot assure you that we will be able to obtain such further approvals according to our planned timeframe for our scheduled commercial production, or at all, or that we will not incur significant additional compliance and other costs not currently anticipated in the course of obtaining these approvals.

As of the Latest Practicable Date, our Mining License is valid for an initial term of ten years commencing on December 8, 2016, which can be extended for another term provided that we comply with the renewal requirements. The licenses, permits and approvals obtained and to be obtained by us may expire from time to time. Our applications for extension or renewal are subject to government discretion, and there is no guarantee that we will be able to obtain any extension or renewal of the licenses, permits and approvals in the future in a timely manner, or at all, or that they will not be subsequently revoked by relevant authorities. See “Business — Licenses and Permits” in this document for details. If we are unable to obtain any of such licenses and permits or extend or renew any of our current licenses or permits upon their expirations, or if we are required to incur significant additional costs to obtain or renew these licenses, permits and approvals, our business and results of operations could be materially and adversely affected.

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RISK FACTORS

Changes to the PRC laws, regulations and governmental policies for the mining industry could adversely affect our business, financial condition and results of operations.

The PRC local, provincial and central government authorities exercise a substantial degree of control over the mining industry in the PRC. Our operations are governed by a wide range of PRC laws, regulations, policies, standards and requirements in relation to, among other things, mine exploration and exploitation, production and production safety, environmental protection, taxation, labor, foreign investment and operational management. Any change to these laws, regulations, policies, standards and requirements or to the interpretation or implementation or establishment of any local practice in enforcing such laws, regulations, policies, standards and requirements may incur additional compliance efforts and increase our operating costs, and thus adversely affect our business, financial condition and results of operations.

As advised by our PRC Legal Advisors, relevant government authorities regularly conduct inspections of mines and facilities of mining enterprises. The timing and the outcome of such inspections are hard to predict. Failure to comply with applicable laws and regulations or failure to pass such inspections may result in rectification orders, fines and penalties or even suspension of our mining operations. It may also harm our corporate image, reputation and the credibility of our management. Any of the above could adversely affect our financial condition and results of operations. There is no assurance that we will be able to fully comply with any new PRC laws, regulations, policies, standards and requirements applicable to the mining industry that may be promulgated, or any changes in existing laws, regulations, policies, standards and requirements economically, or at all. Furthermore, any such new PRC laws, regulations, policies, standards and requirements or any such changes in existing laws, regulations, policies, standards and requirements may also constrain our development plan and adversely affect our profitability.

Our mining operations will be subject to risks relating to environmental protection and rehabilitation.

Our mining operations will be subject to environmental laws, rules and regulations at national, provincial and local levels, such as discharge of pollutants, environmental impact assessment and environmental rehabilitation. We are also required under applicable PRC laws and regulations to conduct our mining operations in a manner that minimizes environmental impact, such as through rehabilitation and revegetation of mined land. Our YQS Nanshan Project will involve underground mining and therefore our rehabilitation and revegetation obligations will be more limited than that of open-pit mining operations. Nonetheless, we may still be subject to rehabilitation obligations in areas that we have cleared for our mining operations.

Environmental hazards may occur in our mining operations as a result of human negligence, natural disasters or other reasons beyond our control. Natural disasters such as earthquakes, floods and landslides and geological changes may destabilize the stopes, block our access to the mine, damage our underground drainage and ventilation adits, and materially and adversely affecting our underground mining activities.

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RISK FACTORS

Since we are currently at the mine site infrastructure development and mine construction preparation stage, we have not incurred any environmental protection related expenditure during the Track Record Period. We expect our environmental protection expenditure with regard to ongoing compliance with relevant laws and regulations and monitoring of environmental impact will increase upon commencing commercial production. We may also incur substantial expenditure on rehabilitation and revegetation of our mine site upon eventual closure of our mine. As of December 31, 2020, we had made provision totaling RMB961,000 for land rehabilitation and mine closure of our YQS Nanshan Project. See “Business — Environmental Protection, Land Rehabilitation and Social Matters — Land Rehabilitation and Soil and Water Conservation” in this document for details.

Moreover, more stringent environmental laws, regulations and policies may be implemented in the future, which may result in substantial increase in our environmental protection compliance costs. We may not always be able to comply with all existing or future laws, regulations or policies on environmental protection. Failure to comply may subject us to fines, penalties, regulatory suspension or even closure of our mining operations, which could have a material adverse impact on our business, financial condition, results of operations and prospects.

Power shortages or substantial increases in energy costs could have an adverse impact on our operations.

When we commence commercial production, we expect we will consume substantial amounts of electricity. According to the Competent Person’s Report, our current electricity supply of 10 kilovolts will be sufficient for our planned operations of the YQS Nanshan Project. However, the PRC Government imposes restrictions on the use of electricity due to power shortages, thereby disrupting our power supply, or if we are not otherwise able to obtain adequate supplies of electricity to meet our production requirements, our operations may be disrupted. On the other hand, any substantial increase in the cost of electricity will increase our mining and production costs and negatively affect our profit margin. Any of the above could have a material negative impact on our business and operations, financial condition and results of operations.

Our mining and processing operations depend on the availability of skilled labor and competitive labor costs.

Our mining operations are labor intensive and depend on the availability of a large number of labor of varying skills. Furthermore, our ore processing and gemstone processing are also labor intensive. For our ore processing, some of the ores will involve manual sorting by hand on low-speed running belt conveyor after the rock has been crushed and screened. As for our gemstone processing, gemstones larger than 7mm will be cut-and-polished by hand. Shortage of labor of needed skills, inefficient labor management or any labor disputes, such as labor strike, may result in disruption of our business operations, which may in turn have a material adverse

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RISK FACTORS effect on our business, financial condition, results of operations and prospects. In addition, labor costs in China have been increasing in recent years. Should our labor costs increase substantially, our financial condition and results of operations may be adversely affected.

We are affected by the demand in the jewelry industry.

The demand for peridot gemstones is affected by the growth of the jewelry industry in China and globally, which could in turn be affected by a number of factors, such as the level of disposable income, fashion trends and consumer preferences on discretionary spending. One of the major applications of our peridot gemstone products is expected to be used for jewelry. Government policies, macro-economic factors, global economic environment, consumer discretionary spending trends and patterns and other factors beyond our control could significantly depress the demand for jewelry in general, which in turn may result in an associated decrease in sales volume or selling prices of our gem-grade peridot, reduce our profit margin and tighten liquidity available to us, any of which may have an adverse effect on our business, financial condition and results of operations.

Failure to compete effectively with our competitors may adversely affect our business and prospects.

We are engaged in the international market for colored gemstones, which is highly competitive. Our products are expected to compete directly with other colored gemstones in the luxury goods and jewelry markets, a majority of which enjoy better and more established market acceptance and consumer interest at the current stage. We will face competition from international colored gemstone producers, some of which may have greater financial, marketing, distribution and other resources and technological capabilities than us. In addition, as we have only sold a limited amount of using the peridot collected during the exploration stage of our YQS Nanshan Project to date, the marketability of our peridot gemstone products is yet to be tested by the market in general. Our failure to compete effectively or if our gem-grade peridot products are not accepted by the market in general, our business, financial condition, results of operations and market position will be materially and adversely affected.

Our “Fuli” brand is critical to our business growth and prospects. Failure to achieve sufficient industry recognition of our “Fuli” brand could have a material negative impact on our business, marketing efforts and sales channel developments

We expect that upon commencement of our commercial production and afterwards, we will generally market our gem-grade peridot products under our “Fuli” brand. We have been and are committed to promoting our “Fuli” brand as the go-to brand for quality gem-grade peridot. Our brand image is crucial to our success and prospects, as market and end-consumers would directly

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RISK FACTORS associate their perception of our brand and our brand positioning with our products, which in turn is critical for market acceptance of our products. Our success in building, promoting and accurately positioning our brand depends on, among other things:

• successful designs and repeated marketing and promotional campaigns;

• effective and appropriate marketing and promotional strategies;

• successful development and association of appropriate emotive messages with our brand and products;

• effective management of our sales channels and product pricing;

• ability to maintain product quality; and

• solid brand image protection measures against negative publicity and counterfeit products.

If our efforts to develop and maintain our brand image and positioning are not effective for any reason, the value chain and end-market perception and acceptance of our brand, our products and our product pricing could be significantly hindered, as a result of which our business, prospects and financial performance could be adversely affected.

If we fail to manage our liquidity position, our ability to expand and our results of operation may be materially and adversely affected.

To date, we have primarily relied on shareholders’ equity funding, loans and advances to fund our capital and operating expenditure. As of December 31, 2018 and 2019, we had net current liabilities of RMB9.2 million and RMB27.3 million, respectively. We had net current assets of approximately RMB11.1 million and RMB7.2 million as of December 31, 2020 and April 30, 2021, respectively, primarily due to (i) the receipt of equity funding from a minority shareholder of Yanbian Fuli and the capitalization of loans provided by certain individual lenders during the year ended December 31, 2020; and (ii) advances from our Directors and Mr. Yu Bing Han, a minority Shareholder, during the four months ended April 30, 2021. See “History, Reorganization and Corporate Structure” and “Financial Information — Indebtedness” in this document. As a developing mining company at the mine site infrastructure development and mine construction preparation stage with no material revenue, we had net cash flows used in operating activities of approximately RMB7.0 million, RMB14.8 million and RMB28.8 million as of December 31, 2018, 2019 and 2020, respectively. We plan to fund the construction of our mine, our ore processing and our gemstone processing facilities entirely with the [REDACTED] from the [REDACTED].We

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RISK FACTORS also plan to fund our planned marketing, promotional and sales channels development initiatives during our mine construction period up to the initial years of commercial production with the [REDACTED] from the [REDACTED].

In the future as we continue to ramp up our mine production and sales, we expect to rely on cash flows generated from our operating activities to fund our mining operations and other operating expenditure. There can be no assurance that our business will generate sufficient cash flows from operations in the future to fund our operations, service any debts and satisfy necessary capital expenditure. If we are unable to generate sufficient cash flow, we may be required to seek additional equity and/or debt financing, or seek to refinance some or all of our debts. If we are unable to repay any of our debts when they fall due, our creditors may take action to recover such debts, which may have a material adverse effect on our business, financial condition and results of operations. If we are unable to obtain additional financial resources at reasonable costs or at all, or if there is a delay in obtaining such financial resources, our business, financial condition and results of operations may also be adversely affected.

Failure to retain our management team and other key personnel and maintain a stable workforce could harm our business.

We place substantial reliance on the experience and knowledge of our management team. For details, see “Directors and Senior Management” in this document. We cannot prevent employees from terminating their respective employment contracts in accordance with the relevant agreed conditions. Finding suitable replacements for such key personnel could be difficult and time-consuming, and competition for such personnel with rich experience is intense. The loss of the services of one or more members of our management team due to their departure or other reasons could materially and adversely affect our business, financial condition and results of operations.

Our success also depends on the ability of our management team to cooperate effectively as a group. Furthermore, our ability to recruit and train skilled personnel is a key factor to the success of our business activities. In addition, our future expansion may place significant strains on our managerial, operational, technical and financial resources. We must attract, recruit, train, manage and retain our workforce of qualified and skilled workers effectively to guarantee a stable workforce and to allocate our resources. If we fail to recruit, train, manage and retain our workforce, or in the event of any labor shortage or labor dispute, our business operations, financial condition and results of operations could be materially and adversely affected.

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RISK FACTORS

Failure to protect our intellectual property rights may materially and adversely affect our competitive position and operations and we may be exposed to infringement or misappropriation claims by third parties.

As of the Latest Practicable Date, we have filed trademark applications, and have successfully registered a number of trademarks that are considered material to our business and operations in China, Hong Kong, the European Union and the United Kingdom. We cannot assure you that the steps we have taken to protect our intellectual property rights are adequate to prevent or deter infringement or other misappropriation of our intellectual property. Any significant infringement of our intellectual property rights could weaken our competitive position and have an adverse effect on our business and prospects. To protect our intellectual property rights, we may have to commence legal proceedings against any misappropriation or infringement. However, there is no assurance that we will prevail in such proceedings. We may be subject to litigation or other proceedings involving allegations of violations of intellectual property rights of third parties. The defense of such litigation or other proceedings can be both costly and time consuming. An adverse determination in any such litigation or proceedings to which we may become a party could materially and adversely affect our business, financial condition and results of operations.

We may not be adequately insured against losses and liabilities arising from our operations.

According to the relevant PRC laws and regulations, we are liable for losses and costs arising from accidents resulting from fault or omission on the part of our own employees or us. The relevant PRC laws and regulations do not require mining enterprises to obtain insurance for such liability, except as it relates to work-related injuries, which we have already obtained for our employees. Should any accidents happen due to negligence on the part of us or our employees, we could be confronted with civil or criminal litigation and expect to incur substantial losses.

There is no assurance that the safety measures, processes and policies we have in place for our operations will be sufficient to mitigate or reduce casualties or accidents. There is also no assurance that our insurance coverage will be sufficient to cover losses and costs associated with material accidents or loss or damage of our properties, facilities, our gemstone inventories, or any patent infringement, environmental protection liabilities, commercial contracts, antitrust or competition law, employment law and employee benefit issues, and other regulatory matters or at all. In the event that we incur substantial losses or liabilities and our insurance is unavailable or inadequate to cover such losses or liabilities, our business, financial condition and results of operations may be materially and adversely affected.

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RISK FACTORS

Our results of operations may be adversely affected if we recognize impairment losses related to our mining rights and related assets.

Based on our accounting policy, mining rights are amortized over the estimated useful life of a mine, in accordance with our production plans and our Probable Ore Reserves using the units of production method, rather than on a straight line basis over the estimated mine life. The process of estimating quantities of the Probable Ore Reserves is inherently uncertain and complex and requires significant judgments and decisions based on available geological, engineering and economic data. Mining rights are written off to profit or loss if the mining property is abandoned, which may have a material adverse effect on our results of operations.

The carrying amount of our property, plant and equipment, including mining infrastructure and mining rights, are reviewed for impairment when events or changes in circumstances indicate that the carrying amount may not be recoverable in accordance with relevant accounting policy. Estimating the value in use requires us to estimate future cash flows from the cash-generating units and to choose a suitable discount rate in order to calculate the present value of those cash flows. Any material decrease in the amount of our Probable Ore Reserve may result in impairment on the carrying value of our mining rights and related assets, which may have a material adverse effect on our business, financial condition and results of operations.

Fluctuations in exchange rates could have an adverse impact on our results of operations.

RMB is our reporting currency as our major assets and our mining operations are and will be in the PRC. Our operating subsidiaries, on the other hand, have different functional currencies including RMB, HKD, USD and GBP, depending on their respective locations. Items included in the financial statements of these subsidiaries are measured using their respective functional currencies. Monetary assets and liabilities of these subsidiaries that are denominated in currencies other than their respective functional currencies will be translated at the relevant functional currency rates of exchange prevailing at the end of each reporting period, and differences arising on settlement or translation of monetary items will be recognized in profit or loss. Additionally, non-monetary items that are measured at fair value in a currency other than the functional currency of the relevant subsidiary are translated using the exchange rates at the date when the fair value was measured, and any gain or loss arising on such translation is to be treated in line with the recognition of gain or loss on change in fair value of the item.

Going forward, as we progressively implement our global marketing and sales channel development strategies, and as we commence commercial production and sales, we anticipate that our operating subsidiaries may be increasingly involved with transactions denominated in currencies other than their respective functional currencies. Moreover, as we expand our scale of business, we may increasingly need to convert our monetary assets from one currency to another for liquidity management and working capital requirement purposes. Fluctuations in exchange rates

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RISK FACTORS in the varying functional currencies of our different subsidiaries may therefore have a material impact on our results of operations in that significant fluctuations in exchange rates that are not in our favor could result in recognition of exchange losses and adversely affecting our results of operations.

Our revenue and financial performance may be adversely affected by Chinese and global economic slowdown.

Our gem-grade peridot products are targeted for the international as well as China markets. Our by-products, on the other hand, are intended to be sold primarily in China. The success of our business will ultimately depend on consumer spending. As a result, our revenue and financial results are impacted to a significant extent by economic conditions in China and globally. The global macroeconomic environment is facing numerous challenges. While the Chinese economy has shown gradual recovery, the global economy is still facing severe economic challenges due to the COVID-19 global pandemic. See “—Any outbreak of widespread contagious diseases, such as the outbreak of COVID-19, may have a material adverse effect on our business, prospects, financial condition and results of operations.” in this section.

In addition, there is considerable uncertainty over the long-term effects of the expansionary monetary and fiscal policies adopted by the central banks and financial authorities of some of the world’s leading economies. There is also significant uncertainty about the development of international diplomatic relationships with respect to trade policies, treaties, government regulations and tariffs, which may potentially have economic effects. Unrest, terrorist threats and the potential for war may increase market volatility across the globe. The global economic conditions are sensitive to changes in economic and political policies in each country and their expected or perceived overall economic growth. Any severe or prolonged slowdown in the Chinese or global economy may materially and adversely affect our business, results of operations and financial condition.

Any outbreak of widespread contagious diseases, such as the outbreak of COVID-19, may have a material adverse effect on our business, prospects, financial condition and results of operations.

Our business could be adversely affected by the effects of epidemics and pandemics, including COVID-19, avian influenza, severe acute respiratory syndrome (SARS), influenza A (H1N1), Ebola or another epidemic or pandemic. Any such occurrences could cause severe disruption to our daily operations, of our future mining and processing operations, and may even require a temporary closure of our facilities. Such epidemic or pandemic may also result in the delay or cancellation of industry events such as trade shows and jewelry fairs. For example, in connection with the intensifying efforts to contain the spread of COVID-19, many countries took a number of actions, including, among others, quarantine measures, travel restrictions, encouraging work from home arrangements and cancellation of public activities. The COVID-19 pandemic has

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RISK FACTORS also resulted in temporary closure of many corporate offices, retail stores, manufacturing facilities and factories in China and across the world. The extent to which COVID-19 impacts our results of operations will depend on the future developments of the outbreak, including new information concerning the global severity of and actions taken to contain the outbreak, which are highly uncertain and unpredictable. To the extent the COVID-19 pandemic adversely affects our business and financial results, it may also have the effect of heightening many of the other risks described in this “Risk Factors” section, such as relating to our liquidity position. Our operations could also be severely disrupted if our suppliers, customers or business partners were affected by such epidemics or pandemics.

RISKS RELATING TO DOING BUSINESS IN THE PRC

Changes in the PRC’s economic, political and social conditions and government policies may have an adverse effect on us.

A vast majority of our assets and operations are located in the PRC. Accordingly, our business operations and prospects are subject, to a significant degree, to the economic, political and legal developments in the PRC. The PRC economy differs from the economies of most developed countries in a number of respects, including structure, degree of government involvement, level of development, control of capital investment, growth rate, control of foreign exchange and allocation of resources.

The PRC Government plays a significant role in regulating various industries by imposing industrial policies and continually adjusting economic reform measures. As such, there can be no assurance that we may be able to benefit from all, or any, of the measures that are under continuous adjustments. In addition, we cannot predict whether changes in the political, economic and social conditions in the PRC or changes in the laws, regulations and policies promulgated by the PRC Government will have any adverse effect on our current or future business, financial condition and results of operations.

The PRC legal system is evolving and has inherent uncertainties that could limit the legal protection available to you and us.

The PRC legal system is a civil law system based on written statutes. Unlike common law systems, prior court decisions may be cited for reference but have limited value as precedents, or at all. Since 1979, the PRC legal system has evolved rapidly and a lot of laws and regulations governing economic matters in general such as foreign investment, corporate organization and governance, commerce, taxation and trade are promulgated by competent authorities. Some of these laws and regulations are relatively new, so the volume of published cases in relation to these laws and regulations are limited. In addition, the interpretations of many laws, regulations and rules are not always consistent and uniform and the enforcement of these laws, regulations and

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RISK FACTORS rules involves uncertainties. These uncertainties could limit the legal protections available to us and other foreign investors. Furthermore, any litigation in the PRC may be protracted, resulting in substantial costs and diversion of our resources and management attention. As Chinese legal system continues to evolve, we cannot predict the future development in the PRC legal system, including promulgation of new laws, changes to existing laws or the interpretation and enforcement thereof. Uncertainties in the interpretation and enforcement of PRC laws and regulations could limit the legal protections available to you and us.

Government control of currency conversion, fluctuations in the exchange rate between RMB and other currencies and restrictions on dividend payments of our PRC subsidiaries could negatively affect our financial condition, operations and our ability to pay dividends.

The PRC Government imposes controls on the convertibility of the RMB into foreign currencies and, in certain cases, the remittance of currency out of the PRC. Under existing PRC foreign exchange regulations, payments of current account items, including profit distributions, interest payments and expenditure from trade related transactions, can be made in foreign currencies without prior approval from SAFE or its local counterparts provided that we satisfy certain procedural requirements. However, capital account transactions must be approved by or registered with SAFE or its local branches. The PRC Government may also at its discretion restrict access in the future to foreign currencies for current account transactions.

Since our operating cash inflows and outflows going forward are expected to involve RMB as well as other foreign currencies, we may need to convert RMB into relevant foreign currencies, or vice versa, to fund our working capital and other operating and capital requirements should there be a mis-match of cash inflows and outflows of RMB or foreign currencies from our operations. In such case, we will be exposed to risks and uncertainties associated with currency exchange control over RMB, where we may not be able to transfer and convert foreign currencies into RMB for our onshore RMB requirements, or transfer and convert our onshore RMB into foreign currencies to fund our operating requirements and dividend payments outside of China. Our liquidity management, business operations and financial condition could be adversely affected as a result.

Moreover, we may rely on dividend payments from our PRC subsidiaries as means of effecting fund transfers between our PRC subsidiaries and other operating subsidiaries outside of China as part of our treasury and liquidity management. The payment of dividends by an entity established in the PRC is subject to limitations. Current PRC regulations permit our PRC subsidiaries to pay dividends to offshore group companies outside of the PRC only out of its accumulated profits, if any, determined in accordance with the PRC accounting standards and regulations. In addition, our subsidiaries in China is required to set aside certain amount of after-tax profits each year, if any, to fund certain statutory reserves. These reserves, however, are not allowed to be distributed as cash dividends. Furthermore, if our subsidiaries in China incur debt on their own behalf, the instruments governing the debt may restrict their ability to pay

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RISK FACTORS dividends or make other payments to us. The inability of our PRC subsidiaries to distribute dividends or other payments to us could materially and adversely affect the results of our operations.

It may be difficult to effect service of legal process or to enforce foreign judgments in the PRC.

Many of our executive Directors and senior management are located in the PRC, and a vast majority of our assets are located within the PRC. Therefore, it may be difficult for investors to effect service of process upon us or those persons inside the PRC or to enforce against us or them in the PRC any judgments obtained from non-PRC courts.

China does not currently have treaties providing for the reciprocal recognition and enforcement of judgments of courts with the United States, the United Kingdom and many other countries. Although an arrangement between the PRC and Hong Kong allowed for reciprocal recognition and enforcement of the decisions of civil and commence cases if the decisions are made with proper written agreement of jurisdiction and require a provision of payment which is binding and enforceable, there are still many restrictions on such arrangement. Therefore, recognition and enforcement in the PRC of judgments of a court in any of these jurisdictions in relation to any matter not subject to a binding arbitration provision may be difficult or impossible.

Restrictions on foreign investment in the PRC mining industry could materially and adversely affect our business, prospects, financial condition and results of operations.

In the PRC, foreign companies have been, and are currently, required to operate within a framework that differs from that imposed on domestic PRC companies. For example, the Negative List and the Encouraged Industry Catalogue for Foreign Investment (2020 version) (鼓勵外商投資產業目錄(2020年版)) contain specific provisions for guiding the access of foreign capital to the market, stipulating industries in which foreign-investment is encouraged, restricted and prohibited. According to the latest amended version of the Negative List, our business does not fall within the prohibited or the restricted category. The PRC Government has been opening up opportunities for foreign investment in certain categories of mining projects and this process is expected to continue. However, if the PRC Government reverses this trend, or imposes greater restrictions on foreign investment in the PRC, or seeks to nationalize our operations in the PRC, our business and results of operations could be materially and adversely affected.

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RISK FACTORS

We may be deemed to be a PRC tax resident under the EIT Law and be subject to PRC taxation on our worldwide income.

The EIT Law provides that enterprises established outside of China whose “de facto management bodies” are located in China are considered “resident enterprises” and are generally subject to the uniform 25% enterprise income tax rate on their global income. “De facto management body” is defined as the body that has the significant and overall management and control over the business, personnel, accounts and properties of an enterprise.

The Notice on Identifying Chinese-Controlled Offshore Enterprises as Chinese Resident Enterprises in accordance with Criteria for Determining Place of Effective Management*《關於境 ( 外註冊中資控股企業依據實際管理機構標準認定為居民企業有關問題的通知》) issued on April 22, 2009 which had a retrospective effect from January 1, 2008, and the Administrative Measures on the Corporate Income Tax of Chinese-Controlled Offshore Incorporated Resident Enterprises (Trial)《境外註冊中資控股居民企業所得稅管理辦法 ( (試行》)) issued on July 27, 2011 and became effective on September 1, 2011 and last amended on June 15, 2018 have set out certain criteria for specifying what constitutes a “de facto management body” in respect of enterprises that are established offshore by PRC enterprises. However, no such criteria are provided in these or other publications by SAT in respect of enterprises established offshore by private individuals or foreign enterprises like us.

As a result, it is unclear whether we will be deemed to be a “PRC tax resident enterprise” for the purpose of the EIT Law even though a substantial majority of our operational management is currently based in the PRC. We are currently not treated as a PRC resident enterprise by the relevant tax authorities. Nonetheless, we cannot assure you that we will not be treated as a “PRC tax resident enterprise” under the EIT Law and not be subject to the enterprise income tax rate of 25% on our worldwide income in the future. If we were treated as a “PRC tax resident enterprise”, we would be subject to PRC income tax at the rate of 25% on our worldwide income, which may adversely affect our profitability and distributable profits to our Shareholders.

The PRC tax authorities have strengthened their scrutiny over transfers of equity interests in a PRC resident enterprise by a non-resident enterprise, which may have an adverse impact on the value of your investment in our Shares.

The SAT issued the Public Announcement on Several Issues Concerning Enterprise Income Tax for Indirect Transfer of Assets by Non-Resident Enterprises《關於非居民企業間接轉讓財產 ( 企業所得稅若干問題的公告》) (the “SAT Circular 7”) on February 3, 2015, which abolished certain provisions in the Notice on Strengthening the Administration of Enterprise Income Tax on Non-Resident Enterprises《關於加强非居民企業股權轉讓企業所得稅管理的通知》 ( ) (the “SAT Circular 698”), which was previously issued by the State Administration of Taxation on December 10, 2009, as well as certain other rules providing clarification on SAT Circular 698. SAT Circular

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RISK FACTORS

7 provided comprehensive guidelines relating to, and also heightened the PRC tax authorities’ scrutiny over, indirect transfers by a non-resident enterprise of assets (including equity interests) of a PRC resident enterprise (the “PRC Taxable Assets”). On October 17, 2017, the SAT issued the Announcement of the State Administration of Taxation on Matters Concerning Withholding of Income Tax of Non-Resident Enterprises at Source《國家稅務總局關於非居民企業所得稅源泉扣 ( 繳有關問題的公告》) (the “SAT Circular 37 (2017)”) which became effective on December 1, 2017. SAT Circular 37 (2017) abolished certain provisions of SAT Circular 7, abolished the entire SAT Circular 698 and provided clearer calculation methods on tax declaring. SAT Circular 7 provides that the PRC tax authorities are entitled to reclassify the nature of an indirect transfer of PRC Taxable Assets, when a non-resident enterprise transfers PRC Taxable Assets indirectly by disposing of equity interests in an overseas holding company directly or indirectly holding such PRC Taxable Assets, by disregarding the existence of such overseas holding company and considering the transaction to be a direct transfer of PRC Taxable Assets, if such transfer is deemed to have been conducted for the purposes of avoiding PRC enterprise income taxes and without any other reasonable commercial purpose. Although SAT Circular 7 contains certain exemptions (including, (i) where a non-resident enterprise derives income from the indirect transfer of PRC Taxable Assets by acquiring and selling shares of a listed overseas holding company which holds such PRC Taxable Assets on a public market; and (ii) where there is an indirect transfer of PRC Taxable Assets, but if the non-resident enterprise had directly held and disposed of such PRC Taxable Assets, the income from the transfer would have been exempted from enterprise income tax in the PRC under an applicable tax treaty or arrangement), it remains unclear whether any exemptions under SAT Circular 7 will be applicable to the transfer of our Shares or to any future acquisition by us outside the PRC involving PRC Taxable Assets, or whether the PRC tax authorities will reclassify such transaction by applying SAT Circular 7. Therefore, the PRC tax authorities may deem any transfer of our Shares by our Shareholders that are non-resident enterprises, or any future acquisition by us outside the PRC involving PRC Taxable Assets, to be subject to the foregoing regulations, which may subject our Shareholders or us to additional PRC tax reporting obligations or tax liabilities.

Dividends payable by us to our foreign investors and gains on the sale of our Shares may become subject to withholding taxes under PRC tax laws.

Under the EIT Law, PRC withholding tax at a rate of 10% is normally applicable to dividends from a PRC source paid to investors that are “non-resident enterprises,” which do not have an establishment or place of business in the PRC, or which have such establishment or place of business but whose relevant income is not effectively connected with the establishment or place of business. Any gain realized on the transfer of shares by such is generally subject to a 10% PRC enterprise income tax if such gain is regarded as income derived from sources within the PRC.

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RISK FACTORS

Under PRC Individual Income Tax law and its implementation rules, dividends from sources within the PRC paid to foreign individual investors who are not PRC residents are generally subject to a PRC withholding tax at a rate of 20% and gains from PRC sources realized by such investors on the transfer of shares are generally subject to PRC income tax at a rate of 20% for individuals. Any PRC tax may be reduced or exempted under applicable tax treaties or similar arrangements.

If we are treated as a PRC resident enterprise as described in the risk factor “— We may be deemed to be a PRC tax resident under the EIT Law and be subject to PRC taxation on our worldwide income.” in this section, dividends we pay with respect to our Shares, or the gain realized from the transfer of our Shares, may be treated as income derived from sources within the PRC and as a result be subject to the PRC income taxes described above. However, Shareholders who are not PRC tax residents and seek to enjoy preferential tax rates under relevant tax treaties may apply to the PRC tax authorities to be recognized as eligible for such benefits in accordance with the Announcement of the SAT on Promulgating the Administrative Measures for Tax Convention Treatment for Non-resident Taxpayers (國家稅務總局關於發布《非居民納稅人享受稅收協定待遇管理辦法》的公告) (the “Circular 35”), which was issued on October 14, 2019 and became effective on January 1, 2020. According to the Circular 35, the preferential tax rate does not automatically apply. With respect to dividends, the “beneficial owner” tests under the Circular on Relevant Issues relating to Beneficial Owner under Tax Treaties (國家稅務總局關於《稅收協定中「受益所有人」有關問題》的公告) (the “Circular 9”) will also apply. If determined to be ineligible for the foregoing tax treaty benefits, gains obtained from sales of our Shares and dividends on our Shares paid to such Shareholders would subject to higher PRC tax rates. In such cases, the value of [REDACTED] may be materially and adversely affected.

PRC regulations relating to the establishment of offshore special purpose companies by PRC residents may subject our PRC resident Shareholders to personal liability and limit our ability to inject capital into our PRC subsidiary, limit our PRC subsidiary’s ability to distribute profits to us, or otherwise adversely affect our financial position.

On October 21, 2005, SAFE issued the Notice of SAFE on Issues Relating to Foreign Exchange Control on Fund Raisings and Round-trip Investment by Domestic Residents Through Offshore Special Purpose (關於境內居民通過境外特殊目的公司融資及返程投資外匯管理有關問題的通知) (the “SAFE Circular No. 75”). SAFE Circular No. 75 came into force on November 1, 2005 and requires PRC residents, including both legal persons and natural persons, to register with the competent local SAFE branch before establishing or controlling any company outside China, referred to as an “offshore special purpose company”, for the purpose of raising funds from overseas with the assets of or equity interest in PRC companies. On July 4, 2014, SAFE issued the Notice on Relevant Issues Concerning Foreign Exchange Administration for PRC Residents to Engage in Overseas Investment and Financing and Inbound Investment via Special Purpose Vehicles (國家外匯管理局關於《境內居民通過特殊目的公司境外投融資及返程投資外匯管理有關

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RISK FACTORS

問題》的通知) (the “SAFE Circular No. 37”), which has replaced SAFE Circular No. 75, and Notice of the SAFE on Further Simplifying and Improving Policies for the Foreign Exchange Administration of Direct Investment (關於《進一步簡化和改進直接投資外匯管理政策》的通知), which was promulgated on February 13, 2015, which became effective on June 1, 2015 and was amended on December 30, 2019, (i) a PRC resident, including a PRC resident natural person or a PRC company, shall register with a qualified bank before it contributes its domestic legitimate assets or its equity interest into a special purpose vehicle for the purpose of investment and financing, and (ii) when the special purpose vehicle undergoes a change of basic information, such as a change of a PRC resident natural person shareholder, name or operating period, or a material event, such as a change in share capital held by a PRC resident natural person, merger or split, the PRC resident shall register such change with the qualified banks timely.

To the best of our knowledge, as of the Latest Practicable Date, our Shareholders who are required to make the foreign exchange registration under SAFE Circular No. 37 had completed such registration with the local competent banks. However, we may not at all times be fully aware or informed of the identities of all our beneficial owners who are PRC citizens or residents, and we may not always be able to compel our beneficial owners to comply with the requirements of SAFE Circular No. 37. As a result, we cannot assure you that all of our Shareholders or beneficial owners who are PRC citizens or residents will at all times comply with, or in the future make or obtain any applicable registrations or approvals required by, SAFE Circular No. 37 or other related regulations. Under the relevant rules, failure to comply with the registration procedures set forth in the Circular 37 may result in restrictions on the foreign exchange activities of the relevant PRC enterprise and may also subject the relevant PRC resident to penalties under the PRC foreign exchange administration regulations.

Inflation in the PRC could materially and adversely affect our profitability and growth.

While the PRC economy has experienced rapid growth, such growth has been uneven among various sectors of the economy and in different geographical areas of the country. Rapid economic growth can lead to growth in the money supply but also a rise in inflation and labor and other operating costs, which could adversely affect our business, financial condition and results of operations. In order to control inflation in the past, the PRC Government has imposed controls on bank credits, limits on loans for fixed assets and restrictions on state bank lending. Such an austerity policy can lead to slowing economic growth, which, in turn, could materially and adversely affect our business and prospects.

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RISK FACTORS

Failure to comply with the PRC regulations in respect of the registration of our PRC individual employees’ share options may subject such employees or us to fines and legal or administrative sanctions.

Pursuant to the Notices on Issues Concerning the Foreign Exchange Administration for Domestic Individuals Participating in Stock Incentive Plans of Overseas Publicly-Listed Companies (國家外匯管理局關於《境內個人參與境外上市公司股權激勵計劃外匯管理有關問題》的通知) (the “Share Option Rules”) issued by the SAFE in February 2012, PRC residents who participate in stock incentive plan in an overseas publicly-listed company are required to register with the SAFE or its local branches and complete certain other procedures. Participants of a stock incentive plan who are PRC residents must retain a qualified PRC agent, which could be a PRC subsidiary of the overseas publicly listed company or another qualified institution selected by the PRC subsidiary, to conduct the SAFE registration and other procedures with respect to the stock incentive plan on behalf of its participants. The participants must also retain an overseas entrusted institution to handle matters in connection with their exercise of share options, the purchase and sale of corresponding shares or interests and fund transfers. In addition, the PRC agent is required to amend the SAFE registration with respect to the stock incentive plan if there is any material change to the stock incentive plan, the PRC agent or the overseas entrusted institution or other material changes. We [have adopted] the Share Option Scheme pursuant to which we may in the future grant to the eligible participants, who may be PRC residents, to subscribe our Shares. Failure of our PRC share option holders to complete their SAFE registrations may subject these PRC residents to fines and legal sanctions and may also limit our ability to contribute additional capital into our PRC subsidiary, and limit our PRC subsidiary’s ability to distribute dividends to us, or otherwise materially and adversely affect our business, financial condition and results of operations.

RISKS RELATING TO OUR SHARES AND THE [REDACTED]

There has been no prior public market for our Shares, and an active trading market may not develop after the [REDACTED].

Priortothe[REDACTED], there has been no public market for our Shares. The initial [REDACTED] range of our Shares will be determined by negotiations between the [REDACTED] (for itself and on behalf of the other [REDACTED]) and us. We have applied for the [REDACTED] on the Stock Exchange. The initial [REDACTED] may bear no relationship to [REDACTED] of our Shares following the [REDACTED]. The [REDACTED], therefore, does not assure the development of an active trading market of our Shares, or if it does develop, that it will be stable and sustainable following completion of the [REDACTED].

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RISK FACTORS

Furthermore, the [REDACTED] of our Shares may be volatile and subject to wide fluctuations in response to the factors including the following:

• variations in our revenue, profit or loss and cash flows;

• unexpected business interruptions resulting from natural disasters, accidents or power shortages;

• deviations from or delay in the implementation of our commercialization scheme;

• potential litigation or administrative investigations;

• fluctuations of exchange rates between RMB and USD or other foreign currencies;

• addition or departure of our key personnel or senior management;

• our inability to obtain or maintain regulatory approvals for our operations;

• our inability to compete effectively in the market;

• political, economic, financial and social developments in the PRC and in the global economy;

• fluctuations in stock market prices and volume;

• changes in financial estimates by securities research analysts; and

• the overall performance of the international and PRC gemstones and jewelry industries.

Future issuances or sales, or perceived issuances or sales, of substantial amounts of our Shares in the [REDACTED] could materially and adversely affect the [REDACTED] of our Shares and our ability to raise capital in the future.

The [REDACTED] of our Shares could decline as a result of future [REDACTED] of substantial amounts of our Shares, or the perception that such [REDACTED] may occur, which, in turn, could adversely affect the value of [REDACTED]. Future [REDACTED],or[REDACTED], of substantial amounts of our Shares could also materially and adversely affect our ability to raise capital in the future at a time and at a [REDACTED] favorable to it.

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RISK FACTORS

Our Shares held by certain of our existing Shareholders are subject to [REDACTED] beginning on the date on which [REDACTED] in our Shares commences on the Stock Exchange. While we are not aware of any intentions of our existing Shareholders to dispose of significant amounts of our Shares upon expiry of the relevant [REDACTED], we are not in a position to give any assurances that they will not dispose of any Shares they may own. In the event that any of our existing Shareholders disposes of our Shares upon expiry of the relevant [REDACTED],this would lead to an increase in the number of our Shares in [REDACTED], and could negatively impact the [REDACTED] of our Shares or lead to volatility in the [REDACTED] or [REDACTED] of our Shares, affecting the value of [REDACTED].

The [REDACTED] of our Shares when [REDACTED] begins could be lower than the [REDACTED].

The initial price to the [REDACTED] of our Shares [REDACTED] is expected to be determined on the [REDACTED]. However, our Shares will not commence [REDACTED] on the Stock Exchange until the [REDACTED]. Investors may not be able to sell or otherwise deal in [REDACTED] during that period. As a result, Shareholders are subject to the risk that [REDACTED] of our Shares following [REDACTED] begins could be lower than the [REDACTED] as a result of adverse market conditions or other adverse developments that may occur during that period.

Future financing may cause a dilution in your shareholding or place restrictions on our operations.

We believe that our current cash and cash equivalents, anticipated cash flows from the [REDACTED] of the [REDACTED] and our operations upon our commercial production will be sufficient to meet our anticipated cash needs for the foreseeable future. We may, however, require additional cash resources due to changed business conditions or other future developments relating to our operations, acquisitions or strategic partnerships. If additional funds are raised through the issuance of new equity or equity-linked securities of our Company other than on a pro rata basis to existing [REDACTED], the percentage ownership of such [REDACTED] in our Company may be reduced, and such new securities may confer rights and privileges that take priority over those conferred by our [REDACTED]. Alternatively, if we meet such funding requirements by way of additional debt financing, we may have restrictions placed on us through such debt financing arrangements which may:

• limit our ability to pay dividends or require us to seek consents prior to the payment of dividends;

• require us to dedicate a substantial portion of our cash flows from operations to service our debt, thereby reducing the availability of our cash flows to fund capital expenditure, working capital requirements and other general corporate needs; and

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RISK FACTORS

• limit our flexibility in planning for, or reacting to, changes in our business and our industry.

You may face difficulties in protecting your interests under Cayman Islands laws or PRC laws.

Our corporate affairs are governed by, among other things, our Memorandum and Articles and the Cayman Companies Act and common law of the Cayman Islands. The rights of Shareholders to take action against our Directors, actions by minority Shareholders and the fiduciary responsibilities of our Directors to us under Cayman Islands law are to a large extent governed by the common law of the Cayman Islands. The laws of the Cayman Islands relating to the protection of the interests of minority shareholders differ in some respects from those in other jurisdictions.

In addition, we conduct a significant portion of our operations in the PRC through our subsidiaries in the PRC, and a majority of our Directors are resided in the PRC. As a result, it may be difficult or impossible for you to bring an action against us or these individuals in the PRC. Even if you are successful in bringing an action outside of Cayman Islands or the PRC, the PRC laws may still render you unable to enforce a judgment against our assets or the assets of our Directors and officers. The PRC does not have treaties providing for the reciprocal enforcement of civil judgments of courts with United Kingdom, the United States and certain other western countries.

Our Controlling Shareholders have significant influence over our Company and their interests may not align with that of our other Shareholders.

Our Controlling Shareholders have significant influence over our operations and business strategies and they have the ability to require us to effect corporate actions according to their own desires by virtue of their shareholding in our Company. The interests of our Controlling Shareholders may not always align with the best interests of our other Shareholders. If the interests of our Controlling Shareholders conflict with that of our other Shareholders, or if our Controlling Shareholders chooses to cause our Group’s business to pursue strategic objectives that conflict with the best interests of our other Shareholders, those other Shareholders’ interests may be adversely affected.

The costs of share options granted or to be granted under the Share Option Scheme may adversely affect our results of operations and any exercise of the options granted may result in dilution in shareholding of our Shareholders.

We [have] conditionally adopted the Share Option Scheme, pursuant to which we may in the future grant to eligible participants options to subscribe our Shares. Following the issue of new Shares upon the exercise of options that may be granted under the Share Option Scheme, there will be an increase in the number of issued Shares. As such, there may be a dilution or reduction of

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RISK FACTORS shareholding of the Shareholders which may in turn result in a dilution or reduction of the earnings per Share and/or net asset value per Share. In addition, the fair value of the options to be granted to eligible participants under the Share Option Scheme will be charged to the consolidated statement of profit and loss of our Group over the vesting periods of the options. The fair value of the options shall be determined on the date of granting of the options. Accordingly, the financial results and profitability of the Group may be adversely affected.

Our financial results are expected to be affected by the expenses in relation to the [REDACTED].

Our financial results will be affected by the expenses in relation to the [REDACTED]. Assuming the [REDACTED] of HK$[REDACTED] per [REDACTED], being the mid-point of the indicative price range of the [REDACTED] stated in this document (and assuming the [REDACTED] is not exercised), the total amount of expenses in relation to the [REDACTED] are estimated to be approximately RMB[REDACTED] million including the [REDACTED] commission and other [REDACTED] expenses and fees. The expenses in relation to the [REDACTED] shall be borne by our Company, of which approximately RMB5.9 million and RMB[REDACTED] million was and will be charged to our Group’s profit and loss for the year ended December 31, 2020 and the year ending December 31, 2021, respectively, and approximately RMB[REDACTED] million of its estimated [REDACTED] expenses is directly attributable to the issue of the [REDACTED] and is to be accounted for as a deduction from equity in accordance with the relevant accounting standard after [REDACTED] for the year ending December 31, 2021. The total expenses for the [REDACTED] represents approximately [REDACTED]%ofthe[REDACTED] from the [REDACTED], based on the mid-point of the proposed [REDACTED] range and the above estimated total expenses for the [REDACTED]. Therefore, our financial results for the year ending December 31, 2021 will be materially negatively affected by the expenses in relation to the [REDACTED].

Investors should not rely on any information contained in the press articles or other media regarding us and the [REDACTED].

Prior to the publication of this document, there might have been press articles and media coverage regarding us and the [REDACTED] which might include certain financial information, financial projections, and other information about us which do not appear in this document. Such information might not be sourced from or authorized by us, hence, we do not accept any responsibility for the accuracy or completeness of such information. We cannot guarantee and make no representation as to the appropriateness, accuracy, completeness or reliability of such information. Potential investors are therefore cautioned to make their investment decisions based solely on the information contained in this document.

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RISK FACTORS

We cannot guarantee the accuracy of facts, forecasts and other statistics with respect to the PRC contained in this document, the reliability of which cannot be assumed or assured.

Certain facts and statistics in this document relating to the PRC, its economy and the industries in which we operate within the PRC are derived from official government publications generally believed to be reliable. While we have taken reasonable care to reproduce such information, we cannot guarantee the quality or reliability of such materials. These facts and statistics have not been prepared or independently verified by us, the Sole Sponsor or the [REDACTED] or any of their respective affiliates or advisers and, therefore, we make no representation as to the accuracy of such facts and statistics, or materials prepared based on such facts and statistics, which may not be consistent with other information compiled within or outside the PRC and may not be complete or up-to-date. Due to possibly flawed or ineffective collection methods or discrepancies between published information and market practice and other difficulties, the statistics presented in this document may be inaccurate or may not be comparable from period to period or to statistics produced for other economics and should not be unduly relied upon. Further, there is no assurance that they are stated or compiled on the same basis or with the same degree of accuracy as may be the case elsewhere. In all cases, investors should give consideration as to how much weight or importance they should place upon all such facts and statistics.

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WAIVERS FROM STRICT COMPLIANCE WITH THE LISTING RULES

In preparation for the [REDACTED], we have sought the following waivers from strict compliance with the relevant provisions of the Listing Rules:

MANAGEMENT PRESENCE

An application [has been submitted] to the Stock Exchange for a waiver from strict compliance with Rule 8.12 of the Listing Rules which requires a new applicant applying for a primary [REDACTED] on the Main Board of the Stock Exchange to have sufficient management presence in Hong Kong. This normally means that at least two of its executive directors must be ordinarily resident in Hong Kong. Since the principal business operations, headquarters and a majority of the assets of our Group are based outside Hong Kong, our executive Directors and a majority of the senior management team of our Group are and will continue to be based outside Hong Kong after [REDACTED]. At present, all of our executive Directors are not ordinarily resident in Hong Kong. Our Directors consider that it would be practically difficult and not commercially feasible for our Company to appoint one or more Hong Kong resident as executive Director or to relocate any of our existing executive Directors to Hong Kong merely for the purpose of complying with Rule 8.12 of the Listing Rules. Accordingly, we do not and, in the foreseeable future, will not have a sufficient management presence in Hong Kong for the purposes of satisfying the requirements under Rule 8.12 of the Listing Rules.

In this regard, the Stock Exchange [has granted] a waiver to our Company from strict compliance with the requirements under Rule 8.12 of the Listing Rules on the basis that our Company will have proper arrangements in place to maintain regular communication with the Stock Exchange, which are in line with the conditions set out in the Guidance Letter HKEx-GL9-09.

In order to maintain effective communication with the Stock Exchange, we will adopt the following arrangements: (a) our Company has appointed two authorized representatives pursuant to Rule 3.05 of the Listing Rules, namely, Mr. Yu, an executive Director, and Mr. Pang Peter Chun Ming (“Mr. Pang”), the chief financial officer of our Group and our joint company secretary, who will act as our principal channel of communication with the Stock Exchange. Mr. Pang is a Hong Kong permanent resident and Mr. Yu possesses valid travel documents to visit Hong Kong, and they will be available to meet with the Stock Exchange in Hong Kong within a reasonable period of time upon request of the Stock Exchange and will be readily contactable by telephone, facsimile and email. Each of Mr. Yu and Mr. Pang has confirmed that he has the means to contact all Directors promptly at all times as and when the Stock Exchange wishes to contact our Directors on any matters. Each of them is authorized to communicate on behalf of our Company with the Stock Exchange; (b) each Director who is not ordinarily resident in Hong Kong has confirmed that he/she possesses valid travel documents to visit Hong Kong and will be able to meet with the Stock Exchange in Hong Kong within a reasonable period of time when required. Each Director

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WAIVERS FROM STRICT COMPLIANCE WITH THE LISTING RULES has provided his/her mobile phone number, office phone number, email address and (if available) fax number to the authorized representatives and the Stock Exchange; (c) our Company has, in accordance with Rule 3A.19 of the Listing Rules, appointed China Galaxy International as compliance advisor for the period commencing on the [REDACTED] and ending on the date on which our Company complies with Rule 13.46 of the Listing Rules in respect of our Company’s financial results for the first full financial year after the [REDACTED]. The compliance advisor will act as an additional channel of communication with the Stock Exchange; and (d) our Company will also appoint other professional advisors (including legal advisors and accountants) after [REDACTED] to assist our Company in dealing with any questions which may be raised by the Stock Exchange and to ensure that there will be efficient communication with the Stock Exchange.

JOINT COMPANY SECRETARIES

Pursuant to Rules 3.28 and 8.17 of the Listing Rules, we must appoint as our company secretary an individual who, by virtue of his academic or professional qualifications or relevant experience, is, in the opinion of the Stock Exchange, capable of discharging the functions of company secretary. Note 1 to Rule 3.28 of the Listing Rules sets out the academic and professional qualifications considered to be acceptable by the Stock Exchange, including (i) a member of The Hong Kong Institute of Chartered Secretaries; (ii) a solicitor or barrister (as defined in the Legal Practitioners Ordinance (Chapter 159 of the Laws of Hong Kong)); and (iii) a certified public accountant (as defined in the Professional Accountants Ordinance (Chapter 50 of the Laws of Hong Kong)). Note 2 to Rule 3.28 of the Listing Rules sets out the factors that the Stock Exchange considers when assessing an individual’s “relevant experience”, including (i) length of employment with the issuer and other issuers and the roles he played; (ii) familiarity with the Listing Rules and other relevant law and regulations including the SFO, the Companies Ordinance, the Companies (Winding Up and Miscellaneous Provisions) Ordinance and the Takeovers Code; (iii) relevant training taken and/or to be taken in addition to the minimum requirement under Rule 3.29 of the Listing Rules; and (iv) professional qualifications in other jurisdictions.

We have appointed Mr. Pang as our joint company secretary. He joined our Group in 2018 and is the chief financial officer of our Group. He has been responsible for the overall financial planning and reporting and treasury management of our Group. Mr. Pang, however, does not possess the specified qualifications required by Rule 3.28 of the Listing Rules.

Mr. Pang has over 17 years of experience in accounting and finance and he has been a certified public accountant of the California Board of Accountancy of the United States since February 2006. From January 2015 to July 2018, Mr. Pang also served as chief financial officer and joint company secretary of Pa Shun Pharmaceutical International Holdings Limited (currently known as Pa Shun International Holdings Limited) (stock code: 574.hk). Our Directors are of the view that Mr. Pang possesses ample financial experience, and has built close working relationships

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WAIVERS FROM STRICT COMPLIANCE WITH THE LISTING RULES with our Board and other management of our Group over the years. Therefore, our Directors believe that Mr. Pang is suitable to act as our joint company secretary and is able to perform the function of a company secretary and to take the necessary actions in an effective and efficient manner.

We have, since February 2019, appointed Mr. To Yu Fai (“Mr. To”), who meets the requirements under Note 1 to Rule 3.28 of the Listing Rules, as company secretary of our Company. Mr. To will work closely with and to provide assistance to Mr. Pang to jointly discharge the duties as joint company secretaries of the Company for an initial period of three years commencing from the [REDACTED] so as to enable Mr. Pang to acquire the relevant experience (as required under Note 2 to Rule 3.28 of the Listing Rules). See “Directors and Senior Management” in this document for further information about the biography of Mr. Pang and Mr. To.

Mr. Pang will endeavor to attend relevant training and familiarize himself with the Listing Rules and duties required for a company secretary of an overseas issuer listed on the Stock Exchange, including briefing on the latest changes to the applicable Hong Kong laws and regulations and the Listing Rules organized by our Company’s Hong Kong legal advisors on an invitation basis and seminars organized by the Stock Exchange for overseas issuers from time to time.

Mr. To, who has joined our Group since July 2018 and is also the financial controller of our Group, has familiarized himself with the affairs of our Company. Mr. To will communicate regularly with Mr. Pang on matters relating to corporate governance, the Listing Rules as well as other laws and regulations which are relevant to our Company and its other affairs. Mr. To will work closely with, and provide assistance to, Mr. Pang in the discharge of his duties as company secretary. Mr. Pang will also be assisted by the compliance advisor and the Hong Kong legal advisors of our Company, particularly in relation to Hong Kong corporate governance practices and regulatory compliance, on matters concerning our Company’s ongoing compliance obligations under the Listing Rules and the applicable laws and regulations.

We [have applied] to the Stock Exchange for, and the Stock Exchange [has granted], a waiver under and in respect of Rules 3.28 and 8.17 of the Listing Rules on certain conditions, among others:

(a) Mr. To, who meets the requirements under Note 1 to Rule 3.28 of the Listing Rules and has been appointed as a company secretary of the Company since February 2019, will assist Mr. Pang in matters concerning the duties and responsibilities of company secretary throughout the period of three years commencing from the [REDACTED] (the “Waiver Period”); and

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WAIVERS FROM STRICT COMPLIANCE WITH THE LISTING RULES

(b) the waiver can be revoked during the Waiver Period if Mr. To ceases to provide assistance to Mr. Pang or if there are material breaches of the Listing Rules by our Company.

Upon expiry of the initial three-year period, the qualifications of Mr. Pang will be re- evaluated to determine whether the requirements as stipulated in Rules 3.28 and 8.17 of the Listing Rules can be satisfied. In the event that Mr. Pang has obtained relevant experience under Rules 3.28 and 8.17 of the Listing Rules at the end of the said initial three-year period, the above joint company secretaries arrangement would no longer be necessary.

BASIC CONDITIONS IN RELATION TO QUALIFICATIONS FOR [REDACTED]

Pursuant to Rule 8.05 of the Listing Rules, we must satisfy one of the three tests in relation to: (i) profit; (ii) market capitalization, revenue and cash flow; or (iii) market capitalization and revenue requirements (collectively, the “Financial Standards Requirements”). In this connection, according to Rule 8.05(1)(a) of the Listing Rules, we need to have a trading record of not less than three financial years, during which the profit attributable to shareholders must, in respect of the most recent financial year, be not less than HK$20.0 million, and in respect of the two preceding financial years, be in aggregate not less than HK$30.0 million.

Pursuant to Rule 8.05B(1) of the Listing Rules, the Stock Exchange may waive the above Financial Standards Requirements for a mineral company as defined under Rule 18.01 of the Listing Rules. In this connection, our Company is regarded as a mineral company under Rule 18.01 of the Listing Rules, to which the provisions of Chapter 18 of the Listing Rules apply.

Rules 8.05B(1) and 18.04 of the Listing Rules further provide that, even though we are unable to satisfy the requirements as set out in of Rule 8.05(1)(a) of the Listing Rules, we may still apply for [REDACTED] if the Stock Exchange is satisfied that our Directors and members of senior management whom we rely on in respect of our mining activities, taken together, have sufficient experience relevant to the exploration and/or extraction activity that we are pursuing. In this connection, individuals relied on must have a minimum of five years relevant industry experience.

In light of the above, we [have applied] to the Stock Exchange for, and the Stock Exchange [has granted] us a waiver from strict compliance with Rule 8.05(1)(a) of the Listing Rules on the grounds as follows:

(a) the primary activity of our Group is exploration for and/or extraction of natural resources;

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WAIVERS FROM STRICT COMPLIANCE WITH THE LISTING RULES

(b) we have demonstrated to the satisfaction of the Stock Exchange that our inability to comply with the Financial Standards Requirements is due to the fact that no formal mining or processing operations was commenced in respect of our YQS Nanshan Project during the Track Record Period, and our YQS Nanshan Project was still at the mine site infrastructure development and mine construction preparation stage as of the Latest Practicable Date;

(c) based on our commercialization scheme, we are able to demonstrate a clear path to commercial production with respect to our YQS Nanshan Project. In particular, our YQS Nanshan Project comprises a meaningful portfolio of Resources and Reserves in terms of both quality and quantity. Please refer to “Path to Commercialization” in this document for further details of our commercialization scheme;

(d) two of our executive Directors, namely Mr. Chi Yongxi and Mr. Liu Zhong, and three members of our senior management, namely, Mr. Guo Junguo, Mr. Yu Hongyi and Mr. Zhang Xiaoman, have at least five years of experience relevant to the exploration and/or extraction activities our Group is pursuing. Please refer to “Directors and Senior Management” in this document for further details of the relevant industry experience of each of Mr. Chi Yongxi, Mr. Liu Zhong, Mr. Guo Junguo, Mr. Yu Hongyi and Mr. Zhang Xiaoman. As such, our Directors and senior management, taken together, have sufficient mining experience as required under Rule 18.04 of the Listing Rules;

(e) save for the funds to be raised from the [REDACTED], there is no need for any additional financing to fund the total outstanding capital expenditure (inclusive of both the initial capital expenditure for the overall construction of our mine site and our ore processing facilities, and the additional capital expenditure for the development of our gemstone processing facilities) for the YQS Nanshan Project as of the Latest Practicable Date;

(f) in addition, we have complied with the other disclosure requirements under Chapter 18 of the Listing Rules and Stock Exchange Guidance Letter HKEx-GL52-13. Our Directors confirm that our Group has sufficient working capital for 125% of our Group’s present requirements, for at least 12 months from the date of this document; and

(g) our Group and our Directors confirmed that all the information that is necessary for the public to make an informed assessment of our Group’s activities and financial position has been included in this document.

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INFORMATION ABOUT THIS DOCUMENT AND THE [REDACTED]

[REDACTED]

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INFORMATION ABOUT THIS DOCUMENT AND THE [REDACTED]

[REDACTED]

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INFORMATION ABOUT THIS DOCUMENT AND THE [REDACTED]

[REDACTED]

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INFORMATION ABOUT THIS DOCUMENT AND THE [REDACTED]

[REDACTED]

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DIRECTORS AND PARTIES INVOLVED IN THE [REDACTED]

DIRECTORS

Name Residential Address Nationality

Executive Directors

Mr. Yu Haiyang (于海洋) Unit 2, Huaming Community Chinese Guangming Street Dongchang District Tonghua City Jilin Province PRC

Mr. Jiang Yingliang (姜英良) Unit 2, House 80 Chinese Zone D, Phase 3, Lijing Dongchang District Tonghua City Jilin Province PRC

Mr. Chi Yongxi (遲永喜) Unit 8, Bishui Community Chinese Henan Street Yanji City Jilin Province PRC

Ms. Pia Pompea Tonna 25 Brook Farm Close British Stoke Hammond Milton Keynes MK17 9FN United Kingdom

Mr. Liu Zhong (劉忠) 23 Zhengyang Street Chinese Lvyuan District Changchun City Jilin Province PRC

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DIRECTORS AND PARTIES INVOLVED IN THE [REDACTED]

Name Residential Address Nationality

Independent non-executive Directors

Dr. Ren Shuang K (任雙奎) 24 Neville Road Australian Dalkeith Perth WA6009 Australia

Dr. Shen Hsi-Tien (沈錫田) 5F-2, No 450, Section 2, Datong Road Taiwanese Limen Li Xizhi District New Taipei City Taiwan

Mr. Li Shu Pai (李書湃) (formerly Flat C, 42/F, Lexington Hill, Chinese known as Lee Shu Paai (李書湃)) 11 Rock Hill Street Hong Kong

Please see “Directors and Senior Management” in this document for further information on our Directors and members of our senior management.

PARTIES INVOLVED IN THE [REDACTED]

Sole Sponsor and [REDACTED] China Galaxy International Securities (Hong Kong) Co., Limited A licensed corporation permitted to carry out type 1 (dealing in securities), type 4 (advising on securities) and type 6 (advising on corporate finance) regulated activities under the SFO 20/F Wing On Centre 111 Connaught Road Central Hong Kong

[REDACTED] [REDACTED]

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DIRECTORS AND PARTIES INVOLVED IN THE [REDACTED]

[REDACTED] [REDACTED]

Legal advisors to our Company As to Hong Kong law: Eric Chow & Co. in Association with Commerce & Finance Law Offices 29/F, 238 Des Voeux Road Central Hong Kong

As to PRC law: Commerce & Finance Law Offices 6/F, NCI Tower A12 Jianguomenwai Avenue Chaoyang District Beijing PRC

As to Cayman Islands law: Appleby Suites 4201-03 & 12 42/F, One Island East, Taikoo Place 18 Westlands Road, Quarry Bay Hong Kong

Legal advisors to the Sole As to Hong Kong law: Sponsor and the [REDACTED] Morgan, Lewis & Bockius Suites 1902-09, 19th Floor Edinburgh Tower, The Landmark 15 Queen’s Road Central Hong Kong

As to PRC law: Jingtian & Gongcheng (Shanghai Office) 45/F, K. Wah Centre 1010 Middle Huaihai Road (M) Xuhui District Shanghai PRC

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DIRECTORS AND PARTIES INVOLVED IN THE [REDACTED]

Auditors and reporting Ernst & Young accountants Certified Public Accountants, Registered Public Interest Entity Auditor 27th Floor, One Taikoo Place 979 King’s Road Quarry Bay Hong Kong

Independent Technical Consultant SRK Consulting China Limited B315 COFCO Plaza No. 8 Jianguomennei Avenue Dongcheng District Beijing PRC

Industry consultant Frost & Sullivan (Beijing) Inc., Shanghai Branch Co. 2504 Wheelock Square 1717 Nanjing West Road Shanghai PRC

Property valuer Jones Lang LaSalle Corporate Appraisal and Advisory Limited 7/F, One Taikoo Place 979 King’s Road Hong Kong

Receiving bank [•]

Compliance advisor China Galaxy International Securities (Hong Kong) Co., Limited 20/F Wing On Centre 111 Connaught Road Central Hong Kong

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CORPORATE INFORMATION

Registered office P.O. Box 31119 Grand Pavilion Hibiscus Way, 802 West Bay Road Grand Cayman KY1-1205 Cayman Islands

Principal place of business in Flat 4B, 5/F Hong Kong Hunghom Commercial Center Tower B No. 37 Ma Tau Wai Road, Hung Hom Kowloon Hong Kong

Headquarters and principal place Industrial and Agricultural Community of business in the PRC Bohai Street Dunhua City Jilin Province PRC

Company website www.fuligemstones.com (Note: information on this website does not form part of this document)

Authorized representatives Mr. Yu Haiyang (于海洋) Unit 2, Huaming Community Guangming Street Dongchang District Tonghua City Jilin Province PRC

Mr. Pang Peter Chun Ming (彭浚銘) Flat NB, 11/F, Tower 5 Festival City Phase 3 1 Mei Tin Road Shatin, New Territories Hong Kong

Joint company secretaries Mr. To Yu Fai (陶宇揮) (HKICPA) Flat C, 12/F, Tower 7 Century Gateway, Phase 2 83 Tuen Mun Heung Sze Wui Road Tuen Mun New Territories Hong Kong

Mr. Pang Peter Chun Ming (彭浚銘) (CPA (California Board of Accountancy), CFA) Flat NB, 11/F, Tower 5 Festival City Phase 3 1 Mei Tin Road Shatin, New Territories Hong Kong

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CORPORATE INFORMATION

Audit committee Mr. Li Shu Pai (李書湃) (Chairman) Dr. Ren Shuang K (任雙奎) Dr. Shen Hsi-Tien (沈錫田)

Remuneration committee Dr. Shen Hsi-Tien (沈錫田) (Chairman) Mr. Li Shu Pai (李書湃) Mr. Yu Haiyang (于海洋)

Nomination committee Mr. Yu Haiyang (于海洋) (Chairman) Mr. Li Shu Pai (李書湃) Dr. Shen Hsi-Tien (沈錫田)

Environmental social governance Mr. Jiang Yingliang (姜英良) (Chairman) committee Dr. Ren Shuang K (任雙奎) Dr. Shen Hsi-Tien (沈錫田)

[REDACTED] [REDACTED]

Principal bankers China Construction Bank (Asia) Corporation Limited 11/F, CCB Center 18 Wang Chiu Road Kowloon Bay, Kowloon Hong Kong

Industrial and Commercial Bank of China Dunhua Sub-Branch 1102 Hanzhang Street, Dunhua City Yanbian Korean Autonomous Prefecture Jilin Province PRC

China Merchants Bank North Third Ring Road (Beijing) Sub-Branch 1/F, Block D, Global Trade Center 36 North Third Ring East Road Dongcheng District Beijing PRC

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INDUSTRY OVERVIEW

The information and statistics related to our industry presented in this section is derived from the F&S Report, as well as various official or publicly available publications. We believe that the sources of the information in this section are appropriate sources for such information, and we have taken reasonable care in extracting and reproducing such information. We have no reason to believe that such information is false or misleading or that any part has been omitted that would render such information materially false or misleading. However, the information has not been independently verified by us, the Sole Sponsor, the [REDACTED],orthe respective affiliates or advisors or any other party involved in the [REDACTED], except Frost & Sullivan and no representation is given to its accuracy.

SOURCES OF INFORMATION AND RESEARCH METHODOLOGY

We commissioned Frost & Sullivan, an independent market research and consulting company to conduct a detailed analysis of, and to prepare a report on, the global and China colored gemstone and peridot gemstone markets. Founded in 1961, Frost & Sullivan provides market research on a variety of industries among other services. The report prepared by Frost & Sullivan is referred to in this document as the F&S Report. We have agreed to pay Frost & Sullivan a fee of RMB480,000, which we believe reflects market rates for reports of this type. Our Directors confirm that, after taking reasonable care, there is no adverse change in the market information since the date of the F&S Report which may qualify, contradict or have an impact on the information disclosed in this section.

We have included certain information from the F&S Report in this document because we believe this information facilitates an understanding of the colored gemstone and peridot gemstone markets for prospective investors. Frost & Sullivan’s independent research consists of both primary and secondary research obtained from various sources in respect of the colored gemstone and peridot gemstone markets. Primary research involved discussing the status of the industry with certain leading industry participants and conducting interviews with relevant parties. Secondary research involved reviewing company reports, independent research reports and data based on Frost & Sullivan’s own research database. Estimated total market size was obtained from historical data analysis plotted against macroeconomic data with reference to specific industry key drivers. Frost & Sullivan has prepared the F&S Report on the assumptions that (i) the social, economic, and political environment of China and the world is likely to remain stable in the forecast period; and (ii) relevant industry key drivers are likely to drive the market in the forecast period. The reliability of the F&S Report may be affected by the accuracy of the foregoing assumptions.

It should be noted that to date, there has not been a public company in the field of peridot that discloses details of their peridot reserve or resource data, nor has there been any stakeholders in the value chain of the peridot gemstone that ever publicly releases information about the overall competitive landscape of the global peridot industry. Frost & Sullivan was unable to identity specific rankings or market shares for any indicators of the global peridot industry due to limited sources of information. To understand the positioning of our YQS Nanshan Project and its significance to the global colored gemstone industry, Frost & Sullivan approached a number of stakeholders in the regions that have peridot mines ever discovered or exploited, primarily through expert interviews, including gemstones dealers, mining companies, veterans who ever worked on peridot mines, machinery suppliers who ever rented or sold mining machinery to clients involved in peridot mining, and local geologists. Frost & Sullivan has carried out procedures to verify the information relating to the peridot market and our YQS Nanshan Project, including (i) calculating the amount of exploitable rough peridot of the YQS Nanshan Project using the Probable Ore Reserves and the average peridot gemstone grade provided in the Competent Person’s Report; (ii)

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INDUSTRY OVERVIEW using the calculated rough peridot data of the YQS Nanshan Project to check with the value chain stakeholders as mentioned above in major regions of recognized peridot mines, including the United States, Pakistan, Myanmar, Germany and Egypt. In that regard, given the mining assets involved are largely personal mine with limited disclosure, the stakeholders interviewed or approached could only advised information and estimates based on their expertise and industry knowledge; and (iii) cross-checked and verified the current period amounts of exploitable rough peridot at the Peridot Mesa Mine in Arizona of the United States and the Sapat Peridot Mine in Khyber Pakhtunkhwa of Pakistan to provide sufficient confidence in the ranking presented.

Except as otherwise noted, all of the data and forecasts contained in this section are derived from the F&S Report, official government publications and other publications. Under circumstances where information is not available, Frost & Sullivan leveraged models and indicators which they believe to be appropriate to arrive at an estimate.

GLOBAL COLORED GEMSTONES MARKET

Colored gemstones are scarce natural resources. Gemstones are classified by their chemical composition and crystal structure. According to the F&S Report, major colored gemstones in the current global market, such as emerald, tanzanite, ruby, sapphire, and tourmaline, are generally treated whereas certain gemstones such as peridot and spinel, are not treated. The following table sets out a summary of major colored gemstones and peridot:

Name Peridot Tourmaline Sapphire Emerald Tanzanite Ruby Spinel

Main Source(s) .. Myanmar, Brazil Madagascar, Colombia, Zambia Tanzania Myanmar, Tanzania, Vietnam Pakistan, USA Tanzania, Sri and Brazil Mozambique, and China Lanka, Thailand, Sri Myanmar, and Lanka and Australia Madagascar

Source: F&S Report

Typically, after the gemstone ores are mined, the gemstones in the ores are separated from other minerals leaving the rough gemstones. They are then processed into cut-and-polished gemstones through different stages such as cutting, bruting faceting and polishing, ready to be sold to jewelry manufacturers, brand owners and designers to be fabricated into a variety of jewelry items and accessories such as rings, necklaces, earrings, bracelets and watches, or sold directly to gemstone dealers. Sales channels for colored gemstones may include auctions, trade fairs and exhibitions, direct negotiations and agreements, as well as e-commerce platforms.

Global Market Size of Colored Gemstones

According to the F&S Report, the market size of global cut-and-polished colored gemstones in terms of sales volume increased from 165.84 tonnes in 2015 to 185.67 tonnes in 2019 with a CAGR of 2.9%. However, with the spread of COVID-19 since the beginning of 2020, the global cut-and-polished colored gemstone industry was adversely affected due to reasons such as suspended mining activities, stricter border controls and transportation limitation. Such negative impact is expected to last in 2021 as the world is still fighting against the COVID-19 pandemic. With the availability of the COVID-19 vaccines, it is expected that the global market and

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INDUSTRY OVERVIEW economic activities should gradually recover in 2022. Frost & Sullivan expects that the sales volume of the cut-and-polished colored gemstone industry will gradually recover from 2022 and reach 203.39 tonnes in 2035.

Market Size by Sales Volume of Cut-and-Polished Colored Gemstone Industry (Global), 2015-2035E

Tonnes CAGR: +1.6% CAGR: +2.9% 220.0 201.46 202.47 203.39 194.41 197.79 199.74 200.0 185.67 185.19 190.08 175.20 180.26 174.61 179.89 180.0 165.84 170.78 169.20 160.15 158.80 163.76 160.0 151.29 154.02 140.0 120.0 100.0 80.0 60.0 40.0 20.0 0.0 2015201620172018 2019 2020E 2021E 2022E 2023E 2024E 2025E 2026E2027E 2028E 2029E 2030E 2031E 2032E 2033E 2034E 2035E

Source: F&S Report

According to the F&S Report, tourmaline, sapphire and emerald were the top three colored gemstones in 2019 in terms of sales volume, with market shares of 28.3%, 13.8% and 10.2%, respectively, while peridot only had a global market share of 0.9%. It is forecasted that with the anticipated market supply of peridot from our YQS Nanshan Project, by 2035 the global market share of peridot will increase to 4.1%.

2019 Sales Volume Breakdown 2023E Sales Volume Breakdown 2035E Sales Volume Breakdown

Emerald Emerald Emerald 10.2% 9.5% 11.4% Ruby Others Ruby Others Ruby Others 6.7% 5.9% 23.4% 29.9% 28.5% 6.5%

Sapphire Sapphire 13.8% 14.7% Peridot Sapphire Peridot 4.1% 16.7% Peridot 1.1% 0.9% Tanzanite Tanzanite 7.3% 7.4% Tanzanite Spinel Spinel Tourmaline 6.4% Tourmaline 2.9% Tourmaline 2.7% 28.7% Spinel 28.3% 30.2% 2.8%

Source: F&S Report

Note: Others include but not limited to aquamarine, opal, alexandrite, moonstone, topaz, chrome-diopside, sinhalite, prehnite, garnet, amethyst, ametrine, citrine, turquoise, zircon, morganite, kunzite, iolite and lapis lazuli.

Prices of Major Colored Gemstones

Colored gemstones are typically viewed as consumer discretionary and luxury products. Unlike other resources such as gold, silver, ferrous and non-ferrous metals that are commodities, gemstones are non-standard products with prices varying significantly depending on the size, clarity, color, shape, cut, and even the origin of each individual gemstone. Prices of a gemstone can also be influenced by consumer preference and perception of its value over time. At present, there is no official, universally adopted grading system for colored gemstones, and the colored gemstones industry generally refers to a grading system developed by GemGuide, (a periodically updated colored gemstones pricing guide proposed by Gemworld International and offers market information and appraisal solutions for the jewelry industry) which separates gemstones into four

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INDUSTRY OVERVIEW categories of commercial, good, fine and extra fine, ranked by quality factors such as color, clarity, cut and carat weight. The following table sets forth the global price range of major colored gemstones in 2019: Colored Gemstones Unit Price Range Ruby ...... US$/ct 7,000−12,000 Emerald...... US$/ct 4,000−5,250 Sapphire ...... US$/ct 1,500−2,250 Tanzanite...... US$/ct 400−475 Tourmaline, green ...... US$/ct 175−250 Tourmaline, pink ...... US$/ct 225−275

Source: F&S Report

Colored Gemstone Value Chain

The following chart summarizes the ecosystem of the colored gemstone value chain in general:

Value Chain of Colored Gemstone Industry

Small-scale Gemstone Gemstone Distributors Distributors and Manufacturers

Large-scale Gemstone Manufacturers End Consumers

Mine Owners Collectors Connoisseurs Trend Setters Mass Consumers Celebrities Brand Owners High-net-worth Individuals Designers

Media, institutions, trade associations, auction organizers and exhibition organizers participate in the whole value chain and promote the development of gemstone industry

Media Institutions Trade Associations Auction Organizers Exhibition Organizers

Source: F&S Report

Gemstone mine owners, gemstone distributors, jewelry manufacturers, trend setters (such as brand owners and designers), end-consumers, media, institutions, trade associations, auction organizers and exhibition organizers jointly participate in the value chain of the colored gemstone industry. The retail demand for a new type of gemstone is typically created and promoted under joint efforts of the entire value chain participants, in particular through (i) consistent supply of the gemstone from mine owners; (ii) effective distribution by the gemstone distributors; (iii) jewelry designers and manufacturers incorporating the gemstone into their products; (iv) marketing strategies and education of the gemstone jointly carried out by brands and designers, media, institutions and trade associations; (v) promotional activities, auctions, trade exhibitions held by auction organizers and exhibition organizers; and (vi) the sharing of gemstone information among end consumers.

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INDUSTRY OVERVIEW

Major Demand Drivers of Colored Gemstones

The F&S Report has identified several driving forces that are commonly shared in the market development of gemstones as illustrated in the diagram below:

Consumer perception & preference Marketing campaigns & consumer Consumer market demand education Price Industry value chain interests & demand

Stable and continuous supply

Consistent supply

According to the F&S Report, only colored gemstones with a stable and continuous supply can drive and create market demand consistently. A consistent and sustainable supply of gemstones provides pertinent support to gemstone providers in managing supply and market education, and enables them to build market demand. The discovery of a large gemstone mine would support stable and continuous supply of gemstones to the market, and only then would the upstream value chain players (such as gem dealers, designers and brands) be interested and drawn to adopt the gemstones into their designs and products, as well as to devote marketing resources to promote and lead consumers’ perception and interests towards the gems. A discovery of gemstones with large reserves therefore may promote the surge in demand and price. On the flip side, if the supply is not consistent, the market circulation of such type of gemstone is likely to face resistance. Gemstone dealers would then turn to other types of gemstones, resulting in a weakening of consumer awareness.

Take the case of the historical development of spinel as an example. According to the F&S Report, red spinel was first discovered between the 7th and 8th century in the Badakhshan region. Global supply of spinel remained low after the suspension of mining in Badakhshan led by the “Black Death” outbreak. With the discovery and the official mining of the high-quality spinel mine in Mahenge, Tanzania in the 21st century, prices and demand of all types of red spinel have continued to rise, with spinel prices having increased by more than three times since 2000 up to 2015.

Another example would be peridot and emerald. Peridot was first discovered around 1500 B.C. in Egypt. However, due to extremely difficult mining conditions, harsh climates and geographical remoteness, exploitation of Egyptian peridot was only intermittent and then ceased altogether in the 17th century. While peridot resources were later mined in countries such as Myanmar, the United States, Pakistan, and China, they failed to create lasting market enthusiasm for reasons such as limited and unstable supply and/or mediocre quality. Conversely, emerald was also first found in Egypt but ceased production in the 14th century. Yet the discovery of Colombian emerald in the 16th century supported a stable supply (in contrast to peridot), driving

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INDUSTRY OVERVIEW gem dealers to choose emerald over peridot, which further increased the demand for emerald and decreased the demand for peridot in the world trade. Consequently emerald overtook the status of peridot as “the king of green gemstones”.

Marketing campaigns and educational efforts

As evidenced by past histories of gemstones with well-established market acceptance, consistent marketing efforts and messages as well as consumer education are critical in driving consumer perception, recognition, emotional attachments and ultimately preference and demand for a particular kind of gemstone. As consumers’ general perception of gemstones is luxury, fashion, power, beauty, wealth, and elegance, there is no natural price cap for gemstones and the consumption is entirely driven by preference and perception. It is believed that the best marketing campaign is to associate a product with an emotion or a symbolic meaning and making it a psychological necessity.

Collaborating with industry value chain stakeholders, including audiences from the art and fashion worlds, jewelry and other luxury brands, up-and-coming designers and influential publishers, is an integral part of marketing initiatives to create market noise and publicity, drive popularity, and influence consumer perception and preference to gravitate towards a particular type of gemstone. According to the F&S Report, Tiffany & Co. promoted Tanzanite with publicity campaigns in the 1960s, making it popular among jewelry designers and gem professionals. Mainstream U.S. news media in early 2001 once reported that Tanzanite was one of the most popular colored gemstones after Sapphire. Associating a gemstone with an emotion or a symbolic meaning and making it a psychological necessity is also a particularly effective marketing strategy, according to the F&S Report. An illustrative example of this would be the advertising campaign slogan “A Diamond is Forever” that successfully associated diamonds with love and eternity, effectively instilling an emotional message and changing the social attitudes of consumers towards diamonds. Yet another illustration would be Mozambique rubies. According to the F&S Report, the increase in the popularity, influence and price of Mozambique rubies was a result of the promotional efforts after the acquisition by Gemfields Group Limited in 2011 of the world’s largest ruby mine, the Montepuez mine in Mozambique that was discovered in 2009.

According to the F&S Report, educating target audiences about the source, history, value and symbolic meaning of gemstones is also an important push factor in promoting growth in both price and consumption demand for gemstones. Popular means of consumer education may include gemstone congresses and fashion shows, sharing gemstone stories and insights with targeted value chain stakeholders, informative booklets at points of sales, short videos or films to introduce the mining, processing and applications of gemstones, articles and reports on new findings by gemstone laboratories or research institutions, and online and offline advertisements.

Customer preferences and trends on demand for colored gemstones

The past decade has seen a resurgence in the popularity of colored gemstones. As more and more luxury brands use colored gemstones in their products, gemstones with exotic colors and diverse cutting styles are likely to become increasingly popular, particularly among younger generations who want unique products reflecting their personalities. Much of the rising popularity of colored gemstones is due to growing awareness (primarily via the Internet and marketing) and developments that have boosted consumer confidence, such as widespread certification and more industry transparency.

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INDUSTRY OVERVIEW

Compared with other colored gemstones such as emerald and ruby, the prices of peridot of comparable quality is relatively low, primarily due to its unstable supply up to date. Because of its untreated characteristic, the processing costs of peridot is also lower than that of other colored gemstones that typically require treatments, such as emerald, ruby and sapphire. Therefore, peridot has the potential to achieve high market profit margins. The high profit margin of peridot is expected to drive more and more companies including international luxury brands, jewelry brands, arts and crafts companies and others to participate in the production and sale of peridot. Some international first-tier jewelry brands and luxury brands have applied peridot as the main stone or decoration gemstone in recent years. Jewelry brands such as BVLGARI, Cartier and Piaget have used peridot in high-end jewelry and custom jewelry. Therefore, the use of peridot by luxury brands is expected to become more popular in the near future which in turn is expected to result in fast sales growth for peridot.

Increased focus on traceability, transparency and sustainability

Traceability, transparency and sustainability have become increasingly important for consumers in the colored gemstone industry. More than ever, consumers are interested in knowing where and how the gemstones they purchased were extracted and manufactured. Especially, driven by increasingly progressive worldviews and a sense of social responsibility, the new generations usually demand transparent and traceable history and background of colored gemstones. International efforts against terrorists financing are also fueling requirements of traceability for major jewelry brands. Gemstone providers who are able to provide the tracking record of gemstones and resolve the issue of traceability and transparency are expected to be more attractive to the end markets and enjoy better market prospects.

Impact by trend setters, major brands and designers

The value and development of gemstones are also impacted by trend setters including major brand owners and designers. International premium and popular brands’ interests in the colored gemstones also play a guiding role in the fashion industry, and among international buyers and mass consumers. Collaborating with trend setters, major brands and designers as well as other stakeholders in the industry value chain is a critical part of the marketing efforts to promote a gemstone.

Popular market channels

In China, the development of Internet technology has actively promoted the development of domestic e-commerce platforms, and formed the mode of KOLs selling goods through live broadcasts, which provides new opportunities for many traditional industries, especially the retail industry. According to the National Bureau of Statistics of China (中華人民共和國國家統計局), the volume of e-commerce transactions in China reached RMB37.2 trillion in 2020, representing an increase of approximately 17.6% from 2018. It is expected that the volume of e-commerce transactions will increase by a CAGR of approximately 10.8% from 2020 to 2030. With the change of consumption patterns, jewelry sales channels are not limited to offline stores, an increasing number of consumers are willing to buy jewelry through online sales platforms.

Colored gemstones are favored by consumers all over the world for their variety and different colors. The diversified demands of consumers are driving more and more major brands and designers to choose colored gemstones on their designs and products. At the same time, the use of colored gemstone jewelry by trend setters and celebrities and coverage by fashion magazines and related jewelry exhibitions have improved the popularity of colored gemstones. With the enhanced

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INDUSTRY OVERVIEW awareness of colored gemstones jewelry, the consumer group of colored gemstone jewelry is expected to expand rapidly, and the market demand for colored gemstones, with peridot among them, is also projected to increase.

GLOBAL PERIDOT GEMSTONE MARKET

Peridot is the gem variety of the mineral olivine, most of which was formed deep inside the earth and was delivered to the surface by volcanoes. The color of peridot ranges from green, yellowish green, greenish yellow, brownish green, and to brown. High-quality peridot is of a bright and saturated color. Peridot is a silicate of magnesium and iron and its primary chemical constitution is (Mg, Fe)2SiO4, where Fe is the color-causing element, and the color of peridot changes according to the content of Fe. Global major peridot mines and reserves Major peridot producing countries include Myanmar, Pakistan, the United States, and China. Other peridot producing countries include North Korea, Australia, Brazil, Kenya, Mexico, Norway, Sri Lanka, South Africa, Vietnam and Ethiopia. Below sets forth details of the three major peridot sources in the world as of 2020:

Major Peridot Mine/Project

Name of Exploitable Region of Location of Country Peridot Rough Parameter of Peridot Peridot Sources Peridot Mine/Project Mine/Project Peridot

Major sources of peridot in • Located approximately 50 km line China are largely found in distance northwest of Dunhua Jilin Province and Hebei City, under the jurisdiction of Fuli YQS • High-quality, large and Province. At present, aside Emu town, Dunhua City, Yanbian 211.5 China Nanshan demonstrate bright and vibrant from Fuli’s YQS Nanshan Prefecture, Jilin Province, China tonnes Project color with good clarity Project, most of China’s other peridot sources have been depleted or no longer being mined.

The major sources of the • Most peridot from Arizona is American peridot come usually smaller in size and from Arizona and New weighted less than 1 carat with Mexico. Peridot deposits in Peridot • Located near San Carlos Apache United Below 20 only a few reaching 3 carats. Arizona are primarily Mesa Reservation, Arizona, U.S. States tonnes • Peridot produced in these areas located in San Carlos. In Mine • Ranked as the second largest are mostly with colors of brown, New Mexico, peridot peridot mine greenish-brown, or deposits are mostly yellowish-green. located in Kilbourne Hole.

• Located near Sapat Valley, Mansehra District, Khyber In Pakistan, peridot Sapat Pakhtunkhwa Province (Western Below 15 Pakistan mines are located in the Peridot • Mostly of high quality Himalaya Mountains), Pakistan tonnes Khyber Pakhtunkhwa. Mine • Ranked as the third largest peridot mine

Source: F&S Report

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INDUSTRY OVERVIEW

Below sets forth the breakdown of global exploitable rough peridot by major countries based on the independent research conducted by Frost & Sullivan as of December 31, 2020:

Others Germany 8.1% 3.2% Myanmar 4.9% Pakistan 7.6%

U.S. 10.3% China 65.7%

Source: F&S Report

According to the F&S Report, global exploitable rough peridot stood at approximately 330.1 tonnes as of 2020. China had the largest share with approximately 65.7% of the global exploitable rough peridot, followed by the U.S. and Pakistan with shares of 10.3% and 7.6%, respectively. In addition, Myanmar occupied 4.9% of the world’s exploitable rough peridot, ranking the fourth. Germany accounted for 3.2%. The rest of the world took up 8.1% of the world’s exploitable rough peridot.

Global Market Size of Peridot Gemstones

Peridot has long been one of the world’s popular green gemstones for consumers due to its vibrant and beautiful color. Peridot is also an untreated gemstone, which helps contribute to its popularity. Below sets forth the historical and forecast market size of global cut-and-polished peridot in sales volume from 2015 to 2035:

Market Size by Sales Volume of Cut-and-Polished Peridot Industry (Global), 2015-2035E

Tonnes CAGR: +13.0% 9.0 8.31 7.90 8.11 8.0 7.58 7.27 7.0 6.82 6.22 6.0 5.66 5.00 5.0 3.97 4.0 3.10 3.0 CAGR: -3.4% 2.38 1.91 2.0 1.87 1.81 1.73 1.66 1.74 1.32 1.14 1.24 1.0

0.0 2015 20162017 2018 20192020E 2021E 2022E 2023E 2024E 2025E 2026E2027E 2028E 2029E 2030E 2031E 2032E 2033E 2034E 2035E

Source: F&S Report

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INDUSTRY OVERVIEW

According to the F&S Report, due to the limited amount of exploited peridot, global sales volume of cut-and-polished peridot has experienced a decrease in the past few years. From 2015 to 2019, global sales volume of cut-and-polished peridot declined from 1.91 tonnes to 1.66 tonnes, representing a CAGR of -3.4%. The downward trend became obvious in 2020 as the result of the COVID-19. In the next few years, with the gradual recovery from the COVID-19 impact, the global sales volume of cut-and-polished peridot is expected to surge driven by the development of the YQS Nanshan Project and its supply to the global market, according to the F&S Report. In addition, various industry participants including mine owners, distributors, designers and brand owners are expected to be stimulated by the remergence of consistent peridot supply, who in turn are expected to divert more resources in the promotion of peridot. As a result, the acceptance and recognition of peridot among consumers is expected to increase in the coming years. Furthermore, driven by the rapid growing economy, growing purchasing power, as well as deeply penetrated to consumer (2C) marketing and sales channels such as social media and e-commerce platform, China is expected to be the emerging market of peridot. It is expected that global cut-and-polished peridot sales volume will increase from 1.32 tonnes in 2020 to 8.31 tonnes in 2035, representing a fast CAGR of 13.0%.

Historical Prices and Price Trend of Cut-and-Polished Peridot Gemstones

Gemstones are usually graded and priced differently based on their size, quality and origin. With the expected increasingly stable supply, market education and more commercialization activities of peridot, the significantly undervalued peridot is expected to experience a period of price increase. According to the F&S Report, the prices of cut-and-polished peridot of 10mm and above, above 7-10mm and above 3-7mm are likely to have a faster growth trend in the next five to ten years to gradually reach its true market value, then the price trend of peridot is expected to grow at a moderate rate and reach US$1,297.8 per carat, US$621.3 per carat and US$463.1 per carat in 2035, respectively.

Price of Cut-and-Polished Peridot (Global), 2010-2035E

USD/Ct 10mm and above Note: above 3 -7mm=0.10-1.25 carat(s); 1,300.0 above 7-10mm above 7-10mm=1.25-3.50 carats; 1,250.0 above 3-7mm 10mm and above=3.50 carats and above 1,200.0 1,150.0 1,100.0 1,050.0 1,000.0 950.0 900.0 850.0 800.0 750.0 700.0 650.0 600.0 550.0 500.0 450.0 400.0 350.0 300.0 250.0 200.0 150.0 100.0 50.0 0.0 2010 20112012 2013 20142015 2016 2017 2018 2019 2020E 2021E 2022E2023E 2024E 2025E2026E 2027E 2028E 2029E2030E 2031E 2032E 2033E 2034E 2035E Global Cut-and- CAGR Unit 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020E 2021E 2022E 2023E 2024E 2025E 2026E 2027E 2028E 2029E 2030E 2031E 2032E 2033E 2034E CAGR Polished Peridot Price 2035E 10-19 20-35 10mm and 166.1 175.2 185.2 196.1 208.1 221.2 235.5 251.6 269.2 288.5 282.7 296.8 332.4 392.2 478.5 579.0 689.0 799.2 895.1 980.1 1050.7 1113.7 1169.4 above US$/ct 1216.2 1260.0 1297.8 6.3% 10.7% above 7-10mm US$/ct 41.0 43.6 46.4 49.4 52.7 56.3 60.2 64.6 69.6 75.3 71.5 78.7 92.6 114.5 146.3 191.7 243.5 297.1 347.6 396.3 439.9 483.9 522.6 559.2 592.8 621.3 7.0% 15.5% above 3-7mm US$/ct 24.3 26.1 28.0 30.1 32.4 34.9 37.7 40.8 44.4 48.4 45.0 51.3 61.0 76.3 99.2 130.9 167.6 206.1 243.2 279.7 313.3 347.8 379.1 409.4 438.1 463.1 8.0% 16.8%

Source: F&S Report

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INDUSTRY OVERVIEW

Comparison of the Global Price Trend of Red Spinel and Peridot

The rising market status and prices of red spinel after the discovery of a large spinel reserve in Tanzania can be a good historical reference and benchmark in forecasting the potential demand and future price trend of peridot following the recent announcement of a large peridot reserve in China. We set out below the historical global price trend of polished spinel from 1985 to 2015 and the historical and forecasted global price trend of polished peridot gemstones from 2010 to 2035(estimated), extracted from the F&S Report and placed one above the other for trend comparison purpose:

Price of Polished Red Spinel (Global), 1985-2015

USD/Ct 3,000 3,000.0 3 carats, Fine, high price 2,500.0 3 carats, Fine, low price 2,000 2,000 2,000.0

1,500.0 1,100 1,000.0 800 600 500 500 400 500.0 675 300 250 0.0 1985 19901995 2000 2005 2010 2015

Price of Polished Peridot (Global), 2010-2035E

USD/Ct above 7-10mm Note: above 7-10mm=1.25-3.50 carats 700.0 621.3 592.8 559.2 600.0 522.6 483.9 500.0 439.9 396.3 400.0 347.6 297.1 300.0 243.5 191.7 200.0 146.3 114.5 69.6 75.3 71.5 78.7 92.6 100.0 43.6 46.4 49.4 52.7 56.3 60.2 64.6 41.0 0.0 2010 20152020E 2025E2030E 2035E

Source: F&S Report

According to the F&S Report, as the global supply of high-quality red spinel has increased since the official mining of Mahenge mine in 2000, the value of red spinel has risen steadily. Similarly, with the YQS Nanshan Project, which holds the largest amount of exploitable rough peridot as of December 31, 2020 among those identified internationally by Frost & Sullivan based on its independent research and is expected to be put into production be end of 2023, it is likely to provide a stable supply of gem-quality peridot in the market and boost the increase of the peridot price accordingly.

COMPETITIVE LANDSCAPE OF COLORED GEMSTONES INDUSTRY

The overall global colored gemstones market is competitive and fragmented with many industry players. Except for a few recognized players in the global colored gemstone market such as Gemfields Group Limited, most are small scale or artisanal miners. Limited by financial, technical and marketing resources, their business scope is relatively small and mainly relies on networks of small dealers to deliver their products to cutters, polishers and ultimately jewelers and consumers. Owing to the relatively low transparency of the market and less developed standards, the colored gemstone industry has a less sophisticated pricing mechanism which may be prone to price discrepancies among gemstones from different places.

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INDUSTRY OVERVIEW

Companies with high quality and stable mines, sufficient capital, strong sales channel networks as well as convenient geographical locations tend to gain more competitive advantages. Some leading companies in the industry tend to integrate with the downstream industry by building own jewelry brands or cooperating with downstream jewelry brand owners and designers. Furthermore, leading industry players are committed to educating consumers through marketing strategies in order to increase customer awareness and visibility of colored gemstones. Marketing, brand building and sustainable or environmentally-friendly mining have become the new factors of competition in the global colored gemstone industry.

Notwithstanding the competitive environment of the colored gemstone industry in general, there are notable entry barriers for new entrants, including:

• Resource Barrier: At present, the bulk of the global peridot resources are concentrated in the hands of a few companies that hold the rights of exploration and mining. A new entrant’s ability to enter the industry depends on its success in discovering new resources.

• Geographical Barrier: The geographical location of resources may render new entrants unable to compete with established players. Remote or politically unstable geographical locations could substantially increase capital and operating costs, practical difficulties in running operations, and risks of business disruptions.

• Capital Barrier: The mining industry requires significant capital investments in infrastructure and mining operations. Location of resources could have substantial impact on capital as well as operating expenditure and could render mining operations economically unviable, which could materially deter interested new entrants from entering into the industry.

• Downstream Industry Expertise Barrier: Knowledge and experience in the unique marketing landscape for gemstones and the mastering of industrial expertise in consumer market trends, as well as connections and relationships with major brands and designers are critical factors for a gemstone company to succeed in the industry. New entrants may have difficulty in developing relationship network with the gemstone industry value chain in a short timeframe.

PERIDOT BY-PRODUCTS MARKET IN CHINA

Industrial-grade peridot sands and basalt are two principal by-products from peridot mines. Industrial-grade peridot sands are formed by mechanical processing and sorting of peridot. Industrial-grade peridot sands can be used in wide range of applications such as metallurgical auxiliary materials, high manganese steel and other materials due to its advantages such as high temperature resistance, corrosion resistance and good chemical stability. It is also considered a natural and environmentally-friendly alternative to other abrasives because of high-temperature resistance and high melting point. Peridot is usually attached to basalt as the ore body. Basalt is a kind of igneous rock formed by underground magma ejecting from volcanoes or overflowing and condensing from surface fissures. Crushed basalt can be used in both construction and engineering of various infrastructure. On the other hand, basalt fibers are considered superior to other fibers in terms of thermal stability, heat and sound insulation properties, vibration resistance and durability.

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INDUSTRY OVERVIEW

During the period from 2015 to 2019, the sales volume of industrial-grade peridot sands in China grew from 3.18 million tonnes to 3.5 million tonnes. The increasing trend was interrupted by the outbreak of COVID-19 as industrial and economic activities in China were significantly impacted. Frost & Sullivan forecasted that sales volume of industrial-grade peridot sands have dropped to 2.98 million tonnes in 2020 and would further drop to 2.89 tonnes in 2021. It is further forecasted that the sales volume of industrial-grade peridot sands will gradually recover from 2022 and reach 5.19 million tonnes by 2035, driven by the rapid development of manufacturing and “New Infrastructure Construction” such as construction of high-speed railways in China, and continuous development of manufacturing industries. The average market price of industrial-grade peridot sands in China also maintained a steady growth between 2015 and 2019, from US$88.3/tonne to US$100.0/tonne. Generally, the higher the magnesium content in industrial-grade peridot sands, the better its high temperature resistance and the higher its market price. Similar to sales volume, Frost & Sullivan forecasted the average market price of industrial-grade peridot sands to drop to US$94.0/tonne in 2020 affected by the COVID-19 pandemic, and resume a steady growth from 2022 and reach US$160.1/tonne by 2035.

Since peridot is usually attached to basalt, large quantities of basalt will also be produced during the peridot mining process, which can be further sold as a by-product. As one of the essential materials in construction and the metallurgical industry, basalt’s price has increased steadily along with the development of economy, construction and real estate industry. According to the F&S Report, the average price of basalt in China increased from approximately RMB210.5 per tonne in 2015 to approximately RMB231.7 per tonne in 2019, representing a CAGR of approximately 2.4%. Going forward, driven by the growing demand of construction industry, growing popularity of basalt fiber as well as increasing infrastructure investment of the Chinese government, the average price of basalt in China is estimated to rise steadily and reach approximately RMB268.7 per tonnes by 2035 at a CAGR of around 1.4% from 2020 to 2035.

HISTORICAL PRICING OF MAJOR RAW MATERIALS

Major raw materials required for peridot mining and processing are energy and labor force. Energy such as gasoline, diesel and electricity are consumed to power the facilities used in peridot mining and processing. Oil, electricity, and other energy sources are provided by the local utility companies. Labor generally involves mining technicians, engineers, miners and other relevant staff to support the mining and processing operations.

The following graphs set forth historical prices of gasoline and diesel, electricity and per capita salary in the mining industry, for the periods indicated:

National market price of gasoline and diesel Average electricity price (China and Jilin Average annual per capita salary of employees in (China), 2015-2019 Province), 2015-2018 urban units of mining industry (China), 2015-2019

RMB/tonne RMB/thousand kWh RMB 10,000 560 105,000 548 91,068 8,258 90,000 7,816 540 532 533 81,429 8,000 7,326 7,170 529 6,875 535 75,000 69,500 520 530 531 526 59,404 60,544 6,000 6,783 5,306 6,518 60,000 5,846 500 45,000 4,000 4,825 480 30,000 2,000 Market Price of Gasoline (95#) National Average Electricity Price 460 Average Annual Per Capita Salary of Employees in Urban Units of Mining Industry Market Price of Diesel (0#) Jilin Province Average Electricity Price 15,000

0 440 0 2015 2016 2017 2018 2019 2015 2016 2017 2018 2015 2016 2017 2018 2019

Source: F&S Report

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REGULATORY OVERVIEW

PRC LAWS AND REGULATIONS RELATING TO FOREIGN INVESTMENT

Laws and Regulations on our Company Establishment and Foreign Investment

The establishment, operation and management of corporate entities in the PRC is governed by the Company Law of the PRC (中華人民共和國公司法) (the “Company Law”), which was issued by the Standing Committee of the National People’s Congress of the PRC (the “SCNPC”) on December 29, 1993, last revised and became effective on October 26 2018. Limited liability companies and stock limited companies established in the PRC shall be subject to the Company Law. A foreign-invested company is also subject to the Company Law unless otherwise provided by the foreign investment laws.

The Foreign Investment Law replaced the major former laws and regulations governing foreign investment to become the legal foundation for foreign investment in the PRC. Under the Foreign Investment Law, “foreign investments” refer to investment activities conducted by foreign investors directly or “indirectly” in the PRC, which include any of the following circumstances: (i) foreign investors setting up foreign-invested enterprises in the PRC solely or jointly with other investors; (ii) foreign investors obtaining shares, equity interests, property portions or other similar rights and interests of enterprises within the PRC; (iii) foreign investors investing in new projects in the PRC solely or jointly with other investors; and (iv) investment of other methods as specified in laws, administrative regulations, or as stipulated by the PRC State Council.

On December 26, 2019, the PRC State Council promulgated the Regulations on Implementing the Foreign Investment Law of the PRC (中華人民共和國外商投資法實施條例), which came into effect on January 1, 2020. According to Foreign Investment Law and its implementing rules, China adopts a system of pre-entry national treatment plus Negative List with respect to foreign investment administration. The Negative List will be proposed by the competent investment department of the PRC State Council in conjunction with the competent commerce department of the PRC State Council and other relevant departments, and be reported to the PRC State Council for promulgation, or be promulgated by the competent investment department or competent commerce department of the PRC State Council after being reported to the PRC State Council for approval.

On December 30, 2019, the MOFCOM and the State Administration for Market Regulation issued the Measures for the Reporting of Foreign Investment Information (外商投資信息報告辦法), which came into effect on January 1, 2020 and replaced the Interim Administrative Measures for the Record-filing of the Incorporation and Change of Foreign-Invested Enterprises (外商投資企業設立及變更備案管理暫行辦法). Since January 1, 2020, for carrying out investment activities directly or indirectly in China, the foreign investors or foreign-invested enterprises shall submit investment information to the commerce administrative authorities through the Enterprise Registration System and the National Enterprise Credit Information Publicity System pursuant to these measures.

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REGULATORY OVERVIEW

The Catalogue for the Guidance of Foreign Investment Industries

Investment in the PRC conducted by foreign investors shall comply with the Negative List and the Encouraged Industry Catalogue for Foreign Investment (2020 version) (鼓勵外商投資產業目錄(2020年版)) (the “Guidance Catalogue”). The Guidance Catalogue and the Negative List contain specific provisions for guiding the access of foreign capital to the market, stipulating industries in which foreign-investment is encouraged, restricted and prohibited. Any industry not listed in the Guidance Catalogue and the Negative List is regarded as an industry in which foreign investment is permitted. Mining of peridot and manufacturing and sales of peridot products, as our Group’s principal business in the PRC, do not fall into the Guidance Catalogue or the Negative List, so foreign investment in such stone industry is permitted under the PRC laws.

Provisions on Merger and Acquisition of Domestic Enterprises by Foreign Investors

The Provisions on Merger and Acquisition of Domestic Enterprises by Foreign Investors (關於外國投資者併購境內企業的規定) (the “M&A Rules”), promulgated by six PRC ministries including MOFCOM, the State-owned Assets Supervision and Administration Commission of the PRC State Council, the SAT, the SAIC, the CSRC, and the SAFE on August 8, 2006, effective from September 8, 2006, amended and became effective on June 22, 2009. The M&A Rules stipulate that foreign investors’ merger and acquisition of domestic enterprises shall comply with the requirements stipulated by laws, administrative regulations and rules of China, and policies concerning industry, land and environment.

A foreign investor is required to obtain necessary approvals when it: (i) acquires the equity of a domestic enterprise so as to convert the domestic enterprise into a foreign-invested enterprise; (ii) subscribes for the increased capital of a domestic enterprise so as to convert the domestic enterprise into a foreign-invested enterprise; (iii) establishes a foreign-invested enterprise through which it purchases the assets of any domestic enterprise and operates these assets; or (iv) purchases the assets of a domestic enterprise, and then invests such assets to establish a foreign-invested enterprise.

Pursuant to the Manual of Guidance on Administration for Foreign Investment Access (外商投資准入管理指引手冊(2008年版)), which was issued and became effective on December 18, 2008 by the MOFCOM, notwithstanding the fact that (i) the domestic shareholder is connected with the foreign investor or not; or that (ii) the foreign investor is the existing shareholder or the new investor, the M&A Rules shall not apply to the transfer of an equity interest in an incorporated foreign-invested enterprise from the domestic shareholder to the foreign investor.

PRC LAWS AND REGULATIONS RELATING TO MINERAL RESOURCES

Pursuant to the Mineral Resources Law of the PRC (中華人民共和國礦產資源法) promulgated on March 19, 1986, effective on October 1, 1986 and latest amended on August 27, 2009 and the Rules for the Implementation of the Mineral Resources Law (中華人民共和國礦產資

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REGULATORY OVERVIEW

源法實施細則) promulgated and effective on March 26, 1994, (i) mineral resources are owned by the State with the PRC State Council exercising ownership over such resources on behalf of the State; (ii) the department in charge of geology and mineral resources under the PRC State Council is authorized by the PRC State Council to supervise and administer the exploration and exploitation of mineral resources nationwide. The department in charge of geology and mineral resources, of each province, autonomous region or municipality directly under the Central Government is responsible for the supervision and administration of the exploration and exploitation of mineral resources within its respective administrative regions; and (iii) any enterprise desiring to conduct exploration of mineral resources shall apply for registration, obtain an exploration permit and acquire the right of exploration; any enterprise desiring to conduct mining of mineral resources must apply for registration, obtain an mining permit and acquire the right of mining.

Under the Rules for the Implementation of the Mineral Resources Law, a holder of a mining license (採礦許可證) has the right to and is also obligated to conduct mining activities in the area and within the time period designated in the mining permit. A holder of a mining permit has certain additional rights including, among others, rights to (i) set up necessary production and living facilities within the designated area; (ii) sell its mineral products, except for the mineral products that the PRC State Council requires to be uniformly purchased by the designated unit; and (iii) acquire the land use rights necessary for the production. A holder of mining permit has certain additional obligations including, among others, obligations to (i) conduct reasonable exploitation, protect and fully utilize mineral resources; (ii) pay resources tax and resources compensation levy according to the laws and regulations; (iii) comply with the laws and regulations relating to occupational safety, soil and water conservation, land rehabilitation and environmental protection; and (iv) submit mineral resource reserve and utilization reports to relevant government authorities as required.

The Rules for the Registration of Mining of Mineral Resources (礦產資源開採登記管理辦法) (“State Council Circular No. 653”) was promulgated by the PRC State Council and became effective on February 12, 1998 and latest amended on July 29, 2014. Under the State Council Circular No. 653, anyone with mining rights shall file an application for registration of change(s) with the appropriate registration and administration authority within the duration of the mining permit term if there is any change in the scope of the mining area, the main exploited mineral categories, the exploitation mode, the name of the mining enterprise and/or the transfer of the mining right according to the relevant laws. If continuation of mining is necessary after the expiration of the mining permit, the holder of a mining permit shall apply for an extension with the registration authority within 30 days prior to the expiration of the term of the mining permit. If the holder of a mining permit fails to apply for an extension prior to the expiration of the term, the mining permit shall terminate automatically.

To regulate the assessment of exploration rights and mining rights, and to ensure the healthy development of the assessment industry, the Administrative Measures on Mining Industry Right Assessment (礦業權評估管理辦法(試行)) was issued on August 23, 2008.

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REGULATORY OVERVIEW

Measures for the Administration of Transfer of Mineral Exploration Right and Mining Right (探礦權採礦權轉讓管理辦法) was promulgated by the PRC State Council on February 12, 1998 and latest revised on July 29, 2014, according to which transfer of mineral exploration right shall comply with the following conditions: (i) expiry of two years from the date of issuance of an exploration and survey permit, or discovery of mineral resources for further exploration and survey or exploitation within the exploration and survey operations area(s); (ii) fulfillment of the specified minimum exploration and survey input; (iii) there is no dispute over the ownership of the mineral exploration right; (iv) the mineral exploration right user’s fee and mineral exploration right purchase price have already been paid pursuant to relevant state provisions; and (v) other conditions prescribed by the competent department of geology and mineral resources under the PRC State Council. The competent departments of geology and mineral resources of people’s governments of the provinces, autonomous regions and municipalities directly under the Central Government shall be responsible for the examination and approval of the transfer of mineral exploration right other than those falling within the scope of their counterpart of national level.

PRC LAWS AND REGULATIONS RELATING TO THE IMPORT AND EXPORT OF PERIDOT PRODUCTS

Administrative Regulations of the PRC on the Import and Export of Goods (中華人民共和國貨物進出口管理條例) issued on December 10, 2001 and became effective on January 1, 2002, stipulates the goods forbidden or restricted to import or export. Unless it is clearly provided in laws or administrative regulations to forbid or restrict the import or export of goods, no entity or individual may establish or maintain prohibitive or restrictive measures over the import or export of goods. Export and import of peridot products by our PRC subsidiaries are not forbidden or restricted in relevant laws or administrative regulations.

Administrative Provisions of the Customs of the PRC on the Declaration of Imported and Exported Goods (中華人民共和國海關進出口貨物申報管理規定) was promulgated by General Administration of Customs PRC on September 18, 2003, came into effect on November 1, 2003 and latest revised on November 23, 2018, which provides that consignors and consignees of exported and imported goods may declare to the customs by themselves or appoint a customs declaration enterprise to declare to the customs on their behalf. The consignors and consignees of exported and imported goods and the appointed customs declaration enterprises shall register with customs in advance in accordance with the law to handle the customs declaration procedures.

PRC LAWS AND REGULATIONS RELATING TO PRODUCTION SAFETY

Pursuant to the Production Safety Law of the PRC (中華人民共和國安全生產法) promulgated on June 29, 2002 and became effective on November 1, 2002 and latest amended on August 31, 2014 and the Law of the PRC on Safety in Mines (中華人民共和國礦山安全法) promulgated on November 7, 1992 and became effective on May 1, 1993 and amended on August 27, 2009 and its related implementation rules (中華人民共和國礦山安全法實施條例) promulgated and became effective on October 30, 1996, respectively, (i) the safety facilities of mines must be

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REGULATORY OVERVIEW designed, constructed and put into operation at the same time as the commencement of the principal parts of the mining projects; (ii) the design of a mine shall comply with the safety rules and technological standards of the mining industry and shall be approved by the relevant authorities; and (iii) mining enterprises shall possess facilities that ensure safety in production, establish and perfect the system of safety management, take effective measures to improve the working conditions for workers and staff and strengthen the work of safety control in mines in order to ensure safe production.

The Regulation on Work Safety Licenses (安全生產許可證條例) was promulgated and became effective on January 13, 2004 and latest amended on July 29, 2014. The Measures for the Implementation of Work Safety Licenses for Non-coal Mine Enterprises (非煤礦礦山企業安全生產許可證實施辦法) was promulgated on June 8, 2009, latest amended on May 26, 2015 and became effective on July 1, 2015. Pursuant to such regulation and measures, (i) the work safety licensing system is established for enterprises engaging in non-coal mining and such enterprises may not commence production without obtaining a work safety license; (ii) prior to the commencement of production, the non-coal mining enterprises shall apply for a work safety license, which is valid for three years; (iii) the work safety bureau at or above municipal level are in charge of issuing the work safety license for non-coal mining enterprises; and (iv) to extend the safety license, an enterprise must apply to the administrative authority who issued the original license for an extension of the license for another three months prior to the expiration of the original license.

Pursuant to Notice of the State Administration of Work Safety on Regulating the Completion and Acceptance of Safety Facilities of Metal and Non-metal Mine Construction Projects (國家安全監管總局關於規範金屬非金屬礦山建設項目安全設施竣工驗收工作的通知) issued by the State Administration of Work Safety on February 5, 2016, mining enterprises may organize the completion acceptance of the safety facilities of the construction project after completing all construction contents in accordance with the approved safety facility design (including design changes) and the safety facility acceptance evaluation conclusion is that the completion acceptance conditions are met. Before such completion acceptance, a work plan for completion acceptance shall be compiled. Mining enterprises should also form a safety facility completion acceptance report and apply for the safety production license to the relevant safety supervision department in a timely manner after the project safety facility has passed the acceptance check.

PRC LAWS AND REGULATIONS RELATING TO ENVIRONMENTAL PROTECTION

The PRC laws and regulations on environmental protection include the Environmental Protection Law of the PRC (中華人民共和國環境保護法) promulgated on December 26, 1989 and latest amended on April 24, 2014, the Law of the PRC on Environment Impact Assessment (中華人民共和國環境影響評價法) revised on December 29, 2018, the Law of the PRC on the Prevention and Control of Air Pollution (中華人民共和國大氣污染防治法) effective since June 1, 1988 and revised on October 26, 2018, the Law of the PRC on the Prevention and Control of Water Pollution (中華人民共和國水污染防治法) revised on June 27, 2017 and became effective on

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REGULATORY OVERVIEW

January 1, 2018, the Law of the PRC on Prevention and Control of Environmental Pollution Caused by Solid Waste (中華人民共和國固體廢物污染環境防治法) revised on April 29, 2020 and became effective on September 1, 2020, the Rules on the Environmental Protection of Construction Projects (建設項目環境保護管理條例) revised on July 16, 2017 and became effective on October 1, 2017, and the Interim Measures on the Environmental Protection Acceptance Check on Construction Projects (建設項目竣工環境保護驗收暫行辦法) promulgated on November 20, 2017 and became effective on the same day.

Pursuant to the laws and regulations stated above, an enterprise that discharges and dispenses toxic and hazardous materials including waste water, solid waste and waste gases, shall comply with the applicable national and local standards. For a construction project for which an environmental impact report or environmental impact statement shall be prepared, the construction unit shall submit the environmental impact report or environmental impact statement to the competent administrative department of the environmental protection for approval before starting construction. For a construction project for which an environmental impact registration form shall be filled in according to the law, the construction unit shall submit the environmental impact registration form to the competent administrative department of the environmental protection for record. For a construction project for which an environmental impact report or environmental impact statement shall be prepared, before starting to operate, the construction unit shall organize the inspection and acceptance, after passing the acceptance check, the project can go into production or be delivered for use. According to the Interim Measures on the Environmental Protection Acceptance Check on Construction Projects promulgated by Ministry of Environmental Protection of the PRC, for a construction project for which its matching noise or solid waste pollution prevention facilities shall be equipped with, before the relevant laws are revised, the facilities shall be checked and accepted by the competent administrative department of the environmental protection.

PRC LAWS AND REGULATIONS RELATING TO WATER RESOURCES

According to the Water Law of the People’s Republic of China (中華人民共和國水法), promulgated by the SCNPC on January 21, 1988, as of effect on July 1, 1988 and amended on August 29, 2002, on August 27, 2009 and on July 2, 2016 respectively, for water resources, the State applies, in accordance with law, the system of licensing for water-drawing and the system of compensation for use of water, except for water of the ponds and reservoirs belonging to rural economic collectives that is used by such collectives and their members. The administrative department for water resources under the PRC State Council is responsible for making arrangements for implementing the system of licensing for water-drawing and the system of compensation for use of water throughout the country.

According to the Regulation on the Administration of the License for Water Drawing and the Levy of Water Resource Fees (取水許可和水資源費徵收管理條例), promulgated by the PRC State Council on February 21, 2006, as of effect on April 15, 2006 and amended on March 1, 2017, and the Measures for the Administration of Water Drawing Licensing (取水許可管理辦法),

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REGULATORY OVERVIEW promulgated by the Ministry of Water Resources of the PRC on April 9, 2008, as of effect on the same day, amended on December 16, 2015, and subsequently amended on December 22, 2017 and effective as of December 22, 2017, any entity or individual that draws water resources shall, apply for the Permit for Water Drawing (取水許可證), and pay water resource fees, except for the circumstances prescribed in Article 4 of the present Regulation, like that a rural collective economic organization or any of its members uses the water in the pond or reservoir of the said organization. And our situation does not belong to any of the exceptions therein. The valid term of a license certificate for water drawing shall generally be five years, and shall not exceed 10 years. If, at expiry of the valid term, the license certificate needs to be renewed, the water drawing entity or individual shall file an application to the original approval organ 45 days prior to the expiry of the valid term. The original approval organ shall, prior to the expiry of the valid term, make a decision on whether or not to approve the renewal.

Soil and Water Conservation Law of the PRC (中華人民共和國水土保持法) promulgated by the SCNPC on June 29, 1991, latest amended on December 25, 2010 and effective from March 1, 2011, regulates prevention and control of water and soil loss, protection and rational utilization of water and soil resources. Production and construction projects conducted in any area that water and soil loss is liable to occur as specified in soil and water conservation planning, the production or construction unites shall compile a scheme for water and soil conservation and report it to the department of competent water administration for examination and approval and shall take measures for preventing and controlling water and soil loss in accordance with the approved water and soil conservation scheme. Water and soil conservation facilities in a production or construction project where the scheme of water and soil conservation is required shall be designed, constructed and put into operation simultaneously with the principal part of the project. When a production or construction project is completed and checked for acceptance, the water and soil conservation facilities shall be checked for acceptance at the same time. The production or construction project may not be put into operation provided that the water and soil conservation facilities fail to be checked or pass the completion acceptance.

PRC LAWS AND REGULATIONS RELATING TO GEOLOGICAL ENVIRONMENT PROTECTION AND RESTORATION

Pursuant to the Provisions on the Protection of the Geologic Environment of Mines (礦山地質環境保護規定) promulgated on March 2, 2009, latest amended on July 24, 2019 and became effective on the same day, (i) when an applicant for mining rights applies for a mining permit, the applicant shall submit a plan on the protection of the mine’s geological environment and land rehabilitation to the competent natural resources authority for approval; (ii) where the mining of mineral resources causes any damage to the geologic environment of mines, the mining right holder shall be responsible for the restoration, and the restoration expenses shall be included in the production cost; and (iii) the holder of a mining permit shall save fund for the mine geological environment governance and restoration. The measures for requiring security deposit for the

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REGULATORY OVERVIEW restoration of the geological environment of mines and the amount of security deposit is implemented in compliance with relevant provisions formulated by each province, autonomous region or municipality.

PRC LAWS AND REGULATIONS RELATING TO LAND REHABILITATION AND ITS IMPLEMENTATION MEASURES

Pursuant to the Regulations on Land Rehabilitation (土地複墾條例) promulgated by the PRC State Council on March 5, 2011 and the Implementation Measures for the Regulations on Land Rehabilitation (土地複墾條例實施辦法) promulgated by the Ministry of Natural Resources on December 27, 2012 and revised on July 24, 2019, the land damaged in production or construction activities, including land damaged by excavation of land surface such as opencast mining, shall be reclaimed by the production or construction unit or individual. Such unit or individual shall prepare the land rehabilitation plan pursuant to the relevant land rehabilitation standards and provisions required by the department in charge of land and resources under the PRC State Council and shall submit the land rehabilitation plan together with the relevant materials submitted for examination and approval when filing applications for construction land or mining rights. Upon completion of the relevant land rehabilitation projects pursuant to land rehabilitation plan, the units or individuals obliged to reclaim the land shall apply to the department in charge of land and resources at local level of its domicile place for examination and acceptance of the rehabilitation project.

PRC LAWS AND REGULATIONS RELATING TO TAXATION

Enterprise Income Tax

Pursuant to the EIT Law, the income tax rate for both resident enterprises and foreign invested enterprises (“FIEs”) is 25%.

Value-added Tax

The Circular on Comprehensively Promoting the Pilot Program of the Collection of Value-added Tax in Lieu of Business Tax (關於全面推開營業稅改徵增值稅試點的通知)was promulgated by SAT and Ministry of Finance on March 23, 2016 and effective from May 1, 2016, the pilot program of the collection of value-added tax in lieu of business tax shall be promoted nationwide in a comprehensive manner as of May 1, 2016. According to the Temporary Regulations on Value-Added Tax (中華人民共和國增值稅暫行條例), issued on December 13, 1993 by the PRC State Council, came into effect on January 1, 1994 and last amended on November 19, 2017 and the Detailed Rules for the Implementation of the Provisional Regulations of the PRC on Value-Added Tax (中華人民共和國增值稅暫行條例實施細則), issued on December 25, 1993 by the Ministry of Finance, and became effective on the same day and revised on December 15, 2008 and October 28, 2011, the Circular of the Ministry of Finance and the SAT on Adjusting Value-added Tax Rates (財政部稅務總局關於調整增值稅稅率的通知), which was promulgated by

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REGULATORY OVERVIEW the Ministry of Finance and the SAT on April 4, 2018, and came into force as of May 1, 2018, and the Announcement on Policies for Deepening the VAT Reform (關於深化增值稅改革有關政策的公告) which was promulgated by the Ministry of Finance, the SAT and the General Administration of Customs of the PRC on March 20, 2019, and came into force as of April 1, 2019 (collectively, the “VAT Regulation”), taxpayers who engaged in the sale of goods, the provision of processing, repairing and replacement services, sell service, intangible assets or immovables or import goods within the territory of the PRC must pay value-added tax. The applicable tax rate is 13%, 9% or 6% respectively for the activities that are subject to the value-added tax listed in the VAT Regulation.

Dividend withholding Tax

The PRC and the government of Hong Kong Special Administrative Region signed the Arrangement between the Mainland of the PRC and Hong Kong Special Administrative Region for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income (內地和香港特別行政區關於對所得避免雙重徵稅和防止偷漏稅的安排) on August 21, 2006 (the “Tax Arrangement”). According to the Tax Arrangement, the withholding tax rate of 5% is applicable to dividends paid by a PRC company to a Hong Kong resident, provided that the recipient is a company that directly holds at least 25% of the equity interests of the PRC company. The 10% withholding tax rate applies to dividends paid by a PRC company to a Hong Kong resident if the recipient is a company that holds less than 25% of the equity interests of the PRC company.

Consumption Tax

Pursuant to the Interim Regulations on Consumption Tax of the PRC (2008 Revision) (中華人民共和國消費稅暫行條例(2008修訂)) (the “Consumption Tax Regulation”), which was promulgated by the PRC State Council on December 13, 1993, latest amended on November 10, 2008 and effective from January 1, 2009, and the Implementing Rules for the Interim Regulations on Consumption Tax of the PRC (中華人民共和國消費稅暫行條例實施細則) which was promulgated by Ministry of Finance on December 18, 2008 and effective on January 1, 2009, any institution and individual that produces, subcontracts the processing of or import the consumer goods specified in Consumption Tax Regulation and other institutions or individuals selling the consumer goods specified in Consumption Tax Regulation that are recognized by the PRC State Council shall be taxpayers of consumption tax. The consumption tax rate for the gemstones is 10%. Taxpayers exporting taxable consumer goods shall be exempt from the consumption tax, unless otherwise provided for by the PRC State Council.

Furthermore, according to the Circular of the SAT on Promulgating the Administrative Measures for Non-Residents to Enjoy the Treatment under Treaties (the “Trial Implementation”) (國家稅務總局關於發布《非居民納稅人享受協定待遇管理辦法》的公告), which was issued by the SAT on October 14, 2019 and became effective on January 1, 2020, any non-resident taxpayer who judge by themselves that they meet the conditions for entitlement to the conventional treatment

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REGULATORY OVERVIEW may obtain the conventional treatment when filing a tax return or making a withholding declaration through a withholding agent, and shall collect and save relevant materials for examination in accordance with the Trial Implementation, subject to the subsequent administration by the tax authorities. According to the Notice on Certain Issues with Respect to the Enforcement of Dividend Provisions in Tax Treaties (國家稅務總局關於執行稅收協定股息條款有關問題的通知) issued on February 20, 2009 by the SAT, if the relevant PRC tax authorities determine, in their discretion, that a company benefits from such reduced income tax rate due to a structure or arrangement that is primarily tax-driven, such PRC tax authorities may adjust the preferential tax treatment.

Resource Tax

Pursuant to the Law of the Resource Tax of the PRC (中華人民共和國資源稅法) promulgated on August 26, 2019 and effective on September 1, 2020, units and individuals that develop taxable resources in the territory of the PRC and other sea areas under the jurisdiction of the PRC are taxpayers of resource taxes and shall pay resource taxes. The taxable items and tax rates of resource tax shall be subject to the Schedule. Where the tax rate scope is provided in the Schedule, the specific applicable tax rate in the Schedule shall be proposed by the people’s government of the province, autonomous region or municipality and be submitted for determination to the standing committee of the people’s congress of the same level, and be reported to the SCNPC and the PRC State Council for record-filing. If the taxable object as specified in the Schedule is raw ores or mineral processing products, the specific applicable tax rates may be determined respectively.

Pursuant to the Provisions on the Administration of the Collection of Mineral Resources Compensation (礦產資源補償費徵收管理規定) promulgated on February 27, 1994, became effective on April 1, 1994 and amended on July 3, 1997, mineral resources compensation is payable by the holder of the mining permit for conducting mineral resources exploitation within the PRC territory, unless such PRC laws or administrative regulations provide otherwise.

PRC LAWS AND REGULATIONS RELATING TO LAND

Pursuant to the Land Administration Law of the PRC (中華人民共和國土地管理法) promulgated on June 25, 1986 and effective on January 1, 1987 and latest amended on August 26, 2019, all land in the PRC is either state-owned or collectively owned, depending on the location of the land. All land in the urban areas of a city or town is state-owned, and all land in the rural areas of a city or town and all rural land is, unless otherwise specified by law, collectively owned. The state has the right to reclaim land in accordance with law if required for public interest. Pursuant to the Regulations on the Implementation of the Land Administration Law of the PRC (中華人民共和國土地管理法實施條例) amended on July 29, 2014, using land for a specific construction project, the construction enterprise shall file an application in accordance with the gross design of the construction project and go through the formalities of examination and approval of land for construction.

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REGULATORY OVERVIEW

In the case of temporary use of state-owned land or land collectively-owned by farmer collectives for construction projects or by geological survey teams, approval shall be obtained from the land administrative department of the government at or above the county level. Temporary land use within the urban planning region shall first obtain consent from the relevant natural resources administrative department before seeking approval. The land user shall enter into a temporary land use contract with the relevant natural resources administrative department or rural collective economic organization or villagers committee in accordance with land ownership, and pay temporary land use compensation fee in accordance with the agreement in the contract. The temporary users shall use land according to the purposes agreed upon in temporary use contracts and shall not build permanent structures on the land. The term for the temporary use of land shall generally not exceed two years.

Pursuant to the Interim Regulations of the PRC on Grant and Transfer of the Right to Use State owned Urban Land (中華人民共和國城鎮國有土地使用權出讓和轉讓暫行條例) promulgated and effective on May 19, 1990 and latest amended on November 29, 2020, local government at or above county level has the power to grant land use rights for a definite period to a land user pursuant to a contract for the grant of land use rights and the land user shall pay the fees to the state. All local and foreign enterprises are permitted acquire land use rights unless the law provides otherwise. The state may not reclaim lawfully granted land use rights prior to expiration of the terms of grant. If public interest requires repossession of land by the state under special circumstances during the term of grant, compensation will be paid by the state. A land grantee may lawfully transfer, mortgage or lease its land use rights to a third-party for the remainder of the terms of grant. Upon expiration of the term of grant, renewal is possibly subject to the execution of a new contract for the grant of land use rights, payment of a premium and registration for the renewal. If the term of the grant is not renewed, the land use rights and ownership of any buildings erected on the land will revert to the state without compensation.

PRC LAWS AND REGULATIONS RELATING TO PREVENTION AND CONTROL OF OCCUPATIONAL DISEASES

Pursuant to the Prevention and Control of Occupational Diseases Law of the PRC (中華人民共和國職業病防治法) promulgated on October 27, 2001 and became effective on May 1, 2002 and latest amended on December 29, 2018, an employer shall: (i) establish and improve the responsibility system of occupational disease prevention and treatment, strengthen the administration and improve the level of occupational disease prevention and treatment, and bear the responsibility for the harm of occupational diseases engendered there from; (ii) purchase social insurance for industrial injury; (iii) adopt effective protective facilities against occupational diseases, and provide protective articles to the laborers for personal use against occupational diseases; (iv) set up alarm equipment, allocate on-spot emergency treatment articles, washing equipment, emergency safety exits and safety zones at poisonous and harmful workplace where acute occupational injuries are likely to take place; (v) give a preference to use the new technologies, processes and materials that are helpful for occupational disease prevention and control, and protecting the health of the workers to replace the technologies, processes and

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REGULATORY OVERVIEW materials that pose serious occupational disease hazards gradually; and (vi) inform the employees, according to the facts, of the potential harm of occupational disease as well as the consequences thereof and the protective measures and treatment against occupational diseases when signing labor contracts with employees.

Pursuant to the Prevention and Control of Occupational Diseases Law of the PRC, for construction projects, including projects to be constructed, expanded or reconstructed, and projects for technical renovation and introduction which may incur occupational disease hazards, the owner responsible for the construction project shall conduct the assessment of occupational disease hazards during the period of feasibility study. The expenses required by the occupational disease protection facilities of the Construction Project shall be included into the construction budget of the Construction Project, and the occupational disease protection facilities shall be designed, built, and put into production and use simultaneously with the main project. The owner shall assess the effect of the control on occupational disease hazards before the construction project is completed for inspection and acceptance.

PRC LAWS AND REGULATIONS RELATING TO EMPLOYMENT AND SOCIAL WELFARE

The relevant labor laws and regulations in the PRC include the Labor Law of the PRC (中華人民共和國勞動法) (the “Labor Law”), promulgated by the SCNPC on July 5, 1994 and was amended on December 29, 2018, the Labor Contract Law of the PRC (中華人民共和國勞動合同法) (the “Labor Contract Law”), promulgated by the SCNPC on June 29, 2007 and amended on December 28, 2012, the Implementation Regulations on the PRC Labor Contract Law (中華人民共和國勞動合同法實施條例), the Interim Provisions on Labor Dispatch (勞務派遣暫行規定), the Social Insurance Law of the PRC (中華人民共和國社會保險法), the Provisional Measures for Maternity Insurance for Enterprise Employees (企業職工生育保險試行辦法), the Regulations on Work Injury Insurance (工傷保險條例), the Regulations on Unemployment Insurance (失業保險條例), the Interim Regulations on Collection of Social Insurance Premiums (社會保險費徵繳暫行條例), the Administrative Regulations on the Declaration and Contribution of Social Insurance Premiums (社會保險費申報繳納管理規定), the Administrative Regulations on Housing Provident Fund (住房公積金管理條例) and other relevant laws and regulations promulgated by the PRC governmental authorities from time to time.

In accordance with the Labor Law, employees are entitled to equal opportunities in employment, selection of occupations, receiving labor remuneration, enjoying rest days and holidays, occupational safety and health protection, social insurance and welfare, etc. Employers shall establish and improve the occupational safety and healthcare system, provide education on occupational safety and healthcare to employees, comply with national regulations on occupational safety and healthcare, conduct labor safety and hygiene education among its workers, and provide labor safety and hygiene conditions in conformity with the regulations of the State and necessary labor protective supplies to employees.

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REGULATORY OVERVIEW

Pursuant to the Labor Contract Law, employers must execute labor contracts with employees so as to establish labor relationships. In recruiting employees, employers shall truthfully inform the employees of the scope of work, working conditions, workplaces, occupational hazards, production safety conditions, labor remuneration and other information requested by the employees. Employers and employees shall fully perform their respective obligations in accordance with the terms of the labor contracts. Employers shall pay labor remuneration to employees in full amount and on time in accordance with the terms of the labor contracts and the provisions of the State.

In accordance with the Implementation Regulations on Labor Contract Law and the Interim Provisions on Labor Dispatch, when placing employees, staffing companies shall enter into staffing agreements with the entities that receive the employees under the placement arrangements (“Receiving Entities”). The staffing agreements shall stipulate the job positions in which the employees are to be placed, the number of persons placed, the term of placement, the amount and method of payment of labor remuneration and social insurance premiums, and the liability for breach of agreement. Work placement is a supplementary form which can only be adopted for temporary, auxiliary or substitute job positions, and an employer shall strictly control the number of dispatched laborers which shall not exceed 10% of the total number of its workers.

Pursuant to the Social Insurance Law of the PRC, the Regulations on Work Injury Insurance, the Provisional Measures for Maternity Insurance for Enterprise Employees and the Interim Regulations on Collection of Social Insurance Premiums, employers shall make contributions to social insurance schemes for its employees, including basic pension insurance, basic medical insurance, unemployment insurance, maternity insurance and work injury insurance. If employers fail to pay social insurance premiums in full amount and on time, the social insurance collection authorities may order the employers to make the payments or to make up the difference within a specified time limit, with late payment fees imposed. If the employers fail to make the payments within such time limit, relevant administrative authorities may impose fines on them.

Pursuant to the Administrative Regulations on Housing Provident Fund (住房公積金管理條例), promulgated by the PRC State Council on April 3, 1999 and amended on March 24, 2019, employers must make contributions to housing provident funds for their employees.

PRC LAWS AND REGULATIONS RELATING TO PRODUCT QUALITY

Pursuant to the Product Quality Law of the PRC (中華人民共和國產品質量法) promulgated on February 22, 1993, and latest amended on December 29, 2018, a producer is obliged: (i) be responsible for the quality of products it produces; (ii) not produce products that have been ordered to cease production; (iii) not forge the origin of a product, or to forge or falsely use the name and address of another producer; not forge or falsely use product quality marks such as authentication marks; (iv) not add impurities or imitations into the products, substitute a fake product for a genuine one, a defective product for a high-quality one, or pass off a substandard product as a qualified one in the production; (v) ensure that, products or the marks on their

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REGULATORY OVERVIEW packaging must be genuine; and (vi) ensure that, for products that may be easily broken, or are inflammable, explosive, toxic, erosive or radioactive and products that cannot be handled upside down in the process of storage or transportation or for which there are other special requirements, the packaging meets the corresponding requirements, carries warning marks or warnings written in Chinese or draws attention to the method of handling.

PRC LAWS AND REGULATIONS RELATING TO FOREIGN EXCHANGE

General Administration of Foreign Exchange

Foreign currencies conversion is mainly subject to the Administrative Regulations on Foreign Exchange of the PRC (中華人民共和國外匯管理條例) (the “Foreign Exchange Administrative Regulations”) promulgated by the PRC State Council on January 29, 1996 and latest amended on August 5, 2008 and the Administrative Provisions on the Settlement, Sales and Payment of Foreign Exchange (結匯、售匯及付匯管理規定) (the “Settlement Provisions”) promulgated by the People’s Bank of China (the “PBOC”) on June 20, 1996. Under such regulations, RMB is generally freely convertible to foreign currencies for current account transactions (such as trade and service-related foreign exchange transactions and dividend payments), but not for capital account transactions (such as capital transfer, direct investment, securities investment, derivative products or loans), except where a prior approval from the SAFE and/or its competent local counterparts is obtained.

Pursuant to the Circular on Printing and Issuing the Provisions on the Foreign Exchange Administration of Direct Investment in China Made by Foreign Investors and the Supporting Documents (關於印發《外國投資者境內直接投資外匯管理規定》及配套文件的通知) promulgated by the SAFE on May 10, 2013 and became effective from May 13, 2013 and latest amended on December 30, 2019, foreign-invested enterprises shall register with the SAFE and/or its competent local counterparts after being established in accordance with the law. When a foreign investor makes capital contributions to an FIE in the form of monetary funds, equity, tangible assets, intangible assets, etc. (including lawful income obtained within the PRC), or when the foreign investor pays consideration for the acquired equity from the domestic side of a Chinese enterprise, the FIE shall register the capital contributions and the rights and interests of the foreign investor with the SAFE and/or its competent local counterparts. When the FIE subsequently increases or reduces its registered capital, transfers its equity or undergoes other capital changes, it shall go through modification registration with the SAFE and/or its competent local counterparts. When the FIE is subsequently deregistered or converted to a non-FIE, it shall go through deregistration with the SAFE and/or its competent local counterparts. An FIE that needs to remit funds abroad due to capital reduction, liquidation, advance recovery of investment, profit distribution, etc. may purchase foreign exchange and make external payment with the relevant bank after going through corresponding registration. A domestic equity transferee who needs to remit funds abroad due to the transfer of the equity held by a foreign investor in an FIE may purchase foreign exchange and make external payment with the bank after the FIE has gone through corresponding registration.

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REGULATORY OVERVIEW

On March 30, 2015, the SAFE promulgated the Circular on Reforming the Management Approach Regarding the Settlement of Foreign Exchange Capital of Foreign-invested Enterprises (國家外匯管理局關於改革外商投資企業外匯資本金結匯管理方式的通知) (the “SAFE Circular No. 19”), which came into effect from June 1, 2015 and latest amended on December 30, 2019. According to SAFE Circular No. 19, the foreign exchange capital of FIEs shall be subject to the Discretional Foreign Exchange Settlement (the “Discretional Foreign Exchange Settlement”). The Discretional Foreign Exchange Settlement refers to the foreign exchange capital in the capital account of an FIE for which the rights and interests of monetary contribution has been confirmed by the local foreign exchange bureau (or the book-entry registration of monetary contribution by the banks) can be settled at the banks based on the actual operational needs of the FIE. The proportion of Discretional Foreign Exchange Settlement of the foreign exchange capital of an FIE is temporarily determined as 100%. The Renminbi converted from the foreign exchange capital will be kept in a designated account. Furthermore, SAFE Circular No.19 stipulates that the use of capital by FIEs shall follow the principles of authenticity and self-use within the business scope of enterprises. The capital of an FIE and capital in Renminbi obtained by the FIE from foreign exchange settlement is prohibited from: (i) being directly or indirectly used for the payment beyond the business scope of the enterprises or the payment prohibited by relevant laws and regulations; (ii) being directly or indirectly used for investment in securities unless otherwise provided by relevant laws and regulations; (iii) being directly or indirectly used for granting the entrust loans in Renminbi (unless permitted by the scope of business), repaying the inter-enterprise borrowings (including advances by the third party) or repaying the bank loans in Renminbi that have been sub-lent to the third party; and (iv) paying the expenses related to the purchase of real estate that is not for self-use (except for the foreign-invested real estate enterprises).

Furthermore, the Notice of the SAFE on Reforming and Regulating Policies on the Control over Foreign Exchange Settlement of Capital Accounts (國家外匯管理局關於改革和規範資本項目結匯管理政策的通知) (the “SAFE Notice No. 16”) was promulgated and became effective on June 9, 2016. According to the SAFE Notice No. 16, enterprises registered in the PRC may also convert their foreign debts from foreign currency into Renminbi on a self-discretionary basis. The SAFE Notice No. 16 provides an integrated standard for conversion of foreign exchange under capital account items (including but not limited to foreign currency capital and foreign debts) on self-discretionary basis, which applies to all enterprises registered in the PRC. The SAFE Notice No. 16 reiterates the principle that Renminbi converted from foreign currency-denominated capital of a company may not be directly or indirectly used for purposes beyond its business scope and may not be used for investments in securities or other investment (with the exception of bank financial products that can guarantee the principal within the PRC unless otherwise specifically provided). Besides, the converted Renminbi shall not be used to make loans for unrelated enterprises unless it is within the business scope or to build or to purchase any real estate that is not for the enterprise’s own use with the exception for the real estate enterprise.

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REGULATORY OVERVIEW

Regulations on Foreign Exchange Registration of Overseas Investment by the PRC Residents

On July 4, 2014, the SAFE promulgated the Circular on Relevant Issues Concerning the Foreign Exchange Administration over the Overseas Investment, Financing and Round-trip Investment by Domestic Residents via Special Purpose Vehicles (關於境內居民通過特殊目的公司境外投融資及返程投資外匯管理有關問題的通知) (the “SAFE Circular No. 37”). Pursuant to SAFE Circular No. 37, the SAFE and its branches regulate the establishment of Special Purpose Vehicles (“SPV”) by domestic residents. “Domestic residents” include domestic institutions and domestic individual residents, which includes, Chinese citizens holding the ID cards for Chinese domestic residents, military ID certificates or ID certificates for armed police force, and overseas individuals that do not hold any domestic legitimate ID certificates but have habitual residences within the territory of the PRC due to relationships of economic interests. Prior to contributing domestic and overseas legitimate assets or interests to a SPV, a domestic resident shall apply to the SAFE for foreign exchange registration of overseas investment. Where a registered overseas SPV undergoes changes of its domestic resident individual shareholders, name, operating period or other basic information, or experiences substantial changes, including but not limited to, the increase or reduction of registered capital by domestic resident individuals, transfer or replacement of equity and merger or split, the SPV shall go through modification registration of foreign exchange for overseas investment with the SAFE. Where a non-listed SPV uses its own equity interests or options to grant equity incentives to the directors, supervisors and senior management of a domestic enterprise under its direct or indirect control, as well as other employees in employment or labor relationships with the aforesaid company, relevant domestic resident individuals may, before exercising their rights, apply to the SAFE for foreign exchange registration of the SPV. Failure to comply with the registration procedures set forth in the SAFE Circular No. 37 may result in penalties under the PRC foreign exchange administration regulations.

Pursuant to Notice of the SAFE on Further Simplifying and Improving Policies for the Foreign Exchange Administration of Direct Investment (關於進一步簡化和改進直接投資外匯管理政策的通知), which was promulgated on February 13, 2015, which became effective on June 1, 2015 and was amended on December 30, 2019, the initial foreign exchange registration for establishing or taking control of a SPV by domestic residents can be conducted with a qualified bank, instead of the local foreign exchange bureau.

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HISTORY, REORGANIZATION AND CORPORATE STRUCTURE

OVERVIEW

The history of our Group can be traced back to April 2015 when Mr. Yu, the chairman of our Board and an executive Director, and Mr. Jiang, an executive Director and our chief executive officer, established Yanbian Fuli as a limited liability company in the PRC with an initial registered capital of RMB30 million. In July 2015, Yanbian Fuli acquired the exploration license for our YQS Nanshan Project and thereafter obtained the mining license in December 2016 with an approved annual production volume of 300,000 tonnes of peridot ore. Since then we have (i) commissioned the Feasibility Study on our YQS Nanshan Project; (ii) engaged the Independent Technical Consultant for the preparation of the Competent Person’s Report; (iii) commenced mine site infrastructure development and mine construction preparation (such as road paving, site leveling, electricity power and water supply); (iv) established offices in Beijing, Hong Kong and London; (v) conducted various pre-market education, publicity and brand promotion activities; and (vi) conducted limited sales of peridot products using the peridot collected during our exploration stage as part of our pre-market sounding-out initiatives.

BUSINESS MILESTONES

The following table sets out major events and milestones we have achieved in the development of our business:

Years Business milestones April 2015 • Yanbian Fuli, our subsidiary operating our YQS Nanshan Project, was established July 2015 • Yanbian Fuli acquired the exploration license for YQS Nanshan Project December 2016 • Yanbian Fuli obtained the mining license for YQS Nanshan Project August 2017 • First issuance of the Feasibility Study on our YQS Nanshan Project February 2018 • Showcased our sample products at the JCK Tucson,agemand jewelry event in the U.S. July 2018 • Fuli HK was incorporated in Hong Kong September 2018 • Beijing Fuli was established in the PRC Showcased our sample products at the Bangkok Gems and Jewelry Fair 62nd Edition in Thailand May 2019 • Sponsored and undertook the organization of “Green China • 70th Anniversary of China — The First International Peridot Design Contest (綠色中國 •70華誕 — 首屆橄欖石國際設計大獎賽)” January 2020 • Fuli UK was incorporated in England and Wales March 2020 • Tonghua Xintong Investment Holding Group Co., Ltd.* (通化信通投資控股集團有限公司)(“Tonghua Xintong”), a subsidiary of State-owned Assets Supervision and Administrative Commission of the Municipal of Tonghua People’s Government (通化市人民政府國有資產監督管理委員會), became a minority shareholder of Yanbian Fuli through capital injection

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HISTORY, REORGANIZATION AND CORPORATE STRUCTURE

Years Business milestones June 2020 • The official publication of T/GAC 13-2020 group standard peridot grading system which was formulated by Gem & Jewelry Trade Association of China and us May 2021 • Jilin Dunhua Development Investment Group Co., Ltd.* (吉林敦化發展投資集團有限公司)(“Jilin Dunhua”), a state-owned enterprise wholly owned by the State-owned Assets Administrative Commission of Dunhua City (敦化市國有資產管理局), became a minority shareholder of Yanbian Fuli through capital injection

OUR PAST AND CURRENT SUBSIDIARIES

Set forth below are the details of our past and current subsidiaries:

Name of subsidiary and Shareholding/ownership place of incorporation/ Date of incorporation/ Type of company, issued shares/registered as of the Latest Approved business scope/principal No. establishment establishment capital as of the Latest Practicable Date Practicable Date business activities Current subsidiaries 1. Yanbian Fuli April 27, 2015 A limited liability company with a 93.10% by Beijing Mining, processing, and sales of (PRC) registered capital of RMB32.2 million Fuli, 4.90% by peridot; processing and sales of Tonghua Xintong basalt; production and sales of and 2.00% by handicrafts, jewelry and Jilin Dunhua ornament; as well as import and export of goods 2. Fuli HK July 16, 2018 A limited liability company with one Wholly owned by Sales and marketing of gemstones (Hong Kong) issued share of HK$1.00 Fuli International 3. Beijing Fuli September 30, 2018 A limited liability company with a Wholly owned by Sales of metal ores, non-metal ores, (PRC) registered capital of RMB30 million Fuli HK handicrafts, and jewelry; as well as import and export of goods 4. Fuli International October 23, 2018 A company limited by shares with Wholly owned by Investment holding (BVI) 50,000 issued shares of a single class our Company of par value of US$1.00 each 5. Fuli Mining January 17, 2020 A company limited by shares with Wholly owned by Investment holding (BVI) 50,000 issued shares of a single class our Company of par value of US$1.00 each 6. Fuli Gemstones January 17, 2020 A company limited by shares with Wholly owned by Investment holding (BVI) 50,000 issued shares of a single class our Company of par value of US$1.00 each 7. Fuli UK January 27, 2020 A company limited by shares with 100 Wholly owned by Sales and trading of gemstones (England and Wales) issued shares of GBP1.00 each Fuli Gemstones 8. Fuli US February 4, 2020 A company with limited liability with Wholly owned by No business activities since its (U.S.) issued common stock of 200 shares of Fuli Mining incorporation no par value Past subsidiary 1. Dunhua Yiqisong Peridot July 12, 2018 A limited liability company with a Not applicable Tourism project development; Cultural & Tourism registered capital of RMB50 million tourist attractions management; Development Co., (no contribution was made up to catering services; accommodation Ltd.* (敦化意氣松橄欖 disposal) services; as well as processing 石文化旅遊開發有限公 and sales of tourism products 司) (Note) (“Dunhua Tourism”) (PRC)

Note: See “— Subsequent Events to the Reorganization but Before the [REDACTED] — (iv) Transfer of Equity Interests in Dunhua Tourism to Two Individual Employees” below in this section for further details of the disposal by our Group of the entire equity interests in Dunhua Tourism during the Track Record Period.

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HISTORY, REORGANIZATION AND CORPORATE STRUCTURE

CORPORATE DEVELOPMENT The following sets forth our major corporate development and shareholding changes before the Reorganization: Yanbian Fuli Yanbian Fuli was established in the PRC on April 27, 2015 with a registered capital of RMB30 million. At the time of its establishment, it was owned as to 60% by Mr. Yu and 40% by Mr. Jiang. On July 12, 2018, Yanbian Fuli established Dunhua Tourism as a wholly-owned subsidiary in the PRC with a registered capital of RMB50 million. On October 22, 2018, each of Mr. Yu and Mr. Jiang entered into an equity transfer agreement with Beijing Fuli, pursuant to which Mr. Yu and Mr. Jiang transferred 60% and 40% of the equity interests in Yanbian Fuli, respectively, to Beijing Fuli at a total consideration of RMB30 million, which was settled on November 14, 2018. The said consideration was determined with reference to the then registered capital of Yanbian Fuli. Upon completion of such equity transfers, Yanbian Fuli became wholly owned by Beijing Fuli. Beijing Fuli Beijing Fuli was established in the PRC on September 30, 2018 with a registered capital of RMB30 million. At the time of its establishment, it was owned as to 60% by Mr. Yu and 40% by Mr. Jiang. On November 19, 2018, each of Mr. Yu and Mr. Jiang entered into an equity transfer agreement with Beijing Futong, pursuant to which Mr. Yu and Mr. Jiang transferred 9.36% and 2.74% of the equity interests in Beijing Fuli, respectively, to Beijing Futong at a total consideration of RMB3.63 million, which was settled on November 23, 2018. The said consideration was determined with reference to the then registered capital of Beijing Fuli. Set out below is the equity interests structure of Beijing Fuli upon completion of such equity transfers:

Percentage of Name of equity interests holder equity interests Mr. Yu...... 50.64% Mr. Jiang...... 37.26% Beijing Futong ...... 12.10% Total ...... 100.00%

Beijing Futong Enterprise Management Centre (Limited Partnership)* (北京富同企業管理中心(有限合夥)) (“Beijing Futong”) was established in the PRC on October 30, 2018 with a registered capital of RMB3.63 million. At the time of acquisition of the 12.10% equity interests of Beijing Fuli, the partnership structure of Beijing Futong was as follows:

Percentage of Name of partner (together, the “13 Individual Shareholders”) Capacity interest Mr. Peng Jianqiang (彭建強)(1) ...... General partner 29.75% Mr. Jiao Wenliang (焦文亮)...... Limited partner 10.33% Mr. Bai Yunsong (白雲松)(2) ...... Limited partner 8.26% Mr. Li Feng (李鋒) ...... Limited partner 8.26% Ms. Zhang Zhixi (張之曦)...... Limited partner 8.26% Ms. Yu Xiaolin (于曉霖)(3) ...... Limited partner 8.26% Ms. Ming Yan (明焱) ...... Limited partner 8.26% Mr. Hou Zhuosen (侯焯森) ...... Limited partner 6.61% Mr. Chi Yongxi (遲永喜)(4) ...... Limited partner 3.72% Mr. Liu Jiayu (劉佳宇)(5) ...... Limited partner 3.31% Mr. Yang Rong (楊榮)...... Limited partner 2.48% Ms. Feng Jian (馮劍)(6) ...... Limited partner 1.65% Ms. Shu Yun (舒雲) ...... Limited partner 0.83% Total ...... 100.00%

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HISTORY, REORGANIZATION AND CORPORATE STRUCTURE

Notes:

(1) Mr. Peng Jianqiang was a former director of certain members of our Group in the 12 months prior to the Latest Practicable Date. (2) Mr. Bai Yunsong is a supervisor of Beijing Fuli and Yanbian Fuli. (3) Ms. Yu Xiaolin is a cousin of Mr. Yu. (4) Mr. Chi Yongxi is an executive Director. (5) Mr. Liu Jiayu is a cousin of Mr. Yu and an employee of our Group. (6) Ms. Feng Jian is a distant relative of Mr. Yu who does not fall under the definition of “deemed connected person” under Rule 14A.21(1)(a) of the Listing Rules. (7) Other than the individuals named in notes (1) and (3) to (6) above, the remaining eight of the 13 Individual Shareholders are Independent Third Parties who were acquainted with Mr. Yu via certain executive management training programs or are Mr. Yu’s social friends. (8) The above percentage figures have been subject to rounding adjustments. REORGANIZATION

The following diagram illustrates our corporate structure immediately before the Reorganization:

Mr. YuMr. Jiang Beijing Futong

50.64% 37.26% 12.10%

Beijing Fuli

100%

Yanbian Fuli

100%

Dunhua Tourism

In preparation for the [REDACTED], we underwent the Reorganization, pursuant to which our Company became the holding company of all our operating subsidiaries. The Reorganization mainly involved the following steps: (i) The Offshore Reorganization Arrangement

In preparation of the [REDACTED], Mr. Jiang Daiwei agreed with Mr. Yu, Mr. Jiang and Mr. Peng Jianqiang for and on behalf of the 13 Individual Shareholders that Mr. Jiang Daiwei would, in consideration for his subscription of 2% of the then issued share capital of our Company as enlarged by the said subscription (the JDW Share Subscription, see (k) below for further details), be responsible for incorporating such offshore entities for the [REDACTED] and undertaking such steps to facilitate the Reorganization (the “Offshore Reorganization Arrangement”). Mr. Jiang Daiwei is a close friend of Mr. Yu, an Australian national and is a supervisor of Beijing Fuli since January 3, 2019 and a supervisor of Yanbian Fuli since January 11, 2019. The said arrangement was evidenced by a confirmation executed by Mr. Yu, Mr. Jiang, Mr. Peng Jianqiang for and on behalf of the 13 Individual Shareholders and Mr. Jiang Daiwei on June 17, 2021. Pursuant to the Offshore Reorganization Arrangement, the following reorganization steps were accordingly effected:

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HISTORY, REORGANIZATION AND CORPORATE STRUCTURE

(a) Incorporation of Starry Global

On May 28, 2018, Starry Global was incorporated under the laws of the BVI and was authorized to issue a maximum number of 50,000 shares of a single class of par value of US$1.00 each. On August 9, 2018, 50,000 ordinary shares were allotted and issued to Mr. Jiang Daiwei. Since then and up to the Latest Practicable Date, Starry Global was wholly owned by Mr. Jiang Daiwei. (b) Incorporation of Fuli HK

On July 16, 2018, Fuli HK was incorporated in Hong Kong as a limited liability company. On the same day, one share was allotted and issued to Mr. Jiang Daiwei. (c) Incorporation of Fuli International and Acquisition of Fuli HK by Fuli International

On October 23, 2018, Fuli International was incorporated under the laws of the BVI and was authorized to issue a maximum number of 50,000 shares of a single class of par value of US$1.00 each. On November 1, 2018, 50,000 ordinary shares were allotted and issued to Starry Global. Upon such share allotment and issuance, Fuli International became wholly owned by Starry Global. On November 1, 2018, Mr. Jiang Daiwei transferred the one share of Fuli HK then held by him to Fuli International at a nominal consideration of HK$1.00. Upon completion of such share transfer, Fuli HK became wholly owned by Fuli International. (d) Conversion of Beijing Fuli into a Sino-foreign Joint Venture Enterprise

On January 3, 2019, Mr. Jiang entered into an equity transfer agreement with Fuli HK, pursuant to which Mr. Jiang transferred 10% of the equity interests in Beijing Fuli to Fuli HK for a consideration of RMB3 million (translated into HK$3,420,000 at the relevant time). The said consideration was determined with reference to the appraised value of the equity interests of Beijing Fuli as at November 30, 2018. The consideration was settled as of May 20, 2019 and funded by Mr. Jiang Daiwei, which ultimately formed part of the overall investment cost of Mr. Jiang Daiwei for the JDW Share Subscription under the Offshore Reorganization Arrangement (see (k) below for further details). Upon completion of the equity transfer, Beijing Fuli became a sino-foreign joint venture enterprise. Set out below is the equity interests structure of Beijing Fuli upon completion of such equity transfer:

Percentage of Name of equity interests holder equity interests Mr. Yu...... 50.64% Mr. Jiang...... 27.26% Beijing Futong ...... 12.10% Fuli HK...... 10.00% Total ...... 100.00%

(e) Incorporation of Kind Modest and Grand Start

On September 12, 2018, Kind Modest was incorporated under the laws of the BVI and was authorized to issue a maximum number of 50,000 shares of a single class of par value of US$1.00 each. On October 30, 2018, 50,000 ordinary shares were allotted and issued to Mr. Yu. Since then and up to the Latest Practicable Date, Kind Modest was wholly owned by Mr. Yu.

–112– THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.

HISTORY, REORGANIZATION AND CORPORATE STRUCTURE

On October 8, 2018, Grand Start was incorporated under the laws of the BVI and was authorized to issue a maximum number of 50,000 shares of a single class of par value of US$1.00 each. On October 30, 2018, 50,000 ordinary shares were allotted and issued to Mr. Jiang. Since then and up to the Latest Practicable Date, Grand Start was wholly owned by Mr. Jiang.

(f) Formation of Tegus Partnership

On January 22, 2019, Tegus Partnership was formed as a limited partnership under the laws of the BVI with a partnership structure comprising the 13 Individual Shareholders and mirroring that of Beijing Futong. Set out below is the partnership interest structure of Tegus Partnership upon its establishment and up to the Latest Practicable Date:

Percentage of Name of partner Capacity interest Mr. Peng Jianqiang(1) ...... General partner 29.75% Mr. Jiao Wenliang ...... Limited partner 10.33% Mr. Bai Yunsong(2) ...... Limited partner 8.26% Mr. Li Feng...... Limited partner 8.26% Ms. Zhang Zhixi ...... Limited partner 8.26% Ms. Yu Xiaolin(3) ...... Limited partner 8.26% Ms. Ming Yan ...... Limited partner 8.26% Mr. Hou Zhuosen ...... Limited partner 6.61% Mr. Chi Yongxi(4) ...... Limited partner 3.72% Mr. Liu Jiayu(5) ...... Limited partner 3.31% Mr. Yang Rong ...... Limited partner 2.48% Ms.FengJian(6) ...... Limited partner 1.65% Ms. Shu Yun ...... Limited partner 0.83% Total ...... 100.00%

Notes:

–113– THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.

HISTORY, REORGANIZATION AND CORPORATE STRUCTURE

(g) Incorporation of our Company

On February 15, 2019, our Company was incorporated in the Cayman Islands as an exempted company with limited liability with an initial authorized share capital of US$50,000 divided into 50,000 Shares of par value of US$1.00 each, of which one ordinary Share was allotted and issued at par to an initial subscriber, an Independent Third Party. On the same day, (i) the said one ordinary Share was transferred by the initial subscriber to Kind Modest at a nominal consideration of US$1.00; (ii) 25,319 ordinary Shares were allotted and issued at par to Kind Modest at a consideration of US$25,319; (iii) 18,630 ordinary Shares were allotted and issued at par to Grand Start at a consideration of US$18,630; and (iv) 6,050 ordinary Shares were allotted and issued at par to Tegus Partnership at a consideration of US$6,050. Set out below is the shareholding structure of our Company after the aforesaid share transfer and allotments and issuances:

Percentage of Name of Shareholder shareholding Kind Modest ...... 50.64% Grand Start ...... 37.26% Tegus Partnership ...... 12.10% Total ...... 100.00%

(h) Acquisition of Shares of Fuli International by our Company

On April 23, 2019, Starry Global (wholly owned by Mr. Jiang Daiwei) transferred all its 50,000 ordinary shares held in Fuli International to our Company at a consideration of US$448,500 (translated into RMB3 million at the relevant time), which was subsequently settled by netting off an equivalent sum against the payment of consideration for the JDW Share Subscription (see (k) below for further details). The said consideration was determined with reference to the consideration for the acquisition by Fuli HK of the 10% equity interests of Beijing Fuli as detailed in (d) above. Upon completion of such share transfer, Fuli International became wholly owned by our Company. (i) Beijing Fuli Becoming a Wholly Foreign-owned Enterprise

On May 8, 2019, each of Mr. Yu, Mr. Jiang and Beijing Futong entered into an equity transfer agreement with Fuli HK, pursuant to which Mr. Yu, Mr. Jiang and Beijing Futong transferred all their respective equity interests of 50.64%, 27.26% and 12.10% in Beijing Fuli to Fuli HK at the consideration of RMB15.192 million, RMB8.178 million and RMB3.63 million, respectively. The respective consideration was determined with reference to the same appraised value of the equity interests of Beijing Fuli as of November 30, 2018 as referenced to in the acquisition by Fuli HK of the 10% equity interests of Beijing Fuli as detailed in (d) above. Upon completion of such equity transfers, Beijing Fuli became wholly owned by Fuli HK (which in turn was wholly owned by Fuli International) and a wholly foreign-owned enterprise. Settlement of the said consideration was completed as of January 29, 2021. (j) Increase in the Authorized Share Capital and Completion of Share Subdivision of our Company

On September 5, 2019, by written resolutions of our Shareholders, the authorized share capital of our Company was increased from US$50,000 divided into 50,000 Shares of par value of US$1.00 each to US$100,000 divided into 100,000 Shares of par value of US$1.00 each, ranking pari passu in all respects with the Shares then in issue. Immediately after such increase in the authorized share capital of our Company, every issued and unissued Share of par value of US$1.00 each in the share capital of our Company was subdivided into 100 Shares of par value of US$0.01 each. As a result, the authorized share capital of our Company became US$100,000 divided into 10,000,000 Shares of par value of US$0.01 each. The number of Shares held by our Shareholders was accordingly adjusted to 2,532,000 Shares by Kind Modest, 1,863,000 Shares by Grand Start and 605,000 Shares by Tegus Partnership, with their respective percentage shareholding in our Company remained unchanged as to 50.64% for Kind Modest, 37.26% for Grand Start and 12.10% for Tegus Partnership.

–114– THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.

HISTORY, REORGANIZATION AND CORPORATE STRUCTURE

(k) Completion of the Offshore Reorganization Arrangement

On September 5, 2019, as part of the Offshore Reorganization Arrangement, Mr. Jiang Daiwei subscribed for, and our Company allotted and issued, 102,330 Shares at a consideration of US$4,235,439, representing 2% of the then enlarged issued share capital of our Company (the “JDW Share Subscription”). Settlement of the said consideration, having netted off the US$448,500 equivalent amount of consideration payable by our Company to Starry Global for the acquisition of shares of Fuli International by our Company under (h) above, was completed as of January 26, 2021. Such subscription of new Shares by Mr. Jiang Daiwei concluded the Offshore Reorganization Arrangement. For the purpose of the [REDACTED], the JDW Share Subscription is considered a [REDACTED] investment. See “— [REDACTED] Investments” in this section for further disclosure.

Mr. Jiang Daiwei has confirmed that he has not participated in any of the financial or operational management or decision making in either Fuli International or Fuli HK (including any of their respective assets and investments) since their respective incorporation, and that all financial and operational management and decisions as well as all operational risks and rewards of Fuli International and Fuli HK (including their respective investments) have all along been vested with Mr. Yu, Mr. Jiang and Mr. Peng Jianqiang on behalf of the 13 Individual Shareholders.

(ii) Top-up Subscription of our Shares by Tegus Partnership

With a view of restoring the percentage shareholding interest held by Tegus Partnership in our Company as a result of the shareholding dilution brought about by the JDW Share Subscription, on September 5, 2019, Tegus Partnership subscribed for additional 14,085 new Shares (the “Tegus Top-up Subscription”) for anti-dilution purpose at a consideration of US$582,978 (translated into HK$4,518,080 at the relevant time). Settlement of the said consideration was completed as of January 14, 2021. For the purpose of the [REDACTED],the Tegus Top-up Subscription is considered a [REDACTED] investment. See “— [REDACTED] Investments” in this section for further disclosure. Set out below is the shareholding structure of our Company upon completion of the JDW Share Subscription and the Tegus Top-up Subscription:

Percentage of Name of Shareholder shareholding Kind Modest...... 49.49% Grand Start ...... 36.41% Tegus Partnership ...... 12.10% Mr. Jiang Daiwei...... 2.00% Total ...... 100.00%

SUBSEQUENT EVENTS TO THE REORGANIZATION BUT BEFORE THE [REDACTED]

(i) Incorporation of the Offshore Subsidiaries of our Group

(a) Incorporation of Fuli Gemstones

On January 17, 2020, Fuli Gemstones was incorporated under the laws of the BVI and was authorized to issue a maximum number of 50,000 shares of a single class of par value of US$1.00 each. On January 24, 2020, 50,000 ordinary shares were allotted and issued to our Company. Since then and up to the Latest Practicable Date, Fuli Gemstones was wholly owned by our Company.

–115– THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.

HISTORY, REORGANIZATION AND CORPORATE STRUCTURE

(b) Incorporation of Fuli Mining

On January 17, 2020, Fuli Mining was incorporated under the laws of the BVI and was authorized to issue a maximum number of 50,000 shares of a single class of par value of US$1.00 each. On January 24, 2020, 50,000 ordinary shares were allotted and issued to our Company. Since then and up to the Latest Practicable Date, Fuli Mining was wholly owned by our Company.

On January 27, 2020, Fuli UK was incorporated in England and Wales with the allotment and issuance of 100 shares of GBP1.00 each to Fuli Gemstones at a consideration of GBP100. Following such share allotment and issuance and up to the Latest Practicable Date, Fuli UK was wholly owned by Fuli Gemstones.

(d) Incorporation of Fuli US

On February 4, 2020, Fuli US was incorporated in the U.S. and was authorized to issue common stock of 200 shares with no par value. On the same day, all 200 shares were allotted and issued to Fuli Mining. Following such share allotment and issuance and up to the Latest Practicable Date, Fuli US was wholly owned by Fuli Mining.

(ii) Increase in the Registered Capital of Yanbian Fuli and Subscription by Tonghua Xintong

On March 30, 2020, Yanbian Fuli, Beijing Fuli and Tonghua Xintong entered into a capital increase agreement, pursuant to which Tonghua Xintong, a state-owned enterprise wholly owned by the State-owned Assets Supervision and Administrative Commission of the Municipal of Tonghua People’s Government and an Independent Third Party, agreed to subscribe for the entire increased registered capital of Yanbian Fuli in the amount of RMB1,578,947 at a consideration of RMB75 million, which was fully settled on May 29, 2020. The said consideration was determined after arm’s length negotiations between Tonghua Xintong and us based on Tonghua Xintong’s assessment and valuation of Yanbian Fuli. Set out below is the equity interests structure of Yanbian Fuli upon completion of the subscription of the increased registered capital:

Registered capital Percentage of Name of equity interests holder (RMB) equity interests Beijing Fuli...... 30,000,000 95.00% Tonghua Xintong...... 1,578,947 5.00% Total ...... 31,578,947 100.00%

(iii) Transfer by Mr. Jiang Daiwei of his Shares to Starry Global

On November 29, 2020, Starry Global repurchased one ordinary share with par value of US$1.00 each from its sole shareholder, Mr. Jiang Daiwei, for cancellation, at the consideration of US$1.00. On the same day, Mr. Jiang Daiwei transferred his 102,330 Shares to Starry Global in consideration for the allotment and issuance of one new ordinary share of par value of US$1.00 in Starry Global, credited as fully paid, to Mr. Jiang Daiwei. Set out below is the shareholding structure of our Company upon completion of such share transfer:

Percentage of Name of Shareholder shareholding Kind Modest ...... 49.49% Grand Start ...... 36.41% Tegus Partnership ...... 12.10% Starry Global...... 2.00% Total ...... 100.00%

–116– THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.

HISTORY, REORGANIZATION AND CORPORATE STRUCTURE

(iv) Transfer of Equity Interests in Dunhua Tourism to Two Individual Employees

Having considered that Dunhua Tourism has not been in substantive operation since its establishment and its business scope is not in line with that of our Group, on November 30, 2020, Yanbian Fuli entered into two equity transfer agreements with two of its employees, each being an Independent Third Party, pursuant to which the entire equity interests of Dunhua Tourism were transferred to these two individual employees at nil consideration. The said consideration was determined with reference to the marginally negative net asset value of Dunhua Tourism at the time of its disposal. Since the date of its establishment and up to the date of disposal, the registered capital of Dunhua Tourism had not been paid up.

(v) Increase in the Registered Capital of Yanbian Fuli and Subscription by Jilin Dunhua

On May 30, 2021, Yanbian Fuli, Beijing Fuli, Tonghua Xintong and Jilin Dunhua entered into a capital increase agreement, pursuant to which Jilin Dunhua, a state-owned enterprise wholly owned by the State-owned Assets Administrative Commission of Dunhua City and an Independent Third Party, agreed to subscribe for the entire increased registered capital of Yanbian Fuli in the amount of RMB644,468 at a consideration of RMB34 million, which was fully settled on June 18, 2021. The said consideration was determined after arm’s length negotiations between the parties with reference to Jilin Dunhua’s internal assessment and the valuation then attributed to Yanbian Fuli under the capital contribution of Tonghua Xintong into Yanbian Fuli in March 2020 (see “(ii) Increase in the Registered Capital of Yanbian Fuli and Subscription by Tonghua Xintong” above). Set out below is the equity interests structure of Yanbian Fuli upon completion of the subscription of the increased registered capital by Jilin Dunhua:

Registered capital Percentage of Name of equity interests holder (RMB) equity interests Beijing Fuli...... 30,000,000 93.10% Tonghua Xintong...... 1,578,947 4.90% Jilin Dunhua ...... 644,468 2.00% Total ...... 32,223,415 100.00%

[REDACTED] AND [REDACTED]

Conditional upon the share premium account of our Company having sufficient balance, or otherwise being credited as a result of the allotment and issuance of the [REDACTED] by our Company pursuant to the [REDACTED], our Company will capitalize a sum of US$[REDACTED] standing to the credit of the share premium account of our Company by applying such sum in paying up in full at par value a total of [REDACTED] Shares for allotment and issuance to the Shareholders whose names appear on the register of members of our Company or the principal share register of our Company at the close of business on the date immediately preceding the date on which the [REDACTED] becomes unconditional (or as they may direct), in proportion (as nearly as possible without involving fractions so that no fraction of a Share shall be allotted and issued) to their respective shareholdings in our Company, and the Shares allotted and issued shall rank pari passu in all respects with the then existing issued Shares.

–117– THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.

HISTORY, REORGANIZATION AND CORPORATE STRUCTURE

[REDACTED] INVESTMENTS

Our Company has undergone the following [REDACTED] investments during the Track Record Period:

(i) Subscription of New Shares by Mr. Jiang Daiwei and Tegus Partnership

As set out in “— Reorganization — (i) The Offshore Reorganization Arrangement” above, Mr. Jiang Daiwei subscribed for 102,330 new Shares as part of the Offshore Reorganization Arrangement on September 5, 2019. In consideration for the subscription of the said Shares, Mr. Jiang Daiwei incurred a total investment cost of HK$32,765,892, comprising (i) RMB3 million (translated into HK$3,420,000 at the relevant time) for the acquisition by Fuli HK of 10% equity interests of Beijing Fuli; and (ii) US$4,235,439 for the JDW Share Subscription; as net off by (iii) US$448,500 (translated into RMB3 million at the relevant time) for the disposal by Starry Global of the entire shareholding interests of Fuli International to our Company. The total investment amount was determined after arm’s length negotiations between the parties with reference to an assessment and a consensus valuation of our Group as of September 2019. For background of Mr. Jiang Daiwei, see “— Reorganization — (i) The Offshore Reonganization Arrangement” above.

As set out in “— Reorganization — (ii) Top-up Subscription of our Shares by Tegus Partnership” above, on September 5, 2019, Tegus Partnership, which was formed by the 13 Individual Shareholders as their offshore investment vehicle to receive their initial onshore equity interests in our Group through Beijing Futong, subscribed for additional 14,085 new Shares for anti-dilution purpose against the JDW Share Subscription, at a consideration of US$582,978 (translated into HK$4,518,080 at the relevant time). The said consideration was determined after arm’s length negotiations between the parties having considered (i) the consensus valuation of our Group as referenced in the JDW Share Subscription; (ii) the early shareholder status of the 13 Individual Shareholders; and (iii) the anti-dilution purpose of the Tegus Top-up Subscription. For the background of the 13 Individual Shareholders, see “— Corporate Development — Beijing Fuli” above.

Set out below is the shareholding structure of our Company following the JDW Share Subscription and the Tegus Top-up Subscription:

Percentage of Name of Shareholder shareholding Kind Modest ...... 49.49% Grand Start ...... 36.41% Tegus Partnership ...... 12.10% Mr. Jiang Daiwei...... 2.00% Total ...... 100.00%

The proceeds from the JDW Share Subscription and the Tegus Top-up Subscription were both utilized primarily for the settlement of consideration for the acquisition of equity interests in Beijing Fuli by Fuli HK (as detailed in “— Reorganization — (i) The Offshore Reorganization Arrangement — (i) Beijing Fuli Becoming a Wholly Foreign-owned Enterprise” above) and as general working capital of our Group. No special rights were attached to either the JDW Share Subscription or the Tegus Top-up Subscription.

–118– THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.

HISTORY, REORGANIZATION AND CORPORATE STRUCTURE

Our Directors consider that the investment from Mr. Jiang Daiwei as part of the Offshore Reorganization Arrangement formed an integral part of the Reorganization, and provided offshore funding to complete the necessary reorganization steps as well as general working capital for our Group. Our Directors also believe that the Tegus Top-up Subscription is a fair and anti-dilution arrangement for our early Shareholders to retain their percentage shareholding in our Company, while supplementing our required offshore funding for the Reorganization and our general working capital needs.

(ii) Loan Capitalization and Further Subscription of Shares by a Lender

(a) Loan Capitalization

During the period from May 2019 to August 2020, the following individuals (collectively, the “Lenders” and each a “Lender”) provided interest-bearing loans to our Company, which were duly received by us at the respective dates of loan provision as set forth in the following table and have been utilized primarily for our non-Renminbi denominated general working capital needs:

Total loan principal Annual and interests Principal amount of interest outstanding as at Name of Lender Background of Lender Date of loan provision loan(s) (365 days) November 30, 2020 Due date Mr. Yu Bing Han (余秉翰) An Independent Third Party August 23, 2019, HK$6,400,000 6% HK$6,797,907 December 31, and an acquaintance of Mr. September 23, 2019, 2022 Yu through an executive and August 21, 2020 training management program Mr. Pang Peter Chun Ming Chief financial officer and a May 24, 2019, June 19, HK$2,500,000 6% HK$2,717,154 December 31, (彭浚銘) joint company secretary of 2019, and July 4, 2019 2022 our Company Mr. Li Xianguang (李獻廣) An acquaintance of Mr. Yu May 23, 2019, and HK$2,000,000 6% HK$2,181,249 December 31, who is contracted by our May 29, 2019 2022 Group for the provision of chauffering and other administrative support for our Hong Kong office Ms. Tsui Chin Ching An Independent Third Party May 24, 2019, and HK$500,000 6% HK$544,203 December 31, (徐展晴) and a sister-in-law of Mr. August 23, 2019 2022 To Yu Fai, a joint company secretary of our Company Ms. Lin Meiling (林美玲) Employee of our Group September 4, 2019, and HK$500,000 6% HK$528,257 December 31, March 4, 2020 2022 Ms. Liu Shuang Employee of our Group August 19, 2019, and HK$400,000 6% HK$423,638 December 31, March 25, 2020 2022 Total HK$12,300,000 HK$13,192,408

–119– THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.

HISTORY, REORGANIZATION AND CORPORATE STRUCTURE

On November 30, 2020, each of the Lenders entered into a deed of loan confirmation and loan capitalization (each a “Deed of Loan Confirmation and Loan Capitalization”) with our Company, pursuant to which each of the Lenders and our Company confirmed and agreed, among others, that (i) the principal amount of the loans together with all unpaid interests accrued thereon be capitalized with the allotment and issuance of such number of new Shares to each of the Lenders based on a valuation on the fair market value of the entire issued share capital of our Company as of October 31, 2020, as appraised by an independent valuer (the “Loan Capitalization”); and (ii) our Company shall be deemed to have properly and fully discharged its repayment obligations under each loan upon completion of the Loan Capitalization. On the same day, a total of 37,704 new Shares were allotted and issued, credited as fully paid, to the Lenders, as full and final settlement of all repayment obligations of our Company to each of the Lenders. See “— Effective Investment Costs and Shareholding Interests of the [REDACTED] Investors” below for details of the number of Shares allotted and issued to each of the Lenders.

(b) Additional Share Subscription by Mr. Pang Peter Chun Ming

On November 30, 2020, Mr. Pang Peter Chun Ming, our chief financial officer and a joint company secretary of our Company and one of the Lenders, further entered into a share subscription agreement with our Company, pursuant to which a total of 714 new Shares were allotted and issued to Mr. Pang Peter Chun Ming at an aggregate subscription price of HK$250,000 which was settled in cash on the same day (the “Additional Share Subscription”). The subscription money was utilized for our non-Renminbi denominated general working capital needs.

The number of new Shares issued to the Lenders pursuant to the Loan Capitalization and the Additional Share Subscription was determined with reference to a valuation as appraised by an independent valuer on the fair market value of the entire issued share capital of our Company as of October 31, 2020. Set out below is the shareholding structure of our Company upon completion of the Loan Capitalization and the Additional Share Subscription:

Percentage of Name of Shareholder shareholding Kind Modest ...... 49.12% Grand Start ...... 36.14% Tegus Partnership ...... 12.01% Starry Global...... 1.99% Lenders ...... 0.74% Total ...... 100.00%

No special rights were attached to either the Loan Capitalization or the Additional Share Subscription. Our Directors consider that the Loan Capitalization enabled our Group to settle all outstanding loans and interests owed to the Lenders, reduce our gearing level and strengthen our financial position while enhancing the equity base of our Company. Moreover, as some of the Lenders are employees of our Group, the Loan Capitalization and the Additional Share Subscription enabled these employees to take up an equity stake in our Company, which our Directors believe would further deepen their commitment to our Group and better align their interests with those of our Group and our Shareholders as a whole.

– 120 – THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.

HISTORY, REORGANIZATION AND CORPORATE STRUCTURE

Effective Investment Costs and Shareholding Interests of the [REDACTED] Investors

The following table sets out the respective investment amounts, the effective investment cost per Share and the shareholding interests of the [REDACTED] investors arising from the [REDACTED] investments, including Mr. Jiang Daiwei (through Starry Global), Tegus Partnership and the Lenders before and after completion of the [REDACTED] and the [REDACTED] (assuming the [REDACTED] is not exercised and without taking into account any Shares which may be issued upon the exercise of any options which may be granted under the Share Option Scheme):

Percentage of shareholding in our Company upon completion of the [REDACTED] and the Percentage of [REDACTED] (assuming the shareholding No. of Shares [REDACTED] is not exercised in our upon and without taking into No. of Shares Company upon completion of account any Shares which Discount to issued under completion of the may be issued upon the mid-point of the the [REDACTED] exercise of any options which Effective the Investment [REDACTED] [REDACTED] and the may be granted under the investment [REDACTED] Name of investor amount investments investments [REDACTED] Share Option Scheme) cost per Share range (1) HK$ % % HK$ % Starry Global (Mr. Jiang Daiwei) ..... 32,765,892 102,330 1.99% [REDACTED] [REDACTED] [REDACTED] [REDACTED] Tegus Partnership — Tegus Top-up Subscription (2) ...... 4,518,080 14,085 0.27% [REDACTED] [REDACTED] [REDACTED] [REDACTED] Mr. Yu Bing Han (余秉翰) ...... 6,797,907 19,430 0.38% [REDACTED] [REDACTED] [REDACTED] [REDACTED] Mr. Pang Peter Chun Ming (彭浚銘) — Loan Capitalization ...... 2,717,154 7,766 0.16% [REDACTED] [REDACTED] [REDACTED] [REDACTED] — Share Subscription ...... 250,000 714 Mr. Li Xianguang (李獻廣) ...... 2,181,249 6,234 0.12% [REDACTED] [REDACTED] [REDACTED] [REDACTED] Ms. Tsui Chin Ching (徐展晴) ...... 544,203 1,555 0.03% [REDACTED] [REDACTED] [REDACTED] [REDACTED] Ms. Lin Meiling (林美玲) ...... 528,257 1,509 0.03% [REDACTED] [REDACTED] [REDACTED] [REDACTED] Ms. Liu Shuang ...... 423,638 1,210 0.02% [REDACTED] [REDACTED] [REDACTED] [REDACTED] Subtotal:...... 50,726,380 [REDACTED] 3.00% [REDACTED] [REDACTED]

Notes:

(1) For illustration purpose only, calculation is based on the [REDACTED] of HK$[REDACTED] per [REDACTED], being the mid-point of the indicative [REDACTED] range of HK$[REDACTED] and HK$[REDACTED] per [REDACTED].

(2) Tegus Partnership already held 605,000 Shares prior to the Tegus Top-up Subscription, therefore it is interested in a total of 619,085 Shares, representing 12.01% of the entire issued share capital of our Company upon completion of the [REDACTED] investments, and will be interested in a total of [REDACTED] Shares, representing [REDACTED]% of the entire issued share capital of our Company upon completion of the [REDACTED] and the [REDACTED] (assuming the [REDACTED] is not exercised and without taking into account any [REDACTED] which may be issued upon the exercise of any options which may be granted under the Share Option Scheme).

Compliance with Interim Guidance

On the basis that (i) all the [REDACTED] investments have been settled more than 28 clear days before the date of our first submission of the [REDACTED] to the Stock Exchange; and (ii) the [REDACTED] investors are not entitled to any special rights under their respective investment in our Company, the Sole Sponsor has confirmed that the [REDACTED] investments are in compliance with the Interim Guidance on pre-IPO Investments (HKEx-GL29-12) and the Guidance on pre-IPO Investments (HKEx-GL43-12) issued by the Stock Exchange.

– 121 – THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.

HISTORY, REORGANIZATION AND CORPORATE STRUCTURE

[REDACTED]

Pursuant to the Listing Rules, at least 25% of the total issued share capital of our Company must at all times be held by the [REDACTED]. As Mr. Jiang Daiwei, Starry Global and the Lenders are not connected persons of our Company, the Shares held by them will be counted towards the [REDACTED]. On the other hand, since Mr. Peng Jianqiang, the general partner of Tegus Partnership, was a former director of certain members of our Group in the 12 months prior to the Latest Practicable Date, the Shares held by Tegus Partnership will not be counted towards the [REDACTED].

LOCK-UP ARRANGEMENTS OF CERTAIN SHAREHOLDERS

Certain of our Shareholders [have provided] lock-up undertakings and are therefore subject to lock-up for certain period commencing on the [REDACTED].

[REDACTED]

Mr. Jiang and Grand Start

Each of Mr. Jiang and Grant Start [has] undertaken to our Company and each of the Sole Sponsor and the [REDACTED], on a joint and several basis that, he/it will not, and will cause his/its respective affiliates, at any time during the 12 months commencing on the [REDACTED] (the “12-Month Period”) not to:

(i) sell, offer to sell, contract or agree to sell, mortgage, charge, pledge, hypothecate, hedge, lend, grant or sell any option, warrant, contract or right to purchase, grant or purchase any option, warrant, contract or right to sell, or otherwise transfer or dispose of or create any Encumbrance (as defined below) over, either directly or indirectly, conditionally or unconditionally, any Shares or other equity securities of our Company or any interest therein (including, without limitation, any securities convertible into or exchangeable or exercisable for or that represent the right to receive, or any warrant or other rights to purchase, any Shares), or deposit any Shares or other equity securities of our Company with a depositary in connection with the issue of depositary receipts. “Encumbrance” means any mortgage, charge, pledge, lien or other security interest or nay option, restriction, right of first refusal, right of pre-emption or other third-party claim, right, interest or preference or any other encumbrance of any kind; or

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HISTORY, REORGANIZATION AND CORPORATE STRUCTURE

(ii) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of any Shares or other securities of our Company or any interest therein (including, without limitation, any securities convertible into or exchangeable or exercisable for or that represent the right to receive, or any warrants or other rights to purchase, any Shares); or

(iii) enter into any transaction with the same economic effect as any transaction specified in (i) or (ii) above; or

(iv) offer to or agree to offer to or agree to or announce any intention to effect any transaction specified in (i), (ii) or (iii) above, in each case, whether any of the transactions specified in (i), (ii) or (iii) above is to be settled by delivery of Shares or other equity securities of our Company or in cash or otherwise (whether or not the issue of such Shares or other equity securities will be completed within the 12-Month Period).

Mr. Jiang Daiwei, Starry Global, Tegus Partnership and the Lenders

Each of Mr. Jiang Daiwei, Starry Global, Tegus Partnership and the Lenders [has] undertaken to the Sole Sponsor that, without the prior written consent of the Sole Sponsor, he/she/it will not, and will cause his/her/its affiliates not to, at any time during the period of six months from the [REDACTED] (the “Six-Month Period”):

(i) sell, offer to sell, contract or agree to sell, mortgage, charge, pledge, hypothecate, hedge, lend, grant or sell any option, warrant, contract or right to purchase, grant or purchase any option, warrant, contract or right to sell, or otherwise transfer or dispose of or create any Encumbrance (as defined above) over, either directly or indirectly, conditionally or unconditionally, any Shares or other equity securities of our Company or any interest therein (including, without limitation, any securities convertible into or exchangeable or exercisable for or that represent the right to receive, or any warrant or other rights to purchase, any Shares), or deposit any Shares or other equity securities of our Company with a depositary in connection with the issue of depositary receipts; or

(iii) enter into any transaction with the same economic effect as any transaction specified in (i) or (ii) above; or

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HISTORY, REORGANIZATION AND CORPORATE STRUCTURE

CORPORATE AND SHAREHOLDING STRUCTURE

The following diagram sets out the shareholding structure of our Group immediately after the Reorganization and the [REDACTED] investments but before completion of the [REDACTED] and the [REDACTED]:

Mr. Jiang 13 Individual Mr. Yu Mr. Jiang Lenders Daiwei Shareholders

100% 100% 100% 100%

Tegus Kind Modest Grand Start Starry Global (BVI) (BVI) Partnership (BVI) (BVI)

49.12% 36.14% 1.99% 12.01% 0.74%

Our Company (Cayman Islands)

100% 100% 100%

Fuli Mining Fuli International Fuli Gemstones (BVI) (BVI) (BVI)

100% 100% 100%

Fuli UK Fuli US Fuli HK (England & (U.S.) (HK) Wales)

100% offshore

onshore Tonghua Xintong Investment Jilin Dunhua Development Holding Group Co., Ltd.* Investment Group Co., Ltd.* Beijing Fuli （通化信通投資控股集團（吉林敦化發展投資集團 (PRC) 有限公司)(1) 有限公司)(2) (PRC) (PRC)

93.10% 4.90% 2.00%

Yanbian Fuli (PRC)

Notes:

(1) It is wholly owned by the State-owned Assets Supervision and Administrative Commission of the Municipal of Tonghua People’s Government which is an Independent Third Party. (2) It is wholly owned by the State-owned Assets Administrative Commission of Dunhua City which is an Independent Third Party. (3) The above percentage figures have been subject to rounding adjustments.

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HISTORY, REORGANIZATION AND CORPORATE STRUCTURE

The following diagram sets out our shareholding and corporate structure immediately upon completion of the [REDACTED] and the [REDACTED] (assuming the [REDACTED] is not exercised and without taking into account any Shares which may be issued upon the exercise of any options which may be granted under the Share Option Scheme):

Mr. Jiang 13 Individual Mr. Yu Mr. Jiang (1) Public Daiwei Shareholders Lenders

100% 100% 100% 100%

Tegus Kind Modest Grand Start Starry Global (BVI) (1) Partnership (BVI) (BVI) (BVI)

[Redacted] [Redacted] [Redacted] [Redacted] [Redacted] [Redacted]

Our Company (Cayman Islands)

100% 100% 100%

Fuli Mining Fuli International Fuli Gemstones (BVI) (BVI) (BVI)

100% 100% 100%

Fuli UK Fuli US Fuli HK (England & (U.S.) (HK) Wales)

100% offshore

onshore Tonghua Xintong Investment Jilin Dunhua Development Holding Group Co., Ltd.* Investment Group Co., Ltd.* Beijing Fuli （通化信通投資控股集團（吉林敦化發展投資集團 (PRC) 有限公司)(2) 有限公司)(3) (PRC) (PRC)

93.10% 4.90% 2.00%

Yanbian Fuli (PRC)

Notes:

(1) The Shares held by each of Starry Global and the Lenders will be counted towards the [REDACTED] of our Company upon [REDACTED]. (2) It is wholly owned by the State-owned Assets Supervision and Administrative Commission of the Municipal of Tonghua People’s Government which is an Independent Third Party. (3) It is wholly owned by the State-owned Assets Administrative Commission of Dunhua City which is an Independent Third Party. (4) The above percentage figures have been subject to rounding adjustments.

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HISTORY, REORGANIZATION AND CORPORATE STRUCTURE

PRC LEGAL COMPLIANCE

As confirmed by our PRC Legal Advisors, we have obtained and completed all necessary approvals, registrations and/or procedures in all material aspects required by the relevant PRC regulatory authorities in respect of the corporate restructuring steps of the Reorganization in relation to our PRC subsidiary, as described above.

Foreign Exchange Registration under Circular 37

Pursuant to the Circular of the SAFE on Foreign Exchange Administration of Overseas Investment, Financing and Round-trip Investments Conducted by Domestic Residents through Special Purpose Vehicles《關於境內居民通過特殊目的公司境外投融資及返程投資外匯管理有關 ( 問題的通知》) (the “SAFE Circular 37”), promulgated by SAFE and which became effective on July 4, 2014, (i) a PRC resident must register with the local SAFE branch before he or she contributes assets or equity interests to an overseas special purpose vehicle (the “Overseas SPV”) that is directly established or indirectly controlled by the PRC resident for the purpose of conducting investment or financing; and (ii) following the initial registration, the PRC resident is also required to register with the local SAFE branch for any major change, in respect of the Overseas SPV, including, among other things, a change of Overseas SPV’s PRC resident shareholder(s), the name of the Overseas SPV, terms of operation, or any increase or reduction of the Overseas SPV’s capital, share transfer or swap, and merger or division. In the event that a PRC shareholder holding interests in a special purpose vehicle fails to fulfill the required SAFE registration, the PRC subsidiaries of that special purpose vehicle may be restricted from making profit distributions to the offshore parent and from carrying out subsequent cross-border foreign exchange activities, and the special purpose vehicle may be restricted in its ability to contribute additional capital into its PRC subsidiary. Furthermore, failure to comply with the various SAFE registration requirements described above could result in liability under PRC law for evasion of foreign exchange controls.

Pursuant to the Circular of the SAFE on Further Simplification and Improvement in Foreign Exchange Administration on Direct Investment《關於進一步簡化和改進直接投資外匯管理政策 ( 的通知》) (the “SAFE Circular 13”), promulgated by SAFE and which became effective on June 1, 2015, the power to accept SAFE registration was delegated from local SAFE to local banks where the assets or interests in the domestic entity are located.

According to the Foreign Exchange Registration Form for Overseas Investment of Domestic Individual Residents (境內居民個人境外投資外匯登記表) and the Business Registration Certificate filled in by Mr. Yu, Mr. Jiang, Mr. Peng Jianqiang, Mr. Jiao Wenliang, Mr. Bai Yunsong, Mr. Li Feng, Ms. Zhang Zhixi, Ms. Yu Xiaolin, Ms. Ming Yan, Mr. Hou Zhuosen, Mr. Chi Yongxi, Mr. Liu Jiayu, Mr. Yang Rong, Ms. Feng Jian, and Ms. Shu Yun all of which were stamped and confirmed by Bank of Jiangsu Co., Ltd, Beijing branch* (江蘇銀行股份有限公司北京分行) on April 12, 2019, and as advised by our PRC Legal Advisors, the individuals mentioned above have completed the registration under the SAFE Circular 37 on April 12, 2019.

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HISTORY, REORGANIZATION AND CORPORATE STRUCTURE

M&A Rules

Under the Provisions on the Merger and Acquisition of Domestic Enterprises by Foreign Investors in the PRC《關於外國投資者併購境內企業的規定》 ( ) (the “M&A Rules”), which was promulgated on August 8, 2006 and was amended and came into effect on June 22, 2009, a foreign investor is required to obtain necessary approvals when it (i) acquires the equity of a domestic enterprise so as to convert the domestic enterprise into a foreign invested enterprise; (ii) subscribes for the increased capital of a domestic enterprise so as to convert the domestic enterprise into a foreign-invested enterprise; (iii) establishes a foreign-invested enterprise through which it purchases the assets of a domestic enterprise and operates these assets; or (iv) purchases the assets of a domestic enterprise, and then invests such assets to establish a foreign-invested enterprise.

Article 11 of the M&A Rules regulates “affiliated mergers”, which refers to the instance where a domestic company or enterprise or a domestic natural person, through an overseas company established or controlled by it/him, acquires a domestic company which is related to or connected with it/him, and an approval from MOFCOM is required.

According to the Interim Measures for the Administration of the Recordation of the Establishment and Change of Foreign-invested Enterprises《外商投資企業設立及變更備案管理暫 ( 行辦法》) (the “Recording Measures”), as promulgated and lastly updated by the MOFCOM on October 8, 2016 and June 29, 2018 respectively, where a non-foreign-invested enterprise changes into a foreign-invested enterprise due to acquisition, consolidation by merger or otherwise, which is subject to record-filing as stipulated in the Recording Measures, it shall file and submit the record-filing information on the incorporation of foreign-invested enterprises simultaneously while going through the registration procedures for incorporation with the competent administrations for industry and commerce and market supervision.

Our PRC Legal Advisors are of the opinion that (i) the acquisition of 10% equity interests in Beijing Fuli by Fuli HK, as a result of which Beijing Fuli was converted into a sino-foreign joint venture enterprise, is subject to the M&A Rules and the Recording Measures, and Beijing Fuli has obtained the record-filing receipt for the incorporation of foreign-invested enterprises (外商投資企業設立備案回執) and the new business license for the conversion of Beijing Fuli into a sino-foreign joint venture enterprise pursuant to the M&A Rules and the Recording Measures; and (ii) Fuli HK’s acquisition of the remaining 90% equity interests in Beijing Fuli is not subject to the M&A Rules but is subject to the Several Provisions on the Change of Investor Equity of Foreign-invested Enterprises《外商投資企業投資者股權變更的若干規定》 ( ), the Recording Measures and other relevant regulations since Beijing Fuli changed into a sino-foreign joint venture enterprise, and Beijing Fuli has obtained the record-filing receipt for the change of foreign-invested enterprises (外商投資企業變更備案回執) and the new business license in accordance with the Recording Measures and relevant laws and regulations.

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OVERVIEW OF OUR YQS NANSHAN PROJECT

Our YQS Nanshan Project is located in Emu Town, Dunhua City, Jilin Province, the PRC. The mine site is accessible through daily domestic flights to Changchun, the provincial capital of Jilin Province, followed by around four hours’ drive (with around 3.5 hours on highway and provincial expressway and 0.5 hour on paved village roads).

According to the F&S Report, our YQS Nanshan Project held the largest amount of exploitable rough peridot as of December 31, 2020 among those identified by Frost & Sullivan internationally based on its independent research. We acquired the exploration license for our YQS Nanshan Project in July 2015 and obtained the Mining License in December 2016, with an approved annual production volume of 300,000 tonnes of peridot ore. Since then, we have commissioned the Feasibility Study, commenced mine site infrastructure development and mine construction preparation, and established offices in Beijing, Hong Kong and London to facilitate our pre-market education, publicity and promotion activities for our brand and our peridot. During the Track Record Period, we utilized peridot obtained during our exploration stage and tested the interest of the market with brand owners and designers as part of our pre-marketing initiatives, which showed initial traction.

In order to develop our YQS Nanshan Project to commercial production, we have formulated a comprehensive commercialization scheme. This scheme is intended to provide us with a well-structured and practicable roadmap to successful commercialization. Our commercialization scheme covers different aspects of our project development from construction, operations to sales and marketing. This section sets out a detailed discussion of our commercialization scheme.

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PATH TO COMMERCIALIZATION

OUR COMMERCIALIZATION ROADMAP

Our Commercialization Timeline

Our YQS Nanshan Project is currently at the mine site infrastructure development and mine construction preparation stage. We set out below an overview of our commercialization timeline in developing and bringing our YQS Nanshan Project to commercial production:

2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 Construction Mine site construction

Above-the-ground facilities construction

Underground facilities and mine construction

Ore processing facilities construction

Gemstone processing facilities construction

Production

Marketing initiatives

Sales initiatives

Mine Site and Processing Facilities Construction

In accordance with our commercialization scheme, we expect to complete our overall mine site construction by the third quarter of 2023 and to commence commercial production in the fourth quarter of 2023. Based on our overall mine site construction plan, we have divided our mine site construction work into three categories, namely (i) above-the-ground facilities construction; (ii) underground facilities and mining construction; and (iii) ore processing facilities construction. For details of our mine construction, see “Business — Our YQS Nanshan Project — Mine Site” in this document.

Our mine production schedule is devised primarily with reference to our sales plan, commencing commercial production in the fourth quarter of 2023 with a relatively conservative ramp-up period of approximately six years to allow for gradual market developments in conjunction with our marketing, promotion and consumer education initiatives.

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PATH TO COMMERCIALIZATION

We also plan to acquire full, in-house gemstone processing capacity upon reaching the stage of full capacity mine production. Based on our scheduled production ramp-up, we plan to commence the process of initial planning, site identification and land acquisition for our gemstone processing facility in 2026, with construction of the factory building and ancillary facilities carried throughout late 2027 to early 2029. We expect the pre-operation testing will complete within 2029 for full operation in 2030 in order to synchronize with our scheduled full capacity mine production. See “Business — Our YQS Nanshan Project — Gemstone processing facilities” in this document for details.

Production

According to the Competent Person’s Report, the estimated Resources of our YQS Nanshan Project under the JORC Code as of December 31, 2020 comprised of (i) 5.2 million tonnes of Indicated Resources, with peridot gemstones averaging 236 carats per tonne and peridot sand inclusion of 16.6%; and (ii) 6.1 million tonnes of Inferred Resources, with peridot gemstones averaging 210 carats per tonne and peridot sand inclusion of 16.1%. At a break-even cut-off grade of 44.7 carats per tonne of peridot gemstone and taking into consideration diluting materials and allowances for losses, the economically mineable part of the Indicated Resources of our YQS Nanshan Project can be converted into 5.19 million tonnes of Probable Ore Reserves, with peridot gemstones averaging 204.11 carats per tonne and peridot sand inclusion of 15.8%. See “Business — Our Peridot Resources and Reserves” in this document and “Competent Person’s Report — 13.12 Mineral Resource Statement” in Appendix IV to this document for details.

According to our commercialization timeline, our YQS Nanshan Project is expected to have a life-of-mine of approximately 21 years. We expect to commence commercial production in the fourth quarter of 2023, with a production ramp-up period of approximately six years up to 2029 to reach full capacity production in 2030, and thereafter operating at full production capacity up to 2041, with a final production ramp-down period from 2042 to 2044. We set out below the volume of peridot ore and the corresponding estimated gem peridot grade and peridot sands which are expected to be produced at our YQS Nanshan Project for the periods indicated:

Peridot ore production volume Gem peridot Planned timetable (Year) Peridot ore grade Peridot sands Carat(s) per ’000 tonnes tonne ore % Ramp-up 2023 (fourth quarter)...... 10 204.11 17.54 2024 ...... 50 204.11 17.26 2025 ...... 150 204.11 16.77 2026 ...... 150 204.11 16.53 2027 ...... 175 204.11 16.60 2028 ...... 250 204.11 16.53 2029 ...... 250 204.11 16.44

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Peridot ore production volume Gem peridot Planned timetable (Year) Peridot ore grade Peridot sands Carat(s) per ’000 tonnes tonne ore % Full production 2030 ...... 300 204.11 15.75 2031 ...... 300 204.11 14.84 2032 ...... 300 204.11 14.49 2033 ...... 300 204.11 14.30 2034 ...... 300 204.11 15.35 2035 ...... 300 204.11 15.67 2036 ...... 300 204.11 16.15 2037 ...... 300 204.11 16.63 2038 ...... 300 204.11 16.47 2039 ...... 300 204.11 16.79 2040 ...... 300 204.11 16.17 2041 ...... 300 204.11 15.69 Ramp-down 2042 ...... 293 204.11 15.58 2043 ...... 133 204.11 14.07 2044 ...... 124 204.11 13.87 Life-of-mine total...... 5,185

Note: A continuous working system is expected to be adopted with 300 working days per year, three shifts per day and eight hours per shift.

For details of our mine production procedures, see “Business — Our Production and Processing — Production” in this document.

Ore Processing

We plan to build our own onsite ore processing facilities to process the peridot ore mined from our YQS Nanshan Project into rough peridot gemstones, peridot sands and basalt. In line with the expected annual mine production volume upon full capacity production, we also plan for these ore processing facilities to have a designed annual processing capacity of 300,000 tonnes of peridot ores. Construction of these ore processing facilities is currently scheduled to be completed by the third quarter of 2023 on or before our scheduled commercial production.

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The table below sets forth the processing parameters of rough peridot and by-products at our ore processing facilities as extracted from the Competent Person’s Report:

Rough peridot processing parameters Estimated Production Size Average grade recovery rate output mm % % Peridot gemstones ...... Above 3 204.11 carats/tonne 95.27 100.0 — Large ...... Above 10 18.37 carats/tonne 98.00 9.0 — Medium ...... Above 7 to 10 75.52 carats/tonne 95.00 37.0 — Small ...... Above 3 to 7 110.22 carats/tonne 95.00 54.0 Peridot sand ...... From 1 to 3 15.80% 70.00 100.0 — Peridot gem dots...... — 0.0079% 70.00 0.05 — Industrial-grade peridot sands ...... — 15.72% 70.00 99.95 Basalt ...... — 84.2% — —

The following table sets forth the estimated output of rough peridot gemstones, peridot sands and basalt at our ore processing facilities for the periods indicated, estimated on the basis of and in line with our annual ore output volume:

Rough peridot gemstone Peridot sands Large Medium Small Industrial- Year(1) gemstone gemstone gemstone Gem-grade grade Basalt(2) Million Million Million Million carat(s)(3) carat(s)(3) carat(s)(3) carat(s)(3) tonnes tonnes Ramp-up 2023 (fourth quarter)...... 0.18 0.72 1.05 3 1,227 6,667 2024 ...... 0.90 3.59 5.24 15 6,039 33,333 2025 ...... 2.70 10.76 15.71 44 17,604 100,000 2026 ...... 2.70 10.76 15.71 43 17,349 100,000 2027 ...... 3.15 12.56 18.32 51 20,326 116,667 2028 ...... 4.50 17.94 26.18 72 28,914 166,667 2029 ...... 4.50 17.94 26.18 72 28,756 166,667 Full production 2030 ...... 5.40 21.52 31.41 83 33,065 200,000 2031 ...... 5.40 21.52 31.41 78 31,157 200,000 2032 ...... 5.40 21.52 31.41 76 30,412 200,000 2033 ...... 5.40 21.52 31.41 75 30,015 200,000 2034 ...... 5.40 21.52 31.41 81 32,216 200,000 2035 ...... 5.40 21.52 31.41 82 32,888 200,000 2036 ...... 5.40 21.52 31.41 85 33,895 200,000 2037 ...... 5.40 21.52 31.41 87 34,904 200,000 2038 ...... 5.40 21.52 31.41 86 34,569 200,000 2039 ...... 5.40 21.52 31.41 88 35,240 200,000 2040 ...... 5.40 21.52 31.41 85 33,931 200,000 2041 ...... 5.40 21.52 31.41 82 32,940 200,000 Ramp-down 2042 ...... 5.27 21.02 30.68 80 31,936 195,333 2043 ...... 2.39 9.54 13.93 33 13,092 88,667 2044 ...... 2.23 8.90 12.98 30 12,035 82,667 Total ...... 93.34 372.00 542.92 1,432 572,510 3,456,667

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Notes:

(1) A continuous working system is expected to be adopted with 300 working days per year, three shifts per day and eight hours per shift.

(2) Basalt used for filling-back is deducted.

(3) One million carats equal to 0.2 tonnes.

For details of the processing procedures of our ore processing facilities, see “Business — Our Production and Processing — Processing — Ore Processing Facilities” in this document.

Gemstone Processing

Our cut-and-polished peridot gemstones and peridot gem dots are obtained from processing rough peridot, which in turn are obtained from the processing of peridot ore. As set out in “Business — Our Production and Processing — Processing — Gemstone processing facilities” in this document, we plan to install our own gemstone processing capacity by constructing relevant gemstone processing facilities to be put into operation upon commencing full capacity mine production in 2030.

For the processing of our rough peridot, according to our commercialization scheme, we plan to use third-party gemstone processing service providers during the ramp-up period from 2023 to 2029. Starting from 2030 upon commencement of full capacity commercial production, we plan to primarily use our own gemstone processing facilities. We currently intend for our own gemstone processing facilities to have a designed annual production capacity of 60 million carats of rough peridot gemstones and 280 tonnes of peridot sands. The table below sets forth the processing parameters of our gemstone processing facilities by different size classification, as extracted from the Competent Person’s Report:

Estimated Processing processing yield Size method (Note) mm % — Large gemstones...... Above 10 By hand 35.0 — Medium gemstones...... Above 7 to 10 By hand 35.0 — Small gemstones...... Above 3 to 7 By machine 35.0 — Peridot gem dots ...... 1 to 3 By machine 37.0

Note:

Estimated processing yield as provided in the Competent Person’s Report is arrived at after taking into account the allowances for processing wastage and depletion.

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Unlike our ore processing facilities whose annual processing volume is expected to be in line with our annual mine production volume, the annual processing volume of our gemstone processing facilities is expected to be driven by our sales plan, that is, the estimated annual sales volume of cut-and-polished peridot gemstones and peridot gem dots in a given year. We set out below our estimated cut-and-polished peridot gemstones and peridot gem dot output for the periods indicated:

Large Medium Small Year(1) gemstone gemstone gemstone Subtotal Peridot gem dot approx. approx. million million million million equivalent million equivalent carat(s) carat(s) carat(s) carat(s) tonnage(2) carat(s) tonnage Ramp-up (outsourced processing) 2023 ...... 0.05 0.21 0.30 0.56 0.11 0.71 0.14 2024 ...... 0.20 0.83 1.19 2.22 0.44 2.84 0.57 2025 ...... 0.52 2.11 3.02 5.65 1.13 13.85 2.77 2026 ...... 0.71 2.86 4.10 7.67 1.53 13.65 2.73 2027 ...... 0.91 3.69 5.29 9.89 1.98 17.87 3.57 2028 ...... 1.12 4.52 6.47 12.11 2.42 25.42 5.08 2029 ...... 1.30 5.27 7.55 14.13 2.83 25.42 5.08 Full production (own processing facilities) 2030 ...... 1.47 5.95 8.52 15.95 3.19 30.60 6.12 2031 ...... 1.58 6.40 9.17 17.16 3.43 28.83 5.77 2032 ...... 1.58 6.40 9.17 17.16 3.43 28.14 5.63 2033 ...... 1.58 6.40 9.17 17.16 3.43 27.78 5.56 2034 ...... 1.58 6.40 9.17 17.16 3.43 29.81 5.96 2035 ...... 1.58 6.40 9.17 17.16 3.43 30.44 6.09 2036 ...... 1.58 6.40 9.17 17.16 3.43 31.37 6.27 2037 ...... 1.58 6.40 9.17 17.16 3.43 32.30 6.46 2038 ...... 1.58 6.40 9.17 17.16 3.43 31.99 6.40 2039 ...... 1.58 6.40 9.17 17.16 3.43 32.61 6.52 2040 ...... 1.58 6.40 9.17 17.16 3.43 31.40 6.28 2041 ...... 1.58 6.40 9.17 17.16 3.43 30.49 6.10 Ramp-down 2042 ...... 1.58 6.00 9.17 16.76 3.35 29.56 5.91 2043 ...... 1.58 4.53 9.17 15.28 3.06 20.00 4.00 2044 ...... 0.77 3.09 4.11 7.97 1.59 14.80 2.96 Total ...... 27.63 109.48 159.78 296.89 59.38 529.88 105.98

Notes:

(1) A continuous working system is expected to be adopted with 330 working days per year, with one eight-hour shift per day of hand processing and two eight-hour shifts per day of machine processing.

(2) One million carats equal to 0.2 tonnes.

For details of the processing procedures of our gemstone processing facilities, see “Business — Our Production and Processing — Processing — Gemstone processing facilities” in this document.

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OUR GLOBAL MARKETING STRATEGIES

According to the F&S Report, consistent marketing efforts and messages are critical in driving consumer perceptions, recognition, emotional attachments and ultimately, preference and demand towards a particular type of gemstone. In the current gemstone market, peridot has not drawn sufficient industry interest or marketing resources to promote it. This is in part due to the lack of a consistent global supply of quality peridot, which is critical for major supply chain players to support continuous product commercialization and justify marketing resource commitment.

As part of our commercialization scheme, we have formulated the following global marketing strategies.

1. Value Chain Promotions and Collaborations

These are primarily below-the-line marketing initiatives targeted at selected participants within the industry value chain. These marketing initiatives are designed to draw the attention of value chain stakeholders to the new and consistent global supply of quality peridot and to foster their interests in peridot. These initiatives are mostly scheduled to commence at the early- to mid-construction stage in advance of our scheduled commencement of commercial production to build pre-market momentum and anticipation.

• Internal proprietary grading system: At present, there is no official, universally adopted grading system for colored gemstones, and the colored gemstones industry generally refers to the grading system developed by GemGuide, a periodically updated colored gemstone pricing guide proposed by Gemworld International, which offers market information and appraisal software solutions for the jewelry industry. GemGuide separates gemstones into four categories of commercial, good, fine and extra fine, ranked by quality factors such as color, clarity, cut and carat weight. We consider that having our own proprietary grading system (while making reference to the GemGuide grading system but tailored more specifically to peridot) can serve as an important tool for delivering a clear, standardized quality peridot grading guidance for our peridot. More importantly, we believe that collaborating with professional institutions to develop such proprietary grading system is an excellent marketing tool to educate the industry about peridot and establish our market standing in the industry supply chain. In this connection, we held preliminary discussions with Ressigeac Gems, a gemstone consultant and trader headquartered in Bangkok, Thailand on potential collaboration. We currently plan to commence the development of this proprietary grading system in 2021

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and aim to complete the development of a full grading system by the end of 2022, ahead of our scheduled commencement of commercial production and sales to allow for sufficient time to promote this proprietary grading system to the industry supply chain.

• Traceability platform development: According to the F&S Report, traceability, transparency and sustainability have become increasingly important attributes in the gemstone industry. With increasingly progressive worldviews and social responsibility, the new generations have been calling for a more transparent and traceable history and background for gemstones. Nowadays, major international brand owners in the jewelry industry such as Kering (Boucheron, Pomellato, Gucci), Richemont (Cartier, Piaget, Van Cleef & Arpels, Buccellati) and LVMH (Bulgari, Louis Vuitton and Tiffany & Co.),are increasingly advocating traceability, chain of custody and responsible sourcing, publicly pronouncing these as part of their procurement policy. We view traceability as one of the cornerstones for potential success in marketing our peridot to these major brands on a commercial scale. We have been in touch with an international traceability advisory firm to examine the plausible routes and technical requirements for the development of a “mine-to-market” traceability platform, capable of tracing and providing chain of custody for our peridot gemstones all the way back to our mine. Similar to our proprietary grading system, we plan to commence the development of this traceability platform in 2021 and complete this initiative by the end of 2022, in advance of our scheduled commencement of commercial production and sales. We believe this will also provide us with the sufficient time to campaign the offering of this traceability feature to major brands and the market, and for these major brands to validate and fully appreciate our traceability offering ahead of our commercial sales.

• Gemological laboratory and trade association collaborations: We consider collaborations with gemological laboratories and trade industry associations to be an effective means to promote awareness and talkability of and interest in our peridot within the gemstones supply chain. We endeavor to engage in various collaborations such as conducting research on our peridot, field trips to our YQS Nanshan Project mine site, sponsorships of colored gemstone congresses and participation in gemstone industry forums to support continuous visibility of our peridot and our brand in the gemstone industry and end markets. In this connection, we have initiated discussions with selected gemological research institutions and trade associations during the Track Record Period. See “Business — Marketing and Sales — Marketing Activities” in this document for details. We expect these collaborations will continue to take place following our commercial production.

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• Brand and designer collaborations: We consider collaborating with brands and designers to incorporate peridot gemstones in their collections to be a direct and effective means to drive demand and sales of our peridot. It also allows us to leverage the resources and marketing campaigns of these brands and designers to gain and develop exposure for our peridot and encourage end-consumers’ interest in peridot products. Continuing on from our efforts in the collaborations with selected internationally well-known jewelry designers as mentioned previously, we plan to expand our collaborations with established brands, as well as up-and-coming brands, and designers, with the aim of providing new products and on-trend designs adopting peridot into the market, and developing interests, publicity and market traction for our peridot gemstones.

• Industry event participation and sponsorships: We view participation and sponsorships of industry events as direct and effective marketing initiatives to promote our peridot and our brand recognition, and forge relationships with major event organizers for public relations and promotional purposes. Aside from sponsoring the 2019 and 2020 BAZAAR Jewelry Annual Design Award, as of the Latest Practicable Date, we have identified selected industry events that we intend to sponsor and/or participate in the near to medium term, including The Jewellery Cut Live in the UK and the International Colored Gemstone Association Congress in Shenzhen, and have already committed to The Jewellery Cut Ltd for a three-year headline event sponsorship starting from 2021.

• Site visit arrangements: Arranging mine site visits for gemstone industry players and influencers such as jewelry brand owners and designers, gemologists and analysts and press is a marketing tool often used by major gemstone mining companies to showcase their mine operations and products. It is considered to be an effective education and marketing tool for the supply chain to gain a more in-depth knowledge about the gemstones, the production, processing, logistics and scale of mining operations, which in turn may foster supply chain confidence and create positive publicity and press coverage. We plan to start this marketing initiative early in the mine construction stage, possibly in the second half of 2021 by inviting limited groups of selected industry players and influencers to showcase our mine deposits, our construction progress and our mine conditions to build their confidence in us and foster closer business relationships. Following commercial production by our YQS Nanshan Project, we intend to further formalize such site visit arrangements into organized, periodically arranged marketing activities with key industry players and influencers.

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2. Brand Awareness and Publicity Campaigns

Brand awareness and publicity campaigns are primarily “broad audience-based”, above-the-line initiatives centered around raising the overall market recognition of peridot gemstones and our brand profile, as well as driving end-market perception of and preference for our products. Our initiatives in this regard will mainly include:

• Online and social media advertising push: We consider online and social media advertising to be a relatively cost-effective yet efficient way of gaining visibility and educating the end-markets about peridot and our brand. Under this marketing initiative, educational and promotional contents of periodot, such as its history and origin, its quality characteristics, its designs and representations, its traceability feature of our peridot and its emotive messages, will be continuously created and deployed through online and social media platforms and target audience groups, which may take the form of:

— Paid-for-push, where relevant educational and promotional contents will be pushed through popular social media platforms such as Facebook, Instagram, LinkedIn, Weibo, Wechat and RED; and

— Sponsored contents, where our educational and promotional contents will be conveyed through chosen influencers and KOLs within the jewelry space, the marketing and publicity messages of our collaborating designers, and editorial materials of collaborating press and industry media.

We have used social media platforms such as Facebook, Instagram, Wechat, Weibo and LinkedIn, and have been featured to disseminate some of our pre-market educational and promotional messages. Different industry media and publications such as Forbes, Vogue, Town & Country and The Jewellery Cut have also run online feature articles on our brand and our peridot. We endeavor to continuously create fresh, updated and engaging contents for deployment through a broad variety of social media and other online platforms throughout our commercialization cycle.

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• Above-the-line advertising campaigns: Above-the-line advertising campaigns are series of advertisements and other marketing communications designed to accomplish a particular set of marketing objectives, such as conveying brand or product messages, raising brand awareness, and/or amplifying the rate of conversions and sales. Based on our overall marketing plan, above-the-line advertising campaigns will be created and launched periodically through various media in a variety of forms, with contents and messages using a combination of film, digital and print. We plan to substantially intensify our above-the-line advertising campaigns closer to our planned commencement of commercial production and sales in 2023. According to the F&S Report, associating a gemstone with an emotion or a symbolic meaning is a particularly effective marketing strategy. See “Industry Overview — Global Colored Gemstones Market — Major Demand Drivers of Colored Gemstones” in this document for further details. We intend to utilize these above-the-line advertising campaigns to establish our central theme of “Peridot, the Gift of Light and Hope”, and to promote the emotive association of peridot with “a gift of celebration of life” throughout a person’s lifecycle of birth, graduation, wedding and career achievements.

• Red Carpet sponsorships: Leveraging the publicity, broad media coverage and public interests drawn to red carpet events and their participating celebrities, we believe that having celebrities showcase branded and designer jewelry with highlighted gemstones in these high-profile events is among the most effective and commonly seen marketing campaigns in the gemstone industry. Under our global marketing strategies, we intend to combine our red carpet sponsorship campaigns with our collaborations with brands and designers, where designer creations utilizing our peridot are expected to be featured by selected celebrities participating in various red carpet events such as the Cannes Film Festival,theBeijing International Film Festival,theGolden Globes Awards,theOscars and the Venice Film Festival. Similar to the above-the-line advertising campaigns, we intend to commence our participation in red carpet events as early as 2023.

SALES CHANNEL DEVELOPMENT

The principal products of our YQS Nanshan Project are (i) cut-and-polished peridot gemstones; (ii) peridot gem dots; and (iii) rough peridot gemstones. During our construction process and throughout our mining operations, we also plan to produce two major by-products: (i) industrial-grade peridot sands; and (ii) basalt. Given that our by-products are primarily for industrial use with relatively more established market and demand, our resources and strategies on sales and sales channel development will be more focused on our main products of gem-grade peridot.

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Gem-grade Peridot

Our strategies on sales and sales channel development for gem-grade peridot are structured around the workings of the industry supply chain and our “mine-to-market” business model. The following is a simplified graphical illustration depicting our targeted sales channels and customer groups:

Our gem-grade peridot

Direct E-commerce Sales Sales Trade shows Auctions channels Channel

Jewelry brands, designers, manufacturers and dealers, fashion and accessory brands, artists, and end-consumers

Aside from leveraging our global marketing strategies to develop and promote direct sales to our target customers, based on our target customer groups, our sales channel development strategies will be mainly targeted at the following channels:

• International and regional trade shows: According to the F&S Report, international and regional trade shows are among the most common sales channels for the gemstone industry. We believe that regular participation in international and regional trade shows and exhibitions would enable us to meet a wide array of brands and designers as well as active gemstone buyers in the industry. We plan to establish our presence in these trade shows and exhibitions early on during our mine construction stage to gain exposure and recognition from these potential customers, to showcase our peridot inventory acquired during our exploration stage, to build confidence in our products from these potential customers, and to create traction for commercial sales. To this end, we will continue to participate in, among others, the China International Jewelry Fair in Beijing, Jewellery & Gem World Hong Kong (formerly known as the September Hong Kong Jewellery & Gem Fair) in Hong Kong, and JCK Tucson in the U.S.. We have also identified a number of major international and regional trade shows and exhibitions, such as Gem Genève in Switzerland and The Jewellery Cut Live in the UK, which we intend to participate in progressively starting from 2021.

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• E-commerce channels: Online shopping has increasingly become part of people’s lifestyle. This is particularly apparent in China, where the proliferation of its electronic payment applications has greatly facilitated online transactions. E-commerce platforms for jewelry sales have gained increasing ground as a result of the COVID-19 pandemic. With a number of trade shows and industry fairs held online, many brands and gemstone dealers have turned to online sales to counter the impact of the restricted retailed activities and in-store sales. We believe that e-commerce platforms will grow to become a well-recognized sales channel for gemstones and other luxury products. Leveraging on our ongoing social media advertising push, we plan to expand our Instagram platform to include functionalities to facilitate direct sales push to consumers outside China, and establish online sales platforms on highly popular e-commerce platforms in China such as Tmall. System development and content construction for these e-commerce channels are currently scheduled to commence during our mine construction period to ensure that they will be fully functional on or before commencement of our commercial production.

• Auction channel establishment: According to the F&S Report, auctions are popular venues for gemstone dealers to purchase bulk rough gemstones for further processing and sales. In addition, auctions are sometimes used by gemstone companies to establish benchmark prices of their gemstones for the market. High-quality and particularly large carat gemstones may also be sold through auction houses. We intend to utilize auctions as one of the sales channels for our rough peridot. Where we acquire particularly large and high-quality peridot during our commercial production, we will also consider using the international auction houses as a channel to reap their full price potential and at the same time create positive industry publicity.

Industrial Grade Peridot Sands and Basalt

Industrial grade peridot sands and basalt are the principal by-products of our mining operations. According to the F&S Report, industrial grade peridot sands is a natural and environmentally-friendly alternative to other industrial abrasives, which can be widely applied in metallurgical auxiliary materials, high manganese steel and other materials. On the other hand, basalt has a very wide application in construction, industrial and highway engineering. More particularly, crushed basalt is used for road base, concrete aggregate, asphalt pavement aggregate, railroad ballast, filter stone in drain fields and many other purposes, or it can be manufactured into fine, superfine and ultra-fine fibers with superior thermal stability, heat and sound insulation properties, vibration resistance and durability. To the best of our understanding, there are ready markets for industrial-grade peridot sands and basalt in China and we intend to sell these by-products within China.

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CAPITAL AND OPERATING EXPENDITURE

Capital Expenditure

On the basis of a maximum annual production capacity of 300,000 tonnes of peridot ore and a life-of-mine of approximately 21 years, the estimated total capital expenditure for the development and operation of our YQS Nanshan Project is projected to amount to around RMB289.6 million, according to the Competent Person’s Report. This projected amount included (i) approximately RMB70.6 million of marketing expenditure projected to be incurred prior to commencement of our commercial production; (ii) approximately RMB157.5 million as initial capital expenditure for construction of our mine site, our onsite ore processing facilities as well as general layout engineering; (iii) approximately RMB35.1 million as additional capital expenditure for the construction of our gemstone processing facilities; and (iv) approximately RMB26.3 million as a general buffer of around 10% on top of the above projected capital expenditure. As of December 31, 2020, we had invested approximately RMB30.7 million in our YQS Nanshan Project, according to the Competent Person’s Report.

If an upside market development occurs, we will accelerate our commercialization plan of our YQS Nanshan Project by accelerating the ramp-up period of the commercial production for our YQS Nanshan Project and shorten the time to reach maximum annual production of 300,000 tonnes of peridot ores earlier than scheduled. In such circumstances we will also push forward our capital expenditure for the development of our gemstone processing facilities to align with our accelerated full-capacity production. If a downside market development occurs, we will (i) adjust our production volume to reduce our product output so as to better align our supply of peridot with market demand to avoid an oversupply; and (ii) adjust our product mix of principal products and by-products to respond to such market fluctuations and unfavorable market conditions.

The following table sets forth a breakdown of the projected initial capital expenditure by category for the periods indicated as shown in the Competent Person’s Report:

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The following table sets forth a breakdown of the projected sustaining capital expenditure for the development of our gemstone processing facilities by category as shown in the Competent Person’s Report:

The following table sets forth a breakdown of the capital expenditure invested as of December 31, 2020, as shown in the Competent Person’s Report:

Cost (RMB’000) Item Mining Construction Equipment Installation Other Total Mining ...... 637 192 4,583 — — 5,412 Processing facilities ...... —————— General layout engineering ... — 16,990 489 — — 17,479 Others ...... ————7,770 7,770 Total invested capital expenditure ...... 637 17,182 5,072 — 7,770 30,661

Operating Expenditure

As extracted from the Competent Person’s Report, on the basis of Probable Ore Reserves of 5.19 million tonnes and a life-of-mine of approximately 21 years, our operating expenditure is estimated to average to approximately RMB12,517 per tonne of ore. The projected total operating expenditure includes (i) operating expenditure for mining and ore processing, which is estimated to average to approximately RMB799 per tonne of ore; (ii) operating expenditure for gemstone processing, which is estimated to average to approximately RMB3,269 per tonne of ore, assuming we outsource our gemstone processing during 2023 to 2029 and use our own gemstone processing facilities from 2030 onwards; and (iii) marketing expenditure, which is estimated to average to approximately RMB8,449 per tonne of ore.

The following table sets forth a breakdown of the projected operating expenditure by category, as shown in the Competent Person’s Report:

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Cost item Amount Unit Mining and ore processing — Materials ...... 114 RMB per tonne of ore — Power and water...... 96 RMB per tonne of ore — Salary and welfare ...... 77 RMB per tonne of ore — Manufactory ...... 89 RMB per tonne of ore — General and administrative ...... 422 RMB per tonne of ore Gemstone processing Outsourced processing (2023-2029) — Hand-cut processing (above 7mm) ...... 65 RMB per carat — Machine processing for small gem (above 3 to 20 RMB per carat 7mm) ...... — Machine processing for peridot gem dot (1 to 20 RMB per carat 3mm) ...... Gemstone processing facilities (2030-) — Hand-cut processing (above 7mm) ...... 46 RMB per carat Machine processing for small gem (above 3 to 7mm) 14 RMB per carat Machine processing for peridot gem dot (1 to 3mm) . 14 RMB per carat Marketing ...... 8,449 RMB per tonne of ore

The Independent Technical Consultant has reviewed the breakdowns of the projected capital and operating expenditure disclosed above and considered the estimates to be reasonable. However, such projected expenditure are estimates only and are subject to change. Our future actual capital and operating expenditure may differ materially from the above estimates due to various reasons, including the factors described in “Risk Factors” in this document. See also “Forward-looking Statements” in this document for the risks of placing undue reliance on any forward-looking information.

Price Trend

According to the F&S Report, peridot gemstones are graded and priced based on, among other factors, their size, quality and origin. Peridot gemstones of larger size are generally priced higher per carat as compared to smaller ones.

Based on our overall sales plan, a vast majority of our gem-grade peridot will be sold as cut-and-polished. According to the F&S Report, prices of cut-and-polished peridot are significantly undervalued. The global prices of cut-and-polished peridot were on an increasing trend between 2015 and 2019, and are forecasted to continue with an upward trend going forward. According to the F&S Report, the commercial production of our YQS Nanshan Project will support a stable, consistent global peridot supply. Coupled with our planned market and promotional initiatives, we expect that the new and consistent supply of peridot from our YQS Nanshan Project will help drive the demand for peridot products, and markets for our products will expand in both mature countries and regions as well as emerging countries such as China, which in turn will fuel further price increases for peridot. Cut-and-polished peridot gemstones under the size of 3mm are referred internally as peridot gem dot, which can be used in fashion, accessories and artistry pieces. In line

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According to the F&S Report, industrial-grade peridot sands and basalt are both versatile materials, which can be used in various manufacturing and infrastructure industry activities. In estimation of the increase in supply and demand of industrial-grade peridot sands upon our commercial production, the price is expected to grow steadily over the years. Driven by the rapid development of manufacturing industries such as automotive industry, the further implementation of the “New Infrastructure Construction” in China (for example, construction of high-speed railways and clean energy facilities) and increasing environmental protection regulations, the demand for industrial-grade peridot sands is expected to continue to increase in the coming years.

Net Present Value and Sensitivity Analysis

Based on an economic analysis presented in the Competent Person’s Report, NPV of our YQS Nanshan Project is estimated to fall in the range of approximately RMB25.15 billion (at a 11% discount rate) to approximately RMB41.51 billion (at a 7% discount rate), with a base case of approximately RMB32.11 billion using a discount rate of 9%. The internal rate of return (“IRR”) is calculated at approximately 134.4%, with a payback period of less than one year from 2024, being the first full year of commercial production of our YQS Nanshan Project according to our commercialization scheme. Our Directors consider that on the basis of the discounted cashflow model used in the economic analysis presented in the Competent Person’s Report, we expect our YQS Nanshan Project will become self-sufficient in terms of working capital and funding within the first full year of our commercial production.

The economic analysis is based on a Probable Ore Reserves of 5.19 million tonnes, a maximum annual production capacity of 300,000 tonnes of ore, a production plan of approximately six years of ramp up followed by 12 years of full production and a ramp-down period of three years, and a total capital and operating expenditure as set out in “— Capital Expenditure” and “— Operating Expenditure” above. In terms of product prices, a relatively conservative product pricing trend is adopted for cut-and-polished peridot gemstones, projected based on our internal estimates which in turn is arrived at taking into consideration the historical market price trend of peridot gemstones and making general reference to the projections in the F&S Report. More specifically, prices of our cut-and-polished peridot gemstones are projected to increase progressively by around 60% from the base prices in 2023 (which in turn is referenced to the early 2021 market prices from Gemworld International) up to 2030 and thereafter remain steady for the remaining of the mine life of our YQS Nanshan Project. For sake of prudence, prices of our peridot gem dots and other by-products are assumed to remain steady for the entire life-of-mine based on our own market research and/or existing market prices or our by-product offtake agreements, as applicable. For details, please refer to “Competent Person’s Report — 18.5 Product Prices” in Appendix IV to this document.

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A sensitivity analysis for our after-tax NPV using the base case discount rate of 9% has been provided in the Competent Person’s Report with respect to capital expenditure, operating expenditure, product prices (including value added tax) and sales volume, selected as the essential factors on cash flow. The effects of these essential factors on the NPV were analyzed within a ±50% range, in each case with all other variables held constant. The results of which are set out below:

NPV variation at 9% discount rate (RMB billion) Parameters ...... 50% 40% 30% 20% 10% 0% -10% -20% -30% -40% -50% Capital expenditure ...... 32.01 32.03 32.05 32.07 32.09 32.11 32.13 32.15 32.17 32.19 32.21 Operating expenditure ...... 23.17 25.04 26.88 28.67 30.41 32.11 33.76 35.37 36.93 38.45 39.92 Product prices ...... 55.55 50.86 46.17 41.84 36.8 32.11 27.42 22.73 18.05 13.36 8.67 Sales volumeNote ...... —————32.11 27.80 23.49 19.19 14.88 10.60

Note: The Ore Reserve statement does not support any increase in sales. For the purpose of the sensitivity analysis, it is assumed that the annual production of rough peridot will adhere to the production schedule as set out in the commercialization scheme (including mining production and ore processing) but gemstone processing will be downward adjusted to align with the reduced sales volume. Accordingly, as sales volume decreases, there will be stored rough peridot gemstones, peridot sands and basalt by the end of the life-of-mine. Total capital expenditure (including initial and additional capital expenditure), marketing expenditure and operating expenditure associated with mining production and ore processing are assumed to remain unchanged, while operating expenditure associated with gemstone processing are downward adjusted according to the reduced gemstone processing operations.

As illustrated in the above table, a 50% increase in product prices will cause the NPV to increase to approximately RMB55.55 billion. A 50% increase in our capital expenditure and operating expenditure will reduce the NPV to approximately RMB32.01 billion and approximately RMB23.17 billion, respectively. On the other hand, a 50% decrease in product prices or sales volume will reduce the NPV to RMB8.67 billion and RMB10.06 billion, respectively. A 50% decrease in our capital expenditure or operating expenditure will increase the NPV to RMB32.21 billion and RMB39.92 billion, respectively.

The following chart depicts a graphical illustration of the results of the above sensitivity analysis: NPVs Vs. Changes of Factors

20 NPV RMB Billions 10

0 50% 40% 30% 20% 10% 0% -10% -20% -30% -40% -50% Changes of Factors CAPEX OPEX Prices Sales

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PATH TO COMMERCIALIZATION

As illustrated in the above chart, changes in capital expenditure have a smaller effect on our YQS Nanshan Project’s NPV than that of changes in operating expenditure. While changes in product prices and sales volume have similar effect on our YQS Nanshan Project’s NPV, changes in product prices have the most significant effect on the said NPV. According to the Competent Person’s Report, a risk analysis further shows that when product prices decrease by about 67.7% or sales volume decreases by about 73.8%, or that when the operating expenditure increases by 155.3%, the NPV of our YQS Nanshan Project will become negative.

The Competent Person’s Report also sets out a sensitivity analysis on the IRR of our YQS Nanshan Project with respect to capital expenditure, operating expenditure and product prices with a ±50% range, again holding all other variables constant. The results of which are set out below:

IRR variation (%) Parameters ...... 50% 40% 30% 20% 10% 0% -10% -20% -30% -40% -50% Capital expenditure ...... 121.5 123.8 126.3 128.8 131.5 134.4 137.2 140.3 143.6 147.0 150.6 Operating expenditure ...... 111.5 116.7 121.5 126.0 130.3 134.4 138.1 141.8 145.3 148.7 152.0 Product prices ...... 173.5 166.8 159.7 152.0 143.6 134.4 123.9 112.2 98.3 81.0 60.3

As illustrated in the above table, on the basis of a base case IRR of 134.4%, a 50% increase in product prices will increase our IRR to 173.5%, while a 50% increase in our capital expenditure or operating expenditure will reduce our IRR to 121.5% and 111.5%, respectively. Further, a 50% decrease in the product prices will reduce our IRR to 60.3%, while a 50% decrease in our capital expenditure or operating expenditure will increase our IRR to 150.6% and 152.0%, respectively.

A sensitivity analysis for payback period is further provided in the Competent Person’s Report with respect to product prices (with all other variables held constant) as set out below:

Payback period variation (year) Product prices ...... 0% -10% -20% -30% -40% -50% -60% Payback period Note ...... 0.3 0.4 0.6 0.8 1.2 3.1 7.1

Note: Calculated using 2024, being the first full year of commercial production, as the base year of calculation.

The Independent Technical Consultant is of the opinion that based on the analysis above, our YQS Nanshan Project is economically viable. For details of the above sensitivity analysis and the assumptions adopted, see “Competent Person’s Report — 21 Economic Analysis” in Appendix IV to this document.

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BUSINESS

OVERVIEW

We strive to become a mining company with a mine-to-market business model encompassing mining operations, our own processing capacity, in-house marketing abilities, as well as sales channels with extensive coverage of the gemstone value chain. We aim to become the leading global producer and supplier of quality peridot gemstones, and to build one of the most innovative, creative, and environmentally responsible gemstone mining companies in the world. To this end, we have devised a comprehensive commercialization scheme to steer us towards our goal.

Our YQS Nanshan Project is located in Emu Town, Dunhua City, Jilin Province, China and is approximately 50km northwest of downtown Dunhua City. The mine site is accessible through daily domestic flights to Changchun, followed by around four hours of traveling by road (with around 3.5 hours on highway and provincial expressway and 0.5 hour on paved village roads). According to the Competent Person’s Report, the estimated Resources of our YQS Nanshan Project under the JORC Code as of December 31, 2020 consisted of (i) 5.2 million tonnes of Indicated Resources, with peridot gemstones averaging 236 carats per tonne and peridot sand inclusion of 16.6%; and (ii) 6.1 million tonnes of Inferred Resources, with peridot gemstones averaging 210 carats per tonne and peridot sand inclusion of 16.1%, which can be converted into 5.19 million tonnes of Probable Ore Reserves with peridot gemstones averaging 204.11 carats per tonne and peridot sand inclusion of 15.8%. According to the Competent Person’s Report, based on the sample study conducted, the peridot gemstones from our YQS Nanshan Project are of relatively saturated color.

Our Mining License provides for an approved Mining Licensed Area of 1.6731 km2 with a maximum annual production capacity of 300,000 tonnes. Our YQS Nanshan Project is currently estimated to have a life-of-mine of approximately 21 years as referred to in the Competent Person’s Report. According to our commercialization scheme, we plan to complete our mine construction and commence our commercial production in the fourth quarter of 2023, followed by a production ramp-up period of approximately six years up to 2029 to reach full production capacity. Our full-capacity production period is expected to be from 2030 to 2041 for a total of 12 years, and a final production ramp-down period of three years from 2042 to 2044.

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BUSINESS

According to our commercialization scheme, we plan to construct our own onsite ore processing facilities with a designed annual processing capacity of 300,000 tonnes of peridot ores to process the peridot ores extracted from our YQS Nanshan Project into rough peridot gemstones and peridot sands. The facilities are intended to be put into operation in conjunction with the commencement of our commercial production in the fourth quarter of 2023. In the longer run, we also plan to build our own gemstone processing facilities. We expect to use the facilities to further process the rough peridot that has been processed by our ore processing facilities into cut-and-polished peridot. With a view to better prioritizing our resource allocation and deployment during our ramp-up period, we plan to begin construction of our gemstone processing facilities at the later stage of our production ramp-up period for it to commence operations upon full-capacity production of our YQS Nanshan Project in 2030. It is currently expected that our gemstone processing facilities will have a designed annual capacity of 60 million carats (or approximately 12 tonnes) of rough peridot gemstones and 280 tonnes of peridot sands. During our production ramp-up period, we plan to outsource our gemstone processing to third-party gemstone processing service providers which we consider to be readily available in China and selected Southeast Asian countries such as Thailand.

We expect that upon commercial production, our YQS Nanshan Project will produce three principal products, namely cut-and-polished peridot gemstones, peridot gem dots and rough peridot gemstones, and two by-products, namely industrial-grade peridot sands and basalt. We plan to introduce our principal products to various market segments by making them available across a variety of sales channels including international and regional trade shows, auctions, e-commerce platforms and direct sales to brands, designers and jewelry and accessories manufacturers. We expect to direct our marketing efforts primarily through our offices in Beijing, Hong Kong and London to take advantage of their established gemstone and jewelry trading platforms. To this end, we have initialized a series of pre-market publicity and consumer education initiatives using the peridot gemstones collected during the exploration stage of our YQS Nanshan Project. We have launched a series of brand awareness initiatives with selected international gemological laboratories, trade associations, international press and media, as well as designers and brands. We have also entered into memoranda of understanding with internationally well-known designers and producers of fine jewelry as well as established jewelry manufacturers, to use our gem-grade peridot in their jewelry collections and collaborate in the global marketing and promotion of our peridot. Further, we have collaborated with the Gems & Jewelry Trade Association of China in formulating the T/GAC 13-2020 group standard peridot grading system in China. See “— Marketing and Sales — Marketing Activities” in this section for details. During the Track Record Period we also generated limited sales of peridot gemstone products using the peridot gemstones collected during our exploration stage. See “— Customers” in this section for details.

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BUSINESS

OUR STRENGTHS

We believe that the following competitive strengths distinguish us from our competitors in the colored gemstone mining industry:

Large probable reserve of peridot allowing for stable supply of peridot gemstones to capture market shares in China and globally

According to the F&S Report, our YQS Nanshan Project held the largest amount of exploitable rough peridot as of December 31, 2020 among those identified internationally by Frost & Sullivan based on its independent research set forth in the F&S Report. Located in China, our YQS Nanshan Project enjoys the geographic advantage of a stable social, political and business environment for our mining operations to ensure a consistent and stable supply. Stable supply is at the heart of a gemstone’s development of its market acceptance, according to Frost & Sullivan. Once highly regarded, peridot was historically sought-after but a lack of consistent worldwide supply led to the decrease in the trading of peridot and a decline in its popularity. With our discovered, abundant reserve of peridot situated in a politically stable environment, coupled with well-planned global marketing strategies and a promising start in the execution of our pre-market education and brand awareness initiatives, we believe we are well-positioned to resolve the inconsistent supply challenge of peridot, build market interest and enthusiasm for peridot, stimulate market demand, and expand the peridot market size and our market share.

According to the F&S Report, driven by the fast growing economy and increasing consumer purchasing power, China has become the second largest market for colored gemstones in the world. We believe that we are well-positioned to succeed in the PRC market. With a brand of Chinese origin, we are likely to enjoy the special emotions and support from consumers in China towards a home-grown brand, according to the F&S Report. Moreover, with green being one of the traditional colors in China, we believe our peridot stands to gain from Chinese consumers’ preference for its natural color. Further, as import tariffs imposed in China do not apply to peridot extracted domestically, we enjoy a competitive advantage on product pricing compared to other colored gemstones imported from other countries. We believe the foregoing factors all work to our advantage in expanding and capturing the Chinese market for our peridot products.

In terms of the global peridot market, according to the F&S Report, some international first-tier jewelry brands and luxury brands have used peridot as the main stone or decoration gemstone in recent years. Jewelry brands such as BVLGARI, Cartier and Piaget have used peridot in high-end jewelry and custom jewelry. We believe when our YQS Nanshan Project enters into commercial production, we will be able to ensure a consistent and stable supply of peridot in the market, which in turn will boost the confidence in our target customers to procure peridot from us and to incorporate them into their designs and jewelry.

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Advantageous project location coupled with the nature of our deposit, enabling a high-yielding mining operation

According to the F&S Report, geographic location has a huge impact on the economic value of a mine. Our YQS Nanshan Project is located in Emu Town, Dunhua City, Jilin Province, China, which is accessible through daily flights to Changchun followed by a four-hour drive using mostly existing public transportation infrastructure (with around 3.5 hours on highway and provincial expressway and 0.5 hour on paved village roads). Compared to mining projects that require the construction of extensive transportation infrastructure, our YQS Nanshan Project has the benefit of considerable time and cost savings on transportation infrastructure construction. We also enjoy labor cost advantage as workers for our YQS Nanshan Project can be hired from neighboring villages with relatively low labor cost.

According to the Competent Person’s Report, the peridot ore deposit of our YQS Nanshan Project has relatively thin and stable ore bodies in nearly horizontal form, which would support the use of the cut-and-fill mining method, which is expected to account for approximately 87% of our mining operation, together with the regular room and pillar mining method and random pillar open stoping mining method, providing for an overall mining recovery rate of 95.6% and mining dilution rate of 8.3% which we consider to be advantageous to us given the nature of our Probable Ore Reserve.

In addition, most colored gemstones in the market, such as ruby, emerald and sapphire, may have undergone different treatments, including heating, oiling and irradiation, to enhance their color, clarity and appearances. On the other hand, the processing of peridot does not require enhancement treatments at any stage, which significantly lowers our processing and pollutant disposal costs.

A mine-to-market business model with integrated operations allowing us to enhance our profit margin, enforce a unified branding and offer traceability which is highly valued in the gemstone industry

Our mine-to-market model, supported with our well-devised commercialization scheme, is expected to give us control over our peridot across different stages of our value chain from mining, sorting, grading, processing (including cutting and polishing), inventory control, marketing, sales and product delivery. We believe our mine-to-market model facilitates our goal to achieve transparency, traceability and clear chain of custody for our peridot, all of which are becoming standard industry expectations, and are increasingly demanded by major brands and new generations of consumers. We expect this traceability feature will enable our gemstones to be traced back from sales to the mine, to retrieve the necessary data to show our socially responsible

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BUSINESS operations. With the increasing focus and heightened responsibilities on environmental, social and governance, we believe the offering of traceability for our gemstones will drive demand from end-customers and stimulate sales of our products.

Furthermore, with this mine-to-market model, we will be able to gather data along the value-chain, including processing data and sales data, which in turn will enable us to gain insights such as end-customers’ preferences, and industry and fashion trend and developments. We can then leverage on this information and the data to better adjust our production and processed products to fit such trends and preferences. Our plan to directly market our products to brands, designers and other corporate users of our peridot also enables us to enforce unified brand positioning strategies to convey consistent messages to the market. Ultimately, this allows us to more effectively internalize our profit margin and improve profitability by eliminating intermediaries.

Early success in establishing a network of key supply chain players

Our early initiation in establishing a network of key supply chain players including jewelry brand owners, designers, international gemological laboratories, trade associations and international press has yielded notable success. This is evidenced by our success in establishing collaborative relationships with a number of internationally well-known jewelry designers and companies such as Zeemou Zeng Limited, Annoushka Ltd and Stephen Webster Limited, various press coverage by international and popular media such as Forbes, British Vogue and BAZAAR Jewelry China on our brand and our peridot, among others, as well as our ongoing discussions with selected gemological institutions on potential collaborations.

According to the F&S Report, knowledge and experience in the unique marketing landscape for gemstones and the connections and relationships with major brands and designers are among the critical factors for a gemstone company to succeed. We believe that we have well demonstrated our ability in forging a solid network of supply chain players at the early stage of our business development. We believe our established supply chain network signifies the market’s anticipation and acceptance of our peridot, and validates the approach of our global marketing strategies. We believe that we have gained a valuable head start in establishing a competitive position in the colored gemstones industry. As we continue to expand, deepen and strengthen our industry value chain network, we believe that we are well-positioned to lead the global supply of peridot, and to compete effectively with producers and suppliers of other major colored gemstones when we reach our commercial production stage.

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BUSINESS

Seasoned and experienced management team covering all aspects of our mine-to-market business model

The composition of our Board is well represented with members possessing extensive and specialized experience covering the full spectrum of our mine-to-market business model, which we believe will facilitate its effective execution.

Our chairman, Mr. Yu, is the director of the Gems and Jewelry Trade Association of China* (中國珠寶玉石首飾行業協會) and the executive vice president of the Gems and Jewelry Trade Association of Jilin Province* (吉林省珠寶玉石首飾行業協會) with approximately ten years of experience in the mining, gemstone and jewelry industries. Our chief executive officer, Mr. Jiang, has more than 16 years of entrepreneurial experience in the gemstone, jewelry, mining and natural resources industries and is the president of Gems and Jewelry Trade Association of Jilin Province. Mr. Yu and Mr. Jiang were among the main drafters of the T/GAC 13-2020 group standard peridot grading system formulated by the Gems and Jewelry Trade Association of China. With their entrepreneurial and investment experiences in mining companies coupled with their knowledge in the gemstone and jewelry industries, in particular in China, we believe we are well-positioned to leverage on their experience and through their management, to lead us to become a market leader of peridot.

As for our day-to-day mine operations, Mr. Yu and Mr. Jiang are supported by a team of mining professionals, including two of our executive Directors, Mr. Chi Yongxi and Mr. Liu Zhong, and three members of our senior management, Mr. Guo Junguo, Mr. Yu Hongyi and Mr. Zhang Xiaoman. Prior to joining the Group, Mr. Chi, Mr. Liu, Mr. Guo, Mr. Yu Hongyi and Mr. Zhang each has an aggregate of over 27, 36, 37, 33 and 33 years of experience in the mining industry, respectively, together covering an array of expertise including exploration, mining production, safety compliance as well as ore beneficiation.

Aside from mining and processing, effective sales and marketing of our peridot products is also a crucial element for a successful implementation of our mine-to-market model. Our executive Director and chief marketing officer, Ms. Pia Pompea Tonna, has substantial experience in the fashion, luxury goods and jewelry industries, focusing on marketing, sales and business development. Prior to joining our Group, Ms. Tonna worked at Gemfields PLC (now known as Gemfields Ltd) (“Gemfields”), a subsidiary of Gemfields Group Limited, an international colored gemstones mining company that is dually listed on Johannesburg Stock Exchange (JSE: GML) and London Stock Exchange (LSE: GEM), with her last position being Director — Marketing and Sales, Europe & Africa. During Ms. Tonna’s tenure as Director — Marketing and Sales, Europe & Africa, Gemfields initiated a large-scale marketing campaign in 2016 designed to drive demand for its rubies mined in the Montepuez ruby deposit in Mozambique, following which Gemfields achieved record revenue in its auction of rough Mozambican rubies in June 2017.

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BUSINESS

We believe that our management team possesses the skills, foresight and extensive industry knowledge necessary to bring forth the successful implementation of our commercialization scheme to bring us to continuous commercial success to achieve our mission.

A balanced product mix that is adaptable to various market conditions

We expect that upon commercial production, our YQS Nanshan Project will produce peridot gemstones, peridot gem dots and rough peridot as our principal products, as well as basalt and industrial-grade peridot sands as our by-products. These products are targeted for different tiers of the end-markets, from luxury to mass and from consumer to industrial. For the consumer market, not only will peridot be used in jewelry, fashion, accessories and art, our peridot will also come in different sizes, at different price points and will be made available to a wide spectrum of market segments, including high jewelry, fine jewelry, demi-fine jewelry and the mass market. As for industrial applications, industrial-grade peridot sands can be used in a wide range of applications such as metallurgical auxiliary materials and high manganese steel casting, and is considered to be a natural and environmentally-friendly alternative to other abrasives; while basalt can be used in both construction and engineering of various infrastructures, and may also be processed into tiles, building veneers, and even superior fibers.

We expect that our product mix will serve as a hedge against the cyclical fluctuations in consumer spending patterns, giving us the flexibility to adjust our sales and marketing focus on different products and market tiers as needed to better respond to economic fluctuations and supply chain disruptions, to optimize our product mix, and to adopt timely countermeasures against unfavorable market conditions from time to time, thereby ensuring that we can continue to capture growth opportunities and maximize our market potential.

OUR STRATEGIES

Our mission is to become a leading global producer and supplier of quality peridot gemstones. To this end, we have formulated the following strategies aimed to drive us towards achieving our mission:

Complete the development of our YQS Nanshan Project and bring it to production and commercialization

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BUSINESS commercialization scheme aimed to bring our YQS Nanshan Project to full commercialization, to provide a stable and consistent supply of peridot to the world, and to promote and drive market demand for peridot gemstones.

As of the Latest Practicable Date, we are at the mine site infrastructure development and mine construction preparation stage. As such, completing the construction and bringing our YQS Nanshan Project to commercial production is considered the foremost foundation in realizing our mission. The construction plan and the major machineries and equipment expected to be procured and installed for the mining operations for our YQS Nanshan Project are based on the recommendations set out in the Competent Person’s Report, which was provided after making reference to and assessing the proposed mine development plan in the Feasibility Study. Our construction plan was devised based on a maximum annual production capacity of 300,000 tonnes of peridot ore as approved under our Mining License. Detailed execution timeline for our mine development, including our onsite ore processing facilities, is set out in “— Our YQS Nanshan Project — Mine Site” in this section. Key production and processing flow to be adopted for our mining operations and ore processing are set out in “— Our Production and Processing” in this section. We endeavor to complete construction and development of our mine site (including our onsite ore processing facilities and backfill plant) and commence commercial production by the fourth quarter of 2023.

The Competent Person’s Report further sets out details of our estimated overall capital and operating expenditure for the construction and operation of our YQS Nanshan Project. Based on our mine site construction schedule, we estimate that upon [REDACTED], our total outstanding capital expenditure for the construction of our overall mine site (including our ore-processing facilities and backfill plant) will amount to approximately HK$[REDACTED] million (or RMB[REDACTED] million), which will be funded entirely by the [REDACTED] from the [REDACTED]. See “Future Plans and [REDACTED]” in this document.

Our strategy to bring our YQS Nanshan Project to full commercialization is relatively prudent and involves an initial production ramp-up period of approximately six years before reaching full production capacity in 2030. Our manpower requirements for mining operations and ore processing will be expanded alongside our production ramp-up plan. Based on the recommendations set out in the Competent Person’s Report, we expect that during the first three calendar years of our production ramp-up period, approximately 25 senior level personnel and up to 230 junior level personnel will be required for our mining and ore processing operations. On the basis of an estimated average staff costs per head of around RMB96,000 for junior level personnel and RMB153,000 for senior level personnel, we have allocated HK$[REDACTED] million (or RMB[REDACTED] million) of our [REDACTED] from the [REDACTED] to fund these staff costs during our initial production ramp-up stage up to 2025.

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BUSINESS

Our commercialization scheme also involves the construction of our own gemstone processing facilities in the longer run, more particularly to be completed upon our YQS Nanshan Project reaching its full capacity production in 2030. See “Path to Commercialization — Our Commercialization Roadmap — Gemstone Processing” in this document for details. We currently estimate that the total costs for developing our own gemstone processing facilities, including the relevant land use right, infrastructure and construction of relevant facilities, as well as purchases and installation of machineries and equipment, will amount to approximately HK$[REDACTED] million (or RMB[REDACTED] million), which will be funded entirely by the [REDACTED] from the [REDACTED].

Systematically execute our global marketing strategies

The principal products of our YQS Nanshan Project following our commercial production are expected to be cut-and-polished peridot gemstones, peridot gem dots and rough peridot gemstones, of which cut-and-polished peridot gemstones and peridot gem dots are expected to be our major revenue drivers.

We recognize that at present, peridot has not drawn sufficient industry interests in part due to the persistent state of inconsistent global supply, and we consider its market to be underdeveloped. According to the F&S Report, colored gemstones are largely preference and perception driven, while consistent marketing efforts and messages are critical in driving preference and demand towards a particular type of gemstones. Notwithstanding that we are confident the commercial production of our YQS Nanshan Project will greatly resolve the inconsistent supply of peridot, we believe having the right set of global marketing strategies with purposeful, well-organized messages, and executing them through carefully selected promotional formats in a systematic, well-coordinated and persistent manner is equally important and serves as the pillar for the successful commercialization of our YQS Nanshan Project.

To this end, we have formulated a set of global marketing strategies, drawn from the expertise of Ms. Pia Pompea Tonna, our chief marketing officer, who spent much of her career in the field of marketing for international consumer and luxury brands. Of particular relevance was her years of experience in marketing, sales and public relations while in Gemfields, an international colored gemstones mining company. These strategies target both the industry value chain as well as the broad end-consumer market, with specific action plans and clearly defined purposes and objectives. We plan to utilize multiple marketing and promotional formats to tailor for different types and tiers of target audiences. Through these global marketing strategies, we aim to (i) re-establish and promote the positioning and value of peridot in the colored gemstones family; (ii) reignite the enthusiasm of both the industry value chain as well as the broad end-consumer base towards peridot gemstones; (iii) deliver a cohesive, impactful, emotive message for peridot gemstones to the broad end-consumer market; (iv) create a positive, enduring influence

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BUSINESS over consumer perception and preference towards peridot as their choice of colored gemstones; and (v) ultimately to bolster demand and price momentum, and drive market demand for our peridot products. For further details of our global marketing strategies, see “Path to Commercialization — Our Global Marketing Strategies” in this document.

We consider it imperative that our marketing strategies are systematically implemented from the early stage of our commercialization scheme. We start by educating the industry value chain about our peridot and the forthcoming market supply of peridot from the commercial production of our YQS Nanshan Project. We believe this will create noise and awareness of our brand and will build market traction for our peridot ahead of our commercial production. We have implemented selected pre-marketing education and brand awareness initiatives since 2020. See “— Marketing and Sales — Marketing Activities” in this section. We endeavor to continuously and systematically implement our working initiatives under our global marketing strategies in accordance with our commercialization scheme. To this end, we have allocated HK$[REDACTED] million (or RMB[REDACTED] million) out of the [REDACTED] from the [REDACTED] to cover the expenditure required for the implementation and running of our global marketing strategies up to the year ending December 31, 2024. See “Future Plans and [REDACTED]” in this document for further breakdown on the said allocated [REDACTED]. We expect the allocated [REDACTED] will be sufficient to cover our scheduled marketing initiatives up to 2024.

Develop our sales channels and sales capabilities

Given that cut-and-polished peridot gemstones and peridot gem dots are expected to be our major revenue drivers following our commercial production, we consider that jewelry brands and designers, jewelry manufacturers, fashion and accessory brands and artists will be our primary target customer groups as they will be the main direct users of our products. Taking into consideration the ecosystem of the gemstone industry value chain and leveraging on our “mine-to-market” business model, we have identified three major sales channels aside from direct sales to our target customers, namely (i) international and regional trade shows; (ii) e-commerce channels; and (iii) auction channels. We consider these channels are effective and complementary to our initiatives in directly approaching our target customer groups. We have accordingly devised development strategies for each of these channels. See “Path to Commercialization — Sales Channel Development” in this document for details.

As of the Latest Practicable Date, we have initialized a series of brand awareness initiatives that also serve as part of our sales channel development efforts, such as our sponsorships of and participation in selected trade shows and industry events in China and overseas, as well as our collaboration initiatives with selected brands and designers. See “— Marketing and Sales — Marketing Activities” in this section. We also plan to commence developing our targeted sales channels ahead of our commercial production to ensure that these sales channels will be ready and

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BUSINESS can be effectively utilized once our products can be launched. To achieve this, we have allocated approximately HK$[REDACTED] million (or RMB[REDACTED] million) out of the [REDACTED] from the [REDACTED] for our sales channels development initiatives, of which HK$[REDACTED] million (or RMB[REDACTED] million) are designated for the expansion of our sales force in China and the UK following the [REDACTED], which we anticipate will cover staff costs for around ten additional sales personnel (including sales directors, regional managers and sales representatives) up to 2024.

OUR BUSINESS MODEL

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BUSINESS

The following diagram sets forth an illustration of our business model:

Mine

Peridot Ores

Basalt

Sales Ore processing Industrial-grade facilities Peridot Sands

Rough Peridot Gemstones Demand Supply

Gemstone processing Sales facilities

Cut-and-polished Peridot Gem Dots Peridot Gemstones

Sales

Note: Images above are for illustration purpose only.

As illustrated in the above diagram, our mine-to-market business model covers the whole value chain from mining to processing to sales. We believe this model will facilitate a more efficient offering of transparency and traceability of our products. According to the F&S Report, traceability and transparency have become increasingly important for consumers in the colored gemstone industry, and that new generations demand a more transparent and traceable history and background of colored gemstones. As such, we believe our implementation of this mine-to-market business model will set us apart from our competitors.

Furthermore, we believe that our mine-to-market business model will allow us to track more closely with market trends and preferences, more effectively enforce a systematic pricing on our products, and retain a bigger share of profit margin by eliminating intermediaries such as gemstones agents and wholesalers and target our sales directly to our target customer groups such as jewelry brands, designers, manufacturers, fashion and accessory brands and even end-consumers. We can also adjust our product mix based on market demand trends we observe.

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OUR YQS NANSHAN PROJECT

Mine Site

Our YQS Nanshan Project is located in Emu Town, Dunhua City, Jilin Province, China, which is approximately 50 km northwest from the downtown of Dunhua City . We hold the mining rights in respect of our YQS Nanshan Project, with an approved Mining Licensed Area of 1.6731 km2. The geographic coordinates are within the limit of longitude 127º55’19”E to 127º57’58”E and latitude 43º47’02”N to 43º48’02”N. The region surrounding our YQS Nanshan Project consists of low-to medium-relief terrain and hilly areas. Elevation ranges from 420m to 750m above sea level with steep slopes and deep valleys. The Zhuerduo River* (珠爾多河) is the main watercourse in the region flowing from west to east at the northern part of the project area, and then flowing southward into the Mudan River* (牡丹江) to the east of our YQS Nanshan Project. The local economy is based on forestry and agriculture. A sub-station is available in the Yiqisong Forestry Farm* (意氣松林場) providing us with sufficient electricity. Manpower is also available from adjacent villages, which we believe will allow us to quickly ramp up our production.

The map below illustrates the geographical location of our YQS Nanshan Project:

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The following map illustrates the main transportation network for our YQS Nanshan Project.

Notes:

(1) The traveling time are estimates based on normal traffic conditions. Actual traveling time may differ.

(2) The distances to and from our YQS Nanshan Project are approximates.

(3) Images above are for illustration purpose only.

We are currently at the mine site infrastructure development and mine construction preparation stage and will be proceeding to mine site construction in the third quarter of 2021. In accordance with our commercialization scheme, we expect to complete our overall mine construction by the third quarter of 2023 and to commence commercial production in the fourth quarter of 2023. Based on our overall mine site construction plan, we have divided our construction work into three sections, namely (i) above-the-ground facilities construction; (ii) underground facilities and mine construction; and (iii) ore processing facilities construction.

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We set out below our mine construction plan to be carried out at our mine site:

2021 2022 2023 Quarter Quarter Quarter 1st 2nd 3rd 4th 1st 2nd 3rd 4th 1st 2nd 3rd 4th Above-the-ground facilities construction Explosives storage

Backfill plant construction

Office building and facilities

Dormitory and facilities

Utilities

Other infrastructures and landscaping

Underground facilities and mine construction

Adits constructions

Utilities installation

Machineries and equipment purchases and installation Ore processing facilities construction

Note: Generally, above-the-ground construction work would be suspended during the winter months due to weather conditions.

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Above-the-ground facilities construction

Site leveling

Temporary retaining wall

Our above-the-ground construction work includes construction of the backfill plant as well as auxiliary facilities and infrastructure related to our mine and mining operations, such as office and dormitory buildings, explosive storage and retaining wall, utilities installation, and landscaping. The backfill plant, which is required for preparing the backfill materials for filling the cuts during our mining process, will be built at 630 meters ASL. Backfill materials will be produced at our backfill plant by combining basalt and coarse aggregate with other materials such as water and concrete, and will be pumped through underground pipes to fill the cuts. At the moment, above-the-ground construction preparation work such as site leveling, initial road paving, installation of basic power and water supply as well as temporary retaining wall erection has been ongoing. Thereafter, we expect to commence initial construction work, which is expected to be completed before the end of 2022. Such initial construction work mainly includes site office and dormitory building foundation, main access road construction, above-the-ground drainage, explosive storage and compressed air stations, electricity supply system upgrades and overall heating facilities. We aim to commence and complete the remaining principal above-the-ground construction work, mainly the construction of our site office and dormitory buildings, by the third quarter of 2023. As for the construction of our backfill plant, we plan to commence construction and procurement of relevant backfill equipment in the second quarter of 2022. We aim to complete construction of our backfill plant in second half of 2022, with backfill equipment installation completed by the third quarter of 2023.

Underground facilities and mine construction

Main adit entrance Main adit Main adit

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Underground facilities and mine construction are intended to be carried out concurrently with the above-the-ground construction work, covering the construction of the mine adits and auxiliary facilities. More specifically, mine adits will include the main adit, the ventilation adit, excavation adits and other auxiliary adits. We plan to complete construction of the main adit in the second half of 2021, with construction of the ventilation adit scheduled to commence in the fourth quarter of 2021. Construction of underground excavation adits, which is expected to take up a majority of our mine construction time, is expected to commence in the first quarter of 2022 following completion of the main adit construction, and is currently expected to be completed by the third quarter of 2023. Construction of other auxiliary adits is scheduled to be completed by the third quarter of 2023. In addition, we plan to commence procurement of major mining machineries and equipment in 2022, with installation scheduled to be completed by the third quarter of 2023. Other underground auxiliary support engineering work, including but not limited to the installation of electricity supply system and ventilation system are scheduled to commence generally in 2023 and are expected to be completed by the third quarter of 2023.

Ore processing facilities and construction

We plan to construct our own onsite ore processing facilities to process the peridot ores produced from our YQS Nanshan Project into rough peridot gemstones and peridot sands. The construction work of the facilities will involve mainly land foundation work, building construction, processing equipment procurement and installation, and utilities installation. Construction of land foundation work for the ore processing facilities is currently scheduled to be completed in the second half of 2022, while building construction work will commence in the second quarter of 2023. Procurement of relevant ore processing equipment is initially scheduled to be in the second quarter of 2022 with installation to be completed by the third quarter of 2023, while connection of electricity and other utility systems are scheduled to take place in the second to third quarter of 2023.

Gemstone Processing Facilities and Construction

With a view to better prioritizing our resource allocation and deployment during our production ramp-up period, we plan to engage third-party gemstone processing service providers to process our gem-grade rough peridot into cut-and-polished peridot gemstones and peridot gem dots. See “— Subcontractors” below for details.

In the longer run, however, we plan to establish our own gemstone processing capability by constructing our own gemstone processing facilities, currently intended to be located in Dunhua City where our operating center is also located for ease of centralized management. Additionally, we consider that Dunhua City has a relatively well-developed public transportation infrastructure

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BUSINESS and is of reasonable proximity to Jiaohe City (蛟河市), a city with a relatively established gemstones processing industry, which can provide us with more readily available skilled labor in gemstone processing.

Based on our commercialization scheme, we plan to acquire an industrial land with a site area of about 20,000 sq.m. for the construction of our gemstone processing facilities. In selecting our site location, we will take into account factors such as surrounding public transportation infrastructure, site utilities, and site readiness for construction work as well as readiness in facilitating proper title transfers. We plan to utilize part of our [REDACTED] to set up our gemstone processing facilities. See “Future Plan and [REDACTED] — [REDACTED]”inthis document for details. We plan to acquire full, in-house gemstone processing capacity upon reaching the stage of full capacity mine production. Based on our scheduled production ramp-up, we plan to commence the process of initial planning, site identification and land acquisition for our gemstone processing facility in 2026, with construction of factory building and ancillary facilities carried throughout late 2027 to early 2029, and machinery and equipment installation as well as pre-operation testing completed within 2029 for full operation in 2030 in order to synchronize with our scheduled full capacity mine production. Taking into consideration our mine production and estimated output mix as well as our sales plan, the gemstone processing facilities is intended to have a designed annual production capacity of 60 million carats (or approximately 12 tonnes) of rough peridot gemstones and 280 tonnes of peridot sands.

Our Peridot Resources and Reserves

Resources

The following table sets out the estimated Resources of our YQS Nanshan Project under the JORC Code as of December 31, 2020, as extracted from the Competent Person’s Report:

Grade

Estimated Peridot gemstone Category Resources (Note) Peridot sand

(million tonnes) (carats per tonne) % Indicated ...... 5.2 236 16.6 Inferred ...... 6.1 210 16.1

Note: Cut-off grade for peridot gemstone is 20 carats per tonne.

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Reserves

According to the Competent Person’s Report, at a break-even cut-off grade of 44.7 carats per tonne of peridot gemstone and taking into consideration diluting materials and allowances for losses, the economically mineable part of the Indicated Resources of our YQS Nanshan Project can be converted into 5.19 million tonnes of Probable Ore Reserves, with peridot gemstones averaging 204.11 carats per tonne and peridot sand inclusion of 15.8%. The following table sets out the estimated Probable Ore Reserves of our YQS Nanshan Project by product type as of December 31, 2020 as shown in the Competent Person’s Report:

Probable Ore Reserves Peridot gemstone grade Peridot sand grade

(million tonnes) (carats per tonne) % 5.19 204.11 15.80

For details of the peridot Resource and Ore Reserve statements, see “Competent Person’s Report — 13.12 Mineral Resource Statement” in Appendix IV to this document.

According to the Independent Technical Consultant, there had been no material change to the Resource and Ore Reserve estimates of our YQS Nanshan Project since December 31, 2020, being the effective date of the Competent Person’s Report, and up to the Latest Practicable Date.

OUR PRODUCTS

Our YQS Nanshan Project will primarily produce three principal products, namely cut-and-polished peridot gemstones, peridot gem dots and rough peridot gemstones, as well as two by-products, namely industrial-grade peridot sands and basalt.

According to the Competent Person’s Report, peridot is the specific name given to gem-quality olivine. Nearly all of the olivine contained in our YQS Nanshan Project is peridot. The color of peridot ranges from pure green to yellowish green, and greenish yellow and further to brownish green, and to brown. Peridot is a transparent gemstone and is one of the few gemstones generally available in the market that are natural and untreated. Our gem-grade peridot can be classified into (i) peridot gemstones, which are transparent olivine that is anticipated to produce cut-and-polished peridot of no less than 3 mm; and (ii) peridot gem dots which are transparent olivine that is anticipated to produce cut-and-polished peridot of less than 3 mm.

Peridot ores extracted from our YQS Nanshan Project is crushed, screened, sorted and graded to produce rough peridot which may then be further processed into cut-and-polished peridot. Peridot ores also produce industrial-grade peridot sands and basalt as by-products.

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The pictures below illustrate the peridot inclusion in basalt, with peridot gemstone and peridot sands embedded:

PPeridot ggemstone

Basalt

Peridot sand

Our Principal Products

The table below sets forth the sample pictures and general descriptions of our principal products:

Picture Name Description Cut-and-polished peridot Cut-and-polished peridot gemstones are peridot which have gemstone been through the processing of cutting, bruting, faceting and polishing.

Peridot gem dots Peridot gem dots refer to cut-and-polished peridot sands which are aesthetically qualified to be applied on or used as jewelry or other accessories.

Rough peridot gemstone Rough peridot gemstones are natural peridot which has been sorted and graded but not yet further processed into cut-and-polished peridot.

Commercial Applications

According to our overall sales plan, most of our gem-grade peridot products will be sold as cut-and-polished. Different sizes of our cut-and-polished peridot gemstones to be produced from our YQS Nanshan Project can be applied for the following commercial applications:

5 to 10 carats and above High Jewelry, ﬁne to extra ﬁne quality

3 to 5 carats Fine Jewelry, ﬁne to extra ﬁne quality

1 to 3 carats Demi-ﬁne Jewelry, demi-ﬁne quality

less than 1 carat and peridot gem dots Commercial, fashion and artistry, gem grade

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• High jewelry: These are signature, trend setting collections from luxury goods groups such as Kering (Boucheron, Pomellato, Gucci), Richemont (Cartier, Piaget, Van Cleef & Arpels, Buccellati) and LVMH (Bulgari, Louis Vuitton and Tiffany & Co.). These brands generally produce one to two such collections each year, which are often sold during the Paris Couture. The high jewelry collections are the highlight of the jewelry calendar and influence the trends for fine and commercial jewelry. We are targeting our peridot gemstones that are of fine to extra fine quality with sizes of 5 to 10 carats and above for this tier of jewelry products.

• Fine jewelry: This tier of jewelry includes those offered by the above luxury brands, the design of which are often inspired and/or based on their high jewelry collections, and are produced as production runs. It also includes fine jewelry products from fine jewelry brands such as Annoushka, Roberto Coin, David Yurman and Bucherer, which have “self-purchase” accessible price points, as well as non-branded jewelry of established jewelry retailers and chains. Our peridot gemstones that are of fine to extra fine quality with sizes in the range of 3 to 5 carats are targeted for this tier.

• Demi-fine jewelry: Up-and-coming designers and direct-to-consumers jewelry brands are major contributors to the demi-fine jewelry category. We consider them to be major influencers on jewelry trends and are equally as important as the above two tiers. As their jewelry products are targeted more towards the mass consumer market and newer generations that more often purchase and wear jewelry for fashion and aesthetics practicality, we are targeting this tier for our peridot that are of demi-fine quality with sizes in the range of 1 to 3 carats, which we expect to have a higher volume of output from our YQS Nanshan Project and to have more accessible price points so as to align with the end-market price points of these jewelry products.

• Commercial, fashion and artistry applications: Small gemstones and gem dots are commonly used in mass-produced commercial jewelry, and are also applied for non-jewelry fashion and other luxury accessory products and even artistry. We expect that our mine, upon reaching its commercial production stage, will mass produce commercial grade peridot of less than 1 carat and peridot gem dots, which are of gem grade but may not be suitable for creating jewelry of the three tiers above. We are targeting the manufacturers of mass market jewelry and accessories for these small peridot gemstones and gem dots.

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By-Products

We set out below sample pictures and general descriptions of our by-products:

Picture Name Description Industrial-grade peridot Industrial-grade peridot sands refer to non-gem grade peridot sands sands. It is a natural and environmentally-friendly alternative to other industrial abrasives, and can be used in a wide range of applications such as metallurgical auxiliary materials and high manganese steel.

Basalt Basalt is the predominant gangue mineral enveloping the peridotite inclusions and monomers. It can be used as crushed rock in areas such as construction and highway engineering. Basalt slab can also be cut-and-polished into floor tiles and building veneer or be processed or utilized as superior fibers.

OUR PRODUCTION AND PROCESSING

Overview

We plan to complete mine development of our YQS Nanshan Project and commence mine production in or around the fourth quarter of 2023, followed by around six years of ramp-up production up to 2029, and further reaching the full annual production and processing volume of 300,000 tonnes of peridot ores by 2030. We expect the full production period to cover a total of 12 years, followed by a final ramp-down period of three years from 2042 to 2044. See “Path to Commercialization — Our Commercialization Roadmap — Production” for details of the volume of peridot ore, and the corresponding estimated gem peridot grade and percentage inclusion of peridot sands, which are expected to be produced at our YQS Nanshan Project for the relevant periods.

Mining Operations

In accordance with the mine development plan proposed in the Feasibility Study, we will use the underground cut-and-fill, regular room and pillar, as well as random pillar open-stope mining methods at our YQS Nanshan Project. Trackless equipment will be used to shove and transport the mined ores. According to the Competent Person’s Report, the specific mining method to be used will depend on the particle size and distribution of the peridot in order to minimize the damage to the integrity of the gemstone during the mining process. It is estimated that approximately 87% of our mining will be using the cut-and-fill mining method, 8% will be using the regular room and pillar mining method, with the remaining 5% using the random pillar open stoping mining method. We expect our mining operation will operate 300 days per year with three eight-hour shifts per day. Once our mining preparation, which includes the main transportation roadway and the cross cut and backfill drive, is ready, we will proceed to our mining operations.

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We set out below the major steps and the estimated timeline for our mining operation using the cut-and-fill mining method expected to be carried out at our YQS Nanshan Project during each eight-hour shift:

Backﬁlling (in parallel)

Explosive Air Drilling Blasng Mucking ﬁlling circulaon

4hours 1hour 3hours

With the cut-and-fill mining method, we will be drilling primary and secondary cuts. Primary cuts will be mined first by using boom jumbo to drill the holes. Holes will then be filled with explosives and to be detonated by tube detonators. After the blasting, we will muck the ores using underground load-haul-dump loaders. Once the primary cuts are emptied, we will backfill the cuts using cemented sand through our backfill connection in the adit. The fill will act as support for our secondary cuts, which requires a typical fill cure time of at least 28 days for the proposed strength to be achieved. Similarly, secondary cuts will be carried out in a similar manner but will be filled with materials such as developmental waste or waste sand from our ore processing facilities, which will be trucked underground instead of through the backfill connection.

Throughout our mining operations, the stope will mainly use fresh airflows through the transportation roadway, the air inlet rise-entry and the connection roadway. We may also use local fans in parallel within the return air rise-entry as auxiliary ventilation.

The following diagram illustrates the typical progression of the cut and fill method according to the Competent Person’s Report:

Source: Competent Person’s Report

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Processing

Ore processing facilities

We plan to complete construction of our onsite ore processing facilities concurrent with our mine construction to process the peridot ores mined from our YQS Nanshan Project into rough peridot gemstones, peridot sands and basalt. The ore processing facilities will be located adjacent to the main adit exit at the YQS Nanshan Project. To align with the expected annual production volume of our mine upon reaching full capacity, the planned annual processing capacity of the ore processing facilities will be 300,000 tonnes of peridot ores. The annual processing capacity is calculated based on a daily processing capacity of 1,000 tonnes of ore, with the ore processing facilities operating 300 days per year with three eight-hour shifts per day.

The following diagram illustrates the ore processing flow at our ore processing facilities:

Ores 60mm and smaller Ores 30mm and smaller

Primary Vibrang Secondary Vibrang Photometric Ore sorng Primary Ore sorng crushing screening crushing screening sorng crushing

1 minute / tonne 15 minutes / tonnes 12 minutes / tonne Ores larger than 60mm

The ores brought from the mine will first be fed into a feeder to sort the ores into sizes of 60mm and above, and below 60mm. Those that are below 60mm will go through a first vibrating screening process, which will separate the ores with a cut size of 30mm. Those with sizes of 60mm and above will go through a first round of crushing before going through the first vibrating screening. After the first vibrating screening, ores having sizes of above 30mm will go through a secondary crushing to further reduce its size. Thereafter, the ores will go through a second round of vibrating screening process where they will be separated into sizes of less than 1mm, 1mm to less than 3mm, 3mm to less than 10mm, 10mm to less than 30mm. Those that are less than 1mm or remain larger than 30mm (without any visible inclusion of peridot) will be passed on as basalt. The remaining ones that are sized between 1mm and 30mm will be fed into photometric sorters to sort peridot from feed materials such as industrial-grade peridot sands and basalt. See “Competent Person’s Report — 12.3.2 Processing Flowsheet” in Appendix IV to this document for the diagram illustrating the mechanical processing flowchart of our ore processing facilities.

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Gemstone processing facilities

We plan to construct our own gemstone processing facilities (currently planned to be located in Dunhua City) during our mine production ramp-up period, to be put into operation by 2030 upon our mine reaches full production capacity, to further process rough peridot produced in our ore processing facilities into cut-and-polished peridot. See “— Our YQS Nanshan Project — Gemstone Processing Facilities and Construction” in this section for further details. The designed capacity of the gemstone processing facilities is expected to be 60 million carats of rough peridot gemstones per year and 280 tonnes of peridot sands, operating 330 days per year with one eight-hour shift per day for hand processing and two eight-hour shifts per day for machine processing.

As our peridot gemstones will be categorized into large gemstones (sized above 10 mm), medium gemstones (sized above 7 mm to 10 mm) and small gemstones (sized above 3 mm to 7 mm), and peridot gem dots (sized between 1 mm to 3 mm), we have preliminarily planned for our facilities to process our rough peridot gemstones into these products. The large and medium gemstones will be processed by hand, whereas the small gemstones and peridot gem dots will be machine-processed.

The following diagram illustrates the typical gemstone processing steps and the estimated time for each step:

Rough Peridot 1 hour Grading(1)

Above 7mm 7mm and below 30 hours Hand Machine Cutting(1) Cutting(2)

Cleaning 1 hour

Quality Control 2 to 4 hours

Notes:

(1) The estimated time above is calculated (i) based on 100 pieces of medium-sized rough peridot gemstones; (ii) rounded up to the closest hour; and (iii) based on our Directors’ best knowledge, information and belief.

(2) Our gemstone processing machines will be operated on two eight-hour shifts per day, on a continuous basis during each shift.

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Rough peridot will first be graded according to its color, clarity and particle size. They will then be sorted based on the cut-off size of 7mm. Rough peridot that are 7mm and below will be machine-cut whereas those that are sized above 7mm will go through the hand-cutting process. The main difference between hand cutting and machine cutting is that hand cutting will cut each gemstone manually whereas machine cutting will use machine for bruting, faceting and polishing by batch. After the cutting process, the gemstones will be cleaned by removing the glue and dust. Before the gemstones will become sellable products, we will do a final quality inspection based on the “4C”, namely, color, clarity, cut and carat weight.

The following diagram illustrates the process and the estimated timeline for the hand cutting procedure:

Primary Sorting Adhering Bruting Faceting Polishing Final Girdling cutting polishing

4 hours 1 hour 1 hour 3 hours 20 hours 2 hours

Note: The estimated time above is calculated (i) based on 100 pieces of medium-sized rough peridot gemstones; (ii) rounded up to the closest hour; and (iii) based on our Directors’ best knowledge, information and belief.

Under the hand-cutting process, the rough peridot will first go through primary cutting to reach our primary shape and specifications by removing internal characteristics that affect the peridot’s beauty and durability, while taking into account weight retention. The primary cut peridot will then go through sorting where they will be separated based on shape and dimensions. Thereafter, the gemstones will be glued to the hand tools for the next stage of processing. Then, for bruting, the primary-cut peridot will be shaped by hand from irregular shapes into more geometric shapes. The next stage of processing will take the longest time as this will involve customizing the gemstones through faceting the gemstones into the required shape and specification, polishing the facets, and further refining the faceted and polished gemstones through final polishing. Afterwards, the girdle of the gemstones will also be polished as the final step.

According to our commercialization plan, gemstones between 3mm and 7mm will be machine processed. We will load the rough peridot gemstones into the processing machine by batch, which will automatically cut and polish the gemstones. Based on currently available information, and to the best knowledge, information and belief of our Directors, the processing lines will be operated continuously during each shift, and will be able to process between 2,000 and 5,500 pieces of gemstones per shift.

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Pilot processing workshop

With the aim of acquiring more practical and reliable data for the estimation of operating expenditure relating to gemstone processing and to facilitate our pre-marketing initiatives, we have established a pilot processing workshop at our Dunhua operating center to undertake hand processing of rough peridot extracted during our exploration stage into cut-and-polished peridot, some of which were sold either as peridot gemstones or further fabricated into jewelry, during the Track Record Period.

Machinery and Equipment

Our mining production activities will require various types of machinery and equipment, which in turn will depend on the kind of activity we are to carry out. For our mining operations, we will require a range of equipment such as underground load-haul-dump (LHD) loaders, trucks and mini buses, boomer drilling jumbos, and fans. See “Competent Person’s Report — 15.3.4 Main Mining Equipment” in Appendix IV to this document for details. As for our backfill plant, for producing the backfill materials by combining our by-product basalt with cement, we will require machinery and equipment such as feeders, conveyors and pumps. See “Competent Person’s Report — 15.4.4 Backfill Plant” in Appendix IV to this document for details. As for ore processing, we will require crushers, feeders and conveyors. See “Competent Person’s Report — 12.3.3 Processing Facilities and Equipment” in Appendix IV to this document for details.

As we have yet to commence production, up to December 31, 2020, we only purchased a few mining machinery and equipment, principally boomer drilling jumbos sourced from our suppliers in the PRC. Our machinery and equipment generally has a useful life of ten years, and depreciation is calculated on a straight-line basis. As of December 31, 2020, the average remaining useful life of our mining machinery and equipment was around seven years.

We set out in the table below the net book value of our mining machinery and equipment as of the date indicated:

As of December 31

2018 2019 2020

RMB’000 RMB’000 RMB’000 Mining machinery and equipment ...... 3,529 3,213 2,859

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Utilities

Electricity

Electricity and water are the major utilities for the mining and processing operations of our YQS Nanshan Project. In order to connect the electricity supply to our YQS Nanshan Project from the upper level transformer station of our electricity supplier, Jilin Dunhua National Power Supply Co., Ltd.* (國網吉林敦化市供電有限公司), an Independent Third Party, we engaged a contractor during the Track Record Period to construct and install the electricity infrastructure and equipment, which were completed in 2020. We have also entered into a high pressure electricity supply contract (高壓供用電合同) with Jilin Dunhua National Power Supply Co., Ltd.* in July 2020. Our electricity supply contract has a term of three years commencing from July 7, 2020 and ending on July 6, 2023. Based on the said contract, the electricity price will be determined with reference to the government-approved electricity price. Upon expiry of the contract, the term may be renewed unless terminated by either party in writing.

As of the Latest Practicable Date, we have a dedicated electricity supply of 10 kilovolts (kv) with a maximum capacity of 630 kilovolt-ampere (kVA). According to the Competent Person’s Report, our current electricity supply is sufficient to support our expected mining and processing operations. We will also install, as part of mine site construction under the commercialization scheme and in accordance with the PRC laws and regulations, a series of backup diesel generators with an aggregate electricity supply of 380 volts.

For the three years ended December 31, 2018, 2019 and 2020, our total electricity consumption was nil, nil and 10,400 kWh. During the Track Record Period and up to the Latest Practicable Date, we did not experience any significant interruption of electricity supply shortage or outages.

Water

The main water supply for our planned mining and processing operations, as well for fire safety of our YQS Nanshan Project will be from underground water sources. During the Track Record Period, we drilled two wells for fresh water support for domestic use and landscaping purposes.

As part of the mine site construction under the commercialization scheme, for our main water supply (for mining and processing operations purpose), we will be (i) building a water collection slump about 80 meters from the entrance of our main adit to collect and store underground water; (ii) installing a head tank with a capacity of 600 m3 on site at around 686 meters ASL to store and supply water for our mining and processing operations and for fire fighting purposes; and (iii)

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BUSINESS installing two pumps to pump water from the water connection slump to the head tank. According to the Competent Person’s Report, our main water supply is reasonably reliable and sufficient to support the planned mine and processing facilities operations.

During the Track Record Period and up to the Latest Practicable Date, we did not experience any significant interruption of water supply shortage.

SUPPLIERS

During the Track Record Period, we did not enter into any long-term contract with any of our suppliers. Payment terms imposed by our suppliers may range from payment in advance to a credit period of one month after delivery.

Major Suppliers

For the three years ended December 31, 2020, purchases from our five largest suppliers amounted to approximately RMB5.0 million, RMB9.9 million and RMB5.7 million, representing approximately 83.7%, 78.4%, and 71.6% of our total purchases, respectively; while purchases from our largest supplier amounted to approximately RMB3.5 million, RMB8.2 million, and RMB1.8 million, representing approximately 59.0%, 65.1%, and 23.1% respectively, of our total purchases. To the best knowledge of our Directors, (i) to the extent applicable, our major suppliers possessed the requisite licenses and permits to conduct the activities for which they were engaged; (ii) all our five largest suppliers (and where applicable, their respective controllers) during the Track Record Period were Independent Third Parties; (iii) none of our Directors, their respective associates or any of our Shareholders who, to the knowledge of our Directors, owns more than 5% of the issued share capital of our Company, was related to or owned any interest in any of these five largest suppliers during the Track Record Period and up to the Latest Practicable Date; and (iv) none of our five largest suppliers were also customers of our Group during the Track Record Period.

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The following table sets forth details of our five largest suppliers for the year ended December 31, 2018:

Length of business relationship as Products/services Location of the of April 30, Purchase Payment Rank Name of supplier procured by the Group headquarters 2021 amount method (RMB’000) 1. Jilin Ruisheng Machinery Procurement of mine drilling rigs Jilin Less than 3,534 Bank transfer Co., Ltd.* (吉林瑞晟機械 Province, three years 有限公司) ...... China 2. Mr. Zhang Liang (張亮) ... Vehicle and hook machine rental — Less than 490 Bank transfer services three years 3. Guangzhou Yixing Jewelry Jewelry fabrication services Guangdong Less than 413 Bank transfer Co., Ltd.* (廣州藝興珠寶 Province, four years 有限公司) ...... China 4. Changchun Changheng Loader rental services Jilin Three years 336 Bank transfer Trading Co. Ltd.* (長春 Province, 長恆經貿有限公司) .... China 5. Mr. Shao Huiyuan (邵會元) . Haulage of mine construction — Less than 239 Bank transfer related vehicles four years

The following table sets forth details of our five largest suppliers for the year ended December 31, 2019:

Length of business relationship as Products/services Location of the of April 30, Purchase Payment Rank Name of supplier procured by the Group headquarters 2021 amount method (RMB’000) 1. A group of companies and Sands and gravels, road Jilin Less than 8,202 Bank transfer sole proprietorships construction, adit maintenance Province, four years controlled by Mr. Ning and hook machines rental China Dehui (寧德輝)(1) ..... services 2. Dunhua City Li Lingyuan Excavator rental services Jilin Less than 550 Bank transfer Machinery Province, three years Equipment Vehicle Rental China Department* (敦化市李靈元機械設備車輛租賃部) .. 3. Mr. Jiang Changgui Retaining wall construction — Less than two 487 Bank transfer (姜長貴) ...... services years 4. A group of sole Procurement of sands and gravels Jilin Less than two 383 Bank transfer proprietorships controlled Province, years by Mr. Li Songyan China (李松岩)(2) ...... 5. Guangzhou Yixing Jewelry Jewelry fabrication services Guangdong Less than 262 Bank transfer Co., Ltd.* ...... Province, four years China

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Notes:

1: The group of companies and sole proprietorships controlled by Mr. Ning Dehui comprised of Baishan City Hunjiang District Hongda Construction Team* (白山市渾江區洪達工程施工隊), Baishan City Hunjiang District Jiangtao Construction Team* (白山市渾江區江濤工程勞務施工隊), Baishan City Hunjiang District Dayun Construction Team* (白山市渾江區達運建築工程施工隊), Baishan City Hengcheng Civil Engineering Service Co., Ltd.* (白山市恆程土石方工程服務有限公司), Baishan City Karong Technology Co., Ltd.* (白山市卡融科技有限公司) (Currently known as Baishan City Karong Mechanical and Electrical Equipment Co., Ltd.* (白山市卡融機電設備有限公司)), and Baishan City Hunjiang District Dongyuan Building Materials and Machinery Parts Wholesaler* (白山市渾江區東原建材機械配件批發商行).

2: The group of sole proprietorships controlled by Mr. Li Songyan comprised of Dunhua City Xiulan Sands and Gravel Agency* (敦化市秀蘭砂石經銷處) and Dunhua City Shengen Sands and Gravel Agency* (敦化聖恩砂石經銷處).

The following table sets forth details of our five largest suppliers for the year ended December 31, 2020:

Length of business relationship as Products/services Location of the of April 30, Purchase Payment Rank Name of supplier procured by the Group headquarters 2021 amount method (RMB’000) 1. Hangzhou Zeya Architectural Infrastructure construction Zhejiang One year 1,832 Bank transfer Design Co., Ltd.* (杭州澤 planning and design consultancy Province, 雅建築設計有限公司) ... services China 2. A group of sole Forklift and excavator rental Jilin Less than two 1,200 Bank transfer proprietorships controlled services Province, years by Mr. Sun Wei (孫偉)(1) . China 3. Yanbian Electric Power Electricity system installation Jilin Less than two 1,073 Bank transfer Installation Co., Ltd* services Province, years (延邊電力安裝有限公司) . China 4. A group of sole Procurement of sands and gravels Jilin Less than two 979 Bank transfer proprietorships controlled Province, years by Mr. Li Songyan(2) .... China 5. Dunhua City Yutong Building Procurement of sands and gravels Jilin Less than one 295 Bank transfer Materials Agency* (敦化市 Province, year 宇通建材經銷處) ...... China 5. Dunhua City Tengsheng Procurement of sands and gravels Jilin Less than one 295 Bank transfer Sands and Gravels Province, year Agency* (敦化市騰勝砂石 China 經銷處) ......

Notes:

1: The group of sole proprietorships controlled by Mr. Sun Wei comprised of Dunhua City Ganyuan Construction Machinery Leasing Department* (敦化市干源工程機械租賃部), Dunhua City Sun Huarong Construction Vehicles Leasing Department* (敦化市孫化榮機械車輛租賃部), Dunhua City Sun Lili Construction Vehicles Leasing Department* (敦化市孫麗麗機械車輛租賃部), and Dunhua City Yue Hongfang Construction Equipment Leasing Department* (敦化市岳洪芳機械設備租賃部).

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SUBCONTRACTORS

During the Track Record Period, we outsourced certain of our gemstone processing and all jewelry fabrication work to gemstone processing and jewelry fabrication service providers, who were Independent Third Parties. During the Track Record Period, we engaged a total of ten such service providers, all of which were Independent Third Parties, to carry out gemstone processing and jewelry fabrication and the total subcontracting charges incurred were RMB0.6 million, RMB0.7 million and RMB0.6 million during the three years ended December 31, 2018, 2019 and 2020, respectively. In accordance with our commercialization scheme, during our mining production ramp-up period up to 2029, we will continue to outsource our gemstone processing and, where circumstances arise, jewelry fabrication, to third-party service providers. We consider the use of third-party service providers for our gemstone processing during our mining production ramp-up stage allows us to better prioritize our resource allocation and deployment for our sales and market development initiatives, and to conserve our capital resources to withstand any unforeseen unfavorable fluctuations in operating and market conditions during our production ramp-up stage.

We consider there are readily available quality gemstone processing and jewelry fabrication service providers in China and selected Southeast Asian countries such as Thailand. We have not however secured or committed to or entered into any contractual arrangement with any of such service providers as of the Latest Practicable Date. As gemstone processing is an important step of our production, we have established a set of criteria for the selection of our third-party gemstone processing service providers, which include, without limitation, the length and history of operations, past experiences, capacity and lead-time, capabilities, requisite licenses and permits if applicable, such as for production safety and environmental protection in the PRC, and references and recommendations from other trade sources such as from experienced gemstones dealers. We will maintain a list of approved gemstone processing service providers, which will be reviewed from time to time. We will also request potential service providers to do a sample or master-set of cut-and-polished gemstones to examine their work quality and to set as the benchmark for any forthcoming volume order. We plan to commence the process of assessing potential third-party gemstone processing service providers closer to the commencement of our commercial production.

Going forward, we may also outsource certain work which require specific technical expertise and experience or specific industrial equipment to subcontractors if necessary. We require our subcontractors to maintain such quality, occupational health and safety and environmental protection standards acceptable to us. We will monitor the performance of our subcontractors through onsite inspections and supervision while the outsourced activities are being carried out by

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BUSINESS our subcontractors. We will also request our subcontractors to comply with the applicable laws and regulations and safety requirements imposed by the relevant government authorities. If there is any non-compliance detected during our inspections, we will request them to adopt necessary remedial measures at their own costs. All losses caused by or incurred as a result of their failure to maintain proper quality, safety and/or environmental protection standards will be borne by the subcontractors themselves.

We endeavor to maintain contact with at least two subcontractors for each outsourced assignment to mitigate risks generally associated with outsourcing arrangements and reliance on any subcontractors.

MARKETING AND SALES

Marketing Activities

During the Track Record Period and up to the Latest Practicable Date, we embarked on a series of brand awareness initiatives, such as giving out information about our peridot and our brand to our supply chain and end-markets to build market traction for our peridot. These initiatives include:

• having selected international news, trade and fashion publications such as Forbes, Vogue, BAZAAR Jewelry China, Rapaport USA and Retail Jeweller run feature articles on us and our peridot;

• holding discussions with selected gemology and research institutions for a variety of potential collaborations including research, field trips, sponsorships and industry forums to support continuous visibility of peridot and our brand in the gemstone industry and end market. For example, Lotus Gemology, a gemology laboratory headquartered in Bangkok, Thailand, has conducted a study of our peridot gemstones and has featured the results on their database as well as social media channels. We also collaborated with Gem & Jewelry Trade Association of China in the formulation of the industry-wide gemstone grading system T/GAC 13-2020, and held preliminary discussions with Ressigeac Gems, a mining consultant and gemstone trader headquartered in Bangkok, Thailand regarding potential collaborations in the development of our proprietary internal grading system and our traceability platform.

• having sponsored the 2019 and 2020 BAZAAR Jewelry Annual Design Award organized by BAZAAR Jewelry China, a magazine in China focusing on high-end jewelry to increase the exposure and awareness of our “Fuli” brand and our peridot;

• having sponsored and undertaken the organization of “Green China • 70th Anniversary of China — The First International Peridot Design Contest (綠色中國 •70華誕 — 首屆橄欖石國際設計大獎賽)” in 2019;

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Winning designs of the Green China International Peridot Design Award 2019

• established collaborative relationships with Liv Luttrell, Zeemou Zeng Limited, Annoushka Ltd and Stephen Webster Limited, all internationally well-known designers or jewelry companies carrying fine jewelry products designed by their respective founders, about creating customized jewelry pieces using our peridot;

Jewelry pieces designed and created by Zeemou Zeng and Liv Luttrell using our peridot gemstones

• entered into non-binding memoranda of understanding with Zeemou Zeng Limited, Annoushka Ltd and Stephen Webster Limited as well as with Memorigin Watch Co. Ltd., a timepiece brand and a pioneer in the production of tourbillon in Hong Kong, and Cuihuating (Beijing) Jewelry Co., Ltd.*(萃華廷(北京)珠寶有限公司), a wholly-owned subsidiary of Shenyang Cuihua Gold and Silver Jewelry Co., Ltd.* (瀋陽萃華金銀珠寶股份有限公司) which is a company listed on the Shenzhen Stock Exchange (stock code: 002731) whose history could trace back to 1895 for classic royal fine jewelry, to explore potential areas of collaboration, including the use of our peridot in their respective jewelry collections and pieces and the global marketing and promotion of our peridot. We consider collaborations with brands and designers, such as the use of our peridot in their jewelry collections, to be a direct and effective means of driving publicity and interests as well as demand and sales of our peridot gemstones;

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• initiated contacts with other key target brands and designers including, among others, Saul Gemstones, and discussed potential orders as well as the possible use of our gemstones in their jewelry collections and pieces; and

• participated in selected trade shows including JCK Tucson, China International Jewellery Fair, and China International Consumer Products Expo, where our peridot products were showcased and limited sales were conducted during these trade fairs.

JCK Tucson (February 2018)

China International Jewelry Fair (November 2020)

China International Consumer Products Expo (May 2021)

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Through these brand awareness initiative ahead of our commercial production, we believe we have gained industry exposure, increased our brand awareness, and have had the opportunity to initiate discussions with targeted supply chain players on potential collaborations. We also believe that building and expanding our network within the industry ahead of our planned mine construction and commercial production is a crucial step in developing “Fuli” into the trusted, “go-to” peridot supplier within the industry.

Going forward, we plan to ramp up our marketing initiatives to proactively build our industry and market recognition, and to bring our YQS Nanshan Project to successful commercialization. For details, see “Path to Commercialization — Our Global Marketing Strategies” in the document.

Customers

Our target customers upon commencement of commercial production will include jewelry, fashion and accessories brands, designers and manufacturers, gemstone dealers, as well as end-consumers. Nonetheless, during the Track Record Period, we sold limited amounts of rough peridot, cut-and-polished peridot and jewelry produced using peridot collected during our exploration stage as part of our pre-market sounding-out initiatives, and generated revenue amounting to RMB1.1 million, RMB1.2 million, and RMB707,000 for the three years ended December 31, 2020, respectively. Certain of these sales were made to retail customers during our participation in trade shows, or through our three retail showrooms located in our Dunhua operating center, the Yanji airport and the Changbaishan tourist area. These retail sales represented approximately 38.2%, 64.4% and 71.7% of our revenue for the corresponding periods. The remaining sales were largely made to our employees, management and minority shareholders, their friends and families, and related companies (generally through direct liaison with our office sales personnel). We generally did not provide credit terms for these sales.

Set forth below are the revenues of our products during the Track Record Period:

For the year ended December 31,

2018 2019 2020

RMB’000 RMB’000 RMB’000 Rough gemstones ...... 641 Cut-and-polished gemstones ...... 348 310 185 Jewelry ...... 769 840 521 Total ...... 1,123 1,154 707

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Major customers

During the Track Record Period, our five largest customers (which, for the purpose of ranking, excluded sales to retail customers from trade shows and our retail showrooms which were retail in nature and such customers could not be individually identified) included mainly selected employees and management members or their relative(s), a minority Shareholder, and companies controlled or invested by our two founders. For the three years ended December 31, 2018, 2019 and 2020, revenue from our five largest customers amounted to approximately RMB627,000, RMB353,000, and RMB200,000, representing approximately 55.8%, 30.6%, and 28.3% of our total revenue, respectively, while revenue from the largest customer amounted to approximately RMB427,000, RMB269,000, and RMB111,000, representing approximately 38.0%, 23.3%, and 15.7% respectively, of our total revenue.

The following table sets forth details of our five largest customers for the year ended December 31, 2018:

Location of the Relationship with the Rank Name of customer Products purchased headquarter Revenue Company Payment method (RMB’000) 1. Mr. Yan Xuesheng (焉學勝) .. Cut-and-polished peridot — 427 Friend of Mr. Yu and Bank transfer gemstones and jewelry Mr. Jiang

2. Mr. Peng Jianqiang (彭建強) .. Jewelry — 86 Minority Shareholder Bank transfer

3. Mr. Jiang Yingchen (姜英臣) .. Jewelry — 51 Brother of Mr. Jiang Bank transfer

4. Ms. Yu Xiaofei (于曉霏).... Cut-and-polished peridot — 46 Senior management Bank transfer and gemstones, rough peridot of our Group electronic payment gemstones and jewelry

5. Mr. Xu Juntao (徐俊濤) .... Cut-and-polished peridot — 17 Employee of our Bank transfer and gemstones and rough peridot Group electronic payment gemstones

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The following table sets forth details of our five largest customers for the year ended December 31, 2019:

Location of the Relationship with the Rank Name of customer Products purchased headquarter Revenue Company Payment method (RMB’000) 1. Mr. Yan Xuesheng .... Cut-and-polished peridot — 269 Friend of Mr. Yu and Bank transfer gemstones and jewelry Mr. Jiang 2. Ji’an City Huayang Jewelry Jilin, China 52 Company over which Bank transfer Construction Labor Mr. Jiang has Service Co., Ltd.* significant (集安市樺陽建築勞務服 influence 務有限公司) ...... 3. Mr. Wang Dongfeng Cut-and-polished peridot — 12 Employee of our Bank transfer, cash (王東峰) ...... gemstones Group and electronic payment 4. Ji’an City Xinli Mining Jewelry Jilin, China 10 Company controlled Bank transfer Co., Ltd.* (集安市鑫立 by Mr. Yu and Mr. 礦業有限公司) ..... Jiang 5. Mr. Bao Dongjie (鮑冬傑) . Cut-and-polished peridot — 10 Employee of our Bank transfer and gemstones Group electronic payment

The following table sets forth details of our five largest customers for the year ended December 31, 2020:

Location of the Relationship with the Rank Name of customer Products purchased headquarter Revenue Company Payment method (RMB’000) 1. Ji’an City Xinli Mining Jewelry Jilin, China 111 Company controlled Bank transfer Co., Ltd.* ...... by Mr. Yu and Mr. Jiang 2. Ji’an City Huayang Jewelry Jilin, China 82 Company over which Bank transfer Construction Labor Mr. Jiang has Service Co., Ltd.*.... significant influence

3. Mr. Cao Xujun (曹緒君) .. Jewelry — 6 Employee of our Electronic payment Group

4. Ms. Dai Hui (代慧) .... Cut-and-polished peridot — 1 Employee of our Cash and electronic gemstones Group payment 5. Mr. Xu Juntao ...... Cut-and-polished peridot — 1 Employee of our Bank transfer and gemstones Group electronic payment

Note: To the best knowledge and information of our Directors, the purchases made by our five largest customers during the Track Record Period were for personal use. Given the nature of the transactions, we consider the purchases made by each of them to be one-off in nature.

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To the best knowledge and belief of our Directors, except as otherwise indicated in the above tables, none of our Directors, their respective close associates, or any Shareholders who, to the knowledge of our Directors, owns more than 5% of the issued share capital of our Company had any interests in any of the five largest customers of our Group during the Track Record Period. To the best knowledge of our Directors, none of our five largest customers were also suppliers of our Group during the Track Record Period.

By-product offtake agreements

As of the Latest Practicable Date, we have entered into an industrial-grade peridot sands offtake agreement (as supplemented) and a basalt offtake agreement (as supplemented) with two Independent Third Party industrial customers, the key terms of which are set out below:

Peridot Sands Offtake Agreement Basalt Offtake Agreement Name of Customer: Anyang Jinrong Metallurgical Materials Jilin Yufeng Basalt New Material Co., Ltd.* Co., Ltd.* (安陽市金熔治金材料有限公司) (吉林宇豐玄武岩新材料有限公司)

Date of Agreement: May 15, 2020 as supplemented on February May 15, 2020 as supplemented on February 22, 2021 and May 10, 2021 22, 2021 and May 10, 2021

Product(s): Industrial grade peridot sands Basalt

Term of Agreement: Up to December 31, 2025 Up to December 31, 2025

Minimum purchase amount(s): Year 2023: 1,198 tonnes Year 2023: 6,000 tonnes Year 2024: 5,192 tonnes Year 2024: 30,000 tonnes Year 2025: 14,956 tonnes Year 2025: 100,000 tonnes

Payment terms: — Deposit of RMB100,000 within ten working days from the date of the relevant agreement, to be set off against payment for the last purchase order placed during the term

— 50% of each order amount within ten working days from placement of the relevant purchase order

— The remaining 50% balance of each order amount within 15 working days from product delivery

Termination: Upon (i) mutual agreement of the parties to the offtake agreement; (ii) occurrence of a force majeure event; (iii) non-performance due to breach of contract; or (iv) invalidated by order of a court or a competent authority

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Our Directors believe that the terms of the above offtake agreements are in line with industry practice.

Pricing

Colored gemstones are scarce natural resources, and are typically viewed as customer discretionary and luxury products. Unlike other resources, gemstones are non-standard products with prices varying significantly depending on a number of factors including color, clarity, cut, carat weight and origin of each individual gemstone. Prices of a gemstone can also be influenced by consumer preference and perception of its value over time.

As of the Latest Practicable Date, our YQS Nanshan Project was at the mine site infrastructure development and mine construction preparation stage and we only had a limited amount of sales of peridot gemstone products in the Track Record Period, during which the products sold to our customers were priced by taking into account the individual grade of each peridot gemstone and the domestic market prices in the PRC. As we are gearing towards commercial production, aiming to bring a consistent supply of carefully graded peridot gemstones to our customers and to execute our commercialization scheme targeting the more premium end of the market, we have revised our pricing strategy in 2021 to be more in line with our global brand and product positioning. We now price our products generally based on factors including (i) prices adopted by industry sources such as GemWorld; (ii) in-market pricing and quotations cited in the international market; (iii) prices of other colored gemstones; (iv) historical selling price of our products; and (v) the unit operating cost per carat of our peridot gemstones. Our present pricing strategy aims to match our target market segments, which will be accompanied by robust and creative marketing and promotional campaigns to further increase confidence in and awareness of our peridot.

When we commence commercial production, we will also be selling industrial-grade peridot sands and basalt as by-products. We intend to market these by-products within China. To the best of our understanding, there are ready markets for industrial grade peridot sands and basalt in China. Our industrial-grade peridot sands and basalt will be priced with reference to prevailing market prices, taking into consideration our production cost.

INVENTORY MANAGEMENT AND PROVISIONING POLICY

During the Track Record Period, our inventories primarily consisted of (i) raw materials, which were rough peridot extracted but had not undergone further processes of cutting and polishing; (ii) work in progress, comprising primarily rough peridot in the process of becoming cut-and-polished peridot; or cut-and-polished peridot in the process of being fabricated into

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BUSINESS jewelry; and (iii) finished goods, being primarily cut-and-polished peridot and jewelry. For the three years ended December 31, 2020, we had inventories of approximately RMB6.9 million, RMB8.4 million and RMB8.1 million, respectively.

We have adopted a perpetual inventory system and implemented guidelines with regard to inventory record keeping. When conducting stock-take, our inventory management department shall designate personnel who are not users or custodians of the inventories to participate in the stock-take as supervisors. Upon completion of the stock-take, an inventory report will be compiled and signed by the personnel conducting the stock-take and the supervisor. Our inventory management personnel are responsible for compiling records for all inventory movements and our finance department will conduct a comprehensive review of inventory balances biannually.

Our inventories are stated at lower of cost and net realizable value. Cost of our inventories is determined on the weighted average basis and, in the case of work in progress and finished goods, comprises direct materials, direct labor and an appropriate proportion of overheads. Net realizable value is based on estimated selling prices less any estimated costs to be incurred to completion and disposal. For details of our inventory provisioning policy, please refer notes 2.4 and 3 to the Accountants’ Report included in Appendix I to this document.

QUALITY CONTROL

We have adopted a set of quality control policies which covers, among others, raw material procurement, production process and product quality.

According to our quality control policies, procurement of raw materials shall be supported by duly executed procurement agreements. Quality inspection shall be performed on the technical indicators of the raw materials procured such as specifications, characteristics and/or content. Before consuming the raw materials, our production personnel shall conduct inspection and properly stock such raw materials in a designated area. All surplus materials after production and/or processing shall be duly returned to the warehouse.

Our production personnel are expected to observe our production process and product quality requirements and shall conduct self-inspection at the end of each relevant procedure. Our quality control personnel will supervise the overall production and processing quality. Finished products shall only be passed to the warehouse upon passing the quality inspection evidenced by a quality report. Our quality control personnel will also implement strict delivery inspection to ensure the quality of our finished products.

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COMPETITION

We are engaged in the international colored gemstones market. The overall global colored gemstones market is competitive and fragmented with many industry players. Our products are expected to compete directly with other colored gemstones in the luxury and jewelry markets, a majority of which enjoy better and more established market acceptance and consumer interests at present. According to the F&S Report, there are currently few recognized players in the global colored gemstones market, such as Gemfields Group Limited. Please see “Industry Overview — Competitive Landscape of Colored Gemstones Industry” in this document for more details.

According to the F&S Report, companies in the global colored gemstones market compete on the basis of, among other factors, quality and stable supply of colored gemstones, competitive marketing and branding strategies, as well as positive engagement to traceability, sustainability and transparency. We believe that we are well-positioned to effectively compete in the industry considering: (i) our YQS Nanshan Project held the largest amount of exploitable rough peridot as of December 31, 2020 among those identified internationally by Frost & Sullivan based on its independent research; (ii) our advantageous project location and cost-effectiveness; (iii) our mine-to-market business model which enables a unified global brand positioning and allows us to better internalize profit margin and offer traceability; and (iv) selective product mix that is adaptable to various market conditions. However, some of our competitors may have greater financial, marketing, distribution and other resources and technological capabilities than we do. In addition, as we have only sold a limited products produced using peridot collected during the exploration stage of our YQS Nanshan Project to date, the marketability of our peridot gemstone products is yet to be tested by the market in general. Please see “Risk Factors — Risks Relating to Our Business — Failure to compete effectively with our competitors may adversely affect our business and prospects.” in this document for more details.

RESEARCH AND DEVELOPMENTS

As we are yet to commence commercial production and we are at the mine site infrastructure development and mine construction preparation stage, we did not incur any research and development expense during the Track Record Period.

ENVIRONMENTAL PROTECTION, LAND REHABILITATION AND SOCIAL MATTERS

Environmental Protection

We are subject to certain national and local environmental protection laws and regulations in the PRC. These laws and regulations govern a broad range of environmental protection matters, including air pollution, noise emissions, water and waste discharge control and, in particular, geological environment protection and land rehabilitation. For further details about such laws and regulations, see “Regulatory Overview” in this document.

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We obtained the environmental impact assessment (“EIA”) approval for our YQS Nanshan Project from Environmental Protection Bureau of Yanbian Korean Autonomous Prefecture (延邊朝鮮族自治州環境保護局) and Environmental Protection Bureau of Dunhua City (敦化市環境保護局) on October 24, 2016 and December 17, 2018, respectively.

On May 17, 2021, we received a written confirmation from Ecological Environment Bureau of Yanbian Korean Autonomous Prefecture Dunhua Branch (延邊朝鮮族自治州生態環境局敦化市分局) which stated that (i) our YQS Nanshan Project was only subject to pollutant discharge registration, and accordingly, we are not required to apply for a pollutant discharge permit; (ii) we had completed the pollutant discharge declaration and registration according to relevant laws and regulations; (iii) we had obtained the environmental impact assessment approvals for our YQS Nanshan Project; (iv) as the mine site was at a mine construction preparation stage, relevant completion inspection and acceptance for the environmental protection facilities of our YQS Nanshan Project are not required until our mine construction is completed; and (v) we had complied with the relevant PRC environmental protection laws and regulations and had not been subject to any administrative penalties or investigations as a result of any breach of environmental protection laws and regulations. Ecological Environment Bureau of Yanbian Korean Autonomous Prefecture Dunhua Branch had not received any claim or complaint against us relating to the breach of any environmental protection laws and regulations.

Our PRC Legal Advisors advised that Ecological Environment Bureau of Yanbian Korean Autonomous Prefecture Dunhua Branch is the competent authority to issue the aforementioned written confirmation.

As of the Latest Practicable Date, we were not subject to any legal proceedings, administrative penalties or investigations for breach of environmental laws and regulations. Our Directors do not foresee any newly introduced or pending environmental regulations or programs that will have a material operational and financial impact on our Group in the near term.

Environmental Impact of Our Mining Activities and Relevant Policies

In light of the various potential environmental impacts which may arise during the operations of our YQS Nanshan Project, we intend to adopt the following measures to mitigate such potential impacts:

(a) Water management

The potential negative impact of our YQS Nanshan Project to surface water and ground water are mainly associated with indiscriminate discharge of untreated production and domestic waste water. In addition, our YQS Nanshan Project may potentially cause change to the groundwater

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BUSINESS table. In accordance with the recommendations of our Independent Technical Consultant, we plan to construct sedimentation ponds on site and drainage ditches on the periphery of the mine site to direct rainwater away from our mine site.

(b) Waste Rock Management

As provided for in the Competent Person’s Report, the waste rocks generated by our YQS Nanshan Project will be reused for industrial site construction and serve as backfill for our underground mine excavations.

Dust emission sources for our YQS Nanshan Project will potentially arise from drilling, loading and unloading, explosion, crashing, screening, fill station and movement of vehicles and mobile equipment. In addition, exhaust gas from boiler room and kitchen may also contaminate the ambient air. In this regard, we will follow the proposed air management measures recommended in our EIA reports produced by Jilin Metallurgy Research Institute* (吉林省冶金研究院) and Jilin Haorong Technology Development Company Ltd* (吉林昊融技術開發有限公司) in November 2016 and December 2018 respectively and endorsed in the Competent Person’s Report, including, amongst others, conducting wet drilling and ventilation, installing dust removers for our mine processing and backfilling, setting speed limit on vehicles traveling in our mine site, and conducting water sprinkling on our haul road(s).

(d) Noise emissions

The potential main sources of noise emissions for our YQS Nanshan Project will include drilling, blasting, air compressor, loader, processing, backfilling and vehicles. We intend to adopt measures including the use of advanced explosion techniques, adoption of shock absorption during equipment installation, use of equipment with low noise and conducting regular maintenance on our equipment to minimize the noise emission impact.

(e) Hazardous materials management

According to the Competent Person’s Report, the hazardous materials for our YQS Nanshan Project will consist mainly of fuels and waste oils. According to our management’s estimates, we will only need around 200 liters (one barrel) of diesel as our onsite diesel reserve, which will be stored with secondary containment. For general diesel refueling for our onsite equipment, we will arrange oil companies to transport diesel to our mine site for refueling, and equipment maintenance will be conducted by maintenance companies. Hence no waste oil is expected to be stored on site.

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For further details on key environmental assessments and recommended measures to alleviate or minimize relevant environmental impact, see “Competent Person’s Report — 19.5 Key Environmental and Social Aspects” in Appendix IV to this document.

Land Rehabilitation and Soil and Water Conservation

China has promulgated environmental protection laws and regulations in relation to mine closure and land rehabilitation. Under these laws and regulations, we are required to prepare a site closure report and submit a site closure application to the relevant authority for assessment and approval if our YQS Nanshan Project is to be closed down.

Pursuant to the relevant PRC laws and regulations, we are responsible for the rehabilitation of land in relation to our mining activities and are required to submit a land rehabilitation plan to the Ministry of Natural Resources of the PRC (中華人民共和國自然資源部) or the local land and resources branch for examination when applying for or renewing our mining license. Before commencing mining activities, we are required to deposit a land rehabilitation fund in the amount, and in the bank account as agreed with the local land and resources branch. The land rehabilitation fund is still owned by us, while the purpose of depositing these funds are for the mine geological environment governance and restoration in the future, and the use of these funds is under continuous supervision of the local land and resources branch. As of the Latest Practicable Date, we have deposited an amount of RMB250,000 in a bank account as agreed with the relevant authority in accordance with the relevant requirements.

We have prepared a land rehabilitation plan which was reviewed by the Prevention of Geological Hazards Association of Jilin Province (吉林省地質災害防治工程協會). As of December 31, 2020 we had made provision totaling RMB961,000 for land rehabilitation and mine closure of our YQS Nanshan Project. For calculation of the provision of rehabilitation costs and relevant accounting treatment, see note 23 of the Accountants’ Report set out in Appendix I to this document. We have also prepared a geological environmental protection and recovery plan for our YQS Nanshan Project. According to the Independent Technical Consultant, our recovery plan is in line with the relevant recognized industry practices in China. We endeavor to develop an operational closure planning process for our YQS Nanshan Project that not only complies with relevant PRC regulatory requirements but also incorporates internationally recognized industry practices. For details of such site closure planning, see “Competent Person’s Report — 19.5.10 Site Closure Planning and Rehabilitation” in Appendix IV to this document.

According to a written confirmation issued by the Natural Resources Bureau of Dunhua City (敦化市自然資源局) on May 28, 2021, they were not aware of our Group being subject to any administrative penalties or investigation as a result of breach of the relevant land rehabilitation laws and regulations and the Natural Resources Bureau of Dunhua City had no disputes with our Group. We have been advised by our PRC Legal Advisors that the Natural Resources Bureau of

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Dunhua City is the competent authority to issue the above written confirmation. We have also obtained a written confirmation issued by the Water Resources Bureau of Dunhua City (敦化市水利局) on May 17, 2021, confirming that (i) we have been in compliance with applicable soil and water conservation laws and regulations; (ii) they have not received any claim or complaint against us relating to the breach of any soil and water conservation laws and regulations; and (iii) they have no disputes with us. We have been advised by our PRC Legal Advisors that the Water Resources Bureau of Dunhua City is the competent authority to issue the above written confirmation.

As of the Latest Practicable Date, we were not subject to any legal proceedings, administrative penalties or investigations for breach of land rehabilitation or soil and water conservation laws and regulations.

Social and Local Community Concerns

Our YQS Nanshan Project is located in Emu Town, Dunhua City of Jilin Province and is generally surrounded by forests. The nearest village is Yiqisong Village which is approximately 3.2 km from our mine site. The area within a 3.2 km radius of the mine site is uninhabited. According to the Competent Person’s Report, there are no natural reserves or significant cultural heritage sites within or surrounding our YQS Nanshan Project site. According to the Competent Person’s Report, local residents mentioned that land disturbance and wild animals are the key environmental concerns for the development of our YQS Nanshan Project. Our Independent Technical Consultant recommended us to maintain communication with surrounding community during our mine construction and mining operations and listen to their opinions in a timely manner.

During the Track Record Period and up to the Latest Practicable Date, we had not received any non-compliance notice or complaint in relation to the development of our YQS Nanshan Project on environmental or social matters, and we had not received any notice from non-governmental organizations in relation to any actual or potential impact on the sustainability of our YQS Nanshan Project.

As of the Latest Practicable Date, to the best of the knowledge and belief of our Directors, neither the local governments nor the local communities had raised any concern in relation to the development of our YQS Nanshan Project that may have a material adverse effect on our business, results of operations and prospect.

Other Social Responsibilities

We believe acting in a socially responsible way is an integral part of our business model. In line with our mission and our promotion of the symbolic message “Peridot, the Gift of Light and Hope”, we are committed to supporting and participating in charitable and socially responsible

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BUSINESS projects to extend benefits to other communities. As an example, we have made charitable donations to the National Emergencies Trust’s Coronavirus Appeal to deliver supplies and services to those in urgent need amidst the COVID-19 pandemic.

According to our EIA reports, survey participants showed 100% support for the construction of our YQS Nanshan Project, whereby local residents stated their belief in our YQS Nanshan Project to improve the development of local economy. See “Appendix IV — Competent Person’s Report — 19.5.12 Social Aspects” in this document for further details.

WORK SAFETY AND OCCUPATIONAL HEALTH

We have conducted preliminary evaluation of occupational disease hazards with regard to our YQS Nanshan Project, and have prepared and filed the Occupational Hazard Pre-evaluation Report (職業病危害預評價報告) and the Report of Facility Design for Controlling Occupational Hazard (職業病防護設施設計專篇) which cover, among others, analysis and evaluation of the possible occupational disease hazards of our YQS Nanshan Project, as well as the facilities and protection measures to be adopted for the prevention and control of such occupational diseases. Upon commercial production and in accordance with the relevant requirements, we will establish an occupational health and safety management system to ensure our workplace safety and occupational health of our YQS Nanshan Project through the formulation and implementation of a comprehensive set of safety management procedures, equipment operating rules and emergency handling procedures.

We have obtained the Opinion on the Safety Permit for Non-coal Mine Construction Project (非煤礦礦山建設項目安全許可意見書) issued by the Safety Supervision and Administration Bureau of Jilin Province (吉林省安全生產監督管理局) and the Department of Emergency Management of Jilin Province (吉林省應急管理廳) on April 6, 2017 and July 5, 2019, respectively.

On May 14, 2021, we received a written confirmation from the Emergency Management Bureau of Dunhua City (敦化市應急管理局) which stated that (i) we have sufficient principals and safety production management personnel, who have obtained the requisite qualification certificates in accordance with relevant laws and regulations; (ii) we are not required to obtain a safety production permit until completion of construction of our YQS Nanshan Project and relevant inspection; (iii) we had been in compliance with the relevant PRC safety production laws and regulations and had not been subject to any penalty or investigation as a result of breach of safety production laws and regulations; and (iv) the Emergency Management Bureau of Dunhua City had not received any claim against us for any breach of any safety production laws and regulations.

We have been advised by our PRC Legal Advisors that the Emergency Management Bureau of Dunhua City is the competent authority to issue the above written confirmation.

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According to a written confirmation from the Health Bureau of Dunhua City (敦化市衛生健康局) dated May 17, 2021, given that the occupational disease protection facilities was at the mine construction preparation stage, upon completion of our mine construction, we can prepare and review the evaluation report of occupational disease hazard control effect in accordance with the applicable law, and form a written report on the evaluation process of occupational disease hazard control effect for future reference. The Health Bureau of Dunhua City further confirmed in their confirmation that (i) they were not aware of any legal obstacles that may hinder the completion and acceptance of such facilities; (ii) we had been in compliance with the relevant laws and regulations in relation to occupational disease prevention; (iii) we had not been subject to any penalty or investigation as a result of breach of occupational disease prevention laws and regulations; and (iv) they have not received any claim against us for any breach of any occupational health prevention laws and regulations.

We have been advised by our PRC Legal Advisors that the Health Bureau of Dunhua City is the competent authority to issue the above written confirmation.

We have established rules and procedures for recording and handling occupational health and work safety accidents. Our work safety personnel will closely monitor the working conditions of our mine site and take prompt actions to eliminate and control occupational health and work safety risks.

As of the Latest Practicable Date, to the best knowledge and belief of our Directors, there had not been any occupational health or work safety accident or any claim arising from such accident that would have a material adverse effect on our business, financial condition and results of operations.

INTELLECTUAL PROPERTY

As of the Latest Practicable Date, we have filed trademark applications, and have successfully registered a number of trademarks that are considered relevant to our business and operations in China, Hong Kong, the European Union and the UK. We have also filed applications for one trademark in China and six trademarks in Hong Kong as of the Latest Practicable Date. See “Statutory and General Information — B. Further Information about Our Business — 2. Intellectual Property Rights of Our Group” in Appendix VI to this document.

As of the Latest Practicable Date, we were not involved in any disputes or litigation relating to the infringement of intellectual property rights, nor are we aware of any such claims either pending or threatened.

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PROPERTIES

Land Used by Our YQS Nanshan Project

Our YQS Nanshan Project is located in Emu Town, Dunhua City of Jilin Province, PRC. To facilitate our mining and ore processing operations, we plan to establish our above-the-ground facilities, as well as the main access road to our mine site within the forest land of 4.5488 ha (equivalent to 45,488 m2) (the “Construction Area”). According to relevant PRC laws and regulations, in order to facilitate mine construction within the Construction Area, we are required to, among others, (i) compensate the relevant right holders of the Construction Area; (ii) obtain approval from the natural resources administrative authorities for the conversion of forest land into construction land; and (iii) obtain relevant land use rights from the natural resources administrative authority.

As of the Latest Practicable Date, we had (i) entered into compensation agreements for the use of the Construction Area with the then existing right holders, under which we had paid the agreed compensation amount in full; (ii) obtained two Approvals to the Construction Land Use of our YQS Nanshan Project (建設用地批覆) from the Department of Natural Resources of Jilin Province (吉林省自然資源廳) (the “Land Conversion Approvals” and each a “Land Conversion Approval”) for the conversion of state-owned agricultural land to construction land as well as the use of state-owned unused land totaling 4.5488 ha, for the purposes of developing our YQS Nanshan Project; (iii) obtained two Planning Permits for Construction Land (建設用地規劃許可證) in respect of an aggregate of 28,421.96 m2 (or 2.8422 ha) of site area; and (iv) entered into two State-owned Construction Land Use Right Assignment Contracts (國有建設用地使用權出讓合同) (the “Land Use Right Contracts” and each a “Land Use Right Contract”) with, and obtained the corresponding Real Estate Title Certificates (不動產權證書) from, the Natural Resources Bureau of Dunhua City regarding an aggregate site area of 28,421.96 m2 (or 2.8422 ha).

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The following map illustrates the location of the Mining Licensed Area as well as the Construction Area (comprising the west main construction area, east supporting construction area and the main access road) of our YQS Nanshan Project:

Mine License Area (1,673,100 m2)

West main construction area/ Y879-1 plot (25,706.3 m2)

East supporting construction area/ Y879-2 plot (2,175.66 m2)

Main Access Road (17,066 m2)

West main construction area/ East supporting Y879-1 plot construction area/ (25,706.3 m2) Y879-2 plot (2,716.66 m2)

Mine License Area (1,673,100 m2)

The Land Conversion Approvals

On January 19, 2020, the Department of Natural Resources of Jilin Province issued the Land Conversion Approval, pursuant to which it agreed that 1.3087 ha (equivalent to 13,087 sq.m) of state-owned agricultural land will be converted into construction land, and 1.5335 ha (equivalent to 15,335 sq.m) of state-owned unused land will be used as construction land (in aggregate 2.8422 ha (or 28,422 sq.m)). On April 25, 2021, the Department of Natural Resources of Jilin Province issued a further Land Conversion Approval, pursuant to which it agreed that the remaining 1.7066 ha (equivalent to 17,066 sq.m) of forest land will be converted into construction land.

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Right Holders’ Compensation

On January 10, 2018, we have entered into compensation agreements with the four right holders concerning the Construction Area. Details of each of the compensation agreements are set forth below:

Compensation Right holders Type of rights amount

(RMB) Changbaishan Forest Industry Group Land use right 2,365,245 Huangnihe Forestry Co., Ltd.* (長白山森工集團黃泥河林業有限公司) (Forestry Bureau of Huangnihe (黃泥河林業局)) ......

Mr. Zhao Lei (趙磊) ...... Contracted management right 105,000

Ms. Xu Yanqiu (徐艷秋) ...... Brown frog farming right 60,000

Ms. Zhao Ying (趙英) ...... Brown frog farming right 300,000

The Land Use Right Contracts

On July 7, 2020, Yanbian Fuli entered into a Land Use Right Contract with the Natural Resources Bureau of Dunhua City, pursuant to which the Natural Resources Bureau of Dunhua City agreed to assign the Y879-1 state-owned land plot located at our YQS Nanshan Project site with an aggregate site area of 25,706.3 sq.m for the use of mining purpose (the “Y879-1 Contract”). The valid term of the Y879-1 Contract is 28 years commencing on July 8, 2020. Yanbian Fuli agreed to pay the Natural Resources Bureau of Dunhua City an assignment charge of RMB4,617,300, which was fully effected prior to July 7, 2020. On the same date, Yanbian Fuli also entered into another Land Use Right Contract with the Natural Resources Bureau of Dunhua City, for the assignment of the Y879-2 state-owned land plot located at our YQS Nanshan Project site with an aggregate site area of 2,715.66 sq.m for the use of mining purpose (the “Y879-2 Contract”). The valid term of the Y879-2 Contract is 28 years commencing on July 8, 2020. Yanbian Fuli agreed to pay the Natural Resources Bureau of Dunhua City an assignment charge of RMB494,700, which was fully effected prior to July 7, 2020. Yanbian Fuli further obtained the Real Estate Title Certificates on June 8, 2021 in respect of these two parcels of land from the Natural Resources Bureau of Dunhua City.

As advised by our PRC Legal Advisors, the Y879-1 Contract and Y879-2 Contract are legal, valid and binding against the parties under the PRC law. Yanbian Fuli has obtained the relevant Real Estate Title Certificates and is entitled to possess, use, lease, mortgage and transfer independently such land in accordance with the PRC law. With regard to the remaining 1.7066 ha

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(equivalent to 17,066 sq.m) of forest land, upon issuance of the relevant Real Estate Title Certificate, Yanbian Fuli is entitled to possess, use, lease, mortgage and transfer independently such land in accordance with the PRC law.

According to the confirmation letters issued by the Natural Resources Bureau of Dunhua City and Forestry Bureau of Huangnihe on May 28, 2021 and May 31, 2021 respectively, (i) the Natural Resources Bureau of Dunhua City is the competent authority in charge of the use of land by Yanbian Fuli, and Forestry Bureau of Huangnihe is the competent authority in charge of the use of forest land by Yanbian Fuli; (ii) Yanbian Fuli is entitled to use the forest land for the purpose of mine construction before obtaining the relevant Real Estate Title Certificates, and neither authority would investigate or penalize, nor will they interfere with Yanbian Fuli’s use of the relevant land; (iii) with regard to the 1.7066 ha (equivalent to 17,066 sq.m) of land for which Yanbian Fuli is applying for state-owned land use rights, the Natural Resources Bureau of Dunhua City intends to enter into the relevant Land Use Right Contract and register the related Real Property Title Right in accordance with relevant laws. The Natural Resources Bureau of Dunhua City has confirmed that there is no legal impediment that would prevent Yanbian Fuli from obtaining the relevant Real Property Title Certificate.

Our PRC Legal Advisors had advised that the Natural Resources Bureau of Dunhua City and Forestry Bureau of Huangnihe are the competent authorities to issue the above written confirmations.

As of the Latest Practicable Date, our Directors were not aware of any claims that may exist over the forest land on which our mining activities had been or would be carried out. We believe that we will be able to continue to use the relevant forest land within the Construction Area without any difficulty.

Temporary Building and Structure

As of the Latest Practicable Date, we have installed two temporary structures, one of which is for storage purpose with a floor area of 330 sq.m, and the other being a temporary retaining wall of 500 lane meters. Both temporary structures are located in the Construction Area.

We have obtained a written confirmation issued by the Housing and Urban-Rural Development Bureau of Dunhua City (敦化市住房和城鄉建設局) on May 17, 2021, confirming that (i) they were aware of the construction of such temporary structures, which does not violate the planning of the area; (ii) they have not and will not investigate or penalize Yanbian Fuli for the construction of such temporary buildings and structures; and (iii) Yanbian Fuli can continue to use those temporary buildings and structures in accordance with the current purposes.

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Our PRC Legal Advisors have advised that the Housing and Urban-Rural Development Bureau of Dunhua City is the competent authority to issue the above written confirmation. Based on the above confirmation letter, our PRC Legal Advisors are of the view that Yanbian Fuli has received the approval from the competent authority to use the relevant temporary structures under the existing purposes, provided that it will demolish such temporary building and structure upon the expiration of the land use right, or other planning implemented by competent authorities.

Other Properties

As of the Latest Practicable Date, we leased 13 properties for office, residential, processing and sales, and parking purposes located in Beijing and Jilin, with an aggregate floor area of approximately 1,445.43 sq.m.

As of the Latest Practicable Date, leases of nine of these 13 properties with an aggregate floor area of approximately 930.65 sq.m were not registered with relevant government authorities. All of these properties are used or planned to be used as offices, employees’ dormitories, pilot showrooms, an employee canteen and a carpark. Our PRC Legal Advisors have advised that we may be subject to a fine of RMB1,000 to RMB10,000 by relevant government authorities for each of these nine properties. With respect to six of these 13 leased properties, the relevant lessors did not provide us with relevant title ownership certificate evidencing their rights to lease the properties to us. These six properties have an aggregate floor area of approximately 374.79 sq.m, which are used or planned to be used as employees’ dormitories, an employee canteen and a carpark. Based on the advice of our PRC Legal Advisors, if the lessors of the relevant leased properties do not have the requisite rights to lease the relevant leased properties, we may be required to vacate from the relevant properties. In addition, one of the 13 properties licensed for industrial and warehousing was leased to us for office use. Our Directors are of the view that the replacement properties for these properties are readily available and the total cost of relocation would not be material. In the event that we are required to terminate our usage of these properties, our operations located at these properties could be relocated to new sites without material interruption to our business, and our financial condition would not be materially affected as a result thereof. As of the Latest Practicable Date, our operations located at the above-mentioned properties have not been disrupted due to non-registration of our lease agreements or third-parties’ challenge on the lessors’ right to lease the relevant properties to us, nor have we received any notice of administrative orders or penalties from the competent authorities.

As of the Latest Practicable Date, we had also leased one property in Hong Kong for office use, and had entered into a license agreement regarding the lease of one property in the UK for office use.

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We did not directly or indirectly hold or develop properties for letting or retention as investments, nor did we purchase or develop properties for subsequent sale or for retention as investments. Details of the property valuation together with the summary of valuation and valuation certificates from our property valuer are set out in Appendix III to this document.

EMPLOYEES

As of the Latest Practicable Date, we had a total of 57 full-time employees. The following table sets forth a breakdown of our employees by function:

Number of Function employees Management ...... 12 Quality control ...... 2 Production and processing ...... 12 Sales and marketing ...... 13 Finance and accounting ...... 8 Administration, compliance and human resources ...... 10 Total ...... 57

During the Track Record Period and up to the Latest Practicable Date, we did not experience any significant difficulties in recruiting suitable employees for our business operations. Neither did we have any material dispute with our employees, nor did we experience any strike, labor disputes or industrial actions that may have a material adverse effect on our business, financial condition and results of operations.

Recruitment and Remuneration

We believe that our employees are among the most valuable assets of our Group and have contributed to the success of our Group. We recruit our employees mainly based on the experience of their respective fields, as well as their educational backgrounds.

Training

We provide our employees with formal and on-the-job training to enhance their technical skills as well as knowledge of industry quality standards and workplace safety.

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Employee Relationship

We believe that we have maintained good relationships with our employees and our management policies, working environment, developmental opportunities and employee benefits have contributed to maintaining good employee relations and enhancing employee retentions.

Welfare or Mandatory Contribution

Pursuant to the relevant PRC laws and regulations, our PRC subsidiaries are required to make contributions to, and our PRC employees are required to participate in, a number of social security funds, including funds for endowment insurance, medical insurance, unemployment insurance, employment injury insurance and maternity insurance, and the housing provident fund. For further details, see “Regulatory Overview” in this document. In Hong Kong, we operate a mandatory provident fund scheme prescribed by the Mandatory Provident Fund Schemes Ordinance (Chapter 485 of the Laws of Hong Kong) for all of our employees in Hong Kong who are eligible to participate in the scheme. In the United Kingdom, under the Pensions Act 2008, employers will have an obligation to automatically enroll eligible employees into a workplace pension scheme that meets certain qualifying criteria and to make mandatory minimum contributions relating to those employees.

As of the Latest Practicable Date, we had fully contributed to the housing provident fund, social insurance and relevant pension schemes for our employees, and had complied with the applicable labor laws and regulations in all material aspects.

INSURANCE

As of the Latest Practicable Date, we had maintained the required PRC employees’ social benefits insurance in accordance with the relevant PRC laws and regulations in all material respects. In respect of our employees in Hong Kong, we have maintained an employees’ compensation insurance in compliance with the Employees’ Compensation Ordinance (Chapter 282 of the Laws of Hong Kong) to cover compensation and costs liable by our Group for personal injuries to employees in Hong Kong in the course of employment with us. We have also maintained relevant labor insurance under the local laws and regulations of the UK.

We have obtained insurance coverage for motor vehicles and the inventories in our operation center located in Dunhua City, including rough peridot gemstones, cut-and-polished peridot gemstones and jewelry. During the Track Record Period and up to the Latest Practicable Date, we did not make any claims under our insurance policies that had a material adverse effect on our business, financial condition or results of operations.

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Except for the above, we do not maintain any other insurance. In particular, we do not maintain any fire, earthquake, liability or other property insurance with respect to our properties, facilities, or inventories other than those located in our Dunhua office, nor do we maintain any business interruption insurance or third-party insurance against claims for property damage, personal injury or environmental protection.

While we believe that our insurance coverage is adequate and in line with the industry norm in the PRC, it may be insufficient to cover losses associated with material accidents or property damages, or claims arising from product liabilities, patent infringement, environmental protection liabilities, distributor terminations, commercial contracts, antitrust or competition law, employment law and employee benefit issues, and other regulatory matters. For risk against insufficient insurance coverage, see “Risk Factors — Risks Relating to our Business — We may not be adequately insured against losses and liabilities arising from our operations” in this document. Our Directors and senior management will closely review the risks relating to our operations and adjust our insurance coverage as we continue to expand our business.

During the Track Record Period, we did not experience any business interruptions or losses or damages to our facilities that had a material adverse effect on our business, financial condition or results of operations.

LICENSES AND PERMITS

We are required to obtain various licenses, permits and certificates for our YQS Nanshan Project. As advised by our PRC Legal Advisors, during the Track Record Period and as of the Latest Practicable Date, we have obtained all material licenses, permits and approvals for the current state of our preparation of mine construction.

Mining License

We hold a Mining License in respect of our YQS Nanshan Project, and the particulars of which are set forth below:

Holder of Mining License: Yanbian Fuli

Mine site name: Dunhua City Yiqisong Nanshan Peridot Mine* (敦化市意氣松南山橄欖石寶石礦)

Mining License number: C2200002016127110143443

Resource type: Gemstones

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Mining method: Underground mining

Approved production volume: 300,000 tonnes per year

Mining Licensed Area: 1.6731 km2

Period of validity: December 8, 2016 to December 8, 2026(Note)

Issuing authority: Department of Land and Resources of Jilin Province (吉林省國土資源廳) (currently known as the Department of Natural Resources of Jilin Province)

Note: According to the written confirmation issued by the Natural Resources Bureau of Dunhua City on May 28, 2021, the Mining License can be extended for another ten years upon expiry of its existing term provided that we comply with the requirements for extension under relevant PRC laws. We intend to extend the Mining License during the mine life of our YQS Nanshan Project. As advised by our PRC Legal Advisors, according to the aforesaid written confirmation and the currently applicable PRC laws and regulations, we are required to apply for the extension of our current Mining License 30 days before its term expires, and if we meet all the procedural and substantive requirements and conditions then prevailing prescribed by the competent government authority, there will be no material legal impediment for us to obtain approval of the extension from the authority.

During the Track Record Period and as at the Latest Practicable Date, we did not pledge our mining rights under our Mining License to secure our borrowings.

Other major licenses, permits and approvals

The following table sets forth a summary of our material licenses, permits and approvals that we have obtained for our operations and remained valid and effective as of the Latest Practicable Date:

Authority granting Description of license/permit/approval license/permit/approval Date of issuance Validity period Mining License ...... Department of Land and Resources December 8, 2016 Ten years of Jilin Province

Approval of the Environmental Impact Environmental Protection Bureau October 24, 2016 — Report of YQS Nanshan Project (關於延 of Yanbian Korean Autonomous 邊富麗橄欖石礦有限公司意氣松南山橄欖 Prefecture 石寶石礦項目環境影響報告書批覆) ....

Opinion on the Safety Permit for Non-coal Work Safety Supervision April 6, 2017 — Mine Construction Project ...... Administration Bureau of Jilin Province

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Authority granting Description of license/permit/approval license/permit/approval Date of issuance Validity period Approval of Application for Water Use (關 Water Resources Bureau of Dunhua December 10, 2018 — 於同意延邊富麗橄欖石礦業有限公司取水 City 許可申請的批覆) ......

Reply to the Environmental Impact Report Environmental Protection Bureau December 17, 2018 — of the Expansion of YQS Nanshan Project of Dunhua City (關於延邊富麗橄欖石礦業有限公司意氣松南山橄欖石寶石礦擴建項目環境影響報告書的批覆) ......

Opinion on the Safety Permit for Non-coal Department of Emergency July 5, 2019 — Mine Construction Project ...... Management of Jilin Province

Approval to the Construction Land Use of Department of Natural Resources January 19, 2020 — the YQS Nanshan Project in respect of of Jilin Province 2.8422 ha of land ......

Registration Receipt of Pollutant Emission Ministry of Ecology and October 26, 2020 Five years for Stationary Pollution Sources (固定污 Environment of the People’s 染源排污登記回執) ...... Republic of China (中華人民共和國生態環境部)

Approval to the Construction Land Use of Department of Natural Resources April 25, 2021 — the YQS Nanshan Project in respect of of Jilin Province 1.7066 ha of land......

Planning Permit for Construction Land (建設 Natural Resources Bureau of May 24, 2021 — 用地規劃許可證) (No. Dizi Dunhua City 222403202100004) in respect of 25,706.3 sq.m for the west main construction area .

Planning Permit for Construction Land (建設 Natural Resources Bureau of May 24, 2021 — 用地規劃許可證) (No. Dizi Dunhua City 222403202100005) in respect of 2,715.66 sq.m for the east supporting construction area ......

Real Estate Title Certificate (Ji (2021) Natural Resources Bureau of June 8, 2021 — Dunhua City Bu Dong Chan Quan No. Dunhua City 0005903) (吉(2021)敦化市不動產權第 0005903號) in respect of the east supporting construction area ......

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Authority granting Description of license/permit/approval license/permit/approval Date of issuance Validity period Real Estate Title Certificate (Ji (2021) Natural Resources Bureau of June 8, 2021 — Dunhua City Bu Dong Chan Quan No. Dunhua City 0005904) (吉(2021)敦化市不動產權第 0005904號) in respect of the west main construction area ......

Licenses to be obtained

Licenses for construction

We set out below material licenses, permits and approvals to be obtained for the formal construction of our mine site and our onsite ore processing facilities:

General validity Key requirements for the relevant licenses, Expected period from the date Licenses, permits and approvals permits and approval time of grant of grant Planning Permit for Construction Land (a) approval and filing of the 2021 — in respect of 17,066 sq.m of land(1) construction project; and

(b) the Land Use Right Contract

Real Property Title Certificate in respect —— of 17,066 sq.m of land

Planning Permit for Construction Project (a) the design scheme of the Two years (建設工程規劃許可證) construction project; and

(b) land use right or land ownership certificates

Construction Permit the [REDACTED] and other supporting 2022 Three months(2) (建築施工許可證) documents required by applicable laws and regulations

Notes:

(1) We have obtained two planning permits for construction land for the west main construction area and the east supporting construction area of a total of 28,421.96 sq.m. The outstanding permit relates to 17,066 sq.m. for the main access road to our YQS Nanshan Project mine site. (2) A construction entity shall commence construction within three months from the date of obtaining the construction permit. The construction permit may be extended twice subject to application in due course, each for a period of three months. The construction permit will be automatically annulled if the construction project has not commenced within the prescribed time limit (or extended time limit in the case of successful application for extension).

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Licenses for commercial production

We set out below material licenses, permits and approvals to be obtained for our commercial production:

General validity Expected time period from the Licenses, permits and approvals Key requirements for the relevant licenses, permits and approval of grant date of grant • Approval on the Inspection (a) matters included in the relevant design and stipulated in the 2023 15 days(1) and Acceptance of the construction contract for the construction project being completed; Completion of Construction (b) complete technical archives and construction management materials; Project (建設工程竣工驗收) (c) test reports of major building materials, components, fittings and equipment used for the construction project being completed; (d) quality conformity documents as signed respectively by the relevant surveyor, designer, construction contractor, project supervisor and other contractors; and (e) warranty for the repair of construction project as signed by the construction contractor concerned

• Approval on the Inspection (a) upon completion of a construction project, the construction entity Five working and Acceptance of shall inspect, monitor and record the construction and commission days(2) Completion of Environmental environmental protection facilities of the construction project, and Protection Facilities (環境保 prepare a report on acceptance inspection and monitoring; 護竣工驗收) (b) disclosure of information relevant to the completion date, the starting and ending date for addressing the shortfalls and the acceptance report to be disclosed to the public through the construction entity’s website or other means; (c) while disclosing the above information, relevant information shall be submitted to the local environmental protection administrative department for inspection and acceptance; and (d) the acceptance report shall be made public within five working days upon completion, for a period of no less than 20 working days

• Evaluation Report on Safety After completion of constructions but prior to commencement of — Production Completion (安全 production or use, the inspection and acceptance of the safety 生產竣工驗收評價) facilities shall be arranged with a written report to be prepared for future reference(3)

• Evaluation Report on the (a) an evaluation of the efficiencies of the facilities for the prevention — Efficiencies of Facilities on and control of occupational disease hazards control shall be the Prevention and Control of conducted and a report shall be prepared during the construction Occupational Disease Hazards project prior to final acceptance(4); and (職業病危害控制效果評價與 (b) facilities for the preventions and control of occupational diseases 防護設施驗收) hazards of construction projects, which fails to pass acceptance in accordance with the relevant requirements shall not go into production

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General validity Expected time period from the Licenses, permits and approvals Key requirements for the relevant licenses, permits and approval of grant date of grant • Filing of Completion (a) the construction entity shall report to the competent fire department — Acceptance of Fire Prevention within five working days from the date of passing the completion Facilities (消防設施竣工驗收) acceptance of fire prevention facilities of the construction projects; and (b) fire control acceptance record-filing, project completion acceptance report and the drawings of construction projects shall also be submitted

• Safety Production Permit An entry shall meet the following work safety conditions: Three years(5) (安全生產許可證) (i) establishing a sound responsibility system for work safety, and formulating a whole set of work safety regulations and operating rules; (ii) investment in safety facilities which meets work safety requirements; (iii) setting up a management department with full-time personnel for work safety; (iv) key person(s)-in-charge and work safety management personnel shall have passed the work safety appraisal; special operation personnel shall have passed the appraisal conducted by the competent authority, and have obtained qualification certificates for special operations; (v) employees are qualified through work safety education and training, participation in industrial injury insurance in accordance with the requirements related to the worksites, safety facilities, equipment and processes which meet the requirements of the laws, regulations, standards and rules related to work safety; (vi) formulating preventive measures against occupational hazards, providing employees with labor protections which meet the national and industrial standards, conducting safety evaluation in accordance with the law, formulating measures for testing, assessing and monitoring sources of grave danger, as well as contingency plans, formulating emergency rescue plans for work-related accidents, setting up departments or appointing personnel to be in charge of emergency rescue, and provide them with the necessary emergency rescue materials and equipment; and (vii) other conditions as provided for by laws and regulations

• Real Property Ownership When registering for state-owned construction land use rights and/or for 2024 — Certificate for Building real property ownership for the first time, the applicant shall submit, (建築部分的不動產證) as part of the application: (i) any real property ownership certificate in question or materials evidencing the origin of the land ownership; (ii) materials evidencing the compliance with the construction plan; (iii) materials evidencing the completion of the construction project in question; (iv) investigation or surveying reports relating to the subject property; (v) payment proof of relevant taxes; and (vi) other requisite materials

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Notes:

(1) The construction entity shall, within 15 days from the date of passing the acceptance of the construction project, file a record with the competent construction department of the local people’s government at or above county level in accordance with the relevant requirements construction in the place where the construction project is located.

(2) Within five working days after the expiration of the publicity period of the acceptance report, the construction entity shall log on to the National Information Platform for the Approval on the Inspection and Acceptance of Completion of Environmental Protection Facilities, fill in the basic information of the construction project, the acceptance of environmental protection facilities and other relevant information, and the competent environmental protection department shall disclose the above information through public means.

(3) The key requirements for inspection and acceptance of the safety facilities upon completion include (i) selecting construction units with appropriate qualifications for construction; (ii) carrying out construction in accordance with the design documents for safety facilities of the construction project; (iii) the construction quality meets the requirements in the design documents for safety facilities of the construction project; (iv) the construction of safety facilities of a construction project conform to the relevant construction technical standards of the State; (v) selecting a qualified safety evaluation institution to carry out safety acceptance evaluation; (vi) passing the safety acceptance evaluation, the safety installations and conditions for safe production conform to the provisions of the relevant laws, regulations, rules on production safety, national standards or industrial standards and technical norms; (vii) no unrectified hidden accidents during the trial operation of the construction project; (viii) establishing the department for the administration of production safety; (ix) having personnel for the administration of production safety, the employees receiving education and training in production safety; and (x) other conditions as required pursuant to the relevant laws and regulations.

(4) The report shall comply with the requirements of the relevant occupational disease prevention and control laws, regulations, rules and standards, mainly containing the overview of construction projects, the analysis and evaluation of the implementation of the design of the protective devices against occupational diseases, the analysis and evaluation of the testing and operation of the protective devices against occupational diseases, the analysis and evaluation of the testing results of occupational disease hazardous factors in workplaces, the analysis and evaluation of the routine monitoring results of occupational disease hazardous factors in workplace, as well as the analysis and evaluation of the extent of damage of occupational disease hazardous factors to the health of employees.

(5) A work safety license is valid for three years. If a work safety license needs to be extended upon its expiration, the enterprise shall go through the extension procedures three months prior to such expiration with the department from which the license was issued.

LEGAL PROCEEDINGS AND COMPLIANCE

As of the Latest Practicable Date, we were not a party to any legal or administrative proceedings. In addition, our Directors are not aware of any claims or proceedings threatened against us or in relation to our mining rights which have been contemplated by government authorities or third parties that might materially and adversely affect our operations, financial condition and reputation. Our Directors confirm that during the Track Record Period and up to the Latest Practicable Date, we have complied with the relevant laws and regulations in all material aspects and have obtained all the material approvals, permits and licenses for our current business operations.

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RISK MANAGEMENT AND INTERNAL CONTROL

Internal Control

We have implemented a series of measures to manage the risks that we may face in our operations. In connection with the [REDACTED], we engaged an independent internal control consultant (the “Internal Control Consultant”) to perform an overall assessment on our internal control system. Our Internal Control Consultant performed testing on relevant internal control policies and procedures selected from July 1, 2019 to June 30, 2020, and also conducted a follow up review from January 18, 2021 to February 11, 2021 to assess remediation of the control deficiencies identified. During the internal control review, while our Internal Control Consultant has provided some recommendations for our management’s consideration to enhance our internal control system, it has not identified any deficiencies in our internal control system in its initial or follow up reviews that would have had a material adverse impact on our business, financial condition or results of operations.

We have devoted ourselves to maintaining an effective internal control system to safeguard our Shareholders’ investment and our assets at all times. We have adopted, or expect to adopt before the [REDACTED], a series of internal control policies, procedures and programs that we consider to be appropriate for our business operations, including effective and efficient operations, reliable financial reporting, anti-money laundering, anti-fraud and bribery policies, and compliance with applicable laws and regulations. We also localize these policies for our local office(s) in our employee’s hand book where applicable.

We plan to provide our Directors, senior management and employees with continuing training programs regarding the relevant laws and regulations in jurisdictions where we have operations on a regular basis with a view to proactively identifying any concerns and issues relating to any potential non-compliance. We will designate personnel to be responsible for ensuring our overall ongoing compliance with the relevant PRC laws and regulations that govern our business operations and overseeing the implementation of any necessary measures.

Taking into account the internal control measures implemented by us and the ongoing monitoring and supervision by our Board with the assistance of professional external advisors where required, our Directors are of the view that (i) our enhanced internal control measures are adequate and effective; (ii) the suitability of our Directors is compliant with Listing Rules 3.08 and 3.09 of the Listing Rules; and (iii) our Company is suitable for [REDACTED] under Rule 8.04 of the Listing Rules. Based on its review of the report prepared by the International Control Consultant and other due diligence documents, discussions with our Directors, the Internal Control Consultant and our PRC Legal Advisors as well as our Directors’ confirmation, the Sole Sponsor concurs with the views of our Directors.

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Risk Management

We recognize risk management as the cornerstone for our long-term development and success. Key operational risks that we face include changes in the general market conditions and regulatory environment relating to the mining industry in the PRC and the colored gemstone industry globally. Other risks that we face include financial risks, investment risks and legal risks. We have designed and implemented a risk management policy to address various potential risks. For details of the major risks identified by our management, see “Risk Factors” in this document. Our risk management policy sets forth procedures to identify, analyze, categorize, mitigate and monitor various risks.

To monitor the ongoing implementation of our risk management policies and corporate governance measures upon the [REDACTED], we have adopted or will adopt, among others, the following risk management and internal control measures:

• we [have established] an audit committee under our Board with members comprising our three independent non-executive Directors, namely, Mr. Li Shu Pai, Dr. Ren Shuang K and Dr. Shen Hsi-Tien, with Mr. Li Shu Pai sitting as chairman of the committee. Our audit committee is responsible for overseeing our financial reporting process and internal control system (including risk management). See “Directors and Senior Management” in this document for the qualifications and experience of these committee members as well as a detailed description of the responsibility of our audit committee;

• we [have established] a strategic and executive committee, whose members include our chairman and executive Director, Mr. Yu, our chief executive officer and executive Director, Mr. Jiang, and Mr. Pang Peter Chun Ming, our chief financial officer and joint company secretary. This committee will be primarily responsible for the ultimate supervision of our implementation of anti-bribery, anti-money laundering and anti-fraud policies and effectiveness of relevant controls;

• the appointment of China Galaxy International as our compliance advisor with effect from the date of the [REDACTED] to advise on ongoing compliance with the Listing Rules and other applicable securities laws and regulations in Hong Kong; and

• the engagement of external legal advisors to advise us on compliance with the Listing Rules and to ensure our compliance with relevant regulatory requirements and applicable laws, where necessary.

In addition, we have adopted various internal control policies against fraud, money laundering and bribery, which include measures against receiving bribes and kickbacks, and misuse of company assets such as:

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• we [have established] an anti-money laundering working group to support our strategic and executive committee’s supervision on our implementation of the anti-money laundering policy and related controls. The working group is primary responsible for managing and supervising day-to-day anti-money laundering matters, including but not limited to keeping updated on the anti-money laundering requirements under the relevant laws and regulations, leading the establishment of our internal anti-money laundering procedures and system for our business operations and providing guidance to our Group companies on their daily operations in complying with the anti-money laundering policy and requirements. The working group [will be] headed by the internal audit and compliance officer.

• for the implementation of our anti-fraud policy, we will designate a relevant legal officer to oversee the management and supervision of our Group companies’ implementation and report to our strategic and executive committee. The officer’s responsibilities will include accepting and registering any alleged fraudulent incidents being reported, organizing investigations of the alleged fraudulent incidents and providing his/her opinion on the findings of such investigations;

• as for the implementation of our anti-bribery control, our administrative department will be responsible for implementing the anti-bribery policy and related controls including ensuring that we are in compliance with the relevant laws and regulations on anti-bribery, that all key personnel of our Group are in compliance with the anti-bribery requirements, and report to our strategic and executive committee on any anti-bribery related matters;

• we encourage our employees, direct and indirect parties who we have business relationship with to report any incident of frauds and bribery to us though our hotline or in writing by post;

• all employees will receive continuous training on anti-fraud, anti-money laundering and anti-bribery from time to time to enhance their knowledge and compliance with applicable laws and regulations, and the relevant policies; and

• undertaking rectification measures with respect to any identified corrupt or fraudulent activities, evaluating the identified corrupt or fraudulent activities and proposing and establishing preventative measures to avoid future non-compliance.

Our Directors are of the view that such controls and measures are sufficient and effective to avoid the occurrence of fraud, money laundering and bribery, or other improper conduct of our employees. During the Track Record Period and up to the Latest Practicable Date, we were not subject to any government investigation or litigation with respect to claims or allegations of fraud, money laundering and bribery activities.

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OUR CONTROLLING SHAREHOLDERS

Immediately following completion of the [REDACTED] and the [REDACTED] (assuming the [REDACTED] is not exercised and without taking into account any Shares which may be issued upon the exercise of any options which may be granted under the Share Option Scheme), Mr. Yu, through Kind Modest, his wholly-owned investment holding company, will be indirectly interested in 36.84% of our Company’s issued share capital. For the purpose of the Listing Rules, Mr. Yu and Kind Modest are regarded as our Controlling Shareholders. Save as disclosed above, there is no other person who, immediately following completion of the [REDACTED] and the [REDACTED] (assuming the [REDACTED] is not exercised and without taking into account any Shares which may be issued upon the exercise of any options which may be granted under the Share Option Scheme), will be directly or indirectly interested in 30% or more of the Shares then in issue.

Mr. Yu is the chairman of our Board and an executive Director. See “Directors and Senior Management — Our Directors — Executive Directors” in this document for more details in relation to Mr. Yu’s biography. Apart from our Company, Mr. Yu controls a number of companies which are investment holding in nature, inactive or engaged in businesses other than gemstone mining. The following table sets forth the companies (other than our Group) controlled by Mr. Yu as of the Latest Practicable Date:

Percentage of Name of company and place of equity interests/shareholding of establishment/incorporation Principal business/operational status Mr. Yu as of the Latest Practicable Date 1. Liuhe Yuanyang Mining Co., Ltd.* Exploration right of potassium 95% (柳河遠洋礦業有限公司) (PRC) feldspar (鉀長石) has been granted as of the Latest Practicable Date but no mining activities have been conducted. Potassium feldspar is a chemical raw material for, among others, glass production.

2. Ji’an City Xinli Mining Co., Ltd.* Mining and processing of 70% (1) (集安市鑫立礦業有限公司) (PRC) serpentinite (蛇紋岩), which can be used to produce art and craft goods.

3. Ji’an Jinshikai Jade Craft Co., Ltd.* The processing arm of Ji’an City 70% (2) (集安金石開玉石工藝有限公司) Xinli Mining Co., Ltd. principally (PRC) engaged in the manufacturing and sales of art and craft goods.

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Percentage of Name of company and place of equity interests/shareholding of establishment/incorporation Principal business/operational status Mr. Yu as of the Latest Practicable Date 4. Tonghua Yuanyang Mining Co., Approved to conduct mining and 69% Ltd.* (通化遠洋礦業有限公司) sales of potassium feldspar. (PRC) Mining license has been granted as of the Latest Practicable Date but no mining activities have been conducted.

5. Zhangjiakou Wanshu Mining Co., Operations ceased with mining 40% (3) Ltd.* (張家口萬樹礦業有限公司) license (in respect of basalt) (PRC) expired in 2016 due to governmental reclamation of mine site in preparation of the 2022 Winter Olympics. To proceed with voluntary dissolution following settlement of governmental compensation.

6. Ji’an City Tiancheng An Lv Shi Feasibility stage exploration on 35% Processing Co., Ltd.* (集安市天誠 serpentinite resources terminated 安綠石加工有限公司) (PRC) due to governmental reclamation of mine site for highway construction. To proceed with voluntary dissolution following settlement of governmental compensation.

7. Tonghua City Haiwei Trading Co., Wholesale and retail of clothing and 100% Ltd.* (通化市海維商貿有限公司) accessories (PRC)

8. Tonghua City Dongchang District Retail of sporting goods 100% Xinbailun Sporting Goods Store* (通化市東昌區新百倫體育用品專賣店) (PRC)

9. Tonghua City Dongchang District Retail of sporting goods 100% Xinbailun Sporting Goods Ouya Store* (通化市東昌區新百倫體戶用品專賣店歐亞店) (PRC)

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Percentage of Name of company and place of equity interests/shareholding of establishment/incorporation Principal business/operational status Mr. Yu as of the Latest Practicable Date 10. Tonghua Yixiang Century Wine Promotion of wine culture and 99% Culture Communication Co., Ltd.* technological development of wine (通化逸香世紀葡萄酒文化傳播有 production 限公司) (PRC)

11. Jiangyi Caiji Chili Crab (Beijing) Catering 80% Catering Co., Ltd.* (匠一財記辣蟹(北京)餐飲有限公司) (PRC)

12. Beijing Lanshi Culture Co., Ltd.* Culture and media 65% (北京欖石文化有限公司) (PRC)

13. Shenzhen Litong Trading Co., Ltd.* Remained inactive as of the Latest 60% (4) (深圳麗同貿易有限公司) (PRC) Practicable Date

14. Jilin Wanshu Forest Natural Food Production and sales of foodstuff 51% Co., Ltd.* (吉林萬樹森林天然食品有限公司) (PRC)

15. Ji’an Jixian Ruishubingguo Agricultural technology research; 50% (5) Agricultural Development Co., planting, processing and sales of Ltd.* (集安集仙瑞樹冰果農業開發 fruits; production and sales of 有限公司) (PRC) grape juice and wine

16. Sanya Yuanyang Car Rental Co., Automobile rental and travel 49% Ltd.* (三亞遠洋汽車租賃有限公 services 司) (PRC)

17. Jilin Handa Forest Resources Timber and forestry 30% (6) Development Co., Ltd.* (吉林漢達森林資源開發有限公司) (PRC)

18. Ocean Candy Limited (Hong Kong) Investment holding 60% (7)

Notes:

1. The remaining 30% equity interests were held by Mr. Jiang.

2. The remaining 30% equity interests were held by Mr. Jiang.

3. Out of the remaining 60% equity interests, 30% were held by Mr. Jiang.

4. The remaining 40% equity interests were held by Mr. Jiang.

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5. Out of the remaining 50% equity interests, 20% were held by Mr. Jiang.

6. The remaining 70% equity interests were held by Mr. Jiang.

7. The remaining 40% equity interests were held by Mr. Jiang.

Given (i) the difference in business nature and/or principal products; and (ii) the operating status of the above companies as of the Latest Practicable Date, our Directors are of the view that none of the above companies controlled by Mr. Yu competes, or is likely to compete, either directly or indirectly with our business. Each of our Controlling Shareholders has further confirmed that he/it and his/its close associates do not have any interest in a business apart from our business which competes or is likely to compete, either directly or indirectly with the business of our Group.

INDEPENDENCE FROM OUR CONTROLLING SHAREHOLDERS

Having considered the following factors, our Directors are of the view that our Group is capable of carrying on our business independently of our Controlling Shareholders and their respective close associates after the [REDACTED]:

Financial Independence

Our Group has an independent financial management, internal control and accounting systems and makes financial decisions according to our business needs. During the Track Record Period, we had certain amounts due to/from Mr. Yu, our Controlling Shareholder, which were unsecured, interest-free, non-trade in nature and have no fixed terms of payment. All amounts due to/from Mr. Yu then outstanding will be fully settled prior to the [REDACTED]. Please refer to note 31 to the Accountants’ Report included in Appendix I to this document for further details.

In view of the above and taking into account the estimated [REDACTED] from the [REDACTED], our Directors believe that we will have sufficient capital for our financial needs without dependence on our Controlling Shareholders. Our Directors also believe that upon [REDACTED], our Group is capable of obtaining financing from third parties without the support of our Controlling Shareholders. Therefore, our Group will be financially independent from our Controlling Shareholders and/or any of their respective close associates.

Operational Independence

Our Group has established our own organizational structure comprising individual departments, each with specific areas of responsibilities. Our Group has not shared our operational resources, marketing, sales and general administration resources with our Controlling Shareholders and/or their close associates. Our Directors are of the view that there is no operational dependence on our Controlling Shareholders.

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RELATIONSHIP WITH OUR CONTROLLING SHAREHOLDERS

During the Track Record Period, our Group had certain transactions with our Controlling Shareholders and/or their respective close associates. See “Financial Information — Related Party Transactions and Balances — Related Party Transactions” in this document for details. Such transactions, however, will not continue following the [REDACTED], and our Directors currently do not expect there will be any significant transaction between our Group and our Controlling Shareholders and/or their close associates following the [REDACTED]. Based on the above, our Directors consider that our operations are independent from our Controlling Shareholders and their close associates.

Management Independence

Our management and operational decisions are made by our Board and our senior management. Our Board consists of eight members, comprising five executive Directors and three independent non-executive Directors. Notwithstanding that Mr. Yu, our Controlling Shareholder, serves as an executive Director, the remaining seven members of our Board are all independent of Mr. Yu. Moreover, each of our Directors is aware of his/her fiduciary duties as a director which requires, among other things, that he/she acts for the benefit and in the best interests of our Company and does not allow any conflict between his/her duties as a Director and his/her personal interest to exist. In the event that there is a potential conflict of interest arising out of any transaction to be entered into between our Group and any of our Directors or their respective associates, the interested Director(s) shall abstain from voting at the relevant Board meeting in respect of such transactions and shall not be counted in the quorum. Our Directors are therefore of the view that we are capable of managing our business independently from our Controlling Shareholders.

NON-COMPETITION UNDERTAKING

On [•], our Controlling Shareholders entered into the Non-competition Undertaking in favor of our Company (for ourselves and on behalf of each of our subsidiaries from time to time), pursuant to which each of our Controlling Shareholders has irrevocably undertaken to us on a joint and several basis that at any time during the Relevant Period (as defined below), each of our Controlling Shareholders shall, and shall procure that their respective close associates and/or companies controlled by them (other than our Group) shall:

(i) not, directly or indirectly, be interested or involved or engaged in or carry out or concern with or acquire or hold any right or interest (in each case whether as a shareholder, partner, agent or otherwise and whether for profit, reward or otherwise) in any business which is or is about to be engaged in any business which competes or is likely to compete directly or indirectly with the business currently and from time to time engaged by our Group (including but not limited to the mining, processing and sale of peridot) in the PRC and any other country or jurisdiction in which our Group carries on such businesses and/or in which any member of our Group carries on business mentioned above currently and from time to time (the “Restricted Activity”);

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RELATIONSHIP WITH OUR CONTROLLING SHAREHOLDERS

(ii) not solicit any existing employee or then existing employee of our Group for employment by it/him or its/his close associates (excluding our Group);

(iii) not, without the consent from our Company, make use of any information pertaining to the business of our Group which may have come to its/his knowledge in its/his capacity as our Controlling Shareholders or otherwise for any purpose of engaging, investing or participating in any Restricted Activity;

(iv) if there is any project or new business opportunity that relates to the Restricted Activity, refer such project or new business opportunity to our Group for consideration;

(v) not invest or participate in or carry out any project or business opportunity of the Restricted Activity; and

(vi) procure its/his close associates (excluding our Group) not to invest or participate in or carry out any project or business opportunity of the Restricted Activity, unless pursuant to the exceptions set out below.

The above undertakings are subject to the exceptions that:

(i) any of the close associates of our Controlling Shareholders (excluding our Group) is entitled to invest, participate and be engaged in or carry out any Restricted Activity or any project or business opportunity, regardless of value, which has been offered or made available to our Group, provided always that information about the principal terms thereof has been disclosed to our Company and our Directors, and our Company shall have, after review (taking into account whether the entering into of such project or business opportunity will be in the best interest of our Group and our subsidiaries) and approval by our Directors (including our independent non-executive Directors without the attendance by any Director with beneficial interest in such project or business opportunities at the meeting, in which resolutions have been duly passed by the majority of the independent non-executive Directors), confirmed its rejection in writing to be involved or engaged, or to participate or carry out, in the relevant Restricted Activity and provided also that the principal terms on which that relevant close associate of our Controlling Shareholders invests, participates or engages or carries on in the Restricted Activity are substantially the same as or not more favorable than those disclosed to our Company. Subject to the above, if the relevant close associate of our Controlling Shareholders decides to be involved, engaged, participate in or carry out the relevant Restricted Activity, whether directly or indirectly, the terms of such involvement, engagement, participation or carrying on must be disclosed to our Company and our Directors as soon as practicable; and

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RELATIONSHIP WITH OUR CONTROLLING SHAREHOLDERS

(ii) each of our Controlling Shareholders may either by himself/itself individually or through his/its close associate(s) hold and/or be interested in any shares or other securities in any listed company which engages or is involved in any business or activity which directly or indirectly competes with the Restricted Activity, provided that our Controlling Shareholders and their respective close associates will not participate in or be otherwise involved in the management of that listed company, and (a) the total shareholding held by our Controlling Shareholders and their respective close associates in such listed company, whether directly or indirectly, do not, in aggregate, exceed five per cent of the issued share capital of such listed company; or (b) the business or activity conducted or engaged in by such listed company which is in direct or indirect competition with the Restricted Activity accounts for less than 10% of that listed company’s consolidated turnover for any financial year or consolidated assets as at any financial year end.

The Non-competition Undertaking is conditional on (i) the [REDACTED] granting [REDACTED] of, and permission to deal in, all our Shares in issue and to be issued under the [REDACTED] and our Shares which may be issued pursuant to the exercise of the [REDACTED] or upon the exercise of the options that may be granted under the Share Option Scheme; and (ii) the obligations of the [REDACTED] under the [REDACTED] becoming unconditional (including, if relevant as a result of the waiver of any condition(s) by the [REDACTED]) and that the [REDACTED] not being terminated in accordance with their terms or otherwise.

For the above purpose, the “Relevant Period” means the period commencing from the [REDACTED] and shall expire on the earlier of the dates below:

(i) as for our Controlling Shareholders, the date on which our Controlling Shareholders and their close associates (individually or taken as a whole) cease to own 10% or more of the then issued share capital of our Company directly or indirectly or cease to be the controlling shareholders of our Company for the purpose of the Listing Rules; and

(ii) the date on which our Shares cease to be [REDACTED] on the Stock Exchange.

Under the Non-competition Undertaking, each of our Controlling Shareholders has unconditionally and irrevocably undertaken to our Group to allow our Directors, their respective representatives and the auditors of our Group to have sufficient access to the records of each of our Controlling Shareholders and their respective close associates to ensure compliance with the terms and conditions of the Non-competition Undertaking. Each of our Controlling Shareholders has unconditionally and irrevocably undertaken under the Non-competition Undertaking that he or it shall provide to us and our Directors (including our independent non-executive Directors) from time to time all information necessary for the annual review by our independent non-executive Directors with regard to compliance with the terms of the Non-competition Undertaking by our

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RELATIONSHIP WITH OUR CONTROLLING SHAREHOLDERS

Controlling Shareholders. Each of our Controlling Shareholders has also unconditionally and irrevocably undertaken to make an annual declaration as to full compliance with the terms of the Non-competition Undertaking and a consent to disclose such letter in our annual report.

CORPORATE GOVERNANCE MEASURES

Our Directors recognize the importance of incorporating elements of good corporate governance in management conducive to the protection of the interests of our Shareholders. In particular, the following corporate governance measures in relation to managing potential conflict of interests arising from potential competing business between our Controlling Shareholders and our Group will be taken:

(a) a Director shall not vote on any resolution approving any contract or arrangement or any other proposal in which such Director or any of his/her close associates have a material interest nor shall such Director be counted in the quorum present at the meeting;

(b) a Director with material interests shall make full disclosure in respect of matters that conflict or potentially conflict with our interest and absent himself/herself from our Board meetings on matters in which such Director or his/her associates have a material interest;

(c) we have appointed three independent non-executive Directors whom we believe possess sufficient experience and they are free of any business or other relationship which could interfere in any material manner with the exercise of their independent judgment and will be able to provide an impartial, external opinion to protect the interests of our [REDACTED] Shareholders. See “Directors and Senior Management — Independent Non-executive Directors” in this document for details of our independent non-executive Directors;

(d) we have appointed China Galaxy International as our compliance advisor, which will provide advice and guidance to us in respect of compliance with the applicable Listing Rules including various requirements relating to Directors’ duties and corporate governance;

(e) we have established an audit committee, a remuneration committee, a nomination committee and an environment social governance committee as part of our management structure, the terms of reference of each of which will require them to be alert to prospective conflict of interest and to formulate their proposals accordingly; and

(f) our independent non-executive Directors will review, on an annual basis, the compliance with the undertaking given by our Controlling Shareholders under the Non-competition Undertaking.

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DIRECTORS AND SENIOR MANAGEMENT

OUR DIRECTORS

Overview

Our Board consists of five executive Directors and three independent non-executive Directors. The table below sets forth certain information in respect of our Directors:

Relationship with other Director(s) Date of first joining Date of appointment Roles and and the senior Name Age Position our Group as Director responsibilities management Executive Directors

Mr. Yu Haiyang 40 Chairman of our April 27, 2015 February 15, Overall strategic planning, Elder cousin of (于海洋) .... Board and 2019 business direction and Ms. Yu Xiaofei executive Director market development (于曉霏), one of our senior management members

Mr. Jiang 44 Executive Director April 27, 2015 February 15, Overall mining and N/A Yingliang and chief executive 2019 operational management (姜英良) .... officer of our Group

Ms. Pia Pompea 51 Executive Director January 27, 2020 June 15, 2021 Business development and N/A Tonna ..... and chief marketing marketing officer of our Group

Mr. Chi Yongxi 48 Executive Director August 6, 2017 June 15, 2021 Supervision of overall N/A (遲永喜) .... and mine manager mining construction and of our Group operations

Mr. Liu Zhong 58 Executive Director January 15, 2021 June 15, 2021 Overall mining related N/A (劉忠) ..... and chief technical technical advisory and engineer of our management Group

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DIRECTORS AND SENIOR MANAGEMENT

Relationship with other Director(s) Date of first joining Date of appointment Roles and and the senior Name Age Position our Group as Director responsibilities management Independent non-executive Directors

Dr. Ren Shuang 64 Independent December 10, December 10, Supervising and providing N/A K(任雙奎)... non-executive 2019 2019 independent opinion to Director our Board

Dr. Shen 58 Independent November 1, November 1, Supervising and providing N/A Hsi-Tien non-executive 2020 2020 independent opinion to (沈錫田) .... Director our Board

Mr. Li Shu Pai 44 Independent November 1, November 1, Supervising and providing N/A (李書湃) non-executive 2020 2020 independent opinion to (formerly Director our Board known as Lee Shu Paai (李書湃)) ......

Executive Directors

Mr. Yu Haiyang (于海洋), aged 40, is one of the co-founders of our Group, the chairman of our Board and an executive Director, primarily responsible for overall strategic planning, business direction and market development of our Group. He co-founded Yanbian Fuli with Mr. Jiang in April 2015. Mr. Yu is also (i) a director and chairman of the board of directors of Yanbian Fuli; (ii) a director and chairman of the board of directors of Beijing Fuli; and (iii) a director of Fuli UK and Fuli HK.

Mr. Yu was appointed as the director of the Gem and Jewelry Trade Association of China* (中國珠寶玉石首飾行業協會) in January 2011 and subsequently its vice president in December 2018. He also served as the vice president of the second session of Gems and Jewelry Trade Association of Jilin Province* (吉林省珠寶玉石首飾行業協會) during the period from July 2013 to October 2020, and was further appointed as the executive vice president of its third session in October 2020. Mr. Yu was accredited with Gem & Jewelry Appraiser Qualification (Level-3) (寶玉石檢驗員三級資質) and Diamond Appraiser Qualification (Level-3) (鑽石檢驗員三級資質)bythe Authority of Quality and Technical Supervision Industry Occupational Skill Testing (質量技術監督行業職業技能鑒定(指導)中心) of PRC Ministry of Human Resources and Social Security of the PRC (中華人民共和國人力資源和社會保障部) in May 2015.

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DIRECTORS AND SENIOR MANAGEMENT

Mr. Yu has around 10 years of entrepreneurial experience in the gemstone, jewelry and mining industries and has invested in various mining related companies, including Tonghua Yuanyang Mining Co., Ltd.* (通化遠洋礦業有限公司), Ji’an City Xinli Mining Co., Ltd.* (集安市鑫立礦業有限公司), Ji’an City Tiancheng An Lv Shi Processing Co., Ltd.* (集安市天誠安綠石加工有限公司) and Ji’an Jinshikai Jade Craft Co., Ltd.* (集安金石開玉石工藝有限公司), where he has assumed the roles of, among others, supervisor, director and/or general manager. See “Relationship with Our Controlling Shareholders” in this document for further details of Mr. Yu’s other business investments.

Aside from the above, since September 2011, Mr. Yu has been serving as general manager of Baishan City Rongyang Mining Co., Ltd.* (白山市榮陽礦業有限公司), a company principally engaged in mining, separation and processing of gold and copper and sales of related products, where he was responsible for business development and strategic planning. During the period from June 2014 to November 2020, Mr. Yu served as supervisor (from June 2014 to March 2015) and executive director and general manager (from March 2015 to November 2020) of Tonghua City Yichen Jewelry Co., Ltd.* (通化市易宸珠寶有限公司), a company principally engaged in sales of jewelry and art crafts which Mr. Yu had previously invested in. From May 2010 to March 2012, he served as an assistant engineer of the Communication Station of People’s Procuratorate of Tonghua City (通化市人民檢察院通訊站), where he was responsible for case statistics. From August 1999 to August 2005, Mr. Yu was engaged in sales and marketing in the food and beverage industry.

Mr. Yu obtained his college diploma in finance and accounting (財務會計專業函授學位)by way of correspondence program from Jilin Commercial College (吉林商業高等專科學校)inthe PRC in July 1999. Mr. Yu obtained a diploma in legal studies from the China Central Radio and TV University (中央廣播電視大學) (now known as the Open University of China* (國家開放大學), a program in cooperation with China University of Political Science and Law* (中國政法大學)) in the PRC in July 2007, and subsequently obtained his executive master’s degree of business administration from the Cheung Kong Graduate School of Business* (長江商學院) in the PRC in September 2018.

Mr. Yu is the elder cousin of Ms. Yu Xiaofei, the chief operating officer of our Group (see “— Our Senior Management” in this section for further details).

Immediately following completion of the [REDACTED] and the [REDACTED], Mr. Yu will be indirectly interested in [REDACTED] Shares, representing [REDACTED]% of the issued share capital of our Company, within the meaning of Part XV of the SFO, all of which will be held by Kind Modest, which is wholly owned by Mr. Yu.

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DIRECTORS AND SENIOR MANAGEMENT

Mr. Jiang Yingliang (姜英良), aged 44, is one of the co-founders of our Group, an executive Director and our chief executive officer, primarily responsible for overall mining and operational management of our Group. He co-founded Yanbian Fuli with Mr. Yu in April 2015. Mr. Jiang is also (i) a director of Fuli UK; (ii) a director and the manager of Yanbian Fuli; and (iii) a director and the general manager of Beijing Fuli.

Mr. Jiang served as the general council member of the second session of the council of the Gem & Jewelry Trade Association of Jilin Province from July 2013 to January 2017 and subsequently served as its deputy president from January 2017 to October 2020. Mr. Jiang was further appointed as the president of the third session of its council in October 2020. Mr. Jiang was accredited with Gem & Jewelry Appraiser Qualification (Level-3) (寶玉石檢驗員三級資質) and Diamond Appraiser Qualification (Level-3) (鑽石檢驗員三級資質) by the Quality and Technical Supervision Industry Occupational Skill Testing Authority (質量技術監督行業職業技能鑒定(指導)中心) of the Ministry of Human Resources and Social Security of the PRC (中華人民共和國人力資源和社會保障部) in May 2015.

Mr. Jiang has over 17 years of entrepreneurial experience in the gemstone, jewelry, mining and natural resources industries and has invested in various mining and natural resources related companies, including Jilin Handa Forest Resources Development Co., Ltd.* (吉林漢達森林資源開發有限公司) and Zhangjiakou Wanshu Mining Co., Ltd.* (張家口萬樹礦業有限公司) (where he also serves as an executive director). Mr. Jiang also serves as the executive director, general manager and legal representative of Ji’an City Xinli Mining Co., Ltd.* (集安市鑫立礦業有限公司) (since March 2013) and Ji’an Jinshikai Jade Craft Co., Ltd.* (集安金石開玉石工藝有限公司) (since March 2013), among the companies which he and Mr. Yu have jointly invested in. Aside from the above, Mr. Jiang operated a wood-processing factory pursuant to a contract with the Forestry Workstation of Shihu Town, Tonghua County (通化縣石湖鎮林業工作站) during the period from May 2004 to December 2020 where he was responsible for overall management of the factory.

Mr. Jiang obtained his college diploma of economic information management from Sichuan Agricultural University (四川農業大學) in the PRC in February 2019 through its online education program.

Immediately following completion of the [REDACTED] and the [REDACTED], Mr. Jiang will be indirectly interested in [REDACTED] Shares, representing [REDACTED]% of the issued share capital of our Company, within the meaning of Part XV of the SFO, all of which will be held by Grand Start, which was wholly owned by Mr. Jiang.

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DIRECTORS AND SENIOR MANAGEMENT

Ms. Pia Pompea Tonna (“Ms. Tonna”), aged 51, is an executive Director and the chief marketing officer of our Group primarily responsible for business development and marketing. She joined our Group in January 2020 as a director of Fuli UK. Ms. Tonna is also the chief marketing officer/general manager (UK) of Fuli UK. Ms. Tonna has substantial experience in the fashion, luxury goods and jewelry industries, focusing on marketing, sales, and business development.

Prior to joining our Group, Ms. Tonna was the head of global PR and marketing of Atelier Swarovski, a jewelry company, from December 2017 to October 2018, where she was responsible for marketing. Ms. Tonna also worked at Gemfields PLC (currently known as Gemfields Ltd) (“Gemfields”) and Fabergé, its subsidiary, from June 2012 to September 2017, both being subsidiaries of Gemfields Group Limited, an international colored gemstones mining company and dually listed on Johannesburg Stock Exchange (JSE: GML) and London Stock Exchange (LSE: GEM). During her time with Gemfields, Ms. Tonna served as (i) manager — communications and PR at Gemfields (from June 2012 to March 2013); (ii) marketing and communications director at Fabergé (from March 2013 to February 2014); (iii) business relationship director at Gemfields (from March 2014 to April 2016); and (iv) director — Marketing and Sales, Europe & Africa at Gemfields (from April 2016 to September 2017).

Prior to joining Gemfields, Ms. Tonna founded Piatonna Limited, a UK incorporated private limited company under the brand of her name, in September 2003, Piatonna Limited was principally engaged in wholesale of handbags and footwear, where she acted as a director and was responsible for overall management and sales. Piatonna Limited was the winner for Exceptional New Exporter award, finalist for the Outstanding Achievement through Passport to Export, and the finalist for Exceptional Manufacturer award during the London Awards 2007 organized by the UK Trade and Investment (now replaced by the UK Department for International Trade). On June 11, 2008, the directors of Piatonna Limited resolved to place Piatonna Limited into insolvency administration proceedings due to insufficiency of liquidity for ongoing operations as a result of the adverse impact from the global financial crisis in 2008. As at July 25, 2009, the total deficiency in funds due to creditors amounted to £193,658 of which all bank loans were subsequently repaid and Ms. Tonna was discharged from her liabilities to the bank. A notice of move from administration to dissolution was filed on February 25, 2010. Piatonna Ltd was dissolved on May 25, 2010.

Prior to her business venture of Piatonna Limited, Ms. Tonna was the head of UK press of Paul Smith Ltd., a fashion brand company, from January 1998 to April 2000. Prior to that, she also worked in various companies in the PR, fashion, and luxury goods industries.

Ms. Tonna attended the Littlehampton School and passed her GCE (ordinary level) examinations in the UK in 1986. She completed a national diploma of design and technology in Northbrook College (now known as Greater Brighton Metropolitan College) in the UK in July 1988.

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DIRECTORS AND SENIOR MANAGEMENT

Mr. Chi Yongxi (遲永喜) (“Mr. Chi”), aged 48, is an executive Director and the mine manager of our Group, primarily responsible for the supervision of overall mining construction and operations of our Group. Mr. Chi has over 27 years of experience in the mining industry. Mr. Chi was accredited as engineer (工程師) in surveying by the Human Resources and Social Security Bureau of Yanbian Korean Autonomous Prefecture (延邊朝鮮族自治州人力資源和社會保障局)in January 2010. He joined Yanbian Fuli in August 2017 and has been its deputy general manager and mine manager since then. He served as a director of Beijing Fuli and Yanbian Fuli since June 2021.

Prior to joining our Group, from January 2015 to April 2017, Mr. Chi worked in Jilin Province Guangtai Mining Co., Ltd.* (吉林省廣泰礦業有限責任公司), a company principally engaged in gold mining and processing, where he held the following position and his relevant mining experience and/or responsibilities are summarized as follows:

Period Position Relevant experience and/or responsibilities January 2015− Deputy general In charge of overall management of mining April 2017 ...... manager operations of an underground gold mine which shares similar mining process as our YQS Nanshan Project, with the following responsibilities:

• designing the mine plan

• formation of production team and devising production schedule

• managing the overall safety of the mine

• application for the relevant licenses

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From March 2007 to December 2014, Mr. Chi worked in Jilin Tianchi Mining Co., Ltd.* (吉林天池礦業有限責任公司) (currently known as Jilin Tianchi Mining Co., Ltd.* (吉林天池礦業股份有限公司)), a company principally engaged in mining and processing of iron and production of purified iron powder, where he held the following positions and his relevant mining experience and/or responsibilities are summarized as follows:

Period Position Relevant experience and/or responsibilities April 2013− Mine manager In charge of overall management of an iron December 2014 .... mine, the underground portion of which shares similar mining process as our YQS Nanshan Project, with the following responsibilities:

• application for the relevant licenses

• devising the mining technical plan together with the mine design unit

• formation of production team and devising production schedule

• directing the construction of mine shafts

March 2007− Mine manager In charge of overall management of an March 2013 ...... underground iron mine which shares similar mining process as our YQS Nanshan Project, with the following responsibilities:

• overall management of the technical aspects, production and safety of the mine

• devising production schedule and arranging mine production

• supervising the mining process with reference to the mine design plan

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From July 1993 to March 2007, Mr. Chi worked in Jilin Haigou Gold Mine Liability Co., Ltd.* (吉林海溝黃金礦業有限責任公司), a company principally engaged in mining, separation, and processing of gold, where he held the following positions and his relevant mining experience and/or responsibilities are summarized as follows:

Period Position Relevant experience and/or responsibilities February 2006− Mine manager In charge of overall management of an March 2007 ...... underground gold mine which shares similar mining process as our YQS Nanshan Project, with the following responsibilities:

• devising the mining technical plan together with the mine design unit

• formation of production team and devising production schedule

• application for the relevant licenses for resumption of operation of the mine

• resumption of mine shaft construction

June 2000− Deputy mine manager Responsible for technology and production February 2006 ..... management of an underground gold mine which shares similar mining process as our YQS Nanshan Project, with the following responsibilities:

• mining technology and production management

• devising the production schedule

• arranging mine production (including human resources deployment)

• supervising the implementation of mine extraction plan

• safety management of the mine

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Period Position Relevant experience and/or responsibilities October 1996− Deputy chief of Responsible for technical management of May 2000...... production geological and surveying works of an department underground gold mine which shares similar mining process as our YQS Nanshan Project, with the following responsibilities:

• designing the mine extraction plan together with geological technicians and surveyors

• leading technicians to provide mine extraction technical support

July 1993− Technician Worked at an underground gold mine which September 1996 .... shares similar mining process as our YQS Nanshan Project, with the following responsibilities:

• underground onsite setting out pursuant to the mine design blueprints

• mine site surveying and mapping

• verification of mine surveying results

Mr. Chi completed a course offered by Changchun Geological School* (長春地質學校)inthe PRC majoring in engineering surveying in July 1993. Mr. Chi graduated from the College of Correspondence Studies Party School of the Central Committee of C.P.C. (中共中央黨校函授學院) in the PRC majoring in legal studies in December 2004, and graduated from a higher education correspondence program in surveying and technical drawing from Jilin University* (吉林大學)in the PRC in June 2009.

Mr. Liu Zhong (劉忠) (“Mr. Liu”), aged 58, is an executive Director and chief technical engineer of our Group, primarily responsible for overall mining related technical advisory and management of our Group. Mr. Liu retired from full-time work in August 2017 and re-entered the workforce and joined Yanbian Fuli in January 2021 as its chief technical engineer. Mr. Liu has over 36 years of experience in the mining industry, and was accredited with Professional and

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Technical Positions of Public Institutions (Level-3) (事業單位專業技術三級崗位) by Professional and Technical Personnel Management Office of Human Resources and Social Security Department of Jilin Province (吉林省人力資源和社會保障廳專業技術人員管理處) in January 2014.

Prior to his retirement from full-time work in August 2017, Mr. Liu worked for the Geological Survey Institute of Jilin Province (吉林省地質調查院)(“Jilin Survey Institute”), a public institute for geological survey and mining development, from December 2001 to August 2017, where he held the following positions and his relevant mining experience and/or responsibilities are summarized as follows:

Period Position Relevant experience and/or responsibilities March 2004− Deputy chief manager In charge of various geological surveying and August 2017...... and deputy dean exploration projects involving tungsten-tin, oil shale, iron, copper-nickel and various gemstones including peridot, corundum, tremolite and quartz, with the following responsibilities:

• onsite geological exploration and general surveying, including studying of geological characteristics and ore-body discovery

• preparation of surveying reports, which covered mine design report preparation, geological surveying, mine resources prospecting and engineering logging

December 2001− Team leader and Responsible for geological pre-surveying February 2004 ..... technical responsible and/or exploration of gold, copper, officer of a research tungsten-tin and nephrite, which included team geological research, onsite surveying and ore formation prognosis.

During Mr. Liu’s employment with the Jilin Survey Institute, he was nominated by the Jilin Survey Institute and the Geological and Mineral Exploration and Development Institute of Jilin Province (吉林省地質礦產勘查開發研究院) (the “Jilin Exploration and Development Institute”), both the affiliates of the Bureau of Geologic Exploration and Mineral Development Bureau of Jilin Province (吉林省地質礦產勘查開發局), to take up directorships in certain mining companies in which the Jilin Survey Institute or the Jilin Exploration and Development Institute

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DIRECTORS AND SENIOR MANAGEMENT had invested in, including (i) Tibet Tianzheng Mining Co Ltd* (西藏天正礦業有限公司) (appointed in July 2012); (ii) Jilin Province Guangshun Mining Co Ltd* (吉林省廣順礦業股份有限公司) (appointed in June 2010); (iii) Huadian City Changhong Mining Development Co Ltd* (樺甸市常宏礦業開發有限公司) (appointed in March 2009); (iv) Changchun Zhongji Jianye Mining Co.,Ltd*(長春中基建業礦業有限責任公司) (appointed in November 2019); and (v) Jilin Province Duojin Mining Co Ltd* (吉林省多金礦業有限公司) (appointed in April 2009). Mr. Liu has acted in accordance with the instructions of the two institutes in the discharge of his duties in these companies, which included, among others, supervision of the use of investment proceeds and, the operations and development of the companies and their mine projects. As of the Latest Practicable Date, Mr. Liu had already tendered his resignation as director of all these companies.

From August 1983 to December 2001, Mr. Liu worked for the Fourth Geological Survey Institute of Jilin Province (吉林省第四地質調查所), a public institute for geological survey and mining development, where he held the following positions and his relevant mining experience and/or responsibilities are summarized as follows:

Period Position Relevant experience and/or responsibilities April 1995− Deputy chief engineer In charge of various geological surveying and December 2001 .... exploration projects involving tourmaline, serpentine, corundum, diamond, peridot and garnet, including onsite geological exploration, general surveying and mineralization research.

April 1989− Team leader and Responsible for geological pre-surveying and March 1995 ...... deputy technical comprehensive surveying of a gold mine, responsible officer conducting field work and the preparation of a research team of the corresponding surveying and mine design reports.

April 1986− Technical responsible Responsible for large-scale mineralization March 1989 ...... officer of a research prognosis for a polymetallic mine team (involving tourmaline and tremolite).

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Period Position Relevant experience and/or responsibilities August 1983− Geological technician Responsible for the following geological March 1986 ...... of a research team surveying and research projects:

• comprehensive surveying of a coal mine and the preparation of the corresponding comprehensive surveying report, which covered mine design report preparation, geological surveying, mine resources prospecting and engineering logging

• research of mineable coal resources underneath an olivine basalt crust, which covered the studying of olivine basalt distribution

Details of Mr. Liu’s awards, accolades and other achievements in the mining industry are set out below:

Period Awards, accolades or other achievements December 1990 Awarded the Level Four Award (四等獎) by the Ministry of Geology and Mineral Resources of the PRC (中華人民共和國地質礦產部) (currently known as the Ministry of Natural Resources of the PRC (中華人民共和國自然資源部)) for a large-scale mineralization prognosis project

January 1998 Awarded the Level Three Award (三等獎) by the Ministry of Geology and Mineral Resources of the PRC for a gold mine exploration project

December 1998 Awarded the Level Three Award by the Ministry of Geology and Mineral Resources of the PRC for a limestone exploration report

February 2013 Awarded the Level Two China Geological Survey Achievement Award (中國地質調查成果獎二等獎) by the China Geological Survey (中國地質調查局) for a mineral resources surveying project

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Period Awards, accolades or other achievements November 2014 Awarded the Level Two Land and Resources Science and Technology Award (國土資源科學技術獎二等獎) by the Review Committee of the Land and Resources Science and Technology Award (國土資源科學技術獎勵評審委員會) for an oil shale comprehensive surveying project

October 2016 Awarded the Level Two Land and Resources Science and Technology Award by the Review Committee of the Land and Resources Science and Technology Award for a tungsten-tin exploration report

Mr. Liu obtained his graduation certificate from Changchun Geological College* (長春地質學院) (currently merged into Jilin University) majoring in geology and specializing in geological investigation and mine surveying in the PRC in July 1983, and his master’s degree of geological engineering from Jilin University in the PRC in December 2001.

Independent Non-executive Directors

Dr. Ren Shuang K (任雙奎) (“Dr. Ren”), aged 64, was appointed as an independent non-executive Director in November 2019, primarily responsible for supervising and providing independent opinion to our Board. Dr. Ren has accumulated approximately 20 years of technical and management experience in the mining industry in both Australia and the PRC. Dr. Ren is currently a member of the Geological Society of Australia and the Australasian Institute of Mining and Metallurgy.

Over the years, Dr. Ren has held various directorships and positions in numerous Australian companies, details of which are set out below.

Name of companies Position Period

Yiren Minerals Pty Ltd ...... Director From October 2020 to present

Cashmere Iron Limited ...... Director From August 2020 to present

SKR Mining Services Pty Ltd...... Director From October 2018 to present

Richmond Vanadium Technology Managing director/ From October 2017 to present Pty Ltd (formerly AXF Vanadium Pty chief executive officer Ltd) ...... Director From March 2017 to March 2019

AXF Gold Ridge Pty Ltd Director From April 2016 to March 2021 (a subsidiary of Wanguo International Mining Group Limited (3939.hk)) ......

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Name of companies Position Period

Australian Solomons Gold Pty Limited (a Director From May 2016 to March 2021 subsidiary of AXF Gold Ridge Pty Ltd) ..

JV Mine (Australia) Pty Ltd Director From September 2016 to March 2021 (a subsidiary of AXF Gold Ridge Pty Ltd) ......

Solomon Islands International Pty Ltd Director From September 2016 to March 2021 (a subsidiary of AXF Gold Ridge Pty Ltd) ......

Mid West Minerals Exploration Pty Ltd.... Director From October 2015 to present

AXF Resources Pty Ltd ...... Director From September 2015 to March 2018

SKR New Investment Pty Ltd...... Director From May 2008 to April 2019

Australiasia Mineral Investment Director From May 2012 to June 2016 Pty Ltd ......

PMHL Holding Australia Pty Ltd ...... Director From February 2014 to June 2015

Mineral Wealth Pty. Ltd ...... Director From October 2010 to October 2013

Mineral Investment (WA) Pty Ltd ...... Director From February 2011 to February 2012

Arm Mining Pty Ltd ...... Director From November 2010 to April 2011

Frid Landcare Pty Ltd ...... Director From November 2010 to April 2011

CITIC Pacific Mining Management Pty Ltd Project director From March 2009 to June 2010 (a subsidiary of CITIC Limited (267.hk)) .

Mineral Securities (NK) Pty Ltd ...... Director From October 2004 to February 2008

Mineral Securities (China) Pty Ltd...... Director From June 2004 to May 2006

From June 2001 to December 2008, he served as vice president — exploration China of AngloGold Ashanti Limited, a resources and mining company listed on the Johannesburg Stock Exchange Limited (JSE: ANG), New York Stock Exchange (NYSE: AU), the Australian Securities Exchange (ASX: AGG) and the Ghana Stock Exchange (GHSE: AGA) and (GHSE: AAD).

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Dr. Ren obtained his graduation certificate in the Department of Earth and Space Sciences from the University of Science and Technology of China* (中國科學技術大學) in the PRC in February 1982, and was admitted to the degree of doctor of philosophy in the field of economic geology under the faculty of science of the Australian National University in Australia in April 1990.

Dr. Shen Hsi-Tien (沈錫田) (“Dr. Shen”), aged 58, was appointed as an independent non-executive Director in November 2020, primarily responsible for supervising and providing independent opinion to our Board. Dr. Shen has accumulated more than 27 years of academic and research experience in the field of gemology. Dr. Shen has been a member of American Geophysical Union, Mineralogical Society of America, and Chinese Society for Mineralogy, Petrology and Geochemistry since 1989, 1990 and 2013, respectively.

Dr. Shen has been serving several positions in the China University of Geoscience (Wuhan)* (中國地質大學(武漢)), including (i) distinguished professor of Gemological Institute of China University of Geosciences (中國地質大學(武漢)珠寶學院) (since September 2013); (ii) person in charge of the organization of the international exchange and annual conferences (since 2014); (iii) director of Center for Innovative Gem Testing Technology of China University of Geosciences (中國地質大學(武漢)珠寶檢測技術創新中心) (since 2015); (iv) editor-in-chief of the Journal of Gems and Gemology (寶石和寶石學雜誌) (since 2015); and (v) discipline leader (學科領軍人才) (since 2019). From January 2004 to July 2013, he served as a research scientist of the Gemological Institute of America. From 2001 to 2004, he served as an associate scientist of the Lindhurst Laboratory of Experimental Geophysics at the California Institute of Technology. From March 1996 to April 2001, he served as a university lecturer in the Department of Earth Sciences of the University of Cambridge. From October 1994 to March 1996, he served as a staff scientist of Bayerisches Geoinstitut, University of Bayreuth in Germany.

Dr. Shen obtained his bachelor’s degree of science in geology from National Taiwan University* (國立台灣大學), in Taiwan in June 1986, and a Doctor of Philosophy from Cornell University, in the U.S. in August 1994.

Mr. Li Shu Pai (李書湃)(“Mr.Li”)(formerly known as Lee Shu Paai (李書湃)), aged 44, was appointed as an independent non-executive Director in November 2020, primarily responsible for supervising and providing independent opinion to our Board. Mr. Li has accumulated more than 17 years of experience in finance, investment, and accounting. Mr. Li was admitted as a Certified Public Accountant and a fellow of the Hong Kong Institute of Certified Public Accountants in October 2004 and February 2012, respectively. Mr. Li was also admitted as a member and a fellow member of Association of Chartered Certified Accountants in July 2012 and September 2017, respectively.

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Since July 2019, Mr. Li has been serving as the chief financial officer and company secretary of Meilleure Health International Industry Group Limited (2327.hk), a company principally engaged in the industrial hemp business, healthcare-related business and trading business. From February 2021 to March 2021, Mr. Li was appointed as an independent non-executive Director of Comtec Solar Systems Group Limited (712.hk), a company principally engaged in design development, manufacturing and marketing of solar wafers. From December 2016 to September 2018, Mr. Li was the chief financial officer and company secretary of Perfectech International Holdings Limited (765.hk), a company principally engaged in manufacture and sales of toy products. From July 2015 to December 2016, Mr. Li served as the chief financial officer and joint company secretary of Chutian Dragon Corporation Limited (楚天龍股份有限公司), a company principally engaged in integrated smart card solution provider and data management. From August 2014 to June 2015, Mr. Li was appointed as the chief financial officer of R2 Games Co., Limited (深圳燦和兄弟網路科技有限公司), a company principally engaged in online game operator and the wholly-owned subsidiary of Beijing Can Brother Technologies Co., Ltd. (NEEQ: 430052). From September 2011 to December 2013, Mr. Li served as the deputy chief financial officer of Beijing Tong Ren Tang Chinese Medicine Co., Ltd (3613.hk), a company principally engaged in traditional Chinese medicine. From July 2010 to August 2011, Mr. Li served as an associate of BNP Paribas Capital (Asia Pacific) Limited. From August 2007 to July 2009, Mr. Li served as an associate of Corporate Finance Department of BOCI Asia Limited. From September 2001 to August 2007, Mr. Li worked in PricewaterhouseCoopers as an associate (from September 2001 to October 2006) and was later promoted to manager (from October 2006 to August 2007).

Mr. Li obtained his bachelor’s degree of business administration in accountancy from City University of Hong Kong in November 2001. Mr. Li obtained his degree of executive master of business administration from The Hong Kong University of Science and Technology in June 2014.

Save as disclosed above, Mr. Li has not held any current or past directorships in any publicly listed companies whether in Hong Kong or overseas, during the three years immediately preceding the date of this document.

Save as disclosed in this document, each of our Directors confirms with respect to himself/herself that: (i) he/she has not held any directorship in the last three years in any public companies, the securities of which are listed on any securities market in Hong Kong or overseas; (ii) he/she does not have any relationship with any other Directors, senior management or substantial or controlling shareholders of our Company; (iii) he/she does not hold any positions in our Company or other members of our Group; (iv) he/she does not have any interests in our Shares within the meaning of Part XV of the SFO; (v) there is no other information that should be disclosed for him/her pursuant to the requirements under Rules 13.51(2)(h) to 13.51(2)(v) of the Listing Rules; and (vi) there are no other matters that need to be brought to the attention of holders of securities of our Company.

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OUR SENIOR MANAGEMENT

The senior management team of our Group, in addition to our Directors listed above, comprised the following:

Relationship with Date of appointment our Director(s) and Date of first joining as senior Roles and the senior Name Age Position our Group management responsibilities management Ms. Yu Xiaofei 37 Chief operating officer of our May 19, 2016 June 15, 2021 Overall supervision of operations Younger cousin (于曉霏) ... Group of Mr. Yu, one of the co-founders of our Group, the chairman of our Board and an executive Director

Mr. Pang Peter 44 Chief financial officer of our August 1, 2018 June 15, 2021 Overall financial planning and N/A Chun Ming (彭 Group and joint company reporting and treasury 浚銘) secretary of our Company management (formerly known as Pang Yan Pak (彭炘栢) ......

Mr. Guo Junguo 59 Mining beneficiation engineer of September 12, June 15, 2021 Mining beneficiation, technical N/A (郭俊國) ... our Group 2020 support, onsite management and training

Mr. Yu Hongyi 55 Mining engineer of our Group March 1, 2021 June 15, 2021 Mine design and planning, onsite N/A (于洪義) ... management and prospecting

Mr. Zhang 56 Mining engineer of our Group March 1, 2021 June 15, 2021 Mine design and planning, onsite N/A Xiaoman management and prospecting (張曉滿) ...

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Ms. Yu Xiaofei (于曉霏) (“Ms. Yu”), aged 37, joined our Group in May 2016 and is the chief operating officer of our Group, primarily responsible for overall supervision of operations of our Group. Ms. Yu is also the chief operating officer and deputy general manager of Yanbian Fuli.

Prior to joining our Group, Ms. Yu worked in the Daily Newspaper Group Information Times* (廣州日報報業集團信息時報社), a newspaper publisher, from April 2010 to October 2011 as a senior planner and subsequently a deputy manager of marketing department, where she was responsible for organizing, planning, and hosting governmental programs, client’s events and internal events, and as secretary to chief officer from October 2011 to May 2015 where she was responsible for management on legal and human resources matters. From September 2008 to March 2010, she served as a host and reporter of the film and television department of Guangzhou Huiguanjia Network Technology Co., Ltd.* (廣州會管家網絡科技有限公司) (formerly known as Guangzhou Hongyi Computer Technology Co., Ltd.* (廣州宏翼計算機科技有限公司)), where she was responsible for preparing and presenting news, conducting interviews, drafting scripts and editing internal journals.

Ms. Yu obtained a bachelor’s degree of arts in English and a bachelor’s degree of administration in logistics management, both from the Harbin University of Commerce (哈爾濱商業大學) in the PRC in July 2008 and January 2009, respectively.

Ms. Yu is the younger cousin of Mr. Yu, the chairman of our Board and an executive Director.

Mr. Pang Peter Chun Ming (彭浚銘) (“Mr. Pang”) (formerly known as Pang Yan Pak (彭炘栢)), aged 44, joined Fuli HK as chief financial officer in August 2018 and is the chief financial officer of our Group and a joint company secretary of our Company, primarily responsible for overall financial planning and reporting and treasury management of our Group. He has over 17 years of experience in accounting and finance. He has been a certified public accountant of the California Board of Accountancy of the United States since February 2006 and a chartered financial analyst (CFA) charterholder since November 2006.

Prior to joining our Group, from January 2015 to July 2018, Mr. Pang served as chief financial officer and joint company secretary of Pa Shun Pharmaceutical International Holdings Limited (currently known as Pa Shun International Holdings Limited) (574.hk), a company principally engaged in pharmaceutical distribution and pharmaceutical manufacturing, where he was responsible for financial reporting, investor relationship and also assisted in corporate governance matters. From April 2011 to December 2014, he served as chief financial officer and company secretary of Renjian Antong International Holdings Limited, where he was responsible for accounting and finance. From September 2010 to April 2011, he served as an associate in the Global Banking Division of Deutsche Bank AG, Hong Kong Branch. From March 2008 to

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September 2010, he served as an associate director of BOCI Asia Limited (Hong Kong), where he was responsible for corporate finance services. From November 2007 to March 2008, he served as manager in the assurance and advisory business service department in Ernst & Young in Hong Kong. He also worked in the assurance standards services group of Ernst & Young LLP in the U.S. from February 2007 to October 2007 and from July 2003 to February 2006 with his last position as a senior in the assurance standards services group.

Mr. Pang obtained his master of accounting degree from the University of Southern California in the U.S. in May 2003 and a bachelor of arts major degree in economics from the University of California at Berkeley in the U.S. in August 1999.

Immediately following completion of the [REDACTED] and the [REDACTED], Mr. Pang will be directly interested in [REDACTED] Shares, representing [REDACTED]% of the issued share capital of our Company, within the meaning of Part XV of the SFO, all of which will be held directly and beneficially owned by Mr. Pang.

Mr. Guo Junguo (郭俊國) (“Mr. Guo”), aged 59, joined our Group in September 2020 as mining beneficiation engineer of Yanbian Fuli, and was promoted as the mining beneficiation engineer of our Group on June 15, 2021, primarily responsible for mining beneficiation, technical support, onsite management and training. Mr. Guo has over 37 years of experience in the mining industry, and was accredited with Engineer Qualification in Mining Beneficiation by Department of Metallurgical Industry of Jilin Province (吉林省冶金工業廳) in January 1997.

Prior to joining our Group, from August 2019 to April 2020, Mr. Guo worked in Aba Prefecture Zhonghe New Energy Co., Ltd.* (阿壩州眾和新能源有限公司), a company principally engaged in the business of industrial lithium hydroxide, lithium carbonate and sodium sulphate, where he held the position of deputy chief engineer, primarily responsible for onsite production technology management.

From August 2017 to July 2019, Mr. Guo served as the chief of technology department of Xinjiang Xingye Lithium Mining Development Co., Ltd.* (新疆興業鋰能礦業開發有限公司), where he was responsible for technical research and overall management of its technology department.

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From February 2014 to July 2017, Mr. Guo worked in Jinguyuan (Sichuan) Mining Co., Ltd.* (金穀源(四川)礦業有限公司), a company principally engaged in the business of non-ferrous metal mineral products, where he held the following position and his relevant mining experience and/or responsibilities are summarized as follows:

Period Position Relevant experience and/or responsibilities February 2014− Deputy head of the Responsible for the ore processing technology July 2017 ...... technology of two lead-zinc mine projects which share department similar ore processing techniques as our YQS Nanshan Projects. The responsibilities of Mr. Guo covered the followings:

• devising the ore processing plan and workflow

• reviewing the technical aspects involved in the whole production process

• coordinating the daily operations of the technology department

• investigating and solving any problems identified in the production process

From April 2010 to January 2014, Mr. Guo worked in Baishan City Tianyi Mining Co., Ltd.* (白山市天一礦業有限公司), a company principally engaged in the business of gold products, where he held the following position and his relevant mining experience and/or responsibilities are summarized as follows:

Period Position Relevant experience and/or responsibilities April 2010− Head of the production Responsible for technical management of a January 2014 ...... technology gold extraction project involving the department processing of gold, lead and iron ores, which adopted similar mine processing techniques as our YQS Nanshan Projects. The responsibilities of Mr. Guo covered the followings:

• reviewing the mine processing techniques, workflow and facilities installation;

• responsible for the critical steps in the production process, and providing technical analysis on problems discovered in the production process

• carrying out routine technical works

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From July 2006 to April 2008, he worked in Keshiketengqi Tianma Mining Development Co., Ltd.* (克什克騰旗天馬礦業開發有限責任公司), a company principally engaged in the business of purified molybdenum, where he held the following position and his relevant mining experience and/or responsibilities are summarized as follows:

Period Position Relevant experience and/or responsibilities July 2006− Head of ore processing Responsible for overall management of a April 2008 ...... plant molybdenum processing plant which adopted ore processing techniques similar to our YQS Nanshan Project. The responsibilities of Mr. Guo covered the followings:

• improving the ore processing techniques and devising and implementing the mine processing workflow

• responsible for the safety aspects of ore processing

• analyzing and investigating problems, and supervising any follow-up actions to be taken

• organizing routine meetings and trainings on production and safety

From September 1981 to February 2006, Mr. Guo worked in Jilin Province Tonghua Copper-nickel Company* (吉林省通化銅鎳公司), a company principally engaged in the business of copper, nickel and non-ferrous metal, where he held the following positions and his relevant mining experience and/or responsibilities are summarized as follows:

Period Position Relevant experience and/or responsibilities January 1997− Engineer Responsible for the development of ore February 2006 ..... processing techniques and technologies. The responsibilities of Mr. Guo covered the followings:

• assisting the chief engineer to devise the ore processing production plan

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Period Position Relevant experience and/or responsibilities • sampling and testing related to ore processing

• tracing ore processing workflow

• debugging and adjusting the ore processing equipment

January 1988− Assistant engineer Responsible for the daily technical December 1996 .... management of ore processing and analysis of ore processing techniques. The responsibilities of Mr. Guo covered the followings:

• devising and perfecting the production techniques and testing procedures, and providing guidance to other staff

• devising and perfecting the production techniques management system, and supervising its implementation

• tracing production process and making necessary adjustments if abnormality is noted

September 1981− Mine processing Participated in the daily technical December 1987 .... technician management of ore processing, with the following responsibilities:

• devising and perfecting the production techniques testing procedures, and providing relevant guidance to other staff

• devising and perfecting the production techniques management system, and supervising its implementation

• tracing production process and making necessary adjustment if abnormality is noted

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In addition to the above positions, Mr. Guo concurrently held the following positions when he worked in Jilin Province Tonghua Copper-nickel Company:

Period Position Relevant experience and/or responsibilities April 2002− Manager of a Responsible for overall management of the February 2006 ..... subsidiary daily operations of the subsidiary. The responsibilities of Mr. Guo covered the followings:

• greening and beautification of the mine site of a copper-nickel mine

• maintenance of roads within the mine site of a copper-nickel mine

• fire prevention of the forestry within the mine site of a copper-nickel mine

July 1994− Deputy director of The responsibilities of Mr. Guo covered the March 2002 ...... production followings: department • daily management of ore processing inspection station, testing laboratory and underground mine site sampling

• managing the production, coordination and safety of various units within the mine site

• implementation of fire prevention and flood prevention measures within the mine site

• monitoring the sale of products

April 1992− Deputy head of ore Responsible for management of the June 1994 ...... processing plant production and safety of the ore processing plant under the leadership of the head of the processing plant. The responsibilities of Mr. Guo covered the followings:

• ensuring the completion of production tasks

• assisting in the promotion of new ore processing techniques and technologies

• safety management

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Period Position Relevant experience and/or responsibilities October 1990− Deputy head of Responsible for the overall operation of the March 1992 ...... mineral smelting high-grade nickel flotation processing plant workshop and the smelting workshop under the leadership of the head of the mineral smelting plant. The responsibilities of Mr. Guo covered the followings:

• handling the work of the said two workshops

• assisting in the devising of the annual operations plan and budget of the mineral smelting plant

• managing the operations of the mineral smelting plant

September 1985− Head of mine Responsible for the daily management of the September 1990 .... processing mine processing inspection station under inspection station the leadership of the head of the quality inspection department. The responsibilities of Mr. Guo covered the followings:

• enhancing the management of inspection checkpoints

• ensuring the theorical and actual recovery rate is within an acceptable range

• leading the other staff of the inspection station to complete the relevant tasks

Mr. Guo obtained his graduation certificate in mining beneficiation of Jilin Metallurgical Industry School* (吉林冶金工業學校) (currently known as Jilin Technology College of Electronic Information* (吉林電子信息職業技術學院)) in the PRC in August 1981.

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Mr. Yu Hongyi (于洪義), aged 55, joined our Group in March 2021 as a mining engineer of Yanbian Fuli, and was promoted as the mining engineer of our Group on June 15, 2021, primarily responsible for mine design and planning, onsite management, and prospecting. Mr. Yu Hongyi has over 33 years of experience in the mining industry.

Prior to joining our Group, during the period from January 2007 to December 2020, Mr. Yu Hongyi worked in Jilin Haorong Group Co., Ltd.* (吉林昊融集團股份有限公司)(“Jilin Haorong Group”), a company principally engaged in the mining, beneficiation, smelting, purification and processing of copper and nickel, where he held the following positions and his relevant mining experience and/or responsibilities are summarized as follows:

Period Position Relevant experience and/or responsibilities December 2017− Manager of a branch In charge of the management of the safety, December 2020 .... company production and operation of an underground copper-nickel mine which shares similar mining process as our YQS Nanshan Project. The responsibilities of Mr. Yu Hongyi covered the followings:

• overall management and coordination of the daily operation of the mine

• devising production plan and overseeing its implementation

• monitoring the underground mining facilities and devising production techniques execution plan

• organizing monthly production safety inspection and regular production safety coordination meeting

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Period Position Relevant experience and/or responsibilities January 2007− Deputy manager of In charge of the production, technology and December 2016 .... production of a safety management of an underground branch company copper-nickel mine which shares similar mining process as our YQS Nanshan Project, with the following responsibilities:

• coordination of the daily operation of the mine

• onsite management of the mine production facilities

• devising production techniques and safety techniques execution plans

• organizing monthly production safety inspection and regular production safety coordination meeting

• devising monthly and annual safety production schedule

March 2016− Mining engineer of In charge of the mine design and underground December 2020 .... another branch mining technique management of an company (on underground copper-nickel mine which secondment) shares similar mining process as our YQS Nanshan Project, with the following responsibilities:

• devising the mine site expansion plan and monitoring the relevant construction progress

• provision of technical production services

• monitoring the ore loss and dilution of the mine

• monitoring mine site safety

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During the period from January 2001 to December 2006, Mr. Yu Hongyi worked in Jilin Jien Nickel Industry Co., Ltd.* (吉林吉恩鎳業股份有限公司)(“Jilin Jien”), one of the subsidiaries of Jilin Haorong Group, where he held the following positions and his relevant mining experience and/or responsibilities are summarized as follows:

Period Position Relevant experience and/or responsibilities January 2006− Assistant to mine In charge of the management of the safety, December 2006 .... manager production, technology and operations of an underground copper-nickel mine which shares similar mining process as our YQS Nanshan Project. The responsibilities of Mr. Yu Hongyi covered the followings:

• coordination of mine production and overseeing the implementation of production plan

• establishing and perfecting mine production and management system, and devising various rules and standards relating to production

• devising the annual, seasonal and monthly production plan

• stope sequencing

January 2005− Chief of the safety Responsible for safety and technical December 2005 .... division of a mine management of an underground copper-nickel mine which shares similar mining process as our YQS Nanshan Project. The responsibilities of Mr. Yu Hongyi covered the followings:

• various safety management works including onsite safety inspection

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Period Position Relevant experience and/or responsibilities • organizing regular and ad-hoc safety inspections

• organizing trainings and education campaigns for safety production

• work injury management including the development of preventive measures

• supervising the operations of safety facilities and the protective measures of production staff

January 2001− Control center officer Responsible for production coordination and December 2004 .... ofamine technical management of an underground copper-nickel mine which shares similar mining process as our YQS Nanshan Project. The responsibilities of Mr. Yu Hongyi covered the followings:

• assisting the mine production manager to manage, organize and coordinate mine production

• participating in the review of mine construction blueprint and production planning

• organizing regular and ad-hoc operations inspections

• conducting safety inspection with respect to production safety and ore loss and dilution

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During the period from July 1987 to December 2000, he worked in Jilin Nickel Company* (吉林鎳業公司), the predecessor company of Jilin Haorong Group, where he held the following positions and his relevant mining experience and/or responsibilities are summarized as follows:

Period Position Relevant experience and/or responsibilities January 1997− Deputy section chief Responsible for production technology and December 2000 .... ofamine operations management of an underground copper-nickel mine which shares similar mining process as our YQS Nanshan Project. The responsibilities of Mr. Yu Hongyi covered the followings:

• implementation of production plan

• monitoring the production progress to ensure its compliance with the production schedule

• productivity analysis and arranging for adjustments in human resources deployment and facilities accordingly

• work site safety management

January 1993− Deputy chief of the Responsible for safety and technical December 1996 .... production division management of an underground ofamine copper-nickel mine which shares similar mining process as our YQS Nanshan Project. The responsibilities of Mr. Yu Hongyi covered the followings:

• production planning including the development of annual, seasonal and monthly production plan, and coordination of production activities

• coordination of various production units

• participating in mine safety management and facilities management

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Period Position Relevant experience and/or responsibilities July 1987− Technician of a mine Responsible for mining technology of an December 1992 .... underground copper-nickel mine which shares similar mining process as our YQS Nanshan Project. The responsibilities of Mr. Yu Hongyi covered the followings:

• participating in the preliminary planning of the mine project and the technology advancement project, and drawing the relevant design blueprints

• mine construction inspection (at various stages and upon completion)

• providing mining technology services and assistances

Mr. Yu Hongyi obtained his graduation certificate in mining from Jilin Metallurgical Industry School* (currently known as Jilin Technology College of Electronic Information*) in the PRC in August 1987.

Mr. Zhang Xiaoman (張曉滿) (“Mr. Zhang”), aged 56, joined our Group in March 2021 as a mining engineer of Yanbian Fuli, and was promoted as the mining engineer of our Group on June 15, 2021, primarily responsible for mine design and planning, onsite management, and prospecting. Mr. Zhang has over 33 years of experience in the mining industry. Mr. Zhang was accredited as Certified Safety Engineer (註冊安全工程師) by the State Administration of Work Safety in the PRC (國家安全生產監督管理總局) in October 2008.

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During the period from October 2019 to January 2021, Mr. Zhang worked in Jilin Daheishan Molybdenum Industry Co., Ltd.* (吉林大黑山鉬業股份有限公司), one of the subsidiaries of Jilin Haorong Group, where he held the following position and his relevant mining experience and/or responsibilities are summarized as follows:

Period Position Relevant experience and/or responsibilities October 2019− Deputy manager of a In charge of the construction and production January 2021 ...... granite processing management of a granite processing project project which adopts similar mineral processing techniques as the backfill plant of our YQS Nanshan Project, with the following responsibilities:

• responsible for project construction and production management with the project manager

• coordinating and supervising the construction of the project

During the period from January 2018 to September 2019, Mr. Zhang worked in Jilin Haorong Group, where he held the following position and his relevant mining experience and/or responsibilities are summarized as follows:

Period Position Relevant experience and/or responsibilities January 2018− Officer of the safety Responsible for safety and environmental September 2019 .... and environmental protection management including protection overseeing two underground copper-nickel department mines which share similar mining process as our YQS Nanshan Project. The responsibilities of Mr. Zhang covered the followings:

• supervising the production, safety and environmental protection management of the mines

• supervising the mining process and the relevant safety and environmental protection measures

• devising the annual production and environmental protection plan and supervising its execution

• developing and perfecting the environmental protection rules and regulations

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During the period from January 2004 to December 2017, Mr. Zhang worked in Jilin Jien, where he held the following positions and his relevant mining experience and/or responsibilities are summarized as follows:

Period Position Relevant experience and/or responsibilities August 2016− Officer of the safety Responsible for production, safety and December 2017 .... and environmental environmental protection management protection including overseeing two underground department copper-nickel mines which share similar mining process as our YQS Nanshan Project. The responsibilities of Mr. Zhang covered the followings:

• supervising the production, safety and environmental protection management of the mines

• supervising the mining process and the relevant safety and environmental protection measures

• devising the annual production and environmental protection plan and supervising its execution

• developing and perfecting the environmental protection rules and regulations

January 2011− Mine manager In charge of the overall management of an July 2016 ...... underground copper-nickel which shares similar mining process as our YQS Nanshan Project, with the following responsibilities:

• overall management of the production, safety, operations, facilities and human resources of the mine

• ensuring compliance with the relevant laws and regulations

• supervising the production safety and production workflow of the mine

• supervising the implementation of staff training programs

• optimization of staffing structure of the mine

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Period Position Relevant experience and/or responsibilities January 2004− Deputy officer of the Responsible for production, safety and December 2010 .... production environmental protection including department overseeing two underground copper-nickel mines which share similar mining process as our YQS Nanshan Project. The responsibilities of Mr. Zhang covered the followings:

• participating in safety and environmental protection supervision

• setting the annual safety and environmental protection target of the company

• supervising the development and enhancement of safety and environmental protection regime of various units

• supervising the implementation of safety and environmental protection measures

During the period from July 1987 to December 2003, Mr. Zhang worked in Jilin Nickel Company, where he held the following positions and his relevant mining experience and/or responsibilities are summarized as follows:

Period Position Relevant experience and/or responsibilities January 1993− Officer of the Responsible for production and technical December 2003 .... production management of an underground technology copper-nickel mine which shares similar department mining process as our YQS Nanshan Project. The responsibilities of Mr. Zhang covered the followings:

• responsible for the overall operations of the production technology department under the leadership of the production mine manager

• devising annual, seasonal and monthly production plan and organizing the implementation of the same

• arranging the work force of the mine

• promotion of new mining techniques

• onsite problem solving

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Period Position Relevant experience and/or responsibilities July 1987− Technician of a mine Responsible for technical management of an December 1992 .... underground copper-nickel mine which shares similar mining process as our YQS Nanshan Project. The responsibilities of Mr. Zhang covered the followings:

• devising the production execution plan of the mine

• onsite management of mining activities

• devising technical solutions for onsite mining

• information collation with respect to mining techniques

Mr. Zhang obtained his graduation certificate in mining from Jilin Metallurgical Industry School* (currently known as Jilin Technology College of Electronic Information*) in the PRC in August 1987. He also completed his college study in mining engineering by way of correspondence program from Fuxin Mining College* (阜新礦業學院) (currently known as Liaoning Technical University* (遼寧工程技術大學)) in the PRC in December 1993.

Each member of our senior management confirms with respect to himself/herself that he/she has not held any directorship in the last three years in any public companies, the securities of which are listed on any securities market in Hong Kong or overseas.

COMPARISON OF EXTRACTION AND EXPLORATION ACTIVITIES

As set out above, Mr. Chi Yongxi and Mr. Liu Zhong, being our executive Directors, and Mr. Guo Junguo, Mr. Yu Hongyi and Mr. Zhang Xiaoman, being members of our senior management (collectively, the “Technical Team”) were involved in exploration, mining and/or processing of various metal (including gold, lead-zinc, iron and copper-nickel), gemstones (including peridot, corundum, tremolite and quartz) and/or other minerals. As confirmed by the Independent Technical Consultant, the previous mining projects in which the members of the Technical Team had participated are substantially similar to our YQS Nanshan Project in terms of (i) characteristics; (ii) mine planning; (iii) exploration; (iv) ore mining, production or processing method, technique or workflow; (v) safety measures; and/or (vi) mining, transportation, production or processing equipment used, such that the Technical Team’s relevant mining experience set out above is transferable to our YQS Nanshan Project.

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JOINT COMPANY SECRETARIES

Mr. Pang is one of the joint company secretaries of our Company. For details of Mr. Pang’s biography, please refer to “— Our Senior Management” in this section.

Mr. To Yu Fai (陶宇揮) (“Mr. To”) joined Fuli HK in July 2018 and is a joint company secretary of our Company. He is primarily responsible for financial control and management of our Group. Mr. To has over 11 years of experience in accounting and finance. Mr. To is currently a member of the Hong Kong Institute of Certified Public Accountants.

Prior to joining our Group, from October 2016 to July 2018, Mr. To served as chief financial officer of Top Famous Construction Engineering Limited. From January 2011 to October 2016, Mr. To worked at Crowe Horwath (HK) CPA Limited where he served as (i) semi-senior auditor (from January 2011 to October 2011); (ii) senior auditor (from November 2011 to October 2012); (iii) assistant manager (November 2012 to May 2014); and (iv) deputy manager (from June 2014 to October 2016). Prior to that, Mr. To worked at Henry Ha & Co. Certified Public Accountants (Practicing) Hong Kong where he served as assistant accountant from June 2009 to March 2010 and as accountant from April 2010 to January 2011.

Mr. To obtained his bachelor’s degree of business administration from Lingnan University (嶺南大學) in Hong Kong in October 2009.

Mr. To has not held any current or past directorships in any publicly listed companies whether in Hong Kong or overseas during the three years preceding the date of this document.

COMPLIANCE ADVISOR

We have appointed China Galaxy International as our compliance advisor subject to and upon the [REDACTED] in compliance with Rule 3A.19 of the Listing Rules. Pursuant to Rule 3A.23 of the Listing Rules, the compliance advisor will advise us on the following circumstances:

(a) before the publication of any regulatory announcement, circular or financial report;

(b) where a transaction, which might be a notifiable or connected transaction, is contemplated, including share issues and share repurchases;

(c) where we propose to use the [REDACTED] of the [REDACTED] in a manner different from that detailed in this document or where our business activities, developments or results deviate from any forecast, estimate or other information in this document; and

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(d) where the Stock Exchange makes an inquiry of our Company under Rule 13.10 of the Listing Rules.

The term of appointment of the compliance advisor shall commence on the [REDACTED] and is expected to end on the date on which our Company distributes its annual report in respect of our financial results for the first full financial year commencing after the [REDACTED].

COMMITTEES UNDER THE BOARD OF DIRECTORS

Our Board delegates certain responsibilities to various committees. In accordance with the Corporate Governance Code set forth in Appendix 14 to the Listing Rules (the “Corporate Governance Code”), our Company [has formed] four Board committees, namely the audit committee, the nomination committee, the remuneration committee, and the environmental social governance committee.

Audit Committee

We [have established] an audit committee with written terms of reference in compliance with Rule 3.21 of the Listing Rules and the Corporate Governance Code as set out in Appendix 14 to the Listing Rules. The audit committee consists of three members, namely Dr. Ren, Dr. Shen, and Mr. Li, with Mr. Li being the chairman of the committee possessing the appropriate accounting or related financial management expertise in compliance with the requirements under Rules 3.10(2) and 3.21 of the Listing Rules.

The primary duties of the audit committee are to review and supervise the financial reporting process and internal control system (including risk management) of our Group, review and approve connected transactions and provide advice and comments to the Board of Directors. The duties of the audit committee also include making recommendations to our Board on the appointment, reappointment, and removal of auditors.

Remuneration Committee

We [have established] a remuneration committee with written terms of reference in compliance with Rule 3.25 of the Listing Rules and the Corporate Governance Code as set out in Appendix 14 to the Listing Rules. The remuneration committee consists of three members, namely Mr. Yu, Dr. Shen and Mr. Li, with Dr. Shen being the chairman of the committee.

The primary duties of the remuneration committee are to review and make recommendations to our Board the terms of remuneration packages, bonuses, and other compensation payable to our Directors and other senior management.

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Nomination Committee

We [have established] a nomination committee with written terms of reference in compliance with the Corporate Governance Code. The nomination committee consists of three members, namely Mr. Yu, Dr. Shen, and Mr. Li, with Mr. Yu being the chairman of the committee.

The primary duties of the nomination committee are to make recommendations to our Board on the appointment of Directors and management of Board succession.

Environmental Social Governance Committee

We [have established] an environmental social governance committee with written terms of reference in compliance with the Corporate Governance Code. The environmental social governance committee consists of three members, namely Dr. Ren, Dr. Shen, and Mr. Jiang, with Mr. Jiang being the chairman of the committee.

The primary duties of the environmental social governance committee are to review the environmental social governance matters and report to our Board in this regard.

BOARD DIVERSITY POLICY

In order to enhance the effectiveness of our Board and to maintain the high standard of corporate governance, we [have adopted] a board diversity policy which sets out the objective and approach to achieve and maintain diversity of our Board. Pursuant to our board diversity policy, we seek to achieve board diversity through the consideration of various factors such as skills, regional and industry experience, background, gender, age, length of service and other qualities of Directors. All Board appointments will be based on merit while taking into account the board diversity policy. Our Board comprises eight members, including five executive Directors and three independent non-executive Directors. Our Directors have a balanced mix of knowledge and experience, including management and strategic development, mining, sales and marketing, as well as accounting and financial management. Furthermore, our Directors, aged between 40 and 64, are in different life stages with a variety of upbringing and education. We have also taken, and will continue to take steps to promote gender diversity at all levels of our Company, including but without limitation at the Board and senior management levels. One of our executive Directors is female and an UK national which is testament of our Group’s dedication in achieving gender and ethnic diversity at Board level. Our nomination committee is responsible for ensuring the diversity of our Board and will annually, in the corporate governance report contained in the Company’s annual report, report on the Board’s diversity, and monitor the implementation of the policy. Upon

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[REDACTED], our nomination committee will review our board diversity policy from time to time to ensure its continued effectiveness. Our implementation of the board diversity policy will be disclosed in our annual reports.

CORPORATE GOVERNANCE

Our Directors recognize the importance of incorporating elements of good corporate governance in the management structures and internal control procedures of our Group so as to achieve effective accountability. Our Company [has adopted] the code provisions stated in the Corporate Governance Code. Our Company is committed to the view that our Board should include a balanced composition of executive and independent non-executive Directors so that there is a strong independent element on our Board, which can effectively exercise independent judgment.

DIRECTORS’ INTEREST IN COMPETING BUSINESS

None of our Directors was, as of the Latest Practicable Date, interested in or engaged in any business, other than our Group’s business, which, competes or is likely to compete, either directly or indirectly, with our Group’s business and which requires disclosure pursuant to Rule 8.10 of the Listing Rules.

DIRECTORS’ AND SENIOR MANAGEMENT’S REMUNERATION

Our Directors and senior management receive compensation from our Group in the form of fees, salaries, bonuses, contributions to pension schemes, allowances and benefits in kind.

The aggregate remuneration (including fees, salaries, contributions to pension schemes, allowances, discretionary bonuses paid and benefits in kind) received by our Directors were RMB0.4 million, RMB0.4 million, and RMB1.5 million in the three years ended 31 December 2020, respectively. Details of our Directors’ remuneration are also set out in note 8 to the Accountants’ Report in Appendix I to this document.

The aggregate remuneration (including fees, salaries, contributions to pension schemes, allowances, discretionary bonuses paid and benefits in kind) of the five highest paid individuals for the three years ended December 31, 2020 was RMB1.5 million, RMB2.5 million, and RMB3.4 million, respectively.

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Save as disclosed above, no other payments have been paid or are payable, in respect of the three years ended December 31, 2020 by our Company to our Directors or senior management. Under the arrangements currently in force, we estimate that the aggregate remuneration, excluding discretionary bonuses, of our Directors for the year ending December 31, 2021 to be RMB2.3 million.

No remuneration was paid to our Directors or the five highest paid individuals as an inducement to join, or upon joining, our Group or as compensation for loss of office during the Track Record Period. None of our Directors waived any emoluments during the same period.

SHARE OPTION SCHEME

Our Company [has conditionally adopted] the Share Option Scheme. For details of the principal terms of the Share Option Scheme, see “Statutory and General Information — D. Share Option Scheme” in Appendix VI to this document.

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SUBSTANTIAL SHAREHOLDERS

As of the Latest Practicable Date and immediately following completion of the [REDACTED] and the [REDACTED] (assuming the [REDACTED] is not exercised and without taking into account any Shares which may be issued upon the exercise of any options which may be granted under the Share Option Scheme), the following persons will have an interest or short position in Shares or underlying Shares which would be required to be disclosed to us and the Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of the SFO, or, directly or indirectly, be interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any other member of our Group:

Immediately after completion of the As of the Latest Practicable Date [REDACTED] and the [REDACTED](1)

Percentage of Percentage of shareholding in our shareholding in our Name Capacity/Nature of interest Number of Shares(2) Company Number of Shares(2) Company Kind Modest ...... Beneficial owner(3) 2,532,000(L) 49.12% [REDACTED](L) [REDACTED]% Mr. Yu ...... Interest in a controlled 2,532,000(L) 49.12% [REDACTED](L) [REDACTED]% corporation(3) Ms. Pang Hao (龐浩) ...... Interest of spouse(4) 2,532,000(L) 49.12% [REDACTED](L) [REDACTED]% Grand Start ...... Beneficial owner(5) 1,863,000(L) 36.14% [REDACTED](L) [REDACTED]% Mr. Jiang ...... Interest in a controlled 1,863,000(L) 36.14% [REDACTED](L) [REDACTED]% corporation(5) Ms. Liu Wei (劉威) ...... Interest of spouse(6) 1,863,000(L) 36.14% [REDACTED](L) [REDACTED]% Tegus Partnership ...... Beneficial owner(7) 619,085(L) 12.01% [REDACTED](L) [REDACTED]% Mr. Peng Jianqiang (彭建強) .... Interest in a controlled 619,085(L) 12.01% [REDACTED](L) [REDACTED]% corporation(7) Ms. Tian Wei (田偉) ...... Interest of spouse(8) 619,085(L) 12.01% [REDACTED](L) [REDACTED]%

Notes:

(1) Assuming the [REDACTED] is not exercised and without taking into account any Shares which may be issued upon the exercise of any options which may be granted under the Share Option Scheme.

(2) The letter “L” denotes long position in our Shares.

(3) Mr. Yu is the sole shareholder of Kind Modest, and he is therefore deemed to be interested in the Shares held by Kind Modest by virtue of the SFO.

(4) Ms. Pang Hao is the spouse of Mr. Yu and she is therefore deemed to be interested in the Shares that Mr. Yu is interested in by virtue of the SFO.

(5) Mr. Jiang is the sole shareholder of Grand Start, and he is therefore deemed to be interested in the Shares held by Grand Start by virtue of the SFO.

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(6) Ms. Liu Wei is the spouse of Mr. Jiang and she is therefore deemed to be interested in the Shares that Mr. Jiang is interested in by virtue of the SFO.

(7) Mr. Peng Jianqiang is the general partner of Tegus Partnership and holds 29.75% interest in Tegus Partnership, and he is therefore deemed to be interested in the Shares held by Tegus Partnership by virtue of the SFO.

(8) Ms. Tian Wei is the spouse of Mr. Peng Jianqiang and she is therefore deemed to be interested in the Shares that Mr. Peng Jianqiang is interested in by virtue of the SFO.

Except as disclosed above, our Directors are not aware of any person who will, immediately following the [REDACTED] and the [REDACTED] (assuming the [REDACTED] is not exercised and without taking into account any Shares which may be issued upon the exercise of any options which may be granted under the Share Option Scheme), have an interest or short position in Shares or underlying Shares which would be required to be disclosed to us and the Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of the SFO, or, directly or indirectly, be interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of our Company.

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SHARE CAPITAL

The authorized and issued share capital of our Company is as follows:

Authorized Share Capital:

US$ [2,000,000,000] Shares as at the date of this document [20,000,000]

Without taking into account any Shares which may be issued upon the exercise of any options which may be granted under the Share Option Scheme, the issued share capital of our Company immediately following the completion of the [REDACTED] and the [REDACTED] and assuming the [REDACTED] is not exercised at all will be as follows:

Issued Share Capital:

US$ 5,154,833 Shares in issue as of the date of this document 51,548.33

[REDACTED] Shares to be issued under the [REDACTED] [REDACTED]

[REDACTED] Shares in total [REDACTED]

Issued Share Capital:

US$ 5,154,833 Shares in issue as of the date of this document 51,548.33

[REDACTED] Shares to be issued under the [REDACTED] [REDACTED]

[REDACTED] Shares to be issued upon exercise of the [REDACTED] [REDACTED]

[REDACTED] Shares in total [REDACTED]

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Notes:

(1) The Shares referred to in the above table have been or will be fully paid or credited as fully paid when issued.

(2) Assuming a total of [REDACTED] Shares will be issued upon exercise of the [REDACTED] in full.

RANKING

The [REDACTED] are ordinary Shares in the share capital of our Company and rank pari passu in all respects with all Shares in issue or to be issued as set out in the above table, and will qualify and rank pari passu for all dividends or other distributions declared, made or paid after the date of this document.

CIRCUMSTANCES UNDER WHICH GENERAL MEETING AND CLASS MEETING ARE REQUIRED

Pursuant to the Cayman Companies Act and the terms of our Articles, our Company may from time to time by ordinary resolution of our Shareholders (i) increase our share capital; (ii) consolidate or divide our share capital into Shares of larger or smaller amount than our existing Shares; (iii) divide our Shares into several classes; (iv) subdivide our Shares into Shares of smaller amount; and (v) cancel any Shares which have not been taken. In addition, our Company may subject to, the Cayman Companies Act, reduce our share capital by our Shareholders passing a special resolution subject to any conditions prescribed by law. For further details, see “Summary of the Constitution of the Company and Cayman Islands Company Law — 2. Articles of Association — (a) Shares — (iii) Alteration of capital” in Appendix V to this document.

Pursuant to the terms of our Articles, all or any of the special rights attached to our Shares or class of Shares may, subject to the provisions of the Companies Act, be varied, modified or abrogated either with the consent in writing of the holders of not less than three-fourths in nominal value of issued Shares of that class or with the sanction of a special resolution passed at a separate general meeting of the holders of our Shares of that class. For further details, see “Summary of the Constitution of the Company and Cayman Islands Company Law — 2. Articles of Association — (a) Shares — (ii) Variation of rights of existing shares or classes of shares” in Appendix V to this document.

Other than the circumstances above, certain corporate actions may require the approval of our Shareholders, which would be obtained in a general meeting. For further details, see “Summary of the Constitution of the Company and Cayman Islands Company Law — 2. Articles of Association — (a) Shares” in Appendix V to this document.

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ALTERATIONS OF SHARE CAPITAL

Our Company may from time to time by ordinary resolution or special resolution (as the case may be) of shareholders alter the share capital of our Company. See “2. Articles of Association — (a) Shares — (iii) Alteration of capital” and “3. Cayman Islands Company Law — (b) Share Capital” in “Summary of the Constitution of the Company and Cayman Islands Company Law” set out in Appendix V to this document for a summary of the provisions in our Articles of Association and the Cayman Islands company law regarding alterations of share capital.

GENERAL MANDATE TO ISSUE SHARES

Our Directors have been granted a general unconditional mandate to allot, issue and deal with Shares with an aggregate nominal value of not more than the sum of:

(i) 20% of the total number of issued Shares immediately following the completion of the [REDACTED] and the [REDACTED] (excluding any Shares which may fall to be issued pursuant to the [REDACTED]); and

(ii) the total number of Shares repurchased by our Company (if any) under the general mandate to repurchase Shares referred to below.

This mandate will expire at the earliest of:

(i) the conclusion of our Company’s next annual general meeting unless renewed by an ordinary resolution of our Shareholders in a general meeting, either unconditionally or subject to conditions; or

(ii) the expiration of the period within which our Company is required by law or the Articles of Association to hold its next annual general meeting; or

(iii) the time when such mandate is varied, revoked or renewed by an ordinary resolution of our Shareholders in a general meeting.

See “Statutory and General Information — A. Further Information about Our Group — 4. Written Resolutions Passed by Our Shareholders on [•]” in Appendix VI to this document for further details of this general mandate.

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SHARE CAPITAL

GENERAL MANDATE TO REPURCHASE SHARES

Our Directors [have been granted] a general unconditional mandate to exercise all the powers of our Company to repurchase Shares with a total nominal value of not more than 10% of the total number of issued Shares immediately following the completion of the [REDACTED] and the [REDACTED] (excluding any Shares which may fall to be issued upon the exercise of the [REDACTED]).

This mandate only relates to repurchases made on the Stock Exchange, or any other approved stock exchange(s) on which our Shares are [REDACTED] (and which is recognized by the SFC and the Stock Exchange for this purpose), and which are made in accordance with all applicable laws and/or requirements of the Listing Rules. See “Statutory and General Information — A. Further Information about our Group — 6. Repurchases of Our Own Securities” in Appendix VI to this document for a summary of the relevant Listing Rules.

This mandate will expire at the earliest of:

(ii) the expiration of the period within which our Company is required by law or our Articles of Association to hold its next annual general meeting; or

(iii) the time when such mandate is varied, revoked or renewed by an ordinary resolution of our Shareholders in a general meeting.

SHARE OPTION SCHEME

Our Company has conditionally adopted the Share Option Scheme on [•]. Under the Share Option Scheme, the eligible participants of the scheme, including any executive Directors, independent non-executive Directors, advisors and consultants of our Group may be granted options which entitle them to subscribe for Shares, when aggregated with options granted under any other scheme, representing initially not more than 10% of the Shares in issue on the [REDACTED]. See “Statutory and General Information — D. Share Option Scheme” in Appendix VI to this document for further details of the rules of the Share Option Scheme.

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FINANCIAL INFORMATION

You should read this section in conjunction with our audited consolidated financial statements, including the notes thereto, as set out in the Accountants’ Report set out in Appendix I to this document. Our Group’s consolidated financial statements have been prepared in accordance with the Hong Kong Financial Reporting Standards (“HKFRSs”) issued by the Hong Kong Institute of Certified Public Accountants (the “HKICPA”). You should read the entire Accountants’ Report and not merely rely on the information contained in this section.

The following discussion and analysis contain certain forward-looking statements that reflect the current views with respect to future events and financial performance. These statements are based on assumptions and analyses made by our Group in light of our experience and perception of historical trends, current conditions and expected future developments, as well as other factors our Group believes are appropriate under the circumstances. However, whether actual outcomes and developments will meet our Group’s expectations and projections depends on a number of risks and uncertainties over which our Group does not have control. For further information, you should refer to “Risk Factors” in this document.

The following discussion and analysis also contain certain amounts and percentage figures that have been subject to rounding adjustments. Accordingly, figures shown as totals in certain tables may not be an arithmetic aggregation of the figures preceding them and all monetary amounts shown are approximate amounts only.

OVERVIEW

During the Track Record Period, we conducted limited sales with peridot gemstones collected during our exploration stage as part of our pre-market sounding-out initiatives, and generated revenue of RMB1.1 million, RMB1.2 million and RMB707,000 for the three years ended December 31, 2020, respectively. During the same period, we incurred losses of RMB10.9 million, RMB17.1 million and RMB24.1 million, respectively. In accordance with our commercialization scheme, we expect to complete our overall mine construction by the third quarter of 2023 and to commence commercial production in the fourth quarter of 2023.

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FINANCIAL INFORMATION

BASIS OF PRESENTATION

Pursuant to the Reorganization, as more fully explained in “History, Reorganization and Corporate Structure — Reorganization” in the document, our Company became the holding company of the companies now comprising the Group on May 8, 2019. As the Reorganization only involved inserting new holding companies at the top of an existing company and has not resulted in any change of economic substances, the historical financial information contained in our consolidated financial statements included in the Accountants’ Report set forth in Appendix I to this document has been presented as a continuation of the existing company using the pooling of interests method as if the group structure had been in place at the beginning of the Track Record Period.

The consolidated statements of profit or loss and other comprehensive loss, consolidated statements of changes in equity and consolidated statements of cash flows of our Group for the Track Record Period include the results and cash flows of all companies now comprising our Group from the earliest date presented or since the date when the subsidiaries and/or businesses were established or acquired, where this is a shorter period. The consolidated statements of financial position of our Group as of December 31, 2018, 2019 and 2020 have been prepared to present the assets and liabilities of the subsidiaries now comprising our Group using the existing book values. No adjustments are made to reflect fair values, or recognize any new assets or liabilities as a result of the Reorganization.

All intra-group transactions and balances have been eliminated on consolidation.

Our consolidated financial information has been prepared in accordance with HKFRSs (which include all Hong Kong Financial Reporting Standards, Hong Kong Accounting Standards and Interpretations) issued by the HKICPA and accounting principles generally accepted in Hong Kong and the Companies Ordinance. All HKFRSs effective for the accounting period commencing from January 1, 2020, together with the relevant transitional provisions, have been early adopted on a consistent basis by the Group in the preparation of the consolidated financial information throughout the Track Record Period. Our Group also early adopted amendment to HKFRS 16 COVID-19-Related Rent Concessions on January 1, 2020.

The consolidated financial information has been prepared under the historical cost convention.

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FINANCIAL INFORMATION

FACTORS AFFECTING OUR FINANCIAL RESULTS

Our results of operations and financial performance have been and will continue to be affected by a number of factors, many of which may be beyond our control, including those factors set out in “Risk Factors” in this document and those set out below.

Demand for Our Products and Effectiveness of Our Marketing Strategies

We acquired the exploration license for our YQS Nanshan Project in July 2015 and obtained the Mining License in December 2016. We expect to commence commercial production in the fourth quarter of 2023 with a production ramp-up period of approximately six years up to 2029 to reach full capacity production in 2030. We expect that upon commercial production, our YQS Nanshan Project will produce three principal products, namely (i) cut-and-polished peridot gemstones, (ii) peridot gem dots, and (iii) rough peridot gemstones; and two by-products, namely (i) industrial-grade peridot sands, and (ii) basalt. During the Track Record Period, we generated insignificant revenue from sales of rough peridot gemstones, cut-and-polished peridot gemstones and jewelry with peridot gemstones collected during our exploration stage as part of our pre-market sounding-out initiatives. Rough peridot gemstones are natural peridot which has been sorted and graded but not yet further processed. Cut-and-polished peridot gemstones are obtained after performing further processing including cutting, bruting, faceting and polishing. Cut-and-polished peridot gemstones can be fabricated into a variety of jewelry items and accessories such as rings, necklaces, earrings, bracelets and watches. Peridot sands can be classified into gem-grade and industrial-grade. Peridot gem dots are cut-and-polished peridot sands which are aesthetically suitable to be applied on jewelry or other accessories.

According to the F&S Report, colored gemstones are generally viewed as consumer discretionary and luxury products which, to a large extent, are preference and perception driven. Consistent marketing efforts and messages are critical in driving consumer perception, recognition, emotional attachments and ultimately, preference and demand for a particular gemstone. In the current gemstone market, peridot has not drawn sufficient industry interest, nor has it been adopted broadly so as to create a critical mass to influence the preference and perception of consumers, in part due to inconsistent global supply.

Our commercialization scheme involves the construction of our mine site, our ore processing facilities and in the longer run, our gemstone processing facilities, as well as elaborate global marketing and sales channel development strategies. We aim to resolve the inconsistent supply challenge of peridot through commercial production under our YQS Nanshan Project, and build market interest and demand in peridot through our marketing and promotion initiatives. The success of our commercialization scheme, however, involves various risks and uncertainties and depends on various factors which are beyond our control. We may encounter unexpected

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FINANCIAL INFORMATION complexities in our mine construction which could substantially increase our construction costs and materially delay our commercial production. Our elaborate global marketing strategies may not be successful in shaping favorable consumer preference and perception towards peridot, or improving market interest in and demand for our peridot products, or generating the targeted sales and revenue for us. Any of the foregoing would have a material impact on the success of our commercialization scheme and, as a result, our business, prospects, financial condition and results of operations.

Price of Our Products

Colored gemstones are scarce natural resources. Unlike other resources, gemstones are non-standard products with prices varying significantly depending on a number of factors including carat weight, color, clarity, cut and origin of each individual gemstone. Prices of a gemstone can also be influenced by consumer preference and perception in its value over time.

As of the Latest Practicable Date, our YQS Nanshan Project remained at the mine site infrastructure development and mine construction preparation stage. During the Track Record Period, we only had a limited amount of sales of peridot gemstone products which were priced taking into account individual grade of each peridot gemstone and domestic market prices in the PRC. In 2021, in line with our brand and positioning to target the more premium end of the market, we have revised our pricing strategies to price our products based on, among other references, prices of reputable industry sources, in-market pricing and quotations cited in the international market and prices of other colored gemstones.

The market prices of cut-and-polished peridot gemstones were on a gradual upward trend between 2015 and 2019. Nevertheless, its general pricing levels have remained largely below other major colored gemstones. We aim to utilize our extensive marketing and promotional initiatives to influence consumer perception of the value of peridot gemstones and to significantly improve its market prices going forward. Our pricing strategy, on the other hand, is devised largely on the basis that these marketing and promotional initiatives will be effective in shaping consumer perception and driving up the perception, demand and market prices of future peridot gemstones progressively, which remains to be tested and validated by the market. According to the Competent Person’s Report, among the essential factors selected for a sensitivity analysis on the net present value of our YQS Nanshan Project, changes in product prices have the most significant effect on the net present value. Our success and financial performance following commercial production would therefore significantly depend on our success in influencing market prices of peridot and market perception of the value of our peridot gemstones through our marketing and promotional initiatives.

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FINANCIAL INFORMATION

Selling and Distribution Expenses

Given the market nature of colored gemstones, consistent marketing efforts and messages are critical in driving consumer perception, recognition, emotional attachments and ultimately preference and demand for a particular type of gemstone, according to the F&S Report. An essential component of our commercialization scheme is our global marketing strategies that will go hand in hand with our sales plan. During the Track Record Period, we have initialized a series of pre-market publicity and consumer education initiatives and accordingly incurred selling and distribution expenses of RMB4.0 million, RMB6.4 million and RMB7.5 million, respectively. We expect that our sales and marketing expenses will increase substantially going forward as we progressively implement our global marketing and sales channel development strategies. In this connection, we have already allocated in aggregate HK$[REDACTED] million out of the [REDACTED] from the [REDACTED] for our expected sales and marketing related expenditure up to 2024, and utilize our internal resources to fund the continuous implementation of our global marketing and sales channels development strategies after that. Our sales and marketing expenses have been, and will continue to be, a major operating expenditure component for our business operations and will have a material impact on our financial condition and results of operations.

Cost of Sales

Cost of sales will be a material factor affecting our results of operations. We did not commence commercial production during the three years ended December 31, 2020, and generated limited revenue from sales of rough peridot gemstones, cut-and-polished peridot gemstones and jewelry with peridot gemstones collected during our exploration stage as part of our pre-market sounding-out initiatives, and incurred insignificant cost of sales from, among others, staff and other operating costs associated with our pilot gemstone processing workshop, subcontracting charges for jewelry fabrication, and miscellaneous consumables. Going forward after we commence commercial production, we expect our cost of sales will increase substantially along with our sales, with labor costs being the key component as we substantially expand our mining, production and processing related workforce. Market rates of compensation packages for mining, production and processing staff going forward are expected to have a material impact on our cost of sales and our gross profit margin.

Exchange Rate Fluctuations

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FINANCIAL INFORMATION currencies other than their respective functional currencies will be translated at the relevant functional currency rates of exchange prevailing at the end of each reporting period, and differences arising on settlement or translation of monetary items will be recognized in profit or loss. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates at dates of the initial transactions. Additionally, non-monetary items that are measured at fair value in a currency other than the functional currency of the relevant subsidiary are translated using the exchange rates at the date when the fair value was measured, and any gain or loss arising on such translation is to be treated in line with the recognition of gain or loss on change in fair value of the item.

Going forward as we progressively implement our global marketing and sales channel development strategies, and as we commence commercial production and sales, we anticipate that our operating subsidiaries may be increasingly involved with transactions denominated in currencies other than their respective functional currencies. Moreover, as we expand our scale of business we may increasingly need to convert our monetary assets from one currency to another for liquidity management and working capital requirement purposes. Fluctuations in exchange rates of the varying functional currencies of our different subsidiaries may therefore have a material impact on our result of operations in that significant fluctuations in exchange rates that are not in our favor could result in recognition of exchange losses and adversely affecting our result of operations.

Taxation

Our profitability and financial performance are affected by applicable tax policies, and the regulatory environment is evolving from time to time. Pursuant to the Law of the Resource Tax of the PRC (中華人民共和國資源稅法), since September 2020, we are required to pay resource taxes as we develop taxable resources in the territory of the PRC and we are subject to a tax rate of 4% with respect to the sales revenue of the taxable peridot products. Further, we are also subject to value-added tax of 13% under the Interim Regulations on Value-added Tax of the PRC (中華人民共和國增值稅暫行條例). In addition, pursuant to the Interim Regulations on Consumption Tax of the PRC (2008 Revision) (中華人民共和國消費稅暫行條例(2008修訂)) (the “Consumption Tax Regulation”) and the Implementing Rules for the Interim Regulations on Consumption Tax of the PRC (中華人民共和國消費稅暫行條例實施細則), any institution and individual that produces, subcontracts the processing of or import the consumer goods specified in the Consumption Tax Regulation, which include certain luxury products including gemstones, and other institutions or individuals selling the consumer goods specified in the Consumption Tax Regulation that are recognized by the PRC State Council shall be taxpayers of consumption tax. The consumption tax rate for the gemstones is 10%. Taxpayers exporting taxable consumer goods shall be exempt from the consumption tax, unless otherwise provided for by the PRC State Council. Changes in

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FINANCIAL INFORMATION applicable PRC tax rates applicable to mining or mineral resources companies such as us, or sales of luxury consumer products such as our peridot gemstones, could have a significant impact on our financial performance and results of operations.

CRITICAL ACCOUNTING POLICIES, ESTIMATE AND JUDGMENTS

Our Directors have identified certain accounting policies that are significant to the preparation of our consolidated financial statements. The significant accounting policies which are important for an understanding of our financial condition and results of operation are set forth in detail in Note 2.4 to the Accountants’ Report included in Appendix I to this document. Some of the accounting policies involve subjective assumptions and estimates, as well as complex judgments relating to accounting items, and such significant accounting estimates and judgments are set forth in detail in Note 3 to the Accountants’ Report included in Appendix I to this document. The determination of these items requires management judgments based on information and financial data that may change in future periods.

Our Directors believe the following accounting policies, estimates and judgments are of critical importance to our Group in the preparation of our consolidated financial statements.

Revenue Recognition

Revenue from Contracts with Customers

Revenue from contracts with customers is recognized when control of goods or services is transferred to the customers at an amount that reflects the consideration to which the Group expects to be entitled in exchange for those goods or services.

When the consideration in a contract includes a variable amount, the amount of consideration to which the Group will be entitled in exchange for transferring the goods or services to the customer will be estimated. The variable consideration is estimated at contract inception and constrained until it is highly probable that a significant revenue reversal in the amount of cumulative revenue recognized will not occur when the associated uncertainty with the variable consideration is subsequently resolved.

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FINANCIAL INFORMATION contract includes the interest expense accreted on the contract liability under the effective interest method. For a contract where the period between the payment by the customer and the transfer of the promised goods or services is one year or less, the transaction price is not adjusted for the effects of a significant financing component, using the practical expedient in HKFRS 15.

Sale of goods

Our Group is mainly involved in the sale of peridot gemstones. Our revenue from the sale of goods is recognized at the point in time when control of goods is transferred to our customers, generally on delivery of the goods.

Other Income

Interest income is recognized on an accrual basis using the effective interest method by applying the rate that exactly discounts the estimated future cash receipts over the expected life of the financial instrument or a shorter period, when appropriate, to the net carrying amount of the financial assets.

Inventories

During the Track Record Period, our raw materials represented rough peridot gemstones which have been sorted and graded but not yet further processed. Our work in progress represented either (i) rough peridot gemstones in the process of becoming cut and polished; or (ii) cut-and-polished peridot gemstones in the process of being fabricated into jewelry. Our finished goods primarily represented cut-and-polished peridot gemstones and jewelry.

Our inventories are stated at the lower of cost and net realizable value. Cost of our inventories is determined on the weighted average basis and, in the case of work in progress and finished goods, comprises direct materials, direct labor and an appropriate proportion of overheads. Net realizable value is based on estimated selling prices less any estimated costs to be incurred to completion and disposal. These estimates are based on the current market condition and the historical experience of selling products of similar nature. Our management reassesses these estimates at the end of each reporting period.

Property, Plant and Equipment

During the Track Record Period, our property, plant and equipment consisted of leasehold improvements, machinery equipment, office equipment, motor vehicles and construction in progress.

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FINANCIAL INFORMATION

Our construction in progress represents items of property, plant and equipment under construction, and in our case our mine construction, which is stated at cost less any impairment losses, and is not depreciated. Cost comprises the direct costs of construction during the period of construction and our construction in progress is reclassified to the appropriate category of property, plant and equipment when completed and ready for use.

Other than construction in progress, property, plant and equipment are stated at cost less accumulated depreciation and any impairment losses. Cost of an item of property, plant and equipment comprises its purchase price and any directly attributable costs of bringing the asset to its working condition and location for its intended use.

Expenditure incurred after items of property, plant and equipment have been put into operation, such as repairs and maintenance, is normally charged to the consolidated statements of profit or loss and other comprehensive income in the period in which it is incurred. In situations where the recognition criteria are satisfied, the expenditure for a major inspection is capitalized in the carrying amount of the assets as a replacement. Where significant parts of property, plant and equipment are required to be replaced at intervals, we recognize such parts as individual assets with specific useful lives and depreciate them accordingly.

Depreciation of items of property, plant and equipment, other than mining infrastructure, is calculated on the straight-line basis to write off the cost of each item of property, plant and equipment to its residual value over its estimated useful life. The principal annual rates used for this purpose are as follows:

Leasehold improvements Over the shorter of the lease terms and 20% Machinery equipment 10.0% Office equipment 20.0%~33.0% Motor vehicles 25.0%

Depreciation of mining infrastructure is calculated using the units of production method to write off the cost of the assets proportionate to the extraction of the proved and probable mineral reserves.

Where parts of an item of property, plant and equipment have different useful lives, the cost of that item is allocated on a reasonable basis among the parts and each part is depreciated separately. Residual values, useful lives and the depreciation method are reviewed, and adjusted if appropriate, at least at each financial year end.

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FINANCIAL INFORMATION

An item of property, plant and equipment including any significant part initially recognized is derecognized upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss on disposal or retirement recognized in the consolidated statements of profit or loss and other comprehensive income in the year the asset is derecognized is the difference between the net sales proceeds and the carrying amount of the relevant asset.

Mining Rights

Mining rights are stated at cost less accumulated amortization and any impairment losses. Mining rights include the cost of acquiring mining licenses, exploration and evaluation costs transferred from exploration rights and assets upon determination that an exploration property is capable of commercial production, and the cost of acquiring interests in the mining reserves of existing mining properties. The mining rights are amortized over the estimated useful lives of the mines, in accordance with the production plans of the entities concerned and the proved and probable reserves of the mines using the units of production method. Mining rights are written off to profit or loss if the mining property is abandoned.

Foreign Currencies

The historical financial information is presented in RMB, which is different than our Company’s functional currency, USD. As the major revenues and assets of our Group are derived from operations in the PRC, RMB is chosen as the presentation currency for the presentation of the historical financial information. Each entity in our Group determines its own functional currency and items included in the financial statements of each entity are measured using that functional currency. Foreign currency transactions recorded by the entities in our Group are initially recorded using their respective functional currency rates prevailing at the dates of the transactions.

Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency rates of exchange ruling at the end of each of the Track Record Period. Differences arising on settlement or translation of monetary items are recognized in profit or loss.

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FINANCIAL INFORMATION

In determining the exchange rate on initial recognition of the related asset, expense or income on the derecognition of a non-monetary asset or non-monetary liability relating to an advance consideration, the date of initial transaction is the date on which the Group initially recognizes the non-monetary asset or non-monetary liability arising from the advance consideration. If there are multiple payments or receipts in advance, the Group determines the transaction date for each payment or receipt of the advance consideration.

The functional currencies of certain overseas subsidiaries are currencies other than RMB. As at December 31, 2018, 2019 and 2020, the assets and liabilities of these entities are translated into RMB at the exchange rates prevailing at December 31, 2018, 2019 and 2020 and the profits or losses are translated into RMB at the weighted average exchange rates for the year.

The resulting exchange differences are recognized in other comprehensive income and accumulated in the exchange fluctuation reserve. On disposal of a foreign operation, the component of other comprehensive income relating to that particular foreign operation is recognized in the consolidated statements of profit or loss and other comprehensive income.

Any goodwill arising on the acquisition of a foreign operation and any fair value adjustments to the carrying amounts of assets and liabilities arising on acquisition are treated as assets and liabilities of the foreign operation and translated at the closing rate.

Provision for Rehabilitation

A provision is recognized when a present obligation (legal or constructive) has arisen as a result of a past event and it is probable that a future outflow of resources will be required to settle the obligation, provided that reliable estimate can be made of the amount of the obligation.

When the effect of discounting is material, the amount recognized for a provision is the present value at the end of the reporting period of the future expenditures expected to be required to settle the obligation. The increase in the discounted present value amount arising from the passage of time is included in interest expenses in profit or loss.

Our provision for rehabilitation is recognized based on estimates of the required expenditure for our YQS Nanshan Project in accordance with the rules and regulations of the PRC. The obligation generally arises when the asset is installed or the ground environment is disturbed at the production location. Our Group estimates our liabilities for final rehabilitation and mine closure based upon detailed calculations of the amount and timing of the future cash expenditure to perform the required work. Spending estimates are escalated for inflation, then discounted at a discount rate that reflects current market assessments of the time value of money and the risks specific to the liability such that the amount of provision reflects the present value of the expenditures expected to be required to settle the obligation. When the liability is initially recognized, the present value of the estimated cost is capitalized by increasing the carrying amount of the related mining infrastructure.

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FINANCIAL INFORMATION

Over time, the discounted liability increases for the change in present value based on the appropriate discount rate. The periodic unwinding of the discount is recognized within interest expenses in profit or loss. The asset is depreciated using the unit of production method over its expected life and the liability is accreted to the projected expenditure date. Additional disturbances or changes in estimates (such as mine plan revisions, changes in estimated costs, or changes in timing of the performance of reclamation activities) will be recognized as additions or charges to the corresponding assets and rehabilitation liabilities when they occur at the appropriate discount rate.

CONSOLIDATED STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE LOSS

Year ended December 31, 2018 2019 2020 RMB’000 RMB’000 RMB’000 Revenue ...... 1,123 1,154 707 Cost of sales ...... (341) (378) (274) Gross profit...... 782 776 433 Other income and gains...... 244 443 175 Selling and distribution expenses ...... (4,004) (6,419) (7,523) Administrative expenses ...... (9,814) (12,932) (18,098) Other expenses ...... (3) — (102) Interest expenses ...... (263) (476) (784) Loss before tax ...... (13,058) (18,608) (25,899) Income tax credit ...... 2,208 1,497 1,755 Loss for the year ...... (10,850) (17,111) (24,144) Attributable to: Owners of the parent ...... (10,850) (17,111) (23,738) Non-controlling interests ...... — — (406) OTHER COMPREHENSIVE INCOME/(LOSS) Other comprehensive income/(loss) that may be reclassified to profit or loss in subsequent periods: Exchange differences on translation of foreign operations ...... (63) (147) 823 Other comprehensive loss that will not be reclassified to profit or loss in subsequent periods: Exchange differences on translation of the Company’s financial statements ...... — (642) (2,048) Other comprehensive loss for the year .... (63) (789) (1,225) Total comprehensive loss for the year ... (10,913) (17,900) (25,369) Attributable to: Owners of the parent ...... (10,913) (17,900) (24,963) Non-controlling interests ...... — — (406) (10,913) (17,900) (25,369)

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FINANCIAL INFORMATION

DESCRIPTION OF CERTAIN LINE ITEMS OF THE CONSOLIDATED STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE LOSS

Revenue

During the Track Record Period, we generated limited revenue from sales of rough peridot gemstones, cut-and-polished peridot gemstones and jewelry with peridot gemstones collected during our exploration stage as part of our pre-market sounding-out initiatives. Our revenue for the three years ended December 31, 2018, 2019 and 2020 was RMB1.1 million, RMB1.2 million and RMB707,000, respectively.

The following table sets forth our revenue by product type for the periods indicated:

Year ended December 31,

2018 2019 2020

RMB’000 RMB’000 RMB’000 Rough gemstones ...... 641 Cut-and-polished gemstones ...... 348 310 185 Jewelry ...... 769 840 521 1,123 1,154 707

We expect that upon commercial production, our YQS Nanshan Project will produce three principal products, namely (i) cut-and-polished peridot gemstones, (ii) peridot gem dots, and (iii) rough peridot gemstones; and two by-products, namely (i) industrial-grade peridot sands, and (ii) basalt.

Cost of Sales

During the Track Record Period, our cost of sales represented cost of inventories that we incurred during our gemstone processing activities, such as staff costs, rental, depreciation and amortization, subcontracting charges for gem processing and jewelry fabrication, consumables, and others that are initially capitalized to inventory. For the three years ended December 31, 2018, 2019 and 2020, our cost of sales amounted to RMB341,000, RMB378,000 and RMB274,000, respectively, representing 30.4%, 32.8% and 38.8% of our revenue for the same periods, and were subsequently recognized as cost of sales as the relevant inventories were sold.

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FINANCIAL INFORMATION

The following table sets forth a breakdown of our cost of sales by product type for the periods indicated:

Year ended December 31, 2018 2019 2020 RMB’000 RMB’000 RMB’000 Rough gemstones(1) ...... ——— Cut-and-polished gemstones ...... 18 18 20 Jewelry ...... 323 360 254 Total ...... 341 378 274

Notes:

1. During the Track Record Period, there were minimal cost of sales attributable to rough gemstones which were less than RMB1,000.

Going forward after we commence commercial production, costs that we expect to incur for our mining and processing operations such as additional staff costs, utility costs, gemstone processing subcontracting charges, depreciation of mining and ore processing equipment as well as amortization of mining rights and leasehold land will also contribute to our cost of inventories and thus increase our cost of sales.

Gross Profit

Our gross profit during the Track Record Period represented our revenue less cost of sales. Our gross profit was RMB782,000, RMB776,000 and RMB433,000 for the three years ended December 31, 2020, respectively, representing gross profit margin of 69.6%, 67.2% and 61.2% for the respective periods.

The gross profit margin for our jewelry products was generally lower than those for our rough gemstones and cut-and-polished gemstones during the Track Record Period, primarily attributable to the additional costs of materials and jewelry fabrication incurred for the production of the end products.

The following table sets forth a breakdown of our gross profit by product type for the periods indicated:

Year ended December 31, 2018 2019 2020 Gross profit Gross profit Gross profit RMB’000 margin (%) RMB’000 margin (%) RMB’000 margin (%) Rough gemstones ...... 6 100.0 4 100.0 1 100.0 Cut-and-polished gemstones ...... 330 94.8 292 94.2 165 89.2 Jewelry ...... 446 58.0 480 57.1 267 51.2 782 69.6 776 67.2 433 61.2

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FINANCIAL INFORMATION

Other Income and Gains

Our other income and gains during the Track Record Period consisted of (i) bank interest income; (ii) government grants; (iii) gain on disposal of items of property, plant and equipment; (iv) gain on disposal of a subsidiary; (v) gain on lease modification, which represented a waiver of part of our lease payment obligations upon early termination of the lease for our Beijing office; and (vi) foreign exchange gain due to appreciation of RMB against USD upon translation of [REDACTED] payables denominated in RMB. Our government grants primarily represented subsidies of RMB300,000 from the Development and Reform Bureau of Dunhua City (敦化市發展和改革局) over the two years ended December 31, 2018 and 2019 for our role in promoting local tourism, and the one-off wage subsidy our Hong Kong subsidiary received under the Employment Support Scheme, an anti-epidemic fund launched by the Hong Kong Government during the year ended December 31, 2020, for Hong Kong employers that agree not to lay off employees during a three-month period, for which we qualified. Our gain on disposal of items of property, plant and equipment represented the gain on disposals of motor vehicles recognized during the year ended December 31, 2019. Our gain on disposal of a subsidiary represented the gain on disposal of the entire equity interest of Dunhua Yiqisong Peridot Cultural & Tourism Development Co., Ltd* (敦化意氣松橄欖石文化旅遊開發有限公司) during the year ended December 31, 2020. For the three years ended December 31, 2020, we had other income and gains of RMB244,000, RMB443,000 and RMB175,000, respectively.

The following table sets forth the breakdown of our other income and gains for the periods indicated:

Year ended December 31,

2018 2019 2020

RMB’000 RMB’000 RMB’000 Bank interest income...... 418 Government grants ...... 240 66 144 Gain on disposal of items of property, plant and equipment ...... — 376 — Gain on disposal of a subsidiary ...... —— 1 Gain on lease modification ...... —— 7 Foreign exchange gain ...... ——15 244 443 175

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FINANCIAL INFORMATION

Selling and Distribution Expenses

Our selling and distribution expenses during the Track Record Period consisted of (i) marketing and promotion expenses; (ii) staff costs; (iii) depreciation and amortization; (iv) consulting expenses; (v) traveling expenses; (vi) office expenses; and (vii) others. Our marketing and promotion expenses primarily represented trade show related expenses, jewelry design competition sponsorship, expenses on branding and expenses on marketing and promotion via various channels such as billboard, television and other online advertisement. Our staff costs mainly represented wages and salaries of our sales and marketing staff. Our depreciation and amortization expenses primarily consisted of depreciation of property, plant and equipment, depreciation of right-of-use assets, and amortization of intangible assets used for selling and marketing purposes. Our consulting expenses represented consulting fees incurred in relation to branding, marketing and promotion activities. For the three years ended December 31, 2020, our selling and distribution expenses amounted to RMB4.0 million, RMB6.4 million and RMB7.5 million, respectively.

The following table sets forth the breakdown of our selling and distribution expenses for the periods indicated:

Year ended December 31,

2018 2019 2020

RMB’000 RMB’000 RMB’000 Marketing and promotion expenses ...... 1,735 4,041 3,649 Staff costs ...... 997 976 2,107 Depreciation and amortization...... 442 604 799 Consulting expenses ...... 325 514 762 Traveling expenses ...... 280 97 79 Office expenses...... 209 177 125 Others ...... 16 10 2 4,004 6,419 7,523

Administrative Expenses

Our administrative expenses during the Track Record Period consisted of (i) staff costs; (ii) depreciation and amortization; (iii) consulting expenses; (iv) entertainment expenses; (v) traveling expenses; (vi) office expenses; (vii) rental expenses; (viii) auditor’s remuneration; (ix) [REDACTED]; and (x) others. Our staff costs represented wages and salaries of our management and our administrative staff, such as human resources and finance staff. Our depreciation and amortization represented our depreciation of property, plant and equipment and right-of-use assets

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FINANCIAL INFORMATION and amortization of intangible assets used for administrative purposes. Our entertainment expenses represented amounts incurred for general business networking such as hospitality, gifts and reception. Our consulting expenses primarily represented (i) human resources related consulting fees incurred during each of the three years ended December 31, 2020, (ii) fees paid to third party professionals for administrative consultancy and advisory services in connection with accountancy and tax filing support for Fuli UK during the year ended December 31, 2020, (iii) fees incurred for the engagements of our Independent Technical Consultant and Frost & Sullivan incurred during the year ended December 31, 2018 and 2019 for our business development purposes prior to the preparation of the [REDACTED], and (iv) consulting fees incurred during the year ended December 31, 2019 and 2020 in connection with the formulation of the T/GAC 13-2020 group standard peridot grading system in collaboration with the Gem & Jewelry Trade Association of China. For the three years ended December 31, 2018, 2019 and 2020, our administrative expenses amounted to RMB9.8 million, RMB12.9 million and RMB18.1 million, respectively.

The following table sets forth a breakdown of our administrative expenses for the periods indicated:

Year ended December 31,

2018 2019 2020

RMB’000 RMB’000 RMB’000 Staff costs ...... 2,670 3,465 4,645 Depreciation and amortization...... 1,881 1,741 2,093 Consulting expenses ...... 1,563 2,295 1,922 Entertainment expenses ...... 1,228 2,774 1,775 Traveling expenses ...... 1,692 1,537 708 Office expenses...... 572 825 819 Rental expenses...... 178 246 155 Auditor’s remuneration ...... 19 29 30 [REDACTED] ...... — — 5,932 Others ...... 11 20 19 9,814 12,932 18,098

Other Expenses

Our other expenses during the Track Record Period primarily consisted of foreign exchange losses and charitable donations. We made one charitable donation in 2020 in the amount of RMB102,000 to the National Emergencies Trust in the UK. For the three years ended December 31, 2018, 2019 and 2020, our other expenses amounted to RMB3,000, nil and RMB102,000, respectively.

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FINANCIAL INFORMATION

The following table sets forth the breakdown of our other expenses for the periods indicated:

Year ended December 31, 2018 2019 2020 RMB’000 RMB’000 RMB’000 Foreign exchange losses ...... 3—— Charitable donations ...... — — 102 3 — 102

Interest Expenses

Our interest expenses during the Track Record Period primarily consisted of (i) interest on other loans; (ii) interest on unwinding of a discount; and (iii) interest on lease liabilities. Our interest on other loans included interest on our borrowings from certain individuals (the “Lenders”) and two Independent Third Parties during the Track Record Period for our working capital purposes. For further details, please refer to “— Indebtedness” below in this section and “History, Reorganization and Corporate Structure — [REDACTED] Investment” in this document. With regard to interest on unwinding of a discount, in accordance with relevant PRC rules and regulations, if any damage is caused to cultivated land, grassland or forest as a result of exploration or mining activities, a mining enterprise must restore the land to a state appropriate for use by reclamation, re-planting trees or grasses or such other measures, as appropriate, after the mining has been completed. We provided for the present obligation of the cost of restoration, which is discounted at a rate of 4.9%. Changes in assumptions could significantly affect these estimates. Over the time, the discounted provision is increased for change in present value based on the discount rate that reflects current market assessments and risks specific to the provision. The periodic unwinding of the discount is recognized in profit or loss as part of the interest expenses, namely interest on unwinding of a discount. Interest on lease liabilities represented the difference between lease payments already made and the net present value of the total lease payments for the entire term of the lease. For the three years ended December 31, 2018, 2019 and 2020, our interest expenses amounted to RMB263,000, RMB476,000 and RMB784,000, respectively.

The following table sets forth the breakdown of our interest expenses for the periods indicated:

Year ended December 31, 2018 2019 2020 RMB’000 RMB’000 RMB’000 Interest on other loans ...... 123 295 663 Interest on unwinding of a discount ...... 41 42 45 Interest on lease liabilities...... 99 139 76 263 476 784

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FINANCIAL INFORMATION

Income Tax Credit

Income tax credit during the Track Record Period represented deferred tax assets of Yanbian Fuli mainly arising from its tax loss which can be deducted from future taxable income. For the three years ended December 31, 2020, our income tax credit amounted to RMB2.2 million, RMB1.5 million and RMB1.8 million, respectively.

We are subject to income tax on an entity basis on profits arising in or derived from the jurisdictions in which members of our Group are domiciled and operate.

Pursuant to the rules and regulations of the Cayman Islands and the British Virgin Islands, the Company and its subsidiaries are not subject to any income tax in the Cayman Islands or the British Virgin Islands.

The statutory tax rate for Fuli HK is 16.5%. No Hong Kong profits tax on this subsidiary has been provided as there was no assessable profit arising in Hong Kong during the Track Record Period.

The statutory tax rate for Fuli US is 21%. No corporation income tax on this subsidiary has been provided as there was no assessable profit arising in the United States during the Track Record Period.

The statutory tax rate for Fuli UK is 19%. No corporation tax on this subsidiary has been provided as there was no assessable profit arising in the United Kingdom during the Track Record Period.

The provision for current income tax in China is based on the statutory rate of 25% of the assessable profits of certain PRC subsidiaries of our Group as determined in accordance with the PRC EIT Law, which was approved and became effective on January 1, 2008, except for certain subsidiaries of our Group in China which are granted tax concession and are taxed at preferential tax rates.

Beijing Fuli is entitled to a preferential income tax rate of 5% for its taxable income less than or equal to RMB1,000,000 during the year ended December 31, 2019 and 2020.

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FINANCIAL INFORMATION

A reconciliation of the tax expense applicable to loss before tax at the statutory rates for the jurisdictions in which the Company and the majority of its subsidiaries are domiciled to the tax expense at the effective tax rates is as follows:

Year ended December 31,

2018 2019 2020

RMB’000 RMB’000 RMB’000 Loss before tax ...... (13,058) (18,608) (25,899)

Tax at the statutory tax rates ...... (3,117) (4,106) (5,595) Lower tax rate enacted by local authority .. — 692 992 Income not subject to tax ...... — — (24) Expenses not deductible for tax...... 568 508 1,273 Tax losses/deductible temporary differences not recognized ...... 341 1,409 1,599 Tax credit at the Group’s effective tax rate . (2,208) (1,497) (1,755)

RESULTS OF OPERATION OF OUR GROUP

Year Ended December 31, 2020 Compared to Year Ended December 31, 2019

Revenue

Our revenue decreased by RMB447,000, or 38.7%, from RMB1.2 million for the year ended December 31, 2019 to RMB707,000 for the year ended December 31, 2020. The decrease was primarily a result of reduced sales as we gradually phased out our sales to friends and families of our Shareholders as part of our pre-market sounding-out initiatives after we adopted a more systematic and formalized approach to our marketing initiatives in 2020.

Cost of Sales

Our cost of sales decreased by RMB104,000, or 27.5%, from RMB378,000 for the year ended December 31, 2019 to RMB274,000 for the year ended December 31, 2020, primarily because of the decrease in our sales.

Gross Profit

Our gross profit decreased by RMB343,000, or 44.2%, from RMB776,000 for the year ended December 31, 2019 to RMB433,000 for the year ended December 31, 2020. Our gross profit margin decreased from 67.2% for the year ended December 31, 2019 to 61.2% for the year ended

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FINANCIAL INFORMATION

December 31, 2020, partly due to the absorption of additional operating costs of our pilot gemstone processing workshop, as well as the increase in subcontracting charges for jewelry fabrication incurred during the year ended December 31, 2020 into the cost of our inventories that were subsequently recognized as cost of sales when the corresponding inventories were sold.

Other Income and Gains

Our other income and gains decreased by RMB268,000, or 60.5%, from RMB443,000 for the year ended December 31, 2019 to RMB175,000 for the year ended December 31, 2020, primarily because in 2019 we had RMB376,000 of gains on disposal of motor vehicles, which we did not have in the year ended December 31, 2020.

Selling and Distribution Expenses

Our selling and distribution expenses increased by RMB1.1 million, or 17.2%, from RMB6.4 million for the year ended December 31, 2019 to RMB7.5 million for the year ended December 31, 2020. This increase was primarily due to the increase in staff costs arising from the remuneration of our chief marketing officer and our marketing and public relations executive whom we recruited in 2020 for Fuli UK’s commencement of operations.

Administrative Expenses

Our administrative expenses increased by RMB5.2 million, or 39.9%, from RMB12.9 million for the year ended December 31, 2019 to RMB18.1 million for the year ended December 31, 2020. This increase in our administrative expenses was primarily due to the [REDACTED] of RMB5.9 million incurred during the year ended December 31, 2020 and the increase in staff costs of RMB1.2 million as a result of the employment of more senior administrative staff with higher remuneration during the year ended December 31, 2020. These increases were partially offset by the decrease in entertainment expenses of RMB999,000 and traveling expenses of RMB829,000, partly as a result of our reduced networking and traveling activities due to various traveling restrictions and social distancing measures imposed in response to the outbreak of COVID-19 during the year ended December 31, 2020.

Other Expenses

Our other expenses increased from nil for the year ended December 31, 2019 to RMB102,000 for the year ended December 31, 2020. Other expenses incurred during the year ended December 31, 2020 represented our charitable donation made to the National Emergencies Trust’s Coronavirus Appeal.

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FINANCIAL INFORMATION

Interest Expenses

Our interest expenses increased by RMB308,000, or 64.7%, from RMB476,000 for the year ended December 31, 2019 to RMB784,000 for the year ended December 31, 2020. The increase in our interest expenses was primarily due to the increase in interest on other loans of RMB368,000 mainly as a result of additional borrowings from the Lenders during the year for our non-RMB general working capital requirements.

Income Tax Credit

Our income tax credit increased by RMB258,000, or 17.2%, from RMB1.5 million for the year ended December 31, 2019 to RMB1.8 million for the year ended December 31, 2020. The increase in our income tax credit was in line with the increase in loss before tax of Yanbian Fuli.

Loss for The Year

As a result of the foregoing, our loss for the year increased by RMB7.0 million, or 41.1%, from RMB17.1 million for the year ended December 31, 2019 to RMB24.1 million for the year ended December 31, 2020.

Year Ended December 31, 2019 Compared to Year Ended December 31, 2018

Revenue

Our revenue increased from RMB1.1 million for the year ended December 31, 2018 to RMB1.2 million for the year ended December 31, 2019, primarily due to a slight increase in our sales of jewelry.

Cost of Sales

Our cost of sales increased by RMB37,000, or 10.9%, from RMB341,000 for the year ended December 31, 2018 to RMB378,000 for the year ended December 31, 2019, primarily as a result of the increase in our sales.

Gross Profit

Our gross profit remained stable at RMB782,000 and RMB776,000 for the years ended December 31, 2018 and 2019, respectively. Our gross profit margin decreased slightly from 69.6% for the year ended December 31, 2018 to 67.2% for the year ended December 31, 2019 primarily

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FINANCIAL INFORMATION because we incurred additional cost of sales during the year 2019, such as additional staff costs, but did not raise our product selling prices as we continued our limited product sales as part of our pre-market sounding out initiatives.

Other Income and Gains

Our other income and gains increased by RMB199,000, or 81.6%, from RMB244,000 for the year ended December 31, 2018 to RMB443,000 for the year ended December 31, 2019. This increase was primarily due to the one-off gain on disposal of motor vehicles during the year ended December 31, 2019 of RMB376,000, which was partially offset by the decrease in government grants from the Development and Reform Bureau of Dunhua City of RMB180,000 during the year.

Selling and Distribution Expenses

Our selling and distribution expenses increased by RMB2.4 million, or 60.3%, from RMB4.0 million for the year ended December 31, 2018 to RMB6.4 million for the year ended December 31, 2019. The increase in our selling and distribution expenses was primarily due to the increase in marketing and promotion expenses as a result of our sponsorship and organization of the “Green China • 70th Anniversary of China — The First International Peridot Design Contest (綠色中國 •7 0華誕 — 首屆橄欖石國際設計大獎賽)”, and our increased participation in trade shows and launches of marketing and promotion initiatives via various channels such as billboard, television and other online advertisements during the year ended December 31, 2019.

Administrative Expenses

Our administrative expenses increased by RMB3.1 million, or 31.8%, from RMB9.8 million for the year ended December 31, 2018 to RMB12.9 million for the year ended December 31, 2019. This increase was primarily due to (i) an increase in entertainment expenses of RMB1.5 million resulting from more frequent general business networking activities; (ii) an increase in staff costs of RMB795,000 primarily resulting from the full year of staff costs we incurred for our chief financial officer and our joint company secretary who came onboard during the third quarter of 2018, and the increase in the number of our administrative staff during the year ended December 31, 2019; and (iii) an increase in consulting expenses of RMB732,000.

Other Expenses

We did not have any other expenses during the year ended December 31, 2019, while we reported foreign exchange losses of RMB3,000 for the year ended December 31, 2018 due to the appreciation of Hong Kong dollars against U.S. dollars.

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FINANCIAL INFORMATION

Interest Expenses

Our interest expenses increased by RMB213,000, or 81.0%, from RMB263,000 for the year ended December 31, 2018 to RMB476,000 for the year ended December 31, 2019. This increase was primarily due to the increase in interest on other loans of RMB172,000 which was mainly as a result of the increase in borrowings for our non-RMB general working capital requirements.

Income Tax Credit

Our income tax credit decreased by RMB711,000, or 32.2%, from RMB2.2 million for the year ended December 31, 2018 to RMB1.5 million for the year ended December 31, 2019. The decrease in our income tax credit was primarily due to the decrease in tax losses of Yanbian Fuli.

Loss for The Year

As a result of the foregoing, our loss for the year increased by RMB6.3 million, or 57.7%. from RMB10.9 million for the year ended December 31, 2018 to RMB17.1 million for the year ended December 31, 2019.

LIQUIDITY AND CAPITAL RESOURCES

We have historically funded our liquidity and capital requirements primarily through a combination of equity contributions, advances from Shareholders and other borrowings. As of December 31, 2018, 2019 and 2020, we had cash and cash equivalents of RMB1.0 million, RMB603,000 and RMB278,000, respectively.

During the Track Record Period, our cash requirements were primarily for our operations, initial marketing and promotion initiatives, general working capital needs, as well as our mine site infrastructure development and mine construction preparation. Going forward, our cash requirements are expected to expand substantially to cover our mine site construction, mining and processing operations and significantly expanded marketing and promotion activities. We expect to fund our future working capital requirements with a combination of various sources, including but not limited to cash generated from our operations, the [REDACTED] from the [REDACTED], available cash on hand and other possible equity and debt financings as and when appropriate.

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FINANCIAL INFORMATION

Cash Flows of Our Group

The following table sets forth the selected cash flow data from our consolidated statements of cash flows for the Track Record Period:

Year ended December 31, 2018 2019 2020 RMB’000 RMB’000 RMB’000 Net cash used in operating activities ...... (7,001) (14,789) (31,917) Net cash flows from/(used in) investing activities ...... 2,484 (10,170) (32,258) Net cash flows from financing activities ... 5,230 24,505 63,903 Net increase/(decrease) in cash and cash equivalents...... 713 (454) (272) Cash and cash equivalents at beginning of year ...... 374 1,030 603 Effect of foreign exchange rate changes ... (57) 27 (53) Cash and cash equivalents at end of year .. 1,030 603 278

Net Cash Used in Operating Activities

For the year ended December 31, 2020, we had net cash flows used in operating activities of RMB31.9 million, mainly arising from (i) loss before tax of RMB25.9 million adjusted for positive non-cash adjustment for interest expenses of RMB784,000 and depreciation of RMB3.1 million; offset by (ii) the increase in prepayments, other receivables and other assets of RMB6.2 million (comprising primarily, subcontracting charges and materials purchases for jewelry fabrication), an increase in [REDACTED] payables of RMB2.8 million and the decrease in amounts due to Directors of RMB5.9 million.

For the year ended December 31, 2019, we had net cash flows used in operating activities of RMB14.8 million, mainly arising from (i) loss before tax of RMB18.6 million adjusted for positive non-cash adjustment for depreciation of RMB2.3 million; coupled with (ii) the increase in inventories of RMB1.4 million as a result of the continuous absorption of operating costs of our pilot processing workshop and, where applicable, additional material costs and subcontracting charges relating to jewelry fabrication; partially offset by (iii) the increase in other payables and accruals of RMB3.3 million driven by the increases in amounts due to Directors and marketing and consulting expenses payable.

For the year ended December 31, 2018, we had net cash used in operating activities of RMB7.0 million, mainly arising from (i) loss before tax of RMB13.1 million adjusted for positive non-cash adjustment for depreciation of RMB2.3 million; coupled with (ii) the increase in

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FINANCIAL INFORMATION inventories of RMB1.6 million as a result of the continuous absorption of operating costs of our pilot processing workshop and, where applicable, additional material costs and subcontracting charges; partially offset by (iii) the increase in amounts due to Directors of RMB4.2 million and the increase in other payables and accruals of RMB1.4 million driven by the increase in accruals of staff costs and consultancy expenses payables.

Net Cash Flows from/used in Investing Activities

For the year ended December 31, 2020, we had net cash flows used in investing activities of RMB32.3 million, which consisted primarily of an increase in construction in progress, purchases of office equipment and increase in amount due from Directors.

For the year ended December 31, 2019, we had net cash flows used in investing activities of RMB10.2 million, which consisted primarily of (i) an increase in construction in progress and purchases of motor vehicles and office equipment; and (ii) payment to Mr. Jiang of RMB3.0 million as part of our reorganization steps for the acquisition of the 10% equity interests in Beijing Fuli.

For the year ended December 31, 2018, we had net cash flows from investing activities of RMB2.5 million, which consisted primarily of an increase in construction in progress, purchases of machinery equipment and motor vehicles and additions to prepaid leasehold land offset by the decrease in amounts due from Directors.

Net Cash Flows from Financing Activities

For the year ended December 31, 2020, we had net cash flows from financing activities of RMB63.9 million, primarily consisted of proceeds from the capital contribution to Yanbian Fuli by Tonghua Xintong Investment Holding Group Co., Ltd. and the subscription of Shares by Mr. Jiang Daiwei, a minority Shareholder totalling RMB85.7 million, which were partially offset by a net decrease in amounts due to Directors of RMB20.2 million.

For the year ended December 31, 2019, we had net cash flows from financing activities of RMB24.5 million, which primarily consisted of net increase in amounts due to Directors of RMB13.4 million and additional borrowings from the Lenders of RMB9.4 million in aggregate.

For the year ended December 31, 2018, we had net cash flows from financing activities of RMB5.2 million, consisted primarily of increase in amounts due to Directors of RMB7.3 million, which were partially offset by lease payments of RMB1.1 million.

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FINANCIAL INFORMATION

NET CURRENT (LIABILITIES)/ASSETS

The following table sets forth the breakdown of our current assets and current liabilities as of the dates indicated:

As of As of December 31, April 30,

2018 2019 2020 2021

RMB’000 RMB’000 RMB’000 RMB’000 (unaudited) Current assets Inventories ...... 6,868 8,378 8,100 9,437 Trade receivables ...... 3 171 4 — Prepayments, other receivables and other assets ...... 1,489 34,597 35,319 13,568 Cash and cash equivalents...... 1,030 603 278 1,586 Total current assets ...... 9,390 43,749 43,701 24,591

Current liabilities Trade payables ...... —292— Other payables and accruals ...... 8,924 47,706 30,587 5,823 Other loans ...... 8,328 21,957 749 10,889 Lease liabilities ...... 1,323 1,429 1,101 632 Government grants ...... 60—8178 Total current liabilities ...... 18,635 71,094 32,610 17,422

Net current (liabilities)/assets ...... (9,245) (27,345) 11,091 7,169

As of December 31, 2018 and 2019, we had net current liabilities of RMB9.2 million and RMB27.3 million, respectively. The increase in net current liabilities from December 31, 2018 to December 31, 2019 was primarily due to (i) the increase in other loans of RMB13.6 million; and (ii) the increase in other payables and accruals of RMB38.8 million, which were partially offset by an increase of RMB33.1 million in prepayments, other receivables and other assets. See “— Other Payables and Accruals” and “— Other Loans” below for further details.

As of December 31, 2020, our Group had net current assets of RMB11.1 million. The change from a net current liabilities position as at December 31, 2019 to a net current assets position as of December 31, 2020 was primarily due to (i) the decrease in other loans of RMB21.2 million; and (ii) the decrease in other payables and accruals of RMB17.1 million. See “— Other Payables and Accruals” and “— Other Loans” below for further details.

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FINANCIAL INFORMATION

As of April 30, 2021, we had net current assets of RMB7.2 million. The decrease in net current assets was primarily due to (i) the decrease in prepayments, other receivables and other assets of RMB21.8 million as a result of the full settlement of the consideration receivables arising from the issuance of Shares to Mr. Jiang Daiwei and Tegus Partnership during the Reorganization; and (ii) the decrease in other payables and accruals of RMB24.8 million primarily as a result of the full settlement of the consideration payables as part of our reorganization steps for the acquisition of the 77.9% equity interests in Beijing Fuli. The above were partially offset by the increase in other loans of RMB10.1 million due to the increase in amounts due to Directors.

During the Track Record Period, we recorded net current liabilities as of December 31, 2018 and 2019 primarily as a result of amounts due to Directors, which represented advances from our Directors for our working capital purposes. We intend to fully settle all outstanding amounts due to Directors prior to the [REDACTED]. Going forward, we expect to fund our future working capital requirements with a combination of various sources, including but not limited to cash generated from our operations, the [REDACTED] from the [REDACTED], available cash on hand and other possible equity and debt financings as and when appropriate.

WORKING CAPITAL

During the Track Record Period, we financed our working capital needs primarily through capital contribution from Tonghua Xintong Investment Holding Group Co., Ltd.* (通化信通投資控股集團有限公司), loans and advances from our Directors, the Lenders, related parties and Independent Third Parties. Our Directors are of the opinion that taking into consideration the financial resources presently available to our Group, including our internal resources, available loan facilities and the estimated [REDACTED] from the [REDACTED], the working capital available to our Group is sufficient for 125% of our present requirements, that is, for at least the next 12 months from the date of this document.

DISCUSSION OF SELECTED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION ITEMS

Property, Plant and Equipment

Our property, plant and equipment consisted of leasehold improvements, machineries and equipment, office equipment, motor vehicles and construction in progress. We had property, plant and equipment of RMB16.2 million, RMB28.3 million and RMB38.4 million as of December 31, 2018, 2019 and 2020, respectively. Our construction in progress represented work done on certain infrastructure development and erection of temporary structures on our mine site. Our machineries and equipment included air compressor, drilling jumbo and blender.

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FINANCIAL INFORMATION

The following table sets forth a breakdown of our property, plant and equipment as of the respective dates indicated:

As of December 31,

2018 2019 2020

RMB’000 RMB’000 RMB’000 Leasehold improvements ...... 1,951 1,297 663 Machinery equipment ...... 3,529 3,213 2,859 Office equipment...... 418 603 2,208 Motor vehicles ...... 1,813 1,350 1,657 Construction in progress ...... 8,473 21,871 31,016 16,184 28,334 38,403

Our property, plant and equipment increased from RMB16.2 million as of December 31, 2018 to RMB28.3 million as of December 31, 2019 primarily due to the increase in construction in progress as a result of the work done on the access road and temporary retaining wall on our mine site.

Our property, plant and equipment increased from RMB28.3 million as of December 31, 2019 to RMB38.4 million as of December 31, 2020 primarily due to the increase in construction in progress as a result of the work done on the electricity system, the additional work done on the temporary retaining wall on our mine site and the purchase of office equipment.

For details of our property, plant and equipment, see Note 13 to the Accountants’ Report included in Appendix I to this document.

Right-of-use Assets

Our right-of-use assets represented (i) leases of our offices in Hong Kong, the PRC and the UK and our retail showrooms in the PRC for our operations; and (ii) leasehold land for our mine site development. Leases of office premises generally have lease terms between two to three years. We had right-of-use assets of RMB3.4 million, RMB2.1 million and RMB4.5 million as of December 31, 2018, 2019 and 2020, respectively.

Our right-of-use assets decreased from RMB3.4 million as of December 31, 2018 to RMB2.1 million as of December 31, 2019 primarily due to depreciation of our leased properties in the PRC.

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FINANCIAL INFORMATION

Our right-of-use assets increased from RMB2.1 million as of December 31, 2019 to RMB4.5 million as of December 31, 2020 primarily due to the recognition of leasehold land of RMB3.2 million, which primarily comprised of filing fees and consideration paid in relation to the land use rights for site area of 2.8422 ha upon entering into two stated-owned construction land use right assignment contracts (國有建設用地使用權出讓合同) (the “Contracts”) during 2020. The above increase was partially offset by depreciation of leased properties.

For details of our right-of-use assets, see Note 14(a) to the Accountants’ Report included in Appendix I to this document.

Advance Payments for Leasehold Land

Our advance payments for leasehold land of RMB1.3 million as of December 31, 2018 and 2019 primarily comprised of filing fees in relation to the land use right of an aggregate site area of 4.5488 ha for our mine site development, in which RMB0.8 million was recognized as part of the right-of-use assets during 2020 upon entering into the Contracts. Our advance payments for leasehold land of RMB0.5 million as of December 31, 2020 primarily consisted of filing fees relating to the land use rights of the remaining site area of 1.7066 ha out of the 4.5488 ha of site area which we are in the course of applying for and will recognize as right-of-use assets upon entering into land use right contract.

Other Intangible Assets

Our other intangible assets primarily consisted of our mining rights and software and trademarks. Our mining rights comprised mainly our acquisition cost for the exploration rights of our YQS Nanshan Project and other exploration related expenses incurred and capitalized prior to the Track Record Period, and no exploration expense was incurred during the Track Record Period. For details of our mining rights, please refer to “Business — Our Resources and Mining Rights” in this document.

Our other intangible assets remained stable at RMB4.7 million, RMB4.6 million and RMB4.7 million as of December 31, 2018, 2019 and 2020, respectively. For details of our intangible assets, see Note 15 to the Accountants’ Report included in Appendix I to this document.

Deferred Tax Assets

We had deferred tax assets arising from Yanbian Fuli of RMB2.2 million, RMB3.7 million and RMB5.4 million as of December 31, 2018, 2019 and 2020, respectively. Our deferred tax assets increased during the Track Record Period primarily due to the accumulated tax loss of Yanbian Fuli during the corresponding periods.

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FINANCIAL INFORMATION

For details of our deferred tax assets, see Note 24 to the Accountants’ Report included in Appendix I to this document.

Inventories

We had inventories of RMB6.9 million, RMB8.4 million and RMB8.1 million as of December 31, 2018, 2019 and 2020, respectively. The following table sets forth the breakdown of our inventories as of the respective dates indicated:

As of December 31,

2018 2019 2020

RMB’000 RMB’000 RMB’000 Raw materials ...... 1,419 1,590 1,729 Work in progress...... 252 464 553 Finished goods ...... 5,197 6,324 5,818 6,868 8,378 8,100

Our inventories increased from RMB6.9 million as of December 31, 2018 to RMB8.4 million as of December 31, 2019 mainly due to the absorption of additional operating costs of our pilot processing workshop into the cost of our inventories.

Our inventories remained stable at RMB8.4 million as of December 31, 2019 and RMB8.1 million as of December 31, 2020.

The following table sets forth our average inventory turnover days:

Year ended December 31,

2018 2019 2020 Inventory turnover days...... 6,420 7,361 10,975

Note: Inventory turnover days were calculated based on the average of the opening and closing inventories divided by cost of sales for the relevant year multiplied by 365 days for the years ended December 31, 2018, 2019 and 2020.

Due to the fact that our YQS Nanshan Project remained at the pre-production stage throughout the Track Record Period, all our inventories were originated from our exploration activities. As we only conducted limited sales from these inventories, and given that our inventories were primarily gemstones which are not subject to expiration or obsolesence, our inventory turnover days during the Track Record Period may not be a meaningful indicator of our results of operations.

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FINANCIAL INFORMATION

As of April 30, 2021, RMB0.1 million, or 1.3%, of our inventories as of December 31, 2020 were subsequently sold or used.

Trade Receivables

During the Track Record Period, our trade receivables were non-interest bearing and generally had no prescribed credit terms. As of December 31, 2018, 2019 and 2020, we had trade receivables of RMB3,000, RMB171,000 and RMB4,000, respectively, including amount due from related parties of RMB3,000, RMB17,000 and RMB4,000 as of the respective dates. Our trade receivables as of December 31, 2019 also included receivable from a customer, which was subsequently settled during the year ended December 31, 2020.

The following table sets forth the aging analysis of our trade receivables as of the respective dates as indicated:

As of December 31,

2018 2019 2020

RMB’000 RMB’000 RMB’000 Within 3 months ...... 32— 3 to 12 months ...... — 166 4 Over 12 months ...... —3— 3 171 4

The following table sets forth our average trade receivables turnover days:

Year ended December 31,

2018 2019 2020 Trade receivables turnover days ...... 12845

Note: Trade receivables turnover days were calculated based on the average of the opening and closing trade receivables divided by revenue for the relevant year multiplied by 365 days for the years ended December 31, 2018, 2019 and 2020. The increases in trade receivables turnover days for both of the year ended December 31, 2019 and the year ended December 31, 2020 were primarily a result of the trade receivable of RMB154,000 from a customer which was initiated in the year ended December 31, 2019 and carried over to and subsequently settled during the year ended December 31, 2020.

As of April 30, 2021, all of our trade receivables outstanding as of December 31, 2020 had been settled in full.

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FINANCIAL INFORMATION

Prepayments, Other Receivables and Other Assets

Our prepayments, other receivables and other assets represented prepayments, deferred [REDACTED], deductible input value-added tax, amounts due from Directors and deposits and other receivables. Our prepayments were mainly subcontracting charges for jewelry fabrication. Deposits and other receivables comprised primarily consideration receivables arising from the issuance of Shares during the Reorganization. As of December 31, 2018, 2019 and 2020, we had prepayments, other receivables and other assets of RMB1.5 million, RMB34.6 million and RMB35.3 million, respectively.

The following table sets forth the breakdown of our prepayments, other receivables and other assets as of the respective dates indicated:

As of December 31,

2018 2019 2020

RMB’000 RMB’000 RMB’000 Prepayments ...... 167 113 4,904 Deferred [REDACTED] ...... — — 1,843 Deductible input value-added tax ...... 1,109 1,345 2,447 Due from Directors ...... 60 2,395 7,192 Deposits and other receivables ...... 470 31,141 19,346 1,806 34,994 35,732 Less: Non-current portion included in deposits and other receivables ...... 317 397 413 1,489 34,597 35,319

Our prepayments, other receivables and other assets increased from RMB1.5 million as of December 31, 2018 to RMB34.6 million as of December 31, 2019, primarily contributed by the increase in deposits and other receivables which in turn was contributed by the consideration receivables arising from the issuance of Shares to Mr. Jiang Daiwei and Tegus Partnership during the Reorganization.

Our prepayments, other receivables and other assets increased from RMB34.6 million as of December 31, 2019 to RMB35.3 million as of December 31, 2020, primarily due to the increase in prepayments for subcontracting charge for jewelry fabrication, the increase in deferred [REDACTED] and the increase in amounts due from Directors, partially offset by the partial settlement of consideration receivables arising from the Shares issuance as described above.

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FINANCIAL INFORMATION

Trade Payables

During the Track Record Period, our trade payables were non-interest bearing. Our suppliers either did not grant us any credit terms or required payment in advance. As of December 31, 2018, 2019 and 2020, we had trade payables of nil, RMB2,000 and RMB92,000, respectively, which related to our procurement of consumables and jewelry fabrication services.

The table below sets forth an analysis of trade payables by age as of the dates indicated presented based on the invoice date:

As of December 31,

2018 2019 2020

RMB’000 RMB’000 RMB’000 Within 3 months ...... —292 —292

The trade payables are non-interest-bearing and have no fixed terms of payment.

The following table sets forth our average trade payables turnover days:

Year ended December 31,

2018 2019 2020 Trade payables turnover days ...... 18 1 63

Note: Trade payables turnover days were calculated based on the average of the opening and closing trade payables divided by the cost of sales for the relevant year multiplied by 365 days for the years ended December 31, 2018, 2019 and 2020.

As of April 30, 2021, we had settled all of our trade payables outstanding as of December 31, 2020.

Other Payables and Accruals

Our other payables and accruals consisted of other payables, amounts due to related parties and Directors, other tax payables and payroll and welfare payables. Our other payables primarily consisted of construction fees payables, [REDACTED] payables, consideration payable for acquisition of equity interests in Beijing Fuli during the Reorganization, and marketing and promotion expenses payables. As of December 31, 2018, 2019 and 2020, we had other payables and accruals of RMB8.9 million, RMB47.7 million and RMB30.6 million, respectively.

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FINANCIAL INFORMATION

The following table sets forth the breakdown of our other payables and accruals as of the respective dates indicated:

As of December 31,

2018 2019 2020

RMB’000 RMB’000 RMB’000 Other payables ...... 3,281 17,201 5,953 Due to related parties ...... 98—— Due to Directors ...... 4,237 29,330 23,401 Other tax payables ...... 32 6 138 Payroll and welfare payables...... 1,276 1,169 1,095 8,924 47,706 30,587

Our other payables and accruals increased from RMB8.9 million as of December 31, 2018 to RMB47.7 million as of December 31, 2019 primarily due to (i) the increase in construction fees payables under other payables in connection with temporary retaining wall construction and road paving; (ii) consideration payable to Beijing Futong Enterprise Management Centre (Limited Partnership)* (北京富同企業管理中心(有限合夥)) for the acquisition of a 12.1% equity interest in Beijing Fuli during the Reorganization; and (iii) an increase in amounts due to Directors for the acquisition of a 77.9% equity interest in Beijing Fuli during the Reorganization.

Our other payables and accruals decreased from RMB47.7 million as of December 31, 2019 to approximately RMB30.6 million as of December 31, 2020 primarily due to the decrease in construction fees payables, a decrease in amounts due to Directors, and full settlement of the consideration payable owed to Beijing Futong Enterprise Management Centre (Limited Partnership)*, partially offset by the increase in [REDACTED] payables.

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FINANCIAL INFORMATION

Other Loans

The following table sets forth details of our other loans as of the dates indicated:

As of December 31,

2018 2019 2020

RMB’000 RMB’000 RMB’000 Other interest-bearing payables(1) ...... 1,036 8,631 998 Due to related parties ...... — 2,461 — Due to Directors ...... 7,292 20,687 444 8,328 31,779 1,442 Less: Non-current portion included in other interest-bearing payables ...... — 7,511 693 Non-current portion included in due to related parties...... —2,311— 8,328 21,957 749

Analyzed into: Other interest-bearing payables: Within one year or on demand ...... 1,036 1,120 305 In the second year ...... — — 392 In the third to fifth years, inclusive(2) . — 7,511 301 1,036 8,631 998 Due to related parties: Within one year or on demand ...... — 150 — In the third to fifth years, inclusive(2) . —2,311— — 2,461 — Due to Directors: Within one year or on demand ...... 7,292 20,687 444 8,328 31,779 1,442

Notes:

(1) Other interest-bearing payables are unsecured and bore interest at a rate between 6% and 17%.

(2) On November 30, 2020, the Lenders entered into a deed of loan confirmation and loan capitalization with the Company in full and final settlement of all repayment obligations of the Company to each of the Lenders.

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FINANCIAL INFORMATION

Our other interest-bearing payables represented our borrowings from an Independent Third Party and the Lenders for our working capital purposes. Due to related parties represented our borrowings for working capital purposes from Mr. Pang Peter Chun Ming, our chief financial officer and one of the Lenders, which were capitalized in November 2020, and from another entity. Due to Directors represented advances from our Directors to our Group for working capital purposes.

Lease Liabilities

During the Track Record Period, we leased offices in Hong Kong, the PRC and the UK, and retail showrooms in the PRC. As of December 31, 2018, 2019 and 2020, we had current and non-current lease liabilities totaling RMB3.4 million, RMB2.1 million and RMB1.4 million, respectively.

Our lease liabilities decreased from RMB3.4 million as of December 31, 2018 to RMB2.1 million as of December 31, 2019 primarily due to lease payments made in 2019 in relation to our leased properties in the PRC.

Our lease liabilities decreased from RMB2.1 million as of December 31, 2019 to RMB1.4 million as of December 31, 2020 primarily due to lease payments made in 2020 relation to our leased properties in the PRC, partially offset by the additions of leases for our offices in Hong Kong and the UK.

Provisions

Our provisions represented provisions for rehabilitation. In accordance with relevant PRC rules and regulations, if any damage is caused to cultivated land, grassland or forest as a result of exploration or mining activities, a mining enterprise must restore the land to a state appropriate for use by reclamation, re-planting trees or grasses or such other measures, as appropriate, after the mining has been completed. As of December 31, 2018, 2019 and 2020, our provisions remained relatively stable at RMB874,000, RMB916,000 and RMB961,000, respectively.

For details of our provisions, see Note 23 to the Accountants’ Report included in Appendix I to this document.

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FINANCIAL INFORMATION

INDEBTEDNESS

The following table sets forth a breakdown of our financial indebtedness as of the dates indicated:

As of December 31, As of April 30,

2018 2019 2020 2021

RMB’000 RMB’000 RMB’000 RMB’000 (unaudited) Other loans ...... 8,328 31,779 1,442 16,457 Lease liabilities ...... 3,409 2,085 1,378 836 Total ...... 11,737 33,864 2,820 17,293

As of December 30, 2018, 2019 and 2020 and April 30, 2021, we had outstanding indebtedness consisting of other loans and lease liabilities of RMB11.7 million, RMB33.9 million, RMB2.8 million and RMB17.3 million, respectively.

As of December 31, As of April 30,

2018 2019 2020 2021

RMB’000 RMB’000 RMB’000 RMB’000 (unaudited) Current, unsecured ...... 8,328 21,957 749 10,889 Non-current, unsecured ...... — 9,822 693 5,568 Total ...... 8,328 31,779 1,442 16,457

Our other loans increased to RMB16.5 million as of April 30, 2021 compared to RMB1.4 million as of December 31, 2020 primarily as a result of advances from our Directors and Mr. Yu Bing Han, our Shareholder and one of the Lenders, for our general working capital purposes.

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FINANCIAL INFORMATION

We apply a single recognition and measurement approach for all leases, except for short-term leases. We recognize lease liabilities to make lease payments and right-of-use assets representing the right to use the underlying assets. The table below sets forth our lease liabilities as of the dates indicated:

As of December 31, As of April 30,

2018 2019 2020 2021

RMB’000 RMB’000 RMB’000 RMB’000 (unaudited) Current ...... 1,323 1,429 1,101 632 Non-current...... 2,086 656 277 204 Total ...... 3,409 2,085 1,378 836

Our lease liabilities decreased to RMB0.8 million as of April 30, 2021 from RMB1.4 million as of December 31, 2020 primarily due to lease payments we made during the four months ended April 30, 2021, which reduced the remaining balance of our total lease liabilities.

Except as discussed above, we did not have any other material mortgages, charges, debentures, loan capital, debt securities, loans, bank overdrafts or other similar indebtedness, finance lease or hire purchase commitments, liabilities under acceptances (other than normal trade bills), acceptance credits, which are either guaranteed, unguaranteed, secured or unsecured, or guarantees or other contingent liabilities as of the Latest Practicable Date.

CONTINGENT LIABILITIES

As of the Latest Practicable Date, we were not involved in any legal proceedings pending or, to our knowledge, threatened against our Group which could have a material adverse effect on our business or operations. Our Directors confirm that as of the Latest Practicable Date, we did not have any significant contingent liabilities.

RELATED PARTY TRANSACTIONS AND BALANCES

Related Party Transactions

During the Track Record Period, our Group had certain transactions with its related parties. See Note 31 to the Accountants’ Report set forth in Appendix I to this document for details.

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FINANCIAL INFORMATION

Trade Nature

Year ended December 31, 2018 2019 2020 RMB’000 RMB’000 RMB’000 Entities controlled by ultimate shareholders: Sales of products ...... 2 12 111 Purchases of products ...... 80 88 321 Purchases of property, plant and equipment ...... — — 2,582

During the Track Record Period, the sales of goods to the related parties primarily involved the sales of jewelry, and the purchases of products and property, plant and equipment from related parties primarily involved purchases of furniture, motor vehicles, decorative crafts, snacks and dried foods.

Non-trade Nature

Year ended December 31,

2018 2019 2020

RMB’000 RMB’000 RMB’000 An entity controlled by ultimate shareholders: Loans to the Group ...... — 150 — Directors: Loans to the Group ...... 7,292 18,153 8,895 Key management personnel: Loans to the Group ...... — 2,203 —

Related Party Balances

The following table sets forth breakdown of balances with our related parties as of the respective dates as indicated:

Due from Directors:

As of December 31, 2018 2019 2020 RMB’000 RMB’000 RMB’000 Mr. Jiang...... 60 130 5,673 Mr. Yu...... — 2,265 1,519 60 2,395 7,192

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FINANCIAL INFORMATION

Due to Directors:

As of December 31,

2018 2019 2020

RMB’000 RMB’000 RMB’000 Mr. Jiang...... 5,224 20,447 8,195 Mr. Yu...... 6,305 29,570 15,636 Mr. Chi Yongxi ...... ——14 11,529 50,017 23,845

Due from Related Parties:

As of December 31,

2018 2019 2020

RMB’000 RMB’000 RMB’000 Jilin Wanshu Forest Natural Food Co., Ltd.* (吉林萬樹森林天然食品有限公司) . 33— Ji’an City Xinli Mining Co., Ltd.* (集安市鑫立礦業有限公司) ...... —124 Dongyue Wandai Jewelry Design (Beijing) Co., Ltd.* (東岳萬岱珠寶設計(北京)有限公司) ...... —2— 3174

Due to Related Parties:

As of December 31,

2018 2019 2020

RMB’000 RMB’000 RMB’000 Jilin Wanshu Forest Natural Food Co., Ltd.* ...... 98—— Ji’an Jixian Ruishubingguo Agricultural Development Co., Ltd.* (集安集仙瑞樹冰果農業開發有限公司) ...... — 150 — Mr. Pang Peter Chun Ming ...... —2,311— 98 2,461 —

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FINANCIAL INFORMATION

The amounts due from/to related parties arising from trade and non-trade transactions, except for those with Mr. Pang Peter Chun Ming, were unsecured, non-interest bearing and repayable on demand. The amounts due to Mr. Pang Peter Chun Ming, our chief financial officer and one of the Lenders, which bore interest of 6% per year, were fully capitalized in November 2020. The amounts due from/to Directors will be settled on or before the [REDACTED]. The amounts due from/to the remaining related parties were fully settled as of April 30, 2021.

Our Directors confirm that (i) each of the related party transactions of trade nature set out above were conducted in the ordinary course of business on an arm’s length basis with normal commercial terms between the relevant parties; (ii) our related party transactions during the Track Record Period would not distort our track record results or make our historical results not reflective of our future performance; and (iii) each related party transaction of trade nature is conducted on terms comparable to those offered by/to Independent Third Parties.

OFF BALANCE SHEET ARRANGEMENTS

During the Track Record Period and up to the Latest Practicable Date, except as disclosed herein, we had no other material off-balance sheet arrangements.

FINANCIAL RISK MANAGEMENT

Our Group’s principal financial instruments comprise (i) cash and cash equivalents; (ii) financial assets included in prepayments, other receivables and other assets; and (iii) financial liabilities included in other payables and accruals and other loans. The main purpose of these financial instruments is to raise finance for our operations. Our Group has various other financial assets and liabilities such as trade receivables and trade payables, which arise directly from our operations. The main risks arising from our Group’s financial instruments are credit risk and liquidity risk.

For further details, please refer to Note 34 to the Accountants’ Report included in Appendix I to this document.

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FINANCIAL INFORMATION

COMMITMENTS

During the Track Record Period, our Group had the following commitments in relation to our mine construction:

Year ended December 31,

2018 2019 2020

RMB’000 RMB’000 RMB’000 Contracted, but not provided for: — Construction in progress...... 63 870 240

CAPITAL AND OPERATING EXPENDITURE

Please refer to the section headed “Path to Commercialization — Capital and Operating Expenditure” in this document for details of our capital and operating expenditure in relation to our YQS Nanshan Project.

For the years ended December 31, 2018, 2019 and 2020, our capital expenditure were RMB12.6 million, RMB14.3 million and RMB15.3 million, respectively. Our capital expenditure during the Track Record Period primarily related to construction in progress, machineries and equipment, motor vehicles, leasehold improvements, office equipment, leasehold land, software and trademarks. We have funded our capital expenditure primarily through a combination of equity contributions, advances from Shareholders and other borrowings.

We expect to incur capital expenditure of RMB7.3 million and RMB83.6 million for the year ending December 31, 2021 and 2022, respectively, primarily for mine construction, purchases of machineries and equipment, and leasehold land. We expect to fund these capital expenditure requirements primarily with the [REDACTED] from the [REDACTED]. See “Future Plans and [REDACTED]” for further details.

KEY FINANCIAL RATIOS

Year ended/As of December 31, 2018 2019 2020 Gross profit margin (1) ...... 69.6% 67.2% 61.2% Current ratio (2) ...... 0.5 0.6 1.3 Quick ratio (3) ...... 0.1 0.5 1.1 Gearing ratio (4) ...... 77.9% 1,257.9% 5.9%

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FINANCIAL INFORMATION

Notes:

1. The calculation of gross profit margin is based on gross profit divided by revenue for the year and multiplied by 100%.

2. The calculation of current ratio is based on current assets divided by current liabilities at the end of the year.

3. The calculation of quick ratio is based on current assets less inventories divided by current liabilities at the end of the year.

4. The calculation of gearing ratio is based on total debts (other loans, lease liabilities, and provision) divided by equity at the end of the year and multiplied by 100%.

Current Ratio

Our current ratio remained stable at 0.5 and 0.6 as at December 31, 2018 and 2019, respectively.

Our current ratio increased from 0.6 as at December 31, 2019 to 1.3 as at December 31, 2020 primarily due to (i) the decrease in amount due to Directors of RMB26.2 million; (ii) the decrease in other payables of RMB11.2 million primarily as a result of the decrease in construction fees payables; and (iii) the capitalization of borrowings from the Lenders of RMB11.2 million.

Quick Ratio

Our quick ratio increased from 0.1 as at December 31, 2018 to 0.5 as at December 31, 2019 primarily due to (i) the increase in prepayments, other receivables and other assets of RMB33.1 million primarily as a result of consideration receivables arising from Share issuance during the Reorganization; as partially offset by (ii) the increase in amount due to Directors of RMB38.5 million partly contributed by the consideration payable for the acquisition of a 77.9% equity interest in Beijing Fuli during the Reorganization; (iii) the increase in other payables of RMB13.9 million primarily as a result of the increase in construction fees payables; and (iv) an increase in borrowings from the Lenders of RMB9.8 million.

Our quick ratio further increased from 0.5 as at December 31, 2019 to 1.1 as at December 31, 2020 primarily due to (i) the decrease in amount due to Directors of RMB26.2 million; (ii) the decrease in other payables of RMB11.2 million, primarily as a result of the decrease in construction fees payables; and (iii) the capitalization of borrowings from the Lenders of RMB11.2 million.

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FINANCIAL INFORMATION

Gearing Ratio

Our gearing ratio increased from 77.9% as at December 31, 2018 to 1,257.9% as at December 31, 2019 primarily due to (i) the increase of amount due to Directors under other loans of RMB13.4 million; (ii) the increase of amount due to the Lenders of RMB9.8 million in aggregate; and (iii) a redeuced total equity resulting from loss for the year.

Our gearing ratio decreased from 1,257.9% as at December 31, 2019 to 5.9% as at December 31, 2020 primarily due to the increase in total equity position as a result of the capital contribution of RMB75.0 million from Tonghua Xintong Investment Holding Group Co., Ltd. to Yanbian Fuli, and the capitalization of loans from the Lenders.

DIVIDEND

No dividend has been paid or declared by our Company during the Track Record Period.

Our Company does not have any specific dividend policy nor pre-determined dividend payout ratios. In the future, declaration and payment of any dividends would require the recommendation of our Board and will be at their discretion. In addition, any final dividend for a financial year will be subject to Shareholders’ approval, but no dividend shall be declared in excess of the amount recommended by the Board. A decision to declare or to pay any dividend in the future, and the amount of any dividends, depends on a number of factors, including our results of operations, financial condition, the payment by our subsidiaries of cash dividends to us, and other factors our Board may deem relevant. There will be no assurance that our Company will be able to declare or distribute any dividend in the amount set out in any plan of the Board or at all. The dividend distribution record in the past may not be used as a reference or basis to determine the level of dividends that may be declared or paid by our Company in the future.

[REDACTED]

Assuming the [REDACTED] of HK$[REDACTED] per [REDACTED], being the mid-point of the indicative range of the [REDACTED] stated in this document (and assuming no [REDACTED] is exercised), the total amount of expenses in relation to the [REDACTED] are estimated to be RMB[REDACTED] including the [REDACTED] and other [REDACTED] expenses and fees. The expenses in relation to the [REDACTED] shall be borne by our Company, of which RMB5.9 million and RMB[REDACTED] was and will be charged to our Group’s profit and loss for the year ended December 31, 2020 and the year ending December 31, 2021, respectively, and RMB[REDACTED] of its estimated [REDACTED] expenses is directly attributable to the issue of the [REDACTED] and is to be accounted for as a deduction from equity in accordance with the relevant accounting standard after [REDACTED] for the year ending December 31, 2021. The total expenses for the [REDACTED] represents

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FINANCIAL INFORMATION

[REDACTED]%ofthe[REDACTED] from the [REDACTED], based on the mid-point of the proposed [REDACTED] range (assuming that the [REDACTED] is not exercised) and the above estimated total expenses for the [REDACTED].

EFFECT ON OUR FINANCIAL PERFORMANCE DUE TO [REDACTED] EXPENSES

We expect the incurrence and recognition of [REDACTED] expenses during the year ending December 31, 2021 will have a substantial impact on our results of operations and will result in a considerably larger net loss attributable to equity holders of our Company for the year ending December 31, 2021 compared to that for the year ended December 31, 2020.

DISTRIBUTABLE RESERVE

As of December 31, 2020, the aggregate amount of reserves available for distribution to the equity holders of our Company amounted to RMB[45.5] million. The Cayman Companies Act provides that share premium account of Cayman Islands company, such as our Company, may be applied in such manner as it may from time to time determine, subject to the provisions, if any, of its memorandum and articles of association, provided that no distribution or dividend may be paid to its members out of the share premium account unless, immediately following the date on which the distribution or dividend is proposed to be paid, such company shall be able to pay its debts as they fall due in the ordinary course of business.

[REDACTED] ADJUSTED NET TANGIBLE ASSETS

Please refer to Appendix II of this document for the [REDACTED] adjusted net tangible assets.

DISCLOSURE UNDER THE LISTING RULES

Our Directors confirm that as of the Latest Practicable Date, they were not aware of any circumstances that would give rise to a disclosure requirement under Rules 13.13 to 13.19 of the Listing Rules.

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FINANCIAL INFORMATION

NO MATERIAL ADVERSE CHANGE

Our Directors confirm that, up to the date of this document, there has been no material adverse change in our financial, operational or trading position since December 31, 2020, being the end of the period reported on in the Accountants’ Report in Appendix I to this document.

PROPERTY INTERESTS AND VALUATION

The table below sets forth the reconciliation between the net book value of leashold land of 28,421.96 sq.m (or 2.8422 ha) together with associated construction in progress thereon (“property”) as of December 31, 2020 and the fair value as of March 31, 2021 as stated in “Appendix III — Property Valuation Report” to this document.

RMB’000 Net book value of the property as of December 31, 2020 ...... [21,103] Less: Depreciation on the property for the three months ended March 31, 2021 ...... [(29)] Add: Valuation surplus ...... [4,326] Valuation of the property as of March 31, 2021 as set forth in Appendix III to this document ...... 25,400

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FUTURE PLANS AND [REDACTED]

See “Business — Strategies” and “Path to Commercialization” in this document for further details of our future plans and our commercialization scheme.

[REDACTED]

We estimate that we will receive [REDACTED] from the [REDACTED] of approximately HK$[REDACTED] million (after deducting the [REDACTED] fees and other estimated expenses paid and payable by us in connection with the [REDACTED]), assuming an [REDACTED] of HK$[REDACTED] per [REDACTED], being the mid-point of the [REDACTED] range of HK$[REDACTED] to HK$[REDACTED], and no exercise of the [REDACTED].

In accordance with our commercialization scheme devised for the purpose of bringing our YQS Nanshan Project to full commercialization, we will apply our [REDACTED] in the following manner:

• Approximately HK$[REDACTED] million (or RMB[REDACTED] million), being [REDACTED]%ofthe[REDACTED], will be applied for the construction and mining operations of our YQS Nanshan Project, of which:

(a) Approximately HK$[REDACTED] million (or RMB[REDACTED] million), being [REDACTED]%ofthe[REDACTED], will be allocated for above-the-ground facilities and infrastructure construction, including (without limitation) (i) above-the-ground site foundation work; (ii) buildings construction including site office, dormitory, our ore processing facilities, our backfill plant and other auxiliary structures; (iii) utility systems and infrastructure; and (iv) roadways and overall site landscaping;

(b) Approximately HK$[REDACTED] million (or RMB[REDACTED] million), being [REDACTED]%ofthe[REDACTED], will be allocated for underground facilities and mine construction, including (without limitation) (i) main adit, excarvation adits, ventilation and other auxiliary adits; and (ii) underground engineering systems and support such as electricity, ventilation and other auxiliary systems;

(c) Approximately HK$[REDACTED] million (or RMB[REDACTED] million), being [REDACTED]%ofthe[REDACTED], will be allocated for machinery and equipment purchases and installation for our mining and ore processing operations as well as our backfill plant; and

(d) Approximately HK$[REDACTED] million (or RMB[REDACTED] million), being [REDACTED]%ofthe[REDACTED], will be allocated for the setting up of our gemstone processing facilities (expected to be put into operation upon our YQS Nanshan Project reaching full capacity production and accordingly to be incurred

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FUTURE PLANS AND [REDACTED]

in the longer run after the [REDACTED]), including (without limitation) costs associated with obtaining the relevant land site, infrastructure and construction of the gemstone processing facilities, as well as purchases and installation of machineries and equipment;

(e) Approximately HK$[REDACTED] million (or RMB[REDACTED] million), being [REDACTED]%ofthe[REDACTED], will be allocated for our manpower expansion in mining operations and ore processing with reference to our estimated operating expenditure as set out in “Path to Commercialization — Capital and Operating Expenditure — Operating Expenditure” in this document;

• Approximately HK$[REDACTED] million (or RMB[REDACTED] million), being [REDACTED]%ofthe[REDACTED], will be applied for the implementation and running of our global marketing strategies (as detailed in “Path to Commercialization — Our Commercialization Roadmap — Our Global Marketing Strategies”), of which:

(a) Approximately HK$[REDACTED] million (or RMB[REDACTED] million), being [REDACTED]%ofthe[REDACTED], will be allocated for our value chain promotions and collaborations initiatives including, without limitation, (i) the development of our proprietary grading system and traceability platform; and (ii) continuous collaborations with selected brands, designers, gemology laboratories and trade associations;

(b) Approximately HK$[REDACTED] million (or RMB[REDACTED] million), being [REDACTED]%ofthe[REDACTED], will be allocated for our brand awareness and publicity initiatives including, without limitation, (i) online and social media advertising; (ii) above-the-line advertising campaigns; and (iii) publicity events sponsorships such as red carpet events; and

(c) Approximately HK$[REDACTED] million (or RMB[REDACTED] million), being [REDACTED]%ofthe[REDACTED], will be allocated for our marketing manpower expansion (expected to be primarily in the PRC and Hong Kong) to support the scaling up of our marketing efforts in line with our scheduled production ramp-up;

• Approximately HK$[REDACTED] million (or RMB[REDACTED] million), being [REDACTED]%ofthe[REDACTED], will be applied for our sales channel development initiatives (as detailed in “Path to Commercialization — Our Commercialization Roadmap — Sales Channel Development”), of which:

(a) Approximately HK$[REDACTED] million (or RMB[REDACTED] million), being [REDACTED]%ofthe[REDACTED], will be allocated for our auction channel development efforts, expenditure relating to regular participations and, where applicable, sponsorships of major trade shows, and the development of e-commerce sales channels; and

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FUTURE PLANS AND [REDACTED]

(b) Approximately HK$[REDACTED] million (or RMB[REDACTED] million), being [REDACTED]%ofthe[REDACTED], will be allocated towards manpower expansion for our sales personnel as well as e-commerce sales support (expected to be primarily in the UK and the PRC);

• Approximately HK$[REDACTED] million (or RMB[REDACTED] million), being [REDACTED]%ofthe[REDACTED], will be allocated for our general working purposes.

In the event that the [REDACTED] is set at the low end of the [REDACTED] range, we estimate that the [REDACTED] from the [REDACTED], after deducting the [REDACTED] commissions and other estimated expenses paid and payable by us in connection with the [REDACTED] and assuming the [REDACTED] is not exercised, will be reduced to approximately HK$[REDACTED] million (or RMB[REDACTED] million).

In the event that the [REDACTED] is set at the high end of the [REDACTED] range, we estimate that the [REDACTED] from the [REDACTED], after deducting the [REDACTED] and other estimated expenses paid and payable by us in connection with the [REDACTED] and assuming the [REDACTED] is not exercised, will be increased to approximately HK$[REDACTED] million (or RMB[REDACTED] million).

In the event that the [REDACTED] is exercised in full, we estimate that we will receive additional [REDACTED] of approximately HK$[REDACTED] million (or RMB[REDACTED]), HK$[REDACTED] million (or RMB[REDACTED]) or HK$[REDACTED] million (or RMB[REDACTED]), calculated based on the high-end, mid-point and low-end of the [REDACTED] range of of HK$[REDACTED], HK$[REDACTED] and HK$[REDACTED] per [REDACTED], respectively, and net of associated [REDACTED] commissions and any additional [REDACTED].

To the extent that the [REDACTED] is set above or below the mid-point of the [REDACTED] range or that the [REDACTED] is exercised (whether in full or in part), the allocation of [REDACTED] will be accordingly adjusted such that (i) the amount of [REDACTED] allocated for each of the stated uses under construction and mining operations of our YQS Nanshan Project will remain unchanged; and (ii) the relevant [REDACTED] allocated to each of the remaining stated uses will be increased or decreased, as the case may be, in accordance with their relative proportion to each other calculated based on the remaining [REDACTED] (after subtracting the fixed amounts allocated for the construction and mining operations of our YQS Nanshan Project).

To the extent that the [REDACTED] are not immediately applied to the above purposes and to the extent permitted by applicable law and regulations, we intend to deposit the [REDACTED] into short-term demand deposits with licensed banks or financial institutions.

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[REDACTED]

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[REDACTED]

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[REDACTED]

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[REDACTED]

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[REDACTED]

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[REDACTED]

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[REDACTED]

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[REDACTED]

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[REDACTED]

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[REDACTED]

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[REDACTED]

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[REDACTED]

Undertakings to the Stock Exchange pursuant to the Listing Rules

(A) Undertakings by our Company

In accordance with Rule 10.08 of the Listing Rules, we have undertaken to the Stock Exchange that within six months from the [REDACTED], no further Shares or securities convertible into shares of our Company (whether or not of a class already [REDACTED])shallbe issued or form the subject of any agreement to such an issue (whether or not such issue of Shares or securities will be completed within six months from the commencement of dealing), except for Shares or securities issued pursuant to the [REDACTED] (including Shares which may be issued pursuant to the exercise of the [REDACTED]) or any of the circumstances provided under Rule 10.08 of the Listing Rules.

[REDACTED]

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[REDACTED]

[REDACTED] interests in our Company

Save as disclosed in this document and save for its obligations under the [REDACTED],as of the Latest Practicable Date, none of the [REDACTED] was interested, legally or beneficially, directly or indirectly, in any Shares or any securities of any member of our Group or had any shareholding interests in our Company or the right or option (whether legally enforceable or not) to subscribe for or purchase, or nominate persons to subscribe for or purchase, any Shares or any securities in our Company or any member of our Group.

Following the completion of the [REDACTED],the[REDACTED] and their affiliated companies may hold a certain portion of the Shares as a result of fulfilling their obligations under the [REDACTED] and the [REDACTED].

The Sole Sponsor’s Independence

The Sole Sponsor satisfies the independence criteria applicable to sponsors as set out in Rule 3A.07 of the Listing Rules.

[REDACTED]

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STRUCTURE OF THE [REDACTED]

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STRUCTURE OF THE [REDACTED]

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HOW TO APPLY FOR THE [REDACTED]

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APPENDIX I ACCOUNTANTS’ REPORT

The following is the text of a report received from the Company’s reporting accountants, Ernst & Young, Certified Public Accountants, Hong Kong, for the purpose of incorporation in this document.

[To insert the firm’s letterhead]

ACCOUNTANTS’ REPORT ON HISTORICAL FINANCIAL INFORMATION TO THE DIRECTORS OF FULI GEMSTONES INTERNATIONAL HOLDINGS LIMITED AND CHINA GALAXY INTERNATIONAL SECURITIES (HONG KONG) CO., LIMITED

Introduction

We report on the historical financial information of Fuli Gemstones International Holdings Limited (the “Company”) and its subsidiaries (together, the “Group”) set out on pages [I-4] to [I-74], which comprises the consolidated statements of profit or loss and other comprehensive loss, statements of changes in equity and statements of cash flows of the Group for each of the years ended 31 December 2018, 2019 and 2020 (the “Relevant Periods”), and the consolidated statements of financial position of the Group as at 31 December 2018, 2019 and 2020 and the statements of financial position of the Company as at 31 December 2019 and 2020 and a summary of significant accounting policies and other explanatory information (together, the “Historical Financial Information”). The Historical Financial Information set out on pages [I-4] to [I-74] forms an integral part of this report, which has been prepared for inclusion in the document of the Company dated [Date] (the “Document”) in connection with the initial [REDACTED] of the shares of the Company on the Main Board of The Stock Exchange of Hong Kong Limited (the “Stock Exchange”).

Directors’ responsibility for the Historical Financial Information

The directors of the Company are responsible for the preparation of the Historical Financial Information that gives a true and fair view in accordance with the basis of presentation and the basis of preparation set out in notes 2.1 and 2.2 to the Historical Financial Information, respectively, and for such internal control as the directors determine is necessary to enable the preparation of the Historical Financial Information that is free from material misstatement, whether due to fraud or error.

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APPENDIX I ACCOUNTANTS’ REPORT

Reporting accountants’ responsibility

Our responsibility is to express an opinion on the Historical Financial Information and to report our opinion to you. We conducted our work in accordance with Hong Kong Standard on Investment Circular Reporting Engagements 200 Accountants’ Reports on Historical Financial Information in Investment Circulars issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”). This standard requires that we comply with ethical standards and plan and perform our work to obtain reasonable assurance about whether the Historical Financial Information is free from material misstatement.

Our work involved performing procedures to obtain evidence about the amounts and disclosures in the Historical Financial Information. The procedures selected depend on the reporting accountants’ judgement, including the assessment of risks of material misstatement of the Historical Financial Information, whether due to fraud or error. In making those risk assessments, the reporting accountants consider internal control relevant to the entity’s preparation of the Historical Financial Information that gives a true and fair view in accordance with the basis of presentation and the basis of preparation set out in notes 2.1 and 2.2 to the Historical Financial Information, respectively, in order to design procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Our work also included evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the Historical Financial Information.

We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Opinion

In our opinion, the Historical Financial Information gives, for the purposes of the accountants’ report, a true and fair view of the financial position of the Group as at 31 December 2018, 2019 and 2020 and of the Company as at 31 December 2019 and 2020, and of the financial performance and cash flows of the Group for each of the Relevant Periods in accordance with the basis of presentation and the basis of preparation set out in notes 2.1 and 2.2 to the Historical Financial Information, respectively.

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APPENDIX I ACCOUNTANTS’ REPORT

Report on matters under the Rules Governing the Listing of Securities on the Stock Exchange and the Companies (Winding Up and Miscellaneous Provisions) Ordinance

Adjustments

In preparing the Historical Financial Information, no adjustments to the Underlying Financial Statements as defined on page [I-4] have been made.

Dividends

We refer to note 11 to the Historical Financial Information which states that no dividends have been paid by the Company in respect of the Relevant Periods.

No historical financial statements for the Company

As at the date of this report, no statutory financial statements have been prepared for the Company since its date of incorporation.

[•] Certified Public Accountants Hong Kong [Date]

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APPENDIX I ACCOUNTANTS’ REPORT

I HISTORICAL FINANCIAL INFORMATION

Preparation of Historical Financial Information

Set out below is the Historical Financial Information which forms an integral part of this accountants’ report.

The financial statements of the Group for the Relevant Periods, on which the Historical Financial Information is based, were audited by Ernst & Young in accordance with Hong Kong Standards on Auditing issued by the Hong Kong Institute of Certified Public Accountants (the “Underlying Financial Statements”).

The Historical Financial Information is presented in Renminbi (“RMB”) and all values are rounded to the nearest thousand (RMB’000) except when otherwise indicated.

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APPENDIX I ACCOUNTANTS’ REPORT

CONSOLIDATED STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE LOSS

Year ended 31 December 2018 2019 2020 Notes RMB’000 RMB’000 RMB’000 REVENUE ...... 5 1,123 1,154 707 Cost of sales ...... (341) (378) (274) Gross profit...... 782 776 433 Other income and gains...... 5 244 443 175 Selling and distribution expenses ...... (4,004) (6,419) (7,523) Administrative expenses ...... (9,814) (12,932) (18,098) Other expenses ...... (3) — (102) Interest expenses ...... 7 (263) (476) (784) LOSS BEFORE TAX ...... 6 (13,058) (18,608) (25,899) Income tax credit ...... 10 2,208 1,497 1,755 LOSS FOR THE YEAR ...... (10,850) (17,111) (24,144)

Attributable to: Owners of the parent ...... (10,850) (17,111) (23,738) Non-controlling interests ...... — — (406)

OTHER COMPREHENSIVE INCOME/(LOSS) Other comprehensive income/(loss) that may be reclassified to profit or loss in subsequent periods: Exchange differences on translation of foreign operations ...... (63) (147) 823 Other comprehensive loss that will not be reclassified to profit or loss in subsequent periods: Exchange differences on translation of the Company’s financial statements ...... — (642) (2,048) OTHER COMPREHENSIVE LOSS FOR THE YEAR ...... (63) (789) (1,225) TOTAL COMPREHENSIVE LOSS FOR THE YEAR ...... (10,913) (17,900) (25,369)

Attributable to: Owners of the parent ...... (10,913) (17,900) (24,963) Non-controlling interests ...... 27 — — (406) (10,913) (17,900) (25,369)

LOSS PER SHARE ATTRIBUTABLE TO ORDINARY EQUITY HOLDERS OF THE PARENT Basic and diluted ...... 12 (2.17) (3.41) (4.62)

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APPENDIX I ACCOUNTANTS’ REPORT

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

As at 31 December

2018 2019 2020

Notes RMB’000 RMB’000 RMB’000 NON-CURRENT ASSETS Property, plant and equipment ...... 13 16,184 28,334 38,403 Right-of-use assets ...... 14(a) 3,364 2,056 4,521 Advance payments for property, plant and equipment ...... 155 862 475 Advance payments for leasehold land .... 1,300 1,300 488 Other intangible assets ...... 15 4,665 4,649 4,683 Deferred tax assets ...... 24 2,156 3,653 5,408 Pledged deposits ...... 19 252 253 254 Other non-current assets ...... 18 317 397 413 Total non-current assets...... 28,393 41,504 54,645 CURRENT ASSETS Inventories ...... 16 6,868 8,378 8,100 Trade receivables ...... 17 3 171 4 Prepayments, other receivables and other assets...... 18 1,489 34,597 35,319 Cash and cash equivalents...... 19 1,030 603 278 Total current assets ...... 9,390 43,749 43,701 CURRENT LIABILITIES Trade payables ...... 20 —292 Other payables and accruals ...... 21 8,924 47,706 30,587 Other loans ...... 22 8,328 21,957 749 Lease liabilities ...... 14(b) 1,323 1,429 1,101 Government grants ...... 60 — 81 Total current liabilities ...... 18,635 71,094 32,610 NET CURRENT ASSETS/(LIABILITIES) ...... (9,245) (27,345) 11,091 TOTAL ASSETS LESS CURRENT LIABILITIES...... 19,148 14,159 65,736

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APPENDIX I ACCOUNTANTS’ REPORT

As at 31 December

2018 2019 2020

Notes RMB’000 RMB’000 RMB’000 TOTAL ASSETS LESS CURRENT LIABILITIES...... 19,148 14,159 65,736 NON-CURRENT LIABILITIES Other loans ...... 22 — 9,822 693 Lease liabilities ...... 14(b) 2,086 656 277 Provision...... 23 874 916 961 Total non-current liabilities ...... 2,960 11,394 1,931 Net assets ...... 16,188 2,765 63,805

EQUITY Equity attributable to owners of the parent Share capital ...... 25 — 346 349 Share premium ...... 25 — 34,131 45,537 Other reserves ...... 26 16,188 (31,712) 14,034 16,188 2,765 59,920 Non-controlling interests ...... 27 — — 3,885 Total equity...... 16,188 2,765 63,805

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APPENDIX I ACCOUNTANTS’ REPORT

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

Attribute to owners of the parent

Exchange Share Share Capital fluctuation Accumulated Total capital premium reserve* reserve* losses* equity

RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 Year ended 31 December 2018 At 1 January 2018...... — — 30,000 — (2,899) 27,101 Loss for the year ...... ————(10,850) (10,850) Exchange differences on translation of foreign operations . — — — (63) — (63) Total comprehensive loss for the year ...... — — — (63) (10,850) (10,913) At 31 December 2018 ...... — — 30,000 (63) (13,749) 16,188

Year ended 31 December 2019 At 1 January 2019...... — — 30,000 (63) (13,749) 16,188 Loss for the year ...... ————(17,111) (17,111) Exchange differences on translation of foreign operations . — — — (147) — (147) Exchange differences on translation of the Company’s financial statements ...... — — — (642) — (642) Total comprehensive loss for the year ...... — — — (789) (17,111) (17,900) Acquisition of equity interest from the then shareholders ...... — — (30,000) — — (30,000) Capital contribution from shareholders ...... 346 34,131 — — — 34,477 At 31 December 2019 ...... 346 34,131 — (852) (30,860) 2,765

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APPENDIX I ACCOUNTANTS’ REPORT

Attributable to owners of the parent

Exchange Non- Share Share Capital fluctuation Accumulated controlling Total capital premium reserve* reserve* losses* Total interests equity

RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 Year ended 31 December 2020 At 1 January 2020 ...... 346 34,131 — (852) (30,860) 2,765 — 2,765 Loss for the year ...... ————(23,738) (23,738) (406) (24,144) Exchange differences on translation of foreign operations...... — — — 823 — 823 — 823 Exchange differences on translation of the Company’s financial statements ...... — — — (2,048) — (2,048) — (2,048) Total comprehensive loss for the year ...... — — — (1,225) (23,738) (24,963) (406) (25,369) Capital contribution from shareholders ...... 3 11,406 — — — 11,409 — 11,409 Disposal of a subsidiary without losing control (note a) ...... — — 70,709 — — 70,709 4,291 75,000 At 31 December 2020 ...... 349 45,537 70,709 (2,077) (54,598) 59,920 3,885 63,805

* These reserve accounts comprise the consolidated other reserves of RMB16,188,000, RMB(31,712,000) and RMB14,034,000 in the consolidated statements of financial position as at 31 December 2018, 2019 and 2020, respectively.

Note:

(a) On 30 March 2020, Yanbian Fuli Peridot Mining Industry Co., Ltd (“Yanbian Fuli”) increased its registered capital by RMB1,578,947 from RMB30,000,000 to RMB31,578,947. Tonghua Xintong Investment Holding Group Co., Ltd (通化信通投資控股集團有限公司)(“Tonghua Xintong”) subscribed for the entire increased registered capital at a consideration of RMB75,000,000.

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APPENDIX I ACCOUNTANTS’ REPORT

CONSOLIDATED STATEMENTS OF CASH FLOWS

Year ended 31 December

2018 2019 2020

Notes RMB’000 RMB’000 RMB’000 CASH FLOWS FROM OPERATING ACTIVITIES Loss before tax ...... (13,058) (18,608) (25,899) Adjustments for: Interest expenses ...... 7 263 476 784 Interest income ...... (1) (1) (1) Foreign exchange differences, net ..... 3 — (15) Gain on disposal of items of property, plant and equipment ...... 5 — (376) — Gain on disposal of a subsidiary ...... 28 —— (1) Gain on lease modification ...... 5 —— (7) Covid-19-related rent concessions from lessors ...... 14(b) — — (229) Depreciation of property, plant and equipment ...... 1,179 1,089 1,403 Depreciation of right-of-use assets..... 1,129 1,240 1,698 Amortisation of government grants .... — (60) — Amortisation of other intangible assets . 15 15 16 20 (10,470) (16,224) (22,247)

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APPENDIX I ACCOUNTANTS’ REPORT

Year ended 31 December

2018 2019 2020

Notes RMB’000 RMB’000 RMB’000 Decrease/(increase) in inventories ...... (1,631) (1,400) 388 Decrease/(increase) in trade receivables .. (3) (168) 167 Increase in prepayments, other receivables and other assets ...... (233) (245) (6,222) Increase in other non-current assets...... (280) (80) (16) Increase/(decrease) in trade payables..... (34) 2 90 Increase/(decrease) in other payables and accruals ...... 5,590 3,326 (4,158) Increase in government grants...... 60 — 81 Cash used in operations...... (7,001) (14,789) (31,917) Net cash flows used in operating activities ...... (7,001) (14,789) (31,917) CASH FLOWS FROM INVESTING ACTIVITIES Purchases of items of property, plant and equipment ...... (13,002) (5,142) (21,247) Repayments for right-of-use assets ...... (280) — (47) Repayments for and additions to leasehold land ...... (1,300) — (5,444) Receipt of government refund for leasehold land ...... — — 3,041 Additions to other intangible assets...... 15 (24) — (57) Acquisition of equity interests from the then shareholders ...... — (3,000) (3,630) Disposal of a subsidiary ...... 28 — — (51) Decrease/(increase) in amounts due from directors ...... 17,090 (2,028) (4,823) Net cash flows from/(used in) investing activities ...... 2,484 (10,170) (32,258)

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APPENDIX I ACCOUNTANTS’ REPORT

Year ended 31 December

2018 2019 2020

Notes RMB’000 RMB’000 RMB’000 CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issue of shares ...... — 3,000 10,712 Disposal of a subsidiary without losing control ...... — — 75,000 New other loans ...... 29(b) 8,292 27,732 10,253 Repayment of other loans and interest.... 29(b) (1,927) (4,764) (29,448) Interest portion of lease payments ...... 29(b) (99) (139) (76) Principal portion of lease payments...... 29(b) (1,036) (1,324) (1,498) Payments for deferred [REDACTED] expenses ...... — — (1,040) Net cash flows from financing activities .. 5,230 24,505 63,903 NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS ...... 713 (454) (272) Cash and cash equivalents at beginning of year ...... 374 1,030 603 Effect of foreign exchange rate changes, net ...... (57) 27 (53) CASH AND CASH EQUIVALENTS AT END OF YEAR ...... 1,030 603 278

ANALYSIS OF BALANCES OF CASH AND CASH EQUIVALENTS Cash and bank balances ...... 19 1,030 603 278 Cash and cash equivalents as stated in the consolidated statements of cash flows and consolidated statements of financial position ...... 1,030 603 278

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APPENDIX I ACCOUNTANTS’ REPORT

STATEMENTS OF FINANCIAL POSITION OF THE COMPANY

As at 31 December

2019 2020

Notes RMB’000 RMB’000 NON-CURRENT ASSETS Investment in subsidiaries ...... 3,000 3,689 Total non-current assets...... 3,000 3,689 CURRENT ASSETS Other receivables ...... 18 30,835 18,675 Due from a subsidiary...... 31(b) — 21,480 Total current assets ...... 30,835 40,155 CURRENT LIABILITIES Due to subsidiaries ...... 31(b) 53 723 Total current liabilities ...... 53 723 NET CURRENT ASSETS ...... 30,782 39,432 TOTAL ASSETS LESS CURRENT LIABILITIES...... 33,782 43,121 Net assets ...... 33,782 43,121

EQUITY Share capital ...... 346 349 Share premium ...... 25 34,131 45,537 Other reserves ...... 26 (695) (2,765) Total equity...... 33,782 43,121

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APPENDIX I ACCOUNTANTS’ REPORT

II NOTES TO THE HISTORICAL FINANCIAL INFORMATION

1. CORPORATE AND GROUP INFORMATION

The Company is a limited liability company incorporated in the Cayman Islands on 15 February 2019. The registered office of the Company is located at the offices of Vistra (Cayman) Limited, P.O. Box 31119 Grand Pavilion, Hibiscus Way, 802 West Bay Road, Grand Cayman, KY1-1205 Cayman Islands.

The Company is an investment holding company. During the Relevant Periods, the Company’s subsidiaries were principally involved in the excavation and sale of peridot gemstones and the Group is a developing mining company at the mine site infrastructure development and mine construction preparation stage. In the opinion of the directors of the Company, the ultimate controlling shareholders of the Group are Mr. Yu Haiyang and Kind Modest Limited, a company incorporated under the laws of British Virgin Islands on 12 September 2018 and wholly owned by Mr. Yu Haiyang.

The Company and its subsidiaries now comprising the Group underwent the Reorganisation as set out in the paragraph headed “Reorganisation” in the section headed “History, Reorganisation and Corporate Development” in the Document. Apart from the Reorganisation, the Company has not commenced any business or operation since its incorporation.

As at the date of this report, the Company had direct and indirect interests in its subsidiaries, all of which are private limited liability companies (or, if incorporated outside Hong Kong, have substantially similar characteristics to a private company incorporated in Hong Kong), the particulars of which are set out below:

Percentage of equity attributable Place and date of Issued ordinary/ to the Company incorporation/establishment registered share Name and place of operations capital Direct Indirect Principal activities Fuli International Company Limited British Virgin Islands US$50,000 100% — Investment holding (note (a)) ...... 23 October 2018

Fuli Peridot Mining Industry (Hong Hong Kong HK$1 — 100% Sale and marketing Kong) Limited (“Fuli HK”) 16 July 2018 (note (b)) ......

Fuli Mining Company limited British Virgin Islands US$50,000 100% — Investment holding (“Fuli Mining”) (note (a)) .... 17 January 2020

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APPENDIX I ACCOUNTANTS’ REPORT

Percentage of equity attributable Place and date of Issued ordinary/ to the Company incorporation/establishment registered share Name and place of operations capital Direct Indirect Principal activities Fuli Gemstones, Inc. (note (a)) ... United States of America (“USA”) — — 100% Dormant 4 February 2020

Fuli Gemstones Company Limited British Virgin Islands US$50,000 100% — Investment holding (“Fuli Gemstones”) (note (a)) .. 17 January 2020

Fuli Gemstones (UK) Limited United Kingdom (“UK”) UK£100 — 100% Trading of peridot (note (a)) ...... 27 January 2020 gemstones

Fuli Peridot Trading (Beijing) People’s Republic of China RMB30,000,000 — 100% Trading of peridot Limited (“Beijing Fuli”) (富麗欖 (“PRC”))/Mainland China gemstones 石貿易(北京)有限公司)* 30 September 2018 (note (c)) ......

Yanbian Fuli (延邊富麗橄欖石礦業 PRC/ RMB32,223,415 — 93.1% Excavation and sales of 有限公司)* (note (d)) ...... Mainland China peridot 27 April 2015

Notes:

(a) No audited financial statements have been prepared for these entities since their dates of incorporation/establishment.

(b) The entity is a limited liability enterprise established under Hong Kong law. The statutory financial statements of Fuli HK for the period from 16 July 2018 (date of incorporation) to 31 December 2019 prepared in accordance with the Small and Medium-sized Entity Financial Reporting Standard were audited by Ian See &Co, certified public accountants registered in Hong Kong. No audited financial statements have been prepared yet for the year ended 31 December 2020.

(c) The entity is a wholly-foreign-owned enterprise established under PRC law. The statutory financial statements of Beijing Fuli for the years ended 31 December 2018 and 2019 prepared under PRC Generally Accepted Accounting Principles were audited by Yanbian Chengxin Certified Public Accountants LLP (延邊誠信會計師事務所(特殊普通合夥)), certified public accountants registered in the PRC. No audited financial statements have been prepared for the year ended 31 December 2020.

(d) The entity is a limited liability enterprise established under PRC law. No audited financial statements have been prepared for the years ended 31 December 2018, 2019 and 2020.

* The English names of these entities registered in the PRC represent the best efforts made by the management of the Company to directly translate their Chinese names as they did not register any official English names.

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APPENDIX I ACCOUNTANTS’ REPORT

2.1 BASIS OF PRESENTATION

Pursuant to the Reorganisation, as more fully explained in the paragraph headed “Reorganisation” in the section headed “History, Reorganisation and Corporate Development” in the Document, the Company became the holding company of the companies now comprising the Group on 8 May 2019. As the Reorganisation only involved inserting new holding companies at the top of an existing company and has not resulted in any change of economic substances, the Historical Financial Information has been presented as a continuation of the existing company using the pooling of interests method as if the group structure had been in place at the beginning of the Relevant Periods.

The consolidated statements of profit or loss and other comprehensive loss, statements of changes in equity and statements of cash flows of the Group for the Relevant Periods include the results and cash flows of all companies now comprising the Group from the earliest date presented or since the date when the subsidiaries and/or businesses were established or acquired, where this is a shorter period. The consolidated statements of financial position of the Group as of 31 December 2018, 2019 and 2020 have been prepared to present the assets and liabilities of the subsidiaries now comprising the Group using the existing book values. No adjustments are made to reflect fair values, or recognise any new assets or liabilities as a result of the Reorganisation.

All intra-group transactions and balances have been eliminated on consolidation.

2.2 BASIS OF PREPARATION

The Historical Financial Information has been prepared in accordance with Hong Kong Financial Reporting Standards (“HKFRSs”) (which include all Hong Kong Financial Reporting Standards, Hong Kong Accounting Standards (“HKASs”) and Interpretations) issued by the HKICPA and accounting principles generally accepted in Hong Kong and the Hong Kong Companies Ordinance. All HKFRSs effective for the accounting period commencing from 1 January 2020, together with the relevant transitional provisions, have been early adopted on a consistent basis by the Group in the preparation of the Historical Financial Information throughout the Relevant Periods. The Group also early adopted Amendment to HKFRS 16 Covid-19-Related Rent Concessions on 1 January 2020.

The Historical Financial Information has been prepared under the historical cost convention.

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APPENDIX I ACCOUNTANTS’ REPORT

2.3 ISSUED BUT NOT YET EFFECTIVE HONG KONG FINANCIAL REPORTING STANDARDS

The Group has not applied the following new and revised HKFRSs, that have been issued but are not yet effective, in the Historical Financial Information.

Amendments to HKFRS 3 Reference to the Conceptual Framework2 Amendments to HKFRS 9, Interest Rate Benchmark Reform — Phase 21 HKAS 39, HKFRS 7, HKFRS 4 and HKFRS 16 Amendments to HKFRS 10 and Sale or Contribution of Assets between an Investor and its HKAS 28 (2011) Associate or Joint Venture4 HKFRS 17 Insurance Contracts3 Amendments to HKFRS 17 Insurance Contracts3,6 Amendments to HKFRS 1 Classification of Liabilities as Current or Non-current3,5 Amendments to HKFRS 1 Disclosure of Accounting Policies3 Amendments to HKAS 8 Definition of Accounting Estimates3 Amendments to HKAS 16 Property, Plant and Equipment: Proceeds before Intended Use2 Amendments to HKFRS 37 Onerous Contracts — Cost of Fulfilling a Contract2 Annual Improvements to HKFRSs Amendments to HKFRS 1, HKFRS 9, Illustrative Examples 2018-2020 accompanying HKFRS 16, and HKAS 412

1 Effective for annual periods beginning on or after 1 January 2021 2 Effective for annual periods beginning on or after 1 January 2022 3 Effective for annual periods beginning on or after 1 January 2023 4 No mandatory effective date yet determined but available for adoption 5 As a consequence of the amendments to HKAS 1, Hong Kong Interpretation 5 Presentation of Financial Statements — Classification by the Borrower of a Term Loan that Contains a Repayment on Demand Clause was revised in October 2020 to align the corresponding wording with no change in conclusion 6 As a consequence of the amendments to HKFRS 17 issued in October 2020, HKFRS 4 was amended to extend the temporary exemption that permits insurers to apply HKAS 39 rather than HKFRS 9 for annual periods beginning before 1 January 2023

The Group is in the process of making an assessment of the impact of these new and revised HKFRSs upon initial application. So far, the Group considers that these new and revised HKFRSs may result in changes in accounting policies but are unlikely to have a significant impact on the Group’s financial performance and financial position.

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APPENDIX I ACCOUNTANTS’ REPORT

2.4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Subsidiaries

A subsidiary is an entity (including a structured entity), directly or indirectly, controlled by the Company. Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee (i.e., existing rights that give the Group the current ability to direct the relevant activities of the investee).

When the Company has, directly or indirectly, less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and circumstances in assessing whether it has power over an investee, including:

(a) the contractual arrangement with the other vote holders of the investee;

(b) rights arising from other contractual arrangements; and

The results of subsidiaries are included in the Company’s profit or loss to the extent of dividends received and receivable.

The Group reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control described above. A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction.

If the Group loses control over a subsidiary, it derecognises (i) the assets (including goodwill) and liabilities of the subsidiary, (ii) the carrying amount of any non-controlling interest and (iii) the cumulative translation differences recorded in equity; and recognises (i) the fair value of the consideration received, (ii) the fair value of any investments retained and (iii) any resulting surplus or deficit in profit or loss. The Group’s share of components previously recognised in other comprehensive income is reclassified to profit or loss or retained profits, as appropriate, on the same basis as would be required if the Group had directly disposed of the related assets or liabilities.

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APPENDIX I ACCOUNTANTS’ REPORT

Impairment of non-financial assets

Where an indication of impairment exists, or when annual impairment testing for an asset is required (other than inventories, deferred tax assets, financial assets and non-current assets), the asset’s recoverable amount is estimated. An asset’s recoverable amount is the higher of the asset’s or cash-generating unit’s value in use and its fair value less costs of disposal, and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets, in which case the recoverable amount is determined for the cash-generating unit to which the asset belongs.

An impairment loss is recognised only if the carrying amount of an asset exceeds its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. An impairment loss is charged to the consolidated statements of profit or loss and other comprehensive income in the period in which it arises in those expense categories consistent with the function of the impaired asset.

An assessment is made at the end of each of the Relevant Periods as to whether there is an indication that previously recognised impairment losses may no longer exist or may have decreased. If such an indication exists, the recoverable amount is estimated. A previously recognised impairment loss of an asset other than goodwill is reversed only if there has been a change in the estimates used to determine the recoverable amount of that asset, but not to an amount higher than the carrying amount that would have been determined (net of any depreciation/amortisation) had no impairment loss been recognised for the asset in prior years. A reversal of such an impairment loss is credited to the consolidated statements of profit or loss and other comprehensive income in the period in which it arises.

Related parties

A party is considered to be related to the Group if:

(a) the party is a person or a close member of that person’s family and that person

(i) has control or joint control over the Group;

(ii) has significant influence over the Group; or

(iii) is a member of the key management personnel of the Group or of a parent of the Group;

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APPENDIX I ACCOUNTANTS’ REPORT

(b) the party is an entity where any of the following conditions applies:

(i) the entity and the Group are members of the same group;

(ii) one entity is an associate or joint venture of the other entity (or of a parent, subsidiary or fellow subsidiary of the other entity);

(iii) the entity and the Group are joint ventures of the same third party;

(iv) one entity is a joint venture of a third entity and the other entity is an associate of the third entity;

(v) the entity is a post-employment benefit plan for the benefit of employees of either the Group or an entity related to the Group;

(vi) the entity is controlled or jointly controlled by a person identified in (a);

(vii) a person identified in (a)(i) has significant influence over the entity or is a member of the key management personnel of the entity (or of a parent of the entity); and

(viii) the entity, or any member of a group of which it is a part, provides key management personnel services to the Group or to the parent of the Group.

Property, plant and equipment and depreciation

Property, plant and equipment, other than construction in progress, are stated at cost less accumulated depreciation and any impairment losses. The cost of an item of property, plant and equipment comprises its purchase price and any directly attributable costs of bringing the asset to its working condition and location for its intended use.

Expenditure incurred after items of property, plant and equipment have been put into operation, such as repairs and maintenance, is normally charged to the consolidated statements of profit or loss and other comprehensive income in the period in which it is incurred. In situations where the recognition criteria are satisfied, the expenditure for a major inspection is capitalised in the carrying amount of the asset as a replacement. Where significant parts of property, plant and equipment are required to be replaced at intervals, the Group recognises such parts as individual assets with specific useful lives and depreciates them accordingly.

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APPENDIX I ACCOUNTANTS’ REPORT

Depreciation of items of property, plant and equipment, other than mining infrastructure is calculated on the straight-line basis to write off the cost of each item of property, plant and equipment to its residual value over its estimated useful life. The principal annual rates used for this purpose are as follows:

Leasehold improvements Over the shorter of the lease terms and 20% Machinery equipment 10.0% Office equipment 20.0%~33.0% Motor vehicles 25.0%

Depreciation of mining infrastructure is calculated using the Units of Production (“UOP”) method to write off the cost of the assets proportionate to the extraction of the proved and probable mineral reserves.

An item of property, plant and equipment including any significant part initially recognised is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss on disposal or retirement recognised in the consolidated statements of profit or loss and other comprehensive income in the year the asset is derecognised is the difference between the net sales proceeds and the carrying amount of the relevant asset.

Construction in progress represents items of property, plant and equipment under construction, which is stated at cost less any impairment losses, and is not depreciated. Cost comprises the direct costs of construction during the period of construction. Construction in progress is reclassified to the appropriate category of property, plant and equipment when completed and ready for use.

Intangible assets (other than goodwill)

Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a business combination is the fair value at the date of acquisition. The useful lives of intangible assets are assessed to be either finite or indefinite. Intangible assets with finite lives are subsequently amortised over the useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method for an intangible asset with a finite useful life are reviewed at least at each financial year end.

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APPENDIX I ACCOUNTANTS’ REPORT

Software and trademarks

Software and trademarks are stated at cost less any impairment loss and is amortised on the straight-line basis over their estimated useful life of 3 to 10 years.

Mining right

Mining rights are stated at cost less accumulated amortisation and any impairment losses. Mining rights include the cost of acquiring mining licenses, exploration and evaluation costs transferred from exploration rights and assets upon determination that an exploration property is capable of commercial production, and the cost of acquiring interests in the mining reserves of existing mining properties. The mining rights are amortised over the estimated useful lives of the mines, in accordance with the production plans of the entities concerned and the proved and probable reserves of the mines using the UOP method. Mining rights are written off to profit or loss if the mining property is abandoned.

Leases

The Group assesses at contract inception whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.

Group as a lessee

The Group applies a single recognition and measurement approach for all leases, except for short-term leases and leases of low-value assets. The Group recognises lease liabilities to make lease payments and right-of-use assets representing the right to use the underlying assets.

(a) Right-of-use assets

Right-of-use assets are recognised at the commencement date of the lease (that is the date the underlying asset is available for use). Right-of-use assets are measured at cost, less any accumulated depreciation and any impairment losses, and adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognised, initial direct costs incurred, and lease payments made at or before the commencement date less any lease incentives received. Right-of-use assets are depreciated on a straight-line basis over the shorter of the lease terms and the estimated useful lives of the assets as follows:

Leasehold land 28 years Office premises 2-3 years

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APPENDIX I ACCOUNTANTS’ REPORT

If ownership of the leased asset transfers to the Group by the end of the lease term or the cost reflects the exercise of a purchase option, depreciation is calculated using the estimated useful life of the asset.

(b) Lease liabilities

Lease liabilities are recognised at the commencement date of the lease at the present value of lease payments to be made over the lease term. The lease payments include fixed payments (including in-substance fixed payments) less any lease incentives receivable, variable lease payments that depend on an index or a rate, and amounts expected to be paid under residual value guarantees. The lease payments also include the exercise price of a purchase option reasonably certain to be exercised by the Group and payments of penalties for termination of a lease, if the lease term reflects the Group exercising the option to terminate the lease. The variable lease payments that do not depend on an index or a rate are recognised as an expense in the period in which the event or condition that triggers the payment occurs.

In calculating the present value of lease payments, the Group uses its incremental borrowing rate at the lease commencement date because the interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease term, a change in lease payments (e.g., a change to future lease payments resulting from a change in an index or rate) or a change in assessment of an option to purchase the underlying asset.

The Group’s lease liabilities are presented separately in the statements of financial position.

The Group applies the short-term lease recognition exemption to its short-term leases of office premises and vehicles (that is those leases that have a lease term of 12 months or less from the commencement date and do not contain a purchase option). Lease payments on short-term leases are recognised as an expense on a straight-line basis over the lease term.

Investments and other financial assets

Initial recognition and measurement

Financial assets are classified, at initial recognition, as subsequently measured at amortised cost, fair value through other comprehensive income, and fair value through profit or loss.

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APPENDIX I ACCOUNTANTS’ REPORT

The classification of financial assets at initial recognition depends on the financial asset’s contractual cash flow characteristics and the Group’s business model for managing them. With the exception of trade receivables that do not contain a significant financing component or for which the Group has applied the practical expedient of not adjusting the effect of a significant financing component, the Group initially measures a financial asset at its fair value plus in the case of a financial asset not at fair value through profit or loss, transaction costs. Trade receivables that do not contain a significant financing component or for which the Group has applied the practical expedient are measured at the transaction price determined under HKFRS 15 in accordance with the policies set out for “Revenue recognition” below.

In order for a financial asset to be classified and measured at amortised cost or fair value through other comprehensive income, it needs to give rise to cash flows that are solely payments of principal and interest (“SPPI”) on the principal amount outstanding. Financial assets with cash flows that are not SPPI are classified and measured at fair value through profit or loss, irrespective of the business model.

The Group’s business model for managing financial assets refers to how it manages its financial assets in order to generate cash flows. The business model determines whether cash flows will result from collecting contractual cash flows, selling the financial assets, or both. Financial assets classified and measured at amortised cost are held within a business model with the objective to hold financial assets in order to collect contractual cash flows, while financial assets classified and measured at fair value through other comprehensive income are held within a business model with the objective of both holding to collect contractual cash flows and selling. Financial assets which are not held within the aforementioned business models are classified and measured at fair value through profit or loss.

All regular way purchases and sales of financial assets are recognised on the trade date, that is, the date that the Group commits to purchase or sell the asset. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the period generally established by regulation or convention in the marketplace.

Subsequent measurement

The subsequent measurement of financial assets depends on their classification as follows:

Financial assets at amortised cost (debt instruments)

Financial assets at amortised cost are subsequently measured using the effective interest method and are subject to impairment. Gains and losses are recognised in the consolidated statements of profit or loss and other comprehensive income when the asset is derecognised, modified or impaired.

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APPENDIX I ACCOUNTANTS’ REPORT

Derecognition of financial assets

A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is primarily derecognised (i.e., removed from the Group’s consolidated statements of financial position) when:

• the rights to receive cash flows from the asset have expired; or

• the Group has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a “pass-through” arrangement; and either (a) the Group has transferred substantially all the risks and rewards of the asset, or (b) the Group has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

When the Group has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, it evaluates if, and to what extent, it has retained the risk and rewards of ownership of the asset. When it has neither transferred nor retained substantially all the risks and rewards of the asset nor transferred control of the asset, the Group continues to recognise the transferred asset to the extent of the Group’s continuing involvement. In that case, the Group also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Group has retained.

Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Group could be required to repay.

Impairment of financial assets

The Group recognises an allowance for expected credit losses (“ECLs”) for all debt instruments not held at fair value through profit or loss. ECLs are based on the difference between the contractual cash flows due in accordance with the contract and all the cash flows that the Group expects to receive, discounted at an approximation of the original effective interest rate. The expected cash flows will include cash flows from the sale of collateral held or other credit enhancements that are integral to the contractual terms.

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APPENDIX I ACCOUNTANTS’ REPORT

General approach

ECLs are recognised in two stages. For credit exposures for which there has not been a significant increase in credit risk since initial recognition, ECLs are provided for credit losses that result from default events that are possible within the next 12 months (a 12-month ECL). For those credit exposures for which there has been a significant increase in credit risk since initial recognition, a loss allowance is required for credit losses expected over the remaining life of the exposure, irrespective of the timing of the default (a lifetime ECL).

At each reporting date, the Group assesses whether the credit risk on a financial instrument has increased significantly since initial recognition. When making the assessment, the Group compares the risk of a default occurring on the financial instrument as at the reporting date with the risk of a default occurring on the financial instrument as at the date of initial recognition and considers reasonable and supportable information that is available without undue cost or effort, including historical and forward-looking information.

The Group considers a financial asset in default when contractual payments are 90 days past due. However, in certain cases, the Group may also consider a financial asset to be in default when internal or external information indicates that the Group is unlikely to receive the outstanding contractual amounts in full before taking into account any credit enhancements held by the Group. A financial asset is written off when there is no reasonable expectation of recovering the contractual cash flows.

Debt investments at fair value through other comprehensive income and financial assets at amortised cost are subject to impairment under the general approach and they are classified within the following stages for measurement of ECLs except for trade receivables which apply the simplified approach as detailed below.

Stage 1 — Financial instruments for which credit risk has not increased significantly since initial recognition and for which the loss allowance is measured at an amount equal to 12-month ECLs

Stage 2 — Financial instruments for which credit risk has increased significantly since initial recognition but that are not credit-impaired financial assets and for which the loss allowance is measured at an amount equal to lifetime ECLs

Stage 3 — Financial assets that are credit-impaired at the reporting date (but that are not purchased or originated credit-impaired) and for which the loss allowance is measured at an amount equal to lifetime ECLs

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APPENDIX I ACCOUNTANTS’ REPORT

Simplified approach

For trade receivables and that do not contain a significant financing component or when the Group applies the practical expedient of not adjusting the effect of a significant financing component, the Group applies the simplified approach in calculating ECLs. Under the simplified approach, the Group does not track changes in credit risk, but instead recognises a loss allowance based on lifetime ECLs at each reporting date. The Group has established a provision matrix that is based on its historical credit loss experience, adjusted for forward-looking factors specific to the debtors and the economic environment.

Financial liabilities

Initial recognition and measurement

Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss, loans and borrowings, payables, or as derivatives designated as hedging instruments in an effective hedge, as appropriate.

All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs.

The Group’s financial liabilities include trade and other payables, other loans and lease liabilities.

Subsequent measurement

The subsequent measurement of financial liabilities depends on their classification as follows:

Financial liabilities at amortised cost (loans and borrowings)

After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost, using the effective interest rate method unless the effect of discounting would be immaterial, in which case they are stated at cost. Gains and losses are recognised in profit or loss when the liabilities are derecognised as well as through the effective interest rate amortisation process.

Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the effective interest rate. The effective interest rate amortisation is included in finance costs in profit or loss.

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APPENDIX I ACCOUNTANTS’ REPORT

Derecognition of financial liabilities

A financial liability is derecognised when the obligation under the liability is discharged or cancelled, or expires.

When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and a recognition of a new liability, and the difference between the respective carrying amounts is recognised in profit or loss.

Offsetting of financial instruments

Financial assets and financial liabilities are offset and the net amount is reported in the statements of financial position if there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, or to realise the assets and settle the liabilities simultaneously.

Inventories

Inventories are stated at the lower of cost and net realisable value. Cost is determined on the weighted average basis and, in the case of work in progress and finished goods, comprises direct materials, direct labour and an appropriate proportion of overheads. Net realisable value is based on estimated selling prices less any estimated costs to be incurred to completion and disposal.

Cash and cash equivalents

For the purpose of the consolidated statements of cash flows, cash and cash equivalents comprise cash on hand and demand deposits, and short-term highly liquid investments that are readily convertible into known amounts of cash, are subject to an insignificant risk of changes in value, and have a short maturity of generally within three months when acquired, less bank overdrafts which are repayable on demand and form an integral part of the Group’s cash management.

For the purpose of the consolidated statements of financial position, cash and cash equivalents comprise cash on hand and at banks, including term deposits, and assets similar in nature to cash, which are not restricted as to use.

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APPENDIX I ACCOUNTANTS’ REPORT

Provisions

A provision is recognised when a present obligation (legal or constructive) has arisen as a result of a past event and it is probable that a future outflow of resources will be required to settle the obligation, provided that reliable estimate can be made of the amount of the obligation.

When the effect of discounting is material, the amount recognised for a provision is the present value at the end of the reporting period of the future expenditures expected to be required to settle the obligation. The increase in the discounted present value amount arising from the passage of time is included in finance costs in profit or loss.

Provisions for the Group’s obligations for rehabilitation are based on estimates of the required expenditure at the mines in accordance with the rules and regulations of the People’s Republic of China (the “PRC”). The obligation generally arises when the asset is installed or the ground environment is disturbed at the production location. The Group estimates its liabilities for final rehabilitation and mine closure based upon detailed calculations of the amount and timing of the future cash expenditure to perform the required work. Spending estimates are escalated for inflation, then discounted at a discount rate that reflects current market assessments of the time value of money and the risks specific to the liability such that the amount of provision reflects the present value of the expenditures expected to be required to settle the obligation. When the liability is initially recognised, the present value of the estimated cost is capitalised by increasing the carrying amount of the related mining infrastructure.

Over time, the discounted liability increases for the change in present value based on the appropriate discount rate. The periodic unwinding of the discount is recognised within “Interest expenses” in profit or loss. The asset is depreciated using the unit-of-production method over its expected life and the liability is accreted to the projected expenditure date. Additional disturbances or changes in estimates (such as mine plan revisions, changes in estimated costs, or changes in timing of the performance of reclamation activities) will be recognised as additions or charges to the corresponding assets and rehabilitation liabilities when they occur at the appropriate discount rate.

Income tax

Income tax comprises current and deferred tax. Income tax relating to items recognised outside profit or loss is recognised outside profit or loss, either in other comprehensive income or directly in equity.

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APPENDIX I ACCOUNTANTS’ REPORT

Current tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of each of the Relevant Periods, taking into consideration interpretations and practices prevailing in the countries in which the Group operates.

Deferred tax is provided, using the liability method, on all temporary differences at the end of each of the Relevant Periods between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.

Deferred tax liabilities are recognised for all taxable temporary differences, except:

• when the deferred tax liability arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and

• in respect of taxable temporary differences associated with investments in subsidiaries, when the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.

Deferred tax assets are recognised for all deductible temporary differences, and the carryforward of unused tax credits and any unused tax losses. Deferred tax assets are recognised to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carryforward of unused tax credits and unused tax losses can be utilised, except:

• when the deferred tax asset relating to the deductible temporary differences arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and

• in respect of deductible temporary differences associated with investments in subsidiaries, deferred tax assets are only recognised to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised.

The carrying amount of deferred tax assets is reviewed at the end of each of the Relevant Periods and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised deferred tax

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APPENDIX I ACCOUNTANTS’ REPORT assets are reassessed at the end of each of the Relevant Periods and are recognised to the extent that it has become probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be recovered.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of each of the Relevant Periods.

Deferred tax assets and deferred tax liabilities are offset if and only if the Group has a legally enforceable right to set off current tax assets and current tax liabilities and the deferred tax assets and deferred tax liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities which intend either to settle current tax liabilities and assets on a net basis, or to realise the assets and settle the liabilities simultaneously, in each future period in which significant amounts of deferred tax liabilities or assets are expected to be settled or recovered.

Government grants

Government grants are recognised at their fair value where there is reasonable assurance that the grant will be received and all attaching conditions will be complied with. When the grant relates to an expense item, it is recognised as income on a systematic basis over the periods that the costs, for which it is intended to compensate, are expensed.

Revenue recognition

Revenue from contracts with customers

Revenue from contracts with customers is recognised when control of goods or services is transferred to the customers at an amount that reflects the consideration to which the Group expects to be entitled in exchange for those goods or services.

When the consideration in a contract includes a variable amount, the amount of consideration is estimated to which the Group will be entitled in exchange for transferring the goods or services to the customer. The variable consideration is estimated at contract inception and constrained until it is highly probable that a significant revenue reversal in the amount of cumulative revenue recognised will not occur when the associated uncertainty with the variable consideration is subsequently resolved.

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APPENDIX I ACCOUNTANTS’ REPORT

When the contract contains a financing component which provides the customer with a significant benefit of financing the transfer of goods or services to the customer for more than one year, revenue is measured at the present value of the amount receivable, discounted using the discount rate that would be reflected in a separate financing transaction between the Group and the customer at contract inception. When the contract contains a financing component which provides the Group with a significant financial benefit for more than one year, revenue recognised under the contract includes the interest expense accreted on the contract liability under the effective interest method. For a contract where the period between the payment by the customer and the transfer of the promised goods or services is one year or less, the transaction price is not adjusted for the effects of a significant financing component, using the practical expedient in HKFRS 15.

Sales of goods

The Group is mainly involved in the sale of peridot gemstones. Revenue from the sale of goods is recognised at the point in time when control of the assets is transferred to the customers, generally on delivery of the goods.

Other income

Interest income is recognised on an accrual basis using the effective interest method by applying the rate that exactly discounts the estimated future cash receipts over the expected life of the financial instrument or a shorter period, when appropriate, to the net carrying amount of the financial asset.

Contract liabilities

A contract liability is recognised when a payment is received or a payment is due (whichever is earlier) from a customer before the Group transfers the related goods or services. Contract liabilities are recognised as revenue when the Group performs under the contract (i.e., transfers control of the related goods or services to the customer).

Employee benefits

Pension schemes

Contributions made to the government retirement benefit fund under defined contribution retirement plans are charged to profit or loss as incurred.

The Group participates in the national pension schemes as defined by the laws of the countries in which it has operations.

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APPENDIX I ACCOUNTANTS’ REPORT

The employees of the Group’s subsidiaries which operate in Mainland China are required to participate in central pension schemes operated by the local municipal government and the central government, respectively. These subsidiaries are required to contribute a certain percentage of payroll costs to the central pension schemes. The contributions are charged to profit or loss as they become payable in accordance with the rules of the central pension schemes.

Dividends

Final dividends are recognised as a liability when they are approved by the shareholders in a general meeting.

Foreign currencies

The Historical Financial Information is presented in RMB, which is different than the Company’s functional currency, the United States dollar (“USD”). As the major revenues and assets of the Group are derived from operations in Mainland China, RMB is chosen as the presentation currency for the presentation of the Historical Financial Information. Each entity in the Group determines its own functional currency and items included in the financial statements of each entity are measured using that functional currency. Foreign currency transactions recorded by the entities in the Group are initially recorded using their respective functional currency rates prevailing at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency rates of exchange ruling at the end of each of the Relevant Periods. Differences arising on settlement or translation of monetary items are recognised in profit or loss.

Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was measured. The gain or loss arising on translation of a non-monetary item measured at fair value is treated in line with the recognition of the gain or loss on change in fair value of the item (i.e., translation difference on the item whose fair value gain or loss is recognised in other comprehensive income or profit or loss is also recognised in other comprehensive income or profit or loss, respectively).

In determining the exchange rate on initial recognition of the related asset, expense or income on the derecognition of a non-monetary asset or non-monetary liability relating to an advance consideration, the date of initial transaction is the date on which the Group initially recognises the non-monetary asset or non-monetary liability arising from the advance consideration. If there are multiple payments or receipts in advance, the Group determines the transaction date for each payment or receipt of the advance consideration.

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APPENDIX I ACCOUNTANTS’ REPORT

The functional currencies of certain overseas subsidiaries are currencies other than RMB. As at the end of each of the Relevant Periods, the assets and liabilities of these entities are translated into RMB at the exchange rates prevailing at the end of each of the Relevant Periods and their profits or losses are translated into RMB at the weighted average exchange rates for the year.

The resulting exchange differences are recognised in other comprehensive income and accumulated in the exchange fluctuation reserve. On disposal of a foreign operation, the component of other comprehensive income relating to that particular foreign operation is recognised in the consolidated statements of profit or loss and other comprehensive income.

3. SIGNIFICANT ACCOUNTING JUDGEMENTS AND ESTIMATES

The preparation of the Group’s Historical Financial Information requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and their accompanying disclosures, and the disclosure of contingent liabilities. Uncertainty about these assumptions and estimates could result in outcomes that could require a material adjustment to the carrying amounts of the assets or liabilities affected in the future.

Estimation uncertainty

The key assumptions concerning the future and other key sources of estimation uncertainty at the end of each of the Relevant Periods, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are described below.

Leases — Estimating the incremental borrowing rate

The Group cannot readily determine the interest rate implicit in a lease, and therefore, it uses an incremental borrowing rate (“IBR”) to measure lease liabilities. The IBR is the rate of interest that the Group would have to pay to borrow over a similar term, and with a similar security, the funds necessary to obtain an asset of a similar value to the right-of-use asset in a similar economic environment. The IBR therefore reflects what the Group “would have to pay”, which requires estimation when no observable rates are available (such as for subsidiaries that do not enter into financing transactions) or when it needs to be adjusted to reflect the terms and conditions of the

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APPENDIX I ACCOUNTANTS’ REPORT lease (for example, when leases are not in the subsidiary’s functional currency). The Group estimates the IBR using observable inputs (such as market interest rates) when available and is required to make certain entity-specific estimates (such as the subsidiary’s stand-alone credit rating).

Net realisable value of inventories

Net realisable value of inventories is the estimated selling price in the ordinary course of business, less estimated costs to be incurred to completion and disposal. These estimates are based on the current market condition and the historical experience of selling products of similar nature. Management reassesses these estimates at the end of each reporting periods. The carrying amounts of inventories as of 31 December 2018, 2019 and 2020 were RMB6,868,000, RMB8,378,000, and RMB8,100,000, respectively.

Provision for rehabilitation

Provision for rehabilitation is based on estimates of future expenditures incurred by management to undertake rehabilitation and restoration work which were discounted at a rate of 4.9% at the end of each of the Relevant Periods to reflect the term and nature of the obligation to their present value. Significant estimates and assumptions are made in determining the provision for rehabilitation as there are numerous factors that will affect the ultimate liability payable. These factors include estimates of the extent and costs of rehabilitation activities, technological changes, regulatory changes, cost increases and changes in the discount rate. Those uncertainties may result in future actual expenditure differing from the amounts currently provided. The provision at the end of the reporting period represents management’s best estimate of the present value of the future rehabilitation costs required. Changes to estimated future costs are recognised in the consolidated statement of financial position by adjusting the rehabilitation asset and liability. Further details are given in note 23 to the Historical Financial Information.

Impairment of non-financial assets (other than goodwill)

The Group assesses whether there are any indicators of impairment for all non-financial assets (including the right-of-use assets) at the end of each of the Relevant Periods. All non-financial assets of the Group are tested for impairment when there are indicators that the carrying amounts may not be recoverable. An impairment exists when the carrying value of an asset or a cash-generating unit exceeds its recoverable amount, which is the higher of its fair value less costs of disposal and its value in use. The calculation of the fair value less costs of disposal is based on available data from binding sales transactions in an arm’s length transaction of similar assets or observable market prices less incremental costs for disposing of the asset. When value in

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APPENDIX I ACCOUNTANTS’ REPORT use calculations are undertaken, management must estimate the expected future cash flows from the asset or cash-generating unit and choose a suitable discount rate in order to calculate the present value of those cash flows.

Deferred tax assets

Deferred tax assets are recognised for unused tax losses to the extent that it is probable that taxable profit will be available against which the losses can be utilised. Significant management judgement is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and level of future taxable profits together with future tax planning strategies. The carrying values of deferred tax assets relating to recognised tax losses at 31 December 2018, 2019 and 2020 were RMB2,039,000, RMB2,961,000 and RMB4,325,000, respectively. The amounts of unrecognised tax losses at 31 December 2018, 2019 and 2020 were RMB8,519,000, RMB17,931,000 and RMB28,906,000, respectively. Further details are contained in note 24 to the Historical Financial Information.

4. OPERATING SEGMENT INFORMATION

For management purposes, the Group is not organised into business units based on their products and only has one reportable operating segment. Management monitors the operating results of the Group’s operating segment as a whole for the purpose of making decisions about resource allocation and performance assessment.

Geographical information

(a) Revenue from external customers

All of the Group’s revenue was generated from customers located in Mainland China during the Relevant Periods, except for sales in 2018 with an amount of RMB15,000 generated from a customer located in the European Union.

(b) Non-current assets

As at 31 December

2018 2019 2020

RMB’000 RMB’000 RMB’000 Hong Kong ...... 11 877 927 Mainland China...... 25,657 36,324 47,122 Other countries ...... — — 521 25,668 37,201 48,570

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APPENDIX I ACCOUNTANTS’ REPORT

The non-current asset information above is based on the locations of the assets and excludes financial instruments and deferred tax assets.

Information about major customers

Revenue from each major customer which accounted for 10% or more of the Group’s revenue during the Relevant Periods is set out below:

Year ended 31 December

2018 2019 2020

RMB’000 RMB’000 RMB’000 Customer 1 ...... 427 269 N/A* Customer 2 ...... N/A* N/A* 111 Customer 3 ...... N/A* N/A* 82

* Less than 10%

5. REVENUE, OTHER INCOME AND GAINS

An analysis of revenue is as follows:

Year ended 31 December

2018 2019 2020

RMB’000 RMB’000 RMB’000 Revenue from contracts with customers .... 1,123 1,154 707

Revenue from contracts with customers

(i) Disaggregated revenue information

Year ended 31 December 2018 2019 2020 RMB’000 RMB’000 RMB’000 Types of goods Rough gemstones ...... 641 Cut-and-polished gemstones ...... 348 310 185 Jewellery...... 769 840 521 Total revenue from contracts with customers...... 1,123 1,154 707

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APPENDIX I ACCOUNTANTS’ REPORT

Year ended 31 December 2018 2019 2020 RMB’000 RMB’000 RMB’000 Timing of revenue recognition Goods transferred at a point in time ...... 1,123 1,154 707

(ii) Performance obligations

Sale of goods

The performance obligation is satisfied upon delivery of goods and payment is generally due within one month from delivery.

An analysis of other income and gains is as follows:

Year ended 31 December 2018 2019 2020

RMB’000 RMB’000 RMB’000 Bank interest income...... 418 Government grants* ...... 240 66 144 Gain on disposal of items of property, plant and equipment ...... — 376 — Gain on disposal of a subsidiary ...... —— 1 Gain on lease modification ...... —— 7 Foreign exchange gain ...... ——15 244 443 175

* The government grants mainly represent incentives awarded by the local governments to support the Group’s operation. Government grants received for which related expenditure has not yet been undertaken are included in government grants in the statements of financial position. There were no unfulfilled conditions or contingencies relating to these grants.

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APPENDIX I ACCOUNTANTS’ REPORT

6. LOSS BEFORE TAX

The Group’s loss before tax is arrived at after charging/(crediting):

Year ended 31 December 2018 2019 2020 Notes RMB’000 RMB’000 RMB’000 Cost of inventories sold ...... 341 378 274 Depreciation of property, plant and equipment *...... 13 1,462 1,629 1,924 Depreciation of right-of-use assets * ..... 14(a) 1,197 1,308 1,823 Amortisation of other intangible assets *.. 15 15 16 20 Lease payments not included in the measurement of lease liabilities ...... 14(c) 178 246 155 Auditor’s remuneration ...... 19 29 30 [REDACTED] expenses ...... — — 5,932 Employee benefit expense (excluding directors’ and chief executive’s remuneration (note 8)): Wages and salaries ...... 4,101 4,689 5,612 Pension scheme contributions ...... 439 354 75 Staff welfare expenses...... 1,091 684 690 5,631 5,727 6,377 Bank interest income...... (4) (1) (8) Government grants ...... (240) (66) (144) Gain on disposal of items of property, plant and equipment ...... — (376) — Gain on disposal of a subsidiary ...... 28 —— (1) Foreign exchange differences, net ...... 3 — (15)

* The amortisation of other intangible assets and the deprecation of property, plant and equipment and right-of-use assets are included in “Inventories”, “Construction in progress”, “Cost of sales”, “Selling and distribution expenses” and “Administrative expenses” in the profit or loss.

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APPENDIX I ACCOUNTANTS’ REPORT

7. INTEREST EXPENSES

An analysis of interest expenses is as follows:

Year ended 31 December 2018 2019 2020 RMB’000 RMB’000 RMB’000 Interest on other loans...... 123 295 663 Interest on unwinding of a discount ...... 41 42 45 Interest on lease liabilities...... 99 139 76 263 476 784

8. DIRECTORS’ AND CHIEF EXECUTIVE’S REMUNERATION

Directors’ and chief executive’s remuneration for the Relevant Periods is as follows:

Year ended 31 December 2018 2019 2020 RMB’000 RMB’000 RMB’000 Fees ...... — 7 161 Other emoluments: Salaries, bonuses allowances and benefits in kind...... 377 392 1,275 Pension scheme contributions ...... 28 28 92 405 420 1,367 405 427 1,528

(a) Independent non-executive directors

The fees paid to independent non-executive directors during the Relevant Periods were as follows:

Year ended 31 December 2018 2019 2020 RMB’000 RMB’000 RMB’000 Ren Shuangkui ...... — 7 120 Li Shupai ...... ——21 Shen Hsi Tien ...... ——20 — 7 161

There were no other emoluments payable to the independent non-executive directors during the Relevant Periods.

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APPENDIX I ACCOUNTANTS’ REPORT

(b) Executive directors and the chief executive

Salaries, bonuses, allowances Pension and benefits scheme Total in kind contributions remuneration

RMB’000 RMB’000 RMB’000 Year ended 31 December 2018 Executive director: Chi Yongxi ...... 377 28 405

Salaries, bonuses, allowances Pension and benefits scheme Total in kind contributions remuneration

RMB’000 RMB’000 RMB’000 Year ended 31 December 2019 Executive director: Chi Yongxi ...... 392 28 420

Salaries, bonuses, allowances Pension and benefits scheme Total in kind contributions remuneration

RMB’000 RMB’000 RMB’000 Year ended 31 December 2020 Executive directors: Yu Haiyang ...... 44 — 44 Chi Yongxi ...... 363 2 365 Pia Tonna ...... 868 90 958 1,275 92 1,367

There was no fees and other emoluments payable to the executive director and chief executive, Jiang Yingliang, during the Relevant Periods.

There was no arrangement under which a director or the chief executive waived or agreed to waive any remuneration during the Relevant Periods.

During the Relevant Periods, no remuneration was paid by the Group to the directors as an inducement to join or upon joining the Group or as compensation for loss of office.

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APPENDIX I ACCOUNTANTS’ REPORT

9. FIVE HIGHEST PAID EMPLOYEES

The five highest paid employees during the Relevant Periods included one, one and two directors, respectively, details of whose remuneration are set out in note 8 above. Details of the remuneration for the remaining four, four and three highest paid employees, respectively, who are neither a director nor chief executive of the Company for the Relevant Periods are as follows:

Year ended 31 December

2018 2019 2020

RMB’000 RMB’000 RMB’000 Salaries, bonuses, allowances and benefits in kind...... 1,028 1,999 1,992 Pension scheme contributions ...... 40 87 48 1,068 2,086 2,040

The number of non-director and non-chief executive highest paid employees whose remuneration fell within the following bands is as follows:

Number of employees

Year ended 31 December

2018 2019 2020 Nil to HK$1,000,000...... 432 HK$1,000,000 to HK$1,500,000 ...... —11

During the Relevant Periods, no remuneration was paid by the Group to the non-director and non-chief executive highest paid employee as an inducement to join or upon joining the Group or as compensation for loss of office.

10. INCOME TAX

The Group is subject to income tax on an entity basis on profits arising in or derived from the jurisdictions in which members of the Group are domiciled and operate.

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APPENDIX I ACCOUNTANTS’ REPORT

The statutory tax rate for the subsidiary in Hong Kong is 16.5%. No Hong Kong profits tax on this subsidiary has been provided as there was no assessable profit arising in Hong Kong during the Relevant Periods.

The statutory tax rate for the subsidiary in the USA is 21%. No corporation income tax on this subsidiary has been provided as there was no assessable profit arising in the United States of America during the Relevant Periods.

The statutory tax rate for the subsidiary in the UK is 19%. No corporation tax on this subsidiary has been provided as there was no assessable profit arising in the United Kingdom during the Relevant Periods.

The provision for current income tax in Mainland China is based on the statutory rate of 25% of the assessable profits of certain PRC subsidiaries of the Group as determined in accordance with the PRC Corporate Income Tax Law, which was approved and became effective on 1 January 2008, except for certain subsidiaries of the Group in Mainland China which are granted tax concession and are taxed at preferential tax rates.

Beijing Fuli is entitled to a preferential income tax rate of 5% for the taxable income less than or equal to RMB1,000,000 during the year ended 31 December 2019 and 2020.

Year ended 31 December 2018 2019 2020 RMB’000 RMB’000 RMB’000 Deferred (note 24)...... (2,208) (1,497) (1,755)

Year ended 31 December 2018 2019 2020 RMB’000 RMB’000 RMB’000 Loss before tax ...... (13,058) (18,608) (25,899)

Tax at the statutory tax rate ...... (3,117) (4,106) (5,595) Lower tax rate enacted by local authority .. — 692 992 Income not subject to tax ...... — — (24) Expenses not deductible for tax...... 568 508 1,273 Tax losses/deductible temporary differences not recognised ...... 341 1,409 1,599 Tax credit at the Group’s effective tax rate . (2,208) (1,497) (1,755)

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APPENDIX I ACCOUNTANTS’ REPORT

11. DIVIDENDS

No dividends have been paid or declared by the Company since its incorporation.

12. LOSS PER SHARE ATTRIBUTABLE TO ORDINARY EQUITY HOLDERS OF THE PARENT

The calculation of the basic loss per share amounts is based on the loss attributable to ordinary equity holders of the parent, and the weighted average number of ordinary shares of 5,000,000, 5,023,618 and 5,133,695 in issue during the Relevant Periods, respectively, on the assumption that 5,000,000 ordinary shares were deemed to have been issued by way of capitalisation from 1 January 2018.

13. PROPERTY, PLANT AND EQUIPMENT

Leasehold Machinery Office Motor Construction improvements equipment equipment vehicles in progress Total

RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 31 December 2018 At 1 January 2018: Cost ...... 1,756 153 370 1,532 1,855 5,666 Accumulated depreciation ...... (324) (32) (87) (180) — (623) Net carrying amount ...... 1,432 121 283 1,352 1,855 5,043

At 1 January 2018, net of accumulated depreciation ..... 1,432 121 283 1,352 1,855 5,043 Additions ...... 979 3,534 266 1,206 6,618 12,603 Depreciation provided during the year ...... (460) (126) (131) (745) — (1,462) At 31 December 2018, net of accumulated depreciation ..... 1,951 3,529 418 1,813 8,473 16,184

At 31 December 2018: Cost ...... 2,735 3,687 636 2,738 8,473 18,269 Accumulated depreciation ...... (784) (158) (218) (925) — (2,085) Net carrying amount ...... 1,951 3,529 418 1,813 8,473 16,184

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APPENDIX I ACCOUNTANTS’ REPORT

Leasehold Machinery Office Motor Construction improvements equipment equipment vehicles in progress Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 31 December 2019 At 1 January 2019: Cost ...... 2,735 3,687 636 2,738 8,473 18,269 Accumulated depreciation ...... (784) (158) (218) (925) — (2,085) Net carrying amount ...... 1,951 3,529 418 1,813 8,473 16,184

At 1 January 2019, net of accumulated depreciation ..... 1,951 3,529 418 1,813 8,473 16,184 Additions ...... — 36 356 520 13,398 14,310 Disposals ...... — — — (545) — (545) Depreciation provided during the year ...... (654) (352) (176) (447) — (1,629) Exchange realignment ...... ——59—14 At 31 December 2019, net of accumulated depreciation ..... 1,297 3,213 603 1,350 21,871 28,334

At 31 December 2019: Cost ...... 2,735 3,723 997 1,996 21,871 31,322 Accumulated depreciation ...... (1,438) (510) (394) (646) — (2,988) Net carrying amount ...... 1,297 3,213 603 1,350 21,871 28,334

Leasehold Machinery Office Motor Construction improvements equipment equipment vehicles in progress Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 31 December 2020 At 1 January 2020: Cost ...... 2,735 3,723 997 1,996 21,871 31,322 Accumulated depreciation ...... (1,438) (510) (394) (646) — (2,988) Net carrying amount ...... 1,297 3,213 603 1,350 21,871 28,334

At 1 January 2020, net of accumulated depreciation ..... 1,297 3,213 603 1,350 21,871 28,334 Additions ...... — — 2,046 847 9,145 12,038 Depreciation provided during the year ...... (634) (354) (420) (516) — (1,924) Exchange realignment ...... — — (21) (24) — (45) At 31 December 2020, net of accumulated depreciation ..... 663 2,859 2,208 1,657 31,016 38,403

At 31 December 2020: Cost ...... 2,150 3,723 3,017 2,811 31,016 42,717 Accumulated depreciation ...... (1,487) (864) (809) (1,154) — (4,314) Net carrying amount ...... 663 2,859 2,208 1,657 31,016 38,403

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APPENDIX I ACCOUNTANTS’ REPORT

14. LEASES

The Group as a lessee

The Group has lease contracts for office premises used in its operations. Lump sum payments were made upfront to acquire the leased land with lease periods of 28 years, and no ongoing payments will be made under the terms of these land leases. Leases of office premises generally have lease terms between 2 and 3 years. Generally, the Group is restricted from assigning and subleasing the leased assets outside the Group.

(a) Right-of-use assets

Leasehold land Office premises Total

RMB’000 RMB’000 RMB’000 As at 1 January 2018 ...... — 1,197 1,197 Additions ...... — 3,364 3,364 Depreciation charge (note 6) ...... — (1,197) (1,197) As at 31 December 2018 and at 1 January 2019 ...... — 3,364 3,364 Depreciation charge (note 6) ...... — (1,308) (1,308) As at 31 December 2019 and at 1 January 2020 ...... — 2,056 2,056 Additions ...... 3,215 1,228 4,443 Exchange realignment ...... — (10) (10) Depreciation charge (note 6) ...... (57) (1,766) (1,823) Revision of a lease term arising from a change in the non-cancellable period of a lease ...... — (145) (145) At 31 December 2020 ...... 3,158 1,363 4,521

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APPENDIX I ACCOUNTANTS’ REPORT

(b) Lease liabilities

The carrying amount of lease liabilities and the movements during the Relevant Periods are as follows:

Year ended 31 December

2018 2019 2020

RMB’000 RMB’000 RMB’000 Carrying amount at 1 January ...... 1,361 3,409 2,085 New leases ...... 3,084 — 1,181 Accretion of interest recognised during the year ...... 99 139 76 Covid-19-related rent concessions from lessors ...... — — (229) Payments...... (1,135) (1,463) (1,574) Revision of a lease term arising from a change in the non-cancellable period of a lease ...... — — (152) Exchange realignment ...... —— (9) Carrying amount at 31 December ...... 3,409 2,085 1,378

Analysed into: Current portion ...... 1,323 1,429 1,101 Non-current portion...... 2,086 656 277

The maturity analysis of lease liabilities is disclosed in note 34 to the Historical Financial Information.

As disclosed in note 2.2 to the Historical Financial Information, the Group has early adopted the amendment to HKFRS 16 and applied the practical expedient to all eligible rent concessions granted by the lessors for leases of certain office premises during the year ended 31 December 2020.

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APPENDIX I ACCOUNTANTS’ REPORT

Year ended 31 December

2018 2019 2020

RMB’000 RMB’000 RMB’000 Interest on lease liabilities...... 99 139 76 Depreciation charge of right-of-use assets .. 1,129 1,240 1,698 Expenses relating to short term leases (included in administrative expenses) ... 178 246 155 Covid-19-related rent concessions from lessors ...... — — (229) Total amount recognised in profit or loss .. 1,406 1,625 1,700

(d) The total cash outflow for leases is disclosed in note 29(c) to the Historical Financial Information.

15. OTHER INTANGIBLE ASSETS

Software and trademarks Mining right Total

RMB’000 RMB’000 RMB’000 31 December 2018 At 1 January 2018: Cost ...... 94 4,579 4,673 Accumulated amortisation ...... (7) (10) (17) Net carrying amount ...... 87 4,569 4,656

Cost at 1 January 2018, net of accumulated amortisation...... 87 4,569 4,656 Addition ...... 24 — 24 Amortisation provided during the year .... (15) — (15) At 31 December 2018 ...... 96 4,569 4,665

At 31 December 2018: Cost ...... 118 4,579 4,697 Accumulated amortisation ...... (22) (10) (32) Net carrying amount ...... 96 4,569 4,665

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APPENDIX I ACCOUNTANTS’ REPORT

Software and trademarks Mining right Total

RMB’000 RMB’000 RMB’000 31 December 2019 At 1 January 2019: Cost ...... 118 4,579 4,697 Accumulated amortisation ...... (22) (10) (32) Net carrying amount ...... 96 4,569 4,665

Cost at 1 January 2019, net of accumulated amortisation...... 96 4,569 4,665 Amortisation provided during the year .... (16) — (16) At 31 December 2019 ...... 80 4,569 4,649

At 31 December 2019: Cost ...... 118 4,579 4,697 Accumulated amortisation ...... (38) (10) (48) Net carrying amount ...... 80 4,569 4,649

Software and trademarks Mining right Total

RMB’000 RMB’000 RMB’000 31 December 2020 At 1 January 2020: Cost ...... 118 4,579 4,697 Accumulated amortisation ...... (38) (10) (48) Net carrying amount ...... 80 4,569 4,649

Cost at 1 January 2020, net of accumulated amortisation...... 80 4,569 4,649 Addition ...... 57 — 57 Amortisation provided during the year .... (20) — (20) Exchange realignment ...... (3) — (3) At 31 December 2020 ...... 114 4,569 4,683

At 31 December 2020: Cost ...... 172 4,579 4,751 Accumulated amortisation ...... (58) (10) (68) Net carrying amount ...... 114 4,569 4,683

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APPENDIX I ACCOUNTANTS’ REPORT

16. INVENTORIES

As at 31 December

2018 2019 2020

RMB’000 RMB’000 RMB’000 Raw materials ...... 1,419 1,590 1,729 Work in progress...... 252 464 553 Finished goods ...... 5,197 6,324 5,818 6,868 8,378 8,100

17. TRADE RECEIVABLES

As at 31 December

2018 2019 2020

RMB’000 RMB’000 RMB’000 Trade receivables ...... 3 171 4

The trade receivables are due when goods are sold. The Group seeks to maintain strict control over its outstanding receivables. Overdue balances are reviewed regularly by senior management. The Group does not hold any collateral or other credit enhancements over tis trade receivable balances. Trade receivables are non-interest-bearing.

Included in the Group’s trade receivables are amounts due from related parties of RMB3,000, RMB17,000 and RMB4,000 as at 31 December 2018, 2019 and 2020, respectively. Details of the amounts due from related parties are included in note 31(b) to the Historical Financial Information.

An ageing analysis of the trade receivables as at the end of each of the Relevant Periods, based on the invoice date and net of loss allowance, is as follows:

As at 31 December

2018 2019 2020

RMB’000 RMB’000 RMB’000 Within 3 months ...... 32— 3 to 12 months ...... — 166 4 Over 12 months...... —3— 3 171 4

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APPENDIX I ACCOUNTANTS’ REPORT

An impairment analysis is performed as at the end of each of the Relevant Periods using a provision matrix to measure expected credit losses. The Group applies the simplified approach to provide for expected credit losses prescribed by HKFRS 9, which permits the use of the lifetime expected loss provision for all trade receivables. To measure the expected credit losses, trade receivables have been grouped based on shared credit risk characteristics and the days past due. The calculation reflects the probability-weighted outcome, the time value of money and reasonable and supportable information that is available at the end of each of the Relevant Periods about past events, current conditions and forecasts of future economic conditions. The expected credit loss rate was reviewed, and adjusted if appropriate, as at the end of each of the Relevant Periods. The provision matrix is initially based on the historical observed default rates from listed companies in the same sector. The Group calibrates the matrix to adjust the historical credit loss experience with forward-looking information. As at 31 December 2018, 2019 and 2020, the loss allowance was assessed to be minimal.

18. PREPAYMENTS, OTHER RECEIVABLES AND OTHER ASSETS

Group

As at 31 December

2018 2019 2020

RMB’000 RMB’000 RMB’000 Prepayments ...... 167 113 4,904 Deferred [REDACTED] expenses...... — — 1,843 Deductible input value-added tax ...... 1,109 1,345 2,447 Due from directors (Note 31(c)) ...... 60 2,395 7,192 Deposits and other receivables ...... 470 31,141 19,346 1,806 34,994 35,732 Less: Non-current portion included in deposits and other receivables .... 317 397 413 1,489 34,597 35,319

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APPENDIX I ACCOUNTANTS’ REPORT

Company

As at 31 December

2018 2019 2020

RMB’000 RMB’000 RMB’000 Due from directors (Note 31(c)) ...... — 307 287 Other receivables (Note (a)) ...... — 30,528 18,388 — 30,835 18,675

Note:

(a) Other receivables represent primarily receivables arising from the issuance of Shares during the Reorganisation.

An impairment analysis was performed at the end of each of the Relevant Periods. The Group has applied the general approach to provide for expected credit losses for non-trade other receivables under HKFRS 9. The Group considered the historical loss rate and adjusted for forward-looking macroeconomic data in calculating the expected credit loss rate.

The financial assets included in the above balances are non-interest-bearing, unsecured and repayable on demand and relate to receivables for which there was no recent history of default and past due amounts. As at 31 December 2018, 2019 and 2020, the Group estimated that the expected loss rate for deposits and other receivables was minimal under the 12-month expected loss method.

19. CASH AND CASH EQUIVALENTS

As at 31 December

2018 2019 2020

RMB’000 RMB’000 RMB’000 Cash and bank balances ...... 1,030 603 278 Time deposits ...... 252 253 254 1,282 856 532 Less: Pledged time deposits: Pledged for rehabilitation ...... 252 253 254 Cash and cash equivalents...... 1,030 603 278

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APPENDIX I ACCOUNTANTS’ REPORT

The RMB is not freely convertible into other currencies, however, under Mainland China’s Foreign Exchange Control Regulations and Administration of Settlement, Sale and Payment of Foreign Exchange Regulations, the Group is permitted to exchange RMB for other currencies through banks authorised to conduct foreign exchange business.

Cash at banks earns interest at floating rates based on daily bank deposit rates. Short term time deposits are made for varying periods of between one day and three months depending on the immediate cash requirements of the Group, and earn interest at the respective short term time deposit rates. The bank balances are deposited with creditworthy banks with no recent history of default.

20. TRADE PAYABLES

An ageing analysis of the trade payables as at the end of each of the Relevant Periods, based on the invoice date, is as follows:

As at 31 December

2018 2019 2020

RMB’000 RMB’000 RMB’000 Within 3 months ...... —292

The trade payables are non-interest-bearing and have no fixed terms of payment.

21. OTHER PAYABLES AND ACCRUALS

As at 31 December

2018 2019 2020

Notes RMB’000 RMB’000 RMB’000 Other payables ...... (a) 3,281 17,201 5,953 Due to related parties ...... 31(b) 98—— Due to directors ...... 31(c) 4,237 29,330 23,401 Other tax payables ...... 32 6 138 Payroll and welfare payable ...... 1,276 1,169 1,095 8,924 47,706 30,587

Note:

(a) Other payables are non-interest-bearing and repayable on demand.

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APPENDIX I ACCOUNTANTS’ REPORT

22. OTHER LOANS

As at 31 December

2018 2019 2020

Notes RMB’000 RMB’000 RMB’000 Other interest-bearing payables ...... (a) 1,036 8,631 998 Due to related parties ...... 31(b) — 2,461 — Due to directors ...... 31(c) 7,292 20,687 444 8,328 31,779 1,442 Less: Non-current portion included in other interest-bearing payables ...... — 7,511 693 Non-current portion included in due to related parties...... —2,311— 8,328 21,957 749

Analysed into: Other interest-bearing payables: Within one year or on demand ...... 1,036 1,120 305 In the second year ...... — — 392 In the third to fifth years, inclusive .. (b) — 7,511 301 1,036 8,631 998 Due to related parties: Within one year or on demand ...... — 150 — In the third to fifth years, inclusive .. (b) —2,311— — 2,461 — Due to directors: Within one year or on demand ...... 7,292 20,687 444 8,328 31,779 1,442

Notes:

(a) Other interest payables are unsecured and bore interest at a rate between 6% and 17%.

(b) On 30 November 2020, some lenders entered into a deed of loan confirmation and loan capitalisation with the Company in full and final settlement of all repayment obligations of the Company to each of the lenders.

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APPENDIX I ACCOUNTANTS’ REPORT

23. PROVISION

As at 31 December 2018 2019 2020 RMB’000 RMB’000 RMB’000 Carrying amount at 1 January ...... 833 874 916 Unwinding of discount (note 7)...... 41 42 45 Carrying amount at 31 December Non-current portion...... 874 916 961

In accordance with relevant PRC rules and regulations, if any damage is caused to cultivated land, grassland or forest as a result of exploration or mining activities, a mining enterprise must restore the land to a state appropriate for use by reclamation, re-planting trees or grasses or such other measures, as appropriate, after the mining has been completed.

The Group provides for the present obligation of the cost of the restoration, which is discounted at a rate of 4.9%. Changes in assumptions could significantly affect these estimates. Over the time, the discounted provision is increased for the change in present value based on the discount rate that reflects current market assessments and risks specific to the provision. The periodic unwinding of the discount is recognised in profit or loss as part of the interest expenses.

24. DEFERRED TAX

The movements in deferred tax assets and liabilities during the year are as follows:

Deferred tax liabilities

Right-of-use Construction Amortisation assets in progress of mining right Total RMB’000 RMB’000 RMB’000 RMB’000 At 1 January 2018...... 299 189 112 600 Deferred tax charged/(credited) to profit or loss during the year ...... (73) — 114 41 Gross deferred tax liabilities at 31 December 2018 and 1 January 2019 ...... 226 189 226 641 Deferred tax charged/(credited) to profit or loss during the year ...... (73) — 115 42 Gross deferred tax liabilities at 31 December 2019 and 1 January 2020 ...... 153 189 341 683 Deferred tax charged/(credited) to profit or loss during the year ...... (73) — 115 42 Gross deferred tax liabilities at 31 December 2020 ...... 80 189 456 725

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APPENDIX I ACCOUNTANTS’ REPORT

Deferred tax assets

Lease Advertising Government Unused tax liabilities Provision expenses grants loss Total

RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 At 1 January 2018...... 340 208 — — — 548 Deferred tax credited/(charged) to profit or loss during the year ...... (78) 10 278 — 2,039 2,249 Gross deferred tax assets at 31 December 2018 and 1 January 2019 ...... 262 218 278 — 2,039 2,797 Deferred tax credited/(charged) to profit or loss during the year ...... (82) 11 688 — 922 1,539 Gross deferred tax assets at 31 December 2019 and 1 January 2020 ...... 180 229 966 — 2,961 4,336 Deferred tax credited/(charged) to profit or loss during the year ...... (97) 11 500 19 1,364 1,797 Gross deferred tax assets at 31 December 2020...... 83 240 1,466 19 4,325 6,133

For presentation purposes, certain deferred tax assets and liabilities have been offset in the statement of financial position. The following is an analysis of the deferred tax balances of the Group for financial reporting purposes:

As at 31 December

2018 2019 2020

RMB’000 RMB’000 RMB’000 Net deferred tax assets recognised in the consolidated statements of financial position ...... 2,156 3,653 5,408

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APPENDIX I ACCOUNTANTS’ REPORT

The Group has tax losses arising in Mainland China of RMB6,819,000, RMB9,989,000 and RMB14,325,000 as at 31 December 2018, 2019 and 2020, respectively, that will expire in one to five years for offsetting against future taxable profits.

The Group has tax losses arising in Hong Kong of RMB1,700,000, RMB7,942,000 and RMB12,272,000 as at 31 December 2018, 2019 and 2020, respectively, that are available indefinitely for offsetting against future taxable profits of the companies in which the losses arose.

The Group has tax losses arising in the United Kingdom of nil, nil and RMB2,305,000 as at 31 December 2018, 2019 and 2020, respectively, that are available indefinitely for offsetting against future taxable profits of the companies in which the losses arose.

The Group also has tax losses arising in the United States of America of nil, nil and RMB4,000 as at 31 December 2018, 2019 and 2020, respectively, that are available indefinitely for offsetting against future taxable profits of the companies in which the losses arose.

Deferred tax assets have not been recognised in respect of these losses as they have arisen in subsidiaries that have been loss-making for some time and it is not considered probable that taxable profits will be available against which the tax losses can be utilised.

Deferred tax assets have not been recognised in respect of the following items:

Year ended 31 December

2018 2019 2020

RMB’000 RMB’000 RMB’000 Tax losses ...... 1,928 9,412 11,184 Deductible temporary differences ...... 13 529 803 1,941 9,941 11,987

The above tax losses are available for offsetting against future taxable profits of the companies in which the losses arose. Deferred tax assets have not been recognised in respect of the above items as it is not considered probable that taxable profits will be available against which the above items can be utilised.

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APPENDIX I ACCOUNTANTS’ REPORT

25. SHARE CAPITAL

As at 31 December

2018 2019 2020

RMB’000 RMB’000 RMB’000 Authorised: 10,000,000 ordinary shares of USD0.01 each...... — 692 692

Issued: 5,154,833 (2019: 5,116,415) ordinary shares of USD0.01 each for 2020 ...... — 346 349

A summary of movements in the Company’s share capital is as follows:

Number of Share shares in issue Share capital premium

Notes RMB’000 RMB’000 At 1 January 2019...... — ——— Allotment ...... (a) 50,000 338 — Subdivision ...... (b) 4,950,000 — — Allotment ...... (b) 116,415 8 34,131 At 31 December 2019 and 1 January 2020 ...... 5,116,415 346 34,131 Loan capitalisation ...... (c) 37,704 3 11,194 Allotment ...... (d) 714 — 212 At 31 December 2020 ...... 5,154,833 349 45,537

Notes:

(a) The Company was incorporated in the Cayman Islands on 15 February 2019 as an exempted company with authorised share capital of US$50,000 with par value of US$1 each.

(b) On 5 September 2019, the authorised share capital of the Company was increased to US$100,000 divided into 100,000 shares of par value US$1.00 each, by the creation of 50,000 additional shares of par value US$1.00 each, ranking pari passu in all respects with the shares then in issue. Immediately thereafter, every issued and unissued share of par value US$1.00 each in the capital of the Company was subdivided into 100 shares of par value US$0.01 each, upon which the authorised share capital of the Company became US$100,000 divided into 10,000,000 shares of par value US$0.01 each and issued 5,000,000 shares.

On the same date, 14,085 and 102,330 ordinary shares were allotted and issued for cash at par to Tegus Company Limited Partnership and Jiang Daiwei. On 30 November 2020, 102,330 ordinary shares were transferred from Jiang Daiwei to Starry Global Enterprises Limited.

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APPENDIX I ACCOUNTANTS’ REPORT

(c) On 30 November 2020, the lenders entered into a deed of loan confirmation and loan capitalisation with the Company in full and final settlement of all repayment obligations of the Company to each of the lenders. On the same day, a total of 37,704 new shares were allotted and issued, credited as fully paid to the lenders.

(d) On 30 November 2020, Peter Chun Ming Pang, Chief financial officer and joint company secretary entered into a share subscription agreement with the Company, pursuant to which a total of 714 new Shares were allotted and issued to Peter Chun Ming Pang for a subscription price of HK$250,000 in cash.

26. OTHER RESERVES

Group

The amounts of the Group’s reserves and the movements therein for the Relevant Periods are presented in the consolidated statements of changes in equity of the Group.

Capital reserve

The capital reserve of the Group represents the paid-up capital of the companies comprising the Group, details of the movements in the capital reserve are set out in the consolidated statements of changes in equity.

Foreign exchange fluctuation reserve

The exchange fluctuation reserve is used to record exchange differences arising from the transaction of the financial statements of entities of which the functional currencies are not RMB.

Company

Exchange fluctuation Accumulated reserve losses Total

RMB’000 RMB’000 RMB’000 At 1 January 2019...... ——— Total comprehensive loss for the year ..... (642) (53) (695) At 31 December 2019 and 1 January 2020 . (642) (53) (695) Total comprehensive loss for the year ..... (2,048) (22) (2,070) At 31 December 2020 ...... (2,690) (75) (2,765)

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APPENDIX I ACCOUNTANTS’ REPORT

27. PARTLY-OWNED SUBSIDIARIES WITH MATERIAL NON-CONTROLLING INTERESTS

Details of the Group’s subsidiaries that have material non-controlling interests are set out below:

2020 Percentage of equity interest held by non-controlling interests: Yanbian Fuli ...... 5%

2020

RMB’000 Loss for the year allocated to non-controlling interests: Yanbian Fuli ...... (406)

Accumulated balances of non-controlling interests at the reporting date: Yanbian Fuli ...... 3,885

The following tables illustrate the summarised financial information of the above subsidiaries. The amounts disclosed are before any inter-company eliminations:

Yanbian Fuli

2020

RMB’000 Revenue ...... 789 Loss for the year...... (8,198) Total comprehensive loss for the year ...... (8,198)

Current assets ...... 30,506 Non-current assets...... 53,057 Current liabilities ...... (4,736) Non-current liabilities ...... (1,128)

Net cash flows used in operating activities ...... (17,550) Net cash flows used in investing activities ...... (38,754) Net cash flows from financing activities ...... 56,245

Net decrease in cash and cash equivalents...... (59)

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APPENDIX I ACCOUNTANTS’ REPORT

28. DISPOSAL OF A SUBSIDIARY

The entire equity interests of Dunhua Yiqisong Peridot Cultural & Tourism Development Co., Ltd (敦化意氣松橄欖石文化旅遊開發有限公司) were transferred to two individual employees of Yanbian Fuli at nil consideration on 30 November 2020.

RMB’000 Net assets disposed of: Cash and bank balances...... 51 Other receivables ...... 250 Other payables...... (302) (1) Gain on disposal of a subsidiary ...... 1

An analysis of the net inflow of cash and cash equivalents in respect of the disposal of a subsidiary is as follows:

RMB’000 Cash and bank balances disposed of ...... (51) Net outflow of cash and cash equivalents in respect of the disposal of a subsidiary ...... (51)

29. NOTES TO THE CONSOLIDATED STATEMENTS OF CASH FLOWS

(a) Major non-cash transactions

During the years ended 31 December 2018, 2019 and 2020, the Group had non-cash additions to right-of-use assets and lease liabilities of RMB3,084,000, nil and RMB1,181,000, respectively, in respect of lease arrangements for office premises.

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APPENDIX I ACCOUNTANTS’ REPORT

(b) Changes in liabilities arising from financing activities

Other loans Lease liabilities

RMB’000 RMB’000 As at 1 January 2018 ...... 1,831 1,361 Changes from financing cash flows...... 6,365 (1,135) New leases ...... — 3,084 Interest expense...... 123 99 Foreign exchange movement ...... 9— At 31 December 2018 and 1 January 2019 ...... 8,328 3,409 Changes from financing cash flows...... 22,968 (1,463) Interest expense...... 295 139 Foreign exchange movement ...... 188 — At 31 December 2019 and 1 January 2020 ...... 31,779 2,085 Changes from financing cash flows...... (19,195) (1,574) New leases ...... — 1,181 Interest expense...... 663 76 Covid-19-related rent concessions from lessors ...... — (229) Lease modification ...... — (152) Loan capitalisation (Note 25) ...... (11,197) — Foreign exchange movement ...... (608) (9) At 31 December 2020 ...... 1,442 1,378

The total cash outflow for leases included in the consolidated statements of cash flows is as follows:

Year ended 31 December

2018 2019 2020

RMB’000 RMB’000 RMB’000 Within operating activities...... 178 246 155 Within financing activities...... 1,135 1,463 1,574 1,313 1,709 1,729

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APPENDIX I ACCOUNTANTS’ REPORT

30. COMMITMENTS

The Group had the following commitments at the end of each of the Relevant Periods:

Year ended 31 December

2018 2019 2020

RMB’000 RMB’000 RMB’000 Contracted, but not provided for: Construction in progress ...... 63 870 240

31. RELATED PARTY TRANSACTIONS

Details of the Company’s principal related parties are as follows:

Company Relationship with the Company

Dongyue Wandai Jewelry Design An entity controlled by an ultimate controlling shareholder (Beijing) Co., Ltd. (“Wandai Zhubao”)* Jilin Wanshu Forest Natural Food An entity controlled by an ultimate controlling shareholder Co.,Ltd.(“Wanshu Forest”) Ji’an Jixian Ruishubingguo An entity controlled by an ultimate controlling shareholder Agricultural Development Co., Ltd. (“Ji’an Ji Xian”) Ji’an Jinshikai Jade Craft Co., An entity controlled by an ultimate controlling shareholder Ltd. (“Ji’an Jinshikai”) Ji’an Xinli Mining Co., Ltd. An entity controlled by an ultimate controlling shareholder (“Xinli Mining”) Mr. Yu Haiyang Ultimate controlling shareholder and director Mr. Jiang Yingliang Ultimate shareholder and director Mr. Chi Yongxi Ultimate shareholder and director Mr. Peter Chun Ming Pang Ultimate shareholder, chief financial officer and joint company secretary

* The ultimate controlling shareholder transferred all of his shares of Wandai Zhubao to a third-party on 22 October 2020.

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APPENDIX I ACCOUNTANTS’ REPORT

(a) In addition to the transactions detailed elsewhere in the Historical Financial Information, the Group had the following transactions with related parties during the Relevant Periods:

Year ended 31 December

2018 2019 2020

Notes RMB’000 RMB’000 RMB’000 Entities controlled by ultimate shareholders: Sales of products ...... (i) 2 12 111 Purchases of products ...... (ii) 80 88 321 Purchases of property, plant and equipment ...... (ii) — — 2,582 Loans to the Group ...... — 150 —

Directors: Loans to the Group ...... 7,292 18,153 8,895

Key management personnel: Loans to the Group ...... — 2,203 —

Notes:

(i) The sales to related parties were made according to the published prices and conditions offered to the major customers of the Group.

(ii) The purchases from related parties were made according to the published prices and conditions offered by the related parties to their major customers.

(b) Outstanding balances with related parties:

Group

Due from related parties:

As at 31 December

2018 2019 2020

Notes RMB’000 RMB’000 RMB’000 Wanshu Forest*...... (i) 33— Xinli Mining* ...... (i) —124 Wandai Zhubao* ...... (i) —2— 3174

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APPENDIX I ACCOUNTANTS’ REPORT

Due to related parties:

As at 31 December 2018 2019 2020 Notes RMB’000 RMB’000 RMB’000 Wanshu Forest*...... (i) 98—— Ji’an Ji Xian** ...... (i) — 150 — Peter Chun Ming Pang** ...... (ii) —2,311— 98 2,461 —

Company

Due from a subsidiary:

As at 31 December

2018 2019 2020

Note RMB’000 RMB’000 RMB’000 Fuli HK...... (i) — — 21,480

Due to a subsidiary:

As at 31 December

2018 2019 2020

Notes RMB’000 RMB’000 RMB’000 Fuli HK...... (i) —5371 Fuli Mining...... (i) — — 326 Fuli Gemstones ...... (i) — — 326 — 53 723

Notes:

(i) The balances are unsecured, interest-free and have no fixed terms of payment.

(ii) The balance is unsecured, bears interest at 6% and has a due date on 31 December 2022. On 30 November 2020, Peter Chun Ming Pang entered into a deed of loan confirmation and loan capitalisation with the Company in full and final settlement of all repayment obligations of the Company to the lender.

* The balances are trade in nature and included in notes 17 and 21 to the Historical Financial Information.

** The balances are non-trade in nature and included in note 22 to the Historical Financial Information.

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APPENDIX I ACCOUNTANTS’ REPORT

Group

Due from directors:

As at 31 December

2018 2019 2020

RMB’000 RMB’000 RMB’000 Jiang Yingliang ...... 60 130 5,673 Yu Haiyang ...... — 2,265 1,519 60 2,395 7,192

Company

Due from directors:

As at 31 December

2018 2019 2020

RMB’000 RMB’000 RMB’000 Jiang Yingliang ...... — 130 122 Yu Haiyang ...... — 177 165 — 307 287

Due from directors, disclosed pursuant to section 383(1)(d) of the Hong Kong Companies Ordinance and Part 3 of the Companies (Disclosure of Information about Benefits of Directors) Regulation, are as follows:

Group

Maximum amount outstanding during the year ended 31 December

2018 2019 2020

RMB’000 RMB’000 RMB’000 Jiang Yingliang ...... 5,337 130 11,505 Yu Haiyang ...... 11,813 2,265 3,061

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APPENDIX I ACCOUNTANTS’ REPORT

Company

Maximum amount outstanding during the year ended 31 December

2018 2019 2020

RMB’000 RMB’000 RMB’000 Jiang Yingliang ...... — 130 130 Yu Haiyang ...... — 177 177

Group

Due to directors:

As at 31 December

2018 2019 2020

RMB’000 RMB’000 RMB’000 Jiang Yingliang ...... 5,224 20,447 8,195 Yu Haiyang ...... 6,305 29,570 15,636 Chi Yongxi ...... ——14 11,529 50,017 23,845

The balances with directors are unsecured, interest-free, non-trade in nature and have no fixed terms of repayment and are included in notes 18, 21 and 22 to the Historical Financial Information.

(d) Compensation of key management personnel of the Group:

Year ended 31 December

2018 2019 2020

RMB’000 RMB’000 RMB’000 Salaries, allowances and benefits in kind .. 1,274 2,155 3,115 Pension scheme contributions ...... 61 86 126 Total compensation paid to key management personnel...... 1,335 2,241 3,241

Further details of directors’ and the chief executive’s emoluments are included in note 8 to the Historical Financial Information.

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APPENDIX I ACCOUNTANTS’ REPORT

32. FINANCIAL INSTRUMENTS BY CATEGORY

The carrying amounts of each of the categories of financial instruments as at the end of each of the Relevant Periods are as follows:

Financial assets at amortised cost

As at 31 December

2018 2019 2020

RMB’000 RMB’000 RMB’000 Trade receivables ...... 3 171 4 Financial assets included in prepayments, other receivables and other assets ...... 530 33,536 26,538 Cash and cash equivalents...... 1,030 603 278 Pledged deposits ...... 252 253 254 1,815 34,563 27,074

Financial liabilities at amortised cost

As at 31 December

2018 2019 2020

RMB’000 RMB’000 RMB’000 Trade payables ...... —292 Lease liabilities ...... 3,409 2,085 1,378 Financial liabilities included in other payables and accruals ...... 7,616 46,531 29,354 Other loans ...... 8,328 31,779 1,442 19,353 80,397 32,266

33. FAIR VALUE AND FAIR VALUE HIERARCHY OF FINANCIAL INSTRUMENTS

Management has assessed that the fair values of cash and cash equivalents, trade receivables, trade payables, financial assets included in prepayments, other receivables and other assets, financial liabilities included in other payables and accruals, lease liabilities and other loans approximate to their carrying amounts largely due to the short term maturities of these instruments.

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APPENDIX I ACCOUNTANTS’ REPORT

The fair values of the financial assets and liabilities are included at the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale.

The fair values of the non-current portion of lease liabilities, other loans, financial assets included in prepayments, other receivables and other assets and pledged deposits have been calculated by discounting the expected future cash flows using rates currently available for instruments with similar terms, credit risk and remaining maturities. The changes in fair value as a result of the Group’s own non-performance risk for lease liabilities as at the end of each of the Relevant Periods were assessed to be insignificant.

The Group did not have any financial assets and financial liabilities measured at fair value as at the end of each of the Relevant Periods.

34. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES

The Group’s principal financial instruments comprise cash and cash equivalents, financial assets included in prepayments, other receivables and other assets, financial liabilities included in other payables and accruals and other loans. The main purpose of these financial instruments is to raise finance for the Group’s operations. The Group has various other financial assets and liabilities such as trade receivables, and trade payables, which arise directly from its operations.

The main risks arising from the Group’s financial instruments are foreign currency risk, credit risk and liquidity risk. The board of directors reviews and agrees policies for managing each of these risks and they are summarised below.

Foreign currency risk

Foreign currency risk is the risk of loss resulting from changes in foreign currency exchange rates. Fluctuations in exchange rates between the RMB and other currencies in which the Group conducts business may affect the Group’s financial condition and results of operations. The Group seeks to limit its exposure to foreign currency risk by minimising its net foreign currency position.

The following table demonstrates the sensitivity at the end of each of the Relevant Periods to a reasonably possible change in foreign currency exchange rates, with all other variables held constant, of the Group’s profit before tax (due to changes in the fair value of monetary assets and liabilities).

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APPENDIX I ACCOUNTANTS’ REPORT

Increase/ (decrease) in rate Increase/ Increase/ of foreign (decrease) in (decrease) in currency profit before tax equity*

% RMB’000 RMB’000 2018 If the RMB weakens against the Hong Kong dollar ...... 551(3) If the RMB strengthens against the Hong Kong dollar ...... (5) (51) 3 2019 If the RMB weakens against the Hong Kong dollar ...... 5 56 (97) If the RMB strengthens against the Hong Kong dollar ...... (5) (56) 97 If the RMB weakens against the USD..... 5 — 1,542 If the RMB strengthens against the USD... (5) — (1,542) 2020 If the RMB weakens against the Hong Kong dollar ...... 5 50 (363) If the RMB strengthens against the Hong Kong dollar ...... (5) (50) 363 If the RMB weakens against the USD..... 5 (18) 2,005 If the RMB strengthens against the USD... (5) 18 (2,005)

* Excluding retained profits

Credit risk

The Group trades mainly with recognised and creditworthy third parties. It is the Group’s policy that all customers who wish to trade on credit terms are subject to credit verification procedures. In addition, receivable balances are monitored on an ongoing basis.

Maximum exposure and year-end staging

The table below shows the credit quality and the maximum exposure to credit risk based on the Group’s credit policy, which is mainly based on past due information unless other information is available without undue cost or effort, and year-end staging classification at the end of each of the Relevant Periods. The amounts presented are gross carrying amounts for financial assets.

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APPENDIX I ACCOUNTANTS’ REPORT

12-month As at 31 December 2018 ECLs Lifetime ECLs Simplified Stage 1 Stage 2 Stage 3 approach Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 Trade receivables ...... ———33 Financial assets included in prepayments, other receivables and other assets — Normal* ...... 530 — — — 530 Pledged deposits ...... — Not yet past due ...... 252 — — — 252 Cash and cash equivalents — Not yet past due ...... 1,030 — — — 1,030 1,812 — — 3 1,815

12-month As at 31 December 2019 ECLs Lifetime ECLs Simplified Stage 1 Stage 2 Stage 3 approach Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 Trade receivables ...... — — — 171 171 Financial assets included in prepayments, other receivables and other assets ...... — Normal* ...... 33,526 — — — 33,526 Pledged deposits ...... — Not yet past due ...... 253 — — — 253 Cash and cash equivalents — Not yet past due ...... 603 — — — 603 34,392 — — 171 34,563

12-month As at 31 December 2020 ECLs Lifetime ECLs Simplified Stage 1 Stage 2 Stage 3 approach Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 Trade receivables ...... ———44 Financial assets included in prepayments, other receivables and other assets ...... — Normal* ...... 26,538 — — — 26,538 Pledged deposits ...... — Not yet past due ...... 254 — — — 254 Cash and cash equivalents — Not yet past due ...... 278 — — — 278 27,070 — — 4 27,074

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APPENDIX I ACCOUNTANTS’ REPORT

* The credit quality of the financial assets included in prepayments, other receivables and other assets is considered to be “normal” when they are not past due and there is no information indicating that the financial assets had a significant increase in credit risk since initial recognition. Otherwise, the credit quality of the financial assets is considered to be “doubtful”.

Liquidity risk

In the management of liquidity risk, the Group monitors and maintains a level of cash and cash equivalents deemed adequate by the management of the Group to finance the operations and mitigate the effects of fluctuations in cash flows.

The maturity profile of the Group’s financial liabilities as at the end of each of the Relevant Periods, based on the contractual undiscounted payments, is as follows:

As at 31 December 2018 3 to less Less than than 1to5 Over On demand 3 months 12 months years 5 years Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 Lease liabilities ...... — 229 1,310 2,175 — 3,714 Financial liabilities included in other payables and accruals ...... 7,616————7,616 Other loans ...... 7,328 15 1,025 — — 8,368 14,944 244 2,335 2,175 — 19,698

As at 31 December 2019 3 to less Less than than 1to5 Over On demand 3 months 12 months years 5 years Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 Trade payables ...... 2———— 2 Lease liabilities ...... — 76 1,423 676 — 2,175 Financial liabilities included in other payables and accruals ...... 46,531————46,531 Other loans ...... 21,134 159 1,520 10,735 — 33,548 67,667 235 2,943 11,411 — 82,256

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APPENDIX I ACCOUNTANTS’ REPORT

As at 31 December 2020 3 to less Less than than 1to5 Over On demand 3 months 12 months years 5 years Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 Trade payables ...... 92————92 Lease liabilities ...... — 173 948 281 — 1,402 Financial liabilities included in other payables and accruals ...... 29,354————29,354 Other loans ...... 444 120 360 800 — 1,724 29,890 293 1,308 1,081 — 32,572

Capital management

The primary objectives of the Group’s capital management are to safeguard the Group’s ability to continue as a going concern and to maintain healthy capital ratios in order to support its business and maximise shareholders’ value.

The Group manages its capital structure and makes adjustments to it in light of changes in economic conditions and the risk characteristics of the underlying assets. To maintain or adjust the capital structure, the Group may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares. The Group is not subject to any externally imposed capital requirements. No changes were made in the objectives, policies or processes for managing capital during the Relevant Periods.

The Group monitors capital using a debt to equity ratio, which is total debt divided by total equity as at the date indicated. Total debt includes other loans, lease liabilities and provision. The gearing ratios as at the end of each of the Relevant Periods were as follows:

As at 31 December 2018 2019 2020 RMB’000 RMB’000 RMB’000 Other loans ...... 8,328 31,779 1,442 Lease liabilities ...... 3,409 2,085 1,378 Provision...... 874 916 961 Total debt ...... 12,611 34,780 3,781 Total equity ...... 16,188 2,765 63,805 Gearing ratio...... 78% 1,258% 6%

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APPENDIX I ACCOUNTANTS’ REPORT

35. EVENTS AFTER THE RELEVANT PERIODS

Pursuant to the Capital Subscription Agreement dated 30 May 2021 entered into amongst the Group, Tonghua Xintong (the non-controlling shareholder of Yanbian Fuli) and an independent third party, Jilin Dunhua Development Investment Group Co., Ltd. (“Jilin Dunhua”), Yanbian Fuli increased its registered capital by RMB644,468 which was fully subscribed by Jilin Dunhua at a cash consideration of RMB34,000,000. The consideration was fully received by the Group in June 2021. Subsequent to the transaction, the Group’s interest in Yanbian Fuli was diluted from 95% to 93.1%.

36. SUBSEQUENT FINANCIAL STATEMENTS

No audited financial statements have been prepared by the Company, the Group or any of the companies now comprising the Group in respect of any period subsequent to 31 December 2020.

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APPENDIX II [REDACTED] FINANCIAL INFORMATION OF THE GROUP

The following information dose not form part of the Accountants’ Report from Ernst & Young, Certified Public Accountants, Hong Kong, the Company’s reporting accountants, as set out in Appendix I to this document, and is included herein for information purpose only.

A. [REDACTED] STATEMENT OF ADJUSTED CONSOLIDATED NET TANGIBLE ASSETS

The following [REDACTED] statement of adjusted net tangible assets of the Group prepared in accordance with Rule 4.29 of the Listing Rules and with reference to Accounting Guideline 7 “Preparation of Pro Forma Financial Information for inclusion in Investment Circulars” issued by the HKICPA is to illustrate the effect of the [REDACTED] on the net tangible assets of the Group attributable to equity shareholders of the Company as at 31 December 2020 as if the [REDACTED] had taken place on that date.

The [REDACTED] statement of adjusted consolidated net tangible assets of the Group has been prepared for illustrative purposes only and, because of its hypothetical nature, it may not provide a true picture of the net tangible assets attributable to equity shareholders of the Company had the [REDACTED] been completed as at 31 December 2020 or at any future date.

[REDACTED] [REDACTED] [REDACTED] adjusted adjusted adjusted consolidated net consolidated net Consolidated net consolidated net tangible assets tangible assets tangible assets tangible assets attributable to attributable to attributable to Estimated attributable to owners of the owners of the owners of the [REDACTED] owners of the parent per Share parent per Share parent as at 31 from the parent as at 31 as at 31 December as at 31 December December 2020 [REDACTED] December 2020 2020 2020

RMB’000 RMB’000 RMB’000 RMB (HK$ equivalent) (Note 1) (Note 2) (Note 3) (Note 4) Based on an [REDACTED] of HK$[REDACTED] per Share...... 55,237 [REDACTED] [REDACTED] [REDACTED] [REDACTED] Based on an [REDACTED] of HK$[REDACTED] per Share...... 55,237 [REDACTED] [REDACTED] [REDACTED] [REDACTED]

Notes:

1. The consolidated net tangible assets attributable to owners of the parent as at 31 December 2020 is arrived at after deducting other intangible assets RMB4,683,000 from the consolidated equity attributable to owners of the parent of RMB59,920,000 as of 31 December 2020, as shown in the Accountants’ Report, the text of which is set out in Appendix I to this Document.

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APPENDIX II [REDACTED] FINANCIAL INFORMATION OF THE GROUP

2. The estimated [REDACTED] from the [REDACTED] are based on estimated [REDACTED] of HK$[REDACTED] or HK$[REDACTED] per Share, being the low-end price and high-end price, after deduction of the [REDACTED] fees and other related expenses payable by our Company (excluding [REDACTED] expenses of RMB5,932,000 which have been charged to profit or loss during the Track Record Period) and do not take into account any Shares which may be issued upon exercise of the [REDACTED].

3. The [REDACTED] adjusted consolidated net tangible assets attributable to owners of the parent per Share is arrived at after adjustments referred to in the preceding paragraphs and on the basis that [REDACTED] Shares are in issue assuming that the [REDACTED] has been completed on 31 December 2020.

4. The [REDACTED] adjusted consolidated net tangible assets attributable to owners of the parent per Share are converted into Hong Kong dollars at an exchange rate of RMB0.845 to HK$1.00.

5. No adjustment has been made to reflect any trading results or open transactions of the Group entered into subsequent to 31 December 2020.

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APPENDIX II [REDACTED] FINANCIAL INFORMATION OF THE GROUP

The following is the text of a report received from our reporting accountants, Ernst & Young, Certified Public Accountants, Hong Kong, prepared for the purposes of incorporation in this document, in respect of the [REDACTED] financial information of the Group.

B. INDEPENDENT REPORTING ACCOUNTANTS’ ASSURANCE REPORT ON THE COMPILATION OF [REDACTED] FINANCIAL INFORMATION

[REDACTED]

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APPENDIX II [REDACTED] FINANCIAL INFORMATION OF THE GROUP

[REDACTED]

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APPENDIX II [REDACTED] FINANCIAL INFORMATION OF THE GROUP

[REDACTED]

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APPENDIX III PROPERTY VALUATION REPORT

The following is the text of a letter and valuation certificate prepared for the purpose of incorporation in this document received from Jones Lang LaSalle Corporate Appraisal and Advisory Limited, an independent valuer, in connection with its valuation as at 31 March 2021 of the property interest held by Yanbian Fuli.

Jones Lang LaSalle Corporate Appraisal and Advisory Limited 7th Floor, One Taikoo Place, 979 King’s Road, Hong Kong tel +852 2846 5000 fax +852 2169 6001 Company Licence No.: C-030171

仲量聯行企業評估及諮詢有限公司香港英皇道979號太古坊一座7樓電話+852 2846 5000 傳真+852 2169 6001 公司牌照號碼：C-030171

[•] June 2021

The Board of Directors Fuli Gemstones International Holdings Limited P.O. Box 31119 Grand Pavilion, Hibiscus Way 802 West Bay Road Grand Cayman, KY1−1205 Cayman Islands

Dear Sirs,

In accordance with your instructions to value the property interest held by Yanbian Fuli Peridot Mining Industry Co., Ltd (“Yanbian Fuli”, a 93.1%-owned subsidiary of Fuli Gemstones International Holdings Limited (the “Company”)) in the People’s Republic of China (the “PRC”), we confirm that we have carried out inspections, made relevant enquiries and searches and obtained such further information as we consider necessary for the purpose of providing you with our opinion of the market value of the property interest as at 31 March 2021 (the “valuation date”).

Our valuation is carried out on a market value basis. Market value is defined as “the estimated amount for which an asset or liability should exchange on the valuation date between a willing buyer and a willing seller in an arm’s-length transaction after proper marketing and where the parties had each acted knowledgeably, prudently and without compulsion”.

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APPENDIX III PROPERTY VALUATION REPORT

We have valued the property interest by the comparison approach assuming sale of the property interest in its existing state with the benefit of immediate vacant possession and by making reference to comparable sales transactions as available in the market. This approach rests on the wide acceptance of the market transactions as the best indicator and presupposes that evidence of relevant transactions in the market place can be extrapolated to similar properties, subject to allowances for variable factors. In arriving at our opinion of values, we have also taken into account the accrued infrastructure cost and professional fees as at the valuation date and rely on such information provided by Yanbian Fuli.

Since Yanbian Fuli did not fully obtain the State-owned Land Use Rights Certificates/Real Estate Title Certificates and/or the payment of the land premium was not fully settled as at the valuation date, we have attributed no commercial value to a portion of the property interest, but based on certain assumptions we have assessed the market value of the property for reference purpose only.

Our valuation has been made on the assumption that the seller sells the property interest in the market without the benefit of a deferred term contract, leaseback, joint venture, management agreement or any similar arrangement, which could serve to affect the value of the property interest.

No allowance has been made in our report for any charge, mortgage or amount owing on any of the property interest valued nor for any expense or taxation which may be incurred in effecting a sale. Unless otherwise stated, it is assumed that the property is free from encumbrances, restrictions and outgoings of an onerous nature, which could affect its value.

In valuing the property interest, we have complied with all requirements contained in Chapter 5 and Practice Note 12 of the Rules Governing the Listing of Securities issued by the Stock Exchange of Hong Kong Limited; the RICS Valuation — Global Standards published by the Royal Institution of Chartered Surveyors; the HKIS Valuation Standards published by the Hong Kong Institute of Surveyors, and the International Valuation Standards issued by the International Valuation Standards Council.

We have relied to a very considerable extent on the information given by Yanbian Fuli and have accepted advice given to us on such matters as tenure, planning approvals, statutory notices, easements, particulars of occupancy, lettings, and all other relevant matters.

We have been shown copies of title documents including State-owned Land Use Rights Grant Contracts, Real Estate Title Certificates and other official documents relating to the property interest and have made relevant enquiries. Where possible, we have examined the original documents to verify the existing title to the property interest in the PRC and any material

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APPENDIX III PROPERTY VALUATION REPORT encumbrance that might be attached to the property interest. We have relied considerably on the advice given by the Company’s PRC Legal Adviser — Commerce & Finance Law Offices, concerning the validity of the property interest in the PRC.

We have had no reason to doubt the truth and accuracy of the information provided to us by Yanbian Fuli. We have also sought confirmation from Yanbian Fuli that no material factors have been omitted from the information supplied. We consider that we have been provided with sufficient information to arrive an informed view, and we have no reason to suspect that any material information has been withheld.

We have not carried out detailed measurements to verify the correctness of the areas in respect of the property but have assumed that the areas shown on the title documents and official site plans handed to us are correct. All documents and contracts have been used as reference only and all dimensions, measurements and areas are approximations. No on-site measurement has been taken.

We have inspected the exterior and, where possible, the interior of the property. However, we have not carried out investigation to determine the suitability of the ground conditions and services for any development thereon. Our valuation has been prepared on the assumption that these aspects are satisfactory. Moreover, no structural survey has been made, but in the course of our inspection, we did not note any serious defect. We are not, however, able to report whether the property is free of rot, infestation or any other structural defect. No tests were carried out on any of the services.

Inspection of the property was carried out in March 2021 by Ms. Hao Wang who has 2 years’ experience in the property valuation in the PRC.

Unless otherwise stated, all monetary figures stated in this report are in Renminbi (RMB).

We are instructed to provide our opinion of value as per the valuation date only. It is based on economic, market and other conditions as they exist on, and information made available to us as of, the valuation date and we assume no obligation to update or otherwise revise these materials for events in the time since then. In particular, the outbreak of the Novel Coronavirus (COVID-19) since declared Global Pandemic on 11 March 2020 has caused much disruption to economic activities around the world. As of the Report Date, China’s economy is experiencing gradual recovery and it is anticipated that disruption to business activities will steadily reduce. We also note that market activity and market sentiment in these particular market sectors remains stable. However, we remain cautious due to uncertainty for the pace of global economic recovery in the midst of the outbreak which may have future impact on the real estate market. Therefore, we recommend that you keep the valuation of the properties under frequent review.

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APPENDIX III PROPERTY VALUATION REPORT

Our valuation certificate is attached below for your attention.

Yours faithfully, For and on behalf of Jones Lang LaSalle Corporate Appraisal and Advisory Limited Eddie T. W. Yiu MRICS MHKIS RPS (GP) Senior Director

Note: Eddie T.W. Yiu is a Chartered Surveyor who has 27 years’ experience in the valuation of properties in Hong Kong and the PRC as well as relevant experience in the Asia-Pacific region.

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APPENDIX III PROPERTY VALUATION REPORT

VALUATION CERTIFICATE

Market value in Particulars of existing state as at Property Description and tenure occupancy the valuation date RMB 3 parcels of land The property is located in Emu Town, Dunhua As at the valuation 27,300,000 located in Emu City. The locality is woodland area where public date, the property (refer to note 5) Town, Dunhua City facilities such as municipal facilities and was bare land for Yanbian Korean amenities have not been developed. future development. Autonomous Prefecture The property comprises three parcels of land with Jilin Province a total site area of approximately 45,487.96 sq.m. The PRC and is scheduled to be developed into an industrial mining complex.

The land use rights of two parcels of land with a site area of approximately 28,421.96 sq.m. have been granted for a term of 28 years expiring on 7 July 2048 for mining use.

Notes:

1. Pursuant to 2 State-owned Land Use Rights Grant Contracts — Dun Hua 2020-6 and Dun Hua 2020-7, the land use rights of 2 parcels of land with a total site area of approximately 28,421.96 sq.m. have been granted to Yanbian Fuli for a term of 28 years for mining use commencing from the land delivery date. The total land consideration was RMB5,112,000.

2. Pursuant to 2 Real Estate Title Certificates — Ji (2021) Dun Hua Shi Bu Dong Chan Quan Di Nos. 0005903 and 0005904, the land use rights of the aforesaid 2 land parcels with a total site area of approximately 28,421.96 sq.m. have been granted to Yanbian Fuli for a term expiring on 7 July 2048 for mining use.

3. Pursuant to the Certificate — Ji Zi Ran Zi Geng Han [2021] No.153 issued by Natural Resources Bureau of Jilin Province (吉林省自然資源廳) dated on 25 April 2021, the remaining parcel of land of the property with a site area of approximately of 17,066.00 sq.m, is approved to be developed as Yiqisong Nanshan peridot mining project (Phase II) by Yanbian Fuli. We have not been provided with any title certificate for this parcel of land of the property.

4. We have been provided with a legal opinion regarding the property interest by the Company’s PRC legal adviser, which contains, inter alia, the following:

a. the 2 State-owned Land Use Rights Grant Contracts mentioned in note 1 are legal and valid;

b. Yanbian Fuli has legally obtained the land use rights of 2 parcels of land of the property mentioned in notes 1 and 2, and it is entitled to legally occupy, use, lease, transfer, mortgage or otherwise dispose of the land parcels within the valid term of the land use rights;

c. for the remaining parcel of land mentioned in note 3, Yanbian Fuli will be entitled to legally occupy, use, lease, transfer, mortgage or otherwise dispose it within the valid term of the land use rights after obtaining the relevant title documents regarding the land use rights.

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APPENDIX III PROPERTY VALUATION REPORT

5. We have relied on the aforesaid legal opinion and attributed no commercial value to the parcel of land mentioned in note 3. However, for reference purpose, we are of the opinion that the market value of this parcel of land as at the valuation date would be RMB9,900,000 assuming the relevant title certificate has been obtained by Yanbian Fuli and Yanbian Fuli is entitled to freely transfer the parcel of land.

6. We have also made reference to sales prices of land within the locality which have the similar characteristics comparable to the property. The accommodation values of these comparable land sites range from about RMB178 to RMB180 per sq.m for mining use. Appropriate adjustments and analysis are considered to the differences in location, size and other characters between the comparable properties and the property to arrive at our assumed accommodation value.

7. In arriving at our opinion of values, we have also taken into account the accrued infrastructure cost and professional fees of the property as at the valuation date with total amount of RMB27,974,000, of which RMB21,524,000 are allocated to two parcels of land with a total site area of approximately 28,421.96 sq.m. mentioned in notes 1 and 2 and RMB6,450,000 are allocated to the remaining parcel of land with a site area of approximately 17,066.00 sq.m. mentioned in note 3.

8. A summary of major certificates/approvals is shown as follows:

a. State-owned Land Use Rights Grant Contract Portion b. Real Estate Title Certificate (Land) Portion

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APPENDIX IV COMPETENT PERSON’S REPORT

DISCLAIMER

The opinions expressed in this Report have been based on the information supplied to SRK Consulting China Ltd (“SRK”) by Yanbian Fuli Peridot Mining Industry Co., Ltd (“Fuli”, or the “Company”). The opinions in this Report are provided in response to a specific request from the Company to do so. SRK has exercised all due care in reviewing the supplied information. Whilst SRK has compared key supplied data with expected values, the accuracy of the results and conclusions from the review are entirely reliant on the accuracy and completeness of the supplied data. SRK does not accept responsibility for any errors or omissions in the supplied information and does not accept any consequential liability arising from commercial decisions or actions resulting from them. Opinions presented in this report apply to the site conditions and features as they existed at the time of SRK’s investigations, and those reasonably foreseeable. These opinions do not necessarily apply to conditions and features that may arise after the date of this Report, about which SRK had no prior knowledge nor had the opportunity to evaluate.

This document, as a collective work of content and the coordination, arrangement and any enhancement of said content, is protected by copyright vested in SRK Consulting China Ltd.

Outside the purposes legislated under provincial securities laws and stipulated in SRK’s contract, this document shall not be reproduced in full or in any edited, abridged or otherwise amended form unless expressly agreed in writing by SRK.

EXECUTIVE SUMMARY

Yanbian Fuli Peridot Mining Industry Co., Ltd. (“Fuli”orthe“Company”) is seeking admission to the Main Board of the Stock Exchange of Hong Kong Limited (“HKEx”). Fuli holds the appropriate business and mining licences pertaining to the Yiqisong Nanshan Peridot Project (the “YQS Nanshan Project”, or the “Project”), a pre-construction project located in Dunhua City, Yanbian Prefecture, Jilin Province, China. Fuli is seeking to [REDACTED] on the HKEx to fund the future development and operation of the YQS Nanshan Project.

SRK was commissioned by Fuli to undertake an independent technical review on its YQS Nanshan Project and to prepare a Competent Person’s Report (“CPR”, or the “Report”) in line with the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (the “JORC Code”, 2012 Edition) and the listing rules, namely Chapter 18 and associate guidance letters, for mineral companies on the HKEx.

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APPENDIX IV COMPETENT PERSON’S REPORT

Outline of Work Program

The work program involved six phases:

• Phase 1: Review of supplied information and a site visit, discussions with key company and project personnel, collection and review of other public documents, data analysis, and preparation of a gap analysis memorandum. This work phase was completed in June 2017.

• Phase 2: Review of proposed exploration programs, supervision by SRK of the exploration process, and implementation of SRK’s internal quality assurance and quality control (“QA/QC”) procedures for the exploration program. This work phase was carried out from July to October 2017. SRK’s project team conducted two site visits to the Project in August and October 2017, respectively;

• Phase 3: Review and analysis of the available data; construction of a geological database, geological model, and resource block model; estimation of mineral resources. This work phase was carried out from November 2017 to January 2018; and

• Phase 4: Review the feasibility study (“FS”) prepared by Jilin North-eastern Asia International Engineering Group Co. Ltd. (“NAIEG”) in August 2017, and subsequent modified version in April 2018 relating to the proposed development of the Project, conversion of qualified Mineral Resources into Ore Reserves, completion of review and assessment on mining, mineral processing, environmental and other modifying factors of the Project, and compilation of a draft technical report on the Project based on available data, as well as on the comments and feedbacks from the Company. This work phase was completed between January and April 2018.

• Phase 5: Preparation of a draft technical report (draft CPR) to summarise key technical aspects of the Project. This work phase was carried out between April 2018 and April 2019.

• Phase 6: Conduct a site visit and review the recent most project status and the updated FS in 2021 (“FS 2021”), further review and assess the updated production schedule, OPEX, CAPEX, product prices projections as well as other marketing studies and company marketing and sales plans. Update the CPR with updated technical parameters and assumptions, and preparation of CPR in line with the listing rules guided by HKEx. This work phase was carried out between September 2020 and May 2021.

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APPENDIX IV COMPETENT PERSON’S REPORT

RESULTS

Overall

Fuli’s YQS Nanshan Project is located approximately 51 kilometers (“km”) line distance northwest of Dunhua City, under the jurisdiction of Emu town, Dunhua City, Yanbian Prefecture, Jilin Province, China. It is a gem peridot project at a stage of pre-construction, with an FS completed in 2017 and updated in 2021. Fuli obtained the mining license for the Project in 2016 and made plans to develop the Project. Fuli had established a circuit of gemstone processing and sales with the peridot gemstone collected from underground exploration adits. Though mining has not yet formally started, the mine site construction including infrastructure preparation (roads, site, electricity power and water supply etc.) has commenced since 2018.

Through the exploration programs conducted in 2015 by No. 2 Geological Investigation Institute of Jilin Province (the “No. 2 Institute”), and further programs in 2017 by the same team and under SRK’s supervision, including surface trenching, underground tunnelling and drilling, the samples and assays collected established the database for mineral resource estimate. To date of this Report, there was no material change since end 2017. As of December 31, 2020, SRK estimated that the Yiqisong Nanshan Project contained Mineral Resources reported in accordance to the JORC Code (2012) criteria of 5.2 million tonnes (“Mt”) of Indicated Resources averaging 236 carats per tonne (ct/t) of gem peridot (>3mm), and 6.1 Mt of Inferred Resources averaging 210 ct/t gem peridot (>3mm). In addition, industrial peridot sands resources (above 1 to 3, or 1-3mm) in the project was estimated and considered.

NAIEG completed in 2017 and updated in 2021 a FS report on the development of the YQS Nanshan peridot resources based on a designed production capacity of 300,000 tonnes per year (“t/a”). The FS 2021 proposed that the project would be developed as an underground mine with adits constructed for mining the resources, and the ore processing plant should be built at the mine site to produce gem peridot stones (>3mm) and peridot sands (1-3mm), as well as by-product of basalt. A gemstone processing facility is proposed to be built in Dunhua City, which is about 50km away from the mine site to cut and polish the stones into final salable gemstone products. The processes in the Dunhua plant will include hand processing of large stones (>10mm) and medium stones (above 7 to 10 or above 7-10mm), and machine processing of small stones (above 3 to 7 or above 3-7mm) in addition to a small part of peridot sands (1-3mm). Fuli plans to build the plant in 2028 and 2029. Prior to the completion of the plant, the further processing of gem peridot will be contracted out.

The proposed initial capital expenditures (“CAPEX”) for the construction of the mine and ore processing plant by the FS 2021 totals RMB250.89 million (“M”). About RMB30.66 M as part of initial CAPEX has been invested into the project. The construction period is 2 years. The

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APPENDIX IV COMPETENT PERSON’S REPORT sustaining CAPEX for the construction of the further processing plant in Dunhua is proposed being RMB38.66 M, which will be invested in 2028 and 2029. The Operating expenses (“OPEX”) of the project was proposed by the FS 2021, and the Company made a plan for marketing and sales. The OPEX for the overall mine life is averaged at RMB12,516.85/t ore, with RMB799.02/t ore for mining and ore processing, RMB3,269.29/t ore for further processing of peridot gemstones and gem quality peridot sands, and RMB8,448.54/t ore for marketing and sales, respectively.

By considering the parameters in the FS and the sales plan provided by the Company, SRK converted the stated Mineral Resources (Indicated or higher) into Ore Reserves reported in accordance to the JORC Code (2012). The total Ore Reserves as of December 31, 2020 are estimated at 5.19 Mt averaging 204 ct/t gem peridot (>3mm), as well as 15.8% peridot sands (1 to 3mm). The proposed life of the mine is more than 21 years, with approximately 6 years of ramp-up, 12 years of full production and 3 years of ramp-down production.

SRK considered the prices projection by Fuli and conducted an economic analysis of the Project. SRK noted that prices of the Project’s main products, cut and polished peridot, were projected based on historical pricing trend and current market prices sourced from Gemguide, an international reference guide on coloured gemstones pricing generally referenced by the coloured gemstones industry, while prices of peridot gem dots and by-products were projected based on current market prices. The net present value (“NPV”) for the Project as calculated using discount cash flow (“DCF”) analysis is in the range of RMB25.15 billion (“Bln”) (at 11% discount rate) to RMB41.51 Bln (at 7% discount rate), with a base case of RMB32.11 Bln using a discount rate of 9%. The internal rate of return (“IRR”) is calculated at 134.3%. The payback period is less than one year.

Based on its review of the available technical data, SRK considers the Fuli Peridot Project is technically feasible and economically viable.

The modifying factors assumed and relied upon in this Report, including the FS and the marketing and sales plan, have predominately been provided by the Company and its third party experts to estimate the Ore Reserves Statement. Specifically the marketing and sales assumptions, including product pricing and volume, has been provided by the Company with reference to industry and market sources as well as third party experts. SRK is not an expert in pricing and sales of gemstones, and accordingly has relied on information provided by the Company and other third party experts to derive the production schedule in the report. SRK and the Competent Person consider the assumptions in this Report to be suitable to underpin the Statements of Mineral Resources and Ore Reserves as per the requirements of the JORC Code.

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APPENDIX IV COMPETENT PERSON’S REPORT

Operational Licences and Permits

The progression towards operational status for the Project is supported by a Business Licence (No. 912224033398816529), which was issued by Dunhua City Market and Quality Supervision Bureau on 1 June 2017 and expires on 26 April 2035. In addition, the Mining Licence (No. C2200002016127110143443) was issued to the project by Jilin Province Land and Resources Bureau on 8 December 2016 and expires on 8 December 2026. The mining licence is renewable.

SRK has sighted a site discharge registration receipt for the Project which is effective from 26 October 2020 to 25 October 2025. National Forest Bureau issued a forestland use approval for the Project on 7 March 2018. The permitted area of forestland use is 4.5488 hectares (ha).

Jilin Province Natural Resources Bureau issued a construction land use approval for the Project on 19 January 2020. The permitted area of land use is 2.8422 ha. The water use application for the Project was approved by Dunhua City Water Bureau on 10 December 2018. The permitted annual water abstraction is 78,426 m3.

SRK noted that the safety production permit for the Project was not required at the moment since the Project was under construction. SRK opines that the Company will be able to acquire the necessary licences and permits to meet the requirements of relevant environmental protection regulations as the Project moves to production stage.

Geology and Mineralisation

The YQS peridot occurs within a zone of coarse-crystalline, ultramafic inclusions lying near the base of a Tertiary basalt flow. The ultramafic inclusions consist primarily of peridotite made up of olivine, pyroxene, magnetite and spinel. Rarely, peridot (gem-quality olivine) is found isolated in the basalt formation. Linkage between the percentage of ultramafic inclusions and the grade of gemstone peridot is defined globally but not as precisely in specific drill core or bulk samples.

Within the YQS Mine area, the main outcropping strata comprise the Upper Permian (259.1 to 251.90 Ma) Yangjiagou Formation; Neogene (23.03 to 2.58 Ma) Chuandishan Formation; and Quaternary (2.58 Ma to present) sediments. The Chuandishan Formation is the main formation in the Project area, and mainly consists of Oligocene basalts, which are irregularly distributed in the central part of the region, and overlie the Breccia granite of the Variscan Period (about 410 to 250 Ma).

The mining area is characterised by horizontal to shallowly dipping basalt with peridotite inclusions, with a clear boundary between mineralised body and surrounding rock. The size (diameter) of the peridotite inclusions is generally between 1 cm and 20 cm. Previous drilling and

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APPENDIX IV COMPETENT PERSON’S REPORT trenching activities at the Project has shown the mineralised zone trends east-west over a length of about 1,700 m, and north-south to a width of 550−800 m, and the thickness ranges from 1.5 m to 7.0 m, with an average thickness of about 3.25 m.

Peridot is the specific name given to gem-quality olivine. The mineral olivine forms a magnesium- iron solid-solution series ranging from forsterite (Mg2SiO4) to fayalite (Fe2SiO4). Peridot’s color ranges from pure green, yellowish green, greenish yellow, brownish green, and further to brown. Peridot is a transparent gemstone, and it rarely presents translucent unless it is a highly included stone. According to Industrial Parameter Instruction for Yanbian Fuli Peridot Mining Industry Co., Ltd. Yiqisong Nanshan Peridot Project compiled by NAIEG:

• Transparent olivine of more than 3 mm is classified as peridot gemstone.

• Transparent olivine of 3 mm and less than 3 mm is classified as peridot sands.

At Yiqisong Nanshan, nearly all of the olivine is peridot. The main ultramafic mineral component at Yiqisong Nanshan is forsterite, typically accounting for more than 85% of the inclusions.

Exploration

Initial geological surveying over the project area started in 1970s, however it was not until the 1990s that exploration focused on peridot in the project area.

In 2002, the No. 2 Institute carried out mineral prospecting in the area, completing five drillholes totalling 271.5m. Six peridot samples were taken from drillholes YK3, KD2, KD2-1.

In 2004, the No. 2 Institute carried out “Detailed Investigation of Dahuashu Peridot Deposit of Dunhua City, Jilin Province”. As part of this program, pits totalling 146m were dug and 36m pits were excavated, with 19 peridot yield samples taken.

In 2016, the No. 2 Institute completed a Detail Exploration Report of Yiqisong Nanshan Peridot Project in Dunhua City, Jilin Province. Based on historical exploration activities, trenches, drillholes and adits were developed, trenches spacing designed as 100~200m, drill hole spacing designed as 200m by 200m were completed to investigate the thickness of the mineralised zone and inclusion content variation. Adits and sample pits were developed to investigate the inclusion content, peridot yield, peridot quality and thickness variation. Fourteen (14) trenches of 2,557.0m3, three sample pits of 1,637.0m3, 37 drillholes of 1,938.51m and one adit of 199.9m were developed. Seven (7) peridot yield samples were taken. Ore density, geo-technical and chemical composition data were also taken. Hydrogeology, engineering and environmental data were also collected; in addition to 1:10,000 and 1:2,000 scale topographic surveying and engineering point measurement.

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In 2017, supplementary exploration, including drilling and bulk sampling, was conducted under SRK’s supervision. SRK conducted measurements for quality assurance and quality control purposes as well as to verify the results of previous programs.

Mineral Resource Estimates

The Mineral Resource Statement reported herein is a collaborative effort between Fuli and SRK China personnel. Prior to SRK’s involvement in 2017, all exploration activities at the Project was carried out by the No. 2 Institute as summarised in the following reports:

• a preliminary exploration report was submitted in 2002 by the No. 2 Institute; and

• a general exploration report was compiled in January 2016 summarising the exploration work conducted by the No. 2 Institute during 2014 and 2015.

The previous (prior to 2017) exploration database was compiled and maintained by the No. 2 Institute and was audited and verified by SRK. Additional drilling and sampling were designed and closely supervised by SRK, from July 2017 to December 2017, which enabled the integration of combined database for the resource evaluation presented in this Report. There was no material change to the Mineral Resources since December 2017.

The geological model and outlines for the peridot-rich ultramafic inclusions were constructed by SRK from a two-dimensional (“2D”) geological interpretation provided by Fuli (prepared by the No. 2 Institute on behalf of Fuli). In SRK’s opinion, the geological model is a reasonable representation of the distribution of the targeted mineralisation at the current level of sampling. The geostatistical analysis, variography and grade models were completed by SRK between December 2017 and January 2018. Detailed descriptions on geology, exploration and resource estimation are presented in Sections 6 to 13.

Apart from gemstone resources comprising peridot at >3 mm grain sizes, finer-grained peridot sands (1-3 mm peridot) resource were determined by the percentage of peridot inclusions. The Mineral Resource statement for the peridot gemstone is shown below.

Table ES-1: Mineral Resource Statement for the YQS Peridot Gemstone (cut-off grade: 20ct/t, as of December 31, 2020)

Percentage of Gem Peridot Category Volume M Tonnage Inclusions Grade

m3 Mt % ct/t Indicated ...... 1.8 5.2 19.5 236 Inferred ...... 2.1 6.1 18.9 210

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* Mineral Resources are reported in relation to a conceptual pit shell. Mineral Resources are not Ore Reserves and do not have demonstrated economic viability. All figures are rounded to reflect the relative accuracy of the estimate.

The information in this report which relates to Mineral Resource is based on collaborative team work done by Dr Anshun Xu, FAusIMM, Mr Pengfei Xiao, MAusIMM, Mr Feng Li, MAusIMM and Mr William Rohtert (Graduate Gemmologist). Dr Xu, Mr Xiao and Mr Li have sufficient experience in the geology and mineralisation style (peridot basalt) and Mr Rohtert has sufficient experience in color gemstone including peridot. The SRK team has sufficient experience relevant to the style of mineralisation and type of deposit under consideration and to the activity which they are undertaking to qualify as Competent Persons as defined in the 2012 Edition of the “Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves”. Mr William Rohtert is the main Competent Person for the mineral resource statements, and consents to the reporting of this information in the form and context in which it appears.

In addition, the peridot sands (1-3mm peridot) resources are stated below.

Table ES-2: Peridot Sands (1-3 mm size) Resource Statement (as of December 31, 2020)

Category Tonnage Peridot Sands

Mt % Indicated ...... 5.2 16.6 Inferred ...... 6.1 16.1

The information in this report which relates to Mineral Resource is based on collaborative team work done by Dr Anshun Xu, FAusIMM, Mr Pengfei Xiao, MAusIMM, Mr Feng Li, MAusIMM and Mr William Rohtert (Graduate Gemmologist. Dr Xu, Mr Xiao and Mr Li have sufficient experience in the geology and mineralisation style (peridot basalt) and Mr Rohtert has sufficient experience in color gemstone including peridot. The SRK team has sufficient experience relevant to the style of mineralisation and type of deposit under consideration and to the activity which they are undertaking to qualify as Competent Persons as defined in the 2012 Edition of the “Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves”. Mr William Rohtert is the main Competent Person for the mineral resource statements, and consents to the reporting of this information in the form and context in which it appears.

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Review on Mining Aspects

The proposed peridot mining operation has been evaluated to FS level based on underground mining at a rate of 300 kilo-tonnes per annum (ktpa). It is based on the development of adits for access, prior to cut and fill mining method, with trackless equipment for loading and transportation of mined ore. The void is subsequently backfilled. The overall mining loss rate is estimated at 4.4% and the mining dilution rate is estimated at 8.3%. The modified life of the mine is 22 years excluding construction. In order to maximise the integrity of gemstones, the mining process is designed to use blasting, cutting, hydraulic splitting and other ore breaking methods, but the application ranges of these types of mining methods have not yet be determined, which shall be settled according to the distribution of the gemstones in actual production.

Following its site visit in 2017 and 2020 and the review of related information, SRK considers the FS report, completed by NAIEG in 2021, has generally met the requirements of the feasibility study and design level. The underground mining method, adit development method, as well as cut and fill stoping method adopted in the FS are considered to be feasible and reasonable. However, for the subsequent filling method adopted for the goaf, SRK suggests further tests and optimization during operation are required, in order to better assess the potential for collapse of the roof prior to back-filling of the voids.

As mine production is dependent on the market requirement, SRK proposed approximately six years for the production ramp-up before it reaches the designed production rate, based on the Company’s sales plan.

Ore Reserve estimates

The Project Ore Reserve was estimated by SRK in accordance with JORC Code (2012) guidelines based on the modifying various factors outlined in the feasibility study report. The economically mineable parts of the Measured Resources, which include diluting materials and allowances of losses, were classified as Proved Ore Reserves. The economically mineable parts of the Indicated Resources including diluting materials and allowances of losses were classified as Probable Ore Reserves.

At a Cut-off Grade (COG) of 44.7 ct/t gem peridot grade and including dilution, the Project contains 5.19 Mt of Probable Ore Reserves averaging 204 ct/t gem peridot grade, 18.6% peridot inclusion and the peridot sands grade is 15.8%. Please note that the reported Ore Reserves are included in the Mineral Resource.

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The following table summarises the estimated Probable Ore Reserve as of December 31, 2020.

Table ES-3: Ore Reserve Statement of Fuli Peridot Project as December 31, 2020

Peridot Inclusion Gem Peridot Peridot sands Volume Tonnage Percentage Grade Grade

Reserve Category Million m3 Mt % ct/t % Probable...... 1.83 5.19 18.6 204 15.8

Note: The information in this report which relates to Ore Reserve conversion is based on information compiled by Mr. Falong Hu, MAusIMM, under the supervision of Mr. Qiuji Huang, FAusIMM, both employees of SRK Consulting China Ltd. Mr. Huang and Mr. Hu have sufficient experience relevant to the style of mineralisation and type of deposit under consideration and to the activity which they are undertaking to qualify as Competent Persons as defined in the 2012 Edition of the “Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves”. Mr. Huang is the main Competent Person for the Ore Reserve Statement and consents to the reporting of this information in the form and context in which it appears.

Mineral Processing and Further Processing for Gems

NAIEG’s Project Feasibility Study proposed to build a Run-of-Mine (“ROM”) processing plant treating 1,000 tonnes per day (“tpd”) or 300,000 tonnes per annum (“tpa”). A two-stage crushing circuit was proposed with pre-screening and control screening process and photometric sorter separating process to produce gem quality peridot (>3mm) and peridot sands (1 to 3mm). The processing plant estimated that recovery rate is 98% for large peridot gemstone (>10mm), and 95% for small and medium peridot gemstones (above 3-7mm and above 7-10mm). The fine-grain peridot sands (1 to 3mm), which is not suitable for gemstone manufacture will be further processed to produce peridot sands for industrial use, and peridot gem dots. The recovery rate for peridot sands is 70.0%. A small percentage (i.e. 0.05%) of the sand would be processed onto peridot gem dots.

The FS proposed to build a second gemstone processing plant in Dunhua City to cut and polish the rough peridot gemstones from the ore processing plant. The processing capacity of the cutting and polishing plant is 60 million carat weight per annum (“ctpa”) of gemstone (excluding the gem quality peridot sands). The peridot stones will be reclassified into three types, i.e. peridot gemstone for hand-processing, peridot gemstone for machine-processing, and gem quality peridot sands for machine processing for peridot gem dots.

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APPENDIX IV COMPETENT PERSON’S REPORT

Gemstones with a grain size over 7mm are to be hand processed, while those below 7mm are to be processed by an automatic gemstone polishing machine. The gemstone plant is designed to produce about 20 million ctpa of peridot gemstone, as well as 60 million ctpa peridot gem dots. The overall processing parameters from ore to gemstone are summarised in Table ES-4.

The final salable products from the Project are proposed to include large hand-processed peridot gemstone (>10mm), medium hand-processed peridot gem stones (above 7 to 10mm), small machined processed peridot gemstones (above 3 to 7mm), machined processed small gem dots (1 to 3mm), and industrial class peridot sands, as well as basalt. The Company will also sell rough peridot gemstone without further processing through auctions.

Table ES-4: Designed Processing Parameters

Average Grade Product (ct/t ore or %) Recovery (%) Total Peridot (>3mm) ...... 204 95.27 Peridot 1 (>10mm) ...... 18.37 98.00 Peridot 2 (above 7-10mm) ...... 75.52 95.00 Peridot 3 (above 3-7mm) ...... 110.22 95.00 Total Peridot sands (1-3mm) ...... 15.8% 70.00 Peridot sands (Gem Grade) ...... 0.0079% 70.00 Peridot sands (Industrial Grade)...... 15.79% 70.00 Basalt ...... 84.2%

Environmental Studies, Permitting, and Social Impact

The table below summarises the status of the environmental assessments and approvals for the Fuli Peridot Project.

Table ES-5: Environmental Assessments and Approvals

Environmental Environmental Final Checking Impact Water and Soil and Assessment Approval for Conservation Approval for Acceptance Project Report (EIA) EIA 1 Plan (WSCP) WSCP 2 Approval 3 Fuli Peridot Project ... YYYYNYR

Notes:

“Y” denotes the license/permit is granted and has been sighted by SRK.

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APPENDIX IV COMPETENT PERSON’S REPORT

“N” means the license/permit has not been completed or is not available.

“NYR” means that license/permit is not yet required.

“NS” denotes that the license/permit has not been sighted.

“n/a” indicates that it is not applicable.

1 Environmental Impact Assessment

2 Water and Soil Conservation Report

3 Formal environmental approval to commence operating

The Company reported to SRK that the mine site was under construction and therefore the Final Check and Acceptance (“FCA”) report and approval were not yet required at the time of SRK’s site visit. SRK opines that the Company will be able to obtain the FCA approval before the formal operation commences to meet the national legal requirements.

SRK notes that the sighted provided EIA reports and approvals for the Project have been compiled in accordance with relevant Chinese laws and regulations. SRK has reviewed the provided EIA reports and approvals and conducted an environmental site visit in Dunhua City against Chinese legislation and recognized recognised international industry environmental management standards, guidelines, and practices. During the time of this site visit, SRK sighted and noted that the mine site was under construction and the formal mining and processing operations had not commenced yet. SRK opines that the Company is able to acquire the necessary environmental FCA approval to be in compliance with Chinese National legal requirements.

The significant inherent environmental and social risks for the Fuli Peridot Project are:

• Water management (i.e. storm-water/surface water drainage — including any mine dewatering);

• Dust management; and

• Social aspects.

The environmental risks outlined above are categorised by SRK as medium/low risks (i.e. requiring risk management measures). It is SRK’s opinion that the environmental and social risks for the Project can be generally managed if Chinese and international recognised environmental standards and regulatory requirements are followed.

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Marketing Strategy and Sales Plan

According to an Independent Market Research on Global and China Peridot Industry prepared by Frost and Sullivan (2021), in the field of coloured stones, such as peridot, only coloured stones with a stable and continuous supply can drive and create market demand consistently. With the development of the YQS peridot project, the Company will be a major player in the peridot gemstone business, and will be able to drive the market demand. Frost and Sullivan estimated that the demand of peridot gemstones will consistently increase in the future, and the main market will be the global market, while domestic market in China will also increase.

As pointed out by Frost and Sullivan (2021), major buying/selling practices in the coloured gemstone industry include auction, trade fairs and exhibition, direct negotiation and agreement as well as e-commerce platforms.

Based on the analysis, the Company has organised and will expand its marketing teams in Beijing, London, Hong Kong and North America. A large amount of operating expenses (about 15% of the revenue) will be allocated for the marketing and sales activities. The Company proposed a practical sales plan with seven years (2023 to 2029) of ramp-up period to have enough time for driving the market demand. The majority of gemstones will be sold in global market and the peridot sands and basalt will be sold in China.

SRK noted that the Company has devised a comprehensive marketing plan and has to date implemented various marketing initiatives as part of its marketing plan to promote the proposed principal products in preparation of the Project’s formal commercial production. SRK consider the Company has demonstrated significant efforts and willingness to commit to a detailed and comprehensive marketing plan to underpin the production and sales plan which underpins the Ore Reserves estimated and stated in this Report.

Capital Costs and Operating Costs

The Yiqisong Nanshan Project involves the construction of new mining and processing facilities with an annual capacity of 300,000 tonne ore. The key functional areas requiring investments include mining engineering, ore processing engineering, and the further processing facilities, as well as engineering of building construction, electricity supply and distribution, heating and other auxiliary engineering.

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APPENDIX IV COMPETENT PERSON’S REPORT

Table ES-6 summarises the CAPEX proposed in the FS. The initial CAPEX for the construction of the mine and ore processing plant is estimated at about RMB250.89 M, and the sustaining CAPEX for the construction of the further processing plant in Dunhua is about RMB38.66 M. Based on its review of these expenditures, SRK considers the estimates to be reasonable and in line with expectations at a FS level of study.

Table ES-6: Initial Capital Expenditures proposed in the FS 2021

Cost (x1,000 RMB)

No. Item Mining Construction Equipment Installation Other Total A ...... Engineering costs 43,455 52,503 37,527 2,904 — 136,388 a...... Mining 43,455 26,733 28,792 2,057 — 101,037 b...... Processing plant — 5,532 7,475 846 — 13,853 c...... General layout engineering — 20,238 1,260 — — 21,498 B ...... Other costs ————91,698 91,698 C ...... Contingency fee 4,346 5,250 3,753 290 9,170 22,809 Grand Total 47,801 57,753 41,279 3,194 100,868 250,894

Source: FS 2021 with SRK adjustment

SRK considers the budget for capital investment is reasonable and achievable. The construction period of the Project is estimated at two years, which will start in late 2021, and complete in late 2023. In SRK’s opinion, the construction period is also reasonable.

In addition to the initial capital cost and the sustaining capital, the working capital is 104.94 M RMB which will be invested in first two years of production and recovered at the end of the project. The Company has invested about 30.66 M RMB into the Project, which will be considered as part of the initial Capital Expenditures.

Table ES-7 summarises the investment plan for the Fuli’s project.

Table ES - 7: Investment Plan of Fuli’s YQS Peridot Project (M RMB)

Item 2020* 2021 2022 2023 2024 2027 2028 2029 Total Initial CAPEX ...... 30.66 17.10 111.07 92.06 250.89 Sustaining Capex ..... 4.26 17.20 17.20 38.66 Working Capital ..... 46.32 58.62 104.94

Source: FS 2021, Fuli and SRK

* The fund has been invested into the project.

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APPENDIX IV COMPETENT PERSON’S REPORT

Based on the FS and initial production trials, the detailed OPEX centers are summarised in Table ES-8.

Table ES-8: Detailed Average Operating Costs of the Fuli Project

Cost Centre Unit Amount Materials ...... RMB/t ore 114.40 Power and water ...... RMB/t ore 96.42 Salary and welfare ...... RMB/t ore 77.13 Manufactory ...... RMB/t ore 88.74 G&A ...... RMB/t ore 422.33 Further processing for gems *...... RMB/t ore 3,269.29 Marketing * ...... RMB/t ore 8,448.54 Total Overall average ...... RMB/t ore 12,516.85

Source: FS (2021) and SRK adjustment

* This is the average over the project life.

SRK considers that the OPEX estimates are reasonable.

Economic Analysis

For the economic analysis of the Project, SRK has adopted a discount cashflow (DCF) method. The Project cashflow is based on the assumptions and parameters as presented in Table ES-9.

Table ES-9: Technical and Economic Parameters used in the Project’s Cashflow analysis

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Item Unit Amount Remarks Processing Designed Production rate ...... ktpa 300 The same as mining Recovery for >10mm gemstone ...... %98 Recovery for 3-10mm gemstone ...... %95 Recovery of Peridot sands (1-3mm) ...... %70 Products from processing Large gems for hand processing (>10mm).. % 9 Totally 100% Medium gems for hand processing (above % 37 Totally 100% 7-10mm) ...... Gems for machine processing ...... % 54 Totally 100% Gem quality peridot sands...... % 0.05 Totally 100% Industrial grade peridot sands ...... % 99.95 Totally 100% Further processing Final product rate for hand-processing .... %35 Final product rate for machine processing .. %35 Peridot gem dot productivity ...... %37 Prices/Revenue Price of large cut gems (>10mm) ...... RMB/ct 1,044.80- Fuli 1,654.51 Price of medium cut gems (above RMB/ct 653.00- By Fuli 7-10mm) ...... 1,034.09 Price of small gems (above 3-7mm) ...... RMB/ct 391.80- By Fuli 620.42 Price of peridot gem dots (1-3mm) ...... RMB/ct 65.30 By Fuli Price of rough peridot gemstone ...... RMB/ct 0.29 By Fuli Price of industrial grade sand ...... RMB/t 1,020.00 By Fuli Basalt ...... RMB/t 170.00 By Fuli

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Item Unit Amount Remarks Operating costs Materials ...... RMB/t ore 114.4 Power and water ...... RMB/t ore 96.42 Salary and welfare ...... RMB/t ore 77.13 Manufactory ...... RMB/t ore 88.74 G&A ...... RMB/t ore 422.33 Further Processing...... RMB/t ore 3,269.29 Varying every year, average Marketing ...... RMB/t ore 8,448.54 Varying every year, average Total ...... RMB/t ore 12,516.85 Hand-cutting cost (Contract) ...... RMB/ct 65.30 Machine Processing for peridot gem dots RMB/ct 19.59 Included in (Contract) ...... further processing cost Hand-cutting cost (Fuli Plant) ...... RMB/ct 45.71 Included in further processing cost Machine Processing for peridot gem dots RMB/ct 13.71 Included in (Fuli Plant) ...... further processing cost CAPEX Initial CAPEX...... RMB M 250.89 CAPEX already invested ...... RMB M 30.66 Included in the initial CAPEX Sustaining CAPEX ...... RMB M 38.66 To be invested in 2027, 2028 and 2029 Mine closure cost ...... RMB M 20 Residual value...... RMB M 20 Working capital...... RMB M 104.94 46.32 in Y1, 58.62 in Y2 VAT ...... %13 City construction fee ...... %7onVAT payable

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Item Unit Amount Remarks Education surtax ...... %5onVAT payable Resource fee ...... % 4 Based on revenue without VAT Gemstone sale tax ...... % 10 Based on revenue without VAT Enterprise income tax ...... %25 Depreciation of fixed asset CAPEX...... years 10 Discount rate...... %9

The present values (“NPV”) was estimated using SRK’s DCF analysis and resides in the range of RMB25.15 Bln (at 11% discount rate) to RMB41.51 Bln (at 7% discount rate), with a base case of RMB32.11 Bln using a discount rate of 9%. The internal rate of return (“IRR”) is calculated at 134.3%. The payback period is less than one year.

A sensitivity analysis indicated that changes in CAPEX have less effect on the Project’s NPV than that of changes in OPEX and Production Rate, while changes in prices have the most significant effect on the Project’s NPV. A risk analysis shows that when the products’ prices decrease about 67.7%, the NPV of the Project will be negative.

Therefore, the Ore Reserve conversion can be supported by the economic analysis.

Risk Assessment

Mining is a relatively high-risk industry. In general, there is an expectation that project risk will decrease from exploration, development, through to production stage. The YQS Peridot Project represents a pre-construction stage project with minor previous production.

SRK considered various technical aspects which may affect the economic viability and future cash flows able to be derived from the Project, and conducted a qualitative risk analysis which has been summarised in Table ES-10. In this risk analysis, various risk sources/issues have been assessed for Likelihood and Consequence, and then an Overall Risk Rating has been assigned.

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APPENDIX IV COMPETENT PERSON’S REPORT

Table ES-10: Project Risk Assessment on Technical Aspects of the YQS Nanshan Project

Risk Source/Issue Likelihood Consequence Overall Geology and Resource Lack of Significant Resources...... Unlikely Moderate Low Lack of Significant Reserves...... Unlikely Major Medium Unexpected Groundwater Ingress ...... Unlikely Minor Low Mining Significant Production Shortfalls ...... Unlikely Major Medium Significant Geological Structure ...... Possible Minor Low Excessive Surface Subsidence ...... Unlikely Minor Low Poor Ground Conditions ...... Possible Moderate Medium Ore Processing Lower Recovery ...... Unlikely Moderate Low High Production Cost ...... Possible Minor Low Poor Plant Reliability ...... Unlikely Minor Low Production and Sales Poor Sales Plan ...... Unlikely Major Medium Under-performing Sales Volume ...... Unlikely Major Medium Significant Product Under-pricing ...... Unlikely Major Medium Capital and Operating Costs Project Timing Delays...... Possible Minor Low Capital Cost Increases...... Unlikely Minor Low Operating Cost Underestimated ...... Likely Minor Medium Environmental and Social Impact to the ecological system ...... Possible Moderate Medium Poor waste rock management ...... Possible Moderate Medium Poor hazardous substances management ... Possible Minor Low Dust Pollution ...... Possible Minor Low

Some medium risks have been identified for the Project. SRK has adopted an approximately 6 year ramp-up period for the Project, during which it is expected the Company will accumulate operating experience with the deposit, as well as greater understanding of the likely production recoveries, sales and product pricing, etc. to further mitigate Project risks going forward.

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APPENDIX IV COMPETENT PERSON’S REPORT

TABLE OF CONTENTS

Disclaimer ...... IV-[•]

Executive Summary...... IV-[•]

Table of Contents ...... IV-[•]

List of Tables ...... IV-[•]

List of Figures ...... IV-[•]

1 Introduction and Terms of Reference...... IV-[•]

1.1 Scope of Work ...... IV-[•]

1.2 WorkProgram...... IV-[•]

1.3 Legal matters ...... IV-[•]

1.4 Reporting standard ...... IV-[•]

1.5 Basis of Technical Report ...... IV-[•]

1.6 Effectivedate...... IV-[•]

1.7 Qualifications of SRK and SRK Team...... IV-[•]

1.8 Site Visit...... IV-[•]

1.9 Limitations, reliance on information, declaration and consent ...... IV-[•]

1.9.1 Limitations...... IV-[•]

1.9.2 Statement of SRK independence ...... IV-[•]

1.9.3 Indemnities ...... IV-[•]

1.9.4 Consent...... IV-[•]

1.9.5 Consulting fees ...... IV-[•]

2 Reliance on Other Experts ...... IV-[•]

3 Property Description and Location...... IV-[•]

3.1 Location ...... IV-[•]

3.2 Access ...... IV-[•]

3.3 Physiography...... IV-[•]

4 Operational Licences and Permits ...... IV-[•]

4.1 Business Licence...... IV-[•]

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APPENDIX IV COMPETENT PERSON’S REPORT

4.2 Mining Licence ...... IV-[•]

4.3 Other Operational Permits...... IV-[•]

5 History ...... IV-[•]

6 Geological Setting and Mineralization ...... IV-[•]

6.1 Regional Geology ...... IV-[•]

6.2 Property Geology ...... IV-[•]

6.2.1 Stratigraphy ...... IV-[•]

6.2.2 Structure...... IV-[•]

6.3 Mineralisation ...... IV-[•]

6.4 Mineralogy and Peridot Gemstone Characteristics ...... IV-[•]

7 Deposit Types...... IV-[•]

8 Exploration ...... IV-[•]

9 Drilling and Trenching ...... IV-[•]

9.1 Drilling ...... IV-[•]

9.2 Trenching ...... IV-[•]

10 Sample Preparation, Analyses, and Security ...... IV-[•]

11 Data Verification Sampling ...... IV-[•]

11.1 Introduction ...... IV-[•]

11.2AditInclusionStatistics...... IV-[•]

11.3 Adit Sampling and Gem Producing Ratio Statistics...... IV-[•]

11.4 Gem Quality and Recovery Verification ...... IV-[•]

12 Mineral Processing ...... IV-[•]

12.1 Ore Properties ...... IV-[•]

12.1.1 Ore Composition ...... IV-[•]

12.1.2 Chemical Composition and Gemstone Identification ...... IV-[•]

12.1.3 OreType...... IV-[•]

12.1.4 Grade Classification of Peridot Gemstone ...... IV-[•]

12.2 Separation Processing Test ...... IV-[•]

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APPENDIX IV COMPETENT PERSON’S REPORT

12.3 Processing Plant Design ...... IV-[•]

12.3.1 Production Capacity and Product Plan...... IV-[•]

12.3.2 Processing Flowsheet ...... IV-[•]

12.3.3 Processing Facilities and Equipment ...... IV-[•]

13 Mineral Resource Estimate ...... IV-[•]

13.1 Introduction ...... IV-[•]

13.2 Resource Estimation Procedures ...... IV-[•]

13.3 Resource Database ...... IV-[•]

13.4 Solid Body Modelling ...... IV-[•]

13.5 Compositing ...... IV-[•]

13.6 Basic Statistics and Evaluation of Outliers ...... IV-[•]

13.7 Density ...... IV-[•]

13.8 Statistical Analysis and Variography ...... IV-[•]

13.9 Block Model and Grade Estimation...... IV-[•]

13.10 Model Validation and Sensitivity...... IV-[•]

13.11 Mineral Resource Classification ...... IV-[•]

13.12 Mineral Resource Statement ...... IV-[•]

14 Ore Reserve Estimates ...... IV-[•]

14.1 Summary of Mining Technical Information/Design Data ...... IV-[•]

14.2 Break-even Cut-off Grade (“BCOG”)...... IV-[•]

14.3 Reserve Block Model ...... IV-[•]

14.3.1 Selective Mining Unit (“SMU”)...... IV-[•]

14.3.2 Model Limits and Items Assignment ...... IV-[•]

14.4 Mining Objects and Layout of Targets ...... IV-[•]

14.5 Dilution and Recovery ...... IV-[•]

14.6 Mining Inventory Estimate ...... IV-[•]

14.7 Mining Schedule ...... IV-[•]

14.8 Ore Reserve Classification ...... IV-[•]

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APPENDIX IV COMPETENT PERSON’S REPORT

14.9 Ore Reserve Statement ...... IV-[•]

14.10 Discussion on Potentially Impacts to Ore Reserve Estimates...... IV-[•]

15 Mining Methods ...... IV-[•]

15.1 Overview ...... IV-[•]

15.2 Deposit Mining Technical Conditions ...... IV-[•]

15.2.1 Deposit Hydrogeological Conditions ...... IV-[•]

15.2.2 Deposit Engineering Geological Conditions...... IV-[•]

15.2.3 Deposit Geology Resource Conditions...... IV-[•]

15.3MiningDesign...... IV-[•]

15.3.1 MiningExtent,MiningTargetsandMiningMethod...... IV-[•]

15.3.3 MiningMethod...... IV-[•]

15.3.4 Main Mining Equipment ...... IV-[•]

15.5 Mine Production Plan ...... IV-[•]

15.5.1 Mine Working System, Production Capacity and Service Life ...... IV-[•]

15.5.2 Mine Production Plan ...... IV-[•]

16 Gemstone Processing of Peridot ...... IV-[•]

16.1 Production Capacity and Product Scheme ...... IV-[•]

16.2 Flowchart and Method of Further Processing ...... IV-[•]

16.3 Quality of Peridot Gemstones ...... IV-[•]

17 Project Infrastructure and Workforce ...... IV-[•]

17.1 Industrial Site ...... IV-[•]

17.1.1 Main Industrial Site ...... IV-[•]

17.1.2 Supportive Industrial Sites ...... IV-[•]

17.1.3 Land Uses for the Industrial Sites ...... IV-[•]

17.2 Water Source and Drainage ...... IV-[•]

17.2.1 Water Sources ...... IV-[•]

17.2.2 Water Supplying System ...... IV-[•]

17.2.3 Water Drainage ...... IV-[•]

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APPENDIX IV COMPETENT PERSON’S REPORT

17.3 Internal and External Roads ...... IV-[•]

17.4 Electricity supply and Distribution ...... IV-[•]

17.4.1 TransformerStationsintheMineSite...... IV-[•]

17.4.2 Transformer Stations in the Processing Plant...... IV-[•]

17.5Buildings...... IV-[•]

17.6Workforce...... IV-[•]

17.6.1 Mining Workshop ...... IV-[•]

17.6.2 Processing Workshop ...... IV-[•]

17.6.3 Further Processing Workshops...... IV-[•]

18 Market Studies and Contracts ...... IV-[•]

18.1 Overview on Peridot Resources and Market ...... IV-[•]

18.2MarketingPlanandStrategy...... IV-[•]

18.3 Sales Channels Development...... IV-[•]

18.4SalesPlan...... IV-[•]

18.5 Product Prices ...... IV-[•]

19 Environmental Studies, Permitting, and Social or Community Impact ...... IV-[•]

19.1 Environmental and Social Review objective ...... IV-[•]

19.2 Environmental and Social Review Process, Scope and Standards ...... IV-[•]

19.3 Status of Environmental Approvals and Permits ...... IV-[•]

19.4 Environmental Conformance and Compliance ...... IV-[•]

19.5 Key Environmental and Social Aspects ...... IV-[•]

19.5.1 Site Ecological Assessment ...... IV-[•]

19.5.2 Water Management ...... IV-[•]

19.5.3 Waste Rock Management ...... IV-[•]

19.5.4 DustandGasEmissions...... IV-[•]

19.5.5 NoiseEmissions...... IV-[•]

19.5.6 General Waste Management ...... IV-[•]

19.5.7 Hazardous Materials Management ...... IV-[•]

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APPENDIX IV COMPETENT PERSON’S REPORT

19.5.8 Emergency Response Plan...... IV-[•]

19.5.9 Occupational Health and Safety ...... IV-[•]

19.5.10 Site Closure Planning and Rehabilitation...... IV-[•]

19.5.11 Environmental Protection and Management Plan ...... IV-[•]

19.5.12 Social Aspects...... IV-[•]

20 Capital and Operating Costs ...... IV-[•]

20.1 Capital Expenditures ...... IV-[•]

20.2 Operating Expenses...... IV-[•]

21 Economic Analysis...... IV-[•]

21.1PrincipalAssumptions...... IV-[•]

21.1.1 Production Plan...... IV-[•]

21.1.2 Value Added Tax...... IV-[•]

21.1.3 Depreciation and Tax ...... IV-[•]

21.2 Discount Cashflow Analysis ...... IV-[•]

21.3 Sensitivity Analysis...... IV-[•]

22 Adjacent Properties...... IV-[•]

23 Interpretation and Conclusions...... IV-[•]

24 Project Qualitative Risk Analysis ...... IV-[•]

25 References ...... IV-[•]

Appendixes ...... IV-[•]

Appendix A: Copies of Mineral Tenure ...... IV-[•]

Appendix B: Table 1 (JORC) ...... IV-[•]

Appendix C: SRK DCF Model ...... IV-[•]

Appendix D: 2015 NGTC Report ...... IV-[•]

LIST OF TABLES

Table 1-1: Recent Reports by SRK for Chinese Companies...... IV-[•]

Table 1-2: SRK Team Members and Responsibilities...... IV-[•]

Table 4-1: Details of the Business Licence ...... IV-[•]

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APPENDIX IV COMPETENT PERSON’S REPORT

Table 4-2: Details of the Mining Licence ...... IV-[•]

Table 6-1: Classification of Peridot Gemstone Quality ...... IV-[•]

Table 8-1: Accomplished Geological Exploration Work in the Project — Prior to 2017 . . IV-[•]

Table 11-1: Borehole Information and Inclusion Statistic ...... IV-[•]

Table 11-2: Inclusion Statistics Results from 1m by 1 m Sampling in Exploration Adit . . IV-[•]

Table 11-3: Verification Sampling Information ...... IV-[•]

Table 11-4: Statistics of Sample and Gemstone Information ...... IV-[•]

Table 11-5: Results of Grab Sample from the Working Face of Yiqisong Nanshan Peridot Mine — 14 August 201755 ...... IV-[•]

Table 12-1: Chemical Composition of Peridotite ...... IV-[•]

Table 12-2: Processing Parameters ...... IV-[•]

Table 12-3: Major Mineral Processing Equipment ...... IV-[•]

Table 13-1: Database Used for Resource Estimates ...... IV-[•]

Table 13-2: Basic Sample Statistics...... IV-[•]

Table 13-3: Comparison of Composites and Blocks — Percentage of Peridot Inclusions. . IV-[•]

Table 13-4: Conceptual Assumptions Considered for Underground Resource Reporting. . . IV-[•]

Table 13-5: Mineral Resource Statement for the YQS Nanshan Peridot Gemstone...... IV-[•]

Table 13-6: Peridot sands (1-3 mm size) Resource Statement ...... IV-[•]

Table 14-1: Calculation of BCOG ...... IV-[•]

Table 14-2: Summary of Operating Cost ...... IV-[•]

Table 14-3: Summary of Plant Recovery Rate ...... IV-[•]

Table 14-4: Summary of Price Assumption ...... IV-[•]

Table 14-5: Estimate Process Summary...... IV-[•]

Table 14-6: Summary of Mining Schedule ...... IV-[•]

Table 14-7: Summary of Ore Reserves, as of December 31, 2020 ...... IV-[•]

Table 15-1: Physical Properties of Intact Rock by Jilin University (2016)...... IV-[•]

Table 15-2: Proposed extents of the mining operation ...... IV-[•]

Table 15-3: Mining Methods Selected for Different Scenarios...... IV-[•]

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APPENDIX IV COMPETENT PERSON’S REPORT

Table 15-4: Stope Structural Parameters of Room am Pillar Mining Method ...... IV-[•]

Table 15-5: Ore Block Structural Parameter ...... IV-[•]

Table 15-6: Comprehensive Mining Technical Indexes ...... IV-[•]

Table 15-7: Main Mining Equipment...... IV-[•]

Table 15-8: Fresh Air Requirement Calculation...... IV-[•]

Table 15-9: Backfill Parameter ...... IV-[•]

Table 15-10: Main Backfill Equipment ...... IV-[•]

Table 16-1: Proposed Production Scheme of the Gemstone Processing Plant...... IV-[•]

Table 17-1: Lists of Land Uses ...... IV-[•]

Table 17-2: Water Balance of the Project ...... IV-[•]

Table 17-3: Specifications of facilities in the mine site of the project ...... IV-[•]

Table 17-4: Positions and personnel needed in the mining workshop of the project...... IV-[•]

Table 17-5: Positions and personnel needed in the ore processing plant of the project . . . IV-[•]

Table 17-6: Positions and Numbers of Personnel in Different Workshops for Further Processing of Fuli Project...... IV-[•]

Table 18-1: Sales Plan by Fuli (2023-2044) ...... IV-[•]

Table 18-2: Auction Plan by Fuli (2023-2044) ...... IV-[•]

Table 18-3: Products’ Prices of Fuli Peridot Project ...... IV-[•]

Table 19-1: EIA Report and Approval ...... IV-[•]

Table 19-2: WSCP Report and Approval ...... IV-[•]

Table 20-1: Initial CAPEX proposed in the FS 2021...... IV-[•]

Table 20-2: CAPEX proposed for Further Processing Plant in the 2021 FS...... IV-[•]

Table 20-3: CAPEX Already Invested into the Fuli’s YQS Peridot Project (M RMB) as of 31 December 2020 ...... IV-[•]

Table 20-4: Investment Plan of Fuli’s YQS Nanshan Project (M RMB)...... IV-[•]

Table 20-5: Average Unit Operating Costs per tonne Ore in Different Centres of the mine and processing plant excluding further processing ...... IV-[•]

Table 20-6: Unit Operating Costs per Carat Gem for Different Processing ...... IV-[•]

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APPENDIX IV COMPETENT PERSON’S REPORT

Table 20-7: Operating costs proposed for marketing and sales during the life oftheproject(RMBM) ...... IV-[•]

Table 20-8: Overall Average Unit Operating Costs per Tonne Ore...... IV-[•]

Table 21-1: Production and Storage of Products of the Ore Processing plant ...... IV-[•]

Table 21-2: Technical and Economic Parameters used in the Cashflow of the Project .... IV-[•]

Table21-3:NPVProjections...... IV-[•]

Table 21-4: Sensitivity Study of NPV (at 9% Discount Rate, in Bln RMB)...... IV-[•]

Table 21-5: Sensitivity Study of IRR (%) ...... IV-[•]

Table 21-6: Sensitivity Study of Payback period (Year) ...... IV-[•]

Table 24-1: Project Risk Assessment of the Yiqisong Nanshan Project ...... IV-[•]

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APPENDIX IV COMPETENT PERSON’S REPORT

LIST OF FIGURES

Figure 3-1: General Location and Access Map of the Project ...... IV-[•]

Figure 6-1: Regional Geological Setting ...... IV-[•]

Figure 6-2: Geology of the YQS Nanshan Project Area...... IV-[•]

Figure 6-3: YQS Mineralised Zone ...... IV-[•]

Figure6-4:PeridotInclusioninBasalt...... IV-[•]

Figure 9-1: Drillhole Location...... IV-[•]

Figure 9-2: Drill Cores and Core Storage ...... IV-[•]

Figure 11-1: Core Photo from Drillhole 14ZK3 completed in ...... IV-[•]

Figure 11-2: Exploration Adit 1m by 1 m Sample Locations ...... IV-[•]

Figure 11-3: Photographs of 1m by 1 m Adit Sampling ...... IV-[•]

Figure 11-4: Sample Weighing ...... IV-[•]

Figure 11-5: Picking of Gemstone...... IV-[•]

Figure 11-6: Channel Sample Locations ...... IV-[•]

Figure 11-7: 10 Pieces of Rough Peridot and 32 Pieces of Cut and Polished Peridot sent to NGTC...... IV-[•]

Figure 11-8: Processing of Grab Samples from the Working Face of Yiqisong Nanshan Peridot Mine — 14 August 2017 ...... IV-[•]

Figure 12-1: A Kind of Color Sorter and Its Separation Test...... IV-[•]

Figure 12-2: Overview of the Processing Industrial Site and Mining Adit ...... IV-[•]

Figure 12-3: Mechanical Processing Flowsheet ...... IV-[•]

Figure 13-1: Oblique section showing solid model of the Peridot Mineralisation Domain . IV-[•]

Figure 13-2: Plan showing Interception and Controlling of the Resource Domain ...... IV-[•]

Figure 13-3: Resource Block Model ...... IV-[•]

Figure 13-4: Plan showing applied Resource Classification (Red—Indicated,Blue—Inferred)...... IV-[•]

Figure 14-1: Ore Reserve Model Limits ...... IV-[•]

Figure 14-2: Planning View of Mining Panels...... IV-[•]

Figure 14-3: Indicated Resource Tonnage per Panel Interval ...... IV-[•]

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APPENDIX IV COMPETENT PERSON’S REPORT

Figure 14-4: Estimate Process-Change in Tonnage ...... IV-[•]

Figure14-5:LOMMiningPlan...... IV-[•]

Figure 15-1: Comprehensive Geotechnical borehole reports ...... IV-[•]

Figure 15-2: BASALT Cores (Roof/Orebody/Floor) in Borehole 14ZK3 ...... IV-[•]

Figure 15-3: The Opening of Existing Adit ...... IV-[•]

Figure 15-4: Planview of Mine Design ...... IV-[•]

Figure 15-5: Schematic of Typical Progression of Cut and Fill Method...... IV-[•]

Figure 15-6: Design Drawing of Overall Mining Method ...... IV-[•]

Figure 16-1: Flowchart of Hand Processing for Peridot Gems...... IV-[•]

Figure 21-1: Sensitivity Analysis of NPV (9% Discount) ...... IV-[•]

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APPENDIX IV COMPETENT PERSON’S REPORT

1 INTRODUCTION AND TERMS OF REFERENCE

Yanbian Fuli Peridot Mining Industry Co., Ltd (“Fuli” or the “Company”) is seeking admission to the Main Board of the Stock Exchange of Hong Kong Limited (“HKEx”). Fuli holds the appropriate business and mining licences pertaining to the Yiqisong Nanshan Peridot Project (the “YQS Nanshan Project”, or the “Project”), an advanced exploration to pre-development project located in Dunhua City, Yanbian Prefecture, Jilin Province, China. Fuli is seeking to [REDACTED] on the HKEx to fund the future development and operation of the YQS Nanshan Project.

The Project is currently at its pre-construction stage, with a feasibility level study done for its development. This study envisages the mining of gem quality peridot to produce some 300,000 tonne per annum (“tpa”) of ore for further processing. Fuli obtained the Project mining license in 2016 and plans to develop the Project. By late 2017, Fuli had established a circuit of gemstone processing and sales with the peridot gemstone collected from underground exploration adits. Formal development and mining have not yet commenced.

This technical report summarises SRK’s findings based on an independent review of the geology, exploration, mining, processing, environmental and techno-economic aspects of the Project, as well as documenting the current Mineral Resource and Ore Reserve statements for the Project. It was prepared following the guidelines of JORC Code (2012) and the HKEx listing rules, principally Chapter 18. For the preparation of this report, SRK has engaged specialists in the fields of geology, gemology, mining, mineral processing and environmental disciplines.

1.1 Scope of Work

SRK’s scope of work, as defined in a letter of engagement executed on 17 June 2017 between Fuli and SRK involves an independent technical review of the YQS Nanshan Project. This involved the assessment of the following aspects, including

• Review geology, gemology and exploration of the Project;

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APPENDIX IV COMPETENT PERSON’S REPORT

• Develop a Mineral Resource model for the peridot gemstone mineralisation delineated by previous underground tunnelling and drilling;

• Review the feasibility study report compiled for the Project, including mining, processing and environmental aspects, market studies, project investment and operating cost estimates as well as project implementation;

• Perform a preliminary economic analysis on the Project;

• Convert stated Mineral Resources to Ore Reserves in accordance to the JORC Code (2012);

• Prepare a Mineral Resource and Ore Reserve Statement for the Project; and

• Review other aspects and prepare a CPR suitable for applying for an [REDACTED] on HKEx

1.2 Work Program

The SRK’s technical review as presented in this Report has been carried out in six phases, namely

• Phase 4: Review the feasibility study (FS) prepared by Jilin North-eastern Asia International Engineering Group Co. Ltd. (“NAIEG”) in August 2017, and subsequent modified version in April 2018 relating to the proposed development of the Project,

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APPENDIX IV COMPETENT PERSON’S REPORT

conversion of qualified Mineral Resources into Ore Reserves, completion of review and assessment on mining, mineral processing, environmental and other modifying factors of the Project, and compilation of a draft technical report on the Project based on available data, as well as on the comments and feedbacks from the Company. This work phase was completed between January and April 2018.

• Phase 5: Preparation of a draft technical report (draft CPR) to summarise key technical aspects of the Project. This work phase was carried out between April 2018 and April 2019.

• Phase 6: Conduct a site visit and review the recent most Project status and the updated FS in 2021 (“FS 2021”), further review and assess the updated production schedule, OPEX, CAPEX, product pricing as well as other marketing studies and company marketing and sales plans. Update the CPR with updated technical parameters and assumptions, and preparation of CPR in line with the listing rules guided by HKEx. This work phase was carried out between September and November 2020.

The Mineral Resource Statement reported herein is a collaborative effort between Fuli and SRK personnel. Prior to SRK’s involvement in 2017, the previous exploration work at the Project was mainly carried out by the No. 2 Geological Investigation Institute of Jilin Province (the “No. 2 Institute”). No. 2 Institute’s exploration activities are summarised in two main reports, namely:

• a preliminary exploration report was submitted in 2002 by the No. 2 Institute; and

• a general report compiled in January 2016 summarising exploration work conducted during 2014 and 2015.

The geological model and mineralised outlines for the peridot inclusions were constructed by SRK from a two-dimensional (“2D”) geological interpretation provided by Fuli (prepared by the No. 2 Institute on behalf of Fuli). In SRK’s opinion, the geological model is a reasonable representation of the distribution of the targeted mineralisation at the current level of sampling. The geostatistical analysis, variography and grade models were completed by SRK during December 2017 and January 2018. The Mineral Resource statement was updated to the date of December 31, 2020.

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APPENDIX IV COMPETENT PERSON’S REPORT

The Ore Reserve estimate was prepared by SRK based on the stated Mineral Resource model and validation/consideration of the modifying factors as outlined in the 2017 Feasibility Study for the Project. A thorough technical assessment and a preliminary economic analysis was performed by SRK and indicates the Project is both technically feasible and economically viable. The Ore Reserve statement was updated to the date of December 31, 2020.

1.3 Legal matters

SRK has not been engaged to comment on any legal matters.

SRK notes that it is not qualified to make legal representations as to the ownership and legal standing of the mineral tenements that are the subject of this valuation. SRK has not attempted to confirm the legal status of the tenements with respect to joint venture agreements, local heritage or potential environmental or land access restrictions.

1.4 Reporting standard

This Report has been prepared to the standard of, and is considered by SRK to be, a Technical Assessment and Valuation Report under the guidelines of the VALMIN Code (2015). The authors of this Report are Members or Fellows of either the Australasian Institute of Mining and Metallurgy (“AusIMM”) or the Australian Institute of Geoscientists (“AIG”) and, as such, are bound by both the VALMIN and JORC Codes. For the avoidance of doubt, this report has been prepared according to:

• The 2015 edition of the Australasian Code for Public Reporting of Technical Assessments and Valuations of Mineral Assets (“VALMIN Code”)

• The 2012 Edition of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (“JORC Code”).

As per the VALMIN Code, a first draft of the report was supplied to the Company to check for material error, factual accuracy and omissions before the final report was issued. SRK’s scope of work was limited to the second draft of the Report after a round of edits by the Company. The final report was issued following review of any comments by the project team.

1.5 Basis of Technical Report

Data and information relating to the assets as used by SRK during the preparation of this Report are referenced throughout the Report.

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APPENDIX IV COMPETENT PERSON’S REPORT

This Report is based on information collected by SRK during site visits conducted in June, July and August 2017, additional information provided by Fuli throughout the course of SRK’s investigations, as well as SRK’s independent on-site verification and QA/QC supervision between July and September 2017, and site visit in September 2020. SRK has exercised all due care in reviewing the supplied information and has no reason to doubt the reliability of the information provided by Fuli. Other information was obtained either from the public domain or authorised third parties. This technical report is based on the following sources of information:

• Discussions with Fuli personnel and the chief geologist at the No. 2 Institute;

• Inspection of the YQS Nanshan Project area, including outcrop, underground adits and drill cores;

• Review of exploration data collected by Fuli;

• Verification sampling and in-fill drilling and sampling supervised by SRK’s geologists;

• Yiqisong Nanshan Peridot Gem Mine Project Feasibility Study Report of Yanbian Fuli Peridotite Mining Co., Ltd, (the “FS”) completed by NAIEG in August 2017 and updated in April 2021;

• Market analysis report and production data from Fuli; and

• Additional information from public domain sources and/or third parties.

1.6 Effective date

The conclusions expressed in this report are appropriate as of 31 December 2020. The report and associated techno-economic analysis is only appropriate for this date and may change in time in response to variations in economic, market, legal or political factors, in addition to ongoing exploration results. All monetary values outlined in this assessment are expressed in United States Dollars (US$), or Chinese Renminbi (RMB), unless otherwise stated.

1.7 Qualifications of SRK and SRK Team

SRK Consulting is an independent, international consulting group with extensive experience in preparing independent technical reports for various stock exchanges around the world (see www.srk.com for a review). SRK is a one-stop consultancy offering specialist services to mining and exploration companies for the entire life cycle of a mining project, from exploration through to mine closure. Among SRK’s more than 1,500 clients are most of the world’s major and

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APPENDIX IV COMPETENT PERSON’S REPORT medium-sized metal and industrial mineral mining houses, exploration companies, banks, petroleum exploration companies, agribusiness companies, construction firms, and government departments.

Formed in Johannesburg, South Africa, in 1974 SRK now employs more than 1,400 professionals internationally in 43 permanent offices on six continents. A broad range of internationally recognized associate consultants complements the core staff.

SRK Consulting employs leading specialists in each field of science and engineering. Its seamless integration of services, and global base, has made the company a world’s leading practice in due diligence, feasibility studies and confidential internal reviews.

The SRK Group’s independence is ensured by the fact that it holds no equity in any project and that its ownership rests solely with its staff. This permits the SRK Group to provide its clients with conflict- free and objective recommendations on crucial judgment issues.

SRK China was established in early 2005, and mainly works on Chinese mining projects independently or together with SRK’s other offices. SRK China has prepared a number of independent technical reports on mining projects for various companies who acquired Chinese projects or completed public listings on overseas stock exchanges, as showing in Table 1-1.

Table 1-1: Recent Reports by SRK for Chinese Companies

Company Year Nature of Transaction Yanzhou Coal Limited 2000 Sale of Jining III coal mine to the listed operating (listed in HKEx) ..... company

Chalco (Aluminum 2001 Listing on HKEx and New York Stock Exchange Corporation of China) .

Fujian Zijin Gold Mining 2004 IPO Listing on HKEx Group ......

Lingbao Gold Limited ... 2005 IPO Listing on HKEx

Yue Da Holdings Limited 2006 Acquisition of shareholding in mining projects in (listed in HKEx) ..... Yunnan, China

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Company Year Nature of Transaction China Coal Energy 2006 IPO Listing on HKEx Company Ltd (China Coal) ......

Sino Gold Mining 2007 Dual Listing on HKEx Limited ......

Xinjiang Xinxin Mining 2007 IPO Listing on HKEx Industry Co., Ltd .....

Kiu Hung International 2008 Acquisition of shareholding in coal projects in Holding Limited...... Inner Mongolia, China

Hao Tian Resource Group 2009 Very Substantial Acquisition of two coal mines in Limited ...... Inner Mongolia, China

Green Global Resources 2009 Acquisition of shareholding in one iron project in Holdings Ltd ...... Mongolia

Ming Fung Jewellery 2009 Acquisition of shareholding in gold project in Inner Group Holdings Ltd ... Mongolia, China

Continental Holdings 2009 Acquisition of a gold project in Henan, China Limited ......

North Mining Shares 2009 Acquisition of a molybdenum mining project in Company Limited..... Shaanxi, China

CNNC International Ltd . 2010 Acquisition of an uranium mine in Africa

Sino Prosper Mineral 2010 Acquisition of shareholdings in one gold project in Products Ltd ...... Inner Mongolia, China

New Times Energy 2010 Acquisition of shareholding in gold projects in Corporation Ltd ...... Hebei, China

United Company RUSAL 2010 IPO Listing on HKEx Limited ......

Citic Dameng Holdings 2010 IPO Listing on HKEx Limited ......

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Company Year Nature of Transaction China Hanking Holdings 2011 IPO Listing on HKEx Limited ......

China Daye Non-Ferrous 2012 Very Substantial Acquisition on HKEx Metal Mining Limited .

China Nonferrous Mining 2012 IPO Listing on HKEx Corporation Limited...

Hengshi Mining 2013 IPO Listing on HKEx Investments Limited...

Future Bright Mining 2014 IPO Listing on HKEx Holdings Limited .....

Agritrade International 2015 Acquisition of Shareholding in one coal mine in Pte LTD ...... Indonesia

China Unienergy Group 2016 IPO Listing on HKEx Limited ......

Pizu Holdings Group .... 2020 Substantial Acquisition on HKEx

SRK’s project team members, with their titles and responsibilities within this Report, are shown in Table 1-2 below.

Table 1-2: SRK Team Members and Responsibilities

Consultant Title Discipline and Task Dr Anson Xu ...... Corporate Consultant Project Manager, whole report, (Geology) Main CP

Pengfei Xiao ...... Principal Consultant (Geology) Geology, exploration and resources

Feng (Frank) Li...... Senior Consultant (Geology) Geology, exploration and resources

Qiuji Huang...... Principal Consultant (Mining) Mining assessment, reserves

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Consultant Title Discipline and Task Falong Hu ...... Senior Consultant (Mining) Assistant to Mr Huang, reserves

Aaron Guan...... Associate （Geotechnical） Geotechnical review

Lanliang Niu ...... Principal Consultant (Ore Ore processing Processing)

Nan Xue ...... Senior Consultant Environment, permits and (Environmental) approvals

Bo Song ...... Assistant Project Manager Project management and translation

Dr Yonglian Sun ...... Corporate Consultant (Project Internal Peer Review Evaluation)

William Rohtert...... Associate (Geology and External Peer Review and CP Resource) for QAQC

Jeames McKebben ...... Principal Consultant External Peer Review and (Valuation) Report Quality Control

Dr Anshun (Anson) Xu, PhD (Geology), FAusIMM, is a Corporate Consultant (Geology) who specialises in the exploration of mineral deposits, and evaluation of mining projects. He has more than 30 years’ experience in exploration and development of various types of mineral deposits including Cu-Ni sulphide deposits related to ultra basic rocks, tungsten and tin deposits, diamond deposits and especially deep expertise in various types of gold deposits, including veins, fracture-breccia zones, alteration, and Carlin deposits. He was responsible for the resource estimations of several diamond deposits and for reviews of resource estimations of several gold deposits. He recently completed several due diligence jobs for clients from both China and overseas including technical review projects such as Canadian National Instrument (NI)43-101 reports and HKEX [REDACTED] (IPO) technical reports. Dr Xu is the project manager and main Competent Person of the Project.

Pengfei Xiao, MSc, MAusIMM, is the Managing Director of SRK China. He is a Principal Consultant (Geology) with a specialty in mineral exploration applying comprehensive geological and geophysical methods; and his expertise also includes resource modelling and estimation. He is familiar with both theory and practice in sampling, sample preparation and chemical analysis. As a consulting geoscientist, he has been active in over 150 projects including due diligence reviews,

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APPENDIX IV COMPETENT PERSON’S REPORT exploration design, data verification and resource estimation in China, Mongolia, Africa, America, Southeast and Central Asia. His experience relates precious metal (Au, Ag, PGE), base metal (Cu, Ni, Pb, Zn) and other metal deposits (Fe, Mn, V, Mo, Co), and also includes a few non-metal projects (phosphorite, potash, gypsum). In the past ten years he has been working in geology and resource assessment with SRK, and co-authored dozens of technical reports aiding clients in successful property transactions; and more than half of them are published in stock exchanges. Mr Xiao managed the data verification program and estimated the mineral resource of the Project.

Feng (Frank) Li, M.Sc, MAusIMM, is Senior Consultant (Geology) with SRK and he has eight years’ experience in field exploration of mineral resources and QA/QC. He is a Member of the AusIMM. Mr Frank Li performed the on-site sample verification and QA/QC for in-fill drilling and sampling. He also closely supervised the data collection and compilation of the Fuli samples from exploration to production circuit. Similarly, though Mr Frank Li qualifies the “Competent Person” in the exploration and sampling area, his work related to the gemstone evaluation is guided by the qualified graduate gemologist. Frank is responsible for QA/QC of the site exploration and geology review.

Qiuji Huang, B.Eng., MAusIMM, Mining Association of the Chinese Society for Metals Member, China Association of National Gold member, is a Principal Consultant (Mining). Prior to joining SRK, he was the technical department manager for a number of gold mines in southwest China, responsible for mine development and mining design. Later he joined the Gold Administration Bureau of Guangxi province and the Guangxi Branch of National Gold, where he was in charge of review, purchasing, planning, and production management. Qiuji has nearly 30 years of mining experience, including deposit development and planning, open-pit mining, underground mining, mine design and consultation. The commodities involved range from precious metals (Au, Ag) to non-ferrous metals (Cu, Zn, Pb, W, Mo), ferrous metals (Fe, Mn) and other metal deposits as well as non-metallic deposits formed under different conditions (such as U, K, S, coal, and stone). Other experience includes mine technology, review, mine construction, production testing, mine management, and more. Since joining SRK, Qiuji has been involved in many due diligence studies in China, Asia, Africa, and South America, including projects for CNNC and CITIC DAMENG, all of which have been listed successfully on the Hong Kong Stock Exchange. Mr Huang is responsible for the mining and reserve conversion, and is the main Competent Person for reporting ore reserves.

Falong Hu, B.Eng., is a Senior Consultant (Mining). He has a Bachelor’s degree in Mining Engineering from Central South University. Before joining SRK he worked as an on-site and head office mining engineer at Sino Gold Mining Limited (which later merged with Eldorado Gold Corp.) and Silvercorp Metals Inc. He is familiar with underground mine production systems and has been involved in mine design, scheduling, and development; underground mining production;

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APPENDIX IV COMPETENT PERSON’S REPORT longhole blasting; rock mechanics; ventilation; back-fill; and cost accounting. He is also proficient in digital modelling using Gencom Surpac. He assisted Mr. Huang in the reserve conversion, as well as the economic analysis.

Aaron Guan, BEng (Geotechnical Engineering, Dipl), BSc (Computer Science and Technology), HydroEng of China MOLAR, SoftwareEng of China MIIT and MP, MAusIMM. He specializes in geotechnical engineering, mining engineering, civil engineering, software engineering, CAD/GIS systems, and coal geology. Aaron worked as Senior Geotechnical Engineer for Golder Associates from 2006 to 2009, as Development Project Manager for NavInfo (SZSE: 002405) from 2005 to 2006, as Senior Software Engineer for Beijing Leading Institute of Software R&D from 2002 to 2005, as Vice General Engineer for Yunnan Southern Geological Survey Co. Ltd in 2002, and as Geotechnical Engineer for Liaoning Institute of Hydrogeology and Geotechnique from 1998 to 2002. Aaron has been involved in over 30 gold, copper, iron ore, and coal projects both in China and abroad, including Oyu Tolgoi Copper Project, Xiongcun Copper Project in Xietongmen of Tibet, Yining Gold Mountain Project in Xinjiang, Ban Houayxai Gold Project in Laos, Yunnan Boka Gold Project, Extension Hill Iron Ore Project in Western Australia, Anhui Xiaonanshan Iron Ore Project Guanshanao TSF, SASOL Shenhua Ningxia CTL Project, Erdenebulag Coal Project in Mongolia and Xinjiang Huahong Coal Project in Qitai etc. He has particular expertise in project management, geotechnical investigation, geotechnical numerical analysis, rock engineering design for both open pit and underground excavation, and design of tailings storage facilities, as well as coal geology exploration. He is responsible for Geotechnical review.

Lanliang Niu, B.Eng., MAusIMM, MCAMRA, is a Principal Consultant (Processing) with SRK Consulting China. He has 25 years’ experience in processing, hydrometallurgical testing and studies, mine technical support, and production management, and he is competent in both theoretical study and actual production. He has specific expertise in the processing of precious metal, nonferrous metal, ferrous metal, and some non-metal, as well as processing test design, data processing, and plant design and operation. He is actively acquainted with the new development and applications of processing technologies, facilities, and reagents. He has received two national awards for his achievements in this area. Since joining SRK, Lanliang has been responsible for mineral processing/metallurgical and economic analysis scopes of work and involved in more than 70 independent technical review projects. Mr Niu was responsible for the mineral processing review for the Project.

Nan Xue, M.Sc., MAusIMM, is a Senior Consultant (Environmental). He holds a Master’s degree in environmental science from Nankai University in Tianjin. He has four years’ experience in environmental impact assessment, environmental planning, and environmental management. He has been involved in a number of large EIA projects and pollution source surveys for SINOPEC, as well as the environmental planning project funded by UNDP. He has particular expertise in

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APPENDIX IV COMPETENT PERSON’S REPORT construction project engineering analysis, pollution source calculations, and impact predictions. In recent years after he joined SRK, Nan Xue has been involved in a number of due diligence projects, such as the Fuguiniao Mining project in China. Mr Xue conducted the environmental and social review.

Dr Yonglian Sun, BEng, PhD, FAusIMM, FIEAust, CPEng, is a Corporate Consultant (Geotech) with over 25 years’ experience in geotechnical and mining engineering in five countries across four continents. He has extensive international mining experience with an emphasis on site investigation, analysis, and modelling of geotechnical issues in open pits, underground mines, and civil tunnels. He also possesses considerable experience in evaluating mining projects. In recent years, Yonglian has coordinated and led dozens of due diligence projects, most of which have been successfully listed in the Stock Exchange of Hong Kong Limited. Dr Sun peer reviewed the report and took internal quality assurance and quality control of the project.

William Rohtert, MSc, Economic Geologist and Graduate Gemologist, Member of International Colored Gemstone Association, American Gem Trade Association, and Society of Economic Geologist, is SRK associate gemologist with over 30 years’ experience in specialised in all phases of diamond and colored gemstone exploration, discovery, production and marketing. Originally educated in the Earth Sciences at the University of California in Los Angeles (UCLA, BSc., 1975), Mr Rohtert completed his graduate studies in economic geology at the University of Colorado, while working in the Central Mineral Resources laboratory of the United States Geological Survey in Denver. Mr Rohtert received his training in gemology from the Gemological Institute of America (GIA) in Los Angeles. He is a member of the International Colored Gemstone Association (ICA) and the American Gem Trade Association (AGTA). He has authored some twenty (20) technical articles in gemology and economic geology. For the past three decades, he has specialised in the management of exploration campaigns covering vast regions of remote terrain throughout the world. Since 1989, the focus of his activities has been the exploration, mining, manufacturing and marketing of diamond and colored gemstones. Prior to 1989, he focused primarily on precious and base metals, along with uranium, thorium, and the rare earths. Mr Rohtert’s key contribution has been to demonstrate the utility of scientific method in the geologic evaluation of diamond and gemstone deposits, proving that many of the standard tools common to the diamond industry can be successfully modified and applied to colored gemstones. Mr Rohtert has reviewed the gemology of the Project and guided the resource evaluation and data verification, and is the main Competent Person for mineral resources.

Jeames McKibben, MBA, MRICS, MAusIM, Executive Member of VALMIN Code Review Committee, Principal Consultant (Valuation). Jeames is an experienced international mining professional having operated in a variety of roles including consultant, project manager, geologist and analyst over more than 25 years. He has a strong record in mineral asset valuation, project due diligence, independent technical review and deposit evaluation. As a consultant, he specialises in

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APPENDIX IV COMPETENT PERSON’S REPORT mineral asset valuations and Independent Technical Reports for equity transactions and in support of project finance. Jeames has been responsible for multi-disciplinary teams covering precious metals, base metals, bulk commodities (ferrous and energy) and other minerals in Australia, Asia, Africa, North and South America and Europe. He has assisted numerous mineral companies, financial, accounting and legal institutions and has been actively involved in arbitration and litigation proceedings. Jeames has experience in the geological evaluation and valuation of mineral projects worldwide. Mr McKbben provided the external peer review and quality control for this report.

Mr Qiuji Huang (FAusIMM, Principal Mining Engineer), Mr Falong Hu (MAusIMM, Registered Constructor, Senior Mining Engineer), Mr Nan Xue (MAusIMM, Senior Environmental Consultant) and Mr Lanliang Niu (MAusIMM, Principal Processing Engineer) have contributed in this Project, in the area of mining, cost review, environmental and social, and mineral processing, respectively. These contributions formed the review and assumption of the “eventual economic extraction” for a “Mineral Resource” as this term is defined in the JORC Code (2012).

1.8 Site Visit

To complete the review process, SRK has conducted several visits to the Project, including

• An initial site visit and gap analysis conducted by Dr Anson Xu and Mr Pengfei Xiao between 24 June and 26 June 2017;

• Site visits and field sampling verification as well as QA/QC supervision by Mr Frank Li between 17 July to 10 September 2017;

• Site visit by Mr William Rohtert, Dr Anson Xu, Mr Pengfei Xiao, Mr Qiuji Huang, Mr Falong Hu, Mr Nan Xue and Mr Bo (Bob) Song between 13 August and 15 August 2017;

• Mr. Lanliang Niu and Dr Anson Xu conducted a site visit between 14 and 16 September 2018 to inspect the mine site, panned ore processing site and further processing site.

• Mr Pengfei Xiao, Mr Falong Hu, Mr Lanliang Niu, Mr Nan Xue visited the Project and oversaw the site development and construction between 21 September and 23 September 2020.

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APPENDIX IV COMPETENT PERSON’S REPORT

The purpose of the site visits was to review the exploration database and validation procedures, review exploration procedures, define geological modelling procedures, examine drill core, interview project personnel, and collect all relevant information for the preparation of a Mineral Resource model and the compilation of a technical report. During the visits, particular attention was given to the treatment and validation of historical drilling data.

The site visit also aimed to investigate the geological and structural controls on the distribution of the peridotite inclusions in order to facilitate the construction of three dimensional peridot domains.

SRK was given full access to relevant data and conducted interviews with Fuli personnel to obtain information on the past exploration work, to understand procedures used to collect, record, store and analyse historical and current exploration data.

1.9 Limitations, reliance on information, declaration and consent

1.9.1 Limitations

SRK’s opinion contained herein is based on information provided to SRK by Fuli throughout the course of SRK’s investigations as described in this Report, which in turn reflects various technical and economic conditions at the time of writing. Such information as provided by Fuli was taken in good faith by SRK. SRK has not independently verified Mineral Resource or Ore Reserve estimates by means of recalculation.

This report includes technical information, which requires subsequent calculations to derive subtotals, totals, averages and weighted averages. Such calculations may involve a degree of rounding. Where such rounding occurs, SRK does not consider them to be material.

As far as SRK has been able to ascertain, the information provided by Fuli was complete and not incorrect, misleading or irrelevant in any material aspect.

Fuli has confirmed in writing to SRK that full disclosure has been made of all material information and that to the best of its knowledge and understanding, the information provided by Fuli was complete, accurate and true and not incorrect, misleading or irrelevant in any material aspect. SRK has no reason to believe that any material facts have been withheld.

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1.9.2 Statement of SRK independence

Neither SRK, nor any of the authors of this Report, has any material present or contingent interest in the outcome of this Report, nor any pecuniary or other interest that could be reasonably regarded as capable of affecting their independence or that of SRK.

SRK has no prior association with Fuli regarding the mineral assets that are the subject of this Report. SRK has no beneficial interest in the outcome of the technical assessment capable of affecting its independence.

1.9.3 Indemnities

As recommended by the VALMIN Code (2015), Fuli have provided SRK with an indemnity under which SRK is to be compensated for any liability and/or any additional work or expenditure resulting from any additional work required:

• which results from SRK’s reliance on information provided by either Fuli or Fuli not providing material information; or

• which relates to any consequential extension workload through queries, questions or public hearings arising from this Report.

1.9.4 Consent

SRK consents to this Report being included, in full, in Fuli’s documents in the form and context in which the technical assessment is provided, and not for any other purpose. SRK provides this consent on the basis that the technical assessment expressed in the Summary and in the individual sections of this Report is considered with, and not independently of, the information set out in the complete report.

1.9.5 Consulting fees

SRK’s estimated fee for completing this Report is based on its normal professional daily rates plus reimbursement of incidental expenses. The fees are agreed based on the complexity of the assignment, SRK’s knowledge of the assets and availability of data. The fee payable to SRK for this engagement is estimated based on the working hours and rates of the consultants assigned to complete the project. The payment of this professional fee is not contingent upon the outcome of this Report.

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2 RELIANCE ON OTHER EXPERTS

SRK has not performed an independent verification of land title and tenure information as summarised in Section 3 of this Report. SRK did not verify the legality of any underlying agreement(s) that may exist concerning the permits or other agreement(s) between third parties. SRK was informed by Fuli that there are no known litigations potentially affecting the YQS Nanshan Project.

SRK’s review of the potential saleable value of peridot gemstone is based on Fuli’s actual sale status and existing contracts, while additional marketing studies are partially relied on, SRK also considered the reference price at global market published by relevant gemstone associations.

3 PROPERTY DESCRIPTION AND LOCATION

3.1 Location

Fuli’s YQS Nanshan Project is located approximately 51 kilometers (“km”) line distance northwest of Dunhua City, under the jurisdiction of Emu town, Dunhua City, Yanbian Prefecture, Jilin Province, China. The geographic coordinates are within the limit of longitude 127˚55’19”E to 127˚57’58”E and latitude 43˚47’02”N to 43˚48’02”N. The general location of the YQS Nanshan Project is shown in Figure 3-1.

Figure 3-1: General Location and Access Map of the Project

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3.2 Access

The YQS Nanshan Project is located in the mountainous region of northeastern China. The proposed mine area is accessible via vehicle by the national expressway G12 connecting the cities of Changchun in the northwest and Hunchun, a border city to the east. The national expressway is connected with paved road (county level road) and village track which provide connections to the mine site.

From Changchun, the capital city of Jilin Province, travel time to the Project is about 4 hours, comprising 3 hours to Huangsongdian Town via the national expressway G12, before turning onto about 5 km paved road and 25 km village track from Huangsongdian Town to the Project site, requiring another hour, There are daily flights between Changchun and other major cities in China. From the mine site it takes about 2 hours to drive to Dunhua City, the headquarters of Fuli and the proposed site for the Company’s proposed peridot finishing processing plant.

3.3 Physiography

The region surrounding the Project consists of low- to medium-relief terrain and hilly areas. Elevation ranges from 420 m to 750 m above sea level (“ASL”) with steep slopes and deep valleys. The Zhuerduo River is the main watercourses in the project region, flowing from west to east at the northern part of the project area, and then flowing southward into the Mudanjiang River to the east of the project.

The Project experiences a typical North sub-frigid monsoon climate with four distinct seasons, winter is cold and long, summer is hot and rainy, spring and autumn are dry and of moderate temperature. The average annual temperature is 3.9 degrees Celsius (°C), lowest temperature is -41.8°C and highest temperate is 35.8°C, with winter lasting from mid-November to mid-April. and snow depth is 1.70 m. The annual average rainfall is 677.5 mm, with the majority of rain (70% of the annual precipitation) falling between June and September. Average annual evaporation is 1,185.9 mm. Snow falls may achieve depths of 1.7 m during winter months.

The local economy is based on forestry and agriculture. A 380V sub-station is available in the Yiqisong forestry farm, with manpower available from the adjacent villages.

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4 OPERATIONAL LICENCES AND PERMITS

4.1 Business Licence

The Project is supported by a granted Business Licence, the details for which are presented in Table 4-1.

Table 4-1: Details of the Business Licence

Project/Company Business Licence No. Issued To Issued By Issue Date Expiry Date Licensed Business Activities Fuli Peridot 912224033398816529 Yanbian Fuli Dunhua City 1-Jun-17 26-Apr-35 Peridot mining, processing Project ... Peridot Market and and sales; basalt Mining Co., Quality processing and sales; Ltd Supervision production and sales of Bureau artware, jewellery and ornament; import and export trade.

4.2 Mining Licence

The Mining Licence for the Project is presented in Table 4-2. For a copy of original mining licence refer to Appendix A.

Table 4-2: Details of the Mining Licence

Production Rate Area (tonnes per Project Mining Licence No. Issued To Issued By Issue Date Expiry Date (km2) Mining Type year) Fuli Peridot C22000020161271 Yanbian Fuli Jilin Province 8-Dec-16 8-Dec-26 1.6731 Underground 300,000 Project ..... 10143443 Peridot Mining Land Mining Co., Ltd and Resources Bureau

4.3 Other Operational Permits

Apart from the Business Licence and Mining Licence, other operational permits required for the Fuli Peridot Project consist of water use permit, safety production permit, site discharge permit, etc.

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SRK has sighted a site discharge registration receipt for the Project which is effective from 26 October 2020 to 25 October 2025.

National Forest Bureau issued a forestland use approval for the Project on 7 March 2018. The permitted area of forestland use is 4.5488 ha.

Jilin Province Natural Resources Bureau issued a construction land use approval for the Project on 19 January 2020. The permitted area of land use is 2.8422 ha.

The water use application for the Project was approved by Dunhua City Water Bureau on 10 December 2018. The permitted annual water abstraction is 78,426 m3.

SRK noted that the aforementioned safety production permit for the Project was not required at the moment since the project was under construction. SRK opines that the Company is able to acquire the necessary licences and permits to meet the requirements of relevant environmental protection regulations before the Project moves to the production stage.

5HISTORY

• From 1979 to 1981, the Geological and Mineral Bureau of Jilin Province carried out 1:200,000 scale regional geological mapping of the Dunhua (11-52-(3)) map sheet, with the Yiqisong Nanshan Project area included as part of this exercise. A “Dunhua regional geological survey report” was submitted, the basalt volcanic group dominating the area was named as the Tertiary Upper Pleistocene Chuandishan Formation.

• From 1986 to 1992, a Dunhua (11-52-(3)) 1:200,000 scale geochemical survey was carried out by the Jilin No. 5 Geological Investigation Institute, with the Yiqisong Nanshan Project area sampled as part of this exercise. A “Dunhua Geochemical Document” was submitted, with a total of 39 geochemical parameters and anomalous delineations defined in the region.

• From 1992 to 1994, the No. 2 Institute carried out a detailed investigation of the Dashihe peridot deposit, and the report “Dahuashu Peridot deposit of Dashihe peridot mine area, Jiaohe City, Jilin Province detailed investigation report” was submitted. In the report, peridot inclusions in basalt rock were recorded in the Yiqisong Nanshan area and reported; here the “Yiqisong Nanshan” refers to the current Project area.

• From 1996 to 1999, the No. 2 Institute carried out the “A Survey of Peridot Deposit in Eastern Jilin Province”. Two exploration adits extending for a total length of 95.5 m, 19 trenches of 804 m3and two pits of 960 m3 were excavated in the Yiqisong Nanshan area.

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APPENDIX IV COMPETENT PERSON’S REPORT

Based on sampling of these, the occurrence of gem-bearing host rock and the gem content were roughly estimated, and the report “Peridot Deposit of Eastern Jilin Province Preliminary Investigation Report” was submitted.

• In 2002, the No. 2 Institute carried out mineral prospecting in the area, with five drill holes totalling 271.5 m completed, and six mini-bulk samples collected for testing of the peridot yield from drill holes YK3, KD2, KD2-1. Based on these activities, the report “Yiqisong Peridot Prospecting Report of Dunhua City, Jilin Province” was prepared.

• In 2004, the No. 2 Institute carried out “Detailed Investigation of Dahuashu Peridot Deposit of Dunhua City, Jilin Province”, with a total of 146 sites tested and 36 pits excavated. A total of 19 bulk samples were collected from these pits and tested for peridot content.

• From 2014 to 2016, the No. 2 Institute carried out detailed exploration of the Project area, the exploration was initially commissioned by Mr. Haiyang Yu (“Mr. Yu”) and Mr. Yingliang Jiang (“Mr. Jiang”) in 2014, Mr. Yu and Mr. Jiang established Fuli in 2015, therefore, the report was issued to Fuli when it is completed in 2016. Based on historical exploration, new trenches, drill holes and adits were developed; with trench spacing designed at 100 to 200 m, and drill hole spacing designed on a 200 m by 200 m grid. These programs were designed to investigate the thickness of the mineralised horizon, the distribution of the peridot inclusions and content variation. Exploration adits and sample pits were developed in order to investigate the inclusion abundance, peridot content, peridot quality and variation. In all, 14 trenches totalling 2,557.0 m3, three sample pits of 1,637.0 m3, 37 drill holes of 1,938.51 m and one adit of 199.9 m were developed. A further seven samples (bulk samples) were taken to determine peridot yield and peridot content. Ore density, geotechnical and chemical composition data were collected. Hydrogeology, engineering and environmental data was also recorded; 1:10,000 and 1:2,000 scale topographic surveys and engineering point measurements were also completed at this time.

6 GEOLOGICAL SETTING AND MINERALIZATION

The geological description provided in this section is based on a “Detailed Investigation Report of Yiqisong Nanshan Peridot Mine in Dunhua City, Jilin Province” compiled by the No. 2 Institute in January 2016.

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6.1 Regional Geology

The YQS Nanshan Project is located at the northern end of the Jiaohe Huadian fold in the Jilin synclinorium of the Jilin fold belt, which forms part of the Tianshan Xingan geosyncline. During the Neogene period, magmatic activity was widespread across the Project area, with basalt flows widely distributed. Within these Neogene basalts are inclusions of peridotite, a coarse-grained igneous rock composed of olivine and pyroxene. Of particular economic importance is the gemstone peridot (an olivine) which occurs within the inclusions in the Neogene basalt. The regional geological map of the Project area is presented as Figure 6-1.

Figure 6-1: Regional Geological Setting

The YQS Nanshan Project is located in the southeastern part of a northwest-southeast orientated tectonic structure, which extends over a distance of about 200 km from the northwest to the southeast of the Project area. The Neogene basalt is interpreted to have been focused along the structure, with a number of peridot mines and/or occurrences occurring along this structure in the surrounding region.

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6.2 Property Geology

6.2.1 Stratigraphy

Within the YQS area, the main outcropping strata include the regional metasedimentary bedrock of the Yangjiagou Formation of Upper Permian age (259.1 to 251.90 Ma); and the overlying, volcanic Chuandishan Formation of Neogene age (23.03 to 2.58 Ma), and Quaternary (2.58 Ma to present) sediments. These Formations are described below from oldest to youngest:

The Yangjiagou Formation mainly consists of sandy slate, and slate with metamorphic sandstone, as well as siltstone, limestone, and hornfels.

The Yangjiagou Formation was extensively intruded by coeval magmatic intrusive bodies throughout the Project area. The main intrusive bodies comprise Variscan-age (about 410-250 Ma) biotite-plagioclase-granodiorite, granodiorite, speckle-biotite plagio-granite, monzonite granite, hornblende plagioclase granite and, from the succeeding Yanshan period, coarse, medium and fine-grained granite. Variscan biotite plagio-granite and granodiorite outcrop in the basement rock at the edge of the Project area.

The Chuandishan Formation is the main formation in the Project area, consisting mainly of Oligocene basalts that are irregularly distributed in the central part of the region, overlying the Breccia granite unit of the Variscan Period. The rock types from top to bottom are:

• massive olivine basalts;

• vesicular lenticular olivine basalts;

• massive olivine basalts;

• lenticular olivine basalts;

• fragmental and lenticular olivine basalts;

• peridot-bearing basalts (ore layers); and

• vesicular and lenticular olivine basalts.

The geology of the YQS Nanshan Project is shown in Figure 6-2.

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Figure 6-2: Geology of the YQS Nanshan Project Area

6.2.2 Structure

The local structure in the region is relatively simple, comprising a buried fault zone striking northwest (310°) is projected from Level 791 (reduced level — RL) to RL 742 in the Dahuashu mine area — Yiqisong Nanshan as the main structure. The total strike length of this fault zone is estimated at more than 15 km. The fault is interpreted to control the distribution of the known peridot mineralisation in the area.

6.3 Mineralisation

Previous exploration has shown that the host to the known “mineralised body” in the mining area is basalt with coarse-crystalline olivine-peridot inclusions. The basalt is a flat dipping to almost horizontal layer (Figure 6-3), with a clear boundary between the mineralised body and the surrounding host rock. The size (diameter) of the peridot inclusions is generally between 1 cm and 20 cm, with some of inclusions reaching a diameter of up to 30 cm in the pit (SRK observation). Previous drilling and trenching has delineated the mineralised zone along an east-west trend measuring about 1,700 m, and a north-south width varying from 550 to 800 m. The mineralised zone ranges from 1.5 m to 7.0 m in thickness, with an average thickness of about 3.25 m.

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Figure 6-3: YQS Mineralised Zone

SRK considers that:

• The scale and occurrence of the mineralised body is relatively stable. The geometry, spatial distribution and volume of mineralised body is constrained by previous exploration drilling, tunneling and trenching.

• According to preliminary drilling and tunnelling, the thickness of the mineralised zone and the local change of the occurrence are obvious, with a certain degree of uncertainty. The current exploration grid and the understanding of the mineralised zone are insufficient to support more detailed project development plans (such as the feasibility study in accordance to international study levels and the construction of tunnels in mining plans).

6.4 Mineralogy and Peridot Gemstone Characteristics

Based on drill core, trench and tunnel samples, the No. 2 Institute estimated the overall content of peridot inclusions in the mineralised zone. For the drill cores, the area ratio (area of the inclusion/area of the core section) was calculated; for the trenching and the tunnel samples, the volume ratio (the volume of the peridot sands/the volume of the sample) was counted. The content of peridot inclusions in the mineralised zone was estimated to range from 10.3% to 40.3%, with an average proportion of about 20%.

Peridot is the name assigned to gem-quality olivine. The mineral olivine forms a magnesium-iron solid-solution series from Forsterite (Mg2SiO4) to Fayalite (Fe2SiO4). The main component of the peridot inclusions at the YQS Nanshan Project is the magnesium-rich olivine, forsterite, which is evident in more than 85% on the inclusions. The pyroxene content is low at about 10%, with accessory minerals including feldspar, magnetite and spinel accounting for the residual minerals. The olivine at the YQS Nanshan Project comprises mostly transparent peridot.

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In order to classify the peridot at YQS, the No. 2 Institute referred to Industrial Parameter Instruction for Yanbian Fuli Peridot Mining Industry Co., Ltd Yiqisong Nanshan Peridot Project compiled by NAIEG and to Gemological Professional identification results, defining:

• transparent olivine of more than 3 mm is classified as peridot gemstones, and

• transparent olivine of 3 mm and less than 3 mm is classified as peridot sands.

The peridot gemstones principally occur in the basalt layers as olivine inclusions, and only rarely occur as phenocrysts in the basalt.

The study of the gemological characteristics of the peridot in the YQS Nanshan Project is based on the identification and evaluation report from Beijing Jewellery Research Institute, of the National Gems & Jewelry Technology Administrative Center (“NGTC”) , administrated by the Ministry of National Resources of the People’s Republic of China. NGTC evaluated and appraised size, color, transparency/clarity, refractive index, hardness, density, chemical composition, and spectral characteristics of 41 samples from the YQS Nanshan Project.

For peridot grading, colour, clarity and size are considered, for statistics and estimation purpose, the No. 2 Institute and Fuli mainly classify the gemstone by size. According to the description by the No. 2 Institute, the gemstones are classified into five categories, see Table 6-1.

Table 6-1: Classification of Peridot Gemstone Quality

Class Granule Size mm I ...... >12

II...... 10-12

III ...... 7-10

IV ...... 5-7

V...... 3-5

Peridot is mainly found in the coarsely-crystalline ultramafic (peridotite) inclusions. Figure 6-2 shows a typical ultramafic inclusion as found in the Fuli exploration adit. Within these inclusions, the minerals olivine and pyroxene are the main minerals with accessory spinel, magnetite and feldspar as described below:

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• Peridot: yellow green, green, mostly coarse grain, with glassy luster, transparent — translucent, conchoidal fracture, with high hardness. Particle size is mostly between 0.5 mm to 3 mm, with a few rarely more than 3 mm to 10 mm. Some with cracks caused by mine blasting, with small bubbles, spinel or magnetite inclusions rarely spotted.

• Pyroxene: mainly orthopyroxene, and also clinopyroxene. The orthopyroxene is gray-brown-greenish-gray, short columnar, plate-like and granular, transparent to translucent, glassy luster, orthorhombic cleavage, particle size of 0.5 mm to 15 mm, occasionally 20 mm, olivine or spinel could be spotted intergrown. Clinopyroxene was emerald green, particle size 0.5 mm to 3 mm, content is minimal.

• Spinel: octahedral and of irregular granularity, particle size 0.2 mm to 5.0 mm, glass luster, translucent. Coarse crystal is black, fine-grained is reddish brown.

• Magnetite: gray and black granular, semi-metallic luster, streaks reddish, with strong magnetic. Some of which have been oxidized into hematite. Particle size is generally less than 0.5 mm.

• Feldspar: gray-white, grainy and plate-like, single crystal or aggregate distribution, glass luster, transparent — translucent, multi-cleavage and cracks, particle size 5 mm to 30 mm.

Figure 6-4: Peridot Inclusion in Basalt

Source: SRK site visit

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The grade (China: yield) of the peridot gemstone varies from 100 to 600 carats/tonne (ct/t), based on results of bulk samples taken from the exploration adits and trenches (drill core samples not assessed). Drill core data provided data for intercepted peridot inclusions and for the extrapolation of mineralisation between and beyond the underground workings.

7 DEPOSIT TYPES

The YQS peridot deposit is related to a volcanic eruptive geologic history with a peridot mineralising event. The peridot is predominately hosted in ultramafic inclusions within a basalt layer with occasional phenocrysts found isolated in the basalt formation. Ultramafic inclusions consist primarily of olivine, pyroxene, magnetite and spinel. Rarely, peridot (gem-quality olivine) is found isolated in the basalt formation. Linkage between the percentage of ultramafic inclusions and the grade of peridot gemstone is defined globally but not as precisely in individual drill core or bulk samples.

World-wide, two principal types of reserve are recognised on the basis of the host rock: (1) basaltic eruptive; and, (2) ultramafic intrusive. By far, the greater production of peridot is derived from the basalt type, whereas the much smaller ultramafic intrusive type deposits often supply the largest and finest gemstones. The YQS peridot deposit is an example of the basaltic eruptive class of deposit. Peridot deposits in Arizona (USA) and China are examples of the Tertiary Basalt Type, whereas reserve in Pakistan and Burma are examples of the Pegmatite Vein in Serpentine Type.

The Type Locality of the basalt eruptive class is San Carlos, Arizona, where olivine basalts of Tertiary age have supplied most of the world’s gem peridot to date. At San Carlos, peridot occurs as nodular inclusions, phenocrysts, and volcanic bomb-cores within scoriatic (containing numerous gas bubbles) cinder overlying a vesicular basalt and in an underlying phreato-volcanic tuff derived from maars (broad, low relief volcanic crater). At San Carlos, a basalt flow containing a concentration of nodular peridot inclusions ranges from 1.5 to3minthickness. The ellipsoidal-shaped inclusions make up 25 to 40 percent of the rock volume and average from 1 to 30 cm in maximum diameter. Peridot cut stones average 1 carat and rarely exceed 5 carats in polished weight. The largest reported is just 22 carats. Over 90% of production is sub 3 mm. Peridot is found primarily as dunite inclusions in the basalt, rarely as single-crystal phenocrysts or xenocrysts in a basal basalt flow. In the field, geologists explore for the volcanic vents to both the initial maar and the subsequent basalt flow eruptives, where the size and concentration of peridot is the highest.

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8 EXPLORATION

Previous exploration work at the YQS Nanshan Project was mainly carried out by the No. 2 Institute. In 2002, a preliminary exploration report was submitted by the No. 2 Institute, which was subsequently commissioned by Fuli to carry out the general exploration work during 2014 and 2015, and prepare a general exploration report in January 2016. According to the 2016 report, the main geological and prospecting work completed in the Project area is listed in Table 8-1.

Table 8-1: Accomplished Geological Exploration Work in the Project — Prior to 2017

Item 2002 and before 2014−2015 Total Geological and topography mapping 1:2000 3.6 km2 3.6 km2 scale ......

Geological mapping 1:10000 scale ...... 6.6 km2 6.6 km2

Trenching ...... 21 trenches for 17 trenches for 38 trenches for 1,084.0 m3 4,194.0 m3 5,278.0 m3

Core Drilling...... 5 holes for 37 holes for 42 holes for 271.5 m 1,938.5 m 2,210.0 m

Underground tunneling ...... 3 tunnels for 1 tunnel of 4 tunnels for 95.5 m 199.9 m 295.4 m

Gravity samples ...... 30 samples 30 samples

Gemstone yield samples ...... 6 samples 7 samples 13 samples

Of the four (4) exploration adits driven at the YQS Nanshan Project, the westernmost is by far the longest extending for twice the length of the other three combined. This western adit provides the best exposure of the mineralised zone, and was the locus for most of the statistical count sampling and channel sampling conducted by SRK in 2017.

SRK considers that based on the previous exploration activities and collected geological data, the project is at a moderately advanced stage of exploration with room for further exploration. SRK recommends that Fuli combine the adjacent exploration right to complete a more detailed exploration in 2 and 3 years to support mining services and to increase mineral resource.

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9 DRILLING AND TRENCHING

9.1 Drilling

During its site visit, SRK observed drill cores collected in 2014-2015 are stored appropriately at the project site. SRK also noted that the cores containing ultramafic inclusions are often more broken and fractured that the adjacent massive basalts, and the peridot particles in the ultramafic inclusions are easily removed from the drill cores with any external force. The 2014-2015 core drilling program was carried out by standard Chinese XY-4 drilling rigs, using a diamond wireline core drilling process, with an opening diameter of 110 mm (PQ), a final hole diameter of 89 mm (HQ) and a core diameter of 65 mm (HQ).

Figure 9-1: Drillhole Location

The drill cores completed prior to 2002 were not preserved and thus are not available for inspection. These holes were drilled with XY150 drilling rigs completing a hole diameter of 109 mm (PQ), a final hole diameter of 75 mm (NQ) and a core diameter of approximately 47 mm (NQ).

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Among all the drill holes, there were 27 holes intercepting ultramafic inclusions. Three of these holes were drilled before 2002, and 24 were drilled in 2014-2015, with average recoveries of rock and mineralised material cores generally above 90%. Two drill holes reportedly had inadequate core recoveries.

Figure 9-2: Drill Cores and Core Storage

In SRK’s opinion:

• The quality of the 2014-2015 drill holes is acceptable, the recovery rates are considered reasonable, and the estimation of the peridotite inclusion content within the drill core are also reasonable.

• The results of the core drilling are used to estimate the volume of mineralised zones across the entire mining area, but are not used for the estimation of peridot grade (yield), the peridot grade (yield) was estimated by inclusion statistics and gem producing ratio statistics in section 11.2 and 11.3 respectively.

• The preservation and safety of the cores are satisfied and are of industrial practice.

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9.2 Trenching

The No. 2 Institute collected bulk samples from the exploration adits at selected sample sites so as to analyse the grade (yield) of peridot gemstones. On the surface, the vegetation across the Project area is relatively well developed, and the mineralised zone is poorly exposed, restricting the number of locations conducive to direct sampling from surface.

10 SAMPLE PREPARATION, ANALYSES, AND SECURITY

Bulk samples from trenches and underground adits were collected by the No. 2 Institute prior to SRK’s involvement in 2017.

The samples were weighted and gem-sized stone (>3 mm) were selected manually by the geologists from the No. 2 Institute.

The professional institute NGTC located in Beijing was engaged to carry out the gemstone identification, classification and certification, a gemstone assessment report was issued on 18 November 2015, the report is attached in the appendix.

In 2017, SRK performed site supervision on the sampling, and sample preparation conducted by Fuli personnel, a total of 32 pieces of cut and polished peridot and 10 pieces of rough peridot were sent to NGTC located in Beijing to determine or confirm principal gemological properties, and to provide diagnostic information on origin and provenance. The sampling procedure is described in section 11.4; the analysis report is attached in the appendix.

11 DATA VERIFICATION SAMPLING

11.1 Introduction

In order to verify the samples collected in earlier drilling and adit sampling campaigns, Fuli engaged SRK to undertake a separate and independent assessment of the YQS deposit. As part of this exercise, SRK supervised the completion of eight drill holes for a total a 509.1 m, collected seven 1m by 1 m statistical-count samples and thirty two channel samples from the same adit as assessed by the No. 2 Institute. The channel samples collectively produced some 602 pieces of facet-grade (>3 mm) peridot weighing 622.14 ct.

For the eight drillholes completed under SRK’s supervision, geological logging and photography documented the location of the mineralised zone and provided statistics for the estimation of the inclusion percentage. Detailed information is listed in Table 11-1.

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Table 11-1: Borehole Information and Inclusion Statistic

Est Inclusion Hole X (North) Y (East) End of Hole Ore location Thickness Inclusion statistics percentage 3ZK4 .... 4851220 43414625 63.45m 56.2-59.55m 3.35m 1~3cm: 3pcs; 3~5cm: 5% 1pcs; 5~7cm: 1pcs

5ZK1-2 ... 4851213 43414395 71.6m 54.1-60.7m 6.6m 1~3cm: 13pcs; 3~5cm: 10% 5pcs; 5~7cm: 1pcs

7ZK2 .... 4851265 43414230 74.6m 52.8-53.9m 1.1m 1~3cm: 3pcs; 3~5cm: 1pcs 3%

7ZK3 .... 4851050 43414220 71m 67.25-69.65m 2.4m 1~3cm: 4pcs; 3~5cm: 5% 5pcs; 5~7cm: 1pcs

11ZK1-2 .. 4851415 43413813 69.8m 41.8-49m 7.2m 1~3: 23pcs 3~5: 4pcs 5~7 20% 1pcs

14ZK2 ... 4850921 43413532 40.6m 16-30.1m 14.1m 1~3: 22pcs 3~5: 8pcs 5~7 40% 6pcs 7~10: 1pcs >10 3pcs

14ZK3 ... 4851496 43413542 45m 34.65-38.65m 4m 1~3cm: 52pcs; 3~5cm: 35% 25pcs; 5~7cm: 10pcs;7~10cm: 2pcs; >10cm: 2pcs

14ZK4 ... 4851353 43413558 73.05m 52.5-58.7m 6.2m 1~3cm: 44pcs; 3~5cm: 35% 30pcs; 5~7cm: 8pcs; >10cm: 9pcs

Source: SRK Analysis

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Figure 11-1: Core Photo from Drillhole 14ZK3 completed in September 2017 under SRK Supervision

Source: SRK Site visit

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11.2 Adit Inclusion Statistics

Sampling on a 1m by 1 m grid provided inclusion statistics for 7 locations in the principal exploration adit, with the locations shown in Figure 11-2 and statistical results shown in Table 11 2.

Figure 11-2: Exploration Adit 1m by 1 m Sample Locations

Source: SRK analysis

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M1 M2

M3 M4

M5 M6

M7 Figure 11-3: Photographs of 1m by 1 m Adit Sampling

Source: SRK Site Visit

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Table 11-2: Inclusion Statistics Results from 1m by 1 m Sampling in Exploration Adit

Est inclusion No. Inclusion counts percentage M1 ...... 91 35% M2 ...... 90 35% M3 ...... 98 50% M4 ...... 170 45% M5 ...... 151 40% M6 ...... 86 40% M7 ...... 99 40%

11.3 Adit Sampling and Gem Producing Ratio Statistics

An air pick was used for channel sampling within the main exploration adit (as previously sampled by the No.2 Institute). The sample length is1mforeachsample, and the sample height varies depending on the thickness of the mineralised layer. A total of 32 channel samples were collected for a total weight is 6,142.45 kg, producing 1,028.45 kg of peridot sands (<3 mm), and a first pick of peridot gemstones (>3 mm) totaling 602 pieces with a combined weight of 622.14 ct, in the preliminary field sort.

Figure 11-4: Sample Weighing

Source: SRK Site Visit

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Figure 11-5: Picking of Gemstone

Source: SRK Site Visit

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Figure 11-6: Channel Sample Locations

Source: SRK Site Visit

SRK’s verification sample information is presented in Table 11-3, sample H9 was not sampled due to the position was too high to access.

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Table 11-3: Verification Sampling Information

Sample Information Peridot Thickness Volume No Sample ID Weight (kg) Sands (kg) Length (m) Height (m) (Calculated) (m3) 1 ...... H1 202 21.5 1 1.3 0.055 0.071 2 ...... H2 200.85 12.5 1 1.3 0.054 0.070 3 ...... H3 215.9 48.3 1 1.6 0.047 0.076 4 ...... H4 190.2 53.15 1 0.9 0.074 0.067 5 ...... H5 193.35 71.85 1 0.9 0.075 0.068 6 ...... H6 184.25 33.75 1 0.9 0.072 0.065 7 ...... H7 200.65 32.05 1 1.2 0.059 0.070 8 ...... H8 162.8 11.4 1 1.2 0.048 0.057 9 ...... H10 210.5 26.6 1 1 0.074 0.074 10 ...... H11 197.05 25.35 1 1 0.069 0.069 11 ...... H12 212.2 66.5 1 1 0.074 0.074 12 ...... H13 168.65 13.5 1 1.2 0.049 0.059 13 ...... H14 168.05 63.1 1 1.2 0.049 0.059 14 ...... H15 195.95 32.35 1 1.2 0.057 0.069 15 ...... H16 191.4 36.3 1 1.5 0.045 0.067 16 ...... H17 162.85 30.1 1 1.5 0.038 0.057 17 ...... H18 214.55 41.7 1 1.5 0.050 0.075 18 ...... H19 192.45 47.8 1 1.2 0.056 0.068 19 ...... H20 199.2 52.7 1 1.2 0.058 0.070 20 ...... H21 193.25 33.5 1 1.2 0.057 0.068 21 ...... H22 194.55 13.3 1 1.2 0.057 0.068 22 ...... H23 199.65 36.95 1 1.2 0.058 0.070 23 ...... H24 183.35 21.95 1 1.2 0.054 0.064 24 ...... H25 200.85 47.6 1 1.8 0.039 0.070 25 ...... H26 187.45 21.9 1 1.8 0.037 0.066 26 ...... H27 189.5 30.05 1 1.8 0.037 0.066 27 ...... H28 182.95 11.95 1 1.2 0.053 0.064 28 ...... H29 178.65 20.95 1 1.2 0.052 0.063 29 ...... H30 210.75 5.5 1 1.2 0.062 0.074 30 ...... H31 182.85 28.2 1 1.2 0.053 0.064 31 ...... H32 187.85 32.3 1 1.2 0.055 0.066 32 ...... H33 187.95 3.8 1 1.2 0.055 0.066 Total 6,142.45 1,028.45

The verification samples were secured by Fuli personnel under SRK’s supervision, and were then screened on-site and delivered for cutting and polishing in the Fuli processing workshop in Dunhua. The channel samples were sorted for stones intended for faceting, including:

• A total of 1,241 pieces totalling 1,710.83 ct of 1 to 3 mm sized stone (peridot sands); and

• A total of 666 pieces totalling 2,386.70 ct of >3 mm sized stone (peridot gemstones).

• The calculated grade for sand is 379.43 g/m3and for gemstone is 221.47g/m3.

The detailed statistics for the channel samples is provided in Table 11-4.

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Table 11-4: Statistics of Sample and Gemstone Information

Statistics of Gemstone Yield (Grade) Peridot Peridot Peridot Sands Gemstone Cuttable Cuttable Weight of Gemstone (1-3 mm) (>3mm) Gemstone Stone Pieces of 1-3 mm Combined Grade Grade No. (>3 mm) Weight (ct) 1-3 mm Sized (ct) (g) (g/m3) (g/m3) 1 ...... 10 42.65ct 5 7.35ct 10.00 141.09 120.35 2 ...... 16 56.95ct 62 104.80ct 32.35 459.04 161.62 3 ...... 30 139.65ct 75 128.45ct 53.62 707.81 368.69 4 ...... 24 68.45ct 16 24.60ct 18.61 278.86 205.13 5 ...... 19 77.35ct 12 30.90ct 21.65 319.12 228.03 6 ...... 9 28.60ct 45 48.55ct 15.43 238.67 88.48 7 ...... 16 42.75ct 29 40.15ct 16.58 235.50 121.44 8 ...... 16 53.65ct 12 18.75ct 14.48 253.49 187.84 9 ...... 15 37.65ct 32 48.05ct 17.14 232.06 101.95 10 ...... 26 107.65ct 44 48.85ct 31.30 452.70 311.40 11 ...... 11 55.40ct 9 11.80ct 13.44 180.51 148.81 12 ...... 27 86.40ct 30 29.40ct 23.16 391.38 292.01 13 ...... 42 190.10ct 44 75.80ct 53.18 901.89 644.79 14 ...... 37 116.40ct 44 48.75ct 33.03 480.41 338.60 15 ...... 26 64.45ct 21 34.25ct 19.74 293.93 191.94 16 ...... 6 9.55ct 12 20.15ct 5.94 103.95 33.43 17 ...... 22 36.65ct 78 65.20ct 20.37 270.59 97.37 18 ...... 17 72.35ct 22 27.90ct 20.05 296.92 214.29 19 ...... 12 45.60ct 24 32.50ct 15.62 223.48 130.48 20 ...... 7 44.60ct 17 25.10ct 13.94 205.58 131.55 21 ...... 24 106.35ct 20 30.75ct 27.42 401.68 311.59 22 ...... 74 353.10ct 105 182.40ct 107.10 1,528.85 1,008.10 23 ...... 11 24.75ct 50 50.25ct 15.00 233.16 76.94 24 ...... 35 118.35ct 57 72.95ct 38.26 542.90 335.87 25 ...... 11 27.95ct 20 20.10ct 9.61 146.11 84.99 26 ...... 21 47.50ct 73 86.55ct 26.81 403.21 142.88 27 ...... 15 59.10ct 49 57.40ct 23.30 362.97 184.13 28 ...... 7 23.45ct 53 90.00ct 22.69 361.97 74.82 29 ...... 13 46.15ct 18 44.88ct 18.21 246.20 124.82 30 ...... 40 100.70ct 45 39.80ct 28.10 437.98 313.91 31 ...... 16 46.75ct 52 56.30ct 20.61 312.69 141.86 32 ...... 11 55.70ct 66 108.15ct 32.77 496.91 168.92 Average Average Total ...... 666 2,386.70ct 1241 1,710.83ct 819.51 379.43 221.47

Rough grades quoted are by cubic meter not by metric tonne (conversion factor 2.85).

Source: SRK Analysis

Channel samples were sorted for polishing, delivering to the lapidary some 666 stones of peridot gemstones (>3 mm) weighing 2,386.70 cts (477.34 gr) and another 1,241 stones of peridot sands (1 to 3 mm) weighing 1,710.83 cts (342.16 gr), collectively 4,097.53 cts (819.51 gr).

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11.4 Gem Quality and Recovery Verification

Ten pieces of raw gem collected from the exploration adit and 32 pieces of cut and polished peridot were selected for gem quality verification.

10 pieces of rough peridot 32 pieces of cut and polished peridot Figure 11-7: 10 Pieces of Rough Peridot and 32 Pieces of Cut and Polished Peridot sent to NGTC

The gemstones comprised a suite of scientific specimens for testing purposes only, with no intended wholesale or retail value. The suite was designed for a Gemstone Authentication and Characterization Study (GACS) performed by an independent laboratory (NGTC and gemstone laboratory in China University of Geoscience) so as to determine or confirm principal gemological properties, and to provide diagnostic information on origin and provenance.

In addition, the GACS assists in construction of a gemstone Master Stone Set (MSS) for rough peridot sorting and cut and polished peridot grading. The MSS standardizes sorting rough and grading cut and polished peridot by the full quality matrix; i.e. size, color, clarity, and ability to be cut or shaped.

The 2017 NGTC report is attached in the appendix.

The current processing by Fuli is based on manual screening of the raw material which is further polished and cut.

The 2021 Feasibility Study report proposed a two stage, closed circuit comprising a crushing cycle followed by color screening, which may produce following type of products.

• Peridot gemstones, separated in several groups according to stone size, namely 30 mm and above, 10 to 30 mm, and 3 to 10 mm;

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• Peridot sands at the size between 1 mm and 3 mm; and

• Construction material basalt.

The overall recovery of the gemstone from screening to cut products is estimated at about 40% according to Fuli’s production records.

In order to test the 40 % yield reported by Fuli, SRK submitted a spot-sample (as collected by our geologists directly from the ultramafic inclusions near the site later tested by statistical sample M4) to Fuli’s gem processing workshop in Dunhua. The spot-sample was collected by SRK’s geologists comprised approximately 30 grams (151.7 carats) of peridot-olivine, which sorted out as shown in Figure 11-8. In all, the coarse fraction returned 63 gems with a total weight of 64.9 carats. Totally 30.1 carats of cut and polished peridot were produced from the coarse stones. Therefore, the “yield” or fraction of the weight produced versus original starting weight, for the coarse-grained (>5 mm) parcel is 46.4 %.

Figure 11-8 shows the samples collected on 14 August 2017 processed to cut and polished peridot in Fuli processing workshop.

Step 1 Sorting raw stone Step 2 Preliminary cutting

Step 3 Sorting by size and ready to grind Step 4 63 pcs gemstones Figure 11-8: Processing of Grab Samples from the Working Face of Yiqisong Nanshan Peridot Mine — 14 August 2017

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Table 11-5: Results of Grab Sample from the Working Face of Yiqisong Nanshan Peridot Mine — 14 August 2017

Stones Original Percent Goods Yield Item (pieces) Carats % Carats % Remark Adit Collection Total...... 58pcs 151.7 100.0 Processed: Coarse...... 63pcs 64.9 42.8 30.1 46.4 ≥5mm Medium...... 28.5 18.8 3-5mm Fine ...... 23.4 15.4 1-3mm Rough Total ...... 116.8 77.0

Source: SRK Analysis

In a blind test of the Fuli gem manufacturing system, all 63 stones in the coarse-grained > 5 mm class were processed to cut and polished peridot at the Company’s processing workshop in Dunhua under close supervision by SRK that same day.

12 MINERAL PROCESSING

12.1 Ore Properties

12.1.1 Ore Composition

The ore components of the ore are mainly basalt, peridotite, lherzolite, ferrichromspinel, magnetite and feldspar, etc. Basalt is the predominant gangue mineral enveloping the peridotite inclusions and monomers.

Peridot gem mainly occurs in peridotite inclusions primarily within the basalt. The dominant component of the peridotite is forsterite (above 85%), followed by pyroxene (more than 10%), spinel, magnetite, and occasionally feldspar. The peridotite in this project is predominately represented by dunite and lherzolite.

Peridot: it is the sole gemstone mineral. It is yellow green, and green, with most having xenomorphic-granular texture and a small number having lenticular lenses texture. It has glassy luster, mostly transparent and rarely translucent, with conchoidal fracture and high hardness. The streaks are colorless. The mineral grain size is mostly 0.5 mm-3 mm, with a few more than 3 mm-10 mm. Most have cracks or lanose lines, with a small amount of bubbles. Fine inclusions of spinel or magnetite are occasionally observed.

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Pyroxene: it is dominated by orthopyroxene, followed by clinopyroxene. Orthopyroxene is grayish brown-grayish green, having short columnar, plate-like and granular texture. It is transparent and translucent, with glassy luster. The two groups have orthogonal cleavage, with one being well developed. The particle size is 0.5mm-15mm, with individuals up to 20mm. Peridotite or spinel is sometimes found wrapped in crystals. The clinopyroxene is emerald green, with a particle size of 0.5 mm-3 mm. It has trace quantity.

Spinel: it has octahedral and irregular granular shape, with particle size 0.2 mm-5.0 mm. It is translucent, with glassy luster. The coarse grain is black, and the fine grain is reddish-brown.

Magnetite: it has grayish black granular texture, with metallic luster. The streaks are cherry-red, with strong magnetic properties. Some have been oxidized to hematite. The particle size is generally less than 0.5mm.

Feldspar: it is grayish white — white, having granular and plate-like texture. It is distributed as single crystal or aggregate. It is transparent and translucent, with glassy luster. There are many cleavages and fractures, with particle size of 5mm-30mm.

12.1.2 Chemical Composition and Gemstone Identification

The chemical analysis results of the lherzolite and dunite are shown in Table 12-1. The results show that peridotite is dominated by the magnesian-rich olivine, forsterite. The results of X ray fluorescence (XRF) geochemical analysis performed by the Beijing Jewellery Research Institute on three samples of peridot gemstone (S1, S2, and S3) selected by Fuli are also listed in Table 12-1.

Table 12-1: Chemical Composition of Peridotite

Chemical Composition and Contents(%) Sample No. Mineral SiO2 Al2O3 Fe2O3 FeO MgO CaO K2O Na2O TiO2 P2O5 MnO Cr2O3 GS-9 ...... lherzolite 44.00 2.32 1.76 6.63 41.85 2.14 0.11 0.20 0.20 0.20 0.12 0.10 765GaoXiDF1 ... Dunite 40.50 0.81 0.47 8.20 48.12 0.39 0.00 0.23 0.00 0.00 0.13 S1 ...... Peridot 41.99 1.24 7.98 48.14 0.14 0.06 0.01 0.00 0.39 0.05 S2 ...... Peridot 42.23 1.06 8.19 47.69 0.16 0.16 0.01 0.00 0.47 0.03 S3 ...... Peridot 42.45 1.20 8.90 46.74 0.19 0.07 0.01 0.00 0.42 0.03

Source:

1. Project Feasibility Study, NAIEG, 2021

2. Gems & Jewelry Identification and Evaluation Report, Beijing Jewellery Research Institute, NGTC, October 2015

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Identification of 41 ROM samples and four pieces of peridot finished product was conducted by Beijing Jewellery Research Institute, National Gems & Jewellery Technology Administrative Center (NGTC), with a resultant Gems & Jewelry Identification and Evaluation Report issued in October 2015. This report states that Raman spectroscopy tests of the black minerals on the surface of the outcropped peridot sample revealed that the black mineral is chromite. Chromite is also wrapped in peridot. The ultraviolet-visible absorption spectra test shows that iron is the main coloring element of the peridot. Based on the aspects of color, quality and shape, clarity, cut (finished product), etc., all 41 ROM samples and four pieces of peridot product were classified as natural peridot of gemstone grade.

12.1.3 Ore Type

According to the occurrence and mineral composition of peridot gemstones, there are three types of ore, including peridotite with pyroxene inclusions, peridotite with crystal inclusions and monocrystalline peridotite.

Peridotite with pyroxene inclusions: The mineral is mainly composed of peridot, associated with pyroxene, etc. The inclusions, having subangular to sub-rounded SR shape, are welded by basalt. The size is generally 3cm to 10cm, with larger gems greater than 25cm. This sub-type represents the main ore type of peridot gem, accounting for about 60 to 70% of the total amount encountered to date.

Peridotite with crystal inclusions: All minerals of inclusions are peridot. The crystal inclusion is welded by basalt, and the size is generally 3cm-7cm, with individuals up to 22cm. The difference of peridot crystals is small and the gem quality is good, accounting for 30 to 40% of the total amount.

Monocrystalline peridotite: Peridot with single crystal is welded by basalt. The degree of idiomorphology and transparency of crystals are good. The crystal grain size is 3mm to 10mm, with larger gems of 12mm to 15mm. The gemstones are of good quality and have large particles, accounting for 1 to 2% of the total amount.

12.1.4 Grade Classification of Peridot Gemstone

According to the quality of peridot, Fuli has adopted the following grading system.

Rough peridot is graded according to its color, clarity and size. Rough peridot is first graded by letter (A, B, C, D) according to their color and clarity. Peridot gemstones are green and without any internal characteristics or only slightly included, are of superior quality (Grade A).

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Then they are divided into five grades of I, II, III, IV and V according to the minimum crystal granularity. The granularity of each grade is: (V) 3mm to 5mm, (IV) 5mm to 7mm, (III) 7mm to 10mm, (II) 10mm to 12mm, and (I) larger than 12mm.

The Yiqisong Nanshan deposit is dominated by IV and V grade products, with about 9% I + II grade products, 37% III grade products and 54% IV and V grade products, based on the gem granularity standards.

12.2 Separation Processing Test

Peridotite ore processing is the process of separating peridot from other minerals (basalt, etc.). There are two main methods which are manual picking and mechanical sorting based on color differences. Manual picking involves sorting ore by hand on low-speed running belt conveyor after the rock has been crushed and screened. The separation results are good, but the labor intensity is high and the efficiency is low. Mechanical sorting involves separating the ore mechanically (by photoelectric separator, color sorter) at different grades after the rock has been crushed and screened based on the difference in the optical properties (colours) of peridot and other minerals. The processing capacity is large, but the sorting accuracy is low.

Manual picking is currently adopted for small scale processing production at the YQS Nanshan Project.. The color sorter is a separation device that sorts in line with the difference in optical properties (color, reflectivity, fluorescence, transparency, transmittance, etc.) between target mineral and gangue mineral. It is initially applied to the processing of minerals (for example, quartz, gypsum, wolframite, etc.) with significant color differences from gangue minerals, and then widely used in the separation of agricultural products such as grain and fruit. It has made great technological progress in recent years, and sorting precision and processing capacity have achieved great development.

In order to understand the sorting results of the color sorter on Yiqisong Nanshan peridot, SRK and Fuli personnel inspected two color sorter manufacturers and conducted sorting tests on YQS Nanshan mineralised samples on June 25-26, 2018. YQS Nanshan artificial ore samples are adopted, namely a mix of 25 peridotites (10 of 5 to 7mm, 10 of 7 to 10mm, and 5 of >10mm) and 5kg basalt particles of different grain size (5 to 10mm, 10 to 15mm, 15 to 30mm and 5 to 30mm) was sorted by a certain type of color sorter, and the test showed good sorting results that all peridot particles were sorted out (recovery rate of 100%) through one-stage separating by color sorter, and the basalt of any grain size were rarely brought into the sorted peridot concentrate with high sorting precision.

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Figure 12-1 shows the color sorter used for the test, the artificial ore sample of a certain grain size (blended ore of peridot and basalt), and the sorted peridot.

Figure 12-1: A Kind of Color Sorter and Its Separation Test

12.3 Processing Plant Design

12.3.1 Production Capacity and Product Plan

According to the Feasibility Study, The ROM processing plant is designed to be situated at the exit of the main adit. Figure 12-2 is the photo of the preparing industrial site taken in September 2020 during SRK’s site visit.

Figure 12-2: Overview of the Processing Industrial Site and Mining Adit

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The designed processing capacity is 300,000 tpa ROM. The product plan consists of three grades of rough peridot gemstones and peridot sands at industrial level. The details are presented in Table 12-2.

The feed ore grade of peridot greater than 3mm is 40.23g/t, of which 9% is greater than >10mm, 37% is above 7-10mm, and 54% is above 3-7mm. The feed ore grade for peridot of 1-3mm is 15.8%. After separated by color sorter, the recovery rates of peridot of each grain size are: 98.00% of >10mm, 95.00% of 3-10mm, and 70.00% of 1-3mm.

For the peridot sands of 1-3mm grade, after screening, 0.05% can be separated to the gem level and 99.95% to the industrial level. In a full capacity, 300,000 tonnes of ore can produce the following primary rough: 1.06 tonne at >10mm, 4.24 tonne at above 7-10mm, 6.19 tonne at above 3-7mm, and 13.8 tonne at 1-3mm, and 27,636 tonne of industrial peridot sands at 1-3mm. The <1mm peridot sands and the remaining >1mm peridot are mixed into the basalt waste rock and are no longer separated.

According to the Feasibility Study, the designed production capacity of the ROM processing plant is 1,000 tpd. The plant is scheduled to operate 300 days per year, two 8-hour shifts per day. The plant annual available rate is forecast at 54.8%.

Table 12-2: Processing Parameters

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12.3.2 Processing Flowsheet

A two-stage open-circuit crushing process and separation by photometric sorter are to be adopted. The final crushing granularity is less than 30mm. as shown in Figure 12-3. The brief description is as follows:

The ore is transported from the mining adit to the ore processing plant and discharged into the ROM bin. A grizzly ore feeder is set under the ROM bin, which pre-classifies the ROM into two parts at a cut size of 60mm and feeds the oversize to the first stage jaw crusher for primary crushing. The crushed ore is classified by #1 vibrating screen at a cut size of 30mm. The oversize of #1 vibrating screen is fed to the secondary jaw crusher. The discharge of the secondary jaw crusher is merged with the undersize of the vibrating screen and then classified by a triple-deck vibrating screen (#2 vibrating screen) to 4 size classes. The different size classes are fed to different photometric sorters, which separate the peridot from the feed materials.

The undersize of the grizzly ore feeder is classified by #3 vibrating screen at a cut size of 30mm. The oversize is fed to the secondary jaw crusher. The undersize is classified by a double-decked vibrating screen (#4 vibrating screen), and then fed to photometric sorters in line with size class. The photometric sorters separate the peridot from its feed materials.

The peridot grains are loose in peridot inclusions and peridot are easy to be liberated from the host basalt, a majority of peridot will be in the under size of the grizzly ore feeder. As the screening efficiency of grizzly feeder is generally low, a specific grizzly ore feeder with longer bars will be used for prompting the screening efficiency.

There is no fatal defect in the flowsheet. Because the throughput and separation efficiency of a color sorter is low when the feed size is fine, SRK recommends screening the less than 3mm fraction into 1-3mm and less than 1mm. The less than 1mm fraction is discard as waste rock and use two or three stages of photometric sorting process (one roughing and two cleanings) to separate the peridot from the 1-3mm fraction.

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Run-of-Mine

Grizzly Ore Feeder +60mm -60mm Primary Crushing Jaw Crusher

st 1 Vibrating Screen 4th Vibrating Screen -30mm +30mm +30mm

Secondary Crushing Jaw Crusher 5th Vibrating Screening

-30+10mm -10+3mm -3mm

nd 2 Vibrating Screening Photometric Sorting 6th Vibrating Screening

+30mm -30+10mm -10+3mm -3mm -3+1mm -1mm

rd Peridot 2 Basalt Basalt Basalt Photometric Sorting 3 Vibrating Screening Photometric Sorting -3+1mm -1mm

Peridot 2 Basalt Basalt Photometric Sorting Photometric Sorting Photometric Sorting -3+1mm -3+1mm Photometric Sorting Photometric Sorting Peridot 1 Basalt Peridot Sand Basalt -3+1mm -3+1mm Peridot 1 Basalt Peridot Sand Basalt

Figure 12-3: Mechanical Processing Flowsheet

12.3.3 Processing Facilities and Equipment

The proposed processing facilities includes ROM ore bin, crushing workshop, screening workshop, photometric sorting workshop, etc.

Table 12-3 lists the major ore processing equipment as outlined in the FS 2021. SRK considers it is reasonable to conduct color separation after ore classification, and the narrower the particle size level, the better the separating effect. SRK considers that there is no fundamental defect in the designed separation process. The appropriate separation size needs to be adjusted in actual production to gradually achieve the best separation effect. For the less than 3mm materials, the production capacity of the color sorter will be seriously reduced due to its fine grain size. It is necessary to screen out the less than 1mm fraction before the separation of the 1-3mm grain size. However, due to the fine grain size, more waste will be brought in, therefore it is recommended to add a cleaning-separation stage to produce pure peridot sands product.

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Table 12-3: Major Mineral Processing Equipment

Motor Power No. Equipment Model/Specification (kw) Quantity 1 Grizzly Feeder ...... GZT0936 15 1 2 Jaw Crusher ...... PEF500×750 55 1 3 Vibrating Ore Feeder ...... ZG40-4 0.5 11 4 Jaw Crusher ...... PEX250×1200 45 2 5 Linear vibrating Screen...... 3USL2.1×4.8 37 1 6 Vibrating Screen ...... USK1.8×4.5 15 1 7 Linear Vibrating screen...... USL1.2×3.0 1 1 8 Linear Vibrating screen...... USL1.2×4.8 11 1 9 Power-driven bridge type lift . LDA10.5-S5T 9.5 1 10 Power-driven bridge type lift . LDA7.5-S5T 8.3 1 11 Electric hoist...... CDI13t-12m 6.5 1 12 Photoelectric Sorter...... 240k 11 11 13 #1 Belt Conveyor ...... B=650 L=25M 11 1 14 #2 Belt Conveyor ...... B=650 L=41M 15 1 15 #3 Belt Conveyor ...... B=500 L=18M 7.5 1 16 #4 Belt Conveyor ...... B=500 L=31M 11 1 17 #5 Belt Conveyor ...... B=500 L=39M 15 1 18 #6 Belt Conveyor ...... B=500 L=28M 11 4 19 #7 Belt Conveyor ...... B=500 L=18M 7.5 1 20 Large angle Conveyor ...... B=500 L=8M 5.5 4 21 Residue pump ...... KZJ40-17 35 2 22 #8 Belt Conveyor ...... B=500 L=31M 11 1 23 #9 Belt Conveyor ...... B=500 L=30M 11 1 24 #10 Belt Conveyor ...... B=500 L=25M 11 1

Source: 2021 Feasibility Study

13 MINERAL RESOURCE ESTIMATE

13.1 Introduction

The Mineral Resource Statement presented herein represents the peridot gemstone resource evaluation prepared for the YQS Nanshan Project in accordance with the JORC Code (2012).

The Mineral Resource model prepared by SRK considers samples derived from 50 diamond core boreholes and 15 trenches, as well as three underground adits as collected by Fuli during the period from 2014 to 2017.

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This section describes the resource estimation methodology and summarises the key assumptions considered by SRK. In the opinion of SRK, the resource reported herein is a reasonable representation of the global peridot resources found in the YQS Nanshan Project based on the current level of sampling. The Mineral Resources have been estimated in conformity with generally accepted Mineral Resource and Ore Reserves Best Practices Guidelines and are reported in accordance with the JORC Code (2012). Mineral Resources are not Ore Reserves and have not demonstrated economic viability. There is no certainty that all or any part of the Mineral Resource will be converted into Ore Reserve.

The database used to estimate the YQS Nanshan Mineral Resource was audited by SRK. SRK is of the opinion that the current drilling information is sufficiently reliable to interpret with confidence the boundaries for the peridot-mineralised zones and that the assay data are sufficiently reliable to support Mineral Resource estimation.

Dassault Systèmes’ Geovia Surpac 6™ software was used to construct the geological solids, prepare assay data for geostatistical analysis, construct the block model, estimate grades, and tabulate Mineral Resources.

13.2 Resource Estimation Procedures

The resource evaluation methodology involved the following procedures:

• Database compilation and verification

• Construction of wireframe models for the boundaries of the peridot mineralization

• Definition of resource domains

• Data conditioning (compositing and capping) for geostatistical analysis and variography

• Block modelling and grade interpolation

• Resource classification and validation

• Assessment of “reasonable prospects for eventual economic extraction” and selection of appropriate cut-off grades

• Preparation of the Mineral Resource Statement

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13.3 Resource Database

The resource database compiled by SRK includes a total of 50 core drill holes, 15 trenches and three underground adits (tunnels). A total of 113 samples were accounted for statistics of gemstone grade. The database has incorporated eight verification drill holes and seven in-fill sampling channels, which were sampled in July and August 2017 under SRK’s supervision. Details of the database were sorted in table below.

Table 13-1: Database Used for Resource Estimates

Hole_ID Northing Easting Elevation Depth ZK5 ...... 4,851,617.66 43,415,059.65 702.17 65.2 0ZK1 ...... 4,851,246.62 43,415,059.72 696.86 64.6 0ZK2 ...... 4,851,807.58 43,415,075.16 679.30 46.1 0ZK3 ...... 4,850,810.86 43,415,059.14 696.23 55.1 0ZK4 ...... 4,851,033.50 43,415,045.64 693.62 48.3 1ZK1 ...... 4,850,815.16 43,414,891.53 697.01 52.0 ZK2 ...... 4,851,414.66 43,414,742.65 676.29 37.8 3ZK1 ...... 4,851,034.04 43,414,671.67 698.87 68.5 3ZK3 ...... 4,850,815.17 43,414,663.66 672.94 38.3 4ZK1 ...... 4,851,619.11 43,415,458.81 694.26 74.2 4ZK2 ...... 4,851,829.97 43,415,468.99 695.86 63.7 4ZK3 ...... 4,851,226.17 43,415,476.65 690.44 62.1 5ZK1 ...... 4,851,436.21 43,414,367.13 684.38 50.3 5ZK2 ...... 4,851,014.92 43,414,370.42 697.55 58.0 5ZK3 ...... 4,850,831.31 43,414,370.48 685.44 45.5 7ZK1 ...... 4,851,432.11 43,414,208.39 701.36 56.8 9ZK2 ...... 4,851,258.77 43,414,064.01 701.14 71.3 9ZK3 ...... 4,851,060.27 43,414,047.00 684.94 63.1 9ZK4 ...... 4,850,878.43 43,414,056.31 650.56 26.5 9ZK5 ...... 4,851,499.69 43,414,043.92 699.48 53.7 9ZK6 ...... 4,851,573.41 43,414,062.95 685.86 40.8 9ZK4-1 ...... 4,851,422.18 43,414,049.47 704.77 59.2 ZK4 ...... 4,851,444.66 43,414,065.65 702.25 57.9 10ZK1 ...... 4,851,030.18 43,416,048.96 671.20 52.6 11ZK1-1 ...... 4,851,447.08 43,413,884.28 701.10 54.1 11ZK1 ...... 4,851,247.84 43,413,865.44 695.82 84.7 11ZK2 ...... 4,851,037.81 43,413,867.93 668.29 43.8 11ZK3 ...... 4,851,521.91 43,413,844.14 693.38 52.6 11ZK5 ...... 4,851,554.16 43,413,880.02 688.04 50.8 11ZK6 ...... 4,851,339.11 43,413,874.73 695.28 58.8

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Hole_ID Northing Easting Elevation Depth ZK3 ...... 4,851,425.66 43,413,668.65 690.98 54.7 13ZK1-1 ...... 4,851,232.15 43,413,670.34 696.97 58.4 13ZK2 ...... 4,851,041.35 43,413,660.60 677.76 36.2 13ZK3 ...... 4,851,560.55 43,413,681.34 672.14 31.3 14ZK1 ...... 4,850,675.78 43,416,463.02 659.26 40.8 15ZK1 ...... 4,851,430.20 43,413,461.58 699.73 57.8 15ZK2 ...... 4,851,242.85 43,413,462.13 691.47 64.7 15ZK3 ...... 4,851,002.78 43,413,464.35 683.09 34.1 15ZK4 ...... 4,850,808.68 43,413,464.32 681.24 35.9 17ZK1 ...... 4,851,448.06 43,413,332.67 673.47 30.5 ZK1 ...... 4,851,444.66 43,413,877.65 700.86 56.0 3ZK4 ...... 4,851,220.00 43,414,625.00 703.00 63.5 5ZK1-2 ...... 4,851,213.00 43,414,395.00 708.00 71.6 7ZK2 ...... 4,851,265.00 43,414,230.00 708.00 74.6 7ZK3 ...... 4,851,050.00 43,414,220.00 703.00 71.0 11ZK1-2 ...... 4,851,415.00 43,413,813.00 698.00 69.8 14ZK2 ...... 4,850,921.00 43,413,532.00 678.00 40.6 14ZK3 ...... 4,851,496.00 43,413,542.00 680.00 45.0 14ZK4 ...... 4,851,353.00 43,413,558.00 703.00 73.1 3YK1 ...... 4,851,513.78 43,414,568.20 660.76 11.6 3YK-2...... 4,851,588.63 43,414,693.98 657.89 8.0 14YK-1...... 4,850,627.01 43,416,397.04 645.07 20.0 98TC2-1 ...... 4,851,662.00 43,413,955.00 670.24 8.1 98TC11...... 4,850,606.62 43,416,445.92 645.47 23.0 99TC9...... 4,851,910.00 43,415,060.00 652.91 7.4 7TC1 ...... 4,851,589.23 43,414,232.05 663.69 37.6 M1 ...... 4,851,607.48 43,413,478.01 651.00 3.0 M2 ...... 4,851,604.54 43,413,477.40 651.00 3.0 M3 ...... 4,851,478.73 43,413,460.71 651.00 3.0 M4 ...... 4,851,475.84 43,413,468.66 651.00 3.0 M5 ...... 4,851,470.43 43,413,468.42 651.00 3.0 M6 ...... 4,851,459.04 43,413,473.61 651.00 3.0 M7 ...... 4,851,462.70 43,413,459.82 651.00 3.0 15KD2 ...... 4,851,614.29 42,413,483.39 651.40 3.1

The topographic data was sourced from survey conducted by the No. 2 Institute in 2016 and there was no material change to the topography, which may impact the resource estimates since January 2016.

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13.4 Solid Body Modelling

SRK has modelled the solid wireframe for the peridot resource domain. During the process, the topography and the roof and base of the mineralisation domain (basalt with peridotite inclusion) were key factors to constrain the solid model. Knowledge of the geological characteristics discussed in aforementioned sections constructed the resource modeling.

Considering YQS Nanshan is an eruptive basalt-type of peridot deposit, the mineralised body shares a relatively flat occurrence with layered distribution (Figure 13-1) conformable to the volcanic host rock. The interpretation of the resource domain was performed by SRK’s geologist based on the drilling/channeling intercepts of the ultramafic inclusions represented by peridotite within the basaltic host. The interpreted wireframe was further constrained by the topographic model, which was based on the survey of collar results.

In general, the domain was controlled by a 200 m by 200 m to 400 m drilling grid, and the extrapolation was done within 100 m (Figure 13-2).

Figure 13-1: Oblique section showing solid model of the Peridot Mineralisation Domain

Source: SRK

Figure 13-2: Plan showing Interception and Controlling of the Resource Domain

Source: SRK

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The resource domain was constrained to the YQS Nanshan Project area. The geometry of the modelled domain was constrained by following coordinates.

• 4850738 to 4851957 N;

• 43413395 to 43415303 E; and

• 623 to 673 m RL.

13.5 Compositing

The compositing was completed prior to geostatistical analysis, and the composites were calculated with a uniform length of samples. According the sample statistics, a length at1mwas selected for compositing, with a minimum accountable length at 0.5 m. The statistics and grade interpolation were based on the composite samples.

13.6 Basic Statistics and Evaluation of Outliers

Prior to grade interpolation (estimation), a basic statistical analysis of the percentage of peridot inclusions and gemstone grade (yield) was performed. The statistics shows that the weighted percentage of peridotite inclusions is about 19.3% and the average grade of peridot gemstone is about 131 g/m3.

Top cut analysis for peridot was conducted on all the domains’ statistics prior to block model grade interpolation. Top cut analysis is undertaken to assess the influence extreme grade outliers have on the sample population of each data type. Although the extreme grades are real, these outliers are not representative of the domain assay population and so may overstate the block grades in some parts of the deposit if left uncut. In order to avoid any disproportionate influence of random, anomalously high-grade assays on the resource average grade, SRK studied the histogram and grade for the composites, and considered there was no need to apply a top cut for this Project.

Table 13-2: Basic Sample Statistics

Inclusion Drill Hole ID From To Interval Percentage ZK5 ...... 54.25 56.90 2.65 10.20 0ZK1...... 52.59 53.69 1.10 24.37 0ZK1...... 53.69 54.59 0.90 28.58 0ZK1...... 54.59 55.60 1.01 26.20

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Inclusion Drill Hole ID From To Interval Percentage 0ZK2...... 35.26 35.86 0.60 19.92 0ZK2...... 35.86 36.62 0.76 20.31 ZK2 ...... 26.50 28.00 1.50 10.40 3ZK1...... 49.23 50.13 0.90 24.22 3ZK1...... 50.13 51.23 1.10 23.47 3ZK1...... 51.23 52.03 0.80 27.50 3ZK1...... 52.03 53.23 1.20 25.64 3ZK1...... 53.23 54.00 0.77 26.56 3ZK1...... 54.00 55.10 25.39 3ZK3...... 28.84 29.74 0.90 20.69 3ZK3...... 29.74 30.54 0.80 22.35 3ZK3...... 30.54 31.65 1.11 18.01 4ZK2...... 53.75 54.15 0.40 23.04 4ZK2...... 54.15 54.75 0.60 23.18 5ZK1...... 29.25 30.25 1.00 23.37 5ZK1...... 30.25 31.38 1.13 24.80 5ZK1...... 31.38 32.28 0.90 26.62 5ZK1...... 32.28 33.48 1.20 27.52 5ZK1...... 33.48 34.28 0.80 26.21 5ZK1...... 34.28 35.07 0.79 24.44 5ZK2...... 45.86 46.86 1.00 20.63 5ZK2...... 46.86 47.82 0.96 20.11 7ZK1...... 45.80 47.00 1.20 12.90 7ZK1...... 47.00 48.45 1.45 11.76 9ZK2...... 44.71 45.51 0.80 23.58 9ZK2...... 45.51 46.26 0.75 24.69 9ZK3...... 30.55 31.55 1.00 14.50 9ZK3...... 31.55 32.45 0.90 16.49 9ZK3...... 32.45 33.50 1.05 15.17 9ZK5...... 44.70 45.70 1.00 9.36 9ZK5...... 45.70 46.60 0.90 12.36 9ZK5...... 46.60 47.55 0.95 9.39 9ZK6...... 26.80 27.80 1.00 16.56 9ZK6...... 27.80 28.50 0.70 18.33 9ZK6...... 28.50 29.35 0.85 17.41 9ZK4-1 ...... 48.05 49.35 1.30 9.20 9ZK4-1 ...... 49.35 50.45 1.10 12.25 9ZK4-1 ...... 50.45 51.45 1.00 9.51 11ZK1-1 ...... 40.00 40.80 0.80 15.43

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Inclusion Drill Hole ID From To Interval Percentage 11ZK1-1 ...... 40.80 41.70 0.90 14.43 11ZK1-1 ...... 41.70 42.40 0.70 19.03 11ZK1-1 ...... 42.40 43.60 1.20 13.27 11ZK1-1 ...... 43.60 44.80 1.20 14.37 11ZK1-1 ...... 44.80 45.86 1.06 16.41 11ZK1...... 43.93 44.83 0.90 13.61 11ZK1...... 44.83 46.03 1.20 16.58 11ZK1...... 46.03 46.63 0.60 15.59 11ZK2...... 23.08 24.18 1.10 18.31 11ZK2...... 24.18 25.23 1.05 18.53 11ZK3...... 35.89 36.69 0.80 18.31 11ZK3...... 36.69 37.79 1.10 19.78 11ZK3...... 37.79 38.69 0.90 22.37 11ZK3...... 38.69 39.89 1.20 21.27 11ZK5...... 37.60 38.40 0.80 14.64 11ZK5...... 38.40 39.40 1.00 14.45 11ZK5...... 39.40 40.30 0.90 16.49 11ZK5...... 40.30 41.20 0.90 15.35 11ZK6...... 43.06 43.96 0.90 14.48 11ZK6...... 43.96 44.96 1.00 13.62 11ZK6...... 44.96 46.06 1.10 16.26 11ZK6...... 46.06 46.86 0.80 17.70 11ZK6...... 46.86 47.96 1.10 16.61 11ZK6...... 47.96 49.06 1.10 14.30 11ZK6...... 49.06 50.04 0.98 15.40 ZK3 ...... 23.00 25.70 2.70 15.50 13ZK1-1 ...... 35.00 36.20 1.20 18.29 13ZK1-1 ...... 36.20 37.60 1.40 21.53 13ZK1-1 ...... 37.60 38.40 0.80 22.05 13ZK1-1 ...... 38.40 39.00 0.60 18.69 13ZK2...... 20.75 21.55 0.80 20.64 13ZK2...... 21.55 22.65 1.10 18.13 13ZK2...... 22.65 23.55 0.90 22.70 13ZK2...... 23.55 24.40 0.85 20.00 13ZK3...... 13.77 14.57 0.80 17.33 13ZK3...... 14.57 15.57 1.00 15.43 15ZK1...... 41.10 42.00 0.90 24.39 15ZK1...... 42.00 43.50 1.50 23.81 15ZK1...... 43.50 44.00 0.50 27.91

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Inclusion Drill Hole ID From To Interval Percentage 15ZK1...... 44.00 45.20 1.20 28.30 15ZK1...... 45.20 46.20 1.00 23.37 15ZK2...... 36.80 37.60 0.80 18.49 15ZK2...... 37.60 38.70 1.10 22.32 15ZK2...... 38.70 39.90 1.20 20.33 15ZK3...... 21.50 22.60 1.10 14.43 15ZK3...... 22.60 23.40 0.80 16.53 15ZK3...... 23.40 24.25 0.85 15.56 15ZK4...... 24.40 25.60 1.20 18.21 15ZK4...... 25.60 26.40 0.80 24.31 15ZK4...... 26.40 27.40 1.00 19.06 3ZK4...... 56.20 59.55 3.35 5.00 5ZK1-2 ...... 54.10 60.70 6.60 10.00 7ZK2...... 52.80 53.90 1.10 3.00 7ZK3...... 67.25 69.65 2.40 5.00 11ZK1-2 ...... 41.80 49.00 7.20 20.00 14ZK2...... 16.00 30.10 14.10 40.00 14ZK3...... 34.65 38.65 4.00 35.00 14ZK4...... 52.50 58.70 6.20 35.00 3YK1 ...... 0.50 3.10 2.60 25.00 3YK1 ...... 4.50 7.00 2.50 26.00 3YK1 ...... 8.50 10.20 1.70 24.00 3YK-2...... — 8.00 2.70 26.00 14YK-1 ...... — 20.00 1.00 — 98TC2-1 ...... —3.300.66— 98TC11 ...... 7.80 10.30 0.58 — 99TC9...... 6.10 7.40 1.07 — 7TC1...... 6.10 13.60 2.29 15.50 M1 ...... — 3.00 3.00 35.00 M2 ...... 1.00 3.00 3.00 35.00 M3 ...... 1.00 3.00 3.00 50.00 M4 ...... 1.00 3.00 3.00 45.00 M5 ...... 1.00 3.00 3.00 40.00 M6 ...... 1.00 3.00 3.00 40.00 M7 ...... 1.00 3.00 3.00 40.00

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13.7 Density

The density data related to this Resource estimate was based on 30 density samples collected and analysed by the No. 2 Institute in 2015 and 50 samples analysed by Changchun Test Centre of Jilin Mineral Resource Supervision and Test Authority in 2017. SRK considers that an average value of 2.85 g/cm3 is appropriate for the tonnage estimation, as this is a reasonable reflection of the basalt density related to the Project.

13.8 Statistical Analysis and Variography

Due to limited grade data, no geostatistical analysis or variogram modelling of the peridot grade was performed in this Project. Instead, SRK has performed an overall statistical analysis of the grade and peridot inclusion percentage. Table 13-2 suggests a relative stable percentage of the peridot inclusions with minor fluctuations.

The inverse distance squared method was used for grade and percentage (peridot inclusions) estimates, and the anisotropy of the major, second major and minor directions was 1:1:4.

13.9 Block Model and Grade Estimation

SRK established the block model according to the geometry of the solid model, and the block sizewasdeterminedas20mby20mby4m(X,Y,Z)withsubsidiary blocks at a size of 10 m by 10mby2m(X,Y,Z).

Figure 13-3: Resource Block Model

During the grade estimation, the maximum search distance along X-Y plan was set to 200 m, while in the vertical direction (Z) was 5 m. The block estimation was constrained in the solid wireframe.

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13.10 Model Validation and Sensitivity

SRK validated the block model validation to confirm the reasonableness of the estimation parameters and estimation result. The following methods were adopted by SRK for validation:

• Visual validation of block grades against drill hole grades; and

• Statistical validation of the mean composite grades versus block estimates.

Table 13-3 shows a comparison of block mean grades with the solid composites grade for the percentage of peridot inclusions, which shows that the differences are within an acceptable limits.

Table 13-3: Comparison of Composites and Blocks — Percentage of Peridot Inclusions

Composites Mean Block Mean % Difference Absolute Difference 19.3 19.1 1.0 0.2

Source: SRK analysis

13.11 Mineral Resource Classification

Mineral Resource classification is typically a subjective concept. Industry best practices suggest that resource classification should consider the confidence in the geological continuity of the mineralised structures, the quality and quantity of exploration data supporting the estimates, and the geostatistical confidence in the tonnage and grade estimates. Appropriate classification criteria should aim at integrating these concepts to delineate regular areas at similar resource classification.

SRK is satisfied that the geological modelling honours the current geological information and knowledge. The location of the samples and the assay data are sufficiently reliable to support resource evaluation. The sampling information was acquired primarily by core drilling and channeling sampling on sections spaced at 200 metres.

Generally, for mineralisation exhibiting good geological continuity investigated at an adequate spacing with reliable sampling information accurately located, SRK considers that blocks estimated during the first estimation run considering full variogram ranges can be classified in the Indicated category within the meaning of the JORC Code (2012). For those blocks, SRK considers that the level of confidence is sufficient to allow appropriate application of technical and economic parameters to support mine planning and to allow evaluation of the economic viability of the deposit. Those blocks can be appropriately classified as Indicated.

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Conversely, blocks estimated during the second pass considering search neighbourhoods set at twice the variogram ranges should be appropriately classified in the Inferred category because the confidence in the estimate is insufficient to allow for the meaningful application of technical and economic parameters or to enable an evaluation of economic viability.

To define the Mineral Resources, SRK has adopted a cut-off grade of the peridot gemstone at 4 g/t (i.e 20 ct/t). The resource classification was performed further based on following criteria.

• Indicated Mineral Resource is defined in the area with at least 2 search holes or channels/trenches separated by the nearest distance of informing samples less than 220 m;

• Inferred Mineral Resource has been limited to the area apart from categorisation of Measured and Indicated Resources and is constrained to the hard boundary of the solid model.

• There are no Measured Mineral Resources defined in the Project.

The classification of local blocks based on the criteria above has been further validated and corrected with the consideration of geological interpretation derived from the drill interceptions (Figure 13-4).

Figure 13-4: Plan showing applied Resource Classification (Red — Indicated, Blue — Inferred)

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13.12 Mineral Resource Statement

The JORC Code (2012) defines a Mineral Resource as:

“A Mineral Resource is 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.”

The “reasonable prospects for eventual economic extraction” requirement generally implies that the quantity and grade estimates meet certain economic thresholds and that the mineral resources are reported at an appropriate cut-off grade that takes into account extraction scenarios and processing recoveries. In order to meet this requirement, SRK considers that major portions of the YQS Nanshan Project are amenable for an underground extraction.

In order to determine the quantities of material offering “reasonable prospects for economic extraction” by an open pit, SRK used a pit optimiser and mining assumptions to evaluate the proportions of the block model (Indicated and Inferred blocks) that could be “reasonably expected” to be mined from an underground operation.

Table 13-4: Conceptual Assumptions Considered for Underground Resource Reporting

Parameter Value Unit Gemstone Price (unpolished raw) — wholesale ..... 3.5 US$/ct Peridot sands (1-3 mm) Price — wholesale ...... 30 US$/t Mining costs ...... 17 US$ per tonne mined Process cost — overall ...... 17 US$ per tonne of feed

Parameter Value Unit General and administrative ...... 8 US$ per tonne of feed Mining + Process recovery ...... 75 percent Sales cost ...... 15 US$ per tonne of feed In-situ Cut-off grade ...... 20 ct/t

SRK considers that the blocks at a cut-off estimated in table above show “reasonable prospects for economic extraction” and can be reported as a Mineral Resource in accordance to the JORC Code (2012) definitions.

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Apart from gemstone resources, the peridot sands (1-3 mm peridot) was determined by the percentage of peridot inclusions. An average percentage at 85% of the peridot sands in the inclusions is recognised.

The Mineral Resource statement for the peridot gemstone is shown in table below.

Table 13-5: Mineral Resource Statement for the YQS Nanshan Peridot Gemstone (cut-off grade: 20ct/t, as of December 31, 2020)

Percentage of Gemstone Category Volume M Tonnage Inclusions Grade

m3 Mt % ct/t Indicated ...... 1.8 5.2 19.5 236 Inferred ...... 2.1 6.1 18.9 210

The information in this report which relates to Mineral Resource is based on collaborative team work done by Dr Anshun Xu, FAusIMM, Mr Pengfei Xiao, MAusIMM, Mr Feng Li, MAusIMM and Mr William Rohtert (Graduate Gemmologist) who represent SRK team being responsible for the Mineral Resource statement. Dr Xu, Mr Xiao and Mr Li have sufficient experience in the geology and mineralisation style (peridot basalt) and Mr Rohtert has sufficient experience in color gemstone including peridot. The SRK team has sufficient experience relevant to the style of mineralisation and type of deposit under consideration and to the activity which they are undertaking to qualify as Competent Persons as defined in the 2012 Edition of the “Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves”. Mr William Rohtert is the main Competent Person for the mineral resource statements and consents to the reporting of this information in the form and context in which it appears.

In addition, the resources of peridot sands (1-3mm peridot) are stated below.

Table 13-6: Peridot sands (1-3 mm size) Resource Statement (as of December 31, 2020)

Category Tonnage Peridot sands

Mt % Indicated ...... 5.2 16.6 Inferred ...... 6.1 16.1

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The information in this report which relates to Mineral Resource is based on collaborative team work done by Dr Anshun Xu, FAusIMM, Mr Pengfei Xiao, MAusIMM, Mr Feng Li, MAusIMM and Mr William Rohtert (Graduate Gemmologist) who represent SRK team being responsible for the Mineral Resource statement. Dr Xu, Mr Xiao and Mr Li have sufficient experience in the geology and mineralisation style (peridot basalt) and Mr Rohtert has sufficient experience in color gemstone including peridot. The SRK team has sufficient experience relevant to the style of mineralisation and type of deposit under consideration and to the activity which they are undertaking to qualify as Competent Persons as defined in the 2012 Edition of the “Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves”. Mr William Rohtert is the main Competent Person for the mineral resource statements and consents to the reporting of this information in the form and context in which it appears.

14 ORE RESERVE ESTIMATES

The purpose of this section is to summarise the Ore Reserve estimate program and results.

A feasibility study was compiled by NAIEG for the Project in April 2020. Based on this feasibility study (FS 2021) SRK considered the relevant modifying factors and estimated the Ore Reserves for the Project using Surpac™ (Version 6.6). The estimated Ore Reserves were reported in accordance with the JORC Code (2012).

14.1 Summary of Mining Technical Information/Design Data

The Company has provided SRK with a feasibility study report for the Project. After reviewing the feasibility study report, SRK considers:

• It is reasonable for any future mining operation to be designed as an underground mine with a full mining capacity of 300,000 tpa ROM in technical approach; and

• It is reasonable to access the deposit using adits with trackless equipment employing cut and fill as main stoping method.

SRK estimated the Ore Reserves for the Project in accordance to the JORC Code (2012) based on the parameters and assumptions outlined in the feasibility study.

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14.2 Break-even Cut-off Grade (“BCOG”)

The following formula was applied by SRK to calculate the BCOG of peridot for ROM.

C A= P×R

The parameters applied to calculate the BCOG are presented in Table 14-1.

Table 14-1: Calculation of BCOG

Variable Unit Value Description A ...... ct/t 44.7 BCOG of peridot C ...... RMB/t ROM 7,895.9 Total operating cost R ...... % 33.9 Total recovery rate P ...... RMB/ct 522.2 Weighted average price of product

The summary of cost, recovery rate and price calculation using for Ore Reserve estimation purposes are presented in Table 14-2, Table 14-3 and Table 14-4 below. The detailed description is included in the following Capital and Operating Costs, Mineral Processing, and Economic Analysis Chapters.

Table 14-2: Summary of Operating Cost

OPEX Unit Parameter Mining cost...... RMB/t ROM 251.7 Ore processing cost ...... RMB/t ROM 205.9 Administrative cost ...... RMB/t ROM 237.6 Sales cost-total products ...... RMB/t ROM 317.0

OPEX Unit Parameter Hand cutting cost-products ...... RMB/t ROM 12.9 Machine processing cost-products ...... RMB/t ROM 9.1 Peridot sand processing cost to peridot gem dots ...... RMB/t ROM 4,861.6 Market development cost...... RMB/t ROM 2,000.0 Total OPEX...... RMB/t ROM 7,895.9

Source: Feasibility Study and Fuli

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Table 14-3: Summary of Plant Recovery Rate

Recovery Unit Parameter Processing recovery (>10mm gems) ...... %98 Processing recovery (<=10mm gems) ...... %95 Processing recovery (peridot sands)...... %70 Further processing yield (>10mm gems) ...... %35 Further processing yield (above 7-10mm gems) ...... %35 Further processing yield (above 3-7mm gems) ...... %36 Total average recovery from rough peridot gemstone to cut and polished peridot ...... % 33.9

Portion of Gems Unit Parameter large gem (>10mm)...... %9 Medium gem (above 7-10mm)...... %37 Small gem (above 3-7mm) ...... %54

Source: Feasibility Study and Fuli

Table 14-4: Summary of Price Assumption

Price Unit Parameter large gem (>10mm)...... RMB/ct 1,883.9 Medium gem (above 7-10mm)...... RMB/ct 491.7 Small gem (above 3-7mm) ...... RMB/ct 316.1 Average Price ...... RMB/ct 522.2

Source: Feasibility Study and Fuli

The BCOG is estimated by SRK at 44.7 ct/t. SRK considers that material with peridot grades greater than 44.7ct/t can be mined economically. Ore Reserves estimated at the BCOG have the most favourable revenues.

Please note that the BCOG provided in Table 14-1 was calculated based on industry-standard technical and economic assumptions. These assumptions will change as time goes on, so various BCOGs, which will affect the Ore Reserve estimate, can be produced.

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14.3 Reserve Block Model

14.3.1 Selective Mining Unit (“SMU”)

SRK conducted the resource estimate for the Project using Surpac™ software (version 6.6) in November 2017. The model has a minimum user block size of 10 m by 10 m by2m(X×Y×Z).

The proposed mining method outlined in the FS 2021 is mainly cut and fill method, which is considered suitable for the flat-lying to horizontal deposits. The proposed stope at YQS Nanshan is forecast to measure approximately 100m by 55m (X by Y). The height is dependent on the deposit, which ranges in thickness from 1.5m to 7m, averaging 3.25m.

By considering the stope shape, SRK considers the model block size is suitable for SMU.

14.3.2 Model Limits and Items Assignment

Model limits adopted by SRK for Ore Reserve estimation are shown in Figure 14-1.

Figure 14-1: Ore Reserve Model Limits

Source: SRK model

14.4 Mining Objects and Layout of Targets

Considering the resource tonnages and geological confidence, the Indicated Resources was designed as the mining target.

SRK model the stopes and panels as mining target based on the FS parameters are presented in in Figure 14-2 below.

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Figure 14-2: Planning View of Mining Panels

Source: FS 2021 and SRK modification

Based on the mine design, and mineral resource occurrence, the Indicated Resource in each panel interval is presented as Figure 14-3 below.

Figure 14-3: Indicated Resource Tonnage per Panel Interval

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14.5 Dilution and Recovery

The potentially mineable ore is an in-situ material and certain assumptions are made during the mining process, including:

• Some dilution is anticipated from a minor amount of blast over-break and situations in which the waste cannot be eliminated during one blasting cut;

• Some dilution is anticipated to result from identified waste zones within the deposit;

• Some ore losses are anticipated in designed safety pillars that is not planned to be mined out;

• Some ore losses are anticipated in stope corners where the loader cannot reach; and

• There may be ore loss or dilution during mucking or transporting processes.

The FS 2021 designed an in-stope pillar recovery method such as replacing the pillar using concrete pillar based on visual estimation of peridot mineral enrichment. The total operating dilution and recovery rates for stopes estimated by the FS 2021 are 8.3% and 95.6%, respectively.

14.6 Mining Inventory Estimate

The underground Mining Inventory estimate based on Mineral Resource Model and modifying factors to the tonnage and potential contained gemstone is summarised in Table 14-5, and is illustrated in waterfall charts shown in Figure 14-4.

Table 14-5: Estimate Process Summary

Gem Peridot Cont. Gem Description Tonne (kt) Grade (ct/t) Peridot (M ct) Ind Mineral Resource ...... 5,200 236 1,227 Mine Design Loss ...... 192 626 120 Potential resource for stopes...... 5,008 221 1,107 Allowance for dilution ...... 416—— Mining Ore Loss ...... -244 200 -49 Mine inventory ...... 5,180 204 1,058

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Figure 14-4: Estimate Process-Change in Tonnage

14.7 Mining Schedule

This Project is proposed work 8 hours per shift, 3 shifts per day, 300 days per year. The mine is designed at a full capacity of 300,000 tpa. The FS 2021 proposed a 2-year period construction from late 2021 to late 2023, to be followed by a ramp up production period and full production. However, the mining schedule is driven by market condition and sale plan. SRK re-scheduled mining production based on SRK’s reserve model and sale plan, which is provide by the client, honoring the mining sequence proposed by the FS 2021.

• Panel intervals: from top to bottom, the initial mining area is #1 panel;

• Longitudinal (within panel): from inner to outer; and

• Simultaneity: two panels works at the same time.

The life of mine shall be about 22 years excluding construction. The mining schedule summary is presented in Table 14-6, and the LOM mining plan is shown in Figure 14-5 below.

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Table 14-6: Summary of Mining Schedule

LOM Item Unit Total 2023 2024 2025 2026 2027 2028 2029 ROM ...... kt 5,185 10 50 150 150 175 250 250 Peridot Gemstone Grade ..... ct/t 204 204 204 204 204 204 204 204 Peridot Inclusion Percentage .. % 18.6 20.6 20.3 19.7 19.4 19.5 19.4 19.3 Peridot sands Grade ...... % 15.8 17.5 17.3 16.8 16.5 16.6 16.5 16.4

Item Unit 2030 2031 2032 2033 2034 2035 2036 2037 ROM ...... kt 300 300 300 300 300 300 300 300 Peridot Gemstone Grade ..... ct/t 204 204 204 204 204 204 204 204 Peridot Inclusion Percentage .. % 18.5 17.5 17.0 16.8 18.1 18.4 19.0 19.6 Peridot sands Grade ...... % 15.8 14.8 14.5 14.3 15.3 15.7 16.1 16.6

Item Unit 2038 2039 2040 2041 2042 2043 2044 ROM ...... kt 300 300 300 300 293 133 124 Peridot Gemstone Grade ...... ct/t 204 204 204 204 204 204 204 Peridot Inclusion Percentage ...... % 19.4 19.8 19.0 18.5 18.3 16.6 16.3 Peridot sands Grade...... % 16.5 16.8 16.2 15.7 15.6 14.1 13.9

Figure 14-5: LOM Mining Plan

SRK opines that the mining plan could be achievable at a low risk in technical consideration.

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14.8 Ore Reserve Classification

The economically mineable part of the Indicated Resources was converted into Probable Ore Reserves, in compliance with the JORC Code (2012).

14.9 Ore Reserve Statement

Table 14-7 shows a summary of the YQS Nanshan Ore Reserves as of December 31, 2020, based on the Mineral Resource model and the FS 2021. The reported Ore Reserve is within the limits of the Company’s proposed mining licence area.

At a COG of 44.7ct/t peridot gemstone grade and including dilution, the Project contains 5.19 Mt of Probable Ore Reserves averaging 204 ct/t peridot gemstone grade, 18.6% peridot inclusion and the peridot sands grade is 15.8%. Please note that the reported Ore Reserves are included in the Mineral Resource.

Table 14-7: Summary of Ore Reserves, as of December 31, 2020

Peridot Peridot Inclusion gemstone Peridot sands Volume Tonnage Percentage Grade Grade

Reserve Category Million m3 Mt % ct/t % Probable...... 1.83 5.19 18.6 204 15.8

Note:

The information in this report which relates to Ore Reserve conversion is based on information compiled by Mr Falong Hu, MAusIMM, under the supervision of Mr. Qiuji Huang, FAusIMM, employees of SRK Consulting China Ltd. Mr. Huang and Mr. Hu have sufficient experience relevant to the style of mineralisation and type of deposit under consideration and to the activity which they are undertaking to qualify as Competent Persons as defined in the 2012 Edition of the “Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves”. Mr. Huang is the main Competent Person for ore reserves and consents to the reporting of this information in the form and context in which it appears.

14.10 Discussion on Potentially Impacts to Ore Reserve Estimates

As is the case for most mining projects, the extent to which the estimate of Ore Reserves may be affected by mining, processing, infrastructure, permitting, market and other factors that could vary from major gains to total losses of Ore Reserves. Currently, SRK’s Competent Person knows of no material issues likely to materially affect the Ore Reserve estimates.

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15 MINING METHODS

15.1 Overview

Fuli holds tenure over a large and geologically continuous peridot deposit. Peridot with size over 3 mm, can be used as raw materials for jewelry. In order to develop the currently stated Mineral Resources of peridot, Fuli commissioned NAIEG to complete a feasibility study report on the Yiqisong Nanshan Peridot Gemstone Mine in 2017, which was subsequently updated in April 2018 and 2021.

The FS 2021 proposed that the mine be developed as an underground mining operating, with a full mining scale of 300,000 tpa. The mine was to be accessed by adits with extraction to be completed using the cut and fill, room and pillar and random pillar open-stope mining methods, with trackless equipment for shoveling and transportation of mined ore. Following extraction of ore and waste, the void is to be backfilled. The overall mining loss rate is forecast at 4.4% and the mining dilution rate is 8.3%.

In order to ensure the integrity of gemstones to the greatest extent, the mining process as outlined in the FS 2021 envisaged the use of blasting, mechanical cutting and hydraulic splitting ore breaking methods. In a sense, the feasibility study cannot determine the specific ore breaking method on individual ore block, and it shall be settled according to the distribution of the gemstones in actual production and the previous operating experiences.

After its site visit and the review of relevant information, SRK regards that the mine engineering geological and hydrogeological conditions to be benign, and there are no major technical issues. The mining and development methods adopted in the FS 2021 are considered to be reasonable.

15.2 Deposit Mining Technical Conditions

15.2.1 Deposit Hydrogeological Conditions

According to the available hydrogeological data, the roof and floor of the YQS deposit comprise porous, amygdaloidal peridot basalts. Under normal circumstances, the roof and floor represent barriers to the entry of water into the deposit, which has only a weak hydraulic connections to fissure water within the upper part of the basalt layer and through joint fissures locally. Therefore, the deposit has only weak water yields.

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The Zhuerduo River flows through the northern part of the proposed mining area, with perennial water. Under normal circumstances, the water flow is about 4.00 m3/s, with sufficient water volume to meet the needs of mine production and domestic water supply.

The elevation of the lowest point in the mining area is 420 m ASL, and the lowest elevation of the orebody is 641.26 m ASL, (i.e. above the erosion datum). According to the calculation of the water inflow in the existing mining tunnels, the minimum groundwater inflow in the mining area is 153.76 m3/d, the normal water inflow is 211.42 m3/d, and the maximum water inflow is 307.52 m3/d. The FS 2021 considered that the mining operation would not be affected by surface water source, and the hydrogeological conditions of the deposit are simple.

The conditions described in the FS 2021 are basically the same as those evidenced by SRK during its site visit. The water inflow volume in the underground workings is very small and will not have a material impact on mine production under normal circumstances. At the same time, SRK also considers the degree of existing hydrogeological investigation in the proposed mining area is relatively low, and the related hydrogeological observations and pumping tests are not complete. As such, SRK considers the hydrogeological conditions of the mining area cannot be accurately described. SRK recommends that Fuli supplement its hydrogeological studies in the future, so as to fully understand the hydrogeological conditions over the entire mining area.

15.2.2 Deposit Engineering Geological Conditions

Historical Geotechnical Studies

Three (3) geotechnical/hydrogeological studies were carried out separately in 2014-16, 2018 and 2019 within the mine lease area.

From July 2014 through January 2016, the No. 2 Institute performed a geotechnical study based on data collected from a hydrogeological and engineering geological mapping within 56 km2 area in scale of 1:10 000, hydrogeological and engineering geological logging of 42 drill holes in length of 2,210.01 m, hydrogeological and engineering geological survey for existing adits of 199.50 m, and laboratory rock testing for three (3) suite typical samples. The results of this study were summarised in a report (“2016 GE report”). The report is in accordance with Chinese national codes/standards.

In 2021, a feasibility study of mining and processing was conducted by NAIEG. A report (“FS 2021”) was prepared summarising the findings. In perspective of geotechnical engineering, the FS 2021 report report directly referred the 2016 GE report.

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In 2019, Golder Associates Consulting Ltd was commissioned to provide appropriate geotechnical input in accordance with basic international best practice. Geotechnical logging was conducted for the cores from three (3) boreholes namely 7ZK2-1, 11ZK1-2 and 14ZK3, selected from the eight (8) additional drill holes for the resource verification campaign in 2017. The three (3) drill holes were selected in a manner to provide general coverage of No. I orebody. Existing adits were also mapped during the investigation. The rock engineering study results were summarised in a report (“2019 Golder report”).

It should be noted that, for feasibility study and design in underground mining, above mentioned geotechnical data and analyses are limited in both quantities and representativeness of material types encountered, appropriate technical judgements and assumptions must be made accordingly.

All available documentations as technical basis for this geotechnical review are listed in below:

• Golder Associates Consulting Ltd, Fuli Peridot Rock Mechanics Study Report (No.: 198521001 R.001_Rev1), 24 July 2019;

• Jilin Northeast Asian International Engineering and Technical Group Ltd, Feasibility Study Report on Yiqisong Nanshan Peridot Gemstone Mine for Yanbian Fuli Peridot Mining Industry Co., Ltd, April 2018; and

• Jilin Second Geological Survey Institute, Detailed Geological Exploration Report on Yiqisong Nanshan Peridot Gemstone Mine for Yanbian Fuli Peridot Mining Industry Co., Ltd in Dunhua, Jilin Province, January 2016;

Geotechnical Core Logging and Adit Mapping

The description of rock masses for engineering purposes requires assessment of the characteristics of both the rock material and the fractures that intersect it (bedding planes, joints, foliation, cleavage); Rock material in its fresh, unweathered state can vary in strength from relatively soft to extremely hard; The strength along fractures can also vary significantly depending on the fracture condition; Rock mass defects are predominantly thin joint features, typically coated with brown iron staining. The rock mass conditions of the mine are summarised in Figure 15-1.

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Thickness Defect Bottom Depth RQD Location Lithology Graphic Log Spacing Description Bottom Elevation (%) (mm) (m)

gray, fine grained, medium to slightly weathered, 34.65 - 52.80 medium to very high; strength, bubbles observed; Roof BASALT 34.65 - 52.80 10 - 300 23 - 48 discontinuities are primarily Joints, with slightly rough 645.35 - 656.20 surfaces, and less than 1 mm separation.

gray, fine grained, medium to slightly weathered, 1.10 - 7.20 medium to high strength, with Peridot inclusion; Orebody BASALT 38.65 - 53.90 10 - 1000 23 - 47 discontinuities are primarily Joints, with slightly rough 641.35 - 654.10 surfaces, and less than 1 mm separation.

gray, fine grained, medium to slightly weathered, high 6.35 - 20.80 to very high strength; bubbles observed; Floor BASALT 45.00 - 69.80 30 - 1000 41 - 70 discontinuities are primarily Joints, with slightly rough 628.20 - 640.00 surfaces, and less than 1 mm separation. Figure 15-1: Comprehensive Geotechnical borehole reports

The roofs and floors of all proposed rooms are all positioned in BASALT along the orebodies. Typical BASALT cores of roof (32.00 — 34.65 m), orebody (34.65 — 38.60 m) and floor (38.60 — 39.00 m) obtained during exploration are respectively illustrated in Figure 15-2.

Figure 15-2: BASALT Cores (Roof/Orebody/Floor) in Borehole 14ZK3

The existing adit was excavated in 2014 and 2015 with a total length of 199.50 m. No support or lining was installed. The adit is about 4 meters wide and 3 meters high. Dense thin joints are observed in the roof and wall at the entrance. No obvious collapse or instability was visible. There was rainfall during the site visit by Golder engineer. Minor water inflow was

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APPENDIX IV COMPETENT PERSON’S REPORT observed from the roofs and side walls of the entrance. It was suspected that atmospheric precipitation penetrated through the joints. No water inflow through roof or walls was observed when entering deep into the tunnel. The status quo of adit opening in June 2019 is shown in below Figure 15-3.

Figure 15-3: The Opening of Existing Adit

Intact Rock Properties

One of the critical tasks of geotechnical study is to determine mechanical properties of various rock types within the mine. The strength properties of the rock must be defined for both the fractures and intact rock. With these properties the rock-mass strength can be estimated. The technical term “rock mass”, refers to the rock on a large scale and represents the composite system of intact rock, faults, joints, and other planes of weakness present within a given rock unit. Since rock-mass properties cannot be measured directly, intact rock properties are appraised combining fracture characters. That is, the mechanical properties of rock mass are characterised by both the intact rock and the discontinuities. For the Yiqisong Nanshan Peridot Mine, A summary of intact rock strengths is shown in Table 15-1.

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Table 15-1: Physical Properties of Intact Rock by Jilin University (2016)

Tensile Sample Unit Weight Strength Cohesion Friction Borehole ID Depth Lithology (g/cm3) (MPa) UCS (MPa) (MPa) Angle (°) 15ZK01-1 ..... Roof Basalt 2.91 5.57 73.01 7.13 40.56 2.89 5.12 67.58 2.91 5.78 74.99 15ZK01-1 ..... Pillar Basalt 2.83 2.63 39.50 3.28 35.65 (Ore 2.82 1.82 29.94 body) 2.81 1.98 35.26 15ZK01-1 ..... Floor Basalt 2.79 5.50 71.89 6.82 39.87 2.77 5.23 63.61 2.79 5.62 73.55

Rock Mass Classification

Rock Mass Classification is the process of placing a rock mass into groups or classes on defined relationships (Bieniawski, 1989) and assigning a unique description (or number) to it, on the basis of similar properties/characteristics, so that the behavior of the rock mass can be predicted. In the feasibility and preliminary design stages of a project, comprehensive information related to the rock mass parameters, their stresses, and hydrologic characteristics is most likely unavailable. Thus, rock mass classification is helpful at this stage for assessing rock mass behavior. It not only gives information about the composition, strength, deformation properties and characteristics of a rock mass required for estimating the support requirements, but also shows which information is relevant and required (Bieniawski, 1989).

In engineering practice, one or more rock mass classification schemes can be used to build up a picture of the composition and characteristics of a rock mass to provide initial estimates of support requirements, and to provide estimates of the strength and deformation properties of the rock mass. The RMR system was used in the 2019 Golder Report. The RMR scheme uses five classification parameters: strength of the intact rock material, Rock Quality Designation (“RQD”), spacing of joints, condition of joints and groundwater conditions. The numerical value of the RMR value ranges from 0 to a maximum of 100.

For the Yiqisong Nanshan Peridot Mine, the RMR values of roof is 53-63, indicating the rock mass quality is FAIR to GOOD; the RMR values of pillar is 49-60, indicating the rock mass quality is FAIR. It should be noted that, while logging in-lieu in 2019, the drill cores have been stored on site for nearly two (2) years with direct exposure to sunshine, air and rainwater. The site

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APPENDIX IV COMPETENT PERSON’S REPORT could be also affected by freezing and thawing freeze-thaw cycle which may speed up the weathering and cracking process of the core. Considering these factors, the calculated RMR values for both roofs and pillars would be conservative.

Pillar Stability Analyses

For proposed room and pillar mining of Yiqisong Nanshan Peridot Mine, the FS 2021 suggested above 3-7 m high rooms, 100×55 m blocks, 5×5 m wide pillars and7mwidemaximum span. The parameters of the rooms and pillars are a result of pillar stability analyses.

Calculations of the stress level at which pillar failure occurs gives some measure of pillar strength. Pillar size calculation is an approach based on the concept of a Factor of Safety (“FOS”), defined as the calculated pillar strength divided by the calculated stress imposed on the pillar. For stable situations, the factor can vary between 1 and 6, its magnitude depending on the reliability of the two values; the higher the magnitude, the less reliable the calculation. In the present pillar design for underground mining, a FOS of 1.5 is accepted. Empirical methods (Salamon and Oraveczl) were used for the assessment of the pillar behaviour in the 2019 Golder report. The results show that the FOS of the pillar is 1.9 for3mhighrooms, 1.1 for7mhighrooms. Appropriate support measures are recommended if the room is higher than 4 m.

Maximum Tunnel Spans

The stability of the underground structure is very much dependent upon the integrity of the rock immediately surrounding the excavation. Existing natural and man-made openings indicate that very large unsupported spans can be safely built and utilised if the rock mass is of sufficiently high quality. The 2019 Golder report concluded the maximum allowable span is 10.39 m using empirical methods by Hoek and Brown (1980) and the simple beam model. It is greater than the designed maximum span width of 7 m.

Rock Support Requirements

The room and pillar geometries, and maximum spans as recommended above could ensure stability of overall mining components. This doesn’t mean no support is required in locally fractured zones.

The primary objective of a support system is to mobilize and conserve the inherent strength of the rock mass so that it becomes self-supporting. Rock support generally combines the effects of reinforcement, by such elements as dowels, tensioned rock bolts and cables, and support, with shotcrete, mesh and steel sets which carry loads from individual rock blocks isolated by structural discontinuities or zones of loosened rock.

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For Yiqisong Nanshan Peridot Mine, given the BASALT rock mass is FAIR to GOOD in quality, corresponding local supports may be required. Based on support measures with the RMR system (after Bieniawski 1989), it is suggested that

1. for Good Rock (RMR = 61-80), locally 3-m-long bolts in roofs, spaced 2.5-m-with occasional wire mesh, and 50 mm shotcrete in roofs where required

2. for Fair Rock (RMR = 41-60), 4-m-long systematic bolts, spaced 1.5-2 m in roofs and walls with wire mesh in roofs, and 50-100 mm shotcrete in roof and 30 mm in sides

3. for the worst-case scenario when rock mass quality is poor (RMR = 21-40), the support measures could be 4-5 m long systematic bolts, spaced 1-1.5 m in roofs and walls with wire mesh; shotcrete of 100-150 mm in roofs and 100 mm in sides; and steel set with light to medium ribs spaced 1.5 m where required

4. for stope walls, rock bolting should be into the immediate roofs.

It should also be noted that, for underground mining, poor blasting also can cause damaging results in decreasing the stability which, in turn, adds to the costs of a project by the requirement of greater volumes of excavation or increased rock support. Since blast damage can easily extend several metres into the rock which has been poorly blasted, the halo of loosened rock can give rise to serious instability problems in the rock surrounding the underground openings. Appropriate blasting tools and techniques should be applied to minimise this kind of damage.

15.2.3 Deposit Geology Resource Conditions

Please refer the resource estimate section (Section 13) for details.

15.3 Mining Design

15.3.1 Mining Extent, Mining Targets and Mining Method

Based on the permit mining area and mining elevation in the mining licence, the FS 2021 determine the extents of the mine to be as presented in Table 15-2.

Table 15-2: Proposed extents of the mining operation

Mining elevation 641m to 668m Elevation of sinking and driving engineering 640m to 668m Mining area 1.6731km2

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The orebody No. I in the mine area is the designed mining target. The FS 2021 noted that the surface of the mine area is mostly covered with forest land, and that if open pit mining were to be adopted, it may be difficult to acquire the forest and land, resulting in high costs and significant environmental impact.

The orebody is relatively thin, and the stripping ratio of open pit mining is relatively large, with low economic benefits. On this basis, the FS recommended underground mining at YQS Nanshan, which is considered appropriate by SRK.

The design scope proposed by the FS considering the potential updates of Inferred Resource. SRK modeled the mine design followed the FS 2021’s design, as presented in Table 15-4 below.

Figure 15-4: Planview of Mine Design

SRK opines that the mine could consider as 2 portions which are mine design scope and potential scope. The Indicated Resources within mine design portion are the basis of life of mine schedule and Ore Reserves conversion. The potential scope is the further production exploration area, the resources within this area could be converted into Ore Reserves since the resources category updated upon Indicated or Measured.

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15.3.2 Mine Development and Haulage System

The adit development method is outlined in the FS. In the proposed design:

• the existing 651m adit is to be extended as the main adit, with tunnelling from north to south across the mineralized zone;

• the adit is expected to connect to the surface at 640m level in the south ridge;

• the northern access to the adit (at 651m adit access) is used as inlet air adit access, and the south access (at 640m adit access) is used as the return air adit access.

• at the southeast corner of the mining area at 640m level, an adit is also tunneled from south to north along the uphill to the north of the ridge as a drainage adit.

Reinforced concrete is to be used in supporting adit access. The support thickness is planned to be no less than 250mm, and the support length should be through the weathered layer but no less than 20m. Support pattern and support thickness within the adit are adopted accordingly in terms of the stability degree of rocks.

From north to south every 100m, the main adit tunnels the roadway of panels toward the direction of return air adit, dividing the seam into panels for mining, and the return air raise is set at the end of the panels and connected with each other.

The Boomer K111 drilling jumbo will be used to drill blast holes for underground mining and excavation. The work heading is to be equipped with a WJ-2 diesel LHD for waste loading and WJD-2A electric LHD for ore loading, and UK-12 underground trucks for ore and waste transportation. The ore transported directly to the surface ROM bin. Most of underground development is within the mineralization, which produces little waste rocks. Waste rocks from the capital construction period are all to be used for surface road pavement. The small amount of waste rocks produced during production is to be directly discarded in the void for backfill, and there is to be no waste dump on the surface.

A single-winged diagonal ventilation system is to be adopted underground. The fresh air is envisaged to flow into the underground from the main adit, and enter the stope via the inlet air roadway of the panel. The exhausted air will pass through the return air ways of the panel, and then the return air adit outlets to the surface.

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APPENDIX IV COMPETENT PERSON’S REPORT

A 600m3 head tank is proposed to be set on the 686m surface level at the top of the main industrial site for fire-fighting water and production water supply. Sump is to be set approximately 80m inward the main adit access and a replenishment pump is set in the sump for water supply of the surface head tank.

Gravity drainage is to be adopted underground. Local low-lying ponding will be drained to haulage way drainage ditch through submerged pump, flowing to the surface through drainage roadway and drainage culvert.

A fan heater is to be set up at the inlet air adit access to heat the inlet air current during winter, keeping the temperature of the inlet air current no less than 2°C. The heat source of the heater comes from the hot blast stove in the boiler room.

In the opinion of SRK, considering the occurrence conditions of the ore body, adit development method adopted in the FS is reasonable.

15.3.3 Mining Method

The FS 2021 design adopted cut and fill (CAF), regular or random pillar open stoping methods. based on the characteristics of the deposit.

The main consideration in support of the open-stope methods included: The continuous geometry and low angle of the deposit which is approximately horizontal, the thickness of the mineralised zone which is between 1.5 m and 7.0 m thick, with an average thickness of 3.25 m; all the sections except the surface weathering zone and the fracture development section are of good stability; there is no parting in the mineralised zone, and the ore is non-caking; and the subsidence of the mine area surface is allowed.

Based on the particle sizes and distribution of the peridot, the FS designed three types of ore breaking and support in order to minimise the damage to the integrity of the gemstone during the mining process. Table 15-3 shows the mining methods selected for different particle sizes of gemstones as outlined in the FS 2021.

Table 15-3: Mining Methods Selected for Different Scenarios

Orebody Particle size of Ore breaking Proportion Mining Method thickness gem Distribution method (%) Cut and Fill Method... 1.5~7m Small Sparse Drilling and 18 blasting 4~7m Small Dense 69

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Orebody Particle size of Ore breaking Proportion Mining Method thickness gem Distribution method (%) Regular Pillar...... 4~7m Large Dense Mechanical 8 Random Pillar Open 1.5~4m Large Sparse Hydraulic 5 Stoping ...... splitting

It can be seen from Table 15-2 that the amount of ore mined by drilling and blasting and mechanical cutting accounts for 87% of the total amount of mining. The process design of the mining methods in FS is outlined below:

Cut and Fill Method

(1) Stope Layout

The ore block layout and structural parameters are shown in Table 15-4.

Table 15-4: Stope Structural Parameters of Room am Pillar Mining Method

Crown Secondary Stope Ore block pillar width Sill pillar Rib pillar Primary cut cut span Stope height (m) length (m) width (m) (m) width (m) width (m) span (m) (m) above 3-7 ..... 100-110 60-70 10 10 5 5 5

(2) Mining Preparation

The mining preparation includes the main transportation roadway, cross cut and backfill drive Develop a cross cut every 60-70m between the panel transportation roadway and the panel return air roadway, split the panel into stopes.

(3) Stoping and Equipment

Both primary and secondary cuts are 5m wide, and the primary cuts will be mined first. The one-boom jumbo (Boomer K111) is proposed for drill holes at 55mm diameter. When the stope height is less than 6m, horizontal drill is employed, and the drill pattern is similar as development headings. About 60 holes will be drilled at 3.5m long and partly will be filled with explosive using the charger (BQF-100). The blasting is initiated with tube detonator. When the stope height is more than 6 m, upwards holes will be employed at the pattern of 0.8 × 1m as short holes from 3 to 5m depending the back of the stope. Blasting will be conducted 6-8 burdens each time. Mucking

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APPENDIX IV COMPETENT PERSON’S REPORT will be done by electric LHD (WJD-2) and loaded into underground truck (UK-12). The drawpoint is within cuts if the mineralization higher than 4m, otherwise the drawpoint will be at the connection between crosscut and mining cuts.

Once the primary cuts emptied, it will be filled with cemented sand with a 14% cement binder via the backfill connection for each individual cut. This fill becomes the support for the secondary cuts.

Secondary cuts will be mined adjacent to the backfilled primary cuts after sufficient fill cure time, which is typically more than 28 days to allow the proposed strength achieved, which is 2mpa (uniaxial compressive strength). Secondary cuts will be filled with unconsolidated material such as development waste or waste sand from processing plant, which is trucked underground.

(4) Stope Ventilation

The stope mainly uses the main air flow for ventilation. The fresh air flows into the stope via the transportation roadway, air inlet rise-entry and connection roadway. After flushing the working face, the exhausted air is discharged to the surface via the return air side connection roadway and return air roadway. When there is a difficult in ventilation, two sets of JK40-1 №7 type local fan will be arranged in parallel within the return air rise-entry for auxiliary ventilation.

(5) Stope Support

The stope is supported by split sets or bolt and mesh based on the conditions of the rock. When the height of stope is less than 3m, artificial scaling and support are used. When the height of stope is more than 3m, scaling and bolting jumbo are used for supporting. The maximum exposure area of the roof in the stope is designed not more than 200 m2. The unsteady sections shall be reinforced with bolts and mesh.

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(6) Pillars Recovery and Goaf Management

The crown and sill pillar of the ore block are gradually recovered in a planned retreating manner according to the situation after the panel stoping work is finished. The voids are support by back filled cuts, which are closed and drain holes are left.

Figure 15-5 shows typical sequence of cut and fill method.

Figure 15-5: Schematic of Typical Progression of Cut and Fill Method

Regular or Random Pillar Open Stoping Method

The regular or random pillars open stoping methods are mostly the similar, except pillar arrangement and rock breaking machinery.

The regular pillar method is proposed using diamond belt saw and wire saw for mining, forklift for mucking and truck for transports. While, the random pillar method will use hydraulic splitting machine for mining.

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(1) Stope Layout

The ore block layout parameters are as follows.

Table 15-5: Ore Block Structural Parameter

Stope Crown Rib Pillar Irregular Room Length Stope Pillar Sill Pillar Thickness Pillar Size Max Span Stope Height (m) (m) Width (m) Height (m) Height (m) (m) (m) (m) Regular Room and Pillar ...... 100 55 5 5 NA NA 7 Random Pillar Open Stoping...... 100 55 8 8 10 4-6×4-6 8~10

(2) Mining Preparation

The mining preparation work includes main transport roadway, cross cuts. Between the panel transport roadway and the panel air return way, about every 55m a cross cut is excavated in the corresponding position and cuts through the rib pillar; connecting with stope every 10m. A 10m wide cemented filled continuous pillar is arranged for stope support in the middle of stope transverse direction

(3) Stoping and Equipment

Regular room and pillar stopes are proposed using Mechanical cutting equipment for mining. The diamond belt saw (Model DC-CS3000) and wire saw (Model ZY-37G-6P) are employed to cut mining cells into cube shape block as about 1~1.3 cubic meter. Then the block loaded into underground truck (Model UK12) by forklift (Model XJ953-D16). The regular arranged 1~1.3m square pillars are left for stope support.

Random pillar open stops are proposed mining the deposit by hydraulic splitter, which is a device that converts axial hydraulic thrust into transverse splitting force using the principle of wedge and hydraulic pressure. With the advantages of simple structure, convenient operation, small size, large splitting force, no vibration, no impact, and fast splitting, it is widely used in stone mining. One set of splitter could provide about 4,900 kN maximum force. One set of splitter with 5-8 wedge-shape working bars is arranged in one stope. Jackleg driller are planned for shallow holes drilling with 47mm diameter, at a pattern of 0.5-0.6m space, 0.8-1.0m burden, and 0.8-1.5m depth. The wedge-shaped bar then set in the holes and break the ore with mechanical pressure. The broken ore are loaded into underground trucks by diesel LHD.

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(4) Stope Ventilation

Blasting is not needed in the stopes. The entire process of stoping adopts wet operation, and the workers all wear dust masks. A JK58-1No3.5 local fan is equipped with each working face, and the air flow into the stope meets the needs of staff.

(5) Stope Support

The maximum exposure area of the roof in the stope is designed no more than 500 m2,the stability of stope roof is graded, and the safety confirmation system is implemented. The stope roof after cutting is free from blasting disturbance with good stability, and support is generally not required. The unsteady sections should be reinforced with more ore pillars, and the specifications of the pillars shall be increased to reduce the exposure area of the roof so as to ensure the stability of the stope roof. The bolt support or bolt and mesh support will be used based on the rock conditions.

(6) Pillar Recovery and Void Management

The crown and sill pillar of the ore block are gradually recovered in a planned retreating manner according to the situation after the panel stoping work is finished. The rib pillars are also planned recover since the continuous filled pillar would support the stope. both regular and irregular pillars within stope might be replace by concrete or even reinforced concrete which blenders are trucked in from surface and artificial preparation locally.

Figure 15-6: Design Drawing of Overall Mining Method

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APPENDIX IV COMPETENT PERSON’S REPORT

The comprehensive technical-economic indexes for mining in the FS design are shown in Table 15-6.

Table 15-6: Comprehensive Mining Technical Indexes

Random Pillar No. Indexes Unit Cut and Fill Room and Pillar Open Stoping Overall 1 Ore breaking ...... Drilling and Mechanical Hydraulic Splitting blasting Cutting

2 Proportion ...... %8785

3 Ore block dip angle ...... ° Nearly horizontal Nearly horizontal Nearly horizontal

4 Orebody thickness ...... m 1.5~7.0 1.5~4.0 1.5~4.0

5 Ore block production capacity..... t/d 400 200 100

6 By-product ore yield ...... % 11.6 11.6 13.8 11.8

7 Mining recovery rate...... % 96.2 90.8 92.7 95.6

8 Mining dilution rate ...... % 8.2 9.7 7.4 8.3

In the opinion of SRK, given the near horizontal aspect, the thin to medium thick nature, and the relatively stable roof and floor to the deposit, the main mining method of cut and fill adopted in the FS are considered reasonable, and relevant technical parameters are within appropriate ranges. As for the gemstone blocks of relatively centralised distribution and larger particle size, the ore breaking method of mechanical cutting or hydraulic splitting for stoping is theoretically reasonable. However, in the process of practical application, it is hard to determine the gemstone distribution, which usually depends visual inspection. It is therefore likely that multiple ore breaking methods will be used in a single ore block.

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15.3.4 Main Mining Equipment

The main mining equipment outlined in the FS is shown in Table 15-7.

Table 15-7: Main Mining Equipment

Quantity Power

Equipment Name Model Unit In Use Standby Total (Kw) Stope local fan ...... JK40-1№7 Set 4 2 6 15 Drifting local fan ...... JK40-1№8 Set 3 3 6 30 Single boomer drilling DWE1-31N Set 3 0 3 63 jumbo ...... Rock bolting jumbo .... Set 1 0 1 66 Scaling jumbo...... XYQM-200 Set 1 0 1 65 Underground diesel LHD . WJ-2 Set 4 0 4 Forklift ...... XJ953-16D Set 1 1 2 Hydraulic splitter ...... Set 8 8 16 Diamond belt saw ..... DC-CS3000 Set 2 1 3 37 Diamondwire saw ..... ZY-37G-6P Set 2 1 3 37 Dry shotcrete ...... PZ-6 Set 2 0 2 Mechanical explosive BQF-100 Set 3 1 4 Charger ...... Emergency evacuation Set 1 0 0 system ...... UG truck ...... UK-12 Set 3 3 6 UG mini bus ...... RU-16 Set 1 1 Main ventilation fan .... DK40-8-No22 Set 1 1 2×90 Main fan motor ...... Yx-355L-6 Set 2 250 Air compressor ...... EX-55A Set 2 1 3 55 Seamless steel pipe .... φ108×4mm m 1,000 Seamless steel pipe .... Φ89×4mm m 1,000 submersible pump ..... 6108A-2 Set 1 1 2 5.5

In the opinion of SRK, the mining equipment adopted in the FS is built in China and widely employed in Chinese mines, and as such is considered to be easy to purchase and configure. Such mining equipment is suitable for the site’s proposed mining production activities. Compared with imported equipment, the price is low. Therefore, once there is a shortage of equipment, new mining equipment can be easily supplemented, which will not have a significant impact on normal production.

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15.4 Underground Service

15.4.1 Ventilation

The ventilation plan for stopes and headings is in diagonal pattern. Fresh air flows to a working face along the main adit and the panel drives. The exhausted air will be raised to surface along the 640m ventilation adit in the southeastern.

The air requirement calculated is 75.7 cubic meters per second (“m3/s”) as presented in Table 15-8 below.

Table 15-8: Fresh Air Requirement Calculation

Minimum Fresh Air 30% Requirement Heading Area Allowance Total FAR (FAR, m/s) Headings (m2) Quantity (m3/s) (m3/s) 0.3 Stopes 55 2 9.9 42.9

0.15 Stope Preparation 20 1 0.9 3.9

0.5 Development Headings 14.6 2 4.4 19.0

0.25 Support Headings 14.6 1 1.1 4.7

Chambers 5.2

75.7

Main fan is proposed installed at the portal of 640m ventilation adit. The main fan is selected as model K40-6-No. 22, the parameters are as:

• Airflow volume: 61.3-113.4m3/s;

• Air pressure:372−1,716 Pa;

• Power motor: Model Yx-355L-6, 250kw;

One more same fan will be installed as standing by.

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The stopes or development headings are proposed using local fans to ventilate, which are model JK40-1 No. 7 or model DJK50-No. 8.5. one or two in series local fans will be employed depending on the distance from fresh air drive is within 200m or far than 200m.

15.4.2 Mine Drainage and Supply

The underground water flow naturally from the higher area down to 640m adit in the south.

There are two slump and pump stations are proposed underground which are #1 station locates 80m from the portal of 651m and #2 station locates 640m drainage adit.

The water collected in #2 slump is pump up to #1 slump, and further pump up to surface head tank at 686m ASL. The head tank is designed 600m3 shared by underground, processing plant, backfill plant and fire fighting.

The consume of each user are as below:

• Underground production: 250m3/d;

• Processing plant; 50m3/d;

• Backfill plant: 180 m3/d;

• Fire fighting reserve: 200 m3/d;

• Other:50m3/d.

The production water will be supplied underground via Φ108×4mm pipe line along main adit (651m) down to each panel drive, and connecting the water user in each working headings. A emergency tank is proposed near head tank on surface and connected to domestic water system.

15.4.3 Compressed Air

The compressed air station is located near to the main adit. As the mine will development using jumbos mainly, only some small headings or the stope corners will be used jack legs for drilling, the estimated compress air is 17.2m3/Min.

Three sets of screw compressors of EX-55A are installed to produce compressive air at surface near main portal. The compressed air will be distributed to each panel along the seamless steel pipes in main adit, which consists of a main pipe of Φ108×4 and a branch pipe of Φ89×4.

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15.4.4 Backfill Plant

The mining method relies on backfill as a ground support method. The backfill method is paste fill (70% concentration) using pump and pipe transportation, the plant is proposed at 630m ASL on surface.

As the industry ground terrain is relatively flat, and the potential location of backfill plant is only 10m higher than the mean elevation of ore body. The backfill stowing gradient is too shallow to flow automatically. The backfill material is proposed via pump system for transportation.

The processing waste (basalt) rock are proposed further milled to product rod-milled sand (<1mm) and coarse aggregate (-10mm) using as main blender from fill material. According to the processing progress, the basalt or say tailing product by the processing plant will be as follows:

• #1 basalt: >30mm about 120ktpa;

• #2 basalt: 10-30mm about 96ktpa;

• #3 basalt: 3-10mm about 27ktpa; and

• #4 basalt: <3mm about 9ktpa.

The basalt using as aggregate is proposed 40ktpa for backfill which are source form #4 and #3 basalt totally, and part of #2 basalt for rod-mill producing sand below 1mm. the rest of #3 basalt are using as coarse aggregate. 32.5mpa cement is proposed as cementing material. The water source from head tank. The backfill parameters proposed by the FS are presented in Table 15-9.

Table 15-9: Backfill Parameter

Item Unit Parameter Remark CAF method ...... ktpa 261

Portion of primary cut...... % 40.7

Fill requirement...... km3pa 37.1

Work frame ...... d/a 110 1 fill day every 3 mining day

Work frame ...... shift/d 2

Work frame ...... hour/shift 6

Fill capacity (inc. 50% allowance) . m3/h 42.3

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Item Unit Parameter Remark Backfill Material Concentration.... %70

Cement ratio ...... % 14.3 1:6 cement/sand and aggregate

Sand ratio ...... % 45 sand/aggregate backfill material density ...... t/m3 1.5

Cement consume ...... ktpa 6.6

Rod-milled sand consume ...... ktpa 17.8

Aggregate consume ...... ktpa 21.7

Water consume ...... ktpa 119.8

Proposed Strength of backfill (28d). Mpa 2

The plant consists aggregate, rod-mill sand, producing and storage lines cement storage and blending line, and pump & transport line.

The aggregate is processed as about 8mm using #2 basalt using cone crusher (model PYD600) and storage in a 200m3 bin which is equipped with vibrator feeder (model TGZ-40-160F) and belt conveyor (0.5m wide).

The sand is processed as 0.15-0.8mm sand from #4 and #3 basalt via rod-mill (Model MBS1830) and storage in a 140m3 bin which is also equipped with vibrator feeder and belt conveyor.

The cement is storage in two 200t bins (150m3) as it is outsourced and transport once for at least 4 times fill work. The water is source from head tank which is share with processing plant and underground operation. The additive such as water reducer, pumping aid are also planned a standby bin with capacity of 100t, and room for further modification.

The batch-type twin-axis horizontal agitator (model JS1500) of a capacity of 75m3/h is proposed to produce slurry and batch operation time is in a range of 90-120 seconds.

The slurry pump is estimated and selected as model HGBS 100.16.320 with a maximum capacity of 115m3/h at 16Mpa (adjustable) pressure.

The φ 106×12 mm steel plaited composite pipe is proposed for slurry main transportation. The φ106 ×10mm steel pipe will be connected to the main pipe within panels and stopes. The φ106mm PVC pipe will be employed for work headings.

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Backfill barrier of stope cut is proposed as 400mm thickness with reinforced concrete (double-deck φ10@20mm, C20) for compressive strength of 9.5Mpa, shear strength of 2.36Mpa, and extension strength of 1.05Mpa.

The main backfill plant equipment are presented in Table 15-10 below.

Table 15-10: Main Backfill Equipment

Equipment Model Parameter Unit QTY Aggregate line Material receiving bin ..... 2m3 Set 1 Vibrator feeder...... TGZ-40-160F ≤50mm; 40t/d Set 1 Belt conveyor...... #1 B=0.5; L=8; v=1 Set 1 Cone crusher ...... PYD600 a≤35; b=3~13; P=23 Set 1 Belt conveyor...... #2 B=0.5; L=15; v=1 Set 1 Bin...... φ=6m, h=7.5m; V=200m3 Set 1 Sand line Vibrator feeder...... TGZ-40-160F ≤50mm; 40t/d Set 1 Belt conveyor...... 1# B=0. 5; L=8; v=1 Set 1 Rod-mill...... MBS1830 a≤25; b=0.15~0.83; P=11.6 Set 1 Belt conveyor...... 1# B=0.65; L=15; v=1 Set 1 Bin...... φ=5m, h=7.5m; V=140m3 Set 1 Cement bin ...... φ=4m, h=12m; V=150m3 Set 2 Blending line Batch-type agitator...... JS1500 Vi=2.4m3；Vo=1.5m3； Set 1 P=75m3/h; Aggregate belt conveyor ... 1# B=0.5; L=15; v=1 Set 1 Sand belt conveyor...... 1# B=0.5; L=15; v=1 Set 1 Cement screw conveyor .... LSY100 φ=133mm; α=0~60°; L=10; Set 1 P=10t/h Screw conveyor ...... LSY100 φ=133mm; α=0~60°; L=10; Set 1 P=10t/h Measure hopper ...... Set 4 Electromagnetic flowmeter.. Set 2 Pipe transportation Slurry Pump...... HGBS 115m3/h, set 1 100.16.320 Pipe ...... Seamless φ106mm, 5mm M 2,300 Dirt catcher ...... set 3 Densimeter...... set Several Ball valve ...... set Several Sluice valve ...... set Several Pipe ...... seamless φ70mm, 3.5mm m 200

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APPENDIX IV COMPETENT PERSON’S REPORT

15.4.5 Maintenance Facilities

A simple maintenance facility is proposed near the main portal. The main maintenance and repairment are proposed outsource from the downtown.

15.5 Mine Production Plan

15.5.1 Mine Working System, Production Capacity and Service Life

A continuous working system is adopted in the FS design, which is 300 working days per year, 3 shifts per day and 8 hours per shift.

The mining production capacity of the mine is determined to be 300 ktpa in the FS according to combination of factors, such as the mining technical conditions of the deposit, recommended mining methods, proposed technical equipment level, simultaneous working ore blocks, economical rational service life and so on.

SRK has converted the qualified Mineral Resources of the project into Ore Reserves according to JORC Code (2012), which adopts a different system to that used in China, as discussed in previous sections. The service life of mine is scheduled to extend for more than 21 years.

15.5.2 Mine Production Plan

SRK has proposed a production schedule as discussed in previous sections, and the mine life is more than 21 years.

16 GEMSTONE PROCESSING OF PERIDOT

16.1 Production Capacity and Product Scheme

The FS 2021 proposed to construct a gemstone processing plant in Dunhua City to further process the peridot produced in the onsite ROM processing plant into salable gemstones. The designed capacity of the plant is 60 million carats of rough peridot gemstones per year and 280 tonnes of peridot sands. Four categories of bare gemstones will be produced, which are large gemstone (>10mm), medium gemstone (above 7-10mm), small gemstone (above 3-7mm), and peridot gem dots (1-3mm). The large and medium gemstones will be processed by hand. The small peridot gemstone and peridot gem dots will be processed automatically.

The plant will be in operation continuously for 330 days per year, and 8 hours per day.

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SRK notes that Fuli has previously established a gemstone processing plant in its headquarter in Dunhua City. The production records show that the overall productivity from the rough gemstones after ore processing to the cut-and-polished peridot is about 35%.

During the full production years, it is forecast the gemstone processing plant will produce in accordance to the product scheme and related parameters given in Table 16-1.

Table 16-1: Proposed Production Scheme of the Gemstone Processing Plant

Products Size Processing Yield

(mm) (%) Large hand-processing gemstone ...... >10 35.00 Medium hand-processing gemstone ...... above 7-10 35.50 Small gemstone...... above 3-7 35.00 Machine processed peridot gem dots ...... 1-3 37.00

16.2 Flowchart and Method of Further Processing

After receiving the rough peridot from the ROM processing plant, the gemstone processing plant will first screen and classify the gemstones. The stones of 7mm and larger will be hand processed by cutting them into various shapes and facets to produce cut and polished peridot. The remaining gemstones, i.e. less than 7mm, will be processed by using fully automatic machines to produce cut and polished peridot.

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APPENDIX IV COMPETENT PERSON’S REPORT

Figure 16-1 describes the flowchart for the hand-processing of larger stones.

Primary Peridot Brief Description

selecting and grading based on the stones’ quality Select Material and size

Cutting cutting the primary peridot along the crack and flaw to clear the gemstone

Sorting separation based on the shapes and dimensions

cut gemstone glued to the hand tools for shaping, Adhering polishing and buffing

rough polish the cut gemstone per the design shape Shaping and the nature shape of the cut material

Polishing polishing the cut stone per the designed shape

Buffing buffing the polished stone to show the brilliance of gemstone

buffing the waist of the gemstone to show the Waist buffing brilliance of the precious stone

release the finished stone from the hand tools and Detaching and Washing wipe off the glue and dust

Checking product check and storage

Figure 16-1: Flowchart of Hand Processing for Peridot Gems

Source: SRK draws according to the flowchart description in FS.

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APPENDIX IV COMPETENT PERSON’S REPORT

16.3 Quality of Peridot Gemstones

The quality of the loose peridot is reflected by color, size, shape, clarity, cut, etc. According to the assay results (Gems & Jewelry Identification and Evaluation Report) of 41 rough peridot and four faceted peridot submitted by Fuli to Beijing Jewelry Research Institute of National Gems & Jewelry Technology Administrative Centre (2015) (Appendix D), the quality of Yiqisong Nanshan peridot is summarised as follows:

Colour

Munsell color system has been adopted to represent the three basic characteristics of color: hue, value (tone), and chroma (saturation).

The YQS Nanshan rough peridot samples are yellow green in hue (5GY). The tone is 4 to 8, most of high tone (6 to 7). Most rough peridot has saturation of 8, with a small amount having 6. This indicates that the color of samples is relatively saturated.

The hue of the finished product is 5GY, which is yellow-green. It is consistent with the color of rough peridot, indicating that the color of the rough peridot has not changed after being processed. The tone of the finished product is relatively high, ranging from 5 to 7, with a saturation of 10, indicating that the color is relatively saturated.

Size and Shape

Most of the rough peridot has a grain size of 10 to 20 mm. It is in a block shape. After cutting and grinding, a finished product with a relatively large carat weight can be produced, with a good yield. A small amount of sample has plate-like shape, which has a certain influence on the yield.

Clarity

According to the differences between internal and external characteristics of gemstones, the clarity of peridot is divided into three grades, from high to low, expressed as pure (C1), relatively pure (C2) and general (C3). A total of 14 rough peridot samples submitted for analysis have clarity of C1 grade (accounting for 34.1%), 26 in C2 grade (accounting for 63.4%) and one in C3 grade (accounting for 2.4%).

This shows that most of the rough peridot samples are pure to relatively pure.

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The clarity of two finished products is pure (C1 grade); one is relatively pure (C2 grade); and one is general (C3 grade).

Cut

Of the four finished products, one has a pear-shape and three have oval shapes. The ratio of length to width is appropriate. It has good symmetry and polish. In short, the cutting quality is good.

17 PROJECT INFRASTRUCTURE AND WORKFORCE

17.1 Industrial Site

17.1.1 Main Industrial Site

The main haulage adit will be the existing adit at 651m ASL in the northwest corner. In the southeast corner of the mine, at 640m ASL level, adit was proposed to be developed and used as water drainage adit. In the southeastern part of the mine, at 640m ASL, an adit will be developed and used as ventilation and drainage adit. In the central part of northern area of the mine, at 640m ASL, an adit will be developed and used as drainage adit for central part of the mine.

17.1.2 Supportive Industrial Sites

Supportive industrial site is located adjacent to the portal of the 651m ASL main haulage adit, and will be used for dispatch room for the mining, station for air compressor, drying and showering room, machinery maintenance shop, storage room, ventilation room, and head tank.

There will be flood diversion ditches on the top of tunnels to block the flood into the industrial sites.

17.1.3 Land Uses for the Industrial Sites

The total land required is about 45,488 m2. Table 17-1 lists the areas required for each site.

Table 17-1: Lists of Land Uses

Item Land Area (m2) Main industrial site of west side ...... 25,706 Supportive industrial site of east side ...... 2,716 Explosive storage and guard room...... 2,151 Internal mine road...... 14,915 Total ...... 45,488

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17.2 Water Source and Drainage

Table 17-2 summarises the Project’s overall water usage and drainage.

Table 17-2: Water Balance of the Project

Item Flux Water quality

(m3/d) Underground discharge +5,361 mine water and returning water of production (normal mine water) .... Water usage for mining.... -250 mine water and new water Water usage for living and -50 Purified u/g water greening ...... Water overflow ...... -5,011

17.2.1 Water Sources

The main water supply to the mine and processing plant is to be derived from the mine water, while the potable water is to be sourced from deep wells and depending on water quality, may be treated as required. The main water supply is reasonably reliable and sufficient to support the planned operations of the mine and processing plant respectively.

17.2.2 Water Supplying System

Water supplying System for Production

A head tank of 600m3 capacity will be established at an elevation of 686m ASL on site and supply water for underground mine production, processing plant, backfill plant and fire fighting purposes. In addition, there will be a water collection slump, 80m from the portal in the adit, collecting mine water, which will auto-flow into the slump. There will be two pumps (6108A-2 type) to move water from the water collection slump to the 686 m ASL tank out of the adit.

Water Supplying System for Living

Potable water usage includes dispatching rooms and boiler room, and the total usage is estimated at 50m3/day.

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Fire Fighting

According to existing regulations, based on the designated category of the mine and the buildings, it is not necessary to have an in-room water supply system installed, and external fire-fighting may use a low pressure water supplying system. If the fire-fight water supply is less than 15l/sec, and the duration of the fire-fighting is expected to exceed 2 hours, the mine must have capacity for one-time water usage is 108m3.

The head tank will be used for both production and fire-fighting purposes, and has a capacity of 600m3. Necessary measures will be taken to ensure that the water for fire-fighting should not be used for any other purposes. The new water supplying pipe network for production will be shared with the purpose of fire fighting, by installing the valves for fire-fighting with a spacing less than 50m within the tunnels. Fire-fighting pumps and valves will also be installed near the portals of tunnels.

17.2.3 Water Drainage

For surface drainage (i.e. precipitation) within the mine area, rain water will be discharged naturally by gravity. Ditches around the industrial sites and along both sides of roads will be developed to discharge the rain water into the streams down stream of the sites.

17.3 Internal and External Roads

The internal and external transportation will be realised by using trucks. The ore will be transported by trucks from underground stopes to the ROM bins at the processing plant. Consumables and other materials will be transported into the mine by using trucks. The products of the processing plant will be transported by truck.

The road within the mine site is designed to be 5m wide at the base and 4m wide on top, and is to be constructed from sands and gravels. The designed speed limit is 20 km/hour.

The FS estimated that internal transportation will be for 300 ktpa of ROM ore and about 18 ktpa of the waste rocks; and that the external transportation will be for 50 ktpa of raw materials and products, and 20 tpa of living materials and 3 tpa of other materials.

The external transportation will be contracted out.

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17.4 Electricity supply and Distribution

Currently, the mine has electricity connections to an upper level transformer station, and has an electricity supply of 10kV. The transformer station in the mine site has sufficient capacity to supply the electricity for mining and processing. For back-up, a series of diesel generators will be installed to ensure the 380V electricity supply.

17.4.1 Transformer Stations in the Mine Site

Transformer and Distribution Station for Air Compressors

The station will be built near the air compressor room, with the rooms for low voltage and transformer of type S13-M-500kVA 10kV/0.4kV. The supply of 10kV will be the power line extended from an upper level transformer station.

Transformer and Distribution Station for Ventilation Room

The station will be built near the ventilation room, with the rooms for low voltage, transformer of type S13-M-400kVA 10kV/0.4kV, and diesel generators. The supply of 10kV will be the power line extended from an upper level transformer station.

Transformer and Distribution Station for Backfill Plant

The station will be built near the backfill plant, with the rooms for low voltage and transformer of type S13-630kVA 10kV/0.4kV. The supply of 10kV will be the power line extended from an upper level transformer station.

Transformer and Distribution Station for Maintenance Workshop

The station will be built near the maintenance workshop, with the rooms for low voltage and transformer of type S13-M-200kVA 10kV/0.4kV. The supply of 10kV will be the power line extended from an upper level transformer station.

Transformer and Distribution Station for Underground Panels

The station will be built in the production panel with a mine-using transformer of type KS13-400kVA 10kV/0.4kV. The supply of 10kV will be the power line extended from an upper level transformer station.

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17.4.2 Transformer Stations in the Processing Plant

The station will be built near the processing plant, with the rooms for low voltage and transformer of type S13-M-800kVA 10kV/0.4kV. The supply of 10kV will be the power line extended from an upper level transformer station.

17.5 Buildings

According to the FS 2021, various facilities are to be constructed at the mine site as summarised in Table 17-3.

Table 17-3: Specifications of facilities in the mine site of the project

Length × width × Item Height Story Area Structure Foundation

(m) (m2) Mining Engineering

Air Compressor Room. 9×7×5 1 63 Reinforced concrete frame Reinforced concrete structure Independent foundation

Maintenance 29×7×6 1 203 Workshop ......

Dispatch room, 20×13×7.2 2 520 Reinforced concrete frame Reinforced concrete bathroom, miner’s structure Independent foundation lamp room ......

Office building ..... 52×20×22.5 5 3,500 Reinforced concrete frame Reinforced concrete structure Independent foundation

Dormitory and 39×20×23.5 5 3,500 Reinforced concrete frame Reinforced concrete cafeteria ...... structure Independent foundation

Ore Sample Hall .... 30×10×4.5 1 300 Reinforced concrete frame Reinforced concrete structure Independent foundation

Explosive storage.... 7.5×5×4.5 1 37.5 Reinforced concrete frame Reinforced concrete structure Independent foundation

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Length × width × Item Height Story Area Structure Foundation

(m) (m2) Detonator storage.... 7.5×5×4.5 1 37.5 Reinforced concrete frame Reinforced concrete structure Independent foundation

Guard room ...... 12.5×4.8×3 1 60 Reinforced concrete frame Reinforced concrete structure Independent foundation

Janitor room...... 10×6 1 60

Subtotal ...... 8,281

Backfill Engineering .

Backfilling material 35×15×20 1 525 Reinforced concrete Reinforced concrete workshop ...... frame structure Independent foundation

Mixing workshop.... 15×15×15 1 225 Reinforced concrete frame Reinforced concrete structure Independent foundation

Corridors for 11×4（2） 88 Steel truss structure Conveyors......

Subtotal ...... 838

Processing Engineering .....

ROM bin...... 6×5×8 2 60 Reinforced concrete frame Reinforced concrete structure Independent foundation

Reinforced concrete structure for stock bin

Secondary crashing 12×12×12.3 1 144 Reinforced concrete row Reinforced concrete workshop ...... frame structure Independent foundation

First crashing 9×9×10 1 81 Reinforced concrete row Reinforced concrete workshop ...... frame structure Independent foundation

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Length × width × Item Height Story Area Structure Foundation

(m) (m2) Screening workshop .. 29×15×14.6 1 435 Reinforced concrete row Reinforced concrete frame structure Independent foundation

Peridot separation 30×18×7.9 2 810 Portal frame structure workshop ...... Reinforced concrete Independent foundation

Corridors for 28×2.5（1） 1 534 Steel truss structure Conveyors...... 28×5 （1） 18.5×2.5（2） 18.5×5（1） 15×5（1） 26×2.5（1）

Boiler room ...... 20×15×7 1 300

Transformer ...... 10×6 1 60

Subtotal ...... 2,424

Total ...... 11,543

Source: 2021 Feasibility Study

17.6 Workforce

The organisational structure of the Project includes various departments and workshops. The Company’s headquarters are located in Dunhua, Jilin Province. The mining workshop and ROM processing plant will be at the mine site. The workshops for further gem processing will be in Dunhua.

The FS 2021 estimates the total number of personnel in the technical aspects, including mining, ore processing and further processing is 664 with 118 personnel in mining workshop, 201 personnel in the ore processing plant and 345 personnel in the further processing plant.

According to the FS 2021, during the first three calendar years of the production ramp-up period, approximately 25 senior level personnel and up to 230 junior level personnel will be required for the mining and ore processing operations.

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17.6.1 Mining Workshop

The positions and their numbers of personnel in the mining workshop have been listed in Table 17-4, totally 118 personnel, including 89 personnel working underground.

Table 17-4: Positions and personnel needed in the mining workshop of the project

Number of Personnel

8:00- 16:00- 0:00- Total No. Position 16:00 0:00 8:00 Personnel A Managerial Personnel 1 Manager ...... 11 2 Deputy Manager...... 1113 3 Safety official...... 1113 4 Accountant and general administration ...... 22 5 Supply and sales (surface) ...... 11 Subtotal ...... 62210 B Technical personnel 1 Chief technical office ...... 11 2 Machinery and electrical equipment ...... 11 3 Production technicians (geology, survey, mining, 44 and ventilation)...... Subtotal ...... 66 C Special Operational Personnel 1 Safety and examination operation...... 2114 2 Explosive operation ...... 44210 3 Supporting operation ...... 2226 4 Ventilation operation ...... 2226 7 Underground electric operation...... 22 8 Welting and heat cutting operation ...... 11 Subtotal ...... 139729 D Other Underground operational personnel 1 Drill jumbo operator...... 2215 2 Jumbolter operator ...... 1113 3 Scraper operator ...... 2215 4 Underground ore transfer car operator ...... 44412 5 Remover...... 2226 7 Supportive personnel ...... 2226 8 Filling worker (also main material preparation) . 22 4 9 Pipe inspector (also coarse sand preparation) ... 22 4 10 Pipe fitters ...... 2002 Subtotal ...... 19 17 11 47

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Number of Personnel

8:00- 16:00- 0:00- Total No. Position 16:00 0:00 8:00 Personnel E Other operational personnel on the surface 1 Air compressor operator ...... 2226 2 Remover...... 3328 3 Machinery repairing personnel ...... 22 4 Workers preparing main filling materials ...... 22 4 5 Worker preparing coarse sands ...... 22 4 6 Worker for back-filling...... 11 2 Subtotal ...... 12 10 4 26 Grand Total ...... 56 38 24 118 Including underground personnel ...... 41 28 20 89

Source: Feasibility Study 2021

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17.6.2 Processing Workshop

The positions and their numbers of personnel in the ore processing plant have been listed in Table 17-5, totally 201 personnel.

Table 17-5: Positions and personnel needed in the ore processing plant of the project

Number of personnel

8:00- 16:00- 0:00- No. Position 16:00 0:00 8:00 Supplemental Total 1 Manager ...... 11 2 Deputy manager ...... 11 2 3 Major technicians ...... 222 6 4 Safety-examination 222 6 operation ...... 5 Pre-screening ...... 111 3 6 Chute feeder ...... 111 3 7 Coarse crusher ...... 111 3 8 Fine crusher ...... 111 3 9 Screening ...... 111 3 10 Conveyer belt ...... 222 6 11 Photoelectric sorting 999 27 machine...... 12 Filter separator ...... 111 3 13 Sand pump ...... 111 3 14 Electricians ...... 222 6 15 Lifting worker...... 111 3 16 Equipment maintenance and 222 6 repairing ...... 17 Handyman...... 333 9 18 Hand-sorting personnel ..... 90 12 102 19 Others...... 22206 Total...... 123 33 33 12 201

Source: 2021 Feasibility Study

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17.6.3 Further Processing Workshops

There are five workshops for further processing, including preparation workshop, hand-processing workshop, returning gem processing workshop, machine-gem processing workshop and machine gem quality sand processing workshop. Table 17-6 provides details about the positions and personnel required in various workshops.

Table 17-6: Positions and Numbers of Personnel in Different Workshops for Further Processing of Fuli Project

Workshop Position Number of Personnel Administration ...... Managerial personnel 11 Preparation...... Sorting stones 9 31 Cutting 14 Sticking 8 Gem Hand-processing ...... Shaping 35 223 Grinding 179 Acceptance 9 Machine processed gems ..... Grinding 9 10 Acceptance 1 Equipment operators 15 25 Acceptance 10 Polishing stone ...... Equipment operators 6 10 Acceptance 4 Gem quality sand machine Equipment operators 25 25 processing ...... Supportive ...... Other supportive personnel (electricity, 10 security, and maintenance etc.) Total ...... All personnel 345

Source: Feasibility Study 2021

18 MARKET STUDIES AND CONTRACTS

18.1 Overview on Peridot Resources and Market

SRK prepared the section based on the reviews of the Independent Market Research on Global and China Peridot Industry by Frost and Sullivan in 2021 (“Frost and Sullivan 2021”) and the FS 2021.

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The most important products of the peridot business are the peridot gemstones. From ancient times to the present, major peridot producing countries include Egypt, Myanmar, Pakistan, the USA, and China. Other peridot producing countries include Australia, Brazil, Kenya, Mexico, North Korea, Norway, Sri Lanka, South Africa, Vietnam, Ethiopia, etc. The cut and polished peridot is usually used of jewelry (including necklaces, rings, bracelets, earrings), watches, shoes, art paintings, bags as well as fashion accessories, etc.

Industrial Grade Peridot Sands are formed by mechanical processing and sorting of peridot. Industrial grade peridot sands can be widely applied in the manufacturing and production of metallurgical auxiliary materials, high manganese steel casting sands, high temperature refractory materials as a natural and environmentally-friendly alternatives to other abrasives because of its high-temperature resistance and high-melting point.

Figure 18-1 illustrates the exploitable rough peridot of major countries as of the end of 2020.

Peridot Mineral Reserves of Major Countries, 2019

Figure 18-1: Exploitable Rough Peridot of Major Countries, as of 31 December 2020 (Frost and Sullivan (2021))

Peridot resources in China are distributed in Hebei and Jilin Provinces. The YQS Nanshan Peridot deposit in Jilin is the most important deposit for gem quality peridot in China.

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By reviewing and comparing the properties and history of peridot with other colored gemstones, such as emerald, tanzanite, spinel, ruby, sapphire, and tourmaline, Frost and Sullivan (2021) had following key findings:

• In the field of colored stones, only colored stones with a stable and continuous supply can drive and create market demand consistently. No matter what kind of colored stone, if its major mines were to cease production or if they were unable to supply the market with a consistent quantity and quality, the market circulation of the gem will encounter great resistance, and the gem dealers would turn to other gems, which would result in a weakening of consumer awareness of it, even if it were highly regarded in the past. Peridot once had a higher gem status than emerald, but the shutdown of Egyptian peridot mine and the unstable supply of Burmese peridot mine in the 17th century turned gemstone dealer’s attention to other green gemstone mines with stable world supply such as Colombian emerald mine. This further increased the flow of emerald and decreased the flow of peridot in the global trade. Similarly, the “revival” of spinel was mainly attributed to the discovery of large high-quality spinel mine in Mahenge, Tanzania. Therefore, if the newly discovered peridot mines are located in countries with political stability and have large peridot reserves to supply the global market consistently, reigniting consumers’ enthusiasm in peridot and promoting the value of peridot back to its historical status could be expected in the near future.

• The discovery of large scarce gemstone mines will bring stable supply of gemstones to the market and the increasing supply of gemstones will not diminish gemstone value, instead it will continuously increase its market influence and its value. Due to the particularity of gemstones, only when their value is known and recognized by consumers, will its market demand start to grow and then in turn, drive up the price. The stable gemstone supply and the marketing cooperation of different stakeholders in the gemstone market are two key factors of promoting the market position of a gemstone. The “revival” of red spinel is in 21st century is mainly attributed to the discovery of the red spinel mine in Mahenge, Tanzania. In addition, the exposure of giant crystals of rough red spinel acted as the catalyst that brought the Mahenge mines to global attention overnight, attracting miners, geologists and gemstone brands across the world. With the deep collaboration among gemstone suppliers, well-known brands and designers, the long history and the untreated “purity” of red spinel has rekindled consumers’ enthusiasm for it. As a result, the value of the red spinel was successfully stimulated and appreciated by the market. Therefore, the discovery of large reserves of high- quality peridot in China will also provide peridot a precious opportunity to revive its reputation and value in the global market.

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• The continuous rise in the value of tourmaline is a direct result of the huge market demand in China. Gemstones are scarce resources which are classified as luxury products and unnecessaries. Therefore, the demand for gemstones is closely related to the economic development of the market. On one hand, driven by the rapid growing economy, the increasing purchase ability, as well as strong penetrated 2C marketing and sales channels such as social media and e-commerce platforms, China has become the largest market for gold jewellery and the second largest market of colored gemstones in the world. On the other hand, the rising value of rubellite (red tourmaline) is closely related to the long-held Chinese preference and emotive attachments to the colour red. Therefore, if peridot can also gain the same enthusiasm and demand from the Chinese consumers, its value could continue to grow worldwide. There are several distinctive advantages that could also become advantages for Chinese peridot and its success in China: 1) Green is also one of the traditional colors in China; 2) The special emotions and supports from Chinese consumers to Chinese brands; 3) The import tariffs in China do not apply on peridot explored in China; 4) Many Chinese consumers only accept untreated natural gemstones.

Frost and Sullivan (2021) reviewed the historical market size, and estimated the future market size by sales volume of the cut and polished peridot in its research. Figure 18-2 and Figure 18-3 show the historical and future market size of sales of cut-and-polished peridot globally and in China. From the figures it is clear that the sales volume of the cut and polished peridot will steadily increase globally and in China, and that the major market will be global market.

Figure 18-2: Market Size by Sales Volume of Cut and Polished Peridot Industry (Global), 2015- 2035E (Frost and Sullivan (2021)

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Figure 18-3: Market Size by Sales Volume of Cut-and-Polished Peridot Industry (China), 2015- 2035E (Frost and Sullivan (2021)

18.2 Marketing Plan and Strategy

According to the Frost and Sullivan 2021 Report, colored gemstones are scarce natural resources, typically viewed as consumer discretionary and/or luxury products which are very much preference and perception driven. Consistent marketing efforts and messages as well as consumer education are critical in driving consumer perception, recognition, emotional attachments and ultimately preference and demand toward a particular type of gemstones.

With the large peridot reserve, Fuli is in the position of resolving the inconsistent global supply challenge. In addition to a practicable mine construction plan, Fuli has further devised its global marketing strategies to pave the way towards full commercialization.

Fuli’s global marketing strategies

The working initiatives under Fuli’s global marketing strategies are broadly directed at two angles, namely (i) value chain promotions and collaborations; and (ii) brand awareness and publicity campaigns.

Value chain promotions and collaborations

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APPENDIX IV COMPETENT PERSON’S REPORT their interests in peridot. These initiatives are mostly scheduled to commence at the early- to mid-construction stage in advance of our scheduled commencement of commercial production to build pre-market momentum and anticipation.

• Internal proprietary grading system: At present, there is no official, universally adopted grading system for colored gemstones, and the colored gemstones industry generally refers to the grading system developed by GemGuide, which separates gemstones into four categories of commercial, good, fine and extra fine, ranked by quality factors such as color, clarity, cut and carat weight. Fuli considers that having its own proprietary grading system (while making reference to the GemGuide grading system but tailored more specifically to peridot) can serve as an important tool for delivering a clear, standardized quality peridot grading guidance for its peridot. More importantly, Fuli believes that collaborating with professional institutions to develop such proprietary grading system is an excellent marketing tool to educate the industry about peridot and establish its market standing in the industry supply chain. In this connection, Fuli held preliminary discussions with Ressigeac Gems, a gemstone consultant and trader headquartered in Bangkok, Thailand on potential collaboration. Fuli currently plans to commence development of this proprietary grading system in 2021 and aim to complete the development of a full grading system by the end of 2022, ahead of its scheduled commencement of commercial production and sales to allow for sufficient time to promote this proprietary grading system to the industry supply chain.

• Traceability platform development: According to the Frost and Sullivan (2021), traceability, transparency and sustainability have become increasingly important attributes in the gemstone industry. With increasingly progressive worldviews and social responsibility, the new generations have been calling for a transparent and traceable history and background for gemstones. Nowadays, major international brand owners in the jewelry industry such as Kering (Boucheron, Pomellato, Gucci), Richemont (Cartier, Piaget, Van Cleef & Arpels, Buccellati) and LVMH (Bulgari, Louis Vuitton and Tiffany), are increasingly advocating traceability, chain of custody and responsible sourcing, publicly pronouncing these as part of their procurement policy. Fuli views traceability as one of the cornerstones for potential success in marketing its peridot to these major brands on a commercial scale. Fuli has been in touch with an international traceability advisory firm to examine the plausible routes and technical requirements for the development of a “mine-to-market” traceability platform, capable of tracing and providing chain of custody for its peridot gemstones all the way back to its mine. Similar to its proprietary grading system, Fuli plans to commence the development of this traceability platform in 2021 and complete this initiative by the end of 2022, in advance of its scheduled commencement of commercial production and sales. Fuli

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believes this will also provide it with the sufficient time to campaign the offering of this traceability feature to major brands and the market, and for these major brands to validate and fully appreciate its traceability offering ahead of its commercial sales.

• Gemological laboratory and trade association collaborations: Fuli considers collaborations with gemological laboratories and trade industry associations to be an effective means to promote awareness and talkability of and interest in its peridot within the gemstones supply chain. Fuli endeavors to engage in various collaborations such as conducting research on its peridot, field trips to its YQS Nanshan Project mine site, sponsorships of colored gemstone congresses and participation in gemstone industry forums to support continuous visibility of peridot and its brand in the gemstone industry and end markets. In this connection, Fuli has initiated discussions with selected gemological research institutions and trade associations. It expects these collaborations will continue to take place following its commercial production.

• Brand and designer collaborations: Fuli considers collaborating with brands and designers to incorporate peridot gemstones in their collections to be a direct and effective means to drive demand and sales of its peridot. It also allows Fuli to leverage the resources and marketing campaigns of these brands and designers to gain and develop exposure for its peridot and encourage end-consumers’ interest in peridot products. Continuing on from its efforts in the collaborations with selected internationally well-known jewelry designers as mentioned previously, Fuli plans to expand its collaborations with established, as well as up-and-coming brands, and designers with the aim of providing new products and on-trend designs adopting peridot to the market, and developing interests, publicity and market traction for its peridot gemstones.

• Industry event participation and sponsorships: Fuli views participation and sponsorships of industry events as a direct and effective marketing initiative to promote its peridot and brand recognition, and forge relationships with major event organizers for public relations and promotional purposes. Aside from sponsoring the 2019 and 2020 BAZAAR Jewelry Annual Design Award, Fuli has identified selected industry events that it intends to sponsor and/or participate in the near to medium term, including The Jewellery Cut Live in the UK and the International colored Gemstone Association Congress in Shenzhen, and has already committed to The Jewellery Cut Ltd for a three-year headline event sponsorship starting 2021.

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their mine operations and products. It is considered to be an effective education and marketing tool for the supply chain to gain a more in-depth knowledge about the gemstones, the production, processing and logistics and scale of mining operations, which in turn may foster supply chain confidence and create positive publicity and press coverage. Fuli plans to start this marketing initiative early in the mine construction stage, possibly in the second half of 2021 by inviting limited groups of selected industry players and influencers to showcase the mine deposits, construction progress, mine conditions to build their confidence in Fuli and foster closer business relationships. Fuli intends to further formalized such site visit arrangements into organized, periodically arranged marketing activities with key industry players and influencers following commercial production of its mine.

Brand awareness and publicity campaigns

Brand awareness and publicity campaigns are primarily “broad-audience based”, above- the-line initiatives centered around raising the overall market recognition of peridot gemstones and Fuli’s brand profile, as well as driving end-market perception of and preference for the products. Fuli’s initiatives in this regard.

• will mainly include: Online and social media advertising push: Fuli considers online and social media advertising to be a relatively cost-effective yet efficient way of gaining visibility and educating the end-markets about peridot and Fuli brand. Under this marketing initiative, educational and promotional contents, such as the history and origin of peridot, its quality characteristics, its designs and representations, the traceability feature of Fuli’s peridot and its emotive messages will be continuously created and deployed through online and social media platforms and target audience groups, which may take the form of:

— Paid-for-push, where relevant educational and promotional contents will be pushed through popular social media platforms such as Facebook, Instagram, LinkedIn, Weibo, Wechat and RED; and

— Sponsored contents, where the educational and promotional contents will be conveyed through chosen influencers and KOLs within the jewelry space, the marketing and publicity messages of Fuli’s collaborating designers, and editorial materials of collaborating press and industry media. Fuli has used social media platforms such as Instagram, Wechat and Linkedin, and has been featured to disseminate some of its pre-market educational and promotional messages. Different industry media and publications such as Forbes, Vogue, Town & Country and The Jewellery Cut have also run online feature articles on Fuli brand and its

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peridot. Fuli endeavors to continuously create fresh, updated and engaging contents for deployment through a broad variety of social media and other online platforms throughout its commercialization cycle.

• Above-the-line advertising campaigns: Above-the-line advertising campaigns are series of advertisements and other marketing communications designed to accomplish a particular set of marketing objectives, such as conveying brand or product messages, raising brand awareness, and/or amplifying the rate of conversions and sales. Based on Fuli’s overall marketing plan, above-the-line advertising campaigns will be created and launched periodically through various media, in a variety of forms, with contents and messages using a combination of film, digital and print. Fuli plans to substantially intensify its above-the-line advertising campaigns closer to its commercial production and sales in 2023. According to the Frost and Sullivan (2021), associating a gemstone with an emotion or a symbolic meaning is a particularly effective marketing strategy. Fuli intends to utilize these above-the-line advertising campaigns to establish its central theme of “Peridot, the Gift of Light and Hope”, and to promote the emotive association of peridot as “a gift of celebration of life” throughout a person’s lifecycle throughout a person’s lifecycle of birth, graduation, wedding and career achievements.

• Red Carpet sponsorships: Leveraging the publicity, broad media coverage and public interests drawn to red carpet events and their participating celebrities, Fuli believes that having celebrities showcase branded and designer jewelry with highlighted gemstones in these high-profile events is among the most effective and commonly seen marketing campaigns in the gemstone industry. Under Fuli’s global marketing strategies, it intends to combine its red carpet sponsorship campaigns with its collaborations with brands and designers, where designer creations utilizing Fuli’s peridot are expected to be featured by selected celebrities participating in various red carpet events such as the Cannes Film Festival, the Beijing International Film Festival, the Golden Globes Awards, the Oscars and the Venice Film Festival. Similar to the above-the-line advertising campaigns, Fuli intends to commence its participation in red carpet events as early as 2023.During 2018 to 2020, Fuli has embarked on a series of brand awareness initiatives, such as giving out information about its peridot and its brand to its supply chain and end-markets to build market traction for its peridot. These initiatives include: having selected international news, trade and fashion publications such as Forbes, Vogue, BAZAAR Jewelry China, Rapaport USA and Retail Jeweller run feature articles on Fuli and its peridot;

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• Fuli also collaborates with Gem & Jewelry Trade Association of China in the formulation of the industry-wide gemstone grading system T/GAC 13-2020, and held preliminary discussions with Ressigeac Gems, a mining consultant and gemstone trader headquartered in Bangkok, Thailand regarding potential collaborations in the development of its proprietary internal grading system and our traceability platform;

• having Sponsored the 2019 and 2020 BAZAAR Jewelry Annual Design Award organized by BAZAAR Jewelry China, a magazine in China focusing on high-end jewelry to increase the exposure and awareness of the “Fuli” brand and its peridot;

• having sponsored and undertaken the organization of “Green China 70th Anniversary of China The First International Peridot Design Contest (綠色中國70華誕 — 首屆橄欖石國際設計大獎賽)” in 2019;

• Established collaborative relationships with Liv Luttrell, Zeemou Zeng Limited, Annoushka Ltd and Stephen Webster Limited, all internationally well-known designers or jewelry companies carrying fine jewelry products designed by their respective founders, about creating customized jewelry pieces using Fuli’s peridot;

• entered into non-binding memoranda of understanding with Zeemou Zeng Limited, Annoushka Ltd and Stephen Webster Limited as well as with Memorigin Watch Co. Ltd. (a timepiece brand and a pioneer in the production of tourbillon in Hong Kong) and Cuihuating (Beijing) Jewelry Co., Ltd.* (萃華廷(北京)珠寶有限公司), a wholly-owned subsidiary of Shenyang Cuihua Gold and Silver Jewelry Co., Ltd.* (瀋陽萃華金銀珠寶股份有限公司) which is a company listed on the Shenzhen Stock Exchange (stock code: 002731) whose history could trace back to 1895 for classic royal fine jewelry, to explore potential areas of collaboration, including the use of its peridot in their respective jewelry collections and pieces and the global marketing and promotion of its peridot. Fuli considers collaborations with brands and designers, such as the use of its peridot in their jewelry collections, to be a direct and effective means of driving publicity and interests as well as demand and sales of its peridot gemstones;

• initiated contacts with other key target brands and designers such as Saul Gemstones and a New York-based high jewelry house and discussed potential orders as well as the possible use of Fuli’s gemstones in their jewelry collections and pieces; and participated in selected trade shows including JCK Tucson, China International Jewellery Fair, and China International Consumer Products Expo, where Fuli’s peridot products were showcased and limited sales were conducted during these trade fairs.

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18.3 Sales Channels Development

Fuli will adopt a “mine-to-market” business model which is considered to be a more advantageous and sustainable model as it pushes Fuli towards the establishment of direct collaborating relationships with brands, designers and other major supply chain players, making Fuli less dependent on layers of intermediaries and allowing it to optimize profit margin. As important, the “mine-to-market” model would greatly facilitate the offering of traceability and clear chain of custody which is becoming essential for marketing Fuli’s products directly to major brands, and is increasingly appealing to the new generations of end-consumers. Figure 18-4 is a simplified graphical illustration depicting the targeted sales channels and customer groups.

The principal products of Fuli are gem-grade peridot. During its construction process and throughout its mining operations, Fuli will also produce two major by-products: (i) industrial-grade peridot sands; and (ii) basalt. Given that its by-products are primarily for industrial use with relatively more established market and demand, Fuli’s resources and strategies on sales and sales channel development will be more focused on its main products of gem-grade peridot.

Gem-grade Peridot

Fuli’s strategies on sales and sales channel development for gem-grade peridot are structured around the workings of the industry supply chain and its “mine-to-market” business model. The following is a simplified graphical illustration depicting Fuli’s targeted sales channels and customer groups:

Figure 18-4: Fuli’s Targeted Sales Channels and Customer Groups

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Based on the target customer groups, Fuli’s sales channels development strategies are mainly target at the following channels:

• International and regional trade shows: According to the Frost and Sullivan (2021), international and regional trade shows are among the most common sales channels for the gemstone industry. Fuli believes that regular participation in international and regional trade shows and exhibitions would enable it to meet a wide array of brands and designers as well as active gemstone buyers in the industry. Fuli plans to establish its presence in these trade shows and exhibitions early on during the mine construction stage to gain exposure and recognition from these potential customers, to showcase its peridot inventories acquired during the exploration stage, to build confidence in its products from these potential customers and to create traction for commercial sales. To this end, Fuli will continue to participate in, amongst others, the China International Jewelry Fair in Beijing, Jewellery & Gem World Hong Kong (formerly known as the September Hong Kong Jewellery & Gem Fair), and JCK Tucson in the U.S. We have also identified a number of major international and regional trade shows and exhibitions, such as Gem Genève in Switzerland and The Jewellery Cut Live in the UK, which Fuli intends to participate in progressively starting from 2021.

• E-commerce channels: Online shopping has increasingly becoming part of people’s lifestyle. This is particularly apparent in China, where the proliferation of its electronic payment applications has greatly facilitated online transactions. E-commerce platforms for jewellery sales have gained increasing ground as a result of the COVID-19 pandemic. With a number of trade shows and industry fairs held online, many brands and gemstone dealers have turned to online sales to counter the impact of the restricted retailed activities and in-store sales. Fuli believes e-commerce platforms will grow to become a well-recognized sales channel for gemstones and other luxury products. Leveraging on its on-going social media advertising push, Fuli plans to expand its Instagram platform to include functionalities to facilitate direct sales push to consumers outside China, and establish online sales platforms on highly popular e-commerce platforms in China such as Tmall. System development and contents construction for these e-commerce channels are currently scheduled to commence during Fuli’s mine construction period to ensure that they will be fully functional on or before commencement of its commercial production.

• Auction channels establishments: According to the Frost and Sullivan (2021), auctions are popular venues for gemstone dealers to purchase bulk rough gemstones for further processing and sales. In addition, auctions are sometimes used by gemstone companies to establish benchmark prices of their gemstones for the market. High-quality and particularly large carat gemstones may also be sold through auction houses. Fuli intends

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to utilize auctions as one of the sales channels for its rough peridot. Where Fuli acquires particularly large and high-quality peridot during its commercial production, it will also consider using the international auction houses as a channel to reap their full price potential and at the same time create positive industry publicity.

Industrial grade peridot sands and basalt

18.4 Industrial grade peridot sands and basalt are the principal by-products of Fuli’s mining operations. According to the Frost and Sullivan (2021), industrial grade peridot sands is a natural and environmentally-friendly alternative to other industrial abrasives, which can be widely applied in metallurgical auxiliary materials and high manganese steel, etc. On the other hand, basalt has a very wide application in construction, industrial and highway engineering. More particularly, crushed basalt is used for road base, concrete aggregate, asphalt pavement aggregate, railroad ballast, filter stone in the drain field and many other purposes, or it can be manufactured into fine, superfine and ultra-fine fibers with superior thermal stability, heat and sound insulation properties, vibration resistance and durability. To the best of our understanding, there are ready markets for industrial-grade peridot sand and basalt in China and Fuli intends to sell these by-products within China.

Sales Plan

The final products from the Project will be different sizes of rough peridot gemstone, hand-processed cut and polished peridot, and machine-processed cut and polished peridot, as well as industrial-grade peridot sands and basalt.

Industrial-grade peridot sands and basalt will be sold to the domestic market within China. Fuli has advised SRK that some companies intending to buy the industrial-grade peridot sands and basalt have established contacts with them.

Table 18-1 gives the sales plans proposed by the Company.

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Table 18-1: Sales Plan by Fuli (2023-2044)

Medium Small Peridot large gemstones gemstones gemstones Industrial- gemstones (above (above dots grade (>10mm) 7-10mm) 3-7mm) (1-3mm) peridot Year (ct) (ct) (ct) (million ct) sands (t) Basalt (t) 2023 ...... 51,205 207,130 296,725 0.7 1,197.9 6,000 2024 ...... 204,820 828,520 1,186,900 2.8 5,191.6 30,000 2025 ...... 521,360 2,108,960 3,021,200 13.8 14,956.3 100,000 2026 ...... 707,560 2,862,160 4,100,200 13.6 16,473.3 100,000 2027 ...... 912,380 3,690,680 5,287,100 17.9 19,300.4 100,000 2028 ...... 1,117,200 4,519,200 6,474,000 25.4 27,454.2 150,000 2029 ...... 1,303,400 5,272,400 7,553,000 25.4 27,187.3 150,000 2030 ...... 1,470,980 5,950,280 8,524,100 30.6 33,048.6 200,000 2031 ...... 1,582,700 6,402,200 9,171,500 28.8 31,141.8 200,000 2032 ...... 1,582,700 6,402,200 9,171,500 28.1 30,396.4 200,000 2033 ...... 1,582,700 6,402,200 9,171,500 27.8 29,999.8 200,000 2034 ...... 1,582,700 6,402,200 9,171,500 29.8 32,200.0 200,000 2035 ...... 1,582,700 6,402,200 9,171,500 30.4 32,871.7 200,000 2036 ...... 1,582,700 6,402,200 9,171,500 31.4 33,878.4 200,000 2037 ...... 1,582,700 6,402,200 9,171,500 32.3 34,886.4 200,000 2038 ...... 1,582,700 6,402,200 9,171,500 32.0 34,551.9 200,000 2039 ...... 1,582,700 6,402,200 9,171,500 32.6 35,222.0 200,000 2040 ...... 1,582,700 6,402,200 9,171,500 31.4 33,913.6 200,000 2041 ...... 1,582,700 6,402,200 9,171,500 30.5 32,923.5 200,000 2042 ...... 1,582,700 6,002,200 9,171,500 29.6 21,000.0 200,000 2043 ...... 1,582,700 4,525,600 9,171,500 20.0 21,281.0 100,000 2044 ...... 766,519 3,089,227 4,109,709 14.8 23,433.8 120,667

Fuli also plans to sell some rough peridot gemstones through auctions. Table 18-2 gives details about the plan.

The gemstones will be sold through different methods as discussed above, and rough peridot gemstones will be sold through auctions. Based on the available information regarding the market, SRK considers that the sales plan is reasonable.

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Table 18-2: Auction Plan by Fuli (2023-2044)

Medium Large gemstones gemstones Small gemstones (>10mm) (above 7-10mm) (above 3-7mm) Year ct ct ct 2023 ...... 000 2024 ...... 000 2025 ...... 720,000 2,960,000 4,320,000 2026 ...... 720,000 2,960,000 4,320,000 2027 ...... 720,000 2,960,000 4,320,000 2028 ...... 720,000 2,960,000 4,320,000 2029 ...... 720,000 2,960,000 4,320,000 2030 ...... 720,000 2,960,000 4,320,000 2031 ...... 720,000 2,960,000 4,320,000 2032 ...... 720,000 2,960,000 4,320,000 2033 ...... 720,000 2,960,000 4,320,000 2034 ...... 720,000 2,960,000 4,320,000 2035 ...... 720,000 2,960,000 4,320,000 2036 ...... 720,000 2,960,000 4,320,000 2037 ...... 720,000 2,960,000 4,320,000 2038 ...... 720,000 2,960,000 4,320,000 2039 ...... 720,000 2,960,000 4,320,000 2040 ...... 720,000 2,960,000 4,320,000 2041 ...... 720,000 2,960,000 4,320,000 2042 ...... 720,000 2,960,000 4,320,000 2043 ...... 720,000 2,960,000 4,320,000 2044 ...... 720,000 2,960,000 4,320,000

18.5 Product Prices

Table 18-3 provides the products’ prices as supplied by the Company based on previous production and market investigations. More specifically, SRK noted that projected prices of the cut and polished peridot are based on historical pricing trend and current market prices sourced from Gemguide, an international reference guide on coloured gemstones pricing generally referenced by the coloured gemstones industry, while prices of peridot gem dots and by-products are projected based on current market prices.

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Table 18-3: Products’ Prices of Fuli Peridot Project

Item Unit 2023 2024 2025 2026 2027 2028 2029 2030

Large gemstones (>10mm)...... RMB/ct 1044.80 1044.80 1086.59 1130.06 1243.06 1367.38 1504.12 1654.51 Medium gemstones (above 7-10 mm) .. RMB/ct 653.00 653.00 679.12 706.28 776.91 854.58 940.06 1034.09 Small gemstones (above 3-7mm) ... RMB/ct 391.80 391.80 407.47 423.77 466.15 512.87 564.06 620.42 Peridot Gem Dot (1-3 mm) ...... RMB/ct 65.30 65.30 65.30 65.30 65.30 65.30 65.30 65.30 Rough Peridot .... RMB/ct 0.29 0.29 0.29 0.29 0.29 0.29 0.29 0.29 Peridot Sands ..... RMB/t 1020.00 1020.00 1020.00 1020.00 1020.00 1020.00 1020.00 1020.00 Basalt...... RMB/t 170.00 170.00 170.00 170.00 170.00 170.00 170.00 170.00

Products’ prices from 2031 up to 2044 are assumed to be at the same as 2030.

19 ENVIRONMENTAL STUDIES, PERMITTING, AND SOCIAL OR COMMUNITY IMPACT

19.1 Environmental and Social Review objective

The objective of this section is to identify any existing and potential environmental liabilities and risks, and to assess and comment on any associated proposed remediation measures for the Fuli Peridot Project.

19.2 Environmental and Social Review Process, Scope and Standards

SRK’s verification process for the environmental compliance and conformance for the Project comprised a review and inspection of the Project’s environmental management performance against:

• Chinese national environmental regulatory requirements; and

• Equator Principles (World Bank/International Finance Corporation (“IFC”) environmental and social standards and guidelines) and Internationally Recognised Environmental Management Practices.

SRK adopted a desktop review and site visit for this environmental review of the Fuli Peridot Project. The latest environmental site visit for the environmental review was undertaken from 21 to 23 September 2020.

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19.3 Status of Environmental Approvals and Permits

The basis of environmental policy in China is contained in the 2004 Constitution of the People’s Republic of China. Pursuant to Article 26 of the Constitution, the State protects and improves the environment in which people live and the ecological environment. It prevents and controls pollution and other public hazards. The state organises and encourages afforestation and the protection of forests.

The following are other Chinese laws that provide environmental legislative support to the Minerals Resources Law of the People’s Republic of China (1996) and the Environmental Protection Law of the People’s Republic of China (2014):

• Environmental Impact Assessment (EIA) Law (2016).

• Law on Prevention & Control of Atmospheric Pollution (2015).

• Law on Prevention & Control of Noise Pollution (1996).

• Law on Prevention & Control of Water Pollution (2017).

• Law on Prevention & Control Environmental Pollution by Solid Waste (2016).

• Forestry Law (1998).

• Water Law (2016).

• Land Administration Law (2004).

• Protection of Wildlife Law (2016).

• Regulations on the Administration of Construction Project Environmental Protection (2017).

In accordance with Chinese legislation the Project was subject to a comprehensive Environmental Impact Assessment (“EIA”) program to assess the environmental impacts of the proposed development on the human and natural environment prior to the commencement of mining operations.

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The details of the Environmental Impact Assessment (“EIA”) reports and approvals for the Project are presented in Table 19-1.

Table 19-1: EIA Report and Approval

No environmental Final Check and Acceptance (“FCA”) report and approval for the Project have been sighted as part of this review. The Company reported to SRK that the mine site was under construction and therefore the FCA report and approval were not yet required at the time of SRK’s site visit. SRK recommend the Company obtain the FCA approval before the formal operation to meet the national legal requirements.

The details of the Water and Soil Conservation Plan (“WSCP”) report and approval for the Project are presented in Table 19-2.

Table 19-2: WSCP Report and Approval

Production Approval Project Produced By Approved By date date

Changchun Wanlong Water and Soil Conservation Jilin Province Fuli Peridot Project Sep-16 19-Sep-16 Development and Construction Co., Ltd Water Bureau

19.4 Environmental Conformance and Compliance

SRK notes that the provided EIA reports and approvals for the Project have been compiled in accordance with relevant Chinese laws and regulations. SRK has reviewed the provided EIA reports and approvals and conducted an environmental site visit in Dunhua City against Chinese legislation and recognised international industry environmental management standards, guidelines, and practices. During the time of this site visit, SRK noted the mine site was under construction and the formal mining and processing operations had not commenced yet.

SRK recommends the Company acquire the necessary environmental FCA approval to ensure compliance with Chinese National legal requirements. In the following sections, SRK provides comments in respect to the Project’s proposed environmental management measures.

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19.5 Key Environmental and Social Aspects

19.5.1 Site Ecological Assessment

The landform and topography in the mining area is extensively modified by previous open pit mining, waste rock dumping, haul roads, office buildings and dormitories, and other facilities. The development of mining projects may also result in impacts to or loss of flora and fauna habitat. If effective measures are not taken to manage and rehabilitate the disturbed areas, the surrounding land may become polluted and the land utilisation function will be changed, causing an increase in land desertification, water loss and soil erosion. The Project’s EIA should determine the extent and significance of any potential impacts to flora and fauna habitat. Where these potential impacts to flora and fauna habitat are determined to be significant, the EIA should also propose effective measures to reduce and manage these potential impacts.

The EIA reports for the Fuli Peridot Project indicate that no rare or endangered flora and fauna were identified within the project area. Korean pine, oak, birch, poplar, elm are the main plants in this area. The primary wild animals living in the mine site area consist of weasel, badger, rabbit, squirrel, magpie, snake and frog. The EIA report also states the mining operation will have negative impact on the wild animals but that the impact is within an acceptable range.

The WSCP report for the Fuli Peridot Project indicates a total disturbed area of 2.87 ha, which comprises industrial site of 2.56 ha, haul road of 0.28 ha and power transmission line of 0.03 ha respectively. The proposed prevention measures of the WSCP report consists of drainage ditch, retaining wall, topsoil backfill and revegetation.

No other documented, estimated, and/or currently surveyed areas of land disturbance or rehabilitated areas for any of the project have been sighted as part of this review. SRK recommends that the operational areas of land disturbed for the Project be surveyed and recorded on an annual basis. The Company stated that the disturbed areas will be monitored and recorded annually after formal production.

19.5.2 Water Management

The nearest surface watercourse around the mine site is the Zhuerduo River and its tributary, Yiqisong Creek. The FS 2021 report states that the domestic water use for the mine site is sourced from deep well and the mine water will be reused as production water. The EIA report states the normal and maximum mine water are 211.42 m3/d and 307.52 m3/d respectively. The domestic waste water for the project is predicted to be 6.4 m3/d.

The potential negative impacts of a mining project to surface water and ground water are due to the indiscriminate discharge of untreated production and domestic waste water. In addition, the mining activities may lead to the change of the groundwater table. The EIA report for the project proposes the following management measures to prevent water pollution:

• The mine water will be reused for underground mining, fire protection and dust suppression after sedimentation; and

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• The domestic waste water should be collected by a pond and regularly be transported to Dunhua sewage treatment plant.

At the time of SRK’s site visit, the mine site was under construction. SRK recommends the Company implement the water management measures for project’s construction and operation, which are proposed by the EIA reports. SRK also recommends the Company construct an effective drainage system to divert run-off from undisturbed areas around disturbed areas. In addition, some prevention measures, such as settling ponds, surface hardening, water monitoring and second containment facility, are recommended to mitigate the water pollution risks. The Company stated that they will build drainage ditches on the periphery of the mine site so that rainwater from the surrounding area does not enter the mine site, while the ground of mine site will be hardened and sedimentation ponds will be built on site.

19.5.3 Waste Rock Management

According to the latest EIA report, the waste rock generated by the project are to be used as backfill to the underground mine excavations. The Company states that a temporary WRD will be established for the transport buffer. During the time of latest SRK’s site visit, SRK sighted the waste rock generated by initial channel development was reused for industrial site construction.

One of the most serious effects of waste rock is Acid Rock Drainage (“ARD”). ARD refers to the acidic water that is created when sulphide minerals are exposed to air and water and, through a natural chemical reaction, produce sulphuric acid. ARD has the potential to introduce acidity and dissolved metals into water and can thus be harmful to surface and groundwater. During the time of SRK’s site visit, SRK did not observed any evidence of leaching or ARD impacts. In addition, the EIA report states that a leaching toxicity test has been conducted on the Project’s waste rock by Jilin Metallurgical Research Institute in November 2018. The results of the leaching test shows that the waste rock belongs to General Industrial Solid Waste Class I.

19.5.4 Dust and Gas Emissions

The dust emission sources for the Project are mainly from drilling, loading and unloading, explosion, crashing, screening, fill station and movement of vehicles and mobile equipment. In addition, the exhaust gas from boiler room and kitchen will also contaminate the ambient air.

During SRK’s site visit, the Project was under construction and SRK did not observe any obvious fugitive dust emissions on the mine site.

The EIA reports provide the following proposed site dust and gas management measures:

• Conduct wet drilling and ventilation;

• Speed limitation of vehicles;

• Use of bag-type dust remover for processing and backfilling;

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• Conduct water sprinkling on haul road; and

• Install dust remover for boiler and use lampblack purification device in dining hall.

It is SRK’s opinion that the dust and gas prevention measures mentioned in the EIA reports are reasonable. SRK recommends the Company follow the proposed air management measures during project’s construction and operation.

19.5.5 Noise Emissions

The main sources of noise emissions for the Project are from drilling, blasting, air compressor, loader, processing, backfilling and vehicles. The EIA reports for the Project propose the following noise management measures:

• Use of advanced explosion technics;

• Adopt shock absorption when installation;

• Use of equipment with low noise; and

• Conduct regular maintenance for the equipment.

The EIA report also states that the adjacent villages are barely affected by the noise generated by the project. During SRK’s site visit, SRK did not note any obvious noise emissions on the open areas of the mine site.

19.5.6 General Waste Management

The EIA reports for the Project states that the domestic garbage will be collected on site and then treated by local garbage disposal station. During SRK’s site visit, SRK sighted some domestic garbage scattered on the mine site. SRK recommend the Company manage the domestic waste based on the EIA report’s suggestions.

19.5.7 Hazardous Materials Management

Hazardous materials have the characteristics of corrosive, reactive, explosive, toxic, flammable and potentially biologically infectious, which pose a potential risk to human and/or environmental health. Generally, the hazardous materials will be generated mainly by a mining project’s construction and operations and include hydrocarbons (i.e. fuels, waste oils, and lubricants), chemical and oil containers, batteries, etc. The hazardous materials for the Fuli Peridot Project mainly consist of fuels and waste oils.

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APPENDIX IV COMPETENT PERSON’S REPORT

The Company stated that the reserve diesel for the diesel generator only needs to be 200 liters (a barrel) and will be stored with secondary containment. The rest of diesel will be transported by oil companies in tankers to the site for refuelling of equipment and the equipment maintenance will be conducted by maintenance companies hence no waste oil will be stored on site.

19.5.8 Emergency Response Plan

The recognised international industry practice for managing emergencies is for a project to develop and implement an Emergency Response Plan (“ERP”). The general elements of an operational ERP are:

• Administration — policy, purpose, distribution, and definitions of potential site emergencies and

• organisational resources (including setting of roles and responsibilities).

• Emergency response areas — command centres, medical stations, muster and evacuation points.

• Communication systems — both internal and external communications.

• Emergency response procedures — work area specific procedures (including area specific training).

• Checking and updating — prepare checklists (role and action list and equipment checklist) and undertake regular reviews of the plan.

• Business continuity and contingency — options and processes for business recovery from an emergency.

The Company stated that the emergency response plan in line with Chinese National requirements had been developed for the mine site.

19.5.9 Occupational Health and Safety

A well developed and comprehensive safety management system comprises site inductions, site policies, safe work procedures, training, risk/hazard management (including signage), use of personal protective equipment (“PPE”), emergency response process, incident/accident reporting, an onsite first aid/medical centre, designated safety responsibilities for site personnel and regular safety meetings.

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APPENDIX IV COMPETENT PERSON’S REPORT

SRK has reviewed the occupational health management system, safety management system, emergency response plan and responsibility system for safe production of the Project as provided by the Company, and is of the opinion that the reports cover items that are generally in line with recognised Chinese industry practices and Chinese safety regulations. During SRK’s site visit, SRK did not sight any historical occupational health and safety (OHS) records for the Project. SRK notes the operation has not commenced yet and recommends the Company conduct safety record and develop incident analysis reports for the possible injuries in future. The proposed reports analysed the cause of injuries and identified measures to prevent a recurrence, which are in line with international recognised OHS accident monitoring practice. The Company has commissioned a qualified unit to prepare a pre-evaluation of occupational health and the design of occupational health facilities. In addition, the Company stated that the occupational health and safety records will be established as well.

19.5.10 Site Closure Planning and Rehabilitation

The Chinese national requirements for mine closure are covered under Article 21 of the Mineral Resources Law of People’s Republic of China (1996), the Rules for Implementation of the Mineral Resources Law of the People’s Republic of China (2006), Mine Site Geological Environment Protection Regulations (2015), and the Land Rehabilitation Regulation (2011) issued by the State Council. In summary, these legislative requirements cover the need to conduct land rehabilitation, to prepare a site closure report, and to submit a site closure application for assessment and approval.

The recognised international industry practice for managing site closure and rehabilitation is to develop and implement an operational site closure and rehabilitation planning process and document this through an operational Closure and Rehabilitation Plan. This operational closure planning process generally includes the following components:

• Identify all site closure stakeholders (e.g. government, employees, community, etc.).

• Undertake stakeholder consultation to develop agreed site closure criteria and post operational land use.

• Maintain records of stakeholder consultation.

• Establish a site rehabilitation objective in line with the agreed post operational land use.

• Describe/define the site closure liabilities (i.e. determined against agreed closure criteria).

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APPENDIX IV COMPETENT PERSON’S REPORT

• Establish site closure management strategies and cost estimates (i.e. to address/reduce site closure liabilities).

• Establish a cost estimate and financial accrual process for site closure.

• Describe the post site closure monitoring activities/program (i.e. to demonstrate compliance with the rehabilitation objective/closure criteria).

While this site closure planning process is not specified within the Chinese national requirements for mine closure, the implementation of this process for a Chinese mining project will:

• Facilitate achieving compliance with these Chinese national legislative requirements; and

• Demonstrates conformance to a recognised international industry management practice.

According to the Chinese legal requirements, a mine geological environment treatment and restoration fund account should be established by the mine. However, SRK has not sighted any documentary evidence for the guarantee fund as part of this review. SRK was provided with the geological environmental recovery and rehabilitation plan for the project, describing the treatment measures of the site as being undertaken in the aspects of collapse, groundwater, land resources, topography and landscape destruction, etc. SRK notes that the proposed approach to geological environmental protection and treatment of the site is generally in line with the relevant recognised Chinese industry practices.

The estimated investment on the geological environmental protection are RMB1,954,500.

In addition, the plan also specifies the measures adopted to recover soil’s functions. The static investment and dynamic investment on the rehabilitation are estimated to be RMB376,900 and RMB1,224,000.

19.5.11 Environmental Protection and Management Plan

The purpose of an operational Environmental Protection and Management Plan (“EPMP”) is to direct and coordinate the management of the project’s environmental risks. The EPMP documents the establishment, resourcing, and implementation of the project’s environmental management programs. The site environmental performance should be monitored and feedback from this monitoring could then be utilised to revise and streamline the implementation of the EPMP.

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APPENDIX IV COMPETENT PERSON’S REPORT

The Company has developed an EPMP for the Project which is based on the geological environmental recovery and rehabilitation plan. The EIA reports reviewed by SRK describe the various components of a comprehensive operational EPMP for the Project, such as environmental administration, regular air/noise monitoring to be conducted by the commissioned monitoring station and site environmental management. The EIA reports also specify the monitoring points, analysis items and monitoring frequency. The proposed monitoring items comprise noise and total suspended particulate.

19.5.12 Social Aspects

The Fuli Peridot Project is located in Emu Town, Dunhua City, Jilin Province. The general surrounding land to the mine site is tree farm.

The main administrative body for the Project is the Jilin Province Government, with some delegation of environmental regulation to Yanbian Korean Autonomous Prefecture and Dunhua City. According to the provided documentations and company’s statement, SRK has not sighted any historical or current non-compliance notices and or other documented regulatory directives in relation to the development of the project. The company states that there are no natural reserves and significant cultural heritage sites within the project area. The EIA reports also state there are no natural reserves or significant cultural heritage sites within or surrounding the Fuli Peridot Project. Jilin Huangnihe National Natural Reserve Administration issued a certification on 1 August 2019 which states that the Project is not within the Huangnihe National Natural Reserve.

The nearest village is Yiqisong Village, which is at a distance of 3.2 km from the mine site. There are no residences within a 3.2 km radius of the mine site.

The EIA reports provided public participation survey for the mine site and processing plant’s construction. The survey results showed 100% support for the mine site’s construction. Local residents also mentioned land disturbance and wild animals as key environmental concerns for the Project’s development. The EIA reports state local residents believe the Project will improve the development of local economy. SRK recommends that the Company maintain communication with surrounding community during the construction and operation of the Project and listen to their opinions on the construction and operation of the Project in a timely manner.

During SRK’s site visit, the Company stated that there was no documentation in relation to any actual or potential impacts of non-governmental organisation on the sustainability of the Project.

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APPENDIX IV COMPETENT PERSON’S REPORT

20 CAPITAL AND OPERATING COSTS

The forecast of capital expenditure (“CAPEX”) and operating expenditure (“OPEX”) for the Project is based on the FS 2021 completed by Jilin Northeastern Asia International Engineering and Technology Group Co. Ltd. in August 2017 and updated in April 2021.

20.1 Capital Expenditures

Fuli’s YQS Nanshan Project involves the construction of new mining and processing facilities able to support annual production of 300,000t ore. The key areas requiring investment include mining engineering, ore processing engineering, and the further processing facilities, as well as the supportive engineering of building construction, electricity supply and distribution, heating and other auxiliary engineering.

Fuli decided to postpone the construction of the further processing plant, and it will be built in 2028 and 2029.

Table 20-1 summarises the CAPEX proposed in the FS 2021 for the facilities excluding the further processing plant. The overall initial CAPEX is forecast to be about RMB250.9 M.

Table 20-1: Initial CAPEX proposed in the FS 2021

Cost (RMB’000) No. Item Mining Construction Equipment Installation Other Total A Engineering costs 1 Mine Tunnelling ...... 43,455 43,455 Construction engineering...... 23,091 23,091 Electricity engineering ...... 731 1,909 216 2,857 Mining equipment ...... 13,164 311 13,475 Back-filling system ...... 2,090 4,282 485 6,857 Mine machinery engineering ...... 193 5,499 623 6,315 Heating engineering...... 70 1,177 111 1,357 Other supportive systems ...... 558 558 Six Safety engineering ...... 2,760 313 3,073 Subtotal...... 43,455 26,733 28,792 20,57 101,037 2 Ore Processing Construction ...... 5,002 5,002 Electricity...... 382 1,103 125 1,609 Equipment ...... 6,373 721 7,094 Other supportive systems ...... 148 148 Subtotal...... 5,532 7,475 846 13,853 3 General layout engineering Off-site road ...... 6,650 6,650 Earth works...... 48 48

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APPENDIX IV COMPETENT PERSON’S REPORT

Cost (RMB’000) No. Item Mining Construction Equipment Installation Other Total Retaining wall ...... 13,540 13,540 Trucks ...... 1,260 1,260 Subtotal...... 20,238 1,260 21,498 Total Engineering ...... 43,455 52,503 37,527 2,904 136,388 B Other costs 1 Fees for land use ...... 8,817 8,817 2 Administration fee...... 2,326 2,326 3 Tunnel maintenance fee ...... 869 869 4 Worker training fee ...... 664 664 5 Office and living furniture fee ...... 372 372 6 Fee for safety assessment ...... 121 121 7 Fee for environmental assessment .... 117 117 8 Fee for energy assessment ...... 9 Service fee for bidding selection ..... 375 375 10 Supervising fee for engineering...... 2,721 2,721 11 Fee for design ...... 2,094 2,094 12 Drafting fee for construction mapping 396 396 and budgeting ...... 13 Fee for work completion maps ...... 317 317 14 Inspecting fee ...... 531 531 15 Fee for land reclamation ...... 682 682 16 Fee for the reservation plan for water 728 728 and soil...... 17 Fee for further exploration...... 18 Marketing starting fee ...... 70,568 70,568 Subtotal...... 91,698 91,698 Total Engineering and others ...... 43,455 52,503 37,527 2,904 91,698 228,085 Contingency (10%) ...... 4,346 5,250 3,753 290 9,170 22,809 Total Initial Capex...... 47,801 ,57,753 41,279 3,194 100,868 250,894

Source: FS 2021 with SRK adjustment

SRK considers that the budgeted CAPEX is reasonable and achievable. The forecast construction period of the project is two years, which SRK considers to be reasonable.

Table 20-1 summarises the CAPEX proposed in the FS 2021 for the further processing plant. The sustaining CAPEX is forecast to be about RMB34.40 M.

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APPENDIX IV COMPETENT PERSON’S REPORT

Table 20-2: CAPEX proposed for Further Processing Plant in the FS 2021

Cost (RMB’000)

Item Mining Construction Equipment Installation Other Total Construction ...... 20,524 20,524 Gem processing equipment ...... 9,140 518 9,658 Public and supportive facilities ...... 1,091 1,091 Land using right ...... 3,877 3,877 Subtotal ...... 21,614 9,140 517 3,877 35,149 Contingency ...... 2,161 914 52 388 3,515 Total Sustaining CAPEX ...... 23,776 10,054 569 4,265 38,664

The company has invested some fund into the project for surface facilities, equipment, and land using rights etc., Table 20-3 gives a summary of the investment already to the project, which is about 30.66 M. The investment has been considered as part of the initial CAPEX. Therefore, the further initial CAPEX needed will be about RMB 220.23 M.

Table 20-3: CAPEX Already Invested into the Fuli’s YQS Peridot Project (M RMB) as of 31 December 2020

Cost (x1,000 RMB)

Item Mining Construction Equipment Installation Other Total Engineering costs ...... 637 17,182 5,072 — — 22,891 Mining ...... 637 192 4,583 — — 5,412 Processing plant...... —————— General layout engineering ...... — 16,990.32 488.85 — — 17,479.17 Other costs ...... 7,770 7,770 Grand Total ...... 637 17,182 5,072 7,770 30,661

Source: Fuli

The formal construction of the mine and processing plant will start in the second half of 2021 and completed in the second half of 2023. The construction of the further processing plant will start in 2028 and completed in 2029. Table 20-4 lists the CAPEX investment schedule of the project.

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APPENDIX IV COMPETENT PERSON’S REPORT

Table 20-4: Investment Plan of Fuli’s YQS Nanshan Project (M RMB)

Up to Item 2020* 2021 2022 2023 2024 2027 2028 2029 Total Initial CAPEX ...... 30.66 17.10 111.07 92.06 250.89 Sustaining CAPEX ...... 4.26 17.20 17.20 38.66 Working Capital...... 46.32 58.62 104.94

Source: FS 2021, Fuli and SRK * The fund has been invested into the project.

20.2 Operating Expenses

Table 20-4 summarises the operating costs in different areas as outlined in the FS 2021 and adjusted by SRK.

Table 20-5: Average Unit Operating Costs per tonne Ore in Different Centres of the mine and processing plant excluding further processing

Source: FS (2021)

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APPENDIX IV COMPETENT PERSON’S REPORT

In the table above, the unit cost does not include the costs the further processing for the gem peridot and gem quality peridot sands. According Fuli’s plan, in the years from 2023 to 2029, the further processing of cutting and polishing gem peridot and gem quality sand will be contracted out. Table 20-6 provides the information about the contracted processing costs and the costs in the Fuli’s own further processing plant once it is put in production in 2030.

Table 20-6: Unit Operating Costs per Carat Gem for Different Processing

Processing Type Unit Amount Contracted out Hand-cut processing (>7mm gem) ...... US$/ct 10.00 Hand-cut processing (>7mm gem) ...... RMB/ct 65.30 Machine processing for small gem (above 3-7 mm) ...... US$/ct 3.00 Machine processing for small gem (above 3-7 mm) ...... RMB/ct 19.59 Machine processing for peridot gem dots (1-3mm) ...... US$/ct 3.00 Machine processing for peridot gem dots (1-3mm) ...... RMB/ct 19.59 Fuli’s own Plant Hand-cut processing (>7mm gem) ...... RMB$/ct 45.71 Machine processing for small gem (above 3-7 mm) ...... RMB/ct 13.71 Machine processing for peridot gem dots (1-3mm) ...... RMB/ct 13.71

Source: Fuli

The company plans extensive activities and events for marketing and sales of its products, and Table 20-7 gives the operating costs for the marketing and sales during the life of the project.

Table 20-7: Operating costs proposed for marketing and sales during the life of the project (RMB M)

Year...... 2,023 2,024 2,025 2,026 2,027 2,028 2,029 2,030 Marketing and sales cost .. 53 141 1,034 1,363 1,909 1,776 2,568 3,175 Year...... 2,031 2,032 2,033 2,034 2,035 2,036 2,037 2,038 Marketing and sales cost .. 3,175 3,363 2,515 2,512 2,532 2,538 2,547 2,553 Year...... 2,039 2,040 2,041 2,042 2,043 2,044 Marketing and sales cost .. 2,559 2,547 1,692 1,645 1,430 798

Source: Fuli

Over the life of the project, the average cost per tonne ore is given in Table 20-8.

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APPENDIX IV COMPETENT PERSON’S REPORT

Table 20-8: Overall Average Unit Operating Costs per Tonne Ore

Processing Type Unit Amount Mining and ore processing ...... RMB/t ore 799.02 Further processing for gems ...... RMB/t ore 3,269.29 Marketing ...... RMB/t ore 8,448.54 Total Overall average ...... RMB/t ore 12,516.85

21 ECONOMIC ANALYSIS

It should be emphasised that the economic analysis presented in this section is based purely on the results of the technical review provided in previous sections and on some key assumptions. It is provided mainly for Ore Reserve estimation purposes.

21.1 Principal Assumptions

As discussed in previous sections, various technical and economic parameters have been proposed. The Yiqisong Nanshan Project contains about 5.19 Mt of Probable Ore Reserves averaging 204ct/t gem Peridot. The mine plans to maintain a ROM production rate of 300,000 tpa. Construction period is anticipated to about two (2) years and will be followed by approximately six (6) years of ramp-up to allow the Company to develop the product market, then 12 years of full production, followed by 3 years of reducing production period. Therefore, the LOM is estimated at more than 21 years, excluding the construction period. The economic analysis of the Project uses the discount cash flow (“DCF”) model and is based on the following simplifications and assumptions:

• The production rate and ore quality are evenly distributed over the life of mine during the full production years;

• The final products of the project will be peridot gems after further processing, and may be classified into two types: hand-processed large gem (7mm and above), machine-processed small gem stones (above 3-7mm), peridot gem dots (1-3mm); rough peridot gemstones without further processing for auction, industrial grade peridot sands and basalt;

• Chinese currency, Renminbi (“RMB”) is used as the currency in the model and inflation is not considered in the model (real-term model). The exchange rate between US dollar and RMB is USD1=6.53 RMB;

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• Unit cash costs are also considered constants over the LOM; and the cash costs do not include depreciation and amortization;

• product prices were based on Fuli’s forecasts for 2023-2030 for cut and polished peridot, and FS’ estimates for other products;

• Initial capital investment and future investments have been considered as capital costs; the investment already invested into the project was also considered as part of the initial CAPEX;

• The capital costs for engineering work will be depreciated and/or amortized evenly over a 10-year period. About RMB 20 M residual value will be recovered;

• Prices of cut and polished peridot are projected based on historical pricing trend and current market prices sourced from Gemguide, an international reference guide on coloured gemstones pricing generally referenced by the coloured gemstones industry, while prices of peridot gem dots and by-products are projected based on current market prices; and

• The prices used in the model is the prices including Value Added Tax (“VAT”).

21.1.1 Production Plan

As discussed in previous sections, the Company provided SRK its sales and marketing plan. It allows a ramp-up period of seven years for the Company to develop its market. SRK has adjusted the ramp- up period as initially outlined in the FS 2021 to more than six years, with the production rate of 10,000tpa in the first year, 50,000 tpa in the second production year, them 150,000-175,000 tpa in the further three years, 250,000 tpa for two more years, and to 300,000 tpa from the eighth year onwards for 12 years, finally with 3 years of reduced production period.

During the production period, there will be some products of the ore processing plant, i.e. rough peridot, peridot sands and basalt stored, while they will be sold out at the end of the project. Table 21-1 lists the production and storage of various products of the ore processing plant.

Table 21-1: Production and Storage of Products of the Ore Processing plant

Item Unit 2023 2024 2025 2026 2027 2028 2029 2030 Ore mined ...... t 10,000 50,000 150,000 150,000 175,000 250,000 250,000 300,000 Peridot gemstone grade ...... ct/t 204.11 204.11 204.11 204.11 204.11 204.11 204.11 204.11 Peridot sands ...... % 17.54 17.26 16.77 16.53 16.60 16.53 16.44 15.75

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APPENDIX IV COMPETENT PERSON’S REPORT

Item Unit 2023 2024 2025 2026 2027 2028 2029 2030

Rough gemstones and other products from last year large gemstones (>10mm) ..... ct 0 33,728 348,666 839,481 798,297 621,981 1,210,673 1,267,365 Medium gemstones (above 7-10mm) ...... ct 0 125,657 1,345,744 3,122,003 2,746,261 1,796,964 3,861,395 3,773,827 Small gemstones (above 3-7mm) . ct 0 199,314 2,043,670 4,798,167 4,469,807 3,368,053 6,728,405 7,005,900 Peridot gem dots (<3mm) ..... Mct 0 1 9 15 22 24 28 31 Peridot sands ...... t 0 29 877 3,525 4,401 5,427 6,886 8,454 Basalt ...... t 0 667 4,000 4,000 4,000 20,667 37,333 54,000

Produced rough peridot and other products large gem (>10mm) stones..... ct 180,028 900,138 2,700,415 2,700,415 3,150,484 4,500,692 4,500,692 5,400,830 Medium gemstones (above 7-10mm) ...... ct 717,457 3,587,286 10,761,859 10,761,859 12,555,502 17,936,432 17,936,432 21,523,718 Small gemstones (above 3-7mm) . ct 1,047,100 5,235,499 15,706,497 15,706,497 18,324,246 26,177,495 26,177,495 31,412,994 Peridot gem dots (1-3mm) ..... Mct315444351727283 Peridot sands ...... t 1,227 6,039 17,604 17,349 20,326 28,914 28,756 33,065 Basalt (minus those used for filling-back) ...... t 6,667 33,333 100,000 100,000 116,667 166,667 166,667 200,000 Sold products (gemstones) large gemstones (>10mm) ..... ct 51,205 204,820 521,360 707,560 912,380 1,117,200 1,303,400 1,470,980 Medium gemstones (above 7-10mm) ...... ct 207,130 828,520 2,108,960 2,862,160 3,690,680 4,519,200 5,272,400 5,950,280 Small gemstones (above 3-7mm) . ct 296,725 1,186,900 3,021,200 4,100,200 5,287,100 6,474,000 7,553,000 8,524,100 Peridot gem dots (<3mm) .....Million ct 0.71 2.84 13.85 13.65 17.87 25.42 25.42 30.60 Peridot sands ...... t 1,198 5,192 14,956 16,473 19,300 27,454 27,187 33,049 Basalt ...... t 6,000 30,000 100,000 100,000 100,000 150,000 150,000 200,000

Auction sales (gemstones) large gemstones (>10mm) ..... ct 0 0 720,000 720,000 720,000 720,000 720,000 720,000 Medium gemstones (above 7-10mm) ...... ct 0 0 2,960,000 2,960,000 2,960,000 2,960,000 2,960,000 2,960,000 Small gemstones (above 3-7mm) . ct 0 0 4,320,000 4,320,000 4,320,000 4,320,000 4,320,000 4,320,000

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Item Unit 2023 2024 2025 2026 2027 2028 2029 2030 Consumed rough peridot gemstones for cut and polished gemstones and others large gem stones (>10mm)@35% Productivity ...... ct 146,300 585,200 2,209,600 2,741,600 3,326,800 3,912,000 4,444,000 4,922,800 Medium gemstones (above 7-10mm)@35% Productivity .. ct 591,800 2,367,200 8,985,600 11,137,600 13,504,800 15,872,000 18,024,000 19,960,800 Small gemstones (above 3-7mm)@35% Productivity ... ct 847,786 3,391,143 12,952,000 16,034,857 19,426,000 22,817,143 25,900,000 28,674,571 Peridot gem dots (1-3mm)@37% Productivity ...... Mct 2 8 37 37 48 69 69 83 Peridot sands ...... t 1,198 5,192 14,956 16,473 19,300 27,454 27,187 33,049 Basalt ...... t 6,000 30,000 100,000 100,000 100,000 150,000 150,000 200,000

Stored rough gemstones and other products large gemstones (>10mm) ..... ct 33,728 348,666 839,481 798,297 621,981 1,210,673 1,267,365 1,745,396 Medium gemstones (above 7-10mm) ...... ct 125,657 1,345,744 3,122,003 2,746,261 1,796,964 3,861,395 3,773,827 5,336,745 Small gemstones (above 3-7mm) . ct 199,314 2,043,670 4,798,167 4,469,807 3,368,053 6,728,405 7,005,900 9,744,322 Peridot gem dots (<3mm) ..... Mct 1 9 15 22 24 28 31 31 Peridot sands ...... t 29 877 3,525 4,401 5,427 6,886 8,454 8,471 Basalt ...... t 667 4,000 4,000 4,000 20,667 37,333 54,000 54,000

Item Unit 2031 2032 2033 2034 2035 2036 2037 Ore mined ...... t 300,000 300,000 300,000 300,000 300,000 300,000 300,000 Peridot gemstone grade ...... ct/t 204.11 204.11 204.11 204.11 204.11 204.11 204.11 Peridot sands ...... % 14.84 14.49 14.30 15.35 15.67 16.15 16.63

Rough gemstones and other products from last year large gemstones (>10mm) ...... ct 1,745,396 1,904,226 2,063,057 2,221,887 2,380,718 2,539,548 2,698,379 Medium gemstones (above 7-10mm) ... ct 5,336,745 5,608,463 5,880,180 6,151,898 6,423,616 6,695,334 6,967,052 Small gemstones (above 3-7mm) ..... ct 9,744,322 10,633,030 11,521,738 12,410,446 13,299,154 14,187,862 15,076,570 Peridot gem dots (<3mm) ...... Mct 31 31 31 31 31 31 31 Peridot sands ...... t 8,471 8,486 8,502 8,517 8,533 8,549 8,566 Basalt ...... t 54,000 54,000 54,000 54,000 54,000 54,000 54,000

Produced rough peridot and other products large gem (>10mm) stones ...... ct 5,400,830 5,400,830 5,400,830 5,400,830 5,400,830 5,400,830 5,400,830 Medium gemstones (above 7-10mm) ... ct 21,523,718 21,523,718 21,523,718 21,523,718 21,523,718 21,523,718 21,523,718 Small gemstones (above 3-7mm) ..... ct 31,412,994 31,412,994 31,412,994 31,412,994 31,412,994 31,412,994 31,412,994 Peridot gem dots (1-3mm) ...... Mct 78 76 75 81 82 85 87 Peridot sands ...... t 31,157 30,412 30,015 32,216 32,888 33,895 34,904 Basalt (minus those used for filling (back) ...... t 200,000 200,000 200,000 200,000 200,000 200,000 200,000

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APPENDIX IV COMPETENT PERSON’S REPORT

Item Unit 2031 2032 2033 2034 2035 2036 2037 Sold products (gemstones) large gemstones (>10mm) ...... ct 1,582,700 1,582,700 1,582,700 1,582,700 1,582,700 1,582,700 1,582,700 Medium gemstones (above 7-10mm) ... ct 6,402,200 6,402,200 6,402,200 6,402,200 6,402,200 6,402,200 6,402,200 Small gemstones (above 3-7mm) ..... ct 9,171,500 9,171,500 9,171,500 9,171,500 9,171,500 9,171,500 9,171,500 Peridot gem dots (<3mm) ...... Million ct 28.83 28.14 27.78 29.81 30.44 31.37 32.30 Peridot sands ...... t 31,142 30,396 30,000 32,200 32,872 33,878 34,886 Basalt ...... t 200,000 200,000 200,000 200,000 200,000 200,000 200,000

Auction sales (gemstones) large gemstones (>10mm) ...... ct 720,000 720,000 720,000 720,000 720,000 720,000 720,000 Medium gemstones (above 7-10mm) ... ct 2,960,000 2,960,000 2,960,000 2,960,000 2,960,000 2,960,000 2,960,000 Small gemstones (above 3-7mm) ..... ct 4,320,000 4,320,000 4,320,000 4,320,000 4,320,000 4,320,000 4,320,000 Consumed rough peridot gemstones for cut and polished gemstones and others large gem stones (>10mm)@35%Productivity ...... ct 5,242,000 5,242,000 5,242,000 5,242,000 5,242,000 5,242,000 5,242,000 Medium gemstones (above 7-10mm)@35%Productivity ...... ct 21,252,000 21,252,000 21,252,000 21,252,000 21,252,000 21,252,000 21,252,000 Small gemstones (above 3-7mm)@35%Productivity ...... ct 30,524,286 30,524,286 30,524,286 30,524,286 30,524,286 30,524,286 30,524,286 Peridot gem dots (1-3mm)@37%Productivity ...... Mct 78 76 75 81 82 85 175 Peridot sands ...... t 31,142 30,396 30,000 32,200 32,872 33,878 34,886 Basalt ...... t 200,000 200,000 200,000 200,000 200,000 200,000 200,000

Stored rough gemstones and other products large gemstones (>10mm) ...... ct 1,904,226 2,063,057 2,221,887 2,380,718 2,539,548 2,698,379 2,857,209 Medium gemstones (above 7-10mm) ... ct 5,608,463 5,880,180 6,151,898 6,423,616 6,695,334 6,967,052 7,238,770 Small gemstones (above 3-7mm) ..... ct 10,633,030 11,521,738 12,410,446 13,299,154 14,187,862 15,076,570 15,965,278 Peridot gem dots (<3mm) ...... Mct 31 31 31 31 31 31 31 Peridot sands ...... t 8,486 8,502 8,517 8,533 8,549 8,566 8,584 Basalt ...... t 54,000 54,000 54,000 54,000 54,000 54,000 54,000

Item Unit 2038 2039 2040 2041 2042 2043 2044 Ore mined...... t 300,000 300,000 300,000 300,000 293,000 133,000 124,000 Peridot gemstone grade ...... ct/t 204.11 204.11 204.11 204.11 204.11 204.11 204.11 Peridot sands ...... % 16.47 16.79 16.17 15.69 15.58 14.07 13.87

Rough gemstones and other products from last year large gemstones (>10mm) ...... ct 2,857,209 3,016,040 3,174,870 3,333,701 3,492,531 3,525,342 677,710 Medium gemstones (above 7-10mm) ..... ct 7,238,770 7,510,488 7,782,206 8,053,924 8,325,641 9,237,996 2,889,892 Small gemstones (above 3-7mm) ...... ct 15,965,278 16,853,986 17,742,694 18,631,402 19,520,110 19,675,848 3,077,989 Peridot gem dots (<3mm) ...... Mct 31 31 31 31 31 31 10 Peridot sands ...... t 8,584 8,601 8,619 8,636 8,652 19,588 11,399 Basalt ...... t 54,000 54,000 54,000 54,000 54,000 49,333 38,000

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APPENDIX IV COMPETENT PERSON’S REPORT

Item Unit 2038 2039 2040 2041 2042 2043 2044 Produced rough peridot and other products large gem (>10mm) stones ...... ct 5,400,830 5,400,830 5,400,830 5,400,830 5,274,811 2,394,368 2,232,343 Medium gemstones (above 7-10mm) ..... ct 21,523,718 21,523,718 21,523,718 21,523,718 21,021,498 9,542,182 8,896,470 Small gemstones (above 3-7mm) ...... ct 31,412,994 31,412,994 31,412,994 31,412,994 30,680,024 13,926,427 12,984,037 Peridot gem dots (1-3mm) ...... Mct 86 88 85 82 80 33 30 Peridot sands ...... t 34,569 35,240 33,931 32,940 31,936 13,092 12,035 Basalt (minus those used for filling(back)) .. t 200,000 200,000 200,000 200,000 195,333 88,667 82,667

Sold products (gemstones) large gemstones (>10mm) ...... ct 1,582,700 1,582,700 1,582,700 1,582,700 1,582,700 1,582,700 766,519 Medium gemstones (above 7-10mm) ..... ct 6,402,200 6,402,200 6,402,200 6,402,200 6,002,200 4,525,600 3,089,227 Small gemstones (above 3-7mm) ...... ct 9,171,500 9,171,500 9,171,500 9,171,500 9,171,500 9,171,500 4,109,709 Peridot gem dots (<3mm) ...... Million ct 31.99 32.61 31.40 30.48 29.56 20.00 14.80 Peridot sands ...... t 34,552 35,222 33,914 32,923 21,000 21,281 23,434 Basalt ...... t 200,000 200,000 200,000 200,000 200,000 100,000 120,667

Auction sales (gemstones) large gemstones (>10mm) ...... ct 720,000 720,000 720,000 720,000 720,000 720,000 720,000 Medium gemstones (above 7-10mm) ..... ct 2,960,000 2,960,000 2,960,000 2,960,000 2,960,000 2,960,000 2,960,000 Small gemstones (above 3-7mm) ...... ct 4,320,000 4,320,000 4,320,000 4,320,000 4,320,000 4,320,000 4,320,000

Consumed rough peridot gemstones for cut and polished gemstones and others large gem stones (>10mm)@35%Productivity . ct 5,242,000 5,242,000 5,242,000 5,242,000 5,242,000 5,242,000 2,910,053 Medium gemstones (above 7-10mm)@35%Productivity ...... ct 21,252,000 21,252,000 21,252,000 21,252,000 20,109,143 15,890,286 11,786,362 Small gemstones (above 3-7mm)@35%Productivity ...... ct 30,524,286 30,524,286 30,524,286 30,524,286 30,524,286 30,524,286 16,062,026 Peridot gem dots (<3mm)@37%Productivity . Mct 86 88 85 82 80 54 40 Peridot sands ...... t 34,552 35,222 33,914 32,923 21,000 21,281 23,434 Basalt ...... t 200,000 200,000 200,000 200,000 200,000 100,000 120,667

Stored rough gemstones and other products large gemstones (>10mm) ...... ct 3,016,040 3,174,870 3,333,701 3,492,531 3,525,342 677,710 0 Medium gemstones (above 7-10mm) ..... ct 7,510,488 7,782,206 8,053,924 8,325,641 9,237,996 2,889,892 0 Small gemstones (above 3-7mm) ...... ct 16,853,986 17,742,694 18,631,402 19,520,110 19,675,848 3,077,989 0 Peridot gem dots (<3mm) ...... Mct 31 31 31 31 31 10 0 Peridot sands ...... t 8,601 8,619 8,636 8,652 19,588 11,399 0 Basalt ...... t 54,000 54,000 54,000 54,000 49,333 38,000 0

21.1.2 Value Added Tax

In China, mineral product prices include a mining value added tax (“VAT”) calculated at 13% of sales before tax. The Company is allowed to deduct the VAT paid for production costs. SRK used the following simplified formulas to calculate the VAT payable:

• VAT received = total sales revenue before tax × 13%, or;

• VAT received = total sales revenue with tax/(1 + 13%) × 13%;

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APPENDIX IV COMPETENT PERSON’S REPORT

• To be simplified, VAT paid = part (57%) of OPEX/1.13 × 13%; and

• VAT payable = VAT received − VAT paid.

The prices used in the analysis include VAT.

21.1.3 Depreciation and Tax

SRK adopted a 10 years straight line depreciation in its tax calculations and checked that the total depreciation applied matches with the capital spent. SRK also applied a national income tax of rate 25%. In addition to the income tax, there are also other tax and fees. The tax and fees are as below:

• Gemstone sale tax: 10% to revenue before VAT;

• Resource tax/fee: 4% of revenue;

• Education Fee: 5% of VAT payable, and

• City construction fee: 7% of VAT payable

21.2 Discount Cashflow Analysis

For the economic analysis of the Project, SRK adopted a discount cashflow analysis based on previous assumptions and parameters as presented in Table 21-2.

Table 21-2: Technical and Economic Parameters used in the Cashflow of the Project

Item Unit Amount Remarks Probable Ore Reserve...... Mt 5.19 Grade (gem quality)...... ct/t 204 Peridot sands ...... % 15.8 Mining Designed Capacity ...... ktpa 300 Ramp-up for 6.25 years LOM...... years 21.25 Construction period ...... years 2 Processing Designed Production rate ...... ktpa 300 The same as mining Recovery for >10mm gemstone...... %98 Recovery for 3-10mm gemstone ...... %95 Recovery of Peridot sands ...... %70 Products from processing Large gemstones for hand processing (>10mm) .. % 9 Totally 100% Medium gemstones for hand processing (above %37 7-10mm) ...... Gemstones for machine processing...... %54 Gem quality peridot sands ...... % 0.05 Totally 100% Industrial grade peridot sands ...... % 99.95 Further processing Final product rate for hand- processing ...... %35

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APPENDIX IV COMPETENT PERSON’S REPORT

Item Unit Amount Remarks Final product rate for machine processing ..... %35 Peridot dot productivity ...... %37 Prices/Revenue Price of large cut and polished gemstones RMB/ct 1,044.80-1,654.51 Fuli (>10mm) ...... Price of medium cut and polished gemstones RMB/ct 653.00-1,034.09 By Fuli (above 7- 10mm) ...... Price of small cut and polished gemstones (above RMB/ct 391.80-620.42 By Fuli 3-7mm) ...... Price of peridot gem dots (1-3mm) ...... RMB/ct 65.30 By Fuli Price of rough gemstone ...... RMB/ct 0.29 By Fuli Price of industrial grade sand ...... RMB/t 1,020.00 By Fuli Basalt ...... RMB/t 170.00 By Fuli Operating costs Materials ...... RMB/t ore 114.4 Power and water...... RMB/t ore 96.42 Salary and welfare ...... RMB/t ore 77.13 Manufactory ...... RMB/t ore 88.74 G&A...... RMB/t ore 422.33 Further Processing...... RMB/t ore 3,269.29 Varying every year, average Marketing ...... RMB/t ore 8,448.54 Varying every year, average Total...... RMB/t ore 12,516.85 Varying every year, average Hand-cutting cost (Contract) ...... RMB/ct 65.30 Machine Processing for peridot gem dots RMB/ct 19.59 Included in further processing cost (Contract) ...... Hand-cutting cost (Fuli Plant)...... RMB/ct 45.71 Machine Processing for peridot gem dots (Fuli RMB/ct 13.71 Plant) ...... Capital Expenditures Initial CAPEX ...... RMB M 250.89 CAPEX already invested ...... RMB M 30.66 Included in the initial CAPEX Sustaining Capital ...... RMB M 38.66 To be invested in 2027, 2028 and 2029 Mine closure cost ...... RMB M 20 Residual value ...... RMB M 20 Working capital ...... RMB M 104.94 46.32 in Y1, 58.62 in Y2 VAT ...... %13 City construction fee ...... % 7 on VAT payable Education surtax...... % 5 on VAT payable Resource fee ...... % 4 Based on revenue without VAT Gemstone sale tax ...... % 10 Based on revenue without VAT Enterprise income tax...... %25 Depreciation of fixed asset CAPEX ...... years 10 Discount rate ...... %9

Appendix C presents the full techno-economic model for the Project.

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APPENDIX IV COMPETENT PERSON’S REPORT

Table 21-3 below presents the net present value (“NPV”) for the Project as calculated using SRK’s discount cash flow (“DCF”) analysis. SRK estimated the NPV in the range of RMB25.15 Bln (at 11% discount rate) to RMB41.51 Bln (at 7% discount rate), with a base case of RMB32.11 Bln using a discount rate of 9%. The internal rate of return (“IRR”) is calculated at 134.3%. The payback period is less than one year. Table 21-3: NPV Projections

Item Upper Case Base Case Lower Case Discount Rate ...... 7% 9% 11% NPV (RMB in Bln) ...... 41.51 32.11 25.15 21.3 Sensitivity Analysis SRK applied a single factor method for the sensitivity analysis. Many parameters can affect the Project’s NPV. To simplify the calculations, the capital expenditure, operating cost, and the products’ prices and the production rate were selected as the essential variable factors on cash flow. The effects of these essential factors on the NPV were analysed within a ±50% range. The results are shown in Table 21-4 and Figure 21-1. Table 21-4: Sensitivity Study of NPV (at 9% Discount Rate, in Bln RMB)

Item 50% 40% 30% 20% 10% 0% -10% -20% -30% -40% -50% CAPEX ...... 32.01 32.03 32.05 32.07 32.09 32.11 32.13 32.15 32.17 32.19 32.21 OPEX ...... 23.17 25.04 26.88 28.67 30.41 32.11 33.76 35.37 36.93 38.45 39.92 Prices ...... 55.55 50.86 46.17 41.84 36.8 32.11 27.42 22.73 18.05 13.36 8.67 Sales* ...... 32.11 27.8 23.49 19.19 14.88 10.6

* 1. Please note that the Ore Reserve Statement does not support any increase of sales.

2. For the purpose of the sensitivity analysis, it is assumed that the annual production of rough peridot will adhere to the production plan (including mining production and ore processing) but gemstone processing will be downward adjusted to align with the reduced sales volume. Accordingly, as sales volume decreases, there will be stored rough peridot gemstones, peridot sands and basalt by the end of the life-of-mine. Total capital expenditure (including initial and sustaining capital expenditure), operating expenditure for marketing and sales, mining production and ore processing are assumed to remain unchanged, while operating expenditure associated with gemstone processing are downward adjusted according to the reduced gemstone processing operations.

Figure 21-1: Sensitivity Analysis of NPV (9% Discount)

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APPENDIX IV COMPETENT PERSON’S REPORT

As shown in the figure above, changes in CAPEX and OPEX have similar effect on NPV, i.e. when the factors increase, the NPVs decrease, while CAPEX has the smaller effect on the Project’s NPV than that of changes in OPEX; and the changes in Prices and Sales have the similar effect NPV, while changes in prices have the most significant effect on Project on NPV, i.e. the NPVs change positively with the changes of factors, while the changes of Prices has a larger effect that the changes of Sales.

A risk analysis shows that when the products’ prices decrease about 67.7%, or that when the OPEX increases 155.3%, or the Sales decrease about 73.8%, the NPV of the Project will be negative.

The analysis above shows that the project is economically viable, and the ore reserve statement can satisfy with the requirements of JORC Code (2012).

The effects of the capital expenditure, operating cost, and the products’ prices on the IRR were also analysed within a ±50% range. The results are shown in Table 21-5.

Table 21-5: Sensitivity Study of IRR (%)

Item 50% 40% 30% 20% 10% 0% -10% -20% -30% -40% -50% CAPEX ...... 121.5 123.8 126.3 128.8 131.5 134.3 137.2 140.3 143.6 147.0 150.6 OPEX ...... 111.5 116.7 121.5 126.0 130.3 134.3 138.1 141.8 145.3 148.7 152.0 Prices ...... 173.5 166.8 159.7 152.0 143.6 134.3 123.9 112.2 98.3 81.0 60.3

The changes of prices affect the payback period as shown in Table 21-6.

Table 21-6: Sensitivity Study of Payback period (Year)

Item 0% -10% -20% -30% -40% -50% -60% Prices ...... 0.3 0.4 0.6 0.8 1.2 3.1 7.1

22 ADJACENT PROPERTIES

The YQS peridot occurrence is one of five (5) historic gemstone peridot producers lying along a 14 km belt of discontinuous, olivine basalt outcrops. The belt trends west-northwesterly with the individual outcrops flat-lying to shallow-dipping, locally south-southeasterly at the YQS mine. Exploration, discovery and production generally proceeded along this trend from west to east. Four of the five peridot prospects lie within the westernmost four kilometres of the outcrop belt, collectively with an estimated total historic output of around 35 t of olivine. YQS represents the youngest, eastward extension of exploration, lying at higher elevations and in more heavily

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APPENDIX IV COMPETENT PERSON’S REPORT forested terrain. The peridot of Jilin was discovered during prospecting in the 1960s and worked briefly in the earlier years in 1970s. Artisanal development began in earnest during China’s modernisation campaign of the 1990s and gem buyers from South China arrived in 2005 to track output back to the source of supply. Today, the other olivine occurrences in the district are either idle or exhausted, and YQS is the only Project near production.

23 INTERPRETATION AND CONCLUSIONS

Previous exploration programs have built a database suitable for mineral resource estimation purposes. SRK rebuilt the Project’s resource model, and estimated that YQS Nanshan hosts 5.2 Mt of Indicated Resources averaging 236 carat per tonne (ct/t) of peridot gemstones (>3mm), and 6.1 Mt of Inferred Resources averaging 210 ct/t peridot gemstone, as of December 31, 2020, according to the JORC Code (2012). There are also industrial grade peridot resources (1-3mm) in the Project.

SRK converted the stated Mineral Resources (Indicated or higher) into Ore Reserves reported in accordance to the JORC Code (2012). The total Ore Reserves as of December 31, 2020 are estimated at 5.19 Mt averaging 204 ct/t peridot gemstone (>3mm), as well as 15.8% peridot sands (13 to 3 or 1-3mm). The proposed life of the mine is more than 21 years, with approximately 6 years of ramp-up, 12 years of full production and 3 years of ramp-down production.

The proposed peridot mining operation has been evaluated in FS 2021 based on underground mining at a rate of 300,000 tonnes per annum (tpa). It is based on the development of adits for access, prior to cut and fill mining method, with trackless equipment for loading and transportation of mined ore. The void is subsequently backfilled. The overall mining loss rate is estimated at 4.4% and the mining dilution rate is estimated at 8.3%.

The FS 2021 proposed a processing plant to be built at the mine site to process ore from the underground mining operation with designed 300,000 tpa capacity, to produce peridot gemstones (>3mm), and a further gemstone processing plant to be built in Dunhua to cut and polish the gemstones into final salable gemstone products. The processing in the Dunhua plant will include hand process for large gemstones (>10mm) and medium gemstones (above 7 to 10mm), and machine processing for smaller gemstones (above 3 to 7mm).

The peridot sands will also be recovered. The recovery is 70% from the ore at the processing plant. Among which, 0.05% will be the gem quality peridot sands will be further processed in the gemstone processing plant to produce peridot gem dots by using machine. The remaining sands will be sold as industrial peridot sands.

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APPENDIX IV COMPETENT PERSON’S REPORT

For driving the market demand of peridot gemstones, the Company has organised and will expand its marketing teams in Beijing, London, Hong Kong and North America. A large amount of operating expenses will be allocated for the marketing and sales activities. The Company proposed a practical sales plan with more than six (6) years (2023 to 2029) of ramp-up period to have enough time for driving the market demand. The majority of gemstones will be sold in global market and the peridot sands and basalt will be sold in China.

The Project initial CAPEX proposed for the construction of the mine and ore processing plant by the FS totals RMB250.89 M. About RMB 30.66 M as part of initial CAPEX has been invested into the project. The construction period is 2 years. The sustaining CAPEX for the construction of the further processing plant in Dunhua is proposed being RMB38.66 M, which will be invested in 2028 and 2029. The OPEX of the project was proposed by the FS 2021, and the Company’s plan for marketing. The OPEX for the overall mine life is averaged at RMB12,516.85/t ore, with RMB799.02/t ore for mining and ore processing, RMB3,269.29/t ore for further processing of gem peridot and gem quality peridot sands, and RMB8,448.54/t ore for marketing and sales, respectively.

The net present value (“NPV”) for the Project as calculated using SRK’s discount cash flow (“DCF”) analysis is in the range of RMB25.15 Bln (at 11% discount rate) to RMB41.51 Bln (at 7% discount rate), with a base case of RMB32.11 Bln using a discount rate of 9%. The internal rate of return (“IRR”) is calculated at 134.3%. The payback period is less than one year.

The Fuli Peridot Project is technically feasible and economically viable.

24 PROJECT QUALITATIVE RISK ANALYSIS

Mining is a relatively high-risk industry. In general, the risk may be expected to decrease from exploration, development, through to production stage. The Yiqisong Nanshan Project is a pre-construction project. Risks exist in different areas. SRK considered various technical aspects which may affect the feasibility and future cash flow of the Project, and conducted a qualitative

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APPENDIX IV COMPETENT PERSON’S REPORT risk analysis which has been summarised in Table 24-1. In this risk analysis, various risk sources/issues have been assessed for Likelihood and Consequence, and then a Risk Rating has been assigned. The qualitative risk analysis uses the following definitions for likelihood and consequence:

In the risk assessment, various risk issues have been assessed for Likelihood, Consequence, and Overall Rating. SRK has used a matrix as follows:

The Likelihood of a risk is considered within a certain time frame, e.g. 5 years, as

• Likely: will probably occur;

• Possible: may occur; and

• Unlikely: unlikely to occur.

The Consequence of a risk is classified into:

• Major Consequence: the factor poses an immediate danger to the project, if uncorrected, will have a material effect on the project cash flow and performance and could lead a project failure; Moderate Consequence: the factor, if uncorrected, will have a significant effect on the project cash flow and performance; and

• Minor Consequence: the factor, if uncorrected, will have little or no effect on the project cash flow and performance.

The overall risk assessment combines the Likelihood and Consequence of a risk and be classified as Low (unlikely and possible minor risks and unlikely moderate risk), Medium (likely minor, possible moderate and unlikely major risks), and High (likely moderate and major and possible major risks).

Below is the qualitative risk analysis summary table of the Yiqisong Nanshan Project.

Table 24-1: Project Risk Assessment of the Yiqisong Nanshan Project

Risk Source/Issue Likelihood Consequence Overall Geology and Resource Lack of Significant Resources...... Unlikely Moderate Low Lack of Significant Reserves...... Unlikely Major Medium

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APPENDIX IV COMPETENT PERSON’S REPORT

Risk Source/Issue Likelihood Consequence Overall Unexpected Groundwater Ingress ...... Unlikely Minor Low Mining Significant Production Shortfalls ...... Unlikely Major Medium Significant Geological Structure ...... Possible Minor Low Excessive Surface Subsidence ...... Unlikely Minor Low Poor Ground Conditions ...... Possible Moderate Medium Ore Processing Lower Recovery ...... Unlikely Moderate Low High Production Cost ...... Possible Minor Low Poor Plant Reliability ...... Unlikely Minor Low Production and Sales...... Poor Sales Plan ...... Unlikely Major Medium Under-performing Sales Volume ...... Unlikely Major Medium Significant Product Under-pricing ...... Unlikely Major Medium Capital and Operating Costs Project Timing Delays...... Possible Minor Low Capital Cost Increases...... Unlikely Minor Low Operating Cost Underestimated ...... Likely Minor Medium Environmental and Social Impact to the ecological system ...... Possible Moderate Medium Poor waste rock management ...... Possible Moderate Medium Poor hazardous substances management ... Possible Minor Low Dust Pollution ...... Possible Minor Low

Some medium risks have been identified for the Project. SRK has arranged more than 6 years for the ramp-up period for the project, to accumulate the experience for the production, product pricing and sales etc.

25 REFERENCES

AusIMM, 2012, Mine Managers’ Handbook, Monograph 26.

Beijing Jewelry Researches Institute; Report on identification and assessment for jewelry, jade and gems. 2015.

Yanbian Fuli Peridot Mining Industry Co., Ltd.; Introduction of Fuli Peridot Gems. 2017.

Jilin North-eastern Asia International Engineering Group Co. Ltd. Feasibility study report on the Yiqisong Nanshan Peridot gem project of Yanbian Fuli Peridot Mining Co. Ltd. Dated August 2017, which was modified and updated in April 2018 and finalized in April 2021.

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APPENDIX IV COMPETENT PERSON’S REPORT

No. 2 Institute of Geological Survey, Jilin Province; The report for the detailed prospecting on the Yiqisong Nanshan Peridot Gem Project, in Dunhua, Jilin. January 2016.

Bromfield C.S., Shride A.F. (1956) Mineral Resources of the San Carlos Indian Reservation, Arizona.

U.S. Geological Survey Bulletin 1027-N, Washington, DC. P. 613-618.

Eveleth, R.W., and Lueth, V.W. 2010, Gemstone Deposits of the Four Corners Regions, USA: New Mexico Geological Society Guidebook, Four Corners Country, 2010, p. 221-230. 221

Frost and Sullivan, the Independent Market Research on Global and China Peridot Industry. 2021.

Galer, S.J.G., and O’Nions, R.K. (1989) Chemical and isotopic studies of ultramafic inclusions from the San Carlos Volcanic Field, Arizona: A bearing on their petrogenesis: Journal of Petrology: 30, part 4: 1033-1064.

Keller, P.C., and Wang Fuquan, Spring 1986, A Survey of the Gemstone Resources of China: Gems & Gemology, P. 3-13.

Koivula, J.I., 1981 Winter, San Carlos Peridot: Gems & Gemology, P. 205-214.

Koivula, J.I., and Fryer, C. W., Spring 1986, Gems & Gemmology, the Gemological Characteristics of Chinese Peridot, P. 38-40.

Kunz, G. R., 1904, Peridot: Mineral resources of the United States, U.S. Geological Survey, p. 959.

Lausen C. (1927) The occurrence of olivine bombs near Globe, Arizona. American Journal of Science, Vol. 14, 5th series, pp. 293-306.

Marlowe, J.I. (1960) Diatremes and a ring intrusion on the San Carlos Indian Reservation: Arizona Geological Society Digest: 3: 150-154.

Marlowe, J.I. (1961) Late Cenozoic geology of the lower Safford Basin on the San Carlos Indian Reservation, Arizona: Tucson, University of Arizona, Ph.D. dissertation, 184 p.

Peterson, J.A., and Hibpshman, M.H., 1981 Status of Mineral Resource Information for the San Carlos Indian Reservation, Arizona: Administrative Report BIA-87, 45 PP.

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APPENDIX IV COMPETENT PERSON’S REPORT

Moore, R.T. and Vuich, J.S. (1977) An Evaluation of the Olivine Resources of the San Carlos Apache Indian Reservations and Recommendations for Potential Development. NADSAT Project Completion Report No. 1. Arizona Bureau of Mines, 34 pp.

Rabb, D.D., and Vuich, J.S., 1988, San Carlos Indian Reservation Peridot Mine: Inspection Report B75-2, American Indian Consultants,7120 East 4th Street, Scottsdale, AZ, 85251, 602.945.2635. 12 PP.

Riter, J.C.A., and Smith. D, Department of Geological Sciences, University of Texas, Austin, Texas 78712, 1966, Xenolith constraints on the thermal history of the mantle below the Colorado Plateau: Geology; March 1996; v. 24; no. 3; p. 267-270; 3 figures; 1 table.

Sinkankas J. (1976) Gemstones of North America, Vol. 2. Van Nostrand Reinhold Co., New York, pp. 116-118.

TANG Jun, GUO Ying, LAI Xiangxiang, LIU Yimin, WU Qi, 2016, Study on the Correlation between Fe2+ and Peridot’s Yellow Green Color and Quality Evaluation of Color Based on CIE 1976 Uniform Color Space: 5th International Conference on Environment, Materials, Chemistry and Power Electronics (EMCPE 2016) P. 599−604. Published by Atlantis Press.

Vuich, J.S., and Moore, R.T., 1988, Bureau Studies Olivine Resources on San Carlos Apache Reservation: Field Notes from the Arizona Bureau of Mines, v. 7, n. 2, p. 1, 6-10.

Wohletz, K. H., 1-967, The eruptive mechanism of the Peridot Mesa vent, San Carlos, Arizona, in Burt, D. M., and Pewe, T. L., eds., Guidebook to the geology of Central Arizona: Arizona Bureau of Geology and Mineral Technology, University of Arizona, Special Paper 2, p. 167-171.

Wrucke, Chester T. Calvin S. Bromfield, Frank S. Simons, Robert C. Greene, Brenda B.

Houser, Robert J. Miller, and Floyd Gray, 2004, Geologic Map of the San Carlos Indian Reservation, Arizona: Pamphlet to accompany Investigations Series I-2780, Prepared in cooperation with the San Carlos Apache Tribe and U.S. Bureau of Indian Affairs. Two Map Sheets.

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Appendixes

Appendix A: Copies of Mineral Tenure

Mining License for Fuli Peridot Project

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Mining License showing coordinates of locations

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Appendix B: Table 1 (JORC)

Section 1: Sampling Techniques and Data (Criteria in this section apply to all succeeding sections.)

Criteria Explanation Commentary Sampling • Nature and quality of sampling (e.g. cut • For the Fuli Project, most of the samples techniques..... channels, random chips, or specific were taken during 2014 to 2016 exploration specialised industry standard measurement by Jilin No.2 Institute and 2017 the tools appropriate to the minerals under verification program under the supervision of investigation, such as downhole gamma SRK, the major type of the samples was adit sondes, or handheld XRF instruments, etc.). trench sampling from the adit, drillcore were These examples should not be taken as used to statistic the peridot inclusions and to limiting the broad meaning of sampling. determine the mineralization range.

• Include reference to measures taken to • To ensure the representativity of the ensure sample representatively and the sampling, a 1x1m frame was used in the appropriate calibration of any measurement peridot inclusion statistics, tape meter was tools or systems used. used to determine the location; core recovery was measured during the drilling. • Aspects of the determination of mineralisation that are Material to the Public • Mainly include three types samples: Report. — Core samples used to determine the In cases where ‘industry standard’ work has range of mineralization; been done this would be relatively simple (e.g. ‘reverse circulation drilling was used to — Adit inclusion statistic samples in the obtain 1 m samples from which 3 kg was adit to determine the peridot inclusion pulverised to produce a 30 g charge for fire yield. assay’). In other cases more explanation may be required, such as where there is coarse — Channel sampling by air pick in the gold that has inherent sampling problems. adit to estimate the gem producing Unusual commodities or mineralisation types ratio. The channel sample length is (e.g. submarine nodules) may warrant 1m for each sample, and the sample disclosure of detailed information. height varies depend on the thickness of the mineralized layer and were all measured and recorded.

Drilling techniques . • Drill type (e.g. core, reverse circulation, • Most drillholes diameter starts with PQ open-hole hammer, rotary air blast, auger, (109mm) and reduced to NQ (79mm) in Bangka, sonic, etc.) and details (e.g. core deeper part. diameter, triple or standard tube, depth of diamond tails, face-sampling bit or other type, whether core is oriented and if so, by what method, etc.).

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Criteria Explanation Commentary Drill sample • Method of recording and assessing core and • Both coring length and drill footage were recovery ...... chip sample recoveries and results assessed. measured and recorded on a run basis, the run recovery was calculated directly and • Measures taken to maximise sample recovery recorded, the loss part of the run core was and ensure representative nature of the then view determined by site geologist. samples. • Decreased footage per run in fractured strata • Whether a relationship exists between to ensure the core recovery is meet the sample recovery and grade and whether requirement. sample bias may have occurred due to preferential loss/gain of fine/coarse material. • The poor recoveries would have an impact representatively of the samples, probably lead to a negativity bias.

Logging ...... • Whether core and chip samples have been • The lithology, structure zones, mineralization geologically and geotechnically logged to a are detail described during the core logging. level of detail to support appropriate Mineral The level of the details is sufficient to Resource estimation, mining studies and support a Resource estimate. metallurgical studies. • Logging is quantitative in nature; no core • Whether logging is qualitative or quantitative photos are received. in nature. Core (or costean, channel, etc.) photography. • The logging has provided adequate coverage of the full length of each sample the project. • The total length and percentage of the relevant intersections logged.

Sub-sampling • If core, whether cut or sawn and whether • Channel samples were taken by air pick. techniques and quarter, half or all core taken. sample • The samples were collected and sorted on preparation .... • If non-core, whether riffled, tube sampled, site to separate the peridot larger than 3mm, rotary split, etc. and whether sampled wet or the peridot sands and the basalt. The dry. sampling and sorting were under SRK supervision. • For all sample types, the nature, quality and appropriateness of the sample preparation • The sizes of sample are appropriate to the technique. grain size of the sample.

• Quality control procedures adopted for all • No duplicate samples were taken as all the sub-sampling stages to maximize materials are needed to calculate the yield. representatively of samples. • Sample sizing are considered appropriate. • Measures taken to ensure that the sampling is representative of the in situ material collected, including for instance results for field duplicate/second-half sampling.

• Whether sample sizes are appropriate to the grain size of the material being sampled.

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Criteria Explanation Commentary Quality of assay • The nature, quality and appropriateness of • The labs which undertook sample analysis of data and the assaying and laboratory procedures used 2015 and 2017 were accredited with CMA laboratory tests .. and whether the technique is considered certifications. partial or total. • The assaying and laboratory procedures used • For geophysical tools, spectrometers, in the lab follow Chinese standard and the handheld XRF instruments, etc., the procedures are considered of reasonable and parameters used in determining the analysis appropriate to determine the gemstone including instrument make and model, property. The X-ray instrument is GY- reading times, calibrations factors applied MARS/T6600 and EDX-7000. and their derivation, etc. • The lab adopted a quality control procedure • Nature of quality control procedures adopted according to Chinese standard. (e.g. standards, blanks, duplicates, external laboratory checks) and whether acceptable • The samples were chosen randomly from all levels of accuracy (i.e. lack of bias) and the samples provided to the lab, the tests precision have been established. were to specify the composites of the gemstones only, no standards, blanks or duplicates are necessary.

Verification of • The verification of significant intersections • SRK supervised the completion of eightdrill sampling and by either independent or alternative company holes for a total a 509.1 m, collected seven assaying ...... personnel. 1m by 1 m statistical- count samples and thirty two channel samples from the same • The use of twinned holes. adit as assessed by the No. 2 Institute.

• Documentation of primary data, data entry • No twinned holes were done. procedures, data verification, data storage (physical and electronic) protocols. • The data from laboratory and other documents were properly saved • Discuss any adjustment to assay data. electronically.

• Adjustment to assay data is not necessary.

Location of data • Accuracy and quality of surveys used to • The drillhole collars were surveyed by GNSS points ...... locate drill holes (collar and down-hole receiver with RTK during the exploration surveys), trenches, mine workings and other from 2014 to 2016. The collars location were locations used in Mineral Resource surveyed by hand GPS during the 2017 estimation. drilling program.

• Specification of the grid system used. • Unless specified, all the coordinates used in the report are Xi’an 80 coordination system • Quality and adequacy of topographic control. Zone 3°.

• The accuracy and quality of surveys used to locate drill holes (collar and downhole surveys), trenches, and other locations used is considered as enough to support Resource estimation.

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Criteria Explanation Commentary Data spacing and • Data spacing for reporting of Exploration • The basic drillhole spacing is 200m, with distribution .... Results. some adjustment.

• Whether the data spacing and distribution is • The drillhole spacing is sufficient to support sufficient to establish the degree of resource estimation and classification. geological and grade continuity appropriate for the Mineral Resource and Ore Reserve • Not applicable to this project. estimation procedure(s) and classifications applied.

• Whether sample compositing has been applied.

Orientation of data • Whether the orientation of sampling • The boreholes were drilled -90 dip angle. in relation to achieves unbiased sampling of possible geological structures and the extent to which this is • The sampling followed site geologists’ structure ...... known, considering the deposit type. logging, the site geologists have considered the mineralization when logging. • If the relationship between the drilling orientation and the orientation of key mineralised structures is considered to have introduced a sampling bias, this should be assessed and reported if material.

Sample security ... • The measures taken to ensure sample • The sampling program in 2017 was under security. SRK supervision, including sample location design, site sampling, and the transportation of samples.

Audits or reviews .. • The results of any audits or reviews of • The gem property and quality in the 2017 sampling techniques and data. assay report is consistent with the 2015 report, confirming the sampling techniques and data.

Section 2: Reporting of Exploration Results (Criteria listed in the preceding section also apply to this section.)

Criteria Explanation Commentary Mineral tenement • Type, reference name/number, location and • This project consists one mining license. and land tenure ownership including agreements or material Current mining license is valid from 8 status ...... issues with third parties such as joint December 2016 to 8 December 2026. The ventures, partnerships, overriding royalties, range of the mining right covers 1.6731km2. native title interests, historical sites, The mining license No. is wilderness or national park and C2200002016127110143443. environmental settings. • Regarding any impediments, it is unknown to • The security of the tenure held at the time of SRK at this moment. reporting along with any known impediments to obtaining a licence to operate in the area. • Regarding any impediments, it is unknown to SRK at this moment.

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Criteria Explanation Commentary Exploration done by • Acknowledgment and appraisal of • Described in the project history section. other parties ... exploration by other parties.

Geology ...... • Deposit type, geological setting and style of • Mineralization are mainly basalt with mineralisation. coarse-crystalline olivine-peridot inclusions.

Drill hole • A summary of all information material to the • See Section Exploration of the Report. Information .... understanding of the exploration results including a tabulation of the following information for all Material drill holes:

• easting and northing of the drill hole collar

• elevation or RL (Reduced Level — elevation above sea level in metres) of the drill hole collar

• dip and azimuth of the hole

• down hole length and interception depth

• Hole length.

• If the exclusion of this information is justified on the basis that the information is not Material and this exclusion does not detract from the understanding of the report, the Competent Person should clearly explain why this is the case.

Data aggregation • In reporting Exploration Results, weighting • The assay results were checked with a series methods ...... averaging techniques, maximum and/or of regression plots and distribution checks. minimum grade truncations (e.g. cutting of high grades) and cut-off grades are usually • Not applicable to this project Material and should be stated. • Not applicable to this project • Where aggregate intercepts incorporate short lengths of high-grade results and longer lengths of low grade results, the procedure used for such aggregation should be stated and some typical examples of such aggregations should be shown in detail.

• The assumptions used for any reporting of metal equivalent values should be clearly stated.

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Criteria Explanation Commentary Relationship • These relationships are particularly important • The mineralisation zone is relevantly flat, the between in the reporting of Exploration Results. mineralisation width equals to the intercept mineralisation lengths. widths and • If the geometry of the mineralisation with intercept lengths . respect to the drillhole angle is known, its • See Section 8.3 Modelling nature should be reported.

• If it is not known and only the down hole lengths are reported, there should be a clear statement to this effect (e.g. ‘down hole length, true width not known’).

Diagrams...... • Appropriate maps and sections (with scales) • See Section 6: Geology and Section 8: and tabulations of intercepts should be Exploration of this Report. included for any significant discovery being reported These should include, but not be limited to a plan view of drill hole collar locations and appropriate sectional views.

Balanced reporting . • Where comprehensive reporting of all • A series of tables and figures including Exploration Results is not practicable, drillhole location, outlined orebody for representative reporting of both low and high project were shown in the report to avoid grades and/or widths should be practiced to misleading reporting of exploration results. avoid misleading reporting of Exploration Results.

Other substantive • Other exploration data, if meaningful and • SRK is not aware of any other material or exploration data . material, should be reported including (but substantive exploration data that has not not limited to): geological observations; been reported. geophysical survey results; geochemical survey results; bulk samples — size and method of treatment; metallurgical test results; bulk density, groundwater, geotechnical and rock characteristics; potential deleterious or contaminating substances.

Further work .... • The nature and scale of planned further • No further work recommended work (e.g. tests for lateral extensions or depth extensions or large-scale step- out drilling).

• Diagrams clearly highlighting the areas of possible extensions, including the main geological interpretations and future drilling areas, provided this information is not commercially sensitive.

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Section 3: Estimation and Reporting of Mineral Resources (Criteria listed in section 1, and where relevant in section 2, also apply to this section.)

Criteria Explanation Commentary Database integrity.. • Measures taken to ensure that data has not • The data were provided to SRK in Excel and been corrupted by, for example, transcription Autocad format. or keying errors, between its initial collection and its use for Mineral Resource • SRK validated the database estimation purposes. • SRK modelled the mineralised domains • Data validation procedures used. based on the database

Site visits ...... • Comment on any site visits undertaken by • SRK completed five visits to the Project. the Competent Person and the outcome of From June 2017 to September 2020, SRK’s those visits. main CP, and CP of mineral resources visited the site, and held discussions with • If no site visits have been undertaken shareholders, management team, exploration indicate why this is the case. company and local engineers, and collected the Project related data.

• From July to September 2017, SRK geologist performed QA/QC on site. logical • Confidence in (or conversely, the uncertainty • The geological interpretation is supported by interpretation ... of the geological interpretation of the sufficient drilling, adit and trenching. mineral deposit. • The data include geological loggings, • Nature of the data used and of any inclusion statistics, gem yield statistics, gem assumptions made. assay reports.

• The effect, if any, of alternative • The mineralisation zone is outlined based on interpretations on Mineral Resource the drillhole logging. estimation. • Peridot inclusion rate is the main factor • The use of geology in guiding and considered in geology continuity. controlling Mineral Resource estimation.

• The factors affecting continuity both of grade and geology.

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Criteria Explanation Commentary Dimensions ..... • The extent and variability of the Mineral • The peridot basalt mineralisation is around Resource expressed as length (along strike or of 1800m* 600m* 3.3m (Strike * dipping otherwise), plan width, and depth below extension * thickness). surface to the upper and lower limits of the Mineral Resource.

Estimation and • The nature and appropriateness of the • The database used to estimate the YQS modelling estimation technique(s) applied and key Mineral Resource was audited by SRK. SRK techniques..... assumptions, including treatment of extreme is of the opinion that the current drilling grade values, domaining, interpolation information is sufficiently reliable to parameters and maximum distance of interpret with confidence the boundaries for extrapolation from data points. If a computer the peridot-mineralised zones and that the assisted estimation method was chosen assay data are sufficiently reliable to support include a description of computer software Mineral Resource estimation. and parameters used. • The compositing was completed prior to • The availability of check estimates, previous geostatistical analysis, and the composites estimates and/or mine production records and were calculated with a uniform length of whether the Mineral Resource estimate takes samples. According the sample statistics, a appropriate account of such data. length at 1 m was selected for compositing, with a minimum accountable length at 0.5 m. • The assumptions made regarding recovery of The statistics and grade interpolation were by-products. based on the composite samples.

• Estimation of deleterious elements or other • Prior to grade interpolation (estimation), a non-grade variables of economic significance basic statistical analysis of the percentage of (e.g. sulphur for acid mine drainage peridot inclusions and gemstone grade characterisation). (yield) was performed. The statistics shows that the weighted percentage of peridotite • In the case of block model interpolation, the inclusions is about 19.3% and the average block size in relation to the average sample grade of peridot gemstone is about 131 g/m3. spacing and the search employed. • Dassault Systèmes’ Geovia Surpac 6™ • Any assumptions behind modelling of software was used to construct the geological selective mining units. solids, prepare assay data for geostatistical analysis, construct the block model, estimate • Any assumptions about correlation between metal grades, and tabulate Mineral variables. Resources. No by- products have been assumed.

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Criteria Explanation Commentary • Description of how the geological • SRK established the block model according interpretation was used to control the to the geometry of the solid model, and the resource estimates. block size was determined as 20 m by 20 m by 4 m (X, Y, Z) with subsidiary blocks at a • Discussion of basis for using or not using size of 10 m by 10 m by 2 m (X, Y, Z). grade cutting or capping. • SRK has modelled the solid wireframe for • The process of validation, the checking the peridot resource domain. During the process used, the comparison of model data process, the topography and the roof and to drill hole data, and use of reconciliation base of the mineralisation domain (basalt data if available. with peridotite inclusion) were key factors to constrain the solid model. Knowledge of the geological characteristics discussed in aforementioned sections constructed the resource modelling.

• Top cut analysis for peridot was conducted on all the domains’ statistics prior to block model grade interpolation. Top cut analysis is undertaken to assess the influence extreme grade outliers have on the sample population of each data type. Although the extreme grades are real, these outliers are not representative of the domain assay population and so may overstate the block grades in some parts of the deposit if left uncut. In order to avoid any disproportionate influence of random, anomalously high-grade assays on the resource average grade, SRK studied the histogram and grade for the composites, and considered there was no need to apply a top cut for this Project.

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Criteria Explanation Commentary • Due to limited grade data, no geostatistical analysis or variogram modelling of the peridot grade was performed in this Project. Instead, SRK has performed an overall statistical analysis of the grade and peridot inclusion percentage. Table 13 2 suggests a relative stable percentage of the peridot inclusions with minor fluctuations.

• The inverse distance squared method was used for grade and percentage (peridot inclusions) estimates, and the anisotropy of the major, second major and minor directions was 1:1:4.

• SRK validated the block model validation to confirm the reasonableness of the estimation parameters and estimation result. The following methods were adopted by SRK for validation: Visual validation of block grades against drill hole grades; and statistical validation of the mean composite grades versus block estimates.

Table 13-3 shows a comparison of block mean grades with the solid composites grade for the percentage of peridot inclusions, which shows that the differences are within an acceptable limits.

Moisture ...... • Whether the tonnages are estimated on a dry • Tonnages are estimated on natural moisture. basis or with natural moisture, and the method of determination of the moisture content.

Cut-off parameters . • The basis of the adopted cut-off grade(s) or • Cut-off analysis is reported in section 13.12. quality parameters applied.

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Criteria Explanation Commentary Mining factors or • Assumptions made regarding possible mining • Underground mining scheme and cut-fill assumptions .... methods, minimum mining dimensions and mining method were considered. internal (or, if applicable, external) mining dilution. It is always necessary as part of the process of determining reasonable prospects for eventual economic extraction to consider potential mining methods, but the assumptions made regarding mining methods and parameters when estimating Mineral Resources may not always be rigorous. Where this is the case, this should be reported with an explanation of the basis of the mining assumptions made.

Metallurgical • The basis for assumptions or predictions • Identification on the peridot collected from factors or regarding metallurgical amenability. It is the deposit have been done during the assumptions .... always necessary as part of the process of exploration programs, which shows that determining reasonable prospects for majority of the peridot stones are in gem eventual economic extraction to consider quality. Trial production from the sampling potential metallurgical methods, but the adits by Fuli has verified that the peridot assumptions regarding metallurgical stones can be further processed to produce treatment processes and parameters made saleable peridot gemstones. when reporting Mineral Resources may not always be rigorous. Where this is the case, • Colour sorting method was tested to separate this should be reported with an explanation the peridot and other minerals; the overall of the basis of the metallurgical assumptions recovery is 95.27% for the gem quality made. peridot, and 70% for peridot sands.

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Criteria Explanation Commentary Environmental • Assumptions made regarding possible waste • The environmental impact assessment report factors or and process residue disposal options. It is on developing the project has been done and assumptions .... always necessary as part of the process of approved, and necessary permits on determining reasonable prospects for environmental aspect have been either eventual economic extraction to consider the obtained or will be obtained. potential environmental impacts of the mining and processing operation. While at this stage the determination of potential environmental impacts, particularly for a greenfields project, may not always be well advanced, the status of early consideration of these potential environmental impacts should be reported. Where these aspects have not been considered this should be reported with an explanation of the environmental assumptions made.

Bulk density ..... • Whether assumed or determined. If assumed, • The density data related to this Resource the basis for the assumptions. If determined, estimate was based on 30 density samples the method used, whether wet or dry, the collected and analysed by the No. 2 Institute frequency of the measurements, the nature, in 2015 and 50 samples analysed by size and representativeness of the samples. Changchun Test Centre of Jilin Mineral Resource Supervision and Test Authority in • The bulk density for bulk material must have 2017. SRK considers that an average value been measured by methods that adequately of 2.85 g/cm3 is appropriate for the tonnage account for void spaces (vugs, porosity, etc), estimation, as this is a reasonable reflection moisture and differences between rock and of the basalt density related to the Project. alteration zones within the deposit.

• Discuss assumptions for bulk density estimates used in the evaluation process of the different materials.

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Criteria Explanation Commentary Classification .... • The basis for the classification of the • The resource classification was performed Mineral Resources into varying confidence further based on following criteria. categories. • Indicated Mineral Resource is defined in the • Whether appropriate account has been taken area with at least 2 search holes or of all relevant factors (ie relative confidence channels/trenches separated by the nearest in tonnage/grade estimations, reliability of distance of informing samples less than 220 input data, confidence in continuity of m; geology and metal values, quality, quantity and distribution of the data). • Inferred Mineral Resource has been limited to the area apart from categorisation of • Whether the result appropriately reflects the Measured and Indicated Resources and is Competent Person’s view of the deposit. constrained to the hard boundary of the solid model.

• There are no Measured Mineral Resources defined in the Project.

Audits or reviews. . • The results of any audits or reviews of • The input data, including geological mapping Mineral Resource estimates. and drillhole data are comprehensive in their coverage of the mineralisation.

• The Resource estimate appropriately reflects the view of the Competent Person.

• The relative accuracy of the Resource estimate is reflected in the reporting of the Resource as per the guidelines of the JORC Code 2012.

• The statement relates to global volumetric estimates.

• Actual production data has been reviewed by SRK.

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Section 4: Estimation and Reporting of Ore Reserves (Criteria listed in section 1, and where relevant in sections 2 and 3, also apply to this section.)

It’s not applicable for estimation and reporting of Ore Reserves for the Project to date due to many fatal flaws have been observed in the available feasibility study. Just pit inventory was converted at the time of this reporting. The following table is just a check list of pit inventory reporting.

Criteria Explanation Commentary Mineral Resource • Description of the Mineral Resource estimate • The block models prepared by SRK in 2017 estimate for used as a basis for the conversion to an Ore were used as the basis of Ore Reserve conversion to Ore Reserve. estimate. Reserves...... • Clear statement as to whether the Mineral • The Mineral Resources are reported inclusive Resources are reported additional to, or of Ore Reserves. inclusive of, the Ore Reserves.

Site visits ...... • Comment on any site visits undertaken by • SRK engineers that includes mining, the Competent Person and the outcome of processing, geology, environment disciplines those visits. visited the site in August 2017 and in September 2020. SRK personnel inspected • If no site visits have been undertaken the geology, exploration adits, various indicate why this is the case. industrial sites proposed in FS, and took samples for data verification.

Not applicable.

Study status ..... • The type and level of study undertaken to • Feasibility study report (FS) which was enable Mineral Resources to be converted to compiled by NAIET was used as the basis of Ore Reserves. the ore reserve estimate.

• The Code requires that a study to at least • After reviewing the feasibility study report, Pre-Feasibility Study level has been SRK opines that the FS could meet the undertaken to convert Mineral Resources to international pre-feasibility study level in Ore Reserves. Such studies will have been general and could be basic for ore reserves carried out and will have determined a mine conversion. plan that is technically achievable and economically viable, and that material Modifying Factors have been considered.

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Criteria Explanation Commentary Cut-off parameters . • The basis of the cut-off grade(s) or quality • Using a weighted average price for salable parameters applied. carats produced of RMB522/ct.;

• The overall OPEX of RMB7,596/t ROM that includes mining, processing, cutting, general and administrative, and market development;

• The weighted average recovery rate from rough peridot to salable gems is estimated as 33.9%;

• Then, the break-even cut-off grade is estimated at 44.7 ct./t.

Mining factors or • The method and assumptions used as • Underground mining method is proposed to assumptions .... reported in the Pre-Feasibility or Feasibility this project. Study to convert the Mineral Resource to an Ore Reserve (i.e. either by application of • Adit access method is designed and followed appropriate factors by optimisation or by by cut and fill (87% of total), and regular or preliminary or detailed design). random pillars open stoping methods.

• The choice, nature and appropriateness of the • The mining methods selected are appropriate. selected mining method(s) and other mining parameters including associated design issues • The mining sequence is from inner to outer such as pre-strip, access, etc. in general, therefore the level drives targeting Inferred Resource will not • The assumptions made regarding development until the resource category geotechnical parameters (e.g. pit slopes, updated. stope sizes, etc.), grade control and pre- production drilling. • Backfill method is proposed cemented paste fill using processing plant basalt tailings, which will be further crushed or mill, as fill material blender. Cement will be outsourced and could be easily get from the downtown. The fill material will be transported underground via pipes and pumped from backfill plant.

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APPENDIX IV COMPETENT PERSON’S REPORT

Criteria Explanation Commentary • The major assumptions made and Mineral • The underground development is mostly Resource model used for pit and stope within ore body, and the small amount of optimisation (if appropriate). waste will be filled into stopes.

• The mining dilution factors used. • Dilution rate is 8.3% and mining recovery rate is 95.6%, which are both estimated by • The mining recovery factors used. NAIET in FS.

• Any minimum mining widths used. • Inferred Mineral Resources were not considered in Reserve Estimates; however, • The manner in which Inferred Mineral the level drives were over designed targeting Resources are utilised in mining studies and some Inferred Resources in the FS for the sensitivity of the outcome to their prospective mine inventory in future. inclusion. • Access to the mining site is convenient; • The infrastructure requirements of the power and water are available in the project selected mining methods. area.

Metallurgical • The metallurgical process proposed and • Not applicable. factors or the appropriateness of that process to the assumptions style of mineralisation. • Identification on the peridot collected from (Coal Preparation the deposit have been done during the and Coal • Whether the metallurgical process is exploration programs, which shows that Quality) ...... well-tested technology or novel in nature. majority of the peridot stones are in gem quality. Trial production from the sampling • The nature, amount and representativeness of adits by Fuli has verified that the peridot metallurgical test work undertaken, the stones can be further processed to produce nature of the metallurgical domaining saleable peridot gemstones. applied and the corresponding metallurgical recovery factors applied. • Colour sorting method was tested to separate the peridot and other minerals; the overall • Any assumptions or allowances made for recovery is 95.27% for the gem quality deleterious elements. peridot, and 70% for peridot sands.

• The existence of any bulk sample or pilot • The trial production indicates the scale test work and the degree to which such productivities of 35% for cut and polished samples are considered representative of the peridot and 37% for peridot dots. orebody as a whole.

• For minerals that are defined by a specification, has the ore reserve estimation been based on the appropriate mineralogy to meet the specifications?

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APPENDIX IV COMPETENT PERSON’S REPORT

Criteria Explanation Commentary Environmental.... • The status of studies of potential • The environmental impact assessment report environmental impacts of the mining and on developing the project has been done and processing operation. Details of waste rock approved, and necessary permits on characterisation and the consideration of environmental aspect have been either potential sites, status of design options obtained or will be obtained. considered and, where applicable, the status of approvals for process residue storage and waste dumps should be reported.

Infrastructure .... • The existence of appropriate infrastructure: • The land for industrial sites for developing availability of land for plant development, the project has been or will be obtained power, water, transportation (particularly for bulk commodities), labour, accommodation; • The road from the project to the national or the ease with which the infrastructure can expressway will be upgraded be provided, or accessed. • Currently, the mine has electricity connections to an upper level transformer station, and has an electricity supply of 10kV.

• The general labour is available locally, and the professional workers are available in Jinlin Province and in China.

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APPENDIX IV COMPETENT PERSON’S REPORT

Criteria Explanation Commentary Costs ...... • The derivation of, or assumptions made, • The feasibility study has proposed the regarding projected capital costs in the study. CAPEX and OPEX for the mining and processing aspects • The methodology used to estimate operating costs. • Frost and Sullivan (2021) studied the market demand of cut and polished peridot, and • Allowances made for the content of predicted the prices of various sizes of cut deleterious elements. and polished peridot in the future

• The derivation of assumptions made of metal • Various taxes, fees and royalty were or commodity price(s), for the principal considered minerals and co- products.

• The source of exchange rates used in the study.

• Derivation of transportation charges.

• The basis for forecasting or source of treatment and refining charges, penalties for failure to meet specification, etc.

• The allowances made for royalties payable, both Government and private.

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APPENDIX IV COMPETENT PERSON’S REPORT

Criteria Explanation Commentary Revenue factors ... • The derivation of, or assumptions made • The peridot will be sold either as rough regarding revenue factors including head peridot through auctions and as cut and grade, metal or commodity price(s) exchange polished peridot with further processing; rates, transportation and treatment charges, peridot sands and basalt will also be final penalties, net smelter returns, etc. saleable products

• The derivation of assumptions made of metal • The recoveries of the rough gemstones and or commodity price(s), for the principal the productivities of the cut and polished metals, minerals and co-products. peridot have been determined in the trial production

• Frost and Sullivan’s projected prices of various sizes of cut and polished peridot were used

• The Company’s prices for peridot sands and basalt were used.

Market assessment . • The demand, supply and stock situation for • Frost and Sullivan conducted a research on the particular commodity, consumption the peridot industry globally and in China, trends and factors likely to affect supply and and forecasted the market demand. The demand into the future. Company made a sales plan accordingly

• A customer and competitor analysis along • The Company will be the key player for with the identification of likely market peridot gemstones, and Frost and Sullivan windows for the product. believes that a steady supply can drive market demand • Price and volume forecasts and the basis for these forecasts. • Frost and Sullivan forecasts that global and Chinese will have increasing demands for cut • For industrial minerals the customer and polished peridot in the future specification, testing and acceptance requirements prior to a supply contract. • Not applicable.

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APPENDIX IV COMPETENT PERSON’S REPORT

Criteria Explanation Commentary Economic ...... • The inputs to the economic analysis to • See Table 21-2. produce the net present value (NPV) in the study, the source and confidence of these • NPV” is in the range of RMB25.12 Bln (at economic inputs including estimated 11% discount rate) to RMB41.48 Bln (at 7% inflation, discount rate, etc. discount rate), with a base case of RMB32.08 Bln using a discount rate of 9%. • NPV ranges and sensitivity to variations in The internal rate of return (“IRR”) is the significant assumptions and inputs. calculated at 113.78%.

• The products prices will affect NPV most greatly

Social ...... • The status of agreements with key •No stakeholders and matters leading to social licence to operate.

Other ...... • To the extent relevant, the impact of the •No following on the project and/or on the estimation and classification of the Ore •No Reserves: • The mining licence can be renewed before • Any identified material naturally occurring current one expires risks.

• The status of material legal agreements and marketing arrangements.

• The status of governmental agreements and approvals critical to the viability of the project, such as mineral tenement status, and government and statutory approvals. There must be reasonable grounds to expect that all necessary Government approvals will be received within the timeframes anticipated in the Pre- Feasibility or Feasibility study. Highlight and discuss the materiality of any unresolved matter that is dependent on a third party on which extraction of the reserve is contingent.

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APPENDIX IV COMPETENT PERSON’S REPORT

Criteria Explanation Commentary Classification .... • The basis for the classification of the Ore • The mineable Measured resources, including Reserves into varying confidence categories. diluting materials and allowances of losses, were classified as Proved Ore Reserves. • Whether the result appropriately reflects the Competent Person’s view of the deposit. • The mineable Indicated resources, including diluting materials and allowances of losses, • The proportion of Probable Ore Reserves were classified as Probable Ore Reserves. that have been derived from Measured Mineral Resources (if any). • The results appropriately reflect the Competent Person’s view of the deposit.

• No Proved reserves were reported as no Measured resource were reported for the Project.

Audits or reviews .. • The results of any audits or reviews of Ore • Peer reviews of this CPR have been Reserve estimates. performed within SRK internally.

Discussion of • Where appropriate a statement of the relative • Usually, the Ore Reserve estimate is reported relative accuracy and confidence level in the Ore on the basis of some technical and economic accuracy/confidence. Reserve estimate using an approach or assumptions which have been understood procedure deemed appropriate by the well to date. These assumptions would Competent Person. For example, the change as time goes on, so different ore application of statistical or geostatistical reserve can be produced. procedures to quantify the relative accuracy of the reserve within stated confidence • SRK considers the level of sampling work limits, or, if such an approach is not deemed carried out by the client is sufficient for appropriate, a qualitative discussion of the Probable Ore Reserves in accordance with factors which could affect the relative the JORC Code. accuracy and confidence of the estimate. • SRK expects that the future mining • Accuracy and confidence discussions should operations will allow the accuracy of both extend to specific discussions of any applied resource and reserve estimates to be refined. Modifying Factors that may have a material impact on Ore Reserve viability, or for which there are remaining areas of uncertainty at the current study stage.

• It is recognised that this may not be possible or appropriate in all circumstances. These statements of relative accuracy and confidence of the estimate should be compared with production data, where available.

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APPENDIX IV COMPETENT PERSON’S REPORT

Section 5 Estimation and Reporting of Diamonds and Other Gemstones (Criteria listed in other relevant sections also apply to this section. Additional guidelines are available in the ‘Guidelines for the Reporting of Diamond Exploration Results’ issued by the Diamond Exploration Best Practices Committee established by the Canadian Institute of Mining, Metallurgy and Petroleum.)

Criteria Explanation Commentary Indicator minerals.. • Reports of indicator minerals, such as • “mineralised body” in the mining area is chemically/physically distinctive garnet, basalt with coarse-crystalline olivine- peridot ilmenite, chrome spinel and chrome diopside, inclusions. should be prepared by a suitably qualified laboratory.

Source of diamonds. • Details of the form, shape, size and color of • Not applicable. the diamonds and the nature of the source of diamonds (primary or secondary) including the rock type and geological environment.

Sample collection .. • Type of sample, whether outcrop, boulders, • Mainly include three types samples: drill core, reverse circulation drill cuttings, gravel, stream sediment or soil, and purpose — Core samples used to determine the (eg large diameter drilling to establish stones range of mineralization; per unit of volume or bulk samples to establish stone size distribution). — Adit inclusion statistic samples in the adits to determine the peridot • Sample size, distribution and inclusion yield. representativity. — Channel sampling by air pick in the adit to estimate the gem producing ratio. The channel sample length is 1m for each sample, and the sample height varies depend on the thickness of the mineralized layer and were all measured and recorded.

• The sample locations are evenly distributed and considered of representativity.

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APPENDIX IV COMPETENT PERSON’S REPORT

Criteria Explanation Commentary Sample treatment .. • Type of facility, treatment rate, and • The production ratio samples were collected accreditation. in the adit with air pick.

• Sample size reduction. Bottom screen size, • Gems were separated from basalt or peridot top screen size and re-crush. sands by hand-sorting.

• Processes (dense media separation, grease, • Not applicable. X-ray, hand-sorting, etc). • NGTC laboratory was used for gem property • Process efficiency, tailings auditing and determination. The lab was accredited with granulometry. CMA, CAL and CNAS certificates.

• Laboratory used, type of process for micro diamonds and accreditation.

Carat ...... • One fifth (0.2) of a gram (often defined as a • Carat was used as the weight unit of gems in metric carat or MC). this report.

Sample grade .... • Sample grade in this section of Table 1 is • Gram per cubic meter (g/m3) was used for used in the context of carats per units of peridot inclusion statistics. mass, area or volume. • Carats per tonne was used for min • The sample grade above the specified lower cut-off sieve size should be reported as carats per dry metric tonne and/or carats per 100 dry metric tonnes. For alluvial deposits, sample grades quoted in carats per square metre or carats per cubic metre are acceptable if accompanied by a volume to weight basis for calculation.

• In addition to general requirements to assess volume and density there is a need to relate stone frequency (stones per cubic metre or tonne) to stone size (carats per stone) to derive sample grade (carats per tonne).

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APPENDIX IV COMPETENT PERSON’S REPORT

Criteria Explanation Commentary Reporting of • Complete set of sieve data using a standard • A basic statistical analysis of the percentage Exploration progression of sieve sizes per facies. Bulk of peridot inclusions and gemstone grade Results ...... sampling results, global sample grade per (yield) was performed. The statistics shows facies. Spatial structure analysis and grade that the weighted percentage of peridotite distribution. Stone size and number inclusions is about 19.3% and the average distribution. Sample head feed and tailings grade of peridot gemstone is about 131 g/m3. particle granulometry. • Density was based on 30 density samples • Sample density determination. collected and analysed by the No. 2 Institute in 2015 and 50 samples analysed by • Per cent concentrate and undersize per Changchun Test Centre of Jilin Mineral sample. Resource Supervision and Test Authority in 2017. SRK considers that an average value • Sample grade with change in bottom cut- off of 2.85 g/cm3 is appropriate for the tonnage screen size. estimation, as this is a reasonable reflection of the basalt density related to the Project. • Adjustments made to size distribution for sample plant performance and performance • SRK has adopted a cut-off grade of the on a commercial scale. peridot gemstone at 4 g/t (i.e 20 ct/t), the assumptions are listed in Table 13-4 • If appropriate or employed, geostatistical techniques applied to model stone size, distribution or frequency from size distribution of exploration diamond samples.

• The weight of diamonds may only be omitted from the report when the diamonds are considered too small to be of commercial significance. This lower cut-off size should be stated.

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APPENDIX IV COMPETENT PERSON’S REPORT

Criteria Explanation Commentary Grade estimation • Description of the sample type and the • Mainly include three types samples: for reporting spatial arrangement of drilling or sampling Mineral designed for grade estimation. — Core samples used to determine the Resources and range of mineralisation; Ore Reserves ... • The sample crush size and its relationship to that achievable in a commercial treatment — Adit inclusion statistic samples in the plant. adit to determine the peridot inclusion yield. • Total number of diamonds greater than the specified and reported lower cut-off sieve — Channel sampling by air pick in the size. adit to estimate the gem producing ratio. The channel sample length is • Total weight of diamonds greater than the 1m for each sample, and the sample specified and reported lower cut-off sieve height varies depend on the thickness size. of the mineralized layer and were all measured and recorded. • The sample grade above the specified lower cut-off sieve size. • A total of 32 channel samples were collected for a total weight is 6,142.45 kg, producing 1,028.45 kg of peridot sands (<3 mm), and a first pick of peridot gems (>3 mm) totaling 602 pieces with a combined weight of 622.14 ct, in the preliminary field sort.

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APPENDIX IV COMPETENT PERSON’S REPORT

Criteria Explanation Commentary Value estimation .. • Valuations should not be reported for samples of diamonds processed using total liberation method, which is commonly used for processing exploration samples.

• To the extent that such information is not deemed commercially sensitive, Public Reports should include:

• diamonds quantities by appropriate screen size per facies or depth.

• details of parcel valued.

• number of stones, carats, lower size cut- off per facies or depth.

• The average $/carat and $/tonne value at the selected bottom cut-off should be reported in

• US Dollars. The value per carat is of critical importance in demonstrating project value.

• The basis for the price (eg dealer buying price, dealer selling price, etc).

• An assessment of diamond breakage.

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APPENDIX IV COMPETENT PERSON’S REPORT

Criteria Explanation Commentary Security and • Accredited process audit. • As described in the report, the 2017 integrity ...... sampling and processing were under SRK’s • Whether samples were sealed after supervision. excavation. • The collected gems were sealed in the • Valuer location, escort, delivery, cleaning sample bag and transported to the Fuli losses, reconciliation with recorded sample factory under the supervision of SRK. carats and number of stones. • The sample treatment was done in Fuli • Core samples washed prior to treatment for factory. micro diamonds. • Sample density and property was assayed by • Audit samples treated at alternative facility. NGTC and report is attached in the appendix D. • Results of tailings checks.

• Recovery of tracer monitors used in sampling and treatment.

• Geophysical (logged) density and particle density.

• Cross validation of sample weights, wet and dry, with hole volume and density, moisture factor.

Classification .... • In addition to general requirements to assess Drillhole numbers, distance has been considered in volume and density there is a need to relate the resource classification. stone frequency (stones per cubic metre or tonne) to stone size (carats per stone) to derive grade (carats per tonne). The elements of uncertainty in these estimates should be considered, and classification developed accordingly.

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APPENDIX IV COMPETENT PERSON’S REPORT

Appendix C: SRK DCF Model

4 4 5 0 0 0 0 3 3 3 4 4 4 0 3 3 2 2 2 1 1 1 2 0 9 4 0 8 8 9 0 9 5 1 2 2 0 0 3 000 120667 000 120667 0 0 1 1 3 8 1 0 0 2 2 1 3 1 1 1 3525342 677710 0 0 0 0 6 3 8 0 1 0 0 0 0 3 3 8 8 3 00 720000 720000 0 0 0 0 0 9 3 5 9.56 20.00 14.80 0 0 0 1 1 1 9 9 2 25641 9237996 2889892 2 0 0 2 2 3 4 1 7 2 2 293000 133000 124000 0 0 0 3 3 0 0 2 2 1 8 0 0 0 2 2 4 0 5 8 3 4 . 0 0 0 9 9 9 0 6 0 0830 5274811 2394368 2232343 0 0 0 2 2 2 4 8 3 15.69 15.58 14.07 13.87 2 0 0 3 3 3 5 204.11 204.11 204.11 204.11 7 2 2 18631402 19520110 19675848 3077989 0 0 0 4 4 1 0 6 5 1 0 0 0 0 1 1 3 0 3 8 3 4 . 0 0 0 9 9 9 0 6 1 0 0 0 3 3 3 4 8 3 2 0 0 3 3 3 5 7 2 2 320000 4320000 4320000 4320000 4320000 4 0 0 0 0 2 2 0 0 9 8 1 1 0 2960000 2960000 2960000 2960000 2960000 0 0 0 0 0 2 2 4 0 1 8 3 6 . 0 0 0 0 0 2 2 2 0 6 2 0 0 0 0 0 5 5 5 4 8 3 6 2 2 0 0 3 3 3 5 74870 3333701 3492531 3525342 677710 0 82700 1582700 1582700 1582700 1582700 766519 523718 21523718 21523718 21021498 9542182 8896470 9 7 3 2 2 5 1 1412994 31412994 31412994 30680024 13926427 12984037 2 4 1 3 0 0 0 0 0 0 0 2 2 9 0 1 6 1 9 0 0 0 0 0 0 4 5 5 6 0 0 8 3 9 . 0 0 0 0 0 7 0 5 5 5 0 6 500 9171500 9171500 9171500 9171500 9171500 4109709 1 0 0 0 0 0 2 6 4 4 4 4 8 1 2200 6402200 6402200 6402200 6002200 4525600 3089227 3 6 2 0 0 2 8 1 3 3 0 3 5 7 10488 7782206 8053924 8325641 9237996 2889892 0 9 7 2 2 3 5 0 5 4 1 2 4 1 3 7 6 9 0 0 0 0 0 0 9 0 6 6 0 4 0 4 7 0 1 0 0 0 0 0 0 0 0 7 8 8 0 0 0 8 0 8 3 3 . 0 0 0 0 0 7 2 7 8 8 2 9 0 5 5 000 200000 200000 200000 200000 195333 88667 82667 278 16853986 17742694 18631402 19520110 19675848 3077989 0 2 0 0 0 0 0 2 0 7 8 4 4 2 4 4 8 1 5 3 6 2 0 0 2 8 0 5 3 3 3 0 3 5 7 6 9 7 2 2 3 5 2 8 2 4 1 9 2 1 4 2 7 6 9 5 1 0 0 0 0 0 0 0 9 2 8 8 0 5 0 6 5 0 0 1 7 0 0 0 0 0 0 0 7 5 7 7 0 9 0 6 8 0 7 3 3 . 0 0 0 0 0 7 0 3 0 8 8 2 8 0 5 5 5 1 0 0 0 0 0 2 0 8 7 3 3 2 3 4 8 1 6 2000 5242000 5242000 5242000 5242000 5242000 5242000 5242000 2910053 3 6 4 2 0 0 0 8 2 9 6 3 3 0 3 5 7 7 9 2 7 2 2 5 2 3 6 9 4 1 0 2 5 1 4 2 6 6 9 5 1 0 0 0 0 0 0 0 0 8 4 2 2 0 8 0 9 2 0 1 2 4 0 0 0 0 0 0 0 0 4 7 3 7 0 8 0 4 8 0 3 6 4 . 0 0 0 0 0 0 7 0 5 3 8 8 2 0 8 5 5 8 0 0 2 0 0 0 0 2 0 9 5 2 2 2 4 2 8 1 7 3 6 4 2 0 0 0 8 2 3 9 3 3 0 5 3 7 8 9 2 7 2 2 2 5 3 5 6 4 1 1 2 5 1 4 2 6 6 9 4 1 0 0 0 0 0 0 0 0 8 6 0 0 0 0 6 3 1 1 0 4 6 30524286 30524286 30524286 30524286 30524286 30524286 30524286 30524286 30524286 16062026 1 8 0 0 0 0 0 0 0 0 1 0 1 0 0 1 0 3 8 3 0 5 00 21252000 21252000 21252000 21252000 21252000 21252000 21252000 20109143 15890286 11786362 8 . 0 2 0 0 0 0 0 0 7 7 0 6 2 2 0 2 2 5 5 1 9 2 4 0 2 0 0 0 0 2 0 0 3 2 2 4 2 2 8 1 9 2 5 2 6 4 0 2 0 0 8 8 2 2 3 3 5 3 0 7 9 2 5 9 2 2 2 7 2 5 3 3 4 4 1 2 1 0 2 5 1 2 4 6 6 9 3 2 3 1 0 6 0 0 0 0 0 0 0 7 0 8 0 0 0 5 0 7 5 1 0 6 8 0 8 0 0 0 0 0 0 0 8 0 9 0 0 0 1 0 1 7 3 0 4 7 . 0 2 0 0 0 0 0 0 7 8 0 8 0 0 0 2 0 5 5 4 7 2 4 0 2 0 0 0 0 2 1 0 1 4 0 0 0 2 8 1 0 2 5 2 6 4 2 0 0 0 8 2 5 2 5 3 3 3 0 7 1 2 5 9 2 2 2 7 2 5 2 1 3 4 1 4 1 0 2 5 1 2 4 6 6 9 2 2 3 1 0 6 0 0 0 0 0 0 0 7 0 6 6 0 0 2 0 2 6 1 0 8 4 0 8 0 0 0 0 0 0 0 5 0 9 9 8 0 1 0 0 7 3 0 1 3 . 0 2 0 0 0 0 0 0 7 0 0 1 3 3 0 4 2 5 5 7 8 2 4 0 0 0 2 0 0 2 3 4 0 0 0 0 0 2 8 1 1 2 5 2 6 0 0 4 2 0 8 6 5 8 3 3 2 0 3 7 2 2 5 9 2 2 2 7 2 5 0 8 3 4 1 5 1 0 2 5 1 2 5 4 6 9 1 2 3 1 0 6 0 0 0 0 0 0 0 6 0 3 2 2 0 0 7 6 8 1 0 3 0 0 8 0 0 0 0 0 0 0 2 0 6 4 4 0 5 0 8 7 3 0 8 3 . 0 2 0 0 0 0 0 0 7 0 2 1 1 4 1 2 0 4 5 0 8 2 4 0 0 0 0 2 0 2 4 4 8 1 1 1 2 0 8 1 3 2 5 2 6 0 0 2 4 0 8 5 0 0 3 3 0 3 2 7 3 2 5 9 2 2 7 2 2 5 9 6 4 3 1 6 1 0 2 5 1 1 5 6 4 9 0 2 3 1 0 1 0 0 0 0 0 0 0 0 6 9 9 5 5 0 1 3 0 1 0 0 2 0 7 0 0 0 0 0 0 8 0 9 4 4 4 8 6 7 0 8 3 6 0 2 . 8 5 0 0 0 0 0 8 9 0 3 0 0 7 0 4 2 0 1 3 0 0 4 0 0 0 0 0 2 0 4 3 3 5 6 3 0 8 0 4 4 3 6 7 6 0 0 2 2 0 7 5 4 3 3 3 3 5 2 2 4 9 6 9 2 2 7 2 9 4 7 3 9 3 5 7 9 8 2 4 1 1 5 5 4 8 9 1 2 0 0 0 0 0 0 7 0 0 0 7 5 7 7 6 4 9 0 1 0 2 0 0 0 0 0 0 0 0 6 0 0 0 8 8 6 2 5 5 6 0 3 0 4 0 0 . 0 0 0 0 0 0 6 0 0 4 1 1 3 8 7 4 4 0 0 9 5 4 0 0 0 0 6 0 4 4 3 7 7 7 3 8 8 2 0 3 5 2 2 5 5 0 6 6 2 4 5 0 2 2 6 7 2 7 2 5 0 0 1 9 1 9 1 7 4 3 2 7 2 3 5 0 8 2 5 4 1 1 3 5 4 7 7 1 2 0 0 0 0 3 7 0 3 0 0 4 4 9 6 5 3 4 0 8 0 2 0 5 0 0 0 0 4 6 0 3 0 0 5 5 9 7 1 6 8 2 0 0 4 0 0 . 0 0 0 1 0 6 0 3 0 2 4 4 3 6 9 8 2 0 0 4 5 2 0 0 0 6 7 0 7 2 7 7 7 6 1 0 8 9 0 4 8 2 7 5 5 6 6 1 2 3 1 1 2 2 1 6 2 1 2 7 2 8 1 1 9 1 8 7 9 1 2 8 5 3 4 7 5 2 2 3 1 3 1 4 4 6 6 1 2 0 0 0 0 7 7 0 0 0 0 0 0 8 7 6 4 4 1 0 7 0 0 3 0 0 0 6 0 6 0 0 0 0 0 8 4 6 2 2 2 8 8 8 0 0 5 . 8 0 0 6 0 6 0 0 8 3 3 3 9 4 3 9 6 0 1 0 7 4 0 0 6 0 0 0 6 6 9 9 2 5 0 1 6 0 0 7 8 1 0 0 0 2 1 6 2 2 2 1 1 1 2 2 9 9 2 8 6 5 1 1 1 9 7 4 3 9 7 6 6 3 2 3 3 2 3 9 1 3 4 5 3 1 1 0 0 0 0 0 0 0 3 7 3 0 2 0 1 9 1 7 0 7 5 0 0 7 0 0 0 0 0 0 0 7 3 7 6 2 0 0 4 6 9 6 5 6 0 0 0 . 6 0 0 0 0 0 0 4 4 5 6 4 2 3 1 2 8 0 2 8 3 7 0 0 4 0 0 6 0 6 7 4 1 7 6 8 2 4 0 0 9 1 3 0 0 0 6 1 2 1 0 4 1 4 9 6 3 2 0 6 1 1 1 1 9 7 7 7 7 7 8 0 3 1 4 1 2 2 2 2 6 4 4 4 1 1 0 0 0 0 0 0 7 6 5 0 6 0 5 4 3 0 1 0 5 0 0 0 7 0 0 0 0 0 3 0 5 1 5 6 2 0 0 0 0 8 6 8 0 0 0 6 . 6 0 0 0 0 0 9 9 3 5 0 6 0 6 9 4 0 2 0 1 3 5 0 0 4 0 0 4 4 1 3 0 7 9 2 9 8 2 0 1 8 1 8 0 0 0 6 1 1 2 2 1 2 0 0 3 5 2 2 9 9 1 1 1 9 5 7 1 2 1 8 9 0 3 7 8 2 3 2 2 2 3 4 4 1 1 9 15 22 24 28 31 31 31 31 31 31 31 31 31 31 31 31 31 31 10 8 9 0 0 4 0 0 0 0 0 3 2 7 2 0 9 4 6 0 0 3 0 0 29 877 3525 4401 5427 6886 8454 8471 8486 8502 8517 8533 8549 8566 8584 8601 8619 8636 8652 19588 11399 0 0 0 0 3 3 9 7 9 4 2 8 2 0 6 4 0 7 . 667 4000 4000 4000 20667 37333 54000 54000 54000 54000 54000 54000 54000 54000 54000 54000 54000 54000 54000 49333 38000 2 0 0 0 3 0 1 1 8 8 7 6 5 2 1 9 6 2 7 0 4 0 3 6 5 5 4 5 8 8 5 1 6 3 17.26 16.77 16.53 16.60 16.53 16.44 15.75 14.84 14.49 14.30 15.35 15.67 16.15 16.63 16.47 16.79 16.17 50000 150000 150000 175000 250000 25000033728 300000 348666 300000 839481 300000 798297 300000 621981 300000 1210673 300000 1267365 300000 1745396 300000 1904226 300000 2063057 300000 2221887 300000 300000 2380718 2539548 2698379 2857209 3016040 3174870 3333701 3492531 6 3 3 3 0 4 2 4 8 9 8 4 204.11 204.11 204.11 204.11 204.11 204.11 204.11 204.11 204.11 204.11 204.11 204.11 204.11 204.11 204.11 204.11 204.11 125657199314 1345744 2043670 3122003 4798167 2746261 4469807 1796964 3368053 3861395 6728405 3773827 7005900 5336745 9744322 5608463 10633030 5880180 11521738 6151898 12410446 6423616 13299154 14187862 6695334 15076570 6967052 15965278 7238770 16853986 17742694 7510488 7782206 8053924 83 3 2 3 8 3 5 3 1 0 2 1 3 1 2 3154443517272837876758182858786888582803330 0 0 0 7 0 0 0 7 2 1 0 0 0 0 1 7 8 0 9 8 0 5 1 7 4 0 8 0 6 0 5 4 989570 98 95 70 98 95 70 98 95 70 98 95 70 98 95 70 98 95 70 98 95 70 98 95 70 98 95 70 98 95 70 98 95 70 98 95 70 98 95 70 98 95 70 98 95 70 98 95 70 98 95 70 98 95 70 98 95 70 98 95 70 98 95 70 0 6 0 0 0 6 1 2 9 2 9 2 0 7 5 5 3 0 8 2 1 . . . 8 6 0 0 0 6 2 1 1 7 2 6 1 3 7 7 3 9.00 9.000.05 0.05 9.00 0.05 9.00 0.05 9.00 0.05 9.00 0.05 9.00 0.05 9.00 0.05 9.00 0.05 9.00 0.05 9.00 0.05 9.00 0.05 9.00 0.05 9.00 0.05 9.00 9.00 0.05 0.05 9.00 9.00 0.05 9.00 0.05 9.00 0.05 9.00 0.05 9.00 0.05 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– IV-216 – PEDXI OPTN ESNSREPORT PERSON’S COMPETENT IN READ IV BE MUST DOCUMENT. APPENDIX INFORMATION THIS THE OF AND COVER CHANGE THE TO ON SUBJECT “WARNING” AND HEADED INCOMPLETE SECTION FORM, THE DRAFT WITH CONJUNCTION IN IS DOCUMENT THIS

2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 2042 2043 2044 Revenues Revenues Prices Large gem RMB/Ct 1044.80 1044.80 1086.59 1130.06 1243.06 1367.38 1504.12 1654.51 1654.51 1654.51 1654.51 1654.51 1654.51 1654.51 1654.51 1654.51 1654.51 1654.51 1654.51 1654.51 1654.51 1654.51 Medium gem RMB/Ct 653.00 653.00 679.12 706.28 776.91 854.58 940. 06 1034.09 1034.09 1034.09 1034.09 1034.09 1034.09 1034.09 1034.09 1034.09 91034.0 1034.09 1034.09 1034.09 1034.09 1034.09 Small gem RMB/Ct 391.80 391.80 407.47 423.77 466.15 512.87 564.06 620.42 620.42 620.42 620.42 62 0.42 620.42 620.42 620.42 620.42 620.42 620.42 42620. 620.42 620.42 620.42 ots Peridot d RMB/Ct 65.30 65.30 65.30 65.30 65.30 65.30 65.30 65.30 65.30 65.30 65.30 65.30 65.30 65.30 65.30 65.30 65.30 65.30 65 .30 65.30 65.30 65.3 0 Primary stones RMB /Ct 0.29 0.29 0.29 0.29 0.29 0.29 0.29 0.29 0.29 0.29 0.29 0.29 0.29 0.29 0.29 0.29 0.29 0.29 0.29 0.29 0.29 0.29 Sand RMB/t 1020.00 1020.00 1020.00 1020.00 1020.0 0 1020.00 1020.00 1020.00 1020.00 1020.00 1020.00 1020.00 1020.00 1020.00 1020.00 1020.00 010 1020.0020.0 1020.00 1020.00 1020.00 1020.00 Basalt RMB/t 170.00 170.00 170.00 170.00 170.00 170.00 170.00 170.00 170.00 170.0 0 170.00 170.00 170.00 170.00 170.00 170.00 170.00 170.00 170.00 0.0017 170.00 170.00

Income from Large gem Mln RMB 53.5 214.0 566.5 799.6 1134.1 1527.6 1960.5 2433.7 2618.6 2618.6 2618.6 2618.6 2618.6 2618.6 261 8.6 2618.6 2618.6 2618.6 2618.6 18.626 2618.6 1268.2 Medium gem Mln RMB 1.0135.3 1432.254 2021.5 2867.3 3862.0 4956.4 6153.1 6620.5 6620.5 6620.5 6620.5 6620.5 6620.5 6620.5 6620.5 6620.5 6620.5 66 20 .5 6206.8 4679.9 3194.5 Small gem Mln RMB 116.3 465.0 1231.1 1737.5 2464.6 3320.3 4 260.4 5288.5 5690.1 5690.1 5690.1 5690.1 5690.1 5690.1 5690.1 5690.1 5690.1 5690.1 15690 5690.1. 5690.1 2549.7 Peridot dots Mln RMB 46.3 185.4 904.3 891.2 1167.0 1660.0 1660.0 1998.2 1882.9 1837.9 1813 .9 1946.9 1987.5 2048.4 2109.3 2089.1 2129.6 2050.5 71930.01306.0966.41990. Primary stones Mln RMB 0.0 0.0 2.3 2.3 2.3 2.3 2.3 2.3 2.3 2.3 2.3 2.3 2.3 2.3 2. 3 2.3 2.3 2.3 2.3 2.3 2.3 2.3 Sand Mln RMB 1.2 5.3 15.3 16.8 19.7 28.0 27.7 33.7 31.8 31.0 30.6 32.8 33.5 34.6 35.6 35.2 35.9 34.6 33.6 21.4 21.7 23.9 Basalt Mln RMB 1.0 5.1 17.0 17.0 17.0 25.5 25.5 34.0 34.0 34.0 34.0 34.0 34.0 34.0 34.0 34.0 34.0 34.0 34.0 34.0 17.0 20.5 Total 353.6 1415.8 4168.7 5485.9 7672.0 10425.8 12892.7 15943.6 16880.2 16834.4 16810.0 16945.3 16986.6 17048.5 17110.4 17089.9 17131.1 17050.6 16989.8 16503.3 14335.7 8025.7 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 2042 2043 2044 OPEX Operang expenses Mining and ore processing costs 14.40 114.40 114.40 114.40 114.40 114.40 1 Materials RMB/t ore 114.40 114.40 114.40 114.40 114.40 114.40 114.40 114.40 114.40 114.40 114.40 114.40 1 14.40 114.40 114.40 114.40 Power and water B/t ore RM 96.42 96.42 96.42 96.42 96.42 96.42 96.42 96.42 96.42 96.42 96.42 96.42 96.42 96.42 96.42 96.42 96.42 96.42 96.4 2 96.42 96. 42 96.42 Salary and welfare RMB/t ore 77.13 77.13 77.13 77 .13 77.13 77.13 77.13 77.13 77.13 77.13 77.13 77.13 77.13 77.13 77.13 77.13 77.13 77.13 77.13 77.177.133 77.13 Manufactory RMB/t ore 88.74 88.74 88.74 88.74 88.74 88.74 88.74 88.74 88.74 88.74 8 8.74 88.74 88.74 88.74 88.74 88.74 88.74 88.74 88.74 88.74 88.74.74 88 G&A RMB/t ore 422.33 422.33 422.33 422.33 422.33 422.33 422.33 422.33 422.33 422.33 422.33 422.33 422.33 422.33 42 2.33 422.33 422.33 422.33 422.33 22.334 422.33 422.33 Financing cost re RMB/t o Operational cost RMB/t ore Total RMB/t ore 799.02 799.02 799.02 799.02 799.02 799.02 799.02 799.02 799.02 799. 02 799.02 799.02 799.02 799.02 799.02 799.02 799.02 7992.02 799.02799.0 799.02 799.02 Mining and ore processing cost RMB Mln 7.99 39.95 119.85 119.85 139.83 199.76 199.76 239.71 239.71 239.71 239.7 1 239.71 239.71 239.71 239.71 23.719 239.71 239.71 239.71 234.11 106.27 99.08 Gem Processing cost Contracted out >7mm hand cutting (contracted out) US$/ct 10.00 10.00 10.00 10.00 10.00 10.00 10.00 US$1=6.53RMB >7mm hand cutting (contracted out) RMB/ct 65.30 65.30 65.30 65.30 65.30 65.30 65.30 3-7 gem machine processing (contracted out) B/ctRM 19.59 19.59 19.59 19.59 19.59 19.59 19.59 1-3 gem dot machine processingc (ontracted out) RMB/ct 19.59 19.59 19.59 19.59 19.59 19.59 19.59 >7mm hand ctuting (contracted out) Mln RMB 16.87 67.48 171.76 233.10 300.58 368.06 429.40 3-7mm gem machine processing (contracted out) Mln RMB 5.81 23.25 59.19 80.32 103.57 126.83 147.96

V27– IV-217 – 1-3 gem dot machine processing (contracted out) Mln RMB 13.90 55.62 271.29 267.35 350.09 497.99 497.99 Subtotal Contracted out OPEX Mln RMB 36.59 146.34 502.24 580.78 754.24 992.87 1075.35 Fuli gem processing plant Hand-cutting >7mm RMB/ct 45.71 45.71 45.71 45.71 45.71 45.71 45.71 45.71 45.71 45.71 45.71 45.71 45.71 45.71 45.7 1 45.71 45.71 45.71 45.71 45.71145.7145.7 3-7mmM geamchsine processing fRoMr B/ct 13.71 13.71 13.71 13.71 13.71 13.71 13.71 13.71 13.71 13.71 13.71 13.71 13.71 13.71 13.71 13.71 13.71 13. 71 13.71 13.71 13.71 13.71 Machine processing for gem sand to dot RMB/ct 13.71 1 3.71 13.71 13.71 13.71 13.71 13.71 13.71 13.71 13.71 13.71 13.71 13.71 13.71 13.71 13.71 7113. 13.71 13.71 13.71 13.71 13.71 Hand cutting cost-products Mln RMB 5156.28 339.23 364.99 364.99 364.99 364.99 364.99 364.99 364.99 364.99 364.99 364.99 364.99 346.71 279.21 176.25 Machine processing cost-3-7mm gems Mln RMB 1808.24 116.89 125.77 125.77 125.77 125.77 125.77 125.77 125.77 125.77 125.77 125.77 125.77 125.77 125.77 56.36 Machine processing cost to peridot dots Mln RMB 5898.34 419.62 395.41 385.95 380.91 408.85 417.38 430.16 442.96 438.71 447.22 430.61 418.04 405.29 274.26 202.95 Subtotal Fuli plant OPEX 0.00 0.00 0.00 0.00 0.00 0.00 0.00 875.74 886.17 876.71 871.67 899.61 908.14 920.92 933.72 929.47 937.98 921.37 908.80 877.77 679.24 435.55 Total Gem processing OPEX Mln RMB 16951.27 36.59 146.34 502.24 580.78 754.24 992.87 1075.35 875.74 886.17 876.71 871.67 899.61 908.14 920.92 933.72 929.47 937.98 921.37 908.80 877.77 679.24 4 35.55 Marketing and sales cos/tt ore RMB 5303.00 2810.87 6894.06 9086.91 10907.64 7102.17 10271.47 10584.03 11209.73 8384.76 8372.77 8439.29 8459.5 9 8490.03 8520.50 8510.39 8530.65 8491.09 5640.77 5613.65 10749.72 6436.55 Marketing and sales cost Mln RMB 43805.69 53.03 140.54 1034 .11 1363.04 1908.84 1775.54 2567.87 3175.21 3362.92 2515.43 2511.83 2531.79 2537.88 2547.01 2556.15 2553.12 2559.19 2547.33 1692.23 1644.80 1429.71 798.13 Total OPEX Mln RMB 97.61 326.84 1656.20 2063.67 2802.91 2968.17 3842.98 4290.66 4488.80 3631 .84 3623.21 3671.10 3685.72 3707.63 3729.57 3722.29 736.883 3708.40 2840.73 2756.68 2215.22 1332.77

Average unit cost for gem processing LOM RMB/t ore 3269.29 Average unit cost for markeng LOM RMB/t ore 8448.54

9 13274.17 13300. Balance nues minus OPEX Reve Mln RMB 255.99 1088.99 2512.49 3422.28 4869.13 7457.59 9049.75 11652.96 12391.41 13202.54 13186.7 85 13340.83 13380.86 13367.58 13394.20 13342.23 14149.02 13746.59 12120.43 6692.91

Taxes and fees other Value added tax (V AT) @13% Revenue Mln RMB 40.68 162.88 479.58 631.13 882.62 1199.42 1483.23 1834.22 1941.97 1936.70 1933.89 1949.46 1954.21 1961.33 1968.46 1966.09 1970.83 1961.58 1954.57 1898.61 1649.23 923.31 than income tax VAT deduction @57%OPEX@13% Mln RMB 6.40 21.43 108.61 13 5.33 183.80 194.64 252.00 281.36 294.35 238.16 237.59 240.73 241.69 13243. 244.57 244.09 245.05 243.18 186.28 180.77 145.26 87.40 Payable VAT Mln RMB 34.28 141.45 370.98 495.80 698.82 1004.79 1231.23 1552.86 1647.62 1698.54 1696.30 170 8.72 1712.52 1718.20 1723.89 1722.00 5.781 1718.4072 1768.29 1717.84 1503.97 835.91 venue Sales Tax @ 10% Re Mln RMB 31.09 124.37 366.06 482.49 675.69 917.90 1136.24 1404.95 1488.00 1484.02 1481.89 1493.67 1497.26 1502. 65 1508.0 4 1506.25 1509.84 1502.83 1497.54 1455.56 1265.22 706.31 Resources Tax @ 4% Revenue Mln RMB 12.52 50.12 14 7.56 194.19 271.58 369.05 456.38 564.38 597.53 595.91 595.04 599.83 601.29 603.49 605.68 604.95 606.41 603.56 601.41 584.19 507.46 284.09 City Construction fee @7%of Payable VAT Mln RMB 2.40 9.90 25.97 34.71 48.92 70. 34 86.19 108.70 115.33 118.90 118.74 119.61 119.88 120.27 120.67 120.54 120.80 120.29 123.78 120.25 105.28 58.51 Education Surtax @ 5%of Payable VAT Mln RMB 1.71 7.07 18.55 24.79 34.94 50.24 61.56 77.64 82.38 84.93 84.82 85.4 4 85.63 85.91 86.19 86.10 86.29 .9285 88.41 85.89 75.20 41.80 MB4/t oreProduction SafetMy flnee R @MB R 0.04 0.20 0.60 0.60 0.70 1.00 1.00 1.20 1.20 1.20 1.20 1.20 1.20 1.20 1.20 1.20 1.20 1.20 1.20 1.17 0.53 0 . 50

Total Mln RMB 82.04 333.12 929.72 1232.58 1730.65 2413.31 29 72.60 3709.73 3932.06 3983.49 3978.00 4008.47 4017.77 4031.71 4045.68 4041.04 4032.204050.33 4080.63 3964.90 3457.65 1927.12

Balance after other Balance after other taxes and fees Mln RMB 173.95 755.87 1582.78 2189.70 3138.48 5044.28 6077.16 7943.23 8459.35 9219.0 5 9208.79 9265.70 9283.08 9309.11 9335.19 9326.54 9343.87 9310.03 10068.39 9781.69 8662.78 4765.79 taxes and fees iation and amorDteizparteiocn(@10%for10yrs) Mln RMB -15.88 -25.09 -25.09 -25.09 -25.09 -25.52 -27.24 -28.96 -28.96 -28 .96 -13.07 -3.87 -3.87 - 3.87 -3.87 -3.44 -1.72 0.00 Income tax Taxable income Mln RMB 158.07 730.78 1557.69 2164. 61 3113.39 5018.77 6049.92 7914.28 8430.39 9190.10 9195.72 9261.84 9279.21 9305.9331.3225 9323.10 9342.15 9310.03 10068.39 9781.69 8662.78 4765.79 Income tax rate % 25.00 25.00 25.00 25.00 25.00 25.00 25.00 25.00 25.00 25.00 25.00 25.00 25.00 25.00 25.00 25.00 25.00 25.00 25.00 25.00 25.00 25.00 tax paid Income Mln RMB 39.52 182.70 389.42 541.15 778.35 1254.69 1512.48 1978.57 2107.60 2297.52 2298.93 2315.46 2319.80 2326.31 2332.83 2330.7 7 2335.54 2327.51 2517.10 2445.42 2165.69 1191.45 Profit after income tax Mln RMB 134 .43 573.18 1193.36 1648.55 2360.13 3789.59 4564.68 5964.66 6351.75 6921.53 6909.86 6950.24 6963.27 6982.80 002.367 6995.76 7008.33 6982.52 7551.29 7336.27 6497.08 3574.34

2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 2042 2043 2044 CAPEX CAPEX Mln RMB -30.66 -17.10 -111.07 -92.06 -4.26 -17.20 -17.20 Working capital Mln RMB -46.32 -58.62 104.94 Mine closure fee Mln RMB -20 Residual value Mln RMB 20

3 6909.86 6950.24 6963.27 6982. Cashflow Mln RMB -30.66 -17.10 -111.07 -3.95 514.56 1193.36 1648.55 2355.87 3772.39 4547.48 5964.66 6351.75 6921.5 80 7002.36 6995.76 7008.33 6982.52 7551.29 7336.27 6497.08 3679.28 Accumulated cashflow B Mln RM -30.66 -47.76 -158.83 -162.78 351.78 1545.14 3193.69 5549.55 9321.94 13869.42 19834.08 26185.83 33107.36 40017.22 46967.47 53930.74 60913.54 67915.90 74911.66 81919.99 88902.51 96453.81 103790.08 110287.16 113966.44 3.122616714

NPV 7% ¥41,510.54 9% ¥32,110.22 11% ¥25,155.29 THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.

APPENDIX IV COMPETENT PERSON’S REPORT

Appendix D: 2015 NGTC Report

Gems & Jewelry Identification and Evaluation Report

National Gems & Jewelry Technology Administrative Center Beijing Jewelry Research Institute

– IV-218 – THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.

APPENDIX IV COMPETENT PERSON’S REPORT

Contents

1 SAMPLES ...... IV-[•]

2 IDENTIFICATION OF ROUGH AND FINISHED PRODUCTS ...... IV-[•]

2.1 BASIC PROPERTIES OF GEMMOLOGY ...... IV-[•]

2.2 MAGNIFY INSPECTION ...... IV-[•]

2.3 CHEMICAL COMPOSITION ...... IV-[•]

2.4 SPECTROSCOPIC CHARACTERISTICS ...... IV-[•]

2.5 IDENTIFICATION CONCLUSION ...... IV-[•]

3 QUALITY EVALUATION OF PERIDOT...... IV-[•]

3.1 COLOR...... IV-[•]

3.2 QUALITY AND SHAPE ...... IV-[•]

3.3 CLARITY ...... IV-[•]

3.4 CUTTING PROCESS ...... IV-[•]

4 CONCLUSIONS ...... IV-[•]

– IV-219 – THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.

APPENDIX IV COMPETENT PERSON’S REPORT

PERIDOT IDENTIFICATION AND EVALUATION REPORT

In October 2015, the Beijing Jewelry Research Institute of National Gems & Jewelry Technology Administrative Center conducted the identification and evaluation on rough and finished peridot products from the Yiqisong peridot mine in Dunhua, Jilin, submitted by Yanbian Fuli Peridot Mining Co. the research results show that all the samples of rough and finished peridot products are peridot gemstones. The details of the report are as follows:

1 Samples

The samples are divided into rough and finished products. There are a total of 41 rough gemstones, of which 10 are selected and sent to the National Jewelry Gemstone Test Center to issue an identification certificate, numbered Z1-Z10 (Figure 1a); the remaining rough peridot are numbered P1-P31 (Figure 1b); a total of 4 finished peridot products, numbered S1-S4 (Figure 2).

Figure 1 Rough Peridots

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Figure 2 Finished Peridot Products

2 Identification of Rough and Finished Products

2.1 Basic Properties of Gemmology

The rough samples are in irregular granular shape, and the finished products are cut into pear-shaped and oval-shaped. The samples are mainly yellow-green, some are darker yellow-green; vitreous luster; most of the samples are transparent, a small part of the samples are translucent because they contain fissures or gas and liquid inclusions; the refractive index is 1.653-1.689, the birefringence is 0.036; there is no fluorescence or phosphorescence reaction under long and short waves; the Mohs hardness is 6.5-7; the density is 3.29-3.32 g/cm3.

2.2 Inspection under Magnification

1. External characteristics

The rough peridots are mostly massive, with imbricated and disc-shaped etched images on part of the surface (Figure 3). They usually develop in areas subject to strong dissolution. The imbricated etched patterns are regular in triangular pyramid-shaped mounds and drop-shaped mounds. The disc-shaped etched image is a disc-shaped depression below the crystal plane, and the distribution is dense.

2. Internal characteristics

The samples are rich in internal features, such as dark mineral inclusions, negative crystals, “lily pad” inclusions, healed fractures, and two-phase and three- phase inclusions, etc.

1) The dark inclusions are mainly black, maroon, etc., which can be exposed outside the crystals. Some inclusions develop complete tetrahedral and octahedral crystal forms. The octahedral crystals are black, which are confirmed to be chromite by Raman

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spectroscopy. There are small fractures around the inclusions, because of the tension and negative crystals are common in olivine under the tensile stress, and the negative crystals are common in peridot, and they are surrounded by disc-shaped gas-liquid inclusions that form the characteristic lily pad” inclusions in peridot.

Figure 3 The imbricated and disc-shaped etchings of peridot (left: 6.5×, right: 20×)

2) Gas-liquid inclusions and gas-liquid-solid three-phase inclusions can be seen in peridot. Most of these inclusions are needle, columnar or irregular shaped, and circular bubbles can be seen within them.

3) Small fractures can be seen in some samples, which are caused by blasting in the later stage of mining.

Figure 4 Chromite and “lily pad” inclusions in peridot (left: 16×, right: 20×)

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APPENDIX IV COMPETENT PERSON’S REPORT

2.3 Chemical Composition

The chemical composition of the samples was measured by X-ray fluorescence spectroscopy (XRF) (the chemical compositions of representative samples S1, S2 and S3 are listed in Table 1). The main chemical elements present in the samples are Mg, Si and Fe, with minor amounts of Mn,

Cr and Ca. The peridot gemstone is mainly (Mg, Fe)2SiO4, which is an Fe-Mg homogeneous series. When the iron content of peridot is 0-10%, 10-30%, 30-50%, 50-70%, 70-90%, and 90-100%, peridot is divided into six subspecies: forsterite, chrysolite, hyalosiderite, hortonolite, ferrohortonolite, and fayalite. Since the iron content of the samples was less than 10%, the samples were mainly forsterite.

Table Chemical Composition of Samples

Na2OMgOAl2O3 SiO2 K2OCaOCr2O3 MnO FeO 0.01% ...... 48.14% 1.24% 41.99% 0.06% 0.14% 0.05% 0.39% 7.98% 0.01% ...... 47.69% 1.06% 42.23% 0.16% 0.16% 0.03% 0.47% 8.19% 0.01% ...... 46.74% 1.20% 42.45% 0.07% 0.19% 0.03% 0.42% 8.90%

2.4 Spectroscopic Characteristics

1. Infrared Spectroscopy

Reflectance method was used to perform infrared spectroscopy tests on 41 raw gemstone samples and 4 finished products, and the results were converted by K-K. The results showed that the IR spectra of all samples were consistent with the characteristic peaks of peridot (Figure 5), and all samples were peridot.

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APPENDIX IV COMPETENT PERSON’S REPORT

Figure 5 Infrared Spectrogram of Peridot

2. Raman Spectroscopy

The Raman spectra of the rough and finished samples mainly show 603, 824, 857 and 960 cm-1 peaks (Figure 6), which are characteristic peaks of peridot.

Figure 6 Raman Spectrogram of Peridot

Raman spectroscopy of the black minerals on the surface of the exposed sample in the raw gemstone showed mainly 583 and 793 cm-1 peaks for chromite (Figure 7)

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APPENDIX IV COMPETENT PERSON’S REPORT

Figure 7 Raman Spectrogram of Chromite in Peridot

3. UV-Visible Absorption Spectroscopy

The UV-Vis absorption spectra of the samples (Figure 8) show absorption peaks at 450, 470, 490, and 635 nm, making the peridot appear green. The absorption peaks at 450, 470 and 490 nm are due to Fe, which indicates that Fe is the chromogenic element for the green color of peridot.

Figure 8 UV-Vis Spectra of Peridot

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APPENDIX IV COMPETENT PERSON’S REPORT

2.5 Identification Conclusion

41 rough gemstones and 4 finished products were identified and studied, of which 10 rough gemstones and 4 finished products were sent for examination (see Annex 1 for some of the issued peridot certificates). The results of the research and examination showed that the basic gemological properties, internal and external characteristics, chemical composition and spectroscopic characteristics of the samples are in line with the identification features of peridot in the National Standard — “Gem Testing” (GB/T 16553-2010), and therefore all samples are natural peridot.

3 Quality Evaluation of Peridot

Quality evaluation of peridot is evaluated from color, quality and shape, clarity, cutting quality (finished product), etc. For details, please refer to Attachment 2.

3.1 Color

The color of the samples is compared using the Munsell system (Figure 9). The Munsell system shows the three different dimensions (hue, value and chroma). Hue mainly includes 5 main types: red (R), yellow (Y), green (G), blue (B), Purple (P) and 5 intermediate colors of yellow-red (YR), green-yellow (GY), blue-green (BG), purple-blue (PB), red-purple (RP). Each hue can be divided into 10 levels. The level of each main color and intermediate color is set at 5; the value comparison level is 2-9; the chroma comparison level is 2-16. Methods of color specification are: hue, value/chroma.

1. Color of the Rough

1) The hue is mainly 5GY, yellow-green; a small amount is dark yellow- green. The hue of one rough stone is 2.5GY, yellow-green with a heavier yellow hue.

2) The value is 4-8, most has a high value of 6-7. A small amount of samples has low

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APPENDIX IV COMPETENT PERSON’S REPORT

value, which may be caused by external characteristics and internal black inclusions, fractures, etc.

Figure 9 Munsell Colorimetric Card

3 The chroma is mostly 8 and 10, with a small amount being 6, indicating that the color of the sample is relatively saturated.

The color of rough stone can be divided into yellow-green and dark yellow- green. The hue of yellow-green is 5GY, including samples with a value higher than 5 and samples with a color parameter of 5GB 5/10, accounting for 80.5%. The hue of dark yellow-green is 5GY, and its value is lower than 5 and chroma is lower than 8, accounting for 19.5%.

2. The Color of the Finished Product

The hue of the finished product is 5GY, yellow-green, consistent with the main hue of the rough, indicating that the color of the rough has not changed after being processed. The finished product has a higher value, ranging from 5 to 7, and the chroma is 10, indicating that its color is relatively saturated.

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APPENDIX IV COMPETENT PERSON’S REPORT

3.2 Quality and Shape

There are two samples weighing 1-2g, accounting for 4.9%. The number of 2-3g samples is 22, accounting for 53.7%. The number of 3-4g samples is 14,

accounting for 34.1%. The number of 5-6g samples is 2, accounting for 4.9%. And one sample weighs above 10g, accounting for 2%. It can be seen that, in this batch of rough samples, 87.8% of the samples weigh 2-4g, that is, 10 to 20 ct.

Most of the rough gemstones in this batch have a particle size of 10-20 mm, in blocky structure. After cutting and grinding, large finished products can be produced, and it has high yield. A small number of samples have tabular structure (such as P14, P15, P26), which has a certain influence on the yield.

The length and width of the 4 finished products are 16.1 × 9.9, 16.7 × 11.4, 12.1 × 10.0 and 9.9 × 7.9 mm. The weight of the finished product is calculated based on its length, width and depth. It weighs about 3-11.25 ct.

3.3 Clarity

According to the differences in the internal and external characteristics of gemstones, the clarity of peridot is divided into three grades, which are expressed as pure (C1), relatively pure (C2) and normal (C3) from high to low. The judgment method is as follows:

Pure (C1): It is difficult to see the internal and external features of peridot with the naked eye, which has slight effect on the overall appearance;

Relatively pure (C2): The internal and external features of peridot can be seen with the naked eye, which has certain impact on the overall appearance;

Ordinary (C3): The internal and external features of peridot are easy to see with the naked eye, which has a significant impact on the overall appearance.

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APPENDIX IV COMPETENT PERSON’S REPORT

According to these, the clarity grading results of the study sample are as follows:

1. Clarity of Finished Products

The finished product has 2 granules (Sample Nos. S3 and S4) of pure (C1) grade, 1 granule (Sample No. S1) of relatively pure (C2) grade, and 1 granule (Sample No. S2) of ordinary (C3) grade.

2. Clarity of rough gemstones

The rough gemstone has 14 granules (accounting for 34.1%) of pure (C1) grade, 26 granules (63.4%) of relatively pure (C2) grade, and 1 granule (2.4%) of ordinary (C3) grade.

3.4 Cutting Quality

In the study sample, 4 peridot were cut and polished to faceted gemstones, 1 was pear-shaped, and 3 were oval shaped. The length × width of the sample is 16.1 × 9.9 (mm), 16.7 × 11.4, 12.1 × 10.0 and 9.9 × 7.9 mm. They are of proper length and width ratio, good symmetry, and good polish. All in all, the cutting quality is good.

In summary, both rough and finished product of peridot have reached a gemstone grade.

4 Conclusions

Through the test analysis and grading evaluation of the raw stone and finished product samples, the following conclusions are obtained:

1. All gemological characteristics, chemical composition, spectrum specialization, etc. of the study samples (rough and finished product) are in line with the National Standard “Gem Testing” (GB/T 16553-2010), both of which can be named peridot. Some samples were set to by the National Gemstone Testing Center (Appendix I).

2. The rough and finished products of peridot reach a gemstone grade. 85% of the rough gemstone showed yellow-green (color tone is 5GY, including samples with value greater than 5 and samples with color parameters of 5GB 5/10), 19.5% showed dark

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APPENDIX IV COMPETENT PERSON’S REPORT

yellow-green (color tone is 5GY, value is less than 5 and chroma is less than 8). The value and chroma is relatively high. The carat weight of most (87.8%) rough gemstone is between 10 to 20ct (between 2~4g), and one grain of the rough gemstone is up to 63.8ct (12.76g). The diameter of the rough gemstone is mostly between 10~20mm, and it is mainly massive with large particles, which can make a good yield of finished product. The clarity of most rough gemstone is pure or relatively pure grade. A small amount of cracks can be seen in the rough gemstone samples, which is caused by the blasting action during mining, and has a certain influence on the yield of finished product. It is recommended to avoid the use of explosives during mining operation.

The finished product presents in yellow-green (color tone is 5GY, value is 5~7 and chroma is 10). The value and saturation is relatively high. The color of the finished product is not significantly changed compared to the rough gemstone.. The carat weight is between 3 to 11.25ct (between 0.6~2.25g). Most of the clarity is pure or relatively pure grade. It is mainly cut into pear-shaped and oval-shaped with good cutting.

Prepared by: Han Wen Reviewed by: Chen Hua Report Date: 2015.11.18

Appendix I: Identification Certificate of Some Rough Gemstone and Finished Product of Peridot

Appendix II: Quality Evaluation Data Sheet of Rough Gemstone and Finished Product of Peridot

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APPENDIX IV COMPETENT PERSON’S REPORT

Appendix I: Identification Certificate of Some Rough Gemstone and Finished Product of Peridot

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APPENDIX IV COMPETENT PERSON’S REPORT

Appendix II: Quality Evaluation Data Sheet of Rough Gemstone and Finished Product of Peridot

Sample No Weight (g) ct Size (mm) Color Clarity S1 ...... 1.34 6.7 16.1×9.9×5.6 5GY 5/10 C2 S2 ...... 2.25 11.25 16.7×11.4×7.1 5GY 6/10 C3 S3 ...... 1.43 7.15 12.1×10.0×7.1 5GY 7/10 C1 S4 ...... 0.6 3 9.9×7.9×4.6 5GY 5/10 C1 P1 ...... 3.3997 17 17.9×13.7×10 5GY 7/8 C2 P2 ...... 3.8076 19.04 13.5×12.2×11.1 5GY 7/10 C1 P3 ...... 2.3393 11.7 14.3×9.4×9.0 5GY 5/8 C2 P4 ...... 2.7458 13.73 16.8×10.4×9.9 5GY 7/10 C2 P5 ...... 4.2303 21.15 19.6×13.6×12 5GY 4/8 C2 P6 ...... 1.7785 8.89 14.7×10.7×8 5GY 8/10 C1 P7 ...... 2.8596 14.3 15.9×12.9×8.6 5GY 7/8 C1 P8 ...... 2.9143 14.57 17.1×13.2×10.4 5GY 7/10 C2 P9 ...... 3.1257 15.63 18.3×10.5×10.3 5GY 7/10 C1 P10 ...... 2.2375 11.19 15.0×10.2×9.3 5GY 5/8 C2 P11...... 3.9291 19.65 10.9×12.1×8.9 5GY 6/10 C2 P12 ...... 3.8678 19.34 19.0×16.0× 9.3 5GY 8/8 C3 P13 ...... 4.2096 21.05 18.0×15.1×11.5 5GY 6/10 C2 P14 ...... 2.9647 14.82 19.6×16.7×6.4 5GY 7/10 C1 P15 ...... 2.0752 10.38 18.5×9.2×6.1 5GY 7/10 C2 P16 ...... 4.3833 21.92 21.3×11.8×11.6 5GY 7/6 C2 P17 ...... 3.8428 19.21 18.3×14.4 ×11.2 5GY 5/6 C2

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APPENDIX IV COMPETENT PERSON’S REPORT

Sample No Weight (g) ct Size (mm) Color Clarity P18 ...... 4.304 21.52 13.7×14.2×13.1 5GY 4/6 C1 P19 ...... 5.1406 25.7 19.0×16.0×9.3 5GY 5/6 C1 P20 ...... 4.0628 20.31 20.9×14.2×1 1.5 5GY 6/10 C2 P21 ...... 2.578 12.89 16.8×10.8×9.1 5GY 6/6 C2 P22 ...... 1.975 9.88 15.4×10.4×9.1 5GY 6/8 C1 P23 ...... 2.1824 10.91 19.4×10. 4×8.1 5GY 7/8 C1 P24 ...... 3.3563 16.78 15.1×13.8×12.3 5GY 7/8 C1 P25 ...... 2.0624 10.31 19.8×10.8×6.7 5GY 8/8 C1 P26 ...... 2.5589 12.79 17.1×12.3 ×6.8 5GY 6/6 C2 P27 ...... 2.3088 11.54 18.0×11.4×7.3 5GY 7/8 C2 P28 ...... 2.1238 10.62 18.6×11.9×8.2 5GY 6/10 C2 P29 ...... 2.2459 11.23 14.7×9.1×8.2 5GY 8/8 C2 P30 ...... 2.1964 10.98 15.3×12.0×10.0 5GY 7/6 C2 P31 ...... 2.5865 12.93 17.7×12.2×8.4 2.5GY 7/8 C2 Z1 ...... 2.0442 10.22 16.4×11.4×6.5 5GY 8/6 C2 Z2 ...... 2.1935 10.97 17.2×10.5×7.9 5GY 7/10 C1 Z3 ...... 5.7085 28.54 20.7×17.8×13.8 5GY 4/8 C2 Z4 ...... 3.5098 17.55 20.7×14.6×7.7 5GY 7/10 C2 Z5 ...... 2.3658 11.83 16.4×11.2×8.0 5GY 6/10 C1 Z6 ...... 2.4182 12.09 12.3×11.2×10.5 5GY 5/6 C1 Z7 ...... 3.7373 18.69 15.3×14.1×10.9 5GY 6/6 C2 Z8 ...... 2.9327 14.66 20.1×10.9×8.4 5GY 7/6 C2 Z9 ...... 2.1514 10.76 17.4×10.1×7.4 5GY 6/6 C2 Z10 ...... 12.7633 63.82 25.5×21×15.4 5GY 5/10 C2

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APPENDIX IV COMPETENT PERSON’S REPORT

Address: 22nd Floor, Building C, Global Trade Center, 36 Beisanhuan East Road, Dongcheng District, Beijing Post Code: 100013 Tel: 010-58276124 Website: www.ngtc.com.cn

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APPENDIX IV COMPETENT PERSON’S REPORT

SRK Report Distribution Record

Ref: SCN666

Copy No: Version Final

Date: 11 June 2021

Name/Title Company Copy # Yanbian Fuli Peridot Mining 1 Co. Ltd.

Approval Signature:

This document is protected by copyright vested in SRK. It may not be reproduced or transmitted in any form or by any means whatsoever to any person without the written permission of the copyright holder, SRK.

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APPENDIX V SUMMARY OF THE CONSTITUTION OF THE COMPANY AND CAYMAN ISLANDS COMPANY LAW

Set out below is a summary of certain provisions of the Memorandum of Association and the Articles of Association of the Company and of certain aspects of Cayman Islands company law.

The Company was incorporated in the Cayman Islands as an exempted company with limited liability on 15 February 2019 under the Cayman Companies Act. The Company’s constitutional documents consist of the Memorandum and the Articles.

1. MEMORANDUM OF ASSOCIATION

(a) The Memorandum provides, inter alia, that the liability of members of the Company is limited and that the objects for which the Company is established are unrestricted (and therefore include acting as an investment company), and that the Company shall have and be capable of exercising any and all of the powers at any time or from time to time exercisable by a natural person or body corporate whether as principal, agent, contractor or otherwise and, since the Company is an exempted company, that the Company will not trade in the Cayman Islands with any person, firm or corporation except in furtherance of the business of the Company carried on outside the Cayman Islands.

(b) By special resolution the Company may alter the Memorandum with respect to any objects, powers or other matters specified in it.

2. ARTICLES OF ASSOCIATION

The Articles were conditionally adopted on [DATE] 2021 with effect from the [REDACTED]. A summary of certain provisions of the Articles is set out below.

(a) Shares

(i) Classes of shares

The share capital of the Company consists of ordinary shares.

(ii) Variation of rights of existing shares or classes of shares

Subject to the Cayman Companies Act, if at any time the share capital of the Company is divided into different classes of shares, all or any of the special rights attached to any class of shares may (unless otherwise provided for by the terms of issue of the shares of that class) be varied, modified or abrogated either with the consent in writing of the holders of not less than three-fourths in nominal value of the issued shares of that class or with the sanction of a special

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APPENDIX V SUMMARY OF THE CONSTITUTION OF THE COMPANY AND CAYMAN ISLANDS COMPANY LAW resolution passed at a separate general meeting of the holders of the shares of that class. The provisions of the Articles relating to general meetings shall mutatis mutandis apply to every such separate general meeting, but so that the necessary quorum (other than at an adjourned meeting) shall be not less than two persons together holding (or, in the case of a member being a corporation, by its duly authorized representative) or representing by proxy not less than one-third in nominal value of the issued shares of that class. Every holder of shares of the class shall be entitled on a poll to one vote for every such share held by him, and any holder of shares of the class present in person or by proxy may demand a poll.

Any special rights conferred upon the holders of any shares or class of shares shall not, unless otherwise expressly provided in the rights attaching to the terms of issue of such shares, be deemed to be varied by the creation or issue of further shares ranking pari passu therewith.

(iii) Alteration of capital

The Company may, by an ordinary resolution of its members: (a) increase its share capital by the creation of new shares of such amount as it thinks expedient; (b) consolidate or divide all or any of its share capital into shares of larger or smaller amount than its existing shares; (c) divide its unissued shares into several classes and attach to such shares any preferential, deferred, qualified or special rights, privileges or conditions; (d) subdivide its shares or any of them into shares of an amount smaller than that fixed by the Memorandum; (e) cancel any shares which, at the date of the resolution, have not been taken or agreed to be taken by any person and diminish the amount of its share capital by the amount of the shares so cancelled; (f) make provision for the allotment and issue of shares which do not carry any voting rights; and (g) change the currency of denomination of its share capital.

(iv) Transfer of shares

Subject to the Cayman Companies Act and the requirements of The Stock Exchange of Hong Kong Limited (the “Stock Exchange”), all transfers of shares shall be effected by an instrument of transfer in the usual or common form or in such other form as the Board may approve and may be under hand or, if the transferor or transferee is a Clearing House or its nominee(s), under hand or by machine imprinted signature, or by such other manner of execution as the Board may approve from time to time.

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APPENDIX V SUMMARY OF THE CONSTITUTION OF THE COMPANY AND CAYMAN ISLANDS COMPANY LAW

Execution of the instrument of transfer shall be by or on behalf of the transferor and the transferee, provided that the Board may dispense with the execution of the instrument of transfer by the transferor or transferee or accept mechanically executed transfers. The transferor shall be deemed to remain the holder of a share until the name of the transferee is entered in the register of members of the Company in respect of that share.

The Board may, in its absolute discretion, at any time and from time to time remove any share on the principal register to any branch register or any share on any branch register to the principal register or any other branch register. Unless the Board otherwise agrees, no shares on the principal register shall be removed to any branch register nor shall shares on any branch register be removed to the principal register or any other branch register. All removals and other documents of title shall be lodged for registration and registered, in the case of shares on any branch register, at the relevant registration office and, in the case of shares on the principal register, at the place at which the principal register is located.

The Board may, in its absolute discretion, decline to register a transfer of any share (not being a fully paid up share) to a person of whom it does not approve or on which the Company has a lien. It may also decline to register a transfer of any share issued under any share option scheme upon which a restriction on transfer subsists or a transfer of any share to more than four joint holders.

The Board may decline to recognise any instrument of transfer unless a certain fee, up to such maximum sum as the Stock Exchange may determine to be payable, is paid to the Company, the instrument of transfer is properly stamped (if applicable), is in respect of only one class of share and is lodged at the relevant registration office or the place at which the principal register is located accompanied by the relevant share certificate(s) and such other evidence as the Board may reasonably require is provided to show the right of the transferor to make the transfer (and if the instrument of transfer is executed by some other person on his behalf, the authority of that person so to do).

The register of members may, subject to the Listing Rules, be closed at such time or for such period not exceeding in the whole 30 days in each year as the Board may determine.

Fully paid shares shall be free from any restriction on transfer (except when permitted by the Stock Exchange) and shall also be free from all liens.

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APPENDIX V SUMMARY OF THE CONSTITUTION OF THE COMPANY AND CAYMAN ISLANDS COMPANY LAW

(v) Power of the Company to purchase its own shares

The Company may purchase its own shares subject to certain restrictions and the Board may only exercise this power on behalf of the Company subject to any applicable requirement imposed from time to time by the Articles or any, code, rules or regulations issued from time to time by the Stock Exchange and/or the Securities and Futures Commission of Hong Kong.

Where the Company purchases for redemption a redeemable Share, purchases not made through the market or by tender shall be limited to a maximum price and, if purchases are by tender, tenders shall be available to all members alike.

(vi) Power of any subsidiary of the Company to own shares in the Company

There are no provisions in the Articles relating to the ownership of shares in the Company by a subsidiary.

(vii) Calls on shares and forfeiture of shares

The Board may, from time to time, make such calls as it thinks fit upon the members in respect of any monies unpaid on the shares held by them respectively (whether on account of the nominal value of the shares or by way of premium) and not by the conditions of allotment of such shares made payable at fixed times. A call may be made payable either in one sum or by instalments. If the sum payable in respect of any call or instalment is not paid on or before the day appointed for payment thereof, the person or persons from whom the sum is due shall pay interest on the same at such rate not exceeding 20% per annum as the Board shall fix from the day appointed for payment to the time of actual payment, but the Board may waive payment of such interest wholly or in part. The Board may, if it thinks fit, receive from any member willing to advance the same, either in money or money’s worth, all or any part of the money uncalled and unpaid or instalments payable upon any shares held by him, and in respect of all or any of the monies so advanced the Company may pay interest at such rate (if any) not exceeding 20% per annum as the Board may decide.

If a member fails to pay any call or instalment of a call on the day appointed for payment, the Board may, for so long as any part of the call or instalment remains unpaid, serve not less than 14 days’ notice on the member requiring payment of so much of the call or instalment as is unpaid, together with any interest which may have accrued and which may still accrue up to the date of actual payment. The notice shall name a further day (not earlier than the expiration of 14 days from the date of the notice) on or before which the payment required by the notice is to be

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APPENDIX V SUMMARY OF THE CONSTITUTION OF THE COMPANY AND CAYMAN ISLANDS COMPANY LAW made, and shall also name the place where payment is to be made. The notice shall also state that, in the event of non-payment at or before the appointed time, the shares in respect of which the call was made will be liable to be forfeited.

If the requirements of any such notice are not complied with, any share in respect of which the notice has been given may at any time thereafter, before the payment required by the notice has been made, be forfeited by a resolution of the Board to that effect. Such forfeiture will include all dividends and bonuses declared in respect of the forfeited share and not actually paid before the forfeiture.

A person whose shares have been forfeited shall cease to be a member in respect of the forfeited shares but shall, nevertheless, remain liable to pay to the Company all monies which, at the date of forfeiture, were payable by him to the Company in respect of the shares together with (if the Board shall in its discretion so require) interest thereon from the date of forfeiture until payment at such rate not exceeding 20% per annum as the Board may prescribe.

(b) Directors

(i) Appointment, retirement and removal

At any time or from time to time, the Board shall have the power to appoint any person as a Director either to fill a casual vacancy on the Board or as an additional Director to the existing Board subject to any maximum number of Directors, if any, as may be determined by the members in general meeting. Any Director so appointed to fill a casual vacancy shall hold office only until the first general meeting of the Company after his appointment and be subject to re-election at such meeting. Any Director so appointed as an addition to the existing Board shall hold office only until the first annual general meeting of the Company after his appointment and be eligible for re-election at such meeting. Any Director so appointed by the Board shall not be taken into account in determining the Directors or the number of Directors who are to retire by rotation at an annual general meeting.

At each annual general meeting, one third of the Directors for the time being shall retire from office by rotation. However, if the number of Directors is not a multiple of three, then the number nearest to but not less than one third shall be the number of retiring Directors. The Directors to retire in each year shall be those who have been in office longest since their last re-election or appointment but, as between persons who became or were last re-elected Directors on the same day, those to retire shall (unless they otherwise agree among themselves) be determined by lot.

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APPENDIX V SUMMARY OF THE CONSTITUTION OF THE COMPANY AND CAYMAN ISLANDS COMPANY LAW

No person, other than a retiring Director, shall, unless recommended by the Board for election, be eligible for election to the office of Director at any general meeting, unless notice in writing of the intention to propose that person for election as a Director and notice in writing by that person of his willingness to be elected has been lodged at the head office or at the registration office of the Company. The period for lodgment of such notices shall commence no earlier than the day after despatch of the notice of the relevant meeting and end no later than seven days before the date of such meeting and the minimum length of the period during which such notices may be lodged must be at least seven days.

A Director is not required to hold any shares in the Company by way of qualification nor is there any specified upper or lower age limit for Directors either for accession to or retirement from the Board.

A Director may be removed by an ordinary resolution of the Company before the expiration of his term of office (but without prejudice to any claim which such Director may have for damages for any breach of any contract between him and the Company) and the Company may by ordinary resolution appoint another in his place. Any Director so appointed shall be subject to the “retirement by rotation” provisions. The number of Directors shall not be less than two.

The office of a Director shall be vacated if he:

(aa) resigns;

(bb) dies;

(cc) is declared to be of unsound mind and the Board resolves that his office be vacated;

(dd) becomes bankrupt or has a receiving order made against him or suspends payment or compounds with his creditors generally;

(ee) is prohibited from being or ceases to be a director by operation of law;

(ff) without special leave, is absent from meetings of the Board for six consecutive months, and the Board resolves that his office is vacated;

(gg) has been required by the stock exchange of the Relevant Territory (as defined in the Articles) to cease to be a Director; or

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APPENDIX V SUMMARY OF THE CONSTITUTION OF THE COMPANY AND CAYMAN ISLANDS COMPANY LAW

(hh) is removed from office by the requisite majority of the Directors or otherwise pursuant to the Articles.

From time to time the Board may appoint one or more of its body to be managing director, joint managing director or deputy managing director or to hold any other employment or executive office with the Company for such period and upon such terms as the Board may determine, and the Board may revoke or terminate any of such appointments. The Board may also delegate any of its powers to committees consisting of such Director(s) or other person(s) as the Board thinks fit, and from time to time it may also revoke such delegation or revoke the appointment of and discharge any such committees either wholly or in part, and either as to persons or purposes, but every committee so formed shall, in the exercise of the powers so delegated, conform to any regulations that may from time to time be imposed upon it by the Board.

(ii) Power to allot and issue shares and warrants

Subject to the provisions of the Cayman Companies Act, the Memorandum and Articles and without prejudice to any special rights conferred on the holders of any shares or class of shares, any share may be issued with or have attached to it such rights, or such restrictions, whether with regard to dividend, voting, return of capital or otherwise, as the Company may by ordinary resolution determine (or, in the absence of any such determination or so far as the same may not make specific provision, as the Board may determine). Any share may be issued on terms that, upon the happening of a specified event or upon a given date and either at the option of the Company or the holder of the share, it is liable to be redeemed.

The Board may issue warrants to subscribe for any class of shares or other securities of the Company on such terms as it may from time to time determine.

Where warrants are issued to bearer, no certificate in respect of such warrants shall be issued to replace one that has been lost unless the Board is satisfied beyond reasonable doubt that the original certificate has been destroyed and the Company has received an indemnity in such form as the Board thinks fit with regard to the issue of any such replacement certificate.

Subject to the provisions of the Cayman Companies Act, the Articles and, where applicable, the rules of any stock exchange of the Relevant Territory (as defined in the Articles) and without prejudice to any special rights or restrictions for the time being attached to any shares or any class of shares, all unissued shares in the Company shall be at the disposal of the Board, which may offer, allot, grant options over or otherwise dispose of them to such persons, at such times, for such consideration and on such terms and conditions as it in its absolute discretion thinks fit, but so that no shares shall be issued at a discount.

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APPENDIX V SUMMARY OF THE CONSTITUTION OF THE COMPANY AND CAYMAN ISLANDS COMPANY LAW

Neither the Company nor the Board shall be obliged, when making or granting any allotment of, offer of, option over or disposal of shares, to make, or make available, any such allotment, offer, option or shares to members or others whose registered addresses are in any particular territory or territories where, in the absence of a registration statement or other special formalities, this is or may, in the opinion of the Board, be unlawful or impracticable. However, no member affected as a result of the foregoing shall be, or be deemed to be, a separate class of members for any purpose whatsoever.

(iii) Power to dispose of the assets of the Company or any of its subsidiaries

While there are no specific provisions in the Articles relating to the disposal of the assets of the Company or any of its subsidiaries, the Board may exercise all powers and do all acts and things which may be exercised or done or approved by the Company and which are not required by the Articles or the Cayman Companies Act to be exercised or done by the Company in general meeting, but if such power or act is regulated by the Company in general meeting, such [REDACTED] not invalidate any prior act of the Board which would have been valid if such regulation had not been made.

(iv) Borrowing powers

The Board may exercise all the powers of the Company to raise or borrow money, to mortgage or charge all or any part of the undertaking, property and uncalled capital of the Company and, subject to the Cayman Companies Act, to issue debentures, debenture stock, bonds and other securities of the Company, whether outright or as collateral security for any debt, liability or obligation of the Company or of any third party.

(v) Remuneration

The Directors shall be entitled to receive, as ordinary remuneration for their services, such sums as shall from time to time be determined by the Board or the Company in general meeting, as the case may be, such sum (unless otherwise directed by the resolution by which it is determined) to be divided among the Directors in such proportions and in such manner as they may agree or, failing agreement, either equally or, in the case of any Director holding office for only a portion of the period in respect of which the remuneration is payable, pro rata. The Directors shall also be entitled to be repaid all expenses reasonably incurred by them in attending any Board meetings, committee meetings or general meetings or otherwise in connection with the discharge of their duties as Directors. Such remuneration shall be in addition to any other remuneration to which a Director who holds any salaried employment or office in the Company may be entitled by reason of such employment or office.

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APPENDIX V SUMMARY OF THE CONSTITUTION OF THE COMPANY AND CAYMAN ISLANDS COMPANY LAW

Any Director who, at the request of the Company, performs services which in the opinion of the Board goes beyond the ordinary duties of a Director may be paid such special or extra remuneration as the Board may determine, in addition to or in substitution for any ordinary remuneration as a Director. An executive Director appointed to be a managing director, joint managing director, deputy managing director or other executive officer shall receive such remuneration and such other benefits and allowances as the Board may from time to time decide. Such remuneration shall be in addition to his ordinary remuneration as a Director.

The Board may establish, either on its own or jointly in concurrence or agreement with subsidiaries of the Company or companies with which the Company is associated in business, or may make contributions out of the Company’s monies to, any schemes or funds for providing pensions, sickness or compassionate allowances, life assurance or other benefits for employees (which expression as used in this and the following paragraph shall include any Director or former Director who may hold or have held any executive office or any office of profit with the Company or any of its subsidiaries) and former employees of the Company and their dependents or any class or classes of such persons.

The Board may also pay, enter into agreements to pay or make grants of revocable or irrevocable, whether or not subject to any terms or conditions, pensions or other benefits to employees and former employees and their dependents, or to any of such persons, including pensions or benefits additional to those, if any, to which such employees or former employees or their dependents are or may become entitled under any such scheme or fund as mentioned above. Such pension or benefit may, if deemed desirable by the Board, be granted to an employee either before and in anticipation of, or upon or at any time after, his actual retirement.

(vi) Compensation or payments for loss of office

Payments to any present Director or past Director of any sum by way of compensation for loss of office or as consideration for or in connection with his retirement from office (not being a payment to which the Director is contractually or statutorily entitled) must be approved by the Company in general meeting.

(vii) Loans and provision of security for loans to Directors

The Company shall not directly or indirectly make a loan to a Director or a director of any holding company of the Company or any of their respective close associates, enter into any guarantee or provide any security in connection with a loan made by any person to a Director or a director of any holding company of the Company or any of their respective close associates, or, if

–V-9– THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.

APPENDIX V SUMMARY OF THE CONSTITUTION OF THE COMPANY AND CAYMAN ISLANDS COMPANY LAW any one or more of the Directors hold(s) (jointly or severally or directly or indirectly) a controlling interest in another company, make a loan to that other company or enter into any guarantee or provide any security in connection with a loan made by any person to that other company.

(viii) Disclosure of interest in contracts with the Company or any of its subsidiaries

With the exception of the office of auditor of the Company, a Director may hold any other office or place of profit with the Company in conjunction with his office of Director for such period and upon such terms as the Board may determine, and may be paid such extra remuneration for that other office or place of profit, in whatever form, in addition to any remuneration provided for by or pursuant to any other Articles. A Director may be or become a director, officer or member of any other company in which the Company may be interested, and shall not be liable to account to the Company or the members for any remuneration or other benefits received by him as a director, officer or member of such other company. The Board may also cause the voting power conferred by the shares in any other company held or owned by the Company to be exercised in such manner in all respects as it thinks fit, including the exercise in favour of any resolution appointing the Directors or any of them to be directors or officers of such other company.

No Director or intended Director shall be disqualified by his office from contracting with the Company, nor shall any such contract or any other contract or arrangement in which any Director is in any way interested be liable to be avoided, nor shall any Director so contracting or being so interested be liable to account to the Company for any profit realised by any such contract or arrangement by reason only of such Director holding that office or the fiduciary relationship established by it. A Director who is, in any way, materially interested in a contract or arrangement or proposed contract or arrangement with the Company shall declare the nature of his interest at the earliest meeting of the Board at which he may practically do so.

There is no power to freeze or otherwise impair any of the rights attaching to any share by reason that the person or persons who are interested directly or indirectly in that share have failed to disclose their interests to the Company.

A Director shall not vote or be counted in the quorum on any resolution of the Board in respect of any contract or arrangement or proposal in which he or any of his close associate(s) has/have a material interest, and if he shall do so his vote shall not be counted nor shall he be counted in the quorum for that resolution, but this prohibition shall not apply to any of the following matters:

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APPENDIX V SUMMARY OF THE CONSTITUTION OF THE COMPANY AND CAYMAN ISLANDS COMPANY LAW

(aa) the giving of any security or indemnity to the Director or his close associate(s) in respect of money lent or obligations incurred or undertaken by him or any of them at the request of or for the benefit of the Company or any of its subsidiaries;

(bb) the giving of any security or indemnity to a third party in respect of a debt or obligation of the Company or any of its subsidiaries for which the Director or his close associate(s) has/have himself/themselves assumed responsibility in whole or in part whether alone or jointly under a guarantee or indemnity or by the giving of security;

(cc) any proposal concerning an offer of shares, debentures or other securities of or by the Company or any other company which the Company may promote or be interested in for subscription or purchase, where the Director or his close associate(s) is/are or is/are to be interested as a participant in the underwriting or sub-underwriting of the offer;

(dd) any proposal or arrangement concerning the benefit of employees of the Company or any of its subsidiaries, including the adoption, modification or operation of either: (i) any employees’ share scheme or any share incentive or share option scheme under which the Director or his close associate(s) may benefit; or (ii) any of a pension fund or retirement, death or disability benefits scheme which relates to Directors, their close associates and employees of the Company or any of its subsidiaries and does not provide in respect of any Director or his close associate(s) any privilege or advantage not generally accorded to the class of persons to which such scheme or fund relates; and

(ee) any contract or arrangement in which the Director or his close associate(s) is/are interested in the same manner as other holders of shares, debentures or other securities of the Company by virtue only of his/their interest in those shares, debentures or other securities.

(ix) Proceedings of the Board

The Board may meet anywhere in the world for the despatch of business and may adjourn and otherwise regulate its meetings as it thinks fit. Questions arising at any meeting shall be determined by a majority of votes. In the case of an equality of votes, the chairman of the meeting shall have a second or casting vote.

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APPENDIX V SUMMARY OF THE CONSTITUTION OF THE COMPANY AND CAYMAN ISLANDS COMPANY LAW

To the extent that the same is permissible under Cayman Islands law and subject to the Articles, the Memorandum and Articles of the Company may only be altered or amended, and the name of the Company may only be changed, with the sanction of a special resolution of the Company.

(d) Meetings of member

(i) Special and ordinary resolutions

A special resolution of the Company must be passed by a majority of not less than three-fourths of the votes cast by such members as, being entitled so to do, vote in person or by proxy or, in the case of members which are corporations, by their duly authorised representatives or, where proxies are allowed, by proxy at a general meeting of which notice specifying the intention to propose the resolution as a special resolution has been duly given.

Under the Cayman Companies Act, a copy of any special resolution must be forwarded to the Registrar of Companies in the Cayman Islands within 15 days of being passed.

An “ordinary resolution”, by contrast, is a resolution passed by a simple majority of the votes of such members of the Company as, being entitled to do so, vote in person or, in the case of members which are corporations, by their duly authorised representatives or, where proxies are allowed, by proxy at a general meeting of which notice has been duly given.

A resolution in writing signed by or on behalf of all members shall be treated as an ordinary resolution duly passed at a general meeting of the Company duly convened and held, and where relevant as a special resolution so passed.

(ii) Voting rights and right to demand a poll

Subject to any special rights, restrictions or privileges as to voting for the time being attached to any class or classes of shares at any general meeting: (a) on a poll every member present in person or by proxy or, in the case of a member being a corporation, by its duly authorised representative shall have one vote for every share which is fully paid or credited as fully paid registered in his name in the register of members of the Company but so that no amount paid up or credited as paid up on a share in advance of calls or instalments is treated for this purpose as paid up on the share; and (b) on a show of hands every member who is present in person (or, in the case of a member being a corporation, by its duly authorised representative) or by proxy shall have

–V-12– THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.

APPENDIX V SUMMARY OF THE CONSTITUTION OF THE COMPANY AND CAYMAN ISLANDS COMPANY LAW one vote. Where more than one proxy is appointed by a member which is a Clearing House (as defined in the Articles) or its nominee(s), each such proxy shall have one vote on a show of hands. On a poll, a member entitled to more than one vote need not use all his votes or cast all the votes he does use in the same way.

At any general meeting a resolution put to the vote of the meeting is to be decided by poll save that the chairman of the meeting may, pursuant to the Listing Rules, allow a resolution to be voted on by a show of hands. Where a show of hands is allowed, before or on the declaration of the result of the show of hands, a poll may be demanded by (in each case by members present in person or by proxy or by a duly authorised corporate representative):

(A) at least two members;

(B) any member or members representing not less than one-tenth of the total voting rights of all the members having the right to vote at the meeting; or

(C) a member or members holding shares in the Company conferring a right to vote at the meeting on which an aggregate sum has been paid equal to not less than one-tenth of the total sum paid up on all the shares conferring that right.

Should a Clearing House or its nominee(s) be a member of the Company, such person or persons may be authorised as it thinks fit to act as its representative(s) at any meeting of the Company or at any meeting of any class of members of the Company provided that, if more than one person is so authorised, the authorisation shall specify the number and class of shares in respect of which each such person is so authorised. A person authorised in accordance with this provision shall be deemed to have been duly authorised without further evidence of the facts and be entitled to exercise the same rights and powers on behalf of the Clearing House or its nominee(s) as if such person were an individual member including the right to vote individually on a show of hands.

Where the Company has knowledge that any member is, under the Listing Rules, required to abstain from voting on any particular resolution or restricted to voting only for or only against any particular resolution, any votes cast by or on behalf of such member in contravention of such requirement or restriction shall not be counted.

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APPENDIX V SUMMARY OF THE CONSTITUTION OF THE COMPANY AND CAYMAN ISLANDS COMPANY LAW

(iii) Annual general meetings

The Company must hold an annual general meeting each year other than the year of the Company’s adoption of the Articles. Such meeting must be held not more than 15 months after the holding of the last preceding annual general meeting, or such longer period as may be authorised by the Stock Exchange at such time and place as may be determined by the Board.

(iv) Requisition of general meetings

Extraordinary general meetings may be convened on the requisition of one or more members holding, at the date of deposit of the requisition, not less than one tenth of the paid up capital of the Company having the right of voting at general meetings. Such requisition shall be made in writing to the Board or the secretary of the Company for the purpose of requiring an extraordinary general meeting to be called by the Board for the transaction of any business specified in such requisition. Such meeting shall be held within two months after the deposit of such requisition. If within 21 days of such deposit, the Board fails to proceed to convene such meeting, the requisitionist(s) himself (themselves) may do so in the same manner, and all reasonable expenses incurred by the requisitionist(s) as a result of the failure of the Board shall be reimbursed to the requisitionist(s) by the Company.

(v) Notices of meetings and business to be conducted

An annual general meeting of the Company shall be called by at least 21 days’ notice in writing, and any other general meeting of the Company shall be called by at least 14 days’ notice in writing. The notice shall be exclusive of the day on which it is served or deemed to be served and of the day for which it is given, and must specify the time, place and agenda of the meeting and particulars of the resolution(s) to be considered at that meeting and, in the case of special business, the general nature of that business.

Except where otherwise expressly stated, any notice or document (including a share certificate) to be given or issued under the Articles shall be in writing, and may be served by the Company on any member personally, by post to such member’s registered address or (in the case of a notice) by advertisement in the newspapers. Any member whose registered address is outside Hong Kong may notify the Company in writing of an address in Hong Kong which shall be deemed to be his registered address for this purpose. Subject to the Cayman Companies Act and the Listing Rules, a notice or document may also be served or delivered by the Company to any member by electronic means.

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APPENDIX V SUMMARY OF THE CONSTITUTION OF THE COMPANY AND CAYMAN ISLANDS COMPANY LAW

Although a meeting of the Company may be called by shorter notice than as specified above, such meeting may be deemed to have been duly called if it is so agreed:

(i) in the case of an annual general meeting, by all members of the Company entitled to attend and vote thereat; and

(ii) in the case of any other meeting, by a majority in number of the members having a right to attend and vote at the meeting holding not less than 95% of the total voting rights in the Company.

All business transacted at an extraordinary general meeting shall be deemed special business. All business shall also be deemed special business where it is transacted at an annual general meeting, with the exception of certain routine matters which shall be deemed ordinary business.

(vi) Quorum for meetings and separate class meetings

No business shall be transacted at any general meeting unless a quorum is present when the meeting proceeds to business, and continues to be present until the conclusion of the meeting.

The quorum for a general meeting shall be two members present in person (or in the case of a member being a corporation, by its duly authorised representative) or by proxy and entitled to vote. In respect of a separate class meeting (other than an adjourned meeting) convened to sanction the modification of class rights the necessary quorum shall be two persons holding or representing by proxy not less than one-third in nominal value of the issued shares of that class.

(vii) Proxies

Any member of the Company entitled to attend and vote at a meeting of the Company is entitled to appoint another person as his proxy to attend and vote instead of him. A member who is the holder of two or more shares may appoint more than one proxy to represent him and vote on his behalf at a general meeting of the Company or at a class meeting. A proxy need not be a member of the Company and shall be entitled to exercise the same powers on behalf of a member who is an individual and for whom he acts as proxy as such member could exercise. In addition, a proxy shall be entitled to exercise the same powers on behalf of a member which is a corporation and for which he acts as proxy as such member could exercise if it were an individual member. On a poll or on a show of hands, votes may be given either personally (or, in the case of a member being a corporation, by its duly authorized representative) or by proxy.

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APPENDIX V SUMMARY OF THE CONSTITUTION OF THE COMPANY AND CAYMAN ISLANDS COMPANY LAW

The instrument appointing a proxy shall be in writing under the hand of the appointor or of his attorney duly authorised in writing, or if the appointor is a corporation, either under seal or under the hand of a duly authorised officer or attorney. Every instrument of proxy, whether for a specified meeting or otherwise, shall be in such form as the Board may from time to time approve, provided that it shall not preclude the use of the two-way form. Any form issued to a member for appointing a proxy to attend and vote at an extraordinary general meeting or at an annual general meeting at which any business is to be transacted shall be such as to enable the member, according to his intentions, to instruct the proxy to vote in favour of or against (or, in default of instructions, to exercise his discretion in respect of) each resolution dealing with any such business.

(e) Accounts and audit

The Board shall cause proper books of account to be kept of the sums of money received and expended by the Company, and of the assets and liabilities of the Company and of all other matters required by the Cayman Companies Act (which include all sales and purchases of goods by the company) necessary to give a true and fair view of the state of the Company’s affairs and to show and explain its transactions.

The books of accounts of the Company shall be kept at the head office of the Company or at such other place or places as the Board decides and shall always be open to inspection by any Director. No member (other than a Director) shall have any right to inspect any account, book or document of the Company except as conferred by the Cayman Companies Act or ordered by a court of competent jurisdiction or authorised by the Board or the Company in general meeting.

The Board shall from time to time cause to be prepared and laid before the Company at its annual general meeting balance sheets and profit and loss accounts (including every document required by law to be annexed thereto), together with a copy of the Directors’ report and a copy of the auditors’ report, not less than 21 days before the date of the annual general meeting. Copies of these documents shall be sent to every person entitled to receive notices of general meetings of the Company under the provisions of the Articles together with the notice of annual general meeting, not less than 21 days before the date of the meeting.

Subject to the rules of the stock exchange of the Relevant Territory (as defined in the Articles), the Company may send summarized financial statements to members who have, in accordance with the rules of the stock exchange of the Relevant Territory, consented and elected to receive summarized financial statements instead of the full financial statements. The summarized financial statements must be accompanied by any other documents as may be required under the

–V-16– THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.

APPENDIX V SUMMARY OF THE CONSTITUTION OF THE COMPANY AND CAYMAN ISLANDS COMPANY LAW rules of the stock exchange of the Relevant Territory, and must be sent to those members that have consented and elected to receive the summarised financial statements not less than 21 days before the general meeting.

The Company shall at each annual general meeting appoint auditor(s) to hold office until the conclusion of the next annual general meeting on such terms and with such duties as may be agreed with the Board. The Board may fill any casual vacancy in the office of auditors, but while any such vacancy continues the surviving or continuing auditors (if any) may act. The auditors’ remuneration shall be fixed by the Company in general meeting or by the Board if authority is so delegated by the members.

The members may, at a general meeting remove the auditor(s) by a special resolution at any time before the expiration of the term of office of the auditor(s) and shall, by an ordinary resolution, at that meeting appoint new auditor(s) in place of the removed auditor(s) for the remainder of the term.

The auditors shall audit the financial statements of the Company in accordance with generally accepted accounting principles of Hong Kong, the International Accounting Standards or such other standards as may be permitted by the Stock Exchange.

(f) Dividends and other methods of distribution

The Company in general meeting may declare dividends in any currency to be paid to the members but no dividend shall be declared in excess of the amount recommended by the Board.

Except in so far as the rights attaching to, or the terms of issue of, any share may otherwise provide:

(i) all dividends shall be declared and paid according to the amounts paid up on the shares in respect of which the dividend is paid, although no amount paid up on a share in advance of calls shall for this purpose be treated as paid up on the share;

(ii) all dividends shall be apportioned and paid pro rata in accordance with the amount paid up on the shares during any portion(s) of the period in respect of which the dividend is paid; and

(iii) the Board may deduct from any dividend or other monies payable to any member all sums of money (if any) presently payable by him to the Company on account of calls, instalments or otherwise.

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APPENDIX V SUMMARY OF THE CONSTITUTION OF THE COMPANY AND CAYMAN ISLANDS COMPANY LAW

Where the Board or the Company in general meeting has resolved that a dividend should be paid or declared, the Board may resolve:

(aa) that such dividend be satisfied wholly or in part in the form of an allotment of shares credited as fully paid up, provided that the members entitled to such dividend will be entitled to elect to receive such dividend (or part thereof) in cash in lieu of such allotment; or

(bb) that the members entitled to such dividend will be entitled to elect to receive an allotment of shares credited as fully paid up in lieu of the whole or such part of the dividend as the Board may think fit.

Upon the recommendation of the Board, the Company may by ordinary resolution in respect of any one particular dividend of the Company determine that it may be satisfied wholly in the form of an allotment of shares credited as fully paid up without offering any right to members to elect to receive such dividend in cash in lieu of such allotment.

Any dividend, bonus or other sum payable in cash to the holder of shares may be paid by cheque or warrant sent through the post. Every such cheque or warrant shall be made payable to the order of the person to whom it is sent and shall be sent at the holder’s or joint holders’ risk and payment of the cheque or warrant by the bank on which it is drawn shall constitute a good discharge to the Company. Any one of two or more joint holders may give effectual receipts for any dividends or other monies payable or property distributable in respect of the shares held by such joint holders.

Whenever the Board or the Company in general meeting has resolved that a dividend be paid or declared, the Board may further resolve that such dividend be satisfied wholly or in part by the distribution of specific assets of any kind.

The Board may, if it thinks fit, receive from any member willing to advance the same, and either in money or money’s worth, all or any part of the money uncalled and unpaid or instalments payable upon any shares held by him, and in respect of all or any of the monies so advanced may pay interest at such rate (if any) not exceeding 20% per annum, as the Board may decide, but a payment in advance of a call shall not entitle the member to receive any dividend or to exercise any other rights or privileges as a member in respect of the share or the due portion of the shares upon which payment has been advanced by such member before it is called up.

–V-18– THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.

APPENDIX V SUMMARY OF THE CONSTITUTION OF THE COMPANY AND CAYMAN ISLANDS COMPANY LAW

All dividends, bonuses or other distributions unclaimed for one year after having been declared may be invested or otherwise used by the Board for the benefit of the Company until claimed and the Company shall not be constituted a trustee in respect thereof. All dividends, bonuses or other distributions unclaimed for six years after having been declared may be forfeited by the Board and, upon such forfeiture, shall revert to the Company.

No dividend or other monies payable by the Company on or in respect of any share shall bear interest against the Company.

The Company may exercise the power to cease sending cheques for dividend entitlements or dividend warrants by post if such cheques or warrants remain uncashed on two consecutive occasions or after the first occasion on which such a cheque or warrant is returned undelivered.

(g) Inspection of corporate records

For so long as any part of the share capital of the Company is [REDACTED] on the Stock Exchange, any member may inspect any register of members of the Company maintained in Hong Kong (except when the register of members is closed) without charge and require the provision to him of copies or extracts of such register in all respects as if the Company were incorporated under and were subject to the Hong Kong Companies Ordinance.

(h) Rights of minorities in relation to fraud or oppression

There are no provisions in the Articles concerning the rights of minority members in relation to fraud or oppression. However, certain remedies may be available to members of the Company under Cayman Islands law, as summarized in paragraph 3(f) of this Appendix.

(i) Procedures on liquidation

A resolution that the Company be wound up by the court or be wound up voluntarily shall be a special resolution.

Subject to any special rights, privileges or restrictions as to the distribution of available surplus assets on liquidation for the time being attached to any class or classes of shares:

(i) if the Company is wound up, the surplus assets remaining after payment to all creditors shall be divided among the members in proportion to the capital paid up on the shares held by them respectively; and

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APPENDIX V SUMMARY OF THE CONSTITUTION OF THE COMPANY AND CAYMAN ISLANDS COMPANY LAW

(ii) if the Company is wound up and the surplus assets available for distribution among the members are insufficient to repay the whole of the paid-up capital, such assets shall be distributed, subject to the rights of any shares which may be issued on special terms and conditions, so that, as nearly as may be, the losses shall be borne by the members in proportion to the capital paid up on the shares held by them, respectively.

If the Company is wound up (whether the liquidation is voluntary or compelled by the court), the liquidator may, with the sanction of a special resolution and any other sanction required by the Cayman Companies Act, divide among the members in specie or kind the whole or any part of the assets of the Company, whether the assets consist of property of one kind or different kinds, and the liquidator may, for such purpose, set such value as he deems fair upon any one or more class or classes of property to be so divided and may determine how such division shall be carried out as between the members or different classes of members and the members within each class. The liquidator may, with the like sanction, vest any part of the assets in trustees upon such trusts for the benefit of members as the liquidator thinks fit, but so that no member shall be compelled to accept any shares or other property upon which there is a liability.

(j) Subscription rights reserve

Provided that it is not prohibited by and is otherwise in compliance with the Cayman Companies Act, if warrants to subscribe for shares have been issued by the Company and the Company does any act or engages in any transaction which would result in the subscription price of such warrants being reduced below the par value of the shares to be issued on the exercise of such warrants, a subscription rights reserve shall be established and applied in paying up the difference between the subscription price and the par value of such shares.

3. CAYMAN ISLANDS COMPANY LAW

The Company was incorporated in the Cayman Islands as an exempted company on 15 February 2019 subject to the Cayman Companies Act. Certain provisions of Cayman Islands company law are set out below but this section does not purport to contain all applicable qualifications and exceptions or to be a complete review of all matters of the Cayman Companies Act and taxation, which may differ from equivalent provisions in jurisdictions with which interested parties may be more familiar.

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APPENDIX V SUMMARY OF THE CONSTITUTION OF THE COMPANY AND CAYMAN ISLANDS COMPANY LAW

(a) Company operations

An exempted company such as the Company must conduct its operations mainly outside the Cayman Islands. An exempted company is also required to file an annual return each year with the Registrar of Companies of the Cayman Islands and pay a fee which is based on the amount of its authorised share capital.

(b) Share capital

Under the Cayman Companies Act, a Cayman Islands company may issue ordinary, preference or redeemable shares or any combination thereof. Where a company issues shares at a premium, whether for cash or otherwise, a sum equal to the aggregate amount or value of the premiums on those shares shall be transferred to an account, to be called the “share premium account”. At the option of a company, these provisions may not apply to premiums on shares of that company allotted pursuant to any arrangements in consideration of the acquisition or cancellation of shares in any other company and issued at a premium. The share premium account may be applied by the company subject to the provisions, if any, of its memorandum and articles of association, in such manner as the company may from time to time determine including, but without limitation, the following:

(i) paying distributions or dividends to members;

(ii) paying up unissued shares of the company to be issued to members as fully paid bonus shares;

(iii) any manner provided in section 37 of the Cayman Companies Act;

(iv) writing-off the preliminary expenses of the company; and

(v) writing-off the expenses of, or the commission paid or discount allowed on, any issue of shares or debentures of the company.

Notwithstanding the foregoing, no distribution or dividend may be paid to members out of the share premium account unless, immediately following the date on which the distribution or dividend is proposed to be paid, the company will be able to pay its debts as they fall due in the ordinary course of business.

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APPENDIX V SUMMARY OF THE CONSTITUTION OF THE COMPANY AND CAYMAN ISLANDS COMPANY LAW

Subject to confirmation by the court, a company limited by shares or a company limited by guarantee and having a share capital may, if authorised to do so by its articles of association, by special resolution reduce its share capital in any way.

There are no statutory prohibitions in the Cayman Islands on the granting of financial assistance by a company to another person for the purchase of, or subscription for, its own, its holding company’s or a subsidiary’s shares. Therefore, a company may provide financial assistance provided the directors of the company, when proposing to grant such financial assistance, discharge their duties of care and act in good faith, for a proper purpose and in the interests of the company. Such assistance should be on an arm’s-length basis.

(d) Purchase of shares and warrants by a company and its subsidiaries

A company limited by shares or a company limited by guarantee and having a share capital may, if so authorised by its articles of association, issue shares which are to be redeemed or are liable to be redeemed at the option of the company or a member and, for the avoidance of doubt, it shall be lawful for the rights attaching to any shares to be varied, subject to the provisions of the company’s articles of association, so as to provide that such shares are to be or are liable to be so redeemed. In addition, such a company may, if authorised to do so by its articles of association, purchase its own shares, including any redeemable shares; an ordinary resolution of the company approving the manner and terms of the purchase will be required if the articles of association do not authorise the manner and terms of such purchase. A company may not redeem or purchase its shares unless they are fully paid. Furthermore, a company may not redeem or purchase any of its shares if, as a result of the redemption or purchase, there would no longer be any issued shares of the company other than shares held as treasury shares. In addition, a payment out of capital by a company for the redemption or purchase of its own shares is not lawful unless, immediately following the date on which the payment is proposed to be made, the company shall be able to pay its debts as they fall due in the ordinary course of business.

Shares that have been purchased or redeemed by a company or surrendered to the company shall not be treated as cancelled but shall be classified as treasury shares if held in compliance with the requirements of Section 37A(1) of the Cayman Companies Act. Any such shares shall continue to be classified as treasury shares until such shares are either cancelled or transferred pursuant to the Cayman Companies Act.

–V-22– THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.

APPENDIX V SUMMARY OF THE CONSTITUTION OF THE COMPANY AND CAYMAN ISLANDS COMPANY LAW

A Cayman Islands company may be able to purchase its own warrants subject to and in accordance with the terms and conditions of the relevant warrant instrument or certificate. Thus there is no requirement under Cayman Islands law that a company’s memorandum or articles of association contain a specific provision enabling such purchases. The directors of a company may under the general power contained in its memorandum of association be able to buy, sell and deal in personal property of all kinds.

A subsidiary may hold shares in its holding company and, in certain circumstances, may acquire such shares.

(e) Dividends and distributions

Subject to a solvency test, as prescribed in the Cayman Companies Act, and the provisions, if any, of the company’s memorandum and articles of association, a company may pay dividends and distributions out of its share premium account. In addition, based upon English case law which is likely to be persuasive in the Cayman Islands, dividends may be paid out of profits.

For so long as a company holds treasury shares, no dividend may be declared or paid, and no other distribution (whether in cash or otherwise) of the company’s assets (including any distribution of assets to members on a winding up) may be made, in respect of a treasury share.

(f) Protection of minorities and shareholders’ suits

It can be expected that the Cayman Islands courts will ordinarily follow English case law precedents (particularly the rule in the case of Foss v. Harbottle and the exceptions to that rule) which permit a minority member to commence a representative action against or derivative actions in the name of the company to challenge acts which are ultra vires, illegal, fraudulent (and performed by those in control of the Company) against the minority, or represent an irregularity in the passing of a resolution which requires a qualified (or special) majority which has not been obtained.

Where a company (not being a bank) is one which has a share capital divided into shares, the court may, on the application of members holding not less than one-fifth of the shares of the company in issue, appoint an inspector to examine the affairs of the company and, at the direction of the court, to report on such affairs. In addition, any member of a company may petition the court, which may make a winding up order if the court is of the opinion that it is just and equitable that the company should be wound up.

–V-23– THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.

APPENDIX V SUMMARY OF THE CONSTITUTION OF THE COMPANY AND CAYMAN ISLANDS COMPANY LAW

In general, claims against a company by its members must be based on the general laws of contract or tort applicable in the Cayman Islands or be based on potential violation of their individual rights as members as established by a company’s memorandum and articles of association.

(g) Disposal of assets

There are no specific restrictions on the power of directors to dispose of assets of a company, however, the directors are expected to exercise certain duties of care, diligence and skill to the standard that a reasonably prudent person would exercise in comparable circumstances, in addition to fiduciary duties to act in good faith, for proper purpose and in the best interests of the company under English common law (which the Cayman Islands courts will ordinarily follow).

(h) Accounting and auditing requirements

A company must cause proper records of accounts to be kept with respect to: (i) all sums of money received and expended by it; (ii) all sales and purchases of goods by it and (iii) its assets and liabilities.

Proper books of account shall not be deemed to be kept if there are not kept such books as are necessary to give a true and fair view of the state of the company’s affairs and to explain its transactions.

If a company keeps its books of account at any place other than at its registered office or any other place within the Cayman Islands, it shall, upon service of an order or notice by the Tax Information Authority pursuant to the Tax Information Authority Act (2017 Revision) of the Cayman Islands, make available, in electronic form or any other medium, at its registered office copies of its books of account, or any part or parts thereof, as are specified in such order or notice.

(i) Exchange control

There are no exchange control regulations or currency restrictions in effect in the Cayman Islands.

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APPENDIX V SUMMARY OF THE CONSTITUTION OF THE COMPANY AND CAYMAN ISLANDS COMPANY LAW

(j) Taxation

Pursuant to section 6 of the Tax Concessions Act (2018 Revision) of the Cayman Islands, the Company has obtained an undertaking from the Financial Secretary that:

(i) no law which is enacted in the Cayman Islands imposing any tax to be levied on profits or income or gains or appreciations shall apply to the Company or its operations; and

(ii) no tax be levied on profits, income, gains or appreciations or which is in the nature of estate duty or inheritance tax shall be payable by the Company:

(aa) on or in respect of the shares, debentures or other obligations of the Company; or

(bb) by way of the withholding in whole or in part of any relevant payment as defined in section 6(3) of the Tax Concessions Act (2018 Revision).

The undertaking for the Company is for a period of 20 years from 21 May 2021.

The Cayman Islands currently levy no taxes on individuals or corporations based upon profits, income, gains or appreciations and there is no taxation in the nature of inheritance tax or estate duty. There are no other taxes likely to be material to the Company levied by the Government of the Cayman Islands save for certain stamp duties which may be applicable, from time to time, on certain instruments.

(k) Stamp duty on transfers

No stamp duty is payable in the Cayman Islands on transfers of shares of Cayman Islands companies save for those which hold interests in land in the Cayman Islands.

(l) Loans to directors

There is no express provision prohibiting the making of loans by a company to any of its directors. However, the company’s articles of association may provide for the prohibition of such loans under specific circumstances.

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APPENDIX V SUMMARY OF THE CONSTITUTION OF THE COMPANY AND CAYMAN ISLANDS COMPANY LAW

(m) Inspection of corporate records

The members of a company have no general right to inspect or obtain copies of the register of members or corporate records of the company. They will, however, have such rights as may be set out in the company’s articles of association.

(n) Register of members

A Cayman Islands exempted company may maintain its principal register of members and any branch registers in any country or territory, whether within or outside the Cayman Islands, as the company may determine from time to time. There is no requirement for an exempted company to make any returns of members to the Registrar of Companies in the Cayman Islands. The names and addresses of the members are, accordingly, not a matter of public record and are not available for public inspection. However, an exempted company shall make available at its registered office, in electronic form or any other medium, such register of members, including any branch register of member, as may be required of it upon service of an order or notice by the Tax Information Authority pursuant to the Tax Information Authority Act (2017 Revision) of the Cayman Islands.

(o) Register of Directors and officers

Pursuant to the Cayman Companies Act, the Company is required to maintain at its registered office a register of directors, alternate directors and officers which is not available for inspection by the public. A copy of such register must be filed with the Registrar of Companies in the Cayman Islands and any change must be notified to the Registrar within 30 days of any change in such directors or officers, including a change of the name of such directors or officers.

(p) Winding up

A Cayman Islands company may be wound up by: (i) an order of the court; (ii) voluntarily by its members; or (iii) under the supervision of the court.

The court has authority to order winding up in a number of specified circumstances including where, in the opinion of the court, it is just and equitable that such company be so wound up.

A voluntary winding up of a company (other than a limited duration company, for which specific rules apply) occurs where the company resolves by special resolution that it be wound up voluntarily or where the company in general meeting resolves that it be wound up voluntarily because it is unable to pay its debt as they fall due. In the case of a voluntary winding up, the company is obliged to cease to carry on its business from the commencement of its winding up

–V-26– THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.

APPENDIX V SUMMARY OF THE CONSTITUTION OF THE COMPANY AND CAYMAN ISLANDS COMPANY LAW except so far as it may be beneficial for its winding up. Upon appointment of a voluntary liquidator, all the powers of the directors cease, except so far as the company in general meeting or the liquidator sanctions their continuance.

In the case of a members’ voluntary winding up of a company, one or more liquidators are appointed for the purpose of winding up the affairs of the company and distributing its assets.

As soon as the affairs of a company are fully wound up, the liquidator must make a report and an account of the winding up, showing how the winding up has been conducted and the property of the company disposed of, and call a general meeting of the company for the purposes of laying before it the account and giving an explanation of that account.

When a resolution has been passed by a company to wind up voluntarily, the liquidator or any contributory or creditor may apply to the court for an order for the continuation of the winding up under the supervision of the court, on the grounds that: (i) the company is or is likely to become insolvent; or (ii) the supervision of the court will facilitate a more effective, economic or expeditious liquidation of the company in the interests of the contributories and creditors. A supervision order takes effect for all purposes as if it was an order that the company be wound up by the court except that a commenced voluntary winding up and the prior actions of the voluntary liquidator shall be valid and binding upon the company and its official liquidator.

For the purpose of conducting the proceedings in winding up a company and assisting the court, one or more persons may be appointed to be called an official liquidator(s).The court may appoint to such office such person or persons, either provisionally or otherwise, as it thinks fit, and if more than one person is appointed to such office, the court shall declare whether any act required or authorized to be done by the official liquidator is to be done by all or any one or more of such persons. The court may also determine whether any and what security is to be given by an official liquidator on his appointment; if no official liquidator is appointed, or during any vacancy in such office, all the property of the company shall be in the custody of the court.

(q) Reconstructions

Reconstructions and amalgamations may be approved by a majority in number representing 75% in value of the members or creditors, depending on the circumstances, as are present at a meeting called for such purpose and thereafter sanctioned by the courts. Whilst a dissenting member has the right to express to the court his view that the transaction for which approval is being sought would not provide the members with a fair value for their shares, the courts are unlikely to disapprove the transaction on that ground alone in the absence of evidence of fraud or bad faith on behalf of management, and if the transaction were approved and consummated the

–V-27– THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.

APPENDIX V SUMMARY OF THE CONSTITUTION OF THE COMPANY AND CAYMAN ISLANDS COMPANY LAW dissenting member would have no rights comparable to the appraisal rights (i.e. the right to receive payment in cash for the judicially determined value of their shares) ordinarily available, for example, to dissenting members of a United States corporation.

(r) Take-overs

Where an offer is made by a company for the shares of another company and, within four months of the offer, the holders of not less than 90% of the shares which are the subject of the offer accept, the offeror may, at any time within two months after the expiration of that four-month period, by notice require the dissenting members to transfer their shares on the terms of the offer. A dissenting member may apply to the Cayman Islands courts within one month of the notice objecting to the transfer. The burden is on the dissenting member to show that the court should exercise its discretion, which it will be unlikely to do unless there is evidence of fraud or bad faith or collusion as between the offeror and the holders of the shares who have accepted the offer as a means of unfairly forcing out minority members.

(s) Indemnification

Cayman Islands law does not limit the extent to which a company’s articles of association may provide for indemnification of officers and directors, save to the extent any such provision may be held by the court to be contrary to public policy, for example, where a provision purports to provide indemnification against the consequences of committing a crime.

4. GENERAL

Appleby, the Company’s legal advisors on Cayman Islands law, has sent to the Company a letter of advice which summarises certain aspects of the Cayman Islands company law. This letter, together with a copy of the Cayman Companies Act, is available for inspection as referred to in “Documents on Display” in Appendix VII. Any person wishing to have a detailed summary of Cayman Islands company law or advice on the differences between it and the laws of any jurisdiction with which he is more familiar is recommended to seek independent legal advice.

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APPENDIX VI STATUTORY AND GENERAL INFORMATION

A. FURTHER INFORMATION ABOUT OUR GROUP

1. Incorporation of Our Company

Our Company was incorporated in the Cayman Islands as an exempted company with limited liability on February 15, 2019. We have established a principal place of business in Hong Kong at Flat 4B, 5/F, Hunghom Commercial Center Tower B, No. 37 Ma Tau Wai Road, Hung Hom, Kowloon, Hong Kong, and have been registered as a non-Hong Kong company under Part 16 of the Companies Ordinance on March 18, 2021 under the same address. Mr. To Yu Fai and Mr. Pang Peter Chun Ming have been appointed as our authorized representatives for the acceptance of service of process and notices on our behalf in Hong Kong.

As we were incorporated in the Cayman Islands, our operations are subject to the relevant laws of the Cayman Islands and our constitution which comprises the Memorandum of Association and the Articles of Association. A summary of certain provisions of our constitution and relevant aspects of the Cayman Islands company law is set out in Appendix V to this document.

2. Changes in Our Share Capital

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APPENDIX VI STATUTORY AND GENERAL INFORMATION

During the period between September 5, 2019 and November 30, 2020, a total of [REDACTED] Shares were allotted and issued as a result of the [REDACTED] investments. See “History, Reorganization and Corporate Structure — [REDACTED] Investments” in this document for details of the [REDACTED] investments.

On [•], the authorized share capital of our Company was increased from US$100,000 divided into 10,000,000 Shares of par value of US$0.01 each to US$[20,000,000] divided into [2,000,000,000] Shares of par value of US$0.01 each by the creation of [1,990,000,000] Shares of par value of US$0.01 each, and the [REDACTED] was approved pursuant to the written resolutions of our Shareholders passed on [•] referred to in paragraph 4 below and subject to the conditions contained therein.

Save as disclosed above, there is no present intention to issue any of the authorized but unissued share capital of our Company and, without prior approval of our Shareholders in general meetings, no issue of Shares will be made which would effectively alter the control of our Company.

Save as disclosed in this document, there has been no alteration in the share capital of our Company within the two years immediately preceding the date of this document.

3. Changes in the Share Capital of Our Subsidiaries

A summary of the corporate information and the particulars of our subsidiaries are set out in the Accountants’ Report set out in Appendix I to this document.

Save as disclosed in this document, there has been no alteration in the share capital of any of the subsidiaries of our Company within the two years immediately preceding the date of this document.

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APPENDIX VI STATUTORY AND GENERAL INFORMATION

4. Written Resolutions Passed by Our Shareholders on [•]

By written resolutions of our Shareholders passed on [•], pursuant to which, among other matters:

(a) our Company approved and adopted the Memorandum of Association and the Articles of Association conditionally upon the fulfillment of the Conditions (as defined below) and with effect from the [REDACTED];

(b) the authorized share capital of our Company was increased from US$100,000 divided into 10,000,000 Shares of par value of US$0.01 each to US$[20,000,000] divided into [2,000,000,000] Shares of par value of US$0.01 each by the creation of [1,990,000,000] Shares of par value of US$0.01 each; and

(c) conditional on (i) the [REDACTED] granting the approval for the [REDACTED] of, and permission to deal in, the Shares in issue and the Shares to be issued as mentioned in this document, and (ii) the obligations of the [REDACTED] under the [REDACTED] becoming unconditional and not being terminated in accordance with the terms of the [REDACTED] or otherwise, in each case on or before the date falling 30 days after the date of the issue of this document (together, the “Conditions”):

(i) the [REDACTED] was approved and our Directors were authorized to allot and issue the [REDACTED] pursuant to the [REDACTED] and such number of Shares as may be required to be allotted and issued upon the exercise of the [REDACTED];

(ii) the rules of the Share Option Scheme (a summary of its principal terms is set out in “— D. Share Option Scheme” in this appendix) be approved and adopted, and our Directors be authorized, at their absolute discretion subject to the terms and conditions of the Share Option Scheme, to grant options to subscribe for Shares under the Share Option Scheme and to allot, issue and deal with Shares pursuant thereto, and to take all such steps as they consider necessary or desirable to implement the Share Option Scheme;

(iii) conditional on the share premium account of our Company having sufficient balance, or otherwise being credited as a result of the [REDACTED], our Directors were authorized to [REDACTED] US$[REDACTED] standing to the credit of the share premium account of our Company by applying that sum in paying up in full at par [REDACTED] Shares for allotment and issue to the holders of Shares

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APPENDIX VI STATUTORY AND GENERAL INFORMATION

whose names appear on the register of members of our Company at the close of business on the date immediately preceding the date on which the [REDACTED] becomes unconditional (or as they may direct) in proportion (as nearly as possible without involving fractions so that no fraction of a Share shall be allotted and issued) to their then existing respective shareholdings in our Company and so that the Shares be allotted and issued pursuant to this resolution shall rank pari passu in all respects with the then existing issued Shares and our Directors were authorized to give effect to such [REDACTED];

(iv) a general unconditional mandate was given to our Directors to exercise all the powers of our Company to allot, issue and deal with, otherwise than by way of rights issue, scrip dividend schemes or similar arrangements in accordance with the Articles of Association, or pursuant to the exercise of any options granted or to be granted under the Share Option Scheme, or under the [REDACTED] or the [REDACTED] or upon the exercise of the [REDACTED], Shares with an aggregate number of not exceeding the sum of (aa) 20% of the aggregate number of issued shares of our Company immediately following completion of the [REDACTED] and the [REDACTED] but excluding any Shares which may be issued pursuant to the exercise of the [REDACTED] or any option granted or to be granted under the Share Option Scheme; (bb) the number of issued shares of our Company which may be purchased by our Company pursuant to the authority granted to our Directors as referred to in paragraph (v) below, until the conclusion of the next annual general meeting of our Company, or the date by which the next annual general meeting of the Company is required by the Articles of Association or any applicable law to be held, or the passing of an ordinary resolution by our Shareholders revoking or varying the authority given to our Directors, whichever occurs first;

(v) a general unconditional mandate (the “Repurchase Mandate”) was given to our Directors to exercise all powers of our Company to repurchase Shares [REDACTED] on the Stock Exchange or on any other stock exchange on which the securities of our Company may be [REDACTED] and recognised by the SFC and the Stock Exchange for this purpose, in accordance with all applicable laws and requirements of the Listing Rules (or of such other stock exchange), such number of Shares as will represent up to 10% of the aggregate number of the issued Shares immediately following completion of the [REDACTED] and the [REDACTED] but excluding any Shares which may be issued pursuant to the exercise of the [REDACTED] or any option granted or to be granted under the Share Option Scheme, until the conclusion of the next annual general meeting of our Company, or the date by which the next annual general meeting of our

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APPENDIX VI STATUTORY AND GENERAL INFORMATION

Company is required by the Articles of Association or any applicable law to be held, or the passing of an ordinary resolution by our Shareholders revoking or varying the authority given to our Directors, whichever occurs first; and

(vi) the extension of the general mandate to allot, issue and deal with Shares pursuant to paragraph (iv) above to include the number of Shares which may be purchased or repurchased pursuant to (v) above.

5. Reorganization

Our Group underwent the Reorganization in preparation for the [REDACTED]. See “History, Reorganization and Corporate Structure — Reorganization” in this document for further information relating to the Reorganization.

6. Repurchases of Our Own Securities

This section includes information relating to the repurchases of securities, including information required by the Stock Exchange to be included in this document concerning such repurchase.

(a) Provisions of the Listing Rules

The Listing Rules permit companies with a primary listing on the Stock Exchange to repurchase their securities on the Stock Exchange subject to certain restrictions, the more important of which are summarized below:

(i) Shareholders’ approval

All proposed repurchases of Shares (which must be fully paid up) by a company [REDACTED] on the Stock Exchange must be approved in advance by an ordinary resolution of the shareholders in general meeting, either by way of general mandate or by specific approval of a particular transaction.

Pursuant to the written resolutions passed by the Shareholders of our Company on [•], the Repurchase Mandate was given to our Directors authorizing any repurchase by us of Shares [REDACTED] or on any other stock exchange on which the securities may be [REDACTED] and which is recognized by the SFC and the Stock Exchange for this purpose, of not more than 10% of the total number of issued Shares immediately following the completion of the [REDACTED] and

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APPENDIX VI STATUTORY AND GENERAL INFORMATION the [REDACTED] (excluding any Shares which may be issued pursuant to the exercise of the [REDACTED]), further details of which have been described above in “— A. Further Information about Our Group — 4. Written Resolutions Passed by Our Shareholders on [•]”.

(ii) Source of funds

Any repurchases of Shares by us must be paid out of funds legally available for the purpose in accordance with our Articles of Association, the Listing Rules and all the applicable laws and regulations of the Cayman Islands. We are not permitted to repurchase our Shares [REDACTED] for a consideration other than cash or for settlement otherwise than in accordance with the trading rules of the Stock Exchange from time to time. Subject to the foregoing, under the Cayman Companies Act, any repurchases by our Company may be made out of our Company’s profits, out of our Company’s share premium account, out of the proceeds of a new issue of Shares made for the purpose of the repurchase, or, if authorized by the Articles of Association and subject to the provisions of the Cayman Companies Act, out of capital. Any amount of premium payable on a repurchase over the par value of the Shares to be repurchased must be out of either or both our Company’s profits or our Company’s share premium account, before or at time the Shares are repurchased, or, if authorised by the Articles of Association and subject to the provisions of the Cayman Companies Act, out of capital.

(iii) Shares to be repurchased

The Listing Rules provide that the Shares which are proposed to be repurchased by us must be fully-paid up.

(b) Reasons for Repurchases

Our Directors believe that it is in the best interests of us and our Shareholders for our Directors to have general authority from our Shareholders to enable our Directors to repurchase Shares in the [REDACTED]. Such repurchases may, depending on market conditions and funding arrangements at the time, lead to an enhancement of the net asset value per Share and/or earnings per Share and will only be made where our Directors believe that such repurchases will benefit us and our Shareholders.

In repurchasing securities, we may only apply funds legally available for such purpose in accordance with the Memorandum of Association, the Articles of Association, the Listing Rules and the applicable laws and regulations of the Cayman Islands.

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APPENDIX VI STATUTORY AND GENERAL INFORMATION

On the basis of the current financial position as disclosed in this document and taking into account the current working capital position, our Directors consider that, if the Repurchase Mandate were to be exercised in full, it might have a material adverse effect on our working capital and/or gearing position as compared with the position disclosed in this document. Our Directors, however, do not propose to exercise the Repurchase Mandate to such an extent as would, in the circumstances, have a material adverse effect on our working capital requirements or gearing levels which in the opinion of our Directors are from time to time appropriate for us.

(d) General

None of our Directors nor, to the best of their knowledge having made all reasonable enquiries, any of their close associates currently intends to sell any Shares to us or our subsidiaries.

Our Directors have undertaken to the Stock Exchange that, so far as the same may be applicable, they will exercise the Repurchase Mandate in accordance with the Listing Rules and the applicable laws and regulations of the Cayman Islands.

If, as a result of any repurchase of Shares, a Shareholder’s proportionate interest in our voting rights is increased, such increase will be treated as an acquisition for the purposes of the Takeovers Code. Accordingly, a Shareholder or a group of Shareholders acting in concert could obtain or consolidate control of our Company and become obliged to make a mandatory offer in accordance with rule 26 of the Takeovers Code. Save as aforesaid, our Directors are not aware of any consequences which would arise under the Takeovers Code as a consequence of any repurchases pursuant to the Repurchase Mandate. Our Directors will not exercise the Repurchase Mandate if the repurchase would result in the number of Shares which are in the hands of the public falling below 25% of the total number of Shares in issue (or such other percentage as may be prescribed as the minimum public shareholding under the Listing Rules).

Our Company has not made any repurchases of its own securities since its incorporation.

No core connected person has notified us that he or she has a present intention to sell Shares to us, or has undertaken not to do so, if the Repurchase Mandate is exercised.

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APPENDIX VI STATUTORY AND GENERAL INFORMATION

B. FURTHER INFORMATION ABOUT OUR BUSINESS

1. Summary of Material Contracts

The following contracts (not being contracts in our ordinary course of business) have been entered into by members of our Group within the two years preceding the date of this document and are or may be material:

(a) the share subscription agreement dated September 5, 2019 entered into between Mr. Jiang Daiwei and our Company, pursuant to which Mr. Jiang Daiwei agreed to subscribe for 102,330 Shares at a consideration of US$4,235,439 (or equivalent amount in HK$);

(b) the capital increase agreement dated March 30, 2020 entered into among Yanbian Fuli, Beijing Fuli and Tonghua Xintong Investment Holding Group Co., Ltd.* (通化信通投資控股集團有限公司)(“Tonghua Xintong”), pursuant to which Tonghua Xintong agreed to subscribe for the increased registered capital of Yanbian Fuli in the amount of RMB1,578,947 at a consideration of RMB75 million;

(c) the deed of loan confirmation and loan capitalization dated November 30, 2020 entered into between our Company and Mr. Yu Bing Han (余秉翰), pursuant to which the principal amount of the loans owed by our Company to Mr. Yu Bing Han and all unpaid interests accrued thereon, totalling HK$6,797,907, shall be capitalized with the allotment and issuance of 19,430 Shares to Mr. Yu Bing Han, such that our Company shall be deemed to have properly and fully discharged its repayment obligations under the said loans;

(d) the deed of loan confirmation and loan capitalization dated November 30, 2020 entered into between our Company and Mr. Pang Peter Chun Ming (彭浚銘), pursuant to which the principal amount of the loans owed by our Company to Mr. Pang Peter Chun Ming and all unpaid interests accrued thereon, totaling HK$2,717,154, shall be capitalized with the allotment and issuance of 7,766 Shares to Mr. Pang Peter Chun Ming, such that our Company shall be deemed to have properly and fully discharged its repayment obligations under the said loans;

(e) the deed of loan confirmation and loan capitalization dated November 30, 2020 entered into between our Company and Mr. Li Xianguang (李獻廣), pursuant to which the principal amount of the loans owed by our Company to Mr. Li Xianguang and all unpaid interests accrued thereon, totalling HK$2,181,249, shall be capitalized with the

– VI-8 – THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.

APPENDIX VI STATUTORY AND GENERAL INFORMATION

allotment and issuance of 6,234 Shares to Mr. Li Xianguang, such that our Company shall be deemed to have properly and fully discharged its repayment obligations under the said loans;

(f) the deed of loan confirmation and loan capitalization dated November 30, 2020 entered into between our Company and Ms. Tsui Chin Ching (徐展晴), pursuant to which the principal amount of the loans owed by our Company to Ms. Tsui Chin Ching and all unpaid interests accrued thereon, totalling HK$544,203, shall be capitalized with the allotment and issuance of 1,555 Shares to Ms. Tsui Chin Ching, such that our Company shall be deemed to have properly and fully discharged its repayment obligations under the said loans;

(g) the deed of loan confirmation and loan capitalization dated November 30, 2020 entered into between our Company and Ms. Lin Meiling (林美玲), pursuant to which the principal amount of the loans owed by our Company to Ms. Lin Meiling and all unpaid interests accrued thereon, totalling HK$528,257, shall be capitalized with the allotment and issuance of 1,509 Shares to Ms. Lin Meiling, such that our Company shall be deemed to have properly and fully discharged its repayment obligations under the said loans;

(h) the deed of loan confirmation and loan capitalization dated November 30, 2020 entered into between our Company and Ms. Liu Shuang, pursuant to which the principal amount of the loans owed by our Company to Ms. Liu Shuang and all unpaid interests accrued thereon, totalling HK$423,638, shall be capitalized with the allotment and issuance of 1,210 Shares to Ms. Liu Shuang, such that our Company shall be deemed to have properly and fully discharged its repayment obligations under the said loans;

(i) the share subscription agreement dated November 30, 2020 entered into between our Company and Mr. Pang Peter Chun Ming, pursuant to which 714 Shares were allotted and issued to Mr. Pang Peter Chun Ming at a consideration of HK$250,000;

(j) the equity interest transfer agreement dated November 30, 2020 entered into between Yanbian Fuli and Ms. Hao Hui (郝慧), pursuant to which Yanbian Fuli agreed to transfer 49% equity interests in Dunhua Yiqisong Peridot Cultural & Tourism Development Co., Ltd.* (敦化意氣松橄欖石文化旅遊開發有限公司)(“Dunhua Tourism”) to Ms. Hao Hui at nil consideration;

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APPENDIX VI STATUTORY AND GENERAL INFORMATION

(k) the equity interest transfer agreement dated November 30, 2020 entered into between Yanbian Fuli and Mr. Bao Dongjie (鮑冬杰), pursuant to which Yanbian Fuli agreed to transfer 51% equity interests in Dunhua Tourism to Mr. Bao Dongjie at nil consideration;

(l) the shareholder’s loan agreement dated April 1, 2021 entered into between our Company and Mr. Yu Bing Han, pursuant to which Mr. Yu Bing Han agreed to provide a shareholder’s loan of HK$13.0 million to our Company for a period of three years (subject to extensions in accordance with the terms of the agreement) at an annual interest rate of 2.0%;

(m) the capital increase agreement dated May 30, 2021 entered into among Yanbian Fuli, Beijing Fuli, Tonghua Xintong and Jilin Dunhua Development Investment Group Co., Ltd.* (吉林敦化發展投資集團有限公司)(“Jilin Dunhua”), pursuant to which Jilin Dunhua agreed to subscribe for the increased registered capital of Yanbian Fuli in the amount of RMB644,468 at a consideration of RMB34 million;

(n) the Deed of Indemnity; and

(o) the [REDACTED].

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APPENDIX VI STATUTORY AND GENERAL INFORMATION

2. Intellectual Property Rights of Our Group a) Trademarks

As of the Latest Practicable Date, our Group is the owner of the following registered trademarks which we believe are material to our business:

Registration Place of No Trademark number Registered proprietor registration Class(es) Validity period 1. 25368147 Yanbian Fuli PRC 14 July 14, 2018 to July 13, 2028

2. 25354680 Yanbian Fuli PRC 14 July 14, 2018 to July 13, 2028

3. 25368161 Yanbian Fuli PRC 14 October 21, 2018 to October 20, 2028

4. 35779400 Fuli HK PRC 35 October 7, 2019 to October 6, 2029

5. 35821387 Fuli HK PRC 14 November 7, 2019 to November 6, 2029

6. 35824223 Fuli HK PRC 19 October 21, 2019 to October 20, 2029

7. 35838620 Fuli HK PRC 37 November 7, 2019 to November 6, 2029

8. 35843952 Fuli HK PRC 35 November 7, 2019 to November 6, 2029

9. 305423175 Fuli HK Hong Kong 14, 18, 25, 35, 37 October 20, 2020 to and 40 October 19, 2030

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APPENDIX VI STATUTORY AND GENERAL INFORMATION

Registration Place of No Trademark number Registered proprietor registration Class(es) Validity period 10. 304742325 Fuli HK Hong Kong 14, 19, 35 and 37 November 21, 2018 to November 20, 2028

11. 304742343 Fuli HK Hong Kong 14, 19, 35 and 37 November 21, 2018 to November 20, 2028

12. 304742370 Fuli HK Hong Kong 14, 19, 35 and 37 November 21, 2018 to November 20, 2028

13. 018323621 Fuli HK European 14, 18, 35, October 20, 2020 to Union 37 and 40 October 20, 2030

14. 018323617 Fuli HK European 14, 18, 35, October 20, 2020 to Union 37 and 40 October 20, 2030

15. 018008558 Fuli HK European 14, 19, 35 and 37 January 9, 2019 to Union January 9, 2029

16. 018008553 Fuli HK European 14, 19, 35 and 37 January 9, 2019 to Union January 9, 2029

17. UK00003536324 Our Company UK 14, 18, 25, September 23, 2020 to 35, 37 and 40 September 23, 2030

18. UK00003536276 Our Company UK 14, 18, 25, September 23, 2020 to 35, 37 and 40 September 23, 2030

19. UK00003365638 Fuli HK UK 14, 19, 35 and 37 January 9, 2019 to January 9, 2029

20. UK00003365055 Fuli HK UK 14, 19, 35 and 37 January 7, 2019 to January 7, 2029

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APPENDIX VI STATUTORY AND GENERAL INFORMATION

As of the Latest Practicable Date, our Group is applying for the following trademarks:

Application Place of No Trademark number Applicant registration Class(es) Date of application 1. 49720739 Our Company PRC 14, 18, 25, 35, September 14, 2020 37 and 40

2. 305423193AA Fuli HK Hong Kong 18, 35 and 40 October 20, 2020

3. 305423193AB Fuli HK Hong Kong 14, 25 and 37 October 20, 2020

4. 305423184AA Fuli HK Hong Kong 14, 18, 25 and October 20, 2020 37

5. 305423184AB Fuli HK Hong Kong 35 and 40 October 20, 2020

6. 305644666 Fuli HK Hong Kong 14 June 2, 2021

7. 305644675 Fuli HK Hong Kong 14 June 2, 2021 b) Domain Names

As of the Latest Practicable Date, our Group has registered the following domain name in the PRC which we believe is material to our business:

Domain name Registered proprietor Validity period fuligemstones.com Yanbian Fuli December 18, 2019 to December 18, 2022

3. Related Party Transactions

Save as disclosed in note 31 to the Accountants’ Report, during the two years immediately preceding the date of this document, we have not engaged in any other material related party transactions.

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APPENDIX VI STATUTORY AND GENERAL INFORMATION

C. FURTHER INFORMATION ABOUT OUR DIRECTORS AND SUBSTANTIAL SHAREHOLDERS

1. Disclosure of Interests a) Disclosure of Interests of Directors and Chief Executive in the Shares, Underlying Shares and Debentures of Our Company and its Associated Corporations

Immediately following the completion of the [REDACTED] and the [REDACTED] (assuming the [REDACTED] is not exercised and without taking into account any Shares which may be issued upon the exercise of any options which may be granted under the Share Option Scheme), the interests of our Directors or chief executives in the shares, underlying shares and debentures of the Company or its associated corporations (within the meaning of Part XV of the SFO) which will be required to be notified to us and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests or short positions in which they were taken or deemed to have under such provisions of the SFO) or which will be required, under Section 352 of the SFO, to be entered in the register referred to in that section, or which will be required to be notified to our Company and the Stock Exchange, under the Model Code for Securities Transactions by Directors of Listed Issuers as set out in Appendix 10 to the Listing Rules (the “Model Code”), once the Shares are [REDACTED], will be as follows:

As of Immediately after the [REDACTED] and the Latest Practicable Date the [REDACTED] (1) Percentage of Percentage of Capacity/Nature shareholding in our shareholding in our Name of interest Number of Shares (2) Company Number of Shares (2) Company Mr. Yu ...... Interest in controlled 2,532,000 (L) 49.12% [REDACTED] [REDACTED]% corporation (3) (L) Mr. Jiang .... Interest in controlled 1,863,000 (L) 36.14% [REDACTED] [REDACTED]% corporation (4) (L)

Notes:

(1) Assuming the [REDACTED] is not exercised and without taking into account any Shares which may be issued upon the exercise of any options which may be granted under the Share Option Scheme.

(2) The letter “L” denotes long position in our Shares.

(3) Mr. Yu is the sole shareholder of Kind Modest, and he is therefore deemed to be interested in the Shares held by Kind Modest by virtue of the SFO.

(4) Mr. Jiang is the sole shareholder of Grand Start, and he is therefore deemed to be interested in the Shares held by Grand Start by virtue of the SFO.

–VI-14– THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.

APPENDIX VI STATUTORY AND GENERAL INFORMATION b) Interests of the Substantial Shareholders Not Being a Director of Chief Executive of Our Company in the Shares, Underlying Shares and Debentures of Any Member of Our Group

Immediately following completion of the [REDACTED] and the [REDACTED] (assuming the [REDACTED] is not exercised and without taking into account any Shares which may be issued upon the exercise of any options which may be granted under the Share Option Scheme), so far as our Directors are aware, the following persons (not being a Director or chief executive of our Company) are expected to have interests or short positions in our Shares or underlying Shares which would fall to be disclosed to us and the Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of the SFO, or directly or indirectly, be interested in 10% or more of the nominal value of any class of share capital carrying the rights to vote in all circumstances at general meetings of any member of our Group:

Interests in our Company

Immediately after completion of the As of the Latest Practicable Date [REDACTED](1) and the [REDACTED]

Percentage of Percentage of shareholding in our shareholding in our Name Capacity/Nature of interest Number of Shares (2) Company Number of Shares (2) Company Kind Modest ...... Beneficial owner(3) 2,532,000 (L) 49.12% [REDACTED] (L) [REDACTED]% Ms. Pang Hao (龐浩) ...... Interest of spouse(4) 2,532,000 (L) 49.12% [REDACTED] (L) [REDACTED]% Grand Start ...... Beneficial owner(5) 1,863,000 (L) 36.14% [REDACTED] (L) [REDACTED]% Ms. Liu Wei (劉威) ...... Interest of spouse(6) 1,863,000 (L) 36.14% [REDACTED] (L) [REDACTED]% Tegus Partnership ...... Beneficial owner 619,085 (L) 12.01% [REDACTED] (L) [REDACTED]% Mr. Peng Jianqiang (彭建強) ..... Interest in a controlled 619,085 (L) 12.01% [REDACTED] (L) [REDACTED]% corporation(7) Ms. Tian Wei (田偉) ...... Interest of spouse(8) 619,085 (L) 12.01% [REDACTED] (L) [REDACTED]%

Notes:

(1) Assuming the [REDACTED] is not exercised and without taking into account any Shares which may be issued upon the exercise of any options which may be granted under the Share Option Scheme.

(2) The letter “L” denotes long position in our Shares.

(3) Mr. Yu is the sole shareholder of Kind Modest, and he is therefore deemed to be interested in the Shares held by Kind Modest by virtue of the SFO.

(4) Ms. Pang Hao is the spouse of Mr. Yu and she is therefore deemed to be interested in the Shares that Mr. Yu is interested in by virtue of the SFO.

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APPENDIX VI STATUTORY AND GENERAL INFORMATION

(5) Mr. Jiang is the sole shareholder of Grand Start, and he is therefore deemed to be interested in the Shares held by Grand Start by virtue of the SFO.

(6) Ms. Liu Wei is the spouse of Mr. Jiang and she is therefore deemed to be interested in the Shares that Mr. Jiang is interested in by virtue of the SFO.

(8) Ms. Tian Wei is the spouse of Mr. Peng Jianqiang and she is therefore deemed to be interested in the Shares that Mr. Peng Jianqiang is interested in by virtue of the SFO.

2. Further Information about Our Directors

Each of the executive Directors [has entered] into a service contract with us on [•] for a term of three years commencing from [•], subject to termination in certain circumstances as stipulated in the relevant service contract.

Each of the independent non-executive Directors [has signed] an appointment letter with us on [•] for an initial fixed term of [three years] commencing from [•], subject to termination in certain circumstances as stipulated in the relevant appointment letter.

The current basic annual salaries or director’s fees of our Directors under their respective service contract/appointment letter are as follows:

Mr. Yu ...... RMB[66,000] Mr. Jiang ...... — Mr. Chi Yongxi ...... RMB[391,200] Ms. Pia Pompea TONNA ...... GBP[130,000] Mr. Liu Zhong ...... RMB[180,000] Dr. Ren Shuang K...... RMB[120,000] Dr. Shen Hsi-Tien ...... RMB[120,000] Mr. Li Shu Pai ...... HK$[139,200]

Save as aforesaid, none of our Directors has or is proposed to have a service contract with us or any of our subsidiaries (other than contracts expiring or determinable by the employer within one year without the payment of compensation (other than statutory compensation)).

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APPENDIX VI STATUTORY AND GENERAL INFORMATION

3. Remuneration of Directors

The aggregate amount of fees, salaries, contributions to retirement benefits, discretionary bonuses, allowances and other benefits in kind granted to our Directors (in a capacity as directors or employees of any subsidiary of our Group) for three years ended December 31, 2020 were RMB0.4 million, RMB0.4 million, and RMB1.5 million, respectively.

Under the arrangements in force as of the date of this document, our Directors will be entitled to receive remuneration and benefits in kind which, for the year ending 31 December 2021, is expected to be RMB2.3 million in aggregate.

None of our Directors or any past directors of any member of our Group has been paid any sum of money during the three years ended December 31, 2020 (i) as an inducement to join or upon joining our Group, or (ii) for loss of office as a director of any member of our Group or of any other office in connection with the management of the affairs of any member of our Group.

Further, there has been no arrangement under which a Director has waived or agreed to waive any emolument during the three years ended December 31, 2020.

4. Disclaimers

Save as disclosed in this appendix and in “Business” and “Substantial Shareholders” in this document:

(a) taking no account of any Shares which may be taken up or acquired under the [REDACTED], our Directors are not aware of any person who immediately following completion of the [REDACTED] and the [REDACTED] will have an interest or short position in our Shares and underlying Shares which would fall to be disclosed to our Company under the provisions of Divisions 2 and 3 of Part XV of the SFO or who is, either directly or indirectly, interested in 10% or more of the issued voting shares of our Company or any other members of our Group;

(b) none of our Directors or chief executive of our Company has for the purpose of Divisions 7 and 8 of Part XV of the SFO or the Listing Rules, nor is any of them taken to or deemed to have under Divisions 7 and 8 of Part XV of the SFO, an interest or short position in the shares, underlying shares and debentures of our Company or any associated corporations (within the meaning of the SFO) or any interest which will have to be entered in the register of to be kept by our Company pursuant to section 352 of the SFO or which will be required to be notified to our Company and the Stock Exchange pursuant to Appendix 10 to the Listing Rules once our Shares are [REDACTED] on the Stock Exchange;

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APPENDIX VI STATUTORY AND GENERAL INFORMATION

(c) none of the Directors nor any of the experts listed in “— E. Other Information — 8. Qualification of Experts” below has been interested, directly or indirectly, in the promotion of our Company, or in any assets which have been, within the two years immediately preceding the date of this document, acquired or disposed of by or leased to any member of our Group, or are proposed to be acquired or disposed of by or leased to any member of our Group;

(d) none of the Directors is materially interested in any contract or arrangement subsisting at the date of this document which is significant in relation to the business of our Group; and

(e) save in connection with the [REDACTED], none of the experts listed in “— E. Other Information — 8. Qualification of Experts” below:

i. is interested legally or beneficially in any securities of any member of our Group; or

ii. has any right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member of our Group.

D. SHARE OPTION SCHEME

The following is a summary of principal terms of the Share Option Scheme conditionally adopted by written resolutions of our Shareholders passed on [•]. The terms of the Share Option Scheme are in compliance with the provisions of Chapter 17 of the Listing Rules.

1. Purpose

The purpose of the Share Option Scheme is to attract and retain employees of our Group and to reward our eligible employees, our Directors and other Eligible Participants (as defined below) for their past contribution to our Group. Our Directors consider the Share Option Scheme will provide incentives to the employees of our Group to further contribute to our Company and our Group and to align their interests with the best interests of our Company and our Shareholders as a whole. Given that our Directors are entitled to determine the performance targets to be achieved as well as the minimum period that an option must be held before an option can be exercised on a case-by-case basis as provided in the relevant offer letter, and that the exercise price of an option cannot in any event fall below the price stipulated in the Listing Rules or such higher price as may be fixed by our Directors in accordance with the applicable laws and regulations, it is expected

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APPENDIX VI STATUTORY AND GENERAL INFORMATION that grantees of an option will make an effort to contribute to the development of our Group so as to bring about an increased market price of our Shares in order to capitalize on the benefits of the options granted.

2. Who May join

Our Board may, at its absolute discretion, offer options to subscribe for such number of Shares in accordance with the terms set out in the Share Option Scheme to any full-time or part-time employees of our Group, including any executive Directors, independent non-executive Directors, advisors and consultants of our Group (collectively, the “Eligible Participants”).

3. Maximum Number of Shares

(i) The maximum number of Shares which may be issued upon the exercise of all outstanding options granted and yet to be exercised under the Share Option Scheme and any other share option scheme of our Group shall not in aggregate exceed 30.00% of the issued share capital of our Company from time to time.

(ii) The total number of Shares which may be issued upon exercise of all options to be granted under the Share Option Scheme and any other share option scheme of our Group shall not in aggregate exceed 10.00% of our Shares in issue on the day on which [REDACTED], such 10.00% limit represents [REDACTED] Shares (the “General Scheme Limit”), but excluding any Shares which may be issued upon the exercise of the [REDACTED].

(iii) Subject to paragraph (i) above and without prejudice to paragraph (iv) below, our Company may issue a circular to our Shareholders and seek approval of our Shareholders in a general meeting to extend the General Scheme Limit provided that the total number of Shares which may be issued upon exercise of all options to be granted under the Share Option Scheme and any other share options scheme of our Group shall not exceed 10.00% of the Shares in issue as of the date of approval of the limit and, for the purpose of calculating the limit, options (including those outstanding, cancelled, lapsed or exercised in accordance with the Share Option Scheme and any other share option scheme of our Group) previously granted under the Share Option Scheme and any other share option scheme of our Group will not be counted. The circular sent by our Company to our Shareholders shall contain, among other information, the information required under the Listing Rules.

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APPENDIX VI STATUTORY AND GENERAL INFORMATION

(iv) Subject to paragraph (i) above and without prejudice to paragraph (iii) above, our Company may seek separate our Shareholders’ approval in a general meeting to grant options beyond the General Scheme Limit or, if applicable, the extended limit referred to in paragraph (iii) above to participants specifically identified by our Company before such approval is sought. In such event, our Company must send a circular to our Shareholders containing a general description of the specified participants, the number and terms of options to be granted, the purpose of granting options to the specified participants with an explanation as to how the terms of the options serve such purpose and such other information required under the Listing Rules.

(v) The exercise of any option shall be subject to our Shareholders in general meeting approving any increase in the authorized share capital of our Company. Subject thereto, our Board shall make available sufficient authorized but unissued share capital of our Company for purpose of allotment of shares upon exercise of option(s).

4. Maximum Entitlement of Each Participant

The total number of Shares issued and which may fall to be issued upon exercise of the options granted under the Share Option Scheme and any other share option scheme of our Company (including both exercised and outstanding options) to each participant in any 12-month period shall not exceed 1.00% of the issued share capital of our Company for the time being (the “Individual Limit”). Any further grant of options in aggregate in excess of the Individual Limit in any 12-month period up to and including the date of such further grant shall be subject to the issue of a circular to our Shareholders and our Shareholders’ approval in general meeting of our Company with such participant and his close associates (or his associates if the participant is a connected person) abstaining from voting.

5. Grant of Options to Connected Persons

(i) Any grant of options under the Share Option Scheme to a director, chief executive or substantial shareholder of our Company or any of their respective associates must be approved by our independent non-executive Directors (excluding any independent non-executive Director who is the proposed grantee of the options).

(ii) Where any grant of options to a Substantial Shareholder or an independent non-executive Director or any of their respective associates would result in our Shares issued and to be issued upon exercise of all options already granted and to be granted (including options exercised, cancelled and outstanding) to such person in the 12-month period up to and including the date of such grant:

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APPENDIX VI STATUTORY AND GENERAL INFORMATION

(1) representing in aggregate over 0.10% (or such other higher percentage as may from time to time be specified by the Stock Exchange) of our Shares in issue; and

(2) having an aggregate value, based on the [REDACTED] of our Shares as stated in [REDACTED] the date of the offer of grant, in excess of HK$5.0 million (or such other higher amount as may from time to time be specified by the Stock Exchange); such further grant of options must be approved by our Shareholders in a general meeting. Our Company must send a circular to our Shareholders. The grantee, his associates and all core connected persons of our Company must abstain from voting in favor of the relevant resolution at such general meeting. Any vote taken at the general meeting to approve the grant of such options must be taken on a poll. Any change in the terms of options granted to a Substantial Shareholder or an independent non-executive Director or any of their respective associates must be approved by our Shareholders in a general meeting.

6. Time of Acceptance and Exercise of Option

An option may be accepted by a participant from the date of the offer of grant of the option within the offer period as set out in the relevant offer letter issued by our Company to such participant.

An option may be exercised in accordance with the terms of the Share Option Scheme at any time during a period to be determined and notified by our Directors to each grantee, which period may commence on a day after the date upon which the offer for the grant of options is made but shall end in any event not later than 10 years from the date of grant of the option subject to the provisions for early termination under the Share Option Scheme. Unless otherwise determined by our Directors and stated in the offer of the grant of options to a grantee, there is no minimum period required under the Share Option Scheme for the holding of an option before it can be exercised.

7. Payment on Acceptance of Option Offer

RMB1.00 is payable by a participant to our Company on acceptance of the option offer as consideration for the grant.

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APPENDIX VI STATUTORY AND GENERAL INFORMATION

8. Performance Targets

Unless our Directors otherwise determine and state in the offer of the grant of options to a grantee, a grantee is not required to achieve any performance targets before any options granted under the Share Option Scheme can be exercised.

9. Subscription Price for Shares and Consideration for the Option

The subscription price per Share under the Share Option Scheme (the “Subscription Price”) will be a price determined by our Directors, but shall not be less than the highest of (i) the [REDACTED] of the Shares as stated in [REDACTED] on the date of the offer of grant, which must be a business day; (ii) the average [REDACTED] of our Shares as stated in [REDACTED] for the five business days immediately preceding the date of the offer of grant (provided that in the event that any option is proposed to be granted within a period of less than five business days after the [REDACTED], the new issue price of the Shares for the [REDACTED] shall be used as the closing price for any business day falling within the period before [REDACTED]), or if our Shares are not so quoted or traded, the fair market value of a Share as determined by our Board.

10. Ranking of Shares

(i) Shares allotted and issued upon the exercise of an option will be subject to the provisions of the Memorandum and Articles and will rank pari passu with the fully paid Shares in issue as from the date of exercise of the option and in particular will entitle the holders to participate in all dividends or other distributions paid or made on or after the date of exercise of the option other than any dividend or other distribution previously declared or recommended or resolved to be paid or made if the record date therefor is before the date of exercise of the option, provided always that when the date of exercise of the option falls on a date upon which the register of members of the Company is closed then the exercise of the option shall become effective on the first business day on which the register of members of our Company is re-opened. A Share issued upon the exercise of a granted option shall not carry voting rights until the registration of the Grantee (or such other person as may succeed to the Grantees’ title by operation of the applicable laws and in compliance with the terms of the Share Option Scheme) as the holder thereof.

(ii) Unless the context otherwise requires, references to “Shares” in this paragraph include references to shares in the ordinary equity share capital of our Company of such nominal amount as shall result from a subdivision, consolidation, re-classification or re-construction of the share capital of our Company from time to time.

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APPENDIX VI STATUTORY AND GENERAL INFORMATION

11. Restrictions on the Time of Grant of Options

No offer for grant of options shall be made after inside information has come to the Company’s knowledge until it has announced the information in accordance with the requirements of the Listing Rules. In particular, during the period commencing one month immediately preceding the earlier of (a) the date of the meeting of our Directors (as such date is first notified to the Stock Exchange in accordance with the requirements of the Listing Rules) for the approval of our Company’s results for any year, half-year, quarter or any other interim period (whether or not required under the Listing Rules); and (b) the last date on which our Company must publish its announcement of its results for any year, half-year, quarter or any other interim period (whether or not required under the Listing Rules), and ending on the date of the announcement of the results, no offer for grant of options may be made.

Our Directors may not grant any option to a participant who is a Director during the period or time in which Directors are prohibited from dealing in shares pursuant to the Model Code or any corresponding code or securities dealing restrictions adopted by our Company.

12. Period of the Share Option Scheme

The Share Option Scheme will remain in force for a maximum period of 10 years commencing on the date on which the Share Option Scheme is adopted.

13. Rights are Personal to the Grantee

An option is personal to the grantee and shall not be transferable or assignable and no grantee shall in any way sell, transfer, charge, mortgage, encumber or otherwise dispose of or create any interest in favor of or enter into any agreement with any other person over or in relation to any option, except for the transmission of an option on the death of the grantee to his personal representative(s) on the terms of this Share Option Scheme.

14. Rights on Ceasing Employment

Subject to the applicable laws and regulations such Grantee or our Company is then subject to in connection with the exercise of the options, if the grantee of an option is an employee of our Group and ceases to be an employee of our Group for any reason other than death or illness, or for termination for cause before exercising his or her option in full, the unvested option (to the extent not already exercised) will immediately lapse on the date of cessation. The Grantee or his or her personal representatives (if appropriate) may exercise all his or her vested options until later of: (i) 90 days after the date when the options become exercisable as set for sub-paragraph 15 below, or

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APPENDIX VI STATUTORY AND GENERAL INFORMATION

(ii) 30 days after the date of cessation of employment or directorship, or such longer period as our Board may otherwise determine. Any vested option not exercised prior to the expiry of the above-mentioned period shall immediately lapse.

15. Rights on Death or Illness

Subject to the applicable laws and regulations such Grantee or our Company is then subject to in connection with the exercise of the options and subject to sub-paragraph 16 below, if a Grantee ceases to be an employee of our Group by reason of:

— our Grantee’s death; or the Grantee’s serious illness or injury which, in the opinion of the Board, renders the Grantee concerned unfit to perform the duties of his or her employment and which in the normal course would render the Grantee unfit to continue performing the duties under his or her employment contract with the relevant member of our Group provided such illness or injury is not self-inflicted or as a result of alcohol or drug abuse; then any unvested option will immediately lapse. The Grantee or his or her personal representatives (if appropriate) may exercise all his or her vested option until the later of: (i) 90 days after the date when the option become exercisable, or (ii) six (6) months after the date of cessation of employment or directorship, or such longer period as our Board may determine. Any vested option not exercised prior to the expiry of the above-mentioned period shall lapse.

16. Rights on Termination for Cause

If our Board determines that any Grantee ceasing to be an employee of any member of our Group by any of the following reason, (i) any act of grave misconduct or willful default or willful neglect in the discharge of duties of the Grantee with our Group; (ii) without prejudice to the generality of (i) above, being proven to have carried out any fraudulent activity or have fraudulently failed to carry out any activity whether or not in connection with the affairs of our Group; (iii) being convicted of any offence; (iv) being proved to take advantages of such Grantee’s position to make interest for him/herself or for others; (v) being proved to appropriate assets of our Group; (vi) serious violation or persistent breach of any terms of the employment agreement, the confidentiality and intellectual property rights assignment agreement, the non-compete and non-solicitation agreement, the anti-bribery agreement or any other agreements entered into by and between such Grantee and any member of our Group; (vii) repeated drunkenness or use of illegal drugs or being addicted to gambling which adversely interferes with or is reasonably expected to adversely interfere with the performance of such Grantee’s obligations and duties of employment;

–VI-24– THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.

APPENDIX VI STATUTORY AND GENERAL INFORMATION and (viii) any other conduct which, as our Board determines in good faith, would justify the termination of his or her employment, then any option (whether vested or unvested) held by the Grantee shall immediately lapse (unless our Board resolves otherwise in its absolute discretion).

17. Rights on a Reorganization of Capital Structure and Other Corporate Events

An unexercised option may lapse as provided in the case of a general offer or a corporate transaction as specified as follows:

(i) if a general or partial offer, whether by way of take-over offer, share repurchase offer, or scheme of arrangement or otherwise in like manner is made to all shareholders of our Company (or all such shareholders other than the offeror and/or any person controlled by the offeror and/or any person associated with or acting in connect with the offeror), our Company shall use all reasonable endeavours to procure that such offer is extended to all the Grantees on the same terms, mutatis mutandis, and assuming that they will become, by the exercise in full of the options granted to them which at the time vested, shareholders of our Company. If such offer becomes or is declared unconditional or such scheme or arrangements is formally proposed to shareholders of our Company, the Grantee shall, notwithstanding any other terms on which his or her option were granted (provided that any performance condition must first be satisfied), be entitled to exercise his or her vested option at any time up until (i) the close of such offer (or any revised offer); or (ii) the record date for entitlements under a scheme of arrangement, as applicable, and any unexercised option will immediately lapse on the close of business on such date; and

(ii) in the event of a corporate transaction (including a change in control) unless otherwise provided in the relevant offer letter or any other written agreement between the Company or any Grantee or unless otherwise expressly provided by our Board at our time of grant of the option, then, notwithstanding any other provision of the Share Option Scheme, our Board may take one or more of the following actions with respect to granted option, contingent upon the closing or completion of the corporate transaction:

(1) arrange for the surviving entity or acquiring company (or the surviving or acquiring company’s parent company) to assume or continue the option or to substitute a similar award for the option (including, but not limited to, an option to acquire the same consideration paid to our Shareholders pursuant to the corporate transaction);

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APPENDIX VI STATUTORY AND GENERAL INFORMATION

(2) accelerate the vesting, in whole or in part, of the option (and, if applicable, the time at which the option may be exercised) to a date prior to the effective time of such corporate transaction as our Board determines (or, if our Board does not determine such a date, to the date that is five (5) days prior to the effective date of the corporate transaction), with any such option terminating if not exercised (if applicable) at or prior to the effective time of the corporate transaction; provided, however, that our Board may require Grantees to complete and deliver to our Company a notice of exercise before the effective date of a corporate transaction, which exercise is contingent upon the effectiveness of such corporate transaction;

(3) cancel or arrange for the cancellation of the option, to the extent not vested prior to the effective time of the corporate transaction, and pay such cash consideration (or no consideration) as our Board, in its sole discretion, may consider appropriate; and

(4) make a payment for each vested option, in such form as may be determined by our Board equal to the excess, if any, of (x) the per share amount payable to holders of Shares in connection with the corporate transaction, over (y) the exercise price, if any, payable by such holder in connection with such exercise, multiplied by the number of vested Shares under the option. This payment may be $0 if the per share amount payable in respect of a Share in the corporate transaction is equal to or less than the Subscription Price. In addition, any escrow, holdback, earn-out or similar provisions in the definitive agreement for the corporate transaction may apply to such payment to the same extent and in the same manner as such provisions apply to the holders of Shares.

Our Board need not take the same action or actions with respect to all granted options or portions thereof or with respect to all Grantees in a corporate transaction. Our Board may take different actions with respect to the vested and unvested portions of the option.

18. Rights on Winding Up

If notice is duly given of a resolution for the voluntary winding-up of our Company, vested option may, subject to the applicable laws and regulations such Grantee or our Company is then subject to in connection with the exercise of the options, be exercised prior to the date of the resolution. The Grantee shall accordingly be entitled, in respect of the Shares falling to be allotted and issued upon the exercise of his or her option, to participate in the distribution of the assets of our Company available in liquidation pari passu with the holders of the Shares in issue on the day prior to the date of such resolutions.

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APPENDIX VI STATUTORY AND GENERAL INFORMATION

19. Adjustments to the Subscription Price

In the event of any alteration in the capital structure of our Company whilst any granted option remains outstanding, whether by way of capitalization of profits or reserves, rights issue, consolidation, sub-division, or reduction of the share capital of our Company or otherwise howsoever in accordance with legal requirements, other than any alteration in the capital structure of our Company as a result of an issue of Shares as consideration in a transaction to which our Company is a party or an issue of shares pursuant to, or in connection with, any share option plan, share appreciation rights plan or any arrangement for remunerating or incentivizing any employee, consultant or adviser to our Company or any member of our Group or in the event of any distribution of our Company’s capital assets to our Shareholders on a pro rata basis (whether in cash or in specie) other than dividends paid out of the net profits attributable to Our Shareholders for each financial year of our Company, such corresponding alterations (if any) shall be made to:

(i) the number or nominal amount of Shares subject to the granted option so far as unexercised or unsettled;

(ii) the Subscription Price of any option; or any combination thereof, as an independent financial adviser or the auditors shall confirm to our Board in writing, either generally or with regard to any particular Grantee, to have given a participant the same proportion (or rights in respect of the same proportion) of the equity capital as that to which that person was previously entitled, but that no such adjustments be made to the extent that a share would be issued at less than its nominal value. The capacity of the independent financial adviser or auditors (as the case may be) in this paragraph is that of experts and not of arbitrators and their confirmation shall, in the absence of manifest error, be final and binding on our Company and the Grantees.

In addition, in respect of any such adjustments, other than any adjustment made on a capitalization issue, such auditors or independent financial advisor must confirm to our Directors in writing that the adjustments satisfy the requirements of the relevant provision of the Listing Rules and such other applicable guidance and/or interpretation of the Listing Rules from time to time issued by the Stock Exchange.

20. Cancellation of Options

Any option granted but not exercised within the prescribed period as specified in the relevant offer letter shall be cancelled. Prior to the expiry of the option period, any cancellation of options granted but not exercised shall require the approval of our Board and the Grantee in question. If our Company cancels options and issues new ones to the same Grantee, the issue of such new

–VI-27– THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.

APPENDIX VI STATUTORY AND GENERAL INFORMATION options may only be made under a scheme with available unissued options (excluding the cancelled options) within the limit approved by our Shareholders and granted in compliance with the terms of the Share Option Scheme, the Listing Rules and applicable law.

21. Termination of the Share Option Scheme

Our Board may at any time terminate the operation of the Share Option Scheme and in such event no further options will be offered or granted, but in all other respects the provisions of the Share Option Scheme shall remain in full force and effect. All options granted prior to such termination shall continue to be valid and exercisable despite of the termination in accordance with the terms of the Share Option Scheme.

22. Lapse of Option

An option shall lapse automatically (to the extent not already exercised) on the earliest of:

(i) the expiry of the option period as stated in the offer letter in respect of such option;

(ii) the date on which the grantee commits a breach of the provision which restricts the Grantee to transfer or assign an option granted under the Share Option Scheme or sell, transfer, charge, mortgage, encumber or otherwise dispose of or create any interest in favor of or enter into any agreement with any other person over or in relation to any option except for the transmission of an option on the death of the Grantee to his personal representative(s) in accordance with the terms of the Share Option Scheme; or

(iii) subject to sub-paragraphs 14 to 18, on a Grantee ceasing to be an employee of our Group.

23. Others

The Share Option Scheme shall take effect upon all of the following having been satisfied:

(i) the passing of a resolution by our Board to approve and adopt the Share Option Scheme, and to authorize our Board to grant option hereunder and to allot, issue and deal with Shares pursuant to the exercise of any options granted under the Share Option Scheme;

(ii) the passing of a resolution by our Shareholders in general meeting to approve and adopt the Share Option Scheme;

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APPENDIX VI STATUTORY AND GENERAL INFORMATION

(iii) our Company is satisfied that all legal matters in connection with the issuance and delivery of the Shares under the option have been addressed and resolved (including without limitation the publishing of an announcement on the outcome of the shareholders’ meeting for the adoption of the Share Option Scheme in accordance with the Listing Rules); and

(iv) the approval of the [REDACTED] and permission to deal any Shares to be issued and allotted pursuant to the exercise of options under the Share Option Scheme.

Our Company may require, as a condition to the exercise of a granted option or the delivery of Shares under a granted option, such representations or agreements as the advisors for our Company may consider appropriate to avoid violation of any applicable laws and regulations.

The terms and conditions of the Share Option Scheme relating to the matters set forth in Rule 17.03 of the Listing Rules shall not be altered to the advantage of grantees of the options except with the approval of our Shareholders in a general meeting. Any alterations to the terms and conditions of the Share Option Scheme which are of a material nature or any change to the terms of options granted must be approved by our Shareholders in a general meeting and the Stock Exchange, except where the alterations take effect automatically under the existing terms of the Share Option Scheme. The amended terms of the Share Option Scheme or the options shall comply with the relevant requirements of the Listing Rules and the applicable laws. Any change to the authority of our Directors in relation to any alteration to the terms of the Share Option Scheme shall be approved by our Shareholders in a general meeting.

24. Value of Options

Our Directors consider it inappropriate to disclose the value of options which may be granted under the Share Option Scheme as if they had been granted as of the Latest Practicable Date. Any such valuation will have to be made on the basis of a certain option pricing model or other method that depends on various assumptions including the exercise price, the exercise period, interest rate, expected volatility and other variables. As no options have been granted, certain variables are not available for calculating the value of options. Our Directors believe that any calculation of the value of options granted as of the Latest Practicable Date would be based on a number of speculative assumptions that are not meaningful and would be misleading to investors.

25. Grant of Options

As of the date of this document, no options have been granted or agreed to be granted under the Share Option Scheme.

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APPENDIX VI STATUTORY AND GENERAL INFORMATION

Application has been made to the [REDACTED] for the [REDACTED] of, and permission to deal in, the Shares which may fall to be issued pursuant to the exercise of the options to be granted under the Share Option Scheme.

E. OTHER INFORMATION

1. Estate Duty, Tax and Other Indemnities

Our Controlling Shareholders (together, the “Indemnifiers”) [have entered into] the Deed of Indemnity with and in favour of our Company (for itself and as trustee for each of our present subsidiaries) to provide indemnities on a joint and several basis in respect of, among other matters:

(a) any duty which is or hereafter becomes payable by any member of our Group by virtue of section 35 of the Estate Duty Ordinance (Chapter 111 of the Laws of Hong Kong) under the provisions of section 43 of the Estate Duty Ordinance or the equivalent thereof under the laws of any jurisdiction outside Hong Kong by reason of the death of any person and by reason of the assets of our Group or any of such assets being deemed for the purpose of Hong Kong estate duty to be included in the property passing on his death by reason of that person making or having made a relevant transfer to any member of our Group at any time on or prior to the [REDACTED]; and

(b) taxation and taxation claim, together with all costs (including all legal costs), expenses or other liabilities which any member of our Group may incur in connection with (i) the investigation, assessment or the contesting of any taxation claim; (ii) the settlement of any claim under the Deed of Indemnity; (iii) any legal proceedings in which any member of our Group under or in respect of the Deed of Indemnity and in which judgment is given for any member of our Group; or (iv) the enforcement of any such settlement or judgment, falling on any member of our Group resulting from or by reference to any income, profits or gains earned, accrued or received on or before the [REDACTED] or any transactions, events, matters or things entered into or occurring on or before the [REDACTED], whether alone or in conjunction with any other circumstances whenever occurring and whether or not such taxation or taxation claim is chargeable against or attributable to any other person, firm, company or corporation.

The Indemnifiers are under no liability under the Deed of Indemnity in respect of any taxation:

(a) to the extent that provision has been made for such taxation in the audited accounts of any member of our Group for any accounting period up to December 31, 2020; or

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APPENDIX VI STATUTORY AND GENERAL INFORMATION

(b) to the extent that such taxation or liability for such taxation falling on any of the members of our Group in respect of any accounting period commencing on or after January 1, 2021 and ending on the [REDACTED], where such taxation or liability would not have arisen but for some act or omission of, or transaction voluntarily effected by, any member of our Group (whether alone or in conjunction with some other act, omission or transaction, whenever occurring) without the prior written consent or agreement of the Indemnifiers, other than any such act, omission or transaction:

(i) carried out or effected in the ordinary course of business or in the ordinary course of acquiring and disposing of capital assets on or after January 1, 2021; or

(ii) carried out, made or entered into pursuant to a legally binding commitment created on or before December 31, 2020 or pursuant to any statement of intention made in this document; or

(c) to the extent that such taxation liability or claim arises or is incurred as a result of the imposition of taxation as a consequence of any retrospective change in the law, rules and regulations or the interpretation or practice thereof by the Inland Revenue Department or the taxation authority of the PRC, or any other relevant authority (whether in Hong Kong or the PRC or any other part of the world) coming into force after the date of the Deed of Indemnity or to the extent such claim arises or is increased by an increase in rates of taxation after the date of the Deed of Indemnity with retrospective effect; or

(d) to the extent that any provision or reserve made for taxation in the audited accounts of any member of our Group up to December 31, 2020 and which is finally established to be an overprovision or an excessive reserve, in which case the Indemnifiers’ liability (if any) in respect of such taxation shall be reduced by an amount not exceeding such provision or reserve, provided that the amount of any such provision or reserve applied referred to in this paragraph to reduce the Indemnifiers’ liability in respect of taxation shall not be available in respect of any such liability arising thereafter.

Under the Deed of Indemnity, each of the Indemnifiers [has also undertaken] to us that he/it will indemnify and at all times keeps us fully indemnified, on a joint and several basis, from among other matters, all claims, payments, suits, damages, settlements, liabilities, losses, administrative or other charges, levies, payments and any associated costs and expenses which would be incurred or suffered by any member of our Group as a result of any litigation, arbitration and/or legal proceedings against any member of our Group which was issued and/or accrued and/or arising from any act, non-performance, omission, non-compliance, or otherwise of any member of

–VI-31– THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.

APPENDIX VI STATUTORY AND GENERAL INFORMATION our Group on or before the [REDACTED] including, without limitation, the non-compliances, if any, as set out in “Business — Properties” and “Business — Legal Proceedings and Compliance” in this document.

2. Litigation

As of the Latest Practicable Date, we are not aware of any other litigation or arbitration or claim of material importance pending or threatened against us or any of our Directors that could have a material adverse effect on our financial condition or operating results.

3. Sole Sponsor

The Sole Sponsor has made an application on our behalf to the [REDACTED] for the [REDACTED] of, and permission to deal in, our Shares in issue and to be issued as mentioned in this document (including any Share which may be issued pursuant to the exercise of the [REDACTED] and any Shares which may be issued pursuant to the exercise of any options which may be granted under the Share Option Scheme) [REDACTED]. All necessary arrangements [have been made] to enable the securities to be admitted into [REDACTED]. The Sole Sponsor satisfies the independence criteria applicable to sponsors set forth in Rule 3A.07 of the Listing Rules. The fees to the Sole Sponsor in connection with the [REDACTED] is US$1.4 million.

4. Compliance Advisor

Our Company has appointed China Galaxy International as the compliance advisor upon [REDACTED] in compliance with Rule 3A.19 of the Listing Rules.

5. Preliminary Expenses

The preliminary expenses of our Company are estimated to be HK$31,800 and payable by us.

6. Promoter

We have no promoter for the purpose of the Listing Rules. Save as disclosed in this document, within the two years preceding the date of this document, no cash, securities or other benefit had been paid, allotted or given, nor are any such cash, securities or other benefit intend to be paid, allotted or given, to the promoter of our Company in connection with the [REDACTED] or the related transactions described in this document.

–VI-32– THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.

APPENDIX VI STATUTORY AND GENERAL INFORMATION

7. Agency Fees or Commissions Received

Except as disclosed in “[REDACTED] — [REDACTED] Arrangements and Expenses — Commissions and Expenses” in this document, no commissions, discounts, brokerages or other special terms have been granted in connection with the issue or sale of any capital of any member of our Group within the two years immediately preceding the date of this document.

8. Qualification of Experts

The following sets forth the qualifications of the experts who have given opinion or advice contained in this document:

Name Qualifications China Galaxy International Licensed to conduct type 1 (dealing in securities), type 4 Securities (Hong Kong) Co., (advising on securities), and type 6 (advising on corporate Limited finance) regulated activities under the SFO

Ernst & Young Certified Public Accountants and Registered Public Interest Entity Auditor

Commerce & Finance Law Offices PRC Legal Advisors

Appleby Legal advisors to our Company as to the laws of the Cayman Islands

Frost & Sullivan (Beijing) Inc., Independent industry consultant Shanghai Branch Co.

SRK Consulting China Limited Independent Technical Consultant

Jones Lang LaSalle Corporate Independent property valuer Appraisal and Advisory Limited

9. Consent of Experts

Each of the experts named in sub-paragraph 8 above [has given] and has not withdrawn its written consent to the issue of this document with copies of its reports, letters or opinions (as the case may be) and the references to its names or summaries of opinions included herein in the form and context in which they respectively appear.

–VI-33– THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.

APPENDIX VI STATUTORY AND GENERAL INFORMATION

As of the Latest Practicable Date and save as disclosed in this document, none of the experts named above has any shareholder interests in any member of our Group or the right (other than the penal provisions) of sections 44A of the Companies (Winding Up and Miscellaneous Provisions) Ordinance so far as applicable.

10. Binding Effect

This document shall have the effect, if an application is made in pursuance of this document, of rendering all persons concerned bound by all of the provisions (other than the penal provisions) of sections 44A and 44B of the Companies (Winding Up and Miscellaneous Provisions) Ordinance insofar as applicable.

11. Taxation of Holders of Shares

Dealings in Shares registered on our Company’s Hong Kong branch share register will be subject to Hong Kong stamp duty. Intending holders of Shares are recommended to consult their professional advisers if they are in any doubt as to the taxation implications of subscribing for, purchasing, holding or disposing of or dealing in Shares. It is emphasised that none of our Company, our Directors or the other parties involved in the [REDACTED] can accept responsibility for any tax effect on, or liabilities of, holders of Shares resulting from their subscription for, purchase, holding or disposal of or dealing in Shares.

Profits from dealings in our Shares arising in or derived from Hong Kong may also be subject to Hong Kong profits tax.

The sale, purchase and transfer of Shares are subject to Hong Kong stamp duty, the current rate of which is 0.2% of the consideration or, if higher, the value of our Shares being sold or transferred.

Under present Cayman Islands law, transfers and other dispositions of Shares are exempt from Cayman Islands stamp duty so long as our Company does not hold any interest in land in the Cayman Islands.

–VI-34– THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.

APPENDIX VI STATUTORY AND GENERAL INFORMATION

12. Miscellaneous

(a) Save as disclosed in this document,

(i) within two years preceding the date of this document:

(aa) no share or loan capital of our Company or any of our subsidiaries has been issued, agreed to be issued or is proposed to be issued fully or partly paid either for cash or for a consideration other than cash;

(bb) no commissions, discounts, brokerages or other special terms have been granted in connection with the issue or sale of any share or loan capital of our Company or any of our subsidiaries; and

(cc) no commission has been paid or payable for subscribing or agreeing to subscribe, or procuring or agreeing to procure the subscriptions, for any shares in our Company or any of our subsidiaries;

(ii) no part of the Shares or loan capital of our Company is [REDACTED], traded or dealt in on any other stock exchange. At present, our Company is not seeking or proposing to seek [REDACTED] of, or permission to deal in, any part of our Shares or loan capital on any other stock exchange;

(iii) our Company has no outstanding convertible debt securities;

(iv) no share or loan capital of our Company or any of our subsidiaries is under option or is agreed conditionally or unconditionally to be put under option;

(b) Save as disclosed in the document,

(i) no share or loan capital of our Company or any of the subsidiaries is under option or is agreed conditionally or unconditionally to be put under option; and

(ii) no founder, management or deferred shares of our Company or any of our subsidiaries have been issued or agreed to be issued.

(c) Our Directors confirm that there has been no material adverse change in the financial or trading position or prospects of our Group since December 31, 2020 (being the date to which the latest audited consolidated financial statements of our Group were made up); and

–VI-35– THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.

APPENDIX VI STATUTORY AND GENERAL INFORMATION

(d) Our Directors confirm that there has not been any interruption in the business of our Group which may have or has had a material effect on the financial position of our Group in the 12 months preceding the date of this document.

13. Bilingual Document

The English and Chinese language versions of this document are being published separately, in reliance upon the exemption provided by section 4 of the Companies (Exemption of Companies and Prospectuses from Compliance with Provisions) Notice (Chapter 32L of the Laws of Hong Kong). In case of any discrepancies between the English language version and the Chinese language version, the English language version shall prevail.

–VI-36– THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.

APPENDIX VII DOCUMENTS DELIVERED TO THE REGISTRAR OF COMPANIES AND AVAILABLE FOR INSPECTION

DOCUMENTS DELIVERED TO THE REGISTRAR OF COMPANIES

The documents attached to the copy of this document delivered to the Registrar of Companies in Hong Kong for registration were:

(a) a copy of the [REDACTED];

(b) a copy of each of the material contracts referred to in “Statutory and General Information — B. Further Information about Our Business — 1. Summary of Material Contracts” in Appendix VI to this document; and

(c) the written consents referred to in “Statutory and General Information — E. Other Information — 9. Consent of Experts” in Appendix VI to this document.

DOCUMENTS ON DISPLAY

Copies of the following documents will be published on the website of our Company (www.fuligemstones.com) and the website of the Stock Exchange (www.hkexnews.hk)fora period not less than 14 days from the date of this document:

(1) our Memorandum of Association and Articles of Association;

(2) the Accountants’ Report of our Group prepared by Ernst & Young, the text of which is set out in Appendix I to this document;

(3) the audited consolidated financial statements of our Group for each of the three years ended December 31, 2018, 2019 and 2020;

(4) the report received from Ernst & Young on [REDACTED] financial information, the texts of which are set out in Appendix II to this document;

(5) the material contracts referred to in “Statutory and General Information — B. Further Information about Our Business — 1. Summary of Material Contracts” in Appendix VI to this document;

(6) the service contracts and letters of appointment of our Directors, referred to in “Statutory and General Information — C. Further Information about our Directors and Substantial Shareholders — 2. Further Information about Our Directors” in Appendix VI to this document;

– VII-1 – THIS DOCUMENT IS IN DRAFT FORM, INCOMPLETE AND SUBJECT TO CHANGE AND THE INFORMATION MUST BE READ IN CONJUNCTION WITH THE SECTION HEADED “WARNING” ON THE COVER OF THIS DOCUMENT.

APPENDIX VII DOCUMENTS DELIVERED TO THE REGISTRAR OF COMPANIES AND AVAILABLE FOR INSPECTION

(7) the written consents referred to in “Statutory and General Information — E. Other Information — 9. Consent of Experts” in Appendix VI to this document;

(8) the legal opinions prepared by Commerce & Finance Law Offices, our PRC Legal Advisors, in respect of certain aspects of our Group in the PRC and our property interests in the PRC;

(9) the letter of advice prepared by Appleby summarizing certain aspects of Cayman Islands company law referred to in Appendix V to this document;

(10) the industry report prepared by Frost & Sullivan;

(11) the Cayman Companies Act;

(12) the property valuation report prepared by Jones Lang LaSalle Corporate Appraisal and Advisory Limited, the text of which is set out in Appendix III to this document;

(13) the Competent Person’s Report prepared by the Independent Technical Consultant, the text of which is set out in Appendix IV to this document; and

(14) the rules of the Share Option Scheme.

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